Land Conservation: How to Protect and Preserve Nature’s Legacy in Perpetuity

Landowners are increasingly seeking strategies to preserve habitats, safeguard biodiversity, protect local heritage, and ensure equitable access to open spaces for generations to come.

If you are thinking of protecting land that you own, there is much to know and different paths you might take. Among the most popular and effective strategies: conservation easements and donations to private foundations; public charities, such as land trusts; or government entities, such as local, state, or national park systems.

As complicated as these options may seem, they are worth exploring as the potential benefits to communities, humanity, the planet, and a donor’s family can be enormous.

The Big Picture
In the U.S., there are about 2.6 billion acres of land. About 1.3 billion acres of this land is privately owned, with states’ percentage of private versus public ownership varying greatly.¹

Across the U.S., urban areas have more than quadrupled since 1945.¹ This development includes structures (homes, buildings, factories) and infrastructure (roads, bridges, utilities). The American Farmland Trust reports that 11 million acres of farmland have been lost to development in the last 20 years alone.

Put another way: Every year about 1 to 2 million U.S. acres are converted from natural or agricultural use to urban and suburban development. That is the equivalent of adding a new city practically double the size of Los Angeles annually.

On the other hand, between 2010 and 2020, more than 61 million acres were voluntarily conserved by land trusts, a 15-million-acre increase over the decade.² Land trusts, or land conservancies, are nonprofits that take control of land and manage it according to their missions, which are generally centered on preservation and, increasingly, restoration of natural landscapes.

Permanent Protection 
The most straightforward way to protect and preserve land in the U.S. may be to donate it, now or in your will, either to a nonprofit or private foundation that has a mission aligned with your preservation goals, a land trust dedicated to conservation, or a government parks entity.

However, the most common approach is to protect land with a “conservation easement.” An estimated 38 million U.S. acres are subject to conservation easement today.³

What appeals to many landowners is that conservation easements enable them to receive significant tax benefits and achieve their preservation goals yet continue to own the land and retain any existing structures while restricting future development.

Indeed, most owners opt against donating their conservation easement land. For example: Ted Turner, one of the largest private landowners in the U.S., has placed substantial portions of his land under conservation easements but has retained ownership.

Easements terms vary and can be tailored, but the goal is always to conserve the land either in its natural state or as a working farm, ranch, or sustainable timber enterprise. The land in question can be entered into an easement in its entirety or in part. At the owner’s discretion, some conservation easements also permit public access for recreational use, such as hiking or bird watching. These restrictions, it is important to note, reduce the property’s value.

The main function of an easement is to prohibit future residential and commercial development, subdivision, industrial use, and major alteration of natural features. Putting land into a conservation easement therefore can be an important, added layer of protection if you are donating land to a private foundation. However, this safeguard may be unnecessary if the land is being donated to a public charity or government entity whose mission is to conserve land.

Tax Benefits
If tax reduction is the primary goal, the best approach may be to donate the land to a public charity.

While you may donate land to a private foundation, it is less common than donating to a public charity because the tax benefit is reduced. There are additional complexities if there is an outstanding mortgage on the land when contributing to a private foundation that would need to be considered.

Retained Ownership

Tax breaks for landowners who engage in conservation easements and retain ownership can be meaningful:

• Federal income tax deduction — The deduction is based on the reduction in the land’s value due to the restrictions imposed by the easement. Landowners are eligible to deduct up to 50% of their adjusted gross income (AGI) each year, with their unused portion carried forward and available for use for up to 15 years. Qualified farmers and ranchers may deduct up to 100% of their AGI.
• Estate tax deduction — By reducing or eliminating development rights, a conservation easement reduces the value of the property, potentially reducing the value of an estate and therefore the estate taxes (both federal and state) that may be owed.

• Property tax relief — It is possible, and relatively common, for property taxes to decrease due to a conservation easement. However, that reduction depends on local tax rules and how the land was initially assessed. For example, easements on agricultural or open space may not see a significant tax reduction, as they already have a lower tax rate based on current use rather than potential for development.⁴
• State taxes — Many states offer tax breaks for conservation easements; its important to check with your tax advisors to determine what may be available in your state. Among the most generous is Virginia, which allows landowners to claim a credit of 40% of the appraised fair market value of the land at the time of donation. For tax years beginning January 1, 2023, the land preservation tax credit is limited to $50,000 per taxpayer, per tax year. Any unused credit may be carried forward for 10 years.

Donating Land in Full

Tax benefits are significantly greater if the land is donated in its entirety, with or without an easement:

• Federal income taxes — The landowner may qualify for a charitable deduction based on the full fair market value of the property at the time of the donation.
• Capital gains taxes — Landowners can avoid capital gains tax that would have been owed if they had sold the land at a profit.
• Estate taxes — The value of the property is removed completely from the landowner’s estate.
• Property taxes — The former owner is no longer responsible for property taxes.
• State income taxes — Landowners may be eligible to receive state tax credits.

In order to qualify for the tax benefits, the contribution must be exclusively for a conservation purpose, where the term “conservation purpose” means:

• The preservation of land areas for outdoor recreation by, or the education of, the general public.
• The protection of a relatively natural habitat of fish, wildlife, or plants, or similar ecosystem.
• The preservation of a historically important land area or a certified historic structure.
• The preservation of open space (including farmland and forest land) where such preservation is for the scenic enjoyment of the public, or pursuant to a clearly delineated federal, state, or local governmental conservation policy, and will yield a significant public benefit.⁵

Partial Donations

It is possible but more complicated to donate partial interests in easements by transferring ownership rights over time or splitting the donation among multiple parties. That would alter the landowner’s potential tax breaks.

The property must have important conservation values (e.g., natural habitats, open spaces, historical lands) as defined by the IRS and conservation organizations.

Professional Assistance Is Advised

Easements and land donations in general are major commitments that require careful planning and independent financial, tax, and legal advice. Donating an easement also necessitates a strong working partnership with a third-party recipient — i.e., the charity or government entity.

Despite the complexities, you may want to consider protecting your land in a world where the pressure to develop and urbanize is ever increasing.

If you are interested in learning more about how you might leverage your landholdings for conservation purposes, please contact your Bessemer advisor.