Eleventh Circuit Rejects Bullshit Conservation Easement Shelter (7/20/26; 7/27/26)

In Savannah Shoals, LLC v. Commissioner, ___ F.4th ___ (11th Cir. 2026), CA11 here and GS here, the Eleventh Circuit rejects the appeal of a bullshit conservation easement shelter. The result is foretold in the first paragraph of the opinion, noting that the shelter claimed a “$23 million” deduction for an easement found by the Tax Court to be worth $480,000. See Judge Goeke’s opinion Savannah Shoals LLC v. Commissioner, T.C. Memo. 2024-35, here.

I won’t discuss the opinion further because, although it is 34 pages long and is designated “FOR PUBLICATION,” I don’t think it adds anything material to previously developed law, factual conclusions, and appellate review. The bottom-line is for taxpayers and promoters to avoid bullshit claims, including bullshit claims on the Tax Court’s valuations. The Court does not say that or even, for most readers, fairly imply that. Still, that is my inference. And, of course, plenty of other opinions, including from this Court, can be read for that proposition.

One interesting point is that oral argument was 12/10/25 and the unanimous opinion was 7/16/26, for 218 days gestation period for a 34 page opinion of little precedential value. (See CL docket entries here).

However, I will make some comments which are even more picky.

JAT Comments:

 1. The Court discusses the shelter’s attack on the IRS expert. (See Slip Op. 10-16.) The Court spends some time discussing FRE 702 and the Daubert Standard. As it turns out, immediately before I read Savannah Shoals, I had just revised my Federal Tax Procedure Practitioner Edition to add a footnote on the text reference to FRE 702. I just copy and paste that footnote discussion because I don’t think the Court in Savannah Shoals picked up the nuance even though I don’t think the nuance would have changed the outcome.

IRS Makes Generous Offer to Settle Many Bullshit Conservation Easement Cases (5/18/26)

In IR-2026-65 (5/12/26), here, the IRS announced a new time-limited settlement initiative for bullshit conservation easements with bullshit (maybe redundant) claims for charitable deductions. Given that the claimed deductions were always bullshit, those at risk should (in my opinion) take the offer if they are otherwise eligible to do so. I won’t go through the eligibility requirements; those interested in those requirements should consult with counsel who, if competent, should be capable of assessing the high risk of not accepting. I will say that, for the taxpayers targeted, this is an extremely generous offer.

That is to say that, if I had been a Government (IRS or DOJ) attorney litigating one of these cases, there is no way the taxpayers in those cases would have gotten such a settlement offer from me; my opposing counsel when I was a DOJ Tax litigator knew that I did not make settlement offers (I told opposing counsel early on just to be sure they were aware); I recommended acceptance of taxpayer settlement offers only rarely (including one that conceded everything, including a civil fraud penalty that I caused the IRS to assert, but wanted the concession styled as a settlement; I even balked at the description of a complete concession as a “settlement” but finally recommended acceptance of the full concession “settlement” offer). In some rare cases, I did dicker with opposing counsel regard their offers, but we just did not have the same view of the taxpayer winning the case. Even in those cases I lost after receiving a settlement offer I rejected (or DOJ Tax rejected based on my recommendation), I never thought that in retrospect I should have recommended acceptance of the offer. You win some; you lose some.

Another Gross Overvaluation Conservation Easement Claim Fails (5/6/26)

In Kimberly Road Fulton 25, LLC v. Commissioner, T.C. Memo. 2026-36 (5/4/26), Case # 2026-36 here at #178 and GS here, the Court (Judge Holmes) shot down another bullshit syndicated conservation easement (“SCE”). As is common, the bullshit was in the gross overvaluation. So, not only do the partnerships (and their partners) in the consolidated cases lose, but they suffer the 40% 6662(h) gross valuation misstatement penalties. On the penalties, the Court’s analysis driven by its holding of a gross overvaluation is short (p.39, footnote omitted):

VI. Penalties

          The FPAAs determined the applicability of section 6662(h) gross-valuation misstatement penalties. This penalty applies if the value of property claimed on a return is 200% or more of the amount determined to be the correct value. It’s a 40% penalty, and there’s no reasonable cause defense. I.R.C. § 6664(c)(3). This is a math question, and it is a math question that we must find the Commissioner got right. The parties stipulated that the Commissioner complied with the supervisory-approval requirement of section 6751(b)(1) in asserting these penalties, and we therefore uphold them. 

Because its material facts are many and duplicative of patterns in earlier bullshit SCE cases, the only thing that makes this opinion worth reading is its opening (Slip Op. 1-2) which anticipates the conclusions I summarized above:

Jeffrey Grant’s grandfather taught him a saying that has stuck with him all his life: “Sometimes, a fast nickel is worth more than a slow dime.” A self-identified “land man,” Grant has [*2] made a career of buying vacant land in Georgia and quickly turning it into enough “fast nickels” to make a good living.

Court Denies Charity's Motion to Dismiss a Suit to Judicially Extinguish a Conservation Easement Deduction Failing to Achieve a Tax Deduction (4/2/26)

Today’s entry arises from an order in a case where the Petitioner, as successor in interest to three LLCs that made so-called charitable contributions of conservation easements that failed to sustain the tax benefits the predecessors claimed on the partnership tax returns, seeks a “judicial extinguishment” of the original contribution on the notion that the parties made a critical mutual mistake regarding the easement contributions as qualifying for the federal income tax deduction. If achieved that would mean that the conservation easement goes back to the successor in interest, making its fee simple interest more valuable because not subject to the conservation easement. The nondispositive order is McLaws Bay LLC v. National Wild Turkey Federation (S.D. Ga. No. 4:25-cv-00128 (CL here and GS here) Dkt. #24 (CL here) dated 3/30/26). The Respondents filed a motion to dismiss. The order grants and denies in part the motion on the basis that the record is not sufficient to assess the merits of the defense; the case proceeds at this time.

A key paragraph in the order is (bold-face supplied by JAT):

          Petitioner claims that Grantors (Petitioner’s predecessors in interest) and NWTF intended for the conservation easements to qualify as "conservation contributions" under Section 170 of the IRS code, entitling Grantors to tax benefits. (Id. at pp. 34-35; see 26 U.S.C. §170(h)(1).) Each grant references the tax code and provides that the easements are "intended to constitute (i) a ‘qualified conservation contribution’ as that term is defined in Section 170(h)(1) of the Internal Revenue Code." (Doc. 1-2, pp. 34, 52, 89, 126.) Section 5.24 of each easement states that "Grantor represents that he has consulted with an attorney [and] an accountant . . . familiar with Section 170 of the Internal Revenue [Code] for advice related to this Conservation Easement and any potential tax benefits" and that "Grantor warrants and represents that Grantee has made no warranty or representation relating to . . . any entitlement to tax benefits. . . ." (Id. at pp. 35, 80, 117, 154.)

As best I see the case, in broad overview, the Grantors (the predecessor LLCs to the Petitioner, screwed up the contribution and thus failed to meet the tax requirements (probably including a gross overvaluation).

The opinion identifies the predecessor partnerships making the contribution and claiming the deductions as “Dasher’s Bay at Effingham, LLC, River Pointe at Ogeechee, LLC, and River’s Edge Landing, LLC.” The DAWSON information on the LLCs thus named is:

• Dasher’s Bay at Effingham, LLC: T.C. No. 4078-18, here. The decision at Dkt # 52 dated 1/11/23 denies a charitable deduction of $8,619,000
• River Pointe at Ogeechee, LLC: No case with this name found on DAWSON.
• River’s Edge Landing, LLC: No case with this name found on DAWSON.

In any event, the amounts of the disallowed deductions are relevant only, in the one case, to permit a fair inference of at least the possibility of a gross overvaluation.

My reaction—really a guess without digging into the merits—is that, in the final analysis, the court in McLaws will treat McLaws’ claims as bullshit.

Tax Court (Judge Lauber) Strikes Down Another Bullshit Tax Shelter Not Defending It's Return Reporting Valuation (3/30/26; 4/2/26)

In Hancock County Land Acquisitions, LLC v. Commissioner, T.C. Memo. 2026-28, TC here at # 232 and GS here, Judge Lauber shot down another bullshit SCE shelter. Judge Lauber explains in summary in the introduction (pp. 1-3 of the opinion) in a straight-forward way, so I will just cut and paste that portion of the opinion (providing my own bold-face of key parts, with one footnote omitted) and will thereafter make some comments:

LAUBER, Judge: This is a syndicated conservation easement (SCE) case with a familiar fact pattern. In August 2016 Hancock County Land Acquisitions, LLC (HCLA), granted a conservation easement over a 236-acre parcel of land in rural Mississippi. This parcel was part of a 1,698-acre tract that had changed hands three times during the previous 13 years for prices as low as $895 and $2,356 per acre.1 On its 2016 Form 1065, U.S. Return of Partnership Income, HCLA claimed a charitable contribution deduction for the easement on the theory that the [*2] “before value” of the 236-acre parcel—that is, its value before being encumbered by the easement—was $180,177,000, or $763,462 per acre. That figure was calculated as the discounted cashflow (DCF) that supposedly could be derived from constructing and operating a hypothetical sand and gravel (S&G) mining business on the property.

          To its credit, Southeastern Argive Investments, LLC (Argive), petitioner in this case, did not seek to defend that outlandish valuation at trial. Rather, petitioner sought to derive a “before value” for the 236-acre parcel from the amount investors paid to acquire a 97% interest in Argive, or from the amount Argive paid to acquire a 97% interest in HCLA, which owned the land. The “total capital raise” from the investor offering was $23,374,575, and roughly 78% of that amount, or $18,247,575, was paid to the owner of the 236-acre parcel. Petitioner contends that the offering was an arm’s-length transaction close in time to—indeed, just six weeks before—the date the easement was granted (valuation date), and that this transaction constitutes the best evidence of the fair market value (FMV) of the land. While not disclaiming a higher value, petitioner contends that the “before value” of the land (making adjustments for minority interests) was at least $18,634,933, or $78,962 per acre.

          We reject this argument. The investors were not purchasing land; in substance, they were purchasing tax deductions. Each investor was promised a charitable contribution tax deduction of $7,477 for every $1,000 invested. As a result, the amount they paid for their partnership interests was (roughly speaking) the aggregate amount of the promised tax deduction divided by 7.477. Neither the investors nor Argive negotiated at arm’s length over the value of the land; the offering was not priced by reference to the value of the land; and the amount the investors paid had nothing to do with the value of the land. Petitioner produced no credible evidence that the investors expressed any view about what percentage of the offering proceeds should be paid to the land-owner under arm’s-length standards. We find that the sole focus of their concern was the magnitude of the tax deduction. That number would be the same regardless of how much the landowner was paid for the land.

Déjà vu All Over Again-Non SCE Tax Shelter with Alleged Bullshit SCE Features (3/23/26)

Bloomberg has this article: Michael J. Bologna, Whistleblower Targets Tax Shelter Promoting Do-Good Technology (Bloomberg Tax 3/23/26), here. The only thing I know about the strategy is from the article. I therefore cannot speak to whether it is in fact a bullshit tax shelter. However, if the article accurately describes the strategy, it has the earmarks of bullshit tax shelters—likely gross overvaluation of charitable noncash donations—from  Jackie Fine Arts in the 1970s and early 1980s, through a cousin, Barrister, then going through the Syndicated Conservation Easements.

The article appears to be well researched and has some comments by prominent attorneys in this area. Some excerpts:

          Working off a playbook refined over several years, Solidaris and its partners in 2025 proposed four separate plans, each investing in 45 shell companies, and each looking to raise $90 million from wealthy investors.

          In one plan, the investors could vote to donate license rights to a technology designed to help blind people navigate in urban environments. In the second, they could vote to distribute digital coloring books to pediatric cancer patients. And in the two others, they could choose to donate crime-fighting artificial intelligence technology to local police departments. All four plans were described in private placement documents as Regulation D private offerings, allowing the promoters and sponsors to raise capital without registering the investments with the Securities and Exchange Commission.

          Elements of the strategy including outsized charitable deductions, complex procedures, and unusually high fees, warrant government scrutiny, according to former Internal Revenue Service, SEC, and Department of Justice officials who reviewed the documents for Bloomberg Tax.

          “It undermines fundamental economics and human behavior,” said Miles Fuller, a former senior counsel at the IRS Office of Chief Counsel. “One dollar does not turn into five dollars overnight. And if it did, it is unlikely the beneficial party would then donate the five dollars to charity rather than sell and pocket the profit.”

          The Solidaris-led strategy to collect $360 million total from investors last year could generate charitable deductions of $1.8 billion this tax season, assuming high-wealth investors vote to donate the technology and then claim a deduction worth five times their investments. That would cut an estimated $667 million from their federal returns and $90 million from state returns for tax year 2025.

          Solidaris says its investments “multiply good on a local, state, and national scale.” It also said it plays no role in whether investors vote to donate the technology. The company has not been charged with any wrongdoing.

          Under the Internal Revenue Code, whether a tax shelter is allowed or not can be an open question until the government weighs in. And that can take years, especially when the shelter is novel or complicated.

Just a few comments:

Tax Court Dawson Access to Simultaneous Opening Briefs in Syndicated Conservation Easement (1/12/26)

Readers of this blog may know that the Tax Court’s Dawson tool shows the docket entries for cases but has historically included for public view by link only documents prepared and filed by the Court. Dawson is now showing some documents prepared and filed by the parties. For an example, I point to the Simultaneous Opening Briefs in Capitol Places II Owner, LLC v. Commissioner (T.C. No. 16536-23 here at ## 264-265) involving a syndicated conservation easement. (Simultaneous Opening Briefs are acronymed or initialized to SIOB in the system and I use that convention here.) Readers might particularly be interested in the Petitioner’s SIOB, at #265 (note that the Dawson system does not have permanent links, so those wanting to see or download the documents must do so from the docket entries which I link above). Added 1/12/26 @ 10:00pm: I have been reminded that, on 5/5/23, the Tax Court entered Administrative Order No. 2023-02, here, that PostTrial Briefs and Amicus Briefs would be available on Dawson to view and download.

Petitioner’s SIOB is 372 pages; the IRS’s is 221 pages. I have made no attempt to read either of those briefs, but I have paged through the table of contents of both briefs and some of the briefs (as discussed below). The Petitioner's table of contents is 12 pages long and indicates that the body of the brief is 339 pages long.

Judging from Petitioner's table of contents, Petitioner offers a generous smorgasbord of all imaginable claims, many of which appear to be Hail Mary arguments.  Gemini AI says a Hail Mary argument in a legal brief is an argument “highly unlikely to succeed but is included as a last resort, in the desperate hope that a court might accept it.” I am not opining that some of the arguments are weak on merits but merely offering my gut reaction. Of course, ultimately the fatal weakness in these shelters are the bullshit valuations that often accompany the syndications to justify the return reporting positions.

Some points I noted:

 1. IRS statement (p. 11):

 55. The 2014 Form 1065 claimed a noncash charitable contribution deduction in the amount of $23,909,000 for the façade easement contribution. Ex. 32-J.

 2. IRS ultimate findings of fact (pp 92-93):

ULTIMATE FINDINGS OF FACT

1. The FMV of the Subject Property prior to the donation of the easement was $2,770,000. Entire record.

2. The FMV of the Subject Property after the donation of the easement was $2,710,000. Entire record.

3. The FMV of the easement donation was $60,000. Entire record. 4. CP II Owner is not entitled to deduct (1) the $10,000 paid for the Clark Appraisal, (2) the $70,333 paid for the LDS, or (3) the $800,000 paid to GBX for “Tax Consulting” as rental real estate expenses, and those expenses were  properly reclassified as Other Deductions at Schedule K, Line 13d in the FPAA. Entire record.

5. The FPAA was issued timely and the assessment statute expiration date has not passed. Entire record.

6. The accuracy-related penalties asserted with respect to CP II Owner received timely  supervisory approval pursuant to I.R.C. § 6751(b). Entire record.

7. Penalties under I.R.C. § 6662 for gross valuation misstatement, substantial valuation misstatement, negligence,3 and substantial understatement of income tax apply; reasonable cause defenses do not apply. Entire record.

Fn 3 As discussed in respondent’s pre-trial memorandum filed on April 11, 2025, respondent is no longer asserting the negligence or disregard of rules or regulations penalty with respect to the noncash charitable contribution deduction adjustment.

Conservation Easement Case Set for Trial Only on Valuation (and No Other Issue) with No Post-Trial Briefs (12/29/25)

I note that today, among the orders released, the following Order was issued setting a trial of the valuation issue (and no other issue) in a conservation easement case. (I copy and paste the full order below, but readers may access the original order for case # 8669-20, here, at docket entry 86.)

Since gross overvaluation is the common flaw of many bullshit tax shelters, Judge Lauber is cutting to the chase. Any other flaws in the legal structure of the shelter may not matter after this limited trial.

The wording of the order to reject post-trial briefs suggests that Judge Lauber will issue a bench opinion. See Tax Court Rejects a Bullshit Tax Shelter False Valuation Claim with Warning of Sanctions for Taxpayers, their Counsel, and Expert Witness Proffering the Bullshit (7/16/25; 9/10/25), here. As suggested in that prior blog, one issue that may arise is whether the petitioner’s submission of a bullshit valuation may draw sanctions.

United States Tax Court
Washington, DC 20217

MORGAN RUN PARTNERS, LLC,
OVERFLOW MARKETING, LLC, TAX
MATTERS PARTNER,

Petitioner

v.

COMMISSIONER OF INTERNAL
REVENUE,

Respondent

Docket No. 8669-20.

Tax Court Yet Again Finds Bullshit Conservation Easement Grossly Overvalued (11/4/25; 11/16/25)

In Paul Adams Quarrry Trust v. Commissioner, T.C. Memo. 2025-112, GS here and TN here, the Tax Court (Judge Toro) shot down another bullshit conservation easement gambit (this time not a syndicated one, but following the same game plan). As common in such cases, the Court found that the claimed value of the easement was grossly excessive, resulting in denial of most of the amount claimed and imposition of the gross valuation misstatement penalty under I.R.C. § 6662(a) and (h).

Worthy of note is the Court’s opening paragraph:

This case concerns the contribution of a conservation easement by Paul-Adams Quarry Trust, LLC (PaulAdams), in 2017. Petitioner is Francis L. (Rusty) Adams, Paul-Adams’s tax matters partner.1 Petitioner’s heightened rhetoric aside, this is not a difficult case. The principal question before the Court is the value of the easement Paul-Adams granted to the Oconee River Land Trust (Oconee Trust) in December 2017 over approximately 207 acres in Elberton, Georgia (Paul-Adams property). The easement restricted what Paul-Adams [*7] could do in the future with those 207 acres. Paul-Adams claimed in its return that the restriction reduced the value of the Paul-Adams property by $10,234,108. This claim has no basis in reality, and we therefore reject it.

The Court repeats this theme throughout the 100+ pages of the opinion.

Tax Court Rejects Bullshit Syndicated Conservation Easement Shelter for the Usual Reasons (3/31/25)

In Ranch Springs, LLC v. Commissioner, 164 T.C. ___, No. 6 (3/31/25), links below *, the Tax Court rejected another bullshit tax shelter, here of the syndicated conservation easement ilk. The fact pattern for this ilk of bullshit tax shelter may be simply stated: a grossly overvalued property contributed to charity for charitable easement purposes. The holding highly summarized is:

• the real value is determined in an amount grossly less (joining grossly and less may not be good English, but readers will get the concept); and
• the 40% gross valuation misstatement penalty applies because, well, the valuation was grossly misstated.

A more detailed summary is found in the Syllabus and, for those wanting more, in the 66-page opinion (actually 64 excluding the caption and the Syllabus), but that is the guts of the holdings.

These are unexceptional holdings, in my opinion, so I am not sure why the Court designated this a “T.C.” opinion rather than a “T.C. Memo.” opinion. The parts I found interesting (set forth below) are hardly the stuff of which T.C. opinions are usually made. Perhaps the reason is in the third “Held” conclusion in the Syllabus relating to the proffered “before value” found to be erroneous as a matter of law as follows:

Held, further, assuming arguendo that limestone mining was a permissible use, the version of the income method P’s experts used to determine the “before value” of the property is erroneous as a matter of law because it equates the value of raw land with the net present value of a hypothetical limestone business conducted on the land. A knowledgeable willing buyer would not pay, for one of the assets needed to conduct a business, the entire projected value of the business.

. Oh well…..

So, what did I find interesting?

Guest Blog: Professors McGovern and Brewer on APA Status of Listed Transactions (12/12/24)

I offer the second of two guest blogs from Bruce McGovern, Professor teaching tax law at the South Texas College of Law Houston (school resume here) and Professor Cassady V. (“Cass”) Brewer teaching tax law at the Georgia State University College of Law (school resume here). The first offering, titled Guest Blog: Professors McGovern and Brewer on Developments in Hewitt Holding Regulation Procedurally Invalid (12/8/24) is here. I will do a shorter lead in and will cut to the chase. This offering deals with the APA status of IRS Notices:

           2. Yet another Green decision under the APA regarding listed transaction notices has the IRS and Treasury seeing red, but proposed and final regulations provide a blackletter law counterpunch. We previously have written about successful taxpayer challenges to the IRS process of issuing administrative notices identifying “listed transactions” (a subset of “reportable transactions”) under Reg. § 1.6011-4(b)(2), thereby potentially triggering enhanced penalties for noncompliance. Generally, taxpayers participating in such listed transactions must file special disclosures with the IRS under § 6011(a). See Form 8886, Reportable Transaction Disclosure Statement. Material advisors (as defined) to such participating taxpayers are also subject to special disclosure and list maintenance requirements under § 6112(a). See Form 8918, Material Advisor Disclosure Statement. In addition, taxpayers and their material advisors may be subject to enhanced penalties and criminal sanctions for failing to properly disclose, and for participating in, such transactions. See §§ 6662A; 6707; 6707A; 6708. At least three courts have held that the IRS violated the Administrative Procedure Act (“APA”) by issuing certain listed transaction notices. Specifically, the Sixth Circuit, the U.S. District Court for the Eastern District of Tennessee, and the U.S. Tax Court have determined that the three distinct listed transaction notices at issue in those cases were “legislative rules” subject to the notice-and-comment procedures of the APA. Further, because the IRS did not publish an advanced notice of proposed rulemaking inviting public comment before issuing the notices, the courts invalidated them. See Mann Construction, Inc. v. United States, 27 F.4th 1138 (6th Cir. 2022) (invalidating Notice 2007-83, 2007-2 C.B. 960, which identified certain business trust arrangements utilizing cash value life insurance purportedly to provide welfare benefits as listed transactions); CIC Services, LLC v. Internal Revenue Service, 592 F. Supp. 3d 677 (E.D. Tenn. 2022), as modified by unpublished opinion, 2022 WL 2078036 (2022) (invalidating Notice 2016-66, 2016-47 I.R.B. 745, as modified by Notice 2017-8, 2017-3 I.R.B. 423, which identified certain micro-captive insurance arrangements as listed transactions); Green Valley Investors, LLC v. Commissioner, 159 T.C. 80 (2022) (invalidating Notice 2017-10, 2017-4 I.R.B. 544, which identified post-2009 syndicated conservation easements as listed transactions). After initially contesting the application of the APA to the listed transaction notices at issue in Mann Construction, CIC Services, and Green Valley Investors, the IRS and Treasury practically have conceded, responding in at least two instances with proposed APA-compliant listed transaction regulations in place of invalidated notices. See REG-109309-22, Micro-Captive Listed Transactions and Micro-Captive Transactions of Interest, 88 FR 21547 (4/11/23) and REG-106134-22, Syndicated Conservation Easements as Listed Transactions, 87 F.R. 75185 (12/8/22). The latter proposed regulations regarding syndicated conservation easements have been finalized and are discussed further below. For additional background, see Announcement 2023-11, 2023-17 I.R.B. 798. The recent developments summarized immediately below are another installment in the APA tug-of-war between taxpayers and the IRS concerning listed transaction notices under Reg. § 1.6011-4(b)(2) that may implicate enhanced penalties under §§ 6662A; 6707; 6707A; 6708.

                   a. IRS and Treasury see red after Green(s). Green Rock LLC v. Internal Revenue Service, 104 F.4th 220 (11th Cir. 6/4/24), aff’g 654 F. Supp. 3d 1249 (2023). The taxpayer in this case was a promoter/material advisor of syndicated conservation easements. As such, the taxpayer was subject to Notice 2017-10, 2017-4 I.R.B. 544, which identified post-2009 syndicated conservation easements as one type of listed transaction under Reg. § 1.6011-4(b)(2). [*13] Further, as a promoter/material advisor to a listed transaction, the taxpayer potentially was subject to enhanced penalties under § 6707A. The taxpayer complied with Notice 2017-10 and the reportable transaction regime throughout the relevant years, including filing Form 8886, Reportable Transaction Disclosure Statement, and Form 8918, Material Advisor Disclosure Statement. Nevertheless, the taxpayer filed suit in the U.S. District Court for the Northern District of Alabama in 2021, alleging that Notice 2017-10 was invalid under the APA. Like taxpayers in previous similar cases, the taxpayer argued that the IRS had failed to comply with the APA by issuing Notice 2017-10 without providing a formal notice of proposed rulemaking inviting public comment. The district court agreed, setting aside Notice 2017-10 as applied to the taxpayer. See Green Rock LLC v. Internal Revenue Service, 654 F. Supp. 3d 1249 (2023). The taxpayer undoubtedly was emboldened by the Tax Court’s 2022 decision against the IRS in another “Green” case, Green Valley Investors (cited above). By an 11-4-2 vote, the Tax Court invalidated Notice 2017-10 under the APA in that case.

Guest Blog: Professors McGovern and Brewer on Developments in Hewitt Holding Regulation Procedurally Invalid (12/8/24)

This morning I offer a guest blog from Professors Bruce McGovern, teaching tax law at the South Texas College of Law Houston (school resume here) and Cassady V. (“Cass”) Brewer teaching tax law at the Georgia State University College of Law (school resume here). Professor McGovern authors many articles, including an annual article co-authored with Professor Brewer titled Recent Developments in Federal Income Taxation: The Year 2023, 77 Tax Law. 805 (2024). Professor McGovern makes monthly presentations of material included in that annual offering to the Wednesday Tax Forum (“WTF”) in Houston. In the most recent offering on December 13, 2024, Professors McGovern and Brewer had significant items on tax procedure that I thought readers of this blog might find interesting and enlightening. With their permission, I am offering a copy and paste of the two items in two separate blogs (because they are two separate subjects). I offer some comments after that copy and paste.

The first involves the saga of cases starting with Hewitt v. Commissioner, 21 F.4th 1336 (11th Cir. 2021) here, which held IRS proceeds regulation for conservation easements adopted in 1986 invalid under the APA for failure to respond to significant comment in adopting the final regulation. There have been significant developments since Hewitt that Professors McGovern and Brewer cover quite nicely.

IX. EXEMPT ORGANIZATIONS AND CHARITABLE GIVING Exempt Organizations Charitable Giving

          With more than 750 conservation easement cases on the docket, the Tax Court’s flip-flop on the validity of the extinguishment proceeds regulation is not going to help matters. Valley Park Ranch, LLC v. Commissioner, 162 T.C. No. 6 (3/28/24). In a reviewed opinion (7-2-4) by Judge Jones, the Tax Court refused to follow its prior decision in a conservation easement case decided just four years earlier Oakbrook Land Holdings, LLC v. Commissioner, 154 T.C. 180 (2020), aff’d, 28 F.4th 700 (6th Cir. 2022). Instead, rejecting Oakbrook, a majority of the Tax Court in this case appealable to the Tenth Circuit determined that Reg. § 1.170A-14(g)(6)(ii), one of the chief weapons the IRS has used to combat conservation easements, is procedurally invalid under the Administrative Procedure Act (“APA”). It is fair to say that the Tax Court’s decision in Valley Park Ranch will have a significant impact on current and future conservation easement litigation between the taxpayers and the IRS.

          Background. Other than challenging valuations, the IRS’s most successful strategy in combating syndicated conservation easements generally has centered around the “protected in perpetuity” requirement of § 170(h)(2)(C) and (h)(5)(A). The IRS has argued in the Tax Court that the “protected in perpetuity” requirement is not met where the taxpayer’s easement deed fails to meet the strict requirements of the “extinguishment regulation.” See Reg. § 1.170A-14(g)(6)(ii). The extinguishment regulation ensures that conservation easement property is protected in perpetuity because, upon destruction or condemnation of the property and collection of any proceeds therefrom, the charitable donee must proportionately benefit. According to the IRS’s reading of the extinguishment regulation, the charitable donee’s proportionate benefit must be determined by a fraction determined at the time of the gift as follows: the value of the conservation easement as compared to the total value of the property subject to the conservation easement (hereinafter the “proportionate benefit fraction”). See Coal Property Holdings, LLC v. Commissioner, 153 T.C. 126 (10/28/19). Thus, upon extinguishment of a conservation easement due to an unforeseen event such as condemnation, the charitable donee must be entitled to receive an amount equal to the product of the proportionate benefit fraction multiplied by the proceeds realized from the disposition of the property.

          Facts. The taxpayer partnership in this case claimed a $14.8 million charitable contribution deduction for its 2016 tax year after granting to a charity a conservation easement over 45.76 acres of Oklahoma land it acquired in 1998 for $91,610. The easement deed recited in part that the contributed property was to be held “forever predominantly in its natural, scenic, and open space condition” and that “the duration of the Easement shall be in perpetuity.” 162 T.C. at ___. The easement deed further provided in relevant part that if the land was taken by eminent domain, the taxpayer and the charity would, “after the satisfaction of prior claims,” share in the condemnation proceeds “as determined by a Qualified Appraisal meeting standards established by the United States Department of Treasury.” 162 T.C. at _____. Upon audit, the IRS took the position, as it has in many prior cases, that the taxpayer’s deduction should be disallowed for failing to meet the proportionate benefit fraction requirement of the extinguishment proceeds regulation, Reg. [*9] § 1.170A-14(g)(6)(ii). The IRS’s litigating position is that the proportionate benefit fraction must be fixed and unalterable as of the date of the donation according to the following ratio: the value of the conservation easement as compared to the total value of the property subject to the conservation easement. Thus, according to the IRS, leaving the proportionate benefit upon condemnation to be determined later by a qualified appraisal meeting certain standards is insufficient. (Note: Section 4.01 of Notice 2023-30, 2023-17 I.R.B. 766 (4/10/23), sets forth what the IRS considers acceptable language regarding the proportionate benefit fraction as it relates to extinguishment clauses in conservation easement deeds.) After petitioning the Tax Court, the taxpayer argued alternatively that either (i) the easement deed met the requirements of Reg. § 1.170A-14(g)(6)(ii) by “explicit incorporation,” or (ii) the regulation is procedurally invalid under the APA, in which case the easement deed need not strictly comply with the regulation as long as it meets the more general requirements of the applicable subsections of the statute, § 170(h) (qualified conservation contribution). The case was heard by the Tax Court on cross-motions for summary judgment.

          The Tax Court’s Majority Opinion. In a reviewed opinion (7-2-4) by Judge Jones (joined by Judges Foley, Urda, Toro, Greaves, Marshall, and Weiler), the court began its analysis by reviewing the conflicting decisions of the Sixth and Eleventh Circuits concerning the procedural validity of Reg. § 1.170A-14(g)(6)(ii) under the APA. See Hewitt v. Commissioner, 21 F.4th 1336 (11th Cir. 2021) (concluding that the regulation is invalid under the APA); Oakbrook Land Holdings, LLC v. Commissioner, 28 F.4th 700 (6th Cir. 2022) (concluding that the regulation satisfies the APA). The majority emphasized that a divided (2-1) Sixth Circuit panel decided Oakbrook, whereas a unanimous (3-0) Eleventh Circuit panel decided Hewitt. Thus, in a footnote, Judge Jones pointed out that of the six appellate court judges who have considered the issue, four decided that Reg. § 1.170A-14(g)(6)(ii) is invalid under the APA while only two upheld the regulation. Noting that the case is appealable to the Tenth Circuit, which has not taken a position on the validity of Reg. § 1.170A-14(g)(6)(ii), Judge Jones concluded for the majority that “after careful consideration of the Eleventh Circuit’s reasoning in Hewitt, we find it appropriate to change our position.” 162 T.C. at ____. The majority gave a nod to the principle of stare decisis—following established precedent—but reasoned that its holding in Oakbrook, even though affirmed by the Sixth Circuit, is not “entrenched precedent,” thereby allowing the Tax Court to strike down Reg. § 1.170A-14(g)(6)(ii) as procedurally invalid under the APA in line with Hewitt. 162 T.C. at ____.

Tax Court Rejects Bullshit Grossly Overvalued Conservation Easement Claim (7/19/24; 11/7/25)

Added 11/7/25: On November 5, 2025, the Sixth Circuit affirmed the Tax Court opinon reported in the blog below. Corning Place Ohio, LLC v. Commissioner, ___ F.4th ___ (6th Cir. 11/5/25), CA 6 here and GS here. Nothing surprising in the affirmance, but the panel did designate the opinion by Judge Sutton for publication.

In Corning Place Ohio, LLC v. Commissioner, T.C. Memo. 2024-72, JAT Google Docs here and GS here, the Court (Judge Lauber) denied a charitable deduction for an alleged conservation easement and imposed accuracy-related penalties. The Court’s opening paragraph tells the story of a bullshit tax shelter, as so often these days, in the guise of a conservation easement (footnote omitted):

          This case presents what might be called the urban version of the conservation easement tidal wave that has deluged this Court. A partnership acquired a historic office building in downtown Cleveland, Ohio, and proceeded to renovate it into luxury [*3] apartments. The renovation was undertaken pursuant to a “rehabilitation plan” approved by the National Park Service (NPS) and the State of Ohio, both of which awarded historic preservation tax credits. The partnership used the tax credits to finance the renovation.

          Gilding the lily, the partnership then granted a conservation easement over the very same property, claiming a $22.6 million charitable contribution deduction on the theory that it had relinquished valuable development rights. The “lost development rights” allegedly consisted of the notional opportunity to add a 34-story vertical addition on top of the historic building. Apart from being structurally implausible and economically unsound, adding 34 floors of steel and concrete atop the building would have required the partnership to forfeit the Federal and Ohio tax credits upon which it relied to finance the renovation. As a condition of receiving those credits, it had pledged that the rehabilitation plan would entail no rooftop improvements “visible from the street.”

          Needless to say, a 34-story addition on top of the building would have been visible from the street. Finding that the 34-story tower was a chimerical concept ginned up solely to support a wildly inflated appraisal, we will sustain the Commissioner’s disallowance of the charitable contribution deduction and his imposition of a 40% penalty under section 6662(h) for a “gross valuation misstatement.”

I include at the end of this blog entry several quotes from the opinion that I thought particularly good to show the perfidy of the actors involved in the drama. First, I will address two tax procedure issues:

Tax Court Judge Lauber Denies Petitioner Motion for Summary Judgment Rejecting Fraud Penalties in Allegedly Abusive SCE Case; Some Background (4/14/24)

In North Donald LA Property LLC et al. v. Commissioner (Order T.C. Dkt. 24703-21 #140 4/10/24), TA here and TC Dkt here*, a syndicated conservation easement (“SCE”) case, the Court (Judge Lauber) denied the petitioner’s motion for partial summary judgment. 

* This is an order and not an opinion of the Court. Hence there is no direct access to the Court’s order. Access through the Court (as opposed to a third party provider) is by using the Court website to access the docket entries for Case # 24703-21 and going to the particular docket entry (in this case entry 140 dated 4/10/24). Here there is a third party provider, Tax Analysts on its public site sponsored by Deloitte. I take this opportunity to state my appreciation to Tax Analysts and Deloitte for providing this service.

Judge Lauber opens (slip op. 1):

On February 16, 2024, petitioner filed a Motion for Partial Summary Judgment seeking a ruling that the civil fraud penalty, as a matter of law, does not apply because respondent has not alleged facts showing that NDLA “intended to evade taxes known to be owing by conduct intended to conceal, mislead, or otherwise prevent the collection of taxes.” Memorandum in Support of Motion for Partial Summary Judgment at 7 (quoting Parks v. Commissioner, 94 T.C. 654, 661 (1990)). In essence, petitioner contends that respondent cannot carry his burden of proving fraud by clear and convincing evidence because NDLA disclosed on its tax return the facts relating to the conservation easement transaction. Finding that there exist genuine disputes of material fact regarding the possible application of the fraud penalty, we will deny the Motion.

Judge Lauber starts the discussion of the facts as follows:

Sixty West, LLC (Sixty West), was a promoter of syndicated conservation easement transactions.n3 In March 2016 Reserve at Welsh, LLC (Welsh), an entity controlled by Sixty West, purchased 3,324 acres of land in Jefferson Davis Parish, Louisiana (Parent Tract). Sixty West allegedly purchased the Parent Tract for use in multiple syndicated transactions that would generate large charitable contribution tax deductions for investors. The total purchase price for the Parent Tract was $9,888,008, or $2,975 per acre.
   n3 “Promoter” is a loaded term in the syndicated conservation easement space because of the penalty imposed on “promoters” by section 6700(a). In this Order we use the term “promoter” in its ordinary sense, making no determination as to whether Sixty West was a “promoter” within the meaning of section 6700(a), a question that is not before us.

Judge Lauber’s recitation of the rest of the relevant facts then follows a recognizable pattern for those who have watched abusive SCE cases. Setting aside technical foot-faults, the core common pattern is the substantial overvaluations of the donated easements. Based upon the appraisal  of a frequent appraiser in abusive SCE cases (Claud Clark III), NDLA claimed a donation of $115,391,000 for a portion of the property originally purchased. (Order slip op. 2.) That contribution claim was based upon a “’before value’ of the property of $116,303,000, or $471,4561 per acre. Subtracting from the sum an “after value” of $912,000, Mr. Clark asserted that the easement was worth $115,391,000.’” (Slip op. 2-8.)

Timely disclosure Forms were filed as follows (Slip op. 30):

Grossly Overvalued Conservation Easement Disallowed in Full and Gross Valuation Misstatement Penalty Applied (2/24/24)

In Oconee Landing Property, LLC v. Commissioner, T.C. Memo. 2024-25 (2/21/24), GS here, the Court (Judge Lauber) denied the charitable contribution deduction because

• the allegedly relied upon appraisers were not “qualified appraisers” because the petitioners knew the property was worth only a fraction of the appraisers’ opined values (Slip Op. 39-48; and
• the property was “ordinary income property” in the hands of the promoters and that character carried over to the partnership, thus limiting the charitable deduction to the promoters basis. Petitioner supplied “no evidence” of that basis. (Slip Op. 48-57.)

Further, the Court held that, although entitled to no deduction, the Court still had to determine the value of the contributed easement to determine whether the valuation misstatement penalties applied. § 6662(a), (b)(3). The penalties are 20% if the valuation is substantial—i.e., 150% or more of the correct value--and 40% if the valuation is gross—200% or more of the correct value. (Slip Op. 74, citing § 6662(h) and § 6662(h)(2)(A)(i), respectively.) The value of the easement claimed on the return was $20.67 million but the value determined “was no greater than $4,972,002, thus the claimed value “exceeded the correct value by 416%.” (Slip Op. 74-75.)

In support of the first holding (not qualified appraisers), the Court said (Slip Op. pp. 45-46):

A person who achieves an advance agreement with an appraiser that property will be overvalued—knowing that it is being overvalued—cannot establish good faith reliance on professional advice that the appraisal is acceptable. n14

But there is more in the indicated footnote, the Court said (Slip Op. 46):

   n14 In its opening post-trial brief petitioner asserted that the regulations governing qualified appraisals and qualified appraisers “did not go through a proper notice-and-comment process and are, therefore, invalid.” That assertion occupied a single sentence; petitioner supplied no argument in support of that assertion, stating that “the Court need not reach that issue in this case.” And in its post-trial Answering Brief petitioner did not mention any challenge to the validity of Treasury Regulation § 1.170A-13(c)(5)(ii), or any other provision of the regulations, based on the Administrative Procedure Act (APA). Under these circumstances, petitioner has not properly presented or preserved an APA challenge to any regulation discussed in this Opinion.

Promoters of Abusive Conservation Easement Deductions Enjoined from Similar Conduct (3/23/23)

The Court entered Final Judments of Permanent Injunctions against promoters of abusive conservation easement tax shelters (a genre of bullshit tax shelters). The promoters enjoined are Ecovest Capital,   Ecovest Capital, Inc., Alan N. Solon, Robert M. McCullough, and Ralph R. Teal, Jr and Claud Clark III. The Final Judgments are (i) for Claud Clark III here; and (iii) for the remaining defendants here.  The Courtlistener docket entries with links to the pertinent documents most of the key documents in the proceeding are here. The terms summarized are:

(i)  enjoined from participating in any way in a plan or arrangement that involves a deduction for a qualified conservation contribution under 26 U.S.C. § 170(h)”,

(ii)  provide annual statements under penalty of perjury to the IRS and DOJ Tax for the next six years that they have not so participated,

(iii) contact all persons for whom appraisals were provided and all employees or other persons participating in the appraisals, provide them a copy of the Final Judgment of Permanent Injunction, and provide a list of such persons to DOJ Tax;

(iv)  prominently display on the website a copy of the Final Judgment of Permanent Injunction and

(v)  allow, through the Court’s retained jurisdiction, DOJ Tax to take civil discovery to monitor compliance.

I have not focused on the relief requested in the amended complaint (Doc 225 in the docket entries), but I did note that DOJ Tax sought disgorgement in Court V and Relief Sought ¶ m.  The Final Judgment of Permanent Injunction does not address disgorgement. Further in the complaint, the request for the injunction was to enjoin conduct subject to certain IRC penalty provisions (§ 6700, § 6695A, § 6694).  Those specific references are not included in the Final Judgment of Permanent Injunction but the description of the enjoined conduct probably covers conduct under the sections. There is no admission of liability for the penalties.

 A similar consent judgment was previously entered for Nancy Zak. (See Doc 271 and Doc 167 Attachment  1.) 

4th Circuit Holds the Tax Partnership Receiving an Administrative Summons is Different Than its Representative for Purposes of § 7602(d) (7/9/22; 7/12/22)

In Equity Inv. Assocs., LLC v. United States, 40 F.4th 156 (4th Cir. July 8, 2022), CA 4 here and GS here, the Court held that, for purposes of the § 7602(d) limitation on IRS administrative summonses after a criminal referral to DOJ, the person investigated for whose records a third party (bank) was summonsed (in this case a syndicated conservation easement tax partnership) is not the same as a related person (the partnership representative under 26 C.F.R. §§ 301.6223-1) who was under criminal referral, at least in part arising from the same set of facts. See the discussion at Slip Op. 8-11 under the heading “A. “Person” in § 7602(d) does not include a legal person's agents.”  The Court rejects the suggestion that anything other than an actual referral of the person to whom the summons is issued will meet the terms of the statutory limitation. See Slip Op. 11-14, saying at Slip Op. 12:.

            Equity [the summonsed tax partnership] must show evidence that a referral existed before the IRS summons, because the IRS can generally use its summons power to further a criminal investigation. § 7602(b). The summons power only ends “at the point where an investigation was referred to the Justice Department for prosecution.” United States v. Morgan, 761 F.2d 1009, 1012 (4th Cir. 1985). And a Justice Department referral is not simply some generalized suspicion of criminal activity, but a specific procedural mechanism used to share information. Id. (describing a Justice Department referral as a “mechanical test”).

These are pretty straightforward holdings that I am surprised were seriously disputed.  Hence, I think they require no further discussion for the prototypical reader of this blog (as I imagine that reader). But I note that the court makes some statements in the opinion that on their face seem noteworthy or curious. I will just list them without further comment:

 1. Slip Op. 2 n1:

   n1 The IRS has broad powers to investigate criminal tax fraud, but it lacks the power to prosecute tax fraud. So if an IRS criminal investigation discovers evidence of criminal activity, the IRS must refer the case to the Justice Department for prosecution. Once referred, the IRS typically plays a continued role in investigating and prosecuting the case.

2. Explaining how the tax partnership inflates the value of the donated easement (Slip Op. 3 n3):

   n3 This inflation is possible because the easement's value is often not calculated based on the land's recent purchase price but based on the value of its highest and best use. See PBBM-Rose Hill, Ltd. v. Comm'r, 900 F.3d 193, 209 (5th Cir. 2018). So the limit on the valuation is little more than the imagination of the appraiser (who may be in on the scheme), tempered only by the fear of an audit. See generally Mary Clark, Greedy Giving, Bad for Business: Examining Problems with Arbitrary Standards in Appraising Conservation Easements, 51 U. Mem. L. Rev. 479 (2021).

Sixth Circuit Creates Circuit Conflict with Eleventh Circuit on Conservation Easement Regulations (3/15/22)

I recently discussed the Eleventh Circuit’s opinion in  Hewitt v. Commissioner, 21 F.4th 1336 (11th Cir. 2021). 11th Cir. Invalidates Proportionate Sharing Regulations As Procedurally Arbitrary and Capricious for Failing to Address a Significant Comment (12/30/21; 12/31/21), here; and Regulations Interpreting Pre-1996 Code Provisions; Fixing Hewitt (1/6/22; 1/7/22), here. In Hewitt, the Eleventh Circuit invalidated the regulation § 1.170A-14(g)(6)(ii) requiring for charitable conservation donations of partial interests (such as easements) that the deed does not permit the donor to share in proceeds on extinguishment in the property values attributable to post donation improvements made by the donor. Yesterday, the Sixth Circuit sustained the regulation, thus creating a Circuit conflict between Hewitt and Oakbrook Land Holdings, LLC v. Commissioner, 28 F.4th 700 (6th Cir. 2022), CA6 here and GS here.

The Sixth Circuit in Oakbrook holds the regulations are procedurally valid, rejecting the reasoning of the Eleventh Circuit for holding the regulations procedurally invalid. The Sixth Circuit so holds in separate parts of the majority opinion that

(i)                addresses procedural regularity or “arbitrary or capricious” review (in 5 USC § 706 stated in disjunctive but often stated in conjunctive “arbitrary and capricious review) (28 F.4th at 710-718 and 720- 722); and 

(ii)              Chevron analysis (28 F.4th at 718-720). 

 (It is not clear to me why the Court sandwiched Chevron analysis between components of arbitrary and capricious review, but there is a lot of confusion in this general area.)

IRS Offers to Settle Abusive Syndicated Conservation Easement Shelters Pending in Tax Court (6/26/20)

In IR-2020-13, here, the IRS announces that it will offer to settle Conservation Easement Syndication shelters of the BS genre that are currently pending in the Tax Court.  The settlement offer will be made by mail in each pending case.  The announcement says that the following will be the key terms.

• The deduction for the contributed easement is disallowed in full.
• All partners must agree to settle, and the partnership must pay the full amount of tax, penalties and interest before settlement.
• "Investor" partners can deduct their cost of acquiring their partnership interests and pay a reduced penalty of 10 to 20% depending on the ratio of the deduction claimed to partnership investment.
• Partners who provided services in connection with ANY Syndicated Conservation Easement transaction must pay the maximum penalty asserted by IRS (typically 40%) with NO deduction for costs.

Keep in mind that these are not all the terms but only the key terms.  And, I suppose, as presented, they may only be summaries of the key terms so that the actual key terms summarized may present different nuances than one can derive from the summaries.  As I learn more details or obtain more documents or links that may be helpful, I will do update revisions to this blog entry.

One of the key points regarding the offer, it will be made only in those cases pending before the Tax Court.  Cases in the IRS administrative pipeline are not within the scope of the offer as stated.  (Query, will Appeals make the same offer because, once a case gets to Appeals, the same incentive to clear the cases will be presented, because the next step will be litigation in the Tax Court?)

Peter Reilly has a good early discussion of the offer:  IRS Victory In Easement Case Prompts An Offer Not To Be Refused (Forbes 6/25/20), here.  Highly recommended.  And, from knowing Peter and his special interested in the abusive Syndicated Conservation Easement Shelters, he is likely to have more posts as the settlement offer plays out.

In email correspondence with Peter, I offered the following off-the-cuff (meaning not fully considered) comments.  I offer those off-the-cuff comments (modified and expanded but again without detail thought) just for early consideration, but if I have time to try to refine them, I will do so here.

1. The key excerpt, I think, is this:

The IRS realizes that some promoters may tell their clients that their transaction is “better” than or “different” from the transactions previously rejected by the Tax Court and that it may be better for the client to litigate than accept this resolution.  When deciding whether to accept the offer, the IRS encourages taxpayers to consult with independent counsel, meaning a qualified advisor who was not involved in promoting the transaction or handpicked by a promoter to defend it.

2. The penultimate paragraph says that taxpayers not excepting should not expect better terms.  But, as suggested by the above quote, what about those taxpayers who really do have better cases than the very bad cases (i.e., their documents meet the technical requirements of the regulation and their valuation is not grossly inflated as much as the more abusive ones)?  They will have better litigating hazards and the IRS should be willing to settle on a litigating hazards of their cases rather than insisting that one size fits all.