Arthur A. Allen Company and King Howington started the Preservation Group with the belief that conservation efforts can be sustained without sacrificing return on investment. We do this whenever possible by harnessing the fiscal incentives provided by law for land conservation. The incentive is a charitable donation deduction available for land we agree to never develop. Never means never – the land involved with such an agreement will remain building free in perpetuity. The title of the land is encumbered with a conservation easement. Below is a picture of Manhattan with and without a conservation easement. With the fiscal incentives for conservation now available, cities of the future can be a balance of intense vertical space and natural green space. The key is to start with Green Space, which is exactly what Preservation Group is about.
Recently the Internal Revenue Service changed the way they regulate the laws around Conservation Easements. They have added two forms for investors and advisers to report their activity and use of conservation easements, particularly around pass through entities such as LLC’s. While it is a burdensome task, the fear of abuse by groups eager to profit from extra tax savings is a lightning rod for more regulation, and so pursuing sustainable conservation is even more difficult. The penalties for improperly filing are severe so it is more important than ever that investors seek professional guidance. Public companies have dealt with disclosure regulations for decades, with equally severe penalties for improper filing; the IRS seems to be taking after the SEC model making capital markets unapproachable for the average American.
The Preservation Group has always prepared for extreme IRS scrutiny of any transaction we enter that utilizes tax incentives. Its a natural balance between the tax payer and the tax collector. The most informed tax payers (often those who pay the most) are in regular conversations with experts, including IRS officials, about what is the proper interpretation of the regulations. The common goal is how to position their wealth management strategies to maximize their after-tax returns. Pass through entities, partnerships, trusts, etc are all heavily oriented to maximizing after tax rates of return. Conservation Easement benefits from LLC’s are no different. They are legal and in our view absolutely necessary tools to achieve local and national conservation goals. We believe in the power of the individual, the power of small business, and the power of a good idea. Privately funded land conservation is just that. Individuals coming together with small businesses like the Preservation Group will enhance surrounding land values (lower supply), will increase collectively available cash flow from land sales and reduced income taxes, and enhance profitability of small farms and local agriculture generally. At the same time, specific viewscapes are preserved from development and a balance of quality natural habitat is maintained.