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2.0 RLD Exemption Application
GARFIELD COUNTY Building & Planning Department 108 Stn Street. Suite 201 Glenwood Springs. Colorado 81601 Telephone: 970.945.8212 Facsimile: 970.384.3470''ARFi LD COL.BUILDING & PLANNINu RECEIVED OCT 0 6 20U0 Rural Lands Development Option "Exempt t9 GENERAL INFO FR MAT i 0 N To be completed by t7,e Street Address / General Location of Property: j/ r Size of Property (in acres) as of January 1. 1973: -. 7/ cr; -s Size of property (in acres) as of October. 16. 2000: -i • Current Size of Property to be Subdivided (in acres): je l r Proposed number and size of lots to be created via Rural Lands Development Option: Lot #: consisting of 80% of total lot area to include `>'" ! acres Number of lots for each 35 acres: c Number of Lots for each 100 acres in parent property: c An additional bonus lot provided to Applicant: c Total lots to be created via Rural Lands Development Option: Proposed number and size of lots to be created via Exemption from the definition of Subdivision: Lot #: ,k containing acres Lot #: 6 containing `7 T'. ( acres Lot #: - C" containing -er" acres Total lots to be created via Exemption: > Proposed final total number of lots to be created from ti'p's project: • Property's Zone District: 44- r > Name of Property Owner (Applicant): irt' �' " , ,n r (c)11)2' • Address: ri2 -: _ "/ Telephone: 9 - ..., t5.2- • City: .S'i`Z f State: tic - Zip Code: SW. 5 r FAX: <3&" 7 Name of Owner's Representative. if any: ,.-1J f.4 • Address: Telephone: ▪ City: State: Zip Code: FAX: 1 Signature Namebat') 5447-A / I°/° '; Date l eed L:E'.ager e'': Par' Address J1/47g5 .S,fJS Pre-appiic&tion ort sfie visit by Garfie/d Ccu t{' Vedetatiof' t;tµ!'ageme 625-86::, MUST be verified by signature below before application is accepted and at i&cs:.r:'C ,: ccf. :., acs .. &_.......... c t'nart Gari` L•;CC't r: Garfield County Vegetatio��nn/4� 1, Targeted weed / c4.5' 71/.5.11€ .4714 g VI dee-k 2. Total acres ql L:... r":e: ,.Tests.. sores 4v44.s 3. Describe the areas you plan to treat. Dos,ii,.;•}< t; ,, d 7aYSi Add 7-44,4,e- 4. The Districts must know when you are .. ee:J.7(j noxious .vee..S .,..ore: this year's turOnd. Spr?rg Deadline June 30 2006 jiC Fail Deadline November 17, 20oe 0 Springand Fail Deaeine Ne;e""ber 17. 2006- : ea nc .c"_s .veers _"`e Sona' fail � -- -. .. _.. ti .� and air 2:. _sC like reimbursement for both treatments this box ^'::s: de chectac. 5. What methods of treatment .yvill y Si r0Herbicides. Lst product name and rate and ri;rc cVp �cc: c-� � � b. Grazing. Describe grazing pian arc t...:^c. Mechar;icei. Describe method.i'^,ow c. cutting. Ru; ^Gi c. Pflernative methods. .rt1/t- e. Revegetation. What anc when you plan to reseed, ,A1/1 6. Name of professional weed control corroar..y. ,4/// Cu.T,,,e,, 441d Ai Sketch project area. Map must include weed species, location and stand density, Also Include any irrigator, ditches, roads, fences or : ;.`tidings. Aciside, c 1 ht S 741-2 AsTriee, ' ►�'k �' 7 .L4'✓e % ttl4 aTPxj •T^ 4/z f' i�iES, 444 /s thrT eF 7 z AA/di .fid r"14-1.4'44' ,#-s• Irk 7Ac Ad" -"-X c 4 h p 60'41' �,y, f ,�}yti L!$ e.. di l ' .r- ,c,^,,yrs %s c - 1T IS YOUR RESPONSIBILITY TO FILL CUT THE APPLICATION AND TURN IN ON TIME. IF YOU HAVE ANY 441 Parcel Detail Page 1 of 4 Garfield County Assessor/Treasurer Parcel Detail Information Assessor/Treasurer Property Search I Assessor Subset Query I Assessor Sales Search Clerk & Recorder _Reception Search Basic Building.._ Characteristics. I Tax Informatio...n Parcel Detail I Value Detail I Sales Detail I Residential/Commercial Improvement Detail Land Detail 1 Photographs Tax Area 023 Account Number R041810 Parcel Number 240124400254 Mill Levy 44.612 Owner Name and Mailing Address WEST DIVIDE RANCH LLC 2785 COUNTY ROAD 344 SILT, CO 81652-9666 Legal Description SECT,TWN,RNG:24-7-92 DESC: SEC 24 ISE1/4SE1/4 AND SW1/4SE1/4 AND ALL ITHAT PART OF THE SE1/4SW1/4 SEC 24 LYING EASTERLY OF COUNTY ROAD NO SEC 25 W1/2NE1/4, SE1/4NE1/4 AND THAT PORTION OF THE E1/2NW1/4 LYING EASTERLY OF THE FOLLOWING DESCRIBED LINE, BEING THE EASTERLY LINE OF THE COUNTY ROAD. PRE:R023370 SUC:R043299 BK:541 PG:713 BK:1176 PG:839 BK:1 148 PG:610 BK:0754 PG:0291 BK:0541 PG:0716 BK:1693 PG:79 RECPT:675490 BK:1688 PG:650 RECPT:67447.5 BK:1598 PG:683 RECPT:654612 BK:1598 PG:681 RECPT:654611 BK:1480 PG:567 http://www.garcoact.com/assessor/Parcel.asp?AccountNumber=R041810 9/14/2006 Parcel Detail Page 2 of 4 IRECPT:629377 BK:1480 PG:554 RECPT:629376 BK:1474 PG:257 RECPT:628220 BK:1470 PG:710 RECPT:627489 BK:1272 PG:829 RECPT:585274 BK:1272 PG:825 RECPT:585272 BK:1272 PG:821 RECPT:585271 BK:1272 PG:820 RECPT:585270 BK:1272 PG:816 RECPT:585269 BK:0734 PG:0026 BK:0620 PG:0012 Location Physical Address: 11084 311 COUNTY RD SILT Subdivision: Land: Land Acres: 137.815 Land Sq FJ 0 Section Township Range 24 7 92 Property Tax Valuation Information Sale Date: Sale Price: Basic Building Characteristics Number of Residential Buildings: r Number of Comm/Ind Buildings: 1 0 Residential Building Occurrence 1 Characteristics TOTAL HEATED AREA: 1,680 http://www.garcoact.com/assessor/Parcel.asp?AccountNumber=R041810 9/14/2006 Actual Value Assessed Value Land: 29,530 8,560 Improvements: 146,510 11,660 Total: 176,040 20,220 Sale Date: Sale Price: Basic Building Characteristics Number of Residential Buildings: r Number of Comm/Ind Buildings: 1 0 Residential Building Occurrence 1 Characteristics TOTAL HEATED AREA: 1,680 http://www.garcoact.com/assessor/Parcel.asp?AccountNumber=R041810 9/14/2006 Parcel Detail Page 3 of 4 BEDROOMS: ABSTRACT CODE: FARM/RANCH RESIDENCE - IMPS ARCHITECTURAL STYLE: MODULAR - UBC/IRC/IBC EXTERIOR WALL: MASONITE ROOF COVER: COMP SHNGL ROOF STRUCTURE: GABLE INTERIOR WALL: DRYWALL FLOOR: SHT VINYL FLOOR: CARPET HEATING FUEL: GAS HEATING TYPE: STORIES: BATHS: ROOMS: UNITS: FORCED AIR STORIES 1.0 2 6 1 YEAR BUILT: 3 1996 Tax Information Tax Year Transaction Type Amount 2005 Tax Payment: Whole ($910.98) 2005 Tax Amount $910.98 2004 Tax Payment: Whole ($665.80) 2004 Tax Amount $665.80 Top of Page Assessor Database .._Search Options I Treasurer Database Search Options Clerk. &_ Recorder Database Search Options Garfield County Home Page The Garfield County Assessor and Treasurer's Offices make every effort to collect and maintain accurate data. However, Good Turns Software and the Garfield County Assessor and Treasurer's Offices are unable to warrant any of the information herein contained. Copyright © 2005 - 2006 Good Turns Software. All Rights Reserved. http://www.garcoact.com/assessor/Parcel.asp?AccountNumber=R041810 9/14/2006 Parcel Detail Page 4 of 4 Database & Web Design by Good Turns Software. http://www.garcoact.com/assessor/Parcel.asp?AccountNumber=R041810 9/14/2006 s 1 j a i 1 J j a _SXe-r-dj )174 I) 3.— 14.4/1711 vi d l — �Vlde� 9 Crrtg 11 iiThel D ems-/ c / ,///; c q,,; ,1,1; .odd �, S S'e S 6r 4,/j0a �.tice o% Sod 71) es C. € b y 9L /9/tid 4� Cr `)r49e, /.fee % //-4( it c T Z ,) 1)/377C/C7- - Is777'/J v.1,5 6r &1 t1: OaWeA S /1,0d2rS.S e c:s ‚Td btod E. zZo. botA)/4r11,4 e, joi 6 727g5 31'7 Rd) s 1_77 /4zty .,?o(96 4661111)/Li 44 O,7:g 24 -577T ee"r" S66 e„..xe1/, -Z•ikCji i3 /-1 7t- 45_5 s ; //o7 31 ) -3; LT' . kt cr4-71 ..J5/5T5 734 -e-vqe S atouQ z c.tez 7e e nit 0.? -t-/- e Aes crew y -"/- d. &I/SA 7 p t cfrtici ALIZ 4e.s dt../c e hls a7,2-7,ts cl ess- 4.4isc,,, 4,vel d.,7a ,// e t. /0.4 cre_Ari Ls • r 41) -7-1.4f 1, /i373 T4e_ ickyeArli &Ss cdA) eoi 711.4) R 7og 1.49-749gaLfpy 05/19!2U05 16:41 FAX 19709459769 LARRY GREEN 1111111111111111111111111111111111111111111111111111111 674475 05/19/2005 03:30P 81688 P6`30 11 ALSDORF 1 of 4 R 21.00 0 0.00 GARFIELD COUNTY CO SPECIAL WARRANTY DEED Ttus DEED, made this 6 day of May, 2005, between DOW RIPPY and KATHARiNE RIPPY of the County of Garfield and State of Colorado, (Grantors), and WEST DiVIDE RANCH LLC, a Colorado Limited Liability Company, whose legal address is 2785 County Road 344, Silt, CO 81652, (Grantee): Wt'rNESSE't'l1, that the Grantors, for and in consideration of the sum of Ten Dollars and Other Good and Valuable Consideration, the receipt and sufficiency of which is hereby acknowledged, have granted, bargained, sold and conveyed, and by these presents do grant, bargain, sell, convey and confirm, unto the Grantee, its successors and assigns forever, all the real property together with improvements, if any, situate lying and being in the County of Garfield and State of Colorado described as follows: See Exhibit A attached hereto and made a part hereof. Also known as: T0GETUER with all and singular the hereditaments and appurtenances thereto belonging, or in anywise appertaining, and the reversion and reversions, remainder and remainders, rents, issues and profits thereof, and all the estate, right, title, interest, claim and demand whatsoever of the Grantors, either in taw or equity, of, in and to the above bargained premises, with the hereditaments and appurtenances. To HAVE AND TO HOLD the said premises above bargained and described with the appurtenances, unto the Grantee, its successors and assigns forever. The Grantors, for themselves, their heirs and personal representatives, do covenant and agree that they shall and will WARRANT ANO FOREVER DEFEND the above - bargained premises in the quiet and peaceable possession of the Grantee, its successors and assigns, against all and every person or persons claiming the whole or any part thereof, by, through or under the Grantors. IN WITNESS WHEnEoF, the Grantors have exe STATE OF COLORADO COUNTY OF GARFIELD ) ss. ) deed on the date set forth above. L DOW RIPPY The foregoing instrument was acknowledged before me this _� i /S , day of May, 2005, by DOW RIPPY and KATiq,RIPPY. iissioritritpirtitc 1 1 is .dT hand Ail official seal. ." v-':. Notary 1' lie 91 OF CO' Specio1 Warranty Dee ippy (Grantors)/ West Divide Ranch LLC (Grantee) Page 1 of 4 05.'19/2005 15:41 FAX 19709459769 LARRY GREEN i111111ii i111111111111111111111Illirn1111111111111111 674473 @5/18/20@5 03;30P 61688 P661 11 RI.SDORF 2 of 4 R 21.00 D 0.00 GARFIELD COUNTY CO IQ100:z EXHIBIT A A parcel located in Sections 23, 24 and 25, Township 7 South, Range 92 West of the more particularly described as follows: -Section 23: '"'"' Section 24: Section 25: 1,ry N%SE%, SW /6E'4, SEV+SE/ SW'/., S'/SE'/. \VNEV., SE%NE'%'/+, %.'%:NE°%a That portion of the EY*N W'/. lying Easterly of the following described line being easterly of the County Road, to -wit: Beginning at a point on the North line of said Section 25 whence the Northeast Corner of said Section beam N. 89°45' E. 3143.0 feet; thence S. 4°32' W. 346.0 feet; thence S. 34°56' W. 464.6 feet; thence S. 1'49' W. 208.0 feet; thence S. 35°23' E. 140.0 feet; thence S. 64'12' E. 418.7 feet; thence S. 26°18' E. 184.0 feet; thence S. 3°48' E. 418.6 feet; thence S. 27°10'W. 199.0 feet; thence S. 8°49' W. 349.7 feet; thence S.17°46' E. 331.5 feet to the south line of said E'hNW 1/a. That portion of the Nl3'/+NE1/4 described as follows: Beginning at the Southwest corner of the NE'/+ of the NE'/. of said Section 25; thence along the Westerly line of the NE% of said Section 25, N. 00°37'26" E. 595.31 feet to a fence line as constructed and in place; thence S. 38°30'48" E. along said fence 80.86 feet; thence S. 33°40'19" E. along said fence 638.84 feet to a point on the Southerly line of the NE% of the NE% of said Section 25; thence along said Southerly line S. 89°57'02" W. 411.03 feet to the point of beginning. The following parcels are excepted from the above described property, to wit: A parcel of land situated in the N V thNE'/, of said Section 25 describedas follows: Beginning at the Northeast corner of the NW % of the NE' of said Section 25; thence along the Easterly line of the N W % of the NE% of said Section 25 S. 00°37'26" W. 726.57 feet to a fence tine as constructed and in place; thence along said fence line N. 38°30'48" W. 928.45 feet to a point on the Northerly line of the N WY, of the NE'/ of Section 25; thence along said Northerly line N. 89°59'44" E. 586.06 feet to the point of beginning. and A parcel of land situated in the SY2NG'/, of said Section 25 described as follows: Beginning at the Southeast comer of the NE'% of said Section 25; thence S. 89°54'20" W. along the Southerly line of said NEV, 2262.42 feet; thence N. 03°19'02" W. 53.42 feet to a fence as constructed and in place; thence continuing along said fence N. 03°19'02" W. 379,26 feet; thence along said fence N. 07°19'12" W. 324.44 feet; thence along said fence N. Q0°43'20" W. 107.90 feet; thence along said fence N. 1 l .47'10" E. 148.01 feet: thence along said fence N26°24'48" E. 188.69 feet; thence along said fence N. 33'42'59" E. 176.91 feet to the Northerly line ofthe 51/2 of the NE', of said Section 25; thence along the Northerly line of the S1 of said NE1/4, N. 89°57'02" E. 2132.91 feet to the Easterly line of the S1/2 of the NE'/. of said Section 25; thence along the Easterly line of the SYi of the NE% of said Section 25, S. 00°46'27" W. 1320.90 feet to the point of beginning. and !q Special. Warranty Deed Rippy (Grantors) / Jet Divide Ranch LLC ('Grantee) Page 2 of 4 05/19/2005 15:41 FAX 19709459769 LARRY GREEN 1111111 IIID 11111111111 111111 11111111111111111111111111 874470 05/10'2005 0330P 81688 P6$2 M ALSDORF 3 of 4 R 21.00 Co 0.00 GARFIELD COUNTY CO t] 006 A 2.322 acre parcel of land located in the East half of Section 25 arod described in document recorded as Reception No. 346770 in Book 637 at Page 616. and A parcel of land in Sections 23 and 24, 'township 7 South, Range 92 West of the 6" P.M. in Garfield County, Colorado and being more particularly described as follows: Beginning at the Section Corner common to Sections 23, 24, 25 and 26 in above -said Township and Range, said Comer being referenced by a Witness Corner Monument that bears S. 00°02' 14" E. a distance of 33.00 feet; thence from the true position of said Section Corner N. 14°23'44" W. a distance of 36.11 feet to a point on the centerline of a welt service road; thence along said well service road centerline the following twenty-seven (27) courses: 1. N. 49°26'44" E. 12,01 feet to a point on the west line of said Section 24; 2. N. 49°26'44" E. 62.59 feet; 3. S. 79°38'49" E. 94.82 feet; 4. N. 88°36'54" E. 84.47 feet: 5. N. 60°55'45" E. 64.56 feet; 6, N. 05°38'4l" E. 109.07 feet; 7. N. 04°43'35" W. 300.06 feet; 8. N. 03°45'04" W. 228.27 feet; 9. N. 02°5640" E. 289.57 feet; 10. N. 15°46'12" W. 93.66 feet; 11. N. 47°31'11" W.99.11 feet; 12. N. 67°49'19" W. 134.01 feet; 13. N. 77°39'01" W. 41.79 feet to a point on the west line of said Section 24; 14. N. 7799'01" W. 95.74 feet; 15. N. 35°18'21" W. 63.46 feet: 16. N. 01°26'47" W. 115.18 feet; 17. N. 01°49'35" E. 205.44 feet 18. N. 10°57'29" E. 126.00 feet; 19. N. 33°43'54" E. 189.05 feet to a point on the west line of said Section 24; 20. N. 33°43'54" E. 84.91 feet; 21. N. 18°4619" E. 226.83 feet; 22. N. t6°58'58" E. 137.55 feet; 23. N. 31°48'44" W. 71.42 feet; 24. N. 64°07'33" W. 134.27 feet to a point on the west line of said Section 24 and from which the 1/4 Corner common to said Sections 23 and 24 bears N. 00°11'57" E. a distance of 201.10 feet; 25. N. 64°07'33" W. 19.88 feet; 26. N. 52°33'18" W. 232.10 feet; 27. N. 36°09'51" W. 58,94 feet to a point on the north line of the SE% of said Section 23; thence N. 89°11'00" E. a distance of 237.48 feet to said 1/4 Corner common to Sections 23 and 24; thence N. 88°36'58" E. a distance of 2615.17 feet to the Center 1/4 Corner of said Section 24; thence S. 00°10'01" W. a distance of 1350.03 feet to the South 1/16th Corner on the MS centerline of said Section 24; thence S. 89°08'48" W. a distance 01 714.67 feet to a point on the centerline of County Road No. 311; thence along said centerline of County Road No. 311 the following eight (8) courses; 1. S. 18°13'16" E. 146.54 feet; 2. S. 0102634" E. 123.02 feet; Special Warranty Deed Rippe (Grantors) / Hest Divide Ranch LLC (Grantee) Page 3 of 4 05/19/2005 15:42 FAX 19709459759 LARRY GREEN 1111triolLLIt 1111I1li181688 II 1uli UstiiII 674475 05/18/2005 03.30P 4 of 4 R 21.00 D 0.00 GARFIELD COUNTY CO 3_ S. 00°56'23" W. 235.92 feet; 4. S. 06'01'59" E. 73.27 feet; 5. S. 12'31'11" E. 18328 feet; 6. S. 1.4'45'06" E. 186.30 feet; 7. S. 08°14'33" E. 113.78 feet; 8. 5.00°41'33" W. 299.92 feet to a point on the south line of said Section 24; thence leaving said centerline of County Road No. 311 S. 89'40'36" W. a distance of 2057.60 feet to the Point of Beginning. County of Garfield State of Colorado Special Warranty Deed • Rippy (Grantors) ! West Divide Ranch LGC (Grantee) Page 4 al 41e.6 IAL:14ess es- 6 1/K7-- 4doc,;-.free-,5 aba Feer Ak.,eoseel ex,e4y7;;;;,41 rfort4s, ivIch2 b. /g7-5' arfagv 4:1"? 6247- 4.5 9eee7 t96.47 -i,06 -e) I9it 1,4- )1/4A'pifli'eT )1, h1g37 C„g' 3/) SJi d„, / •=4,732? -/y3 -q se/greks'a-di AL/4T 45€,A,9 -4e," 7:- 5:2- 00 e 3z/3 -2,27; 4 /0g7? 31/ Nidled( Ke,4 1.g4)V7 c, -31 1 (11, gie5'2 :rile •14,(4 <1 eile 4 le .7-- cA(c 74 <— . -•‘ ; -->ez 717,74.c. (-1, e ezi4-"q:e: .444-1 _SiX1C.S/4- C ?2. -CO ;‹, e .--;c7ifc, Mar 3U Ub UG:U�p rsamin BURNING MOUNTAINS FIRE PROTECTION DISTRICT Brit C. McLin Chief 611 Main St. P.O. Box 2 Silt, CO. 81652 Building and Planning Department Garfield County Phone: (970) 876-5738 Fax: (970) 876-2774 E -Mail: chief800@rof.net 29 March 2005 In re: Application for Exemption from Definition of Subdivision 1 have reviewed Dow Rippy's application for exemption regarding the properties identified as 10339,10441, and 11084 County Road 311 and have neither concern nor comment as this reflects no change in occupancy or usage. Brit C. McLin, Chief Soils Inventory Report Page 1 of 1 Soils Inventory Report Tue Mar 29 09:43:22 MST 2005 HARLEY DOW RIPPY JR Map Unit Symbol Acres Percent 28 8.7 1 30 34.9 5% 32 2.9 0% 40 16.1 2% 55 181.8 27% X. 65 51.3 8% X 66 32.9 5% 68 54.1 8% 69 245.3 36% 7 7.8 1 70 46.2 7% Total: 682 file://C:\Customer_Files_Toolkit\Rippy 3082\Resource_Maps\soils_map_out.htm 3/29/2005 Customer(s): HARLEY DOW RIPPY JR Field Office: GLENWOOD SPGS SERVICE CENTER 6i70 0 600 1 200 1 800 2 400 image: Garfield County Ortho Mosaic Feet N mrsi J Customer(s). HARLEY DOW RIPPY JR Field Office: GLENWOOD SPGS SERVICE CEN 5N El4V Ortuat ❑" ❑b ❑v ❑� ❑� 063 ❑' ❑ ro 675 0 675 1 350 2 02.5 2 700 Feet Image: Garfield County Ortho Mosaic ISI Non -Technical Descriptions Soil Survey Area: 683 RIFLE AREA, COLORADO, PARTS OF GARFIEL T ♦ 1Ti\ 1 .fit Cl • 1-, !SW Tl Tn1 r.c Map unit: 28 Heldt clay loam, 1 to 3 percent slopes Description Catego,y: SOI This deep, well -drained soil is on alluvial fans and sides of valleys. This soil formed in fine textured alluvium derived from shale and sandstone. The surface layer is clay loam about 8 inches thick. The subsoil is clay loam about 13 inches thick. The substratum is clay to a depth of 60 inches. Permeability is slow, and available water capacity is moderate. Effective rooting depth is 60 inches or more. Runoff is medium, and the erosion hazard is slight. Map unit: 30 Heldt clay loam, 6 to 12 percent slopes Description Category: SOI This deep, well -drained soil is on alluvial fans and sides of valleys. This soil formed in fine textured alluvium derived from shale and sandstone. The surface layer is clay loam about 8 inches thick. The subsoil is clay loam about 13 inches thick. The substratum is clay to a depth of 60 inches. Permeability is slow, and available water capacity is moderate. Effective rooting depth is 60 inches or more. Runoff is medium, and the erosion hazard is moderate. Map unit: 32 Holderness Variant clay loam, 6 to 25 percent slopes Description Category: SOI This deep, well drained soil is on alluvial fans and sides of valleys. This sod formed in fine textured sediment derived from shale and sandstone. The surface layer is clay loam about 11 inches thick. The subsoil is clay about 41 inches thick. The sub stratum is clay loam to a depth of 60 inches. Permeability is slow, and available water capacity is high. Effective rooting depth is 60 inches or more. Runoff is medium, and the erosion hazard is slight. Map unit: 40 Kim loam, 3 to 6 percent slopes Description Category: SOI This deep, well -drained soil is on alluvial fans and benches. This soil formed in alluvium derived from shale and sandstone. The surface layer is loam about 17 inches thick. The underlying material is loam to a depth of 60 inches. Permeability is moder ate, and available water capacity is high. Effective rooting depth is 60 inches or more. Runoff is slow, and the erosion hazard is moderate. Tuesday, March 29, 2005 Page I of 3 Map unit: 55 Potts loam, 3 to 6 percent slopes Description Category: SOI This deep, well -drained soil is on mesas, benches, and sides of valleys. This soil formed in alluvium derived from sandstone, shale, or basalt. The surface layer is loam about 4 inches thick. The subsoil is clay loam about 24 inches thick. The substrat um is loam to a depth of 60 inches. Permeability is moderate, and available water capacity is high. Effective rooting depth is 60 inches or more. Runoff is slow, and the erosion hazard is moderate. Map unit: 65 Torrifluvents, nearly level Description Category: SOI This broadly defined unit consists of deep, well -drained to somewhat poorly drained soils on flood plains. The soils formed in alluvium. These soils are stratified and vary widely in texture and depth. The surface layer ranges from loamy sand and fine s andy loam to silty loam and clay loam. The underlying layers are generally sandy loam or loam stratified with sand, gravel, and cobbles. The water table fluctuates between depths of 2 and 4 feet and in some years is near the surface during spring runoff. These soils are subject to brief, occasional flooding late in spring and early in summer. Permeability is moderately slow to moderately rapid. Available water capacity is low to high. Effective rooting depth is 60 inches or more. Runoff is slow, and the hazard of water erosion is slight. Map unit: 66 Torriorthents-Camborthids-Rock Outcrop complex, Steep Description Category: SOI This broadly defined unit consists of exposed sandstone and shale bedrock, loose stones, and soils that are shallow to deep over sandstone and shale bedrock and stony basaltic alluvium. Torriorthents make up about 45 percent of the complex, Camborthids ma ke up 20 percent, and Rock outcrop makes up 15 percent. The Torriorthents are on foothills and mountainsides below Rock outcrop. The moderately steep Camborthids are on lower toe slopes and concave open areas on foothills and mountainsides. Torriorthents are very shallow to moderately deep. They are well to somewhat excessively drained. They generally are clayey to loamy and contain variable amounts of pebbles, cobbles, and stones. Permeability is slow to moderate, and water holding capaci ty is very low to low. Effective rooting depth is 10 to 40 inches. Runoff is very rapid, and erosion hazard is very high. Camborthids are shallow to deep and are well -drained. They are generally clayey to loamy and have slightly more clay in the subsoil than in the surface layer. The profile is normally free of stones, but scattered basalt stones, cobbles, and sandstone fra gments are on the surface. Permeability is slow to moderate. Available water capacity is low to very low. Effective rooting depth varies from 10 to more than 40 inches. Runoff is rapid or very rapid, and erosion hazard is very high. Rock outcrop is mainly Mesa Verde sandstone and Wasatch Shale. Tuesday, March 29, 2005 Page 2 of 3 Map unit: 68 Vale silt loam, 3 to 6 percent slopes Description Category: SOI This deep, well -drained soil is on mesas, benches, and alluvial fans. This soil formed in calcareous eolian material. The surface layer is silt loam about 7 inches thick. The subsoil is silt loam and silty day loam about 19 inches thick. The substratu m is silt loam to a depth of 60 inches. Permeability is moderate, and available water capacity is high. Effective rooting depth is more than 60 inches. Runoff is medium, and the erosion hazard is moderate. Map unit: 69 Vale silt loam, 6 to 12 percent slopes Description Category: SOI This deep, well -drained soil is on mesas, benches, and alluvial fans. This soil formed in calcareous eolian material. The surface layer is silt loam about 7 inches thick. The subsoil is silt loam and silty clay loam about 19 inches thick. The substratu m is silt loam to a depth of 60 inches. Permeability is moderate, and available water capacity is high. Effective rooting depth is more than 60 inches. Runoff is medium, and the erosion hazard is moderate. - Map unit: 7 Ascalon -Pena complex, 6 to 25 percent slopes Description Category: SOI These soils are on sides of valleys and alluvial fans. The soils formed in alluvium derived from sandstone and shale. Ascalon soil makes up about 65 percent of the complex, and Pena soil makes up about 25 percent. The Ascalon is on the less sloping, som ewhat concave parts of the landscape, and the Pena soil is on the steeper, convex parts. The Ascalon soil is deep and well drained. The surface layer is fine sandy loam about 5 inches thick. The subsoil is sandy clay loam about 30 inches thick_ The substratum is sandy clay loam to a depth of 60 inches. Permeability is moderate, and availab le water capacity is moderate. Effective rooting depth is 60 inches. Runoff is medium, and the erosion hazard is moderate. The Pena soil is deep and well -drained. The surface layer is about 12 inches thick_ The upper part is stony loam, and the lower part is very stony loam. The substratum is very stony sandy loam to a depth of 60 inches. Permeability is moderate, and avai table water capacity is low. Effective rooting depth is 60 inches. Runoff is slow, and the erosion hazard is moderate. Map unit: 70 Vale silt loam, 12 to 25 percent slopes Description Category: SOI This deep, well -drained soil is on mesas, mesa sides, and alluvial fans. This soil formed in calcareous eolian material. The surface layer is silt loam about 7 inches thick. The subsoil is silt loam and silty clay loam about 19 inches thick. The substr atum is silt loam to a depth of 60 inches. Permeability is moderate, and available water capacity is high. Effective rooting depth is more than 60 inches. Runoff is rapid, and the erosion hazard is high. Tuesday, March 29, 2005 Page 3 of 3 k Le,P/I .1-;,/aatie_cf4 Jett, eXts t47:145:-.) /ve, 43-7) A-7ra , 27Z _Se/4i") c ;sioos/4- Se-Ai/lye- 1(1Sioas,9-/ ,44--342e) ,47 PIA f,:icit ohAZ 59oire.,42";;9- ed417;;(' ---51,10ce„5 4-Ae- re:0---#46444;12e. )44 LiA)17ria f)pr^ 213 03 02:18p Wayne Shelton 970-927-3801 P Form No. OFFICE OF THE STATE ENGINEER GWS -25 COLORADO DIVISION OF WATER RESOURCES 818 Centennial Bldg.. 1313 Sherman St.. Denver. Colorado 80203 (303) 866-3581 APPLICANT 1095 WELL PERMIT NUMBER 229'602DIV. 5 WD 45 DES. BASIN MO DIVIDE CREEK LAND & CATTLE CO 12744 HWY 82 CARBONDALE, CO 81623- (970) 963-1971 PERMIT TO CONSTRUCT A WELL I!Q{s °{ Crz 31/ APPROVED WELL LOCATION GARFIELD COUNTY SE 1/4 SW 1/4 Section 24 Township 7 S Range 92 W Sixth P.M. DISTANCES FROM SECTION LINES 390 Ft. from South 2250 Ft. from West Section Line Section Line ISSUANCE OF THIS PERMIT DOES NOT CONFER A WATER RIGHT CONDITIONS OF APPROVAL 1) This well shall be used in such a way as to cause no material injury to existing water rights. The issuance of this permit does not assure the applicant that no injury wilt occur to another vested water right or preclude another owner of a vested water right from seeking relief in a civil court action. 2) The construction of this well shall be in compliance with the Water Well Construction Rules 2 CCR 402-2, unless approval of a variance has been granted by the State Board of Examiners of Water Weil Construction and Pump Installation Contractors in accordance with Rule 18. 3) Approved pursuant to CRS 37-92-602(3)(b)(8)(A) as the only well on a tract of land of 40.00 acres described as the SE 1/4, SW 1/4. Sec. 24, Twp. 7 5, Rng. 92 W, Sixth P.M., Garfield County. 4) The use of ground water from this well is limited to fire protection, ordinary household purposes inside not more than three (3) single family dwellings, the inigation of not more than one (1) acre of home gardens and lawns. and the watering of domestic animals. 5) The maximum pumping rate of this well shall not exceed 15 GPM. 6) The return flow from the use of this well must be through an individual waste water disposal system of the non -evaporative type where the water is returned to the same stream system in which the well is located. 7) This well shall be constructed not more than 200 feet from the location specified on this permit, 8) This permit has been approved for a square 40 acres at the location specified above. You are hereby notified that you have the right to appeal the issuance of this permit, by filing a written request with this office within sixty (60) days of the date of issuance. pursuant to the Slate Administrative Procedures Act. (See Section 24-4-104 through 106, C.R.S.) APPROVED KMG State Engineer Receipt No, 0465502A DATE ISSUED OCT 20 2000 By EXPIRATIOAWATE OCT BURNING MOUNTAINS FIRE PROTECTION (DISTRICT Brit C. McLin Chief 611 Main St. P.O. Box 2 Silt, CO. 81652 Building and Planning Department Garfield County Phone: (970) 876-5738 Fax: (970) 876-2774 E -Mail: chief800@rof.net 29 March 2005 In re: Application for Exemption from Definition of Subdivision I have reviewed Dow Rippy's application for exemption regarding the properties identified as 10339,10441, and 11084 County Road 311 and have neither concern nor comment as this reflects no change in occupancy or usage. Brit C. McLin, Chief Signature W a Date 'Marra '/ 7A f'I Access .7K '/57 1° .S,' 41—r /‘-x- Pre-appiication on site visit by Garfield Crulty V cerariof !: c^age r .' 625 -CH_ ` MUST be verified by signature below before application is accepted and al leas: bf:cr:: .._9'7•c. .. a -pcint sr+ early! Garfield County Vegetation Targeted weed A4,445" ,4/y; •, �1 . - �� 4'i1 Jitc%r 2. Total acres 9S �... cr"G .. ..c, .E^ 4 4eALS 3. Describe the areas you pian to treat. Clmie 't d /its ,Wi f'i'4i{S'. 4. The Districts must know when you are :rea:.n :cx.ous weeds order to cucoe.:his year's funding. Sprang Deadline June 30 2006 114 Fall Deadline November 17, 2006 •1 -or..,... n fair r } ging and Fail Deadline both1�C�'e'"':�E".' , . 2206- j� -`r_ are ..`Fc:.".� ".v�..�'_S ..ecr'.S ...�:+� 5.,:: ,.,, and G and `,NCt:C like reimbursement for treatments Chs vox mustPechecked. 5. What methods of treatment will you use <�_� .S'tit 'Jy, 44161(C) Herbicides.. `!si product name and rate and :li:;rc o 4�o.car;c,.. / b. Grazing. Describe grazing pier. ant ..., rc. j Mechanics , pesote method. 'G4ti°ir,C, ou inc, �U, ^G) ? 4 rd ay v, , , f d. Alternative methods. /A' e. Revegetation. What and w^e^ _.ot.. pian to reseed ,r✓/,(1 6. Name of professional weed control Comoarv. //1 Sketch project area. Map must include weed species, location and stand density. Also include any irrigation ditches, roads. fences or buildings. hi .s, ebe., ttzS 7t-2 AsTriPe Ne../ tT ; -s• ,QzLg�wr,l�, doA of "Aeeds G , , /411,ed 4/eV, As 4)/4 44' M cf z AAAtii 4,4 94 irM 4.b J ie rf.SJ r ' XCC41,,E aitZ All .Ofd .47 'fie.. 73 1T 1S YOUR RESPONSIBILITY TO PILL GUT THE APPLICATION AND TURN 1N ON TIME. IF VDU HAVE ANY Reeoraod at t.10 e'el k >K., February.. _3 *_. Z _._::Book 11.14t9/1,1 5 4140 ,1[�}„ ReeeptionNo._ 2?98 Ella" Stephens, ....liecordor.ir e 7 TAIIS DEED,: Made this,� x '31 - clay of December ,1972 between VAL S. CHRISTENSEN and MARTHA CHRISTENSEN, husband and wife, County ,f Laramie Wyoming of the and State of $df MCA, of the first part, and LEONARD V. CIIRISTENSEN fi WILMA CHRISTENSEN of the hhusbband liniawgre, Garfield and State of it Colorado, of the second part: WITNESSETII, That the said partie 5 of the first part, for and in consideration of the sum of One Dollar and other valuable consideration DOLLARS to the said part ies of the first part in hand paid by said partY of the second part, the receipt whereof is hereby confessed and acknowledged, he Ye granted, bargained, Gold and conveyed, and by these presents do grant, bargain, sell, convey and confirm, unto the said party of the second part,hi5 heirs and assigns for- ever, all the following described lot or parcel of land, situate, lying and being in the County of Garfield and State of Colorado, to wit: STAR 1100101 AAY in FEB 1.3 1973 ,C° I PARCEL I The Nl/2SE1/4 and the SWI/<1SE1/4 of Section 23 and the N1/2SW1/4 of Section 24 all in Township 751192W of the Gth P.M. together with any and all ditch, ditch rights, and water rights appurtenant to or used in connection with any of said lands and particularly but without limitation on the foregoing the grantors interest in the West Divide Creek Ditch No. 32 and in and to water priorities No. 42 and 98 represented by 2500 shares of Capital Stock of the Porter Ditch and Reservoir Company and, together with the following described water rights insofar as the same are appurtenant or used in cotrneclion with the above described real property: TO WIT: 0.936 cubic feet of water per second of time of the total amount of 8.09 cubic feet of water per second of time allowed to flow in the West Divide Creek Ditch under priority No. 42 and 98 from January 9, 1941, the date on • which said water was decreed by order of court; and an undivided 55/475 interest in and to the Dennis Enlargement and extension of the West Divide } Creek Ditch (second enlargement), and in and to the 2.80 cubic feet of water ; per second of time allowed to flow therein under Priority No. 117 E from December 9, 1011. PARCEL II The SE1/4SE1/4 of Section 23, the S1/2SW1/4 and the SWI/4SEI/4 of Section 24, all in Township 7SR92W of the lith P. M. excepting therefrom the portions heretofore sold' to William Johnson and James Ewers for reservoir sites and also rights-of-way conveyed for road purposes. Also the SE1/4SE1/4 of Section 24 Township 7 Sfi92W together with any and all ditches, ditch rights and water rights appurtenant to or used in connection with any of said lands and particularly, but without Limitation Priorities No.42 and 98 of said West Divide Creek Ditch. There is accepted from above described property rights-of-way and easements of record for roads, highways power and telephone lines, ditches and reservoirs if any. The grantors also convey all of their right's, title and interest in and to the grazing permit under the 'Taylor Grazing Act for 120 head of cattle subject to the rules and regulations of said act. f 2o% { 4ff;t ) ic ge' '41 1/4 and th t+iacl a[t tlllt /4 of Section 25, Township 7 31192W of Gt 1 1/X,1/4 of Section. 25 Tow-nolap 7:313.521 following described line, Elite h line Wing tilt easterly lino of the county road to wits beginning at a point on the north line of said Sectio » 25 whence the northeast corner of said Section 25 bears not til 89 45' E 2143.1) ft. thence 5 4o321V346. oft. thence S34°56'W 464.6 ft. thence S1°491V 208.0 ft, thence 535°23'. 140.0 ft, thence 564°12'F 41837 ft, thence S26°18'E 184.0 ft, thence 53°48'E 418. ii ft, thence S27°10'w 199.0 ft, thence S8°49'W 349.7 ft, thence 517°4G'E 331.5 ft to south line of said El./21NW1/4 containing 148_.81acres more or less. Together withthe following, described .. s` ditch and water rights to wit: an undivided two -ninths interest in and to the Clear Creek Ditch, the same being, Ditch No. 12 in decrees of the District Court of Garfield County,, Colorado, in and for Water District No 45 and an /5'0. .undivided two -ninths inteirestand:to the following priorities awarded to said \ : ditch under the, decree aforementioned: . Priority No. 15 for GO cu.ft. of water per minute of time Priority No. 29 for 140 eu.ft_. of water per minute of time and Priority No. 97 for 10 cu.ft. of water per minute of time_ An undivided two-thirds interest in and to the Cavendor,Eniargement and extension of The Clear Creek Ditch and Weber Lateral, the same being Ditch No. 12 in decrees of District Court of Garfield County, Colorado in and for Water District 45 -together with the first sixty cubic feet of water per minute of time and from Priority No_ 146 awarded to said ditch under the decrees of foresaid and also together with an undivided one-half interest in and to the last 120cu.ft. of water per minute of time in and from said Priority No. 146. An undivided one-half interest in and to the Weber Enlargement of the Clear Creek Ditch, the same being Ditch No..12 in decrees of the District Court of Garfield County in and for Water District No. 45, and an undivided one-half interest in Priority No. 143 1 for 72 cu.ft. of water per minute of time awarded to said ditch under the decrees aforementioned. TOGETHER with all and singular the hereditaments and appurtenances thereto belonging, or in anywise appertaining, and the reversion and rever,iora, remainder and remainders, rents, issues and profits thereof; and all the estate, right, title, interest, claim and demand whatsoever of the said parti e S of the first part, either in law or equity, of, in and to the above bargained premises, with the hereditaments and appurtonancea. TO HAVE AND TO HOLD the said premises above bargained and described with the appurtenances, unto the said part y of the second part, hi 5 heirs and assigns forever. And the said part i e 5 of the first part, for tllemael ves . heirs, executors, and administrators, do covenant, grant, bargain, and agree to and with the said part}' of the second part, US S heirs and assigns, that at the time of the ensealing and delivery of these presents, they are Well seized of the premises above conveyed, as of good, sure, perfect, absolute and indefeasible estate of inheritance, in law, in fee simple, and ha Ve good right, frill power and lawful authority to grant, bargain, sen and convey the same in manner and form as aforesaid, and that the same are free and clear from all former and other grants, bargains, sales, liens, taxes, assessments and encumbrances of whatever kind or nature socvcr. and the above bargained premises in the quiet and peaceable possession of the said part y of the second part, his heirs and assigns against all and every person or persona lawfully claiming or to claim the whole or any part thereof, the said part i e 5 of the first part shall and will WARRANT AND FOREVER DEFEND. IN WITNESS WIIEREOF, the said part ies of the first part have hereunto set theIhrtn,t and seals the day and year first above written. i WYOMING STATE OF a0D0801.A19 1 enmity of Laramie Ise. The foregoing instrument was acknowledged before me this - .,".�� day of December 1s 72 ,by Val S. Christensen and Martha Christensen My commission expires _ v tri 2.1 J . L -e --s- IJ t gEAL) Val S. Christensen Mar,,tha Christensen ) a r . ! I :J._.. -.".. ;W -(SEAL) i'/ 14 . Witness my hand and official seal, w If NoCerr Public f' No. 932. wAR:a.AN1T DEED.—For rit©rnrrzahic Record_ --Bradford Pubiiehioa go., 1824-ta Stout Street: Deaver, Colorx410 )/1 JAM4Z (14..."CA'S e WAJtit'S /14) ne- bOtt3 V-"" /4744ae- --175_4" . 91 s,,tri- 5;2 )iv, d ee. j,Iai6772e . 4R 7W. /1712 63-2 440.44 6. g.4;Z3 !q:;:r: 6 te -thl Ad. CA11_0 se 4) I.S gri_ve.,v) e Lese- 4/ d4S ISAACSON ROSENBAUM WOODS & LEVY, P.C. law•client•community® CONSERVATION EASEMENTS AND TAX BENEFITS COLORADO CHAPTER REALTORS LAND INSTITUTE January 14, 2005 by WILLIAM M. SILBERSTEIN, ESQ. e-mail: bsilberstein@irwl.com ISAACSON, ROSENBAUM, WOODS & LEVY, P.C. 633 17th Street, Suite 2200 Denver, CO 80202 303-292-5656 website: www.irwl.com 2005- ISAACSON, ROSENBAUM, WOODS & LEVY, P.C. - All Rights Reserved r CONSERVATION EASEMENTS AND TAX BENEFITS I. What is it? A. A conservation easement is a contract between a landowner and a land trust or government entity which contains permanent restrictions on the use or development of land. The conservation easement is recorded in the real estate records, and binds future landowners. A landowner may reserve several homesites for present and future use. B. Conservation easements may be donated or sold. C. Colorado Enabling Act C.R.S. § 38-30.5-101, et seq. D. There must be a public benefit. II. What is not required? A. Public access is generally not required. B. Land encumbered by a conservation easement can be sold, mortgaged, and passed on to future generations. III. What are typical restrictions in a conservation easement? A. No subdivision or limited subdivision. B. Limited development. C. No commercial or industrial uses other than ranching, fanning, lodging, and cottage industry. D. No surface mining. E. Keep water rights on the property. F. Proper land management. G. Proper timber management. 2005- ISAACSON, ROSENBAUM, WOODS & LEVY, P.C. - All Rights Reserved 1 N. What are the tax benefits? A. Federal Tax Benefits. If the conservation easement satisfies Internal Revenue Code requirements, there are the following three tax benefits: 1. A charitable income tax deduction for the value of the conservation easement. 2. An estate tax reduction, removing the value of the conservation easement from the taxable estate. 3. In limited circumstance, a partial exclusion from estate taxes for the residual value of the land subject to the conservation easement. B. Colorado Tax Benefits. 1. State Income Tax Credit: a) Under Colorado law (C.R.S. § 39-22-522), there is a Colorado income tax credit for a donated conservation easement of up to $260,000 (subject to the limits discussed below) with a 20 year carry forward. The income tax credit may be transferred or refunded in cash in years in which the state has a budget surplus (up to S50,000 of credit and refund per year). b) The income tax credit limit is $100,000 plus 40% of the value of the conservation easement in excess of $100,000 up to a maximum of $260,000. For example, a qualifying donation of a conservation easement with a value of $500,000 will result in a Colorado tax credit equal to $100,000 plus (40% x $400,000) or $260,000; for a conservation easement with a value of $400,000, the credit is $?20,000 ($100,000 plus 40% x 300,000). c) The Colorado income tax credit can be transferred by the donor of a conservation easement, a transferor, by gift or sale to a third party, a transferee, who can then claim the credit. There is no limit 2005- ISAACSON, ROSENBAUM, WOODS & LEVY, P.C. - All Rights Reserved to the number of credits from multiple conservation easement transactions that a transferee can claim. However, the entire credit of a transferor must be claimed or refunded (in a surplus year) before the transferor may claim a new credit for an additional conservation easement donation. For example, assume a transferor donates a conservation easement in 2005, which is eligible for the entire $260,000 Colorado income tax credit. The transferor sells the credit to a transferee who claims $100,000 of the credit in 2005 and $160,000 of the credit in 2005. The transferor must wait until 2006 before donating any additional conservation easement or such a donation will not be eligible for a Colorado income tax credit. A charitable income tax deduction for the value of the conservation easement in excess of $500,000. 3. Property Taxes, Freezes and Reductions: a) Under Colorado law (C.R.S. § 39-1-102(1.6)(a)(III)), There is an agricultural property tax retention for lands classified as agricultural. For non-agricultural land, there should be a property tax reduction. V. What are the requirements to qualify for tax benefits? A. Under Internal Revenue Code § 170(h), the conservation easement must provide a public benefit and be granted exclusively for conservation purposes. Conservation purposes include the following: 1. The preservation of land for public outdoor recreation or education. The protection of the natural habitat of wildlife or plants. 3. The preservation of open space, including farmland and forestland, for the scenic enjoyment of the general public or pursuant to a clearly delineated governmental conservation policy, that will yield a significant public benefit. 3 © 2005- ISAACSON, ROSENBAUM, WOODS & LEVY, P.C. - All Rights Reserved 4. The preservation of historically important land or a certified historic structure. B. The conservation easement must be granted to a qualified organization (IRC § 170(h)(3)). C. Mortgage lender must subordinate. D. No surface mining. 1. The general rule is that no charitable deduction is allowed if the landowner does not own the minerals if at any time there may be a removal of minerals by any surface mining method. 2. However, a landowner may obtain a charitable deduction if the probability of extraction or removal of the minerals by any surface mining method is so remote as to be negligible. E. A baseline inventory is done to satisfy the Internal Revenue Code requirements of "documentation sufficient to establish the condition of the property at the time of the gift." F. The conservation easement must be perpetual. G. The conservation easement must be recorded. H. A cash donation to the land trust or government entity as an endowment for monitoring and enforcement of the conservation easement is usually part of the transaction. The conservation easement must be donated or sold for less than market value. A conservation easement that is granted in return for something, i.e., where there is a "quid pro quo," does not satisfy the "donative intent" requirement and does not qualify for a charitable deduction. An example is a conservation easement granted by a landowner to a city in exchange for annexation or zoning of the property. © 2005- ISAACSON, ROSENBAUM, WOODS & LEVY, P.C. - All Rights Reserved J. The taxpayer must reduce his/her tax basis in the land in the proportion that the value of the conservation easement bears to the value of the land, and will incur a higher capital gain when selling the land. K. See Treasury Regulation § 1-170A-14 (26 CFR Ch. 1). VI. How is a conservation easement valued? A. An appraisal of the property is completed. The IRS regulation requires a determination as to whether there is a record of sales of comparable conservation easements to government programs. If so, the appraisal must be based on those comparable sales. Otherwise and usually the appraiser will value the property before a conservation easement is placed on the property and after the property is encumbered by the conservation easement. The value of the conservation easement is the difference between the "before" and the "after" values of the Property. B. If the conservation easement does not cover all of the property, all of the property must be appraised, and any enhancement to the value of the property not covered by the conservation easement is offset against the value of the conservation easement. C. The appraisal is the document most likely to be reviewed by the IRS. VII. What are the tax benefits for individuals? A. Charitable income tax deduction: 1. May be used against ordinary income as well as capital gains. 2. Limited to tax basis in the conservation easement until the property is owned for one year, and for dealer property (i.e., non -capital gain property). 3. Limited to 30% of adjusted gross income for capital gain property and 50% of adjusted gross income for non -capital gain property. 5 © 2005— ISAACSON, ROSENBAUM, WOODS & LEVY, P.C. — All Rights Reserved 4. May be used in the year of the donation and each of the following five years. 5. Charitable income tax deductions are included with other itemized deductions in the squeeze down of excess itemized deductions for high income taxpayers. 6. Charitable income tax deductions are not worth as much to persons who pay alternative minimum tax. Example: Jane, a traditional landowner, owns Wonderview Ranch, a beautiful Colorado mountain ranch. If Jane sold the Ranch it would produce a long term capital gain. Jane places a conservation easement on the Ranch, reserving, the right to build two additional homes on subdividable lots. The Ranch's fair market value (FMV) before the conservation easement is $2,000,000 and the value of the property after the conservation easement is $1,200,000. Jane has reduced the value of the Ranch by 40% and made an $800,000 charitable contribution. Jane has an adjusted gross income (AGI) of $60,000. Jane would be allowed to take a charitable deduction for federal income taxes up to 30% of her AGI or [$60,000 x 30% = $18,000] in the year she makes the charitable contribution. She could carry forward the remaining $782,000 of deduction and apply it against income for the next five years subject to the 30% limitation. If Jane's income remains at the same level, she would not be able to use the entire deduction. The deduction saves Jane $5,400 in federal income taxes for the year of the gift, calculated by multiplying the deduction times the rate at which she pays taxes [$18,000 x 30% = $5,400]. If her income remains the same, over six years she will save $32,400 in federal income taxes. Jane will also qualify for the $260,000 Colorado income tax credit. She will eliminate her Colorado income tax liability and receive a refund check (if the State has a surplus) for the difference between her Colorado tax liability and $50,000 per year, until the credit is used up. She has the option of selling all or part of the tax credit. Because the value of the conservation easement exceeds $500,000, she will receive the maximum credit, i.e., $260,000. Jane's adjusted tax basis in the Ranch is $200,000. The conservation easement has reduced the value of the Ranch by 40 %, so Jane must reduce her tax basis in the Ranch by 40%, from $200,000 to $120,000. B. An example of sale of development rights: The County offers to purchase Jane's conservation easement for 50% of the appraised value, which is $400,000. This is known as a "bargain sale." It is part taxable sale and part charitable contribution. Jane incurs $64,000 tax on her capital 6 2005- ISAACSON, ROSENBAUM, WOODS & LEVY, P.C. - All Rights Reserved gain ($400,000 less $80,000 basis equals $320,000 capital gain at 20% federal and state rate equals $64,000 tax). Jane also has a charitable contribution of $400,000 that she can use to reduce the capital gain tax and her ordinary income tax (capital gain of $320,000 plus $60,000 of other income equals adjusted gross income of $380,000; 30% of adjusted gross income of $380,000 equals $114,000). She can use the charitable deduction of the conservation easement to reduce federal income tax liability in the year of the transaction by approximately $15,000. Jane can also carry forward $286,000 of the charitable deduction and use it to offset 30% of her adjusted gross income in the next five years, saving her $27,000 more in income taxes. Also, the transaction qualifies for a $220,000 Colorado income tax credit (the value of the donated portion of the easement is $400,000; the tax credit equals the first $100,000 of donated value plus 40% of the next $400,000 of donated value, or in this case $100,000 plus 40% of the $300,000, which equals $220,000). The net effect is that Jane has received $400,000 in cash, has a capital gain tax of $80,000 to pay, saves approximately $42,000 in federal income taxes and has a $220,000 Colorado Income Tax Credit. Note that over time, the tax savings more than offsets her capital gain tax, so her $400,000 receipt is the equivalent of tax free. C. Another example of income tax benefits: Jac:, who until 2001 was employed by a (pick one: dot com, telecommunications, or energy company), cashed in some of his stock market wealth and bought a 700 - acre ranch, for $7,000,000. Jack has always dreamed of owning. a ranch, and is especially interested in preserving and improving wildlife habitat. He has a large income, much of it taxed as ordinary income, but he does not know how much longer this will last (actually, time ran out for Jack). After consulting with his tax advisors, he decided to donate a conservation easement to a land trust. In the conservation easement, Jack extinguished all residential and commercial development, except the right to build one starter castle. The conservation easement reduced the value of the property to $3,200,000, giving Jack a $3,800,000 charitable income tax deduction. Because Jack donated the conservation easement during the first year he owns the property, he was able to use the deduction to offset 50% of his adjusted gross income, saving him $1,520,000 in taxes ($3,800,000 deduction multiplied by the income tax rate of 40%). Jack must also reduce his tax basis in the property by $3,800,000, the amount of the deduction. If Jack is a Colorado taxpayer, he will also have a $260,000 Colorado income tax credit. D. Estate tax: 1. Lowers value of property to "after" value. 7 2005- ISAACSON, ROSENBAUM, WOODS & LEVY, P.C. - All Rights Reserved 2. If the conservation easement qualifies under Internal Revenue Code §2031(c), a portion of the value of the land subject to the conservation easement will be excluded from the taxable estate. Example: Back to Wonderview Ranch and Jane. Jane dies after placing the conservation easement on the Ranch. The FMV of the Ranch before the conservation easement is $2,000,000 and the FMV after the conservation easement is $1,200,000. The estate tax due on the Ranch without the conservation easement is approximately $225,000. The estate tax exclusion for 2005 is $1,500,000. The conservation easement eliminates the estate tax due on the ranch. Another Example: Consider Jack. The estate tax due on the ranch worth $7,000,000 is $2,935,000. The conservation easement reduces the value of the ranch to $3,200,000, and reduces the estate tax on the ranch to $845,000, a savings of over $2,000,000 in estate tax. The ranch qualifies for the §2031(c) exclusion, allowing $500,000 to be excluded from the estate tax. Applying the 2031(c) exclusion, the estate tax is $576,000, saving the heirs $270,000 more in estate tax. E. Estate Tax Exclusion. Under Internal Revenue Code §2031(c), the taxpayer's estate may exclude up to 40% of the residual value of the land from the taxable estate if: 1. The conservation easement was granted by a family member. 2. The conservation easement prohibits more than "a de minimis use for a commercial recreational activity." 3. The partial exclusion is capped at $500,000. VIII. Selected value cases: A. Stotler, et al. v. Commissioner, T.C. Memo 1987-275 (Jane 4, 1987). 1. The Tax Court allowed taxpayer's entire claimed deduction which represented a 91% decrease in value of the property attributable to the conservation easement. 8 2005— ISAACSON, ROSENBAUM, WOODS & LEVY, P.C. — All Rights Reserved 2. The property located near Monterey, California, had much potential for development with few, if any, remaining development rights reserved by the taxpayer after the conservation easement. 3. The court rejected the IRS' appraiser in favor of taxpayer's appraiser who was locally based with much experience in the area of the property. B. S.K. Johnston Jr., et al. v. Commissioner, T.C. Memo 1997-475 (October 20, 1997). 1. The Tax Court adopted taxpayer's appraisal resulting in a 55% diminution of value stating that it was a conservative diminution estimate. 2. The property is near Sheridan, Wyoming, and the conservation easement, which is very restrictive, covers approximately half of the ranch. 3. The court was influenced by taxpayer's expert's analysis of varying percentage diminution based on the extent of the restrictions and prohibitions on the property. C. Browning v. Commissioner, 109 T.C. 16 (November 25, 1997). 1. The Tax Court upheld the charitable contribution for the bargain sale of the conservation easement rejecting the IRS argument that the value of the charitable contribution deduction, the value of the tax deferral from the installment sale of the conservation easement to the county, and the tax exempt interest on the county's debt for the installment sale must be subtracted from the fair market value of the conservation easement. 2. The court rejected the IRS' argument that the before and after value of the property was the same because Howard County, Maryland, actively purchased development rights yielding a substantial record of sales of development rights to the County for comparison. The court found that there was no meaningful or valid comparison because sales of development rights to Howard County was not an uninhibited market, but ® 2005— IS AACSON, ROSENBAUM, WOODS Sc LEVY, P.C. — All Rights Reserved was a market characterized by sellers intending to make gifts to the county by way of bargain sales. D. Strasburg v. Commission, T.C. Memo 2000-94 (March 20, 2000). 1. The Tax Court reduced the value of a conservation easement on a 320 acre parcel on the upper Boulder River in Montana from 55% to 44% of the value of the property. 2. The Tax Court approved a deduction of $290,000 for the effect of an amendment reducing the number of homes permitted on the property from three to two. 3. This is the first case approving a deduction for an amendment to a conservation easement. IX. What are the tax benefits for corporations, etc.? A. C Corporation: deduction limited to 10% of corporation's contribution base (taxable income with certain adjustments). B. S Corporation: deduction passes through to shareholders but limited to their basis in their stock. C. Partnerships, limited liability companies: deduction passes through to owners without the basis limitation. X. What are the other federal tax issues? A. Dealer Issues. Different tax rules apply to the grantor of a conservation easement if they are a "dealer" under the Internal Revenue Code rules. A real estate developer may often be a dealer. A dealer is limited to a tax deduction equal to her "basis" (or cost) of the donated property. This is particularly a problem where the property is owned by a dealer and the land has appreciated substantially in value. 10 ® 2005- ISAACSON, ROSENBAUM, WOODS & LEVY, P.C. - All Rights Reserved B. A conservation easement can be made by will. A gift made by will is considered effective as of the date of death and will reduce the estate taxes of the decedent. C. A conservation easement can be conveyed after death by the decedent's estate and qualify for an estate tax deduction if the property meets the requirements of Internal Revenue Code §2031(c) and if authorized under state law. See C.R.S. § 15-1-804(2)(hh) which gives a fiduciary the authority to grant a conservation easement, subject to notice and consent requirements. D. Conservation easements are interests in real property that can be used in tax-free like -kind exchanges. 1046949_1.doc 11 © 2005— ISAACSON, ROSENBAUM, WOODS & LEVY, P.C. — All Rights Reserved Treasury and IRS Issue Notice Regarding Improper Deductions for Conservation Easeme... Page 1 of 1 Internal Revenue Service IRS.gov DEPAiTAPINIF THE TREASURY Treasury and IRS Issue Notice Regarding Improper Deductions for Conservation Easement Donations IR -2004-86, June 30, 2004 WASHINGTON — Today the Treasury Department and the Internal Revenue Service issued a notice to advise taxpayers that the IRS intends to disallow improper charitable contribution deductions for transfers of easements on real property to charitable organizations and for transfers of easements in connection with purchases of real property from charitable organizations. Taxpayers claiming improper charitable contribution deductions for such transfers may be subject to accuracy -related penalties. "We've uncovered numerous instances where the tax benefits of preserving open spaces and historic buildings have been twisted for inappropriate individual benefit," said IRS Commissioner Mark W. Everson. "Taxpayers who want to game the system and the charities that assist them will be called to account." The IRS is aware that some taxpayers are claiming inappropriate charitable contribution deductions for easement transfers that do not qualify as qualified conservation contributions, or are claiming deductions for amounts that exceed the fair market value of the donated easement. In addition, the IRS is aware that some taxpayers are claiming inappropriate charitable contribution deductions for cash payments or easement transfers to charitable organizations in connection with the taxpayers' purchases of real property. The IRS may impose penalties on promoters, appraisers and other persons involved in these transactions. In appropriate cases, the IRS may challenge the tax-exempt status of the charitable organization, based on the organization's operation for a substantial nonexempt purpose or impermissible private benefit. One of the agency's four service -wide enforcement priorities is to discourage and deter non- compliance within tax-exempt and govemment entities and misuse of such entities by third parties for tax avoidance and other unintended purposes. Related Item: Notice 2004-41 (PDF 64K) — Charitable Contributions and Conservation Easements Subscribe to IRS Newswire http://www.irs.gov/newsroom/article/0„id=124485,00.htm1 1/12/2005 1. Estimate of Value to the highest and best use; if landowner has owned the property for more than 1 year current market value can be used in the equation 2. For this type of Conservation Easement the landowner does not need approvals for the proposed divisions; just need to use good judgment and be realistic. • Purchase Burtard 80 acres for $1,000,000 • For this example you hold this property for 1 year and have: 4 — 20 acres parcels with market value of $300,000 each There are 3 most common types Conservation Easements (C.E.) you can donate: 1. Wildlife purpose: 90% value of whole property and value of conservation easement 2. Ag w/ no structure: 75% value of whole property and value of conservation easement 3. Ag w/ structures: 50% of value of whole property and value of conservation easement For this example we have 4 lots: 1. 3 - 40 acre lots with wildlife C.E. — valued at $900,000 x 90%= $810,000 2. 1 — 40 acre lot w/ structures C.E. - valued at $300,000 x 50% _ $150,000 C.E. value = $960,000 • State Tax Credits for the 1st $100,000 you can take dollar for dollar; • On the next $400,000 you can take 40% on the dollar. The State of Colorado will write checks to the landowner if there is a surplus in the state budget (which at this point there is not). If landowner is not in the tax income bracket to be able to use these credits, then the tax credits can be sold to a party needing them for 85% on the dollar. • Federal Income Deductions can be written off in the full amount, but are subject to a limit in that you cannot deduct more than 30% of the adjusted gross income (similar to a charitable donation). For this example we will donate over a two year period: • 1st Year donate $500,000 (in this example to use the $500,000 Federal Tax Deduction you have to have $1.5 million in income -you have to be in the highest tax bracket of 38%) 38% of $500,000 = $190,000 State Tax Credits = 100,000+160,000= $260,000 X 85%= $221,000 Federal tax saved + $190,000 *Total for 1St year = $411,000 • 2nd Year donate the remaining $460,000 State Tax Credits = 100,000+144,000 = $244,000 X 85% = $207,400 Federal tax saved + $174,800 *Total for 2nd year = $382,200 Benefits to Landowner: pay $1 million for ranch, realize back through State Tax Credits and Federal Tax Deductions $78,000 and still own ranch with the right to construct 1 house and 1 barn on the 80 acre parcel. A Conservation Easement Appraisal Guide Page 1 TABLE OF CONTENTS Introduction Page 2 I. Frequently Asked Questions about Appraisals Page 4 II. Hiring an Appraiser Page 11 III. General Outline of Conservation Easement Appraisal Contents Page 15 IV. Frequently Committed Sins in Valuing Conservation Easements Page 33 V. Suggested Reading and Reference Tools Page 35 A Conservation Easement Appraisal Guide Page 2 INTRODUCTION By most measures, the past several years have been banner years for conservation easement activity throughout the State of Colorado. This is due in large part to the financial incentives designed into Colorado's unique state income tax credit for conservation easement donations. This program, along with other conservation programs such as Great Outdoors Colorado (GOCO) or the federal income tax benefits, has helped Colorado's landowners and conservation entities to protect many of Colorado's most cherished landscapes. All of this activity has greatly benefited Colorado's residents and visitors alike. With this increase in easement activity has come an increased scrutiny of conservation easement valuations. While easement deals and easement donors vary dramatically, if landowner's intend to make a charitable contribution and take advantage of the federal and state tax benefits, the conservation easement's value must be substantiated by a qualified easement appraisal that determines its fair market value. The appraisal is also the single item that can come under the closest scrutiny from the IRS, the Colorado Department of Revenue, conservation funders or potential brokers and buyers of tax credits. Therefore, it is absolutely critical that easement appraisals be done by qualified appraisers who thoroughly understand the very complicated process of valuing a conservation easement. This Guide has one primary purpose: to help ensure that Colorado has the most sound conservation easement transactions possible by introducing conservation practitioners and landowners to the fundamentals of the appraisal process. Poorly drafted or fraudulent appraisals not only damage the integrity of the particular easement transaction; they also can dent the reputation of important conservation programs such as the easement tax credit. And most importantly, bad transactions can betray the public's trust and support for conservation in general. The primary audiences for the Guide are: 1) landowners who are considering donating or selling an easement; 2) conservation organization staff or volunteers; and 3) conservation consultants, including appraisers and attorneys. This Guide assumes readers have a general understanding of what conservation easements are and what the respective roles are of easement donors, their advisors, and holders of the easement. For more information regarding land trusts, conservation easements and other conservation activity, visit www.lta.org or see Section V for additional references. Landowners will hopefully utilize this Guide to familiarize themselves with the appraisal process and resulting document. It should provide them with several appropriate questions to ask when hiring an appraiser, help them communicate with their appraiser, and increase their basic understanding of the resulting easement appraisal document. A Conservation Easement Appraisal Guide Page 3 For land trusts and government open space programs, this Guide provides a quick overview of things to consider when hiring their own appraisers and provides them with a template to review the resulting document. More importantly, it also provides staff or volunteers with a point of departure for discussing appraisals with potential easement donors. Finally, for appraisers and other conservation consultants, this Guide—though basic—provides a checklist of many of the factors that should be considered when conducting an appraisal. However, it is not intended as a training manual in and of itself, nor is it intended to supplant existing information, standards or educational materials designed for appraisers. The Guide is organized into five primary sections following this introduction: Section I "Frequently Asked Questions about Appraisals" lists just that: a few selected questions that landowners and others may find useful in understanding some of the basic principles of easement appraisals. Section II, "Hiring an Appraiser", addresses specific questions that landowners and others should ask when hiring an appraiser. Appraisers that offer the highest land values or those with the lowest price are not necessarily the best or most appropriate. Section III, "A General Outline of Conservation Easement Appraisal Contents," is intended to provide a concise outline of the necessary contents of a conservation easement appraisal. This outline is best used a checklist or comparison when reviewing an actual appraisal. Its development was facilitated by input from several experienced conservation easement appraisers and has also had important contributions from other appraisers and several experienced attorneys. Section IV, "Frequently Committed Sins in Valuing Conservation Easements", provides readers with a few basic issues that are often associated with incomplete or erroneous appraisals. Finally, the last section, "Suggested Reading and Reference Tools" provides a brief list of resources for additional reading about conservation easements and appraisals. One useful reference that provides a much more extensive overview of easement valuation is the Land Trust Alliance's Appraising Easements, which can be ordered from www.lta.org. This Guide is a work in progress, one that we hope to refine as information changes and as time and resources allow. As such, we welcome your thoughts and comments on this draft and wish you the very best in your conservation endeavors. Mark Weston Hunsperger & Weston, Ltd. and Board Member, Colorado Coalition of Land Trusts June, 2004 Kris William Larson Executive Director Colorado Coalition of Land Trusts A Conservation Easement Appraisal Guide Page 4 I. FREQUENTLY ASKED QUESTIONS ABOUT APPRAISALS 1. What is a conservation easement? A conservation easement is a tool used to preserve important lands and water features on a given property. It is a voluntary, recorded agreement between a landowner and a "holder" of the easement, which can either be a qualified charitable organization— typically a land trust—or a unit of government. A conservation easement identifies important historic, scenic, natural or agricultural characteristics of the property which benefit the general public (collectively known as the "conservation values") and then establishes a set of restrictions on use of that property which will ensure that those conservation values are protected. In signing an easement, the landowner is granting to the easement holder the right to enforce those restrictions. The land stays in private ownership and the landowner typically reserves certain rights to the property such as the ability to maintain a residence, continue to farm or ranch, or use the property for limited recreational purposes. Most Federal or State tax incentives or easement purchase programs require that the easement be perpetual. That is, easements are intended to be in place on the property forever, and as such, the easement restrictions transfer with the title of the property to subsequent owners. For further discussion of easements and their complexities, see Section V for additional resources. 2. What rights are typically restricted through an easement? Conservation easements are relatively flexible tools, and as such, the restrictions on use can vary depending upon the landowner's needs, on the goals of the easement holder, and most importantly, on the conservation needs of the property. Typical easement restrictions include limitations on further subdivision or development of the property, commercial or industrial use, mining and many other uses. The restrictions are intended to preserve the conservation values of the property as set forth in the easement document as well as an accompanying document known as the Baseline Documentation or property report. The easement holder must also be able to enforce the particular restrictions that are desired. More recently in Colorado, many conservation easements have included provisions restricting the sale or transfer of water rights. This is especially true for those properties in which the conservation values include irrigated crop lands, wetlands or other water features that are dependent upon the water. As such, the water rights are required to stay with the property and be exercised so as to not be lost through forfeiture. For more information on restricting certain water rights through a conservation easement, seek the advice of attorneys and other professionals knowledgeable about water issues. The Colorado Water Trust also has valuable information on their website at www.coloradowatertrust.org. A Conservation Easement Appraisal Guide Page 5 3. What are the benefits of conservation easements? For the general public, conservation easements can be a very valuable and cost- effective preservation tool. Many landscapes that are important to the daily lives of Colorado residents and visitors are largely privately owned. Whether it is a scenic ranchland in a mountain valley, a fruit orchard on the western slope, or a high-value waterfowl habitat along a river on the eastern plains, many of these landscapes have scenic, cultural or natural value to the public. Many of these lands are inappropriate for public ownership or even public access. However, the protection of these private lands can have immense benefits to the surrounding communities. For landowners considering an easement, the primary benefit of placing an easement on their property is having the peace of mind knowing that their beloved property will be forever protected, even once it transfers out of their hands. In addition, there are several financial incentives available to landowners, including a few that are unique to Colorado. These incentives include easement purchases, which are available through several Federal and State conservation programs, including Great Outdoors Colorado. The financial incentives also include Federal and State tax programs for easement donations. These include potential Federal income or estate tax deductions for the charitable contribution of a conservation easement, as well as the unique State of Colorado income tax credit. This Guide cannot go into detail over these programs (see Section V for additional resources). However, these financial incentives are the driving force behind needing to value a conservation easement. Because of their potential to reduce the estate tax burdens for working ranch and farmland families, conservation easements can also be an important tool to keep the land in family hands. 4. Why do conservation easements need to be appraised? Not all conservation easements need to be valued or appraised. Several examples include cases in which a landowner does not intend to utilize any tax benefits or if the easement does not have any "gift" status, such as an easement on open space within a development. However, if landowners intend to take advantage of the available public incentives for donating a conservation easement, such as a state income tax credit or a federal income tax deduction, the easement must be valued to determine its worth. Conservation easements are considered an asset that has value which can be "gifted" to a qualified easement holder. IRS publication 561 "Determining the Value of Donated Property" spells out the guidelines for determining the value of this gift, which is necessary for all gifts of real property greater than $5,000. In addition, if you intend to sell a conservation easement on your property, in most cases a buyer will need to substantiate the value through a conservation easement A Conservation Easement Appraisal Guide Page 6 appraisal. Most local, state or federal programs that fund easement purchases have specific requirements for their appraisals. In rare cases of condemnation of all or part of a conservation easement property, most easements have a provision in which the easement holder will receive a percentage of the proceeds equivalent to the conservation easement's value at the time of donation. As such, these cases would also require the documentation of value through an appraisal. 5. How are easements valued? While there may be other methods of determining an easement's value, the IRS, most state tax incentives, and most easement purchase programs, require the use of a qualified appraisal to determine an easement's value. The various methodologies for completing an easement appraisal are explored in more detail in Section III: "A General Outline of Conservation Easement Appraisals." In summary, there are three primary approaches to determining the value of real estate: The Sales Comparison approach, the Cost approach, and the Income Approach. The Sales Comparison approach --in which appraisers base the value of the easement on comparable easement sales on similar properties with roughly similar restrictions -- is the mandated approach in the Treasury Regulations § 1.170A if "... there is a substantial record of sales of easements comparable to the donated easement (such as purchases pursuant to a government program)..." However, in most areas of Colorado, such market data are not sufficiently available, at least not presently. Therefore, most easements are valued through the "before and after" process, in which an appraiser: • Determines a "before" property value, which is an opinion of the fair market value of a property as if the landowner were to sell it without placing an easement on it (for example, the "before" value is $1,000,000) • Determines an "after" property value, which is an opinion of fair market value of a property as if the landowner were to sell the property with the easement restrictions in place. (for example, the "after" value is $400,000) • Subtracts the "after" value from the "before" to determine the value of the conservation easement (in this case, $1,000,000 - $400,000 = $600,000 conservation easement value). As stated above, there are exceptions to this methodology, as will be seen in the third section. 6. What are the general requirements for conservation easement appraisals? The requirements for appraisals depend upon the program or purpose for valuing an easement. If the easement is intended to qualify as a charitable contribution under Federal tax code, the value must be substantiated with a "qualified" appraisal. To be qualified, the appraisal must 1) be made not earlier than 60 days prior to the date of A Conservation Easement Appraisal Guide Page 7 contribution; 2) not involve a prohibited appraisal fee (such as a fee based on the percentage of the deduction); 3) include certain information (which is outlined in Section III); and 4) must be prepared, signed and dated by a "qualified appraiser." If the easement is intended to qualify as a donation under the Colorado State Income Tax Credit Program, the appraisals also need to follow these federal guidelines. However, many easement purchase programs, especially those funded by federal agencies, have more stringent requirements for valuing easements. After the Savings and Loan scandals of the 1980s, Congress passed legislation in 1989 requiring states to license or certify appraisers. At the same time, the Uniform Standards of Professional Appraisal Practice (USPAP) was created to set the ethical and technical standards for appraisals for "federally -related transactions." While neither Internal Revenue Service nor the Tax Code recognize USPAP, it has been the recognized cornerstone of accepted appraisal standards throughout the country. For example, federal land acquisition and direct lending agencies have been required by the Office of Management and Budget (OMB) to use appraisals in conformance with USPAP standards since 1992. Information on USPAP can be found at www.appraisalfoundation.org. In addition, most agencies acquiring easements using federal funds must adhere to the Uniform Appraisal Standards for Federal Land Acquisitions (UAS or "Yellow Book"), which is updated periodically by the Interagency Land Acquisition Conference. Though not technically required by the Tax Code for valuing conservation easement donations, UAS has become the standard format followed and taught by many easement appraisers. As such, the outline in Section III follows the UAS format. 7. What is a "qualified appraiser"? According to the IRS Publication 561, a "qualified appraiser" is an individual that 1) holds himself or herself out to the public as an appraiser or performs appraisals on a regular basis; 2) is qualified to make appraisals of the type of property being valued because of his or her qualifications that are described in the appraisal; 3) is not an excluded individual (such as the donor or the donor's relative); and 4) understands that an intentionally false overstatement of value of property may subject him or her to the penalty for aiding and abetting an understatement of tax liability. For mortgage purposes, appraisers must be licensed by the State of Colorado. However, only 27 states have requirements for appraisers to be certified or licensed for conservation donations. Colorado is among the states in which an appraiser of conservation easements does not have to be licensed by the state licensing board (the Colorado Board of Real Estate Appraisers). Nor are appraisers of conservation easements required to be a member of one of the five major private appraisal associations that have some form of designation (the American Society of Farm Managers and Rural Appraisers; the American Society of Appraisers; the Appraisal A Conservation Easement Appraisal Guide Page 8 Institute; the National Association of Independent Fee Appraisers; and the National Association of Master Appraisers). Because the requirements to be a "qualified appraiser" are relatively loose and left to the judgement of the appraiser, being certified by the state (or holding membership in a professional organization) is an indication that an appraiser has taken important steps to become more knowledgeable and professional. However, because there is no licensure or certification based solely on an appraiser's knowledge of easement valuation, neither state certification nor private designation verifies that a particular appraiser is competent in conservation easement valuation or any of the other specialized valuations. 8. What is "Fair Market Value"? Appraisals set forth opinions of the "fair market value" of a given property or easement. The Tax Code describes fair market value as "the price the property would sell for on the open market. It is the price that would be agreed on between a willing buyer and willing seller, with neither being required to act, and both having reasonable knowledge of the relevant facts." 9. What is generally valued in an easement appraisal? Conservation easement valuations should take into consideration all of the restrictions and reserved rights outlined in the conservation easement. This includes any restrictions on future development or subdivision and any limitations on the sale of water rights. The appraisal should cover the same legal area described in the conservation easement (many landowners only place easements on portions of their entire property). Appraisals also need to take into consideration all of the other property owned in the area by the landowners and their family. This is because of what is known as "enhancement" value. If a landowner places an easement on property adjacent to her father, the father's property benefits (or is enhanced) by the adjacent conservation easement. Therefore it must be reflected in the easement's value. 10. How accurate are easement appraisals? Conservation easement appraisals are often described as part science, part art. It is important to note that appraisals are only opinions of value. As a result, appraisal values may vary depending on the appraiser and his or her methodology. However, competent appraisers using the same set of facts and similar guidelines should arrive at roughly similar results. In addition, appraisals that follow the format and content guidelines such as those outlined in Section III are likely to reflect a more thorough assessment of the easement's value. A Conservation Easement Appraisal Guide Page 9 11. What are the ramifications of bad or erroneous appraisals? Appraisals with minor technical or formatting flaws can be corrected relatively easily without major ramifications. However, grossly inaccurate or purposefully misleading overstatements of value are indeed serious and should not be tolerated by any party to the transaction. Such appraisals—and their resulting tax implications or excessive purchase prices—can erode the public's trust in conservation easements in general and in the particular tax benefit or conservation program specifically. The news of either inaccurate or fraudulent valuations can make it difficult to gain or retain local support for important conservation initiatives, even if the news is from another part of the state. Poorly constructed or inaccurate appraisals can also make it difficult for landowners to market and sell their tax credits, as was recently seen in Colorado. After conducting their due diligence, the buyers of credits may have reservations about purchasing a particular credit if they are not confident in the integrity of the appraisal. This is a particularly unfortunate situation that should be avoided at all costs. In addition, both the federal and state tax systems contain penalties for the overvaluation of donated property, for underpayment of estate or gift taxes, and for the promotion of abusive tax shelters. It is beyond the scope of this Guide to go into detail over these penalties, but readers should be aware that such penalties are real and substantial. Finally, appraisers who have prepared fraudulent appraisals may have their state licensure or private certifications revoked. They may also be prohibited by the IRS from having their appraisals considered "qualified appraisals." 12. What role do land trusts or other conservation entities have regarding easement appraisals? A land trust's role regarding easement appraisals may differ depending on the nature of the transaction and the easement holder's philosophy. With the donation of gifts to a charitable organization, such as a painting to a museum, it is important that the organization receiving the gift stay at arm's length from the valuation process to avoid the perception that they are influencing the value of the gift. The same is largely true with the donation of conservation easements. However, easement holders should ensure to the greatest extent possible that easement donors are aware of federal or state requirements should they intend to claim a tax deduction or credit, such as the need to obtain a qualified appraisal. For easement donations that are claimed as a charitable contributions, easement holders will be asked to sign I.R.S. Form 8283. This form was developed in response to the Tax Reform Act of 1984, and it requires that easement holders be furnished with, and acknowledge receipt of, the donor's appraisal summary and gift of the A Conservation Easement Appraisal Guide Page 10 easement. The easement holder's acknowledgement of the gift does not indicate that they agree with the value claimed. There is currently no consensus as to the extent that land trusts should be involved in the appraisal and tax processes. An example of this is split opinions on whether or not a land trust should sign a Form 8283 in which the claimed value is considered to be excessive. However, every easement holder has an interest in ensuring that landowners receive sound appraisals with reasonable valuations. This is not only important for maintaining good relationships with the easement donors, but it is also critical to maintain the integrity of the tax benefits for charitable easement contributions. Finally, in the event of easement purchases, a trust or easement holder may be the entity hiring an appraiser. In these cases, the trust or easement holder will become more involved in the valuation process, and like all landowners, they should be aware of the important questions to ask when hiring an appraiser. A Conservation Easement Appraisal Guide Page 11 II. HIRING AN APPRAISER One of the first steps towards securing a sound appraisal is to hire a knowledgeable and competent appraiser. In addition to securing the services of a good appraiser, it is important that you stay in close contact with him or her throughout the valuation process. For example, the landowner may be negotiating the terms of the easement without telling the appraiser, who in turn provides an appraisal based on the wrong set of facts. Below are several questions you might consider when pursuing the services of an appraiser. 1. Where do I find out about potential conservation easement appraisers? There is no formal association of conservation easement appraisers, and many real estate appraisers are not familiar with conservation easements. As a result, several of the best sources of names of potential conservation easement appraisers are: • Other appraisers who you may already know, • Lawyers that are experienced in drafting and negotiating conservation easements, and • Land trusts who have had occasion to hire appraisers for their own purposes or who work with landowners that have had easement appraisals. Recommendations or word of mouth from other landowners who have worked with a particular appraiser are also helpful. However, most landowners do not have extensive background in easements or appraisals; as a result, they often will have few points of comparison or reference when discussing an appraiser with whom they have worked. 2. When do I need to secure the services of an appraiser? Under IRS rules, conservation easement appraisals must be completed no sooner than 60 days prior to the date of donation, and no later than the date of filing federal income taxes, including extensions. Because good conservation easement appraisals can take time, it is necessary to contact an appraiser as soon as you are considering donating or selling an easement. That appraiser can advise you as to the timeframe for securing the necessary documents and other aspects of the appraisal process. It is also important to note that it is possible to ask an appraiser for a preliminary opinion of value. While it would not be a qualified appraisal for income tax purposes, a preliminary valuation might be helpful if you are determining whether or not to pursue an easement. A Conservation Easement Appraisal Guide Page 12 3. What questions should I ask a potential appraiser before hiring one? Before retaining an appraiser, it is a good idea to engage potential candidates in a wide-ranging discussion about their work experience, professional background and general attitude about conservation easements. Some pertinent questions that you may want to ask are: • Do you hold a current Certified General appraisal license from the State of Colorado? Though not technically necessarily to value conservation easements in Colorado, such licensure indicates a level of professionalism on the part of the appraiser. • Do you have any other special designations such as the Appraisal Institute's RM or MAI or the American Society of Farm Managers and Rural Appraisers ARA? Why or why not? As stated above, neither state licensure nor private certification necessarily indicates a familiarity with easements, but it may indicate a level of professionalism on the part of the appraiser. • Can you explain to me what are a "qualified appraisal" and a "qualified appraiser"? Appraisers who are valuing easements for federal or state tax purposes should have a working understanding of the regulations regarding appraisals. • Have you appraised property in this county recently? Though not essential, this helps indicate a familiarity with local markets (or geographic competency). • Have you appraised property similar to mine recently (development land, ranch land, farm land, etc.)? Though not essential, this helps indicate competency. • How long have you been an appraiser? Time in the business does not necessarily equate to competency, but it provides you with a general understanding of their experience. • Have you appraised property for the purpose of estimating the value of a conservation easement? This is perhaps one of the more important questions. If they have not completed an easement valuation before, the appraiser should be still be familiar with the technical requirements and procedures for valuing easements. While all appraisers need to do their first valuations at some point, you should recognize that there is some inherent risk involved. • If not, what steps will you take to familiarize yourself with this type of appraisal? Would you consider affiliating with a more experienced appraiser? Affiliating with a more experienced appraiser may help reduce some of the risks in hiring an inexperienced appraiser. A Conservation Easement Appraisal Guide Page 13 • If so, how many appraisals of this type have you completed, and have you worked for easement donors, land trusts or other entities (such as GOCO, the Forest Service, and the BLM)? This will provide a greater sense of their experience and competency. • Do you have experience with the IRS in defending any of your appraisals? Being required to defend an easement appraisal is not necessarily a negative thing, as easement donations can be flagged for review on a number of issues. However, you should be interested in the results of such a defense. • In your opinion, what are the best techniques for appraising a perpetual conservation easement? See the outline in Section III for the techniques and methodologies. • Please tell me how you propose to address my water rights that I am / am not planning to encumber with my easement. Water rights, as suggested above, are more frequently being restricted through the use of conservation easements. In some areas, they also represent substantial value. However, not all appraisers are familiar with valuing water rights. • What do you need from me to complete the appraisal (documents, etc.)? See below. • What are the fees and timeline to complete the appraisal? See below. • Finally, please provide three references of past clients. Like all services, it is important that you feel comfortable with the appraiser on a number of fronts, including their level ofprofessionalism, timeliness, and technical expertise. 4. What will my appraiser need from me to complete the appraisal? Individual appraisers may request different documents. However, below are the basic documents generally required to complete an appraisal: • Legal Descriptions of the entire property, the area subject to the easement, and any property owned by the landowners, their family, or "related persons" that is in the vicinity. • Copies of closing documents (if recent enough to be meaningful), related purchase agreements/contracts, and copies of deeds and deeds of trust. • Recent title insurance policy or title insurance commitments, including copies of material exceptions to title. A Conservation Easement Appraisal Guide Page 14 • Maps, surveys and sketches that identify the subject property, any specific building envelopes or restricted zones, and any other property owned by the landowners, their family, or "related persons." • Draft or final version of the proposed conservation easement, or at least a summary of the intended restrictions and retained rights. • Depending on the complexity of a property or assignment, additional consultants (land planner, engineer with expertise in land development, water engineer, etc.) may be appropriate. 5. What is a reasonable cost for a conservation easement appraisal? The costs associated with easement appraisals may vary widely, depending on property's location, the particular appraiser, the level of easement complexity and other factors. They can typically range between $5,000 and $20,000. Please note that is a general estimate only, and you will need to speak directly with your appraiser to determine a range of his or her fees. 6. What do I do if I have misgivings about the resulting easement value or process, or more importantly, if I feel that the appraisal value might cause my donation or sale of the easement to be questioned? As stated above, appraisals are only opinions of fair market value, based on a certain set of facts and experiences. Should you strongly feel that an appraisal's value is exceptionally high or low, you should discuss your concerns with your appraiser. Should you still not be satisfied with his or her explanation, it is always possible to secure the services of another appraiser. Remember: if you are donating a conservation easement and intend to take a tax deduction or credit, it is your responsibility to minimize the risks of the transaction and secure the most sound appraisal possible. Should you have extreme concerns about an appraiser's ethical conduct, there is a process for filing a complaint with the Colorado Board of Real Estate Appraisers. You can find a description of this process at www.dora.co.us/real-estate. A Conservation Easement Appraisal Guide Page 15 III. A GENERAL OUTLINE OF EASEMENT APPRAISAL CONTENTS Introduction to Outline This outline summarizes the "Before and After" appraisal process as it pertains to valuing conservation easements in gross. It is based generally on the very useful format found in the Uniform Appraisal Standards for Federal Land Acquisition, or UAS (see Section V: Suggested Reading & Reference Tools). It is intended to provide a detailed overview of the components of a "qualified appraisal" for federal income tax purposes as defined at Treasury Regulations 1.170A-13. While the appraisal report formatting presented here is only a suggestion (independent appraisers value their status and ability to present data and analysis in ways of their own choosing), the appraisal contents outlined, unless noted, must be addressed in a qualified appraisal. Most of this material pertains to valuation of one or more types of open space or wildlife habitat easements. These are the types of conservation easements most frequently encountered in Colorado and can include easements permitting agricultural production, protection of fish, wildlife or plant habitat, or simply preservation of open space. Each of these types of easements can accommodate limited residential, agricultural and recreational uses, as long as they are conveyed exclusively for conservation purposes and offer significant public benefit. There are some things not addressed here. One is the appraisal of historic facade easements, a flavor of conservation easement not as common here as the more popular conservation easement. This outline does not address in any detail the issues associated with the appraisal of post mortem easements under Internal Revenue Code Section 2031(C). Also, it does not address in detail the issues associated with basis -limited gifts of conservation easements, where the donor has owned the real property for less than 12 months. This Outline can be used in several ways. For appraisers, it can provide a brief refresher on the content of conservation easement appraisals. For landowners and land trusts hiring an appraiser, it can help familiarize them with the appraisal document and point them to potential questions they may ask about the document itself. And for all parties, the Outline is perhaps best used with a copy of an appraisal in hand to verify that the various components of the conservation easement appraisal are indeed covered. A Conservation Easement Appraisal Guide Page 16 Easement Appraisal Contents A. LETTER OF TRANSMITTAL 1. May summarize value conclusion 2. States date of value 3. Identifies property and purpose of appraisal 4. Highlights any unusual assumptions or limiting conditions 5. States that appraisal is prepared for income tax purposes of the easement donor 6. Provides appraiser's identifying number (SSN and/or EIN) B. TABLE OF CONTENTS C. IN PRODUCTION 1. Certification a) Acknowledges assistance of others who made significant professional contribution to development of the appraisal b) Assures readers of the report that appraiser did (or did not) inspect the property c) Indicates that the appraisal report is in compliance with the Uniform Standards of Professional Appraisal Practice (USPAP), the UAS "Yellow Book" or any other supplemental standards set forth by a particular funding source or private professional associations with which the appraiser is affiliated 2. Summary of Salient Facts a) Identifies Owner/Donor b) States location, brief legal description and/or property address c) Reviews the purpose and function of appraisal A Conservation Easement Appraisal Guide Page 17 d) Establishes the date of value e) Identifies the property rights appraised (1) Fee simple before grant of easement, subject to exceptions to title including pre-existing conservation restrictions (2) Fee simple after grant of easement, subject to newly -created perpetual restrictions and pre-existing restrictions or exceptions (3) Value of the conservation easement f) Includes a brief description of subject site and improvements, including water rights and minerals estate g) Includes as part of the subject all contiguous property owned by the donor, the donor's family, or "related persons", even if only a portion of the property is encumbered by the easement (to reflect the "enhancement" value described above). h) Identifies any other property owned by donor or a related person, whether or not such property is contiguous — may or may not require an appraisal of this other property i) Highlights any unusual or important assumptions made in appraisal j) Summarizes the easement (1) Consistent and inconsistent activities (sometimes called restrictions and permissions) (2) Conservation or historic preservation values k) Summarizes conclusions of highest and best use (1) Before grant of easement (2) After grant of easement 1) Summarizes value opinions of all property owned by the donor and the donor's family, and possibly the value of other property owned by the donor or a related person (1) Before grant of easement A Conservation Easement Appraisal Guide Page 18 (2) After grant of easement m) States the market value of the conservation easement 3. Purpose and Function of Appraisal a) Indicates that the appraisal is prepared for the federal and state income tax purposes of the donor, for use by funding agencies in support of grant -making decisions, etc. (it is acceptable to have multiple purposes) b) Provides this value definition: "... the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having a reasonable knowledge of the facts." (Treas. Reg. § 1.170A -1(c)(2)) 4. Property Rights Appraised a) Defines fee simple and easement interests b) Addresses water rights that may be associated with or appurtenant to the property c) Addresses fractional interests, interests of tenants in possession and mortgage holders d) Addresses mineral estate 5. Scope of Appraisal a) Summarizes the steps taken in preparing the appraisal b) States whether or not the appraisal has departed from USPAP's guidelines, thus invoking USPAP's Departure Provision (for example, appraisals prepared for use by the State Board of the Great Outdoors Colorado Trust Fund (GOCO) in support of funding decisions must be Complete Appraisals, which means they must contain all of the required provisions) c) States the type of report format (Self -Contained or Summary; a Restricted report by definition is not acceptable) d) Restates any unusual or important assumptions made in appraisal A Conservation Easement Appraisal Guide Page 19 6. Property Identification Restates summary information about the property, possibly with greater detail. 7. Important Dates a) States Date of Value — current or retrospective b) Restates Date of Report c) Identifies Date(s) of property inspection 8. Assessment and Taxation Data a) Provides schedule and/or parcel number (if available) b) Summarizes information available from county assessor and treasurer c) Discusses assessment classification, likelihood of change, effect on future tax burden 9. Property History a) Summarizes and analyzes leases, sales within at least the past three years, and current or recent listing agreements b) Discusses history of use c) The appraiser may request data pertaining to last sale of the property, no matter how long ago it occurred 10. Contingent and Limiting Conditions a) Limits reliance on or use of the appraisal report b) Disclaims responsibility for issues, facts and studies outside the purview of the appraisal c) Restates prominently and in detail any unusual or important assumptions made in the appraisal A Conservation Easement Appraisal Guide Page 20 D. FACTUAL DATA BEFORE GRANT OF EASEMENT 1. Legal Description a) Provides detailed description using metes and bounds, aliquot portions and/or lots & blocks b) May include map(s) or survey, overlain on USGS 7.5° quadrangle maps, tax maps, recorded plats, etc. as appropriate 2. Area Data Provides enough information about the immediate neighborhood and market area for the property to create a context for subsequent sections of the report discussing the property, its highest and best use and the valuation. Defines market area through a determination of what other properties reasonably compete with the subject in the market. Reports and analyzes local market trends, such as historic and forecast population changes (up, down, or level), any market for water rights separate from land, employment trends, etc. 3. Property Data a) What should be appraised (1) Appraisals being prepared for income tax purposes must (a) contain an opinion of the value of all contiguous property owned by the donor or the donor 's family (b) address any increase or decrease in the value of any other property owned by the donor or a related person (2) When selecting what property to value, prudent appraisers will follow accepted practice for eminent domain appraisals and appraise the larger parcel (to be appraised before and after the easement) defined by (a) unity of title (b) physical contiguity (c) unity of use A Conservation Easement Appraisal Guide Page 21 b) Site or Land - Describes in detail the property under study, beginning with the site. Depending on property type, it will emphasize features key to value and use. For example, the appraisal of a rural parcel would address, at a minimum: Location Size and shape Topography Soils Minerals estate Environmental hazards / nuisances or hazards / endangered species (7) Floodplain and drainage (8) Legal and physical access (9) Existing easements or deed restrictions (10) Status of public utilities (11) Water rights, ditches, ditch and water companies, etc. (12) Land use regulations (13) Surrounding ownership and uses c) Improvements (1) Many open space or scenic easements do not affect the use of existing improvements; they were there before imposition of the easement, and they will be there afterward. (2) Improvements need be addressed in detail only when the easement will have an effect on the utility, hence value, of the structures. For example, many historic facade easements require extraordinary upkeep, maintenance or renovation, calling for archaic techniques or materials that may be very costly. In cases like this, the improvements may turn out to be extremely important, creating a burden on the land or site. A Conservation Easement Appraisal Guide Page 22 (3) Depending on the circumstances, there may be little need to do more than give passing mention to buildings in place at the time of the grant of easement. However, once an easement is in place, the buildings may take on more significance. For example, in some areas, a large component of the market value (or at least cost) of a property may be attributable to the value of existing structures (often second or third homes). (4) Appraisals should not attribute (without market support) a percentage loss in value to the whole property (land, water and buildings), when typically only the value of the land, or land and water components, is affected by the easement. E. DATA ANALYSIS AND CONCLUSIONS OF PROPERTY VALUE BEFORE GRANT OF EASEMENT 1. Highest and Best Use of the Property — this means the land and water a) Site As Vacant (1) Legal Uses - considers current zoning (and reasonable probability of it changing), existing deed restrictions or conservation easements, building codes and environmental regulations. Specifically for water, appraisals consider the landowner's ability to put the water to a use different from the current use (ditch company bylaws, water court involvement, etc.). (2) Physically Possible Uses — considers physical factors, utilities availability and site improvements. As to the water, can its point of diversion be changed, or are there physical limitations on what can be done with the specific shares appurtenant to a specific property under a particular ditch or canal? A Conservation Easement Appraisal Guide Page 23 (3) Financially Feasible Uses — market demand must be evaluated. Just because state law permits a landowner to divide the property into parcels 35 acres and larger does not mean it is financially feasible to do so. Similarly, a board of county commissioners may approve zoning or a plat that permits a retirement home and a hospital — the appraiser must investigate the financial feasibility of such a permitted use, as it could contribute no value at all to a parcel. The same is true for the water. This is an excellent place in an appraisal report to highlight the disparity between the value of mutual ditch company water for irrigation and the value of the same water for municipal or industrial use, if the criteria of legal permissibility and physical possibility are satisfied. For example, if the landowner is seeking more than an in-place, irrigated land value and there is not an immediate, functional and transparent market for the specific rights, there may a need for a substantially greater analyses of the various markets and in any engineering and/or legal limitations to determine value. (4) Maximally Productive Use — that use from those considered that survives all these tests and produces the greatest financial return to the land b) Site As Improved (1) Considers the same four tests itemized above (2) Explains whether the improvements require demolition or modification or if they are consistent with the highest and best use of the site or land c) Conclusion of Highest and Best Use of the Entire Property (Land, Improvements and Water) (1) Must be consistent with the four criteria outlined under E 1.a. above (2) Does not need to bear any relationship to the present use, but if it does not, it must be a use that could reasonably be achieved (and the appraisal needs to contain evidence that is sufficient to support the claim of reasonableness) (3) States the highest and best use of the property without consideration of the proposed restrictions contained in the conservation easement A Conservation Easement Appraisal Guide Page 24 2. Approaches to Valuation a) Introduces the concept of valuation, defines the three recognized methods of valuation (Sales Comparison Approach, Cost Approach and Income Approach), and sets forth the procedure to be used in the report. For each method not used, the appraiser must explain why the method was omitted. b) Land or Site Valuation. In many open space or wildlife habitat easement appraisals, most of the property value before and after the easement derives from the "vacant" land itself (and not necessarily from additional development potential, etc.) Thus in many easement appraisals, this will be the principal valuation question to be solved. In these cases, often the Sales Comparison approach is the most likely to be used. (1) There are six interrelated techniques for valuing land as vacant: (a) Sales Comparison (b) Allocation (c) Extraction (d) Subdivision Development NOTE — This technique results in very misleading indications of property value when it is not used extremely carefully. This technique should not be used unless the highest and best use of a property is for division and development within a reasonably short period of time, when costs of development can be accurately identified, when potential sale prices of resulting parcels can be estimated, and when realistic absorption rates can be supported by market evidence. (e) Land Residual (f) Ground Rent Capitalization (2) The Land or Site Valuation process can be incorporated into the Sales Comparison approach when the subject property: (a) is vacant, A Conservation Easement Appraisal Guide Page 25 (b) is considered to have a highest and best use as if vacant, or (c) is minimally improved with the improvements being addressed as items of contributory value. (3) It can form the initial part of the Cost Approach when the subject property's improvements are being valued based on their replacement or reproduction cost. However, as described below, the Cost Approach alone is not relevant to vacant property in which there are no substantial improvements. (4) In valuing certain properties, other experts' opinions (water and minerals are the most common) may be valid. However, if the opinions of other experts are relied on, the appraiser must be aware of USPAP requirements regarding use of consultant 's reports. Standards Rule 2-3, states as follows: "When signing appraiser(s) has relied on work done by others who do not sign the certification, the signing appraiser is responsible for the decision to rely on their work. "The signing appraiser(s) is required to have a reasonable basis for believing that those individuals performing the work are competent and that their work is credible. " c) Cost Approach. This approach is not relevant to a vacant property, for it is requires that the property have substantial improvements. d) Income Approach. This approach may not be relevant to a vacant property, for it is based on the income a particular property generates, such as professionally operated guest ranches. e) Correlation and Conclusion of Value. In this section, appraisers will compare the values obtained using the three methods if appropriate and determine a conclusion of value. A Conservation Easement Appraisal Guide Page 26 F. FACTUAL DATA AFTER GRANT OF EASEMENT 1. The Conservation Easement a) Describes in detail the restrictions and retained permissions contained in the easement in adequate detail to set the stage for the analysis of highest and best use. b) When possible, the appraisal includes a recorded copy of the deed of conservation easement as an exhibit to the report. If this is not available, it should include a draft copy. If no easement document is available, it should include a statement identifying the source of the terms and conditions described above. G. DATA ANALYSIS AND CONCLUSIONS OF PROPERTY VALUE AFTER GRANT OF EASEMENT 1. Highest and Best Use It may not be necessary to reanalyze highest and best use in detail. Normally, the easement will be specific enough so that a statement or two will suffice. However, it is good practice to re -consider the legally permissible, physically possible, and financially feasible land uses in order to support the conclusion of what use(s) is the maximally productive land use after grant of easement. 2. Valuation Introduces the concept of valuing a restricted parcel, sets forth and explains the specific procedure(s) to be used in the report, such as: a) An appraiser may consider valuing the easement itself by comparing it with the sale of other conservation easements. This technique is required by the Treasury Regulations "if there is a substantial record of sales of easements comparable to the donated easement (such as purchases pursuant to a governmental program), the fair market value of the donated easement is based on the sales prices of such comparable easements." A Conservation Easement Appraisal Guide Page 27 b) The Regulations also state "If no substantial record of marketplace sales is available to use as a meaningful or valid comparison, as a general rule (but not necessarily in all cases) the fair market value of a perpetual conservation restriction is equal to the difference between the fair market value of the property it encumbers before the granting of the restriction and the fair market value of the encumbered property after the granting of the restriction." This suggests valuation of the property subject to the easement using as many of the traditional approaches to value as are applicable. (1) Using the Sales Comparison technique, compare the property under study to sales of other properties already subjected to similar restrictions (due to easements, restrictive covenants, physical or location considerations) at time of their sale. This should result in an opinion of property value after easement conveyance. (a) an appraiser should reflect appropriates units of comparison (such as per building site retained on the encumbered parcel, per -acre, or perhaps others). This requires knowledge of the details of the easements affecting each sale considered and their affect on value, including: (i) what Subdivision (as meant in Colorado, tracts less than 35 acres), division or parceling potential remains; (ii) the number of houses and/or structures that can be built, limitations on their size, height, occupancy, and limitations on their ability to be conveyed separately from the parent tract; (iii)any restrictions on use of the protected land (fencing, construction of outbuildings, grazing practices, use of riparian areas, public access, special land management requirements related to weed control, modification of natural drainage, prohibitions on commercial timber harvesting, mining, sand and gravel extraction, etc.); (iv)the effect of the easement on the land owner's ability to convey water separately from the protected land or to change the use of that water; A Conservation Easement Appraisal Guide Page 28 (a) identifies and analyzes the impact of any requirement to keep the land in irrigation, as some easements may prohibit the separate conveyance of all or some of the water; (b) identifies and analyzes the impact of any change in the highest and best use of the water, even though water per se cannot typically be encumbered by a conservation easement; (v) rights of first refusal (often recorded in conjunction with but separate from a conservation easement) retained by the grantee. (2) Appraisers may apply a "percentage loss in value" to the subject property. This technique can be used effectively when a subject property's local market does not have sales of restricted properties, necessitating analysis of the relationship of encumbered and unencumbered (but otherwise comparable) sales in other areas; (a) An appraiser should not rely on real estate listings of unencumbered but otherwise comparable properties (b) Great care should be exercised when relying on other appraisers' opinions of value in such analyses. (3) If using a Subdivision Development technique, appraisers should consider the reduced number of units or parcels that can be created on the subject property. NOTE: As in Before - Easement valuation, the development technique is valid only when some type of development is in fact the highest and best use of the property, when that development is fairly imminent, when costs of development can be identified accurately, and when absorption rates can be supported by market evidence. (4) Cost Approach (if applicable) (a) Requires care, as the effect of the permanent restrictions on the site must be considered. (b) May not be useful in determining market value, as the easement restrictions may make it virtually impossible to account for obsolescence A Conservation Easement Appraisal Guide Page 29 (5) Income Approach (if applicable) (a) May be the best method for establishing baseline value of restricted but still productive agricultural lands as well as properties with income-producing characteristics (b) Care should be taken in development of pro forma effective gross and net operating income estimates, as well as overall capitalization rates and discount rates (c) Requires caution due to potential `premium value" that many buyers may associate with scenic, recreational or secluded ranches. Such factors suggest a greater reliance on the Sales Comparison approach than on the Income Approach during reconciliation of the different values derived from the approaches. c) Correlation and Conclusion of Value (1) General considerations can include (a) difficulty or increased expense of obtaining mortgage financing; (b) perception offuture (or present) difficulty in dealing with the easement -holding organization, sometimes described as a loss of part of the right of `quiet enjoyment'. (c) potential for change in marketing time due to easement restrictions; (2) Appraisers should address increase or decrease in the value of other contiguous property owned by donor or donor's family; (a) Required by IRS Regulations; (b) If appropriate property was appraised, whatever change in value may have occurred to the contiguous property should already be included in the Before and After difference, even if all the contiguous property was not burdened by the easement; A Conservation Easement Appraisal Guide Page 30 (3) Appraisers should address increase or decrease in value of other non-contiguous property owned by donor or a related person; (a) If there was no effect on either contiguous or noncontiguous property, a logical explanation should suffice,- (b) uffice; (b) If such property was affected, it may also need to be appraised in order to conclude the effect on its value (increase or decrease) resulting from the easement H. ANALYSIS AND VALUATION OF THE EASEMENT 1. As more data become available, it is expected that valuation of easements by Sales Comparison will become more prevalent. However, as described in H.2 below, because adequate market data do not exist in most areas of Colorado, the most common approach remains the Before and After method. a) Use of the Sales Comparison approach to value easements is mandated by the Treasury Regulations §1.170A-14(h)(3)(i) which provide that "If there is a substantial record of sales of easements comparable to the donated easement (such as purchases pursuant to a government program), the fair market value of the easement is based on the sales prices of such comparable easements." While this statement may offend many appraisers who would contend that purchases pursuant to a government program would by definition not be reliable comparables, the Treasury Regulations are clear and unambiguous. Only in markets where such government programs are not established (which is almost everywhere) does the "before and after" rule apply. b) Appraisers must be cautious in analyzing sales of easement interests or fee interests in easement -burdened properties, as any units of comparison developed often would not reflect damages or benefits imposed on unburdened remainders, contiguous or not. Also, as illustrated recently in the Browning v. Commissioner Tax Court ruling, analysts must be aware that many easement sales are intended to be bargain sales, reflecting some donative intent on the part of both grantor and grantee. A Conservation Easement Appraisal Guide Page 31 2. As described above, the most common approach remains the Before and After, where Value Before the Easement --Value After the Easement Value of the Conservation Easement I. EXHIBITS 1. A "Self -Contained" appraisal report should include those of the following exhibits necessary to inform a reader who is not familiar with the subject property area. Such exhibits are not required by the Treasury Regulations, and may not appear in many Summary appraisal reports. These are the types of exhibits required in some government agency and private concern appraisal contracts: a) Maps: All maps shall be highly legible with properties clearly identified, highlighted if necessary, and depicted in contrasting colors (e.g., subject — red, blue, or green; comparable sales — purple, etc.). Maps should be of sufficient detail, with legend, scale, north arrow, geographic features and ground -control information, so properties may be readily located on -the -ground. (1) Area Map: Small-scale map showing general location of the subject neighborhood (2) Neighborhood Map: This map shall show the appraised property and its immediate neighborhood. (3) Tract or Plat Map: This shall be a large-scale (2 -inches per mile or larger) map clearly showing the appraised property and pertinent physical features, such as roads, streams, improvements, etc. If portions of the appraised property are assigned separate values, these various areas shall be delineated on this map, or a separate map may be prepared (4) Comparable Sales Location Map: This shall show the location of the appraised property and the sales used in the appraisal. Scale shall be a minimum of 1/4 -inch per mile. Where appropriate, the Comparable Sales Map may be combined with the Area Map or Neighborhood Map. A Conservation Easement Appraisal Guide Page 32 b) Photographs: Each copy of the appraisal should contain color photographs of the appraised property and all comparable sales relied upon. Each photograph shall be identified as follows: (1) Identify the scene — Appraisers should identify features shown and, if applicable, the purpose of the photograph. (2) Appraisers should identify location where photograph take, direction of view, etc. This may be done on map. c) Comparable Sale Data Sheet: For all sales used in the appraisal, it should show detailed information concerning each transaction. Photograph and map of each sale is required. A Conservation Easement Appraisal Guide Page 33 IV. FREQUENTLY COMMITTED SINS IN VALUING CONSERVATION EASEMENTS While almost all conservation easement appraisals are done in an ethical, technically sound manner, common mistakes or red flags may appear from time to time. Below is a short list of some common problems found in limited scope reviews of more than 80 purported "qualified appraisals" of conservation easements at the end of 2003. Many, while not fatal, highlight appraisers' lack of familiarity with the Treasury Regulations; these are easy to correct. Others are considered to be more serious technical flaws. These "sins" can be informative when completing or reviewing easement appraisals. 1. Serious Technical Issues A. Appraising the wrong property. Care should be taken that the appraisal's legal description reflects the area covered by the easement. In addition, there are instances in which the appraiser does not value all of the donor's and their family's property before and after imposition of the easement (thus it doesn't reflect "enhancement" value as described above). B. Relying entirely on the Subdivision Development Analysis technique (which bases the easement's "before" value on revenues generated by the development of the property). In order to be valid, the subdivision development plan must be a permitted use according to local zoning codes, must be technically feasible, and must be a likely form of development given the local market. Many Subdivision Development Analyses are frequently supported by: • inadequate land use plan without engineering input and lacking substantiated development costs. • poorly supported forecasts of lot sale prices, • poorly supported lot absorption forecasts, • poorly supported discount rates, • inadequate profit allocation C. Appraisals of second- or third -phase easements where the impact of the earlier easements was improperly accounted for. This is one of the common problems associated with the phasing of easements (placing an easement on only a portion of the property, with the intention of doing additional easements in the coming years). D. Ignoring or omitting existing zoning or property restrictions, such as covenants, deed restrictions, rights-of-way, or other pre-existing limitations on use of the property. A Conservation Easement Appraisal Guide Page 34 2. Lack of Familiarity with the Treasury Regulations A. Using the wrong definition of market value B. Failure to state that the appraisal was prepared for the income tax purposes of the donor C. Easements with effective dates beyond the 60 -day shelf life of their appraisal's effective dates of value 3. Other More Serious Issues Not Directly Related to Appraisals A. Appraisals of conservation easements without evident conservation purpose. Easements without obvious conservation values and purpose risk not qualifying under Internal Revenue Code 170(h) and as such, risk not qualifying for Colorado's state income tax credit. B. Clever division of family-owned lands intended to maximize donors' tax credits and to avoid the issue of "enhancement" values. The phasing of easements is not uncommon and should only be considered by a land trust if each phased easement can stand alone on conservation values and purpose. However, it is not acceptable to shelter properties through various names or other methods in order to skirt the constraints of the tax credit rules or to avoid the enhancement values.