With What Time Remains
~
Land Conservation in North Carolina
First published in the May 2007 issue of Wildlife in North Carolina magazine
The varied and vibrant landscapes of North Carolina are currently facing their greatest existential threat since the massive ecological changes wrought by European settlement. Within recent memory the Old North State was largely an agricultural domain, heavily forested on its Appalachian western flank, with highly productive farmland in the Piedmont and coastal plain and some of the most pristine beaches on the Atlantic coast. I can personally recall as a child in the 1970s climbing the dunes of Nags Head on summer mornings, and looking both south and north until the sea mist closed over the far distances I would count maybe four dozen people, total. And this was in July and August.
In an astoundingly short space of time the Outer Banks has been converted into a built-out, year-round imitation of the Jersey Shore. North Carolina is now a highly urbanized destination for hundreds of thousands of retirees and other transplants from northern states and south of the Rio Grande, with howling interstates linking uninterrupted beach condos to the exurban development spreading like fungal filaments out from Raleigh, then through the smoggy commercial strip along I-40 west of Durham and into the rapidly urbanizing mountains.
The state’s elected officialdom cheers this radical change as good for the economy, and certainly there must be a lot of people somewhere making a lot of money. But epidemic development in and of itself - with the massive increases in population and destruction of the natural world it necessarily instigates - cannot be allowed to dictate our patterns of land use. A more thoughtful, stable and sustainable developmental pattern must become the equal partner of programs that vigorously preserve the natural and rural landscapes that give North Carolina its irreplaceable character.
Of paramount concern is the ongoing destruction of farmland and wildlife habitat. According to the state Department of Environment and Natural Resources (DENR), “By 2030, North Carolina’s population is expected to increase fifty percent to more than twelve million. Currently, North Carolina leads the United States in lost farms and forests at more than one million acres in ten years. At least 383 acres per day are converted to new roads, shopping malls and housing developments.” DENR notes that the acreage of open space permanently lost to development since 2003 is as if the state had lost an entire county every four years. This is much more than a transient issue like the economic rollercoaster or the latest political tomfoolery: if we wish to retain our heritage of undeveloped open spaces we must immediately accelerate our pace of land preservation.
Fortunately there are ample tools at hand, and the most successful and trusted means of protecting privately owned property is through the donation of a conservation easement. Landowners who choose to place conservation easements on their property voluntarily and permanently relinquish the right to intensively develop their land, with the donation of this right being made to an easement “holder,” typically a nonprofit land trust or a state agency. This donation provides a benefit to the general public by protecting specified conservation values found on the land, which might include agriculture, forestry, wildlife habitat, or scenic or historic significance, as well as acreage contributing to a riparian buffer zone along a stream, swamp or river. Conservation easements are legally binding on all future landowners and protect the land in perpetuity while allowing the landowner to retain the rights of private ownership and traditional land uses such as hunting and farming.
As well as being donated by conscientious landowners, easements on properties with exceptional conservation importance are sometimes purchased through public bodies such as the Clean Water Management Trust Fund (CWMTF), which since 1996 has invested over $950 million to help local governments, state agencies, and land trusts acquire both conservation easements and land purchases to protect riparian buffers, floodplains and wetlands. CWMTF has leveraged an additional $1.4 billion in private and other public funds to protect more than 454,944 acres of open space and 4,859 miles of riparian buffers.
The first step in donating a conservation easement is identifying the land’s conservation values, followed by the careful drafting of a deed by an experienced attorney that specifically protects those values. Title and all other property rights remain with the landowner, as does the right to use the land in any way that doesn’t harm the conservation values identified in the deed of easement. The donor may sell, bequeath, or lease his property as usual. Public access is not necessary, nor does donating an easement “lock up” real estate or somehow render it unprofitable. Sustainable uses such as farming may continue indefinitely, and land under easement appreciates like all other real estate.
But make no mistake: conservation easements are for those who love their land and want to retain what makes it special. While there are generous tax incentives involved with easement donation, for those whose chief concern is their financial bottom line it will always be more profitable to destroy their land’s unique features through development than to preserve those values in perpetuity. By deciding to renounce their legal right to turn their farms into suburbs, easement donors are making an indisputable financial sacrifice, one worthy of compensation. Easement donation protects wildlife habitat, forests and farmland for the use and enjoyment of future generations and is therefore regarded by both federal and state governments as providing a public benefit, worthy of economic rewards to help offset the expense of professional counsel and a reduced property value.
Let’s see how it all works with a fictional example of an easement donation. Thomas and Julia Wolfe have a 200-acre farm in southern Person County east of Hurdle Mills. The farm has been in the Wolfe family for generations and over time has been much reduced from its original size. The Wolfes raise corn, soybeans and organic beef cattle, and their property contains a small hardwood forest that is selectively logged for timber and is home to deer, turkey, migrating songbirds and other native wildlife.
Thomas is an enthusiastic hunter and has worked with the Wildlife Resources Commission to create food plots and vegetated fencerows to encourage the local quail population. Livestock have been fenced out of the spring-fed stream that flows through the farm, which is visible from a state highway and provides the driving public with agreeable pastoral views. The Wolfe family depends largely on their farm for income, and has thus far refused the steady drumbeat of offers to sell made by land speculators eager to capitalize on the urban sprawl creeping north from Raleigh. The Wolfe property was recently appraised at $1,000,000.
One day the Wolfes hear about the advantages of donating a conservation easement on their farm and approach a local land trust, which informs them that their property has significant conservation values: farm and forestland, wildlife habitat, water resources, and scenic assets. Working closely with the land trust, the Wolfes place their farm under a conservation easement which allows for the limited expansion of their current home and the future construction of a guest cottage nearby, but no further residential construction (although future barns and other agricultural buildings are welcome). The easement, consistent with the county’s comprehensive plan, prohibits the division of the property and precludes most commercial uses other than farming and forestry, thus preserving its conservation values for the future. Hunting, fishing, horseback riding and other customary outdoor uses may continue unchanged, as will the Wolfes’ ability to continue making a living from farming.
North Carolina landowners who donate a qualifying conservation easement as charitable gifts for public benefit can generally claim federal income tax deductions and state income tax credits. In addition, the donation of a conservation easement removes the value attributable to the easement from the donor’s estate for inheritance tax purposes, while the lowered property value typically results in a lower property tax assessment.
The federal charitable income tax deduction, usually equal to the value of the easement (a property’s pre-easement value minus its post-easement value equals its easement value), can be used to reduce the donor’s tax obligation by up to fifty percent of adjusted gross income (AGI) per year for sixteen years or until the amount of the easement value is used up. Taxpayers making fifty percent or more of their income from farming or forestry during the year of donation can reduce their AGI by up to one hundred percent.
Note that this generous incentive expired at the end of 2009, at which time the rates were reduced to only thirty percent of AGI annually for all easement donors. The Conservation Easement Incentive Act, H.R. 1831, (the Senate equivalent is S. 812) has been introduced in Congress to make the enhanced federal deduction permanent and retroactive to January 1, 2010, providing rural landowners nationwide with financially compelling grounds to grant permanent protection to their open spaces. Thus far 267 Representatives and 41 Senators from all 50 states have signed on. Support private lands protection by urging your congressional delegation to champion this bill, which may be viewed at: http://thomas.loc.gov/cgi-bin/query/z?c111:H.R.1831.
The state’s Conservation and Tax Credit Program (CTC) has since 1983 offered landowners a credit on their state income tax worth twenty-five perdent of their easement value up to $250,000 for individuals and $500,000 for corporations. The credit may be carried over for five years after certification, and has thus far aided in the preservation of 188,000 acres of open space.
Easement value is normally determined by the “before and after” method utilized by a real estate appraiser specifically trained in the appraisal of conservation easements. As with their attorney and accountant, potential easement donors must make every effort to engage an individual that has the experience and education necessary for work in the field of conservation easements, an area which involves numerous legal and tax complexities associated with state and federal regulations. Local land trusts can make an important contribution by recommending proven professional advisors to landowners.
Let’s take another look at our hypothetical easement donors, the Wolfes. Because their conservation easement prohibited intensive subdivision and development, the Wolfe farm’s post-easement appraisal value was $600,000, a forty percent drop from its pre-easement value of $1,000,000. This difference of $400,000 is the Wolfes’ easement value, twenty-five percent ($100,000) of which can be put toward their state income tax under the CTC program.
North Carolina Conservation & Tax Credit
$1,000,000 = land value pre-easement
$600,000 = land value post-easement (reduced due to development restrictions)
$400,000 = easement value
$100,000 = state income tax credit (25% of easement value).
Federal Income Tax Deduction (assuming the reinstitution of a 50% annual AGI rate)
Donor’s easement value is $400,000
Donor makes $100,000 in 2008
$50,000 is deductible from donor’s AGI in 2009 (50% of AGI)
Donor makes $200,000 in 2009
$100,000 is deductible from donor’s AGI in 2010 (50% of AGI)
Donor makes $300,000 in 2010
$150,000 is deductible from donor’s AGI in 2011 (50% of AGI)
Donor makes $400,000 in 2011
Just $100,000 is deductible from donor’s AGI in 2012 because that is all he has left as he has reached his $400,000 easement value.
Unfortunately for the Wolfes and other North Carolina landowners – most particularly the average “land rich and cash poor” farmer – the state does not yet allow its tax credit to be transferrable. In Virginia, the state tax credit can also be used to offset an easement donor’s state income tax liability dollar-for-dollar (though Virginia credits are worth forty percent rather than twenty-five percent of easement value), except that any unused credit can be sold for cash to other Virginia taxpayers. For landowners without a sizeable tax burden, the ability to sell unused state income tax to other taxpayers (usually wealthy individuals or corporations) has been tremendously successful in preserving farms, forests, and the rural lands upon which many of us rely for hunting access.
Chuck Roe, Southeast Program Director for the Land Trust Alliance and a veteran North Carolina land conservationist, sees a “synchrony of circumstances” that has contributed to the state’s becoming, seemingly overnight, the most heavily developed southern state next to Florida. “North Carolina has a large and expanding population with a lot of big, medium-sized, and smaller cities,” says Roe. “This provides for a great deal of urban/rural interface and resulting sprawl development leaching out into farmland and forests.” If there is any benefit to these multiple instances of urban/suburban sprawl, Roe says it is that having urban areas scattered across all regions of the state contributes to a stable membership base for the twenty-five local and regional land trusts that together hold easements on 150,000 acres of signature open space and have purchased or otherwise helped acquire another 150,000 acres.
The splendid open spaces of North Carolina are under mortal siege, plain and simple. From her muddied mountain streams to her vanishing Piedmont farms and overdeveloped Outer Banks, the state’s matchless land legacy is buckling from the strains of uncontrolled land conversion. For rural landowners hoping to keep their farms, forests, and hunting preserves intact for future generations, keep this in mind: whatever open space that is not granted permanent protection will eventually be lost to development. It is inevitable. The only certain way to safeguard the land you love is by protecting it with a conservation easement, a legal guarantee that your crops and cattle, your tobacco barns, hardwood stands and wildlife food plots, will persist when you are no longer here to protect them.
Think about the inheritance you want to leave your children, and their children. Recall what your own childhood amid the sights and sounds of the natural world meant to you, and make your decision accordingly.
In an astoundingly short space of time the Outer Banks has been converted into a built-out, year-round imitation of the Jersey Shore. North Carolina is now a highly urbanized destination for hundreds of thousands of retirees and other transplants from northern states and south of the Rio Grande, with howling interstates linking uninterrupted beach condos to the exurban development spreading like fungal filaments out from Raleigh, then through the smoggy commercial strip along I-40 west of Durham and into the rapidly urbanizing mountains.
The state’s elected officialdom cheers this radical change as good for the economy, and certainly there must be a lot of people somewhere making a lot of money. But epidemic development in and of itself - with the massive increases in population and destruction of the natural world it necessarily instigates - cannot be allowed to dictate our patterns of land use. A more thoughtful, stable and sustainable developmental pattern must become the equal partner of programs that vigorously preserve the natural and rural landscapes that give North Carolina its irreplaceable character.
Of paramount concern is the ongoing destruction of farmland and wildlife habitat. According to the state Department of Environment and Natural Resources (DENR), “By 2030, North Carolina’s population is expected to increase fifty percent to more than twelve million. Currently, North Carolina leads the United States in lost farms and forests at more than one million acres in ten years. At least 383 acres per day are converted to new roads, shopping malls and housing developments.” DENR notes that the acreage of open space permanently lost to development since 2003 is as if the state had lost an entire county every four years. This is much more than a transient issue like the economic rollercoaster or the latest political tomfoolery: if we wish to retain our heritage of undeveloped open spaces we must immediately accelerate our pace of land preservation.
Fortunately there are ample tools at hand, and the most successful and trusted means of protecting privately owned property is through the donation of a conservation easement. Landowners who choose to place conservation easements on their property voluntarily and permanently relinquish the right to intensively develop their land, with the donation of this right being made to an easement “holder,” typically a nonprofit land trust or a state agency. This donation provides a benefit to the general public by protecting specified conservation values found on the land, which might include agriculture, forestry, wildlife habitat, or scenic or historic significance, as well as acreage contributing to a riparian buffer zone along a stream, swamp or river. Conservation easements are legally binding on all future landowners and protect the land in perpetuity while allowing the landowner to retain the rights of private ownership and traditional land uses such as hunting and farming.
As well as being donated by conscientious landowners, easements on properties with exceptional conservation importance are sometimes purchased through public bodies such as the Clean Water Management Trust Fund (CWMTF), which since 1996 has invested over $950 million to help local governments, state agencies, and land trusts acquire both conservation easements and land purchases to protect riparian buffers, floodplains and wetlands. CWMTF has leveraged an additional $1.4 billion in private and other public funds to protect more than 454,944 acres of open space and 4,859 miles of riparian buffers.
The first step in donating a conservation easement is identifying the land’s conservation values, followed by the careful drafting of a deed by an experienced attorney that specifically protects those values. Title and all other property rights remain with the landowner, as does the right to use the land in any way that doesn’t harm the conservation values identified in the deed of easement. The donor may sell, bequeath, or lease his property as usual. Public access is not necessary, nor does donating an easement “lock up” real estate or somehow render it unprofitable. Sustainable uses such as farming may continue indefinitely, and land under easement appreciates like all other real estate.
But make no mistake: conservation easements are for those who love their land and want to retain what makes it special. While there are generous tax incentives involved with easement donation, for those whose chief concern is their financial bottom line it will always be more profitable to destroy their land’s unique features through development than to preserve those values in perpetuity. By deciding to renounce their legal right to turn their farms into suburbs, easement donors are making an indisputable financial sacrifice, one worthy of compensation. Easement donation protects wildlife habitat, forests and farmland for the use and enjoyment of future generations and is therefore regarded by both federal and state governments as providing a public benefit, worthy of economic rewards to help offset the expense of professional counsel and a reduced property value.
Let’s see how it all works with a fictional example of an easement donation. Thomas and Julia Wolfe have a 200-acre farm in southern Person County east of Hurdle Mills. The farm has been in the Wolfe family for generations and over time has been much reduced from its original size. The Wolfes raise corn, soybeans and organic beef cattle, and their property contains a small hardwood forest that is selectively logged for timber and is home to deer, turkey, migrating songbirds and other native wildlife.
Thomas is an enthusiastic hunter and has worked with the Wildlife Resources Commission to create food plots and vegetated fencerows to encourage the local quail population. Livestock have been fenced out of the spring-fed stream that flows through the farm, which is visible from a state highway and provides the driving public with agreeable pastoral views. The Wolfe family depends largely on their farm for income, and has thus far refused the steady drumbeat of offers to sell made by land speculators eager to capitalize on the urban sprawl creeping north from Raleigh. The Wolfe property was recently appraised at $1,000,000.
One day the Wolfes hear about the advantages of donating a conservation easement on their farm and approach a local land trust, which informs them that their property has significant conservation values: farm and forestland, wildlife habitat, water resources, and scenic assets. Working closely with the land trust, the Wolfes place their farm under a conservation easement which allows for the limited expansion of their current home and the future construction of a guest cottage nearby, but no further residential construction (although future barns and other agricultural buildings are welcome). The easement, consistent with the county’s comprehensive plan, prohibits the division of the property and precludes most commercial uses other than farming and forestry, thus preserving its conservation values for the future. Hunting, fishing, horseback riding and other customary outdoor uses may continue unchanged, as will the Wolfes’ ability to continue making a living from farming.
North Carolina landowners who donate a qualifying conservation easement as charitable gifts for public benefit can generally claim federal income tax deductions and state income tax credits. In addition, the donation of a conservation easement removes the value attributable to the easement from the donor’s estate for inheritance tax purposes, while the lowered property value typically results in a lower property tax assessment.
The federal charitable income tax deduction, usually equal to the value of the easement (a property’s pre-easement value minus its post-easement value equals its easement value), can be used to reduce the donor’s tax obligation by up to fifty percent of adjusted gross income (AGI) per year for sixteen years or until the amount of the easement value is used up. Taxpayers making fifty percent or more of their income from farming or forestry during the year of donation can reduce their AGI by up to one hundred percent.
Note that this generous incentive expired at the end of 2009, at which time the rates were reduced to only thirty percent of AGI annually for all easement donors. The Conservation Easement Incentive Act, H.R. 1831, (the Senate equivalent is S. 812) has been introduced in Congress to make the enhanced federal deduction permanent and retroactive to January 1, 2010, providing rural landowners nationwide with financially compelling grounds to grant permanent protection to their open spaces. Thus far 267 Representatives and 41 Senators from all 50 states have signed on. Support private lands protection by urging your congressional delegation to champion this bill, which may be viewed at: http://thomas.loc.gov/cgi-bin/query/z?c111:H.R.1831.
The state’s Conservation and Tax Credit Program (CTC) has since 1983 offered landowners a credit on their state income tax worth twenty-five perdent of their easement value up to $250,000 for individuals and $500,000 for corporations. The credit may be carried over for five years after certification, and has thus far aided in the preservation of 188,000 acres of open space.
Easement value is normally determined by the “before and after” method utilized by a real estate appraiser specifically trained in the appraisal of conservation easements. As with their attorney and accountant, potential easement donors must make every effort to engage an individual that has the experience and education necessary for work in the field of conservation easements, an area which involves numerous legal and tax complexities associated with state and federal regulations. Local land trusts can make an important contribution by recommending proven professional advisors to landowners.
Let’s take another look at our hypothetical easement donors, the Wolfes. Because their conservation easement prohibited intensive subdivision and development, the Wolfe farm’s post-easement appraisal value was $600,000, a forty percent drop from its pre-easement value of $1,000,000. This difference of $400,000 is the Wolfes’ easement value, twenty-five percent ($100,000) of which can be put toward their state income tax under the CTC program.
North Carolina Conservation & Tax Credit
$1,000,000 = land value pre-easement
$600,000 = land value post-easement (reduced due to development restrictions)
$400,000 = easement value
$100,000 = state income tax credit (25% of easement value).
Federal Income Tax Deduction (assuming the reinstitution of a 50% annual AGI rate)
Donor’s easement value is $400,000
Donor makes $100,000 in 2008
$50,000 is deductible from donor’s AGI in 2009 (50% of AGI)
Donor makes $200,000 in 2009
$100,000 is deductible from donor’s AGI in 2010 (50% of AGI)
Donor makes $300,000 in 2010
$150,000 is deductible from donor’s AGI in 2011 (50% of AGI)
Donor makes $400,000 in 2011
Just $100,000 is deductible from donor’s AGI in 2012 because that is all he has left as he has reached his $400,000 easement value.
Unfortunately for the Wolfes and other North Carolina landowners – most particularly the average “land rich and cash poor” farmer – the state does not yet allow its tax credit to be transferrable. In Virginia, the state tax credit can also be used to offset an easement donor’s state income tax liability dollar-for-dollar (though Virginia credits are worth forty percent rather than twenty-five percent of easement value), except that any unused credit can be sold for cash to other Virginia taxpayers. For landowners without a sizeable tax burden, the ability to sell unused state income tax to other taxpayers (usually wealthy individuals or corporations) has been tremendously successful in preserving farms, forests, and the rural lands upon which many of us rely for hunting access.
Chuck Roe, Southeast Program Director for the Land Trust Alliance and a veteran North Carolina land conservationist, sees a “synchrony of circumstances” that has contributed to the state’s becoming, seemingly overnight, the most heavily developed southern state next to Florida. “North Carolina has a large and expanding population with a lot of big, medium-sized, and smaller cities,” says Roe. “This provides for a great deal of urban/rural interface and resulting sprawl development leaching out into farmland and forests.” If there is any benefit to these multiple instances of urban/suburban sprawl, Roe says it is that having urban areas scattered across all regions of the state contributes to a stable membership base for the twenty-five local and regional land trusts that together hold easements on 150,000 acres of signature open space and have purchased or otherwise helped acquire another 150,000 acres.
The splendid open spaces of North Carolina are under mortal siege, plain and simple. From her muddied mountain streams to her vanishing Piedmont farms and overdeveloped Outer Banks, the state’s matchless land legacy is buckling from the strains of uncontrolled land conversion. For rural landowners hoping to keep their farms, forests, and hunting preserves intact for future generations, keep this in mind: whatever open space that is not granted permanent protection will eventually be lost to development. It is inevitable. The only certain way to safeguard the land you love is by protecting it with a conservation easement, a legal guarantee that your crops and cattle, your tobacco barns, hardwood stands and wildlife food plots, will persist when you are no longer here to protect them.
Think about the inheritance you want to leave your children, and their children. Recall what your own childhood amid the sights and sounds of the natural world meant to you, and make your decision accordingly.
