Changes to Form 8283 for 2013
While taxpayers who donate partial interests in property for conservation purposes (i.e. conservation easements) can qualify for tax benefits, the taxpayers must substantiate their claim for benefits with a considerable amount of paperwork—and the terms of the required substantiation have changed over the years. Failure to attach the required documentation or correctly complete the form can be the basis for a full denial of the entire deduction.
The following material is provided to assist donors and conservation professionals looking for more information on IRS publications. It is published for informational purposes only and is not meant as legal advice. Donors, conservation professionals, and land trusts should seek qualified counsel for specific questions. The Land Trust Alliance is solely responsible for this content.
New Requirements for 2013
In December of 2012, the IRS released a new Form 8283 for the reporting of noncash charitable contributions with new instructions. Careful reading of the instructions reveals a new requirement: the donor must attach a copy of the easement deed or provide a detailed description of the terms of the easement. The form also lists requirements for appraisals.
The new instructions state:
- That the taxpayer must either: “…describe the easement terms in detail, or attach a copy of the easement deed.” Experts have been advising that the landowner attach the conservation easement to Form 8283 for a few years. Now the IRS is requiring that or a detailed explanation.
- That “If you use appraisals by more than one appraiser, or if two or more appraisers contribute to a single appraisal, all the appraisers must sign the appraisal and Part III of Form 8283.” This was a source of pain and confusion in the past few years with some deductions fully disallowed because not all the contributing appraisers signed the 8283. Please note that all the contributing appraisers should also sign the appraisal too.
- That appraisers must declare that they “perform appraisals on a regular basis”.
- That you must clarify which “basis” you are reporting. This allows the IRS to compare the basis of asset with the claimed FMV of gift. Presumably if the IRS examiner feels the spread is too large then the return is flagged for an audit.
New Requirements Added in 2006
In 2006, the Internal Revenue Service published a new Form 8283 and new instructions that require additional information from conservation easement donors. Recent experience suggests that the IRS takes these questions very seriously and a sufficiently detailed "supplemental statement" ought to be 5-10 pages long. IRS officials also emphasize that an address is not an adequate "description of donated property" for form 8283 and have suggested attaching the entire recorded easement and baseline report.
The new instructions require that conservation easement donors attach to their 8283 a statement that:
- Identifies the conservation purposes furthered by your donation;
- Shows, if before and after valuation is used, the fair market value of the underlying property before and after the gift;
- States whether you made the donation in order to get a permit or other approval from a local or other governing authority and whether the donation was required by a contract; and
- If you or a related person has any interest in other property nearby, describe that interest.
The new instructions also state:
"The donee must be a qualified organization as defined in section 170(h)(3) and must have the resources to be able to monitor and enforce the conservation easement.... To enable the organization to do this, you [the donor] must give it [the donee organization] documents, such as maps and photographs, that establish the condition of the property at the time of the gift."
How Land Trusts Can Help
Land trusts can help by making sure that their donors know about the new forms and instructions, and by helping donors with a statement they will have to provide the IRS that "identifies the conservation purposes furthered by your donation." That should be easily derived from the "purposes" and "recitals" (whereas clauses) of the easement. The IRS is not looking for "conservation" as Webster defines it -- they are looking to see that the easement serves one or more of the specific "conservation purposes" defined in IRC 170(h)(4).
It is important, too, that you notify appraisers who work with your donors of the new requirements, as they will have to provide the donor a statement that "shows, if before and after valuation is used, the Fair Market Value of the underlying property before and after the gift." The new instructions also require the appraiser to state in their appraisal "the method of valuation (such as the income approach or the market data approach) and the specific basis for the valuation (such as comparable sales transactions)".