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Taxes in Your Practice: Appropriations act addresses retirement savings and conservation easements

Vol. 79, No. 1 / January - February 2023

Scott VincentScott E. Vincent

Scott E. Vincent is the founding member of Vincent Law, LLC in Kansas City. 


As 2022 wound down, Congress passed the Consolidated Appropriations Act, 2023, (“the appropriations act”) and President Biden signed it into law. The act includes the “SECURE Act 2.0” with multiple retirement-related changes that build on the Setting Every Community Up for Retirement Enhancement of 2019 (SECURE Act).

The appropriations act also includes a limitation on charitable deductions for partners of pass-through entities that make conservation easement contributions. This article highlights a few key provisions in this legislation. This is not a comprehensive list, and you should refer to the appropriations act and implementation of these provisions for technical details and other provisions.

SECURE Act 2.0

Some highlights of the SECURE Act 2.0 include the following provisions:

Increase in age for mandatory required minimum distributions: The appropriations act increases the age for mandatory annual required minimum distributions (RMDs) from 72 to 73 starting in 2023. The appropriations act further increases the age for mandatory RMDs to 75 starting in 2033.

Higher catchup limits: Starting in 2024, the appropriations act indexes for inflation the $1,000 annual limit for additional catchup contributions to certain retirement plans for individuals 50 years or older. Starting in 2025, the appropriations act also increases the annual catchup contribution to the greater of $10,000 or 50% more than the regular catchup amount for individuals ages 62-64.

New starter 401(k) plans: The appropriations act adds the new § 401(k)(16) to allow employers to offer “starter” retirement plans with simplified requirements. Available effective in 2024, the starter plans must offer automatic deferral of at least 3% and not more than 15% of an employee’s compensation, and limit employee contributions to $6,000.

Automatic enrollment in retirement plans: Starting in 2025, § 401(k) retirement plans and § 403(b) annuity contracts are subject to expanded automatic enrollment requirements, including a minimum contribution percentage of 3-10% during the first year of participation and increasing percentages thereafter. There are also provisions allowing automatic portability of certain accounts when participants change jobs. Businesses in existence less than three years, small businesses that employ 10 or fewer employees, and church and governmental plans are exempt from the automatic enrollment requirements.

Expanded credit for small employer pension plan startup costs: Effective 2023, startup costs paid by small employers to establish or administer an eligible employer plan are eligible for an increased in credit, now 100% of qualified startup costs for employers of up to 50 employees. The appropriations act also provides additional credits for contributions by eligible employers.

Savings match replaced: Effective 2027, new § 6433 replaces prior provisions with a matching contribution paid by the government to certain individuals who make qualified retirement savings contributions. The amount of the matching contribution is generally 50% of up to $2,000 of the contributions made for the tax year and is subject to phaseouts based on modified adjusted gross income.

Emergency savings: Effective 2024, the appropriations act gives employers the option to offer pension-linked emergency savings accounts to non-highly compensated employees. Employers may automatically opt employees into these accounts at no more than 3% of their salary, and the portion of an account attributable to the contribution is capped at $2,500 (or lower as set by the employer). Contributions are treated like Roth accounts, and excess contributions can be directed to an employee’s Roth retirement account.

Student loan debt: Effective 2024, employers will be allowed to “match” qualified student loan payments by an employee with contributions to the employee’s retirement account.

Conservation easements

The appropriations act includes provisions limiting conservation easement deductions by pass-through entities that are effective for contributions made after Dec. 29, 2022. Under the new § 170(h)(7), a contribution by a partnership generally is not treated as a qualified conservation contribution if the amount of the contribution exceeds 2.5 times the sum of each partner’s basis in the partnership. However, exceptions apply for contributions of property with a holding period of at least three years, for family partnerships, and for certain historic structures.

The appropriations act also amends § 6662(b) to apply an accuracy-related penalty to the portion of an underpayment attributable to disallowance of a deduction under the new § 170(h)(7). In addition, a disallowance of such a deduction is subject to the gross valuation misstatement penalty under § 6662(h). Further, the reasonable cause exception does not apply, and the IRS is not required to obtain written supervisory approval for applying these penalties.

In addition, the appropriations act amends § 170(f) to codify certain reporting requirements for qualified conservation contributions made by partnerships that exceed 2.5 times the sum of each partner’s basis. The U.S. Secretary of the Treasury is also instructed to publish safe harbor deed language for extinguishment clauses within 120 days of enactment. Donors are provided a 90-day period to amend easement deeds and substitute the safe harbor language.


The appropriations act addresses a variety of retirement provisions with an overall goal of increasing retirement plan access and savings, and there are multiple, technical provisions. The interpretation and implementation of this legislation over the next several years will be an ongoing process with the IRS, employers, and retirement plan service providers. With respect to conservation easements, the appropriations act demonstrates continued regulatory focus and gives the IRS additional penalties and discretion in auditing conservation easements.