April 29, 2013

Also see Commentary by J.D. Wright

Dear Members of the General Assembly,

Please kill HB 13-1183 (Extend Conservation Easement Tax Credit Cap), and SB13-221 Conservation Easement Tax Credit Cert Application.

Restricting land through Conservation Easements in the name of "protecting Agriculture" simply put, does not protect agriculture.

Agriculture has been and remains Colorado's most reliable, solid economic foundation. Without Agriculture, Colorado has nothing!

If you want to protect Agriculture, you will focus on alleviating the real pressures Ag producers are subjected to including: Death Tax, Mother Nature, destructive man-made rules and regulations, and taxes.

Couple critical items you need to be aware of:

Sen. Vikki Marble and Rep. Lori Saine's SB13-130 addressed the IRS imposed requirement of “perpetual” or “perpetuity," through honoring Colorado's "Rule against Perpetuities."

But, before testimonies were heard, the hearing committee had pre-determined their NO vote. During the hearing, they claimed CEs - in particular the tax structure - were too complex for their understanding. Albeit drafter's failure to correct glaring errors in SB13-130 may have contributed to unnecessary confusion.

Committee members claimed powerless over addressing how state and federal duped hundreds of CE sellers (visit with J.D. Wright ) over "assessments/taxes" (which left CE sellers physically, mentally and financially spent).

Now, in a breathless turnabout, tax credits and certifications are your hot topics? Why? To benefit CE promoters and buyers who obviously wrote these two bills?

To each member of this 2013 session: If you sincerely care about the hundreds of compromised CE sellers who are suffering, you will kill these two bills today and turn your energies towards cleaning up the horrific mess state and federal made- and left - in Colorado!

Here's how:

Kill SB13-221 and HB 13-1183, and contact Sen. Marble to resuscitate SB 13-130.

The I.R.S. is at the crux of this entire debacle two-fold: I.R.S. mandates CEs stand in perpetuity, and I.R.S. clings to the Estate (death) Tax. The main pressure, and reason most decide to place their property in a land trust or conservation easement, is the death tax. There’d be little if any reason for conservation easements, if the I.R.S. abolished the death tax.

Fact is, any entity sincere about saving agriculture would focus on killing the death tax.

Most states have in their constitutions "no monopolies or perpetuities." Colorado's not as specific, but, it did enact "Rules against Perpetuities." CEs clearly violate this. SB13-130 would have honored Colorado's Rules against Perpetuities.

IRS requirement of "Perpetuity" in CEs doesn’t give “prospective seller”any choices. Seller can’t choose who to sell to because there’s only one buyer; any entity receiving federal funding via such as The Nature Conservancy.

Seller doesn’t get to choose the time frame of easement agreement. The Rules against Perpetuities would give seller the 21 year option. One could argue this 21 years option as a “Revisionary Clause”- in that the seller could actually SEE if the conservation easement is working the way they envisioned, and make revisions while they’re still alive.

The hundreds of Coloradoans who sold out to CEs later found the CE didn't perform the way it was promoted. Then state and federal got into a huge argument over assessments, and the sellers got caught in the middle, and with no recourse. If Colorado honored its existing enactment of the Rules against Perpetuities, this debacle would likely have been diminished- or possibly not happen at all.

If you want to keep CEs in Colorado, then PLEASE work with Senator Marble to at least install the Rules against Perpetuities in them!

If Colorado's Members of the General Assembly choose to continue trotting alongside Conservations Easement promoters, you should implement the following:

a) Require Land Trust Agents be licensed and regulated by State Real Estate Commission (since they are acting as land brokers).
b) Require bonding on each CE transaction equivalent to value of encumbered property before transaction.
c) Renegotiation language built into CE contract that allows Grantee to renegotiate every 5 years
(North Dakota has 10 year limits - no perpetuity allowed!).
d) If renegotiations cannot be accomplished satisfactory of landowner, CE contract becomes null & void.
e) Land Trust pays back-taxes on land if this occurs, not landowner (don't forget that if a CE is ended, under current law the landowner pays the IRS the back-taxes back to the time of the origin of the CE, not the trust).
f) Land Trust pays taxable value of severed development right to county to prevent erosion of tax base as community infrastructure demands increase (check with county appraiser for development right tax values).
g) No CE shall be valid and enforceable unless the limitations or obligations created by the easement are clearly presented in writing on the face of any document creating the CE, including information from the UCEA 1981 (Uniform Conservation Easement Act).
h) Water, Grazing, Farming and Mineral Rights shall not be encumbered by conditions or restrictions imposed or agreed to in the CE contract.
i) Grantee (landowner) retains rights of transfer on all rights not expressly identified in CE. Local and State Legislation expressly prohibiting Transfer of CE to other parties without formal written consent of Landowner (a common practice of land trusts is to trade CEs without knowledge or consent of landowner).
j) Elimination of third-party enforcement clause language from CE contracts - Must be State law! (Colorado apparently already has this law, and it has been upheld in one case.).
k) Each CE contract should be required to include in writing: Seller has option to set up a limited liability company or incorporation, which would leave government out of your private property business. This would better serve you, the landowner's tax needs, instead of this CE (PDR) that brings in tax-exempt third party and potential federal management.

And finally, here are questions you should demand truthful answers backed up with verifiable documents, from each land trust, conservation easement promoter:

What are CE (PDR) impacts to private landowners and communities?
Do the "benefits" offset the impacts? (Lost tax revenue and future earnings opportunities).
What are the other impacts and implications from imposing a CE (PDR) on private land? (Federal Nexus and Section 7)
What is the long-range outcome from imposing a CE (PDR) on private landowners? According to whom? (A tax-exempt organization?)
Explain how you believe I.R.S.'s required Perpetuity inclusion in CE protects agriculture.
Have you made any effort what-so-ever to kill the Death Tax?

Remember: Restricting land through Conservation Easements in the name of "protecting Agriculture" simply put, does not protect agriculture.

Because this 2013 session appears all about "choices" gives me strong reason to believe you'll seize my recommendations; for you'll quickly see how they will indeed give landowners the "real choices" necessary for them to then determine the healthiest ways to go with their property.

Please kill HB 13-1183 (Extend Conservation Easement Tax Credit Cap), and SB13-221 Conservation Easement Tax Credit Cert Application.

Thank you,
Roni Bell Sylvester
Volunteer Editor www.LandAndWaterUSA.com
(970) 284-6874