The second of two bills dealing with the longstanding problems of the state’s controversial conservation easement program cleared the House Agriculture, Livestock and Water Committee on Monday.
The bill wasn’t backed by the working group charged with coming up with solutions to the problems the program has generated over the past 20 years. That’s caused some hard feelings and accusations of bad faith.
Conservation easements work like this: a landowner — often a farmer or rancher — donates a portion of undeveloped land to a land trust or county, which is then responsible for maintaining it . While the donated land remains in the hands of the land trust in perpetuity, the landowner still holds the title and can sell the entire farm or ranch with that easement. The landowner is then eligible, under current law, for a tax credit equal to 50% of the value of the land being donated, which is determined by a licensed appraiser.
That’s where the trouble began with the program. Between the program’s creation in 2000 and 2013, about 4,000 easements were granted. But in about 800 of those easements, the tax credits were denied by the Department of Revenue, which claimed the donated land had no value. Even though some landowners brought as evidence multiple appraisals, the department continued to deny the tax credits. Most of those denied tax credits were for easements in southeastern Colorado.
Tax credits are also granted for those donations by the Internal Revenue Service. Not once in the program’s history were those federal credits ever denied, according to landowners who have testified about the program’s problems over the years.
Those whose tax credits were denied were required to pay them back with penalties and interest, sometimes years after the tax credits were first awarded. Those financial headaches caused foreclosures, bankruptcies, divorces and several suicides, according to witness testimony.
Lawmakers have tried to tweak the program to stop the problems: In 2013, a law removed the program’s oversight from the Department of Revenue and putting it into the hands of a new Division of Conservation within the Department of Regulatory Agencies. Decisions on appraisals, and the tax credits that go with them, are now decided at the time the easement is granted through a Conservation Easement Oversight Board within the division.
But the issue of the denied tax credits has continued to dog the program, and while the Department of Revenue has up to $45 million per year it can grant in tax credits, in the past five years it has awarded a fraction of that, as low as $8 million in 2016.
The reason? Coloradans have been scared away from participating in the program due to bad publicity about those who were denied their tax credits, according to witnesses who testified on a 2019 bill that set up a working group to come up with solutions on reparations, alternative valuations and what to do about easements abandoned by defunct land trusts.
The working group met throughout 2019 to come up with those plans, and in 2020, the General Assembly began working on bills to put reparations on the table. But the cost of those reparations — estimated at $145 million, to be paid for with the annual tax credit pot at the Department of Revenue — and COVID-19 stopped that bill before it made much progress.
Last month, state Sen. Jerry Sonnenberg, R-Sterling, who has been working on the problem for the better part of a decade, tried again with a bill on reparations. Senate Bill 33 was reviewed by the Senate Finance Committee on March 11. At least one person, Sen. Pete Lee, D-Colorado Springs, was hearing about the program’s abuses for the first time, and told Colorado Politics he was horrified.
But during the hearing, other committee Democrats hinted at another bill waiting in the wings, and the hearing came to a halt. Sonnenberg was asked to work with the sponsors of the other bill. His measure is still awaiting resolution from the finance committee. Sonnenberg said he knew nothing of the other bill and was furious.
News of what happened in the hearing and the other bill, sponsored by Rep. Dylan Roberts, D-Eagle (who was a sponsor of the 2019 measure), flew through the working group, along with accusations of bad faith directed at members who work for or with land trusts.
House Bill 1233 won a 9-2 vote on Monday from the House Agriculture, Livestock and Water Committee. The bill has nothing to do with reparations; it deals with another recommendation from the working group: sweetening the deal for landowners who enter into conservation easements in the future.
Under the bill, a tax credit for an easement can be awarded for 90% of the land’s value, up from the 50% that exists in current law.
Roberts acknowledged during Monday’s hearing that the bill did not come from the working group; it came from the land trusts, who “went rogue,” according to Sonnenberg.
“Conservation easements in my district is a dirty word,” said Rep. Richard Holtorf, R-Akron. “Dirty deeds were done to constituents and citizens of House District 64 and the sins of the past have not been corrected,” he told the sponsors, which includes Rep. Perry Will, R-New Castle. “I need assurances we will not have those horrible occurrences” again, he said.
This bill will alleviate those kinds of issues, said Will, but “we need to correct all those issues,” and that includes SB33.
Roberts echoed that. “I don’t want us to be in a position where landowners have adverse issues because of easements,” he said. This will set the program on the right path forward, and no one will be set up for those consequences, he explained.
These bills in conjunction with each other will be safe and a positive agreement on [farmers and ranchers] lands, Roberts added.
Roberts told Colorado Politics on Monday that despite the request from the Senate Finance Committee, he cannot incorporate the reparations language from SB 33 into his bill because of its title. However, he said he still believes there is a path forward for Sonnenberg’s bill. He also told the ag committee he will be the Senate bill’s House sponsor.
Sonnenberg said Tuesday that the Senate sponsors of HB 1233 — Sens. Faith Winter, D-Westminster and Kerry Donovan, D-Vail — have agreed to co-sponsor his bill so that all parties are moving forward on the same path toward a final resolution of the 20-year problem.