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Tuesday, June 06, 2006

Is All Conservation Good Conservation?

Yesterday's Washington Post ran a story about a successful IRS effort to deny a tax deduction for the donation of a conservation easement in Fairfax County, Virginia.  The easement was a promise not to "overdevelop" land near Mt. Vernon; but the land was subsequently developed into 29 houses.  (This apparently did not violate the easement.)  The Tax Court ruled that the $350K deduction was not available because the easement "did not protect open space or a historically important land area."  I don't know much about tax, so I'll pass on the merits of that decision.  (The property owners sound like they were playing pretty fast and loose with the definition of "conservation," though.)

The case touches upon an interesting question about the optimal level of land conservation.  Right now, the federal tax code, reflecting conventional wisdom, assumes that all conservation is good -- and therefore encourages owners to donate conservation easements.  But Julia Mahoney and Nancy McLaughlin have both questioned this wisdom:  Conservation easements are property interest designed to last forever.  Development needs and conservation priorities change over time.  For example, my colleague John Nagle tells me that Colton California -- home of the Dehli Sands Flower Loving Fly of Commerce Clause fame -- is considering prohibiting owners from restricting their property with conservation easements.  Colton thinks it needs development, not conservation.  Before reading Mahoney and McLaughlin, I bought the conventional wisdom about conservation easement:  What could be wrong with private property owners voluntarily restricting their property?  Is there a reason to question this wisdom?

Posted by ngarnett on June 6, 2006 at 01:29 PM in Property | Permalink


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