The recent flurry of talk and e--mails about facade easements mainly got going after a series of articles (“Rich with Heritage”) ran in the Washington Post on December 12 and 13—two front-page ones by Staff Writer Joe Stephens (“Loophole Pays Off on Upscale Buildings” and “Tax Break Turns Into Big Business”) plus others inside. “Senators Vow to End Tax Breaks on Easements” proclaimed a follow-up headline on December 18.
Around the same time, stories on easements showed up in the Boston Globe, New York Times, Seattle Times, and on Fox News. And these got cited, with links, on Yahoo! News and websites with names like Scams and Scandals, and The Scoop.
Despite the buzz they generated, the truth is that these articles did not attack preservation easements in general, only certain abuses. But preservationists should be aware that there is a risk now that reaction from Congress may significantly reduce tax incentives for easement donations.
The news coverage specifically exposed two questionable practices. One is the significant overvaluing of easement donations to enable homeowners to take huge tax deductions particularly for residential properties in neighborhoods where the donations actually may have little or no financial impact because strong local preservation ordinances already prohibit inappropriate facade changes. The articles also raised concerns about organizations that aggressively market easement donations and then take fees for processing them.
Sen. Charles Grassley, chairman of the Committee on Finance, and Sen. Max Baucus, ranking member, announced on December 17 that they will put forth legislation early this year to crack down on easement overvaluations. They also called for better scrutiny of easement donations by the IRS, along with other proposals to curb abuses. Grassley said, “Over the years, American communities have benefited from tax incentives that foster historic preservation. I want to continue the important goal of historic preservation while ending the abuse.”
The National Trust agrees that legislative changes should be adopted to discourage valuation and other abuses relating to easement donations. A December 17 statement by National Trust President Richard Moe affirms, “The National Trust is eager to assist these efforts in any way possible in order to maintain public confidence in historic easements as a legitimate preservation tool.”
In late January, however, a report from the congressional Joint Committee on Taxation proposed a “solution” to the problem of easement abuses that would drastically reduce, and in many cases eliminate, easement donations altogether. The committee proposes eliminating all tax deductions for both preservation and conservation easements on properties used by the easement donor (or the donor’s family). All other easement deductions would be slashed by at least two-thirds. While the proposal is simply that the tax writing committees of Congress have yet to indicate their views on the recommendations of the joint committee—preservationists should be prepared to contact their congressional representatives about the important benefits of easements as a preservation tool, and the value of continuing the federal tax incentives.
For updates on this topic, check the National Trust’s website, www.nationaltrust.org, or log on to the Forum--L listserve. To access the Washington Post articles go to www.washingtonpost.com and search the archives for “easements.”
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Publication Date: March/April 2005