Requirements Manual

Written project-selection criteria exist.

Approved projects generally consistent with project-selection criteria.

Visual inspection conducted as part of evaluating each project.

Title investigation by title company or attorney identifies ownership and encumbrances^? for each project. _{(?Includes mortgages, severed mineral rights, severed water rights, tax liens or judgments, easements, use agreements, covenants or other restrictions. If mineral rights are excluded from the title investigation, includes a risk analysis of the potentially severed mineral rights.)}

Final title investigation updated^? by title company or attorney no earlier than 30 days before closing. _{(?Such as a title insurance policy, an updated title search, or title insurance commitment.)}

Encumbrances and/or severed mineral rights shown in the title investigation appropriately addressed^? to avoid the possibility of a conservation easement extinguishment, adverse impacts to property ownership, or significant adverse impacts to the conservation values. _{(?Example documentation includes mortgage subordination recorded before or contemporaneous to the conservation easement; mortgage discharge before closing; mineral remoteness report; water rights due diligence report; memo to file with analysis of how substantial access easements or rights-of-way could impact project.)}

Independent appraisal^? by qualified appraiser obtained prior to closing for each purchase or bargain-sale purchase of conservation property, conservation easement, or other real property interest. If the property has a very low economic value, an appraisal is not feasible before a public auction, or the amount paid is significantly below market value, a letter of opinion from a qualified real estate professional can be obtained instead of an appraisal. _{(?Must comply with Uniform Standards of Professional Appraisal Practice and be prepared by a state-licensed or state-certified appraiser who has verifiable conservation easement or conservation property real estate experience. The following are not considered acceptable: landowner’s appraisal [unless the land trust is listed as an intended user]; appraisal for an adjacent property; tax assessment; summary of comparable sales by individuals other than qualified appraisers.)}

If purchased above appraised value, contemporaneous documentation appropriately^? justifies the purchase price and confirms there was no private inurement or impermissible private benefit. _{(?The higher the amount and/or percentage paid above appraised value, the more detailed the documentation and supporting evidence must be.)}

Land trust addresses substantial concerns^? with the appraisal or appraised value before the purchase. _{(?Such as the property interest appraised does not reflect the actual interest being purchased, the appraisal does not consider restrictions or conditions placed on the property by the seller, or if there are significant concerns about the conditions or assumptions in the appraisal.)}

Board or delegated entity reviews each project.

Board or delegated entity receives sufficient materials describing the project^? several days in advance of the decision-making meeting. _{(?Such as project location, project size, how the project meets the project-selection criteria, conservation values, costs, project risks, and, as applicable number/type of reserved rights retained, management challenges, preliminary management goals.)}

Board or delegated entity approves^? each project before closing. _{(?If there is a preliminary approval of the project, there is also documentation of final approval.)}

If project significantly changes^? after approval, then notice of change provided to board or delegated entity before closing. _{(?Such as significant changes in size, restrictions, number/type of reserved rights.)}

If decision-making authority delegated, delegation policy or bylaws provisions define limits^? given to delegated entity. _{(?Such as requiring full board approval if a conflicted party is involved, requiring committee review before a final decision is made.)}

If decision-making authority delegated, timely notification of completed transactions provided to the board.

Conservation easements are perpetual and include the following:

• a. Name of grantor and grantee

• b. Legal description

• c. Identification of protected conservation values

• d. Locations of specific zones or areas^?, if restrictions or permitted rights are specific to such areas _{(?Such as building envelopes, building exclusion zones.)}

• e. Control over future exercise of significant permitted rights, including designation of when grantee review or approval is required and how review or approval is obtained

• f. Right of entry that does not unduly limit access to monitor

• g. Right to enforce and to take immediate action

• h. Extinguishment and proceeds provisions

• i. Baseline documentation report reference

Tax-deductible conservation easements also include the following consistent with the Treasury Department regulations:

a. Identification of conservation purposes

b. Prohibition on surface mining

c. Limitation on assignment to qualified holder

d. Approval provisions that do not allow lack of grantee’s response to grantor’s request to be automatic approval of the activity ^{Started in 2022}

e. Extinguishment provisions that require:

• i. Grantee be entitled to at least the proportionate value? of the conservation easement at the time of the gift _{(?Must not subtract a) the value of permitted improvements since the time of the gift or b) the satisfaction of any and all prior claims.)} ^{Started in 2022}

• ii. Grantee to use proceeds in a manner consistent with the conservation purposes

• iii. Extinguishment can only occur for unexpected changes that make continued use of the property impossible or impractical for conservation purposes

• iv. Extinguishment can only be accomplished by judicial proceedings

Permitted rights in conservation easements:

• a. Are generally consistent with conservation purposes

• b.  Do not significantly impair protected conservation values

• c. Are not so broad that they negate other conservation easement provisions

Restrictions and permitted rights generally can be monitored or enforced.

Conservation easements and fee title deeds submitted for recording generally within a week after the final signature(s).

Every conservation easement has a baseline documentation report (or current conditions report) that includes the following:

a. Date of completion

b. Written descriptions, maps and photographs that document the following:

• i. Protected conservation values

• ii. Relevant conditions of the property as necessary to monitor and enforce the conservation easement

c. Acknowledgement attesting to the accuracy of the report signed by the following:

• i. Land trust

• ii. Landowner, for all easements completed in 2004 or later (or documented attempt to obtain signature)

If a first-time applicant has a baseline documentation report (or current conditions report) for each conservation easement but one or more are missing some of the required content above, a feasible plan with strategies and timelines to upgrade them before its first renewal exists.

Baseline documentation reports are complete and signed by the land trust and landowner at or before closing. If seasonal conditions prevent this, interim data and a schedule for finalizing the full report are signed by the land trust and landowner at or before closing.

Each baseline documentation report is a distinct document that represents the property’s condition at a point in time.

Written notification to potential land or conservation easement donors includes the following:

a. The project must meet the requirements of Internal Revenue Code §170 and the accompanying Treasury Department regulations and any other federal or state requirements

b. The donor is required to obtain a qualified appraisal prepared by a qualified appraiser for gifts of property valued at more than $5,000

c. The land trust will request a copy of the completed appraisal

d. The land trust is not providing individualized legal or tax advice ^{Starting in 2027}

Notification of tax code requirements is provided to potential donors before closing.

Individualized legal or tax advice is not provided.

Land trust evaluates each transaction and takes actions to resolve substantial concerns¹ with the appraisal, appraised value, or other terms of the transaction to ensure the land trust does not knowingly participate in potentially fraudulent or abusive transactions, including the following: _{(1If the title investigation or other documentation shows the property has been held for a short period, the landowner appears to have inflated expectations for the value of the donation, the appraised valued does not appear defensible in light of the land trust’s knowledge of local land values, the appraisal appears to contain unjustified extraordinary assumptions, the appraised value is significantly in excess of the donor’s cost or adjusted basis [if recent].)}

a. Involving legal counsel as appropriate

b. Taking appropriate action including one or more of the following: documenting concerns were shared with the donor, seeking an independent substantiation of value, withdrawing from the transaction prior to closing, asking to see the landowner’s appraisal prior to closing, documenting the board’s decision to proceed with the transaction and/or with signing the Form 8283, refusing to sign the Form 8283

c. Signing the Form 8283 only when a gift was received

d. Declining to participate in a transaction with a pass-through entity of unrelated parties that was either prohibited by the Standards² or that would not be treated as a qualified conservation contribution under law² _{(2Beginning in 2016 until it was superseded by law in December 2022, land trusts were required to decline to participate in a transaction with a pass-through entity of unrelated parties when a) the appraisal indicated an increase in value of more than 2.5 times the basis in the property within 36 months of the pass-through entity’s acquisition of the property and b) the value of the donation was $1 million or greater. After 2022, the Charitable Conservation Easement Program Integrity Act and its regulations disallow a conservation easement tax deduction when a) the contribution exceeds 2.5 times the sum of each partner’s relevant basis in the donor entity, b) the contribution is made within three years of the latest of each member/entity acquiring an interest in the property or the entity, and c) less than 90% of the contributing entity is owned by members of a family.)}

Land trust evaluates the Form 8283 and any landowner’s “qualified appraisal” and addresses concerns before signing the Form 8283 for the following:

a. Landowner’s appraisal is “qualified”¹ and includes the following:

• i. Property description for the gift that was donated²

• ii. Effective date not more than 60 days before the donation

• iii. Statement the appraisal was prepared for income tax purposes

• iv. Value for the entire contiguous parcel, if clearly applies

• v. Consideration of enhancement, if clearly applies

_{(1A qualified appraisal is defined by Treasury Department Regulations and contains specific items, such as the qualifications of the appraiser, the method of valuation used to determine fair market value [such as the comparable sales approach or income approach], and the specific basis for the valuation [such as inclusion of comparable sales transactions].)}

_{(2 The property description should reflect the terms of any agreement or understanding entered into, or expected to be entered into, that relates to the use, sale, or other disposition of the donated property.)}

b. Form 8283 includes the following:

• i. Name of landowner(s) that matches landowner(s) in title investigation

• ii. Detailed gift description (or supplemental statement)

• iii. Appraised fair market value that matches value in appraisal

• iv. Amount received in a bargain sale, if any

• v. Donor’s cost or adjusted basis

• vi. Date of gift^? _{(^?For conservation easements, year of gift needs to match year conservation easement recorded.)}

If the land trust pays for the landowner’s appraisal, payment to landowner appropriately documented^?. _{(^?Such as the gift acknowledgement letter or other documentation.)}

Complete and final originals^? (maintained in paper or digital form) of the following records are retained, kept generally secure and protected from damage or loss:

a. Legal agreements, deeds, conservation easements, amendments

b. Critical correspondence, including those related to project goals, tax and legal matters, enforcement, other matters essential to the project

c. Baseline documentation reports

d. Title insurance policies or evidence of title investigation

e. Surveys, if any

f. Appraisals used to substantiate the purchase price or used by the landowner to substantiate the value on the Form 8283

g. Forms 8283

h. Conservation easement monitoring reports

i. Fee property inspection reports

j. Contracts and leases in effect for long-term land management activities

k. Conservation easement stewardship records, including substantive notices, approvals, denials, interpretations, exercise of significant permitted rights

_{(^?Originals are the land trust’s primary, permanent records.)}

Copies retained of the following records:

a. Critical correspondence (see above)

b. Baseline documentation reports

c. Title insurance policies, if any

d. Unrecorded surveys, if any

Originals and copies are stored in locations that could not be destroyed in a single calamity^?. _{(^?Such as fire, flood, cyberattack.)}

Copies are replicas of signed originals with all exhibits and attachments.