Conservation Easements and Other Financial Aspects to Owning Forestland
In establishing an easement, landowners voluntarily give up development rights in exchange for cash, tax benefits, or both. Easements are legally recorded restrictions tied to the land rather than an individual owner. Easements usually confer tax advantages through deductions based on having a charitable contribution of part of the value and also through lowering the property value, potentially reducing both property and inheritance taxes.
"Most of the landowners we've worked with are mulitgeneration ranch and forest landowners who don't want to see their property split up...subdivided and broken up."
Michael Cipra , North Coast Regional Land Trust
What is a conservation easement?
A conservation easement is a voluntary,
incentive-based legal agreement that limits
the type and amount of development allowed
on a parcel of land, either for a set period of
time or in perpetuity.
Why is it important?
More than 1.3 million acres of agricultural
lands in California were converted to other
uses between 1994 and 1998. Grazing
lands decreased by 19,000 acres annually.
Urbanization accounts for 80% of these losses,
creating concern that we are losing important
potential to produce food and fiber in the face of our growing population. In addition, the primary threat to wildlife and biodiversity is habitat loss, making the conservation of working landscapes that much more important.
How can i benefit?
Reducing your annual and succession costs
improves your family’s ability to make a living
off the land. Selling an easement can give you a significant
one-time earnings boost. Donating an easement can give you a significant savings on income taxes for many years.
An easement can protect your land and it’s
natural resources and agricultural potential
How important is estate planning to small parcel owners?
A benefit to including your forestland in estate planning is to address CA Probate issues. Estate planning can minimize the expenses and long time lines associated with Calif. probate. Current law states that heirs are not going to pay an estate tax unless all assets total $22 million for a couple filing jointly. This expires in 2025.
what markets are available for carbon sequestration and carbon credits?
There are great possibilities for carbon sequestration! We see a lot of interest by landowners in carbon, forest health, etc. The carbon sequestration market and good forest management go hand-in-hand and benefit climate. However, the carbon market process for small, private forest landowners is still cumbersome (lots of inventory work that needs to be done) and unless you own thousands of acres, the financial payoffs are not quite there yet.
The CA Air Resources Board supports AB32 cap and trade (the compliance market). Large carbon emitters need to cap their emissions levels. They can offset a certain percentage of those emissions by buying carbon credits. It is currently set at 4% of their emissions, but will go down to 2% in a few years with the understanding that industry is actually reducing carbon emissions. Typically, the ARB program is stringent with a time commitment of 100 years. Minimum size of forested acreage is more than 5000 acres, which is not feasible for most small forest landowners.
Other markets include the voluntary markets, which are trying to make it easier to enroll small acreage landowners with their protocols. The time commitments are usually less than 100 years. You have to start with an intensive forest inventory that will calculate the carbon levels, model growth and yield over the required time period, and a baseline scenario. You get credits between the baseline and what you will be sequestering. Some programs just provide credits for growth.
Some companies to look in to include:
Financial Aspects to Owning Forestland