KOWALCHIK v. BROHL (Brohl II)

Court of Appeals of Colorado, Division A, No. 11CA2634, March 15, 2012: Resolution of litigation regarding Colorado conservation easement tax credits between Dept. of Revenue and the original donor of the easement as tax matters representative is binding on transferees of the CE credits; transferees are not necessary parties to such disputes and need not be served with summonses and complaints; but transferees are ‘taxpayers’ and thus may be liable for deficiencies, interest, and penalties, if disallowance of the CE credits the transferees claimed is upheld.

The Court wrote: “In this dispute involving conservation easement (CE) tax credits, this [same Court] granted the petition of defendant, Barbara Brohl, the Executive Director of the Colorado Department of Revenue (DOR), for interlocutory review of the trial court’s orders in favor of plaintiffs, holding that persons who purchased CE tax credits (transferees) from plaintiffs: are not within the statutory definition of “taxpayer” under section 39-22-522(1), C.R.S. 2011; have no tax liability for deficiencies, interest, and penalties for the improper claim of a tax credit; need not be joined as necessary parties to this action under C.R.C.P. 19(a); and may be given notice of this proceeding by mail rather than being personally served under C.R.C.P. 4. Kowalchik v. Brohl, 2012 COA 25, ¶ 1 (Brohl I).

“Having received briefs on the merits and heard oral argument, we conclude that although under section 39-22-522(7)(j), C.R.S. 2011, ‘[f]inal resolution of disputes regarding the tax credit between [DOR] and the tax matters representative . . . shall be binding on transferees,’ the transferees are not necessary parties, and need not be served with summonses and complaints. However, contrary to the trial court, we further conclude that transferees are within the definition of ‘taxpayer,’ and thus may be liable for deficiencies, interest, and penalties, if disallowance of the CE credits they claimed is upheld in this action.”

Decision available at http://www.cobar.org/opinions/opinion.cfm?opinionid=8441&courtid=1.

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