Understanding IRS Notice 2023-30: Safe Harbor Deed Language for Conservation Easements
If you have a conservation easement on your property or are in the process of putting a conservation easement on your property make sure your attorney includes Safe Harbor Language to protect the easement against future changes that could impact your easement.
The Internal Revenue Service (IRS) has released Notice 2023-30 which outlines the safe harbor deed language for extinguishment and boundary line adjustment clauses. This language is required by Section 605(d)(1) of the SECURE 2.0 Act of 2022 and the notice explains how donors can amend an original eligible easement deed to incorporate the safe harbor language.
Charitable contributions of qualified real property interests to qualified organizations for conservation purposes can be eligible for deductions. A qualified real property interest includes a restriction (granted in perpetuity) on the use that may be made of the real property.
The SECURE 2.0 Act, necessitates the release of safe harbor deed language for extinguishment and boundary line adjustment clauses. After the release, donors have a 90-day period, up until July 24, 2023, to amend an original eligible easement deed to incorporate the safe harbor language.
Here are the salient points of the safe harbor deed language:
1. **Extinguishment clause**: If unexpected change in conditions renders continued use of the property for conservation purposes impossible or impractical, the conservation purpose can nonetheless be protected in perpetuity if the restrictions are extinguished by judicial proceeding and all of the donee’s proceeds from a subsequent sale or exchange of the property are used in a manner consistent with the conservation purposes of the original contribution.
2. **Boundary line adjustments clause**: Boundary line adjustments to the real property subject to the restrictions may only be made pursuant to a judicial proceeding to resolve a dispute regarding a boundary line’s location.
The original deed can be amended using this language, provided the deed is signed by the donor and donee, and recorded by July 24, 2023. However, there are exceptions and the eligible easement deed does not include any contribution related to reportable transactions, non-qualified conservation contributions, deductions under dispute or deductions that resulted in penalties.
These guidelines for conservation easements play a crucial role in incentivizing and facilitating land conservation efforts while ensuring appropriate transparency and compliance. As such, it is critical for donors and donees to be aware of the requirements and timelines associated with the recent IRS Notice 2023-30. For more information, individuals can contact Elizabeth Boone or Hannah Kim of the Office of Associate Chief Counsel (Income Tax & Accounting) at the IRS.
About the Author
This article was written by Benjamin Inman, an estate and business planning attorney at Insight Law.