The Internal Revenue Service (IRS) has announced a time-limited settlement offer for taxpayers who participated in Syndicated Conservation Easements (SCE) and similar transactions that are currently under audit. This move targets taxpayers involved in SCEs audited by the IRS’s Large Business & International and Small Business and Self-Employed divisions.
Eligibility and Terms of the Settlement Offer
Eligible taxpayers will receive a notification letter from the IRS outlining the terms and timelines to respond to the settlement offer. Key points of the settlement include:
Substantial concession of the claimed income tax benefits.
Application of penalties.
Continued IRS enforcement actions, including potential full disallowance of charitable contributions associated with SCEs, for those who do not participate in the settlement.
Taxpayers who do not receive a letter are not eligible for this resolution, and the IRS will continue enforcement actions against them. Additionally, taxpayers with cases pending in the United States Tax Court are not eligible for this settlement offer.
IRS Crackdown on Abusive SCE Transactions
The IRS has a long-standing policy of disallowing the tax benefits claimed by taxpayers involved in abusive SCE transactions. These transactions have repeatedly appeared on the IRS’s Dirty Dozen list of tax scams. The U.S. Tax Court has consistently supported the IRS’s position, with several notable cases highlighting the issue:
Plateau Holdings, LLC v. Commissioner, T.C. Memo. 2020-93
TOT Property Holdings, LLC v. Commissioner, T.C. Docket No. 5600-17 (unpublished bench op., Nov. 22, 2019)
Mill Road 36 Henry, LLC v. Commissioner, T.C. Memo. 2023-129
Oconee Landing Property, LLC v. Commissioner, T.C. Memo. 2024-25
Savannah Shoals, LLC v. Commissioner, T.C. Memo. 2024-35
Buckelew Farm, LLC v. Commissioner, T.C. Memo. 2024-52
In these cases, the true value of the easement was found to be only a fraction of the claimed value. The IRS’s aggressive stance has led to at least nine guilty pleas and two promoters being sentenced to 25 and 23 years in prison.
Legislative and Administrative Actions
In December 2022, Congress passed the SECURE 2.0 Act, which includes provisions aimed at curbing SCE abuse by limiting deductions for certain charitable contributions under Internal Revenue Code section 170. The IRS’s current settlement offer follows extensive consideration and input from external stakeholders and represents an additional measure to combat SCE abuse.
Encouragement for Taxpayers and Advisors
The IRS strongly encourages eligible taxpayers and their advisors to carefully review the settlement offer. Participating in the settlement is presented as the most effective and efficient way to resolve these transactions and achieve tax certainty. The IRS views this offer as a critical step towards sound tax administration and the final resolution of these disputed transactions.
Conclusion
The IRS’s announcement of a time-limited settlement offer for participants in Syndicated Conservation Easements is a significant development in the ongoing effort to combat abusive tax schemes. By providing a clear pathway to resolution, the IRS aims to bring finality and tax certainty to affected taxpayers while reinforcing its commitment to enforcing tax laws and protecting the tax system from abuse.
For more information on the settlement offer and eligibility, taxpayers should consult the IRS’s official communications or contact a qualified tax advisor.
