The Conservation Easement Tax Expenditure: In Search of Conservation Value
Catholic University of America (CUA) - Columbus School of Law
February 11, 2012
Columbia Journal of Environmental Law, Vol. 37, No. 1, 2012
CUA Columbus School of Law Legal Studies Research Paper No. 2012-2
Federal tax law has long provided a tax benefit for charitable contributions of easements for conservation purposes. A fundamental problem with this conservation easement tax expenditure is that the measure for the tax benefit – lost economic development value – is erroneous. Use of such an erroneous measure obscures the conservation benefits of the program by focusing attention and resources on divining a largely extraneous and unhelpful number. Further, to a considerable extent, the easement program is reflexively justified and understood based on this false measure, as if it represented the conservation value of the program. The Article argues that, in theory, the measure for the tax benefit should be changed to one that better approximates conservation value. This would help ensure that the program is efficient, in the sense that conservation benefits would exceed program costs.
However, the theory must account for the fact that conservation value is not, at least not yet, readily susceptible to quantification for tax purposes. Accordingly, the Article also argues that a second-best approach would be to change the measure of the tax benefit to a more objective number – the fair market value of the underlying fee interest – not only to provide greater certainty but more importantly to shift administrative and legal resources and attention to where it should be: on the conservation benefits of the program. Finally, the Article argues that serious consideration should be given to converting the deduction to a credit, both to make the tax benefit more equitable and also to provide greater flexibility, by more easily allowing for different levels of tax benefit to be provided based on satisfaction of conservation criteria, which could and should evolve over time to account for society’s changing needs. In any event, irrespective of the details, the conservation easement tax expenditure should be designed to promote a concept of conservation value – an affirmative value – that represents the best use of the land. The value of the tax expenditure should no longer be defined by what is lost, but rather by what is gained.
Number of Pages in PDF File: 62
Keywords: conservation easement, charitable deduction, facade easement, tax expenditure, cost-benefit, credit, public benefit, land trust, partial interest, efficiency
JEL Classification: D61, H10, H23, H20, H21, H24, H26, H29, H41, H49, H53, H60, H70, H82, K11, K34 ,L3, L30, L31, L33,
Date posted: February 14, 2012