6/28/2016 Land Trust Standards & Practices on Conservation - PDF document

6/28/2016 Land Trust Standards & Practices on Conservation Easements Standards 8, 9, 10 (drafting) & 11 (stewardship) • Good conservation: deals and deeds • Enforceable conditions: drafting and baselines • Defense: Good monitoring practices, baselines, and landowner relationships • Perpetuity: Stewardship reserves, amendments • Tax policy: Qualifying transactions, Amendments 1 Project Selection & Planning, not specific to Easements 8B. Project Selection Criteria and Public Benefit 8C. Property Evaluation 8D. Project Planning 9A. Legal Review 9C. Environmental Due Diligence for Hazardous Materials 9D. Determining Property Boundaries 9F. Title Investigation and Recording 9G. Recordkeeping 9H. Purchasing Land or Conservation Easements 9I. Selling Land or Conservation Easements 9J. Transfers and Exchanges of Land or Conservation Easements Standard 10: Tax Benefits and Appraisals 2 Practice 9E: Easement Drafting No significant change in the proposed revisions 9E1. Every conservation easement a. Individually tailor it to the specific property b. Identify the conservation values being protected c. Only allow uses and permitted rights that are not inconsistent with the conservation purposes and that will not significantly impair the important conservation values d. Only include restrictions and permitted rights that the land trust is capable of monitoring and enforcing e. Include all necessary and appropriate provisions to ensure it is legally enforceable 9E2. Ensure each federally tax-deductible easement is consistent with the Treasury Department regulations (U.S.C. § 1.170A-14) 3 1

6/28/2016 Accreditation Requirements Indicator Practice 9E Key Elements of the Indicator Practice • Conservation easements are individually tailored to the specific property according to a project plan or process. • Conservation easements only permit uses and reserved rights that will not significantly impair the important conservation values. • Conservation easement restrictions are within the capacity of the organization to monitor. • Conservation easements are enforceable. 4 Accreditation Requirements Indicator Practice 9E Additional Elements of Practice Implementation • The person responsible for drafting the organization’s conservation easements has the necessary knowledge and experience or the organization obtains legal review of its conservation easements. • The conservation easement contains all basic elements . • If the organization’s standard conservation easements include a broad discretionary consent clause, then the organization has conservation easement provisions, discretionary consent policies, procedures, or guidelines, and/or amendment policies or procedures (also relates to practice 11I) that address discretionary consent. • If the landowner intends to take a tax deduction for a conservation easement donation or bargain sale of a conservation easement, then the conservation easement must meet the requirements of the Internal Revenue Code and Treasury Department Regulations. 5 9E2. Ensure each federally tax-deductible easement is consistent with the Treasury Department regulations (U.S.C. § 1.170A-14) Basic Elements: If the landowner intends on taking a tax deduction, the conservation easement also must include the following elements required by the Treasury Department Regulations (U.S.C. §1.170A-14) • Statement that the conservation easement is perpetual • Identification of one or more conservation purposes as defined in the Treasury Department Regulations • Prohibition on the surface extraction of minerals • Provision that the conservation easement is transferrable only to another qualified organization that agrees to carry out the original conservation purposes of the conservation easement • Extinguishment provisions that include the following In the event of termination or condemnation, the organization is entitled to proportionate proceeds o to be used consistent with the conservation purposes Extinguishment for unexpected changes that make continued use of the property impossible or o impractical for conservation purposes can only be accomplished by judicial proceedings • The conservation easement must give rise to an immediately vested property right 6 2

6/28/2016 The Alliance’s Draft Proposal & “Andrew’s Blogpost” Tax Shelters aren’t Charity Cut off Tax Shelters Non-Adversarial Valuation • • 100+ member partnerships c/n opt out IRS to defer to other federal agency valuations • Deductions limited to <250% partner’s • basis for 5 yrs Establish: • Donations >$2M “reportable • Canadian panel, Arbitration by non-IRS transactions” appraisers, or Baseball Arbitration Stop IRS Attacks on Good Easements Other Reforms • • Allow amendments (*no net private No easements on golf courses benefit, positive conservation benefit) • Halve capital gains tax on conservation • Allow corrections w/I 90 days sales • Modernize “Conservation Purpose” • Apply easement incentive to conservation donations in fee • Defer estate taxes on ranch, farm and Change who is Audited - Establish Audit forest land until actually sold Panel • Remove recapture penalty for 2032A caused by sale of easement 7 3