The lake on the Gentz farm, Sterling

The lake on the Gentz farm, part of an easement that the Department of Revenue claimed had no value for conservation.

The final report containing recommendations on reparations and other issues tied to conservation easements was submitted to Colorado's General Assembly this week. The working group tasked with coming up with those recommendations held one last session to amend the report, based in part on concerns that the price of reparations might make cost-sensitive lawmakers nervous.

A draft report completed on Nov. 12 estimated the cost at $147 million, the cumulative amount of tax credits denied by the Colorado Department of Revenue (DOR) between 2000 and 2013. That’s total denied tax credits at $206.2 million, less $61.3 million paid to DOR in settlements, plus $1.5 million in penalties and interest.

But that high cost of repaying the tax credits — reparations to Coloradans who lost millions when DOR decided their donated land had no value — had some members of the working group concerned that a figure so high might not win approval from lawmakers in the 2020 session.

Conservation easements are donations of land (although the landowner keeps the title) to land trusts, counties and other nonprofits and are intended to conserve the land for future generations.

Rules require an easement to have historical or recreational value, protect a “relatively natural habitat” or preserve open space. In exchange for the donation, the landowner receives a tax credit from DOR. Some landowners sell their tax credits, usually for about 80 cents on the dollar, to those who can use them to pay their tax liability and save some money in the process.

Conservation easements are forever; once donated, the landowner has no ability to develop the easement, and it is permanently in the hands of the land trust or other easement holder.

Melissa Durana of Keep It Colorado, formerly the Colorado Association of Land Trusts, told Colorado Politics that the working group met one final time last week and talked about omitting interest and penalties, and looked for ways to reduce the reparations price tag down to around $75 million. However, “the ultimate decision was to let the legislators writing the bill determine the total amount of repayments and the mechanics of making those payments,” Durana said.

The final report said DOR disallowed tax credits for 740 conservation easements applied for between Jan. 1, 2000, and Dec. 31, 2013. Those invalidated tax credits totaled $144.9 million, the final report said. Another nine cases of disputed tax credits are still in the works.

The final report also added in some strong words for the DOR, for its “arbitrarily disallowance” of conservation easement tax credits. “The total harm is estimated to be approximately $147 [million] not including lost opportunity costs, attorney fees, and pain and suffering,” the report said.

The working group was charged through legislation passed in the 2019 session to come up with recommendation on reparations, how to deal with abandoned or orphaned easements, and how land should be valued for future easements.

Abandoned or orphaned easements are those held by a land trust or nonprofit that is no longer able to care for the easement. Sometimes it’s because the land trust or nonprofit is no longer in business, is legally operating but no longer functioning, is unable or unwilling to continue maintaining the easement, or has failed to complete its monitoring obligations for at least three years.

The group’s recommendations on orphan easements stayed basically the same from the draft report, which is to recommend that the Division of Conservation Easement investigate the status of the entity. If the division finds the easement abandoned, it would be placed in receivership for a period of up to five years, during which time they would look for another entity to assume stewardship.

The working group was not able to come up with a recommendation for the stickiest issue: an alternate way to value land being donated for an easement. The group, however, did recommend that it be allowed to keep working on the issue, including review of a study coming from Colorado State University on alternative valuation methods. The group also wants to review possible pilot programs, and options for “less than perpetual and less than ownership interest” in conservation easements.

While the working group’s charge was for just those three issues, the final report noted there are other unresolved issues related to conservation easements. That includes:

  • Improvements to the website for the Division of Conservation, which the report said is not user friendly. While the website has general information on conservation easements, “it is difficult for a member of the public to quickly determine what information is contained in which report or link.” The working group suggested the division work with stakeholders to make the website more user friendly, and to ensure all relevant data and links to outside resources are included and properly identified.
  • A second recommendation is that the division should survey all potential easements holders, in an effort to check the status of any easements they control and whether or when those easements are being monitored.

Erik Glenn of the Colorado Cattlemen’s Land Trust said land trusts, through Keep It Colorado, will be generally supportive of the recommendations.

At least three lawmakers have already indicated an interest in sponsoring legislation tied to those recommendations in the 2020 session: state Sens. Jerry Sonnenberg (R-Sterling) and Faith Winter (D-Westminster), and Rep. Dylan Roberts (D-Eagle).

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