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- Tax Legislation and Regulations
- Internal Revenue Code Section 170(h)
- US Code of Federal Regulations, Section 1.170A-14
Tax Legislation and Regulations
The resources contained in this Tax Legislation and Regulations section consist of the principal Internal Revenue Code section providing an incentive for contribution of a historic preservation easement (Section 170(h)) and the principal regulations under that section (Section 1.170A-14). Also included are a brief prepared by an IRS representative regarding easement contributions and a notice issued by the IRS regarding easement abuses.The Internal Revenue Code excerpts incorporate recent changes to the legislation passed by Congress in August 2006. For information on these legislative changes, please return to "Home" and click on "News and Issues."
These materials are provided only for ease of reference. The Trust does not provide legal or tax advice regarding the effects of an easement donation. Each donor should consult with its own tax advisor regarding the specific requirements of claiming a tax deduction for donation of a historic preservation easement.
Internal Revenue Code Section 170(h)
The section of the Internal Revenue Code that provides for a charitable contribution for donation of a historic preservation easement is Section 170(h), reproduced below. To see Section 170, Charitable Contributions and Gifts, in its entirety, please click on the pdf at the end of this section.Section 170 (h) Qualified conservation contribution.—
(1) In general.—For purposes of subsection (f)(3)(B)(iii), the term "qualified conservation contribution" means a contribution—
(A) of a qualified real property interest,
(B) to a qualified organization,
(C) exclusively for conservation purposes.
(2) Qualified real property interest.—For purposes of this subsection, the term "qualified real property interest" means any of the following interests in real property:
(A) the entire interest of the donor other than a qualified mineral interest,
(B) a remainder interest, and
(C) a restriction (granted in perpetuity) on the use which may be made of the real property.
(3) Qualified organization.—For purposes of paragraph (1), the term "qualified organization" means an organization which—
(A) is described in clause (v) or (vi) of subsection (b)(1)(A), or
(B) is described in section 501(c)(3) and—
(i) meets the requirements of section 509(a)(2), or
(ii) meets the requirements of section 509(a)(3) and is controlled by an organization described in subparagraph (A) or in clause (i) of this subparagraph.
(4) Conservation purpose defined
(A) In general.—For purposes of this subsection, the term "conservation purpose" means—
(i) the preservation of land areas for outdoor recreation by, or the education of, the general public,
(ii) the protection of a relatively natural habitat of fish, wildlife, or plants, or similar ecosystem,
(iii) the preservation of open space (including farmland and forest land) where such preservation is—
(I) for the scenic enjoyment of the general public, or
(II) pursuant to a clearly delineated Federal, State, or local governmental conservation policy, and will yield a significant public benefit, or
(iv) the preservation of an historically important land area or a certified historic structure.
(B) Special Rules with Respect to Buildings in Registered Historic Districts. In the case of any contribution of a qualified real property interest which is a restriction with respect to the exterior of a building described in subparagraph (C)(ii), such contribution shall not be considered to be exclusively for conservation purposes unless—
(i) such interest—
(I) includes a restriction which preserves the entire exterior of the building (including the front, sides, rear, and height of the building), and
(II) prohibits any change in the exterior of the building which is inconsistent with the historical character of such exterior,
(ii) the donor and donee enter into a written agreement certifying, under penalty of perjury, that the donee—
(I) is a qualified organization (as defined in paragraph (3)) with a purpose of environmental protection, open space preservation, or historic preservation, and
(II) has the resources to manage and enforce the restriction and a commitment to do so, and
(iii) in the case of any contribution made in a taxable year beginning after the date of the enactment of this subparagraph, the taxpayer includes with the taxpayer’s return for the taxable year of the contribution—
(I) a qualified appraisal (within the meaning of subsection (f)(11)(E)) of the qualified property interest,
(II) photographs of all the entire exterior of the building; and
(III) a description of all restrictions on the development of the building.
(C) Certified historic structure. For purposes of subparagraph (A)(iv), the term certified historic structure means:
(i) any building, structure or land area which is listed in the National Register, or
(ii) any build
Section 170 Charitable Contributions and Gifts
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US Code of Federal Regulations, Section 1.170A-14
The US Code of Federal Regulations, Section 1.170A-14, contains the IRS regulations promulgated under Section 170(h) of the Internal Revenue Code regarding easement donations. The following are excerpted paragraphs from this Regulations Section that highlight the areas of particular interest.To review the Regulations regarding Charitable Contributions in their entirety, please click on the pdf document below.
§1.170A-14. Qualified conservation contributions
(a) Qualified conservation contributions.—A deduction under Section 170 is generally not allowed for a charitable contribution of any interest in property that consists of less than the donor's entire interest in the property other than certain transfers in trust (see Sec. 1.170A-6 relating to charitable contributions in trust and Sec. 1.170A-7 relating to contributions not in trust of partial interests in property). However, a deduction may be allowed under section 170(f)(3)(B)(iii) for the value of a qualified conservation contribution if the requirements of this section are met. A qualified conservation contribution is the contribution of a qualified real property interest to a qualified organization exclusively for conservation purposes. To be eligible for a deduction under this section, the conservation purpose must be protected in perpetuity.
(b) Qualified organization.
(1) Eligible donee. To be considered an eligible donee under this section, an organization must be a qualified organization, have a commitment to protect the conservation purposes of the donation, and have the resources to enforce the restrictions. A conservation group organized or operated primarily or substantially for one of the conservation purposes specified in section 170(h)(4)(A) will be considered to have the commitment required by the preceding sentence. For purposes of this section, the term qualified organization means: (iii) A charitable organization described in section 501(c)(3) that meets the public support test of section 509(a)(2).
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(c) Qualified Organization
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(2) Transfers by donee. A deduction shall be allowed for a contribution under this section only if in the instrument of conveyance the donor prohibits the donee from subsequently transferring the easement (or, in the case of a remainder interest or the reservation of a qualified mineral interest, the property), whether or not for consideration, unless the donee organization, as a condition of the subsequent transfer, requires that the conservation purposes which the contribution was originally intended to advance continue to be carried out. Moreover, subsequent transfers must be restricted to organizations qualifying, at the time of the subsequent transfer, as an eligible donee under paragraph (c)(1) of this section.
(d) Conservation purposes
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(5) Historic preservation
(i) In general. The donation of a qualified real property interest to preserve a historically important land area or a certified historic structure will meet the conservation purposes test of this section. When restrictions to preserve a building or land area within a registered historic district permit future development on the site, a deduction will be allowed under this section only if the terms of the restrictions require that such development conform to appropriate local, State, or Federal standards for construction or rehabilitation within the district. See also, Section 1.170A-14(h)(3)(ii).
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(iii) Certified historic structure. The term certified historic structure, for the purposes of this section, means any building, structure or land area which is:
1. Listed in the National Register, or
2. Located in a registered historic district (as defined in Section 4
Regulations Sections 1.170A-1 to A-14
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