Some conservation easements qualify as "qualified conservation contributions" under Section 170(h) of the Internal Revenue Code. To the extent they do, a federal income tax deduction may be available. A deduction generally is not available if the donor lacks "donative intent" – that is, the donor is making the donation because he or she is required to (for example, pursuant to a condition in a subdivision approval or other permit), or in cases where the donor is receiving some consideration or other "quid pro quo" in return for donating the easement. Each donor must consult with his or her own tax advisers. No person is authorized to make representations on behalf of HHLT regarding the availability or amount of any such deduction. HHLT will not participate in a conservation easement donation where significant concerns about a claimed tax deduction are identified during the donation process.
REPRESENTATION REGARDING TAX IMPLICATIONS OF CONSERVATION EASEMENT DONATIONS
If a donor intends to seek a tax deduction from the IRS for making a qualified charitable contribution of development rights, an appraisal must be obtained from a qualified appraiser who follows Uniform Standards of Professional Appraisal Practice. The appraisal must be completed not earlier than 60 days prior to closing on the easement donation, and no later than the due date (including extensions) of the income tax return on which the deduction is claimed. As required by Internal Revenue Code, this appraisal establishes proper value of the donation at the time of conveyance of development rights to the Land Trust.
Whether or not a tax deduction is sought, the landowner to determine the effect restrictions may have on the value of the property can obtain a preliminary appraisal or “opinion of value.” The Land Trust can refer the landowner to qualified appraisers, as necessary. In the event that the donor decides to seek a tax deduction, the Land Trust will require a copy of the completed appraisal upon submission of IRS Form 8283 to the Land Trust for signature.
In the event that a mortgage exists on the property protected by the conservation easement and if the property owner plans to seek a tax deduction for the donation, Treasury Regulations require that the mortgagee (mortgage lender) subordinate its rights in the property to the right of the easement holder (Land Trust) to enforce the conservation purposes of the gift in perpetuity. A standardized mortgage subordination document is signed by the property owner, the mortgage lender, and the Land Trust prior to the easement closing, and is legally filed, along with the conservation easement, at the county clerk’s office. As a practice, the Land Trust requires mortgage subordination (if a mortgage exists) whether or not the property owner plans to seek a tax deduction for the donation.
As part of the closing, each donor is required to sign a standard form (a) acknowledging that neither the Hudson Highlands Land Trust nor any person acting on its behalf has made any representations about the federal or other tax implications of the proposed donation, (b) representing that they are not, as of the date of the easement, required to do so under any condition to subdivision approval or other permit, and (c) agreeing that they shall not claim any federal or other deduction or credit in respect of the donation unless, following consultation with a professional tax adviser, they believe in good faith that they are entitled to such deduction.