On October 15, 2021, the Office of Chief Counsel of the Internal Revenue Service (IRS) disclosed a copy of a communication in 202141022 suggesting that notification of the exercise or continuance of a use of land that pre-exists the donation of a conservation easement is required in order for the conservation easement to meet the “protected in perpetuity” requirement of Treas. Reg. Sec. 1.170A-14(g)(5)(ii).  The relevant portion of this provision of the Treasury Regulations states in part: “In the case of any donation referred to in paragraph (g)(5)(i) of this section, the donor must agree to notify the donee, in writing, before exercising any reserved right, e.g. the right to extract certain minerals which may have an adverse impact on the conservation interests associated with the qualified real property interest.”

Many conservation easements contain a requirement that the donor of the conservation easement notify the donee of the exercise of reserved rights in a conservation easement, and the regulations suggest that this is a required element of the conservation easement in order for the donation of the easement to qualify for a charitable deduction.  The concept raised by the chief counsel document more specifically discusses whether the donor of the conservation easement must notify the donee prior to continuing a use of the property that pre-exists the donation of the conservation easement.  Most conservation easements recite the existing uses of the property and that such uses are intended to continue after the donation of the conservation easement, and it seems that this recitation would provide adequate notice to the donee of the continuation and exercise of the pre-existing use.


On July 30, 2021, the Office of Chief Counsel of the Internal Revenue Service (IRS) released a Chief Counsel Advice Memorandum 202130014 on the requirements of I.R.C. Section 170(h) and Treas. Reg. Section 1.170A014(g)(6)(ii) for an extinguishment proceeds clause in a conservation easement.  Citing PBBM-Rose Hill, Ltd. v. Commissioner and Coal Property Holdings, LLC v. Commissioner, the Memorandum states that extinguishment proceeds clauses must closely adhere to the language in the Treasury Regulations and may not provide for a reduction of the donee’s proceeds for the value of post-donation improvements or any post-donation increase in the value of improvements.

The Memorandum further provides sample conservation easement language for proceeds clauses as follows:

Donor agrees that the donation of the perpetual conservation restriction described in this deed gives rise to a property right, immediately vested in the donee organization, with a fair market value that is at least equal to the proportionate value that the perpetual conservation restriction, at the time of the gift, bears to the fair market value of the property as a whole at that time.  For purposes of this paragraph, the proportionate value of the organization’s property rights shall remain constant.

On a subsequent sale, exchange, or involuntary conversion of the subject property, the donee organization will be entitled to a portion of the proceeds at least equal to that proportionate value of the perpetual conservation restriction.

All of the donee organization’s proceeds from a subsequent sale or exchange of the property must be used by the donee organization in a manner consistent with the conservation purposes of the original contribution.


The Metzler Property in Castle Rock, Colorado was preserved today through the generous donation by the Estate of Robert F. Metzler of 60 acres of land to the Town of Castle Rock and a conservation easement to Douglas Land Conservancy (DLC) on 49 of those acres.  The Metzler Property is located along Founders Parkway and Crowfoot Valley Road in a rapidly developing area of the Town and will serve existing and new residents in the area with scenic views and a new trail system.  The remaining 11 acres of the property is planned for use as a community and educational facility with a parking lot to access the trail system.  The conserved portion of the property also contains the original homestead and ranch buildings including an historic silo.  Congratulations to DLC, the Estate and the Town on their collaboration to preserve the Metzler property!

On June 23, 2021, the U.S. Court of Appeals for the 11th Circuit in TOT Property Holdings upheld the denial of a charitable deduction for a conservation easement on the grounds that the donated  conservation easement was not protected in perpetuity under I.R.C. § 170(h)(5)(A).  The denial was based once again on an improper proceeds clause that the court determined did not comply with 26 C.F.R. § 1.170A-14(g)(6)(ii) because it allowed the donee’s proceeds in the case of condemnation or extinguishment to be reduced by the increase in value of any improvements constructed after the date of the conservation easement.

What is unique about this case is the inclusion in the conservation easement of language requiring the interpretation of the proceeds clause in a manner consistent with 26 C.F.R. § 1.170A-14(g)(6)(ii).  The intent of this language was to override the express language in the proceeds clause, if challenged, in an attempt to demonstrate compliance with the Internal Revenue Code and the Treasury Regulations. The court determined that the attempted savings clause is an impermissible condition subsequent and unenforceable for federal tax purposes.

Today the Colorado legislature passed HB21-1233, the Conservation Easement Enhancement and Rural Stimulus Act.  The Act was proposed and shepherded by Keep It Colorado, and will now proceed to the Governor’s desk to be signed.

The Act modifies the Colorado conservation easement tax credit program by increasing the amount of tax credits that a landowner can obtain from a conservation easement donation to 90% of the fair market value of the conservation easement up to a maximum of $5,000,000.  This increase will be retroactive to January 1, 2021.  Certain water entities are also now allowed to receive tax credits, including government entities who will receive a transferrable expense amount which may be transferred to an entity that can use the amount as a tax credit.  And the Act modifies certain administrative procedures, including the process used to track sales of tax credits.

Congratulations to Keep It Colorado and the conservation community on this important win!

Today the Biden Administration released a preliminary report to the National Climate Task Force titled Conserving and Restoring America the Beautiful.  The report provides a vision and plan to preserve at least 30% of the country’s land and waters by 2030 with a locally led America the Beautiful campaign. Continue Reading America the Beautiful Campaign: The Next Step for the 30×30 Goal

On April 19, 2021, the Internal Revenue Service (IRS) announced the formation of the Office of Promoter Investigations (OPI) (IR-2021-88) to increase the focus of the IRS on the promoters of abusive tax avoidance transactions, including abusive syndicated conservation easements.  The new OPI will coordinate the efforts of various business divisions, including Large Business & International, Tax Exempt/Government Entities, the Office of Fraud Enforcement, and Criminal Investigations, with a focus specifically on promoters of abusive transactions and the schemes utilized by those promoters.  The OPI will channel its resources to increase detection and deterrence of promoters throughout the IRS.  The acting director of the new OPI is Lois Deitrich, a 20-year veteran of the IRS who earned her master’s degree in tax from the University of Denver and is a both a CPA and a certified fraud examiner.

In a previous post, we noted that the Colorado Department of Revenue (CDOR) was considering revisions to conservation easement tax credit regulations, and on March 17, 2021, those revisions were adopted.  Rule 39-22-104(3)(g), Rule 39-22-304(2)(f) and Rule 39-22-522 will become effective on April 30, 2021.  As a reminder, the amendments are intended to conform the regulations to House Bill 19-1264 signed into law on June 3, 2019, which included a number of substantive revisions to the conservation easement enabling statute (C.R.S. § 38-30.5-101, et seq.) and the conservation easement tax credit program in Colorado. Continue Reading Colorado Department of Revenue Adopts Revised Conservation Easement Tax Credit Regulations

Bloomberg reported today about the criminal prosecutions of two promoters of syndicated conservation easements.  The article details the guilty pleas of two brothers, Stein Agee and Corey Agee, to federal tax-fraud conspiracy charges.  Their scheme involved classic syndication collaboration with lawyers, accountants and appraisers to sell shares in entities donating conservations easements and then overvaluing the conservation easements to take federal tax deductions in excess of the price paid to buy in to the entities.  The article reports that the two brothers are cooperating with prosecutors in their investigation of promoters, and that grand juries in Georgia, Missouri and North Carolina are currently considering charges against other promoters.

The Land Trust Alliance and attorney Steve Small have been instrumental in shining a bright light on these fraudulent syndicated transactions utilized to create tax shelters.  A legitimate conservation easement donation is not a tax shelter, but is instead a valuable tool to accomplish land preservation for a landowner with true charitable and donative intent to preserve land in perpetuity.  It is critical for the Internal Revenue Service (IRS) to halt fraudulent syndicated transactions by going after the overvaluations that are integral to these transactions, but the IRS needs to be careful not to view legitimate conservation easement donations with the same dirty lens.

On February 17, 2021, Douglas Land Conservancy (DLC) and Douglas County partnered to protect 2,558 acres with perpetual conservation easements on two Douglas County open space properties.  Sandstone Ranch (2,038 acres) and the Schmidt Construction Open Space (520 acres) were both acquired by Douglas County in cooperation with the Chatfield Reservoir Mitigation Company to provide mitigation for the Preble’s meadow jumping mouse as part of the Chatfield Storage Reallocation Project.  The purchase of Sandstone Ranch was also completed with funding from Great Outdoors ColoradoContinue Reading Douglas Land Conservancy Protects 2,558 Acres in Douglas County