MLEX US Tax Watch 21

MLEX US Tax Watch
Alan K. Ota
February 11, 2019

A leading new advocate for conservation partnerships plans to apply a lesson from his recent electoral triumph on a Georgia state constitutional amendment in a drive to head off Senator Steve Daines’ plan to cap tax breaks for conservation easements.

Georgia voters demonstrated strong support for water and land conservation projects by approving in November the Georgia Outdoor Stewardship Amendment to tap sporting-goods store sales tax revenue. Now, Robert Ramsay, a leader of that campaign, has come to Washington as the new executive director for the Partnership for Conservation, a non-profit advocacy group for conservation investors building a coalition to push back against Daines’ plan to curb tax breaks for conservation easements.

“The lesson is, if you’re going to make effective and lasting change, you need to work with all the stakeholders,” Ramsay said.

He points to his work as former president of the Georgia Conservancy, a non-profit group, in helping win voter approval in the November election of the Georgia Outdoor Stewardship Amendment.

In his new role, Ramsay argues for changing how the Internal Revenue Service polices conservation incentives in lieu of capping such tax breaks, which he said had strong public support. “Conservation has really gotten the crumbs from the table for far too long. At this moment in our nation’s history, we need to be focused on more opportunities for conservation, not removing tools from the conservation toolbox,” Ramsay said.

With a new seat on the Senate Finance Committee, Daines said he’s open to discuss tweaks to his bill (S 170), but also clarified he intends to work with a partner, Senator Debbie Stabenow, to enact a key provision aimed at capping the tax write-off for a donated conservation easement at 2.5 times the taxpayer’s original investment stake.

“It’s actually something that could garner bipartisan support because both Democrats and Republicans support conservation easements. The bill addresses those who are bad actors in an otherwise great program,” Daines told MLex® US Tax Watch.

Daines and his allies argue a cap would stop abuses and avert potential political pressure to kill outright the 43-year-old easement incentive program (PL 94-455) to pay for other fiscal needs. His proposal has drawn endorsements from leaders of several advocacy groups, such as the Nature Conservancy, Ducks Unlimited and Land Trust Alliance.

But Ramsay warns a cap like the one proposed by Daines would deter some investors and lead to “less land being conserved.”

Instead of capping the tax breaks, Ramsay calls for other measures such as a requirement for a taxpayer to provide a pair of valuation estimates for a donated conservation easement, one apiece from two appraisers independent of one another. And he also calls for another requirement for an investor to hold land for at least a year before donating a conservation easement to a charitable group.

– Justice, IRS target syndication group –

While Ramsay hunts for allies to promote such measures instead of a deduction cap, the Internal Revenue Service and the Justice Department continue to keep pressure on investors claiming large tax breaks for some donated conservation easements.

For example, the Justice Department filed suit in Georgia federal court in December seeking permanent injunctions to stop EcoVest Capital Inc. and five individuals from continuing an alleged abusive conservation easement syndication tax scheme. According to a DOJ press release, the group put together 96 conservation easement syndicates responsible for more than $2 billion in deductions for thousands of investors, resulting in “hundreds of millions of dollars of tax harm.”

Richard E. Zuckerman, the DOJ Tax Division’s principal deputy assistant attorney general, said in a written statement he was working with the IRS to “shut down fraudulent conservation easement shelters, which in this case were based on willfully false valuations.” He added investors in “these schemes with benefits that seem too good to be true should ensure they are paying their proper federal income tax.”

IRS Commissioner Charles Rettig pointed to the case in a written statement as an example of joint efforts by the IRS and DOJ to crack down on claims for tax breaks for certain donated conservation easements.

“When it comes to aggressive transactions marketed by unscrupulous advisors, we will take every enforcement option available, including civil and criminal penalties,” Rettig said.

Last July, the IRS told former Senate Finance Chairman Orrin Hatch the agency had linked $6 billion in easement deductions to 248 groups in 2016, nearly double the amount claimed by all taxpayers in 2014. And for 2017, Assistant Treasury Secretary David J. Kautter, former acting IRS commissioner, said the average claim was for $4.74 in tax breaks for each dollar invested. He said the top 10 percent of these syndicated transactions produced an average of $8.23 in tax breaks for each dollar invested.

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