Charlestown Land Trust plays Russian Roulette with the IRS

Will the Trust’s handling of conservation easements cause tax problems for itself and its donors?

By Will Collette

On June 25, the Y-Gate Scandal was extended for another month. At the request of the Charlestown Land Trust, the Town Council voted to defer action on the resolutions to consummate the Y-Gate deal – i.e. the payment of $398,000 in town funds for a “conservation easement” until its July meeting.

That gives us more time to examine exactly what a “Conservation Easement” means and why it is being used as the device to loot Charlestown taxpayers of their money for the limited use of a derelict piece of property.

Until the Charlestown Land Trust became a central figure in the Y-Gate Scandal, it was a widely respected community institution in Charlestown as it has taken 52 properties under its stewardship. The Trust has done great things for Charlestown, and hopefully it will resolve its problems, mend fences and do great things in the future.

But since its involvement in Y-Gate, we have learned that the Charlestown Land Trust had put its corporate charter in jeopardy by failing to file the simple, 2-page annual report with the Secretary of State and had given the Town of Charlestown a land appraisal on the derelict YMCA camp that was based on “hypotheticals known to be false.” 

Now there are serious concerns about the way the Trust valuates conservation easements, such as the easement it has proposed to sell to Charlestown taxpayers for $398,000. We've raised questions - based on the paper trail - about how much a conservation easement is actually worth and what Charlestown citizens would actually get for their money.

So far, neither the Town Council nor the Land Trust have given answers consistent with the actual records.

Conservation easements are the bread-and-butter of hundreds of land trusts all across the US. Such easements are the way most land trusts acquire property – they receive a conservation easement from a property owner to preserve desirable property from development, and the property owner gets to deduct the value of that easement from his or her income taxes.

Often, a conservation easement allows the property owner to retain the ownership and use of the land, including the right to sell the land, easement and all.

Because of the high potential for tax fraud, IRS has strict rules on how you set the value of a conservation easement. The national umbrella group for America’s land trusts provides detailed guidance on how to set the value for conservation easements.

Looking at the CLT’s records, it appears that the Charlestown Land Trust does not follow the IRS regulations nor the Land Trust Alliance guidelines. By contrast, the Westerly Land Trust seems to go by the book. Here’s how the Westerly Land Trust describes conservation easements in its most recent IRS-990 filing:

By contrast, this is how the Charlestown Land Trust handled the same IRS question:

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I did not see in any of the Charlestown Land Trust's tax filings an explanation for why they decided to change their valuation method away from the prescribed method. But their choice to value conservation easements in this fashion comes with consequences. 

One of those consequences is their credibility. Land Trust Treasurer Russ Ricci wants Charlestown to forget what the CLT told the IRS and pay attention instead to the fairy tale appraisal that valued the Y-gate property at $730,000. Just pretend it's a residential development with none of the obvious structural problems and potential contamination. Ignore what the Land Trust told IRS and just pay the money and be thankful for 27.5 acres of rural junkyard being added to the town's "open space" inventory.

But it also occurred to me that the Charlestown Land Trust may have more problems than its credibility issues with Charlestown taxpayers.

The IRS really, really watches how land trusts deal with the valuation of conservation easements. The Land Trust’s non-conforming definition of the value of conservation easements could draw down IRS wrath not just on the Land Trust but also on those donors who have given the Land Trust conservation easements and then taken the charitable donation on their federal income tax. All in good faith.

As Evelyn Smith commented, there are well-established rules for how conservation easements are valued. They are set by the IRS and well known throughout the many land trusts across the country.

According to the notice the Charlestown Land Trust filed with the IRS, they changed their method of valuation in 2009. Why or how they did so is not explained. Why they decided to deviate from the guidelines from the national Land Trust Alliance or the IRS regulations is not explained. I would really like to know what the Land Trust gained by making this important definition change.

The Y-Gate transaction started in 2011, so at the time the Charlestown Land Trust’s Treasurer Russ Ricci told Charlestown taxpayers that $475,000 (the price last February) for a conservation easement was “a bargain….like fifty cents on the dollar,” he must have known that his organization told IRS that they considered conservation easements to be worth no more than $1, and that they were actually a liability.


After all, it was Russ Ricci who signed that tax return carrying the statement that conservation easements are actually a liability..

But what about the CLT’s land donors? They gave the CLT easements in good faith and have presumably been deducting the value of their easements from their taxes. What number are they using? Zero? $1? Less than zero? Or a valuation based on an appraisal that uses false assumptions?

It is not just the Land Trust’s reputation that is in jeopardy, but the legal interests of their donors as well. And did I mention that they want Charlestown taxpayers to buy an easement they consider to be less than worthless for $398,000?