Did you Contribute to a Syndicated Conservation Easement?

The IRS issued final regulations in October 2024 regarding contributions to syndicated conservation easements. The IRS now considers contributions to conservation easements a listed transaction. When the IRS takes the step to label certain tax positions a “listed transaction”, it results in more taxpayer requirements to claim these potential tax benefits. This may mean higher disclosure standards and record retention. In addition, inaccurately claiming certain tax positions related to a “listed transaction” may result in hefty tax penalties.

What exactly are Syndicated Conservation Easements?

• These types of conservation easements are made by allowing taxpayers to invest in land conservations. A partnership may allow a partner to contribute to the conservation easement, which may trigger a pass-through charitable donation deduction to the partner. These types of tax positions typically result in high tax deductions.

Update to the IRS Final Regulations.

• The key changes by the IRS include criteria that place stricter enforcement on qualification for initial investment in the easement. In addition, this places more scrutiny on the pass-through allowance that the individual taxpayer may claim as a deduction.
• The IRS paying close attention to past deductions claimed by taxpayers based on Syndicated Conservation easements.
• The IRS seeks to identify potential abuse of Syndicated Conservation Easements.
• The IRS is offering options for taxpayers to avoid erroneous contributions before they are made by deeming them a listed transaction.
• In some instances, the IRS is offering settlements to partnerships that were part of syndicated conservation easements. The settlements may affect individual taxpayers if they had a deduction that passed through to their individual return.

The Possible Effect on Individual Tax Returns.

• The taxpayer will need to meet new requirements and scrutiny, to claim deductions related to these contributions.
• If the taxpayer is involved in a partnership that accepts an IRS settlement related to a Syndicated Conservation Easement, they will need to determine what effect this will have on their individual return.
• The taxpayer may need to amend their individual Federal and/or state returns to reflect the pass-through deduction change.

What if the taxpayer was party to a partnership settlement?

• The taxpayer should seek assistance from a tax professional to determine the effect the settlement may have on their individual Federal and/or state return.
• There may be options available to limit the potential penalty and interest accruals on their individual returns with both the Internal Revenue Service and the state tax authorities.
• There may be opportunities to stop additional interest and penalty accruals by determining the adjustments before the taxpayer is contacted about their individual tax returns.

In closing, the IRS has concluded that Syndicated Conservation Easements are now considered listed transactions. With these changes, the IRS is not only paying closer attention to future taxpayer deductions related to these tax positions, but they are scrutinizing previously filed returns. It is imperative that taxpayers understand the rules related to Syndicated Conservation Easement claims. If the taxpayer has previously claimed a deduction for these transactions, they should seek a tax professional to discuss their options. Should you receive any notices or have concerns about these changes, please don’t hesitate to call us at 404-255-7400, or email Bobby Hoffman or Tabitha Relota.