Owners of ranch and forest land who are pressed by real estate taxes agree to donate or sell the land (often at below market price) to land trusts so that their tax burden will be relieved. As an alternative, the rancher may split the title and sell a conservation easement in the land to a land trust. State tax structure may allow that taxes on the conservation portion of the title will to be separately assessed and that portion of the value treated as tax exempt.
The favorable tax treatment of land trusts, which claim that they will be managing the land to preserve ranching, is build on a fictitious attribute of uniqueness to the corporate purposes of the land trust, e.g., that it is incorporated to "preserve land." Ranching, however, is based on the necessity of preserving the land, and ranch land should have the same treatment for real estate tax purposes as land held by a land trust.
The conservation easement restricts the future use of the land and allows the land trust or, depending on the state law, another non-profit organization, to enforce the easement through the court. Future litigation is almost insured.
The Uniform Conservation Easement Act of 1981, a model law passed by the National Conference of Commissioners on Uniform State Laws, has been and is being passed by many state legislatures. Under this uniform law, non-parties to the conservation easement transaction that are not-for-profit organizations that meet certain standards have legal standing to bring a civil action to enforce the conservation easement. This means that the rancher must not only satisfy the land trust that holds the conservation easement, but must also be concerned that other parties that may have a stricter interpretation of the conservation easement will bring the rancher to court.
Land trusts use the IRS law to pressure ranchers to grant perpetual conservation easements to the land trust to avoid estate taxes. These encumbrances virtually insure that the ranch will be subject to perpetual vulnerability to litigation. A perpetual encumbrance defies the common law traditions of English and subsequent American law. A primary motivation for the Uniform Conservation Easement Act described above was to overcome the common law traditions that protect private property, such as prohibition of purely negative encumbrances. If the uniform conservation easement act has been passed in the state, it should be repealed.
One important common law tradition is that "the dead hand cannot rule from the grave." Gray's Rule Against Perpetuities (1886) limits the ability of testators to control use of land for a period of time longer than the last life in being plus 21 years.
The common law tradition protects the unencumbered ownership of private property and should be preserved. It should not be possible to acquire a perpetual encumbrance on land. Even the easements created for construction of railroads during the past century were framed so that they expired when the land ceased to be used for railroad purposes. Perpetual conservation easements mean perpetual problems.
In conjunction with such legislation, pass a resolution in the state legislature to support the federal repeal the IRS requirement that conservation easements must be perpetual.
Land trusts use the existence of the estate tax to pressure ranchers to sell or donate all or part of their property or conservation easements to the land trust. In fact, most of the pressure to transfer title to land trusts is artificially created by real estate and estate tax law.
Elimination of the preferred real estate tax treatment afforded to land trusts will remove the incentive of land-based producers to sell or donate land or conservation easements to them.
It is important that an industry trade organization create the stewardship certification program, rather than the environmental non-profit community, which is at present, starting with the forestry, trying to obtain a world wide monopoly on stewardship certification.
By enacting legislation to eliminate third party intermediaries in government land acquisitions, some of the most extreme abuses of the land procurement process will be curtailed. The legislation should specify an open procurement process, whereby parcels or areas to be acquired are identified by a process following public hearings as in the promulgation of regulations. and subsequently the landholders are approached directly, preliminary to the classical eminent domain process, if the land is needed immediately, or where the land is acquired when available by an exercise of first refusal or simply willing seller at the schedule of the landholder. The "willing seller" saw so distorted by the land trusts will be eliminated.
Environmental departments will be prohibited from approaching land trusts to acquire the property and hold it until the government buys it on a flip, as is the usual case today through the use of third party intermediary land trusts.
At present, in some state environmental departments, and in federal transactions, there are barely any guidelines as to the costs incurred by land trusts that are reimbursable, resulting in unacceptable flexibility and abuse.
The Nature Conservancy enjoys a near monopoly in the states of the provision of Natural Heritage surveys, even though it has to hire outside consultants to conduct the surveys. Legislation should ensure that such services are competitively bid, and that no hidden reductions in costs of services are included such as understandings to share staff and office space. In addition, provision of parks and the like should be provided for under the usual constraints requiring formal requests for proposals and comparisons subject to all of the usual audits by the comptroller.
Informed consent would include written revelations at the contract stage such as:
Many of the legislative proposals above are alternatives to each other, or are inapplicable in various states. The above legislative proposals need to be evaluated for the applicability to the state for which they are contemplated. In addition, some of the proposals are lesser impact legislation that could be used for negotiations to obtain very important, even if less complete, reforms.
Carol W. LaGrasse
January 31, 2001