The Billion-Dollar Loophole
This article is a collaboration with Fortune.
The idea seems like the perfect marriage of environmentalism and capitalism: Landowners give up their right to develop a piece of property, and in exchange they receive a special tax deduction. Nature is preserved and everybody benefits.
That’s traditionally how what are known as “conservation easements” worked. In California’s Napa Valley, for example, a former biology professor and museum director named Giles Mead agreed not to develop 1,318 hilltop acres in 1983 and got a deduction in return. The property, Mead Ranch, features vernal pools and rare and endangered plants. Two entirely new species were discovered there. Bears, bobcats and mountain lions roam the grounds. Mead allowed groups of hikers, birders, and plant enthusiasts to visit. He sometimes greeted them with glasses of wine from the family’s vineyard. Since Mead’s death, his daughter has kept the property available to the public.
A growing number of recent easement donations, however, are driven by a more commercial reward — an outsized tax deduction for wealthy investors. Known as “syndications” (or “syndicated partnerships,” since they’re typically offered in that structure), they’re deals orchestrated by middlemen with the goal of big payoffs for all of the participants, many of whom have never visited the land in question.
One example: the former Millstone Golf Course outside of Greenville, South Carolina. Closed back in 2006, it sat vacant for a decade. Abandoned irrigation equipment sat on the driving range. Overgrowth shrouded rusting food and beverage kiosks. The land’s proximity to a trailer park depressed its value. In 2015, the owner put the property up for sale, asking $5.8 million. When there were no takers, he cut the price to $5.4 million in 2016.
https://www.propublica.org/article/conservation-easements-the-billion-dollar-loophole