Washington – Senate Finance Committee Chairman Chuck Grassley (R-Iowa) and Ranking Member Ron Wyden (D-Ore.) today released a report on their investigation into the abuse of syndicated conservation-easement transactions, which may have allowed a number of taxpayers to profit from gaming the tax code and deprived the federal government of billions of dollars in revenue.
“Shady tax deals often have a low profile with the public, but that doesn’t make them any less wrong. The conservation-easement deduction provides an important tool for the preservation of our environment, but the federal government needs to curtail the aggressiveness that goes on with these syndicated transactions. The American tax system relies on fairness and good faith compliance. This isn't a partisan issue. Serious, fair enforcement of our tax laws is the best way to preserve that system and uphold our understanding that the law applies equally to all of us,” Grassley said.
“Since 2016 I have been deeply concerned about abuse of the syndicated conservation easement program, and the threat a few bad actors pose to a program that’s critical to preserving open lands. Our bipartisan report lays out serious and persistent abuse in the program. This is part of a larger pattern of wealthy tax cheats ripping off the American people because they know they can get away with it after years of cuts to the IRS budget. As with broader enforcement issues, cracking down on abusive syndicated conservation easements requires ensuring IRS has the resources and legal tools to do its job,” Wyden said.
What is a Syndicated Conservation Easement Transaction?
These transactions involve promoters selling interests in tracts of land to taxpayers looking for large tax deductions. Following their initial investment, the taxpayers get inflated appraisals of those tracts of land, grant conservation easements on that land, and then share significantly inflated tax deductions among the taxpayers who have invested. In simple terms, the promoters tell their taxpayer-investors that for every dollar the taxpayer-investors pay to the promoters, they would save two dollars on their taxes.
Tax Shelter Calculator: How much could you save?
One of the largest promoters of syndicated conservation-easement transactions, EcoVest Capital, gave its potential “investors” a spreadsheet calculator
to show them exactly how much “investing” in one of their transactions supposedly would cut the investors’ taxes.
To see how much EcoVest could have helped you skirt on your tax bill, just fill in the tan boxes with how many “units” in the EcoVest transaction you could buy, and then fill in your top Federal and State tax rates, and the blue box shows you exactly how much EcoVest claimed your tax bill would go down.
The transactions discussed in this report involve land valuations that appear so inflated above their original purchase prices that they cannot reasonably be characterized as anything other than abusive tax shelters. Despite the formal documentation developed by the promoters and nominal votes by investors, documents obtained in this investigation clearly show that both the promoters and the taxpayer-investors in these deals understood them simply as tax shelters. At their core, they are transactions in which taxpayers can save two dollars in taxes for every one dollar they give to transaction promoters—with promoters pocketing millions of dollars in fees for organizing the deals.
Based on the information gathered in this investigation, Grassley and Wyden conclude the IRS has strong reason for taking enforcement action against syndicated conservation-easement transactions, as it has to date. Furthermore, in light of the continued use of these abusive transactions despite the issuance of IRS Notice 2017-10, Grassley and Wyden believe Congress, the IRS and the Treasury Department of should take further action to preserve the integrity of the conservation-easement tax deduction.
Full text of the Report on the Senate Finance Committee’s Investigation can be found HERE
Appendixes and exhibits to the report can be found HERE