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The Never-ending Tax Rip-off

For the past six years, government authorities have worked harder than ever to put an end to a sort of tax avoidance plan that the Internal Revenue Service has dubbed “abusive” and “among the worst of the worst tax schemes.”

The IRS has conducted tens of thousands of audits and has threatened harsh fines for anyone who takes advantage of the system. The Justice Department has charged and sued prominent promoters of “fraudulent” agreements, resulting in multiple guilty pleas and a civil settlement. Democrats and Republicans in Congress have joined forces to introduce legislation to end the practice.

But the business has fought back with a posse of lobbyists, including Henry Waxman, a former member of Congress who was long seen as a liberal lion. The fight demonstrates how well-funded interests may sabotage a solution even when both parties agree to take action.

As a result, the scheme is still in use. According to the IRS, it has cost the US Treasury billions in missing taxes along the road.

“There’s a gold mine of tax shelters here,” Oregon Sen. Ron Wyden, chair of the Senate Finance Committee, said. “As long as the number of transactions keeps expanding, there are vast sums of money to be made.” This is a textbook example of lobbyists’ power.”

The government is after a tax deduction known as a “syndicated conservation easement,” which takes advantage of a charity tax break intended by Congress to support the preservation of open land. Landowners who give up development rights for their acreage, usually by gifting those rights to a nonprofit land trust, are entitled to a charitable deduction under standard conservation easements.

Both the public and the property owner gain when conservation easements are used as intended. A pristine area of land is maintained, sometimes as a public park, and the donor receives a tax benefit.

The syndicated versions differ from the originals. Profit-seeking intermediaries have turned abandoned golf courses and lonely scrubland into high-return investment vehicles, rather than protecting a bucolic reserve for animals or humans. These promoters snatched up vacant land that was previously worthless.

Then they employ an appraiser who will say that it has enormous, hitherto unappreciated development value — possibly for luxury holiday houses or a solar farm — and is thus worth several times its purchase price.

Individuals buy stakes in the contribution from the promoters and claim charitable deductions for four or five times their investment. The promoters are paid millions of dollars.


Back in 2017, ProPublica looked into the burgeoning syndicated conservation easement market, which began in Georgia. The Land Trust Alliance, a trade organisation with 950 members who administer traditional conservation easements, was leading efforts to shut it down at the time.

As long-time supporters of the charitable tax break, Alliance leaders were outraged to see it being misused by “brazen” profiteers claiming false deductions, in their opinion.

Fearing that the conservation deduction may be jeopardised entirely, the Alliance prevented its members from collecting easement donations from syndicated sales and urged the IRS to launch an investigation. By 2020, the effort was well started.

Despite IRS audits and enforcement attempts, which had previously shut down other tax schemes, the syndicators perplexed their opponents by refusing to back down. The syndicators had founded the Partnership for Conservation, a Washington trade group (or P4C).

They began spending millions on lobbying and public relations in Congress. P4C claims that syndicated deals provide both conservation and profit, and it criticises the government’s crackdown for having a “chilling effect.”

The battle has turned into a grind. According to the IRS, the usage of syndicated easements has increased from 249 deals in 2016, which generated $6 billion in charity deductions, to 296 deals in 2018, which generated $9.2 billion in deductions. (By contrast, over 2,000 non-syndicated easement deductions have resulted in annual reductions of over $1 billion.)

Last month, IRS Commissioner Charles Rettig told the Senate Subcommittee on Financial Services and General Government that the practice is still going on. He appeared to be irritated. “Despite our efforts,” Rettig testified, “we have not been able to essentially cut down the volume of these transactions that we currently receive.” We require congressional assistance. We need a lawyer to assist us to stop this.”

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A bipartisan coalition of powerful legislators has attempted. In 2020, Wyden and Iowa Sen. Charles Grassley, the finance committee’s ranking Republican, produced a 151-page investigation study calling syndicated easements a “dollar engine” for rich taxpayers.

“You simply insert the dollar bill, and the Dollar Machine returns two dollar bills to you,” according to the report. “However, it was not the promoters who returned the two dollars; it was the federal government, in the form of lost tax income, and the only risk involved was whether the transaction would result in an audit.”

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