DEPARTMENT OF REGULATORY AGENCIES
DIVISION OF REAL ESTATE
CONSERVATION EASEMENTS

NOTICE OF PROPOSED PERMANENT RULEMAKING HEARING
November 3, 2014

RULE Chapter 2.  CERTIFICATION OF CONSERVATION EASEMENT HOLDERS 
Pursuant to and in compliance with Title 12, Article 61 and Title 24, Article 4, C.R.S. as amended, notice of proposed rulemaking is hereby given, including notice to the Attorney General of the State of Colorado and to all persons who have requested to be advised of the intention of the Colorado Department of Regulatory Agencies and the Division of Real Estate to promulgate rules, or to amend, repeal or repeal and re-enact the present rules related to conservation easements.

STATEMENT OF BASIS
The statutory basis for the rules titled Conservation Easements is Chapter 7 of Title 12, Article 61, Colorado Revised Statutes, as amended.  
STATEMENT OF PURPOSE
The purpose of this rule is to effectuate the legislative directive to promulgate necessary and appropriate rules in conformity with section 12-61-720, C.R.S.

SPECIFIC PURPOSE OF THIS RULEMAKING
The specific purpose of this rule is to establish and implement the requirements necessary for the certification and discipline of qualified organizations that hold conservation easements for which a tax credit is claimed.
Proposed New, Amended and Repealed Rules
[Deleted material showed struck through, new material shown ALL CAPS. Rules, or portions of rules, which are unaffected are reproduced.  Readers are advised to obtain a copy of the complete rules of the Division at http://www.sos.state.co.us]

CHAPTER 2: CERTIFICATION OF CONSERVATION EASEMENT HOLDERS 
2.1.	  QUALIFICATIONS FOR CERTIFICATION TO HOLD CONSERVATION EASEMENTS
THE DIVISION MAY DENY, REFUSE TO RENEW, OR REVOKE THE CERTIFICATION OF A CONSERVATION EASEMENT HOLDER WHO FAILS TO MEET ANY OF THE FOLLOWING MINIMUM QUALIFICATIONS:

A.	ORGANIZATION
THE CONSERVATION EASEMENT HOLDER:
1.	MEETS THE REQUIREMENTS OF A QUALIFIED ORGANIZATION UNDER SECTION 12-61-720 C.R.S. AND THE QUALIFICATIONS IN SECTION 38-30.5-104(2), C.R.S., TO HOLD A CONSERVATION EASEMENT FOR WHICH A STATE TAX CREDIT MAY BE CLAIMED;

2.	   HAS THE CAPACITY, INCLUDING, BUT NOT LIMITED TO, A SUFFICIENT NUMBER OF BOARD MEMBERS, STAFF, AND/OR VOLUNTEERS, TO ACCOMPLISH THE WORK OF THE ORGANIZATION;

3.	   HAS A SUFFICIENT NUMBER OF BOARD MEETINGS PER YEAR TO ACCOMPLISH THE WORK OF THE ORGANIZATION; AND

4.	   IF A NON-GOVERNMENTAL ENTITY, THE ORGANIZATION IS IN GOOD STANDING WITH THE COLORADO SECRETARY OF STATE.

B.	PROCESS: CONSERVATION EASEMENT SELECTION, REVIEW AND APPROVAL

1.	   THE CONSERVATION EASEMENT HOLDER HAS AND FOLLOWS REASONABLE POLICIES AND PROCEDURES FOR SELECTING CONSERVATION EASEMENTS. THESE INCLUDE, BUT ARE NOT LIMITED TO:

a.	ESTABLISHING AND FOLLOWING SELECTION CRITERIA TO IDENTIFY CONSERVATION EASEMENTS WITH A CONSERVATION PURPOSE AS DEFINED IN SECTION 12-61-723(1)(b), C.R.S.;

b.	IDENTIFYING AND DOCUMENTING THE CONSERVATION VALUES AND THE PUBLIC BENEFITS FROM PROTECTING THOSE VALUES PRIOR TO ACCEPTING THE CONSERVATION EASEMENT;

c.	WORKING WITH THE CONSERVATION EASEMENT GRANTOR TO IDENTIFY AND DESIGN THE PERMITTED USES, RESERVED RIGHTS, AND PROHIBITED USES FOR THE CONSERVATION EASEMENT ON AN INDIVIDUAL BASIS; AND

d.	RECEIVING AND REVIEWING A BASELINE DOCUMENTATION REPORT FOR THE CONSERVATION EASEMENT BEFORE ACCEPTING THE DONATION, AND UPDATING THE REPORT AS NEEDED. THE BASELINE REPORT DOCUMENTS THE CONSERVATION VALUES AND CONDITION OF THE PROPERTY AT THE TIME OF CONVEYANCE.

2.	   THE CONSERVATION EASEMENT HOLDER HAS AND FOLLOWS REASONABLE POLICIES AND PROCEDURES FOR REVIEWING CONSERVATION EASEMENTS. THESE INCLUDE, BUT ARE NOT LIMITED TO:

a.	PERFORMING DUE DILIGENCE ON THE TITLE, WATER AND MINERAL RIGHTS ON THE PROPERTY BEFORE APPROVING THE TRANSACTION;

b.	ENSURING ANY LIENS OR ENCUMBRANCES ARE SUBORDINATED OR ADDRESSED IN A MANNER SO THAT THE CONSERVATION RIGHTS SET FORTH IN THE DEED WILL BE ENSURED IN PERPETUITY;

c.	HAVING AND FOLLOWING A POLICY FOR PHASED CONSERVATION EASEMENTS SUCH THAT EACH CONSERVATION EASEMENT OF A PHASED PROJECT HAS AN INDEPENDENT CONSERVATION PURPOSE AS DEFINED  IN SECTION 12-61-723(1)(B), C.R.S.;

d.	OBTAINING A LEGAL REVIEW OF THE TRANSACTION APPROPRIATE TO THE COMPLEXITY OF THE TRANSACTION;

e.	USING APPROPRIATE EXPERTISE TO SUBSTANTIATE THE CONSERVATION VALUES; AND

f.	RECEIVING AND ADEQUATELY REVIEWING A COPY OF THE APPRAISAL FOR A CONSERVATION EASEMENT FOR WHICH A TAX CREDIT MAY BE CLAIMED PURSUANT TO SECTION 39-22-522, C.R.S. 

3.	   THE CONSERVATION EASEMENT HOLDER HAS AND FOLLOWS REASONABLE POLICIES AND PROCEDURES FOR APPROVING CONSERVATION EASEMENTS. THESE INCLUDE, BUT ARE NOT LIMITED TO:

a.	DECLINING PROJECTS THAT DO NOT HAVE CONSERVATION VALUE, THE NECESSARY DONATIVE INTENT OR APPEAR TO BE FRAUDULENT;

b.	HAVING THE BOARD APPROVE ALL CONSERVATION EASEMENT DONATIONS, OR ESTABLISHING POLICIES DELEGATING THE AUTHORITY TO APPROVE TRANSACTIONS TO A QUALIFIED COMMITTEE OR OTHER DESIGNEE;

c.	PROVIDING SUFFICIENT INFORMATION TO THE BOARD, A QUALIFIED COMMITTEE OR OTHER DESIGNEE FOR REVIEW BEFORE A CONSERVATION EASEMENT IS APPROVED; AND

d.	ADVISING POTENTIAL CONSERVATION EASEMENT GRANTORS THAT THE ORGANIZATION DOES NOT GUARANTEE THE QUALIFICATION OF THE CONSERVATION EASEMENT FOR TAX CREDIT PURPOSES, AND THAT THEY SHOULD SEEK THEIR OWN LEGAL, FINANCIAL AND TAX ADVICE.

C.	STEWARDSHIP: PRACTICES AND CAPACITY

1.	THE CONSERVATION EASEMENT HOLDER HAS AND FOLLOWS REASONABLE POLICIES AND PROCEDURES TO ENSURE THE SHORT- AND LONG-TERM MANAGEMENT OF ITS CONSERVATION EASEMENTS. THESE INCLUDE, BUT ARE NOT LIMITED TO:

a.	HAVING ADEQUATE CAPACITY AND RESOURCES IN PLACE TO PROVIDE ANNUAL MONITORING OF EACH CONSERVATION EASEMENT HELD IN COLORADO;

b.	MONITORING ALL CONSERVATION EASEMENTS ON AT LEAST AN ANNUAL BASIS, INCLUDING VISUALLY INSPECTING THE PROPERTY AND PERFORMING OTHER TYPES OF MONITORING ACTIONS AS APPROPRIATE;

c.	MONITORING IS DOCUMENTED BY A QUALIFIED INDIVIDUAL, AND THE DOCUMENTATION IS REVIEWED BY THE BOARD, A QUALIFIED COMMITTEE OR OTHER DESIGNEE;

d.	ENFORCING EVERY CONSERVATION EASEMENT DEED, AND ADDRESSING VIOLATIONS IN A MANNER APPROPRIATE TO THE SCALE OF THE VIOLATION;

e.	REVIEWING PROPOSED AMENDMENTS TO CONSERVATION EASEMENT DEEDS TO CONFIRM THEY DO NOT RESULT IN A NET LOSS OF CONSERVATION VALUE AND DO NOT CREATE AN IMPERMISSIBLE PRIVATE BENEFIT TO THE GRANTOR; AND

f.	PRESERVING ORIGINAL AND DUPLICATE COPIES OF NECESSARY AND IMPORTANT RECORDS, SUCH AS DEEDS, BASELINE REPORTS, MONITORING REPORTS AND APPRAISALS, IN A SAFE AND SECURE MANNER.

2.	THE CONSERVATION EASEMENT HOLDER HAS THE NECESSARY PERSONNEL AND FINANCIAL CAPACITY AND POLICIES AND PROCEDURES TO ENSURE THE SHORT- AND LONG-TERM MANAGEMENT OF ITS CONSERVATION EASEMENTS. THESE MAY INCLUDE, BUT ARE NOT LIMITED TO:

a.	ESTABLISHING LASTING DEDICATED STEWARDSHIP AND ENFORCEMENT FUNDS FOR THE MANAGEMENT AND ENFORCEMENT OF EVERY CONSERVATION EASEMENT HELD;

b.	USING THE DEDICATED STEWARDSHIP AND ENFORCEMENT FUNDS FOR STEWARDSHIP- AND ENFORCEMENT-RELATED PURPOSES ONLY, OR OTHER ALLOWABLE USES ONLY AS ESTABLISHED THROUGH WRITTEN POLICIES;

c.	DETERMINING THE APPROXIMATE AMOUNT OF STEWARDSHIP AND ENFORCEMENT FUNDS THAT WILL BE NEEDED FOR THE SHORT- AND LONG-TERM MANAGEMENT OF ALL CONSERVATION EASEMENTS; AND

d.	PROCURING THE ADEQUATE STEWARDSHIP AND ENFORCEMENT FUNDS NEEDED WITH ALL CONSERVATION EASEMENTS.

D.	FINANCE
THE CONSERVATION EASEMENT HOLDER HAS AND FOLLOWS REASONABLE FISCAL POLICIES AND PROCEDURES TO ENSURE THE TRANSPARENT AND RESPONSIBLE MANAGEMENT OF ITS ASSETS. THESE MAY INCLUDE, BUT ARE NOT LIMITED TO:

1.	HAVING THE BOARD REVIEW AND/OR REGULARLY ASSESS THE ORGANIZATION’S FINANCIAL STATUS, INCLUDING THE ANNUAL BUDGET AND ANY FINANCIAL CHANGES THAT HAVE OCCURRED; AND

2.	HAVING A QUALIFIED INDIVIDUAL CONDUCT A FINANCIAL AUDIT OR OTHER FINANCIAL REVIEW ON AN ANNUAL BASIS.

E.	GOVERNANCE
THE CONSERVATION EASEMENT HOLDER DEMONSTRATES IT HAS AND FOLLOWS REASONABLE POLICIES AND PROCEDURES TO ENSURE THE RESPONSIBLE MANAGEMENT OF CONFLICTS OF INTEREST AND ANY TRANSACTIONS WITH INSIDERS.

2.2.	   EXPIRATION DATE FOR CERTIFICATION
CERTIFICATION FOR A CONSERVATION EASEMENT HOLDER EXPIRES ON DECEMBER 31 FOLLOWING THE DATE OF ISSUANCE.

2.3.	   ELIGIBILITY FOR CONSERVATION EASEMENT HOLDERS AFTER REVOCATION
A CONSERVATION EASEMENT HOLDER WHOSE CERTIFICATION TO HOLD A CONSERVATION EASEMENT HAS BEEN REVOKED IS RENDERED INELIGIBLE TO RE-APPLY FOR CERTIFICATION UNTIL MORE THAN TWO YEARS HAVE ELAPSED FROM THE DATE OF REVOCATION OF THE CERTIFICATION. ANY RE-APPLICATION AFTER SUCH TWO-YEAR PERIOD IS REQUIRED TO BE SUBMITTED ON A NEW APPLICATION.

2.4.	   CERTIFICATION RENEWAL 
RENEWAL OF A CONSERVATION EASEMENT HOLDER CERTIFICATION CAN BE EXECUTED ONLY WITH THE RENEWAL APPLICATION PROVIDED BY THE DIVISION, SUBMITTED AND ACCOMPANIED BY THE PRESCRIBED NONREFUNDABLE FEE BY DECEMBER 31 OF EACH YEAR.

2.5.	   REINSTATEMENT OF CERTIFICATION
A CERTIFICATION THAT HAS EXPIRED MAY BE REINSTATED WITHIN ONE YEAR AFTER THE DATE OF EXPIRATION IF THE HOLDER MEETS ALL THE REQUIREMENTS IN SECTION 12-61-720, C.R.S. AND RULE 2.1. A COMPLETE RENEWAL APPLICATION AND THE PRESCRIBED NONREFUNDABLE RENEWAL FEE MUST BE SUBMITTED TO THE DIVISION FOR REINSTATEMENT. CERTIFICATION IS EFFECTIVE ON THE DATE REINSTATEMENT IS ISSUED AND CANNOT BE APPLIED RETROACTIVELY. ANY CERTIFICATION THAT HAS BEEN EXPIRED GREATER THAN ONE YEAR MAY NOT BE REINSTATED.

2.6.	   CONDITIONAL CERTIFICATION 

A.	THE DIRECTOR IN CONSULTATION WITH THE COMMISSION MAY ISSUE CONDITIONAL CERTIFICATION TO ANY CONSERVATION EASEMENT HOLDER THAT DOES NOT CLEARLY DEMONSTRATE, TO THE SATISFACTION OF THE DIRECTOR, COMPLIANCE WITH RULE 2.1. TITLED QUALIFICATIONS FOR CERTIFICATION TO HOLD CONSERVATION EASEMENTS. THE TERMS AND LENGTH OF CONDITIONAL CERTIFICATION WILL BE DETERMINED BY THE DIRECTOR AND MAY INCLUDE, BUT ARE NOT LIMITED TO:

1.	A REQUIREMENT THAT THE CONDITIONALLY CERTIFIED CONSERVATION EASEMENT HOLDER CO-HOLD CONSERVATION EASEMENTS FOR WHICH A STATE TAX CREDIT MAY BE CLAIMED WITH A FULLY CERTIFIED CONSERVATION EASEMENT HOLDER.

2.	SUBMISSION OF ALL REQUESTED PROJECT AND GOVERNANCE DOCUMENTATION IN A MANNER PRESCRIBED BY THE DIRECTOR.

3.	APPROVAL OF PROJECT DOCUMENTATION BY THE DIRECTOR PRIOR TO THE CONSERVATION EASEMENT HOLDER ACCEPTING A NEW CONSERVATION EASEMENT.

4.	ANY OTHER RESTRICTION OR TERM DEEMED NECESSARY BY THE DIRECTOR TO ENSURE ONGOING COMPLIANCE WITH ALL APPLICABLE STATUTES AND RULES.

B.	CONSERVATION EASEMENT HOLDERS GRANTED CONDITIONAL CERTIFICATION ARE SUBJECT TO ALL FEES, STATUTES AND RULES PROMULGATED FOR CERTIFIED CONSERVATION EASEMENT HOLDERS, INCLUDING, BUT NOT LIMITED TO RULE 2.1. TITLED QUALIFICATIONS FOR CERTIFICATION TO HOLD CONSERVATION EASEMENTS, AND ALL OTHER RULES REGARDING EXPIRATION AND RENEWAL OF STATE CERTIFICATION.

2.7.	DISCIPLINARY ACTION 
THE DIRECTOR MAY IMPOSE AN ADMINISTRATIVE FINE NOT TO EXCEED TWO THOUSAND FIVE HUNDRED   DOLLARS ($2,500) FOR EACH SEPARATE OFFENSE; MAY ISSUE A LETTER OF ADMONITION; MAY PLACE A CONSERVATION EASEMENT HOLDER ON PROBATION UNDER THE DIRECTOR’S CLOSE SUPERVISION ON SUCH TERMS AND FOR SUCH TIME AS THE DIRECTOR DEEMS APPROPRIATE; AND MAY REFUSE TO RENEW, REVOKE, OR SUSPEND THE CERTIFICATION OF ANY CONSERVATION EASEMENT HOLDER IF, AFTER AN INVESTIGATION AND AFTER NOTICE AND HEARING PURSUANT TO THE PROVISIONS OF SECTION 24-4-104, C.R.S., THE DIRECTOR DETERMINES THAT THE CONSERVATION EASEMENT HOLDER OR ANY DIRECTOR, OFFICER, OR BOARD MEMBER:

A.	HAS MADE FALSE OR MISLEADING STATEMENTS OR MATERIAL OMISSION IN THEIR APPLICATION FOR CERTIFICATION;

B.	HAS MISREPRESENTED OR CONCEALED ANY MATERIAL FACT FROM A CONSERVATION EASEMENT GRANTOR;

C.	HAS EMPLOYED ANY DEVICE, SCHEME, OR ARTIFICE WITH INTENT TO DEFRAUD A CONSERVATION EASEMENT GRANTOR OR ANY GOVERNMENT AGENCY;

D.	HAS FAILED TO COMPLY WITH ANY STIPULATION OR AGREEMENT MADE WITH THE DIRECTOR; OR

E.	HAS FAILED TO COMPLY WITH ANY OF THE CERTIFICATION REQUIREMENTS, OR ANY LAWFUL RULE OR REGULATION PROMULGATED BY THE DIRECTOR.

2.8.	INFORMATION REQUEST 
A CONSERVATION EASEMENT HOLDER MUST FURNISH TO THE DIRECTOR SUCH INFORMATION OR DOCUMENTATION AS THE DIRECTOR IN HER/HIS SOLE DISCRETION DEEMS REASONABLY NECESSARY FOR THE ENFORCEMENT OF TITLE 12, ARTICLE 61, PART 7, C.R.S. OR ANY RULES ENACTED BY THE DIVISION. IF INFORMATION OR DOCUMENTATION IS REQUIRED, THE DIRECTOR MUST GIVE WRITTEN NOTICE, IN DETAIL, OF THE INFORMATION SO REQUIRED AND MUST ALLOW AN ADDITIONAL TWENTY-ONE (21) DAYS FROM DELIVERY TO PRESENT SUCH MATERIAL, WHICH PERIOD MAY BE EXTENDED ONLY UPON SHOWING OF GOOD CAUSE. WRITTEN NOTICE MAY BE FAXED, HAND-DELIVERED OR MAILED TO THE PARTY ENTITLED THERETO. IF FAXED OR HAND DELIVERED, SAID NOTICE IS DEEMED DELIVERED UPON CONFIRMATION OF SUCCESSFUL TRANSMISSION OF THE FAX OR UPON HAND DELIVERY. IF MAILED, SAID NOTICE MUST BE MAILED BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, AND SAID NOTICE IS DEEMED DELIVERED THE DATE OF MAILING.

2.9.	      CEASE AND DESIST
IF THE DIVISION HAS REASONABLE CAUSE TO BELIEVE ANY PUBLIC OR PRIVATE ORGANIZATION IS NOT IN COMPLIANCE WITH SECTION 38-30.5-104 (2), C.R.S. AND SECTION 12-61-720, C.R.S., THE DIRECTOR MAY ENTER AN ORDER REQUIRING SUCH ORGANIZATION TO CEASE AND DESIST FROM ATTEMPTING TO HOLD A CONSERVATION EASEMENT FOR WHICH A STATE TAX CREDIT MAY BE CLAIMED.

2.10.	   TRANSFERRING CONSERVATION EASEMENTS TO NON-CERTIFIED ENTITIES
A CONSERVATION EASEMENT HOLDER MUST NOT ASSIGN OR OTHERWISE TRANSFER ALL OR A PARTIAL INTEREST IN A CONSERVATION EASEMENT FOR WHICH A STATE TAX CREDIT MAY BE CLAIMED TO A NON-CERTIFIED ORGANIZATION. AN ORGANIZATION MUST NOT ACCEPT AN ASSIGNED OR OTHERWISE TRANSFERRED INTEREST IN A CONSERVATION EASEMENT FOR WHICH A STATE TAX CREDIT MAY BE CLAIMED IF THEY ARE NOT CERTIFIED AT THE TIME OF ACCEPTANCE. GOVERNMENTAL ENTITIES TRANSFERRING A PARTIAL INTEREST IN A CONSERVATION EASEMENT TO ANOTHER GOVERNMENTAL ENTITY IN ACCORDANCE WITH AN ESTABLISHED WRITTEN AGREEMENT ARE EXEMPT FROM THIS PROHIBITION ON TRANSFERRING A PARTIAL INTEREST IN A CONSERVATION EASEMENT. THE CERTIFIED GRANTEE AND ALL CERTIFIED ORGANIZATIONS RETAINING A PARTIAL INTEREST IN THE CONSERVATION EASEMENT MUST REMAIN RESPONSIBLE FOR STEWARDSHIP AND DEFENSE OF THE CONSERVATION EASEMENT AT ALL TIMES.

2.11.	 COURTESY FILING 
A CERTIFIED CONSERVATION EASEMENT HOLDER MUST PROVIDE THE FOLLOWING INFORMATION AND/OR DOCUMENTATION TO THE DIVISION WITHIN 30 DAYS OF A SUBSTANTIVE CHANGE IN:

A.	PHYSICAL OR MAILING ADDRESS OF THE ORGANIZATION;

B.	AUTHORIZED CONTACT PERSON; OR

C.	POLICY NECESSARY FOR COMPLIANCE WITH RULE 2.1. 

A hearing on the above subject matter will be held on Monday, November 3, 2014, at the Colorado Division of Real Estate, 1560 Broadway, Suite 1250-C, Denver, Colorado 80202 beginning at 9:00 a.m. 
Any interested person may participate in the rule making through submission of written data, views and arguments to the Division of Real Estate. Persons are requested to submit data, views and arguments to the Division of Real Estate in writing no less than ten (10) days prior to the hearing date and time set forth above. However, all data, views and arguments submitted prior to or at the rulemaking hearing or prior to the closure of the rulemaking record (if different from the date and time of hearing), shall be considered.
Please be advised that the rule being considered is subject to further changes and modifications after public comment and formal hearing.