The legacy of land

October 20, 2008
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Paul Bigford has roamed his 140 acres along the Pere Marquette River in Lake County his whole life. The land has been in his family for five generations.

“I found a number of arrowheads around here and showed some of them to an archeologist. She told me, ‘That one and that one, those go back 6,000 years,’” said Bigford, Sweetwater Township supervisor.

“If you figure 20 years to a generation, that’s 300 generations of humans who’ve been along this river, which is kind of a cool thing to think about. I would just like to think that 300 generations from now, there’s going to be some portions of the river that aren’t all developed and subdivided. I look at that as my family’s legacy for the Pere Marquette River.”

Last fall, Bigford donated a conservation easement to the Land Conservancy of West Michigan. Not only does the easement prevent development on the property no matter who owns it, but Bigford also can write off the donation’s value — up to 30 percent of his annual income — on income taxes in each of the next 16 years.

Land Protection Specialist Pete DeBoer of LCWM said the income tax write-off for farmers plus a state property tax incentive have sparked a renewed interest in protecting land from development.

“We did a record number of acres last year … about 1,200 last year alone,” DeBoer said, or about one-quarter of the total 4,700 acres under LCWM’s jurisdiction. LCWM works in eight West Michigan counties, including Kent and Ottawa.

The amount of the charitable gift to the LCWM, one of 44 land conservancy organizations in Michigan, is determined by an appraiser, who provides a value for the property as is and a second value after the terms of the donation are detailed in a contract, DeBoer said. The difference is the amount of the donation.

The write-off in the federal farm bill approved in June contains three provisions to sweeten the pot for giving up development rights during 2008 and 2009, he said:

**It raises the percentage of gross income available for write-off from 30 percent to 50 percent.

**It extends the number of years available to claim the incentive from five to 16.

**If more than 50 percent of the donor’s income comes from farming, the individual can write off 100 percent of income, reducing federal income tax to zero.

The longer period for using the income tax benefit means that people with less income have an opportunity to write off more of the value of the donation, he said. It helps people, especially retirees, whose land has a high value but whose income is not high.

Even more effective in Michigan has been state legislation, signed by Gov. Jennifer Granholm in 2006, that suppresses the property tax bounce that comes with a land sale, DeBoer said.

Under Proposal A, the property tax reform package passed by voters in 1994, annual increases in the assessment on which property taxes are based — taxable value — are limited to 5 percent or the rate of inflation, whichever is lower. However, with a sale or inheritance, the taxable value is allowed to rise to meet the current SEV, thus increasing the property tax bill.

The 2006 state law prevents that change in the SEV on property under a conservation easement, DeBoer explained.

That’s a persuasive point in Sweetwater Township, where property values along the Pere Marquette have increased, said Bigford, who is president of the Pere Marquette Watershed Council and holds several other river and preservation related posts.

“A lot of the families in our township and people I know up and down the river have been devastated by this, because not only do they experience the death of a parent or grandparent, they also find out that the property tax burden quadruples,” he said. He added that he knows of one riverfront land sale that fell apart at the last minute when the buyer learned that property taxes would skyrocket past $20,000 annually.

By donating the conservation easement, the landowner avoids that “unintended consequence” of Proposal A, he said.

“A lot of these properties have been in the family for numbers of generations, and to be able to set their kids up so that they can take the property and not be burdened with these higher property taxes is really a huge benefit for them,” DeBoer said. The income tax benefit often is seen as “icing on the cake,” he added.

The poor economy and national clampdown on credit are changing the equation, particularly for large agricultural tracts near urban areas, he added. With developers facing difficulty in getting financing for new development, big acreage may be less valuable today.

“The market downspin in the state has some bearing, too. They have to hold on to property a lot longer to see a benefit. People are thinking about doing this because they’re not seeing as much money for development,” DeBoer said. “It may be more financially beneficial for people to hold on to those properties in high-density areas and wait out this economy.”

Erin Heskett, the Portage-based Midwest program director for the Land Trust Alliance, a national coalition of 1,600 land conservancy organizations, said his group lobbied Congress for the farm bill provision. It has started out as part of the Pension Protection Act of 2006.

“Our efforts have resulted in millions of acres of farmland, forest and rangeland being conserved,” he said. A study is underway to determine the impact of the tax incentive, he said. The alliance’s challenge now is to make the write-offs permanent, Heskett added.

Michigan is tenth in the nation and second in the Midwest to Wisconsin in the number of land conservancies, he said.

“The Michigan land conservancies have played a direct role in protecting more than 400,000 acres of forestland, farmland, coastline and other types of important land,” Heskett said.

Bigford said he’s grateful for the opportunity to preserve his land along what he called “a special river.”

“Everyone appreciates tax deductions,” he said. “I would rest in my grave better knowing my son had the whole place.”

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