Alabama Partnership Fights IRS Penalty on Conservation Easement

An Alabama partnership said the IRS is unfairly cutting its tax deduction for preserving land.

Hanbury Properties LLC petitioned the US Tax Court after the IRS disallowed its claimed $14.8 million charitable contribution tax deduction for donating a conservation easement on 205 acres in central Alabama. After determining the “economically and ecologically valuable real property” could be developed with a single-family “active adult” housing development, the partnership instead donated an easement encumbering the property’s development to Southeast Regional Land Conservancy Inc. in 2020, according to its petition.

In a conservation easement, a property owner donates an easement that restricts development ...