Category: Newsletters – IRS – Company

Issue Number:    IR-2026-65

Inside This Issue

IRS announces terms of a time-limited settlement opportunity for eligible taxpayers involved in conservation easement disputes

IR-2026-65, May 13, 2026

WASHINGTON — The Internal Revenue Service is announcing the terms of a time-limited settlement opportunity for eligible taxpayers involved in conservation easement or historic preservation easement disputes with the IRS.

Since 2020, the IRS has offered settlement initiatives in these cases that were significantly more favorable than the outcomes taxpayers have generally achieved in the Tax Court. Under each of those prior initiatives, taxpayers were required to pay penalties on their underpayments and were not permitted to claim a charitable contribution deduction for the claimed donation, being limited solely to a deduction for estimated out-of-pocket costs. Nonetheless, the prior settlement initiatives resolved 405 cases, with 32% of all offers accepted.

This new time-limited settlement opportunity is intended to advance the goals of the prior initiatives while addressing barriers that may have discouraged acceptance. Today, there are over 1,100 conservation easement cases (around 740 docketed cases in Tax Court and 400 cases in Exam). Under this new offer initiative, nearly 450 cases will no longer be required to make an upfront payment of the settlement amount, and instead the liability will be subject to post-settlement collection as described below. Separately, as many as 500 cases where prior settlement offers expired or were rejected by the taxpayer will have the renewed ability to settle their cases. The offer will also be extended to as many as 175 cases that did not previously have the opportunity to participate in an IRS settlement initiative.

“Congress created the conservation easement deduction to encourage genuine preservation, not to subsidize tax shelters built on inflated valuations,” said IRS Chief Executive Officer Frank J. Bisignano. “This settlement opportunity gives eligible taxpayers a chance to resolve these cases on terms more favorable than the results taxpayers have generally achieved in court, while allowing the IRS to continue enforcing the law in a fair and efficient way.”

“The courts have repeatedly found abusive activity in this area, regularly sustaining major reductions in claimed deductions and significant penalties and interest,” said Acting IRS Chief Counsel Kenneth J. Kies. “Taxpayers and their advisors should carefully review the terms of this initiative and the substantial litigation risks of continuing to contest these cases.”

Background

The tax law allows an income tax deduction for property owners who relinquish certain rights in land or buildings to preserve those properties for future generations. Over time, however, Congress, the IRS, and courts have identified serious abuses, leading to legislative changes, enforcement actions, settlement initiatives, and civil and criminal judgments.

In recent litigation, the government has consistently prevailed. On average, the Tax Court has only allowed 6% of the original claimed deduction and has generally imposed a 40% gross valuation misstatement penalty, plus interest.

Taxpayers can learn more about how promoters have peddled syndicated easement transactions and how badly these transactions have fared in court at Conservation Easement on IRS.gov.

New time-limited settlement opportunity

Eligible partnerships will receive individualized correspondence, to be issued on a rolling basis, from the IRS setting forth their specific settlement terms.

For a period of 90 days following the issuance of a settlement letter, the following terms will be available to an eligible partnership:

• No charitable contribution deduction will be allowed.
• An “other deduction,” in an amount determined by the IRS, generally equal to the partnership’s approximate out-of-pocket costs (often based on cash-contributed amounts reflected on Schedule M-2), will be allowed.
• A gross valuation misstatement penalty will apply at a rate of 10%.
• Interest will accrue as required by law.
• The partnership will not be required to make payment at the time it elects into the initiative.
• Non-docketed Bipartisan Budget Act cases will be resolved by closing agreement or similar document.
• Docketed cases will be resolved by stipulated decision.
• No extension of the 90-day period will be available.

For a period of 45 days following the close of the initial 90-day period, eligible partnerships may settle on generally the same terms, except that the gross valuation misstatement penalty will apply at a rate of 20%. No extension of the 45-day period will be available.

The applicable time period will begin on the postmark date or date of electronic transmission, and each letter will specify the applicable deadlines.

After the expiration of the two periods, totaling 135 days from the date of issuance of the individualized settlement letter, cases will be resolved before a court decision only on the basis of hazards of litigation. In general, that will reflect a charitable contribution deduction of approximately 5% to 7% of the claimed deduction and a 40% gross valuation misstatement penalty.

This settlement opportunity is not available in every conservation easement or historic preservation easement case. Specifically, this settlement is not available in cases:

• That have been tried and are awaiting an opinion.
• That are on appeal to one of the United States Circuit Courts of Appeal.
• That have already settled (i.e., settled based on hazards of litigation before trial or conceded, including those in which no decision has been entered).
• That have agreed to be bound to another case if the test case has been tried and is awaiting final decision.
• That have a trial that is set to commence within 30 days of the date of this announcement.
• That are designated as test cases, unless all bound cases have settled or agree to settle under this initiative.

The IRS will determine eligibility based on the status of the case and other case-specific considerations relevant to administration of the initiative.

Additional information

In cases governed by the Tax Equity and Fiscal Responsibility Act (TEFRA), generally involving tax years 2017 and earlier, taxpayers should expect to receive IRS notices stating the amount owed by each investor. Those notices will be sent following IRS processing after the settlement is reached and the Tax Court decision becomes final.

In cases governed by the Bipartisan Budget Act of 2015 (BBA), generally involving tax years 2018 and later, if the partnership did not elect to push out the liability, the partnership will be responsible for payment. If the partnership is unable to pay, investors will receive notices from the IRS stating the amounts owed as a result of the settlement adjustments. If the partnership elected to push out the liability, the partnership must furnish statements to investors and the IRS describing the adjustments and amounts being pushed out, and investors must take those adjustments into account accordingly.

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Issue Number:  Tax Tip 2026-39

Got mail from the IRS? Don’t toss it

Some taxpayers may get mail from the IRS. It’s important that they open any mail they receive and read it carefully.

Most letters or notices are about federal tax returns or tax accounts. Each notice will outline the specific issue and include steps the taxpayer needs to take. A notice may reference changes to a taxpayer’s account, taxes owed, a payment request or a specific issue on a tax return or credit.

Review the information. If the mail is about a changed or corrected tax return, the taxpayer should review the information and compare it with the original return. If the taxpayer agrees, they should make notes about the corrections on their personal copy of the tax return and keep it for their records. Typically, a taxpayer will need to act only if they don’t agree with the information, if the IRS asked for more information or if there’s a balance due.

Take any requested action. This may include making a payment. The IRS and authorized private debt collection agencies do send letters by mail. Taxpayers can also view digital copies of select IRS notices by logging into their IRS Online Account. The IRS offers several options to help taxpayers struggling to pay a tax bill. Taking prompt action could minimize additional interest and penalty charges.

Reply only if needed. Taxpayers don’t need to reply to a notice unless specifically told to do so. If a taxpayer needs to call the IRS, they should use the number in the upper right-hand corner of the notice and have a copy of their tax return and letter.

Let the IRS know of a disputed notice. If a taxpayer doesn’t agree with the IRS, they should follow the instructions in the notice to dispute what the notice says. The taxpayer should include information and documents for the IRS to review when considering the dispute.

Keep the letter or notice for their records. Taxpayers should keep notices or letters they receive from the IRS for three years from the date the tax return was filed. These include adjustment notices.

Watch for scams.
The IRS will never contact a taxpayer using social media. The first contact from the IRS usually comes in the mail.

More information

• Understanding your IRS notice or letter
• IRS Taxpayer Bill of Rights

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Issue Number: Tax Tip 2026-38

National Small Business Week: Tools for business owners and entrepreneurs

Being a small business owner or entrepreneur can be a heavy lift sometimes. Fortunately, there’re several tools and resources that can help them manage their tax responsibilities efficiently. National Small Business Week 2026, is an opportunity to highlight some of the improvements and technology available to enhance the taxpayer experience.

Business Tax Account
Business Tax Account is a secure, centralized platform that allows authorized users to:

• View tax balances
• Make payments including Offer in Compromise for eligible users
• See payment history
• Download select digital notices
• View eligible transcripts, such as payroll and income
• Request a tax compliance check
• See the business name and address on file with the IRS

BTA recently expanded access to millions more users. The organizational types that can access BTA are sole proprietorships, partnerships, S corporations, C corporations, federal, state, and local governments, Indian tribal governments, and tax-exempt organizations. For more information or to learn about eligibility requirements to use BTA, visit www.irs.gov/businessaccount.

Information Returns Intake System
IRIS is a modernized system that lets taxpayers e-file information returns for tax years 2022 and later as well as file a correction and request automatic extensions.

Digital and mobile-friendly forms
Certain IRS forms are available for taxpayers to easily complete and submit from their computer, cell phone or tablet. This gives taxpayers a safe and fast way to electronically engage with IRS. For forms that require signatures, they need an IRS Individual Account to complete the mobile friendly forms.

IRS Secure Messaging
It’s a way for taxpayers and authorized representatives of a taxpayer/business to directly interact with IRS representatives. Taxpayers can submit electronic documentation quickly and securely and reduce or eliminate the need to call or mail documents. Secure messages can be sent to you by IRS representatives.

More information
Small business and self-employed tax center

Subscribe to IRS Tax Tips

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Issue Number: 2026-10

Inside This Issue

• New option for requesting more time after ERC claim disallowance
• IRS issues Whistleblower Alert to help uncover fraud
• Taxpayer Advocacy Panel Annual Report now available
• IRS issues disaster tax relief for Mississippi and Hawaii
• IRS issues annual update to Form 656-B, Offer in Compromise Booklet
• Other tax news

New option for requesting more time after ERC claim disallowance

The IRS recently announced a new, streamlined way for small businesses to extend the period for the IRS and the IRS Independent Office of Appeals to review a response to the disallowance of an Employee Retention Credit claim to avoid refund litigation.

Small businesses can file Form 907, Agreement to Extend the Time to Bring Suit, if they meet both of these conditions:

• Waiting for the IRS to consider their response to the notice of disallowance on Letter 105-C or 106-C
• Have six months or less remaining before their two-year period expires.

The IRS is sending Notice CP320B to taxpayers identified as eligible for this new Form 907 submission method. Step-by-step instructions are available at IRS.gov/CP320B.

Small businesses can also submit Form 907 requesting an extension through the IRS Document Upload Tool by going to IRS.gov/DUTReply and selecting notice ‘CP320B’ from the drop-down menu.

For full details see the news release.

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IRS issues Whistleblower Alert to help uncover fraud

The IRS recently issued Whistleblower Alert asking for more information about misuse, diversion or fraudulent use of federal funds by tax-exempt organizations, businesses and individuals. Small businesses should report what they know using Form 211, Application for Award for Original Information, at IRS.gov/SubmitATip.

Whistleblower awards pay up to 30% of the proceeds collected if attributable to the whistleblower’s information.

More information about the Whistleblower Program is available at IRS.gov/Whistleblower and the news release.

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Taxpayer Advocacy Panel Annual Report now available

In its 2025 Annual Report, the Taxpayer Advocacy Panel highlights IRS accomplishments and efforts to improve delivery, communication with taxpayers, reduce taxpayer burden and support continued transformation efforts.

The recommendations focus on:

• Improving taxpayer notices
• Enhancing online tools and digital services
• Streamlining IRS correspondence
• Improving the clarity of IRS tax forms and publications 
• Reinforcing the importance of in-person assistance
• Reducing wait time on IRS toll-free phone lines

The full 2025 TAP Annual Report is available to download on ImproveIRS.org.

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IRS issues disaster tax relief for Mississippi and Hawaii

Businesses and individuals in Mississippi affected by the severe winter storm that began on Jan. 23, 2026, now have until June 8, 2026, to file various federal individual and business tax returns and make tax payments.

Businesses and individuals in Hawaii affected by flooding and mudslides due to severe storms that began on March 10, 2026, now have until July 8, 2026, to file various federal individual and business tax returns and make tax payments.

The IRS automatically identifies taxpayers located in covered disaster areas and applies filing and payment relief. But affected taxpayers who reside or have a business located outside the covered disaster area should call the IRS Special Services toll-free number at 866-562-5227 to request this tax relief.

The Tax relief in disaster situations page on IRS.gov has the most recent tax relief info for taxpayers affected by a disaster.

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IRS issues annual update to Form 656-B, Offer in Compromise Booklet 

The IRS released its annual update to Form 656-B, Offer in Compromise Booklet. An Offer in Compromise is an agreement between a taxpayer and the IRS that settles a tax debt for less than the full amount owed.

The booklet includes all the forms small businesses need to file an offer in compromise and includes new information on how to file an offer electronically through an IRS Individual Account. It also leads small businesses and tax professionals through a series of steps to help calculate an appropriate OIC based on assets, income, expenses and future earning potential.

For more information, see the offer in compromise page on IRS.gov.

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Other tax news

The following information may be of interest to individuals and groups in or related to small businesses:

• IRS updates educational assistance programs FAQs
• VITA and TCE volunteers recognized during National Volunteer Week
• IRS updates frequently asked questions about section 127 educational assistance programs

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Issue Number:  IR-2026-64

Inside This Issue

Apply for a Low Income Taxpayer Clinic grant to serve taxpayers in your community

Grant application period runs May 6 to July 6, 2026

IR-2026-64, May 6, 2026

WASHINGTON — The Low Income Taxpayer Clinic Program today announced it will accept applications for LITC matching grants from all qualified organizations from May 6, 2026, to July 6, 2026. The grant period of performance will be Jan. 1, 2027, through Dec. 31, 2027, and applications from underserved areas will be given special consideration.

The Taxpayer Advocate Service, an independent organization led by National Taxpayer Advocate Erin M. Collins, administers the LITC Program. Although LITCs receive partial funding from the IRS, LITCs and their employees and volunteers operate independently from the IRS.

“Low Income Taxpayer Clinics are essential to ensuring that every taxpayer, regardless of income or language, has access to a fair and just tax system,” Collins said. “These clinics are a lifeline that protect taxpayer rights, ensure fairness, and provide trusted support to those who need it most. I encourage community organizations to apply and join us in expanding this vital work so that every taxpayer, in every community, has access to justice.”

IRS Chief Executive Officer Frank J. Bisignano added, “Low Income Taxpayer Clinics are an important part of the IRS’s overall approach to improving case resolution and protecting taxpayer rights. By helping taxpayers resolve issues earlier, these clinics can reduce burdens for taxpayers and the IRS alike. Expanding taxpayer access to qualified representation helps ensure cases are handled correctly and limits unnecessary escalation.”

LITCs ensure the fairness and integrity of the tax system for taxpayers by:

Providing pro bono representation to assist low-income taxpayers in resolving tax disputes with the IRS.

Educating taxpayers for whom English is a second language about their rights and responsibilities as taxpayers.

Identifying and advocating for issues that impact these taxpayers.

The IRS awards matching grants to qualifying organizations to develop, expand, or maintain an LITC. For every dollar awarded by the IRS, an LITC must provide an equal match. An LITC must also provide services for free or for no more than a nominal fee, except for reimbursement of actual costs incurred.

Applicants may request up to $200,000 for the 2027 grant year. If Congress reduces overall funding for the LITC Program or reduces the per-clinic funding cap amount for fiscal year 2027, the IRS will adjust each grant recipient’s award accordingly.

Applicants must submit grant applications electronically by 11:59 p.m. Eastern Time on July 6, 2026. The funding number is TREAS-GRANTS-042027-001. Send questions about the LITC Program or grant application process to LITCProgramOffice@irs.gov.

Expanded access to reach underserved communities

The LITC Program continues to expand access to clinic services by supporting new clinics and innovative service delivery models designed to reach underserved communities. Special consideration will be given to applicants proposing to serve in Hawaii, Kansas, Montana, West Virginia, and Wisconsin and in underserved counties with limited or no coverage, including the following counties in Florida, Nevada, and South Dakota:

• Florida: Brevard, Citrus, Glades, Hamilton, Hardee, Hendry, Hernando, Highlands, Indian River, Lafayette, Lake, Madison, Martin, Nassau, Okeechobee, Orange, Osceola, Polk, Seminole, St. Johns, St. Lucie, Sumter, Suwannee, Taylor, and Volusia.
• Nevada: Carson City, Churchill, Douglas, Elko, Esmeralda, Eureka, Humboldt, Lander, Lincoln, Lyon, Mineral, Nye, Pershing, Storey, and White Pine.
• South Dakota: Aurora, Beadle, Bennett, Bon Homme, Brookings, Brown, Brule, Buffalo, Butte, Campbell, Charles Mix, Clark, Clay, Codington, Corson, Custer, Davison, Deuel, Dewey, Douglas, Edmunds, Fall River, Faulk, Grant, Gregory, Haakon, Hamlin, Hand, Hanson, Harding, Hughes, Hutchinson, Hyde, Jackson, Jerauld, Jones, Kingsbury, Lake, Lawrence, Lincoln, Lyman, McCook, McPherson, Meade, Mellette, Miner, Minnehaha, Moody, Oglala Lakota, Pennington, Perkins, Potter, Sanborn , Shannon, Spink, Stanley, Sully, Todd, Tripp, Turner, Union, Walworth, Yankton, and Ziebach.

The IRS is particularly interested in applications that address geographic gaps or areas with high compliance activity but limited clinic presence. Priority will be given to established organizations that can extend services into underserved areas, including those using referral models for representation, and organizations with strong community partnerships that can quickly deliver effective ESL education services.

Webinar schedule

The LITC Program Office will host optional webinars to learn more about the LITC Program and the application process. These sessions will provide further information for new applicants or those interested in learning more about the process. Visit the LITC Grants site to register.

• Session One: Application Basics, Tuesday, May 12, 2026, 1-3 p.m. ET.
• Session Two: LITC Grants Portal Overview and Application Considerations, Wednesday, May 13, 2026, 1-3 p.m. ET.
• Session Three: Budget Basics, Tuesday, May 26, 2026, 1-3 p.m. ET.
• Q&A Sessions: Tuesday, June 16, 2026, and June 29, 2026, 1-2 p.m. ET, no formal presentation.

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