"Green" charitable contributions.

• Author: O'Connell, Frank J., Jr.

A qualified conservation contribution, usually in the form of a conservation easement, is a tax-saving tool often overlooked by landowners and their tax advisers. A planned giving program using conservation easements will generate Federal and state income tax savings and leave a legacy of protected land for future generations.

Statutory Requirements

Sec. 170(h) allows a charitable deduction for contributions of certain partial interests in real property for conservation purposes. To qualify, a donor must meet the following four requirements:

1. The property must be a "qualified real property interest."

2. The property must be donated to a "qualified organization."

3. A donation made for "conservation purposes" must include at least one of the following (under Sec. 170(h)(4)(A)):

   * Preservation of land areas for outdoor recreation by, or for the education of, the general public;

   * Protection of a relatively natural habitat of fish, wildlife, or plants or similar ecosystem;

   * Preservation of open space (including farmland and forest land), when such preservation will yield a significant public benefit and is (1) for the scenic enjoyment of the general public or (2) pursuant to a clearly delineated governmental (e.g., Federal, state or local) conservation policy; or

   * Preservation of a historically important land area or a certified historic structure.

4. The contribution must be "exclusively" for conservation purposes. However, Regs. Sec. 1.170A-14(e)(2) states that this does not prohibit certain uses (e.g., selective timber harvesting or selective farming) if, under the circumstances, they do not impair significant conservation interests.

   What Is a Conservation Easement?

   A conservation easement is a legal agreement between a landowner and a government, public charity or land trust that permanently protects land by limiting the extent and type of development, but leaving the land in private ownership. The conservation easement usually results in a qualified conservation contribution.

   The decrease in the fair market value (FMV) of property donated in perpetuity may generate a deductible charitable contribution. When a landowner establishes a conservation easement, he or she may continue to live on the land or work it--in accordance with the easement's provisions--and can sell the land or pass it on to heirs.

   Conservation easements offer many options and can be written to define the conservation purpose. An easement that protects a wildlife habitat...