Determination of Payment (Owner Income)
CLARKE COUNTY CONSERVATION EASEMENT AUTHORITY
Once a property owner confirms in writing their interest in selling an easement, the Authority will make a determination of the value of the easement for purposes of a purchase of the easement. The Authority will ask the owner to provide their average annual adjusted gross income in each of the three most recent tax years. The amount to be paid for the easement is adjusted based on the income of the owner. Lowest-income owners may be offered up to the full value of the easement. Middle-income and higher-income owners are offered a progressively reduced (see following chart). All income information is kept confidential and the privacy of the owner respected.
The purpose of adjusting the purchase price by income is to focus the available funds toward lower- and middle-income property owners. Higher-income owners who donate easements may benefit from a federal charitable tax deduction and a Virginia tax credit. Lower- and middle-income owners benefit less, or not at all, from a tax deduction of a donation because of their lower income. The following chart takes into account the relative financial benefits of easement donation for owners in the $55,000 to $205,000 and higher income range. The higher the owner’s income, the greater financial benefit he or she would receive from the tax benefits by donating an easement. The lower the owner’s income, the more money he or she would need to obtain a comparable financial benefit for conveying an easement.
The property owner is informed of the purchase price which will be offered for the easement. The remainder of the value of the easement may be eligible for a federal tax deduction (as a charitable donation) and a Virginia tax credit. Once a purchase price is agreed upon, the Authority then submits the proposed purchase to the Board of Supervisors for approval.
The purchase price of a conservation easement is calculated by multiplying the value by the applicable percentage set forth in the table below. The average annual adjusted gross income is based on the aggregate of the annual adjusted gross income of each owner of record and the members of each owner’s household for each of the three most recently filed tax returns. In the case of a parcel owned by an entity such as a corporation, partnership, limited liability company, trust, or estate, the average annual adjusted gross income of the owner is based on the weighted average of the annual adjusted gross incomes of the shareholders, partners, members, grantor, beneficiaries, or decedent, as the case may be.
Average Annual Adjusted Gross Income
Percentage of Easement Value
$ 0 – $55,000
$55,001 – $65,000
$65,001 – $75,000
$75,001 – $85,000
$85,001 – $95,000
$95,001 – $105,000
$105,001 – $115,000
$115,001 – $125,000
$125,001 – $135,000
$135,001 – $145,000
$145,001 – $155,000
$155,001 – $165,000
$165,001 – $175,000
$175,001 – $185,000
$185,001 – $195,000
$195,001 – $205,000
$205,001 or more
Purchases from Nonprofits – The Authority may offer payment of up to 25% of the value of the easement.
Example Determination of Conservation Easement Value – Owner Income
Part of determining how much to pay a landowner for an easement is determining owner income. There are 3 basic formulas to apply depending on ownership type.
A. Single owner or family (one tax return)
- obtain copies of 3 most recent tax returns (1040)
- average the adjusted gross income (AGI) for the 3 years return
Example: Joe Smith made $55000 in 2005, $65,000 in 2006, and $48,000 in 2007; the average adjusted gross income is ($55,000+$65,000+$48,000)/3 = $56,000.
B.Two or more owners (separate tax returns)
- obtain copies of 3 most recent tax returns (1040) for each owner add the AGI’s for all owners for each year
- average the total income for the 3 years return
Example: Joe Smith and Harry Thomas own parcel X.
3 yr average AGI
- obtain copies of 3 most recent tax returns (1040) for each person with an interest in the entity (LLC, etc.)
- determine from applicants the % interest of each person
- determine the weighted average of the avg. AGI of the persons with interest
- example: Joe Smith, Harry Thomas, and Jane Doe own parcel X.
- determine weighted average:
3 yr average AGI
Joe Smith: 3 yr avg. AGI = $56,000 * 50% = $28,000