The Conservation Easement Tax Deduction was introduced by the Internal Revenue Service (IRS) in 1976. The program provides landowners with tax benefits when they agree to protect their land from development and environmental degradation. However, this program has faced many controversies, leading to recent lawsuits filed against it.
Conservation Easement Tax Deduction works like this: When a landowner donates or sells the development rights to their land to a qualified land trust or government agency, they receive a tax deduction equal to the fair market value of the easement. They can then use the deduction to reduce their taxable income and lower their overall tax bill. It’s a win-win situation for landowners who want to preserve the natural beauty of their land and reduce their tax bill.
The program has become more popular in recent years as people become increasingly aware of the need to conserve our natural resources. According to the Land Trust Alliance, more than 23 million acres have been protected through this program, and the numbers keep growing. This program not only benefits landowners but also the environment, wildlife, and local communities.
However, this program has been subjected to several lawsuits by the IRS in recent years. According to the IRS, some conservation easements were not legitimate because they failed to meet the requirements outlined by the IRS. Some of the issues include overvaluation, inflation of appraisals, and failure to maintain easement restrictions.
The IRS’s primary concern is to ensure that the program is not abused for personal gain by the landowners or their appraisers. This has led to increased scrutiny and several legal challenges. The IRS has revoked some of the conservation easement deductions, which have resulted in many landowners losing their tax benefits. The affected landowners are fighting back, and several lawsuits are pending.
The controversy surrounding the Conservation Easement Tax Deduction program is not going away anytime soon. Landowners must ensure they comply with the IRS regulations and have legitimate appraisals to avoid losing their tax benefits. Land trusts and other organizations need to educate landowners and their appraisers about the rules and regulations surrounding conservation easements.
If you claimed a Conservation Easement Tax Deduction and have since received a notice from the IRS it is important that you contact a tax professional; especially since this is an evolving area of law.
