The abuse of conservation tax breaks is cheating taxpayers of billions of dollars. Instead of protecting the environment, conservation tax deductions are often protecting golf courses, resorts, and backyards, according to a new study.
The tax provision that was meant to incentivize private conservation has become a lucrative way to exploit the tax system and the taxpayers.
Conservation easements allow private landowners to receive tax deductions in return for donating certain rights to develop their land. The monetary benefits are meant to ameliorate the costs incurred by conserving the land instead of it.
The provision, however, contains a loophole of sorts: the estimation of the conservation easement is based on the commercial value of the property. Landowners can increase their tax deduction by increasing the value of their land — by developing it.
The tax provision can become lucrative if landowners first develop the land, and then donate it as a conservation easement.
Golf courses and expensive resorts are particularly adept in using this loophole to circumvent paying millions of dollars in taxes, according to an Urban-Brookings Tax Policy Center analysis by Adam Looney.
The elite golf course at Kiva Dunes used this loophole to claim a $30 million deduction for preserving the open land on the golf course.
Before applying for the deduction, however, the owner of the golf course converted the undeveloped land into a 141-acre golf course and a gated residential subdivision with tennis courts and swimming pools. Only after developing the land did the owner place an easement on the golf course.
As a result, the owner claimed a tax deduction of $30,588,235 for a property that was only purchased for $1 million. The property now has a dubious environmental value, if any.
The owner of the golf course at Kiva Dunes alone in reaping such benefits at the expense of both the environment and the taxpayers. President Donald Trump also received a $39 million deduction for donating an easement on his New Jersey golf course, said Looney. The tax exemption has also been applied to resorts, subdivision lawns, and residential backyards.
The provision has cost the U.S. $3.2 billion in lost tax revenue, while often failing to deliver any substantial environmental benefit, according to Looney’s analysis.
The provision has been hailed as a way to encourage private conservation since it was created 40 years ago, but because of its vulnerability to abuse, the provision has often done little to truly advance the environmental cause, concluded Looney.