Conservation Deeds and Consistency with Treasury Regulations

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Micah D. Miller

Micah D. Miller



Micah Miller represents companies and entrepreneurs in connection with transactional, corporate, and litigation matters. While Mr. Miller’s clients entrust him with a broad range of matters, his work is concentrated on company formation, acquisitions, financings, corporate agreements, and commercial contracts. Additionally, he has recently gained significant experience representing construction-industry contractors in disputes involving federal projects.

Having worked as a foreign legal consultant in Buenos Aires, Argentina from 2013 to 2018 after earning an MBA at IAE Business School (Buenos Aires) in 2012, Mr. Miller leverages his international legal experience and Spanish-language skills to represent clients from Latin America who invest or do business in the United States. Mr. Miller currently resides and practices in Austin, Texas. He began his legal career at a prestigious law firm in his hometown of El Paso, Texas, where his practice focused on the areas of general business, real estate and bankruptcy, including both litigation and transactional matters.

Through his educational background and work experience, Micah believes he has developed a unique capacity to understand and resolve a broad range of legal problems, especially those faced by business concerns and individuals engaged in cross-border activities. He prefers a no non-sense approach to practicing law, values ethical and cost-effective services, and believes in caring for his clients by striving to create and preserve value.

Morgan Run Partners, LLC, Overflow Marketing, LLC, Tax Matters Partner v. Comm’r, T.C. Memo. 2022-61 | June 14, 2022 | Lauber, J. | Docket No. 8669-20

Short Summary: Morgan Run Partners, LLC (“Morgan” or “Petitioner”) petitioned the Tax Court for readjustment of partnership items after the IRS disallowed a deduction and assessed penalties. The IRS disallowed Morgan’s charitable contribution deduction for a syndicated conservation easement, which it claimed on a timely Form 1065 and supported with an appraisal.

Morgan granted to the National Farmer’s Trust (the “Trust”) a conservation easement over 232 acres of land. Petitioner timely filed a return and for 2016 and a deduction of $26 million for donation of the easement. The IRS then selected Morgan’s return for an examination. The Revenue Agent (RA) recommended assessing penalties under IRC sections 6662 and 6662A. Her manager agreed and signed an approval form in September of 2019. In late October the RA mailed petitioner documents detailing the proposed adjustments and penalties. Then in January 2020, the IRS sent a notice of final partnership administrative adjustment (FPAA), including a Form 886–A, Explanation of Items.

Key Issues:

In a Motion for Summary Judgment, the IRS asked the Court to find that procedure was properly followed and attacked various aspects of the easement deed, arguing that certain of its terms did not comply with the requirement that a conservation easement’s purpose must be “protected in perpetuity” to be deductible. See IRC §§ 170(f)(3)(A), 170(f)(B)(iii), (h)(1), (5)(A); see TOT Prop. Holdings, LLC v. Commissioner, 1 F.4th 1354, 1362 (11th Cir. 2021); PBBM-Rose Hill, Ltd. v. Commissioner, 900 F.3d 193, 201 (5th Cir. 2018). The Tax Court’s opinion evaluated whether:

Primary Holdings:

Key Point of Law:

Insights: From the Tax Court’s review of the Petitioner’s deed, it appears that the deed failed to track all of the requirements in the relevant Treasury Regulations. For instance, the deed does not address judicial extinguishment. Rather, it expresses the parties’ intention that changed conditions would not result in extinguishment of any the deed’s provisions. Also, it defined the fair market value of the Trust’s right and interest as equal to the value of the easement but did not specify a valuation date. Further, the deed requires collaboration for the parties to recover the full value of the damages if the easement’s purpose were to be voided by eminent domain and for the rights of each to a “Proportionate Share” of the proceeds, but it failed to define that term. The Court noted, however, that the deed referenced the relevant rules, suggesting that the deed may evince the parties’ intent for the deed to comply with rules governing the deduction, even if it lacked the express formalities demanded.

In general, this is good news for taxpayers interested in taking deductions based on conservation easements. Notwithstanding, this case also serves as a lesson to taxpayers and their counsel to spend the time to ensure formalistic compliance with regulatory requirements when seeking deductions. It is good to prevail in court, but in situations like these having to litigate in the first place is losing.

Conservation Easement Defense

In recent years, the IRS has prioritized tax enforcement efforts against syndicated conservation easements that it believes to be abusive. Freeman Law’s tax controversy practice regularly represents clients in conservation easement tax disputes. Schedule a consultation or call (214) 984-3000 to discuss your conservation easement concerns or questions.