On December 29, 2022, President Joe Biden signed into law the Charitable Conservation Easement Integrity Act becoming effective that date forward. This legislation has been a priority for the Land Trust Alliance for years in an effort to halt abuse and shut down a tax avoidance scheme that took advantage of the federal conservation easement tax incentive. The legislation was rolled into the omnibus spending bill through the SECURE 2.0 Act of 2022.
This new legislation has several impacts for landowning partnerships such as LLCs and S Corps in considering a donation of a conservation easement. Mainly, the Act disallows the charitable deduction when the amount claimed is 2.5 times the sum of the entire basis unless the partnership has owned the property for more than 3 years or the partnership is owned by members of a family.
Additionally, the Act allows taxpayers to correct “defects” in an easement deed through a 120-day safe harbor period to address matters that the IRS had ruled to disallow the charitable contribution because of deed language pertaining to extinguishment and boundary line adjustments.
Fortunately, for the conservation easements that CRLC holds neither scenario was applicable. However, it is important that such legislation be enacted to curtail any abuse of the program that is essential to preserving our land and water for future generations.