At the close of 2016, the IRS’ contempt for syndicated conservation easement deals reached its peak with the IRS identifying such transactions as “listed transactions.” See prior MC Talks Tax blog post here. By virtue of this listing, the IRS extended the statute of limitations for all open tax years until one year after either the taxpayer discloses it to the IRS on Form 8886 or until disclosure is made to the IRS by a material advisor in response to an IRS list-maintenance request. Additionally, the listing triggered an obligation by taxpayers who participated in a syndicated conservation easement deal in prior tax years to disclose their participation to the IRS (via filing a Form 8886) by June 21, 2017. Failure to timely file a Form 8886 with the Office of Tax Shelter Analysis by June 21, 2017 would expose a taxpayer to potentially significant penalties equal to 75% of any tax savings, up to a statutory cap of $100,000 for natural persons and $200,000 for other entities. There is no reasonable-cause defense – it is strict liability penalty.
Fortunately, a few days ago, the IRS announced an extension of the June 21st disclosure deadline. The extended deadline is now October 2, 2017. See Notice 2017-29, linked here.
Given the voluminous details that must be disclosed, coupled with the Form 8886 due date being just two weeks before a major filing deadline, tax practitioners should remain diligent in their efforts to prepare the required disclosures to insure that their client’s disclosure obligations are timely met. Instructions to the Form 8886 are linked here. Tax practitioners should also use this opportunity to visit with their clients about the merits of their particular transaction, the potential litigation hazards, and whether an amended return should be considered.
If you have any questions about your client’s disclosure obligations, or about conservation easements generally, please do not hesitate to contact me at (214) 749-2464 or email me at email@example.com.