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Memo to the Senate Committee on Finance
by Stephen J. Small, Esq.
To: Senate Committee on Finance, Joint Committee on Taxation
From: Stephen J. Small, Esq.
Date: March 29, 2005
Subject: Conservation Easements 2005 - How to Fix What's Wrong
Summary
I had four years of tax training as an attorney in IRS Chief Counsel's office, where I wrote the income tax regulations on conservation easements. That was followed by more than twenty years in private practice, many of those years immersed in private land conservation transactions that have protected hundreds of thousands of acres of productive farmland, forestland, ranchland, wildlife habitat, scenic property, and open space that gives a community its character and preserves a quality of life that once gone is irreplaceable.
From my perspective and my experience in this field, it astounds me that a field that has accomplished so much good is viewed as suspicious by some policymakers in Washington. What could they be thinking? I conclude that this could only be happening if there is a genuine misunderstanding in Washington about voluntary private land protection and conservation easements.
There are abuses in this field. Some of them have been widely publicized but they are absolutely not representative of what is happening with conservation easements today. The abuses are hardly widespread, and it is very easy to find them, stop them, raise some revenue, and shut down the bad guys. Congress and the IRS should focus on what can be readily accomplished. I discuss how to do this below.
The Joint Committee on Taxation, the Senate Finance Committee, and the IRS have made it clear that things are changing in the conservation easement field. Donors, donees, advisors, and appraisers are now on notice. Congress and the IRS have the wherewithal to target the abuses, not with "remedies" that will put a screeching halt to meaningful private voluntary land conservation in this country but principally by attacking bad appraisals. A methodical and targeted attack on the bad transactions is happening in South Carolina and it can and should happen at the federal level as well. It is not necessary to overstate the need for "reform."
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