House Members Ask Commissioner to Call Off the Conservation Easement Dogs on Historic Preservation

A letter sent by a bipartisan group of Representatives asks the Commissioner to pump the breaks on the war on conservation easements.  They worry that historic building preservationists are becoming unintentional casualties. The letter suggests that long drawn out litigation is caused by taxpayer confusion and that the Service should work with the Congress, rather than through the courts, towards some clarity.  I don’t know how much clearer “stop lying about the value” can be, but all right let’s give it a try.  Seriously, the letter rests on a valid premise.  Historic building easements are qualitatively different from land or open space conservation easements — the latter being amenable to much more abuse than the former.  The Representatives make a legitimate request that historic building preservation easements not be lumped into the same basket and subjected to the same enforcement suspicion as land and open space conservation easements.  Here is an excerpt:

Guidance Needed to Clarify and Settle Historic Preservation Easement Controversy

As Commissioner you have an opportunity to take a fresh look at how the historic preservation community has been included in the tax controversy surrounding conservation casements. Currently, the program is primarily used on large projects to protect historic commercial properties in urban centers. Unfortunately, we hear all too often that this is the only practical way to currently use the program given the high cost of accountants and attorneys necessary to complete these projects. As members representing both urban and rural neighborhoods with an abundance of at-risk historic buildings, we would like to see easements used more widely to protect historic buildings of all sizes. This would empower historic preservationists that might not have the resources of larger developers.

When valid concerns over the inflated valuation of land or property are raised by the IRS or others, property valuation should be challenged. Too often, however, we hear from taxpayers who feel that they are virtually guaranteed to face years of tax controversy for utilizing a historic preservation casement. They should also not get caught in the middle of interagency battles over whether certain improvements diminish the historic character of a building, or over the broader question of whether the National Park Service or the IRS determines the meaning of “historic character”. Too often, preservation non-profits feel forced to hire expensive accountants and attorneys to navigate shortcomings over a lack of technical details needed for casement deeds to be deemed sufficient.

These types of issues should be worked out by engaging with stakeholders to identify solutions. The current path of auditing every easement transaction, removing the ability of exam or appeals to resolve cases, then litigating in court for years on end incurs great expense to historic building owners, the government, and all parties involved. This path is unsustainable and could be quickly remedied with clear, comprehensive guidance to the historic casement community.

Our sincere hope is that under your leadership the IRS will provide the guidance and clarity needed for historic building owners, taxpayers, and the preservation community to utilize historic preservation casements with confidence going forward and to settle outstanding cases. Preservationists have long been able to rely on clear IRS guidance regarding historic tax credits, but that level of clarity is not available for the historic preservation casement program.

You recently stated to be open to the IRS using more strategics to “explore agreements, safe harbors, and voluntary compliance initiatives” to help close the “tax gap” between taxes owed and taxes paid. We believe that your office has an opportunity to do just that here and we ask for your commitment to engage with the historic preservation community and our offices to protect access to this program, as Congress intended. We believe that by working together with our office and stakeholders in the historic preservation community we can target and improve the agency’s enforcement posture, so that it no longer places this critical tool out of reach for many property owners and preservationists.

Without these important preservation programs, many historic buildings will fall into disrepair and be lost for posterity. We cannot afford to deter well-intentioned preservationists from using federal incentives because of the lack of clarity around how to access them and what their rules are. Every penny counts to a property owner weighing whether to undertake a costly historic preservation project or to bulldoze and build new. Once a historic building is gone, it is lost forever. We support improvements to congressionally enacted preservation programs because we believe that federal investment in historic preservation is crucial to our communities and the country. Unfortunately, however, we’ve seen less value in these programs in recent years in part due to a lack of taxpayer clarity. We are hopeful that we can work with you to improve tools like the historic preservation casement program and the historic tax credit.

Sounds reasonable.

darryll k. jones