IRS Pursues Criminal Cases on Land-Tax Donation Deals
12 November 2019 - 11:25PM
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 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. But in practice, some landowners and
tax advisers have been using aggressive land valuations and
partnership structures to generate large tax deductions. 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."
Write to Richard Rubin at richard.rubin@wsj.com
(END) Dow Jones Newswires
November 12, 2019 18:10 ET (23:10 GMT)
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