Conservation Easements

Understanding Agricultural Conservation Easements

Conservation Easements Preserve Ranching for the Future
California Rangeland Trust uses conservation easements as a tool to preserve the inherent benefits of the ranching industry for future generations. An agricultural conservation easement is a voluntary, legally recorded agreement between the landowner and California Rangeland Trust that restricts the land to agricultural and open space uses.

By voluntarily limiting their ability to develop the land, landowners permanently protect its open space and agricultural values. This does not necessarily allow public access onto the protected property, unless that is the specific wish of a particular landowner. In some situations, landowners can reserve home sites for future building.

Development rights are extinguished by the conservation easement and cannot be sold or transferred to another entity. The easement generally prohibits or limits any subdivision, development or practice that would damage the agricultural value or productivity of the land.

Once California Rangeland Trust accepts a conservation easement, they take on the responsibility of monitoring the easement land annually to confirm that the landowner is complying with the terms of the agreement. California Rangeland Trust requires an endowment by the landowner to cover the costs of monitoring those long-term obligations.

Why Choose a Conservation Easement?

Open rangeland is best protected by the ranchers who make their living from it. Profitability and economic survival are critical concerns in agriculture, but escalating land values in the nation's most populated state have created new challenges for landowners who wish to stay in production agriculture. A conservation easement allows the landowner to receive compensation for the open space values his or her property provides but still maintains it as a working landscape. Because easements are created in perpetuity, they ensure that future generations will have the opportunity to continue California's ranching heritage, and that the general public can continue to benefit from these open spaces and the conservation values they provide.

What Are the Benefits of a Conservation Easement?

Creating a Conservation Easement
A conservation easement is created when a landowner signs an agreement with the California Rangeland Trust, or any other qualified organization or government agency willing to accept the easement. The agreement, frequently called a "deed of conservation easement," must be recorded in the local land records. If there is a mortgage or deed of trust on the property, the lender must subordinate its lien to the easement.

California Rangeland Trust works closely with the landowner and usually handles the entire transaction. The Trust will prepare all documentation and process the paperwork accordingly and, if needed, will work to obtain funding from a variety of sources, both private and public. The landowner must obtain an appraisal and any necessary tax and legal advice. The entire process can take as little as a few months for a donated easement, or as long as two years for a transaction funded by a third party.

Values for the Community

Protecting agricultural land and rangeland through conservation easements helps to maintain the viability of a region's agricultural economic base. Land remains in private ownership and on the county tax rolls. Any potential income from an easement helps maintain the economic sustainability of the agricultural enterprise, which have often been in operation for generations. Conservation easements also protect a community's scenery, natural resources, wildlife habitat and quality of life.

The Grant of a Conservation Easement is an Exercise of Property Rights

One of the fundamental rights of property ownership is the right to donate or sell an interest in the property, such as a conservation easement.

Following the donation or sale of a conservation easement, a landowner retains rights to use the land for any agricultural operations and for any purpose that is not prohibited by the terms of the easement.

While a conservation easement removes the development rights, the landowner still holds the title to the property, the right to restrict public access, and the right to sell, donate or transfer the property.

Easement Obligations and Property Rights for the Landowner

The landowner remains fully responsible for the land stewardship – for its maintenance and upkeep, for paying taxes and for otherwise meeting the typical obligations of land ownership.

Conservation Easement Benefits to the Landowner:

• The landowner knows his or her property will remain as open space.
• The landowner receives cash and/or tax benefits.

Stewardship

What Rights Does California Rangeland Trust Have to the Land?

As the organization holding the easement, California Rangeland Trust is required to monitor and enforce the terms of the easement. To accomplish this, a representative will visit the property approximately once every year to ensure that the terms of the agreement are being upheld. The visits are always scheduled with the cooperation of the landowner.

This does not mean, however, that California Rangeland Trust – or any other group – has the right to use the land, nor does it allow public access for any reason, unless specifically agreed to by the landowner under the terms of the easement.

How is the Value of an Easement Determined?

Establishing the Value of an Easement

Any time there is a change in the rights of a piece of land, the value of the land is affected. As a landowner you have the rights, for example, to run cattle, plant corn, cut timber or build homes; so, when you remove any of these rights, the value of the land changes. The value of a conservation easement is the difference between the appraised value of the land without any restrictions and the appraised value of the land after the restrictions of the easement have been recorded.

When the easement qualifies under IRS regulations, that amount is also usually the value of the charitable donation.

For example, if JohnSmith decided to donate an agricultural easement on his 1,000-acre ranch to California Rangeland Trust, and the property's current appraised value were $150 per acre, its total fair market value – before an easement was in place would be:

1,000 acres x $150 = $150,000

If placing an easement on the property (and removing the non-agricultural development rights) lowered the value to $80 per acre, the fair market value of the restricted property would be:

1,000 acres x $80 = $80,000

The difference between the before and after values is $70,000, and would become the value of the conservation easement.

$150,000 - $80,000 = $70,000

Tax Benefits

A conservation easement can provide tax benefits to landowners and future generations.

• The landowner may be entitled to a charitable tax deduction if the conservation easement is donated.
• If the conservation easement is sold for less than its fair market value, there may be a charitable tax deduction for the portion donated.
• A conservation easement can lower the taxable value of the land for estate tax purposes.
• Persons inheriting qualifying property may make an after-death donation of a conservation easement and receive estate tax benefits.
• A conservation easement may lower real property taxes.

Tax benefits are subject to complex rules, so professional advice is strongly recommended. ~ The forgoing benefits may not apply to every transaction. This information is provided for general use, and should not be relied upon as tax advice.

Conservation Easements Responsibilities and Requirements of the Landowner

• To notify the California Rangeland Trust of Proposed changes to the property.
• To allow a representative of California Rangeland Trust to conduct periodic monitoring visits.
• To notify California Rangeland Trust when selling or transferring the property.
• To comply with the restrictions on the conservation easement.

California Rangeland Trust has become a leading force in conserving working ranches and the habitat these lands provide. Ranchers' confidence in California Rangeland Trust is the product of our leadership in blending strong resources protection with the continuation of historic ranching traditions. California Rangeland Trust is enthusiastic about its key role in assuring the American public that open rangeland will be protected forever, along with the amazing cultural, historical, biological and ecological values that our ranching families work to preserve for generation after generation.