Expansion of Land Conservation Tax Incentives Underway

The late media mogul Ted Turner utilized conservation easements to protect his vast ranch, which spans roughly 114,000 acres near Bozeman, Montana.

Congress is currently advancing initiatives to widen land conservation tax incentives that have faced scrutiny for nearly a decade. The proposed farm bills from both the House and Senate aim to establish a new program that would allocate funding to landowners willing to maintain their forests instead of selling or developing them.

In the past, the IRS tightened regulations on conservation easements since some investor groups exploited them for inflated tax credits. However, attorneys specializing in these easements assert that the tax strategy remains beneficial for individuals and families aiming to preserve their land while reducing their tax burden.

Many states provide tax credits for donated land. In recent years, states like New York, Colorado, and Georgia have notably expanded their conservation easement initiatives.

“I’ve encountered people who say, ‘Conservation easements are a bad idea. They’re being abused.’ That’s not the case,” noted Florida attorney Keith Fountain. “The concept benefits a small group of landowners who genuinely value their property. Conservation easements allow them to keep, manage, and protect their land sustainably, while also reaping economic benefits.”

These easements permit landowners to maintain property ownership while relinquishing certain development rights. Generally, owners agree to place permanent restrictions on how their property can be used, safeguarding agricultural land, wildlife habitats, or open spaces. They can either donate or sell the development rights at a reduced price to land trusts, government bodies, or other approved organizations.

Alternatively, landowners can take a charitable deduction. Often, they can continue living on the land and utilizing it for recreational activities like hunting and fishing, as long as they adhere to the easement’s stipulations.

According to Fountain, many ranch owners opt to sell conservation easements to retain family land, using those funds to settle debts or buy out younger relatives who may not want to carry on ranching. Selling easements at discounts allows them to claim a charitable deduction based on the difference between the sale price and the fair market value.

However, transactions that involve groups of investors—referred to as syndicated conservation easement transactions—have attracted IRS scrutiny. In these cases, promoters sell land interests to investors and then donate the easement, often leading to inflated property valuations that allow for substantial tax credits.

A recent ruling by the U.S. Tax Court found an Alabama partnership tried to claim a $41.6 million deduction based on an exaggerated property assessment. The court sided with the IRS, maintaining the deduction resulted from speculative valuations regarding the property’s potential as a limestone quarry.

To combat issues with syndicated easements, Congress capped their value in 2022, yet the IRS is still investigating around 1,100 cases and has extended the settlement period to alleviate its backlog.

While the government is focused on syndicated transactions, individual landowners can also raise red flags for an IRS audit by donating easements. Consequently, as Fountain explained, many choose to sell easements even though donating them could yield better tax benefits.

Notably, many attorneys shy away from advising on conservation easements. However, former IRS national fraud attorney Carolyn Schenk emphasized to CNBC that these easements shouldn’t be dismissed entirely.

“Just because some taxpayers misuse the rules doesn’t mean the fundamental policy is without merit,” Schenk stated, having transitioned from the IRS to a law firm in 2025. “There’s a consensus at the IRS that supporting conservation easements isn’t simply exploiting a loophole.”

Navigating the Complexities of Conservation Easements

In the last couple of years, tax courts have increasingly concentrated on assessing the value of abandoned development rights on lands. This shift in focus has provided clarity for land trusts and owners, especially as past cases often revolved around technical errors in deeds and documentation.

Attorney Steve Small emphasized that conservation easements pose minimal risk if established correctly and within the law, particularly when partnered with someone well-versed in enforcing such agreements. Small himself contributed to writing the conservation easement tax law while working at the IRS in the early 1980s.

He noted that unrealistic expectations from clients about deductions—often instilled by syndicated easement promoters—can complicate matters. For properties acquired recently, deductions depend on a percentage of the purchase price rather than a multiple.

Donors should also account for less obvious factors that might diminish their deductions; for instance, protecting scenic views through easements can actually enhance surrounding property values. If the easement benefits nearby land owned by the same individual or their relatives, this added value should be deducted from the overall deduction claim.

Moreover, Small advised clients to incorporate ample photographs of the land when submitting forms to the IRS, as a mere stack of typed papers doesn’t capture the project’s essence.

“When you take the easement deduction, what does the IRS see? Just paperwork,” he remarked. “They miss the beauty of the land and the expansive views.”

Overall, Small conveyed that if a conservation easement is properly structured, the likelihood of an audit remains low, especially given current IRS staffing challenges. “In reality, executing a well-thought-out conservation easement project today bears a lower risk than it did a decade ago,” he concluded.