Hall and Hall Partner Discusses Montana Conservation Easements

Keith Lenard  - Hall and Hall Partner
Missoula, MT

This month, Montana’s newspapers sported headlines touting the use of federal dollars for the purchase of conservation easements in the Bitterroot Valley. The Bitterroot is one of our favorite Montana valleys, offering a fantastic mix of outdoor adventures, all in a location with easy access to a broad array of cultural opportunities including theater, fine dining and the University of Montana.

The Kootenai Springs Ranch, for example, offers two miles of Bitterroot River frontage, abundant wildlife including a resident elk herd and teaming populations of waterfowl all within a five minute drive of a latte and fine baked goods. Because of its broad appeal, however, the valley has been subject to more severe development pressures than most of its Montana brethren. The arrival of conservation easement funding serves testimony to this fact. While I certainly don’t know all the details of the specific transactions highlighted in the papers this week, my 15 years in non-profit conservation and my direct involvement in over 40 such transactions provides some insight.

A well-crafted conservation easement can benefit both the land and the land owner by maintaining a ranch in its current form and protecting both the agricultural and natural values that make our landscape so special. The Trapper Peak Ranch, for example, has a conservation easement that is broadly permissive of all manner of agricultural and habitat enhancement activities, while the already established improvements provide a luxurious retreat for the most discerning tastes.  Sounds like a perfect combination and, indeed, it may be for some people, but conservation easements are not for everyone.

Despite the much vaunted arrival of federal dollars, federal granting guidelines coupled with surging demand for this type of funding and IRS regulations all conspire to make the proposition a costly one for most landowners. Typically, federal grant funding competition creates a dynamic where a significant bargain-sale component is required. While the grantor of the easement can typically deduct the portion of the value of their easement that is donated (for example, if the grantor receive 50% of the value of the easement from a grant, he/she may be able to deduct the other 50% from their gross income), there still winds up being a significant out-of-pocket cost to the donor.  The transaction costs plus the impact to real value can combine to produce an expensive scenario. Still, this tool is valuable for individuals that are primarily concerned with their land legacy and/or individuals that plan a very long-term hold, say 20+ years. Many of our clients take a different route altogether and choose the path of private stewardship. For ranches in strong hands with good inter-generational transfer prospects, private stewardship preserves all choices going forward and places the responsibility for the future of the ranch squarely in the hands of the family that is operating it. With cattle prices strong and world-wide demand for beef protein rising steadily, the prospects are bright for private stewardship.

Keith Lenard  - Hall and Hall Partner
Missoula, MT

Keith joined Hall and Hall in 2008 after spending 13 years developing conservation agreements with rural landowners across the West. Working for a variety of conservation organizations, his experience in conservation includes working as Vice President of Lands for the Rocky Mountain Elk Foundation, as Director of Land Conservation for The Nature Conservancy in Wyoming and as executive director for a local California land trust. Keith is an avid hunter, angler and international traveler with a special interest in Mexico, Central and South America. He currently serves on the Board of Directors of the American Land Conservancy.

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