Protecting Working Forests with Conservation Easements

South Carolina and the entire United States face a significant shift in private land ownership within the next several decades as properties are passed to the next generation. A recent article in the Annual Journal of the Association of Consulting Foresters noted, “We are currently in the midst of the largest intergenerational transfer of land our country has ever experienced.”¹ South Carolina forests cover 12.9 million acres of the state’s landmass. Of this, 63% are privately owned family forests, which average eighty acres. Data collected by the National Woodland Owner Survey between 2011 and 2013 indicated that over 80% of these private forest owners with ten acres or more were 55 years and older.²

The entire southeast region is also facing increasing threats from urbanization, which could increase up to 190% by 2060, resulting in the loss of 10% of forests in the region.³ Sale of property for non-timber uses, reduction or elimination of current forestry practices, or subdivision among heirs into tracts too small to feasibly manage for sustainable forestry are all potential impacts of land ownership transitions.⁴ Conservation easements are a feasible option for some forest landowners to continue their management regimes, protect the conservation values they hold for their property, receive a financial incentive to facilitate continued management, or reduce estate tax liability. This publication is intended to provide a general overview of conservation easements and how they can be utilized as a tool to keep working family forests productive and intact.

The Rights of Landowners

Land ownership is often described as a bundle of rights available for use by an owner for his own purposes, which can include management as forest land.⁵ Among the rights of land ownership is the ability to sell, bequeath, trade, donate, and subdivide property. These rights cannot be impinged upon except when superseded by rights of local, state, or federal governments. Owners also have the right to grant easements, which give other individuals control over some portion of the property and limit the owner’s rights. Commonly granted easements are for access to an adjoining property and utility rights-of-way. A less frequently granted easement is a conservation easement.

What is a Conservation Easement?

A conservation easement is a “voluntary, legal agreement between a landowner (grantor) and a land trust or government agency (grantee) that permanently limits uses of the land in order to protect its conservation values.”⁶ The document is a recorded deed that will transfer with ownership of the land. Landowners continue to own and manage their land with the conservation easement in place. Due to a conservation easement’s perpetual nature, landowners should enter into these agreements considering future plans for their property and guidance from legal and financial advisors.

The heart of a conservation easement is the conservation values or purposes protected by the document. These values are determined by the landowner, often with assistance from an attorney or the grantee. They are selected to maintain the landowner’s desired condition of the property into the future. To be considered a qualified conservation donation by the Internal Revenue Service, the conservation easement must be placed on real property and be given to a qualified conservation organization. Additionally, to qualify for state and federal deductions or credits, or a reduction in estate taxes, the conservation values or purposes must meet at least one of the four Internal Revenue Service criteria.⁷ These criteria are found in IRC §170(h)(4)(A) and are

The preservation of land areas for outdoor recreation by, or the education of, the general public

The protection of  relatively natural habitat of fish, wildlife, or plants, or similar ecosystem

The preservation of open space (including farmland and forest land)

The preservation of a historically important land area or a certified historic structure⁸

A Brief History of Conservation Easements in the United States and South Carolina

The use of conservation easements in the United States dates back to 1891 when a document was utilized to protect the Boston parkways designed by Frederick Law Olmsted. This document continued to be used primarily by local, state, and federal organizations into the middle of the 20^th century to protect parks and other open spaces.⁹ New environmental laws from the 1960s and 1970s increased public awareness of conservation issues and spurred interest among private landowners to find means of protecting their property for conservation purposes. During this time, individual states gradually passed legislation allowing private organizations to acquire and hold conservation easements.⁹ By the 1980s, this wave of new legislation in conjunction with favorable tax incentives for conservation easements as charitable donations was the beginning of a dramatic increase in the number of land trusts across the United States and the acres placed under conservation easements.

As the conservation easement movement began to boom, states enacted legislation to address issues arising from loopholes in the federal regulations, which could lead to fraud.⁹ The South Carolina Conservation Easement Act of 1991 clarifies the requirements and validity of conservation easements and grantee organizations’ responsibilities in the state. It became law just as the number of acres placed under conservation easement began to increase dramatically. The 2015 National Land Trust Census indicated that conservation easement acreage in South Carolina grew from 98,349 acres in 2005 to 540,336 acres in 2015.¹⁰

The benefits of conserved forestland are numerous and include protection of soil and water quality, providing scenic beauty, recreation, and wildlife habitat, and improving quality of life. However, placing an economic value to society on such acreage is difficult. The public good generated by conservation easements varies with habitat types conserved, past and current land management practices, surrounding development pressure, local zoning restrictions, and connectivity to other protected properties.^11,12 An economic influence that can be measured is the increased values of property adjacent to conserved land.¹² While this may not provide any additional benefit to the owners of conserved property, it is an indication that society does place a value on permanently protected open space.

Steps to Developing a Conservation Easement

The first step in developing a conservation easement is to select and engage with a qualified conservation organization, such as a land trust, which will be the easement holder or grantee. Land trusts often operate within a set geographic or ecological area. Since conservation priorities can vary between land trusts, a landowner may want to determine which organization will best fit the landowner’s conservation purposes for their property.

The next step is the drafting of the deed of a conservation easement. This legally binding document should be prepared to meet the common conservation goals of the grantor and grantee. It should also ensure that the grantor and subsequent owners can manage the land and its natural resources in a manner that meets the document’s conservation purposes while being consistent with the grantor’s land management objectives. Conservation easement documents can vary greatly even within one region. Still, they must include a statement of the conservation purposes, a list of the rights the grantee will have on the property, a list of the landowner’s reserved rights, any restrictions placed on the landowner, and all terms and conditions related to the agreement.¹³

Following the drafting of a conservation easement deed, an appraisal for the easement value must be obtained if the grantor wishes to sell the easement or receive any financial incentives such as a reduction in state and federal income or estate taxes. In the most basic terms, the value of the conservation easement is the full market value of the property sold for at its highest and best use, minus the property’s value with the restrictions of the conservation easement.⁵ The appraisal process must follow stringent guidelines for it to be accepted to consider the conservation easement as a charitable donation.

The final component of the conservation easement preparation is the development of the baseline documentation report. This document details the existing conditions on the property. It must be completed no later than the closing of the deed of a conservation easement or within a short, agreed-upon timeframe following the closing if conditions such as seasonal inclement weather exist.¹³ Maps, detailed descriptions of property characteristics (natural and developed), and photographs serve as proof of the state of the property at the time of donation. This report is then referenced in the conservation easement and during annual monitoring to ensure that the landowner has continued to protect the property’s conservation purposes and is abiding by the easement restrictions.⁹

Once these steps are completed, and all the required paperwork has been prepared, a closing is scheduled for the grantor and grantee to sign the conservation easement deed. This document is then recorded in the public record of the county where the property is located, and from that point forward, runs with the title of the property in perpetuity.⁹ Costs are associated with each of the steps in the conservation easement development process and can vary greatly between properties and among land trusts. Negotiations between grantor and grantee to share these costs can reduce the cash outlay required by a landowner.

Forest Management Under a Conservation Easement

Although not suitable for use on all forested properties, conservation easements can provide some families a tool to continue managing their properties as working forests when faced with increasing property expenses, a need to provide financial support to a family member managing the property, or when a property ownership transition is impending. A conservation easement can also be a viable option for family forest landowners to ensure their property’s continued management to protect conservation values, prevent development, and obtain financial incentives that may eliminate the need to sell their property to pay estate expenses.¹³

Misconceptions have abounded that landowners who grant a conservation easement will lose all their rights to make land management decisions.¹⁴ The specific section of a conservation easement known as the reserved rights clarifies those rights that a landowner intends to retain for current and future land uses. Since the conservation organization, which holds a conservation easement, is tasked with enforcing the document’s intent to protect its conservation values, it is crucial that all reserved rights to implement forestry practices be clearly defined in this section to avoid misinterpretation and practice restrictions.¹³ Reserved rights for forestry practices may include timber harvests, reforestation, road construction, intermediate stand operations, and sources of generated income other than timber harvests such as pine straw raking, hunt leases, and recreation. Often conservation organizations are staffed with natural resource professionals qualified to draft basic land management practice recommendations. However, a landowner’s specific forestry practices to include in his reserved rights may best be drafted by a professional forester.

Conclusion

As South Carolina and other states face shifts in private land ownership, a conservation easement is an option for some forest landowners seeking a means to maintain their property as working family forests. Protecting their conservation values, obtaining financial incentives, and reducing estate tax liability are potential benefits from conservation easements. A conservation easement document places restrictions on a protected property in perpetuity, and therefore should only be executed following careful consideration.

References Cited

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8. I.R.C. §170.
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10. 2015 National Land Trust Census Report. Washington (DC): Land Trust Alliance; 2016 Nov [accessed 2020 Feb 7]. http://s3.amazonaws.com/landtrustalliance.org/2015NationalLandTrustCensusReport.pdf.
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12. Kline, DJ, Alig, RJ. Garber-Younts, B. Forestland social values and open space preservation. Journal of Forestry. 2004 Dec 1 [accessed 2020 Feb 12];102(8):39-45. https://www.fs.usda.gov/pnw/pubs/journals/pnw_2004_kline002.pdf.
13. Bick S, Haney HL. The landowner’s guide to conservation easements. Dubuque (IA): Kendall/Hunt; 2001.
14. Facts (and myths) about conservation easements. My Land Plan. Washington (DC): American Forest Foundation; 2016 Nov 8 [accessed 2019 Nov 8]. https://mylandplan.org/content/facts-and-myths-about-conservation-easements.