Landowners Can Receive Tax Benefits for Donating to the Future Management of Conservation Easements [Note]

Abstract

Conservation easements are supposed to place protections on land forever. But that requires a responsible party to forever monitor and enforce the easement’s terms. Monitoring and enforcement require resources, and someone has to provide those resources. Today, landowners who are donating or selling conservation easements to land trusts are often required to contribute funds for the future management of the easement, including a land trust’s general operating costs. If the conservation easement itself is donated, its value can be deducted as a charitable contribution for income tax purposes. But it is less clear whether other required payments for monitoring and enforcement of the easement can also be deducted as charitable contributions. Charitable deductibility is determined in a holistic, case-by-case analysis by the IRS and courts. Existing guidance is therefore vague, and experts are reluctant to make anything resembling substantial predictions. This note serves to fill in some of the gaps resulting from that vagueness. The short answer is: yes, so long as a conservation easement transaction is not considered quid pro quo, landowners can deduct their required contributions to land trusts for the future monitoring and enforcement of conservation easements.