Result of Review in Light of Recent Court Cases

WeConservePA has completed a review of the Model Grant of Conservation Easement and Declaration of Covenants in light of recent court decisions regarding grants of easement involving a federal tax deduction.

Key Result I: WeConservePA proposes replacing the model’s §1.07(b) to improve clarity

Proposed New Text:
Conservation Purposes. The undersigned Owner or Owners have granted the Conservation Easement exclusively for conservation purposes (as defined in §1.170A-14(d) of the Regulations). The applicable conservation purposes are described by the Conservation Objectives and supported by the binding covenants established by this Grant. The Baseline Documentation may identify other information supporting the achievement of the conservation purposes.

Current Text:
Public Benefit. The undersigned Owner or Owners have granted the Conservation Easement to provide a significant public benefit (as defined in §1.170A-14(d)(4) of the Regulations). In addition to the public benefits described in the Conservation Objectives, the Baseline Documentation may identify other information supporting the significant public benefit of the Conservation Easement.

Key Result II: No need for other change
§1.07(e) of the model contains a reference to the Internal Revenue Code regulation, 26 CFR §1.170A-14(g)(6)(ii), regarding the “proportionate value” calculation in the event of extinguishment.  In March, the United States Tax Court struck down this regulation due to a decades-old rulemaking error by the IRS. See Valley Park Ranch, LLC v. Commissioner, 162 T.C. No. 6 (2024). This does not harm the operation of the model, which has a severability clause at §8.06 and what is essentially a well-reasoned backup to §1.07(e) at §7.03(a). As such, WeConservePA has decided to keep §1.07(e) as written (at least for the time being) since it is not yet known how or when the IRS will pursue further rulemaking to replace or restore the invalidated regulation, or whether courts will provide further direction.

Please submit comments or questions regarding this potential change to Justin Hollinger, Esq., at [email protected] no later than June 10, 2024.