Hoffman Properties II v. CIR, 956 F.3d 832

Background

Hoffman Properties donated a façade easement and airspace restrictions on the historic Tremaine Building in Cleveland to the American Association of Historic Preservation (AAHP) and claimed a $15 million charitable deduction.
The easement reserved conditional rights to Hoffman to alter the façade or airspace, subject to AAHP approval under the Secretary’s Standards.
Paragraph 3 of the agreement provided that AAHP’s failure to act on a proposed change within 45 days would be deemed approval, allowing Hoffman to proceed.
The IRS disallowed the deduction; the Tax Court granted summary judgment for the IRS, holding the donation was not “exclusively for conservation purposes” because it failed to “protect[]” those purposes “in perpetuity” under I.R.C. § 170(h)(5)(A).
The Sixth Circuit reviewed de novo and affirmed, holding the 45‑day automatic‑approval clause fatally undermined the perpetuity requirement.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the 45‑day deemed‑approval clause satisfies the §170(h)(5)(A) "in perpetuity" requirement	Hoffman: the restrictions remain in the agreement forever, so conservation purposes are protected	IRS: automatic approval after 45 days allows donor to effect changes inconsistent with conservation, so restrictions are not enforceable in perpetuity	Held: 45‑day clause defeats perpetuity requirement; not protected "in perpetuity"
Whether the Tax Court’s consideration of the 45‑day clause sua sponte prejudiced Hoffman	Hoffman: Tax Court raised issue on its own and thus was prejudiced	IRS: Hoffman had opportunities to brief the provision and cannot show prejudice	Held: No prejudice; Hoffman had chance to address the issue and identifies no additional evidence it would have offered
Whether an unrecorded amendment or equitable reformation cured the 45‑day provision	Hoffman: it amended/reformed the agreement to prohibit inconsistent exterior changes	IRS: amendment unrecorded as required by the original agreement; Tax Court properly denied reformation	Held: Unrecorded amendment ineffective; Tax Court’s denial of reformation not an abuse of discretion
Whether the remote‑future‑event exception applies (negligible chance of defeat)	Hoffman: triggering the 45‑day clause was highly improbable	IRS: the agreement expressly contemplates the contingency; Hoffman bears burden to show negligible chance and offered no evidence	Held: Exception not met; Hoffman failed to show the risk was "so remote as to be negligible"

Key Cases Cited

Glass v. Comm'r, 471 F.3d 698 (6th Cir. 2006) (explains that a donation must include legally enforceable restrictions that prevent uses of retained interest inconsistent with conservation purposes)
Golden v. Comm'r, 548 F.3d 487 (6th Cir. 2008) (standard of review for Tax Court decisions)
Kaufman v. Shulman, 687 F.3d 21 (1st Cir. 2012) (upheld donation clauses allowing donee consent or abandonment; distinguished here)
Comm'r v. Simmons, 646 F.3d 6 (D.C. Cir. 2011) (similar to Kaufman on consent/abandonment clauses)
Mitchell v. Comm'r, 775 F.3d 1243 (10th Cir. 2015) (defines "so remote as to be negligible" standard for remote‑future‑event exception)
Woods v. Comm'r, 92 T.C. 776 (1989) (discusses equitable reformation of donation agreements)