Investors in Many Syndicated Conservation Easement Deals Must Notify the IRS

Posted in Real estate, Transactional

The IRS has designated certain syndicated conservation easement transactions as “listed transactions.” This will require taxpayers who have invested in such transactions to file a notice with the IRS. It will also result in reporting and list maintenance obligations for professionals (law firms, accountants, appraisers, etc.) who provided material advice on such transactions. If the required notice is not provided, severe penalties will be imposed.

Conservation easements, a tax planning technique that has gained popularity with real estate developers, have been under IRS scrutiny for over a decade. Syndicated conservation easements are those offered to prospective investors in a partnership or other pass-through entity that purport to give investors the opportunity to obtain a charitable contribution deduction for donation of the easement. The IRS just increased the heat by classifying these syndicated conservation easement deals as listed transactions. The notice required to be given to the IRS by law may result in a close examination of the reported deals; consequently, taxpayers considering going into a syndicated conservation easement transaction should be extremely cautious.

The tax code allows a charitable contribution deduction for the donation of a qualified conservation contribution (QCC) if several conditions are satisfied.  A QCC can either be for an open space conservation easement or a facade easement for a certified historic structure. With an open space easement, the donor puts a perpetual deed restriction on the property which limits development. With a façade easement, alteration of the exterior is restricted. The amount of the charitable deduction that may be claimed is based on the reduction in value to the real property as a result of the development restriction, which must be documented by a qualified appraisal. The IRS claims in many syndicated conservation easement transactions that the value of the affected real property prior to the recording of the development restriction is greatly overstated, thereby artificially increasing the value of the charitable contribution. The IRS has successfully challenged the over-valuation of many QCC’s, and designating these deals as listed transactions will allow the Service to easily identify these transactions for a closer look and likely denial of the deduction.

IRS Notice 2017-10 which was released on Dec. 23, 2016, says that a conservation easement is a listed transaction where: (1) the investor receives promotional materials describing the transaction; and, (2) the amount of the charitable deduction claimed to be available to the investor is 2.5 times greater than the amount invested. The IRS Notice says that taxpayers who have invested in such a listed transaction on or after Jan. 1, 2010, must disclose the investment for tax years that are open under the statute of limitations as of Dec. 23, 2016. For most taxpayers, this means that a disclosure will need to be made for deals entered into on or after Jan. 1,  2013; however, if the investor extended the statute of limitations for the 2010, 2011, or 2012 tax years, the notice requirements may still be required for deals entered into on or after Jan. 1, 2010.

The required notice of involvement in such transactions is filed on IRS Form 8886.

In addition, Notice 2017-10 says that advisors who provide material assistance with respect to organizing, managing, promoting, selling, implementing, insuring, or carrying out  the easement transaction since 2010 also are required to report the transaction to the IRS and maintain a list of investors in the deal. A material advisor in a listed transaction must file IRS Form 8918 to comply with this notice requirement.

For more information on filing obligations if you have either invested in or acted as a material advisor on a syndicated conservation easement transaction, please contact your Greenberg Traurig attorney.

EPA’s Amendments to the Standards for Hazardous Waste Generators

Posted in Articles, EPA, Hazardous Waste, Pennsylvania, RCRA, Solid waste

Last month, the U.S. Environmental Protection Agency published its amendments to, and reorganization of, the regulations governing generators of hazardous waste, 81 Fed. Reg. 85,732 (Nov. 28). These rules govern the hundreds of thousands of enterprises nationally that produce wastes characterized or listed as hazardous under the Resource Conservation and Recovery Act (RCRA), 42 U.S.C. Sections 6901-91i. For the most part, these amendments do not change the requirements that generators face, but merely reorganize the regulations in a way that will make old guidance and citations obsolete. However, the final rule also codifies a number of EPA interpretations of the rules found in letters and memoranda that the EPA has written over the years. In addition, in some respects the rules will change when this rulemaking becomes effective on May 30, 2017.

Read more from my article in The Legal Intelligencer supplement, PA Law Weekly by clicking here.

FAST Act Implementation Progress: An Important Tool for Expediting Energy Projects for the Incoming Trump Administration?

Posted in FAST Act, Federal, Federal Regulation, Infrastructure, NEPA, Permitting

FAST Act Implementation Progress: An Important Tool for Expediting Energy Projects for the Incoming Trump Administration?

On Dec. 4, 2015, President Obama signed the Fixing America’s Surface Transportation Act, also known as the “FAST Act,” which sought to expedite the NEPA environmental review process for major infrastructure projects. One year later, rulemaking and guidance from both the Federal Permitting Improvement Steering Council (FPISC) and affected agencies have helped provide some contours to the program as a whole, painting a better picture of how this proposed expedited review will function.


Summary of 2016 Activity

  • FPISC Takes Shape

As discussed in our prior blog post, a substantial area of uncertainty under the FAST act related to the newly established Federal Permitting Improvement Steering Council; now, some of those questions have been answered. The Steering Council, which comprises 15 federal agencies, is an expansion of the 13-member Federal Permitting Steering Committee established by a 2012 executive order. Agencies in the FPISC include:

  1. Advisory Council on Historic Preservation
  2. Army Corps of Engineers
  3. Department of Agriculture
  4. Department of Commerce
  5. Department of Defense
  6. Department of Energy
  7. Department of Homeland Security
  8. Department of Housing and Urban Development
  9. Department of the Interior
  10. Department of Transportation
  11. Environmental Protection Agency
  12. Federal Energy Regulatory Commission
  13. Nuclear Regulatory Commission
  14. U.S. Coast Guard
  15. Udall Foundation

The FPISC has also updated the Permitting Dashboard to reflect the changed regulatory atmosphere under the FAST Act.


  • Richard Kidd IV Appointed Executive Director of the FPISC

In July, President Obama appointed Richard G. Kidd IV, the Deputy Assistant Secretary of the Army for Energy and Sustainability, to serve as the Executive Director of the FPISC. In his capacity as Deputy Assistant Secretary, a position he has held since 2010, and in prior positions with the Department of Energy, the State Department, and the United Nations, Executive Director Kidd has extensive experience with infrastructure projects and environmental review.


  • Establishment of Covered Project Inventory

In coordination with its constituent agencies, the FPISC has established the preliminary inventory of the “Covered Projects” under Section 41 of the FAST Act. On Sept. 22, Executive Director Kidd announced a list of 34 pending projects that will benefit from expedited review. The inventory contains a number of major infrastructure projects, ranging from Nuclear Regulatory Commission approvals of new generators to HUD Coastal Resiliency projects on Manhattan’s East Side.Surprisingly, however, none of the projects currently covered by the FAST Act—a law passed ostensibly to modernize surface transportation—fall within the traditional realm of transportation projects. Of the projects approved, many fall within the energy sector. The projects include:

  • Four nuclear power plants
  • One offshore oil and gas terminal
  • Five electricity transmission projects
  • Eleven natural gas and pipelines
  • Seven solar and hydroelectric generating plants
  • Two HUD coastal resiliency plans
  • One solar panel manufacturing plant


  • Individual Agencies Provide Initial Guidance

In addition to the activities undertaken by the FPISC in aggregate, its constituent agencies have been providing additional guidance on the implementation of the FAST Act. Through opinions, Fact Sheets, and FAQs, the individual agencies like the Department of Transportation and the Department of Agriculture have explained the way that Section 41 and other elements of the FAST Act will affect numerous elements of current and future programs, such as funding mechanisms and state obligation systems.


How Much FAST-er Under the New Administration?

As with many areas of law and policy, the future of the FAST Act under the Trump administration remains up in the air. The FAST Act, which seeks to reduce the burden of the regulatory apparatus by expediting environmental review, would appear to align with many of the goals stated by the incoming administration, including its emphasis on infrastructure and energy projects. It is therefore likely that many more projects—even those not traditionally seen as infrastructure projects—will benefit from the expedited review procedures over the next four years.

Federal Court Rejects Citizen Suit to Force Stormwater Permitting Program

Posted in Clean Water Act, Federal, Permitting, Stormwater

Last week, a federal district court in Rhode Island dismissed a citizen suit that sought to radically expand Clean Water Act stormwater permitting programs. In Conservation Law Found’n v. U.S. Environmental Protection Agency, Civil Action No. 15-165-ML, the plaintiff attempted to invoke a rarely used provision in the Clean Water to mandate that the U.S. EPA regulate stormwater discharges to impaired waterbodies with approved Total Maximum Daily Loads (TMDLs). The court granted the government’s motion to dismiss in what appears to be a case of first impression for the federal courts.

33 U.S.C. Section 1342(p) grants the U.S. EPA authority to regulate stormwater discharges where it has determined that those discharges “contribute[] to a violation of a water quality standard or is a significant contributor of pollutants to waters of the United States.” Referred to as “Residual Designation Authority,” this provision has been exercised in only two instances (both at the instigation of environmental groups) to address water quality impacts from stormwater discharges.

In this case, Conservation Law Foundation (CLF) sued the U.S. EPA to force the agency to require permits for stormwater discharges to five impaired waterbodies in Rhode Island. Under 33 U.S.C. Section 1313(d), states must develop TMDLs for such impaired waterbodies, which essentially act as pollution budgets to help ensure that the impaired waterbodies achieve state water quality standards. CLF argued that, by approving the TMDLs for the impaired waterbodies, the U.S. EPA had made a “determination” that stormwater discharges to those waterbodies “contribute[] to a violation of a water quality standard or is a significant contributor of pollutants to waters of the United States.” According to CLF, that determination triggered a non-discretionary duty to exercise the U.S. EPA’s Residual Designation Authority and required permits for stormwater discharges from commercial and industrial facilities to those impaired waterbodies.

The court rejected that claim, based on a close examination of the five TMDLs in question, none of which the court concluded rose to the level of an actual determination that stormwater discharges to those waterbodies were contributing to a violation of a water quality standard or otherwise were a significant contributor of pollutants to waters of the United States. On that basis, the court dismissed CLF’s suit. CLF has not yet appealed, and may not appeal, that decision.

Beyond being a case of first impression for a federal court, this case is significant for two other reasons. First, CLF has filed a similar case in Massachusetts, seeking to compel the U.S. EPA to regulate stormwater discharges to the Charles River based on TMDLs the U.S. EPA previously approved for that watershed. The government has moved to dismiss that case as well and a hearing on that motion is scheduled for January 2017. Last week’s ruling, though tied to the specific TMDLs at issue in Rhode Island, may have some persuasive authority for the Massachusetts federal district court.

Second, there are thousands of approved TMDLs around the United States, and an even larger backlog of impaired waterbodies that require TMDLs which have not yet been approved. If taken literally, CLF’s claims would mandate that the U.S. EPA (or the delegated state permitting agency) establish stormwater permitting programs for each TMDL for which stormwater is determined to “contribute[] to a violation of a water quality standard or is a significant contributor of pollutants to waters of the United States.” CLF and other environmental groups have repeatedly petitioned the U.S. EPA to exercise its Residual Designation Authority, which the U.S. EPA has declined to do. The Rhode Island and Massachusetts cases reveal that those environmental groups are now turning to the federal courts to force the regulatory outcome they have been seeking. In the first court ruling to address it, that strategy has been rejected.

EPA Seeks to Impose Financial Responsibility Requirements on Hardrock Mine Operators

Posted in Chemicals, Environment, EPA, Federal Regulation

On Dec. 1, the Environmental Protection Agency (EPA) administrator signed a proposed rule, “Financial Responsibility Requirements under CERCLA § 108(b) for Classes of Facilities in the Hardrock Mining Industry,” which would impose new financial responsibility requirements for current owners and operators of hardrock mines, including numerous metal mines in the western United States. Federal Register publication of the proposed rule is expected within the month.

According to the agency, this rule is designed to ensure that mining companies have the resources to pay for liabilities arising under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). Under CERCLA’s strict joint and several liability scheme, the government may incur up-front costs for responding to pollution at a particular site, and is able to recover those cleanup costs from “potentially responsible parties,” defined in the CERCLA to include current and past owners and operators.

Problems can arise when a potentially responsible party is unable to pay (e.g., because it has filed for bankruptcy), which under CERCLA’s joint liability regime causes that party’s share of liability to pass to any financially secure co-defendants, or if there are none, to the government. To avoid this problem in the mining sector, the EPA seeks to impose financial responsibility requirements on all hardrock mine owners and operators, even those who may never be involved in a CERCLA matter.

Legal Background: Under section 108(b) of CERCLA, 42 U.S.C. § 9608(b), the EPA is required to “promulgate requirements . . . that classes of facilities establish and maintain evidence of financial responsibility consistent with the degree and duration of risk associated with the production, transportation, treatment, storage, or disposal of hazardous substances.” Although this provision was enacted in 1980, the EPA did not take action for decades. In fact, the hardrock mining rule has been promulgated under the terms of a settlement between the EPA and environmental groups who, in In re: Idaho Conservation League, petitioned the United States Court of Appeals for the D.C. Circuit for a writ of mandamus compelling the EPA to issue the requirements under CERCLA. The parties negotiated a schedule for EPA’s rulemaking activities, and in January 2016, the D.C. Circuit issued an opinion approving the parties’ settlement as well as an order establishing agreed-upon deadlines for the EPA.

The New Regulations: The proposed regulations at 40 C.F.R. Part 320 would establish the amount of financial assurance owners and operators of hardrock mines are required to hold. Notably, the amount of financial assurance needed per the proposed formula in 40 C.F.R. § 320.63 will be lower for facilities that have certain environmental protection practices in place, giving regulated entities an opportunity to reduce insurance needs.

Regulated entities are also given options for meeting the financial responsibility requirements: the regulation identifies several acceptable financial instruments and includes an option for corporations to self-insure if qualified to do so.

As detailed in the EPA’s July 28, 2009 Federal Register Notice, the EPA considers “facilities which extract, beneficiate or process metals (e.g. copper, gold, iron, lead, magnesium, molybdenum, silver, uranium, and zinc) and non-metallic, non-fuel minerals (e.g. asbestos, gypsum, phosphate rock, and sulfur)” to be generally subject to the rule. Notably, the agency did not include several non-fuel mineral (including sand, gravel, and limestone) mines within its group of priority classes of facilities. (See “Mining Classes Not Included in Identified Hardrock Mining Classes of Facilities,” available here). The proposed rule at 40 C.F.R. § 320.60(a)(2) further exempts the following facilities from the financial responsibility requirements: “(i) Mines conducting only placer mining activities; (ii) Mines conducting only exploration activities; (iii) Mines with less than five disturbed acres that are not located within one mile of another area of mine disturbance that occurred in the prior ten-year period, and that do not employ hazardous substances in their processes; and (iv) Processors with less than five disturbed acres of waste pile and surface impoundment.” The EPA expects approximately 221 facilities to be affected, but that number is subject to fluctuation.

The plaintiffs in In Re: Idaho requested that the EPA promulgate financial responsibility regulations for four industry sectors: hardrock mining; chemical manufacturing; petroleum and coal products manufacturing; and electric power generation, transmission, and distribution. Accordingly, the D.C. Circuit also ordered the EPA to determine by Dec. 1 whether it would initiate rulemaking for the other three industries. Per the agency’s “Notice of Regulatory Determination for Financial Responsibility Requirements for Facilities in the Chemical, Petroleum and Electric Power Industries,” it will continue the regulatory process and determine whether financial responsibility requirements are necessary for the remaining three sectors. The EPA must issue the final rules by December 2020, 2021, and 2024. However, the order does not specify the sequence in which the three industries should be addressed, nor does it require the EPA to actually promulgate final rules. Thus, the EPA still retains discretion in determining requirements for these three industries.

Future of the Financial Responsibility Regulations: Critics of the rule argue that additional financial assurances are unnecessary and duplicative – mining is already a heavily regulated industry subjected to state financial responsibility obligations and a host of state and federal environmental regulations – and the new rules will only increase compliance costs without improving environmental conditions. In addition, President-elect Trump has been critical of existing environmental regulations for their impact on U.S. jobs, especially in industries that will be targeted for financial responsibility requirements. Since the incoming administration and Congress appear receptive to the concerns of industry, advocacy during the upcoming comment period may be particularly effective in changing the rule before finalization.

However, the background of this particular financial responsibility rule – promulgated pursuant to a court order and 40-year old congressional mandate – makes it hard to revoke. Although executive branch agencies typically enjoy significant discretion in rulemaking, the EPA’s actions here are required by court order, and the In re: Idaho plaintiffs could take additional legal action if the agency fails to comply. The case also serves as a reminder of how environmental organizations can use legal action to advance policy goals. Given the new administration’s stated opposition to many environmental regulations, we may see an increase in court involvement, through citizens suits filed both to compel agency action as well as to compel regulated entities to comply with environmental statutes.

Buckle Up for a Wild Ride: Environmental Policy in the Trump Administration

Posted in Articles, Environment, EPA, Federal, Federal Regulation, Legislation, Pennsylvania, Policy, Politics

Millions of Americans are coming to grips with the broad social and political ramifications of Donald Trump’s stunning upset victory in last Tuesday’s presidential election. And while the president-elect’s policy pronouncements to date have been short on detail, one thing is clear: those concerned with environmental protection and climate change had better buckle up for a wild ride.

As a 15-year veteran of the U.S. Environmental Protection Agency (EPA) and former agency enforcement official, I served under both Republican and Democratic administrations and played key roles in briefing incoming political leadership during transitions. As I know up close, for better or worse, federal agencies are not nimble and do not steer on a dime, a fact that often frustrates new political leadership.

Read more from my article in The Legal Intelligencer supplement, PA Law Weekly by clicking here.

Brexit: The Great Repeal Bill and the EU’s Chemicals, Emissions, and Medicines Regimes

Posted in Brexit, Chemicals, Environment, REACH

As discussed in our recent GT Alert, “Brexit: 100 Day Update“,  the UK Prime Minister Theresa May recently announced plans for a “Great Repeal Bill” for the repeal of the 1972 European Communities Act (ECA). Under the ECA, European Union (EU) law was established as part of the UK’s legal order and was given supremacy over the UK’s domestic laws.

It is intended that the Great Repeal Bill will enter into force on the date of Brexit (which appears to be March/April 2019 at the earliest). It is expected that the Great Repeal Bill will preserve the majority of existing EU law in domestic UK legislation until the UK Government has had an opportunity to assess individual EU-derived domestic laws and decide whether to retain, amend, or remove them. This process is likely to take many years, depending on the resources devoted to it.  New, post-Brexit EU law, including the decisions of the European Court of Justice, will not form part of UK domestic law.

Continue Reading.

Philadelphia’s Approach to Nuisance Abatement on Vacant Properties

Posted in Articles, Contamination, Environment, Pennsylvania, Real estate

Conventional environmental lawyers may find themselves in unfamiliar territory when faced with a municipal citation for allowing a vacant property to become a nuisance or a municipal claim to recover the costs of abating that nuisance.  In Philadelphia, the City has a regular program to do both.  That program proceeds under City ordinances and regulations, and not the more familiar state environmental laws.  A special unit within the City Solicitor’s Office handles this code enforcement program and brings enforcement proceedings before a single judge of the Philadelphia Court of Common Pleas.

Read more from my Pennsylvania Law Weekly article by clicking here.

U.S. EPA Declines to Require Permits for Stormwater Discharges from Commercial Properties

Posted in Clean Water Act, EPA, Permitting, Stormwater, Water

How to regulate stormwater discharges from impervious areas such as parking lots remains a hotly disputed environmental issue. Most recently, U.S. EPA Region 9 rejected a petition filed by environmental advocacy groups under the federal Clean Water Act calling for regulation of stormwater discharges into the Alamitos Bay/Los Cerritos Channel watershed in Los Angeles County from “privately-owned commercial, industrial, and institutional sites.”  This petition is one of a number of so-called Residual Designation Authority (RDA) petitions that have been filed around the country demanding that the U.S. EPA regulate stormwater discharges from commercial properties with large areas of impervious surface, like office parks, shopping centers, and apartment complexes.  If successful, these RDA petitions would impose costly regulatory requirements (including retrofitting stormwater treatment systems) on commercial property owners and developers.  Industrial and institutional properties, like warehouses, hospitals and college campuses could also be affected.

Section 402(p)(2)(E) of the Clean Water Act and 40 C.F.R § 122.26(a)(9) provides the U.S. EPA with authority to regulate certain otherwise unregulated stormwater discharges if itdetermines that those discharges are contributing to violations of water quality standards or are a significant contributor of pollutants. The U.S. EPA’s regulations expressly allow for third parties like environmental advocacy groups to file petitions seeking exercise of this RDA. 40 C.F.R. § 122.26(f)(2).

In this most recent case, three environmental groups filed an RDA petition demanding that U.S. EPA Region 9 require privately-owned commercial, industrial, and institutional sites in the Alamitos Bay/Los Cerritos Channel watershed to apply for Clean Water Act NPDES permits.  U.S. EPA Region 9 demurred on the grounds that other regulatory programs were already in place to address water quality impairments from stormwater discharges, and that these programs, including permitting requirements on municipal separate stormwater sewers, should be allowed adequate time to take effect before considering additional regulatory requirements.

This RDA petition was one of three filed last year targeting specific watersheds around the country. The two other petitions were filed in U.S. EPA Region 3 – one regarding the Back River watershed in Baltimore, MD and the other regarding Army Creek in New Castle County, DE.  U.S. EPA Region 3 has not responded to either of those petitions yet.

While environmental groups are increasingly turning to RDA petitions to force additional regulation of stormwater discharges from non-industrial sources, that strategy has yielded mixed results to date. The Conservation Law Foundation (CLF) first employed this approach in Vermont, where it secured a court order compelling the Agency for Natural Resources to implement an RDA stormwater permitting program.  In re Storwater NPDES Petition, 910 A.2d 824 (2006).  In another instance, CLF relied on the RDA provisions to provide a regulatory framework for a consensual stormwater management program implemented in a portion of the Long Creek watershed in Portland, ME.

Subsequent efforts with RDA petitions have proven less successful. CLF has filed several RDA petitions to force regulation of stormwater discharges from commercial properties into the Charles River watershed outside of Boston, MA.  U.S. EPA’s New England Region declined to act on these RDA petitions.  In response, CLF filed a Clean Water Act citizen suit last February seeking to compel U.S. EPA to take the actions demanded in the RDA petitions. Conservation Law Found. v. U.S EPA, Civil Action No. 1:16-cv-10397 (D. Mass.)  The government has moved to dismiss the case, but a decision on that motion is likely months away. (CLF filed a similar citizen suit in Rhode Island, which the government has also moved to dismiss).

In 2014, environmental groups filed RDA petitions in U.S. EPA Regions 1, 3 and 9 seeking broad residual designations for stormwater discharges in each of those regions. Each of those regions declined to take any action in response to any of those petitions.

The U.S. EPA’s approach with respect to RDA petitions appears consistent with its approach to the previously proposed national post-construction stormwater regulations.  In 2010, in connection with the settlement of a citizen suit involving water quality impacts in the Chesapeake Bay, the U.S. EPA agreed to propose regulations to manage stormwater discharges from commercial sites after they are developed or re-developed.  After four years of extensive rulemaking efforts, U.S. EPA announced that it would not move forward with these post-construction regulations, but would instead rely on existing regulatory programs, as well as providing additional incentives and technical assistance, to address stormwater impacts from commercial sites.

While that may seem like a sensible approach – both with respect to the previously proposed national post-construction regulations and the more recent watershed-specific RDA petitions – environmental advocacy groups continue to argue that the U.S. EPA has a non-discretionary duty to take regulatory action. The question then becomes whether these groups can convince a court to adopt their view that U.S. EPA lacks discretion to determine what if any administrative actions should be implemented to address stormwater impacts from commercial properties.

The use of RDA petitions to force implementation of stormwater permitting programs for commercial, industrial and institutional properties remains a developing issue that could have significant consequences for owners and developers of those properties, and we will continue to monitor this issue closely.

Steps for Young Environmental Lawyers to Take for Success

Posted in Articles, Environment

Autumn has arrived, and with it the promise of a fresh crop of law school graduates entering practice. That means that all the more experienced young lawyers move up a notch in our oddly hierarchical profession. Soon, they will have to sustain themselves; they will have to find enough work from their employers, their partners, or external clients to keep themselves busy without depending on some other, mature environmental lawyer (like me). There are some steps those young environmental lawyers might take to help the process. There are some opportunities in that process for clients. There are surely opportunities for the environmental bar to become more diverse if that process succeeds.

Read more from my Pennsylvania Law Weekly article by clicking here.