IRS Audits Conservation Easements and Captive Insurance

On Monday, December 21, 2020, Stein and Corey Agee of Atlanta, Georgia entered guilty pleas in federal court to conspiracy charges related to their roles in syndicated conservation easement transactions. These are the first guilty pleas related to the continuing IRS and Department of Justice criminal investigations across the country pertaining to easement transactions. In December 2017, the IRS issued Notice 2017-10, designating certain syndicated conservation easements as “listed transactions,” which are subject to significant scrutiny. The IRS has since announced syndicated conservation easement transactions as an area of focus for enforcement, by launching a Large Business & International Division (“LB&I”) compliance campaign in September 2018 and by including these transactions on the IRS’s annual “Dirty Dozen” list of tax scams in 2019 and 2020. In November 2019, with IR-2019-182, the IRS announced a “significant increase in enforcement actions,” explaining that coordinated examinations were being conducted by three IRS divisions: LB&I, Small Business & Self-Employed (“SBSE”), and Tax Exempt and Government Entities (“TGE”). The IRS also noted that it was working closely with the Department of Justice to pursue wrongdoers. The IRS explained they would be casting a broad net, pursuing those who promoted, assisted (e.g., appraisers and return preparers), or participated in the transactions. Increased enforcement has resulted in many IRS victories in conservation easement cases. Captive Insurance is also on the IRS dirty dozen list. During the early 2010s, the IRS started investigating captives for abusive transactions. In 2016, the IRS published Notice 2016-66 in which the agency advised that micro-captive insurance transactions have the potential for tax avoidance or evasion. The IRS filed suit against companies paying premiums to captives and won three major lawsuits starting in 2017. Since micro-captive insurance companies were placed on the IRS’ “Dirty Dozen” list of tax scams in 2014 and identified as a transaction of interest in 2016, the IRS has continued to expand its enforcement efforts of what it views as abusive micro-captive insurance arrangements. Lance Wallach receives hundreds of phone calls to fight the IRS and help the consumer get all his money back from the promoter of the captive scam. As an expert witness Lance Wallach has never lost a case. 516 2368440. Google him and your advisor, who do YOU trust? wallachinc@gmail.com