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First Golfer proposes end to golf course charitable tax deduction

President Obama is a golfer. And I suspect like a lot of duffers this weekend, he's watching The Masters tournament being played at Augusta, Ga.

But Obama also is a golfer facing a $777 billion dollar federal deficit in the first half of fiscal year 2012.

So his love of a good walk spoiled apparently was set aside in the drafting of the Fiscal Year 2013 budget. Obama's latest financial blueprint for the country includes a provision to eliminate charitable deductions for golf course easements.

Under current law, explains the Green Book (aka the General Explanations of the Administration’s Fiscal Year 2013), while a deduction is generally available for charitable contributions of cash and property, it is limited -- or disallowed entirely -- for certain types of hard-to-value property.

"In general, no charitable deduction is allowed for a contribution of a partial interest in property. An exception to this rule provides that a donor may deduct the value of a conservation easement (a partial interest) that is donated to a qualified charitable organization exclusively for conservation purposes. The value of the deduction for any contribution that produces a return benefit to the donor must be reduced by the value of the benefit received."

Recent court decisions, note the president's budget specialists, have upheld large deductions taken for contributions of easements preserving recreational amenities, including golf courses, surrounded by upscale, private home sites.

But such contributions have raised concerns, "both that the deduction amounts claimed for such easements (often by the developers of the private home sites) are excessive, and also that the conservation easement deduction is not narrowly tailored to promote only bona fide conservation activities, as opposed to the private interests of donors."

"These concerns are particularly strong in the case of the deduction for contributions of easements on golf courses. The benefit of an easement on a private golf course, especially one that is part of a luxury housing development, may accrue to a limited number of users such as members of the course club or the owners of the surrounding homes, not the general public, and the construction and operation of the course may even result in environmental degradation."

In addition, says the FY13 budget book, easements on golf courses "are particularly susceptible to overvaluation, as private interests often profit from the contribution of the easement."

The Nonprofit Law Prof Blog provides background on the proposed golf course donation law change. The IRS suffered a "major defeat" in 2009, says the blog, when the U.S. Tax Court approved a $28.6 million charitable tax deduction for the donation of a conservation easement encumbering the Kiva Dunes golf course on the gulf coast in Baldwin County, Ala.

I doubt the proposal will get much discussion on tee boxes across the country.

But you can bet that tax attorneys and accountants for golf facilities, regardless of whether they hit the links themselves, are keeping an eye on this provision.

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