An independent examination of federal conservation easement audits found that the IRS routinely rejected landowners’ property valuations, often without site inspections or documented specialist qualifications, raising questions about appraisal standards and the future of tax incentives intended to protect undeveloped land.

By yourNEWS Media Newsroom

WASHINGTON — The Internal Revenue Service reduced landowners’ claimed property valuations by an average of approximately 97% in a series of conservation easement audits, according to a newly released investigation that questions whether federal appraisers adequately examined the properties, evaluated their development potential or followed established professional standards before rejecting deductions worth millions of dollars.

The findings, published in a September 2026 report by financial advisory firm Infinity Advisory Services and detailed Sunday by Just the News, concern a federal tax incentive established to encourage private landowners to permanently protect agricultural property, wildlife habitats and other environmentally significant areas from development.

The investigation reviewed more than 130 IRS appraisal reports and identified 115 cases containing both the taxpayer’s original valuation and the government’s competing assessment. Across those cases, the researchers found that IRS reviewers reduced the claimed property values by approximately 97%, with some individual reductions exceeding 99%.

The findings also raise questions about the qualifications of people conducting specialized valuations and the extent to which federal reviewers relied on paperwork rather than personally examining the land.

According to Just the News’ investigation into the disputed IRS valuations, some landowners spent hundreds of thousands of dollars obtaining geological studies, engineering assessments, drilling results and professional appraisals before federal reviewers rejected nearly the entire claimed value.

The report’s central allegation is that the IRS may have adopted a systematic approach to reducing conservation easement valuations before fully considering the circumstances of individual properties.

The researchers did not establish that every taxpayer’s original appraisal was accurate or that each government review violated the law. Instead, they questioned why properties with substantially different characteristics, potential uses and geographic locations repeatedly received similarly large reductions.

The 33-page analysis, titled Predetermination in the Federal Conservation Easement Campaign, examines the methods used by federal appraisers and outside contractors, including how they evaluated land containing potentially valuable mineral deposits or sites suitable for commercial solar development.

The report was prepared by Bernie Donachie of Infinity Advisory Services, a firm specializing in business valuation, litigation support and financial consulting.

Researchers argued that the consistency of the reductions warranted examination because the properties differed significantly in location, available natural resources, possible development projects and market conditions.

“We believe that the record perhaps details that an analytic position was developed within the government before the examination program was built; enforcement action timed to external advocacy rather than to the development of case evidence; categorical public characterization of the outcome before adjudication; constraints on the government’s own valuation professionals that foreclose the approaches capable of supporting a higher value; and a settlement schedule priced from a sample the government itself assembled,” the report states.

The analysis challenges a federal enforcement effort that has increasingly scrutinized conservation easement tax deductions, particularly transactions involving investors and partnerships claiming substantial charitable contribution benefits.

Conservation easements allow landowners to voluntarily surrender certain development rights while retaining ownership of their property. The agreements are generally granted to qualified conservation organizations or government agencies and are intended to remain in effect permanently.

A farmer, for example, might agree to prevent future commercial development on agricultural land while continuing to operate the property for permitted farming purposes. Other easements protect forests, wetlands, wildlife habitats, scenic landscapes or historically significant locations.

In exchange for donating qualifying development rights, property owners may receive federal charitable contribution deductions based on the value of the rights surrendered.

That value can be substantial when the land could otherwise support profitable commercial activity, including mining, residential construction, industrial facilities or renewable energy development.

The dispute arises because determining the value of those surrendered rights can require complex judgments about what the property could reasonably have been used for without the conservation restrictions.

Congress formally established the modern federal conservation easement deduction through legislation enacted in 1980, expanding a tax policy that the IRS had recognized in earlier administrative guidance.

The historical development of conservation easement tax policy reflects a longstanding effort to encourage private conservation by allowing property owners to receive charitable deductions for protecting land that might otherwise be developed.

The program remains governed principally by Section 170(h) of the Internal Revenue Code and accompanying Treasury regulations.

Those rules require qualifying easements to serve recognized conservation purposes and generally protect the donated property interest in perpetuity.

The IRS recognizes several qualifying objectives, including protecting natural habitats, preserving open spaces that provide significant public benefits, maintaining land for public recreation or education, and protecting historically important sites.

Under the applicable valuation rules, an easement’s value ordinarily reflects the difference between the property’s fair market value before the restrictions and its fair market value after the restrictions are imposed.

That approach requires appraisers to consider what a willing buyer would pay for the property under its legally permissible and reasonably probable uses, including development opportunities that could be eliminated by the easement.

The concept is commonly described as the property’s highest and best use.

Federal Treasury regulations governing conservation easement valuations explicitly require consideration of development potential while also accounting for zoning restrictions, environmental regulations and the probability that a proposed development could actually occur.

A hypothetical mining operation, for example, cannot automatically be treated as commercially viable merely because mineral deposits exist beneath the property. Appraisers must consider whether extraction is physically possible, legally permissible and economically feasible.

Similarly, landowners cannot necessarily claim the full projected value of a proposed solar installation unless market conditions, site suitability, regulatory requirements and other factors support the development’s reasonable likelihood.

The Infinity Advisory Services investigation argues that IRS reviewers in numerous cases failed to give sufficient weight to those possibilities even when landowners had commissioned technical studies intended to establish their feasibility.

In one example, a taxpayer’s team of experts concluded that a property had a value of $27.88 million based on its potential economic uses. The IRS review reduced the valuation to $400,000, a decrease of approximately 98.6%.

The magnitude of that difference illustrates how competing appraisal methods can dramatically alter the tax consequences of a conservation easement donation.

A large charitable deduction can reduce a taxpayer’s federal income tax liability, subject to applicable limitations. If the IRS subsequently disallows most of the claimed value, the taxpayer may face additional taxes, interest and potentially significant penalties.

Such disputes can continue for years through administrative appeals and federal tax litigation, requiring substantial expenditures on attorneys, appraisers and technical witnesses.

The report also examined the methods used by the government to review the original valuations.

Among 178 IRS review reports analyzed for inspection practices, researchers identified 111 desk reviews, representing 62.4% of the total. Only 61 documented a property visit by an IRS appraiser, while six did not clearly establish whether a site inspection occurred.

Desk reviews rely on existing documentation, market information, photographs, maps and other materials rather than an appraiser’s direct inspection of the property.

Such reviews are not automatically improper. Their adequacy depends on the purpose of the assignment, the available evidence, the property’s characteristics and the professional standards applicable to the review.

However, Infinity Advisory Services questioned whether document-based assessments were sufficient in cases involving specialized geological conditions, subsurface mineral resources or proposed development projects requiring detailed technical evaluation.

The researchers also examined 102 cases involving geological assessments. Only 11 identified a technical specialist holding a recognized professional qualification, such as registration as a professional geologist or licensing as a professional engineer.

Just one of those cases documented a site visit by the technical specialist, and none documented both a recognized professional qualification and a site inspection.

The report argues that those findings raise concerns about whether the government consistently obtained expertise comparable to that used in the landowners’ original appraisals.

The analysis also considered compliance with the Uniform Standards of Professional Appraisal Practice, commonly known as USPAP.

Those standards establish widely recognized requirements for professional appraisal work, including competency, appropriate investigation, scope of work and credible valuation conclusions.

According to the researchers, 175 of the 178 reviews examined included statements asserting compliance with or conformity to USPAP.

The firm questioned whether the underlying work adequately supported those certifications, particularly where reports lacked evidence of detailed property investigations or qualified technical analysis.

The findings do not establish that an on-site inspection was legally required in every case or that a desk review necessarily violated professional standards. They do, however, raise questions about how reviewers established reliable valuations when assessing properties with complex geological or commercial characteristics.

The investigation also identified concerns about the professional backgrounds of certain individuals whose assessments were used during federal reviews.

Donachie said the records included people whose experience involved activities such as hog hunting, breeding pit bulls and operating a limousine company.

According to the reporting, their backgrounds raised questions about whether they possessed the specialized expertise necessary to evaluate particular properties or natural resources.

A person’s unrelated business activities do not, by themselves, establish that the individual lacked appraisal qualifications. The relevant question is whether the reviewer possessed sufficient education, training and experience for the specific valuation assignment.

The report nevertheless argues that the government did not consistently document the technical credentials necessary to evaluate specialized mineral and development projects.

Researchers identified additional examples involving reference materials they considered poorly suited to the assignments.

In one review concerning granite resources, the government cited a 1989 tourism pamphlet prepared for schoolchildren and a 1977 publication discussing the manufacture of granite memorials and headstones.

The investigators questioned whether those materials could adequately support a contemporary assessment of commercially valuable geological deposits.

The report also identified instances in which appraisers allegedly relied on generic market assumptions, disregarded geological findings or adopted valuations that did not appear to reflect the specific characteristics of the property under examination.

In a separate group of 40 cases involving conservation donations across nine states, the researchers found that the IRS reduced claimed values by approximately 98% in the aggregate.

The properties included sites containing clay, limestone, granite, sandstone, silica sand and other resources, as well as land evaluated for utility-scale solar development.

Despite those differences, many reviews produced valuations comparable to nearby agricultural land.

Ten of the 40 properties were valued at exactly $3,000 per acre, while 28 of the 35 resource-related properties received valuations between $2,000 and $4,000 per acre.

Infinity Advisory Services argued that the narrow range suggested reviewers may have placed excessive emphasis on existing agricultural land values rather than independently assessing commercially viable alternatives.

The disagreement concerns more than whether farmland should be valued as farmland.

A property with established mineral reserves or commercially feasible solar development potential may command a different market price from otherwise similar agricultural land. At the same time, speculative development opportunities may not support a substantial valuation increase if permits, financing, infrastructure or market demand are uncertain.

Determining the appropriate figure requires examining the individual property rather than assuming either that all potential development is economically viable or that undeveloped land has no significant value beyond its current use.

The report argues that government reviewers frequently favored the latter approach, producing valuations that did not adequately reflect evidence presented by landowners.

The researchers also examined the involvement of outside contractors in the federal review process.

Some valuation work was obtained through contracts associated with the Small Business Administration’s 8(a) Business Development Program, which was established to assist eligible small businesses in obtaining federal contracting opportunities.

According to the report, one contracting arrangement involved RER Solutions, which held a federal contract and subcontracted appraisal work to Jones Lang LaSalle.

The researchers argued that the arrangement raised questions about how responsibilities were divided among the government, the prime contractor, the subcontractor and the individual professionals signing the valuation reports.

Although federal agencies routinely use outside contractors to provide specialized services, the report questioned whether the documentation adequately established who selected the appraisal methods, conducted the substantive work and verified compliance with professional standards.

The concerns arise amid broader federal changes to small-business contracting policies.

The Small Business Administration finalized a significant rule in August 2026 affecting the 8(a) program and its treatment of eligibility requirements.

The changes followed an earlier proposal to revise the program toward race-neutral eligibility standards, part of a wider debate about how federal contracting opportunities should be awarded and monitored.

The contracting questions identified by Infinity Advisory Services are distinct from whether individual land valuations were accurate. Participation in the 8(a) program does not, by itself, establish improper contracting or inadequate professional qualifications.

However, the researchers contend that a multilayered contracting structure can make it more difficult for taxpayers to determine who performed particular analyses and whether the appropriate expertise was used.

The consequences of disputed valuations have become particularly significant for landowners considering conservation easements involving substantial potential development revenue.

In an earlier case examined by Just the News involving a Colorado farmer, the property owner said he spent nearly $1 million obtaining professional evaluations before becoming involved in an IRS audit.

The farmer reported hiring approximately a dozen specialists, including geologists, drilling companies, solar engineers, tax attorneys and experts in property titles and zoning regulations.

The work involved geological testing, core samples and other analyses intended to establish the property’s potential commercial value.

The farmer had considered a substantial solar development opportunity but ultimately pursued conservation, expecting the tax treatment to reflect the value of development rights surrendered.

His experience illustrates the financial risks facing property owners who incur substantial expenses preparing conservation transactions before the IRS reviews their deductions.

A reduction in a claimed conservation deduction does not automatically mean that the land itself has lost market value or that the original owner must develop it.

It can, however, substantially reduce the financial benefit of donating development rights, potentially affecting the incentives available to other property owners considering similar arrangements.

The report argues that repeated disputes over large deductions may make landowners more reluctant to participate in conservation programs.

If property owners cannot reasonably predict the tax consequences of permanently restricting their land, they may decide that retaining development opportunities is financially preferable.

That possibility has implications for privately funded conservation efforts, which frequently depend on cooperation among landowners, conservation organizations and government agencies.

At the same time, the IRS has defended its broader enforcement campaign against abusive conservation easement transactions.

Federal officials have long warned that some promoters have used conservation easements to market tax shelters based on inflated valuations, particularly through syndicated partnerships.

In those arrangements, investors may purchase interests in partnerships that acquire property and subsequently donate development rights while claiming charitable deductions significantly exceeding the investors’ original contributions.

The IRS has argued that some transactions rely on unrealistic assumptions about land values and future development potential, resulting in deductions that improperly reduce federal tax liabilities.

In a May 2026 announcement addressing abusive conservation easement transactions, the agency reiterated that legitimate preservation activities remain eligible for tax benefits but warned that inflated valuations and promoter-driven arrangements can produce substantial penalties.

IRS Chief Executive Officer Frank J. Bisignano said the deduction was intended to support genuine land preservation rather than provide artificial tax advantages through transactions structured around exaggerated appraisals.

Acting IRS Chief Counsel Kenneth J. Kies also pointed to court decisions rejecting abusive conservation easement arrangements and sustaining substantial reductions in claimed deductions.

The agency announced that it was preparing a settlement opportunity for certain taxpayers involved in disputed transactions.

That enforcement position provides an important counterpoint to the allegations raised by Infinity Advisory Services.

While the report questions the uniformity and documentation of government valuations, the IRS maintains that aggressive scrutiny is necessary to prevent taxpayers from claiming deductions unsupported by credible market evidence.

The two positions are not necessarily mutually exclusive. Improperly inflated taxpayer appraisals can exist alongside concerns about whether government reviewers adequately documented their competing conclusions.

The report itself acknowledges that it did not independently determine the correct fair market value of each disputed property.

Its findings therefore do not establish that the IRS should have accepted the taxpayers’ original valuations or that every adjustment was unjustified.

The researchers instead focus on whether the government consistently applied appropriate appraisal methods and obtained sufficient evidence to support its conclusions.

That distinction will be important in any future review of the agency’s practices.

An independent examination of disputed conservation valuations would need to consider both the taxpayers’ original appraisals and the government’s alternative assessments, including assumptions about development feasibility, market demand, comparable property sales and applicable land-use restrictions.

The report’s sample also does not establish that the IRS reduces conservation easement values by 97% across all audits nationwide. The figure applies to the 115 reviewed cases containing comparable taxpayer and government valuation figures.

The IRS did not respond to a request for comment from Just the News concerning the latest investigation. No agency response specifically addressing the report’s methodology or individual examples was available in the reporting reviewed.

The controversy now presents a broader question about how the federal government can enforce tax laws against inflated deductions without discouraging legitimate conservation activity.

Congress created the conservation easement deduction to make preservation financially feasible for landowners who might otherwise pursue more profitable uses of their property.

Federal tax authorities, meanwhile, are responsible for ensuring that those deductions accurately reflect the economic value of the rights donated.

The competing responsibilities require reliable valuations and consistent application of the law, particularly when the amounts in dispute reach millions of dollars.

Infinity Advisory Services maintains that the repeated reductions identified in its review warrant closer examination of the government’s appraisal procedures, professional qualifications and contracting practices.

The report also raises questions about whether taxpayers have adequate access to the information necessary to challenge federal assessments, especially when outside contractors contribute to valuation decisions.

Although the investigation does not independently establish misconduct, its findings provide a detailed account of disputed appraisal practices affecting landowners who have sought federal tax benefits for permanent conservation agreements.

The central figures remain substantial: approximately 97% reductions in the reviewed valuations, desk-based assessments accounting for 62.4% of the examined reports and limited documentation of recognized technical qualifications in cases involving geological evaluations.

The potential consequences extend beyond individual tax disputes. If landowners conclude that the financial benefits of conservation cannot be reliably established, some may be less willing to permanently surrender development rights.

Whether that concern leads to changes in federal appraisal procedures, additional oversight or revisions to conservation tax policy remains uncertain.

For now, the new investigation places renewed attention on the balance between preventing abusive tax deductions and maintaining the congressional incentive designed to protect privately owned land from development.

Original article