First Regular Session Sixty-eighth General Assembly STATE OF COLORADO INTRODUCED LLS NO. 11-0279.01 Gregg Fraser HOUSE BILL 11-1208 HOUSE SPONSORSHIP McKinley, SENATE SPONSORSHIP (None), House Committees Senate Committees Finance A BILL FOR AN ACT Concerning a perpetual conservation easement in gross granted for property in Colorado. Bill Summary (Note: This summary applies to this bill as introduced and does not reflect any amendments that may be subsequently adopted. If this bill passes third reading in the house of introduction, a bill summary that applies to the reengrossed version of this bill will be available at http://www.leg.state.co.us/billsummaries.) Under current law, a state income tax credit is allowed for a portion of the value of a perpetual conservation easement that is granted by a taxpayer on real property located in Colorado. If the easement is terminated for any reason, the bill requires the value of the tax credit to be repaid to the state general fund before the termination is effective. If a governmental entity interferes with the conservation purpose of an easement, the bill specifies that this constitutes a taking of or damage to the easement which can be compensated as provided by law. If land subject to a conservation easement is condemned, the state general fund is to be compensated for the value of any tax credit claimed for the easement. The executive director of the department of revenue (executive director) is authorized to review the appraisal supporting the valuation of an easement and to reject the value of the easement and the amount of the credit claimed in certain circumstances. The bill restricts the ability of the executive director to contest an appraisal and credit claimed for an easement donated prior to January 1, 2008, unless: The executive director has produced clear and convincing proof of overvaluation of the easement, confirmed in writing by the state attorney general prior to a specified date; or The valuation is supported solely by an appraisal from an appraiser convicted of fraud or misrepresentation prior to April 1, 2011, in connection with preparing the appraisal. If the attorney general confirms the clear and convincing proof of overvaluation of an easement and the donor of the easement subsequently prevails in protesting the disallowance of the tax credit, the bill requires the state to reimburse the donor for all costs and attorney fees incurred by the donor reasonably related to the allowance of the tax credit. Be it enacted by the General Assembly of the State of Colorado: SECTION 1. 38-30.5-107, Colorado Revised Statutes, is amended to read: 38-30.5-107. Release - termination. Conservation easements in gross may, in whole or in part, be released, terminated, extinguished, or abandoned by merger with the underlying fee interest in the servient land or water rights or in any other manner in which easements may be lawfully terminated, released, extinguished, or abandoned. If a Colorado state income tax credit has been allowed for a conservation easement pursuant to section 39-22-522, C.R.S., the amount of such credit shall be repaid to the state general fund in full before any such release, termination, extinguishment, or abandonment by merger with an underlying fee interest may become effective. SECTION 2. 38-30.5-108, Colorado Revised Statutes, is amended BY THE ADDITION OF THE FOLLOWING NEW SUBSECTIONS to read: 38-30.5-108. Enforcement - remedies. (4) In addition to any other protections afforded to the owner of property by law, any action of or permitted by a governmental entity that interferes with the conservation purpose of a conservation easement, including activities on property near or in the airspace above a property for which a conservation easement has been granted, shall constitute a taking of or damage to all or a portion of the value of the easement and shall be compensable as otherwise provided by law. For purposes of this subsection (4), routine wildlife and habitat management activities, routine exploration and maintenance of infrastructure such as oil and gas pipelines, routine agricultural purposes such as crop dusting, and the use of airspace by aircraft ordinarily used for emergency purposes such as search and rescue shall not constitute interference with the conservation purpose of a conservation easement. (5) If land subject to a conservation easement is condemned, the amount of compensation to be awarded shall include an amount equal to the amount of any income tax credit allowed for the easement pursuant to section 39-22-522, C.R.S. Such amount shall be paid to the state general fund, with any remaining compensation awarded to be apportioned between the grantor and grantee of the conservation easement. SECTION 3. 39-22-522 (3.5), Colorado Revised Statutes, is amended BY THE ADDITION OF THE FOLLOWING NEW PARAGRAPHS to read: 39-22-522. Credit against tax - conservation easements. (3.5) (c) Notwithstanding any other provision of this section to the contrary, for any conservation easement in gross donated prior to January 1, 2008, for which a credit is claimed, the credit shall be allowed and the executive director shall neither contest nor require additional information regarding the appraisal value of the easement, the amount of the credit, or the validity of the credit allowed pursuant to subsection (2) of this section unless: (I) Prior to April 1, 2011, the executive director has produced sufficient valid evidence to support clear and convincing proof of a rejection based upon overvaluation of the easement, which evidence and sufficiency has been confirmed in writing by the state attorney general and, prior to such date, a formal rejection together with the written confirmation of the attorney general has been mailed to the donor at the donor's last known address; or (II) The valuation is supported solely by an appraisal from an appraiser convicted of fraud or another criminal act of misrepresentation prior to April 1, 2011, in connection with the preparation of the appraisal. (d) In the event that the attorney general confirms the evidence to support a rejection based upon overvaluation of an easement to be clear and convincing in accordance with the provisions of subparagraph (I) of paragraph (c) of this subsection (3.5), and the donor elects to protest the disallowance of the tax credit and prevails in the subsequent hearing or litigation, the state shall reimburse the donor of the conservation easement within thirty days after the final order for all costs and attorney fees incurred by the donor reasonably related to the allowance of said tax credit. SECTION 4. Safety clause. The general assembly hereby finds, determines, and declares that this act is necessary for the immediate preservation of the public peace, health, and safety.