Fraudulent preserves costing taxpayers

Kent and Lynn Davis look over a survey of the land they set aside as a conservation easement on State 11 e-mail this story print this story Related Related Web site • Upstate Forever • South Carolina Conservation Bank • Department of Revenue

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Instead, he stayed put and signed a legal agreement known as a "conservation easement" that forever prevents development on more than a quarter of the property and helps protect mountain views on State 11.

In return for conservation easements, landowners get thousands in tax benefits.

Davis did his easement by the book, but similar agreements across the state are under scrutiny because they've set up lucrative tax breaks without the public benefits, said Burnie Maybank, director of the state Department of Revenue.

Now, state and federal tax authorities are investigating what they believe to be illegitimate easements that have cost taxpayers $220 million over three years, Maybank said. That's could pay more than 5,300 teachers' salaries or nearly two-years of tuition for each of Clemson University's 17,000 students.

Conservation advocates said they fear such shams could give a bad name to legitimate efforts that have protected historic battle sites, mountaintop vistas and Lowcountry marshes.

"The funds being set aside for this effort are much needed," said Bernie Wright, executive director of Penn Center, a group that has conserved 194 acres of Beaufort County land.

Federal law says landowners should receive the tax benefits from easements only if the land serves the public, for example, by protecting views or endangered species. But Maybank said some developers' easements have no public value and in some cases have been inflated by fraudulent appraisals.

Brad Wyche, executive director of Upstate Forever, said the state should investigate abuses and follow up on them.

"Those are very few bad apples in a large barrel of solid, good transactions," he said.

Land loses value when it's put into an easement because it's no longer open to development. The upside is that landowners are eligible for tax benefits.

Landowners can take an income tax deduction of up to 30 percent of their adjusted gross annual income, according to Upstate Forever. The amount of the tax break is determined by figuring the difference between the value of the land with the easement and the value without it.

Maybank said state law prohibits the department from identifying the land parcels it's examining. But he said the irregularities investigators have uncovered take various forms.

Appraisers working with the landowners overvalue the property to increase the tax benefits, he said. In other cases, developers set up land trusts to "grease the skids of residential developments," he said, and put land into easement that shouldn't qualify because it wasn't worthy to develop in the first place.

In one Midlands case, property fronting a golf course was valued at $55 million, or the same as land next to Augusta National, Maybank said.

"You could've bought the whole burg for that and had land left over," he said.

Landowners who legitimately put parcels into easement go through nonprofits that agree to monitor the property forever.

Davis, who retired from Sealed Air Cryovac in 2001, and his wife, Lynn, live next to their 28-acre easement off State 11. They hope the easement helps keep the highway from becoming a commercial corridor like Woodruff or Fairview roads.

"I want to see it stay as scenic as possible," Lynn Davis said.

State taxpayers spent $11 million last year to conserve land by purchasing development rights through the State Conservation Bank. Landowners received a one-time cash payment rather than tax credits, said executive director Marvin Davant. Landowners who conserve land through the state bank must have property that is significant because of its wildlife, ecology, geology or use as a park.

The state conserved 25,000 acres, including a $675,000 tract next to Lake Conestee, a $2 million mountain plot at "Pretty Place" in northern Greenville County and a $341,250 Revolutionary War battlefield in Camden.

"This is too important for an individual to ruin for those who are trying to do it right," Davant said.

Maybank said conservation purchases handled by the State Conservation Bank aren't part of the investigation.

As part of the investigation, the state has audited 32,000 acres on 51 parcels valued at more than $1 million that were put into easement between 2001 and 2003. Investigators did a "spot check" on all easements, even if no wrongdoing was suspected.

The Internal Revenue Service has also launched an investigation, said Maybank.

Maybank said he doesn't expect the state to press criminal charges but abusers could end up having to pay back taxes and the names of some appraisers could be turned over to the state licensing board.

The Davis couple said they haven't decided what to do with the unprotected part of their land when they die, but they have considered putting it into an easement.

"It's a legacy for us to leave behind," Lynn Davis said. Paul Alongi can be reached at 298-4746.