Case Studies

Abusive Conservation Easements: What Investors & Partnerships Need to Know

IRS is stepping up enforcement around conservation easements—learn how to spot red flags, prepare for audits or settlements, and protect your deductions.

By NomadicTax Research Team • 5-8 min read • May 21, 2026

## Understanding Conservation Easements and Recent Trends Conservation easements were originally designed to encourage preservation of land and open space by offering **tax deductions** when landowners limit development rights. But recent court cases and IRS action reveal worrying trends in **abusive transactions** using inflated valuations. ([irs.gov](https://www.irs.gov/newsroom/irs-updates-conservation-easement-site-settlement-opportunity-details-forthcoming?utm_source=openai)) ### What the IRS Has Announced - Updated website content with examples of abusive easement transactions and warning signs for investors. ([irs.gov](https://www.irs.gov/newsroom/irs-updates-conservation-easement-site-settlement-opportunity-details-forthcoming?utm_source=openai)) - A **time-limited settlement opportunity** will soon be released for **eligible partnerships** involved in conservation easement or historic preservation easement disputes, allowing them to resolve potential federal tax issues with more certainty. ([irs.gov](https://www.irs.gov/newsroom/irs-updates-conservation-easement-site-settlement-opportunity-details-forthcoming?utm_source=openai)) ## Red Flags for Abusive Easement Deals Watch out for: - **Inflated appraisals**: strong pressure to overvalue the easement, often via questionable comparables. - **Promoter-driven deals**: brokers or groups pushing easements without full transparency. - **Tax shelters masquerading as easements**: transactions artificial in structure for tax benefits. ## Actionable Guidance for Investors & Partnerships - **Get independent appraisals** from reputable sources—not from promoters. - Seek legal counsel specializing in conservation easement law before entering into large deals. - Document your conservation intent and usage of the property—photos, restoration, public accessibility when claimed. - Monitor IRS guidance, especially the upcoming settlement terms—participation may limit penalties and dispute costs. ## Example Scenario A partnership owns a tract of land near a city. A promoter offers them a conservation easement deal, claiming huge deduction due to development pressures. The partnership hires its own appraiser who values the landlower, but still qualifying. It opts into the settlement when terms are released, avoids litigation, and reduces risk of penalties for overstated valuation.| ## What to Do Now - If you have or plan to enter into an easement transaction, perform your due diligence now—not afterward. - Maintain records: appraisal reports, legal opinions, appraisal calculations. - Evaluate whether your transaction will qualify for the upcoming settlement—once announced. This is a high-risk area under IRS scrutiny—handle easements carefully, value realistically, and be ready to substantiate every claim.