Recent IRS Memo Supports Use of Summonses for Syndicated Conservation Easement Transactions

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Jason B. Freeman

Jason B. Freeman

Managing Member

214.984.3410
jason@freemanlaw.com

Mr. Freeman is the founding member of Freeman Law, PLLC. He is a dual-credentialed attorney-CPA, author, law professor, and trial attorney.

Mr. Freeman has been named by Chambers & Partners as among the leading tax and litigation attorneys in the United States and to U.S. News and World Report’s Best Lawyers in America list. He is a former recipient of the American Bar Association’s “On the Rise – Top 40 Young Lawyers” in America award. Mr. Freeman was named the “Leading Tax Controversy Litigation Attorney of the Year” for the State of Texas for 2019 and 2020 by AI.

Mr. Freeman has been recognized multiple times by D Magazine , a D Magazine Partner service, as one of the Best Lawyers in Dallas, and as a Super Lawyer by Super Lawyers, a Thomson Reuters service. He has previously been recognized by Super Lawyers as a Top 100 Up-And-Coming Attorney in Texas.

Mr. Freeman currently serves as the chairman of the Texas Society of CPAs (TXCPA). He is a former chairman of the Dallas Society of CPAs (TXCPA-Dallas). Mr. Freeman also served multiple terms as the President of the North Texas chapter of the American Academy of Attorney-CPAs. He has been previously recognized as the Young CPA of the Year in the State of Texas (an award given to only one CPA in the state of Texas under 40).

The IRS recently issue a memorandum encouraging IRS examine to issue administrative summons to taxpayers that do not respond to Information Document Requests regarding syndicated conservation easement transactions.  The memo, entitled Use of Summons and Summons Enforcement in Syndicated Conservation Easement Cases, Reportable Transactions, and Other Abusive Tax Avoidance Transactions, furthers the IRS’s aggressive approach towards taxpayers and professionals involved in syndicated conservation easement transactions.

The memorandum provides, in part, as follows:

Syndicated Conservation Easement transactions continue to be a service-wide priority, and the IRS is fully committed to identifying and pursuing this abuse. Our commitment to stopping abusive transactions is a service to all taxpayers who play by the rules and pay their fair share. In the case of Syndicated Conservation Easement transactions, the IRS’s enforcement efforts also support the goals of legitimate conservation easements as envisioned by Congress; those goals are actively undermined by those taxpayers and promoters who engage in abusive arrangements. To that end, examiners should use all available administrative tools to gather information necessary for fair, timely, and comprehensive development of issues in these cases. The IRS has become aware that certain taxpayers and promoters of Syndicated Conservation Easement transactions are refusing to cooperate with examiners and impeding case development. Full development of the facts and issues in Syndicated Conservation Easement transaction cases is necessary for the IRS to accurately make its tax determinations and bring taxpayers, promoters, appraisers, and preparers engaged in this abuse into compliance with the tax law.

In the course of an examination or investigation, examiners will issue Information Document Requests (IDRs), and, in the vast majority of cases, taxpayers voluntarily produce information in response to these informal requests. However, if taxpayers do not cooperate with timely and complete responses to IDRs required for full case development, IRC 7602(a) gives the IRS the broad authority to issue an administrative summons to compel a taxpayer and a third party to produce the information in the form of documents or testimony or both. If necessary, examiners should follow existing procedures in IRM 25.5.2 to promptly issue summonses in consultation with their manager and Counsel, as appropriate.

The IRS designated syndicated conservation easement transactions as “listed transactions” in December of 2016 in Notice 2017-10.  The IRS signaled a significant step up in enforcement actions against listed syndicated conservation easement transactions in late 2019.  Administrative summonses have proven a significant part of its efforts to gather information on the transactions and individual taxpayers’ tax benefits.

For more on conservation easement transactions, see Conservation Easement Deductions: A Primer on Key ProvisionsSenate Releases Report on Syndicated Conservation Easements, and Settling Conservation Easement Penalties: The IRS And Some New Insights.

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