Pointers for Drafting the Proceeds Clause in Conservation Easements

Two U.S. Court decisions raised questions regarding the permitted extent, use, size and location of building rights in deductible conservation easements, including bargain sales. The Alliance has taken steps to address this for its members, but land trusts should evaluate easement templates.

Recent advice from the IRS Office of Chief Counsel reiterates the IRS’s position on perpetual conservation easements on land where the landowner retains the rights to extract minerals using surface mining methods.

If consistently and professionally prepared in the ordinary course of business, baseline documentation can help defend the easement by creating an exception to hearsay rules, allowing the baseline to be introduced as evidence in court even though the preparer(s) of the baseline is no longer available to testify to its accuracy. This factsheet explains the purpose of baselines, describes "minimally complete and adequate," and discusses certification and storage.

Negotiating easement terms with a landowner attorney who is not experienced in conservation law can be a challenge. The pointer provides a sampling of easement language to orient attorneys for landowners on the variety of easement provisions which are non-negotiable. Share it with landowners and their attorneys for smoother easement negotiations.

These drafting pointers will help you consider the minimum criteria for a sound forestry clause, whether the landowner manages the conserved land for timber income or whether forest management activities support personal use goals, such as firewood production, habitat improvement or recreation.

Ongoing communication between an easement holder and a landowner is critical to ensure that activities on and uses of the land are consistent with an easement's conservation purposes. To effectuate this goal, conservation easements often include clauses governing activities or uses permitted only when the landowner requests the express prior approval of the easement holder. This Practical Pointer contains elements to consider in drafting approval standards.