If Donald Trump and Congressional Republicans were your candidates of choice, then congratulations, and may you be correct in placing your faith in them. On the other hand, if you view last month’s election results as alarming, then read on for more reasons to be concerned. In particular, what does the new regime mean for land conservation? With the caveat that everything here is speculation, and that a Trump presidency is going to be wildly unpredictable, here are some initial thoughts, all of them rather sobering.
The point of this discussion is not to depress anyone further, but rather to be clear-eyed about the challenges facing us as land conservationists. I, for one, intend to remain on the front lines at the local, state, and federal levels to continue to advocate for all that I hold dear. I hope you will join me.
One step you can take right this minute: Sign up to become a Land Trust Alliance Advocacy Ambassador to receive timely prompts to assist with federal land conservation lobbying efforts.
In recent Tax Court cases and through statements at the Land Trust Alliance Rally, the Internal Revenue Service has signaled its continuing interest in conservation easement amendments. Let’s take a closer look at each of these developments and see what’s going on.
First, to the Tax Court. In four pending cases, the IRS has challenged the deductibility of conservation easements based in part on what it contends is an overly broad amendment provision. The IRS argument is sweeping and vague, and seeks to link these provisions to the holdings in the recent decisions in Belk, Balsam Mountain, and Bosque Canyon. However, the amendment provisions in these four pending cases are easily distinguishable from those three earlier cases, which dealt with very non-traditional substitution provisions. In fact, the currently disputed amendment provisions are typical of those found in well-drafted conservation easements throughout the nation, as they prohibit the easement holders from approving an amendment unless it is consistent with the easement’s conservation purposes. The Land Trust Alliance is currently considering filing a friend-of-the-court brief in the pending cases.
Meanwhile, at the Rally in October, Karin Gross, a senior attorney at the IRS who has focused on conservation easements for many years, announced her intention to undertake a process in 2017 to issue regulatory guidance around the subject of amendments. She solicited feedback from the land trust community as to what should be included in this guidance. It is unclear at this point if the guidance would be issued as a full-blown regulation, or something less formal, and whether the incoming Trump administration could delay or upend this new initiative. Gross indicated that possible topics to be addressed by the guidance would be whether and how to implement third party review of amendments, how to ensure that amendments do not result in impermissible private benefit, and ensuring that amendments keep faith with the perpetuity requirement of § 170(h).
Whatever the IRS comes up with, it is certain to significantly impact how we draft and administer conservation easements in Maine and throughout the country. A poorly conceived product could do much damage to land conservation efforts, so it’s important that the IRS gets it right and does not overreach. Some in the land trust community believe that the IRs should be dissuaded from issuing any guidance at all. If you or your land trust would like to offer feedback to the IRS, including whether to proceed with this guidance initiative, please e-mail me for the relevant contact information.
Another issue that has received IRS and Land Trust Alliance attention is the use of conservation easements as syndicated tax shelters. This is a complicated legal and tax issue, best summarized in this post from the Alliance. Fortunately, we are not seeing much, if any, such abuses occurring in Maine. Nevertheless, land trusts and their attorneys are advised to be on the lookout for deals that seem suspect. One key indicator of abusive tax shelters is a recently formed a limited liability company having multiple non-related individuals as members. For starters, the Alliance is recommending the use of this flow chart to guide land trusts.
At Rally in October, Karin Gross announced that the IRS will issue by the end of 2016 a notice on abusive conservation easement transactions. We are not certain what form that guidance will take, and the hope is that this notice will have a chilling effect on abusive transactions but will not discourage legitimate ones.
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