Conservation easements are a powerful tool for protecting environmentally and historically critical plots of land—and come with some significant tax benefits, too. Unfortunately, those benefits have made them the object of aggressive IRS scrutiny, leaving investors like you at risk of significant clawback of taxes, penalties, and interest.
Wiggam Law’s expert tax attorneys are here to help you protect yourself.
Conservation easements were designed to provide tax incentives to investors and landowners for conserving land. However, the IRS has been intensely scrutinizing syndicated conservation easements (SCEs) with a robust enforcement campaign against potential abuses. SCE funds have struggled to defend their appraisal valuations in court. Outcomes thus far have largely favored the IRS, subjecting participants to significant penalties. Given the current landscape, investors involved in these easements must understand their options and seek independent legal counsel.
Civil and Criminal Investigations of SCE Promoters
IRS Audits for Investors
Accuracy Penalties and Interest on Owed Taxes
If you are an investor and your CE deductions are denied by the IRS, you could be on the hook to repay the amount of the deduction, along with a 40% accuracy penalty—on top of the money you spent on your initial investment. If you invested in a SCE, do the following as soon as possible:
Seek Independent Counsel from Tax Attorneys
When you have tax troubles, always make seeking out an attorney your first move. An attorney who does not represent your conservation easement partnership can serve as your independent advocate by advising you about your options for relief, helping you pursue the best course of action, and representing you in front of the IRS or Georgia DOR.
Evaluate IRS Settlement Offers
The IRS has provided multiple avenues for settlement in order to resolve potential liabilities without prolonged litigation. Global Settlement Offers provide partners with deductions for the cost of investment and reduce penalties while disallowing the charitable deduction in full, in exchange for paying back taxes, penalties, and interests.
Options to protect yourself and resolve the situation include:
Pursuing Refundable Deposits
The IRS’s aggressive stance on SCEs can lead to substantial federal income tax liabilities. Section 6603 refundable deposits allow investors can halt the accrual of interest (currently 8% annual, compounded daily) on potential liabilities while preserving the right to a refund if the dispute is resolved in their favor.
Entering Georgia’s Voluntary Disclosure Program
The Georgia Department of Revenue (“GA DOR”) has its own voluntary disclosure program specifically for conservation easements to help you mitigate your liability and avoid severe SCE-related penalties and resolve your tax issues. You do not need to have settled with the IRS first before participating in the VDA program.
Three-Year Lookback
The state limits its review period to only the most recent three years and waives other taxes, penalties, and interest for years outside the disclosure period.
Penalty Waiver
Participating in the voluntary disclosure program waives state penalties for the three years included in your settlement, reducing your financial burden.
Stop Interest Accrual
The GA DOR charges 11.5% interest on unpaid taxes and penalties, and do not have a refundable deposit program. Participation stops interest from accruing.
The VDA program promotes and enhances voluntary compliance with the tax law while providing financial relief for taxpayers who have made errors with their conservation easement deductions and who voluntarily come forward to fix it.
Determine Your Eligibility
Are you having second thoughts about your tax deductions? Discuss your situation with tax professionals and determine if you meet the eligibility criteria for the VDA program.
Gather Tax Documents
Collect all of the documents related to your conservation easement deductions and then complete and submit your application.
Negotiate With the DOR
After the Georgia DOR approves your application, you may be able to negotiate the terms of tax settlement. A tax attorney can help you secure the best terms for your settlement.
Finalize Your Settlement
One the terms of your settlement have been agreed on, sign any necessary agreements and begin making payments to resolve your tax issues and get your life back on track.
If you suspect you will soon be under IRS investigation for conservation easement tax deductions or have received notice of an IRS investigation, Wiggam Law is firmly in your corner and ready to help you find relief. Our tax law team treats every client like family and makes your best interest and well-being our highest priority.
When you end up in tax trouble, Wiggam Law is here to help you take back control of your life.
Meet the Wiggam Law Team
Wiggam Law’s team of tax attorneys are here to represent individuals and businesses like you in IRS and state tax matters, especially tax settlements, compliance, audit representation, and syndicated conservation easement issues. No matter how severe your tax issue are, we approach your case with compassion and zealously defend and advocate for you to get the best outcome possible.
We’re here to help.
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