conservation organizations to take a tax deduction for the amount of that donation among other statutory requirements that congress imposed on conservation easements it requires that those easements be donated to the conservation organization in in order to be qualified for the tax deduction the i r s has interpreted that start statutory term in perpetuity in its regulations in ways that has varied over time at issue here is a particular section of those i regulations governing extinguishment proceeds extinguishment proceeds occur two for example if the government were to come in and condemn land through eminent domain that was otherwise protected by a conservation easement and in that case notwithstanding that there would otherwise be an easement on the land the conservation purposes of the donation continue to be protected in perpetuity so long as the proceeds of that extinguishment proceeding are donated to the conservation organization according to a regulatory formula the tax court here committed a fundamental error when it wrongly interpreted section nine of the underlying conservation easements and held that that provision violated the i r s regulations on extinguish proceedings and as a result of that the tax court invalidated the entire amount of the tax deduction taken by my client but foothills land conservancy the conservation  including section nine and it knew what it was doing when it did that it included the language in section nine that expressly references the irises extinguishment preceding provisions and held that in all cases the formula incorporated in the regulations allows a conservation organization to take maximal advantage of proceeds from any extinguishment proceedings the government's only argument why that particular provision of a hypothetical future extinguish proceeding invalidates the entire deduction is a misreading of the plain language of section nine the government argues that the language referring expressly to the regulations and holding that they control the distribution of proceeds isn't isn't an interpretive provision but is rather a condition subsequent that renders the entire amount of the deduction invalid the error that the tax court committed in holding that that in perpetuity violation occurred in section nine here in fact of the entire decision below and merits this court's reversal and i made a set aside to three things st then you do not challenge the validity of the regulation i would argue that it's inconsistent with the i r s is current view of the regulation and i think that that's an important distinction because it explains why the formula in section one dollar appears in the easement and why the language and sex section nine point regulation the you do not understand you the challenge that will bring so i think it's important to look at everything the th circuit said about the language of that particular provision of course it language in the regulation differently including through various private letters it issued to various tax payers explaining you know you may be able to allow for post improvement provisions and to deduct those amounts from extinguishment proceedings i'm not contesting that that's the view the i r s holds today obviously the i r s now has flip flopped on that question and interprets the regulations differently but i do think it's important history for the court to know why there could be an alternative formula in this particular deed of these men challenge the fact that if this if different your over and close if your over a clause is in fact a condition subsequent savings clause you do not challenge the fact that if it is a condition subsequent savings clause then it is not operative and does well that's certainly what the tax court held below so i think if this court agreed with that interpretation it would be affirming rather than reversing but i think that the clearest reason why this is not a saving squad is you know it is obvious if the court just looks at the language that was at issue in the th circuit cases belk and proctor and compares that to the plain language of the interpretive provision here unlike the th circuit cases there's nothing about the underlying conveyance that will change over time depending on this language quite the opposite the underlying conveyance remains the same still in a conservation organization i the gist of my questions is that the issue before this code and as i asked saw it at least subject to being convinced the issue is whether or not this it seems to me that your subtraction language is an ambiguous i don't see anything they are to interpret in other words if the regulation because i think it's important important to keep in mind the way in which that quad is in the in the deed and it doesn't say in all cases in all events you apply the formula in nine dollars that includes the suppression language you just mentioned it says you either apply the regulations and it expressly cites to those regulations which include the different formula or you apply the nine dollars language but that it makes clear that if there's a conflict between those two things the regulations control and so that's why i think it's interpretive and not a nine two that's the that's the provision that's operative here that's the interpretive operative provision not the explanation of the formula in the deed itself decides that it wants to do that rather than simply remanding i think the fundamental error and we've listed several in our in our brief was the the tax court essentially discredited our expert in our ex in his entirety by on the basis of a single typ error in the expert report related to the you know alleged mountain landscape that doesn't exist so the tax court looked at that clause and said well you know that that doesn't apply here and therefore i'm discounting the rest of your of your valuation i think that's the most fundamental error in the you know subsequent fail with a particular sale price i don't think that answers the question what the value of the event is is that the time of the transfer thank you is that you have five minutes remaining for mr sheen and yes may have please the court i am anthony sheehan for the commissioner of internal revenue thank you for months good morning the argument so far has focused mainly upon the formula in the easement deed and also what t o t holdings calls its treasury regulation override there is no question in our minds that the formula in the easement deed which is quite clear allows a subtraction and the regulation does not provide for a subtraction as the th circuit correctly held and key b m v rosehill it's interesting why t o c holdings in their brief would call this a treasury regulation override unless they thought there was a problem and something that had to be overridden and that is the key to why these those following clauses in the east indeed are in fact impermissible savings clauses as the tax court correctly found that's a sticky to a savings clause is that it sets up a conflict we start with the proposition from the regulation that the dony organization is and that property rights has to be protected in perpetuity one of the property rights is the right if the easement is traditionally extinguished to a portion of the proceeds to insure the public good of the conservation purpose continuing here in this case there is that stark conflict either it's just if this  extinguished by a court either t o t holdings is allowed to have a subtraction and gets more proceeds or a rd party and it can be the tennessee court i know t o t n this reply brief says the federal government  you can be the tennessee court which will probably be ruling on this will have to make a decision and the decision will impact how much money it's a choice between allowing subtraction or not allowing some trans am and that is why it is  attorney drafting this deed could simply copy and paste the regulatory language or even simpler could say that the proceeds upon extinguishment shall be distributed as required by the regulation that gives t o t holdings an immediate property right d d immediate property right to which it is intitled under the law and very simple and there's no need to even try to come up with formulas if the regulatory language is in there or state regulation is references to source to go to then that is sufficient to protect this to provide for that aspect of this is what the taxpayer was trying to do here was to mike some as what would come to the don't know are upon condemnation improvements so that there was a real chance that this dhoni would not get what the law requires in perfect to it in other words if it fall but if there is a chance and it does seem to me it is then i can see the rationale behind eliminating the d likely as your honor has said mr tax court said that in an extinguishment proceeding several years down the road that the court was simply look to the formula in the easement deeps of the parties agree to it and even if foothills yes if there was no litigation and the t o t and foothill sat down did probably just look at the easement deed and say there is a subtraction for improvements i interrupted you  if one sentence in their expert's report talking about the property being suitable for a mountain residential mountain retreat development problem with that is that there is ample evidence in the record especially from the commissioners expert and going on to this court's statement in a home ranch holdings and also in the regulation the key here is whether the property is needed or likely to be needed in a reasonably near future that's home or ranch or the treasury regulation how immediate or remote the likelihood is that the property absent that restriction wouldn't fact be developed that's the key here if you look at v m here in county tennessee rural county seventy five percent undeveloped lots of land up there is general barber commissioners experts said this property is not particularly attractive it's the northwest about five miles away that has lakes it has ample recreational facilities by two thousand and thirteen that time an issue they'd only been able to sell sixty two out of the ninety lots in only twenty one had been developed so there is ample secure your land in this county that a developer would look to st to develop and there's really no reason to get to this piece of land in the reasonably near you have three and five and you judge thank you thank you judge will go so i'd like to start with mr shand response to a question that you asked judge alito i believe you asked him how  conservation organization could draft an extinguishment clause that would be consistent with the regulations and i heard him say two things one the conservation organization could copy and paste the regulatory language or two could say something akin to the extinguishment proceedings would be distributed as required by the regulations and respectfully i think that is exactly what section nine here does it doesn't copy and paste the entire language of the c regulations but it express lee cites to the relevant provision that includes the formula and says that provision controls the outcome of the extinguishment proceedings so i'm not sure how the conservation organization could have been clearer that if there any ambiguity about the amounts to which they are entitled they are entitled to the amount allowed them under the i r s as regulations so i think that's a problem i have with that is that what that a lesson around now would have gone to the bell in the end that's why these conditions subsequent savings clauses are missed i'm glad you asked me that judge anderson because i wanted to discuss the conversation you had with opposing counsel during his time and here's why i think that's not the right way to think about this particular case st of all section nine wasn't drafted by my client the taxpayer in order to accomplish tax avoidance it was drafted by foothills land conservancy the conservation organization and their interest is to maximize the amount of proceeds to which they would be entitled and so i think that touches on a couple of things including invalidating this provision invalidates invalidating this deduction invalidate similar to duction that are otherwise totally unobjectionable and valid that foothills itself was was you know entering into in order to further their conservation purposes so you know we might be sort of vulnerable to you know your honor is concerned if we had drafted the deed of easement if we the taxpayer had drafted it but but we didn't and and the nd important point i think to take away from that would be most convincing to me if you challenging the validity of the regulation but you are not challenging the validity of the regulation and that's because i think i'm sure any interpretation of the regulation the language in section nine complies with  it and i think that you know that might my nd sort of answer to your honor's concern would be to think about if there were the type of federal future extinguishment proceeding what that looks like that doesn't have sort of the strong arm of the i r s coming in to save the day and protect the conservation organization that has the conservation organization itself showing up in court just like my client would talk about how the proceeds of any extinguishment would be distributed and the judge adjudicating that proceeding would look to section nine and say ok see two things here i see you know a potential way to distribute these proceeds according to nine two or i see this reference to the statutory formula that has another potentially different formula in it but the deed specifically says the i r s regulations control so i think there's no chance that any judge worth his salt would be confused about how to distribute extinguishment proceeds and that the conservation organization would get the maximum value to which they're entitled in such in such a proceeding so the one issue the court hasn't touched on today that i do want to make sure i touch on if only briefly is the issue of i r s supervisor approval for the forty percent overvaluation penalty here i think it's you know it's important in importan taxpayer protection that when the i r s is going to levy a forty percent overvaluation penalty that that the communication of that penalty to the taxpayer in the st instance is expressively endorsed and approved by an i r s supervisor and the record here unequivocal establishes that that wasn't the case so the i r s is failure to comply with that statutory mandate and its own internal regulations i think independently merits a close look by this court at the forty percent overvaluation penalty is not th circuit rosehill case i think was right on the question of savings clause versus interpretive provisions but was wrong on the question of supervisory approval for the penalty and i think that this court takes an honest and faithful look at the plain text of the statute that congress passed and even the plain text of the regulations the agency itself uses to interpret that statute about supervisory approval it's clear that contemporaneous approval was not given here so yes i think the th circuit just got it wrong on this question