Significant sentences and almost $1 billion in ordered restitution have been issued this week in federal court in a case concerning fraudulent charitable deductions and land rights. These outcomes present a potentially pivotal moment that could limit a disputed tax transaction, furthermore streamlining subsequent case victories for the IRS in US Tax Court. More details are available for those seeking comprehensive coverage of this evolving story.
In this particular lawsuit, defendants Jack Fisher and James Sinnott were implicated in syndicated easements. These circumstances involve promoters who assemble partnerships to buy land and then give rights to develop the land in exchange for colossal tax deductions. Nearly $36 billion in unwarranted deductions have been asserted by investors from 2010 to 2018, according to the Land Trust Alliance, a nonprofit organization that opposes syndicated easements.
This case’s successful prosecution marks a scarcely seen triumph for the government in its enduring efforts to curb such practices. The guilty verdict and the resulting rigorous sentencing might sway future potential prosecutions and cases that IRS is currently contesting in Tax Court.
The Tax Court cases have often been protracted, some even lasting a decade, and there are still hundreds pending in the queue, according to Russell Shay, a public policy consultant with over a decade of experience tracking syndicated conservation easements.
In relation to IRS’s strategy to prevent such transactions in the future, Shay emphasizes the need for IRS to devise methods for reviewing returns and winning cases in Tax Court based on valuation. IRS also needs to act more decisively when first alerted to such transactions, as syndicated conservation easements ballooned from a cottage industry to a significant drain on the Treasury over more than a decade after IRS first became aware of such practices.
Tax shelters engaging in such malpractices will continue to face rigorous law enforcement measures, as per Jim Lee, the chief of IRS Criminal Investigation. Meanwhile, the EcoVest case had been resolved in 2023 under the condition that the company would not promote easement deals, although admission of any unlawful activity was not requested by the government. Entities continuing to engage in syndicated deals or similar products could potentially see similar legal complexities.
Sean Akins, an attorney representing EcoVest Capital, a company that has promoted syndicated easements, warns that anyone still partaking in these activities post the passage of regulatory legislation should act proactively to avoid the fates of Fisher and Sinnott. Therefore, seeking skilled legal counsel sooner, rather than later, is strongly advised.
The case in question is US v. Lewis, sentenced on January 9, 2024.