Oakbrook Land Holdings, LLC v. Comm'r of Internal Rev.

RECOMMENDED FOR PUBLICATION
Pursuant to Sixth Circuit I.O.P. 32.1(b)
File Name: 22a0048p.06

UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT

┐
OAKBROOK LAND HOLDINGS, LLC; WILLIAM DUANE
│
HORTON, Tax Matters Partner,
│
Petitioners-Appellants, > No. 20-2117
│
│
v. │
│
COMMISSIONER OF INTERNAL REVENUE, │
Respondent-Appellee. │
┘

On Appeal from the United States Tax Court.
No. 005444-13—Mark V. Holmes, Judge.

Argued: October 27, 2021

Decided and Filed: March 14, 2022

Before: GUY, MOORE, and GIBBONS, Circuit Judges.

_________________

COUNSEL

ARGUED: David William Foster, SKADDEN, ARPS, SLATE, MEAGHER & FLOM, LLP,
Washington, D.C., for Appellants. Nathaniel S. Pollock, UNITED STATES DEPARTMENT
OF JUSTICE, Washington, DC, for Appellee. ON BRIEF: Michelle Abroms Levin, SIROTE
& PERMUTT, P.C., Huntsville, Alabama, Gregory P. Rhodes, SIROTE & PERMUTT, P.C.,
Birmingham, Alabama, for Appellants. Nathaniel S. Pollock, Francesca Ugolini, Arthur T.
Catterall, UNITED STATES DEPARTMENT OF JUSTICE, Washington, DC, for Appellee.
Joseph D. Henchman, NATIONAL TAXPAYERS UNION FOUNDATION, Washington, D.C.,
Kip D. Nelson, FOX ROTHSCHILD LLP, Greensboro, North Carolina, for Amici Curiae.

MOORE, J., delivered the opinion of the court in which GIBBONS, J., joined. GUY, J.
(pg. 28–41), delivered a separate opinion concurring in the judgment only.
 No. 20-2117 Oakbrook Land Holdings et al. v. Comm’r of Internal Rev. Page 2

_________________

OPINION
_________________

KAREN NELSON MOORE, Circuit Judge. Under § 170(h) of the Internal Revenue
Code, taxpayers who donate an easement in land to a conservation organization may be eligible
to claim a charitable deduction on their Federal income tax returns. Crucially, the easement’s
conservation purpose must be guaranteed to extend in perpetuity to qualify for the deduction.
See 26 U.S.C. (I.R.C.) § 170(h)(5)(A). Unexpected developments, however, may make this
impossible long after the donor has deeded the easement away. How, then, can an easement
satisfy the perpetuity requirement?

Contemplating such scenarios, the Department of Treasury has promulgated a rule,
26 C.F.R. (Treas. Reg.) § 1.170A-14(g)(6). This regulation addresses situations in which
unforeseen changes to the surrounding land make it “impossible or impractical” for an easement
to fulfill its conservation purpose. Treas. Reg. § 1.170A-14(g)(6)(i). In these events, the
conservation purpose may still be protected in perpetuity “if the restrictions are extinguished by
judicial proceeding and all of the donee’s proceeds . . . from a subsequent sale or exchange of the
property are used by the donee” to further the original conservation purpose. Id. Proceeds are
calculated by a formula in § 1.170A-14(g)(6)(ii), a provision to which we refer as the “proceeds
regulation.”

On this appeal from the United States Tax Court, the petitioners, Oakbrook Land
Holdings, LLC (Oakbrook) and William Duane Horton, challenge the validity of the proceeds
regulation. The petitioners contend that, in promulgating this rule, Treasury violated the notice-
and-comment requirements of the Administrative Procedure Act (APA). The petitioners also
argue that Treasury’s interpretation of § 170(h)—the statute that the rule implements—is
unreasonable. Finally, the petitioners argue that the proceeds regulation is arbitrary or
capricious. The full Tax Court considered these arguments and found them to be unpersuasive.
See Oakbrook Land Holdings v. Comm’r, 154 T.C. 180, 181 (T.C. 2020). We agree with the Tax
Court and AFFIRM.
 No. 20-2117 Oakbrook Land Holdings et al. v. Comm’r of Internal Rev. Page 3

I. BACKGROUND

Due to the nature of the issues, we outline the statutory and regulatory framework that
governs charitable deductions for conservation easements before describing the rulemaking
process of the proceeds regulation. Once that is established, we turn to the facts of this case.

A. Statutory and Regulatory Framework

Section 170(a)(1) of the Internal Revenue Code allows taxpayers to deduct charitable
donations made during the tax year. The Code generally disallows gifts that consist of less than
the taxpayer’s entire interest in the property—such as an easement—from qualifying for a
deduction. See I.R.C. § 170(f)(3)(A); Glass v. Comm’r, 471 F.3d 698, 706 (6th Cir. 2006).
There is an exception if the interest is a “qualified conservation contribution.” I.R.C.
§ 170(f)(3)(B)(iii). This type of gift may qualify for a deduction if it is “of a qualified real
property interest,” “to a qualified organization,” and is “exclusively for conservation purposes.”
I.R.C. § 170(h)(1)(A)–(C). Easements can qualify as such contributions. See Glass, 471 F.3d at
699–700.

Perpetuity is vital to the statutory scheme. An easement is a qualified real property
interest only if its deed creates “a restriction (granted in perpetuity) on the use which may be
made of the real property.” I.R.C. § 170(h)(2)(C) (emphasis added). Driving home how
important the parenthetical phrase in § 170(h)(2)(C) is, a nearby provision explains that a
contribution will not be treated as having been made exclusively for conservation purposes
“unless the conservation purpose is protected in perpetuity.” I.R.C. § 170(h)(5)(A) (emphasis
added). In other words, the donation of an easement will not qualify for a charitable deduction
unless the taxpayer can guarantee that both the grant of the interest and the conservation goals
which it serves will endure for quite a long time—forever, to be exact. See Hoffman Props. II,
LP v. Comm’r, 956 F.3d 832, 835 (6th Cir. 2020).

Although I.R.C. § 170(h)(5)(A) expressly mandates that a donated easement’s
conservation purpose must be protected in perpetuity, the section does not detail what should
happen if some external event frustrates this purpose, such as when unforeseen changes in the
surrounding land undermine the easement’s conservation goals or when a government entity
 No. 20-2117 Oakbrook Land Holdings et al. v. Comm’r of Internal Rev. Page 4

condemns the property. See generally Nancy A. McLaughlin, Conservation Easements and the
Proceeds Regulation, 56 REAL PROP. TR. & EST. L. J. 111, 122, 150–52 (2021) (discussing ways
in which easements’ conservation purposes can be thwarted). For guidance in these scenarios,
taxpayers must turn from the text of I.R.C. § 170(h)(5)(A) to the administrative regulation
implementing it.

Treasury Regulation § 1.170A-14(g)(6) governs in the event of an “extinguishment.”
When a “subsequent unexpected change in the conditions surrounding the property . . . . make[s]
impossible or impractical the continued use of the property for conservation purposes,” the
perpetuity requirement of I.R.C. § 170(h)(5)(A) can still be satisfied if two conditions are met.
First, the restriction is “extinguished by judicial proceeding.” Treas. Reg. § 1.170A-14(g)(6)(i).
Second, “all of the donee’s proceeds (determined under paragraph (g)(6)(ii) of this section) from
a subsequent sale or exchange of the property are used by the donee organization in a manner
consistent with the conservation purposes of the original contribution.” Id.

Upon extinguishment, a donee organization must receive as proceeds “a fair market value
that is at least equal to the proportionate value that the perpetual conservation restriction at the
time of the gift[] bears to the value of the property as a whole at that time.” Treas. Reg.
§ 1.170A-14(g)(6)(ii) (emphasis added). To determine the “proportionate value” of an easement,
the fair market “value of the conservation easement at the time of the gift [must be] divided by
the value of the property as a whole at that time.” PBBM-Rose Hill, Ltd. v. Comm’r, 900 F.3d
193, 207 (5th Cir. 2018). For example, if, at the time of the donation, the fair market value of an
easement was $25,000 and the value of the land was $100,000, then the easement would be
assessed at twenty-five percent of the value of the property. Next, if a judicial extinguishment
occurs, the donee must receive proceeds equal to the proportionate value from any “subsequent
sale, exchange, or involuntary conversion.” Treas. Reg. § 1.170A-14(g)(6)(ii). The donee in the
previous example would therefore receive twenty-five percent of any proceeds of a sale,
exchange, or involuntary conversion that followed judicial extinguishment of the easement.
 No. 20-2117 Oakbrook Land Holdings et al. v. Comm’r of Internal Rev. Page 5

Finally, no “amount, including that attributable to improvements, may be subtracted out” of this
percentage.1 PBBM-Rose Hill, Ltd., 900 F.3d at 208.

Although the possibility of an easement being judicially extinguished is a contingency,
taxpayers still need to address this issue in the easement’s deed. The deed must entitle the donee
“to a portion of the proceeds at least equal to that proportionate value of the perpetual
conservation restriction” should a judicial extinguishment occur.2 Treas. Reg. § 1.170A-
14(g)(6)(ii). Failure to draft a deed that achieves this goal will leave the taxpayer unable to claim
a charitable deduction for their donation. Treas. Reg. § 1.170A-14(g)(1).

B. Promulgation of Treas. Reg. § 1.170A-14(g)(6)(ii)

On May 23, 1983, Treasury issued a notice of proposed rulemaking with “proposed
regulations relating to contributions of partial interests in property for conservation purposes.”
48 Fed. Reg. 22940, 22940 (May 23, 1983). In that notice, Treasury detailed the legislative
history of § 170(h), describing how Congress had shifted from limiting the deductibility of
conservation easements to allowing them when the easement was “perpetual.” Id. The preamble
noted that the proposed regulations “reflect the major policy decisions made by the Congress and
expressed in [its] committee reports.” Id. Among the proposed rules was the proceeds
regulation.

A period of public input followed Treasury’s publication of the notice of proposed
rulemaking in which the agency received comments regarding the regulations. Ninety
organizations submitted over 700 pages of commentary that addressed various aspects of the
regulations. Oakbrook Land Holdings, 154 T.C. at 186. Of these commentators, approximately
a dozen mentioned the proceeds regulation, though mostly in passing. Id. We detail several of
these comments further below. Treasury also held a public hearing on the proposed regulations
on September 15, 1983. Id. at 188.

1
The parties do not appear to dispute how proceeds are calculated under the regulation.
2
Treasury Regulation § 1.170A-14(g)(6)(ii) also contains an exception for when “state law provides that
the donor is entitled to the full proceeds from the conversion without regard to the terms of the prior perpetual
conservation restriction,” but the current case does not implicate this provision.
 No. 20-2117 Oakbrook Land Holdings et al. v. Comm’r of Internal Rev. Page 6

When Treasury issued the final regulations, the accompanying preamble stated that the
agency had promulgated the regulations “[a]fter consideration of all comments regarding the
proposed amendments.” 51 Fed. Reg. 1496, 1496 (Jan. 14, 1986). Some comments that
Treasury received during the rulemaking process did cause the agency to alter parts of the
regulations, leading the agency to summarize these comments and the changes that they
prompted. Id. at 1497–98. Treasury also revised the proceeds regulation, but these changes
were editorial in nature and aimed at clarifying the rule, not altering its meaning.3 Treasury did
not specifically address any comments that it received about the proceeds regulation.

C. Oakbrook’s Easement

Oakbrook is a Tennessee Limited Liability Company with its principal place of business
in Chattanooga. Joint Appendix (J.A.) at 98–99 (Stipulation of Facts at ¶ 1). William Duane
Horton and a group of investors formed the company to purchase and develop a 143-acre parcel
of land on White Oak Mountain, an outcropping of the Appalachians near Chattanooga. Id. at
1179–80 (Tax Ct. Mem. Op. at 3–4). In 2007, Oakbrook bought the land for $1,700,000. Id. at
1180 (Tax Ct. Mem. Op. at 4).

Originally Horton and his wife found the property in their search for a place to build a
home. Id. at 1179 (Tax Ct. Mem. Op. at 3). The property’s proximity to Chattanooga led Horton
to believe that residential units could be developed there, and this is what Oakbrook set about to
achieve after purchasing the land. Id. at 1180 (Tax Ct. Mem. Op. at 4). After learning about
conservation easements, Horton convinced his fellow investors in 2008 to have Oakbrook donate
a conservation easement on 106 acres of the land to the Southeast Regional Land Conservancy
(SRLC), reserving the remaining acreage for development. Id. at 1181 (Tax Ct. Mem. Op. at 5).

The deed that conveyed the easement provided for allocation of proceeds upon
extinguishment or condemnation, and the parties do not dispute how this calculation works. Id.
at 121–22 (Deed at Article VI, § B(2)–(3)). Under the deed, the fair market value of the

3
Instead of providing that the donor agree at the time of the gift that the donee receive on a subsequent sale,
exchange, or involuntary conversion of the property “a minimum ascertainable proportion of the fair market value to
the entire property,” 48 Fed. Reg. at 22946, the final rule ensured that the donee receive “a fair market value that is
at least equal to the proportionate value that the perpetual conservation restriction at the time of the gift[] bears to
the value of the property as a whole at that time.” 51 Fed. Reg. at 1505.
 No. 20-2117 Oakbrook Land Holdings et al. v. Comm’r of Internal Rev. Page 7

easement is determined by calculating the fair market value of the land without the encumbrance
of the easement, and then subtracting from this number the fair market value of the land with the
easement. Id. at 121 (Deed at Art. VI, § B(2)). The fair market value of each is determined at
the time of the gift, creating a fixed value. Id. The deed then requires one more subtraction:
the fixed value of the easement must be reduced by the value of any post-donation
improvements made by Oakbrook to the land as specified by any subsequent condemnation
award. Id. at 121–22 (Deed at Art. VI, § B(2)).

While negotiating these terms, Oakbrook arranged for an appraisal of the conservation
easement to determine the amount to claim as a charitable deduction. Id. at 1184 (Tax Ct. Mem.
Op. at 8). Initially, the appraiser valued the easement at $19,500,000, but Horton expressed
unease about setting the value so high, likely because Oakbrook had bought all 143 acres the
year before for $1,700,000. Id. The appraiser then reassessed the easement at $9,545,000. Id.
Oakbrook claimed this amount as a charitable deduction for the 2008 tax year. Id. at 1184–85
(Tax Ct. Mem. Op. at 8–9).

D. Procedural History

After Oakbrook filed its 2008 tax return, the Internal Revenue Service (IRS) examined
the claimed charitable contribution deduction. Id. at 1185 (Tax Ct. Mem. Op. at 9). Because the
easement’s deed did not comply with Treas. Reg. § 1.170A-14(g)(6)(ii), the IRS disallowed
Oakbrook’s deduction in full. Id. at 17–29, 213–22 (Disallowances). Oakbrook timely
petitioned the Tax Court for a readjustment. Id. at 8–16 (Pet. for Readjustment). Tax Court
Judge Holmes held a bench trial in October 2016 to resolve the matter. Id. at 4 (Tax Ct. Dkt. at
4).

In the Tax Court, the petitioners argued both that the easement deed satisfied Treas. Reg.
§ 1.170A-14(g)(6)(ii) and, alternatively, that the regulation was invalid. Id. at 1179 (Tax Ct.
Mem. Op. at 3). The full Tax Court heard argument concerning the validity of Treas. Reg.
§ 1.170A-14(g)(6)(ii), see Oakbrook Land Holdings, 154 T.C. at 180–81, while Judge Holmes
heard arguments about whether Oakbrook’s deed violated the regulation, J.A. at 1179 (Tax Ct.
Mem. Op. at 3). The full Tax Court upheld the regulation. See Oakbrook Land Holdings,
 No. 20-2117 Oakbrook Land Holdings et al. v. Comm’r of Internal Rev. Page 8

154 T.C. at 180–81, 198–200, 230. At the same time, Judge Holmes held that Oakbrook’s deed
violated the proceeds regulation in two ways: first by ascribing a fixed rather than proportionate
value that would go to SRLC upon judicial extinguishment, and second by subtracting from this
amount any post-donation improvements that Oakbrook made to the land. J.A. at 1212–17 (Tax
Ct. Mem. Op. at 36–41).

The petitioners timely appealed. Id. at 1226–27 (Notice of Appeal). See 26 U.S.C.
§ 7483. We have jurisdiction over the case under 26 U.S.C. § 7482(a).

II. ANALYSIS

On appeal, the petitioners take aim directly at the proceeds regulation, arguing that the
Tax Court erred in upholding the regulation. We review the Tax Court’s findings of fact for
clear error and its application of law de novo. Glass, 471 F.3d at 706. Our “function in
reviewing final agency action following informal rulemaking [such as Treasury’s promulgation
of the proceeds regulation] is prescribed by the APA.” Simms v. Nat’l Highway Traffic Safety
Admin., 45 F.3d 999, 1003 (6th Cir. 1995). Under § 706(2)(A) of the APA, we must set aside
agency action that is “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance
with law.”

A. Enforceability of Oakbrook’s Deed Under I.R.C. § 170(h)

Before addressing the proceeds regulation’s validity, we must address a preliminary
matter. To count as a qualified real property interest under I.R.C. § 170(h)(1)(A), the
Commissioner argues that a conservation easement’s deed must guarantee that the donee will
receive the fair market value of the interest upon judicial extinguishment. Pointing to the
provisions in the deed that fix the easement’s value at the time of the gift and then subtract the
worth of post-donation improvements, the Commissioner concludes that Oakbrook’s deed would
fail to compensate SRLC at fair market value should the easement be extinguished. Under this
reading of I.R.C. § 170(h)(1)(A), the Commissioner argues, we need not determine whether
Treas. Reg. § 1.170A-14(g)(6)(ii) is a valid regulation because Oakbrook’s deed violates the
statute.
 No. 20-2117 Oakbrook Land Holdings et al. v. Comm’r of Internal Rev. Page 9

Regardless of whether this interpretation of I.R.C. § 170(h)(1)(A) is correct, the
Commissioner introduces it for the first time on appeal. The only issue that the Commissioner
raised below about Oakbrook’s deed satisfying § 170(h) was the argument in his pretrial
memorandum that the deed inadequately defined the physical area intended for conservation
purposes, leaving it impossible to determine what was being conserved and what was not. J.A. at
40, 47–49 (Resp’t Pretrial Mem. at 3, 10–12). Nowhere did the Commissioner argue that the
deed would fail to compensate SRLC at fair market value should the easement be extinguished.
Instead, Judge Toro’s concurrence in the Tax Court’s opinion raised this issue sua sponte with
neither the majority nor the dissent addressing it. Oakbrook Land Holdings, 154 T.C. at 203–07.

“[A]ppellate courts ordinarily abstain from entertaining issues that have not been raised
and preserved in the court of first instance.” Wood v. Milyard, 566 U.S. 463, 473 (2012). This
case demonstrates the wisdom of this approach. For Oakbrook’s deed to violate the
Commissioner’s interpretation of the statute, it must fail to provide whatever the fair market
value of the easement will be upon extinguishment. But this conclusion relies on an assessment
of the projected economic worth of the property interest, which is not in the record.4 Should the
fair market value of the interest have increased by the time of extinguishment, then the
Commissioner will be proven right. Should the value decline, then the Commissioner will be
proven wrong. Either way, future events, not statutory text, hold the answer. Cf. United States v.
Ellison, 462 F.3d 557, 560–61 (6th Cir. 2006) (addressing argument not raised below where
issue turned on pure question of law). For this reason, we decline to address the Commissioner’s
newly raised argument.

4
Instead of citing to the record, the Commissioner cites to data pulled from Zillow.com and
Neighborhoodscout.com to support the proposition that under the terms of the deed, judicial extinguishment “20, 50,
or 100 years from now” would lead to SRLC receiving less than the easement’s fair market value. Resp’t Br. at 36.
Likewise, the Commissioner asserts, without any citations, that the value of fixed structures that Oakbrook may add
to the property will likely increase over time, which, because of the mechanism in the deed that allows Oakbrook to
recoup this value, would further cut into the amount SRLC would receive in the event of judicial extinguishment.
Id. at 38. Although the concurrence appears confident in these assessments, we are hesitant to rely on economic
projections that have not been vetted by the adversarial process, provide no supporting evidence, and are based on
commercial real estate websites.
 No. 20-2117 Oakbrook Land Holdings et al. v. Comm’r of Internal Rev. Page 10

B. Procedural Issues with Treas. Reg. § 1.170A-14(g)(6)(ii)

This leaves us to examine the validity of Treas. Reg. § 1.170A-14(g)(6)(ii). Under the
APA, whenever agencies promulgate “a rule that ‘intends to create new law, rights or duties’”
such as this regulation does, they must engage in a process known as notice-and-comment
rulemaking. Tennessee Hosp. Ass’n v. Azar, 908 F.3d 1029, 1042 (6th Cir. 2018) (quoting
Michigan v. Thomas, 805 F.2d 176, 182–83 (6th Cir. 1986)). See also 5 U.S.C. § 553(b). There
are three steps involved in this process. First, the agency must publish a “notice of proposed rule
making” in the Federal Register. 5 U.S.C. § 553(b). Next, the agency must afford “interested
persons an opportunity to participate in the rule making through submission of written data,
views, or arguments.” § 553(c). Finally, “[a]fter consideration of the relevant matter presented,
the agency shall incorporate in the rules adopted a concise general statement of their basis and
purpose.” Id.

The petitioners contend that the agency deviated from the APA’s notice and comment
requirements in two ways. First, the petitioners argue that Treasury inadequately explained the
rationale for the proceeds regulation in its concise general statement of basis and purpose.
Second, the petitioners argue that the agency failed to respond to certain comments about the
regulation, which, according to the petitioners, raised significant issues. We consider each
argument in turn.

1. Adequacy of Treasury’s Concise Statement of Basis and Purpose

After the comment period closed, Treasury issued a concise statement of basis and
purpose for Treas. Reg. § 1.170A-14 that explained the regulations’ goals and addressed various
comments made about the rules. See 51 Fed. Reg. at 1497–98. This statement lacked an
explanation for the policy rationale behind Treas. Reg. § 1.170A-14(g)(6)(ii) specifically.
Instead, Treasury explained that the regulations contained in Treas. Reg. § 1.170A-14 “provide
necessary guidance to the public for compliance with the law and affect donors and donees of
qualified conservation contributions.” 51 Fed. Reg. at 1496. To the petitioners, this explanation
is far too succinct to provide adequate insight into the proceeds regulation’s rationale. Placing
this explanation within the context of the rulemaking leads us to the opposite conclusion.
 No. 20-2117 Oakbrook Land Holdings et al. v. Comm’r of Internal Rev. Page 11

What an agency must include in a concise general statement of basis and purpose is
dictated by competing considerations. Courts, on the one hand, must be able “to see what major
issues of policy were ventilated by the informal proceedings and why the agency reacted to them
as it did.” Simms, 45 F.3d at 1005 (quoting Auto. Parts & Accessories Ass’n, Inc. v Boyd, 407
F.2d 330, 338 (D.C. Cir. 1968)). Judicial scrutiny does not “contemplate that the court itself
will, by a laborious examination of the record, formulate in the first instance the significant
issues faced by the agency and articulate the rationale of their resolution.” Auto. Parts &
Accessories Ass’n, Inc., 407 F.2d at 338. Agencies, on the other hand, operate with scarce time
and limited resources. See Vermont Yankee Nuclear Power Corp. v. Nat. Res. Defense Council,
Inc., 435 U.S. 519, 551 (1978). These limitations mean that an agency cannot “discuss every
item of fact or opinion included in the submissions made to it in informal rule making.” Simms,
45 F.3d at 1005 (quoting Auto. Parts & Accessories Ass’n, Inc., 407 F.2d at 338).

Balancing these considerations, the APA’s concise-general-statement requirement “is not
meant to be particularly onerous.” Nat’l Mining Ass’n v. Mine Safety & Health Admin. 512 F.3d
696, 700 (D.C. Cir. 2008). Absent an ideal statement, courts may still conduct judicial review
and uphold a regulation “where the basis and purpose [are] considered obvious.” Cal-Almond,
Inc. v. U.S. Dep’t of Agric., 14 F.3d 429, 443 (9th Cir. 1993); see also Schiller v. Tower
Semiconductor Ltd., 449 F.3d 286, 303 (2d Cir. 2006); Citizens to Save Spencer Cnty. v. U.S.
EPA, 600 F.2d 844, 884 (D.C. Cir. 1979). If a statement is truly concise, then “[a] careful
reading of the agency’s published notices, from its original grant of the petition for rulemaking to
its final rule, [may still] disclose[] a ‘reasoned path’” that the agency followed to reach its
ultimate rule. Simms, 45 F.3d at 1006 (quoting Neighborhood TV Co. v. FCC, 742 F.2d 629, 639
(D.C. Cir. 1984)).

Juxtaposing the final version of Treas. Reg. § 1.170A-14(g)(6)(ii) with the notice of
proposed rulemaking reveals that the basis and purpose of the rule are apparent. In the
background section of the proposed version of the proceeds regulation, Treasury provided a brief
history of how the Code had treated the charitable deductions of conservation easements.
48 Fed. Reg. at 22940. This history traced how contributions of partial interests went from being
disfavored under the Tax Reform Act of 1969, to being allowed under the Tax Reduction and
 No. 20-2117 Oakbrook Land Holdings et al. v. Comm’r of Internal Rev. Page 12

Simplification Act of 1977. Id. This allowance came with a caveat: conservation easements had
to “be perpetual in order to qualify for a deduction under section 170.” Id. After Congress again
amended the Code with the Tax Treatment Extension Act of 1980, Treasury proposed the
proceeds regulation to implement I.R.C. § 170(h). 48 Fed. Reg. at 22940. Notably, although
I.R.C. § 170(h)(5)(A) required that easements’ conservation purposes be protected in perpetuity,
the provision was silent about how to guarantee this requirement in the event of extinguishment.
Facing this lacuna, it was obvious that Treasury would need to craft a regulation that spoke to the
issue of protecting an easement’s conservation purpose should unforeseen circumstances stymie
this end.5

As it contemplated promulgating the regulations of which Treas. Reg. § 1.170A-
14(g)(6)(ii) was a part, Treasury noted its animating concerns. Foremost among these was the
“problem” of “how to provide a workable framework for donors, donees, and the Internal
Revenue Service to judge the deductibility of open space easements.” 48 Fed. Reg. at 22940.
Treasury’s explicit reliance on the committee reports that accompanied the 1980 reforms to the
Code make clear the contours of this problem. See id. (detailing how the proposed regulations
“reflect the major policy decisions . . . expressed” in H.R. REP. NO. 96-1278 (1980) and S. REP.
NO. 96-1007 (1980)).

Both the House Ways and Means Committee and the Senate Finance Committee noted
that conservation easements threatened to incentivize “tax-avoidance transactions in which the
taxpayer could obtain a deduction for a gift to a charity of the use of part of his property.”
H.R. REP. NO. 96-1278, at 14; S. REP. NO. 96-1007, at 8. To avoid such abuse, the committees
emphasized that the “bill would restrict the qualifying contributions where there is no assurance
that the public benefit, if any, furthered by the contribution would be substantial enough to
justify the allowance of a deduction.” H.R. REP. NO. 96-1278, at 15; S. REP. NO. 96-1007, at 10.
Key among these restrictions was the addition of a requirement not previously in the Code: that
an easement’s conservation purpose be protected in perpetuity to qualify for a charitable

5
Although Congress was aware that extinguishment could pose difficulties for ensuring that a conservation
easement’s purpose was protected in perpetuity, a coalition of land trusts convinced it to leave the creation of rules
to govern these circumstances to Treasury. See McLaughlin, supra, at 122–23 (detailing legislative history).
 No. 20-2117 Oakbrook Land Holdings et al. v. Comm’r of Internal Rev. Page 13

deduction. See H.R. REP. NO. 96-1278, at 18 (“Moreover, the bill explicitly provides that [the]
requirement [that a contribution is made exclusively for conservation purposes] is not satisfied
unless the conservation purpose is protected in perpetuity.”); S. REP. NO. 96-1007, at 13 (same).
An easement’s deed needed to “prevent uses of the retained interest inconsistent with the
conservation purposes” for an eternity. H.R. REP. NO. 96-1278, at 18; S. REP. NO. 96-1007, at
13.

Along with stressing the need for restrictions in the deed to ensure that an easement
served its conservation purpose in perpetuity, the congressional committees were concerned
about how the burdens and benefits associated with fulfilling this requirement might be allotted.
For instance, when the Senate Committee on Finance reported the bill out of committee, it noted
that the perpetuity requirement of I.R.C. § 170(h)(5)(A) aimed “to limit the deduction only to
those cases where the conservation purposes will in practice be carried out.” S. REP. NO. 96-
1007, at 14. With this goal in mind, the Committee noted that contributions must “be made to
organizations which have the commitment and the resources to enforce the perpetual restrictions
and to protect the conservation purposes.” Id. Yet whereas the Committee was concerned about
the welfare of the donee, it sought to bar the donor from receiving any benefit from the donation
above and beyond the deduction. See id. at 15 (“[T]here may be instances in which the grant of
an easement may serve to enhance, rather than reduce, the value of property, and in such
instances no deduction would be allowable . . . .”). Solely in circumstances where these high
bars could be cleared would an easement qualify for a charitable deduction under § 170(h). See
id. at 14, 15; see also H.R. REP. NO. 96-1278, at 19, 20 (same discussion).

Taken together, then, the statutory text and the legislative history that Treasury
contemplated in promulgating Treas. Reg. § 1.170A-14(g)(6)(ii) illuminate the regulation’s basis
and purpose: to provide an administrable mechanism that would ensure that an easement’s
conservation purpose as per I.R.C. § 170(h)(5)(A) continued to be protected should the interest
be extinguished. That the regulation allots proceeds in a manner more favorable to donees than
to donors merely demonstrates Treasury’s acute awareness of Congress’s decision to concern
itself with the welfare of one entity over the other once the donation was made. Because we can
 No. 20-2117 Oakbrook Land Holdings et al. v. Comm’r of Internal Rev. Page 14

discern this from the information that Treasury provided during the rulemaking, its concise
statement suffices.6

2. Failure to Respond to Comments

In the concise general statement of basis and purpose that accompanied the final rule,
Treasury also did not address any comments that touched on Treas. Reg. § 1.170A-14(g)(6)(ii).
For the petitioners, this oversight is the main procedural deficiency with the rule. To this end,
they list a series of comments that mentioned the proceeds regulation, argue that at least some of
these required Treasury’s attention, and conclude that the agency’s failure to do so is fatal to the
regulations. Having thoroughly examined these comments, we disagree.

The APA’s requirement of soliciting comments serves several ends. “In addition to
increasing the quality of rules, the required public participation helps ‘ensure fair treatment for
persons to be affected by’ regulation.” United States v. Cain, 583 F.3d 408, 420 (6th Cir. 2009)
(quoting Dismas Charities, Inc. v. U.S. Dep’t of Justice, 401 F.3d 666, 678 (6th Cir. 2005)).
From these principles follows an agency’s duty to respond to “significant points raised by the
public.” Sherley v. Sebelius, 689 F.3d 776, 784 (D.C. Cir. 2012) (quoting Home Box Office, Inc.
v. FCC, 567 F.2d 9, 35–36 (D.C. Cir. 1977)). After all, if an agency could ignore every comment
regardless of its content, then the process of soliciting public input would be pointless. See id.

Yet the inverse is true, too. Requiring an agency to respond to every comment regardless
of its content would transform rulemaking into

a game or a forum to engage in unjustified obstructionism by making cryptic and
obscure reference to matters that “ought to be” considered and then, after failing
to do more to bring the matter to the agency’s attention, seeking to have that
agency determination vacated on the ground that the agency failed to consider
matters “forcefully presented.”

6
Unlike Dominion Resources, Inc. v. United States, on which the concurrence relies to reach the opposite
conclusion, the proceeds regulation does not “directly contradict[]” Congress’s intent, as is clear from the legislative
history that Treasury provided in its notice of proposed rulemaking. 681 F.3d 1313, 1317 (Fed. Cir. 2012). The fact
that Treasury provided citations to the congressional reports that informed its thinking provides another contrast to
the agency’s actions in Dominion, where Treasury provided no indication of its rationale for the proposed rule. Id.
at 1319. These citations allow us to discern what the Federal Circuit could not: the “reasoned path” that Treasury
followed in arriving at the regulation. Simms, 45 F.3d at 1006 (quoting Neighborhood TV, 742 F.2d at 639).
 No. 20-2117 Oakbrook Land Holdings et al. v. Comm’r of Internal Rev. Page 15

Vermont Yankee, 435 U.S. at 553–54. Recognizing that notice-and-comment rulemaking is not
an administrative sport, we have repeatedly concluded that an agency must “give reasoned
responses to all significant comments in a rulemaking proceeding,” not that an agency must
respond to all comments. United States v. Utesch, 596 F.3d 302, 310 (6th Cir. 2010) (quoting
PPG Indus., Inc. v. Costle, 630 F.2d 462, 466 (6th Cir. 1980)) (emphasis added); see also
Navistar Int’l Transp. Corp. v. U.S. EPA, 941 F.2d 1339, 1359 (6th Cir. 1991).

Significance is difficult to measure in the abstract. The petitioners catalog cases that they
argue use different “tests” for determining whether a comment requires an agency’s response.
See, e.g., Indep. U.S. Tanker Owners Comm. v. Dole, 809 F.2d 847, 852 (D.C. Cir. 1987); Home
Box Office, Inc., 567 F.2d at 35 n.58; United States v. Nova Scotia Food Prods. Corp., 568 F.2d
240, 253 (2d Cir. 1977). Rather than provide discrete tests, however, these cases demonstrate
that assessing significance is context dependent and requires reading the comment in light of
both the rulemaking of which it was part and the statutory ends that the proposed rule is meant to
serve.

“Accordingly, an agency must respond to comments ‘that can be thought to challenge a
fundamental premise’ underlying the proposed agency decision.” Carlson v. Postal Regul.
Comm’n, 938 F.3d 337, 344 (D.C. Cir. 2019) (quoting MCI WorldCom, Inc. v. FCC, 209 F.3d
760, 765 (D.C. Cir. 2000)). A comment must provide enough facts and reasoning to show the
agency what the issue is and how it is relevant to the agency’s aims. See Vermont Yankee, 435
U.S. at 553; Home Box Office, Inc., 567 F.2d at 35 n.58. Comments that do so are “significant
enough to step over a threshold requirement of materiality” needed for an agency to address
them. Vermont Yankee, 435 U.S. at 553 (quoting Portland Cement Ass’n v. Ruckelshaus, 486
F.2d 375, 394 (D.C. Cir. 1973)).

To make this concrete, consider one of the cases upon which petitioners rely. In United
States v. Nova Scotia Food Products Corp., the Second Circuit considered a rule issued by the
Food and Drug Administration (FDA) to address a spate of botulism cases within the inland fish
market and ensure that fish could be safely consumed. 568 F.2d at 243. While promulgating the
rule, which required all fish to be cooked or brined according to its specifications, the FDA
ignored a comment by Nova Scotia Food Products Corp., a company that sold smoked whitefish.
 No. 20-2117 Oakbrook Land Holdings et al. v. Comm’r of Internal Rev. Page 16

Id. at 245. Nova Scotia had recommended that the agency adopt a rule tailored to the heat
tolerance of each species so that their product would not be “completely destroy[ed],” due to
whitefish being unable to withstand the rigors of the proposed rule. Id. The Second Circuit held
that the FDA’s failure to respond to Nova Scotia’s and similar comments rendered the rule
arbitrary or capricious. Id. at 253. It was unclear how making a fish product inedible would
further the FDA’s goal of rendering fish safe for human consumption. Id.

After examining the comments that petitioners have identified, we hold that none
required Treasury’s response as Nova Scotia’s did the FDA’s. Of the comments to which
Treasury did not respond, the petitioners focus their attention on four: those made by the New
York Landmarks Conservancy, the Landmarks Preservation Council of Illinois, the Land Trust
Exchange, and the Trust for Public Land. Situating these comments in the context of the
problem that Treasury sought to solve—providing a method for I.R.C. § 170(h)(5)(A)’s
perpetuity requirement to be met upon judicial extinguishment—shows why they do not qualify
as significant.

The New York Landmarks Conservancy’s comment noted three issues with the proceeds
regulation: that, based on undisclosed anecdotal evidence, the rule would deter donors from
donating easements; that providing the donee with the value of post-donation improvements
made by the donor was inequitable; and that it was “possible” that the regulation’s allocation of
proceeds would conflict with some states’ condemnation laws, though the organization did not
identify the laws or states. J.A. at 671–72 (N.Y. Landmarks Conservancy Cmt. at 3–4).
Although these remarks registered the New York Landmarks Conservancy’s dissatisfactions with
the proceeds regulation, the comment did not engage with I.R.C. § 170(h)(5)(A)’s perpetuity
requirement and whether the rule served this end. Instead, it left Treasury to guess at the
connection, if any, between the organization’s problems and the proceeds regulation’s basis and
purpose. Treasury was not required to respond to the comment.

Next, the Landmarks Preservation Council of Illinois commented that how Treas. Reg.
§ 1.170A-14(g)(6)(ii) calculated proceeds would put a donor at risk of having to pay the donee
additional funds if a condemnation award did not cover the amount of money calculated by the
rule. J.A. at 778 (Landmarks Pres. Council of Ill. Cmt. at 5). The organization’s concern,
 No. 20-2117 Oakbrook Land Holdings et al. v. Comm’r of Internal Rev. Page 17

however, was not only “purely speculative.” Home Box Office, Inc., 567 F.2d at 35 n.58. It was
also wrong. Because Treas. Reg. § 1.170A-14(g)(6)(ii) calculates proceeds by using a formula
based on the proportionate value, not the fixed value, of the easement, the donor could never owe
to the donee more than what the extinguishment proceeds are. So, if an easement was worth fifty
percent of the value of the donor’s entire property at the time of the grant, then the donee would
be entitled to fifty percent of any extinguishment proceeds, whatever the amount of those
proceeds is. Given that the comment did not raise a significant issue, Treasury was not obliged
to respond it.

Both the Land Trust Exchange and the Trust for Public Land suggested that Treasury
adopt the remote future event rule in lieu of the proceeds regulation. J.A. at 685 (Land Tr.
Exchange Cmt. at 7); id. at 795 (Tr. for Pub. Land Cmt. at 7). The organizations’ proposals refer
to the provision of the regulations that bears the same name, Treas. Reg. § 1.170A-14(g)(3). The
remote future event rule provides a “narrow exception to the perpetuity requirement” of I.R.C.
§ 170(h)(5)(A), Hoffman Props., 956 F.3d at 837, allowing deductions when the conservation
purpose of an easement may be defeated by an “act or event” whose occurrence is “so remote as
to be negligible.” Treas. Reg. § 1.170A-14(g)(3). Neither organization provided any indication
of how expanding this rule—which permits deductions in the face of uncertainty—would fulfill
Congress’s express aim in I.R.C. § 170(h)(5)(A) of limiting deductions to those instances where
an easement’s conservation purpose can be safeguarded forever. Because Treasury could not
ignore this goal, the agency was not required to respond to comments that would have led it to do
so.

The Land Trust Exchange asserted that the tax benefit rule rendered the proceeds
regulation unnecessary as well. J.A. at 685 (Land Tr. Exchange Cmt. at 7). Again, how so is
unclear from the comment. The tax benefit rule allows a taxpayer to exclude “income
attributable to the recovery during the taxable year of any amount deducted in any prior taxable
year to the extent such amount did not reduce the amount of tax imposed by this chapter.” I.R.C.
§ 111(a). This rule—which benefits the donor—bears no relation to the requirement under
I.R.C. § 170(h)(5)(A) that an easement’s conservation purpose be protected in perpetuity. Nor
 No. 20-2117 Oakbrook Land Holdings et al. v. Comm’r of Internal Rev. Page 18

did the Land Trust Exchange Treasury provide an explanation that would have made it necessary
for Treasury to consider the tax benefit rule in this context.

Finally, the other comments that the petitioners reference in passing did not raise
significant concerns. Pet’r Br. at 33. Most comments provided only cursory commentary on
Treas. Reg. § 1.170A-14(g)(6)(ii), often with either no discussion of the facts on which they
were basing their criticisms, or only vague indications of the sources of these facts. See Home
Box Office, Inc., 567 F.2d at 35 n.58. Comments that provided alternatives to the proceeds
regulation failed to discuss how these alternatives would satisfy I.R.C. § 170(h)(5)(A). See J.A.
at 721 (Brandywine Conservancy Cmt. at 3); id. at 723 (Wash. Tr. for Hist. Pres. Cmt. at 1); id.
at 801 (Ginsberg Cmt. at 5). Indeed, no comment that addressed the regulation raised a concern
about it failing to satisfy that provision’s perpetuity requirement. The APA thus did not require
that Treasury provide a response to these comments either.

The petitioners’ attempt to reach a different conclusion based on the facts of two of our
cases—Simms v. National Highway Traffic Safety Administration and PPG Industries, Inc. v.
Costle—falls short. Simms provides little guidance here. In that case, the National Highway
Traffic Safety Administration (NHTSA) of the Department of Transportation promulgated a rule
regarding how wheelchairs were to be secured on school buses based on “static” rather than
“dynamic” testing of securements. 45 F.3d at 1005. Addressing challenges on the adequacy of
NHTSA’s response to comments that advocated for dynamic testing, we upheld the rule,
pointing to the fact that, although NHTSA acknowledged in its concise general statement that
“dynamic testing was the preferred approach among commentators,” the agency had also
“explained the benefits of using static testing and discussed its rationale for rejecting dynamic
testing.” Id. Besides the fact that in the present case there was no well-developed, “preferred
approach” among the commentators that Treasury ignored, Simms illustrates only what an
adequate response to significant comments looks like. But such comments were not before
Treasury here.

PPG Industries is unhelpful as well. In that case, the Environmental Protection Agency
(EPA) designated Summit County, Ohio as needing to take special air pollution abatement
measures. PPG Industries, 630 F.2d at 464. The EPA had previously relied on faulty computer
 No. 20-2117 Oakbrook Land Holdings et al. v. Comm’r of Internal Rev. Page 19

modelling in making its designation. Id. at 465. When the plaintiffs challenged the new
designation, the EPA responded that it had “reanalyzed” the previously faulty data that it
computed. Id. at 466. The EPA, however, was unable to point to anywhere in the administrative
record to support this reanalysis. Id. We remanded to the agency so that an administrative
record could be developed. Id. at 468. Although the petitioners in the present case rely on the
fact that we criticized “EPA’s perfunctory treatment” of comments that made it “impossible to
determine whether the agency’s Summit County designation was arbitrary [or] capricious,” this
misses the forest for the trees. Id. at 466. Unlike in PPG Industries, Inc., there is no indication
here that Treasury relied on faulty or impermissible premises in promulgating the proceeds
regulation.

The petitioners also direct us to a recent decision by the Eleventh Circuit that held the
proceeds regulation to be procedurally invalid under the APA. See Hewitt v. Comm’r, 21 F.4th
1336, 1339 (11th Cir. 2021). Unlike the concurrence, we find that decision’s reasoning to be
unpersuasive. In concluding that the New York Landmarks Conservancy’s comment raised
significant concerns about possible deterrent effects that the proceeds regulation could have on
donations, the Eleventh Circuit stressed that one of I.R.C. § 170’s aims is “to allow deductions
for the donation of conservation easements to encourage donation for such easements.” Id. at
1352. Although encouraging the donation of conservation easements is undeniably a goal of the
statute, highlighting this point overlooks a crucial condition that Congress demanded be met by
donors seeking deductions: an easement’s conservation purpose must be “protected in
perpetuity.”7 I.R.C. § 170(h)(5)(A).

That the proceeds regulation interprets I.R.C. § 170(h)(5)(A) and is meant to enforce
Congress’s goal of limiting deductions to those instances in which the perpetuity requirement
can be satisfied is evident from the regulations. Not only does the plain language of the proceeds
regulation address this end, see Treas. Reg. § 1.170A-14(g)(6)(i) (“the conservation purpose can
nonetheless be treated as protected in perpetuity” if the proceeds regulation is followed upon
judicial extinguishment), but the rule is also part of a section in the regulations titled

7
As noted supra, the committee reports emphasized this restriction, too. See H.R. REP. NO. 96-1278, at 18;
S. REP. NO. 96-1007, at 13.
 No. 20-2117 Oakbrook Land Holdings et al. v. Comm’r of Internal Rev. Page 20

“Enforceable in perpetuity,” Treas. Reg. § 1.170A-14(g), that contemplates various scenarios in
which the perpetuity requirement of I.R.C. § 170(h)(5)(A) would not be met, see, e.g., Treas.
Reg. § 1.170A-14(g)(2), id. § 1.170A-14(g)(4). Other than missing § 1.170A-14(g)(2), which
regulates how mortgages impact the perpetuity requirement and was added in response to other
comments, the proposed rule contained the same relevant language. See 48 Fed. Reg. at 22945–
47. Put differently, I.R.C. § 170(h)(5)(A) embodies a particular policy that restricts deductions
to where an easement’s conservation purpose can be protected forever, and Treas. Reg.
§ 1.170A-14(g)(6)(ii) interprets how to implement that policy. The Eleventh Circuit’s decision
thus does not alter our conclusion that Oakbrook has failed to cite comments that raised valid
concerns about how the regulation served this policy.

At this point, the concurrence interjects to accuse us of treating the perpetuity
requirement of I.R.C. § 170(h)(5)(A) as a trump card. But we did not decide that perpetuity
should play a vital role in the statutory scheme. Congress did. Even aside from the legislative
history on which Treasury expressly relied in crafting the proceeds regulation, the statute’s text
makes it apparent that what Congress sought to encourage is not simply the donation of
conservation easements as the concurrence believes. Rather, Congress intended to incentivize
the donations of only those easements that met a highly circumscribed set of prerequisites.
These easements must be “of a qualified real property interest,” which includes the requirement
that the interest contain a perpetual restriction on its use. I.R.C. § 170(h)(1)(A), (2)(C).
Donations must be “to a qualified organization.” I.R.C. § 170(h)(1)(B). And, of course, they
must be “exclusively for conservation purposes”—purposes that must be ensured to endure
forever. I.R.C. § 170(h)(1)(C), (5)(A). Cf. Carlson, 938 F.3d at 342, 345–46 (noting that
“simplicity of structure” was one of the “fourteen [statutory] factors” that Congress explicitly
deemed it necessary for the Postal Service to contemplate in rulemaking).

Congress has long understood that any deductions it crafts are to be “strictly construed.”
Indopco, Inc. v. Comm’r, 503 U.S. 79, 84 (1992) (citing New Colonial Ice Co. v. Helvering,
292 U.S. 435, 440 (1934); Deputy v. Du Pont, 308 U.S. 488, 493 (1940)). If there ever was an
instance in which this canon of statutory interpretation lined up with congressional intent, it is
one in which Congress created a deduction predicated on eternal, unending, ceaseless vigilance.
 No. 20-2117 Oakbrook Land Holdings et al. v. Comm’r of Internal Rev. Page 21

Such a requirement is strict indeed. We thus cannot do as the comments identified by petitioners
did and overlook Congress’s decision to emphasize that a conservation easement’s purpose be
protected in perpetuity. Instead, we agree with the Tax Court. Treasury’s lack of a response to
these comments does not jeopardize the validity of Treas. Reg. § 1.170A-14(g)(6)(ii).

C. Chevron Deference

The petitioners also challenge Treas. Reg. § 1.170A-14(g)(6)(ii) as violating Chevron
USA Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). As background, the
proceeds regulation implements I.R.C. § 170(h)(5)(A), which provides: “A contribution shall
not be treated as exclusively for conservation purposes unless the conservation purpose is
protected in perpetuity.” Because the regulation does not allow donors to be compensated for
post-donation improvements, the petitioners maintain that the proceeds regulation is not a
permissible construction of I.R.C. § 170(h). We are unpersuaded.

“In Chevron, the Supreme Court observed that, pursuant to the principle of deference to
administrative interpretations, ‘considerable weight should be accorded to an executive
department’s construction of a statutory scheme it is entrusted to administer.’” Alliance for
Cmty. Media v. FCC, 529 F.3d 763, 776 (6th Cir. 2008) (quoting Chevron, 467 U.S. at 844). To
determine whether deference to Treasury’s statutory interpretation is warranted, we employ the
familiar, two-step Chevron analysis. See Mayo Found. for Med. Educ. & Rsch. v. United States,
562 U.S. 44, 53–58 (2011). “The initial question under step one of the Chevron framework is
‘whether Congress has directly spoken to the precise question at issue’ by employing precise,
unambiguous statutory language.” Alliance for Cmty. Media, 529 F.3d at 776–77 (quoting
Chevron, 467 U.S. at 842). It is undisputed that I.R.C. § 170(h)(5)(A), the provision requiring
that the conservation purpose of a donation be “protected in perpetuity,” does not speak to the
precise question at issue: how judicial extinguishment affects the perpetuity requirement.

Our analysis thus proceeds to the second step of Chevron, which asks whether Treasury’s
interpretation was “based on a permissible construction of the statute.” Tennessee Hosp. Ass’n,
908 F.3d at 1037–38 (quoting Chevron, 467 U.S. at 843). “If a statute is ambiguous, and if the
implementing agency’s construction is reasonable, Chevron requires a federal court to accept the
 No. 20-2117 Oakbrook Land Holdings et al. v. Comm’r of Internal Rev. Page 22

agency’s construction of the statute, even if the agency’s reading differs from what the court
believes is the best statutory interpretation.” Nat’l Cable & Telecomms. Ass’n v. Brand X
Internet Servs., 545 U.S. 967, 980 (2005). “Whether an agency’s construction is reasonable
depends, in part, ‘on the construction’s “fit” with the statutory language, as well as its conformity
to statutory purposes.’” Good Fortune Shipping SA v. Comm’r, 897 F.3d 256, 262 (D.C. Cir.
2018) (quoting Goldstein v. SEC, 451 F.3d 873, 881 (D.C. Cir. 2006)).

At its core, the petitioners’ position centers on the fact that “[n]othing in § 170(h)
suggests that a qualified organization must be compensated above the value of its qualified real
property interest in the event the easement is extinguished.” Pet’r Br. at 55. This statement is
true, but incomplete: nothing in that section suggests that donors must be compensated for their
post-donation improvements upon extinguishment either. Instead, the section is silent on what
should happen if an easement is extinguished by judicial proceedings, including about what
should happen with the value added by any post-donation improvements made by a donor.

Although it does not answer this exact question, the text of I.R.C. § 170(h)(5)(A) still
provides direction. Section 170(h)(5)(A) requires that easements’ conservation purposes be
protected in perpetuity after the donation. This leaves donees responsible for stewarding the
interest through eternity, a task that consumes not only time but resources, too.8 A rule that, in
the event of extinguishment, allowed donors to retain the value of post-donation improvements
such as the petitioners propose would “likely enrich property owners at the public’s expense, and
leave donees with fewer proceeds with which to advance similar conservation purposes
elsewhere.” McLaughlin, supra at 139. Erring on the side of providing the donee with higher
rather than lower proceeds, moreover, buoys the donee’s ability to ensure that the conservation
purpose of the easement continues upon extinguishment. With additional funds at its disposal,
the conservation organization will likely have more options available to further the original
conservation purpose in line with § 170(h)(5)(A). See id. at 136. Treasury Regulation § 1.170A-
14(g)(6)(ii) does just that and is thus a reasonable interpretation of the section.

8
As also noted supra, the legislative history that Treasury cited in its notice of proposed rulemaking
confirms that Congress was concerned about donees having sufficient resources to ensure that an easement’s
conservation purpose be protected in perpetuity. See H.R. REP. NO. 96-1278, at 19; S. REP. NO. 96-1007, at 14.
 No. 20-2117 Oakbrook Land Holdings et al. v. Comm’r of Internal Rev. Page 23

Bolstering the reasonableness of the proceeds regulation is the fact that Congress has
amended I.R.C. § 170 over thirty times during the past thirty-four years but has not voided Treas.
Reg. § 1.170A-14(g)(6)(ii). See Oakbrook Land Holdings, 154 T.C. at 199–200, 199 n.5
(cataloguing amendments to § 170). “Treasury regulations and interpretations long continued
without substantial change, applying to unamended or substantially reenacted statutes, are
deemed to have received congressional approval and have the effect of law.” Cottage Sav. Ass’n
v. Comm’r, 499 U.S. 554, 561 (1991) (quoting United States v. Correll, 389 U.S. 299, 305–06
(1967)). Over three decades of congressional acquiescence to the proceeds regulation leaves us
confident that the regulation is owed our deference under Chevron.

Against this conclusion, the petitioners point to the other provision of I.R.C. § 170(h) that
contains a perpetuity requirement, § 170(h)(2)(C). This subsection provides the definition of
“qualified real property interest,” which is “a restriction (granted in perpetuity) on the use which
may be made of the real property.” I.R.C. § 170(h)(2)(C). According to the petitioners, a donee
has no interest in donor improvements under this subsection, and therefore it is unreasonable to
give a donee the proceeds after judicial extinguishment that result from a donor’s post-donation
improvements.

Whatever else I.R.C. § 170(h)(2)(C) requires, the petitioners have not established that it
requires donors to receive the value of their post-donation improvements. The subsection’s text
does not dictate this outcome, for all that it provides is that a qualified real property interest both
be a restriction on the use of real property, and that the restriction be “granted in perpetuity.” Id.
Subsection 170(h)(2)(C) simply does not encompass post-donation improvements or suggest to
whom their value should accrue upon judicial extinguishment. That gap was left for Treasury to
fill, as it reasonably did with the proceeds regulation.

D. Arbitrary or Capricious Review

Coupled with their Chevron argument, the petitioners argue that Treasury acted
arbitrarily or capriciously in promulgating Treas. Reg. § 1.170A-14(g)(6)(ii) for two distinct
 No. 20-2117 Oakbrook Land Holdings et al. v. Comm’r of Internal Rev. Page 24

reasons: because Treasury provided no explanation for why it adopted the rule, and because
Treasury failed to consider a variety of alternatives.9 Neither argument is convincing.

When determining whether a final agency action is arbitrary or capricious, the scope of
our review is “an extremely narrow one.” Navistar Int’l Transp. Corp., 941 F.2d at 1352. A
court may not “substitute its judgment for that of the agency.” Greenbaum v. U.S. EPA,
370 F.3d 527, 542 (6th Cir. 2004) (quoting Bowman Transp., Inc. v. Arkansas-Best Freight Sys.,
Inc., 419 U.S. 281, 285 (1974)). Instead, we consider whether “the agency has relied on factors
which Congress has not intended it to consider, entirely failed to consider an important aspect of
the problem, offered an explanation for its decision that runs counter to the evidence before the
agency, or is so implausible that it could not be ascribed to a difference in view or the product of
agency expertise.” Ne. Ohio Reg’l Sewer Dist. v. U.S. EPA, 411 F.3d 726, 731 (6th Cir. 2005)
(quoting Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co. (State Farm),
463 U.S. 29, 43 (1983)). “Even when an agency explains its decision with less than ideal clarity,
a reviewing court will not upset the decision on that account if the agency’s path may reasonably
be discerned.” Id. (quoting Alaska Dep’t of Env’t Conservation v. U.S. EPA, 540 U.S. 461, 497
(2004)).

The petitioners’ first argument for why Treas. Reg. § 1.170A-14(g)(6)(ii) is arbitrary or
capricious duplicates their argument for why the rule’s concise general statement of basis and
purpose is deficient. In essence, the petitioners argue that the proceeds regulation could not be
the product of reasoned decision-making because Treasury provided no explanation for why the
agency settled on that formula for calculating proceeds. Yet given the context of the rulemaking
and the statutory issue that the agency confronted, we reiterate that the concise statement of basis
and purpose that accompanied the proceeds regulation adequately explained Treasury’s rationale:
to create an administrable mechanism for enforcing I.R.C. § 170(h)(5)(A)’s perpetuity
requirement.

9
The petitioners insist that their arbitrary-or-capricious arguments are part of the Chevron analysis.
Because we have previously analyzed these issues separately, see Atrium Med. Ctr. v. U.S. Dep’t of HHS, 766 F.3d
560, 567 (6th Cir. 2014), we do so here.
 No. 20-2117 Oakbrook Land Holdings et al. v. Comm’r of Internal Rev. Page 25

Insofar as the petitioners try to bolster their arbitrary-or-capricious argument by relying
on SEC v. Chenery Corp., 318 U.S. 80, 88 (1943), this, too, fails. In Chenery, the Supreme
Court limited the grounds on which an agency’s action could be upheld to those on which the
agency relied at the time. 318 U.S. at 88. Under this rule, an agency must defend its actions
based on the reasons that animated the act at issue, not for reasons that it formulated during
litigation. State Farm, 463 U.S. at 50. Chenery does not, however, narrow our inquiry into an
agency’s contemporaneous rationale solely to the concise general statement. See State Farm,
463 U.S. at 43. As the Supreme Court has held in the context of determining whether a
particular statutory interpretation guided an agency’s actions, courts may accept the explanation
provided by an agency during litigation for its conduct when this is “the only plausible
explanation” of the course taken in the rulemaking. Nat’l R.R. Passenger Corp. v. Boston &
Maine Corp., 503 U.S. 407, 420 (1992); see also Nat’l Elec. Mfrs. Ass’n v. U.S. Dept. of Energy,
654 F.3d 496, 513 (4th Cir. 2011).

Such is the case here. Contrary to what the petitioners maintain, the Commissioner’s
rationale for the proceeds regulation—namely, that it was promulgated to create an administrable
rule which ensured that a donee would receive sufficient funds upon extinguishment to continue
the conservation purpose—aligns with the obvious concern evinced by Treasury during the
rulemaking process that I.R.C. § 170(h)(5)(A)’s perpetuity requirement be satisfied in the event
of judicial extinguishment. This rationale both tethered the regulation to its statutory source and
left us a clear thread to trace how Treasury navigated between these two points. Treasury’s
citations to the committee reports provided further guidance into its decision to craft a rule that
stood to benefit donees over donors upon extinguishment, an aim which coincided with
Congress’s “major policy decisions” concerning which entity should be favored post-donation.10
48 Fed. Reg. at 22940.

Moving to the petitioners’ second rationale, none of the alternatives to which they point
required Treasury’s consideration. Two sources of possible alternatives—the RESTATEMENT

10
The concurrence would have us ignore the Supreme Court because of its reading of National Railroad.
Passenger Corp. as a “dead letter in legal history.” Concur. op. at 37. We must, however, decline to conclude that
“more recent cases have, by implication, overruled an earlier precedent” of the Court. Agostini v. Felton, 521 U.S.
203, 237 (1997).
 No. 20-2117 Oakbrook Land Holdings et al. v. Comm’r of Internal Rev. Page 26

(THIRD) OF PROPERTY § 7.11 (Am. Law. Inst. 2000) and the testimony of SLRC’s Executive
Director, James Wright, at the trial before Judge Holmes in 2016, see J.A. 405–08 (Wright Test.
Tr. at 205–08); Pet’r Br. at 51—did not exist when Treasury was promulgating the proceeds
regulation in the 1980s. “[A] rulemaking ‘cannot be found wanting simply because the agency
failed to include every alternative device and thought conceivable by the mind of man . . .
regardless of how uncommon or unknown that alternative may have been”—or, in this case,
regardless of how distant in the future that alternative was from existing. State Farm, 463 U.S.
at 51 (quoting Vermont Yankee, 435 U.S. at 551); see also Simms, 45 F.3d at 1006.

The petitioners also flag a Maryland statute that governed condemnation awards and
which the Maryland Agricultural Land Preservation Foundation attached to its comment. See
J.A. at 742 (Md. Agric. Land Pres. Found. Cmt. attach.). According to the petitioners, this
statute provided an alternative approach to how Treas. Reg. § 1.170A-14(g)(6)(ii) allocates
proceeds. If it did, however, the Maryland Agricultural Land Preservation Foundation
apparently did not think so. The organization’s comment neither drew attention to this statute,
nor put it forward as an alternative to the proceeds regulation. Instead, the Maryland
Agricultural Land Preservation Foundation lumped this statute in with a series of laws from
which the organization derived its legislative mandate. Id. at 725 (Md. Agric. Land Pres. Found.
Cmt. at 1). Because even the organization that cited the statute did not consider it to be an
alternative to the proceeds regulation, Treasury did not have to assess whether it was one.

Finally, the petitioners’ heavy reliance on State Farm and Judulang v. Holder, 565 U.S.
42 (2011), to support their arbitrary-or-capricious arguments is misplaced. In State Farm, the
alternative that the agency failed to consider—airbags—was well-known at the time, including to
the agency itself. See 463 U.S. at 48. In Judulang, the agency had applied diverse statutory
factors in an arbitrary manner. See 565 U.S. at 58–59. The petitioners have not pointed to an
alternative to the proceeds regulation that was both well established and that Treasury ignored.
Additionally, the regulation is a reasonable way to ensure that the perpetuity requirement of
I.R.C. § 170(h)(5)(A) is protected in the event of a judicial extinguishment of a conservation
easement. Therefore, Treasury acted neither arbitrarily nor capriciously in promulgating Treas.
Reg. § 1.170A-14(g)(6)(ii).
 No. 20-2117 Oakbrook Land Holdings et al. v. Comm’r of Internal Rev. Page 27

III. CONCLUSION

For the foregoing reasons, we AFFIRM the judgment of the Tax Court upholding the
procedural and substantive validity of Treas. Reg. § 1.170A-14(g)(6)(ii).
 No. 20-2117 Oakbrook Land Holdings et al. v. Comm’r of Internal Rev. Page 28

_____________________________________

CONCURRING IN THE JUDGMENT
_____________________________________

RALPH B. GUY, JR., Circuit Judge, concurring in the judgment only. The Department
of the Treasury must play by the same rules as other federal agencies. The Supreme Court made
that clear when it refused to “carve out an approach to administrative review good for tax law
only” and “expressly ‘recognized the importance of maintaining a uniform approach to judicial
review of administrative action.’” Mayo Found. for Med. Educ. & Rsch. v. United States,
562 U.S. 44, 55 (2011) (cleaned up) (quoting Dickinson v. Zurko, 527 U.S. 150, 154 (1999)).
But it seems the majority opinion has done the opposite for Treasury’s proceeds regulation
(Treas. Reg. § 1.170A-14(g)(6)(ii)). In my view, the regulation is procedurally invalid under the
Administrative Procedure Act (APA) for substantially the same reasons stated by the Eleventh
Circuit in Hewitt v. Commissioner of IRS, 21 F.4th 1336 (11th Cir. 2021), and by the concurring
and dissenting opinions in Oakbrook Land Holdings, LLC v. Commissioner of IRS, 154 T.C. 180,
200-30 (2020) (Torro, J., concurring in the judgment, joined in full by Urda, J., and joined in part
by Gustafson and Jones, JJ.); id. at 230-259 (Holmes, J., dissenting). But I would conclude that
the Commissioner’s statutory argument is not forfeited and affirm on that basis.

I.

The proceeds regulation at issue is procedurally invalid under 5 U.S.C. §§ 553(c), and
706(2)(A), of the APA. Hewitt, 21 F.4th at 1350-53; Oakbrook, 154 T.C. at 216-30 (Torro, J.,
concurring in the judgment); id. at 230-53 (Holmes, J., dissenting).1

“One of the basic procedural requirements of administrative rulemaking is that an agency
must give adequate reasons for its decisions.” Encino Motorcars, LLC v. Navarro, 579 U.S. 211,
221 (2016). Further, “[a]n agency must consider and respond to significant comments received
during the period for public comment.” Perez v. Mortg. Bankers Ass’n, 575 U.S. 92, 96 (2015)
(emphasis added) (collecting cases). Treasury cannot get by without any explanation for the

1
Insofar as it concerns the validity of the proceeds regulation, this case is materially identical to Hewitt
because, there, the tax court decided the case based upon its Oakbrook decision. Hewitt, 21 F.4th at 1339. But the
Eleventh Circuit reversed—and rightly so. Id. at 1353.
 No. 20-2117 Oakbrook Land Holdings et al. v. Comm’r of Internal Rev. Page 29

regulation and without responding to the significant comment submitted by the New York Land
Conservancy (NYLC). See 51 Fed. Reg. 1496, 1496 (Jan. 14, 1986). (Contra Maj. Op. 6, 10,
16).

As the Eleventh Circuit held, NYLC’s comment “was significant and required a response
by Treasury to satisfy the APA’s procedural requirements.” Hewitt, 21 F.4th at 1351. Because
Treasury “failed to respond to NYLC’s significant comment concerning the post-donation
improvements issue as to proceeds, it violated the APA’s procedural requirements.” Id. at 1353.

The majority opinion makes NYLC’s four-page comment seem insignificant by
condensing it to one sentence and omitting the most important part. Compare (Maj. Op. 16),
with Hewitt, 21 F.4th at 1345 (quoting extensively from NYLC’s comment). In part, NYLC’s
comment made the following points:

1. Most importantly, NYLC stated that the proceeds regulation “contemplates
that a ratio of value of the conservation restriction to value of the fee will be
fixed at the time of the donation and will remain in effect forever thereafter.
This formula fails to take into account that improvements may be made
thereafter by the owner which should properly alter the ratio.” J.A. 671
(emphasis added). NYLC drove the point home with a specific example.
Suppose the owner of property worth $100,000 grants a “scenic easement”
worth 10% of the value of the entire parcel, guaranteeing that the owner of
Parkacre and his successors will never build high-rise buildings in order to
ensure Parkacre is a place to enjoy nature and sunlight. See J.A. 670-71; see
also 48 Fed. Reg. 22940, 22944-55 (May 23, 1983). The parcel owner then
spends $2 million to build rental housing units on the parcel. Id. If the
easement is later extinguished in eminent domain proceedings for the parcel,
“the donee organization would be entitled . . . to 10% of the sale price of the
entire parcel including the improvements,” i.e., 10% of $2.1 million. J.A.
671. “This would obviously be undesirable to the prospective donor and
would constitute a windfall to the donee organization.” Id. (emphasis added).
2. NYLC thus contended that the proceeds regulation “contain[s] problems of
policy and practical application so pervasive as to cause [NYLC] to
recommend strongly the deletion of these provisions. The statute was enacted
by Congress to encourage the protection of our significant natural and built
environment through the donation of conservation restrictions and yet, the
proposed provisions would thwart the purpose of the statute by deterring
prospective donors.” J.A. 670 (emphasis added).
 No. 20-2117 Oakbrook Land Holdings et al. v. Comm’r of Internal Rev. Page 30

3. NYLC spoke from first-hand experience, recounting that “it is our experience
that prospective donors frequently raise the question that ‘perpetuity’ is a long
time and may impose unforeseeably heavy burdens on themselves or future
owners under unforeseeable future circumstances. We find ordinarily that
these concerns are mollified upon the donor’s recognition that common law
permits extinguishment of restrictions . . . . Obviously, the prospect of
extinguishment would no longer mollify these fears if a split of proceeds
under unknown circumstances would be required.” J.A. 670-71.
4. NYLC—a donee organization—emphasized that “[t]he value of a
conservation restriction to the donee organization is not a monetary value but
a philanthropic value as a device for achieving the charitable objectives of the
organization,” such that “the extinguishment of a conservation restriction
cannot be compensated by the payment of money.” J.A. 671. To that end,
NYLC stated that it “would prefer to eliminate” the proceeds regulation rather
than “trade on the prospect of future windfalls when restrictions are
extinguished.” Id.
5. “In light of the potential inequities described,” NYLC concluded by
“recommend[ing] that the proposed proceeds formula be revised to prevent
such inequities,” but “strongly recommend[ed] deletion of the entire
extinguishment provision.” J.A. 672 (emphasis added).

NYLC’s comment was “significant”: It “show[ed] why [a] mistake was of possible
significance in the results.” Vt. Yankee Nuclear Power Corp. v. Nat. Res. Def. Council, Inc.,
435 U.S. 519, 553 (1978) (quoting Portland Cement Ass’n v. Ruckelshaus, 486 F.2d 375, 394
(D.C. Cir. 1973)). The comment is significant for two principal reasons.

First, NYLC’s comment is significant because it showed that the regulation “would
thwart” one of “the purpose[s] of the statute by deterring prospective donors.” J.A. 670; accord
Hewitt, 21 F.4th at 1351. That is, “[o]ne of the policy decisions reflected in th[e] ‘committee
reports,’ expressly referenced by Treasury,” Hewitt, 21 F.4th at 1351 (quoting 48 Fed. Reg. at
22940), “provided that ‘the preservation of our country’s natural resources and cultural heritage
is important,’ that ‘conservation easements now play an important role in preservation efforts,’
and that ‘provisions allowing deductions for conservation easements should be directed at the
preservation of unique or otherwise significant land areas or structures.’” Id. (quoting S. REP.
NO. 96-1007, at 9 (1980)); see also BC Ranch II, L.P. v. Comm’r of IRS, 867 F.3d 547, 553-54
(5th Cir. 2017).
 No. 20-2117 Oakbrook Land Holdings et al. v. Comm’r of Internal Rev. Page 31

Second, NYLC cast doubt on the reasonableness of the regulation’s formula and further
showed that it would “obviously” deter donors because “the regulation’s proceeds
formula: (1) ‘contemplates that a ratio of value of the conservation restriction to value of the fee
will be fixed at the time of the donation and will remain in effect forever thereafter’;
and (2) ‘fail[ed] to take into account that improvements may be made thereafter by the owner
which should properly alter the ratio.’” Hewitt, 21 F.4th at 1351 (quoting NYLC’s comment);
see J.A. 670-71. The majority opinion does not grapple with this second aspect of the reasoning
in Hewitt. If it was a significant comment to suggest that an agency’s uniform cook temperature
for all fish should be altered to each species of fish so that the product is not destroyed, United
States v. Nova Scotia Food Prods. Corp., 568 F.2d 240, 243, 252-53 (2d Cir. 1977); (Maj. Op.
15-16), then NYLC’s comment was likewise significant because it argued that a donor’s post-
donation improvements “should properly alter the ratio” so that Congress’s tax incentive for
prospective donors is not destroyed. J.A. 671.

Treasury might have explained that post-donation improvements might cause a slight
indirect increase in the value of an easement and that the donee should reap the total value of the
easement. But Treasury did not. More importantly, Treasury left everyone to wonder: Why
would the easement holder be entitled to receive a proportional percentage of the actual value of
the donor’s post-donation improvements, i.e., rental housing units or a country club and golf
course? Why would the statutory tax deduction incentivize any donor to grant a conservation
easement if it means the donor (and any successors) must agree to give the donee the easement
proceeds and a proportional ratio of any future improvements in the event of judicial
extinguishment? Or why would Treasury require that the value of separate property rights (the
easement and the property burdened) always maintain a proportional value relationship when
“there is commonly little, if any, relation.” RESTATEMENT (FIRST) OF PROPERTY § 508 cmt. b
(Am. Law. Inst. 1944). This court should not “sanction silence in the face of such vital
questions.” Nova Scotia Food Prods., 568 F.2d at 253.2

2
The Restatement (Second) of Property did not address easements because the Restatement (First) of
Property remained the prevailing rules for easements at the time Congress added the perpetuity requirements in
I.R.C. § 170(h)(2)(C), and (h)(5)(A). See RESTATEMENT (SECOND) OF PROPERTY: LANDLORD AND TENANT intro.
(Am. L. Inst. 1983), and RESTATEMENT (SECOND) OF PROPERTY: DONATIVE TRANSFERS intro. (Am. L. Inst. 1977).
 No. 20-2117 Oakbrook Land Holdings et al. v. Comm’r of Internal Rev. Page 32

The bottom line is there is no doubt that NYLC’s comment “‘can be thought to challenge
[two] fundamental premise[s]’ underlying the proposed agency decision” and Treasury failed to
respond. Carlson v. Postal Regul. Comm’n, 938 F.3d 337, 344 (D.C. Cir. 2019) (quoting MCI
WorldCom, Inc. v. FCC, 209 F.3d 760, 765 (D.C. Cir. 2000)); see Hewitt, 21 F.4th at 1351-52.
(Contra Maj. Op. 15-16 (stating the same test but a contrary conclusion). In other words,
Treasury’s decision is arbitrary and capricious because it “entirely failed to consider [these]
important aspect[s] of the problem.” Nat’l Ass’n of Home Builders v. Defs. of Wildlife, 551 U.S.
644, 658 (2007) (quoting Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S.
29, 43 (1983)).

Two of the cases Oakbrook relies upon underscore the errors in this case. Both cases
invalidated agency action because the agency’s explanation was insufficient.

At issue in Dominion Resources, Inc. v. United States, 681 F.3d 1313 (Fed. Cir. 2012),
was a Treasury regulation interpreting “the avoided-cost rule set out in the statute at
I.R.C. § 263A(f)(2)(A)(ii),” “as applied to property temporarily withdrawn from service.” 681
F.3d at 1317. Dominion explained that the notice of proposed rulemaking “provided no rationale
other than the general statement that the regulations are intended to implement the avoided-cost
method.” Id. at 1319. Here, Treasury did not even do that much. And, as in this case, the
agency in Dominion “provided no rationale in the final regulations.” Id. The Federal Circuit
reversed the trial court because it “erroneously stretched to conclude that ‘the path that Treasury
was taking in the rulemaking proceedings can be discerned, albeit somewhat murkily.’” Id.

Treasury gave us even less to work with than in Dominion. Here, the notice of proposed
rulemaking simply stated that the regulations relate to “contributions not in trust of partial
interests in property” under “section 6 of the Tax Treatment Extension Act of 1980” and that
“[t]he regulations reflect the major policy decisions made by the Congress and expressed in these
committee reports.” 48 Fed. Reg. at 22940. The final regulations merely stated that the
“regulations provide necessary guidance to the public for compliance with the law and affect

The law of easements was not revisited until 2000, but even then the changes were intended to “simplif[y] and
clarif[y]” this area of the law and were largely a matter of “form rather than of substance.” See RESTATEMENT
(THIRD) OF PROPERTY: SERVITUDES intro. (Am. L. Inst. 2000).
 No. 20-2117 Oakbrook Land Holdings et al. v. Comm’r of Internal Rev. Page 33

donors and donees of qualified conservation contributions.” 51 Fed. Reg. at 1496. From these
statements and the use of “protected in perpetuity” in Treas. Reg. § 1.17A-14(g)(6)(i), the
majority opinion stretches to conclude that Treasury “tethered the regulation to its statutory
source and left us a clear thread to trace how Treasury navigated between these two points.”
(Maj. Op. 25).

We may be able to discern that Treasury was interpreting Congress’s perpetuity
requirement, but the thread stops there. As in Dominion, the proceeds regulation is invalid
because Treasury provided “no explanation for the way that use of [a fixed ratio at the time of
the grant] implements the [protected-in-perpetuity] rule.” 681 F.3d at 1319. Treasury
compounded its error by failing to address NYLC’s significant comment that post-donation
improvements should “properly alter the ratio,” rather than be divvied up according to a ratio
fixed at the time of the grant.3

The reasoning in Carlson v. Postal Regulatory Commission, 938 F.3d 337 (D.C. Cir.
2019), explains why NYLC’s comment required a response. Carlson considered an agency’s
decision to increase the cost of letter stamps by five cents. 938 F.3d at 341. The Postal Service’s
proposal noted that “keeping the price of stamps ‘at round numbers divisible by five’” would
help achieve one of the statutory goals, “simplicity of structure.” Id. at 342. Carlson, a “postal
customer and watchdog,” chimed in during notice-and-comment, arguing: (1) that “keeping the
price of a stamp divisible by five did not promote the value of ‘simplicity of structure’”; (2); that
“raising the price of stamps by five cents was inconsistent with the statutory objective of
‘establish[ing] and maintain[ing] a just and reasonable schedule for rates’” (similar to NYLC’s
argument that the fixed-ratio formula is flawed and would “thwart” the statutory goal of
encouraging conservation easements); and (3) that “the detrimental ‘effect of rate increases upon
the general public’ weighed against the Postal Service’s proposal” (analogous to NYLC’s

3
The majority opinion cites three rare cases from other circuits for the proposition that a statement of basis
and purpose is not necessary “where the basis and purpose [are] considered obvious.” (Maj. Op. 11 (quoting Cal-
Almond, Inc. v. U.S. Dep’t of Agric., 14 F.3d 429, 443 (9th Cir. 1993)). But the basis for Treasury’s fixed-ratio
formula is far from obvious. This is not a case where the agency used a “mechanical application of the statutory
formula” to merely set a rate per pound of almonds to fund its operations, as required. See Cal-Almond, 14 F.3d at
433, 439, 443. Here, Treasury created a formula for the division of proceeds from the sale of discrete property
interests based upon the word “perpetuity,” I.R.C. § 170(h)(2)(C), and (h)(5)(A), or at least that is what we can
gather from the proceeds regulation itself because Treasury did not provide an explanation.
 No. 20-2117 Oakbrook Land Holdings et al. v. Comm’r of Internal Rev. Page 34

statement that “problems of policy and practical application” and “inequities” weighed in favor
of revising the regulation or deleting it altogether). Id. at 342, 345-47 (alterations in original).
The agency did not respond to Carlson’s comments, but it did more than Treasury here; it at least
“referenced, but did not resolve, Carlson’s” first point. Id. at 342. The court held that all of
Carlson’s comments were significant and “warranted [a] response” because they concerned
“several relevant statutory objectives and factors.” Id. at 345. “By failing to consider relevant
statutory objectives and factors and declining to respond to significant public comments, the
Commission violated the APA when it approved the stamp price hike.” Id. at 351. The same is
true here.

The majority opinion acknowledges that “encouraging the donation of conservation
easements is undeniably a goal of the statute.” (Maj. Op. 19). Yet it treats one other statutory
goal—perpetuity—as a trump card, such that Treasury was free to ignore any comment unless
the comment showed that the regulation “fail[ed] to satisfy” the “perpetuity requirement.” (Maj.
Op. 18; see id. 16-21, 23-24).

On the contrary, “[e]ven when an agency has significant discretion in deciding how much
weight to accord each statutory factor, that does not mean it is free to ignore any individual
factor entirely.” Carlson, 938 F.3d at 344 (cleaned up) (quoting Tex. Oil & Gas Ass’n v. EPA,
161 F.3d 923, 934 (5th Cir. 1998)); see also Int’l Ladies’ Garment Workers’ Union v. Donovan,
722 F.2d 795, 818 (D.C. Cir. 1983) (holding that the agency “must explain why a particular
proposal is inconsistent with the balance between regulation and competition” (citation
omitted)); Nova Scotia Food Prods., 568 F.2d at 253 (“[T]he administrative process should
disclose, at least, whether the proposed regulation is considered to be commercially feasible, or
whether other considerations prevail even if commercial infeasibility is acknowledged.”). As in
Carlson, Treasury “also failed to evaluate how other statutory objectives and factors,” such as
encouraging the donation of conservation easements, “might bear on the proposed [proceeds
regulation] or outweigh [Treasury’s purported] reliance on” the perpetuity requirement. Id. at
347.
 No. 20-2117 Oakbrook Land Holdings et al. v. Comm’r of Internal Rev. Page 35

Treasury was required to explain to the public, why post-donation improvements are not
taken into account and why it balanced the competing statutory interests in favor of adopting a
fixed-ratio formula. “[A]n agency may justify its policy choice by explaining why [its] policy ‘is
more consistent with statutory language’ than alternative policies,” but Treasury is not permitted
to remain silent and leave it for a court to “supply a reasoned basis for the agency’s decision.”
Encino Motorcars, 579 U.S. at 223 (citation omitted). (Contra Maj. Op. 13, 19-20, 22, 25).

Against this backdrop, NYLC’s comment required a response because it was based on
first-hand experience, and common sense for that matter; it challenged the logic of the fixed-ratio
formula that Treasury created; and it raised relevant statutory objectives. After all, if individuals
“must turn square corners when they deal with the Government,” it is only fair that “the
Government should turn square corners in dealing with the people.” Dep’t of Homeland Sec. v.
Regents of the Univ. of Cal., 140 S. Ct. 1891, 1909 (2020) (citations omitted). Because Treasury
failed to respond to NYLC’s comment, the proceeds regulation is procedurally invalid.

The majority opinion concedes that “if an agency could ignore every comment regardless
of its content, then the process of soliciting public input would be pointless.” (Maj. Op. 14
(citing Sherley v. Sebelius, 689 F.3d 776, 784 (D.C. Cir. 2012)). But in the end, the majority has
rendered that process meaningless because Treasury provided no explanation for its decision and
Treasury ignored NYLC’s significant comment and every other comment about the proceeds
regulation.

II.

Treasury’s decision to remain silent has consequences: We cannot rely on post hoc
explanations; nor can a court offer the reasons that might have supported Treasury’s decision.
The majority explains why the proceeds regulation is needed to implement the statute’s
protected-in-perpetuity requirement and why, as a matter of policy, the division of
extinguishment proceeds should be “more favorable to donees than to donors,” such that the
easement holder should receive a fixed ratio of the actual value of the donor’s post-donation
improvements. (Maj. Op. 13, 19-20, 22, 25). The problem is that Treasury did not provide these
reasons at the time it promulgated the proceeds regulation.
 No. 20-2117 Oakbrook Land Holdings et al. v. Comm’r of Internal Rev. Page 36

“It is a ‘foundational principle of administrative law’ that judicial review of agency
action is limited to ‘the grounds that the agency invoked when it took the action.’” Dep’t of
Homeland Sec., 140 S. Ct. at 1907 (quoting Michigan v. EPA, 576 U.S. 743, 758 (2015)). “It is
not the role of the courts to speculate on reasons that might have supported an agency’s decision.
‘[W]e may not supply a reasoned basis for the agency’s action that the agency itself has not
given.’” Encino Motorcars, 579 U.S. at 224 (quoting State Farm, 463 U.S. at 43). That also
means “courts may not accept . . . counsel’s post hoc rationalizations for agency action.” State
Farm, 463 U.S. at 50. This “rule serves important values”: It promotes “agency accountability”;
instills “confidence that the reasons given are not simply ‘convenient litigating position[s]’”; and
preserves “the orderly functioning of the process of review.” Dep’t of Homeland Sec., 140 S. Ct.
at 1909 (citations omitted).

The Commissioner’s brief and the majority opinion offer a similar rationale and cite the
same law review article published in 2021. (Appellee Br. 61-63; Maj. Op. 13, 22). But “[t]he
functional reasons for requiring contemporaneous explanations apply with equal force regardless
whether post hoc justifications are raised in court by those appearing on behalf of the agency or
by agency officials themselves.” Dep’t of Homeland Sec., 140 S. Ct. at 1909.

Yet the claim is made that: “[T]he Supreme Court has held in the context of determining
whether a particular statutory interpretation guided an agency’s actions, courts may accept the
explanation provided by an agency during litigation for its conduct when this is ‘the only
plausible explanation’ of the course taken in the rulemaking.” (Maj. Op. 25 (quoting Nat’l R.R.
Passenger Corp. v. Boston & Maine Corp., 503 U.S. 407, 420 (1992)).

But Boston & Maine Corp. is not relevant. There, the Court addressed an agency’s
“interpretation of the word ‘required,’” which the agency “did not in so many words articulate”
in the context of an adjudication—not notice-and-comment rulemaking. See id. at 409-10;
United States v. Mead Corp., 533 U.S. 218, 230 n.12 (2001). Moreover, the Court deferred to
the agency’s “position before the Court” because “the only plausible explanation” of the
agency’s opinion was that the agency’s adjudicative “decision was based on the [same] proffered
interpretation.” 503 U.S. at 418, 420. That is a world apart from the situation here: a
proceeds regulation interpreting the statutory requirements that a deed must grant an easement
 No. 20-2117 Oakbrook Land Holdings et al. v. Comm’r of Internal Rev. Page 37

“in perpetuity” for a “conservation purpose [that] is protected in perpetuity.” I.R.C.
§ 170(h)(2)(C), (h)(5)(A). It is one thing to say that it is obvious Treasury’s regulation is
interpreting the protected-in-perpetuity requirement. But it is a stretch to say that there is only
one plausible rationale (if any) for a regulation that divides proceeds according to a fixed ratio
set at the time of the easement grant. Otherwise, Boston & Maine would swallow the rule that
we may consider “only contemporaneous explanations for agency action.” Dep’t of Homeland
Sec., 140 S. Ct. at 1908.

The Supreme Court has never again so much as mentioned the statement the majority
relies on from Boston & Maine. Instead, the Court has since repeatedly said the opposite, and
that shows Boston & Maine is a dead letter in legal history. See 503 U.S. at 425-28 (White, J.,
joined by Blackmun and Thomas, JJ., dissenting) (arguing State Farm controls and “the majority
is simply wrong” to defer to “the post hoc rationalization of Government lawyers”); cf. Trump v.
Hawaii, 138 S. Ct. 2392, 2423 (2018). There is no reason to resurrect the statement in Boston
& Maine.

III.

The proceeds regulation also does not survive Chevron. Where, as here, the rulemaking
process was “procedurally defective,” a regulation does not receive Chevron deference.
Household Credit Servs. v. Pfennig, 541 U.S. 232, 242 (2004) (quoting Mead, 533 U.S. at 227);
accord Mayo Found., 562 U.S. at 53; see, e.g., Encino Motorcars, 579 U.S. at 220-21, 224.4

IV.

But this does not mean Oakbrook should prevail outright. Because Oakbrook’s deed
calls for the donee to receive a fixed amount in the event of a judicial extinguishment, the deed
violates the plain language of Congress’s requirement that the conservation easement must be
granted in perpetuity under I.R.C. § 170(h)(2)(C). (Appellee Br. 32-35, 37); see Oakbrook,
154 T.C. at 204-07 (Toro, J., concurring in the judgment, joined by Gustafson, Urda, and Jones,
JJ.).

4
The Eleventh Circuit decided not to reach the claimants’ Chevron arguments because it concluded
that Treas. Reg. § 1.170A-14(g)(6)(ii) is procedurally invalid under the APA. Hewitt, 21 F.4th at 1339 n.1.
 No. 20-2117 Oakbrook Land Holdings et al. v. Comm’r of Internal Rev. Page 38

Congress did not require much as it relates to “perpetuity.” The easement deed need only
impose “a restriction (granted in perpetuity) on the use which may be made of the real property,”
I.R.C. § 170(h)(2)(C), and ensure that “the conservation purpose” (the restriction) is “protected
in perpetuity,” § 170(h)(5)(A); see also Pub. L. No. 96-541, § 6, 94 Stat. 3204, 3206-07 (1980).
At the time of enactment in 1980, dictionaries defined “perpetuity” as “forever.” Hoffman
Props. II, LP v. Comm’r of IRS, 956 F.3d 832, 834 (6th Cir. 2020) (citations omitted).

“Property is often described as a bundle of rights or sticks,” meaning “that ownership of
property involves certain ‘sticks’ (or ‘strands’) of legal rights”—e.g., the right to possess, the
right to use and develop, the right to exclude, the right to convey, and the right to profit from
property—and thus “the aggregate of all of the sticks constitutes the full ‘bundle’ of rights.” See
2A JULIUS L. SACKMAN ET AL., NICHOLS ON EMINENT DOMAIN § 6.01(8) (Matthew Bender 3d ed.
2021), and accompanying footnotes; see also Andrus v. Allard, 444 U.S. 51, 65-67 (1979);
Kaiser Aetna v. United States, 444 U.S. 164, 176 (1979). An easement is “[a]n interest in land
owned by another person” that “may last forever, but it does not give the holder the right to
possess, take from, improve, or sell the land.” Easement, BLACK’S LAW DICTIONARY (11th ed.
2019); see also RESTATEMENT (FIRST) OF PROPERTY §§ 450, 452 (Am. L. Inst. 1944). By 1965,
it was well understood that a “conservation easement” “permanently restricts or imposes
affirmative obligations on the property’s owner or lessee to retain or protect natural, scenic, or
open-space values of real property, . . . while allowing the landowner to continue to own and use
the land, sell it, or transfer it to heirs.” Easement (conservation easement), BLACK’S LAW
DICTIONARY, supra.

With that understanding, the statute only requires a donor to give a qualified organization
one right from the bundle—the right to forever prevent uses of the property in a way inconsistent
with the qualified conservation purpose. See, e.g., Hoffman Props., 956 F.3d at 835; Pine Mt.
Pres. v. Comm’r of IRS, 978 F.3d 1200, 1206 (11th Cir. 2020); BC Ranch II, 867 F.3d at 551-54.
Oakbrook’s deed does that. See J.A. 112-19. Oakbrook holds all the remaining rights.

From there, the statute requires that the easement be “granted in perpetuity,” I.R.C.
§ 170(h)(2)(C), meaning the donee must “hold [that] property interest in perpetuity[.]” Glass v.
Comm’r of IRS, 471 F.3d 698, 713 (6th Cir. 2006) (cleaned up; emphasis added). When that
 No. 20-2117 Oakbrook Land Holdings et al. v. Comm’r of Internal Rev. Page 39

provision was enacted, the blackletter law of property dictated that “[u]pon the extinguishment of
an easement by eminent domain, the owner of the easement is entitled to compensation
measured by the value of the easement.” RESTATEMENT (FIRST) OF PROPERTY § 508 (emphasis
added); see also id. § 508 cmt. b (“Fair value for purposes of the award is the loss to the owner
of the easement[.]”); id. § 566 cmt. b. Indeed, the Supreme Court “repeatedly held that just
compensation normally is to be measured by ‘the market value of the property at the time of the
taking contemporaneously paid in money.’” United States v. 50 Acres of Land, 469 U.S. 24, 29
(1984) (emphasis added) (quoting Olson v. United States, 292 U.S. 246, 255 (1934)); accord
Horne v. Dep’t of Agric., 576 U.S. 351, 368-69 (2015).5 Today, Tennessee follows the same
rules.6

Oakbrook’s deed, however, limits the donee’s proceeds to a fixed amount determined at
the time of the grant. J.A. 121-22. Oakbrook admits that “‘perpetuity’—as used in connection
with conservation easements—draws on the term’s common-law meaning and denotes only that
the granted property won’t automatically revert to the grantor, his heirs, or assigns.” Pine Mt.
Pres., 978 F.3d at 1209; (Reply Br. 6). But Oakbrook’s deed does not treat the donee as the
holder of the easement right at the time of judicial extinguishment because the donee’s easement
rights are not appraised at the time of judicial extinguishment. Rather, the announcement of a
judicial extinguishment effectively means the easement right reverts to Oakbrook because the
donee receives a fixed amount set at the time of the grant. Accordingly, Oakbrook did not gift an
easement interest “granted in perpetuity.” See I.R.C. § 170(h)(2)(C).

In that regard, Oakbrook’s deed makes this case different from Hewitt. There, the deed
provided that, upon judicial extinguishment, the donee will receive “a fair market value
determined by”: (1) finding the current “fair market value of the Property unencumbered by the

5
The Restatement (First) of Property articulates the prevailing rules for easements at the time Congress
added the perpetuity requirements in I.R.C. § 170(h)(2)(C), and (h)(5)(A). See supra n.2.
6
“The appraisal shall value the property considering its highest and best use, its use at the time of the
taking, and any other uses to which the property is legally adaptable at the time of the taking.” Tenn. Code Ann.
§ 29-17-1004 (emphasis added); see also id. § 29-17-902 (providing that the condemning governmental authority
“shall proceed to determine what it deems to be the amount of damages to which the owner is entitled because of the
taking of such property or property rights”); id. § 29-17-910 (“In all instances the amount to which an owner is
entitled shall be determined by ascertaining the fair cash market value of the property or property rights taken.”)
(emphasis added).
 No. 20-2117 Oakbrook Land Holdings et al. v. Comm’r of Internal Rev. Page 40

Easement (minus any increase in value after the date of th[e] grant attributable to
improvements)”; and (2) multiplying that amount “by the ratio of the value of the Easement at
the time of this grant to the value of the Property.” Hewitt, 21 F.4th at 1340 (emphasis in
original). While Oakbrook’s deed similarly subtracts post-donation improvements, it differs
because it fixes the fair market value “as of the date of th[e] Conservation Easement” grant. J.A.
121.

The only problem is that, although the Commissioner presses this statutory argument
now, the Commissioner did not raise the argument before the tax court. It appears four of the tax
court judges decided to raise the argument sua sponte. See Oakbrook, 154 T.C. at 204-07 (Toro,
J., concurring in the judgment, joined by Gustafson, Urda, and Jones, JJ.). The only statutory
argument the Commissioner raised was that Oakbrook’s easement deed “violates I.R.C.
§ 170(h)(2)(C) and (h)(5)(A) because the area covered by the conservation easement is not
clearly defined.” J.A. 34, 39-40, 47-49. The same provisions are the basis of the
Commissioner’s current statutory argument.

“[W]e customarily require the party to raise the issue in the [trial] court” before we will
consider the issue on appeal. Sheet Metal Workers’ Health & Welfare Fund of N. Carolina v. L.
Off. of Michael A. DeMayo, LLP, 21 F.4th 350, 355 (6th Cir. 2021) (explaining the reasons for
the rule). “An exception can be made, however, for ‘exceptional cases’ or if failing to consider
the argument would result in a ‘plain miscarriage of justice.’” United States v. Ellison, 462 F.3d
557, 560 (6th Cir. 2006) (Gibbons, J.) (quoting Pinney Dock & Transp. Co. v. Penn Cent. Corp.,
838 F.2d 1445, 1461 (6th Cir. 1988)); see also Sheet Metal, 21 F.4th at 357.

As in Ellison, this is “an exceptional case.” 462 F.3d at 560. The question here is
“purely a legal one”—whether a deed provides that extinguishment proceeds are measured by
the value of property rights at the time of extinguishment in order to satisfy the statutory
requirement that a conservation easement must be “granted in perpetuity.” Id. The parties also
have fully briefed the issue, so it is “‘presented with sufficient clarity and completeness’ to
ensure a proper resolution.” Id. at 560-61 (quoting Pinney Dock, 838 F.2d at 1461). “It requires
no further development of the record at the [trial] court level, and thus, [Oakbrook] will not be
 No. 20-2117 Oakbrook Land Holdings et al. v. Comm’r of Internal Rev. Page 41

prejudiced by the inability to present evidence to that court.” Id. at 561 (reversing district court
based on new argument).

In terms of fairness to the tax court, see Sheet Metal, 21 F.4th at 356, there is a significant
difference between considering an argument to reverse a trial court and considering an argument
to affirm. After all, we “may affirm a decision of the district court for any reason supported by
the record, including on grounds different from those on which the district court relied.” Thomas
v. City of Columbus, 854 F.3d 361, 364-65 (6th Cir. 2017) (citation omitted); accord U.S. Postal
Serv. v. Nat’l Ass’n of Letter Carriers, AFL-CIO, 330 F.3d 747, 750 (6th Cir. 2003).

Setting aside any exception to the forfeiture rule, our court and the Supreme Court
“recognize a distinction between failing to properly raise a claim before the district court and
failing to make an argument in support of that claim.” United States v. Reed, 993 F.3d 441, 453
(6th Cir. 2021) (citation omitted); see also Citizens United v. FEC, 558 U.S. 310, 330-31 (2010)
(concluding that the argument that a case “should be overruled is ‘not a new claim,’” but instead,
“it is—at most—‘a new argument to support what has been a consistent claim: that the FEC did
not accord Citizens United the rights it was obliged to provide by the First Amendment” (cleaned
up)). The Commissioners’ “arguments” that Oakbrook’s deed violates § 170(h)(2)(C) and
(h)(5)(A) “in two different ways, by [failing to sufficiently define the conservation area] and by
[failing to satisfy the perpetuity requirements], are not separate claims. They are, rather,
separate arguments in support of a single claim—that the [deed] effects [a violation of the
statute].” Yee v. City of Escondido, 503 U.S. 519, 534-35 (1992). “Having raised a [statutory
violation] claim in the [tax] courts, therefore, [Oakbrook] could have formulated any argument
[it] liked in support of that claim here.” Id. at 535.

Accordingly, I would address the Commissioner’s statutory argument.

* * *

I would conclude that the proceeds regulation is invalid. But I would still affirm on the
basis that Oakbrook’s deed violates the perpetuity requirement under I.R.C. § 170(h)(2)(C).