Private landowners have two basic options to preserve and protect the natural landscapes and open spaces on their property: Donation of land (fee title transfer) to the City or a non-profit conservation organization, and granting of a conservation easement that allows continued private ownership but requires the owner to give up future development rights. Both approaches can have significant tax benefits to landowners, either as tax-deductible gifts or by qualifying for Colorado and federal tax credits to encourage land conservation. Individuals should consult their own tax and legal advisors to see how those tax strategies might apply to their situation and as part of their estate planning.
Donation of land to the City or to a non-profit such as CHLP is a simple fee title transfer that grants the owner a tax-deductible gift against income tax, capital gains, or estate taxes. There are several ways to donate land. One is an outright donation and title transfer, in which the owner would likely take a tax deduction for the full appraised value. The seller can grant title during their lifetime or as part of their estate. This strategy has been effective when properties have been held for many years and have experienced a high appreciation in value.
The second is a bargain sale in which the landowner receives less than fair market value in cash and a tax deduction based on the difference between the fair market value and the cash price. This is a good option for landowners who would like to receive some current income from the sale, but would also like to make a lasting legacy gift of open space. It does require fund-raising and resources for the cash portion of the purchase.
Another option for landowners is to grant a conservation easement to a non-profit land trust or municipal entity. What is a Conservation Easement? It is a legal restriction that attaches to the property deed and follows the land regardless of future ownership. This agreement is between the landowner and a land trust so that the landowner gives up future development rights in exchange for current tax credits now, and the land trust monitors the property to ensure that agreement is followed over time. The landowner then applies for state and federal tax credits based on the different between the property’s fair market value with and without the development rights. [Disclaimer: Each property is unique and there are many requirements for properties with conservation easements to qualify for such tax credits. Further, CHLP is not a legal or tax advisor – please consult your own advisors as to your specific situation. ]
If a family is not ready to commit to a permanent land protection strategy, they can be a “conservation-minded buyer” that honors their stewardship responsibility at the present time (and accordingly limits development impact, protects natural habitat, and preserves scenic view lines) and protects the possibility of permanent protection in the future.
For more information and case studies on conservation options, click here.