A conservation easement is one of the most powerful — and most misunderstood — tax tools available to land owners in the Wasatch Back. Done correctly, it can generate a federal income tax deduction worth millions and permanently protect land you care about. Done incorrectly — or through a promoter-driven syndicated deal — it can trigger IRS penalties and years of audit exposure.
This post explains what a conservation easement is, how the federal deduction works, what the IRS is watching for, and how to evaluate whether an easement is appropriate for your parcel.
What Is a Conservation Easement?
A conservation easement is a voluntary, permanent legal agreement recorded against your deed. In it, you donate certain rights to your property — most commonly the right to develop — to a qualified land trust or government agency. The land trust holds those rights in perpetuity and enforces the restrictions.
You retain ownership of the land. You can still use it, sell it, or pass it to heirs — but the restrictions travel with the deed. A future owner cannot build a subdivision on land encumbered by an easement that prohibits development.
The federal tax benefit comes from the charitable deduction: under IRC §170(h), the value of the rights you donated is deductible as a charitable contribution.
How the Deduction Is Calculated
The deduction equals the difference between the property's fair market value before the easement and its fair market value after the easement is placed. This "before and after" value is established by a qualified appraisal from an IRS-qualified appraiser.
On a large agricultural parcel in Summit County with significant development potential, the difference can be enormous. A 200-acre ranch worth $8 million at market might be worth $3 million with development permanently restricted — producing a $5 million charitable deduction.
That deduction can offset up to 50% of adjusted gross income per year, with a 15-year carryforward for unused amounts. Qualified farmers and ranchers may deduct up to 100% of AGI in the year of the donation.
What Qualifies as a Conservation Purpose
Under IRC §170(h)(4), the easement must serve at least one of the following conservation purposes:
· Scenic/open space — preservation of land for public scenic enjoyment or governmental conservation policy
· Habitat — protection of wildlife or plant habitat
· Outdoor recreation — public access for recreation or education
· Historic preservation — preservation of a historically important land area or structure
Most agricultural and scenic parcels in Summit and Wasatch County qualify on open space and habitat grounds.
The Land Trust Process
A legitimate conservation easement is structured through an accredited land trust — a 501(c)(3) nonprofit whose mission is land conservation. The process generally takes 12 to 24 months and involves:
1. Initial evaluation — the land trust assesses whether the parcel meets their conservation criteria and geographic focus.
2. Baseline documentation — a detailed record of the property's current condition: ecology, hydrology, structures, and uses. This becomes the enforcement baseline.
3. Easement negotiation — the specific restrictions are negotiated. Not all easements are the same — some allow one home site, some allow none; some allow agricultural buildings, some do not.
4. Appraisal — an IRS-qualified appraiser values the "before and after" difference. This appraisal is attached to your tax return and is subject to IRS review.
5. Closing and recording — the deed of conservation easement is executed and recorded with the county.
Is an Easement Right for Your Parcel?
An easement makes sense when you have a parcel with significant development potential you don't intend to exercise, you have high income in the near term that needs offsetting, and you have a genuine conservation interest — not just a tax motivation. The IRS looks at the totality of the transaction.
It does not make sense if you're holding the land for development, if you need maximum flexibility for future use, or if the appraisal value is being driven by a promoter rather than an independent market analysis.