The ACE Basin, which stands for the three rivers -- Ashepoo, Combahee and Edisto -- that run through it, is closely tied to tax incentives for conservation easements that have protected more than 57,000 acres of the 350,000-acre watershed.
Easements are guarantees by private landowners to restrict or eliminate development opportunities on their land in return for valuable tax benefits.
But, after substantial media coverage of abuses, state and federal tax collectors are scrutinizing past conservation gifts and suggesting sweeping tax reforms in an effort to pull money-hungry developers out of a tax credit program established to spur land preservation, not private profit.
Offenders include golf courses receiving large tax returns for protecting greenways and developers offering up undevelopable portions of their land for the lucrative tax credits.
While conservationists support state efforts to crack down on abusers, they oppose federal efforts to reduce or eliminate what is considered to be a major tool in competing for viewscapes and historical vistas often eyed for opulent waterfront homes and rural hideaways.
Current incentives include a 100 percent tax deduction for the value of a conservation gift -- more profitable for property owners who donate land or sell development rights through a conservation easement. South Carolina also provides an income tax break for 25 percent of the federal deduction.
Recommendations for nonprofit reforms coming out of the Joint Committee on Taxation earlier this year included eliminating federal tax credits for property owners who continue to live on the property under an easement and reduce other federal tax credits from 100 percent to 33 percent.
"That's overkill," said Ken Driggers, executive director of the Palmetto Conservation Foundation.
The Senate Finance Committee is expected to take up the recommendations this spring, along with reviews underway by state officials and a commissioned nonprofit panel.
Questionable values
The abuses in the system, recognized by the federal tax commission and a statewide review by the S.C. Department of Revenue, are typically due to tax rewards for worthless easements or overestimated property values garnering unwarranted tax breaks.
The state audit of conservation easements negotiated by 55 state land trusts from 2001 to 2003 valued at least $1 million each showed easement values totaling more than $255 million.
The Revenue Department will narrow the review of properties to those where the tax deduction should be revoked or minimized and issue new tax bills for the balance, likely collecting "multi-millions" of dollars for the state, Bernie Maybank, director of the Revenue Department, said Wednesday.
Among those properties, between five and 10 had questionable or no conservation value, he said.
Though he would not give specific examples, Maybank said questionable properties included land protected where development was already restricted or prohibited, including wetlands, or golf courses and other commercial property designated as open space that would have been preserved regardless.
With almost 1,500 acres under easement, the Beaufort County Open Land Trust doesn't take any easements on wetlands or marshlands, said Cindy Baysden, the nonprofit's executive director.
"What can happen to them? Nothing," she said. "So why protect them?"
An unknown number of other easements audited by the state had inflated values, Maybank said, with most offenders involved in establishing exclusive trusts for their property to avoid the outside scrutiny of nonprofits.
"We found some grossly excessive valuations," he said.
Aside from intentionally misleading evaluations, the difficulties in appraising easements were recognized by both Maybank and the federal report. Valid appraisals can sometimes be complicated because comparable sales are hard to find to establish values, said Stewart Tedford, a Columbia appraiser.
"There's not really a market," he said. "There's really a lack of sales data."
When sales are not available, an appraiser must determine the cost to the property owner in limiting development on the land, where errors can often be introduced, Tedford said.
"There really hasn't been a lot of education offerings," he said. "They can be very difficult even for the most experienced appraiser."
A legitimate appraiser can decrease an easements tax value based on when a property has limited or no conservation value or when there are other benefits to the taxpayer, including the increased value of a neighboring lot, Tedford said.
While federal officials are concerned about other activity, including trusts selling off conserved land for a profit and other conflicts of interest, none were uncovered in the state report, Maybank said.
Call to action
South Carolina conservationists argue that reforms are needed in enforcement and assessments, but eliminating or reducing the tax credits shouldn't be an option.
"At the very least we need to maintain the incentives we have," said Brad Wyche, president of the South Carolina Land Trust Network.
The reform talks follow a hot year for conservation in Beaufort County, with nearly $20 million spent on land buys and conservation easements matched with a steady pace of nonprofit efforts.
Because Beaufort County has been primarily purchasing property, mostly at the fair market value, tax benefits are minimal for property owners, said Slade Gleaton, Charleston director for the county's conservation partner, the Trust for Public Land.
"I can't say it's been a strong incentive for any of the purchases," he said.
But local conservation nonprofits often accept donated land or receive conservation easements promising development restrictions. Both transactions rely heavily on the tax benefits to entice property owners.
"It will tragically impact conservation," Baysden said, noting the 1,500 acres the local Open Land Trust has protected through easements. "Those property owners were incented because of the tax benefits."
Though appreciative of the tax break, John Iglehart said he granted a 110 acre conservation easement of his property near the ACE Basin in early 2003 primarily because of the need.
"The main thing for us was to conserve open space," he said.
Iglehart hasn't used the tax credit yet because his property already receives a reduced tax bill under state agricultural exemptions. But he said he'll likely use the credit when he sells the property to offset a mandated five-year rollback of the agricultural exemptions.
Local and nationwide groups are calling on members to write personal letters to the Washington legislators likely to weigh the recommendations coming out of the taxation committee this spring.
In a letter earlier this month to Sen. Charles Grassley, R-Iowa, chairman of the Senate Finance Committee, Gov. Mark Sanford stated his opposition to the tax reforms.
"While there have been some abuses of the tax benefits of easements, conservation easements have been successful and are essential to the protection of land in South Carolina and many other states," the governor states.
Sanford noted easements often keep property on the tax rolls while requiring little, if any, public cash or maintenance.
Sen. Lindsey Graham's spokesman Kevin Bishop said Thursday that the South Carolina Republican also has concerns about the reach of the easement incentive reforms.
Instead of curtailing incentives, Sanford called on Congress to enact strict standards for easement grants so that landowners looking for legitimate compensation can continue to be encouraged.
The national Land Trust Alliance has established its own strengthened guidelines for acceptable easements, calling on trusts to confirm their ability to enforce and maintain easements and for more stringent accreditation for easement assessors.
Baysden said the guidelines will bring other trusts up to standards the Beaufort group already holds itself to. She noted the group annually performs on-site reviews to make sure easements are being carried out faithfully.
While the state and federal officials look to weed out abusers, Driggers stressed that the Palmetto Conservation Foundation and other established South Carolina trusts are doing legitimate work.
"The organizations (taxpayers) are familiar with are valid organizations doing valid conservation work," he said.