A number of our readers have confided in us about how the IRS seems to be overly focused and aggressive with respect to how donations of conservation easements are subjected to the audit process. And we have experienced the aggressive approach used by the IRS in these cases at Exam and in the Tax Court. So we are gratified to see that on February 22, 2016, US Senators Richard Blumenthal and Chris Murphy, both of whom are from the State of Connecticut, have written a letter (click here) to IRS Commissioner John Koskinen that makes the following points:
The IRS's interest in these charitable donations is understandable, as the donations are very valuable (noting that the IRS' Statistics of Income reports show that conservation easement donations have the highest average dollar value of any class of charitable donations of property -- ten or more times as valuable as the average donation of appreciated securities and up to fifty times as valuable as the average donation of a work of art).
While fully recognizing the value of these donations and the IRS's role in ensuring their proper use, the Senators noted that they are deeply troubled by a trend recounted by a number of constituents, who have chosen to conserve their properties, especially given Congress's strong and unambiguous support of the charitable deduction.
The Senators' constituents describe audits focused on their donation of a conservation easement as antagonistic, aggressively adversarial, lengthy, and expensive -- even when the final result is a "no change" letter from the Service.
We are also aware that a number of our readers have had conversations with elected officials from their jurisdictions making similar complaints about the process involving audits of conservation easement donations that, as the Senators have stated, is often considered “antagonistic, aggressively adversarial, lengthy, and expensive.”