Opinion
1547-18
02-07-2023
BRIARCREEK PRESERVE, LLC, LDHL INVESTMENTS, LLC, TAX MATTERS PARTNER, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
Travis A. Greaves Judge
This case concerns whether Briarcreek Preserve, LLC (Briarcreek), is entitled to a charitable contribution deduction for a donation of a conservation easement, and if not, whether Briarcreek is liable for an accuracy-related penalty. On August 10, 2018, respondent filed a Motion for Partial Summary Judgment asserting that Briarcreek failed to comply with Treasury Regulation §§ 1.170A-14(g)(6) and -13(c).On October 26, 2018, petitioner filed a Cross Motion for Partial Summary Judgment asserting that Briarcreek complied with both Treasury Regulation sections. In the alternative, petitioner asserted that Treasury Regulation § 1.170A-14(g)(6) was procedurally invalid under the Administrative Procedures Act. Petitioner further contended that even if Briarcreek did not comply with -13(c), it had reasonable cause for its reporting position due to reliance on the advice of a tax professional. In opposing respondent's motion, petitioner also argued that Treasury Regulation § 1.170A-13(c) was invalid.
Unless otherwise noted, all regulation references are to the Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all relevant times.
On April 4, 2022, we issued an Order granting respondent's Motion and denying petitioner's Cross Motion insofar as the Court agreed that Briarcreek failed to comply with Treasury Regulation §§ 1.170A-14(g)(6) and -13(c). The Order also denied petitioner's Cross Motion as to whether reasonable cause excused Briarcreek's noncompliance with -13(c) because relevant facts and circumstances related to the issue remain subject to genuine dispute. Lastly, we held in abeyance petitioner's Cross Motion with respect to the validity of Treasury Regulation § 1.170A-14(g)(6) pending further appellate developments, the context of which is explained below.
In Oakbrook Land Holdings, LLC v. Commissioner, 154 T.C. 180 (2020), and Hewitt v. Commissioner, T.C. Memo. 2020-89, this Court upheld and applied Treasury Regulation § 1.170A-14(g)(6). However, on December 29, 2021, the U.S. Court of Appeals for the Eleventh Circuit, in which venue would lie for an appeal in this case, reversed Hewitt and 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 (11th Cir. Dec. 29, 2021), rev'g and remanding T.C. Memo. 2020-89. A few months later, the Court of Appeals for the Sixth Circuit affirmed the Tax Court's view of the regulation in Oakbrook Land Holdings, LLC v. Commissioner, 28 F.4th 700 (6th Cir. 2022), aff'g 154 T.C. 180, 189-200 (2020), causing a "split" in the Circuits. On October 4, 2022, petitioner in Oakbrook filed a petition for writ of certiorari with the Supreme Court, which the Supreme Court denied on January 9, 2023. No. 22-323, 2023 WL 124412 (Jan. 9, 2023).
In light of the Supreme Court's denial of certiorari, we will follow Eleventh Circuit precedent with respect to the issue of the validity of Treasury Regulation § 1.170A-14(g)(6). 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 Briarcreek failed to satisfy the perpetuity requirement.
It is therefore
ORDERED that petitioner's Cross Motion for Partial Summary Judgment, filed October 26, 2018, is granted insofar as to the invalidity of Treasury Regulation § 1.170A-14(g)(6). It is further
ORDERED that respondent's Motion for Partial Summary Judgment, filed August 10, 2018, is denied insofar as petitioner failed to comply with Treasury Regulation § 1.170A-14(g)(6).