Friday, March 5, 2021
Nancy A. McLaughlin (Utah), Amendment Clauses in Easements: Ensuring Protection in Perpetuity, 168 Tax Notes Fed. 819 (Aug. 3, 2020):
Internal Revenue Code § 170(h)(5)(A) requires that the conservation purpose of a deductible conservation easement be “protected in perpetuity.” This article explains how the protected-in-perpetuity requirement should limit the parties’ ability to reserve the right to make post-donation changes to the terms of a deductible easement.
To comply with section 170(h)(5)(A)’s protected-in-perpetuity requirement, it is not sufficient for a conservation easement to prevent uses of the originally-protected property that would be inconsistent with the conservation purposes of the donation. The easement must also (among other things) not permit uses that could be destructive of the conservation interests that are the subject of the contribution or, with one limited exception, any other significant conservation interests on the property. Any reserved right to make changes should have to comply with these and all other applicable section 170(h) and regulation requirements,40 and to assess compliance it is necessary to read the easement deed as a whole.41 It also is important to recognize that historic preservation easements are subject to special rules and, thus, some of the holdings in cases involving historic preservation easements are not good precedent for cases involving habitat, open-space, or outdoor recreation-or-education easements.
Forever is a really long time, and careful drafting is required to ensure it.