On Wednesday, July 8, 2022, Governor Polis signed SB22-208 into law.  As discussed in a prior blog post, the new law provides that if property encumbered by a conservation easement will be condemned, and the property will be acquired free and clear of the conservation easement interest, the condemning authority must value the property as if it is unencumbered by the conservation easement.  The new law codifies the common practice of condemning authorities to award full compensation to landowners and holders of conservation easements.

On May 10, 2022, the Colorado Legislature passed SB22-208, titled “Concerning Just Compensation for the Condemnation of Property Encumbered by a Conservation Easement in Gross.”  If signed, the bill ensures that if property encumbered by a conservation easement will be condemned, and the property will be acquired free and clear of the conservation easement interest, the condemning authority must value the property as if it is unencumbered by the conservation easement.  The bill moves on to the governor’s desk for signing. Continue Reading Colorado Legislature Passes Bill for Valuation of Conservation Easement Properties in Condemnation Actions

On March 14, 2022, the U.S. Court of Appeals for the 6th Circuit delivered its opinion in Oakbrook Land Holdings, LLC v. Commissioner regarding the proceeds clause in conservation easements.  The court upheld the Tax Court’s ruling in determining that the proceeds regulation for conservation easements in Treas. Reg. § 1.170A-14(g)(6)(ii) did not violate the notice and comment requirements of the Administrative Procedure Act (APA).  The 6th Circuit court’s decision is inconsistent with the December 29, 2021 decision in Hewitt v. Commissioner by the U.S. Court of Appeals for the 11th Circuit, creating a circuit split on the issue.  See this prior blog post for a discussion of the Hewitt case.

In Oakbrook the 6th Circuit court determined that the Treasury Department’s adoption of the proceeds regulation for conservation easements in Treas. Reg. § 1.170A-14(g)(6)(ii) without consideration of comments made regarding this regulation did not violate the APA because the comments at issue did not raise a concern related to the provision’s purpose for conservation easements to meet the protected in perpetuity requirement of I.R.C. § 170(h)(5)(A).  The 6th Circuit court was not persuaded by the 11th Circuit court’s decision in Hewitt.

The Circuit split results in two different rules for the proceeds clause in conservation easements based on the location of the land subject to the conservation easement.  It seems that conservation easements donated in Alabama, Georgia and Florida cannot be challenged by the IRS on the grounds that the proceeds clause in the conservation easement violates Treas. Reg. § 1.170A-14(g)(6)(ii), while the IRS can continue to challenge conservation easements on these grounds in all other states.




The Department of Justice announced March 1, 2022 that five tax shelter promoters and two appraisers have been charged with conspiracy to defraud the United States and other crimes arising from their promotion of syndicated conservation easements which the indictment alleges were abusive tax shelters. The indictment was issued on February 24, 2022, and alleges that the co-conspirators promoted, marketed and sold partnership units and guaranteed a 4 to 1 tax deduction ratio to their clients and then provided spreadsheets to the appraisers which identified the conservation easement valuations necessary to provide the correct tax deduction ratio to their clients.  The alleged activities date back as far as 2012.

On February 25, 2022, the Colorado Division of Conservation announced that the 2021 conservation easement tax credit annual cap of $45 million has been reached for the first time since the cap was established in 2014.  The Division Director Aaron Welch stated:  “The Colorado Division of Conservation is encouraged at the increased pace of private land conservation at a time when development pressure has never been higher. The investments made by the conservation easement tax credit preserve recreation areas, wildlife habitat, agricultural working landscapes, scenic vistas, and historic areas. The work of the Division ensures that these conservation values are preserved in perpetuity. The reservation of the full $45 million for 2021 has been years in the making and is a testament to the high level of confidence in the regulatory framework by program participants and the Division’s commitment to consumer protection.”

Although the 2021 annual cap has been reached, the 2022 annual cap still has $15 million available specifically for 2021 transactions (See C.R.S. § 39-22-522(2.5)).  Landowners donating conservation easements in 2021 can still apply for tax credits, and their applications will be considered in the order they are received.  But these additional applications will receive 2022 tax credits which can be claimed to pay 2022 Colorado income tax.  The Division of Conservation keeps a running tally on the status of the tax credit cap on its website.

In December 2021, the America the Beautiful Interagency Working Group provided the first annual report on the America the Beautiful campaign (Year One Report).  The report highlights efforts undertaken across the key areas identified in the original America the Beautiful report and identifies next steps in each of these areas to further the goals of the campaign.  With regard to private land conservation, the following programs, among others, are identified as supportive of the private conservation efforts of ranchers, farmers, forest owners, and other landowners:

The Year One Report also includes a status report on lands, water and wildlife and the urgency of continued conservation efforts.

Colorado Open Lands and San Isabel Land Protection Trust announced a merger of operations effective December 31, 2021.  The two land trusts have collaborated on a number of projects in the past, and the collaboration is taken to a new level with the merger.  Colorado Open Lands has protected more than 600,000 acres of land in conservation easements statewide, and San Isabel holds conservation easements on more than 42,000 acres in southern Colorado.  Colorado Open Lands will maintain an office in San Isabel’s existing location in Westcliffe, Colorado.  Congratulations to both organizations!

On December 29, 2021, in Hewitt v. Commissioner, the Court of Appeals for the 11th Circuit reversed the U.S. Tax Court’s decision regarding the proceeds clause set forth in Treas. Reg. Sec. 1.170A-14(g)(6)(ii).  Numerous cases decided by the Tax Court have determined that the proceeds clause in a conservation easement may not allow 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.

The circuit court found that the Treasury Department did not properly follow the procedures outlined in the Administrative Procedures Act (APA) at the time of adoption of the final regulations for conservation easements.  Specifically, in the final regulations, Treasury did not address significant comments related to the proceeds clause made by the public after the notice of proposed rulemaking.  Therefore, the court concluded the Commissioner’s interpretation of Treas. Reg. Sec. 1.170A-14(g)(6)(ii) to disallow the taxpayer’s deduction was arbitrary and capricious and invalid under the APA’s procedural requirements.


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.