AUGUSTA (Georgia) — A judge ruled last month to allow Champions Retreat to claim a charitable deduction of almost $8 million. This was in response to Evans’ win in a federal tax case. Evans is a suburb in Augusta.
The case has been in litigation since 2013, when the Internal Revenue Service rejected a $10.4 million conservation-easement deduction. U.S. Tax Court Judge Cary Douglas Pugh recently allowed more than $7.8million of the $10.4million deduction claimed by Champions Retreat Golf Founders LLC in its 2010 tax return.
Champions Retreat purchased more than 463 acres in April 2002 for the development of a neighborhood called Founders Village and a 27-hole course.
The Evans course hosts the Augusta National Women’s Amateur Tournament. It was completed in June 2005. It features three 9-hole holes, a pro shop and a restaurant. There is also a driving range. Gary Player, Arnold Palmer, and Jack Nicklaus designed the three courses.
The easement and subsequent sale
After the recession, the Champions Retreat Golf Club’s then-owners granted 349 acres of easement to North American Land Trust.
Property owners can take charitable tax deductions through conservation easements for properties that are gifted to land trusts.
The easement area contained 25 holes of the golf club, the majority of the remaining holes, and the driving range. The easement granted to the land trust by the owners was a $10.4million charitable deduction. This deduction was based on the appraisal of its appraiser.
The golf club and some of the cabins were sold by Tower Three Partners in October 2014 to San Diego-based Heritage Golf Group, which was its affiliate. It cost $6.64 million.
In 2018, deduction is denied
Champions Retreat claimed that the easement met conservation purposes in September 2018. It protected the natural habitat of wildlife, the ecosystem, and preserved open spaces. Court documents show that Champions Retreat supported this argument. Champions Retreat specifically mentioned the endangered southern fox squirrel, denseflower knotweed and other threatened species.
Judge Pugh determined that there weren’t enough endangered knotweed plants in this area, and the state still allows squirrel hunting.
Pugh explained that the easement area was located in a private part of the complex and is only accessible by members and their guests through a gate that is manned 24 hours per day. It is not available for the general public.
The court ruled that Champions Retreat didn’t support an “identified conservation program” and supported the IRS in denying the deduction for 2010.
Champions Retreat appealed against the decision. When Champions Retreat was brought back to court, on May 13, 2020 the 11th Circuit Court of Appeals reversed its 2018 ruling against Champions Retreat, stating that Champions Retreat was entitled for a deduction. The court decided the amount of the deduction in October 2022.
The easement should be valued
Claud Clark III was appointed by the court to appraise Champions Retreat. He estimated the fair market value at nearly $11 million. He said that the best and most efficient use of the 27-holes course was an 18 hole golf course and residential subdivision.
David G. Pope, an IRS appraiser, stated that the best and highest use of the 27-hole golf course was to be a golf course. Pope valued the easement at $22,000
Both appraisals were so different because of the differences in usage. Clark included the cost of lots if they were used for residential housing, while Pope limited the use to a golf course.
It ends up being a case of dueling experts in litigation, according to Gregg D. Polsky (University of Georgia professor of taxation law).
“The taxpayer’s expert claimed that a portion of the course could be developed into residential property and sold at large prices, but it couldn’t,” Polsky stated. “The government expert said no, in fact the best and highest use of the course is the golf club, so the deduction is zero.”
According to Polsky, the IRS is cracking down on syndicated conservation agreement deals. These usually involve investors purchasing vacant land at a low price and then hiring an appraiser in order to claim it has high developmental value.
Investors are told by the promoters that they will purchase the property, grant easements and then claim charitable deductions greater than their initial investment.
“Syndicated conservation easement agreements are very sketchy and they’ve been attacked by the IRS, most often successfully,” Polsky stated. In this instance, there was separation from the time the property was acquired or developed to the time the easement was granted. These are more legal, but they both rely on aggressive valuations. Basically, you want to get your appraiser sort of to provide a super high “highest and most beneficial use” valuation.
“An advocate is as valuable as an expert”
Clark was named in a bipartisan investigation report by the U.S. Senate Finance Committee that focuses on syndicated conservation easements. Clark is specifically mentioned in the report for his involvement in an Alabama transaction.
Clark was the appraiser for that transaction. According to the report, Clark “played an important role in the world syndicated conservation easements,” which is critical of Clark’s work.
The Alabama Real Estate Appraisers Board challenged Clark’s Black Bear Enterprises appraisal for not meeting the appropriate standards. According to the report, Clark gave up his Alabama appraisal license rather than defend himself in front of the board.
According to court documents, Clark was serving as an advocate in the Champions case.
Clark was unable to be reached by The Augusta Chronicle. Clark’s business phone number is listed online and the phone numbers of Clark were provided in court documents. Clark was also reached out by the Chronicle via Facebook, but he did not respond immediately.
Judge Pugh sided with Clark despite his criticisms of Clark and determined that the property could be used as residential housing.
“The tax court generally agreed to the [Champions Retreats] expert and reduced deduction by approximately 20%, bringing the total to about $8 million,” Polsky stated.
Pugh determined that the fair market value for the easement in 2010, after taking into account the lots, was $7,834,091.
Champions Retreat referred The Augusta Chronicle the E.G. owners of Champions Retreat. Robert Pollard and Meybohm. Mike Polatty was unaware that Meybohm had been convicted and did not want to speak on the record.
Vivian D. Hoard is an Atlanta-based attorney at Fox Rothschild, which represented former owners of the course. He did not respond to our requests for comment immediately.