June 17, 2018

Colorado Court of Appeals: Donor and Transferee Are One Entity for Conservation Easement Tax Credit Purposes

The Colorado Court of Appeals issued its opinion in Medved v. Colorado Department of Revenue on Thursday, October 20, 2016.

Conservation Easement Tax Credit—Statute of Limitations—Notice of Disallowance.

The Medveds purchased a conservation easement (CE) tax credit from Whites Corporation (Whites). The appraised value of the tax credit was $130,000. Whites was the CE donor and the Medveds were the CE transferees. On October 23, 2006, the Medveds filed their 2005 Colorado tax returns and claimed a $130,000 credit based on the CE. On October 30, 2007, Whites filed a Colorado State C Corporation income tax return and claimed a $260,000 credit based on the same CE.

On March 4, 2011, the Colorado Department of Revenue (Department) issued a notice of disallowance to Whites and the Medveds, disallowing the credit in its entirety. The Medveds appealed to the district court and argued the notice of disallowance was barred by the four-year statute of limitation in C.R.S. § 39-21-107(2). The Department argued that the Medveds and Whites were subject to the same statute of limitations that was triggered when the donor filed its tax return under C.R.S. § 39-22-522(7)(i). The district court found that the donor and the transferee were a single entity and were bound as to all issues concerning the tax credit to the four-year statute of limitations, which was triggered by the donor’s tax claim. Because Whites filed its return on October 30, 2007, the Department’s notice of disallowance was within the statute of limitations.

On appeal, the Medveds claimed they were not bound by the same statute of limitations as Whites. The court of appeals agreed with the Department that a donor and transferee are considered a single entity under the statute and are bound by the same statute of limitations. The Medveds also argued that the first claim filed triggers the four-year statute of limitations. Finding the statutory language ambiguous, the court considered its legislative intent and purposes and concluded that the General Assembly intended that the first claim filed, either by the donor or transferee, begins the four-year statute of limitations period. Because the Department’s notice of disallowance was beyond the four-year limitations period, the Department’s disallowance was untimely and statutorily barred.

The judgment was reversed and the case was remanded for dismissal.

Summary provided courtesy of The Colorado Lawyer.

Print Friendly, PDF & Email

Speak Your Mind

*