Opinion
11814-19
01-10-2022
OCONEE LANDING PROPERTY, LLC, OCONEE LANDING INVESTORS, 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 Oconee Landing Property, LLC, for a conservation easement. The Internal Revenue Service (IRS or respondent) disallowed this deduction in its entirety. On January 28, 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.
Unless otherwise indicated, all statutory references are to the Internal Revenue Code in effect at all relevant times, all regulation references are to 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 April 3, 2020, filed a cross-motion for partial summary judgment. In its cross-motion petitioner contended that the "judicial extinguishment" regulation is substantively and procedurally invalid. By Order served August 18, 2020, we denied both motions. We denied respondent's motion, finding genuine disputes of material fact as to whether any increase in value attributable to donor improvements would be de minimis. And we denied petitioner's motion because we had previously rejected the same arguments in Oak-brook Land Holdings, LLC v. Commissioner, 154 T.C. 180 (2020).
Currently before the Court is petitioner's Motion for Reconsideration, filed January 6, 2022. Petitioner requests that we reconsider our August 18, 2020, Order and grant its cross-motion for partial summary judgment due to an "intervening change in the law." 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, __F.4th__, __ (slip op. at 36) (11th Cir. Dec. 29, 2021), rev'g and remanding T.C. Memo. 2020-89. Oconee 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).
We will direct respondent to respond to petitioner's Motion for Reconsideration. Our tentative inclination, in light of the Eleventh Circuit's opinion, would be to grant the Motion, vacate our August 18, 2020, Order to the extent it denies petitioner's cross-motion for partial summary judgment, and hold petitioner's cross-motion in abeyance pending further developments. This is the course we have followed in other cases presenting this scenario. See, e.g., Wisawee Partners II, LLC v. Commissioner, T.C. Dkt. No. 6105-18 (Jan. 7, 2022) (order). Further appellate proceedings in Hewitt are possible, and similar questions concerning the validity of the "judicial extinguishment" regulation are now pending before the U.S. Court of Appeals for the Sixth Circuit. See Oakbrook Land Holdings, LLC v. Commissioner, No. 20-2117 (6th Cir. appeal filed Oct. 16, 2020). 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 latter question, we see little to be gained by attempting a definite disposition of petitioner's cross-motion for partial summary judgment now.
In consideration of the foregoing, it is
ORDERED that respondent shall file, by February 10, 2022, a response to petitioner's Motion for Reconsideration of Order filed January 6, 2022. It is further
ORDERED that petitioner may file, if it wishes, by March 3, 2022, a reply to respondent's response.