Tax Shelters
The improper use of federal income tax deductions for both land and for conservation easements donations can involve potentially abusive tax shelters. To help land trusts identify and mitigate any questionable transactions, multiple resources are available here for reference and guidance.
Please note these general resources are not intended to replace the expert and individualized advice land trusts should obtain regarding their transactions from external legal and tax advisors. Because the Land Trust Alliance does not oversee or review individual transactions conducted by member land trusts, land trusts should contact legal professionals with any questions regarding any transactions.
Important Advisory
Please use this advisory for guidance regarding potentially abusive federal income tax deduction transactions. Also, view this flow chart as guidance to determine if you need to use the tax shelter advisory.
Joint Letters of Support
Read the letter in support of S. 170, the Charitable Conservation Easement Program Integrity Act, sent to Senators Daines and Stabenow from the Land Trust Alliance and the following organizations: American Society of Farm Managers and Rural Appraisers, Appalachian Trail Conservancy, Appraisal Institute, Ducks Unlimited, Partnership of Rangeland Trusts, Pheasants Forever Quail Forever, The Conservation Fund, The Nature Conservancy and The Trust for Public Land.
Frequently Asked Questions about Tax Shelters
What does IRS Notice 2017-10 mean for land trusts?
For almost all conservation donations, IRS Notice 2017-10 will not affect donors or land trusts. The notice specifically exempts land trusts from having to report simply because the land trust accepted an easement or land donation. Moreover, the problematic transactions described in the notice are rare, and very few Alliance member land trusts have ever seen one of these transactions, let alone participated in one. Learn more about what IRS Notice 2017-10 means for land trusts.
What does the Notice mean for landowners?
The notice has no effect on landowners making a traditional donation of land or a traditional donation of a conservation easement. It imposes no new requirements for — and brings no more scrutiny to — such donations. Audits of traditional conservation donations remain a possibility, but audits are no more or less likely now. Learn more about what IRS Notice 2017-10 means for landowners.
What is potentially questionable about the use of land or conservation easement tax deductions as tax shelters?
Federal tax benefits resulting from the donation of a conservation easement or land cannot be sold or transferred by one taxpayer to another.
What is the Alliance’s position on transactions involving tax shelter use of conservation easement or land donation tax deductions?
The Alliance stands against such tax schemes and is proactively working to educate its members about the serious legal issues associated with misallocations and overvaluation. By watching for warning signs, land trusts can better evaluate when to walk away from such transactions.
The Alliance has crafted legislation that deters abuses of section 170h of the tax code, upholds the legality of easement donations and helps prevent well-intentioned easement donors from being subjected to adverserial, expensive and intrusive audits. Learn more about the options under consideration to include in the legislation.
What are the warning signs?
Warning signs include instances where consultants or facilitators instead of landowners or their attorneys manage the transaction; where an egregious overvaluation of the easement or land exists; and where short-term investors receive a tax benefit that is much larger than their investment.
Are any Alliance members known to have participated in a transaction involving tax shelter use of land or conservation easement donation tax deductions?
The Alliance recognizes that a few of its more than 1,000 members may have unwittingly been involved with land and conservation easement donations involving these tax shelters. That is why we recently issued expanded guidance for land trusts and are increasing our education efforts.
Does the Alliance have ethical guidance in place regarding tax shelters and conservation easement or land donation tax deductions?
The Alliance and its members are committed to operating with the highest ethical principles, a commitment represented in part by Land Trust Standards and Practices. All Alliance members are required to adopt the Standards. The Alliance encourages land trusts, which are committed to acting for the larger public good, to use common sense and care when examining each transaction in the context of their missions.
Can’t the Alliance just veto or overrule any land trust transaction that is suspect?
Because the Alliance does not oversee or review individual transactions conducted by member land trusts, land trusts should contact a legal professional with any questions regarding any transactions.
I’m a member of the media and I need to know more about this issue. Whom can I contact?
For more information or to schedule an interview with an Alliance expert on this issue, please contact Vice President of Communications Elizabeth Ward at eward@lta.org or 202-638-5658 or Media Relations Manager Joshua Lynsen at jlynsen@lta.org or 202-800-2239 (desk) or 202-570-3304 (cell).
