A Future for Conservation Easements

As a member of the Board of a Louisiana land trust and someone who has been interested in the use of permanent conservation easements for a number of years, I offer an idea for expanding the use of conservation easements on lands whose owners are “land rich, but cash poor”—that is, the large majority of American landowners.  My goal is to further the utilization of permanent conservation easements (CE) by all Americans. 
   We know the current Federal Tax Code gives the majority of benefits/incentives (although there are some states with their own CE incentives) to those who conserve properties in perpetuity. With a little adjustment, current federal tax law could encourage Americans to preserve more rural lands through use of CEs. Such adjustments could prompt a positive boost to economic activity around our great country without causing the federal government to lose much, if any, tax revenue.
    The idea is to adjust the Tax Code (26 US Code 170 [h]) to allow the tax deduction incentives/benefits to be portable by creating a secondary market for the sale of CE tax deductions. This would encourage small landowners as well as the “land rich and cash poor” to participate in the conservation of lands that in most cases are taken permanently out of rural use because the only option available is to sell the land for development. . . . (more)

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I sincerely believe that expansion of tax credits for land conservation would work if applied widely and made transferable by the federal government.  Consider the case of a dairy farmer: Over the course of the last 50 years, a husband and wife have secured and paid for a 400-acre farm. Now in their older years, they want to take life a little slower, but they want to keep their farm in agriculture.  Their options include finding a young operator to take over the dairy (not many young folks are looking for this type of business) or selling it for some other type of farming operation (again, the market is thin).  Because these options are rarely available, the couple finds that they must sell their farm to a developer, who invariably creates a subdivision with a golf course.
    It would seem that a good alternative would be to place the dairy farm land in a CE.  However, because the dairy operation is no longer generating much in taxable income, and there is no significant foreseeable future taxable income for this dairy farm, placing a CE on this land would equate to giving a donation to the federal government. Thus, in this and many similar cases, the development option will ultimately prevail.
     If the adjustments to the Federal Tax Code suggested above were in place in this example, it would provide a real win-win for all.  First, the farmer/landowners could have placed their land into a perpetual CE and generated some market-value incentives and retained the ownership of their rural lands, with a lower basis that could then be affordable for a new (possibly younger) operator.  Second, this transaction would have triggered a taxable event (the sale of the benefits in the secondary market), and federal, state, and local governments would receive tax revenues that otherwise would not have been received—unless the developer was persuasive or if some death taxes came into play.  
    Third, by converting some non-liquid assets (developmental rights on land) into cash, the farmer-landowners would have some ability to improve their farm and home, help their kids with college, set up some investments for their retirement, etc.  Any and all of these would cause a ripple of economic impact in the local area.
    Fourth, the buyer of the tax deductions--a corporation or an individual with high income--could have expressed their interest in helping the cause of conservation by bidding for these deductions and publicizing their part in conservation. Finally, the federal government would have benefited by having lands go into CEs, leaving the burden of management with the private sector.
    My interest in the use of permanent conservation easements is long standing.  I believe this idea could be a great boon: furthering conservation through adjustments to the current Federal Tax Code that create a secondary market for CE deductions/benefits.  I am interested in knowing whether this idea agrees with your thinking.  If you have any concerns, considerations, or modifications to this idea, I would appreciate your feedback. I look forward to hearing from you!                                                     --Arthur Landry,   llandry13@cox.net  or  225-356-3171