IRS Zeroes in on Obscure Tax Break for Rich Property Owners
The Internal Revenue Service (IRS) wants to eliminate a tax break that financially has benefited wealthy landowners, but also preserved historic buildings and open lands. That’s why getting rid of the tax deduction may prove difficult, what with conservationists and rich individuals teaming up to fight the change.
Under a provision in the tax code, landowners can deduct millions of dollars from their tax bills if they own—and don’t alter—the historic structures they own. The same applies to large tracts of land protected through conservation easements, which environmental groups often like.
These conservation easements saved 2,933 taxpayers more than $760 million in 2010, according to IRS data.
“While that’s down from a $2.2 billion peak in 2007, the conservation easement break is more valuable than ever this year because of tax-rate increases for top earners and a temporary incentive that expires” at the end of this year, Richard Rubin wrote at Bloomberg.
The tax break is just one of hundreds in the tax code that lawmakers are reviewing as part of a major overhaul in the works.
Dean Zerbe, who examined easement donations as a Republican aide on the Senate Finance Committee, told Bloomberg that the easements “overwhelmingly” help “high-end individuals and provide little to no benefit to the public.”
He added: “I don’t know if I could design a tax break that’s more targeted toward the millionaire set.”
One example is New Orleans’ Ritz-Carlton Hotel, whose owners sought a $7.4 million tax deduction for not altering the building’s historic façade. The IRS claimed the value was 15% of that figure, and an ensuing legal battle has raged for 16 years.
Many wildlife groups and conservationists don’t want the easement donation eliminated, fearing its loss will leave rich people with less incentive to preserve important structures or undeveloped lands.
However, not all conservation easements are beloved by environmentalists.
In Virginia, some of these easements have been used to support oil and gas drilling, including the kind that utilizes hydraulic fracturing (aka fracking), which critics say results in groundwater pollution.
Tax deductions for conservation easements were first permitted by Congress in 1976 and codified in 1980. Various congressional modifications and court rulings resulted in the rules being tightened in 2006. But in spite of that, the tax break remains intact for “golf-course developers who promise not to build houses on fairways, owners of historic townhouses who pledge not to build skyscrapers, and rural landowners who donate development rights on 20-acre backyards they don’t intend to sell,” wrote Bloomberg’s Rubin.
To Learn More:
IRS Cracks Down on Breaks in Land of Rich Americans (by Richard Rubin, Bloomberg)
Fracking May Occur on Protected Lands (by Rusty Dennen, Fredericksburg Free Lance-Star)
- Top Stories
- Unusual News
- Where is the Money Going?
- U.S. and the World
- Appointments and Resignations
- Latest News
- Assistant Attorney General for the Office of Legal Counsel: Who Is Steven A. Engel?
- Secretary of the Navy: Who Is Philip Bilden?
- Director of the United States Attorneys: Who is Monty Wilkinson?
- Chief of U.S. Border Patrol: Who Is Ron Vitiello?
- Chairman of the U.S. Parole Commission: Who is J. Patricia Wilson Smoot?