By Michele S. Byers
Farmers have long known that one rotten apple is enough to spoil the whole bunch. In the land conservation business, a couple of “bad apples” are threatening to spoil the work of hundreds of reputable land conservation groups and projects.
The Land Trust Alliance, a national nonprofit organization dedicated to supporting the conservation community, is calling out a shady tax shelter scheme involving charitable donations.
The bad apples are abusing a tax incentive that allows landowners who preserve their land by donating conservation easements to take a charitable deduction based on the fair market value of the donated easement.
According to the alliance, in the scheme investors are encouraged to buy shares in partnerships or limited liability companies that hold title to land. After a short holding period, these entities donate conservation easements (or land) to land trusts.
They then claim tax deductions based on inflated appraised values that are often far in excess – sometimes by three to 10 times – of the original acquisition price. As a result of the inflated appraisals, investors reap tax benefits worth significantly more than their initial investment.
The vast majority of land trusts are preserving land and natural resources for the right reasons: For the enjoyment of current and future generations, for clean drinking water, for decreased flooding, for healthy recreation opportunities and a better quality of life.
The conservation easement tax incentive has helped tens of thousands of Americans with charitable intent preserve their land.
To combat the abusive bad apples, a bipartisan group including U.S. senators Steve Daines (R-Montana) and Debbie Stabenow (D-Michigan) recently introduced the Charitable Conservation Easement Program Integrity Act.
Congressmen Mike Thompson (D-California) and Mike Kelly (R-Pennsylvania) introduced a companion measure in the House of Representatives.
The narrowly focused legislation would prohibit the allowance of charitable deductions when profits are taken within a short time of the conservation easement donation. This would shut down schemes that make fast profits by exploiting the incentive.
The Charitable Conservation Easement Program Integrity Act would ensure that tax incentives for land conservation remain available for genuine philanthropists – of which there are many.
Most people who donate conservation easements on their land don’t do it for the money. They do it because they love their land and don’t want to see it developed.
A conservation easement is a voluntary legal agreement between a landowner and a land trust or government agency that permanently limits development of the land to protect its conservation values.
For example, an easement might be designed to protect a beloved patch of forest, a buffer area along a stream, a farm field or a place with a scenic view.
Landowners retain many of their rights, including the right to own and use the land, sell it and pass it on to their heirs. But the conservation easement is written into the deed, so future owners are subject to the same restrictions.
Having permanent restrictions on land makes it less valuable, so it makes sense to offer tax incentives for these donations. The conservation easement tax deduction is one of the most valuable tools for encouraging the preservation of land with high conservation value.
The exploitation of the conservation easement tax incentive must be stopped. It is costing honest taxpayers billions of dollars and erodes the public’s faith and trust in legitimate land preservation donations.
We cannot let the bad apples spoil this incredibly successful and important program. Enacting the Charitable Conservation Easement Program Integrity Act is the fastest and most efficient way to stop abusers.
Please urge your Congressional representative and U.S. senators to support bills S-170 and HR-1992.
To learn more about tax shelter abuse of conservation donations, go to https://www.landtrustalliance.org/important-advisory-tax-shelter-abuse-conservation-donations
Michele S. Byers is the executive director of the New Jersey Conservation Foundation, Far Hills. She may be reached at email@example.com