IRS Announces Terms of

The Internal Revenue Service (IRS) has announced a “time-limited” opportunity to settle conservation easement disputes. The IRS began sending settlement letters to eligible taxpayers in May and continues to send them on a rolling basis. Taxpayers who receive settlement letters will need to make informed decisions about how to respond—and they will want to consult with an experienced Boston tax lawyer before the 90-day response deadline expires.

On May 13, 2026, the Internal Revenue Service (IRS) announced the start of a “time-limited settlement opportunity for eligible taxpayers involved in conservation easement disputes.” Eligible taxpayers are those who receive a settlement letter from the IRS. While settling with the IRS may be the best approach in some cases, all taxpayers need to ensure they make informed, strategic decisions based on an accurate assessment of their federal tax liability and risk exposure. Learn more from Boston tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group:

The IRS is Working Through a Backlog of Conservation Easement Enforcement Cases

According to the IRS’ announcement, it currently has more than 1,100 pending conservation easement cases—including 740 cases pending in the U.S. Tax Court. The IRS has prioritized enforcement in this area in recent years, focusing on partnerships and other high-income taxpayers suspected of claiming fraudulent conservation easement deductions. While many of these cases involve allegations of artificially inflated appraisals, taxpayers can face (and are facing) scrutiny for other reasons as well.

What Taxpayers Who Receive Settlement Letters Need to Know

Despite this backlog, the IRS is continuing to aggressively pursue investigations in this area as well—and, as a result, the scope of the IRS’ work is continuing to grow. Given this, the IRS has begun sending settlement letters to taxpayers with pending disputes. While each of these letters is “individualized,” the IRS has stated that all proposed settlements are subject to the following terms:

• No charitable contribution will be allowed, but the taxpayer will be allowed to claim an “other deduction” equal to its approximate out-of-pocket costs;
• The taxpayer will be required to pay a 10-percent gross valuation misstatement penalty; and,
• Interest will accrue as provided for in the Internal Revenue Code.

Taxpayers who receive a settlement letter will have 90 days to accept. If they do not accept within 90 days, they will have an additional 45 days during which the applicable gross valuation misstatement penalty will increase to 20 percent. After 135 days, the offer will expire, and the IRS’ announcement states that any future settlement requests will be considered only on the basis of the “hazards of litigation.” This means that settlements will generally result in allowance of five to seven percent of the claimed conservation easement deduction and a 40-percent gross valuation misstatement penalty.

Request a Confidential Consultation with Boston Tax Lawyer Kevin E. Thorn

If you need to know more about the IRS’ ongoing efforts to target fraudulent conservation easement deductions, we invite you to get in touch. Please call 617-692-2989 or contact us online to schedule a confidential consultation with Boston tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group.