Title: Land Protection Through Donations and Bargain Sales: A New Groth Management Tool?
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Permanent Link: http://ufdc.ufl.edu/UF00052561/00001
 Material Information
Title: Land Protection Through Donations and Bargain Sales: A New Groth Management Tool?
Alternate Title: May, James W. "Land Protection Through Donations and Bargain Sales: A New Groth Management Tool?" Environmental Exchange Point, Department of Environmental Regulation. V. 2, No. 3
Physical Description: 4p.
Language: English
Creator: May, James W ( Author )
Publication Date: October 1990
 Subjects
Spatial Coverage: North America -- United States of America -- Florida
 Notes
General Note: Box 5, Folder 5 ( SF LAND ACQUISITION ), Item 8
Funding: Digitized by the Legal Technology Institute in the Levin College of Law at the University of Florida.
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Bibliographic ID: UF00052561
Volume ID: VID00001
Source Institution: University of Florida
Holding Location: Levin College of Law, University of Florida
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Office of Planning and Research Department of Environmental Regulation
VOLUME 2, NUMBER 3 OCTOBER 1990
Land Protection Through Donations and Bargain Sales:
A New Growth Management Tool?
By James W. May
The author is the Senior Research Associate of the Homer Hoyt Center
for Land Economics and Real Estate at Florida State University.

As cities and counties move for- grams, such as the Conservation and Homer Hoyt Center in 1989 with
ward in their local comprehensive Recreation Lands the 1990 legislative funding assistance from the STAR
planning programs under the Growth session as part of the Preservation program.
Management Act of 1985, land acqui- 2000 program. For many landowners the most
sition will grow in popularity as a There is no question that an ag- important benefit in selling land to
means of accomplishing a wide vari- gressive local land acquisition pro- their city or county would be the
ety of local planning objectives. Land gram can be an important comple- opportunity to ensure the protection
acquisition can be a primary tool for ment to traditional growth manage- of the natural beauty and productiv-
achieving many conservation and re- ment tools such as comprehensive ity of their land, which may have been
source protection objectives (e.g., planning and land development regu- in their stewardship for many years.
wetlands and floodplain protection, lation. Equally important, however, Land sold or donated to local govern-
preservation of endangered habitats are programs that encourage the ac- ments can be permanently protected.
and wildlife corridors), coastal man- tive involvement and public support Cities and counties can also make
agement goals (beach and dune pro- of local citizens in land acquisition allowances for those who wish to
tection and restoration programs, and management. An ideal way to protect their land, but also wish to
public beach access policies), land solicit this involvement, while at the continueowningit Localgovernments
banking for future infrastructure de- same time stretching local land ac- may, through conservation easements
velopment (new facility sites, right-of- quisition budgets a little farther, is to and other legal devices, protect land
way corridors), innovative transpor- encourage voluntary land donations which they do not directly own. These
station access ideas (the rails to trails and acquisitions through bargain options can provide peace of mind for
program, bicycle paths), and the pro- sales from private individuals. The both the landowner and other resi-
vision of open space and parks for real question becomes how to get the dents by ensuring that the land will
recreation needs, to name but a few. most land possible that possesses the remain undeveloped for future gen-
Several counties in Florida have necessary natural resource attributes erations to enjoy.
moved aggressively to establish lo- for the limited amounts of available Additionally, the financial impli-
cally-financed land acquisition pro- public dollars. cations of a sale or donation of land or
grams, Volusia County being an early One of the more innovative ap- interests in land to local governments
leader in this respect. Other local preaches to solving this problem is to are an important consideration for
governments recently enacting land simply pay less than the full market manylandowners. These include both
acquisition programs include Brevard, value for the land. There obviously is cash flow and tax benefits. Govern-
Martin, Palm Beach, Broward, Dade, a great public benefit to acquiring mental agencies enjoy the same sta-
Collier, Lee, Sarasota, and property at less than its full market tus as non-profit organizations and
Hillsborough counties. These pro- price, since the ultimate result is to charities for purposes of charitable
grams can work in conjunction with acquire more resource lands at less contributions and tax deductions. As
existing state land acquisition pro- cost to the state's taxpayers. long as IRS guidelines are adhered to,
Cities and counties in- contributions to government agencies
terested in such a program are tax-deductible.
to encourage land donations Local governments are empowered
CI Th i Iq U)?: and bargain sales should to purchase land at its full market
be aware of the benefits and value, and for some landowners cash
Transportation Planning and land protection options flow considerations may make this
Air Quality: Inseparable issues" available to landowners the best option. For tax reasons, do-
"Public's Role in the Planning Process wishing to consider a less nating land or selling it at less than its
"Coastal Development Costs" than market value transac- market value is a more attractive
"Coastal Barrier Island Protection" tion. The following informa- options for many. If the property is
"Storwater Update" tion about these benefits sold to a city or county at its full
and options is taken from market value, the landowner will be
", : The Landowner's Guide," liable for income taxes on any capital
published by the FSU See LAND PROTECTION page 7


1









LAND PROTECTION from pg.1
gains that accrue from the sale. If sold at less than market value to a local signed to encourage voluntary conser-
the land is donated, the owner may government, for example: vation efforts. Before deciding
claim the value of the land as a 1) the conservation easement which option to use, landowners must
charitable donation for income tax permanently protects the natural re- decide whether they want to continue
purposes. Similarly, if the land is source and environmental values of the to own the land. Some options protect
sold to a district at less than its full land; land by restricting the uses to which
market value, the owner can claim 2) the landowner retains owner- it can be put, but do not necessarily
the difference between the sale price ship of the land; require selling the land. These are
and the market price as a charitable 3) the landowner can in most discussed below under Protection by
donation. Because tax deductions cases take a federal income tax deduc- Restriction. Other options do involve
for these donations may reduce or tion based on the value of the conserva- transfer of title. These are discussed
eliminate any capital gains tax due tion easement (ifit involves a charitable below under the heading of Protection
on the transaction, the after-tax contribution, e.g. is donated or sold byTransfer ofTitle. These options are
proceeds of a donation or bargain below market value); summarized in the accompanying fig-
sale to a local government can equal 4) the landowner obtains a cash ure entitled "Land Protection Options."
or exceed those of a full market return on part of the value of the ease-
value sale. ment; PROTECTION BY RESTRICTION
The same benefits can ac- 5) the landowner's local property
crue when the landowner chooses taxes should be reduced since the as- Conservation Easements
to retain title but protect the land sessed value of the property will be Conservation easements are
with a conservation easement. The diminished by the restrictions in the the most popular way of ensuring the
rights conveyed by the easement conservation easement; preservation of environmentally sen-
would command a certain price if sitive land while obtaining some of
sold on the open market If the the tax benefits associated with
easement is donated, therefore, the charitable donations. A conservation
landowner can usually claim the easement transfers a limited number
value ofthe easement as a charitable V IRONM of "sticks" which make up the bundle
donation. Similarly, if the easement of property rights. The rights trans-
is sold to a city or county at less than ferred can vary, but are typically those
its full market value, the difference necessary to protect the environ-
between the market value and the Cc mental characteristics of the land.
actual sale price can be claimed as For example, local governments
a charitable donation. Additionally, may acquire conservation easements
transferring partial interests often which prohibit further development
lowers the assessed value of the of the property, but which allow the
land, and therefore results in re- original owner to retain ownership of
duced local property taxes as well. F OR\ the land, including the rights to hunt,
For those landowners anx- OFFL fish, and maintain a house on the
ious to pass their property to their land.
children estate tax considerations Easements can be granted
are also important. Land bought 6) the value of the landowner's by donation, bargain sale, or full mar-
years ago and kept undeveloped or estate is reduced by the value of the ketvalue sale. Granting the easement
in agricultural use may today be conservation easement, thereby reduc- usually reduces the value of the prop-
worth many times its original value, ing estate taxes; erty by the value of the rights which
especially if located near a rapidly 7) because estate taxes are low- the easement transfers, and can
growing urban area. This land com- ered, the landowner's heirs are less therefore reduce property and estate
mands a higher price in the real likely to have to sell the land to meet taxes. Moreover, if the easement is
estate market for urban uses than estate tax obligations, transferred as a donation or at less
for agricultural uses. Such land has than market rates, the difference be-
often appreciated to such an extent These examples point out the tween the full value of the rights and
that it must be broken up and sold flexibility that donations or bargain the transfer price may qualify as a
for development upon the death of sales of land to local governments offer charitable deduction for income tax
the owner, simply to pay the estate landowners in meeting their personal purposes. Once the easement is es-
taxes. Granting an easement which environmental or financial objectives. tablished, the protection it confers is
prevents future development of the Land transactions involving bargain permanent, and the local government
land or keeps it in agricultural use sales, donations, or easements are has the right to enforce its provisions.
may reduce the value of the land to necessarily complicated. Before com- It is important to understand that
a level where it no longer needs to be mitting to any course of action, land- while an easement transfers certain
sold to pay estate taxes. In many owners and local officials should seek rights in a parcel of land, title to the
cases, this may be the only way for the advice of an experienced tax spe- land remains with the original owner.
heirs to actually inherit and enjoy cialist.
the land. Some land protection options Lease
In fact, a transaction may available to landowners are briefly de- Leases are another way of
be structured in such a way as to scribed below. Each of these options providing some protection to land
meet a variety of objectives. In the suggest different ways in which local while retaining ownership of it. Leas-
case of a conservation easement land acquisition programs can be de- see LAND PROTECTION pg. 10



8








LAND PROTECTIONfrom page 8
ing land to a local government effec- leasing is weak compared to that pro- ability of enforcing a deed restriction
tively protects the land to the extent vided by a conservation easement, falls largely on the landowner, since it
provided by the terms of the lease. because it is limited in time. is not automatically assumed by a
The terms of the lease may specify Deed Restrictions third party such as a conservation
that the propertywill be used only for Deed restrictions are similar group. It may be difficult for some
certain purposes for the duration of to conservation easements in that parties to obtain legal standing to
the lease, such as for passive recre- they restrict the uses to which a prop- enforce a deed restriction. The re-
ation activities or for scientific or edu- erty can be put However, there are strictions may eventually become un-
cational uses, or the use of the prop- important differences between the two enforceable under the doctrine of
erty maybe left to the discretion ofthe approaches for landowners, both in changed circumstances. Under this
city or county. One advantage to the terms of the tax benefits that may be doctrine, courts mayrefuse toenforce
landowner is that land management available and in the degree of land the restrictions if changing circum-
responsibility can be delegated in this protection afforded their property. stances make it impossible to achieve
fashion, possibly for a nominal Deed restrictions convey no the benefits which the restrictions
amount of lease revenue depending interests in the land to others; they were originally intended to produce.
upon the natural resource values of are private restrictions on property Although deed restrictions may lower
the property. However, the long-term uses that continue to apply after the a person's property value, and there-
conservation protection afforded by land is sold to others. The responsi- fore lower the landowner's estate and
property taxes. they cannot be claimed
as charitable contributions for fed-
eral income tax purposes. Still, deed
restrictions provide some land pro-
LAND PROTEC N O S tection and are relatively simple to
LAND PROTECTION OPTIONS implement, since they can be put into
place by the landowner without the
cooperation of another party.

Does the landowner wish to continue owning the land? PROTECTION BY TRANSFEROF
A TITLE

Donation
A land donation is in some
Yes No ways the simplest method oftransfer-
I ring land to a local government, be-
cause no negotiations about price are
necessary. All property rights are
Is Compensation Desired? Is Compensation Desired? transferred, the local government as-
sumes full control of the land, and
e (sale) (donation) permanent protection of the land's
natural resources and environmental
ST values is assured. The tax benefits of
-'-- outright donation are usually greater
Fair Market Less Than Lss Than Fair Market LessThan Less Than than those ofa bargain sale, since the
ValuOpo Market Market Valu Opin Market Market entire fair market value of the prop-
Sv.lu Value v"u Vluo erty can be claimed as a charitable
KOptions:f Option: Option: ption:
Long-erm o purchase contribution. Donations also remove
e, Pat Tl fd Et the property in question from the
market rate year ona market rat Bargain Outright owner's estate, reducing any future
lease partial Lad estate taxes.
rtial intrin exchange t In some cases a landowner
wiaaret i St I 1,. ca,, iDao may want to protect land by transfer-
at market cquir in tallmnt dvise ring it to a city or countyyet still wish
rate (a bargain restriconl (FMV rat to retain use of the property during
Srucomla r am as =um' ) [ his or her lifetime, or that of a spouse
Srior sale of Re* |a 0*nad or another individual. In these cases,
u conservation Ista 8llmn t sirtate it may be appropriate to consider a
smen|t assume donation by devise, or a donation with
So udt) |Pior a reserved life estate.
Ir mipn donaon of Donation by Devise
Prior bargain conservation Donation by devise involves
se nation easnt leaving property to a local govern-
voluntary *-m**nt | ment in a will. The value of the land
T,'nr.'o. will not be included in the estate
when the landowner dies, so estate
taxes potentially owed by heirs are
continued next page


10








continued from page 10
reduced accordingly. However, there It does not provide the tax benefits Third Parties
are no immediate tax benefits to the which accompany donations or bar- Because of financial and
landowner, since a donation by de- gain sales. Offsetting this is the fact statutory constraints, it is sometimes
vise cannot be claimed as a chari- that the landowner receives the full not possible for local governments or
table contribution during the lifetime market value of the property. After the other public agencies to immediately
of the donor. This option should be federal income tax on capital gains purchase land in which they are in-
combined with others that ensure the and the alternative minimum tax pro- terested andwhich alandownerwould
preservation of these values during visions of federal tax law are taken like to sell. In these cases, it may be
the lifetime of the donor. Donors in- into account, this may or may not be possible for a private nonprofit con-
terested in this land protection op- the best approach, economically, for a servation organization to step in and
tion should also ensure that a local landowner to take. help. The Nature Conservancy and
government will be able and willing to Sale with Reserved Life Estate The Trust For Public Land are well-
accept their lands for permanent As in the case with dona- known examples of these organiza-
management and protection. tons, landowners may wish to sell tions. They are sometimes able to
Donation with Reserved Life Es- land to a local government, but also contract with private landowners to
tate wish to continue using it. This can be buy environmentally sensitive land
Donation with a reserved life achieved by retaining a life estate in and hold it for a limited, agreed-upon
estate (also known as a donation of a the property. The local government period until a public agency can fund
remainder interest) differs from a do- acquires title to the land immediately, the purchase. They then resell the
nation by devise in that the local but the donors may continue to use it land to the public agency. Local land
government assumes ownership of during their lifetime. The value of the trusts can sometimes play a similar
the land immediately. The donor, land is removed from the estate and, role.
however, reserves the right to use the depending upon the price at which While sales that involve third
property during his or her lifetime, or the land is sold, income tax advan- party nonprofit conservation organi-
that of another specified party. The tages may be available as well. zations can become intricate, they're
difference between the full value of Leasebacks now a commonplace conservation
the property and the value of its life- Leasebacks provide yet an- practice. In most cases, these agen-
time use mayin some cases be claimed otherway of obtaining the tax benefits cies are also qualified to receive chari-
as a charitable contribution for fed- of donating or selling land to a city or table contributions directly, so that
eral tax purposes; the value of the county, yet continuing to use it for the tax benefits to landowners remain
property is also removed from the certain activities. To accommodate the same as if the land were trans-
estate. special conditions, a local government ferred directly to a local government.
Bargain Sale may allow a limited number of short In cases where a parcel offered by a
Bargain sales may also be term continuing uses so long as they landownerwould further the purposes
authorized under local government are compatible with resource protec- of the local government's land acqul-
land acquisition programs. These in- tion on the transferred lands. Ex- sition program, but cannot be pur-
volve land sales to a city or county at amples might include hunting (pri- chased by a public agency immedi-
less than the full market value of the vate preserves), horseback riding, ately, the possibility of a third party
land. This has several advantages for passive recreation, and selective tim- transaction is well worth exploring.
both the landowner and the local being. If these activities are currently In summary, land acquisition pro-
government. The landowner can still taking place on the land, and do not grams can play an important role in
claim the difference between the full affect the property's value, local gov- the arsenal of local growth manage-
market value of the land and the ernments can acquire title to the land ment tools needed to successfully cope
transfer price as a charitable dona- and possibly lease it back to the origi- with population growth and develop-
tion when computing federal income nal owner for continued use. The con- ment in Florida today. Programs that
taxes. The value of the estate is also tinued use of the leased land by the encourage voluntary land donations
reduced by the full market value of original owner does not affect any tax and bargain sales can sometimes
the land. Yet, the landowner still re- benefits which result from the trans- stretch acquisition budgets a little
ceives some monetary compensation fer of title, further while also contributing to a
in return for the property. This may Right of First Refusal greater sense of citizen involvement
be an important factor in making the A right of first refusal gives a in local conservation efforts. The op-
transaction possible. For local gov- local government first choice in buy- tions outlined above suggest that lo-
ernments, bargain sales help stretch ing a parcel when it is placed on the cal governments have a variety of
their land acquisition dollars and in- market. Thus, it does not involve any means at their disposal to encourage
crease the amount of land they can immediate transfer of title. To the good conservation practices and
protect. extent that an agreement can be achieve resource planning and pro-
Full Market Value Sale reached between the landowner and tection objectives without limiting
Full market value sale in- the city or county when the land is to themselves to full market value land
volves the transferofpropertyorrights be sold, it may result in the local purchases in every instance. Citizens
in property at the price which they government acquiring the land. Nego- of the community may likewise be
would command on the open real tiating a right of first refusal with a surprised at the resource protection
estate market. Following this option local government may be desirable for choices available to them as private
under a local land acquisition pro- landowners who anticipate selling landowners, as well as the ways in
gram can fully protect the environ- their land in the future and would like which they can benefit monetarily
mental and resource-related values to see its environmental and conser- through a donation or bargain sale
of the land as well as remove the vation value protected after the land transaction involving their property.
property from the landowner's estate, passes from their possession.



11




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