"First, granting access to the public to your land is never a requirement of a conservation easement. However, a landowner can voluntarily agree to it.
"Second, the terms of a conservation easement are negotiable.
"Third, there are requirements for certain standards to be met for a landowner to receive the full federal and state tax benefits of placing a CE on their land.
"The federal tax benefits can come from income tax deductions, estate tax relief, capital gains relief, et cetera.
"The current state tax benefits consist of deductions from income.
"Now an example: John Q. Landowner has a 1,000-acre tract of land with no houses or buildings on it (that) is bordered on three sides by the Daniel Boone National Forest. The appraised value is $1,000 per acre, for a total full market value of $1 million.
How it would work
"(He) is approached by a land trust about placing a conservation easement on his land.
"Under the proposed legislation, here is how it could work:
"The land trust negotiates a conservation easement with the landowner that:
* disallows subdivision of the property.
* disallows construction on the property.
* allows road building only as part of a farming and/or timber management project.
* may set some guidelines on timber harvest. As examples, it must follow best management practices and must have a timber management plan approved by the land trust before beginning to cut timber.
* farming will be allowed under certain guidelines that are also negotiable. Examples are: no overgrazing, no woods grazing, no new fences, no tilling to the creek edge.
"With these and a few more restrictions that are agreed to by the landowner and the land trust, a CE is signed and recorded. At this point the value of the land has been reduced because of the voluntary deed restrictions that the landowner agreed to.
"To make it easy, let's pretend the appraised value with these new restrictions is now $500,000. The land has lost half of its value.
"The landowner can treat this reduction in value as a charitable contribution to the land trust, and the land trust will probably ask for a stewardship donation on top of the CE.
"The land trust is now responsible for monitoring and enforcing the terms of the CE into perpetuity. The landowner has several years to take this deduction on his federal income taxes.
"With the proposed CE tax credit legislation in Kentucky, the landowner can get a state tax credit for 25 percent of the value of the CE.
"The CE (in our example) is worth $500,000, and 25 percent of that is $125,000. Therefore, the landowner receives a state tax credit of $125,000 and has 20 years to use it all.
"If he does not need all of it, he can sell the credit to somebody that does. Tax credits usually bring between 70 and 80 cents on the dollar.
"Or the landowner may be land-rich and cash-poor, and he does not need any state tax credits. Then he can sell all of his credits and put some cash into his pocket, but he still gets to farm, cut timber, hunt on and enjoy his land.
"If the landowner agrees to a perpetual access agreement with the Kentucky Department of Fish and Wildlife Resources on top of the CE, he can get a tax credit for the full $500,000 value of the CE.
"The access agreement will be with KDFWR, and will not be enforced by the land trust. This will be a separate agreement in a separate document with the state.
"A disclaimer: I am not sure these percentages are right: If the landowner grants a 15-year access agreement he can receive a 45 percent tax credit, and a 30-year agreement will get him a 75 percent tax credit.
"This will not work for or be attractive to all landowners, but it will be to some."
