Conservation easements are an excellent method for maintaining ownership of one’s land while not only prohibiting development but also receiving tax benefits. A conservation easement is a legally-binding agreement between a property owner and a nonprofit organization or a government agency that restricts development on the land covered by the easement. 

Contributions of a qualified real property interest to an organization for conservation purposes can result in a charitable deduction from income tax (Internal Revenue Code (IRC) § 170(h)(1)). Conservation purposes under IRC § 170(h)(4)(A) are (1) preserving land for outdoor recreational use by, or education of, the general public; (2) protecting relatively natural habitats of fish, wildlife or plants; (3) preserving open space (including farmland or forest space) for scenic enjoyment of the general public or under a governmental conservation policy yielding significant public benefit; and (4) preserving a historically important land area or a certified historic structure.

It is important to have a conservation easement properly documented, recorded, donated, and appraised. Otherwise there can be fairly significant penalties as IRC § 6662 imposes accuracy-related penalties on underpayments. The maximum accuracy- related penalty imposed on any portion of an underpayment is 20% (40% in the case of a  gross valuation misstatement), even if that portion of the underpayment is attributable to more than one type of misconduct.