Valuing Conservation Easements under § 1.170A-14(h)(3) of the Income Tax
Regulations
This Chief Counsel Advice responds to your request for assistance regarding the
valuation of perpetual conservation restrictions, or “conservation easements.”
Specifically, you have asked about the application of the “Contiguous Parcel Rule” and
the “Enhancement Rule” found in § 1.170A-14(h)(3)(i) of the Income Tax Regulations.
Section 170 of the Internal Revenue Code allows as a deduction any charitable
contribution payment of which is made within the taxable year.
Under § 170(f)(3), no deduction is allowed for a contribution of an interest in property
that consists of less than the taxpayer’s entire interest in the property. However,
under § 170(f)(3)(B)(iii), a deduction is allowed for a qualified conservation
contribution, even though it is a contribution of a partial interest.
Section 170(h)(1) and § 1.170A-14(a) provide that a qualified conservation
contribution is a contribution of a qualified real property interest to a qualified
organization exclusively for conservation purposes. One such qualified real property
interest is a conservation easement.
To prepare a conservation easement appraisal for which the Internal Revenue Service is an intended user, we must value the entire contiguous parcel, as directed by Treasury Regulation §1.170A‐14 (h)(3)(i).