February 18, 2012; Source: Nonprofit Law Prof Blog
Do you consider a golf course easement worth a charitable deduction? If President Obama were to eliminate golf course easements from charitable deductions, would national nonprofit trade associations go to the mat to tell the president and Congress not to meddle with the charitable deduction?
In the wake of the 2009 Kiva Dunes Conservation LLC v. the Commissioner of Internal Revenue Tax Court case, the administration has clearly been struggling with determining exactly how much of a charitable deduction, if any, should go for the donation or bargain sale of an open space easement on golf courses. The very useful Nonprofit Law Prof Blog spotted the Obama administration’s proposed elimination of golf course easements as charitable deductions in the FY2013 revenue proposals (estimated to save the federal budget $593 million, presumably over a period of some years).
The administration’s rationale on golf courses is that the “benefit of an easement on a private golf course, especially one that is part of a luxury housing development, may accrue to a limited number of users such as members of the course club or the owners of the surrounding homes, not the general public, and the construction and operation of the course may even result in environmental degradation.”
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The administration goes on to state, “Easements on golf courses are particularly susceptible to overvaluation, as private interests often profit from the contribution of the easement” but that “it is difficult and costly for the IRS to challenge inflated golf course easement deductions.” Therefore, the White House concludes that “to promote the kinds of public benefits intended by the charitable deduction provision and to prevent abuses, no charitable deduction should be allowed for contributions of easements on golf courses.”
In other words, what’s the point of a charitable deduction for something that is supposed to benefit the public when it benefits, at most, a restricted slice of the public and provides disproportionate and sometimes all-but-exclusive benefits to private interests—such as wealthy golf course homeowners?
Are golf course easements unusual? A quick Google search of recent news stories would suggest that they are not.
For example, a golf course conservation easement is one of the strategies being suggested for reviving or perhaps jump-starting the Cliffs at High Carolina near Asheville, N.C., a luxury home and (Tiger Woods-designed) golf course development. On the western side of Michigan’s Lower Peninsula, a former golf course is being converted into private housing and the developers are planning a conservation easement to preserve 50 acres of open space. And in Pine Mountain, Ga., the Callaway Gardens golf resort is home to a forest preserve under conservation easement.
The Obama proposal seems to remove a component of the charitable deduction that has relatively little public benefit but a lot of restricted private benefit. Is it a good idea?—Rick Cohen