CAUV establishes a property tax rate based on Current Agricultural Use rather than on prospective “development” value. Since agricultural value is less than development value, the land is taxed at a lower rate.

Enrollment in the CAUV program is intended to foster continued production of the land and to eliminate the potential of its conversion and development during the period of enrollment. There are penalties for withdrawing from the programs. These penalty fees are meant to discourage these lands from being removed from the programs and converted or developed. Properties enrolled in the programs are assessed recoupment fees anytime they are withdrawn, regardless of their ultimate use. Public park districts and other government subdivisions are exempt, provided the land is not acquired by eminent domain. Private non-profit conservation organizations, however, are still assessed the recoupment fees even though they are acquiring land for conservation purposes such as a nature preserve or park. This means any time a qualified private non-profit conservation organization (“qualified” meaning one that is organized and operated in accordance with state and federal standards), acquires property enrolled in one of the programs, the recoupment cost is triggered and must be paid.

Recoupment fees are also triggered in certain circumstances when a qualified conservation organization acquires a conservation easement. Conservation easements provide much stronger protection than enrollment in one of the programs. Conservation easements permanently protect the land from conversion and development, meaning the land will always be available for agriculture or forestry regardless of whether it is currently under production. If the landowner chooses to cease active farming or forestry efforts, the recoupment fee is triggered even though the land will never be developed.

The cost of the recoupment fee is borne by the non-profit, which ultimately costs the public. It either costs the non-profit more to purchase the land from the landowner or the non-profit is required to pay the fees as a condition of the acquiring the land. This can be very expensive and drains scarce funding away from the conservation activities of the non-profit. Recoupment fees in these instances should be eliminated. Acquisition of land by qualified private entities for parks or conservation purposes, whether in fee or by conservation easement, provides more protection than enrollment in the CAUV or Forestry programs. Landowners, conservation organizations and ultimately the public should not be penalized for providing parks or conserving land for other purposes that benefit the public.

Recommendation: Amend CAUV program language to automatically extend to lands that are protected by qualifying conservation easements, regardless of whether or not they are currently producing agricultural crops or forestry products. Eliminate recoupment penalty fees for lands and interests in lands transferred to qualified conservation organizations for conservation purposes or public parks.

Karson Pasture	The protection of a qualifying permanent conservation easement is much stronger than enrollment in the CAUV program. Nevertheless, the donor of this conservation easement had to pay recoupment fees and saw her property taxes increase substantially when she chose to remove her land from production, even though the conservation easement she had granted ensured her
land will not be converted and developed and therefore will be available for future agricultural or forestry production forever.

Conservation easements permanently protect land from conversion and development. Like other easements, they are a limited interest in property—less than full “fee” ownership. They give certain rights to the easement holder, but not ownership of the land.

The purpose of a conservation easement is to protect the important natural, scenic, agricultural or other values of a property. Landowners voluntarily grant restrictions on the uses of a property to activities that won’t destroy the “conservation values”. These restrictions are created through the conservation easement, which is granted to a “qualified” organization—a unit of government or a non-profit conservation organization that is organized and operated in accordance with state and federal standards. If donated, a “qualifying” conservation easement may entitle the donor to take a deduction on their federal income taxes. “Qualifying” is a technical term referring to conservation easements that are developed to meet the standards described in the Internal Revenue Code, Section 170 H.

One of the standards that must be met for a conservation easement to qualify for tax deductions is that it must be perpetual—it cannot be extinguished later on because the donors change their mind. Overturning a conservation easement can only happen in the most extreme circumstances, such as if the original purpose of the conservation easement has been completely lost for reasons beyond the control of the grantor, or if the property is taken by a government agency for a different public purpose (like a freeway) through eminent domain. If it is extinguished, it requires a tremendous amount of effort and triggers very stiff penalties.

Ohio’s Marketable Title Act requires that interests in land that are less than the entire fee interest—easements, mineral rights or other severed interests—must be re-recorded every 40 years or the severed interest ceases to exist—it automatically reunites with the fee interest. This is in direct conflict with the IRS standard for deductibility for “qualifying” conservation easements and could eliminate the deductibility of any easement donated to the state or other qualifying organization.

This could have huge ramifications for state, local, and private programs that work to conserve natural resources for the public benefit. If deductibility is lost, incentives for landowners to donate or sell conservation or agricultural easements will be lost. Consequently, the ability to meet local match requirements of programs like the Clean Ohio Fund and other state and federal programs through donation or bargain sale of conservation easements could be eliminated.

Recommendation: Amend the Ohio Marketable Title Act to exempt qualifying conservation easements—those that are drafted to meet the IRS standard.

Rocky River Tributary

This conservation easement, protecting critical riparian corridor along the Rocky River, would not have been donated if tax deductions were not allowed. Conflicting standard between Ohio’s Marketable Title Act and Section 170 H of the Internal Revenue Code create conflicts that threaten the deductibility of conservation easements and could eliminate important conservation projects like this one.