NTU: Environmental Tax Deduction At Risk Due to Overzealous IRS

National Taxpayers Union
By Bryan Hickman
July 29, 2019

For more than a half century, the U.S. Tax Code has provided incentives to encourage private conservation, the most prominent being the deduction for conservation easements provided by Section 170(h).[1] This provision furnishes a charitable tax deduction for taxpayers who place easements on their property for conservation purposes and then donate the easements to qualified conservation organizations.

Officially codified in 1980 and renewed and updated on several occasions, the deduction for conservation easements has enjoyed broad bipartisan support, even as the divide between Republicans and Democrats on broader tax policy has widened considerably. From the outset, it was intended to promote private stewardship of conservation lands to spare taxpayers the costs of government-run land preservation efforts. And, by any objective measure, the deduction has been a success.

Recently, concern has arisen about conservation easements claimed by partnerships (and LLCs, S-corporations) with the benefits of the deduction spread out among the multiple partners. These arrangements are typically referred to as conservation partnerships, but disparagingly referred to as “syndicated easements.” In December 2016, in the waning days of the Obama Administration, the IRS issued Notice 2017-10 in response to concerns about conservation partnerships that “purport to give investors the opportunity to obtain charitable contributions deductions in amounts that significantly exceed the amount invested.”[2] Specifically, the Notice designated some of these partnerships – those nefariously referred to as “syndicated” conservation partnerships – as “listed transactions,” triggering a host of additional filing requirements and subjecting landowners and claimants to stiffer fines and penalties for noncompliance.

As written and enforced, Notice 2017-10 threatens the ongoing effort to promote private conservation and poses a real danger to taxpayer rights. By focusing on a specific class of taxpayer, i.e. conservation partnerships, the notice fails to address the underlying concern of valuation or qualification of conservation easement donations. It also imposes significant burdens on taxpayers without a tangible benefit to the IRS enforcement efforts while undermining the Congress’s intent behind the conservation easement deduction. This paper will address these concerns, propose more reasonable alternatives, and provide additional evidence of the benefits of private conservation.

Read more here.

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