Treasury and IRS Issue Notice Regarding Improper Deductions for
Conservation Easement Donations
IR-2004-86, June 30, 2004
WASHINGTON — Today the Treasury Department and the Internal
Revenue Service issued a notice to advise taxpayers that the IRS intends to
disallow improper charitable contribution deductions for transfers of easements
on real property to charitable organizations and for transfers of easements in
connection with purchases of real property from charitable organizations.
Taxpayers claiming improper charitable contribution deductions for such
transfers may be subject to accuracy-related penalties.
“We’ve uncovered numerous instances where the tax benefits
of preserving open spaces and historic buildings have been twisted for
inappropriate individual benefit,” said IRS Commissioner Mark W. Everson.
“Taxpayers who want to game the system and the charities that assist them
will be called to account.”
The IRS is aware that some taxpayers are claiming inappropriate
charitable contribution deductions for easement transfers that do not qualify
as qualified conservation contributions, or are claiming deductions for amounts
that exceed the fair market value of the donated easement.
In addition, the IRS is aware that some taxpayers are claiming
inappropriate charitable contribution deductions for cash payments or easement
transfers to charitable organizations in connection with the taxpayers’
purchases of real property.
The IRS may impose penalties on promoters, appraisers and other
persons involved in these transactions. In appropriate cases, the IRS may
challenge the tax-exempt status of the charitable organization, based on the
organization’s operation for a substantial nonexempt purpose or
impermissible private benefit.
One of the agency’s four service-wide enforcement priorities is
to discourage and deter non-compliance within tax-exempt and government
entities and misuse of such entities by third parties for tax avoidance and
other unintended purposes.
Related Item: Notice 2004-41 (PDF 64K) —
Charitable Contributions and Conservation Easements