Weeding out taxpayers who abuse conservation tools
As environmental consciousness continues to rise, so does the subject of conservation easements as a tax-savvy charitable giving tool. Perhaps your clients have even explored this vehicle, which involves the client giving up certain rights to the ability to alter a tract of land, with the intent to preserve the land indefinitely. The reason this transaction creates a charitable gift is because the easement typically results in a lower property value because the parcel’s usefulness for commercial purposes is eliminated or drastically reduced.
Conservation easements are not new. A resource called the National Conservation Easement Database provides mapping and information related to all conservation easements in the United States, which as of 2018 totaled 130,000 in number and covered nearly 25 million acres of land.
Unfortunately, conservation easements can be the target of abuse by unscrupulous taxpayers seeking to undermine the Internal Revenue Service’s strict parameters for deductions and tax benefits generated from the grant of a conservation easement. This abuse has caught the attention of lawmakers. On August 25, 2020, Senate Finance Committee Chairman Chuck Grassley and Ranking Member Ron Wyden released a report on the findings of investigations into a few “bad actors” who, they believe, are circumventing the rules and thereby reducing federal tax revenue to the tune of billions of dollars.
The report is a must-read if you have clients who are involved in conservation easements or are considering using this planning vehicle.