A notice recently published by the Internal Revenue Service (IRS) may affect conservation easements that contain boundary line adjustment provisions and/or extinguishment provisions if the easements were used to claim federal tax deductions.
In its notice, the IRS is providing “Safe Harbor” language that can be used to substitute what it considers “faulty” language that may trigger an audit. The substitution process must be done by amendment, which must be recorded on or before Monday, July 24, 2023.
Most easements recorded by VOF within the past six years don’t contain a boundary line adjustment provision. Furthermore, most easements recorded by VOF within the past six years contain extinguishment provisions that are functionally, but not word for word, equivalent to the IRS Safe Harbor language.
VOF easement donors who claimed federal deductions and have any questions about whether such Safe Harbor language should be substituted for any boundary line adjustment provision or extinguishment provision in their easements should contact their attorneys to discuss this matter.
VOF’s Board of Trustees will consider a resolution at its June 1 meeting authorizing staff to assist with any desired amendments. VOF is unable to provide legal advice.
The Land Trust Alliance (LTA), a national conservation organization that supports hundreds of land trusts across the nation and follows easement-related tax policy matters closely, has created a document entitled “Integrity Act’s Safe Harbor Provisions; Frequently Asked Questions” that provides landowners with further information about how the Safe Harbor provisions may safeguard their federal tax deductions. This document may be found at https://landtrustalliance.org/resources/learn/explore/integrity-act-s-safe-harbor-provisions-frequently-asked-questions.
The IRS notice, which that sets forth the Safe Harbor language and spells out how to substitute such language for “faulty” language in an easement, may be found at https://www.irs.gov/pub/irs-drop/n-23-30.pdf.