A move to reinstate more than $147 million tax credits for landowners who eschewed development for conservation reasons has gained bipartisan in the fractious state General Assembly.
“I never thought I’d see this day,” Sen. Jerry Sonnenberg, R-Sterling said during a hearing for the measure.
The harmony comes after more than a decade that saw landowners lose out on tax advantages that were supposed to accompany placing land into easements, which block development on open tracts.
Last year’s House Bill 19-1264 seeks a path reinstate state tax credits denied for about 800 conservation easements during the program’s troubled period of 2000 to 2013. The tax credits compensate land owners, to a degree, for what that land could be worth if it were studded with houses or businesses.
Sonnenberg said the harmony came from the work of the task force’s two co-chairs, who haven’t exactly seen eye to eye on the issue in the past.
Co-chairing the task force: landowner Alan Gentz of Sterling, whose conservation easement tax credits were denied more than 15 years ago because the Department of Revenue and the Conservation Easement Oversight Commission believed his lake-improved property had no value. That’s despite the fact that he intended to develop a portion of the property for homes. His farm, which has been in his family for at least two generations, is surrounded on three sides by homes valued for as much as $400,000.
“We’re in a very beautiful place tonight,” Gentz told the joint committee.
Sitting next to Gentz: co-chair Erik Glenn, executive director of the Colorado Cattlemen’s Agricultural Land Trust, one of the many organizations that hold those easements.
Easements are forever. An easement is a donation of land, although the landowner retains the title. Once the donation is signed over to a land trust, the easement is in perpetuity. The state then awards landowners state tax credits, which landowners could use for their own tax bills or sell to tax credit buyers, usually for about 80 cents on the dollar.
In El Paso County, conservation easement s have been used to create buffer zones around military bases including Fort Carson. That has eased development fears from the Pentagon. Other easements have been used to preserve the state’s wildlands and to offer recreation for outdoor enthusiasts.
Glenn and Gentz, who have been on opposite sides of the war between landowners and land trusts, found a way to work together to solve the program’s biggest headache: the millions of dollars in denied state tax credits tied to about 800 conservation easements, mostly in southeastern Colorado, and much of those easements tied to to farm and/or ranch land. It’s caused bankruptcies, foreclosures, divorces, and, according to the aggrieved landowners, at least one suicide.
But 2019 turned out to be the watershed moment everyone was looking for, beginning with an acknowledgement from the land trusts that people were backing away from donating their land for conservation easements, given the years of problems, coupled with news reports about the program’s abuses.
“For the past several years, Erik and I were on opposite sides,” Gentz said.
Sonnenberg has tried to fix the program for years, as has then-state Rep. Jon Becker of Fort Morgan. The two were joined three years ago by the late state Rep. Kimmi Lewis, R-Kim. About 80% of the denied tax credits — around 800 out of 4,200 — were for easements in Lewis’ district.
The task force worked throughout the summer and fall to come up with recommendations for reparations for the tax credits and to come up an alternative valuation system for those easements.
The task force recommended reinstatement of state tax credits when there is a federal tax exemption also granted on the easement. The funds would come from the existing easement program, which can cover up to $45 million in tax credits annually. The task force recommended that landowners, as well as those who purchased tax credits from those landowners, should be repaid those tax credits, less any settlements reached, with up to half of the tax credits available annually from that $45 million pot.
That would take place until all reparations are paid, to the tune of about $147 million.
The task force was unable to come up with a method for alternative valuations, but pledged more work including a Colorado State University study and pilot programs.
Senate Ariculture Chair Kerry Donovan, D-Vail praised the effort.
“You pulled something genuine to the intent of what we asked you to do.”