The Internal Revenue Service announced a new time-limited settlement initiative on May 13 for eligible taxpayers involved in conservation easement or historic preservation easement disputes, identified as news release IR-2026-65. The program covers a 135-day window from the date individualized settlement letters are issued.
The IRS has been pursuing what it characterizes as abusive syndicated conservation easement transactions for years. Since 2020, the agency has run several settlement initiatives that were generally more favorable than the outcomes taxpayers reached in Tax Court. The prior offers required taxpayers to pay underpayment penalties and prohibited any charitable contribution deduction beyond actual out-of-pocket costs. According to the IRS, those earlier initiatives resolved 405 cases, with about 32% of all offers accepted.
The new opportunity runs in two phases following the issuance of an individualized settlement letter:
The combined window totals 135 days from the date the IRS issues the settlement letter to a given taxpayer. After expiration, the IRS says cases will only be resolved before a Tax Court decision on the basis of litigation hazards — which, in general, means roughly a 5% to 7% allowed charitable contribution deduction against the claimed amount plus a 40% gross valuation misstatement penalty.
The IRS will determine eligibility case by case. The initiative is generally not available for cases that:
For cases governed by the Tax Equity and Fiscal Responsibility Act (TEFRA), generally involving tax years 2017 and earlier, individual investors should expect to receive IRS notices stating amounts owed after the settlement is finalized and the Tax Court decision becomes final. For cases under the Bipartisan Budget Act of 2015 (BBA), generally tax years 2018 and later, the partnership itself bears responsibility for payment unless an election to push out the liability was made.
For taxpayers currently in a conservation easement dispute, the settlement window offers a defined off-ramp with stricter penalty terms than prior initiatives but a clearer path to closure. The IRS framed the design as an attempt to address barriers that may have discouraged acceptance under earlier programs. Anyone holding an outstanding easement claim should expect formal communication from the IRS specifying applicable deadlines, and should consult a tax attorney before responding.
News items from the IRS may not be updated after their release, so the practical advice for anyone affected is to act on the individualized letter rather than the news release alone.
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