What are the Purposes of a Conservation Easement?
From: Conservation Easements: The Federal Tax Rules and Special Considerations Applicable to Syndicated Transactions
By: Bryan Mick, JD, MBA and Bradford Updike, JD, LLM
Mick Law P.C.
Conservation easements are restrictions placed on real property to protect its natural resource values or those of ecologically related properties. Easements are either voluntarily sold or donated by the landowner and constitute legally binding agreements that limit certain types of uses or development on the subject property in perpetuity. 1 A central attribute of these easements is that their restrictions and terms can sometimes be designed to fit the needs of the underlying fee owner and the easement holder so long as they retain a public purpose or intent.2
Permitted Purposes. To be deductible, donated conservation easements must be legally binding and permanent restrictions on the use, modification and development of conservation valued property such as parks, wetlands, farmland, forest land, scenic areas, historic land or historic structures. Section 170(h) of the Code states that a qualified conservation contribution is “a contribution (i) of a qualified real property interest” (i.e., a restriction granted in perpetuity on the use which may be made of the real property), “(ii) to a qualified organization, (iii) exclusively for conservation purposes.”3 Qualified organizations that accept conservation easements (i.e. charitable organizations that are organized for conservation purposes and governmental units) must have a commitment to protect the conservation purposes of the donation and must have sufficient resources to enforce compliance with the terms of the easement agreement.4 Section 170(h)(4)(A) specifies the four deductible types of conservation easements:
- Preservation of land areas for outdoor recreation by, or the education of, the general public;
- Protection of a relatively natural habitat of fish, wildlife, or plants or similar ecosystems;
- Preservation of open space (including farmland and forest land); or
- Preservation of a historically important land area or a certified historic structure.4
Bryan S. Mick is the President of Mick Law P.C. in Omaha, Nebraska, and a provider of independent due diligence legal services for various broker-dealers and registered investment advisors throughout the country.
Brad Updike joined Mick Law in August 15, 2006, and his areas of practice include securities law, oil and gas, private equity, conservation real estate, DPP due diligence, taxation analysis relating to securitized financing, and securities advertising practices. On a local level, Mr. Updike has also served the legal needs of Omaha-based clients on matters relating to estate planning, private placements, trademark law, and 501(c)(3) non-profit taxation matters.
Bryan Mick, Bradford Updike, Mick Law P.C., SANDLAPPER Securities, LLC, Sandlapper Wealth Management, LLC, and TRIPS are unaffiliated.
1 Treas. Reg.§1.170A-14(f)
2 I.R.C. § 170(h) (2014)
3 Treas. Reg. § 1.70A-14(c)
4 I.R.C. § 170(h)(4) (2006). A more specific explanation of the qualification criteria relating to all four conservation purposes is provided within section 1.170A-14(d) of the Treasury Regulations. Treas. Reg. §1.170A-14(d).
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