Several local businessmen are named among 14 people the U.S. Senate Finance Committee requested information from about what the committee chairman characterized as “gaming the tax code” through conservation easement transactions.
According to a Senate Finance Committee release:
Committee Chairman Sen. Chuck Grassley, R-Iowa, and ranking member Sen. Ron Wyden, D-Ore., recently launched an investigation into the matter by requesting information from the men who appear to be associated with investor groups who may have “unfairly profited from conservation easements,” the news release stated.
At this point no one involved has said any law has been broken.
But senators are saying the companies may have exploited a loophole, thereby allowing some taxpayers to profit and therefore depriving “the federal government of billions of dollars in revenue.”
The letters were sent to John Steven Bush, Matthew Campbell, Andrew Kyle Carney, Thomas Jason Free, James Freeman, Christopher Graham, Bryan Kelley, Aaron J. Kowan, Robert McCullough, Matt Ornstein, Eugene “Chip” Pearson, Jr., Mark Pickett, Ricky Novak and Frank Schuler on March 27. The letters requested information about companies the men may or may not have had involvement with.
The letter requested information such as:
♦ Are you associated with these entities in any way?
♦ Is the information contained in the database correct?
♦ If it is not correct, please describe the nature of the entities listed immediately above, their purposes, and how or whether they created, distributed, or provided tax deductions for charitable contributions pursuant to 26 U.S.C. § 170 to their partners.
The questions then progress to seeking information about dates each of the companies were formed, customer information and requesting promotional materials distributed to potential clients.
“There are very legitimate purposes for the conservation easement provisions of the tax code,” Grassley said in the release. He continued to say this is the first step to find out how, and if, the “tax provisions are being abused, and it will inform what else ought to be done to fix the problem.”
Essentially, they’re saying promoters sold interest in tracts of lands to investors seeking to receive large tax deductions. The idea is after getting an inflated appraisal on the value of the land, the tracts were then designated as a conservation easement and the resulting charitable deductions split among the parties.
Kirk Jarrett, a CPA, explained that investors create partnerships to own the property that is then put into a conservation easement. That designation means the land cannot be developed and is saved as greenspace in perpetuity.
Essentially it’s considered a gift, Jarrett said, and there are calculations to determine the value of that gift.
“There is a calculation as to what the future value of that property would be worth and that future value is then used as a charitable deduction for the gift of that property,” he said.
The benefit to investors is the charitable deduction passes through to the investors.
This practice cost the federal government more than $3 billion in tax revenue in 2014 alone, according to a 2017 Brookings Institution report cited in the release.
“Our first concern is preserving the integrity of the conservation easement program, which has helped protect critical habitat across the country,” Wyden said in the release.