Conservation Easements Face New Regulations

On today’s show we are talking about conservation easements. 

We tend to think of the income tax code as a mechanism for extracting revenue from the population and from businesses. To be fair, that is true. But there are thousands upon thousands of pages in the tax code. 

You can describe how much a business or an individual needs to pay in income tax in a very small number of pages. 

The remainder of those thousands of pages is primarily a series of incentives 

Conservation easements are one of those incentives. 

Under standard conservation easements, landowners give up development rights for their acreage to a land trust. In return, they receive a charitable deduction equal to the property’s value, at its highest and best use, and the public benefits by the preservation of the land, which in some cases is made available as a park. In order to be eligible for conservation, the land must have actual conservation value. If the land was previously developed, it’s unlikely that you would successfully argue that the property has conservation value.

Conservation easements are more robust than zoning when it comes to protecting land. Zoning can be changed, and conservation easements are perpetual.

But there have arguably been abuses of this provision that went beyond the original intent of the legislation. In particular, the so-called syndicated conservation easements have been deals where promoters would buy a piece of land for a low price and then go get an appraisal for the value of that land as development land, regardless whether there was any realistic development potential for that land. With that appraisal in hand, the land would be donated to a land trust and the promoter would claim a tax deduction for the appraised value of the property.

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Host: Victor Menasce

email: podcast@victorjm.com