Jan 29, 2019      News      

Ornstein-Schuler Investments Discontinues Conservation Easement Option

Notice from Ornstein-Schuler Investments LLC re Conservation Easements

Ornstein-Schuler and its affiliates specialize in securing real estate and private equity investment options for accredited investors in investment-grade land, apartment complexes, office buildings, and other types of real estate.  With respect to our partnerships that own undeveloped land, the members of the partnerships are offered several options and strategies for the underlying real estate investment, including, for example, developing the property directly, holding the property for appreciation, and leasing the property to a third party.  One of the other options that has been available to some of these investment partnerships in the past was to conserve the land by placing a conservation easement on the property and potentially donating the encumbered land to a local municipality or qualified 501(c)(3) organization for use as a park, important community greenspace, and/or a nature preserve.  After having invested, the members voted on which option the partnership would employ and we are proud that many of our investors voted to select the conservation option, thereby preserving and permanently protecting more than 27,000 acres of land from development.

Last month, the federal government brought a civil lawsuit in Georgia against several entities and individuals challenging the propriety of tax deductions related to conservation easements facilitated by the defendants.  The defendants in the lawsuit have publicly stated that the government’s factual and legal allegations in the lawsuit are not true and that they will vigorously contest the lawsuit.  (Note: Neither Ornstein-Schuler nor any individual associated with the Ornstein-Schuler companies was named in or otherwise involved in any of the allegations in this lawsuit.)

Please note that all of Ornstein-Schuler’s partnership-owned properties, where the partners elected to donate a conservation easement, were appraised at fair market value by independent, licensed, experienced, and reputable appraisers in accordance with Uniform Standards of Professional Appraisal Practice.  In addition, all of our partnerships have economic substance and real business investment purposes.  Our investment partnerships were also subject to robust legal and securities compliance review; thus, we are confident that they were structured and carried out in full compliance with the letter and intent of the law.

Ornstein-Schuler is working with its attorneys and advisors, as well as national conservation groups, to obtain guidance about the scope of the IRS’s position and its effect on donations of conservation easements by partnerships.  However, unless the uncertainty with respect to the acceptable parameters for engaging in conservation easement transactions is eliminated through new IRS published guidance, court decisions, and/or legislative actions (for example, a “safe harbor” procedure to follow or specific guidance from the IRS regarding how to satisfy certain ultra-technical requirements), Ornstein-Schuler will no longer be involved in donations of conservation easements and/or fee simple donations.

We remain excited and optimistic about offering other investment opportunities that do not have a conservation option available.

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