Federal Tax Regulations for All Conservation Contributions

As a land trust or donor, whether considering an easement or some other conservation donation, there are many federal tax regulations you must follow to ensure proper credit for your charitable gift.

On This Page:

• Internal Revenue Service Guidance and Private Letter Rulings

• Bill Text and Treasury Regulations

• IRS Requiring Substantiation Letters and Form 8283 Attachments

• Perspectives and Analysis

• For Further Reading

Internal Revenue Service Guidance and Private Letter Rulings

• IRS Guidance on New Conservation Tax Incentive
  In early 2007, the Land Trust Alliance submitted questions to the IRS requesting guidance on the easement incentive. See their full response and our summary.

• IRS Guidance on Appraisers and Appraisals
  In late 2006, the Land Trust Alliance received guidance from the IRS defining "qualified appraiser" and clarifying that appraisals made before August 17, 2006 did not need to meet the new Pension Protection Act requirements.
• IRS Letter about Natural Habitat Conservation Purpose
  This letter confirms that conserved lands need not protect endangered species to qualify as protecting "a relatively natural habitat of fish, wildlife or plants."
• 2008 Private Letter Ruling on Conservation Easements
  An instructive look at criteria considered in the IRS review of a typical, well-drafted conservation easement.

Key Bill Text and Treasury Regulations

• US Code Section 26 170(h)
  The legal text that creates a federal income tax deduction for qualified conservation easements
• U.S. Treasury Regulations on Qualified Conservation Contributions
  An essential resource for land trusts accepting easements
• Relevant text of the 2006 pensions bill
  Legislation that enhanced tax incentives for conservation easements and modified other conservation incentives. Also see our summary of these changes and the 2008 Farm Bill that extended the incentive.
• 2004 Law on Appraisal Requirements
  This law summarizes existing appraisal requirements and adds new requirements for ALL non-cash charitable contributions over $500.

IRS Requiring Substantiation Letters and Form 8283 Attachments

Contemporaneous Written Substantiation

The Internal Revenue Code clearly states that all charitable gifts valued at $250 or more must be substantiated by a letter acknowledging the gift and stating that the donor received no goods or services in return.  This requirement applies to easement donations, and several recent cases, including Bruzewicz and Gomez, have denied deductions on this basis.  The IRS says that neither Form 8283 nor language in the easement itself can substitute for such a letter. Although two recent tax court cases, Simmons and Consolidated Investors, suggest that substantial compliance may be adequate, you shouldn't risk putting your donors through an audit to find out. If you are not providing such a letter to conservation easement donors, you should! It is far easier to write a short and simple thank you letter (or email) for your donor than to have to explain why you didn’t.

• Details on Substantiation Requirements and Sample Letters
• Advice on Substantiation Letters from Miller Chevalier
  
  

Form 8283 Instructions Require New Attachments

In 2006 the Internal Revenue Service released a new version of Form 8283.  But for conservation donors, even more important than the new form are the new instructions, which include new requirements for conservation easement donors to attach statements that aren’t reflected on the form. Read more.

IRS Chief Counsel also recently confirmed that form 8283 and the appraisal must be signed by the actual appraiser, not just the appraiser's firm. Read more.

Perspectives and Analysis

The Internal Revenue Service:

• IRS Still Concerned About Conservation Easement Donations
  June 28, 2007 letter from the IRS to Senator Charles Grassley that briefly touched upon concerns about land trusts monitoring and enforcing conservation easements.

• Speech on easements by Steven Miller, IRS Commissioner for Tax Exempt and Government Entities
  

Land Trust Attorneys:

• Proper-and Improper-Deductions for Conservation Easement Donations, including Developer Donations
  Stephen Small article in Tax Notes reviewing the tax law of conservation easements and highlighting abuses that are raising concerns with the IRS.
• Stephen J. Small's Perspective on H.R. 4 (PDF; 38 KB)
• Bill Hutton's Perspective on H.R. 4 (PDF; 52 KB)

The Independent Sector:

• What else is in H.R. 4 that directly affects charities?
• IRA Charitable Resource Center

The National Trust for Historic Preservation:

• Summary of Changes in H.R. 4 Relating to Preservation Easements (PDF; 119KB)
• Other Resources on Historic Preservation Easements

For Further Reading

• The Federal Tax Law of Conservation Easements (and 3rd Supplement) by Stephen J. Small
• Preserving Family Lands: Book I – Essential Tax Strategies for the Landowner by Stephen J. Small
• A Tax Guide to Conservation Easements by C. Timothy Lindstrom
• Tax Benefits and Appraisals of Conservation Projects, a Standards & Practices Curriculum text by Larry Kueter and Mark Weston
  This book is also available as a full featured course on The Learning Center, free to board, staff and volunteers of member land trusts and partner organizations and to individuals joining at the $250 level and above.