Abuses of the Conservation Easement System

Conservation easements have become considerably more popular in recent years, which has proven to be both a cause for celebration and for concern. It has been reported that between 1990 and 1994, the amount of land in conservation easements increased 50% (Kuhn et. al, 1996). Several Farm Bills, especially the 1996 Farm Bill, also led to an increase in conservation easements due to the authorization of purchase of farmland conservation easements through the Farmland Protection Program and through other programs such as the Conservation Reserve Program (Plantinga, 2001).

With increasing number of easements, many Land Trusts are experience difficulty with picking appropriate sites for conservation easements or properly enforcing the maintenance of conservation easements. For instance, in a 2005 report the Minnesota Land Trust reported that they attempt to monitor 85-95% of their properties each year, in the form of flyover's, but they are far behind for even this amount. For all of the properties that have been monitored by the Minnesota Land Trust, 20 easement violations have been detected. Although fly-overs may be beneficial to detect development on the land, they will not be able to pick up minute violations such as the use of pesticides (Merenlender et. al, 1998). The Minnesota Land Trust, along with other small land trusts and conservation organizations, are heavily run by volunteers who may not be as qualified to properly monitor conservation easement properties.

Due to the rapidly increasing number of conservation easements in recent years and the inability of land trusts and government entities to keep up, a number of abuses of the system have been noted. This has occurred to the point that conservation easements are listed as number nine on the IRS's list of "Dirty Dozen Tax Scams."

Beginning around 2000, the emphasis of conservation easements shifted from landowners wishing to preserve their land to real estate developers and tax advisers wishing to take advantage of the potential tax benefits that conservation easements can offer. For example, a developer may try to qualify for a conservation easement by putting fewer houses on a piece of property than development plans originally called for, but this has no significant conservation value and thus would not be considered for a conservation easement. There are also reports of landowners putting conservation easements on golf courses and between houses in gated communities, as well as qualifying for charitable deductions even when their easement is only for a limited duration or is put on a piece of property that has no potential for future development and thus should not be eligible for a conservation easement.

The IRS is particulary targeting those who exploit the system of conservation easements. For instance, there is record of promoters who significantly and deliberately overstate the value of land and thus help landowners qualify for a greater tax reimbursement than is deserved ( Kiplinger Tax Review, 2006). Also, in 2005 several charities were under examination by the IRS because they were believed to be knowingly involved in abuse of the system. This abuse of the system moves conservation easements away from a mutually beneficial conservation tool to one primarily for personal gratification, with little ecological benefit.

In January 2005, the Joint Committee on Taxation recommended drastic tax cuts for conservation easements due to these abuses. They recommended that

1.) Deductions for a conservation easement be limited to no more than 33% of the easement's appraised value

2.) No deductions be allowed on property that landowners use as a private residence

3.) Landowners must demonstrate that their easement has fulfilled a legitimate public policy such as protecting the environment and creating recreational activities

4.) The deduction be limited to the original price of the land plus any capital improvements that have been made

In effect, although conservation easements have been shown to have benefits for Minnesota, particularly in Northern Minnesota, and the rest of the country, the actions of individual landowners and companies are threatening the future of this conservation tool.

Other Potential Drawbacks

Some feel that although conservation easements have great potential to be a viable conservation tool, they have been evolving too quickly to properly assess their present accomplishments and long-term viability (Merenlender et. al, 1998). Although the flexibility of conservation easements has proven to be a benefit, it is also a drawback in the sense that assessing the outcome to land conservation has become even more difficult. Will the conservation easements that have become popular with the economic upturn of recent years be able to withstand changes in the political and economic climate?

Although some feel that a benefit of conservation easements come from the fact that many work to restrict development on the land for perpetuity, others feel that this might be too binding for future generations. Unlike with other popular forms of conservation, such as land use regulation or purchases by conservation organizations, non-development decisions made with conservation easements are very difficult to change (although it is possible for them to be modified). The decisions that we make in the present may not be relevant in the future due to changes in existing values or scientific improvements (Mahoney, 2002). "The conventional conservation easement imposes fixed land use restrictions that, unlike the land, the circumstances of the landowner's life, and prevailing scientific thought, do not change over time. While commentators have praised conservation easements for their adaptability to a wide variety of landscapes and landowners, this flexibility typically ends once an easement is finalized" (Greene, 2005). In effect, although conservation easements are flexible in the fact that they take many types of land and landowners into account, they are not subject to change after they have been finalized, causing a dynamic approach to land conservation to suddenly turn static. Thus, it is thought that conservation easements will only prove effective if they allow for land uses to adapt over time according to current needs, but some might also fear that this would allow for the land to be developed in the future, going against the primary purpose of the conservation easement.

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