State gives new tax credits for conservation easements

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— Last week, Gov. Bill Owens signed a bill that gives landowners who put their property into a conservation easement a sizable state tax credit.

With 25,000 acres of the land already in conservation easements in Routt County, the move will make it more financially viable for people to enter into conservation easements.

"It's just one of the ways the state can help," said Susan Otis, executive director of the Yampa Valley Land Trust.

The bill, which applies to anyone who has entered into a conservation easement since January, gives landowners up to $100,000 in tax credits. Those credits can be traded on the open market or turned in for cash when the state has a surplus in its yearly budget.

That's a good deal for people interested in conservation easements, especially small-land owners with relatively low incomes.

Before House Bill 1348 was signed, the only tax break for people entering conservation easements was for federal taxes, which tended to favor the rich over the average landowner.

The new state tax relief program gives the landowner a one-third break on taxable income for six years, Jo Stanko said.

Jo and Jim Stanko, who are longtime ranchers in the Yampa Valley, signed a conservation easement in early March covering 141 acres of their 540-acre ranch.

As part of the deal, as in most conservation easements, the Stankos had to donate the building rights to their land. The land was worth $251,000.

With the federal tax breaks, the Stankos would have to make $199,000 a year to make back the value of their land. That won't happen, Stanko said. The new state law will help compensate them for their land donation.

But that doesn't mean more people will go into the conservation easements in the valley, Otis said.

Most conservation easements permanently take away the building rights to the land. "Rarely can that be changed," Otis said.

That can be a large sacrifice for some landowners.

"It just depends on what kind of situation you're in," Routt County Farm Bureau President and rancher Dan Craig said. "For a lot of people, they're giving away a little bit of their life's earnings."

Craig started ranching with two heifers while he and his wife lived in a trailer park. "In the last 30 years we've been able to put some land together," he said.

Now his land is worth four times what he paid. A conservation easement is tempting because it reduces inheritance tax, or death tax, penalties.

"That's why a lot of these farmers and ranchers are trying to do this," Craig said.

If Craig's son were to inherit the land at today's market value, he would have pay $480,000 in taxes.

"What you try to do is put the land into an easement and then pass it down," Craig said.

With building rights removed from the land, the market value of the land is reduced, thereby lowering death taxes.

"That's great, but what if the kid doesn't want to work on the land?" Craig asked rhetorically.

The death tax was a big reason the Stankos put part of their land in the conservation easement, but the not the only one.

In most agreements, the landowner is paid for the building rights on part of their land.

"It gives you some cash income up front that you can use for retirement," Stanko.

Money isn't the only reason for selling building rights on the land.

"There's an altruistic side to this," Stanko said. "You have to be willing to give up something as a legacy to the community."

It's a sacrifice for wanting to keep open spaces in rural areas as well as preserving agricultural land.

"The people we've been dealing with, they're dedicated to conserving their land," Otis said. "If your only motivator is the bottom line, you probably won't go through the process."

To reach Doug Crowl call 871-4206 or e-mail dcrowl@amigo.net

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