Tax compliance is not a once-a-year event, and the conservation easement area proves it. On August 19, 2026, the IRS announced the creation of an Office of Conservation Easements, a permanent internal function built to centralize technical expertise and coordinate policy, enforcement, and case resolution strategy across the agency and with the Office of Chief Counsel. On the same day, the IRS concluded its uniform settlement initiative, stopped issuing settlement letters under the May 13 program, and withdrew the acceptance deadlines attached to offers already mailed. Taxpayers who were still thinking about that offer now have a different conversation ahead of them. Tax problems are easier to manage before the IRS process controls the timeline, and if you want a practical review of your exposure, planning options, or IRS correspondence, speak with Steve Perry, EA. Call 678-717-9818, email steve@bookstaxesatl.com, or connect on LinkedIn at www.linkedin.com/in/steveperrybtm.
What the New Office Signals
A new office is not a press release. It is a staffing and sequencing decision. When the IRS builds a dedicated function around a single issue, it is telling you that the issue will be worked by people who see the same fact patterns every day, apply consistent positions, and coordinate with Chief Counsel before a case reaches trial. The IRS states that the Office will centralize technical expertise, support engagement with taxpayers and practitioners, and work with Treasury to evaluate administrative and legislative options that strengthen valuation integrity.
For a taxpayer holding a questionable deduction, that changes the odds in a specific way. Arguments that once depended on an examiner being unfamiliar with syndicated structures, tiered partnerships, appraisal methodology, or historic district restrictions become much weaker when the file is routed to specialists.
The Settlement Window Is a Case Study in Option Loss
The transition announcement is the part that carries the immediate lesson. The IRS said it will not issue additional uniform settlement letters, that deadlines for accepting previously issued offers are withdrawn, and that prior elections to participate will remain in effect and be processed according to their terms. Taxpayers with pending cases may still request settlement through their assigned examination or Chief Counsel representative, and where a case remains eligible the IRS may issue a new offer on the same standardized terms. The IRS also stated plainly that the transition does not signal a new or more favorable standardized offer.
Read that sequence carefully. Taxpayers who elected in are being processed. Taxpayers who waited to see whether a better deal would appear are now negotiating case by case, without a published framework, against a specialized office. That is how leverage decays. It rarely disappears in one dramatic moment. It erodes while a taxpayer waits for certainty that the IRS has no obligation to provide. Before assuming your tax position is settled for the year, consider having Steve Perry, EA evaluate your records, IRS risk, and planning opportunities. Call 678-717-9818, email steve@bookstaxesatl.com, or connect on LinkedIn at www.linkedin.com/in/steveperrybtm.
The Statute Already Narrowed the Path
Enforcement attention is only part of the picture. Congress limited these deductions directly. Under section 170(h)(7), a contribution by a partnership is not treated as a qualified conservation contribution if the amount exceeds 2.5 times the sum of each partner’s relevant basis in the partnership, and the rule applies to S corporations and other pass-through entities in the same manner. The statute carries narrow exceptions, including contributions made at least three years after the relevant acquisition dates, certain family partnerships, and contributions preserving a certified historic structure.
The substantiation rules are equally unforgiving. No deduction is allowed for a property contribution above $500 unless the applicable description, appraisal, and attachment requirements are met, a qualified appraisal is required above $5,000, and the appraisal itself must be attached above $500,000. For a partnership, those requirements are applied at the entity level while the deduction is denied at the partner or shareholder level. A single missing attachment can travel down to every investor.
Where the Records Problem Shows Up
Most easement disputes are won or lost in documents assembled years before the notice arrives. The IRS has described abusive transactions as involving inflated appraisals, overstated valuations, and failures to meet statutory requirements, and it reports that Tax Court decisions have on average allowed roughly six percent of the claimed deduction while imposing the forty percent gross valuation misstatement penalty. In one case the agency highlights, a $22.6 million claimed deduction based on speculative air rights was reduced to $900,000 with a forty percent penalty sustained.
The records that matter in that environment are usually limited and knowable:
- Acquisition documents establishing the holding period and the chain of partnership interests.
- Partner basis computations supporting the 2.5 times relevant basis calculation.
- The qualified appraisal, the appraiser’s credentials, and the engagement terms.
- Baseline documentation, photographs, and the recorded deed restrictions.
- Any required disclosure filings and the promoter materials received.
Other items may be relevant depending on the facts and circumstances of the transaction.
Behavior, Not Just Positions
The IRS has designated syndicated conservation easement transactions as listed transactions under Notice 2017-10, and it has stated that it will continue to pursue penalties under sections 6662, 6700, 6701, 6694, and 6663, along with criminal enforcement where appropriate. Promoters have been convicted and sentenced to lengthy prison terms in connection with a scheme involving more than $1.3 billion in claimed deductions.
An investor who never promoted anything can still lose the case slowly through inaction: unopened correspondence, a missed response window, an unreturned call from an examiner, a broker who is no longer reachable, a basis schedule nobody reconstructed. If IRS notices, unpaid balances, missing records, or planning gaps are starting to create concern, speak with Steve Perry, EA before the problem becomes harder to control. Call 678-717-9818, email steve@bookstaxesatl.com, or connect on LinkedIn at www.linkedin.com/in/steveperrybtm.
Closing
Planning and IRS risk management continue after the return is filed. The Office of Conservation Easements will be handling files that were created years ago, and the outcomes will turn on what taxpayers did after the deduction was claimed: whether records were preserved, whether notices were answered on time, whether a settlement election was made while one was available, and whether the exposure was measured before it became a collection matter. Many IRS problems are not filing mistakes. They are the accumulated cost of waiting. Good tax outcomes come from managing the year before the IRS forces the issue, and for help reviewing your next steps, speak with Steve Perry, EA. Call 678-717-9818, email steve@bookstaxesatl.com, or connect on LinkedIn at www.linkedin.com/in/steveperrybtm.
Frequently Asked Questions
Does the new office mean the IRS is softening its position?
No. The IRS stated that the transition does not signal a new or more favorable standardized offer, and the office is designed to coordinate enforcement and case resolution strategy with Chief Counsel.
I received a uniform settlement letter but never responded. What now?
Deadlines on previously issued offers were withdrawn. Pending cases may still request settlement through the assigned examination or Chief Counsel representative, and a new offer on the same standardized terms may be issued if the case remains eligible.
Are all conservation easement deductions considered abusive?
No. The IRS describes a legitimate easement as generally involving long standing ownership, an accurate property specific valuation, and compliance with the qualified conservation contribution rules.
How does the 2.5 times basis rule apply to my partnership?
It disallows the qualified conservation contribution when the amount exceeds 2.5 times the sum of each partner’s relevant basis, subject to exceptions for certain holding periods, family partnerships, and certified historic structures.
What should I do if no notice has arrived yet?
Reconstruct basis and appraisal documentation now, confirm any required disclosures were filed, and have your exposure reviewed while response options are still open.
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