New bill would crack down on conservation easement tax abuses

Congress reintroduced legislation to prevent abuses of the charitable conservation easement tax break that’s supposed to protect public lands, but is often used as a tax shelter.

Rep. Mike Thompson, D-California , who chairs the House Ways and Means Subcommittee on Select Revenue Measures introduced the Charitable Conservation Easement Program Integrity Act on Thursday, with Rep. Mike Kelly, R-Pennsylvania, and a companion bill was introduced in the Senate by Sen. Steve Daines, R-Montana, Debbie Stabenow, D-Michigan, Ron Wyden, D-Oregon, and Chuck Grassley, R-Iowa. The bill would curb abuse of the charitable conservation easement tax deduction, which is supposed to promote federal efforts to preserve and protect public lands, but has been used by investors as a way to shield their income from taxes.

The Internal Revenue Service has been trying for years to crack down on the promoters of syndicated conservation easements. The easement provides a tax deduction for the donation of a conservation easement to a land trust, which in turn is responsible for ensuring the owner of the land or structure abides to the terms of the easement. By donating the easement, a taxpayer essentially pledges the land will be preserved in its natural state in perpetuity. Generally, the amount of the tax deduction corresponds to the foregone development value of the land. However, ”promoters” or “syndicators” have devised a tax shelter — generally through a single or multitier partnership — by grossly inflating the value of that development potential and offering investors a share of the tax deductions far in excess of their investments in the partnership. The legislation, which was originally introduced in 2019 during the previous congressional term, aims to shut down such tax shelters by disallowing charitable deductions where the amount of the deduction claimed exceeds 250% of the total amount of investments attributable to the property that is the subject of the easement.

“The Charitable Conservation Easement Program has been used for years to incentivize conserving our public lands and charitable giving,” Thompson said in a statement. “The program works, it is one of the most efficient land conservation tools at our disposal, and it has been a priority of mine for nearly two decades. That’s why I have reintroduced the Charitable Conservation Easement Program Integrity Act, a bill to protect the integrity of the program from the actions of a small minority of bad actors. This legislation prevents bad actors from abusing the Charitable Conservation Easement Program, which costs taxpayers billions of dollars. I look forward to advancing this legislation to continue protecting public lands for our next generation.”

The bill complements efforts by the IRS and the Justice Department, which have been working since 2015 to curb the abuse of syndicated conservation easements, including Justice Department civil suits and criminal charges against bad actors.

“The time has come to safeguard taxpayers and ensure the continued viability and integrity of this successful program,” said Andrew Bowman, president and CEO of the Land Trust Alliance, in a statement. “Congress must pass the Charitable Conservation Easement Program Integrity Act this year. Lobbyists working against the Charitable Conservation Easement Program Integrity Act claim it would hinder land conservation. But even a cursory examination of the facts shows this is patently false. Each year, approximately 2,000 to 2,500 conservation donations are made by landowners for truly charitable purposes. Such donations total about $1 billion in claimed deductions per year. That stands in sharp contrast with the $9.2 billion claimed by 296 entities — bad actors gaming the system through abusive transactions — in 2018 alone. If these bad actors are allowed to continue, their actions could destroy a longstanding and successful program. It is these bad actors, not this good legislation, that stand to hinder land conservation.”

He argued that passing the Charitable Conservation Easement Program Integrity Act would safeguard the taxpaying public while ensuring the incentive for land conservation remains available for landowners acting with true charitable intent. “Lobbyists have claimed the effective date of the bill is retroactive,” Bowman added. “But that’s a disingenuous argument. The effective date of the legislation is the actual date the IRS placed these bad actors on notice and told them to halt their abusive transactions. Maintaining the effective date will ensure that funds taken from taxpayers and pocketed by these bad actors will be returned. Any attempts to shift the effective date are de facto attempts to protect the massive profiteering these bad actors have enjoyed.”