On July 12, 2004, the IRS published Notice 2004-41 concerning the valuation of façade conservation easements. This section summarizes this and subsequent actions by the IRS in reverse chronological order.
In addition, this section provides US Tax Court case citations concerning deductions associated with façade conservation easement donations as a reference for professional tax advisors.
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- March 13, 2008, Letter from IRS to NTHP
- December 13, 2007, Letter to IRS from NTHP-NHRA
- September 21, 2007, IRS Releases Chief Counsel Memorandum: Valuation of Facade Easements
- June 18, 2007, IRS Notice 2007-50 on Deductions for Qualified Conservation Contributions
- November 13, 2006, IRS Issues Notice 2006-96: Transitional Guidance Regarding Appraisal Requirements for Noncash Charitable Contributions
- March 28, 2006 IRS's Steven Miller Speaks Regarding Conservation Easements
- February 7, 2006 IRS Issues Notice IR-2006-25
- November, 2005 Trust Receives Notification of IRS Challenges
- June 23, 2005 Hearing by the House Ways and Means - IRS Opening Statement
- June 23, 2005 Hearing by the House Ways and Means on Façade Conservation Easements
- February 28, 2005 IRS Issues Notice IR-2005-19 and National Architectural Trust Requests Clarification
- December 29, 2004 National Architectural Trust Requests Meeting with IRS
- October 22, 2004 Speech from Stephen Miller, IRS
- August 16, 2004 Clarification Requested on Notice IR-2004-41
- July 12, 2004 Notice IR-2004-41
- Hilborn v. Commissioner, 85 T.C. 677 (U.S. Tax Ct. 1985)
- Nicoladis v. Commissioner, T.C. Memo 1988-163 (U.S.Tax Ct. 1988)
- Losch v. Commissioner, T.C. Memo 1988-230 (U.S. Tax Ct. 1988)
- Griffin v. Commissioner, T.C. Memo 1989-130 (U.S.Tax Ct. 1988)
- Dorsey v. Commissioner, T.C. Memo 1990-242 (U.S. Tax Ct. 1990)
March 13, 2008, Letter from IRS to NTHP
This is a letter from Stephen Miller, IRS Commissioner in charge of Tax Exempt and Government Entities, to Paul Edmonson, Vice President and General Counsel for the National Trust for Historic Preservation.
March 13, 2008 Letter from IRS to NTHP
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December 13, 2007, Letter to IRS from NTHP-NHRA
This is a letter from Paul Edmonson, Vice President and General Counsel of the National Trust for Historic Preservation, to Stephen Miller, IRS Commissioner in charge of Tax Exempt and Government Entities.
December 13, 2007 Letter from NTHP-NHRA to IRS
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September 21, 2007, IRS Releases Chief Counsel Memorandum: Valuation of Facade Easements
This memorandum summarizes IRS Chief Counsel's position regarding the "before and after" valuation of façade easements.
September 21, 2007, IRS Chief Counsel Memorandum
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June 18, 2007, IRS Notice 2007-50 on Deductions for Qualified Conservation Contributions
This notice provides guidance relating to the percentage limitations imposed by recent changes to the Internal Revenue Code on "qualified conservation contributions" made by individuals. The recent changes are effective for contributions made in taxable years beginning after December 31, 2005, and before January 1, 2008.
Notice 2007-50
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November 13, 2006, IRS Issues Notice 2006-96: Transitional Guidance Regarding Appraisal Requirements for Noncash Charitable Contributions
This notice provides transitional guidance relating to the new definitions of “qualified appraisal” and qualified appraiser” in § 170(f)(11) of the Internal Revenue Code, and new § 6695A of the Code regarding substantial or gross valuation misstatements, as added by §1219 of the Pension Protection Act of 2006, Pub. L. No. 109-280, 120 Stat. 780 (2006).
IRS Notice 2006-96
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March 28, 2006 IRS's Steven Miller Speaks Regarding Conservation Easements
In a March 28, 2006 speech in Washinton, DC to the Spring Public Lands Conference, IRS Tax Exempt/Government Entities Commissioner Steven Miller discussed some recent findings of his agency's analysis of donations of conservation easements.
IRS' Miller Speaks on Conservation Easements
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February 7, 2006 IRS Issues Notice IR-2006-25
On February 7, 2006, the Internal Revenue Service issued Notice IR-2006-25, which is their annual list of potential tax scams. In this notice, the IRS identifies the potential for donors to take overvalued tax deductions with respect to donations of façade conservation easements. The notice was specific as to the potential overvaluation being on properties already subject to local historic preservation laws that prohibit alteration to the building's façade.
IRS Notice IR-2006-25
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November, 2005 Trust Receives Notification of IRS Challenges
The Trust is aware of several IRS audits on donors closed within the last two years that did not result in a change in the donors' claimed value of the façade conservation easements donated. However, in the fourth quarter of 2005, the Trust was notified of several instances in New York City where the IRS has initiated challenges to the value of 2002 façade conservation easement donations on residential properties. Each of these IRS challenges raised specific issues concerning the supporting appraisal of the easement's valuation. The IRS asserted the following requirements, observations and preliminary conclusions with respect to the appraisals:
• Valuation based on the Court Case History Measurement and IRS acceptable valuation range "methodologies" are either not relevant or are not recognized by the IRS.
• The estimation of values by use of the "before and after" analysis requires employing market derived empirical evidence to measure any loss in value after the donation.
• The appraisal report submitted to the IRS failed to identify a loss in value by use of any empirical evidence.
• Since the subject property is located in a local historic district in which there are existing restrictions, regulations and controls, the terms of the easement are substantially redundant.
June 23, 2005 Hearing by the House Ways and Means - IRS Opening Statement
On June23, 2005, the House Ways and Means Oversight Committee held a hearing on façade conservation easements. Included on the panel was Stephen Miller, IRS Commissioner for Tax Exempt and Government Entities, among others. The IRS prepared an opening statement summarizing its views.
IRS Opening Statement by Stephen T. Miller
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June 23, 2005 Hearing by the House Ways and Means on Façade Conservation Easements
On June 23, 2005, the House Ways and Means Oversight Committee held a hearing on façade conservation easements. Included on the panel was Steven McClain of the National Architectural Trust among others. The Trust prepared an opening statement summarizing the Trust’s views as to the importance of the program.
National Architectural Trust Opening Statement by Steven McClain
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February 28, 2005 IRS Issues Notice IR-2005-19 and National Architectural Trust Requests Clarification
On February 28, 2005, the IRS issued Notice IR-2005-19, which covered many topics and included a single statement relating to the Federal Historic Preservation Tax Incentive Program as follows: "In many cases, local historic preservation laws already prohibit alteration of the home's façade, making the contributed easement superfluous. Even if the façade could be alteed, the deduction claimed for the easement contribution may far exceed the easement's impact on the value of the property."
On March 24, 2005, the National Architectural Trust requested that the Internal Revenue Service clarify this statement contained in IR-2005-19. Included in this letter were a number of facts which counter the presupposition that local ordinances reduce the public benefit provided by this program.
National Architectural Trust Requests Clarification to Notice IR-2005-19
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December 29, 2004 National Architectural Trust Requests Meeting with IRS
On December 29, 2004, the National Architectural Trust requested a meeting with the IRS after the Trust had not received clarification requested to Notice 2004-41 earlier that year. The IRS agreed to the meeting in the form of a conference call that occurred on February 7, 2005. The IRS continued to refrain from giving any additional guidance at that time regardless of the Trust’s efforts to explain the precedence on easement valuations already set by the US Tax Courts and the impact that the absence of this information had on the historic preservation movement.
IRS Meeting Request
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October 22, 2004 Speech from Stephen Miller, IRS
On October 22, 2004, Stephen Miller, IRS Commissioner for Tax Exempt and Government Entities, spoke before the American Society of Appraisers concerning conservation easements. Mr. Miller reiterated the removal of easement valuation range guidelines from IRS documentation.
IRS Speech on Conservation Easements
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August 16, 2004 Clarification Requested on Notice IR-2004-41
On August 16, 2004, a memorandum prepared by Patton Boggs LLP, on behalf of the National Architectural Trust was sent to the IRS requesting that the IRS clarify Notice 2004-41 by providing more specific guidance to tax-exempt organizations and their donors with respect to conservation easement donations under IRC section 170.
Memo to the IRS from Patton Boggs LLP
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July 12, 2004 Notice IR-2004-41
On July 12, 2004, the IRS published Notice 2004-41 concerning the valuation of façade conservation easements. In the timeframe surrounding the publication of this notice, the IRS made unannounced removals of suggested easement valuation ranges from approximately ten to fifteen percent of the fair market value of the property including land from two broadly referenced IRS documents. Before the IRS issued this notice and removed these statements from their documentation, it was common practice for government agencies, historic trusts, appraisers and tax professionals to reference these sources as a guideline.
The National Architectural Trust, as a result of these actions, received invitations to participate in several meetings in cooperation with the IRS, other historic preservation organizations and appraisal associations. The Trust and other preservation and appraisal organizations went to great lengths to explain the benefits of the façade conservation easement program and the checks and balances included in the process to ensure proper easement valuation and the perpetual nature of the easement per the Internal Revenue Code.
Notice IR-2004-41
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Hilborn v. Commissioner, 85 T.C. 677 (U.S. Tax Ct. 1985)
Before and after the IRS issued final regulations governing the circumstances under which easement donations would be allowable as charitable deductions (Treasury Regulations Section 1.170A-14), several cases relating to façade conservation easements were heard by the United States Tax Court. This case citation is one of five significant cases resolving issues raised by the IRS relating to the fair market value of façade conservation easement donations. Appraisers and tax advisors may find helpful guidance on questions relating to the valuation of façade conservation easements by reviewing these relevant United States Tax Court cases. The Trust also recommends potential donors review Notice 2004-41 and these cases with their legal and tax advisors.
Hilborn v. Commissioner, 85 T.C. 677 (U.S. Tax Ct. 1985)
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Nicoladis v. Commissioner, T.C. Memo 1988-163 (U.S.Tax Ct. 1988)
Before and after the IRS issued final regulations governing the circumstances under which easement donations would be allowable as charitable deductions (Treasury Regulations Section 1.170A-14), several cases relating to façade conservation easements were heard by the United States Tax Court. This case citation is one of five significant cases resolving issues raised by the IRS relating to the fair market value of façade conservation easement donations. Appraisers and tax advisors may find helpful guidance on questions relating to the valuation of façade conservation easements by reviewing these relevant United States Tax Court cases. The Trust also recommends potential donors review Notice 2004-41 and these cases with their legal and tax advisors.
Nicoladis v. Commissioner, T.C. Memo 1988-163 (U.S.Tax Ct. 1988)
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Losch v. Commissioner, T.C. Memo 1988-230 (U.S. Tax Ct. 1988)
Before and after the IRS issued final regulations governing the circumstances under which easement donations would be allowable as charitable deductions (Treasury Regulations Section 1.170A-14), several cases relating to façade conservation easements were heard by the United States Tax Court. This case citation is one of five significant cases resolving issues raised by the IRS relating to the fair market value of façade conservation easement donations. Appraisers and tax advisors may find helpful guidance on questions relating to the valuation of façade conservation easements by reviewing these relevant United States Tax Court cases. The Trust also recommends potential donors review Notice 2004-41 and these cases with their legal and tax advisors.
Losch v. Commissioner, T.C. Memo 1988-230 (U.S. Tax Ct. 1988)
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Griffin v. Commissioner, T.C. Memo 1989-130 (U.S.Tax Ct. 1988)
Before and after the IRS issued final regulations governing the circumstances under which easement donations would be allowable as charitable deductions (Treasury Regulations Section 1.170A-14), several cases relating to façade conservation easements were heard by the United States Tax Court. This case citation is one of five significant cases resolving issues raised by the IRS relating to the fair market value of façade conservation easement donations. Appraisers and tax advisors may find helpful guidance on questions relating to the valuation of façade conservation easements by reviewing these relevant United States Tax Court cases. The Trust also recommends potential donors review Notice 2004-41 and these cases with their legal and tax advisors.
Griffin v. Commissioner, T.C. Memo 1989-130 (U.S.Tax Ct. 1988)
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Dorsey v. Commissioner, T.C. Memo 1990-242 (U.S. Tax Ct. 1990)
Before and after the IRS issued final regulations governing the circumstances under which easement donations would be allowable as charitable deductions (Treasury Regulations Section 1.170A-14), several cases relating to façade conservation easements were heard by the United States Tax Court. This case citation is one of five significant cases resolving issues raised by the IRS relating to the fair market value of façade conservation easement donations. Appraisers and tax advisors may find helpful guidance on questions relating to the valuation of façade conservation easements by reviewing these relevant United States Tax Court cases. The Trust also recommends potential donors review Notice 2004-41 and these cases with their legal and tax advisors.
Dorsey v. Commissioner, T.C. Memo 1990-242 (U.S. Tax Ct. 1990)
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