introduction to conservation easements: statutory requirements & qualified ... · 2020. 1....
TRANSCRIPT
![Page 1: Introduction to Conservation Easements: Statutory Requirements & Qualified ... · 2020. 1. 17. · Deed of Easement •Describes the conservation purpose(s), restrictions, and permissible](https://reader036.vdocument.in/reader036/viewer/2022071510/612f776e1ecc5158694376af/html5/thumbnails/1.jpg)
Introduction to Conservation
Easements: Statutory Requirements & Qualified Conservation
Contribution
January 2020 Stephen Rothandler Karin Gross Alex Nicholaides Marc Caine
![Page 2: Introduction to Conservation Easements: Statutory Requirements & Qualified ... · 2020. 1. 17. · Deed of Easement •Describes the conservation purpose(s), restrictions, and permissible](https://reader036.vdocument.in/reader036/viewer/2022071510/612f776e1ecc5158694376af/html5/thumbnails/2.jpg)
Conservation Easement
• For purposes of section 170(h), a deductible conservation easement is an easement granted for preservation of land areas for outdoor recreation, protection of habitat, preservation of open space, or preservation of historically important land area or buildings
• Permanent restrictions on use of land or buildings
![Page 3: Introduction to Conservation Easements: Statutory Requirements & Qualified ... · 2020. 1. 17. · Deed of Easement •Describes the conservation purpose(s), restrictions, and permissible](https://reader036.vdocument.in/reader036/viewer/2022071510/612f776e1ecc5158694376af/html5/thumbnails/3.jpg)
Deed of Easement
• Describes the conservation purpose(s), restrictions, and permissible use of the property.
• To be effective it must contain legally binding restrictions enforceable by the donee organization. Treas. Reg. § 1.170A-14(g)(1).
• Enforceable, e.g. by recordation in land records of the jurisdiction where the property is located.
![Page 4: Introduction to Conservation Easements: Statutory Requirements & Qualified ... · 2020. 1. 17. · Deed of Easement •Describes the conservation purpose(s), restrictions, and permissible](https://reader036.vdocument.in/reader036/viewer/2022071510/612f776e1ecc5158694376af/html5/thumbnails/4.jpg)
Charitable Contribution Section 170(c)
• Contribution or gift to or for the use of a qualifying organization
• Made with charitable intent and without receipt of adequate consideration. Treas. Reg. § 1.170A-1(h)
• Made without expectation of a direct or indirect benefit to the donor (no quid quo pro)
![Page 5: Introduction to Conservation Easements: Statutory Requirements & Qualified ... · 2020. 1. 17. · Deed of Easement •Describes the conservation purpose(s), restrictions, and permissible](https://reader036.vdocument.in/reader036/viewer/2022071510/612f776e1ecc5158694376af/html5/thumbnails/5.jpg)
Amount of Deduction Section 170(b)
• For charitable contributions of capital gain property, generally limited to 30% of an individual’s contribution base. Section 170(b)(1)(B).
• Contribution base of an individual is generally adjusted gross income. Section 170(b)(1)(G).
• An individual may deduct a qualified conservation easement contribution up to 50% of the individual’s contribution base. Section 170(b)(1)(E)(i).
• Special rule (100%) for qualified farmers and ranchers. Section 170(b)(1)(E)(iv).
![Page 6: Introduction to Conservation Easements: Statutory Requirements & Qualified ... · 2020. 1. 17. · Deed of Easement •Describes the conservation purpose(s), restrictions, and permissible](https://reader036.vdocument.in/reader036/viewer/2022071510/612f776e1ecc5158694376af/html5/thumbnails/6.jpg)
Carryovers
• In general, taxpayers (both individuals and corporations) can carry over unused charitable contributions for up to 5 years. Section 170(d)(1).
• For conservation easements, the carryover period is 15 years. Section 170(b)(1)(E)(ii).
![Page 7: Introduction to Conservation Easements: Statutory Requirements & Qualified ... · 2020. 1. 17. · Deed of Easement •Describes the conservation purpose(s), restrictions, and permissible](https://reader036.vdocument.in/reader036/viewer/2022071510/612f776e1ecc5158694376af/html5/thumbnails/7.jpg)
Partial Interest Rule Section 170(f)(3)
• In general, no charitable contribution deduction shall be allowed for a contribution of a partial interest, which is an interest that consists of less than the donor’s entire interest in the property. Sec. 170(f)(3)
• Section 170(f)(3)(B)(iii) permits a deduction for a partial interest provided that it is a qualified conservation contribution.
![Page 8: Introduction to Conservation Easements: Statutory Requirements & Qualified ... · 2020. 1. 17. · Deed of Easement •Describes the conservation purpose(s), restrictions, and permissible](https://reader036.vdocument.in/reader036/viewer/2022071510/612f776e1ecc5158694376af/html5/thumbnails/8.jpg)
Qualified Conservation Contribution Section 170(h)(1)
• Qualified real property interest
• Granted in perpetuity (Section 170(h)(2)(C))
• Qualified organization
• Exclusively for conservation purposes
![Page 9: Introduction to Conservation Easements: Statutory Requirements & Qualified ... · 2020. 1. 17. · Deed of Easement •Describes the conservation purpose(s), restrictions, and permissible](https://reader036.vdocument.in/reader036/viewer/2022071510/612f776e1ecc5158694376af/html5/thumbnails/9.jpg)
Qualified Real Property Interest Section 170(h)(2)
Any of the following interests in real property:
• Transfer of an entire interest in property except for qualifying mineral interest
• A remainder interest in real property
• A restriction on the use of the real property granted in perpetuity.
• Easement, conservation restriction, and perpetual conservation restriction have the same meaning. (Treas. Reg. § 1.170A-14(b)(2)).
![Page 10: Introduction to Conservation Easements: Statutory Requirements & Qualified ... · 2020. 1. 17. · Deed of Easement •Describes the conservation purpose(s), restrictions, and permissible](https://reader036.vdocument.in/reader036/viewer/2022071510/612f776e1ecc5158694376af/html5/thumbnails/10.jpg)
Qualified Organization Section 170(h)(3)
• Generally, a qualified organization is a public charity described in section 501(c)(3) or a government unit described in section 170(b)(1)(A)(v) and (vi).
![Page 11: Introduction to Conservation Easements: Statutory Requirements & Qualified ... · 2020. 1. 17. · Deed of Easement •Describes the conservation purpose(s), restrictions, and permissible](https://reader036.vdocument.in/reader036/viewer/2022071510/612f776e1ecc5158694376af/html5/thumbnails/11.jpg)
Granted in Perpetuity Section 170(h)(2)(C)
• Perpetuity is a fundamental requirement.
• A CE must be granted in perpetuity.
![Page 12: Introduction to Conservation Easements: Statutory Requirements & Qualified ... · 2020. 1. 17. · Deed of Easement •Describes the conservation purpose(s), restrictions, and permissible](https://reader036.vdocument.in/reader036/viewer/2022071510/612f776e1ecc5158694376af/html5/thumbnails/12.jpg)
Protected in Perpetuity Section 170(h)(5)(A)
• Second perpetuity requirement.
• A qualified conservation contribution must be exclusively for conservation purposes. Section 170(h)(1)(C).
• A contribution shall not be treated as exclusively for conservation purposes unless the conservation purpose is protected in perpetuity. Defined in Section 170(h)(5)(A).
![Page 13: Introduction to Conservation Easements: Statutory Requirements & Qualified ... · 2020. 1. 17. · Deed of Easement •Describes the conservation purpose(s), restrictions, and permissible](https://reader036.vdocument.in/reader036/viewer/2022071510/612f776e1ecc5158694376af/html5/thumbnails/13.jpg)
Enforceable in Perpetuity Treas. Reg. § 1.170A-14(g)
• Donor’s interest in the property must be subject to legally enforceable restrictions (e.g., deed recordation) that will prevent uses of the property that are inconsistent with the conservation purposes of the donation.
![Page 14: Introduction to Conservation Easements: Statutory Requirements & Qualified ... · 2020. 1. 17. · Deed of Easement •Describes the conservation purpose(s), restrictions, and permissible](https://reader036.vdocument.in/reader036/viewer/2022071510/612f776e1ecc5158694376af/html5/thumbnails/14.jpg)
Conservation Purposes Section 170(h)(4)(A)
• Outdoor recreation • Protection of a natural habitat • Preservation of open space (must yield significant
public benefit) -for scenic enjoyment of general public, or -pursuant to a clearly delineated Federal, State, or local governmental conservation policy
• Historically important land area or certified historic structure
• Donor must satisfy one or more of these purposes.
![Page 15: Introduction to Conservation Easements: Statutory Requirements & Qualified ... · 2020. 1. 17. · Deed of Easement •Describes the conservation purpose(s), restrictions, and permissible](https://reader036.vdocument.in/reader036/viewer/2022071510/612f776e1ecc5158694376af/html5/thumbnails/15.jpg)
5 Key Documents for Audit
• Deed of Easement
• CWA
• Appraisal
• Form 8283
• Baseline Documentation Report
![Page 16: Introduction to Conservation Easements: Statutory Requirements & Qualified ... · 2020. 1. 17. · Deed of Easement •Describes the conservation purpose(s), restrictions, and permissible](https://reader036.vdocument.in/reader036/viewer/2022071510/612f776e1ecc5158694376af/html5/thumbnails/16.jpg)
Deed of Easement
![Page 17: Introduction to Conservation Easements: Statutory Requirements & Qualified ... · 2020. 1. 17. · Deed of Easement •Describes the conservation purpose(s), restrictions, and permissible](https://reader036.vdocument.in/reader036/viewer/2022071510/612f776e1ecc5158694376af/html5/thumbnails/17.jpg)
Contemporaneous Written Acknowledgment
![Page 18: Introduction to Conservation Easements: Statutory Requirements & Qualified ... · 2020. 1. 17. · Deed of Easement •Describes the conservation purpose(s), restrictions, and permissible](https://reader036.vdocument.in/reader036/viewer/2022071510/612f776e1ecc5158694376af/html5/thumbnails/18.jpg)
Appraisal
![Page 19: Introduction to Conservation Easements: Statutory Requirements & Qualified ... · 2020. 1. 17. · Deed of Easement •Describes the conservation purpose(s), restrictions, and permissible](https://reader036.vdocument.in/reader036/viewer/2022071510/612f776e1ecc5158694376af/html5/thumbnails/19.jpg)
Form 8283
![Page 20: Introduction to Conservation Easements: Statutory Requirements & Qualified ... · 2020. 1. 17. · Deed of Easement •Describes the conservation purpose(s), restrictions, and permissible](https://reader036.vdocument.in/reader036/viewer/2022071510/612f776e1ecc5158694376af/html5/thumbnails/20.jpg)
Baseline Documentation Report
![Page 21: Introduction to Conservation Easements: Statutory Requirements & Qualified ... · 2020. 1. 17. · Deed of Easement •Describes the conservation purpose(s), restrictions, and permissible](https://reader036.vdocument.in/reader036/viewer/2022071510/612f776e1ecc5158694376af/html5/thumbnails/21.jpg)
Questions?