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Conservation Drafting and Documentation

Conservation Drafting and Documentation. Pennsylvania Land Conservation Conference: Working Together to Protect Land, Water and Communities May 8, 2009. Presenters. Patricia L. Pregmon Lauren Pregmon Tetreault. Dawn Gorham, PhD. What is a Conservation Easement?. Owner declares covenants

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Conservation Drafting and Documentation

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  1. Conservation Drafting and Documentation Pennsylvania Land Conservation Conference: Working Together to Protect Land, Water and Communities May 8, 2009

  2. Presenters Patricia L. Pregmon Lauren Pregmon Tetreault Dawn Gorham, PhD

  3. What is a Conservation Easement? • Owner declares covenants • Subdivision • Improvements • Activities and Uses • Conservation Organization commits to enforce in perpetuity

  4. SAMPLE DEED COVENANT And the Grantee, by acceptance of this Deed, covenants to and with the Grantor that the following covenants shall be binding upon the above-described premises granted herein in perpetuity as covenants running with the land: 1. That the premises shall never be subdivided. 2. That there shall be no building or other improvement erected or constructed within 50-feet of Winding Creek. 3. That the premises shall be used only for residential and agricultural purposes.

  5. ADVANTAGES Inexpensive Fast DISADVANTAGES Black and white – no grey Who’s going to enforce? Who’s going to pay for enforcement? Who is going to monitor? And how? Whose consent needed to amend? What happens when conditions change? DEED COVENANT

  6. Pennsylvania Land Trust Association Model documents available online at: www.conserveland.org Model Conservation Easement Commentary Regular Updates

  7. Conservation Easements Protect

  8. Three Levels of Protection

  9. Aerial photo of Ohner Farm 350 acres owned Mary Ohner bounded by Sycamore St. and Fairview Ave. in Growing Township, Progressive County, PA.  135 acres farmland; 215 acres woodland; traversed by Winding Creek.  Has been in Ohner family for 100 years.

  10. Perspectives on Conservation

  11. Preparation for Interview • CLC Conservation Easement Checklist (p.72 -74 Workbook) • Aerial - GPS • Zoning – Subdivision/Development Approvals • Property tax records • Title records – liens, last deed • Google - Networking

  12. Morning Break

  13. Breakout Session • Interviewing Mary Ohner • What are her conservation objectives? • Are they feasible for Land Trust to enforce? • How will preparation and long term enforcement be funded? • Proposal for Conservation Easement • Subdivision • Location of HPA (if any) • Location and number of MPA(s) • Number and size of buildings permitted within SPA; Impervious Coverage limit • Recommendations to Board for approval

  14. Conservation Plan for Ohner Farm Conservation Objectives Land Planning Objectives Estate and Tax Planning Objectives

  15. Charitable Contribution • Conservation Tax Outline • Course Workbook pp. 26-33 • Section 1.06 of Pennsylvania Conservation Easement and Commentary • Lindstrom, Tax Guide to Conservation Easements • Small, Preserving Family Lands

  16. Exclusively for Conservation Purposes

  17. Enforceable in Perpetuity

  18. Potential Income Tax Benefits Fair Market Value of Property: $2,000,000 Donation of a Conservation Easement on the Property to a Qualified Conservation Organization Fair Market Value of Property with Conservation Easement: $1,000,000 Owner has a $1,000,000 charitable income tax deduction for donating the conservation easement (equal to the diminution in value of the Property). Generally, Owner can take the income tax deduction up to 30% of her adjusted gross income for the year of the gift (50% if donated in 2008 or 2009), with a 5-year carry-forward of any unused amount (15 years if donated in 2008 or 2009).

  19. Without the Donation Income: $100,000 Tax Due: $ 33,000 With the Donation Income: $100,000 Deduction: $ 50,000 Tax Due: $ 16,500 Tax Savings: $ 16,500 *Tax Savings over 15 years: $264,000 *Assumes 2007 federal tax incentives are made permanent. With a $1,000,000 Deduction . . .

  20. Estate Tax Benefits Land subject to Conservation Easement is valued as restricted for Estate Tax purposes IRC 2031(c) Exclusion • Exclude up to 40% of value • Must be owned 3 years preceding death • CE granted by decedent or family member • Maximum $500,000 • CARRY OVER BASIS

  21. Lunch Break 12:00-1:00pm

  22. Summary of Objectives for First Draft Conservation Easement

  23. Drafting the Conservation Easement based on the Pennsylvania Model Articles; Sections; Definitions Using the Commentary

  24. Parties; Property • “Undersigned Owner or Owners” and “Owners” (8.30) • Property; Conservation Area • Conservation Plan

  25. Conservation Objectives; Baseline Documentation • 1.03 Select and apply to Property • 1.04 Support with Baseline Documentation • Sources of information • Photographic documentation • Descriptions of Native, endangered or threatened resources found on or about; use as corridors; connection to larger landscape • Support for IRC public benefit test

  26. Section 1.06 and other legal requirements • Tax Requirements • 1.06 Federal Tax items • 1.04 Baseline Documentation • 5.01 Grant in Perpetuity; Superior to all Liens • 5.02 Duty to enforce in perpetuity • 7.03 Assignment only to Qualified Organization • Conservation Easement Act • Coal Rights notice

  27. Structure Articles II, III and IV

  28. Article II Subdivision • Broad definition in 8.44 • Transfer of Existing Lot • Condominium and HOA units • Option to add other “Permitted Subdivisions” per Commentary • Option to add, delete or move “subject to Review” (procedure in 5.04)

  29. Article II – Future MPAs • Option to establish MPAs in future • Within Designation Area • By ruling out certain areas • “Floating” MPA can jeopardize charitable contribution

  30. Afternoon Break

  31. Article III Improvements

  32. Improvements in HPA • Highest Protection Area • Fences and signage - Owner concerns re security, trespassing, etc. vs. protection of scenic views • Trails – Impervious Coverage (8.20) • Other access subject to Review to protect Conservation Objectives for protection of habitat, water resources • Extraction Improvements (may be deleted)

  33. Improvements within SPA • Agricultural • Utility Improvements and Site Improvements for agricultural and recreational uses • Limitations to preserve Conservation Objectives re: scenic views, open space preservation and water resource preservation • Numbers in model for illustrative purposes only • Option to permit Renewable Energy Improvements

  34. Improvements within MPA • Adds Residential Improvements • Option to limit Habitable Improvements • Option to limit Impervious Coverage • Option to permit Extraction Improvements

  35. Article IV Activities, Uses; Disturbance of Resources • Prohibition (4.01) broader than Article II and III • Zoning and TDR issues (4.02) • Important definitions • Native Species (8.29) • Wet Area (8.48) • Best Management Practices (8.08) • Sustainable (8.45) • Resource Management Plan (8.38) • Soil conservation plan (8.42) • Agricultural management plan (Commentary) • Forest management plan (Commentary)

  36. Activities within HPA • Existing Agreements – check whether need subordination or surface use agreement • Disturbance of Resources • (i) Liability issues • (iv) Vehicular – ATV issues (also (d)) • (v) Removal of downed trees, cutting live trees • (ix) Accommodates possibility of change

  37. Working Landscape within SPA • Sustainable Agriculture • No plan required for grazing, hayfield • Soil Conservation Plan for field crops • Option: Agricultural Management Plan (Commentary) • Sustainable Forestry • Resource Management Plan • Option: Forest Management Plan (Commentary) • Certified Sustainable or compliance with requirements • No conversion of woodland to agriculture

  38. Recreational within SPA • Any kind of outdoor recreation activity subject to overall prohibition on frequency and intensity of use (4.01) and availability of improvement for that use under Article III • Motor vehicle issue

  39. Activities and Uses within MPA • No limits on planting or removal of vegetation (other than introduction of Invasive) • No limit on uses or activities within Improvements (Residential and Agricultural) permitted within MPA • Residential and Agricultural uses

  40. Articles V Rights and Duties • 5.01 Rights AND duties of Holder • 5.02 Rights but NOT duties of Holder • Option: add selected rights NOT duties for Beneficiaries • 5.04 Procedure for Review • Option: Add Alternative Dispute Resolution • Option: add Public Access

  41. Article VI Enforcement

  42. Closing • Satisfying title requirements • Subordination of liens • Existing Agreements • 3-4 originals CE and Baseline Documentation • Acknowledgment by Notary Public • Recording

  43. Post-Closing • Written acknowledgment • Appraisal/IRS Form 8283 • Qualified Appraisal if over $5000 (1.170A-13(c)(2)) • Summary of conservation purposes • No quid pro quo • Disclosure of related person’s property in vicinity • Policy on signing 8283

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