Belair Woods, LLC, Effingham Managers, LLC, Tax Matters Partner v. Commissioner , 2020 T.C. Memo. 112 ( 2020 )

T.C. Memo. 2020-112
UNITED STATES TAX COURT
BELAIR WOODS, LLC, EFFINGHAM MANAGERS, LLC,
TAX MATTERS PARTNER, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 19493-17. Filed July 22, 2020.
David M. Wooldridge, Ronald Levitt, Gregory P. Rhodes, and Michelle A.
Levin, for petitioner.
Christopher D. Bradley, Jason P. Oppenheim, John W. Sheffield III, and
John T. Arthur, for respondent.
MEMORANDUM OPINION
LAUBER, Judge: This is one of many cases in this Court involving chari-
table contribution deductions for conservation easements. Currently before the
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[*2] Court is a motion for partial summary judgment filed by the Internal Revenue
Service (IRS or respondent). Respondent contends that the charitable contribution
deduction claimed by Belair Woods, LLC (Belair), was properly disallowed be-
cause the conservation purpose underlying the easement was not “protected in
perpetuity” as section 170(h)(5)(A) requires.1 That is so, respondent urges, be-
cause the easement deed contravenes the requirement that the grantee receive, in
the event the easement is extinguished, a proportionate share of the proceeds upon
any subsequent sale of the property. See sec. 1.170A-14(g)(6), Income Tax Regs.2
The questions presented by respondent’s motion are substantially similar to
those decided adversely to the taxpayers in PBBM-Rose Hill, Ltd. v. Commission-
1
Unless otherwise indicated, all statutory references are to the Internal
Revenue Code (Code) in effect for the year at issue, all Rule references are to the
Tax Court Rules of Practice and Procedure, and all paragraph references are to the
paragraphs of the deed of conservation easement at issue. We round monetary
amounts to the nearest dollar.
2
This is the third opinion we have issued in this case. In Belair Woods, LLC
v. Commissioner, T.C. Memo. 2018-159, we held that Belair failed to satisfy the
requirement that it attach a fully-completed “appraisal summary” to the return on
which its deduction was claimed. See sec. 1.170A-13(c)(2)(i)(B), Income Tax
Regs. However, we reserved for trial the question whether Belair could excuse
this failure by showing that it “[wa]s due to reasonable cause and not to willful ne-
glect.” See sec. 170(f)(11)(A)(ii)(II). In Belair Woods, LLC v. Commissioner,
154 T.C. ___ (Jan. 6, 2020), we addressed, and resolved mostly in respondent’s
favor, the parties’ dispute as to whether the IRS had obtained timely supervisory
approval, as required by section 6751(b)(1), for the accuracy-related penalties it
determined in this case.
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[*3] er, 900 F.3d 193 (5th Cir. 2018); Oakbrook Land Holdings, LLC v.
Commissioner, 154 T.C. __ (May 12, 2020); Coal Prop. Holdings, LLC v.
Commissioner, 153 T.C. 126 (2019); and Carroll v. Commissioner, 146 T.C. 196
(2016). But petitioner also proffers in support of its position several arguments
that we have not previously addressed. Adhering to the analyses in our prior
opinions, and rejecting the additional arguments petitioner advances, we will grant
respondent’s motion.
Background
There is no dispute as to the following facts, which are drawn from the peti-
tion, the parties’ motion papers, and the attached declarations and exhibits. Belair
is a Georgia limited liability company (LLC) that has operated at all times as a
partnership for Federal income tax purposes. Belair had its principal place of
business in Georgia when it filed its petition.
In December 2008 Belair acquired, by contribution from HRH Investments,
LLC (HRH), a 145-acre tract of land in Effingham County, Georgia. On Decem-
ber 30, 2009, Belair donated a conservation easement over 141 acres of that tract
to the Georgia Land Trust (GLT or grantee), a “qualified organization” for pur-
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[*4] poses of section 170(h)(3). We will refer to this 141-acre tract as the
conserved area or the Property. The deed of easement was recorded the same day.3
The easement deed recites several conservation purposes, including promo-
tion of governmental policies set forth in Georgia’s Uniform Conservation Ease-
ment Act and related laws. See Ga. Code Ann. secs. 44-10 et seq., 48-7-29.12
(2019). The deed generally prohibits commercial or residential development. But
it reserves certain rights to Belair as grantor, including the rights to conduct
commercial agricultural and timber-harvesting activities within the conserved
area. Belair also reserved the right to construct within the conserved area “a
limited number of new improvements.” These improvements could include the
development of “woods roads” for permitted agricultural and forestry activities,
construction of an irrigation system capable of irrigating up to 20 acres,
maintenance of existing roads, construction of two ponds for recreational pur-
3
HRH or its affiliates contributed other tracts of land in Effingham County
to other LLCs, and Effingham Managers, LLC, petitioner in this case, served as
tax matters partner for most of these LLCs. Each LLC granted a conservation
easement to GLT. The IRS has challenged the charitable contribution deductions
claimed by the LLCs for those other donations. See Englewood Place, LLC v.
Commissioner, T.C. Memo. 2020-105; Maple Landing, LLC v. Commissioner,
T.C. Memo. 2020-104; Riverside Place, LLC v. Commissioner, T.C. Memo.
2020-103; Village at Effingham, LLC v. Commissioner, T.C. Memo. 2020-102;
Oakhill Woods, LLC v. Commissioner, T.C. Memo. 2020-24; Cottonwood Place,
LLC v. Commissioner, T.C. Dkt. No. 14076-17; Red Oak Estates, LLC v. Com-
missioner, T.C. Dkt. No. 13659-17.
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[*5] poses, and the construction of residential driveways and utilities (including
water, septic, and power lines) to serve a pair of adjacent two-acre residential
parcels owned by Belair.
The deed recognizes the possibility that the easement might be extinguished
at some future date. In the event the property were sold following judicial extin-
guishment of the easement, paragraph 17 provided that “[t]he amount of the pro-
ceeds to which Grantee shall be entitled, after the satisfaction of any and all prior
claims, shall be determined, unless otherwise provided by Georgia law at the time,
in accordance with the Proceeds paragraph.” Paragraph 19, captioned “Proceeds,”
specified that the deed granted the Conservancy “a real property interest, immedi-
ately vested in Grantee,” and that this vested property interest entitled the
Conservancy to receive, in the event of an extinguishment, a share of any future
proceeds determined
by multiplying the fair market value of the Property unencumbered by
this Conservation Easement (minus any increase in value after the
date of this Conservation Easement attributable to improvements) by
the ratio of the value of the Conservation Easement at the time of this
conveyance to the value of the Property at the time of this conveyance
without deduction for the value of the Conservation Easement.
Belair timely filed Form 1065, U.S. Return of Partnership Income, for its
taxable year beginning November 11 and ending December 31, 2009. On that
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[*6] return it claimed a charitable contribution deduction of $4,778,000 for its
donation of the easement. Belair relied on an appraisal by David R. Roberts, who
used the “before and after method” to determine the easement’s fair market value
(FMV).4
The IRS selected Belair’s 2009 return for examination. On June 19, 2017,
the IRS issued Belair a timely notice of final partnership administrative adjustment
(FPAA) disallowing the charitable contribution deduction in full because Belair
had not shown that the requirements of section 170 were met. The FPAA alterna-
tively determined that, if any deduction were allowable, Belair had not established
that the FMV of the easement exceeded zero. The FPAA determined a 40% “gross
valuation misstatement” penalty under section 6662(h) and (in the alternative) a
20% accuracy-related penalty under other provisions of section 6662(a).
Petitioner timely petitioned this Court for readjustment of the partnership
items. See sec. 6226(f). On October 11, 2018, respondent filed a motion for par-
4
Mr. Roberts’ appraisal states that the 145-acre tract was part of a larger
1,447-acre tract acquired by HRH in August 2007 for $3,818,200, or $2,639 per
acre. Assuming that to be true, Mr. Roberts’ valuation supposed that the Property
had appreciated in value by nearly 1,300% during the Great Recession. Mr.
Roberts was the original appraiser in many other conservation easement cases that
this Court has decided. See, e.g., Plateau Holdings, LLC v. Commissioner, T.C.
Memo. 2020-93; Woodland Prop. Holdings, LLC v. Commissioner, T.C. Memo.
2020-55; Oakhill Woods, LLC v. Commissioner, T.C. Memo. 2020-24.
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[*7] tial summary judgment addressed to the “judicial extinguishment” issue.
Petitioner timely responded to that motion.
Discussion
A. Summary Judgment Standard
The purpose of summary judgment is to expedite litigation and avoid costly,
unnecessary, and time-consuming trials. See FPL Grp., Inc. & Subs. v. Commis-
sioner, 116 T.C. 73, 74 (2001). We may grant partial summary judgment regard-
ing an issue as to which there is no genuine dispute of material fact and a decision
may be rendered as a matter of law. Rule 121(b); Elec. Arts, Inc. v. Commission-
er, 118 T.C. 226, 238 (2002). Petitioner has alleged no genuine dispute of materi-
al fact affecting the question that respondent has proposed for summary adjudica-
tion. We conclude that this question may appropriately be adjudicated summarily.
B. Judicial Extinguishment
The Code generally restricts a taxpayer’s charitable contribution deduction
for the donation of “an interest in property which consists of less than the taxpay-
er’s entire interest in such property.” Sec. 170(f)(3)(A). But there is an exception
for a “qualified conservation contribution.” Sec. 170(f)(3)(B)(iii), (h)(1). For the
donation of an easement to be a “qualified conservation contribution,” the conser-
vation purpose must be “protected in perpetuity.” Sec. 170(h)(5)(A).
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[*8] The regulations set forth detailed rules for determining whether this “protec-
ted in perpetuity” requirement is met. Of importance here are the rules governing
the mandatory division of proceeds in the event the property is sold following a
judicial extinguishment of the easement. See sec. 1.170A-14(g)(6), Income Tax
Regs. The regulations recognize that “a subsequent unexpected change in the con-
ditions surrounding the property that is the subject of a donation * * * can make
impossible or impractical the continued use of the property for conservation pur-
poses.” Id. subdiv. (i). Despite that possibility, “the conservation purpose can
nonetheless be treated as protected in perpetuity if the restrictions are extinguished
by judicial proceeding” and the easement deed ensures that the charitable donee,
following sale of the property, will receive a proportionate share of the proceeds
and use those proceeds consistently with the conservation purposes underlying the
original gift. Ibid. In effect, the “perpetuity” requirement is deemed satisfied be-
cause the sale proceeds replace the easement as an asset deployed by the donee
“exclusively for conservation purposes.” Sec. 170(h)(5)(A).
The judicial extinguishment provisions of the deed in this case are substan-
tially similar to those that we considered in Coal Prop. Holdings, 153 T.C. 130-
131. Following our reasoning in that case, we conclude that Belair’s deed fails to
satisfy the “protected in perpetuity” requirement for two reasons.
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[*9] First, the regulatory fraction used in the deed to determine the grantee’s
proportionate share of post-extinguishment proceeds is applied, not to the full sale
proceeds--an amount presumably equivalent to the FMV of the property at the
time of sale--but to the proceeds “minus any increase in value after the date of this
Conservation Easement attributable to improvements.” Thus, the grantee’s share
is improperly reduced on account of (i) appreciation in the value of improvements
existing when the easement was granted plus (ii) the FMV of any improvements
that the donor or its successors subsequently make to the property. By reducing
the grantee’s share in this way, the deed violates the regulatory requirement that
the donee receive, in the event the property is sold following extinguishment of
the easement, a share of proceeds that is “at least equal to the proportionate value
that the perpetual conservation restriction at the time of the gift, bears to the value
of the property as a whole at that time.” See sec. 1.170A-14(g)(6)(ii), Income Tax
Regs.
As we have noted previously, the requirements of this regulation “are strict-
ly construed.” Carroll, 146 T.C. 212. Because the grantee in this case “is not
absolutely entitled to a proportionate share of * * * [the] proceeds” upon a post-
extinguishment sale of the Property, the conservation purpose underlying the con-
tribution is not “protected in perpetuity.” Coal Prop. Holdings, LLC, 153 T.C.
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[*10] at 127, 139; accord, Plateau Holdings, LLC v. Commissioner, T.C. Memo.
2020-93, at *23; Oakbrook Land Holdings, LLC v. Commissioner, T.C. Memo.
2020-54. The U.S. Court of Appeals for the Fifth Circuit has likewise sustained
the disallowance of a charitable contribution deduction where the judicial
extinguishment provision of an easement deed included a carve-out for donor
improvements similar to that here. See PBBM-Rose Hill, 900 F.3d at 208.
The easement deed here has a second problem, which was also present in
Coal Prop. Holdings. The grantee’s tentative share of the proceeds, as determined
under paragraph 19 of the deed, is adjusted further by paragraph 17. It provides
that the grantee’s share will be determined under the Proceeds paragraph, but only
“after the satisfaction of any and all prior claims.” Prior claims against the sale
proceeds might be held by various creditors of Belair or its successors.
It is not necessarily unreasonable for a deed to provide that prior claims may
be paid from sale proceeds. What is unreasonable is the requirement that all prior
claims be paid out of the grantee’s share of the proceeds, even if those claims
represent liabilities of Belair or its successors. See Coal Prop. Holdings, LLC, 153
T.C. 145 n.5. Because the grantee’s share of the proceeds is improperly reduced
by carve-outs both for donor improvements and for claims against the donor, the
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[*11] deed’s judicial extinguishment provisions do not satisfy the regulatory
requirements.
If the regulation is interpreted, as we have interpreted it, to make Belair
ineligible for a charitable contribution deduction, Belair contends that the regula-
tion is invalid. It urges that section 1.170A-14(g)(6), Income Tax Regs., is an
“arbitrary and capricious” rule promulgated in violation of the Administrative
Procedure Act. And it contends that the regulation is substantively invalid under
the test set forth in Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S.
837 (1984). We comprehensively addressed and rejected both of these arguments
in a recent Court-reviewed Opinion. See Oakbrook Land Holdings, LLC v. Com-
missioner, 154 T.C. at __ (slip op. at 15-33). We need not repeat that analysis
here.5
5
Petitioner draws our attention to Priv. Ltr. Rul. 200836014 (Sept. 5, 2008)
(PLR), in which the IRS found unobjectionable an easement deed with a judicial
extinguishment clause resembling that here. Petitioner contends that respondent’s
interpretation of the regulation as set forth in that PLR is binding on respondent
under Auer v. Robbins, 519 U.S. 452, 461 (1997). Petitioner’s argument ignores
the fact that determinations embodied in a PLR “may not be used or cited as prece-
dent.” Sec. 6110(k)(3). The taxpayer in PBBM-Rose Hill brought the same PLR
to the Court of Appeals’ attention, but that court paid no heed to it, finding the
regulation unambiguous on its face. See PBBM-Rose Hill, Ltd. v. Commissioner,
900 F.3d 193, 207-208 (5th Cir. 2018). We have done the same. See Coal Prop.
Holdings, 153 T.C. 144; Hewitt v. Commissioner, T.C. Memo. 2020-89, at *20-
*21 (concluding that the PLR “is neither persuasive nor relevant”).
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[*12] C. Petitioner’s Additional Arguments
1. Estoppel
Petitioner contends that judicial estoppel should prevent the IRS from disal-
lowing Belair’s deduction because, in an unrelated case, the Government stipulat-
ed that a deed with an analogous extinguishment clause satisfied the regulations.
Petitioner directs our attention to DMB Realco LLC v. United States, Civil
No. 16-1585-NVW (D. Ariz. filed May 23, 2016), where the IRS had disallowed a
$26.44 million charitable contribution deduction for a conservation easement. The
parties filed a “joint stipulation of facts for purposes of summary judgment” in
which they stipulated that the easement deed, originally conveyed in 2006, satis-
fied the “judicial extinguishment” regulation after the deed was amended in 2012.
The Government concurrently filed a motion for summary judgment contending
that the original, unamended deed controlled as to whether the taxpayer was enti-
tled to a deduction. Before the court could hear argument on that motion, the par-
ties reached a settlement that allowed the taxpayer a deduction of $6.61 million.
Judicial estoppel applies in the Tax Court. See Huddleston v. Commission-
er, 100 T.C. 17, 28 (1993). Generally, three non-exhaustive factors guide our
analysis when asked to invoke this doctrine. We consider whether: (1) “a party’s
later position * * * [is] ‘clearly inconsistent’ with its earlier position,” (2) “the
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[*13] party has succeeded in persuading a court to accept that party’s earlier
position,” and (3) “the party seeking to assert an inconsistent position would
derive an unfair advantage.” New Hampshire v. Maine, 532 U.S. 742, 750-751
(2001). Where (as here) a party seeks to invoke judicial estoppel on the basis of a
prior proceeding to which it was not a party, the Court of Appeals for the Eleventh
Circuit--to which an appeal of this case would appear to lie--instructs trial courts
to apply a stricter, two-factor test. That test asks whether: “(1) the party took an
inconsistent position under oath in a separate proceeding, and (2) the inconsistent
positions were ‘calculated to make a mockery of the judicial system.’” Slater v.
U.S. Steel Corp., 871 F.3d 1174, 1181 (11th Cir. 2017) (quoting Burnes v. Pemco
Aeroplex, Inc., 291 F.3d 1282, 1285 (11th Cir. 2002)).
None of these conditions is met here. The Government’s “earlier position”
was simply a concession, and it evidently made that concession for the purpose of
facilitating summary judgment on another theory that it deemed meritorious. Par-
ties to litigation make concessions for all sorts of reasons unrelated to the underly-
ing merits, and the Government’s action in the Arizona case was not “clearly in-
consistent” with respondent’s current position. Ibid. (quoting New Hampshire,
532 U.S. at 750-751). Nor did the Government “persuad[e] a court to accept * * *
[its] earlier position.” Ibid. Because the Government made a tactical stipulation
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[*14] and ultimately settled the case, the District Court had no occasion either to
accept or to reject the Government’s position. See Kaplan v. Commissioner, 795
F.3d 808, 813 (8th Cir. 2015), aff’g T.C. Memo. 2014-43. Finally, petitioner has
not shown how the Government’s concession in the earlier case would allow it to
derive “an unfair advantage,” see New Hampshire, 532 U.S. at 751, much less that
it was “calculated to make a mockery of the judicial system,” see Slater, 871 F.3d
at 1181; Smith Lake, LLC v. Commissioner, T.C. Memo. 2020-107.
2. Supposed Irrelevance of Improvements
The regulation requires that the grantee must be entitled to a proportionate
share of proceeds from a subsequent sale, exchange, or involuntary conversion “of
the subject property.” Sec. 1.170A-14(g)(6)(ii), Income Tax Regs. The “subject
property” means “the property that is the subject of a donation under this para-
graph,” as to which the surrounding conditions have unexpectedly changed. Id.
subdiv. (i). Petitioner urges that the regulation does not require the grantee to
receive any proceeds attributable to improvements because improvements are not
part of “the property that is the subject of a donation under this paragraph.” Ibid.
Rather, petitioner contends that the “property that is the subject of [the] donation”
is simply “the underlying land.”
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[*15] We disagree. The donation of a conservation easement gives rise to a de-
duction only if it imposes “a restriction (granted in perpetuity) on the use which
may be made of the real property.” Sec. 170(h)(2)(C). The “donation under this
paragraph” thus consists of the use restrictions that are imposed in perpetuity by
the easement deed. See sec. 1.170A-14(g)(6)(i), Income Tax Regs. The restric-
tions imposed by the easement deed necessarily apply, not only to the land, but
also to any improvements made by the grantor pursuant to its reserved rights.
Here, the deed reserves to Belair the right to conduct forestry and agricul-
tural activities, but it restricts the scale of those activities and the manner in which
they may be performed. Para. 4(a) and (b). The deed reserves to Belair the right
to “construct a limited number of new improvements,” but restricts that right in
various ways. The deed specifies the permissible location of residential driveways
and utility lines, including water, septic, and power lines. Para. 4(e)(i). Utility
lines must be buried if possible “so as to minimize interference with the scenic
nature” of the conserved area. Ibid. The installation of any irrigation system must
not “interfere with the Conservation Values protected herein.” Para. 4(e)(ii).
“Utility and driveway placement and any construction performed shall be done in
such a manner as to minimize damage to the environment and the Conservation
Values.” Para. 4(e)(iii). “Roads, the driveway and utilities shall not be placed in
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[*16] locations which significantly interfere with the Conservation Values.” Ibid.
Any ponds constructed may not exceed four acres in toto, may not “impact the
ecological integrity of any wetlands [or] creek,” and are conditioned on the
Conservancy’s approval as to location. Para. 4(f).
In short, the deed’s restrictions are imposed on the entirety of the conserved
area--both the land and any improvements Belair makes to it. The “property that is
the subject of * * * [the] donation” thus includes both the land and its improve-
ments. Sec. 1.170A-14(g)(6)(i), Income Tax Regs.; see Hewitt v. Commissioner,
T.C. Memo. 2020-89, at *18 (“The subject property refers to the property that is
sold that generates the proceeds after the easement is extinguished.”). The pro-
ceeds that the Conservancy must receive upon a post-extinguishment sale of the
subject property thus include the Conservancy’s proportionate share of proceeds
attributable to improvements.6
6
This conclusion is consistent with a commonsense understanding of the
regulatory language referring to proceeds from sale “of the subject property.” Sec.
1.170A-14(g)(6)(ii), Income Tax Regs. Owners of real estate do not typically sell
roads, driveways, ponds, or buried utility lines separately from the real estate on
which those improvements are situated. If the property is sold, the sale proceeds
are necessarily attributable both to the land and to the attached improvements.
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[*17] 3. Supposed Worthlessness of Improvements
Petitioner next asserts that any future improvements would not meaningfully
increase the value of the subject property. For that reason, petitioner contends that
the deed’s carve-out for donor improvements would not cause the Conservancy to
receive less than its full proportionate share of post-extinguishment proceeds. In
essence, petitioner urges that this is a case of “no harm, no foul.”
Again we disagree. To start, petitioner’s contention rests uneasily with the
terms of the deed. Paragraph 4(a) reserves to Belair the right to “construct a limit-
ed number of new improvements” and enumerates the types of improvements that
Belair may make. Paragraph 19 explicitly subtracts from the sale proceeds, and
reserves to Belair, “any increase in value after the date of this Conservation Ease-
ment attributable to improvements.” It is hard to understand why the draftsperson
would have included this language if Belair had believed that its anticipated im-
provements would not enhance the property’s value. And it seems entirely plausi-
ble that they would do so: Roads, driveways, irrigation systems, water pipes, elec-
tric cables, and septic systems have value intrinsically and as furnishing essential
services to Belair’s adjoining residential parcels.
Deductions are a matter of legislative grace, and a taxpayer must prove its
entitlement to the deductions it claims. INDOPCO, Inc. v. Commissioner, 503
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[*18] U.S. 79, 84 (1992). To be entitled to a deduction for the donation of a
conservation easement, the donor must ensure that the donation “gives rise to a
property right, immediately vested in the donee organization,” to receive a
proportionate share of the proceeds of any post-extinguishment sale. Sec. 1.170A-
14(g)(6)(ii), Income Tax Regs. The deed here does not meet this test because it
reserves to Belair the right to make “improvements” of obvious value and to retain
all proceeds attributable to those improvements.7
4. Georgia Law
The regulation entitles the grantee to a proportionate share of post-extin-
guishment proceeds “unless state law provides that the donor is entitled to the full
proceeds from the conversion without regard to the terms of the prior perpetual
conservation restriction.” Ibid. Petitioner contends that Georgia law (the law ap-
plicable here) would preclude the Conservancy from receiving any proceeds in a
condemnation proceeding involving the property. According to petitioner, a con-
7
Citing Thornton v. Dep’t of Transp., 620 S.E.2d 621, 624 (Ga. Ct. App.
2005), petitioner urges that “the cost to build a driveway on a property does not
reflect the property’s fair market value.” It is true that money spent to improve
property does not necessarily produce a dollar-for-dollar increase in the FMV of
the property. But it does not follow that a combination of roads, driveways,
irrigation systems, water pipes, electric cables, and septic systems would have no
effect on the FMV of the conserved area. In any event, petitioner can only
speculate about the future value of the specific improvements it has retained the
right to make but has not yet made.
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[*19] servation easement is not compensable to the grantee in a Georgia
condemnation proceeding.
Petitioner directs our attention to Anderson v. Lynch, 3 S.E.2d 85 (Ga.
1939). That case involved contiguous parcels of land, each subject to a covenant
restricting it to residential use. The city condemned one of the lots for use as a
public road, a nonresidential use. The court held that the owners of the neighbor-
ing lots had no compensable interest in the condemnation proceeding, reasoning
that they held no property interest in the lot sought to be condemned. Id. at 89.
“The most that can be said,” the court concluded, “is that the restrictive covenants
* * * are enforceable as between the parties thereto and their successors with
notice. They do not convey an interest in the land.” Ibid.
Petitioner’s argument is unpersuasive for at least three reasons. First, peti-
tioner cites no Georgia authority that extends the principles of Anderson to conser-
vation easements held by charitable organizations. Well after Anderson was de-
cided, Georgia enacted (with a few minor alterations) the Uniform Conservation
Easement Act. See Ga. Code Ann. secs. 44-10 et seq. Georgia’s public policy
now appears to favor enforcement of conservation easements; indeed, the deed in
this case recites several of these policies. See supra p. 4.
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[*20] Second, the court in Anderson reasoned that the plaintiffs owned no prop-
erty interest in the land sought to be condemned. Here, by contrast, the deed of
easement explicitly grants the Conservancy “a real property interest, immediately
vested in Grantee.” Para. 19; see sec. 1.170A-14(g)(6)(ii), Income Tax Regs.
(requiring donor to agree that the easement “gives rise to a property right, immedi-
ately vested in the donee organization”).
Georgia’s takings clause now makes compensable “every species of proper-
ty, real and personal, corporeal and incorporeal.” Bowers v. Fulton Cty., 146 S.E.
2d 884, 889 (Ga. 1966). Moreover, whereas the plaintiffs’ claims in Anderson
were speculative, the deed here provides an explicit method for determining the
value of the Conservancy’s real property interest. See Palm Beach Cty. v. Cove
Club Inv’rs Ltd., 734 So. 2d 379, 385-387 (Fla. 1999) (distinguishing Anderson
and related cases where a condemnation claimant had a contractual right to com-
pensation that was “far from speculative,” reducing the risk of “an endless number
of claims based on unknown and incalculable depreciation of value to land”).
Finally, as petitioner recognizes, Anderson addressed the narrow situation
where property was “converted to public use through a condemnation.” The extin-
guishment regulation, by contrast, applies broadly wherever an “unexpected
change in the conditions surrounding the property * * * make[s] impossible or
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[*21] impractical * * * [its] continued use * * * for conservation purposes.” Sec.
1.170A-14(g)(6)(i), Income Tax Regs. Even if Anderson were thought to deny the
Conservancy any proceeds in the event of condemnation, petitioner has supplied
no Georgia authority for the proposition that the same result would follow if the
easement were judicially extinguished in other ways or for other reasons, e.g.,
because the property had become blighted or the conservation purpose had other-
wise become impossible to accomplish. See Carroll, 146 T.C. 219 (reasoning
similarly regarding a Maryland condemnation provision). For all these reasons,
we hold that Anderson does not suffice to establish that Georgia law would entitle
Belair, following a judicial extinguishment of the easement, “to the full proceeds
from the conversion without regard to the terms of the * * * perpetual conserva-
tion restriction.” See sec. 1.170A-14(g)(6)(ii), Income Tax Regs.
To implement the foregoing,
An order will be issued granting
respondent’s motion for partial summary
judgment.