Golf Courses Battle with IRS Over Tax Deductions for Conservation

January 5, 2016

Anyone who golfs gets penalized plenty.

But golf courses? They get off easy. At least according to the IRS.

As part of an effort to tighten what it sees as an overly generous environmental incentive, the Internal Revenue Service is going after courses that it believes benefit from undeserved tax breaks.

The details of the story were laid bare this week in a Wall Street Journal article on the growing battle over what is known as the conservation-easement tax break, which allows property owners to claim charitable deductions for passing on their right to develop swatches of their land.

As the Journal story puts it, the fight pits the IRS against a range of wealthy landowners, “including golf clubs, over an environmental incentive that lets taxpayers deduct sums well into the millions.”

In the eyes of the federal government, a number of courses seek tax breaks based on conservation claims that don’t stand up to careful scrutiny.

One of the cases covered in the Journal story involves two courses at St. James Plantation in North Carolina, which have claimed nearly $8 million in conservation-based tax breaks.

The most recent round in that fight went to the IRS, when the U.S. Tax Court ruled against the courses’ eco-claims. In his decision, the Journal reported, Judge Thomas Wells wrote that “patches of native vegetation and wildlife” did not merit seven-figure tax exemptions.

If you think the rules of golf can get arcane, try the U.S. tax code. Sift through the fine print, and you come across a myriad of instances when tax law gets entangled with the game.

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The Journal story traces that entwinement to a three-year court battle between the IRS and a coastal Alabama golf course, Kiva Dunes. That battle ended in 2009 in a victory for Kiva Dunes, which was vindicated in its claim to a nearly $28.7 million tax break in exchange for its promise to leave 141 acres of land undeveloped.

“After that 2009 loss,” the Journal story says, “the Obama administration tried another approach — getting Congress to ban golf course easements altogether. The golf industry helped beat back that idea, and the most recent tax law preserves an expanded version of the break that had lapsed at the end of 2014.”

Which brings us up to date and to a spreading legal struggle between golf clubs and the IRS. Among the other cases cited in the Journal story is a pending court date for the Champions Retreat Golf Club in Evans, Georgia, which has laid claim to a $10.4 million deduction; and an awaited court ruling involving the National Golf Club of Kansas City, whose conservation claims, the Journal reported, include “the importance of fishless ponds for amphibian reproduction” and “the presence of milkweed and red-eared sliders.”