IRS Ramps Up Investigations Into Conservation Easements

The Internal Revenue Service (IRS) has recently intensified its efforts to uncover fraudulent conservation easements. As it continues to aggressively pursue investigations, the IRS has also opened a time-limited settlement opportunity for eligible taxpayers who have submitted fraudulent claims. Taxpayers in Massachusetts who have concerns about their federal conservation easement deductions should promptly consult a Boston tax attorney.

Exposing fraudulent conservation easements has been a top enforcement priority for the Internal Revenue Service (IRS) in recent years. While granting conservation easements can serve as a legitimate means of reducing taxpayers’ federal liability, the conservation easement deduction is also heavily abused.

The IRS knows that this is the case—and it is now taking action to hold bad actors accountable. We have recently seen a significant increase in investigations targeting conservation easement deductions, and these investigations have led to substantial liability in many cases. Learn more from Boston tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group:

Courts Allow Just Six Percent of Claimed Conservation Easement Deductions on Average

According to the IRS, when evaluating conservation easement deductions, courts allow just six percent of the claimed deduction on average. Courts also routinely impose the maximum 40-percent gross valuation misstatement penalty. The IRS touts these results (highlighting the fact that it has “repeatedly prevailed”) in justifying its continued efforts to target fraudulent conservation easement claims. The IRS also highlights the fact that, “[r]ecent appellate decisions indicate that partnerships should not expect more favorable outcomes on appeal.”

Responding to an IRS Conservation Easement Investigation

With this in mind, partnerships and other taxpayers that are facing IRS investigations related to conservation easement deductions need to engage experienced counsel to help them build and execute a strategic defense. This starts with assessing the validity of the taxpayer’s claimed deduction. If a taxpayer’s claimed deduction is valid, then demonstrating that this is the case should facilitate an efficient and favorable resolution. On the other hand, if a taxpayer’s claimed deduction is not valid, a very different approach will be required.

Responding to a Conservation Easement Settlement Letter from the IRS

Last month, the IRS began sending settlement letters to taxpayers suspected of claiming fraudulent conservation easement deductions. Taxpayers that receive these letters need to respond very carefully.

Letter recipients only have a limited amount of time to respond, and those that fail to respond will generally face, “a charitable contribution deduction of approximately 5% to 7% of the claimed deduction and a 40% gross valuation misstatement penalty.” With that said, settling on the IRS’ terms is not necessarily the best approach; and, here too, taxpayers should promptly engage experienced counsel to help them make informed and strategic decisions.

Request a Call with Boston Tax Attorney Kevin E. Thorn

If you need to know more about the IRS’ efforts to target fraudulent conservation easement deductions in 2026, we invite you to get in touch. To request a call with Boston tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, call us at 617-692-2989 or contact us confidentially online today.