Terrain, Taxes, and Land Trusts: Saving the Florida Panther Through the Use of Conservation Easements.

• Author: Hughes, Elizabeth M.

The Florida panther (puma concolor coryi), the official state animal of Florida, is the last remaining subspecies of "Puma" (also known as mountain lion or cougar) still surviving in the eastern United States. (1) Extensive hunting devastated the population, and the Florida panther was one of the first species added to the U.S. endangered species list in 1973.2 By 1995, Florida panther populations dropped to less than 20 to 30 individuals in the wild (3) and the Florida panther's current status remains listed as endangered.

Historically, panthers were found throughout the southeastern U.S., including Arkansas, Louisiana, Mississippi, Alabama, Georgia, Florida, and parts of South Carolina. (4) Although it is estimated that more than 200 panthers roam freely throughout Florida today, they are presently restricted to less than 5% of their historical range in a single breeding population in southern Florida. (5) Habitat loss and habitat fragmentation continue to threaten the panther's existence. The survival and recovery of the Florida panther are dependent upon maintaining, restoring, and expanding the panther population and its habitat in Florida and beyond. (6)

Panthers are a wide-roaming species that require large, contiguous areas of suitable habitat to meet their social and reproductive needs. (7) For panther population growth, they will need much more protected habitat than they currently use. The existing amount of habitat available to them on public lands is being encroached upon daily with development and is inadequate for the species to recover and be removed from the federal list of endangered or threatened species. (8) The Florida panther currently roams on state and federal lands in South Florida, including the Florida Panther National Wildlife Refuge, the Big Cypress National Preserve, and the Audubon Corkscrew Swamp Sanctuary. 9 But panther recovery goals cannot be met without establishing additional populations outside of these limited areas of southern Florida and this requires support from private landowners. (10) The U.S. Fish and Wildlife Service specifically recognizes that public support and developing incentives for private landowners to retain and manage panther habitat are equally critical components to achieving panther recovery. (11)

In 2008, the U.S. Fish and Wildlife Service established a Panther Recovery Plan, which aims for habitat for the panther to be conserved on both public and private lands throughout Florida. (12) The plan identifies private rangelands in southwest and southcentral Florida that can provide vital habitat and prey for the Florida panther and can have a key role in conserving other native Florida species. (13) Preservation of this land will allow panthers to safely migrate to the historic northern habitat they once roamed.

One of the most important and practical approaches to conserving panther habitat on private lands is the utilization of conservation easements. Florida's private landowners can donate the developmental rights to a qualified conservation organization under a conservation easement --a voluntary, legal agreement between a private landowner and a governmental or nongovernment organization that then permanently restricts the development or use of land such as parks, wetlands, farmland, forest land, or historic structures to achieve certain conservation purposes in perpetuity. (14) By placing the easement, some quality of the property is protected such as wildlife, habitat, open space, or forest management. Conservation easements have been an accepted and popular conservationist's tool for decades, largely because of the substantial tax and economic benefits for easement donors. Since their launch more than 40 years ago, the use of conservation easements has become a critical component in protecting ecologically important lands (15) and they can continue to be used as an important tool to save the Florida panther. By donating conservation easements on private land in Florida, landowners can continue to enjoy the land and save the Florida panther by providing necessary habitat for their expansion while receiving significant state and federal tax benefits. (16)

Cat's Meow: Conservation Easements Requirements

* Federal Definitions and Requirements for Deductibility--"Conservation easement" is the commonly used term for deductible easements granted for the preservation of 1) land areas for outdoor recreation by, or the education of, the general public; 2) protection of a relatively natural habitat of fish, wildlife or plants, or similar ecosystem; 3) preservation of open space (including farmland and forest land); or 4) preservation of a historically important land area or a certified historic structure. (17) Conservation easements permanently restrict how land or buildings are used, and these restrictions on the property must be perpetual. (18) To qualify for tax deductibility, donated conservation easements must be "legally binding, permanent restrictions on the use, modification, and development of property such as parks, wetlands, farmland, forest land, scenic areas, historic land or historic structures." (19)

A land trust is very often the charitable donee to which a landowner grants a conservation easement. The land is then subject to restrictions on its use and/or development. The land donor gives up certain rights as specified in a deed of easement but retains ownership of the underlying property. 20 The specific terms in the deed of easement will control the breadth of the donee organization's rights. The charitable organization then has an interest in the encumbered property that runs with the land, meaning that current and future landowners of the property are bound by the terms and restrictions in the deed of easement.

With respect to tax deductibility, the general rule is that no charitable contribution deduction is allowed for a transfer of property of less than the taxpayer's entire interest in the property. 21 But [section]170(f)(3)(B)(iii) provides an exception to the partial interest rule for contributions of "qualified conservation easements." (22) Internal Revenue Code [section]170(h) states that a qualified conservation contribution is a contribution of 1) a qualified real property interest; 2) where the donee is a qualified organization; and where 3) the contribution is exclusively for conservation purposes. (23)

1) Qualified Real Property Interest: A qualified real property interest includes, among other things, a restriction granted in perpetuity on the use that may be made of the real property (often referred to as a conservation easement). (24) Section 170(h)(2) (C) requires that the interest in real property be subject to a use restriction granted in perpetuity, and [section]170(h)(5) (A) requires that the conservation purpose be protected in perpetuity. (25)

The perpetuity of conservation purpose requirement is meant to prevent taxpayers from trading a use restriction for a current tax deduction and then removing the restriction if it becomes inconvenient. The perpetuity requirement has been a major source of conservation easement litigation. For example, in Carpenter v. Commissioner, T.C. Memo. 2012-1 (2012), a conservation easement was determined "not enforceable in perpetuity" because it allowed for the extinguishment of the easement by mutual consent of the parties if circumstances arose in the future that would render the purpose of the conservation easement impossible to accomplish. (26) After Carpenter, the Tax Court in Grave v. Commissioner, 140 T.C. 377 (2013), disallowed a charitable deduction because the charity to which the easement had been donated provided the taxpayers with a side letter, stating that if their deduction was disallowed, the charity would return the donation. The Tax Court held that the donation was, accordingly, a conditional, nondeductible gift. Then, in Belk v. Commissioner, 140 T.C. 1 (2014), aff'd 774 F. 3d 221 (4th Cir. 2014), the Tax Court again disallowed the charitable deduction because the easement was not a restriction granted in perpetuity. The deed of easement allowed the taxpayers and donee to change the property subject to the easement by swapping other property owned by the taxpayer. (27)

Another source of litigation stemming from the perpetual duration requirement is related to the timely recordation of easement deeds and the subordination of pre-existing mortgages. (28) These cases contain a common warning. If the property has a mortgage or lien in effect at the time the easement is recorded, the easement contribution is not deductible unless the mortgage or lien holder subordinates its rights to the donee organization. (29) In addition, the subordination agreement must be recorded at the time that the deed of easement is recorded.

2) Donee Qualified Organization: A qualified organization (30) generally consists of a governmental unit or charitable organization that is an eligible donee for such contributions because it has a commitment to protect the conservation purposes of the donation and has the resources to enforce the restrictions. (31) Qualified organizations include the federal government; a U.S. possession; the District of Columbia; a state government; any political subdivision of a state or U.S. possession; an organization described in I.R.C. [section]170(b)(1)(A)(vi); a charity described in I.R.C [section]501(c)(3) that meets the public support test of I.R.C. [section]509(a) (2); or a [section]501(c)(3) organization that meets the requirements of [section]509(a)(3) and is controlled by one of the organizations described above. (32)

3) Exclusively for Conservation Purposes: Seldom at issue is the requirement that the contribution be made to a qualified organization. Conversely, the "exclusively for conservation purposes" requirement has been a common subject of conservation easement controversy. (33) A contribution is considered to be made "exclusively...