Carolyn Schenck Shares Insights on IRS Conservation Easement Enforcement in Law360

The nascent office will address easements on multiple fronts by centralizing the Internal Revenue Service's expertise on the cases and guiding "policy, enforcement and case-resolution strategy," the agency said. These disputes have overwhelmed government resources in the years since the agency flagged certain arrangements as potentially abusive tax shelters a decade ago.

The new office appears to be a distillation of the IRS' approach to policing conservation easement tax abuse. The agency's aggressive enforcement of conservation easements has resulted in hundreds of suits in federal courts and a backlog of cases, according to practitioners.

"I can't imagine people see this as a retreat from enforcement," said Carolyn A. Schenck, formerly an attorney at the IRS Office of Chief Counsel. "I see it more as a dynamic maturing and institutionalizing of the IRS' approach."

"The announcement recognizes that conservation easement disputes are not a monolithic category of cases," said Schenck, who joined Caplin & Drysdale last year.

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The office should recognize the balance between easement deductions as legitimate transactions and their use by bad actors for improper tax avoidance, according to practitioners.

Section 170(h) cases "frequently involve complex valuation questions, partnership structures, procedural considerations and unique factual circumstances," Schenck said, so the office must be able to parse out the proper arrangements as part of an effort to reduce the backlog.

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