A conservation easement is a legally binding agreement that permanently restricts the development and future uses of real property (i.e., land) in order to protect the land from future commercial development. In most cases, the landowner donates the easement to a government or land trust while retaining title to the land. In return, the landowner is entitled to a tax deduction. 

In the 1970s and 1980s, the government recognized that urban sprawl was impinging on vast natural land resources. Initially, the government responded through acquisitions and regulatory restrictions on land use. But these efforts became prohibitively invasive, costly, and ineffective – thus, the introduction of the conservation easement. 

In the 1980s, local and state governments introduced the conservation easement and accompanying tax deduction. Since then, businesses and landowners alike have strategically used these laws to conserve real property while at the same time achieving favorable tax benefits. 

Conservation purposes for which a conservation easement may be donated include the following:

• The preservation of land for outdoor recreation or education for substantial and regular use for the public;
• The protection of the natural habitat of fish, wildlife, or plants;
• The preservation of open space, including farmland and forestland, where such preservation is for the scenic enjoyment of the general public or is pursuant to a clearly delineated governmental conservation policy and will yield a significant public benefit; and
• The preservation of historically important land or a certified historic structure.

Once the easement is placed on the property, the value of the property is diminished as a result of the restrictions on allowable uses of the property. If the conservation easement satisfies the Internal Revenue Code requirements, the grantor of a conservation easement may receive a charitable income tax deduction (not a tax credit) for the difference in the value of the property before the easement was granted compared to the value of the property after the granting of the conservation easement. Qualifications for income tax deductions are defined in Internal Revenue Code §170(h) (26 USC §170) and Treasury Regulations §1.170A-14 (26 CFR 1.170A-14).

We work with a variety of clients who own or invest in raw land real estate assets. Our clients include landowners, family offices, and real estate investors. Conservation easements can create current liquidity in highly illiquid assets, reduce property taxes, and preserve land and natural resources for the enjoyment of future generations. 

Conservation Easements are a triple win!! 

1. The government achieves its purpose of setting aside greenspace
2. The landowner retains ownership of the land
3. The landowner gets a tax benefit