The IRS recently designated certain donations of conservation easements and substantially similar transactions as “listed transactions.” The IRS requires special disclosures for listed transactions but the agency had postponed the deadline for implementing the disclosure requirements. We had hoped the new Administration would help convince the IRS to reverse its course on these disclosures, but no such luck so far, and we now need our clients’ input to begin the compliance process and meet the new deadline.
We have had conversations with most WBL clients who we know have these investments. However, it is possible some of our newer clients may have invested in conservation easements or similar transactions in years prior to our association. If you have participated in a syndicated partnership or a similar arrangement in the past that involved such donations, it is important that you meet the deadlines for filing the special disclosures the IRS is now requiring for these transactions or face significant penalties.
If you have participated in these syndicated conservation transactions, you should have gotten information from the syndicator, some of which we will need to complete the disclosures. They will be reported on Forms 8886, Reportable Transaction Disclosure Statement. While the IRS seems to be targeting conservation easements for the additional disclosures, we have been advised that those clients that have participated in syndicated fee simple land donations should also file the Forms 8886.
The IRS is interested in syndicated conservation transactions dating back to 2010. However, you can generally ignore 2010-2012 if the statute of limitations for those years expired prior to December 23, 2016, and you claimed the deductions prior to 2013 with no carryover deductions to post-2012 years. Otherwise, you will need to include such transactions on Forms 8886 and file them by October 2, 2017. Transactions undertaken in 2013 – 2015 also require Forms 8886 be filed by October 2, 2017. Transactions undertaken in 2016 require Forms 8886 to be filed with the filing of your 2016 tax return, which for most have been extended to October 15, 2017. There are significant financial penalties for not complying with no “reasonable cause” exceptions.
While we believe we are aware of our clients who are required to file the Forms 8886, we are requesting that anyone who participated in a syndicated conservation transaction after January 1, 2010 contact their WBL tax partner or manager. We will need a list from you of those transactions and the years they were undertaken by September 15, 2017. This is particularly important for our newer clients whose prior year returns may have been prepared by another firm. In addition, please forward any communication and pre-populated forms that the syndicator likely provided. We need your help to ensure that you remain in compliance.
If you have any questions about the content of this post or conservation easements, please contact Steve Horn, Tax Partner.