Property Rights Foundation of America®
Founded 1994

May 2002:

Land Trusts, Members of Congress, Big Industry Testify Exclusively

Congress Holds Stacked Hearing on Conservation Tax Credits

Big Capital Gains Tax Break would Shift Private Land and
Conservation Easements to Land Trusts and Government

By Carol W. LaGrasse

There was no chance to be heard. The House Ways and Means Committee's Select Revenue Measures Committee held an advocates-only oversight hearing on April 29 to "scrutinize" the Bush Administration's proposal to "encourage conservation" by granting a fifty percent reduction in the capitol gains tax if a landowner sells land or conservation easements to the government or a non-profit land trust.

The Nature Conservancy (TNC), whose president Steven J. McCormick, was near the top of the list of invited witnesses, reportedly announced that H.R. 2290, the bill containing the capitol gains tax break, was their "longtime top priority." TNC's director for congressional affairs, Helen Hooper, pointed out that the bill would create an incentive for landowners who cannot afford to donate their lands to sell land or conservation easements to them or the government.

Land trusts, who are the middle men for the conservation easement transactions, tout this form of divestiture to partial title to land as a way to avoid burdensome estate taxes, fight urban sprawl, and promote "private conservation," and extend other benefits. Private property activists have created a national controversy about the steamrollering movement by pointing out the great loss of equity to the landowner and the permanent removal of the lion's share of the title to private land to the government sector. (The land trusts commonly flip conservation easements on large tracts to government.) In addition, litigation and personal tragedies are beginning to occur because of the weak portion of title retained by the landowner and the misunderstandings related to this.

Subcommittee officials ignored property rights activists who made a behind-the-scenes effort for two weeks before the hearing to seek a more balanced roster of witnesses, or at least nominal representation at the hearing by one or two expert witnesses who have voiced opposition to additional acquisition of fee simple land and conservation easements. Letters that had been sent during recent months to top Bush Administration officials who may be in a position to change the decades-old federal policy of gobbling up full and partial title to private have received unresponsive replies.

By contrast, property rights activists received sympathetic treatment from the press. An article by Audrey Hudson in The Washington Times during February quoted this writer stating that the tax incentive puts the squeeze on private landowners to sell to the government. "This is just another nail in the coffin of private property owners in rural America," was the article's featured quotation.

Chuck Cushman, executive director of the American Land Rights Association, said "I don't know anyone outside of environmental groups who thinks the land is better off when it is managed by the government," according to that article.

Shortly before the hearing, Insight magazine carried an article about the controversy about conservation easements, "Sacrificing Rights to Protect Property."

The article, written by Pat Taylor, investigated a "red-flag alert that went out over the Internet recently warning that a new tactic is being used surreptitiously to deprive landowners of their property rights." According to the article, "The alert was raised by a woman who actually read the fine print after she and her husband had their wills and trusts updated. She was shocked to find clause had been inserted that would allow the 'trustee' to create a conservation easement on their property 'without the consent of any beneficiary.'"

The in-depth article tackled the controversy around conservation easements head on. "[T]he incident illustrates the subterfuge, real and imagined, that critics say has become common in the burgeoning multibillion-dollar conservation-easement movement."

"The ostensible intent of such a legal maneuver is to save the environment and ensure that the land is maintained forever as open space or as, say, a family farm or ranch. But during the last decade it has been fueled by infusions of taxpayer money to huge land-trust charitable foundations, and new IRS laws baiting the hook with potentially huge tax breaks," states Insight.

"The greatest tax break for farmers and ranchers in these schemes comes from their effect on the estate or 'death' tax that heirs must pay," continues the article by Taylor, pointing out that "LaGrasse...has proposed a series of tax reforms, including elimination of the death tax and repeal of the IRS requirement that easements be perpetual. In addition, she argues that ordinary landowners such as ranchers and farmers should get the same tax breaks as tax-exempt land trusts since they too are providing open space with their ranches or farmland."

However, the Bush administration doesn't seem to have taken notice of the many missives or heard the voices of property rights activists at meetings with high-level officials. The President's budget for the Department of Interior includes the fifty percent capital gains tax exclusion for private landowners to sell land and interests in land or water to a government agency or land trust. The budget summary for fiscal 2003, which was proposed during February, stated, "This incentive is another example of a cost effective, non-regulatory, market-based approach to conservation."

The Administration's budget includes more than $530 million for the purchase of private lands or conservation easements, according to the Insight article. A spokesperson at the White House for the office of Management and Budget told Insight that the intent of proposed capital gains cut is to "encourage the sale of appreciated, environmentally sensitive land and land rights to qualified conservation groups, thus achieving conservation goals through voluntary sales of property, rather than imposing government regulation on land use."

The final quote in the Insight article was, "LaGrasse responds, '...They miss the point that restrictions on land that result from conservation easements are by and large greater than restrictions that could be successfully legislated. You can defeat micromanagement of property in a legislative battle, but it's impossible to muster debate or a policy discussion in a transaction involving a single landowner. Easements appear to be nonregulatory, but they are actually very regulatory.'"

The dogged work by property rights activists against the conservation easement movement and the Bush Administration's and Congress's land acquisition proposals has garnered national attention. Perhaps this is why the April 29 hearing was so exclusive. The Washington press might have savored the controversy between grassroots conservatives and "their" Administration.

A lot is at stake. The Administration wants to appear to be easing up on regulations. While appeasing the powerful environmental machine, a big budget for buying land and conservation easements derives credibility with the anti-regulatory crowd on the basis of the "voluntary" aspect, tax alleviation, and "free market claim."

Vice President Dick Cheney has a long involvement with conservation easements. In the days when he was a critic of then-President Clinton's land conservation policies, according to The Wall Street Journal, Dick Cheney was on the board of directors of a preserve formed by several prominent Wyoming ranch owners to save themselves from having to sell their ranches to pay estate taxes. The Spring Gulch ranch owners, including World Bank President James Wolfensohn, tried to persuade Washington to buy conservation easements that would allow the families to use the land and continue living there. The board made a proposal to the Bureau oaf Land Management to exchange conservation easements for the families' 5,020 acres, which were valued at least $130 million when the Journal reported about it in September 2000, for lucrative mineral rights on federal land in southwest Wyoming.

Mr. Cheney set up a meeting between other board members of the Spring Gulch group and the Assistant Secretary of Interior, Robert Anderson. However, according to the Journal, "The Interior Department thought the proposal would unfairly benefit just a few families while taking income from counties in southwest Wyoming that share in federal mineral-rights revenues."

Later, according to the Journal, one ranch owner sold 367 acres for $14 million and the land was subdivided into ranchettes. Other ranch owners began to deal with The Nature Conservancy to convey conservation easements.

The plan to create tax incentives to expand federal government acquisition of land and conservation easements extends back into the first summer of the Bush Administration. In June 2001, The Wall Street Journal reported that Senator Charles Grassley, an Iowa Republican, and Senate Finance Committee Chairman Max Baucus, a Montana Democrat, jointly supported the fifty percent tax break. Sen. Grassley reportedly said , "To my mind, tax incentives may be the next wave of success in the land-conservation movement."

As the proposal and similar bills moved along, bipartisan teamwork led to a roster of five Republicans and two Democrats representing districts from Georgia to the State of Washington who were scheduled to testify on April 29. They were joined by Pam Olsen, Acting Assistant Secretary for Tax Policy of the U.S. Treasury. Jim DeCosmo, Vice President, Forest, Temple Inland Forest Products Corporation, Diboll, Texas, was scheduled to testify on behalf of the American Forest and Paper Association.

Land Trusts were well represented. In addition to the president of The Nature Conservancy, the president of the Land Trust Alliance, Rand Wentworth, and top officials of regional land trusts testified.

The House Subcommittee is chaired by Rep. Nancy Johnson, a Connecticut Republican. Sen. Baucus's companion bill, S. 701, was already the subject of a hearing before the Senate Finance Committee.

The Bush Administration, meanwhile, has dropped its vision of repealing the estate tax, in spite of the research showing the harm that the tax does to free enterprise and the economy. This is a profound example of the problem we face, governed by people who do not make decisions on the basis of principle, including the foundational concept of private property that is the hallmark of our freedom.

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