A Brief History of Conservation Easements

Conservation easements were initially used in Massachusetts in the late 19th century by the Trustees of Reservations to protect the parks that Frederick Law Olmsted designed around Boston. In 1959, William H. Whyte wrote the first major work on conservation easements. Conservation easements began to grow in popularity in the late 1970s, in part because of the use of conservation easements to preserve farmland in Suffolk County, NY, and throughout Maryland and Massachusetts.

In the late 1970s, attorney Stephen Small drafted the federal income tax regulations on conservation easements that became the Federal Tax Treatment Extension Act of 1980 (P.L. 96-541). Section 170(h) of the Internal Revenue Code clarified the federal income and estate tax benefits to individuals and families for donating conservation easements. Key among the provisions of Section 170(h) are a public benefits test and proof that significant conservation values are being protected through a conservation easement.

Small recognized that increases in real estate values were creating estate tax problems, making it difficult for families to transfer land from one generation to the next. The donation of a conservation easement could not only produce income tax benefits, but estate tax savings as well, thus enabling a family to hold onto their land, rather than have to sell it for development to pay federal estate taxes. Later, when more public and private funding for purchasing conservation easements became available, many easements were acquired through “bargain sales” featuring part cash and part donation. Bargain sales increased the relevance of the public benefit and significant conservation values tests under Section 170(h). By contrast, the purchase of a conservation easement for full appraised value does not have to meet the requirements of Section 170(h), even though it should as a matter of good practice.

In the 1980s, the Reagan Administration reduced funding for federal land acquisition programs, such as the Land and Water Conservation Fund. In response, there was a sharp increase in the number of private nonprofit land trusts. The land trust movement also grew as a result of frustrations with the rapid pace of development in many communities and the ineffectiveness of local planning efforts to protect wildlife habitat, important landscapes, and water resources. Between 1980 and 2003, the number of land trusts rose nearly fourfold from about 400 to 1,526. Prior to 1980, the large majority of land trusts were found in the Northeast where there was little government-owned land. Since 1980, land trusts have proliferated throughout the United States, and there is at least one land trust in every state.

A primary strength of conservation easements is that they provide greater permanence in the landscape and hence greater protection for wildlife habitat than land use regulations. Regulations can easily be changed through variances, re-zonings, special exceptions, and conditional uses. In many parts of the United States there is a strong aversion to land use regulation, making the sale of land and sale or donation of conservation easements by willing landowners the only acceptable alternatives for protecting wildlife habitats. Conservation easements are often cited as having a lower cost than outright acquisition. On the other hand, if the land trust or government agency wants to actively manage the property, then fee simple purchase is recommended.

Meanwhile, estate and land transfer planning have continued to be necessary because of the rising value of real estate, especially in metropolitan regions. Federal estate taxes begin at 37% on estates valued at more than $1.5 million in 2005. The personal exemption from the estate tax rises to $3.5 million by 2009. There will be no estate taxes in 2010, but in 2011 the estate tax returns at 2003 rates and exemptions. In short, the greater a landowner’s wealth and income, the more financial incentive the landowner has to donate or sell a conservation easement as part of an estate plan or to transfer land intact to the next generation.

“A Brief History of Conservation Easements,” taken directly from the Final Report to the National Fish and Wildlife Foundation: An Evaluation of the Foundation’s Conservation Easement and Capacity-Building Grants Program (2005).