The U.S. Tax Court denied a Georgia partnership’s motion to immunize from criminal prosecution two appraisers in a dispute over a conservation easement deduction, finding that it lacked jurisdiction in the face of questions for the witnesses from the IRS.
In a September 22 order in Oconee Landing Property LLC v. Commissioner (Dkt No. 11814-19), Judge Albert Lauber said it was “well established that the Tax Court lacks jurisdiction to grant criminal immunity to a witness who may be called to testify” before it. Such power “resides solely with the U.S. district courts and only upon the request of the U.S. attorney for the applicable district,” the judge added.
“It is equally well established that this Court lacks jurisdiction to compel the IRS to seek an order of immunity for a witness,” the order continued, citing similar findings from past Tax Court cases, including Coulter v. Commissioner, 82 TC 580, 583 (1984) and Hartman v. Commissioner, 65 TC 542, 547 (1975).
The finding was in response to a September 2 motion in which Oconee Landing Investors LLC, which is challenging an IRS decision to deny a nearly $21 million easement deduction, asked the court either to force the IRS to grant criminal immunity to Thomas Wingard and Martin Van Sant or do so on its own “inherent authority.”
Judge Lauber in August had ordered Wingard and Van Sant to respond to written questions from the IRS regarding their work in providing appraisals used by Oconee to claim a deduction for a charitable contribution made on its 2015 partnership tax return after donating a conservation easement affecting 355 acres to Georgia-Alabama Land Trust Inc. In response to an IRS motion, the judge compelled the two men to be deposed earlier this year, but on advice of counsel, both invoked their constitutional right against self-incrimination and refused to answer questions involving syndicated conservation easements.
A conservation easement is an agreement to permanently limit use of a tract of land to protect its environmental value, and Code Sec. 170 provides tax deductions for donations of such land for conservation purposes. However, the IRS has identified syndications of conservation easement deals as potentially abusive in that they often rely on appraisal that significantly overvalues the property, inflating the available deduction. Since issuing Notice 2017-10 in December 2016, the IRS has required that it be notified of these arrangements.
In filings in the Oconee case, the IRS said the two principals of an Atlanta investment firm that backed Oconee’s syndicated easement deal gave Wingard and Van Sant predetermined numbers with which to value the easement donation.
The latest judicial order cited a letter to the IRS from the two appraisers’ attorney following the depositions asking whether Wingard and Van Sant were under scrutiny in an ongoing criminal investigation. In the letter, the IRS was asked to act to ensure the appraisers were given immunity from prosecution regarding their testimony in the Oconee Landing case, or that the agency stipulate to their being granted immunity by the Tax Court. The IRS “declined these requests and served the 45 questions” to the appraisers, Judge Lauber wrote.
Responding to Oconee’s motion to compel Wingard and Van Sant’s immunization, the IRS had argued that the Tax Court lacked jurisdiction either to grant witnesses immunity on its own authority or to compel the IRS to do so.
“This Court has no ‘inherent authority’ to confer immunity on a witness,” the order stated. “Such discretionary power is statutorily reserved to the executive branch and is available to neither the Tax Court nor U.S. district courts (absent an application from a U.S. attorney).” It said Oconee had cited cases out of context to support its motion, nearly all of which involved a federal district court acting at the request of a U.S. attorney.
Regarding Oconee’s argument that Wingard and Van Sant should be deemed qualified appraisers and that the work they did for Oconee was qualified under Section 170, the order found that such questions “involve genuine disputes as to material fact and must be reserved for trial.”
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