Members of the Senate Finance Committee have announced plans to stop millions of dollars in excessive income-tax write-offs by property owners who promise not to change the facades...
WASHINGTON Members of the Senate Finance Committee have announced plans to stop millions of dollars in excessive income-tax write-offs by property owners who promise not to change the facades on their historic properties.
Chairman Charles Grassley, R-Iowa, and ranking Democrat Max Baucus, D-Mont., said Friday they will introduce legislation to fine property owners, promoters and appraisers involved in donating facade easements that lead to undue tax deductions.
Most Read Stories
- Seattle hits record high for income inequality, now rivals San Francisco
- Anthony Bourdain brought 'Parts Unknown' to Seattle — here's where he ate
- A Washington county that went for Trump is shaken as immigrant neighbors start disappearing VIEW
- Seattle’s crazy restaurant boom | PNW Magazine VIEW
- Seattle-Dublin nonstop flights to begin in May 2018
The penalties would be retroactive to prevent homeowners from cashing in this tax season, before the reforms, they said.
“Some people might be thinking they should rush to hitch up this horse before Congress closes the barn door,” Grassley said. “I’ll seek to pass legislation that will be effective today and will significantly increase the fines and penalties for those who contribute a facade easement and take an inflated valuation.”
The senators said their action came in response to a Washington Post series that examined the rapid growth in such easements and the financial windfall they have bestowed on homeowners, nonprofit trusts and for-profit companies that process the easements.
Under the system, property owners pledge that they will not change the outward appearance of their historic homes without permission. They “donate” the promises to historic-preservation organizations and deduct the gifts’ cash value from their income taxes just as if they had given a threadbare couch to a charity thrift shop.
But preservation laws in Washington, D.C., and elsewhere already forbid unapproved changes in the exterior of historic homes. That means homeowners largely are collecting tax breaks for agreeing not to change something they are precluded from changing anyway.
The tax write-offs are supposed to represent the decline in the home’s market value because of the facade restrictions, and they typically range from 10 to 15 percent of the property’s value.
But real-estate specialists said the easements generally do not hurt resale values. Homes with easements often are worth more than $1 million, and the write-offs routinely reach six figures, the Post analysis found.
Nonprofit trusts that hold the easements and the for-profit companies they work with have collected millions of dollars in related fees and donations in recent years.
Richard Moe, president of the Washington-based National Trust for Historic Preservation, a congressionally chartered nonprofit, endorsed the reforms. Aggressive easement-promoting organizations have given the program a bad image, he said.
“We want to correct the abuse,” Moe said. “I strongly support increased fines and penalties.”
Grassley and Baucus called for the IRS to make audits of easement deductions a priority. IRS Commissioner Mark Everson said he had created a “special compliance project” targeting abusive write-offs.
Washington Post reporter Albert B. Crenshaw
contributed to this report.