Lawmakers Ask IRS for Clarity on Historic Easement Deduction

January 15, 2021

The Honorable Charles Rettig
Commissioner
Internal Revenue Service
1111 Constitution Avenue, NW
Washington, DC 20224

Dear Commissioner Rettig,

Thank you for your continued work throughout this pandemic and commitment to serving the American people. As our economy continues to recover and rebuild in the wake of the ongoing pandemic, rehabilitation and revitalization of historic buildings will play an important role in strengthening our local economies by helping create jobs, increasing tax revenues, and spurring further investment.

For the last 40 years, Congress has continued to extend and expand historic tax credits and historic preservation easement programs, many of which now complement state and local programs. These programs help to offset the significantly increased cost of rehabilitating old buildings. They offer tools that encourage developers to think twice before bulldozing architecturally significant structures to pave parking lots, or demolishing local landmarks for cheap new construction.

Unfortunately, while the Internal Revenue Service (IRS) has issued clear rules related to the issuance of historic tax credits over the years, there has been a general lack of guidance or safe harbor on historic preservation easements. As a result, historic building owners who are in compliance with Congressional intent have faced increased scrutiny from the IRS, deterring investment in historic property rehabilitation and undermining the use of this important program.

For example, the IRS recently disallowed a historic easement tax deduction on a building in Cleveland, Ohio due to the property owner making alterations required in order to be compliant with the Americans with Disabilities Act (ADA). In response to a staff inquiry from the office of Representative Anthony Gonzalez to this concern, the IRS responded saying “a deductible easement on a building in a registered historic district must 'preserve the entire exterior of the building'. The law does not provide exceptions for local fire and safety laws or the Americans with Disabilities Act when considering whether the easement complies with this statutory requirement.” Given this response, we ask for further clarification to the questions below:

We thank you for your attention to this important issue and we look forward to continuing to work with your office to strengthen our local economies.

Sincerely,

Anthony Gonzalez
Member of Congress

Senator Rob Portman
United States Senate

Senator Sherrod Brown
United States Senate

David P. Joyce
Member of Congress

Tim Ryan
Member of Congress

Bill Johnson
Member of Congress

Warren Davidson
Member of Congress

Michael Turner
Member of Congress

Ted Deutch
Member of Congress