New IRS Reporting Requirements for Easement-Holding Organizations

By Patrica Fry | Posted December 10, 2007 | Volumne 1, Issue 12

Preservation organizations with easement programs should be aware that Schedule A to the 2006 Form 990 Federal Tax Return for Tax Exempt Organizations includes a new provision requiring nonprofit organizations to report whether they received or held conservation easements, including easements on historic land areas or historic structures.

Organizations responding in the affirmative must attach a schedule with detailed information about the easements held by the organization, which includes information about the organization's practices with respect to inspection, monitoring, and enforcement. For any easement on historic buildings or structures acquired after August 17, 2006, the organization must also report whether the easement complies with the new "special rules" provisions of the Pension Protection Act of 2006.

The text of the Schedule and the instructions are printed below. For information on the new "special rules," click here. Note that some of these reporting requirement (such as that relating to acreage under protection) appear to relate more to conservation easements that protect land, but the requirement apply to historic preservation easements nonetheless. Note also that the reporting obligation applies not only with respect to easements for which a federal tax deduction was sought by the donor, but all conservation easements held by the nonprofit organization.

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In addition to the 2006 update, the IRS has recently proposed a number of changes to the 2007 Form 990 and its schedules, some of which would incorporate similar reporting obligations. The National Trust’s has provided comments on the proposed draft, which may be downloaded here.

2006 Form 990, Schedule A

Conservation easements. Answer "Yes" if the organization received or held one or more conservation easements during the year. In general, an easement is an interest in the land of another. A conservation easement is an interest in the land of another for purposes that include environmental protection; the preservation of open space; or the preservation of property for historic, educational, or recreational purposes. For more information see Notice 2004-41, 2004-28 I.R.B. 31.

Attached schedule. If "Yes," the organization must attach a schedule that includes the following information.

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Total Number of Properties
In 2005 Since Inception
Acquisition/Resale
0
0
Acquisition/Rehab/Resale
0
0
Loans
1
1
Interest Buy-down
0
0
Options
0
0
Easements
0
0
Feasibility Studies
0
0

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