What is a Purchase of Development Rights Program?
A Purchase of Development Rights program, or PDR program, is a voluntary program that compensates owners of agricultural property for their willingness to accept a permanent deed restriction (through a conservation easement) on their land. The conservation easement limits future development allowed on the property in order to preserve the agricultural value and open space value of the land. The value of the development rights is the difference between the value of the land based on its development potential and the value of the land after easement.
Market Value of the Property Before
- (Remaining Agriculture Value)
= Value of the development rights
Once an easement is in place, the landowner may still sell or bequeath their land on the open market as farmland. The property remains in private ownership and the City of Ann Arbor conducts an annual monitoring visit to ensure the terms of the easement are being upheld.
Click here for PDR Template Easement
Click here for Easement Monitoring Form
Why would a landowner be interested in PDR?
Participation is completely voluntary.
The landowner may receive income tax benefits for donating all or a portion of the value of the development rights.
Landowner retains ownership of the land and can continue to farm and live on property. Landowner can sell, donate or bequeath property to heirs.
Cash from the sale of the development rights can be used for reducing debt, retirement, improving or expanding farm operations, buying additional farmland, or any purpose the individual wishes.
Farmland is now more affordable for younger farmers and may help ease the transfer of the property.
Landowner can still borrow against the reduced equity in their land.
Landowner Donations
The 2008 Farm Bill recently extended a 2006 incentive that enables family farmers, ranchers, and other moderate-income landowners to get a significant tax benefit for donation a conservation easement on their land or for making a “bargain sale” of a conservation easement on their property. As it stands now, the increased tax incentive expires at the end of 2009.
How the Tax Incentive Works
* Always check with your tax consultant to determine whether this will for you.
The tax incentive:
Raised the maximum deduction a donor can take for donating a conservation easement (or portion of value thereof) from 30% of their adjusted gross income (AGI) in any year to 50% of their AGI;
Allows qualified farmers and ranchers to deduct up to 100% of their AGI; and
Increased the number of years over which a donor can take deductions from 6 year to 16 years.
The increased tax incentive expires on December 31, 2009.