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N.C. Department of Environment and Natural Resources

NC Department of Environment and Natural Resources
Conservation Tax Credit Certification - What reviewers look for in applications

Conservation Tax Credit Certification

What do reviewers look for in applications?

Specific reviewer guidelines are provided here that correspond to public benefits, so please check those first. In addition, clear and straightforward Instruments of Transfer are not only helpful in the review process, but also should make it easier to monitor and steward the conservation property in perpetuity. Where there are retained rights, the reviewers look for a balance that provides adequate conservation of the environment and natural resources.

Other things that get extra scrutiny from reviewers and could prevent certification:

  • Reserved home site and/or subdivision resulting in fragmentation
  • Inadequate conservation of water quality or other sensitive/important habitats
  • Retained rights which could or would degrade conservation value if exercised
  • Provisions for alteration in retained rights (e.g. conversion of existing forested habitats to agricultural purposes, or conversion of agricultural land to developed areas; impoundments of free-flowing streams)
  • Retained rights with potential off-site impact, such as changes to natural hydrology
  • Retained rights with no review by grantee
  • Size, shape and configuration of conservation area
  • Multiple retained rights, or retained rights to actions at unspecified locations.  In these cases, the reviewers must assume the worst-case scenario in regards to how the public benefit would be protected when the rights are exercised. 
  • Substitution of property is not reviewed favorably. The conservation intent of donation would imply that important resources are protected from the beginning.
  • Resource agency reviewers recently recommended that the right of commercial forestry be excluded from identified natural areas.  In some cases forest management, such as ecological restoration to remove hardwoods from a longleaf pine forest or successional pines from a Piedmont oak-hickory forest, would still be appropriate.

Can a home site be reserved within the conservation area and still get the tax credit?

This is a difficult question, but the reviewers have worked to identify an approach to take in this regard.  This general rule for a reserved home site is used, in order of preference: 
  1. Prefer to exclude the reserved home site from the conservation area.
  2. In the cases where there is some practicality for a home site to be within the conservation area, and the home site is reserved in the corresponding easement, reviewers prefer that that the location be specified. Reviewers will examine location, footprint/envelope, impervious surface, building square foot/height, as well as reservations for access road and utilities and other associated retained rights. Prescribed caps or limits will help reviewers evaluate impact on conservation values. Reviewers would expect impact to be minimal, and the recipient (easement holder) to have right of review before construction.
  3. Easements where a home site is reserved in the conservation area, but the location is not identified as part of the conservation easement will be evaluated as if the future home site will be located in the least ideal location (e.g. prime farm fields, within stream buffers, on rare plant populations, or situated to maximize fragmentation of wildlife habitat). 
Some programs have a rule of thumb for the number of reserved home sites (e.g., for the USDA Farm and Ranchland Protection Program, one home site is allowed per the average size farm in the area, which usually translates to one home site per 50-100 acres). Of course, fragmentation is a great concern for wildlife habitat, so home sites will be carefully evaluated in non-farmland projects.

Public benefits (conservation values) must be protected in perpetuity:

In order to qualify for conservation tax credit, the conservation values of the property must also be protected in perpetuity. Adequate protection of land requires ownership or oversight by an organization or entity whose mission is to protect the significant conservation values, and provision for such oversight in perpetuity. The public benefit of a transaction can be lost if the conditions of the agreement are not maintained into the future. For both fee simple and conservation easement donations, the recipient should have the ability to monitor and defend the conservation lands, and must be committed to retaining the public benefits. This type of review may be out of the purview of the resource agency reviewers, such as the Natural Heritage Program, so it will likely be incumbent on the Department of Revenue and Department of Environment and Natural Resources to ensure, to the extent possible under the General Statutes, that recipients are qualified and have sufficient resources to monitor, manage and/or defend conservation lands. 

Download application

Click here to download the application.

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