TheDenverChannel.com
Ritter Rejects Tax Amnesty For Land Credits
Disputed Credits Total $100 Million
POSTED: 8:45 am MST January 23, 2010
UPDATED: 11:39 am MST January 23, 2010
DENVER -- Gov. Bill Ritter will oppose any legislation to grant amnesty to hundreds of Coloradans whose tax credits for conservation easements are being challenged by federal and state authorities. Ritter's chief counsel, Trey Rogers, said the disputed credits total $100 million -- money the state needs with a $1.5 billion budget deficit. Instead, the administration wants to settle each case individually.
Conservation easements guarantee that land will not be developed. They allow struggling farmers and ranchers to keep land in agricultural production. Property owners can write off easements as charitable contributions, and they keep title to the land. State tax credits under the program jumped from $2.3 million in 2001 to $98 million in 2008, fueled in part by a change in 2003 that allowed the credits to be transferred and sold.
A report last year by legislative analysts put total credits from 2000 to 2007 at $274 million. The Colorado Department of Revenue has notified 295 landowners and easement credit buyers that their credits were being disallowed because the easements were overvalued by state-licensed appraisers. It ordered them to pay the credits along with penalties and interest.
The Internal Revenue Service reported last year that it had audited people, including buyers of easements, who claimed credits to which they weren't entitled. Rep. Wes McKinley, D-Walsh, said he plans to introduce a bill to grant amnesty for landowners with disputed credits, which he estimates at $300 million, including penalties and interest. "The state made a deal. It was a bad deal, but we need to honor the deals that we make," McKinley said. But Rogers said the best way to serve state government and landholders is to settle each case individually.
Nearly 300 landowners who face state action say they based their credit claims on land appraisals by unscrupulous brokers who offered to develop the land, in violation of state law. Landowners who sell credits to investors are stuck with indemnity clauses that require landowners to cover any losses -- including demands for back taxes. The state sent about 1,200 letters to people who bought tax credits notifying them their deductions were disallowed because the state disagreed with their land appraisals.
Erin Toll, director of Colorado's Division of Real Estate, told lawmakers in April that a grand jury was looking into $24 million that may have been fraudulently claimed for overvalued land. Attorney General John Suthers has refused to say if a grand jury is investigating. The state contends landowners should have known their property values -- which the credits are based on -- were inflated.
John Swartout, executive director of the Colorado Coalition of Land Trusts, says he understands the naivete of some landowners. "They were used to farm subsidy programs that sometimes are too good to be true," Swartout said. J.D. Wright, president of Land Owners United, represents 80 landowners fighting the state. He says mediation can only get landowners in trouble with the IRS, and he has asked Ritter to cease all audits and reevaluate the state tax program. "Any other measure or lack of action will ultimately destroy hundreds of good, honest Colorado citizens," said Wright, a landowner north of Fowler whose one-time $50,000 conservation easement tax credit is in dispute.
Wright said farmers who spent money saved by tax credits on farm equipment and other expenses could be forced into bankruptcy. The impact could ripple through small communities across the state because most easements are in rural areas, he said. Southeast Colorado farmers who filed credits are particularly vulnerable because they are recovering from drought, Wright said. "The number of individuals who are on the brink of foreclosure, as well as troubled banks, is mounting daily," he said. "The state is not going to get its money back. The only way to fix this is grandfather them in."
Conservation groups say the dispute could provide ammunition to kill the program. Ritter wants to cut $13 million from the $52 million program over the first half of this year, and another $13 million for the fiscal year that begins in July. "It's an incredibly effective tool to preserve Colorado's ranch lands from unnecessary development," said Pete Maysmith, executive director of Colorado Conservation Voters, a nonprofit advocacy group.
Conservation easements guarantee that land will not be developed. They allow struggling farmers and ranchers to keep land in agricultural production. Property owners can write off easements as charitable contributions, and they keep title to the land. State tax credits under the program jumped from $2.3 million in 2001 to $98 million in 2008, fueled in part by a change in 2003 that allowed the credits to be transferred and sold.
A report last year by legislative analysts put total credits from 2000 to 2007 at $274 million. The Colorado Department of Revenue has notified 295 landowners and easement credit buyers that their credits were being disallowed because the easements were overvalued by state-licensed appraisers. It ordered them to pay the credits along with penalties and interest.
The Internal Revenue Service reported last year that it had audited people, including buyers of easements, who claimed credits to which they weren't entitled. Rep. Wes McKinley, D-Walsh, said he plans to introduce a bill to grant amnesty for landowners with disputed credits, which he estimates at $300 million, including penalties and interest. "The state made a deal. It was a bad deal, but we need to honor the deals that we make," McKinley said. But Rogers said the best way to serve state government and landholders is to settle each case individually.
Nearly 300 landowners who face state action say they based their credit claims on land appraisals by unscrupulous brokers who offered to develop the land, in violation of state law. Landowners who sell credits to investors are stuck with indemnity clauses that require landowners to cover any losses -- including demands for back taxes. The state sent about 1,200 letters to people who bought tax credits notifying them their deductions were disallowed because the state disagreed with their land appraisals.
Erin Toll, director of Colorado's Division of Real Estate, told lawmakers in April that a grand jury was looking into $24 million that may have been fraudulently claimed for overvalued land. Attorney General John Suthers has refused to say if a grand jury is investigating. The state contends landowners should have known their property values -- which the credits are based on -- were inflated.
John Swartout, executive director of the Colorado Coalition of Land Trusts, says he understands the naivete of some landowners. "They were used to farm subsidy programs that sometimes are too good to be true," Swartout said. J.D. Wright, president of Land Owners United, represents 80 landowners fighting the state. He says mediation can only get landowners in trouble with the IRS, and he has asked Ritter to cease all audits and reevaluate the state tax program. "Any other measure or lack of action will ultimately destroy hundreds of good, honest Colorado citizens," said Wright, a landowner north of Fowler whose one-time $50,000 conservation easement tax credit is in dispute.
Wright said farmers who spent money saved by tax credits on farm equipment and other expenses could be forced into bankruptcy. The impact could ripple through small communities across the state because most easements are in rural areas, he said. Southeast Colorado farmers who filed credits are particularly vulnerable because they are recovering from drought, Wright said. "The number of individuals who are on the brink of foreclosure, as well as troubled banks, is mounting daily," he said. "The state is not going to get its money back. The only way to fix this is grandfather them in."
Conservation groups say the dispute could provide ammunition to kill the program. Ritter wants to cut $13 million from the $52 million program over the first half of this year, and another $13 million for the fiscal year that begins in July. "It's an incredibly effective tool to preserve Colorado's ranch lands from unnecessary development," said Pete Maysmith, executive director of Colorado Conservation Voters, a nonprofit advocacy group.
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