Shortly after the Senate Finance Committee released an investigative report on certain conservation easement tax deduction transactions, Pete Sepp, President of the National Taxpayers Union (NTU), made the following statement:
In its zeal to identify “abusive transactions” involving conservation easement deductions, the Committee’s report overlooked abusive tactics from the IRS that could harm thousands -- even millions -- of American taxpayers who’ve never even heard the word “easement.” Throughout its 51-year history, NTU has witnessed similar and sad results: the Internal Revenue Service’s unacceptable behavior toward taxpayers regarding one area of law establishes precedents with serious implications for the entire system of tax administration.
Near the top of the list is retroactive imposition of interpretations about how the laws are supposed to function, which has been a problem with the IRS’s actions in the conservation easement space for several years now. This type of retroactivity is particularly harmful because it undermines the very faith and confidence in the tax system the report claims it is attempting to uphold. Equally important, in each case the IRS is given sanction to act this way, Congress is surrendering even more of its authority to make rational law that all taxpayers can respect.
Meanwhile, the Service has, through administrative actions and courtroom crusades, run roughshod over due process and the basic taxpayer rights provisions that National Taxpayers Union has struggled to enact during the past four decades The Committee needs to exercise its oversight function in encouraging Congress to protect the laws it has rightfully written to safeguard Americans from overzealous tax administration. Make no mistake: retroactive tax hikes, intrusive information demands, arbitrary “foot faults” in long-held legal agreements, and heavy-handed enforcement strategies will ultimately be used against countless taxpayers unless Congress supports balanced “rules of the road” for a deduction it has not only upheld, but has also affirmed.
The report stated that “Congress, the IRS, and Department of the Treasury should take further action to preserve the integrity of the conservation-easement tax deduction.” If this is the Committee’s intent, why not start with endorsing the National Taxpayer Advocate’s suggestion that the IRS provide clearer, binding guidance on how a taxpayer may safely claim such a deduction? Why not create a special entity to address questions of easement language and valuations that have been the source of so much litigation? Why not establish limits on the IRS’s ability to retroactively impose new enforcement burdens on tax filers? NTU has made numerous recommendations to achieve these ends with the conservation easement deduction, while preventing yet another wave of IRS overreactions that could leave millions of Americans suffering.
In the 1980s with the Taxpayer Bill of Rights, in the 1990s with the IRS Restructuring and Reform Act, and most recently in 2019 with the Taxpayer First Act, the Finance Committee has properly and correctly recognized the danger of giving the IRS weapons to wield against certain groups of taxpayers will that ultimately harm everyone. The Committee must again do so now, by leading Congress toward thoughtful proposals that will not only protect the environment through private conservation, but also protect taxpayers’ rights.
As part of its five-decade-long leadership on taxpayer rights issues, NTU has been monitoring the IRS’s activities in several areas of tax administration, including Notice 2017-10, pertaining to certain conservation easement transactions. For further information on our work, visit ntu.org.