Conservation Easement Settlement Offers

After a recent IRS press release regarding conservation easement cases on May 13, 2026, partnerships that have pending cases in the United States Tax Court received what is advertised as a final settlement offer. This IRS settlement offer is significantly more favorable than the recent decisions from the U.S. Tax Court and the Courts of Appeals. Under this 2026 settlement offer, the penalty rate is reduced to a 10% gross valuation misstatement penalty, compared to the 40% penalty sustained routinely by courts. This initiative addresses partnerships currently in audit (non-docketed) and those already in active litigation (docketed). Eligible partnerships will receive individualized correspondence issued on a rolling basis with qualified terms. For a period of 45 days following the close of the initial 90-day period, eligible partnerships may settle on essentially the same terms, except that the gross valuation misstatement penalty will apply at a rate of 20%. As the IRS stated in its press release, no extension of the 135-day period will be available. If the partnership waits beyond 90 or 135 days, the IRS penalty structure automatically increases.

This means that if you have invested in one of the partnerships that are litigating a conservation easement case, the weight of this IRS announcement falls squarely on your shoulders. As an investor, you may not be the ultimate decision-maker with respect to the settlement, but you should still plan to have a tax payment strategy. Carbone Law can provide personal advice tailored to your background and tax liabilities. We will model your specific exposure, analyze any claims that may exist for reducing penalties and interest, and execute the strategy that preserves your financial interest. Contact us to schedule a consultation with Attorney Patricia Carbone.