In 2006, the federal historic facade easement program was thoroughly reviewed by various Congressional Committees, and a new, revised version of the legislation was signed by the President in August of that year. The new bill provided much needed guidelines for qualified and independent appraisers, processors, and donation organizations. As in the past, you should always be very suspicious of easement processors that are overly aggressive or financially connected in any way with an appraiser or the donation organization, and verify their independence.
We are proud to process easements in Washington, DC ONLY for the well respected L'Enfant Trust, which has been accepting them for nearly 30 years (www.lenfant.org), and for the Foundation for the Preservation of Historic Georgetown (www.preservegeorgetown.org) for properties located in the old Georgetown Historic District. We also process easements for historic homes located in historic districts in the State of Maryland only for the Maryland Historical Trust (www.marylandhistoricaltrust.net/easement.html)
We are the only firm in town that can provide you, the IRS, and the donation organization with a professionally researched and illustrated house history. Other processors simply do not have the capability of our documented work and nearly twenty years of archival research experience. We encourage you to begin this process early in the year to allow ample time for the various components to be completed, including historic research, detailed architectural description, photographic documentation, review and notarized signatures from your mortgage holder, and official historic certification from the Department of the Interior. It's a very time consuming process that generates a substantial amount of paperwork for a qualified easement. In addition, the L'Enfant Trust offers discounts on their fair share contribution (FSC) for donations made before June 30, 2007, and September 30, 2007. The final deadline for donating is December 1st of any fiven year. For a sample of the tax savings you can enjoy with a façade easement donation, please see our Sample Savings Document.
Façade Easement Donations
An easement is a way to ensure that a home will retain its historical appearance, while the homeowner benefits from a substantial federal income tax deduction. Condominiums and cooperatives are also eligible for easement donations. An easement donation is deductible as a charitable contribution and is a voluntary, legal agreement between the homeowner and a non-profit organization. As such, it involves future review and approval of changes to the exterior elevations of the home by the grantee, in the same way a homeowner is already subject to by the local and city Historic Preservation Review Board as a homeowner in a historic district in Washington. As with any legal agreement, there are considerable paperwork and approvals for a façade easement donation. Kelsey & Associates will guide your application through all the necessary steps to ensure acceptance by your mortgage holder, the façade easement grantee and the IRS.
Kelsey & Associates is the only Washington area firm completing easement donations that has both extensive experience in researching your home's past and presents you with a richly illustrated and detailed house history as part of our easement donation package!
Kelsey & Associates will coordinate a specialized real estate façade appraisal to determine the value of potential donation and complete the necessary application to have your home officially certified "historic" by the U.S. Department of the Interior. We will complete this requirement with historic research into your home's past and an analysis and description of your homes architectural style and its context within your historic neighborhood. With our established relationship with myriad bankers, we also will coordinate deed recordation and legal compliance and subordination with your mortgage lender, as is required for an easement. We will then follow the application through all necessary steps in the process - completion of all IRS forms and the easement acceptance by the non-profit organization, including the writing of a justification and supplying necessary exterior and interior photographs.
In addition to the array of tax benefits, those who donate an easement to the L'Enfant Trust will receive a cast bronze plaque placed on the front wall of each property so that the homeowner can display their pride. Prices for the coordination of an easement donation vary; however, the typical price for services for a Washington, D.C., townhome is approximately $2,500. This price does not include appraisal fees and the donation to the non-profit organization. Kelsey & Associates will be happy to supply more detailed information on the easement process, typical costs, along with a customized, personalized quote for your home if you would kindly fill out a Free Easement Quote Form.
For More Information, click here to read an article by Paul K. Williams on Easements that appeared in the March 31, 2003 edition of the Legal Times.
Special alert: The US Tax Court has recently ruled in favor of an easement donation recently donated to the L'EnFant Trust, but against on donated to other less reputible organizations. We advise that you choose your donee very carefully.
On September 15, 2009, the U.S. Tax Court handed down its decision in Simmons v. Commissioner (T.C. Memo. 2009-208). Mrs. Simmons had donated two easements to The L'Enfant Trust, one in 2003 and one in 2004, claiming charitable contribution deductions. The deductions were entirely disallowed by the Internal Revenue Service, which asserted that the donations were valueless and that in any event they failed to comply with statutory requirements for deductible conservation easements because of various provisions in the easement deed.
The Court held unambiguously that the easements on Mrs. Simmons properties are valid conservation easements, and it struck down all of the IRS arguments that various provisions in The L'Enfant Trust's deeds made Mrs. Simmons' gifts non-deductible. The Court also made clear “that the easements granted do affect the fair market value of the subject properties,” and rejected as not “credible” the IRS’s expert opinion to the contrary. The Court came close to "splitting the difference" between the deduction Mrs. Simmons had claimed and the zero valuation asserted by the IRS appraiser, finding that the easements resulted in a 5-percent reduction in the values of the subject properties. This reduction, the Court explained, "stems from the heightened financial burdens of an eased façade and L’Enfant’s affirmative enforcement of its easements."
Previously, The L’Enfant Trust advised donors of the IRS’s vigorous campaign against conservation easements. It is unclear whether the IRS will abandon its pursuit of these issues given the Simmons case. However, the Court’s decision should provide D.C. property owners comfort that donations of conservation easements to The L'Enfant Trust and similar organizations with a proven record of affirmative easement enforcement will allow owners to take federal tax deductions.'
L'Enfant Trust Donors Are Unaffected By U.S. Tax Court Ruling in Kaufman
On April 26, 2010, in Kaufman v. Commissioner (134 T.C. No. 9), the United States Tax Court ruled that a facade easement given to the National Architectural Trust ("NAT," now renamed "Trust for Architectural Easements") was not entitled to a charitable contribution deduction. At issue in Kaufman was whether the donor gave NAT sufficient ownership rights over the property’s mortgage holder to make the easement run “in perpetuity” as required for a tax deduction under the tax code. Based on the specific language of the deed at issue there, the Court concluded that the mortgage holder had not sufficiently subordinated its rights to NAT at the time of the donation.
The standard L’Enfant Trust deed is different from the deed at issue in Kaufman in key respects, including with respect to mortgage holder subordination. As a result, the reasoning of the Kaufman case does not apply to The L’Enfant Trust’s donors. In fact, in Simmons v. Commissioner, the United States Tax Court reviewed The L’Enfant Trust’s subordination form and concluded that the form satisfied the tax code’s perpetuity requirement. See our website tab "You Should Care Who Holds Your Easement" in the "About the Easement Program" section.