Land Conservation Easements Tax Breaks Being Investigated

The Internal Revenue Service (IRS) revealed at a heavily attended hearing before the Senate Finance Committee, that it has set up a team to gather information relating to the abuse of land conservation easements. The team will conduct investigations of large and small organizations promoting land conservation tax schemes.

The most prominent organization under consideration is the Nature Conservancy. Senate staffers have been examining the Nature Conservancy’s land transactions and relationships with for-profit businesses since July 2003. Several other individuals and smaller charity organizations are also being probed for potentially manipulating conservation laws to create excessive tax deductions.

“We are going to shine the searchlight in their direction, and will use all civil and criminal tools at our disposal to combat abuses,” IRS Commissioner Steven T. Miller said in written testimony reported in the Washington Post. “What began as a laudable program to save open space, natural habitats, and historical sites may have become distorted,” he finished.

Conservation easements are development restrictions added to land to shield it from commercial development. The major recipients, and apparent abusers, of lucrative tax deductions, seem to be the owners and developers of golf courses.

The Chronicles of Philanthropy reports that during three hours of hearings, Steven T. Miller, the commissioner of the IRS’ tax-exempt division, testified that the IRS is examining more than 20 promoters of easement-donation and five more are in line for investigation. More than 240 “high-dollar” conservation easement donors are also being audited and 100 more are being considered for audits.

In an effort to identify non-profit organizations holding conservation easements, the IRS requires additional reporting identifying easement donors and appraisals disclosing the value of large donations.

The Chronicle of Philanthropy reports that South Carolina Revenue Director Burnet R. Maybank III testified that his department examined 110 easements donated between 2001 and 2003 and found that $125M of the $300M in donated properties valued at more than $1M were improperly taken.
“If you want to have the most immediate and dramatic impact, go after golf course developers,” Director Maybank told the Committee according to the Chronicle of Philanthropy. “The numbers we have seen are simply astonishing.”

Sen. Charles E. Grassley (Iowa-R) urged the abolition of tax shelters resulting from the, “slippery slope of the donors’ own appraisals.”

“When I see ‘tax shelter’ being used in documents of charities, we ought to be really worried,” Sen. Grassley is reported by the Chronicle of Philanthropy as saying. The Chronicle reports he plans to introduce measures to fix the problems he sees with donors taking overstated tax deductions for their gifts of land.

Along with Sen. Max S. Baucus (Montana-D), Grassley wants to improve the way charities, foundations, and donors obtain property appraisals as well as practices such as governance, public disclosure, and spending on salaries and travel. They want to pass legislation ending abuses but encouraging donations.

In their defense, the Nature Conservancy counters the accuracy of the newspaper articles that have been published since the congressional investigation began. All policy considerations cited in the report have been altered in the past two years.

“Not everything we tried succeeded, and on occasion we made mistakes, but all our work was done in good faith and was undertaken to accomplish significant conservation goals,” Reuters reports a statement from the Nature Conservancy as saying.

Although the Conservancy has engaged in activities where it had shown little expertise in the past, Steven J. McCormick, president of the organization, said that it has instituted a risk assessment committee to control the organization’s expansion of “core competencies.”

Sen. Rick Santorum (Pennsylvania-R) warned that making sweeping changes to conservation policy might hamstring the efforts of smaller organizations such as the Stockgrowers Agriculture Land Trust in Wyoming’s Platte Valley to which a rancher John Lundt donated an easement in 1997. The easement on his 1,380-acre ranch was donated to preserve an open range habitat for antelope, bald eagles, elk, and migratory birds.

“We feel this place belongs to the generations, not the developers,” John Lundt told Reuters reporters.

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