Prior to Notice 2017-10, taxpayers were already required to raise their hands when claiming a deduction for a conservation easement donation by including IRS Form 8283, Noncash Charitable Contributions, with their tax return for any deduction claimed for the donation of a conservation easement. Additionally, taxpayers claiming a deduction greater than $500,000 must have a qualified appraisal attached to their tax return. Failure to submit or complete the information required by the Form 8283 (which must also be signed by both the appraiser and the donee) can result in the entire conservation easement deduction being automatically disallowed. Additionally, prior to the Notice, taxpayers were already at risk for penalties if the IRS disagreed with value reported by the taxpayer. Such valuation penalties include a 20% increase of the additional tax owed if the IRS determines the donation’s correct value is between 50% and 66.6% of the taxpayer reported value, and 40% if the IRS determines the value is less than 50% of the taxpayer reported value.
As a result of Notice 2017-10, taxpayers must also fill out Forms 8886, Reportable Transaction Disclosure Statement, which takes, by the IRS’s own estimates, approximately 20 hours to complete. The penalty for a taxpayer who fails to adequately complete and file the Form 8886 can be as high as $100,000. The Form 8886 does not provide the IRS with any additional substantive information that is not already disclosed on the Form 8283 or other information sources or places that are included with the taxpayer’s return.
If the IRS needs additional information from taxpayers, it would be more effective and far less burdensome for the IRS to ask for the additional information in a revised Form 8283. Consolidated disclosure would ensure compliance through tacking on to the existing disclosure Form 8283 and avoid the imposition of onerous penalties.