Opinion ID: 219206
Heading Depth: 2
Heading Rank: 1

Heading: Exclusively for Conservation Purposes

Text: To reiterate, a taxpayer may take a deduction for a conservation contribution only if it constitutes a qualified interest in real property given exclusively for a conservation purpose[ ]. For a contribution to be deemed exclusively for a conservation purpose, that purpose must be protected in perpetuity. 26 U.S.C. § 170(h)(5)(A). A regulation promulgated by the Department of the Treasury states further that any interest in the property retained by the donor ... must be subject to legally enforceable restrictions ... that will prevent uses of the retained interest inconsistent with the conservation purposes of the donation. Treas. Reg. § 1.170A-14(g)(1). The Commissioner argues Simmons is not entitled to deductions for charitable contributions because the easements she granted L'Enfant satisfy neither the statute nor the regulation quoted above. More specifically, the Commissioner points to the clause in the deeds stating nothing herein contained shall be construed to limit the Grantee's right to give its consent (e.g., to changes in a Façade) or to abandon some or all of its rights hereunder. This clause, he maintains, is inconsistent with conservation in perpetuity because it leaves L'Enfant free to consent to an ahistorical change in the façade and to abandon altogether its right to enforce the restrictions set out in the deeds. The Commissioner also asserts the deeds will not prevent uses of the properties inconsistent with their conservation because neither easement includes a clause providing for the perpetuation of the easements in the event L'Enfant ceases to exist or simply abandons its right to enforce the easements. Simmons objects that each deed states explicitly the parties' intent to preserve the subject property and that, in any event, both she and L'Enfant are limited in what they can change by the District's historic preservation laws. She also points out that L'Enfant's interest in preserving its tax-exempt status will prevent it from approving changes inconsistent with the conservation purposes oflet alone abandoning the easements. Finally, Simmons maintains if L'Enfant is dissolved, then the easements will be transferred to another organization that engages in similar activities, citing the testimony of the State Historic Preservation Officer. We conclude the easements meet the requirement of perpetuity in § 170(h)(5)(A). The deeds impose an affirmative obligation upon Simmons in perpetuity to maintain the properties in a manner consistent with their historic character and grant L'Enfant the authority to inspect the properties and to enforce the easements. By their terms, the deeds will survive any termination of Grantor's or the Grantee's existence. Although the deeds do not spell out precisely what would happen upon the dissolution of L'Enfant, D.C. law provides the easements would be transferred to another organization that engages in activities substantially similar to those of L'Enfant. D.C.Code §§ 29-301.48, 29-301.56. More specifically, the State Historic Preservation Officer testified the easement initially reverts to the District of Columbia, which then seeks to assign it to a conservation organization. Accordingly, the deeds do all the Commissioner can reasonably demand to prevent uses of the properties inconsistent with conservation purposes, as required by Treasury Regulation § 1.170A-14(g)(1). The clauses permitting consent and abandonment, upon which the Commissioner so heavily relies, have no discrete effect upon the perpetuity of the easements: Any donee might fail to enforce a conservation easement, with or without a clause stating it may consent to a change or abandon its rights, and a tax-exempt organization would do so at its peril. As the amici curiaethe National Trust for Historic Preservation, L'Enfant, and the Foundation for the Preservation of Historic Georgetownfurther explain, this type of clause is needed to allow a charitable organization that holds a conservation easement to accommodate such change as may become necessary to make a building livable or usable for future generations while still ensuring the change is consistent with the conservation purpose of the easement. Moreover, the Commissioner has not shown the possibility L'Enfant will actually abandon its rights is more than negligible. L'Enfant has been holding and monitoring easements in the District of Columbia since 1978, yet the Commissioner points to not a single instance of its having abandoned its right to enforce. Simmons's deeds in particular make express L'Enfant's intention to ensure her properties remain essentially unchanged. Treasury Regulation § 1.170A-14(c)(1) also provides an eligible doneeas L'Enfant undisputedly ismust have a commitment to protect the conservation purposes of the donation and the resources to enforce the restrictions. Simmons's entitlement to a deduction for a qualified conservation contribution under 26 U.S.C. § 170(f)(3)(B)(iii), therefore, is supported by the limitation in Treasury Regulation § 1.170A-14(g)(3): A deduction shall not be disallowed under section 170(f)(3)(B)(iii) and this section merely because the interest which passes to, or is vested in, the donee organization may be defeated by the performance of some act or the happening of some event, if on the date of the gift it appears that the possibility that such act or event will occur is so remote as to be negligible. Simmons's deductions cannot be disallowed based upon the remote possibility L'Enfant will abandon the easements. See Stotler v. Comm'r, 53 T.C.M. (CCH) 973, 980-81 (1987) (concluding easement was granted in perpetuity even though grantee could abandon it because possibility future events would undermine perpetuity was so remote as to be negligible). We also note any change in the façade to which L'Enfant might consent would have to comply with all applicable laws and regulations, including the District's historic preservation laws. [] In short, because the donated easements will prevent in perpetuity any changes to the properties inconsistent with conservation purposes, we hold Simmons has made a contribution exclusively for conservation purposes, in accordance with 26 U.S.C. § 170(h)(1)(C).