Lawmakers introduce bill to curb abuses of conservation easement tax break

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A pair of congressional representatives has introduced bipartisan legislation to discourage abuses of the conservation easement tax break.

Reps. Mike Thompson, D-Calif., who chairs the House Ways and Means Subcommittee on Select Revenue Measures and Rep. Mike Kelly, R-Pa., introduced the Charitable Conservation Easement Program Integrity Act of 2019 on Thursday. This bill aims to curb abuses of the conservation tax incentive program that lets taxpayers claim a charitable deduction after donating lands for public use and conservation. In the four years since Congress approved the tax incentive, some taxpayers have abused the tax break, in some cases setting aside some space on a golf course and claiming it as conservation.

The bipartisan legislation from the tax-writing House Ways and Means Committee comes on the heels of an investigation announced Wednesday by the Democratic and Republican leaders of the Senate’s main tax committee, the Senate Finance Committee, chairman Chuck Grassley, R-Iowa, and ranking member Ron Wyden, D-Ore. (see Senators investigate abuses of conservation easement tax break).

“Protecting public lands and incentivizing legitimate charitable donations of land for conservation has been a priority of mine since my days in the California State Senate,” Thompson said in a statement. “We cannot allow the abusive actions of a small minority to erode the integrity of this important program. That’s why I’m proud to introduce the Charitable Conservation Easement Program Integrity Act, simple and bipartisan legislation to prevent such abuses from taking place and in turn protect the incentives that this program offers. We must continue working to ensure these lands can be preserved for generations to come.”

The legislation aims to stop investor groups from unfairly taking advantage of the conservation easement program, in some cases by vastly inflating the amount of investment claimed. The bill would disallow a charitable deduction only when a profit is made in a short time (three years or less) from the donation of a conservation easement and includes an exception for family partnerships. An advocacy group known as the Land Trust Alliance pointed out that IRS data released in 2017 indicated that a sampling of these transactions enabled investors to claim, on average, deductions valued at nine times the amount of their original investment. “In the most current data available, approximately $20 billion in tax deductions were claimed from 2010 to 2016,” said the group. “In 2016 alone, $6 billion in apparently unwarranted charitable deductions was claimed by participants from just 248 transactions.”

“When bad actors abuse provisions of the tax code and subvert Congressional intent, Congress must act,” said Kelly. “The tax incentive for conservation easements exists for good reason: to preserve open space for the enjoyment of future generations of Americans. Offering family forest owners, farmers and ranchers a tax benefit for donating a conservation easement on their land is good policy. Unfortunately, some have unfairly gamed the system to line their pockets at a cost to U.S. taxpayers."

He noted that in 2015, he and Thompson led the effort to make the enhanced federal tax incentive for conservation easement donations permanent. "It has become one of the most powerful conservation measures enacted by Congress in decades," Kelly added. "Today, I introduced legislation with Congressman Thompson again to ensure that this tax incentive is properly used to preserve open spaces.”

An advocacy group that represents taxpayers claiming the tax break had some objections to the proposed legislation. “Private conservation easements, including those achieved through partnerships, are critical to protecting natural habitats, tackling the threat of climate change and preserving the character of America’s open spaces,” said Partnership for Conservation executive director Robert Ramsay in a statement. “Legislative solutions should not discriminate against an important class of land ownership, but instead should focus on strengthening conservation efforts while stopping the limited instances of abuse. While we do not agree with the language of this bill, we look forward to using its introduction as an opportunity to bring stakeholders together to discuss commonsense solutions that address issues of valuation and transparency and make the conservation easement process more efficient, open and accountable.”

Other groups expressed more support. “Representative Thompson has a long track record of supporting land conservation efforts in California and I applaud his reintroduction of the Charitable Conservation Easement Program Integrity Act,” stated Dave Koehler, executive director of Sonoma Land Trust. “Conservation easements and the tax incentives they offer farmers and ranchers is key for landowners to voluntarily protect natural resources here at home and throughout our nation. It’s vital that this powerful tool remains protected from abuse.”

“We work with lots of landowners who genuinely want to protect their land and are willing to make the commitment to do that,” said Land Trust of Napa County CEO Doug Parker in a statement. “This legislation is essential to curb abuses and maintain the viability of successful easement programs that permanently protect significant natural and agricultural lands. Thank you, Mike, for working on this!”

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Tax breaks Finance, investment and tax-related legislation Tax deductions Qualified conservation contribution