2006 © The E.W. Scripps Co.
The Internal Revenue Service is
threatening to sharply limit the use of
conservation easements, which have
protected huge stretches of Colorado
land from development.
Conservation leaders and lawyers say
that in the past few weeks, IRS
officials have said they believe only
habitat for endangered or threatened
species qualifies for tax incentives.
"We're all in a little bit of a
shock," over that interpretation, said
Will Shafroth, head of the Colorado
Conservation Trust. The definition of
qualifying land in the IRS code itself
is "relatively natural habitat," he
An IRS spokeswoman could not be
reached for comment Tuesday afternoon.
The IRS move "could damage the
integrity of hundreds of legitimate
conservation efforts across Colorado, as
well as thousands across the country,"
the Colorado Coalition of Land Trusts
told Sen. Ken Salazar in a recent
letter, according to director Jill
If it stands, it "will disqualify a
very large number of Colorado
donations," said attorney Larry Kueter,
who has handled many such easements and
is counsel to the Colorado Coalition of
Land Trusts. "It's not supported by law,
regulations or a tax court decision."
He said the IRS may have to lose an
appeal before it backs off.
The IRS is auditing 250 Colorado tax
returns with conservation easement
deductions and says it found that most
don't meet the law or have high
However, an IRS agent at a recent
meeting with Salazar said his agency had
not yet formally rejected any taxpayers'
deductions, said Ozar-ski, who was at
John Swartout, head of Great Outdoors
Colorado, said the mere threat from the
IRS is damaging. "The fear is: Do a
conservation easement and you get an IRS
audit," he said.
Colorado activists have taken a much
broader view of land that holds
conservation value. It includes scenic
vistas along Interstate 25, habitat for
favorites like bighorn sheep and homes
for not-yet- threatened species, like
the mountain plover, activists say.
"We're trying to protect habitat
ahead of listing as an endangered
species," said Swartout, whose agency
gives grants for the purchase and
donation of easements. "It's pre-
"For the IRS to say, 'We don't see
the conservation value,' it's
Conservation easements have preserved
nearly 1 million acres in the state,
according to the Colorado Conservation
Trust. The state says it has handed out
$193 million of tax credits for such
easements in the past six years.
Attorney Kueter said he believes 95
percent of the conservation easements in
the state are legitimate, but others are
"We have tried to get the state
Department of Revenue to investigate
those, without much success," Kueter
said. "Right now, the community thinks
they can do what they want because
But the IRS also is questioning
appraisals that have been approved by
several state and federal agencies,
Conservation easements work like
this: An appraiser values land at
$100,000 if developed, or $40,000 if not
developed. The owner donates a
conservation easement to a land trust.
He keeps the land now worth $40,000
because nothing can be built on it, and
gets a $60,000 state tax credit. He may
also get a $60,000 write-off on his
federal tax return. That would cut his
federal taxes about $20,000 if he's in
the 33 percent tax bracket.
To qualify for the state tax credit,
owners must meet requirements for the
federal write-off. So the IRS definition
easements in Colorado
Counties with the largest number of
acres protected by easements:
• Las Animas: 146,711
• Costilla: 124,293
• Routt: 51,796 acres
• Huerfano: 49,782
• Saguache: 49,639
• Total statewide: