Treasury Promulgates Syndicated Easement Listed Transaction Regulations (10/13/24)

The IRS long identified certain syndicated conservation easements as potentially abusive tax shelters. One prong of that attack Notice 2017-10 designating such transactions as “listed transactions” which carried certain reporting requirements with heavy potential penalties. Courts declared that designating a transaction as a “listed transaction” must be by notice and comment regulation rather than Notice or Revenue Ruling. E.g., Mann Constr., Inc. v. United States, 27 F.4th 1138 (6th Cir. 2022), here; and Green Rock LLC v. IRS, 104 F. 4th 220 (11th Cir. 2024), here. The statutory path the courts followed to justify the holding is a feasible one but another feasible interpretation would have sustained the IRS use of Notices. See Sixth Circuit Invalidates Notice Identifying Listed Transaction Requiring Reporting and Potential Penalties (Federal Tax Procedure Blog 3/3/22); here, and Eleventh Circuit Invalidates IRS Designation of Listed Transaction by Notice; Designation Must be by Notice and Comment Regulation (Federal Tax Procedure Blog 6/16/24), here.

The IRS promulgated final regulations treating certain syndicated conservation easement transactions as listed transactions. Reg. § 1.6011-9, titled “Syndicated conservation easement listed transactions,” effective 10/8/24, TN here. The regulation grandfathers prior disclosures under Notice 2017-10. Reg § 1.6011-9(g). The regulations incorporate provisions fleshing out the addition § 170(h)(7)(A) in 2022 which limits the charitable deduction if the amount of the deduction exceeds 2.5  times the sum of each partner's relevant basis in such partnership or S Corporation.

I offer here only a general notice of the regulation. Those interested can parse the regulations for the details.

One thing that I noticed was the IRS wording for claiming authority to promulgate regulations in this area—describing as “express delegation of authority” in each of Code §§ 6001, 6011, 6707A(c)(1), 6707A(c)(2), and 7805(a). I think those claims of “express delegation of authority” is in response to Loper Bright Enterprises v. Raimondo, 603 U. S. ____, 144 S. Ct. 2244 (2024), here. In the past, my recollection is that § 7805(a) as called a general authority delegation and other more explicit authority delegations (such as in the other Code sections cited above) were called specific authority. E.g., Altera Corp. et al. v. Commissioner, 145 T.C. 91, 111 n.10  (2015) (“Because the terms "legislative" and "interpretive" have different meanings in the administrative law context, * * * * we will refer to regulations issued pursuant to specific grants of rulemaking authority as specific authority regulations and regulations issued pursuant to Treasury's general rulemaking authority, under sec. 7805(a), as general authority regulations.” Readers will likely recall that Altera was reversed on appeal, but did not affect this use of terms to describe the regulations. In any event, there was a differentiation between specific authority delegations in specific Code sections and the general authority delegation in § 7805(a).

So, the claim is made now that “The final regulations are also issued under the express delegation of authority under section 7805(a) of the Code..” To be sure, § 7805(a) expresses a delegation of authority, but I am having some difficulty understanding why, standing alone, § 7805(a) would be an “express delegation” in some sense that is meaningful given the history of distinguishing between specific and general authority delegations. I assume that Treasury used “express delegation” to invite additional gravitas for the regulations under Loper Bright, but I am still not sure that would be meaningful.

Having said that, I have raised the question of whether, given that Loper Bright makes § 7805(b) meaningless, does that mean that § 7805(a) is the type of cognizable congressional delegation that might command deference or some extra Oomph under Loper Bright. See Can § 7805(a) & (b) Be Read as Delegating to Treasury/IRS Interpretive Authority with Deference (7/14/24), here.

I have incorporated parts of this blog into the working draft of the Federal Tax Procedure Book (2025 Editions) to be published in August 2025.