Wednesday, October 10, 2012
Some of the most questionable conservation easements are those covering golf courses. A recent summary judgment ruling from the Tax Court highlights the concerns that arise. RP Golf LLC owns 277 acres in Platte County, Missouri where it has two private golf courses. It placed a conservation easement over the golf courses and claimed a $16,400,000 tax deduction (yep that’s $16.4 million to agree not to subdivide its golf courses).
To qualify for tax deductions, conservation easements must have a qualified “conservation purpose” as defined in § 170(h)(4)(A) of the Internal Revenue Code. RP Golf claims that its conservation easements meet two different purpose requirements: (1) open space and (2) natural habitat.
Deductions are allowed for conservation easements that protect open space where such preservation is pursuant to a clearly delineated Federal, State, or local governmental conservation policy. I.R.C. § 170(h)(4)(A)(iii)(II). Missouri does have a general policy to promote open space, but the policy enables counties and the state park board to acquire property rights to protect open space in counties where the population exceeds 200,000. Mo. Ann. Stat. § 67.870. As Platte County has fewer than 100,000 residents, the court concluded the golf course conservation easements were not acquired pursuant to a conservation policy.
Deductions are also permissible where conservation easements protect relatively natural habitat of fish, wildlife or plants. Perhaps somewhat audaciously, RP Golf contends that its conservation easements protect “relatively natural habitat.” It is always a challenge to determine what is “natural” these days and the court found that there disputed material facts on this issue (thus making it inappropriate for summary judgment).
This little cases raises a lot of issues regarding what we protect for whom along with what we consider natural in our increasingly developed world.
- Jessie Owley