Conservation Easements

Conservation Easements Investment Loss Did your broker or investment advisor recommend you invest in conservation easement investments?We ar investigating brokers and investment advisors across the country who recommended their clients invest in conservation easement transactions, which the Internal Revenue Service (IRS) is now describing as abusive tax shelters. We are investigating whether brokers and investment advisors withheld key facts and failed to conduct adequate due diligence of syndicated conservation easement offerings prior to recommending the offerings to retail investors. Adequate due diligence typically involves conducting meaningful, independent research on material aspects of the offering, identifying red flags with the offering or the issuer, and addressing and resolving concerns that would be relevant to a potential investor. According to the December 2018 the Report on FINRA Examination Findings, brokerage firms should use a reasonable diligence process to mitigate conflicts of interest, ensure that the offerings were suitable for investors in spite of such conflicts of interest, and develop comprehensive disclosures. Regrettably for some investors, some brokerage firms and investment advisors reviewed relevant offering documentation, but did not adequately disclose the material aspects of the offerings and did not investigate red flags, including significant risk of the IRS disallowing tax deductions, as well as concerns regarding land appraisals. What is a Conservation Easement? Conservation easements help to preserve property by restricting development, commercial, industrial and other intrusive uses on the protected property in a permanent capacity. Donors may be eligible for a federal income tax charitable deduction equal to the value of their donation of the land that they purchased, if they follow the requirements in section 170 of the Internal Revenue Code. Appraisers value the easement donation by calculating the difference between the fair market value of the property before and after the easement takes effect. Syndicated conservation easements are a type of private placement that promises a tax deduction worth 2.5 to 5 times a person’s investment. Brokers and investment brokers target high net worth individuals, such as doctors, entrepreneurs and other rich individuals to buy into partnerships that seek to exploit tax benefits from land conservation. Syndicated Conservation Easements as Tax Schemes Some conservation easement syndicators and promoters over-inflated the price of the donated land to maximize the tax deductions, which made the investments more attractive to investors. In fact, some conservation easements were promoted as offering 2.5- to 5-times or more on every dollar invested through tax avoidance; these investments were sold to high-income earners and high net worth individuals. These conservation easement investments were tax schemes that intended to defraud the IRS with fraudulent appraisals, leaving investors to face audits and pay substantial legal fees, interest, millions of dollars in back taxes, and substantial penalties. In 2016, the IRS, “designated certain syndicated conservation easements as listed transactions. Specifically, the Notice listed transactions where investors in pass-through entities receive promotional material offering the possibility of a charitable contribution deduction worth at least two and half times their investment. In many transactions, the deduction taken is significantly higher than 250 percent of the investment.” This rule required conservation easement transactions to be notated as “listed transactions,” which means that their participants must disclose to the IRS on their tax returns their participation in the transaction. In 1980, Congress created the incentive for tax breaks for conservation easements donated to land trusts or government, for owners who pledge to never develop their properties. This has led to preservation of more than 30 million acres. The IRS named syndicated conservation easements as one of the dirty dozen list of tax scams to avoid in 2019. According to the IRS, “The IRS is fully committed to putting an end to abusive syndicated conservation easement transactions, and holding accountable the individuals and entities who promoted, assisted with or participated in these schemes. The IRS is committing significant examination and investigative resources to vigorously audit the entities and individuals involved in this scheme, including those who failed to properly disclose their participation as required. Additionally, the IRS is also litigating cases where necessary, with more than 80 currently docketed cases in the Tax Court.” The IRS said that promoters are cheating the system by inflating what the land would be worth if developed and thereby any tax benefits. In March 2019, the United States Senate Committee on Finance launched an investigation into the potential abuse of syndicated conservation easement investments that may have allowed taxpayers to game the tax code and deprive the federal government of more than $3 billion in revenue in 2014 alone; it has cost even more in the years since. In October 2020, the Senate Finance Committee introduced a bill that will “protect conservation easements from abuse, save taxpayers billions of dollars and promote conservation around the country.” In April 2021, IRS Commissioner Charles Rettig told a Senate panel that 28,000 taxpayers are under examination. The IRS has challenged $21 billion in tax deductions that are claimed for syndicated conservation easement investments from 2016 through 2018. Many of our clients come to us because of our specialization in recovering investment losses. We use considerable resources to help investors who trusted their reckless and unethical brokers who recommended private placements such as conservation easements. We have been retained by investors to recover losses caused by investment advisors that recommended conservation easements as a tax mitigation strategy. We have helped investors whose conservation easements have been subject to audit by the IRS and their charitable deductions have been disallowed by the IRS and state tax authorities. In certain cases, our clients have had to pay back taxes, interest and/or fines. If you invested in conservation easements without understanding the risks associated with your investment, you may be able to recoup your losses. As an expert witness Lance Wallach has never lost a lawsuit. 516-236-8440 Wallachinc@gmail.com https://conservationeasementsirs.com/