Case Studies
Understanding the IRS’s 2026 Settlement Opportunity for Conservation Easement Disputes
IRS is offering new settlement terms for conservation easement cases—learn if this applies to you and how to take advantage.
By NomadicTax Research Team • 5-8 min read • June 8, 2026
## What’s the Settlement Opportunity?
On **May 13, 2026**, the IRS announced a **time-limited settlement opportunity** (IR-2026-65) for taxpayers involved in conservation easement or historic preservation easement disputes. ([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)) This program aims to resolve cases on terms more favorable than those generally achieved in court. Roughly **1,100 cases** are involved. ([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 Terms & Deadlines
- A **90-day window** following IRS issuance of an individualized settlement offer to opt in. ([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))
- **No charitable contribution deduction** allowed; instead, taxpayers can claim an “other deduction” based on out-of-pocket costs. ([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))
- **Gross valuation misstatement penalty**: 10% during the initial 90-day window; increases to 20% during the subsequent 45-day period. ([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))
- **Interest** continues to accrue as required by law. ([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))
- Eligible partnerships will receive **individual letters** outlining their settlement terms on a rolling basis. Non-docketed cases resolved via closing agreements; docketed via stipulated decisions. ([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 & Who’s Not
Eligible for settlement offers:
- Partnerships involved in pending conservation easement or historic preservation easement cases. ([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))
Excluded:
- Cases already tried or awaiting opinion (in court).
- Cases on appeal.
- Cases already settled; designated test cases unless all bound cases settle.
- Cases with trial set within 30 days of announcement. ([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))
## Practical Advice for Impacted Taxpayers
1. **Review your case’s status**. If you are involved in one of the ~1,100 relevant cases, check where your case falls: docketed vs non-docketed, appeal status, etc.
2. **Wait for the individualized letter**. Only those with specific settlement terms may opt in; don’t presume universal eligibility.
3. **Evaluate costs vs litigation risk**. If courts have routinely reduced deductions significantly (on average allowing ~6% in past cases), settling early even with reduced penalties may be prudent. ([irs.gov](https://www.irs.gov/charities-non-profits/conservation-easements?utm_source=openai))
4. **Document your investment & promoter history**. Be ready for large valuation disputes; court has favored IRS expert evidence heavily. ([irs.gov](https://www.irs.gov/charities-non-profits/conservation-easements?utm_source=openai))
## Example
Partnership A has claimed a $10 million syndicated conservation easement deduction to promote real estate preservation. The IRS notice offers settlement with a penalty of 10% and no contribution deduction, only an “other deduction” of $500,000 in out-of-pocket costs. With litigation risk high, accepting this may be far more favorable than facing court where only ~6-7% of the deduction might be preserved plus 40% penalty.
## Risks & Trade-Offs
- Settling forfeits any chance of preserving a full charitable contribution.
- Post-settlement collection could entail cash flow management issues for partnerships.
- For those with strong legal positions or low-risk valuation methods, litigation might yield higher deductions—but risks are substantial.
## Conclusion
This settlement is a rare chance to cap losses in a notoriously volatile litigation area. For participating taxpayers, the math may favor resolving quickly. If you’re involved, start gathering your case status info, consult trusted counsel, and be ready to respond when your letter arrives.