April 17, Re: Broad Interest in Clarifying Deductibility of a Water Right Donation.
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1 April 17, 2012 Ms. Karin Gross, Esq. Internal Revenue Service Via e mail at Karin.Gross@IRSCOUNSEL.TREAS.GOV Re: Broad Interest in Clarifying Deductibility of a Water Right Donation. Dear Ms. Gross: There is widespread interest in obtaining clarification from the Internal Revenue Service (IRS) of the tax deductibility of a water right donation under Section 170 of the Internal Revenue Code. We write to express our interest in the IRS s clarification of this important issue, and to explain briefly why removing the uncertainty surrounding the tax deductibility of a water right donation would serve a broad public purpose. The undersigned organizations engage in the work of aquatic ecosystem and streamflow restoration, and an IRS Revenue Ruling on this issue would benefit our restoration efforts. Clarification of the tax deductibility of a water right donation would boost our collective restoration work by making a donation of a water right to restore streamflows to a dewatered stream more financially attractive to a potential donor. Streamflow restoration is often the most difficult and most critical piece of a broader aquatic restoration effort. In the American West, the prior appropriation doctrine governs the use and allocation of water. This means that early settlers diverting water from rivers and streams typically for irrigation, stock watering, and mining have the most senior rights to use water, before junior users or even the rivers themselves. Indeed, until recent legal reforms, there was no legal right for rivers and streams to have water flowing in them. Not surprisingly, animals that live in freshwater, wetland, or riparian habitats during at least part of their life cycle are about twice as likely to be at risk of extinction as those in other environments. The greatest numbers of candidate species for listing under the Endangered Species Act are aquatic species. Fifty of the sixty eight western fish species already listed were listed in large part because of water diversions, dams, reservoirs, channeling, and other watershed disturbances. Fortunately, a dewatered stream is not a lost cause. The restoration of streamflows to dewatered streams and rivers is an emerging area of conservation work that is vitally important. Dewatering is one of the key limiting factors for imperiled aquatic species, and often the success of multi year, ambitious stream restoration hinges on the ability to secure adequate streamflows. As water scarcity becomes an increasingly important concern for agricultural, municipal, and commercial uses, so too does the work to restore flows to streams that are too dewatered to sustain healthy aquatic ecosystems. The most effective streamflow restoration work relies on market based, private, volun
2 tary water right transactions, because the most valuable water lies in privately held property rights to use water. However, without clarity on the issue of federal income tax deductibility, we lack one of the tools fundamental to similar market based private land conservation, which has helped make land conservation work so successful. Clarification of the tax code s recognition of a water right as a property interest that can be donated to a non profit organization, and thereby qualify the donor for a tax deduction, would facilitate donations or bargain sales of water rights to an instream purpose. This in turn supports the broad based, community efforts across the West to restore and protect watersheds that are vital for providing clean and abundant water for downstream users as well as habitat for native and imperiled species. We would be happy to provide additional background, illustrations of our work, or any other information that would be useful to you. Thank you for your consideration. Yours truly, Laura Ziemer, Director Trout Unlimited s Montana Water Project (406) ext 103 lziemer@tu.org Amy Beatie, Executive Director Colorado Water Trust (720) abeatie@coloradowatertrust.org Cathy Schaeffer Executive Director Walla Walla Watershed Management Partnership cathy.schaeffer@wwcc.edu Scott McCaulou, Program Director Deschutes River Conservancy x17 Philip Tabas, Vice President and General Counsel The Nature Conservancy 4245 N Fairfax Drive, Suite 100 Arlington, VA 22203
3 Karyn Stockdale Vice President and Executive Director Audubon New Mexico P.O. Box 9314 Santa Fe, NM (505) , ext 32 Brian J. Johnson, Staff Attorney & Director, Trout Unlimited s California Water Project 2239 B 5th Street Berkeley, CA (510) bjohnson@tu.org Susan Adams Executive Director Washington Water Trust 1530 Westlake Avenue N, Suite 400 Seattle, WA x101 washingtonwatertrust.org Cory Toye, Director Trout Unlimited s Wyoming Water Project (307) ext 14 ctoye@tu.org Drew Peternell, Director Trout Unlimited s Colorado Water Project (303) ext 102 dpeternell@tu.org Karen Knudson, Executive Director Clark Fork Coalition PO Box 7593 Missoula, MT (406) karen@clarkfork.org
4 Lisa Pelly, Director Trout Unlimited s Washington Water Project (509) lpelly@tu.org Tom Hicks Director, Instream Water Transfer Program Resource Renewal Institute (415) tomhicks@rri.org Brian Patton, Bureau Chief Idaho Water Resource Board PO Box Boise, ID (208) brian.patton@idwr.idaho.gov Tim Hawkes, Director Trout Unlimited s Utah Water Project (801) thawkes@tu.org David Pilz, Flow Restoration Director Oregon Freshwater Trust 65 SW Yamhill St, Suite 200 Portland, OR (503) david@thefreshwatertrust.org Shannon Peterson Executive Director Klamath Basin Rangeland Trust (541) speterson@kbrt.org
5 Kimberly Goodman Trotter, Director Trout Unlimited s Idaho Water Project (208) ktrotter@tu.org Maia Bellon, Program Manager Water Resources Program Department of Ecology (360) maib461@ecy.wa.gov Charles P. Pope Co executive director Nevada Land Conservancy P.O. Box Reno, NV Scott Yates, Director Trout Unlimited s Western Water Project (307) ext 13 syates@tu.org Steve Harris HCR 69 Box 3 C Embudo, NM phone/fax: e mail: unclergr@laplaza.org Sari Sommarstrom, Ph.D Executive Director Scott River Water Trust
6 Jeff Darlington, President Sierra Cascade Land Trust Council
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