11/21

Conservation Easements in Tax Notes

Recently, Jenny Johnson Ware wrote in Tax Notes how two executive orders President Trump signed in October 2019 will benefit current conservation easement legislation. The pair of orders require federal agencies like the Internal Revenue Service (IRS) to provide ‘transparent” guidelines on application and to avoid “unfair surprise[s]” on enforcement.

How does this all relate to conservation easement legislation? Ware explains:

“Two new Trump administration executive orders addressing agency guidance and enforcement actions should help end a game of “gotcha” that the IRS has been playing in denying taxpayers deductions for charitable contributions of conservation easements, finally forcing the agency to abandon its practice of asserting novel legal theories against taxpayers in its effort to avoid the ultimate question of valuation…

EO 13891, titled “Promoting the Rule of Law Through Improved Agency Guidance Documents,” requires that “agencies treat guidance documents as non-binding both in law and practice.” Taking a meaningful step beyond Treasury’s policy statement, the executive order contemplates procedures for ensuring transparent use of guidance documents and a timetable for implementation…

On the other hand, EO 13892, titled “Promoting the Rule of Law Through Transparency and Fairness in Civil Administrative Enforcement and Adjudication,” should have an immediate effect on the enforcement strategies the IRS uses in denying deductions for contributions of conservation easements. EO 13892 commands that an agency “avoid unfair surprise” in all enforcement actions…

Unless the IRS changes course in its attack on conservation easement deductions, it will be in violation of EO 13892’s command that administrative enforcement action take place only ‘in a manner that would not cause unfair surprise.’ The IRS should therefore revert to its congressionally mandated role in policing these easement donations — ensuring that taxpayers are not getting away with excessive valuations — leaving the protection of the conservation purpose to the donee organization.”

This announcement is a positive step in the right direction, and we look forward to continued progress in preserving and improving current conservation easement legislation.


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