IRS Announces Conservation Easement Settlement Opportunity

A recent Internal Revenue Service news release announced a “time-limited settlement opportunity” for certain taxpayers with IRS disputes concerning conservation easements or historic preservation easements. Published on May 13, 2026, the release outlines the terms of the settlement opportunity, which affects hundreds of ongoing easement cases.

As the IRS explains, it has previously offered settlement opportunities “that were significantly more favorable than the outcomes taxpayers have generally achieved in the Tax Court.” These initiatives required taxpayers to make penalty payments on tax underpayments; it also prohibited them from claiming charitable deductions for donations that they claimed. According to the IRS, taxpayers accepted 32% of the offered settlements, leading to resolutions of 405 easement disputes. The government has historically won a majority of these cases, the IRS argues.

The new settlement opportunity stands to mitigate the burden of easement cases on the tax court system, which currently total 1,100. “Under this new offer initiative, nearly 450 cases will no longer be required to make an upfront payment of the settlement amount, and instead the liability will be subject to post-settlement collection as described below,” the IRS explains. “Separately, as many as 500 cases where prior settlement offers expired or were rejected by the taxpayer will have the renewed ability to settle their cases.” Finally, it will apply to almost 200 cases excluded from participating in the IRS’s previous settlement opportunity.

The terms of the settlement opportunity will apply for 90 days after eligible parties receive individualized outreach from the IRS. Per the news release, these terms provide that charitable contribution deductions will not be allowed; taxpayers will be allowed an “other deduction” in amounts determined by the IRS; taxpayers will be required to pay a “gross valuation misstatement penalty” of 10 percent; and legally required interest will accrue. Other terms are specified in the news release.

The IRS also notes that the settlement opportunity will not be offered to every ongoing easement case. Exclusions include cases “that have been tried and are awaiting an opinion,” those “on appeal to one of the United States Circuit Courts of Appeal,” and those that have already reached settlements.

“Congress created the conservation easement deduction to encourage genuine preservation, not to subsidize tax shelters built on inflated valuations,” said IRS Chief Executive Officer Frank J. Bisignano in a statement about the settlement opportunity. “This settlement opportunity gives eligible taxpayers a chance to resolve these cases on terms more favorable than the results taxpayers have generally achieved in court, while allowing the IRS to continue enforcing the law in a fair and efficient way.”

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