Alms to the Rich: The Façade Easement Deduction

38 Pages Posted: 11 Jun 2014 Last revised: 26 Sep 2014

See all articles by Wendy C. Gerzog

Wendy C. Gerzog

University of Baltimore - School of Law

Date Written: June 9, 2014

Abstract

This article presents the case for repeal of the façade easement deduction. Proponents of this benefit argue that the deduction encourages historic preservation by reimbursing property owners for relinquishing their right to alter the façade of their property in a way inconsistent with that conservation goal; however, this article shows that there are many reasons to urge its repeal: the revenue loss, the small number of beneficiaries, the financial demographics of that group of beneficiaries; the dubious industries that are supported by the deduction; and the continual marked overvaluation and abuse despite Congressional, court, and administrative review and expense.

After the last major reform effort, the Pension Protection Act of 2006 (PPA), in 2009, only 94 taxpayers claimed the façade easement charitable deduction with an average return deduction of $477,225. While there may be a desire to retain a tax benefit with purported charitable aims, the long history of unbridled abuse even with repeated legislative and administrative response should make it clear that amending the façade easement deduction is an unending proposition. In today’s world, real estate is often subject to regulation that buyers and their neighbors accept in order to retain and increase a community’s property values. The very wealthiest of homeowners who purchase homes in historic districts willingly accept local restrictions on their property’s use. There is no evidence that façade easements significantly alter the behavior of property owners. It provides them with huge tax savings for doing what they would do anyway.

Keywords: facade easement, conservation easement, charitable deduction, split interest, real property regulation, Pension Protection Act of 2006

JEL Classification: H2, H10, H24, H26, H29, K11, K32, K34, L30, L31

Suggested Citation

Gerzog, Wendy C., Alms to the Rich: The Façade Easement Deduction (June 9, 2014). Virginia Tax Review, Forthcoming; University of Baltimore School of Law Legal Studies Research Paper No. 2014-11. Available at SSRN: https://ssrn.com/abstract=2447975

Wendy C. Gerzog (Contact Author)

University of Baltimore - School of Law ( email )

1420 N. Charles Street
Baltimore, MD 21218
United States
410-837-4522 (Phone)

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