Fore! Are Private Golf Clubs Destroying the Purpose of Conservation?

• Publication year: 2021

Fore! Are Private Golf Clubs Destroying the Purpose of Conservation?

Davis D. Lackey

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Fore! Are Private Golf Clubs Destroying the Purpose of Conservation?^*

I. Introduction

A. The Savannah River Region

The heart of the Savannah River cuts right through the Augusta region, inhabiting various species of wildlife. Stretching from the Blue Ridge Mountains to the Atlantic Ocean, the Savannah River plays an important role in the Georgia and South Carolina economy. The robust ecosystem creates a thriving tourist industry, which provides several outdoor recreational experiences designed for people of all ages.¹

Folks venture from across the country to explore the scenic rivers and trails nestled in the Augusta territory. Hiking, kayaking, canoeing, and mountain biking are just a few activities this area provides for the experienced outdoorsman and the novice adventurer.² The Savannah River region is a safe haven for migrating birds as it offers secure nesting grounds.³ Because of this, a diverse presence of wildlife inhabits the banks of the Savannah River and the surrounding areas, which provides for bird watching opportunities and tours.⁴ Beautiful wildflowers cloak the edges of the streams and brooks that meander through the area, affording beautiful scenery for walking or kayaking.

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Additionally, alligators, coyotes, and other predators have been known to roam the area.⁵

Conservation has played a crucial role in the Augusta region by preserving wildlife areas and protecting endangered species. The Central Savannah River and Land Trust ("the River Trust") has been a key player for conservation along the Savannah River.⁶ The River Trust has worked with the Georgia Greenspace Program to preserve thousands of acres in the Savannah River region.⁷ Some of the projects the River Trust has worked on are the Greystone Preserve, which is a 262 acre preserve in North Augusta,⁸ as well as the Savannah River Greenway, which encompasses 150 miles of pathways for people to bike, walk and run.⁹ With projects like these, the River Trust's goal is to preserve at least twenty percent of the wildlife areas in urban areas surrounding the Augusta area.¹⁰

B. Champions

Where the Georgia state line begins to descend upon the "low country" of South Carolina lays the little town of Evans, Georgia. The quaint, charming city of Evans radiates with southern hospitality. Just minutes away from Augusta, the Evans area attracts an influx of visitors, fans, and tourists during the week of the Masters Golf Tournament, which is played annually at the Augusta National Golf Club.

With a rich golf culture, coupled with a range of outdoor activities, it isn't a surprise that resorts in the Evans/Augusta area have had tremendous success in attracting visitors. However, in the wake of the Internal Revenue Service's ("the IRS") recent aggressive stance towards conservation easement transactions, one golf club battled the IRS on a challenged charitable conservation contribution.

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Champions Retreat Golf Founders, LLC ("Champions") built¹¹ and established a golf course in 2005.¹² However, the Pollard Land Company ("Pollard") previously owned the land. Pollard originally owned nearly 2,000 acres of undeveloped land that backed up to the Savannah River. The land was situated 13 miles north of Augusta. In 2002, Pollard conveyed some of the undeveloped land, approximately 463 acres, to Champions. When the golf course finally opened up in 2005, the course was only available to its club members and their guests. To this day, the course nevertheless remains private, restricted to its club members.

Of the 463 acres conveyed to Champions, the golf course only covered two-thirds of the property. Champions sold 66 lots for future home sites on the west side of the golf course (opposite direction of the Savannah River). For individuals to access the course and the home sites, they must enter through a single security entrance that is controlled by staff around the clock.

About fifty-seven acres of Champions' land remains undeveloped, largely entailing wetlands, marshes, and dense forests. Within this portion lies the Little River, which is a smaller waterway spinning off of the Savannah River. Germain Island rests in between this fork in the river. Germain Island, while for the most part is still undeveloped, includes six holes of the golf course.

During the recession of 2009, Champions' golf course was fraught with financial hardships. Seeking refuge from the recession, Champions contributed 348 of its 468 acres to the North American Land Trust ("the Trust") for the purpose of claiming a charitable deduction.¹³ What enticed Champions to contribute this conservation easement was a Tax Court decision¹⁴ that "allow[ed] a charitable deduction for a conservation easement over a golf course property."¹⁵

The easement property here, consisting of 348 acres, included the golf course, driving range, and undeveloped land, but excluded the golf course buildings and parking lots. A vast number of species, including some rare plants and animals, reside on the property.¹⁶ Two important rare species native to the property are the southern fox squirrel and the

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denseflower knotweed. There is also a significant amount of birds that dwell on the easement property, although some are perhaps migratory or seasonal.¹⁷ The public cannot access the easement property, but the public that enjoys watersports like kayaking can view the property from the Little River and Savannah River.¹⁸

As a result of this contribution, Champions claimed a charitable deduction.¹⁹ The IRS denied the deduction and litigation ensued.²⁰

II. The Foundation and History of § 170(h)

A. Scope of Article

Undoubtedly, anyone who has ever stumbled across I.R.C. § 170 ("§ 170")²¹ and the pertaining regulations knows that § 170 is a complex statute. The purpose of this Comment is to provide a broad sweeping, birds-eye-view narrative concerning a specific subsection of § 170. More precisely, the principal goal is to analyze what it means to make a contribution for conservation purposes under § 170(h)(4). This article seeks to raise important questions about the purpose of conservation easements as well as provide a practical discourse regarding the application of the Code.

This Comment involves three cases that contain similar facts. Each case involves a private golf course and a conservation easement. However, each court adopts a different approach. One of the objectives of this Comment is to analyze the framework of § 170(h) while dissecting each court's approach to applying the Tax Code ("the Code") and Treasury Regulations.

B. History of § 170(h)

The original language of the charitable deduction provided in the War Income Tax Revenue Act of 1917 read as follows:

Contributions or gifts actually made within the year to corporations or associations organized and operated exclusively for religious, charitable, scientific, or educational purposes, or to societies for the prevention of cruelty to children or animals, no part of the net income of which inures to the benefit of any private stockholder or individual, to an amount not in excess of fifteen per centum of the

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taxpayer's taxable net income as computed without the benefit of this paragraph. Such contributions or gifts shall be allowable as deduction only if verified under rules and regulations prescribed by the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury.²²

It wasn't until 1954, however, that Congress decided to renumber the charitable contribution deduction statute to its current position of § 170.²³ Along with the numerical reorganization of § 170, this was the first time Congress extended such generous deductions to encourage the American people to make charitable contributions.²⁴ The language from the 1954 Tax Code regarding § 170(h)(1) provided: "For purposes of subsection (f)(3)(B)(iii), the term 'qualified conservation contribution' means a contribution—(A) of a qualified real property interest, (B) to a qualified organization, (C) exclusively for conservation purposes."²⁵ The 1954 Code then provides in § 170(h)(4)(A) the definition of conservation purpose:

(A) For purposes of this subsection, the term "conservation purpose" means—(i) the preservation of land areas for outdoor recreation by, or the education of, the general public, (ii) the protection of a relatively natural habitat of fish, wildlife, or plants, or similar ecosystem, (iii) the preservation or open space (including farmland and forest land) where such preservation is (I) for the scenic enjoyment of the general public, or (II) pursuant to a clearly delineated Federal, State, or local governmental conservation policy, and will yield a significant public benefit, or (iv) the preservation of an historically important land area or a certified historic structure.²⁶

For the most part, the four conservation purposes listed above under § 170(h)(4) have remained the same for the last sixty plus years. In a 1980 Senate Report regarding § 170, the language offers insight to the purpose behind the enactment of § 170.

The committee believes that the preservation of our country's natural resources and cultural heritage is important, and the committee

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recognizes that conservation easements now play an important role in preservation efforts. The committee also recognizes that it is not in the country's best interest to restrict or prohibit the development of all land areas and existing structures. Therefore, the committee believes that the provisions allowing deductions for conservation easements should be directed at the preservation of unique or otherwise significant land areas or structures.

In particular, the committee found it appropriate to expand the types of transfers which will qualify as deductible contributions in certain cases where the contributions are likely to further significant

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