The IRS has been focused on enforcement efforts targeting conservation easement transactions. And IRS data indicates that more enforcement efforts lie ahead. The Senate Finance Committee, which has been engaged in a years-long investigation into the tax play, recently released a report noting a “significant increase in conservation easement transactions,” and its chairman expressed concerns about what he characterized as the “serious and persistent abuse of the syndicated conservation easement program.” The IRS, in virtual lockstep, has used similar rhetoric, vowing to use “[e]very available enforcement option . . . including civil penalties and . . . criminal investigations” to carry out its “pursuit of everyone involved in the creation, marketing, promotion and wrongful acquisition of artificial, highly inflated deductions” associated with syndicated conservation easement transactions. See here.
This enforcement focus has given rise to newfound interest—both from politicians and the public—in conservation easements, though they are anything but a new phenomenon. And while the concept and focus has given rise to a fair amount of public fodder and rhetoric, the truth is that the tax-compliance aspects of conservation easements are quite complex. In this article, we will canvass a number of the fundamental tax provisions with respect to conservation easement deductions.