Although the Internal Revenue Code expressly provides for tax benefits for the donation of historic preservation easements that are made in the manner set out in the Code and Treasury Regulations, the Internal Revenue Service (the “IRS”) has identified easement donations as an area in which taxpayers may act in a manner that is abusive. In recent years, the IRS has increased its enforcement efforts associated with the donation of historic preservation easements. As a result, the IRS has conducted, and is continuing to conduct, examinations of a number of taxpayers who have made historic preservation easement donations to the Trust and to other easement-holding organizations throughout the country.
In general, the IRS has been challenging the value of the easement as determined by the taxpayer’s appraiser, and has frequently focused on whether the appraiser adequately considered the impact of local preservation ordinances restricting the property. Other issues that have been raised by the IRS have included whether the supporting appraisal is a “qualified appraisal” as defined by the Treasury Regulations, as amended by the PPA, and whether the language of the specific easement properly preserves the property for conservation purposes in perpetuity.
Some taxpayers have elected to challenge unfavorable determinations by the IRS. Some cases have been tried in the Tax Court and are awaiting a decision, others will be heard in the coming months, and others have not yet received a trial date. Below are links to court decisions and publicly available documents in pending cases before the Tax Court, which the Trust is including on this site by permission of the donor.
Pending Court Cases
Below are links to publicly available documents in some easement cases pending before the Tax Court and US Court of Appeals.
The taxpayers appealed the 2008 Tax Court decision regarding tax deficiencies. On August 10, 2010, the Fifth Circuit issued an opinion vacating the Tax Court decision and remanding the case to the Tax Court for further proceedings. The Tax Court issued a supplemental opinion on October 23, 2012. The taxpayers have appealed the 2012 Tax Court decision.
The taxpayers appealed the 2010 Tax Court decision regarding tax deficiencies, and the IRS filed a cross-appeal on penalties. Oral argument was held on December 15, 2011, in New York. On June 15, 2012, the Second Circuit issued an opinion vacating the Tax Court decision and remanding the case to the Tax Court for further proceedings. The Tax Court issued a supplemental memorandum opinion on January 16, 2013. The taxpayers have appealed the 2013 Tax Court decision.
The taxpayers appealed the 2011 Tax Court decision regarding tax deficiencies and certain penalties, and the IRS filed a cross-appeal on the imposition of certain penalties. Oral argument was held on May 7, 2012, in Boston. On July 19, 2012, the First Circuit issued an opinion vacating the Tax Court decision only with respect to the non-cash charitable contribution deduction and assessment of associated penalties, and remanding the case to the Tax Court for further proceedings.
The Tax Court recently issued T.C. Memo. 2011-238 regarding the petitioners’ and respondent’s motions for partial summary judgment.