Tax Breaks for Golf Courses

IRS Going After Golf Courses for Tax Deduction

Golf Course Easement2It’s getting much tougher to successfully claim a charitable deduction for a conservation easement. Unfortunately, this will further erode the construction of new golf course projects in 2016 and beyond.

Typically, a new golf course project will make consideration plans to conserve and protect the natural habitat of fish, wildlife, and natural ecosystem by preserving open space for the scenic enjoyment of the general public. These easements often amount to sizeable charitable deductions which help offset the investment.

Although the IRS has lost several conservation easement cases regarding golf courses, they turned the tide in 2003 and 2005 and have become more aggressive fighting these situations. In 2003 and 2005, the IRS went to Tax Court over two North Carolina golf course easements. In both instances, the IRS disagreed with the taxpayers over charitable deductions. The court, the IRS stated that “fairways, tee boxes and greens … are sodded or planted with 419 Bermuda and Tidwarf, which are nonnative grasses and consequently do not provide a relatively natural habitat for the Golf Course Easementpitcher plants and Venus flytraps.” Additionally, the court found that the use of pesticides, insecticides, fungicides, herbicides and fertilizers not only does not preserve the natural habitat, but actually “injures or destroys” the habitat. And, being part of a gated community that is not open to the general public does not provide scenic enjoyment for the general public. In both cases, the IRS won.

In 2009, a coastal Alabama golf course project, Kiva Dunes, won a three year court battle which vindicated their $28.7M tax break in exchange for leaving 141 acres of land undeveloped. This setback created a round of legislative changes aimed at banning golf course easements altogether. Fortunately, this effort was blunted by the golf industry.

Since the beginning of 2014, there have been 19 cases heard in US Tax or federal district court regarding conservation easements for golf courses.

If you are seeking to lower your tax obligations legally and would like assistance, call Michael Kimmey & Associates at 708-687-2917 or 630-581-7007.