Since the early 2000s, the Internal Revenue Service has been fighting to undermine and ultimately nullify tax incentives put in place by Congress to reward taxpayers for conserving private land.
The IRS has used its auditing power as a cudgel, unilaterally changed the rules, and even taken taxpayers to court, where the agency has lost time and again. Now, turning to scare-tactics as a last resort, the IRS is threatening to bring criminal cases.
The prolonged intimidation campaign shows just how far the IRS is willing to go when it sees taxpayer dollars it thinks it should be entitled to, especially at a time when tax revenues are up. However, the agency’s latest escalation — especially considering its promise to get back on track after having to apologize for targeting conservative groups — should be a wakeup call to private taxpayers that the IRS is falling back on old habits.
The incentives in question are part of a program designed to encourage the voluntary donation of conservation easements, a tool established nearly 40 years ago.
Here’s how it works: A landowner whose property contains important ecological features can place an easement — essentially rules that prohibit development in perpetuity — on that property and donate the easement to a qualified nonprofit land trust. The landowner can claim a charitable deduction on the donation based on how much value is given up by choosing to conserve rather than develop the property.
Nobody denies that conservation easements have dramatically increased private land conservation over the last four decades. More than 27 million acres — roughly the equivalent of the entire state of New York — are currently protected under conservation easements.
This wave of voluntary, private conservation has brought with it a variety of significant environmental benefits.
For example, easements help preserve the natural tree cover, which improves air and water quality, shrinks energy costs, and helps prevent damaging runoff and flooding. Easements on other types of commercially viable property — such as land rich in valuable minerals and ripe for mining — often protect wildlife habitats and help preserve the natural process of carbon sequestration that experts say can help mitigate the effects of climate change.
In other words, the program, as designed by Congress to promote private conservation, is working. But to the IRS, whose authority ought to be limited to the tax laws Congress enacts, it’s seen as a pesky limit on the agency’s ability to collect. That’s because private taxpayers who voluntarily decide to place an easement on a property instead of developing it can claim a tax deduction based on the potential value of the property if it were developed.
Whether or not the law needs reform and what those reforms should look like are questions for Congress to answer. And they are in the process of doing just that, as the Senate Finance Committee is looking into rare cases of potential abuse of conservation easements, which, of course, should be prevented.
By threatening criminal cases, the IRS is no doubt hoping to make enough of a stink that Congress reforms the law. Threatening criminal cases also sends a clear warning to landowners who might be thinking about conserving their property: Proceed at your own risk.
What kind of message is that to send to landowners who, instead of electing to put a shovel in the ground and develop their valuable land, voluntarily decide to place permanent restrictions on their land in the name of conservation?
The reality is, the IRS has no business attempting to tip the scales on what should be a robust debate among policymakers about how to most effectively fortify a 40-year-old program that has done a lot of good in the eyes of Democrats and Republicans alike.
John Burnett is the Managing Director and Founder of 1 Empire Group consulting firm and a business executive with over 20 years of experience in the financial services and energy pricing industries. A veteran of politics, John is an official with the New York State Republican Party and ran for New York City Comptroller in 2013. An adjunct professor at Hampton University and New York University, John’s editorials on business, the economy, policy, and politics have appeared in HuffPost, U.S. News and World Report, and Washington Examiner. He is also a frequent guest commentator on Fox News, Fox Business News, New York 1, and PIX 11 News. John holds a B.S. with honors from New York University and an MBA from The Johnson School of Management at Cornell University. To read more of his reports — Click Here Now.
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