IRS offers discounted settlement for disputed conservation easement deductions

What it does

This bill creates a one-time settlement program for partnerships that claimed tax deductions for conservation easement donations that are now under IRS examination or dispute. Partnerships can elect to settle by paying a reduced amount based on 2.5–3.2 times their capital contribution (rather than the full claimed deduction), plus a penalty and interest. The bill also clarifies that 'contributing buildings' in historic districts qualify for conservation easement deductions if they appear in National Register documentation or are certified by the Interior Department.

Why we flagged it

The bill's operative mechanism is a voluntary settlement election for disputed conservation easement deductions, coupled with a technical amendment clarifying the definition of 'contributing buildings' for historic preservation tax credits. The settlement pathway is the dominant feature.

• Section 3 amends IRC §170(h)(4)(C) and §47(c)(3) to redefine 'contributing building' for conservation easement and historic preservation credit purposes. This is substantively unrelated to the settlement election mechanism in Section 2.

What the text implies

• The settlement cap (2.5–3.2× capital contributed) may establish a de facto valuation floor for future conservation easement claims, signaling to promoters and taxpayers that valuations up to this multiple are 'safe' and unlikely to trigger examination.
• Non-contributing partners face immediate assessment and a 25% penalty surcharge without the partnership's ability to contest the computation except by paying first and filing a refund claim—a departure from normal tax procedure that may disproportionately affect passive investors.
• The 360-day election period creates a narrow window for thousands of partnerships to coordinate and file, potentially overwhelming IRS processing capacity and creating administrative bottlenecks.
• The bill treats the settlement as a 'closing agreement' under IRC §7121, which is normally negotiated and discretionary; here it is automatic upon payment, removing IRS discretion to reject settlements it deems inadequate.
• The 'common marketing group' aggregation rule may allow promoters and syndicators to negotiate a single settlement for dozens of partnerships, concentrating settlement authority in the hands of the organizer rather than individual partnerships.

Section numbers refer to the bill text the analysis read — linked under Primary records below.

Who it affects

The bill provides certainty and finality for taxpayers facing uncertain litigation over conservation easement valuations—a genuine benefit to those in dispute. However, it simultaneously creates a penalty-discounted settlement pathway that may incentivize aggressive easement valuations going forward, and it shifts enforcement burden to individual partners who refuse to pay, potentially creating collection friction. The net public benefit (stronger conservation easement enforcement, reduced litig

Who stands to gain

• conservation easement promoters and syndicators (reduced litigation exposure)
• partnerships with disputed easement deductions (settlement certainty, reduced penalties)
• high-net-worth individuals in conservation easement partnerships (ability to settle at discounted ra

Named in the bill

Internal Revenue Service (IRS), Secretary of the Treasury, Secretary of the Interior, Tax Court, partnerships claiming conservation easement deductions, conservation easement promoters and organizers

Where it stands

4 cosponsors: 4 Republicans.

• Oct 15, 2026 — Introduced · Congress.gov: “Introduced in House”
• Oct 15, 2026 — Referred to House Committee on Ways and Means · Congress.gov: “Referred to the House Committee on Ways and Means”

Dates and quoted wording are Congress.gov's action record; the timeline shows status changes, not every procedural step.