The Tax Times: IRS Establishes Office of Conservation Easements — and Pulls the Plug on Its Uniform Settlement Letters

On August 19, 2026, the IRS announced in IR-2026-95 that it is standing up a dedicated Office of Conservation Easements and, at the same time, immediately concluding the uniform settlement initiative it had launched barely three months earlier in IR-2026-65 (May 13, 2026).

For the roughly 1,100 conservation easement and historic preservation easement cases still open — approximately 740 docketed in Tax Court and another 400 in Exam (Baker McKenzie) — this is a meaningful change in how, and with whom, these cases get resolved.

What the New Office Will Do

The IRS says the Office was created because conservation and historic preservation easements present "specialized tax, valuation, contractual, and procedural issues." According to the release, the Office will:

Centralize technical expertise and coordinate policy, enforcement, and case-resolution strategy across the IRS and with the Office of Chief Counsel;
Support engagement with taxpayers, practitioners, and conservation and historic preservation organizations; and
Work with Treasury to evaluate administrative and legislative options that advance Congress's conservation objectives, promote consistent tax administration, and "strengthen valuation integrity."

Once operational, the Office will serve as "central coordination and a channel for general inquiries." Contact information is to be announced separately.

Why the IRS Abandoned Uniform Settlement Letters

The candor in the release is worth quoting. The IRS states that experience administering the May initiative, "together with engagement with taxpayers, 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."

The reason: "Partnership agreements, insurance arrangements, procedural posture, and other circumstances may differ materially and affect when and how taxpayers evaluate settlement."

Anyone who has actually tried to get a syndicated easement partnership to a vote inside a hard 90-day window will recognize the problem. A one-size-fits-all letter with a non-extendable clock ran headlong into partnership consent provisions, tax matters partner / partnership representative authority questions, and tax-liability insurance carriers with their own approval processes.

The Mechanics of the Transition

Four points matter operationally:

No more uniform letters. Effective August 19, 2026, the IRS will not issue additional uniform settlement letters under the May 13 program.
Existing deadlines are withdrawn. "Any deadlines for accepting previously issued offers are withdrawn." The 90-day and 45-day clocks on outstanding letters are gone.
Prior elections stand. Elections already submitted under the May 13 framework "will remain in effect and will be processed in accordance with their terms."
4. The terms themselves survive on request. 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.

As a reminder, those standardized terms were: full disallowance of the charitable contribution deduction; an "other deduction" roughly equal to the partnership's out-of-pocket costs (often the cash contributions reflected on Schedule M-2); a 10% gross valuation misstatement penalty under §6662(h) (rising to 20% in the secondary window); statutory interest; and no up-front payment requirement, with the liability instead subject to post-settlement collection (Baker McKenzie, Greenberg Traurig).

Do Not Misread This as Leniency

The IRS closed the door on that interpretation in one sentence: "This transition does not signal a new or more favorable standardized offer. Rather, it ends issuance of uniform offers and deadlines."

Individual cases "may continue to be resolved on different terms where warranted by the hazards of litigation" — and the hazards baseline in this program area has been unforgiving: a charitable deduction limited to roughly 5% to 7% of the amount claimed, plus the full 40% gross valuation misstatement penalty.

Recent case law reinforces that the litigation alternative is expensive. In North Donald LA Property, LLC v. Commissioner, T.C. Memo. 2026-19, the Tax Court rejected the Service's 75% civil fraud penalty for failure to carry its clear-and-convincing burden — but still sustained the 40% gross valuation misstatement penalty on a wildly overstated value (JD Supra). Winning on fraud and still absorbing 40% is not a favorable outcome.

Downstream Collection: Who Actually Pays

Practitioners should be clear with investors about where the liability lands under the BBA partnership audit regime (§§ 6221–6241):

No push-out election under §6226: the partnership itself pays the settled amount. If the partnership cannot pay, investors will receive IRS notices stating the amounts they owe as a result of the settlement adjustments.
Push-out election made: the partnership must furnish statements to the investors and the IRS describing the adjustments pushed out, and each investor must take those adjustments into account on their own return.

Individual notices generally follow IRS processing after the settlement is reached and the Tax Court decision becomes final (Current Federal Tax Developments).

Practical Takeaways

Relief from the clock is not relief from the exposure. If you were racing a 90-day or 135-day deadline, that pressure is off — but the arithmetic of settling versus trying the case has not improved.
Settlement is now affirmative, not reactive. Nobody is going to mail you an offer. If the standardized terms are acceptable, you must request them from the assigned Exam or Chief Counsel representative and confirm continued eligibility.
Use the pause productively. Obtain partnership consents, resolve partnership representative authority, and get tax-liability insurance carriers aligned now, so that when an offer issues there is no scramble.
Eligibility exclusions still bite. Cases tried and awaiting opinion, cases on appeal, previously settled cases, and designated test cases (absent bound-case agreement) were outside the May framework and remain problematic.
Expect centralized, more consistent positions. A single office coordinating with Chief Counsel should reduce inconsistency between examiners — which cuts both ways for taxpayers hoping for a favorable local resolution.
Watch for what comes next. The Office's mandate to work with Treasury on "administrative and legislative options" and valuation integrity suggests future guidance on appraisal standards is a live possibility.

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