One of the developments I’ve been watching out of the corner of my eye, but not following very closely (or writing about), is the current kerfuffle over land trusts. It’s an important issue, though. Land trusts protect an immense amount of land in the U.S., and their very existence has recently been in question.

Luckily, there’s an excellent blog — Nature Noted — devoted entirely to land trusts. If you want to follow the unfolding developments, that’s the place to go.

I invited its proprietor, Pat Burns, to join us here with a rundown on the issue, the recent developments, and what’s at stake. His essay follows. (Thanks, Pat.)

One of the most successful environmental movements of the last fifty years is about to change the way it does business. And if it doesn’t do it on its own, the government will step in and force it to change.

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That’s the headline on the recent investigation of the nation’s land trusts by the Senate Finance Committee.

Wednesday, the Finance Committee held hearings ostensibly aimed at tightening the tax code on the use of conservation easements, which have become a prime tool in conserving land from development. It’s also become a prime tool for evading taxes. The Finance Committee began its investigation three years ago after a series of embarrassing articles in the Washington Post about the practices of the country’s biggest trust, The Nature Conservancy.

The staff released the results of its investigation Tuesday, outlining a series of abuses by TNC, including:

  • A pattern of dealings with insiders that gave preferential treatment on land deals;
  • a pattern of dealings with the companies of board members (PDF);
  • selling emissions credits, including a $10 million deal with General Motors while GM’s chairman John Smith served on TNC’s board;
  • selling emissions credits that it may or may not have even owned, essentially furthering its own environmental goals (buying land) at the expense of another environmental goal (reducing greenhouse gases); and
  • allowing oil and gas drilling on one of three known habitats of the Attwater Prairie chicken, bumbling its way through the deal so that it ended up in court, accused of cheating one of its partners, all while pocketing over $8 million in royalties.

The report paints a picture of an organization that’s gotten so big, and so successful, it lost sight of why it was formed in the first place. To its credit, TNC leaders know they need to make some big changes, and appear to have done so, although there are still questions about whether the new safeguards are as effective as they can be. Also the report breaks out just how wealthy TNC has become. At the end of fiscal year 2004, it had gross receipts of $2.5 billion with revenues of $732 million.

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But TNC isn’t the only reason the Senate began investigating. It has become clear that some people have been abusing the law that allows tax deductions for conservation easements. The easement deduction allows me to sell the development rights to my property to a land trust. I keep the property the way it is, and everyone who buys it from me agrees to keep it that way too. If it’s wilderness, it stays wilderness. If it’s a ranch, it stays a ranch. In areas with lots of development, that can be worth a ton of money. The big question: How much?

It’s a subjective appraisal, and if both parties want to unfairly jack up the value, the hearings have shown the IRS doesn’t have the manpower to catch it. And it’s led to a cottage industry in easement tax shelters, including millions of exemptions for golf courses, driving ranges, and backyards. Phony trusts were set up not to protect land, but to act as tax shelters for the wealthy. As the facts come out, it’s outraging critics, and depressing supporters.

There’s also the unfairness of the tax code. I can only write off the amount of the deduction against what I earn. If I’m a small rancher just getting by, the deduction isn’t worth nearly as much as if I’m a millionaire who keeps the ranch for weekend getaways.

And the investigation highlighted the difficulty in monitoring the easements. They are donated in perpetuity. That’s a long time. Is the supervising trust making sure the land stays the same, and new owners haven’t bulldozed a big section for a new pool? Will they have the stomach for a legal fight if the contract is violated 10, 20, or 100 years from now?

So why not just kill the easement deduction? That’s what the Joint Senate Committee essentially proposed earlier this year (PDF), sending land trusts into a panic. Trust leaders say that it would, instead, kill the movement. Easements are effective because they allow land to stay in private hands, and give the trusts more bang for their buck. Far fewer acres would be conserved, and smaller trusts simply wouldn’t have the money to even exist. Fewer landowners would be willing to donate their property. More land would go to development.

Land trusts that have played by the rules have been unfairly tarred by the abuses. But the damage is done. The consensus is that in order to keep the easement deduction, and to stay in business, trusts will have to agree to reforms. The Land Trust Alliance has proposed an accreditation system (PDF) that is going to mean tougher standards, more paperwork, and stronger monitoring. It’s institutionalize or die. And many trust members have debated whether it’s not better to just pack it in. They argue the reforms are going to rip the soul out of their organizations.

Most are small, predominately volunteer groups, staffed by people who love their local land. They got into this to save a particular patch of ground that means something to them. They didn’t get into it to become bureaucrats.

There’s also an outrage that they’ve done nothing wrong, but now they are being viewed as tax cheats, out to help the rich and big corporations. But it’s clear to most that the freewheeling days of a bunch of like-minded individuals getting together to save some land is over. The days of the IRS forms, staff accountants, and lawyers are here.

So why should anyone else in the environmental community care?

First, land trusts work: They’ve conserved over 9 million acres of privately held land, 5 million of those through easements. Most importantly, they enjoy broad political support. You won’t find many organizations that do as much environmental good that are supported by conservatives and liberals alike.

Bottom line, trusts work. And if it hadn’t been for an intensive lobbying campaign by the LTA and other conservation leaders, and a deep reservoir of goodwill, trusts faced at the very least the loss of their most effective tool. At the worst, it would have meant the end of many trusts.

And that would have been the real crime.

Pat Burns, Nature Noted

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