The wait may finally be near an end for hundreds of farmers and ranchers whose livelihoods have hung in the balance for more than a decade because of the state’s conservation easement program.

Senate Bill 33, which addresses reparations to landowners who did not receive tax credits from the Department of Revenue that were promised to them, was amended Wednesday by the Senate Finance Committee to put into place just how those reparations would be paid. The bill won a unanimous vote, a first for a conservation easement bill.

Conservation easements work like this: a farmer or rancher donates a portion of their land to a land trust or county. The land technically still belongs to the rancher or farmer, but the land trust maintains the easement, undeveloped. Easements are granted in perpetuity.

Under the way the program worked when it was set up in 1999, the Department of Revenue would issue a state tax credit for that donation, based on an appraisal by a state-certified appraiser, equivalent to 50% of the land’s value.

During the program’s problem period, from 2000 to 2013, about 4,000 easements were granted. But for about 800 of those easements, the Department of Revenue revoked the tax credits, claiming the land had no value, despite state-certified appraisers who said otherwise. Sometimes the department would wait until the very last day allowed under a statute of limitations to revoke those credits, and then demand penalties and interest for the entire period. 

It put hundreds of farmers and ranchers into financial chaos. There were bankruptcies, divorces, foreclosures and at least a couple of suicides, according to landowners who have been fighting the state for more than 15 years, sometimes in court. 

In 2014, the program was removed from the Department of Revenue’s authority and placed into the hands of the Division of Conservation Easement within the Department of Regulatory Agencies.

But the years of bad publicity over the program took its toll: landowners stopped donating easements to land trusts. That got the attention of Democratic lawmakers who for years showed little to no interest in fixing the problem. 

In 2019, Rep. Dylan Roberts, D-Eagle, and Sen. Jerry Sonnenberg, R-Sterling, won approval for a bill setting up a working group that would figure out the reparations issue along with other problems in the program, primarily over abandoned easements and new ways to value those easements. The working group spent most of 2019 coming up with a proposal, estimating at that time that reparations could cost the state $270 million. That figure has dropped over time but the exact number is known only to the Department of Revenue, which has not released those numbers because they’re tied to tax returns, which are confidential.

An estimate in 2020 pegged the reparations at $145 million. 

Where those reparations would come from: the Division of Conservation Easement is allocated $45 million per year in tax credits. Between 2014 and 2020, the tax credits awarded have ranged from $12 million to $27 million per year, far short of what’s available.

The amendment adopted by the Senate Finance Committee Wednesday will tap that tax credit pool in two ways: first, a straight-up $15 million per year from the $45 million pool will be used to repay the tax credits, in 2021 and 2022, and $10 million in 2023. 

Second: any tax credits left over from the $45 million pool, once new easements have been covered, would also be dedicated to reparations. For example, in 2021, so far, the Division has reserved about $9 million in tax credits for new easements. That leaves $36 million, with $15 million going to reparations as detailed by the amendment. Were there to be no more tax credits reserved in 2021, that would leave another $21 million for reparations. 

The first three years of reparations, totaling $40 million, are a way to jump start the repayments, Sonnenberg told Colorado Politics Wednesday. Once those three years are over, any leftover tax credits would go toward reparations. It may take some time, but those tax credits will continue to be available until “all valid claims have been satisfied,” according to the amendment. 

The change to SB 33 has the support of the working group, which includes landowners who lost tax credits, tax credit buyers and land trusts.

The bill also gained strong support with new co-sponsor Sen. Faith Winter, D-Westminster, and in the House, Roberts and Rep. Perry Will, R-New Castle. 

“It’s appropriate to me to settle this once and for all,” Winter told the finance committee Wednesday. The controversy hasn’t been good for landowners or the conservation easement program, she added. SB 33 will allow the program to move forward without “the black cloud” the program has had over its head for years. 

“I’m hoping to finally put this to rest,” Sonnenberg said. “It’s not the fault of the landowners and appraisers who acted in good faith.” 

A good-faith standard is the appropriate one for making people whole, added Winter. 

“When government makes a promise, it is on government to keep its promise as long as someone was not acting in bad faith … . Getting folks made whole and making sure the government is keeping its word is important,” said Sen. Jeff Bridges, D-Greenwood Village, a member of the committee. 

The bill moves on to the Senate Appropriations Committee.