On October 15, 2021, the Office of Chief Counsel of the Internal Revenue Service (IRS) disclosed a copy of a communication in 202141022 suggesting that notification of the exercise or continuance of a use of land that pre-exists the donation of a conservation easement is required in order for the conservation easement to meet the “protected in perpetuity” requirement of Treas. Reg. Sec. 1.170A-14(g)(5)(ii). The relevant portion of this provision of the Treasury Regulations states in part: “In the case of any donation referred to in paragraph (g)(5)(i) of this section, the donor must agree to notify the donee, in writing, before exercising any reserved right, e.g. the right to extract certain minerals which may have an adverse impact on the conservation interests associated with the qualified real property interest.”
Many conservation easements contain a requirement that the donor of the conservation easement notify the donee of the exercise of reserved rights in a conservation easement, and the regulations suggest that this is a required element of the conservation easement in order for the donation of the easement to qualify for a charitable deduction. The concept raised by the chief counsel document more specifically discusses whether the donor of the conservation easement must notify the donee prior to continuing a use of the property that pre-exists the donation of the conservation easement. Most conservation easements recite the existing uses of the property and that such uses are intended to continue after the donation of the conservation easement, and it seems that this recitation would provide adequate notice to the donee of the continuation and exercise of the pre-existing use.