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Voluntary Wetland Protection Options

Click here to view full size picture The following information is from Living With Michigan's Wetlands: A Landowner's Guide, copyright 1996, Tip of the Mitt Watershed Council

Because of their love for the land, many property owners want to permanently protect their wetlands. Donations or sale of property to a conservation organization, or the creation of what is known as a conservation easement, can effectively protect wetlands in perpetuity, allowing landowners to pass on a legacy of bountiful natural resources to their children and grandchildren. In addition to benefiting your family, society benefits from the voluntary and permanent protection of wetlands. Because of this, provisions in the tax codes allow for financial benefits in the form of income and property tax reductions. Wetland regulations exempt many activities that impact wetlands. Voluntary protection options can serve to protect wetlands to a greater extent than regulations. This chapter describes the primary methods of voluntary wetland protection.

Donation
Conservation Easements
Deed Restrictions
Sale
Designing Development
Michigan Natural Areas Registry
National Heritage Stewardship Program
Wetlands Stewardship Program
Michigan Wetlands Regulatory Program

Donation

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Donation of land has long played an important role in the protection of natural areas. It continues to be important because of its effectiveness, its relative simplicity, and its financial benefits to the landowner. By execution of a deed, the owner gives his or her land (or a specified part of it) for conservation purposes to a qualified nonprofit organization or governmental agency. A donor's gift of land is tax deductible. Each donation of land has different tax advantages for different individuals. Different types of taxes (e.g., real property taxes, gift taxes, estate taxes, or income taxes) are affected differently in each situation. Landowners considering the donation of wetland property are encouraged to retain a tax attorney or accountant to analyze the tax consequences of his or her particular situation.

There are several variations on the donation theme: outright donation, bargain sale, donation with a reserved life estate, and a bequest. With a bargain sale, the land is conveyed at a price below the market value, which may be attractive to a landowner who can not afford to convey the land without some compensation. A bargain sale is part gift and part sale. The sale price is determined jointly by the landowner and the recipient. For federal income tax purposes, it can result in both a taxable sale and a charitable contribution deduction, depending on the particular circumstances.

A donation with a reserved life estate is a donation in which the donor retains possession and use of the property for his or her lifetime. An income tax deduction is allowed for the value of the charitable contribution, which is the difference between the property's fair market value and its value under the provisions of the donation with a reserved life estate. The Internal Revenue Service takes into account the number of years that a donor with a reserved life estate is likely to enjoy the use of the property. Thus, such a donation will yield greater tax benefits to an older donor.

A bequest of land is a donation of land in an owner's will. Although such a donation does not enable the donor to realize an income tax deduction, the value of the bequest is deductible in determining the donor's taxable estate, which can benefit heirs by reducing estate taxes.

Donation of natural land has a number of potential income and estate tax advantages. Such donation may also significantly reduce the costs of land ownership, such as real estate taxes. However, the extent of those financial benefits will depend upon the kind of donation, the donor's financial situation, and prevailing federal tax law at the time the donation occurs. The major incentive for donation of natural land is that it offers the most simple and effective tool available to the landowner who wants to protect his or her wetland.

Conservation Easements

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A conservation easement is a voluntary agreement that is used to transfer certain rights concerning the use of land to a qualified nonprofit organization, governmental body, or other legal entity without transferring title to the land. In Michigan, part 21 of the Michigan Natural Resources and Environmental Code (Act 451 of 1994) authorizes the creation of voluntary conservation easements. A conservation easement under this statute can provide limitation on the use of, or can prohibit certain acts on, a parcel of land. The easement is considered a conveyance of real property and must be recorded with the registrar of deeds in the appropriate county to be enforceable against a subsequent purchaser of the property.

Conservation easements are flexible, effective, and allow the landowner to maintain ownership of the property. A common misconception about conservation easements is that the land must be open to public access. The public does not have access to property protected by a conservation easement unless the landowner who grants the easement specifically allows it. Conservation easements may be drafted to meet particular circumstances and objectives of an individual landowner. They can allow for uses compatible with wetland protection (e.g., nature study and passive outdoor recreation such as walking). They can identify areas on a property that will be reserved for future development. They can protect the easement area against disturbances that are not covered by wetland regulations, such as vegetation clearing, in short, conservation easements are a powerful tool that enable you to manage your land in a particular way well into the future.

To be eligible for a tax deduction, conservation easements must be granted in perpetuity by the landowner. Several tax benefits may be available to the grantor, including deduction of the value of an easement as a charitable contribution, as determined by the amount by which the easement reduces the market value of the property. The Internal Revenue Code normally allows an itemized deduction of up to 30 percent of an individual's adjusted gross income for such contributions. As with land donations, if you are considering granting a conservation easement, you should contact an attorney or accountant for an analysis of posible tax benefits based on your financial situation.

Deed Restrictions

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Deed restrictions are clauses placed in deeds restricting the future use of land. When property containing wetlands is transferred, deed restrictions can prohibit uses or activities by the new owners that would destroy, damage, or modify wetlands. A covenant is a contract between a landowner and another party stating that the landowner will use or refrain from using, their land in a certain manner. Like a deed restriction, a covenant can require that landowners refrain from activities that will damage wetlands. Once placed in deeds, covenants become deed restrictions.

Mutual covenants involve agreements between nearby or adjacent landowners to control the future use of their land through restrictions agreed upon by all participating landowners. The fact that multiple landowners participate in the covenant provides greater incentive to comply with the terms of the covenant. However, getting numerous property owners to voluntarily agree on certain management practices can be very challenging.

Although deed restrictions and covenants have been used across the country to protect wetlands, their use in Michigan is not as effective as a conservation easement. This is primarily for two reasons. First, unlike a conservation easement that is granted to and signed by an organization that has a commitment and responsibility to resource protection, the enforcement of deed restriction and covenants is less reliable. Because deed restrictions are placed in the deed and run with the land there is not continuity of oversight, unlike the continuous ownership of an easement holder. Hence, with a deed restriction, you're relying on the concern and commitment of some unidentified body to provide the oversight. Second, it is relatively easy for a future landowner to petition the courts to vacate a particular deed restriction. Although it is theoretically possible to modify a conservation easement, many changes are prohibited by federal regulations where income tax deductions are involved and all signatories to the easement must agree to proposed changes. Another major difference between conservation easements and deed restrictions or covenants is that the loss in market value due to deed restrictions and covenants cannot be claimed as a charitable deduction on income tax returns.

Sale

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Sometimes a landowner is in a situation where they must sell their wetland for financial or other reasons. In regard to protecting wetlands, the values and land use interests of the person who purchases the wetland are of paramount concern. If you must sell your wetland, but are concerned about its future protection, you can consider using a deed restriction, covenant, or conservation easement to permanently restrict activities that degrade wetlands before you sell. For example one of the beauties of a conservation easement is that it runs with the title in perpetuity. Prior to listing the property for sale, the wetland portion of the property may be protected by a conservation easement granted to a local conservancy or other qualified entity. The bargain sale option provides substantial tax benefits to the seller while reducing the purchase price for the buyer.

Another way to help ensure protection of your wetland after it is sold is to seek a purchaser who shares your values and goals regarding wetland protection and property management. If the area provides wildlife habitat, then advertising its availability in hunting magazines will get you in touch with individuals who may want to manage it for hunting purposes. Don't limit your search for a buyer to individuals. Nonprofit organizations such as The Nature Conservancy, local land conservancies, Michigan Audubon Society, and many others own property and may be interested in yours. In addition, local units of government may be interested in your property for the purpose of preserving community open space and passive recreation areas. Contact these organizations to gauge their interest in purchasing your property. Don't be discouraged if your offer to sell them your wetland is not immediately accepted. These entities have limited budgets for property acquisition and most have fairly specific guidelines that must be met before they can justify purchasing a parcel. Another option is to sell your property to your local unit of government. The Michigan Natural Resources Trust fund provides grants to local units to assist in purchase of significant natural lands.

Designing Development

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For those landowners who desire to develop their property for residential and commercial use, wetland protection can be integrated into your development plan. In many cases across Michigan, residential lots adjacent to a protected wetland fetched higher sale prices than nearby lots not adjacent to the wetland.

To plan development that protect wetlands, you must first consider an assessment of the wetland that would include (at a minimum): wetland boundaries, wetland size, wetland type, connections to other bodies of water, and critical upland habitat that should be protected along with the wetland. Once this is determined, the next step is to determine what type of development is compatible with protecting the wetlands on the site while still meeting your financial desires. The layout for the buildings and roads should be designed in a way that avoids wetlands and minimizes wetland crossings as much as possible. How the upland adjacent to a wetland will be developed has important implications for the long-term health of the wetland. Important considerations include the establishment of greenbelts and buffer zones around wetlands, managing the quantity and quality of the stormwater that will be generated in a way that does not harm the wetland, human access and use of the wetland, and land use practices (e.g., fertilizer and pesticide use) that will be in place once the property is fully developed.

After a plan for the property has been developed that will protect the wetland over time, you have many options to help put that plan into place. Implementing the protection measure through a conservation easement can result in substantial tax benefits. Likewise, donating the portion of the property that is to be protected to a qualified organization will result in tax benefits. Ensuring that upland practices such as lawn maintenance are compatible with wetland protection often provide the largest challenge when attempting to design developments to protect wetlands. The best way to do this depends on the pattern of ownership in the development. With a condominium-type ownership pattern, the developer retains responsibility to manage the property. However, in a traditional subdivision ownership pattern, unacceptable land use practices may need to be prohibited through deed restrictions or covenants. A neighborhood or property owner's association can serve to enforce the deed restrictions.

Michigan Natural Areas Registry

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The Michigan Chapter of The Nature Conservancy promotes the preservation of important natural areas, including wetlands, through voluntary nonregulatory agreements between landowners and The Nature Conservancy. The Michigan Natural Features Inventory (MNFI), a program partially supported by funds from The Nature Conservancy, provides a listing of significant natural areas in the state. The Nature Conservancy staff provides outreach to the landowners of significant areas to develop positive relationships and voluntary protection agreements. To qualify for the Registry, a property must be either ecologically significant, such as an unusual wetland or old growth forest, or be a relict plant community (survivors from climates and ecosystems of the past), or be habitat for rare, threatened, or endangered plants or animals. If you think you have wetlands that qualify, contact The Nature Conservancy on how you can nominate your land to be entered into their Michigan Natural Areas Registry.

National Heritage Stewardship Program

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Coordinated by the Michigan Natural Features Inventory, this program promotes the voluntary preservation of endangered or threatened species and their habitats. Currently, the program focuses on threatened species that inhabit the Great Lakes shoreline and interdunal swale wetlands, including Houghton's goldenrod, dwarf lake iris, Piping Plover, and Pitcher's thistle. The program uses information from the MNFI to target properties which may have significant habitat. The purpose of the project is to contact landowners and provide information regarding how to protect and enhance significant habitat areas either on their property or on nearby state land. Landowners who participate in voluntary stewardship activities receive a certificate of recognition and a limited edition wildlife print. Since wetlands are the home for more endangered and threatened species than any other landform, this program helps to raise awareness and encourage proper stewardship of wetlands.

Wetlands Stewardship Program

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Many local organizations coordinate wetland stewardship programs. For example, in northern lower Michigan, the Tip of the Mitt Watershed Council has developed a Wetland Stewardship Program to involve landowners in wetland protection who may not be ready to commit to permanent protection. The Watershed Council has identified wetland owners in their service area and encouraged them to become wetland stewards. The goal of the program is to protect wetlands through voluntary commitments from the owners of the resource.

The Wetland Stewardship Program promotes the protection of wetlands through voluntary, nonbinding agreements between wetland owners and the Watershed Council. The wetland steward agrees not to drain, dredge, fill, or in any other way destroy his or her wetland. They also agree to notify the Watershed Council when they plan to sell the land or if they decide not to participate any longer in the Stewardship Program. In return for becoming a Wetland Steward, the Watershed Council provides assistance regarding land management, advice on other protection measures and a certificate of appreciation. Hopefully, the wetland stewards also receive the satisfaction and pride which come from knowing they have helped protect Michigan's wetlands. If you are interested in this sort of program, contact the conservation organizations that serve your area. If they do not currently have such a program, help them develop one!

Michigan Wetlands Regulatory Program

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At the heart of Michigan's wetland regulatory program is Part 303, Wetland Protection, of the Natural Resources and Environmental Protection Act (Act 451 of 1994), formerly referred to as the Goemaere-Anderson Wetlands Protection Act, P.A. 203 of 1979. The Michigan Department of Environmental Quality Land and Water Management Division administers the permit program.

Michigan's Wetland Protection Act has several components. First, it establishes a state policy to protect the public against the loss of wetlands and makes explicit findings as to the benefits wetlands provide. Second, it establishes a permit program regulating some activities in wetland which are above the ordinary high water mark of lakes and streams. Third, the Wetland Protection Act provides enforcement language and sets maximum penalties for violations. Fourth, it explicitly authorizes regulation of wetlands by local governments.

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