The IRS has stopped sending its standard settlement letters in easement cases, and the deadlines on the offers already out have been withdrawn

The letters stop today.

The Internal Revenue Service said on Wednesday that it will issue no further uniform settlement letters under the initiative it announced on 13 May, that the initiative is concluded effective the same day, and that any deadline attached to an offer already sent out is withdrawn. In the same release it announced an Office of Conservation Easements, which it says will centralise technical expertise and coordinate policy, enforcement and case resolution across the agency and with the Office of Chief Counsel.

The reason given is a mismatch between a standard letter and a docket that is anything but standard. Unsolicited letters going out on a rolling basis, each with a fixed response period, are described in the release as poorly suited to the full range of these cases, because partnership agreements, insurance arrangements and procedural posture differ from one case to the next and change when a taxpayer is in a position to weigh an offer at all.

What is being wound down

The May initiative was a timed one. A partnership that received a letter had 90 days to take terms under which no charitable contribution deduction was allowed, an other deduction roughly equal to its out of pocket costs was allowed, and the gross valuation misstatement penalty applied at 10 percent. For 45 days after that the same deal was available at a 20 percent penalty. The agency said then that no extension of either window would be granted, and that once the 135 days ran out a case would be resolved before a court decision only on the hazards of litigation, which it put at a deduction of roughly 5 to 7 percent of the amount claimed and a 40 percent penalty.

The population it was aimed at was large. In May the agency counted more than 1,100 conservation easement cases, around 740 of them docketed in the Tax Court and 400 in examination, and said the initiative would reach as many as 175 taxpayers who had never been offered a settlement before. Its own count of the earlier rounds was 405 cases resolved, on 32 percent of offers accepted.

What survives it

Three things, and the release is precise about each. Elections already made remain in effect and will be processed according to their terms. A taxpayer with a pending case may still ask for the May framework through the examination or Chief Counsel representative assigned to that case, and if the case is still eligible the agency will issue a new offer on the same standardised terms. Individual cases may still be resolved on different terms where the hazards of litigation warrant it.

The release then shuts the door the announcement might otherwise have opened. This transition, it says, does not signal a new or more favorable standardized offer, and what has ended is the issuance of uniform offers and deadlines rather than the terms inside them.

The office

The new office is described rather than staffed. It is to coordinate across the IRS and with Chief Counsel, to support engagement with taxpayers, practitioners and conservation and historic preservation organisations, and to work with Treasury on administrative and legislative options that the release ties to congressional conservation and preservation objectives, consistent tax administration and valuation integrity. Contact details are to be announced separately. The release says the office will provide a channel for general inquiries once it is operational, and that case specific questions still go to the representative already assigned.