IRS Ramps Up Pressure on Taxpayers Suspected of Claiming Fraudulent Conservation Easement Deductions

The Internal Revenue Service (IRS) has recently ramped up pressure on partnerships and other taxpayers suspected of claiming fraudulent conservation easement deductions. This includes both conducting intensive investigations and offering a “time-limited” settlement opportunity to those who may have violated the law. Taxpayers facing potential liability related to their conservation easement deductions should promptly consult with an experienced Washington, D.C., tax attorney.

Conservation easement fraud has become a priority enforcement area for the Internal Revenue Service (IRS). The IRS is using criminal investigations to target partnerships and other taxpayers suspected of claiming fraudulent conservation easement deductions—and these investigations could result in fines and prison time. Even without an indictment, taxpayers risk losing their conservation easement deductions and facing additional liability for interest and penalties. Learn more from Washington D.C. tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group:

Exposing Conservation Easement Fraud Remains a Top Priority for the IRS

The IRS began focusing on conservation easement fraud in 2016, when it devoted additional resources to auditing high-income and high-net-worth taxpayers that were using conservation easement deductions to substantially reduce their federal income tax liability. The IRS is continuing to prioritize conservation easement fraud today, but its enforcement tactics have evolved.

Increasingly, the IRS is using investigations to target conservation easement fraud rather than audits. When conducting investigations, the IRS has additional information-gathering tools at its disposal, and these investigations can substantiate criminal charges. As noted above, even when taxpayers are not at risk of facing prosecution, they can still face substantial civil liability. The IRS has recently reported that:

• On average, courts reviewing conservation easement deductions allow only about 6% of the claimed deduction.
• Courts routinely impose the maximum 40-percent gross-valuation misstatement penalty in conservation-easement fraud cases.
• Appellate courts typically uphold lower courts’ decisions regarding taxpayers’ federal tax liability for conservation easements.

With these facts in mind, the IRS has been emboldened to aggressively pursue allegations of conservation easement fraud. We have recently seen an increase in conservation easement-related investigations, which have led to substantial liability in many cases.

IRS Offers “Time-Limited” Settlement Opportunity for Taxpayers with Fraudulent Conservation Easement Deductions

While the IRS is aggressively pursuing conservation easement fraud investigations, it has also recently announced a “time-limited” settlement opportunity for taxpayers that have fraudulently claimed conservation easement deductions. The IRS began sending settlement letters to taxpayers in May, and taxpayers that receive letters have 90 days to accept the IRS’ offer without facing additional consequences. With that said, it is critical for taxpayers that receive settlement letters to make informed decisions—as agreeing to the IRS’ settlement terms won’t necessarily be the best approach in all cases.

Request an Appointment with Washington D.C. Tax Attorney Kevin E. Thorn

If you need more information about the IRS’ efforts to target conservation easement fraud in 2026, we invite you to get in touch. Call us at 202-349-4033 or contact us confidentially online to request an appointment with Washington D.C. tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group.