Valley Park Ranch, LLC, Reed Oppenheimer, Tax Matters Partner

United States Tax Court

162 T.C. No. 6

VALLEY PARK RANCH, LLC, REED OPPENHEIMER,
TAX MATTERS PARTNER,
Petitioner

v.

COMMISSIONER OF INTERNAL REVENUE,
Respondent

—————

Docket No. 12384-20. Filed March 28, 2024.

—————

P, tax matters partner of VP, timely petitioned this
Court challenging the IRS’s notice of final partnership
administrative adjustment. In 2016, VP donated a
conservation easement and claimed a charitable
contribution deduction under I.R.C. § 170(a). The easement
deed provides that if the conservation restriction is
terminated, the donee will receive (i) an amount
determined by a court, unless otherwise provided by state
or federal law, or (ii) in the event of the government’s
exercise of eminent domain, the respective share of the
proceeds from a “qualified appraisal.”

The parties filed Cross-Motions for Partial
Summary Judgment as to whether the deed conveying the
easement satisfies the requirements of I.R.C. § 170(h) and
Treas. Reg. § 1.170A-14(g)(6)(ii). P principally contends
that the deed satisfies the statute and the regulation, but
in the alternative contends that the regulation is invalid
under the Administrative Procedure Act, or that the deed
is ambiguous.

Held: Following Hewitt v. Commissioner, 21 F.4th
1336 (11th Cir. 2021), rev’g and remanding T.C. Memo.
2020-89, we hold that Treas. Reg. § 1.170A-14(g)(6)(ii) is

Served 03/28/24
 2

procedurally invalid under the Administrative Procedure
Act and that the deed therefore need not comply with its
requirements. To the extent Oakbrook Land Holdings,
LLC v. Commissioner, 154 T.C. 180 (2020), aff’d, 28 F.4th
700 (6th Cir. 2022), holds otherwise, we will no longer
follow it.

Held, further, the easement deed satisfies the
“restriction (granted in perpetuity)” requirement under
I.R.C. § 170(h)(2)(C) and the “protected in perpetuity”
requirement of I.R.C. § 170(h)(5).

—————

Gabriella K. Cole, John W. Hackney, Erin R. Hines, Jeffrey S.
Luechtefeld, John J. Nail, and Hale E. Sheppard, for petitioner.

Jason P. Oppenheim and John W. Sheffield III, for respondent.

OPINION

JONES, Judge: This case concerns a $14.8 million deduction
claimed under section 170(h) 1 for the conveyance of a conservation
easement (Easement) in taxable year 2016 by Valley Park Ranch, LLC
(Valley Park). This case is a partnership-level proceeding under the
unified partnership audit and litigation procedures of the Tax Equity
and Fiscal Responsibility Act of 1982 (TEFRA), Pub. L. No. 97-248,
§§ 401–407, 96 Stat. 324, 648–71. 2 The Internal Revenue Service (IRS)
disallowed the deduction in a notice of final partnership administrative
adjustment (FPAA) dated July 23, 2020. Valley Park’s tax matters
partner (TMP), Reed Oppenheimer (Mr. Oppenheimer), timely
petitioned this Court for review of the adjustment pursuant to section
6226(a)(1).

1 Unless otherwise indicated, statutory references are to the Internal Revenue

Code, Title 26 U.S.C., in effect at all relevant times, regulatory references are to the
Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all relevant times, Rule
references are to the Tax Court Rules of Practice and Procedure, and paragraph
references are to the paragraphs of the deed of conservation easement at issue.
2 Before its repeal, TEFRA governed the audit and litigation procedures for

many partnerships (including entities that elected to be treated as partnerships).
 3

Before the Court are the parties’ respective Motions for Partial
Summary Judgment on the issues of whether the deed conveying the
Easement is in accord with Treasury Regulation § 1.170A-14(g)(6)(ii),
whether that regulatory provision is valid under the Administrative
Procedure Act (APA), and if not, whether the deed satisfies the statute.
For the reasons elaborated upon below, we find that the regulation is
invalid under the APA. We also find that the deed satisfies certain
statutory requirements. Consequently, we will deny respondent’s
Motion and grant Mr. Oppenheimer’s.

Background

The following background is drawn from the parties’ pleadings,
motion papers, and the exhibits attached therein. This background is
recited only to resolve the present Motions and not as findings of fact in
this case. See Rule 1(b); Fed. R. Civ. P. 52(a)(3); see also Sundstrand
Corp. v. Commissioner, 98 T.C. 518, 520 (1992), aff’d, 17 F.3d 965 (7th
Cir. 1994).

I. Valley Park and the Deed of Conservation Easement

Valley Park is a limited liability company organized under the
laws of Oklahoma. It is treated as a partnership for federal income tax
purposes. When Mr. Oppenheimer filed the Petition, Valley Park’s
principal place of business was in Tulsa, Oklahoma. 3

On December 22, 2016, Valley Park conveyed a conservation
easement over approximately 45.76 acres of land (Property) in Rogers
County, Oklahoma, to Compatible Lands Foundation (CLF). The deed of
conservation easement was recorded with the Rogers County Clerk on
the same day.

The conveyance paragraph of the deed provides that Valley Park
“grants and conveys to [CLF] a conservation easement in perpetuity over
the Property of the nature and character and to the extent hereinafter
set forth.”

The deed recites the conservation purpose of the easement in
paragraph 1 as follows:

3 Absent stipulation to the contrary, and as discussed further below, appeal of

this case would lie in the U.S. Court of Appeals for the Tenth Circuit. See
§ 7482(b)(1)(E).
 4

It is the purpose of this Easement to assure that the
Property will be retained forever predominantly in its
natural, scenic, and open space condition and to prevent
any use of the Property that will significantly impair or
interfere with the conservation values of the Property.
[Valley Park] intends that this Easement will confine the
use of the Property to such activities, including, without
limitation, those involving traditional ranching or other
agricultural and agroecology uses that are consistent with
the purpose of this Easement. The duration of this
Easement shall be in perpetuity.

In paragraph 2, the deed provides:

To accomplish the purpose of this Easement the following
rights are perpetually conveyed to [CLF] by this Easement:

(a) To preserve and protect the conservation values of the
Property;

(b) To enter upon the Property at reasonable times in order
to monitor [Valley Park’s] compliance with and
otherwise to enforce the terms of this Easement,
provided that such entry shall be upon prior reasonable
notice to [Valley Park], and [CLF] shall not
unreasonably interfere with [Valley Park’s] use and
quiet enjoyment of the Property; and

(c) To prevent any activity on or use of the Property that is
inconsistent with the purpose of this Easement and to
require the restoration of such areas or features of the
Property that may be damaged by any inconsistent
activity or use, pursuant to paragraph 6.

At paragraph 4, the deed sets forth a nonexhaustive list of
activities and uses of the Property that are “perpetually prohibited,”
including “[a]ny activity on or use of the Property inconsistent with the
purpose of [the] Easement.”

The deed also acknowledges that future circumstances may arise
that render the conservation purpose of the Easement obsolete or
impossible to accomplish. Under such circumstances, the deed provides
in paragraph 12:
 5

[The Easement] can only be terminated or extinguished,
whether in whole or in part, by judicial proceedings in a
court of competent jurisdiction, and the amount of the
proceeds to which [CLF] shall be entitled, after the
satisfaction of prior claims, from any sale, exchange, or
involuntary conversion of all or any portion of the Property
subsequent to such termination or extinguishment, shall
be determined by the court, unless otherwise provided by
State or Federal law at the time.

Relatedly, the deed also contemplates the prospect of
extinguishment via condemnation providing in paragraph 13:

If the Easement is taken, in whole or in part, by exercise of
the power of eminent domain, [Valley Park] and [CLF]
shall be entitled to compensation, by the entity declaring
power of eminent domain, in accordance with applicable
law, policy and procedures. Respective portions shall be
determined by a Qualified Appraisal meeting standards as
established by the United States Department of the
Treasury.

II. Valley Park’s Return and IRS Examination

Valley Park filed Form 1065, U.S. Return of Partnership Income
(return), for its short taxable year 2016, which began on December 22,
2016, and ended on December 31, 2016. It claimed therein a
$14.8 million deduction under section 170(h) for the conveyance of the
Easement. Valley Park included with the return Form 8283, Noncash
Charitable Contributions, which states that Valley Park acquired the
Property in January 1998 and that its cost or adjusted basis in the
Property was $91,610.

Valley Park’s return was selected for examination, which
culminated in the instant FPAA dated July 23, 2020. 4 Therein, the IRS

4 Shortly before the issuance of the FPAA, Valley Park and CLF executed an

amendment to the deed’s extinguishment and condemnation provisions (i.e.,
paragraphs 12 and 13, respectively) on June 4, 2020. The amendment was recorded
with the Rogers County Clerk on July 21, 2020. In pertinent part, the amendment
provided that the deed “should be amended” such that in the event of the easement’s
extinguishment (including due to condemnation), CLF was entitled to:
 6

disallowed the claimed $14.8 million deduction because Valley Park did
not establish that all of the requirements of section 170(h) and the
corresponding Treasury regulations for deducting a noncash charitable
contribution were satisfied. 5 On October 19, 2020, Mr. Oppenheimer
timely petitioned this Court—in his capacity as Valley Park’s TMP—
for review of the IRS’s adjustments as reflected in the FPAA.

III. The Parties’ Arguments

In the Motion for Partial Summary Judgment, respondent
principally argues that the IRS’s determination disallowing the
$14.8 million deduction should be sustained because the conservation
purpose of the Easement is not “protected in perpetuity” as required by
section 170(h)(5)(A) and, specifically, by operation of Treasury
Regulation § 1.170A-14(g)(6)(ii).

In his Motion for Partial Summary Judgment, Mr. Oppenheimer’s
principal argument is that the deed satisfies the “protected in

[A] portion of the proceeds of such sale or exchange at least equal to
the proportionate value that the perpetual conservation easement
granted hereunder bears to the value of the Property as a whole on the
date hereof unless state law provides that [Valley Park] is entitled to
the full proceeds for such judicial conversion without regard to the
terms of this Easement. Such portion of the proceeds allocable to [CLF]
shall be used by [CLF] in a manner consistent with the Purpose of this
Easement as set forth herein.
Mr. Oppenheimer does not assert that the amendment to the deed brings the
conveyance into compliance with Treasury Regulation § 1.170A-14(g)(6)(ii). Rather, he
argues that it reflects the parties’ intent to comply with the law. Regardless, we find
the amendment to the deed—which was executed and recorded more than three years
after the end of the taxable year at issue—immaterial for purposes of resolving the
present Motions. All of the requirements of section 170(h) must be satisfied at the time
of the easement’s grant. See Mitchell v. Commissioner, 138 T.C. 324, 332 (2012),
supplemented by T.C. Memo. 2013-204, aff’d, 775 F.3d 1243 (10th Cir. 2015); see also
Palmolive Bldg. Invs., LLC v. Commissioner, 149 T.C. 380, 405 (2017) (rejecting
taxpayer argument that a saving clause cured a deed’s noncompliance with Treasury
Regulation § 1.170A-14(g)(6)(ii) reasoning in part that “the requirements of section 170
must be satisfied at the time of the gift” (emphasis added)). We do not address the
amendment any further.
5 The IRS also made penalty determinations against Valley Park at the

partnership level. These penalties were determined in the alternative under section
6662(h), providing a penalty equal to 40% of any underpayment of tax; section 6662A,
providing a penalty equal to 30% of any underpayment; and section 6662(c), (d), or (e),
providing a penalty equal to 20% of any underpayment. The propriety of these penalty
determinations is not at issue in the present Motions.
 7

perpetuity” requirement of section 170(h)(5)(A) and Treasury
Regulation § 1.170A-14(g)(6)(ii). In his view, the text of the deed
complies on its face with the regulation through “explicit incorporation.”
Nonetheless, he maintains that Treasury Regulation
§ 1.170A-14(g)(6)(ii) is procedurally invalid under the APA and that the
deed therefore need not comply with its requirements. 6

We ordered the parties to further address whether the deed
satisfies the statutory requirements of section 170(h)(2) and (5)(A),

6 The dissent suggests we ought to address “whether the deed complies [with

Treasury Regulation § 1.170A-14(g)(6)(ii)] or a trial is needed because the deed is
ambiguous” before considering the validity of the regulation. See dissenting op. p. 35.
But upon review of the deed, we are not optimistic that Valley Park would prevail
under the regulation. In relevant part, paragraph 12 of the deed provides that, upon
termination or extinguishment of the Easement by a court, “the amount of the proceeds
to which [CLF] shall be entitled . . . shall be determined by the court, unless otherwise
provided by State or Federal law at the time.” First, this paragraph reads much like a
saving clause, which our Court has held does not comply with the regulation. See Coal
Prop. Holdings, LLC v. Commissioner, 153 T.C. 126, 140–45 (2019); Palmolive Bldg.
Invs., LLC, 149 T.C. at 404–05.
Second, the deed’s reference to “Federal law” does nothing to bind an
extinguishing court in terms of allocating the proceeds following a disposition of the
property. Notwithstanding the vague reference to “[f]ederal law,” the requirements of
the regulation are solely for the purpose of a taxpayer’s claiming a tax deduction under
section 170(h) for the charitable conveyance of a conservation easement. Its
applicability is confined to this narrow purpose, and the regulation itself does not
purport to require an extinguishing court to allocate proceeds in any particular
manner.
The dissent also takes up Mr. Oppenheimer’s argument that the deed is
ambiguous. See dissenting op. pp. 34–35. In making this argument, Mr. Oppenheimer
did not clearly articulate where the purported ambiguity lies beyond his conclusory
assertion that the deed is ambiguous and that it could be read multiple ways. We have
examined the deed and concluded that any potential ambiguities—which, for purposes
of this discussion, we will assume are ambiguities as a matter of Oklahoma law—are
moot. Accordingly, we find that Valley Park’s deduction would fail to satisfy Treasury
Regulation § 1.170A-14(g)(6)(ii) regardless of how such purported ambiguities are
construed.
Further rendering any potential ambiguities moot is the effect of the
exempting clause’s reference to “at the time.” In context, “at the time” unambiguously
refers to the time of the easement’s hypothetical extinguishment. Treasury Regulation
§ 1.170A-14(g)(6)(ii) as in effect at the time of the easement’s hypothetical
extinguishment (during some point in perpetuity) is irrelevant; in fact, it may not even
exist at such a time. The propriety of the deduction must be determined with respect
to Treasury Regulation § 1.170A-14(g)(6)(ii) as it was in effect for taxable year 2016
(i.e., the year of the conveyance and for which Valley Park claimed the deduction).
 8

irrespective of Treasury Regulation § 1.170A-14(g)(6)(ii).
Mr. Oppenheimer and respondent timely filed responses to our Order.

IV. Jurisprudential Development

In an Opinion reviewed pursuant to section 7460(b), a majority of
this Court upheld the substantive and procedural validity of Treasury
Regulation § 1.170A-14(g)(6)(ii). Oakbrook Land Holdings, LLC v.
Commissioner (Oakbrook I), 154 T.C. 180 (2020), aff’d, Oakbrook Land
Holdings, LLC v. Commissioner (Oakbrook II), 28 F.4th 700 (6th Cir.
2022), cert. denied, 143 S. Ct. 626 (2023). 7

After our decision in Oakbrook I, a unanimous panel of the
U.S. Court of Appeals for the Eleventh Circuit reversed this Court’s
reliance on that decision. The Eleventh Circuit held that “the
Commissioner’s interpretation of § 1.170A-14(g)(6)(ii), to disallow the
subtraction of the value of post-donation improvements . . . , is arbitrary
and capricious and therefore invalid under the APA’s procedural
requirements.” Hewitt v. Commissioner, 21 F.4th 1336, 1353 (11th Cir.
2021), rev’g and remanding T.C. Memo. 2020-89. 8

In contrast, a divided panel of the U.S. Court of Appeals for the
Sixth Circuit affirmed this Court’s holdings in Oakbrook I and rejected
the reasoning of the Eleventh Circuit. Oakbrook II, 28 F.4th at 717. In
a concurring opinion, Judge Guy stated that he would find the
regulation invalid for the reasons set forth by the Eleventh Circuit in
Hewitt but would have nonetheless affirmed our decision by applying
the statute to the deed. Id. at 722 (Guy, J., concurring in the judgment
only). Oakbrook Land Holdings sought Supreme Court review of the
Sixth Circuit’s majority opinion. Notably, in briefing that opposed
certiorari to the Supreme Court, the Solicitor General stated that the
statute answered the question, observing that Oakbrook “would be a
poor vehicle in which to address the question [of the regulation’s
validity] because the statute itself compels disallowance of petitioners’
deduction, rendering the validity of the challenged regulation

7 In separate opinions, Judges Toro and Holmes reflect their disagreement with

the majority opinion’s conclusion regarding the procedural validity of Treasury
Regulation § 1.170A-14(g)(6)(ii). See Oakbrook I, 154 T.C. at 216–30 (Toro, J.,
concurring in the result); id. at 235–53 (Holmes, J., dissenting).
8 The Eleventh Circuit subsequently confirmed that Hewitt invalidated

Treasury Regulation § 1.170A-14(g)(6)(ii). Glade Creek Partner, LLC v. Commissioner,
No. 21-11251, 2022 WL 3582113, at *3 (11th Cir. Aug. 22, 2022), aff’g in part, vacating
in part and remanding T.C. Memo. 2020-148.
 9

academic.” Brief for Respondent at 13, Oakbrook Land Holdings, LLC v.
Commissioner, No. 22-323 (U.S. Dec. 7, 2022). Certiorari was denied.
Oakbrook Land Holdings, LLC v. Commissioner, 143 S. Ct. 626.

To effect “efficient and harmonious judicial administration,” this
Court will follow a court of appeals decision that is “squarely in point
where appeal from our decision lies to that Court of Appeals and to that
court alone.” Golsen v. Commissioner, 54 T.C. 742, 757 (1970), aff’d,
445 F.2d 985 (10th Cir. 1971). Appeal of this case would lie in the U.S.
Court of Appeals for the Tenth Circuit, absent written stipulation to the
contrary. § 7482(b)(1)(E). Accordingly, in this case we are not bound to
follow either the decision of the Sixth Circuit in Oakbrook II (upholding
the regulation) or that of the Eleventh Circuit in Hewitt (invalidating
the regulation). See Golsen, 54 T.C. at 757. As of this writing, the Tenth
Circuit has not taken a position on the validity of Treasury Regulation
§ 1.170A-14(g)(6)(ii).

In light of the reversal by the Eleventh Circuit, we reconsider our
holding in Oakbrook I. See Lawrence v. Commissioner, 27 T.C. 713,
716–17 (1957) (observing that when one of our decisions is reversed by
an appellate court, we must “thoroughly reconsider the problem in the
light of the reasoning of the reversing appellate court and, if convinced
thereby, . . . follow the higher court”), rev’d on other grounds, 258 F.2d
562 (9th Cir. 1958); see also, e.g., Tice v. Commissioner, No. 24983-15,
160 T.C., slip op. at 10–11 (Apr. 10, 2023); Peat Oil & Gas Assocs. v.
Commissioner, 100 T.C. 271, 274 (1993), aff’d per curiam sub nom.
Ferguson v. Commissioner, 29 F.3d 98 (2d Cir. 1994).

Where we have been reversed by a single appellate court, we have
at times declined to change our position. See, e.g., Hall v. Commissioner,
135 T.C. 374, 382 (2010) (sticking with our interpretation of section
6015(f) despite reversal by the U.S. Court of Appeals for the Seventh
Circuit in Lantz v. Commissioner, 607 F.3d 479 (7th Cir. 2010), rev’g 132
T.C. 131 (2009)); Metro Leasing & Dev. Corp. v. Commissioner, 119 T.C.
8, 14–17, 23 (2002) (declining to follow the U.S. Court of Appeals for the
Fifth Circuit’s holding and rationale regarding the calculation of
accumulated taxable income under section 535(b)(1) in J.H. Rutter Rex
Mfg. Co. v. Commissioner, 853 F.2d 1275 (5th Cir. 1988), rev’g on this
point T.C. Memo. 1987-296), supplementing T.C. Memo. 2001-119;
Lychuk v. Commissioner, 116 T.C. 374, 408 (2001) (adhering to our view
on the rules of capitalization after reversal by the U.S. Court of Appeals
for the Third Circuit in PNC Bancorp, Inc. v. Commissioner, 212 F.3d
822 (3d Cir. 2000), rev’g 110 T.C. 349 (1998)).
 10

On other occasions, we have adopted the reasoning of the
reversing court. See, e.g., Graev v. Commissioner, 149 T.C. 485 (2017)
(adjusting our interpretation of section 6751(b)(1) to follow the
U.S. Court of Appeals for the Second Circuit after reversal in Chai v.
Commissioner, 851 F.3d 190 (2d Cir. 2017), aff’g in part, rev’g in part
T.C. Memo. 2015-42), supplementing and overruling in part 147 T.C. 460
(2016); Square D. Co. & Subs. v. Commissioner, 118 T.C. 299, 304 (2002)
(changing our position that Treasury Regulation § 1.267(a)-3 was
invalid following the Third Circuit’s reversal in Tate & Lyle, Inc. v.
Commissioner, 87 F.3d 99 (3d Cir. 1996), rev’g and remanding 103 T.C.
656 (1994)), aff’d, 438 F.3d 739 (7th Cir. 2006).

We have also waited for more jurisprudential development. With
respect to the validity of the regulations under section 163, the
U.S. Court of Appeals for the Eighth Circuit’s position was established
in 1995, see Miller v. United States, 65 F.3d 687, 691 (8th Cir. 1995),
before we took a contrary position in 1996, see Redlark v. Commissioner,
106 T.C. 31, 47 (1996), rev’d, 141 F.3d 936 (9th Cir. 1998). When we
ultimately changed our position in Robinson v. Commissioner, 119 T.C.
44 (2002) (holding that we would no longer follow Redlark), five courts
of appeals had taken a position on the issue, see Kikalos v.
Commissioner, 190 F.3d 791, 799 (7th Cir. 1999), rev’g T.C. Memo. 1998-
92; McDonnell v. United States, 180 F.3d 721, 723 (6th Cir. 1999); Allen
v. United States, 173 F.3d 533, 538 (4th Cir. 1999); Redlark v.
Commissioner, 141 F.3d at 942; Miller, 65 F.3d at 691.

In this instance, we recognize that the Sixth Circuit affirmed
Oakbrook I after the Eleventh Circuit’s reversal in Hewitt. But we agree
with Judge Guy and the Solicitor General that resolution of Oakbrook
did not require reaching the validity of the regulation. See Oakbrook II,
28 F.4th at 729 (Guy, J., concurring in the judgment only); Brief for
Respondent at 21–22, Oakbrook Land Holdings, LLC v. Commissioner,
No. 22-323. 9 Accordingly, after careful consideration of the Eleventh

9 The dissent argues that the Sixth Circuit’s affirmance of Oakbrook I after the

Eleventh Circuit’s reversal in Hewitt somehow undermines the reversal. See dissenting
op. pp. 36–37. As we have noted, when one of our decisions is reversed we must
“thoroughly reconsider the problem in the light of the reasoning of the reversing
appellate court and, if convinced thereby, . . . follow the higher court.” Lawrence, 27
T.C. at 716–17; see supra p. 9. We are not aware of any suggestion that chronology—
as between reversal and affirmance—dilutes our duty to undertake thorough
reconsideration.
 11

Circuit’s reasoning in Hewitt, we find it appropriate to change our
position.

We disagree with the dissenting opinion’s argument that our
conclusion fails to follow stare decisis principles and will result in
instability in the law. See dissenting op. pp. 37–39. Respectfully, we
must revisit our decision in Oakbrook precisely because the law is
already unstable. See supra pp. 8–9; see also Analog Devices, Inc. &
Subs. v. Commissioner, 147 T.C. 429, 443 (2016) (noting the requirement
to revisit our analysis in light of a reversal and the parties’ arguments).
To be sure, “[t]he doctrine of stare decisis is important to this Court, and
we are mindful of its role in [relevant cases].” Analog Devices, 147 T.C.
at 443. But where, as here, we are faced with “issues on which a Court
of Appeals has reversed our prior decision,” see id., we are obligated to
thoroughly reconsider our position, Lawrence, 27 T.C. at 716–17;
see supra p. 9.

Moreover, Oakbrook I—decided just four years ago—is not
entrenched precedent. To our knowledge, the Sixth and Eleventh
Circuits are the only courts of appeals to speak on the issues we consider
today. Thus, “the important goals of stare decisis to ensure the
‘evenhanded, predictable, and consistent development of legal
principles’ and to ‘foster[] reliance on judicial decisions’ . . . are not
served by our continued adherence” to Oakbrook I. Analog Devices, 147
T.C. at 444 (alteration in original) (quoting Payne v. Tennessee, 501 U.S.
808, 827 (1991)). In consideration of the split between the Sixth and
Eleventh Circuits, this is the right time to “gracefully and good
naturedly surrender[] former views to a better considered position.”
McGrath v. Kristensen, 340 U.S. 162, 178 (1950) (Jackson, J.,
concurring).

Discussion

For the reasons discussed below, we hold that Treasury
Regulation § 1.170A-14(g)(6)(ii) is procedurally invalid under the APA
and that the deed therefore need not comply with its requirements. See
Hewitt v. Commissioner, 21 F.4th at 1348. To the extent Oakbrook I

Furthermore, the Sixth Circuit was not unanimous in its conclusion that the
proceeds regulation is valid. Judge Guy stated that he would find the regulation invalid
for the reasons set forth by the Eleventh Circuit in Hewitt. Oakbrook II, 28 F.4th at 722
(Guy, J., concurring in the judgment only); see supra p. 8. Thus, four out of six members
of the appellate courts who have analyzed the issue have concluded that the regulation
is procedurally invalid.
 12

holds otherwise, we will no longer follow it. We further hold that the
easement deed satisfies certain requirements set forth in section
170(h)(2)(C) and (5)(A).

I. Summary Judgment Standard

Summary judgment serves to “expedite litigation and avoid
unnecessary and expensive trials.” See Fla. Peach Corp. v.
Commissioner, 90 T.C. 678, 681 (1988). We may grant summary
judgment regarding an issue when there is no genuine dispute of
material fact and a decision may be rendered as a matter of law.
Rule 121(a)(1) and (2); Sundstrand Corp., 98 T.C. at 520.

Upon review of the parties’ pleadings, motion papers, and the
exhibits attached thereto, we conclude that judgment on the issue of the
procedural validity of Treasury Regulation § 1.170A-14(g)(6)(ii) may be
rendered as a matter of law. We also conclude that judgment on the
issues of whether the deed satisfies the “granted in perpetuity”
requirement of section 170(h)(2)(C) and the “protected in perpetuity”
requirement of section 170(h)(5)(A) may be rendered as a matter of law.

II. Procedural Validity of the Regulation

A. Applicable Framework for Judicial Review

Under the APA, a “reviewing court shall . . . hold unlawful and
set aside agency action, findings, and conclusions found to be . . .
arbitrary, capricious, an abuse of discretion, or otherwise not in
accordance with law.” 5 U.S.C. § 706(2)(A). Our review standard is
“narrow,” and we will not substitute our judgment for that of the agency.
Zzyym v. Pompeo, 958 F.3d 1014, 1022 (10th Cir. 2020) (quoting Motor
Vehicle Mfrs. Ass’n of U.S. v. State Farm Mut. Auto. Ins. Co., 463 U.S.
29, 43 (1983)). However, in employing this deferential standard of
review, we must determine whether the decision was based on
consideration of the relevant factors and whether there was a clear error
of judgment. W. Watersheds Project v. Bureau of Land Mgmt., 721 F.3d
1264, 1273 (10th Cir. 2013) (citing State of N.M. ex rel. Richardson v.
BLM, 565 F.3d 683, 704–05 (10th Cir. 2009)). Furthermore, “we may not
supply a reasoned basis for the agency’s action that the agency itself has
not given,” although we will “uphold a decision of less than ideal clarity
if the agency’s path may reasonably be discerned.” Motor Vehicle Mfrs.
Ass’n, 463 U.S. at 43 (first citing SEC v. Chenery Corp., 332 U.S. 194,
196 (1947); and then quoting Bowman Transp., Inc. v. Ark.-Best Freight
Sys., Inc., 419 U.S. 281, 286 (1974)).
 13

The APA “prescribes a three-step procedure for so-called ‘notice-
and-comment rulemaking.’” Perez v. Mortg. Bankers Ass’n, 575 U.S. 92,
96 (2015); accord 5 U.S.C. § 553. First, an agency “must issue a ‘[g]eneral
notice of proposed rule making,’ ordinarily by publication in the Federal
Register.” Mortg. Bankers Ass’n, 575 U.S. at 96 (alteration in original)
(quoting 5 U.S.C. § 553(b)). Second, “if ‘notice [is] required,’ the agency
must ‘give interested persons an opportunity to participate in the rule
making through submission of written data, views, or arguments,’” and
the agency “must consider and respond to significant comments received
during the period for public comment.” Id. (alteration in original)
(quoting 5 U.S.C. § 553(c)).

Third, in promulgating the final rule, the agency must include in
its text a “concise general statement of [the rule’s] basis and purpose.”
Gallegos v. Lyng, 891 F.2d 788, 795 (10th Cir. 1989) (alteration in
original) (quoting 5 U.S.C. § 553(c)). As the Supreme Court has
explained, “[r]ules issued through the notice-and-comment process are
often referred to as ‘legislative rules’ because they have the ‘force and
effect of law.’” Mortg. Bankers Ass’n, 575 U.S. at 96 (quoting Chrysler
Corp. v. Brown, 441 U.S. 281, 302–03 (1979)). Thus, basis and purpose
statements must contain sufficient information to allow a court to
exercise judicial review, see, e.g., Kennecott Copper Corp. v. EPA, 612
F.2d 1232, 1236 (10th Cir. 1979), as “[o]ne 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); see also United States v. Frontier Airlines, Inc.,
563 F.2d 1008, 1013 (10th Cir. 1977) (“The Basis and Purpose Statement
is a very significant portion of a regulation when an issue arises as to its
application and scope.”).

Further, an agency must respond to comments “that can be
thought to challenge a fundamental premise” underlying the proposed
agency decision. MCI WorldCom, Inc. v. FCC, 209 F.3d 760, 765 (D.C.
Cir. 2000). Thus, an agency should respond to significant points and
consider vital relevant comments. W. Coal Traffic League v. United
States, 677 F.2d 915, 927 (D.C. Cir. 1982); see also Balt. Gas & Elec. Co.
v. United States, 817 F.2d 108, 116 (D.C. Cir. 1987) (noting that under
the arbitrary and capricious standard of review, an agency is “required
to respond to significant comments that cast doubt on the
reasonableness of the rule the agency adopts”).
 14

B. Statutory and Regulatory Framework: Treasury’s
Rulemaking Process

Section 170(a)(1) generally permits a deduction for charitable
contributions made during the taxable year. However, section
170(f)(3)(A) denies the deduction for contributions of property that
consist of less than the taxpayer’s entire interest in such property. The
denial of the deduction for charitable contributions of partial interests
in property does not, however, apply to “qualified conservation
contribution[s].” See § 170(f)(3)(B)(iii).

A “qualified conservation contribution” is defined under section
170(h)(1) as a contribution (1) “of a qualified real property interest,”
(2) “to a qualified organization,” and (3) “exclusively for conservation
purposes.” Under section 170(h)(2)(C), a “qualified real property
interest” includes “a restriction (granted in perpetuity) on the use which
may be made of the real property.” Moreover, section 170(h)(5)(A)
provides that a contribution shall not be treated as “exclusively for
conservation purposes,” see § 170(h)(1)(C), unless the conservation
purpose of the contribution is “protected in perpetuity.” The statute,
however, does not define the term “protected in perpetuity” nor
elaborate on the requirement. Mitchell v. Commissioner, 775 F.3d
at 1247.

To the extent a taxpayer claims a deduction for the charitable
contribution of a conservation easement under section 170(h), the
Commissioner’s position is that the contribution must also satisfy the
relevant regulatory requirements promulgated pursuant to section
170(h).

On May 23, 1983, the Department of the Treasury (Treasury) and
the IRS issued a notice of proposed rulemaking with “proposed
regulations relating to contributions of partial interests in property for
conservation purposes.” Prop. Treas. Reg. § 1.170A-13, 48 Fed. Reg.
22,940, 22,940 (May 23, 1983). In response to the notice, Treasury
received more than 700 pages of comments during the comment period.
See Oakbrook I, 154 T.C. at 186. A public hearing on the proposed
amendments to the regulations was held on September 15, 1983. Id.
at 188.

On January 14, 1986, Treasury issued final regulations with
revisions, including the regulation at issue in this case—Treasury
Regulation § 1.170A-14(g)(6)(ii)—concerning requirements in
 15

contemplation of an easement’s extinguishment by judicial proceedings.
See T.D. 8069, 1986-1 C.B. 89; see also Oakbrook I, 154 T.C. at 188.

Treasury Regulation § 1.170A-14(g)(6), titled “Extinguishment,”
provides: 10

(i) In general. If a subsequent unexpected change in
the conditions surrounding the property that is the subject
of a donation under this paragraph can make impossible or
impractical the continued use of the property for
conservation purposes, the conservation purpose can
nonetheless be treated as protected in perpetuity if the
restrictions are extinguished by judicial proceeding and 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.
(ii) Proceeds. In case of a donation made after
February 13, 1986, for a deduction to be allowed under this
section, at the time of the gift the donor must agree that
the donation of the perpetual conservation restriction gives
rise to a property right, immediately vested in the donee
organization, with 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. . . . For purposes of this
paragraph (g)(6)(ii), that proportionate value of the donee’s
property rights shall remain constant. Accordingly, when a
change in conditions give rise to the extinguishment of a
perpetual conservation restriction under paragraph
(g)(6)(i) of this section, the donee organization, on a
subsequent sale, exchange, or involuntary conversion of
the subject property, must be entitled to a portion of the
proceeds at least equal to that proportionate value of the
perpetual conservation restriction, unless state law
provides that the donor is entitled to the full proceeds from

10 Going forward, we generally refer to Treasury Regulation § 1.170A-14(g)(6)

as the “extinguishment provision” and to paragraph (g)(6)(ii) as the “proceeds
regulation.”
 16

the conversion without regard to the terms of the prior
perpetual conservation restriction.[11]

The Treasury Decision spanned roughly 12 pages, of which
approximately 10 contained the actual text of the regulations, leaving
just over 2 pages for Treasury’s responses to comments and other
administrative matters. See Hewitt v. Commissioner, 21 F.4th at 1348;
see also T.D. 8069.

C. Application of Analytical Framework to Treasury’s
Rulemaking Process for Treasury Regulation
§ 1.170A-14(g)(6)(ii)

Relying upon Hewitt v. Commissioner, 21 F.4th at 1339 (holding
the IRS’s “interpretation of [Treasury Regulation] § 1.170A-14(g)(6)(ii)
to be invalid under the APA”), Mr. Oppenheimer contends that the
proceeds regulation is procedurally invalid under the APA. Specifically,
Mr. Oppenheimer contends that the administrative record demonstrates
that comments raising concerns with Treasury Regulation § 1.170A-
14(g)(6)(ii) were filed during the rulemaking process, that those
comments required a response from Treasury, and that Treasury failed
to adequately respond to those significant comments in the final
regulation’s “basis and purpose” statement, in violation of the APA’s
procedural requirements. He therefore claims that the regulation is
inapplicable to the conveyance at issue. 12 We agree.

Comments and concerns regarding the extinguishment provision,
including how to treat postdonation improvements, were submitted to
Treasury during the comment period. See, e.g., Hewitt v. Commissioner,
21 F.4th at 1351. Turning to the most detailed comment, the New York
Landmarks Conservancy (NYLC) submitted a comment letter urging

11 Mr. Oppenheimer does not argue that the state law exemption applies.

12 As best we understand Mr. Oppenheimer’s motion papers, he is challenging

only the procedural validity of Treasury Regulation § 1.170A-14(g)(6)(ii). Nonetheless,
we acknowledge his passing reference to the regulation’s purported substantive
invalidity under Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837
(1984). However, this reference was raised for the first time in his response to our
Order, see Pet’r’s Resp. to Order (No. 35); Order (No. 28), and is beyond the scope of
the briefing requested through that Order. Oakbrook I also held that Treasury
Regulation § 1.170A-14(g)(6) was substantively valid under Chevron. See Oakbrook I,
154 T.C. at 195–200. The Eleventh Circuit’s opinion in Hewitt did not reach the
regulation’s substantive validity under Chevron. See Hewitt v. Commissioner, 21 F.4th
at 1339 n.1. Consequently, Mr. Oppenheimer’s passing reference to the regulation’s
purported substantive invalidity does not alter our disposition of the Motions.
 17

Treasury to delete the proposed proceeds regulation because it
contained pervasive “problems of policy and practical application.”
Id. at 1345. NYLC stated that while Congress enacted the statute “to
encourage the protection of [the] . . . environment through the donation
of conservation restrictions,” the proposed regulation “would thwart the
purpose of the statute by deterring prospective donors.” Id. On the basis
of its concerns and because “the possibility of extinguishment is
relatively remote,” NYLC stated it was “unnecessary” for Treasury
“to provide for allocation of proceeds after extinguishment.” Id.

NYLC also commented on whether the value of postdonation
improvements to the easement property should be included or excluded
from the proceeds formula in the regulation. Id. Specifically, NYLC
stated that the regulation’s structure “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.” Id.
But, according to NYLC, the formula “fail[ed] to take into account that
improvements may be made thereafter by the owner which should
properly alter the ratio.” Id. To support its concern, NYLC presented a
mathematical example, based on a fact pattern in the proposed
regulations, to show that requiring the prospective donor to turn over
extinguishment proceeds “would obviously be undesirable to the
prospective donor and would constitute a windfall to the donee
organization.” Id. at 1351. Thus, NYLC recommended that the proposed
formula be revised to prevent inequities in the event Treasury retained
the extinguishment provision, but NYLC “strongly recommend[ed]
deletion of the entire extinguishment provision.” Id. (alteration in
original).

Although NYLC offered the most extensive comments on the
proposed extinguishment provision, other commenters similarly
expressed criticism or urged caution. Id. at 1345–46. For example, the
Landmarks Preservation Council of Illinois “urge[d] caution in the
treatment of the concept of ‘extinguishment’ in the regulations,” as “[t]he
discussion in the regulations of the conditions under which that binding
agreement may be abrogated lends an undesirable air of legitimacy to
the concept of ‘extinguishment.’” Id. at 1346. It also cautioned that the
regulations could create a disincentive to donate easements. Id.

The Land Trust Exchange cautioned that the regulations “may
result in donors or donees having to pay real estate transfer taxes” and
that it was “unnecessary.” Id. The Trust for Public Land commented
that it had “serious doubts whether the provision . . . could be enforced
 18

against anyone other than the original donor of the easement” and that
“the tax benefit rule is a satisfactory means of meeting any concern the
IRS may have that a donor might receive the double benefit of an
easement deduction followed by later recovery of the value donated.” Id.

The Brandywine Conservancy averred that the proposed
regulation “may unnecessarily restrict the amount, payable to the
holder of an easement, if changes in surrounding territory have made
the easement proportionately more valuable than the retained interest”
and that “[t]he donee should be entitled to proceeds equal to the greater
of its original proportionate value or its proportionate value at the time
of the extinguishment.” Id. And the Nature Conservancy and the Maine
Coast Heritage Trust both stated that the regulation should be “clear”
that the original proportionate value is the minimum that a donee will
receive in extinguishment proceeds. Id.

After a public hearing, Treasury adopted the proposed
regulations with revisions. T.D. 8069. In the preamble to the final
rulemaking, Treasury stated that “[t]hese regulations provide necessary
guidance to the public for compliance with the law and affect donors and
donees of qualified conservation contributions” and that it had
“consider[ed] . . . all comments regarding the proposed amendments.” Id.
In the subsequent “Summary of Comments” section, however, Treasury
did not discuss or respond to the comments made by NYLC or the other
six commenters concerning the extinguishment provision. See id.,
1986-1 C.B. at 90–91; see also Hewitt v. Commissioner, 21 F.4th at 1346;
Oakbrook I, 154 T.C. at 188 (“The ‘judicial extinguishment’ provision is
not among the amendments specifically addressed in the ‘Summary of
Comments.’”); id. at 239 (Holmes, J., dissenting) (“The Final Rule’s
statement of basis and purpose shows absolutely no mention of the
extinguishment-proceeds clause at all . . . .”).

Upon careful consideration of the Eleventh Circuit’s analysis in
Hewitt regarding the promulgation of the proceeds regulation, we are
persuaded that Treasury’s actions did not provide “an explanation [that]
is clear enough that its ‘path may reasonably be discerned.’” Hewitt v.
Commissioner, 21 F.4th at 1349 (alteration in original) (quoting Encino
Motorcars, 579 U.S. at 221). Treasury’s action did not provide any
insight on “what major issues of policy were ventilated . . . and why the
agency reacted to them as it did” with respect to the proceeds regulation.
See id. (quoting Carlson v. Postal Regul. Comm’n, 938 F.3d 337, 344
(D.C. Cir. 2019)). Absent any explanation from Treasury on why the
considerations raised by NYLC and other commentators should not have
 19

been heeded, “[i]t 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 (second alteration in original)
(quoting Motor Vehicle Mfrs. Ass’n, 463 U.S. at 43).

We agree with the Eleventh Circuit’s conclusion that “NYLC’s
comment was significant and required a response by Treasury to satisfy
the APA’s procedural requirements.” Hewitt v. Commissioner, 21 F.4th
at 1351. 13 The record leaves no doubt that NYLC—and others—made
comments “‘that can be thought to challenge a fundamental premise’
underlying the proposed agency decision.” Carlson, 938 F.3d at 344
(quoting MCI WorldCom, Inc., 209 F.3d at 765); Oakbrook I, 154 T.C.
at 243 (Holmes, J., dissenting) (describing significant comments as those
that “identify a specific and objective issue created by the language of
the proposed rule and give some explanation for why that language is
troublesome”); see also supra pp. 16–18. The preamble to the proposed
regulations explained that the proposed rules “reflect the major policy
decisions made by the Congress.” Prop. Treas. Reg. § 1.170A-13, 48 Fed.
Reg. at 22940. But the NYLC comments essentially countered that the
proposed proceeds regulation was contrary to those policy decisions and
offered comments that, “if adopted, would require a change in an
agency’s proposed rule.” Home Box Off., Inc. v. FCC, 567 F.2d 9, 35 n.58
(D.C. Cir. 1977).

NYLC stated that while Congress enacted the statute “to
encourage the protection of [the] . . . environment through the donation
of conservation restrictions,” the proposed regulation “would thwart the
purpose of the statute by deterring prospective donors.” Hewitt v.
Commissioner, 21 F.4th at 1345; see also supra p. 17. 14 NYLC noted that

13 The Eleventh Circuit noted the possibility that in failing to respond to
significant comments, Treasury “was simply following its historical position that the
APA’s procedural requirements did not apply to these types of regulations.” Hewitt v.
Commissioner, 21 F.4th at 1348 (quoting Oakbrook I, 154 T.C. at 222 (Toro, J.,
concurring in the result)). To the extent that position was operative in the
promulgation of the proceeds regulation, the Eleventh Circuit and the majority opinion
in Oakbrook I made clear that it was mistaken. Hewitt v. Commissioner, 21 F.4th
at 1350; Oakbrook I, 154 T.C. at 190–91; see also Oakbrook I, 154 T.C. at 222 (Toro, J.,
concurring in the result).
14 The dissenting opinion argues that NYLC’s comment “suppos[ed] that the

proceeds regulation might disincentivize the donation of easements that did not
comply with the statute.” See dissenting op. p. 37. As a result of the comment’s
 20

the regulation’s structure “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.” Hewitt v.
Commissioner, 21 F.4th at 1345; see also supra p. 17. But, according to
NYLC, the formula “fail[ed] to take into account that improvements may
be made thereafter by the owner which should properly alter the ratio.”
Hewitt v. Commissioner, 21 F.4th at 1345.

NYLC expressly tied its comments both to a specific rule included
in the proposed regulations and to a specific fact pattern contemplated
by the proposed regulations. Hewitt v. Commissioner, 21 F.4th at 1348
(citing Oakbrook I, 154 T.C. at 224 (Toro, J., concurring in the result)).
Thus, NYLC explained why the regulation contained “problems of policy
and practical application” and therefore “strongly recommend[ed]
deletion of the entire extinguishment provision.” Id. at 1345 (alteration
in original); see supra pp. 16–17. We therefore follow the Eleventh
Circuit and hold that those comments were both “relevant and
significant,” requiring a response. Hewitt v. Commissioner, 21 F.4th
at 1351; Grand Canyon Air Tour Coal. v. FAA, 154 F.3d 455, 468 (D.C.
Cir. 1998); accord Carlson, 938 F.3d at 343–44.

purported concern about noncomplying donations, the dissent concludes that the
comment, “did not ‘challenge a fundamental premise’ underlying the proposed
regulation.” See dissenting op. p. 37 (quoting Carlson, 938 F.3d at 344). This is a
strawman. NYLC’s comment never suggested that possible donations would not have
to comply with the statute’s requirement that easements be protected in perpetuity.
NYLC made clear that its concern was pointed at Treasury’s proposed interpretation
of that requirement.
Moreover, we are not aware of any rule that requires commentators to address
every conceivable Congressional purpose in an enactment. As an organization with
experience in donations of conservation easements, NYLC understandably focused
upon Congress’s purpose in the Tax Treatment Extension Act of 1980 to “encourage
the protection of [the] . . . environment through the donation of conservation
restrictions.” See supra p. 17. This purpose is elucidated by the statutory history.
Before 1976, there was no explicit statutory authority for deductions for
contributions of partial interests. See Nancy A. McLaughlin, Internal Revenue Code
Section 170(h): National Perpetuity Standards for Federally Subsidized Conservation
Easements, 45 Real Prop. Tr. & Est. L.J. 473, 476 (2010). In just five years,
Congressional policy changed dramatically to one that provides a permanent deduction
for qualifying contributions of such property. Compare Tax Reform Act of 1976,
Pub. L. No. 94-455, § 2124(e), 90 Stat. 1520, 1919, with Tax Treatment Extension Act
of 1980, Pub. L. No. 96-541, § 6, 94 Stat. 3204, 3206. The significance of NYLC’s
comment is underscored by the backdrop of Congress’s considerable policy shift over
such a short period of time.
 21

In Oakbrook I the opinion of the Court reasoned that Treasury
“clearly considered” comments on the requirement that the donee
receive a proportional share of the proceeds because Treasury
“substantially revised the text of [the proceeds regulation] . . . in
response to those comments.” Oakbrook I, 154 T.C. at 192. But the
regulatory text was changed only to re-articulate the formula by which
the proceeds would be apportioned. See Oakbrook II, 28 F.4th at 707
(finding that Treasury’s revisions to the regulation were only “editorial
in nature” and “aimed at clarifying the rule, not altering its meaning.”);
Oakbrook I, 154 T.C. at 252 (Holmes, J., dissenting) (observing that the
change to the regulatory text “has no obvious explanation other than to
increase editorial clarity”). The regulatory text was not changed to
delete the apportionment provision altogether, as NYLC had explicitly
requested, or as suggested by commentors such as the Land Trust
Exchange and the Trust for Public Land. They respectively found the
regulation “unnecessary” and unlikely to be enforceable beyond the
original easement donor. See supra pp. 17–18. Treasury offered no
explanation for the restatement of the formula, nor did it address
NYLC’s concern about the operation of the proposed rule in the context
of Treasury’s own fact pattern. Hewitt v. Commissioner, 21 F.4th
at 1351, 1353.

In Oakbrook I, 154 T.C. at 194, the opinion of this Court rejected
the argument that Treasury did not comply with the APA because the
preamble “did not discuss the ‘basis and purpose’ of the judicial
extinguishment provision specifically.” See Hewitt v. Commissioner,
21 F.4th at 1347. The majority opinion reasoned that “[e]ven where a
regulation contains no statement of basis and purpose whatsoever, it
may be upheld ‘where the basis and purpose . . . [are] considered
obvious.’” Oakbrook I, 154 T.C. at 194 (alteration in original) (quoting
Cal-Almond, Inc. v. USDA, 14 F.3d 429, 443 (9th Cir. 1993)); Hewitt v.
Commissioner, 21 F.4th at 1347–48. But as the Eleventh Circuit
subsequently explained in Hewitt, “[b]asis and purpose statements must
enable the reviewing court to see the objections and why the agency
reacted to them as it did” and that agencies should rebut relevant
comments. Hewitt v. Commissioner, 21 F.4th at 1350 (quoting Lloyd
Noland Hosp. & Clinic v. Heckler, 762 F.2d 1561, 1566–67 (11th Cir.
1985)); see also Home Box Off., Inc., 567 F.2d at 35–36 (“[A] dialogue is
a two-way street: the opportunity to comment is meaningless unless the
agency responds to significant points raised by the public.” (footnote
omitted)).
 22

The Eleventh Circuit observed that the Court’s majority opinion
in Oakbrook I “concluded that ‘[t]he broad statements of purpose
contained in the preambles to the final and proposed regulations,
coupled with obvious inferences drawn from the regulations themselves,
[were] more than adequate.’” Hewitt v. Commissioner, 21 F.4th at 1348
(quoting Oakbrook I, 154 T.C. at 194). But the Eleventh Circuit rejected
that rationale. In addition to finding its analysis in Lloyd Noland to be
“instructive,” the Eleventh Circuit also cited Encino Motorcars for the
proposition that “[t]he [agency’s] conclusory statements do not suffice to
explain its decision.” Id. at 1350 (quoting Encino Motorcars, 579 U.S.
at 224). 15

In agreement with the Eleventh Circuit’s reasoning in Hewitt v.
Commissioner, 21 F.4th at 1350–53, we hold that Treasury Regulation
§ 1.170A-14(g)(6)(ii) is procedurally invalid under the APA because
Treasury failed to respond to a significant comment. Accordingly, we set
it aside.

III. The Deed’s Satisfaction of the “Restriction (Granted in
Perpetuity)” Requirement of Section 170(h)(2)(C) and the
“Protected in Perpetuity” Requirement of Section 170(h)(5)

Having concluded that the regulation is not valid and should not
govern our decision, we instead evaluate the deed simply in light of the
statute. The Supreme Court has told us that judicial inquiry begins with
the statutory text and ends there as well if the text is unambiguous.
BedRoc Ltd., LLC v. United States, 541 U.S. 176, 183 (2004) (first citing
Lamie v. U.S. Tr., 540 U.S. 526, 534 (2004); then citing Hartford
Underwriters Ins. Co. v. Union Planters Bank, N.A., 530 U.S. 1, 6 (2000);
then citing Hughes Aircraft Co. v. Jacobson, 525 U.S. 432, 438 (1999);
and then citing Conn. Nat’l Bank v. Germain, 503 U.S. 249, 254 (1992)).
As set forth below, we find that the relevant text is clear and that the
deed satisfies the requirement of “a restriction (granted in perpetuity)”
under section 170(h)(2)(C) and the requirement that the conservation
purpose be “protected in perpetuity” under section 170(h)(5)(A).

15 We likewise agree with the Eleventh Circuit that the fact that Treasury

stated that it had considered “all comments,” without more discussion, does not “enable
[us] to see [NYLC’s] objections and why [Treasury] reacted to them as it did.” Hewitt
v. Commissioner, 21 F.4th at 1350 (quoting Lloyd Noland, 762 F.2d at 1566); Carlson,
938 F.3d at 344; Oakbrook I, 154 T.C. at 250–51 (Holmes, J., dissenting).
 23

A. The Section 170(h)(2)(C) Requirements for a Restriction
Granted in Perpetuity

1. A Restriction

Section 170(h)(2)(C) refers to “a restriction (granted in perpetuity)
on the use which may be made of the real property.” The Eleventh
Circuit has found that a sufficient “restriction” exists if the deed in
question “burdens what would otherwise be the landowner’s fee-simple
enjoyment of—and absolute discretion over—the use of its property.”
Pine Mountain Pres., LLLP v. Commissioner, 978 F.3d 1200, 1206 (11th
Cir. 2020), aff’g in part, rev’g in part, vacating and remanding 151 T.C.
247 (2018). 16 Further, the Eleventh Circuit has found it “indisputable”
that an easement imposes “a restriction” when it “broadly restrict[s] . . .
preexisting development rights.” Id. 17

Adopting the construction set forth by the Eleventh Circuit, we
conclude that the section 170(h)(2)(C) requirement for a “restriction” is
met in the instant deed. Paragraph 1 declares that “[i]t is the purpose of
this Easement to assure that the Property will be retained forever
predominantly in its natural, scenic, and open space condition and to
prevent any use of the Property that will significantly impair or interfere
with the conservation values of the Property.” Paragraph 1 further
provides that “[g]rantor will not perform, nor knowingly allow others to
perform, any act on or affecting the Property that is inconsistent with
the purposes of this Easement.” Paragraph 4 sets forth a nonexhaustive
list of “[p]erpetually [p]rohibited [u]ses and [a]ctivities,” which

16 While we note that the Eleventh Circuit twice referred to section
“170(b)(2)(C)” in its articulation and analysis of its holding, see Pine Mountain Pres.,
LLLP v. Commissioner, 978 F.3d at 1206, it is apparent from the statutory text and
any quotes and references thereto that the reference to subsection “(b)” of section 170
is a typographical error. Accordingly, we will treat the two references to section
“170(b)(2)(C)” as if made to section 170(h)(2)(C). See Pine Mountain Pres., LLLP v.
Commissioner, 978 F.3d at 1206; see also, e.g., id. at 1205 (referring to section
170(h)(2)(C) as the relevant provision).
17 Other courts of appeals have also considered the application of section

170(h)(2)(C) and (5)(A). See, e.g., Oakbrook II, 28 F.4th 700; BC Ranch II, L.P. v.
Commissioner, 867 F.3d 547 (5th Cir. 2017), vacating and remanding Bosque Canyon
Ranch, L.P. v. Commissioner, T.C. Memo. 2015-130; Belk v. Commissioner, 774 F.3d
221 (4th Cir. 2014), aff’g 140 T.C. 1 (2013); Commissioner v. Simmons, 646 F.3d 6, 10
(D.C. Cir. 2011), aff’g T.C. Memo. 2009-208. We find the Eleventh Circuit’s discussion
in Pine Mountain particularly instructive because the court considered issues similar
to those we address here.
 24

encompasses “[a]ny activity on or use of the Property inconsistent with
the purpose of this Easement.”

In addition, prohibited activities expressly enumerated in the
deed include “[t]he right to establish or maintain any residential,
commercial, recreational, or industrial facility on the Property or any
other structure not specifically reserved herein” and “[s]urface mining
or quarrying of soil, sand, or other minerals,” except for “a permitted use
of the Property in a manner consistent with the conservation purpose of
this deed.” In stating that the Easement’s purpose is the retention of the
Property’s “natural, scenic, and open space condition” and “prevent[ion]
[of] any use of the Property that [would] significantly impair or interfere
with the conservation values of the Property,” Valley Park is prohibited
from engaging in any act inconsistent with the Easement’s conservation
purpose. And by providing a nonexhaustive list of “[p]erpetually
[p]rohibited [u]ses and [a]ctivities,” paragraphs 1 and 4 of the deed
“burden[] what would otherwise be the landowner’s fee-simple
enjoyment of—and absolute discretion over—the use of its property.”
Pine Mountain Pres., LLLP v. Commissioner, 978 F.3d at 1206.
Likewise, these terms of the deed broadly restrict Valley Park’s
preexisting development rights. See id.

Further, in Pine Mountain Preserve, the Eleventh Circuit found
that “[a] broad limitation on the use of the property that applies to the
parcel as a whole satisfies the statutory test, even if within that parcel
there exist certain narrow exceptions to that limitation.” Id. 18 We agree.
The deed in the instant case passes muster because, as discussed above,
it forbids the development and maintenance of “residential, commercial,
recreational, or industrial” facilities and proscribes “surface mining or
quarrying of soil, sand, or other minerals” on the entire Property.
Accordingly, we conclude that the instant deed contains “[a] broad
limitation on the use of the property that applies to the parcel as a
whole” and, therefore, satisfies the statutory test. Id.

2. Granted in Perpetuity

a. Express “in [P]erpetuity” Terms

The “granted in perpetuity” requirement of section 170(h)(2)(C) is
satisfied where “nothing in the grant envisions a reversion of the

18 In his Motion in the instant case, respondent does not allege that the deed

contains the type of “narrow exceptions,” i.e., reserved rights, that were at issue in
Pine Mountain Preserve, LLLP v. Commissioner, 978 F.3d at 1204.
 25

easement interest to the landowner, its heirs, or assigns.” Pine
Mountain Pres., LLLP v. Commissioner, 978 F.3d at 1206. In so holding,
the court of appeals relied on the common law meaning of “perpetuity”
and found that the easements at issue imposed a restriction because
“Pine Mountain, its heirs, or assigns remain indefinitely subject to the
restriction and because nothing in the grants will cause the easements,
either automatically or upon the happening of some event, to revert back
to [the grantor] or its successors.” Id. (citing Jon W. Bruce & James W.
Ely, Jr., The Law of Easements & Licenses in Land § 10:1).

Again, we agree with the Eleventh Circuit’s construction of the
statutory text. See id. at 1208 (“In brief, we hold that § 170(h)(2)(C)
means just what it says it means—that to qualify for a deduction, a
conservation easement must grant ‘a restriction’ . . . ‘in perpetuity,’ as
that term has traditionally been used and understood in common-law
practice.”); see also Perpetuity, Random House Webster’s College
Dictionary (2d ed. 2001) (defining “perpetuity” as “endless or indefinitely
long duration or existence”). 19 Applying that construction in the instant
case, we similarly find that the deed grants a restriction in perpetuity,
as required by section 170(h)(2)(C). The conveyance paragraph of the
deed provides that Valley Park, “grants and conveys to [CLF] a
conservation easement in perpetuity over the Property of the nature and
character and to the extent hereinafter set forth.” (Emphasis added.)
Paragraph 1 states that the purpose of the Easement is to “assure that
the Property will be retained forever predominantly in its natural,
scenic, and open space condition and to prevent any use of the Property
that will significantly impair or interfere with the conservation values
of the Property.” (Emphasis added.) Paragraph 1 continues by stating
that “the duration of this Easement shall be in perpetuity.” These
provisions impose an affirmative obligation upon CLF, “in perpetuity,”
to maintain the Property in a manner consistent with its native
condition. See also Commissioner v. Simmons, 646 F.3d at 10. Our
review of the entire deed reveals nothing in the grant that “envisions a
reversion of the easement interest to the landowner, its heirs, or
assigns.” Pine Mountain Pres., LLLP v. Commissioner, 978 F.3d at 1206.
Thus, between the conveyance paragraph and the stated purpose of the

19 We note that the Sixth Circuit has articulated a somewhat different view.

See Oakbrook II, 28 F.4th at 706 (“[T]he 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.”).
 26

easement in Paragraph 1, we conclude that the section 170(h)(2)(C)
requirement of a grant “in perpetuity” is met.

b. “Prior [C]laims” Clause

Respondent argues that the “prior claims” clause in paragraph 12
causes the deed to fail the perpetuity requirement of section
170(h)(2)(C). The relevant portion of paragraph 12 provides that in the
event of a judicial extinguishment:

[T]he amount of the proceeds to which Grantee [CLF] shall
be entitled, after the satisfaction of prior claims, from any
sale, exchange, or involuntary conversion of all or any
portion of the Property subsequent to such termination or
extinguishment, shall be determined by the court.

Though respondent seems to acknowledge that there were no claims
against the subject property before the time of the execution of the deed,
see BC Ranch II, L.P. v. Commissioner, 867 F.3d at 554 n.21 (noting that
our perpetuity analysis should not concern itself with trifles), he posits
that the word “prior” may include liabilities that “arise after the [d]eed
was signed but before the date of extinguishment.” Under respondent’s
reading of the prior claims clause, CLF’s proceeds upon judicial
extinguishment could be reduced to zero if an Oklahoma court
prioritized claims that arise on the subject property between the date of
the deed and judicial extinguishment, i.e., after the grant of the
easement. 20 We find his interpretation implausible.

We have long recognized that a contract “is a proper subject of
judicial interpretation as to its meaning, in the light of the language
used and the circumstances surrounding its execution.” Robbins Tire &
Rubber Co. v. Commissioner, 52 T.C. 420, 435–36 (1969) (first citing
Colo. Milling & Elevator Co. v. Howbert, 57 F.2d 769, 771 (10th Cir.
1932); and then citing Big Diamond Mills Co. v. United States, 51 F.2d
721, 724 (8th Cir. 1931)). Accordingly, we look to the text of the contract
and the context in which it was executed to determine the proper
meaning of its terms. See, e.g., McGivney v. Commissioner, T.C. Memo.
2000-224, 2000 WL 1036364, at *1 (applying principles of contract

20 Respondent does not argue that “prior” means any claim that takes

precedence over others. See, e.g., Prior, Black’s Law Dictionary (10th ed. 2016)
(defining “prior” as “[t]aking precedence”). Rather, his argument is framed only in
terms of chronological priority, i.e., the prospect of claims that arise after the grant of
easement but that are “prior” to a later extinguishment.
 27

construction to stipulations). Black’s Law Dictionary defines “prior” as
“[p]receding in time or order.” Prior, Black’s Law Dictionary (10th ed.
2016). 21 A straightforward reading of the text of paragraph 12 leads us
to conclude that “prior” means any claim that preceded the date of the
grant. See Mitchell, 138 T.C. at 332 (focusing on whether the
requirements of section 170(h) were satisfied at the time of the
easement’s grant). 22

Our interpretation of the text is confirmed by the context. See
Robbins Tire & Rubber Co., 52 T.C. at 436. The prior claims clause is in
paragraph 12, which sets forth the terms for the division of proceeds in
the event of judicial extinguishment. In that context, it is logical that
the point of reference for the existence of claims that would be paid
ahead of CLF’s claim would be those in existence before the grant of the
easement. Respondent does not dispute that there were no such claims.
Moreover, respondent does not point us to any Oklahoma caselaw that
holds that a prior claims clause, such as this one, would be read to apply
to claims arising after the time of the grant. Therefore, in light of the
deed’s text and the context in which it was executed, we decline to adopt
respondent’s reading.

B. The Section 170(h)(5)(A) Requirement that the
Conservation Purpose be Protected in Perpetuity

Section 170(h)(2)(C) and section 170(h)(5)(A) impose separate
requirements. See Pine Mountain Pres., LLLP v. Commissioner, 978
F.3d at 1207; see also Belk v. Commissioner, 774 F.3d at 228. Building
upon the section 170(h)(1) rule that a contribution is not qualified unless
it is “exclusively for conservation purposes,” section 170(h)(5)(A)
provides that “[a] contribution shall not be treated as exclusively for

21At least two other sources—both published contemporaneously with the
execution of the deed—confirm this definition. Prior, American Heritage Dictionary of
the English Language (5th ed. 2016) (defining “prior” as “[p]receding in time or order”);
Prior, Webster’s New World College Dictionary (5th ed. 2016) (defining “prior” as
“preceding in time; earlier; previous; former”).
22 Paragraph 22(b) of the deed also provides that “[a]ny general rule of

construction to the contrary notwithstanding, this Easement shall be liberally
construed in favor of the Grantee to affect the purpose of this Easement.” Clause (b)
continues, stating that “[i]f any provision in this instrument is found to be ambiguous,
an interpretation consistent with the purpose of this Easement that would render the
provision valid shall be favored over any interpretation that would render it invalid.”
Therefore, the terms of the deed itself provide additional support for adopting this
interpretation.
 28

conservation purposes unless the conservation purpose is protected in
perpetuity.”

1. Conservation Purpose

Titled “[p]urpose,” paragraph 1 of the deed provides that the
purpose of the Easement is to “assure that the Property will be retained
forever predominantly in its natural, scenic, and open space condition
and to prevent any use of the Property that will significantly impair or
interfere with the conservation values of the Property.” See, e.g., Murphy
v. Commissioner, T.C. Memo. 2023-72, at *43–47 (focusing on the
conservation purposes stated in the deeds). Respondent’s Motion does
not argue that the deed lacks a conservation purpose. 23 Therefore, solely
for the purpose of resolving the present Motions, we turn to the
“protected in perpetuity” requirement.

2. Protected in Perpetuity

The word “‘perpetuity’ [in section 170(h)(5)(A)]—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
Mountain Pres., LLLP v. Commissioner, 978 F.3d at 1209. As we have
discussed supra Part III.A.2, the conveyance paragraph and
paragraph 1 here provide sufficient basis for us to conclude that the
granted property will not automatically revert to the grantor or his heirs
or assigns. Our review of the entire deed confirms the conclusion that
“nothing in the grant envisions a reversion of the easement interest to
the landowner, its heirs, or assigns.” Id. at 1206.

Respondent argues that “the [d]eed statutorily fails to protect the
conservation purposes in perpetuity” because it “does not require that
the donee use any future proceeds consistent with the purposes of the

23 Respondent “does not concede that Valley Park Ranch’s claimed noncash

charitable contribution meets any of the requirements of I.R.C. § 170 or the regulations
promulgated thereunder which are not discussed herein. Accordingly, respondent
specifically reserves the right, should this motion be denied, to advance any and all
theories supporting the adjustment determined in the FPAA, including other
components of the perpetuity requirement not argued in this motion.” Resp’t’s Mot. for
Summ. J. ¶ 6 (No. 9).
 29

original contribution.” 24 But the statute requires “only that the granted
property won’t automatically revert to the grantor, his heirs, or assigns.”
Id. at 1209. Under that interpretation, respondent’s argument
necessarily fails. 25 Cf. Commissioner v. Simmons, 646 F.3d at 10 (finding
that a remote possibility that the donee might abandon an easement
does not cause the easement to fail the perpetuity requirement in section
170(h)(5)(A)).

Respondent also argues that the prior claims clause of
Paragraph 12 causes the deed to fail the section 170(h)(5)(A) “protected
in perpetuity” requirement. His argument relies on his interpretation of
the clause, which we have rejected. See supra pp. 26–27.

IV. Conclusion

In conclusion, we will deny respondent’s Motion (Doc. 9) and
grant Mr. Oppenheimer’s Motion (Doc. 16) as set forth herein. Following
the Eleventh Circuit, we hold that the proceeds regulation is invalid
under the APA. Moreover, we hold that the easement deed satisfies the
“restriction (granted in perpetuity)” requirement of section 170(h)(2)(C)
and the “protected in perpetuity” requirement of section 170(h)(5)(A).

24 Because we hold that the proceeds regulation is invalid under the APA, see

supra p. 22, respondent’s arguments that rely upon it and caselaw that applied it, see,
e.g., Coal Prop. Holdings, LLC, 153 T.C. 126, are unavailing.
25 We construe respondent’s argument that the deed fails the protected-in-

perpetuity requirement of section 170(h)(5)(A) because it “does not dictate what [CLF]
. . . must do with any extinguishment or condemnation proceeds in the event [of judicial
extinguishment],” see Resp’t’s Resp. to Order ¶ 28 (No. 39), to be a restatement of his
argument that the deed “statutorily” fails because it “does not require that the donee
use any future proceeds consistent with the purposes of the original contribution,” see
Resp’t’s Resp. to Mot. for Partial Summ. J. ¶ 56 (No. 25). We reject the restated
argument for the same reasons we rejected its original formulation. See supra
pp. 24–26. Respondent lodged the same argument based on Treasury Regulation
§ 1.170A-14(g)(6)(i). See Resp’t’s Resp. to Mot. for Partial Summ. J. (No. 25). Because
we have analyzed and rejected the argument under the statute, we need not consider
the regulation. See also Whirlpool Fin. Corp. v. Commissioner, 19 F.4th 944, 949 (6th
Cir. 2021), aff’g 154 T.C. 142 (2020). But whether asserted under the statute or the
regulation, the argument fails for the reasons we have stated. See supra pp. 24–26.
 30

An appropriate order will be issued.

Reviewed by the Court.

FOLEY, URDA, TORO, GREAVES, MARSHALL, and WEILER,
JJ., agree with this opinion of the Court.

BUCH and COPELAND, JJ., concur in the result.

KERRIGAN, NEGA, PUGH, and ASHFORD, JJ., dissent.
 31

BUCH, J., concurring in the result: The Court, indeed the tax
system at large, is currently faced with a flood of conservation easement
cases. In 2022 it was reported that the Court had over 425 conservation
easement cases. Aysha Bagchi, Tax Court Pondering Three Options for
Ballooning Easement Docket, Daily Tax Rep. (BL) (Dec. 16, 2022). A year
later that number ballooned to more than 750. See Armando Gomez &
Roland Barral, It’s High Time to Clear Out the Tax Court’s Easement
Backlog, 179 Tax Notes Fed. 251 (2023). And with the Commissioner’s
recent commitment to challenging conservation easements, that number
will continue to increase.

We often write that the purpose of summary judgment is to
expedite litigation and avoid costly, unnecessary, and time-consuming
trials. See FPL Grp., Inc. & Subs. v. Commissioner, 116 T.C. 73, 74
(2001). Perhaps for this reason, the Commissioner often attempts to
dispose of conservation easement cases by summary judgment. Some of
those motions have been directed at whether the easement serves a
conservation purpose. See, e.g., Village at Effingham, LLC v.
Commissioner, T.C. Memo. 2020-102, at *6–7 (finding conservation
purpose not protected in perpetuity). Others have been directed at
procedural missteps. See, e.g., Belair Woods, LLC v. Commissioner,
T.C. Memo. 2018-159, at *10 (finding that the taxpayer did not
substantially comply with reporting requirements when it failed to
disclose cost or adjusted basis). The Commissioner has even sought to
disqualify easements due to mere foot faults. See, e.g., Bond v.
Commissioner, 100 T.C. 32, 42 (1993) (finding that the taxpayer
substantially complied with reporting requirements notwithstanding
omission of appraiser’s qualifications). But it can be difficult to
distinguish between a misstep and a foot fault.

Counterintuitively, disposing of issues by summary judgment can
create uncertainty in the law and sometimes delay litigation. For
example, Belair Woods and Bond are both well-reasoned cases. But
when taken together, they do not lend certainty to when a taxpayer has
or has not substantially complied with the reporting requirements for
conservation easements. Another example is Friedberg v.
Commissioner, T.C. Memo. 2011-238, 2011 Tax Ct. Memo LEXIS 234,
supplemented by T.C. Memo. 2013-224. Initially we held on summary
judgment that the taxpayer was not entitled to a charitable contribution
deduction with respect to a facade easement because he did not submit
a qualified appraisal. We based this conclusion on the unreliability of
the appraisal method. Friedberg, 2011 Tax Ct. Memo LEXIS 234,
at *40–45. Two years later we were called upon to revisit this conclusion
 32

after the U.S. Court of Appeals for the Second Circuit held that an
appraisal is sufficient if the appraiser’s analysis is present, even if
unconvincing.

Litigation over the proceeds regulation has likewise created
uncertainty rather than clarity. In Oakbrook we found the regulation
procedurally and substantively valid. Oakbrook Land Holdings, LLC v.
Commissioner (Oakbrook I), 154 T.C. 180 (2020), aff’d, Oakbrook Land
Holdings, LLC v. Commissioner (Oakbrook II), 28 F.4th 700 (6th Cir.
2022), cert. denied, 143 S. Ct. 626 (2023). And our holding was affirmed
by the U.S. Court of Appeals for the Sixth Circuit. See Oakbrook II,
28 F.4th 700. However, the U.S. Court of Appeals for the Eleventh
Circuit has held the same regulation to be invalid. See Hewitt v.
Commissioner, 21 F.4th 1336 (11th Cir. 2021), rev’g and remanding T.C.
Memo. 2020-89. Although this conflict among the circuits led the
taxpayer in Oakbrook to seek Supreme Court review, the Solicitor
General opposed certiorari because Oakbrook could be affirmed on
grounds other than the validity of a regulation. Brief for Respondent
at 13, Oakbrook Land Holdings, LLC v. Commissioner, No. 22-323 (U.S.
Dec. 7, 2022). Judge Toro likewise suggested that Oakbrook I could have
been decided by our Court on other grounds, writing: “Since applying
the text of the statute to the terms of the easement before us suffices to
resolve the dispute before the Court, there is no need to address the
much more difficult question of the validity of section 1.170A-14(g)(6),
Income Tax Regs.” Oakbrook I, 154 T.C. at 201 (Toro, J., concurring in
the result).

The Solicitor General’s observation in Oakbrook is equally apt
here. Because there are alternative grounds to grant petitioner partial
summary judgment, an opinion on the validity of the proceeds
regulation is unnecessary to decide this case. 1 The deed at issue
preserves the donee’s interest in the property in the event of
extinguishment. The deed provides that the easement

can only be terminated or extinguished, whether in whole
or in part, by judicial proceedings in a court of competent
jurisdiction, and the amount of the proceeds to which [the
donee] shall be entitled, after the satisfaction of prior
claims, from any sale, exchange, or involuntary conversion
of all or any portion of the Property subsequent to such
termination or extinguishment, shall be determined by the

1 In this regard I agree with Part I of Chief Judge Kerrigan’s dissent.
 33

court, unless otherwise provided by State or Federal law at
the time.

Federal law certainly includes federal tax law. And by preserving for the
donee whatever amount is provided by federal law at the time, the
drafters took into account the ever-shifting landscape of federal law as
it relates to conservation easements. But see Coal Prop. Holdings, LLC
v. Commissioner, 153 T.C. 126, 143–45 (2019) (finding that a saving
clause is an impermissible condition subsequent). We need not reach the
question of the validity of the proceeds regulation to decide this case.

COPELAND, J., agrees with this opinion concurring in the result.
 34

KERRIGAN, C.J., dissenting: I disagree with the outcome in the
opinion of the Court, which concludes that Treasury Regulation
§ 1.170A-14(g)(6)(ii), referred to as the “proceeds” regulation, is
procedurally invalid under the Administrative Procedure Act (APA).
The opinion of the Court relies upon the holding in Hewitt v.
Commissioner, 21 F.4th 1336, 1353 (11th Cir. 2021), rev’g and
remanding T.C. Memo. 2020-89, that the regulation establishing the
values of a donor’s and a donee’s proportionate interests upon judicial
extinguishment of a perpetual conservation easement for purposes of a
charitable contribution deduction was arbitrary and capricious because
it failed to comply with the APA’s procedural requirements and, thus,
was invalid.

The opinion of the Court follows the reasoning of the U.S. Court
of Appeals for the Eleventh Circuit in Hewitt and rejects this Court’s
holding in Oakbrook Land Holdings, LLC v. Commissioner (Oakbrook I),
154 T.C. 180 (2020), aff’d, Oakbrook Land Holdings, LLC v.
Commissioner (Oakbrook II), 28 F.4th 700 (6th Cir. 2022) (Oakbrook II),
cert. denied, 143 S. Ct. 626 (2023), which upheld the substantive and
procedural validity of the “proceeds” regulation. I joined the opinion of
the Court in Oakbrook I, and I adhere to its reasoning and result.

I disagree with the opinion of the Court for three reasons. First,
I do not think it necessary to decide the validity of Treasury Regulation
§ 1.170A-14(g)(6)(ii) to resolve the Cross-Motions for Partial Summary
Judgment. Second, I supported the opinion of the Court in Oakbrook I,
and I find no compelling reason to change my position. Third, the
longstanding principle of stare decisis should be followed.

I. Deed and Compliance Requirements

The first question the Court should address is whether the deed
of easement at issue complies with Treasury Regulation § 1.170A-
14(g)(6)(ii). If it does, petitioner’s Motion can be granted (and
respondent’s denied) without any need to consider the validity of the
regulation. 1 Petitioner contends that the deed of easement does comply
with the regulation or is at worst ambiguous. The opinion of the Court
declines to address these contentions because “we hold that [the
regulation] is procedurally invalid under the APA.” See op. Ct. p. 11.
Instead of invalidating a regulation, I think the preferred approach is to

1 In this regard I agree with Judge Buch’s concurrence in the result.
 35

determine whether the deed complies or a trial is needed because the
deed is ambiguous.

If the Court concludes that paragraph 12 of the deed is
ambiguous, the appropriate course of action in my view would be to defer
resolution of this issue to trial, at which documentary and testimonial
evidence could be adduced to help resolve the ambiguity. Instead, the
opinion of the Court invalidated the “proceeds” regulation.

II. Validity of “Proceeds” Regulation

In Oakbrook I, 154 T.C. at 195, we held that Treasury satisfied
all the APA requirements. We considered whether the agency
“articulate[d] a satisfactory explanation for its action,” id. at 190
(quoting Motor Vehicle Mfrs. Ass’n of the U.S. v. State Farm Mut. Auto.
Ins. Co., 463 U.S. 29, 43 (1983)), and concluded that “[t]he broad
statements of purpose contained in the preambles to the final and
proposed regulations, coupled with obvious inferences drawn from the
regulations themselves, are more than adequate to enable us to perform
judicial review,” id. at 194. Accordingly, we held that Treasury satisfied
all the applicable APA requirements.

The U.S. Court of Appeals for the Sixth Circuit in Oakbrook II
explained that pursuant to the APA, “[w]hat an agency must include in
a concise general statement of basis and purpose is dictated by
competing considerations.” Oakbrook II, 28 F.4th at 711. The Sixth
Circuit expounded that 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.” Id. (quoting Simms v.
Nat’l Highway Traffic Safety Admin., 45 F.3d 999, 1005 (6th Cir. 1995)).
Courts need not do 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. Oakbrook II, 28 F.4th at 711;
Auto. Parts & Accessories Ass’n v. Boyd, 407 F.2d 330, 338 (D.C. Cir.
1968). Agencies operate with scarce time and limited resources.
Oakbrook II, 28 F.4th at 711. For these reasons, the APA’s concise
general statement requirement is not meant to be onerous. Id.; Nat’l
Mining Ass’n v. Mine Safety & Health Admin., 512 F.3d 696, 700 (D.C.
Cir. 2008).

The Sixth Circuit concluded that the basis and purpose of the
donor’s improvements’ regulation are clear. Oakbrook II, 28 F.4th
at 711. The Sixth Circuit further concluded that the comments the
 36

taxpayer referenced did not raise significant concerns and that these
comments did not necessitate Treasury to provide a response. Id. at 716.

As the Sixth Circuit observed, “[s]ignificance is difficult to
measure in the abstract.” Id. at 714. Rather, “assessing significance is
context dependent and requires reading the comment in light of both the
rulemaking of which it was a part and the statutory ends that the
proposed rule is meant to serve.” Id. As guidance for this inquiry the
Sixth Circuit adopted the test articulated by the U.S. Court of Appeals
for the D.C. Circuit: “[A]n agency must respond to comments ‘that can
be thought to challenge a fundamental premise’ underlying the proposed
agency decision.” Id. (quoting Carlson v. Postal Regul. Comm’n, 938
F.3d 337, 344 (D.C. Cir. 2019)). The opinion of the Court appears to
accept the Carlson test as setting the appropriate standard for assessing
whether comments are “significant” enough to demand an explicit
response. See op. Ct. p. 19.

This brings us to the central question: Did the comments offered
by 2 of the 90 commenters, suggesting that the extinguishment
regulation “would thwart the [statutory] purpose” by disincentivizing
the donation of conservation easements, “challenge a fundamental
premise” underlying the proposed regulation? Carlson, 938 F.3d at 344
(quoting MCI WorldCom, Inc. v. FCC, 209 F.3d 760, 765 (D.C. Cir.
2000)). The opinion of the Court answers this question “yes.” I would
answer “no,” for two major reasons.

First, Oakbrook II was decided after the Eleventh Circuit’s
decision in Hewitt. The Sixth Circuit found the reasoning in Hewitt to
be unpersuasive. Oakbrook II, 28 F.4th at 717. The Sixth Circuit
disagreed with the Eleventh Circuit’s conclusion that the comments at
issue raised significant concerns about possible deterrent effects that
regulation could have on donations and that the goal of section 170 is to
allow for deductions for the donation of conservation easements to
encourage donation of such easements. Id.; Hewitt v. Commissioner, 21
F.4th at 1352. The Sixth Circuit concluded that this point overlooks
Congress’s requirement that an easement’s conservation purpose must
be “protected in perpetuity.” Oakbrook II, 28 F.4th at 717; see
§ 170(h)(5)(A).

Second, the Sixth Circuit in Oakbrook II supplied the correct
answer to the Eleventh Circuit’s argument: “Although encouraging the
donation of conservation easements is undeniably a goal of the statute,
highlighting this point overlooks a crucial condition that Congress
 37

demanded be met by donors seeking deductions: an easement’s
conservation purpose must be ‘protected in perpetuity.’” Oakbrook II,
28 F.4th at 717. Stated differently, Congress’s policy objective was not
to encourage the donation of easements regardless of their terms, but to
encourage the donation of easements that satisfied the statutory
perpetuity requirements. By supposing that the proceeds regulation
might disincentivize the donation of easements that did not comply with
the statute, comments cited by the taxpayer did not “challenge a
fundamental premise” underlying the proposed regulation. Carlson,
938 F.3d at 344.

In 21 cases between 2016 and 2021, this Court sustained the
disallowance of charitable contribution deductions because the deeds of
easement failed to comply with the proceeds regulation. This is not a
case where Treasury failed to conduct a rulemaking, failed to hold a
public hearing, or failed to solicit and consider comments. Treasury did
all these things.

I agree with the Sixth Circuit in Oakbrook II, and I cannot
overlook “Congress’s decision to emphasize that a conservation
easement’s purpose be protected in perpetuity.” Oakbrook II, 28 F.4th
at 718. I see no reason to change my position that Treasury’s lack of
response to comments petitioner cited do not jeopardize the validity of
the regulation. Furthermore, the Eleventh Circuit in Hewitt does not
raise any new arguments that were not considered by this Court in
Oakbrook I.

III. Stare Decisis

The opinion of the Court does not follow the longstanding legal
principle stare decisis. Stare decisis is “[t]he doctrine of precedent,
under which a court must follow earlier judicial decisions when the same
points arise again in litigation.” Stare decisis, Black’s Law Dictionary
(11th ed. 2019). Courts have repeatedly taken the position that “[s]tare
decisis is the preferred course because it promotes the evenhanded,
predictable, and consistent development of legal principles, fosters
reliance on judicial decisions, and contributes to the actual and
perceived integrity of the judicial process.” Payne v. Tennessee, 501 U.S.
808, 827 (1991). That “today’s Court should stand by yesterday’s
decisions . . . is ‘a foundation stone of the rule of law.’” Kimble v. Marvel
Ent., LLC, 576 U.S. 446, 455 (2015) (quoting Michigan v. Bay Mills
Indian Cmty., 572 U.S. 782, 798 (2014)).
 38

Stare decisis also “reduces incentives for challenging settled
precedents, saving parties and courts the expense of endless
relitigation.” Id. We generally adhere to our prior decisions, absent
exceptional circumstance, because doing so “promotes the evenhanded,
predictable, and consistent development of legal principles, fosters
reliance on judicial decisions, and contributes to the actual and
perceived integrity of the judicial process.” Payne, 501 U.S. at 827.

The Supreme Court views stare decisis as a “principle of policy”
that balances several factors to decide whether the scales tip in favor of
overruling precedent. Citizens United v. Fed. Election Comm’n, 558 U.S.
310, 362–63 (2010) (quoting Helvering v. Hallock, 309 U.S. 106, 119
(1940)). Among these factors are the “workability” of the standard, “the
antiquity of the precedent, the reliance interests at stake, and of course
whether the decision was well reasoned.” Montejo v. Louisiana, 556 U.S.
778, 792–93 (2009).

“Stare decisis is not an inexorable command . . . .” Payne, 501 U.S.
at 828. However, “any departure from the doctrine of stare decisis
demands special justification.” Arizona v. Rumsey, 467 U.S. 203, 212
(1984). This “special justification” is over and above the belief “that the
precedent was wrongly decided.” Halliburton Co. v. Erica P. John Fund,
Inc., 573 U.S. 258, 266 (2014). Assertions previously reviewed and
rejected by the Court are not a “special justification.” Bay Mills Indian
Cmty., 572 U.S. at 798–99.

The opinion of the Court gives the same statutory text a different
interpretation that effectively overrules a prior case interpreting
identical operative text, a course of action that basic principles of stare
decisis wisely counsel us not to take. See United States v. Home Concrete
& Supply, LLC, 566 U.S. 478, 483 (2012) (citing John R. Sand & Gravel
Co. v. United States, 552 U.S. 130, 139 (2008)). “[S]tare decisis in respect
to statutory interpretation has ‘special force,’ for ‘Congress remains free
to alter what we have done.” John R. Sand & Gravel Co., 552 U.S. at 139
(quoting Patterson v. McLean Credit Union, 491 U.S. 164, 172–73
(1989)).

The principle of stare decisis dates back to the Federalist Papers.
Alexander Hamilton stated that “strict rules and precedents” help “[t]o
avoid an arbitrary discretion in the courts.” The Federalist No. 78
(Alexander Hamilton). Professor Kozel explains that the Supreme
Court generally requires some “special justification” to overcome stare
 39

decisis. Randy J. Kozel, Special Justifications: Settled Versus Right: A
Theory of Precedent, 33 Const. Comment 471, 475 (2018).

Under this approach, a precedent is subject to overruling if
it is obviously wrong, but not if it is a close call. The special
justification is the presence of a clear error as compared
with a less egregious mistake. Mere disagreement with a
precedent is not enough to overrule it. But a decision that
is clearly erroneous contains its own basis for departure.

Id.

The Supreme Court examines multiple factors in determining a
special justification, including the “traditional” ones: (1) whether the
statutory and doctrinal underpinnings of the existing caselaw have
eroded over time, either through growth of judicial doctrine or
Congressional action; and (2) whether the existing caselaw has proved
unworkable. Kimble, 576 U.S. at 458–59. The “lesson is that every
successful proponent of overruling precedent has borne the heavy
burden of persuading the Court that changes in society or in the law
dictate that the values served by stare decisis yield in favor of a greater
objective.” Vasquez v. Hillery, 474 U.S. 254, 266 (1986). The Supreme
Court has also considered, as special justification, whether the prior
decision rests on underlying facts that have changed, have come to be
seen differently, or were mistaken from the outset. Kimble, 576 U.S.
at 460. None of the justifications applies to this case.

I am concerned that the Court’s reversing a prior position taken
only four years ago and without compelling new legal argument will
result in instability of the law in the area of conservation easements.
Additionally, the opinion of the Court may result in challenges to
regulations that have been relied upon for over 40 years. I reiterate here
what I stated in my concurrence to 3M about “creat[ing] a slippery slope
whereby courts would be constantly faced with determining whether
comments are significant and whether the agency responded
appropriately to them.” 3M Co. & Subs. v. Commissioner, No. 5816-13,
160 T.C., slip op. at 280 (Feb. 9, 2023) (Kerrigan, C.J., concurring).

For the above-stated reasons, I cannot agree with the opinion of
the Court.

NEGA, PUGH, and ASHFORD, JJ., agree with this dissent.