Kristen Parillo (Tax Analysts): New IRS Easement Settlement Offer Eliminates Up-Front Payment
Eligible partnerships that accept the terms of the IRS’s latest — and purportedly final — settlement offer for syndicated conservation easement and historic preservation easement cases won’t be required to pay the full settlement amount up front.
The liability will instead be subject to post-settlement collection, according to a May 13 IRS release detailing the terms of the settlement initiative.
The new offer — the fourth one issued since June 2020 — applies to cases docketed in the Tax Court and to nondocketed cases, meaning those under audit or seeking reconsideration by the IRS Independent Office of Appeals immediately after an audit. There are now 740 easement cases docketed in the Tax Court and 400 cases under exam, the IRS said.
The offer’s terms are similar to those of the second, “unofficial” settlement initiative that the IRS launched in early 2024 for docketed easement cases after its initial June 2020 offer yielded few settlements, according to William A. Stone III of Stone Tax Counsel LLC.
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Still, the new offer “does allow for nondocketed cases to settle without the up-front payment, which had always inhibited the ability to accept the nondocketed settlement,” Stone said, referring to the IRS’s June 2024 settlement initiative for nondocketed cases.
Erin Schilling (Bloomberg Law): IRS Offers Conservation Easement Deal to Bring Down Big Backlog
The IRS is offering a new settlement to taxpayers who took illegitimate conservation easement deductions, a type of tax scheme the agency has battled for more than a decade.
Partnerships will receive a letter from the IRS notifying them of their eligibility, according to the Wednesday announcement. The offer is valid for 90 days, disallows all charitable contribution deductions, and applies a 10% penalty and interest.
The settlement offer is the latest attempt to combat syndicated conservation easements transactions, where a group of investors inflate the value of donated land and take an outsized tax break. The transactions have resulted in tens of billions of dollars in unwarranted tax breaks.
The cases continue to clog Tax Court, with hundreds on the docket and hundreds more headed to court. Congress passed a law in 2022 to cap conservation easement values in response to fraud.
The agency’s previous settlement offers in 2020 and 2024 largely flopped because the IRS offered different deals to similar taxpayers, required strict deadlines, and made it difficult for companies with many investors to pay, tax lawyers said. The IRS said it resolved 405 cases through previous settlement offers, about a third of those offered accepted it.
The new offer intends to build on prior initiatives “while addressing barriers that may have discouraged acceptance,” according to the announcement.
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