Senate Releases Report on Syndicated Conservation Easements

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Jason B. Freeman

Jason B. Freeman

Managing Member


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).

Syndicated conservation easements seem to be all the rage in the tax world today.  Only recently, the United States Tax Court issued a litany of opinions (in favor of the government) related to these transactions, which was quickly followed by the announcement of an IRS settlement program.  Now, the Senate Finance Committee has weighed in and issued a bipartisan report regarding these potentially abusive transactions.  This Insight discusses syndicated conservation easements generally and also provides some commentary on the recent Senate report.

What is a Syndicated Conservation Easement?

The Internal Revenue Code (the “Code”) permits taxpayers to claim deductions for charitable contributions.  However, there are a host of requirements the taxpayer must meet to properly claim the deduction on a tax return.  Generally, an initial requirement is that the taxpayer itemize his or her deductions on Schedule A, Itemized Deductions.[1]  Some additional requirements include:

  1. The donation/contribution must be made to a “qualified organization,” g., certain churches or other charities that qualify under Section 501(c)(3);
  2. The donation/contribution must be made voluntarily and not quid pro quo; and
  3. The taxpayer must contribute the entire interest in the property—partial interests, subject to some exceptions, are generally not deductible. See Section 170(f)(3)(A).

The partial interest rule of Section 170(f)(3)(A) generally disallows a taxpayer from contributing less than all of his or her interest in property and claiming a charitable contribution deduction.  But to promote the donations of interests in property that could further certain conservation purposes, Congress carved out an exception to the partial interest rule through permitting charitable conservation easement deductions, which, by definition, are generally less than the full interest of the property.

Recognizing that these transactions could be the subject of taxpayer abuse, Congress required taxpayers to jump through numerous statutory hoops to claim a deduction related to conservation easements.  Through the promulgation of Regulations, Treasury added additional hoops.  But if the taxpayer meets all of these requirements, the taxpayer can claim a deduction for the fair market value of the donation of the conservation easement made to a charity, which, in many cases, can be substantial.

In recent years, so-called “syndicated conservation easements” have gained more and more notoriety.  Generally, with these transactions, a taxpayer invests in a partnership established by a promoter.  In exchange for his or her investment in the partnership, the promoter provides the taxpayer with an appraisal, which values the donation of the conservation easement many times more than the taxpayer’s investment in the partnership.  The result:  the taxpayer actually makes money via tax refunds that exceed the partnership investment.

The Senate Finance Committee Report

On August 25, 2020, the Senate Finance Committee issued a report styled “Syndicated Conservation Easement Transactions: Bipartisan Investigative Report as Submitted by Chairman Grassley and Ranking Member Wyden.”  That report begins:

This report discusses the findings of the United States Senate Committee on Finance’s investigation into syndicated conservation-easement transactions.  The investigation began on March 27, 2019, when Chairman Charles Grassley and Ranking Member Ron Wyden jointly sent letters to 14 individuals suspected of promoting these transactions.  The letters requested information and documents about the transactions . . . [and t]he documents provided in this investigation confirm that syndicated conservation-easement transactions appear to be highly abusive tax shelters.

 Report, at 1.  The report further stated:

The syndicated conservation-easement transactions examined in this report appear to be nothing more than retail tax shelters that let taxpayers buy tax deductions at the end of any given year, depending on how much income those taxpayers would like to shelter from the IRS, with no economic risk.  Although the various offerings differ in their specifics, the general outcome is the same:  for every dollar a taxpayer pays to a promoter to become an ‘investor’ (or a ‘partner’ or a ‘member’) in a syndicated conservation-easement transaction, he or she commonly purchases a little more than four dollars’ worth of tax deductions.  For most taxpayers involved, this ultimately means that for every dollar paid to tax-shelter promoters, the taxpayers saved two dollars in taxes they did not pay.    

Report, at 3.  Significantly, the report estimated that between 2010 through 2017, syndicated conservation easement transactions generated approximately $27 billion in charitable contribution deductions, resulting in a potential loss to the Treasury of approximately $10.6 billion.  Report, at 2-3.  Moreover, the report concluded that the participants (i.e., the investors) generally were “doctors, lawyers, small-business owners, large-business executives, professional athletes, rock stars, entertainers, and other celebrities, most of whom appear to reside or work in the southeastern United States.”  Report, at 3.

Tellingly, the report concludes that “the IRS has strong reason for taking enforcement action against syndicated conservation-easement transactions as it has to date . . . [and that the Senate] believe[s] Congress, the IRS, and Department of the Treasury should take further action to preserve the integrity of the conservation-easement deduction.”  Report, at 4.


Given the findings in the Senate report, it is almost inevitable that Congress will attempt to offer a legislative fix to the potential abusive transactions discussed in the report.  Moreover, it can be expected that the IRS will continue to attack conservation easement deductions, even potentially those that are not of the syndicated variety.  Accordingly, taxpayers who have claimed charitable conservation easement deductions in prior years or who intend to claim such deductions in the future would be wise to have their transactions reviewed by a tax professional.


Conservation Easement Defense

In recent years, the IRS has prioritized tax enforcement efforts against syndicated conservation easements that it believes to be abusive. Freeman Law’s tax controversy practice regularly represents clients in conservation easement tax disputes. We have experience defending against a range of government agencies, with a particular focus on the IRS. Schedule a consultation or call (214) 984-3000 to discuss your conservation easement concerns or questions. 


[1] Recent legislation in response to COVID-19 has permitted taxpayers, in some cases, to claim charitable contribution deductions even if they do not itemize.