Tax Evasion and Judicial Oversight: Examining the Circuit Split on Conservation Easements

Conservation easements have long been an attractive tool for those seeking to minimize their tax bill. After all, it is a low-cost method of getting a sizeable tax deduction. But what should be an incentive for the environmental or historical preservation of land is instead a frequent avenue for tax abuse and avoidance. Regulations are one way the Internal Revenue Service (IRS) works to make the deduction harder to abuse. The subject of this Note provides one example: the “Proceeds Regulation,” which provides certain protections for the recipient of the conservation easement. However, after a challenge from a taxpayer in Alabama, the Court of Appeals for the Eleventh Circuit found the Proceeds Regulation to be procedurally invalid. This has left the IRS without an important tool against abuse in the region of the United States that uses this deduction the most. This decision is now part of a circuit split, with the only other circuit court to consider the Proceeds Regulation’s validity coming to the opposite conclusion. This circuit split has left the validity of the rule in question throughout the country, creating uncertainty for taxpayers seeking a deduction for the charitable donation of a conservation easement. This Note evaluates and compares the respective decisions in the Eleventh and Sixth Circuits and offers potential solutions for how this newfound uncertainty can be resolved in a judicial landscape that is increasingly hostile to administrative actions.