Conservation Easements and the Proceeds Regulation

56 Real Prop. Tr. & Est. L.J. 1 (2021), Forthcoming

University of Utah College of Law Research Paper No. 411

45 Pages Posted: 9 Jan 2021 Last revised: 11 Jan 2021

See all articles by Nancy A. McLaughlin

Nancy A. McLaughlin

University of Utah S.J. Quinney College of Law

Date Written: January 9, 2021

Abstract

This article provides an in-depth look at Treasury Regulation § 1.170A-14(g)(6)(ii), known as the proceeds regulation. The proceeds regulation is intended to protect the public investment in conservation if a perpetual conservation easement that was the subject of a charitable deduction under Internal Revenue Code § 170(h) is later extinguished. A proper understanding of the proceeds regulation is critical because the public investment in deductible easements is significant—billions of dollars are being invested in such easements annually—and the regulation has recently been subject to challenges regarding its interpretation and validity. This article examines the history and operation of the proceeds regulation as well as possible alternatives. It explains that the proceeds regulation provides a simple and easy-to-implement rule that avoids a host of future valuation difficulties. It demonstrates that the proceeds regulation is neither irrational nor inherently unfair to donors or subsequent property owners, and serves to temper the perverse incentive that property owners may have to seek to extinguish easements. This article concludes that the proceeds regulation provides a reasonable solution to the difficult problem of ensuring that the conservation purpose of a contribution will be protected in perpetuity as required by § 170(h)(5)(A).

Keywords: conservation easement, 170(h), extinguishment, protected in perpetuity, proceeds, proceeds regulation, procedural invalidity, substantive invalidity, Chevron

JEL Classification: H20, H50, K11, K34, L30, Q20, Q24

Suggested Citation

McLaughlin, Nancy A., Conservation Easements and the Proceeds Regulation (January 9, 2021). 56 Real Prop. Tr. & Est. L.J. 1 (2021), Forthcoming, University of Utah College of Law Research Paper No. 411 , Available at SSRN: https://ssrn.com/abstract=3760530

Nancy A. McLaughlin (Contact Author)

University of Utah S.J. Quinney College of Law ( email )

332 South 1400 East, Rm 101
Salt Lake City, UT 84112-0730
United States
801-581-5944 (Phone)
801-581-6897 (Fax)

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