The IRS is Focused on Conservation Easement Fraud Enforcement: What VA Taxpayers Need to Know

Allegations of conservation easement fraud can expose taxpayers to substantial penalties—including criminal penalties in some cases. The Internal Revenue Service (IRS) has recently begun prioritizing fraud in this area. Taxpayers who are facing investigations need to defend themselves effectively, while those who have received settlement letters under the IRS’ “time-limited” settlement program need to make informed decisions. This starts with hiring an experienced Virginia tax attorney.

The Internal Revenue Service (IRS) is ramping up its efforts to target fraudulent conservation easement deductions. We have recently seen an uptick in investigations in this area, and the IRS announced a “time-limited” settlement program to resolve outstanding cases. Learn more from Virginia tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group:

The IRS is Targeting Fraudulent Conservation Easement Deductions

Under the Internal Revenue Code, taxpayers can deduct the value of a “qualified conservation contribution” on their federal return in order to reduce their income tax liability.  While granting conservation easements is a valid tax mitigation strategy, widespread abuse has led to increased IRS scrutiny in recent years.

In 2026, the IRS is aggressively pursuing investigations into suspected fraud involving conservation easement deductions. It is targeting partnerships and other high-income taxpayers and using the full scope of its investigative authority to do so. While many of the IRS’ conservation easement fraud investigations result in back tax liability, interest, and administrative penalties, criminal enforcement is also a risk in many cases.

According to the IRS, its efforts to date have been highly successful. The IRS reports that in litigated cases:

• Courts allow approximately six percent of taxpayers’ claimed deductions on average; and
• Courts routinely impose the maximum 40% gross valuation misstatement penalty.

However, the IRS recently disclosed that it has more than 1,000 pending conservation easement cases, including 740 pending before the U.S. Tax Court. Given this, the IRS is seeking to resolve cases as quickly as possible. In support of these efforts, it announced a “time-limited” settlement program on May 13, 2026.

Under this program, the IRS is sending settlement letters to taxpayers with pending cases (both in and out of court). Taxpayers that receive a settlement letter have 90 days to accept the IRS’ terms or face additional consequences. After 135 days, the IRS advises that “cases will be resolved before a court decision only on the basis of hazards of litigation [and will generally] reflect a charitable contribution deduction of approximately 5% to 7% of the claimed deduction and a 40% gross valuation misstatement penalty.”

Request a Confidential Consultation with Virginia Tax Attorney Kevin E. Thorn

If you need legal advice regarding the IRS’ efforts to target fraudulent conservation easement deductions, we invite you to get in touch. To request a confidential consultation with Virginia tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, please call 703-752-3752 or contact us confidentially online today.