IRS Proposes Rule to Limit Syndicated Conservation Easements

The IRS on Nov. 20 announced that it’s seeking comments on proposed regulations that would clarify provisions in the SECURE 2.0 Act of 2022 aimed at preventing partnerships from claiming unwarranted tax deductions for syndicated conservation easement donations.

The proposal is generally consistent with the SECURE 2.0 Act in that it disallows a federal tax deduction for a qualified conservation contribution made by a partnership or an S corporation after Dec. 29, 2022, if the amount of the contribution exceeds two-and-a-half times the sum of each partner or S corporation shareholder’s relevant basis within a three-year holding period.

The proposed regulations are supported by the Appraisal Institute and conservation organizations because they can prevent the abuse of syndicated conservation easement transactions that lead to the heightened scrutiny of appraisals. The proposal may also result in appraisers having to provide more detailed documentation in their work.

Comments are due Dec. 20, 2023, and the proposal makes note of a public hearing Jan. 3, 2024.