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Legally Speaking


Issue: October, 2005
Author: C. Timothy Lindstrom

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Conservation Easements in Wyoming

In February the Wyoming Legislature enacted the Wyoming Uniform Conservation Easement Act (Wy. Stat. §§34-1-201 through 207, the “Act”). The Act simplifies the conveyance of conservation easements in Wyoming by eliminating the need to follow common law rules. Prior to the Act landowners conveying a conservation easement were often required to convey a small parcel in fee to which the easement became appurtenant, thereby making it an enforceable interest under common law.

Conservation easements are private contracts between a landowner and a conservation organization or government agency (such organizations or agencies are referred to as the “holder” of the easement) providing for the conservation of land. The terms of the contract are up to the landowner and the prospective easement holder. The Act defines a conservation easement in the following terms:

“‘Conservation easement’ means a nonpossessory interest of a holder in real property imposing limitations or affirmative obligations the purposes of which include retaining or protecting natural, scenic, or open space values of real property, assuring its availability for agricultural, forest, recreational or open space use, protecting natural resources, maintaining or enhancing air or water quality, or preserving the historical, architectural, archeological or cultural aspects of real property.” Wy. Stat. §34-1-201(b)(1).

The Act does not impose any particular requirements for conservation easements, although it is probably wise to reference the Act in drafting a conservation easement. For example:

“This conveyance is made pursuant to the provisions of the Wyoming Uniform Conservation Easement Act, §§34-1-2-1 through 34-1-207 of the Statutes of Wyoming, and the conservation easement hereby conveyed is intended by the parties hereto to be a ‘conservation easement,’ as defined by, and for all purposes within the meaning of, said statute.”

Conservation easements are frequently held by land trusts. Land trusts are non-profit corporations qualified as public charities under §501(c)(3) of the Internal Revenue Code (the “Code”). There are three land trusts that operate exclusively in Wyoming: The Green River Valley Land Trust, the Jackson Hole Land Trust, and the Wyoming Stockgrowers Agricultural Land Trust. In addition, The Nature Conservancy has a Wyoming chapter that holds conservation easements in the state, as does the Rocky Mountain Elk Foundation.

Conservation easements are often conveyed as charitable contributions, or they may be sold for less than fair market value as “bargain sales,” also qualifying as charitable contributions. Where the conveyance of a conservation easement is intended as a charitable contribution, the easement must not only comply with the Act, it must also comply with federal tax law. While compliance with the Act is easy, compliance with the IRC provisions (§170(h) of the Code) and Treasury Regulations (§1.170A-14 of the Regulations), is more demanding.

As a general rule, a landowner is entitled to a federal income tax deduction for the value of a conservation easement donated pursuant to the Code and Regulations. The value of the deduction is the difference in the value of land before a conservation easement is in place and after it is in place. Any enhancement in the value of other land owned by an easement donor or member of the donor’s family resulting from the conservation easement must be subtracted from the value of the easement in determining the amount of the deduction.

In addition to income tax benefits, there are federal estate tax benefits as well. While the future of the federal estate tax is uncertain, it is currently 47% on all assets included in a decedent’s estate in excess of $2 million. The Code provides that the value of any development potential, or other value, eliminated by the easement is not subject to estate tax. In addition, the Code allows a decedent’s executor to elect to exclude up to 40% of the restricted value of land subject to a qualified easement, up to a total exclusion of $500,000. The numerous requirements and limitations on federal income and estate tax benefits for conservation easement donations are beyond the scope of this article.

There are some general concerns about conservation easements. An important one is that, in order to reap any federal tax benefits, a conservation easement must be granted in perpetuity. In essence, this means that the donor cannot retain any rights to change or terminate the easement in the future, and the easement must bind all future owners. However, easements can be, and frequently have been, amended where the landowner and easement holder agree. Such amendments cannot confer any financial benefits on the landowner as a general rule, however. In addition, under the doctrine of cy pres a court can modify or terminate a conservation easement which no longer serves a public purpose.

Another concern is that land subject to a conservation easement is more likely to be taken over by the government than other land. This is not the case, unless the easement donor agrees in the easement document to government takeover. In fact, unless held by a government agency, a conservation easement is private property and can only be taken through the exercise of eminent domain, the same as any other private property.

There is also a concern that donating a conservation easement opens private land to public use. While an easement donor may agree to open his or her land to the public, this is not a requirement of either state or federal law, and most conservation easements do not allow public access. However, easements do require that the holder of the easement have the opportunity to enter land over which they hold easements to insure compliance with the terms of the easement. Beyond the right of access for monitoring purposes, easement holders obtain no rights to use or occupy land subject to a conservation easement.

Some concern has been expressed about the impact of conservation easements on local real estate taxes. In most cases conservation easements are conveyed over land that is already being taxed at agricultural rates, and the easement will not further reduce the taxable value of that land. The Act provides that in no event may a conservation easement reduce the taxable value of land below the taxable value of comparable agricultural land. Of course, by reducing development potential, conservation easements also reduce the demand for government services, which may generate long-term tax savings.

Conservation easements are an important conservation tool as well as a tool for individual financial planning. While conservation easements are certainly not for everyone, they may be exactly the right thing for some.

Tim Lindstrom is Staff Attorney and Director of Protection for the Jackson Hole Land Trust, and he has a national practice dealing with conservation easements. He has written and lectured extensively on the subject. Tim is a member of the Wyoming, Michigan and Virginia Bar Associations.

Copyright © 2005 – Wyoming State Bar