Open Space Protection Collaborative
About Us Advisor Tools Tax Incentives Frequently Asked Questions Resources Events Working Lands Home

Congress passed code 170(h) in 1976 and modified it in subsequent years to provide income tax incentives to landowners to protect environmentally and historically significant property.

Section 170(h)(1) is the starting point for determining eligibility for tax benefits. To qualify for a federal income tax deduction, the donation of land or an easement must be in perpetuity and donated to a public charity such as a land trust or government entity. The public charity must have the resources and commitment to steward the easement. Land trusts are qualified charitable organizations with the mission and resources to own conservation land and hold easements.

The donation must serve at least one of the following conservation purposes:

  • Preservation of land areas for outdoor recreation or education for the benefit of the general public.
  • Protection of a relatively natural habitat of fish, wildlife, plants or similar ecosystem.
  • Preservation of open space, including farm and forest land, where such preservation will yield a significant public benefit either for 1) the scenic enjoyment of the general public; or 2) pursuant to a clearly delineated federal, state, or local governmental conservation policy.
  • Preservation of a historically important land area, or certified historic structure.

Congress’ intent was to allow a tax deduction for the protection of conservation resources that clearly provide a significant public benefit.


Some of the factors considered when evaluating Significant Public Benefit are:

  • Uniqueness of the property to the area.
  • Intensity of land development in the vicinity of the property
    (both existing development and foreseeable trends of development).
  • Consistency of the proposed open space use with public programs for
    conservation in the region, including programs for outdoor recreation, irrigation or water supply protection, water quality maintenance or enhancement, flood prevention and control, erosion control, shoreline protection, and protection of land areas included in, or related to, a government approved master plan or land management area.
  • Consistency of the proposed open space use with existing private conservation programs in the area, as evidenced by other land, protected by easement or fee ownership by organizations referred to in1.170A-14(c), in close proximity to the property.
  • Likelihood that development of the property would lead to or contribute to degradation of the scenic, natural, or historic character of the area.
  • Opportunity for the general public to use the property or to appreciate its scenic values.
  • Importance of the property in preserving a local or regional landscape or resource that attracts tourism or commerce to the area.
  • Likelihood that the donee will acquire equally desirable and valuable substitute property or property rights.
  • Cost to the donee of enforcing the terms of the conservation restriction.
  • Population density in the area of the property.
  • Consistency of the proposed open space use with a legislatively mandated program identifying particular parcels of land for future protection.

is evaluated by considering all pertinent facts and circumstances. Most conservation donations today qualify as a public benefit under scenic enjoyment, or as protection of natural habitat.


Following charitable deduction rules, a gift of land or a conservation easement must be made with “donative intent” — that is, without the expectation of receiving economic benefits for the gift.

Real estate developers may not take a charitable deduction if it is quid pro quo. For instance, they can’t receive a deduction for donating land in exchange for zoning approval. Another example would be a developer’s donation of a neighborhood green space where it enhances the value of the remaining parcels.


Property owned more than one year is long-term property. Individuals may deduct the market value of the gift up to 30% of his or her contribution base (usually AGI) for the year and can carry forward the unused balance for up to 5 years.

Property owned less than one year is short-term. Individuals may deduct the cost basis of the gift up to 50% of his or her contribution base for the year with the remainder carried forward for up to 5 years.

A taxpayer may elect to treat 30% property as 50% property. This may be advantageous when there is little capital gain on the property.

Corporations or developers of prestigious real estate(e.g., Regalia) may deduct up to 10% of taxable income with a 5-year carryforward.

For ordinary income property, the deduction is limited to the property’s basis. Examples of ordinary property are:

  • Inventory
  • Property held primarily for sale to customers in the ordinary course of trade or business
  • Depreciable business property
  • Real property used in the taxpayer’s trade or business


The donor of the conservation easement reduces the cost basis in the retained property by the ratio of the value of the easement to the value of the property before the easement. For example, Mr. Bridges owns a $2,000,000 farm in the foothills. He places a conservation easement on the property worth $1,000,000. His cost basis before the easement was $100,000. His basis after the easement is $50,000.


In most parts of NC and SC, there are few comparable sales figures available to value easements. Most valuations are based on the value of the land before and after the easement. The market value of the land before the easement minus the value of the land after the easement equals the value of the conservation easement—the value of the charitable donation.

For bargain sales, the value of the gift is the market value of the property minus the sale price of the property. Bargain sales should be at least 80% below market value to be eligible for bargain sale treatment.

APPRAISALS - Reg § 1.170A-14(h)(3)

To claim a federal income tax deduction, the taxpayer must have a “qualified appraisal” from a “qualified appraiser.” A taxpayer can lose tax benefits for failure to comply with the appraisal requirements and may face substantial penalties if values are overstated. The IRS issued a statement in July 2004 highlighting its intent to enforce accurate charitable contribution deductions.


Choose an appraiser familiar with conservation easements.

Land trusts maintain lists of appraisers familiar with conservation properties.


Donations worth more than $5,000 must be valued by a qualified appraiser no earlier than sixty days before the contribution and no later than the day the tax return is due.

Form 8323 must be signed by the qualified appraiser and the donee.

Placing an easement on land may affect the value of other property owned by the donor. The appraisal takes this into account:

Contiguous Property Appraisals must take into consideration the change in value of any contiguous property owned by the donor and the donor’s family. The value of the easement is equal to the value of the entire contiguous property before the easement minus the value of the entire contiguous property after the easement.

Enhancement Rule The appraisal must consider possible enhancement of other property owned by taxpayer, taxpayer’s family, or related parties (with expansive definition of related parties). Example: A donor places an easement on his mountain property which preserves an excellent view for his property down in the valley. A qualified appraisal must take into consideration the increased value of his valley property because of the protected view.

Reference Material: LTA Easement Series, Appraising Easements, Guidelines for Valuation of Land Conservation and Historic Preservation Easements By Land Trust Alliance and National Trust for Historic Preservation. Available from the Land Trust Alliance

The Open Space Protection Collaborative provides information to promote the proper use of easements and other conservation tools. This information is not intended to be tax or legal advice; individuals should consult their own legal and financial advisers before drafting, executing or donating a conservation easement.

Copyright © 2004 Open Space Protection Collaborative