[This article originally appeared in the New England Real Estate Journal, March 7, 1997.]
Most New Hampshire property owners are familiar with the “current use” tax program pursuant to which open space land of ten or more acres is eligible for a significant property tax discount. Far fewer owners are aware of a parallel program available to owners of property subject to conservation restrictions.
Provided certain requirements are met, creating a conservation restriction generates a federal income tax deduction equal to the value of the restriction. An additional tax benefit is also available for New Hampshire property. Under RSA chapter 79-B, land subject to a qualifying conservation restriction receives the same property tax discount as open space land under New Hampshire’s current use tax program so long as certain requirements are met.
Unlike current use, no minimum acreage requirement need be met for this special tax treatment. As with current use, an application must first be submitted to and approved by the local assessing officials. In addition, the restriction must permanently prohibit development of the property and require that it be maintained predominantly in its natural, scenic or open condition. Certain agricultural and forest uses qualify but residential, commercial or industrial structures and mining or excavating activities do not.
The restriction also must provide a “demonstrated public benefit” by protecting at least one of the following values: (i) outdoor recreation by, or education of, the general public where there is public access to the property; (ii) habitats for fish, wildlife or plants in the property’s natural state; (iii) preservation of open space land; or (iv) historic preservation.
Finally, the restriction must be given to a charitable, educational or other nonprofit corporation established for natural resource conservation and must be signed by both the grantor and grantee.
Although New Hampshire law affords a unique economic benefit to owners of restricted land, submitting real estate to the conservation restriction assessment program is not without some cost. Once created, the consent of the grantee is required to terminate the restriction. Also, a financial penalty is incurred if the land is later developed or if the terms of the restriction are violated. This penalty is equal to 10% of the fair market value of the land at the time a violation occurs. After that, the land is taxed at regular property tax rates.
Knowledge of this program and its requirements will allow New Hampshire property owners to take full economic advantage of conservation restrictions. Program requirements should be reviewed with a competent professional. A moderate investment in an experienced professional can result in substantial long term savings.