June 9, 2005 | Read Time: 4 minutes
The Senate Finance Committee, which is examining how best to improve governance and accountability in the nonprofit world, is expected to announce at a hearing this week proposals to tighten the laws governing at least one aspect of charitable giving: land donations.
Nonprofit officials say that proposals might include plans to toughen rules for real-estate appraisals — for instance, requiring that they be done by someone with state certification — and stiffen fines for appraisers who submit inaccurate appraisals.
At the hearing, the Senate panel is also expected to release its long-awaited report on the Nature Conservancy, the nation’s biggest land-conservation charity. The conservancy first became the subject of congressional scrutiny in 2003, following a series of articles in The Washington Post cataloging controversial practices at the charity, including what appeared to be sweetheart real-estate transactions involving board members.
Since then, members of the Senate Finance Committee have delved into the operations of the Nature Conservancy and intensified their broad look at how all charities operate.
A spokesman for the Nature Conservancy says that the organization “has taken seriously all the concerns that have been raised and made dozens of changes to strengthen” its governance, accountability, and transparency.
Land donations have garnered special notice from lawmakers because of both their size and their number.
Gifts of real estate are typically worth tens of thousands, if not millions, of dollars, and draw considerable tax benefits for their donors. And the number of land gifts have soared in recent years, especially those called conservation easements — though which charities secure legal restrictions on how land can be used and donors take tax deductions for giving up rights to their property.
Such growth has prompted increased concerns about improper deals and, especially, inflated appraisals of the value of donated land. Charity and tax regulators, both state and federal, have been weighing how best to prevent donors from inflating the value of donated land, or from writing off tracts so undesirable they hold no environmental value or need no protection from development.
IRS Action
The Internal Revenue Service announced last year that it would crack down on improper tax deductions taken by people who donate land or arrange conservation easements with charities. The service said it would focus on easements that have questionable public benefit or have been manipulated to generate inflated deductions.
And in February, Congress’s Joint Committee on Taxation proposed reducing, and in some cases eliminating, conservation tax breaks. The committee’s ideas on how to adjust tax law often shape legislation passed by the House and Senate.
The Land Trust Alliance, a national association of more than 1,500 charities dedicated to preserving land, has been at work on its own plans to police the activities of its members. In April, the group received $1-million from the Doris Duke Charitable Foundation to start a training and accreditation program intended to improve ethics and governance at land-conservation groups.
Rand Wentworth, president of the Land Trust Alliance, says he intends at this week’s hearing to encourage Congress to support changes in the law and stepped-up enforcement by the IRSto get rid of people and organizations that are abusing the tax law. He plans to push Congress to require real-estate appraisers involved in conservation-easement deals to follow the uniform appraisal standards set out in federal law for other types of land transactions.
Stephen J. McCormick, chief executive of the Nature Conservancy, is also expected to speak at the hearing and to push for tougher oversight of land deals.
In April, the conservancy sent the Finance Committee several proposals, including recommendations that charities be required to disclose on their annual informational returns easements for which a donor took a tax deduction and that the government prohibit tax deductions for certain kinds of conservation-easement transactions, such as those for golf courses.
Last month, the Nature Conservancy announced that it had halved the size of its governing board — from 41 to 21 — and made other structural changes to improve oversight of its activities.
Among the significant changes made by the Nature Conservancy since it came under scrutiny two years ago is a prohibition against real-estate transactions with members of the board of directors, trustees, staff members, and the immediate families of all three of those groups.
