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By Jeremy B. Fancher
June 1, 2023
We are writing to inform you of a recent development regarding conservation easements that may have a significant impact on your charitable deductions. In order to preserve your charitable deduction from a grant of a conservation easement, you must act to amend your easement deed by July 24, 2023.
The Treasury has released Notice 2023-30, which sets forth the safe harbor deed language for extinguishment and boundary line adjustment clauses in conservation easements as required by the SECURE 2.0 Act of 2022. This notice is crucial for those who have granted a conservation easement and taken a charitable gift deduction for doing so.
Overview
Notice 2023-30 provides the safe harbor language that can be used in easement grants to cover situations where the easement is later extinguished due to unexpected circumstances or when a boundary line adjustment is needed. By incorporating this language into your easement grant, you can ensure that your charitable deduction will be preserved even in these situations.
For those who have already granted a conservation easement, you can now amend your easement to include the safe harbor language. However, to take advantage of this opportunity, the amendment must be recorded by July 24, 2023. There is no requirement to amend your conservation easement, but we recommend doing so if you wish to preserve your charitable deduction in light of these new provisions.
Background
A qualified conservation contribution, as defined in Section 170(a) of the Internal Revenue Code, allows taxpayers to claim a charitable deduction for the donation of a perpetual conservation restriction on the use of real property. This contribution must be made to a qualified organization and exclusively for conservation purposes. The perpetual conservation restriction is critical to maintaining the charitable deduction.
The SECURE 2.0 Act of 2022 has now directed the Treasury to provide safe harbor deed language for extinguishment and boundary line adjustment clauses in conservation easements. This development is significant, as it allows donors to maintain their charitable deductions even when unexpected changes occur, provided they have incorporated the safe harbor language into their easement grants. We encourage you to review your current conservation easements and consider amending them to include the safe harbor language provided in Notice 2023-30.
Amending Your Conservation Easement Deed
To amend your existing conservation easement deed to include the safe harbor language provided in Notice 2023-30, please follow these steps:
- Review your current easement deed to identify any existing provisions related to extinguishment and boundary line adjustments. Make note of any differences from the safe harbor language.
- Consult with your legal counsel and qualified organization to ensure that they are aware of Notice 2023-30 and the potential need to amend the deed.
- Draft an amendment to the deed that incorporates the safe harbor language as provided in Notice 2023-30. Be sure to consider any state or local legal requirements that may apply to the amendment process.
- Obtain the necessary approvals from the qualified organization and any other relevant parties, such as lenders or government entities, before finalizing the amendment.
- Record the amendment by July 24, 2023, to ensure compliance with the new requirements and preservation of your charitable deduction.
Ongoing Compliance and Considerations
In addition to amending your conservation easement deed, we encourage you to consider the following ongoing compliance measures and best practices:
- Regularly review and monitor the conservation values of your property to ensure that the easement’s purposes are being maintained.
- Stay informed about changes in tax laws and regulations related to conservation easements and charitable deductions, as these may impact your tax planning and compliance.
- Maintain open lines of communication with the qualified organization responsible for enforcing your easement, as well as any other relevant parties, such as lenders or government entities.
- Keep accurate records of the ongoing management and stewardship of your property to demonstrate compliance with the easement’s terms and conditions.
- Consult with your legal and tax advisors regularly to ensure that your conservation easement continues to provide the intended benefits and comply with all applicable laws and regulations.
Our team remains committed to assisting you in understanding and implementing these new requirements. Please reach out to us if you have any questions or concerns related to Notice 2023-30 and the preservation of your charitable deductions.