Posted: January 2, 2023
Washington – Today, Rep. Mike Thompson (CA-05) announced that his legislation to shut down abusive conservation easement transactions was included in the final 2023 government funding bill.
“Abuse of conservation easements has cost taxpayers billions of dollars and provided wealthy developers with a loophole to abuse our tax code,” said Thompson. “Shutting down these tax shelters is a no-brainer. By closing this loophole, we ensure that taxpayers are defended and that conservation easements remain a successful and cost-effective means of protecting our shared natural heritage.”
Taxpayers are able to claim a charitable tax deduction when they donate a conservation easement to a qualified land trust. By placing a conservation easement on a piece of qualified property and then donating the easement to an entity dedicated to land conservation, the taxpayer essentially protects the piece of land permanently. This makes the deduction a very successful and cost-effective way of conserving wild spaces.
However, bad actors have abused the program, essentially using the deduction as an investment vehicle: in simple terms, a group of investors would buy a piece of land, overstate the appraisal value of the land, then donate the easement and claim a deduction far greater than what they invested. The Internal Revenue Service (IRS) has designated these easement deals as “listed transactions,” meaning they are subjected to greater than usual scrutiny, and the Justice Department has repeatedly, and often successfully, pursued bad actors in court for abusing the easement program as a tax shelter.
Rep. Thompson’s legislation, H.R. 4164 (the Charitable Conservation Easement Program Integrity Act), was bipartisan and bicameral and will save taxpayers billions of dollars. The bill was backed by numerous Justice Department indictments, a bipartisan Senate Finance Committee report, and multiple formal statements issued by IRS.
The government funding bill passed the Senate by vote of 68-29. The bill passed the House by a vote of 225-201-1. President Joe Biden signed the government funding bill into law on December 29, 2022.