Settlement Trust
The Alaska Native Claims Settlement Act (ANCSA) authorizes Alaska Native Corporations (ANCs) to establish Alaska Native Settlement Trusts (ANSTs). An ANST is essentially a private permanent fund to promote the health, education, and welfare of its beneficiaries (ANC’s shareholders) that will last for generations. The Tax Cuts and Jobs Act of 2017 significantly increased the benefits of establishing an ANST, including the ability to defer recognizing non-cash contributions, such as real estate, as income until the trust sells or disposes of the property. The valuation of ANSTs involves several unique appraisal problems that must be addressed, including the following:
Appraisal Problem: Prospective ANST lands should be selected based on maximizing the financial benefits. The financial benefits are largely unknown in advance, making the selection process difficult for the ANC.
Appraisal Solution: Reliant LLC can consult with the ANC on which lands would most probably provide the maximum financial benefit to the ANC and the ANST. The consultation takes into consideration the goals of the ANC with respect to their ANCSA land selections. Reliant LLC will work with the ANC’s accounting and legal team to optimize the selection process.
Appraisal Problem: Alaska land characteristics vary widely within a small geographic area and, as a result, the subject property and the comparable sales may include a combination of multiple physical characteristics.
Appraisal Solution: Reliant LLC uses 3D aerial photography and GIS mapping technology for the subject and comparable sale properties to segment the data by physical characteristics, which can include waterfront type (low bank, medium bank, high bank, saltwater, lake, river), elevation (low, medium, high), terrain/topography (flat, medium slope, steep slope), wetlands, and other relevant characteristics.
Appraisal Problem: Large acreage land transactions are difficult to locate, as Alaska is a non-disclosure state whereby sales prices are not public information. A settlement trust valuation requires both a historic and a current effective date of valuation.
Appraisal Solution: Reliant LLC retains a database of over 1,000 acreage land transactions that have dates of sale from the 1960s to the present, which equips us to appraise land in any region in the state.
Appraisal Problem: ANCSA permitted the US Government to convey lands and other real estate to Alaska Native Corporations. ANC property rights include the surface, subsurface, or both estates. Regional ANCs typically own subsurface and surface interests. Village Corporations own surface estates.
Appraisal Solution: Reliant LLC’s comparable data set includes land sales of fee simple, surface, and subsurface estates. Where required, this permits Reliant LLC to perform a reliable allocation between the surface and subsurface estates.
Appraisal Problem: The locations of many prospective ANST lands are remote and appraisal inspection and documentation of physical characteristics are challenging.
Appraisal Solution: A Managing Member of Reliant LLC (Per E. Bjorn-Roli, MAI) owns a Cessna 185 that is flown on floats, wheels, and skis. This aircraft is utilized in aerial inspections of the prospective ANST properties. In one recent assignment, the ANST properties were spread out over 1,200 miles. The GPS coordinates of the ANST properties were plotted into a flight plan that was flown over a two-day period. Aerial photographs of each property were made, including 360-degree high resolution imaging via an external camera mounted to the aircraft wing. A digital record of the exact flight path flown is created and geocoordinates are logged. The location of the aircraft at a particular time can be compared with the exact time a photograph was taken, providing surety that the inspection and photographic images correctly identified the prospective ANST lands.
Appraisal Problem: The appraisal determines the non-cash contribution to an ANST and can be subject to stringent third-party review and Internal Revenue Service (IRS) audit.
Appraisal Solution: Reliant LLC’s valuation methodology, extensive research, analysis, and documentation provides a credible valuation that can stand up to the most rigorous review. Members of our appraisal team have appraised over 500,000 acres of ANCSA lands for ANSTs. We also have experience appraising thousands of acres of land holdings for Alaska Mental Health Trust and University of Alaska Trust lands.
No Reliant LLC valuations have been rejected by third-party tax auditors or the IRS. The valuation work is performed and the appraisal report is prepared in anticipation of an IRS audit. In one recent assignment, an ANC’s global tax auditing firm reviewed a Reliant LLC report and fully endorsed the report as being rock solid. That said, one of Reliant LLC’s core areas of valuation expertise is litigation support and expert testimony, with multiple team members having provided expert testimony in a variety of high-profile litigation assignments. In the unlikely event of an audit, and the even unlikelier event of an appraisal challenge, Reliant LLC will defend its assignment results.
Conclusion: Reliant LLC has been retained by some of the most prestigious and well-respected management teams of ANCs and their legal counsel. Reliant LLC has assisted in the valuation of hundreds of millions of dollars of remote, highly geographically diverse lands located throughout the State of Alaska. These lands have successfully been placed into an ANST by the ANC owner, reaping the tax benefits set forth in the Tax Cuts and Jobs Act of 2017.