Kyrsten Sinema boldly fights her own party — to save another tax break for the rich

Sinema is the only Senate Democrat opposing a crackdown on tax break abused by Donald Trump and wealthy investors

By Igor Derysh

Senior News Editor

Published December 15, 2021 12:42PM (EST)

Kysten Sinema (Chip Somodevilla/Getty Images)
Kysten Sinema (Chip Somodevilla/Getty Images)

Sen. Kyrsten Sinema, D-Ariz., is pushing back against another Democratic proposal to crack down on a tax break that has been abused by the wealthy in negotiations over President Biden's Build Back Better bill.

Sinema, who already killed Democratic efforts to roll back some of the Trump-era tax cuts for the ultra-rich and big corporations — a proposed change that even fellow "centrist" holdout Sen. Joe Manchin of West Virginia supported — is the only Democrat opposed to cracking down on abuse of the conservation easement tax deduction, three sources told The Daily Beast.

The conservation easement deduction allows landowners who donate land for conservation to claim tax deductions on their income. It was originally intended to protect land from development but has long been abused by "syndicates" of investors, who often buy up cheap properties, persuade an appraiser to overvalue it and then reap the benefits of large tax breaks, frequently worth many times the amount originally invested, ProPublica detailed in an investigation last year. Former President Donald Trump currently faces a New York state investigation into whether he improperly inflated the value of his Westchester County mansion to score a $21 million tax break under the program. IRS efforts to crack down on abuse of the tax break have largely fallen flat, leading both Democrats and Republicans in Congress to push for a fix.

Sen. Ron Wyden, D-Ore., the chairman of the Senate Finance Committee, is pushing for the BBB package to include the Charitable Conservation Easement Program Integrity Act, which would bar conservation easement deductions exceeding 250% of the total amount invested in the property. Rep. Mike Thompson, D-Calif., who introduced the bill in the House, said the bill would protect the tax deduction from "bad actors" abusing the program.

Groups backing the tax break, which have spent $9 million on lobbyists over the past four years, are fighting to kill the proposal, according to Bloomberg. So is Sinema, whose opposition led to the provision being axed from the bill passed by the House last month. Democrats and conservation advocacy groups are still trying to get Sinema on board with the bill, which even has support from some Republicans, including Sens. Chuck Grassley, R-Iowa, and Steve Daines, R-Mont.

RELATED: The IRS tried to crack down on rich people using an "abusive" tax deduction. It hasn't gone so well

"We respectfully ask you to stand with us — and all in our community — by urging your leadership to curb abuse and restore the integrity of this cherished and worthy conservation program," a coalition of more than a dozen conservation advocacy groups wrote in a letter to Sinema, according to the Daily Beast.

Sinema spokesman John LaBombard told the outlet that constituent groups like hospitals and colleges have raised concerns with "the approach under consideration for this legislation." While some groups that oppose the proposal have indeed complained that the bill would apply to past transactions as well as future ones, Sinema has also rejected a compromise deal that would limit the ban to future transactions, according to the Daily Beast report.

Sinema "shares the goal of stopping abusive comprehensive easement practices and believes that comprehensive reforms are needed" but "believes that such reforms must be designed thoughtfully, after a robust review process that includes the views of impacted stakeholders — because oversimplified legislation could have a chilling effect on legitimate charitable donations of lands for conservation, hurting states like Arizona," LaBombard told the Beast. "The senator looks forward to continuing discussions with the bipartisan group of senators examining this challenge."

Conservation groups have warned for years that the tax break is being abused. The Land Trust Alliance, which represents organizations that receive conservation easements, says that syndicated conservation easements, in which promoters organize groups of investors who buy land to generate big tax deductions, accounted for $9.2 billion in deductions to fewer than 300 entities in 2018, compared to $1 billion in deductions for 2,000 to 2,500 non-syndicated landowners.

"The IRS and Treasury Department have stepped up their efforts to halt this abuse," Andrew Bowman, the group's president, told Bloomberg. "It is time for Congress to do its part."

Wyden told Bloomberg that efforts to crack down on the abuse have been stymied by industry groups. "There have been loads of lobbyists running around standing up for policies that really flagrantly abuse" the tax break, he said.

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Sinema, who has repeatedly met with lobbyists fighting provisions in the BBB, previously torpedoed efforts to roll back the Trump tax cut on corporations and top earners even though she previously voted against them. She told The Washington Post last month that she is focused on "maintaining American competitiveness and ensuring that businesses of all sizes in America, and particularly in Arizona, have the ability to grow and to compete."

Sinema was also instrumental in gutting the Democratic proposal to allow Medicare to negotiate lower drug prices, drastically limiting which drugs can be negotiated after receiving hundreds of thousands in donations from the pharmaceutical industry.

Democrats say it's imperative to seize this opportunity to crack down on abuse of the deduction. "These types of conservation easements, some of them are the shadiest of the shady transactions," Wyden told HuffPost earlier this month. "We're working hard to get all the senators on board."

Even Republicans opposed to the overall package hope that Wyden will be able to win over Sinema.

"Democrats aren't going to listen to me on that," Grassley told HuffPost, "but if they listen to Wyden, that'd be OK with me."

Read more on BBB and attempts to end tax breaks for the wealthy:

By Igor Derysh

Igor Derysh is Salon's senior news editor. His work has also appeared in the Los Angeles Times, Chicago Tribune, Boston Herald and Baltimore Sun.

MORE FROM Igor Derysh

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Aggregation Build Back Better Donald Trump Kyrsten Sinema Politics Taxes