Syndicated Conservation Easements: IRS Scrutiny Continues

Syndicated Conservation Easements: IRS Scrutiny Continues

On May 2, 2022, the Wall Street Journal published two detailed articles authored by Richard Rubin on the subject of syndicated conservation easements: Conservation Tax-Break Deals Keep Flowing Despite IRS Crackdown (WSJ 2022.05.02) and How a Georgia Pine Farm Became a Significant Tax Deduction (WJS 2022.05.02). In the first article, the author notes that IRS data released in 2020 showed syndicated easement deductions climbing from $6 billion in 2016 to $9.2 billion in 2018. And, the author quotes the head of the IRS’s business and international division as stating, “We don’t feel like we’ve seen the full impact of our [the IRS’s] efforts just yet. . . . We view it as abusive and problematic, and we will continue to throw significant enforcement tools” at abusive syndicated conservation easement tax shelters.

In the second article, the author focuses on a specific 434-acre pine-tree farm in Georgia and its dedication for conservation purposes pursuant to a syndicated easement arrangement. The author writes, “In 2020, some McGinnis family members sold off three-fifths of the property for $310,000. By the end of 2021, the . . . land had been sold again, this time to a business that raised $10.7 million from investors in a land-conservation deal. That transaction could yield its investors millions of dollars more in tax deductions—as well as scrutiny from the Internal Revenue Service.” Rubin writes that billions of dollars of tax revenue are at stake in abusive syndicated conservation easement tax shelters.

As Freeman Law has reported, syndicated conservation easements are #1 on the IRS’s Dirty Dozen list for 2021, which notes: “In syndicated conservation easements promoters take a provision of tax law for conservation easements and twist it through using inflated appraisals of undeveloped land and partnerships. These abusive arrangements are designed to game the system and generate inflated and unwarranted tax deductions, often by using inflated appraisals of undeveloped land and partnerships devoid of a legitimate business purpose.”

Freeman Law has written extensively on the challenges of and scrutiny received by conservation easements—syndicated and otherwise. See, for example:

Freeman Law’s Tax Court in Brief: Oxbow Bend, LLC v. Commissioner, T.C. Memo 2022-23 (March 21, 2022)Pickens Decorative Stone, LLC v. Commissioner, T.C. Memo. 2022-22 (March 17, 2022)

Freeman Law Senate Releases Report on Syndicated Conservation Easements

Freeman Law Syndicated Conservation Easements (and Other Tax Schemes) Beware

Freeman Law The Art of an IRS APA Defense: Conservation Easements and Hewitt

Freeman Law Conservation Easement Deductions: A Primer on Key Provisions

Freeman Law Recent Tax Court Conservation Easement Decision Demonstrates Continued IRS Enforcement Efforts and Penalty Defenses

Have a question? Contact Cory Halliburton, Freeman Law.

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