IRS disallowances of certain syndicated conservation easement (SCE) deductions have hit Georgia investors hard over the last 10-plus years. But a new IRS settlement initiative offers potential relief to taxpayers who are still dealing with the fallout from these cases.
Announced in May 2026, the settlement limits penalties to 10% for qualifying investors and lets them claim a deduction for cash contributed to the partnership, but only if they respond by the deadline in the IRS’s settlement notice. To review options, Georgia taxpayers with SCE deductions under review or docketed before the Tax Court should consult with an experienced tax attorney as soon as possible.
Learn how the conservation easement attorneys at Wiggam Law can help you navigate this case with both the IRS and the Georgia Department of Revenue (DOR).
Key takeaways
- In 2026, the IRS announced plans to send SCE settlement offers to qualifying investors from over 1000 SCE cases currently under exam or on the Tax Court docket.
- The offer limits penalties and allows investors to claim a deduction equal to their contribution into the partnership.
- Although the settlement removes the majority of the original claimed deduction, it offers greater savings than most claimants get through litigation.
- To minimize the impact on state tax liabilities, investors should work with Georgia-based attorneys who are experienced with SCE cases.
What Is the 2026 IRS SCE Settlement for Georgia Investors?
In May 2026, the IRS announced that it planned to send settlement offers to partners in over 1,100 SCE cases, including cases docketed in the Tax Court and still in Exam.
If you accept the settlement, the IRS will disallow your charitable deduction and apply a penalty for valuation misstatement, but it will allow a deduction based on the value of your actual contribution and cut the penalty to 10%.
According to IRS Chief Executive Officer Frank J. Bisignano, “This settlement opportunity gives eligible taxpayers a chance to resolve these cases on terms more favorable than the results taxpayers have generally achieved in court.”
On average, the Tax Court has reduced deductions by about 94% and assessed 40% penalties. For more details, see the rulings in several 2025 SCE cases.
How Much Can You Save with the 2026 SCE Settlement?
Here’s how the 2026 settlement terms compare to the average SCE Tax Court case results. For this example, we’re assuming the taxpayer contributed $100,000 to a partnership and claimed a $400,000 charitable deduction.
Those are fairly standard numbers in these cases – many promoters secured investors’ charitable deductions worth about four times their contributions – but of course, the exact numbers vary drastically from case to case.
| Sample Comparison: Tax Court vs. 2026 SCE Settlement | ||
|---|---|---|
| Tax Court | 2026 SCE Settlement | |
| Allowed deduction | 5 to 7% of the original amount claimed | Equal to the partner’s actual contribution |
| Value of the allowed deduction | $20,000 to $28,000 | $100,000 |
| Disallowed deduction (based on claiming a $400,000 deduction) | $372,000 to $380,000 | $300,000 |
| Tax understatement based on a 37% tax rate | $137,000 to $141,000 | $111,000 |
| Penalty rate | 40% of the underreported tax | 10% of the underreported tax |
| Penalty | $54,800 to $56,400 | $11,100 |
| Penalty plus tax | $191,800 to $197,400 | $122,100 |
| Savings with settlement | N/A | Approximately $70,000 to $75,000 plus the cost of litigation and your time. |
Bottom line: The 2026 SCE settlement has the potential to save Georgia investors $70,000 to $75,000 based on claiming a $400,000 charitable deduction and making a $100,000 initial contribution to the partnership. The savings are much higher when you consider the cost of litigation, the value of your time, the mental toll of an ongoing tax dispute, and interest.
Interest on Tax Liabilities From Disallowed SCE Deductions
These numbers do not include interest, which is typically backdated to the original due date and compounded daily. The IRS updates its interest rate quarterly, and over the last decade, it’s fluctuated between 3 and 8%.
If you assume an average interest rate of 6%, an investor who incurs a liability of $197,000 on a 10-year-old tax debt will owe nearly $360,000 – that’s over $160,000 in interest alone.
In contrast, an investor who takes advantage of the settlement and reduces their tax and penalty to $122,000 will owe $222,000 in tax, interest, and penalties over the same time frame with the same interest rate. That’s an additional savings of nearly $140,000 on top of what the investor saved in tax and penalties.
However, an experienced tax attorney may save you even more in interest. In the 2025 case, Kwong v. United States, one court ruled that the IRS was required to suspend certain deadlines that fell during the COVID pandemic, offering SCE investors the chance to abate significant amounts of interest. This could give SCE investors the chance to have 3.5 years of interest due to COVID delays shaved off their accounts – on a $200,000 liability, that’s a $32,000 savings – but only if you make a claim by the deadline.
Potential Georgia Income Tax Savings
Georgia taxpayers who take advantage of the IRS’s newest SCE settlement should also see significant savings on their state tax liabilities. The savings vary based on the specifics of the case – including the deduction claimed, the year the return was filed, and other factors.
For simplicity, let’s say an investor put in $100,000 and claimed a $250,000 deduction. They took advantage of the 2026 SCE settlement offer, so the IRS disallowed the $250,000 charitable deduction but allowed them to keep a $100,000 deduction. That increased their taxable income by $150,000.
Based on a 4.99% Georgia income tax rate, the $150,000 addition to the taxpayer’s reported income leads to a state tax liability of $7,485. However, if that same taxpayer had 95% of their $250,000 deduction disallowed in Tax Court, they’d see a $237,500 increase in their reported income. At a 4.99% income tax rate, that’s approximately $11,851 in state tax.
Penalties may also apply, and the DOR will backdate interest at the Fed Rate plus three, or 1% per month (12% per year) for periods prior to July 1, 2016.
Note that the 4.99% tax rate is just used as an example – as that’s Georgia’s newest income tax rate, investors may have faced significantly different rates in previous years.
However, Georgia investors may be able to increase their savings even more – especially when they work with an experienced tax attorney.
Additional Protection – Georgia Voluntary Disclosure
Georgia investors who approach the DOR before reaching a final agreement with the IRS may qualify for the state’s Voluntary Disclosure Agreement (VDA). A GA VDA can insulate you from civil penalties and the risk of criminal enforcement, and if you’re dealing with multiple years of SCE deductions, the DOR may agree to a limited look-back period of only three years.
In a recent case, Wiggam Law saved a client nearly $400,000 on GA tax and penalties – the savings included one year of no state tax liability or penalties, three years of no penalties, and no interest on the penalties that were abated.
Will the IRS Make a Better Offer for GA SCE Investors?
The IRS offered SCE settlements in 2005, 2020, and most recently in 2024, leaving investors wondering whether the agency will make a better settlement offer in the future.
That appears unlikely. During the 2026 DC Bar Tax Conference in Washington, D.C, IRS Chief Counsel Kenneth Kies declared that the agency will not improve its offer. When announcing the settlement in May 2026, Kies doubled down on this statement, urging investors to take the settlement and consider the “substantial litigation risks of continuing to contest these cases.”
Multiple other signs indicate that this may be the best offer available to investors in Georgia, as well as other parts of the country:
Timing – The IRS generally cannot make settlement offers to taxpayers whose cases have already been settled, tried, or appealed. The majority of cases eligible for the 2026 settlement are already on the court’s docket, indicating that the IRS will be unlikely to make another offer before these cases move forward.
Terms of previous settlement offers – The penalty reductions with the 2026 offers are not as generous as they were with previous settlements. In 2024, the IRS offered to reduce penalties to 10% for docketed cases and to just 5% for undocketed cases. The higher penalty tiers (10% and 20%) with the 2026 offer indicate that the agency is unwilling to move backward in these cases.
Unrelenting IRS enforcement — The IRS has been approaching SCE cases with extreme aggressiveness since 2016, when the agency classified SCE deductions as listed transactions, requiring additional filings (sometimes even retroactively) from investors. Audits of SCE deductions have been very adversarial and often focused on minor procedural or technical errors.
Increasingly aggressive valuation proposals – Over the last 15 years, the IRS has gotten increasingly aggressive in its valuation claims on SCE cases. Since 2011, the IRS has proposed a $0 valuation in 93% of reviews, and in cases where the auditors suggested a higher valuation, the average was only 2% of the original amount claimed. That’s gotten even worse recently– since 2022, the IRS has suggested a zero valuation in 97% of cases.
The Tax Court has disagreed with the IRS’s zero valuation in most cases, but that’s been of little help to investors. On average, the court has only allowed deductions worth 5 to 7% of the original claims, and has only upheld valuations in a very small number of cases.
Stricter rules on SCE deductions – In 2022, Congress banned SCE deductions that exceed 2.5 times investor basis, unless the easement was held for at least three years, involves a donated building certified as historic, or the partnership was owned by family members. The updated legal code suggests that the IRS has no tolerance for inflated SCE deductions, and in fact, the IRS has continued to review claims even if they do fall into the allowable parameters.
The signs indicate that this is the best SCE offer for Georgia investors, and taxpayers who are tempted to wait for a better offer put themselves and their cases at significant risk. To protect yourself, you should consult with an attorney who can provide guidance personalized to your case.
Benefits of the 2026 SCE Settlement for Georgia Investors
Georgia taxpayers who invested in SCE cases stand to reap the following benefits by taking advantage of the IRS’s latest SCE settlement:
- Limited deduction disallowance: The majority of Tax Court decisions disallow 93 to 95% of claimed deductions. For example, the court will disallow $93,000 to $97,000 of an investor’s $100,000 deduction. With the settlement, the IRS will disallow the full charitable deduction but allow investors to claim another deduction.
- Other deduction allowed: Most Tax Court cases that have gone through trial have severely limited the allowable deductions investors can take, but the 2026 settlement allows investors to claim a deduction equal to the costs they contributed to the SCE.
- Reduced valuation penalties: The Tax Court routinely applies a misvaluation penalty of 40% of the understated tax, but the settlement offers investors a 10% penalty if they take the settlement by the 90-day deadline or a 20% penalty if they act by the 135-day deadline (45 days after the 90-day deadline.
- Interest savings: The IRS imposes interest on tax underpayments and penalties backdated to the original due date. Cutting the penalties by 75% (from 40% to 10%) reduces the interest substantially, especially when you take the IRS’s daily compounding into account.
- Time savings: On average, the IRS takes over four years to complete exams of SCE deductions. If cases go to Tax Court, that often adds another four to six years to the time frame.
- Protection from Civil Fraud penalties: The Tax Court typically applies the valuation misstatement penalty, even in cases where the IRS recommends the 75% civil fraud penalty. But if you go to court, there’s always a risk of fraud penalties – taking the settlement eliminates that risk.
Georgia investors who work with an experienced Atlanta-based attorney can reap additional benefits as their counsel can help them coordinate a strategy that seeks the best possible outcome on both the state and federal levels.
What About Appealing the Tax Court’s Decision?
- The Appeals court has upheld the majority of the Tax Court’s decisions in these cases. In particular, investors who want to mount a case to dispute the Tax Court’s valuation should be aware that appellate courts only review valuation disputes in cases with clear errors and will not overturn a decision based on an argument that the taxpayers’ appraisal expert was more reliable than the government’s. This means it is very difficult to overturn a Tax Court decision based on valuation.
How to Pay for SCE Settlements
The 2026 SCE settlement doesn’t require partnerships to pay in advance, which was one of the most limiting factors of earlier settlement offers. However, once investors agree to a 2026 settlement, they must make payment arrangements.
The right option depends on your situation, but may include:
- Installment agreements – monthly payments on IRS tax debt. The GA DOR also offers payment plans.
- Offer in compromise – if you can’t afford the liability, you may qualify for an offer based on double as to collectibility from the IRS and potentially a GA DOR offer as well.
- Currently not collectible – delay in collections based on financial hardship experienced by the taxpayer.
Additional strategies may include interest abatements based on the Kwong ruling and bankruptcy in some cases.
FAQs for SCE Settlements in Georgia
Should I skip the settlement and go to Tax Court?
The majority of investors are better off accepting the settlement than continuing to move forward through the litigation process. However, the right decision depends on your case – talk with a tax attorney who’s experienced with SCE cases for customized guidance.
What if I don’t qualify for a settlement?
Then, you need to contact an experienced tax attorney to talk about your options. Reach out to an attorney based in your state so they can help you navigate state tax and penalties as well.
Can I get a settlement based on effective tax administration?
The IRS does not allow an offer in compromise based on effective tax administration in cases involving abusive tax promotions. If an attorney pitches this idea to you, it may indicate that they lack experience in this area.
Will the IRS abate interest due to unreasonable delays?
That’s unlikely but possible. Some practitioners may recommend seeking an interest abatement based on unreasonable delays, and that “Hail Mary pass” may work in some cases. But typically, once the taxpayer files a Tax Court petition, they lose the chance to qualify for abatement under these terms.
Does the Georgia DOR offer SCE settlements?
No, but the agency has a Voluntary Disclosure program, which can help qualifying taxpayers save a lot of money while also protecting themselves from risks.
Get Representation from Georgia SCE Attorneys
At Wiggam Law, we are committed to getting our clients the best possible results – that requires extensive experience and in-depth knowledge of every case. When you work with us, we’ll get to know your case inside and out and develop a strategy based on your unique needs.
Don’t wait – and don’t risk litigating an SCE case without experienced representation. Instead, reach out for help today. We’ll help you navigate this stressful time in the easiest way possible. Schedule a consultation today to learn more.
