Why did an Augusta golf course receive an $8 million tax deduction? The southern fox squirrel is part of the answer
AUGUSTA, Georgia — A judge last month ruled to allow an almost $8 million charitable deduction claimed by Champions Retreat, following the Evans golf course’s win in a 2020 federal tax case. Evans is a suburb of 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 decided to allow more than $7.8 million of the $10.4 million deduction claimed by Champions Retreat Golf Founders LLC on its 2010 tax return.
Champions Retreat acquired more than 463 acres of land in April 2002 to develop a neighborhood, Founders Village, and a 27-hole golf course.
The Evans course, which hosts the annual Augusta National Women’s Amateur tournament, was completed in June 2005 and boasts three 9-hole courses, a pro shop, a restaurant, a locker room and a driving range. The three courses were designed by golf legends Gary Player, Arnold Palmer and Jack Nicklaus.
Carolina Melgrati, of Italy, tosses her club after missing a putt during day two of the second round of the Augusta National Women’s Amateur at Champions Retreat on Friday, April 1, 2022. (Photo by Katie Goodale/USA TODAY NETWORK)
The easement, subsequent sale
Then-owners of the Champions Retreat Golf Club granted a 349-acre easement to the North American Land Trust on Dec. 16, 2010, after the recession.
Conservation easements enable property owners to take charitable tax deductions on properties gifted to land trusts.
The easement area included 25 holes of the golf course, most of the two remaining holes and the driving range. Owners claimed a $10.4 million charitable deduction for the 2010 taxable year for the grant of the easement to the land trust, basing the deduction off its appraiser’s evaluation.
In October 2014, the golf club and some of its cabins were sold to Tower Three Partners and its affiliate, San Diego-based Heritage Golf Group for $6.64 million.
Hsin-Yu Li, of Chinese Taipei, putts during the second round of the Augusta National Women’s Amateur at Champions Retreat on Thursday, March 31, 2022. Rain delayed tee times until 3 p.m. (Photo by Katie Goodale/USA TODAY NETWORK)
Deduction denied in 2018
In September 2018, Champions Retreat argued the easement satisfied conservation purposes by protecting the natural habitat of wildlife and the ecosystem and preserved open space, according to court documents. It noted specifically the southern fox squirrel and the denseflower knotweed, all of which Champions Retreat stated were rare, endangered or threatened.
However, Judge Pugh found there were not enough of the endangered knotweed plants in the area and the squirrels are still hunted legally in the state.
Pugh added that since the easement area is in a private section of the complex, only accessible to members and their guests through a gate manned 24 hours a day, it is unavailable for the public to enjoy.
The court concluded Champions Retreat did not support an “identified conservation project,” and sided with the IRS, denying the deduction for the 2010 tax year.
Champions Retreat appealed the decision and when brought back to court on May 13, 2020, the 11th Circuit Court of Appeals reversed the 2018 ruling against the club, stating Champions Retreat was entitled to a deduction. Later, in October 2022, the court determined the amount of the deduction.
Players get ready to tee off during the first round of the Augusta National Women’s Amateur at Champions Retreat on Wednesday, March 30, 2022. (Photo by Katie Goodale/USA TODAY NETWORK)
Valuing the easement
Claud Clark III was recognized by the court as an appraiser for Champions Retreat and assessed the fair market value of the easement at almost $11 million. He stated the highest and best use of the 27-hole course was an 18-hole golf course and residential subdivision.
However, IRS appraiser David G. Pope said the highest and best use of the 27-hole course was to remain a golf course. Pope assessed the easement at $20,000.
The two appraisals varied so widely because of the difference in usage, with Clark factoring in the price of lots if used for residential housing and Pope limiting the usage to a golf course.
In litigation, it ends up being a dueling experts situation, said Gregg D. Polsky, a University of Georgia professor in taxation law.
“The claim of the taxpayer’s expert was that part of the course could have been developed into residential property and sold for large dollars, and after the easement it couldn’t,” Polsky said. ”The government expert came in and said no, actually the highest and best use is the golf course, so effectively the deduction is zero.”
The IRS has been cracking down on syndicated conservation easement deals, which usually entail investors buying cheap, vacant land and then hiring an appraiser to claim that it has large developmental value, according to Polsky.
The promoters tell investors they will buy the property, grant the easement and then claim charitable deductions that are larger than their initial investment.
“Syndicated conservation easement deals are very sketchy, and they’ve been attacked, mostly successfully, by the IRS,” Polsky said. ”In this case, there was separation between the time the property was acquired and developed and the time that the easement was granted. Those are more legitimate, but both types of contexts rely on sort of aggressive valuations; basically, trying to get your appraiser to sort of provide a super high ’highest and best use’ valuation.”
‘An advocate as much as an expert’
Clark is named in a bipartisan investigative report by the U.S. Senate Finance Committee centered around syndicated conservation easements. The report specifically cites Clark’s involvement in a transaction that took place in Alabama.
Clark was the appraiser in that transaction and “played a prominent role in the world of syndicated conservation easements,” according to the report, which is critical of Clark’s work.
In 2019, the Alabama Real Estate Appraisers Board challenged a Black Bear Enterprises appraisal conducted by Clark for not conforming to the proper standards of an appraisal. Rather than defend himself before the board, Clark surrendered his appraisal license in Alabama, according to the report.
In the Champions’ case, the court stated Clark was “serving as an advocate as much as an expert,” according to court documents.
The Augusta Chronicle tried to reach Clark for comment via phone numbers on court documents and his business’s phone number listed online, but all lines were disconnected. The Chronicle also reached out to Clark via Facebook but did not receive an immediate response.
Despite his criticism of Clark, Judge Pugh ultimately sided with the appraiser, finding the property could be used for residential housing.
“The tax court generally agreed with the [Champions Retreats’] expert and reduced the deduction by roughly 20%, bringing it to around $8 million,” Polsky said.
Pugh found the fair market value of the easement in 2010, taking the lots into account, to be $7,834,091.
Champions Retreat referred The Augusta Chronicle to the former Champions Retreat owners E.G. Meybohm and Robert Pollard. Meybohm’s representative, Mike Polatty, was not aware on Thursday that the case had concluded and did not wish to speak on the record.
Vivian D. Hoard, an Atlanta-based attorney with the Fox Rothschild law firm, which represented the former course owners, did not immediately respond to requests for comment.
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