House Ways and Means Subcommittee Holds Hearing on Façade Easements
As part of the House Ways and Means Committee’s recent focus on the tax-exempt sector, its Oversight Subcommittee held a hearing June 23 to review tax deductions for historic facade easements. These easements allow a donor to take a deduction for the value of a donated easement in exchange for promising not to alter the facade without the permission of the donee organization. Subcommittee Chairman Jim Ramstad (R-MN) said the hearing was intended to determine whether the tax deduction for facade easements is being abused.
During testimony, Steve Miller of the Tax-Exempt and Government Entities Division of the IRS reviewed existing law and the steps the IRS is taking to improve reporting of easements. He noted that as the Subcommittee considers potential changes in law regarding the tax-exempt sector, it should look at the areas of concern highlighted in IRS Commissioner Mark Everson’s testimony to the full Committee on May 26th: 1) potential gaps in the current statutory and regulatory framework; 2) the need of the IRS for enhanced flexibility in compliance; 3) efforts to promote greater transparency in the tax-exempt sector; and, 4) the need for additional enforcement resources for the IRS. He also asked the Subcommittee to consider the Administration’s intermediate sanctions proposal contained in its FY 2006 budget proposals.
Other witnesses included Steven L. McClain of the National Architectural Trust, Paul W. Edmondson of the National Trust for Historic Preservation, Peg Breen of the New York Landmarks Conservancy, and David C. Lennhoff of the Appraisal Division of Delta Associates.
They focused their remarks on the importance of façade easements to historic preservation and community revitalization, the efforts of the historic preservation community to enforce easements and comply with current law, concerns about valuation abuses and over-promotion of façade easement donations, and potential reforms, particularly in the areas of appraiser standards, the appraisal process, and sanction enhancements for overvaluation.
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The Subcommittee members directed many of their questions at Steven McClain of the National Architectural Trust, which was the subject of a series of articles last year in the Washington Post. Members were aggressive in asking McClain about his organization’s activities, including its promotion and valuation of façade easement donations, its financial and management relationship to Springfield Management Services, a for-profit entity, and the compensation of its executives.
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