Land Conservation Options
Many people moved to Cherry Hills Village because of the open spaces. If you own land and you want to preserve the beauty of this open space we can help you understand your options. Most land protections fall into two categories. One is a Land Donation or Sale (a fee title transfer) to the Cherry Hills Land Preserve or another conservation entity. With such a transfer of title the conservation entity owns and maintains the land. The second option is to grant a Conservation Easement. With a Conservation Easement, the family continues to own and maintain the land but gives up the development rights.
With both options, there are numerous scenarios tailored to the family’s needs and desires that meet the goal of preserving open space. Both Land Donation and Conservation Easements provide tax strategies that will often allow a significant benefit. It is important to meet with an attorney and/or tax specialist to determine the exact tax benefit in each situation. The CHLP can help facilitate this meeting. Often the total value of the gift is tax deductible whether against income tax, capital gains or in an estate plan.
Conservation Tools Appropriate in CHV
Some or all of the following tools might be appropriate to landowners in CHV. With each of the tools listed below, the land owner does not need to provide public access and except for the fact that certain rights to use of the land have been limited by the terms of the easement, the land owner negotiates the limitations and continues to own, use and manage the property.
Owner Retains Control Over Property
Limited or Protected Development. Because of the high cost of land in CHV “protective” or limited development allows for controlled development of a portion of the property in exchange for the protection of the remainder. The undeveloped portion could be placed in a conservation easement. The reserved development sites are located so as not to interfere with the wildlife habitat, scenic and other resource values. The value of the limited development sites is enhanced by the permanent protection of the adjacent lands. The City Council could be asked to allow for smaller lot sizes given the open space protection plan. Through this approach the economic objectives of the landowner can begin to be met through the sale of a few sensitively located, but valuable residential lots.
- Purchase of a Conservation Easement. Conservation easements are voluntary and permanent agreements whereby a landowner relinquishes certain property rights for specific conservation purposes. The easement carries forward to any subsequent owner of the land. Conservation easements are flexible and can limit development as much as the land owner desires. The value of the easement depends upon the size and limitations on property. An independent appraiser would set the value of the easement based on the development value of the land prior to the easement and then after the property is encumbered with the easement.
- Donation of a Conservation Easement. These easements can be donated to a Land Trust or government for charitable income tax deductions against the owner’s federal income tax return. In Colorado, the donation also creates a tax credit against Colorado income tax. Until 2015, the maximum Colorado tax credit was $375,000 for a $750,000 donation. In 2015, Governor Hickenlooper signed Senate Bill 206 which provides up to $1.5 million in State tax credits to landowners who protect their land with a conservation easement. The bill now provides a State tax credit equal to 75% of the first $100,000 of the fair market value of the easement and 50% of the value above that amount up to a total credit of $1.5 million. Any portion of the tax credit not used in the year of the gift may be carried forward and used to offset Colorado income taxes for up to 20 more years. In addition, the easement can lower the value of the land for estate tax purposes and may qualify for a partial exclusion from estate tax.
Acquisition of Title
In addition to the direct cash purchase at fair market value there are many creative land purchase options that can fulfill the landowner objectives and conservation interests. These creative approaches to land purchases are listed below:
- Installment Purchase—An installment purchase is spread over a term of years to benefit both the seller and the purchaser. An interest rate is built into each installment payment and if sold to a public entity that interest may be tax exempt.
- Lease-Option—With a lease-option agreement the governmental entity leases a property for a period of time with an option to purchase the property during or at the end of the term of the lease. Such an arrangement would permit the governmental entity time to determine property management, uses and financing.
- Rolling Option—Rolling options allow the purchaser to buy sections of a property over a period of years. Rolling options are often used by public entities that do not have the funds to purchase the entire property at one time and yet can rely on an annual appropriation for a portion of the sale price. Generally, the least desirable portion of the property is sold first so there is incentive for the public entity to complete the full purchase once the rolling option period begins.
- Right of First Refusal—Common in real estate transactions, with this tool the landowner agrees to inform the public, or nonprofit, entity of their intention to sell a property to another party, but the public entity is allowed to match the best offer. This right of first refusal does not bind the public entity to purchase but does provide that opportunity.
- Bridge Financing/Land Trust—Many land trusts, such as Colorado Conservation and Trust for Public Land, acquire lands for public entities and then resell to the public agency on terms that are beneficial to the public. A benefit is that land trusts can often act much more quickly if an owner must sell a property in a short time frame.
- Donation or Gift—For certain land owners the charitable donation of land to a conservation entity is attractive for tax, family and estate planning reasons.
- Bargain Sale—A bargain sale is a combination of gift and sale of a property to a conservation or governmental entity. The land owner receives the benefit of both cash income and a charitable gift deduction for the difference between fair market value and the bargain price.
- Donation with Reserved Life Estate—This structure has been used successfully in preserving Qunicy Farms in Cherry Hills Village. The landowner wishes to donate the land but retain the use of all or part of it during their lifetime or the lifetime of the immediate family.
- Charitable Gift Annuity or Charitable Remainder Trust—Landowners may wish to donate their property in return for an annuity or fixed payment instead of a cash sale. This arrangement may have significant tax benefits to landowners who have held property for long periods and can be an effective estate planning tool.
Call us! The CHLP has a Land Protection Committee that meets monthly to review potential properties and to assist families in their desire to preserve and protect open space.
Further Information and Options
Land Conservation Background
Prepared by CHLP, December 2010
State and Federal Tax Law
Prior to planning protection strategies, each site should be evaluated by a conservation professional. In determining what rights a property owner may want to have reserved on a property that is being placed under a conservation easement, one must remember that the law states that those rights cannot negatively affect the conservation values on the property.
The Federal law reads that land may qualify for tax benefits if it provides one or more of the following conservation benefits:
- Outdoor recreation/education of the public (note: this benefit requires public access to a property; as noted elsewhere on this page, conservation easements do not require public access–the decision to allow the public onto a property is strictly the landowner’s.)
- Protection of relatively natural habitat of fish, wildlife, plants, ecosystems
- Preservation of open space (farmland/forest land)
- Pursuant to federal, state or local policy
- Open Space
- Pursuant to federal, state or local policy
- Scenic enjoyment by the general public (this requires that a property be viewable from some publicly accessible vantage point, such as a public road.)
- Historically important land area or certified historic structure
The tax benefits of a conservation easement sold at less than fair market value to a qualified land trust is treated as a charitable gift for the value of the development rights . The charitable gift amount is determined by an appraisal of the land prior to the conservation easement and after the conservation easement encumbers the land. This creates an income tax deduction of the landowner’s federal income taxes due. The deduction can be used as needed in years subsequent to the donation, or used to offset either ordinary income or capital gains. Congress just renewed the enhanced tax incentive for conservation easement donations! President Obama signed H.R. 4853, making the incentive effective through December 31, 2011 and retroactive to January 1, 2010.
Colorado taxes allow a tax credit against state income tax. The maximum amount of the credit is $375,000 for a $750,000 donation and this amount may be spread over 20 years, as needed. In addition, a conservation easement can lower the property tax value for estate tax purposes and may qualify the land for an addition partial exclusion from estate tax. This tax credit may be sold for immediate compensation, or may be used as a tax refund in years of state surplus. However, if a refund is claimed, the maximum amount of the total refund and the credit used to offset taxes is $50,000 for easements granted on or after January 1, 2003.
Using the example above, if a property’s value after a conservation easement reduced for estate tax purposes to $1.25 M rather than $2 M, the property value has been reduced by $750,000. With the high rate of estate taxes, the affect of the conservation easement may save the heirs as much as $235,000 to $350,000 after death of the landowner, depending on the size of the estate. Most importantly, it may mean the difference in the heirs needing to sell the property to pay the taxes or keeping it in the family.
Selected Case Studies of Conservation Projects-Prepared by Colorado Open Lands
Highline Farm, Arapahoe County, 19 acres
Partners: The Duke Family and Trust for Public Land, with funding from City of Greenwood Village, Arapahoe County and Great Outdoors Colorado
Conservation Values: The property, one of the last two undeveloped parcels of its size in the area, consists of open meadows and a small wetland that provide habitat for a variety of wildlife species, primarily small mammals and birds. The property also serves as valuable open space for the scenic views of the Rocky Mountains it provides to recreationists along the Highline Trail, which forms the eastern boundary of the property. The Trail serves as a tremendous amenity for residents of not only Greenwood Village but the greater Denver metro area for walking, jogging, biking, and horseback riding.
The easement is a part of the County’s South Platte Greenway Legacy Project. The property, which has been owned by the Duke family since 1952, lies a few miles south of another Colorado Open Lands easement in Cherry Hills Village and the Marjorie Perry Nature Preserve, which is 55 acres of protected open space owned by the City of Greenwood Village.
Marjorie Perry Nature Preserve, Arapahoe County, 4 acres
Partners: Greenwood Village, Arapahoe County, GOCO
Conservation Values: The Marjorie Perry Nature Preserve is fifty five acres of extraordinary natural beauty at the heart of Denver’s Southern metro area. The preserve is a treasured resource for those who walk, jog, bike and ride horses through stands of cottonwood trees, past ponds, wetlands and grasslands, enjoying wonderful views of the Front Range.
As part of the Trust for Public Lands’ (TPL) long-term commitment to provide access to nature for metro area residents, TPL worked with the City of Greenwood Village, the Greenwood Village Foundation, Arapahoe County, and Great Outdoors Colorado to purchase four acres of additional land and place a conservation easement on the preserve. This project was funded through:
- $1 million appropriation from the City of Greenwood Village;
- $250,000 from Arapahoe County Open Space;
- $250,000 from Great Outdoors Colorado (GOCO);
- $766,750 in private fundraising; and
- $2.75 million in landowner donations.
Quincy Farms Cherry Hills Village
(Catherine Anderson Property), Arapahoe County, 18 acres
Partners: Catherine Anderson, The Conservation Fund
Conservation Values: A long-time supporter of Colorado Open Lands, Catherine Anderson decided that it was time to protect an important urban gem for future generations. Eighteen acres is a lot in the city, and Anderson’s property is packed with history, wildlife habitat, public recreational opportunities, and scenic importance.
For starters, the house and farm buildings on the property are listed under the National Register of Historic Places as Hopkins Farm. The Highline Canal Trail, a highly popular public-use trail for pedestrians, cyclists, and equestrians, runs through the property. Luckily, you don’t have to walk the Highline Canal to see the property, since it is also visible from Quincy Avenue. The Anderson property also offers significant wildlife habitat with wetlands, a pond, and acres of natural areas that offer feeding and nesting areas to waterfowl such as the Hooded Merganser, as well as shorebirds, hawks and neo-tropical migrants.
Weil – East, Elbert County, 44 acres
Partners: Carl Weil
Conservation Values: Situated in the unique Black Forest but comprised of nearly all native grassland, Carl Weil’s land contains many native grass species, including little bluestem, big bluestem, green needle grass, needle and thread, prairie sand reed, blue grama, and several other native grasses. This stand has significance since most of the grasslands in the Black Forest were plowed for cropland, or otherwise converted to European pasture grasses.
Furthermore, four Colorado Natural Heritage Program-tracked butterfly species may potentially occur on this land. This is because portions of the habitats for all four species are found on the property and two of their host plants, little bluestem and big bluestem, are specifically found on this land.
Weil’s third donation culminates protection of his entire 120 acres, bringing him peace of mind for the future of this biologically unique land, bolstering his Wilderness Medicine School operations, and enhancing the scenic views of his community forever.
Weil Amended and Restated, Elbert County, 35 acres (76 total acres protected)
Partners: Fore-Weil LLC
Conservation Values: After running Wilderness Medicine Outfitters on his property for 35 years, Carl Weil decided it was time to permanently protect the land he relies upon for his highly successful school. Following his first conservation easement donation in 2005, Weil added acreage to the existing easement, further buffering Gold Creek, enhancing wildlife habitat and ensuring the land’s scenic beauty.
Part of a distinctive high uplift plateau, Weil’s property offers unique refuge for both plants and wildlife found only in lower plains or higher mountain locations. Gold Creek wends its way through a corner of the property, its banks scattered with plains cottonwoods, coyote willow, and other trees and shrubs, along with associated wetlands vegetated with cattails, bulrushes, and rushes.
Elsewhere on the land is a ponderosa pine forest and a small native grassland. The land is further defined by rolling hills of short-grass prairie that support a diverse assemblage of plants including over 30 medicinal plants and provide food, shelter, breeding ground, and migration corridors for nesting birds, raptors, mammals and amphibians.
Camp Rollandet, Denver County, 7 acres
Partners: City and County of Denver and Camp Fire Girls USA with funding from Great Outdoors Colorado
Conservation Values: After extensive negotiations and general worrying, the City and County of Denver successfully negotiated the purchase of this historic property owned by Camp Fire Girls USA. A $450,000 grant from Great Outdoors Colorado (GOCO) made the purchase possible for Denver, which intends to continue the property’s use for environmental education along with its historic name. Along with the grant from GOCO came a requirement to donate a conservation easement to ensure perpetual protection of the land.
Located along Sheridan Boulevard, a heavily used thoroughfare, these seven acres contain an enclave of upland prairie open space and wooded areas within a heavily urbanized area. A wooded ravine on the Property serves as natural habitat and a corridor for several small mammals and birds including fox, deer, rabbits, raccoons, and coyote. Protection of the property now provides an opportunity to preserve and restore wildlife habitat and native plant biodiversity.
Public access to the property will be permitted but controlled to assure that passive recreational and educational uses are low impact. Programs and activities will be conducted in a manner to preserve and protect the natural conditions on the property and to showcase a sustainable eco-system within an urban setting.
Heine Wildlife Sanctuary, Jefferson County, 3.7 acres
Partners: Karin Heine
Conservation Values: Karin Heine put her money where her heart is, buying a heavily wooded piece of land and turning it over to the critters living there. After five years of planting berries, trees, and shrubs, Heine’s sanctuary nourishes everything from butterflies and bluebirds to foxes and deer.
But it will never accommodate the 16 houses that could have been built on the site. Classes from Alpine Valley School and other schools in the area tour the sanctuary and the local Girl Scouts and neighborhood kids are regular contributors to the welfare of the site.
Heron Pond, Denver County, 21.07 acres
Partners: Colorado Open Lands and the City and County of Denver
Conservation Values: Heron Pond, currently containing environmentally toxic materials, is in the process of being remediated by the City. Once finished, the property will provide valuable urban open space along the South Platte River.
A wildlife viewing area will be provided and visitors will find educational information about the ecology of the South Platte River floodplain ecosystem. The City is also restoring the wetland, riparian, and upland communities on the property. Once completed, the property will contain open space, scenic, wildlife habitat, and passive recreational values for residents and visitors of Denver.
Indian Hills, Jefferson County, 3 acres
Partners: The landowners
Conservation Values: In addition to a resident population of owls, Indian Hills provides important wildlife habitat for mule deer, elk, black bear, mountain lion, cottontail and coyote, and serves as habitat for several species of hawks.
In the family for 26 years, the couple that own the land have had a lifelong love of the outdoors, but have also watched the land around them develop over the years. Wishing to see it remain open and forever protected from development, they considered their options and ultimately decided to donate a conservation easement to Colorado Open Lands.
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