Conservation Easements - A Creek Runs Through It

To the Editor:

Much of Texas east of a line from Fort Worth and down through the Hill County / San Antonio has seen tremendous development and change of land use in the last 50 years. Many family farms and ranches that existed for generations are gone. We all know this. Farmers and ranchers and people who don’t want to live in the congestion of big cities still enjoy open spaces and living close to nature that rural counties like Fayette County provide.

According to the Texas A&M Natural Resources Institute, Texas loses about 640 acres of farm and ranchland each day (233,600 acres per year) to conversion for non-ag use. (For comparison, Fayette County is about 614,000 acres, with 471,000 acres in agriculture. USDA National Agricultural Statistics Service, 2022 Census.) Texas Parks & Wildlife says: “The biggest threat to wildlife and habitat today is ‘land fragmentation’ - the break-up of large land holdings into smaller tracts.” We have all seen instances of the farm or ranch that the grandparents owned gets divided up between the children. Then the land gets divided again by the next generation. Pretty soon what was a farm or ranch of a couple of hundred acres has been divided down into 40 and 20-acre parcels or even smaller.

When considering how their property will be kept as farmland into the future, people may think that, “Well, my kids are going to get my property and they will take care of it.” Maybe they will for another generation but after that it might get leased for a gravel pit or sold for a housing development. Gravel companies and developers pay landowners big money to destroy farm and ranch land. The destruction is forever. Each generation that doesn’t farm the land or live on it is of course less connected to it.

One way to ensure that the land is not destroyed is a conservation easement (CE). The Texas A&M AgriLife Extension Service says a “Conservation Easement” is “a voluntary legal agreement between a private landowner and a private nonprofit organization or land trust whereby the landowner gives up future development rights, which are transferred to the organization in order to protect certain desirable features of their land in perpetuity. This is done according to the landowner’s wishes and can provide significant tax benefits.” A CE guarantees fu-ture use of the land is restricted to agriculture or wildlife management or some other conservation purpose.

When you establish a CE on your land, you transfer your right to use the land for nonagricultural, commercial development to a non-profit corporation that was established for the sole and specific purpose of making sure the land is used only for agriculture or wildlife management forever.

Things to know about conservation easements: 1. Landowners do not give up legal title to their property, just the right to commercially develop the property. They keep the rights to sell, lease, borrow against and manage their land just as they have been. A CE is a legal arrangement with flexibility to the needs of the landowner. The landowner is directly involved in writing the CE document. It is similar to a pipeline easement agreement or lease agreement for grazing or row crop farming. You can negotiate terms of use that are not inconsistent with the conservation purpose of the CE. You keep your oil and gas rights and payments for any production from the land.

2. The public has absolutely NO right to come on your land if you have a CE on it. A land trust representative will usually visit the property annually to make sure it is being cared for properly.

3. With a CE, you can sell or lease your land (for ag use or hunting, fishing – any noncommercial use that doesn’t undermine the conservation purpose or damage the land). You can designate areas by acreage on which you or future owners can build a house, barns, livestock pens, stock ponds, hunting or fishing camp houses and non-commercial recreational facilities.

4. The land is not eventually going to end up in the hands of the government – unless the landowner wants that. This would be done by you in a will or by a lifetime donation.

5. Banks will make loans collateralized by a property with a CE, but the loan amount may be reduced based on the property’s value with the easement on it.

6. The land trust cannot sell or give the CE to a third party. The CE agreement will only allow the CE rights to be transferred to another land trust that can protect the property as well or better.

A CE essentially ensures that if your land has been used for farming and ranching that its use in the future will be limited to farming and ranching. The purpose of the CE is to protect agricultural land, including wildlife habitat and water resources. You may not own 800 acres of land with a river running through it but the 80 acres you do own may be prairie that has never been plowed with an abundance of native plants that are being lost in other areas or a woodland with old growth trees that provides an ideal environment for particular birds and animals whose habitat is shrinking elsewhere.

A CE is in effect a donation of land rights to a non-profit organization which will hold those rights into perpetuity. That donation may make the donor/landowner eligible for a “tax deduction” just like for the money you give to your church or other charitable organizations. The value of the easement donation is determined by an appraisal by a certified real estate appraiser. The IRS then allows the donor/landowner to deduct 50% of his/her “Adjusted Gross Income” (Line 11a on your Form 1040 tax return) for the year in which the CE donation is made and up to an additional 15 years until the value of the easement is exhausted. The value of a conservation easement is typically considered to be about 30% of the fair market value (FMV) of the land. If the FMV of the land is $10,000/ acre, the value of the easement (30% of the total value) would be $3,300/acre. On 80 acres, the amount of the donation would be $264,000. The FMV of the land is reduced by the CE value.

Another approach to agricultural conservation easements is Agricultural Land Easements (ALEs) under the Agricultural Conservation Easement Program (ACEP) administered by the Natural Resources Conservation Service (NRCS) of the U. S. Department of Agriculture. NRCS says through ALEs: “NRCS provides financial assistance to eligible partners for purchasing Agricultural Land Easements that protect the agricultural use and conservation values of eligible land.” The program helps farmers and ranchers keep their land in agriculture and helps the federal government to reduce the loss of farmland in the U.S.

NRCS can contribute up to 50% of the fair market value of the agricultural land easement. The Land Trust Alliance ( landtrustalliance.org) lists land trusts that will acquire ALEs. The government funding helps to enable farm or ranch owners to be paid for conservation easements. This allows a person who wants to keep farming or ranching to use his or share of the proceeds from the sale of the CE to “buy out” some or all of the ownership interests of other family members who don’t want to be in agriculture. As a result, more of the land can be kept together to make it more viable for operating a farm or ranch. Like other government programs using taxpayer money, there are eligibility requirements and paperwork to fill out. The Natural Resources Conservation Service for Fayette County is located at the USDA Service Center in La Grange. The NRCS website is www.nrcs.usda.gov.

With either approach, there are expenses for the landowner. The transfer is much like any real estate transaction. Asurvey of the land and a title insurance policy are usually necessary. It is a good idea for the landowner to have a lawyer who has experience with CEs to help work through the process. The landowner also makes an up-front payment to establish a “Stewardship Fund” which is used by the land trust organization to monitor future use of the property.

If you want the CE donation to be “tax deductible”, an appraisal of the value of the CE is required by the IRS and a CPA will need to fill out an IRS Form 8283 (Noncash Charitable Contributions) to file with your tax return. The Stewardship Fund payment is tax deductible. Other expenses may be deductible.

About 5 million acres in the U.S. (an area about the size of New Jersey) are enrolled in CEs through the USDA’s Natural Resources Conservation Service (NRCS). The Texas Land Trust Council says that about 1 million acres in Texas are now covered by CEs. Fayette County has 3 locations where the landowners have established CEs with different land trusts.

A CE handbook is posted on the Texas Land Trust Council website ( texaslandtrustcouncil. org) for landowners who are interested in CEs and want more information. The website also lists land trusts in Texas and the conservation focus of each.

It’s not necessarily a quick, easy process to establish a CE but our ancestors (or we) worked hard to acquire the land. We should want to preserve the beauty and productivity of it for future generations.