Syndicated conservation easement (SCE) investors are often shocked at the amount of interest that has accrued as these cases have moved slowly through the courts over the last decade or longer.
The COVID-19 pandemic era further extended the timeline of many SCE cases, making the process stretch out even longer. During COVID, the court calendars were slow, settlement negotiations were delayed, and the administrative backlogs didn’t help. All this while the interest kept growing.
Fortunately, thanks to the Kwong v. United States court case, SCE investors may be able to request a refund of interest that accrued during the COVID-19 pandemic. Let our legal team lead the way – contact us for help making a protective refund claim today.
Key Takeaways
- What led to COVID-19 interest refunds? The court’s decision in Kwong determined that the COVID-19 disaster declaration should have paused tax deadlines and, potentially, stopped interest from accruing.
- What is the period subject to relief? January 20, 2020, through July 10, 2023.
- Who is eligible? Taxpayers who paid interest and penalties that accrued in the eligible period, including SCE investors.
- Caveats? You must request the refund by the deadline, and you may need to make a payment first if you haven’t already.
- Refund claim deadline: Within two years of paying the interest.
Why SCE Cases Were Uniquely Affected by COVID-19
SCE cases have a unique timing, as they’ve stretched on for years, including right in the middle of the pandemic. Cases that were filed years ago continued to drag on through the same period the pandemic emergency declaration was in effect, and the IRS let interest compound for those 3.5 years, as if the disaster declaration didn’t exist.
Long Audits Made Even Longer Due to COVID
Audits of SCE deductions typically take over four years, while litigation takes at least as long, if not longer, especially due to COVID delays. Unfortunately, SCE investors can’t get the IRS to eliminate the interest and penalties resulting from IRS slowdowns, appeal backlogs, and litigation delays, but they may be able to get some relief by claiming refunds on interest charged during the pandemic, which is significant given the size of the tax liabilities.
Years and Years of Compounding Interest
Although the IRS cannot collect on the tax during this process, the balance looms over investors as they wait for the case to get resolved. When SCE partnerships go through litigation, the courts typically rule against the majority of the deduction, assess a 40% penalty, and backdate interest to the return’s original due date.
For many investors, that’s 10+ years of interest, meaning COVID-era interest often represents over a third of the full amount due.
The COVID Timeline and Why It Matters for SCE Cases
The COVID-19 disaster timeline is as follows:
- January 20, 2020: COVID-19 was declared a federal disaster in March 2020, but its start date was set a few weeks early in January.
- March 2020: IRS and the appeals process started slowing down, with several processes being stopped completely.
- May 11, 2023: The official end of the federal pandemic emergency period was declared by the president.
- July 10, 2023: The end date of the mandatory IRS relief period based on adding a statutory 60-day extension as outlined in the Internal Revenue Code.
Here’s why it matters. In November 2025, the US Court of Federal Claims issued a decision in Kwong v. United States that has become a major controversy in the tax community.
The court determined that since the pandemic emergency was a presidentially declared disaster, the statute required a 60-day extension from the end of the declaration date. In other words, the IRS should have observed a mandatory relief period from the first day of the disaster to 60 days after its end date, and so, theoretically, the IRS should have paused the accrual of penalties and interest under I.R.C. Section 7508A(d) for that full time.
The IRS argued that its regulations capped the postponement period at one year. However, the U.S. Federal Claims Court disagreed, pointing out that the agency had misinterpreted the law and acted contrary to what the statute clearly states. As of May 2026, the IRS has appealed, and the appeals case has not yet been scheduled.
To cut the story short: The interest clock should’ve stopped ticking for more than three years, and yet the IRS kept accruing interest for taxpayers, who may now be entitled to a refund if the appellate court sides with the lower court. Read more about the legal arguments in the Kwong case.
How Much Interest May Have Been Added During the Pandemic
The COVID-19 pandemic declaration lasted for more than three years, during which penalties and interest compounded daily. For taxpayers with large balances like SCE investors, the compounding interest during the pandemic period alone could add up to hundreds of thousands of dollars on a million-dollar tax liability.
For example, if a taxpayer owed the IRS $200,000 on January 20, 2020. By July 10, 2023, the interest had grown by $32,118. Based on the Kwong ruling, this taxpayer may now be eligible to pursue a refund of the $32,118 in accrued interest.
The figures in conservation easement cases vary, but given the passage of time, the ratio of interest to underlying tax debt is dramatic for all taxpayers.
Here’s a comparison snapshot to help you get the full picture:
| Amount Owed as of January 20, 2020 | Interest Accrued through July 10, 2023 |
|---|---|
| $100,000.00 | $16,059.07 |
| $200,000.00 | $32,118.20 |
| $500,000.00 | $80,295.46 |
| $1,000,000.00 | $160,590.95 |
Who Should File a Claim for an Interest Refund?
Here are some scenarios where refunds may apply and their deadlines:
- You accepted an SCE settlement and paid in full – the deadline is two years after the full payment.
- You are making payments on a settlement – the deadline varies based on when payments were applied to the interest eligible for the refund.
- You made a deposit on a pending case – the deadline is two years after the later of the payment or assessment date. For example, say you made a deposit in 2022 but the court assessed the tax in 2025, you have until that date in 2027 to request a refund.
- You’re dealing with pending litigation (including docketed and undocketed cases), but haven’t made a deposit – the deadline will depend on when the tax is assessed, and payment is made.
The one factor that you need to keep in mind when applying for a refund claim is the strict deadlines. For easement investors, the relevant deadline is two years after payment, but if you’ve made a deposit, you also have to consider the assessment date.
If you have an outstanding balance that’s been assessed, a tax attorney can advise you on how to make a payment to stop the interest so you can pursue a refund of that payment. They can also answer any other questions about how these refund claims work with SCE cases.
How Wiggam Law Can Help
You’ve probably heard that this is a complex tax situation because the law is still developing, and you should work with a professional, but you have no idea what to expect when working with an attorney. Here’s what working with us would look like:
- Thorough review of your IRS account transcripts to confirm you’re eligible for the interest refund.
- Identifying interest and penalties charged during COVID
- Calculating potential refund amounts to ensure it’s worth pursuing
- Evaluating statute-of-limitations deadlines
If you’re eligible and the amount you can request is significant, we file a claim with the IRS, including calculations and supporting documentation. Although every case is unique, we typically find that investors with at least a $150,000 SCE liability can benefit from these claims.
How much would you actually save from working with us? About $16,000 of interest for every $100k owed, and even when you take our fees out of that, the savings are still substantial.
Here’s a breakdown of our fee structure:
| Description | Amount |
|---|---|
| Interest Refund | $32,118 |
| Submission Flat Fee for up to five refund claims | $5,000 |
| Contingency Fee (20%) | $6,424 |
| Refund after Legal Fees | $20,694 |
This means you keep 64% of the total interest paid, and we do all the work. The flat fee stays the same for up to five refund submissions, meaning that the more you owe, the larger share of the refund goes into your pocket.
For example, an investor claiming a refund of about $320,000 in interest on a million-dollar liability would pay about $69,000 in flat fees and contingency fees, meaning they keep 78.4% of their refund. We can also handle these cases at our usual per-hour rate on retainer, if preferred.
The Law Is Still Developing: Is This Worth Pursuing?
The Kwong decision is a major milestone on this tax issue. The legal theory for penalty and interest during the pandemic is well-grounded. The precedent is favorable, and the process to file a refund or an abatement is clearly defined.
The IRS has shown no sign of voluntarily abating interest or penalties amid current legal uncertainties. For taxpayers, that means the best way to approach this is to be proactive about preserving their claim.
Be aware of professionals who assure you that this is a guaranteed offer; we can’t state enough that the law is still developing. While there’s a high chance of the COVID-19 interest refund being approved, that hasn’t happened yet. Fake tax relief companies are already selling the “guaranteed COVID-19 interest refund” narrative to entice innocent taxpayers. Avoid anyone who pressures you to share personal information before reviewing your transcripts.
When we file your refund claim, we invoke the Kwong argument, but we also leave no stone unturned when it comes to leveraging other angles for your refund. While some protective claims may not be accepted until the Kwong appeal is complete, the IRS may approve others before litigation winds up.
Frequently Asked Questions (FAQs)
Here are answers to the most asked questions on SCE investors in relation to the Kwong case:
Does the Kwong ruling only apply to tax disputes over conservation easements?
Absolutely not, the Kwong case is broader and applies to any assessment of penalties and interest between January 20, 2020, and July 10, 2023. The Kwong case wasn’t specifically focused on interest or penalties, but its ruling, as well as other recent rulings, open the door to this relief.
What happens if the IRS denies my abatement claim?
Denial is always a possible outcome when dealing with the IRS. In some cases, a taxpayer can appeal by submitting a protest letter, supporting documents, and legal arguments to the IRS explaining why the IRS’s verdict is unsatisfactory. If the appeal doesn’t work, you can consider litigation and challenge the IRS’s judgment in court.
At Wiggam Law, our goal is always to win – and we generally don’t take on cases unless they indicate a very high likelihood of success. We’ll provide a realistic analysis of the anticipated outcome of your claim.
Why are conservation easement cases impacted more than other cases?
Because of the time frame, disputes over conservation easements are complex and time-consuming. They involve partnership proceedings, multiple investors, valuation disputes, federal litigation, and IRS appeals. When cases last this long, the interest becomes extremely high.
Can I get a refund of interest applied by the Georgia DOR?
At this point, no, this case doesn’t apply to interest on state tax liabilities. However, Georgia investors stand to benefit from the latest SCE settlement offered by the IRS.
Does the July 10, 2026, deadline apply to SCE investors?
Generally not, but consult with an attorney for your specific deadline. The July 10, 2026, deadline applied to taxpayers whose returns or payments were due during COVID (January 2020 to July 2023) – for example, if you incurred penalties on payroll returns filed late during COVID. This deadline allows taxpayers who made payments during COVID to use the three-year rule (where refunds are available three years after a return’s due date) when seeking refunds. This helps taxpayers who are already long past two years after payment.
Should I make a deposit?
Yes, whether or not you qualify for Kwong interest refunds, you should still consider making a Section 6603 deposit. That stops the running of interest on your account while you wait for the case to be resolved.
What if the SCE-related tax was assessed during COVID?
Then, you may have additional options for relief. The mandated relief may also have prevented the IRS from adding additions to tax or any penalties during the COVID disaster, but again, you need to talk with an attorney about your specific case.
File Your Refund Claim Today
The Kwong decision can be a great opportunity for the SCE investors to recover some of the money they’ve lost on these cases. While taxpayers can’t have all the penalties and interest erased, getting a refund of more than three years of interest would be a huge financial step.
Unfortunately, this offer comes with a ticking clock on it, and if you have not filed by the deadline for your situation, then you might miss out on the offer.
If you have a resolved conservation easement case and you’re not sure whether you’re eligible for an interest refund, we can help. Contact the Wiggam Law team today, and we will assess your tax situation and advise on the next steps.
