The world of Syndicated Conservation Easements (SCEs) has undergone significant changes in recent years, particularly with the limitation of deductions in the tax code. No longer viewed as a tax savings strategy that can help save the environment, the IRS is seeking out those it believes have used this tool to fraudulently get out of their tax obligations. As such, investors with existing easements face complex audits and settlements as the IRS has intensified scrutiny on these arrangements.
What should I know about IRS settlement offers?
In an effort to help address what the IRS views as “abusive SCE transactions” in an efficient manner, the agency has sent out settlement offers to qualifying taxpayers. Only those who receive a letter are eligible. Taxpayers who are currently working on cases with the United States Tax Court are not eligible.
Investors who receive an offer are wise to weigh the benefits and potential drawbacks. Carefully review the offer to understand the terms, including deadlines, financial implications, and future obligations. It is also helpful to consider alternative options. Explore other settlement options that may offer better outcomes but keep in mind the IRS continues to pursue enforcement actions related to SCEs.
Do I need legal counsel?
Coming to a decision on whether to accept the offer is not an easy one and the right answer varies depending on the details of the situation. A law firm with experience in this niche area of tax law can offer support and help guide you through the process. Benefits of legal counsel when navigating this decision can include:
- Audit preparation and defense: Attorneys can help prepare for IRS audits by reviewing documentation, ensuring compliance, and defending the easement’s validity.
- Settlement negotiation: Legal counsel can assist in evaluating IRS settlement offers, advising on acceptance or negotiation strategies to minimize financial impact.
- Criminal interview preparation: Though less common, criminal investigations can arise. Attorneys can prepare clients for interviews, ensuring they understand their rights and obligations.
- Civil lawsuit tax relief: More frequently, investors face civil lawsuits. Legal counsel can guide them through the process, seeking tax relief and minimizing penalties.
SCE audits and settlements present significant challenges for investors. With the right legal support, navigating these complexities is more manageable. By understanding the current landscape and seeking experienced legal advice, investors can protect their interests and work towards a more favorable outcome.