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Civil Tax Audits

Conservation and Facade Easement Disputes

 

As part of the Pension Protection Act of 2006, Congress passed and enacted several provisions to encourage property and land contributions known as Conservation and Façade Easements.   Congress’ intent was to allow certain income tax deductions for owners of property who gave up certain rights of ownership in order to preserve land and buildings for future generations, and in so doing, provide an enhanced preservation of our heritage.

Unfortunately, the IRS has been investigating many of the taxpayers that have taken advantage of the very provisions that Congress passed in regards to conservation easements.  Specifically, the IRS believes that promoters with questionable appraisals have convinced taxpayers to take inappropriate deductions for conservation easements.  Further, the IRS believes that taxpayers have sometimes used or developed these properties in manner inconsistent with the requirements of section 501(c)(3) of the Internal Revenue Code or have allowed property owners to modify the easement to develop the land in a manner inconsistent with the easement’s restrictions.

In addition to conservation easements, the IRS has been investigating façade easements.  As with its contest against conservation easement, the IRS believes that some taxpayers are taking improper deductions in relation to façade easements.  Specifically, the IRS believes that many of these façade easements were already subject to restrictions under local zoning ordinances, and therefore, such benefits may not be available to the taxpayers.

At Thorn Law Group, we are experienced at representing taxpayers who contributed conservation and façade easements.  If the IRS is challenging your contribution, contact Thorn Law Group today.

For more information on the Internal Revenue Service’s position regarding conservation and façade easements:

  • Notice 2007-50, Guidance on percentage limitations imposed by Code section 170(b)(1)(E) on qualified conservation contributions made by individuals.
  • IR-2005-19, News release announcing "dirty dozen" tax scams, including contributions of historic facade easements (Feb. 28, 2005).
  • Notice 2004-41, Notice informing taxpayers of the potential adverse tax consequences of certain transactions involving conservation easements.