The Internal Revenue Service (IRS) announced on August 31, 2020 that Coal Property Holdings, LLC and its partners agreed to a disallowance of their $155 million charitable deduction claimed for a conservation easement donation on 3,700 acres in Tennessee (IR-2020-196).
Senate Finance Committee Chairman Chuck Grassley (R-Iowa) and Ranking Member Ron Wyden (D-Ore.) released a report on their bipartisan investigation into syndicated conservation easement transactions (report summarized here). These abusive transactions are created by promoters who sell interests in land to taxpayers seeking large tax deductions. Upon investing in these schemes, the taxpayers grant conservation easements using inflated appraisals and then share the inflated tax deductions among the investors. The abusive nature of these transactions stems from the inflated appraised values of the conservation easements and the effective purchase by investors of tax deductions, both concepts negating any charitable intent by the donors of the conservation easements. The report states that the IRS estimates that between 2010 and 2017, syndicated conservation easement transactions have generated $26.8 billion in charitable contribution deductions for the investors. Continue Reading Senate Report on Syndicated Conservation Easement Transactions
On August 4, 2020, the Great American Outdoors Act was signed into law, providing $900 million of full and dedicated funding of the Land and Water Conservation Fund (LWCF) for the protection of parks, wildlife refuges and recreation areas at the federal, state and local level. The LWCF was created by Congress in 1964 with revenues from offshore oil and gas royalty payments, but until the passage of the Act, was only partially and inconsistently funded. Funds from LWCF are used by the National Park Service, the Bureau of Land Management, the U.S. Fish and Wildlife Service and the U.S. Forest Service to protect and conserve federal lands administered by these agencies, and state and local funding programs like the Forest Legacy Program, provide local funding for the creation of recreation areas and the preservation of natural areas. The Land & Water Conservation Fund Coalition, including the Land Trust Alliance, The Conservation Fund, The Nature Conservancy and numerous state and local outdoor recreation and conservation organizations in the Rocky Mountain West and throughout the country have worked for years to make this funding a reality.
On July 9, 2020, the U.S. Tax Court granted partial summary judgment in favor of the Internal Revenue Service (IRS) in four separate cases brought against taxpayers for charitable contributions of conservation easements. The basis for the judgments against the taxpayers were (i) violation of the proceeds clause under Treas. Reg. § 1.170A-14(g)(6)(ii) which results in a violation of the perpetuity requirement under I.R.C. § 170(h)(5)(a); and (ii) failure to provide the cost basis in IRS Form 8283 which was not substantial compliance with IRS requirements. Continue Reading Charitable Deductions Denied on Four Conservation Easement Donations