by Sheila Harrington and Susan Mehinagic

Deforestation and changes in land use are the second leading cause of global warming.

Some of the most biologically diverse natural areas are on small pockets of land in densely populated areas – the southern Okanagan, the Lower Fraser Valley and south-eastern Vancouver Island. “Taking Nature’s Pulse,” a recent scientific evaluation of our globally significant biodiversity, reports that due to habitat destruction and climate change, more than half of the ecological communities in B.C. are of provincial conservation concern.

Professional advisors involved in Real Estate and Estate Planning are in a good position to help. Private lands can be protected in collaboration with land trusts through acquisition or through conservation covenants. Land trusts (often called conservancies) have worked across B.C. with professionals and landowners to protect nearly a million hectares of land, in perpetuity.

In 1994, Section 219 of the B.C. Land Title Act was changed so that approved non-government organizations could hold covenants. Conservation covenants are customized to suit the goals of the landowner and the land trust responsible for its enforcement. They can apply to all or just a portion of the land. The owner can receive a charitable receipt for donations on the value of the land, and in some cases reduced property taxes.

Conservation covenants allow families or individuals to protect forested areas or wetlands permanently, and continue to live and work on the property. Some land trusts will acquire ecologically significant property, and arrange life estates or a lease to ensure the continuation of its private use, while protecting its biodiversity.

There are several tax advantages associated with “Ecological Gifts.” The first is exemption from capital gains arising on the gifting of ecologically sensitive land that is capital property for qualifying gifts made after May 1, 2006. The second is the introduction of the split receipting rules which apply to gifts made after December 20, 2002, permitting the donor to receive partial consideration for the donation and still, in many circumstances, receive a reduction in income taxes based on the receipted amount, which is the fair market value of the property donated, less the consideration received.

The ecological gifting provisions of the Income Tax Act allow for either a deduction from income for a corporation, or a tax credit for an individual, unless the land is classed as inventory to the donating taxpayer. No limitation on the amount of eligible donation applies to ecological gifts and donation amounts not used to reduce taxes in the current year may be carried forward for five years. Thus donors of ecologically sensitive capital property may eliminate their entire tax obligation.

The process of making an ecological gift involves finding an “eligible recipient” who will agree to act as stewards for the land, help in determining the covenant restrictions, and to monitor and enforce the covenant. It is recommended that two organizations/agencies share the stewardship, management and other long-term responsibilities. The owner must obtain Ecological Gift and Appraisal certification from Environment Canada. As with most taxing legislation, there are many intricacies that may bear on specific transactions. Though tax benefits may be a factor, the over-riding motivation for most people will be to contribute to a conservation legacy.

For further information contact Sheila Harrington at The Land Trust Alliance of British Columbia: www.landtrustalliance.bc.ca / 250-538-0112 / Sheila@landtrustalliance.bc.ca. or Susan H. Mehinagic / 250-995-3356 / smehinagic@grantthornton.ca.

Ruth Masters donated her 18-acre property to the city of Courtenay with a Conservation covenant held by the Comox Valley Land Trust and TLC, The Land Conservancy of British Columbia.

This article was published in the April 2009 issue of BarTalk. © 2009 The Canadian Bar Association. All rights reserved.