I. LAND TRUSTS AND NONPROFIT CONSERVATION ORGANIZATIONS.
A. Land Trusts are voluntary organizations
that work to preserve land for conservation purposes, including
protection of plant and animal habitat, water resources, natural
areas, historic sites, open space, farms, forests and other
working lands.
B. Wisconsin land trusts are typically organized
as nonprofit, nonstock corporations under Chapter 181 of the
Wisconsin Statutes. (Less often, they are set up as charitable
associations or trusts.)
C. Most land trusts are specially recognized
under Federal tax law?
II. PRIVATE CONSERVATION TOOLS.
A. Land trusts protect land by identifying
land features with important conservation values and working
to retain those critical lands
III. THE EASEMENT APPROACH.
A. Common law tradition.
B. Statutes of limitation and Marketable
Title Statutes. Sec. 893.33(6)(m), Wis. Stats.
C. The Uniform Conservation Easement Act.
D. Easement acquisition.
E. Easement Valuation. Easement value is based on the difference
between appraised value “before and after” imposition
of easement (Rev. Rul. 73-399, 1973-2 Cum. Bul. 68).
IV. DONATING A CONSERVATION EASEMENT -- A BROAD
LOOK.
A. If you donate a conservation easement,
you still own the property.
B. Conservation easements restrict the use
of the property in very specific terms agreed to by the owner
and the conservation organization.
C. Public access is typically not a requirement.
D. Conservation easements are flexible, the
restrictions on use of the property can be customized to suit
each unique piece of land. Income producing uses compatible
with conservation purposes are permitted.
E. Under I.R.C. Section 170, the contribution
of a “qualifying conservation interest”, including
certain conservation easements, is deductible from taxable income
as a charitable deduction for the donor.
F. Owners of land subject to conservation
easements typically qualify for certain tax benefits.
V. CONSERVATION EASEMENT DRAFTING.
A. Drafting a legal document intended to limit
the use of property in perpetuity is (to say the very least)
a daunting task. As with most legal writing, there is conflict
between precision and accuracy, brevity and detail. The use
of terms that do not have clear meanings is an invitation to
future disputes and potential litigation. Land trusts should
continually consider their capacity to monitor to determine
compliance with easement restrictions and their realistic capability
to enforce those included in an easement.
B. All Conservation Easement grants need
to include...
VI. AMENDING CONSERVATION EASEMENTS.
A. Amendments to a conservation easement
may be constrained by the terms of the easement, state conservation
easement law, the Internal Revenue Code, charitable trust law,
and public policy considerations.
B. Restatement (Third) of Property (Servitudes)
§ 7.11 (2000) establishes special guidelines for modifying
conservation easements under identified changed circumstances,
including changed conditions of the surrounding landscape.
C. Some typical amendment situations are the
correction of drafting errors, clarification of ambiguities
and expansion of the geographical scope of or protections imposed
by the easement.
D. As a matter of policy, amendments should
be carefully scrutinized and conservation organizations shall
adopt amendment policies.
E. Back-up holders, co-holders and third-party
enforcement
VII. NEGOTIATION BETWEEN LAND TRUST AND LAND
OWNER.
A. A successful conservation easement transaction
is the product of extensive discussion between the landowner
family and the land trust. Both parties typically bring both
preferences and “bottom lines” to these negotiations.
Sometimes a land trust cannot meet a landowner’s needs
in a manner consistent with its conservation mission or organizational
capabilities.
B. A Land trust may negotiate for terms in
the conservation easement to the same extent as any other organization,
and owes no greater duty of disclosure to a conservation easement
donor than any other organization engaged in negotiations; land
trust is not required to disclose its ultimate or “fall
back” position, and failure to do so does not constitute
fraudulent misrepresentation. See Maryland Environmental Trust
v. Gaynor, 803 A.2d 512.
VIII. WORKING WITH SOME REAL WORLD SCENARIOS.
I. GOALS AND OBJECTIVES.
A. Current Tax Benefits.
B. General Preservation Desires.
C. Assist Retention of Family Land.
D. Preservation of Family Business.
E. Estate Tax Benefits.
II. CONTRIBUTIONS DEDUCTIBLE FOR INCOME TAX
PURPOSES – GENERAL RULES.
A. General Charitable Contribution Rules.
B. Partial Interest Restrictions.
III. QUALIFIED CONSERVATION CONTRIBUTION.
A. Qualified Real Property Interest.
B. Qualified Organization.
C. Conservation Purposes.
D. Exclusively for Conservation Purposes.
IV. VALUATION.
A. Donor’s Entire Interest.
B. Remainder Interest.
C. Conservation Easement.
V. REPORTING AND SUBSTANTIATION.
A. Contemporaneous Written Acknowledgment.
B. Appraisal Requirements.
C. Overvaluation Penalties.
VI. ESTATE TAX PLANNING.
VII. CURRENT ISSUES
A. Tax Issues Associated With Developer Donations.
B. Internal Revenue Service Notice 2004-41
C. Joint Committee on Taxation – January 27, 2005 Proposal
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