Conservation Easement Education & Updates

This page is dedicated to educating my clients and keeping up them up to date on current news regarding Conservation Easements (CEs). There is a lot of negative press out there and, even though there are a few bad apples, it is important to have information for both sides of the aisle.

This information is STRICTLY for Cerebral clients ONLY!! Please do not share this page with others without Cerebral’s express written permission.

In no way is the information on this page an endorsement or rejection of the CE investments. Cerebral’s services allow our clients to investigate all of their options when considering different investments. The ultimate decision to invest in any investment lies with the taxpayer.


Alexis’ Comment on This Article

No concerns about this article at the moment. This is a typical scare tactic by the IRS. It only applies to those investments that are considered abusive transactions. Although the multiplier for the investments that typically come across my desk are more than the 2.5 multiplier that goes unscrutinized by the IRS, they are more concerned with investments that have 8, 9, or even up to 20 multiplier. 

If you noticed this paragraph in the article it even mentions that most IRS cases that are one are based on technicalities than actual valuations.

“There are, of course, two sides to the story.  And many have argued that the transactions at issue comply with existing laws and IRS standards.  In fact, much of the IRS’s recent litigation successes have come about due to technical defects with deeds granting conservation easements.  Regardless, the IRS shows no signs of slowing its focus on the transactions.”

They just took captive insurance companies off the “dirty dozen list” because they’re completely legal and just because a few bad apples spoil the pot doesn’t mean that they are legitimate strategies. As long as you are crossing your Ts and dotting our Is, there is less likely to be an issue.

This of course is just my opinion. It’s important to take a look at all the facts and derive your own opinion from there.


(Authored by Jim Sullivan of Terra Optima, LLC)

Legislative Update

At the end of last year, most of the country was tired of hearing out the impeachment controversies. It had totally absorbed the attention of most in the Capitol as well. But our policy teams are well aware that it is typical that year-end tax extender packages get passed even under such extenuating circumstances. And so it was in December of 2019. There was no consensus until a very late hour. Amongst the push and pull, there was a vain attempt to propose a way to pay for some of the tax expenditures by incorporating S.170, but our multiyear effort in educating legislators on its misguided approach paid off. The final product can be read about here, but suffice it to say that while most people were making their last Holiday preparations, our teams were working hard until the very end to ensure conservation did not incur a setback. Steve Daines’ bill S.170 was once again shown to not effectively address the needed tax reform issues to the satisfaction of Congress. It is a bad policy proposal, and that idea is being understood more and more. No wonder it still only has a 3% likelihood of being enacted after 3 years sitting there motionless.

Regulatory Update

Over the recent months, many have asked me about the DOJ Civil Suit against Ecovest, including Nancy Zak and Appraiser Claude Clarke. To date there have been no hearings on that matter in 2020 that I am aware of. But there was a significant development on this that might have escaped your notice just before the end of the year. In short, one of the defendants in the civil allegation was dismissed in part – namely Ms. Nancy Zak. She was dismissed in part, and Judge Amy Totenberg indicated that as to a full dismissal it was premature for to grant a full dismissal until all the discovery was complete. It is my understanding that the window of discovery in this matter is to conclude in September 2020. One could expect that at that time Judge Totenberg would be a better position to evaluate the merits of a full dismissal. The Judge has left the door open here in that full dismissal is still in play, and possible. For further reading I have attached Tax Analysts coverage on this development by Kristen Parillo.

This is the second setback in two consecutive hearings for the DOJ’s case. As you may recall, in the first hearing on the matter earlier in June 2019, the DOJ’s suit was met with a chilly reception by the court. In review, a summary of that event was covered by Pete Sepp of The National Taxpayers Union here.


(Authored by Jim Sullivan of Terra Optima, LLC)

It’s been a few months now since my last update – more time than I would have liked, but with the Coronavirus Pandemic and the resulting shutdown it has made for a very interesting few months for us all. I sincerely hope you and yours are well and that neither you nor those you love have incurred any loss of life or long term loss of health in this national crisis.

I write today to update you on a few developments in the last few weeks. It will be my objective in the next few weeks to catch up a bit and encapsulate meaningful issues and events that have transpired since the turn of the year.

Legislative Update

The capitol has been transfixed with all thing Covid-19. That has left little “air in the room” to discuss much of anything else. In this update, I want to point your attention to a letter written by Grover Norquist of Americans for Tax Reform (ATR) to all members of Congress. This letter is of particular interest to Republican Legislators who would have signed  ATR’s pledge to not enact any tax increases.

ATR has significant influence on the Republican side of the aisle. Once they sign the ATR pledge a Republican would seriously run afoul if they break that pledge and hope to enjoy ATR’s support in re-election. In addition, as you may recall from our previous updates, that the only form or proposed legislation to date was S.170 (HB 1992) which has been parked as a “marker bill” for 3 years now. It had made no progress in any committees to date, and has been stalled due to it’s language. Among its problematic provisions would be that of proposed retroactive tax law changes. ATR sees this as a retroactive tax increase, bad tax policy, and a suggestion that should have no place of consideration in the national conversation on conservation easement tax reform.

“If lawmakers determine that the conservation easement deduction or any statutory provision is being used by taxpayers in a way that is inconsistent with its original intent, Congress should disallow or modify the provision on a prospective basis.”            Grover Norquist, President, ATR

I have attached their letter delivered to all Senate and Representative offices. To read their post about it the issue, see here. This organization’s choice to raise it’s voice on this issue has real volume and has not gone unnoticed by policy makers on the Hill! Chief sponsors and co-sponsors of S.170 and HB 1992 have signed the pledge and are now in the ATR’s sights for supporting legislative ideas that break their word.

Regulatory Update

There is a great deal of discussion arising on the need for IRS reform. Areas of IRS overreach are elevating concerns likened to the those that came to a crescendo in the late 1990s causing Congress to enact the Tax Payer Bill of Rights and create the Office of The National Taxpayer Advocate. Among the concerns that are elevating are questions if the IRS is acting within the confines of established law.

As you may recall, on December 23, 2016 the IRS made Conservation Partnerships a “Listed Transaction”  (Notice 2017-10) thus mandating an elevated level of disclosure on what by nature was already a highly disclosed and well documented charitable gift when done properly. What you might not recall was that just a month prior the IRS made Micro-Captive Insurance companies a “Transaction of Interest” (Notice 2016-66), subjecting them to most of the same types of disclosure requirements. In a step that took many observers by surprise, The US Supreme Court (SCOTUS) has agreed to hear arguments this year that will determine if the Service went about the process correctly. Was utilizing this type of reporting requirement even in the scope of the powers of the IRS? The crux of the case revolves around the  Administrative Procedure Act  (APA) because the IRS did not go through the notice-and-comment procedures required by that law.

Like us, we are sure you will be watching how The SCOTUS rules in this case with great interest due to the case’s direct impact on actions the IRS has taken in recent years to chill the activity of law abiding CE donors. The lack of compliance to the APA was equally as glaring in the enaction of both IRS Notices 2017-10 and 2016-66.

Advocate With Us

We advocate in Washington DC with like-minded individuals for CE tax reform that will maintain the integrity of the conservation easement deduction. This is accomplished through balanced proposals narrowly tailored to tamp down on CE abuse in the tax system. Our approach intends to strike at the true heart of the issues most fair minded, honest thinking people are concerned about.  You can read our legislative proposals here.

If you believe in this environmental tool, and believe it is worthy of fair tax treatment and continued existence in the Internal Revenue Code, then I invite you join the effective work being done by Partnership for Conservation (P4C). In doing so, you can help advance the cause of private land conservation and help bring much of the current controversy to a conclusion that will best serve the generations to come. To become a member go here.

Further, if you are interested in doing even more to support this effort, reach out to me personally to be informed on how your help can be strategically applied in more direct ways to our shared goals with P4C.


(Authored by Jim Sullivan of Terra Optima, LLC)

Legislative Update:

The two pieces of legislation proposing CE tax reform (S.170 and HB 1992) still only have a 3% likelihood of passage. This believed to be because of their language imposing retroactive action – something that enjoys political support so small it is deemed negligible. We have had interactions with some Washington’s most powerful individuals who determine what will passthrough committees to be debated and voted on in Congress, and we have been give firm indication that nothing with any retroactivity will be passed in this Congress as it is presently led. We will continue to hold them to that commitment. Though still just “marker bills’, S.170 and HB 1992 have gained additional sponsors, which is the result of our detractors on the Hill persisting in promulgating a false narrative that just because there is leverage in this instrument of planned charitable giving, that the presence of leverage is evidence of abuse. We have made the case that the majority of these opportunities, that’s the furthest thing from the truth. Leverage is the evidence of landowner generosity, and the necessity to offset the tax risk to donors should their tax benefits be curtailed to any degree in the circumstance of an audit. We believe that is the case for the majority of these transactions. Abuse is real, but rare, and must be curbed or if possible put to a halt entirely.

As we have held scores of meetings, it appears everyone in Washington is waiting for the Senate Finance Committee to complete its review of over 180 different transactions and put forward its findings and recommendations. Sources close to this proceeding indicate that this will not be concluded until the end of January at its soonest. Few in the world of tax and land conservation possess the institutional memory of the last wave of abuse in this space 15 years ago that presented a level of concern that, like today, resulted in a full Senate Review of Conservation Easements (see link for 2005 details). If you scrubbed the date from the 2005 article you would think it was published today. There was a period of time in the last couple of months where the Tax Extenders Bill was thought to perhaps pass and might make for the right vehicle upon which to attach conservation easement reform. But it now appears that partisan rancor is at a fever pitch with impeachment hearings keeping Congress from getting anything done (see Law 360 article on extenders attached).

Regulatory Update:

Among the most notable recent developments was  a news release published by the IRS earlier this month on 11/12/19 (see link). The news release puts a together an assemblage of things already previously stated and known in other contexts, all on one page including the enumerated powers of the IRS to address abuse of the tax system. One must notice that the focus is “abusive transactions”…. abuse, not proper use. Further focus is on “artificially inflated appraisals” – the likes of which we would never have anything to do with. You will notice that later in the news release they acknowledge that there are many good, sound conservation easement transactions happening:

“The IRS’s comprehensive compliance efforts are focused on the abusive syndicated conservation easement transactions described in Notice 2017-10, recognizing that there are many legitimate conservation easement transactions.”

Both the National Tax Payers Union and the Americans for Tax Reform quickly weighed in on the topic (see links).

Our assessment is that the timing of this press release is intended to have a chilling effect given its release at the time of year when these types of gifts are being contemplated. But in substance, nothing has changed in the IRS stance or the law. However, anyone who’s abusing the system or doing anything in the realm of fraud should heed the warning it issues. Abusers beware…the tax man cometh. That said, neither we nor any appraisers, geotechnical firms, land trusts or tax professionals we work with engage in “knowingly making willful understatements” on tax forms, or artificially inflated overstatements of appraisal values. To the contrary, ours has been a reliable history of wholesome conservation. That is also why we are active in the Capitol advocating for real tax reform that will curb or altogether eliminate CE abuse. The IRS’s position on this matter is not to be casually disregarded and we are not among those who proceed in a nonchalant attitude about the commissioner’s comments. Our organization would never be involved in anything having to do with the abuse that is at the heart of the IRS’s concerns. The press release mentions a suggestion about taxpayers voluntarily amending their returns if they declared “improper contribution deductions”, which breeds on fear. This part of the press release has had concerns raised about it by experienced tax minds stating it is at best misleading, and at worst downright false (see attached Asbury Law Firm Update).

But we are also keenly aware of the fact that the IRS does not make tax law, legislators do. To quote noted author and CPA Tom Wheelwright, “Tax is about the facts”. Tax is not about fear. Press releases are information for the public use to reference, but could never be relied upon to defend oneself in an audit or conversely, grounds to disallow a single deduction. In contrast, Congress make law. Executive Orders from The President also have the force of law and do not have to be approved by Congress.

I say this because what did not make as big a news splash was that just over a month ago the Trump administration placed 2 executive orders that say that the IRS needs to stop harassing conservation easement donors with spurious and ex post facto “gotcha” arguments not in the code or guidance for tax payers to act upon in reliance and good faith (see attached Tax Notes article). The EOs are posted here and here. To quote the Tax Notes author Jenny Johnson Ware:

“Two new Trump administration executive orders addressing agency guidance and enforcement actions should help end a game of “gotcha” that the IRS has been playing in denying taxpayers deductions for charitable contributions of conservation easements, finally forcing the agency to abandon its practice of asserting novel legal theories against taxpayers in its effort to avoid the ultimate question of valuation.”

As King Solomon said, “…there is nothing new under the sun”, and for those who have been aware of the IRS concerns about CE’s there’s nothing new in this news release.  In conclusion, since 2004 – 2005 there has never been a more important time to be dotting your “I’s” and crossing your “T’s”  in the world of conservation easements.


(Authored by Jim Sullivan of Terra Optima, LLC)

It’s been a few weeks since you’ve heard from me. Since  that time I and my team have spent a number of days in the Capitol, and had meetings with numerous legislators. My personal team ourselves met with 8 legislators in just two days. We were able to showcase good wholesome examples of great land conservation performed in partnerships where, over time the surrounding markets have echoed that though the partnership deductions were large and leveraged, the appraisal was proved to be modest and conservative by the market in the years that followed. The general response was one of receptivity, as we have spent a good deal educating the staff of certain legislators. Of all the meeting, most notable were the meetings held with the primary sponsors of the House and Senate Bills HB 1993 (Rep. Mike Thompson) and S. 170 (Sen. Daines).

On that note, an update is in order. Of these two these pieces of proposed legislation (S.170 and HB 1992) they both still only enjoy no more than a 2% likelihood of passage. This believed to be because of their language imposing retroactive action – something that enjoys political support so small it is deemed negligible.

Last week meaningful progress was made by our team and other in prompting these two legislators to convene in discussions that bring major conservation stakeholders to the table to discuss an approach that everyone feels curbs abuses in conservation partnerships. For now, we are moving ahead trusting these statements as good faith expressions of intent to craft legislative reform that addresses valuation abuse, rather than a “one size fits all” approach as is currently proposed.

Recently, one of the most compelling developments prompting this type of response was a study that was released by Bill Snape, Senior Counsel for the Center for Biological Diversity (CBD). The CBD is known and revered in Washington DC for its work protecting endangered species through legal action, scientific petitions, creative media and grassroots activism. I have attached the report for your review. In it, they document results having studied the environmental reports of 200 Conservation Partnerships. This studied is debunking the false narrative that tax payers have been getting a “bad deal” for funds forgone from the Treasury to support this important structure of conservation finance.

The following are revealing highlights from his study:

“The preliminary results show that 64 percent of all BBRs are outstanding in quality, 35 percent of BBRs are acceptable, and only 1 percent is somehow inadequate.”

“In addition to the excellent overall grades for BBR conservation, 81 percent of examined conservation easements left an important natural resource unexploited, 80 percent had active habitat management regimes, 70 percent had monitoring and compliance plans, 69 percent addressed climate change, and 38 percent allowed no economic use at all.”

“Our data indicate that the approach under these bills, while likely in good faith, won’t solve the purported problems of the federal conservation easement program. Beware of the law of unintended consequences in the field of modern conservation easements. The truly conservative approach is to have more congressional hearings on the topic, release more agency data, and make intelligent changes to a system that has become, wittingly or not, a vital conservation pillar for the country.”