IRS announces new settlement offer for certain conservation easement disputes
Eligible partnerships will receive a settlement letter from the IRS and will have a 90-day period to accept the offer.
The IRS today announced a new time-limited settlement opportunity for certain taxpayers involved in disputes over conservation or historic preservation easements.
According to today’s IRS release—IR-2026-65—eligible partnerships will receive a settlement letter from the IRS and will have a 90-day period to accept the offer. The following terms during this initial period will be available:
- No charitable contribution deduction will be allowed.
- An “other deduction,” in an amount determined by the IRS, generally equal to the partnership’s approximate out-of-pocket costs (often based on cash-contributed amounts reflected on Schedule M-2), will be allowed.
- A gross valuation misstatement penalty will apply at a rate of 10%.
- Interest will accrue as required by law.
- The partnership will not be required to make payment at the time it elects into the initiative.
- Non-docketed Bipartisan Budget Act cases will be resolved by closing agreement or similar document.
- Docketed cases will be resolved by stipulated decision.
- No extension of the 90-day period will be available.
For a 45-day period immediately following the initial 90-day window, partnerships may still settle, but the gross valuation misstatement penalty will increase to 20%. After this 135-day period expires, cases will be resolved before a court decision only on the basis of hazards of litigation.
The settlement opportunity is not available for all cases, and the IRS will determine eligibility. Exclusions apply to cases that have already been tried, are on appeal, have already been settled, or are designated as test cases, among others.