Taxing and Untaxing Land

This article was originally published in State Tax Notes, a journal by Tax Analysts, on September 11, 2006.

One of the most dramatic recent developments in the usually staid evolution of property law in this country has been the explosive growth of conservation easements over the past three decades. All but unknown before then, conservation easements today number in the tens of thousands and restrict millions of acres of land. Perhaps their most innovative feature is their duration because they generally limit development in perpetuity. Their implications for land use planning, environmental management, and land markets are still not fully understood, and it is not surprising that many aspects of their property tax treatment remain unsettled as well.

A conservation easement restricts development on a parcel of land. An owner who conveys an easement to an exempt organization, such as a land trust or the Nature Conservancy, usually expects future property tax assessments to reflect that reduction in development potential. However, state law may be unclear on that point, and the drafters of the Uniform Conservation Easement Act deliberately avoided any legislative statement on local tax consequences. Moreover, it is often difficult to estimate the effect of an easement on property value.