Court of Appeals Overturns Tax Court Case Disallowing Conservative Easement Charitable Contribution
May 22, 2020
In Champions Retreat Golf Founders, LLC v. Comm’r, the taxpayer claimed a charitable contribution deduction for donating a conservation easement over property that included a private golf course and undeveloped land. The IRS disallowed the deduction and the Tax Court upheld the IRS’ determination. The taxpayer appealed and the Eleventh Circuit Court of Appeals reversed the Tax Court’s decision and remanded the case for the determination of the proper amount of the charitable contribution deduction.
In 2002, Champions Retreat Golf Founders, LLC (“Champions”) acquired 463 acres of land along the Savannah River north of Augusta, Georgia. Champions developed a private golf course on roughly two-thirds of the 463 acres, sold homesites on 95 of the acres away from the river, and retained the remaining 57 acres along the river, consisting primarily of forests and wetlands, as undeveloped land. The property is accessible only through a gate that is staffed 24 hours a day, although it is readily observable to members of the public who kayak or canoe on the nearby rivers.
In 2010, Champions contributed a conservation easement covering 348 acres consisting of the undeveloped land and the golf course, including the driving range, but not including the golf course buildings and parking lot or any of the homesites. Champions claimed a charitable deduction for the contribution.
A deduction for a qualified conservation contribution is allowed if the easement is exclusively for conservation purposes, which are defined as, among other things, the protection of a relatively natural habitat of fish, wildlife, or plants, or similar ecosystem. The Eleventh Circuit analyzed the regulations that define conservation purposes and determined that the same factors apply despite the presence of a private golf course on part of the property. The court explained that a charitable contribution deduction for a conservation easement is available even if the land has been altered by human activity so long as the fish, wildlife, or plants continue to exist in a relatively natural state, which was the case here.
A charitable deduction is also allowed for a qualified conservation contribution if the easement is for the preservation of open space that is for the scenic enjoyment of the general public or will yield a significant public benefit. The regulations provide that the general public need only have visual, not physical, access to or across the property, and that the entire property need not be visible to the public. The court noted that were it not for the presence of the private golf course on part of the property, there would be no question that the preservation of the land along the rivers was for the scenic enjoyment of the general public and provided a public benefit, and therefore this test was met.
The court concluded that Champions was entitled to a deduction for the contribution of the conservation easement, despite the IRS’ and Tax Court’s findings to the contrary. Because the Tax Court had not determined the proper amount of the charitable contribution, the case was sent back for that calculation.