Legislature continues decades-long work on conservation easements

The year 2020 had such promise for the hundreds of Coloradans, primarily farmers and ranchers, who hoped that this would be the year that the State would resolve the decades-long issue over denied tax credits for conservation easements.

But concerns over the cost, and the pandemic-shortened legislative session, put an end to the legislation that would have started down that path.

This week, State Senator Jerry Sonnenberg, R-Sterling, will begin afresh with legislation that will deal with one of the three recommendations from a 2019 working group.

Conservation easements have been a tool for preserving undeveloped lands that the state believes should be left wild. The State has granted more than 4,000 such easements over the last 20 years. An easement basically goes under a land trust or a county for preservation. The property owner retains title to the land, in exchange for tax credits. 

But tax credits for about 800 of those easements were denied by the Department of Revenue. Frequently, the department claimed the land had no value, despite numerous real estate appraisals to the contrary. About $149 million in tax credits were denied, forcing some landowners into bankruptcy and foreclosure. Most of the 800 denied credits were for farm land in southeastern Colorado. 

Even though the tax credits were denied, the easements still became the property of the land trusts and counties that accepted them, meaning the landowners got no tax credits and lost the right to develop their lands in perpetuity. 

The group, led by Erik Glenn, Executive Director of the Colorado Cattlemen's Agricultural Land Trust and Alan Gentz of Sterling, recommended reparations, to be paid for with the annual tax credits held by the Colorado Department of Revenue. Two other issues, on how to deal with “orphan” easements that have been abandoned by land trusts and a new way to value those easements, also were part of the recommendations.

The Senate Finance Committee is slated to look at the tax credit issue this week. 

Under Senate Bill 33, a landowner can claim a tax credit for each conservation easement donated between Jan. 1, 2000, and Dec. 31, 2013, that was denied by the Department of Revenue. The rejected donation must have qualified for the federal tax deduction as allowed by the Internal Revenue Service.

The Department of Revenue has until August 15 of this year to post information online that those denied tax credits may be eligible to apply for a new one. Taxpayers then have until Sept. 30, 2022 to submit a claim to the Division of Conservation in the Department of Regulatory Agencies.

The revenue department, under existing state law, has about $45 million per year to award in tax credits. The bill’s fiscal analysis estimates that about $8 million of that would be claimed in 2020-21, with $17 million per year claimed in the next two years. 

Despite the recession, the tax credits have continued to be issued; in 2020, that totaled $12,421,250 in tax credits issued and more than $27 million in tax credits reserved.

Where the bill may run into trouble: the cost of setting up the refund program, at $3.9 million in 2021-22. The fiscal analysis also claims the division of conservation and department of revenue would need an additional 21 full-time employees to manage the program in the first year. However, most of those employees and the cost, as reported by the fiscal analysis, are for legal services, to be contracted with the Attorney General’s office. 

A four-year lawsuit filed by the Landowners United Advocacy Foundation against the Department of Revenue and other affiliated state agencies and personnel was dismissed by the US Court of Appeals last August.

The Foundation is trying another tactic: filing a class-action lawsuit against the State in one of the counties where there was most of the damage done.

Last October, the Foundation sued the Department of Revenue and the department employee that it claims did most of the tax credit denials, Deborah Van Wyke, in Prowers County District Court. https://luaf.net/october-2020-luaf-files-class-complaint-in-district-court/.

The lawsuit claims the department, and Van Wyke, engaged in a “bait-and-switch” scheme to defraud farmers and ranchers of their land. “Many landowners participated because the program presented the only viable way to preserve their farming and ranching activities during trying economic times,” the lawsuit stated. The State benefits from the conservation easement program because it preserves large tracts of land from development in pristine, open-space condition. “Habitats and historically significant land areas and structures are preserved.”

But the department sought to reap the benefits of that land “while bullying and scheming” to deprive landowners of their tax credits, usually years after the credits had been claimed. That led to demands that the landowners repay the credits with penalties and interest. 

The case is pending in Prowers County District Court.

Also this week at the state Capitol: lawmakers are expected to vote on two bills tied to guns. House Bill 1106 requires gun owners to safely secure their firearms, particularly in households with minors. The firearms can be secured in one of several ways, by carrying it; keeping it in a locked gun safe or other secure container or installing a locking device. 

The bill creates a new class two misdemeanor penalty for failure to secure a gun and which carries fines of up to $1,000.

House Bill 1106 was approved by the Democrat-majority House State, Civic, Veterans and Military Affairs Committee on March 1 on a party-line 7-4 vote. 

The second bill is Senate Bill 78, which was approved by the Senate Judiciary Committee on March 4 on a party-line 3-2 vote. It is now awaiting further action from the full Senate.

The bill creates a yet-unnamed misdemeanor offense for failing to report a lost or stolen gun. Among those testifying in the March 4 hearing, Ana Thallas, whose daughter, Isabelle, was shot to death last June as she was walking her dog near Coors Field in Denver. The gun used in the shooting was an AR-15 rifle that the shooter, Michael Close, had borrowed from a friend, a Denver Police officer, without that officer’s knowledge.

Close also shot Thallas’ boyfriend. Close is now charged with first-degree murder and 14 other charges.

Sen. Sonya Jaquez Lewis, D-Longmont, the bill’s sponsor, said during the March 4 hearing that, "We know the majority of gun owners in Colorado are responsible. We're trying to go after the folks that maybe are not paying attention to where their firearms are."