Alaska Native corporations face a dilemma. They own land of immense and significant cultural and ecological value. Their lands are critical for maintaining the Alaska Natives' subsistence needs. But they are also corporations established under the law to maximize the economic value of their land holdings to provide financial dividends to their Native shareholders. This paper explores the enhanced federal tax incentive for donations of perpetual conservation easements that became available in 2015 to Alaska Native corporations. The tax incentive offers Alaska Native corporations a way to protect the aboriginal lands conveyed to them under the Alaska Native Claims Settlement Act while reaping the potential economic value of those lands.
This paper also summarizes certain legal issues that are likely to occur in donated conservation easement transactions and offers guidance on how to address each issue. These issues include, among others: (1) how to qualify the conservation easement under state and federal law; (2) whether to have a nonprofit land trust, government agency or an Alaska Native tribal entity hold the conservation easement and how to make them eligible to do so; (3) how to handle the fee estates split between the Alaska Native village corporation (typical owner of the surface estate) and the Alaska Native regional corporation (typical owner of the subsurface estate); (4) whether to include subsistence uses as a conservation value to be permanently protected under the conservation easement; (5) how to address certain appraisal rules to properly substantiate the value of the conservation easement for federal charitable deduction purposes; and (6) if some funding is available for the conservation easement, whether and how to structure and substantiate the transaction as a bargain sale under applicable federal tax rules.
The authors conclude that under the right circumstances, making use of the enhanced federal tax incentive for conservation easements may be just the tool Alaska Native corporations need to protect the subsistence value of their lands while also boosting their bottom lines.
Timothy Troll & Konrad Liegel,
Protecting Subsistence Lands While Boosting the Bottom Line: The Enhanced Federal Tax Incentive Available to Alaska Native Corporations for Donations of Conservation Easements,
39 Alaska Law Review
Available at: https://scholarship.law.duke.edu/alr/vol39/iss2/4