[PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

________________________

No. 19-11795

________________________

Agency No. 008956-13

PINE MOUTAIN PRESERVE, LLLP, 

f.k.a. Chelsea Preserve, LLLP, 

Eddleman Properties, LLC, 

Tax Matters Partner,

 Petitioner - Appellant - Cross Appellee,

 versus

COMMISSIONER OF INTERNAL REVENUE, 

 Respondent - Appellee - Cross Appellant.

________________________

Petitions for Review of a Decision of the

U.S. Tax Court

________________________

(October 22, 2020)

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Before NEWSOM and BRANCH, Circuit Judges, and RAY,* District Judge.

NEWSOM, Circuit Judge: 

This case requires us to assess the federal tax treatment of “conservation 

easements”—so called because they are created when a landowner agrees to forgo 

its absolute right to use its property as it sees fit and subjects itself, contractually,

to the oversight of a land-conservation organization. Although intimidating on its 

face—situated as it is at the intersection of obscure common-law property concepts

and the often byzantine Internal Revenue Code—the case actually turns on a fairly 

straightforward application of basic statutory-interpretation principles. Our focus 

is I.R.C. § 170, which allows a landowner to take a deduction when it grants a 

conservation easement to a qualified land trust. As relevant here, § 170 entails two 

conditions. First, the easement must impose “a restriction (granted in perpetuity) 

on the use which may be made of the real property.” I.R.C. § 170(h)(2)(C). And 

second, the grant must ensure that the easement’s “conservation purposes” are

“protected in perpetuity.” Id. § 170(h)(5)(A). 

In 2005, 2006, and 2007, Pine Mountain Preserve LLLP granted the North 

American Land Trust conservation easements over large parcels of land near 

Birmingham, Alabama. Pine Mountain claimed tax deductions for the easements

* Honorable William M. Ray II, United States District Judge for the Northern District of Georgia, 

sitting by designation.

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under § 170, but the IRS denied them. Pine Mountain challenged the IRS’s denials 

in the Tax Court, which made three determinations that together have become the 

subjects of this appeal. First, the court held that the 2005 and 2006 easements were 

not “granted in perpetuity” within the meaning of § 170(h)(2)(C) because, although 

Pine Mountain had agreed to extensive restrictions on its use of the land, it had 

reserved to itself limited development rights within the conservation areas. 

Second, the court concluded that the 2007 easement complied with 

§ 170(h)(5)(A)’s requirement that the easement’s conservation purposes be 

“protected in perpetuity,” notwithstanding its inclusion of a clause permitting the 

contracting parties to bilaterally amend the grant. Finally, the court valued the 

2007 easement at $4,779,500—which, it turns out, is almost exactly midway 

between the parties’ wildly divergent appraisals.

We will affirm in part, reverse in part, and remand for further proceedings. 

We hold (1) that the 2005 and 2006 easements satisfy § 170(h)(2)(C)’s granted-inperpetuity requirement, (2) that the existence of an amendment clause in an 

easement does not violate § 170(h)(5)(A)’s protected-in-perpetuity requirement, 

and (3) that the Tax Court applied the wrong method for valuing the 2007 

easement.

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I

A

Before diving into the facts and procedural history of this particular case, we 

set out in some detail the governing statutory framework. Section 170 of the 

Internal Revenue Code allows tax deductions for charitable contributions and gifts 

of interests in real property. As a general rule, the Code forbids deductions for 

conveyances of partial—i.e., less than fee-simple—interests. In 1980, though, 

Congress amended the Code to permit landowners a deduction for a “qualified 

conservation contribution” of less than an entire interest in a parcel. See Tax 

Treatment Extension Act, Pub. L. No. 96-541 § 6(b), 94 Stat. 3204, 3206 (1980), 

codified at I.R.C § 170(f)(3)(B)(iii). To qualify as a “qualified conservation 

contribution,” a grant must be “(A) of a qualified real property interest,” “(B) to a 

qualified organization,” and “(C) exclusively for conservation purposes.” I.R.C. 

§ 170(h)(1).

The parties here agree that the grants at issue were made to a “qualified 

organization,” so our analysis will focus on the other two requirements—that the 

grants be “qualified real property interest[s]” and “exclusively for conservation 

purposes.” Section 170(h)(2) defines the former, and § 170(h)(5) defines the latter. 

According to § 170(h)(2)(C), a “qualified real property interest” includes, as 

relevant here, “a restriction (granted in perpetuity) on the use which may be made 

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of the real property.” We’ll call this the “granted-in-perpetuity” requirement. 

According to § 170(h)(5)(A), “[a] contribution shall not be treated as exclusively 

for conservation purposes” within the meaning of § 170(h)(1) “unless the 

conservation purpose is protected in perpetuity.” We’ll call this the “protected-inperpetuity” requirement. 

To sum up, then: The Code permits taxpayers to claim deductions for 

charitable contributions, including contributions of land. If a landowner donates 

less than its entire interest in a piece of property, the Code allows a deduction, as 

relevant here, where the landowner makes a “qualified conservation contribution.” 

To qualify—again, as relevant for our purposes—a grant must be a “qualified real 

property interest” and “exclusively for conservation purposes.” To constitute a 

“qualified real property interest,” the grant must satisfy § 170(h)(2)(C)’s grantedin-perpetuity requirement, and to be “exclusively for conservation purposes,” the 

grant must satisfy § 170(h)(5)(A)’s protected-in-perpetuity requirement.

Deep breath.

B

Next, the facts. Pine Mountain owns 6,224 contiguous acres of unimproved 

land near Birmingham, Alabama. In each of 2005, 2006, and 2007, Pine Mountain 

granted the North American Land Trust (NALT)—which all agree is a “qualified 

organization” within the meaning of I.R.C. § 170(h)(3)—conservation easements 

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over large tracts of its land. Under the easements, Pine Mountain gives up its right 

to develop its land as it sees fit and cedes to NALT private contractual rights to 

police its use of the property; in return for its forbearance, Pine Mountain hoped

for substantial tax deductions. 

Each grant gives NALT a “perpetual easement in gross” over a specified 

conservation area “for the purpose of preserving and protecting” defined 

“conservation purposes.” In accordance with the Internal Revenue Code, those

purposes—memorialized in the easements themselves—include the preservation of 

the areas as “relatively natural habitat[s] of fish, wildlife, or plants or similar 

ecosystem” and “open space[s]” which provide “scenic enjoyment to the general 

public” and “yield a significant public benefit.” Cf. I.R.C. § 170(h)(4)(A). As a 

means of protecting these purposes, the easements empower NALT to enforce the

restrictive covenants contained therein. Each easement contains a declaration of 

covenants and restrictions whereby Pine Mountain promises—for the most part, 

anyway (more on that later)—not to develop the conservation areas for commercial 

or residential use. 

The 2005 easement restricts 559 acres, the 2006 easement 499 acres, and the 

2007 easement 224 acres; together, the three restrict 1,282 of Pine Mountain’s 

6,224 acres of property—more than 20%. Each of the three easements broadly

restricts Pine Mountain’s use of the conservation area—including, among others,

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prohibitions on building structures, roads and driveways, collecting ground or 

surface water, removing trees, posting signs, mining, dumping, modifying 

topography and water courses, introducing non-native plant species, and 

subdividing the land. Boiled down, each easement aims to prohibit development 

that could interfere with the Code-authorized conservation purposes. 

In each of the three easements, Pine Mountain retains a targeted set of 

“reserved rights.” The 2005 easement, for instance, reserves to Pine Mountain the 

right to build a single-family structure on each of ten one-acre lots designated as 

“Building Area[s]” and marked on an attached plan, as well as a barn within 1000 

feet of each Building Area. Although the presumptive Building Areas are clearly 

defined, the easement authorizes the parties to modify the locations so long as (1)

the Building Areas’ total acreage remains unchanged and (2) NALT doesn’t

conclude that a modification would “result in any material adverse effect on any of 

the Conservation Purposes.” Pine Mountain further reserves rights to build one 

additional barn on an area not to exceed ten acres, two scenic overlooks with 

attendant structures, a road and driveways, five ponds, and an unspecified number 

of hunting blinds—all subject to NALT’s approval—as well as a few limited 

exemptions from other restrictions. 

The 2006 easement similarly reserves to Pine Mountain the right to build a 

single-family residence on each of six Building Areas. Unlike the 2005 easement,

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the 2006 easement doesn’t delineate the Building Areas’ precise locations; instead, 

the easement gives NALT the right to approve in advance where Pine Mountain 

places the Building Areas and to determine whether the chosen locations would 

adversely affect the easement’s conservation purposes. Like the 2005 easement, 

the 2006 easement also reserves to Pine Mountain the right to build other structures 

on the Building Areas, subject to NALT’s advance approval. 

The 2007 easement doesn’t allow for single-family residences, but it does 

reserve to Pine Mountain the right to build a water tower on a site subject to 

NALT’s approval. 

Each grant also contains a provision allowing the parties to bilaterally amend 

the easement’s terms. In particular, the clause specifies that both Pine Mountain 

and NALT “mutually have the right, in their sole discretion, to agree to 

amendments to th[e] Conservation Easement”—provided, that is, that the changes

are “not inconsistent” with the easement’s conservation purposes. The amendment 

provision also expressly forbids NALT to “agree to any amendments . . . that 

would result in th[e] Conservation Easement failing to qualify . . . as a qualified 

conservation contribution under Section 170(h).” 

C

In 2005, 2006, and 2007, Pine Mountain claimed tax deductions under I.R.C. 

§ 170(h) for the conservation easements in the amounts of $16,550,00, 

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$12,726,000, and $4,100,00, respectively. After an audit, the IRS denied the 

deductions in their entirety. Pine Mountain filed a petition in the Tax Court 

contesting the IRS’s denials. 

Following a trial, the Tax Court issued two separate opinions. In the first, 

the court held (1) that the reserved rights to build residential units and other 

structures in the 2005 and 2006 grants disqualified the conservation easements

from being “granted in perpetuity” within the meaning of § 170(h)(2)(C), but (2) 

that the 2007 grant’s reservation of Pine Mountain’s right to build a water tower 

did not violate the granted-in-perpetuity requirement. The Tax Court’s first 

opinion separately determined that the amendment clause contained in all three 

easements—which permitted the parties “in their sole discretion” to modify the 

grant’s terms—did not cause the 2007 easement to violate § 170(h)(5)(A)’s 

protected-in-perpetuity requirement.

Having concluded that a deduction for the 2007 easement was proper, the 

Tax Court proceeded in its second opinion to value that easement using what can 

only be described as a “split-the-baby” approach. Pine Mountain estimated the 

easement’s value of $9,110,000, while the Commissioner estimated its value at 

$449,000. After considering both sides’ experts—but without applying the 

valuation methodology specified in the governing regulations or explaining its own 

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methodology or math—the court settled on a number right at the numerical mean, 

$4,779,500. 

Pine Mountain now appeals the Tax Court’s decision that the 2005 and 2006 

easements violate § 170(h)(2)(C)’s granted-in-perpetuity requirement. The 

Commissioner, in turn, cross-appeals (1) the Tax Court’s decision that the 2007 

easement’s amendment clause complies with § 170(h)(5)(A)’s protected-inperpetuity requirement and (2) the court’s valuation of the 2007 easement.1

 

II

A

We’ll start with Pine Mountain’s appeal. The Tax Court held that the 2005 

and 2006 easements violated § 170(h)(2)(C). It did so because it concluded that 

each easement’s reservation to Pine Mountain of rights to build a limited number 

of residential homes and accompanying structures meant that it no longer qualified 

as “a restriction (granted in perpetuity) on the uses which may be made of the real 

property.” Relying heavily on its own precedent, the Tax Court held that because 

the homesite-development areas were not subject to the conservation easement’s 

1 We review the Tax Court’s legal conclusions de novo and its findings of fact for clear error. 

See Ocmulgee Fields, Inc. v. C.I.R., 613 F.3d 1360, 1364 (11th Cir. 2010). In this case, there

aren’t any material facts in dispute—the parties have stipulated that Pine Mountain’s 

conservation easements satisfied conservation purposes. What are in dispute, and up for our 

review on appeal, are the Tax Court’s construction of I.R.C. § 170(h)’s granted-in-perpetuity and 

protected-in-perpetuity requirements and that court’s choice of valuation method for the 2007 

easement. These issues present questions of law that we review de novo.

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restrictions “in any meaningful sense,” the entire easement failed § 170(h)(2)(C)’s

granted-in-perpetuity requirement. See Pine Mountain Pres., LLLP v. Comm'r of 

Internal Revenue, 151 T.C. 247, 277 (2018). According to the Tax Court—using a 

Swiss-cheese metaphor to which we shall return—the building sites represented 

“holes” in the conservation area, such that the easement’s restrictions didn’t attach 

to a “defined parcel of real property.” Id. at 278.

We disagree with the Tax Court’s determination. We hold that the plain 

language of § 170(b)(2)(C), the statutory structure more generally, and relevant 

precedent all demonstrate that the 2005 and 2006 easements satisfy the granted-inperpetuity requirement.

B

1

“As always, we begin with the text of the statute.” Limtiaco v. Camacho, 

549 U.S. 483, 488 (2007). On its face, § 170(b)(2)(C) doesn’t require much—only 

that a grant embody “a restriction (granted in perpetuity) on the uses which may be 

made of the real property.” It seems to us clear that a conservation easement of the 

sort at issue here qualifies. It constitutes “a restriction” on “the use . . . of the real 

property” because it burdens what would otherwise be the landowner’s fee-simple 

enjoyment of—and absolute discretion over—the use of its property. And it does 

so “in perpetuity” because nothing in the grant envisions a reversion of the 

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easement interest to the landowner, its heirs, or assigns. A broad limitation on the 

use of the property that applies to the parcel as a whole satisfies the statutory test, 

even if within that parcel there exist certain narrow exceptions to that limitation. 

I.R.C. § 170(h)(2)(C). 

The Commissioner contends, by contrast, that an aggregate restriction on the 

use of the land isn’t enough; rather, he asserts, every inch of land must be subject 

to the restriction in perpetuity—such that, his argument goes, even a limited 

reservation of development rights violates the granted-in-perpetuity requirement. 

“[T]he whole point of § 170(h)(2)(C),” the Commissioner argues, “is to ensure that 

a conservation easement’s restriction on the use that may be made of the real 

property is perpetual, meaning that the restriction cannot be subsequently 

removed, weakened, or diminished . . . .” Br. of Appellee at 45–46 (emphasis 

original). But the Commissioner misunderstands both the plain language of the 

statute and the common-law provenance of the term “perpetuity.” As for the 

language, the word that precedes the term “restriction” is “a,” and it seems to us 

indisputable that the 2005 and 2006 easements impose “a restriction”—singular—

on the uses to which the subject parcels may be put because they broadly restrict 

Pine Mountain’s preexisting development rights. And they impose that restriction

“in perpetuity,” as that term is understood in the common law, because Pine 

Mountain, its heirs, or assigns remain indefinitely subject to the restriction and 

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because nothing in the grants will cause the easements, either automatically or 

upon the happening of some event, to revert back to the Pine Mountain or its 

successors. See The Law of Easements & Licenses in Land § 10:1. “[A] 

restriction” on the landowner’s use of its land, “granted in perpetuity”—that’s all 

§ 170(h)(2)(C) requires.2

2

Not only does the Tax Court’s interpretation of § 170(h)(2)(C) defy the 

provision’s straightforward language, but it also renders § 170(h)(5)(A) 

superfluous. The Tax Court recognized—correctly—that § 170(h)(2)(C) and 

§ 170(h)(5)(A) impose separate requirements. Even so, in the court’s view, a grant 

violates § 170(h)(2)(C) if even a single sub-parcel of property is exempted from 

the overall restriction. The Tax Court constructed a “Swiss cheese” analogy—the 

entire conservation area serving as the slice and the development zones the holes. 

As the Tax Court saw it, § 170(h)(2)(C) demands that the entire slice (the 

conservation area) be protected from development in perpetuity, such that the 

2 The Tax Court’s holding that the 2005 and 2006 easements violated § 170(h)(2)(C)’s grantedin-perpetuity requirement makes even less sense in light of its contrary decision regarding the 

2007 easement. The court concluded that the 2007 easement complied with § 170(h)(2)(C) 

because it reserved to Pine Mountain only the right to construct a water tower. We fail to see 

how that distinction—homes and barns vs. a water tower—bears on the dispositive question 

under § 170(h)(2)(C), whether the easement imposes “a restriction” in “perpetuity.” The fact 

that the 2007 easement’s water-tower reservation may seem less significant, in a quantitative or 

qualitative sense, than the 2005 and 2006 easements’ homesite-and-barns reservation is 

irrelevant. As explained below, that distinction may matter for § 170(h)(5)(A) protected-inperpetuity purposes, but it has no bearing on § 170(h)(2)(C).

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landowner cannot under any circumstances relocate any of the holes (reserved 

rights). 

But whether exceptions to restrictions in a conservation easement poke holes 

in the slice runs, we think, to whether the easement adequately protects the 

conservation purposes, which is a question to be answered by reference to 

§ 170(h)(5)(A), not § 170(h)(2)(C). Using the Tax Court’s own cheese metaphor, 

all that § 170(h)(2)(C)’s granted-in-perpetuity condition requires is that the 

landowner grant a slice (i.e., a restrictive easement) in the first place, which here 

Pine Mountain plainly did. We agree with Pine Mountain that the better cheese 

analogy is to Pepper Jack. Here, the reserved rights don’t introduce holes into the 

conservation-easement slice, because the entire slice remains subject to “a 

restriction”—i.e., the conservation easement. Instead, the reserved rights are 

embedded pepper flakes, and, so long as they don’t alter the actual boundaries of 

the easement, § 170(h)(2)(C) is satisfied. 

At bottom, the Tax Court and the Commissioner challenge the quality—the 

substance, or merits—of Pine Mountain’s easements. That challenge, though, 

implicates § 170(h)(5)(A)’s protected-in-perpetuity requirement, not 

§ 170(h)(2)(C)’s granted-in-perpetuity requirement. For now, the sole question is 

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whether the 2005 and 2006 easements imposed “a restriction” on the use of Pine 

Mountain’s parcels “in perpetuity.” They did.3

3

In rejecting the deductions for the 2005 and 2006 easements, the Tax Court 

relied heavily on a series of its own previous decisions that the Fourth Circuit 

subsequently affirmed in Belk v. C.I.R., 774 F.3d 221 (4th Cir. 2014). Belk 

concerned a conservation easement in which the landowner had reserved a right, 

subject to the donee organization’s approval, to “substitute an area of land . . . 

contiguous to the Conservation Area for an equal or lesser area of land comprising 

a portion of the Conservation Area.” Belk v. C.I.R., 140 T.C. 1, 3 (2013), aff'd, 774 

F.3d 221 (4th Cir. 2014). The reviewing courts held that this provision 

disqualified the property interest under § 170(h)(2)(C) “because the real property 

contributed to the Trust is not subject to a use restriction in perpetuity.” Belk, 774 

F.3d at 226. As the Fourth Circuit interpreted that provision, “[t]he placement of 

the article ‘the’ before ‘real property’ makes clear that a perpetual use restriction 

must attach to a defined parcel of real property rather than simply some or any (or 

3 The Treasury Department’s own regulations indicate that the mere presence of movable 

building sites does not render a conservation easement non-deductible. 26 C.F.R. § 1.170A14(f)’s Example 4 depicts a conservation easement that allows for “limited cluster development 

of no more than five nine-acre clusters (with four houses on each cluster) . . . subject to site and 

building plan approval by the donee organization in order to preserve the scenic view from the 

park.” Although the example aims to illustrate § 170(h)(5)(A)’s protected-in-perpetuity 

requirement, it shows that movable building sites do not alone disqualify a donation for a 

deduction.

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interchangeable parcels of) real property.” Id. at 225 (emphasis in original). It 

held that if the grant permits land from outside the easement to be swapped for 

easement land—thus freeing the easement land from the attendant restrictions—

then “the restriction on ‘the real property’ is not” perpetual because the boundaries 

of the restricted property have shifted. Id. at 226.

The 2005 and 2006 easements here bear no resemblance to the one at issue 

in the Belk litigation. The easements that Pine Mountain granted only allow 

building areas to be moved around within the fixed boundaries of the easement—

they don’t permit outside-territory swapping. Pine Mountain’s easements more 

closely resemble those in BC Ranch II v. C.I.R., 867 F.3d 547 (5th Cir. 2017). In 

that case, landowners had deeded perpetual conservation easements to a land trust 

but reserved rights to build homesites on select five-acre plots, subject to the trust’s 

consent. The Fifth Circuit held that the easements satisfied § 170(h)(2)(C)’s 

granted-in-perpetuity requirement because “[o]nly discrete five-acre residential 

parcels, entirely within the exterior boundaries of the easement property,” could be 

moved within the conservation area. Id. at 553. In so holding, the court 

distinguished Belk on grounds that apply equally here. The Fifth Circuit explained 

that the problem in Belk arose “because the donor of the easement could develop 

the same land that it had promised to protect, simply by lifting the easement and 

moving it elsewhere,” even to “tracts of land entirely different and remote from the 

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property originally covered by that easement”—that, the court recognized, is what

violated the granted-in-perpetuity requirement. Id. at 553. The Fifth Circuit also 

observed that parcel-swapping would complicate valuations because an appraiser 

would have to value a moving target. Id. 

By contrast, there are no such dangers where, as in BC Ranch—and here—

an easement only permits the relocation of building areas within the conservation 

area without changings the easement’s boundaries. Id. at 552. First, such an

arrangement can’t be used to release the real property from the easement in a 

wholesale manner. And second, so long as “the unencumbered homesite parcels 

have roughly the same per-acre value as the rest of the” easement territory, then

appraisal is feasible because “changing the boundaries of some of the homesite 

parcels would not return any value to the easement donors.” Id. at 553. 

* * *

In brief, we hold that § 170(h)(2)(C) means just what it says it means—that 

to qualify for a deduction, a conservation easement must grant “a restriction”

(meaning at least one) on the use to which the subject property can be put, and 

must do so “in perpetuity,” as that term has traditionally been used and understood 

in common-law practice. An easement granted in perpetuity over a defined 

conservation area clears § 170(h)(2)(C)’s relatively low threshold, even if it 

reserves targeted development rights for homesite construction. Based on those 

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metrics, the 2005, 2006, and 2007 easements all qualify. The Tax Court, of course, 

hasn’t yet addressed whether the 2005 and 2006 easements satisfy § 170(h)(5)(A)’s 

protected-in-perpetuity requirement. On remand, it will need to do so.

4

III

We turn, then, to consider the Commissioner’s cross-appeal. He raises two 

arguments. First, he contends that the Tax Court erred in concluding that the 2007 

easement’s provision allowing the contracting parties to amend the grant doesn’t 

violate § 170(h)(5)(A)’s protected-in-perpetuity requirement. Second, even 

assuming the 2007 easement is valid, he argues that the Tax Court erred in its 

valuation. We will consider the Commissioner’s arguments in turn.

A

First, the 2007 easement’s amendment provision. (In fact, all three 

easements contain substantially identical amendment clauses, but because the Tax 

Court had already held that the 2005 and 2006 easements’ reservations of rights

4 Lest anyone worry that our interpretation of § 170(h)(2)(C) gives the Pine Mountains of the 

world a free pass, we make two observations in closing our discussion of the 2005 and 2006 

easements. First, we have dealt only with § 170(h)(2)(C). Even after passing through the 

granted-in-perpetuity gateway, a conservation easement must still satisfy § 170(h)(5)(A)’s 

protected-in-perpetuity requirement; that, it seems to us, is likely where Congress envisioned the 

heavy lifting—the more rigorous analysis of the degree to which the grant protects conservation 

purposes—should occur. Second, recall that NALT has extensive advance-approval rights under 

these easement contracts. NALT is a sophisticated land-conservation organization, and we have 

little doubt that when it comes to negotiating conservation easements, it is well positioned and 

equipped to look after conservation interests. 

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violated § 170(h)(2)(C), it addressed only the 2007 easement’s amendment clause

under § 170(h)(5)(A).) We agree with the Tax Court that the amendment clause in 

the 2007 easement—and, by extension, the 2005 and 2006 easements—doesn’t

violate § 170(h)(5)(A)’s protected-in-perpetuity requirement.

Each easement’s amendment clause “recognize[s] that circumstances could 

arise which would justify the modification of certain restrictions” in the grant. The 

clause thus states that NALT, as the “Holder,” and Pine Mountain, as the “legal 

owner,” “shall mutually have the right, in their sole discretion, to agree to 

amendments to this Conservation Easement, which are not inconsistent with the 

Conservation Purposes.” The Commissioner asserts that the amendment provision

gives so much discretion to the parties that it causes the 2007 easement—and 

again, by extension the others as well—to violate the “double-perpetuity 

requirement” of § 170(h)(2)(C) and § 170(h)(5)(A). 

We disagree. For starters, to the extent that the Commissioner’s position 

equates “perpetuity” with inalienability, unreleasability, or unamendability, we 

reject it. As we have explained, “perpetuity”—as used in connection with 

conservation easements—draws on the term’s common-law meaning and denotes 

only that the granted property won’t automatically revert to the grantor, his heirs, 

or assigns. See supra at 12–13. 

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Separately, it seems to us that the Commissioner’s position proves entirely 

too much. Parties to a bilateral contract—which is all a conservation easement 

is—can always agree after the fact to amend their agreement, whether or not they 

expressly reserve that right to themselves in writing. If the possibility of 

amendment were a deal-killer, then there could be no such thing as a taxdeductible conservation easement.

As the Tax Court correctly observed, the easements at issue here are 

conveyances with respect to which Pine Mountain and NALT contracted. It is 

(literally) hornbook contract law that contracting parties are free to amend their 

agreements after the fact. See 28 Williston on Contracts § 70:154 (4th ed.) (“A 

promise modifying a duty under an executory contract is binding if the 

modification is fair and equitable in view of circumstances not anticipated by the 

parties when the contract was made.”); see also Restatement (Second) of Contracts 

§ 89 (1981) (similar). More particularly, traditional servitude doctrine has long 

allowed for the amendment of easements. See Restatement (Third) of Property 

(Servitudes) § 7.1 (2000) (observing that a property servitude “may be modified or 

terminated by agreement of the parties, pursuant to its terms”).

5

 And indeed, even 

5 The Restatement has a special rule that addresses when changed circumstances justify 

modification by a court, but it is clear that any servitude may be modified by mutual consent of

the parties. Compare Restatement (Third) of Property (Servitudes) § 7.10 (2000) with

Restatement (Third) of Property (Servitudes) § 7.11 (2000).

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the Uniform Conservation Easement Act—the act that enabled landowners to grant 

perpetual easements to conservation trusts—provides for the possibility of bilateral 

amendments. See UCEA § 2(a) (“Except as otherwise provided . . . , a 

conservation easement may be created, conveyed, recorded, assigned, released, 

modified, terminated, or otherwise altered or affected in the same manner as other 

easements.” (emphasis added)). 

In short, we agree with the Tax Court that the 2007 easement’s amendment 

provision does not cause it to violate § 170(h)(5)(A)’s protected-in-perpetuity 

requirement.6

 

B

Finally, we address the Tax Court’s valuation of the 2007 easement. It 

seems to us obvious that in valuing the easement the court simply “split the baby”

and picked a number that was almost exactly midway between the parties’ (wildly 

6 Separately, the notion that an amendment clause alone renders a conservation easement neither 

granted-in-perpetuity nor protected-in-perpetuity on the ground that the parties will agree to 

amendments that undermine the conservation purposes of the entire grant is a risk that is, we 

think, “so remote as to be negligible.” 26 C.F.R. § 1.170A-14(g)(3). As a land trust that

regularly deals in these types of conservation easements and whose purpose is to protect 

conservation areas, NALT would be quite unlikely to agree to amendments that would clearly 

violate a grant’s conservation purposes.

We note in closing that although the Tax Court didn’t reach the issue, on appeal the 

Commissioner has separately argued that the amendment provision causes the 2007 easement to 

violate § 170(h)(2)(C)’s granted-in-perpetuity requirement. We reject that contention for 

essentially the same reasons that we have concluded that the moveable-homesite provisions of 

the 2005 and 2006 easements don’t run afoul of § 170(h)(2)(C). Amendment clause or no, the 

2007 easement embodies “a restriction” on land use that is “granted in perpetuity.” See supra at 

17–18.

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divergent) estimates. While we appreciate the difficulty of determining the exact 

value of a conservation easement, we must insist that the Tax Court apply a 

discernible methodology that is appropriately tied to the standard set out in the 

governing regulations. 

According to those regulations, the value of a conservation easement 

donated under § 170 “is the fair market value of the perpetual conservation 

restriction at the time of the contribution.” 26 C.F.R. § 1.170A-14(h)(3)(i). The 

regulations go on to specify alternative methods of valuing such contributions:

[1] If there is a substantial record of sales of easements comparable to 

the donated easement (such as purchases pursuant to a governmental 

program), the fair market value of the donated easement is based on the 

sales prices of such comparable easements. [2] If no substantial record 

of market-place sales is available to use as a meaningful or valid 

comparison, as a general rule (but not necessarily in all cases) the fair 

market value of a perpetual conservation restriction is equal to the 

difference between the fair market value of the property it encumbers 

before the granting of the restriction and the fair market value of the 

encumbered property after the granting of the restriction.

Id.

On its tax returns, Pine Mountain claimed that the 2005, 2006, and 2007 

easements were worth $16.5 million, $12.7 million, and $4.1 million, respectively. 

In the Tax Court, Pine Mountain’s valuations ballooned to $54.7 million, $33.6 

million, and $9.1 million—totaling $97 million in deductions for a property that it

purchased for only $37 million. The Commissioner, in stark contrast, valued the 

tracts at $1,119,000, $998,000, and $449,000. 

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The Tax Court declined to use either the comparable-sales or before-andafter methodologies specified in the regulations. Instead, after reviewing reports 

from both sides’ valuation experts, the court concluded that Pine Mountain’s 

expert had overvalued the 2007 easement, that the Commissioner’s expert had 

undervalued it, and that their errors simply cancelled one another out. On the one 

hand, the court said that Pine Mountain’s expert had “overestimated the value of 

the 2007 easement by ignoring the beneficial effects the easement had on the 

unrestricted Pine Mountain property” and by using “diminution of the underlying 

land’s value,” which was “an imperfect proxy for the market value of this 

particular easement that restricts the use of highly valuable developable land.” 

Pine Mountain Preserve, LLLP v. C.I.R., 116 T.C.M. (CCH) 597 (T.C. 2018). On 

the other hand, the court found that the Commissioner’s expert had “assumed 

incorrectly that the Pine Mountain property would not be developed.” Id. These 

errors offset, the court reasoned, “because the magnitude of all three errors is 

proportional to the probability that the Pine Mountain property would be 

developed.” Id. Oddly, the court observed (we think correctly) that “[t]he mere 

fact that the magnitude of the two experts’ errors vary proportionally does not 

mean that the magnitudes are equal”—but it nonetheless proceeded to conclude

(albeit without explanation) that “on our review of the entire record, we are 

convinced that the errors are roughly equal in magnitude.” Id.

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Without quantifying the magnitude of the experts’ respective 

miscalculations, the Tax Court then combined the two experts’ estimates and gave 

each equal weight. Using a “pox on both your houses” methodology, the court 

divided each estimate by two and added the resulting two numbers together to 

reach a valuation: $9,110,000/2 + $449,000/2 = $4,779,500. 

Again, under I.R.C. § 170, the correct measure of an easement’s value is the 

“fair market value of the perpetual conservation restriction at the time of the 

contribution.” 26 C.F.R. § 1.170(A)-14(h)(3)(i) The calculation requires 

reviewing comparable sales of similar easements or, if no substantial record of 

such sales exists, gauging the difference between the fair market value of the 

property pre- and post-encumbrance. Id. The Tax Court neither engaged in that 

exercise nor gave any justification for its own “methodology,” which weighted 

exactly equally the two sides’ competing values. 

On remand, the Tax Court must evaluate the fair market value of the 

conservation restriction at the time of the contribution, as § 1.170(A)-14(h)(3)(i) 

requires. 

V

To summarize, we hold as follows:

1. The 2005 and 2006 easements satisfy I.R.C. § 170(h)(2)(C)’s grantedin-perpetuity requirement;

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2. The existence of an amendment clause in an easement does not violate 

I.R.C. § 170(h)(5)(A)’s protected-in-perpetuity requirement; and

3. The Tax Court applied an improper method for valuing the 2007 

easement and, on remand, should value the easement using the standards set forth 

in the governing regulations.

REVERSED in part, AFFIRMED in part, and VACATED and 

REMANDED. 

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