Land Trust AllianceLand Trust Alliance

S. 170 / H.R. 1992

The Charitable Conservation Easement Program Integrity Act was first introduced in the U.S. House of Representatives on Nov. 28, 2017, and the U.S. Senate on Feb. 15, 2018. On Jan. 18, 2019, it was reintroduced in the Senate before being reintroduced in the House on March 29, 2019, to address an urgent problem for our community. This legislation requires your support.

What’s the issue?

Not all donations of conservation easements are created equal. While the vast majority are truly charitable endeavors, a few bad actors are promoting conservation easement donations as a way for investors to make a fast profit by gaining access to very large federal tax deductions. These transactions are essentially tax shelters and cannot be allowed to continue.

Is the abuse a big problem?

Yes. IRS data released in 2018 show that the average return ratio for the top 10 percent of these transactions enabled investors to claim, on average, deductions valued at more than eight times the amount of their original investment. And the bloated nature of these transactions appears to be showing up in the amount of federal deductions that taxpayers are claiming from the donation of conservation easements. In the most current data available, close to $27 billion in tax deductions were claimed from 2010 to 2017. In 2016 alone, $6 billion in apparently unwarranted charitable deductions was claimed by participants from just 248 transactions, while another $6.8 billion was claimed in 2017. Sources are here, here and here. Additional background is here.

Has anyone tried to shut down these tax shelters?

Yes. For years, the Land Trust Alliance has pursued a variety of public and private solutions. We have made clear through an advisory to our members, multiple articles in our quarterly magazine and the revised Land Trust Standards and Practices how our members can — and must — avoid these transactions. In December 2016, the IRS categorized these donations as “listed transactions.” This means promoters of and participants in these transactions must report their activities to the IRS or face fines. But despite these and other efforts, the problem persists.

Why does the problem persist?

Simply put, there are millions of dollars to be made from a single transaction. The promoters are highly motivated to keep the game going.

Is the media reporting on this problem?

Yes. Some of the most prominent examples are an investigation jointly published by ProPublica and Fortune magazine, a report by The Wall Street Journal (subscription required) and an article published by CNBC.com. Additionally, local news media such as NPR-affiliated KUAF in Arkansas, are increasingly focusing on this issue.

Publications specializing in tax and legal matters, including Bloomberg (subscription required) and Law360 (subscription required), have also reported on this issue. For a look at how one such outlet covered major developments in this matter, we recommend the Tax Notes articles below. These articles are republished here with permission.

What is Congress doing?

Members of Congress introduced a simple, smart and effective approach to address this problem. The bipartisan Charitable Conservation Easement Program Integrity Act will continue to reward honest philanthropy while shutting down those who would abuse this charitable incentive for profit. This bill is straightforward and narrowly drafted. It disallows a charitable deduction only when a profit is made in a short time from the donation of a conservation easement. To best target the scheme used for tax shelters and to ensure that legitimate conservation transactions are not impacted, the bill focuses on transactions that generate profits over a short period of time (three years or less) and also includes an exception for family partnerships.

Currently, H.R. 1992 has 33 sponsors: Reps. Cindy Axne (D-Iowa), Tom Cole (R-Oklahoma), Jason Crow (D-Colorado), Joe Cunningham (D-South Carolina), Madeleine Dean (D-Pennsylvania), Suzan DelBene (D-Washington), Antonio Delgado (D-New York), Veronica Escobar (D-Texas), Brian Fitzpatrick (R-Pennsylvania), Chuck Fleischmann (R-Tennessee), John Garamendi (D-California), Greg Gianforte (R-Montana), Vicente Gonzalez (D-Texas), Vicky Hartzler (R-Missouri), Chrissy Houlahan (D-Pennsylvania), Mike Kelly (R-Pennsylvania), Ron Kind (D-Wisconsin), Ann Kuster (D-New Hampshire), Tom Malinowski (D-New Jersey), Jim McGovern (D-Massachusetts), Jimmy Panetta (D-California), Chris Pappas (D-New Hampshire), Bill Pascrell (D-New Jersey), Ed Perlmutter (D-Colorado), Mark Pocan (D-Wisconsin), Jamie Raskin (D-Maryland), Brad Schneider (D-Illinois), Kim Schrier (D-Washington), Tom Suozzi (D-New York), Mike Thompson (D-California), Pete Vislosky (D-Indiana), Peter Welch (D-Vermont) and Ted Yoho (R-Florida).

In the Senate, S. 170 has 10 sponsors: Sens. Michael Bennet (D-Colrado), Cory Booker (D-New Jersey), Susan Collins (R-Maine), Steve Daines (R-Montana), Martin Heinrich (D-New Mexico), Doug Jones (D-Alabama), Chris Van Hollen (D-Maryland) Tim Kaine (D-Virginia), Jeanne Shaheen (D-New Hampshire) and Debbie Stabenow (D-Michigan).

In addition, in March 2019, the U.S. Senate Finance Committee led by Senator Chuck Grassley (R-Iowa) and Ron Wyden (D-Oregon) launched an investigation into 14 individuals associated with these abusive transactions. As part of the investigation, the Committee issued six subpoenas demanding recipients provide information about these transactions. You can learn more about this development here.

What is the IRS doing?

Since categorizing these donations as “listed transactions” in 2015, the IRS has worked aggressively to seek justice and protect taxpayers. Over the last several years, the IRS has continued to provide the U.S. Senate Finance Committee with data illustrating the continuing cost of abuse. Additionally, in November 2019, the agency announced increased enforcement actions. In June 2020, the agency issued a settlement offer to certain taxpayers involved in syndicated conservation easement transactions. Shortly thereafter, during a June 2020 Senate Finance Committee hearing, IRS Commissioner Charles Rettig confirmed the agency’s commitment to halting the abuse and spoke about the need for legislation.  

What is the U.S. Department of Justice doing?

Like Congress and the IRS, the U.S. Department of Justice is taking forceful action to crack down on abuse. In December 2018, the Justice Department filed a civil suit against six individuals associated with these abusive transactions. You can learn more about this development here.

Would all partnerships be impacted?

Absolutely not. As noted above, family partnerships that are charitable-minded have nothing to fear. The bill isn't looking to stop deals involving land that’s been family-owned for generations and seen a fair rise in value. Rather, the bill addresses deals that are promoted as a way to generate a profit in a short time. Deals where land values rise suspiciously almost overnight are what will be thwarted — not partnerships.

If the bill doesn't pass, what would happen?

As these transactions continue, they pose a profound threat to the land trust community. It’s easy to imagine a scenario in which Congress could reduce or even erase federal tax incentives for conservation easement donations. We cannot let that happen. The Charitable Conservation Easement Program Integrity Act might be our last opportunity to stop this from happening.

Yikes! What can I do?

We need your help now to encourage Congress to pass these bills. Please write your members of Congress and ask him or her to support — or, better yet, cosponsor — legislation to stop people from abusing the conservation easement deduction. The time to act is now.

To identify and contact your member of Congress, click here and enter your ZIP code in the Find Your Representative tool. Search results will provide you with a representative’s email and website. While an email in your own words would be most effective, you can use the following as your starting point:

Dear Senator / Representative [NAME],

I'm writing today to ask for your support of S. 170 / H.R. 1992, also known as the Charitable Conservation Easement Program Integrity Act.

I believe strongly in private land conservation and I appreciate the many good economic, health and environmental benefits that land conservation gives us. Land conservation is something that Congress has rightly chosen to support in the past by granting limited financial rewards to honest donors. But I know now that a few bad actors are abusing the system that grants those rewards. This should not be allowed to continue. At the same time, well-intentioned donations should not be hindered. This bill achieves both goals.

Please support S. 170 / H.R. 1992 and please consider becoming a cosponsor. This bill is extremely important to me.

Thank you.

What else can I do?

Help demonstrate the importance of the federal tax incentive to members of Congress while you build — or strengthen — your land trust’s relationship with local media. Whenever possible, highlight good examples of how federal tax incentives for conservation easement donations are being used locally. Current and recent examples are strongest, of course, but have past examples ready, too.

More broadly, there are other steps you can take to make your land trust more important to local media. Make sure they’re aware of the work your organization is doing, whether that’s finalizing a new easement or offering events that could be listed in your newspaper’s community calendar. Invite the newspaper’s publisher to visit conserved lands and help build familiarity with your land trust’s work. And be sure your land trust is in their rolodex, so to speak, for the next time they’re reporting on land conservation. The more that media know your land trust is a force for good, the more your entire community benefits.