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The Eleventh Circuit affirmed Tuesday 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.

IRS Easement Disclosure Affirmation: Court's Decision

A three-judge panel upheld the ruling of an Alabama federal judge who last year sided with the land donation advisory firm Green Rock LLC. The firm argued that the notice was invalid because it was not subjected to the Administrative Procedure Act's notice-and-comment procedures. This affirmation underscores the importance of public participation in rulemaking, even for the IRS Easement Disclosure Affirmation.

Government's Argument Rejected

The panel dismissed the government's claim that Internal Revenue Code Section 6011, which oversees information related to reportable tax shelter transactions, authorized the agency to issue guidance without adhering to the APA's public comment requirements. The panel clarified that no such express exemption exists in the law. Moreover, provisions that might offer an exemption "make no explicit reference to notice and comment, the Administrative Procedure Act, or procedural requirements at all."

Notice 2017-10 and Its Implications

Notice 2017-10, released in December 2016, mandated the disclosure of syndicated conservation easements. These are arrangements where partnerships donate land for conservation to receive charitable tax deductions under IRC Section 170(h). This notice has been central to the IRS Easement Disclosure Affirmation, emphasizing the need for transparency and public input in tax regulation.

IRS Easement Disclosure Affirmation: Case Background

The case, Green Rock LLC v. Internal Revenue Service et al., case number 23-11041, in the U.S. Court of Appeals for the Eleventh Circuit, highlights the judicial scrutiny over IRS regulatory practices. This decision reiterates the necessity for the IRS to follow procedural requirements, including the APA's notice-and-comment procedures, to ensure the validity of its notices.