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Q. What is the Federal Farmland Protection Program?
A. The Farmland Protection Program (FPP) is a voluntary program
that helps farmers keep their land in agriculture. The program provides
funding to State, local, or tribal entities with existing farmland protection
programs to purchase conservation easements or other interests. The goal
of the program is to protect between 170,000 and 340,000 acres of farmland.
The U.S. Department of Agriculture's (USDA) Natural Resources Conservation
Service (NRCS) has been designated as the lead agency in implementing this
program.
Q. What is a Purchase of Agricultural Conservation Easement program?
A. A purchase of agricultural conservation easement (PACE) program,
commonly referred to as a purchase of development rights program, is a voluntary
farmland protection technique that compensates landowners for voluntarily
limiting future development on their land. Landowners retain many property
rights according to the provisions specified in the easement and the right
to farm. An easement separates certain rights--primarily development as
nonagricultural land--and conveys them to another party. PACE programs enable
landowners to sell rights to develop their land to a government agency while
retaining full ownership.
Q. How does a landowner participate in FPP?
A. To participate, landowners submit applications to State, local,
or tribal entities and agree to limit the use of their land for nonagricultural
purposes. State, local, or tribal governments are asked to submit proposals
to help USDA acquire conservation easements or other interests in productive
farmland to limit nonagricultural uses of that land.
Q. How is the value of a conservation easement determined?
A. The value of the conservation easement is usually determined
through a professional appraisal. A qualified, professional appraiser assesses
the difference between the fair-market value of the property, often using
comparable sales, and its restricted value. In some areas, the restricted
value for agricultural use is based on comparable sales, while other programs
use a formula incorporating land rents and soil productivity.
Q. What restrictions are found in a typical easement?
A. The easements generally restrict nonfarm development and subdivisions.
Some allowances for farm-related housing may be allowed. Generally, there
are few restrictions on improvements and construction related to the farming
operation. The easements become part of the land deed and are recorded in
the local land records.
Q. Are all agricultural conservation easements the same?
A. The basic purpose and structure of all agricultural conservation
easements are the same. However, each easement is tailored to the specific
farm being protected. Exact language in the easement may reflect future
expansion plans of the landowners, including the needs of their heirs.
Q. How do the easements affect other rights of ownership?
A. The landowner controls the land and use of the land not covered
by the agricultural conservation easement. The land is still owned by the
landowner and can be transferred, deeded, or sold just as any other piece
of property. The easement does not require any provisions for public access,
unless such access was negotiated as part of the easement purchase transaction.
Q. Does a conservation easement affect a farmer's ability to borrow
money?
A. The experience of those farmers who have participated in existing
State and local PACE programs is that their ability to borrow operating
funds for the farm is not affected by the presence of the conservation easement.
If a lending institution holds a lien on a property, it must subordinate
the sale of the conservation easement just as it would need to sign off
on any transaction on the property. Since a farm loan is usually based on
the ability of the farm operation to carry the loan, a conservation easement,
which only affects nonfarm development activities, not the farm operation,
would not have a bearing on the performance of the loan.
Q. What are the local property tax implications of protecting farmland
with conservation easements?
A. Because the landowner still owns the property, he or she is
still responsible for paying any associated property taxes. Since many States
have programs that tax farmland based on its use or farm value, the net
effect of the easement on local property tax revenues is little to none.
Q. How are the proceeds from the sale of a conservation easement treated
for tax purposes?
A. The easement sale proceeds are treated like any other capital
gain for Federal, State, or local income tax purposes. Some programs have
provisions that allow for installment purchases or have used securable tax-exempt
bonds as a method of payment.
Q. Is additional information available on FPP?
A. NRCS, the Farm Service Agency, Extension Service, or local
conservation district can provide more information. Local USDA Service Centers
are listed in the telephone book under U.S. Department of Agriculture. Information
is also available on USDA's World Wide Web site: http://www.nrcs.usda.gov.
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