IRS updates conservation easement warnings, raising stakes for tax advisors

The IRS sharpened its warning on syndicated conservation easements on May 6, a move that raises the pressure on KPMG tax-controversy, planning and private-client teams already fielding anxious questions from wealthy taxpayers. In its updated Conservation Easement page, the agency expanded material on abusive transactions, recent court decisions and investor warning signs, while Acting IRS Chief Counsel Kenneth J. Kies said courts have repeatedly rejected abusive arrangements and often upheld major deduction cuts and penalties.

That matters because the IRS is not treating this as a narrow technical dispute. The updated page says syndicated conservation easement transactions have increasingly been used to generate inflated tax deductions, while legitimate conservation easements should rest on long-standing ownership, accurate property-specific valuation and compliance with the rules for qualified conservation contributions. The abusive cases, by contrast, often feature promoter-driven structuring, inflated appraisals and deductions that far outstrip the actual economics of the investment.

For advisers inside a firm like KPMG, the practical effect is more scrutiny and less room for optimistic valuation stories. Documentation has to be tighter. Independent appraisal review matters earlier. Marketed structures and contingent fee arrangements look riskier when the IRS is explicitly flagging them as warning signs. Even when a client frames the deal as philanthropy or land preservation, the agency’s message is that weak substantiation and aggressive pricing will keep drawing attention.

The timing is also important for teams handling clients already under audit or in litigation. The IRS said it will soon release the terms of a time-limited settlement opportunity for eligible taxpayers, after announcing similar time-limited settlement offer letters in June 2024 for certain taxpayers under audit in the Large Business & International Division and the Small Business and Self-Employed Division. An IRS Appeals memorandum says eligible non-docketed syndicated conservation easement cases generally will be offered a settlement, but docketed Tax Court cases will not be eligible under that process.

That kind of bifurcated path forces faster calls from advisers and clients about whether to fight, settle or rewrite the risk case altogether. The Tax Court has also increasingly signaled that sanctions against taxpayers’ counsel may be imposed when meritless arguments are pursued, adding another layer of exposure for firms advising on these disputes.

The enforcement backdrop explains the urgency. The IRS first made syndicated conservation easement transactions a priority compliance area in November 2019. In May 2025, it said Atlanta attorney Vi Bui was sentenced to 16 months in prison for obstructing the IRS in connection with abusive syndicated conservation easement shelters, and it said Jack Fisher and James Sinnott had been sentenced in January 2024 to 25 years and 23 years, respectively. The IRS said the scheme involved sham partnerships, backdated documents and fraudulent appraisals. For KPMG people, the warning is blunt: the work now carries more response pressure, more client anxiety and higher reputational stakes if a bad position is allowed to harden into a controversy.