Q.  What is a Conservation Easement?
A. Generally, a Conservation Easement is a voluntary legal agreement made
between a property owner and a qualified organization that protects a significant historic or cultural resource. The L'Enfant Trust accepts donations of easements that protect historic building facades. By granting an easement, the owner promises not to change the outside appearance of their building without the permission of the Trust.
  
 Q. How long does an easement last?
 A. Because the main purpose of a conservation easement is to guarantee the protection of the property, the tax code requires that in order to qualify for tax benefits, the easement must be granted in perpetuity. The easement is recorded with local land records, and "runs with the land," that is, it binds future owners of the property as well.
  
 Q. What are the tax advantages of donating an easement?
 A. Conservation easement donations are recognized as charitable contributions under the tax code. The value of the easement donation is therefore deductible for federal income, estate, and gift tax purposes in the same manner as all other charitable contributions. The L'Enfant Trust is a 501(c)(3) non-profit organization, a status which entitles its donors to the maximum allowable charitable contribution deduction. Because of the complexity of the tax laws, the Trust urges its donors to seek competent tax counsel.
  
Q. How is the value of an easement donation determined?
A. A qualified appraiser selected by the donor-taxpayer determines the value of the easement based on the difference between the appraised fair market value of the property before conveyance of an easement and its value with the easement restrictions in place. For detailed information on the valuation of conservation easements, see Appraising Easements, a joint publication of the National Trust for Historic Preservation and the Land Trust Alliance. The publication is available at www.preservationbooks.org.
  
Q.  Is there a "typical" easement value?
A. Easement value depends on a number of different factors including the type of property, the specific development or property rights affected, the burdens the particular easement deed imposes on the property, etc. Treasury Regulations make it clear that an easement's valuation must be an objective assessment of the easement's impact on a specific property. Donors should be wary of appraisers or easement promoters who suggest that a formulaic approach can be followed. For a number of years, several IRS publications suggested that facade easements might typically be worth 10-15%, more or less, of the fair market value of the property, but in 2004 the IRS withdrew any reference to a specific percentage as an appropriate valuation range. Some commentators have suggested that the recent Tax Court opinion in Simmons v. Commissioner valuing two easements donated to The L'Enfant Trust at 5% of their market value, effectively sets 5% as a minimum value, at least for easements donated to The L'Enfant Trust. These commentators reason that, because the Simmons Court attributed the 5% loss in value solely to "the heightened financial burdens of an eased façade and L'Enfant's affirmative enforcement of its easements," additional factors, such as lost development rights, could only increase that 5% easement valuation. Still, The L'Enfant Trust warns donors that there is no IRS-sanctioned "safe harbor" percentage, and that each donation needs to be individually appraised.
  
Q. Do both residential and commercial properties qualify?
A. Yes - any property which is listed on the National Register or is located in a registered historic district and which can be certified as contributing to the character of that historic district may qualify.
  
Q. What restrictions are imposed on the property owner?
A. The basic restrictions relate to structure modification and preservation of open space. They require that an owner receive the consent of The L'Enfant Trust before any exterior changes can be made to the property.
  
Q. Is an easement property open to the public?
A. No - the easement does not grant public access to the property. The owner's "gift to the street" preserves the external view of a historically significant building facade for future generations to enjoy.
  
Q. Can an easement be donated before major rehabilitation occurs?
A. Yes - the Trust has accepted easement donations on several properties prior to renovation where the donor submits architects' plans governing the treatment of the facade. If you are also seeking to qualify for a Federal Historic Rehabilitation Tax Credit, you should consult with your tax advisors to determine the most advantageous method of combining these benefits.

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