More on Settlement Offers to the Conservation Easement Syndicate

The Service has basically won the war against inflated conservation easement deductions but it is still working to round up prisoners.  Here are terms of the Service’s most recent pre-emptive settlement offers to syndicated conservation easement partnerships:

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Syndicated Conservation Easement (Non-Docketed) Resolution Terms and Election

Below are the terms of the 2024 Syndicated Conservation Easement (Non-Docketed) Resolution. The Internal Revenue Service (IRS) will not entertain counteroffers to these terms.  This resolution is being offered to the entity listed above and is not available to partners on an individual basis. The terms of the resolution are outlined below.

A. Election to Participate

The election to participate must be received by the IRS within 30 calendar days of the date of the offer letter.

To elect into the resolution:

1. An Authorized Signer must initial each page and sign the last page of this form in the spaces provided.

2. Partnership must provide its Form 1065 or, if applicable, the Form 1065 of the entity in which individual investors purchased their interest and from whom the individual investors received a Schedule K-1 (investment-tier partnership) reflecting the claimed charitable contribution deduction.

3. A Partnership with less than one year remaining on the statute of limitation must sign a consent to extend the statute for no less than one year. A statute extension is enclosed with this letter, if needed, and must be signed and returned within 30 calendar days of this letter to participate in the settlement.

B. Resolution Terms Deduction, Tax, and Penalties

1. Charitable Contribution Deduction: The Partnership is not entitled to a charitable contribution deduction claimed for a conservation easement, donation of a fee simple interest in real property, or other noncash charitable contributions.

2. Allowable Deduction (estimated out-of-pocket costs): The Partnership is entitled to a deduction for estimated out-of-pocket costs (i.e., the estimated amount the investors paid to either the Partnership or an investment-tier entity for an interest in the SCE transaction) allocable to the SCE transaction being The IRS will calculate this amount. In general, the allowable deduction will be the amount reported on the Partnership’s (or investment-tier partnership’s) Schedule M-2, Capital Contributed (Cash).

3. Tax Rate: The IRS will calculate the tax due at the partnership level using a tax rate of 21%.

4. Penalties: An accuracy-related penalty for a gross valuation misstatement under section 6662(h) applies at a rate of 5%.

5. Amount Due: Once an election to participate is received, the IRS will provide the Authorized Signer with the necessary computational information, including the disallowed charitable contribution deduction, the estimated out-of-pocket costs allowed and the tax, penalties, and interest that will be aggregated into the Settlement Payment (as defined in section B.9.).

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darryll k. jones