On November 25, 2020, the Internal Revenue Service (IRS) updated its Conservation Easement Audit Technique Guide with a revision date of November 9, 2020. The Guide is a reference document for IRS staff for the examination of charitable contributions of conservation easements. Although the IRS is quick to point out that the Guide is not a comprehensive training manual, the Guide does provide information about conservation easements generally and more specific information regarding the requirements for a valid charitable contribution, including citations to recent cases on relevant topics. Land trusts, landowners, and their attorneys can all benefit from reviewing the Guide as a checklist of the issues IRS auditors will be looking for when reviewing a conservation easement charitable contribution.
The Trust for Public Land (TPL) reports that 26 conservation measures supported by TPL in the 2020 election were approved by voters, amounting to nearly $3.7 billion in funding for land conservation, parks, climate resiliency and habitat. Four of these ballot measures were located in the Rocky Mountain region in Colorado and Montana. Continue Reading 2020 Conservation Ballot Measures Approved in the Rocky Mountains
Colorado West Land Trust has announced a merger with Black Canyon Regional Land Trust to better serve the conservation needs of western Colorado. In 2017 the two organizations consolidated operations but continued as two separate legal entities. The success of this collaboration led to the full legal merger. Great Outdoors Colorado provided a grant to assist with the costs of the merger as part of its Resilient Communities Program. Colorado West Land Trust will remain headquartered in Grand Junction with a satellite office in Montrose. Congratulations to both organizations!
The IRS Office of Chief Counsel provides guidance in Notice CC 2021-001 regarding settlement options offered by the IRS for U.S. Tax Court cases currently pending under Notice 2017-10 for syndicated conservation easement transactions. The Notice provides information about financial terms and process for settlement in an effort to promote efficient and consistent resolutions of these pending cases. The guidance suggests the terms of the settlement are more favorable than the results a partnership should expect at trial or terms available through the Independent Office of Appeals.
The Colorado Department of Revenue, Division of Taxation is seeking public comment on amendments to three conservation easement tax credit regulations. The amendments are intended to conform the regulations to House Bill 19-1264 signed into law on June 3, 2019, which included a number of substantive revisions to the conservation easement enabling statute (C.R.S. § 38-30.5-101, et seq.) and the conservation easement tax credit program in Colorado. Continue Reading Colorado Department of Revenue Proposes Revisions to Conservation Easement Tax Credit Regulations
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