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Real estate, land use and zoning attorney. I use my twenty-five years of experience and bar licenses in CA, NV, OR and WA to assist landowners and land trusts in large-scale conservation easement projects.

Property Taxes and Conservation Easements

Conservation easements are a remarkable legal tool for protecting land from development.  Among the things that make conservation easements unique is that they are the result of transactions by willing sellers and willing buyers, and thus are not imposed by regulation, they are negotiable and they are in almost every case perpetual.  The primary driver of conservation easements has traditionally been tax incentives in the form of deductions for federal income tax purposes for donors of qualified conservation easements.  Another important, but less frequently employed, tax incentive arises at the state level in the form of state income tax deductions or state income tax credits.

A much seldom discussed tax incentive, or disincentive as the case may be, are local property taxes that in some instances may be affected by the imposition of a conservation easement on land already on the local tax rolls.  The incentive value of property taxes occurs when the reduction in value of real property is reduced by the grant of a conservation easement and this reduction is formally and legally acknowledged by the tax assessor who then lowers the property taxes accordingly.  The disincentive value of property taxes occurs in the opposite scenario, namely when a landowner sells or donates a conservation easement that restricts the use to which the eased land may be put thereby lowering the value of the land but the tax assessor neglects to or declines to reduce the property taxes assessed on the eased land.

There is a good explanation for the lack of discussion of property tax reduction as an incentive for granting conservation easement easements, and that is that there is absolutely no consistency from state to state and, worse, even within states!   For almost any given state (please comment on this blog if you are aware of exceptions)  whether tax assessments on eased lands are reduced is a matter that varies from county to county and from city to city.  In some instances the issue is even left to the discretion (or whim) of a given assessor, who is often an elected official.

Thus, while the land trust and conservation landowner community can look to what is essentially a unified body of law governing federal tax consequences of conservation easement donations, and can in many states find legal guidance regarding state law tax consequences, the effects of conservation easement deployment on local property taxes while sometimes predictable are in most instances simply a crap shoot.

Such uncertainty cannot help the conservation easement movement, and no doubt in many transactions it can act as a drag on the negotiations and the probability that a grant will ultimately be made.  Unfortunately, this status quo shows no sign of changing in the near future, and from my perspective at least there are no signs of trends otherwise.

This is not to say that there is no guidance on the property tax conundrum.  Although a jurisdiction-by-jurisdiction survey of the effect of conservation easements on property taxes is beyond the scope of this blog, there are two tidbits of information worth passing on as a starting point.

The first is California’s response to the issue which is to give it constitutional stature by declaring in Article 13 of the California Constitution that when land is enforceably restricted to recreation, scenic, natural resource conservation or agricultural purposes (I have paraphrased here) that the California legislature “shall” provide that  the land shall be valued for property tax purposes based upon such restrictions.

The second piece of information, actually a breaking news story, is from the other side of the country, where a Superior Court in Maine (arguably the most progressive state in the nation when it comes to conservation easements) has recently ruled that the Town of Limington may not deny or limit property tax exemptions on lands identified for “Tree Growth” or “Open Space” under Maine state law.  (Here is a link to a July 15, 2013 blog on this still evolving dispute: “Maine Land Conservation Trust Wins Property Tax Exemption Appeal.”

While there is not an abundance of research and analysis of this issue, there have been at least some attempts over the years to help piece together a picture of how conservation easements and property taxes interact across the country.   Here is a sample of such works that have found their way into my library, though some are by now quite dated.  (Please do let me know if these are helpful.  If anyone has any other similar works they would like to share, please do email them to me, and I will add them to this list which will remain permanently available on the web.  Many thanks in advance for those who add to the list!)

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One Comment on “Property Taxes and Conservation Easements”

  1. Erik Kingfisher August 9, 2013 at 9:05 pm #

    Thanks Jim,

    The consequence we’re struggling with currently is that our Assessor is now taxing us, the Grantee of purchased conservation easements (Jefferson Land Trust, in WA), property taxes on the value of the conservation easement! Do you know of this happening anywhere else? Any thoughts on this situation?

    We’re getting some pretty hefty bills, but so far have successfully received the standard exemption from the state. A lot of paperwork and staff hours – it’s a really unfortunate situation. The WA Association of Land Trusts has been working to try and find a solution to this issue.

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