Conservation Easements in Georgia: How a Popular Tax Strategy Became a Major Enforcement Target and What Taxpayers Should Do Now

For more than a decade, conservation easements were promoted as a sophisticated, defensible, and socially beneficial tax strategy. They were often introduced to taxpayers not through fringe operators, but through trusted professionals: CPAs, tax preparers, financial advisors, and tax attorneys. The message was consistent and reassuring. Conservation easements preserved land, aligned with public policy, and were supported by long-standing provisions of the Internal Revenue Code. When properly documented, taxpayers were told, the charitable deduction was not only legitimate but prudent.Georgia emerged as one of the epicenters of this strategy. Estimates suggest that more than 30 percent of syndicated conservation easement transactions nationwide involved Georgia property, a staggering concentration for a single state. The availability of undeveloped land, proximity to fast-growing metropolitan areas, and aggressive valuation assumptions made Georgia particularly attractive for these transactions. For many taxpayers, especially business owners and professionals with fluctuating income, conservation easements appeared to offer a lawful way to smooth tax liability while participating in land preservation.What followed has become one of the most consequential tax enforcement stories of the last generation.

How Conservation Easements Were Sold and Why the IRS Objected

At a basic level, conservation easements are not abusive by definition. A landowner may voluntarily and permanently restrict development rights over property and donate that restriction to a qualified charitable organization. In return, the landowner may claim a charitable contribution deduction equal to the value of the surrendered rights. When done conservatively, independently valued, and without manipulation, this structure can still serve legitimate purposes.

The problem arose with syndicated conservation easements, where promoters structured partnerships to acquire land and then allocate large charitable deductions to investors who had little economic exposure. These transactions were marketed with explicit deduction multiples, sometimes four, five, or even ten times the amount invested. The higher the valuation, the greater the deduction, and the more attractive the transaction appeared.

Taxpayers were often provided with appraisals, legal opinions, and assurances that the structure had been reviewed and blessed by experienced professionals. In many cases, taxpayers were told that even if the IRS challenged the deduction, the government would eventually lose or be forced to settle on favorable terms. The risk, as presented, was minimal. The reward was immediate.

The IRS disagreed, and disagreed forcefully.

The IRS Crackdown and Its Consequences

The Internal Revenue Service designated syndicated conservation easements as a listed transaction, a classification reserved for arrangements the government believes are inherently abusive. This designation triggered heightened disclosure requirements, aggressive audits, and coordinated litigation strategies. The IRS did not merely challenge valuations. It attacked deed language, timing issues, partnership allocations, perpetuity clauses, and technical compliance failures that left little room for compromise.

The results have been devastating for many taxpayers. The government has prevailed in the overwhelming majority of conservation easement cases brought before the Tax Court. In many decisions, the court disallowed the entire deduction without ever reaching valuation, concluding that technical requirements were not satisfied. Good faith reliance on advisors has rarely saved taxpayers from liability.

Once a deduction is disallowed, the financial consequences escalate quickly. Tax is assessed on the full amount of the disallowed deduction. Penalties are layered on top, including accuracy-related penalties and gross valuation misstatement penalties. Interest accrues daily from the original due date of the return, often years in the past. In the aggregate, tax, penalties, and interest can approach or exceed 50 percent of the disallowed amount.

What was once presented as a tax-efficient investment has, for many, become a prolonged and expensive ordeal.

The Persistent Myth of “Fighting It”

Despite the clear enforcement trend, many promoters and some law firms continue to encourage taxpayers to fight. Settlement is framed as capitulation. Litigation is framed as principled resistance. Taxpayers are told that the government’s position is overreaching, that the courts will eventually correct course, or that their case is different.

This advice often fails to account for reality.

Litigation is slow and costly. It exposes taxpayers to years of compounding interest while the case proceeds. Even a partial victory can leave significant liabilities unresolved. More importantly, the statistical odds are poor. The IRS has refined its arguments, selected favorable cases, and consistently prevailed. Hope is not a strategy, particularly when interest accrues every day.

For many taxpayers, voting to settle is not an admission of wrongdoing but a rational financial decision. Settlement brings certainty. It caps exposure. It allows taxpayers to move forward rather than remain trapped in limbo while liabilities quietly grow.Interest as the Silent AcceleratorOne of the most misunderstood aspects of conservation easement disputes is the role of interest. Interest is not frozen during audits or litigation. It compounds daily, regardless of how cooperative the taxpayer may be or how long the government takes to act. Delays that feel procedural can have massive financial consequences.

This is where proactive planning becomes critical.

Using IRC § 6603 Deposits to Stop the Bleeding

Internal Revenue Code Section 6603 allows taxpayers to make deposits toward disputed tax liabilities. A properly designated 6603 deposit stops interest from accruing on the amount deposited while preserving the taxpayer’s ability to contest the liability. If the taxpayer settles or loses, the deposit can be converted into a payment. If the taxpayer prevails, the deposit may be returned.

In conservation easement cases, the failure to make a 6603 deposit can be extraordinarily costly. Taxpayers who wait for resolution without taking this step often discover that interest alone has added hundreds of thousands of dollars to their exposure. Deposits are not an admission of liability. They are a defensive tool designed to control damage.Georgia’s Role and the Power of Voluntary DisclosureFederal liability is only part of the picture. Georgia has actively followed the IRS in examining conservation easement deductions claimed on Georgia income tax returns. Adjustments at the federal level often cascade into state assessments, with penalties and interest applied under Georgia law.

However, Georgia offers a uniquely powerful opportunity through its Voluntary Disclosure Agreement (VDA) program.

For eligible taxpayers, a Georgia VDA can dramatically limit exposure. The lookback period is capped at three years. All penalties are waived. The process allows taxpayers to resolve state liability efficiently and without litigation, even while federal matters remain ongoing.

For taxpayers facing conservation easement adjustments, coordinating federal settlement strategy with a Georgia VDA can materially reduce total liability. Waiting too long can forfeit this opportunity entirely.

Timing Matters More Than Most Taxpayers Realize

Conservation easement cases do not improve with time. Interest accrues. Penalties solidify. Settlement programs expire. State agencies become less flexible once assessments are issued. The earlier a taxpayer engages in strategic planning, the more options remain available.What once felt like a theoretical risk is now a concrete financial problem for thousands of Georgia taxpayers. Addressing it proactively is not pessimism. It is prudence.

How Childress Law Firm P.C. Approaches Conservation Easement Resolution

Childress Law Firm P.C. focuses on tax controversy and resolution, not transaction promotion. We do not sell conservation easements, defend marketing narratives, or minimize risk. Our role is to help taxpayers confront reality, evaluate options honestly, and resolve disputes efficiently.We assist clients with IRS conservation easement audits, strategic settlement decisions, proper use of IRC § 6603 deposits, Georgia Voluntary Disclosure Agreements, penalty mitigation, and coordinated federal and state resolution planning. Our objective is simple: reduce exposure, restore certainty, and allow clients to move forward.

If you claimed a conservation easement deduction in Georgia and are now facing IRS or Georgia Department of Revenue scrutiny, the most important question is no longer whether the idea once sounded good. The question is how to resolve the issue intelligently, decisively, and before additional damage is done.

Schedule a confidential consultation with Childress Law Firm P.C. to discuss your options and stop the bleeding.