From the Minneapolis Star Tribune: Editorial
The U.S. Senate Finance Committee must be careful to separate the baby from the bath water as it ponders changes in tax treatment of conservation easements this summer.
There is cause to believe some landowners have abused the laws that have allowed them, for three decades or so, to give up specified development rights in return for a tax break sized to the property value they forfeit. The favored anecdotes concern easements obtained for golf courses, back yards and the like.
But there is deep uncertainty about the extent of those abuses, as the committee's hearing established last week, and sharp disagreement about the best response. Chairman Charles Grassley, an Iowa Republican, says he hasn't decided which approach he will favor. But he has entertained proposals to drastically reduce the allowable deductions, which would punish the innocent along with the guilty -- and deal a disastrous blow to what has become perhaps the nation's most important tool for land preservation.
His committee's interest in the subject was piqued by series of Washington Post articles in 2003 that documented an embarrassing range of management lapses and self-serving transactions at The Nature Conservancy (TNC). This page shared in the dismay over revelations that this organization had, for example, permitted oil drilling in a Texas preserve and allowed many transactions involving its board members, trustees and corporate donors.
But as Grassley acknowledged at the hearing, TNC has already undertaken significant, voluntary reforms in response to the disclosures. These include setting new guidelines as to what can or cannot be done on lands designated for conservation, strengthening its accounting and reporting practices, clarifying its operating principles and conflict-of-interest rules, and establishing new compliance reviews and whistleblower protections. We are encouraged by an independent examiner's finding that the organization is making "a good faith continuous review" of all activities "to assure the public of TNC's integrity in carrying out its important mission."
That mission, shared by other land-trust groups, is to preserve open space, wildlife habitat and recreation acreage in the face of ever-advancing development. For many landowners, rich in property but not in cash, the easement and associated tax break may be their only way to shield the land they love, while sharing some of its value with the public. The lost tax revenue is minimal compared with the public cost if government had to buy the land.
Needless to say, easements would become much less attractive if the Senate were to accept some recommendations of the Joint Committee on Taxation -- cutting the allowable deduction by 70 percent, disallowing any deduction of easements on land where the taxpayer lives, or calculating easement value based on the property's original purchase price.
In addition to its ongoing audit of The Nature Conservancy, the Internal Revenue Service has established a special unit to look for patterns of abuses in easement-related deductions. No doubt it will find some inflated valuations, fictional conservation projects and other trickery.
But surely these can be prevented with firmer enforcement of the laws already on the books -- and without discouraging the legitimate easements that have kept so much green land asphalt-free.
