The IRS recently did something federal agencies almost never do: admit their approach wasn’t working.
They conceded that the approach to the Conservation Easement program tax assessments is flawed and often unfair.
In a press release last month, the IRS rightly stopped its assault — at least for now — on more than a thousand separate groups nationwide, comprised of about 250,000 individuals, who have participated in land conservation easements. The agency decided to withdraw its own arbitrary deadlines under its punitive settlement initiative for these donations that taxpayers, relying on qualified appraisals and professional advice, believed complied with federal law.
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This longstanding program provides tax incentives for people who have put hundreds of thousands of acres of pristine forest, ranch, and farmland into a “conservation easement” — preventing it from ever being developed. Despite some of its flaws, including fraudulent property assessments, the program has long been supported by Republicans and Democrats.
The IRS made a concession that standardized, one-size-fits-all settlement offers “are not well suited to the full range of conservation easement cases.” But it didn’t stop there. The creation of the new Office of Conservation Easements was also announced — giving hope to many that the wrongs of the past will finally be addressed in a deliberate, fair manner.
One of this administration’s best, Treasury Secretary Scott Bessent, deserves credit for his willingness to take a pause, look closer at these complex cases, and potentially implement corrective action to address serious questions about a law that has been around for decades. This was not an easy move to make, but it is the right one.
For decades, more than a quarter of a million American taxpayers have preserved pristine land and prevented development through legal conservation easement donations on the professional advice of expert geologists, land managers, thousands of credentialed lawyers, CPAs, and certified appraisers — to name a few. But those law-abiding taxpayers, who listened to the advice of experts, have been treated by non-experts at the IRS as a single undifferentiated class of common criminals.
The IRS has been threatening billions of dollars in tax bills — even to honest taxpayers who played by the rules.
It’s become a political football, and a fair resolution needs to be reached quickly.
The Tax Court’s docket remains intact and backlogged, and if hearings started today, they wouldn’t be completed for about 10 years. Knowing this, the IRS is still pushing taxpayers to make expensive court appearances.
Despite the creation of the new Office of Conservation Easements to adjudicate these cases, program participants continue to move toward trial with no fair settlement in sight. These cases routinely produce inconsistent outcomes in court, with judges sustaining a large share of a claimed deduction in one case while all but zeroing out comparable claims in others. The taxpayers are still caught in a game of Russian roulette.
Detailed reviews of these cases show valuations are often done behind a desk at the IRS by people who never visit the property in question, nor do they possess any knowledge or expertise in the field in which they are operating.
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The Treasury is rightly trying to root out fraudulent land appraisals, as they should.
But they are casting a very wide net that too often ensnares both the fraudsters and the law-abiding taxpayers in the same net. The good news is that the Office of Conservation Easements has the potential to look past the IRS’s faulty, deeply flawed, one-size-fits-all, foregone conclusions model and instead build a systematic process to evaluate property value based on objective and verifiable data on land values.
For all the program’s shortcomings, Congress and federal government agencies spent sixty years building the conservation easement program and encouraging Americans to use it. In fact, when the issue was revisited several times along the way, the tax deductions were not stopped; they were enhanced.
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By all means, go after those who have defrauded taxpayers. But fix the program. By all means, fix the land appraisal system so that the tax cheats can be exposed. But stop punishing those who played by the rules.
This can be achieved by using independent valuation and appraisal specialists, land-use and conservation experts, geologists, and other parties with direct, ground-level familiarity with the real value of properties put into conservation. This would help expose bad actors who committed fraud and protect those taxpayers who followed the law.
Too often the Biden administration weaponized the IRS by adding tens of thousands of new agents. Eliminating what supporters called IRS witch hunts was a clear promise that Trump campaigned on. This is a good opportunity to stand and deliver on tax fairness.
It’s good policy and good politics.
