Recent Legal Decisions Affecting Agricultural Land Conservation

Recent Legal Decisions AffectingAgricultural Land ConservationSarah EverhartALEI Legal SpecialistKelly Winslow NuckollsALEI Extension Legal SpecialistMaryland Land ConservationConference, May 17, 2018

Agriculture LawEducation InitiativeThe Agriculture Law Education Initiative (ALEI) is a collaboration of the FrancisKing Carey School of Law at the University of Maryland, Baltimore (UMB); theCollege of Agriculture & Natural Resources at the University of Maryland(UMCP); and the School of Agriculture and Natural Sciences at the Universityof Maryland Eastern Shore (UMES).ALEI is an initiative of the University of Maryland Strategic Partnership:MPowering the State, a collaboration between UMB and UMCP. Thispartnership leverages the sizable strengths and complementary missions ofboth institutions to strengthen Maryland’s innovation economy, advanceinterdisciplinary research, create opportunities for students, and solveimportant problems for the people of Maryland and the nation.Website: www.umaglaw.orgTwitter: @MdAgLawFacebook: www.facebook.com/MdAgLawEmail: umaglaw@umd.edu

DisclaimerThis presentation is intended to provide generalinformation and should not be construed as providing legaladvice. It should not be cited or relied upon as legalauthority. For advice about how these issues might apply toyour individual situation, consult an attorney.

Ag Land Conservation Who can enforce an agconservation easement? Can an eased farm bepartitioned? Who does the IRS considerto be a qualified farmer? What legislative changeswere made in 2018? What can be done toencourage conservationpractices on leasedfarmland?

I’m Still StandingLegal standing-whether theparty has the sufficientlegal interest to bring thecase-a property interest-an interest arising out of acontract-an interest that someonehas lost through a tortiousaction, or one founded inlaw.

I’m Still Standing With an agriculturalconservationeasement, clearly thegrantor and thegrantee have standing,but what about thirdparties?

Two’s company, three is acrowd Does a neighbor/3rd party have standing toenforce an agricultural conservationeasement?– Schwartz v. Chester County Agricultural LandPreservation Board, Nos., 180 A.3d 510 (2018)

Schwartz v. Chester CountyAgricultural Land Preservation Board Ag conservation easementwas granted to the localtownship, the County andthe Chester CountyAgricultural LandPreservation Board (Board)to limit development anduse of the land for nonagricultural purposes.

Schwartz v. Chester CountyAgricultural Land Preservation Board Farm operators began an organiccomposting business on a portion of landunder easement. Schwartz (neighbor) submitted a formalcomplaint to the Board claiming the usewas in violation of the easement andasked the Board to take enforcementaction.

Schwartz v. Chester CountyAgricultural Land Preservation Board Board conducted an inspection and held apublic hearing. Board sent Schwartz a letter explaining thatthe composting use was consistent with theterms of the easement.

Schwartz v. Chester CountyAgricultural Land Preservation Board Schwartz filed a Petition for Judicial Review ofBoard’s action. Common Pleas Court: denied the Board’sMotion to Dismiss the action (upheld standing)but ruled that the use did not violate theEasement. Both sides appealed.

Schwartz v. Chester County AgriculturalLand Preservation Board Commonwealth Court agreed with lower court’sinterpretation of the use but also granted theBoard’s Motion to Dismiss. 3rd party standing?– When the plaintiff is not a party to the easement,look to the easement language and the regulatoryframework.

The easement providesthe Board with the powerto determine if there hasbeen a violation of theeasement and does notprovide third-parties withan enforcement right. Neither the county’seasement program norstate law provides a thirdparty right ofenforcement.

Schwartz v. Chester CountyAgricultural Land Preservation Board The Board’s letter to Schwartz was not an“adjudication” subject to judicial review. There was no procedure for complaints to be filedwith the Board- that would have made the Board’sdecisions quasi judicial. “When an agency considers whether or not to takean enforcement action, itexercises prosecutorial discretion that is beyondjudicial review.”

Standing to Enforce Long Green Valley Ass'n v. Bellevale Farms, Inc.,432 Md. App. 292 (2013) Similar case to Schwartz Neighbors and a community association unhappywith the use of an eased property filed suit toforce MALPF to enforce an easement. CSA and COA examined whether the plaintiffs hadstanding.

Long Green Valley Ass'n v. BellevaleFarms, Inc.In CSA case- Plaintiffs claimed they wereintended 3rd party beneficiaries.They argued 3rd party beneficiaries included-The general public-Other parties with easements-Neighbors

Standing to EnforceQuizQuiz- What is one way totell if a 3rd party hasstanding? Answer- look to thelanguage of theeasement!

Long Green Valley Ass'n v. BellevaleFarms, Inc.The MALPF Easement Agreement provides that theState, as the grantee, may enforce the easement, andexpressly limits public access and use of the land.No express statement in the Easement that others whohave placed their property under MALPF easements,the general public, or adjoining property owners, areintended 3rd party beneficiaries to the Easement.

Long Green Valley Ass'n v. BellevaleFarms, Inc. Parties also claimed standing to enforce theeasement based on the charitable trust doctrine. COA- a MALPF easement did not constitute acharitable trust that could be enforceable by anyinterested person. Language of the easement and MALPF program'sstatutory scheme demonstrated that objective ofthe easement was maintaining agriculture as aprofitable endeavor not charitable.

More than a Neighbor, LessThan a Party with Standing Estate of Merrill P. Robbinsv. Chebeague &Cumberland Land Trust etal, 154 A.3d 1185 (2017) Marion Payson donated aconservation easementon 100 acres of coastalland to the Chebeague &Cumberland Land Trust(CCLT).

Estate of Merrill P. Robbins v. Chebeague &Cumberland Land Trust et al, Easement allowed for 10 building lots. Afterher death, Payson Estate agreed to sell thebulk of the protected property to a developer,and the family retained a two-acre parcel. Developer sold 25 acres of the property to theTown for a beachfront park, including pavingan existing dirt access road and grading aparking area and adding portable toilets and apier.

Estate of Merrill P. Robbins v. Chebeague& Cumberland Land Trust et al Payson Estate filed suit against CCLT and theTown, claiming that the park improvementsviolated the easement. The Town and CCLT filed motions to dismiss,contending the Estate had no standingbecause it owned only the two-acre parcel,which was separate from the beach parkparcel.

Standing to EnforceQuizQuiz- What is one way totell if a 3rd party hasstanding? Answer- look to theregulatory/legalframework!

Estate of Merrill P. Robbins v. Chebeague& Cumberland Land Trust et al The statute provides a grant of standing to “[a]nowner of an interest in the real propertyburdened by the easement” The Estate argued their interest in the 2 acreparcel gave them standing to enforce theeasement on the remainder of the land owned bythe Town.

Estate of Merrill P. Robbins v.Chebeague & Cumberland LandTrust et al What do you think? Does it mean an ownerof any real propertyburdened by theeasement or the ownerof the property subjectto the enforcementaction?

Estate of Merrill P. Robbins v.Chebeague & Cumberland LandTrust et al Court found: A landowner of one geographic portion of aneasement-protected property does not havestanding to enforce that easement as itpertains to a separate area of the protectedproperty owned by another person. Takeaway- Neighbors can seek to enforcelocal zoning regulations but have limitedauthority to enforce conservation easements.

Are you a farmer enough fora full deduction? Rutkoske, et al. v.Commissioner of InternalRevenue, 149 T.C. No. 6 (2017) Two brothers were membersof a limited liability company(LLC) established to ownfarmland. In the same year, the brotherssold a conservation easementand sold the farmland at issueto an unrelated third party.

Rutkoske, et al. v. Commissionerof Internal Revenue For income tax purposes the two brothersclassified themselves as “qualified farmers” asdefined by the Internal Revenue Code, eligible todeduct 100% of their contribution base. A “qualified farmer or rancher” is an individualwhose gross income from the trade or business offarming is greater than 50% of their gross incomefor the taxable year ((26 U.S. Code Section170(b)(1)(E)(v)).

Rutkoske, et al. v. Commissionerof Internal Revenue Farming includes (A) cultivating the soil or raising or harvesting anyagricultural or horticultural commodity (includinganimals) on a farm; (B) handling, drying, packing, grading or storing of anycommodity in its unmanufactured state if the ownerof the farm regularly produces more than one-half ofthe commodity so treated, and/or (C) planting, cultivating, caring for or cutting of treesor the preparation of trees for market (26 U.S. CodeSection 2032A(e)(5)).

Rutkoske, et al. v. Commissioner ofInternal Revenue The brothers in Rutkoske argued thatthe income derived from the sale ofthe conservation easement and fromthe sale of the land constitutedincome derived from the trade orbusiness of farming. The Court disagreed, explaining itwas confined to look to the incomederived from the sale of agriculturalproducts, not from the sale of landdevelopment rights or the land onwhich agricultural products aregrown.

Rutkoske, et al. v. Commissioner ofInternal Revenue The Court also explained that even if it had agreedwith the brothers’ reasoning, the brothers still wouldnot have prevailed because the LLC which sold theproperty was not in the business of farming; it was inthe business of leasing real estate. The LLC’s income from the sale of the property,which flowed to the brothers individually, did notconstitute income from the trade or business offarming.

Can Tenants in CommonSplit up? Taylor v. Taylor, 2018 Ohio Misc. LEXIS 1705 ( Ohio Ct.App. Apr. 23, 2018). Brother and Sister own farmland that includes aconservation easement as tenants in common Can the property be divided if the conservationeasement agreement prohibits division of theproperty?Photo by Edwin Remsberg

Taylor v. Taylor Trial Court held that the conservationeasement’s unlimited prohibition on dividingthe property was invalid under state law andthat the property could be divided Court of Appeals:– So long as it is not an absolute restraint onalienability the agreement to prohibit the divisionof property is valid The agreement does not prohibit the sale of theproperty

Partition Splits &Maryland Courts Tenants in Common have the right to compela partition in Maryland, but . . . Md. Real Property Code Ann. 1-104 &Balderston v. Balderston, 388 A.2d 183– Court of Special Appeals stated a co-owner cangive up their right to compel partition or sale ofproperty through an express agreement

Don’t Forget About Those LocalTax Benefits And Their Rules Woolford v. Virginia Dept. of Taxation, 806 S.E.2d398 (Va. 2017) Dept. of Taxation in Virginia tookback a 4.9 million landpreservation state tax credit 1. Was the appraiser “qualified” ? 2. Can the Department audit thetax credit after its approved?Photo by Edwin Remsberg

Woolford v. VirginiaDept. of Taxation “Qualified” appraiser as defined underfederal law governing charitablecontributions ( 26 U.S.C. § 170(f)(11)(E)(ii) ) Who can be a qualified appraiser?– Earned designation of appraiser from aprofessional appraiser organization– Receives compensation for appraisals on aregular basis– Must have verified education and experiencewith valuing that type of property