11th Circ. Affirms TC Invalidation of IRS Easement Disclosure Guidance

On November 10, 2022 we posted Notice 2017-10 Conservation Easement Penalty Notice Struck Down By Tax Court where we discussed that the IRS violated administrative law in issuing a notice requiring the disclosure of potentially abusive conservation easement transactions under threat of penalty, the U.S. Tax Court ruled on November 9, 2022, striking down the guidance and rejecting penalties the agency sought to impose on four North Carolina partnerships.

Now according to Law360, the Eleventh Circuit affirmed on June 4, 2024 that an Internal Revenue Service notice imposing reporting requirements on potentially abusive conservation easements was invalid because the agency failed to solicit the public feedback required by administrative law.

A three-judge panel affirmed the ruling of an Alabama federal judge who last year sided with the land donation advisory firm Green Rock LLC in invalidating the notice on the grounds that it wasn't put through the Administrative Procedure Act's notice-and-comment procedures.

The panel rejected the government's argument that Internal Revenue Code Section 6011, which governs information tied to reportable tax shelter transactions, had authorized the agency to promulgate guidance without following the APA's public comment requirements.

The panel said no such express exemption exists in the law and that provisions that might provide an exemption "make no explicit reference to notice and comment, the Administrative Procedure Act, or procedural requirements at all."

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