Here’s how Trump’s private club deal used conservation easement to take advantage of IRS rules,
What is a conservation easement?
A property owner agrees to give up the right to develop land or make changes to specific features in exchange for tax benefits. The owner deeds an easement on the land or property to a qualified nonprofit organization or agency, which makes sure the owner maintains and preserves the property.
Why do they exist?
To promote the conservation and preservation of land and buildings, Congress approved an income tax deduction for conservation easements in 1980. Since the easements usually devalue a property — a future owner can’t demolish, build additions or convert it into condos, for example — the IRS in the 1970s allowed property owners to deduct that drop in value from their personal income taxes.
Why were such easements on the IRS list of the Dirty Dozen Tax Scams?
After detecting abuse of the tax break in 2005 and 2006, the IRS announced that onethird of all easement donors would be subject to a pre-audit review. The reviews almost always rejected the deduction, according to a 2009 report of the IRS Service Advisory Council. Among the most common reasons the deductions had little or no value: They’re not needed when local preservation laws are already in place.
Does the town of Palm Beach already preserve historic buildings such as Mar-a-Lago?
Palm Beach has rigorous preservation regulations. Designated historic buildings, such as Mar-a-Lago, must obtain approval from the town’s Landmarks Preservation Commission to modify the exterior of a building — but not the interior.
So why did Trump donate a preservation easement on Mar-a-Lago?
The easement that Trump gave to the National Trust for Historic Preservation covers not only the exterior of Mara-Lago but also “critical features” of the interior, which are not protected by the town’s rigorous rules. The town insisted on the protections before granting Trump the right to open a private club.
What must Trump do?
Under its terms, Trump continues to own and use Mara-Lago but must maintain, replace, rebuild and repair the critical features “in substantially the form and condition with substantially similar materials.” Those features include carvings, columns, doors, windows, light fixtures, walls, floors and ceilings in 25 rooms, including bedrooms, the dining room, bathrooms and the living room. The easement also protects panoramic views of the ocean.
Does Trump get a tax break?
He hired an appraiser who estimated Mar-a-Lago lost $5.7 million in value because of the easement to the National Trust. The appraisal, completed in 1996, states that its purpose is to “estimate for federal income tax purposes the fair market value of the subject property.” Since Trump has not released his tax returns, the status of the tax break is not publicly known.
What other properties has Trump gotten a tax break to protect?
Although Trump has not released his tax returns he has made public his charitable donations from 2010 through 2015, which totaled more than $100 million. Conservation easements accounted for $63.8 million of those donations.
In addition to that, Trump deducted $39.1 million from his 2005 federal income taxes under the terms of an easement that barred him from building houses on his golf course in Bedminster, N.J., The Wall Street Journal reported.
Trump also donated a conservation easement for his Seven Springs estate in Westchester County, N.Y., The Journal found. The Journal also reported that, in 2014, Trump donated an easement on 11.5acres of his Trump National Golf Course in Los Angeles.