SERVICES - Facilitate Conservation Easement Donations - Steps to Donating an EasementDonating a conservation easement to the Wyoming Land Trust (WLT) offers a unique opportunity to conserve your property for future generations. It also offers a chance to realize significant income and estate tax benefits. Though each project is different, most involve the following steps. Landowners typically pay modest transaction costs during the donation process, which many recover in tax savings.
1. Planning and Gathering Information
Choosing to donate a conservation easement represents an exciting decision for landowners and their families. Like any decision, a little planning based on good information goes a long way. Resources like the WLT, legal and financial professionals, and others familiar with conservation easements can help landowners with this decision to ensure that the easement meets—and exceeds—their goals.
2. Obtaining Land Trust Board Approval
The WLT’s Board of Directors approves each phase of a project from beginning to end. This provides “checkpoints” throughout the donation process to ensure that the WLT doesn’t overlook anything.
3. Preparing the Conservation Easement and Supporting Documents
The WLT prepares an initial draft of the conservation easement for the landowner and their attorney or other advisors to review. The WLT staff then work with the landowner and their advisors to create a mutually-acceptable easement document. Though the WLT works diligently to see that every donated easement meets the IRS requirements for deductibility, please recognize that we cannot assure the deductibility of a particular donation.
Landowners intending to claim a federal tax deduction for their easement donation (including donations through qualified bargain sales) bear legal responsibility for ensuring that the donation complies with Internal Revenue Code 170(h), the accompanying Treasury Regulations and/or any other federal or state requirements. WLT works diligently to see that every donated easement meets these requirements, but cannot assure the deductibility, value or financial benefits of a particular donation.
Four documents typically support the conservation easement:
A title report ensures that the conservation easement will meet the IRS requirements
for deductibility and address any issues that could undermine the
property’s natural values. For example, the report could reveal
mortgages, liens or access easements on the property requiring
subordination before the easement is signed.
A surface mineral report likewise ensures that the conservation easement will meet the IRS
requirements for deductibility and address any issues that could
undermine the property’s natural values. The IRS generally prohibits
deductions for easements that allow surface mining by any method. Since
this requirement can pose difficulties in split estate states like
Wyoming, the IRS allows deductions for easements on split estate
properties “if the probability of surface mining . . . is so remote as
to be negligible.” Easement donors typically obtain a surface mineral
report from a qualified geologist to meet this “remoteness test.”
An independent appraisal determines the easement’s value. If landowners wish to claim a tax
deduction for donating the easement, they must engage a qualified
appraiser to prepare a qualified appraisal that meets the requirements
of the Internal Revenue Code.
A resource inventory documents the condition of the easement property at the time of the
donation. The inventory describes the natural and man-made features of
the easement property and includes maps and photos. Landowners can
engage a resource consultant to prepare the inventory or request that
the WLT prepare it in-house.
4. Finalizing and Recording the Easement
When the landowner and the WLT are comfortable with the conservation easement, each signs before a notary public. The signings need not occur simultaneously and signatures can be exchanged through the mail or delivery service. After the landowner and the WLT have signed the conservation easement, the WLT records the document with the appropriate County clerk. The WLT keeps the original document in its safe deposit box and provides a copy to the landowner for their records.
5. Claiming the Tax Benefits for the Easement Donation
Once the easement is recorded, landowners can claim a deduction for the easement’s value on their federal tax returns. Landowners must file a special form with their returns, which their appraiser and the WLT will sign prior to filing.
6. Contributing to the WLT Legacy Fund
The WLT strongly encourages each easement donor to contribute to its Legacy Fund, formerly the Stewardship Fund. This fund helps the WLT cover the costs of monitoring and enforcing the terms of the easement in perpetuity. The WLT determines the amount of each contribution based on a formula that accounts for the easement terms. Easement donors can make a gift in a variety of ways, including over time or through their estate plan. The WLT will gladly discuss the suggested gift amount, as well as various ways that the easement donor can make the gift, at the easement donor’s request.
After completing these steps, the landowner and the WLT begin a working relationship to ensure that the easement meets the landowner’s conservation objectives into the future. The WLT monitors the property annually, but leaves day-to-day land management decisions to the landowner. These annual visits foster good communication with the landowner and provide an opportunity to answer questions, respond to concerns or discuss funding options for enhancement projects. In many ways, the conservation easement is a working partnership for the land.