BUILT FOR THE EXAMINER · Part 3 of 3
Subtitle: The IRS created a permanent Office of Conservation Easements and ended its settlement program in the same release. Nineteen days on, the Office has no leader, no contact information and no start date — and the terms have not moved.
Part 1 took up casualty losses. Part 2 took up the failure modes courts keep finding in valuations. This edition closes the series on the structure being built around them — what the Internal Revenue Service (IRS) announced in August, what it did not announce, and where deduction pressure goes next.
On August 19, 2026, the IRS announced a permanent Office of Conservation Easements and, in the same release, ended the settlement program it had launched ninety-eight days earlier.
Nineteen days later, the Office has no announced leader, no published contact information, and no stated date on which it becomes operational. The release said additional contact information "will be announced separately." Nothing further has been published. The agency's own conservation-easement landing page, last reviewed July 27, 2026, still tells taxpayers that the IRS "will soon be releasing a time-limited settlement opportunity" — a program announced in May and terminated in August.
None of that is a criticism of the reorganization. It is a description of where advisors actually stand: a settlement window that closed, an institution not yet standing, and, in between, a set of substantive terms that did not move at all.
That last point is the one that matters, and the release states it in a single sentence: "This transition does not signal a new or more favorable standardized offer. Rather, it ends issuance of uniform offers and deadlines."
What IR-2026-95 says, precisely
The release is titled "IRS establishes Office of Conservation Easements and transitions settlement process," IR-2026-95, August 19, 2026. Read closely, it does four things.
It creates an institution and gives it a valuation mandate. The Office "will centralize technical expertise and coordinate policy, enforcement, and case-resolution strategy across the IRS and with the Office of Chief Counsel." It will work with the Department of the Treasury "to evaluate administrative and legislative options that advance Congress's conservation and historic preservation objectives, promote consistent tax administration, and strengthen valuation integrity." Three objectives, and the third is the subject of this series.
It explains why the uniform settlement letters stopped, and the reason is administrative rather than doctrinal. Experience with the initiative "has shown that standardized, unsolicited settlement letters on a rolling basis, each with a fixed response period, are not well suited to the full range of conservation easement cases," because "[p]artnership agreements, insurance arrangements, procedural posture, and other circumstances may differ materially and affect when and how taxpayers evaluate settlement."
It withdraws deadlines without withdrawing terms. The IRS "will not issue any additional uniform settlement letters under the May 13 program"; "[a]ny deadlines for accepting previously issued offers are withdrawn"; and prior elections "will remain in effect and will be processed in accordance with their terms." Critically: "Taxpayers with pending cases may continue to request settlement under the May 13 framework through their assigned IRS examination or Chief Counsel representative. If the case remains eligible, the IRS will issue a new offer on the same standardized terms."
It forecloses the reading everyone wanted. Hence the sentence quoted above. What ended was the mailing, not the math.
Worth noting for what it lacks: unlike the May release, IR-2026-95 quotes no IRS official, names no one to run the Office, and gives no operational date.
The arithmetic underneath, which did not change
Removing a deadline changes leverage. It does not change the numbers a case settles against, and those numbers come from the May release, IR-2026-65.
Inside the first 90 days after a settlement letter issued, an eligible partnership could accept these terms: no charitable contribution deduction allowed at all; an "other deduction" determined by the IRS and "generally equal to the partnership's approximate out-of-pocket costs"; a gross valuation misstatement penalty at 10%; interest as required by law; and no payment required at the time of election. For the next 45 days, the same terms applied with the penalty at 20%.
Then the sentence that gives the whole structure its meaning: "After the expiration of the two periods, totaling 135 days from the date of issuance of the individualized settlement letter, cases will be resolved before a court decision only on the basis of hazards of litigation. In general, that will reflect a charitable contribution deduction of approximately 5% to 7% of the claimed deduction and a 40% gross valuation misstatement penalty."
The scale: "Today, there are over 1,100 conservation easement cases (around 740 docketed cases in Tax Court and 400 cases in Exam)." The track record the IRS cited for its own prior programs: "the prior settlement initiatives resolved 405 cases, with 32% of all offers accepted." And the litigated baseline, in the agency's words: "On average, the Tax Court has only allowed 6% of the original claimed deduction and has generally imposed a 40% gross valuation misstatement penalty, plus interest."
So the structure that survives August 19 looks like this. A taxpayer who asks can still get 10% or 20%. A taxpayer who waits gets 5% to 7% of the deduction and 40%. The deadline was the only thing making the first number urgent, and it is gone. The second number is not.
The deduction has more than one place to die, and only one of them is the appraisal
Here is the structural point this series has been building toward, and it is the reason a valuation-centered view of easement risk is incomplete.
A charitable contribution deduction on real property has to survive several independent tests. They are decided by different documents, at different times, by different people. An appraisal answers exactly one of them. Three decisions from the past twenty months make the point better than any summary.
The property may not qualify at all. In Capitol Places II Owner, LLC v. Commissioner, 164 T.C. No. 1 (January 2, 2025), a façade easement over the Manson Building in Columbia, South Carolina supported a claimed deduction of $23.9 million. The building sat inside a registered historic district and was identified as contributing to it. The Tax Court granted the Commissioner partial summary judgment and allowed nothing, holding that "listed in the National Register" under §170(h)(4)(C)(i) means individually entered in the Register — otherwise the separate district provision at clause (ii) would be redundant. The court never reached valuation and never discussed penalties. The appraisal, whatever it said, was never opened. (The ruling is partial summary judgment and therefore interlocutory; no appellate docket exists, because there is not yet a final decision to appeal.)
The property's character may cap the deduction below its value. In Mill Road 36 Henry, LLC v. Commissioner, No. 24-11334 (11th Cir. August 20, 2026) (unpublished), affirming T.C. Memo. 2023-129, the partnership claimed $8.9 million. The Tax Court valued the easement at $900,000 — and then limited the deduction further, to the partnership's basis of $416,563, under §170(e)(1)(A), because the property was held as inventory rather than as a capital asset. The 40% gross valuation misstatement penalty was affirmed anyway. The Eleventh Circuit's disposition is four sentences: "The tax court did not err in valuing the easement. It did not err in imposing the valuation penalty. And it did not err in limiting the deduction to Mill Road's basis in the property. We affirm the tax court in full."
Read that sequence again. The valuation was litigated, decided against the taxpayer, penalized — and then made largely academic by a characterization rule that turns on how the entity held the land, not on what the land was worth.
The deduction may belong to someone else. In Corning Place Ohio, LLC v. Commissioner, No. 25-1093 (6th Cir. November 5, 2025), a published decision, a historic preservation easement over an eleven-story Cleveland building supported a claimed deduction of $22,601,000. The Tax Court valued it at $900,000 and sustained penalties totaling $8,993,400 across three separate grounds — 20% negligence for claiming the deduction in the wrong tax year, 40% for the gross valuation overstatement, and 20% negligence for inadequate expense documentation. The Sixth Circuit affirmed, holding that "[b]ecause Corning Place improperly claimed a deduction that belonged to another taxpayer and no one corrected the mistake in a timely way, the Tax Court legitimately denied the deduction." On value, the court rejected development plans it found speculative and financially infeasible, requiring instead a showing of reasonable probability.
The entity may be capped by statute regardless of any of it. Section 170(h)(7) disallows a partnership's qualified conservation contribution to the extent it "exceeds 2.5 times the sum of each partner's relevant basis in such partnership," for contributions made after December 29, 2022. Two of its three exceptions are routinely described inaccurately, and the inaccuracy is expensive.
The holding-period exception at §170(h)(7)(C) is not a three-year hold. It requires the contribution to be made at least three years after the latest of the last date the partnership acquired any portion of the property, the last date any partner acquired any interest in the partnership, and — in tiered structures — the corresponding dates at every tier. One partner admitted late restarts the clock for the entire entity.
The second exception, at §170(h)(7)(D), is captioned "Exception for family partnerships," and the statute defines no such thing as a "family pass-through entity." It applies where "substantially all of the partnership interests in such partnership are held, directly or indirectly, by an individual and members of the family of such individual," with family defined by reference to §152(d)(2)(A) through (G).
The third, at §170(h)(7)(E), reaches a contribution whose conservation purpose "is the preservation of any building which is a certified historic structure." Note that it attaches to a building, not to a historic land area. Hold that thought.
The reporting machinery is at Treasury Decision (T.D.) 9999, 89 FR 54284 (June 28, 2024), which built the computation into Treas. Reg. §1.170A-14(j) through (m) and pushed disclosure onto Form 8283 through §1.170A-16 — the contributing entity reports the sum of each ultimate member's relevant basis, every upper-tier entity files its own Form 8283 doing the same, and each partner claiming an allocated deduction attaches a copy to their own return.
And the transaction may have to be disclosed before any of this is argued. Since T.D. 10007, 89 FR 81341 (October 8, 2024), Treas. Reg. §1.6011-9 identifies syndicated conservation easement transactions as listed transactions. The trigger is what the promotional materials offered — "a charitable contribution deduction the amount of which equals or exceeds an amount that is two and one-half times the amount of the taxpayer's investment." Participants file Form 8886; material advisors file Form 8918 and maintain lists. Failure to file carries §6707A for participants (75% of the tax decrease, capped at $200,000, or $100,000 for an individual, with a $10,000 floor), §6707 for advisors (for listed transactions, the greater of $200,000 or 50% of gross income from the advice, rising to 75% if intentional), §6708 for list maintenance ($10,000 per day, uncapped, after twenty business days), and §6662A on any reportable transaction understatement (20%, or 30% where disclosure was inadequate).
Five ways to lose, decided by the deed, the entity's books, the ownership chart, the holding period, the promotional materials, and the return. The appraisal answers the sixth question. It cannot answer the other five, and no amount of valuation quality substitutes for them.
The procedural attack on the listing regime is spent
Advisors who followed the earlier fight should update their picture, because it has resolved in a way that cuts both ways.
The IRS originally listed syndicated easements by sub-regulatory notice. In Green Valley Investors, LLC v. Commissioner, 159 T.C. No. 5 (2022), the Tax Court held Notice 2017-10 invalid for failure to observe notice-and-comment rulemaking under the Administrative Procedure Act (APA). The Eleventh Circuit reached the same result in Green Rock LLC v. IRS, No. 23-11041 (11th Cir. June 4, 2024): "Because the notice was a legislative rule and Congress did not expressly exempt the Service from notice-and-comment rulemaking, Notice 2017-10 is not binding on Green Rock."
The IRS then did two things. It acquiesced — Action on Decision 2024-01, released December 23, 2024, announced that it would no longer defend listing notices issued after the American Jobs Creation Act without notice-and-comment, would follow those decisions in all circuits, and would concede or abate the associated §§6662A, 6707, 6707A and 6708 penalties. And Treasury cured the defect by re-listing the transactions through full notice-and-comment as T.D. 10007. As of publication, no reported challenge to §1.6011-9 itself has been filed.
The contrast is instructive. Treasury re-did the listing rule after losing on procedure. It has not re-done the extinguishment-proceeds regulation, Treas. Reg. §1.170A-14(g)(6)(ii), after losing on procedure in Hewitt v. Commissioner, 21 F.4th 1336 (11th Cir. 2021) — and that regulation's status has since shifted again. The Supreme Court denied certiorari in Oakbrook Land Holdings, where the Sixth Circuit had upheld the regulation, on January 9, 2023. Then in Valley Park Ranch, LLC v. Commissioner, 162 T.C. No. 6 (March 28, 2024), the Tax Court overruled its own prior decision and adopted Hewitt, holding the regulation procedurally invalid.
The practical consequence for a deed dispute today: the proceeds regulation is invalid in the Eleventh Circuit, valid in the Sixth, and invalid in the Tax Court everywhere else absent contrary circuit precedent — which, since most of these cases originate in the Tax Court, means Valley Park Ranch rather than the circuit split is the operative rule for most taxpayers. Loper Bright Enterprises v. Raimondo, 603 U.S. 369 (2024), does not change this analysis; these decisions rest on arbitrary-and-capricious review and the duty to respond to significant comments, not on deference to Treasury's reading of the statute.
One correction to make plainly, because this newsletter has said otherwise. Notice 2023-30's safe-harbor deed language required that an amended deed "be signed by the donor and donee and recorded on or before July 24, 2023." That window is closed. The Notice is diagnostic for deeds actually amended in 2023 and is not available as prospective drafting insurance.
Where the pressure goes
Section 170(h)(7) makes the syndicated pass-through easement structurally uneconomic. The natural question is where valuation-driven deduction pressure migrates, and the honest answer requires separating what has been observed from what the incentive architecture predicts.
Observed, but at a trickle. Outright fee-simple donations of real property present the same speculative-highest-and-best-use problem with none of the easement machinery. Karl W. Leo v. Commissioner, T.C. Memo. 2025-9 (January 2025), involved a donation of the whole property — 136.4 acres and roughly 1.09 million square feet of buildings in Union County, Mississippi, a former furniture factory, given to a charitable foundation. Claimed: $15,800,000. Determined: $4,050,000. Penalty: 40% under §6662(h). That is one decided fee-simple overvaluation case against roughly a dozen easement valuation opinions in 2026 alone. The channel is being litigated; it is not yet a wave.
Predicted by the statute, and Congress is already looking at it. The §170(h)(7)(E) exception for certified historic structures is the one opening in the 2.5x cap, and the façade docket already shows what valuation looks like there — $22.6 million to $900,000 in Corning Place, $23.9 million to nothing in Capitol Places II. H.R. 9398, the Historic Preservation and Land Conservation Certainty Act, introduced June 23, 2026 by Rep. Mike Carey and referred to the House Committee on Ways and Means, would do two things: create an election to resolve open partnership easement controversies, and replace §170(h)(4)(C)'s requirement of certification by the Secretary of the Interior with a "contributing building" standard keyed to the National Register nomination or the district's official documentation. Because §170(h)(7)(E) is defined by cross-reference to (4)(C), loosening (4)(C) would widen the only exception to the entity-level cap. The bill has had no committee action.
Not observed, and worth saying so. There is no decided opinion valuing an easement on a proposed solar-generation highest and best use; a September 2025 trade report of a roughly $45 million claim on that theory describes a partnership's contention to the Tax Court, not a holding. There is no decided data-center donation case. No Department of Justice (DOJ) press release in 2026 through early September announced a new conservation easement prosecution, though the Tax Division has been actively publishing other tax prosecutions throughout the year. And despite the Tax Court's warning in Veribest Vesta that continuing to press incredible valuation arguments "may result in sanctions on petitioner or its counsel," no §6673 sanction appears to have actually been imposed on a taxpayer or counsel for a frivolous valuation position in 2024, 2025 or 2026. Each of those is an absence, reported as an absence.
The appraiser sits inside the architecture, not beside it
Two appraisers were indicted in the March 1, 2022 Atlanta superseding indictment, which alleged that seven defendants "sold over $1.3 billion in false and fraudulent tax deductions through this scheme." Their outcomes diverged completely, and the divergence is the most useful thing in the record for a valuation professional.
Walter "Terry" Douglas Roberts II was convicted and sentenced on November 14, 2023 to twelve months in prison and $129,210,760 in restitution. DOJ's description of the conduct is exact: from 2008 through 2019 he "fraudulently inflated the values of at least 18 conservation easements by, among other things, not following normal appraisal methods, making false statements and either personally manipulating or relying on knowingly manipulated data to reach a targeted appraisal value – communicated to him by co-conspirators – that would result in the desired tax deduction amount." He "admitted that he inflated some of his appraisals by at least 600%." Those eighteen easements "claimed approximately $466,961,000 in tax deductions." The federal Appraisal Subcommittee (ASC) National Registry now records his certified general credentials in North Carolina and South Carolina as inactive, with the notation "Voluntary Surrender."
Clayton Weibel, the other appraiser charged in the same scheme, was acquitted. DOJ's own release on the September 2023 verdict says so in four words: "A co-defendant, Clay Weibel, was acquitted."
Two appraisers, one scheme, one indictment, opposite results. What separated them was not the size of the numbers; it was the process behind them.
Civil exposure needs no indictment. Section 6695A imposes on the appraiser the lesser of [the greater of 10% of the underpayment attributable to the misstatement, or $1,000] or [125% of the gross income received for the appraisal] — with escape only where the appraiser establishes that the value "was more likely than not the proper value." That is a burden on the appraiser, measured against the correct value rather than against the reasonableness of the method.
And the rule most often stated loosely is worth stating exactly. Treas. Reg. §1.170A-17(a)(9) provides that "[t]he fee for a qualified appraisal cannot be based to any extent on the appraised value of the property," and that a fee is so based "if any part of the fee depends on the amount of the appraised value that is allowed by the Internal Revenue Service after an examination." That is broader than a contingency and broader than a percentage of value. It reaches the flat fee with a value-linked bonus and the fee that survives an examination.
Above all of it sits §6664(c)(3), which decides more of these cases than any valuation principle. For charitable deduction property, reasonable cause is switched off for both substantial and gross valuation overstatements, and then restored — by the statute's own words, "to a substantial valuation overstatement" only — where the value rested on a qualified appraisal and the taxpayer also made a good faith investigation of value. At the gross level, 200% or more of correct value, there is no qualified-appraisal defense at all. A flawless appraisal from an impeccable appraiser is not an answer once the misstatement is gross. That is what Malibu Valley Land survived and what the eight cases beneath it in Part 2's table did not.
What to confirm before the return is filed
Ordered by the sequence in which a deduction fails, not by importance:
- Does the property qualify? For a historic structure, is the building individually entered in the National Register, or is the reliance on district contribution plus Interior certification — and does the file contain the certification itself?
- Whose deduction is it, and in which tax year? Corning Place lost on this before value was ever reached, and drew a negligence penalty for it.
- How is the property held on the entity's books? Inventory or dealer property caps the deduction at basis under §170(e)(1)(A), whatever the appraisal concludes.
- Run the §170(h)(7) test with the actual dates. The three-year exception measures from the latest of the property acquisition, any partner's acquisition of any interest, and every tier above. Get the capital account history, not a summary.
- Is the family-partnership exception really available? "Substantially all," directly or indirectly, by one individual and §152(d)(2) relatives.
- Was the transaction promoted? If the materials offered 2.5x or more of investment, Forms 8886 and 8918 are in play, with §§6707A, 6707, 6708 and 6662A behind them — and the participant obligation reaches back to any year whose assessment period is still open.
- Read the deed against the current law of the forum. The proceeds regulation is invalid in the Eleventh Circuit and in the Tax Court, valid in the Sixth. Notice 2023-30 is not available for anything recorded after July 24, 2023.
- Check the appraiser's engagement terms in writing. Any fee component tied to appraised value — including value allowed on examination — disqualifies the appraisal.
- Confirm the appraisal's signature date. No earlier than 60 days before the contribution and no later than the return's due date including extensions.
- Assume no reasonable-cause defense above 200%. Model the outcome at 40% and decide whether the position is worth taking on that assumption, because the statute will not let you argue otherwise later.
The through-line
Three editions ago this series took its name from a sentence about the reader every return-supporting valuation eventually meets. That reader now has an office with his name on the door and, as of this writing, nothing else — no leader, no telephone number, no start date. It would be a mistake to read the vacancy as slack.
What the August release actually did was replace a queue with an institution, and institutions outlast windows. The uniform letters are gone; the 5% to 7% and the 40% are not. Over 1,100 files are open. And the sentence in the release with the longest reach is the one naming what the new Office is for: to strengthen valuation integrity.
Every layer of the architecture above the appraisal — qualification, character, ownership, holding period, basis, disclosure — is a document question that someone could answer in an afternoon, before a valuation is ever ordered. Most of the deductions in the reported cases failed one of them while everyone was arguing about the number. But the layer that closes the file is still the number, and the number is still the one thing that cannot be assembled after the fact.
Rights, evidence, and what a market will actually pay. That has been the argument in every edition of this newsletter, whether the subject was a quarry, a marina, a hurricane, or a perpetual deed. On a return, it is also the law.
A question for your practice: Before your client's next donation, who on the team is responsible for confirming the property qualifies — and is that the same person who reads the appraisal?
Solving complex real estate and personal property problems is the work our team does — untangling what a client actually owns across land, water, minerals, timber, equipment and the operating business, and turning that inventory into numbers counsel and advisors can defend. Every kill switch described above is answered by that inventory.
If a client's holdings raise these questions — resource land, a historic building, a property in transition, an operating asset where the real estate and the business are entangled — that intersection is exactly where our team works. If your firm would like a private presentation on these topics, feel free to reach out. We regularly present to law firms and legal teams (including continuing legal education (CLE)-style briefings), certified public accountant (CPA) firms and societies (including continuing professional education (CPE)-style sessions), family offices, owner-users, and industry stakeholders on complex property and specialized asset issues.
This edition closes the BUILT FOR THE EXAMINER series. Beyond the Core Four returns next with a new asset class.
Daniel Boring, CRE®, MAI, ARA, ASA | Senior Vice President – Valuation Advisory Services | Kidder Mathews
Beyond the Core Four focuses on specialized properties that fall outside the traditional industrial, retail, multifamily, and office categories. The newsletter examines how value, risk, and utility are shaped by the operational realities of assets such as quarries, marinas, agricultural facilities, processing plants, water-dependent operations, and other complex property types where the real estate is only part of the story.
Sources and further reading: IRS, IR-2026-95, "IRS establishes Office of Conservation Easements and transitions settlement process" (Aug. 19, 2026); IRS, IR-2026-65 (May 13, 2026); IRS, Conservation easements; Capitol Places II Owner, LLC v. Commissioner, 164 T.C. No. 1 (2025); Mill Road 36 Henry, LLC v. Commissioner, No. 24-11334 (11th Cir. Aug. 20, 2026) (unpublished), aff'g T.C. Memo. 2023-129; Corning Place Ohio, LLC v. Commissioner, No. 25-1093 (6th Cir. Nov. 5, 2025); Karl W. Leo v. Commissioner, T.C. Memo. 2025-9; Valley Park Ranch, LLC v. Commissioner, 162 T.C. No. 6 (2024); Hewitt v. Commissioner, 21 F.4th 1336 (11th Cir. 2021); Oakbrook Land Holdings, LLC v. Commissioner, 28 F.4th 700 (6th Cir. 2022), cert. denied, 143 S. Ct. 626 (2023); Green Valley Investors, LLC v. Commissioner, 159 T.C. No. 5 (2022); Green Rock LLC v. IRS, No. 23-11041 (11th Cir. 2024); IRS, Action on Decision 2024-01 (Dec. 23, 2024); 26 U.S.C. §170(h)(7); §6664; §6695A; §6707A; §6707; §6708; §6662A; T.D. 9999, 89 FR 54284 (June 28, 2024); T.D. 10007, 89 FR 81341 (Oct. 8, 2024); T.D. 9836, 83 FR 36417, 36425 (July 30, 2018); 26 CFR §1.6011-9; §1.170A-14; §1.170A-16; §1.170A-17; IRS, Notice 2023-30; H.R. 9398, 119th Cong. (2026); U.S. Dep't of Justice, appraiser sentencing release (Nov. 14, 2023), trial verdict release (Sept. 22, 2023), and indictment release (Mar. 1, 2022); Appraisal Subcommittee National Registry.
Case details, figures, ownership information, and property identifiers have been modified or generalized to protect confidentiality. The discussion is based on real-world appraisal and advisory experience and is presented for educational purposes only. It is not intended as valuation advice, legal advice, tax advice, accounting advice, or investment advice for any specific property, transaction, or dispute.