Tools for Land Conservation

1. Sarah Richardson, Land Conservation Coordinator Potomac Watershed Forum August 10, 2007 Tools for Land Conservation

2. Protecting Open Spaces • Improves/preserves the quality of life • Safeguards drinking water supplies • Reduces runoff that overloads streams and lakes in developed areas • Protects wildlife habitat and biodiversity • Provides recreation in and near urban areas • Improves air quality • Can be used to help curb urban sprawl • Protects scenic resources

3. Development in Virginia • In Virginia, 60,000 acres are converted to development each year. • Every day, more than 100 acres are converted to impervious surfaces. • USDA estimates 20,000 acres of prime farmland are lost each year. • DOF estimates 31% of forests with high value for water quality are threatened by development in the next 5 to 15 years.

4. Development in Virginia • Forest lands provide the best land cover for water quality protection. • Private landowners hold nearly 80% of forest land in the Bay watershed. • 64% of Bay watershed forest land is held by family (not corporate) owners. • Therefore: protection of forestland is largely up to family landowners.

5. State Programs for Land Conservation: A Three-Legged Stool • Virginia Land Conservation Foundation • Competitive matching grant program for individual projects • Eligible: state agencies, local governments, nonprofits • Grant applications ranked by an interagency team • Future funding unknown

6. State Programs for Land Conservation: A Three-Legged Stool • Purchase of Development Rights • Office of Farmland Preservation (VDACS) • Matching funds to localities – not competitive • Currently about $5 million available • Private Land Trusts and VOF • Depend to a great extent on generous federal and state tax incentives for donations or bargain sales • Most land conservation in Virginia happens this way

7. How do we protect land? Land conservation = acquisition Acquire what? Fee simple interest Conservation easements (most land protection is through easements) How is it acquired? • Purchase • Donation Who acquires the land? • State & federal agencies • Local governments • Private land trusts

8. What are conservation easements?

9. Owning Land • Landowners possess a collection of rights that are like a bundle of sticks. • Each stick in the bundle represents a right the landowner possesses. • These include the right to: • occupy the land; • use the land; • sell the land, give it away, or bequeath it in a will; • keep others off the land; and • subdivide the land. • Owning all the sticks is called “fee simple” ownership.

10. Conservation Easements • A conservation easement is a voluntary, legally binding, and perpetual agreement created when a landowner gives or sells a few of their property rights (some of the “sticks in the bundle”) to another party, who holds those rights in public trust forever. • The landowner does this with the express intention of conserving some characteristics of the land. • Enforcement of the easement is transferred to a public body or a “holder.”

11. Conservation Easements • By giving up some rights from the “bundle of sticks”, a landowner ensures that the property will be protected from unrestricted development forever. • The landowner retains possession and use of his land, while conserving the property for future generations and potentially realizing some of the financial gain from that asset.

12. Conservation Easements • Rights commonly given up in a conservation easement are: • The right to subdivide, • The right to build new structures, • The right to engage in activities that may endanger the resource being protected. • These rights are given up forever.

13. Conservation Easements • Rights that are not given up in a conservation easement: • The right to sell or give the land away, • The right to occupy the land, • The right to use the land in any way that does not endanger the resource being protected, • The right to exclude others from the property (except the easement monitor), • Any right not specifically mentioned in the conservation easement.

14. Who Holds Conservation Easements? The Code of Virginia authorizes public bodies and “holders” to receive conservation easements. • Public bodies are state agencies, counties or municipalities, park authorities, Soil & Water Conservation Districts, or community development authorities. • Holders are defined by Va. Code as charitable organizations whose primary purposes include: • protecting natural resources and natural or open-space values of real property; • assuring availability of property for agricultural, forestal, recreational, or open-space use; • maintaining or enhancing air or water quality; or • preserving historic, architectural, or archaeological lands.

15. What Are the Best Candidates for a Conservation Easement? • A landowner who is motivated by love of the land and desire to preserve it. • Tax incentives are great, but they won’t make the landowner wealthy! • Land that has good conservation value. • Land that doesn’t require intensive management. • Current and future uses of the land are compatible with preservation.

16. Tax Incentives • To qualify as a charitable contribution, a donation must be: • In perpetuity (permanent) • Made to a qualified grantee (land trust or public agency) • Must meet at least one of the following conservation purposes: • Preservation of land for public outdoor recreation or education • Protection of relatively natural habitats of fish, wildlife, or plants • Preservation of open space including farm and forest land • Preservation of historically important land or buildings

17. Federal Tax Deductions • 2006 and 2007 – these rules expire 12/31/07 unless Congress decides to extend them. • Generous deduction: Landowners who donate a conservation easement on their land can apply the value of the donation as a deduction on up to 50 percent of their adjusted gross income (AGI). • Farmers: Qualified farmers and ranchers (50 percent of income from agriculture) can deduct the value of the donation on 100 percent of their AGI per year. • Carry forward: The donor can carry the deduction forward for 15 years.

18. Other Tax Incentives • Capital gains tax exclusion • If the land is dedicated to open-space use, any profit on the sale of land or an easement on land is not taxed. • Estate and gift taxes • Donation of a conservation easement reduces the assessed value of the land, which can reduce the tax liability of an estate or taxes due on gifts of land. • Property taxes • Land restricted by a conservation easement is eligible for reduced property taxes.

19. What is the VirginiaLand Preservation Tax Credit? • LPTC is a credit against Virginia state income tax available to landowners who donate any interest in land for a conservation purpose in perpetuity. • The credit is worth 40% of the appraised value of the easement. • The recipient can use the credit for their state taxes or sell it to another taxpayer for cash.

20. Virginia Tax Credits • Cap: each year, tax credits granted will be capped statewide at $100 million. • First come, first served – donations that come in after the cap is reached are rolled over to the next year. • Carry forward: Tax credits can be claimed in the year of the gift and the subsequent 10 years or until used up. • Transfer: Tax credits may be transferred (given or sold).

21. Example of Land Preservation Tax Credit • Ms. Jones owns 100 acres of land with an appraised value of $300,000. • She donates a conservation easement, which reduces the value of her property by giving up subdivision rights and restricting development. • After the donation her property has an appraised value of $200,000. • Therefore, the appraised value of the easement is $100,000.

22. Appraised Value of Ms. Jones’ Conservation Easement Property Value Before Easement = $300,000 Property Value After Easement = $200,000 Value of Conservation Easement = $100,000 Land Preservation Tax Credit = 40% of $100,000 Land Preservation Tax Credit = $ 40,000

23. What is DCR’s role in the Land Preservation Tax Credit? The Code of Virginia requires DCR to: • Report annually on all donations of less-than-fee-simple interests in land (i.e., conservation easements) where a donor claims a Land Preservation Tax Credit of any value. • Verify to the Virginia Department of Taxation the Conservation Value of all donations of interest in land where a credit of $1 million or more is claimed by the donor.

24. What does this mean to those applying for a Land Preservation Tax Credit? • A copy of all applications for credits from donations made on or after January 1, 2007, must be sent to DCR. • All applications claiming a credit of $1 million or more will be subject to a verification of “Conservation Value.”

25. What is Verification of Conservation Value? • DCR’s verification of Conservation Value will consider three factors: • Conservation Purpose, • Public Benefit, and • Water Quality and Forest Management. • Together these are the Conservation Value of the donated land.

26. For more information on DCR’s Conservation Value Review: www.dcr.virginia.gov/virginia_land_conservation_foundation/

27. So What Can YOU Do? • Landowner outreach • Hand out brochures or other publications • Hold landowner information meetings • What to do in the absence of funding • Encourage donations • Track inquiries to demonstrate need • Refer landowners to appropriate easement holders

28. www.dcr.virginia.gov/land_conservation/whereto4.shtml

29. Progress towards land conservation goals • Governor’s goal to protect 400,000 new acres by 2010 • 155,561 new acres have been protected as of June 30, 2007 • 242,439 acres left, with 2.5 years to go • Chesapeake 2000 Agreement goal to protect 20% of Virginia’s lands in the Bay watershed by 2010 • 18% have been protected

30. What is the Commonwealth doing to advance these land conservation goals? • Outreach and capacity building – educational workshops and conferences for land trusts and other conservation organizations • Tracking – monthly reports and conserved lands database • Targeting tools – Virginia Conservation Lands Needs Assessment

31. What is DCR doing to advance these land conservation goals? • Grants – Virginia Land Conservation Foundation, Land and Water Conservation Fund, Water Quality Improvement Fund • State Parks and Natural Area Preserves – both acquisitions and conservation easements • CREP – permanent easements on riparian buffers in farmlands

32. DCR’s Office of Land Conservation Sarah Richardson Jeremy Stone (804) 225-2048 (804) 371-5218 www.dcr.virginia.gov/land_conservation/