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Tax Terrain Alert: Navigating the Storm of New Regulations on Conservation Easements!

In the realm of tax regulations, a warning resonates as the Department of the Treasury and the IRS unveil proposed regulations. Specifically honing in on conservation easement contributions by partnerships and S corporations, these regulations carry the weight of transformation. Taxpayers, be prepared for a strategic shift and heed the cautionary note embedded in this regulatory evolution.

  1. Regulatory Guidance Issued: The Department of Treasury and IRS have jointly released proposed regulations to enforce the disallowance of deductions related to certain conservation easement contributions by partnerships and S-corporations.

  2. Targeting "Dirty Dozen": The IRS has consistently flagged syndicated conservation easements, often included in the notorious "Dirty Dozen" tax schemes, promptig hieghtened regulatory focus.

  3. SECURE 2.0 Act Implications: The SECURE 2.0 Act of 2022 introduced critical changes, impacting the landscape of charitable contributions under Internal Revenue Code section 170, with specific attention to pass-through entities.

  4. Protecting Legitimate Conservation Easements: The regulations aim to distinguish between legitimate conservation easements and those serving as retail tax shelters, thereby upholding the integrity of genuine contributions.

  5. Affected Entities: These regulations have implications for partnerships, S corporations, and upper-tier entities, as well as partners and S corporation shareholders involved in conservation contributions.

  6. Calculation Guidelines: The regulations provide clarity on calculations, stating that deductions will be disallowed if the contribution exceeds two and a half times the partner's or shareholder's relevant basis in the partnership or S corporation.

  7. Statutory Exceptions: Exploring exceptions, the proposed regulations address specific scenarios, including family partnerships and S corporations, along with contributions made outside a three-year holding period.

  8. Substantiation and Reporting Updates: The regulations also include updates on substantiation and reporting rules for certain charitable contributions, enhancing transparency and compliance measures.

In conclusion, the unveiling of proposed regulations by the Department of the Treasury and the IRS signifies a pivotal moment in the landscape of conservation easement contributions. As the IRS strategically aligns its efforts to combat tax evasion and fortify the integrity of legitimate contributions, taxpayers navigating these changes should tread with caution. In light of this, taxpayers who have participated in conservation easements should consult with Mark Sullivan Consulting, leveraging his expertise to navigate the evolving tax terrain and ensure compliance in these transformative times.

About the author

Mark W. Sullivan, EA, the founder of Sullivan Consulting, established the firm's roots in St. Louis, MO, in 1998. In 2020, he made a strategic move to the thriving business environment of Arizona. Mark specializes in the intricate realm of federal tax controversy representation, appeals, and consulting, catering not only to individuals and businesses but also extending his expertise to renowned law and accounting firms nationwide.

Mark's distinguished career includes serving as a consulting and expert witness in a multitude of civil and criminal cases, spanning several federal district courts. His credentials are underscored by an unlimited Enrolled Agents license, a testament to his exceptional knowledge and unwavering commitment to his craft. His recognition by the Internal Revenue Service for admission to practice is grounded in his extensive background as a Revenue Officer, having worked in demanding locations such as New York, NY, St. Louis, MO, and Washington, D.C.

Mark's extensive experience as a Revenue Officer has uniquely positioned him to navigate the intricate landscape of federal tax matters. Now, based in Scottsdale, AZ, Mark continues to offer his expertise to clients across the nation, ensuring that their interests are diligently and professionally represented.

Disclaimer: This article is for information purposes only and cannot be cited as precedent or relied upon in a tax dispute before the IRS.

Copyright 2023 Mark Sullivan Consulting, PLLC

Reference: IR-2023-216


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