Settlement offers to be sent on syndicated conservation easements

The IRS said Wednesday that it is making a time-limited settlement offer to certain taxpayers who participated in syndicated conservation easements and similar transactions.

Eligible taxpayers will learn of the terms to respond in a letter from the IRS in July, the Service said in a news release. The terms will require “substantial concession” of income tax benefits and the imposition of some penalties, the release said.

Taxpayers that are already under examination, receive a letter, and decide not to accept the settlement offer will continue to face IRS enforcement actions, including potential full disallowance of charitable contributions associated with the syndicated conservation easements and the imposition of all applicable penalties, the release said.

Taxpayers who do not receive a letter are not eligible for the offer, and the IRS will continue enforcement-related actions against them. Taxpayers with cases pending in Tax Court also are not eligible.

The Service said it is making the offers “in the interest of sound tax administration” but did not indicate how it is determining which taxpayers are eligible.

The IRS has previously offered settlements for cases involving syndicated conservation easement transactions, including in June 2020, when it made a settlement offer to taxpayers with cases pending in Tax Court, and in October 2005, when syndicated conservation easement transactions were included in a settlement initiative for taxpayers who voluntarily came forward.

The IRS has consistently disallowed the tax benefits claimed by taxpayers in abusive syndicated conservation easement transactions, which have appeared on the IRS’s Dirty Dozen list of tax scams multiple times. The Tax Court also has issued many opinions involving the transactions.

Also, at least nine taxpayers have pleaded guilty to crimes arising from their organization, promotion, and sale of abusive syndicated conservation easement tax shelters, the release said, and two promoters have been found guilty and sentenced to 25 and 23 years, respectively, in prison.

In December 2022, Congress passed the SECURE 2.0 Act of 2022 (Division T of the Consolidated Appropriations Act, 2023, P.L. 117-328), which applies to contributions of property made after Dec. 29, 2022, to help curb syndicated conservation easement abuse by limiting deductions for certain charitable contributions under Sec. 170.

The IRS is publishing final regulations (T.D. 9999) on Friday that provide guidance on the application of the rule enacted by the Secure 2.0 Act that disallows deductions for certain qualified conservation contributions by partnerships or S corporations after Dec. 29, 2022.

— To comment on this article or to suggest an idea for another article, contact Martha Waggoner at Martha.Waggoner@aicpa-cima.com.