Recently, there has been considerable discussion about conservation easement amendment clauses on the land trust listserv, a discussion forum that is not officially moderated by the Land Trust Alliance, but our staff frequently join the conversation. We continue to strongly recommend well-drafted amendment clauses in all conservation easements (as you may have seen stated by an Alliance staffer on the forum).
The Alliance has long held that amendment clauses in conservation easements actually strengthen easements and improve enforceability. Rather than falling short of “protected in perpetuity,” amendment clauses improve the chances that easements will be protected in the long term. They help conservation organizations properly address unforeseen circumstances with well-crafted guiding principles.
Land trusts preparing year-end transactions may wish to review the amendment principles in the 2007 Amending Conservation Easements: Evolving Practices and Legal Principles and ensure any amendment clauses reflect the amendment principles. The Alliance specifically recommends an amendment clause “to allow amendments that are consistent with the overall purposes of the easement, subject to the requirements of applicable laws. Doing so clarifies up front for all parties that there are circumstances under which conservation easements may be modified.” In addition, Land Trust Standards and Practices require land trusts holding easements to have a written policy on amendments that articulates the principles and limitations for amendments, such as those enumerated in the Amendment Principles below. To date, tax court decisions have ruled only against clauses that explicitly provided for removal of land from the easement.
In 2005, the Alliance specifically advised land trusts to include an amendment clause in their easements in the Conservation Easement Handbook. Alliance guidance and publications support land trusts in developing responsible protocols that thoughtfully deal with the inevitable changes that conservation easement lands face. The amendment principles and Practice 11I of Land Trust Standards and Practices are noted below.
Amendment principles from the 2007 Amending Conservation Easements: Evolving Practices and Legal Principles:
A conservation easement amendment should meet all of the following 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 donor, grantor and any direct funding source
- Have a net beneficial or neutral effect on the relevant conservation values protected by the easement.
No amendment policy should be more permissive than these principles allow, but some land trusts may choose to adopt more conservative amendment guidelines.
Land Trust Standards and Practices 11I. Amendments states: “The land trust recognizes that amendments are not routine, but can serve to strengthen an easement or improve its enforceability. The land trust has a written policy or procedure guiding amendment requests that: includes a prohibition against private inurement and impermissible private benefit; requires compliance with the land trust’s conflict of interest policy; requires compliance with any funding requirements; addresses the role of the board; and contains a requirement that all amendments result in either a positive or not less than neutral conservation outcome and are consistent with the organization’s mission.”
IRS trial attorneys look for any and all rationales to persuade the court the easement does not comply with the technical statutory and regulatory requirements so that they can avoid the difficulties of challenging perceived overvaluation. The Alliance does not recommend policy or practice changes based on IRS litigation strategy. The Alliance does not provide legal, tax or other advice, but we do not foresee an increase in IRS conservation audits or a change in how deductions are selected for audit, which happens without anyone at the IRS seeing the easement.
Beyond the audit stage, the IRS litigation strategy apparently continues to become more aggressive. Taxpayers and their advisors can reduce the likelihood of an audit or court challenge by submitting a full and complete package of tax filing materials correct in every detail and refrain from any deduction overvaluation. The appraisal should comply with the regulations in every detail and document fully all value assumptions.
You can find more information about conservation easements, on our website. For technical assistance, contact your regional Alliance office or one of the following Alliance staff:
Sylvia Bates
Director of Standards and Educational Services
(603) 708-1073 | sbates@lta.org
Leslie Ratley-Beach
Conservation Defense Director
(802) 262-6051 | lrbeach@lta.org
For inquiries regarding federal policy and process, contact:
Russ Shay
Director of Public Policy
(202) 800-2230 | rshay@lta.org