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BOZEMAN -- Many Montana ranchers face a dilemma: Sell the ranch for development and fetch a high price, or try to stay in ranching and preserve the land and business for the family.
Conservation easements are one alternative to selling a ranch. The economic incentives and possible tax advantages of an easement can offset or exceed the economic gain from selling, says Jim Knight, Montana State University Extension wildlife specialist.
Since 1975, when Montana cleared the way for the use of conservation easements, over 300,000 acres in the state have been protected, says Knight, the author of a new Extension "Montguide" titled "Conservation Easements on Montana Ranches."
Conservation easements work best when their purpose is to maintain existing land uses. Easements are given -- typically to government or non-profit agencies, or local land trusts -- to preserve ecological or recreational values on wildlife habitat, productive agricultural land, scenic river corridors and other prized values.
Perpetual conservation easements -- as opposed to term easements of 15 years -- offer the most potential tax benefits. They can qualify as a charitable deduction for federal and state income taxes, and they can lower federal inheritance and estate taxes.
For tax purposes, the fair market value of a conservation easement is set by a land appraiser. The income tax deduction is generally limited to 30 percent of the landowner's adjusted gross income each year. The landowner has up to six years to deduct the full value of the easement donation.
Conservation easements typically will not lower property taxes, because under Montana law, property taxes are calculated in accordance with current land use. This means that the assessed value of land in agricultural use will not be significantly affected by a conservation easement.
Landowners who convey an easement can retain the right to control public access to their land. And, easements can be set up so the landowner reserves the right to build a few homes or to develop land in combination with a gift of an easement on an adjoining parcel. However, the value and acceptability of the easement will be affected accordingly.
The primary mistake a rancher can make is not getting enough professional assistance, says Knight. Another error is failure to anticipate future situations, such as the need for future ranch roads, salvage harvest of dead timber or potential home sites for future generations of the ranch family.
To get a free copy of the Conservation Easement Montguide, contact your county's MSU Extension Office. You may also send for this and other publications, for a $2.95 handling charge, from Extension Publications, P.O. Box 172040, Montana State University, Bozeman, Montana 59717-2040
This publication is also available on the web in Adobe Acrobat format (Acrobat Reader is available free to download). You can find it in the agriculture listings at: http://www.montana.edu/wwwpb/pubs/pubs.html".