IRS Offers Time-Limited Settlement to Taxpayers in Syndicated Conservation Easement Cases

Internal Revenue Service (IRS)

WASHINGTON, D.C. — The Internal Revenue Service (IRS) has announced a time-limited settlement offer for taxpayers involved in Syndicated Conservation Easements (SCE) and similar transactions that are currently under audit. The IRS is targeting these transactions, which have frequently been flagged as abusive tax avoidance schemes on the agency’s “Dirty Dozen” list of tax scams.

Eligible taxpayers will receive notification letters from the IRS detailing the terms of the settlement and the deadline to respond. The settlement requires significant concessions of the claimed income tax benefits and includes the imposition of penalties. For those who choose not to accept the offer, the IRS will continue enforcement actions, potentially disallowing all associated charitable contributions and applying full penalties.

Taxpayers who do not receive the letter are not eligible for this settlement and will remain subject to ongoing enforcement actions. Additionally, those with cases pending in the United States Tax Court are excluded from this offer.

The IRS has been steadfast in disallowing tax benefits claimed through abusive SCE transactions. These transactions often involve inflated valuations of property set aside for conservation, leading to unjustified tax deductions. The U.S. Tax Court has ruled against these schemes in notable cases such as Plateau Holdings, LLC v. Commissioner and Mill Road 36 Henry, LLC v. Commissioner, finding that the true value of the easements was a small fraction of the amounts claimed.

Moreover, legal actions have resulted in at least nine guilty pleas and two promoters receiving substantial prison sentences of 25 and 23 years for their roles in these fraudulent schemes.

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In December 2022, Congress passed the SECURE 2.0 Act, which intends to curb SCE abuse by limiting deductions for certain charitable contributions. This legislation is part of broader efforts to close loopholes and ensure fair tax practices.

The IRS’s latest step, offering time-limited settlements, is seen as a strategic move to promote sound tax administration. By encouraging taxpayers to settle, the IRS seeks to resolve these disputes efficiently and provide tax certainty for both the government and the taxpayers involved.

Taxpayers and their advisors are urged to carefully review the settlement offer. Accepting the offer is considered the quickest and most effective way to finalize these transactions and avoid prolonged litigation or further penalties.

This settlement initiative aims to combat tax evasion and maintain the integrity of the tax system. Ensuring compliance with tax laws not only upholds fairness but also fortifies public trust in the tax administration process.

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