Conservation Easements: Appraisal Requirements for Tax Deduction Claims
What a Conservation Easement Is
A conservation easement is a voluntary, legally binding restriction placed on a property's use, typically donated or sold to a qualified land trust or government entity to protect conservation values such as open space, agricultural land, or historic character.
The “Qualified Appraisal” Requirement
To claim a charitable deduction for a conservation easement donation, the IRS requires a “qualified appraisal” prepared by a “qualified appraiser,” as defined under Internal Revenue Code Section 170(f)(11), and reported on IRS Form 8283. The appraisal must comply with generally accepted appraisal standards, including USPAP, and address the specific before-and-after valuation methodology the IRS expects for easement transactions.
Why IRS Scrutiny Has Increased
In recent years, the IRS has significantly increased enforcement attention on conservation easement transactions, particularly syndicated arrangements involving aggressive valuation claims. This heightened scrutiny makes a well-documented, independently supportable valuation more important than ever.
What Makes an Easement Appraisal Defensible
A defensible easement appraisal typically includes a clearly documented before-and-after valuation analysis, a supportable highest-and-best-use determination for both scenarios, market-derived comparable data, and thorough documentation of the easement's specific restrictions and their impact on value.
Given the complexity and scrutiny surrounding conservation easement valuations, Dunkin Advisors recommends engaging a qualified appraiser and tax counsel together, early in the process. Contact us to discuss your property.
Compliance Note: This article is provided for general educational purposes only and does not constitute legal or tax advice. Conservation easement transactions involve complex, evolving IRS requirements and significant regulatory scrutiny. Property owners considering an easement donation should consult a qualified tax attorney or CPA before proceeding.