Drafting Conservation Easements for Agriculture Jerry Cosgrove Attorney

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Drafting Conservation Easements for Agriculture Jerry Cosgrove Attorney and Co-author of Your Land is

Drafting Conservation Easements for Agriculture Jerry Cosgrove Attorney and Co-author of Your Land is Your Legacy, A Guide to Planning the Future of Your Farm 3/12/2021 1

Legal Framework • Environmental Conservation Law Article 49, Title 3 • General Municipal Law

Legal Framework • Environmental Conservation Law Article 49, Title 3 • General Municipal Law 247 • Internal Revenue Code 170(h) 2

Basic Structure and Function • Negative covenant • Usually no requirement for agricultural use

Basic Structure and Function • Negative covenant • Usually no requirement for agricultural use • Flexibility for agricultural use • No public access required • Development “rights” not transferable 3

Key Drafting Issues • • Purpose Clause Agricultural Structures Farmworker Housing Other Rural Enterprises

Key Drafting Issues • • Purpose Clause Agricultural Structures Farmworker Housing Other Rural Enterprises Farming Operations Renewable Energy Affordability Affirmative Farming Covenant 4

Drafting Issues Cont. • • • Residential Building Subdivision Mining Extinguishment/Termination Resource Protection Areas

Drafting Issues Cont. • • • Residential Building Subdivision Mining Extinguishment/Termination Resource Protection Areas 5

IRC Requirements • Perpetual duration • “Qualified” organization • Exclusively for Conservation Purposes: –

IRC Requirements • Perpetual duration • “Qualified” organization • Exclusively for Conservation Purposes: – Recreation/Education – Natural Habitat – Open Space(including farmland) – Historical Importance 6

IRS “Two Prong” Test for Open Space • Must further a clearly delineated government

IRS “Two Prong” Test for Open Space • Must further a clearly delineated government conservation policy and yield a significant public benefit • Or provide scenic enjoyment for the general public and yield a significant public benefit 7

Purchase of Development Rights • Benefits – can strengthen farm business and help transfer

Purchase of Development Rights • Benefits – can strengthen farm business and help transfer the farm operation • Disadvantage – limited funding and potentially complex transaction process 8

Planning with PDR / CE’S Issues – • Land Planning • Business Planning •

Planning with PDR / CE’S Issues – • Land Planning • Business Planning • Financial Planning • Estate/Succession Planning 9

Tax Implications/Opportunities with PDR • • Capital Gain Allocation of Basis 1031 Like-kind exchange

Tax Implications/Opportunities with PDR • • Capital Gain Allocation of Basis 1031 Like-kind exchange Bargain sales 10

Donation of Conservation Easements • Tax benefits – Income (170(h), Gift (2522(d), Estate (2055(f),

Donation of Conservation Easements • Tax benefits – Income (170(h), Gift (2522(d), Estate (2055(f), 2031(c)) • Valuation – “before and after” appraisal • “Qualified” Appraisal required (form 8283) 11

Funding Sources • New York State – EPF • Federal – ACEP / ALE

Funding Sources • New York State – EPF • Federal – ACEP / ALE • Private matching funds – – Nonprofits – Neighboring landowners – Bargain sale 12