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IRS letter ruling 201110020

This 2011 IRS private letter ruling illustrates a rare instance of a land trust losing its tax-exempt status. It exhibits the consequences of flagrant disregard for legal and ethical standards and the process of fact-finding that may result in an adverse IRS action. The factors supporting the IRS determination that the land trust was operating for private (as opposed to public) benefit included: • an abject failure to maintain corporate records; • failure to report compensation paid to its founder/president; • dubious business relationships between the founder/president's for-profit company and the land trust; • receipt of payment from a landowner, and payment by the land trust of "consulting fees" to the founder/president, in connection with an easement amendment that doubled the building right with no reciprocal conservation benefits to the land trust; • the making of direct political campaign contributions; • a lack of resources or staff to monitor or enforce its easements; and • the founder/president entering private consulting contracts with prospective land donors.