1 5 4 T.C. No . 1 0

UNITED STATES TAX COURT
OAKBROOK LAND HOLDINGS, LLC, WILLIAM DUANE HORTON, TAX

M ATTERS PARTNER, Pet i t i o ner v . COM M ISSIONER OF INTERNAL REVENUE, Res po n d en t

Do ck etNo . 5 4 4 4-1 3. Fi l edM ay 1 2 , 2 0 2 0
.

In 2 0 0 8 P d o n at eda co n s erv at i o n eas em en tt o a qu al i fi edo rg an i zat io n an d cl ai m eda ch ari t ab l e co n tri b u t i o n d edu ct i o n u n d er I.R.C. s ec. 1 7 0 (a). Th e eas em en td eedp ro v id edth at , i f th e co n s erv at i o n res tri ct i o n were ex t i n g u i s h edats o m e fu tu re d at e, t he d o n ee wo u ldrecei v e a s h are o f t h e p ro ceed s equ al t o th e fai r m ark etv al ue o f t h e eas em en to n th e d at e t h e co n tri b ut i o n was m ad e. Th e d eed fu rt h er p ro v id edth atth e d o n ee’ s s h are as th u s d et erm i n edwo u l db e redu cedb y

th e v al u e o f an y

i m p ro v em en t s m ad e b y

th e d o n o r aft er g ran ti n g th e eas em en t . R d i s al l o w edth e d educt i o n , co n t en d i n g (am o n g o th er t hi n g s ) t h atth e ex t i n g u i s h m en tcl au s e v i o l at edth e req u irem en ts o f s ec. 1 .1 7 0 A-1 4 (g )(6 ), In co m e Tax Reg s. In Oak b ro o kLan dHo l d i n g s , LLC v . Co m m i s s i o n er, T.C. M em o . 2 0 2 0 -5 4 , i s s u edco n cu rren t l y wi th thi s Op i n i o n , th e Co u rt h o l d s th atth e eas em en td eedv i o lat es th e “p ro t ect edi n p erp etui ty ” req u irem en t o f I.R.C. s ec. 1 7 0 (h )(5 ), as i n t erp ret edi n s ec. 1 .1 7 0 A -1 4 (g )(6 ), In co m e Tax Reg s ., b ecau s e t h e d o n ee’ s s h are o f t he-2
-

ex t i n g u i s h m en tp ro ceed s (1 ) i s b as edo n a fi x ed h is t o ri cal v al u e rat h er th an a p ro p o rt i o n at e s h are, an d(2 ) i s redu cedb y th e v al u e o f an y i m p ro v em en t s m ad e b y

th e d o n o r. Th i s Op i n i o n ad dres s es p et i
t i on er’ s ch al len g e t o t h e v al id i ty o f t h e reg u l at io n . Hel d : Sec. 1 .1 7 0 A-1 4 (g )(6 ), In co m e Tax Reg s., was p ro perl y p ro m u l g at edan di s v al i du n d er t h e Ad m i n i s trat i v e Pro cedu re Act , 5 U.S.C. s ec. 5 5 3 (2 0 1 8 ). Hel d , fu rt h er, t h e co n s tru ct i o n o f I.R.C. s ec. 1 7 0 (h )(5 ) as s et fo rt h i n s ec. 1 .1 70 A-1 4(g )(6 ), In co m e Tax Reg s., i s v al idu n der Ch ev ro n , U.S.A., In c. v . Nat . Res . Def. Co u n ci l, In c., 4 6 7 U.S. 8 37 (1 9 8 4 ).

Dav i dM . W o o l dri d g e, M i ch el le A. Lev i n , Ro n al dA. Lev i t t, an dGreg o ry P. Rh o d es , fo r p et i t i o n er. W . Ben jam i n M cCl en d o n , Bru ce K. M en eel y , Ro b ertW . Di ll ard , an d W i ll i am W . Ki es s l i n g, fo r res p o n d en t .
LAUBER, J u d g e: Oak

b ro o kLan dHo ld i n g s , LLC (Oak b ro o k ), p urch as ed 1 4 3 acres o f l an dn ear Ch at t an o o g a, Ten n es s ee, i n Decem ber 2 00 7 fo r $ 1 ,7 0 0 ,0 0 0
. In Decem b er 2 0 08 , s l i g h t l y

m o re t h an o n e y ear l at er, Oakb ro o k d o n at eda co n s erv at i o n eas em en to v er a p o rt i o n o f t h e t ract t o th e So u th eas t Reg i o nal Lan dCo n s erv an cy (SRLC). On i t s Fed eral i n co m e t ax return fo r 2 0 0 8 , Oak b ro o kcl ai m edfo r th i s d o n at i o n a ch ari t ab le co nt ri b u t i o n d edu ct i o n o f $ 9 ,5 4 5 , 0 00 . Oak bro o kth u s-3
-

t o o kth e p o s i t i o n t h atth e l an dco v ered b y th e eas em en th adap p reci at edi n v al u e b y ab o u t 7 0 0 % i n a s i n g l e y ear du ri n g t h e wo rs t real es t at e cri s i s t o h itth e Un i ted St at es s i n ce t h e Great Dep res s io n . Th e cas e was tri edb efo re J u d g e Ho l m es i n 2 0 1 6 , an dth e fact s are s tat ed
m o re fu ll y

i n a s ep arat e M em o ran du m Op i n i on au th o redb y

h i m an dfi ledco n cu rren t l y h erewi th . Oak

b ro o kLan dHo l d i n g s, LLC v . Co m m i s s i o n er, T.C. M em o . 2 0 2 0 -5 4 . Th ato p i n i o n h o l d s th atth e eas em en t Oak b ro o kg ran t edd i dn o ts at i s fy th e “ pro t ect edi n p erp etu i ty ” req u i rem en to f s ect i o n 1 7 0 (h )(5 )(A) an ds ect i o n 1 .1 70 A-1 4 (g )(6 ), In co m e Tax Reg s . 1 Th ati s b ecau s e t h e d o n ee’ s s h are o f t h e p ro ceed s, i n t h e ev en tth e p ro p ert y were s ol d fo l lo wi n g a ju d i ci al ex t i n g ui s h m en t
o f t h e eas em en t , wo u l db e (1 ) d et erm i n edacco rd i n g t o a fi x edh i s t o ri cal v al u e rat h er t h ana p ro p o rt i o n at e s h are o f t h e p ro ceed s an d(2 ) redu cedb y th e v al u e o f
an y i m p ro v em en t s m ad e b y

th e d o n o r. See Oak

b ro okLan dHo l d i ng s , LLC, T.C. M em o. 2 0 2 0 -5 4 , at* 3 6 -* 3 7 . Inth i s Op in i o n we ad dres s an d reject p et i t i o n er’ s ch al l en g e t o th e v al i d i ty o f t h i s reg u l at io n .

1 Un l es s o th erwi s e i nd i cat ed , al l s tatu to ry referen ces are t o th e In t ern al Rev enu e Co de (Co d e) i n effect fo r t h e y ear at i ss u e. W e ro u n dm os tm o n et ary am ou n t s t o th e n eares t d o l l ar.-4
- FINDINGS OF FACT In Decem b er 2 0 08 Oak

b ro o kex ecu t eda Co ns erv at i o n Eas em en t an dDecl arat i o n o f Res tri ct io n s an d Co v en an t s (Deed ) wi th SRLC, a “ qu al i fi edo rg an i zat i on ” u n d er s ect i o n 1 7 0 (h )(3 ). Th i s eas em en tco v ered1 0 6 acres (o r 7 5 %) o f t h e tract Oak b ro o kh adp u rch as edth e p rev i o u s Decem b er. Th e p art i es u n ders t o o dth at ch an gedci rcu m s t an ces m ig h tm ak e i t i m po s si b l e, ats o m e p o in ti n t h e fu tu re, t o
co n ti n u e p ro t ect i n g th e co n s erv at i o n area. Sh o u l d t h ath ap pen , art i cl e VI, s ect i o n B(2 ), o f th e Deedg ov ern edh o w Oak bro o k an dSRLC wo u l dd i v i d e t h e p ro ceed s
o f s al e fo l l owi n g a ju d i ci al ex t in g u is h m en to f th e eas em en t . Itp ro v i d ed :

Th i s Co n serv at io n Eas em en tg i v es ri s e t o a real p ro p ert y ri g h t an di n t eres ti m

m ed i at el y v es tedi n SRLC. Fo r p u rp o s es o f t h i s Co n s erv at i o n Eas em en t, th e fai r m ark etv al u e o f SRLC’ s ri gh t an di n t eres ts h al l b e eq u al t o the d i fferen ce b et ween (a) t h e fai r m ark et v al u e o f t h e Co n s erv at i o n Area as i f n o tb urd en edb y thi s Co n s erv at i o n Eas em en tan d (b ) t h e fai r m ark etv al u e o f t h e Co n s erv at io n Area b u rd en edb y

th i s Co n s erv at i o n Eas em en t , as s u ch v al u es are d et erm i n edas o f the d at e o f thi s Co n s erv at i o n Eas em en t, (c) l es s am o u n ts fo r i m p ro v em en t s m ad e b y

* * * [Oakbro o k ] i n t h e Co n s erv at i o n Area s ub s equen tt o th e d at e o f t h i s Co ns erv at i o n Eas em en t , th e am o u nto f wh i ch wi ll b e d et erm i n edb y th e v al u e s p eci fi edfo r t h es e i m p ro v em en t s i n a co n d em

n at i o n award i n t h e ev en tal l o r p arto f t h e Co n serv at i o n Area i s t ak en i n ex erci se o f em i n en td o m ai n * * * . If a ch an g e i n co nd i t i o n s m ak es i m p o s s i b le o r i m

p ract i cal an y

co n t i n u ed p ro t ect i o n o f t h e Co n s erv at i o n Area fo r co n s erv at i o n p u rp o s es , th e res tri ct i o n s co nt ai n edh erei n m ay o n l y b e ex ti n g u i sh edb y

ju d i ci al p ro ceed i n g . Up on s u ch p ro ceed i n g , SRLC, up o n a s ub s equen t s al e, ex ch an g e o r i n v ol u n t ary

co n v ers i o n o f t he Co n s erv at i o n Area, s hal l-5
-

b e en t it l edt o a p o rt io n o f t h e p ro ceed s equ al t o the fai r m ark etv al u e o f t h e Co n s erv at i o n Eas em en tas p ro v i dedab o v e. In th e ev en tal l o r p arto f t h e co n s erv at i o n area were t ak en b y em i n en t d o m ai n “ s o
as t o ab ro g at e the res tri ct io n s i m p o s ed b y th i s Co n s erv at i o n Eas em en t , * * * [t h e] p ro ceed s s h al l b e d i v id edi n acco rd an ce wi th th e p ro p o rt i o n at e v al u e o f SRLC’ s
an d * * * [Oakb ro o k ’ s ] i n teres t s as s peci fi edab o v e.” Deedart . VI, s ec. B(3 ). Oak b ro okt i m el y

fi l eda Fo rm

1 0 6 5 , U.S. Retu rn o f Part ners h i p In co m e, fo r i t s 2 0 0 8 t ax ab l e y ear. On th atretu rn i t cl ai m eda ch ari t ab l e co n tri b ut i o n d edu ct i o n
o f $ 9 , 5 4 5 ,0 0 0 fo r i t s d o n at i o n o f t h e eas em en t . Th e In tern al Rev en u e Serv i ce (IRS) s el ect edOak

b ro o k ’ s retu rn fo r ex am i nat i on . On Decem b er 6 , 2 0 1 2 , th e IRS i s su edOak

b ro ok ’ s t ax m at t ers p art n er (TM P o r p et i t i o ner) a n o t ice o f fi nal p art n ers h i p ad m i n i s trat i v e ad ju s t m en tth atd i sal l o wedth e ch ari t ab le co nt ri bu t i o n d educt i o n i n fu l l. Th e TM P t i m el y p et it i o n edfo r read ju s tm en to f t h e p art ners h i p i t em s . Tri al was h el d b efo re J u d g e Ho l m es i n Bi rm i n gh am , Al ab am a, i n 2 0 1 6 . At tri al th e Co u rth eardt es t i m o n y fro m th e SRLC rep res en t at i ve wh o h addraft edth e Deed . Inp o s t -t ri al b ri efs p et i ti o n er co nt en d edth at(1 ) t h e ex t i n gu i s h m en tp ro v i
s i on o f t h e Deedco m

p l i es wi th th e req u i rem en t s o f s ect i o n 1
. 1 7 0A-1 4 (g )(6 ), In
co m e Tax Reg s . , an d(2 ) i n th e al t ern at i v e, th e reg u l at io n i s i n v al i d
.-6
-

J u d g e Ho l m es i n t erp ret edthe Deed t o m ean th at , i n t h e ev en to f a s al e fo l
l o wi n g ju d i ci al ex t in g u i s h m en to f t h e eas em en t , SRLC’ s s h are o f t h e p ro ceed s
wo u l db e l im i t edt o the “ i ni t i al fi x edv al u e” o f th e eas em en t , i .e., i t s fai r m ark et
v al u e (FM V) o n th e d at e i twas g ran t ed . Oak bro o k Lan dHo l di n g s , LLC, T.C. M em o. 2 0 2 0 -5 4 , at* 3 5 . Th e d o n ee’ s p ro ceed s as th u s d et erm i n edwo u l dth en b e redu ced by

th e v al u e (as s peci fi edi n an y fu tu re co n d em

n at i o n award ) o f an y

i m p ro v em en t s th at Oak

b ro o k h adm ad e t o th e co n s erv at i o n area aft er d on at i n g th e
eas em en t . Ib i d . Thu s , i f p ro p erty v al u es ro s e aft er t h atd at e, SRLC’ s s hare wo u l d
n o t“b e p ro t ect edfro m

i n fl at i o n ei th er i n l o cal l an d p ri ces o r t h e eco n o m y m o re g en eral l y .” Id . at* 3 5 -* 3 6 . Co n v ers el y , i f p ro p ert y v al u es fel l , SRLC m i g h tn o t recei v e ev en the i n it i al fi x ed v al u e o f t h e eas em en t b ecau s e o f t h e redu ct i o n fo r i m p ro v em en t s . Id . at* 3 6
. Th e Co u rtco n cl u d edth atth e Deed , as th u s co n st ru ed , fai l ed t o s at i sfy th e req u i rem en t s o f s ect i o n 1 .1 70 A-1 4 (g )(6 ), In co m e Tax Reg s ., fo r t w o reas o n s . Fi rs t , th e reg u l at i on req u i res th atth e d o n ee b e en t i tl edt o a p ro p ort i on at e s h are o f th e p ro ceed s , n o tt o a fi x edd o l l ar am o un tk ey edt o t h e eas em en t ’ s i n i t i al v al u e. Oak bro o kLan dHo l d i n g s , LLC, T.C. M em o . 2 0 2 0 -5 4 , at* 3 7. Seco n d , th e reg u l at i o n d o es n o t p erm i ta redu ct i o n o f th e d on ee’ s p ro ceed s o n acco u n t o f i m p ro v em en t s m ad e b y

th e d o n o r. Id . at* 3 7 -* 38 (ci t i n g PBBM -Ro se Hi l l, Lt d . v .-7
-

Co m m i s s i o n er, 9 0 0 F.3 d1 9 3 , 2 0 8 (5 th Ci r. 2 0 1 8 )). In th i s Op i n i o n we ad dres s p et i t i o n er’ s ch al l en g e t o th e v al i d i ty o f t h i s reg ul at i o n . OPINION A. St atu t o ry

an dReg u l at o ry

Fram ewo rk Sect io n 1 7 0 (a)(1 ) al lo w s a d educt i o n fo r an y ch ari tab l e co n tri b u t i on m ad e wi th i n th e t ax ab le y ear. If t h e t ax p ay er m ak es a ch ari tab l e co n tri b u t i on o f p ro p erty o th er th an m o n ey , th e am o u nto f t h e co n tri b u ti o n i s g en eral l y equ al t o the FM V
o f t h e p ro p ert y

atth e t im e t h e g i fti s m ad e. See s ec. 1 .1 7 0 A-1 (c)(1 ), In co m e Tax Reg s. Th e Co d e g en eral l y res tri ct s a t ax pay er’ s ch ari t ab le co nt ri b u ti o n d edu ct i o n fo r t h e d o n at io n o f “ an i n t eres ti n p ro p ert y wh i ch co n s i s t s o f l es s th an th e t ax p ay er’ s en t i re i n t eres ti n s uch p ro p ert y .” Sec. 1 7 0 (f)(3 )(A). Bu t th ere i s an ex cep t i on t o thi s ru l e fo r a “ qual i fi edco n s erv at i o n co n tri b u t i on .” Sec. 1 7 0 (f)(3 )(B)(i i i ). Th i s ex cep t i on ap p l i es wh ere: (1 ) t h e t ax p ay er m ak es a co n tri b ut i o n o f a “ qu al i
fi edreal p ro p ert y i n t eres t ,” (2 ) t h e d o n ee i s a “ qu al i fi edo rg an i zat i o n,” an d(3 ) t he
co n tri b u t i o n i s “ ex cl u s iv el y fo r co n s erv at i o n p u rp os es .” Sec. 1 7 0 (h )(1 ). Sect io n 1 7 0 (h )(5 )(A) p ro v i d es th ata co n tri b u ti on wi l l n o tb e t reat edas b ei n g m ad e ex cl us i v el y

fo r co n s erv at i o n p urp o s es “ u n l es s th e co n s erv at io n p u rp o s e i s p ro t ect edi n p erp etui ty .” Th e reg u l at i o n i n t erp ret i n g thi s p ro v i s i o n reco g n i zes-8
-

th at“ a s ub s equ en t u n ex pect ed ch an g e i n th e co n d i t io n s s urro u n di n g the [d o n at ed ] p ro p erty * * * can m ak e i m

p os s i b l e o r i m

p ract i cal th e co nt i n uedu s e o f t h e p ro p erty fo r co n s erv at i o n p u rp o s es .” Sec. 1 .1 7 0 A -1 4 (g )(6 )(i ), In co m e Tax Reg s . Des p i t e t h atp o s s i b i l it y

“ th e co n s erv at i o n p urp o s e can n o n ethel es s b e t reat edas p ro t ect edi n p erp etu i ty

i f th e res tri ct i o n s are ex t i n g u is hed b y ju d i ci al p ro ceed in g ” an d th e eas em en t d eeden s u res th atth e ch ari t ab l e d o n ee, fo ll o wi n g s al e o f t h e p ro p erty , wi l l recei v e a p ro p o rt i on at e s h are o f t h e p ro ceed s an du s e t h o s e p ro ceed s co n s i st en t l y wi th t h e co n s erv at io n p u rp os es u n d erl y i n g th e o ri gi n al g ift . Ib id . Ineffect , th e “p erp etui ty ” req u i rem en t i s d eem eds at i s fi edb ecau se t h e s al e p ro ceed s rep l ace t he eas em en t as an as s etd ep l o y edb y the d o n ee “ ex cl u s iv el y fo r co n s erv at i o n p u rp o s es .” Sec. 1 7 0 (h )(5 )(A). Sect io n 1 .1 7 0 A-1 4 (g )(6 )(i ), In co m e Tax Reg s ., p ro v i d es th at the d o n ee m u s t b e en ti t l edt o p ro ceed s “ d et erm i n edu nd er p arag rap h (g )(6 )(i i ).” Th atp arag rap h , cap t i on ed“ Pro ceed s,” p ro v i d es i n p artas fo ll ows : [F] o r a d edu ct io n t o b e al l o wedu n d er t h i s s ect i o n , at the t i m e o f t h e g i ftth e d o n o r m

u s tag ree t h atth e d o n at i o n o f t h e p erp etu al co n s erv at i on res tri ct io n g i v es ri s e t o a p ro p ert y ri g ht , i m m ed i at el y v es t edi n th e d o n ee o rg an izat i o n , wi th a fai r m ark etv al u e t h ati s atl eas t equ al t o th e p ro po rt i o n at e v al ue t h atth e p erp etu al co n s erv at i o n res tri ct i o n atth e t i m e o f the g ift , b ears t o t h e v al u e o f t h e p ro p erty as a wh o l e at th att i m e. * * * Fo r p urp o s es o f t h i s p arag rap h * * * , th at p ro p o rt io n at e v al u e o f th e d on ee’ s p ro p ert y ri gh t s s hal l rem ai n co n s t an t . Acco rd in gl y , wh en a ch an g e i n co n d i t i o n s g i v e[s ] ri se t o t h e ex t i n g u i s h
--9
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m en to f a p erp etu al co n serv at i o n res tri ct i on u n d er p arag rap h (g )(6 )(i ) o f t h i s s ect i o n , th e d o n ee o rg an i zat i o n , o n a s ub s equ en ts al e, ex ch an g e, o r i n v ol u n t ary

co n v ers i o n o f t h e s ub

jectp ro p ert y , m

u s tb e en t i t l edt o a p o rt i o n o f t h e p ro ceed s atl eas tequ al t o t h atp ro p o rt i o n at e v al u e o f th e p erp etual co n s erv at i o n res tri ct i o n , u nl es s s t at e l aw p ro v i d es th atth e d o n o r i s en t i t l ed t o t h e fu l l p ro ceed s * * *
. Th i s reg u l at io n req u i res th atth e eas em en td eed g u aran t ee t h e d o n ee “ a p ro p o rt i on at e s h are o f ex t i n g u i s hm en tp ro ceed s .” Carro l l v . Co m m is s i o n er, 1 4 6 T.C. 1 9 6 , 2 1 9 (2 0 1 6); s ee PBBM -Ro s e Hi l l , 9 0 0 F.3 dat2 0 7 (“ [T] h e ‘ p ro p o rt i o n at e
v al u e’ i s a fract i o n equ al t o the v al u e o f t he co n serv at i on eas em en tatth e t i m e o f th e g i ft , d i v i d edb y th e v al ue o f t h e p ro p ert y as a wh o l e atthatt i m e.”). Fu rt h er, th e reg u l at i o n d oes n o tp erm itth at“ an y am o un t , i n cl u d i n g t h atat tri b ut ab l e t o i m p ro v em en t s , m ay

b e s ub tract edo u t ” o f t he p ro ceed s ag ai n s twh i ch th e p ro p o rt i o n at e v al u e i s ap pl i ed . PBBM -Ro s e Hi l l , 9 0 0 F.3 d at2 08 ; acco rd , Co al Pro p . Ho l d
i n g s , LLC v . Co m

m i ss i o n er, 1 5 3 T.C. 1 2 6 , 1 3 6 -1 37 (2 0 19 ). B. Reg u l at o ry Back g ro u n d Th e Tax Refo rm

Act o f 1 9 6 9 , Pub . L. No . 9 1 -1 7 2 , s ec. 2 0 1 , 8 3 St at . at5 5 6 , g en eral l y d i s al l o wedch ari t ab l e co n tri b u t i on d edu ct i o n s fo r g i ft s o f p art i al i n t eres t s i n p ro p ert y . In1 9 8 0 Co n g res s rev i s edth e Co de t o al l o w d edu ct i o n s fo r s u ch g i ft s wh en th ey co n st i tut e “ qu al i fi edco n s erv at i o n co n tri bu t io n s . ” See Tax Treat m en t Ex t en s io n Act o f 1 98 0 (1 9 8 0 Act ), Pub
. L. No . 9 6 -5 4 1 , s ec. 6 , 9 4 St at . at3 2 0 6-1 0
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(ad d i n g s ect i o n 1 7 0 (h )). Co n g res s s p eci fi edn u m ero u s req u i rem en t s fo r a “ qu al i
fi edco n s erv at i o n co n tri b ut io n ,” i n cl u d i n g th e req u i rem en t s thatth e co n tri b u t i o n b e m ad e “ ex cl u s i v el y

fo r co n s erv at i o n p urp o s es ” an d t h atth e “ co n s erv at i o n p u rp o s e [b e] p ro t ect edi n p erp etui ty .” Ib i d . (co d i fi edats ect io n 1 70 (h )(1 )(C), (5 )(A)). OnM ay 2 3 , 1 9 8 3 , th e Dep art m en to f t h e Treas u ry (Treas u ry ) i s s ueda n o t ice
o f p ro p o s ed ru l em ak in g wi th “p ro p os edreg u l at i o n s rel at i n g t o co n tri b u t i o n s o f p art i al i n t eres t s i n p ro p ert y fo r co n s erv at i o n p u rp o s es .” 4 8 Fed . Reg . 2 2 9 4 0 (M ay 2 3 , 1 9 8 3 ). Th e p ream

b l e ex p l ai n edth e h i s t o ry

o f co n g res s io n al en act m en ts i n th i s area, h i gh l ig h t i n g th e requ i rem en tth at a d o n at edeas em en t“b e p erp etu al i n o rd er t o qu al i fy fo r a d edu ct i o n . ” Ib i d . Treas u ry n o t edthatth e Ho u s e an dSen at e co m m i t t ee rep o rt s acco m

p an y in g the 1 9 80 Acth ad“p ro vi d ed , fo r t h e fi rs tt i m e, an i n d ep th s t at em en to f co n g res s i o n al i nt en tco n cern i n g th e d on at i o n o f p art i al i n t eres t s fo r co n s erv at i o n p u rp o s es .” Ib i d . Th e p ream b l e s t at edth atth e p ro p o s edreg u l at i on s “ refl ectthe m ajo r p o l i cy d eci s i o n s m ad e b y

th e Co n g res s an dex p res s edi n th es e co m

m i t t ee rep o rt s . ” Ib i d
. Th e p ro p os edreg u l at i on s s p an n edn i n e p ag es o f th e Fed eral Reg is ter an d i n cl u d edp ro v i s i o n s --m an y qu it e t ech n i cal --ad dres s i n g co n cep t s s u ch as “ qu al i fi ed real p ro p ert y

i nt eres t , ” “ p erp etu al co n s erv at i o n res tri ct i o n,” “ h i s t o ri cal l y i m p o rt an t l an darea,” “ cert i fi edh i s t o ri c s tru ctu re,” “ co n s erv at io n p u rp o s e,” an d “ s i g ni fi can t-1 1
-

p ub l i c b en efi t .” Id . at2 29 4 1 -2 2 9 4 9 . Ov eral l , th e p ro p o s ed reg u lat i on s co v eri n g

“ qu al i fi edco n s erv at i o n co nt ri b u t i o n s ” co n si s t edo f 1 0 p arag rap h s , 2 3 s ub p arag rap h s , 3 0 s ub di v i s i o n s , an d2 1 ex am p l es . On e o f t h es e 2 3 s ubp arag rap h s b ecam e wh ati s n o w s ect i o n 1 .1 7 0A-1 4 (g )(6 ), In co m e Tax Reg s ., co v eri n g ju di ci al ex t i ng u i s h m en to f eas em en t s an dal l o cat i o n o f t h e res u l t i ng p ro ceed s . 4 8 Fed
. Reg
. at2 2 9 46
. In res p o n s e t o i t s req u es tfo r p ub l i c co m m en t s , Treas u ry recei v edm o re t h an 7 0 0 p ag es o f co m

m en t ary . Ni n et y

o rg an i zat i on s o r i n di v i du al s s ub m i t t edco m m en t s ad dres si n g v ari o u s as pect s o f t h e p ro p os edru l es . Of th e 9 0 co m m en t ers
o n l y 1 3 m en ti o n edth e ju d i ci al ex t i n g u i s h m en tp ro v i s i o n . Of th o se 1 3 m o s t d ev ot ed o n l y

a few s en t en ces t o th i s s ubject , g en eral l y atth e en do f a s ubm i s s i on th atem p h as i zedo th er m at t ers . M o s t o f t h e co m

m en ters wh o m en t i o n edth e ju d i ci al ex t i n gu i s hm en tp ro v i s i o n s up p o rt edi t . Th e M ai ne Co as tHeri t ag e Tru s t“ s tro ng l y en d o rs e[d ] th e p ro p o s edp ro v i s i o n s fo r ex ti n g u i s h i n g eas em en t s .” Oth er co m m en t ers ech o edth i s p o i n t , em p h as i zi n g th atth e p ro p o rt i o n at e v al u e as s i g n edt o th e eas em en t s ho u l db e

“ th e m i ni m

u m th ata g ran t ee o rg an i zat i o n s h ou l drecei ve.” Sev eral co m m en t ers
reco m m en d edth atth e p ro ceed s fo rm ul a b e rev is edt o m ak e i tm o re fav orab l e t o-1 2
-

th e d o nee, s u ch thatth e d o n ee’ s s h are wo u l db e “ equ al t o th e g reat er o f i t s o ri g i n al p ro p ort i o n at e v al u e o r i t s p ro p o rt i o nat e v al u e atth e t i m e o f t h e ex t i n g u i s h m en t .” So m e co m

m en t ers wh o s up p o rt edth e ju d i ci al ex t in g u i s h m en tru l e s u g g es tedm in o r t weak s t o i t. Th e Nat i o n al Tru stfo r Hi s t o ri c Pres erv at i on reco m m en d ed

“ i n cl u d in g ‘ refi n an ci n g ’ i n th e l i s to f ev en t s th atwo u l dtri g g er t h e p ro p ert y o wn er’ s o bl i g at i on t o p ay

th e eas em en th o l d er fo r t h e v al ue o f i ts ex t i n g u i s h edeas em en tri g h t s .” Th e W as h i n g t o n Tru s t fo r Hi s t o ri c Pres erv at i o n reco m m en d edth at th e l i s to f t ri g g eri ng ev en t s , rat h er t h an b ei n g ex p an d ed , s h ou l db e res tri ct edt o

“ ‘ act s o f Go d ’ wh i ch s ub s t an t i al l y d es tro y th e p ro p ert y . ” Th e Natu ral Lan ds Tru s t
reco m m en d edth atth e fract i o n d et erm i n in g th e d o n ee’ s s h are b e co m p u t edo n th e b as i s o f v al u es ex is t i ng “ atth e t i m e o f t h e ex t i n g ui s h m en t .” Sev eral co m

m en t ers s u g g es t edth atthe ju d ici al ex t i n g u is hm en t ru l e m i g h t b e u n n eces s ary

o r d i ffi cu l tt o en fo rce ag ai n s tfu tu re o wn ers . Two co m m en t ers
n o t edco n cern th atd on o rs o r d o n ees m fi g h tb e s ubjectt o St at e t ran sfer t ax es up on d i s tri b u t i o n o f ex t i n g u i s h m en t p ro ceed s . Th ree co m m en t ers qu es ti o n edth e “p ro p o rt i on at e v al u e” ap p ro ach as ap p l i edt o facad e eas em en ts o n cert i fi edh i s t o ri c
s tru ctu res , wh il e ag reei n g th atth i s ap p ro ach was ap p ro p ri at e “ as ap p l i edt o o p en
s p ace eas em en t s ” o n l an d
.-1 3
-

Two co m m en t ers were d efi n i t el y

o p p os edt o the ju d ici al ex t i ng u is h m en t
ru l e, feari n g th ati two u l d“ creat e a p o t en t i al d i s i ncen t i v e t o th e d o n at io n o f eas em en t s .” Acco rd i n g t o t h e Lan dm ark s Pres erv at i o n Co u n ci l o f Il l in o i s, th e “ p ro p o rt i on at e v al u e” ap p ro ach t o d i s tri bu t i o n o f p ro ceed s was p ro b l em at i c as ap p l i ed t o facad e eas em en t s o n “ en d an g eredh is t ori c p ro p ert i es * * * i n d o wn t o wnco m m erci al areas .” Th e New Yo rkLan d m ark s Co ns erv an cy (NYLC), wh i ch was

“ d ed i cat edt o th e p res erv at i o n o f arch i t ectu ral l y , h i s t o ri cal l y an dcu ltu ral l y

s i g n i fi can t b u i l d i n g s,” d ev ot edtwo p ag es o f co m m en t s t o th e ju d ici al ex t i n g u is hm en t
ru l e, fo cu s in g i t s co n cern o n th e s upp o s ed“ d et erren teffect ” o f t h i s p ro v i s i o n . No t in g th atju d i ci al ex t i ng u i s h m en twas a “ rel at i v el y rem ot e” p o s si b i l i ty , i t qu es ti o n edwh eth er t h e reg u l at i o n s n eed edt o ad dres s t h is p o in t . NYLC was th e o n l y

co m m en ter t o m en t i o n d o n o r i m pro v em en t s t o th e co ns erv at i o n area. It u rg edth atth e p ro p o rt io n at e v al u e fo rm u la “ fai l s t o t ak e i n t o acco u ntth ati m

p ro v em en t s m ay

b e m ad e * * * b y

th e o wn er wh i ch s h o ul dp ro p erl y al t er t h e rat i o .” Itco nt en d ed th atfai l u re t o o ffs eti m p ro v em en ts ag ai n s t th e d o n ee’ s s h are o f t h e p ro ceed s “ wo u l do b v i o u s l y b e u n des i rab l e t o t h e p ro s pect i v e d o n o r an dwo u l dco n s t i tu t e a wi n d fal l t o th e d o nee o rg an izat i o n .” Bu tNYLC
s u g g es t edn o al t ern at i ve t ex t t o ad dres s th i s co n cern , o th er t h an t o “ reco m m en d-1 4
-

d el et io n o f t h e en t i re ex t i n g u i s h m en tp ro v i s io n .” No r d i dan y o th er co m

m en t er
s u g g es tal t ern at i v e t ex t t o ad dres s t h e co n cern s (i f an y ) t h at i tex p res s ed
. A p ub l i c h eari n g on th e p ro p os edam en d m en t s t o t h e reg u l at i o n s was h el d
o n Sep t em

b er 1 5 , 1 9 8 3 . OnJ an u ary 1 4 , 1 9 8 6 , Treas u ry

ad o p t edth e p ro p o s ed
am en d m en t s wi th n u m ero u s rev i s i o n s . See T.D. 8 0 6 9 , 1 98 6 -1 C.B. 8 9 . Th e p ream bl e t o th e fi n al reg u l at i o n s p ro v i des a s u m m ary o f t he l aw an ds t at es th at ,

“ [a] ft er co n s i d erat i o n o f al l co m m en t s reg ard i n g the p ro po s edam en d m en ts * * * , th o s e am en d m en t s are ad o p t edas rev i s ed b y th is Treas u ry

d eci s i o n .” Id . at9 0
. In a s ect i o n cap ti o n ed“ Su m m ary o f Co m m en t s ,” t h e p ream

b le ex pl ai n ed th atTreas u ry

h adm ad e s ub s t an t i al rev i s i o n s i n res p o n s e t o th e co m m en t s i trecei v ed . Th e p ream

bl e d is cu s s eds ev en as p ect s o f t h e p ro p o sedreg u l at i o n s i n d et ai l; i n each cas e Treas u ry rev i s edo r cl ari fi ed t ex t , fi l l edi n g ap s , o r p ro v i d ed ad d it i o n al ex p lan at o ry

ex am p l es . Id . at9 0-9 1 . Sev eral o f t h es e p ro v i s i o n s h ad g en erat ed“ m an y

co m m en t s .” Ib i d
. Th e “ ju di ci al ex t i n g u i s h m en t ” p ro v i s i o n i s n o tam o n g th e am en d m en t s s p eci fi cal l y ad dres s ed i n th e “ Su m

m ary o f Co m m en t s .” Ho wev er, Treas u ry d i dm ak e ch an ges t o th atp ro v i s i o n i n res p o n s e t o t h e co m m en t s i trecei v ed
. As o ri g i n al l y p ro p os ed , th e “

ju d i ci al ex t i n g ui s h m en t ” ru l e v es t edth e d o n ee wi th a p ro p ert y ri g h t h av in g an FM V“ th ati s a m i ni m u m as cert ai n ab l e p ro p ort i o n o f t h e fai r m ark et-1 5
-

v al u e t o th e en t i re p ro pert y .” 4 8 Fed . Reg . at2 2 9 46 . Th e fi nal reg u l at i o n rev i s ed
s ub p arag rap h (6 )(i i ) t o refer t o a p ro p ert y ri g h twi th an FM V “ th ati s atl eas tequ al t o the p ro p o rt i o n at e v al ue t h at th e p erp etu al co n s erv at i o n res tri ct i o n atth e t i m e o f th e g i ft , b ears t o the v al u e o f t h e p ro p ert y as a wh ol e atth at t i m e.” Sec. 1
. 1 7 0 A1 4 (g )(6 )(i i ), In co m e Tax Reg s . ; s ee T.D. 8 0 6 9 , 1 9 8 6-1 C.B. at9 9
. Treas u ry co n cu rren t l y m ad e th ree o th er t ech n i cal an dco n fo rm in g ch an g es t o th e t ex t o f t h i s p ro v is i o n . Th es e ch an g es t o th e “

ju d i ci al ex t i n gu i sh m en t ” ru l e res p o nd edt o co m m en t s th atTreas u ry

h adrecei v edfro m

th e Natu re Co n s erv an cy , th e M ai n e Co as tHeri t ag e Tru s t, th e Bran dyw i n e Co ns erv an cy , an dth e Lan d Tru stEx ch an ge. (Th e Lan d Tru s tEx ch an g e h ads yn thes i zedco m m en t s fro m

l an d tru st s acro s s t h e
co u nt ry .) Th es e co m

m en t ers u rg edth at“ th e p ro p o rt i o n at e v al u e, n o t th e ab s o l u t e
v al u e, * * * i s th e i m

p ort an tfi g u re,” an d that“ th e p ro p o rt i o n at e v al u e as s i g n edt o
an eas em en tatthe t i m e o f g i fti s th e m i n i m um th ata g ran t ee o rg an izat i o n s h o u l d recei v e i n t h e ev en t o f an ex t i ng u i s h m en t an d s al e.” C. Pro cedu ral Val i d i ty o f t h e Reg u l at i o n Pet i t i o ner fi rs tco n t en d s th atthe ju d i ci al ex t i ng u i s h m en treg u l at i on i s p ro cedu ral l y d efect i v e o n th e t heo ry

thati twas n o tp ro p erl y

p ro m u l gat edas req u i red b y th e Ad m i n i s trat i v e Pro cedu re Act(APA), 5 U.S.C. s ec. 5 5 3 (2 0 1 8 ).-1 6
-

1
. Leg i s l at i v e v s . In t erp ret i v e Ru les Ad m i ni st rat i v e l aw d is t in g u i s h es b et ween i nt erp ret i ve an d l eg i s l at i ve ag en cy ru l es . “ Ani n t erp ret i v e ru le m erel y cl ari fi es o r ex p l ai n s p reex is t i n g s ub s t an t i v e l aw o r reg u l at io ns .” SIH Part n ers LLLP v . Co m m i s s i o n er, 1 50 T.C. 2 8 , 4 0 (2 0 1 8 ) (ci t i n g El i zab et h Bl ack wel l Heal th Ct r. fo r W o m en v . Kn ol l, 6 1 F.3 d 1 7 0, 1 8 1 (3 d Ci r. 1 9 95 )), aff’ d , 9 2 3 F.3 d 2 9 6 (3 dCi r. 2 0 19 ); s ee Ten n . Ho s p . As s ’ n v . Azar, 9 0 8 F.3 d1 0 29 , 1 0 4 2 (6 th Ci r. 2 0 1 8 ). A l eg i s l at i v e ru l e, o n th e o th er h an d , “ creat es ri g h t s , as s ig n s du ti es , o r i m p o s es o b l i g at i o n s , the b as ic t en o r o f wh i ch i s n o t al read y o u t l i n edi n th e l aw i t s el f.” SIH Part n ers , 1 5 0 T.C. at4 0 (q u o t in g Di a Nav ig at io n Co . v . Po m ero y , 3 4 F.3 d1 2 5 5 , 1 2 6 4 (3 dCi r. 1 9 9 4 )); s ee Ten n . Ho s p . As s ’ n , 9 0 8 F.3 d at1 0 4 2
. Leg i s l at i v e ru l es h av e “ th e fo rce an d effect o f l aw.” Ch ry s l er Co rp . v . Bro wn , 4 41 U.S. 2 8 1 , 3 03 (1 9 7 9 ) (qu o t i n g Bat t ert o n v . Fran ci s , 4 3 2 U.S. 4 1 9 , 4 2 5 n .9 (1 9 7 7 )). Sect io n 1 7 0 (h )(5 )(A) req u i res th atth e co n s erv at i o n p u rp o s e u nd erl y i n g th e
eas em en tb e “ p ro t ect edi n p erp etu i ty . ” Bu t th e s t atu t e d o es n o ti n d icat e h ow (o r wh et h er) t h i s req u i rem en tco u l db e d eem eds at i sfi edg i v en th e p o s si bi l i ty th atthe
eas em en tm i g h tl at er b e ex t i n g u i s h ed . Th e reg u l at i on s p eci fi es th e ci rcu m s t an ces i n wh ich “ th e co n s erv at i o n p u rp o s e can n o net h el es s b e t reat edas p ro t ect edi n p erp etu i ty . ” Sec. 1
. 1 7 0 A -1 4 (g )(6 )(i ), In co m e Tax Reg s .-1 7
-

To s ecu re t hi s treat m en tth e reg u l at i o n req ui res thatth e d o n o r ag ree, at th e t i m e o f t h e g i ft , t o a s p eci fi edd i v i s i o n o f p ro ceed s i n the ev en tth e p ro pert y i s s o l d fo l l o w i n g ju di ci al ex t i ng u i s h m en to f t h e eas em en t . Ib i d . Th e requ iredd i v i s i o n o f p ro ceed s i s s etfo rt h i n s ub p arag rap h (6 )(i i). Becau s e t h e reg u lat i o n i m p o s es a req u i rem en tn o t ex p l ici t l y s etfo rt h i n th e s t atu t e, i t i s ap p ro p ri at el y treat edas a l eg i s lat i v e ru l e. Cf. SIH Part ners , 1 5 0 T.C. at4 0 -4 1
. 2
. Pro cedu ral Req ui rem en t s fo r Leg i s l at i v e Ru l es Leg i s l at i v e ru l es are s ub

jectt o APA n o t i ce-an d -co m m en tru l em ak i n g p ro cedu res . See 5 U.S.C. s ec. 5 5 3 (b ); Ten n . Ho s p . As s ’ n , 9 08 F.3 d at1 0 4 2 . To i s s u e a l eg i s lat i v e reg u l at i o n co n s i st en t l y wi th t h e APA an ag en cy m us t : (1 ) p ub l i s h a
n o t i ce o f p ro po s edru l em ak i n g i n th e Fed eral Reg i s t er; (2 ) p ro v i d e “ i n t eres t edp ers o n s an o p p o rtu ni ty

t o p art i ci p at e * * * th ro u g h s ub m i s s i o n o f wri tt en d at a, v i ews , o r arg u m en t s ”; an d (3 ) “ [a] ft er co n s id erat i o n o f t he rel ev an tm at t er p res en t ed , * * * i nco rp orat e i n the ru l es ad o p t ed a co n ci s e g en eral s t at em en to f t h ei r b as i s
an d p u rp o s e.” See 5 U.S.C. s ec. 5 5 3 (b ) an d(c). Th e ad m i ni s trat iv e reco rdfo r T.D. 8 0 6 9 s h o w s (an dp et i t i o ner d o es n o t d i s p u t e) t h atTreas u ry

s at i s fi edth e fi rs ttwo req ui rem en t s . Pet it i o n er co n t en d s th at Treas u ry fai l edt o co n si d er a “ rel ev an tm at ter p res en ted ” t o i t an dfai ledt o i n cl u d e i n the fi nal reg u l at i o n s a “ co nci s e g en eral s t at em en t o f t h ei r b as i s an dp urp o s e.”-1 8
-

Th e APA p ro v i d es th ata rev i ewi n g co urts h al l s etas i d e ag en cy act i o n th at i s “ arb i trary , cap ri ci o u s , an ab u s e o f d i s cret i o n , o r o therwi s e n o ti n acco rd an ce wi th l aw.” 5 U.S.C. s ec. 7 0 6 (2 )(a). Th e s co p e o f o u r rev i ew “ i s a n arro w o n e” b ecau s e “ [t ] h e co u rti s n o tem p o wered t o s ub s t i tu t e i t s ju d g m en tfo r t h ato f th e ag en cy .” Bo wm an Tran s p ., In c. v . Ark .-Bes tFrei g h t Sy s ., In c., 4 1 9 U.S. 2 8 1 , 2 8 5 (1 9 7 4) (q u o ti n g Ci t i zen s t o Pres . Ov ert o n Park , In c. v . Vo l p e, 4 0 1 U.S. 4 0 2 , 4 1 6 (1 9 7 1)). W e co n s i d er o n l y wh et h er t h e ag en cy

“ art i cu l at e[d ] a s at i s fact o ry ex p lan at i o n fo r i t s act i o n .” M o t o r Veh i cl e M frs
. As s’ n , In c. v . St at e Farm M u t. Au t o. In s . Co
. (St at e Farm ), 4 6 3 U.S. 2 9, 4 3 (1 98 3 ). Wh i l e we can n o tp ro v id e a reas o n edb as i s fo r ag en cy act io n th atth e ag en cy i t sel f d i dn o ts up p l y , we wi ll “ up h o l da d eci s i o n o f l es s th an i d eal cl ari ty i f t h e ag en cy ’ s p ath m ay

reas o n ab l y

b e d i s cern ed
. ” Bo wm anTran s p ., In c., 4 19 U.S. at2 8 5 -2 8 6 . “ So l o ng as an ag en cy ’ s rat i on al e can reas o n ab l y b e d i s cern edan d th atrat i o n al e co in ci d es wi th t h e ag en cy ’ s au th o ri ty an do b l i g at i o n s u nd er t h e rel ev an t s t atu t e, a rev i ewi n g co u rtm ay n o t ‘ b ro ad l y

req u i re an ag en cy

t o co n s i d er al l p o l icy al t ern at i v es i n reach i n g d eci s i o n . ’ ” SIH Part n ers , 1 5 0 T.C. at 4 7 (qu ot i n g St at e Farm , 4 6 3 U.S. at5 1 ). In d eed , “ reg u l at i o n s wi th n o s t at em en t o f b as i s
an d p u rp o s e h av e b een up h el d wh ere t h e b as i s an d p u rp o s e w[ere] co n s i d ered
o b v i o u s .” Cal -Al m o n d, In c. v . U.S. Dep ’ to f Ag ri c., 1 4 F.3 d 4 2 9 , 4 4 3 (9 th Ci r.-1 9
-

1 9 9 3 ) (ci t i n g Ci t i zen s t o Sav e Sp en cer Ct y . v . EPA, 6 0 0 F.2 d 8 44 , 8 84 (D.C. Ci r. 1 9 7 9 )). 2 Th e p ream

bl e t o th e fi n al reg u l at i o n s ex p l ai ns th atth ey were b ei n g p ro m

u l
g at edt o “p ro v id e n eces s ary g u i d an ce t o th e p ub l i c fo r co m p l i an ce wi th th e l aw,”
as recen t ly

am en d edb y

Co n g res s , “ rel at i n g t o co n tri b u t i o n s * * * o f p art i al i n t eres t s i n p ro pert y

fo r co n s erv at i o n p u rp o s es .” T.D. 8 0 6 9 , 1 9 8 6 -1 C.B. at8 9 . Th e p ream bl e t o th e p ro po s edreg u lat i o n s s upp l i edex t en s i v e b ack g ro u n d ab o u t th e l eg i s lat i v e h i s to ry , ex p l ai n i ng th at“ [t ] h e reg u l at i o n s refl ectth e m ajo r p o li cy d eci s i o n s m ad e b y th e Co n g res s an dex p res s edi n th e[] co m m i t t ee rep ort s .” 4 8 Fed
. Reg . at2 2 9 4 0 . Treas u ry n o t edth at“ [t ] he m o s td i ffi cu l tp ro b l em p o s edi n thi s reg u l at i o n was h o w t o p ro v i d e a wo rk ab l e fram ewo rk fo r d o n o rs , d o n ees , an dthe
* * * [IRS] t o ju d g e th e d edu ct i b i l i ty o f o p en s pace eas em en t s ,” i n vi t i n g p ub l i c
co m m en t s o n th i s an do th er p o i n t s. Ib i d
.

2 In St at e Farm th e Sup rem e Co urtfo u n d ag en cy act i o n arb i traryan d cap ri
ci o u s b ecau s e i t“ fai l edt o p res en tan ad equ at e b as is an dex p l an at i o n ” o f i t s d eci
s i on t o rev ers e a l o n g s t an di n g ru l e. St at e Farm , 4 63 U.S. at3 4 . Onth e b as i s o f th e reco rdi n th atcas e, t h e ag en cy ’ s ex p l an at io n was “ n o t s u ffi ci en t t o en ab l e * * * [t he Co u rt ] t o co n cl u d e t h atth e reci s s i on was a p ro du cto f reas o nedd eci s i on m ak
i n g .” Id . at5 2
. Here, Treas u ry was p ro m

u l g at i n g n ew ru l es i n res p on s e t o Co n g res s ’ am en d m en t s t o s ect i o n 1 7 0 . Treas u ry was n o trev ers i n g an earl i er p o l i cy s up p ort edb y

a b o dy o f fact th atwo u l d req u i re s ub s tan t ial ev i d en ce t o ju s t i fy a rev ers al of co u rs e. See SIH Part n ers , 1 50 T.C. at4 3 -4 4 (d i s t i n g u i s h i ng St at e Farm o n th e s am e g ro u n d ).-2 0
-

In res p o n s e t o t h i s req ues tTreas u ry recei v edco m

m en t s fro m

9 0 o rg an i zat i on s an di n d i v i du al s wh o s up pl i ed v o l u m i n o u s co m m en t ary o n m an y as p ect s o f th e p ro p o s edreg u l at i o ns . Treas u ry co n s id eredth es e co m

m en t s an d m ad e n u m ero u s ch an g es th ro u g h o ut , h i gh l i g h t in g th e m o sti m p o rt an trev i s io n s i n a t wo -p ag e

“ Su m m ary o f Co m m en t s .” T.D. 8 0 6 9 , 1 9 8 6-1 C.B. at9 0 -9 1 . Th e p ream b le t o t h e fi nal reg ul at i o ns s t at es th at , “ [a] ft er co ns i d erat i o n o f al l co m m en t s reg ard i n g th e p ro p os edam en d m en t s * * * , th o s e am en d m en ts are ad o pt edas rev i s edb y th i s Treas u ry d eci si o n .” Id . at9 0 . Th i s Co u rth as fo u n d a s im i l ar s t at em en t , co up l ed wi th th e ad m i n i s trat i v e reco rd , s u ffi ci en tt o fi n d thatTreas u ry h ad co n s i d eredth e rel ev an t m at t er p res en t edt o i t . See W i ng v . Co m m i s s i on er, 8 1 T.C. 1 7 , 3 1 -3 2 (1 9 8 3) (up h ol d i n g a reg ul at i o n wh o s e p ream b l e s tat edth at , “ [a] ft er co ns i d erat i o n
o f al l co m

m en t s reg ard i n g th e p ro po s ed am en d m en t s , th i s Treas u ry Deci s io n i s ad o pt ed ” (qu o t i n g T.D. 7 52 3 , 4 2 Fed
. Reg
. 6 36 4 0 (Dec. 1 9 , 1 9 7 7 ))). Th e p ream

bl e t o th e fi n al reg u l at i o n s d i s cu s s es s ev enm ajo r g ro up s o f co m m en t s an dth e ch an g es Treas u ry m ad e i n res p on s e t o th em . Bu tan ag en cy can n ot
reas on ab l y

b e ex p ect edt o ad dres s ev ery co m m en ti t recei v ed . Th e APA “ has
n ev er b een i n t erp ret ed t o req ui re t h e ag en cy t o res po n dt o ev ery

co m m en t, o r t o
an al y s e ev ery

i s s u e o r al t ern at i v e rai s ed b y th e co m m en t s , n o m at t er h o wi ns ub
s t an t ial .” Th o m

ps o n v . Cl ark , 7 4 1 F.2 d 4 01 , 4 0 8 (D.C. Ci r. 1 98 4 ). “ W e d o n o t-2 1
-

ex p ectth e ag en cy t o d i s cu s s ev ery i tem o f fact o r o pi n i o n i n cl u d edi n th e s ub m i s s i on s m ad e t o i t .” Si m

m s v . Nat ’ l Hi g h way

Traffi c Safet y

Adm i n ., 4 5 F.3 d9 9 9 , 1 0 0 5 (6 th Ci r. 1 99 5 ) (qu o t i ng Au to . Part s & Acces so ri es As s ’ n , In c. v . Bo y d , 4 0 7 F.2 d3 3 0 , 3 3 8 (D.C. Ci r. 1 9 6 8 )); s ee Act i o n o n Sm o k i n g & Heal th v . Ci v i l Aero
n au ti cs Bd ., 6 9 9 F.2 d1 2 0 9 , 1 2 1 6 (D.C. Ci r. 1 9 8 3) (“ Anag en cy n eedn o tres p o n d t o ev ery co m m en t.”). Th e t wo as pect s o f t h e “

ju d i ci al ex ti n g u i sh m en t ” ru l e t o wh i ch p et i t i o n er
o b ject s are t h e req u i rem en t th atth e d o n ee recei v e a p ro p o rt i o nal s h are o f t he p ro ceed s an d t h e fact th at th e “p ro p o rt io n at e s h are” fo rm u l a d o es n otacco u n t fo r t h e p o s s i b i l i ty

o f d o no r i m

p ro v em en t s . Treas u ry

cl earl y co n si d eredth e co m

m en t s i t recei v edo n th e fi rs tp o i n tb ecau s e i ts ubs t an ti al l y rev i s edth e t ex t o f s ect i o n 1 .1 70 A-1 4 (g )(6 )(i i ), In co m e Tax Reg s ., i n res p o n s e t o th o s e co m m en ts . See s up ra p p . 1 4 -1 5
. On l y o n e o f t h e 9 0 co m

m en t ers m en t i o n edd o n o r i m p ro v em en t s , an di td ev o t edex act l y

o n e p arag rap h t o th i s s ub ject . Th atco m

m en t er, NYLC, was co n cern edab o u t facad e eas em en t s o n h i s t o ri c s tru ctu res , as o p p os edt o “p erp etu al
o p en s pace eas em en t s,” wi th wh i ch Treas u ry was ch i efl y

co n cern ed . See 4 8 Fed
. Reg
. at 2 29 4 0 . An dNYLC m en t i o n edthi s p o i n tt o s upp o rt i t s b el ief t h atd o n o rs-2 2
-

o f facad e eas em en t s “ are l i k el y t o b e d i sco u rag edfro m

m ak in g a d o n at i o n ,” a s up p o s i t i on th atTreas u ry

m ay reas o n ab l y

h av e d i sco u n t ed
. In an y ev en t , “ [t ] h e ad m i n i s trat i v e reco rd refl ect s th atn o s ub s t an t i v e al t ern at i v es t o th e fi n al ru l es were p res en t ed fo r Treas u ry ’ s co n s i d erat i o n.” SIH Part
n ers , 1 5 0 T.C. at4 4 ; s ee d i s s en t i n g o p . p . 1 0 2 (“ A co m m en ti s * * * m o re l i k el y t o b e s i g n i fi can ti f t h e co m

m en t er s u g g es t s a rem ed y fo r t he p u rp o rt edp ro b l em i t i d en t i fi es .”). NYLC o fferedn o s u g g es t i o n ab o u t h o w th e s ub jecto f d o no r i m p ro v em en t s m i g h tb e h an d l ed ; i ts i m p l y reco m m en d ed “ d el et i o n o f t he en t i re ex t i ng u i s h m en tp ro v i s i on .” On l y o n e o th er co m

m en t er o f t h e 1 3 m en t io n i ng ju d i ci al
ex t i n g u i s h m en tv o i cedth atreco m m en d at io n. 3

3 Ou r d i s s en t i n g co ll eag u e errs i n rel y in g o n Un i t ed St at es v . No v a Sco t i a Fo o dPro d s . Co rp ., 5 68 F.2 d 2 4 0 (2 dCi r. 1 9 7 7), t o s up p o rth i s p os i t i o n. See d i s s en t i n g o p . p p . 1 1 0-1 1 3. Th atcas e i n v ol v ed a Fo o d an dDru g Adm i ni s trat i o n (FDA) reg ul at i o n es t ab l i s hi n g m i n i m u m “ t im e, t em

p erat u re, an ds al i n i ty ” req u i rem en t s fo r p ro ces s i n g fi s h
. Th e Seco n dCi rcu i ti n v al i d at edth e reg u l at i o n as ap p li edt o o n e cat eg o ry

o f fi sh p ro du ct , “ n o n -v acuu m -p ack edh o t -s m ok edwh i t efi sh .” No v a Sco t i a Fo odPro d s . Co rp . , 5 6 8 F.2 dat2 5 3
. Th e co urtfi rs t h el dth at th e FDA h ad“ fai l ed t o d i scl o s e t o i n t eres t edp art i es th e s ci en t i fi c d at a an dth e m et h o do l o gy

up on wh i ch i trel i ed .” Id . at2 5 0
. “ Wh en the b as i s fo r a p ro p o s ed ru l e i s a s ci en t ifi c d eci si o n, the s ci en t i fi c m at eri al wh i ch i s b el iev edt o s up p o rt t h e ru l e s h o u l db e ex po s edt o th e v i ew o f i n teres t edp art i es fo r t hei r co m m en t .” Id . at 2 5 2 . Th e co u rtal s o h el d t h atth e ag en cy h ad fai l edt o co ns i d er: (1 ) ev i den ce t h at h eat i ng “ cert ai n ty

pes o f fi s h t o h i g h t em

perat ures wi l l co m

p l et el y d es tro y th e p ro duct ,” (2 ) t he s u g g es t i on th atu s i n g “ n i tri t e an ds al tas ad d i ti v es co u lds afel y l o wer t h e h i g h t em

perat u re o th erwi se req u i red ,” an d(3 ) t h e s u gg es t i o n t h at d i fferen t p ro ces s i n g req u i rem en t s s h o u l db e es t ab l i s h edfo r d i fferen ts p eci es o f (co n ti n u ed ...)-2 3
-

Th e APA req u i res “ co n s i d erat i o n o f t he rel ev an tm at ter p res en t ed ” du ri n g th e ru l em ak i n g p ro ces s . 5 U.S.C. s ec. 5 5 3 (c). Ou r rev i ew o f t h e ad m in i s trat i v e
reco rdl eav es u s wi th n o d o ub t th atTreas u ry co n si dered th e rel ev an tm at t er p res en t edt o i t. See W i n g , 8 1 T.C. at3 3 . An dwe fi n dequ al ly l i t t l e m eri ti n p et i t i o n er’ s as s ert i o n th atTreas u ry fai ledt o “ i n co rp o rat e i n t h e ru l es ad o p t eda co n ci s e g en eral s t at em en to f t h ei r b as i s an dp u rp os e.” See 5 U.S.C. s ec. 5 5 3(c). Th e p ream

bl e t o th e fi n al reg u l at i o n s ex p l ai ns th atth ey were b ei n g p ro m

u l
g at edt o “p ro v id e n eces s ary g u i d an ce t o th e p ub l i c fo r co m p l i an ce wi th th e l aw,”
as recen t ly

am en d edb y

Co n g res s , “ rel at i n g t o co n tri b u t i o n s * * * o f p art i al i n t eres t s i n p ro pert y

fo r co n s erv at i o n p u rp o s es .” T.D. 8 0 6 9 , 1 9 8 6 -1 C.B. at8 9 . Th e p ream bl e t o th e p ro po s edreg u lat i o n s em p h as izedth e req u i rem en tthatco n s erv at i on eas em en ts “b e p erp etu al i n o rd er t o qu al ify fo r a d edu ct i o n.” 4 8 Fed . Reg
. 2 2 9 4 0 . Th e p urp os e o f t h e “ ju d i ci al ex t i ng u i s h m en t ” ru le i s p l ai n o n i t s face--t o p ro v id e a m ech an is m

t o en s u re t h atth e co n s erv at io n p urp o s e can b e d eem ed

3 (...co n t in u ed ) fi sh . Id . at2 4 5. Here, t h e b as i s fo r t h e p ro po s edreg u l at i o n was n o t“ a s ci en t i fi c d eci s i o n ”; Treas u ry

rel i edo n n o u n d i s cl o sedd at a wh en p ro p os i n g i t s reg ul at i o n ; th e t wo co m

m en t ers wh o o p p o s edth e ju d i ci al ex t i n g ui s h m en tru l e o ffered n o co n cret e al t ern at i v e s u gg es t i o n s ; an dth e co n cern s th ey ex p res s edl ack edth e s i gn i fi can ce o f co n cern s ab ou td es tro y i n g th e co m m erci al v i ab i l i ty

o f a p ro du ct , wh i ch th e Seco n dCi rcu i tap t l y d es cri b edas “ v i t al qu es t i o n s ” i n No v a Sco t i a Fo o d Pro d s. Co rp ., 5 6 8 F.2 dat2 5 2.-2 4
-

“p ro t ect edi n p erp etu i ty ” n o tw i th s t an d i n g the p o s s i b i l i ty th atth e eas em en tm i g h t l at er b e ex t i n g u is h ed . Sec. 1 .1 7 0 A-1 4(g )(6 )(i ), In co m e Tax Reg s . Ev en wh ere a reg u l at i o n co n t ai n s n o s t at em en to f b as i s an d p urp o s e wh at s o ev er, i tm ay b e up h el d“ wh ere t h e b as i s an dp u rp o s e * * * [are] co n s i d eredo b v i o u s.” Cal -Al m o n d , In c., 1 4 F.3 dat4 4 3
. Pet i t i o ner i n s i s t s th atTreas u ry fai l ed t o co m

p ly wi th th e APA b ecau s e t h e p ream bl e t o th e fi n al reg u l at i o n s d i dn o td i s cu s s th e “b as i s an dp u rp os e” o f t h e ju d i ci al ex t i ng u i s h m en t p ro v i s i o n s p eci fi cal l y . Bu tth i s p ro v i s i o n rep res en t edo n e
s ub p arag rap h o f a reg u l at i o n p ro jectco n s i s t i n g o f 1 0 p arag rap h s , 2 3 s ub p arag rap h s , 3 0 s ub di v i s i o n s , an d2 1 ex am p l es . No co u rth as ev er co n s tru edth e APA t o m an d at e t h atan ag en cy ex p l ai n th e b as i s an d p u rp os e o f each i n d iv i du al co m p o n en to f a reg u l at i o n s ep arat el y . “ [T] h e d et ai l req ui redi n a s t at em en to f b as i s
an d p u rp o s e d ep en ds o n the s ub jecto f t h e reg u l at i o n an dth e n atu re o f t h e co m m en t s recei v ed .” Reytb l at tv . U.S. Nu cl ear Reg u l at o ry Co m m ’ n , 1 0 5 F.3 d7 1 5 , 7 2 2 (D.C. Ci r. 1 9 9 7 ) (qu o t i n g Act io n o n Sm o k i n g & Heal th , 6 9 9 F.2 d at1 2 1 6 ). Th i s s t at em en tn eedo n l y “ co nt ai n s u ffi ci en ti n fo rm at i o n t o al lo w a co u rtt o ex erci s e ju d i ci al rev iew.” Un i t edSt at es v . Garn er, 7 6 7 F.2 d1 0 4 , 1 1 7 (5 th Ci r. 1 9 8 5 );
s ee Si m m s , 4 5 F.3 dat 1 0 0 5 (qu o t i n g Au t o . Part s & Acces s o ri es As s’ n , In c., 4 0 7 F.2 dat 3 38 ).-2 5
-

Th e b ro ads t at em en t s o f p u rp o s e co n tai n edi n th e p ream b les t o the fi n al an d p ro p os edreg u l at i on s , co up l edwi th o bv i o us i n feren ces drawn fro m th e reg u l at i o n s th em s el v es , are m ore t h an ad equ at e t o en ab le u s t o p erfo rm ju d i ci al rev i ew. W e fi ndth atTreas u ry ’ s rat i o n al e fo r t h e ju d i ci al ex t i n g u i s h m en tru l e “ can reas o n ab l y b e d i s cern edan d * * * co in ci d es wi th th e ag en cy ’ s au tho ri ty an do b l i g at i o n s u n der th e rel ev an ts t atu t e.” SIH Part n ers , 1 5 0 T.C. at4 7. W e acco rd i n g l y h o l dth at Treas u ry s at i sfi edal l ap p l i cab l e APA req ui rem en t s wh en p ro m u l g at i ng th is ru l e. 4

4 Pet i t i on er ci t es o nl y

o n e cas e i n wh i ch a Fed eral co u rth as i n v al i d at eda Treas u ry reg u l at i o n o n th e t h eo ry

th atth e reg u l at i o n was n o t p ro p erl y p ro m u l g at ed u n d er t h e APA. See Do m i n i o n Res ., In c. v . Un i tedSt at es , 6 8 1 F.3 d1 3 1 3 (Fed
. Ci r. 2 0 12 ). Th atcas e i n v ol v eda reg ul at i on g o v ern in g cap i t al i zat i o n o f i n t eres t u n d er s ect i o n 2 6 3 A. Th e Fed eral Ci rcu i tfi rs th el d th e reg ul at i o n s ub s t an t i v el y i n v al i du n d er Ch ev ro n s t ep two , co n cl u d in g th ati t“ d irect l y co n trad i ct [ed ] th e av o id ed -co s tru l e t h atCo n g res s i n t en d edth e s t atu t e t o i m p lem en t . ” Do m in i o n Res
. , In c., 6 81 F.3 dat 1 3 1 7 . Th e co u rtal s o h el dth atTreas u ry d i d n o t“pro v i d e a reas on edex p l an at i o n fo r ad o p ti n g * * * [t h e] reg u l at i o n ,” t h us v i o l at in g “ th e St at e Farm req u i rem en t th at th e reg u l at i o n m u s tart i cu lat e a s at i s fact o ry o r co gen t ex p lan at i o n .” Id . at1 3 1 9 . Si n ce t h e co u rtfo u n dth e reg u lat i o n i n co ns i s t en twi t h th e s t atu t e, i tu n s u rp ri si n gl y fo u n d th atTreas u ry

was o b l i gat edt o ex p l ai n wh y i t n ev erth el es s ad o p tedthe ru l e. No s u ch p ro bl em ex i s t s h ere: Th e ju d i ci al ex t i n g u i s h m en tru l e i s cl earl y

co n s i s t en twi th , an d was d es i g n edt o en su re s at i s fact i o n o f, the s t atu t o ry

req u irem en tth atth e co n s erv at i o n p u rp o s e b e “ p ro t ect ed i n p erp etu i ty . ” Sec. 1 70 (h )(5 )(C). Pet i t i o n er d o es n otal l eg e an y i nco n si s t en cy

b et ween th e s t atu t e an dth e reg ul at i o n ; rat h er, i tfau l t s Treas u ry fo r fai l i n g t o refi n e t h e p ro ceed s fo rm

u la t o m ak e i ts l i g h t ly

m o re fav orab l e t o d o no rs i n the u n l i k el y ev en t o f ju d i ci al ex t i n g u i sh m en t. As ex p l ai ned i n th e t ex t, o nl y 1 o f 9 0 co m

m en t ers (NYLC) ev en m en t io n edth i s i s s u e, an d i t s p ro p o s eds o l u t i o n was t o el i m i n at e t h e ju d i ci al ex t i ng u i s h m en t ru l e i n i t s en t iret y . Treas u ry d i dn o tab u se i ts d i s cret i o n i n reject i n g th ato p t i o n.-2 6
-

D. Sub s t an t i ve Val i d it y o f th e Reg u l at i o n 1
. Th e “ J u d i ci al Ex t i n g u i s h m en t ” Pro v i s i on Gen eral l y Hav i n g co n cl u d edth at th e reg u l at i o n was p ro p erl y p ro m u lg at ed , we tu rn t o p et i t i o n er’ s co nt en t i o n th at th e reg u l at i o n i s s ubs t an t i v el y i n val i d. Wh en co n s i d eri n g a ch al l en ge t o th e s ubs t an t i v e v al i d i ty o f a reg ul at io n , we g en eral l y em p l o y th e two -p artt es tes t ab l i s h edb y Ch ev ro n , U.S.A., In c. v . Nat . Res . Def. Co u n ci l , In c., 4 6 7 U.S. 8 3 7 (1 98 4 ). Th e fi rs tp ro n g o f t h att es t as k s “ wh et h er Co n g res s h as d i rect l y s p o k en t o th e p reci s e qu es t io n ati s s u e.” Id . at8 4 2 . “ If t h e i n t en to f Co n g res s i s cl ear, t hati s the en do f th e m at t er.” Ib i d
. Sect io n 1 7 0 (h )(5 )(A) s et s fo rt h a g en eral req u irem en t th at th e co ns erv at i o n p u rp os e b e “ p ro t ect edi n p erp etu i ty .” Co n g res s d o es n otap p ear t o h av e co n s i dered th e p os s i b i li ty

th atan eas em en t m i g h tb e ju di ci al l y ex t in g ui s h ed , an dth e
s t atu te d o es n o tad dres s h ow t h atp o s s i b i l i ty wo u ldaffect a t ax p ay er’ s ab il i ty t o
s at i s fy th e “ p erp etu i ty ” requ i rem en t . Co ng res s th erefo re d i d n ots p eak d irect l y t o th e qu es t i o n ati s s u e. W e acco rd i n g l y p ro ceed t o Ch ev ro n s t ep two , wh i ch req u i res u s t o co n s i d er wh et h er t h e reg u l at i on “ i s b as edo n a p erm i s si bl e co n s tru ct i on o f t h e s t atu t e.” Ch ev ro n , 4 6 7 U
. S. at 8 4 3
. If t h e s t atu t e i s s il en t , we m u s tg i v e d eferen ce t o t h e i n t erp ret at io n em

b o d i ed i n th e ag en cy ’ s reg u lat i o n u n les s i ti s “ arb i trary , cap ri ci
--2 7
-

o u s , o r m an i fes t l y

co n traryt o th e s t atu t e.” Id
. at8 4 4 ; s ee Un i t ed St at es v . M ead Co rp ., 5 3 3 U.S. 2 1 8, 2 27 (2 0 0 1). In o th er wo rd s we m u s ts u s t ai n th e reg u lat i o n s o l o n g as i trep res en t s a “ reas o nab l e i n t erp ret at i o n ” o f th e l aw Co n g res s en act ed
. Ch ev ro n , 4 6 7 U
. S. at 8 4 4 ; s ee SIH Part ners , 1 5 0 T.C. at5 0
. Pet i t i o ner d o es n o tch al l en g e t h e v al i d i ty o f t h e “ j u d ici al ex t i n g u is hm en t ” reg u l at i o n as a wh o l e, an di two u l db e d i ffi cu l tt o d o s o . Treas u ry faced a co n u n dru m : Ho w co u l dth e IRS d et erm in e t h at a co ns erv at i o n p u rp o s e was p ro t ect edi n p erp etu i ty , th u s en ab l in g t h e d o n o r t o qu al i fy fo r a d edu ct i o n i n th e y ear h e m ad e th e g i ft , wh en th e eas em en tm i g h tb e ex t i n gu i s h edats o m e fu tu re d at e? Th e reg u l at i o n s o l v es th i s p ro b l em b y req u i ri n g the d o n o r t o ag ree, up fro n t , t o d i vi d e wi t h th e d o nee an y

p ro ceed s fro m a p o s t -ex t in g u i s h m en ts al e. Th e “ p erp etui ty ” requ i rem en ti s d eem eds at i s fi edb ecau s e “ th e d o n ee o rg an i zat i o n can u s e i t s p ro p o rt i on at e s h are o f t h e p ro ceed s t o ad van ce t he cau s e o f h i s t o ri c p res erv at i o n el s ewh ere.” Carro l l , 1 4 6 T.C. at2 1 4 (qu o t i n g Kau fm anv . Sh u l m an , 6 8 7 F.3 d 2 1 , 2 6 (1 s tCi r. 2 0 1 2 )). 2
. Pro p o rt i o n at e Val u e Wh i l e n o td i s p u ti n g th e v al i d i ty o f Treas u ry ’ s o v eral l o b

j ect i ve, p et i t i o n er
u rg es th atth e reg u l at io n i s u n reas o n ab l e i n two res p ect s . Fi rs t, p et it i o n er ch al
l en g es th e “ p ro p o rt i o n at e v al u e” ap p ro ach t o d i v i s io n o f s al e p ro ceed s. Un d er-2 8
-

s ect i on 1 .1 7 0 A-1 4 (g )(6 )(i i), In co m e Tax Reg s ., th e d o n ee’ s s h are i s d et erm i n ed b y
m u lt i p l y i n g th e s al e p ro ceed s b y a fract i o n , th e n u m erat o r o f wh i ch i s t h e FM V o f th e eas em en t atth e t im e i twas g ran t ed , an dth e d en o m i n at o r o f wh i ch i s the FM V
o f t h e en t i re p ro p ert y

atth att i m e. Pet i t io n er co n t en d s th atTreas u ry s ho u l dh av e cap p edthe d o n ee’ s s h are atthe FM V o f t h e eas em en t atth e t i m e i t was g ran t ed
. W e can n o ts ay

th at th e reg u l at i on ’ s “p ro p o rt i o n at e v al u e” ap p ro ach i s “ arb i
trary , cap ri ci o us , o r m an i fes t l y co nt raryt o th e s tatu te.” Ch ev ro n , 4 6 7 U.S. at8 4 4
. Un d er t h e reg u l at i o n th e d o n ee acq u i res “ a p ro p ert y ri g h t , i m m ed i at el y v es t edi n th e d o nee o rg an izat i o n ,” i n a s h are o f an y fu ture p ro ceed s . Sec. 1 .1 7 0 A
1 4 (g )(6 )(i i ), In co m e Tax Reg s . Need l es s t o s ay , th e eas em en tm i g h t b e ex t i n g u i s h ed m an y

y ears aft er i twas g ran t ed , an d co ns i d erab le i n fl at i o n i n p ro p ert y
v al u es m i g h t o ccu r i n th e i n t eri m . If th e d on ee’ s s h are were l i m i t ed t o the eas em en t ’ s h i s to ri cal FM V , i t s p ro p ert y ri g h tco ul db e ev i s cerat edi n real d o ll ar t erm s . Th i s wo u l dal l o w the d o n or o r i t s s u cces s o rs t o “ reap [] a wi n d fal l i f t h e p ro p ert y i s d es tro y edo r co n d em

n ed .” Carro l l , 1 4 6 T.C. at2 1 4 (quo t i n g Kau fm an , 6 8 7 F.3 d at2 6 ). Th ato u t co m e wo ul d b e ato d d s wi th th e reg u l at i o n ’ s cen tral p u rp o se: t o
en s u re s at i s fact i o n o f t h e s t atu t e’ s “p ro tect edi n p erp etui ty ” req ui rem en tb y
s up p ly i n g th e d o n ee wi th an as s etth atrep l aces , i n real t erm s , th e eas em en t th at h as b een l o s t .-2 9
-

3
. Do n or Im

p ro v em en t s Seco n d , p et i t i o n er co n t en d s th atth e reg u l at i o n i s i n v al i d b ecau s e i t d o es n ot p erm i tthe d o n ee’ s s h are o f t h e p ro ceed s t o b e redu cedb y th e v al u e o f i m

pro v em en t s (i f an y ) m ad e b y

th e d o n o r. Th e reg u l at i o n as p ro p os edd i d n o tad dres s d o n o r i m p ro v em en ts , an d o n l y

o n e o f 9 0 co m

m en t ers m en ti on edth e p o i n t . See
s up ra p p . 2 1 -2 2. On ce ag ai n , we can n o ts ay th at th e ab sen ce o f a p ro v i s i o n ad
dres s i n g d o n o r i m

p ro v em en t s ren d ers th e reg u lat i o n “ arb i trary , cap ri ci o u s, o r
m an i fes t l y

co n traryt o th e s t atu t e.” Ch ev ro n , 4 67 U.S. at8 4 4
. Treas u ry ’ s g o al i n p res cri b i n g th i s reg u l at i o n was t o en s u re s at i s fact i o n o f th e s t atu t e’ s “p ro t ect edi n p erp etu i ty ” req u i rem en t . Ineffect th i s req u i rem en ti s d eem eds at i s fi edb ecau s e t h e s al e p ro ceed s rep l ace t h e eas em en tas an as s etd ep l o y edb y th e d o n ee “ ex cl u s iv el y

fo r co ns erv at i o n p u rp os es .” Sec. 1 70 (h )(5 )(A). In cert ai n fact ual s cen ari o s , redu ci n g th e d o n ee’ s p ro ceed s o n acco un to f d o n o r i m p ro v em en t s co ul d fru st rat e t h i s g o al , es p eci al l y i f l o cal l an d v al ues s h o u l dd ecl i n e. Fo r ex am

pl e, as su m e t h ata t ax p ay er d o n at es an eas em en t v al u edat$ 1 m i l
l i on o n p ro p ert y

v al u edat$ 2 m i l l i o n wi th o u tthe eas em en t . Th e t ax p ay er t h ereaft er s p en d s $ 1 m i l li o n i m p ro v i n g th e p ro p ert y . M an y y ears l at er, th ere i s an eco n o m i c d o wn turn , th e eas em en ti s ex t i n g u i s h ed , an d th e p ro p ert y i s s o l d fo r $ 2 m i l
--3 0
-

l i on . Un der t h e reg u l at i on th e d o n ee wo u l db e en ti t ledt o $ 1 m i ll i on (h al f o f t h e p ro ceed s) an dth e co ns erv at i o n p u rp o s e wo u l db e d eem ed“p ro t ect edi n p erp etu i ty .” Sec. 1 7 0 (h )(5 )(A). Bu ti f i m p ro vem en t s were carv edo u t, th e d o n ee’ s s h are
wo u l db e redu cedt o $ 50 0 ,0 0 0 o r zero , d ep en d i n g o n wh et h er t h e carv e-o utwas ap p li edt o th e en t ire p ro ceed s o r t o th e d o n ee’ s 5 0 % s h are. NYLC, th e o n l y

co m m en t er t o m en t i o n d o n o r i m p ro v em en t s , n o t ab l y

d i d
n o ts u g g es tan y

t ex tt o ad dres s th i s p ro b l em . An d ad dres s in g i two u l dh av e rai s ed a h o s t o f qu es t io n s : W o u l d th e d o n ee’ s p ro ceed s b e redu cedb y i m p ro v em en t s th e d o n o r h adm ad e b efo re g ran t i n g the eas em en t , aft er g ran ti n g i t , o r b o th ? W o u l d th e d o no r g etcred i tfo r i m p ro v em en t s t o th e l an di t s el f (s u ch as g rad i ng ) o r o n ly fo r erect i n g s tru ctu res ? W ou l dth e d o n ee’ s p ro ceed s b e redu cedb y th e d o n o r’ s
co s tfo r t h e i m

p ro v em en t s o r b y

th ei r FM Vatth e t i m e t h e eas em en twas ex t i n g u i s h ed ? An dh o w wo u l dth e p ro b l em m en ti o nedi n th e p rev i o u s p arag rap h b e
s o l v ed , t o p rev en t th e d o n ee’ s s h are fro m b ei n g s ev erel y

reduced o r ev en el i m i
n at ed ? Iti s co n cei vab l e t h atTreas u ry co u l d h av e d raft eda reg u l at io n th atad
dres s edth e p o s s ib i l i ty o f d o n o r i m p ro v em en t s, d eal in g wi th thes e an ci l l ary qu es t i on s i n s o m e rat i o n al w ay . Bu tth atwas a p o li cy d eci s i o n fo r Treas u ry , n o tth i s Co u rt , t o m ak e.-3 1
-

Treas u ry ’ s o v erarch i n g go al was t o g u aran tee t h atth e d o n ee, up on ju d i ci al
ex t i n g u i s h m en to f t h e eas em en t , wo u l drecei v e t h e fu l l s h are o f p ro ceed s t o wh i ch i t w as en t i t l ed . Th e few co m m en t ers wh o ad dres s edthi s p o i n to fferedd i fferi n g
v i ews o n p reci s el y

h o w th e d on ee’ s “p ro p ort i on at e s h are” s h o u l db e d et erm i n ed
. NYLC reg ard edthe fo rm u l a as t o o fav o rab l e t o th e d on ee b ecau se i td i d n o tacco u ntfo r p o s s i b l e d o n o r i m p ro v em en t s . Oth er co m

m en t ers u rg edth at th e fo rm u l a
s h o u ldb e m ad e m o re fav o rab l e t o th e d o nee, wi th th e d o nee’ s s h are b ei n g “ equ al t o the g reat er o f i ts o ri g in al p ro p o rt i on at e v al u e o r i t s p ro p o rt i o nat e v al u e atth e t i m e o f t h e ex t i n g u i s hm en t .” W e fi n dth atTreas u ry

ex erci s edreas o n edju d gm en t b y ad heri ng t o a s i m p l e
ru l e t hats p l i t s s al e p ro ceed s i n a d i rect p ro p o rt i o n al m an n er o n th e b as i s o f a fract i o n det erm i n edas o f t h e d at e t h e g i ftwas m ad e. Becau s e t h e reg u l at i o n as draft eden s u res sat i sfact i o n o f t h e s t atu t o ry m an d at e t h atth e co n s erv at io n p u rp o se b e “ p ro t ect edi n p erp etu i ty ,” s ec. 1 7 0 (h )(5 )(A), we can n otfi n d th e reg u l at i o n t o b e

“ arb i trary , cap ri ci o u s , o r m an i fes t l y co n trary t o th e s t atut e,” Ch ev ro n, 4 6 7 U.S. at8 4 4
. Fi n al l y , th e ag e o f thi s reg u l at i on g i v es wei g h tt o th e p res um p ti o n o f reas o n ab l en es s . “ Treas u ry

reg u lat i o n s an di n t erp ret at i o n s l o n g co n t i nu edwi th o u ts ub
s t an t ial ch an g e, ap p l y i n g t o u n am en d edo r s ub s tan t ial l y reën act eds t atu t es , are-3 2
-

d eem edt o h av e recei v edco n g res s i o n al ap pro v al an dh av e th e effect o f l aw.” Co t t ag e Sav
. As s ’ n v . Co m

m i s s i on er, 4 9 9 U.S. 5 5 4 , 5 61 (1 9 9 1 ) (qu o t i n g Un i t ed St at es v . Co rrel l, 3 89 U.S. 2 9 9 , 3 0 5 -3 0 6 (1 9 6 7 )). “ [A] g en cy i n terp ret at i o ns th at
are o f l on g s tan d i n g co m e b efo re u s wi th a cert ai n cred en ti al o f reas o n ab l en es s , s i nce i t i s rare t h aterro r wo u l dl o n g p ers i s t .” Sm i l ey v . Ci ti b an k(S.D.), N.A., 5 1 7 U.S. 7 3 5 , 7 4 0 (1 9 9 6 ); s ee Carl eb ach v . Co m m i s s i on er, 1 3 9 T.C. 1 , 1 2 (2 0 1 2 ) (s u s t ai n i n g u n d er Ch ev ro n s t ep two a reg u lat i o n th ath ad“ gai n [ed ] l eg i ti m acy ” b ecau s e i th adp ers i s t eds ub st an t ial l y u n ch an g eds i n ce 1 9 4 4 ). Th e reg u l at i o n p et i t i o n er ch al l en ges was p ro m u l g at edi n J an u ary 1 9 8 6 . It h as n ev er b een am en d ed . In th e p as t 3 4 y ears Co n g res s h as am en d eds ect i o n 1 7 0
m o re th an 3 0 t i m es , 5 b u tth es e am en d m en ts h av e n ev er s u g g es t edan y

5 See Pu b. L. No
. 9 9 -5 1 4 , s ecs . 1 4 2 (d ), 2 31 (f), 3 0 1 (b )(2 ), 1 8 3 1 , 1 0 0 St at . at2 1 2 0, 2 1 8 0 , 2 2 1 7 , 2 8 51 (1 9 8 6 ); Pub . L. No . 1 0 0 -2 0 3, s ec. 1 0 7 1 1 (a)(1 ), 1 0 1 St at . at 1 33 0 -4 6 4 (1 9 8 7 ); Pub . L. No . 1 0 0 -6 4 7 , s ec. 6 0 0 1 (a), 1 0 2 St at . at3 6 8 3 (1 9 8 8); Pub
. L. No
. 1 0 1-5 0 8 , s ecs . 1 1 8 01 (a)(1 1 ), (c)(5 ), 1 1 8 1 3 (b )(1 0 ), 1 0 4 St at . at1 3 8 8-5 2 0 , 1 38 8 -5 2 3 , 1 3 88 -5 5 4 (1 9 9 0 ); Pub . L. No
. 1 0 3 -6 6 , s ecs . 1 3 1 7 2 (a), 1 3 2 2 2 (b ), 1 0 7 St at . at4 5 5 , 4 7 9 (1 9 9 3 ); Pub . L. No . 1 0 4 -1 8 8 , s ecs . 1 20 6 (a), 1 3 1 6 (b ), 1 10 St at . at1 77 6 , 1 7 8 6 (1 9 9 6 ); Pub . L. No . 1 0 5 -3 4 , s ecs . 2 24 (a), 5 0 8 (d ), 6 0 2 (a), 9 7 3 (a), 1 1 1 St at . at8 1 8, 8 6 0 , 8 6 2 , 8 98 (1 9 9 7 ); Pub. L. No
. 1 0 5 -2 0 6 , s ec. 6 0 0 4 (e), 1 1 2 St at . at7 95 (1 9 9 8); Pub . L. No . 1 0 5-2 7 7 , s ec. 1 00 4 (a)(1 ), 1 1 2 St at . at2 6 8 1-8 8 8 (1 9 9 8 ); Pub . L. No . 1 0 6 -1 7 0 , s ecs . 5 3 2 (c)(1 )(A) an d(B), 5 3 7 (a), 1 1 3 St at . at 1 93 0 , 1 9 3 6 (1 9 9 9 ); Pub. L. No . 1 0 6-5 5 4 , s ecs . 1 (a)(7 ), 1 6 5 (a)-(e), 1 1 4 St at . at 2 76 3 , 2 7 6 3A-6 2 6 (2 0 0 0 ); Pub . L. No . 1 0 7-1 6 , s ec. 5 4 2(e)(2 )(B), 1 1 5 St at . at8 4 (2 0 0 1 ); Pub . L. No . 1 0 7 -1 4 7 , s ec. 4 1 7 (7 ), (2 2 ), 1 16 St at . at5 6 , 5 7 (2 0 0 2 ); Pub . L. No . 1 0 8 -8 1 , s ec. 5 0 3 , 1 1 7 St at . at 1 0 0 3 (2 00 3 ); Pub
. L. No . 1 0 8 -3 1 1 , s ecs . (co n ti n u ed ...)-3 3
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d i s ag reem en twi th th e co n s tru ct i o n o f t h e s t atu t e t h at Treas ury ad o p tedi n s ect i o n 1 .1 70 A-1 4 (g )(6 ), In co m e Tax Reg s . Th is “ s tro n g l y s u g g es t s th at* * * [Co n g res s ] d i dn o t v i ew Treas ury ’ s co n st ru ct i o n * * * as u n reas o nab l e o r co n trary t o t h e l aw’ s p u rp os e.” SIH Part n ers , 1 5 0 T.C. at5 3 -5 4 (s u s t ai n i n g u n d er Ch ev ro n s t ep two a reg u l at i o n th ath adp ers i s t eds ub s t an t i al l y u n ch an g edfo r n earl y 5 0 y ears ).

5 (...co n t in u ed ) 2 0 7 (1 5 ), (1 6 ), 3 06 (a), 1 18 St at . at1 1 7 7 , 1 1 7 9 (2 0 04 ); Pub
. L. No . 1 0 8 -3 5 7 , s ecs . 3 3 5 (a), 4 1 3 (c)(3 0 ), 8 8 2(a), (b ), (d ), 8 8 3 (a), 8 84 (a), 1 1 8 St at . at1 4 7 8 , 1 5 0 9 , 1 6 2 7, 1 6 3 1 , 1 6 3 2 (2 00 4 ); Pub . L. No . 1 0 9 -7 3 , s ecs . 3 0 5 (a), 3 0 6 (a), 1 19 St at . at 2 0 2 5 (2 0 0 5); Pub
. L. No
. 1 0 9-1 3 5 , s ec. 4 0 3 (a)(1 6 ), (g g ), 1 19 St at . at2 6 1 9 , 2 6 3 1 (2 0 0 5 ); Pub . L. No . 1 0 9 -2 2 2 , s ec. 2 0 4 (b ), 1 2 0 St at . at3 5 0 (2 00 6 ); Pub . L. No . 1 0 9 -2 8 0 , s ecs . 1 2 02 (a), 1 2 0 4 (a), 1 2 0 6 (a), (b )(1 ), 1 2 1 3 (a)(1 ), (b )-(d ), 1 2 1 4 (a) an d(b ), 1 2 1 5 (a), 1 2 1 6(a), 1 2 1 7 (a), 1 2 18 (a), 1 2 1 9 (c)(1 ), 1 2 3 4 (a), 1 2 0 St at . at 1 0 6 6 , 1 0 6 8 , 1 0 7 5 , 1 0 7 7 , 1 0 7 9, 1 0 8 0 , 1 0 8 5, 1 1 0 0 (2 0 0 6 ); Pub . L. No . 1 0 9 -4 3 2, s ec. 1 1 6 (a)(1 ), (b )(1 ) an d (2 ), 1 2 0 St at . at2 9 4 1 (2 0 0 6 ); Pub . L. No . 1 1 0 -1 7 2, s ecs . 3 (c), 1 1 (a)(1 4 )(A) an d (B), (1 5 ) an d(1 6 ), 1 2 1 St at . at2 4 74 , 2 4 8 5 (2 0 0 7 ); Pub
. L. No
. 1 1 0 -2 3 4 , s ec. 1 5 3 0 2 (a), 1 22 St at . at1 5 0 1 (2 0 0 8 ); Pub . L. No . 1 1 0 -2 4 6 , s ecs . 4 (a), 1 5 3 0 2 (a), 1 2 2 St at . at 16 6 4 , 2 2 6 3 (2 0 0 8 ); Pub . L. No . 1 1 0-3 4 3 , s ecs . 3 2 1 (b ), 3 2 3 (a)(1 ), (b )(1 ), 3 2 4(a), (b ), 1 2 2 St at . at3 8 7 3 , 3 8 7 4 , 3 8 7 5 (2 0 0 8 ); Pub
. L. No
. 1 1 1 -3 1 2 , s ecs . 3 0 1 (a), 7 2 3 (a) an d(b ), 7 4 0(a), 7 4 1 (a), 7 42 (a), 1 24 St at . at3 3 0 0 , 3 3 1 6 , 3 3 1 9 (2 01 0 ); Pub . L. No . 1 1 2 -2 4 0 , s ecs . 2 0 6 (a) an d(b ), 3 1 4 (a), 1 2 6 St at . at2 3 2 4, 2 3 3 0 (2 0 1 3); Pub . L. No . 1 13 -2 9 5 , s ecs . 1 0 6(a) an d(b ), 1 26 (a), 2 2 1 (a)(2 8 ), 1 2 8 St at . at4 0 13 , 4 0 1 7 , 4 0 4 1 (2 0 1 4); Pub . L. No . 1 1 4 -4 1 , s ec. 2 0 0 6 (a)(2 )(A), 1 2 9 St at . at4 5 7 (2 0 1 5 ); Pub . L. No . 1 1 4-1 1 3 , s ecs . 1 1 1 (a)-(b )(2 ), 1 1 3 (a) an d(b ), 3 3 1 (a), 1 2 9 St at . at3 0 4 6 , 3 0 47 , 3 10 4 (2 0 1 5 ); Pub . L. No . 1 1 5 -9 7 , s ecs . 1 1 01 1(d )(5 ), 1 10 23 (a), 1 3 3 0 5 (b )(2 ), 1 3 7 0 4 (a), 1 3 7 0 5 (a), 1 31 St at . at 2 0 7 1 , 2 0 7 4 , 2 1 2 6 , 2 1 6 9 (2 0 1 7 ); Pub. L. No
. 1 1 5-1 4 1 , s ec. 4 01 (a)(5 2 ), (b )(1 4), 1 3 2 St at . at1 1 8 6, 1 2 0 2 (2 0 1 8); Pub . L. No . 1 15 -2 3 2 , s ec. 8 0 9 (h )(1 ), 1 3 2 St at . at1 8 4 2 (2 0 1 8).-3 4
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To i m p lem en tth e fo reg o i n g , Anap p ro p ri at e d eci s i o n wi l l b e
en t ered
. Rev iewedb y

the Co u rt . FOLEY, GALE, THORNTON, PARIS, M ORRISON, KERRIGAN, BUCH, NEGA, PUGH, ASHFORD, an dCOPELAND, J J ., ag ree wi th th i s o p in i o n o f t he Co u rt . GUSTAFSON, J
. , ag rees wi th p art s A, B, C, D.1 , an dD.2 o f th i s o p i n i o n . HOLM ES, J ., d i s s en t s .-3 5
-

TORO, J ., co n cu rri n g i n th e res u l t : Th e qu es t i o n b efo re t h e Co u rt i s wh et h er an eas em en tg ran t edb y Oak b ro o kLan dHo l d in g s , LLC (“ Oak bro o k ”) t o th e So ut h eas tReg i on al Lan dCo n serv an cy (“ SRLC”) i n Decem

b er 2 0 0 8
co n st i tu t es a “ qu al i fi edco n serv at i o n co n tri b ut i o n ” u n d er s ect i o n 1 7 0(h )(1 ),
en t i t l i n g Oak

b ro o kt o th e ch ari t ab l e co n tri b u ti o n d edu ct i o n cl ai m ed fo r th aty ear. Ap p l y in g th e t ex to f t h e s t atut e t o th e t erm s o f th e eas em en t b efo re u s l ead s m e t o
co n cl u d e th atth e eas em en ti s n o ta “ qu al i fi edco n s erv at i o n co n tri b u t i on ” b ecau s e i t fai l s t o g ran t t o th e ch ari ty al l o f t h e ri g h t s i n heren ti n th e i n teres ti n real p ro p erty co n t em p l at ed b y th e s t atu t e. Th u s, i n m y v i ew, th e Co m

m i s s io ner was ri gh t t o d i s al l o w Oak

b ro o k ’ s ch ari t ab l e co n tri b u t io n d edu ct i o n, an dth e d efi ci en cy th atth e Co m

m i ss io n er d et erm in edm

u s tb e up h el d . See i n fra Part I. Becau s e t h e
o p i n i o n o f t h e Co u rtan n o u n ces th e s am e d is po s it i on , I co n cu r i n th atres u l t . Si n ce ap p l y i n g th e t ex to f t h e s t atu t e t o th e t erm s o f t h e eas em en t b efo re u s
s u ffi ces to res o l v e t h e d i s pu t e b efo re t h e Co u rt , there i s n o n eedt o ad dres s th e
m u ch m o re d iffi cu l t qu es t i o n o f t h e v al i d i ty o f s ect io n 1
. 1 7 0 A-1 4 (g )(6 ), In co m e Tax Reg s . Acco rdSt ro m m e v . Co m

m i s s i on er, 1 3 8 T.C. 2 1 3 , 2 18 n .8 (2 0 1 2 ) (“ Fo r
n o w, th e b et ter co u rs e i s ‘ t o o b s erv e t h e wi s e l i m i t at i o n s o n o u r fu n ct i o n an dt o
co n fi n e o u rs el v es t o d eci d i n g o n l y wh at i s n eces s ary

t o th e d i s po s i t i on o f t h e i m m ed i at e cas e.’ ” (quo t i n g Whi t eh o u s e v . Il l . Cen t . R.R., 3 49 U.S. 3 6 6 , 3 7 2 -3 7 3-3 6
-

(1 9 5 5))); s ee M cLai n e v . Co m m i s s i o n er, 1 3 8 T.C. 2 28 , 2 42 (2 0 1 2 ) (ex p res s i n g th e
s am e v i ew); s ee al s o , e.g ., PDK Lab s . In c. v . DEA, 3 62 F.3 d 7 86 , 7 9 9 (D.C. Ci r. 2 0 0 4 ) (Ro b ert s , J ., co n cu rri n g i n p artan d co n cu rri n g i n the ju d gm en t) (ex p l ai n i ng th atwh ere “ a s u ffi ci en tg ro un d[ex i s ts ] fo r d eci d i n g * * * [a] cas e, * * * th e card i n al p ri n ci pl e o f ju d ici al res t rai n t--i f i ti s n o tn eces s ary t o d eci de m ore, i ti s
n eces s ary n o tt o d eci d e m o re--co u n sel s u s t o g o n o fu rt h er”). Un li k e t he o p i n i on
o f t h e Co u rt , I wo u ldl eav e t hatqu es t i o n fo r an o th er d ay wh en i t s an s w er wo u l d
m ak e a d i fferen ce t o th e res o l ut i o n o f a cas e b efo re u s . Becau s e t he o pi ni o n o f t h e Co u rtd eci d es t o d o o th erwi se, h owev er, I
ex p lai n b el o w wh y

a p o rt i o n o f t h e reg u lat i o n uph el db y th e o p i n i o n o f t h e Co u rt , i f i n t erp ret edas th e Co m

m i s si o n er u rg es , refl ect s an u nreas o n ab l e i n t erp ret at i o n o f th e s t atu t e u n d er s t ep two o f th e fram ewo rkes t ab l i s h edb y Ch ev ro n , U.S.A., In c.
v . Nat . Res . Def. Co u n ci l , In c., 4 6 7 U.S. 8 37 (1 9 8 4 ), s ee i n fra Part II, an dal s o fai l s t o m eetth e p ro cedu ral req u i rem en t s o f th e Ad m i n i s trat iv e Pro cedu re Act (“ APA”), 5 U.S.C. s ec. 5 5 3 (2 01 8 ), s ee i n fra Part III. I. Th e Eas em en tFai l s To M eetth e St atu t ory Req u i rem en t s . I b eg i n b y

co ns i deri n g fi rs tth i n g s fi rs t : wh et her t he Co n s erv at i o n Eas em en t
an d Decl arat i o n o f Res tri ct io n s an d Co v en an t s (t h e “ Deed ”) th ro ug h wh i ch Oak bro o kg ran t edan eas em en tco v eri n g ab o u tth ree-q u art ers o f i t s tract t o SRLC-3 7
-

p as s es m u s t er u n d er s ect i o n 1 7 0 (h ). As th e o pi n io n o f t h e Co u rto b s erv es , th e p art i es u n d ers to o dth atch an g es i n ci rcu m st an ces m i g htm ak e i ti m p o s si bl e t o
co n ti n u e p ro t ect i n g th e co n s erv at i o n area i n t h e fu tu re. See o p. Ct . p . 4
. Th e d i sp u t e b efo re u s fo cu s es o n th e p ro v i s io n s o f t h e Deed ad dres s i n g the p o s s i b i l i ty

o f u n an t i ci pat edch an g es i n ci rcu m s t an ces . If t h atp o s s ib i l i ty were t o
m at eri al i ze, t h e Deedp ro vi des th atth e d o n ee wi l l b e en t i t l edt o an am ou n t equ al t o th e d i fferen ce b et ween (a) t h e fai r m ark etv al u e o f t h e Co n serv at i o n Area as i f n o t b u rd en edb y thi s Co n s erv at i o n Eas em en t an d(b ) t h e fai r m ark etv al u e o f t h e Co n serv at i on Area b u rd en edb y th i s Co n s erv at i o n Eas em en t , as s u ch v al u es are d et erm i n edas o f t h e d at e o f th is Co n s erv at i o n Eas em en t , (c) l es s am o u n t s fo r i m p ro v em en t s m ad e b y

[Oakb ro o k ] i n th e Co n s erv at i on Area s ub s equ en tt o th e d at e o f t h i s Co n s erv at i o n Eas em en t * * * Deedart . VI, s ec. B(2 ). As ex pl ai n edfu rt h er b el o w, th i s p ro v i s i o n fai ls t o co n v ey t o the d o n ee t h e req u i s it e ri g h ts u n d er s ect i o n 1 7 0 (h )(2 )(C) an d (5 )(A). A. St atu t o ry

Fram ewo rk Sect io n 1 7 0 g en eral l y

al l o ws a d edu ct i o n fo r co n tri bu t io n s t o cert ai n ch ari t ab le o rg an i zat i on s . See s ec. 1 7 0 (a), (c). See g en eral l y Gl as s v . Co m m i s s i o n er, 4 7 1 F.3 d6 9 8 , 7 0 6 -7 0 8 (6 th Ci r. 2 00 6 ) (p ro v i d i ng a s u m m ary o f th e ru l es g ov ern in g d edu ct io ns fo r qu al i fi edco n s erv at i o n eas em en t s ), aff’ g 1 2 4 T.C. 2 5 8 (2 0 0 5 ). Bu ts ect i o n 1 7 0 al s o i m po s es res tri ct i on s o n t h e t y p es o f
co n tri b u t i o n s fo r wh i ch a d edu ct i o n i s al l o wed . As rel ev an t h ere, s ub p arag rap h A-3 8
-

o f s ect i o n 1 7 0(f)(3 ) g en eral l y d i s al l o w s a d edu ct i on fo r co n tri b ut i o n s o f p art i al i n t eres t s i n p ro p ert y . Yet wh ats ub p arag rap h A t ak es away , s ub p arag rap h B g i v es b ack in cert ai n ci rcu m s t an ces . Inth e wo rd s o f t h at p ro v i s io n , “ [s ] ub p arag rap h (A)
s h al l n o tap p l y

t o * * * [am o n g o th ers ] a qu al i fi edco n s erv at i o n co nt ri b u t i on .” Sec. 1 7 0(f)(3 )(B)(i i i ). Sect io n 1 7 0 (h )(1 ) t el l s u s wh ata “ qu al i fi edco n serv at i on co n tri bu t i o n ” i s : Fo r p u rp o s es o f s ub s ect io n (f)(3 )(B)(i i i ), th e t erm “ qual i fi ed co n s erv at io n co n tri b u t i on ” m ean s a co n tri b ut i o n --

(A) o f a qual i fi ed real p ro p ert y i n t eres t, (B) t o a qual i fi edo rg an izat i o n , (C) ex cl u s i vel y

fo r co n s erv at io n p urp o s es . Th atd efi ni ti o n i ncl u d es i t s o wnd efi n edt erm s . Thu s, s ect io n 1 7 0 (h )(2 )
ex p lai n s : Fo r p u rp o s es o f * * * [s ect i o n 1 7 0 (h )] , th e t erm “ qu al i fi edreal p ro p ert y i n t eres t ” m ean s an y

o f t h e fo l l o wi n g i n t eres t s i n real p ro p ert y : (A) t h e en t i re i n t eres to f t h e d o no r o th er th an a qu al i fi ed m i n eral i n t eres t , (B) a rem ai n d er i n t eres t , an d (C) a res tri ct i o n (g ran t edi n p erp etu i ty ) o n t h e u se wh i ch m ay b e m ad e o f t h e real p ro p ert y . [Em p h as i s ad d ed .]-3 9
-

Sect i o n 1 7 0 (h )(3 ) g o es o n t o ex p l ai n wh at a “ qu al i fi edo rg an izat i o n ” i s fo r t h es e p u rp os es , 1 an ds ect io n 1 70 (h )(4 ) d efi n es wh atco n s t itu t es a “ co n s erv at i on p u rp os e.” Th e s t atu t e al s o p ro v i d es th at “ [a] co n tri b u t i o n s hal l n o t b e t reat edas
ex cl u s i v el y

fo r co n s erv at i o n p u rp o s es u n l es s th e co n s erv at i o n p u rp o s e i s p ro t ect ed i n p erp etu i ty .” Sec. 1 7 0 (h )(5 )(A) (em p h as i s ad d ed ). 2 Th e up s h ot o f t hes e p ro v i s i o n s i s th ata d on o r wh o co n tri b u t es t o an ap p ro p ri at e o rg an izat i o n a p art i al “ i n t eres t [] i n real p ro pert y ” m ay b e en t i t l edt o a ch ari t ab le co n tri b u t i on d educt i o n i f (1 ) t h ati n t eres ti s a res tri ct i o n o n h o w th e real p ro p erty m ay b e u s ed , (2 ) th e res tri ct i o n i s g ran t edi n p erp etui ty , (3 ) th e res tri ct i o n ad v an ces (t h at i s , i s “ fo r”) a co n s erv at i o n p u rp o s e, an d(4 ) t h e co n s erv at i o n p u rp os e i s p ro t ect edi n p erp etu i ty . B. Ap p li cat i o n o f St atu t o ry Fram ewo rkt o th e Eas em en t Oak b ro okcan n o tp rev ai l b ecau s e t h e eas em en tati s su e h ere fai l s t o m eetth e req u i rem en t s o f t h e s t atu t e. Sp eci fi cal ly , Deedart icl e VI, s ect io n B(2 ), wh i ch s et s fo rt h t he fo rm

ul a t o d et erm i n e t h e am o u ntt o wh i ch SRLC wo u l d b e en t i t l edwh ere

1 Th e p art i es ag ree t h atth e eas em en tati s s u e was g ran tedt o a “ qu al ifi ed o rg an i zat i o n ,” m ak i n g i tu n n eces s ary t o l i n g er o v er t h i s req u i rem en t . 2 Th e p art i es al s o ag ree t h at th e eas em en t was fo r a “ co n s erv at io n p u rp o s e.” As ex pl ai n edi n m o re d et ai l b el o w, th e d i s p ut e i s wh et h er i twas “ ex cl u s i v el y ” s o .-4 0
-

an u n ex p ect ed ch an g e i n co n di t i o n s m ak es i m p o s s ib l e o r i m

p ract i cal th e co n t i n u ed
u s e o f th e eas em en tfo r co n s erv at i o n p urp o s es , ru n s co u n t er t o the Co d e. Th e Co d e d o es n o t ad dres s ex p l i ci t l y wh ats h ou l dh ap p en i f u n ex p ect ed ch an ges th ato ccu r aft er t h e g ran t i n g o f th e eas em en tm ak e i ti m po s s i b l e o r i m p ract i cal t o co n t i n u e u s i n g th e p ro p ert y fo r t h e co n serv at i o n p u rp o ses s eto u ti n th e Deed
. Bu tthatd oes n o tm ean th ati ti s s i len to n th i s s co re, an dth e p art i es ap p ear t o ag ree t h at , i f t h e d o n o r an dth e d o n ee’ s real p ro p ert y i n t eres t s are
co n vert edi n t o m o n ey

as a res u l to f s u ch u n ex p ect edch an g es , th e s t atu t ory req u i rem en to f s ect i o n 1 7 0(h )(5 )(A) can b e s at i s fi eds o l o n g as th e d on ee recei v es
an ap pro p ri at e am o u nto f m o n ey an du s es th atm o n ey

i n a m an ner co ns i s t en twi t h th e p u rp o s es o f t h e o ri g i n al co nt ri bu t i o n . Th e o n l y qu es t io n i s wh atth e ap p ro p ri at e am o un to f m o n ey s h o u l db e. Oak b ro okm ai n tai n s th atth e req u i rem en to f s ect i o n 1 7 0(h )(5 )(A) i s m ets o l o n g as th e d o nee, up o n a s al e o r o ther d i s p os i t i o n aft er ex t i n g u i s h m en tb y ju d i ci al p ro ceed in g , wo u l do b t ai n an am o un tequ al t o th e fai r m ark et v al u e o f t h e eas em en t atthe t im e t h e eas em en twas es t ab l i sh ed , s ub jectt o redu ct io n fo r s ub s equ en t i m p ro v em en t s fu n d edex cl u s i v el y b y th e d o no r. 3 Bu tOak

b ro o k ’ s p o s i t i o n i g n o res

3 By co n tras t , th e Co m

m i s s io n er m ai n t ai n s th at , u nd er t h e t erm s o f t he eas em en t , th e d o n ee m

us t b o th g etth e b en efi to f an y ap p reci at i o n i n th e v al u e o f

(co n ti n u ed ...)-4 1
-

th e fact th at , t o b e el ig ib l e fo r a d edu ct i o n u n der s ect i o n 1 7 0 (h ) i n the fi rs t p l ace, a d o n o r m u s tg ran t t o a d o n ee an “ i n t eres t [] i n real p ro p erty .” Sec. 1 7 0(h )(2 ). On e
o f t h e ri gh ts i n heren ti n a real p ro p ert y i n teres t(an dp res u m ab l y req u i redt o b e tran s ferred t o t h e d o n ee i n o rd er t o s at i s fy s ect i o n 1 7 0(h )(2 )(C)) i s t h e p ro p ert y h o l d er’ s ri g h tt o b e co m

p en s at edatfai r m ark etv al u e up o n a s ub s equ en t tran s fer o r t ak i n g . See Ten n . Co d e An n . s ec. 2 9 -1 7 -9 1 0 (2 02 0 ) (“ In al l i n s tan ces th e am o u n t t o wh ich an o wn er i s en t i tl eds h al l b e d et erm in edb y as cert ai ni n g the fai r cas h
m ark etv al u e o f t h e p ro p ert y o r p ro p ert y ri g h ts t ak en [.] ”); M cKi n n ey v . Sm i th Ct y ., No . M 1 9 98 -0 00 7 4 -COAR3 CV, 1 9 9 9 W L 1 0 00 8 8 7 , at* 6 -* 7 (Ten n . Ct . Ap p . No v . 5 , 1 9 9 9 ) (ad dres si n g t h e co m p en s at i o n du e t o th e o wn er o f an “ eas em en to f
acces s [t hat ] h as b een t ak en o r i m p ai redb y th e St at e” an dco l l ect i n g au th o ri t i es ). 4

3 (...co n t in u ed ) th e eas em en t fro m

th e t i m e t he eas em en twas g ran t edup t o th e t im e i t i s co n v ert ed i n t o m o n ey

an d s h are i n an y

ap p reci at i on at tri bu t ab l e t o i m p ro v em en t s t o t h e p ro p erty fu n d ed ex cl us i v el y

b y th e d o n o r. 4 Fo r ad d i t i o n al an al y s is o n th i s p o i n t , co n s i d er al s o Ol s on v . Un i t edSt at es , 2 9 2 U.S. 2 4 6 , 2 5 4 -2 55 (1 9 3 4) (n o t i n g , i n a cas e i n v o l v i n g an eas em en tp erm i t t i n g p ri v at e l an d t o b e fl o o dedfro m t i m e t o t i m e, t h at“ ‘ n o p ri v at e p ro p erty s h al l b e ap p ro p ri at edt o p ub l i c u ses u n les s a fu l l an dex actequ i v al en t fo r i tb e ret u rn edt o th e o wn er’ ” an do b s erv i n g th at“ [t ] h atequi v al en ti s th e m ark etv al u e o f t h e p ro p erty atth e t im e o f t he t ak i ng co n t em p o ran eo u sl y p ai d i n m o n ey ” (qu o t i n g M o n on g ah el a Nav i g at i o n Co
. v . Un i t edSt at es , 1 4 8 U.S. 3 12 , 3 26 (1 8 93 ))), an d Un i ted St at es v . M i l l er, 3 1 7 U.S. 3 6 9 , 3 7 3 -3 7 4 (1 9 4 3) (o bs erv i n g th at“ th e co u rt s earl y ad op t ed , an dh av e ret ai n ed , th e co n cep to f m ark etv al u e” fo r d et erm i n i n g th e (co n ti n u ed ...)-4 2
-

Th e fai r m ark et v al u e o f a real p ro p ert y i n t eres two u l db e ex p ect edt o ch an g e--i .e., i n creas e o r d ecreas e--b as edo n ch an g es i n ci rcu m s t an ces . 5 Bu t , u n der t h e

4 (...co n t in u ed ) v al u e o f p ro p ert y

t ak en b y Go vern m en tact io n ). See al s o Un i t edSt at es ex rel
. Ten n. Val l ey

Au th . v . Eas em en tan d Ri g h t o f W ay Ov er a Tract o f Lan di n M ad i s o n Ct y ., 4 0 5 F.2 d 3 0 5 , 3 0 7 (6 th Ci r. 1 9 68 ) (cal cu l at i ng “ ju s tco m p en s at i o n ” aft er St at e co n demn at i o n o f eas em en t ); Tu rn er v . Un i t edSt at es , 2 3 Cl . Ct . 4 4 7 (1 9 9 1) (ap p l y i n g M i ll er i n award i n g d am ag es wi th res p ectt o a fl o o d i ng eas em en t ); Un i t edSt at es v . AnEas em en t an d Ri g h t -o f-W ay Ov er 3 .7 4 Acres o f Lan d, M o re o r Les s , i n M o n t go m ery Ct y ., 4 1 5 F. Sup p . 3 d8 1 2 , 8 18 -8 1 9 (M .D. Ten n. 2 0 1 9 ) (cal cu l at i n g “ ju s tco m p en s at io n” aft er St at e co n d em n at i o n o f eas em en t ); 2 Th o m

p s o n o n Real Pro p ert y , Th o m as Ed i t i o n s , s ec. 1 4 .0 4 (c)(1 ) (2 0 1 9) (“ Own ers h i p h as b een l i k en edt o a b u n d l e o f s ti ck s . Each s t ickrep res en ts o n e o f t h e t o t al n u m

b er o f p o s s i b l e i n t eres t s i n s um o f ri g h t s , p o w ers , p ri v i l eg es , i m m u ni t ies an dl i ab i li t i es . * * * If o n e co n cei v es o f p ro p ert y as l i k en edth u s t o a b u n d l e o f ri g ht s , p ri v i leg es , i m m u n i t i es an d l i ab i l i t i es ad ap t ab l e t o an y p h y s i cal th i n g , th e fee s i m

pl e ab s o lu t e i s th e l arg es ts eg m en tth ereo f t h atthe p o l i ti cal p h i l o s o p hy

o f t h e t i m e an dp lace p erm i t s an y p ri v at e i n di v i du al t o o b t ai n .”); 9 Th o m p s o n o n Real Pro p ert y , s up ra, s ec. 8 0 .0 8 (b )(2 )(i i) (“ Wh ere t he t ak i n g i s n o t t o t al , th e ‘ b efo re an d aft er’ ru l e i s co m m o n l y u s ed . Ju s t co m

p en s at io n fo r a p art i al t ak i n g i s cal cu l at edei th er at(a) t h e v al u e o f t h e rem ai n der b efo re t ak in g m i n u s th e v al u e o f t h e rem ai n der aft er t ak i n g , o r (b ) t h e v al u e o f t h e en t i re t ract b efo re t h e t ak i n g m in u s th e v al u e o f t h e rem ai n d er aft er t h e t ak i n g.” (Fn
. ref. o m i t t ed .)).

5 “ Fo r th os e wh o co n s i d er l eg i s l at i v e h i s t o ry rel ev an t,” W arg er v . Sh au ers , 5 7 4 U.S. 4 0 , 4 8 (2 0 1 4 ), I n ot e fo r co n t ex tth at , i n thei r rep ort s o n th e b i l ls p ro p os i n g wh atb ecam e s ect i o n 1 7 0 (h ), b o th th e Ho u s e W ay s an dM ean s Co m m i t t ee an dth e Sen at e Fi n an ce Co m m i t t ee t oo kas a g i v en th e ri g h t o f an eas em en th o l der t o b e co m p en s at ed atfai r m ark etv al u e fo r t ran sferri n g th atri g h t , s ee H.R. Rep t . No . 9 6 -1 2 78 , at1 9 (1 9 8 0 ); S. Rep t . No . 9 6 -1 0 0 7 , at1 4 (1 9 8 0 ), 1 9 8 0 -2 C.B. 5 9 9 , 6 0 6. As th e Ho us e co m m it t ee rep o rto b s erv ed : In g en eral , a d edu ct i on i s al l o wedfo r a ch ari t ab l e co n tri bu t io n i n th e am o u nto f the fai r m ark etv al u e o f t h e co n tri b ut edp ro p ert y , d efi n ed (co n ti n u ed ...)-4 3
-

ap p ro ach Oak

b ro o kp ro p o s es (an dth e Deedrefl ect s ), th e o n ly am o u n tg u aran t eed t o the o wn er o f t h e eas em en t (i .e., th e d o n ee) i n th e ev en tthe real p ro pert y ri g h t s
are co n v ert edi n t o cas h i s a fi x edd o l l ar am o u ntequ al t o th e fai r m ark etv al u e o f th e eas em en t as o f t h e g ran td at e. Th atfi x edd o l l ar am o u n tfai ls t o acco u n tfo r an y
m ark et -b as edap p reci at i o n th atm ay h av e o ccu rredaft er t h e g ran to f th e eas em en t . Th e fo rm u la s eto u ti n t h e Deedex p o s es the fu n dam en t al p ro b l em fo r Oak b ro o k
-- u n d er t h e t erm s o f t h e Deed , th e d o n ee n ev er recei vedth e ty p e o f “ i n t eres t [] i n real p ro p erty ” co n t em

p l at edb y s ect i o n 1 7 0 (h )(2 )(C) an d fu rth er p ro tect edb y s ect i o n 1 7 0 (h )(5 )(A). Pu tan o th er way , b y fai l i n g t o co n v ey

t o th e d on ee t h e u n res tri ct ed ri gh t t o b e co m

p en s at edatfai r m ark etv al u e up o n a fu tu re t ran s fer o r t ak i n g , th e

5 (...co n t in u ed ) as th e p ri ce atwh ich the p ro p ert y wo u l dch an g e h an d s b etween a wi l l i n g b u y er an d a wi l l in g s el l er. Th u s , th e am o u nto f t h e d edu ct i o n fo r t h e co n tri b u ti o n o f a co n s erv at io n eas em en to r o ther res tri ct i on i s th e fai r m ark etv al u e o f t h e i n t eres tco n v ey edt o th e reci p i en t . Ho wev er, b ecau s e m ark et s g en eral l y are n o twel l es t ab l i s h edfo r eas em en t s o r s im i l ar res tri ct io n s , th e wi ll i n g b u y er/ wi l l i n g s el l er t es t m ay b e d i ffi cu l tt o ap p l y

(al tho u g h i tm ay

b eco m e i n creas i n g l y p o s s i b l e t o d et erm i ne t h e v al u e o f co n serv at i on eas em en t s b y referen ce t o am ou n t s p ai dfo r s uch i n t eres t s i n eas em en tacq u i si t io n p ro g ram s as s u ch p ro g ram s i n creas e). * * * H.R. Rep t . No . 9 6 -1 2 7 8 , at1 9 (em p has i s ad d ed ); S. Rep t . No . 9 6 -1 0 0 7 , at1 4 , 1 9 8 0 -2 C.B. at6 0 6
.-4 4
-

Deeds o res tri ct edth e d on ee’ s i n t eres tas t o cau s e i tt o fal l o u t s i d e t h e p u rv i ew o f
s ect i on 1 7 0 (h )(2 )(C). Th e s h o rt co m i n g i n h eren ti n th e Deedal s o affect s Oak b ro o k ’ s co m

pl i an ce wi th s ect i o n 1 7 0 (h )(5 )(A). Th e p aym en t o f a p red et erm i n edfi x edam ou n two u ld b e i n s u ffi ci en tas co m

p en sat io n fo r a ri g h t“p ro t ect edi n p erp etu i ty ” i f th e fai r
m ark etv al u e o f t h e p ro p ert y h adap p reci at eds i n ce t h e d at e t h e eas em en t was g ran t ed . Wh ena t ran s fer o f m on ey t o the d o n ee i s i n t en d edt o s at i s fy th e

“p erp etu i ty

o f p u rp o se” req u i rem en to f s ect io n 1 70 (h )(5 )(A), n o reas o n ab l e read i n g o f t h e s t atu t e wo u l db l es s th e d on ee recei v i n g an am ou n tth at i s l es s th an th e fai r m ark etv al u e o f i t s “ i nt eres t [] i n real p ro pert y ” as o f th e t i m e o f t h e
co n vers io n o f i t s i n t eres t i n t o cas h
. 6

6 As th e Sup rem e Co u rth as o b s erv ed , “ [b ] ecau s e t h e Co n s t itu t i o n p ro t ect s rat h er t h ancreat es p ro p ert y i n t eres t s , th e ex i s ten ce o f a p ro p ert y i n t eres ti s d et erm i n edb y

referen ce t o ‘ ex i s t i n g ru l es o r u n d ers t an d in g s t hats t em fro m an i n d ep en den ts o u rce s u ch as s t at e l aw.’ ” Ph i l l i p s v . W as h . Leg al Fo un d ., 5 2 4 U.S. 1 5 6 , 1 6 4 (1 9 9 8) (q uo t i n g Bd . o f Reg en t s o f St at e Co l ls . v . Ro th , 4 08 U.S. 5 6 4 , 5 7 7 (1 9 7 2)). Ten n es s ee acco rd in g l y co u l dm an d at e t h atth e d o n o r recei v e al l am o u n t s fro m an y ju d i ci al ex t in g u i s h m en t . As Oak b ro o kh as n o t m ad e t h at p o i n t (wh i ch wo u l dcl i n ch th e cas e o n i t s b eh al f), I as s u m e t h at , u n d er Ten n es s ee l aw, Oak bro o ki s n o t en t i tl edt o s u ch p ro ceed s an d th ats u ch p ro ceed s wo u l db e al l o cat edt o the d on o r an dth e d o n ee o n t he b as i s o f th e rel ev an tv al u es o f t h e real p ro p erty i n t eres t s ati s s u e atth e t i m e o f ex t i ng u i s h m en t . Cf. Ten n . Co d e An n . s ec. 2 9 -1 6 -2 0 3(c)(1 ) (2 0 2 0 ) (p ro v i d i ng ru l es fo r t h e al l ocat i o n o f p ro ceed s b et ween a l an d l o rd an d a t en an ti n an em i nen td o m ai n p ro ceed i n g ).-4 5
-

In s h o rt , b ecau s e t h e Deedfai l s t o s at is fy th e p ro vi s i o n s o f t h e s t atu t e, Oak bro o kwo u l d n o t b e en t i t l edt o a ch ari t ab le co nt ri b u ti o n d edu ct i o n . Th e Co m m i s s i o n er’ s d i s al l owan ce o f t h at d edu ct i o n m us tth erefo re b e s u s t ai n ed
. II. Th e Co m

m is s i o n er’ s Read i ng o f t h e Do n o r Im p ro vem en t s Po rt i o n o f t h e Reg u l at i o n Do es No t Su rv iv e Sub s t an t i v e Rev i ew Un d er St ep Two o f Ch ev ro n . As ex p l ai n edab o v e, t h e s t atu te p ro vi d es a s u ffi ci en tb as i s fo r d en y i n g th e d educt i o n ati s s u e h ere. In l i g hto f t h at co ncl u s io n , I n eedn o tad dres s th e v al i d i ty
o f t h e reg u lat i o n . In d eed , we s h o u l dn o t . As J u s t i ce Fran k fu rt er o n ce cau t i o n ed , wh en faced wi th “p erp l ex i ng qu es t i o n s ,” “ [t ] h ei r d i ffi cu l ty ad m o n i s h es u s t o
o b s erv e t h e wi s e l i m i t at i o n s o n o u r fu n ct i on an dt o co n fi n e o u rs el v es t o d eci d i n g
o n l y wh ati s n eces s ary

t o t he d i s p o s i t i o n o f t he i m m ed i at e cas e.” Wh i t eh o u s e, 3 4 9 U.S. at3 7 2 -3 7 3 . Th i s Co u rth as h eed edth atad m o ni t i o n i n t h e p as t . Stro m m e v . Co m m i s s i o n er, 1 3 8 T.C. at2 1 8 n .8 (ci ti n g Wh i t eh o u s e, 3 4 9 U.S. at3 7 2 -3 7 3 , As h w an d er v . Ten n . Val l ey Au th ., 2 9 7 U.S. 2 8 8 , 3 4 5 -3 46 (1 93 6 ) (Bran d ei s , J ., co n cu rri n g ), an dLi v erp oo l , N.Y. & Ph i l a. S.S. Co . v . Co m m ’ rs o f Em i g rat i o n , 1 1 3 U.S. 3 3 , 3 9 (1 88 5 )); acco rdM cLai n e v . Co m m i s si o n er, 1 3 8 T.C. at 2 4 2 . Its h o u l d d o s o h ere as wel l
. Th e o p i n i o n o f t h e Co u rtn o n et h el es s h as ch o s en t o co n s i d er an dup h o l dth e
v al i d i ty o f t h e reg u l at io n. In s o d o i n g , i ten d ors es th e g l o s s thatth e Co m m i s s i o ner-4 6
-

h as ap pl i edt o th e reg u lat i o n wi th res p ectt o d on o r i m p ro v em en ts --a t o p ic wh o l l y ab s en tfro m

th e t ex to f t h e reg ul at i o n . Becau s e t h e o pi n i o n o f t h e Co u rt up h o l d s th e reg u l at i o n i n i t s en ti rety , i tb eco m es n eces s ary t o s et o u tm

y reas o n s fo r d i s ag reei n g wi th th e Co u rt ’ s co n cl u s i o n o n th is s co re. As ex pl ai n ed i n fu rt h er d et ai l b el o w, I b el i ev e t h at , i f i n t erp ret edas th e Co m m i s s io ner req u es t s , th e p o rt i on o f t h e reg u l at i o n ad dres s i n g d o n o r i m p ro vem en t s d o es n ots u rv i v e
s ub s t an t i ve rev i ew u n d er s t ep two o f t h e Ch ev ro n fram ewo rk
. Befo re tu rn i n g t o t h i s p o i n t , h o wev er, I co n s i d er fi rs twh et h er th e reg u l at i o n ati ss u e n eed s t o b e i n t erp ret edas th e Co m m i s s i o n er u rg es . A. Sect io n 1 .1 7 0 A-1 4 (g )(6 ) Is Su s cep ti b l e t o Two Po t en t ial Read i n g s . As d i s cu s s edab ov e s ect io n 1 7 0 (h )(1 )(C) al l o ws a d edu ct i o n o n ly wh en th e
co n tri b u t i o n o f a qu al i fi edreal p ro p ert y i n t eres ti s “ ex cl u s i v el y

fo r co ns erv at i o n p u rp os es ,” an d s ect i o n 1 7 0 (h )(5 )(A) p ro v i d es th at“ [a] co n tri b u t i o n s h al l n o tb e treat ed as ex cl u s i v el y

fo r co n s erv at i o n p u rp o s es u n l es s th e co ns erv at i o n p u rp o s e i s p ro t ect edi n p erp etui ty .” (Em ph as is ad d ed .) M o reo v er, wh en i tco m es t o
eas em en t s , th e g ran tm

u s t b e “ i n p erp etu i ty .” Sec. 1 7 0 (h )(2 )(C). Im p l em en t i n g th es e p ro v i s i o n s , s ect i o n 1 .1 7 0A-1 4 (g )(6 )(i i ), In co m e Tax Reg s ., p ro v i d es th at fo r a d edu ct i on t o b e al l o wedu n d er th is s ect i on , atthe t i m e o f t h e g i ft th e d o n o r m

u s t ag ree t h atth e d on at i o n o f t h e p erp etu al co n s erv at i o n res tri ct i o n g i v es ri s e t o a p ro pert y ri g h t, i m m ed i at el y v es t ed i n the-4 7
-

d o n ee o rg an i zat i o n, wi th a fai r m ark et v al u e t h ati s at l eas t equal t o th e p ro p o rt i o n at e v al u e t h atth e p erp etu al co ns erv at i o n res tri ct i o n at th e t i m e o f t h e g i ft , b ears t o th e v al u e o f t h e p ro p ert y as a wh o l e at th att i m e. * * * Th e reg u l at i o n p ro v i d es , i n m y v i ew, a fu l l er d es cri p t i o n o f wh atth e s t atu t e req u i res --thati s , the co n v ey an ce o f an “ i nt eres t [] i n real p ro p ert y ” “ gran t edi n p erp etu i ty ” t h at d o es n o t l i m i t i n an y way th e ch ari ty ’ s i n h eren tri g h t t o m on et i ze th e fai r m ark etv al u e o f t h e co n v ey edi n t eres tats o m e p o i n ti n th e fu tu re. See
s up ra Part I.A. an d B. So far, t h e reg u l at i o n i s co n s i s t en twi th t h e s t atu t e an di s
u n o b ject i o n ab l e. Th e reg u l at i o n g o es o n t o ex p l ai n th at“ [f] or p u rp o s es o f th i s p arag rap h (g )(6 )(i i ), th atp ro p o rt i o n at e v al ue o f t he d o n ee’ s p ro p erty ri g ht s s h al l
rem ai n co n s t an t . ” Sec. 1 .1 70 A-1 4 (g )(6 )(i i ), In co m e Tax Reg s . Th i s s en t en ce i s
s u s cep t i b l e t o two d i fferen tread i n g s .

1
. Al t ern at i v e 1 Onth e o n e h an d , th e s en t en ce co u l db e readt o p ro vi d e t h at , al l el se b ei n g equ al , th e p ro p o rt io n at e v al u es o f t h e p art i al i nt eres t s o wn edb y th e d o n o r an dth e d o n ee, res p ect i v el y , d o n o tch an g e ev en as the fai r m ark etv al ue o f t he p ro p ert y as a wh o l e m ay

v ary wi th m ark etco n d i t i o n s . To i l lu s trat e, i f t h e v al u e o f t h e
eas em en tatth e t i m e t h e g i fti s m ad e i s $ 5 0 0,0 0 0 , an dth e v al ue o f t he p ro p ert y as-4 8
-

a wh o l e atth e s am e t i m e i s $ 1 , 0 0 0 ,0 0 0 , th e p ro po rt i o n at e v al u e o f t h e d o n ee’ s p ro p erty ri g h two ul db e 5 0 % an dth e p ro po rt i o n at e v al u e o f t h e d o n o r’ s p ro p ert y ri gh t wo ul dal s o b e 5 0 %. Thu s , i f t h e p ro p ert y rem ai n s u n ch an ged b y

th e d o n o r
an d i s s o l daft er a ju d i ci al ex ti n g u i s h m en tp ro ceed i n g , as p ro v i d edi n
s ect i on 1 .1 7 0 A-1 4 (g )(6 )(i ), In co m e Tax Reg s ., th e d o n ee an d t h e d on o r wo u l d each b e en t i t l edt o 5 0 % o f t h e p ro ceed s . Th i s wo u l db e t ru e wh et h er t h e p ro p ert y
as a wh o l e h adi n creas edi n v al u e t o , s ay , $ 1 ,5 0 0 ,0 0 0 o r h add ecreas edi n v al u e t o , s ay , $ 5 0 0 ,0 0 0 . In th e fi rs ti n st an ce, th e d o n ee wo ul db e en t i tl ed t o $ 7 5 0 , 0 00 o f th e p ro ceed s (i .e., 5 0% o f $ 1 ,5 00 ,0 0 0 ), an d , i n th e s eco nd , th e d o n ee wo u l db e en t i t l ed t o $ 2 5 0,0 0 0 (i
. e., 5 0 % o f $ 5 0 0 ,0 0 0 ). In ei th er s i tu at i o n , th e d o n ee wo u l drecei v e a p o rt i on o f t h e p ro ceed s at tri b u t ab l e t o i t s o wni n t eres t , t ak i n g i n t o acco u n tm ark et d ev el o p m en t s . Co n s i s t en twi th th i s read i n g , th e l as ts en t en ce o f s ect i o n 1 .1 70 A-1 4 (g )(6 )(i i ), In co m e Tax Reg s ., p ro v i des : Acco rd i ng l y , wh en a ch an g e i n co n d i t i o n s g i v e ri s e t o th e ex t i n g u i s h m en to f a p erp etu al co n s erv at io n res tri ct i o n u n d er p arag rap h (g )(6 )(I) o f th i s s ect i o n , th e d o n ee o rg an i zat i o n , o n a s ub s equ en ts al e, ex ch an g e, o r i nv o l un t ary co nv ers i o n o f t h e s ub

ject p ro p ert y , m

u stb e en t i t l edt o a p o rt i o n o f t he p ro ceed s atl eas tequ al t o th atp ro p o rt i o n at e v al u e o f t h e p erp etu al co n s erv at i on res tri ct io n * * * [Em p h as is ad d ed .] Th i s read i n g o f t h e reg u l at i on l eav es o p en the p o s s i b i l i ty th ati m pro v em en t s b y th e d o n o r t o i t s o wnp art i al real p ro p ert y i n t eres tm ay

n eedt o b e t ak en i n t o-4 9
-

acco u n t if t h ey

o ccu r. Wh en s uch i m

p ro v em en t s are m ad e, t h e p art i es wo ul db e
ex p ect edt o d et erm i n e t h e fai r m ark et v al u e o f t h ei r res p ect i ve i nt eres t s as o f t h e t i m e o f t h e i m

p ro v em en ts an dp ro v i d e fo r fu tu re al l ocat i o n s o f p ro ceed s i n l i g h to f th e i m p ro v em en t s . Co n t i n u i n g wi th th e ex am p l e s eto u t ab o v e, as s u m e t h atth ree y ears aft er t h e eas em en ti s g ran t ed , wh en th e v al u e o f t h e p ro p erty as a wh o l e h as i n creas edt o $ 2 ,0 0 0 ,0 0 0, the d on o r d eci d es t o b u il d a h o u se wo rt h $ 2 ,0 0 0 ,0 0 0 o n th e p ro p ert y

as p erm i t t edb y

th e ex p res s t erm s o f t h e eas em en t . Cf.
s ec. 1 .1 7 0A-1 4 (f), Ex am

p l es (3 ) an d(4 ), In co m e Tax Reg s .; Let t er fro m M i ch ael S. Gru en , Eas em en t s Co m m . Ch ai rm an , New Yo rkLan d m ark s Co n s erv an cy , t o Co m m i s s i o n er o f In t ern al Rev en u e (Au g . 3 1, 1 9 83 ), Res p on d en t ’ s Res p o n s e t o Ord er Dat ed0 2 / 2 7/ 2 0 1 9, at3 7 2 (fi l edM ar. 2 7 , 2 0 1 9 ) (t h e “NYLC Co m m en t Let t er”) (s et t in g o u t a s im i l ar ex am p l e i n co m

m en t s p ro v id edt o Treas u ry i n
res p o n s e t o th e p ro p o s edreg ul at i o n s o n co n s erv at i o n eas em en t s ). Befo re t h e h o u s e i s b u i l t , th e v al u e o f th e eas em en two u l d b e $ 1,0 0 0 ,0 0 0 ($ 2 ,0 0 0 ,0 00 t i m es th e p rei m p ro v em en ts h are o f 5 0 %). Aft er t h e h ou s e i s b u i l t , o n e wo u l dex pect t h e
v al u e o f t h e eas em en tn ott o h av e ch an g ed , s i nce t he h o u s e i m p ro vedth e d o n o r’ s ret ai n ed real p ro p ert y

i n t eres t. W i th res p ectt o the d o n o r, th e i nt eres ti n the
u n i m p ro v edl an dwo ul db e ex pect edt o b e wo rt h $ 1 ,0 0 0 ,0 0 0 ($ 2 ,0 0 0 ,0 0 0 t i m es th e p rei m p ro v em en ts h are o f 5 0 %), an dth e i n t eres t i n th e i m p ro v em en t s wo u l d b e-5 0
-

ex p ect edt o b e wo rt h $ 2 ,0 0 0,0 0 0 . If, s h o rt l y aft er co m

p l et i o n o f t he h o u s e, t h e p ro p erty were req u i redt o b e s o l dt o a g o v ern m en t al en t i ty fo r $ 4 ,0 0 0,0 0 0 t o p erm i tthe co n s tru ct i o n of a h i gh way , th e p ro ceed s co u l db e al l o cat ed as fo l l o ws : Reci p i en tan d i n t eres t Am o u n t Sh are o f t o t al p ro ceed s Pro ceed s at tri b u t ab l e t o d o n ee’ s i n teres t $ 1 ,0 0 0,0 0 0 2 5 % Pro ceed s at tri b u t ab l e t o d o n o r’ s i n t eres ti n u n i m p ro v edl an d 1 ,0 0 0 ,0 0 0 2 5 %

Pro ceed s at tri b u t ab l e t o d o n o r’ s i m

p ro v em en t s 2 ,0 0 0 ,0 0 0 5 0 % To t al 4 ,0 0 0 ,0 0 0 1 0 0 % As th e ex am

pl e i ll u st rat es , th e “ p ro p ort i on at e v al u e o f th e d on ee’ s p ro p ert y ri gh t s” rem ai ns co n s t an t wh en co m p aredt o th e d o n o r’ s p ro p erty ri g h t s as th ey
ex i s t edatth e t im e o f t he g ran t . Al th o u g h each o f t h o s e ri g h ts i s n o w wo rth o n l y 2 5 % o f t h e t ot al v al u e o f th e p ro p ert y as a wh o l e (an d t h ey

were wo rt h 5 0 % o f t h e t o t al v al u e o f t he p ro p erty as a wh o l e b efo re t h e h o u s e was co n s tru ct ed ), th ey s t i l l h av e a o n e-t o -o n e rel at i o n s h i p t o each o th er. 7 Thu s , u nd er t h i s read i n g o f t h e

7 Th e an al y s i s s eto u t i n th i s PartII.A.1 . i s co ns i s t en t wi th th e an al y si s o f t h e U.S. Co urto f Ap p eal s fo r t h e Fi ft h Ci rcu i ti n PBBM -Ro s e Hi ll , Lt d
. v . Co m m i s s i o n er, 9 0 0 F.3 d1 9 3 , 2 0 7 -2 0 8 (5 th Ci r. 2 01 8 ). Th ere t he Fi ft h Ci rcu i t m ad e cl ear t hat al l o f t he p ro ceed s fro m a fu ture s al e m

u s tb e t ak en i n to acco u n t b efo re t h e rat i o i s ap p l iedan dth atth o s e p ro ceed s m ay n o t b e redu cedfi rs t t o

(co n ti n u ed ...)-5 1
-

reg u l at i o n , p erm i t t i n g th e d o n o r t o b e co m p en s at edwi th res p ectt o fu tu re
ex p en d i tu res i ncu rredi n i m p ro v i n g th e d o n or’ s o wnp ro p ert y i n t eres two ul dn o tb e i n co n s i s t en twi th th e t ex to f th e reg u l at i o n . 8

7 (...co n t in u ed ) acco u n t fo r d o n o r i m

p ro v em en t s . Id . at2 0 8 (ex p l ai n i n g th at , b ecau s e t h e d eedat i s su e “ p erm i t s th e d edu ct io n o f th e v al ue o f i m p ro v em en t s fro m

th e p ro ceed s , p ri o r t o t h e d o n ee t ak i ng i t s s h are, t h e p ro v i si o n fai ls t o m eetth e req u i rem en ts et fo rt h i n § 1 .1 7 0 A -1 4 (g )(6 )(i i )”); s ee al s o Carro l l v . Co m m i s s i o n er, 1 4 6 T.C. 1 9 6 , 2 0 3 (2 01 6 ) (ad dres s i n g a d eedth ath ad a s i m i l ar p ro v i si o n ). Th e Fi ft h Ci rcu i td i d n o tco ns i d er t h e cen tral an al yt i cal i s s u e i n th i s cas e--h o w t o d et erm i n e t he p ro p er rat i o bet ween th e i n t eres t s o f d o n ee an d d on o r wh en th e d o n o r h as m ad e s ub s equ en ti m

p ro v em en t s t o i t s ret ai n edi n teres t , th ereb y i ncreas in g th e fai r m ark etv al u e o f t h e p ro p ert y as a wh o l e. Th e an al y s i s s eto u ti n th e t ex ts t art s at th e s am e p o in tas th e Fi ft h Ci rcu i td i d --“ th e t o t al am o un tb ro ug h ti n fro m th e s al e,” PBBM -Ro s e Hi l l , Lt d . v . Co m m i s s i o n er, 9 0 0 F.3 dat2 0 8 --an dthen fo cu s es o n h o w th e d o nee’ s an dd on o r’ s s h ares are co m p u t edb efo re t ho s e s h ares are ap p li edt o th e u n d i m in i s hedp ro ceed s fro m th e s al e, s ee al s o i n fra n o t e 8
. 8 No t e t h at , u n d er t h i s read i n g o f t h e reg u l at i o n , d o n o r i m pro v em en t s wo u l d n o trecei v e p ri o ri ty

o f co m p en sat i o n as co m

pared t o th e d o n ee’ s i n t eres t . Fo r ex am p l e, i f, aft er t h e h o us e was b u i lt , real p ro pert y v al ues i n th e area d ecl in ed s i gn i fi can t l y

an dth e o v eral l fai r m ark etv al u e o f t h e p ro pert y was redu cedt o $ 1 ,0 0 0 ,0 0 0 , p ro ceed s fro m a s al e atthatt i m e wo u ldb e d i s tri b u t edas fo l l o ws : (co n ti n u ed ...)-5 2
- 2
. Al t ern at i v e 2 Th e Co m m is s i o n er m ai n t ai n s th atth e reg u l at i o n d o es co n s i d erab l y m o re
wo rkth an s u g g es t edb y

th e read i n g u n d er Al t ern at iv e 1 . Inh i s v i ew, th e Deed
m u stp ro vi d e t hatthe p ro p ort i o n at e v al u e o f th e d on ee’ s p ro p ert y ri g h t s wi l l
rem ai n co n s t an t n o m at t er wh atth e d o n o r d o es wi th res pect t o i t s o wn p art i al real p ro p erty i n t eres taft er t h e eas em en ti s g ran t ed . Un d er t h i s cat eg o ri cal read i n g , i f th e d o no r m ak es s i g n i fi can t i m p ro v em en t s t o i t s o wnp art ial i n t eres t, th e d on o r

8 (...co n t in u ed ) Reci p i en tan di n t eres t Am o u n t Sh are o f t o t al p ro ceed s Pro ceed s at tri b u t ab l e t o d o n ee’ s i n teres t $ 2 5 0,0 0 0 2 5 % Pro ceed s at tri b u t ab l e t o d o n o r’ s i n t eres ti n u n i m p ro v edl an d 2 5 0 ,0 0 0 2 5 %

Pro ceed s at tri b u t ab l e t o d o n o r’ s i m

p ro v em en t s 5 0 0 ,0 0 0 5 0 % To t al 1 ,0 0 0,0 0 0 1 0 0 % As b efo re, t h e “ p ro p o rt i o n at e v al u e o f t h e d o nee’ s p ro p ert y ri gh t s ” rem ai n s co n st an twh en co m

p aredt o th e d o n o r’ s p ro p ert y ri g h t s as th ey

ex i s t ed atth e t i m e o f t h e g ran t. Th ey

s t il l h av e a o n e-t o -o n e rel at i o n s h i p t o each o th er. An d , al th o u g h th e d o n ee wo u l drecei v e o n l y $ 2 5 0,0 00 o f t h e o v eral l p ro ceed s , the redu ct i o n fro m

th e i n i ti al v al ue o f $ 5 0 0 ,0 00 i s at tri b u tab l e t o m ark etfo rces . As th e i n i ti al ex am

p l e i n th e t ex ts h o ws , s ee s up ra p p . 4 7-4 8 , th e d o n ee wo ul dh av e recei v eda s i m il ar (red uced ) co m p en s at i o n i f n o i m

pro v em en t s h ad b een m ad e an d th e o v eral l v al u e o f t h e p ro p ert y ats o m e p o i n th add ecl i n edt o $ 5 0 0 ,0 0 0 fro m th e i n i t i al o v eral l v al u e o f $ 1 ,0 00 ,0 0 0.-5 3
-

m ay n o t b e en t i t l ed t o b e co m p en s at edfo r t he v al u e o f th o s e i m p ro v em en t s i f t h e
v al u e o f t h e p ro p ert y

i s co n v ert edi n t o cas h i n th e fu tu re. To i l l u s trat e u s i ng th e ex am p l e fro m ab o v e, i f, s h ort l y

aft er t h e h ou s e i s
co m p l et ed , th e p ro p ert y

were req u i red t o b e s ol d t o a g o v ern m en t al en t it y fo r $ 4 ,0 0 0 ,0 0 0 t o p erm i t th e co n s tru ct i o n o f a h i g h way , acco rd in g t o th e Co m m i s s i o n er, t h e p ro ceed s s h o u l db e al l o cat edas fo l lo ws : Reci p i en t an d i n t eres t Am o u n t Sh are o f t o t al p ro ceed s Pro ceed s al l o cat edt o d o nee $ 2 ,0 00 ,0 0 0 5 0 % Pro ceed s al l o cat edt o d o no r (fo r u n i m

pro ved l an dan dth e h o u s e) 2 , 0 0 0 ,0 0 0 5 0 %

To t al 4 , 0 0 0 ,0 0 0 1 0 0 % It is n o tcl ear t o m e h o w a ru l e t h at i s fo cu s edo n th e “ p ro p o rt i o n at e v al u e o f th e p erp etu al co ns erv at i o n res tri ct i o n ,” s ec. 1 .1 70 A-1 4(g )(6 )(i i ), In co m e Tax Reg s. (em

p h as i s ad ded ), m ay

b e read t o fo rce t h e d o n or t o p ro m i s e i n th e d eedth at th e d o no r wi l l tu rn o v er t o th e d o n ee p ro ceed s p ro perl y at tri b u tab l e t o the d o n o r’ s
o wnret ai n edreal p ro p ert y i n t eres t . Bu tth ati s h o w the Co m m i s s i o n er read s th e-5 4
-

reg u l at i o n an dwh atth e o p i n io n o f t h e Co u rtaccep t s t o d ay . To m y ey e, h o wev er, th atread i n g can no ts u rv i v e s tep two o f t he Ch ev ro n an al y s i s . 9 B. Th e Co m

m is s i o n er’ s Read i ng o f t h e Do n o r Im p ro vem en t s Po rt i o n o f th e Reg u l at i o n Do es No tSu rv i v e Subs t an t i v e Rev i ew Un d er St ep Two o f Ch ev ro n . Two p rel i m i n ary

co m m en t s b efo re g et t i n g t o th e s ub s t an t iv e i s s u e. Fi rs t , al th o u g h i n rev i ewi ng th e v al i d i t y o f a reg u l at i on a co u rtg en eral l y b eg i n s b y
co n si d eri n g wh et her t h e reg u l at i o n co m p l i es wi th th e APA’ s p ro cedu ral req u i rem en t s , i n th i s cas e, i ti s u s efu l t o tu rn fi rs tt o th e s ubs t an ti v e v al i d i ty o f t h e reg u l at i o n , as an u n d ers t an d i ng o f t h e s ubs t an t i v e m eri t s o f t h e i s s u e al s o s h ed s l i gh t o n th e v al i d it y

o f t he p ro cedu res em

p l o y edb y Treas u ry i n p ro m u l g at in g th e reg u l at i o n . Seco n d , fo r p u rp o s es o f t h i s an al y s i s , I as s um e wi th o u td eci d in g th atth e
s t atu te i s am

b i gu o u s reg ard i n g th e al l o cat io n o f p ro ceed s i n t h e ev en to f a ju d i ci al
ex t i n g u i s h m en to f an eas em en t . See Go o dFo rtu n e Sh i p p i n g SA v
. Co m m i s s i o n er, 8 9 7 F.3 d2 5 6, 2 6 1 (D.C. Ci r. 2 0 1 8 ) (“ [W ] e m ay * * * as s u m e arg u en d o th atth e

9 Ch ev ro n , U.S.A., In c. v . Nat . Res
. Def. Co u n ci l , In c., 4 6 7 U.S. 8 3 7 (1 9 8 4 ), p ro v id es th e fram ewo rkfo r an al y si s h ere u n l es s an d u n t il th atcas e i s o v erru l ed
. See Bal dw i n v . Un i t edSt at es , 5 8 9 U.S. _

_ _ , 1 4 0 S. Ct . 6 90 (2 0 20 ) (Th o m as , J ., d i s s en t i n g fro m d en i al o f cert i o rari ).-5 5
-

s t atu te i s am

b i gu o u s an dp ro ceed t o Ch ev ro n ’ s s eco n d s tep .”), rev ’ g 1 4 8 T.C. 2 6 2 (2 0 1 7). No w t o th e m eri t s . Th e qu es t i o n u nd er Ch ev ro n s t ep tw o i s wh et h er t h e i n t erp ret at io n o f t h e reg ul at i o n o ffered b y the Co m m i ss i on er refl ect s a p erm i s s i b l e read i n g o f t h e s t atu t e. As the Sup rem e Co u rth as s ai d: Ch ev ro n d i rect s co u rt s t o accep tan ag en cy ’ s reas on ab l e res o lu t i o n o f an am b ig ui ty i n a s t atu t e t h atth e ag en cy ad m i n i s t ers . * * * [Ch ev ro n ] , at8 4 2 -8 4 3 . Ev en u n d er th i s d eferen t i al s t an d ard , h o wev er, “ ag en ci es m

u s t o p erat e wi thi n th e b ou n d s o f reas o n ab l e i n t erp ret at i o n .” Ut i l it y

Ai r Reg u l at o ry

Gro up v . EPA, 5 73 U.S. _

_ _,

_ _ _ (2 0 1 4 ) (s l i p o p ., at1 6 ) (i n t ern al qu ot at i o n m ark s o m i t t ed ). * * * M i ch i g an v . EPA, 5 7 6 U.S. _

_ _ , _

_ _ , 1 3 5 S. Ct . 2 6 9 9 , 2 7 0 7 (2 0 1 5 ); s ee al s o Ten n . Ho s p. As s o c. v . Azar, 9 0 8 F.3 d1 0 29 , 1 03 7 -1 0 3 8 (6 th Ci r. 2 0 18 ) (s u m m ari zi n g
s t an d ardo f rev i ew); Atri u m M ed . Ct r. v . U.S. Dep ’ to f Heal th & Hu m an Serv s ., 7 6 6 F.3 d5 6 0, 5 6 6 -5 68 (6 th Ci r. 2 0 1 4 ) (s am e). Here, t h e Co m m i s si o n er “ s tray ed far b ey o n dth o s e b o u n d s ” wh en h e read s ect i o n 1 7 0(h )(5 )(A) t o req u i re a d o n o r t o tu rn o v er t o t h e d o n ee a p ort io n o f t h e p ro ceed s at tri b u t ab l e t o i t s o wnp erm i s s i b l e ret ai n ed real p ro p ert y

i n t eres t. M i ch i gan , 5 76 U.S. at_ _ _ , 1 3 5 S. Ct
. at2 7 0 7
. It is wel l s et t l edth at [w] h et h er an ag en cy ’ s co n s tru ct i o n i s reas o n ab l e d ep en d s , i n p art , “ o n th e co n s tru ct i o n ’ s ‘ fi t ’ wi th the s t atut o ry l an g u ag e, as wel l as i t s co n fo rm it y

t o s tatu t o ry

p u rp o ses .” Go ld s t ei n v . SEC, 4 5 1 F.3 d 8 7 3 , 8 8 1 (D.C. Ci r. 2 0 0 6) (q u o t i n g Ab b o t tLab s . v . Yo u ng , 9 20 F.2 d-5 6
-

9 8 4 , 9 8 8 (D.C. Ci r. 1 9 9 0)). In d eed , “ [t ] h e s t art i ng p l ace fo r an y Ch ev ro n St ep Two i n qu i ry i s th e t ex t o f th e s tatu te.” Van Ho l len v . FEC, 8 1 1 F.3 d 4 8 6 , 4 9 2 (D.C. Ci r. 2 0 1 6 ). Go o dFo rtu n e Sh ip pi n g SA v . Co m m i s si o n er, 8 9 7 F.3 d at2 6 2
. I b eg i n at th e s am e s t art i n g p l ace--t he s t atu t o ry t ex t . Th e s t atu t e p ro v i d es a d educt i o n fo r a co n tri b u t i o n t o a qu al i fi edo rg an i zat i o n o f a “ qu al i fi ed real p ro p erty i n t eres t ” m ad e “ ex cl u si v el y fo r co n s erv at i o n p u rp o s es .” Al tho u g h th e
s t atu te m ak es cl ear t h atth ere can b e n o d edu ct i o n u n l es s t h e co n s erv at i o n p u rp os es are “ p ro t ect edi n p erp etu i ty ,” o n e can n o tl o s e t racko f t he fact th atth e d educt i o n i s p red i cat edo n a “ qu al i fi edreal p ro p ert y i n t eres t ” b ei n g co n tri b u t edt o a qu al i fi edo rg an i zat i o n . Thu s , th e m o s tth ata qu al i fi edo rg an izat i o n can b e
en t i t l edt o recei ve i f i t s “ qu al i fi edreal p ro p ert y i n t eres t ” i s ex t i n g u i sh edi n th e fu tu re i s th e fu l l v al u e o f t h ati n t eres t . Wh at ev er t h e p u rp o se o f a co nt ri bu t i o n , th atp u rp o s e m ay

n otb e i n v o kedt o req u i re t h e d on o r t o g i v e t h e d o n ee, as a p reco n di t i o n t o recei v i n g a d edu ct i o n fo r h is co n tri b u ti on , a ri g htt o recei ve
co m p en s at i o n p ro p erl y

at tri b u t edt o the real p ro p erty i n t eres tth atthe Co de p erm it s th e d o no r t o ret ai n. A reg u l at i on i nt erp ret edt o req u i re o th erwi se can n o tb e a p erm i s s i b l e i nt erp ret at i o n o f t h e s tatu t o ry t ex tb efo re u s . Un d er th att ex t , th e i n t eres tth e d on ee o rg an i zat i o n m u s to b t ai n i n co nn ect i o n wi th a co n tri b ut i o n i s th e “ qu al i fi edreal p ro p ert y i n t eres t ” t ran s ferred t o i t . Requ i ri n g t h e d o n o r t o-5 7
-

p ro m i s e t o tu rn o v er t o th e d o n ee p ro ceed s i n ex ces s o f t h e fai r m ark etv al u e o f th ati n teres ti s i n co n si s t en twi th t h e s t atu t o ry fram ewo rk , an dn o th i n g i n th e

“ s t atu t o ry p u rp o ses ” co m

p el s a d i fferen tco n cl u si on . Go l d s t ei n , 4 5 1 F.3 d at8 8 1 (qu o ti n g Ab b o ttLab s ., 9 2 0 F.2 dat9 8 8 ). Th e o p i n i o n o f t h e Co u rtad m i t s th at“ [i ] t i s co n cei v ab le t h atTreas u ry co u l d h av e draft ed a reg u lat i o n th atad dres s edth e p o ss i b i l i ty o f d o no r i m

p ro v em en t s , d eal i ng wi th [t h e t y

p es o f qu es t i o n s n o t ed ab ov e] i n s o m e rat i o nal way .” See o p . Ct . p . 3 0. Bu tth e o p i n i o n o f t h e Co u rto v erl oo k s th e l acko f a “ rat i o n al ” s o l u t i o n t o tho s e p ro b lem s , b y

n o t in g that“ th at was a p o l i cy d eci si o n fo r Treas u ry , n o tth i s Co u rt , t o m ak e.” See i d
. Inth e Co u rt ’ s v iew, “ Treas u ry ’ s o v erarch i n g g o al [i n p res cri bi n g th e reg ul at i o n ] was t o g u aran t ee t h atth e d o n ee, up on ju d i ci al
ex t i n g u i s h m en to f t h e eas em en t , wo u l drecei v e t h e fu l l s h are o f p ro ceed s t o wh i ch i t w as en t i t l ed . * * * Treas u ry ex erci s edreas on ed ju d g m en tb y ad h eri n g t o a
s i m p l e ru l e t h ats p l i t s s al e p ro ceed s i n a d i rect p ro p o rt i o n al m an n er.” See i d
. p . 3 1. I ag ree wi th th e o pi n i o n o f t h e Co u rtth atth e d o n ee s h o u l d “ recei v e t h e fu l l
s h are o f p ro ceed s t o wh i ch i twas en t i t l ed .” See i d . (em p h as i s ad d ed ). Bu ta ru l e i n t erp ret edt o req u i re t h e d eedt o al l o cat e t o the d o n ee n o to nl y the p ro ceed s at tri b u t ab l e t o i t s o wnreal p ro pert y i n t eres tb u tal so a s h are o f t h e p ro ceed s-5 8
-

at tri b u t ab l e t o th e i n teres tthe Co d e p erm i t s th e d o n or t o ret ai n d o es n o t

“ ‘ “ fi t ”’ wi th th e s tatu t o ry l an g u ag e” an d i s u n reas o nab l e. Go o dFo rtu n e Sh i p p i n g SA v . Co m

m i s s i o n er, 8 9 7 F.3 dat2 62 (qu o t i n g Go l d s t ei n, 4 5 1 F.3 dat8 81 ). Cal l i ng i ta “ p o l icy

d eci s i o n ” d o es n o tch an g e t he fact th atth e ru l e, as i nt erp ret ed b y th e Co m m i s s io n er, y i el d s i n cert ai n ci rcu m s t an ces a res u l tth ati s en t i rel y
u n reas o nab l e an dwi th ou tan y b as is i n th e s t atu t e. Un d er Ch ev ro n , Treas u ry i s
en t i t l edt o draw l i nes o n th e p ag e p ro v id edb y Co n g res s ; Ch ev ro n d o es n o t g i v e Treas u ry l eg i s l at i v e au tho ri ty

t o s ub s ti tu t e a d i fferen t p ag e fo r t h e o n e Co ng res s
en act edi n t o l aw. See i d . (ci t i n g Go l ds t ei n , 4 5 1 F.3 dat8 81 ). In s h o rt , i n m y ju d g m en t , i f s ect i o n 1 .1 7 0 A-1 4 (g )(6 )(i i), In co m e Tax Reg s ., i s i n t erp ret edas th e Co m m i s s i o n er m ai n t ai n s wi th res p ectt o al l fu tu re d o n o r i m p ro v em en ts , i t i s an
u n reas o nab l e i nt erp ret at i o n o f t h e s t atu t e an dth erefo re i n v al i d
. 1 0

1 0 I n o t e t h atm

y co n cl u si o n h ere d oes n o t h el p Oak b ro o k . Th e Deed p ro v id es th atp ro ceed s fro m a fu tu re s al e m

u s tfi rs t b e p ai d t o Oak

b ro o ki n res p ect o f “ i m p ro v em en t s m ad e b y

* * * [Oakb ro ok ] i n th e Co n serv at i o n Area s ub s equ en t t o the d at e o f th i s Co ns erv at i o n Eas em en t .” Deedart . VI, s ec. B(2 ). As ex p l ai n ed ab o ve, s ee s up ra n o t es 7 an d8 , I d o n o tth i n kth atan “ i m p ro v em en t s are co m p en s at edfi rs t ” ap p ro ach i s co n s i s t en t wi th the real p ro p ert y i n t eres t s co n tem p l at edb y th e Co d e. Acco rd i n g l y , th i s as pect o f Oakb ro o k ’ s Deed p ro v i d es an ad di t i o n al , an d i n d ep en d en t , g ro u n dfo r d en y i n g th e d edu ct i o n ati s s u e. Th i s as p ecto f t h e Deedal s o p ro v id es o n e m o re reas o n t o res erv e fo r an o th er d ay a d eci s i o n o n wh et h er t h e reg u lat i o n, as i n terp ret edb y th e Co m m i s si on er, i s v al i d i n s o far as i tad dres s es i m p ro v em en t s m ad e b y a d o n o r aft er t h e g ran ti n g o f t h e eas em en t .-5 9
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III. If Read as th e Co m m i s s i o n er Pro p o s es , the Do n o r Im p ro v em en t s Po rt i o n o f th e Reg u l at i o n Do es No tCo m p l y W i th th e Pro cedu ral Req u i rem en t s o f t h e APA. Treas u ry m ig h tn o th av e fo u n d i t s el f i n th i s p red i cam en t u n d er Ch ev ro n i f i t h ad fo ll o wedm o re carefu l ly th e APA’ s p ro cedu ral req u i rem en t s , wh i ch are d es i g n edt o h el p ag en ci es co ns i d er ex act l y th i s ty p e o f i s s u e b efo re a ru l e b eco m es fi nal
. Iti s t o th o s e req u i rem en t s th atI n o w tu rn . In ev al u at i n g wh eth er t h e cat eg o ri cal read i n g o f t h e d o n or i m pro v em en t s
ru l e ad v an cedb y

th e Co m m i ss i o n er m eet s th e p ro cedu ral req u i rem en t s o f t h e APA, I co n s i der fi rs tthe fram ewo rkth atg o v ern s ju d i ci al rev i ew i n t h i s area. I th en ap p l y

th atfram ewo rkt o Treas u ry ’ s ru l em ak i n g p ro ces s i n the cas e b efo re u s . A. Ap p li cab l e Fram ewo rkfo r J u d i ci al Rev iew Th e APA s et s o u tp ro cedu ral req u i rem en t s fo r th e p ro m ul g at i o n o f l eg i s lat i v e ru l es . As rel ev an th ere, an ag en cy wi s h i n g t o ad op ts u ch a ru l e m u s t p ro v id e n o t i ce i n t h e Fed eral Reg i s t er. 5 U.S.C. s ec. 5 5 3(b ). In ad di ti o n , [a] ft er n o ti ce req u i redb y

th i s s ect i o n, the ag en cy

s h al l g i v e i n t eres t ed p ers on s an o p p o rtu ni ty

t o p art i ci pat e i n th e ru l e m ak i n g t h ro u gh s ub m i s s io n o f wri t t en d at a, v i ews , o r arg u m en t s wi th o r wi th o u t o p p o rtun i ty

fo r o ral p res en t at io n . Aft er co n s i d erat i o n o f t h e rel ev an t m at t er p res en t ed , th e ag en cy s h al l i n co rp o rat e i n th e ru l es ad o p t eda co n ci s e g en eral s t at em en to f t h ei r b as is an dp urp o s e. * * *-6 0
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5 U.S.C. s ec. 5 5 3 (c). Sect i o n 7 0 6 o f t h e APA, wh ich s et s the b o u n d ari es fo r ju d i ci al rev i ew o f ag en cy act i o n s , p ro v i d es th ata “ rev i ewi n g co u rts h al l * * * h o l d
u n l awfu l an ds etas i d e ag en cy act i o n , fi n di n g s , an dco ncl u s i o ns fo u n d t o b e * * * arb i trary , cap ri ci o us , an ab u s e o f d i s cret io n , o r o th erwi s e n o ti n acco rd an ce wi t h l aw.” 5 U.S.C. s ec. 7 0 6(2 )(A) (2 0 1 8 ). Th e fram ewo rkfo r rev i ewi n g wh et h er an ag en cy h as co m p l i edwi th th e p ro cedural req u i rem en ts o f t h e APA i s wel l es t ab l i s h ed . As th e Sup rem e Co u rt h as ex pl ai n edwi th res p ectt o l eg i s l at i ve ru l es s u ch as th e o n es b efo re u s :

On e o f t h e b as i c p ro cedu ral req u i rem en t s o f adm i n i s trat i v e ru l em ak in g i s t h atan ag en cy m u s t g i v e ad equ at e reas o n s fo r i ts d eci si o n s . Th e ag en cy

“ m u s tex am in e t h e rel ev an td at a an d art i cu l at e a s at i s fact o ry

ex p lan at i o n fo r i t s act i o n i n cl ud i n g a rat i o n al co n n ect i o n b et w een th e fact s fo u n dan d t h e ch oi ce m ad e.” M o t o r Veh i cl e M frs . As s n . o f Un it edSt at es , In c. v . St at e Farm M u t. Au t o m o bi l e In s . Co ., 4 6 3 U.S. 2 9, 4 3 (1 9 8 3 ) (i n t ern al qu o t at i on m ark s o m i t ted ). Th atreq u i rem en ti s s at i s fi edwh en th e ag en cy ’ s ex p l an at i on i s cl ear en o ug h th ati t s “pat h m ay reas o n ab l y

b e d i s cern ed
. ” Bo w m an Tran s p ., In c. v . Ark an s as -Bes t Frei g h tSy s tem , In c., 4 1 9 U.S. 2 8 1 , 2 8 6 (1 9 7 4 ). Bu twh ere t he ag en cy h as fai l edt o p ro v i d e ev en th atm i n im al l ev el o f an al y s i s, i t s act i o n i s arb i trary an d cap ri ci o u s an d s o can n o tcarryth e fo rce o f l aw. See 5 U.S.C. § 7 0 6 (2 )(A); St at e Farm , s up ra, at 4 2-4 3
. En ci n o M o t o rcars , LLC v . Nav arro , 5 7 9 U.S. _

_ _ , _ _ _ , 1 3 6 S. Ct
. 2 11 7 , 2 1 2 5 (2 0 1 6).-6 1
-

Wh en th e reco rdd o es n otco n t ai n “ th atm in i m al l ev el o f an al y s is ,” “ [i ] ti s
n o tth e ro l e o f t h e co urt s t o s p ecu l at e o n reas on s th atm i gh th av e s up p o rt edan ag en cy ’ s d eci si o n . ‘ [W ] e m ay n o ts up p l y

a reas o n ed b as i s fo r t h e ag en cy ’ s act i o n th atth e ag en cy

i t s el f h as n o tg i v en .’ ” Id . at_ _ _ , _ _ _ , 1 3 6 S. Ct . at2 1 2 5 , 2 1 2 7 (qu o ti n g St at e Farm , 4 6 3 U.S. at4 3 ); s ee al s o Atri u m M ed . Ct r., 7 66 F.3 d at5 6 8 (“ [A] n ag en cy can n o tb o l s t er i t s cas e wi th rat i o n al es o ffered p o s t h o c.” (ci t i n g Co l um b u s & S. Oh i o El ec. Co
. v . Co s t l e, 6 3 8 F.2 d9 1 0 , 9 1 2 (6 th Ci r. 1 98 0 ))). As th e Sup rem e Co u rt fu rt her ex p l ai n ed i n J u du l an g v . Ho l d er, 5 6 5 U.S. 4 2 , 5 2 -5 3 (2 0 1 1 ), [t ] h e s co p e o f * * * [ju d i ci al ] rev i ew un der * * * [s ect io n 7 06 (2 )(A) o f t h e APA] i s “ narro w”; as we h av e o ft en reco g ni zed , “ a co u rti s n o t t o s ub s t itu t e i t s ju d gm en tfo r t h ato f t h e ag en cy . ” M o t o r Veh i cl e M frs As s ’ n o f Un i t edSt at es , In c. v . St at e Farm M ut . Au t o m o b i l e In s . Co ., 4 3 6 U.S. 2 9 , 4 3 (1 9 8 3 ); s ee Ci ti zen s t o Pres erv e Ov ert on Park , In c. v . Vo l p e, 4 0 1 U.S. 4 0 2 , 4 1 6 (1 9 7 1 ). Ag en ci es * * * h av e ex p ert i s e an d ex p eri en ce i n ad m i n is t eri n g th ei r s t atu t es th atn o co u rt can p ro p erl y i g n o re. Bu tco u rt s ret ai n a ro l e, an d an i m p o rt an t o n e, i n en s u ri n g th atag en ci es h av e en g ag edi n reas o nedd eci s i o n m ak i ng . Wh en rev iewi n g an ag en cy act i o n , we m

u stas s es s , am o n g o th er m at t ers , “ ‘ whet h er t he d eci s i o n was b as edo n a co ns i d erat i o n o f t he rel ev an tfact ors an dwh et h er th ere h as b een a cl ear erro r o f ju d g m en t .’ ” St at e Farm , 4 6 3 U.S. at4 3 (q u o t in g Bo wm an Tran s p . In c. v . Ark an s as -Bes tFrei g h t Sy st em , In c., 4 1 9 U.S. 2 8 1 , 2 85 ). Th at t as k i n v o l v es ex am i n i n g th e reas o n s fo r ag en cy d eci s i on s --o r, as th e cas e m ay b e, t h e ab s en ce o f s u ch reas o n s. See FCC v . Fo x Tel ev i s i o n St at i o n s , In c., 5 56 U.S. 5 0 2 , 5 1 5 (2 00 9 ) (n o t i n g “ the req u i rem en tth at an ag en cy

p ro vi d e reas o n edex p lan at i on fo r i t s act i on ”).-6 2
-

Acco rd Atri u m

M ed . Ct r., 7 6 6 F.3 dat5 6 7 (“ A tb as e, arb i traryan dcap ri ci o u s
rev i ew fu n ct i o n s t o ‘ en s u r[e] thatag en ci es h av e en g ag edi n reas o n ed d eci s i o n m ak i n g . ’ ” (q uo t i n g J u du l an g , 5 6 5 U.S. at5 3 )). A recen td eci s io n b y

th e U.S. Co u rto f Ap p eal s fo r th e Di s tri cto f Co l u m bi a Ci rcu i tap t l y

s u m m ari zes th e APA’ s p ro cedu ral req ui rem en t s , p art i cu l arl y as th ey ad dres s th e n eedfo r an ag en cy t o co n s i d er co m

m en t s :

“ Th e APA’ s arb i trary -an d -cap ri ci o u s s t an d ardreq u i res th atag en cy ru l es b e reas o n ab l e an dreas on ab l y ex p l ai n ed .” Nat ’ l Tel
. Co o p . As s ’ n v . FCC, 5 6 3 F.3 d5 3 6 , 5 4 0 (D.C. Ci r. 2 0 0 9 ). Anag en cy v i o l at es th i s s t an d ardi f i t“ en ti rel y fai l [s ] t o co n s id er an i m po rt an t as p ecto f t h e p ro b l em .” St at e Farm , 4 63 U.S. at4 3 . Anag en cy al s o v i o l at es th i s s t an d ardi f i tfai l s t o res p o n dt o “ s i g n i fi can tp o in t s ” an d co n s i d er “ al l rel ev an t fact o rs ” rai s edb y th e p ubl i c co m

m en t s . Ho m e Bo x Offi ce, In c. v . FCC, 5 6 7 F.2 d 9 , 3 5 -3 6 (D.C. Ci r. 1 9 77 ). Acco rd i ng l y , an ag en cy

m u s t res p o ndt o co m

m en t s “ th atcan b e th o u g h tt o ch al l en g e a fu n d am en t al p rem i s e” u n derl y i n g th e p ro po s ed ag en cy d eci s i o n . M CI W o rl d Co m , In c. v . FCC, 2 0 9 F.3 d7 6 0, 7 6 5 (D.C. Ci r. 2 0 0 0 ). Anag en cy n eedn o t “ d i s cu s s ev ery

i t em o f fact o r o p i n i o n i n cl u d edi n th e s ub m i s s i on s m ad e t o i t . ” Del . Dep ’ to f Nat
. Res . & En v t l . Co n tro l v . EPA, 7 8 5 F.3 d1 , 1 7 (D.C. Ci r. 2 0 1 5 ) (ci t at i o n o m i tt ed ). Anag en cy ’ s res p o n s e t o p ub l i c co m m en t s , h o wev er, m

u s tb e s u ffi ci en tt o en ab l e t h e co u rt s “ t o s ee wh atm ajo r i s su es o f p o l icy

were v en t i l at ed. . . an dwh y th e ag en cy

react edt o th em as i td i d .” Id . (ci t at i o n o m i t t ed ). Ev enwh en an ag en cy “ h as s i gn i fi can t d i s cret i o n i n d eci d i ng h o w m u ch wei g h t t o acco rd each s t atu t o ry fact o r,” t h atd o es n o t m ean i t i s “ free t o i gn o re an y i n d i vi du al fact o r en t i rel y .” Tex . Oi l & Gas As s ’ n v . EPA, 1 61 F.3 d 9 2 3 , 9 3 4 (5 th Ci r. 1 9 9 8 ) (ci t i n g W ey erh aeu s er Co . v . Co st l e, 5 9 0 F.2 d 1 0 1 1 , 1 0 4 5 (D.C. Ci r. 1 97 8 )) (ev al u at i n g ag en cy ’ s co n s id erat i o n o f s t atu t o ry fact o rs u n d er arb i trary -an d -cap ri ci o us rev i ew).-6 3
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Carl s o n v. Po s t al Reg u l at o ry Co m m ’ n , 9 3 8 F.3 d3 37 , 3 4 3 -3 4 4 (D.C. Ci r. 2 0 1 9 ). Pu tan ot h er way , “ [a] n ag en cy i s req u i redt o p ro v i d e a m ean in g fu l o p p ortu n i ty fo r
co m m en t s , wh i ch m ean s th atthe ag en cy ’ s m in dm u s tb e o p en t o co n si d eri ng th em .” Gran dCan y on Ai r To ur Co al . v . FAA, 1 5 4 F.3 d4 5 5 , 4 6 8 (D.C. Ci r. 1 9 9 8 ) (ci t i n g M cLo u th St eel Pro d s . Co rp . v . Th o m as , 8 3 8 F.2 d 1 31 7 , 1 3 2 3 (D.C. Ci r. 1 9 8 8 )). “ Anag en cy

m u s t al s o d em o n s trat e th e rat i o n al it y o f i t s d eci s io n -m ak i n g p ro ces s b y

res po n d i n g t o th o s e co m m en t s th atare rel ev an tan ds i g n i fi can t .” Id
. (ci t i n g Pro f’ l Pi l o t s Fed ’ n v . FAA, 1 1 8 F.3 d7 58 , 7 63 (D.C. Ci r. 1 9 9 7 ), an dHo m e Bo x Offi ce, 5 6 7 F.2 dat 3 5 ); 1 1 s ee al s o PPG In du s., In c. v . Co s tl e, 6 3 0 F.2 d4 6 2 , 4 6 6 (6 th Ci r. 1 9 80 ) (ex p l ai ni n g th atthe APA req u i res ag en ci es “ t o g i v e reas o n ed
res p o n s es t o al l s i g n ifi can tco m m en t s i n a ru l em ak i n g p ro ceed in g ”). Th e reas o n s fo r t h e p ro cedu ral req ui rem en t s o f t h e APA are n o td i ffi cu l tt o
u n d ers t an d
.

1 1 As th e Co u rto f Ap peal s i n Ho m e Bo x Offi ce, In c. v . FCC, 5 6 7 F.2 d9 , 3 5 n .5 8 (D.C. Ci r. 1 97 7), n o ted : In d et erm in i n g wh atp oi n t s are s ig n i fi can t , th e “ arb i traryan d cap ri ci o u s ” s t an d ard o f rev i ew m u s tb e k ep ti n m i n d . Thu s o n l y co m m en t s wh i ch , i f t ru e, rai s e p oi n ts rel ev an t t o t h e ag en cy ’ s d eci si o n an d wh i ch , i f ad o p t ed , wo u l d req u ire a ch an g e i n an ag en cy ’ s p ro po s edru l e cas td o ubto n th e reas o n ab l en es s o f a p o s i t i o n t ak en b y th e ag en cy . * * *-6 4
-

[Th ey ] are i n t en dedt o as s i s tju d i ci al rev i ew as wel l as t o p ro v i d e fai r treat m en tfo r p ers on s affect edb y a ru l e. To th is en dth ere m u s t b e an ex ch an g e o f v iews , i n fo rm at i o n , an d cri ti ci s m b et ween i n t eres t ed p ers on s an dth e ag en cy . Co n s equ en t l y , th e n o t i ce req u i redb y th e APA, o r i nfo rm at io n s ub s equ en t l y s up p li edt o t h e p ub l i c, m u s t d i s cl o s e i n d et ai l th e t hi nk i n g th ath as an i m at ed th e fo rm o f a p ro p o s ed ru l e an dth e d at a up o n wh i ch th atru l e i s b as ed . M o reo v er, a d i al o g ue i s a t wo -way

s treet : th e o p p o rtu n i ty

t o co m m en ti s m ean i n g l es s u n les s th e ag en cy res p o n d s t o s i g n i fi can tp o i n t s rai s ed b y th e p ub l ic. A res p o n s e i s al s o m an d at edb y Ov ert on Park , wh i ch req u ires a rev i ewi n g co u rtt o as s u re i t s el f t h atal l rel ev an tfact o rs h av e b een co n s i d eredb y

th e ag en cy . Ho m e Bo x Offi ce, 5 6 7 F.2 dat3 5 -3 6 (fn . ref. o m i t t ed ) (ci t at i o ns o m i t t ed ); s ee al so Di s m as Ch ari ti es , In c. v . U.S. Dep ’ to f J us t i ce, 4 0 1 F.3 d6 66 , 6 7 8 (6 th Ci r. 2 0 0 5 ) (“ [O] n e o f t h e cen tral p u rp o s es o f t h e * * * [n o t i ce-an d-co m m en treq u i rem en t ] i s t o g i v e t h o s e wi th i n t eres t s affect edb y ru l es th e ch an ce t o p art i ci p at e i n th e p ro m u l gat i o n o f t h e ru l es * * * [an d ] en s u re fai r t reat m en t fo r p ers o ns t o b e affect edb y

reg u l at i o ns .”). No twi th s t an d i n g th e v ery g o o dreas o n s fo r req u i ri n g an ag en cy t o res p o n d t o co m m en t s , an ag en cy ’ s fai l u re t o ad dres s a p art i cu l ar co m m en to r cat eg o ry

o f co m m en t s i s n o t an APA v i o l at i o n p er s e. See, e.g
. , Th o m ps o n v . Cl ark , 7 41 F.2 d 4 0 1, 4 0 8 (D.C. Ci r. 1 9 8 4) (“ [APA § 5 5 3] h as n ev er b een i nt erp ret edt o req u i re t he ag en cy t o res po n dt o ev ery

co m m en t, o r t o an al y ze ev ery

i s s u e o r al t ern at i v e rai s edb y th e co m m en t s , n o m at t er h o w i n s ub st an t i al .”). W e rev i ew an ag en cy ’ s res p o ns e t o co m m en t s u n d er t h e s am e arb i trary -an d -cap ri ci o u s s t an d ardt o wh i ch we h o l dth e res to f i t s act i o n s . See Ho m e Bo x Offi ce, 5 67 F.2 d at3 5-6 5
-

n .5 8 . Pu ts i m

p l y , “ Th e fai l u re t o res p on dt o co m m en t s i s s i g n i fi can t o n l y i n s o far as i t d em on st rat es th atth e ag en cy ’ s d eci s io n was n ot b as edo n a co n s i d erat i o n o f t h e rel ev an tfact o rs .” Co v adCo m m c’ n s v . FCC, 4 5 0 F.3 d 5 2 8 , 5 5 0 (D.C. Ci r. 2 00 6 ) (qu o t i n g Th o m ps o n, 7 4 1 F.2 dat4 0 9 ). Sh erl ey v . Seb el i u s , 6 8 9 F.3 d7 7 6 , 7 8 4 (D.C. Ci r. 2 0 1 2 ); s ee al s o PPG In dus ., 6 3 0 F.2 dat 4 66
. B. Ap p li cat i o n o f Fram ewo rkfo r J u d i ci al Rev iew Hav i n g o ut li n edab o v e t h e fram ewo rkth atg o vern s o u r rev i ew o f th e reg u l at i o n ati s s ue h ere, I t u rn n ex tt o ap p ly i n g th atfram ewo rk
.

1
. Treas u ry ’ s Ru l em ak i n g Pro ces s I b eg i n b y

s u m m ari zi n g wh atwe kn o w ab ou tTreas ury ’ s ru l em ak i n g p ro ces s i n thi s cas e. On M ay

2 3 , 1 98 3 , Treas ury

an dth e In t ern al Rev en ue Serv i ce (t h e

“ IRS”) 1 2 i s s u eda n o t ice p ro p o si n g “ reg u lat i on s rel at i n g t o co n tri b u t i on s o f p art i al i n t eres t s i n p ro p ert y fo r co n s erv at i o n p u rp o ses .” 4 8 Fed . Reg . 2 2 9 4 0 (M ay 2 3 , 1 9 8 3 ). Th e s t at edp u rp o s e o f t h e n o t ice was “ t o cl eari fy [s i c] th e s t atu t ory

ru l es i n effect u n der * * * [t h e Tax Treat m en tEx t en s i o n Acto f 1 9 8 0] .” Id . Th e n o t i ce al s o o b s erv edth at“ [t ] he reg u l at i o n s refl ectth e m ajo r p ol i cy d eci s i o n s m ad e b y

th e Co n g res s an d ex p res s edi n * * * [t h e] co m m i tt ee rep o rt s ” t h atacco m p an i edth e

1 2 Fo r s im p l i ci ty , I refer t o b o th Treas u ry an dth e IRS as “ Treas ury .”-6 6
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l eg i s lat i o n . Id . Th e n ot ice s p an n edro ug h l y ei g h tp ag es o f t h e Fed eral Reg i s t er, i n cl u d i n g a o ne-p ag e p ream b l e. Th e n o ti ce al s o i n v i t ed p ub l ic co m m en t s an d
ex p lai n edth at “ [a] p ub l i c h eari n g * * * [wo u l d ] b e h el d upo n wri t t en req u es tt o th e Co m m i s s i o n er b y

an y p ers o n wh o h as s ub m i t t edwri t t en co m m en t s .” Id
. at2 2 9 41 . Th e i n i t ial d ead l i n e fo r s ub m i t t i n g co m m en ts was J ul y

2 2 , 1 98 3
. Id
. at2 2 9 40 . Th atd ead l i n e was s ub seq u en t l y ex t en d edt o Sep t em b er 1 , 1 98 3
. See 4 8 Fed
. Reg . 3 3 0 0 6 (J u l y 2 0 , 1 9 8 3). In res p o n s e t o t h e n o t i ce, Treas ury recei vedm o re t h an7 0 0 p ag es o f
co m m en t s du ri n g th e ex t en d edco m m en t p eri o d 1 3 an d atl eas tan o th er 1 3 0 p ag es aft er t h e co m

m en tp eri o d h adcl o s ed
. 1 4 A h eari ng o n th e p ro po s edreg ul at i o n was req u es t edan dwas h el d o n Sep t em b er 1 5 , 1 9 83 . Th i rt y -s ev en m em bers o f t h e p ub l i c were o ri g i n al l y

s ch edul edt o s p eak atth e h eari n g , an d 3 0 actu al l y s p o k e. Th e h eari n g l as t edm o re t h anfi v e h o u rs , an dth e t ran s cri ptex ceed s 2 0 0 p ag es .

1 3 So m e p ub l i c co m

m en t s i n th e ad m i n i s trat i v e reco rd were t ran s m i t t edaft er th e cl o s e o f th e ex t en d edco m m en tp eri odo n Sep tem

b er 1 , 1 98 3 , b u tb efo re th e p ub l i c h eari ng t oo kp l ace o n Sep t em b er 1 5 , 1 9 8 3
. 1 4 Al th o u g h s o m e co m

m en t s co v er o v erl ap p i n g i ss u es , th ey d o n o t ap p ear t o b e m as s g en erat edb y

n o n ex i s t en tco m

m en t ers . Cf. J am es V. Gri m al d i , “ U.S. News : FCC Ch ief Pro p os es Rev am p o f On l i ne Co m

m en t s ,” W al l St . J ., Ju l y

1 2 , 2 0 1 8 , at A3 ; J am es V. Gri m al d i an dPau l Ov erb erg , “ Fi du ci ary Ru l e Draws A Lo t o f Fak e Cri t i cs ,” W al l St . J ., Dec. 2 8 , 2 0 1 7, atB1 ; J am es V. Gri m al d i an dPau l Ov erb erg , “ Fak e Co m

m en t s Hi tRu l e M ak i n g --Ph o n y Subm i s s io n s Targ etNet Neu tral i ty ,” W al l St . J ., Dec. 1 3 , 2 0 1 7 , atA1
.-6 7
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A Treas u ry Deci s i o n ad o p t i n g fi n al reg u l at i o n s was p ub l i s h edi n th e Fed eral Reg is t er o n J an u ary

1 4 , 1 98 6 . See T.D. 8 0 6 9 , 1 9 8 6 -1 C.B. 8 9 , 5 1 Fed . Reg . 1 4 9 6 (J an . 1 4 , 1 9 8 6 ). Th e Treas u ry Deci s i o n s p an n ed ro u g h l y 1 2 p ag es , o f wh i ch ap p ro x i m at el y 1 0 co n t ai nedth e act u al t ex t o f t h e reg u l at io n s . Th atl eftju s to v er two p ag es fo r Treas u ry ’ s res p o n s es t o co m m en ts an do ther ad m i n i s trat i ve m at t ers (fo r ex am p l e, t h e Pap erwo rkRedu ct i o n Actn ot i ce an ddraft in g i n fo rm at i o n). Pu t
an o th er way , Treas u ry

u s eds i x co l u m

n s o f t h e Fed eral Reg i st er t o ad dres s m o re th an 7 00 p ag es o f t i m el y

co m m en t s an dm o re t h an2 0 0 p ag es o f p ub l i c t es ti m o n y . Th o se s i x co l u m

n s were i n ten d edt o co v er co m m en t s o n a “ reg u lat i o n p ro ject
co n si s t i n g o f 1 0 p arag rap h s, 2 3 s ub parag rap hs , 3 0 s ub di v i s i o n s , an d2 1
ex am p l es .” See o p . Ct . p . 2 4
. On e m i g h two nd er h o w an ag en cy fam i l i ar wi th th e D.C. Ci rcu i t ’ s d eci s i o n i n Ho m e Bo x Offi ce, wh i ch b y 1 9 8 6 h adb een o n th e b o ok s fo r m o re t h an ei g h t y ears , co u l dh av e th o u g h tthats i x co l u m n s i n t h e Fed eral Reg i s ter s u ffi cedt o

“ res p o n d [] t o s i g n i fi can tp o i n t s rai s edb y th e p ub l i c” i n m o re t h an 7 00 p ag es , o r h o w thatres p o n se co n s t i tu teda “ d i al o g u e” b etween th e ag en cy an d th e p ub l i c
co n tem p l at edb y th e APA as i n t erp ret edb y Ho m e Bo x Offi ce an d t h e au th ori t i es
o n wh i ch i t rel i ed
. Ho m e Bo x Offi ce, 5 67 F.2 d at3 5 -3 6 (fn . ref. o m i t t ed ); s ee al s o PPG In du s ., 6 3 0 F.2 dat4 6 6 (rei t erat i n g th at th e APA req ui res ag en ci es “ t o g i v e-6 8
-

reas on edres po n s es t o al l s i g n i fi can t co m m en ts i n a ru l em ak i ng p ro ceed i n g”). Ev en fo r an ag en cy

d et erm i n edt o b e ex ceed i n g l y “ co n ci se,” s i x co l u m

n s i n th e Fed eral Reg i st er wo u l db e a t i g h tam o u n to f s p ace t o s ho w “ wh atm ajo r i s s u es o f p o l i cy were v en t i lat ed. . . an dwh y th e ag en cy

react edt o them

as i t d i d .” Carl s o n , 9 3 8 F.3 dat3 4 4 (al t erat i on i n o ri g i n al ) (qu ot i n g Del . Dep ’ to f Nat . Res . & En v t l
. Co n tro l v . EPA, 7 8 5 F.3 d1 , 1 7 (D.C. Ci r. 2 0 1 5 )). Bu t , i n m y v i ew, Treas u ry

d i dn otth i n ki t co nfro n t ed s uch a Hercu l ean t as k
. It is m ore l i k el y th atTreas u ry was s i m pl y fo ll o wi n g i t s h i s t o ri cal p o s i t io n th atth e APA’ s p ro cedu ral req u i rem en t s d i dn o tap p l y t o th es e t y p es o f reg u l at i o n s . 1 5 As th e Treas u ry

Deci s io n ex p l ai n s , Treas u ry t o o kth e v iew t h at “ [a] l th ou g h a n o t i ce o f p ro p os edru lem ak i ng wh i ch s o l i ci t edp ub l ic co m m en t s was i s s u ed , th e * * * [IRS]
co n cl u d ed wh en th e n o t i ce was i s s u edth atth e reg u l at i o n s are i n t erp ret at i ve an d th atth e n o t i ce an d p ub l i c co m m en tp ro cedu re req ui rem en to f 5 U.S.C. 5 5 3 d i dn o t

1 5 See Kri s t i n E. Hi ck m an , “ Co l o ri n g Ou ts i d e t h e Li n es : Ex am i n i ng Treas u ry ’ s (Lacko f) Co m p l i an ce wi th Adm i n is trat i v e Pro cedu re ActRu l em ak i n g Req ui rem en t s ,” 8 2 No tre Dam e L. Rev . 1 7 2 7 , 1 7 2 9 (2 0 0 7 ) (“ Treas u ry ack n owl ed ges th atAPA s ect io n 5 5 3 g o v ern s i ts v ari o u s reg u l at ory effo rt s . Treas u ry al s o co n ten d s , h o wev er, t h atm o stTreas u ry reg u l at i o ns are i n t erp ret i v e i n ch aract er an dth u s ex em

p tfro m th e p ub l i c n ot i ce an dco m m en treq u i rem en t s b y th e APA’ s o wn t erm s .” (Fn . ref. o m i t t ed .)).-6 9
-

ap p ly .” 1 6 T.D. 8 0 6 9 , 1 9 8 6-1 C.B. at9 2
. Wh en an ag en cy en g ag edi n a p art i cu l ar
ru l em ak i n g ex erci s e b el iev es th e APA d o es n o treq ui re i tt o p ro v i d e n ot i ce an d recei v e co m

m en t s atal l , i ti s n otd i ffi cu ltt o s ee wh y th at ag en cy

m ig h tth i nkth ata rat h er b ri ef ex p l an at i o n , o ffered as i twere o u to f i t s o wng en ero s it y , s h ou l db e g o o den o u g h
. 1 7 Th e p ro b lem wi th thi s p o s i t i o n , h o wev er, i s th atTreas u ry ’ s co n cl u s i o n th at th e reg u l at i o n at i s s u e h ere d i dn o treq u i re n o ti ce an dco m m en twas m i s t ak en , as th e o p in i o n o f t h e Co u rtco rrect l y m ak es cl ear. See o p. Ct . p p . 1 7 -1 8
. Inl i g h to f th atco n cl u s i o n , atl eas twi th res p ectt o th e d o n or i m p ro v em en t s i nt erp ret at i o n th at th e Co m m i s s i o n er ad v an ces befo re u s , th e s ix Fed eral Reg i s t er co l u m n s t h at

1 6 Onth i s b as i s , th e Treas u ry Deci s i o n co n cl ud edth at“ th e fi nal reg u l at i o n s d o n o t co n s t i tu t e reg u l at i o n s s ub jectt o th e Reg u l at o ry

Fl ex i b i l it y

Act(5 U.S.C. ch ap ter 6 ).” T.D. 8 0 6 9 , 1 9 8 6 -1 C.B. 8 9 , 9 2, 5 1 Fed
. Reg . 1 4 98
.

1 7 Th ere i s n o d o ub t th at Treas u ry kn ows h o w t o p ro v i d e m ean i n g fu l res p o n s es t o co m

m en t s wh eni tco n s i d ers i t s el f b o u n d b y th e n o t i ce an dco m

m en t req u i rem en t s o f t h e APA. See, e.g ., T.D. 9 8 4 6 , 2 0 1 9 -9 I.R.B. 5 8 3, 8 4 Fed . Reg
. 1 8 3 8 (Feb . 5 , 2 0 1 9 ) (Treas u ry Deci s i on co n cern i n g reg u l at i o n s u nd er s ect i o n 9 6 5 s p an ned7 8 p ag es o f t h e Fed eral Reg i s t er, i n cl ud i n g a p ream b l e o f m o re t han 3 6 p ag es , o f wh i ch m o re t h an 30 p ag es res p o n dedt o co m m en t s); T.D. 9 7 9 0 , 2 0 1 6 -4 5 I.R.B. 5 4 0 , 8 1 Fed . Reg . 7 2 8 58 (Oct . 2 1 , 2 0 1 6 ) (Treas u ry Deci s i o n co n cern i n g reg u l at i o n s u n der s ect i o n 3 8 5 sp an n ed 1 2 7 p ag es o f t h e Fed eral Reg i s t er, i n cl u d i n g a p ream

b l e o f m o re t h an 9 0 p ag es , o f wh i ch m o re t h an 8 0 p ag es res p o n d ed t o co m

m en ts ).-7 0
-

Treas u ry o fferedfai l t o pro vi d e “ th atm in i m al l ev el o f an al y s i s ” req u i redb y th e APA. En ci n o M o t o rcars , 5 7 9 U.S. at_ _ _ , 1 3 6 S. Ct . at2 1 2 5
. As ex p l ai n edfu rth er b el o w, Treas u ry fai l edt o “ res p o n d t o ‘ s i g n i fi can t p o i n t s ’ an dco n s i d er ‘ al l rel ev an tfact o rs ’ rai s edb y th e p ub l i c co m

m en t s .” See Carl s o n , 9 3 8 F.3 dat3 44 (qu o ti n g Ho m e Bo x Offi ce, 5 6 7 F.2 dat3 5 -3 6); PPG In du s., 6 3 0 F.2 dat4 66
.

2
. Ap p li cat i o n o f Fram ewo rkt o Treas u ry ’ s Ru l em ak i n g Pro ces s Th e qu es ti o n o f h ow t o treat d o n o r i m p ro v em en t s u n dert ak en aft er t h e g ran t
o f t h e eas em en ti n th e ev en tth e p ro p ert y was s ub s equ en t l y

s o l d was p u ts qu arel y b efo re Treas u ry du ri n g th e co m m en tp eri od . OnAu g u st3 1 , 1 9 83 , th e New Yo rk Lan dm ark s Co n serv an cy

(“NYLC”) s ub m i t teda co m m en tl et t er o f ju s t o v er fo u r p ag es . See NYLC Co m m en tLet ter, s upra. Two o f t h o s e p ag es were d ed icat edt o th e ex t i n g u is h m en tp ro v i s i o n s ati s su e h ere, an dn earl y h al f o f th at d i s cu s s i o n fo cu s edo n th e t reat m en to f fu tu re i m pro v em en t s m ad e b y

th e d o n o r. Onfu tu re i m

p ro v em en t s , th e NYLC Co m m en tLet t er ex p l ai n edas fo l l o ws : Th e s tru ctu re o f § 1 .1 7 0 A-1 3 (g )(5 )(i i ) [t h e p ro p o s edru l e fo r wh ati s n o w s ect i o n 1.1 7 0 A-1 4 (g )(6 )(i i ), In co m e Tax Reg s.,] co n t em p l at es th ata rat i o o f v al u e o f t h e co n s erv at i on res tri ct i o n t o v al u e o f t h e fee wi l l b e fi x ed atth e t i m e o f t he d on at i on an dwi ll rem ai n i n effect fo rev er t h ereaft er. Th i s fo rm u l a fai ls t o t ak e i nt o acco u n tth at i m p ro v em en t s m ay b e m ad e t hereaft er b y the o wn er wh i ch s h o u l d p ro p erl y al t er t h e rat i o . Fo r ex am p l e, (u s i n g the fact s o f ex am pl e 4 i n-7 1
-

§ 1 .1 7 0 A-1 3 (f) [t h e p ro po s edru l e fo r wh ati s n o w s ect i on 1 .1 7 0 A1 4 (f), In co m e Tax Reg s .,] atp ag e 2 2 9 4 5 ), s upp o s e t h e d on at i o n o f a s cen ic eas em en t up o n Green acre p ro v id i n g l i m it edcl u st er d ev el o p m en ti n areas g en eral l y n o t v is i b l e fro m

a n earb y n at io n al p ark
. Atth e t i m e o f t h e d o n at i o n, Green acre was wo rt h $ 10 0 ,0 0 0 an d th e eas em en t acco u n t s fo r 1 0 % o f t h e v al u e. Th ereaft er, t h e o wn er s p en d s $ 2 m i l li o n o n th e co n st ru ct i o n o f h o u s i ng u n i t s t o b e ren t ed
. If t h e eas em en t w ere s ub s equ en t l y ex ti n g ui sh ed , th e d o n ee o rg an i zat i o n wo u l db e en t i t l edu n d er § 1 .1 7 0A-1 3 (g )(5 )(i i ) t o 1 0 % o f th e s al e p ri ce o f t he en t i re p arcel i n cl u d i n g th e i m p ro v em en t s . Th i s wo u ldo b v i ou s l y

b e u nd es i rab l e t o th e p ro sp ect i v e d on o r an dwo u l d co n s t i tut e a wi n d fal l t o th e d on ee o rg an i zat i o n .

* * * * * * * In l i g h to f the p ot en t i al i n equi t i es d es cri b ed ab o v e, t h e * * * [NYLC] reco m m en d s th at th e p ro p o s edp ro ceed s fo rm u l a b e rev i s ed t o p rev en t s u ch i neq u it i es s h o u l dth e Dep art m en t o f t h e Treas u ry d eci d e t o ret ai n th e p ro v i s i o n . Ho wev er, th e * * * [NYLC] s tro n gl y reco m m en d s d el et i o n o f t h e en t i re ex t i n g u i sh m en t p ro v i s io n . Res po n d en t ’ s Res p o n s e t o Ord er Dat ed0 2 / 2 7 / 2 01 9 , at3 7 4 -3 75 (em ph as i s ad d ed ). Th e NYLC Co m

m en t Let t er s up p ort edi ts reco m m en dat i o n as fo ll o ws : Th e p ro v is i o n s fo r ap p o rt i o n m en to f p ro ceed s i n th e cas e o f ex t i n g u i s h m en to f a co n s erv at i o n res tri ct i o n * * * co n t ai n p ro b l em s o f p o l icy an dp ract i cal ap p l i cat i o n s o p erv as i v e as t o cau s e u s t o reco m m en ds tro n g l y th e d el et i o n o f t h es e p ro vi s i o n s . Th e s t atut e was en act ed b y

Co n g res s t o en co urag e t he p ro t ect i o n o f o u r s i gn i fi can t n atu ral an d b u i l t en v iro nm en tthro u g h t h e d o n at i o n o f co n s erv at i o n res tri ct i o n s an d y et , th e p ro p o s edp ro v is io n s wo u l dthwart th e p u rp o s e o f t h e s t atu t e b y

d et erri n g p ro s p ect i v e d o n o rs . Id . at3 7 3
.-7 2
-

As s h o wnab o v e, t h e NYLC Co m m en tLet t er m ad e cl ear t h at , i n i ts v i ew, i t
wo u l db e i nap p ro p ri at e t o co n d i t i o n th e av ai l ab i l i ty o f t h e d educt i o n fo r a
co n serv at i on eas em en to n th e d o n or’ s ag reem en tt o tu rn o v er t o t h e d o n ee p ro ceed s at tri b u t ab l e t o i m p ro v em en t s o n t h e real p ro pert y i n t eres tth atth e Co d e p erm i t t edth e d o n or t o ret ai n . Th e NYLC Co m m en tLet t er ex p res s ly

t i edi t s
co m m en t s b o th t o a s p eci fi c ru l e i n cl u d edi n th e p ro p o s edreg u lat i o n s --p ro p o s ed
s ect i on 1 .1 7 0 A-1 3 (g )(5 )(i i) (wh i ch u lt i m at el y b ecam e cu rren ts ect io n 1
. 1 7 0 A1 4 (g )(6 )(i i ), In co m e Tax Reg s . )--an dt o a s p eci fi c factp at t ern co n t em p l at edb y the p ro p os edreg u l at i on s --Ex am pl e (4 ) i n p ro p o s eds ect i o n 1 .1 7 0 A-1 3 (f) (wh ich
u l t i m at el y

b ecam e Ex am

p l e (4 ) i n s ect io n 1
. 1 70 A-1 4(f), In co m e Tax Reg s.). Th e NYLC Co m

m en tLet ter al s o ex p l ai n edth atthe p ro p o s edru l e wo u l d“ th wartth e p u rp os e o f t h e s t atu t e,” wh i ch , acco rd i n g t o NYLC, was t o “ en co u rag e t he p ro t ect i o n o f o u r s i g n i fi can tn atu ral an db u i l ten v i ro n m en tth ro u g h th e d o n at i o n o f
co n serv at i on res tri ct i o n s.” Id . at3 7 3 . A p ro p o s edru l e t h at req u ireda d on o r t o tu rn o v er t o t h e d o n ee p ro ceed s t h atwere p ro p erl y at tri b u t ab l e t o th e ret ai n ed i n t eres to f t h e d o n o r “ wo u l do b v i o u sl y b e u n d es i rab l e t o th e p ro s p ect i v e d o n o r an d
wo u l dco n s t i tu t e a wi n d fal l t o t h e d o n ee o rg an i zat io n .” Id
. at3 7 4 . Inl ig h to f th es e co n cern s , NYLC reco m m en d ed thatth i s p ro v is i o n b e d el et edo r, at th e v ery l eas t , “ b e rev i s edt o p rev en t* * * [t h e] i n equ i t i es ” i th ad i d en t i fi ed . Id
.-7 3
-

Th e reco rdl eav es n o d o ub tth atNYLC m ad e co m m en t s “ ‘ th atcan b e th o u g h tt o ch al l en g e a fu n d am en t al p rem i s e’ u n derl y i n g th e p ro po s edag en cy d eci s i o n .” Carl so n , 9 38 F.3 d at3 4 4 (qu ot i n g M CI W o rl d Co m , In c., 2 0 9 F.3 d at7 6 5 ). Th e p ream

b le t o th e p ro po s edreg u l at i o ns h adex p l ai n edth atth e p ro p o s ed
ru l es “ refl ect th e m ajo r p o l i cy d eci s i o n s m ad e b y

th e Co n g res s .” 4 8 Fed . Reg
. 2 2 9 4 0 . Th e NYLC Co m

m en t Let t er i n effect co u n t ered th atth e p ro p os edru l e o n fu tu re d o n o r i m

p ro v em en t s was co n traryt o th o se p o l i cy d eci s i o n s , wo u l dl eadt o i n equ i t ab l e res ul t s th atwere i n co n s i st en twi th th e s tatu te, an dwo u l d d et er fu tu re
co n tri b u t i o n s. In s h o rt , th e NYLC Co m m en tLet t er o ffered co m

m en t s th at , “ i f ad o pt ed , wo u l dreq u i re a ch an ge i n an ag en cy ’ s p ro p os edru l e.” Ho m e Bo x Offi ce, 5 6 7 F.2 dat 3 5 n .5 8
. Th o s e co m m en t s were b o th “ rel ev an tan d
s i gn i fi can t ,” req ui ri n g a res p on s e. Gran d Can y o n , 1 5 4 F.3 dat4 6 8 ; acco rd Carl s o n , 9 3 8 F.3 dat3 43 -3 4 4
. Un fo rtu n at el y , h o wev er, t h e Treas u ry Deci s i o n fi n al i zi n g th e reg u lat i o n s
co n tai n s n o s uch res p o n se. Th e Treas u ry Deci s i o n ch an g edth e s en ten ce o n wh ich th e Co m m i s s i o n er rel i es wi th res pect t o d o n o r i m p ro v em en t s as fo l l o w s (wi th th e rel ev an t ch an g e u n d ers co red ): (1 ) Pro p o s edReg u lat io n : “ Fo r p u rp o s es o f t h i s p arag rap h (g )(5 )(i i ), thato ri g i n al m i n i m um p ro p o rt io n at e v al u e o f t h e d o n ee’ s p ro p ert y ri g h t s s h al l rem ai n co n s t an t.” 4 8 Fed . Reg . 2 2 9 4 6
.-7 4
-

(2 ) Fi n al Reg u lat i o n : “ Fo r p u rp o s es o f th is p arag rap h (g )(6 )(i i ), th atp ro p o rt i o n at e v al u e o f t h e d o n ee’ s p ro p erty ri g ht s s h al l rem ai n co n s t an t .” T.D. 8 06 9 , 1 9 8 6 -1 C.B. at9 9
. Bu t Treas u ry

g av e n o ex p l an at io n as t o h o w th e ch an g e ad dres sedth e co n cern s
ex p res s edi n th e NYLC Co m m en t Let t er. In s h o rt , Treas u ry ’ s act i o ns d i dn o t p ro v id e “ an ex pl an at io n [t h at ] i s cl ear en o u g h th ati t s ‘ p at h m ay reas o n ab l y

b e d i s cern ed .’ ” En ci n o M o t o rcars , 5 7 9 U.S. at_ _ _, 1 3 6 S. Ct . at2 1 2 5 (qu o t i n g Bo wm an Tran sp ., 4 1 9 U.S. at 28 6 ). 1 8 No r d o es Treas u ry ’ s act io n p ro v i d e an y i n s i g h to n “ wh atm ajo r i s su es o f p o l i cy were v en t i l at ed. . . an dwh y th e ag en cy react ed t o t h em

as i td id ” o n t h i s p o i n t . Carl s on , 9 3 8 F.3 dat 3 4 4 (qu ot i n g Del
. Dep ’ to f Nat . Res . & En vt l . Co n tro l, 7 85 F.3 dat 1 7). Ab s en tan y ex p lan at i o n fro m Treas u ry o n wh y th e co n s i d erat i o n s rai s edb y NYLC s ho u l dn o t h av e b een h eed ed , “ [i ] t i s n o tth e ro l e o f t h e co u rt s t o s p ecu l at e o n reas o n s thatm i g h t h av e

1 8 In Bo wm anTran s p o rt at i o n , th e cas e t h at g av e ri se t o t h e “ p at h m ay reas on ab l y

b e d i s cern ed ” fo rm

u l at i o n , th e Sup rem e Co u rt o b s erv edth atthe In t ers t at e Co m

m erce Co m

m i s s i o n h adi n factp ro v i d edan ex p l an at io n o f h o w i t h ad v i ewedth e rel ev an t ev id en ce an dp ro ceed edt o d i s cu s s th atex pl an at i o n . Bo wm an Tran sp ., In c. v . Ark .-Bes tFrei g h tSy s., In c., 4 1 9 U.S. 2 8 1 , 2 9 0 (1 9 7 4 ) (“ Th e qu es t i o n b efo re t h e Co m m i s s i o n was wh eth er s erv i ce o n th e ro u t es ati s s u e wo u l db e en h an cedb y

p erm i tt in g n ew en try , an das t o t h i s th e p erfo rm an ce b y p ro s p ect i v e en tran t s o n n ew ro u t es was o f l i m i t edrel ev an ce. Th e Co m m i s s i o n n o t edwi th res p ectt o tran s i tt i m es th atd i fferen th ig h way co n d i t i o ns m i g h tm ak e ex p eri en ce t here a p o o r i n d i cat i o n o f t h e t i m es ap p l i can t s co u l dp ro vi d e o n th e ro u t es th ey

s o ug h tt o en t er.”). Th e reco rdh ere fai l s t o p ro v i d e ev en “ th atm i n i m al l ev el o f an al y s i s ,” En ci n o M ot o rcars , LLC v . Nav arro , 5 7 9 U.S. _

_ _ , _ _ _ , 1 3 6 S. Ct . 2 1 1 7 , 2 1 2 5 (2 01 6 ), req u i redb y Bo wm an Tran s p o rt at i o n .-7 5
-

s up p ort edan ag en cy ’ s d eci s i on . ‘ [W ] e m ay n o ts up p l y

a reas o nedb as i s fo r t h e ag en cy ’ s act i o n th atth e ag en cy i t s el f h as n o t g i v en .’ ” En ci n o M o t orcars , 5 7 9 U.S. at_ _ _ , 1 3 6 S. Ct . at2 1 2 7 (qu o t i n g St at e Farm , 4 6 3 U.S. at4 3 ). 1 9 Th e o p i n i o n o f t h e Co u rt ’ s d efen se o f t he fu tu re d o n o r i m pro v em en t s p o rt i on o f t h e reg u l at i o n i s u np ers u as iv e. Th e Co u rto b serv es th at“ [t ] he p ream bl e t o the fi nal reg u l at i o n s s t at es th at , ‘ [a] ft er co ns i d erat i o n o f al l co m m en t s reg ard i n g th e p ro p o s edam en d m en t s * * * , th os e am en dm en ts are ad o pt edas rev i s edb y th i s Treas u ry d eci si o n ,’ ” s ee o p . Ct . p . 2 0 (qu o ti ng T.D. 8 0 6 9 , 1 9 86 -1 C.B. at9 0 ), an d al s o n o t es th at“ [t ] h i s Co u rth as fo u n da s i m i l ar s t at em en t, co up ledwi th th e ad m i n is trat i v e reco rd , s u ffi ci en tt o fi n dth atTreas u ry h adco n s i d eredth e rel ev an t
m at t er p res en t edt o i t ,” s ee i d . (ci t i n g W i n g v . Co m m is s i o n er, 8 1 T.C. 1 7 , 3 1 -3 2 (1 9 8 3)). Bu t as th e U.S. Co u rto f Ap peal s fo r t h e Si x th Ci rcu i th as o bs erv ed ,

1 9 Th e o pi ni o n o f t h e Co u rtn o t es th atNYLC “ o ffered n o s u g g es t i o n ab o u t h o w the s ubjecto f d on o r i m p ro v em en t s m i gh tb e h an d led ; i t s im p l y reco m m en d ed ‘ del et i o n o f t h e en t i re ex t i n g ui s h m en tp ro vi s i o n .’ ” See o p. Ct . p . 2 2 . If th e Co u rt m ean s t o s u g g es t th ata co m m en tm ay b e d i s reg ard edu n l es s i tp ro p o s es s peci fi c t ex tfo r h o wth e reg u l at i o n s h o u l db e ch an ged , th ati s n o treq u i redb y th e APA. On ce a co m

m en t er b ri n g s a rel ev an tan ds i g n i fi can ti s su e t o th e ag en cy ’ s at t en t i o n , i t is th e ag en cy ’ s res po n s i b i l i ty t o d et erm i n e h ow t h atco m m en t s ho u ldb e i m p l em en t ed . Th e ag en cy

can n o trel y

o n t h e p ub l i c t o d o i t s h o m ewo rk . See Ho m e Bo x Offi ce, 5 6 7 F.2 dat3 5 -3 6 (“ [T] h e o p po rtu ni ty t o co m m en ti s m ean i n g l es s u n les s th e ag en cy res p o n d s t o s i g n i fi can tp o i n t s rai s edb y th e p ub li c.” (Em p h as i s ad d ed ; fn
. ref. o m it t ed
. )).-7 6
-

“ [w] e are n o t req u i redt o ‘ t ak e t h e ag en cy ’ s wo rdth ati tco n s i d eredal l rel ev an t
m at t ers .’ ” PPG In du s ., 6 3 0 F.2 dat4 6 6 (qu o t in g As arco , In c. v . EPA, 6 1 6 F.2 d 1 1 5 3 , 1 1 6 0 (9 th Ci r. 1 9 8 0 )). M o reo v er, t h e o p i n i o n o f t he Co u rt ’ s rel i an ce o n W i ng i s m i s pl aced , as thatcas e was d eci d edb efo re t h e Sup rem e Co u rtan dth e Co u rt s o f Ap p eal s h adart i cu lat ed fu l l y th e fram ewo rkfo r ju d ici al rev i ew o f l eg i s lat i v e ru l es u n d er t he p ro cedu ral req u i rem en t s o f t h e APA. See s up ra Part III.A. Th e o p i n i o n o f t h e Co u rtal s o ap p ears t o s u gg es t th atb ecau s e “ [o ] n l y o n e o f th e 9 0 co m

m en t ers m en ti o n ed d o n o r i m p ro v em en t s , an di t d ev o t edex act ly o n e p arag rap h t o th i s s ub

ject ,” s ee o p . Ct . p . 2 1 , Treas u ry was n o treq u i redt o res p o n d t o i t. Th i s i s n o ts o . A “ rel ev an tan ds i g n i fi can tco m m en t ” req u i res a res p o n s e, reg ard l es s o f wh et h er t h e p o i n ti s m ad e b y m an y , a few, o r ev en a s i n g l e
co m m en t er. See, e.g
. , Carl s o n , 9 3 8 F.3 dat3 4 2 , 3 4 5 -3 4 9 (i n val i d at i n g an i n creas e i n the p ri ce o f s t am

p s, i n p art , o n th e b as i s o f co m m en ts fro m

Do u g las Carl s o n , “ a p o s t al cu s t o m er an dwat ch d o g ”). M o reo v er, a co m m en td o es n o t l o s e i t s
s i gn i fi can ce b ecau s e i t i s p res en t eds u cci n ct ly . Aft er al l , the Co m m i s si on er can h ard l y co m p l ai n ab o u tNYLC’ s b rev i ty i n th is cas e. Th e Co m

m i s s i o n er’ s o wn p o s i t i on wi th res p ectt o fu tu re d o n or i m pro v em en t s i s b as edo n a s i ng l e s en t en ce,
an d NYLC’ s co m

m en t s o n t h i s i s s u e were cert ai nl y l on g er th ana s en t en ce. In-7 7
-

ad d it i o n , th e Co m

m i s s io n er’ s act i o n s b el i e an y cl ai m thatth e co m

m en td i d n o t rai s e a s i g n i fi can ti s s u e. As Oak b ro oko b s erv es i n i t s “ Rep l y t o M em o ran du m Reg ard in g th e Val i di ty

o f Treas . Reg . Sect i o n 1
. 1 7 0 A-1 4 (g )(6 )(i i ),” “ [i ] ti s d i s i n g en u o u s fo r Res p on d en tt o n o w arg ue t hatco m m en t s reg ard i n g th e * * * [reg ul at io n ati s su e] are n ot‘ si g n i fi can t ,’ wh en Res po n d en t h as rep eat ed l y d en i ed t ax p ay ers ’ d edu ct i o n s fo r fai lu re t o co m p ly wi th ” th atreg u l at io n . Th e o p i n i o n o f t h e Co u rtal s o s eem s t o s u g g es tth atth e s co p e o f t h e p ro ject --th e fact th at i ti n cl u d ed“ 10 p arag rap h s , 2 3 s ub p arag rap h s , 3 0
s ub d iv i s i o n s , an d 2 1 ex am p l es ,” s ee o p . Ct
. p . 2 4 --s om eh o w ex cu s es Treas u ry ’ s fai l u re t o res p o n dt o co m m en t s o n th e p ro v i s i o n at i ss u e h ere. Bu tTreas u ry ch o s e th e s co p e o f t h e p ro

ject . If th e p ro

jectwas t o o l arg e t o p erm i t an ap pro p ri at e
res p o n s e t o al l “ rel ev an tan d s i g n i fi can tco m m en ts ,” t h en Treas u ry

co u l dh av e b ro k enth e p ro

jectd o wni n t o s m al l er p art s . Wh ati tco u l dn o td o i s av o i dth e

“ d i al o g ue” req u iredb y

th e APA an ds ay

n ot h i n g ab o ut“ s i g n i fi can tp o i nt s rai s ed b y th e p ub l i c.” Ho m e Bo x Offi ce, 5 6 7 F.2 dat3 5 -3 6 (fn . ref. o m it t ed ). As th e
o p i n i o n o f t h e Co u rtackn o wl ed g es , th e “ d et ai l req u i red i n a s t at em en t o f b as i s an d p u rp os e d ep en ds o n th e s ub jecto f t h e reg u l at i o n an dthe n atu re o f t h e co m m en t s recei v ed .” See o p . Ct . p . 2 4 (qu o t i n g Reytbl at tv . U.S. Nu cl ear Reg u l at o ry Co m m ’ n , 1 0 5 F.3 d7 15 , 7 2 2 (D.C. Ci r. 1 9 9 7)). Al tho u g h “ [t ] hi s s t at em en tn eed-7 8
-

o n l y ‘ co n t ai n s u ffi ci en ti n fo rm at i o n t o al lo w a co u rtt o ex erci se ju d ici al rev i ew,’ ”
s ee i d . (qu o t in g Un it edSt at es v . Garn er, 7 6 7 F.2 d1 0 4 , 1 1 7 (5 th Ci r. 1 9 8 5 )), i t d o es requi re s o m e i nfo rm at i o n . An dh ere Treas u ry o ffered n o res po n s e atal l
. Fi n al l y , I n o t e t h atth i s wo u l dn o tb e t h e fi rs t cas e i n wh i ch a co u rt i n v al i d at eda Treas ury

reg u l at i o n o n p ro cedu ral g ro u nd s , as th e o p i n i o n o f t h e Co u rtackn o w l ed g es . See i d . n o t e 4 . Oak b ro o k ’ s “ Rep l y t o M em o ran du m Reg ard in g th e Val i di ty

o f Treas . Reg . Sect i o n 1
. 1 7 0 A-1 4 (g )(6 )(i i )” ci t es , at5
an d 6 , th e U.S. Co u rto f Ap p eal s fo r t h e Fed eral Ci rcu i t ’ s d eci s i o n i n Do m i n i o n Res
. , In c. v . Un i t ed St at es , 6 8 1 F.3 d1 3 1 3 , 1 3 1 9 (Fed . Ci r. 2 0 1 2 ). Th atd eci s i o n h el d(i n Part V) th at“ [t ] he as s o ci at ed -p ro p ert y ru l e i n Treas u ry

Reg u l at i o n § 1
. 26 3 A-1 1 (e)(1 )(i i )(B) as ap pl i edt o p ro p erty t em p o rari l y wi th drawn fro m
s erv i ce al s o v io lat es th e St at e Farm req u i rem en tth atTreas u ry p ro v i d e a reas o n ed
ex p lan at i o n fo r ad o pt i n g a reg u l at i o n .” 2 0 Id .; s ee al s o i d . at 1 3 2 0 (Cl ev en g er, J ., co n cu rri n g i n p artan d co ncu rri n g i n t h e res ul t ) (“ Th ere ap p ears t o b e n o d is p u t e
am on g th e p an el th atth e g o v ern m en th as n otart i cu lat edan y rat i o nal ex p l an at i o n fo r m an y d et ai l s o f t h e reg u l at i o n b efo re u s , fro m th e reg u l at i o n ’ s fi rs t p ro p o s al i n

2 0 In ad di t i o n t o h o l d i n g th atth e reg u l at io n ati s s u e fai l edt o s at i s fy M o t o r Veh icl e M frs As s ’ n o f Un i t edSt at es , In c. v . St at e Farm M u t . Au t o m o bi l e In s . Co ., 4 3 6 U.S. 2 9 (1 9 83 ), th e m ajo ri ty i n Do m i n i o n Res ., In c. v . Un it edSt at es , 6 8 1 F.3 d 1 3 1 3 (Fed . Ci r. 2 0 1 2 ), h el dthatth e reg u l at io n fai l edu n d er s t ep tw o o f t h e Ch ev ro n an al y s i s , h en ce t h e “ al s o ” i n th e qu o t at io n ab o v e.-7 9
-

th e m i d -‘ 9 0s up t o th e cu rren t d at e. Su ch a fai l u re m ak es th e reg u l at i o n p ro cedural ly

u n l awfu l . I wo u l drev ers e o n th e g ro u n ds s etfo rt h i n p artV o f t h e
m ajo ri ty o p i n i o n [.] ”). Th e o p i n i o n o f t he Co urtat t em p t s t o d i s t i n g u i sh Do m i n io n Res ou rces fro m

th i s cas e o n t h e g ro u n d t hatth e m ajo ri ty i n Do m i n io n Res o u rces al s o h el dthatthe reg u lat i o n th ere fai l edu n d er s t ep two o f Ch ev ro n . See o p . Ct
. n o t e 4
. Bu tth atd i s t i n ct i o n d o es n o tcarryth e d ay . Th e p ro cedu ral h o l d i ng i n th e
cas e was an i nd ep en d en tg ro un dfo r t h e d eci s i o n , as th e co n cu rri n g ju d ge m ad e cl ear. 2 1 See W o od s v . In t ers t at e Real ty Co ., 3 3 7 U.S. 5 3 5 , 5 3 7 (1 94 9 ) (“ [W ] h ere a d eci s i o n res ts o n two o r m o re g ro u n d s , n o n e can b e rel eg at edt o th e cat eg o ry o f
o b i t er d i ctu m .” (ci t in g Un i tedSt at es v . Ti tl e In s . & Tr. Co
. , 2 6 5 U.S. 4 7 2, 4 8 6 (1 9 2 4), an dM as s ach u s et t s v . Un i t edSt at es , 3 3 3 U.S. 6 1 1 , 6 2 3 (1 9 4 8 ))).

2 1 J u d g e Cl ev en g er d i sag reedwi th t h e m ajo ri ty ’ s d eci si o n t o reach th e Ch ev ro n s t ep two an al y s i s , o bs erv i n g :

Th e o u t co m e o f t h i s cas e can an d s ho u l dex t en d fro m St at e Farm . Th e g o v ern m en t ’ s fai l u re t o ju st ify i t s reg u l at i o n ab i n i t i o l eft o p en th e ques t i o n o f wh et h er t h e av o i d edco s tp ri n ci pl e n eces s ari ly u n d erm in es an y rat i o n al e th atco u l dju st ify treat i n g an ad

ju s t edb as i s o f p ro pert y

wi th drawnfro m

s erv i ce fo r i m

pro v em en tas a p ro du ct i o n ex p en d itu re, fo r p u rp o s es o f cal cu l at i ng i n teres tt o b e cap i t al ized
. Su ch reaffi rm s m

y co n cl u s i o n th atth i s ap p eal d o es n o tp res en tan ap p ro p ri at e v eh i cl e fo r d eci d in g th e Ch ev ro n qu es t i o n . Iti s t h erefo re a m o re d i s creet ap p ro ach t o l eav e t h atques t i o n as i de. * * * Do m i n i o n Res ., 6 81 F.3 d at1 3 2 2 (Cl ev en g er, J ., co n cu rri n g i n p artan dco n cu rri n g i n the res u lt ).-8 0
-

Treas u ry ’ s p ro cedu ral m i ss t ep s h ere are s im il ar t o , an dp erh ap s m o re s i g n i fi can t th an , th o s e i n Do m i n i o n Res o u rces . 2 2 Retu rn i n g t o t h e fact s o f t h i s cas e, i f Treas ury h adp ai d cl o s er at t en t io n t o th e NYLC Co m

m en t Let t er, i tm i g h th av e co u rs e-co rrect edan dad o p t ed a fo rm u l a th atp ro p erl y acco u n t ed fo r fu tu re d o n o r i m p ro v em en t s an dfo recl o s ed the cat eg o ri cal i nt erp ret at i o n ad v an cedb y th e Co m m i s s i o n er i n th i s cas e. Th ati s aft er al l wh y th e APA req u i res ag en ci es “ t o p ro v i d e a m ean i ng fu l o p p o rtu n i ty fo r
co m m en t s , wh i ch m ean s th atthe ag en cy ’ s m in dm u s tb e o p en t o co n si d eri ng th em .” Gran dCan y on , 1 5 4 F.3 dat4 6 8 (ci t i n g M cLo u th , 8 3 8 F.2 dat1 3 2 3 ). By fai l i n g t o d o s o h ere, Treas ury d i di t s el f a d i s s erv ice. Fo r t h e reas o n s s eto u t ab o v e, I b el iev e t h e d o n o r i m p ro v em en ts ru l e, as readb y th e Co m m i s s i o n er, i s i n co n s i s t en t wi th th e p ro cedu ral req u irem en ts o f t h e APA. “ Wh en an ad m i ni s trat iv e ag en cy s et s p o l i cy , i tm

u s tp ro v i d e a reas o n ed
ex p lan at i o n fo r i t s act i o n . Th ati s n o ta h i gh b ar, b u t i ti s an u nwav eri n g o n e. Here, * * * [Treas u ry ] h as fai l edt o m eeti t .” J udu l an g , 5 6 5 U.S. at4 5
. W i th
res p ect , I can n o tag ree wi th th e Co u rt ’ s co n traryco n cl u s i o n .

2 2 Treas u ry ’ s fai l u re t o co m p l y wi th th e p ro cedu ral req u i rem en t s o f t h e APA al s o res u l t edi n th e i n v al i dat i o n o f a t em p o raryreg u l at i o n i s s uedu nd er s ect i on 7 8 7 4 . See Ch am

b er o f Co m

m erce v . IRS, No . 1 : 1 6-CV-9 4 4 -LY, 2 0 1 7 W L 4 6 8 2 0 5 0 (W .D. Tex . Oct . 6 , 2 0 1 7 ).-8 1
- * * * I en dwh ere I b eg an . Th e u l t i m at e qu es t io n b efo re th e o p i n i o n o f t h e Co u rt i s wh eth er Oak

b ro o ki s en t i t ledt o th e ch ari t ab l e co n tri b u t i o n d edu ct i o n i tcl ai m ed
o n th e b as i s o f t h e eas em en ti tg ran t edt o SRLC. As I h av e ex p l ai n ed , ap p l y i n g th e t ex to f t h e s t atu t e t o th e t erm s o f t h ateas em en tl ead s t o th e co n cl u s i on th atth e
eas em en ti s n o t a “ qu al i fi edco n s erv at i o n co n tri b u ti o n.” Acco rd i n g l y , Oak b ro o k i s
n o ten ti t l edt o a ch ari t ab l e co n tri b ut i o n d edu ct i o n . Th at co n cl u s i on fu l l y res o l v es th e d i s p u t e b efo re u s . Th e rem ai n i n g i s s ues rai sedb y th e p art i es p res en t

“p erp l ex i n g qu es t i on s,” o n wh i ch th e m em b ers o f th i s Co u rtd o n o t ag ree. As J u s t i ce Fran kfu rt er o n ce cau t i o n ed , “ [t ] h ei r d i ffi cu l ty ad m o n i s h es u s t o o b s erv e t h e wi s e l i m i t at i o n s o n o u r fu n ct io n an dt o co n fi n e o u rs el v es t o d eci d i n g o n ly wh ati s
n eces s ary t o th e d i s p o si t i o n o f t h e i m m ed i at e cas e.” Wh i t eh o u s e, 3 49 U.S. at3 7 2
- 3 7 3 . Th ati s wh atI wo u l dh av e d o n e. Becau s e t h e Co u rt d oes o th erwi s e, I
res p ect fu l l y

co n cu r o n l y i n th e res u l t . GUSTAFSON, J
. , ag rees wi th p art s I, II.A, an d II.B o f t h i s co n cu rri ng o p i n i o n , URDA, J ., ag rees w it h t h i s co n cu rri n g o p in i o n , an dJ ONES, J ., ag rees wi th p artI o f thi s co n cu rri n g o p i n i o n .-8 2
-

HOLM ES, J ., d i s s en t i n g: Ou r h o l d i n g t o d ay wi l l l i k el y

d en y an y ch ari t ab l e d educt i o n t o h u n dred s o r t h o u s an d s o f t ax p ay ers wh o d o n at ed th e co n s erv at i o n
eas em en t s th atp ro t ectp erh ap s m i l l io n s o f acres . See Oakbro o kLan dHo l di n g s , LLC v . Co m

m i s s i o n er, T.C. M em o . 2 0 2 0-5 4 , at* 7 n .2 . Th is i s the s eco n dt i m e we’ v e t ak en an ax t o en t i re fo res t s o f t h es e d edu ct i o ns . InPi n e M ou n t ai n Pres ., LLLP v
. Co m

m is s i o n er, 1 5 1 T.C. 2 4 7 (2 0 1 8 ), ap p eal fi l ed(1 1 th Ci r. M ay 7 , 2 0 1 9 ), we wen tah eadan dh el dth atres erv i n g a l i m i t edri g h tt o b u i ldo n co n s erv ed p ro p erty --u n l es s th e s i te i s d es cri b edwi th ex cep t i on al p reci s i o n --d es tro y s an y d educt i o n fo r t h e d o n at i on , kn o wi n g th atwe were s et t i n g up a co n fl i ctwi th th e
o n l y ci rcu i tco urt t o ru l e o n the i s s u e. See i d . at2 7 2 -7 3 (s t at in g th atwe wi l l n o t fo l l o wBC Ran ch II, L.P. v . Co m m i s s i o n er, 8 6 7 F.3 d5 4 7 (5 th Ci r. 2 0 17 ), v acat i ng
an d rem an di n g Bo s que Can y o n Ran ch , L.P. v . Co m m i s s i o n er, T.C. M em o . 2 0 1 5
- 1 3 0 ). In t o d ay ’ s cas e, we h o l dth atth e Treas u ry Dep art m en tg et s t o i gn o re b as i c p ri n ci p l es o f ad m in i s trat i ve l aw t h atreq u i re an ag en cy “ t o g iv e reas on edres p o n s es t o al l s i g n i fi can tco m

m en t s i n a ru l em ak i n g p ro ceed i n g .” PPG In du s., In c. v . Co s t le, 6 3 0 F.2 d4 62 , 4 6 6 (6 th Ci r. 1 9 8 0 ). A co u rti s s up po s edt o en s u re t h atan ag en cy h as t ak en“ a ‘ h ard l o o k ’ atal l rel ev an ti s s u es an d co ns i d ered reas o nab l e al t ern at i v es .” Si m

m s v . Nat ’ l H i g h way

Traffi c Safet y Ad m i n ., 4 5 F.3 d 9 9 9 , 1 0 04-8 3
-

(6 th Ci r. 1 9 9 5 ) (qu o t i n g Nei g h b o rh o o dTV Co ., In c. v . FCC, 7 4 2 F.2 d6 2 9 , 6 3 9 (D.C. Ci r. 1 9 8 4 )). Bu t i f t h e m ajo ri ty i s ri g h t , th e Treas u ry

Dep art m en tcan g etb y wi th th e ad m i n i s trat i v e-s t at e eq u i v al en to f a qu i et s hru g , a kn owi n g wi n k , an da
s i len t fl eet i n g g l an ce fro m acro s s a cro wd edro o m . Th i s i s n o tth e way

ru l em ak in g i s s up p o s ed t o b e. An di ti s n o t th e way th at th e Art i cl e III co u rt s , i ncl u d in g t h e co u rtt o wh i ch an ap peal o f t h i s cas e l i es , rev i ew t h e v al i d i ty

o f reg u l at i o n s . To ex p l ai n wh atwe s h o u l dh av e d o n e, I
! b ri efl y

rev i ew s o m e g en eral p ri n ci pl es o f ad m i n is trat i v e l aw t h atare rel ev an th ere, ! ex p l ai n wh y

th i s reg u l at i o n i s p ro cedu ral l y i n v al i d , ! s u g g es tth atev en i f p ro cedu ral l y v al i di t s th i n ad m i n i s trat i ve reco rd m i g h t m ak e i ts ub s t an t i v el y i n v al i d , an d
! s u m

m ari ze wh ere t h i s l eav es co n s erv at io n -eas em en t -d edu ct i o n l aw aft er t od ay . I. A. W e b eg i n b y

b l azi n g th ro u g h th i s th i ck ett o wh ere t h e t rai l s o f ad m i n is trat i v e an dp ro cedu ral l aw m eet . Th e m ajo ri ty m en ti o n s th e ag e o f t h i s reg u l at i o n as a reas o n t o up ho l di t . See o p . Ct
. p p . 3 1 -3 3. Bu twh enco u l di th av e-8 4
-

b een ch al l en g ed ? 1 Ti t le 2 8 U.S.C. s ect i o n 2 4 01 (a) p ro v i des th at , wi th l i m i t ed
ex cep t i o n s n o trel ev an th ere, “ ev ery ci v il act i o n co m

m en ced ag ai ns tth e Un i t ed St at es s h al l b e b arred u nl es s th e co m p l ai nti s fi l edwi th i n s i x y ears aft er t he ri g h t
o f act io n fi rs t accru es . ” Treas u ry is s u ed th e reg u l at io n ati s s u e i n 1 9 8 6 . See 5 1 Fed . Reg
. 1 49 6 (J an . 1 4 , 1 9 8 6 ). Oak

b ro o k was fo rm ed i n Au g us t2 0 0 7 an dfi l edi t s p et i t io n i n M arch 2 0 1 3 , wi th i n s i x y ears o f t h e reg u l at i o n ’ s fi rs ti n vad i n g i t s i n t eres t . 2 An d th e Si x th Ci rcu i th as h el d th at 2 8 U.S.C. “ [s ] ect i o n 2 4 0 1 (a) d o es n o tl im i t a fed eral
co u rt ’ s s ub

ject -m at ter ju ri s d i ct io n .” Herr v . U.S. Fo res tServ ., 8 0 3 F.3 d8 0 9 , 8 1 8

1 Th e Ni n th Ci rcu itas k edth i s qu es t i o n ev en wh en th e p art i es d i dn ’ t rai s e i t . See Ord er, Sep t . 2 8 , 2 0 18 , at 1 , Al t era Co rp . v . Co m m i s s i on er, 9 2 6 F.3 d1 0 6 1 (9 t h Ci r. 2 0 19 ) (No s . 1 6 -7 0 4 9 6 , 1 6 -7 0 4 9 7 ) (o rd eri n g th e p art i es t o b e p rep aredt o d i s cu s s wh et h er th e s i x -y ear s tatu t e o f l im i t at i o ns s h o u l db e ap p li cab l e t o a t ax reg u l at i o n , as wel l as o fferi n g th e o p p o rtu n i ty t o fi l e s up p l em en t al b ri efs o n th e qu es ti o n ).

2 Th e An t i-In

jun ct i on Act(AIA) p ro h ib i t s t ax p ay ers fro m b ri n g i n g s u i t“ fo r th e p u rp o s e o f res trai n i n g th e as s es s m en to r co l l ect i o n o f an y t ax .” Sec. 7 4 2 1 (a). Co u rt s i n t erp retth i s l an g u ag e t o m ean th atth e AIA “ g en eral ly b ars p reen fo rcem en tch al l en g es t o cert ai n t ax s tatu t es an dreg u l at io n s . ” Fl a. Ban k ers As s ’ n v . U.S. Dep ’ to f Treas u ry , 7 9 9 F.3 d1 0 6 5 , 1 0 6 6 (D.C. Ci r. 2 0 1 5 ). Th i s d o es m ak e t ax l aw ex cep t io nal , b u tev en o n th i s t op i c t h ere h as b een o n e p owerfu l d i s s en t al , s ee CIC Serv s ., LLC v . IRS, 9 2 5 F.3 d2 4 7 , 2 5 9 -6 1 (6 th Ci r. 2 0 19 ) (Nal b an d i an , J ., d i s s en t i ng ), cert . g ran t ed , _

_ U.S. _

_ , _

_ S. Ct . _

_ , 2 0 2 0 W L 2 1 0 5 2 0 8 (M ay

4 , 2 0 2 0 ), an dacad em i c an al y s i s , s ee Kri st in E. Hi ck m an & Geral d Kers k a, “ Res t o ri n g th e Lo s t An t i -In jun ct i on Act ”, 1 0 3 Va. L. Rev . 1 68 3 (2 0 1 7 ), th ats u g g es ta ch an g e m ay b e co m i n g . W e, o f co u rs e, l o o kt o the l aw as i t cu rren t l y i s .-8 5
-

(6 th Ci r. 2 0 1 5 ). Th e ag e o f t h i s reg u l at i o n i s n o o b s t acl e t o ch al l en g i n g i t s v al i d i t y h ere. Th i s i s a s h al l o w ro o tth atOak bro o k can ju s ts tro l l o v er. B. W i th th i s p o p qu i z i n ci vi l p ro cedure o v er, we can g raduat e t o AdLaw 1 0 1
. As a g en eral m at t er, fo r a reg u l at i o n --i n cl u d i ng t ax reg u lat i o n s --t o b e v al i di t s p ro m u l gat i o n m

us t co m p ly wi th th e n o t i ce-an d -co m m en tp ro cedu res o f t h e Ad m i n i s trat i v e Pro cedu re Act (APA). 3 See 5 U.S.C. s ec. 5 5 3 (a)-(c) (2 0 0 6 ); Perez
v . M o rt g . Ban k ers As s ’ n , 5 7 5 U.S. 9 2 , 9 6 (2 0 1 5 ); M ay o Fo un d . fo r M ed . Edu c. & Res earch v . Un i t ed St at es , 5 6 2 U.S. 4 4 , 5 5 (2 0 1 1 ) (“ [W ] e are n o ti n cl i n edt o carv e
o u tan ap p ro ach t o ad m i n i s trat i v e rev i ew g o odfo r t ax l aw o n l y . To th e co n trary , we h av e ex p res s l y

‘ [r] eco g ni z[ed ] th e i m

p ort an ce o f m ai nt ai n i n g a u n i fo rm ap p ro ach t o ju d i ci al rev i ew o f ad m i n is trat iv e act i o n.’ ” (q u o ti n g Di ck i n s o n v . Zu rk o , 5 2 7 U.S. 1 5 0 , 1 5 4 (1 9 9 9 ))); Ch i l dren ’ s Ho s p . o f t h e Ki ng ’ s Dau g h t ers , In c.
v . Azar, 8 9 6 F.3 d6 15 , 6 1 9 -2 0 (4 th Ci r. 2 0 1 8 ). If a reg u l at i o n i s p ro m u l gat ed p ro p erl y u n d er n o t i ce-an d -co m

m en tp ro cedures , we m

u s t n ex tl o o kt o rev i ew t h e

3 No t i ce-an d -co m

m en t p ro cedu res ap p ly

o nl y t o “ l eg i s lat i v e ru les ”--i .e. ru l es wi th th e fo rce o f l aw. See Perez v . M ort g . Ban kers As s ’ n , 5 7 5 U.S. 9 2 , 9 6 (2 0 1 5). I ag ree wi th th e m ajo ri ty th atth i s ru l e, ev en th o u g h t h e Treas u ry Dep art m en tcal l edi t “ i n terp ret i v e”, i s actu al ly “ l eg i s l at i v e” an d , th erefo re, n o t i cean d -co m m en tp ro cedu res ap pl y . See o p . Ct . p p . 1 6-1 7
.-8 6
-

s ub s t an ce o f t h e ag en cy

act i o n --i .e., d o es th e ag en cy act i o n ru n co u n t er t o th e
s t atu to ry l an gu ag e, s ee Ch ev ro n , U.S.A., In c. v . Nat . Res . Def. Co u n ci l, In c., 4 6 7 U.S. 8 3 7 , 8 4 2 -4 3 (1 9 8 4 ), o r was th e ag en cy ’ s d eci s i o n m ak i n g arb i trary an d cap ri ci ou s , s ee APA s ec. 7 0 6 (2 )(A); M o t o r Veh i cl e M frs . As s ’ n v . St at e Farm M u t . Au t o . In s . Co ., 4 63 U.S. 2 9 , 4 6 (1 9 8 3 ). On l y i f we fi ndth at th e ag en cy ’ s act i on co m

p l i ed wi th APA s ect i o n 5 5 3 d o we th enap p l y th e arb i trary -an d
cap ri ci ou s s tan d ardo f APA s ect i o n 7 0 6 (2 )(A), s ee HLI Lo rd s hi p In du s ., In c. v . Co m m . fo r Pu rch as e fro m

th e Bl i n d& Ot h er Sev erel y Han d i cap p ed , 7 91 F.2 d 1 1 3 6 , 1 1 4 0 (4 th Ci r. 1 9 8 6 ) (“ Th e ‘ co n ci s e g en eral s t at em en t ’ m an d at edb y [APA
s ect i on ] 55 3 (c), an d o th er p ro cedu ral req ui rem en t s , are p reco n di t i o n s t o th e h i g h l y d eferen t i al ‘ arb i traryan dcap ri ci o us ’ s t an dardo f rev i ew.”), o r Ch ev ro n ’ s rel at ed
s t an d ard
. 4 An d , as a g en eral p o i n t, th e ag en cy ’ s art i cu l at i on fo r a reg u l at i o n ’ s v al i d i t y
m u stb e co n t em

p o ran eo us wi th i t s i s s u an ce o f t h e fi n al ru l e an dwi thi n th e ad m i n is trat i v e reco rd , b ecau s e a rev i ewi n g co u rt“ m ay n o t s up p l y a reas on edb as i s fo r t h e ag en cy ’ s act i o n thatthe ag en cy i t sel f h as n o tg i v en .” St at e Farm , 4 6 3 U.S. at4 3 ; s ee al s o Atri u m

M ed . Ct r. v . HHS, 7 6 6 F.3 d5 60 , 5 68 (6 th Ci r. 2 0 14 ) (“ [A] n

4 Bu t , as J us t ice Th o m as h as arg u ed , th e Ch ev ro n tw o -s t ep m ay ev en b e co n traryt o th e APA i t s el f. See Bal dw in v . Un i t edSt at es , 5 8 9 U.S. _

_ , _ _, 1 4 0 S. Ct . 6 9 0 , 6 9 2 (2 0 2 0) (Th o m as , J ., d is s en t i n g fro m d en i al o f cert i o rari ).-8 7
-

ag en cy can n o tb o ls t er i t s cas e wi th rat i o n al es o ffered p o s th o c”). Th i s i s n o tt o s ay th atan ag en cy

m u s tp erfect l y

art i cu l at e i t s reas on s fo r ch o i ces m ad e, as a co u rt wi l l “ up h o l da d eci si o n o f l es s th an i d eal cl ari ty i f t h e ag en cy ’ s p at h m ay
reas on ab l y

b e d i s cern ed
. ” Bo wm an Tran sp ., In c. v . Ark .-Bes tFrei g h tSy s . , In c., 4 1 9 U.S. 2 8 1 , 2 8 6 (1 9 7 4 ). “ Bu twh ere t he ag en cy h as fai l edt o p ro vi d e even th a t mi n ima l l evel o f a n a l ys is , i ts act i o n i s arb i traryan dcap ri ci o u s.” En ci n o M o t o rcars , LLC v . Nav arro , 5 7 9 U.S. _

_ , _

_ , 1 3 6 S. Ct . 2 1 1 7, 2 1 25 (2 0 1 6 ) (em p h as i s ad ded ). Oak b ro ok ’ s m ai n arg u m en ti s d i rect edt o ward s Treas u ry ’ s al l eg ed p ro cedural s ho rt co m i n g s i n p ro m u l g at i ng s ect i o n 1 .1 7 0 A-1 4 (g )(6 )(i i ), In co m e Tax Reg s. Th e fo u nd at i o n o f t h i s arg u m en ti s t h atTreas u ry fai ledt o p ro v i d e a
reas on edb as i s i n th e ad m i n i s trat i v e reco rdfo r i t s act io n . Oak bro o karg ues th at th i s n o to n l y

m ak es i t“ d i ffi cu l tt o d i s cern th e m ean i n g o f t he Reg u l at i on , [o r] h o w t o ap p ly i ti n p ract i ce,” b u t fru s trat es an y m ean in g fu l an al y s is o f “ wh et h er t h e [Treas u ry ] ’ s act i o n i n p ro m u l g at i n g th e Reg u l at i o n i s arb i traryan dcap ri ci o u s .” Th i s arg u m en tg o es t o th e h eart o f Treas u ry ’ s ru l em ak i n g p ro cedu re u nd er t h e APA an d m ay b e o f d eci s i v e i m p o rt an ce b ecau s e o n l y

reg u l at i o n s i s s u edi n a v al i d
m an n er are el i gi b l e fo r d eferen ce. See En ci n o M o t o rcars , 5 7 9 U.S. at_ _ , 1 3 6 S. Ct . at2 1 2 5 . Th ere are n o s p eci al p ro cedu ral ru l es fo r t ax reg u l at i o ns --we h av e-8 8
-

t o l oo kt o th e APA, wh i ch i t sel f “ s et s fo rth t h e fu l l ex t en to f ju di ci al au th o ri ty t o
rev i ew ex ecu t i v e ag en cy

act i on fo r p ro cedu ral co rrect n es s .” FCC v
. Fo x Tel ev i s i on St at i o n s , In c., 5 5 6 U.S. 5 0 2 , 5 1 3 (2 0 0 9 ). Onth i s p o in t, I d o ag ree wi th the m ajo ri ty , wh ich co rrect l y p o in ts o u t , s ee
o p . Ct . p . 1 7 , thatAPA s ect i o n 5 5 3 h as th ree req u i rem en t s fo r an ag en cy th at
wan ts t o i s su e reg u l at i o n s th ro u g h i n fo rm al ru l em ak in g . It m u s t(1 ) p ub li s h a
n o t i ce o f p ro po s edru l em ak i n g i n th e Fed eral Reg i s t er; (2 ) p ro v i d e t h e p ub l i c wi t h
an o p p o rtu n i ty

t o p art i ci pat e i n th e ru l em ak i n g --co m m o n ly th ro u g h t h e s ub m i s s i o n
o f wri t t en co m

m en ts ; an d(3 ) aft er co n s i d erat i o n o f rel ev an tp ub l i c s ub m i s s i o n s , p ub l i s h th e fi n al ru l e an d a co n ci s e s t at em en to f i t s b as i s an d p u rp o s e. APA s ec. 5 5 3 (b )-(c). Bu tthe m ajo ri ty , I fear, h as m i s s edth e m ai n ro o to f Oak b ro o k ’ s arg u m en t --t h atatth e t im e o f t he reg u l at i o n ’ s p ro m u l g at i on , co m

m en ters m ad e
s i gn i fi can tco m

m en t s , an dTreas u ry

fai l edt o ad dres s th em

i n i t s s tat em en t o f t h e reg u l at i o n ’ s b as i s an dp urp os e. See, e.g ., Reytb l at tv . U.S. Nu cl ear Reg u l at o ry Co m m ’ n , 1 0 5 F.3 d7 15 , 7 2 2 (D.C. Ci r. 1 9 9 7) (b as is an dp u rp o s e s t at em en t i n ex tri cab l y

i n t ertwi n ed wi th recei p to f co m m en t s ); Un i t edSt at es v . No v a Sco t i a Fo o dPro d s . Co rp ., 5 68 F.2 d 2 4 0 , 2 5 2 (2 d Ci r. 1 9 7 7) (“ co nci s e g en eral s t at em en t ” req u i redb y

APA s ect i on 5 5 3 (c) i s i n ad equ at e wh enm at eri al co m m en t s are l eft
co m p l et el y u n an s wered ).-8 9
- II. W i th th es e g en eral p ri n ci p les i n p l ace, o n e can tu rnt o th e m eri t s o f Oak bro o k ’ s p ro cedural ch al l en g e t o th e reg u l at i o n --t h atTreas u ry fai l ed t o res p on d t o s i g n i fi can tco m

m en t s rel at in g t o s ect i o n 1
. 1 7 0 A-1 4 (g )(6 )(i i ), In co m e Tax Reg s .

A. Let ’ s tu rn fi rs t t o th e co m m en t s s en t t o Treas u ry

wh i l e i tco n t em

p lat edth e reg u l at i o n b efo re u s . 5 Treas u ry recei v edap p ro x i m at el y

9 0 co m m en t s reg ard i n g th e s ub s t an ce o f t h e p ro p o s eds ect io n 1 70 A reg u l at i o n s. 6 Am on g th o s e, t h e fo l l o w i n g co m

m en t ers s p eci fi cal l y

ex p res s edco n cern wi th wh at i s n o w s ect i o n 1 .1 70 A-1 4 (g )(6 )(i i ), In co m e Tax Reg s .: ! New Yo rk L an d m ark s Co n s erv an cy ; ! Ph i l ad el p h i a Hi s t ori c Pres erv at i o n Co rp o rat i o n; ! Th e Tru s tfo r Pub l i c Lan d ; ! Lan d m ark s Pres erv at io n Co u n ci l o f Il l in o i s ;

5 W e d i rect edth e Co m

m i s s i o ner t o p ro v i d e t h e co m m en t s th atth e p ub l i c s ub m i t t eddu ri n g th e ru l em ak i n g p ro ceed i n g . He fi l ed th e en t i re ad m in i st rat i v e reco rdfo r T.D. 8 0 6 9 , 1 98 6-1 C.B. 8 9 , i n wh i ch th e Fi n al Ru l e was p ub l i s h ed
. Th atreco rdam o u n t edt o o v er 2 ,5 0 0 p ag es , an di n cl u d edo v er 5 5 0 p ag es o f s ub m i s si o n s fro m

th e p ub l i c. 6 Th i s n u m

ber ex cl ud es t i m el y

co m m en t s th atas k edo n l y

t o p art i ci p at e i n th e p ubl i c h eari ng .-9 0
-

! M ai n e Co as tHeri t ag e Tru s t ; ! Th e Natu re Co n s erv an cy ; ! W es tern Pen n s y l van i a Co n s erv an cy ; ! Bran dywi n e Co n s erv an cy , In c.; ! Ho fs tra Un i v ers it y ; ! Natu ral Lan d s Tru s t , In c.; ! Nat i on al Tru stfo r Hi s t o ri c Pres erv at i on ; ! Th e W as h i n g t o n Tru s tfo r Hi s t o ri c Pres erv at i on ; an d
! Lan dTru stEx ch an g e. Th es e co m

m en t ers rai seda v ari et y

o f p ot en t i al l y

s i g n i fi can t i s s ues wi th th e p ro p os edru le, b u tI fo cu s o n l y o n th o s e rel ev an t t o Oak b ro ok ’ s ch al l en g e h ere: Wh y d i dTreas u ry

ch o o se t o req u i re t h ata d o n ee recei ve a p ro p o rt i o n at e s h are rat h er t h ana fi x eds u m

i f t h e eas em en ti s ex t i n g u i s h edo r co n d em n ed ? An dwh y d i dTreas u ry

ch o o s e t o req u i re t h ata d o n ee s hare i n the v al u e ad d edt o th e p ro p erty b y l at er i m p ro v em en t s t o i t ? (W e’ l l fo l l o w th e m ajo ri ty ’ s s h o rt h an dan d cal l th es e t he p ro b l em s o f p ro p o rt i o n at e s h are an dd o n or i m p ro v em en t s.) Th e
co m m en t s s ub m i t t ed b y

th e New Yo rkLan d m ark s Co n s erv an cy (NYLC) ad dres s edth es e qu es t i on s m o s t ex ten s i vel y . Acco rd i n g t o th e NYLC, “ [t ] h e p ro v is i o n s fo r ap p o rt i o n m en t o f p ro ceed s i n the cas e o f ex t i ng u i s h m en to f a-9 1
-

co n serv at i on res tri ct i o n * * * co n t ai n p ro b l em s o f p ol i cy an dp ract i cal ap p l i cat i o n
s o p erv as i v e as t o cau s e u s t o reco m m en ds tro ng l y

th e d el et i o n o f t hes e p ro v is i o n s .” Res po n d en t ’ s Res p o n s e t o Ord er Dat ed0 2 /2 7 /2 0 1 9 , Adm i n i s trat i v e Reco rd (Res p o n s e t o Ord er) at 3 7 3 , Oak b ro o kLan dHo l d in g s , LLC v
. Co m m i s s i o n er, T.C. M em o . 2 0 2 0 -5 4
. Th e NYLC i d en t i fi edfo u r s p eci fi c “ i neq u i ti es ” wi th th e p ro v i s io n s. Fi rs t , i t b el i ev edth atth e p ro vi s io ns wo u l dd et er p ro s p ect i v e d o n ors fro m d o n at i n g
co n serv at i on eas em en t s i f t h ey were req u i redt o s h are ex t i n g ui s h m en tp ro ceed s at
s o m e i n det erm i n at e t i m e u n d er u n fo res een ci rcu m s t an ces . Id . Fro m i t s
ex p eri en ce, t h e co m

m o n -l aw d o ct ri n e o f ch an g edco n d i t i o n s al l ay eds u ch co n cern s
am on g eas em en td o n o rs b u t , as p ro p o s ed , th e ex t i n g u is hm en t p ro v i s i o n s “ wo u l d
n o l o n ger m o l l i fy

thes e fears i f a s p l i t o f p ro ceed s u n d er u n kn o wnci rcu m s t an ces
wo u l db e req u i red .” Id . at3 7 4 ; s ee al s o Oak b ro o k , T.C. M em o . 2 0 2 0 -5 4 , at* 1 4
-
* 1 6 (al s o d i s cu s s i n g “ ch an gedco n d i ti o ns ” as i tap p l i es t o co n s erv at i o n eas em en t s
u n d er co m

m o n l aw). Seco n d , i tfel tth atp ro v is i o n s i n th e p ro po s edreg ul at i o n s thatreco gn i zeda p ro p erty ri g h tv es t edi n th e d o n ee i m p ro perl y as s u m edth ata co n s erv at io n
eas em en trep res en t eda p o s i t iv e eco n o m i c v al u e t o d on ees b ecau s e o f t h e-9 2
-

p o s s i b i l i ty

th atd o n ees m i g h to n e d ay recei v e p ro ceed s fro m

ex t i n g u i s h m en t . 7 See Res po n s e t o Ord er at3 7 4
. It arg u edth atan y s uch as su m p ti o n was “ u n real i s t i c”
s i nce “ [t ] h e v al ue o f a co n s erv at i o n res tri ct i on t o the d o nee o rg an i zat i o n i s n o ta
m o net ary v al u e b u ta p h i lan th ro p i c v al ue as a d ev i ce fo r ach i ev i ng th e ch ari t ab l e
o b ject i ves o f th e o rg an i zat i o n .” Id . So wh i l e t h e NYLC ack n owl ed g edi t wo u ld wel co m e t h e recei p to f ex t i ng u i s h m en tp ro ceed s , i tp referred th e el i m i n at i o n o f t h e p ro v is i o n b ecau s e i tb el i ev edth ati t s d et erren teffect o n p o t en t ial d o n ors wo u l d h arm co ns erv an ci es m ore t h an “ th e p ro s p ecto f fu tu re wi n d fal l s wh enres tri ct i o n s
are ex t i n g u i sh ed ” m i gh tb en efi tth em . Id
. Th e NYLC i d en t i fi edas a t h i rdp ro bl em th e p o t en t i al co n fl i ctb et ween th e p ro p os edru le an ds t at e co n d em n at i o n l aw. Id . at3 7 5
. To i l l u s trat e i t s co n cern , i t

7 Th e W es t ern Pen n s y lv an i a Co n s erv an cy (W PC) an dth e M ai n e Co as t Heri t ag e Tru s t(M CHT) al s o i d en t i fi edth i s as s u m p ti o n as a p ro b l em

wi th th e p ro p os edru le an ds u g g es t edth at i tco u l dh av e u n to wardacco u n t i ng an d t ax co n seq u en ces . Bo th arg u edth atco n s erv at i on eas em en ts h av e a n eg at i v e eco n om i c v al u e b ecau s e d o n ees h av e t o p ay th e co sto f m on i t o ri n g an den fo rci n g co m p l ian ce wi th thei r res tri ct i o n s , wh i l e b ei ng u n ab l e t o s el l th em ex cep ti n th e n arro wes to f ci rcu m s t an ces . To s u g ges to th erwi s e, th e M CHT cl ai m ed , i s n o to n l y “ m i s l ead in g ” b u tco u l dactu al l y “ jeo p ard i ze i t s s t atu s as a p ub l i cl y -s up p o rt ed ch ari ty ” i f i twere req u i redt o rep o rt co n serv at i o n eas em en ts as m as s i v e as s et s o r co n tri b u t i o n s o n i t s Fo rm 9 9 0, Retu rn o f Org an i zat i o n Ex em p tFro m In co m e Tax
. Res po n s e t o Ord er at5 1 1
. Th e W PC rai s ed the s o m ewh at rel at edco n cern th at t h e i m p l i cat i o n o f t h e reg u l at i o n m i g h t“ req u i re d o n o rs o r co n s erv an ci es t o p ay tran s fer t ax es --y etan ot h er s i g n i fi can tcu m u l at i v e b u rd en wh i ch * * * wi ll wei g h h eav il y ag ai n s tth e u ti l i ty o f t h i s co n s erv at i on t o o l .” Id . at7 8 3.-9 3
-

g av e anex am

p l e wh ere an eas em en ti s ex t i n g u i s h edup on co n d em n at io n . It cl ai m edth ati n s u ch a s i tu at i o n “ s t at e l aw wo u l do p erat e t o d et erm i n e wh et h er t he
co n serv at i on o rg an i zat i on ’ s res tri ct i on h ada co m p en s ab l e v al u e.” Id . Th e p ro b lem , i targ u ed , i s th at“ [i ] t i s p o s s i b le t h ats o m e s t at es wo u ldn o t p ro v i d e
co m p en s at i o n fo r s u ch a p ro p ert y i n t eres t , y etu n der t he p ro p o s ed reg u l at i on , th e
o wn er o f t h e co n d em

n edp ro p erty

wo u l db e req u iredt o s hare t h e co n d em nat i o n p ro ceed s wi th th e co ns erv at i o n o rg an i zat i o n . ” Id
. Th e NYLC h ad o n e fi nal co n cern --t h at“ [t ] h e s tru ctu re o f [s ect i o n 1 .1 70 A-1 4 (g )(6 )(i i ), In co m e Tax Reg s .,] co n tem p l at es thata rat i o * * * wi ll b e fi xedatth e t i m e o f t h e d o n at i o n ” b u tth atth e “ fo rm u l a fai l s t o t ak e i n t o acco u n t th ati m p ro v em en t s m ay b e m ad e t h ereaft er b y th e o wn er wh ich s h o u l d p ro p erl y al t er t h e rat i o .” Id . at3 7 4 . Th e NYLC th en p ro v i d edan ex am p le wh ere a d o n o r i m p ro v es th e d o n at edp ro p ert y aft er t h e g iftan dth e d o nee s hares i n t h e v al u e o f th o s e i m p ro v em en t s up o n ex t i n g u i s h m en t , wh ich i t arg u ed“ wo u l d o b v i ou s l y b e
u n d es i rab l e t o th e p ro s p ect i v e d o n o r an d wo u ldco n s ti tut e a wi n d fal l t o th e d o n ee
o rg an i zat i o n .” Id
. Th i s i s p reci s el y th e arg u m en t thatOak

b ro okm ak es reg ard i n g th e al l ocat i o n o f ex t i ng u i s h m en tp ro ceed s at tri b u tab l e t o i m pro v em en t s. No tal l co m

m en t ers , h owev er, ag reed wi th the NYLC o n th is p o in t --b u t
ev en th ey req u es t edm o re cl ari ty . Bo th th e Natu re Co n s erv an cy an dth e M CHT-9 4
-

fel tth atth e p ro p o sedru l e n eed edt o cl ari fy thatd o n ees wo u l d b e en t i t l edup o n
ex t i n g u i s h m en tt o b o th th e o ri g i n al p ro p o rt io n at e v al ue an dan y s ub s equ en t i n creas e i n v al u e at tri b u t ab le t o m ark et fo rces . See i d . at5 1 1 , 5 7 9 . Th e Bran dywi n e Co n s erv an cy , In c., m ad e a s i m i l ar arg u m en tan ds t at edthatth e p ro p os edru le wo u l d “ un n eces s ari l y res tri ct th e am o un tp ay ab l e t o th e h o ld er o f an
eas em en t , i f ch an g es i n s u rro un d i n g t erri to ry h av e m ad e t h e eas em en t p ro p ort i o n at el y

m o re v al u ab l e t h an th e ret ai nedi n teres t .” Id . at5 9 3 . Th at
co n serv an cy

arg uedth atthe ru l e s h o u l db e ch an g eds o thata d o n ee i s “ en t it l edt o p ro ceed s eq u al t o th e gr ea t er o f i t s o ri g i n al p ro p o rt i o nat e v al u e o r i t s p ro p ort i o n at e v al u e atth e t i m e o f t h e ex t i n g u i s hm en t.” Id
. Th e Tru s tfo r Pub l i c Lan d(TPL) qu es t i o n edwh et h er t h e p ro v i s i on fo r t h e al l o cat i o n o f ex ti n g u i s h m en t p ro ceed s co u l db e en fo rced ag ai ns tan y o n e o th er t h an th e o ri gi n al d o n or, b u t al s o fel tth atth e reg u l at i o n s i m p o s edan u n du e b u rd en o n d o n o rs i n l i g h to f t he t ax -b en efi tru l e an d th e rem o t e-fu tu re-ev en tru l e. 8 TPL th o u g h tth o s e ru l es wo u ldad equ at el y ad dres s Treas u ry ’ s co n cern s . Id . at 8 4 4 . It

8 “ [T] h e t ax b en efi tru le o rd i n ari l y ap p l ies t o req u i re t h e i ncl u s i o n o f i n co m e wh en ev en t s o ccu r th atare fu n d am en t al l y i nco n s i s t en twi th an earl i er d educt i o n .” Hi l l s bo ro Nat ’ l Ban kv . Co m m i s s io n er, 4 6 0 U.S. 3 7 0 , 3 72 (1 9 8 3 ). Th e rem o t e-fu tu re-ev en tru le p erm i t s a ch ari t ab l e-co n tri b ut io n d edu ct i o n o n l y i f, o n th e d at e o f d o nat i o n , th e p o s s i b il i ty th at th e d o n ee’ s v es t edi n t eres t“ m ay b e d efeat edb y

th e p erfo rm an ce o f s o m e act o r h ap p en i n g o f s om e ev en t* * * i s s o rem o t e as t o b e n eg l i g i b le.” Sec. 1 .1 7 0 A-1 4 (g )(3 ), In co m e Tax Reg s .-9 5
-

s u g g es t edth at th e “ t ax b en efi t ru l e i s a s at i sfact o ry m ean s o f m eet i n g an y

co n cern th e IRS m ay

h av e t h at a d on o r m i g h t recei v e t h e d oub l e b en efi to f an eas em en t d educt i o n fo l l o wedb y

l at er reco v ery

o f t h e v al u e d on at ed .” Id . TPL al s o
s u g g es t edth at th e rem ot e-fu tu re-ev en tru le s h o u l ds u ffi ci en t l y as s uag e an y
co n cern th at co n s erv at io n eas em en t s m i g h tn o tb e p ro t ect edi n p erp etu i ty , b ecau s e i t w o u ldb ar a d edu ct i o n i f a d o n o r kn o ws atth e d at e o f d on at i o n th ata ch an g e i n ci rcu m s t an ces wi l l o ccu r i n th e fo res eeab l e fu tu re t h atwi l l ex t i n g u i s h th e
eas em en t . Id
. Th es e are m

u l t i p l e s eri o u s co m

m en t s thati d en ti fi ed p ro b l em s wi th th e reg u l at i o n wh en i twas p ro p o s edan dex pl ai n ed wh y tho s e p ro b l em s m at t ered
. Co m m en t s wi th th i s l ev el o f d et ai l an dd i s p u t e am o n g th e co m m en t ers wo ul ds eem
en o ug h t o co ncl u d e t h at Treas u ry h adb efo re i t“ s i g n i fi can t” co m m en t s . Su ch
co m m en t s d es erv e res p o n s es . W e tu rn o u r at t en t i o n t o Treas ury ’ s res p o n s e. B. Wh atwe h ear i s the ch i rp i n g o f cri ck et s . Th e Fi n al Ru l e’ s s t at em en to f b as i s an dp u rp os e s h o ws ab s o l u t el y n o
m en t i o n o f t h e ex t i n g u i s h m en t -p ro ceed s cl au s e atal l , m u ch l es s an y

m en ti o n o f th e p ro p o rt i o n at e-s h are o r i m p ro v em en t s p ro bl em s --an dn o reas o n ed res p on s e t o-9 6
-

an y o f t h e p ubl i c’ s co m

m en t s o n th o s e p ro v is i o n s . 9 Th e m ajo ri ty d o es n’ td en y th i s , s ee o p . Ct . p p . 2 3 -2 5 , an dwe aren ’ tev en th e fi rs t co u rtt o n o ti ce: In Kau fm an v . Sh u l m an , 6 8 7 F.3 d2 1 , 2 6 (1 s tCi r. 2 0 1 2 ), th e Fi rs t Ci rcu i t was fo rced t o g u es s atthe ap p aren tp u rp o s e o f t h e s ect i o n 1 .1 7 0 A -1 4 (g )(6 )(i i ), In co m e Tax Reg s., aft er n o t i n g t h ati t“ was u n ex p l ai n edwh en fi rs t p ro m u l g at ed .” Th i s m ak es th e d efi n i n g ch aract eri s t i c o f s ect i o n 1 .1 70 A-1 4(g )(6 )(i i ), In co m e Tax Reg s ., i t s u t t er l acko f an y co n tem po ran eo u s ex p l an at i o n o f i t s k ey ch o ices --t o req u i re t h atd o n ees g eta fract i o n , rat h er t h an an ab s o l u t e am o u n t , o f
ex t i n g u i s h m en tp ro ceed s an dt o req u ire t h atth ey g et a s h are o f an y

p ro ceed s fro m a d o n o r’ s i m

p ro v em en t s t o th e p ro pert y . Th ere i s n o p refi g u ri n g o f t h es e ch o i ces i n the l eg i s l at i v e h i s t o ry

o r t h e n o t i ce o f p ro po s edru l em ak i n g , an dn o ex p l an at i o n
o f t h em i n th e Fi n al Ru l e. HadTreas u ry res po n d edi n an y

m ean i n g fu l way

t o th e
co m m en t s th ati trecei v ed , s u ch as th o s e fro m th e NYLC, n ei th er d o n o rs an d d o n ees , n o r co u rt s , s ee, e.g ., Oak b ro o k , T.C. M em o . 2 02 0 -5 4 , at * 2 0 -* 2 8 (h i g h l i g h t i n g th e co n fu s in g n atu re o f s ect i on 1 .1 7 0 A-1 4 (g )(6 ), In co m e Tax Reg s .,

9 Atl eas to ne co m

m en t er h adal s o n o t i cedth atth e p ro p o sedreg u l at i o n m i g h tcau s e s p eci al p ro b l em s fo r co n s erv at io n eas em en t s ai m ed atp res erv i n g b u i l d i n g facad es . Th e Ph i l ad el p h i a Hi s t o ri c Pres erv at i o n Co rp o rat i o n arg u edth at “ [t ] h e p ro v i s i o n s rel at i n g t o ex t i n g u i sh m en to f eas em en t s * * * are a b i tp erp l ex i n g an d * * * u n reas o n ab l e as ap pl i edt o facad e eas em en t s .” Res p on s e t o Ord er at7 7 0
. Treas u ry

d i dn ’ tres po n dt o th i s co m m en t ei th er.-9 7
-

an d at t em p t i n g t o d i s cern i t s m ean i n g ), n o r th e IRS, co m p are Pri v . Ltr. Ru l
. 2 0 0 8 3 6 0 14 (Sep t . 5 , 2 0 0 8 ) (s t at i n g th atth e reg u l at i o n i sn ’ tv i o l at edb y a
co n serv at i on eas em en ti n wh i ch a d o n ee recei v es o n l y p ro ceed s l es s an y

am o u n t at tri b u t ab l e t o an i m

p ro v em en t ), wi th Oak

bro o k , T.C. M em o . 2 0 20 -5 4 , at* 3 6 (ad dres s i n g t h e IRS’ s arg u m en tth ata co n s erv at i o n eas em en ti n wh i ch a d o n ee recei v es o n l y

p ro ceed s l es s an y

am o u n tat tri b ut ab l e t o an i m p ro v em en ti s a
v i o l at i o n o f t h e reg u l at i on ), wo u l d h av e t o g rap pl e wi th wh et h er “ p ro p o rt i o n at e
v al u e” es t ab li s hes a fract i o n o r a fi x ed v al u e, o r wh et h er a d on ee i s en ti t l edt o an y
ex t i n g u i s h m en tp ro ceed s at tri b u t ab l e t o th e v al ue o f i m p ro v em en t s o r ri s i n g l an d
v al u es . Su ch wi d es p readi n du st ry co n fu s i o n i s p reci sel y wh atAPA s ect i o n 5 5 3 i s i n t en d edt o av o i d . So wh il e we d o n ’ td em an da p erfect ex p l an at i o n fo r Treas u ry ’ s d eci s i o n m ak i n g , s ee Bo wm an Tran s p ., 4 1 9 U.S. at2 8 6, we s h o ul dd em an d s o m e,
s ee En ci n o M o t o rcars , 5 7 9 U.S. at_ _ , 1 3 6 S. Ct . at2 1 2 5. An dh ere, t h ere was n’ t
an y .-9 8
- C. Bu tth e m ajo ri ty

wo u l dl etth e reg u l at i o n s t an dd es p it e th is s i l en ce. It arg u es i n turn th at : ! Treas u ry di dn ’ tn eedt o res po n dt o th es e co m m en t s b ecau se t h e s t at em en to f b as i s an dp u rp o s e m ad e o b v i o u s wh ati twas d oi n g , s ee o p . Ct . p p . 2 3 -2 4 ; ! ev en i f Treas u ry

was n ’ to b v io u s i n wh ati twas d o i n g , i t d ids ay i t co n s i d ered“ al l co m

m en t s ” an dth at ’ s g o o den o u gh , s ee i d . p . 2 0 ; an d
! ev en i f i td i dn ’ ts ay th at i tco n s i d ered“ al l co m m en ts ” i td idm ak e s o m e ch an g es t o th e p ro p os edreg u l at i o n fro m wh i ch we can i n fer i t s res p o n s e t o th em , s ee i d . p . 2 1
. Let ’ s l o o kateach p o i n t . 1
. Th e m ajo ri ty

arg u es th atTreas u ry d id n ’ tn eedt o res po n dt o co m m en t s reg ard i n g s ect i o n 1 .1 70 A-1 4(g )(6 )(i i ). In fact , i th ad “ n o d o ub t ” t h atTreas u ry
co n si d eredth e rel ev an t m at t er--t h e ag en cy h adres p o n dedt o m o s to f t he co m m en t s th ati trecei v edo n o th er p art s o f t h e ru lem ak i n g , an dn o ag en cy h as t o ad dres s al l th e co m m en t s i trecei v es . See o p . Ct . p p . 2 3 -2 4
. I ad dres s th i s arg u m en t
s o m ewh ati n rev ers e. Th ere are cas es th ats ay th at n o tev ery

co m m en th as t o b e ad dres s ed --h ow co ul d i tb e o th erwi s e wh enth ere are s o m e ru l es th atrecei v e m o re-9 9
-

th an o ne m i l l i on co m

m en t s ? 1 0 See Cl ean W at er Ru l e: Defi n i t i o n o f “ W at ers o f th e Un i t edSt at es ,” 8 0 Fed . Reg . 3 7 0 57 (J u n e 2 9 , 2 0 15 ). 1 1 In the m o d ern era, ag en ci es can recei v e co m m en t s o v er t h e i n t ern etan dru n d edup l i cat i n g s oft ware t o
m ak e t h ei r jo b s eas ier. See Perm an en tSub co m m i t t ee o n In v es t ig at io n s, Co m m i t t ee o n Ho m el an dSecu ri t y an dGo v ern m en t al Affai rs , “ Ab u s es o f t h e Fed eral No t i ce-an d -Co m m en tRu l em ak i n g Pro ces s ” 1 3 -1 6 (Oct . 4 , 2 0 1 9 ). Th ey
can g ro up co m

m en ts th atare s im i l ar o r i d en t i cal , an dth ey can d i s t i ll co m

m en t s t o fai rl y p arap h ras e th e k ey

p o i n t s t h atth ey

m ak e. I th erefo re ag ree wi th th e m ajo ri t y th atn o co u rth as ev er co n s tru edth e APA t o req u ire a res po n s e t o ev ery co m m en t
s ep arat el y , an dthatco u rt s h av e co n s tru edth e APA t o req u i re an ag en cy ’ s
res p o n s e t o b e b as edo n t h e n atu re o f t he co m m en t s i th as recei v ed . See o p . Ct . p .

1 0 Co m p aredt o wh at th e EPA an dFCC recei ve, 7 0 0 p ag es o f ev en “ v o l u m i n o u s” co m

m en t ary fro m o n l y 9 0 co m m en t in g o rg an i zat i o n s , s ee o p. Ct
. p . 1 1, i s rat h er s m al l
. Ag en ci es freq u en t l y h av e t o d eal wi th m o re co m m en t ers an d m o re p ag es o f co m

m en t s . See, e.g ., 8 4 Fed . Reg . 6 8 8 3 4 (Dec. 1 7 , 2 0 1 9) (recei v in g o ver 7 ,7 0 0 co m m en t s o n a p ro p o s edTreas u ry reg u l at io n d eal i n g wi t h s ect i on 1 6 2 , 1 64 , an d1 7 0 A); 8 4 Fed . Reg . 2 9 5 2 , 2 9 5 2 -5 3 (recei vi n g 3 3 5 co m m en t s rel at ed t o 1 9 9 A reg u l at i o n s ).
1 1 So m an y co m

m en t s can cras h an ag en cy ’ s web s i t e. See So ray a Nad i a M cDo n al d , “ J o hn Ol i v er’ s NetNeu tral i ty Ran tM ay

Hav e Cau s edFCC Si t e Cras h ”, W as h i ng t o n Po s t , J u n e 4 , 2 0 1 4 (d es cri b i n g h o w J oh n Ol i v er en co u rag ed h i s v i ewers t o co m

m en to n t h e FCC’ s p ro po s edn et -n eu tral i ty ru l e an dth e s y s t em s ub s equ en t l y

s t o p pedwo rk i n g b ecau s e o f m o re t han 4 5 ,0 0 0 n ew co m m en t s th at cam e i n ).-1 0 0-

2 4 ; s ee al s o Rey tb l at t , 1 0 5 F.3 dat7 2 2 (qu o t i n g Act i o n o n Sm o k in g an d Heal th v . CAB, 6 9 9 F.2 d 1 2 0 9 , 1 2 1 6 (D.C. Ci r. 1 9 83 )). Bu tth e an al y s is s h ou l dn ’ ts t o p th ere--wh ati s th e na t ur e o f a co m m en tth at tri g g ers an ag en cy ’ s o bl i g at i on t o res p o n d ? Th e cas el aw t el l s u s t o l o o k ata
co m m en t ’ s s i gn i f ica n ce . Ag en ci es m

u s t “ g i v e reas o n edres po n ses t o a l l
s i gn i f ica nt co mmen t s i n a ru l em ak i n g p ro ceed in g.” PPG In du s ., 6 30 F.2 d at4 6 6 (em p h as i s ad ded ); s ee al s o Perez, 5 7 5 U.S. at 9 6 (“ Anag en cy m u s tco n s i d er an d
res p o n d t o s i

gn i fi ca n t co mmen t s recei v eddu ri n g th e p eri o dfo r p ub l i c co m m en t .” (em p h as i s ad ded )); In t ers t at e Nat . Gas As s ’ n o f Am . v . FERC, 4 94 F.3 d 1 0 9 2 , 1 0 9 6 (D.C. Ci r. 2 0 0 7 ) (ag en ci es m u s t“ g i v e reas o n edres p o n s es t o a l l s i gn i f i ca n t
co mmen t s ” (em p h as i s ad ded )). Th i s i s b ecau s e “ the o p p o rtu n i ty t o co m m en ti s
m ean i n g l es s u n les s th e ag en cy res p o n d s t o s i

gn i f i ca n t p o i n t s rai sedb y

th e p ub li c.” Ho m e Bo x Offi ce, In c. v . FCC, 5 6 7 F.2 d9 , 3 5 -3 6 (D.C. Ci r. 1 9 7 7 ) (em p h as i s ad d ed ) (ci t i n g Po rt lan dCem en tAs s ’ n v . Ru ck el s h au s , 4 8 6 F.2 d3 7 5 , 3 9 3 -9 4 (D.C. Ci r. 1 9 73 )); s ee al s o No v a Sco t i a, 5 6 8 F.2 dat2 5 2 (“ Iti s n o ti n k eep i n g wi th th e rat i o nal p ro ces s [o f APA s ect i o n 5 5 3 (c)] t o l eav e v i t al qu es t i on s , rai s edb y
co m m en t s wh i ch are o f co g en tm at eri al i ty , co m p let el y u n an s wered ”). So , th o u gh
an ag en cy

d oes n ’ th av e t o res p o n dt o al l co m m en ts , i tm

u s t res p o n dt o al l
s i gn i f ica nt co m m en t s .-1 0 1-

Th i s m ak es i ti m

p o rt an tt o fi g u re o u t wh i ch co m m en t s are “ s i g n i fi can t ” an d wh i ch are n o t . Th e m ajo ri ty d oes n ’ tev en ad dres s wh et h er th e co m m en t s h ere are
s i gn i fi can t . 1 2 Bu ti ti m

p l i es th atth e o n l y

co m m en t s thatare s i g n i fi can tare t h o s e th at“ s u g ges t al t ern at i v e t ex t .” See o p . Ct
. p p . 1 3 -1 4, 2 2 n . 3 . Itg i v es n o ci t e fo r th i s , n o r co u l di t d o s o , b ecau s e t h ere i s n o ta p reci s e d efi n i t i o n i n th e
cas el aw--rat h er t h ere are t h em es . On e i s th at an ag en cy

s h o u l dad dres s wh y

i treject edp ro ffered al tern at i v es . See In d ep . U.S. Tan k er Own ers Co m m . v . Do l e, 8 0 9 F.2 d8 4 7, 8 5 2 (D.C. Ci r. 1 9 8 7 ) (s t at i n g th atth e Secret ary fai l edt o ad dres s wh y

al t ern at i v e m eas ures were reject ed ); No va Sco t ia, 5 6 8 F.2 dat2 5 3 (“ Th o u g h th i s al t ern at i v e was s u g g es t ed b y an ag en cy

o f t h e fed eral g o v ern m en t , i t s s ug g es t i o n, tho ugh a ckn o wl ed g ed , was
n ev er an swered ” (em

p has i s ad d ed )).

1 2 Th e m ajo ri ty

fo cu s es i n s t eado n wh ether Treas u ry co n s id eredrel ev an t m at t er (wh ich the m ajo ri ty h as “ n o d o ub t ” t h ati td i d ) an dwh et h er t h e b as i s an d p u rp os e i s o b v i o u s . See o p . Ct . p p . 2 3 -2 4 . To s up p o rtthi s p ro p o s i t i o n th e m ajo ri ty ci t es Cal -Al m o n d, In c v . U.S. Dep t . Of Ag ri c., 1 4 F.3 d4 2 9 , 4 4 3 (9 th Ci r. 1 9 9 3 ). See o p . Ct . p . 2 4
. InCal -Al m o n d, h o wev er, t h e ag en cy h adal t o g et h er i g n o redn o t i ce-an d -co m

m en t p ro cedu res ; th e qu es ti o n was wh et her t h i s fai l u re was h arm l es s erro r. Cal -Al m o n d , 1 4 F.3 d at4 4 1
. Th ere was n ’ tev en a p ro p o s ed ru l e t o co m

m en to n --i n t eres t edp art i es h adth e o pp o rtu n i ty t o s ub m i ti np uto n l y o ral l y atan o pen b o ardm eet i n g . See 4 5 Fed . Reg . 5 6 7 9 5 (Au g . 2 6 , 1 9 8 0). Th ere i s n o th i n g i n thato pi ni o n ab o u th o w t o g au g e wh et h er a co m m en twas s i g n i fi can t an d wh et h er t h e ag en cy ’ s res p on s e wh en i t i s s uedi t s fi nal ru l e was ad equ at e.-1 0 2-

An o th er t h em e i s th ati ti s n otrat i o n al t o “ l eav e v i tal qu es t i o ns , rai s edb y
co m m en t s wh i ch are o f co g en tm at eri al i ty , co m p let el y u n an s wered .” No v a Sco ti a, 5 6 8 F.2 dat2 5 2 . I ag ree t h at “ [w] e d o n otex p ectth e ag en cy t o d i s cu s s ev ery

i t em
o f fact o r o p in io n i ncl u d edi n th e s ub m i s s io n s m ad e t o i t i n i n fo rm al ru lem ak i n g .” Id . (qu o ti n g Au t o . Part s & Acces s o ri es As s ’ n , In c. v . Bo y d, 4 0 7 F.2 d3 3 0 , 3 3 8 (D.C. Ci r. 1 9 6 8 )). Bu t we s h o u l db e ab l e t o “ s ee wh atm ajo r i s s ues o f p o l icy were
v en ti l at edb y

th e i n fo rm al p ro ceed i n g s an dwh y the ag en cy

react ed t o th em

as i t d i d .” Id . (qu ot i n g Au t o. Part s , 4 0 7 F.2 dat 3 3 8 ). W e s h o u l db e ab l e t o s ee wh y Treas u ry “ [ch o s e] t o fo l l o w o n e co u rs e rat h er t h anan o th er.” See In du s . Un i o n Dep ’ t , AFL-CIO v . Ho d g s o n , 4 9 9 F.2 d4 6 7 , 4 7 5 (D.C. Ci r. 1 97 4 ). Si g n i fi can tco m

m en t s are al s o th o s e “ wh i ch , i f t ru e, rai s e p o i n t s rel ev an tt o th e ag en cy ’ s d eci s i o n an dwh i ch , i f ad o p t ed , wo u ldreq u i re a ch an g e i n an ag en cy ’ s p ro po s edru l e.” Ho m e Bo x Offi ce, 5 67 F.2 d at 3 5 n . 5 8 . Si g n ifi can t
co m m en t s are n otju s tth o s e t h ati n cl u d e d raft s o f al t ern at i ve reg u l at o ry l an g u ag e, b u tth o s e t h ati d en t i fy

a s p eci fi c an do b

ject i v e i s s u e creat edb y

th e l an gu ag e o f t h e p ro p os edru le an dg i ve s o m e ex p l an at i o n fo r wh y th atl an g u ag e i s tro ub l es o m e. Th i n k o f t h i s as th e wh at an dwh y t es t : (1 ) wh at

i s th e p ro bl em ; an d(2 ) wh yi s i ta p ro b lem ? A co m

m en ti s t h us m o re l i k el y

t o b e s i g n i fi can ti f t h e co m m en t er
s u g g es t s a rem edy

fo r t h e p u rp o rt edp ro b l em i ti d en ti fi es . In s i gn i fi can t co m m en t s,-1 0 3-

o n th e o th er h an d , are t h o se wh i ch are “ p u rel y s p ecu l at iv e an dd o n o t d i s cl o s e t h e fact ual o r p o l i cy

b as i s o n wh ich th ey

res t .” Id
. Inth e ab s en ce o f s i g n i fi can t
co m m en t s o r an ex p l ici tco ng res s i o n al d i rect i v e, t h ere i s n o req u i rem en tthat“ an ag en cy en g ag e i n an dd o cu m en tan ex h au s t i v e rev i ew o f h y p ot h et i cal ‘ as p ect [s ] o f th e p ro b l em .’ ” SIH Part n ers LLLP v . Co m m i ss i o ner, 1 5 0 T.C. 2 8 , 4 7 (2 0 1 8 ), aff’ d , 9 2 3 F.3 d2 9 6 (3 dCi r. 2 0 1 9 ); s ee al s o Th o m p s o n v . Cl ark , 7 4 1 F.2 d4 0 1 , 4 0 8 (D.C. Ci r. 1 9 8 4 ) (“ [APA s ect i o n 5 5 3 (c)] h as n ev er b een i n t erp ret edt o req u i re t he ag en cy t o res p o n dt o ev ery

co m m en t , o r t o an al y [z] e ev ery i s s u e o r al t ern at i v e rai s edb y th e co m m en t s , n o m at t er h o w i n s ub s t an t i al ”). Wh en i tcam e t o th e p ro po rt io n at e-s h are an d d on o r-i m p ro v em en t s i ss u es , th e Treas u ry

recei v ed sev eral co m

m en ts . Th e NYLC b el i ev edth atth e reg u l at i o n

“ co n t ai n[ed ] p ro b l em s o f p o l i cy an dp ract i cal ap p li cat i o n s o p erv as iv e as t o cau s e
u s t o reco m

m en d s tro n g l y

th e d el et i o n o f [t h e] p ro vi s i o n s .” Res p o n s e t o Ord er at 3 7 3 . Th e NYLC d i dn ’ t s to p t here, b u t rat h er i d en t i fi edfo u r s p eci fi c i n equ i t i es wi th th e p ro v i s i on : ! i two u l dd et er p ro s p ect iv e d o n ors fro m d on at i n g co n s erv at i o n eas em en t s , i d .; ! th e p ro v i s i o n i m

p ro p erl y as s u m edth at a co n s erv at i o n eas em en t rep res en t eda p o s i t i v e eco n om i c v al u e t o d on ees b as edo n the p os s i b i l i ty

th atth e d o n ees m i g h to n e d ay recei ve p ro ceed s fro m ex t in g u i s h m en t , i d . at 3 7 4 ;-1 0 4-

! th ere was a p ot en t i al co n fl i ctwi th th e p ro vi s i o n an d s tat e co n d em n at io n l aw, i d . at 3 7 5 ; an d
! th e rat i o fai l s t o t ak e i n t o acco u n ti m p ro v em en t s m ad e b y

th e o wn er aft er d on at i o n wh i ch s h o u l dal ter t h e rat io , i d. at 3 74
. TPL ag reedwi th th e NYLC--b el i ev i n g th atth e p ro vi si o n was an u n du e b u rd en o n d o n o rs i n l i g h to f t he t ax -b en efi tru l e an d th e rem o t e-fu tu re-ev en tru l e. Id . at8 4 4
. Bu t th ere were t h o s e t h atd i s ag reedwi th NYLC’ s p o i n t s , i n cl u d i n g th e Natu re Co n s erv an cy , th e M CHT, an dBran dywi n e Co n s erv an cy , In c.--feel i n g th atth e d o n ees s h o u l d b e en t i t l ed t o an y s ub s equ en ti n creas e i n v al u e at tri b u t ab l e t o
m ark etfo rces . 1 3 See i d . at5 1 1 , 5 7 9 , 5 9 3 . Bu t ev enth es e co m m en ters th ou g h tthe p ro v is i o n n eed edt o b e cl earer. Id
. As Oak b ro o kp o i nt s o u t , th ere were a n u m ber o f co m

m en t s o n t h e
ex t i n g u i s h m en t -p ro ceed s reg u l at i o n th atwere “ s i g ni fi can t ” u n der t h es e g u i d el i n es . Co m m en t ers d i dn ’ tju s ts ay , “ Del et e t h e reg ul at i o n , we d o n ’ tl i k e i t . ” Th ey wro t e i n t o p ro p o s e o th er al t ern at i v es t o ach i ev e t h e Co d e’ s req u irem en t th at th e
co n serv at i on p urp o s e o f a d o n at edeas em en t b e p res erv ed“ i n p erp etu i ty . ”

1 3 Th e m ajo ri ty

i n co rrect l y

as s ert s th ato n l y NYLC m en t i on edd o n o r i m p ro v em en t s . See o p . Ct . p . 1 3 . Bu tTPL, Natu re Co n s erv an cy , M CHT, an d Bran dywi n e Co n s erv an cy al so m en t i o n th em . See Res p on s e t o Ord er at 5 1 1 , 5 7 9 , 5 9 3 , 8 4 4
.-1 0 5-

Th es e al t ern at i v es i n cl ud edrel i an ce o n th e co m m o n -l aw d o ct ri n es o f ch an gedco n d i ti o n s t o d eal wi th th e rem o te co nt in g en cy o f co nd em

nat i on o r ju d i ci al ex t i ng u i s h m en t . An o th er co m m en t p ro p o s edrel ian ce o n th e t ax -b en efi t
ru l e o r t he rem o te-fu tu re-ev en tru l e i n s teado f t he ch al l en g edreg ul at i o n . So m e p o i n t edo u tth atthe p ro p o rt i o n at e-v al u e ru l e m i g hto v erco m p en s at e d on ees an d d i s co u rag e d o nat i o n s, wh i ch m i g h tb e t h o u g h to f as co n traryt o th e ev i d en tp o l i cy
o f s ect i o n 1 7 0A t o en co u rag e d o n at i o n s o f g en u i n e co n s erv at i o n eas em en t s . Th e NYLC tho u g htth atreq u i ri n g t h e co s to f i m p ro v em en t s t o b e i g n o red i n s p l i t t i n g
up p ro ceed s wo u l dl eadt o a wi n d fal l t o d o n ees . Th e m ajo ri ty

s eem s t o co n cl u d e th atth es e co m m en t s were n o t

s i g n i fi can t i n th e s p eci fi c s en s e i n wh i ch th e cas el aw d efi n es th e co n cep t : A co m m en t“ wh i ch , i f t ru e, rai s e p oi nt s rel ev an t t o th e ag en cy ’ s d eci s i o n an dwh i ch , i f ad o p ted , wo u l d req u i re a ch an g e i n an ag en cy ’ s p ro po s ed ru l e * * * .” Ho m e Bo x Offi ce, 5 6 7 F.2 d at3 5 n . 5 8 . Lo o k in g atth e co m m en t s o ffered h ere--wh i ch i d en t i fi ed i neq u i t i es wi th th e reg u l at i o n , s u g g es t edal t ern at i v es , i d en t i fi edp o ten t ial n eg at i v e effect s o n th e wi l l i n g n es s o f d o n o rs t o m ak e d o n at io n s, u n co vered p o t en t i al co n fl i ct s wi th
s t at e l aw, an ds i m

p l y as k edfo r m o re cl ari ty --t h i s i s a b ewi l d eri n g co n cl u s i o n . Un d er t h e cas el aw, the co m m en t s m ad e were s i g ni fi can tan d are en t i tl edt o an ag en cy res p o ns e.-1 0 6-

Th e m ajo ri ty

th o u g h s ay s n o s weat --ev en i f t h es e co m m en t s are s i g n i fi can t , Treas u ry d idres p o n dt o th em

b y s t at in g i n th e p ream

b le t h ati tco n s i d ered“ al l
co m m en t s ” an d b y

m ak i n g ch an g es t o th e p ro po s edreg u l at i o n.

2
. Befo re d et erm i n i n g wh et h er t h e ag en cy ’ s res po n s e h ere was ad equ at e, o ne
m u stfi rs t l o o kt o cas el aw t o d et erm i n e wh atan ad equ at e res p on s e ev en l o o k s l i k e. Gen eral l y , th e p oi n to f t h e APA’ s p ro cedu ral ru l es fo r n o t i ce-an d -co m m en tru l em ak i n g i s t o en s u re t hat“ th ere [] b e an ex ch an g e o f v i ews , i n fo rm at i o n, an d cri t i ci s m b et ween i n t eres t edp ers o n s an d th e ag en cy .” Ho m e Bo x Offi ce, 5 6 7 F.2 d at3 5 . Th e n o t i ce-an d -co m m en tp ro cedu re p ro m o t es th e qu al i ty o f ag en cy

ru l es
an d “ en s u re[s ] fai r t reat m en tfo r p ers o n s t o b e affect edb y ” t h em . Di s m as Ch ari t i es , In c. v . U.S. Dep ’ to f J u s t i ce, 4 01 F.3 d 6 6 6 , 6 7 8 (6 th Ci r. 2 0 05 ); s ee al so Un i ted St at es v . Cai n , 5 8 3 F.3 d4 0 8 , 4 2 0 (6 th Ci r. 2 00 9 ). It al s o p ro v i des co u rt s wi th a m ean in g fu l o p p o rtu n i ty t o “ s ee wh atm ajo r i s s u es o f p o l i cy were v en t i l at ed b y th e i n fo rm al p ro ceed i n g s an dwh y th e ag en cy react edt o th em as i td i d .” Si m m s , 4 5 F.3 d at1 0 0 5 (qu o t i n g Au t o . Part s , 4 0 7 F.2 d at3 3 8 ). Th i s i s wh y

i n Do m i n i on Res o u rces , In c. v . Un i tedSt at es , 6 8 1 F.3 d1 3 1 3 , 1 3 1 9 (Fed . Ci r. 2 0 1 2 ), rev ’ g 9 7 Fed . Cl . 2 3 9 (2 0 1 1), Treas ury ’ s ex p l i ci ts t at em en t th ati treject edthe co m

m en t at o rs ’ reco m

m en d at io n an db ri ef ex p l an at i o n i n-1 0 7-

g en eral t erm s o f h o wo n e o f t h e p ro v i s i o n s wo rk edwas n ’ ten o u gh . Do m i n i o n Res ou rces rev i ewedth e p ro m ul g at i o n o f Treas u ry

reg u l at i o n s ect io n 1
. 2 6 3 A1 1 (e)(1 )(i i )(B). 1 4 Th i s reg u l at io n g o v ern edh o w m u ch i n t eres tex p en se a
co rp o rat i o n h adt o cap i t al i ze--i n s t eado f d edu ct --wh en i tb o rro wedm o n ey t o i m p ro v e real p ro p erty . Wh atm ad e i tco nt ro v ers i al was thati t req u i redth e cap i t al i zat io n o f i n t eres ti n cu rredt o p ay n o to n ly th e co s to f an i m

pro v em en tt o real p ro p ert y , b u to f t h e i n t eres ti n cu rredo n th e en ti re b as i s o f t h e p ro p ert y b ei n g i m p ro v edwh i l e i twas o ffl i n e t o ad dth e i m p ro v em en t . See T.D. 8 5 8 4 , 1 9 9 5 -1 C.B. 2 0 , 2 6 . A u t i l i ty

co m p an y ch al l en ged i t s v al id i ty i n Do m i n io n Res o u rces , 9 7 Fed
. Cl
. 2 3 9
. Li k e t he reg u l at io n h ere, t h e ch al len g ed reg u lat i on i n Do m i n i o n Res o u rces
was p arto f a v ery

l arg e p ro jectt o i m p l em en t a n ew p arto f t h e 1 9 8 6 Co d e. As h ere, t h ere h adb een co m m en t s o n th e en t i re reg u l at i o n, as wel l as th e s peci fi c p art
o f i tth atwas u n d er at t ack . See Do m i n i o n Res ., 9 7 Fed . Cl . at2 55 -5 6 . Un l i k e i ts

1 4 Fi n d in g o th er p ro cedu ral ch al l en ges t o Treas ury reg u l at io n s m ay

p ro v e d i ffi cu l t --i twas n ’ t un t i l 2 0 1 1 th atth e Sup rem e Co u rtd efi n it i vel y p ro n o u n cedth at “ we are n o ti n cl in edt o carv e o u tan ap p ro ach t o ad m in i s trat i ve rev i ew g o o dfo r t ax l aw o n l y . To th e co nt rary , we h av e ex p res s l y ‘ [r] eco g n i z[ed ] the i m

p o rt an ce o f m ai n t ai n i n g a u n i fo rm

ap p ro ach t o ju d i ci al rev i ew o f ad m i n i s trat iv e act io n .’ ” M ay o Fo u nd ., 5 6 2 U.S. at5 5 (qu o t i n g Di ck i n s o n , 5 2 7 U.S. at1 54 ). Th e m ajo ri ty th o u g h co n fi n es i t s d i s cu s s i o n o f t h e m o s trel ev an tci rcu i t -co u rtcas e t h atan al y zes h o w a Treas u ry reg u l at i o n can b e p ro cedu ral l y d efect iv e t o a fo o tn ot e. See o p . Ct
. p . 2 5 n .4
.-1 0 8-

s i len ce h ere, Treas u ry ’ s res p o n s e t o t h e co m m en ts th ati t ’ drecei v edo n th e
as s o ci at ed -p ro p erty

ru l e ati s s u e i n Do m i n i o n Res ou rces were l es s l aco n i c. 1 5 It
s u m m ari zedth o s e co m

m en t s i n th e p ream

b l e t o th e fi n al reg u l at i o n , an d i tev en
ex p lai n edh o w the ch al l en g edp arto f t he reg ul at i o n wo u l d wo rk , al th o u g h th e p ream bl e d i d “ n otex p lai n wh y

th e co m m en t at o rs ’ s u g g es ti o n was reject ed .” Id
. at2 5 6
. Th e co m p an y p o i n tedth i s o u t --“ D o m i n io n co n t en d s t hatTreas u ry ‘ fai l ed t o p ro v id e an y

ex p l an at i o n o f t h e reas o n i ng th at l edi t t o ad o p tth e as s oci at ed
p ro p erty ru l e.’ ” Id
. at 2 5 8 . Th e t ri al co u rtn ev erth el es s up h el dth e ru l e, b ecau s e Treas u ry s eem edt o h av e m ad e s o m e ch an g es t o i ts t ex ti n res p o n s e t o the
co m m en t s , i d . at2 5 9 ; an dTreas u ry , aft er s u m m ari zi n g s om e o f t he co m m en t s , d i d
s t at e “ [t ] h e fi n al reg ul at i o n s d o n o tad o p tth e s ug g es t i o n,” i d . at2 5 6 . As th atco u rt
reas on ed , “ l acko f ex act itu d e an dth e en s u in g co n fu s i o n d o n o ts i g ni fy th at Treas u ry act edt o es tab l i s h t h e fi n al ru l e i n an arb i traryan d cap ri ci o u s m an n er.

1 5 Th i s ru l e h adth e s h o rt h an dn am e o f th e “ as s o ci at ed -p ro p ert y ru l e” b ecau s e i tg o v ern edi n t eres tcap i t al i zat i o n o n th e p ro pert y as s oci at edwi th an i m p ro v em en tth atn eed edt o b e t ak en o u to f s erv i ce wh i l e t h e i m p ro v em en twas m ad e. See Do m i ni on Res ., 9 7 Fed . Cl . at2 40 (s t at i n g th e i ss ue o f t he cas e req u i redan al y s i s o f “ th e Treas u ry Dep art m en t ’ s as s o ci at ed -p ro p ert y ru l e fo r cap i t al i zi n g i n teres to n a t ax pay er’ s i n s t al lat i on o r co ns tru ct i o n o f i m pro v em en ts o r ad d it i o n s t o p ro p ert y u s edt o g en erat e i n co m e. Th e as s o ci at ed -p ro p ert y ru l e rel at es t o p ro p ert y

t em p o rari l y rem o v edfro m

s erv i ce i n co n n ect i o n wi th i n s t al l at i on o r ad d i ti o n o f an i m p ro vem en t* * * .”)-1 0 9-

Th e ‘ p at h ’ th atTreas u ry was t ak i n g i n th e ru l em ak i n g p ro ceed i n g s can b e

‘ di s cern ed ,’ al b ei t s o m ewh atm u rk i l y .” Id . at2 5 9
. An d th en th e cas e was ap p eal ed
. Th e Fed eral Ci rcu i trev ers ed . It was n o t en o u g h fo r Treas u ry t o m en t i o n o r p arap h ras e t he co m

m en t s thati trecei v ed , s ee T.D. 8 5 8 4 , 1 9 9 5 -1 C.B. 2 0 , 2 6 (s u m m ari zi n g p o t en ti al i s s u es an dal t ern at i v es rai s edb y th e co m m en ts ); an di twas
n o ten ou g h t o p ro v i d e g en eral s t at em en t s th ata reg ul at io n was i n t en d edt o i m p l em en ta p art i cu l ar Co d e s ect i o n o r u s e a p art i cu l ar m etho d , s ee i d . at2 1 (s t at i n g reg u l at i o n d es i g n edt o redu ce co m p l ex it y wi th o u t u nd erm i n i ng th e Co d e p ro v is i o n ). See Do m i n i o n Res ., 6 8 1 F.3 d at1 3 1 9 . Th e p ro b l em wi th th e reg u l at i o n was thata s tat em en t th atTreas u ry h ad reject eda co m

m en t, o r p ro v i d ed
an ex pl an at i o n o f h o wth e reg u l at i o n wo u l dwo rk , i s n o tth e s am e as g i v i n g
r ea s o n s fo r reject i n g a co m m en to r ch o o s i ng wh y t o m ak e t he reg ul at i o n wo rko n e way i n s t eado f an o th er. It ’ s n o t“ reas on edd eci s io n m ak i n g ” wi th ou treas o n s . See i d . (fi n di n g th atth e ag en cy fai l edt o ex p l ai n th e rat i o nal co n n ect i on b et ween th e fact s an dch o i ces m ad e d es p i t e s t at em en t s th at i th adreject edco m m en t s , s ee T.D. 8 5 8 4 , 1 9 9 5 -1 C.B. at2 7 , an dfai l edt o ex pl ai n h ow t h e reg u l at i o n wo rk ed , s ee i d
. at2 6 ). “ Anag en cy

m u s tco g en t l y

ex p l ai n wh y i th as ex erci s edi t s d i s cret i o n i n a g i v en m an n er.” Do m i n i o n Res ., 6 81 F.3 dat1 31 9 (qu o ti ng St at e Farm , 4 63 U.S.-1 1 0-

at4 8 ). J u d g e Cl ev en g er s u m m ari zedthe p ro b l em

m o re p it h i l y

i n h i s co n cu rren ce, wh ere h e wro t e t h at“ th e g o v ern m en th as n o t art i cu l at edan y rat i o n al ex p l an at i o n fo r m an y d et ai l s o f t h e reg u l at i o n b efo re u s , fro m th e reg u l at i o n ’ s fi rs t p ro p o s al i n th e m i d -‘ 9 0s up t o th e cu rren t d at e. Su ch a fai l u re m ak es th e reg u l at i o n p ro cedural ly

u n l awfu l .” Id . at1 3 2 0 (Cl ev en g er, J ., co ncu rri n g ). 1 6 Oak b ro ok ’ s arg u m en ti n th i s cas e i s s tro ng er--Treas u ry d i dn ’ t ev en ack n owl ed ge t h e rel ev an t co m m en t s o r ex p res s ly

s t at e i t s d i s ag reem en twi th th em . In s t eadi tju s t i g n oredth em . Th ere i s n o tev en “ a m i n i m al l ev el o f an al y s i s ,” as th e Suprem e Co u rt , ju sta co up l e y ears ag o, i ns i s t ed an ag en cy m u s ts h o w i f i t h o p es t o av o i di t s reg u l at io n’ s b ei ng h el d p ro cedu ral l y i n v al i d . En ci n o M o t o rcars , 5 7 9 U.S. at_

_, 1 3 6 S. Ct . at 21 2 0
. No v a Sco t i a al s o s h o ws wh ats h o u ldh ap p en wh en an ag en cy d o es n ’ t
co n si d er s i g n i fi can tco m

m en t s . 1 7 Th ere, t he co u rtfo u n d n o co n ci s e g en eral

1 6 Th e m ajo ri ty

m i s read s Do m i n io n Res o u rces t o ap p l y o n l y t o reg u l at i o n s th atare i n co n si s ten twi th s t atu t o ry t ex t. See o p . Ct . p . 2 5 n .4 . No ts o --a reg u l at i o n th ati s co n traryt o th e t ex to f a s t atu t e i s i n v al i das “ no ti n acco rd an ce wi th l aw.” APA s ec. 7 0 6 (2 )(A). Treas ury ’ s fai l u re t o fo l l o w th e APA’ s p ro cedural req u i rem en ts was an i n d ep en d en t , al t ern at i v e reas o n fo r i n val i dat i n g th e reg u l at i o n . See Do m i ni o n Res ., 6 8 1 F.3 dat1 3 1 9
.

1 7 In No va Sco t i a, the ag en cy was res p o n d i n g t o s ev eral cas es o f b otu l i s m i n fi sh . Th e ch al len g edreg u l at i o ns req u i redth e fi s h t o b e co ok ed ata cert ai n t em p erat u re, fo r a cert ai n t i m e, an di n b ri n e o f a cert ai n p ercen t ag e o f s al i ni ty . (co n ti n u ed ...)-1 1 1-

s t at em en to f wh y

i twas n eces s ary

th atthe reg ul at io n ap p l y t o al l s p eci es o f fi s h
an d wh y th e reg ul at i o n was n eces saryev enth o ug h i t was co m m erci al l y i n feas i b l e fo r s o m e fi s heri es . No v a Sco t ia, 5 6 8 F.2 d at2 5 3 . Th e co u rtp o i n t edo u tth atth e Treas u ry fai l edt o ad dres s s ug g es t edal t ern at i v es an d was s i l en tab o u tthe
co m m en t s th atas s ert edth e p ro p o s edreg u l at i on s were eco n o m i cal ly i n feas i b l e. Id
. Bu twh at i s m o re i ll u m i n at i n g i s wh atth e ag en cy i n No v a Sco t i a d i dd o . Th e ag en cy

d i dm ak e m in o r ch an g es fro m th e p ro p os edreg u l at io n t o th e fi n al reg u l at i o n t o ad dres s s o m e co m m en t s recei v ed
. Id . at2 4 4 . Th e ag en cy d idas s u re th e read er o f t h e p ream

b l e t h ati th ad co n s i d eredthe co m m en t s th at i trecei v ed . 3 5 Fed
. Reg . 1 7 4 0 1 (No v . 1 3 , 1 97 0 ). Th e ag en cy d i d s umm ari ze t h o s e co m m en t s . It
ev en gav e a g en eral reas o n --t h atth e reg u l at i o n req u i redfo r al l fi s h t h e s afes t kn o wn p ro cedure t o prev en tb o tu l i s m . 1 8 Id
.

1 7 (...co n t i nu ed ) No v a Sco t i a, 5 6 8 F.2 d at2 4 3 -4 4
.

1 8 Th e p ream

bl e act u al l y

h ada fai r am o u nto f d et ai l : Cu rren t g o o d m an u fact u ri n g p ract i ce (s an i t at i o n ) i n m an u factu re, p ro ces s i n g , p ack i n g , o r h o ld i n g o f s m o k edan d s m o k e-fl av o redfi s h fo r h u m an fo o d
. In th e FEDERAL REGISTER o f Oct o b er 2 3 , 1 9 6 9 (3 4 F.R. 1 7 1 7 6 ), th e Co m

m i s si o n er o f Fo o dan dDru gs p ro p os edreg u l at i o n s (Sub p artA, Part 1 2 8 a) co v eri n g cu rren tg o o d m an u fact u ri n g p ract i ce (s an it at i o n) i n th e m an u factu re, p ro ces s i n g , p ack i n g , o r h o l d i ng o f (co n ti n u ed ...)-1 1 2-

Bu tth o s e ch an g es an ds ev eral s h o rtp arag rap h s o f ex p l an at i o n were n o t
en o ug h i n No va Sco t i a. 1 9 An d i n Oak b ro o kwe d o n ’ tg et s ev eral s ho rtp arag rap h s ,

1 8 (...co n t i nu ed ) s m o k ed fi sh . Inres p o n s e, co m m en t s were recei v edfro m two trad e as s o ci at i o ns , ei g h tm an u fact u rers , an dthe Bu reauo f Co m m erci al Fi s h eri es , Dep art m en to f In t eri o r. Th e co m m en t s i ncl u d e o p p o s i t i o n t o cert ai n req u i rem en t s an ds u g g es t i o n s fo r cl ari fy i n g an dt ech n i cal ch an g es . Th e p ri n ci p al o b

ject i o n i s thatth e p ro ces s req u irem en ts i n th e p ro p o s ed reg u l at i on s can n o tb e ap p l i edt o al l s p eci es o f fi s h p res en t l y b ei n g s m o k edb y

th e i n du s try

an dth at th e reg u l at i on s s ho u l d th erefo re s p eci fy

t i m e-t em p erat u re req u irem en t s , as d ev el op edb y res earch an ds tu dy , o n a s peci es -b y -s p eci es b as i s . Th e Co m m is s i o n er fi n d s : (1 ) Th atal th o u g h ad equ at e t im es , t em p erat u res , an d s al tco n cen trat i o n s h av e n o tb een d em o n s trat edfo r each i nd i v i du al s p eci es o f fi s h p res en t l y s m o k ed , the p ro ces s i n g req u irem en ts o f t h e p ro p o s edreg u l at i o n s are t h e s afes tn o w kn o wn t o p rev en tthe o u t g ro wth an dt o x in fo rm at i o n o f C. b o tu l i n u m Ty p e E; an d(2 ) t h ats i n ce t h e p ubl i c h eal th h azard o f C. b o tu l in u m Ty p e E i n s m o k ed fi sh i s n o tres tri ct edt o a s i n g l e s p eci es o f fi s h, the co n di t i o n s o f cu rren t g o o dm an u fact u ri n g p ract i ce fo r th i s i n du s try s h ou l db e es t ab l i sh edwi th o utfu rt h er d el ay . Th erefo re, h av in g co n s i d ered th e co m m en t s recei v edan do th er rel ev an tm at eri al , the Co m m i s s i o n er co n cl u d es thatth e p ro p os ed reg u lat i o n s , wi th m o s to f t h e s u g g es t edcl ari fy i n g an dt ech n i cal ch an g es i n co rp o rat ed , s ho u l db e ad op t ed as s et fo rt h b el o w. Acco rd i ng l y , p u rs u an tt o p ro v i s i o n s o f t he Fed eral Fo o d , Dru g , an d Co s m et ic Act * * * th e fo l l o wi n g n ew Sub p artA i s ad d ed* * *
. 3 5 Fed . Reg . 1 7 40 1 , 1 7 4 0 1 (No v . 1 3 , 1 97 0 ).

1 9 Th e m ajo ri ty

read s i n to No v a Sco t i a a p h an to m l i m it at io n o f i t s h o l d i n g t o wh ati tcal l s “ s ci en ti fi c d eci s i o n ” reg u l at i on s . See o p . Ct
. p . 2 2 n .3 . Bu t the Seco n dCi rcu i t i n v al i d at edth e reg u l at i o n ati s s u e o n t wo s ep arat e g ro u n d s . On l y (co n ti n u ed ...)-1 1 3-

we d o n ’ t g etev en o n e s h o rtp arag rap h --we g et b u p kis . Th e IRS i g n o red
co m m en t s th atqu es t i o n edth e p ract i cal ap p li cat i o n o f t h e reg u l at i o n , i t s cl ari ty , an d s peci al p ro b l em s i t wo u l d cau s e s o m e d o n ors . I ag ree t h ats ect i o n 5 5 3 (c) d o es n’ treq u ire an en cy cl op ed i a, b u ti th as t o req u i re m o re t h an n o th i ng ; an d i g n o ri n g co m

m en t s i n th e p ream

b l e i s n o tres p o nd i n g t o th em . As J u dg e Gu rfei n
wro te i n No v a Sco t i a, 5 8 6 F.2 dat2 5 2 , “ [t ] h e ag en ci es cert ai n l y h av e a g o o dd eal
o f d i s cret i o n i n ex p res s i ng th e b as i s o f a ru l e, b u t th e ag en ci es d o n oth av e qu i t e th e p rero g at iv e o f o b scu ran ti s m res erv ed t o l eg i s l atu res .”

1 9 (...co n t i nu ed ) th e fi rs twas th at“ [w] h en the b as i s fo r a p ro p o s edru le i s a s ci en t i f i c d ecis i o n , th e s ci en t i fi c m at eri al wh i ch i s b el i ev edt o s up p o rtth e ru l e s h o u l db e ex p os edt o th e v i ew o f i n t eres t edp art i es fo r t h ei r co m m en t .” No v a Sco t i a, 5 6 8 F.2 dat2 52 (em p h as i s ad ded ). Bu tth ere was a s eco n d reas o n fo r t h e co u rt ’ s h o l di n g --t h e ag en cy h adfai ledt o res po n dt o s i g n i fi can tco m m en t s . Id . Th i s p arto f t h e o p i n i o n d o es n’ tev en i nv o k e t h e wo rd s “ s ci en t i fi c d eci s io n .” Id . at2 5 2 -5 3. No v a Sco t i a can n ots o eas i l y

b e cab i n ed . See, e.g ., Nu tri t i o n al Heal th Al l . v . FDA, 3 1 8 F.3 d 9 2 , 9 4 , 9 8 (2 dCi r. 2 00 3 ) (ap p l y i n g No v a Sco t i a t o a reg u l at i o n reg ard i n g p ack ag i ng ru l es ); Nat ’ l Bl ackM ed i a Co al
. v . Fed
. Co m m c’ ns Co m

m ’ n , 7 9 1 F.2 d 1 0 1 6 , 1 0 1 8 , 1 0 2 3 (2 dCi r. 1 9 86 ) (h o l d i n g thatan ag en cy v i o l at edNo v a Sco t i a wh en i tfai ledt o d i s cl o s e s tu d ies an dm ap s i t rel iedo n wh en craft i n g a reg u l at i o n reg ard i n g freq uen cy

al l o cat i o n s fo r AM b ro ad cas tch an n el s ); Un i t ed St at es v . Garn er, 7 6 7 F.2 d1 04 , 1 1 7 -1 8 , 1 2 1 (5 th Ci r. 1 9 8 5 ) (an al y zi n g a reg u l at i o n req u i ri n g i n d i v i du al s t o refi n an ce t h ei r l oan s u n d er No v a Sco t i a).-1 1 4- 3
. Th e m ajo ri ty

n ev ert h el es s s ay s th ere’ s en o ug h th ere t o up ho l dth e reg u l at i o n . Itfi rs tp o i n t s u s t o th e p ream b l e t o th e fi n al reg u l at i o ns , s ee o p . Ct
. p p . 1 9 , 2 5 , an di n si s t s th at“ al l co m m en t s ” were co n s i d ered b y Treas u ry h ere. Bu t i f we l o o katthe n o t i ce o f t he fi n al reg u lat i o n , we s ee n o m ean i n g fu l co n si derat i on
o f co m m en t s atal l
. It i s tru e th atTreas u ry

s ai dth ere t h ati twas ad o p t i n g th e ru l e “ aft er
co n si d erat io n o f a l l

co m m en t s .” 5 1 Fed . Reg . at1 49 6 (em p h as i s ad d ed ). An d b efo re En ci n o M o t o rcars , b efo re Ch ev ro n , an dev en b efo re St at e Farm we di d
reas on o ur way to up ho l d i n g t ax reg u l at i o n s b y n ot i n g th e ri tu al i n vo cat i o n o f t h i s
m ag i c p hras e. See W in g v . Co m m i s s i o n er, 8 1 T.C. 1 7 , 3 1 -3 2 (1 9 8 3 ). Bu twh at we n ev er s eem

t o h av e n o t i cedi s h o wco m m on th i s s t at em en ti s . It cert ai n l y

p o p s up wi th s t art l i n g freq u en cy i n th e IRS Cu m

u lat i v e Bu l l et i n . See, e.g ., T.D. 8 5 8 4 , 1 9 9 5-1 C.B. at2 1 (“ Aft er carefu l co n s id erat i o n o f al l th e
co m m en t s ”); T.D. 8 5 4 0, 1 9 9 4 -2 C.B. 2 9 7 , 2 97 (“ Aft er co n s i d erat i o n o f al l o f t h e
co m m en t s recei v ed ”); T.D. 8 4 76 , 1 9 9 3 -2 C.B. 1 3 , 1 4 (“ A ft er co n s id erat i o n o f t h e
co m m en t s ”); T.D. 8 0 6 9, 1 9 8 6 -1 C.B. at9 0 (“ Aft er co n s i d erat i on o f al l co m m en t s reg ard i n g th e p ro p o s edam en d m en t s ”); T.D. 8 0 6 7 , 1 9 8 6 -1 C.B. 2 1 8 , 2 1 9 (“ Aft er
co n si d erat io n o f al l co m

m en t s an dt es t i m o n y recei v edo n th e p ro po s ed-1 1 5-

am en d m en t s ”); T.D. 8 07 5 , 1 9 8 6 -1 C.B. 2 4 5, 2 4 6 (“ Aft er co n s i d erat i o n o f al l wri t ten co m

m en t s recei v ed ”); T.D. 8 0 6 5 , 1 9 8 6 -1 C.B. 2 5 4 , 2 5 4 (“ Aft er
co n si d erat io n o f al l co m

m en t s reg ard i n g th e p ro po s edreg u l at i o n s ”); T.D. 8 0 8 1 , 1 9 8 6 -1 C.B. 3 4 3 , 3 4 4 (“ Aft er co n s i d erat i o n o f al l co m m en t s recei v ed ”). It is as i f th i s p h ras e i s fro m a fo rm i n Treas u ry ’ s reg u l at i o n -d raft i n g g u i d e-- wh i ch i ti s . See In t ern al Rev en u e M an u al p t . 3 2
. 1
. 5 .4 .7 .1 (1 ) (Ex am p le 4 ) (Au g. 2 1 , 2 0 1 8) (“ Aft er co n s i d erat i o n o f al l th e co m m en ts , th e p ro p o s ed reg u l at i o n s are ad o p t edas am en d ed ”). Th e APA, h o wev er, h as n o p ro v is i on fo r ag en ci es t o u s e ri tu al i n can t at i o n s t o wardo ff ju d i ci al rev i ew. See Do m i n i o n Res ., 6 8 1 F.3 dat1 3 1 9 (d et erm in i n g th atth e ag en cy ’ s s tat em en to f “ [a] ft er carefu l
co n si d erat io n o f al l the co m m en t s ,” T.D. 8 5 8 4 , 1 9 95 -1 C.B. at 2 1 , was n o ta
s at i s fact o ry

ex p l an at io n o f i t s act i o n ). Th e s am e p h ras e was u s edb y th e Dep art m en to f Lab o r wh en i ti ss u edth e reg u l at i on th atth e Sup rem e Co u rt i n v al i d at edi n En ci no M ot o rcars , 5 7 9 U.S. at_ _ , 1 36 S. Ct . at2 1 26 (“ Th e Dep art m en ts ai dthat , i n reach i n g i t s d eci s i o n , i th ad‘ carefu l l y co n s i d eredal l o f th e co m m en t s , an al y s es , an d arg u m en t s m ad e fo r an d ag ai n s t th e p ro p o s ed ch an ges ’ ”). Bu t th i s m ak es s en s e--b ecau se i f th e APA d i dal lo w co m m en t s t o b e d i s reg ard edwi th th is s i m pl e m ag i cal p h ras e as p art o f a s t an d ardfo rm , i two u l d
m ak e co m

m en t i n g m ean i n g l es s. See Sh erl ey v . Seb el i us , 6 8 9 F.3 d7 7 6 , 7 8 4 (D.C.-1 1 6-

Ci r. 2 0 12 ) (i nd i cat i n g t h atag en cy act i o n wh ich m ak es co m m en ti n g m ean i n g l es s
v i o l at es th e APA) (ci t in g Ho m e Bo x Offi ce, 5 6 7 F.2 dat3 5 -3 6). Th i s was n o ten o u g h i n En ci n o M o t o rcars , 5 79 U.S. at

_ _ , 1 3 6 S. Ct . at 2 1 2 7 , wh ere t h e Co u rto b s erv edth at“ wh en i t cam e t o ex p l ai n i n g th e ‘ g o od
reas on s fo r t h e n ew p o l i cy ’ * * * th e Dep art m en ts ai dal m os tn o th i n g .” It sh o ul d n o t b e g o o den o u g h fo r u s t o d ay . 4
. Th e m ajo ri ty ’ s fi nal arg u m en to n t hi s t o p i c i s th at Treas u ry actual l y d i d
res p o n d t o th em --n o t wi th an yth i n g i n a s t at em en tthatacco m p an i edth e fi n al ru l e, b u tb y ch an g i n g the p ro p o s edru l e b efo re i t wen tfi n al . See o p . Ct . p . 2 1 (“ Treas u ry cl ea r l

yco n s i d eredth e co m

m en t s * * * b ecau s e i t s u b s ta n ti a l l yrev i sed th e t ex t[o f t he reg u l at i o n ] i n res p on s e t o [t h e] co m m en t s ” (em

p h as is ad d ed )). Th i s arg u m en t , h o wev er, was reject edb y Fed eral Ci rcu i t i n Do m i n io n Res o u rces , 6 8 1 F.3 dat1 3 1 9 , an dth e Seco n dCi rcu iti n No v a Sco ti a, 5 6 8 F.2 dat2 4 4 , 2 5 2 -5 3
. Ev en i f th e IRS h adb een m ak i n g a p u re p o l icy d eci s i o n wi th n o fact fi n d i n g
n eed edatal l , i two u l ds t i ll h av e h adt o i den t i fy th e co n s id erat i o n s i tfo u nd p ers u as i v e. In du s . Un i o n Dep ’ t , 4 9 9 F.2 dat4 7 6
. InIs h ty aqv . Nel s o n, 6 2 7 F. Sup p . 1 3 (E.D.N.Y. 1 9 8 3 ), fo r ex am p l e, t h e p lai n t i ffs arg u ed thata reg u lat i o n l ack edan ad equ at e “ co n ci s e g en eral s t at em en t .” Th e co u rtd i s ag reedb ecau s e t h e-1 1 7-

ag en cy h adackn o w l ed g edth e co m m en t s , s t at ed i t s p os i t i o n o n th e p ri n ci p al
o b ject i on rai s edb y

co m m en t ers , an ds h o wedwh y i tch o se t o fo l l ow o n e co u rs e o f act i on rat h er t h an an o th er. Id
. at2 1 -2 3
. So th i s i d ea t h atth e ag en cy h ere co u l dres p o n d t o s i g n i fi can tco m m en t s b y
m ak i n g o n l y

m i no r ch an g es t o th e p ro p os edreg ul at i o n , ab s en tan y s up p l em en t al
ex p lan at i o n , i s i n s u ffi ci en tas a res p o n s e t o s i g n i fi can tco m m en t s . Bu tm ay

b e t h e
m ajo ri ty i s ri gh tan d I an dth e ap p el l at e co u rt s are wro n g , an d a co urtm ay i n fer an ag en cy ’ s reas o n edres p o n s e t o a s ig n i fi can tco m m en t . Th e p ro b lem i s th at ev en i f Treas u ry co u l dres p o n di n th i s way t o s i g n i fi can t
co m m en t s , i t d i dn ’ ti n fact d o t h at h ere. Th ere wer e ch an g es m ad e t o th e p ro p o s ed reg u l at i o n b efo re i tb ecam e fi n al --b u tth es e ch an g es were far fro m wh at th e
m ajo ri ty d es cri b es as “ s ub s t an ti al l y rev i s ed ” l an gu ag e. A ch an g e fro m a d o n ee’ s
en t i t l em en tt o ex t i n g u is h m en tp ro ceed s th ath av e anFM V thati s “ a m in i m u m
as cert ai n ab l e p ro p o rt io n o f t h e fai r m ark etv al u e t o the en t i re p ro p ert y ,” 4 8 Fed
. Reg
. 2 2 9 4 6 (M ay

2 3 , 1 9 8 3 ), t o “ atl eas t equ al t o th e p ro p o rt i o n at e v al u e t h atth e p erp etu al co ns erv at i o n res tri ct i o n atth e t i m e o f t h e g i ft , b ears t o the v al u e o f t h e p ro p erty as a wh o l e atth att i m e,” 5 1 Fed . Reg . 1 4 9 6, 1 5 05 (J an . 1 4 , 1 9 8 6), h as n o
o b v i o u s ex p l an at io n o th er th an t o i n creas e ed i t o ri al cl ari ty . An d th e s eco n d ch an ge t hatthe Co m

m i s s i o n er an dm ajo ri ty

p o i n t t o --g o i n g fro m

“ o ri g i n al-1 1 8-

p ro p ort i o n at e v al u e” t o “ th atp ro p o rt i o nat e v al u e”--s eem s en t i rel y ed i t o ri al . Th e
m ajo ri ty i m p l i es th atth es e ch an g es are s ub s tan t i al , y eto n e wo ul d b e h ardp res s ed t o thi n ko f an y

s eto f fact s i n wh i ch th e ch an g edl an gu ag e wo u l dch an g e t h e
o u t co m e i n an y

p art i cu l ar cas e. Th e Sup rem e Co u rti n En ci n o M ot o rcars , 5 7 9 U.S. at_ _ , 1 36 S. Ct . at2 1 2 6 , i n v al i d at eda reg u l at i o n fro m an ag en cy th ato ffered “b arel y an y ex p l an at i o n .” Here we h av e n o ne. W e s h ou l d , th erefo re, h ol dth atTreas u ry ’ s fai l u re t o res p o n d t o s i g n i fi can tco m

m en t s i n t h e Fi n al Ru l e’ s s tat em en t o f b as is an dp u rp o s e
v i o l at edAPA s ect i o n 5 5 3 (c). Th at i s reas o n en o u g h t o h o l ds ect i o n 1 .1 7 0 A
1 4 (g )(6 )(i i ), In co m e Tax Reg s . , i n v al idu n d er APA s ect i o n 7 0 6(2 )(D). To d o
o th erwi s e wo u l db e t o h o l dth at“ th e o p p o rtu ni ty t o co m m en ti s m ean i ng l es s .” Ho m e Bo x Offi ce, 5 6 7 F.2 dat3 5
. III. Th ere’ s an o ther p ro b l em

wi th o u r o p i n i o n . Ev en i f t hi s reg ul at i o n were t o b e p ro cedu ral l y

v al i d , i tm ig htwel l b e s ub s t an t i v el y i n val i d. Oak

b ro okarg u edi n-1 1 9-

i t s o ri g i n al p o s t tri al b ri efs thatwe s ho u l d u s e t h e Ch ev ro n tw o -s t ep . 2 0 Th e Co m m i s s i o n er ag reed , an d th e m ajo ri ty t ag s al on g . See o p. Ct
. p . 2 6
. Un d er th i s fam i l i ar s t an d ard , co u rt s d efer t o an ag en cy ’ s reas o n ab l e
co n st ru ct i o n o f anam

b i g u o u s s t atu t e thatCo n g res s h as t as k edth e ag en cy wi th ad m i n is t eri n g . Ch ev ro n , 4 6 7 U.S. at8 4 3 -4 4. Atth e fi rs ts t ep , co u rt s em p l o y

“ trad i t i on al t o o ls o f s t atut o ry co n s tru ct i o n” t o d et erm i n e wh et h er “ Co n g res s h as d i rect l y s p o k en t o th e p reci s e qu es t io n ati s s u e.” Id . at8 4 2 , 8 4 3 n .9 . If i t h as , th e
s t atu te i s u n am

b i g u o u s, an dwe ap p l y

i tas wri tt en ; fo r “ thati s th e en do f th e
m at t er.” Id . at 8 4 2
. Bu t“ i f t h e s t atu t e i s s i l en to r am b i g u ou s wi th res p ect t o th e
s p eci fi c i s s u e,” we m o v e t o th e s eco n d s t ep , wh i ch as k s “ wh et h er t h e ag en cy ’ s
an s wer i s b as edo n a p erm i s s ib l e co n s tru ct i o n o f t h e s t atu t e.” Id . at8 4 3 . Wh ere

“ Co n g res s h as ex pl i ci t l y

l efta g ap fo r t h e ag en cy

t o fi l l ” b y

reg u l at i o n , we d efer t o th e ag en cy ’ s co n s tru ct i o n u n l es s i ti s “ arb it rary , cap ri ci o u s, o r m an i fes tl y co n trary t o the s t atu t e.” Id . at8 4 3 -4 4 . As a t ri al co u rt , i t ’ s n otup t o u s t o ch al l en g e t h e Ch ev ro n s t an d ard , b u tth e m ajo ri ty s h o u l dh av e atl eas tackn o wl ed g edth atth ere

2 0 Aft er t h e Fi ft h Ci rcu i t ’ s d eci si o n i n PBBM -Ro s e Hi l l , 9 0 0 F.3 d1 9 3 , an d th e real i zat i o n thatth i s cas e was the fi rs t t o ch al len g e t h e reg u l at i o n ’ s v al i d i ty , we o rd eredp ro du ct i o n o f t h e ad m in i s trat iv e reco rdo f th e reg u lat i o n ’ s o ri g in an dg av e th e p art i es th e o p po rtu n i ty t o fi l e an o th er ro un do f b ri efs t o m ak e an y arg u m en t s o n th e reg u l at i o n’ s v al i d i ty thatth ey wan t edt o p res erv e.-1 2 0-

are co n traryp o s i t io n s ab o u t wh et h er Ch ev ro n s up p li es th e o n l y s t an d ard o f
rev i ew. Th i s i s es peci al l y

tru e b ecau s e Oakbro o kn o w al s o rel i es o n St at e Farm . In th atcas e, t h e Sup rem e Co u rt was as k edt o d et erm i n e wh et h er an ag en cy ’ s d eci s i o n t o res ci n da reg u l at i o n was arb i traryan d cap ri ci o u s . St at e Farm , 4 6 3 U.S. at3 4
. In h o ld i n g th ati twas , th e Co u rtes t ab l i s h edfo u r fact o rs thatco u rt s m i g h t co n s i d er i n d et erm i n i n g wh et h er an ag en cy act i o n i s d efi ci en t , an d s t at ed : No rm al l y , an ag en cy

ru le wo u ldb e arb it raryan dcap ri ci ou s i f th e ag en cy h as [(1 )] rel i edo n fact o rs wh i ch Co n g res s h as n o t i n t en d edi t t o co n s i d er, [(2 )] en t i rel y fai l edt o co n s i d er an i m

p o rt an t as pect o f t h e p ro b l em , [(3 )] o ffered an ex p l an at i o n fo r i t s d eci s io n th atru n s co u n t er t o th e ev i d en ce b efo re t h e ag en cy , o r [(4 )] i s s o i m p l au s i b l e t h ati t co u l d n o tb e as cri bedt o a d i fferen ce i n v i ew o r t h e p ro du ct o f ag en cy ex p ert i s e. Id . at4 3
. So h o wd o we rev i ew t h e s ub st an t iv e ag en cy act i o n ? W el l, th e rel at i o n s h i p b et ween St at e Farm

an d Ch ev ro n i s l es s t han cl ear ri g h t n ow. 2 1 St at e Farm i s s t i l l

2 1 On e t h in g we d o kn o w i s th atco u rt s an al y ze t h e v al i d i ty o f reg u l at i o n s u n d er St at e Farm

ev en wh ere t h e reg u l at i o n d o es n o t “ rev ers e[] an earl i er p o l i cy s up p ort edb y

a b o dy o f fact .” Co m

p are o p . Ct . p . 1 9 n .2 , wi th Fed . En erg y Reg ul at ory

Co m m ’ n v . El ec. Po wer Sup p l y As s o c., 5 7 7 U.S. _

_ , _ _, 1 3 6 S. Ct
. 7 6 0 , 7 7 1 -7 2 , 7 8 2 -8 4 (2 0 1 6 ) (St at e Farm rev i ew o f a reg u l at i o n thatd i dn’ trev ers e p o l i cy ); Bo wen v . Am . Ho s p . As s ’ n , 4 7 6 U.S. 6 1 0 , 6 1 3 -1 7, 6 2 6-4 2 (1 9 86 ) (s am e); Atri um M ed . Ct r. v . HHS, 7 6 6 F.3 d5 6 0 , 5 6 7 (6 th Ci r. 2 0 14 ) (s am e); an dAl l . fo r Co m ty . M ed i a v . FCC, 5 2 9 F.3 d7 6 3 , 7 6 9 , 7 8 6 -8 7 (6 th Ci r. 2 0 0 8 ) (s am e).-1 2 1-

th e g o -t o s t an d ardfo r ch al l en g es t o a reg u l at i o n ’ s v al i d i ty o n th e g ro u ndth ati ti s arb i trary an dcap ri ci o u s u nd er t h e APA, wh i l e Ch ev ro n (p art i cu l arl y s t ep two ) i s p ri n ci p al l y u s edfo r ch al l en g es t o a reg u l at i o n ’ s v al i d it y o n th e g ro u n dth ati ti s
u n reas o nab l e. In recen ty ears th e l i n e b et ween St at e Farm an dCh ev ro n s tep two h as b lu rred . See J u du lan g v . Ho l d er, 5 6 5 U.S. 4 2 , 5 2 n .7 (2 0 1 1 ) (“ [Th e] an al y s i s
wo u l db e t he s am e, b ecau s e u n d er Ch ev ro n s t ep tw o , we as k wh et h er an ag en cy i n t erp ret at io n i s ‘ arb i traryo r cap ri ci o u s i n s ub st an ce’ ”). In a cas e ap peal edt o th e Ni n th Ci rcu i t , we o u rs el v es h el dth at “ reg ard l es s o f t h e u l t i m at e s t an d ardo f
rev i ew--t h e fi n al ru l e m

u s ts at is fy

St at e Farm ’ s reas on edd eci s i o n m ak i n g
s t an d ard .” Al t era Co rp . v . Co m m i ss i o ner, 1 4 5 T.C. 9 1 , 1 1 7 (2 0 1 5 ), rev ’ d , 9 2 6 F.3 d1 0 6 1 (9 th Ci r. 2 0 18 ), p et i t i o n fo r h eari n g en b an c d en i ed , 9 4 1 F.3 d1 2 0 0 (9 t h Ci r. 2 0 19 ), p et i t io n fo r cert . fi l edNo . 1 9 -1 00 9 (Feb . 1 3 , 2 0 2 0 ). Bu tn o tal l co u rt s ag ree. Th e Seco n d Ci rcu it , fo r ex am p l e, h el d th atth e d i s tri ctco u rt ’ s ap p li cat i o n o f t h e St at e Farm s t an dardatCh ev ro n s t ep two was
rev ers i bl e erro r: “ Whi l e we h av e g reat res p ectfo r th e d is tri ctco u rt ’ s carefu l an d
s earch i n g an al y s i s * * * , we co n cl u d e th ati terred b y i n co rp o rat i n g t h e St at e Farm
s t an d ardi n t o i t s Ch ev ro n St ep Two an al y s i s an dth ereb y ap p l y i n g t oo s tri cta
s t an d ardo f rev i ew.” Cat s k i l l M o u n t ai n s Ch ap t er o f Tro u tUn lt d ., In c. v . EPA, 8 4 6-1 2 2-

F.3 d4 9 2 , 5 2 1 (2 dCi r. 2 0 17 ). A b ri ef s u rv ey o f t he o th er ci rcu i t s s i n ce J u du l an g
s h o ws ju sth o wu n s et t l edth i s qu es t i o n rem ai ns : ! Crak er v . DEA, 7 14 F.3 d1 7 , 2 6 (1 s tCi r. 2 0 13 ) (ev en i f ag en cy ’ s s t atu t o ry i n t erp ret at i o n s at i s fi es Ch ev ro n , i tm ay s t i l l b e s etas i d e as arb i traryan dcap ri ci o u s u n d er St at e Farm );
! Al m

y v . Seb el i u s , 6 7 9 F.3 d2 9 7, 3 0 2 (4 th Ci r. 2 0 1 2 ) (Ch ev ro n o perat es “ [i ] n ad d i t i o n t o” St at e Farm );
! Sw. El ec. Po wer Co . v . EPA, 9 2 0 F.3 d9 9 9, 1 0 28 (5 th Ci r. 2 0 1 9 ) (Ch ev ro n s tep two an d th e APA s hare t h e arb i traryan dcap ri ci o u s s t an dardan dth e an al y s i s u n d er t h e t wo s tan d ard s p ro ceed s s i m i l arl y ) (ci t i ng Ri ch ardJ . Pi erce, J r., Adm i n is trat i v e Law Treat i s e, s ec. 3 .6 (5 th ed . 2 0 1 0) (s u g g es t i ng th atCh ev ro n s t ep two h as “ co m p l et e o verl ap ” wi th t h e APA an d St at e Farm i f ru l e ch al l en g edas “ u n reas on ab l e”));
! Ab rah am Li n co l n M em ’ l Ho s p . v . Seb el i u s, 6 9 8 F.3 d5 36 , 5 4 7 (7 t h Ci r. 2 0 1 2 ) (s u g ges t i n g a d i s ti n ct i o n b et ween arb i trary -an d -cap ri ci ou s rev i ew u n d er St at e Farm an dCh ev ro n s t ep tw o );
! Al t era, 9 2 6 F.3 dat1 0 7 5 -7 6 (ad o pt i n g Seco n d Ci rcu i tan al y s i s o f Cat s ki ll M o u n t ai n ); b u ts ee Tu rt le Is l an d Res t o rat i o n Net w o rkv . Un i t edSt at es Dep ’ to f Co m m erce, 8 7 8 F.3 d7 2 5, 7 3 2 -3 3 (9 th Ci r. 2 01 7 ) (Ch ev ro n s t ep two equ i v al en tt o t h e St at e Farm arb i trary -an d
cap ri ci o u s rev i ew);
! Nu traceu t i cal Co rp . v . Vo n Es ch en bach , 4 5 9 F.3 d1 0 3 3 , 1 0 37 -3 8 (1 0 th Ci r. 2 0 0 6 ) (s u g g es t i ng o v erl ap b et ween St at e Farm ’ s arb i trary an dcap ri ci ou s s tan d ardan dCh ev ro n s t ep two ); s ee al s o Gu t i errez-Bri zu el a v . Ly

nch , 8 34 F.3 d 1 1 4 2 , 1 1 4 9 -5 8 (1 0 th Ci r. 2 01 6 ) (Go rs u ch , J ., co ncu rri n g ) (qu es t i o n i n g t h e co n s ti tut i o n al i ty o f Ch ev ro n );-1 2 3-

! Nat ’ l M i n in g As s ’ n v . Sec’ y , U.S. Dep ’ to f Lab o r, 8 1 2 F.3 d8 4 3 , 8 6 5 n . 2 3 (1 1 th Ci r. 2 0 1 6 ) (Ch ev ro n s t ep two fu n ct i o nal l y equi v al en tt o arb i traryan dcap ri ci o u s rev i ew u n d er t h e St at e Farm );
! So ren s o n Co m

m c’ n s , LLC v . FCC, 8 9 7 F.3 d2 1 4 , 2 3 0 (D.C. Ci r. 2 01 8 ) (i den t i fy i n g s i g n i fi can to v erl ap b et ween Ch ev ro n s t ep two an d St at e Farm ); an d
! Bal es tra v . Un i t edSt at es , 8 0 3 F.3 d1 3 6 3, 1 3 68 n .2 (Fed . Ci r. 2 0 1 5 ) (St at e Farm

o ft en o v erl ap s wi th an al y s i s u nd er Ch ev ro n s t ep two , b u t th e t wo s t an d ard s s h o u l db e ap p li eds ep arat el y ). 2 2 Becau s e t hi s cas e i s ap p eal ab l e, ab s en t s t i p u l at i o n t o th e co n trary , t o th e Si x th Ci rcu i t , I wo u l dfo l l o w i t s ap p ro ach . See Go l s en v . Co m m i s s io n er, 5 4 T.C. 7 4 2 , 7 5 6 (1 9 7 0), aff’ d , 4 4 5 F.2 d9 85 (1 0 th Ci r. 1 9 71 ). Th at ap pro ach i s t o an al y ze ch al l en g es t o a reg u l at i o n u n der Ch ev ro n s t ep tw o an dSt at e Farm i n d ep en d en t l y . See At ri u m

M ed . Ct r., 7 66 F.3 d at 5 6 7 (“ Ev en i f an ag en cy ’ s s tatu t o ry i n t erp ret at io n i s p erm i ss i b l e u n d er Ch ev ro n * * * , th e ag en cy ’ s act i o n m ay s t i l l b e

‘ arb it rary , cap ri ci ou s , an ab u se o f d i s cret i on , o r o th erwi s e n o ti n acco rd an ce wi t h l aw.’ ” (q u o t i n g APA s ec. 7 0 6(2 )(A))); s ee al s o Nat ’ l Tru ckEqu i p . As s’ n v . Nat ’ l Hi g hway Traffi c Safet y Ad m i n ., 7 1 1 F.3 d6 62 , 6 6 8 -6 9 (6 th Ci r. 2 01 3 ). Th e g o al o f rev i ew un d er ei th er APA s ect i o n 7 0 6(2 )(A) o r (D), an du n d er Ch ev ro n o r St at e Farm

i s t o en s u re t h atan ag en cy en gag es i n reas o n ed d eci s i o n m ak i n g . Acco rd i n g t o th e Si x th Ci rcu i t , “ [a] tb as e, arb i traryan d

2 2 Th e Th i rdan dEi gh th Ci rcu i t s s eem n o tt o h av e co n s id eredth i s qu es t i on .-1 2 4-

cap ri ci ou s rev i ew fu nct i o n s t o ‘ en s u r[e] th at ag en ci es h av e en gag edi n r ea s o n ed d ecis i o n ma ki n g . ’ ” Atri u m M ed . Ct r., 7 6 6 F.3 dat5 6 7 (em ph as is ad d ed ) (qu o t i n g J u du lan g, 5 6 5 U.S. at5 3 ). Reas o n edd eci si o n m ak i n g m ean s thatth e ag en cy

“ ex am i n e[s ] th e rel ev an td at a an dart i cu l at e[s ] a s at is fact o ry ex pl an at i o n fo r i t s act i on i n cl u d i n g a rat i o n al co n n ect i o n b etw een th e fact s fo u n d an d t h e ch o i ce
m ad e.” St at e Farm , 4 6 3 U.S. at4 3 (i n t ern al qu o tat i o n m ark s o m i t t ed ); s ee al s o APA s ec. 5 5 3 (c). Oak b ro okarg u es th atth e reg u l at i o n i s arb it raryan dcap ri ci ou s u n der t h e APA an d t h e St at e Farm

s t an d ard , an dth e Co m

m i s s i o n er ju s tas p l ai n l y

d efen d s th e reg u l at i o n as reas o n edd eci s i o n m ak i ng . Th e m ajo ri ty t o d ay d oes n ’ tev en ad dres s th i s arg um en t ; i t s h o u l dh av e. An dfo ll o wi ng th e Si x th Ci rcu it ’ s l ead , we
s h o u ldru n th i s reg u l at i on n o to n l y th ro u g h Ch ev ro n b u tth ro u gh St at e Farm t o o . As t o h o w th is reg u l at i o n fares u n d er Ch ev ro n , I ag ree wi th th e m ajo ri ty th at

“p erp etu i ty ” al l o ws fo r a wi d e ran g e o f p o s s i b l e i nt erp ret at i o ns ; i tcert ai n ly d o es n’ tb y

i t s el f s h o w Co n g res s s p o ke o n the i s s u e o f p res erv i n g the co n serv at i o n p u rp os es o f a d on at edeas em en tth ath as b een ex t i n g u i sh edo r co n d em n ed . Th at ’ s
en o ug h t o s k i p p as ts t ep o n e. Th e p ro b lem i s wi th s t ep two , an di taffect s b o th th e “ p ro p ort i o n at e v al u e”
an d “ d o nee i m

p ro v em en t s” p art s o f t h e ch al l en g edreg ul at i o n . Th e m ajo ri ty fi n ds-1 2 5-

th e reg u l at i o n reas o n ab l e i n req u i ri n g a p ro p o rt i on at e s p l i t o f t h e p ro ceed s fro m an
eas em en t ’ s ex ti n g u i s h m en t b ecau s e “ co n s i d erab l e i n fl at i o n i n p ro p ert y v al u es
m i g h to ccu r i n the i n teri m .” See o p . Ct . p . 2 8 . Its i m i l arl y fi n d s th e reg u l at i o n ’ s b an o n reduci ng th e d o n ee’ s s h are o f p ro ceed s t o acco u n t fo r i m p ro vem en t s
reas on ab l e b ecau s e “ [i ] n cert ai n fact u al s cen ari o s , redu ci n g th e d o n ee’ s p ro ceed s
o n acco u n to f d o n o r i m

p ro vem en t s co u l dfru s trat e t hi s g o al , es p eci al l y i f l o cal l an dv al u es s ho u l d d ecl in e.” See i d . p . 2 9
. Th es e s eem

l i k e p erfect ly

p l au s i b l e reas o n s . Bu t they are n o t th e o n es th at Treas u ry i t s el f o ffered atth e t i m e i ti s s u edth e reg u l at i on . Th i s rai s es an o th er p ro b lem fo r t h e Co m

m i s s i o ner i n h i s d efen s e--t h e Ch en ery ru l e. Th e Ch en ery
ru l e p rev en t s an ag en cy

fro m rel y i n g o n p o s t

h o c rat i o n al izat i o n s t o d efen d i t s d eci s i o n m ak i n g . SEC v
. Ch en ery Co rp ., 3 1 8 U.S. 8 0, 8 7 (1 9 4 3 ) (“ Th e g ro u n d s
up o n wh i ch an ad m i n i st rat i v e o rd er m u s tb e ju d g edare t h o se up o n wh ich th e
reco rdd i s cl o s es th ati t s act i o n was b as ed .”); s ee al s o St at e Farm , 4 6 3 U.S. at5 0 (co u rt s m ay

n o t accep tp o s th o c rat i o n al izat i o ns ). An dCh ev ro n s tep 2 i s l i m i t ed b y Ch en ery . Ban ko f Am ., N.A. v
. FDIC, 2 4 4 F.3 d 1 3 0 9 , 1 3 1 9 (1 1 th Ci r. 2 0 0 1 ) (s t at i n g th atCh en ery

m u s t b e co n si d eredats t ep 2 o f Ch ev ro n ); s ee al s o Co u n ci l fo r Uro l o g i cal In t eres t s v . Bu rwel l , 7 9 0 F.3 d2 1 2 , 2 2 2 (D.C. Ci r. 2 0 1 5 ); Am eri ca’ s Cmty . Ban k ers v . FDIC, 2 0 0 F.3 d8 2 2 , 8 3 5 (D.C. Ci r. 2 00 0 ). W e s ho u ld n ’ tb e-1 2 6-

co m i n g up wi th o u r o wn po s t h o c ju s t i fi cat i o n s fo r t h e reas o n ab len es s o f t he ru l e i f t h e Co m

m i s s i o n er’ s l awy ers wo ul dn ’ tb e ab l e t o . Th e s am e p ro b l em

affect s o u r an al y si s o f t he s ubs t an t i v e v al i d i ty o f t h i s reg u l at i o n u n d er St at e Farm . Th e Si x th Ci rcu i th as warn edag en ci es th ati t s arg u m en t s i n fav o r o f a reg u lat i o n n o tb ei n g “ arb i trary , cap ri ci o u s , an ab us e o f d i s cret i o n , o r o th erwi s e n o ti n acco rd an ce wi th l aw” i s l i k ewi s e l i m it ed b y th e Ch en ery ru l e. See At ri u m , 7 6 6 F.3 dat5 6 7 -6 8 (“ [T] h e g ro u ndup o n wh i ch an ad m i n is trat i v e o rd er m

u stb e ju d g edare t ho s e up o n wh i ch th e reco rd d i s cl os es th at i t s act i o n was bas ed .” (qu o t i n g Ch en ery , 3 18 U.S. at8 7 )). Th e m ajo ri ty

t o d ay co m es up wi th as g o oda s eto f arg u m en ts as p o s s i b l e t o ju s t ify th e reas on ab l en es s o f t h e reg u l at ory ch o i ces th atTreas u ry

m ad e wh en i t
was draft i n g th i s reg u l at io n . Bu tTreas u ry d i dn ’ tm ak e t h em . Or atl eas t i td i dn ’ t
m ak e t h em

i n th e ad m i n i s trat iv e reco rdo f t hi s reg u l at i o n. IV. I wi l l en dwi th wh ere I b eg an i n t o d ay ’ s M em o ran du m Op i n i o n o n the l es s
co n tro v ers i al p art s o f t h is cas e: Co n serv at i o n -eas em en tcas es m i g h t h av e b een
m o re reas o n ab l y

res o l vedcas e-b y -cas e i n co nt es t s o f v al u at io n . Th e s yn d i cat ed
co n serv at i on -eas em en td eal s wi th wi l d l y i n fl at edd edu ct i on s o n l an db o u g h tat
m u ch l o wer p ri ces w ou l ds eem p erfect l y fi n e fo d d er fo r feed i ng i n to a v al u at i o n-1 2 7-

g ri n d er. Val u at i o n l aw i s reas o n ab l y wel l kn o wn , an d v al u at i o n cas es are
ex cep t i o n al l y

cap ab l e o f s et t l em en t . Co n gres s , h o wev er, en act edthes e s ect i o n s o f t h e Co de an dp res u m ab l y
wan ted reas o n ab l y

v al u edco n s erv at i o n eas em en t s t o b e al l o wed . Yet we’ v e co m e t o a p o in twh ere we are d i s al l o wi n g a g reat m an y co n s erv at i o n-eas em en t d educt i o n s al t o g et h er, n otfo r ex ag g erat i on o f t h ei r v al u e o r l acko f co n s erv at i o n p u rp os e, b utb ecau s e o f v ery co n t es t ab l e read i n gs o f wh ati tm ean s fo r an
eas em en tt o b e p erp etu al . W e d i dd efu se t he Co m m i ss i o n er’ s th erm o nu cl earb o m b o f an arg u m en t th atth e ret ai n edp o w er o f p art i es t o an y co n tract t o m o d i fy i t s t erm s m ean tth atn o eas em en tan ywh ere at an y t i m e co u l d ev er p res erv e i t s
co n serv at i on p urp o s e “ i n p erp etu i ty .” Pi n e M o u nt ai n , 1 5 1 T.C. at2 8 0 -8 2. Bu t
o u r ag reem en t wi th th e Co m m is s i o n er i n Pi n e M o u nt ai n l as ty ear t h ata res erv ed ri gh t t o b u i l da h o m e o n p ro p ert y s ub jectt o an eas em en ti s d efeat ed i f i ts l o cat i o n i s n o tp reci s el y

d efi n edwi l l l ead , atb es t , t o a ci rcu i t co nfl i ct th atth e Sup rem e Co u rtwi ll h av e t o res o l v e. 2 3

2 3 On e can ev en fo res ee a co nfl i ct b et ween th e accep t ab l e p o wer t o am en d an d th e u n accep t ab le “ fl o at i n g h o m es i t e” p ro v is i on : Im ag i n e t h e cas e wh ere a g en eral p ro v i s i o n i n an eas em en td eedal l o w s fo r am en dm en t s s o l on g as the d o n ee fi n d s thatthe co ns erv at i o n p u rp o s e i s p res erv ed , b u th as n o ex p res s p ro v is i o n th at al l o ws th e d o n o r t o ad di m p ro v em en t s ex cep tt o b u i l da s i n g l e h o m e i n a l o cat i o n fi xedwi th ex trem e p reci s io n b y th e d eed . Years p as s , i tco m es t i m e (co n ti n u ed ...)-1 2 8-

To d ay we up h ol da reg u l at i o n th at wi l l i n v al i d at e wh o kn o ws h o w m an y
o th er co n s erv at i o n-eas em en td edu ct i o n s , an dwi l l al m o st cert ai n l y l eadt o ap p eal s i n m u l t i p l e ci rcu i ts . If th e Co m m i s s i o n er co n t i n u es t o s eek g ro s s -m i s v al u at i o n p en al t i es , we wi l l al s o h av e t o fi g u re o u ti n a g reat m an y cas es h o w t o d et erm i n e wh i ch p o rt i o n o f an u n d erp aym en ti s at tri b u t ab l e t o a v al u at i o n m i s s t at em en tan d wh i ch i s du e t o a fai l u re o f t h e co n s erv at i o n eas em en tal to g et h er, wh en i tm i g h t ju s t ly b e s ai dt o b e at tri b u t ab l e t o b ot h
. See PBBM -Ro s e Hi l l , 9 0 0 F.3 dat2 1 4
. I fear t h ato u r effo rt s t o cl ear cu t an db ru sh h o g o ur way o u t o f t he v o l u m e
o f co n serv at io n -eas em en t cas es we h av e t o d eal wi th h as l eft u s a fi el dfar
s tum p i er t h an wh enwe b eg an . I res p ect fu l l y

d i s s en t .

2 3 (...co n t i nu ed ) t o b u i l d , b u ti n b u i l d i n g t h e d o n o r d i s co v ers a s i n kh o l e o n th e ed g e o f t h e b u i l d i n g area, m ak i n g i tu nb u il d ab l e. He d et erm i n es h e co ul dav o i dth e s i n kh ol e b y s h i ft i n g th e l o cat i o n o f t h e b u il d i n g area o n e fo o tfro m i t s o ri g i n al l o cat i on . W i t h th e d o nee’ s p erm i s s i on , h e am en d s th e d eed , as i s h i s ri gh tu n d er t h e g en eral am en d m en tp ro v i s i on , t o s h i ftth e b o u n d ary o f t he b u i l di n g area. Wh y th i s d educt i o n wo u l db e al l o wab l e, wh i l e an o th er i n wh i ch a d eedo f eas em en t ex p res s l y p erm i ts a d o no r t o s h i ft th e l o cat i o n o f th e b ui ld i n g area wi th th e s am e req u i redp erm i s si o n an dp res erv at i o n o f co ns erv at i o n p u rp o s e, i s n o to b v i o u s .