IRS Releases New Safe Harbor Provisions

The IRS released Notice 2023-30 on April 10, 2023.

The Notice includes new conservation easement safe harbor deed language for extinguishment and boundary line adjustment clauses and will be published in the Internal Revenue Bulletin on April 24, 2023 in accordance with the SECURE 2.0 Act.

Congress enacted the SECURE 2.0 Act (as part of the “Consolidated Appropriations Act of 2023”) on December 29, 2022.  Read more about how the Charitable Conservation Easement Program Integrity Act provisions of the SECURE 2.0 Act affect conservation easement deductions in our recent blog.

Under the new law, landowners who donated eligible conservation easements may amend their easement deeds to replace original deed language with newly released, IRS-approved safe harbor provisions as to extinguishment and boundary line adjustment clauses only.

Amended deeds that comply with IRS Notice 2023-30 and each deed’s own amendment clause will be treated as effective as of the date the easement deed was originally recorded, regardless of whether the amended easement deed is effective retroactively under relevant state law.

All amendments must be signed by the Donor and Donee and recorded no later than July 24, 2023.

An amended conservation easement deed will not be treated effective as of the date the original easement was recorded unless the easement constitutes an “eligible easement deed.” Under Notice 2023-30 and the SECURE 2.0 Act, ineligible easements involve the following types of contributions: (1) syndicated easements; (2) disallowed easements that have been contested by the donor and are subject to a case currently docketed in a Federal court on a date before the date the amended deed is recorded; or (3) easements that resulted in a tax underpayment penalty if the penalty has been finalized pursuant to an administrative decision or judicial proceeding.

Although donors are not required to amend their easement deeds, landowners who are still claiming carryover deductions or who were parties to easement transactions that are still subject to audit should consult their conservation easement attorney to determine whether they need to pursue an amendment given the specific language in their original easement deed.

If your easement interests were purchased by NRCS or a similar state or local funding program, please be mindful that these agencies may need significant lead time to review, approve, and sign any proposed amendments submitted by landowners pursuant to IRS Notice 2023-30 and the SECURE 2.0 Act.