Landowners aim to reclaim losses in easement scandal
By Jerd Smith, Rocky Mountain News
Published August 11, 2008 at 12:05 a.m.
Hundreds of landowners caught up in the state's conservation easement scandal are joining forces in hopes of reclaiming thousands of dollars lost on transactions now deemed invalid.
"It's one of the worse messes I've been in, and it's not getting any better," said J.D. Wright, a rancher in Ordway who placed his lands under easement.
At issue is an innovative state program in which landowners who agree to permanently protect their properties from development can claim lucrative state income tax credits. The credits - worth as much as $350,000 each - can be sold for cash.
But in the eight years since the program took effect, dozens of instances of suspected fraud and abuse have been uncovered. Now, the Colorado Department of Revenue is seeking at least $19 million in repayment, and that number is expected to grow. Attorney General John Suthers has convened a grand jury to investigate questionable transactions.
Tonight, more than 100 landowners, legislators and others are expected to gather in Swink, near Rocky Ford, to map out ways to resurrect the value of their tax credits.
The program was intended to protect scenic lands and working ranches. And in many instances that has occurred.
But an investigation by the Rocky Mountain News earlier this year found that an array of questionable tactics was used to generate tax credits, including placing land in subdivisions and on golf courses under easement; protecting lands for conservation purposes while also allowing oil and gas development on them, and subdividing land into small parcels so that multiple tax credits could be claimed.
This year, lawmakers passed a major reform bill that will require more oversight of the program. But with investigations continuing, the tax credits have been almost impossible to sell. Also, some of the credits have been ruled invalid by either the IRS or the state because appraisals were inflated or because the land had little conservation value.
Still, landowners who believe they tried to do the right thing are angry with the state for enacting what they say is a poorly written law.
LeRoy Brase, a rancher in Prowers County, spent $40,000 on appraisal, accounting and legal fees to place his lands under easement. But the tax credits have been deemed invalid by the IRS because, according to Brase, they were done by an appraiser whose work has since come under fire.
Brase is still farming the land, but he said the conservation easement program has become so tarnished that no one will even talk to him about re-evaluating the easements.
"I wish I was the only landowner in this situation," he said, "but there are hundreds of us."
How much, if any, relief is available isn't clear.
Jill Ozarski, executive director of the Colorado Coalition of Land Trusts, said her organization is trying to help landowners find solutions. Landowners can seek new appraisals, so they can get some value from the tax credits, even though it may be less than originally planned, Ozarski said. Or they can also take legal action against the professional who advised them on the deals.
J.D. Wright, who has testified repeatedly at the legislature about the bungled easement program, is angry and frustrated at the land trust community and the state. He feels he entered the program in good faith and wound up with nothing.
"I think this program is without any leadership," Wright said. "The CCLT contends they know how to take care of this thing, but the truth is they don't. There are acres and acres of land with conservation easements on them, and no money has ever come back to the participants."
smithj@RockyMountainNews.com or 303-954-5474
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Darwin writes:
Knock, knock, knock. "Hello, I'm from the government and I'm here to help you...". I can't imagine why some people want more government programs after seeing examples of this scam as well as Social Security, Medicare, etc. Hey, the government pays farmers, which includes me as a farmer (Indiana) to not grow crops on part of our land - soil conservation, land regeneration.