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 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.

 

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Photo of Melinda Beck Melinda Beck

Melinda Beck is a real estate and land use attorney who has more than two decades of experience.  Melinda’s conservation law expertise includes the donation and purchase and sale of conservation easements to land trusts and local governments by private landowners throughout Colorado

Melinda Beck is a real estate and land use attorney who has more than two decades of experience.  Melinda’s conservation law expertise includes the donation and purchase and sale of conservation easements to land trusts and local governments by private landowners throughout Colorado and nationally. She represents land trusts and private landowners regarding all issues related to conservation easement transactions and stewardship, including obtaining discretionary approvals and amendments to conservation easements. She is an emeritus member of the Land Trust Alliance Conservation Defense Advisory Council. Melinda has a degree in Economics from Pomona College and a law degree from the University of Denver, Sturm College of Law.