U.S. Tax Court: Conservation easement contribution regulations held invalid under APA
A U.S. Tax Court case concerning conservation easement contribution regulations under Administrative Procedure Act
Conservation easement contribution regulations held invalid
The U.S. Tax Court today held that Treas. Reg. § 1.170A-14(g)(6)(ii), which implements the requirement under section 170(h)(5)(A) that the conservation purpose of an easement be “protected in perpetuity” in order to qualify as a “qualified conservation contribution,” is procedurally invalid under the Administrative Procedure Act because the Treasury department and IRS failed to respond to a “significant comment” when issuing the final regulations in 1986.
In so doing, the Tax Court followed the reasoning of the U.S. Court of Appeals for the Eleventh Circuit in its decision in Hewitt v. Commissioner, 21 F.4th 1336, (11th Cir. 2021), and rejected the competing decision of the U.S. Court of Appeals for the Sixth Circuit in Oakbrook Land Holdings, LLC v. Commissioner, 28 F.4th 700 (6th Cir. 2022).
The court further held that the easement deed at issue in the case satisfied the “restriction (granted in perpetuity)” requirement under the statute and thus that the taxpayer claim a deduction for the charitable contribution of a conservation easement under section 170(h).
The case is: Valley Park Ranch, LLC v. Commissioner, 162 T.C. No. 6 (March 28, 2024). Read text of the Tax Court’s opinion, which includes a dissenting opinion joined by four judges.
The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 3712, 1801 K Street NW, Washington, DC 20006.