IRS Offers “Limited-Time Settlement Opportunity” for Conservation Easement Disputes

On May 13, 2026, the Internal Revenue Service (IRS) announced a “limited-time settlement opportunity” for eligible taxpayers to resolve conservation easement and historic preservation easement disputes. The IRS is allowing eligible taxpayers to settle their disputes without making an upfront payment, while warning that declining its settlement terms will lead to substantially higher settlement costs—unless taxpayers prevail in court. As a result, consulting with an experienced Texas tax attorney is essential.

Disputes involving the validity of conservation easements and historic preservation easements can expose high-net-worth taxpayers to substantial liability for back taxes, interest, and penalties. The Internal Revenue Service (IRS) has prioritized enforcement in these cases in recent years—so much so that it now has a backlog of cases awaiting resolution.

As a result, the IRS has announced a “limited-time settlement opportunity” for taxpayers with conservation easement and historic preservation easement disputes pending. Announced on May 13, 2026, the opportunity involves:

• Waiving the upfront payment requirement for settlements;
• Reopening cases in which taxpayers’ settlement offers expired or were rejected; and
• Offering settlement to as many as 175 taxpayers that did not previously have the opportunity to settle.

The IRS’ announcement quotes the Acting IRS Chief Counsel as stating that, “[t]axpayers and their advisors should carefully review the terms of this initiative and the substantial litigation risks of continuing to contest these cases.” The announcement goes on to state that when taxpayers do not settle on the IRS’s terms, “cases will be resolved before a court decision only on the basis of hazards of litigation[ and, i]n general, . . . will reflect a charitable contribution deduction of approximately 5% to 7% of the claimed deduction and a 40% gross valuation misstatement penalty.”

Eligible Taxpayers Will Receive Settlement Letters from the IRS

According to the announcement, eligible taxpayers will receive settlement letters from the IRS “on a rolling basis.” These letters will set forth the specific settlement terms offered to each individual taxpayer; and, while taxpayers are considering their offers, the following terms will apply:

• No charitable deduction will be allowed;
• The taxpayer will be allowed an “other deduction” in an amount determined by the IRS;
• A 10-percent gross valuation misstatement penalty and interest will accrue.

Taxpayers will have 90 days to accept the IRS’s settlement terms; and, if they accept, they will not have to submit payment immediately. Instead, “liability will be subject to post-settlement collection.” If taxpayers do not accept within 90 days, they will have an additional 45 days to settle subject to a 20-percent gross valuation misstatement penalty. Taxpayers that do not accept will be able to continue to dispute their liability in court.

Not All Taxpayers with Pending Conservation Easement and Historic Preservation Easement Disputes Are Eligible

While the IRS has stated that it intends to send settlement letters to approximately 1,000 taxpayers, it is not offering its “limited-time settlement opportunity” to all taxpayers with pending disputes. Those that are not eligible include:

• Taxpayers with tried cases that are awaiting a decision;
• Taxpayers with federal appeals pending;
• Taxpayers that have already settled with the IRS;
• Taxpayers with cases designated as test cases;
• Taxpayers that have agreed to be bound by the decision in a test case if the test case is awaiting a decision;
• Taxpayers that have a trial scheduled within 30 days of the IRS’s announcement.

Since eligible taxpayers will receive a letter, those who believe they are eligible and wish to participate should monitor for receipt of a letter from the IRS. In the meantime, these taxpayers (and others) should continue to prioritize compliance; and those that have questions or concerns about their conservation easement or historic preservation easement deductions should consult with experienced tax counsel promptly.

The IRS is Continuing to Pursue Cases Dating Back More Than a Decade

While the IRS usually does not examine more than six years’ worth of a taxpayer’s returns, it can go back further if it chooses to do so. In this case, the IRS has stated that it intends to go back at least a decade, and potentially even further. Specifically, the IRS’s announcement states that it is targeting:

• Cases governed by the Tax Equity and Fiscal Responsibility Act (TEFRA) (involving tax years 2017 and earlier); and
• Cases governed by the Bipartisan Budget Act of 2015 (BBA) (involving tax years 2018 and later).

With this in mind, all taxpayers that have claimed substantial charitable deductions related to conservation easements and historic preservation easements in the last decade-plus need to ensure that they are making informed decisions about mitigating their potential liability exposure. For those that are not yet facing disputes with the IRS, this could involve submitting an amended filing, submitting a voluntary disclosure, or targeting a civil settlement with the IRS depending on the circumstances at hand.

FAQs: Resolving Conservation Easement and Historic Preservation Easement Disputes with the IRS

What is the IRS’ “limited-time settlement opportunity” for conservation easement and historic preservation easement disputes?

The IRS is offering eligible taxpayers the option to settle pending conservation easement and historic preservation easement disputes without the need to pay at the time of settlement. Taxpayers must agree to the IRS’s proposed settlement terms in order to participate.

When does the limited-time opportunity end?

The IRS has not published an end date for its limited-time settlement opportunity. It is issuing settlement letters to eligible taxpayers on a rolling basis, and these taxpayers will have up to 135 days to respond before the IRS’s settlement offer expires.

What should taxpayers do if they have concerns related to their charitable deductions for conservation easements or historic preservation easements?

Taxpayers who have concerns related to their charitable deductions for conservation easements or historic preservation easements should consult with experienced tax counsel promptly. These are potentially high-stakes matters that can require an informed and strategic approach to secure a favorable resolution.

Request a Confidential Consultation with Texas Tax Attorney Lawrence Brown

If you have received a settlement letter from the IRS or would like to know more about the options for resolving conservation easement and historic preservation easement disputes, we invite you to get in touch. Please call 888-870-0025 or contact us online to request a confidential consultation with Texas tax attorney Lawrence Brown.