SIMMONS TAX COURT RULING AFFIRMED

Decision Confirms That Easements Given to The L'Enfant Trust Were Deductible and Valuable

The loss in value of an eased property stems from“. . . the heightened financial burdens of an eased façade and L’Enfant’s affirmative enforcement of its easements.”
                                                                            United States Tax Court Judge Goeke

On June 21, 2011, in a unanimous decision, a three-judge panel of the United States Court of Appeals for the District of Columbia Circuit affirmed last year's U.S. Tax Court Ruling in Simmons v. Commissioner. The appellate court held that two easements donated to The L'Enfant Trust were tax deductible as charitable contributions because the easements satisfied statutory and regulatory requirements. The Court also affirmed the Tax Court's ruling that the appraisals at issue satisfied the substantiation requirements concerning valuation.

Simmons has implications for the preservation community at large, but the facts of Simmons are specific to District of Columbia preservation law and practice, The L'Enfant Trust's form of easement deed, and The L'Enfant Trust's decades-long record of good easement enforcement and stewardship. For the past few years, The L'Enfant Trust has cautioned potential easement donors that the IRS has been hostile to preservation easements, auditing many easement donors across the country and asserting severe penalties for overvaluations. Many potential L'Enfant Trust easement donors chose to defer making or considering the gift.

Now, given the D.C. Circuit's unanimous rejection of the IRS's arguments, owners of historic properties once again can take comfort that easements donated to The L'Enfant Trust do have value, and that, to the extent supported by a qualified appraisal, tax deductions for those donations are likely to be upheld.

The L'Enfant Trust extends its gratitude and deep appreciation to its counsel in the Washington office of the law firm of Arnold & Porter LLP, with special thanks to George Covucci who has represented The L'Enfant Trust for many years, and Matthew Eisenstein who wrote the amicus curiae brief in the Simmons matter.