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Colo. investigating conservation easement program

Colorado officials say they're still trying to untangle a state conservation easement program that was riddled with fraud.
/ Source: The Associated Press

Colorado officials say they're still trying to untangle a state conservation easement program that was riddled with fraud.

Erin Toll, director of Colorado's Division of Real Estate, told lawmakers Wednesday the program is the target of a grand jury investigation that involves millions of dollars in questionable tax breaks.

State lawmakers want to suspend the program and use the money to restore a property tax break for seniors, but Toll warned that could jeopardize hundreds of landowners who have taken advantage of tax credits who were told the easements would continue forever.

She said tax benefits continue for up to 20 years, and some property owners have already sold those tax credits.

"There's a rollover for people who took that credit," she told legislators.

Toll said a grand jury is looking into $24 million that may have been fraudulently claimed with the help of unscrupulous appraisers who overvalued the land. Toll said three appraisers have been suspended and two of them are believed to be in Mexico.

"We discovered millions of dollars in suspect credits," Toll told legislators.

Toll said state regulators were hamstrung because of state laws that kept tax records private. She said new laws passed over the past two years will help investigators unravel what happened.

Lawmakers were outraged when they were told they may not be able to cancel the program because of contracts that have already been signed to sell the easements.

"Why would we want to continue with a program that had problems with fraud and deceit? It appears to be an ongoing mess that's not getting better," Rep. Jim Kerr, R-Littleton, told members of the House Agriculture, Livestock and Natural Resources Committee, which held a hearing on the easements.

The easements guarantee that land will not be developed. Property owners can write off easements as charitable contributions, and they get to keep the land.

Use of the program jumped from $2.3 million in state tax credits in 2001 to $98 million in 2008, fueled in part by a change in 2003 that allowed the credits to be transferred and sold.

Officials said things got so far out of control they had to ask the IRS to audit people who claimed credits to which they were not entitled. IRS Acting Commissioner Kevin Brown wrote a letter to lawmakers saying that a federal investigation indicated 96 out of 108 cases reviewed showed problems.