Tax Law Insights

There are 12.9 million acres of commercial forestland in South Carolina. More than half of the forestland is family-owned, and 82% of private owners live on the land. The state also has about 25,000 farms, which encompass 4.9 million acres. Many landowners would like to maintain their property as farmland or forestland but are tempted to capitalize on appreciating land values as development moves towards their property. Conservation easements can help owners monetize development rights while preserving property as farmland or forestland.  A conservation easement is a voluntary agreement between an owner and a third party to restrict the use of the property. A landowner does not need to restrict his use of property as farmland or forestland in order to receive tax benefits. The tax benefits provided to landowners who enter into qualifying conservation easements include:- Income tax deductions equal to the value of the conservation easement;- South Carolina state tax credits worth up to 25% of the value of the easement;- Estate tax exclusions that reduce the value of a conservation easement for estate tax purposes up to 40%; and- Property tax benefits that may lower the property tax value of property.A landowner granting a conservation easement will need to identify a suitable donee organization, negotiate the terms of the conservation easement, record the conservation easement, and report the conservation easement on his tax return. A landowner will need to establish a team of professionals to ensure the landowner will receive the expected tax benefits and continue to be able to use his property as desired. At a minimum, the team will consist of an attorney and an appraiser. Depending on the size and complexity of the conservation easement, additional professionals may also need to be added to the team. There are many technical requirements that must be met when granting a conservation easement. Future blogs will explore these technical requirements and the available tax credits in more detail.