Thoughts on Enhancing Conservation Options: An Argument for Statutory Recognition of Options to Purchase Conservation Easements

• Date: 01 August 2017

8-2017 NEWS & ANALYSIS 47 ELR 10665

mately $7,000,000. Meanwhile, the taxpayer presented an

expert trial witness who testied to t he number of around

$101,000,000.

As the trial concluded, the judge reportedly called coun-

sel to the parties into his chambers to encourage the parties

to “split the dierence.” e government lawyer a ssumed

that this meant the average of $7,000,000 and $33,000,000

(for an amount of $20,000,000), and expressed optimism

that such a deal could be reached at that amount. e

judge is said to have quickly claried that he had been

greatly impressed by the taxpayer’s expert, and that the

average should instead be taken between $7,000,000 and

$101,000,000 (for an amount of $54,000,000)!

ird, another crucial issue is the permanence of a con-

servation easement. In a recent ling in the Pine Mountain

Preserve case, the government argued that the easement in

question was not permanent because it had a plain, rudi-

mentary amendatory clause. Unfortunately, such a position

would preclude even minor amendments to conservation

easements. Instead, greater exibility is needed in order

to maintain the integrity of the conservation commit-

ment, while allowing for rea listic, benecial adjustments.

One solution could be a national panel of ecologists and

other experts that could approve or disapprove a proposed

amendment. Another solution might prohibit only amend-

ments for easements that are 10 years old or less. is could

help account for long-term change. Such a solution would

acknowledge that ta x deduction is driving the boat, but it

would allow some exibility.

is Comment is based on a transcript of a panel discussion held on

Monday, March 13, 2017, at Vanderbilt University Law School in

Nashville, Tennessee.

C O M M E N T

Thoughts on Enhancing Conservation

Options: An Argument for Statutory

Recognition of Options to Purchase

Conservation Easements

by Bill Sylvester

Bill Sylvester is a shareholder at Baker Donelson’s Birmingham oce. He has substantial experience in federal tax

law and real property law, including work on the real estate and tax implications of conservation easements.

The following brief comments on Profs. Federico

Cheever’s and Jessica Owley’s article are from the per-

spective of a tax and real estate lawyer. First, a key issue

to ag is the possibility of Trump Administration tax reforms

that could decrease the value of the deductions for conserva-

tion easements, if the maximum federal tax rate is reduced.

Second, in reaction to their a rgument for statutory rec-

ognition of options to purchase conservation easements, is

a tax deduction for giving an option raises valuation issues.

Valuation is often the most important federal tax issue con-

cerning conservation easements, which are covered by the

deduction under Section 170(h) of the Internal Revenue

Code. e Code requires a ba seline report which is a reci-

tation of the condition of a property on the date that a gift

is made. In almost all ca ses, the baseline documentation is

done by the donee, and donees very rarely nd that there

are not adequate conservation purposes because t hey hope

to get a stewardship payment.

e trial associated with the Pine Mountain Preserve,

in Shelby County, Alabama, near Birmingham, and in

which no decision has yet been rendered, shows the cha l-

lenges associated with valuation. Usually, after these type s

of trials occur, it might be 18 months or more before the

judge issues an opinion. In most cases, IRS Form 8283

is led and signed by the appraiser, the donor, and the

donee, and in this case the original appraiser found a value

of $33,000,000 for three related conservation easements

at issue.

At tria l, the government took the view that the aggre-

gate value of the conservation easements was approxi-

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