Requirements for certain donations to be tax-deductible; Internal Revenue Code (I.R.C.) § 170(h)(5)(A); General rule that taxpayers cannot take a charitable deduction for a donation of a partial interest in property (such as an easement); I.R.C. § 170(f)(3)(A); Treasury Regulation § 1.170A-14(a); “Qualified conservation contribution” exception; § 170(f)(3)(B)(iii); §§ 170(h)(1)(C), (4)(A)(iv), & (4)(B); Treasury Regulations §§ 1.170A-14(d)(5) & (e); Whether the donation qualified where it was not “protected in perpetuity”; § 170(h)(5)(A); § 1.170A-14(g)(1); Glass v. Commissioner; Distinguishing Kaufman v. Shulman (1st Cir.) & Commissioner v. Simmons (DC Cir.); Whether the Tax Court erred by denying the request to reform the donation agreement; Woods v. Commissioner (TC); Kelley v. Commissioner (9th Cir.); Anchor v. O’Toole; Greer v. Commissioner; “Remote future events”; § 1.170A-14(g)(3); Mitchell v. Commissioner (10th Cir.); Alioto v. Commissioner

On appeal from the Tax Court, the court held that petitioner-Hoffman’s donation of an easement in property did not constitute a “qualified conservation contribution” and did not merit a tax deduction where the donation was not “protected in perpetuity.” Hoffman donated an easement to a preservation society and agreed not to change the façade of an historic building that it owned. Hoffman sought a charitable deduction for the donation, arguing that it was a qualified conservation contribution. In order to take this deduction, I.R.C. § 170(h)(5)(A) requires that the donation be protected “in perpetuity.” The Tax Court ruled that Hoffman was not entitled to claim the deduction because Hoffman’s donation permitted it to “‘make harmful changes to the donation whenever the donee fails to act within 45 days of the proposed change.’” Applying Ohio contract law, the court first held that the donation agreement failed to protect conservation rights in perpetuity. It then considered Hoffman’s argument that the restrictions were “perpetual because they will always be a part of the agreement and might prevent future changes to the donation.” It held that the “Revenue Code doesn’t care about the mere existence of restrictions; it requires that the donation ‘protect[]’ the conservation purposes ‘in perpetuity.’” The court noted that the agreement’s 45-day provision “distinguishes this case from others where courts have upheld tax deductions based on similar donations[,]” like Kaufman and Simmons. The agreements in those cases included provisions that permitted “the donee ‘to give its consent (e.g., to changes in the Façade) or to abandon some or all of its rights’ in the donation.” The court upheld the Tax Court’s refusal to allow Hoffman to reform the donation agreement where Hoffman did not show that the refusal was an abuse of discretion. The court rejected its claim that this case fell “within the narrow exception to the perpetuity requirement for remote future events.” To qualify, “the possibility that the conservation purpose may be defeated must be ‘so remote as to be negligible.’” Hoffman’s donation agreement contained “multiple terms that specifically address the possibility that the conservation purpose would be defeated. Given that fact, it’s hard to see how the possibility was ‘so highly improbable that it might be ignored.’” Affirmed.