The US Congress is considering making permanent the enhanced charitable deduction for conservation easements. Virginia also lures the unwary landowner with a Virginia income tax credit of 40% of the value of the easement. However, with conservation easements, a landowner is best advised to look twice and never leap.
Please remember that the value of a conservation easement stems from an appraisal of the decrease in value of the landowner's property from his permanently forfeiting rights. Unless a landowner has a compelling desire to preserve property or wants to handcuff his heirs, a conservation easement is rarely worth its cost. Moreover, the value must be determined through appraisal, and do not forget that the value of the easement is decreased for any increase in value ("enhancement") of adjacent property of the landowner or related parties. The landowner must obtain (and defend) three separate appraisals: (i) the value before the easement; (ii) the value after the easement; and (iii) the value of any enhancement.
Having to rely on appraisals should scare away all but the most hardy of landowners. The IRS and the Virginia Department of Taxation are attacking almost every significant appraisal (whether or not such attack is justified). VaDoTax has also gotten the General Assembly to enact provisions that terrorize even the most conservative of appraisers. (See, Virginia Code Section 58.1-512.B.) Thus, the Virginia Department of Conservation and Recreation lures the landowner like a siren with melodies of federal deductions and Virginia credits while VaDoTax crashes the values on the rocks after the landowner has made permanent restrictions to his land.
If a landowner is determined to dedicate a conservation easement even with these obstacles, he needs to engage competent appraisers, accountants, and attorneys. Furthermore, these advisors need to understand the current and ever changing crags.