Land Donations and Conservation Restrictions

What Is a Conservation Restriction?

A conservation restriction (also called a conservation easement) is a permanent legal agreement between a landowner and a qualified conservation organization or government agency that protects the conservation values of a property.

With a conservation restriction:

• You continue to own the land.
• You voluntarily give up some or all of the property’s future development rights.
• The restriction is permanently recorded with the property’s deed and remains in effect for all future owners.
• The land can continue to be used, sold, inherited, or transferred, subject to the terms of the restriction.

The purpose is to permanently protect important natural and cultural resources, including wildlife habitat, forests and woodlands, farmland, wetlands and waterways, scenic landscapes, historic and archaeological resources, and open space for future generations.

Potential Tax Benefits

Donating a qualifying conservation restriction may provide several financial benefits. Because every situation is unique, landowners should consult a qualified tax professional.

Federal Income Tax Deduction — A donated conservation restriction may qualify as a charitable contribution. The deduction is based on the difference between the property’s fair market value before and after the restriction. The deduction is generally limited to 30% of the donor’s adjusted gross income (AGI) in the year of donation, with any unused portion carried forward for up to five additional years.

Estate Tax Benefits — Because a conservation restriction typically reduces a property’s market value, it may also reduce the taxable value of an estate, potentially lowering federal estate taxes.

Reduced Real Estate Taxes — Permanently limiting development may reduce a property’s assessed value, which could result in lower local property taxes.

Massachusetts Conservation Land Tax Credit — Under Chapter 509 of the Acts of 2008, eligible landowners who donate land, donate a conservation restriction, or complete a qualifying bargain sale may be eligible for a state income tax credit of 50% of the appraised value of the donated interest, up to a maximum of $50,000.

Example: If your property is worth $800,000 before a conservation restriction and $550,000 after, the value of the donated restriction would be $250,000. The charitable deduction would generally be based on this reduction, subject to IRS rules.

Requirements for Federal Tax Deductibility — To qualify, a conservation restriction must be permanent, donated to a qualified organization, supported by a qualified appraisal, and donated exclusively for recognized conservation purposes.

Purchase of Development Rights (PDR) — A PDR program compensates landowners who voluntarily sell the right to develop their property while retaining ownership. These programs are especially valuable for farmers. Funding sources include the Massachusetts Agricultural Preservation Restriction (APR) Program and Community Preservation Act (CPA) funds from Fairhaven and Acushnet.

How These Programs Work Together — Landowners can often combine several conservation funding sources. The APR Program may purchase development rights, CPA funds can bridge funding gaps, and any remaining value may be donated as a bargain sale qualifying for tax benefits.

Important: Donating a conservation restriction is both a significant conservation decision and a legal transaction. Landowners are strongly encouraged to work with a qualified land trust, certified real estate appraiser, CPA or tax professional, and an attorney experienced in conservation easements.