1 116TH CONGRESS " 2nd Session COMMITTEE PRINT ! S. PRT. 116–44 SYNDICATED CONSERVATION-EASEMENT TRANSACTIONS BIPARTISAN INVESTIGATIVE REPORT AS SUBMITTED BY CHAIRMAN GRASSLEY AND RANKING MEMBER WYDEN COMMITTEE ON FINANCE UNITED STATES SENATE CHARLES E. GRASSLEY, Chairman RON WYDEN, Ranking Member AUGUST 2020 VerDate Sep 11 2014 12:55 Aug 25, 2020 Jkt 000000 PO 00000 Frm 00001 Fmt 6012 Sfmt 6012 congress.#13 Printed for the use of the Committee on Finance H:\2020 116TH CONGRESS 2ND SESSION\2020 COMMITTEE PRINTS\COMMITTEE P\CV COMMITTEE ON FINANCE CHARLES E. GRASSLEY, Iowa, Chairman MIKE CRAPO, Idaho PAT ROBERTS, Kansas MICHAEL B. ENZI, Wyoming JOHN CORNYN, Texas JOHN THUNE, South Dakota RICHARD BURR, North Carolina ROB PORTMAN, Ohio PATRICK J. TOOMEY, Pennsylvania TIM SCOTT, South Carolina BILL CASSIDY, Louisiana JAMES LANKFORD, Oklahoma STEVE DAINES, Montana TODD YOUNG, Indiana BEN SASSE, Nebraska RON WYDEN, Oregon DEBBIE STABENOW, Michigan MARIA CANTWELL, Washington ROBERT MENENDEZ, New Jersey THOMAS R. CARPER, Delaware BENJAMIN L. CARDIN, Maryland SHERROD BROWN, Ohio MICHAEL F. BENNET, Colorado ROBERT P. CASEY, JR., Pennsylvania MARK R. WARNER, Virginia SHELDON WHITEHOUSE, Rhode Island MAGGIE HASSAN, New Hampshire CATHERINE CORTEZ MASTO, Nevada KOLAN DAVIS, Staff Director and Chief Counsel JOSHUA SHEINKMAN, Democratic Staff Director ii Table of Contents 1. Introduction ............................................................................................................................. 1 2. Summary.................................................................................................................................. 5 3. Relevant Law for Syndicated Conservation-Easement Transactions ...................................... 8 a. Charitable Deductions, Qualified Conservation Contributions, and Conservation Easements .................................................................................................................................... 8 Partnerships and Other “Pass-Through” Entities ............................................................... 11 b. i. Partnerships in General .................................................................................................. 11 ii. LLCs .............................................................................................................................. 12 c. Sham Partnerships .............................................................................................................. 13 4. How Do Syndicated Conservation-Easement Transactions Work? ...................................... 15 5. History of Syndicated Conservation-Easement Transactions ............................................... 20 6. Promotion of Tax Benefits .................................................................................................... 24 7. Communication of Tax Benefits............................................................................................ 31 a. EcoVest Capital Emails ..................................................................................................... 31 b. EvrSource Capital Emails .................................................................................................. 38 c. Ornstein-Schuler Emails .................................................................................................... 43 d. Other Promoters’ Emails.................................................................................................... 52 8. Inflated Appraisals ................................................................................................................. 53 9. Transaction Details ................................................................................................................ 57 a. EcoVest and North Myrtle Beach ...................................................................................... 57 i. Azalea Bay Resort, LLC ................................................................................................ 58 ii. Magnolia Bay Resort, LLC ............................................................................................ 63 iii. EcoVest’s Other “Resort” Investments in North Myrtle Beach .................................... 66 b. EvrSource Capital and Hamilton County, Florida ............................................................. 70 i. Bienville 75, LLC and Bienville 75 Acquisitions, LLC ................................................ 70 ii. Roaring Creek Plantation, LLC and Roaring Florida Acquisitions, LLC ..................... 74 c. Webb Creek and Clay County, Georgia ............................................................................ 77 d. Ornstein-Schuler and Polk County, Florida ....................................................................... 83 i. FG River Resources LLC............................................................................................... 85 ii. Green Cove Group LLC................................................................................................. 87 iii. Ornstein-Schuler’s Other County Line Ranch Transactions ......................................... 89 iii e. Dr. Kyle Carney, Thomas Jason Free, and Humphreys and Perry County, Tennessee ..... 91 i. Little Pumpkin Creek Investments................................................................................. 92 ii. Little Pumpkin Creek North Investments ...................................................................... 95 iii. Ginn Creek Investments ................................................................................................. 97 iv. Tennessee Ranch Estates ............................................................................................... 99 v. Crockett Investors, LLC............................................................................................... 102 10. Conclusion ....................................................................................................................... 105 11. Appendix .......................................................................................................................... 107 a. Transaction Details .......................................................................................................... 107 i. EcoVest Capital ........................................................................................................... 107 ii. EvrSource Capital ........................................................................................................ 133 iii. Webb Creek ................................................................................................................. 137 iv. Ornstein-Schuler .......................................................................................................... 138 v. Dr. Kyle Carney ........................................................................................................... 165 vi. Thomas Jason Free ....................................................................................................... 170 b. Exhibit List....................................................................................................................... 176 iv “I would steer clear of this. It is a ‘syndicated conservation easement’ tax shelter deal. These have been labeled tax avoidance transactions by the IRS, and are ‘listed transactions.’ An audit is guaranteed. And the odds are heavily in favor of the IRS prevailing. How do you justify paying less than $3 million for a property that an appraiser says is worth $81 million, with a conservation easement worth $78 million?”1 -Email from independent attorney to potential investor in syndicated conservation-easement transaction 1. Introduction This report discusses the findings of the United States Senate Committee on Finance’s investigation into syndicated conservation-easement transactions. The investigation began on March 27, 2019, when Chairman Charles Grassley and Ranking Member Ron Wyden jointly sent letters to 14 individuals suspected of promoting these transactions. The letters requested information and documents about the transactions. Six of those individuals failed to voluntarily comply, so the Finance Committee issued subpoenas to them to compel production of that information. Those six individuals were Robert McCullough of EcoVest Capital; Matt Ornstein and Frank Schuler of Ornstein-Schuler Investments; and Matthew Campbell, Eugene “Chip” Pearson, Jr., and Mark Pickett of EvrSource Capital. The documents provided in this investigation confirm that syndicated conservation-easement transactions appear to be highly abusive tax shelters. In general, the conservation-easement tax incentive established under Internal Revenue Code (the “Code”) section 170(h) has enjoyed broad bipartisan support.2 However, over the last decade, the syndication of conservation-easement transactions among unrelated participants, or “investors,” has developed a controversial reputation within the tax community. Some argue syndicated conservation-easement transactions are an effective method for conserving land, while others argue they are abusive shelters. During the 115th Congress, the controversy had made its way to Capitol Hill, with lobbyists representing interests on both sides of the matter advocating for policies that would either increase or decrease the Federal government’s scrutiny of the transactions. On December 23, 2016, in the closing days of the Obama Administration, the Department of the Treasury and the IRS issued a notice, known as IRS Notice 2017-10,3 which designated syndicated conservation-easement transactions as “listed transactions,” meaning their promoters and participants must affirmatively tell the IRS they were and are Ex. 1 – Email from Tom [REDACTED] to Robert [REDACTED] and David [REDACTED] (Dec. 9, 2017, 4:25:34 AM GMT), at ex. p. ECOVEST-SF_0308688. 1 2 See, Conservation Easement Incentive Act of 2015, S. 330, 114 Cong. (2015), sponsored by Sens. Heller, Stabenow, and 50 other Senators. 3 IRS Notice 2017-10, 2017-4 IRB 544 (Dec. 23, 2016), available at https://www.irs.gov/pub/irs-drop/n- 17-10.pdf. 1 participating in those transactions. Like all such notices about listed transactions, IRS Notice 2017-10 also communicated to the public that the IRS generally considered the transactions to be tax shelters. In March 2017, the Wall Street Journal reported, Promoters of tax-advantaged land conservation investment deals, stung by an IRS decision last year that cracked down on the activity, are lobbying Congress to protect their interests. They’ve hired well-connected Washington firms and filed the paperwork to start a political fundraising account that will allow industry players to donate money to members of Congress with influence over IRS enforcement. This week, they will engage in another well-worn Washington ritual: The fly-in, where members from 10 states will walk the halls of the Capitol complex and meet face-to-face with lawmakers from their home states. While lobbying is Washington’s stock in trade, it is rare when it comes to protecting a practice that the government has labeled as a tax shelter.4 That lobbying effort included EcoVest Capital, a company that promoted its own syndicated conservation-easement transactions, as well as a nonprofit organization known as Partnership for Conservation (or simply, P4C) comprised of transaction promoters from other companies. These groups generally lobbied Members of Congress and their staffs to first ask the IRS to withdraw the notice making syndicated conservation-easement transactions into listed transactions, and when that did not come to fruition, to withhold funding from the IRS’ enforcement efforts surrounding IRS Notice 2017-10. Another group known as the Land Trust Alliance, which is made up of land trusts that hold land for conservation but do not accept land donated by syndicated transactions, lobbied Congress in the opposite direction, generally asking Congress not to interfere with the IRS’ work in this space. Ultimately IRS Notice 2017-10 remained active, and the IRS kept its funding for enforcing that notice. These competing lobbying efforts and related questions about abuse of syndicated conservation-easement transactions are the motivation for this investigation and this report. The IRS estimates that between 2010 through 2017, syndicated conservation-easement transactions generated $26.8 billion in charitable contribution deductions for the transactions’ investors.5 Assuming such deductions reduced reportable income that would have otherwise been taxed at the then-existing top federal income tax rate of 39.6 percent, these transactions collectively lowered the taxpayer-investors’ Federal income tax bills by approximately $10.6 4 Richard Rubin and Brody Mullins, Land-Tax Deal Promoters Lobby Congress After IRS Crackdown, WALL STREET JOURNAL, March 28, 2017. Ex. 2 – Letter from David J. Kautter, Acting Commissioner, Internal Revenue Service, to Orrin G. Hatch, Chairman, U.S Senate Committee on Finance, United States Senate (July 12, 2018); Ex. 3 – Letter from Charles P. Rettig, Commissioner, Internal Revenue Service, to Charles Grassley, Chairman, U.S Senate Committee on Finance, United States Senate (Feb. 12, 2020). 5 2 Based on the information gathered in this investigation, the Senate Finance Committee Chairman and Ranking Member conclude the IRS has strong reason for taking enforcement action against syndicated conservation-easement transactions as it has to date. Furthermore, in light of the continued use of these abusive transactions despite the issuance of IRS Notice 201710, the Chairman and Ranking Member believe Congress, the IRS, and Department of the Treasury should take further action to preserve the integrity of the conservation-easement tax deduction. 4 2. Summary All tax shelters benefit from the same characteristic: they avoid wide-scale publicity and public scrutiny because they are hard to understand. The investigation behind this report involved the review of hundreds of thousands of pages of documents and several state and municipal land databases. This report finds syndicated conservation-easement transactions to be transactions designed to provide tax deductions to high-income taxpayers by way of (1) inflated appraisals of undeveloped land through (2) partnership entities that appear to serve no non-tax business purpose for existing other than the provision of tax deductions. Where the report describes appraisals as inflated, it does so because those appraisals value property at multiples of what transaction promoters or their investors paid to acquire ownership interests in that property, as is discussed in this report. The report is structured so that the most relevant information for understanding these transactions is provided in the beginning sections, and the later sections go into greater details about the transactions and the pieces of land involved in them. The section immediately below, Section 3, discusses the relevant tax law for understanding and critiquing syndicated conservation easement transactions. Specifically, this section examines (1) what a conservation easement is for tax purposes and how Federal tax law provides a charitable deduction for granting a conservation easement, (2) partnership tax law and why partnerships are a critical ingredient for tax shelters, and (3) the “the sham entity doctrine,” which is a common-law doctrine that says the IRS or a reviewing court does not have to respect a partnership for tax purposes if it finds the partnership exists solely for tax reasons and has little or no non-tax business reason for existing – namely, if the partnership is a sham. Section 4 discusses how syndicated conservation easements work. This includes a hypothetical example of how a landowner can get a tax deduction by granting a conservation easement on the land and forever preventing it from being developed. It also includes a hypothetical example of how the landowner’s conservation easement might look if it were similar to a syndicated conservation-easement transaction. The section ends with a discussion of how promoters of syndicated conservation-easement transactions have defended the transactions. Section 5 discusses the history of syndicated conservation easement, particularly a 2009 Tax Court case called Kiva Dunes Conservation, LLC v. Commissioner of Internal Revenue, which has since become a seminal case in the otherwise niche world of conservation easements. In that case, the Tax Court found mostly in favor of the taxpayer, which was a developer of the Kiva Dunes resort in coastal Alabama. The case involved the valuation of a conservation easement granted on the resort’s golf course, and this investigation finds that the transactions’ promoters have since been relying heavily on this case for justifying their syndicated conservation-easement transactions. Section 6 shows how the promoters of syndicated conservation-easement transactions took a seemingly complicated transaction and distilled it down to a very simple proposition to would-be taxpayer-investors. That proposition is this: for every dollar you give us to “invest” in a partnership that would grant a conservation easement on land owned by the partnership, we will provide you with between $4 and $4.40 worth of charitable deductions that you can claim on 5 your tax returns, which will reduce your tax bill by about two dollars. To put it even simpler, the promoters told their taxpayer-investors that for every dollar the taxpayer-investors paid to the promoters, they would save two dollars on their taxes. Section 7 examines the email communications between the transactions’ promoters and their taxpayer-investors, where the parties to these transactions appear to speak more directly and honestly about their reasons for participating in syndicated conservation-easement transactions. Tax-shelter promoters generally defend their transactions by arguing that the transactions are something other than what they really are, and the complicated nature of tax-shelter transactions help them shield the true nature of the transactions. But these emails provide transparency and simplicity, and they demonstrate in plain words what the transactions are really all about. The best way for a government to successfully argue against a tax shelter in court is to show the court the transaction promoters’ emails. The emails the Committee reviewed here demonstrate a significant gap between how promoters publicly characterize syndicated conservation-easement transactions and the true nature of the transactions. The promoters of syndicated conservation-easement transactions sometimes argued in their letters to the Committee that their transactions were investment vehicles that provided their investors with opportunities to partake in developing or mining land, holding the land for future investment, or granting a conservation easement on the land. The promoters went to great lengths to make it appear, on paper, that these were all viable investment options. But their emails tell a much different story, that the taxpayer-investors had no interest in a wide variety of land-investment possibilities; they just wanted to buy tax deductions. Section 8 discusses the engine of every syndicated conservation-easement transaction: an inflated appraisal. It gives an example of an appraisal used in a relatively small syndicated conservation-easement transaction that took place in Alabama, called Black Bear Enterprises. The appraiser in that transaction was a man named Claud Clark, III. Mr. Clark played a prominent role in the world of syndicated conservation easements, as the appraiser for numerous transactions, especially for transactions promoted by EcoVest Capital. The Black Bear Enterprises transaction is an important transaction because, in 2019, the regulatory body for real estate appraisers in Alabama, known as the Alabama Real Estate Appraisers Board, challenged the Black Bear Enterprises appraisal for not conforming to the proper standards of an appraisal. Rather than defend himself before the board, Mr. Clark surrendered his appraisal license in Alabama. This report’s Section 8 discusses the Alabama Real Estate Appraisers Board critique of Mr. Clark’s Black Bear Enterprises appraisal, as those critiques are helpful in understanding the appraisals and transactions that are discussed in detail in this report’s Section 9. Section 9 goes into detail about some of the syndicated conservation-easement transactions that have been promoted over the last decade, including:  First, several of the transactions promoted by EcoVest Capital in the area of North Myrtle Beach, South Carolina between 2015 through 2016. EcoVest told taxpayer-investors that this land, in a city with fewer than 17,000 people as of 2018, was quite valuable because EcoVest could have built several thousand apartment complexes, with over 40,000 new 6 bedrooms, in an area that was ten minutes from the beach and, in one case, next to a solid-waste treatment plant. In 2015 and 2016, EcoVest’s taxpayer-investors would claim approximately $919 million worth of deductions by way of conservation easements granted on 1,300 acres of land in North Myrtle Beach, reducing their Federal income taxes by about $377 million.  Second, transactions promoted by EvrSource Capital in Hamilton County, Florida in 2015 and 2016 around the bass-fishing destination known as Bienville Plantation, where the promoters said the land was worth between $45,000 and $71,000 per acre at around the same time that the new owners of the Bienville Plantation paid $274 per acre for neighboring land. These EvrSource transactions created over $156 million worth of tax deductions for their taxpayer-investors, saving them $61.8 million in Federal income taxes.  Third, a 2013 transaction known as Adam Smith Ventures promoted by a company called Webb Creek, which told taxpayer-investors that land in Clay County, Georgia – a county in one of the most impoverished areas of the United States – was prime real estate, worth over $54,000 per acre, for a senior-living facility. Because of this, Webb Creek generated $12 million worth of deductions for its taxpayer-investors in 2013, saving them about $4.8 million in taxes.  Fourth, transactions from 2015 through 2017 promoted by Ornstein-Schuler that involved reclaimed phosphate mines in Polk County, Florida, an area nicknamed “Bone Valley.” Ornstein-Schuler told its taxpayer-investors that their land was worth upwards of $164,000 per acre at a time when no one actually wanted to buy that land for even $3,495 per acre. Between 2015 and 2017, this created $288 million in deductions for OrnsteinSchuler’s taxpayer-investors, saving them over $114 million in Federal income taxes.  Fifth, transactions in Humphreys and Perry County, Tennessee, which are rural counties near Interstate 40 about one third of the way from Nashville to Memphis. Two different syndicated conservation-easement transaction promoters, Dr. Kyle Carney and Thomas Jason Free, both from Rome, Georgia, promoted their own transactions involving land they paid between $1,200 and $1,500 per acre for in the middle part of the last decade. In 2015 and 2016, however, they told investors that their lands were worth between $12,000 and $15,000 per acre because of the potential for low-density residential development. All together, these transactions generated $72.6 million in deductions for taxpayerinvestors, savings them $28.8 million in Federal income taxes. This report provides as much detail as possible, especially in the later sections, so as to offer the clearest understanding to date of how syndicated conservation-easement transactions have worked over the last decade. After this report’s conclusion, its appendix outlines the most important details of many of the transactions used with the lands discussed in Section 9. The appendix also lists the exhibits used to substantiate the findings of this report. 7 3. Relevant Law for Syndicated Conservation-Easement Transactions This section discusses the Federal tax laws governing conservation easements. The first subsection below discusses how the law permits a taxpayer to claim a deduction for a conservation easement. The second subsection discusses the Federal tax laws governing partnerships. This is important because, unlike businesses that are corporations, businesses that are partnerships are not taxed at the business level (or at the “partnership level”), but rather, the owners of the partnership are taxed directly (or at the “partner level”). In tax lingo, this means the tax effects – taxes owed, deductions and credits claimed, etc. – pass through to the partners of the partnership rather than stop at the partnership. This is critical for syndicated conservationeasement transactions to work because they exist in order to transfer a tax deduction created by a partnership down to the partnership’s “investors.” The transactions would not work if only the business could use the tax deduction. The third subsection below discusses what is known as the sham entity doctrine. This is a common-law doctrine that courts can use to disregard, or ignore, the existence of a partnership, and therefore eliminate the tax benefits that come with being a partnership, when the partnership exists solely to create tax benefits for its owners rather than carry on a real business. When this happens, the partnership is considered a sham. This is important because the partnerships discussed in this report appear to do exactly this: try to make themselves look like legitimate investment opportunities with real non-tax economic reasons for being, but in reality, appear to operate as shams designed with no other purpose than to transfer large tax deductions to their taxpayer-investors. a. Charitable Deductions, Qualified Conservation Contributions, and Conservation Easements Tax law permits an income tax deduction for charitable contributions, subject to certain limitations that depend on the type of taxpayer, the property contributed, and the type of recipient organization.8 The amount of the deduction generally equals the fair market value of the contributed property on the date of the contribution, except as specified in the Code. The donor must properly substantiate the contribution in order to claim the deduction.9 As a general matter, a taxpayer may not claim a charitable deduction for a contribution of a partial interest in property, such as a remainder interest or a grant of only certain rights to a piece of land. The Code provides an exception to this partial interest rule, however, for “qualified conservation contributions.”10 A qualified conservation contribution is a contribution of a qualified real-property interest to a qualified organization exclusively for conservation 8 26 U.S.C. § 170. 9 See 26 U.S.C. § 170(f)(8) (requiring the taxpayer to obtain a contemporaneous written acknowledgment from the donee organization) and § 170(f)(11) (imposing additional documentation and/or appraisal requirements for contributions with a claimed value in excess of $500, $5,000, and $500,000). 10 26 U.S.C. §§ 170(f)(3)(B)(iii) and 170(h). 8 purposes.11 A qualified real-property interest is defined as: (1) the entire interest of the donor other than a qualified mineral interest; (2) a remainder interest; or (3) a restriction (granted in perpetuity) on the use that may be made of the real property (i.e., an easement).12 Qualified organizations include certain governmental units, public charities that meet certain public support tests, and certain supporting organizations.13 Conservation purposes include: (1) the preservation of land areas for outdoor recreation by, or for the education of, the general public; (2) the protection of a relatively natural habitat of fish, wildlife, or plants, or a similar ecosystem; (3) the preservation of open space (including farmland and forest land) where such preservation will yield a significant public benefit and is either for the scenic enjoyment of the general public or pursuant to a clearly delineated Federal, State, or local governmental conservation policy; and (4) the preservation of an historically important land area or a certified historic structure.14 A contribution is not a qualified conservation contribution unless the conservation purpose of the contribution is protected in perpetuity and certain other requirements are satisfied.15 Conservation easements are a common type of qualified real-property interest. Essentially, a conservation easement is a legal agreement in which a landowner voluntarily gives a qualified organization the right to prevent the landowner (and any future landowners) from developing the land, subject to the terms of the easement. The landowner is said to “grant” a conservation easement to the qualified organization, which is the “holder” of the conservation easement. Under the Code, when a landowner grants a conservation easement to a qualified organization, the landowner is able to claim a charitable deduction. If the easement property is long-term capital gain property (generally, a capital asset that has been held for more than one year), the taxpayer may deduct the fair market value of the donated easement determined as of the time of the contribution.16 Under Treasury regulations, if there is a substantial record of sales of easements comparable to the donated easement, the fair market value is based on the sales prices. In the absence of a substantial record of comparable easement sales, the fair market value generally is determined by comparing the fair market value of the underlying property before it is encumbered by the conservation easement to the fair market value of the underlying property after the easement is granted.17 Under Treasury regulations, the fair market value of the property before the granting of a conservation easement 11 26 U.S.C. § 170(h)(1). 12 26 U.S.C. § 170(h)(2). 13 See 26 U.S.C. § 170(h)(3). For example, a section 501(c)(3) land trust might be a qualified organization to which a conservation easement is contributed. 14 See 26 U.S.C. § 170(h)(4). 15 26 U.S.C. § 170(h)(5)(A). 16 26 U.S.C. § 170(e)(1). Otherwise, the value of the contribution must be reduced by the amount of gain that would not have been long-term capital gain if the property contributed had been sold at its fair market value, generally resulting in a reduction to the taxpayer’s basis in the property contributed. 26 U.S.C. § 170(e)(1)(A). 17 26 C.F.R. § 1.170A-14(h)(3). 9 must take into account not only the current use of the property but also an objective assessment of how immediate or remote the likelihood is that the property, absent the [easement], would in fact be developed, as well as any effect from zoning, conservation, or historic preservation laws that already restrict the property’s potential highest and best use.18 Generally, a substantial record of sales of easements comparable to the donated easement does not exist. Therefore, the diminution in value of the property that results from placing easement restrictions on the property generally is the fair market value of the easement for charitable deduction purposes.19 The promoters of syndicated conservation easement transactions often defend their transactions by arguing the Treasury regulation discussed above, sometimes referred to as the “highest and best use” requirement, makes appraisals for conservation easements different from appraisals commonly used by purchasers of land and their lenders. For example, Robert Ramsay of the Partnership for Conservation recently wrote in the Exempt Organization Tax Review that it is a “myth” that a “conservation easement’s value cannot exceed the current value of the land.” Mr. Ramsay purported to correct this “myth” by stating, A conservation easement’s value is the value of the development rights that are forfeited in perpetuity when an easement is in place. Treasury’s own regulations require that these rights be valued based on the land’s highest and best use. When the existing state of land is different from its highest and best use, giving up the opportunity to develop the land forgoes substantial value. It is that value that the law permits as a deduction.20 The Committee is aware of this argument and agrees that the fair market value of land involves consideration of the land’s highest and best use. However, courts and the IRS have long held that where a taxpayer asserts that the highest and best use of land is different than the land’s current use, the taxpayer is obligated to demonstrate that such alternative use is reasonably probable, not simply within the realm of possibility.21 Courts have clearly stated that the concept 18 26 C.F.R. § 1.170A-14(h)(3)(ii). 19 The applicable charitable deduction percentage limits are more generous for qualified conservation contributions than for most other types of charitable contributions. In the case of an individual taxpayer, a qualified conservation contribution generally is allowed up to 50 percent of the individual’s contribution base (adjusted gross income computed without regard to net operating loss carrybacks), or 100 percent of the individual’s contribution base if the individual is a qualified farmer or rancher. See 26 U.S.C. §§ 170(b)(1)(E) and (H). In the case of a corporation that is a qualified farmer or rancher, a qualified conservation contribution generally is allowed up to 100 percent of the corporation’s taxable income. 26 U.S.C. § 170(b)(2)(B). Excess qualified conservation contributions may be carried forward 15 years. 26 U.S.C. §§ 170(b)(1)(E)(ii) and 170(b)(2)(B)(ii). 20 Ex. 4 – Robert Ramsay, A Dirty Dozen Myths About Conservation Easements and One Sad Truth, EXEMPT ORGANIZATION TAX REVIEW, May 2020, at 280. Stanley Works & Subsidiaries v. Comm’r of Internal Revenue, 87 T.C. 389 (1986), citing Olson v. United States, 292 U.S. 246 (1934) (“Elements affecting value that depend upon events or combinations of 21 10 of highest and best use is an element in the determination of fair market value, but it does not eliminate the requirement that fair market value is the amount a willing buyer would agree to pay a willing seller for the land.22 Many of the transactions reviewed in this investigation and analyzed in this report rely on this type of argument as the basis for appraisals used to establish charitable deductions claimed by taxpayer-investors. However, the transactions reviewed in this report illustrate a consistent pattern of land (or interest in a partnership holding land) sold in an arm’s length transaction, followed shortly thereafter by an appraisal asserting land values multiple times higher than the value established in that prior arm’s length transaction. This pattern clearly calls into question the accuracy of these appraisals that consistently value property many times higher than was established in prior arm’s length transactions. b. Partnerships and Other “Pass-Through” Entities i. Partnerships in General Generally, federal law treats partnerships as pass-through entities for Federal income tax purposes, meaning that a partnership generally is not subject to Federal income tax at the entity level.23 Instead, the items of income (including tax-exempt income), gain, loss, deduction, and credit of the partnership pass through to the partners in accordance with partners’ shares of the items. Partners take these items into account when computing their Federal income tax liabilities, regardless of whether income is distributed to the partners.24 A partner’s deduction for the partner’s share of partnership losses and deductions is limited to the partner’s adjusted basis in its partnership interest.25 Losses and deductions not occurrences which, while within the realm of possibility, are not fairly shown to be reasonably probable should be excluded from consideration.”). Boltar, L.L.C. v. Comm’r of Internal Revenue, 136 T.C. 326 (2011) (“The concept of ‘highest and best use’ is an element in the determination of fair market value, but it does not eliminate the requirement that a hypothetical willing buyer would purchase the subject property for the indicated value.”); Stanley Works & Subsidiaries v. Comm’r of Internal Revenue, 87 T.C. 389 (1986), citing United States v. 320.0 Acres of Land, More or Less in Monroe County, State of Fla., 605 U.S. 762, 781 (5th Cir. 1979) (“If a hypothetical buyer would not reasonably have taken into account that potential use in agreeing to purchase the property, such potential use should not be considered in valuing the property.”). 22 23 26 U.S.C. § 701. A partnership with employees is, however, subject to payroll tax (paying both the employer’s share, and withholding and paying over the employee’s share) under sections 3102 and 3111. Under section 7704, a publicly traded partnership generally is subject to tax as a corporation, but an exception from corporate treatment is provided for certain publicly traded partnerships, 90 percent or more of whose gross income is qualifying income (as defined in section 7704(d)). This qualifying income exception does not apply to any partnership resembling a mutual fund (i.e., that would be described in section 851(a) if it were a domestic corporation). 26 U.S.C. § 7704(d)(3). 24 26 U.S.C. § 702(a). 25 26 U.S.C. § 704(d). In addition, passive loss and at-risk limitations limit the extent to which certain types of income can be offset by partnership deductions (§§ 469 and 465). These limitations do not apply to 11 allowed as a result of that limitation generally are carried forward to the next year. A partner’s adjusted basis in the partnership interest generally equals the sum of (1) the partner’s capital contributions to the partnership, (2) the partner’s distributive share of partnership income, and (3) the partner’s share of partnership liabilities, less (i) the partner’s distributive share of losses allowed as a deduction and certain nondeductible expenditures, (ii) any partnership distributions to the partner, and (iii) certain deductions for depletion.26 A partner generally may receive a distribution of partnership property without recognition of gain or loss, though the basis of the distributed property and the partner’s basis in its partnership interest are adjusted to reflect the distribution.27 A partnership may allocate items of income, gain, loss, deduction, and credit among the partners, provided the allocations have “substantial economic effect.”28 In general, an allocation has substantial economic effect to the extent the partner to which the allocation is made receives the economic benefit or bears the economic burden of such allocation and the allocation substantially affects the dollar amounts to be received by the partners from the partnership independent of tax consequences.29 ii. LLCs Since 1977, States have enacted laws providing for a form of business entity known as an LLC, which is short for limited liability company.30 LLCs are neither partnerships nor corporations under applicable State law but they generally provide limited liability to their owners with respect to business obligations. Treasury regulations promulgated in 199631 generally treat any domestic nonpublicly traded unincorporated entity, such as a partnership or LLC, with two or more members as a partnership for Federal income tax purposes. The regulations also treat any single-member domestic unincorporated entity as disregarded for Federal income tax purposes (i.e., treated as corporate partners (except certain closely-held corporations) and may not be important to individual partners who have partner-level passive income from other investments. 26 26 U.S.C. § 705. 27 26 U.S.C. §§ 731 and 732. Gain or loss may nevertheless be recognized, for example, on the distribution of money or marketable securities in excess of the adjusted basis of the partnership interest (§ 731(a)(2)), or on distributions with respect to contributed property (§§ 704(c)(1)(B) and 737), or in the case of certain disproportionate distributions that give rise to ordinary income (§ 751). 26 U.S.C. § 704(b). Otherwise, the partner’s share of income, gain, loss, deduction, or credit (or item thereof) is determined in accordance with the partner’s interest in the partnership, taking into account all the facts and circumstances. Ibid. 28 29 26 C.F.R. § 1.704-1(b)(2). 30 The first LLC statute was enacted in Wyoming in 1977. All States (and the District of Columbia) have LLC statutes, though the treatment of LLCs for State tax purposes may differ between jurisdictions. 31 26 C.F.R. § 301.7701-3. 12 not separate from its owner). However, a State-law partnership or LLC may instead elect to be treated as a corporation for Federal income tax purposes. The regulations providing this election, known as the “check-the-box” regulations, were a response, in part, to the growth in popularity of LLCs. Many of the entities listed in this report are LLCs, meaning tax law may treat those companies like partnerships for tax purposes, with tax deductions created by those companies flowing directly to their “investors.” c. Sham Partnerships A basic principle of Federal tax law is that a partnership or other pass-through entity such as an LLC must have a reason for existing aside from simply creating tax benefits for its partners. Under certain circumstances, such entities may be disregarded for Federal tax purposes under what is often referred to as the sham entity doctrine. In general, under this doctrine, an entity may be disregarded for Federal tax purposes if (1) the entity does not have a non-tax business purpose, and (2) the entity does not engage in business activity.32 Moreover, under the doctrine, some courts have disregarded an entity, including a partnership, when the entity does not have a non-tax business purpose, even if the entity does, in fact, engage in business activity.33 Furthermore, two Supreme Court cases, Culbertson v. Commissioner34 and Commissioner v. Tower,35 address the circumstances in which a State-law partnership is recognized as a partnership for Federal tax purposes, and provide an intent-based test. Under this intent-based See Moline Properties, Inc. v. Comm’r of Internal Revenue, 319 U.S. 436 (1942) (“Whether the purpose be to gain an advantage under the law of the state of incorporation or to avoid or to comply with the demands of creditors or to serve the creator’s personal or undisclosed convenience, so long as that purpose is the equivalent of business activity or is followed by the carrying on of business by the corporation, the corporation remains a separate taxable entity”); see also Bollinger v. Comm’r of Internal Revenue, 485 U.S. 340 (1988); National Carbide v. Comm’r of Internal Revenue, 336 U.S. 422 (1949); Ross v. Comm’r of Internal Revenue, 129 F.2d 310 (5th Cir. 1942); Paymer v. Comm’r of Internal Revenue, 150 F.2d 334 (2d Cir. 1945). While the Supreme Court case law addresses the application of the sham entity doctrine to corporations, the sham entity doctrine has been applied by the courts and the Internal Revenue Service in evaluating whether to recognize a partnership as an entity that is distinct from one or more of its partners. See, e.g., Friedlander Corp. v. Comm’r of Internal Revenue, 216 F.2d 757 (5th Cir. 1954); Seminole Flavor Co. v. Comm’r of Internal Revenue, 4 T.C. 1215 (1945); Buffalo Meter Co. v. Comm’r of Internal Revenue, 10 T.C. 83 (1948); Campbell County State Bank v. Comm’r of Internal Revenue, 37 T.C. 430 (1961), rev’d on a different issue, 311 F.2d 374 (8th Cir. 1963); Cooper v. Comm’r of Internal Revenue, 61 T.C. 599 (1974); Masoni v. Comm’r of Internal Revenue, T.C. Memo. 1968-129 (1968); see also General Counsel Memorandum 35990 (Sept. 18, 1974) (the “principles governing when the separate identity of a corporation should be recognized also apply to determine when the separate identity of a partnership should be recognized”; “the same rules that govern whether a corporation is a viable entity separate from its creator are applied to determine whether a partnership is a viable entity. If a partnership is a sham formed solely for purposes of avoiding taxes, then the Service would not have to recognize it for federal income tax purposes.”). 32 33 See, e.g., ASA Investerings v. Comm’r of Internal Revenue, 201 F.3d 505 (D.C. Cir. 2000), aff’g T.C. Memo. 1998-305 (1998) (“[T]he absence of a non-tax business purpose is fatal.”); New Colonial Ice Co. v. Helvering, 292 U.S. 435 (1934). 34 Culbertson v. Comm’r of Internal Revenue, 337 U.S. 733 (1949). 35 Comm’r of Internal Revenue v. Tower, 327 U.S. 280 (1946). 13 test, a partnership is recognized for Federal income tax purposes only if “the parties in good faith and acting with a business purpose intended to join together in the present conduct of the enterprise.”36 In recent cases, partners have claimed partnership-allocated deductions for conservation easement contributions.37 However, courts have not yet considered whether the sham entity doctrine should be applied to the specific syndicated conservation-easement partnership structures described in this report. Generally, the transactions discussed below involved pass-through entities that formed quickly and toward the end of a tax year with multiple purported business purposes. For example, a promoter may state that the entity will choose one of three courses of future action, subject to a vote of the investors: (1) developing land, (2) holding land for investment, or (3) conserving that land in order to share the resulting tax deduction with the partnership’s investors. The third option, conserving land for the tax benefit, may be viewed as an illegitimate business purpose and could jeopardize the partnership under the sham-entity doctrine if it were the partnership’s only business purpose. By nominally considering additional non-tax business purposes (developing land or holding it for investment), promoters of these transactions seek to avoid negative treatment under the sham entity doctrine. However, as this report details, both the investors and promotors in these transactions share an understanding that the partnership is organized exclusively for the potentially illegitimate purpose of syndicating tax benefits. In every case, investors in the partnerships voted overwhelmingly to grant a conservation easement on the land for the tax benefits. Section 9 discusses these and other similar facts in greater detail below. 36 Culbertson v. Comm’r of Internal Revenue, 337 U.S. 733, 742 (1949). See, e.g., PBBM-Rose Hill, Ltd. v. Comm’r of Internal Revenue, 900 F.3d 193 (5th Cir. 2018); Coal Property Holdings, LLC v. Comm’r of Internal Revenue, 153 T.C. 7 (2019); Palmolive Bldg. Investors, LLC v. Comm’r of Internal Revenue, 149 T.C. 380 (2017); Belk v. Comm’r of Internal Revenue, 140 T.C. 1 (2013); TOT Property Holdings, LLC v. Comm’r of Internal Revenue, T.C. No. 5600-17 (Dec. 13, 2019). 37 14 4. How Do Syndicated Conservation-Easement Transactions Work? In general, the syndicated conservation-easement transactions described in this report involve high-income individuals purchasing large charitable deductions in order to shelter income from Federal and State tax. Specifically, taxpayers buy an interest in a pass-through entity, such as a partnership, that owns real property (or, more commonly, owns another passthrough entity that owns the property) based on promotional materials advertising a specified amount of tax deductions in exchange for the purchase price. Once the promoter of the transaction has sold all the available interests in the partnership, the entity places a conservation easement on the land and grants it to a tax-exempt organization, usually known as a land trust, which is nominally a charity that is supposed to make sure the land stays undeveloped forever. Using an inflated appraisal to claim the lost value of the land, because of the easement, is greater than it actually is, the investors then claim a charitable-contribution deduction on their income tax returns for granting that easement. By their nature, tax deductions are not profitable unto themselves. The ability to deduct from gross income a dollar spent should only provide the taxpayer with a value less than that dollar spent, namely the amount of tax he or she did not have to pay on that dollar of income. But that unpaid amount of tax is still less than the dollar spent to get that dollar’s worth of deduction. If a taxpayer’s top income tax rate is 37 percent and she gives a dollar to a charity, the taxpayer gets to deduct that dollar as a charitable deduction (assuming she itemizes her deductions rather than takes the standard deduction), so she saves 37 cents in taxes. But she is still poorer by one dollar – she gave it away to charity – even if she is richer by 37 cents, giving her an overall loss of 63 cents. When done properly, this principle also should apply to conservation-easement deductions. If a farmer owns land that has been in his family for generations, meaning he paid nothing for it, and he does not want his children to develop that land after he passes away, the farmer can grant a conservation easement on the land. If the pre-easement value of the land is $1 million because of its development potential, but only worth $100,000 after the easement when that land can no longer be developed, the farmer gains up to $333,000 in a reduced tax bill ($900,000 diminution in land value multiplied by the farmer’s top tax rate, perhaps 37 percent under current law, with limitations on how much can be deducted each year). On the surface it might look like the farmer gained $333,000 by way of land he paid nothing for, but in reality the farmer is still economically poorer than he otherwise would have been before granting the easement. Economically speaking, he lost $900,000 by taking land that was worth $1 million and chopping its value down to $100,000. No rational taxpayer would give up $900,000 in value to reduce a tax bill by $333,000. The farmer would grant the easement for a purpose different than financial profit, namely a non-economic desire for the land to stay undeveloped forever. Syndicated conservation-easement transactions turn this principle on its head. They use inflated appraisals to achieve deductions, making the transactions financially profitable to taxpayers. In the syndicated conservation-easement transactions reviewed in this investigation, taxpayer-investors purchased nominal interests in land that came with inflated appraisals based on development or mining potentials of that land – potentials that never actually bore fruit. The 15 promoters pitched the transactions as investments in land with substantial economic potential, but it does not appear those promoters ever intended for the land to profit their investors aside from the creation of tax benefits. The promoters typically substantiated tax deductions by procuring an inflated appraisal to say the land has substantial development potential and is therefore worth a lot, grant a conservation easement on the land, then get another appraisal (generally in the same document as the first appraisal) to say how little the land is worth after granting the easement. This before-and-after difference in value is the manufactured charitable deduction that is shared among the “partners” (or “members”) in the “investment.” To apply this situation to the hypothetical farmer discussed above, if that farmer were to get an aggressive appraiser to say – fraudulently – his land, which is really worth $1 million, is actually worth $10 million for tax purposes, and then grant a conservation easement on that land, that would actually be more profitable for the farmer than selling the land. In that case, the farmer fraudulently represents that a conservation easement granted on the land would be worth the difference between $10 million and $100,000, or simply $9.9 million. If the farmer claimed that conservation-easement value as a charitable deduction (again, fraudulently), he would save up to $3,663,000 ($9,900,000 multiplied by a 37-percent tax rate) in taxes even though he could not have actually sold the land for more than $1 million.38 And if that were the case, it would essentially mean the federal government paid $3,663,000 in the form of foregone tax revenue to conserve land that would have only cost the government $1 million to buy outright. This is a simplified example of how the transactions reviewed in this report and discussed below benefited promoters and taxpayer-investors, except that the taxpayers are high-income individuals in seemingly sham partnerships looking to get a piece of that $9.9 million deduction. EcoVest Capital claims their syndicated conservation-easement transactions should be viewed in a different light. They claim their transactions are vehicles for encouraging conservation by landowners who have valuable land that might be worth preserving but not a lot of income and therefore not a large need for a charitable deduction. By sharing the charitable deduction with high-income individuals who buy an interest in the land, that charitable deduction is spread around among taxpayers who can use the deduction to shelter their income from taxation, and the landowner has greater incentive to conserve the land. An EcoVest promotional document drafted by the law firm Sirotte & Permutt, PC describes the benefits of syndicating the transaction this way, with a different take on the farmer example: Conservation Easement and Real Estate Partnerships The use of partnership structures can allow, under the right circumstances, the maximum use of the tax benefits attributable to a conservation easement donation. This results in allowing preservation of land that might not be otherwise protected. 38 Charitable deductions for conservation easements cannot reduce adjusted gross income by more than 50 percent in any given tax year. This example assumes the farmer is quite wealthy, having an adjusted gross income for the year of at least $19.8 million. 16 Many landowners are not able to take advantage of a deduction for a conservation easement on their property because they lack sufficient income. However, there are high-income taxpayers willing to invest in land owning entities if they can receive the benefit of a conservation easement deduction. This matching of interests allows preservation of the land on terms satisfactory to all and increases the amount of land preserved by fully utilizing the tax incentives of section 170(h). For example, this may occur if, after the investment is made by the high-income taxpayer, the entity chooses to donate a conservation easement on the property and forego other options available to it. The charitable deduction resulting from the conservation easement would then be allocated to the current owners of the land owning entity, which would include the high-income investor. Thus, the tax incentive for conservation easements found in Section 170(h) will achieve its purpose by encouraging the donation of a conservation easement on property and by protecting the conservation values Congress wants to preserve in perpetuity for future generations. These transactions can be complex, but they are designed to allow the tax incentives of Section 170(h) to be used as Congress originally intended. Below is an example of how this works. Assume that Mr. Jones … owns the property with his son, Casey, in a partnership, and assume that Mr. Jones and Casey each have an annual adjusted gross income of only $50,000. If Mr. Jones and Casey were to donate a conservation easement over their property, they would likely be unable to fully utilize the $9 million deduction attributable to an easement donation[, which reduced the property’s value from $10 million to $1 million,] because of the deduction limitations discussed above (Mr. Jones and Casey would each be limited to deducting $25,000 of the $9 million deduction in the year of donation, and roughly the same amount for each carryover year afterward.) However, if Mr. Jones and Casey admitted other high-income investors into their partnerships by selling them LLC interests, and the partnership subsequently elected to donate an easement over the property, the investors would be able to share in the deduction. Thus, the partnership structure, and the admission of additional partners, can enable the tax benefits attributable to a conservation easement donation to be fully utilized.39 This example begs certain questions that are critical to this example working as a syndicated conservation-easement transaction. First, is the land really worth $10 million if Mr. Jones and Casey were willing to sell interests in their land-holding partnership for an amount far less than $10 million? According to the Joint Committee on Taxation’s General Explanation of Tax Legislation Enacted in 2015, Congress did not intend for the value of a conservation Ex. 5 – Ronald Levitt and David Woolridge, Sirotte & Permutt PC, Conservation Easement Overview (2013), at 5 (ex. p. ECOVEST-SF_0105665) (emphasis original). 39 17 easement to exceed the fair market value of the land, as “[t]he amount of [the] deduction generally equals the fair market value of the contributed property on the date of the contribution.”40 In order for the high-income “investors” to make a profit from the deduction created in this example, they would have had to pay far less than $10 million for their combined ownership interests in the property. And if they did that, was the property really worth $10 million? Second, did these investors have a non-tax reason for entering into the partnership? If not, the partnership risks being considered a sham in which case a reviewing court would deny the investors their tax deductions. In September 2017, a lawyer named Michael M. Smith at the Baker Donelson law firm described on a webcast the structuring of syndicated conservation-easement transactions, and the partnerships necessary for them to work, in this way: Generally speaking – and a lot of these deals are structured the same – is, you’ve got a property-owning entity, which is structured as a pass-through entity, which could be a partnership, a limited-liability partnership, an LP, LLC, S corps in some situations, as well as an investment vehicle, which is what we call “InvestCo,” or the company that actually undergoes private placement offering to outside investors. Following the private placement offering and closing of it, the normal structure is that the investment vehicle acquires a controlling interest in the property-owning entity through some type of membership-interest purchase agreement, membership-unit purchase agreement, contribution agreement – I mean, there’s a number of different forms that this takes, but generally speaking, it’s an acquisition of a controlling interest, and we’re always using pass-through entities so that the deductions flow upwards to the investors. The thing that I like that I want to point out about this slide is that, even though a lot of the investors have participated in these transactions are participating for tax-planning purposes, we do very – we’re very mindful about how we structure these transactions. Even though Bill noted that we talked in the hypothetical with a lot of these transactions, and case law supports that, the best deals that we can put together is when there is an absolute viable business purpose, and there’s an alternative for investors participating in the offering. So, you normally will see is after the— sometime after the closing of the private placement offering, the decision is made at the investor level on what to do with the property, and sometimes it is to conserve the property. But other times it could be to hold for long-term investment or actually do— move forward and pursue the development activity, and that’s why we, a lot of our clients put a lot of emphasis on this, because the better the situation is, not only does it support the value but also 40 Joint Committee on Taxation, General Explanation of Tax Legislation Enacted in 2015 (JCS–1–16), March 2016, at 121. 18 supports things like having true and separate economic substance in the partnerships. So that’s one thing I want to point out.41 This emphasized portion of the transcript raises the question of whether promoters created the transactions to include non-tax business purposes or whether the promoters created the transactions to look like they had non-tax business purposes. The facts surrounding the purported business purposes in the transactions discussed in Section 9 indicate the latter. William M. Osterbrock, Baker Donelson, Webinar Presentation – Current Issues Concerning Charitable Gifts of Real Estate (Sep. 28, 2017), https://www.bakerdonelson.com/current-issues-concerning-charitable-giftsreal-estate (beginning at approximately 43:13, last visited May 13, 2020) (emphasis added), see audio recording at Ex. 6 and accompanying presentation slide at Ex. 6.1. 41 19 5. History of Syndicated Conservation-Easement Transactions Kiva Dunes is a beach resort on Alabama’s Fort Morgan peninsula separating Mobile Bay and Bon Secour Bay to the north, and the Gulf of Mexico to the South. Its website describes it as “a mile of sugar-white private beachfront” that includes a “full restaurant and bar with breathtaking views of the Gulf of Mexico, and the only resort offering food and drink service on the beach.”42 It is also home to an 18-hole golf course designed in 1995 by professional golfer Jerry Pate, a course that claims awards such as “Top 100 Gold Resorts by GolfWeek” and “No. 1 Public Golf Course in the state by Golf Advisor.”43 In addition to being a picturesque golf venue, the Kiva Dunes Golf Course also holds an obscure distinction in the history in U.S. tax controversy. It is bound by a conservation easement that was the first conservation easement involving a golf course to go to trial against the IRS, a seminal case in the otherwise niche world of syndicated conservation-easement transactions. Bill Sylvester, a tax lawyer in the Birmingham, Alabama office of the Baker Donelson law firm, describes the genesis of the Kiva Dunes conservation-easement transaction like this: “I’ve been involved with conservation easements since 2002. A now-deceased stock broker from Birmingham, Alabama met a fellow from Columbia – no Charleston, South Carolina when they were boat fishing in the Virgin Islands and they had a good conversation about: was there a way to transfer interest in a good conservation-minded property to someone with a higher tax bracket? The wouldbe client brought that to our office when he returned, and over a weekend I looked at the Subchapter K and 170(h) rules and came up with the plan that ultimately resulted in the Kiva Dunes transaction later that year. And also we did another golf course, so I’ve had – this has been a part of my practice since then, and it’s very enjoyable.”44 Seven years later, the IRS challenged the developer of the Kiva Dunes Golf Course in Tax Court, alleging the taxpayer overvalued the contribution from that conservation easement.45 In 2002, the taxpayer claimed a deduction of $30,588,235 for a conservation easement on the Kiva Dunes Golf Course granted on December 31, 2002. Essentially, in that case, the developer argued that by forever preventing itself from developing homes on its golf course, it suffered a loss in value in that land and therefore was entitled to a corresponding charitable deduction. The developer’s appraiser and expert witness in the case, Mr. Claud Clark, III, who had decades of 42 Kiva Dunes, at https://www kivadunes.com/. 43 The Kiva Dunes Golf Course, at https://www.kivadunes.com/golf/ 44 William R. Sylvester, Baker Donelson, Webinar Presentation – Current Issues Concerning Charitable Gifts of Real Estate (Sep. 28, 2017), https://www.bakerdonelson.com/current-issues-concerning-charitable-giftsreal-estate (beginning at approximately 2:32, last visited May 13, 2020), see audio recording at Ex. 7 and accompanying presentation slide at Ex. 7.1. 45 Kiva Dunes Conservation, LLC v. Comm’r of Internal Revenue, T.C. Memo. 2009-145, *1-2 (June 22, 2009). 20 experience in the Kiva Dunes area according to the Tax Court, estimated the golf course was worth approximately $32 million, prior to its conservation easement, because of its pre-easement potential for residential development.46 The IRS’ appraiser estimated that pre-easement value at only $10 million.47 In their analyses, both appraisers looked to comparable sales as well as using what is known as a discounted cash flow analysis, which is a determination of value based on estimated costs and revenues associated with developing the land.48 After making a relatively small downward adjustment to the charitable deduction allowed, the Tax Court agreed with Mr. Clark’s appraisal and found for the taxpayer in Kiva Dunes. In a footnote, the Tax Court emphasized the desirability of the Kiva Dunes land as justifying a pre-easement premium: “With Kiva Dunes Golf Course sitting on one of the most beautiful stretches of coastline in the United States, a willing buyer and a willing seller would necessarily anticipate a premium price for the property.”49 In the decade that followed, promoters of syndicated conservation-easement transactions invoked that Kiva Dunes opinion as the legal basis for similar transactions involving highly inflated appraisals. For example, in December 2017, a would-be investor named David emailed his attorney asking about the legitimacy of an EcoVest-sponsored conservation-easement transaction known as Azul Bay, which David was “investing in … personally as a tax shelter.”50 That email developed into a thread between David, one of his attorneys who expressed skepticism about the transaction’s land valuations, and an investment advisor named David Mirolli who helped promote the transaction to David. Mr. Mirolli defended the transaction’s land valuation by invoking the Kiva Dunes case: “[A] conservation easement appraisal is very different from a normal real estate appraisal since it takes in to account all future economic benefit on the land and takes future value discounted to present day. Claude Clark [sic] of Clark Davis Appraisal has the most experience of any conservation easement appraiser in the country with over 500 CE appraisals to his credit. Claude has been tested under fire with the tax courts particularly in the Kiva Dunes case in [sic] known to be a huge victory for conservation easements.”51 46 Id., *9-10. 47 Id., *10. 48 Id., *10, 14-16. 49 Id., *11 n.9. Ex. 1 – Email from David [REDACTED] to Robert [REDACTED] (Dec. 7, 2017, 5:09:23 PM), at ex. p. ECOVEST-SF_0308689. 50 51 Ex. 1 at ex. p. ECOVEST-SF_0308687. 21 the promoters offered conservation-easement transactions on land that could not sell at anywhere near the prices they said it was worth. Since then, promoters of syndicated conservation-easement transactions have been relying on the Kiva Dunes opinion to aggressively market such transactions involving inflated appraisals for lands that often appear to have questionable commercial values, at least at the values claimed by the promoters. 23 6. Promotion of Tax Benefits Imagine walking up to a vending machine with a sign on it that read, “The Dollar Machine.” Instead of selling sodas or candy for a small amount, this supposed Dollar Machine offered to give you two dollar bills back for every dollar bill you inserted. This would be a simple, 100-percent return on investment, virtually guaranteed. It would not be subject to market forces, such as how well the overall economy is doing, or how well the housing market is doing, or how well the stock market is doing. You would not have to do an economic risk/reward analysis of any kind, such as whether you want to buy a share in a startup company that might skyrocket in value but might also go bankrupt in sixth months. Your dollar investment would not be subject to credit risk, such as the chance of your borrower failing to pay you back on the loan you made to him or her. There would be no defaulting of any kind; the Dollar Machine is definitely giving you two dollars back. You simply insert the dollar bill and then watch the Dollar Machine return two dollar bills to you. No rational investor would skip this kind of chance to double his or her money, but the skeptical ones would probably think it is too good to be true. This is essentially what promoters of syndicated-conservation easement transactions promised their taxpayer-investors every year: for every dollar you give us, you will get back two dollars, sometimes a little more and sometimes a little less. But it was not the promoters who gave back the two dollars; it was the Federal government by way of foregone tax revenue, and the only risk involved was whether or not the transaction would lead to an audit. Documents received in this investigation showed how promoters made clear to U.S. taxpayers that participating in a syndicated conservation-easement transaction would lower their tax obligations significantly. According to slide-deck language that promoters Matt Ornstein and Frank Schuler of Ornstein-Schuler would reuse for a variety of transactions, “For every $1.00 contributed to Investco, the new member would receive a charitable deduction of approximately $4.39 ($4.38596 to be exact) that should save the member approximately $2.00 in taxes.”53 Ex. 9 – The 2015 Information Package for FG River Partners LLC, Conservation Saves LLC & Galt Mining Investments, LLC, at 13 (ex. p. HK_SFCSubpoena_000029444). 53 24 The ratio was always almost exactly 2:1. For every “unit” a taxpayer-investor “subscribed” to, at a cost of $27,000, he or she would save slightly more than twice that, $54,441 in taxes. Everything about these transactions were designed to create a tax deduction that would save the taxpayer-investors two dollars for every dollar they gave the promoter. 30 7. Communication of Tax Benefits The Committee on Finance requested and subpoenaed copies of emails exchanged between transaction promoters and their taxpayer-investors in order to fully understand the nature of the transactions at issue in this investigation. Generally, those emails make clear that taxpayer-investors were exclusively interested in receiving tax deductions by participating in the transactions. The emails did not reflect any investor interest in developing land or holding it for investment. This report redacts the last names of taxpayer-investors, non-owner employees of promoters, and third parties, such as the taxpayers’ advisors, as well as their identifying information. Where revealing even just the first name might identify an individual, the individual’s first initial is used, and spouses’ first names are redacted to reduce the risk of identifying couples by their first names together. a. EcoVest Capital Emails As partially discussed above, on December 7, 2017, a taxpayer named David sent an email to his attorney named Rob asking Rob’s opinion about a tax shelter promoted by EcoVest Capital called Azul Bay. David wrote, “I’m investing personally in this as a tax shelter. Can someone from your firm review to check its legitimacy prior to me wiring the funds? Lauren from [REDACTED] approved it with some caveats, but I want a legal perspective. I’ll send you the emails describing the ‘investment.’”61 Rob forwarded the inquiry to his partner Tom, who then responded to both with the following advice: I would steer clear of this. It is a ‘syndicated conservation easement’ tax shelter deal. These have been labeled tax avoidance transactions by the IRS, and are ‘listed transactions.’ An audit is guaranteed. And the odds are heavily in favor of the IRS prevailing. How do you justify paying less than $3 million for a property that an appraiser says is worth $81 million, with a conservation easement worth $78 million?62 Ex. 1 – Email from David [REDACTED] to Robert [REDACTED] (Dec. 7, 2017, 5:09:23 PM), at ex. p. ECOVEST-SF_0308689. 61 62 Id. at ex. p. ECOVEST-SF_0308688. 31 About a month earlier, a taxpayer-investor named John exchanged emails with EvrSource’s Chip Pearson asking how much John should pay into a syndicated conservationeasement transaction in order to reduce his tax bill as much as possible, keeping in mind that under then-existing law a taxpayer could only deduct 30 percent of his or her adjusted gross income (referred to as “AGI” in the emails). At the time, there was the possibility of Congress increasing that limit to 50 percent, which eventually did happen at the end of 2015.75 This is how that discussion unfolded. John to Chip Pearson: I hope all is well. I should know my AGI in about 2-3 weeks. What is the multiplier you guys are using for this one?76 Chip Pearson to John: Thanks John – let me know asap so I reserve you a spot – 4.4 multiple. Thanks. cp77 John to Chip Pearson: So I should divide my projected AGI by 4.4 to get investment amount? Thanks78 Chip Person to John: The eligible amount currently is 30% og [sic] AGI. It may go to 50% before year end (like last year) but for now only 30. So example would be $300’ AGI, 30 percent would be $100, divided by 4.4 equals $22,730.00.79 75 At the time, the temporary increased limit of 50 percent of adjusted gross income for qualified contributions (100 percent in the case of contributions of farm property) had lapsed, although Congress retroactively made the enhanced deduction permanent at the end of 2015. Ex. 22 – Email from John [REDACTED] to Chip Pearson, EvrSource Capital (Nov. 11, 2015, 12:20 PM), at ex. p. SENATE_FINANCE-0009263. 76 77 Id., Email from Chip Pearson, EvrSource Capital to John [REDACTED] (Nov. 11, 2015), at ex. p. SENATE_FINANCE-0009263. 78 Id., Email from John [REDACTED] to Chip Pearson, EvrSource Capital (Nov. 11, 2015, 1:27 PM), at ex. p. SENATE_FINANCE-0009263. 79 Id., Email from Chip Pearson, EvrSource Capital to John [REDACTED] (Nov. 11, 2015, 1:49 PM), at ex. p. SENATE_FINANCE-0009263. 41 amount needed to deduct all of that income (“should divide my projected AGI by 4.4 to get investment amount”), which would theoretically eliminate his taxes owed if there were no limit on charitable deductions. Chip Pearson then tells him he can only deduct 30 percent of his income, and perhaps 50 percent. The math is this with a hypothetical $300,000 adjusted gross income: $300,000 * 30 percent / 4.4 = $20,454.55 (while on his BlackBerry, Chip Pearson incorrectly writes to John that 30 percent of $300,000 is $100,000, thus leading to his incorrect hypothetical investment amount of $22,730). This email fails to show discussion of any non-tax business purposes. If an investor were really considering investing in a partnership that sought a profit by developing homes and selling them to the general public, the investor’s decision on how much to invest would be tempered by a simple risk-adjusted return analysis. How much does the investor think the investment might pay off, and how does that compare to what the investor is afraid of losing if the development fails? In syndicated conservation-easement transactions, there is no need for that analysis because there is no economic or market risk, just risk of a tax audit. Assuming the taxpayer does not fear the IRS disallowing the transaction, the only limits then for “investing” in syndicated conservation-easement transactions are the limits on how much adjusted gross income taxpayers could deduct in any given year. c. Ornstein-Schuler Emails Emails produced by Ornstein-Schuler in response to committee subpoenas also show their syndicated conservation-easement transactions were quick ways for upper-income taxpayers to shelter income from tax. Those emails, however, involved language from the promoters to the taxpayer-investors that tried to drive home to the taxpayer-investors that simply buying a deduction, which is what they were doing, would have been a sham. Whenever taxpayer-investors contacted Ornstein-Schuler to request participation in a syndicated conservation-easement transaction, always for tax-deduction purposes, Matt Ornstein reminded them with stock language that deductions could not actually be purchased, even though that was exactly what Ornstein-Schuler was selling to them. 43 However, by July 7, 2015, less than two months later, when Shelly wrote back to Matt Ornstein, “Just checking in with you on timing for a 2015 Easement. Is there anything currently available for us to contribute this year?”87 Matt Ornstein wrote back with a slightly new signature block that no longer made it entirely clear that he was in the business of selling conservation-easement transactions: 87 Id., Email from Shelly [REDACTED] to Matt Ornstein (July 7, 2015, 7:53 AM), at 1 (ex. p. HK_SFCSubpoena_000202606). 50 Thereafter, Mr. Ornstein and his other colleagues offered this stock language in emails to their taxpayer-investors who made clear by their own email communications that they only wanted to buy tax deductions. d. Other Promoters’ Emails This investigation involved reviewing hundreds of additional emails, which generally repeated the subjects discussed above. The transaction promoters were selling tax deductions, and their taxpayer-investors were buying them. The investigation did not uncover a single email from a single promoter, responding either voluntarily or to a subpoena, that reflects a taxpayer’s primary interest being the development of land, and this investigation did not uncover a single email that a reflected a taxpayer’s primary interest being the conservation of land. 52 8. Inflated Appraisals At first glance, most tax shelters appear to involve an overwhelming level of financial detail with seemingly endless transaction documents and tremendous complexity. With syndicated conservation easements, there are draft appraisals, final appraisals, product placement memoranda, operating agreements, management agreements, baseline reports, and numerous other documents that create an air of serious financial dealing. But all tax shelters share a similar feature, which is that the seemingly complicated details are really ancillary to the true nature of the deal, and each tax shelter at its core is a simple transaction with no more than a couple simple elements that defy economic reality and make the deal profitable. The beneficiaries of those elements are always the promoters and their taxpayer-investors who symbiotically gain at the expense of the public fisc. With syndicated conservation easement transactions, that element is always the same: an inflated appraisal saying any given piece of land has substantial development or extraction potential, thus giving taxpayer-investors large charitable deductions after they grant conservation easements on the land and prevent it from actually being developed or extracted. In this investigation, the same appraisers often appeared again and again on appraisals used in the transactions. Based on analyses of transaction reports filed under IRS Notice 2017-10, the IRS identified approximately 25 appraisers who provided appraisals for all reported conservation easement transactions reported in 2016.89 One name that arose frequently in this investigation was the star of the Kiva Dunes case, Claud Clark, III. Since his work as the expert-witness appraiser for the taxpayer in Kiva Dunes, Claud Clark has continued to attract attention from government officials but not always in a positive way. In late 2018, the U.S. Department of Justice filed a lawsuit against Mr. Clark and others seeking to prevent him from issuing future appraisals involving syndicated conservation easements. DOJ’s lawsuit alleged Mr. Clark “[c]ontinually and repeatedly … relied upon inappropriate assumptions, utilized inappropriate methodology and used various techniques to improperly inflate the value of … conservation easements.”90 A couple weeks later, on January 11, 2019, Ms. Lisa Brooks, the Executive Director of the Alabama Real Estate Appraisers Board, executed a summons commanding Mr. Clark to appear at a hearing before that Board and answer to a four-count complaint against him.91 The complaint alleged one of Mr. Clark’s appraisals – a conservation easement on 579.79 acres of non-consecutive sections of land in Saraland, Alabama owned by an entity known as Black Bear Enterprises – violated Alabama law by willfully disregarding real-estate appraisal standards.92 Ex. 2 – Letter from David J. Kautter, Acting Commissioner, Internal Revenue Service, to Orrin G. Hatch, Chairman, U.S. Senate Committee on Finance, United States Senate (July 12, 2018). 89 90 United States v. Nancy Zak et. al, 1:18-cv-05774-AT (N.D. Georgia), Doc. 1 at 55. Ex. 26 – In re Claud Clark, III, State of Alabama Real Estate Appraiser Board, AB 16-15, Summons and Notice of Hearing and Complaint (Jan. 11, 2019). 91 92 See generally id. 53 Rather than challenge the Alabama Real Estate Appraisers Board complaint against him, Mr. Clark announced to the Board that he would surrender his appraisal license in Alabama. He did not admit to any of the violations the Board alleged against him and his work on this one appraisal.93 With the help of an outside advisor that performed a review of Mr. Clark’s Black Bear Enterprises appraisal, the Board alleged well over one hundred such violations. Some of the most prominent alleged violations included the following:           Primarily relying on a Discounted Cash Flow Analysis (DCF) method – essentially, asking how much money can the property make for the developer once it is developed – for valuing the property before a conservation easement is granted, rather than primarily relying on comparable sales for determining this value using DCF merely as support for that valuation (Notice of Hearing and Complaint at 2-3, 13), Overstating value by not deducting costs associated with the time necessary to approve, construct, market, and sell developed homes (Notice of Hearing and Complaint at 3, 14), Failing to include evidence of market demand for developed homes (Notice of Hearing and Complaint at 3, 14), Failing to include data on economic, jobs, population, and household growth (Notice of Hearing and Complaint at 3, 13), Falsely stating that no comparable sales could be found to help value the property before granting easement but then incorporating comparable sales for valuing property after granting easement, including sales from other states (Notice of Hearing and Complaint at 3-4, 14), Assuming economic feasibility of building extensive access roads to support noncontiguous development while possibly crossing wetlands and floodlands (Notice of Hearing and Complaint at 3, 13), Failing to consider availability of and costs associated with extending sewers and public utilities to the property (Notice of Hearing and Complaint at 5, 14), Failing to consider wet-soil issues (Notice of Hearing and Complaint at 4), Failing to support claims that developments have necessary approvals (Notice of Hearing and Complaint at 4), and Falsely claiming property is accessible from multiple public roads (Notice of Hearing and Complaint at 4).94 In the Black Bear Enterprises appraisal, Mr. Clark valued the property as if it could accommodate a residential development, that is, before granting a conservation easement on the Ex. 27 – In re Claud Clark, III, State of Alabama Real Estate Appraiser Board, AB 16-15, Voluntary Revocation Consent Order (May 16, 2019). 93 94 See generally id. 54 DCF presented appears to overstate value due to lack of deducting time to approve, construct, market and close lot sales. Minimal evidence of demand via absorption in comparable subdivisions and no specific economic, (jobs), population and household growth was presented. The report states that a search was undertaken for appropriate “before” land sales and “did not find any.” This is inconsistent with the data presented on comparable residential subdivisions active in the local market which would indicate past sales of these properties.101 The outside advisor also critiqued Mr. Clark’s optimistic language about the economic viability of developing homes on the land, questioning his quotations and data as follows: p. 65 says “Demand in the City of Saraland for the developed residential properties appears to be on the rise.” This statement is not supported in the report by any clear jobs, population or household trends. p. 66 says “Competing developed properties have sold out or are enjoying strong sales.” The subject is raw land where roads and public utilities don’t exist. It is not comparable to “developed properties.” P. 67 Presents statistics in a Market Profile which indicate that as of 2013, there is an excess supply of 390 dwelling units. Population 13,803 /2.51 persons per household = 5,500 households (demand). There are 5,890 housing units = 390 units market oversupply. p. 70 Has charts of sold units in four competing subdivisions. The total sales for all four have been 26 to 33 per year over the past three years (demand). The supply via expected new building permits is expected to double the 2013 building permits which were approximately 39. There is no demand increase.102 Similar patterns are common in appraisals reviewed as part of this investigation. Such appraisals are the engines of syndicated conservation-easement transactions, giving power to a deduction that otherwise would not be profitable for a participating taxpayer-investor. The next section goes into the details of some of the syndicated conservation-easement transactions reviewed in this investigation. 101 Id. at 7-8. 102 Id. at 22. 56 9. Transaction Details a. EcoVest and North Myrtle Beach By June 2011, the city of North Myrtle Beach, South Carolina had agreed to annex into its city limits approximately 1,647 acres of undeveloped land owned by four different companies that were each partially owned by Ralph Teal, Jr. The city’s interest in the annexation stemmed from the future tax revenue that development might generate, as Mr. Teal petitioned for the land to be zoned for residential and commercial development.103 One city councilmember understood the point of the annexation and rezoning to be for “commercial and high-density residential…. It was a logical growth area for residential communities.”104 However, during this process, city officials developed a suspicion that Mr. Teal might not develop the property, but rather, might place conservation easements on the land, forever preventing its development. According to local news reports at the time, one city spokesperson stated, “If [Mr. Teal’s company] Sandridge LLC is allowed to have the option to place its land under a conservation easement, there is the real risk that the land will never be developed, and its annexation into the city would be pointless.”105 Ultimately, Mr. Teal validated the concerns of the North Myrtle Beach officials, as the majority of this land is now encumbered by conservation easements. Ralph Teal, Jr., is also one of the two directors of EcoVest Capital, which is one of the nation’s most prominent syndicators of conservation-easement transactions. EcoVest describes itself on its website as “a next generation real estate company … [that] believe[s] that development opportunities should not be judged on economic viability alone, but that the responsible use and preservation of natural resources should be equally considered.”106 The EcoVest website lists Mr. Teal as having been a home seller and homebuilder generally in the southeast region since the 1980s,107 but by the last decade his interest in North Myrtle Beach real estate focused on tax shelters rather than homes. In 2015 and 2016, Mr. Teal and EcoVest used approximately 1,300 acres of North Myrtle Beach land to generate over $919 million dollars of charitable tax deductions for taxpayer-investors by placing conservation easements on that land. They did this by claiming the 1,300 acres of land – once subdivided among 17 different passthrough entities for taxpayer-investors to invest in – was worth a collective $950,976,576, or David Weissman, Behind North Myrtle Beach’s failed growth plan, and its link to $2 billion tax fraud case, Myrtle Beach Sun News (June 14, 2019), at https://www.myrtlebeachonline.com/news/local/article231401118.html; see also, North Myrtle Beach Planning Commission Meeting Agenda, May 17, 2011, available at http://www.nmb.us/files/pdf/uploads/agendaMinutes/306-17%20May%20Packet.pdf. 103 104 David Weissman, Behind North Myrtle Beach’s failed growth plan, and its link to $2 billion tax fraud case, Myrtle Beach Sun News (June 14, 2019), at https://www.myrtlebeachonline.com/news/local/article231401118.html. 105 Id. 106 EcoVest Capital, Our Purpose, at http://ecovest.com/our-purpose (last visited May 13, 2020). 107 EcoVest Capital, http://ecovest.com/our-team/board-of-directors/ralph-teal/ (last visited May 13, 2020). 57 The first two sentences of this quote are identical to the phrasing used in the Black Bear Enterprises appraisal, the only difference being the name of the land. After granting a conservation easement on the Azalea Bay Resort land, the property would only be worth $2,816,950, or $10,456 per acre, according to Mr. Clark.112 The difference between the “before” value of the land and its “after” value would create over $43 million worth of tax deductions for its taxpayer-investors, based on what appears to be boilerplate language copied from an appraisal of a different piece of property. Those investors, 80 in total,113 did not pay anywhere near the $48 million for that land that Claud Clark said it was worth, pre-easement. Instead, they collectively paid $3,749,678.02 for a 94.5-percent ownership in the company that owned the land, meaning the investors essentially valued the land as being worth $3,967,913.25, or $14,728 per acre.114 The facts surrounding the transaction make clear that no taxpayer-investors expressed interest in developing or investing in real estate. The transaction closed to taxpayer-investors on August 21, 2015.115 Those 80 taxpayer-investors voted 706 in favor of granting a conservation easement on the land, 0 votes in favor of developing it, and 0 votes in favor of holding the property for future investment.116 EcoVest provided taxpayer-investors with a spreadsheet that let them calculate how much they would save in taxes by granting the conservation easement.117 Less than two weeks before a charitable deduction could no longer be claimed on taxpayer-investors’ 2015 tax returns, the company granted on December 22, 2015, a conservation easement on the land, allocating $42,987,100 worth of tax deductions to taxpayer-investors.118 EcoVest earned nearly $1.5 million in fees for executing the transaction.119 112 Id. at 2-3 (ex. p. ECOVEST-SF_0002316-17). Ex. 15 – Letter from Sean M. Akins, Partner, Covington & Burling LLP, to John L. Schoenecker, Senior Investigative Counsel, United States Senate Committee on Finance (June 21, 2019), at 16. 113 114 Ex. 32 – Assignment and Assumption of Membership Interest of Azalea Bay Resort (ex. p. ECOVESTSF_0000787-89); Ex. 15 – Letter from Sean M. Akins, Partner, Covington & Burling LLP, to John L. Schoenecker, Senior Investigative Counsel, United States Senate Committee on Finance (June 21, 2019), at 23. 115 Ex. 15 at 12. 116 Id. at 21. Each taxpayer-investor could purchase up to 945 units per EcoVest transaction, with each purchased unit getting one vote on what to do with the land. See Ex. 30, at ex. p. ECOVEST-SF_0000009. 117 Ex. 33 – Azalea Bay Resort Holdings, LLC spreadsheet calculator. 118 Ex. 15 at 13. 119 Ex. 30 at 12 (ex. p. ECOVEST-SF_0000027). This amount, $1,483,491 to be exact, is calculated by adding “Arrangement Fee,” “Annual Management Fee,” and the “Disposition Management Fee” for the “Conservation Option” having been chosen. Reimbursements to EcoVest for its out-of-pocket expenses are not included in this amount. 60 added roughly an additional 40,000 bedrooms to North Myrtle Beach. The city, however, only has 16,573 residents as of July 2018, according to the U.S. Census Bureau.137 Occasionally EcoVest sold land intended for residential development, rather than syndicating conservation-easement transactions. In those instances, the land valuations appear much lower than those involved in tax-driven transactions. For example, another EcoVest taxpayer-investor entity known as Long Bay Marina Holdings, LLC, generated significant tax deductions (similar to those discussed above), creating a $39 million charitable deduction for taxpayer-investors by granting a conservation easement on 61 acres of undeveloped land in North Myrtle Beach.138 It did so by claiming this 61 acres of land was worth $43,517,980, or approximately $713,410 per acre, before granting a conservation easement on it, but only $2,094,550, or approximately $34,337 per acre, after the easement.139 However, when Long Bay Marina Holdings, LLC, dealt in Myrtle Beach-area land in order to actually develop it, rather than just syndicate tax deductions, the valuations were significantly lower. In 2015, the year after generating its $39 million tax deduction with this 61acre plot of land, Long Bay Marina Holdings purchased a different, 41-acre plot of undeveloped land in the Carolina Forest area known as Providence Forest, inland of Myrtle Beach and approximately 20 miles south of North Myrtle Beach, for $1.39 million, or approximately $33,902 per acre. A year later, EcoVest and Long Bay Marina Holdings, LLC turned around and sold this 41-acre plot of land to a third-party developer for $2 million, or approximately $48,780 per acre.140 137 U.S. Census Bureau, QuickFacts, North Myrtle Beach, South Carolina, available at https://www.census.gov/quickfacts/fact/table/northmyrtlebeachcitysouthcarolina/PST045219. 138 Ex. 39 – Letter from Robert M. McCullough, Senior Vice President and CFO, EcoVest Capital, Inc., to financial advisors (Jan. 6, 2016), at ECOVEST-SF_0120564. Ex. 40 – Claud Clark, III, Clark-Davis, PC, Appraisal of Long Bay Marina (Dec. 30, 2014), at 2 (ex. p. ECOVEST-SF_0120628). 139 140 Ex. 39 at ECOVEST-SF_0120564. 67 By all accounts, North Myrtle Beach is a growing community,143 and the Park Pointe homes appear to be selling to homebuyers,144 but no EcoVest-related company is selling homes in the Myrtle Beach area at anywhere near the quantity that EcoVest estimated in its syndicated conservation-easement promotional materials. 143 See, Chloe Johnson and David Slade, Myrtle Beach Still Leading East Coast Population Growth, But Can Local Governments Keep Up?, THE POST AND COURIER, March 25, 2018, available at https://www.postandcourier.com/news/myrtle-beach-still-leading-east-coast-population-growth-but-can-localgovernments-keep-up/article_8a9bfc44-2c7d-11e8-8627-effb3224b9e7 html. 144 See, Real Realstar Homes Reviews, at https://www.gorealstar.com/reviews. 69 At the same time, a company called EvrSource Capital, a promoter of syndicated conservation-easement transactions, was telling its taxpayer-investors that nearby land known as Bienville 75 (the name of the land’s holding company) was worth about 259 times the amount paid by Messrs. Morey and Bauer – $71,013 per acre – because Bienville 75 could be turned into “mixed use residential and recreational subdivision from its current use as vacant land.”148 Like with the other syndicated conservation-easement transactions, however, this valuation simply served the purpose of generating large tax deductions for EvrSource Capital’s taxpayerinvestors. According to the 2010 Census, 14,799 people lived in Hamilton County, a population that dipped slightly to 14,428 by 2019. The county’s median household income between 2014 and 2018 was $34,583, or $15,097 per person, and 28 percent of the county’s population then lived below the poverty line.149 Yet according to EvrSource Capital, its development potential was substantial in 2015, promoting to taxpayer-investors that the land could accommodate the following developments:            144 motor coach lots 161 lakefront homes sites 222 smaller lakefront homes 1,330 interior single family homes 742 duplexes 1 hotel 1 transient RV site 24 commercial sites 20 boat and RV storage sites 24 utility sites 1 golf course150 According to an appraiser named Raymond E. Veal, this development potential made the 1,267.37-acre property worth $90,000,000, or $71,013 per acre.151 As was the case with Claud Clark’s appraisals for EcoVest, Mr. Veal used a discounted cash flow method, which he referred to as an “income capitalization approach” as well as a “discounted sellout analysis,” to get to this estimate.152 Mr. Veal said in his appraisal he would have also used a sales-comparison approach Ex. 42 – Raymond E. Veal, Market Value Appraisal Bienville 75 (Oct. 20, 2015) at 86 (ex. p. SENATE_FINANCE-0002792). 148 149 U.S. Census Bureau, QuickFacts, Hamilton County, Florida, available at https://www.census.gov/quickfacts/hamiltoncountyflorida. 150 Ex. 42 at 80 (ex. p. SENATE_FINANCE-0002786). 151 Id. at 2, 86 (ex. p. SENATE_FINANCE-0002703, -0002792). 152 Id. at 78-81 (ex. p. SENATE_FINANCE-002784-2787). 71 and “searched the state of Florida for sales of land adjacent to a large recreational fishing lake” but was “not able to find any sales that have occurred within a reasonable period before the valuation date.”153 Nevertheless, his appraisal was optimistic about the potential for developing the land: Previously, no efforts have been made to attract mixed use development to the area. As a result there are few nearby residents, and little market activity, because of a lack of product. The northern portion of Florida has a long history of demand for residential real estate, which is documented in the Norton Consulting Report provided. There is ample market evidence that a mixed use development geared toward a nationally known fishing and hunting plantation would be feasible.” 154 However, if EvrSource Capital’s investors in this land were to grant a conservation easement on it, it would then only be worth $1,267,370, or $1,000 per acre, according to Mr. Veal’s appraisal.155 By December 23, 2015, EvrSource Capital had gathered 174 different taxpayerinvestors to participate in the Bienville 75 transaction.156 Those investors collectively paid EvrSource a combined total of $19,334,299 to buy into another holding company called Bienville 75 Acquisitions.157 That holding company in turn paid $12.2 million to buy a 98 percent interest of Bienville 75 (for clarity’s sake, Bienville 75 Acquisitions acquired Bienville 75), which is the entity that actually owned the land.158 That essentially means those investors valued the land at $12,448,979.60, or $9,823 per acre. Within days of investing in the transaction, all surrounding Christmas 2015, the Bienville 75 Acquisition taxpayer-investors then voted 98.84 percent (12,057,500 shares) in favor of granting a conservation easement, 0.71 percent (86,000 shares) in favor of developing the land, and 0.45 percent (55,000 shares) in favor of holding it for further investment.159 153 Id. at 77 (ex. p. SENATE_FINANCE-0002783). 154 Id. at 75 (ex. p. SENATE_FINANCE-0002781). 155 Id. at 124 (ex. p. SENATE_FINANCE-0002830). Ex. 43 – Senate Committee on Finance Supplemental Response Written Answer – Bienville 75 Acquisitions, LLC at p. 2 of 8 156 157 Id. at p. 8 of 8 Ex. 44 – Bienville 75, LLC, Private Placement Memorandum (Oct. 30, 2015) at 3 (ex. p. SENATE_FINANCE-0002637); Ex. 43 at p. 8 of 8. 158 159 Based on the documents provided in this investigation, the results of this vote are not entirely clear. EvrSource Capital affirmatively answered that 55,000 votes out of up to 19,334,299 were in favor of holding the land for long-term investment, and 86,000 votes were in favor of developing the land. These answers did not answer how many votes favored granting a conservation easement on the land. See Ex. 43 at p. 1 and 6 of 8. However, the vote totals listed above for the conservation-easement option are necessarily too low. Of the 125 taxpayer-investor ballots provided in this investigation, 119 were in favor of granting a conservation easement, 2 were in favor of further developing the land, 1 was in favor of holding the land for investment, and 3 could not be 72 ii. Roaring Creek Plantation, LLC and Roaring Florida Acquisitions, LLC In 2016, EvrSource Capital replicated its 2015 effort in Hamilton County with another property in the same neighborhood as the Bienville 75 property, known as Roaring Creek Plantation. According to EvrSource Capital, they could have built and sold the following developments on the property:       1,291 lots for single family homes in the “Active Adult Community” 466 lots planned for “Active Adult” duplex, triplex, and quadruplex homes, including 200 of such units for assisted living 258 lots for “lake access” or “direct lake frontage” second home community 144-lot motor coach community One 150-unit lodge style hotel 192 transient recreational vehicle lots164 Just like in 2015, Raymond Veal was the appraiser, and this development potential made the 1,518.44-acre property worth $69,050,000, or $45,474 per acre according to his appraisal.165 Again Mr. Veal used a discounted cash flow method for this estimate.166 And again Mr. Veal said in his appraisal he would have used a sales-comparison approach and “searched the state of Florida for sales of land adjacent to a large recreational fishing lake” but was “not able to find any sales that have occurred within a reasonable period before the valuation date.”167 His assessment of the property’s development prospect was nearly identical to the Bienville 75 deal: Previously, no efforts have been made to attract mixed use development to the area. As a result there are few nearby residents, and little market activity, because of a lack of product. The northern portion of Florida has a long history of demand for residential real estate, which is documented in the Norton Consulting Report provided. There is ample market evidence that a mixed use development geared toward a nationally known fishing and hunting plantation would be feasible.” 168 However, post-conservation easement, the Roaring Creek Plantation would only be worth $1,520,000, or about $1,000 per acre, according to Mr. Veal’s appraisal.169 EvrSource Capital also employed a reviewing appraiser to confirm the quality of Mr. Veal’s appraisal as that of a “qualified appraisal” for IRS purposes, but that 164 Ex. 46 at 14 (ex. p. SENATE_FINANCE-0001101). 165 Ex. 47 at 2, 92 (ex. p. SENATE_FINANCE-0001993, -0002079). 166 Id. at 79-90 (ex. p. SENATE_FINANCE-0002070-81). 167 Id. at 80 (ex. p. SENATE_FINANCE-0002071). 168 Id. at 78 (ex. p. SENATE_FINANCE-0002069). 169 Id. at 121 (ex. p. SENATE_FINANCE-0002112). 74 reviewing appraiser was Claud Clark. Mr. Clark determined that Mr. Veal’s appraisal was a qualifying one for IRS purposes.170 EvrSource Capital closed the transaction to new investors on December 22, 2016 after 136 different taxpayer-investors bought into it.171 Those investors collectively paid EvrSource $15,303,567 to buy into a holding company called Roaring Florida Acquisitions. That holding company in turn paid $9,513,393.16 to buy a 96.564 percent interest of Roaring Creek Plantation, which is the company that actually owned the land.172 Essentially, those investors valued the land at $9,851,904.60, or $6,488 per acre. Days later, once again surrounding the Christmas holiday, the Roaring Florida Acquisition taxpayer-investors voted 98 percent in favor of granting the conservation on the land, while only about two percent of those taxpayer-investors voted to develop the land or hold it for further investment.173 Once again, the record does not show that any investor expressed interest in building thousands of homes and a hotel over reclaimed phosphate mines. On December 28, 2016, EvrSource Capital granted the conservation easement on the Roaring Creek Plantation land in time for its taxpayer-investors to claim the deductions on their 2016 tax returns.174 The combined tax deduction from the transaction was $67,530,000,175 saving the taxpayer-investors about $26,741,880 in taxes See generally Ex. 48 – Claud Clark, III, Clark-Davis, PC, Conservation Easement Review Appraisal of Roaring Creek Plantation (Nov. 3, 2016). 170 Ex. 49 – Senate Committee on Finance Supplemental Response Written Answer – Roaring Florida Acquisitions, LLC at p. 2 of 9. 171 172 Ex. 46 at 4 (ex. p. SENATE_FINANCE-0001091); Ex. 49 at p. 2 of 9. 173 Based on the documents provided in this investigation, the results of this vote are not entirely clear. EvrSource Capital affirmatively answered that 280,000 votes out of up to 15,303,567 were in favor of holding the land for long-term investment (1.83 percent), and 50,000 votes were in favor of developing the land (0.33 percent). These answers did not say exactly how many votes favored granting a conservation easement on the land nor the total number of ballots cast. See Ex. 49 at p. 1, 6, and 7 of 9. However, a draft email turned over in the investigation indicates that EvrSource Capital personnel contemplated telling its Roaring Florida Acquisition taxpayer-investors that, in light of the IRS having issued Notice 2017-10 on December 23, 2016, which was around the time of that vote, they could change their vote if they wanted to, as EvrSource Capital “only received votes representing 36.66% of the shares” during the initial vote days earlier. In that initial vote, “The Conservation easement received the most votes representing 36.18% of the 36.66% received,” which means the conservationeasement option received 98.69 percent of the vote. Ex. 50 – Draft email to Roaring Florida Acquisition members, ex. p. SENATE_FINANCE-0009436. 174 Ex. 49 at p. 2 of 9. 175 Ex. 49 at p. 7 of 9. 75 land along the Clay County’s Eufaula Highway (parcel number 013 067) on June 21, 2006 for $609,246, or $2,683 per acre.182 This is the land Webb Creek told its investors it might use to develop such a senior living facility, making the land valuable for tax purposes. It lies southwest of the Meadow Links golf course, which is part of the George T. Bagby State Park & Lodge, and most of which is across the street from the property that is next to Walter F. George Lake. Bryan Kelley is the manager and 50-percent owner of the Webb Creek Management Group, which managed Adam Smith Ventures.183 By December 26, 2013, Bryan Kelley and Webb Creek had sold slightly more than 91 percent of Adam Smith Ventures, including the 227 acres of property it owned, to taxpayer-investors for a combined total of $2,347,640, thus valuing it at $2,571,854.25, or $11,330 per acre.184 But according to an appraisal commissioned by Webb Creek and performed by Jim R. Clower, Sr., from November 2013, that property had a highest and best use as “an adult seniors facility for ’55 and over,’”185 and was really worth $12,400,000, or $54,626 per acre,186 a five-fold increase from what Adam Smith Ventures’ investors then paid for it—and a 20-fold increase from what Adam Smith Ventures paid for that land seven years earlier. Mr. Clower arrived at this figure by comparing it to sales of then-undeveloped land that was in the north Georgia city of Suwanee (sold for $44,979 per acre), and the counties of Gwinett (sold for $80,846 per acre) and Towns (sold for $94,306 per acre),187 the first two of which are Atlanta suburbs and the latter of which is further north nearing Georgia’s border with North Carolina. Mr. Clower also arrived at this $54,626/acre figure for the Adam Smith Ventures property by comparing it to sales of undeveloped land that would eventually be built into senior-living facilities. But instead of comparing these properties on a per-acre basis, he compared them on a per-housing-unit basis. For example, in the first such comparison to another property in Towns County, Mr. Clower found that the comparable property was worth $24,138 per would-be housing unit because the land sold for $2.1 million and would eventually contain 87 houses.188 In the second per-unit comparison, this time to a land sale in Hall County to the 182 Board of Tax Assessors, Clay County, Georgia, at http://qpublic.net/ga/clay/. Ex. 51 – Brian W. Kelley’s responses regarding Adam Smith Ventures, LLC to questions in letter from Charles Grassley, Chairman, U.S. Senate Committee on Finance, and Ron Wyden, Ranking Member, U.S. Senate Committee on Finance, to Brian Kelley, Webb Creek Management Group (Mar. 27, 2019) at ex. p. WCP000537. 183 Ex. 52 – Letter from Bryan W. Kelley, CEO, Webb Creek Management Group, LLC, to Adam Smith Ventures, LLC members (Sept. 1, 2017), containing draft sample Form 8886 – Reportable Transaction Disclosure Statement at ex. p. WCP000520. 184 185 Ex. 53 – Jim R. Clower, Sr., A Self-Contained Appraisal Report for a Proposed Conservation Easement on an Approximate 227 +/- Acre Tract of Vacant Land (Nov. 12, 2013) at ex. p. WCP000838. 186 Id. at ex. p. WCP000852. 187 Id. at ex. p. WCP000842-45. 188 Id. at ex. p. WCP000848. 78 northeast of Atlanta, the land sold for $1.6 million and would eventually contain 94 houses, making that land worth about $17,000 per would-be house.189 Finally, in the third per-unit comparison, to a land sale in Cartersville to the northwest of Atlanta, the land sold for $943,524 and would eventually contain 72 houses, making that land worth about $13,104 per would-be house.190 Despite all of these properties being in north Georgia, Mr. Clower relied on these estimates to determine that the Adam Smith Ventures property could house 800 housing units across its 227 acres, units that would sell out in two years. From these comparisons, Mr. Clower estimated the property to be worth $12,400,000, or $54,626/acre.191 But after granting a conservation easement on the Adam Smith Ventures property, it would only be worth $295,100, or $1,300/acre, according to that same November 2013 appraisal.192 Mr. Clower arrived at this figure by comparing it to a May 2007 sale of 371.5 acres of land near the Lavender Trail in Floyd County, Georgia, which is about 200 miles north of Clay County. He also compared the property, post-easement, to an October 2007 sale of 126 acres of land in Hickman County, Tennessee, as well as an October 2009 sale of 423 acres of land in Hardeman County, Tennessee.193 Later on in his appraisal, Mr. Clower provides qualitative support for his valuation of the land as if it were prime real estate for a senior living facility. The “Market Summary” in this appraisal generally offers optimistic language about the property’s prospects as such but does not substantiate its optimism with hard data, and he begins this supporting language with a seeming contradiction: Our housing market, in general, is in a slump with its end not yet in sight. There is, however, one segment of this market experiencing only a minor decline. That segment is construction for the “Boomers”, the name we seem to have adopted for the 50+/Retiree housing market. This market appears to be blossoming, and will continue to do so for many years to come before reaching its peak. … The proposed development is an ideal location for an active community due to the amenities and natural landscape.194 189 Id. at ex. p. WCP000849. 190 Id. at ex. p. WCP000850. 191 Id. at ex. p. WCP000852. 192 Id. at ex. p. WCP000860. 193 Id. at ex. p. WCP000856-57. 194 Id. at ex. p. WCP000902 (emphases added). 79 Mr. Clower then goes on to cite to “a recent market survey completed by Mature Market Consultants from September 2006 through May 2007,” described as the following: The market survey consisted of a test ad being placed in the Georgia edition of Mature Living Choices, a new homes/communities real estate guide published specifically for the 50+ market. This is a national publication with editions in many states and published by Network Communications, Inc., the largest publisher of real estate, lifestyle and housing guides. The purpose of the ad was to gauge interest in an active adult community in Southwest Georgia. The response to the survey by far exceeded the norm in producing over 2100+ written responses with an interest in Southwest Georgia during the nine month test period. Mature Market Consultants maintains a database of these individuals and regular communication is maintain via newsletter.195 The “Neighborhood Analysis” in this appraisal includes language that gives pause to the idea that Clay County was then primed for expansion: Walter F. George Lake and Bagby State Park are across county road Hwy 39 from the subject property, forming the boundary on the West. Dothan, Al. is South and Albany, Ga. is to the East and North. The surrounding land and municipalities are mostly agricultural and less industrialized and populated than the larger towns such as Dothan, and Eufaula, Al. and Columbus, and Albany, Ga. Blakley, Ga. Is about 18 miles south, end Eufaula, Al. is approximately 21 miles to the North West. Albany Is East about 40 miles. Dothan is South West about 45 miles. Both have excellent hospitals and medical outlets. The location of the subject, more inland and off the major highway system, there are fewer employment opportunities. This has caused the small town populations to decrease. In that sense, there are fewer businesses and some travel is necessary for major retail shopping. Cultural events, however, are available in the smaller towns such as the Arts Festival and Pilgrimage of Homes in Eufaula, the Swamp Gravy Playhouse In Colquill, and the Peanut Festival in Dothan, to name a few. For the retired resident, employment is not a factor of major importance. The Lake and Golf Course is a well-kept secret which will be the main attraction to the retired individuals. 196 This appraisal compared land in an area of southwest Georgia where there are few employment opportunities, a decreasing population, and little in the way of shopping compared to senior-living developments in suburban Atlanta. According to Bryan Kelley’s responses to questions posed to him in this investigation, a total of 56 taxpayer-investors contributed 195 Id. at ex. p. WCP000903. 196 Id. at ex. p. WCP000899 (emphasis added). 80 charitable deductions between them,202 the Webb Creek Management Group claimed $200,000 in fees for the transaction, and Jim Clower made $12,500 for his appraisal.203 On May 24, 2018, Adam Smith Ventures then appears to have sold the land to an unrelated party for $100,000.204 202 Id. at ex. p. 538. 203 Ex. 54 at 19 (ex. p. WCP000129). See Board of Tax Assessors – Clay County, Georgia, at http://www.qpublic net/ga/clay (search records for parcel 013 067). 204 82 Imperial Aggregates Group LLC214 Jackson River Partners LLC215 KR Stone Group LLC216 LM Bass Partners LLC217 Manatee Minerals Group LLC218 Nassau River Partners LLC219 TOTAL 123.3 134.1 126.8 130.1 157.2 193.1 1,241.7 $17.8 million $17.8 million $17.8 million $17.8 million $17.8 million $17.8 million $160.2 million $144,363 $450,000 $3,650 $132,737 $460,000 $3,430 $140,379 $450,000 $3,549 $136,818 $450,000 $3,459 $113,232 $500,000 $3,181 $92,180 $530,000 $2,745 $129,017 $4.17 million $3,358 On an individual basis, these transactions had very similar, short lives designed to manufacture quickly large tax deductions for their taxpayer-investors. The details of some of the transactions are as follows: i. FG River Resources LLC Ornstein-Schuler told its taxpayer-investors this 122.5-acre220 rectangular tract of land was worth $17.8 million, or $145,306 per acre, before granting a conservation easement on it.221 The company based that number on an appraisal written by Clayton M. Weibel, who used 214 Ex. 60 – Clayton M. Weibel, MAI, Appraisal Report for Imperial Aggregates LLC (as of Dec. 28, 2015), at HK_SFCSubpoena_000058264. Ex. 61 – Clayton M. Weibel, MAI, Appraisal Report for Jackson River Minerals LLC (as of Dec. 28, 2015), at HK_SFCSubpoena_000062586. 215 Ex. 62 – Clayton M. Weibel, MAI, Appraisal Report for KR Stone Resources LLC (as of Dec. 28, 2015), at HK_SFCSubpoena_000071112. 216 Ex. 63 – Clayton M. Weibel, MAI, Appraisal Report for LM Bass Aggregates LLC (as of Dec. 29, 2015), at HK_SFCSubpoena_000075442. 217 218 Ex. 64 – Clayton M. Weibel, MAI, Appraisal Report for Manatee Minerals LLC (as of Dec. 28, 2015), at HK_SFCSubpoena_000083208. Ex. 65 – Clayton M. Weibel, MAI, Appraisal Report for Nassau River Stone LLC (as of Dec. 29, 2015), at HK_SFCSubpoena_000088860. 219 220 Ex. 57 at HK_SFCSubpoena_000029885. 221 Id. at 1 (ex. p. HK_SFCSubpoena_000029889). 85 both a discounted cash flow method as well as comparable sales to come to that estimate. 222 The comparable sales he used were in Vero Beach, Indian River County, Florida; Mobile County, Alabama; La Salle County, Illinois; Jackson County, Wisconsin; and Hall County, Georgia.223 Mr. Weibel’s discounted cash flow analysis relied on a reserve analysis commissioned by Ornstein-Schuler, and dated November 24, 2015, stating the property contained proven reserves of 6.775 million tons of limerock.224 Specifically, the appraisal found: The reserve conclusions are: Proven Mineral Reserves without 20 acres plant is 6.775 million tons of limerock. The drilling and geology of the area give a high level of confidence in the resource to determine it a proven mineral reserve. In addition, there are several other mining operations with close proximity mining the same deposit.225 This reserve analysis, however, was based on drilling samples conducted nine years earlier, in 2006, when a geologist analyzed the County Line Ranch property by drilling 90 different holes in the property and sampling the materials extracted from them.226 That analysis showed a 21-foot layer of limerock covered by 39 feet of “dark brown, high organic sandy soil, then a variety of layers of sand, clayey sand, sandy clay and clay.”227 Since the time of that 2006 analysis, the owners of the County Line Ranch tried to sell it for $10,000 per acre, advertising it as containing “150 million tons of mineable lime rock,”228 but it did not sell. Nine years later, Ornstein-Schuler told its taxpayer-investors the property was worth $145,306 per acre because of its mineable limerock. Clayton Weibel estimated that the property would only be worth $440,000, or $3,592 per acre, after a conservation easement would be granted on it.229 The transaction closed to new investors on November 28, 2015.230 By December 10, 2015, investors had collectively paid $3,558,000 to purchase a 95.99 percent interest in the holding company that owned the 122.5- 222 Id. at 69 (ex. p. HK_SFCSubpoena_000029957). 223 Id. at 70-89 (ex. p. HK_SFCSubpoena_000029958-77). 224 Id. at 94, Exhibit IV, page 10 of 21 (ex. p. HK_SFCSubpoena_000029982, 30107). 225 Id. at 94, Exhibit IV, page 10 of 21 (ex. p. HK_SFCSubpoena_000029982, 30107). 226 Id. at Exhibit VI (ex. p. HK_SFCSubpoena_000030124). 227 Id. at Exhibit IV, Appendix B, p. 4 (ex. p. HK_SFCSubpoena_000030127). 228 Ex. 55. 229 Ex. 57 at HK_SFCSubpoena_000029885. Ex. 66 – Letter from Christopher DeLacy, Partner, Holland & Knight LLP, to Charles Grassley, Chairman, U.S. Senate Committee on Finance, and Ron Wyden, Ranking Member, U.S. Senate Committee on Finance (Apr. 30, 2019), Attachment – OSI Response Chart 2(b) and 2(d). 230 86 Mr. Weibel again used both a discounted cash flow method as well as comparable sales to come to that estimate,237 and he used the same comparable sales that he used in his FG Resources appraisal. 238 His discounted cash flow analysis relied on the very same reserve analysis commissioned by Ornstein-Schuler, and dated November 24, 2015, stating the property contained proven reserves of 6.775 million tons of limerock. 239 Mr. Weibel estimated the Green Cove property would only be worth $450,000, or $3,510 per acre, after a conservation easement was granted on it.240 The transaction closed to new investors on November 5, 2015.241 By December 10, 2015, the taxpayer-investors had collectively paid $3,645,000 to purchase a 95.99 percent interest in the holding company that owned the 128.2-acre tract of land, thus valuing it at $3,797,270.55, or $29,620 per acre.242 They voted 77.82 percent in favor of granting a conservation easement on the land, 0 percent in favor of mining it, 0 percent in favor of leasing it, and 0 percent in favor of holding the property for future investment.243 On December 22, 2015, the company granted that conservation easement244 and split $17,350,000 worth of charitable deductions between the taxpayerinvestors.245 At a 39.6 percent tax rate, this would have saved these taxpayer-investors $6,870,600 in federal income taxes. 237 Id. at 69 (ex. p. HK_SFCSubpoena_000037657). 238 Id. at 70-89 (ex. p. HK_SFCSubpoena_000037658-77). 239 Id. at 94, Exhibit VI, page 10 of 21 (ex. p. HK_SFCSubpoena_000037682, 37807). 240 Id. at 1 (ex. p. HK_SFCSubpoena_000037585). 241 Ex. 66, Attachment – OSI Response Chart 2(b) and 2(d). 242 Ex. 58 at HK_SFCSubpoena_000037585 243 Ex. 67. 244 Ex. 58 at 1 (ex. p. HK_SFCSubpoena_000037589). 245 Id. at HK_SFCSubpoena_000037585. 88 Not far to the west of the Center for Music and Nature, promoters of syndicated conservation-easement transaction held a total of 6,818 acres of land they told the IRS was worth $78 million, and all of which appear to have been used for tax shelters. One of those promoters, Dr. Kyle Carney, discussed above, simultaneously pitched taxpayer-investors on three different transactions that granted conservation easements on land all within this same secluded, wooded area. Another promoter, Thomas Jason Free (who goes by his middle name), promoted two other transactions in same general area. Dr. Carney’s transactions were known as Little Pumpkin Creek Investments, Little Pumpkin Creek North Investments, and Ginn Creek Investments. Mr. Free’s transactions were known as Tennessee Ranch Estates Investments and Crockett 941 Investments. i. Little Pumpkin Creek Investments On October 21, 2015, a holding company managed by Dr. Carney known as Little Pumpkin Creek purchased 2,497.25 wooded acres in Humphreys County (and Perry County, immediately south of Humphreys County) for $3,121,562.50, or $1,250 per acre.257 A year later, at the end of 2016, 47 different taxpayer-investors in another holding company known as Little Pumpkin Creek Investments claimed that about half of that land, 1,209.38 acres,258 had a pre-conservation easement value of $18,470,000, or approximately $15,272 per acre, which is more than 12 times what the land sold for in October 2015.259 (The other half of the land was used in the transaction discussed next, Little Pumpkin Creek North Investments.) In December 2016, those 47 different taxpayer-investors collectively paid $3,047,000 for a 96-percent interest in the company owning the underlying land (Little Pumpkin Creek), thus valuing the land as being worth $3,173,958.33, or $2,624 per acre.260 The basis for the land’s $18.47 million valuation was an appraisal written by Ronald S. Foster. According to that appraisal, the land could accommodate low-density residential development, specifically “49 large view lots averaging 24± acres.”261 Mr. Foster used both Ex. 75 – Ronald S. Foster, Ronald S. Foster & Company, Inc., Appraisal Report for Little Pumpkin Creek North, LLC (Dec. 2, 2016), at 38 (ex. p. CARNEY-SFC_00005437). 257 Ex. 76 – Letter from Daniel J. Donovan, Partner, King & Spalding LLP, to Charles Grassley, Chairman, U.S. Senate Committee on Finance, and Ron Wyden, Ranking Member, U.S. Senate Committee on Finance (Apr. 30, 2019), Appendix A, Attachment A at SFC-Carney_00000001 (first spreadsheet). 258 Ex. 77 – Ronald S. Foster, Ronald S. Foster & Company, Inc., Appraisal Report for Little Pumpkin Creek, LLC (Dec. 2, 2016), at 3 (ex. p. CARNEY-SFC_00005072). 259 260 Ex. 78 – Little Pumpkin Creek, LLC, Confidential Private Placement Memorandum, at 6, 17 (ex. p. SFC-Carney_00002194, 2205). Ex. 13 – Investment Summary for Little Pumpkin Creek Investments, LLC, at SFC-Carney_00002181; Ex. 77 – Ronald S. Foster, Ronald S. Foster & Company, Inc., Appraisal Report for Little Pumpkin Creek, LLC (Dec. 2, 2016), at 61 (ex. p. CARNEY-SFC_00005130). 261 92 discounted cash flow and sales-comparison methods.262 However, the lands he picked as comparisons were not in Humphreys County. Instead, he compared the subject property to properties in the Tennessee counties of Robertson, Madison, and Shelby.263 Robertson County’s estimated 2019 population was 71,813 (Humphreys: 18,582) and its median household income between 2014 and 2018 was $61,774 (Humphreys: $41,510).264 Madison County’s estimated 2019 population was 97,984 (Humphreys: 18,582), and its median household income was $46,223 (Humphreys: $41,510).265 Shelby County’s estimated 2019 population was 937,166 (Humphreys: 18,582) and its median household income was $49,782 (Humphreys: $41,510).266 Shelby County is the largest county in Tennessee, and Memphis is its seat.267 One of Mr. Foster’s reasons for looking outside of Humphreys County for comparable sales was because of a limited number of sales in the subject market. Specifically, he stated: The subject market area yielded very limited sales data that was comparable to the subject. A large portion of the sales data consisted of small commercial or residential sites that were not considered comparable to the size of the subject. Another portion of the sales data consisted of condemnation transfers and REO/bank owned sales. My opinion is that arm’s length sales may be outside of the subject market area but in similar locations would be comparable to the subject. 268 Despite this seemingly illiquid land market in Humphrey’s County, Mr. Foster wrote in his appraisal, The residential market in the immediate neighborhood has experienced moderate growth. Research indicates that demand for residential properties is average in the subject area. Many buyers are looking for an adequate sized parcel with adequate available utilities and natural scenic views. The subject tract’s large size gives it the ability to subdivide into numerous single-family lots fitting market 262 See Ex. 77 at 57-89 (ex. p. CARNEY-SFC_00005126-5158). 263 Ex. 77 at 65-70 (ex. p. CARNEY-SFC_00005134-5139). 264 U.S. Census Bureau, QuickFacts, Robertson County, Tennessee, available at https://www.census.gov/quickfacts/robertsoncountytennessee. 265 U.S. Census Bureau, QuickFacts, Madison County, Tennessee, available at https://www.census.gov/quickfacts/madisoncountytennessee. 266 U.S. Census Bureau, QuickFacts, Shelby County, Tennessee, available at https://www.census.gov/quickfacts/shelbycountytennessee. Shelby County, Tennessee – About Our Government, at https://shelbycountytn.gov/67/About-OurGovernment. 267 268 Ex. 77 at 78 (ex. p. CARNEY-SFC_00005147). 93 iii. Ginn Creek Investments Additionally, Dr. Carney promoted a third conservation-easement tax shelter for 2016 in Humphreys County, this time calling it Ginn Creek. It involved 1,081.06 acres of land,292 again with a purported development potential for low-density residential.293 The appraiser was different from the Little Pumpkin Creek transactions. David R. Roberts estimated the wooded property’s “before” value at $14,054,000, or approximately $13,000 per acre. 294 Unlike the other appraisers discussed in this report, Mr. Roberts used only comparison sales in coming to his “before” estimate and did not use a discounted cash flow method, the method that helped get Claud Clark in trouble with the Alabama Real Estate Appraisers Board.295 However, the properties Mr. Roberts used as comparison sales were not in Humphreys County. Rather, three were in Williamson County, Tennessee; one was in Rutherford County, Tennessee; and another was in Walker County, Georgia, specifically on Lookout Mountain. Williamson County’s estimated 2019 population was 238,412 (Humphreys: 18,582) and its median household income between 2014 and 2018 was $109,026 (Humphreys: $41,510).296 In 2017, Forbes listed Williamson County as the wealthiest county in Tennessee and the seventh wealthiest county in the United States.297 Rutherford County’s estimated 2019 population was 332,285 (Humphreys: 18,582), and its median household income was $63,846 (Humphreys: $41,510).298 Walker County, Georgia’s estimated 2019 population was 69,761 (Humphreys: 18,582) and its median household income was $43,650 (Humphreys: $41,510).299 The median household income for Lookout Mountain, specifically, was $106,908 in 2017.300 Lookout Mountain was the site of the 1863 “Battle Above the Clouds” during the Civil War and 292 Ex. 76, Appendix A, Attachment A at SFC-Carney_00000001 (first spreadsheet). Ex. 14 – Investment Summary for Ginn Creek Investments, LLC, at SFC-Carney_00001954; Ex. 82 – David R. Roberts, Tennille & Associates, Inc., Appraisal Report for Ginn Creek, LLC (Dec. 8, 2016), at 7 (ex. p. CARNEY-SFC_00004361). 293 Ex. 82 – David R. Roberts, Tennille & Associates, Inc., Appraisal Report for Ginn Creek, LLC (Dec. 8, 2016), at 3 (ex. p. CARNEY-SFC_00004358). 294 295 See Ex. 82 at 50-65 (ex. p. CARNEY-SFC_00004404-4419). 296 U.S. Census Bureau, QuickFacts, Williamson County, Tennessee, available at https://www.census.gov/quickfacts/williamsoncountytennessee. 297 Rebecca Lerner, The 10 Richest Counties In America 2017, Forbes (July 13, 2017), at https://www.forbes.com/sites/rebeccalerner/2017/07/13/top-10-richest-counties-in-america-2017/#59e7a6bf2ef3. 298 U.S. Census Bureau, QuickFacts, Rutherford County, Tennessee, available at https://www.census.gov/quickfacts/rutherfordcountytennessee. 299 U.S. Census Bureau, QuickFacts, Walker County, Georgia, available at https://www.census.gov/quickfacts/walkercountygeorgia. 300 Data USA, Lookout Mountain, Georgia, at https://datausa.io/profile/geo/lookout-mountain-ga. 97 In his appraisal, Mr. Roberts’s offered this opinion about the development potential of the property, essentially saying that smaller sites would not sell, but a few larger ones would: The subject property was opened in 2007 as a 109 site residential subdivision, Tennessee Ranch Estates. In 2008 the economic downturn that effected the entire United States stopped the sales of the property. The property has not been marketed for many years by the previous owners. Also information gathered from the immediate subject neighborhood, including an adjoining subdivision, indicate that the lack of sales in the immediate subject market area currently would not indicate the demand for 190 residential homesites. However, numerous developments with larger homesites ranging from 5 to 10-acres, located on the Cumberland Plateau, have experienced growth and development in this market. These include the Jasper Highlands neighborhood west of Chattanooga, Tennessee, and Long Branch Lakes. Combining the 190 residential homesites that average 5-acres in size to larger homesites would be best use of the property, adding to the privacy and appeal of the homesites. Considering the prime access to the site off I-40, and the attraction of the rolling Tennessee Hills in the subject neighborhood, the most financially feasible use of the subject property would be for larger residential homesites, adding to the privacy and appeal, utilizing the roads in place, to homesites of 10 to 20-acres in size.317 Elsewhere in his appraisal, Mr. Roberts stated how the land was a prime location for residential development. Although the existing residential subdivision, which was opened in 2007, was not successful and was sold to the current owners, one of the major factors of this failure was the economic downturn that began in 2008 nationwide. This downturn has stabilized and Nashville, Tennessee is one of the strongest residential markets in the United States. This growth and development has spread north, south, and west of Nashville, as noted in the discussion of Humphreys County. Several adjoining counties have begun to experience residential growth and development. The neighborhood has excellent access off I-40, public roads, public water available, and gently rolling topography. It is prime location for residential development.318 According to Mr. Roberts, if the owners were to grant a conservation easement on most of the property (leaving ten acres unencumbered so that five homes could still be built there) then it would only be worth $1,094,000, or $1,083 per acre.319 317 Id. at 42 (ex. p. FREE00002579). 318 Id. at 20 (ex. p. FREE00002557). 319 Id. at 3, 93 (ex. p. FREE000002541, 2630). 100 v. Crockett Investors, LLC In 2016, Mr. Free promoted a similar transaction in the same Humphreys County neighborhood, this one with a 941.76-acre property he called Crockett 941,327 which directly borders Victor Wooten’s Center for Music and Nature to the west.328 Again, the purported development potential was “low-density residential,”329 and appraiser David Roberts estimated the property’s “before”-easement value at $11,301,000, or approximately $12,000 per acre.330 He arrived at this estimate by using sales comparisons331 in Williamson County, Tennessee; Lookout Mountain, Georgia; Rutherford County, Tennessee; and Sullivan County, Tennessee.332 Mr. Roberts’s opinion about development potential of the property was virtually identical to his opinion about the development of Ginn Creek, discussed above.333 Mr. Roberts also stated the following about the property, which is identical to the same language in his Ginn Creek appraisal, listed above: The neighborhood is rural, and no public water or sewer is offered by Humphreys County, and there is no countywide zoning. Neighborhood land is rolling to sloping with good ridgetop views, and the land along the Duck River is rolling. I40 runs east to west through the county and the neighborhood is approximately 25% developed. Some of the neighborhood land has been utilized for timber tracts over the past few years, and there has been some residential growth and development along the Duck River. There is also extensive hunting done in the subject county, and many of these tracts are utilized by owners or leased by hunting clubs for deer and turkey. The subject property is located west of Nashville, Tennessee which is one the [sic] growing urban areas in the United States. This growth and development has spread west along I-40, and although not reaching Humphreys County, Tennessee just yet for fulltime residents, this growth is headed in this direction. Many of the Ex. 86 – Crockett Investors, LLC, Confidential Private Placement Memorandum (Oct. 25, 2016), at 2 (ex. p. FREE00000002); Ex. 87 – David R. Roberts, Tennille & Associates, Inc., Appraisal Report for Crockett 941, LLC (Dec. 6, 2016), at 1 (ex. p. FREE00000673). 327 328 See State of Tennessee Comptroller of the Treasury, at https://assessment.cot.tn.gov/RE_Assessment (search for Humphreys County, Parcel IDs 152 003.00 and 152 007.00). 329 Ex. 87 – David R. Roberts, Tennille & Associates, Inc., Appraisal Report for Crockett 941, LLC (Dec. 6, 2016), at 7 (ex. p. FREE00000678). 330 Id. at 8 (ex. p. FREE00000679). 331 Id. at 43 (ex. p. FREE00000714). 332 Id. at 56 (ex. p. FREE00000727). 333 Id. at 40 (ex. p. FREE00000711). 102 properties built are weekend residents due to the nearby activities along the Tennessee River, Duck River, and Kentucky Lake. Considering the good access to the property off I-40, public roads, and the gently rolling topography of the land, and the nearby access to recreational areas, it is a prime location for lowdensity residential development around recreational areas.334 In fact, not only is the last paragraph directly above identical to the same corresponding paragraph in Mr. Roberts’ appraisal for Ginn Creek, but it is clear he simply cut and pasted that language from one to the other, as the same typographical error of “which is one the” appears in both appraisals. Mr. Roberts estimated that, once encumbered by a conservation easement, the property would be worth $615,000, or $656 per acre for 937.76 conserved acres (four of the property’s acres would be excluded from easement in order to build two homesites).335 This estimated post-conservation easement value was not much different from what Mr. Free originally purchased the unencumbered land for. The company that actually owned the land by the time it would have conservation easement granted on it – Crocket 941 LLC – paid $752,800 for a 98-percent interest of that land on July 22, 2016, essentially valuing the land at $768,163.27, or $760 per acre.336 Thereafter, by December 16, 2016,337 the four taxpayer-investors collectively paid $2,100,000 to Mr. Free for that 98-percent interest, thus valuing it at $2,142,857.14, or $2,275 per acre.338 The taxpayer-investors all voted to grant a conservation easement on the land instead of developing it,339 and the easement was granted on December 22, 2016,340 just in time for the four taxpayer-investors to claim deductions for the 2016 tax year. They shared $10,501,680 worth of federal tax deductions,341 saving them an estimated 334 Id. at 19 (ex. p. FREE00000690). Ex. 87 – David R. Roberts, Tennille & Associates, Inc., Appraisal Report for Crockett 941, LLC (Dec. 6, 2016), at 8 (ex. p. FREE00000679). 335 336 Ex. 86 at 7 (ex. p. FREE00000007). 337 Ex. 84 at 6. 338 Id. at 9. 339 Id. at 17. 340 Id. at 7. 341 See Ex. 84 at 8. 103 10. Conclusion This Committee is made up of Members with a diversity of views on the role of taxation in our Nation. There is no disagreement among the Members, however, when it comes to taxpayers employing abusive methods to reduce their taxes. Judge Learned Hand famously stated, “Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one’s taxes.”344 There is, however, a duty for taxpayers to be honest in reporting their income and claiming deductions on their tax returns. The transactions discussed in this report involve land valuations that appear so inflated above their original purchase prices that they cannot reasonably be characterized as anything other than abusive tax shelters. Despite the formal documentation developed by the promoters and nominal votes by investors, documents obtained in this investigation clearly show that both the promoters and the taxpayer-investors in these deals understood them simply as tax shelters. At their core, they are transactions in which taxpayers can save two dollars in taxes for every one dollar they give to transaction promoters – with promoters pocketing millions of dollars in fees for organizing the deals. These types of abusive tax shelters erode the Nation’s tax base and sow pessimism among all Americans about the fairness of our tax laws. Our tax system is a self-reporting one, meaning individual taxpayers are required to honestly report their income and pay taxes on it. The burden is not on the government to determine those amounts, as it would be impossible for the government to do so for hundreds of millions of taxpayers. In order for this self-reporting system to work and not devolve into a culture of duplicity as the norm, it is critical for taxpayers to generally believe the system is fair – even if a taxpayer does not like paying over his or her hard-earned money to the government, he or she knows his or her neighbors must do so as well. If this understanding breaks down, so too could a culture of compliance in our self-reporting system. If syndicated conservation-easement transactions continue to exist in the form they have over the past decade, they risk not only depriving the government of billions of dollars of revenue but also degrading the general understanding that our Nation’s tax laws apply equally to us all. *** 344 Helvering v. Gregory, 69 F.2d 809, 810 (2d Cir. 1934) (Hand, J.), aff’d, 293 U.S. 465 (1935). 105 The Senate Committee on Finance thanks the staff of the Joint Committee on Taxation for its technical assistance in developing this report. We also thank our clerks for their assistance. They were: Alexander K. Albrecht, American University Washington College of Law ’21 Dillon Chepp, American University Washington College of Law ’20 Caitlin Hird, Harvard Law School ’22 Jonathan Moseley, Penn State Law ’20 106 11. Appendix a. Transaction Details i. EcoVest Capital 1. Azalea Bay Resort (2015) a. Acres: 269.41345 b. Purported units to be developed: 936 two-bedroom units (1,300 square-feet each), 936 three-bedroom units (1,600 square-feet each), and 284 four-bedroom units (2,200 square-feet each) for a total of 117 four-story buildings346 c. Claud Clark’s “before”-easement value of the property: $47,954,567, or approximately $177,998 per acre347 d. Claud Clark’s primary method for estimating “before” value of the property: discounted cash flow348 e. Claud Clark’s opinion on development potential of the property: “Sufficiency of Demand – The success of developed residential lots in and around Azalea Bay Resort, as well as other similar developments is evident. Competing developed areas have sold out or are enjoying strong sales. This is one of the last remaining large tracts available in the area to develop.”349 f. Claud Clark’s “after”-easement value of the property: $2,816,950, or $10,456 per acre350 g. Number of taxpayer-investors involved in the transaction: 80351 h. Taxpayer-investors’ total buy-in for 94.5 percent of company owning the underlying land: $3,749,678.02, thus Ex. 30 – Azalea Bay Resort Holdings, LLC, Confidential Private Placement Memorandum (June 1, 2015), at 7 (ex. p. ECOVEST-SF_0000007); Ex. 31 – Claud Clark, III, Clark-Davis, PC, Appraisal of Azalea Bay Resort (Mar. 3, 2015), at 42 (ex. p. ECOVEST-SF_0002356). 345 346 Ex. 30 at 42 (ex. p. ECOVEST-SF_0002356). Ex. 31 – Claud Clark, III, Clark-Davis, PC, Appraisal of Azalea Bay Resort (Mar. 3, 2015), at 2-3 (ex. p. ECOVEST-SF_0002316-17). 347 348 Ex. 31 at 49 (ex. p. ECOVEST-SF_0002363). 349 Id. at 48 (ex. p. ECOVEST-SF_0002362). 350 Id. at 2-3 (ex. p. ECOVEST-SF_0002316-17). Ex. 15 – Letter from Sean M. Akins, Partner, Covington & Burling LLP, to John L. Schoenecker, Senior Investigative Counsel, United States Senate Committee on Finance (June 21, 2019), at 16. 351 107 i. j. k. l. m. n. valuing the land as being worth $3,967,913.25, or $14,728 per acre352 Close date for investing in the transaction: August 21, 2015353 Taxpayer-investor vote on disposition of property: 706 votes in favor of granting a conservation easement on the land, 0 votes in favor of developing it, and 0 votes in favor of holding the property for future investment354 Date of granting conservation easement on the land: December 22, 2015355 Total deductions allocated as a result of the easement: $42,987,100356 Total tax benefit to taxpayer-investors: $16,086,633357 EcoVest’s fees as a result of the transaction: $1,483,491358 2. Belle Harbour Resort (2015) a. Acres: 36.7359 b. Purported units to be developed: 266 two-bedroom units, 500 three-bedroom units, and 286 four-bedroom units among 13 four-story buildings and one nine-story building360 352 Ex. 32 – Assignment and Assumption of Membership Interest of Azalea Bay Resort (ex. p. ECOVESTSF_0000787-98); Ex. 15 – Letter from Sean M. Akins, Partner, Covington & Burling LLP, to John L. Schoenecker, Senior Investigative Counsel, United States Senate Committee on Finance (June 21, 2019), at 23. 353 Ex. 15 at 12. 354 Id. at ex. p. ECOVEST-SF_0000009. 355 Id. at 13. 356 Id. at 15. 357 Id. at 23. 358 Ex. 30 at 12 (ex. p. ECOVEST-SF_0000027). This amount is calculated by adding “Arrangement Fee,” “Annual Management Fee,” and the “Disposition Management Fee” for the “Conservation Option” having been chosen. Reimbursements to EcoVest for its out-of-pocket expenses are not included in this amount. Ex. 88 – Belle Harbour Resort Holdings, LLC, Confidential Private Placement Memorandum (Sept. 21, 2015), at ex. p. ECOVEST-SF_0015101. 359 360 Ex. 88 at ex. p. ECOVEST-SF_0015101. 108 c. Claud Clark’s “before”-easement value of the property: $59,207,554, or $1,613,285 per acre361 d. Claud Clark’s primary method for estimating “before” value of the property: discounted cash flow362 e. Claud Clark’s opinion on development potential of the property: “Sufficiency of Demand – The success of developed residential lots in and around Belle Harbour Resort, as well as other similar developments is evident. Competing developed areas have sold out or are enjoying strong sales. This is one of the last remaining large tracts available in the area to develop.”363 f. Claud Clark’s “after”-easement value of the property: $406,808, or $11,085 per acre364 g. Number of taxpayer-investors involved in the transaction: 155365 h. Taxpayer-investors’ total buy-in for 94.5 percent of company owning the underlying land: $1,759,200, thus valuing the land at $1,861,587.30, or $50,724 per acre.366 i. Close date for investing in the transaction: December 17, 2015367 j. Taxpayer-investor vote on disposition of property: 548 votes in favor of granting a conservation easement on the land, 6 votes in favor of developing it, and 0 votes in favor of holding the property for future investment368 k. Date of granting conservation easement on the land: December 22, 2015369 Ex. 89 – Claud Clark, III, Clark-Davis, PC, Appraisal of Belle Harbour Resort (Dec. 15, 2015), at 2-3 (ex. p. ECOVEST-SF_0017583-84). 361 362 Id. at 57 (ex. p. ECOVEST-SF_0017638). 363 Id. at 56 (ex. p. ECOVEST-SF_0017637). 364 Id. at 2-3 (ex. p. ECOVEST-SF_0017583-84). 365 Ex. 15 at 16. 366 Ex. 90 – Assignment and Assumption of Membership Interest (Dec. 17, 2015), at 1 (at ex. p. ECOVEST-SF_0016030); Ex. 15 – Letter from Sean M. Akins, Partner, Covington & Burling LLP, to John L. Schoenecker, Senior Investigative Counsel, United States Senate Committee on Finance (June 21, 2019), at 23. 367 Ex. 15 at 13. 368 Id. at 21. 369 Id. at 13. 109 l. Total deductions allocated as a result of the easement: $55,890,950370 m. Total tax benefit to taxpayer-investors: $20,915,511371 n. EcoVest’s fees as a result of the transaction: $1,423,434372 3. Cypress Cove Marina (2015) a. Acres: 28373 b. Purported units to be developed: 242 two-bedroom units, 485 three-bedroom units, and 252 four-bedroom units among 10 four-story buildings and one nine-story building374 c. Claud Clark’s “before”-easement value of the property: $39,960,013, or $1,427,143 per acre375 d. Claud Clark’s primary method for estimating “before” value of the property: discounted cash flow376 e. Claud Clark’s opinion on development potential of the property: “Sufficiency of Demand – The success of developed residential lots in and around Cypress Cove Marina, as well as other similar developments is evident. Competing developed areas have sold out or are enjoying strong sales. This is one of the last remaining large tracts available in the area to develop.”377 f. Claud Clark’s “after”-easement value of the property: $263,462, or $9,409 per acre378 370 Id. at 15. 371 Id. at 23. 372 Ex. 88 at 13 (ex. p. ECOVEST-SF_0015122). Ex. 91 – Cypress Cove Marina Holdings, LLC, Confidential Private Placement Memorandum (Aug. 3, 2015), at ex. p. ECOVEST-SF_0007717. 373 374 Id. 375 Ex. 92 – Claud Clark, III, Clark-Davis, PC, Appraisal of Cypress Cove Marina (Dec. 15, 2015), at 2-3 (ex. p. ECOVEST-SF_0009220-01). 376 Id. at 51 (ex. p. ECOVEST-SF_0009269). 377 Id. at 50 (ex. p. ECOVEST-SF_0009268). 378 Id. at 2-3 (ex. p. ECOVEST-SF_0009220-01). 110 g. Number of taxpayer-investors involved in the transaction: 114379 h. Taxpayer-investors’ total buy-in for 94.5 percent of company owning the underlying land: $1,040,000, thus valuing the land at $1,100,529.10, or $39,304.61 per acre.380 i. Close date for investing in the transaction: November 13, 2015381 j. Taxpayer-investor vote on disposition of property: 504 votes in favor of granting a conservation easement on the land, 0 votes in favor of developing it, and 0 votes in favor of holding the property for future investment382 k. Date of granting conservation easement on the land: December 22, 2015383 l. Total deductions allocated as a result of the easement: $37,742,150384 m. Total tax benefit to taxpayer-investors: $14,123,867385 n. EcoVest’s fees as a result of the transaction: $1,012,568386 4. Diamond Grande Resort (2015) a. Acres: 67.2387 b. Purported units to be developed: 292 two-bedroom units, 526 three-bedroom units, and 299 four-bedroom units among 13 five-story buildings and one nine-story building388 379 Ex. 15 at 16. 380 Ex. 91 at 23. 381 Ex. 15 at 13. 382 Id. at 21. 383 Id. at 14. 384 Id. at 16. 385 Id. at 23. 386 Ex. 91 at 13 (ex. p. ECOVEST-SF_0007738). Ex. 93 – Diamond Grande Resort Holdings, LLC, Confidential Private Placement Memorandum (Oct. 13, 2015), at ex. p. ECOVEST-SF_0021358. 387 388 Ex. 93 at ex. p. ECOVEST-SF_0021358. 111 c. Claud Clark’s “before”-easement value of the property: $56,013,625, or $833,536 per acre389 d. Claud Clark’s primary method for estimating “before” value of the property: discounted cash flow390 e. Claud Clark’s opinion on development potential of the property: “Sufficiency of Demand – The success of developed residential lots in and around Diamond Grande Resort, as well as other similar developments is evident. Competing developed areas have sold out or are enjoying strong sales. This is one of the last remaining large tracts available in the area to develop.”391 f. Claud Clark’s “after”-easement value of the property: $454,191, or $6,759 per acre392 g. Number of taxpayer-investors involved in the transaction: 168393 h. Taxpayer-investors’ total buy-in for 94.5 percent of company owning the underlying land: $3,226,560, thus valuing the land at $3,414,349, or $50,809 per acre394 i. Close date for investing in the transaction: December 23, 2015395 j. Taxpayer-investor vote on disposition of property: 621 votes in favor of granting a conservation easement on the land, 0 votes in favor of developing it, and 0 votes in favor of holding the property for future investment396 k. Date of granting conservation easement on the land: December 28, 2015397 Ex. 94 – Claud Clark, III, Clark-Davis, PC, Appraisal of Diamond Grande Resort (Dec. 15, 2015), at 23 (ex. p. ECOVEST-SF_0022898-99). 389 390 Id. at 52 (ex. p. ECOVEST-SF_0022948). 391 Id. at 51 (ex. p. ECOVEST-SF_0022947). Ex. 94 – Claud Clark, III, Clark-Davis, PC, Appraisal of Diamond Grande Resort (Dec. 15, 2015), at 23 (ex. p. ECOVEST-SF_0022898-99). 392 393 Ex. 15 at 17. 394 Ex. 95 – Assignment and Assumption of Membership Interest (Dec. 23, 2015), at 1 (at ex. p. ECOVEST-SF_0022187); Ex. 15 at 23. 395 Ex. 15 at 13. 396 Id. at 21. 397 Id. at 14. 112 l. Total deductions allocated as a result of the easement: $52,811,050398 m. Total tax benefit to taxpayer-investors: $19,762,951399 n. EcoVest’s fees as a result of the transaction: $1,224,872400 5. Magnolia Bay Resort (2015) a. Acres: 150.55401 b. Purported units to be developed: 808 two-bedroom units (1,300 square-feet each), 808 three-bedroom units (1,600 square-feet each), and 292 four-bedroom units (2,200 square-feet each) for a total of 101 four-story buildings402 c. Claud Clark’s “before”-easement value of the property: $51,275,850, or approximately $340,590 per acre403 d. Claud Clark’s primary method for estimating “before” value of the property: discounted cash flow404 e. Claud Clark’s opinion on development potential of the property: “Sufficiency of Demand – The success of developed residential lots in and around Magnolia Bay Resort, as well as other similar developments is evident. Competing developed areas have sold out or are enjoying strong sales. This is one of the last remaining large tracts available in the area to develop.”405 f. Claud Clark’s “after”-easement value of the property: $962,500, or $6,393 per acre406 398 Id. at 16. 399 Id. at 23. 400 Ex. 93 at 13 (ex. p. ECOVEST-SF_0021379). Ex. 36 – Magnolia Bay Resort Holdings, LLC, Confidential Private Placement Memorandum (June 11, 2015), at ex. p. ECOVEST-SF_0004100. 401 402 Ex. 36 at ex. p. ECOVEST-SF_0004100. 403 Ex. 37 – Claud Clark, III, Clark-Davis, PC, Appraisal of Magnolia Bay Resort (Dec. 15, 2015), at 2-3, (ex. p. ECOVEST-SF_0006067-68). 404 Id. at 50 (ex. p. ECOVEST-SF_0006115). 405 Id. at 49 (ex. p. ECOVEST-SF_0006114). 406 Id. at 2-3 (ex. p. ECOVEST-SF_0006067-68). 113 g. Number of taxpayer-investors involved in the transaction: 138407 h. Taxpayer-investors’ total buy-in for 94.5 percent of company owning the underlying land: $3,250,321.98, thus valuing the land as being worth approximately $3,439,494.16, or approximately $22,846 per acre. 408 i. Close date for investing in the transaction: October 9, 2015409 j. Taxpayer-investor vote on disposition of property: 682 votes in favor of granting a conservation easement on the land, 0 votes in favor of developing it, and 5 votes in favor of holding the property for future investment410 k. Date of granting conservation easement on the land: December 22, 2015411 l. Total deductions allocated as a result of the easement: $47,827,350412 m. Total tax benefit to taxpayer-investors: $17,897,951413 n. EcoVest’s fees as a result of the transaction: $1,323,310414 6. Sanibel Resort, LLC (2015) a. Acres: 28.53415 b. Purported units to be developed: 242 two-bedroom units, 476 three-bedroom units, and 270 four-bedroom units 407 Ex. 15 at 17. Ex. 38 – Assignment and Assumption of Membership Interest of Magnolia Bay Resort (Oct. 9. 2015), ex. p. ECOVEST-SF_0005078-80; Ex. 15 – Letter from Sean M. Akins, Partner, Covington & Burling LLP, to John L. Schoenecker, Senior Investigative Counsel, United States Senate Committee on Finance (June 21, 2019), at 23. 408 409 Ex. 15 at 13. 410 Id. at 21. 411 Id. at 14. 412 Id. at 16. 413 Id. at 23. 414 Ex. 36 at 12 (ex. p. ECOVEST-SF_0004120). Ex. 96 – Sanibel Resort Holdings, LLC, Confidential Private Placement Memorandum (Sept. 14, 2015), at ex. p. ECOVEST-SF_0012024. 415 114 c. d. e. f. g. h. i. j. 416 among two four-story buildings, one five-story building, and one nine-story building416 Claud Clark’s “before”-easement value of the property: $54,798,677, or $1,920,738.77 per acre417 Claud Clark’s primary method for estimating “before” value of the property: discounted cash flow418 Claud Clark’s opinion on development potential of the property: “Sufficiency of Demand – The success of developed residential lots in and around Sanibel Resort, as well as other similar developments is evident. Competing developed areas have sold out or are enjoying strong sales. This is one of the last remaining large tracts available in the area to develop.”419 Claud Clark’s “after”-easement value of the property: $264,222, or $9,261 per acre420 Number of taxpayer-investors involved in the transaction: 135421 Taxpayer-investors’ total buy-in for 94.5 percent of company owning the underlying land: $3,851,550, thus valuing the land at $4,075,714.29, or $142,857.14 per acre422 Close date for investing in the transaction: December 1, 2015423 Taxpayer-investor vote on disposition of property: 688 votes in favor of granting a conservation easement on the land, 8 votes in favor of developing it, and 0 votes in favor of holding the property for future investment.424 Id. at ex. p. ECOVEST-SF_0012024. Ex. 97 – Claud Clark, III, Clark-Davis, PC, Appraisal of Sanibel Resort (Dec. 15, 2015), at 2-3 (ex. p. ECOVEST-SF_0012951-52). 417 418 Id. at 56 (ex. p. ECOVEST-SF_0013005). 419 Id. at 55 (ex. p. ECOVEST-SF_0013004). 420 Id. at 2-3 (ex. p. ECOVEST-SF_0012951-52). 421 Ex. 15 at 17. 422 Ex. 96 at 23. 423 Ex. 15 at 13. 424 Id. at 21. 115 k. Date of granting conservation easement on the land: December 22, 2015425 l. Total deductions allocated as a result of the easement: $51,837,300426 m. Total tax benefit to taxpayer-investors: $19,398,554427 n. EcoVest’s fees as a result of the transaction: $1,173,602428 7. Seavista Resort, LLC (2015) a. Acres: 29429 b. Purported units to be developed: 160 two-bedroom units, 376 three-bedroom units, and 215 four-bedroom units among two four-story buildings and one nine-story building430 c. Claud Clark’s “before”-easement value of the property: $55,379,424, or $1,909,635 per acre431 d. Claud Clark’s primary method for estimating “before” value of the property: discounted cash flow432 e. Claud Clark’s opinion on development potential of the property: “Sufficiency of Demand – The success of developed residential lots in and around Seavista Resort, as well as other similar developments is evident. Competing developed areas have sold out or are enjoying strong sales. This is one of the last remaining large tracts available in the area to develop.”433 425 Id. at 14. 426 Id. at 16. 427 Id. at 23. 428 Ex. 96 at 13 (at ex. p. ECOVEST-SF_0012045). Ex. 98 – Seavista Resort Holdings, LLC, Confidential Private Placement Memorandum (Oct. 30, 2015), at ex. p. ECOVEST-SF_0025730. 429 430 Ex. 98 – Seavista Resort Holdings, LLC, Confidential Private Placement Memorandum (Oct. 30, 2015), at ex. p. ECOVEST-SF_0025730. Ex. 99 – Claud Clark, III, Clark-Davis, PC, Appraisal of Seavista Resort (Dec. 15, 2015), at 2-3 (ex. p. ECOVEST-SF_0026637-38). 431 432 Id. at 54 (ex. p. ECOVEST-SF_0026689). 433 Id. at 53 (ex. p. ECOVEST-SF_0026688). 116 f. Claud Clark’s “after”-easement value of the property: $264,950, or $9,136 per acre434 g. Number of taxpayer-investors involved in the transaction: 107435 h. Taxpayer-investors’ total buy-in for 94.5 percent of company owning the underlying land: $2,948,400, thus valuing the land at $3,120,000 or $107,586 per acre436 i. Close date for investing in the transaction: December 24, 2015437 j. Taxpayer-investor vote on disposition of property: 719 votes in favor of granting a conservation easement on the land, 0 votes in favor of developing it, and 0 votes in favor of holding the property for future investment438 k. Date of granting conservation easement on the land: December 28, 2015439 l. Total deductions allocated as a result of the easement: $52,388,300440 m. Total tax benefit to taxpayer-investors: $19,604,750441 n. EcoVest’s fees as a result of the transaction: $1,248,184442 434 Id. at 2-3 (ex. p. ECOVEST-SF_0026637-38). 435 Ex. 15 at 17. 436 Ex. 98 at 23. 437 Ex. 15 at 13. 438 Id. at 21. 439 Id. at 14. 440 Id. at 16. 441 Id. at 23. 442 Ex. 98 at 13 (at ex. p. ECOVEST-SF_0025751). 117 8. South Bay Cove, LLC (2015) a. Acres: 27.50443 b. Purported units to be developed: 135 two-bedroom units, 342 three-bedroom units, and 198 four-bedroom units in one nine-story building444 c. Claud Clark’s “before”-easement value of the property: $50,837,900, or $1,848,651 per acre445 d. Claud Clark’s primary method for estimating “before” value of the property: discounted cash flow446 e. Claud Clark’s opinion on development potential of the property: “Sufficiency of Demand – The success of developed residential lots in and around South Bay Cove, as well as other similar developments is evident. Competing developed areas have sold out or are enjoying strong sales. This is one of the last remaining large tracts available in the area to develop.”447 f. Claud Clark’s “after”-easement value of the property: $349,250, or $12,700 per acre448 g. Number of taxpayer-investors involved in the transaction: 121449 h. Taxpayer-investors’ total buy-in for 94.5 percent of company owning the underlying land: $3,250,000, thus valuing the land at $3,429,153 or $125,060 per acre450 i. Close date for investing in the transaction: December 29, 2015451 Ex. 100 – South Bay Cove Holdings, LLC, Confidential Private Placement Memorandum (Nov. 17, 2015), at ex. p. ECOVEST-SF_0033593. 443 444 Id. at ex. p. ECOVEST-SF_0033593. Ex. 101 – Claud Clark, III, Clark-Davis, PC, Appraisal of South Bay Cove (Dec. 15, 2015), at 2-3 (ex. p. ECOVEST-SF_0034545-46). 445 446 Id. at 53 (ex. p. ECOVEST-SF_0034596). 447 Id. at 52 (ex. p. ECOVEST-SF_0034595). 448 Id. at 2-3 (ex. p. ECOVEST-SF_0034545-46). 449 Ex. 15 at 17. 450 Ex. 100 at 8 (at ex. p. ECOVEST-SF_0033609); Ex. 15 at 23. 451 Ex. 15 at 13. 118 j. Taxpayer-investor vote on disposition of property: 691 votes in favor of granting a conservation easement on the land, 0 votes in favor of developing it, and 0 votes in favor of holding the property for future investment452 k. Date of granting conservation easement on the land: December 30, 2015453 l. Total deductions allocated as a result of the easement: $47,994,550454 m. Total tax benefit to taxpayer-investors: $17,960,521455 n. EcoVest’s fees as a result of the transaction: $1,124,606456 9. Arcadian Quay Holdings, LLC (2016) a. Acres: 30.27457 b. Purported units to be developed: 121 two-bedroom units, 318 three-bedroom units, and 94 four-bedroom units in ten four-story buildings and one nine-story building458 c. Claud Clark’s “before”-easement value of the property: $61,850,730, or $2,043,301 per acre459 d. Claud Clark’s primary method for estimating “before” value of the property: discounted cash flow460 e. Claud Clark’s opinion on development potential of the property: “Sufficiency of Demand – The success of developed residential lots in and around Arcadian Quay, as well as other similar developments is evident. Competing developed areas have sold out or are enjoying strong sales. 452 Id. at 21. 453 Id. at 14. 454 Id. at 16. 455 Id. at 23. 456 Ex. 100 at 13 (at ex. p. ECOVEST-SF_0033614). 457 Ex. 102 – Arcadian Quay Holdings, LLC, Confidential Private Placement Memorandum (Nov. 17, 2015), at ex. p. ECOVEST-SF_0072633. 458 Id. at ex. p. ECOVEST-SF_0072633. Ex. 103 – Claud Clark, III, Clark-Davis, PC, Appraisal of Arcadian Quay (Jan. 2, 2017), at 2-3 (ex. p. ECOVEST-SF_0076241-42). 459 460 Id. at 55 (ex. p. ECOVEST-SF_0076293). 119 f. g. h. i. j. k. l. m. n. This is one of the last remaining large tracts available in the area to develop.”461 Claud Clark’s “after”-easement value of the property: $198,432, or $6,555 per acre462 Number of taxpayer-investors involved in the transaction: 168463 Taxpayer-investors’ total buy-in for 94.5 percent of company owning the underlying land: $3,170,286, thus valuing the land at $3,354,800 or $110,829 per acre464 Close date for investing in the transaction: December 2, 2016465 Taxpayer-investor vote on disposition of property: 626 votes in favor of granting a conservation easement on the land, 2 votes in favor of developing it, and 0 votes in favor of holding the property for future investment466 Date of granting conservation easement on the land: December 15, 2016467 Total deductions allocated as a result of the easement: $61,652,000468 Total tax benefit to taxpayer-investors: $23,071,411469 EcoVest’s fees as a result of the transaction: $1,575,129470 461 Id. at 54 (ex. p. ECOVEST-SF_0076293). 462 Id. at 2-3 (ex. p. ECOVEST-SF_0076241-42). 463 Ex. 15 at 16. 464 Ex. 102 at 8 (ex. p. ECOVEST-SF_0072650); Ex. 15 at 23. 465 Ex. 15 at 12. 466 Id. at 21. 467 Id. at 13. 468 Id. at 15. 469 Id. at 23. 470 Ex. 102 at 13 (at ex. p. ECOVEST-SF_0072655). 120 10. Camellia Station Holdings, LLC (2016) a. Acres: 45.22471 b. Purported units to be developed: 140 two-bedroom units, 420 three-bedroom units, and 140 four-bedroom units in eight four-story buildings and six nine-story buildings472 c. Claud Clark’s “before”-easement value of the property: $53,627,227, or $1,185,918 per acre473 d. Claud Clark’s primary method for estimating “before” value of the property: discounted cash flow474 e. Claud Clark’s opinion on development potential of the property: “Sufficiency of Demand – The success of developed residential lots in and around Camellia Station, as well as other similar developments is evident. Competing developed areas have sold out or are enjoying strong sales. This is one of the last remaining large tracts available in the area to develop.”475 f. Claud Clark’s “after”-easement value of the property: $222,320, or $4,916 per acre476 g. Number of taxpayer-investors involved in the transaction: 96477 h. Taxpayer-investors’ total buy-in for 94.5 percent of company owning the underlying land: $4,186,450, thus valuing the land at $4,430,105.82 or $97,968 per acre478 i. Close date for investing in the transaction: December 1, 2016479 Ex. 104 – Camellia Station Holdings, LLC, Confidential Private Placement Memorandum (Sept. 1, 2016), at ex. p. ECOVEST-SF_0068068. 471 472 Id. at ex. p. ECOVEST-SF_0068068. Ex. 105 – Claud Clark, III, Clark-Davis, PC, Appraisal of Camellia Station (Jan. 2, 2017), at 2-3 (ex. p. ECOVEST-SF_0069752-53). 473 474 Id. at 56 (ex. p. ECOVEST-SF_0069806). 475 Id. at 55 (ex. p. ECOVEST-SF_0069805). 476 Id. at 2-3 (ex. p. ECOVEST-SF_0069752-53). 477 Ex. 15 at 16. 478 Ex. 104 at 23. 479 Ex. 15 at 13. 121 j. Taxpayer-investor vote on disposition of property: 795 votes in favor of granting a conservation easement on the land, 2 votes in favor of developing it, and 4 votes in favor of holding the property for future investment480 k. Date of granting conservation easement on the land: December 15, 2016481 l. Total deductions allocated as a result of the easement: $53,405,000482 m. Total tax benefit to taxpayer-investors: $19,985,219483 n. EcoVest’s fees as a result of the transaction: $1,216,405484 11. Lakeshore Resort Holdings, LLC (2016) a. Acres: 44.23485 b. Purported units to be developed: 102 two-bedroom units, 306 three-bedroom units, and 102 four-bedroom units in six four-story buildings and three 13-story building486 c. Claud Clark’s “before”-easement value of the property: $49,409,360, or $1,117,101 per acre487 d. Claud Clark’s primary method for estimating “before” value of the property: discounted cash flow488 e. Claud Clark’s opinion on development potential of the property: “Sufficiency of Demand – The success of developed residential lots in and around Lakeshore Resort, as well as other similar developments is evident. Competing developed areas have sold out or are enjoying 480 Id. at 21. 481 Id. at 13. 482 Id. at 15. 483 Id. at 23. 484 Ex. 104 at 13 (at ex. p. ECOVEST-SF_0068090). 485 Ex. 106 – Lakeshore Resort Holdings, LLC, Confidential Private Placement Memorandum (Aug. 3, 2016), at ex. p. ECOVEST-SF_0058880. 486 Id. at ex. p. ECOVEST-SF_0058880. Ex. 107 – Claud Clark, III, Clark-Davis, PC, Appraisal of Lakeshore Resort (Jan. 2, 2017), at 2-3 (ex. p. ECOVEST-SF_0060368-69). 487 488 Id. at 56 (ex. p. ECOVEST-SF_0060422). 122 f. g. h. i. j. k. l. m. n. strong sales. This is one of the last remaining large tracts available in the area to develop.”489 Claud Clark’s “after”-easement value of the property: $220,720, or $4,990 per acre490 Number of taxpayer-investors involved in the transaction: 124491 Taxpayer-investors’ total buy-in for 94.5 percent of company owning the underlying land: $3,002,000, thus valuing the land at $3,176,719.58 or $71,823 per acre.492 Close date for investing in the transaction: November 2, 2016493 Taxpayer-investor vote on disposition of property: 623 votes in favor of granting a conservation easement on the land, 0 votes in favor of developing it, and 6 vote in favor of holding the property for future investment494 Date of granting conservation easement on the land: December 15, 2016495 Total deductions allocated as a result of the easement: $49,189,000496 Total tax benefit to taxpayer-investors: $18,407,508497 EcoVest’s fees as a result of the transaction: $1,213,255498 489 Id. at 55 (ex. p. ECOVEST-SF_0060421). 490 Id. at 2-3 (ex. p. ECOVEST-SF_0060368-69). 491 Ex. 15 at 17. 492 Ex. at 8 (ex. p. ECOVEST-SF_0058897); Ex. 15 at 23. 493 Ex. 15 at 13. 494 Id. at 21. 495 Id. at 14. 496 Id. at 16. 497 Id. at 23. 498 Ex. 106 at ex. p. ECOVEST-SF_0058880. 123 12. Myrtle West Resort Holdings, LLC (2016) a. Acres: 27.43499 b. Purported units to be developed: 119 two-bedroom units, 266 three-bedroom units, and 154 four-bedroom units in one seven-story building500 c. Claud Clark’s “before”-easement value of the property: $42,587,132, or $1,552,575 per acre501 d. Claud Clark’s primary method for estimating “before” value of the property: discounted cash flow502 e. Claud Clark’s opinion on development potential of the property: “Sufficiency of Demand – The success of developed residential lots in and around Myrtle West Resort, as well as other similar developments is evident. Competing developed areas have sold out or are enjoying strong sales. This is one of the last remaining large tracts available in the area to develop.”503 f. Claud Clark’s “after”-easement value of the property: $349,250, or $12,732 per acre504 g. Number of taxpayer-investors involved in the transaction: 102505 h. Taxpayer-investors’ total buy-in for 94.5 percent of company owning the underlying land: $3,250,000, thus valuing the land at $3,439,153.44 or $125,379 per acre506 i. Close date for investing in the transaction: August 23, 2016507 Ex. 108 – Myrtle West Resort Holdings, LLC, Confidential Private Placement Memorandum (Mar. 29, 2016), at ex. p. ECOVEST-SF_0045818. 499 500 Id. at ex. p. ECOVEST-SF_0045818. Ex. 109 – Claud Clark, III, Clark-Davis, PC, Appraisal of Myrtle West Resort (Jan. 2, 2017), at 2-3 (ex. p. ECOVEST-SF_0047203-04). 501 502 Id. at 56 (ex. p. ECOVEST-SF_0047257). 503 Id. at 55 (ex. p. ECOVEST-SF_0047256). 504 Id. at 2-3 (ex. p. ECOVEST-SF_0047203-04). 505 Ex. 15 at 17. 506 Ex. 108 at 23. 507 Ex. 15 at 13. 124 j. Taxpayer-investor vote on disposition of property: 571 votes in favor of granting a conservation easement on the land, 10 votes in favor of developing it, and 0 votes in favor of holding the property for future investment508 k. Date of granting conservation easement on the land: November 3, 2016509 l. Total deductions allocated as a result of the easement: $42,238,000510 m. Total tax benefit to taxpayer-investors: $15,806,304511 n. EcoVest’s fees as a result of the transaction: $965,343512 13. North Bay Cove Holdings, LLC (2016) a. Acres: 28.04513 b. Purported units to be developed: 97 two-bedroom units, 246 three-bedroom units, and 70 four-bedroom units in four four-story buildings and one nine-story building514 c. Claud Clark’s “before”-easement value of the property: $46,172,176, or $1,646,654 per acre515 d. Claud Clark’s primary method for estimating “before” value of the property: discounted cash flow516 e. Claud Clark’s opinion on development potential of the property: “Sufficiency of Demand – The success of developed residential lots in and around North Bay Cove, as well as other similar developments is evident. Competing developed areas have sold out or are enjoying 508 Id. at 21. 509 Id. at 14. 510 Id. at 16. 511 Id. at 23. 512 Ex. 108 at 13 (ex. p. ECOVEST-SF_0045840). 513 Ex. 110 – North Bay Cove Holdings, LLC, Confidential Private Placement Memorandum (Aug. 25, 2016), at ex. p. ECOVEST-SF_0063638. 514 Id. at ex. p. ECOVEST-SF_0063638. Ex. 111 – Claud Clark, III, Clark-Davis, PC, Appraisal of North Bay Cove (Jan. 2, 2017), at 2-3 (ex. p. ECOVEST-SF_0065164-65). 515 516 Id. at 55 (ex. p. ECOVEST-SF_0065217). 125 f. g. h. i. j. k. l. m. n. strong sales. This is one of the last remaining large tracts available in the area to develop.”517 Claud Clark’s “after”-easement value of the property: $194,864, or $6,950 per acre518 Number of taxpayer-investors involved in the transaction: 115519 Taxpayer-investors’ total buy-in for 94.5 percent of company owning the underlying land: $3,250,000, thus valuing the land at $3,439,153.44 or $115,906 per acre520 Close date for investing in the transaction: November 30, 2016521 Taxpayer-investor vote on disposition of property: 735 votes in favor of granting a conservation easement on the land, 9 votes in favor of developing it, and 0 vote in favor of holding the property for future investment522 Date of granting conservation easement on the land: December 15, 2016523 Total deductions allocated as a result of the easement: $45,977,000524 Total tax benefit to taxpayer-investors: $17,205,513525 EcoVest’s fees as a result of the transaction: $1,109,027526 517 Id. at 54 (ex. p. ECOVEST-SF_0065216). 518 Id. at 2-3 (ex. p. ECOVEST-SF_0065164-65). 519 Ex. 15 at 17. 520 Ex. 110 at 8 (ex. p. ECOVEST-SF_0063655); Ex. 15 at 23. 521 Ex. 15 at 13. 522 Id. at 21. 523 Id. at 14. 524 Id. at 16. 525 Id. at 23. 526 Ex. 110 at 13 (ex. p. ECOVEST-SF_0063660). 126 14. Ocean Grove Resort Holdings, LLC (2016) a. Acres: 225.5527 b. Purported units to be developed: 332 two-bedroom units, 996 three-bedroom units, and 332 four-bedroom units in 83 four-story buildings528 c. Claud Clark’s “before”-easement value of the property: $81,553,913, or $361,658 per acre529 d. Claud Clark’s primary method for estimating “before” value of the property: discounted cash flow530 e. Claud Clark’s opinion on development potential of the property: “Sufficiency of Demand – The success of developed residential lots in and around Ocean Grove Resort, as well as other similar developments is evident. Competing developed areas have sold out or are enjoying strong sales. This is one of the last remaining large tracts available in the area to develop.”531 f. Claud Clark’s “after”-easement value of the property: $960,800, or $4,261 per acre532 g. Number of taxpayer-investors involved in the transaction: 193533 h. Taxpayer-investors’ total buy-in for 94.5 percent of company owning the underlying land: $5,024,000, thus valuing the land at $5,316,402.12 or $23,576 per acre534 i. Close date for investing in the transaction: October 14, 2016535 Ex. 112 – Ocean Grove Resort Holdings, LLC, Confidential Private Placement Memorandum (June 17, 2016), at ex. p. ECOVEST-SF_0050078. 527 528 Id. at ex. p. ECOVEST-SF_0050078. Ex. 113 – Claud Clark, III, Clark-Davis, PC, Appraisal of Ocean Grove Resort (Jan. 2, 2017), at 2-3 (ex. p. ECOVEST-SF_0051547-48). 529 530 Id. at 58 (ex. p. ECOVEST-SF_0051603). 531 Id. at 57 (ex. p. ECOVEST-SF_0051602). 532 Id. at 2-3 (ex. p. ECOVEST-SF_0051547-48). 533 Ex. 15 at 17. 534 Ex. 112 at 8 (ex. p. ECOVEST-SF_0050095); Ex. 15 at 23. 535 Ex. 15 at 13. 127 j. Taxpayer-investor vote on disposition of property: 596 votes in favor of granting a conservation easement on the land, 8 votes in favor of developing it, and 3 votes in favor of holding the property for future investment536 k. Date of granting conservation easement on the land: November 21, 2016537 l. Total deductions allocated as a result of the easement: $80,593,000538 m. Total tax benefit to taxpayer-investors: $30,159,512539 n. EcoVest’s fees as a result of the transaction: $2,006,291540 15. Queen’s Cove Holdings, LLC (2016) a. Acres: 51.38541 b. Purported units to be developed: 116 two-bedroom units, 328 three-bedroom units, and 136 four-bedroom units in 19 four-story buildings and one ten-story building542 c. Claud Clark’s “before”-easement value of the property: $61,224,881, or $1,191,609 per acre543 d. Claud Clark’s primary method for estimating “before” value of the property: discounted cash flow544 e. Claud Clark’s opinion on development potential of the property: “Sufficiency of Demand – The success of developed residential lots in and around Queens Cove, as well as other similar developments is evident. Competing developed areas have sold out or are enjoying strong sales. 536 Id. at 21. 537 Id. at 14. 538 Id. at 16. 539 Id. at 23. 540 Ex. 112 at 13 (ex. p. ECOVEST-SF_0050100). 541 Ex. 114 – Queen’s Cove Holdings, LLC, Confidential Private Placement Memorandum (Nov. 17, 2016), at ex. p. ECOVEST-SF_0087138. 542 Id. at ex. p. ECOVEST-SF_0087138. Ex. 115 – Claud Clark, III, Clark-Davis, PC, Appraisal of Queen’s Cove (Jan. 2, 2017), at 2-3 (ex. p. ECOVEST-SF_0088838-39). 543 544 Id. at 55 (ex. p. ECOVEST-SF_0088891). 128 f. g. h. i. j. k. l. m. n. This is one of the last remaining large tracts available in the area to develop.”545 Claud Clark’s “after”-easement value of the property: $2,405,408, or $46,816 per acre546 Number of taxpayer-investors involved in the transaction: 145547 Taxpayer-investors’ total buy-in for 94.5 percent of company owning the underlying land: $6,152,400, thus valuing the land at $6,510,476.19 or $126,712 per acre548 Close date for investing in the transaction: December 19, 2016549 Taxpayer-investor vote on disposition of property: 581 votes in favor of granting a conservation easement on the land, 18 votes in favor of developing it, and 11 votes in favor of holding the property for future investment550 Date of granting conservation easement on the land: December 27, 2016551 Total deductions allocated as a result of the easement: $58,819,000552 Total tax benefit to taxpayer-investors: $22,011,246553 EcoVest’s fees as a result of the transaction: $1,782,226554 545 Id. at 54 (ex. p. ECOVEST-SF_0088890). 546 Id. at 2-3 (ex. p. ECOVEST-SF_0088838-39). 547 Ex. 15 at 17. 548 Ex. 114 at 8 (ex. p. ECOVEST-SF_0087155); Ex. 15 at 23. 549 Ex. 15 at 13. 550 Id. at 21. 551 Id. at 14. 552 Id. at 16. 553 Id. at 23. 554 Ex. 114 at 13 (ex. p. ECOVEST-SF_0087160). 129 16. Waterway Grove Holdings, LLC (2016) a. Acres: 30.41555 b. Purported units to be developed: 121 two-bedroom units, 318 three-bedroom units, and 94 four-bedroom units in ten four-story buildings and one nine-story building556 c. Claud Clark’s “before”-easement value of the property: $61,631,524, or $2,026,686 per acre557 d. Claud Clark’s primary method for estimating “before” value of the property: discounted cash flow558 e. Claud Clark’s opinion on development potential of the property: “Sufficiency of Demand – The success of developed residential lots in and around Waterway Grove, as well as other similar developments is evident. Competing developed areas have sold out or are enjoying strong sales. This is one of the last remaining large tracts available in the area to develop.”559 f. Claud Clark’s “after”-easement value of the property: $198,656, or $6,533 per acre560 g. Number of taxpayer-investors involved in the transaction: 146561 h. Taxpayer-investors’ total buy-in for 94.5 percent of company owning the underlying land: $3,249,550, thus valuing the land at $3,438,677.25 or $113,077 per acre562 i. Close date for investing in the transaction: December 22, 2016563 Ex. 116 – Waterway Grove Holdings, LLC, Confidential Private Placement Memorandum (Dec. 2, 2016), at ex. p. ECOVEST-SF_0094675. 555 556 Id. at ex. p. ECOVEST-SF_0094675. Ex. 117 – Claud Clark, III, Clark-Davis, PC, Appraisal of Waterway Grove (Jan. 2, 2017), at 2-3 (ex. p. ECOVEST-SF_0095501-02). 557 558 Id. at 56 (ex. p. ECOVEST-SF_0095555). 559 Id. at 55 (ex. p. ECOVEST-SF_0095554). 560 Id. at 2-3 (ex. p. ECOVEST-SF_0095501-02). 561 Ex. 15 at 17. 562 Ex. 116 at 23. 563 Ex. 15 at 13. 130 j. Taxpayer-investor vote on disposition of property: 539 votes in favor of granting a conservation easement on the land, 4 votes in favor of developing it, and 2 votes in favor of holding the property for future investment564 k. Date of granting conservation easement on the land: December 27, 2016565 l. Total deductions allocated as a result of the easement: $61,433,000566 m. Total tax benefit to taxpayer-investors: $22,989,457567 n. EcoVest’s fees as a result of the transaction: $1,589,173568 17. White Sands Village Holdings, LLC (2016) a. Acres: 181.2569 b. Purported units to be developed: 304 two-bedroom units, 912 three-bedroom units, and 304 four-bedroom units in 76 four-story buildings570 c. Claud Clark’s “before”-easement value of the property: $77,492,023, or $427,660 per acre571 d. Claud Clark’s primary method for estimating “before” value of the property: discounted cash flow572 e. Claud Clark’s opinion on development potential of the property: “Sufficiency of Demand – The success of developed residential lots in and around White Sands Village, as well as other similar developments is evident. Competing developed areas have sold out or are enjoying 564 Id. at 21. 565 Id. at 14. 566 Id. at 16. 567 Id. at 23. 568 Ex. 116 at 13 (ex. p. ECOVEST-SF_0094697). 569 Ex. 118 – White Sands Village Holdings, LLC, Confidential Private Placement Memorandum (July 1, 2016), at ex. p. ECOVEST-SF_0055253. 570 Id. at ex. p. ECOVEST-SF_0055253. Ex. 119 – Claud Clark, III, Clark-Davis, PC, Appraisal of White Sands Village (Jan. 2, 2017), at 2-3 (ex. p. ECOVEST-SF_0056023-24). 571 572 Id. at 57 (ex. p. ECOVEST-SF_0056078). 131 f. g. h. i. j. k. l. m. n. strong sales. This is one of the last remaining large tracts available in the area to develop.”573 Claud Clark’s “after”-easement value of the property: $889,920, or $4,911 per acre574 Number of taxpayer-investors involved in the transaction: 143575 Taxpayer-investors’ total buy-in for 94.5 percent of company owning the underlying land: $4,601,000, thus valuing the land at $4,868,783.07 or $26,870 per acre576 Close date for investing in the transaction: October 19, 2016577 Taxpayer-investor vote on disposition of property: 634 votes in favor of granting a conservation easement on the land, 6 votes in favor of developing it, and 3 votes in favor of holding the property for future investment578 Date of granting conservation easement on the land: November 21, 2016579 Total deductions allocated as a result of the easement: $76,602,000580 Total tax benefit to taxpayer-investors: $28,666,000581 EcoVest’s fees as a result of the transaction: $1,937,239582 573 Id. at 56 (ex. p. ECOVEST-SF_0056077). 574 Id. at 2-3 (ex. p. ECOVEST-SF_0056023-24). 575 Ex. 15 at 17. 576 Ex. 118 at 8 (ex. p. ECOVEST-SF_0055270); Ex. 15 at 23. 577 Ex. 15 at 13. 578 Id. at 21. 579 Id. at 14. 580 Id. at 16. 581 Id. at 23. 582 Ex. 118 at 13 (ex. p. ECOVEST-SF_0055275). 132 ii. EvrSource Capital 1. Bienville 75 Acquisitions, LLC a. Acres: 1,267.37 (1,194 to be conserved)583 b. Purported units to be developed: 144 motor coach lots, 161 lakefront homes sites, 222 smaller lakefront homes, 1,330 interior single family homes, 742 duplexes, 1 hotel, 1 transient RV site, 24 commercial sites, 20 boat and RV storage sites, 24 utility sites, and 1 golf course584 c. Raymond Veal’s “before”-easement value of the property: $90,000,000, or $71,013 per acre585 d. Raymond E. Veal’s method for estimating “before” value of the property: discounted cash flow, referred to as “income capitalization approach” or “discounted sellout analysis”586 e. Raymond Veal’s opinion on development potential of the property: “Previously, no efforts have been made to attract mixed use development to the area. As a result there are few nearby residents, and little market activity, because of a lack of product. The northern portion of Florida has a long history of demand for residential real estate, which is documented in the Norton Consulting Report provided. There is ample market evidence that a mixed use development geared toward a nationally known fishing and hunting plantation would be feasible.”587 f. Raymond Veal’s “after”-easement value of the property: $1,267,370, or $1,000 per acre588 Ex. 120 – Form 8886 – Reportable Transaction Disclosure Statement for Bienville 75 Acquisitions, LLC at 2, supplemental 4 (ex. p. SENATE_FINANCE-0007127, 31); Ex. 42 – Raymond E. Veal, Market Value Appraisal Bienville 75 (Oct. 20, 2015) at 2, 115 (ex. p. SENATE_FINANCE-0002703, -0002821). 583 584 Id. at 80 (ex. p. SENATE_FINANCE-0002786). 585 Id. at 86 (ex. p. SENATE_FINANCE-0002792). 586 Id. at 78-81 (ex. p. SENATE_FINANCE-002784-2787). 587 Id. at 75 (ex. p. SENATE_FINANCE-0002781). 588 Id. at 124 (ex. p. SENATE_FINANCE-0002830). 133 g. Number of taxpayer-investors involved in the transaction: 174589 h. Taxpayer-investors’ total buy-in for 98 percent of company owning the underlying land, known as Bienville 75, LLC: $12,200,000.00, thus valuing the land at $12,448,979.60, or $9,823 per acre590 i. Close date for investing in the transaction: December 23, 2015591 j. Taxpayer-investor vote on disposition of property: 98.84 percent (12,057,500 votes) in favor of granting a conservation easement, 0.71 percent (86,000 votes) in favor of developing the land, and 0.45 percent (55,000) in favor of holding it for further investment592 k. Date of granting conservation easement on the land: December 29, 2015593 l. Total deductions allocated to taxpayer-investors as a result of the easement: $88,530,000594 m. Total tax benefit to taxpayer-investors: $35,057,880595 589 Ex. 43 – Senate Committee on Finance Supplemental Response Written Answer – Bienville 75 Acquisitions, LLC at p. 2 of 8. Ex. 44 – Bienville 75, LLC, Private Placement Memorandum (Oct. 30, 2015) at 3 (ex. p. SENATE_FINANCE-0002637). 590 591 Ex. 43 at p. 2 of 8. 592 Based on the documents provided in this investigation, the results of this vote are not entirely clear. EvrSource Capital affirmatively answered that 55,000 votes out of up to 19,334,299 were in favor of holding the land for long-term investment, and 86,000 votes were in favor of developing the land. These answers did not answer how many votes favored granting a conservation easement on the land. See Ex. 43 at p. 1 and 6 of 8. However, the vote totals listed above for the conservation-easement option are necessarily too low. Of the 125 taxpayer-investor ballots provided in this investigation, 119 were in favor of granting a conservation easement, 2 were in favor of further developing the land, 1 was in favor of holding the land for investment, and 3 could not be determined based on the information provided. Of the 119 ballots affirmatively in favor of granting the conservation easement, 30 such ballots failed to list the number of votes in favor of that option. Because the average number of votes per ballot with known vote totals was 131,060, it is very likely that the vote total for granting the conservation easement was over 99 percent in favor of it. See Ex. 45 – Bienville 75 Acquisitions, LLC ballots at ex. p. SENATE_FINANCE-0008467-8778. 593 Ex. 43 at p. 2 of 8. 594 Id. at p. 7 of 8. 595 This figure is derived from multiplying the total deductions allocated to taxpayer-investors in the transaction by the then-existing top individual federal income-tax rate of 39.6 percent. 134 n. EvrSource Capital’s fees as a result of the transaction: $1,157,000596 2. Roaring Florida Acquisitions a. Acres: 1,518.44 (1,478.08 to be conserved)597 b. Purported units to be developed: 150 lodge units, 192 transient recreational-vehicle units, 1291 single-family homes, 466 duplexes, 200 assisted-living apartments, 258 lake-front or lake-access second homes, 144 permanent recreational-vehicle units598 c. Raymond Veal’s “before”-easement value of the property: $69,050,000, or $45,474 per acre599 d. Raymond E. Veal’s method for estimating “before” value of the property: discounted cash flow, referred to as “income capitalization approach” or “discounted sellout analysis”600 e. Raymond Veal’s opinion on development potential of the property: “Previously, no efforts have been made to attract mixed use development to the area. As a result there are few nearby residents, and little market activity, because of a lack of product. The northern portion of Florida has a long history of demand for residential real estate, which is documented in the Norton Consulting Report provided. There is ample market evidence that a mixed use development geared toward a nationally known fishing and hunting plantation would be feasible.”601 596 Ex. 44 at 15 (ex. p. SENATE_FINANCE-0002649). This amount is derived by adding the $500,000 “EvrSource Capital, LLC” fee listed therein to the “additional consulting fees” upon the condition of Bienville 75 Acquisitions’ investors choosing the “Conservation Proposal” listed in footnote 9 therein. According to EvrSource Capital’s answers to the Finance Committee, this additional consulting fee was $657,000. Ex. 43 at p. 8 of 8. 597 Ex. 47 – Raymond E. Veal, Market Value Appraisal Roaring Creek Plantation (Feb. 14, 2017) at 2, 92 (ex. p. SENATE_FINANCE-0001993, -0002083). 598 Id. at 25 (ex. p. SENATE_FINANCE-0002016). 599 Id. at 88-90 (ex. p. SENATE_FINANCE-0002079-81). 600 Id. at 79-90 (ex. p. SENATE_FINANCE-0002070-81). 601 Id. at 78 (ex. p. SENATE_FINANCE-0002069). 135 f. Raymond Veal’s “after”-easement value of the property: $1,520,100, or $1,000 per acre602 g. Number of taxpayer-investors involved in the transaction: 136603 h. Taxpayer-investors’ total buy-in for 96.564 percent of company owning the underlying land, known as Roaring Creek Plantation, LLC: $9,513,393.16, thus valuing the land at $9,851,904.60, or $6,488 per acre604 i. Close date for investing in the transaction: December 22, 2016605 j. Taxpayer-investor vote on disposition of property: appr. 98 percent in favor of granting a conservation easement, appr, two percent in favor of either developing the land or holding it for further investment606 k. Date of granting conservation easement on the land: December 28, 2016607 l. Total deductions allocated to taxpayer-investors as a result of the easement: $67,530,000608 m. Total tax benefit to taxpayer-investors: $26,741,880609 602 Id. at 121 (ex. p. SENATE_FINANCE-0002112). Ex. 49 – Senate Committee on Finance Supplemental Response Written Answer – Roaring Florida Acquisitions, LLC at p. 2 of 9. 603 Ex. 46 – Roaring Florida Acquisitions, LLC, Private Placement Memorandum (Nov. 8, 2016) at 4 (ex. p. SENATE_FINANCE-0001091). 604 605 Ex. 49 at p. 2 of 9. 606 Based on the documents provided in this investigation, the results of this vote are not entirely clear. EvrSource Capital affirmatively answered that 280,000 votes out of up to 15,303,567 were in favor of holding the land for long-term investment (1.83 percent), and 50,000 votes were in favor of developing the land (0.33 percent). These answers did not say exactly how many votes favored granting a conservation easement on the land. See Ex. 49 at p. 1, 6, and 7 of 9. However, a draft email turned over in the investigation indicates that EvrSource Capital personnel contemplated telling its Roaring Florida Acquisition taxpayer-investors that, in light of the IRS having issued Notice 2017-10 on December 23, 2016, which was around the time of that vote, they could change their vote if they wanted to, as EvrSource Capital “only received votes representing 36.66% of the shares” during the initial vote days earlier. In that initial vote, “The Conservation easement received the most votes representing 36.18% of the 36.66% received,” which the conservation-easement option received 98.69 percent of the vote. Ex. 50 – Draft email to Roaring Florida Acquisition members, ex. p. SENATE_FINANCE-0009436. 607 Ex. 49 at p. 2 of 9. 608 Id. at p. 7 of 9. 609 This figure is derived from multiplying the total deductions allocated to taxpayer-investors in the transaction by the then-existing top individual federal income-tax rate of 39.6 percent. 136 n. EvrSource Capital’s fees as a result of the transaction: $1,460,000610 iii. Webb Creek 1. Adam Smith Ventures (2013) a. Acres: 227611 b. Purported units to be developed: 800 units612 c. Jim Clower’s “before”-easement value of the property: $12,400,000, or $55,000 per acre613 d. Jim Clower’s method for estimating “before” value of the property: sales comparisons614 e. Jim Clower’s opinion on development potential of the property: “The proposed development is an ideal location for an active community due to the amenities and natural landscape.”615 f. Jim Clower’s “after”-easement value of the property: $295,100, or $1,300 per acre616 g. Number of taxpayer-investors involved in the transaction: 56617 610 Ex. 46 at 24 (ex. p. SENATE_FINANCE-0001111). This amount is derived by adding the $500,000 “EvrSource Capital, LLC” fee listed therein to the $960,000 listed for “additional consulting fees to EvrSource” upon the condition of Roaring Florida Acquisitions’ investors choosing the “Conservation Proposal” listed in footnote 14 therein. Ex. 54 – Adam Smith Ventures, LLC, Confidential Private Placement Memorandum (Nov. 30, 2012), Appendix 4, Jim R. Clower, Sr., A Self-Contained Appraisal Report for a Proposed Conservation Easement on an Approximate 227 +/- Acre Tract of Vacant Land (Nov, 12, 2012) at ex. p. WCP000105. 611 Ex. 53 – Jim R. Clower, Sr., A Self-Contained Appraisal Report for a Proposed Conservation Easement on an Approximate 227 +/- Acre Tract of Vacant Land (Nov. 12, 2013) at ex. p. WCP000852. 612 613 Id. 614 Id. at ex. p. WCP000841-52. 615 Id. at ex. p. WCP000902. 616 Id. at ex. p. WCP000860. Ex. 51 – Brian W. Kelley’s responses regarding Adam Smith Ventures, LLC to questions in letter from Charles Grassley, Chairman, U.S. Senate Committee on Finance, and Ron Wyden, Ranking Member, U.S. Senate Committee on Finance, to Brian Kelley, Webb Creek Management Group (Mar. 27, 2019), at ex. p. WCP000538. 617 137 h. Taxpayer-investors’ total buy-in for 91.282 percent of company owning the underlying land: $2,347,640, thus valuing the land at $2,571,854.25, or $11,330 per acre618 i. Close date for investing in the transaction: December 26, 2013619 j. Taxpayer-investor vote on disposition of property: 96 percent in favor of granting a conservation easement, four percent in favor of further of the investment proposal620 k. Date of granting conservation easement on the land: December 28, 2013621 l. Total deductions allocated to taxpayer-investors as a result of the easement: $12,000,000622 m. Total tax benefit to taxpayer-investors: $4,752,000623 n. Webb Creek’s fees as a result of the transaction: $200,000624 iv. Ornstein-Schuler 1. FG River Partners LLC a. Acres: 122.5625 b. Development potential: 6.775 million tons of limerock626 618 Ex. 52 – Letter from Bryan W. Kelley, CEO, Webb Creek Management Group, LLC, to Adam Smith Ventures, LLC members (Sept. 1, 2017), containing draft sample Form 8886 – Reportable Transaction Disclosure Statement at ex. p. WCP000520. 619 Ex. 51 at ex. p. WCP000538. 620 See Ex. 51 at ex. p. WCP000541-42. 621 Ex. 51 at ex. p. WCP000538. 622 Id. 623 This figure is derived from multiplying the total deductions allocated to taxpayer-investors in the transaction by the then-existing top individual federal income-tax rate of 39.6 percent. 624 Ex. 54 at 19 (ex. p. WCP000129). Ex. 57 – Clayton M. Weibel, MAI, Appraisal Report for FG River Resources LLC (as of Dec. 29, 2015), at HK_SFCSubpoena_000029885. 625 626 Id. at 94, Exhibit IV, page 10 of 21 (ex. p. HK_SFCSubpoena_000029982, 30107). 138 c. Clayton Weibel’s “before”-easement value of the property: $17,800,000, or $145,306 per acre 627 d. Clayton Weibel’s primary method for estimating “before” value of the property: discounted cash flow, supported by comparable sales of surface mining operations628 e. Location of Clayton Weibel’s comparable sales: Vero Beach, Indian River County, Florida; Mobile County, Alabama; La Salle County, Illinois; Jackson County, Wisconsin; and Hall County, Georgia629 f. Clayton Weibel’s opinion on development potential of the property: “The reserve conclusions are: Proven Mineral Reserves without 20 acres plant is 6.775 million tons of limerock. The drilling and geology of the area give a high level of confidence in the resource to determine it a proven mineral reserve. In addition, there are several other mining operations with close proximity mining the same deposit.”630 g. Date of drilling and sampling program: August 15 to 16, 2006631 h. Average overburden: “The general stratigraphy of the property starts with the overburden which consists of between 1 and 3 feet of dark brown, high organic sandy soil, then a variety of layers of sand, clayey sand, sandy clay and clay averaging about 39 feet.”632 i. Clayton Weibel’s “after”-easement value of the property: $440,000, or $3,592 per acre633 j. Taxpayer-investors’ total buy-in for 95.99 percent of company owning the underlying land: $3,558,000, purchased on December 10, 2015,634 thus valuing the land at $3,706,636.11, or $30,258 per acre 627 Id. at 1 (ex. p. HK_SFCSubpoena_000029889). 628 Id. at 69 (ex. p. HK_SFCSubpoena_000029957). 629 Id. at 70-89 (ex. p. HK_SFCSubpoena_000029958-77). 630 Id. at 94, Exhibit IV, page 10 of 21 (ex. p. HK_SFCSubpoena_000029982, 30107). 631 Id., Exhibit IV, page 7 of 21 (ex. p. HK_SFCSubpoena_000030104). 632 Id., Exhibit IV, Appendix B, p. 4 (ex. p. HK_SFCSubpoena_000030127). 633 Id. at HK_SFCSubpoena_000029885. Ex. 66 – Letter from Christopher DeLacy, Partner, Holland & Knight LLP, to Charles Grassley, Chairman, U.S. Senate Committee on Finance, and Ron Wyden, Ranking Member, U.S. Senate Committee on 634 139 k. Close date for investing in the transaction: November 28, 2015635 l. Taxpayer-investor vote on disposition of property: 91.02 percent of votes in favor of granting a conservation easement on the land, 0 percent in favor of mining it, 3.85 percent in favor of leasing it, and 0 percent in favor of holding the property for future investment636 m. Date of granting conservation easement on the land: December 22, 2015637 n. Total deductions allocated to taxpayer-investors as a result of the easement: $17,360,000638 o. Total tax benefit to taxpayer-investors: $6,874,560639 2. Green Cove Group LLC a. Acres: 128.2640 b. Development potential: 6.775 million tons of limerock641 c. Clayton Weibel’s “before”-easement value of the property: $17,800,000, or $138,846 per acre642 Finance (Apr. 30, 2019), Attachment – OSI Response Chart 2(b) and 2(d); Ex. 9 – The 2015 Information Package for FG River Partners LLC, Conservation Saves LLC & Galt Mining Investments, LLC, at 13 (ex. p. HK_SFCSubpoena_000029444). 635 Ex. 66, Attachment – OSI Response Chart 2(b) and 2(d). 636 Ex. 67 – Request10VotingData, SFCHK00116379. 637 Ex. 57 at 1 (ex. p. HK_SFCSubpoena_000029889). Ex. 121 – IRS Form 1065, U.S. Return of Partnership Income for FG River Resources LLC (for tax year beginning Dec. 11, 2015 and ending Dec. 31, 2015), Schedule K, Statement 1, at 7 (ex. p. HK_SFCSubpoena_000123996). 638 639 This figure is derived from multiplying the total deductions allocated to taxpayer-investors in the transaction by the then-existing top individual federal income-tax rate of 39.6 percent. 640 Ex. 58 – Clayton M. Weibel, MAI, Appraisal Report for Green Cove Rock LLC (Dec. 28, 2015), at HK_SFCSubpoena_000037585; Ex. 66 – Letter from Christopher DeLacy, Partner, Holland & Knight LLP, to Charles Grassley, Chairman, U.S. Senate Committee on Finance, and Ron Wyden, Ranking Member, U.S. Senate Committee on Finance (Apr. 30, 2019), Attachment – OSI Response Chart 2(b) and 2(d). 641 Id. at 94, Exhibit VI, page 10 of 21 (ex. p. HK_SFCSubpoena_000037682, 37807). 642 Id. at 1 (ex. p. HK_SFCSubpoena_000037585). 140 d. Clayton Weibel’s primary method for estimating “before” value of the property: discounted cash flow, supported by comparable sales of surface mining operations643 e. Location of Clayton Weibel’s comparable sales: Vero Beach, Indian River County, Florida; Mobile County, Alabama; La Salle County, Illinois; Jackson County, Wisconsin; and Hall County, Georgia644 f. Clayton Weibel’s opinion on development potential of the property: “The reserve conclusions are: Proven Mineral Reserves without 20 acres plant is 6.775 million tons of limerock. The drilling and geology of the area give a high level of confidence in the resource to determine it a proven mineral reserve. In addition, there are several other mining operations with close proximity mining the same deposit.”645 g. Date of drilling and sampling program: August 9 to 11, 2006646 h. Clayton Weibel’s “after”-easement value of the property: $450,000, or $3,510 per acre 647 i. Taxpayer-investors’ total buy-in for 95.99 percent of company owning the underlying land: $3,645,000, purchased December 10, 2015,648 thus valuing it at 3,797,270.55, or 29,620 per acre j. Close date for investing in the transaction: November 5, 2015649 k. Taxpayer-investor vote on disposition of property: 77.82 percent of votes in favor of granting a conservation easement on the land, 0 percent in favor of mining it, 0 643 Id. at 69 (ex. p. HK_SFCSubpoena_000037657). 644 Id. at 70-89 (ex. p. HK_SFCSubpoena_000037658-77). 645 Id. at 94, Exhibit VI, page 10 of 21 (ex. p. HK_SFCSubpoena_000037682, 37807). 646 Id. at 94, Exhibit VI, page 7 of 21 (ex. p. HK_SFCSubpoena_000037804). 647 Id. at HK_SFCSubpoena_000037585. Ex. 66, Attachment – OSI Response Chart 2(b) and 2(d); Ex. 10 – The 2015 Information Package for Green Cove Group LLC, Conservation Saves LLC & Galt Mining Investments, LLC, at 13 (ex. p. HK_SFCSubpoena_000037142). 648 649 Ex. 66, Attachment – OSI Response Chart 2(b) and 2(d). 141 percent in favor of leasing it, and 0 percent in favor of holding the property for future investment.650 l. Date of granting conservation easement on the land: December 22, 2015651 m. Total deductions allocated to taxpayer-investors as a result of the easement: $17,350,000652 n. Total tax benefit to taxpayer-investors: $6,870,600653 3. Huston Minerals Partners LLC a. Acres: 126.4654 b. Development potential: 6.775 million tons of limerock655 c. Clayton Weibel’s “before”-easement value of the property: $17,800,000, or $140,823 per acre656 d. Clayton Weibel’s primary method for estimating “before” value of the property: discounted cash flow, supported by comparable sales of surface mining operations657 e. Location of Clayton Weibel’s comparable sales: Vero Beach, Indian River County, Florida; Mobile County, Alabama; La Salle County, Illinois; Jackson County, Wisconsin; and Hall County, Georgia658 f. Clayton Weibel’s opinion on development potential of the property: “The reserve conclusions are: Proven Mineral Reserves without 20 acres plant is 6.775 million tons of limerock. The drilling and geology of the area give a high level of confidence in the resource to determine it a proven 650 Ex. 67, SFCHK00116379. 651 Ex. 58 at 1 (ex. p. HK_SFCSubpoena_000037589). 652 Ex. 58 at 1 (ex. p. HK_SFCSubpoena_000037585). 653 This figure is derived from multiplying the total deductions allocated to taxpayer-investors in the transaction by the then-existing top individual federal income-tax rate of 39.6 percent. 654 Ex. 59 – Clayton M. Weibel, MAI, Appraisal Report for Huston Minerals LLC (as of Dec. 28, 2015), at HK_SFCSubpoena_000053018; Ex. 66, Attachment – OSI Response Chart 2(b) and 2(d). 655 Ex. 59 at 94, Exhibit VI, page 10 of 21 (ex. p. HK_SFCSubpoena_000053115, 53241). 656 Id. at 1 (ex. p. HK_SFCSubpoena_000053022). 657 Id. at 69 (ex. p. HK_SFCSubpoena_000053090). 658 Id. at 70-89 (ex. p. HK_SFCSubpoena_000053091-110). 142 g. h. i. j. k. l. m. n. mineral reserve. In addition, there are several other mining operations with close proximity mining the same deposit.”659 Date of drilling and sampling program: August 9 to 11, 2006660 Clayton Weibel’s “after”-easement value of the property: $440,000, or $3,481 per acre661 Taxpayer-investors’ total buy-in for 95.99 percent of company owning the underlying land: $3,645,000, purchased December 10, 2015,662 thus valuing it at 3,797,270.55, or 30,042 per acre Close date for investing in the transaction: November 5, 2015663 Taxpayer-investor vote on disposition of property: 83.22 percent of votes in favor of granting a conservation easement on the land, 3.66 percent in favor of mining it, 0 percent in favor of leasing it, and 0 percent in favor of holding the property for future investment664 Date of granting conservation easement on the land: December 28, 2015665 Total deductions allocated to taxpayer-investors as a result of the easement: $17,360,000666 Total tax benefit to taxpayer-investors: $6,874,560667 659 Id. at 94, Exhibit VI, page 10 of 21 (ex. p. HK_SFCSubpoena_000053115, 53241). 660 Id. at Exhibit VI, page 7 of 21 (ex. p. HK_SFCSubpoena_000053238). 661 Id. at 1 (ex. p. HK_SFCSubpoena_000053022). Ex. 66, Attachment – OSI Response Chart 2(b) and 2(d); Ex. 122 – The 2015 Information Package for Huston Minerals Partners LLC, Conservation Saves LLC & Galt Mining Investments, LLC, at 13 (ex. p. HK_SFCSubpoena_000052577). 662 663 Ex. 66, Attachment – OSI Response Chart 2(b) and 2(d). 664 Ex. 67, SFCHK00116379. 665 Ex. 59 at 1 (ex. p. HK_SFCSubpoena_000053022). 666 Id. at 1 (ex. p. HK_SFCSubpoena_000053022). 667 This figure is derived from multiplying the total deductions allocated to taxpayer-investors in the transaction by the then-existing top individual federal income-tax rate of 39.6 percent. 143 4. Imperial Aggregates Group LLC a. Acres: 123.3668 b. Development potential: 6.775 million tons of limerock669 c. Clayton Weibel’s “before”-easement value of the property: $17,800,000, or $144,363 per acre670 d. Clayton Weibel’s primary method for estimating “before” value of the property: discounted cash flow, supported by comparable sales of surface mining operations671 e. Location of Clayton Weibel’s comparable sales: Vero Beach, Indian River County, Florida; Mobile County, Alabama; La Salle County, Illinois; Jackson County, Wisconsin; and Hall County, Georgia672 f. Clayton Weibel’s opinion on development potential of the property: “The reserve conclusions are: Proven Mineral Reserves without 20 acres plant is 6.775 million tons of limerock. The drilling and geology of the area give a high level of confidence in the resource to determine it a proven mineral reserve. In addition, there are several other mining operations with close proximity mining the same deposit.”673 g. Date of drilling and sampling program: August 8 to 11, 2006674 h. Clayton Weibel’s “after”-easement value of the property: $450,000, or $3,650 per acre675 i. Taxpayer-investors’ total buy-in for 95.99 percent of company owning the underlying land: $3,641,000, Ex. 60 – Clayton M. Weibel, MAI, Appraisal Report for Imperial Aggregates LLC (as of Dec. 28, 2015), at HK_SFCSubpoena_000058263; Ex. 66, Attachment – OSI Response Chart 2(b) and 2(d). 668 669 Ex. 60 at 95, Exhibit VI, page 10 of 21 (ex. p. HK_SFCSubpoena_000058362, 58486). 670 Id. at 1 (ex. p. HK_SFCSubpoena_000058266). 671 Id. at 70 (ex. p. HK_SFCSubpoena_000058337). 672 Id. at 71-90 (ex. p. HK_SFCSubpoena_000058338-57). 673 Id. at 95, Exhibit VI, page 10 of 21 (ex. p. HK_SFCSubpoena_000058362, 58486). 674 Id. at Exhibit VI, page 7 of 21 (ex. p. HK_SFCSubpoena_000058483). 675 Id. at 1 (ex. p. HK_SFCSubpoena_000058266). 144 j. k. l. m. n. purchased December 10, 2015,676 thus valuing it at 3,793,103.45, or 30,763 per acre Close date for investing in the transaction: November 3, 2015677 Taxpayer-investor vote on disposition of property: 98.18 percent of votes in favor of granting a conservation easement on the land, 0 percent in favor of mining it, 0 percent in favor of leasing it, and 0 percent in favor of holding the property for future investment.678 Date of granting conservation easement on the land: December 21, 2015679 Total deductions allocated to taxpayer-investors as a result of the easement: $17,350,000680 Total tax benefit to taxpayer-investors: $6,870,600681 5. Jackson River Partners LLC a. Acres: 134.1682 b. Development potential: 6.775 million tons of limerock683 c. Clayton Weibel’s “before”-easement value of the property: $17,800,000, or $132,737 per acre684 676 Ex. 66, Attachment – OSI Response Chart 2(b) and 2(d); Ex. 123 – The 2015 Information Package for Imperial Aggregates LLC, Conservation Saves LLC & Galt Mining Investments, LLC, at 13 (ex. p. HK_SFCSubpoena_000057821). 677 Ex. 66, Attachment – OSI Response Chart 2(b) and 2(d). 678 Ex. 67, SFCHK00116379. 679 Ex. 60 at 1 (ex. p. HK_SFCSubpoena_000058266). 680 Id. 681 This figure is derived from multiplying the total deductions allocated to taxpayer-investors in the transaction by the then-existing top individual federal income-tax rate of 39.6 percent. Ex. 61 – Clayton M. Weibel, MAI, Appraisal Report for Jackson River Minerals LLC (as of Dec. 28, 2015), at HK_SFCSubpoena_000062585; Ex. 66, Attachment – OSI Response Chart 2(b) and 2(d). 682 683 Ex. 61 at 94, Exhibit VI, page 10 of 21 (ex. p. HK_SFCSubpoena_000062683, 62810). 684 Id. at 1 (ex. p. HK_SFCSubpoena_000062590). 145 d. Clayton Weibel’s primary method for estimating “before” value of the property: discounted cash flow, supported by comparable sales of surface mining operations685 e. Location of Clayton Weibel’s comparable sales: Vero Beach, Indian River County, Florida; Mobile County, Alabama; La Salle County, Illinois; Jackson County, Wisconsin; and Hall County, Georgia686 f. Clayton Weibel’s opinion on development potential of the property: “The reserve conclusions are: Proven Mineral Reserves without 20 acres plant is 6.775 million tons of limerock. The drilling and geology of the area give a high level of confidence in the resource to determine it a proven mineral reserve. In addition, there are several other mining operations with close proximity mining the same deposit.”687 g. Date of drilling and sampling program: August 6, 2006 and December 21, 2006688 h. Clayton Weibel’s “after”-easement value of the property: $460,000, or $3,430 per acre689 i. Taxpayer-investors’ total buy-in for 95.99 percent of company owning the underlying land: $3,599,000, purchased December 10, 2015,690 thus valuing it at 3,749,349.89, or 27,959 per acre j. Close date for investing in the transaction: November 13, 2015691 k. Taxpayer-investor vote on disposition of property: 67.91 percent of votes in favor of granting a conservation easement on the land, 0 percent in favor of mining it, 0 685 Id. at 69 (ex. p. HK_SFCSubpoena_000062658). 686 Id. at 70-89 (ex. p. HK_SFCSubpoena_000062659-678). 687 Id. at 94, Exhibit VI, page 10 of 21 (ex. p. HK_SFCSubpoena_000062683, 62810). 688 Id. at Exhibit VI, page 7 of 21 (ex. p. HK_SFCSubpoena_000062807). 689 Id. at 1 (ex. p. HK_SFCSubpoena_000062590). Ex. 66, Attachment – OSI Response Chart 2(b) and 2(d); Ex. 124 – The 2015 Information Package for Jackson River Partners LLC, Conservation Saves LLC & Galt Mining Investments, LLC, at 13 (ex. p. HK_SFCSubpoena_000062148). 690 691 Ex. 66, Attachment – OSI Response Chart 2(b) and 2(d). 146 percent in favor of leasing it, and 0 percent in favor of holding the property for future investment692 l. Date of granting conservation easement on the land: December 22, 2015693 m. Total deductions allocated to taxpayer-investors as a result of the easement: $17,340,000694 Total tax benefit to taxpayer-investors: $6,866,640695 6. KR Stone Group LLC a. Acres: 126.8696 b. Development potential: 6.775 million tons of limerock697 c. Clayton Weibel’s “before”-easement value of the property: $17,800,000, or $140,379 per acre698 d. Clayton Weibel’s primary method for estimating “before” value of the property: discounted cash flow, supported by comparable sales of surface mining operations699 e. Location of Clayton Weibel’s comparable sales: Vero Beach, Indian River County, Florida; Mobile County, Alabama; La Salle County, Illinois; Jackson County, Wisconsin; and Hall County, Georgia700 f. Clayton Weibel’s opinion on development potential of the property: “The reserve conclusions are: Proven Mineral Reserves without 20 acres plant is 6.775 million tons of limerock. The drilling and geology of the area give a high level of confidence in the resource to determine it a proven 692 Ex. 67, SFCHK00116379. 693 Ex. 61 at 1 (ex. p. HK_SFCSubpoena_000062590). 694 Id. 695 This figure is derived from multiplying the total deductions allocated to taxpayer-investors in the transaction by the then-existing top individual federal income-tax rate of 39.6 percent. 696 Ex. 62 – Clayton M. Weibel, MAI, Appraisal Report for KR Stone Resources LLC (as of Dec. 28, 2015), at HK_SFCSubpoena_000071111; Ex. 66, Attachment – OSI Response Chart 2(b) and 2(d). 697 Id. at 94, Exhibit VI, page 10 of 21 (ex. p. HK_SFCSubpoena_000071209, 71335). 698 Id. at 1 (ex. p. HK_SFCSubpoena_000071116). 699 Id. at 69 (ex. p. HK_SFCSubpoena_000071184). 700 Id. at 70-89 (ex. p. HK_SFCSubpoena_000071185-204). 147 g. h. i. j. k. l. m. n. mineral reserve. In addition, there are several other mining operations with close proximity mining the same deposit.”701 Date of drilling and sampling program: August 15 and 16, 2006702 Clayton Weibel’s “after”-easement value of the property: $450,000, or $3,549 per acre703 Taxpayer-investors’ total buy-in for 95.99 percent of company owning the underlying land: $3,624,000, purchased December 10, 2015,704 thus valuing it at 3,775,393.27, or 29,774 per acre Close date for investing in the transaction: November 12, 2015705 Taxpayer-investor vote on disposition of property: 91.91 percent of votes in favor of granting a conservation easement on the land, 0 percent in favor of mining it, 0 percent in favor of leasing it, and 3.34 percent in favor of holding the property for future investment706 Date of granting conservation easement on the land: December 22, 2015707 Total deductions allocated to taxpayer-investors as a result of the easement: $17,350,000708 Total tax benefit to taxpayer-investors: $6,870,600709 701 Id. at 94, Exhibit VI, page 10 of 21 (ex. p HK_SFCSubpoena_000071209, 71335). 702 Id. at Exhibit VI, page 7 of 21 (ex. p. HK_SFCSubpoena_000071332). 703 Id. at 1 (ex. p. HK_SFCSubpoena_000071116). Ex. 66, Attachment – OSI Response Chart 2(b) and 2(d); Ex. 125 – The 2015 Information Package for KR Stone Group LLC, Conservation Saves LLC & Galt Mining Investments, LLC, at 13 (ex. p. HK_SFCSubpoena_000070675). 704 705 Ex. 66, Attachment – OSI Response Chart 2(b) and 2(d). 706 Ex. 76, SFCHK00116379. 707 Ex. 62 at 1 (ex. p. HK_SFCSubpoena_000071116). 708 Ex. 62 at 1 (ex. p. HK_SFCSubpoena_000071116). 709 This figure is derived from multiplying the total deductions allocated to taxpayer-investors in the transaction by the then-existing top individual federal income-tax rate of 39.6 percent. 148 7. LM Bass Partners LLC a. Acres: 130.1710 b. Development potential: 6.775 million tons of limerock711 c. Clayton Weibel’s “before”-easement value of the property: $17,800,000, or $136,818 per acre712 d. Clayton Weibel’s primary method for estimating “before” value of the property: discounted cash flow, supported by comparable sales of surface mining operations713 e. Location of Clayton Weibel’s comparable sales: Vero Beach, Indian River County, Florida; Mobile County, Alabama; La Salle County, Illinois; Jackson County, Wisconsin; and Hall County, Georgia714 f. Clayton Weibel’s opinion on development potential of the property: “The reserve conclusions are: Proven Mineral Reserves without 20 acres plant is 6.775 million tons of limerock. The drilling and geology of the area give a high level of confidence in the resource to determine it a proven mineral reserve. In addition, there are several other mining operations with close proximity mining the same deposit.”715 g. Date of drilling and sampling program: August 15 and 16, 2006716 h. Clayton Weibel’s “after”-easement value of the property: $450,000, or $3,459 per acre717 i. Taxpayer-investors’ total buy-in for 95.99 percent of company owning the underlying land: $3,604,000, Ex. 63 – Clayton M. Weibel, MAI, Appraisal Report for LM Bass Aggregates LLC (as of Dec. 29, 2015), at HK_SFCSubpoena_000075441; Ex. 66, Attachment – OSI Response Chart 2(b) and 2(d). 710 711 Id. at 94, Exhibit VI, page 10 of 21 (ex. p. HK_SFCSubpoena_000075539, 75665). 712 Id. at 1 at HK_SFCSubpoena_000075446). 713 Id. at 69 (ex. p. HK_SFCSubpoena_000075514). 714 Id. at 70-89 (ex. p. HK_SFCSubpoena_000075515-34). 715 Id. at 94, Exhibit VI, page 10 of 21 (ex. p. HK_SFCSubpoena_000075539, 75665). 716 Id. at Exhibit VI, page 7 of 21 (ex. p. HK_SFCSubpoena_000075662). 717 Id. at 1 at HK_SFCSubpoena_000075446). 149 j. k. l. m. n. purchased December 10, 2015,718 thus valuing it at 3,754,557.77, or 28,859 per acre Close date for investing in the transaction: November 11, 2015719 Taxpayer-investor vote on disposition of property: 97.69 percent of votes in favor of granting a conservation easement on the land, 0 percent in favor of mining it, 0 percent in favor of leasing it, and 0 percent in favor of holding the property for future investment720 Date of granting conservation easement on the land: December 22, 2015721 Total deductions allocated to taxpayer-investors as a result of the easement: $17,350,000722 Total tax benefit to taxpayer-investors: $6,870,600723 8. Manatee Minerals Group LLC a. Acres: 157.2724 b. Development potential: 6.775 million tons of limerock725 c. Clayton Weibel’s “before”-easement value of the property: $17,800,000, $113,232 per acre726 Ex. 66, Attachment – OSI Response Chart 2(b) and 2(d); Ex. 126 – The 2015 Information Package for LM Bass Partners LLC, Conservation Saves LLC & Galt Mining Investments, LLC, at 13 (ex. p. HK_SFCSubpoena_000075001). 718 Ex. 66 – Letter from Christopher DeLacy, Partner, Holland & Knight LLP, to Charles Grassley, Chairman, U.S. Senate Committee on Finance, and Ron Wyden, Ranking Member, U.S. Senate Committee on Finance (Apr. 30, 2019), Attachment – OSI Response Chart 2(b) and 2(d). 719 720 Ex. 67 – Request10VotingData, SFCHK00116379. 721 Ex. 63 at 1 at HK_SFCSubpoena_000075446). 722 Ex. 63 at 1 at HK_SFCSubpoena_000075446). 723 This figure is derived from multiplying the total deductions allocated to taxpayer-investors in the transaction by the then-existing top individual federal income-tax rate of 39.6 percent. Ex. 64 – Clayton M. Weibel, MAI, Appraisal Report for Manatee Minerals LLC (as of Dec. 28, 2015), at HK_SFCSubpoena_000083207; Ex. 66, Attachment – OSI Response Chart 2(b) and 2(d). 724 725 Id. at 94, Exhibit VI, page 10 of 21 (ex. p. HK_SFCSubpoena_000083305, 83428). 726 Id. at 1 (ex. p. HK_SFCSubpoena_000083212). 150 d. Clayton Weibel’s primary method for estimating “before” value of the property: discounted cash flow, supported by comparable sales of surface mining operations727 e. Location of Clayton Weibel’s comparable sales: Vero Beach, Indian River County, Florida; Mobile County, Alabama; La Salle County, Illinois; Jackson County, Wisconsin; and Hall County, Georgia728 f. Clayton Weibel’s opinion on development potential of the property: “The reserve conclusions are: Proven Mineral Reserves without 20 acres plant is 6.775 million tons of limerock. The drilling and geology of the area give a high level of confidence in the resource to determine it a proven mineral reserve. In addition, there are several other mining operations with close proximity mining the same deposit.”729 g. Date of drilling and sampling program: August 16 and 17, 2006730 h. Clayton Weibel’s “after”-easement value of the property: $500,000, or 3,181 per acre731 i. Taxpayer-investors’ total buy-in for 95.99 percent of company owning the underlying land: $3,667,000, purchased December 11, 2015,732 thus valuing it at 3,820,189.60, or 24,301 per acre j. Close date for investing in the transaction: November 12, 2015733 k. Taxpayer-investor vote on disposition of property: 95.25 percent of votes in favor of granting a conservation easement on the land, 0 percent in favor of mining it, 0 727 Id. at 69 (ex. p. HK_SFCSubpoena_000083280). 728 Id. at 70-89 (ex. p. HK_SFCSubpoena_000083281-300). 729 Id. at 94, Exhibit VI, page 10 of 21 (ex. p. HK_SFCSubpoena_000083305, 83428). 730 Id. at Exhibit VI, page 7 of 21 (ex. p. HK_SFCSubpoena_000083425). 731 Id. at 1 (ex. p. HK_SFCSubpoena_000083212). Ex. 66, Attachment – OSI Response Chart 2(b) and 2(d); Ex. 127 – The 2015 Information Package for Manatee Minerals Group LLC, Conservation Saves LLC & Galt Mining Investments, LLC, at 13 (ex. p. HK_SFCSubpoena_000082768). 732 733 Ex. 66, Attachment – OSI Response Chart 2(b) and 2(d). 151 percent in favor of leasing it, and 0 percent in favor of holding the property for future investment734 l. Date of granting conservation easement on the land: December 22, 2015735 m. Total deductions allocated to taxpayer-investors as a result of the easement: $17,300,000736 n. Total tax benefit to taxpayer-investors: $6,850,800737 9. Nassau River Partners LLC a. Acres: 193.1738 b. Development potential: 6.775 million tons of limerock739 c. Clayton Weibel’s “before”-easement value of the property: $17,800,000, or $92,180 per acre740 d. Clayton Weibel’s primary method for estimating “before” value of the property: discounted cash flow, supported by comparable sales of surface mining operations741 e. Location of Clayton Weibel’s comparable sales: Vero Beach, Indian River County, Florida; Mobile County, Alabama; La Salle County, Illinois; Jackson County, Wisconsin; and Hall County, Georgia742 f. Clayton Weibel’s opinion on development potential of the property: “The reserve conclusions are: Proven Mineral Reserves without 20 acres plant is 6.775 million tons of limerock. The drilling and geology of the area give a high level of confidence in the resource to determine it a proven 734 Ex. 67, SFCHK00116379. 735 Ex. 64 at 1 (ex. p. HK_SFCSubpoena_000083212). 736 Id. at 1 (ex. p. HK_SFCSubpoena_000083212). 737 This figure is derived from multiplying the total deductions allocated to taxpayer-investors in the transaction by the then-existing top individual federal income-tax rate of 39.6 percent. 738 Ex. 65 – Clayton M. Weibel, MAI, Appraisal Report for Nassau River Stone LLC (as of Dec. 29, 2015), at HK_SFCSubpoena_000088859; Ex. 66, Attachment – OSI Response Chart 2(b) and 2(d). 739 Id. at 94, Exhibit VI, page 10 of 21 (ex. p. HK_SFCSubpoena_000088957, 89086). 740 Id. at 1 (ex. p. HK_SFCSubpoena_000088864). 741 Id. at 69 (ex. p. HK_SFCSubpoena_000088932). 742 Id. at 70-89 (ex. p. HK_SFCSubpoena_000088933-852). 152 g. h. i. j. k. l. m. n. mineral reserve. In addition, there are several other mining operations with close proximity mining the same deposit.”743 Date of drilling and sampling program: August 15 and 16, 2006744 Clayton Weibel’s “after”-easement value of the property: $530,000, or $2,745 per acre745 Taxpayer-investors’ total buy-in for 95.99 percent of company owning the underlying land: $3,679,000, purchased December 11, 2015,746 thus valuing it at 3,832,690.91, or 19,848 per acre Close date for investing in the transaction: November 12, 2015747 Taxpayer-investor vote on disposition of property: 96.19 percent of votes in favor of granting a conservation easement on the land, 0 percent in favor of mining it, 1.24 percent in favor of leasing it, and 0 percent in favor of holding the property for future investment748 Date of granting conservation easement on the land: December 22, 2015749 Total deductions allocated to taxpayer-investors as a result of the easement: $17,270,000750 Total tax benefit to taxpayer-investors: $6,838,920751 743 Id. at 94, Exhibit VI, page 10 of 21 (ex. p. HK_SFCSubpoena_000088957, 89086). 744 Id. at Exhibit VI, page 7 of 21 (ex. p. HK_SFCSubpoena_000089083). 745 Id. at 1 (ex. p. HK_SFCSubpoena_000088864). Ex. 66, Attachment – OSI Response Chart 2(b) and 2(d); Ex. 128 – The 2015 Information Package for Nassau River Partners LLC, Conservation Saves LLC & Galt Mining Investments, LLC, at 13 (ex. p. HK_SFCSubpoena_000088419). 746 747 Ex. 66, Attachment – OSI Response Chart 2(b) and 2(d). 748 Ex. 67, SFCHK00116379. 749 Ex. 65 at 1 (ex. p. HK_SFCSubpoena_000088864). 750 Id. 751 This figure is derived from multiplying the total deductions allocated to taxpayer-investors in the transaction by the then-existing top individual federal income-tax rate of 39.6 percent. 153 10. Orange Woods Partners LLC a. Acres: 125.31752 b. Development potential: 4.8 million tons of limerock753 c. Clayton Weibel’s “before”-easement value of the property: $17,800,000, or $142,048 per acre754 d. Clayton Weibel’s primary method for estimating “before” value of the property: discounted cash flow, supported by comparable sales of surface mining operations755 e. Location of Clayton Weibel’s comparable sales: Mobile County, Alabama, Florida; La Salle County, Illinois; Jackson County, Wisconsin; San Diego County, California; and Hall County, Georgia756 f. Clayton Weibel’s opinion on development potential of the property: “Based on the geologic investigation of the area including drilling and other considerations for mining feasibility, such as legally permissible, financial soundness, and market data, this classifies as ‘Proven Mineral Reserves.’ In addition, there are several other mining operations mining the same deposit in the region. Therefore, Proven Mineral Reserves without 20-acre plant is ≈4.8 million tons of lime rock that is both FDOT Road Base and general construction material.” 757 g. Date of drilling and sampling program: August 8 through 17, 2006 and December 21, 2006758 h. Clayton Weibel’s “after”-easement value of the property: $375,000, or $2,993 per acre759 i. Taxpayer-investors’ total buy-in for 98.99 percent of company owning the underlying land: $3,673,351, Ex. 68 – Clayton M. Weibel, MAI, Appraisal Report for Orange Woods Capital LLC (as of Oct. 5, 2016), at HK_SFCSubpoena_000090710). 752 753 Id. at 88 (ex. p. HK_SFCSubpoena_000090803). 754 Id. at 1 (ex. p. HK_SFCSubpoena_000090716). 755 Id. at 70 (ex. p. HK_SFCSubpoena_000090785). 756 Id. at 71-83 (ex. p. HK_SFCSubpoena_000090786-98). 757 Id. at 88 (ex. p. HK_SFCSubpoena_000090803) (emphasis removed). 758 Id. at Exhibit V, page 1 (ex. p. HK_SFCSubpoena_000090930). 759 Id. at 1 (ex. p. HK_SFCSubpoena_000090716). 154 j. k. l. m. n. purchased August 11, 2016,760 thus valuing it at 3,710,830.39, or 29,613 per acre Close date for investing in the transaction: July 12, 2016761 Taxpayer-investor vote on disposition of property: 86.98 percent of votes in favor of granting a conservation easement on the land, 0 percent in favor of mining it, 0 percent in favor of leasing it, and 0 percent in favor of holding the property for future investment762 Date of granting conservation easement on the land: October 5, 2016763 Total deductions allocated to taxpayer-investors as a result of the easement: $17,425,000764 Total tax benefit to taxpayer-investors: $6,900,300765 11. Palmetto Waters Group LLC a. Acres: 121.99766 b. Development potential: 4.8 million tons of limerock767 c. Clayton Weibel’s “before”-easement value of the property: $17,800,000, or $145,914 per acre768 d. Clayton Weibel’s primary method for estimating “before” value of the property: discounted cash flow, supported by comparable sales of surface mining operations769 760 Ex. 66, Attachment – OSI Response Chart 2(b) and 2(d); Ex. 129 – The 2016 Information Package for Orange Woods Partners LLC, Ornstein-Schuler Investments LLC, at 14 (ex. p. HK_SFCSubpoena_000090238). 761 Ex. 66, Attachment – OSI Response Chart 2(b) and 2(d). 762 Ex. 67, SFCHK00116379. 763 Ex. 68 at 1 (ex. p. HK_SFCSubpoena_000090716). 764 Id. at 1 (ex. p. HK_SFCSubpoena_000090716). 765 This figure is derived from multiplying the total deductions allocated to taxpayer-investors in the transaction by the then-existing top individual federal income-tax rate of 39.6 percent. 766 Ex. 69 – Clayton M. Weibel, MAI, Appraisal Report for Palmetto Waters LLC (as of Oct. 5, 2016), at HK_SFCSubpoena_000092754. 767 Id. at 88 (ex. p. HK_SFCSubpoena_000092847). 768 Id. at 1 (ex. p. HK_SFCSubpoena_000092760). 769 Id. at 70 (ex. p. HK_SFCSubpoena_000092829). 155 e. Location of Clayton Weibel’s comparable sales: Mobile County, Alabama, Florida; La Salle County, Illinois; Jackson County, Wisconsin; San Diego County, California; and Hall County, Georgia770 f. Clayton Weibel’s opinion on development potential of the property: “Based on the geologic investigation of the area including drilling and other considerations for mining feasibility, such as legally permissible, financial soundness, and market data, this classifies as ‘Proven Mineral Reserves.’ In addition, there are several other mining operations mining the same deposit in the region. Therefore, Proven Mineral Reserves without 20-acre plant is ≈4.8 million tons of lime rock that is both FDOT Road Base and general construction material.”771 g. Date of drilling and sampling program: August 8 through 17, 2006 and December 21, 2006772 h. Clayton Weibel’s “after”-easement value of the property: $375,000, or $3,074 per acre773 i. Taxpayer-investors’ total buy-in for 98.99 percent of company owning the underlying land: $3,774,000, purchased August 31, 2016,774 thus valuing it at 3,812,506.31, or 31,253 per acre j. Close date for investing in the transaction: August 5, 2016775 k. Taxpayer-investor vote on disposition of property: 96.27 percent of votes in favor of granting a conservation easement on the land, 0 percent in favor of mining it, 0 percent in favor of leasing it, and 0 percent in favor of holding the property for future investment776 770 Id. at 71-83 (ex. p. HK_SFCSubpoena_000092830-42). 771 Id. at 88 (ex. p. HK_SFCSubpoena_000092847). 772 Id., Exhibit V, page 1 (ex. p. HK_SFCSubpoena_000092973). 773 Id. at 1 (ex. p. HK_SFCSubpoena_000092760). Ex. 66, Attachment – OSI Response Chart 2(b) and 2(d); Ex. 130 – The 2016 Information Package for Palmetto Waters Group LLC, Ornstein-Schuler Investments LLC, at 14 (ex. p. HK_SFCSubpoena_000092281). 774 775 Ex. 66, Attachment – OSI Response Chart 2(b) and 2(d). 776 Ex. 67, SFCHK00116379. 156 l. Date of granting conservation easement on the land: October 5, 2016777 m. Total deductions allocated to taxpayer-investors as a result of the easement: $17,425,000778 n. Total tax benefit to taxpayer-investors: $6,900,300779 12. Quality Stones Group LLC a. Acres: 111780 b. Development potential: 4.812 million tons of limerock781 c. Clayton Weibel’s “before”-easement value of the property: $17,860,000, or $160,901 per acre782 d. Clayton Weibel’s primary method for estimating “before” value of the property: discounted cash flow, supported by comparable sales of surface mining operations783 e. Location of Clayton Weibel’s comparable sales: Mobile County, Alabama, Florida; La Salle County, Illinois; Jackson County, Wisconsin; San Diego County, California; and Hall County, Georgia784 f. Clayton Weibel’s opinion on development potential of the property: “Based on the geologic investigation of the area including drilling and other considerations for mining feasibility, such as legally permissible, financial soundness, and market data, this classifies as ‘Proven Mineral Reserves.’ In addition, there are several other mining operations mining the same deposit in the region. Therefore, Proven Mineral Reserves without 20-acre plant 777 Ex. 69 at 1 (ex. p. HK_SFCSubpoena_000092760). 778 Ex. 69 at 1 (ex. p. HK_SFCSubpoena_000092760). 779 This figure is derived from multiplying the total deductions allocated to taxpayer-investors in the transaction by the then-existing top individual federal income-tax rate of 39.6 percent. 780 Ex. 70 at HK_SFCSubpoena_000096549. 781 Id. at 88 (ex. p. HK_SFCSubpoena_000096642). 782 Id. at 1 (ex. p. HK_SFCSubpoena_000096555). 783 Id. at 70 (ex. p. HK_SFCSubpoena_000096624). 784 Id. at 71-83 (ex. p. HK_SFCSubpoena_000096624-37). 157 g. h. i. j. k. l. m. n. is ≈4.812 million tons of lime rock that is both FDOT Road Base and general construction material.”785 Date of drilling and sampling program: August 8 through 17, 2006 and December 21, 2006786 Clayton Weibel’s “after”-easement value of the property: $360,000, or $3,243 per acre787 Taxpayer-investors’ total buy-in for 98.99 percent of company owning the underlying land: $3,673,000, purchased December 21, 2016,788 thus valuing it at 3,710,475.81, or 33,428 per acre Close date for investing in the transaction: December 14, 2016789 Taxpayer-investor vote on disposition of property: 98.14 percent of votes in favor of granting a conservation easement on the land, 0 percent in favor of mining it, 0 percent in favor of leasing it, and 1.86 percent in favor of holding the property for future investment790 Date of granting conservation easement on the land: December 22, 2016791 Total deductions allocated to taxpayer-investors as a result of the easement: $17,500,000792 Total tax benefit to taxpayer-investors: $6,930,000793 785 Id. at 88 (ex. p. HK_SFCSubpoena_000096642) (emphasis removed). 786 Id. Exhibit V, page 1 (ex. p. HK_SFCSubpoena_000096767). 787 Id. at 1 (ex. p. HK_SFCSubpoena_000096555). Ex. 66, Attachment – OSI Response Chart 2(b) and 2(d); Ex. 131 – The 2016 Information Package for Quality Stones Group LLC, Ornstein-Schuler Investments LLC, at 14 (ex. p. HK_SFCSubpoena_000096078). 788 789 Id., Attachment – OSI Response Chart 2(b) and 2(d). 790 Ex. 67 – Request10VotingData, SFCHK00116379. 791 Ex. 70 – Clayton M. Weibel, MAI, Appraisal Report for Quality River Stones LLC (as of Dec. 22, 2016), at 1 (ex. p. HK_SFCSubpoena_000096555). 792 Id. 793 This figure is derived from multiplying the total deductions allocated to taxpayer-investors in the transaction by the then-existing top individual federal income-tax rate of 39.6 percent. 158 13. Regional Minerals Partners LLC a. Acres: 121.04794 b. Development potential: 4.808 million tons of limerock795 c. Clayton Weibel’s “before”-easement value of the property: $17,800,000, or $147,059 per acre796 d. Clayton Weibel’s primary method for estimating “before” value of the property: discounted cash flow, supported by comparable sales of surface mining operations797 e. Location of Clayton Weibel’s comparable sales: Mobile County, Alabama, Florida; La Salle County, Illinois; Jackson County, Wisconsin; San Diego County, California; and Hall County, Georgia798 f. Clayton Weibel’s opinion on development potential of the property: “Based on the geologic investigation of the area including drilling and other considerations for mining feasibility, such as legally permissible, financial soundness, and market data, this classifies as ‘Proven Mineral Reserves.’ In addition, there are several other mining operations mining the same deposit in the region. Therefore, Proven Mineral Reserves without 20-acre plant is ≈4.808 million tons of lime rock that is both FDOT Road Base and general construction material.”799 g. Date of drilling and sampling program: August 8 through 17, 2006 and December 21, 2006800 h. Clayton Weibel’s “after”-easement value of the property: $375,000, or $3,098 per acre801 i. Taxpayer-investors’ total buy-in for 98.99 percent of company owning the underlying land: $3,720,000, Ex. 71 – Clayton M. Weibel, MAI, Appraisal Report for Regional Minerals LLC (as of Dec. 27, 2016), at HK_SFCSubpoena_000098601. 794 795 Id. at 88 (ex. p. HK_SFCSubpoena_000098694). 796 Id. at 1 (ex. p. HK_SFCSubpoena_000098607). 797 Id. at 70 (ex. p. HK_SFCSubpoena_000098676). 798 Id. at 71-83 (ex. p. HK_SFCSubpoena_000098677-89). 799 Id. at 88 (ex. p. HK_SFCSubpoena_000098694) (emphasis removed). 800 Id., Exhibit V, page 1 (ex. p. HK_SFCSubpoena_000098820). 801 Id. at 1 (ex. p. HK_SFCSubpoena_000098607). 159 j. k. l. m. n. purchased December 21, 2016,802 thus valuing it at 3,757,955.35, or 31,047 per acre Close date for investing in the transaction: December 15, 2016803 Taxpayer-investor vote on disposition of property: 92.18 percent of votes in favor of granting a conservation easement on the land, 0 percent in favor of mining it, 0 percent in favor of leasing it, and 0 percent in favor of holding the property for future investment804 Date of granting conservation easement on the land: December 27, 2016805 Total deductions allocated to taxpayer-investors as a result of the easement: $17,425,000806 Total tax benefit to taxpayer-investors: $6,900,300807 14. Sailfish Cove Group LLC a. Acres: 122.95808 b. Development potential: 4.805 million tons of limerock809 c. Clayton Weibel’s “before”-easement value of the property: $17,790,000, or $144,693 per acre810 d. Clayton Weibel’s primary method for estimating “before” value of the property: discounted cash flow, supported by comparable sales of surface mining operations811 802 Ex. 66, Attachment – OSI Response Chart 2(b) and 2(d); Ex. 132 – The 2016 Information Package for Regional Minerals Partners LLC, Ornstein-Schuler Investments LLC, at 14 (ex. p. HK_SFCSubpoena_000098130). 803 Ex. 66, Attachment – OSI Response Chart 2(b) and 2(d). 804 Ex. 67, SFCHK00116379. 805 Ex. 71 at 1 (ex. p. HK_SFCSubpoena_000098607). 806 Id. at 1 (ex. p. HK_SFCSubpoena_000098607). 807 This figure is derived from multiplying the total deductions allocated to taxpayer-investors in the transaction by the then-existing top individual federal income-tax rate of 39.6 percent. 808 Ex. 72 – Clayton M. Weibel, MAI, Appraisal Report for Sailfish Cove LLC (as of Dec. 5, 2016), at HK_SFCSubpoena_000102381. 809 Id. at 89 (ex. p. HK_SFCSubpoena_000102475). 810 Id. at 1 (ex. p. HK_SFCSubpoena_000102387). 811 Id. at 71 (ex. p. HK_SFCSubpoena_000102459). 160 e. Location of Clayton Weibel’s comparable sales: Mobile County, Alabama, Florida; La Salle County, Illinois; Jackson County, Wisconsin; San Diego County, California; and Hall County, Georgia812 f. Clayton Weibel’s opinion on development potential of the property: “Based on the geologic investigation of the area including drilling and other considerations for mining feasibility, such as legally permissible, financial soundness, and market data, this classifies as ‘Proven Mineral Reserves.’ In addition, there are several other mining operations mining the same deposit in the region. Therefore, Proven Mineral Reserves without 20-acre plant is ≈4.805 million tons of lime rock that is both FDOT Road Base and general construction material.”813 g. Date of drilling and sampling program: August 8 through 17, 2006 and December 21, 2006814 h. Clayton Weibel’s “after”-easement value of the property: $360,000, or $2,928 per acre815 i. Taxpayer-investors’ total buy-in for 98.99 percent of company owning the underlying land: $3,750,000, purchased November 21, 2016,816 thus valuing it at 3,788,261.44, or 30,811 per acre j. Close date for investing in the transaction: October 21, 2016817 k. Taxpayer-investor vote on disposition of property: 100 percent of votes in favor of granting a conservation easement on the land, 0 percent in favor of mining it, 0 812 Id. at 72-84 (ex. p. HK_SFCSubpoena_000102458-70). 813 Id. at 89 (ex. p. HK_SFCSubpoena_000102475) (emphasis removed). 814 Id., Exhibit V, page 1 (ex. p. HK_SFCSubpoena_000102602). 815 Id. at 1 (ex. p. HK_SFCSubpoena_000102387). Ex. 66 – Letter from Christopher DeLacy, Partner, Holland & Knight LLP, to Charles Grassley, Chairman, U.S. Senate Committee on Finance, and Ron Wyden, Ranking Member, U.S. Senate Committee on Finance (Apr. 30, 2019), Attachment – OSI Response Chart 2(b) and 2(d); Ex. 133 – The 2016 Information Package for Sailfish Cove Group LLC, Ornstein-Schuler Investments LLC, at 14 (ex. p. HK_SFCSubpoena_000101910). 816 Ex. 66 – Letter from Christopher DeLacy, Partner, Holland & Knight LLP, to Charles Grassley, Chairman, U.S. Senate Committee on Finance, and Ron Wyden, Ranking Member, U.S. Senate Committee on Finance (Apr. 30, 2019), Attachment – OSI Response Chart 2(b) and 2(d). 817 161 percent in favor of leasing it, and 0 percent in favor of holding the property for future investment818 l. Date of granting conservation easement on the land: December 5, 2016819 m. Total deductions allocated to taxpayer-investors as a result of the easement: $17,430,000820 n. Total tax benefit to taxpayer-investors: $6,902,280821 15. Fantail Holdings LLC a. Acres: 100.56822 b. Development potential: 4.563 million tons of limerock823 c. Clayton Weibel’s and Lucus M. Von Esh’s “before”easement value of the property: $19,230,000, or $191,229 per acre824 d. Clayton Weibel’s and Lucus M. Von Esh’s primary method for estimating “before” value of the property: discounted cash flow825 e. Clayton Weibel’s and Lucus M. Von Esh’s opinion on development potential of the property: “Based on the geologic investigation of the area including drilling and other considerations for mining feasibility, such as legally permissible, financial soundness, and market data, this classifies as ‘Proven Mineral Reserves.’ In addition, there are several other mining operations mining the same deposit in the region. Therefore, Proven Mineral Reserves with a portable plant is ≈4.563 million tons of lime rock 818 Ex. 67, SFCHK00116379. 819 Id. at 1 (ex. p. HK_SFCSubpoena_000102387). 820 Id. at 1 (ex. p. HK_SFCSubpoena_000102387). 821 This figure is derived from multiplying the total deductions allocated to taxpayer-investors in the transaction by the then-existing top individual federal income-tax rate of 39.6 percent. 822 Ex. 73 – Clayton M. Weibel, MAI, and Lucas Mason, Inc., Appraisal Report for Fantail Holdings LLC (as of Nov. 30, 2017), at HK_SFCSubpoena_000161167. 823 Id. at 76 (ex. p. HK_SFCSubpoena_000161249). 824 Id. at 1 (ex. p. HK_SFCSubpoena_000161174). 825 Id. at 72 (ex. p. HK_SFCSubpoena_000161245). 162 f. g. h. i. j. that is both FDOT Road Base and general construction material.”826 Date of drilling and sampling program: August 8 through 17, 2006 and December 21, 2006827 Clayton Weibel’s and Lucus M. Von Esh’s “after”easement value of the property: $220,000, or $2,188 per acre828 Date of granting conservation easement on the land: November 30, 2016829 Total deductions allocated to taxpayer-investors as a result of the easement: $19,010,000830 Total tax benefit to taxpayer-investors: $7,527,960831 16. Orange Stone Group LLC a. Acres: 109.46832 b. Development potential: 6.16 million tons of limerock833 c. Clayton Weibel’s and Lucus M. Von Esh’s “before”easement value of the property: $26,070,000, or $238,169 per acre834 d. Clayton Weibel’s and Lucus M. Von Esh’s primary method for estimating “before” value of the property: discounted cash flow835 e. Clayton Weibel’s and Lucus M. Von Esh’s opinion on development potential of the property: “Based on the 826 Id. at 76 (ex. p. HK_SFCSubpoena_000161249) (emphasis removed). 827 Id., Exhibit IV, page 1 (ex. p. HK_SFCSubpoena_000161393). 828 Id. at 1 (ex. p. HK_SFCSubpoena_000161174). 829 Id. at 1 (ex. p. HK_SFCSubpoena_000161174). 830 Id. at 1 (ex. p. HK_SFCSubpoena_000161174). 831 This figure is derived from multiplying the total deductions allocated to taxpayer-investors in the transaction by the then-existing top individual federal income-tax rate of 39.6 percent. 832 Ex. 74 – Clayton M. Weibel, MAI, and Lucas Mason, Inc., Appraisal Report for Orange Stone LLC (as of Nov. 20, 2017), at HK_SFCSubpoena_000188211. 833 Id. at 76 (ex. p. HK_SFCSubpoena_000188293). 834 Id. at 1 (ex. p. HK_SFCSubpoena_000188218). 835 Id. at 71 (ex. p. HK_SFCSubpoena_000188288). 163 f. g. h. i. j. geologic investigation of the area including drilling and other considerations for mining feasibility, such as legally permissible, financial soundness, and market data, this classifies as ‘Proven Mineral Reserves.’ In addition, there are several other mining operations mining the same deposit in the region. Therefore, Proven Mineral Reserves with a portable plant is ≈6.160 million tons of lime rock that is both FDOT Road Base and general construction material.”836 Date of drilling and sampling program: August 8 through 17, 2006 and December 21, 2006837 Clayton Weibel’s and Lucus M. Von Esh’s “after”easement value of the property: $240,000, or $2,193 per acre838 Date of granting conservation easement on the land: November 20, 2016839 Total deductions allocated to taxpayer-investors as a result of the easement: $25,830,000840 Total tax benefit to taxpayer-investors: $10,228,680841 836 Id. at 76 (ex. p. HK_SFCSubpoena_000188293) (emphasis removed). 837 Id. at Exhibit IV, page 1 (ex. p. HK_SFCSubpoena_000188435). 838 Id. at 1 (ex. p. HK_SFCSubpoena_000188218). 839 Id. at 1 (ex. p. HK_SFCSubpoena_000188218). 840 Id. at 1 (ex. p. HK_SFCSubpoena_000188218). 841 This figure is derived from multiplying the total deductions allocated to taxpayer-investors in the transaction by the then-existing top individual federal income-tax rate of 39.6 percent. 164 v. Dr. Kyle Carney 1. Little Pumpkin Creek (Kyle Carney) a. Acres: 1209.38842 b. Purported development: residential development, “49 large view lots averaging 24± acres”843 c. Ronald S. Foster’s “before”-easement value of the property: $18,470,000, or approximately $15,272 per acre.844 Little Pumpkin Creek, LLC purchased the property for $1,250 per acre just 14 months earlier, on October 21, 2015 (2,497.25 acres for $3,121,562.50)845 d. Ronald S. Foster’s methods for estimating “before” value of the property: discounted cash flow and sales comparisons846 e. Locations of comparable sales: one in Robertson County, Tennessee; one in Madison County, Tennessee; and one in Shelby County, Tennessee847 f. Ronald S. Foster’s opinion on development potential of the property: “The residential market in the immediate neighborhood has experienced moderate growth. Research indicates that demand for residential properties average in the subject area. Many buyers are looking for an adequate sized parcel with adequate available utilities and natural scenic views. The subject tracts large size gives it the ability to subdivide into numerous single-family lots fitting market demand. For these reasons, it is my opinion that the Ex. 76 – Letter from Daniel J. Donovan, Partner, King & Spalding LLP, to Charles Grassley, Chairman, U.S. Senate Committee on Finance, and Ron Wyden, Ranking Member, U.S. Senate Committee on Finance (Apr. 30, 2019), Appendix A, Attachment A at SFC-Carney_00000001 (first spreadsheet). 842 Ex. 13 – Investment Summary for Little Pumpkin Creek Investments, LLC, at SFC-Carney_00002181; Ex. 77 – Ronald S. Foster, Ronald S. Foster & Company, Inc., Appraisal Report for Little Pumpkin Creek, LLC (Dec. 2, 2016), at 61 (ex. p. CARNEY-SFC_00005130). 843 844 Ex. 77 at 3 (ex. p. CARNEY-SFC_00005072). 845 Id. at 40 (ex. p. CARNEY-SFC_00005109). 846 See id. at 57-89 (ex. p. CARNEY-SFC_00005126-5158). 847 Id. at 65-70 (ex. p. CARNEY-SFC_00005134-5139). 165 g. h. i. j. k. l. m. n. o. subject property development with residential lots is financially feasible.”848 Ronald S. Foster’s “after”-easement value of the property: $1,209,360, or $1,000 per acre849 Number of taxpayer-investors involved in the transaction: 47850 Taxpayer-investors’ total buy-in for 96 percent of company owning the underlying land: $3,047,000, thus valuing the land as being worth $3,173,958.33, or $2,624 per acre851 Close date for investing in the transaction: September 2, 2016852 Taxpayer-investor vote on disposition of property: 46 out of Little Pumpkin Creek Investments’ 47 taxpayerinvestors voted to grant a conservation easement on the land, and one taxpayer-investor failed to properly vote853 Date of granting conservation easement on the land: December 2, 2016854 Total deductions allocated to taxpayer-investors as a result of the easement: $17,260,000855 Total tax benefit to taxpayer-investors: $6,834,960856 Dr. Carney’s fees as a result of the transaction: $500,000857 848 Id. at 61 (ex. p. CARNEY-SFC_00005130). 849 Id. at 3 (ex. p. CARNEY-SFC_00005402). 850 Ex. 76, Appendix A, Attachment A at SFC-Carney_00000001 (second spreadsheet). 851 Ex. 78 – Little Pumpkin Creek, LLC, Confidential Private Placement Memorandum, at 6, 17 (ex. p. SFC-Carney_00002194, 2205). 852 Ex. 76, Appendix A, Attachment A at SFC-Carney_00000001 (second spreadsheet). Ex. 79 – Letter from Daniel J. Donovan, Partner, King & Spalding LLP, to Charles Grassley, Chairman, U.S. Senate Committee on Finance, and Ron Wyden, Ranking Member, U.S. Senate Committee on Finance (Sept. 10, 2019), Appendix A, Attachment A, at SFC-Carney_00043654. 853 854 Ex. 76, Appendix A, Attachment A at SFC-Carney_00000001 (second spreadsheet). 855 Id. 856 This figure is derived from multiplying the total deductions allocated to taxpayer-investors in the transaction by the then-existing top individual federal income-tax rate of 39.6 percent. Ex. 80 – Letter from Daniel J. Donovan, Partner, King & Spalding LLP, to Charles Grassley, Chairman, U.S. Senate Committee on Finance, and Ron Wyden, Ranking Member, U.S. Senate Committee on Finance (July 31, 2019), Appendix A, Attachment A at SFC-Carney_00012643 (second spreadsheet). 857 166 2. Little Pumpkin Creek North Investments a. Acres: 1287.13858 b. Purported development: residential development, “31 large view lots averaging 41± acres”859 c. Ronald S. Foster’s “before”-easement value of the property: $20,000,000, or approximately $15,538 per acre.860 Little Pumpkin Creek, LLC purchased the property for $1,250 per acre just 14 months earlier, on October 21, 2015 (2,497.25 acres for $3,121,562.50).861 d. Ronald S. Foster’s methods for estimating “before” value of the property: discounted cash flow and sales comparisons862 e. Locations of comparable sales: one in Robertson County, Tennessee; one in Madison County, Tennessee; and one in Shelby County, Tennessee863 f. Ronald S. Foster’s opinion on development potential of the property: “The residential market in the immediate neighborhood has experienced moderate growth. Research indicates that demand for residential properties average in the subject area. Many buyers are looking for an adequate sized parcel with adequate available utilities and natural scenic views. The subject tracts large size gives it the ability to subdivide into numerous single-family lots fitting market demand. For these reasons, it is my opinion that the subject property development with residential lots is financially feasible.”864 g. Ronald S. Foster’s “after”-easement value of the property: $1,287,130, or $1,000 per acre865 Ex. 12 – Investment Summary for Little Pumpkin Creek North Investments, LLC, at SFCCarney_00002331); Ex. 76, Appendix A, Attachment A at SFC-Carney_00000001 (first spreadsheet). 858 859 Ex. 12 at SFC-Carney_00002332; Ex. 75 at 56 (ex. p. CARNEY-SFC_00005455). 860 Ex. 75 at 3 (ex. p. CARNEY-SFC_00005402). 861 Id. at 38 (ex. p. CARNEY-SFC_00005437). 862 Id. at 52-84 (ex. p. CARNEY-SFC_00005451-5483). 863 Id. at 60-67 (ex. p. CARNEY-SFC_00005459-5466). 864 Id. at 56 (ex. p. CARNEY-SFC_00005455). 865 Id. at 3 (ex. p. CARNEY-SFC_00005402). 167 h. Number of taxpayer-investors involved in the transaction: Four866 i. Taxpayer-investors’ total buy-in for 95 percent of company owning the underlying land: $3,329,150, thus valuing the land as being worth $3,504,368.42, or $2,723 per acre.867 j. Close date for investing in the transaction: November 28, 2016868 k. Taxpayer-investor vote on disposition of property: all four of Little Pumpkin Creek North Investments’ partners voted to grant a conservation easement on the land869 l. Date of granting conservation easement on the land: December 2, 2016870 m. Total deductions allocated to taxpayer-investors as a result of the easement: $18,711,000871 n. Total tax benefit to taxpayer-investors: $7,409,556872 o. Dr. Carney’s fees as a result of the transaction: $500,000873 3. Ginn Creek a. Acres: 1081.06874 b. Purported development: low-density residential875 866 Ex. 76, Appendix A, Attachment A at SFC-Carney_00000001 (second spreadsheet). 867 Ex. 81 at 6, 17 (ex. p. SFC-Carney_00002345, 2356). 868 Ex. 76, Appendix A, Attachment A at SFC-Carney_00000001 (second spreadsheet). 869 Ex. 79, Appendix A, Attachment A, at SFC-Carney_00043654. 870 Ex. 76, Appendix A, Attachment A at SFC-Carney_00000001 (second spreadsheet). 871 Id., Appendix A, Attachment A at SFC-Carney_00000001 (second spreadsheet). 872 This figure is derived from multiplying the total deductions allocated to taxpayer-investors in the transaction by the then-existing top individual federal income-tax rate of 39.6 percent. 873 Ex. 80, Appendix A, Attachment A at SFC-Carney_00012643 (second spreadsheet). 874 Ex. 76, Appendix A, Attachment A at SFC-Carney_00000001 (first spreadsheet). Ex. 14 – Investment Summary for Ginn Creek Investments, LLC, at SFC-Carney_00001954; Ex. 82 – David R. Roberts, Tennille & Associates, Inc., Appraisal Report for Ginn Creek, LLC (Dec. 8, 2016), at 7 (ex. p. CARNEY-SFC_00004361). 875 168 c. David Roberts’ “before”-easement value of the property: $14,054,000, or approximately $13,000 per acre876 d. David Roberts’ methods for estimating “before” value of the property: sales comparisons877 e. Locations of comparable sales: three in Williamson County, Tennessee; one on Lookout Mountain, Walker County, Georgia; and one in Rutherford County, Tennessee878 f. David Roberts’ opinion on development potential of the property: “Humphreys and Perry County, Tennessee have not experienced a large amount of residential growth and development at this time. However, in recent years several residential properties have been built near the Duck River for recreational purposes. There has also been extensive use of large land tracts for private hunting land. The growth and development from Nashville, Tennessee west has begun to reach the subject market area, including Humphreys County, Tennessee. In 2014 Humphreys County, Tennessee had a total of 25 buildings permits and in 2015, 28 permits for residential development. Nearby Dickson County had a total of 81 permits in 2014, and 75 merits in 2015. Both of these counties indicate the increased growth and development of second homeowners to the area. Considering the location of the subject property, and the good access, the most financially feasible use of the site would be for low-density residential development with larger homesites, surrounded by private recreational and hunting land.”879 g. David Roberts’ “after”-easement value of the property: $704,000, or $651 per acre880 h. Number of taxpayer-investors involved in the transaction: 50881 Ex. 82 – David R. Roberts, Tennille & Associates, Inc., Appraisal Report for Ginn Creek, LLC (Dec. 8, 2016), at 3 (ex. p. CARNEY-SFC_00004358). 876 877 See id. at 50-65 (ex. p. CARNEY-SFC_00004404-4419). 878 Id. at 63 (ex. p. CARNEY-SFC_00004417). 879 Id. at 47 (ex. p. CARNEY-SFC_00004401). 880 Id. at 3 (ex. p. CARNEY-SFC_00004358). 881 Ex. 76, Appendix A, Attachment A at SFC-Carney_00000001 (second spreadsheet). 169 i. Taxpayer-investors’ total buy-in for 95 percent of company owning the underlying land: $2,007,500, thus valuing the land as being worth $2,113,157.89, or $1,955 per acre.882 j. Close date for investing in the transaction: July 13, 2016883 k. Taxpayer-investor vote on disposition of property: 49 out of Ginn Creek Investments’ 50 taxpayer-investors voted to grant a conservation easement on the land, and one taxpayer-investor voted to hold the land for investment.884 l. Date of granting conservation easement on the land: December 2, 2016885 m. Total deductions allocated to taxpayer-investors as a result of the easement: $13,350,000886 n. Total tax benefit to taxpayer-investors: $5,286,600887 o. Dr. Carney’s fees as a result of the transaction: $500,000888 vi. Thomas Jason Free 1. Tennessee Ranch Estates (2015) a. Acres: 1,010.43889 b. Purported development: low-density residential890 c. David Roberts’ “before”-easement value of the property: $14,146,000, or approximately $14,000 per acre891 882 Ex. 83 – Ginn Creek Investments, LLC, Confidential Private Placement Memorandum, at 6, 17 (ex. p. SFC-Carney_00001967, 1978). 883 Ex. 76, Appendix A, Attachment A at SFC-Carney_00000001 (second spreadsheet). 884 Ex. 79, Appendix A, Attachment A, at SFC-Carney_00043654. 885 Ex. 76, Appendix A, Attachment A at SFC-Carney_00000001 (second spreadsheet). 886 Id. 887 This figure is derived from multiplying the total deductions allocated to taxpayer-investors in the transaction by the then-existing top individual federal income-tax rate of 39.6 percent. 888 Ex. 80, Appendix A, Attachment A at SFC-Carney_00012643 (second spreadsheet). 889 Ex. 8 – Tennessee Ranch Estates Investors, Confidential Private Placement Memorandum, LLC (Oct. 16, 2015), at 2 (ex. p. FREE00000418); Ex. 85 – David R. Roberts, Tennille & Associates, Inc., Appraisal Report for Tennessee Ranch Estates, LLC (Dec. 3, 2015), at 1 (ex. p. FREE00000673). 890 Ex. 85 at 7 (ex. p. FREE00002544). 891 Id. at 3, 93 (ex. p. FREE00002541, 2630). 170 d. David Roberts’ primary method for estimating “before” value of the property: sales comparisons892 e. Locations of comparable sales: three in Williamson County and one in Rutherford County, Tennessee893 f. David Roberts’s opinion on development potential of the property: “The subject property was opened in 2007 as a 109 site residential subdivision, Tennessee Ranch Estates. In 2008 the economic downturn that effected the entire United States stopped the sales of the property. The property has not been marketed for many years by the previous owners. Also information gathered from the immediate subject neighborhood, including an adjoining subdivision, indicate that the lack of sales in the immediate subject market area currently would not indicate the demand for 190 residential homesites. However, numerous developments with larger homesites ranging from 5 to 10acres, located on the Cumberland Plateau, have experienced growth and development in this market. These include the Jasper Highlands neighborhood west of Chattanooga, Tennessee, and Long Branch Lakes. Combining the 190 residential homesites that average 5acres in size to larger homesites would be best use of the property, adding to the privacy and appeal of the homesites. Considering the prime access to the site off I-140, and the attraction of the rolling Tennessee Hills in the subject neighborhood, the most financially feasible use of the subject property would be for larger residential homesites, adding to the privacy and appeal, utilizing the roads in place, to homesites of 10 to 20-acres in size.”894 g. David Roberts’ “after”-easement value of the property: $1,094,000, or $1,083 per acre (1,000.43 conserved, ten acres excluded for five homesites)895 892 Id. at 45 (ex. p. FREE00002582). 893 Id. at 55 (ex. p. FREE00002592). 894 Id. at 42 (ex. p. FREE00002579). 895 Id. at 3, 93 (ex. p. FREE000002541, 2630). 171 h. Number of taxpayer-investors involved in the transaction: 26896 i. Taxpayer-investors’ total buy-in for 98 percent of company owning the underlying land: $2,618,330, thus valuing the land as being worth $2,671,765.31, or $2,644 per acre,897 purchased on December 17, 2015. On December 24, 2014, Jason Free and Lane Lawler purchased the land using a holding company for $1,432,601 from a company called 1st American Land Holdings, Inc.898 j. Close date for investing in the transaction: December 15, 2015899 k. Taxpayer-investor vote on disposition of property: no vote900 l. Date of granting conservation easement on the land: December 29, 2015901 m. Total deductions allocated to taxpayer-investors as a result of the easement: $12,790,960902 n. Total tax benefit to taxpayer-investors: $5,065,220903 o. Mr. Free’s and Mr. Lawler’s fees as a result of the transaction: $121,378904 896 Ex. 84 – Letter from Mark D. Allison, Partner, Caplan & Drysdale, Chartered, to John L. Schoenecker, Senior Investigative Counsel, and Christopher Arneson, Senior Tax Policy Advisor, United States Senate Committee on Finance (July 31, 2019), at 9. 897 Ex. 8 at 5 (ex. p. FREE00000421); Ex. 84 at 9. 898 Ex. 8 at 6 (ex. p. FREE00000422); Ex. 84 at 6. 899 Ex. 84 at 6. 900 Id. at 17. 901 Id. at 7. 902 Id. at 8. 903 This figure is derived from multiplying the total deductions allocated to taxpayer-investors in the transaction by the then-existing top individual federal income-tax rate of 39.6 percent. 904 Ex. 84 at 21. 172 2. Crockett Investors, LLC (Jason Free and Lane Lawler – 2016) a. Acres: 941.76905 b. Purported development: low-density residential906 c. David Roberts’ “before”-easement value of the property: $11,301,000, or approximately $12,000 per acre907 d. David Roberts’ primary method for estimating “before” value of the property: sales comparisons908 e. Locations of comparable sales: two in Williamson County, Tennessee; one on Lookout Mountain, Walker County, Georgia; one in Rutherford County, Tennessee; and one in Sullivan County, Tennessee909 f. David Roberts’s opinion on development potential of the property: “Humphreys County, Tennessee has not experienced a large amount of residential growth and development at this time. However, in recent years several residential properties have been built near the Duck River for recreational purposes. There has also been extensive use of large land tracts for private hunting land. The growth and development from Nashville, Tennessee west has begun to reach the subject market area, including Humphreys County, Tennessee. In 2014 Humphreys County, Tennessee had a total of 25 buildings permits and in 2015, 28 permits for residential development. Nearby Dickson County had a total of 81 permits in 2014, and 75 merits in 2015. Both of these counties indicate the increased growth and development of second homeowners to the area. Considering the location of the subject property near the Duck River and the good access, the most financially feasible use of the site would be for low-density Ex. 86 – Crockett Investors, LLC, Confidential Private Placement Memorandum (Oct. 25, 2016), at 2 (ex. p. FREE00000002); Ex. 87 – David R. Roberts, Tennille & Associates, Inc., Appraisal Report for Crockett 941, LLC (Dec. 6, 2016), at 1 (ex. p. FREE00000673). 905 906 Ex. 87 at 7 (ex. p. FREE00000678). 907 Id. at 8 (ex. p. FREE00000679). 908 Id. at 43 (ex. p. FREE00000714). 909 Id. at 56 (ex. p. FREE00000727). 173 g. h. i. j. k. l. m. n. residential development with larger homesites, surrounded by private recreational and hunting land.”910 David Roberts’ “after”-easement value of the property: $615,000, or $656 per acre (937.76 conserved, four acres excluded for two homesites)911 Number of taxpayer-investors involved in the transaction: Four912 Jason Free’s total buy-in for 98-percent interest in the land from the company originally owning that land: $752,800, thus valuing the land as being worth $768,163.27, or $760 per acre.913 Taxpayer-investors’ total buy-in for that 98percent interest in the land: $2,100,000, thus valuing the land at $2,142,857.14, or $2,275 per acre.914 Close date for investing in the transaction: December 16, 2016915 Taxpayer-investor vote on disposition of property: all four of Crockett Investments’ partners voted to grant a conservation easement on the land916 Date of granting conservation easement on the land: December 22, 2016917 Total deductions allocated to taxpayer-investors as a result of the easement: $10,501,680918 Total tax benefit to taxpayer-investors: $4,158,665919 910 Id. at 40 (ex. p. FREE00000711). 911 Id. at 8 (ex. p. FREE00000679). 912 Ex. 84 at 9. 913 Ex. 86 at 7 (ex. p. FREE00000007). 914 Ex. 84 at 9. 915 Id. at 6. 916 Id. at 17. 917 Id. at 7. 918 Id. at 8. 919 This figure is derived from multiplying the total deductions allocated to taxpayer-investors in the transaction by the then-existing top individual federal income-tax rate of 39.6 percent. 174 o. Mr. Free’s and Mr. Lawler’s fee as a result of the transaction: $736,780920 920 Ex. 84 at 21. 175 b. Exhibit List Ex. 1 – Email thread among Robert McCullough, Senior Vice President & CFO, EcoVest Capital, Inc., David Mirolli, Managing Partner, Catalyst Wealth Management, David [REDACTED], Robert [REDACTED], Tom [REDACTED], et al. (Dec. 7., 2017 through Dec. 9, 2017) Ex. 2 – Letter from David J. Kautter, Acting Commissioner, Internal Revenue Service, to Orrin G. Hatch, Chairman, U.S Senate Committee on Finance, United States Senate (July 12, 2018) Ex. 3 – Letter from Charles P. Rettig, Commissioner, Internal Revenue Service, to Charles Grassley, Chairman, U.S Senate Committee on Finance, United States Senate (Feb. 12, 2020) Ex. 4 – Robert Ramsay, A Dirty Dozen Myths About Conservation Easements and One Sad Truth, EXEMPT ORGANIZATION TAX REVIEW, May 2020 Ex. 5 – Ronald Levitt and David Woolridge, Sirotte & Permutt PC, Conservation Easement Overview (2013) Ex. 6 – audio recording of William M. Osterbrock, Baker Donelson, Webinar Presentation – Current Issues Concerning Charitable Gifts of Real Estate (Sep. 28, 2017), https://www.bakerdonelson.com/current-issues-concerning-charitable-gifts-realestate (beginning at approximately 43:13, last visited May 13, 2020) Ex. 6.1 – accompanying presentation slide Ex. 7 – audio recording of William R. Sylvester, Baker Donelson, Webinar Presentation – Current Issues Concerning Charitable Gifts of Real Estate (Sep. 28, 2017), https://www.bakerdonelson.com/current-issues-concerning-charitable-gifts-realestate (beginning at approximately 2:32, last visited May 13, 2020) Ex. 7.1 – accompanying presentation slide Ex. 8 – Tennessee Ranch Estates Investors, LLC, Confidential Private Placement Memorandum (Oct. 16, 2015) Ex. 9 – The 2015 Information Package for FG River Partners LLC, Conservation Saves LLC & Galt Mining Investments, LLC Ex. 10 – The 2015 Information Package for Green Cove Group LLC, Conservation Saves LLC & Galt Mining Investments, LLC Ex. 11 – Azalea Bay Resort Holdings LLC, Manager’s Analysis, EcoVest Capital, Inc. (Sept. 4, 2015) Ex. 12 – Investment Summary for Little Pumpkin Creek North Investments, LLC Ex. 13 – Investment Summary for Little Pumpkin Creek Investments, LLC 176 Ex. 14 – Investment Summary for Ginn Creek Investments, LLC Ex. 15 – Letter from Sean M. Akins, Partner, Covington & Burling LLP, to John L. Schoenecker, Senior Investigative Counsel, United States Senate Committee on Finance (June 21, 2019) Ex. 16 – Email thread among David Mirolli, Managing Partner, Catalyst Wealth Management, D. [REDACTED] , E. [REDACTED], and T. [REDACTED] (Sept. 1, 2017 through Sept. 8, 2017) Ex. 17 – Email thread among E. [REDACTED] and Derek [REDACTED] (Nov. 10, 2016) Ex. 18 – Email from Anthony [REDACTED] to E. [REDACTED], EcoVest Capital, Inc. (Oct. 23, 2018 through Dec. 11, 2018) Ex. 19 – Email from Matt [REDACTED] to Investor Relations, EcoVest Capital, Inc. (Jan. 30, 2017) Ex. 20 – Email thread among B. [REDACTED], EvrSource Capital, Laura [REDACTED], Matthew Campbell, EvrSource Capital, Peter [REDACTED] (Dec. 7, 2015 through Dec. 15, 2015) Ex. 21 – Email thread among B. [REDACTED], EvrSource Capital, E. [REDACTED], Lisa [REDACTED], Matthew Campbell, EvrSource Capital, (Dec. 17, 2015 through Dec. 18, 2015) Ex. 22 – Email thread among Chip Pearson, EvrSource Capital and John [REDACTED] (Nov. 4, 2015 through Dec. 15, 2015) Ex. 23 – Email thread among J. [REDACTED], Matthew Ornstein, Ornstein-Schuler Investments, and Dr. Michael [REDACTED] (Sept. 21, 2015) Ex. 24 – Email thread among D. [REDACTED] and Matthew Ornstein, Ornstein-Schuler Investments (Sept. 29, 2015) Ex. 25 – Email thread among Shelly [REDACTED] and Matthew Ornstein, Ornstein-Schuler Investments (May 14, 2015 through July 7, 2015) Ex. 26 – In re Claud Clark, III, State of Alabama Real Estate Appraiser Board, AB 16-15, Summons and Notice of Hearing and Complaint (Jan. 11, 2019) Ex. 27 – In re Claud Clark, III, State of Alabama Real Estate Appraiser Board, AB 16-15, Voluntary Revocation Consent Order (May 16, 2019) Ex. 28 – Claud Clark, III, Clark-Davis, PC, Appraisal of Black Bear Enter. (Mar. 18, 2015) Ex. 29 – Letter from Susanne M. Curran, Managing Director, Curran Realty Advisors LLC, to Lisa Brooks, Executive Director, and Neva Conway, General Counsel at 8 (May 15, 2018) 177 Ex. 30 – Azalea Bay Resort Holdings, LLC, Confidential Private Placement Memorandum (June 1, 2015) Ex. 31 – Claud Clark, III, Clark-Davis, PC, Appraisal of Azalea Bay Resort (Mar. 3, 2015) Ex. 32 – Assignment and Assumption of Membership Interest of Azalea Bay Resort Ex. 33 – Azalea Bay Resort Holdings, LLC spreadsheet calculator Ex. 34 – Letter from Alan N. Solon, Chairman & CEO, EcoVest Capital, Inc., to Azalea Bay Holdings, LLC members (July 27, 2018) Ex. 35 – Strategic Solutions Alliance, EcoVest Capital, Inc., Sandridge Recommendations (Dec. 4, 2018) Ex. 36 – Magnolia Bay Resort Holdings, LLC, Confidential Private Placement Memorandum (June 11, 2015) Ex. 37 – Claud Clark, III, Clark-Davis, PC, Appraisal of Magnolia Bay Resort (Dec. 15, 2015) Ex. 38 – Assignment and Assumption of Membership Interest of Magnolia Bay Resort (Oct. 9. 2015) Ex. 39 – Letter from Robert M. McCullough, Senior Vice President and CFO, EcoVest Capital, Inc., to financial advisors (Jan. 6, 2016) Ex. 40 – Claud Clark, III, Clark-Davis, PC, Appraisal of Long Bay Marina (Dec. 30, 2014) Ex. 41 – Letter from Alan N. Solon, Chairman and Chief Executive Office, EcoVest Capital, Inc., to members of Long Bay Marina Holdings, LLC (Apr. 13, 2018) Ex. 42 – Raymond E. Veal, Market Value Appraisal Bienville 75 (Oct. 20, 2015) Ex. 43 – Senate Committee on Finance Supplemental Response Written Answer – Bienville 75 Acquisitions, LLC Ex. 44 – Bienville 75, LLC, Private Placement Memorandum (Oct. 30, 2015) Ex. 45 – Bienville 75 Acquisitions, LLC ballots Ex. 46 – Roaring Florida Acquisitions, LLC, Private Placement Memorandum (Nov. 8, 2016) Ex. 47 – Raymond E. Veal, Market Value Appraisal Roaring Creek Plantation (Feb. 14, 2017) Ex. 48 – Claud Clark, III, Clark-Davis, PC, Conservation Easement Review Appraisal of Roaring Creek Plantation (Nov. 3, 2016) Ex. 49 – Senate Committee on Finance Supplemental Response Written Answer – Roaring Florida Acquisitions, LLC Ex. 50 – Draft email to Roaring Florida Acquisition members 178 Ex. 51 – Brian W. Kelley’s responses regarding Adam Smith Ventures, LLC to questions in letter from Charles Grassley, Chairman, U.S. Senate Committee on Finance, and Ron Wyden, Ranking Member, U.S. Senate Committee on Finance, to Brian Kelley, Webb Creek Management Group (Mar. 27, 2019) Ex. 52 – Letter from Bryan W. Kelley, CEO, Webb Creek Management Group, LLC, to Adam Smith Ventures, LLC members (Sept. 1, 2017) Ex. 53 – Jim R. Clower, Sr., A Self-Contained Appraisal Report for a Proposed Conservation Easement on an Approximate 227 +/- Acre Tract of Vacant Land (Nov. 12, 2013) Ex. 54 – Adam Smith Ventures, LLC, Confidential Private Placement Memorandum (Nov. 30, 2012) Ex. 55 – County Line Ranch, Bowling Green, FL, Coldwell Banker Commercial, Saunders Real Estate (2008) Ex. 56 – Land Listings Catalog, Coldwell Banker Commercial Saunders Real Estate (Fall 2015) Ex. 57 – Clayton M. Weibel, MAI, Appraisal Report for FG River Resources LLC (as of Dec. 29, 2015) Ex. 58 – Clayton M. Weibel, MAI, Appraisal Report for Green Cove Rock LLC (as of Dec. 28, 2015) Ex. 59 – Clayton M. Weibel, MAI, Appraisal Report for Huston Minerals LLC (as of Dec. 28, 2015). Ex. 60 – Clayton M. Weibel, MAI, Appraisal Report for Imperial Aggregates LLC (as of Dec. 28, 2015) Ex. 61 – Clayton M. Weibel, MAI, Appraisal Report for Jackson River Minerals LLC (as of Dec. 28, 2015) Ex. 62 – Clayton M. Weibel, MAI, Appraisal Report for KR Stone Resources LLC (as of Dec. 28, 2015) Ex. 63 – Clayton M. Weibel, MAI, Appraisal Report for LM Bass Aggregates LLC (as of Dec. 29, 2015) Ex. 64 – Clayton M. Weibel, MAI, Appraisal Report for Manatee Minerals LLC (as of Dec. 29, 2015) Ex. 65 – Clayton M. Weibel, MAI, Appraisal Report for Nassau River Stone LLC (as of Dec. 29, 2015) Ex. 66 – Letter from Christopher DeLacy, Partner, Holland & Knight LLP, to Charles Grassley, Chairman, U.S. Senate Committee on Finance, and Ron Wyden, Ranking Member, U.S. Senate Committee on Finance (Apr. 30, 2019) 179 Ex. 67 – Request10VotingData Ex. 68 – Clayton M. Weibel, MAI, Appraisal Report for Orange Woods Capital LLC (as of October 5, 2016) Ex. 69 – Clayton M. Weibel, MAI, Appraisal Report for Palmetto Waters LLC (as of October 5, 2016). Ex. 70 – Clayton M. Weibel, MAI, Appraisal Report for Quality River Stones LLC (as of Dec. 22, 2016) Ex. 71 – Clayton M. Weibel, MAI, Appraisal Report for Regional Minerals LLC (as of Dec. 27, 2016) Ex. 72 – Clayton M. Weibel, MAI, Appraisal Report for Sailfish Cove LLC (as of Dec. 5, 2016) Ex. 73 – Clayton M. Weibel, MAI, and Lucas Mason, Inc., Appraisal Report for Fantail Holdings LLC (as of Nov. 30, 2017) Ex. 74 – Clayton M. Weibel, MAI, and Lucas Mason, Inc., Appraisal Report for Orange Stone LLC (as of Nov. 20, 2016) Ex. 75 – Ronald S. Foster, Ronald S. Foster & Company, Inc., Appraisal Report for Little Pumpkin Creek North, LLC (Dec. 2, 2016) Ex. 76 – Letter from Daniel J. Donovan, Partner, King & Spalding LLP, to Charles Grassley, Chairman, U.S. Senate Committee on Finance, and Ron Wyden, Ranking Member, U.S. Senate Committee on Finance (Apr. 30, 2019) Ex. 77 – Ronald S. Foster, Ronald S. Foster & Company, Inc., Appraisal Report for Little Pumpkin Creek, LLC (Dec. 2, 2016). Ex. 78 – Little Pumpkin Creek, LLC, Confidential Private Placement Memorandum Ex. 79 – Letter from Daniel J. Donovan, Partner, King & Spalding LLP, to Charles Grassley, Chairman, U.S. Senate Committee on Finance, and Ron Wyden, Ranking Member, U.S. Senate Committee on Finance (Sept. 10, 2019). Ex. 80 – Letter from Daniel J. Donovan, Partner, King & Spalding LLP, to Charles Grassley, Chairman, U.S. Senate Committee on Finance, and Ron Wyden, Ranking Member, U.S. Senate Committee on Finance (July 31, 2019). Ex. 81 – Little Pumpkin Creek North, LLC, Confidential Private Placement Memorandum Ex. 82 – David R. Roberts, Tennille & Associates, Inc., Appraisal Report for Ginn Creek, LLC (Dec. 8, 2016) Ex. 83 – Ginn Creek Investments, LLC, Confidential Private Placement Memorandum 180 Ex. 84 – Letter from Mark D. Allison, Partner, Caplan & Drysdale, Chartered, to John L. Schoenecker, Senior Investigative Counsel, and Christopher Arneson, Senior Tax Policy Advisor, United States Senate Committee on Finance (July 31, 2019) Ex. 85 – David R. Roberts, Tennille & Associates, Inc., Appraisal Report for Tennessee Ranch Estates, LLC (Dec. 3, 2015) Ex. 86 – Crockett Investors, LLC, Confidential Private Placement Memorandum (Oct. 25, 2016) Ex. 87 – David R. Roberts, Tennille & Associates, Inc., Appraisal Report for Crockett 941, LLC (Dec. 6, 2016) Ex. 88 – Belle Harbour Resort Holdings, LLC, Confidential Private Placement Memorandum (Sept. 21, 2015) Ex. 89 – Claud Clark, III, Clark-Davis, PC, Appraisal of Belle Harbour Resort (Dec. 15, 2015) Ex. 90 – Assignment and Assumption of Membership Interest (Dec. 17, 2015) Ex. 91 – Cypress Cove Marina Holdings, LLC, Confidential Private Placement Memorandum (Aug. 3, 2015) Ex. 92 – Claud Clark, III, Clark-Davis, PC, Appraisal of Cypress Cove Marina (Dec. 15, 2015) Ex. 93 – Diamond Grande Resort Holdings, LLC, Confidential Private Placement Memorandum (Oct. 13, 2015) Ex. 94 – Claud Clark, III, Clark-Davis, PC, Appraisal of Diamond Grande Resort (Dec. 15, 2015) Ex. 95 – Assignment and Assumption of Membership Interest (Dec. 23, 2015) Ex. 96 – Sanibel Resort Holdings, LLC, Confidential Private Placement Memorandum (Sept. 14, 2015) Ex. 97 – Claud Clark, III, Clark-Davis, PC, Appraisal of Sanibel Resort (Dec. 15, 2015) Ex. 98 – Claud Clark, III, Clark-Davis, PC, Appraisal of Seavista Resort (Dec. 15, 2015) Ex. 99 – Claud Clark, III, Clark-Davis, PC, Appraisal of Seavista Resort (Dec. 15, 2015) Exhibit 100 – South Bay Cove Holdings, LLC, Confidential Private Placement Memorandum (Nov. 17, 2015) Exhibit 101 – Claud Clark, III, Clark-Davis, PC, Appraisal of South Bay Cove (Dec. 15, 2015) Exhibit 102 – Arcadian Quay Holdings, LLC, Confidential Private Placement Memorandum (Nov. 17, 2015) Exhibit 103 – Claud Clark, III, Clark-Davis, PC, Appraisal of Arcadian Quay (Jan. 2, 2017) 181 Exhibit 104 – Camellia Station Holdings, LLC, Confidential Private Placement Memorandum (Sept. 1, 2016) Exhibit 105 – Claud Clark, III, Clark-Davis, PC, Appraisal of Camellia Station (Jan. 2, 2017) Exhibit 106 – Lakeshore Resort Holdings, LLC, Confidential Private Placement Memorandum (Aug. 3, 2016) Exhibit 107 – Claud Clark, III, Clark-Davis, PC, Appraisal of Lakeshore Resort (Jan. 2, 2017) Exhibit 108 – Myrtle West Resort Holdings, LLC, Confidential Private Placement Memorandum (Mar. 29, 2016) Exhibit 109 – Claud Clark, III, Clark-Davis, PC, Appraisal of Myrtle West Resort (Jan. 2, 2017) Exhibit 110 – North Bay Cove Holdings, LLC, Confidential Private Placement Memorandum (Aug. 25, 2016) Exhibit 111 – Claud Clark, III, Clark-Davis, PC, Appraisal of North Bay Cove (Jan. 2, 2017) Exhibit 112 – Ocean Grove Resort Holdings, LLC, Confidential Private Placement Memorandum (June 17, 2016) Exhibit 113 – Claud Clark, III, Clark-Davis, PC, Appraisal of Ocean Grove Resort (Jan. 2, 2017) Exhibit 114 – Queen’s Cove Holdings, LLC, Confidential Private Placement Memorandum (Nov. 17, 2016) Exhibit 115 – Claud Clark, III, Clark-Davis, PC, Appraisal of Queen’s Cove (Jan. 2, 2017) Exhibit 116 – Waterway Grove Holdings, LLC, Confidential Private Placement Memorandum (Dec. 2, 2016) Exhibit 117 – Claud Clark, III, Clark-Davis, PC, Appraisal of Waterway Grove (Jan. 2, 2017) Exhibit 118 – White Sands Village Holdings, LLC, Confidential Private Placement Memorandum (July 1, 2016) Exhibit 119 – Claud Clark, III, Clark-Davis, PC, Appraisal of White Sands Village (Jan. 2, 2017) Exhibit 120 – Form 8886 – Reportable Transaction Disclosure Statement for Bienville 75 Acquisitions, LLC Exhibit 121 – IRS Form 1065, U.S. Return of Partnership Income for FG River Resources LLC (for tax year beginning Dec. 11, 2015 and ending Dec. 31, 2015) Exhibit 122 – The 2015 Information Package for Huston Minerals Partners LLC, Conservation Saves LLC & Galt Mining Investments, LLC Exhibit 123 – The 2015 Information Package for Imperial Aggregates LLC, Conservation Saves LLC & Galt Mining Investments, LLC 182 Exhibit 124 – The 2015 Information Package for Jackson River Partners LLC, Conservation Saves LLC & Galt Mining Investments, LLC Exhibit 125 – The 2015 Information Package for KR Stone Group LLC, Conservation Saves LLC & Galt Mining Investments, LLC Exhibit 126 – The 2015 Information Package for LM Bass Partners LLC, Conservation Saves LLC & Galt Mining Investments, LLC Exhibit 127 – The 2015 Information Package for Manatee Minerals Group LLC, Conservation Saves LLC & Galt Mining Investments, LLC Exhibit 128 – The 2015 Information Package for Nassau River Partners LLC, Conservation Saves LLC & Galt Mining Investments, LLC Exhibit 129 – The 2016 Information Package for Orange Woods Partners LLC, Ornstein-Schuler Investments LLC Exhibit 130 – The 2016 Information Package for Palmetto Waters Group LLC, Ornstein-Schuler Investments LLC Exhibit 131 – The 2016 Information Package for Quality Stones Group LLC, Ornstein-Schuler Investments LLC Exhibit 132 – The 2016 Information Package for Regional Minerals Partners LLC, OrnsteinSchuler Investments LLC Exhibit 133 – The 2016 Information Package for Sailfish Cove Group LLC, Ornstein-Schuler Investments LLC *** 183