The Internal Revenue Service (IRS) announced on August 31, 2020 that Coal Property Holdings, LLC and its partners agreed to a disallowance of their $155 million charitable deduction claimed for a conservation easement donation on 3,700 acres in Tennessee (IR-2020-196).
On October 28, 2019, the U.S. Tax Court issued its opinion in Coal Property granting partial summary judgment to the IRS by holding that the proceeds clause of the conservation easement failed the requirements of § 1.170A-14(g)(6) of the Treasury Regulations. In June 2020, the IRS Office of Chief Counsel reached out to partnerships involved in syndicated conservation easement transactions, including Coal Property Holdings, LLC, to encourage settlement of pending Tax Court cases (IR-2020-30). The settlement of Coal Property Holdings, LLC is the first settlement under this initiative, and the IRS anticipates more partnerships will accept similar offers.
The settlement terms included a disallowance of the entire $155 million deduction. The partners were permitted to deduct their investment costs and paid a ten percent penalty. The promoter received no deduction for costs and paid a 40% penalty. All tax, penalties and interest were paid as part of the settlement, and a public statement acknowledging the settlement was required.