historic preservation easement business definition
A legal agreement that protects a significant historic, archaeological, or cultural resource by providing assurance the property's intrinsic value will be preserved through subsequent ownership. Tax benefits are available for owners of properties that qualify for preservation easements.Case Study
A charitable tax deduction for a historic preservation easement is justified by an assumed reduction in a property's market value following the donation. The deduction can also include related appraisal and attorney's fees incurred by the owner. For example, a historic home located in an area zoned for commercial development may lose substantial market value when the owner agrees to a historic preservation easement that includes a prohibition against using the property as an office building. Abuses, including exaggerated estimates of declining property values resulting from donations of historic easements, resulted in federal reform legislation in 2006. Among other provisions, the legislation disallowed deductions for easements that permit changes incompatible with a building's historic character. In addition, the legislation required that the owner provide the Internal Revenue Service with detailed substantiation justifying the value of the easement donation. It also imposed tougher qualification standards for appraisals and appraisers, and reduced thresholds for overvaluation penalties.