Natural Habitat Conservation
From: Conservation Easements: The Federal Tax Rules and Special Considerations Applicable to Syndicated Transactions
By: Bryan Mick, JD, MBA and Bradford Updike, JD, LLM
Mick Law P.C.
The natural habitat or ecosystem conservation purpose is satisfied if the conservation easement protects a “significant relatively natural habitat in which a fish, wildlife, or plant community, or similar ecosystem, normally lives[.]” 1 This conservation purpose may be satisfied and the deduction may be allowed if the subject habitat has been altered to some extent by human activity “if the fish, wildlife, or plants continue to exist there in a relatively natural state.” 2 An ordinary tract of land where a common fish, animal or plant community, or similar ecosystem normally lives does not satisfy this conservation purpose; the conservation easement must protect a habitat that is significant.3 Significant habitats and ecosystems include habitats for “rare, endangered, or threatened species of animals, fish or plants[.]”4 Alternatively, they can include “natural areas that represent high quality examples of a terrestrial or aquatic community[.]”5 They can also include natural areas that “are included in, or which contribute to, the ecological viability of a local, sate or national park, nature preserve, wildlife refuge, wilderness area, or other similar conservation area.”6
Bryan S. Mick is the President of Mick Law P.C. in Omaha, Nebraska, and a provider of independent due diligence legal services for various broker-dealers and registered investment advisors throughout the country.
Brad Updike joined Mick Law in August 15, 2006, and his areas of practice include securities law, oil and gas, private equity, conservation real estate, DPP due diligence, taxation analysis relating to securitized financing, and securities advertising practices. On a local level, Mr. Updike has also served the legal needs of Omaha-based clients on matters relating to estate planning, private placements, trademark law, and 501(c)(3) non-profit taxation matters.
Bryan Mick, Bradford Updike, Mick Law P.C., SANDLAPPER Securities, LLC, Sandlapper Wealth Management, LLC, and TRIPS are unaffiliated.
1 Treas. Reg. § 1.170A-14(d)(3)(i).
2 Id. For example, the preservation of a lake formed by a man-made dam or a salt pond formed by a man-made dike would meet the conservation purposes test if the lake or pond was a nature feeding area for a wildlife community that included rare, endangered, or threatened native species. Id.
3 Treas. Reg. §1.170A-14(d)(3)(ii)(emphasis added)
4Id. (emphasis added); see also International Union for Conservation of Nature, The IUCN Red List of Threatened Species, http://www.iucnredlist.org/about/introduction. The IUCN Red List of Threatened Species (“IUCN Red List”) is the best known worldwide conservation status listing and ranking system. Species are classified by the IUCN Red List into nine groups set through criteria such as rate of decline, population size, area of geographic distribution, and degree of population and distribution fragmentation. Also included are species that are extinct. When discussing the IUCN Red List, the official term “threatened” is a grouping of three categories: critically endangered, endangered, and vulnerable. The nine groups are: (i) Extinct (EX, no known species remaining), (ii) Extinct in the Wild (EW, known only to survive in captivity, or as a naturalized population outside its historic range), (iii) Critically Endangered (CR, extremely high risk of extinction in the wild), (v) Vulnerable (VU, high risk of endangerment in the wild), (vi) Near Threatened (NT, likely to become endangered in the near future), (vii) Least Concern (LC, lowest risk that does not qualify for a higher risk category and are widespread and abundant), (viii) Data Deficient (DD, not enough data to make an assessment of its risk of extinction), and (ix) Not Evaluated (NE, has not yet been evaluated against the criteria). For due diligence purposes, it is important to consider these classifications when considering the findings of baseline documentation reports that are commissioned by easement donors to justify the conservation values of the properties subjected to easements.
5 Treas. Reg. §1.170A-14(d)(3)(ii). A high quality example of a terrestrial community would include an island that is undeveloped or not intensely developed where the coastal ecosystem is relatively intact. Id.
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