Eligible Taxpayers Have "Time-Limited" Opportunity to Settle Conservation Easement Disputes with the IRS

The Internal Revenue Service (IRS) is sending settlement letters to eligible taxpayers with pending conservation easement disputes. Taxpayers who receive these letters must accept the IRS’s offer within 90 days to avoid additional liability, though taxpayers must also make informed decisions about whether to settle with the IRS at all. Taxpayers who have claimed valid conservation easement deductions should not accept liability unnecessarily.

The Internal Revenue Service (IRS) is sending settlement letters to hundreds of taxpayers with pending conservation easement disputes. Taxpayers that receive these letters must make informed decisions about whether to accept—as accepting the IRS’ terms will not be the best approach in all cases. Learn more from New Jersey tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group:

IRS Launches New Settlement Initiative Focused on Conservation Easement Disputes

On May 13, 2026, the IRS announced a new settlement initiative focused on conservation easement disputes. As the IRS’s announcement states, this initiative follows similar initiatives in recent years, offering terms that “were significantly more favorable than the outcomes taxpayers have generally achieved in the Tax Court.”

With its current initiative, the IRS is allowing taxpayers to settle without paying the full amount due up front. Instead, taxpayers’ outstanding liability, “will be subject to post-settlement collection.” This, however, is contingent upon eligible taxpayers agreeing to the following terms:

• Non-allowance of the taxpayer’s claimed charitable deduction (though taxpayers will be allowed to claim an “other deduction” for their out-of-pocket costs);
• Payment of a 10-percent gross valuation misstatement penalty (this increases to 20 percent if taxpayers do not accept within 90 days); and,
• Payment of interest accrued pursuant to the Internal Revenue Code.

Overall, taxpayers have 135 days to accept the IRS’ offer. Once the IRS’ offer is automatically withdrawn, the IRS’ announcement states that any future settlement offers “will reflect a charitable contribution deduction of approximately 5% to 7% of the claimed deduction and a 40% gross valuation misstatement penalty.” According to the IRS, this is consistent with taxpayers’ average liability in cases resolved through the U.S. Tax Court.

Settling On the IRS’ Terms Will Not Be the Best Approach in All Cases

While the IRS’ settlement terms will be favorable for some taxpayers, settling will not be the best approach in all cases. Taxpayers who have claimed valid conservation easement deductions should not agree to unwarranted liability. To make informed decisions, taxpayers who receive settlement letters will need to work with experienced tax counsel to reassess their claimed deductions and accurately determine their potential liability exposure.

Schedule a Call with New Jersey Tax Lawyer Kevin E. Thorn

If you received a settlement letter from the IRS or have concerns related to a federal conservation easement deduction, we invite you to get in touch. To schedule a call with New Jersey tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, please call 201-842-7696 or contact us online today.