Rarely does a United States Tax Court decision deliver the highs and lows of an amusement park ride. But Pine Mountain Preserve accomplishes the feat in bewildering style.
Let’s start with the good stuff. Back in October’s E-Bulletin, I wrote about how the IRS had been denying charitable deductions due to the presence of standard amendment provisions in conservation easements. In Pine Mountain, the Tax Court soundly rejected this argument. In 2017, I assisted the Land Trust Alliance with amicus briefs in this case as well as two others before the Tax Court, in order to counter the IRS’ aggressive position. Following the arguments set forth in these amicus briefs, as well as the rationale of earlier cases, the Pine Mountain majority found that easement holders can be assumed to remain faithful to the conservation purposes upon which their 501(c)(3) tax exemption rests. Therefore, an amendment provision based on the conservation purposes standard is consistent with the perpetuity requirements of Code § 170(h) and the accompany Regulations. Pine Mountain thus represents a solid victory for the land trust community on the amendment provision issue and will hopefully put an end to the IRS’ pursuit of this line of attack. Maine land trusts can continue to use traditional amendment provisions that tie decisions to consistency with the easement’s conservation purposes as well as our state’s unique statutory “materially detract” standard.
But while the Tax Court properly settled the amendment provision dustup, in the very same opinion it obfuscated issues about the siting and adjustability of building areas. While acknowledging the usefulness of flexibility in the amendment context, the court denies easement holders an equal level of discretion regarding building areas, even those that are included within the terms of the easement. The opinion seems to suggest that deductions may be denied when easements allow for even partially floating building areas and when they allow too many unsited building rights. For more on the far-reaching implications of this decision, I highly recommend the Alliance’s Pointers, with which I assisted in the drafting. In addition, I am working with the Alliance on preparing another amicus brief, as we expect the taxpayer to appeal to the 11thCircuit. Nevertheless, any appellate decision is likely at least a year or two away, and in the meantime we are stuck with the uncertainty stemming from this wild ride of a decision. Buckle up.
How refreshing it is that “conservation” and “climate” are no longer dirty words in the Blaine House. With the election of Janet Mills and strong Democratic majorities in the Legislature, Maine can finally begin to make up for our regress of the past eight years. There are dozens of important bills in the works, and it is far too soon to make predictions about which ones will survive the legislative process.
As for conservation funding, the Maine conservation and hunting community is pushing for a new Land For Maine’s Future bond, paired with funds to improve state parks. See the Maine Land Conservation Task Force Draft Recommendations. State Senator Cathy Breen, who served on the Task Force and has a powerful role as a co-chair of the Appropriations Committee, recently introduced L.D. 11, which calls for $75 million in LMF funding and $20 million for capital improvements to state parks and historic sites, both over five years. In her budget address, Governor Mills has indicated receptivity to a new LMF bond. That said, fiscal pressures are expected to come into play, and I encourage you to reach out to the Governor and your representatives to push for funding at the $75 million level.
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