Opinion
12482-20
11-17-2022
JACK'S CREEK RESERVE LLC, FIVE RIVERS CONSERVATION GROUP, LLC, TAX MATTERS PARTNER, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
Joseph W. Nega, Judge
This consolidated conservation easement case was previously calendared for the session of the Court scheduled to commence January 31, 2022, in Birmingham, Alabama. On September 18, 2021, respondent filed a Motion for Partial Summary Judgment (respondent's motion) and a Declaration of William Carl Hankla in Support of Motion for Partial Summary Judgment. On September 28, 2021, petitioners filed a Motion to Stay Proceedings (petitioners' motion), seeking a stay pending decision by the U.S. Court of Appeals for the Eleventh Circuit in Hewitt v. Commissioner. By Order issued October 6, 2021, the Court granted petitioners' motion, stayed proceedings pending the outcome of Hewitt, and held respondent's motion in abeyance.
On December 29, 2021, the Eleventh Circuit issued its decision in Hewitt v. Commissioner, 21 F.4th 1336 (11th Cir. 2021). Reversing this Court's decision in T.C. Memo. 2020-89, the Eleventh Circuit held that Treas. Reg. § 1.170A-14(g)(6) was procedurally invalid under the Administrative Procedure Act (APA), due to the Department of Treasury's failure to address a "significant" comment raised during the notice-and-comment process. Hewitt, 21 F.4th at 1352-53. On January 4, 2022, the parties filed a Status Report, in which they requested that the Court continue the stay on proceedings, in light of the possibility that respondent would pursue a petition for rehearing and/or a petition for a writ of certiorari in Hewitt.
Unless otherwise indicated, all statutory references are to the Internal Revenue Code, Title 26 U.S.C., in effect at all relevant times, all regulation references are to the Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all relevant times, and all Rule references are to the Tax Court Rules of Practice and Procedure.
On August 19, 2022, the parties filed a Status Report in which they represented that it would be appropriate to lift the stay on proceedings. By Order issued August 25, 2022, the Court lifted the stay and directed petitioners to file a response to respondent's motion on or before October 25, 2022. On October 25, 2022, petitioners filed a Response to Motion for Partial Summary Judgment (petitioners' response), a Declaration of Todd Collins in Support of Response to Motion for Partial Summary Judgment, and a Declaration of Randy Bowen in Support of Response to Motion for Partial Summary Judgment.
Respondent raises two issues with respect to why the deficiency determinations should be sustained in part at the summary judgment stage. First, respondent argues that the conservation easement donations at issue failed to meet the perpetuity requirement in section 170(h)(5)(A) and Treas. Reg. § 1.170-14(g)(6), because the easement deeds at issue allowed petitioners to "reduce any proceeds received upon extinguishment by the amount of post-donation appreciation in value attributable to existing or future improvements." Second, respondent argues that the Forms 8283, Noncash Charitable Contributions, attached to petitioners' 2015 returns were inaccurate with respect to acquisition date and manner of acquisition.
Petitioners seek to rebut both arguments. First, petitioners state that the decision in Hewitt invalidated Treas. Reg. § 1.170-14(g)(6) and thus eliminated the basis for respondent's first argument. Second, petitioners contend that "a dispute of material fact exists as to the substantive and procedural validity of Treasury Regulation 1.170A-13(c)" under the APA. In the alternative, petitioners argue (1) that they strictly or substantially complied with the Form 8283 reporting requirements and (2) that they had reasonable cause for their reporting positions due to reliance on the advice of a tax professional.
Treas. Reg. § 1.170A-13(c) provides certain substantiation requirements for charitable contributions, including, as relevant here, the requirement that a taxpayer "[a]ttach a fully completed appraisal summary. . . to the tax return (or, in the case of a donor that is a partnership or S corporation, the information return) on which the deduction for the contribution is first claimed (or reported) by the donor." Treas. Reg. § 1.170A-13(c)(2)(i)(B).
With respect to the validity of Treas. Reg. § 1.170-14(g)(6), we agree with petitioners. We are obligated to follow Eleventh Circuit precedent on this issue. See Golsen v. Commissioner, 54 T.C. 742, 756-57 (1970), aff'd, 445 F.2d 985 (10th Cir. 1971). Accordingly, respondent is not entitled to judgment as a matter of law on the basis that petitioners failed to satisfy the perpetuity requirement.
Absent stipulation to the contrary, this case is appealable to the Eleventh Circuit. § 7482(b)(1)(E).
With respect to the Forms 8283 issue, we conclude that partial summary judgment would neither expedite resolution of this case nor make trial unnecessary. See Rule 121; Fla. Peach Corp. v. Commissioner, 90 T.C. 678, 681 (1988). Accordingly, we will deny respondent's motion.
Upon due consideration and for cause, it is
ORDERED that respondent's Motion for Partial Summary Judgment, filed September 18, 2021, is denied without prejudice. It is further
ORDERED that, on or before January 17, 2023, the parties shall file a joint status report (or if that is not possible, then separate reports), stating the then current status of this case.