By demonstrating strong leadership in ethical reforms, I believe that land trusts can limit the need for excessive government regulations.
Rand Wentworth. Exchange, Fall, 2004,pp 3
Most of us remember 2003 and 2004. It was the dot-com bust for the land trust community. Decades of unprecedented growth hit the skids. Since the 70s, land conservation had been on a roll – hundreds of new land trusts, thousands of new easements, millions of new acres protected. New federal funding, new state tax incentives, new local open space programs. Land trusts were non-partisan; we were win-win; they loved us on Wall Street, they loved us on Main Street, they loved us where there were no streets. With the exception of a handful of people in Alamogordo, New Mexico, who saw black helicopters in their cornflakes, everyone loved land trusts.
Then a couple of Woodward/Bernstein wannabes published a series of articles in the Washington Post that exposed some unseemly deals at The Nature Conservancy. Truth be told, it almost had to be TNC, because the deals were too big for virtually any of the rest of us. Low-interest mortgage loans to the President, a $3 million for-profit bed and breakfast venture, oil & gas royalty deals. The rest, as they say, is history. The Senate Finance Committee, long a friend to conservation, scheduled hearings on the TNC debacle. Next up was hearings on land trusts. The staff head of the Committee wanted blood. The IRS was asked to look into land trusts and conservation easements. The powerful Joint-Committee on Taxation recommended draconian regulations. Rumblings of Congressional oversight were in the air.
They were dark days. Conservation easements made the IRS list of top ten tax scams. Suddenly, land trusts were mentioned in the same breath as the United Way, which had been exposed a year earlier for massive abuses. By the luck of the draw, Colorado became ground-zero. The IRS opened a special 14-person office in Denver and declared “96% of conservation easements flawed.” The press ran articles. Legislators took notice.
To their credit, Rand Wentworth and Russ Shay at LTA took on the fight immediately. They were willing to step in front of what appeared to be a fast-moving federal freight train coming through the tunnel. I know Mark Ackelson at the Iowa Natural Heritage Foundation and Rock Ringling at the Montana Land Reliance were critical in reassuring the Finance Committee leadership – Senators Grassley and Baucus from their home states – that we could right the ship. We had to prove we could fix the problems, or face serious regulation and a slash in conservation benefits. Our thirty-year honeymoon was over.
LTA began the process to revise the 1996 version of its Standards and Practices for Land Trusts. These revisions were to become the centerpiece of the effort to demonstrate to Congress that, yes, the land trust industry could self-regulate. Concerted effort was made to build land trust consensus around the Standards. Adoption was made mandatory for LTA membership. Education was stepped up to raise the bar. A new accreditation program would recognize compliance. An industry mobilized to meet the challenge of self-regulation.
The Colorado situation was unique. Two rogue groups had capitalized on lucrative tax benefits to run amok. Despite repeated pleas from the land trust community, the State agency that was supposed to oversee them did not. Eventually, the land trust community engaged supportive legislators to introduce reform legislation to stop the abuse. The reforms, based largely on Standards and Practices, worked. The bad guys have been stopped and the industry is regaining public trust. In Colorado, the legitimate land trust community did not create the problem, but it solved it.
I’m sure there may be an industry that has addressed self-regulation as competently and constructively as the land trust community, but I don’t know what it is. As Diana Aviv, President and CEO of the Independent Sector said, “I have been impressed at how quickly this program (Accreditation) has won the confidence of Congress and the IRS, and I commend the Land Trust Alliance for serving as a national model for self-regulation.“ It appears we’ve weathered the storm. Congress is back to talking about incentives, not regulation, for land conservation.
Sad to say, that may not be light we see at the end of the tunnel. It may be another freight train coming our way. Actually, fifty freight trains. While we may have fended off federal regulation, we could be on the verge of new, wide-spread regulation at the State level. An elite, powerful legal group, the Uniform Law Commission (www.nccusl.org), has issued the Model Protection of Charitable Assets Act, and endorsed the Act’s adoption at the state level. While comprised of lawyers from each state, the ULC is not elected, and judging by the record, neither sought nor received any stakeholder input in drafting the Model Act. Now the Act is in the hands of most or all of the State Attorney Generals, and, at least in Colorado, the legislative drafting office.
The Act affords very broad authority over “charitable assets” (the comments accompanying the Act include conservation easements in that definition) to the State Attorney General. This includes the right to “enforce, remedy, or intervene in their misapplication.” It provides the AG with subpoena and investigative powers, and requires land trust registration, annual reporting and fees. It requires notification of the AG of any “disposition, amendment, action or proceeding” relating to a charitable asset (i.e., conservation easement). The Act further gives the AG rule-making authority for charitable assets.
Obviously, provisions of the Act may run counter to existing State laws, particularly in states recognizing conservation easements as a property interest. Certainly Section 7 of the Act, which renders a federal court decision regarding a conservation easement not binding if the AG has not been notified, runs counter to Sec. 170(h) of the Treasury Regulations. But there’s also no reason to suppose that rules promulgated by a State AG will be consistent with Standards and Practices, or for that matter, be consistent with other states.
So while we can pat ourselves on the back for demonstrating a commitment to self-regulation adequate for Congress, it apparently falls short of the expectations of the Uniform Law Commission. So what is the consequence of State AG oversight and rule-making? It would appear that the parameters of 170(h) are now in play, as are the Standards and Practices adopted by land trusts across the country. If State AG’s promulgate their own regulations, each with their own nuances, will Standards and Practices, the centerpiece of the industry self-regulation, be relevant? What if these new regulations are not consistent with Standards and Practices? What is the significance of Accreditation if AGs take over the registration, reporting, and regulation of charitable assets? In other words, what’s the relevance of self-regulation, if you’re not self-regulated?
It potentially goes further. By granting the Attorney General the authority to protect charitable assets (conservation easements), including their “modification, interpretation and termination,” what is the role of land trusts in conservation easement amendment, enforcement and defense? What is the role of the new insurance vehicle, Terafirma? Should land trusts defend easements, or leave it to the State? If the State compels a land trust to defend an easement, will Terafirma provide adequate coverage? Of course, problematic in all this, is, will the State get it right? Will they understand conservation purposes? Will they interpret intent as we do? Will they get industry practices for stewardship? Perhaps most important, will they care?
In short, will the campaign for land trust self-regulation all be for naught?
Experience should teach us to be most on our guard to protect liberty when the government’s purposes are beneficial. Men born to freedom are naturally alert to repel invasion of their liberty by evil-minded rulers. The greater dangers to liberty lurk in insidious encroachment by men of zeal, well-meaning but without understanding.
Justice Brandeis in Olmstead v. United States in 1928