Opinion
9254-19
02-25-2022
MONTGOMERY-ALABAMA RIVER, LLC, PARKWAY SOUTH, LLC, TAX MATTERS PARTNER, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
Albert G. Lauber Judge
This case involves a charitable contribution deduction claimed by Montgomery-Alabama River, LLC (Montgomery), for a conservation easement. The Internal Revenue Service (IRS or respondent) disallowed this deduction in its entirety. On July 31, 2020, respondent filed a motion for partial summary judgment contending that the deduction was properly disallowed because the deed of easement does not comply with the "judicial extinguishment" regulation. See Treas. Reg. § 1.170A-14(g)(6)(ii).Specifically, respondent argued that the deed contains an impermissible carve-out for donor improvements, which would improperly reduce the charitable grantee's share of the proceeds if the property were sold following judicial extinguishment of the use restriction.
All statutory references are to the Internal Revenue Code 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.
Petitioner timely objected to respondent's motion and, on October 30, 2020, filed a cross-motion for partial summary judgment. In its cross-motion petitioner contended (among other things) that the "judicial extinguishment" regulation is pro-cedurally invalid under the Administrative Procedure Act (APA). By Order served June 11, 2021, we denied both motions. We denied respondent's motion, finding genuine disputes of material fact as to whether the easement deed violated the judicial extinguishment regulation. And we denied petitioner's motion because we had previously rejected the same arguments in Oakbrook Land Holdings, LLC v. Commissioner, 154 T.C. 180 (2020).
Currently before the Court is petitioner's "Renewed Motion for Summary Judgment Under Hewitt v. Commissioner," filed January 20, 2022. Petitioner requests that we reconsider our June 11, 2021, Order and grant its cross-motion for partial summary judgment due to "[n]ewly decided authority." On December 29, 2021, the U.S. Court of Appeals for the Eleventh Circuit held that "the Commissioner's interpretation of § 1.170A-14(g)(6)(ii), to disallow the subtraction of the value of post-donation improvements . . . is arbitrary and capricious and therefore invalid under the APA's procedural requirements." Hewitt v. Commissioner, 21 F.4th 1336, 1353 (11th Cir. 2021), rev'g and remanding T.C. Memo. 2020-89. Montgomery had its principal place of business in Georgia when its petition was filed. Absent stipulation to the contrary, this case would thus be appealable to the Eleventh Circuit. See § 7482(b)(1)(E).
On February 23, 2022, respondent filed a response to petitioner's Renewed Motion. Respondent represents that he does not oppose petitioner's Motion, insofar as it is addressed to the "donor improvements" issue, in light of the Eleventh Circuit's opinion in Hewitt and the "Golsen rule." See Golsen v. Commissioner, 54 T.C. 742, 757 (1970), aff'd, 445 F.2d 985 (10th Cir. 1971). Respondent agrees that his "donor improvements" argument is currently untenable under Hewitt, but he has preserved all other arguments.
We will accordingly vacate our June 11, 2021, Order insofar as it denied petitioner's motion for partial summary judgment on the APA question. And we will hold petitioner's Renewed Motion for Summary Judgment in abeyance pending further developments. This is the course we have followed in other cases presenting this scenario. See, e.g., Oconee Landing Prop., LLC v. Commissioner, T.C. Dkt. No. 11814-19 (Jan. 10, 2022) (order); Wisawee Partners II, LLC v. Commissioner, T.C. Dkt. No. 6105-18 (Jan. 7, 2022) (order). Because we have denied respondent's motion for partial summary judgment on the "donor improvements" issue--for reasons unrelated to the Eleventh Circuit's opinion in Hewitt--this case (unless settled) will proceed to trial to determine the proper valuation of the easement, whether or not the regulation is valid. Given the possibility of further appellate developments on the "donor improvements" issue, we think that the most prudent course is to preserve this issue for possible consideration at trial or in post-trial briefs.
In consideration of the foregoing, it is
ORDERED that the Court's June 11, 2021, Order is vacated insofar as it denied petitioner's Motion for Partial Summary Judgment on the "donor improvements" question. It is further
ORDERED that petitioner's Renewed Motion for Summary Judgment, filed January 20, 2022, is held in abeyance.