The IRS Is Watching Your Golf Course
The IRS believes it is owed millions of dollars from golf clubs taking tax deductions for environmental protections that are not appropriate.
The Internal Revenue Service may never be able to get all of the tax dollars it expects from wealthy investors or corporations due to tax loopholes or offshore tax havens.
But that doesn’t mean it doesn’t chase tax dollars when it sees a chance to do so.
The IRS is now being aggressive in pursuit of dollars from future tax breaks golf courses can take if they claim they are not developing land due to environmental concerns.
For years, golf courses and golf clubs, as well as other wealthy landowners, have had a tax incentive that allows them to deduct large sums for refusing to develop land it owns. The tax break comes because the undeveloped land has some form of environmental role the U.S. government deemed necessary for protection.
But the IRS believes golf courses are abusing the privilege by declaring some developed lands as protected lands deserving of a tax break, known as the conservation-easement tax break.
The Wall Street Journal covered the issue in a Jan. 4 story detailing the case of two St. James Plantation courses in North Carolina which declare almost $8 million in conservation-related tax breaks annually. The WSJ saw a researcher from the Duke University Wetland Center collecting data for the IRS in its attempts to disclaim the St. James tax break.
“They were claiming every inch: the greens, the fairways, the tees, the boxes, the trails, even if they were paved,’’ said Curtis Richardson from Duke University. “This just flies in the face of what a conservation area is.”
The IRS currently is winning its battle against St. James thanks to a U.S. Tax Court ruling that too much property was being written off for conservation purposes. “Patches of native vegetation and wildlife’’ do not justify a seven-figure tax break, the Tax Court judge ruled.
The WSJ story detailed examples of the fight the IRS has for proper use of the tax break wording. One example won by the IRS was against the preservation of the terra cotta façade of the Ritz-Carlton in New Orleans.
In 2012, the conservation-easement tax break was taken by 1,114 taxpayers for an average deduction of $872,250. Add that up and you get just under $1 billion in tax breaks.
However, golf courses are the most frequent users of the tax break, and they claim millions of dollars in tax dollars due to conservation efforts that come from just not developing land they own.
The St. James victory for the IRS reverses years of defeats in which tax courts claimed golf courses were preserving the environment appropriately and deserved the tax break.
Big cases currently under consideration include the National Golf Club of Kansas City, which takes millions of dollars in tax breaks due to fishless ponds it claims is used for amphibian reproduction, and the Champions Retreat in Evans, Ga., which has a $10.4 million deduction annually for land it claims it has no developed.
