Keep the Farm a Farm With a Conservation Easement, Step by Step

Every family farm eventually meets two visitors. One is a developer with a check. The other is the tax collector, who arrives when the older generation passes and the land is worth more as subdivisions than as soybeans. Between those two visitors a great many farms have simply vanished into cul-de-sacs.

There is a third option, and it is the sort conservatives ought to love: private, voluntary, written into a deed and enforced by contract rather than by a regulator. It is called a conservation easement. It lets a family keep owning and working its land while giving up one particular right, the right to develop it, in exchange for payment or a tax benefit. No federal agency takes the land. No zoning board gets a veto. The family decides. This is the how-to, in order, and it is not legal or tax advice for your own situation; each step names the professionals you will need.

What a Conservation Easement Is

Property law treats ownership as a bundle of rights: the right to occupy, to farm, to lease, to sell, to build, to cut timber, to pass the land to your heirs. An easement is a legal interest that lets someone else hold one of those rights, or lets a restriction on one of them bind the land. A conservation easement is a voluntary, recorded restriction on how land may be used, held by a qualified organization, whose purpose is to protect the land's conservation values: farmland, forest, habitat, open space or a historic setting.

The restriction runs with the land, binding every future owner. The family keeps title. It can farm, ranch, hunt, sell the land, leave it to the children. What it gives up, for good, is the right to carry out the uses the easement forbids, usually subdivision and commercial or residential development. The holder, a land trust or a government agency, has the right to monitor the land and enforce the terms.

The idea is rooted in the oldest conservative principle about property: that it is a bundle of rights an owner may divide, sell or give away as he sees fit. James Madison, writing in 1792, argued that a just government protects property of every kind; see Madison Wrote That Government Exists to Protect Property of Every Sort. An easement is the owner exercising that freedom, not the state taking it.

Part One: Decide What You Want

Step 1: Decide What Rights You Will Keep and What You Will Give Up

This is the most important decision, and it belongs to you. Before you talk to anyone, write down what you want the land to be in fifty years. Then list the rights.

• Rights you will almost certainly keep: farming, ranching, forestry, hunting, the existing house, a home for the next generation, the ability to sell or bequeath the land.
• Rights you may give up: subdivision, commercial or industrial development, mining at the surface, building beyond a set footprint, and sometimes new residences beyond a limit.
• Rights you may reserve for the future: a number of homesites for children, farm buildings, a farm stand, or an improvement area. Easements can be written to leave room for a working farm to evolve.

The more you restrict, the greater the reduction in market value, and that reduction is the measure of what the easement is worth. A tight easement can be worth a great deal. A loose easement may protect little and, as we will see, may not qualify for a tax benefit. Take your time. Talk it over with your family first, since the easement binds your heirs.

Step 2: Choose Who Will Hold It

An easement needs a holder: an organization with the legal capacity and the commitment to monitor and enforce it forever. Your choices are generally these.

1. A private land trust. A nonprofit conservation organization, local or national. Local trusts know the land and the community; national ones may bring more resources. Look for one accredited by the Land Trust Accreditation Commission, which sets standards for governance and stewardship, and ask whether it has a defense fund for the day someone challenges an easement in court. The Land Trust Alliance, the trade association, publishes standards and practices.
2. A government agency. Some state and local governments hold easements, and many run purchase of development rights programs that pay landowners for the easement.
3. The federal Agricultural Conservation Easement Program (ACEP). The Natural Resources Conservation Service runs ACEP, created in the 2014 farm bill. Under its agricultural land easements component, the NRCS partners with eligible land trusts and governments, and it can cover a portion of the easement's cost, with the federal share generally limited to half of the appraised value for these easements. A separate wetland reserve component handles wetlands.

Which to pick depends on what you value. A private trust may move faster and offer more flexibility. A government program may offer money. Interview at least two holders. Ask about their track record, their staff, their monitoring practices and what they do when a neighbor or a later owner breaks the terms.

Step 3: Decide Whether You Will Donate or Sell

An easement can be donated, in which case you may qualify for a federal income tax deduction, or sold, often through a purchase-of-development-rights program or ACEP, in which case you receive cash. Many deals are a bargain sale, part sale and part donation.

The difference matters. A donation gives you a deduction rather than cash, and a sale gives cash but no deduction for the portion sold. The right choice depends on your finances, your tax position and your heirs, so this is a point for your own advisers, not for a web page. What this guide can tell you is that both paths exist and both are used by working farm families.

Part Two: Prepare the Paperwork

Step 4: Assemble Your Team

You will need professionals, and you should hire them early.

• An attorney experienced in conservation easements to review the deed and protect your interests, preferably one who does not also represent the land trust.
• A qualified appraiser with experience valuing conservation easements.
• A tax adviser familiar with the rules on conservation contributions.
• A surveyor or mapping professional, and sometimes a forester or a soil scientist.
• Your lender, if the land is mortgaged. Under the rules for a qualified conservation contribution, any mortgage on the property generally must be subordinated to the easement, which means the lender must agree.

The lender point surprises people. If you have a mortgage and the lender will not subordinate, the easement may fail to qualify for the deduction. Raise it first.

Step 5: The Baseline Documentation Report

Before the easement is signed, the land trust prepares a baseline documentation report: a detailed, signed record of the land's condition on the day of the gift. It includes maps, photographs, a description of buildings and roads, the soil and vegetation, and any features the easement is meant to protect. The Treasury regulations on qualified conservation contributions call for documentation of the land's condition when the donor keeps rights that could affect the conservation purposes, and it is how everyone will later know whether a change counts as a violation.

Read this report carefully and sign it only if you agree it is accurate. A good baseline protects you as much as the trust. If a dispute arises thirty years from now about whether a barn was there or a pond was dug, this is the document the argument will turn on.

Step 6: The Appraisal

For a donated easement and a bargain sale, you need a qualified appraisal by a qualified appraiser. The standard method is the before-and-after method: the appraiser values the land as it could be used before the easement, at its highest and best use, which may be development, and values it again with the restrictions. The difference is the value of the easement.

Two cautions. First, the appraisal must reflect real market conditions and reasonable assumptions about what could be built. An appraisal that assumes a development nobody could actually build is the root of most trouble with the IRS. Second, for a deduction the appraisal has to meet IRS standards and be attached to your return, with the required forms. Your tax adviser will tell you the deadlines.

Part Three: Tax Rules, Recording and the Warning Signs

Step 7: The Tax Rules in Section 170(h)

The federal income tax deduction for a donated easement comes from Section 170(h) of the Internal Revenue Code, which defines a qualified conservation contribution. In short, it has three parts.

1. A qualified real property interest. This includes a restriction, granted in perpetuity, on the use of the land.
2. A qualified organization. A government unit or a publicly supported charity, such as a land trust, with the commitment and resources to enforce the easement.
3. Exclusively for conservation purposes. The purposes the statute recognizes are outdoor recreation or education for the public, protection of a natural habitat, preservation of open space (including farmland and forest) for scenic enjoyment or under a clearly delineated government conservation policy, with a public benefit, and preservation of a historically important land area or structure.

The word "perpetuity" is the heart of it. The restriction must last forever, and the deed must be written so it does. That is why trusts insist on exacting language.

The size of the deduction and the carryforward period were made permanent by Congress in 2015. Under the rules for a qualified conservation contribution, individuals can generally deduct up to 50 percent of their adjusted gross income for the gift, and qualified farmers and ranchers up to 100 percent, with any excess carried forward for up to fifteen years. There is also a separate estate-tax benefit in Section 2031(c), which lets an estate exclude part of the value of land subject to a qualified easement, subject to a limit. These rules have conditions and phase-outs, and the code is the place to confirm them with a professional. This guide gives the outline, not the bottom line.

Step 8: Record the Deed

When the terms are settled, the attorney drafts the deed of conservation easement, the landowner and the holder sign it, and it is recorded in the county land records. Recording is what makes the restriction run with the land and bind later buyers. Before the deed is signed, the title company or attorney should check for any prior liens and for mineral rights owned by others, since a third party's right to mine could undercut the conservation purpose.

After recording, expect an annual visit. The holder will walk the land to confirm compliance, which is the monitoring that makes the promise real. Treat it as a neighborly check-in, not an audit. Some trusts also ask for a stewardship contribution at closing to fund future monitoring and defense. Budget for it.

Step 9: Avoid the Syndicated Schemes

Here the how-to turns into a warning. A syndicated conservation easement is a transaction in which promoters sell interests in a partnership that buys land, obtains an inflated appraisal, donates an easement and passes a deduction worth several times the investment to the investors. The IRS regards these as abusive. In late 2016 it issued Notice 2017-10, designating certain syndicated easement transactions as listed transactions that must be reported, and it has pursued audits and litigation against promoters and participants. Courts have sided with the IRS in a number of cases on technical grounds, including defects in the deed language and inflated valuations. In December 2022 Congress added a limit on partnership deductions for these deals in a law known as SECURE 2.0.

The lesson for an honest landowner is simple. Be suspicious of anyone who promises a tax deduction several times the amount of money you put in. A real easement protects a real piece of land and a real conservation purpose, and its value is the difference in the land's market value, nothing more. A family that keeps its farm and donates an easement is a different thing entirely from an investment scheme that treats an easement as a coupon. The schemes hurt the families, because every abuse invites stricter rules on the honest ones.

Step 10: Plan for the Next Generation

A last step that families often skip. Tell your children. Explain what the easement allows and forbids. An easement does not trap a family; it gives the land a future. Several benefits tend to follow: the land's lower market value can reduce estate-tax exposure, which can help a family keep the farm intact after a death, and it can make the land more affordable for the next farmer. A conversation now prevents a fight later.

Why This Is the Conservative Way to Protect Land

Set the easement beside the alternatives. Federal ownership means the land passes into the control of a bureau and out of the family's hands. Heavy regulation makes the owner carry the cost of a public benefit without compensation. The easement says: the public wants this land kept open, so the public, or a willing donor, pays for the right to keep it that way, and the family stays on the land. It respects property, honors the family and avoids a new bureaucracy. It does what the Takings Clause says: if the public wants something from a private owner, the public pays, a principle traced in The Takings Clause Explained, From Public Use to Just Compensation. And where an owner is tempted to clear land early to avoid a regulator, as the Endangered Species Act can encourage, Why the Endangered Species Act Punishes the Landowner Who Helps a Bird shows how voluntary agreements fix the incentive.

The farm that outlasts the family's grief is worth the paperwork. Roosevelt wanted it to be so, and so does anyone who has stood in a field and thought about who will plant it next; see Theodore Roosevelt Made Conservation a Conservative Cause, and It Still Is.

The case in brief

1. A conservation easement is a voluntary, recorded restriction that lets a family keep owning and working its land while giving up the right to develop it.
2. Decide which rights to keep, choose an accredited land trust or a government program such as ACEP, and decide whether to donate or sell.
3. Build a team of attorney, appraiser and tax adviser, get the lender's consent, and insist on an accurate baseline documentation report.
4. A donated easement must meet Section 170(h): a perpetual restriction held by a qualified organization for a recognized conservation purpose, supported by a real before-and-after appraisal.
5. Avoid syndicated easement schemes that promise outsized deductions, and tell your heirs what the deed means.

What you can do: contact your county's farm bureau or your state's land trust association and ask for a list of accredited land trusts that work in your county.