Colorado Open Lands
President's Letter
Taking Responsibility
Dan Pike
President
Over the last several years, I’ve written in this column about the increased scrutiny that has befallen the land trust community. Starting with Senate Finance Committee hearings in 2004, subsequent Internal Revenue Service investigations of conservation easements, and press and legislative focus on Colorado, the land conservation community has been under the microscope.
Much of the scrutiny was deserved. On one level, the land trust community had flourished while flying under the general public radar screen, and in some cases it had become sloppy or even reckless. On a second level, new, less than scrupulous players had entered the business, gaming the system merely for profit.
As the 2004 Senate hearings wore on, Congressional staff began to draft new regulations for oversight of the conservation industry. The Congressional Joint Committee on Taxation recommended draconian cuts in conservation incentives. The community feared a regulatory overkill that would bring a halt to the growing success of land conservation.
The Land Trust Alliance, the national association for land trusts, began delicate negotiations with Congressional staff. Why not let us try policing ourselves, the LTA folks argued. 95% of this community is doing it right—we don’t want to lose all that good work. The Congressional staff countered that self-regulation is typically very weak, and seldom works. LTA pressed on—give us a chance, and then if it doesn’t work, we’ll go along with new regulations. With the aid of Senators Grassley and Baucus, long-time friends of conservation, LTA bought some time.
The promulgation of new industry standards, in the works for several years, was accelerated. These new standards were universally adopted by LTA members. More significantly, LTA proposed a new program to accredit land trusts, based on their compliance with the standards. A rigorous Accreditation Program was launched in 2005, chaired by Larry Kueter of the Denver law firm of Isaacson, Rosenbaum. In the first year, 39 land trusts were accredited, including five from Colorado. (See our related press release: Accepted & Accredited.) At the end of 2009, 82 land trusts have been accredited nationally, and the program has raised both the awareness of the standards, and the level of industry practice.
An unfortunate consequence of the Senate Finance hearings was the subsequent intense focus on Colorado’s conservation easement transactions by the IRS. Colorado was singled out, with a reported team of fourteen agency personnel scrutinizing State transactions over a two-year period. The Service, operating largely in secret, at one point claimed “96% of Colorado easements were flawed.” Exhibiting a stunning lack of ability to distinguish between good and bad transactions, in many cases the Service determined the easements had no value—even those purchased with State or fellow federal agency funds and appraisals.
The IRS actions appalled landowners, Colorado’s land trust community, and state officials. The community took action. We provided landowners with information on fighting the IRS claims. We identified legal and accounting experts to consult with landowners. We rallied State officials and the Congressional delegation to get explanations from the Service. We led national workshops and national discussions on dealing with the IRS. We are now in our third year of weekly strategy conference calls among land trust practitioners, lawyers, accountants and tax credit advisors. Progress has been slow, but it is coming. The IRS Colorado team is gone. Cases are settling. The IRS has admitted mistakes.
Colorado’s conservation easement tax credit has been a phenomenal tool in making Colorado a leader in land conservation. It has stimulated unprecedented protection of irreplaceable wildlife habitat, prime agricultural lands, and Colorado’s infamous scenic landscapes.
But the community began to hear of easement transactions that raised concern— transactions by individuals and organizations no one knew. We urged the State to look into the deals. In 2006, the Colorado Division of Real Estate did just that, suspending two easement appraisers’ licenses. The press and the legislature took notice. Then, word came of millions of dollars of suspect transactions. Alice Madden, at the time the Speaker of the Colorado House, created an interim Task Force to make recommendations for action. Manned with legislators, state agency representatives, landowners, and land trust professionals, the Task Force developed recommendations for legislation.
In 2007, these recommendations were adopted in HR 1353, which went into effect in 2008. HR 1353 authorized Division of Real Estate review of easement appraisals, created an Oversight Commission, and requires certification of both non-profit and government holders of easements. Throughout this process, the land trust community has worked closely with the legislature, the State, and the Commission to ensure constructive oversight of the tax credit program. It has worked. As reported by the Division of Real Estate to the legislature in January, it appears fraudulent transactions have been virtually eliminated.
The last six years have been difficult ones for the land trust community—ones of unprecedented threats and scrutiny. But the community has responded admirably, taking responsibility for fixing the problems. Land trusts have raised the bar on themselves, which has not been without pain and adjustment. But going forward, the industry and conservation are better for it.