Colorado lawmakers are set to consider a proposal next week that could refund hundreds of millions of dollars to people who innocently bought into the state’s conservation easement tax credit program, only to see officials dismiss the tax credits as worthless and tag them with hefty bills.

The individuals bought the credits from landowners who had received them after protecting millions of acres of property from future development, or their representatives.

But revenue officials eventually said the land wasn’t worth what the landowners claimed and negated more than $220 million in credits, leaving the buyers on the hook for the tab.

That was a decade ago.

After years of public hearings, focus groups and stakeholder conferences, Sens. Jerry Sonnenberg, R-Sterling, and Kerry Donovan, D-Vail, seek to undo the mess and ensure those individuals who unknowingly bought into the program are repaid. House co-sponsors include Dylan Roberts, D-Avon, and James Wilson, R-Salida.

The bill is largely the result of a task force empaneled from a bill Sonnenberg successfully pushed last year. The leaders of the task force — a landowner caught in the tax-credit debacle and the director of a land trust that managed many easements — were frequently at odds on the issue but worked together to find solutions.

“This is great progress,” said Fort Collins businessman Mark Lueker, who years ago helplessly watched the state negate $60,000 in conservation easement tax credits he bought. The move cost him an additional $43,000 in taxes and penalties.

The state at the time said Lueker’s purchase was a private contract between him and the tax-credit broker he purchased from, so any refunds needed to come from there.

Like many others, the landowner who generated the original credits likely rolled the funds back into their farms, leaving a lawsuit and bankruptcy as the only options for Lueker to collect. Credit buyers refused to push farmers over the financial edge for something they didn’t do knowingly.

“The state created, advertised, and promoted the conservation easement program with the full understanding of the (land) appraisals, and (knew about) them for years,” Lueker said at the time.

Tax-credit buyers said they believed the state had scrutinized the process when they bought in.

The problem revolved around about 500 easements that were mostly donated between 2003 and 2007, created under a state law that for years had no oversight.

It took years for state investigations to unravel the problem, eventually pegging it to flawed land appraisals and wealthy investors who took advantage of an apparent loophole.

Though the program works well today, the tax-credit buyers were caught in the middle without any relief in sight. Like Lueker, nearly all lost the original dollars they paid for the credits, often sold at a discount, as well as the taxes they planned to use the credits to pay.

“It’s been a very long, hard road, but I’m still cautiously optimistic for a good outcome,” Sonnenberg said in a telephone interview. “It’s been such a nightmare.”

Among other things, the bill aims to refund the tax-credit buyers if they can show the original easement amount was approved by federal tax authorities, as most were. But concerns remain.

“The bill doesn’t say how a transferee, like me, needs to justify the claimed amount,” Lueker said, noting he purchased his credits through a broker. “I don’t have access to whomever the original seller of the tax credits was.”

Sonnenberg conceded the bill still has an uphill battle, not only because previous efforts to fix the problem have been unsuccessful, but because the Department of Revenue doesn’t have the budget to pay it all back.

“I’d argue that since (the Department of) Revenue screwed this all up, they should pay it,” Sonnenberg said.

Fort Collins businessman David Neenan bought $80,000 worth of tax credits for himself and his family for $64,000, only to pay the state $128,000 in back taxes, penalties and interest.

An initial tax bill of $80,000 eventually cost him more than $200,000 because of the problems.

The farmers Neenan bought the credits from had either gone bankrupt or had only a small house and a few tractors in assets, hardly enough to collect from.

Sonnenberg’s bill gives Neenan some hope.

“It’s a political mess we’ve been putting up with,” he said. “How can our (government) take advantage, to (punish) other citizens at their expense? It makes me sick.”

The bill, SB 20-135, is scheduled to be heard Feb. 13 before the Senate’s Agriculture and Natural Resources Committee.

David Migoya: (303) 954-1506; dmigoya@denverpost.com; @davidmigoya.