Prop. regs. identify syndicated conservation easements as listed transactions

By Martha Waggoner

In the wake of Sixth Circuit and Tax Court decisions holding that the Administrative Procedure Act requires the IRS to identify listed transactions through notice-and-comment rulemaking, the IRS has issued proposed regulations that identify certain syndicated conservation easement transactions as listed transactions (REG-106134-22). The Service stated that it intends to finalize the proposed regulations, after due consideration of public comments, in 2023 and to issue proposed regulations identifying additional listed transactions in the near future (Announcement 2022-28).

The IRS said in the announcement that it disagrees with a recent Tax Court decision in Green Valley Investors, LLC, 159 T.C. No. 5 (2022), which held that Notice 2017-10 was invalid because it was issued without following the Administrative Procedure Act's notice-and-comment rulemaking procedure. The notice identified certain syndicated conservation easements as listed transactions, which must be reported to the IRS. Earlier this year, the Sixth Circuit issued a similar decision in a case known as Mann Construction, Inc., No. 21-1500 (6th Cir. 3/3/22), which involved a different listed transaction.

Although it disagrees with these decisions, the IRS stated it was issuing the proposed regulations identifying certain conservation easement syndicate transactions as listed transactions "to avoid confusion and to prevent disruption of the IRS's ongoing efforts to identify and examine abusive tax shelters throughout the nation."

The IRS issued Notice 2017-10 because of concerns that people use conservation easements — which limit the use of land to protect it and provide deductions for taxpayers who donate the land — to avoid paying taxes, especially when investors — or a syndicate — buy the land together.

The IRS has requested comments on the proposed regulations by Feb. 16, 2023. Syndicated conservation easement transactions identified in Prop. Regs. Sec. 1.6011-9(b) would become listed transactions on the date the proposed regulations are published as final.

— To comment on this article or to suggest an idea for another article, contact Martha Waggoner at

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