Cash payments are by far the most lucrative and versatile form of compensation for a conservation easement … and by far the rarest! Land trusts and government agencies rarely have cash to pay for conservation easements, and when they do, they are rarely able to compensate the full value.
Two notable exceptions exist. Land trusts, through their conservation planning, may identify areas that are of particular importance to them, or that are particularly threatened, then approach various funding sources to raise money for the purchase of land or conservation easements. In general, payments for conservation easements are for a percentage of the parcel value, and typically vary from 25-35%. In these cases, the qualified organization will often use ‘Split Receipting.’
Split Receipting
Financial benefits for conservation easements are often characterized as cash OR a tax receipt, but there is a third option that splits the difference: split receipting.
In “split receipting” (also called a “bargain sale” in the U.S.) the landowner receives a combination of a cash payment and a tax receipt that add up to the full value of the conservation easement.
This option arose because circumstances when cash was available to compensate landowners for the full value of the conservation easement are rare. These circumstances tend to happen only with certain land trusts, in specific locations, and in exceptional times when cash is available. In many cases, landowners who receive a split receipt must use its full value within a specific time frame, which often proves challenging. As with calculations of other tax benefits, the specific details of compensation in split receipting are negotiated between the parties involved.
In 2002, the Canada Revenue Agency issued a policy bulletin proposing guidelines for split receipting, which have since become their operating policy (the CRA tends not to amend The Income Tax Act and regularly uses these bulletins as de facto policy). These guidelines contain some restrictions, a key one being that there must be clear “donative intent.” This means the landowner receiving the combined tax receipt/payment must be able to show that there was a clear intent to make a gift (freely and without consideration). The guidance offered to satisfy this restriction is that the cash cannot make up more than 80% of the value of the conservation easement.
