Prose by Tax Pros

There is a method the IRS often uses to combat transactions it opposes. The precise steps vary, but it generally entails warning the public, labeling items “abusive,” conducting lots of audits, forcing weak cases to trial quickly to obtain favorable court decisions, introducing settlement programs with terms designed to tempt risk-averse taxpayers, and encouraging Congress to make legislative changes. Does this sound familiar? It sure does to those involved with conservation easements, with one exception. When it comes to easements, the IRS has been launching settlement programs for years, which, for different reasons, have made resolving matters before trial unappealing and/or impractical for many partnerships. This article, which expands on earlier ones, examines challenges with three IRS settlement programs. Read the full article here. About Hale E. Sheppard HALE E. SHEPPARD, Esq. (B.S., M.A., J.D., LL.M., LL.M.T.)  is a partner at Eversheds Sutherland.  He defends clients ...

Conservation easement disputes have lasted nearly a decade and the end is far for clear. What is apparent, though, is that the IRS is now eager conclude as many cases as possible, and fast. Why? The IRS might be concerned about losing a major case on valuation issues, which could unleash many taxpayer victories in later cases. Another possibility is that the IRS wants to clear its massive inventory of existing SCET cases. Yet another motive might be that battling sophisticated taxpayers in high-dollar, complex, document-intensive cases takes a serious toll on the IRS. The true reasons for the IRS’s desire to resolve conservation easement cases now is not particularly important; what matters is understanding the relevant settlement programs and their nuances. This article, which expands on several of my earlier ones, compares and contrasts three different IRS programs. Read the full article here. About Hale E. Sheppard HALE E. SHEPPARD, Esq. (B.S., M.A., J.D., LL.M., LL.M.T.)  is a ...

In its effort to win conservation easement cases, the IRS has trotted out lots of different arguments over the years. Some were rejected by the Tax Court upon arrival, others gradually disappeared as taxpayers improved pre-donation documentation to avoid “technical” flaws, and a few still exist. One of the lingering challenges centers on the character of the property on which an easement is placed. This argument has been dubbed the “inventory issue,” and the IRS is now raising it frequently. These efforts have resulted in three recent Tax Court victories for the IRS. This article examines concepts in easement disputes, key participants, legal support for the “inventory issue,” and three pivotal cases thus far. Read the full article here. About Hale E. Sheppard HALE E. SHEPPARD, Esq. (B.S., M.A., J.D., LL.M., LL.M.T.)  is a partner in the Tax Controversy Section of Chamberlain Hrdlicka.  He defends clients in tax audits, tax appeals, and Tax Court litigation, covering both dome...

The IRS recently launched its second major effort to dispense with cases involving what it calls syndicated conservation easement transactions. In order for partnerships and their partners to make intelligent decisions, they first need to understand the context. This includes the types of challenges the IRS raises in easement disputes, the terms of the initial settlement introduced back in 2020, the terms of the current settlement launched in 2024, and the types of partnerships to which the current settlement might appeal. This article covers those topics and more. Read the full article here. About Hale E. Sheppard HALE E. SHEPPARD, Esq. (B.S., M.A., J.D., LL.M., LL.M.T.)  is a partner in the Tax Controversy Section of Chamberlain Hrdlicka.  He defends clients in tax audits, tax appeals, and Tax Court litigation, covering both domestic and international issues.

  Things are dynamic when it comes to the Employee Retention Credit (“ERC”). Among the most recent events is the introduction of the Voluntary Disclosure Program, which is designed for taxpayers that previously filed ERCs claims, got paid, later questioned their eligibility, and now want to give the money back with minimal financial downsides. This article, the latest in an ongoing series, compares methods used by the IRS in addressing conservation easement donations and ERCs, and then presents some questions to consider. Read the full article here. About Hale E. Sheppard HALE E. SHEPPARD, Esq. (B.S., M.A., J.D., LL.M., LL.M.T.)  is a partner in the Tax Controversy Section of Chamberlain Hrdlicka.  He defends clients in tax audits, tax appeals, and Tax Court litigation, covering both domestic and international issues.

After courts held that the IRS violated the law when it issued Notice 2017-10 classifying syndicated conservation easement transactions (“SCETs”) as “listed transactions,” the IRS scrambled to salvage the situation. In particular, it released Proposed Regulations in December 2022, which centered on information-reporting requirements for those involved with SCETs. About three weeks later, Congress enacted the Secure 2.0 Act. That legislation did not address disclosure duties; rather, it identified easement donations that would get a tax deduction of $0 if their value surpassed a certain amount. The disparate objectives, timing, terminology, and standards in the Proposed Regulations and Secure 2.0 Act have caused confusion among easement stakeholders. The attached article examines the current situation, as well as the actions leading up to it.  Read the full article here. About Hale E. Sheppard HALE E. SHEPPARD, Esq. (B.S., M.A., J.D., LL.M., LL.M.T.) is a Shareholder in the Tax Cont...

The IRS has been attacking syndicated conservation easement transactions (“SCETs”) for more than half a decade. These disputes often involve prolonged audits, Appeals Office conferences, Tax Court trials, and appellate litigation. Such procedures can have a huge cost, not only to the partnerships, but also to the IRS and the entire judicial system. For instance, even after diverting lots of personnel to its Compliance Campaign aimed at SCETs, the IRS acknowledged in early 2022 that it was still severely understaffed and needed to spend yet more to hire, train and integrate 200 additional attorneys. At this juncture, reviewing proposed solutions, both by the IRS and state tax authorities, for resolving SCET cases is worthwhile. This article analyzes the conservation easement donation process, role of Qualified Amended Returns, prior Settlement Initiative offered by the IRS, and current approach for partners in California. Read the full article here. About Hale E. Sheppard HALE E. SHEPP...

  The article summarizes the rules affecting conservation easement donations, identifies the “technical” arguments on which the IRS has heavily relied, describes newer attacks by the IRS focused on appraisals, analyzes multiple sources supporting valuation of real property based on its highest and best use, and suggests that the IRS has failed to adequately explain why it, taxpayers, and/or the courts should ignore longstanding authorities. Read the full article here. About Hale E. Sheppard HALE E. SHEPPARD, Esq. (B.S., M.A., J.D., LL.M., LL.M.T.) is a Shareholder in the Tax Controversy Section of Chamberlain Hrdlicka and Chair of the International Tax Group.

  The IRS believes that certain partnerships that donate conservation easements are using inflated appraisals to claim excessive tax deductions. The partnerships disagree, and battles ensue. They often entail prolonged audits, administrative appeals, and Tax Court trials. All this fighting has a large cost to the IRS, the partnerships, and the judicial system. The enclosed article provides an overview of the rules related to conservation easement donations, identifies supposed “technical” flaws that the IRS attacks, describes several Tax Court holdings that are beneficial to all partnerships, explores the use of Qualified Offers, and demonstrates that easement cases can be resolved before trial where the IRS acts reasonably by focusing on the real issue, valuation. Read the full article here. About Hale E. Sheppard HALE E. SHEPPARD, Esq. (B.S., M.A., J.D., LL.M., LL.M.T.) is a Shareholder in the Tax Controversy Section of Chamberlain Hrdlicka and Chair of the International Tax Grou...

  The IRS has drastically changed its procedures for reviewing appraisals. It first issued a memo about Section 6695A penalties, which eliminated the multi-level review procedure formerly used to safeguard appraisers against improper penalties and premature disciplinary referrals. Next, the IRS ignored several suggestions from accounting and valuation organizations about potential problems. Doubling down on its initial position, the IRS most recently issued a Chief Counsel Advisory to its personnel further reducing appraiser rights. This article, which supplements an earlier one, analyzes the main concepts around conservation easement donations, evolution of appraiser penalties, disregarded suggestions from professional organizations, and recent IRS actions depriving appraisers of historical protections. Read the full article here. About Hale E. Sheppard HALE E. SHEPPARD, Esq. (B.S., M.A., J.D., LL.M., LL.M.T.) is a Shareholder in the Tax Controversy Section of Chamberlain Hrdlicka...

The IRS believes that partnerships that engage in syndicated conservation easement transactions (“SCETs”) are claiming excessive tax deductions. The partnerships, on the other hand, point to congressional support for over 50 years, large amounts of pre-donation due diligence, full disclosure to the IRS, and reliance on a long list of experts. The two sides simply disagree, which is fine. What is not okay, though, is that in attacking SCETs, the IRS is utilizing extraordinary tactics that might negatively affect all taxpayers. The article suggests that those concerned about taxpayer rights, separation of powers, environmental protection and other large-scale matters might question whether numerous “wrongs” by the IRS are achieving a “right.” Read the full article here. About Hale E. Sheppard HALE E. SHEPPARD, Esq. (B.S., M.A., J.D., LL.M., LL.M.T.) is a Shareholder in the Tax Controversy Section of Chamberlain Hrdlicka and Chair of the International Tax Group.

The IRS continues to challenge partnerships that donate conservation easements, implementing extreme enforcement techniques as part of the process. As this article explains, the newest tactic is depriving partnerships of their general right to seek reconsideration by the Independent Office of Appeals before engaging in long, expensive, complicated tax litigation. To maximize their chances of prevailing against the IRS, taxpayers must remain hyperaware of the evolving enforcement tools. Read the full article here. About Hale E. Sheppard HALE E. SHEPPARD, Esq. (B.S., M.A., J.D., LL.M., LL.M.T.) is a Shareholder in the Tax Controversy Section of Chamberlain Hrdlicka and Chair of the International Tax Group.

  The Coronavirus revealed several important things, one of which is how much people crave certainty. Aggressive enforcement actions by the IRS have increased insecurity for many taxpayers, particularly partnerships that donated conservation easements. Seeking certainty, some partnerships obtained tax insurance, and the IRS began attacking in three ways. This article analyzes the attacks and the challenges the IRS faces. Read the full article here. About Hale E. Sheppard HALE E. SHEPPARD, Esq. (B.S., M.A., J.D., LL.M., LL.M.T.) is a Shareholder in the Tax Controversy Section of Chamberlain Hrdlicka and Chair of the International Tax Group.

There is so much misinformation, hyperbole, distortion, chest-thumping, and other “noise” surrounding conservation easement disputes nowadays that it is difficult to get to the truth. Most rational people agree on a few things, though. these include that Congress has expressly incentivized donations of real property interests to charity for over 50 years, increasing numbers of taxpayers have pooled their interests recently to take advantage of this tax benefit, and the Internal Revenue Service(“IRS”),convinced that some taxpayers are inappropriately exploiting the system, has implemented a long list of tactics to challenge what it calls syndicated conservation easement transactions (“SCETs”). However, there is considerable disagreement about whether the IRS’s actions have gone too far, undermining both congressional intent and public confidence in the integrity of tax enforcement procedures.  This article explains the rules related to conservation easement donations, long-stan...

Taxpayers embroiled in a tax dispute often feel bullied by the IRS. This is particularly true with partnerships that donated conservation easements to charitable organizations, because the IRS has implemented a long list of aggressive enforcement tactics. The good news is that various mechanisms are available to taxpayers to turn the proverbial tide, one of which is submitting a “qualified offer” to the IRS. In simplified terms, if the IRS ignores or rejects a qualified offer, the case goes to trial, and the court rules that the taxpayer’s liability is less than the amount in the earlier qualified offer, then the IRS must reimburse the taxpayer’s reasonable administrative and/or litigation costs.  Only two cases have addressed whether partnerships subject to the special proceedings created by the Tax Equity and Fiscal Responsibility Act (“TEFRA”) are able to make a qualified offer. Just one of these cases yielded a decision with precedential value, and it explained that TEFRA part...

The IRS has been riding high recently because of several Tax Court victories on “technical” issues in conservation easement disputes. However, several signs exist that the tide might be turning. One of these is the recent decision by the Eleventh Circuit Court of Appeals in Pine Mountain Preserve, LLLP. This article explains the general rules related to conservation easement donations, critical facts from the case, analysis by the Tax Court, overlooked aspects of the initial decision, recent rulings by the Court of Appeals, issues that the Tax Court must now decide on remand, and the positive aspects of the case thus far for taxpayers making charitable donations. Click here to read the full article. About Hale E. Sheppard HALE E. SHEPPARD, Esq. (B.S., M.A., J.D., LL.M., LL.M.T.) is a Shareholder in the Tax Controversy Section of Chamberlain Hrdlicka and Chair of the International Tax Group.

  The IRS is sending mixed messages when it comes to potential resolution of disputes involving partnerships that engaged in a so-called syndicated conservation easement transaction (SCET). On one hand, the IRS has taken several enforcement actions recently, which make it procedurally  impossible for an individual partner to voluntarily resolve matters with the IRS and remain penalty-free by submitting a qualified amended return (QAR). On the other hand, the IRS commissioner issued two news releases in November and December, warning taxpayers of increased  enforcement activities and “encouraging” them to file QARs. This apparent inconsistency has many in the tax community confused and unable to properly advise partners, partnerships, and others. The good news is that the regulations seem to grant the commissioner authority to modify the QAR rules as necessary. This article reviews SCET issues; explains ongoing enforcement tools; summarizes recent IRS announcements urging ...

The IRS takes the stance that any error or omission in connection with Form 8283, regardless of how minor, merits a deduction of $0. The IRS has recently added new layers to this argument. It now contends that some partnerships are not properly accounting for “syndication expenses,” which  leads to unwarranted deductions and/or inaccurate basis information on Form 8283, which impairs the IRS’s ability to detect non-compliance, which justifies complete disallowance of charitable deductions. This article analyzes issues relevant to this expanded position by the IRS. Read the full article here. About Hale E. Sheppard HALE E. SHEPPARD, Esq. (B.S., M.A., J.D., LL.M., LL.M.T.) is a Shareholder in the Tax Controversy Section of Chamberlain Hrdlicka and Chair of the International Tax Group.

Uplifted by some recent Tax Court victories on “technical” issues in conservation easement disputes, and cognizant of the enormous amount of additional cases headed its way in the coming years, the IRS announced a settlement initiative in June. The agency first described the terms of the settlement initiative through two means: a public release and private offer letters to eligible partnerships. Not surprisingly, that initial guidance had several holes. The IRS tried to plug them in October 2020 by publishing a chief counsel notice, along with a second release. This article analyzes all the information provided thus far about the settlement initiative, identifying key issues that remain unaddressed by the IRS, whether strategically or inadvertently. Read the full article here. About Hale E. Sheppard HALE E. SHEPPARD, Esq. (B.S., M.A., J.D., LL.M., LL.M.T.) is a Shareholder in the Tax Controversy Section of Chamberlain Hrdlicka and Chair of the International Tax Group.

The IRS is attacking partnerships that donate conservation easements to charitable organizations and then pass along the corresponding tax deductions to their partners. In an effort to dispense with cases quickly and avoid addressing the key issue — valuation of easements — the IRS often raises a long list of technical arguments. These generally focus on unintentional flaws with the deed of conservation easement, the appraisal, or Form 8283, “Noncash Charitable Contributions.” To the dismay of many in the conservation, tax, and legal communities, the Tax Court has ruled in favor of the IRS on technical issues in several recent cases. The IRS, leveraging the momentum from its recent victories, issued a release in late June describing a potential path to resolution (the settlement initiative). The Tax Court has a backlog  of conservation easement cases, with many more to come; the IRS has limited resources; and the IRS knows that many of the technical issues it is currently exploitin...