Yes, nine long years after our initial formation, Stan and I could finally write checks to our cherished partners. You can’t imagine our joy in sending them money! Hallelujah, this was going to work. It was a miracle!
By the end of November 2005, we were finalizing the details of a settlement with T.C.*, and ready to move forward with the Conservation Easements.
Todd, our “one-stop shop” C.E. attorney, encouraged us to actually go ahead and make some donations for 2005. After the lawsuit with T.C., we were hurting for cash, so we decided this was “A Miracle” – an answer to our many prayers -- and we moved forward with gusto.
We read all the materials that Todd had given us, and Stan diligently studied the law on conservation easements. As Todd said, “The law was made for us.” There were no red flags. It was golden.
Phasing the Subdivision
The next step was to finish “phasing” the subdivision. We had Phase I and Phase II drawn up and approved by the county. We needed to finish dividing up all the land.
Why? Because a landowner could only make one C.E. donation per year, and at that rate, it would take us 24-to-28 years to make all the 35-acre donations from our 1000-acre parcel.
Wait! Why wouldn’t we just donate the whole thing all at once and be done with it? Because we’d only get the $260,000 tax credit once for the entire 1000 acres, whereas if we divided the 1000 acres into 35-acre parcels (entirely legal), we could do 24-to-28 donations x $260,000. We had 24 partners, so it worked out perfectly. It was a miracle – the law was made for us. In fact, in looking back through my files to refresh my memory to write this post, I found a letter we sent to the partners explaining how the C.E.s worked, in which we wrote, “Interestingly enough, this is also part of the miracle because owning the land in a limited partnership sets us up in an ideal way to maximize the potential of conservation easements -- far more so than if a single individual owned the land.”
One of our partners owned an engineering firm, so he finished up the “phasing” of the subdivision for us, dividing it into 28 parcels, and we were able to create seven qualified donations in 2005.
The Cost of Donating a Conservation Easement
Little did we know how expensive doing the C.E.’s was going to be! There were fees for the subdivision work, high fees for the appraiser (an appraisal was required for the donation), fees for some guy (it turned out to be Todd’s father) to come and do a “Baseline Report,” and, of course, Todd’s bills.
And, honest-to-goodness, I’m not making this up: we had to give a cash donation to the Land Trust to help cover the costs of administration of the land we were donating to them! Sheesh! We began to feel a little frustrated as we saw our profits on each parcel dwindle. Even if we could get the predicted $208,000 for a brokered deal, we were paying tens of thousands of dollars for each donation. We were beginning to feel a little raked over.
Still, we trusted this was The Miracle we needed, and the proceeds, even if they were dwindling daily, would cover our recent legal expenses in our T.C. case, and still net enough to start sending money to our partners. Additionally, we were genuinely excited about preserving the land and the amazing views from the county road that bisects the property. We have to drive right down the middle of that 1000 acre parcel to reach our home, and we were delighted that the land could be preserved.
December was a blitz of paperwork and following Todd’s directions: sign this, sigh this, sign this.
At one point, I remember saying to him, “just let us know when the appraiser is coming down, and we’ll show her around,” and he said, “oh, she’s already been there.” And, sure enough, massive and complex appraisals started showing up. I don’t remember actually having a holiday season that year. It was just a mad scramble to keep up and get all the paperwork done and ready.
The Appraisals Arrive: Sticker Shock in More Ways Than One!
The appraisals were huge documents, hundreds of pages long. We were shocked at the values in the appraisals. They were very low in relationship to the future development value of our subdivision, and C.E. appraisals are to be done taking the “highest and best use” of the land into consideration. Our appraiser clearly didn’t understand how valuable our land was, and what we would earn if we continued to build it out as a development. But, it didn’t really matter, because the appraisal figures were still high enough to get us over the threshold for getting the full tax credit for each parcel. Dear reader, please bookmark this thought as it will be very important in the future!
In addition, the cost of the appraisals was beastly! They were about $3,800.00 each and we did seven, so we had to pay the appraiser more than $26,000. We later found out that was relatively cheap – that other appraisers charged $20,000 to $100,000 for a single conservation easement appraisal! Do you smell a racket?
Writing Checks
The transferees (the people buying the tax credits) have until April 15 of the following tax year to buy the tax credits, so we knew we might have to wait for the all to be sold. But, in December of 2005, the money started coming in, with commitments for all of the money to arrive by April 1, 2006.
After paying all the costs associated with donating the easements, we really did have some money left over, and we began making distributions to our partners in March. Yes, nine long years after our initial formation, Stan and I could finally write checks to our cherished partners. You can’t imagine our joy in sending them money! Hallelujah, this was going to work. It was a miracle. © Sharon Cairns Mann
*Unfortunately, we can’t say a peep about the settlement.
Todd, our “one-stop shop” C.E. attorney, encouraged us to actually go ahead and make some donations for 2005. After the lawsuit with T.C., we were hurting for cash, so we decided this was “A Miracle” – an answer to our many prayers -- and we moved forward with gusto.
We read all the materials that Todd had given us, and Stan diligently studied the law on conservation easements. As Todd said, “The law was made for us.” There were no red flags. It was golden.
Phasing the Subdivision
The next step was to finish “phasing” the subdivision. We had Phase I and Phase II drawn up and approved by the county. We needed to finish dividing up all the land.
Why? Because a landowner could only make one C.E. donation per year, and at that rate, it would take us 24-to-28 years to make all the 35-acre donations from our 1000-acre parcel.
Wait! Why wouldn’t we just donate the whole thing all at once and be done with it? Because we’d only get the $260,000 tax credit once for the entire 1000 acres, whereas if we divided the 1000 acres into 35-acre parcels (entirely legal), we could do 24-to-28 donations x $260,000. We had 24 partners, so it worked out perfectly. It was a miracle – the law was made for us. In fact, in looking back through my files to refresh my memory to write this post, I found a letter we sent to the partners explaining how the C.E.s worked, in which we wrote, “Interestingly enough, this is also part of the miracle because owning the land in a limited partnership sets us up in an ideal way to maximize the potential of conservation easements -- far more so than if a single individual owned the land.”
One of our partners owned an engineering firm, so he finished up the “phasing” of the subdivision for us, dividing it into 28 parcels, and we were able to create seven qualified donations in 2005.
The Cost of Donating a Conservation Easement
Little did we know how expensive doing the C.E.’s was going to be! There were fees for the subdivision work, high fees for the appraiser (an appraisal was required for the donation), fees for some guy (it turned out to be Todd’s father) to come and do a “Baseline Report,” and, of course, Todd’s bills.
And, honest-to-goodness, I’m not making this up: we had to give a cash donation to the Land Trust to help cover the costs of administration of the land we were donating to them! Sheesh! We began to feel a little frustrated as we saw our profits on each parcel dwindle. Even if we could get the predicted $208,000 for a brokered deal, we were paying tens of thousands of dollars for each donation. We were beginning to feel a little raked over.
Still, we trusted this was The Miracle we needed, and the proceeds, even if they were dwindling daily, would cover our recent legal expenses in our T.C. case, and still net enough to start sending money to our partners. Additionally, we were genuinely excited about preserving the land and the amazing views from the county road that bisects the property. We have to drive right down the middle of that 1000 acre parcel to reach our home, and we were delighted that the land could be preserved.
December was a blitz of paperwork and following Todd’s directions: sign this, sigh this, sign this.
At one point, I remember saying to him, “just let us know when the appraiser is coming down, and we’ll show her around,” and he said, “oh, she’s already been there.” And, sure enough, massive and complex appraisals started showing up. I don’t remember actually having a holiday season that year. It was just a mad scramble to keep up and get all the paperwork done and ready.
The Appraisals Arrive: Sticker Shock in More Ways Than One!
The appraisals were huge documents, hundreds of pages long. We were shocked at the values in the appraisals. They were very low in relationship to the future development value of our subdivision, and C.E. appraisals are to be done taking the “highest and best use” of the land into consideration. Our appraiser clearly didn’t understand how valuable our land was, and what we would earn if we continued to build it out as a development. But, it didn’t really matter, because the appraisal figures were still high enough to get us over the threshold for getting the full tax credit for each parcel. Dear reader, please bookmark this thought as it will be very important in the future!
In addition, the cost of the appraisals was beastly! They were about $3,800.00 each and we did seven, so we had to pay the appraiser more than $26,000. We later found out that was relatively cheap – that other appraisers charged $20,000 to $100,000 for a single conservation easement appraisal! Do you smell a racket?
Writing Checks
The transferees (the people buying the tax credits) have until April 15 of the following tax year to buy the tax credits, so we knew we might have to wait for the all to be sold. But, in December of 2005, the money started coming in, with commitments for all of the money to arrive by April 1, 2006.
After paying all the costs associated with donating the easements, we really did have some money left over, and we began making distributions to our partners in March. Yes, nine long years after our initial formation, Stan and I could finally write checks to our cherished partners. You can’t imagine our joy in sending them money! Hallelujah, this was going to work. It was a miracle. © Sharon Cairns Mann
*Unfortunately, we can’t say a peep about the settlement.
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