IRS Notices and Guidelines - Tax Law and IRS Matters - Trust for Architectural Easements

IRS Notices & Guidelines

The IRS has issued considerable guidance in the area of qualified conservation contributions over the past several years. In 2006, the IRS provided appraisal standards for historic preservation easement donations by issuing Notice 2006-96. In April 2007, the IRS revised the instructions for Form 8283 and reissued an updated version of Publication 561 containing a section specifically focused on valuation of qualified conservation contributions. Further, in September 2007, the IRS released Chief Counsel Memorandum 200738013, concerning the IRS’s requirements for the valuation of historic preservation easements. In 2008, the IRS issued Proposed Regulations (Reg. 140029-07) regarding substantiation and reporting requirements for cash and non-cash charitable contribution deductions.

2009 Internal Revenue Service Advisory Council Report

On November 19, 2009, the Internal Revenue Service Advisory Council (IRSAC), an organized public forum established to discuss relevant tax administration issues, released its 2009 report. IRSAC has noted that "the current IRS audit effort strains the agency's resources and may fail to distinguish between a legitimate deduction authorized by statute and an abusive tax shelter. " The report includes recommendations on how to resolve the current controversy.

IR-2009-41

On April 13, 2009, the IRS issued Notice IR-2009-41, which is their annual list of potential tax scams. In this notice, the IRS stated that it

"continues to investigate various schemes involving the donation of non-cash assets, including easements on property, closely-held corporate stock and real property. Often, the donations are highly overvalued …. The Pension Protection Act of 2006 imposed increased penalties for inaccurate appraisals and new definitions of qualified appraisals and qualified appraisers for taxpayers claiming charitable contributions."

IRS Publication 526, Charitable Contributions

This publication explains how to claim a deduction for your charitable contributions. It discusses organizations that are qualified to receive charitable contributions, the types of contributions you can deduct, how much you can deduct, what records to keep, and how to report charitable contributions.

March 13, 2008 IRS Letter re. Easement Valuation to National Trust for Historic Preservation

This is a letter from Stephen Miller, former IRS Commissioner in charge of Tax Exempt and Government Entities, to Paul Edmonson, Vice President and General Counsel for the National Trust for Historic Preservation.

December 13, 2007 National Trust for Historic Preservation Letter re. Easement Valuation to IRS

This is a letter from Paul Edmonson, Vice President and General Counsel of the National Trust for Historic Preservation, to Stephen Miller, former IRS Commissioner in charge of Tax Exempt and Government Entities.

Chief Counsel Memorandum 200738013

This Memorandum answers the question: May an appraisal of a façade easement that values the easement as a percentage of the value of the underlying fee before the granting of the easement, without reference to the actual value of the underlying fee after the granting of the easement, be used to substantiate the fair market value of the easement under Section 170(h) of the Internal Revenue Code?

IRS Publication 561; Determining the Value of Donated Property

This publication is designed to help donors and appraisers determine the value of property (other than cash) that is given to qualified organizations. Page 8 has a section relating specifically to qualified conservation contributions under the paragraph heading Partial Interest in Property Not in Trust. It also explains what kind of information you must have to support the charitable contribution deduction you claim on your return.

IRS Form 8283-V; Payment Voucher for Filing Fee Under Section 170(f)(13)

Form 8283-V is a statement you send with your check or money order to pay the $500 filing fee that is required if you claim a deduction of more than $10,000 for a charitable contribution that: (a) is an easement on the exterior of a building in a registered historic district, and (b) is made after February 12, 2007.

Instructions for IRS Form 8283, Noncash Charitable Contributions

Detailed instructions for completing IRS Form 8283 containing specific directions for donors of qualified conservation contributions.

IRS Form 8283, Noncash Charitable Contributions

IRS Form 8283 is used to report information about noncash charitable contributions. You must file Form 8283 if the amount of your deduction for all noncash gifts is more than $500. File Form 8283 with your tax return for the year you contribute the property and first claim a deduction.

Internal Revenue Bulletin 2006-46 aka Notice 2006-96; Guidance Regarding Appraisal Requirements for Noncash Charitable Contributions

This notice provides transitional guidance relating to the new definitions of “qualified appraisal” and “qualified appraiser” in § 170(f)(11) of the Internal Revenue Code, and new § 6695A of the Code regarding substantial or gross valuation misstatements, as added by § 1219 of the Pension Protection Act of 2006 (P.L. 109-280).

IRS’s Steven Miller Speaks Regarding Conservation Easements

In a March 28, 2006 speech in Washington, DC to the Spring Public Lands Conference, IRS Tax Exempt and Government Entities Commissioner Steven Miller discussed some recent findings of his agency's analysis of donations of conservation easements.

IR-2006-25

On February 7, 2006, the Internal Revenue Service issued Notice IR-2006-25, which is their annual list of potential tax scams. In this notice, the IRS identifies the potential for donors to take overvalued tax deductions with respect to donations of facade conservation easements. The notice was specific as to the potential overvaluation being on properties already subject to local historic preservation laws that prohibit alteration to the building's facade.

IR-2005-19

On February 28, 2005, the IRS issued Notice IR-2005-19, which covered many topics and included a single statement relating to the Federal Historic Preservation Tax Incentive Program as follows: "In many cases, local historic preservation laws already prohibit alteration of the home's façade, making the contributed easement superfluous. Even if the façade could be altered, the deduction claimed for the easement contribution may far exceed the easement's impact on the value of the property."

IRS’s Steven Miller Speaks Regarding Conservation Easements

On October 21, 2004, Stephen Miller, IRS Commissioner for Tax Exempt and Government Entities, spoke before the American Society of Appraisers concerning conservation easements. Mr. Miller reiterated the removal of easement valuation range guidelines from IRS documentation.

Notice 2004-41

The purpose of the notice was to advise participants of contributions of conservation easements and purchases of real property from charitable organizations that in appropriate cases, the IRS intends to disallow such deductions and may impose penalties and excise taxes. The notice reviews the requirements for qualified conservation contributions and identifies concerns in connection with purchases of real property from charitable organizations.