Frontera Land Alliance

Conservation Agreements

The Frontera Land Alliance (Frontera) is devoted solely to conserving land. Frontera conserves special lands and waters by permanently protecting them from development for the benefit of the people, economy and wildlife of our state.

Conservation agreements (also known as a conservation easement) offer great flexibility. If the donation benefits the public by permanently protecting important conservation resources and meets other federal tax code requirements it can qualify as a tax-deductible charitable donation. The amount of the donation is the difference between the land’s value with the easement and its value without the easement. Placing an easement on your property may or may not result in property tax savings.

Conservation agreements permanently limit uses of the land in order to protect its conservation values. It allows the owner to continue to own and use your land and to sell it or pass it on to heirs. Future owners will be bound by the agreement’s terms.

By protecting these lands, land trusts help ensure that every Texan has access to clean water, the freedom and peace granted by natural areas and the opportunity to be physically connected to our natural and cultural heritage.
People execute a conservation easement because they love their open space land, and want to protect their land from inappropriate development while keeping their private ownership of the property. Perhaps most important, a conservation easement can be essential for passing land on to the next generation. By removing the land’s development potential, the easement lowers its market value, which in turn lowers estate tax.
The Frontera Land Alliance and the landowner(s) work together to write a conservation easement that reflect both the landowner’s desires and the need to protect conservation values. A conservation easement restricts development to the degree that is necessary to protect the significant conservation values of that particular property. The conservation easement does not allow for public access unless otherwise stated and the conservation easement can be placed on a portion of the land or the entire land. Every conservation easement is unique, tailored to a particular landowner’s goals and their land.
Most conservation easements “run with the land,” binding the original owner and all subsequent owners to the conservation easement’s restrictions. Only gifts of perpetual conservation easements can qualify for income and estate tax benefits. The conservation easement is recorded at the county or town records office so all future owners and lenders will learn about the restrictions.
The Frontera Land Alliance is responsible for enforcing the restrictions that the easement document spells out. The Frontera Land Alliance monitors the property once a year to determine that the property remains in the condition prescribed by the easement document. The Frontera Land Alliance maintains written records of these monitoring visits.

IRS regulations require that the property have “significant” conservation values. This includes forests, wetlands, endangered species habitat, ranches, scenic areas and more.
Federal law governs only the tax treatment of a conservation easement as a charitable gift. While you should consult your attorney or a person knowledgeable of federal requirements, in general the following rules apply in order to receive a tax benefit:

1. The conservation easement must be granted in perpetuity (mortgage and/or contract holders must agree to subordinate to the easement).

2. The easement must provide at least one of the following three conservation purposes:
- Protection of relatively natural habitat for fish, wildlife, plants or similar ecosystems,
- Preservation of open space (including farmland, ranchland or forest land) for (1) scenic enjoyment of the general public and/or (2) significant public benefit pursuant to a clearly delineated government policy,
- Preservation of land areas for the education of or outdoor recreation by the general public.

3. The easement must be granted to a qualified organization.

4.The easement must prohibit all surface mining. If the easement donor does not own all of the mineral rights, the possibility of surface mining must be determined “so remote as to be negligible.”

5. Resource data documenting the conservation values of the property must be collected prior to donation of the easement.

If you are interested in The Frontera Land Alliance at 915-351-TFLA or email The Frontera Land Alliance Staff will be happy to discuss with you your situation, concerns and wishes in a confidential manner.
The below information describes new estate tax benefits and has been reprinted from the Land Alliance. For more information please log on to

Land Trust Alliance
1331 Street, NW Suite 400
Washington, DC 20005
Tel: 202-638-4725
Fax: 202-638-4730000
The donation of a conservation easement by a landowner can be an effective means to reduce estate taxes on lands. Section 2055(f) of the Internal Revenue Code (I.R.C.) allows donations of qualifying easements to a public charity such as a land The Frontera Land Alliance to be deducted from the taxable value of an estate.

Section 508 of Public Law 105-34 (the Taxpayer Relief Act of 1997) created another benefit for donations of easements, I.R.C. section 2031(c). This benefit can reduce the taxable value of an estate an additional amount, up to $500,000. This section of the code can be confusing because of the way it is worded. But it does work, and the IRS has confirmed its operation in letter rulings and in practice. Taken together, 2055(f) and 2031(c) create a powerful incentive for conservation which no one who owns land with public value for open space, agricultural preservation, wildlife habitat or recreation should ignore.

Section 6007(g) of the Internal Revenue Service Reform Act (H.R. 2676), signed into law on July 22, 1998, extended these benefits in a new way. Under this provision, when a landowner dies without having donated a conservation easement, his or her heirs may be allowed to elect to donate a conservation easement on the inherited lands and get these estate tax benefits post-mortem.

Getting this post-mortem option requires qualifying for the 2031(c) benefit, and this requires some attention to detail. These provisions have requirements beyond those that qualify conservation easements for income tax deductions under I.R.C. 170(h).
Section 2031(c) of the Internal Revenue Code allows beneficiaries to exclude from the taxable estate 40% of the otherwise taxable value of land subject to a qualifying conservation easement. The exclusion is limited to $400,000 in 2001, and increases to $500,000 in 2002.

Under I.R.C. 2031(c), the percentage of the value of a piece of land that can be excluded from an estate is reduced below 40% when the easement itself is worth less than 30% of the total value of the land. Retained development rights are fully subject to estate tax, but payment of the tax can be deferred for up to two years.
As passed in 1997, IRC 2031(c) applied only to certain geographic areas near metropolitan statistical areas, national parks, federally-designated Wilderness Areas, or Urban National Forests (a designation of the U.S. Forest Service). But section 551 of the tax bill enacted in 2001 (H.R. 1835, P.L 107-16) eliminates those restrictions, making property anywhere in the United States eligible. That law also makes it clear that the values to be used to determine what percentage of the property’s value is encumbered by the easement are the values at the time of donation.

The land must have been owned by the decedent or a member of his family for three years prior to death. Property subject to a mortgage is eligible for the 1997 exclusion only to the extent of the net equity in the property. The value of structures cannot be counted in any way in applying these provisions — only the value of the land.

Generally, the value of rights retained to use the land for commercial purposes cannot be excluded from the taxable estate. However, the value of retained rights that are “subordinate to and directly supportive of the use of land as a farm” may be excluded. Such uses include timber cultivation and harvest.
To qualify for these benefits, easements must first qualify for a deduction under section 170(h) of the I.R.C. They must be perpetual conservation easements, donated to a public charity such as a land The Frontera Land Alliance, or to a governmental entity. The easement must protect outdoor recreation or education resources, wildlife habitat, or open space “for the scenic enjoyment of the general public or in fulfillment of a clearly delineated public conservation policy.” Easements solely for the purpose of historic preservation qualify under section 170(h), but they do not qualify for the benefits of IRC 2031(c).

To qualify for IRC 2031(c), an easement must also prohibit all but “de minimus” commercial recreational activities. The authors of the provision, however, did specify in the legislative history of the 1997 bill that they did not intend hunting or fishing to be considered “commercial recreational activities.”
IRC 2031(c) can be the result of a conservation easement donated in a will or prior to death. But where it is the heirs who are making the donation, the executor must make an irrevocable election to take these benefits. Such an election can be made only if the easement is placed on the land by the executor or beneficiaries before the filing of estate taxes — generally nine months from the death of the decedent. Land excluded from estate tax under this provision will receive a carryover basis rather than a stepped-up basis for purposes of calculating any gain on a subsequent sale.
The existence of the post-mortem option is no substitute for good estate planning by a landowner. The power of an executor to make a post-mortem donation of an easement may be limited by state probate law1, and a disagreement among heirs could easily frustrate the use of these provisions to preserve family lands from development. In addition, good estate planning by a landowner can yield substantial additional benefits including income tax deductions under I.R.C. section 170(h), which are not allowed in cases where estate tax benefits are taken for easement donations made post-mortem.

Landowners should always consult a qualified attorney in dealing with the particulars of their own situation.

Russell Shay
Director of Public Policy
The Land Alliance
August 16, 2001
A conservation easement is a voluntary agreement between a landowner and The Frontera Land Alliance that defines how property will be managed in perpetuity. Landowner(s) work directly with The Frontera Land Alliance to create a conservation easement that shows what the property may be used for as well as those uses that will be restricted. Each conservation easement is tailored to fit the unique character of the land and the desires of the landowner and The Frontera Land Alliance’s criteria.

Landowner(s) need to know why they want to preserve their land. Typically landowner(s) don’t want to see their rural, farm and ranchland or wildlife habitat destroyed. About 80 percent of Texas farms and ranches are now less than 500 acres. Farms and ranches between 500 and 2000 acres in size are declining. As these open lands shrink, we face the dilemma of how to maintain the open land that sustains the rivers, lakes, aquifers and springs.
Once a landowner(s) has made the decision to place a conservation easement on their property with The Frontera Land Alliance there are several steps that must take place. The Frontera Land Alliance Staff will walk the property with the landowner(s) to ensure the property meets the mission of The Frontera Land Alliance. Landowners will need to have an appraisal and a survey maybe required.

During the conservation easement process The Frontera Land Alliance encourages landowners to meet with their attorney and financial advisors to review the documents prior to being signed. Once all the documents have been prepared and the landowner completely understands and agrees with the uses and restrictions of the conservation easement the documents are signed and filed at the county clerk’s office. At this point the conservation easement will “run with the land” binding the original owner and all the subsequent owners to the conservation easements restrictions. A donation is requested from the landowner for The Frontera Land Alliance’s stewardship fund for perpetual annual monitoring of the land.

The Frontera Land Alliance will hold the conservation easement and work with landowner(s) throughout the easement process. The Frontera Land Alliance will conduct a baseline assessment of the property. The baseline assessment will record the current state and natural features of the land and will include the conservation benefits of the property, building envelopes, if any, and existing structures will be recorded.

The Frontera Land Alliance will work closely with the landowner(s) to meet their needs. Below is an overview of the steps that The Frontera Land Alliance works through with the landowner.

* Identify the Conservation Values of the Land to Determine if an Easement is the Appropriate Conservation Tool;
* Decide as an Organization Whether or Not to Pursue the Project;
* Advise the Landowner to Consult Legal and Tax Advisors;
* Identify the Goals and Objectives of the Landowner;
* Compile Baseline Data and Inventory of Property;
* Draft the Conservation Easement Document;
* Sign and Record the Final Conservation Easement;
* The The Frontera Land Alliance Committed to the Annual Monitoring of the land and the Long- Term Stewardship.