Correction to APA Non-Compliance | IRS Issues Proposed Regulations for Syndicated Conservation Easements

Share this Article
Facebook Icon LinkedIn Icon Twitter Icon
Cory D. Halliburton

Cory D. Halliburton



Cory Halliburton serves as general counsel and business adviser to a nationwide nonprofit / tax-exempt client base, as well as for multi-state professional service companies. He is a results-oriented attorney, with executive-level strategy and an understanding of the intersection of law and business judgment. With a practical upbringing, he pushes for process-driven results in internal governance, strategy and compliance with employment law, and complex or unique contracts and business relationships.

He dedicated the first ten years of his practice to mainly commercial litigation matters in West Texas and the Dallas-Fort Worth Metroplex. During that experience, Mr. Halliburton transitioned his practice to a more general counsel role, with an emphasis on nonprofit and tax-exempt organizations, advising those organizations through formation, dissolution, litigation, governance, leadership succession, employment law, contracts, intellectual property, tax exemption issues, policy creation, mergers and other. He has served as borrower’s counsel for tax-exempt bond and loan transactions near $100 million aggregate; some with complex pre-issue construction, debt payoff and other debt financing challenges.

Mr. Halliburton also serves as outside legal and business advisor for executive professionals in multi-state engineering firms, with a focus on drafting and counsel on significant service agreements, employment law matters, and protection of trade secrets.

Freeman Law is, and for years has been heavily involved in advising on and defense of conservation easement charitable contributions authorized under section 170, Title 26 of the Internal Revenue Code. Whether in formation of compliant arrangements or in defense of allegedly tax non-compliant transactions, Freeman Law has seen or reported on just about every issue that can be dug up from the Code or the related Treasury Regulations. See Freeman Law Insights blog archives for Conservation Easements or search “conservation easements” on our Insights blog.

In early November 2022, Freeman Law—in its ever-timely Tax Court in Brief blog—provided a focused report on the pivotal syndicated conservation easement opinion from the U.S. Tax Court in Green Valley Investors, LLC v. Comm’r.

Since I manage the Tax Court in Brief blog for the Firm, I can report that my colleague, Matthew Roberts, enthusiastically accepted the blog assignment (as he does any time I submit a Tax Court blog assignment to his care). Based on review of Green Valley, Mr. Roberts concluded that the Tax Court found that the IRS Notice 2017-10 is a legislative rule that was improperly issued by the IRS without notice and comment as required under the Administrative Procedures Act, 5 U.S.C. §§ 551-559. Mr. Roberts keenly noted that, according to the U.S. Tax Court, Notice 2017-10 must be set aside under the APA, thus rendering the penalties that the IRS was assessing pursuant to 26 U.S.C. § 6662A unlawful.

Fast forward to December 6, 2022 (as if this world needs a fast-forward button).

On December 6th, the IRS proposed regulations (and comment period for same) that would require participants and promoters of syndicated conservation easement transactions to make certain disclosures relating conservation easement transactions, or face penalties under Code section 4965, Excise tax on certain tax-exempt entities entering into prohibited tax shelter transactions. See IRS Announcement, Syndicated Conservation Easement Transactions as Listed Transactions.

In the announcement (and in an apparent attempt to correct past shortcomings in the IRS’s compliance with the APA), the IRS expresses its ire and disagreement with the United States Court of Appeals for the Sixth Circuit’s decision earlier in the year in the case of Mann Construction v. United States, 27 F.4th 1138, 1147 (6th Cir. 2022) and in the U.S. Tax Court’s opinion of Green Valley.  In Mann Construction, the court of appeals—like the U.S. Tax Court in Green Valley—held that the IRS Notice 2007-83, 2007-2 C.B. 960, which identified certain trust arrangements as listed transactions (akin to syndicated charitable contribution conservation easements), violated the APA because the notice was issued without following the notice-and-comment procedures required by section 553 of the APA.

In its recent announcement, the IRS attempts to cover its tracks in relation to apparent failures to comply with the APA and in enforcement of what are, according to the IRS, alleged shelters under the guise of charitable contribution conservation easements. The announcement addresses or warns an array of entities or individuals who may be involved in a conservation easement transaction—including promoters, charitable organizations, landowners, appraisers, and land trusts—any one or more of whom, according to the IRS, may know, or have reason to know, that the transaction in which they are involved is an abusive tax shelter, thus potentially subjecting the participant to excise taxes under section 4965 of the Code among other adverse consequences.

Freeman Law will remain vigilant on these important matters affecting the IRS, the U.S. Tax Court, our clients, prospective clients, and colleagues in the trenches.

Until next time, and as I warned many months ago: Beware of the syndicated conservation easement landmine.