Case Studies
Navigating the IRS Settlement Opportunity for Conservation Easement Disputes
A new offer initiative gives eligible taxpayers a chance to settle past conservation easement disputes with more favorable terms—but you’ll need to know if you qualify and act fast.
By NomadicTax Research Team • 5-8 min read • June 18, 2026
## What Are Conservation Easement Disputes?
These involve partnerships or individuals claiming deductions for donating property or property rights (land or historic preservation easements). Courts have identified abuses—claims often involving **inflated valuations**, resulting deductions being slashed (on average to ~6%) and steep penalties. ([irs.gov](https://www.irs.gov/newsroom/irs-announces-terms-of-a-time-limited-settlement-opportunity-for-eligible-taxpayers-involved-in-conservation-easement-disputes?utm_source=openai))
## Key Features of the New Time-Limited Opportunity
IRS has announced a settlement initiative covering a number of historic and conservation easement cases, with more favorable terms than typical litigation outcomes. Major points include: ([irs.gov](https://www.irs.gov/newsroom/irs-announces-terms-of-a-time-limited-settlement-opportunity-for-eligible-taxpayers-involved-in-conservation-easement-disputes?utm_source=openai))
- **Who’s eligible**: Current cases—both docketed in Tax Court or under Examination—including many that previously rejected settlement offers. Up to around 1,100 cases in total.
- **Penalties & deductions**:
- During the first 90-day offer period: 10% gross valuation misstatement penalty (instead of 40%), no charitable contribution deduction but deduction based on out of pocket “other deduction.”
- Next 45-days: terms are similar except penalty rate rises to 20%.
- **Payment**: No upfront payment required to elect the settlement—liability deferred.
## Do You Qualify?
Check this if your case meets *all* of the following:
- Partnership case (TEFRA / BBA)
- Not yet tried and awaiting opinion
- Not under appeal
- Didn’t settle previously under equivalent terms
- Not part of test case unless other bound cases have settled or agree to settle under this initiative
If your case meets the criteria, you’ll receive a **settlement letter** from the IRS with your specific offer terms. ([irs.gov](https://www.irs.gov/newsroom/irs-announces-terms-of-a-time-limited-settlement-opportunity-for-eligible-taxpayers-involved-in-conservation-easement-disputes?utm_source=openai))
## Example Scenario
*Partnership GreenFields claimed a $5 million deduction for a land easement in 2020. After audit, IRS allowed only $300,000 (6% of original) with a 40% penalty. GreenFields rejected earlier offers. Now, via the new settlement initiative, it may receive a letter offering an “other deduction” close to its $200,000 out-of-pocket contribution with only 10-20% penalty and no upfront payment.*
## What You Should Do ASAP
- Be on lookout for letters from the IRS if you believe your easement dispute is eligible.
- Review valuation documentation and out-of-pocket investment amounts—your proof will drive the “other deduction.”
- Consult counsel experienced in easement law and IRS litigation.
- Understand that if you don’t act during the settlement windows (90 or next 45 days), default litigation outcomes usually mean harsh penalties and tiny deductions.
## Long-Term Implications
- Encourages more conservative valuation practices in future easement donations.
- Courts and IRS may increasingly view inflated valuation claims skeptically.
- Planning arrangements should now include realistic appraisal documentation and risk assessments.
This initiative could effectively reshape easement dispute resolution. If you're part of a qualifying case, innovative terms offer a chance for a much better outcome—don’t let the deadline pass.