Land Trusts Help Protect the Environment and Save Money, Too
In the central Iowa town of Ackley, near the banks of the Iowa River, you"ll find Bob deNeui, a submarine engineer-turned-conservationist. You"ll find him fishing for bass or catfish, or he may be out collecting firewood. Sometimes you"ll find him camping in the dense woodlands near his farm, which are full of deer, coyotes, wild turkeys, hawks and the occasional eagle.
When deNeui left the Navy 25 years ago and bought a 700-acre farm, he made a decision not to disrupt this 200-acre tract of woodlands. That’s odd for an Iowa farmer, most of whom sell the trees to loggers and raise resource-hungry animals or monocultured crops. Or they parcel out their property for new housing and development. Farming isn’t a lucrative profession, after all, and most farmers have to be very efficient to get by.
"I wanted to keep it as is, because to me, that’s where the value is," says deNeui. "It’s a little island of woods in the middle of crop ground." And thanks to deNeui, it’s here to stay. A few years back, he teamed up with a land trust to secure a conservation easement, which is a legal agreement ensuring no development or logging will ever take place in his forest.
It’s an option more and more landowners are choosing. Land trusts, nonprofit organizations that protect environmentally significant acreage, are the fastest-growing arm of the conservation movement. More than 1,200 land trusts exist today, up from 53 in 1950, according to the Land Trust Alliance. The majority of these organizations operate locally, focusing their efforts on just one county, one watershed, one forest or one island.
Land trusts give landowners peace of mind by ensuring a property will be protected in perpetuity. But they also offer another advantage, as deNeui discovered: substantial tax benefits. Because of their nonprofit status, conserving land through a land trust is considered a charitable donation by the Internal Revenue Service (IRS).
Here’s how it works: Conservation Easement. One of the most popular preservation options, a conservation easement is flexible, allowing landowners to permanently restrict development and logging on certain pieces of land. Restricting these uses often results in a lower property value, and this decrease in value can be written off as a charitable donation. Additionally, the lower value works to decrease estate taxes, which can be as much as half of a property’s value.
Outright Donation. You can also simply hand over land, allowing a trust to manage it permanently. This is popular among landowners who don’t plan to live on the land or don’t plan to pass it on to their heirs. "If you donate your land outright, it’s like donating art to a museum," says Martha Nudel of the Land Trust Alliance.
Bargain Sale. For those who would like their property preserved but need some cash for selling the land, a bargain sale allows landowners to sell the land to a trust at a discounted rate. The difference between the sale price and the property’s fair market value can be deducted, offsetting capital gains taxes incurred by selling the property. The bargain sale doesn’t work everywhere because it requires a trust to have accessible cash. A third of the country’s land trusts don’t even have a single paid staff member, so there’s no guarantee your local trust can accommodate a bargain sale.
"Do your research. Find the right group," says Anita O"Gara of the Iowa Natural Heritage Foundation, a trust that helped deNeui set up his conservation easement. "The key is to pick an organization that is stable and you can trust." When deNeui donated his property’s development and logging rights, the land’s assessed value dropped by $250,000. In the same year, he sold another property in nearby Des Moines.
The conservation easement decreased his capital gains taxes brought by the Des Moines sale by $25,000 in the first year alone. Since the IRS only allows 30 percent of gross adjusted income to be claimed as a charitable donation, deNeui spread the tax benefits from his conservation easement out for the next five years. Now he pays about 10 percent of his income to the IRS, a 20 percent reduction. "That helped to lessen my tax bill over the next six years," he says. "That was an incentive, though I probably would’ve done it anyway. It needs to be done."