“There is a tax shelter gold mine here, and they’re fighting very hard to protect it,” Oregon Sen. Ron Wyden, chair of the Senate Finance Committee, said. “There are enormous sums of money to be made as long as the number of transactions keeps increasing. This is a textbook case of the power of lobbyists.”
The government is targeting a tax deduction that goes by the cumbersome name “syndicated conservation easement,” which exploits a charitable tax break that Congress established to encourage preservation of open land. Under standard conservation easements, landowners who give up development rights for their acreage, usually by donating those rights to a nonprofit land trust, get a charitable deduction in return. When conservation easements are used as intended, both the public and the owner of the property benefit. A piece of pristine land is preserved, sometimes as a park that the public can use, and the donor gets a tax break.
The syndicated versions are different. Instead of seeking to protect a bucolic reserve for wildlife or humans, profit-seeking intermediaries have turned the likes of abandoned golf courses or remote scrubland into high-return investment vehicles. These promoters snatch up vacant land that till then was worth little. Then they hire an appraiser willing to declare that it has huge, previously unrecognized development value — perhaps for luxury vacation homes or a solar farm — and thus is really worth many times its purchase price. The promoters sell stakes in the donation to individuals, who claim charitable deductions that are four or five times their investment. The promoters reap millions in fees.
ProPublica first investigated the booming syndicated conservation easement business, which initially took root in Georgia, back in 2017. Efforts to shut it down were then already underway, led by the Land Trust Alliance, a trade association whose 950 members administer traditional conservation easements. As longtime advocates of the charitable tax break, Alliance leaders were horrified to see it exploited, in their view, by “brazen” profiteers claiming bogus deductions.
Fearful that this would jeopardize the conservation deduction altogether, the Alliance barred its members from accepting easement donations from syndicated deals and prodded the IRS to begin a crackdown. By 2020, that effort was underway in earnest.
But the syndicators flummoxed their opponents by refusing to back down, despite IRS audits and enforcement efforts, which had shut down other tax schemes in the past. The syndicators had formed their own Washington trade group, called the Partnership for Conservation (or P4C). They began spending millions on lobbying Congress and public relations. P4C argues that syndicated deals offer conservation and profit, and it rues what it has called the “chilling effect” of the government efforts to crack down.
Today, the fight has taken on a grinding quality. By the IRS’ most recent reckoning, the use of syndicated easements grew from 249 deals in 2016, generating $6 billion in charitable deductions, to 296 deals in 2018, producing $9.2 billion in deductions. (By contrast, more than 2,000 nonsyndicated easement deductions have resulted in about $1 billion in annual deductions.)
The trend continues today, IRS Commissioner Charles Rettig told the Senate Subcommittee on Financial Services and General Government last month. He was visibly frustrated. “Notwithstanding our efforts,” Rettig testified, “we have not had an impact on essentially slowing the volume of these transactions that we receive currently. We need Congressional help. We need a statute to help us curb this activity.”
A bipartisan group of influential lawmakers has tried. Democrat Wyden and Iowa Sen. Charles Grassley, the finance committee’s ranking Republican, jointly released a 151-page investigative report in 2020 that referred to syndicated easements as a “dollar machine” for wealthy taxpayers. “You simply insert the dollar bill and then watch the Dollar Machine return two dollar bills to you,” the report explained. “But it was not the promoters who gave back the two dollars; it was the Federal government by way of foregone tax revenue, and the only risk involved was whether or not the transaction would lead to an audit.”
Others looking to rein in syndicated deals include Montana Republican Sen. Steve Daines, Michigan Democratic Sen. Debbie Stabenow and House members Mike Thompson, a California Democrat, and Mike Kelly, a Pennsylvania Republican. Together, several of these lawmakers introduced the Charitable Conservation Easement Program Integrity Act of 2017 — and have reintroduced it, in updated form, in one congressional chamber or the other, eight times since, most recently a year ago.
The legislation aims to put an end to syndicated deals by eliminating their profitability, with a bar on taxpayers claiming easement deductions that exceed 2.5 times their investments. Closing this loophole would generate $12 billion in additional tax revenue through 2027, according to the Office of Management and Budget. But the legislation has never gotten far — and lawmakers say that’s no accident.
Since 2017, syndicators have spent $11 million on lobbyists, according to publicly filed lobbying disclosures. P4C has paid for more than $6 million of that. EcoVest Capital, a big promoter based in Atlanta that is now facing a Justice Department civil fraud suit, has spent $3.3 million. (By contrast, the Land Trust Alliance has spent $2.4 million on lobbyists during the same time period.)
While recruiting congressional allies to block the Easement Program Integrity Act, syndication advocates have also gone on the attack, pressing Congress (unsuccessfully, so far) to strip the IRS of funds used to enforce the agency’s 2017 listing notice that flags profit-making syndicated deals as abusive and requires participants to report their involvement.
Syndication promoters have actively courted Democratic support, adding Waxman Strategies, a self-described “progressive-minded public affairs firm” chaired by Henry Waxman, 82, the liberal former California representative, to their lineup of heavyweight lobbyists. In April 2018, P4C founder Frank Schuler, whose Atlanta firm was then one of the most prolific promoters, advised top executives at EcoVest about the move. “P4C is about to get the Waxman group underway to work on the D side of things,” Schuler wrote, in an email disclosed in court filings. “They really believe in what we are doing and that was a condition of Waxman’s to undertake the engagement. This is another $23k per month but we are in the thick of the fight and now is the time.”
Since then, Waxman Strategies has earned $485,000 for representing syndicators, with the former congressional representative working on the issue along with others at the firm. “Partnership style conservation easements are an important tool for conserving land that is under development pressure,” Michael Goo, the firm’s managing director and a former staff director for a House environmental subcommittee, told ProPublica in a written response to questions sent to Henry Waxman. “We believe they can be used to mobilize private capital into conserving land that in fact would be developed sooner or later.” The reform legislation, he added, “would effectively remove the incentive for investors to mobilize private capital into conservation easements.”
Unable to move their Easement Program Integrity Act through a divided Congress, supporters managed late last year to get its language included in the “Build Back Better” provisions passed by the House Ways and Means Committee. This raised hopes that it could get enacted along with the spending measure, which would require just a majority vote in the Senate.
Sen. Kyrsten Sinema, the enigmatic Arizona Democrat, who represented a potentially decisive vote in her 50-50 chamber, put an end to that, telling the White House the syndication-killer language was among the provisions she wanted out of the bill, according to press reports. It was removed. That prompted 13 conservation groups to write Sinema on Dec. 7, pleading with her to “stand with us” to “curb abuse and restore the integrity of this cherished and worthy conservation program.”
Sinema, whose objections to the measure remain unclear, was unmoved. “All efforts to persuade the AZ Senator to reconsider her position have failed,” one advocate for the measure told ProPublica in an email. (Sinema’s staff did not respond to ProPublica’s requests for comment.)
Since then, President Joe Biden, signaling his support, has included the measure in his proposed 2023 budget in a section entitled “close loopholes.” But it remains far from enactment.
Rep. Thompson, an original sponsor of the measure, told ProPublica his bill is “a no-brainer. It stops a bunch of individuals who have been taking advantage of the taxpayers and lining their pockets with taxpayer dollars. It’s one degree off criminal what they’re doing, and they’re getting away with it.” Thompson said he’s looking for “other places to put the language. If we can find a vehicle where it works, we’ll put it in. I’d do it today if I could.”
Syndication easement promoters have attacked the measure by claiming it would allow the IRS to “retroactively” disallow transactions that are now legal — even though the agency first warned taxpayers against engaging in syndicated deals back in early 2017, when it identified them in its listing notice as an abusive “tax avoidance transaction.” The IRS has been routinely auditing such deals since then.
P4C has taken up this cry on its web page and Facebook site, where it promotes its members’ work on behalf of “private land conservation” as essential to the survival of the planet. One posting displays an image of two trapped raccoons, next to the words, “Don’t let this happen to our wildlife”; it warns that “retroactive tax hikes will have devastating consequences on our natural lands and wildlife.” Robert Ramsay, the group’s president, told ProPublica that such a “punitive retroactive tax law change” would harm “a large swath of American taxpayers” eager to participate in land conservation, from “a variety of walks of life.”
Andrew Bowman, CEO of the Land Trust Alliance, called the fairness argument “a canard.” As he put it, “People were on very clear notice that the federal government was saying this was abuse. They haven’t seen the need to stop.” This, he said, is why congressional action is necessary: “The IRS has thrown everything they have at it.”
In 2020, after warning that it planned to audit every taxpayer return claiming a deduction for a syndicated easement, the IRS announced a “limited-term” settlement offer, allowing individual investors to pay back taxes with a reduced penalty. Few took the agency up on its offer. In an internal IRS management review last year, agency officials lamented the poor response, noting, “Many taxpayers are undeterred and are opting for litigation, clogging up the Tax Court.” (One reason taxpayers are willing to fight: Syndicated easement deals routinely set aside $500,000 or more in advance to handle lengthy audits and tax court fights.)
The IRS is now examining the returns of 28,000 investors in syndicated easements, challenging $21 billion in deductions claimed between 2016 and 2018, according to testimony by Rettig.
For its part, the Justice Department has taken the enforcement fight to the courts, with legal actions shedding light on industry practices. In December 2018, a government civil suit targeted Atlanta’s EcoVest Capital, which built a national client-feeder network of brokers, financial advisors and accountants, who received generous referral fees.
According to an amended DOJ complaint, EcoVest had been involved in 58 syndication deals between 2013 and 2018, generating nearly $3 billion in federal tax deductions — on average, a write-off of $4.39 for every dollar invested. (For a wealthy taxpayer investing $100,000, that would have effectively generated a profit, often in a matter of months, of $60,000 or more.) Fifty-one of those 58 deals, according to the government complaint, relied on what the DOJ called “grossly overvalued” appraisals performed by a single appraiser, Claud Clark III, based in Magnolia Springs, Alabama.
The Justice Department sought to bar EcoVest and five individuals associated with the company, including Clark, from any future easement deals. It has already made some inroads. Defendant Nancy Zak, a syndicated easement pioneer, settled with the government in March 2021. She denied wrongdoing but accepted a lifetime bar from the easement business and agreed to pay an undisclosed settlement. (According to lobbying registrations, it was one of Zak’s firms, called Greenth, that hired Waxman Strategies in 2018, paying $20,000 in fees. Waxman Strategies said it terminated its relationship with Zak immediately after the government sued her. The firm then began getting paid, $465,000 to date, by Red Oak Reserve LLC, a low-profile legal entity that previously listed Zak’s office number in SEC filings. Waxman Strategies’ Michael Goo said Red Oak Reserve was founded by Brian Sullivan, who is a former Nancy Zak associate. Sullivan declined to comment.)
EcoVest’s go-to appraiser, Clark, also now appears to be out of the syndicated easement business. After several complaints to state boards about his methods, Clark has given up all his licenses to perform appraisals, according to a national appraisal industry database. His LinkedIn account now lists him as “Retired.” A recent filing in the DOJ case says he’s currently engaged in settlement talks with the government.
EcoVest’s CEO and Zak did not respond to ProPublica’s requests for comment. EcoVest and Clark (whose lawyer declined comment) have denied any wrongdoing in earlier court filings. Atlanta-based Ornstein-Schuler, another of the biggest syndicated easement promoters, announced in January 2019 that it was getting out of the business.
Criminal investigations of industry practices are reportedly underway in three states. The crackdown’s most sensational case became public in February, when a federal grand jury in Atlanta indicted North Carolina developer Jack Fisher, a major syndication deal promoter and owner of Inland Capital Management. The 135-count indictment charged Fisher and six associates with participating in a conspiracy to sell $1.3 billion worth of illegal tax shelters. The charges against Fisher include wire fraud, conspiracy to defraud the U.S., money laundering and aiding in the filing of false tax returns. He has pleaded not guilty.
The indictment was backed by a string of damning statements attributed to Fisher, including several secretly recorded by an undercover government agent posing as an easement promoter.
The indictment, for example, charged that Fisher’s conservation deals relied on “fraudulent” and “grossly inflated” land appraisals, often valuing the easement properties at more than 10 times what he had paid for them just months earlier. It asserted that Fisher routinely “pre-determined” these valuations before any appraisal was actually performed, telling his two “hand-picked” appraisers what valuation he needed to generate the generous deductions he’d promised investors. In one recorded conversation described in the indictment, Fisher said one of the appraisers simply “puts down whatever we say.” In another, he said he always made sure easement valuations were high enough to make sure investors “can still get a good return on their money,” even if a later IRS audit reduced their charitable deduction.
The government also charged that Fisher frequently orchestrated the illegal backdating of checks and tax documents, allowing him to keep offering unsold stakes in his deals to investors as much as nine months after the year-end tax deadline, after the easement was already donated. In one recording, Fisher acknowledged rewarding partners at an accounting firm with free shares in an easement deal because “they participated in basically backdating all the documents.” After learning he was under investigation, according to the indictment, Fisher told one associate he could claim that backdated checks weren’t deposited until after the close of the tax year because they had been “lost” on someone’s desk.
Both appraisers, now among Fisher’s fellow defendants, have pleaded not guilty. One says on his website that his firm decided in mid-2019 to stop doing conservation easement work “until there is greater clarity from the courts on conservation easements.”
Three accountants who worked closely with Fisher had been criminally charged earlier. One, Herbert Lewis, has pleaded not guilty. Two others, brothers Corey and Stein Agee, pleaded guilty to conspiracy to defraud the United States and are cooperating with prosecutors. According to the government, the Agees each received $1.7 million in fees from promoting the syndicated deals.
Fisher, a CPA himself, once worked for the IRS.
The indictment said he made $60 million personally from the 15 syndicated easement deals he put together between 2013 and 2020. With those funds, the government said, Fisher purchased a $2 million home on the Caribbean island of Bonaire, an airplane, a $450,000 luxury recreational vehicle, a $750,000 show jumping horse and more.
Fisher’s attorney, Russ Ferguson, said in a statement: “Jack Fisher looks forward to defending the allegations brought by the Department of Justice in court and hopes for a speedy trial. Through a congressionally authorized and IRS-approved tax deduction to encourage conservation, Jack Fisher has conserved nearly 10,000 acres of developable, natural land for generations to come. In doing so, Mr. Fisher has not only followed the law but has acted in conformity with IRS regulations, agency guidance and audit guidelines.” The statement said Fisher stopped promoting easement donations in 2019 because the government “now considers such transactions criminal.”
