Conservation Easements Under Fire: A Five-Point Strategy To Defend The Deduction

Conflict Between Statutory Incentive and IRS Enforcement

Comments by IRS officials and government reports reveal that the IRS is heightening its scrutiny of deductions claimed for the charitable contributions of conservation easements under Internal Revenue Code section 170(h). The IRS is devoting increased resources and coordinating the issue on a nationwide basis.

At the same time, Congress and the states continue to increase the statutory tax incentive for individuals to donate conservation easements. For example, during 2006 and 2007, Congress reduced the limitation on the deduction and extended the carry-forward period from 5 years to 15 years.¹ Thus, the Federal and state tax writers' encouragement have left taxpayers wondering why the IRS is devoting considerable resources in order to disallow the deductions.