Lawmakers need to crack down

The legislative task force reviewing Colorado’s overly generous tax treatment of conservation easements is likely to propose some useful ways to root out fraud in the program, but they don’t go far enough.

Colorado officials have already invalidated nearly $15 million in tax credits due to inflated assessments on easements that were donated to land trusts. The state could recover much more after the IRS concludes a more sweeping review of easement deductions declared on federal tax returns.

Problem is, investigators could locate all the bad actors and the legislature could eliminate nearly all the inflated assessments and Colorado could continue to hemorrhage tax dollars. After all, the treasury has handed out more than $270 million in state tax credits for easements since the program became more generous in 2000.

That’s because the easement program — which gives landowners a tax break if they don’t fully develop their property — is open-ended. The amount of tax credits the state could grant in a single year is not capped.

This absence of limits allows the state to hand out credits without setting priorities. And that encourages landowners to cash in with little regard for the relative environmental value the public is getting for its money.

The task force of lawmakers, state regulators and conservation officials is drafting legislation for the next session. Among the promising ideas being considered are mandates to make easement assessments public records, setting up a review committee to approve easement applications before tax credits are granted, and requiring land trusts that qualify for easements to be licensed by the state.

These would all tighten eligibility for landowners and should discourage outright scam artists. But any legislation should go beyond beefed-up disclosure mandates. It should call for mechanisms that place meaningful dollar limits on the easement program. Tax credits have soared from $2.3 million in 2001 to $85 million in 2005.

Other states have found ways to keep their programs under control. Some place much lower caps on the amount of tax credits a donor can claim in a single year. Or they only allow credits to be sold or transferred to third parties if the easement is on land that’s adjacent to parks or other officially protected locations (such as federal Wild and Scenic Rivers). This lessens the chance that owners of rural land that’s unlikely to be developed will take advantage of the easement program.

We not suggesting Colorado adopt one of those ideas wholesale but merely that what’s being proposed may not go far enough. And unless the legislature places a ceiling on the value of conservation easements, the program will continue to encourage abuse while siphoning staggering sums from the state treasury.