Landowners air concerns to easement commission

By Jerd Smith, Rocky Mountain News

Published November 11, 2008 at 12:05 a.m.

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LA JUNTA - Five years ago, longtime ranchers Jillane Hixson and her brothers borrowed $70,000 to pay for what they considered an honorable gesture, placing their ranch lands outside Lamar under conservation easement.

The transaction would permanently bar development on the property, and, in exchange, the family would receive state tax credits they could sell for cash.

Plagued by drought and looking for ways to finance their operations, Hixson and many of her neighbors thought the program was a lifesaver.

Not anymore.

Now they're being audited by the Internal Revenue Service and the state. Hixson said her attorneys have told her to expect to pay back more than $200,000 in taxes, penalties and interest, far more than they received when they sold the credits.

"And the people who bought my tax credits are suing me," she said, because the credits, which can be used to offset tax bills, are now in question.

"I feel like, by the stroke of a pen, I've wiped out the life work of my grandfather, my father and my brothers," Hixson said here Monday afternoon, before a meeting of the newly seated Colorado Conservation Easement Oversight Commission.

Hixson and dozens of other landowners in the Lower Arkansas Valley are deeply angry with the state because they've invested thousands of dollars in legal fees, appraisals and habitat studies to comply with state conservation easement law, only to have their tax credits invalidated by taxing authorities.

The landowners are calling for the state to suspend the conservation program, while upholding easements granted between 2003 and 2007, before a comprehensive reform program was enacted.

"You need to end this program until these issues are resolved and have these easements upheld before this bankrupts all of southeastern Colorado," Hixson told the commission.

Colorado launched the easement program in 2000, but until this year, there was no state oversight of the program, and millions of dollars in improper easements and tax credits were granted. Many used super-inflated appraisals to boost the value of the tax credits or protected lands of questionable public value. Still others allowed gravel mining and oil and gas development, a violation of the IRS code.

Hundreds of transactions are being investigated by the Colorado Division of Real Estate, and the Colorado Attorney General's Office has convened a criminal grand jury to investigate several land trusts, appraisers and attorneys.

However, landowners here say the state must step forward to honor their transactions.

U.S. Rep. John Salazar, who represents the region, said Colorado may need to suspend the program or at least grandfather in easements of landowners who made a good-faith effort to comply with the law.

But John Stulp, Colorado commissioner of agriculture, said it will be difficult for Colorado to enact any across-the-board fix because problems are different across the state and different land trusts and appraisers are involved.

"You will have to look at the credibility of each of the land trusts and appraisers involved," Stulp said.

Nothing is likely to occur quickly, in part because the state has yet to finish its grand jury investigation.

"A lot of people were depending on this," Stulp said. "They're worse off now than they were before. It's insult on top of injury."

Jim Butcher, a landowner from Pueblo, is holding several tax credits that he can't sell, not because he did anything wrong but because the program has become so tainted that the market for the credits is drying up.

Butcher said Colorado needs to admit it set up the program poorly and help landowners who have permanently forfeited their development rights.

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