Measure targets land tax credits

Bill seeks policing of easement deals

By Jerd Smith, Rocky Mountain News

Saturday, March 8, 2008

A program that has handed out more than $274 million in state tax credits in exchange for "conservation easements" on private lands would be policed for the first time by a new commission under proposed legislation.

The land conservation program, one of the most aggressive in the country, has come under fire for dispensing the lucrative tax credits based on inflated appraisals and because of the questionable public value of some lands that have been protected.

Under a regulatory scheme proposed Friday by Rep. Alice Madden, D-Boulder, and Sen. Jim Isgar, D-Hesperus, the land trusts granting the conservation easements would have to be certified to ensure they have the expertise to evaluate complicated land transactions, as well as the ability to protect their conservation easements from future development, as required by law.

"Essentially, we're setting up screening processes," Madden said. "Unless (proposed easements) can pass that review, they will be held up. Obviously, there are a lot of legitimate tax credits and a number of bad ones. It will take human eyes to catch these things."

The bill would create a 10-member commission, staffed by the Division of Real Estate, to advise the state on conservation easements where tax credits are being claimed. It also would work to certify the land trusts and local governments that grant easements.

The legislation also would require appraisals be reviewed by the Division of Real Estate and that fees be charged to cover the costs of the additional oversight.

The idea behind the easement program was to protect important scenic lands and working ranches, but an investigation by the Rocky Mountain News found tax credits have been claimed on lots in pricey gated subdivisions, on golf courses and on small parcels that also allowed for oil and gas development.

Last year, the Division of Real Estate began investigating appraisers involved in questionable transactions, and the Department of Revenue has begun seeking repayment of at least $15 million in improper tax credits.

Until now, no single state agency has overseen the program. Instead, nonprofit land trusts and local governments were charged with evaluating the deals and then authorizing landowners to claim the tax credits, which can be sold for cash.

The Rocky's investigation found a number of transactions in which a single parcel of land was divided into multiple parcels whose ownership was then transferred to newly created companies. Each company then collected a tax credit, apparently to avoid a provision of the law that allows only one tax credit per easement.

The new proposal does not expressly prohibit such practices, Madden said.

"But a certified land trust would never approve something like that," Madden said.

smithj@RockyMountainNews.com or 303-954-5474