Updates: Latest & Greatest AGENDA: 1) Terrafirma Conservation - - PowerPoint PPT Presentation

Conservation Easement Issues and Updates: Latest & Greatest

1) Terrafirma Conservation Defense Insurance: Tips for Filing Claims 2) Land Trust Alliance Advisory on Conservation Tax Shelters 3) LTA Revised Report on Amending Conservation Easements

AGENDA:

TERRAFIRMA CONSERVATION DEFENSE INSURANCE: TIPS FOR FILING CLAIMS

TAKEAWAY:

TIMELY NOTIFY TERRAFIRMA OF POTENTIAL VIOLATIONS

Not sure you want to pursue a Terrafirma claim? File a Placeholder Claim

If you suspect a conservation easement violation:

You don’t even have to file a Placeholder Claim –

• email Terrafirma
• describe your situation
• they can guide you

• A very good lawyer will first analyze

the strength of your case

• Come up with a strategy
• Help create the proper record

FILING A PLACEHOLDER CLAIM OR FULL CLAIM DOES NOT COMMIT YOU TO LITIGATION

TERRAFIRMA CONSERVATION DEFENSE INSURANCE

Filing a claim will NOT increase your insurance premium

TERRAFIRMA CONSERVATION DEFENSE INSURANCE

Filing a claim will NOT increase your insurance premium

TERRAFIRMA CONSERVATION DEFENSE INSURANCE: TIPS FOR FILING CLAIMS

TAKEAWAY:

TIMELY NOTIFY TERRAFIRMA OF POTENTIAL VIOLATIONS

AKA Marketing of Conservation Easement Tax Deductions LAND TRUST ALLIANCE REVISED ADVISORY ON CONSERVATION TAX SHELTERS

• Land is placed into a “pass-through” entity

– partnership or LLC

• Wealthy investors buy interests in LLC
• LLC donates conservation easement on land
• Tax deduction passes through to investors

SYNDICATION – HOW IT WORKS:

Non-pass- through entity

WHAT IS A PASS-THROUGH ENTITY?

C-Corporation Corporation itself pays taxes =

____________________________________________________________

Pass- through entity Partnership LLC S-Corporation =

Entity does not pay tax – tax liability & benefits pass through to shareholders

• Land is placed into a “pass-through” entity

– partnership or LLC

• Wealthy investors buy interests in LLC
• LLC donates conservation easement on land
• Tax deduction passes through to investors

SYNDICATION – HOW IT WORKS:

New Practice 10C4 deals with transactions with pass-through entities of unrelated parties

LTA STANDARDS & PRACTICES

LTA Practice does not apply to FAMILY Partnerships & FAMILY LLCs Note: Practice applies only where TAX BENEFITS are sought – does not apply to Mitigation Banks

Syndications often involve

highly inflated appraisals

to juice the tax benefits

SYNDICATION – WHERE’S THE BEEF?

SYNDICATION – HOW DO YOU KNOW? LOOK FOR 2 THINGS:

1) Land owned by a pass-through entity 2) Owners who are not related

Who owns the property?

• Ask them
• Ask for a copy of their deed
• Order title commitment

SYNDICATION – HOW DO YOU KNOW?

If the property is owned by a pass-through entity (LLC, Partnership, S Corp) Find out who the owners (managers, partners, investors, members) are?

• Ask them
• Some info at Tx Sec’y of State web site

Contact qualified legal counsel

SUMMING UP - THIS COULD BE A SYNDICATION:

1) Tax benefits being sought 2) Land owned by pass-through entity 3) Owners not related

Most basic: Conservation Easement Amendments: The Revised LTA Amendment Report 2017 1) Land trust must have amendment policy which includes LTA’s 7 Amendment Principles 2) In the event of CE amendment, the land trust must implement the policy and must document that they have implemented the policy

LTA AMENDMENT PRINCIPLES A conservation easement amendment should conform to all of the following amendment principles:

• Clearly serve the public interest and be consistent with the

land trust’s mission 


• Comply with all applicable federal, state and local laws 

• Not jeopardize the land trust’s tax-exempt status or status as a

charitable organization under federal or state law 


• Not result in private inurement or confer impermissible

private benefit 


• Be consistent with the conservation purpose(s) and intent of

the easement 


• Be consistent with the documented intent of the grantor and

any direct funding source 


• Have a net beneficial or neutral effect on the relevant

conservation values protected by the easement

Line 3 For each easement modified, transferred, released, extinguished, or terminated, in whole or in part, explain the changes in Part XIII. Tax exemption may be undermined by the modification, transfer, release, extinguishment, or termination of an easement.

LAND TRUST ALLIANCE RECOMMENDATION:

In Schedule D, Part XIII narrative, make concise statement of how amendment benefits conservation

TAKEAWAY:

LIST EVERY CE AMENDMENT IN IRS FORM 990, SCHEDULE D, & COMPLETE PART XIII NARRATIVE

CE AMENDMENTS AND PRIVATE BENEFIT

LTA Accreditation Indicator Practice 11I requires documentation of no private inurement or impermissible private benefit:

Appraisals or other contemporaneous evidence (such as a letter of opinion from a qualified real estate professional, correspondence with an attorney, board materials, memo to the file, etc.) appropriate to the scale of the amendment document that no private inurement or impermissible private benefit resulted from the conservation easement amendment.

• pp. 11-14 discuss range of methods of

determining private benefit, depending on risk

• f finding it

LTA REVISED AMENDMENT REPORT

http://conservationtools.org/library_items/582- Amending-Conservation-Easements-Evolving-Practices- and-Legal-Principles

Consult Report when doing any amendment where there could be private benefit

Amendment Report: The land trust should not accept an offered cash donation as a full offset to the potential financial gain.

CHALLENGE OF PRIVATE BENEFIT:

Practice Tips:

CONSERVATION EASEMENT AMENDMENTS

1) Multiple lots allowed? State in CE who can approve amendment 2) Get title update before accepting amendment 3) Does amendment increase land trust stewardship burden? Additional stewardship contribution may be warranted.

CONSERVATION EASEMENT AMENDMENTS: The “Four Corners” Issue

100 acres 150 acres THE FOUR CORNERS ISSUE: Land Trust holds a 250 acre conservation easement, in 2 parcels - one of 100 acres, one

• f 150 acres

120 acres

250 acres

100 acres 150 acres THE FOUR CORNERS ISSUE: Can the land trust swap 100 acres out of a CE for another 120 acres? 120 acres

FOUR CORNERS COROLLARY:

Can a land trust agree to an amendment that -

• Diminishes conservation values on a CE parcel
• A conservation easement on ADDITIONAL

LAND? In Exchange For

FOUR CORNERS COROLLARY:

PRINCIPLE:

• A conservation easement amendment

must have a neutral or positive impact inside the boundaries of the original CE

LAND TRUST CAN CONSIDER AMENDMENT:

• Has some negative impact on original CE

property

• In exchange for conservation of nearby land that

has POSITIVE impact on original CE property

• Nets POSITIVE or NEUTRAL impact on ORIGINAL

CE Property

ORIGINAL CONSERVATION EASEMENT

ADDED LAND BENEFITS ORIGINAL CE

GOAL: OVERALL, CE AMENDMENT HAS NEUTRAL OR POSITIVE CONSERVATION IMPACT ON ORIGINAL CE PROPERTY

ADDITIONAL RESOURCES

Texas Land Trust Council: www.texaslandtrustcouncil.org Land Trust Alliance: www.lta.org Conservation Easements: A Guide for Texas Landowners http://www.gbrtrust.org/documents/easements/Conservation Easements.pdf Law Office of Burgess Jackson 1206 W Saint Johns Ave Austin, TX 78757 512/699-9012 burgess@conservationlaw.net