Organizers of land-conservation deals the IRS considers abusive tax shelters spent years lobbying amid an agency
The conflict involves promoters who organize syndicates that buy land, donate easements to leave it undeveloped, and generate large charitable tax deductions. IRS Commissioner Chuck Rettig claims the deals, known as syndicated conservation easements, inflate deductions based on overvalued appraisals. The IRS questioned $21 billion in deductions from 2016 to 2018 and is auditing 28,000 taxpayers.
Democrats in the U.S. Senate were considering whether to include restrictions on syndicated easements in the $1.75 trillion Build Back Better Act supported by President Joe Biden. But promoters of the land deals are pushing hard with Congress to keep the new measures out of the bill, which
“We’ve worked an awful long time to defeat this,” said Robert Ramsay, president of Partnership for Conservation, a nonprofit that represents several deal promoters fighting the Internal Revenue Service. Ramsay said his group wants Congress to “advance sensible and equitable solutions to enhance the integrity of all conservation easements and safeguard market-based incentives” to preserve habitats and land.
Ramsay’s group was among those in the syndicated-easement business that have spent a combined $9 million on lobbyists over the past four years, records show. That includes hiring by EcoVest Capital Inc., which is fighting a U.S. lawsuit claiming it made fraudulent statements in deals that led to $3 billion in tax deductions.
Promoters also gave money to a
EcoVest and Partnership for Conservation hired lobbyists at six firms including Covington & Burling and Holland & Knight, government records show. Some of them previously worked in White House jobs or at the IRS, or on tax-writing and appropriations committees in Congress, or in political jobs in Georgia, where many syndicated-easement promoters are based.
Ornstein-Schuler, which
A spokesman for the IRS declined to comment.
The chief adversary of the deal promoters in the current legislative fight is the nonprofit
The alliance says 296 syndicated entities claimed $9.2 billion in deductions in 2018. By comparison, non-syndicated landowners claim about $1 billion in deductions for 2,000 to 2,500 donations annually, the nonprofit says.
“The IRS and Treasury Department have stepped up their efforts to halt this abuse,” said Andrew Bowman, alliance president and chief executive officer. “It is time for Congress to do its part.”
The Senate Finance Committee issued a report last year that was highly critical of syndicated conservation easements. Committee Chairman Ron Wyden, an Oregon Democrat, is among the lawmakers pushing to pass the Charitable Conservation Easement Program Integrity Act.
“There have been loads of lobbyists running around standing up for policies that really flagrantly abuse” the purpose of conservation easements, Wyden said.
The proposed law cleared the House Ways and Means Committee this year but didn’t make it into the House version of Biden’s $1.75 trillion spending bill. The obstacle was Sen. Kyrsten Sinema, an Arizona Democrat. Her opposition has led to tense negotiations in an evenly divided Senate. Sinema’s office didn’t reply to requests for comment.
While there are some GOP supporters of restrictions on syndicated easements, they face intense political pressure to reject Biden’s bill. Senate Republicans Steve Daines of Montana and Chuck Grassley of Iowa said they might vote for an amendment, but would join the rest of their GOP colleagues in rejecting the overall spending package.
At the same time, another bill sponsor, Rep. Mike Thompson, a California Democrat, said he’s trying to win Sinema’s support. Thompson said Sinema questions how the IRS conducts all types of appraisals, not just on easements. Sinema’s office didn’t respond to requests for comment.
As with any legislation, the details are crucial. Some conservative groups oppose the plan to collect taxes years after deductions were claimed. The bill pegs collections to December 2016, when an IRS notice warned promoters and investors the deals faced more scrutiny.
Americans for Tax Reform, a powerful conservative group run by Grover Norquist, said the IRS notice didn’t empower retroactive tax collections.
“I don’t buy the logic that you can go back and apply tax changes back to that date,” said Alex Hendrie, ATR’s director of tax policy.
Thompson acknowledged the retroactive tax increase is a key sticking point among lawmakers and said he’d agree to remove it to get the bill passed, “because it will stop this from continuing to happen.”
Michael Desmond, former chief counsel at the IRS, said having the agency audit thousands of taxpayers and litigating in Tax Court is not ideal.
“Everyone would agree that legislation is the best way to address problems in existing tax law,” Desmond said.
The IRS notice was supposed to deter the deals, but that “obviously hasn’t happened here,” he said. “It comes down to the market dynamics and the risk tolerance of taxpayers knowing full well that they’re going to get audited.”
Ramsay said that Partnership for Conservation wants Congress to “reject policies that unfairly change the Tax Code retroactively, eliminating tax benefits for donations that cannot be undone.” Those policies “would set a dangerous precedent for taxpayers and undermine public confidence in all tax incentive programs.”
