IRS Pursues Criminal Cases on Land-Tax Donation Deals -- Updated
November 12 2019 - 9:19PM
Dow Jones News
By Richard Rubin
WASHINGTON -- The Internal Revenue Service is pursuing criminal
cases surrounding land-conservation deals that have emerged as a
focus of the agency's enforcement efforts, the tax agency said on
Tuesday.
The involvement of IRS criminal investigators marks the latest
expansion of the tax agency's yearslong attempts to curb so-called
syndicated conservation easements.
The IRS "now intends to pull out the big guns to uncover and
prosecute criminal violations," said Nancy McLaughlin, a University
of Utah law professor who studies conservation easements. "This is
great news for federal taxpayers and for conservation, both of
which suffer when billions of dollars are wasted on these abusive
transactions."
The IRS didn't disclose details about the number of potential
criminal cases, but said its combined civil and criminal efforts
include billions of dollars in deductions and thousands of
investors in the deals.
"Abusive syndicated conservation easement transactions undermine
the public's trust in private-land conservation and defraud the
government of revenue," IRS Commissioner Charles Rettig said in a
Tuesday statement. "Putting an end to these abusive schemes is a
high priority for the IRS."
U.S. tax law lets landowners donate easements that limit
development on their property through permanent deed restrictions
aimed at protecting sensitive habitats and meeting other
environmental aims. They can then claim charitable-contribution
deductions for the diminished value of the land.
Conservation groups and bipartisan majorities of Congress
support that basic concept and say it has proven useful in
preserving land in fast-growing areas. But in practice, some
landowners and tax advisers have been using aggressive land
valuations and partnership structures to generate large tax
deductions and investment opportunities marketed to wealthy
individuals. In some deals, high-income people can invest $1 and
claim $4 or more in deductions within months, enough to turn a
quick profit on the tax break. Those deals have been particularly
popular in the southeastern U.S.
The IRS has been attacking such easement donations for several
years, auditing donors and pursuing litigation in Tax Court.
In late 2016, the government began requiring taxpayers and
promoters in certain deals to flag the transactions on tax returns,
making it easier for the IRS to identify and audit them. Those
red-flagged deals include transactions where the deduction is at
least 2.5 times the investment. The IRS in 2018 made easements a
priority for the agency's large business and international
division.
Also last year, the IRS filed suit against easement promoters in
Georgia to block them from preparing tax returns. That case is
pending.
Separately, the bipartisan leaders of the Senate Finance
Committee are investigating conservation-easement promoters.
"We're encouraged to see the IRS increase enforcement activity
on abusive conservation easements," Andrew Bowman, president and
CEO of the Land Trust Alliance, said in a statement.
"At the same time, we hope the agency is careful not to sweep up
well-meaning philanthropists in actions that target wrongdoers," he
added.
Robert Ramsay, who leads Partnership for Conservation, a group
that has advocated the use of investment vehicles in easement
deals, said there are limited instances of abuse that can be
addressed mostly by changing appraisal standards and offering
clearer guidance.
Write to Richard Rubin at richard.rubin@wsj.com
(END) Dow Jones Newswires
November 12, 2019 21:04 ET (02:04 GMT)
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