Syndicated Conservation Easements

Perhaps one of the biggest trends that can change IRS Enforcement in 2026 is the constant stream of US Tax Court cases striking down syndicated conservation easements.  Taxpayers attempting to defend syndicated conservation easements have had a rough time in recent tax court cases.  One recent US Tax Court case described a particular syndicated conservation easement as, “yet another in the depressingly long line of cash grabs dressed up in eleemosynary clothing.”  Another recent tax court case described a particular syndicated conservation easement as “an outrageous overstatement untethered from reality.”

A syndicated conservation easement is an often-abused tax planning technique that provides charitable deductions to real estate investors.  In a syndicated conservation easement, the investors form a partnership and purchase land.  The partnership then donates a conservation easement. The investors claim a deduction for the value of the conservation easement. 

For example, investors may purchase a few hundred acres of undeveloped forest land.  The investors will then donate a conservation easement which prevents an activity such as mining on undeveloped land.  The investors may claim a charitable deduction equal to the fair market value of the easement.  To use the above example, the investors would claim a deduction equal to the fair market value a landowner would receive in exchange for an easement that would prevent the landowner from mining on its land. 

The technique is often abused.  Investors often over-appraise the value of the easement they donate.  (It is not necessarily easy to value what a landowner would receive in exchange for an easement on hypothetical open and fair market.)  In one of the cases mentioned above, taxpayers purchased 165 acres of land for $585,000 and claimed a charitable deduction of over $12 million for a conservation easement.  Needless to say, these over-inflated charitable deduction claims are not passing muster with the Tax Court.  The Tax Court is not only finding the taxpayers liable for tax owed because the tax court is disallowing charitable deductions but also finding taxpayers liable for gross valuation penalties (which can be 40% of the tax owed).  The IRS has also pursued fraud penalties against the businesses which can be as much as 75% of the tax owed. 

The real battle in the most syndicated conservation easement cases is not whether the investors owe the underlying tax (you do not need to have an LL.M. in taxation to know a $12 million deduction on a property less than $600,000 is not valid), but what penalties, if any, the investors should pay.  Taxpayers have had success defending themselves against the 75% fraud penalties, but they have experienced mixed results defending themselves against other penalties.  The tax code imposes heightened requirements on taxpayers reporting a deduction from a syndicated conservation easement on their return.  These requirements include obtaining qualified appraisals and making certain disclosures on their tax returns.  Taxpayers that fail to meet these heightened requirements face exposure to penalties.

Taxpayers that find themselves presented with an opportunity to invest in a syndicated conservation easement should be careful and consult with a trusted tax advisor.  If the investment sounds too good to be true, i.e., one can get a $12 million deduction with a $600,000 investment, chances are it is too good to be true.  One should also be careful and ensure all legal and tax-related requirements are met for claiming the deduction such as obtaining proper appraisals. 

RJS LAW helps taxpayers with a wide range of tax planning and estate planning problems.  Our experienced attorneys work with taxpayers who have found themselves in the IRS or FTB crosshairs because of a syndicated contribution easement that went bad.  Please contact us at 619-595-1655 or on -line at RJS LAW for a no-cost consultation. 

Written by Joseph Cole, Esq., LL.M.