IRS shifts approach to conservation easement disputes

The IRS is taking a new tack to dealing with conservation easement disputes by ending uniform settlement initiatives and establishing the Office of Conservation Easements after previous settlement efforts fell short, the agency said Wednesday.

IRS experience with administering previous settlement initiatives and engaging with taxpayers has “shown that standardized, unsolicited settlement letters on a rolling basis, each with a fixed response period, are not well suited to the full range of conservation easement cases,” the IRS said in a news release. “Partnership agreements, insurance arrangements, procedural posture, and other circumstances may differ materially and affect when and how taxpayers evaluate settlement.”

The IRS has long targeted what it considers improper deductions for qualified conservation contributions under Sec. 170(h), particularly those involving syndicated partnerships. The cases have frequently been the subject of litigation, with more than 1,100 cases docketed in Tax Court or IRS Exam as of May, and several broad settlement initiatives.

New office

The new office, the IRS said, “will centralize technical expertise and coordinate policy, enforcement, and case-resolution strategy across the IRS and with the Office of Chief Counsel. It will support engagement with taxpayers, practitioners, conservation and historic preservation organizations, and other stakeholders.”

The office also will work with Treasury to review administrative and legislative options related to conservation and historic preservation tax policies, with an emphasis on consistent tax administration and valuation integrity, the IRS said.

Current initiative

Effective Aug. 19, the IRS ended a uniform settlement initiative that began in May and will not issue any additional uniform settlement letters under that program. The IRS is withdrawing any deadlines for accepting previously issued offers, although prior elections to participate in the May settlement framework will remain in effect and will be processed in accordance with their terms.

Taxpayers with pending cases may continue to request settlement under the May framework through their assigned IRS examination or chief counsel representative. If the case remains eligible, the IRS will issue a new offer on the same standardized terms. Individual cases may continue to be resolved on different terms where warranted by the hazards of litigation.

“This transition does not signal a new or more favorable standardized offer. Rather, it ends issuance of uniform offers and deadlines,” the IRS said.

The IRS, which provided no details on when the office will be operational, said additional contact information will be announced separately.

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