Point, Counterpoint: Conservation Tax Incentive

August 29, 2017

 

A recent article in Bloomberg news highlighted the complexities of the conservation easement tax break.  A conservation easement is a voluntary legal restriction by a landowner to permanently limit uses of the land to protect its conservation values. 

 

The federal government and certain state governments offer tax deductions for these easements. 

 

Both conservation easements and the related tax incentives are sophisticated real estate and tax matters subject to regular debate by landowners, land trusts, and the Internal Revenue Service. 

 

The Bloomberg article describes the conservation program in part as a “complex and obscure tax break that benefits some of the nation’s wealthiest property owners.”  Problems can arise when landowners take advantage of the program by using unreasonably high appraisal values for their properties to calculate the tax break amount. 

 

Due to the apparent problems, uncertainty, and possibility of IRS scrutiny, some landowners are shying away from utilizing the conservation easement.

 

Another article, a response to the Bloomberg article, appeared on the Land Trust Alliance website.  The response notes certain apparent factual errors, including the type of landowner making the donation (the LTA articles states that 8 in 10 are not millionaires) and that the cost of the deductions appeared to be overstated by 400%.

 

Although informed minds may differ, what appears consistent is that the conservation easement program – for the land trust, the landowner, and the IRS – continues to be a complex program with enough uncertainties to cause continuing debate among the various parties. 

 

This result may have an unintended consequence: because property owners look for certainty in their investments and accounting, when a potential tax break is not easy, clear, and certain, then the property owners may decide it is too much trouble to pursue that tax break. 

 

The conservation easement tax break, an apparently beneficial program, may never be fully utilized by landowners due to its own problematic nature.

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