IRS Toughens Scrutiny of Land Gifts

The IRS said one of the agency's top priorities now is fighting abusive tax-deduction schemes involving nonprofit organizations.

The Senate Finance Committee began investigating easement transactions involving the Conservancy and other charities last year. Committee Chairman Charles E. Grassley (R-Iowa) said the investigation's findings so far demand "a serious rethinking" of tax laws and stronger enforcement by the IRS.

"The IRS is right to subject these sweetheart deals, often to insiders, to hard scrutiny," Grassley said yesterday. "I'm encouraged that the IRS is willing to challenge the tax-exempt status of charitable organizations that engage in shady practices in land-donation transactions. Shutting down the bad actors will be a strong signal that 'business as usual' has been put out of business.

"Land donated for a conservation purpose should help the environment or create open space," he said. "All too often, these conservation donations appear to do very little for the environment and only help fill the bank accounts of donors and middlemen."

Rand Wentworth, president of the Land Trust Alliance, called the IRS action "really good news for legitimate charities." The group represents 1,260 nonprofit land banks, many of which hold conservation easements.

"This will help restore the integrity of good land trusts," Wentworth said.

Stephen J. Small, a former IRS lawyer and a leading expert on easements, said he is pleased the agency is targeting appraisers and promoters of improper tax deals. "In this field, this is new," he said. "I think that's great."

Land trusts hold more than 12,000 conservation easements nationwide, though not all of them generate tax deductions for the owners. The IRS said it has no figures for the total value of tax deductions generated by easements.