The concept of letting the Department of Revenue grind its way through these cases at their own speed without clear guidelines is entirely unacceptable, abusive, and probably unconstitutional.
Yesterday a Special Review Committee met in the Colorado State Capital to review HB-1169. This Bill was an amnesty effort to grandfather in all tax credits from 2003-2007 as a way to end the approximately 500+ tax-credit-disallowance cases now pending in Colorado. The Bill was originally sponsored by State Representative Wes McKinley and co-sponsored by Speaker Terrance Carroll. In addition to the Committee members (Brian Del Grosso; Cheri Gerou, John Kefalas, Jeanne Labuda), there were several other legislators present, most from the Finance Committee and at least one whose oversight included the Department of Regulatory Agencies.
The Bill was originally vehemently opposed by the Governor and had been “Put-over Indefinitely” for further study (see Blog #26: “Yes, it can get worse”). The Governor instead endorsed a mediation process for negotiating each case to a resolution designed to gain some income for the State. The Department of Revenue was charged with evaluating each case and making recommendations to the Attorney General for negotiation compromises relative to mediation. However, then the budget for the Department of Revenue was severely limited—as all budgets are at this point—and the Department of Revenue could not afford to hire appraisers and properly evaluate cases. So, all the Department has done to date is assign someone to review the returns involving conservation easements and disallow whatever ones they decide to disallow. Where the mediation process stands, whether or not it is actually binding upon any of the involved parties—i.e. donors, purchasers--; and who is going to pay for it seems to be undetermined.
Wes McKinley chaired the meeting and gave the Executive Director of the Department of Revenue one hour—including questions from the audience—to present her Department’s position regarding the process now in place. Wes then gave Landowner/Donors one hour to present their position and suggestions to the Committee—also including questions from the audience and the legislators. And finally, he gave those who purchased tax credits one hour to present their position, suggestions and responses to questions.
Revenue: Essentially, the position of the Director of Revenue is that she “is doing all she can with the budget she has,” and although it is devastating to many of us, we “are not alone and must just see it through” because she and her department are all good people doing their best.
Landowner/Donors: Three of our partners, Marsh, Walt, and Paul went with me to the meeting. Marsh and Walt—both of whom are lawyers—spent time helping me prepare to speak for our partners at the meeting.
Our Presentation: When the Chair called for input from Landowners/Donors I was first on my feet to speak in behalf of all of you. The essence of what I presented is outlined below in the Handout (I left copies for each legislator at the end of my comments). However, mostly because of the presentation of the Director of Revenue I decided it was necessary to change the tone of the meeting. Therefore, I focused upon attacking the process:
1. First, using our cases as a prime example of what is wrong with the process I told them about the fact that “an agent for the State brought one of our appraisers to a hearing under the Department of Regulatory Agencies for overvaluation of our properties.” Then, after the hearing officer expressly found “No evidence of overvaluation,” that same agent (Erin Toll) reporting what she claimed was the evidence provided to the Real Estate Commission (a part of the Department of Regulatory Agencies) quoted only the allegations brought against the appraiser, and never mentioned the actual findings of “No evidence of overvaluation.” On that false basis they literally drove the appraiser out of business and I think out of Colorado. Further, those same false allegations now appear in the attack upon our donations by the IRS and the Colorado Department of Revenue, and the actual hearing result: “No evidence of overvaluation,” appears to be forever lost.
2. When heads began to nod in affirmation of what I was saying, I knew the strategy was working and that it was the right strategy. Therefore I began to seriously attack the fact that the easement program was formulated in the first place by the State to entice people to participate; that it worked; and that if it was faulty it was the State’s fault and not ours.
3. When the audience began interrupting me with applause it was clear the tone had changed. The concept of letting the Revenue Department grind their way through these cases at their own speed and without clear guidelines is entirely unacceptable, abusive, and probably unconstitutional.
4. Essentially, the rest of my presentation pretty much followed the Handout included below.
5. Many other Landowner/Donors spoke, telling some really sad and financially devastating stories, but with the new tone clearly evident: We cannot live with this current approach.
Tax Credit Purchasers: Only a few purchasers came to the meeting, but those who spoke were highly effective. One man is a gravel expert from the southeastern part of the state, and had some revealing tales to tell about his experience in trying to educate a government appraiser on the value of gravel land in Colorado. It was obvious the government, both State and Federal, has no intention of valuing anything above zero or bad pasture land.
The Conclusion: At the end of the meeting, virtually every legislator present vowed that something has to change. Wes McKinley outright stated, “The State designed the program, made the deal, and it is time to stick to it.” He favors a full amnesty for all tax credits through 2007 with no conditions. At least one legislator wanted some exceptions or some form of latitude in the prosecutorial process. Most, however, seemed to favor full amnesty.
Wes McKinley asked me if I would help him rewrite the Bill. Of course, I agreed, and of course I will seek the input of both Marsh and Walt in doing so.
A new Bill will take time, and will not likely help us unless our cases drag on longer than we expect. (Letter written by Stanley K. Mann; blog post by ©Sharon Cairns Mann.)