These are agreements between the landowner and the organization holding the covenant that directs the ways in which the land may used. COLT’s intention is to protect these lands from development forever.
a. Similar to the donation of land, the first step is to have the land appraised.
b. Establishment of a covenant can reduce the appraised value of the land (because it limits what can be done to the land). The difference between the covenanted and non-covenanted values of the land is considered to be the value of the covenant.
c. As with a land donation, this covenant value may be considered a capital gain and be subject to tax. The Land Trust will issue a charitable receipt for the value of the covenant and this can be used to offset tax on capital gains. The offset can be carried forward for up to five years.
d. As the value of the covenanted land may be reduced compared to the non-covenanted value, there may be property tax benefits to the landowner.
NOTE: as with all such transactions, donors are encouraged to seek independent legal and accounting advice.