Conservation easement settlement options after IRS reset
The Internal Revenue Service (IRS) has ended its automatic, time-limited settlement initiative for conservation easement disputes, but settlement remains available in eligible cases. Tax professionals should now focus on the client’s current case status and work through the assigned IRS examination or Chief Counsel representative.
The Aug. 19, 2026, announcement does not change any underlying deduction rules; it instead alters how the IRS will administer settlement requests and coordinate its broader conservation easement strategy.
The automatic settlement clock has stopped
In May, the IRS announced that eligible partnerships would receive unsolicited settlement letters on a rolling basis. Each letter provided a 90-day period with a 10% penalty, followed by a 45-day period with generally similar terms and a 20% penalty.
The IRS has now concluded that standardized letters with fixed response periods do not fit the full range of conservation easement cases. Case-specific contractual arrangements and procedural posture can affect how a taxpayer evaluates settlement.
Effective Aug. 19, the IRS stopped issuing new unsolicited letters under the May initiative. It also withdrew the acceptance deadlines attached to previously issued offers.
This doesn’t mean every pending offer or election disappeared. The next step for taxpayers depends on what happened before the transition:
- A prior election to participate remains effective and will be processed according to its terms.
- A taxpayer who received an offer but had not accepted it is no longer bound by the deadline stated in that letter.
- An eligible taxpayer with a pending case may still request settlement under the May framework.
Settlement requests stay with the assigned representative
Practitioners should not send case-specific settlement requests directly to the new Office of Conservation Easements. For now, taxpayers should continue working with their assigned IRS examination or Chief Counsel representative.
If a pending case remains eligible, the IRS may issue a new offer using the standardized May terms, but the transition does not create a new or more favorable uniform offer. Individual cases may still settle differently when warranted by the hazards of litigation.
The new office will centralize conservation easement expertise and coordinate case-resolution work across the IRS and Chief Counsel. Once operational, it will provide a channel for general inquiries, although the IRS has not yet announced contact information.
Match the easement case to the next step
Use this table when reviewing a conservation easement client’s file:
| Current case status | Practitioner action |
|---|---|
| The taxpayer already elected into the May settlement framework | Confirm that the election is documented in the file; it remains effective and should be processed under its existing terms. |
| The taxpayer received an offer but did not accept it | Disregard the original acceptance deadline. Contact the assigned representative to discuss the case’s current settlement posture. |
| The taxpayer has a pending case but never received an offer | Ask the assigned examination or Chief Counsel representative whether the case remains eligible for settlement under the May terms. |
| The taxpayer wants different settlement terms | Evaluate the case-specific litigation hazards with controversy counsel. The IRS may resolve an individual case differently when those hazards support another result. |
This review can also reveal whether the taxpayer’s expectations still match the case’s procedural and financial exposure. If the client is considering settlement, document the terms discussed and the consequences of continuing the dispute before the client chooses a course of action.
NATP keeps watch on conservation easement guidance
NATP will continue monitoring guidance from the new Office of Conservation Easements, including the release of contact information or additional settlement procedures. Tax professionals can rely on NATP to translate those developments into clear, practical guidance for managing affected client cases.
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NATP Staff