How government spending bill may help prevent abuse of federal tax incentives for land conservation

The $1.7 trillion federal spending bill includes a change designed to curb the abuse of tax incentives for land conservation.

Federal conservation easements enable property owners to take a charitable deduction when they give up certain rights to develop land. The incentives, which were made permanent by Congress in 2015, help offset the owners’ financial loss for other potential uses for the property.

However, misuse of those deductions has been a persistent problem, whereby groups of investors may obtain inflated land appraisals and receive higher tax deductions.

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The appropriations bill includes language that would put a stop to those abuses. The change is inspired by the Charitable Conservation Easement Program Integrity Act, which was first introduced in 2017. The original bill was introduced in the House by Reps. Mike Thompson, D-Calif., and Mike Kelly, R-Pa., and in the Senate by Sens. Steve Daines, R-Mont., Debbie Stabenow, D-Mich., and Chuck Grassley, R-Iowa.

“This is a great victory for conservation,” said Lori Faeth, senior director of government relations at the Land Trust Alliance, a national land conservation organization that has advocated for the bill since it was first introduced.

The bill will halt the abuse of the conservation easements going forward because it takes away the ability for participants in abusive syndicated transactions to even file for a deduction, she said.

The move will save the IRS and government both time and money, Faeth said, as the tax agency’s audits often lead to court battles.

“It will drive a stake through the heart of this abuse,” Faeth said.

“It will save the taxpayers literally billions of dollars and it will ensure that the thousands of transactions and conservation donations that happen each year in the name of true charity and true philanthropy will continue to go on,” she said.

Notably, the IRS will still continue to pursue enforcement of the cases that are already in the tax courts. The number of those cases is well over 450, Faeth said.

Earlier this year, a group of seven individuals were indicted for a tax scheme involving syndicated conservation easements with more than $1.3 billion in fraudulent tax deductions.

“Those who contemplate promoting fraudulent tax shelters involving syndicated conservation easements — and the accountants, appraisers and tax preparers who create and execute strategies to assist them — should know that the Tax Division and IRS will unravel even the most elaborate schemes,” Stuart M. Goldberg, acting deputy assistant attorney general of the Justice Department’s Tax Division, said in a statement.