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Is Your Conservation Easement a Listed Transaction?

If you invested in a partnership or other passthrough entity, which provides pass-through deductions for conservation easements, that arrangement may be considered a “syndicated conservation easement” and a “listed transaction,”  and you may be faced with  new IRS reporting obligations.

According to Notice 2017-10, if you entered into this type of arrangement on or after January 1, 2010, and if that arrangement is “the same as or substantially similar to” the syndicated conservation easements described in the Notice, the “listed transaction” provisions of  §1.6011-4(b)(2) and §§6111 and 6112 become effective December 23, 2016.  If these provisions apply, you must disclose the transaction to the IRS, for each taxable year in which you participated in the transaction, provided that the period of limitations for assessment of tax has not ended on or before December 23, 2016.  Failure to disclose your participation can result in stiff civil monetary penalties.

Further, according to the Notice, promoters, material advisors, including appraisers, who make a tax statement on or after January 1, 2010, with respect to transactions entered into on or after January 1, 2010, have disclosure and list maintenance obligations under §§6111 and 6112. See §§301.6111-3 , 301.6112-1.  Failure to comply with these provisions also carries significant civil monetary penalties.

With the 2016 income tax filing season opening this month, this issue may affect tax returns filed in the coming months and requires a look-back to 2010 as well.  For questions regarding syndicated conservation easements, or listed transactions, please contact Jim Mastracchio at (202) 496-7251; james.mastracchio@dentons.com


IRS Clarifies Renewable Energy Construction Requirements

The IRS released Notice 2013-60 (the “Current Notice”) last week which clarifies the beginning of construction requirements for the renewable energy production tax credit(PTC) or the investment tax credit (ITC). A taxpayer will be eligible to receive the PTC under Section 45 of the Code, or the ITC under Section 48 of the Code in lieu of the PTC, with respect to a facility if construction of such facility begins before January 1, 2014. As you may know, the IRS released Notice 2013-29 in April, 2013 (the “Prior Notice”), which provides the taxpayer with two methods for establishing the beginning of construction: starting physical work of a significant nature (the “Physical Work Test”); or paying or incurring five percent or more of the total cost of the facility (the “Safe Harbor”).

The Current Notice provides a method for taxpayers to satisfy the continuous construction or continuous efforts tests, clarifies that the master contract rules apply to the Safe Harbor, and clarifies that a taxpayer may transfer a facility after construction has begun.

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