The pitch, which came by mail, was intriguing: Donate part of your townhouse, save your neighborhood, and get a tax break. The preservation-inclined homeowner, who lives in brownstone Brooklyn and spoke on condition of anonymity, consulted his accountant and did his research. Everything seemed legit. So in 2004, he transferred ownership of his Federal-style brownstone’s façade to the group, which was called the National Architectural Trust. He donated thousands of dollars, about 1 percent of the house’s value, to the not-for-profit organization—standard practice, given that it had guided him through the process and would now have to monitor the structure forever. In return, he was able to deduct a not-so-insignificant amount—11 percent off his federal income tax—in return for the commitment that he and future owners couldn’t change an inch of the brick front, keeping some future buyer from stripping or demolishing the house. “How could this be bad?” he remembers asking.
Here’s how: He’s now getting audited by the IRS, and he’s not alone. In fact, the same year he signed up for the “preservation easement,” the press examined how the deduction was problematic. Then–IRS commissioner Mark Everson said it had been “twisted for inappropriate individual benefit.” But the commotion died down and the deduction, amended to reduce abuses, has stayed on the books. (President Bush signed a bill renewing easement deductions in 2006.) Still, confusion lingers, and, worse, that tempting tax break (no matter how lawful) could have the IRS banging on your door.
The Greenwich Village Society for Historic Preservation’s Andrew Berman says his organization receives tons of calls asking for guidance on these “easement deductions.” But the issue is so complex, he says, “we neither recommend doing nor not doing them.” One big question is whether the service is necessary—and deduction-worthy—in swaths of the city that are already landmarked. Steve McClain, president of the Trust for Architectural Easements (the new name of the National Architectural Trust), says easement donations add an extra layer of protection, noting that 500 homeowners have signed on. “We’re concerned that people not be discouraged from the program. It’s good social policy.” Still, donors need to know what they’re up against, and extra diligence is a must, says Berman. “They should contact a tax lawyer.”