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articles & updates | article
Ethics Plenary Speech
by Stephen J. Small, Esq.
My friends, all of a sudden there seems to be a chill in the air. For a long time now, the land trust movement in this country has been a cozy little field, growing by leaps and bounds but still cozy, basking in the sun, hawks floating overhead on the thermals, aspens gently quaking in the warm breezes. And now there is a chill in the air.
Let me be absolutely clear about this. Ninety percent - ninety-five percent - of the conservation easement deals in this country are still done primarily right. But we are now starting to see a very very disturbing trend. We are starting to see bad deals out there, we are starting to see bad promoters out there, we are starting to see a lot of egregious advice coming from the professional planning community. The media is watching us, Congress is watching us, some donors are beginning to get a bit skittish, the whole mood is starting to change and that is the chill in the air. I think many people in this room used to go about this business, in a good faith and ethical way, but a bit lazy, basking in those lazy hazy crazy days of our long summer. And those days are over.
Let me tell you a little bit about my perspective. I'm a tax lawyer. I was there at IRS in the late 1970s and early 1980s when Congress rewrote the conservation easement tax incentives under Section 170(h) of the tax code. At IRS, I wrote the income tax regulations under Section 170(h). What Congress wanted to do was to provide an income tax incentive - a deduction - for landowners who protected open space, farmland, forestland, wildlife habitat, scenic property. Congress wanted to provide an income tax deduction for people who protected land with important conservation values, not for people who developed large estate lots in gated communities with some woodland buffer around and between the house lots.
Here is another very important bit of history from that time. While I was writing the regulations, a question kept coming up at IRS: "what is the enforcement mechanism? How do we at IRS know that the donated easements will meet the tax code requirements?" And the answer, from the Treasury Department and from the IRS, the answer time and time again was this: we are going to leave it to the tax-exempt land conservation community to enforce these rules. The Treasury and the IRS said, the first line of defense against bad conservation easement donations is the donee community. The Treasury and the IRS said, land trusts and government organizations that accept easements should refuse to accept easements that don't meet the tax code requirements.
Through the 1980s, and even through most of the 1990s, most easement donors and most land trusts seemed to understand the conservation emphasis in the tax rules. You get a deduction for protecting something, not for building fewer house lots than the law allows. Most telephone calls I got in years past were from landowners who genuinely loved their land and wanted to protect it.
This has started to change. Of course we still get calls from landowners who love their land, but now we are getting calls from people who are totally misinformed about conservation easements and the potential tax benefits from conservation easement donations. These callers are getting bad information about conservation easements and - now listen to this - they are not getting good information. Listen to this again - lawyers and accountants and promoters and investors are giving them bad information, telling them they can do this, or that, and claim a big deduction, and there aren't enough people out there telling them they can't and there aren't enough people out there telling them the right way to do conservation easement transactions. Are you listening? This means you!!! The problem is starting outside the land trust movement but it is coming right at us.
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