Protecting the Farm Forever–Chapter Three, Recording the Easement, Costs and Benefits
A Historic Day for Farmland
Staunton, Virginia: It was a hot summer day on August 4. We met the senior easement specialist with the Virginia Outdoors Foundation at our lawyer’s office to walk the four blocks to the courthouse. Our lawyer, Alan Garrison, said he could have recorded our conservation deed of easement (DOE) electronically, but it was a historic moment for Jeanne and me, so we wanted to witness the event the old-fashioned way.
We all went through security at the courthouse, even Val, our Border Collie. Alan handed the DOE to the clerk. It didn’t take very long, and at 3:51 p.m., the clerk handed Jeanne the receipt proving that the easement had been recorded. Our 150-acre farm in Churchville will now remain a farm forever. There will be no Walmarts, no McMansions, no subdivisions, no farmettes, and no divisions of any kind—ever.
The Seed Was Planted Long Ago
When did the journey begin? It’s hard to say. Perhaps over 40 years ago, when I realized that the ever-increasing pace of economic development would eventually destroy humanity’s ability to feed itself unless private landowners stepped up to do something. There is really no significant national or global plan to protect the best farmland from being paved over, not even farmland that can produce food, feed, fiber, fertilizer, and fuel without irrigation. The farmland in Virginia’s legendary Shenandoah Valley can do that.
The Pace of Farmland Conversion Is Not Sustainable
We are losing 2,000 acres of private farmland to development every day in America. That’s a whopping 1.4 acres every 60 seconds, according to the latest USDA and American Farmland Trust data. The pace of conversion is increasing, and that number is expected to rise to a million acres every day. The best hope for saving farmland rests with people who understand the severity of the problem and with conservation land trusts. We can’t wait for the government to fix this. We need to act now.
Steps for Whiskey Creek Angus to Be Protected Forever
The journey for Whiskey Creek Angus started a month before we bought the farm in September 2020. We had to own or rent the farm to enroll in a program to fence the cattle out of streams and provide water for our cattle throughout the farm. The owners agreed to rent the farm to us so we could begin the process to install best management practices.
Step One: Install Best Management Practices
We enrolled the farm in the Virginia Agricultural Best Management Practice Cost-Share program to fence the cattle out of the streams, develop livestock watering stations throughout the farm, and plant 3,000 native trees along the streams. Jeanne and I wanted to engage in these practices because we believe in regenerative farming—producing wholesome food along with clean water, air, and wildlife habitat. We also knew that for a land trust to defend the conservation values on the farm, it helps to have regenerative practices installed and functioning. The best management practice projects were completed on March 21, 2021.
Step Two: Amend the County’s Comprehensive Plan
Now that the best management practices had been installed, we started the process of securing a conservation easement on the farm. Our next task was to amend the county’s comprehensive plan that called for the part of our farm along Buffalo Gap Highway to have low-density housing. A conservation easement cannot be designated for low-density housing, and a land trust will not hold an easement that is in conflict with the local comprehensive plan. The amendment process started when we signed an application in early November and paid the county $550. See chapter 1 of this journey.
Step Three: Secure an Easement Holder
Securing an easement holder was complicated and confusing. Read chapter 2 for details.
Step Four: Record the Conservation Deed of Easement
On August 4, the conservation deed of easement was recorded.
Step Five: Pay the Pipers
Brace yourself. The process cost much more than we had anticipated: an astonishing $11,200! A couple of programs can pay these costs upfront for you, but these amounts will then be deducted from the tax benefits you receive. Here’s the breakdown:
Application fee to amend the county’s comprehensive plan: $550
Application fee to the Virginia Outdoors Foundation: $1,500
VOF Baseline Report: $3,000
Certified appraisal: $4,500
Accountant fee to fill out IRS form 8283: $1,200
Lawyer fees: $450
Step Six: Secure the Tax Benefits
Donating a conservation easement for the protection of farmland offers many tax benefits: a federal tax deduction, Virginia Land Preservation tax credits, inheritance tax benefits, and possible local real estate tax benefits.
Federal tax deductions
The IRS treats the value of our conservation easement as a charitable donation, like giving money to a church. The value of our easement, according to the certified appraisal, was 38 percent of the value of the farm. For simplicity’s sake, let’s just say our farm is worth $1 million. The value of the easement would be $380,000. Years ago, we could have used this value to reduce our adjusted gross income by up to 50 percent each year until we used up the $380,000. We were allowed to do this for 16 years. The Trump administration changed the federal tax law so that we could use only 60 percent of this easement value, or in this example, $228,000, partly because Virginia allows us to use 40 percent of the value as a tax credit.
Virginia’s Land Preservation Tax Credit
Virginia allows us to use 40 percent of the easement value as a tax credit. In other words, we can deduct $152,000 from the state taxes we owe for 10 years. What we don’t want to use in tax credits, we can sell to people who need the tax credits.
Inheritance tax benefits
The value of our farm from an inheritance asset point of view was reduced by 38 percent, which in essence lowers the value of our total assets. This can be advantageous to heirs.
Local real estate tax benefits
The devaluation of the farm should be reflected in a lower value for tax assessment purposes. We already receive land-use tax benefits from our county because it is a working farm, so it is unlikely that we would benefit from the devaluation. But in some counties, this may be a huge factor to consider.
Was It Worth It?
You bet it was. First and foremost, the farm is protected forever from development. The tax benefits are the icing on the cake. We will use the federal income tax deductions for many years–reducing our adjusted gross income by 50% every year until we use it up for up to 16 years. What we don’t use to offset our state tax for the next 10 years, we will sell, get the cash and pay off debt or invest.
Where to Get Help
There are over 1,000 land trusts in America and at least 40 operating in Virginia. Let me know if you need help, I will be glad to help you. Below are just some of the organizations where you can get more information. There are also purchase of development rights programs offered in many states such as Pennsylvania and Delaware. Some counties offer PDR programs such as Albemarle and Shenandoah in Virginia. PDRs are also available from some private non-profits such as the Piedmont Environmental Council, the Alliance for the Shenandoah Valley (coming soon), and The Nature Conservancy.
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