Mellette Forestry Group has experience with helping landowners value conservation easements, which permanently preserve the land and allow the landowner to maximize tax benefits. Conservation Easements may be donated or sold and can include almost any kind of restriction agreed to by the landowner and easement holder. Each conservation easement should specifically address the protection needs of the particular piece of land.
How is a conservation easement created?
A Conservation easement is created when the landowner transfers some or all rights to develop the property to a government agency or qualified conservation non-governmental organization (NGO). The government agency or conservation organization, as the owner of the easement, has the legal right to block incompatible uses of the land. As with other property rights conservation easement may be either donated or sold.
What are the Federal Income Tax Benefits of donating a conservation easement?
The Federal Income tax benefits of donating a conservation easement are similar to those of making any other tax-deductible gifts of real estate, but are subject to some unique requirements. To meet the additional criteria for the tax deduction, a permanent easement must be donated to a qualified land trust for a qualified conservation purpose, such as:
- The preservation of land areas for outdoor recreation by, or the education of, the general public
- The protection of a relatively natural habitat of fish, wildlife, or plants, or similar ecosystem
- The preservation of open space (including farmland and forest land) where such preservation is for the scenic enjoyment of the general public and/or pursuant to a clearly delineated federal, state, or local government conservation policy yielding a significant public benefit
- The preservation of a historically important land area or a certified historic structure.
A person "donating" a qualified conservation interest may deduct the appraised value of the easement from their adjusted gross income, provided that the deduction does not exceed 30% of their adjusted gross income in the year of the gift. Any excess balance of the deduction may be carried over for up to five succeeding years, subject to the same annual 30% limitation. (IRC Section 170)
Forestry Investment Analysis
Foresters engaged in the management of forest properties or who advise others on forest management must be cognizant of the economic implications of alternative choices. Generally, capital resources available to individuals and organizations for investment are limited. Capital must be allocated among competing investment alternatives. The nature of forestry investments requires a long-range commitment of resources. The time required to grow a tree seedling to maturity underscores this point.
Forestry Investment-The decision to commit limited resources to a particular course of events should be based on the best information available. This translates into a need for systematically analyzing potential investment opportunities over time. Compound interest, growth, and yield models are the tools used for comparing the rate of return on a forestry investment with some other use of money.
Net Present Value, Internal Rate of Return, and Land Expectation Value are three of the decision criteria that are most commonly used when analyzing forestry investments.
Forestry Investment Analysis can provide answers to the following questions:
- Bare land value of a property
- Rate of return on a forest investment
- Feasibility of various forest management costs, such as fertilization
- Benefit/Cost Ratio of a project
- Comparing an investment that pays periodic returns (forestry) with an equivalent annual cash flow (agricultural crops)
- Optimum rotation for a forest
- The effect of taxes on an investment
- Effects of inflation
- Estimating cash flows
Timber growth and yield is an important component in forestry investment analysis. In order to predict cash flows, it is necessary to know how much timber the forest will produce over time. We employ TAUYIELD (Developed by Virginia Tech’s Forest Modeling Research Cooperative) to predict timber growth and yield in our forestry investment analysis. TAUYIELD 3.0 is a computer program which can be used to predict the growth and yield of thinned and unthinned loblolly pine plantations on cutover, site-prepared lands and do financial analyses based on those predictions. Mellette Forestry Group understands all of the essentials of forestry investment analysis, and we employ the most up-to-date computer models to project forest investment returns. Please contact us for professional forestry investment analysis and advice.
Expert Witness Testimony
Unfortunately, there are times when a forest landowner may need the advice, consultation, or expert witness testimony of a professional forester to help settle a legal dispute involving timberland. While it is always better to strive to settle a civil case out of court, sometimes litigation cannot be avoided. Some of the situations where a professional forester's advice may be needed include:
- Timber trespass
- Boundary line disputes
- Timber Sale Contracts
- Timberland Valuation
- Timber Taxation Issues
- Professional Ethics Violations
- Endangered Species
- Environmental Regulations
An objective, ethical, experienced, professional forester can assist the landowner and attorney to settle many of the difficult situations the landowner may encounter. In 39 years of providing professional forestry advice and services to private forest landowners, Morgan Mellette has served as an expert witness on many of the legal matters listed above and has served as an arbitrator in settling contract disputes involving forestry and timber sale matters.