A few weeks ago we shared National Taxpayers Union President Pete Sepp’s op-ed detailing the IRS’ bad behavior in regard to conservation easement donations.
A recent case by the 5th Circuit threatens the viability of conservation easement donations. Below, the Alabama law firm of Sirote and Permutt discusses this case and highlights a troubling new position the IRS has been pursuing to disallow conservation easement deductions. As should be evident from below, rather than focus on whether a taxpayer has substantially complied with the letter and spirt of Section 170(h), the IRS continues its attack on conservation easement donations for hyper-technical foot-faults — this is certainly not what Congress intended.
Read an excerpt of the piece below.
The 5th Circuit Pushes PBBM Down Rose Hill
By Ronald Levitt and Gregory P. Rhodes
The 5th Circuit’s recent opinion in PBBM-Rose Hill will impact thousands of conservation easement deductions. Three aspects of the 5th Circuit’s opinion are significant: (1) the opinion invalidates a common easement deed provision allocating proceeds from judicially extinguished conservation easements; (2) the opinion contradicts existing law governing whether the IRS must comply with the managerial approval of penalties requirement under Code section 6751(b); and (3) the good news for taxpayers is that the 5th Circuit reversed the Tax Court and determined that protection of conservation purpose is based on the language of the easement deed, disregarding the actions of a subsequent owner of the eased property…
…Prior to the Tax Court’s ruling, numerous easement deeds containing “improvements clauses” had passed IRS and court scrutiny in audits and court cases. Indeed, in the one private ruling letter in which the IRS directly addressed and analyzed an improvements clause, the IRS determined that the clause was appropriate. Nonetheless, the 5th Circuit refused to consider the private letter ruling because the 5th Circuit concluded that the “regulation [was] not ambiguous.” The determination leads one to question how the same government agency can construe the same regulatory language two different ways if the regulation was not “ambiguous.”
We continue to stand for conservation for more Americans, and our Legislative Proposals reflect our commitment to ensuring the purpose of the tax incentive is utilized and enforced as Congress intended.