Property Devaluation –
Conservation Easements (CE) are specifically designed to reduce land values. Typical CE transactions result in a 30% to 100% assessed devaluation, a decrease not confined only to CE-burdened lands: the devaluations can spill to neighboring, non-participating landholders, reducing their property values as well.
Under IRS 171 Rules, one requirement to achieve the maximum estate tax benefit is that the CE must result in 30% minimum land devaluation – and it must encumber the land in perpetuity (forever).
Under Kansas law KSA 79-1476, lands enrolled in the Federal Conservation Easement Wetlands Reserve Program (WRP) must be re-classified as “native grassland” for the purpose of property tax valuation. Reclassification of land devalues property and erodes the local tax base as land market-values decrease. No provision at the Federal or State level has, to date, been made to recognize or compensate for devaluations realized at the local level.
KNRC’s research demonstrates a Federal CE in Finney County has resulted in an 83% revenue loss for county tax purposes. A detailed description of that and other Easement can be found here.
Lands encumbered by CEs are often difficult to sell since development and mineral rights are restricted from production and the properties are subject to mandatory 3rd-party monitoring. Less obvious but equally problematic is the specter of regional property value reductions arising from introduction of endangered species, imposition of buffer zones and corridors, and impacts from nearby Federal and State Conservation programs.
CEs force lenders into a subordinate title position, a requirement that can cloud titles, inhibit liquidity, and affect lending or land-mortgaging potential. Farming and ranching operations contemplating CEs should evaluate not only the tax benefits but potential long-term consequences that could affect local resources, encumber surrounding properties or lead to large-scale, unintended land acquisitions.
Regional CE maps, CE position papers and other information can be found here.Please Share this