Atkinson v Commissioner

U.S. Tax Court, T.C. Memo 2015-236, December 9, 2015: Golf course conservation easement doesn’t qualify for deduction.

The Tax Court held that contribution of certain conservation easements on land at the subject golf course do not qualify for a Federal income tax charitable deduction because they do not meet the conservation purposes requirement of the tax Code, Sec. 170(h)(1). The court’s memo is interesting reading about baseline reports and interpretations of some categories of the “conservation purposes” requirements of the code and Treasury Regulations.

The members of two limited liability companies which own a golf course in North Carolina sought Federal income tax deductions for contribution of conservation easements on land of the golf course (the “2003 Easement,” consisting of six noncontiguous tracts, and the “2005 Easement,” consisting of three noncontiguous tracts). To be a “qualified conservation contribution” eligible for an income tax deduction, a conservation easement must be “exclusively for conservation purposes,” among other requirements. The taxpayer-members contended that the easements were exclusively for two of the conservation purposes listed in Code section 170(h)(4)(A): “protection of a relatively natural habitat of fish, wildlife, or plants, or similar ecosystem,” and “preservation of open space (including farmland and forest land) where such preservation is … for the scenic enjoyment of the general public, or pursuant to a clearly delineated Federal, State, or local governmental conservation policy, and will yield a significant public benefit.”

In a lengthy analysis the court reviewed the provisions of the easements and evidence about the land and its plant- and wildlife.

The court noted that the “natural habitat” purpose requires:

  • A “habitat,” meaning an “area or environment where an organism or ecological community normally lives or occurs” or the “place where a person or thing is most likely to be found.”
  • “Significant” habitats and ecosystems, which include, but are not limited to, habitats for rare, endangered, or threatened species of animal, fish, or plants; and natural areas which are included in, or which contribute to, the ecological viability of a local, state, or national park, nature preserve, wildlife refuge, wilderness area, or other similar conservation area.

The key evidentiary facts about the subject land and ecosystem were:

  • Although the easements include longleaf pines at the margins of the fairways, the terms of the 2003 easement do not protect the longleaf pine from removal; the longleaf pine currently on the 2003 easement property are not maintained in a relatively natural state; and there is no management plan for the pines.
  • Although there are manmade ponds on the 2003 easement, the ponds lack sufficient significant transition areas to mimic nature so that plants and animals would be able to use them or allow rare, endangered, or threatened native species of wildlife or plants to exist in a relatively natural state.
  • The 2003 easement does not actually limit the use of pesticides and chemicals which could injure or destroy the ecosystem and therefore may destroy the conservation purpose.
  • The 2003 easement property does not qualify as a “relatively natural habitat” or as a “natural” habitat, and accordingly is not a “natural area” that “contributes to” the ecological viability of a local conservation area known as the Middle Swamp or surrounding undeveloped area.
  • The 2003 easement property does not act as a “wildlife corridor” or “sink” for any species.
  • On the basis of the foregoing, rare, endangered, or threatened wildlife and plants are not “most likely” to be found or do not “normally live” on the 2003 easement property.
  • The 2005 easement suffers from the same problems as the 2003 easement.

The court also addressed the conservation purpose of preserving open space, although neither party presented expert testimony to establish whether the easement areas serve that purpose. First the court concluded that the taxpayers did not establish any clearly delineated governmental policies that apply to either easement area. Then the court concluded that the easement areas did not meet the public benefit test, because there was no evidentiary basis to conclude either that the general public has physical or visual access.

The court accordingly found that the easements did not meet the conservation purpose requirement of a qualified conservation contribution.

The court declined to impose an accuracy related penalty, finding that the taxpayers qualify for the reasonable cause defense of section 6664(c)(1) because, in relying on various experts as to the qualification of the easements, they had reasonable cause and acted in good faith in claiming the deduction.

Decision available at

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