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N.C. Department of Environment and Natural Resources

NC Department of Environment and Natural Resources
Conservation Tax Credit Certification - Glossary

Conservation Tax Credit Certification

Glossary of Conservation Terms

Appraisal

A professionally-determined estimate of the value of property.

Assessment

The value placed on a piece of property by a taxing authority to calculate the municipal property tax.

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Bargain Sale

Sale of land or interests in land (easement) at a price below its appraised market value. The donated value may allow the seller tax benefits as a return on investment, and as an alternative to taxable sales (balance pre-tax compensation against post-tax compensation) while reducing the cost to the public agency or private nonprofit acquiring the land.

Basis

A term used by the Internal Revenue Service to mean the cost of property at the time of acquisition, or value when inherited.

Bequest

Land and interests in land (easement) may be donated through a landowner's will. The value of the estate is reduced by the value of the donation and there can be federal and state income tax advantages. The same conservation purposes and estate tax advantages can be achieved with a living trust, which avoids the probate process as well.

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Capital gains tax

A tax imposed by the IRS on profit made from the sale of property which is permanent in nature such as land, buildings, machinery).

Charitable contribution

The tax-deductible transfer of money or property to a qualified charitable organization or government entity.

Charitable Remainder Trust

Land and interest in land (easement) may be donated through a remainder trust. The remainder interest may be transferred on a specified date or at the close of an estate. A revokable trust will have tax advantages beginning at the time of its transfer, while an irrevocable trust will have tax advantages from the time of its creation. Depending upon the specific characteristics of a charitable remainder trust, its appraised value may reduce capital gains and estate taxes, as well as income taxes.

Conservation easement

A legal agreement between a property owner and a conservation or government organization that protects the conservation value of the parcel by permanently limiting the uses and changes an owner may make. The conservation organization or agency agrees to monitor the property and enforce the restrictions.

Convey

To give, transfer, sell, deed or otherwise change the ownership of one's property.

Covenant

A written promise contained in a contract, lease, deed or other form of agreement. A conservation covenant or restriction is generally written to continue in effect despite changes in ownership, thus it is said to "run with the land."

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Deed

A written legal document by which ownership of property is transferred from one owner to another.

Development rights purchase or donation

Transfer of an easement that disallows further development. This is a typical element of easements to maintain "forever wild" conditions, or to perpetuate agricultural and forestry practices on specific lands. (Also see easement and bargain sale)

Donation

Donations of land or interests in land (easement) can be made by a landowner to the public agency or private nonprofit organization. This may allow the donor to claim federal and state income tax advantages, remove donated value from capital gains, and reduce potential estate taxes. Donation of an easement routinely reduces the donor's property taxes in proportion to the easement's value.

Donation by Heirs

Federal tax law allows the executor of an estate to donate a conservation easement under specified conditions. Conserved lands must be within 25 miles of a metropolitan region, national park, or designated wilderness area. The value of an estate may be reduced by up to 40 percent by the value of the donation. The estate or the beneficiaries are eligible for state income tax advantages resulting from a donation.

Donee

One who receives a contribution or donation.

Donor

One who makes a contribution or donation.

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Easement Purchase or Donation

Transfer of specific interests in land (rights) from a landowner to another party. For example, an easement may specify that all or part of the land be left in a natural state through the transfer of all or limited mineral rights, timber rights, subdivision rights, etc. It may allow restricted or unrestricted public access. The landowner may retain ownership and specified reserved uses (e.g. agricultural/forest management, personal residential use), while the easement holder has the right to enforce restrictive conditions included in the easement. Appraised value and, therefore, property taxes and estate taxes, are routinely reduced in proportion to the reduction in land value when an easement is donated to a government agency or private nonprofit organization. Easements must be in perpetuity to qualify for federal and state income tax advantages. (Also see bargain sale)

Easement value

The difference between a property's value before the easement is placed on it and the value after the easement is placed on it.

Eminent Domain

A governmental unit may pass laws which allow it to exercise the right to "take in fee" specific privately owned property which is determined to be needed for a project which serves a specified public good. A specific public condemnation process must be followed and fair market value offered. Eminent domain is normally used as a last resort because it may have severe public relation challenges that could negatively impact public-private partnerships.

Endowment

A permanent fund established to support costs of a named project or purpose. Permanence is assured by restricting withdrawals of principal and generally relying on investment income for support.

Estate

The interest or sort of interest that one has in property such as life estate, estate of a deceased or real estate.

Estate tax

A tax the federal and state governments impose on assets of a person at death based on their net value at the time of death. An easement often reduces estate taxes.

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Fair market value

The dollar value that a willing buyer would pay a willing seller, neither being under any compulsion to buy or sell and both having full knowledge of relevant facts surrounding the transaction.

Fee Simple Purchase or Donation

Transfer of all rights in land. Fee simple sales at market value are usually taxable transactions. (Also see bargain sale, donation, and life estates)

Grantee

One who receives gifts, rights or property. Often, a land trust or government agency is "grantee" of an easement.

Grantor

One who gives gifts, rights or property.

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Heir

One who inherits the estate or property of another.

Holder

Grantee of an easement.

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Land Exchange

Under federal and state tax laws a landowner may exchange one tract of land for another. An advantage of such transaction is that capital gains taxes are deferred. For example, the swapping of privately owned land with conservation value for publicly or private nonprofit owned developable land.

Land trust

A nonprofit organization formed for the express purpose of holding land (or restrictive easements on land) for its conservation, historic preservation, wildlife protection and/or recreation values, among other things.

Life Estates

Life estates are a specific class of donation that allows the landowner to continue living on or using the land for their lifetime, but then have deferred benefits for estate taxes. A life estate may be integrated into a purchase or donation of land or interests in land (easement), as well as remainder trusts. This allows the donor to deduct the appraised value of the donation from federal and state income taxes and removes the value from amounts subject to capital gains and estate taxes.

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Option Purchase or Donation

A temporary technique to allow time to raise funds or to make arrangements for permanent protection. In agreeing to an option on land, the owner gives the recipient the right to execute the transfer of land (or an easement) at a specified price and date.

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Property tax

A tax assessed and collected by the county and state in which the property is located, based on its assessed value.

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Railbanking

Railbanking is a voluntary agreement between a railroad company and a trail group or agency which preserves the future rail use of an out-of-service rail line. With this agreement in place, the railroad can sell or lease a rail corridor, while assuring interim use as a public trail and the long-term potential for its use as a rail-with-trail.

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Stewardship

Stewardship refers to maintaining the protection of the ecological integrity of conservation properties. Stewardship, especially in regard to conservation easements, may consist of a variety of activities, including: maintaining landowner relationship, monitoring, reporting, management of funds, enforcement and defense, and site-management activities.

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Title

The evidence one has of legal ownership of property.

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Undivided interest Purchase or Donation

A technique for breaking a transaction into parts to accommodate installment transfers, and allow the landowner to optimize tax advantages. It avoids the necessity to subdivide the land or divide the interests in land to accomplish the same purpose. There can be a disadvantage in this technique that results from the uncertainty about how the final outcome will evolve over time.

Use Agreements

Transaction that allows (sometimes for a fee) specific negotiated uses for explicit durations. For example, wildlife gameland leases and natural heritage registrations. Use agreements typically are not permanent and will not qualify for federal and state income tax advantages for that reason.

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