New federal law will reduce conservation easement fraud

On December 29, 2022, the Charitable Conservation Easement Program Integrity Act (the Act) was signed into law in order to address fraudulent practices around conservation easements.

Conservation easements are one of the primary tools of private land conservation.  They are legal agreements entered into by a landowner and a land trust that limits in perpetuity certain activities on and development of the subject land.  We (Catawba Lands Conservancy) hold approximately 130 conservation easements.

Our landowner partners have acted in good faith to preserve their lands for charitable and conservation purposes and received a tax deduction as a result.  However, in the past decade, some bad actors have sought to exploit the federal income tax deduction associated with a charitable conservation easement donation.

The Act ensures the deduction remains available for those landowners who conserve their property with a truly charitable purpose and vision for conservation, and curbs fraud.  The law limits investors’ deductions to no greater than 2.5 times the initial cost of the property, with some exceptions for family-owned property or property held longer than three years.  It also allows a 90-day window to amend conservation easements, if needed, to update deficient language in key areas and prevent audit. That window is currently open.

We have reviewed our conservation easements and found that our language is consistent with the IRS’s recommendation, and does not include language that the IRS named as problematic. If you are a landowner with a conservation easement and have questions or concerns, we encourage you to speak with your attorney and/or tax professional about the Act.

We prioritize the integrity of our conservation transactions and take care to comply with legal and ethical standards as we work to save land and connect lives to nature in our region.