On May 13, 2026, the Internal Revenue Service issued IR-2026-65 (accessed May 25, 2026) announcing a time-limited settlement opportunity for eligible taxpayers involved in conservation easement or historic preservation easement disputes. The initiative targets partnerships engaged in certain syndicated transactions and provides individualized settlement offers on a rolling basis. This publication reflects tax law and regulations applicable as of May 2026 and is subject to change without notice.
This article examines the eligibility requirements and exclusions for the IRS time-limited settlement opportunity announced in IR-2026-65, the specific settlement terms regarding deductions and penalties, the 90-day acceptance window, and procedures for eligible partnerships.
Eligibility for the Settlement Opportunity
The IRS is issuing individualized settlement letters to eligible partnerships involved in conservation easement or historic preservation easement disputes. The program covers approximately 1,100 current cases, including nearly 450 cases that no longer require an upfront payment and as many as 500 cases where prior settlement offers expired or were rejected.
The settlement opportunity is not available in the following cases:
- Cases that have been tried and are awaiting an opinion.
- Cases that are on appeal to a United States Circuit Court of Appeals.
- Cases that have already settled.
- Cases that have agreed to be bound by another case if the test case has been tried and is awaiting a final decision.
- Cases with a trial set to commence within 30 days of the May 13, 2026 announcement.
- Designated test cases, unless all bound cases have settled or agree to settle under this initiative.
Settlement Terms
Under the terms of the settlement, no charitable contribution deduction is allowed. An "other deduction" is permitted, generally equal to the partnership's approximate out-of-pocket costs (typically based on cash-contributed amounts reflected on Schedule M-2). A gross valuation misstatement penalty applies at a reduced rate of 10 percent during the initial 90-day acceptance period (increasing to 20 percent during the subsequent 45-day period). Interest accrues as required by law. No upfront payment is required at the time of acceptance.
Eligible partnerships must respond within 90 days of the postmark date or electronic transmission date of the individualized settlement letter. No extensions are available. Failure to accept within the initial 90-day window results in less favorable terms during the subsequent 45-day period. After the full 135-day period, cases will be resolved based on hazards of litigation.
Compliance Resources and Tools
Official IRS announcements including IR-2026-65 (accessed May 25, 2026) and IRS Publication 526 (accessed May 25, 2026) are available on IRS.gov.
- The IRS time-limited settlement opportunity under IR-2026-65 applies to eligible partnerships in conservation easement disputes, providing individualized offers on a rolling basis.
- Settlement terms generally allow an "other deduction" for out-of-pocket costs while disallowing the charitable contribution deduction.
- A reduced 10 percent gross valuation misstatement penalty applies during the initial 90-day acceptance window.
- No upfront payment is required upon acceptance; the liability is subject to post-settlement collection.
- The opportunity is not available for cases that have been tried, are on appeal, have already settled, or meet other specified exclusion criteria.
- Strict deadlines apply with no extensions; partnerships should review any received correspondence promptly.
References
- Internal Revenue Service. (2026). IR-2026-65: IRS announces terms of a time-limited settlement opportunity. IRS.gov. Accessed May 25, 2026. https://www.irs.gov/newsroom.
- Internal Revenue Service. (2026). Conservation Easements. IRS.gov. Accessed May 25, 2026. https://www.irs.gov/charities-non-profits/conservation-easements.
- Internal Revenue Service. (2026). Publication 526: Charitable Contributions. IRS.gov. Accessed May 25, 2026. https://www.irs.gov/publications/p526.
- Internal Revenue Service. (2026). Instructions for Form 8283. IRS.gov. Accessed May 25, 2026. https://www.irs.gov/instructions/i8283.
- Internal Revenue Service. (2026). About Schedule K-1 (Form 1065). IRS.gov. Accessed May 25, 2026. https://www.irs.gov/forms-pubs/about-schedule-k-1-form-1065.
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The content reflects tax law and regulations applicable on the date of publication only and is subject to change without notice. Examples and illustrations are hypothetical and do not represent any specific taxpayer situation.
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