Citing Importance of Conservation Easement Program in Colorado, Lawmakers Urge Feds to Work With State to Provide Certainty to Landowners
Request Status Update of Ongoing Audits of Existing Conservation Easements
Mark Udall and Michael Bennet, U.S. Senators for Colorado, today urged the Internal Revenue Service (IRS) to work with state officials to protect the long-term viability and integrity of Colorado's conservation easement program, citing steps the State has already taken to provide strong oversight and eliminate fraud while promoting conservation activities.
Colorado landowners' ability to pair state and federal tax benefits is part of what has made the state a national model for use of conservation easements and incentives. Combined state and federal efforts have protected over a million acres of land in Colorado.
Colorado has been in close communication with the IRS for years about the extensive auditing process the IRS undertook in 2006 and has yet to complete. Many of the audits remain unresolved to this day, leaving landowners and land trusts alike in limbo.
In a letter to IRS Commissioner Douglas Shulman, Bennet and Udall expressed concerns with the agency's ongoing audits of conservation easements in Colorado and called attention to recent actions taken by state agencies to improve and strengthen oversight of conservation easements.
"While we appreciate the need to examine these conservation easements to address any abuse, we believe that Colorado has been making great strides to ensure the legitimacy and appropriate value of associated tax benefits of conservation easements across the state," wrote Udall and Bennet.
"As a result, we would encourage the IRS to work with Colorado officials on these efforts so that we can help property owners-many of whom worked in good faith to establish these easements-resolve their tax issues and enjoy some certainty regarding their easements and tax obligations and liabilities," the lawmakers continued.
In addition, the lawmakers asked Commissioner Shulman for updates on the status of ongoing audits of existing conservation easements in Colorado, and pushed for answers on what methods and procedures the IRS is using as it carries out the auditing process.
The full text of the letter to Commissioner Shulman is included below:
The Honorable Douglas Shulman
Internal Revenue Service
1111 Constitution Avenue, Northwest
Washington, DC 20224
Dear Commissioner Shulman:
We are writing to express our concerns with the ongoing efforts by the Internal Revenue Service to audit conservation easements in Colorado. While we appreciate the need to examine these conservation easements to address any abuse, we believe that Colorado has been making great strides to ensure the legitimacy and appropriate value of associated tax benefits of conservation easements across the state. As a result, we would encourage the IRS to work with Colorado officials on these efforts so that we can help property owners-many of whom worked in good faith to establish these easements-resolve their tax issues and enjoy some certainty regarding their easements and tax obligations and liabilities.
Conservation easements are an important land management and land preservation tool in Colorado. A combined state and federal commitment to land preservation via a federal income tax credit, a state income tax credit, and the state's Great Outdoors Colorado Trust Fund collectively have made Colorado a national model for conservation incentives by carefully balancing regional economic needs with critical land and water preservation. Colorado's efforts combined with the incentives created by Congress have protected over a million acres of land in our state.
We want to bring to your attention some recent actions taken by Colorado that in our view should already provide strong oversight of conservation easements. In 2008, the state of Colorado enacted HB08-1353, important reform legislation to eliminate fraud while promoting conservation. Specifically, the law set in place three important safeguards:
- All conservation easements that result in a tax credit must now be held by organizations certified by the State.
- All conservation easement appraisals must be submitted to the State for review.
- The law created a Conservation Easement Oversight Commission to advise the Colorado Department of Revenue and Colorado Division of Real Estate regarding conservation easements.
These reforms have been very successful in eliminating abuse of the tax incentives Colorado has in place. We are pleased the State has taken steps to ensure that landowners can continue to utilize conservation easements to preserve farm and ranch land, maintain critical wildlife habitats and community recreation lands.
We also would like to take this opportunity to request an update from the IRS with regard to the status of ongoing audits of existing conservation easements in Colorado. Specifically, we would like the IRS to confirm:
- How many total audits have been conducted in Colorado since 2005 and how many are in process now? How do these numbers compare with other states?
- How did the IRS go about conducting the audits it undertook and if settlement was offered, what was the procedure used to notify individuals of the audit? How were any settlement offers made, what was the process for notification and what were the proposed terms of settlement?
- Are the easements being audited based on the value of conservation qualities or the appraised easement value?
- In auditing lands to determine land and tax credit values, did the IRS use certified appraisers that are familiar with Colorado land values? Are the comparable values that they used available for public review?
Coloradans consistently identify conservation as one of the most important issues facing them today. Maintaining these programs is also critical to our farmers and ranchers whose lands provide important agricultural products, wildlife habitat, water resources, and scenic vistas for which our state is famous. We are committed to working with you, our Congressional colleagues, the State, and with you to ensure conservation easements are utilized properly and remain a viable land preservation tool in our state and across the country. We look forward to your response.