DOJ sues Syndicated Easement Promoters
The Department of Justice has finally filed a civil complaint against certain promoters who have been spearheading syndicated easements to the tune of over $2 billion in claimed federal tax deductions using grossly inflated appraisals.
Most participants in the conservation easement arena are aware of the syndication plague that is unfairly besmirching the reputation of good conservation organizations. For those who haven’t been following closely, in December 2016, the IRS issued a notice classifying certain syndicated easements as “listed transactions” (otherwise known as tax shelters) subject to heightened IRS audit scrutiny.
Usually designation as a listed transaction will shut down the targeted tax shelter, but not in this instance, since the promoters are making so much money that they are willing to spin the audit roulette wheel and gamble that most of their transactions won’t be caught. In 2017, the Land Trust Alliance began advocating for the passage of H.R. 4459 to automatically disallow charitable deductions for these syndications, rather than wait for a few of them to be flushed out on audit. That bill has not yet passed, so the epidemic continues. For a more detailed primer on syndicated easements and their evils, please see my overview here.
Because of the syndications pushed by a few bad actors, IRS efforts to disallow deductions for all conservation easements have increased in the past decade. So, it comes as a great relief that the Department of Justice is finally going after some of the syndicators. Hopefully, the DOJ’s suit will be the beginning of the end of the syndication saga, so that we can all direct our attention to legitimate conservation efforts.