WASHINGTON—Today, after hearing from concerned Connecticut landowners that the Internal Revenue Service’s (IRS) audit process for making charitable land contributions is antagonistic, lengthy and expensive, U.S. Senator Chris Murphy (D-Conn.) and U.S. Senator Richard Blumenthal (D-Conn.) called on the IRS to explore alternative ways to audit the charitable donations of property made through the conservation easement tax incentive. In a letter to IRS Commissioner John Koskinen, Murphy and Blumenthal emphasized that despite Congress’ support and passage of a permanent extension of the conservation easement tax incentive last year, the IRS has continued to conduct an unnecessarily lengthy, confrontational, and expensive audit process. The senators specifically suggested that the IRS handle conservation easement donations similar to the way it previously processed major donations of art – by using the opinions of third-party, outside experts on the value of donations.  

“On December 18, 2015, the Senate passed, and we supported, a permanent extension of the deduction for charitable contributions of conservation easements. This deduction was enacted into law the same day,” wrote the senators. “While fully recognizing the value of these donations and the IRS’s role in ensuring their proper use, we are deeply troubled by a trend recounted by a number of constituents who have chosen to conserve their properties, especially given Congress’s strong and unambiguous support of the charitable deduction. In light of the jarring juxtaposition between Congressional intent regarding the deduction for charitable contributions of conservation easements and the Service’s treatment of those who donate easements, we implore the Service to explore some way other than the current audit system to find potential abuses in the area of conservation easements.”

The full text of the letter is available online and below:

The Honorable John Koskinen
Commissioner
Internal Revenue Service
1111 Constitution Avenue, NW
Washington, DC 20224

Dear Commissioner Koskinen:

On December 18, 2015, the Senate passed, and we supported, a permanent extension of the deduction for charitable contributions of conservation easements. This deduction was enacted into law the same day. The stand-alone bill introduced in the Senate to permanently extend the deduction had fifty-three Senate sponsors—including us—and its House companion passed with a two-thirds majority early last year. The record is clear: Congress values the conservation of land protection by private landowners through the charitable contribution of conservation easements.

The IRS’s interest in these charitable donations is understandable, as the donations are very valuable. The Service’s Statistics of Income reports show that conservation easement donations have the highest average dollar value of any class of charitable donations of property—ten or more times as valuable as the average donation of appreciated securities and up to fifty times as valuable as the average donation of a work of art.

While fully recognizing the value of these donations and the IRS’s role in ensuring their proper use, we are deeply troubled by a trend recounted by a number of constituents who have chosen to conserve their properties, especially given Congress’s strong and unambiguous support of the charitable deduction. These constituents describe audits focused on their donation of a conservation easement as antagonistic, aggressively adversarial, lengthy, and expensive—even when the final result is a “no change” letter from the Service.

In light of the jarring juxtaposition between Congressional intent regarding the deduction for charitable contributions of conservation easements and the Service’s treatment of those who donate easements, we implore the Service to explore some way other than the current audit system to find potential abuses in the area of conservation easements. Based on the experiences of our constituents, the Service would do well to handle these particular donations just as it handled major donations of art decades ago through the creation of the Art Advisory Panel. By using the opinions of outside experts on the value of art donations, the Art Advisory Panel allowed donors and Commissioners to agree on value in more than ninety-five percent of cases handled—without an audit process that is lengthy and expensive for the Service, taxpayer, and donor. We believe an analogous panel for the donation of conservation easements would be beneficial both the IRS and to many of our constituents, whose actions Congress wholeheartedly endorses.

We look forward to working with you to find a mutually constructive solution and urge you to consider modifying your approach to finding potential abuses with the donation of conservation easements.

Sincerely,


CHRISTOPHER S. MURPHY

RICHARD BLUMENTHAL                        


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The Honorable Orrin G. Hatch                     The Honorable Ron Wyden
Chairman                                               Ranking Member
Committee on Finance                              Committee on Finance
United States Senate                                United States Senate
219 Dirksen Senate Office Building              219 Dirksen Senate Office Building
Washington, D.C. 20510                            Washington, D.C. 20510