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Thursday July 25, 2024

Bills / Cases / IRS

Conservation Easement Appraisers with Potential Criminal Liability

Oconee Landing Property LLC et al. v. Commissioner; No. 11814-19


United States Tax Court
Washington, DC 20217


This case, currently calendared for a special trial session in Atlanta, Georgia, beginning November 14, 2022, involves a charitable contribution deduction claimed by Oconee Landing Property, LLC (Oconee), for a conservation easement. By Order served November 24, 2021, we granted motions by the Internal Revenue Service (IRS or respondent) to compel the depositions of non-party witnesses Thomas F. Wingard and Martin H. Van Sant, who prepared the appraisal supporting the value that petitioner placed on the easement. Messrs. Wingard and Van Sant were represented by counsel during their depositions. When they were asked any questions referring to "syndicated conservation easements," their counsel invoked their Fifth Amendment privilege against self-incrimination and instructed them not to answer.

On July 29, 2022, respondent moved to compel Messrs. Wingard and Van Sant to answer the questions as to which these claims of privilege had been made. On August 12, 2022, the Court held an informal conference call with the parties and deponents' counsel. We informed deponents' counsel that we would have overruled most (if not all) of his objections based on the Fifth Amendment because the questions asked seemed anodyne and appeared to create no "real danger" of self-incrimination. Rodgers v. United States, 340 U.S. 367, 374 (1951).

Following the conference call, we directed respondent to issue to Messrs. Wingard and Van Sant, by August 26, 2011, up to 45 written questions in lieu of the Court's ordering a second round of depositions. We instructed respondent to attempt to frame the questions to deponents in a factual manner to minimize potential Fifth Amendment concerns. We directed Messrs. Wingard and Van Sant to answer these questions under penalties of perjury within 14 days of their counsel's receipt of the written questions. We noted that if the Fifth Amendment privilege was claimed as to any question, deponents' counsel would need to supply a detailed explanation laying out the ground for the claim, cognizant that the Fifth Amendment only protects against real dangers, and not remote or speculative possibilities. Zicarelli v. N.J. State Comm'n, 406 U.S. 472 (1972).

According to petitioner, deponents' counsel subsequently sent a letter to respondent's counsel requesting that respondent: (1) advise whether Messrs. Wingard and Van Sant are the subjects or targets of an ongoing criminal investigation, (2) take steps to ensure that Messrs. Wingard and Van Sant are granted immunity from prosecution relating to their testimony in this case, or (3) enter a stipulation granting Messrs. Wingard and Van Sant immunity. According to petitioner, respondent's counsel declined these requests and served the 45 questions.

On September 2, 2022, petitioner filed a Motion to Compel Immunization of Third-Party Witnesses. In its Motion petitioner asks that the Court compel respondent to grant immunity to Messrs. Wingard and Van Sant or (alternatively) that the Court itself grant such immunity on its own "inherent authority." By Order served September 7, 2022, we directed respondent to file a response to petitioner's Motion by September 21, 2022. On September 16, 2022, respondent timely responded to petitioner's Motion, contending that this Court lacks jurisdiction either to grant witness immunity on its own "inherent authority" or to compel respondent to do so. We agree and will deny the Motion.

It is well established that this Court lacks jurisdiction to grant criminal immunity to a witness who may be called to testify before the Tax Court. This power resides solely with the U.S. District Courts and only upon the request of the U.S. Attorney for the applicable district. 18 U.S.C. 6001-6003; see, e.g., Coulter v. Commissioner, 82 T.C. 580, 583 (1984) (finding that "the Tax Court is not authorized to grant immunity" to a taxpayer); Hartman v. Commissioner, 65 T.C. 542, 547 (1975) (denying a taxpayer's request for immunity "since jurisdiction to take such action is vested exclusively in the United States District Courts, and then only upon application of a United States Attorney"); Reynolds v. Commissioner, T.C. Memo. 1981-364, 42 T.C.M. (CCH) 395, 397 (holding that a taxpayer's request that we grant him immunity "is spurious since jurisdiction to take such action is vested exclusively in the U.S. District Courts, and then only upon application of a U.S. Attorney"). It is equally well established that this Court lacks jurisdiction to compel the IRS to seek an order of immunity for a witness. See Hartman, 65 T.C. at 547-48; Hershberger v. Commissioner, T.C. Memo. 1979-522 (finding that a taxpayer's request that the Tax Court order the IRS to grant him transactional immunity was baseless). This Court has no "inherent authority" to confer immunity on a witness. Such discretionary power is statutorily reserved to the Executive Branch and is available to neither the Tax Court nor U.S. district courts (absent an application from a U.S. Attorney). See 18 U.S.C. 6001-6005.

In support of its position petitioner cites squibs from various cases taken out of context. Virtually all of these cases involve U.S. District Courts acting on the request of a U.S. Attorney. For example, petitioner errs in relying on United States v. Bahadar, 954 F.2d 821 (2d Cir. 1992). The question there was whether the U.S. District Court for the Eastern District of New York committed error by failing to order the government to immunize a witness and co-conspirator in a criminal drug trial. See id. at 825. Most cases cited by petitioner rely on Government of Virgin Islands v. Smith, 615 F.2d 964 (3d Cir. 1980). That precedent has been rejected by the Eleventh Circuit, to which this case is appealable. See United States v. DiBernardo, 880 F.2d 1216, 1220 (11th Cir. 1989) (ruling that the grant of immunity is strictly an Executive Branch function). Indeed, Government of the Virgin Islands has since been overturned by the Third Circuit, to the extent that it recognized any inherent authority of courts to confer immunity on a witness. United States v. Quinn, 728 F.3d 243, 252-61 (3d Cir. 2013).

Alternatively, if we decline to grant (or order) immunity for Messrs. Wingard and Van Sant, petitioner requests that we find the appraisal that they completed to be a "qualified appraisal" prepared by "qualified appraisers." See I.R.C. 170(f)(11) (A), (E). Such questions involve genuine disputes as to material fact and must be reserved for trial. See Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), aff'd, 17 F.3d 965 (7th Cir. 1994).

Upon due consideration, it is

ORDERED that petitioner's Motion to Compel Immunization of Third-Party Witnesses, filed September 2, 2022, is denied.

(Signed) Albert G. Lauber

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