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What is PACE?
The Kentucky General Assembly in 1994 established the Purchase
of Agricultural Conservation Easement Corporation and authorized the state to
purchase agricultural conservation easements in order to ensure that lands
currently in agricultural use will continue to remain available for agriculture
and not be converted to other uses.
Although PACE was established to purchase conservation
easements, landowners also are encouraged to donate easements in order to
dedicate their land to agricultural uses.
Donors of conservation easements may receive federal and state
income tax and estate tax benefits.
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Conservation Easements
A conservation easement is a legal agreement a property owner
makes to restrict the type and amount of development that can take place on his
or her property.
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Who is eligible?
All landowners who hold title to farmland which is being used,
or is available for use, for agricultural production.
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Should I participate?
First, talk with your own legal, financial, and tax advisors.
You should make decisions affecting the ownership and use and value of your
property only after careful consideration and professional consultation.
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How do I participate?
Contact the Kentucky Department of Agriculture, Office for
Environmental Outreach located at 500 Mero St., Frankfort, KY 40601.
Submit an application to the PACE Board for evaluation and
approval. Agree to the restrictions limiting the use of your property to
agricultural production. Call or fax to obtain and application.
Phone: 502.564.4696
Fax: 502.564.2133
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Determining Easement Value
Those wishing to estimate their easement values can use the
following example to see how the process works.
First, determine the fair market value of your land according to
its development potential. Next, estimate the value of your land if its use is
restricted to agriculture. The easement value for any given acreage will fall
somewhere between the two.
Landowners can use these two figures to help them determine an
asking price. The landowner and the PACE Board will then negotiate the final
conservation easement value.
All transactions are subject to negotiations and restrictions
established by the Board.
Example: A 200-acre farm...
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Appraised at fair market development value: $2,500
per acre = $500,000
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Estimated farmland restricted value: $1,200 per acre
= $240,000
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Potential conservation easement value: $1,300 per
acre = $260,000
Note: Values are variable, subject to established
appraisal procedures
(302 KAR 100.020) for purchasing agricultural conservation easements.
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Determining Tax Value
Landowners may donate a conservation easement, which is tax-deductible,
charitable gift, provided the easement is perpetual and donated exclusively for
conservation purposes. Conservation purposes include preserving open space for
farmland.
The example below demonstrates possible tax benefits of donating
a conservation easement.
Example: A 200-acre farm...
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Appraised at fair market development value: $2,500
per acre = $500,000
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Estimated farmland restricted value: $1,200 per acre
= $240,000
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Potential tax-deductible charitable gift value: $1,300 per
acre = $260,000
The landowner is eligible to deduct an amount equal to 30% of
adjusted gross income each year for a total of six years or until matching the
value of the gift.
For the purposes of this example, the landowner has an annual
federal adjusted gross income of $100,000. Therefore, the landowner may deduct
$30,000 a year for the next six years if the income does not change.
Six years at $30,000 amounts to a $180,000 total federal tax
deduction.
Note: State income tax deductions for charitable gifts
follow the same guidelines as for federal tax deductions. Thus, the potential
state tax deduction is an additional $180,000.
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Benefits
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Offers financial incentives to landowners for long-term
commitment to agriculture.
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Protects normal farming operations in agricultural areas.
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Enhances contribution that agriculture makes to the economy.
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Landowner retains the right of ownership in the land,
including the right to sell or transfer title to the property, subject only
to the terms of the easement agreement.
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Donation of conservation easements can result in federal,
state, and local tax benefits.
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By granting the easement in perpetuity, the owner may be
assured that the agricultural resource values of his or her property will be
protected indefinitely, no matter who the future owners are.
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Provides our children with an agriculture legacy.
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Pace Board of Directors
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The Kentucky Commissioner of Agriculture
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Secretary of the Natural Resources & Environmental
Protection Cabinet
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Dean of the University of Kentucky College of Agriculture
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Chair of the Soil & Water Conservation Commission
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Representative of Kentucky Farm Bureau
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Representative from each Kentucky Congressional District
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