Bloomberg Law Quotes Carolyn Schenck on IRS Easement Settlement Push

The IRS is trying for a third time to try to settle en masse the backlog of litigation involving conservation easement tax breaks, but some attorneys are skeptical this latest effort will yield a different result.

There are over 1,100 conservation easement cases—about 740 docketed cases in US Tax Court and 400 cases under exam, according to the IRS. Twice before, first in 2020 and then again in 2024 for docketed cases and those still under exam, the IRS offered settlements to the taxpayers involved in these disputes, but more than two-thirds of those who received these offers turned them down, according to the agency.

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Carolyn Schenck, who joined Caplin & Drysdale last year after decades at the IRS’s Office of Chief Counsel, agrees this is a problem but said it’s “something that no settlement initiative can fully solve” because of the need for full consensus.

However, she said it makes sense for the IRS to put back on the table the same terms it already offered in 2024. That’s because, since then, the agency has enjoyed a big winning streak on conservation easement cases in the courts and, as a result, its hand is now stronger, Schenck said.

“The landscape is obviously changed from a legal perspective,” she said. “The government has shown in no uncertain terms that it is following through with its promise to audit and litigate all of these cases.”

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If they and their attorneys are in fact thinking this way, that would be a mistake, Schenck said.

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