Enduring protection for the land

A landowner may consider donating a conservation easement for many reasons. Passion for a place. Safeguarding the soil. Peace of mind. Leaving a legacy. Few would say they do it for the money, but for many owners it is a major financial decision affecting their largest asset — the land.

Qualified owners of land with important agricultural, natural or historic resources can receive tax benefits if they donate a conservation easement to a nonprofit land trust or agency. The enhanced federal tax incentive for conservation easement donations was made permanent in 2015 — a top goal for the Land Trust Alliance — and since then it has helped many working farm and ranch families establish enduring protections for their land.

Rick Berg is the fourth generation of his family to live and work on the sprawling cattle ranch 70 miles north of Livingston at the upper end of the Musselshell River Valley in the shadow of the Crazy and the Castle mountain ranges. The ranch ascends from the valley floor up to 6,800 feet, providing habitat for healthy wildlife populations of moose, elk, deer, pronghorn, black bears, sandhill cranes and dozens of other species in a setting that offers both the long views and the wide open spaces that Rick loves. 

His great grandfather Jakob Berg, a Norwegian immigrant, homesteaded there around 1890 and by 1916 had amassed much of the 7,500 acres that make up the ranch today. Rick’s grandfather and his father followed in Jakob’s footsteps, as Rick follows in theirs and as his daughter Kari hopes to follow in his. 

But with five bad drought years in a row in the early 2000s and a fifth generation of the family ready to come home, Rick and his wife Gayle knew they would need help preserving that legacy. Rick had watched as irreplaceable farmland in the Gallatin and Flathead valleys was lost to development, and he didn’t want that to happen to his ranch. In 2006, that led him to donate a conservation easement to the accredited Montana Land Reliance, which has protected more than a million acres of land in the state. 

As a qualified rancher (he receives more than 50% of his gross income from ranching),  Rick was able to take advantage of the then brand-new federal incentive program, as well as its permanent extension in 2015. He could deduct up to 100% of his income in the year of the easement transaction, up to the amount of the donated value. Any remaining value could be carried forward for up to 15 years.

“It’s been a big help. Once in a while in the cattle business we’ll have a great year, and it’s been very beneficial to use the charitable tax deduction to save the money that would have been paid as income tax and use it in the bad years.” It will help his daughter Kari, too, who moved back to the ranch with her husband and two children in 2012 and took over most of the management. “So they’re the fifth generation, and I’ve got grandkids just down the road who may become the sixth generation and will keep this thing going. It’s been a pretty amazing family legacy.”

Gloria Wraight says the Ellington, Connecticut, farm that passed from her in-laws to her husband John is “something of an oasis.” The farm comprises 37 acres of hay fields, pastureland and woodlands, but the area around the farm is experiencing rapid residential growth. With its considerable road frontage, the Wraight Farm is particularly attractive to developers of house lots.

Beginning in 1956, John Wraight’s father raised pheasants and Hereford cattle until illness forced him to phase out the business. John had joined the Navy, then went into other work, though he continued to cultivate the hayfields. After his father passed away, there was no one to take over the farm. “He’s an only child, and we don’t have children,” explains Gloria. “We’re in our 70s and it’s getting to be too much to try to keep up the properties.”

“We didn’t want to see it developed, so that’s why we contacted the Connecticut Farmland Trust [accredited] in 2019 to see if we could donate the easement to them and that way preserve it from development,” says Gloria. Because the easement-protected property would decrease in value, the Wraights could sell the farm at a reduced price to someone who would continue farming there. “We had to get two appraisals — one as if we would be selling it to a developer and one that was a farmland appraisal.” The difference between the two amounts is the value of the easement, and thus the amount the Wraights could claim as a charitable contribution and get the federal incentive. “The tax incentive was just kind of a bonus. We didn’t do it for that reason, but it helped us on our taxes.” 

Conservation Manager Kathleen Doherty says Connecticut Farmland Trust has worked with many farmers and landowners of moderate means who have taken advantage of the incentive. CFT also helps administer Connecticut Farmlink, a clearinghouse for the transition between generations of landowners, where the Wraight Farm is currently listed.

Erik Glenn, executive director of the accredited Colorado Cattlemen’s Agricultural Land Trust, calls the federal tax incentive an important tool in the conservation toolbox. “If we want to conserve working farms and ranches, preserve open space and wildlife habitat, hit climate targets or any other environmental targets, we have to incentivize people who own the land, and sometimes a tax deduction helps,” he says. 

Colorado rancher Jay Fetcher’s father first considered conveying a conservation easement on his 1,400-acre cattle ranch while doing estate planning in 1993. The ranch is located near the popular Steamboat Springs ski area where the price of land for vacation homesites far outpaced its agricultural value. “If he had died at that point, we would have had to sell half the ranch to pay the estate tax, but that’s a small part of it,” said Fetcher. “The main driving force for us to look at the easement was the passion we had to protect that land forever.” 

A 1994 easement donation allowed the Fetchers to take a charitable deduction on their taxes. “But truthfully we ranchers don’t make enough to use that.” The greatest advantage for conserving their land at the time was the value loss the easement created, which had benefits for estate planning purposes. Jay felt that conservation easements could greatly benefit other farmers and ranchers, too, and in 1995 he went on to establish the Colorado Cattlemen’s Agricultural Land Trust with the Colorado Cattlemen’s Association, the first land trust formed by a state livestock association. 

Colorado is one of 14 states offering some form of tax credit for conservation easement donations. Beginning in 2000, landowners could donate an easement and get a direct state tax credit, Jay explains, and in some ways the state credit was more effective than the federal deduction, especially if an owner sells the easement for less than its stated value in what is known as a “bargain sale.” That’s where the enhanced deduction really makes a difference, Glenn says, because it provides tax relief from the revenues they received as part of selling the easement. 

It also benefits landowners who sell their state tax credits. After protecting the initial ranch in 1994, the Fetchers conserved other portions of their ranch through a bargain sale. They were then able to use the federal tax deduction to offset the proceeds from the bargain sale and the sale of tax credits.

In 1988, Larry and Sue Koehrsen bought a 145-acre Iowa farm located about halfway between Iowa City and Cedar Rapids on Iowa Highway 1, an easy 15-minute commute to either city. They envisioned it as a weekend retreat for their family, though they seldom sat idle when they were there. “We probably planted 30,000 trees on that farm over the time that we owned it,” recalls Larry. They also restored about 50 acres of native grasses and wildflowers and rented out other acreage for crops. But by 2017, they had moved farther from the farm and were not able to spend as much time there. Their son and daughter, the farm’s co-owners, lived out of state. They made the difficult decision to sell, but wanted to make sure the farm was protected from the area’s growing residential development pressure and that it would remain available for agriculture, so they contacted the accredited Iowa Natural Heritage Foundation.

“We have always had a strong interest in preserving the land,” says Larry, “and so a conservation easement was just a logical way to protect it.” By donating the easement to INHF, the Koehrsens qualified for the enhanced federal tax incentive based on the difference between the land’s appraised value before and after completing the conservation easement. “That worked out very nicely for us,” says Larry.

The property is a model combination of rural Iowa agriculture and woodland, according to INHF’s Conservation Easement Director Erin Van Waus. Easement provisions protect the natural features of the property — mature stands of walnut, hickory and oak trees, a 7-acre riparian buffer strip along the stream that bisects the property, wildlife habitat and about 15 acres of prairie. They also provide for the agricultural use of the land to preserve the character of the landscape.

Just up the road, Matt Kroul had grown up at his family’s farm, a diversified operation with pumpkins as the main cash crop, in addition to flowers, sweet corn and other produce. The family also sells firewood and rough-cut lumber, and operates a farm store. Matt was a standout high school and college football player at the University of Iowa, and he played professional football for four years with the New York Jets. At 27, he returned home.

When the Koehrsens decided to sell, they thought of him. His family had done some farming for them over the years, and they knew Matt was interested in expanding the business. With land in the area selling for up to $10,000 an acre, it would be almost impossible for a young farmer like Matt to get a start. Because the conservation easement reduced the land’s fair market value enough to put the selling price within reach, and with a loan from the USDA Farm Service Agency’s “Beginning Farmer” program, Matt and his wife Nicole were able  to purchase the property from the Koehrsens and will farm nearly 70 arable acres, with the rest of the property remaining in trees or permanent native grasses. “The price that we were able to get it at came with some stipulations, but those stipulations didn’t really bother us since they fit the scheme that we believe in anyway,” says Matt. Now, he says, “My full-time job is that farm and everything we do there.”

For land trusts across the country, the permanent incentive represents increased opportunities to protect the special places in their communities. For landowners, it offers a prudent way to both save the land and realize significant federal tax savings, helping them afford to choose conservation over development. When incentives are in place, conservation easement donations increase and more land gets saved.