Appraisal Guidelines

Landowners who donate a conservation easement to a land trust usually seek to take a deduction from their federal and state taxes for the value of the gift. Internal Revenue Service regulations require that gifts to charity that exceed $5,000 be substantiated in order to accurately establish the value of the gift. Donors 'substantiate' their gifts by obtaining an appraisal of the property they donate.

The value of a conservation easement is based upon an appraiser's determination of the price that a willing buyer would be expected to pay the owner for the property at the property's highest and most economically productive use. The appraiser will calculate the fair market value of the property before the creation of the easement and the fair market value that will remain after the easement has been created. The charitable gift deduction will be equal to the difference in the fair market value before and after the creation of the easement.

The appraisal can be obtained at any time within a period not earlier than 60 days prior to the date of the gift and not later than the day before the due date of the income tax return for the taxable year in which the gift was made. The donor must also submit an appraisal summary (IRS Form 8283) with his or her income tax return.

The IRS offers guidance on appraisals, which may be found at: http://www.lta.org/publicpolicy/tax_incentives_resources.htm#appraisals

The Colorado Coalition of Land Trusts has produced A Conservation Easement Appraisal Guide which is a useful resource. However, be aware that the cost of appraisals in the document are much larger than in Maryland due to the larger size of properties in Colorado.

http://www.cclt.org/downloads/CCLT_Appraisal_Guide_6_01_04.pdf

As well, Conservation Partners, LLC has produced an extensive list of easement appraisal standards. Conservation Partners works with Virginia landowners and their advisors in each phase of preparing and valuing conservation easements, registering the resulting transferable Virginia land preservation tax credits, and facilitating the marketing and sale of the credits. Conservation Partners will only work with credits that meet their Standards for Land Preservation Tax Credit Quality (see link below), which includes appraisal standards.

These appraisal standards are based on national standards and expertise and therefore may be useful in Maryland as well. The "Conservation Easement Appraisal Standards" section of the document outlines the appraisal standards, and the "Appraisal Screening" and "Conservation Easement Appraisal Report Summary" sections can be used to summarize and/or evaluate an appraisal.

Click here http://www.conservationpartnersllc.com/partners.html and then click on “Standards for Virginia Land Preservation Tax Credit Quality”.