Farmland conservation is a key strategy to ensure that farmland remains available and affordable to farmers now and for generations to come. Conservation easements are voluntary, legal agreements between a landowner and a public agency or qualified conservation organization, such as a land trust, that permanently limit uses of the land in order to protect its conservation values—typically by prohibiting future subdivision and development of the land.
An agricultural conservation easement is designed to keep productive land available for farming and often includes provisions that allow for building agricultural structures and conducting farming activity. Landowners can either sell or donate the rights associated with these easements in exchange for monetary compensation or tax breaks.
When conservation easement rights are sold, capital gains taxes are imposed on the value of the sale. This not only discourages landowners who want to leave a legacy of protected land, but adversely impacts young, beginning and BIPOC farmers, for whom protected farmland is often the only land they can afford to purchase.
Excluding the proceeds from the sale of an agricultural conservation easement from capital gains tax would spur landowner participation in federal, state, and local Purchase of Agricultural Conservation Easement (PACE) programs. Importantly, it would also free up proceeds from easement sales for reinvestment in or expansion of farm businesses, proving additional economic opportunities for the current and next generation of farmers on the land.
Federal vs. State
Both federal and state legislators can make this change, but the most impact will come from federal capital gains tax reform since the tax rate is much higher than at the state level.