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December 1, 2023

Proposed regulations on conservation contributions clarify when charitable contributions by partnerships and S corporations would be disallowed, increase reporting requirements

  • The disallowance rule would disqualify a conservation contribution to upper-tier entities but not to lower-tier entities.
  • Additional reporting requirements for all in-kind donations made by pass-through entities will result in more attachments to returns.

In proposed regulations (REG-112916-23), the Treasury Department and IRS clarify when a tax deduction for a qualified conservation contribution made by a partnership or an S corporation is disallowed. The proposed regulations include definitions, methods to calculate the relevant basis of the contribution, statutory exceptions to the statutory disallowance rule. The proposed regulations also would also implement increased reporting requirements for all in-kind donations, including qualified conservation contributions.

Generally, the proposed regulations would apply to qualified charitable contributions and in-kind donations made after December 29, 2022.


IRC Section 170(h)(7), added by the SECURE 2.0 Act of 2022, defines qualified conservation contributions, a type of in-kind donation. Under the IRC Section 170(h)(7)(a) disallowance rule, a contribution by a partnership (whether directly or as a distributive share of a contribution of another partnership) is not treated as a qualified conservation contribution for purposes of IRC Section 170 if the contribution exceeds 2.5 times the sum of each partner's relevant basis in the partnership. IRC Section 170(h)(7)(F) applies the rules in IRC Section 170(h)(7) to "S corporations and other pass-through entities in the same manner as such rules apply to partnerships" except as the Secretary may otherwise provide.

Proposed regulations

The proposed regulations would change and clarify the existing regulations and only apply to partnerships and S corporations, not other types of pass-through entities.

The proposed regulations clarify (1) how the disallowance rule applies to partnerships and S corporations, (2) how to compute relevant basis and modified basis, including in tiered structures, and (3) the three statutory exceptions to the disallowance rule.

The proposed regulations would also modify the reporting requirements in Treas. Reg. Section 1.170A-16 of all in-kind donations to address substantiation of charitable contribution deductions.

Applying the disallowance rule

The disallowance rule applies to both contributing partnerships and upper-tier partnerships. Generally, a qualified conservation contribution by a contributing partnership or S corporation would be disallowed if the qualified conservation contribution exceeded 2.5 times the sum of each of the contributing partnership's or contributing S corporation's ultimate member's relevant basis as determined under Prop. Treas. Reg Section 1.170A-14(j) through (m). The basis determination "must be applied at each tier unless and until the test is failed at one tier, in which case that portion of the contribution will be a disallowed qualified conservation contribution to that tier and any subsequent tiers."

Prop. Treas. Reg. Section 1.170A-14(j)(3) contains relevant definitions, including for a contributing partnership, contributing S corporation, ultimate member, allocated portion, upper-tier partnership and upper-tier S corporation.

If the disallowance rule applied to a partnership or S corporation, then the qualified conservation contribution would be disallowed to any person receiving a distributive share or pro rata share, directly or indirectly, of that partnership's or S corporation's disallowed qualified conservation contribution. The disallowance rule would not affect, however, any lower-tier entities. Thus, if the disallowance rule's application to an upper-tier partnership or upper-tier S corporation results in a disallowed qualified conservation contribution, federal income tax consequences would occur up the chain of tiers but not down the chain of tiers and the contributing partnership would not be affected.

The IRS noted that IRC Section 170(h)(7) is not a safe harbor; a qualified conservation contribution that is not disallowed under this section does not necessarily comply with the other provisions of IRC Section 170.

Computing relevant basis and modified basis

Under Prop. Treas. Reg. Section 1.170A-14(k), the relevant basis of a qualified conservation contribution is, with respect to any ultimate member, the portion of the ultimate member's modified basis that is allocable to the portion of the real property with respect to which the qualified conservation contribution is made. The proposed regulations go into detail, with equations and examples, about how to determine basis for various entity members.

Contributing partnerships, contributing S corporations, upper-tier partnerships and upper-tier S corporations would have to substantiate the computation of their adjusted basis, modified basis and relevant basis by maintaining dated, written statements in their books and records, by the due date, including extensions, of their federal income tax returns.

Three statutory exceptions to the disallowance rule

Prop. Treas. Reg. Section 1.170A-14(n) clarifies the three exceptions to the disallowance rule. The disallowance rule does not apply to qualified conservation contributions made:

  • Outside the three-year holding period
  • By family partnerships and S corporations (if at least 90% of the interests are held by an individual and family members)
  • To preserve certified historic structures

Reporting requirements

Partnerships and S corporations making qualified conservation contributions currently must complete Form 8283, Noncash Charitable Contributions. The proposed regulations would require taxpayers to include numbers in Section A (reporting more than $500) or Section B (reporting more than $5,000) specifying the amount of the contribution. In addition, taxpayers would have to report the sum of each of their relevant bases on the Form 8283 (Section B).


Mathematical complexity

The basis computations in these regulations involve some complicated math, which will likely make complying with the regulations onerous for those interested in making legitimate qualified conservation contributions with old and cold property. Based on the Preamble, the IRS could have adopted a less complicated approach, but appeared to believe that the mathematical complexity was the best to carry out congressional intent. As such, the current approach is unlikely to change, despite requests for comments from tax practitioners.

Although the disallowance rule does not apply in certain cases, meeting one of its exceptions would not lessen the mathematical complexity. Taxpayers claiming to fall within an exception would still have to prove that they are not subject to the disallowance via information reporting on the Form 8283 and all of the associated calculations.

Practically speaking, the regulations imply that going through the mathematical exercise at each level of a pass-through entity tier is a choice. If the pass-through entity donates land in fee-simple to an organization and that donation is not a "qualified conservation contribution" under IRC Section 170(h), then the 2.5 times limit under IRC Section 170(h)(7) and the algebraic exercises contained in Prop. Treas. Reg. Section 1.170A-14 do not apply. Thus, the choice is between a straight-out donation that is not subject to the rules and a qualified conservation contribution that is subject to the rules.

This portion of the proposed regulations would be effective for qualified conservation contributions made after December 29, 2022. As the regulations' effective date does not include transition rules for returns that have already been filed, the IRS might have believed that relatively few donations in the last two days of calendar year 2022 would be affected. While this may be true for calendar-year pass-through entities, fiscal-year S corporations and partnerships need to know what they must do to retroactively apply these rules.

Additional reporting

While the disallowance rules apply to qualified conservation contributions, the additional reporting requirements in the proposed regulations, which the Preamble seems to characterize as clarifications of the existing rules, apply to all in-kind donations and would significantly increase the number of Forms 8283 that an entity must file. Each pass-through entity would have to deliver to its owners (1) the Form 8283 it prepared, plus (2) any Form 8283 that a lower-tier partnership provided.

The rule's complexity can be illustrated in the following example:

Assume partnership, PRS, donates non-cash property to a local charitable organization in December 2023. PRS has four owners: (1) an S corporation, (2) two individuals — A and B, and (3) a C corporation. The S corporation has 10 individuals as shareholders (Individuals C-L).

Affected taxpayers

Number of Forms 8283 filed with return

Number of Forms 8283 distributed to owners



4 (copy of Form 8283 attached to PRS's Form 1065)

Individual A

1 (provided from PRS)


Individual B

1 (provided from PRS)


C Corporation

1 (provided from PRS)


S Corporation

2 (one provided from PRS, one prepared by S Corporation)

20 (one provided from PRS, one prepared by S Corporation)

Individual C

2 (one provided from PRS, one prepared by S Corporation)


Individual D

2 (one provided from PRS, one prepared by S Corporation)


Individual E

2 (one provided from PRS, one prepared by S Corporation)


Individual F

2 (one provided from PRS, one prepared by S Corporation)


Individual G

2 (one provided from PRS, one prepared by S Corporation)


Individual H

2 (one provided from PRS, one prepared by S Corporation)


Individual I

2 (one provided from PRS, one prepared by S Corporation)


Individual J

2 (one provided from PRS, one prepared by S Corporation)


Individual K

2 (one provided from PRS, one prepared by S Corporation)


Individual L

2 (one provided from PRS, one prepared by S Corporation)





As the example illustrates, one in-kind donation by PRS will generate 26 Forms 8283 to file with the 2023 return and 24 Forms 8283 to distribute to owners. If each individual shareholder in the S corporation had excess charitable contribution carryovers, the IRS could receive an additional 100 Forms 8283 (i.e., two Forms 8283 for each individual attached to their tax returns for the five years into the future (2024–2028) that the donation carries forward).

Based on this example, taxpayers should keep the following in mind:

  1. The additional reporting requirements apply to any in-kind donation.
  2. Neither the current regulations nor the proposed regulations include a de minimis exception to spare taxpayers from having to attach multiple Forms 8283 to tax returns.
  3. The IRS noted that "[t]o the extent there is a change in burden as a result of these regulations, the change in burden will be reflected in the updated burden estimates for the Form 8283 and Schedule K-1 for Forms 1065 and 1120-S. The requirement to maintain records to substantiate information on Form 8283 and Schedule K-1 for Forms 1065 and 1120-S is already contained in the burden associated with the control number for the forms and remains unchanged."

The regulations also state that "[t]he estimated burden for taxpayers filing Form 8283 under OMB control number 1545–0074 is [19] minutes for recordkeeping, [29] minutes for learning about the law or the form, one hour and four minutes for preparing the form, and [34] minutes for copying, assembling, and sending the form to the IRS."

The instructions to the Form 8283 have not been updated since these regulations were released. Hopefully, the updated instructions will address the burden posed by these regulations and try to minimize it.

This portion of the regulations is proposed to be effective for tax years ending on or after the date the proposed regulations were published in the Federal Register (November 20, 2023). While taxpayers are not required to follow proposed regulations, those who do not would have to amend their returns (or Administrative Adjustment Requests for BBA partnerships) if the proposed regulations were finalized in their current form, as failure to attach a Form 8283 to a return can be fatal to a deduction.1


Contact Information
For additional information concerning this Alert, please contact:
Private Client Services
   • David Kirk (
   • Justin Ransome (
   • Ankur Thakkar (

Published by NTD’s Tax Technical Knowledge Services group; Andrea Ben-Yosef, legal editor



1 Before 2018, a reasonable cause exception applied for not including Form 8283 in a return. See Treas. Reg. Section 1.170A-13(c)(4)(iv)(H). The exception, however, was quietly removed from the substantiation regulations for donations made after July 30, 2018.