How Congress can improve laws on land conservation

Robert Ramsay

...One critical tool designed to encourage private land conservation is the tax deduction available to those who protect their land through conservation easements — restrictions that run with the land forever protecting it from development. Many private landowners who want to conserve their land face a difficult choice. On the one hand is their desire to protect natural habitats, open spaces or working lands for their children and future generations. On the other hand, placing a conservation easement on their property impairs its value and is too often a serious financial burden that most simply cannot afford. Congress recognized this dilemma when it first created the tax incentive for private land conservation more than 40 years ago. Since then the tax incentive has been updated by Congress to encourage more Americans to participate in land conservation. The most recent example came in 2015 when Congress made permanent the enhanced tax incentive, increasing the value of the deduction for donations, called Section 170(h). By increasing the value of the tax benefit permanently, Congress intended to encourage more conservation by more Americans. And it worked — there are currently more than 50 million acres nationwide protected by conservation easements...For over a year, the U.S. Senate Finance Committee has been reviewing this tax incentive over concerns about potential abuse. Last month the committee concluded its review, finding that improvements should be made to the tax incentive and identifying valuation of donations as the major source of concern. The next step should be for Congress to take action to address valuation concerns. In addition, Congress should provide greater clarity on the conservation easement rules so landowners won’t risk loss of deductions because of easement drafting issues. Recently the IRS has been challenging a once-standard easement clause and denying easement deductions in dozens of cases. The Land Trust Alliance’s (LTA) 2020 Policy Agenda notes that “the IRS continues to focus on innocent donor documentation mistakes.” While the LTA has called on the IRS to crack down on some conservation easements, it has only recently recognized the importance of reining in the IRS approach to conservation easements. I appreciate that LTA now acknowledges that there is far too much uncertainty in this space and that important conservation easements are being needlessly challenged. Fortunately, there are common sense ways for Congress to address valuation issues without limiting the ability of Americans to conserve land. Congress should put in place reforms that strengthen appraisal standards. This could include requiring proper vetting of all appraisers and mandating that any appraiser working on a conservation easement must have taken a specific educational course on conservation easement appraisals. In addition, appraisals should be independently verified. This could include hiring a second appraiser to review the initial assessment. As the National Taxpayers Union has noted in the past, an IRS easement valuation advisory panel could also be useful to help resolve audit disputes...MORE

The Senate Committee report (116-44) referred to is embedded below and can be found here.