A move to make land trusts more accountable
by Jennie Lay
Land Trust Alliance unveils accreditation program
to weed out ‘bad actors’
A Better Business Bureau for land trusts:
That’s what the Land Trust Alliance would like to see, instead
of federal legislation that would likely end most tax incentives for
land conservation.
Under the national organization’s newly unveiled voluntary
accreditation program, land trusts will soon be able to open up
their books and their conservation easements to an independent commission
for its stamp of approval.
"It took a long time for the (land trust) industry to come
around to this being OK," says Martha Cochran, executive director
of the Aspen Valley Land Trust, Colorado’s oldest. But she
and other leaders now believe that accreditation is essential to
alleviate growing concerns that conservation easements are too easily
abused for personal gain (HCN, 5/30/05: Write-off on the Range).
Conservation easements have become the primary tool for preserving
private land. An easement is a deed restriction that restricts or
eliminates future development rights. Landowners can donate those
development rights to a land trust — a private nonprofit land-conservation
organization — in exchange for federal tax deductions. As
an added incentive, 14 states offer their own tax credits for donating
conservation easements.
Concerns about abuse of conservation easements hit the national
news in 2003, when the Washington Post published a series of stories
about dubious land deals and conflict of interest within the leadership
of The Nature Conservancy, the world’s largest land-conservation
organization. The Post also exposed a few smaller land trusts doing
questionable easements, and wealthy landowners taking hefty tax
write-offs for easements on golf courses, dude ranches, and bits
of open land in ritzy subdivisions.
The coverage caught the eye of Congress, which began holding hearings
and commissioned a report from the Joint Committee on Taxation.
Released in January 2005, the report recommended eliminating almost
all benefits for conservation donations. The Internal Revenue Service
also jumped in, announcing that it would do an unprecedented 400
audits of conservation easements this year.
"Conservation easements and land trusts
really have been wearing the white hats for 30 years," says
land trust veteran Dan Pike, president of Colorado Open Lands. "Now
they’re under attack — and frankly, some of it is justified."
A test run in Colorado
In an attempt to get ahead of Congress and the
IRS, earlier this year the Land Trust Alliance, which represents more
than 1,000 of the nation’s 1,500 land trusts, conducted several
pilot tests of the accreditation program it has been developing since
2004. The group zeroed in on Colorado, where a generous state tax
credit program has made conservation easements extremely popular and
where the IRS is conducting half of its 400 audits. Three land trusts
— Estes Valley, Eagle Valley and Aspen Valley — allowed
two evaluators to comb through hundreds of pages of policies and easement
agreements and to do site visits of specific easements.
The Colorado test results will help shape the national program,
according to Rand Wentworth, president of the Land Trust Alliance.
The national program will be carried out by a commission of experts
who will look at 42 specific factors to determine the overall financial
and ethical health of land trusts. They’ll scrutinize specific
conservation easements, funding sources, and policies for dealing
with issues such as conflict of interest. They’ll even drill
down to such specifics as how a land trust protects its easement
documents from fire and flood. Wentworth says the alliance will
further hone the program with more testing before officially launching
it in 2008.
What will Congress do?
Most land trusts have embraced the idea of voluntary
accreditation, though some smaller trusts say they will have a difficult
time finding the time and manpower to pull together all the necessary
documents. Other land-trust officials worry that the program does
not include local governments, which hold many conservation easements
and have also come under fire for providing inadequate oversight.
But the biggest hurdle remains Congress, which is still debating changes
to the tax code affecting land conservation.
Wentworth says the accreditation program should convince Congress
that it does not need to impose severe restrictions because, ultimately,
the private sector should regulate itself. He suggests that the IRS
could use the absence of accreditation as one of the triggers for
an audit.
Others argue for a stronger role for accreditation.
Colorado Open Lands’ Pike believes the tax-exempt status of
land trusts should be tied to accreditation, while Eagle Valley’s
Cohagen argues that the IRS should allow tax deductions only for
landowners who work through accredited trusts.
However, a Senate aide involved in ongoing
discussions with the Land Trust Alliance says that the accreditation
program, although a vital step, is still not enough. Additional
measures will be needed to end conservation easement abuses, says
the aide, including stricter land-appraisal standards.
At a recent meeting of land trusts, Pike outlined
what he thinks some of those new measures will be when a tax bill
finally makes it out of the Senate: formal appraisal standards for
conservation easements, including a requirement for two appraisals
on any donation over $5 million; personal accountability for land-trust
boards and staff members in cases of fraud; the elimination of deductions
for golf courses and small "backyard"-size easements;
and, as a reward for good conservation practices, a possible bump
in the size and duration of income tax deductions.
Mike Strugar, a Colorado tax credit broker,
welcomes the changes. "You’re supposed to be getting
the tax benefits for something that hurts," he says. "If
it doesn’t hurt you, if you’re not leaving something
on the table, you shouldn’t be getting the benefits."
The author writes from Steamboat Springs, Colo.
