The following is a comment letter submitted through regulations.gov on February 6, 2023 ​​​by Elizabeth K. Blickley, Brian C. Bernhardt, Nicholas Lyskin and Adam R. Young.

One of the principal purposes of the Internal Revenue Code and accompanying Treasury Regulations is to put the public on notice of the requirements to report income, deductions, and credits. One major failing of Notice 2017-10 (the “Notice”) was despite its purported restrictions on application to syndicated conservation easements exceeding 2.5 times the partners’ basis, the Notice was applied to all donations of real property. The IRS routinely denies deductions in full in many conservation donation cases regardless of whether the donation was of a fee simple or an easement; the donor was an individual [1] or a group; the donee was a 501(c)(3) organization or a subdivision of local government; the transaction was or was not syndicated; the value of the donation was less than 2.5 times the partners’ basis [2]; where an appraisal and a contemporaneous written acknowledgement were attached to the return; where the IRS has hired its own appraiser during the examination process and determined there is a value; and where the property provided habitat for verified endangered species. By reissuing Notice 2017-10 in regulation format, the government is not providing any guidelines to taxpayers that by following these regulations, taxpayers can avoid any penalties.

When Congress has spoken, its direction is binding. It is only when there is a gap to fill that an agency should issue regulations [3]. When those regulations are themselves legislative in nature, they are held to a higher standard than regulations that merely interpret preexisting legislation. This distinction is important, as the 6th Circuit in Mann Construction [4] succinctly stated: 

Legislative rules have the “force and effect of law”; interpretive rules do not. Perez v. Mortg. Bankers Ass’n, 575 U.S. 92, 96-97 (2015) (quoting Shalala v. Guernsey Mem’l Hosp., 514 U.S. 87, 99 (1995)). Legislative rules impose new rights or duties and change the legal status of regulated parties; interpretive rules articulate what an agency thinks a statute means or remind parties of pre-existing duties. Tenn. Hosp. Ass’n v. Azar, 908 F.3d 1029, 1042 (6th Cir. 2018). When rulemaking carries out an express delegation of authority from Congress to an agency, it usually leads to legislative rules; interpretive rules merely clarify the requirements that Congress has already put in place. Id. at 104 .

The Tax Court in Green Valley Investors recently invalidated Listing Notice 2017-10 on the grounds that it was issued without following the notice-and-comment procedures required by Section 553 of the Administrative Procedure Act (“APA”) [5]. Treasury has attempted to correct this error by reissuing the problematic Notice in regulation format—but without attempting to correct for the other failures of the Notice and instead extending its scope to items never contemplated by Congress.

As of the date of this Comment, the Code still allows a deduction for the donation of a conservation easement in whatever form, so long as the donation meets the requirements of Section 170 and the related regulations. The interpretive rules of the related regulations are intended to provide the IRS with data it believes it needs to supervise and review the claimed deductions. Legislative rules in the related regulations issued with notice-and-comment add additional requirements. Notice 2017-10 added yet another layer—not because of the substance of the deduction but because the government believed the value of syndicated conservation easements was improperly inflated [6]. Yet, the Notice merely attempted to penalize participation in a donation, rather than get to the root of IRS’s perceived problem: valuation.

We all know that real estate inherently has value. Indeed, it is the major source of wealth for most homeowners. There are other commonly accepted truisms as well: real estate will generally increase in value over time; the way to invest in real estate is to buy low and sell high; altering zoning can increase the value without physically changing the property; and physically developing property can increase its value. But in practice, the government ignores all of these truths by relying solely on the contributing partner’s original purchase price and ignoring all evidence of value to the contrary, including the required qualified appraisal attached to the tax return. Further, the government routinely ignores its own appraiser’s valuation, asserts that the donated rights should be valued at zero, and completely denies the deduction in full.

However, denying the deduction has not been enough. Instead, the IRS has also sought to impose a penalty simply for utilizing Section 170. Even though 20% and 40% penalties already existed for understating tax or overstating a deduction, [7] the IRS began applying a penalty under Section 6662A, which requires the transaction to be “identified by the Secretary as a tax avoidance transaction” [8]. Issuing a Notice was a quick and easy method to accomplish that result and yet Treasury never attempted to issue proposed regulations for notice-and-comment and instead waited for the Notice to be invalidated. Further, despite the explanation and headings in the Notice, the IRS applied the additional penalties under the Notice to non-syndicated easements [9]. Now that more courts are agreeing with the Tax Court that the listing notice was required to undergo notice-and-comment rulemaking, [10] the IRS is attempting to reimpose the requirements of the Notice and include additional and problematic requirements.

The Proposed Regulations should be withdrawn in part, amended in part, and should instead impose some concrete criteria taxpayers can rely on for three principal reasons. First, just like Notice 2017-10, the Proposed Regulations would improperly apply to anyone even tangentially connected with the donation of real property, including those who donate real property in transactions that do not meet the four elements proposed in § 1.6011-9(b)(1) through (4). Second, the Proposed Regulations would impose new, counterproductive rules and requirements that were not even present in Notice 2017-10, further reducing the likelihood of taxpayers donating land for conservation purposes. And third, the Proposed Regulations include proposals that have already been preempted by the “Consolidated Appropriations Act, 2023,” more commonly known as the $1.7 trillion Omnibus bill passed in December of 2022 (herein “the Omnibus Bill”) [11].

1. Overarching changes to the proposed regulations required by Congressional preemption

On December 29, 2022, Congress spoke yet again [12]. The legislature has continued to permit a deduction under Section 170, although adjusting the criteria to all transactions after that date to focus on the investor’s “relevant basis” [13]. In practice, the IRS focused on the original landowner’s purchase price in the real estate. The new law divorces the inquiry from the value of the donation and instead focuses on the limitation of the deduction for individual taxpayers. Under Sec. 170 (a)(1) there is an allowable deduction for any allowable charitable contribution, and 170(h)(1)(A) continues to define “qualified conservation contribution” to mean a contribution of a “qualified real property interest”. In the new 170(h)(1)(7)(A), Congress excluded from “qualified real property interest” contributions from passthrough entities that exceed 2.5 times the sum of the partners’ relevant basis.14 This requires four alterations to the proposed regulations:

(1) Removal of all direct and indirect references to basis in the hands of the partnership.

(2) Removal of all direct or indirect references to the appraisal of the donated rights in relation to 2.5 times the partnership’s basis [15].

(3) Removal of all references to an amount equal to 2.5 times the individual partners’ relevant basis [16].

(4) Recitation that donations not made through a passthrough entity are not governed by the new sub-section or the proposed regulations.

Further, the Omnibus bill stated these new Code sections are applicable to donations after its effective date. Until the regulations become final, any regulations’ effective date should be the day after they become final. Congress determined all rules relating to donations after December 29, 2022, shall only apply prospectively and until Treasury puts the public on notice with final regulations, the regulations should have no retroactive effect.

The Omnibus bill included a safe-harbor provision for amending deeds and these proposed regulations should also include a safe harbor. The Omnibus bill also required that taxpayers have a period of time to amend their easement deed to follow whatever language the IRS deems appropriate. This is akin to amending deeds for mutual mistake. There have been various legal battles about provisions from model deeds that IRS routinely and repeatedly accepted in the past and were therefore reused in almost all easement deeds. That the IRS later decided the model deed’s language caused the easements to fail the intended “in perpetuity” requirement all parties to the deed agreed to, the parties’ actions show there was mutual mistake. The public has been asking the IRS for model deed language for many years, so this is not a new request that surprised the IRS when it was included in the Omnibus bill. Because the Omnibus bill specifically ordered the IRS to come up with the language, all taxpayers should be permitted to utilize the language IRS ultimately blesses in all easements. If taxpayers entering into these transactions after the Omnibus bill have this safe harbor, so too should all other taxpayers.

       2. The Proposed Regulations will improperly apply to everyone who wishes to donate land for conservation purposes.

The Proposed Regulations provide that transactions that are the same as, or “substantially similar” to, a syndicated conservation easement transaction constitute a listed transaction. To define a syndicated conservation easement transaction, the Proposed Regulations adopt the same four-pronged definition set forth in Notice 2017-10:

i. The taxpayer receives “promotional materials” that provide for a charitable contribution deduction equal to or more than 2.5 times the taxpayer’s investment;

ii. The taxpayer invests directly, or indirectly, through a passthrough entity;

iii. The passthrough entity contributes the conservation easement to a qualified organization and allocates the charitable contribution deduction to the taxpayer; and

iv. The taxpayer reports the charitable contribution deduction on the taxpayer’s federal tax return.

See Prop. Reg. § 1.6011-9(b). However, the Proposed Regulations also expand on these four factors in a manner that would deceive taxpayers and make land conservation less likely.

Consider this example:

Taxpayer A and her childhood friend and neighbor, Taxpayer B, form a pass-through entity for the purposes of acquiring real property in which they intend to operate a farm. During their lives, the taxpayers’ parents operated separate farms and the taxpayers intend to continue each of their families’ traditions albeit in a different location. Taxpayer A and Taxpayer B each contribute cash to the pass-through entity in exchange for an equity interest and the pass through entity acquires 150 acres of pristine farmland near a suburb of a major metropolitan city.

Due to rising inflation and Taxpayer B’s declining health due to long-Covid, the farming revenues substantially decline and the taxpayers close up shop one year after acquiring the property. As the taxpayers are aware that the United States lost 2,000 acres of farmland and ranchland per day from 2001 to 2016 [17] and local developers intend to acquire the property (if sold) to construct a mixed-use commercial and industrial complex, the taxpayers plan to conserve the property by donating it to a qualified organization. As part of such plan, the taxpayers obtain a qualified appraisal which provides a value for the property that would result in a charitable contribution deduction which equals or exceeds 2.5 times the taxpayers’ investments in the pass-through entity. Understanding that the IRS has substantially increased audits of conservation easement transactions, the taxpayers engage a local accounting firm to prepare an opinion as to whether the transaction satisfies all of the rules under Section 170.

Shortly thereafter, and within three years of acquiring the property, the pass-through entity donates the property to a local land trust and reports a charitable contribution deduction which flows through to the taxpayers. At this point, Taxpayer A and Taxpayer B have satisfied all four prongs of Prop. Reg. § 1.6011-9(b). Did Congress intend to penalize Taxpayer A and Taxpayer B for claiming a charitable contribution deduction in this case? Even though the taxpayers sought to follow all of the IRS’ draconian rules with respect to claiming a charitable contribution deduction for a donation of real property, the taxpayers are subject to a substantial risk of audit. Based on the IRS’ consistent position that all property donated to a qualified organization has little value regardless of the facts and circumstances, the taxpayers likely could be liable for tax, penalties, and interest if the deduction is denied. The Proposed Regulations clearly frustrate Congressional intent of encouraging taxpayers to donate property for charitable purposes by swallowing every taxpayer in its path. See War Income Tax Revenue Act of 1917, ch. 63, § 1201(2), reprinted in J.S. Seidman, Seidman's Legislative History of Federal Income Tax Laws, 1938-1861, at 944 (1938).

Assume the same facts from the example above except that taxpayer B is taxpayer A’s spouse. In that case, Section 170(h)(7)(A), as amended by the Omnibus Bill, would not apply. If taxpayer B was taxpayer A’s spouse, instead of her childhood friend, then the partnership could donate the property to the qualified organization as “family partnerships” are exempted from the new Section 170(h)(7)(A) limitations on qualified conservation contributions. See Section 170(h)(7)(D). However, it does not appear that the Proposed Regulations take into account the family partnership exception to Section 170(h)(7)(A), nor is it clear the IRS would not determine this transaction is “substantially similar” despite the carve out and seek to apply the penalty. This is yet another instance where Congress has acted and the Proposed Regulations are required to either remove this section or include Congress’ language.

a. The “2.5 Rule” and “substantially similar” transactions

The 2.5 Rule is satisfied if a taxpayer receives “promotional materials” offering a charitable contribution deduction that equals or exceeds 2.5 times the amount of the taxpayer's investment in the pass-through entity. While this may sound like a straightforward inquiry, it is anything but. In fact, the Proposed Regulations define “promotional materials” so broadly that it would be effectively impossible for a taxpayer to prove he or she did not receive promotional materials:

[T]he term “promotional materials” includes materials described in § 301.6112-1(b)(3)(iii)(B) and any other written or oral communication regarding the transaction provided to investors, such as marketing materials, appraisals (including preliminary appraisals, draft appraisals, and the appraisal that is attached to the taxpayer's return), websites, transactional documents such as the deed of conveyance, private placement memoranda, tax opinions, operating agreements, subscription agreements, statements of the anticipated value of the conservation easement, and statements of the anticipated amount of the charitable contribution deduction.

Prop. Reg. § 1.6011-9(c)(4) (emphasis added).

By including “oral” communications in the Proposed Regulations, Treasury effectively gives itself free reign to allege that any given taxpayer received promotional materials. Indeed, when charged with such allegation, how could one prove that he or she never received even an oral communication? Notice also the oral communication could be to any other investor and any one oral communication regardless of accuracy, renders the deduction unavailable to all investors [18]. Regardless, the Proposed Regulations are so misguided that even this potential evidentiary inquiry is a moot point. Treasury does not actually utilize the four-factor test to make its determination with respect to whether a donation of land constitutes a syndicated conservation easement transaction.

When Treasury applied Notice 2017-10 (before it was invalidated), it simply deemed all donations of real property as transactions that are “substantially similar” to syndicated conservation easement transactions. In other words, taxpayers who fell beyond the plain language of Notice 2017-10 and its accompanying penalties could not rely on the 2.5 Rule or other criteria set forth under Notice 2017-10. Instead, Treasury applied Notice 2017-10 in such a way that there was only one relevant question: was there a donation of real property? If so, Treasury applied Notice 2017-10 and asserted the corresponding penalties against the taxpayer.

Given that the Proposed Regulations utilize the exact same “criteria,” it is not difficult to surmise that the Proposed Regulations will be applied in the same fashion. The broad language would allow Treasury to hide behind the “substantially similar” language and avoid putting the public on notice of what the actual rules and requirements are. Not only does such action violate basic tenets of governance in a democratic society, but it also violates basic principles of statutory interpretation. For example, "[a] statute should be construed so that effect is given to all its provisions, so that no part will be inoperative or superfluous, void or insignificant" [19]. Yet, by simply applying Notice 2017-10 (and inevitably the Proposed Regulations) to all donations of real property, the Treasury renders superfluous the entirety of the actual language. Worse still, a broad construction would mislead taxpayers who rely on the purported factors in an effort to comply with the law. Compliance with congressionally enacted law should not be rendered impossible by unelected officials at Treasury.

b. Three new subrules under the 2.5 Rule

The Proposed Regulations are further misguided in their addition of three new sub-rules with respect to the 2.5 Rule. First, if any of the taxpayer’s promotional materials are “ambiguous,” all ambiguity will be resolved in favor of Treasury. Second, the Proposed Regulations create a rebuttable presumption that the 2.5 Rule is satisfied if the pass-through entity donates a conservation easement within three years of the taxpayer’s investment and the deduction amounts to over 2.5 times the taxpayer’s investment. Third, the “Anti-Stuffing Rule” provides that the taxpayer’s “investment” for purposes of the 2.5 Rule only amounts to whatever amount Treasury believes is attributable to real property donated. These new three sub-rules should be removed entirely. Not only are they irrelevant to the real world (given how Treasury interprets the “substantially similar” language), but they are also flawed for their own independent reasons.

For example, the first rule with respect to “ambiguous” materials is misleading because it does not actually apply to any real ambiguity. Rather, because the “ambiguous” sub-rule applies to the highest deduction amount stated or implied by the promotional materials, such rule simply grants Treasury yet another excuse to apply the Proposed Regulations to all donations of real property. In other words, it does not apply to ambiguities in the taxpayer’s materials, it allows the Treasury to create ambiguities in the taxpayer’s materials.

Plus, when combined with Treasury’s inclusion of “oral” communications under the 2.5 Rule, the taxpayer’s burden would be to convince Treasury that: (1) he or she did not receive any communications, even oral communications, (2) no other investor received any communications, even oral communications, and (3) none of any of the communications even so much as implied that a charitable deduction equal to or greater than 2.5 times the taxpayer’s investment would be available. An individual cannot prove a negative, especially regarding an oral communication the individual was not party to.

Moreover, even if any given taxpayer could overcome such an impossible hurdle, the Proposed Regulations include a new, “rebuttable presumption,” whereby Treasury gives itself permission to simply assume the taxpayer received promotional materials that offered a charitable deduction equal to or greater than 2.5 times the taxpayer’s investment. See § 1.6011-9(d)(2). The practical effect of the “rebuttable presumption” mirrors that of the “substantially similar” language: it allows Treasury to apply the Proposed Regulations to all transactions involving donations of real property, even those outside of the four-pronged definition of syndicated conservation easement transactions. More specifically, it allows Treasury— without even inquiring as to whether the taxpayer received any promotional materials at all— to deem any donation of real property as akin to a syndicated conservation easement transaction.

The only way for a taxpayer to overcome the rebuttable presumption is to establish, “to the satisfaction of the Commissioner,” that none of the promotional materials contained a suggestion or implication that investors might receive a charitable contribution deduction that equals or exceeds an amount that is 2.5 times the amount of their investment in the pass-through entity. Id. But again, the Commissioner does not even have to consider the taxpayer’s evidence.

With respect to the proposed “Anti-Stuffing Rule” set forth at § 1.6011-9(d)(3)-(4), the rule provides that the amount of a taxpayer's investment in the pass-through entity, for purposes of determining application of the 2.5 Rule, is limited to the portion of the taxpayer’s investment attributable to the portion of the real property on which a conservation easement is placed and that produces the charitable contribution deduction described in § 1.6011-9 (b)(3). However, the rule is merely another example of overreach.

The Omnibus Bill already encompasses, and thereby preempts, the proposed Anti Stuffing Rule. For example, the Omnibus Bill amended I.R.C. § 170(h) by adding the provision regarding “relevant basis,” as follows:

(A) IN GENERAL. — A contribution by a partnership (whether directly or as a distributive share of a contribution of another partnership) shall not be treated as a qualified conservation contribution for purposes of this section if the amount of such contribution exceeds 2.5 times the sum of each partner’s relevant basis in such partnership.

(B) RELEVANT BASIS. — The term ‘relevant basis’ means, with respect to any partner, the portion of such partner's modified basis in the partnership which is allocable (under rules similar to the rules of section 755) to the portion of the real property with respect to which the contribution described in subparagraph (A) is made [20].

Put differently, the Omnibus Bill’s amendment to I.R.C. § 170(h)(7) provides that if the taxpayer invests in a partnership with multiple assets (one being the real property to be the subject of the conservation easement), the taxpayer’s “relevant basis” is the portion attributable to the real property under the typical rules for allocating one’s basis. This is not a provision that needs further explanation, given it goes so far as to cite basis allocation rules under Section 755. Granted, the Proposed Regulations include an “Example illustrating anti-stuffing rule” [21], but this is merely an example of the basis allocation rules under I.R.C. § 755. As such, the Anti-Stuffing Rule serves no purpose and should be removed from the Proposed Regulations. The entire purpose of the Proposed Regulations, or any regulation, is to fill in gaps that Congress has left for the applicable agency to address [22]. No such gap exists here.

       3. The § 4965 carve-out and why it should not be eliminated.

Not only do the Proposed Regulations make land conservation less likely from the donor side, they also make it less likely from the donee side. Specifically, the Proposed Regulations propose provisions that would burden donees and thereby reduce land conservation moving forward.

First, the Proposed Regulations consider removing an important exclusion contained in Notice 2017-10, which excluded qualified organizations (e.g., land conservancy groups with nonprofit status) from the definition of “material advisor” and “participant” in a syndicated conservation easement transaction. In other words, if a taxpayer donates a conservation easement and claims a deduction greater than the IRS believes is accurate, Treasury is considering whether to impose part of the blame on the charity that merely agreed to ensure the property would be conserved in accordance with the conservation easement deed. If so, the donee-charity would be required to adhere to additional disclosure requirements as if it were an ordinary participant in a taxable transaction. Further, donee charities are already required to report conservation easements contributed on Line 14, Schedule M of Form 990.

Treasury should cast this thought aside, especially given Treasury’s admission that only a “small number of qualified organizations facilitate abusive syndicated conservation easement transactions” [23]. The government has plenty of pre-existing tools at its disposal for remedying this concern, including revocation of the qualified organization’s tax-exempt status. Otherwise, qualified organizations, generally, will refuse to accept donations of real property out of fear of audits, potential penalties, and corresponding negative impacts to their charitable causes.

Relatedly, the Proposed Regulations also consider removing the Section 4965 carve out. Currently, qualified organizations who receive a conservation easement donation need not worry about excise taxes under Section 4965. However, if this carve out is removed, land conservation will become even less likely because these qualified organizations will refuse to accept the donations out of fear of excise taxes (or possible even losing their tax-exempt status). In short, Treasury is considering labeling tax-exempt charities, which were specifically founded to preserve land for conservation purposes, as akin to promoters of tax shelters. Perhaps doing so would reduce the likelihood that some taxpayers will overvalue their charitable deductions, but it would also substantially reduce the amount of land that will be conserved moving forward. Conserving land and reducing tax shelters are both congressional priorities, but Treasury’s Proposed Regulations would only mildly further one priority (reducing tax shelters) at the complete expense of the other (conserving land).

       4. Conclusion

The primary problem with the Proposed Regulations is that they deceive taxpayers seeking to make a charitable donation involving real property. Today there are more than 100 requirements in Section 170 and the related regulations, and most taxpayers engage experts such as lawyers, accountants, and qualified appraisers to assist them in complying with the requirements. These Proposed Regulations add yet another layer of requirements that taxpayers cannot even rely upon. Taxpayers will undoubtedly believe that they need not worry about their donation of real property so long as they fall outside the scope of Treasury’s four-part definition of syndicated conservation easement. However, because Treasury lumps all donations involving real property into the “substantially similar” category, both under the Notice and under these Proposed Regulations, these Proposed Regulations provide no notice and no guidance to anyone. In short, unless the goal is to substantially reduce land conservation and further backlog the Tax Court with conservation easement cases, changes should be made to the Proposed Regulations before they go into effect.

       5. Recommendations

First, we recommend that the Proposed Regulations include a safe harbor provision, consistent with the Omnibus bill whereby taxpayers have a period of time to amend their easement deed to follow whatever language the IRS deems appropriate. If taxpayers entering into these transactions after the Omnibus bill have this safe harbor, so too should all other taxpayers.

Second, the Anti-Stuffing Rule should be removed entirely on the grounds that it has since been preempted by the Omnibus Bill.

Third, because the new law divorces the inquiry from the value of the donation and instead focuses on the limitation of the deduction for individual taxpayers, all direct and indirect references to basis in the hands of the partnership should be completely removed from the Proposed Regulations.

Fourth, the Proposed Regulations should clearly state that they only apply to donations made through a pass-through entity, as preempted by the Omnibus Bill.

Fifth, the Omnibus bill determined new law or regulations that have the effect of law shall be prospective only.

None of these Proposed Regulations should have an effective date before they become final.

Sixth, Treasury should remove all references to promotional materials, because Congress stated the focus is on the value of the individual partner’s relevant basis, not on advertising or potentially inaccurate statements of a 3rd party.

Seventh, Treasury should remove all references to oral communications. No taxpayer can prove what was or was not in the content of oral communications made to any other investor, and any attempts to prove such a thing in Court is hearsay.

Eighth, Treasury should incorporate the family rule exception from the Omnibus Bill into these proposed regulations.

[1] An individual’s donation necessarily does not involve either promotional materials nor any sponsor and often does not involve any passthrough entity for contribution or donation.

[2] 35 N. Fourth Street Ltd. v. United States, No. 2:22-cv-02684 (S.D. Ohio 2022).

[3] Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 468 U.S. 837 (1984).

[4] Mann Construction, Inc. v. United States, 27 F.4th 1138, 1147 (6th Cir. 2022).

[5] See Green Valley Investors, LLC, et al. v. Commissioner, 159 T.C. No. 5 (Nov. 9, 2022); see also Mann Construction v. United States, 27 F.4th 1138, 1147 (6th Cir. 2022).

[6] See Notice 2017-10, pgs. 2-3.

[7] See Sec. 6662.

[8] This penalty is separate from the penalty under Sec. 6707A for failure to disclose participation.

[9] Notice 2017-10, p. 5.

[10] Green Rock, LLC v. Internal Revenue Service, et. al., 2:21-cv-01320-ACA (February 2, 2023).

[11] Consolidated Appropriations Act, 2023, Pub. L. No. 117-328, 136 Stat 4459 (December 29, 2022).

[12] Consolidated Appropriations Act, 2023, Pub. L. No. 117-328, § 605- Charitable Conservation Easements (amending I.R.C. § 170(h)(7)).

[13] Id.

[14] This is likely to result to the equivalent of leaving money on the table, either in terms of the value contributed but not deductible or property not donated because the value has increased beyond 2.5 times the partners’ relevant basis.

[15] This proposed regulations currently includes such language, i.e. “(i) the appraisal indicates an increase in value of more than two and one-half times the basis in the property.”

[16] According to the Omnibus bill, new Sec. 170(h)(1)(7)(A) and (f)(19)(B)(iii) only reference an amount that exceeds, not any amount that equals, 2.5 times the partners’ relevant basis. There is no gap for the IRS or Treasury to fill here.

[17] 7 Hunter, M., A. Sorensen, T. Nogeire-McRae, S. Beck, S. Shutts, R. Murphy, American Farmland Trust, Farms Under Threat 2040: Choosing an Abundant Future, 2022, at ii, https://farmlandinfo.org/wp-content/uploads/sites/2/2022/08/AFT_FUT_Abundant-Future-7_29_22-WEB.pdf.

[18] § 1.6011–9(c)(4) of the Proposed Regulations

[19] See e.g., Hibbs v. Winn, 542 U.S. 88, 101 (2004) (quoted in Corley v. United States, 556 U.S. 303, 314 (2009)).

[20] Consolidated Appropriations Act, 2023, Pub. L. No. 117-328, § 605- Charitable Conservation Easements (amending I.R.C. § 170(h)(7)) (emphasis added).

[21] See Prop. Regs. § 1.6011-9(d)(4).

[22] See, e.g., United States v. Vogel Fertilizer Co., 455 U.S. 16, 24 (explaining that the Commissioner has general authority to “prescribe all needful rules and regulations.”).

[23] See Prop. Regs. § V, Party to a Prohibited Tax Shelter Transaction.