Historic Preservation and Land Conservation Certainty Act
- Sponsor
- Rep. Carey, Mike [R-OH-15]
- Committees
- Ways and Means Committee (primary)
- Last action
- Oct 15, 2026
Bottom line
This bill offers a structured settlement pathway for certain conservation easement tax disputes and clarifies definitions for historic preservation tax credits, aiming to reduce litigation and provide tax certainty.
What it actually does
This bill establishes an election process for partnerships involved in open tax controversies with the IRS regarding conservation easement deductions. It allows these partnerships to resolve disputes by agreeing to a capped deduction amount and paying a settlement that includes a tax component and a penalty component, thereby waiving further litigation. Additionally, it clarifies the definition of a "contributing building" for historic preservation tax benefits.
Proponents argue
Proponents argue that this bill provides much-needed certainty and a fair, efficient resolution mechanism for taxpayers and the IRS, allowing them to avoid prolonged and costly litigation over complex conservation easement deductions. They also contend that clarifying the definition of 'contributing building' will streamline legitimate historic preservation efforts.
Opponents contend
Opponents might argue that this bill could be perceived as a lenient settlement for what the IRS considers abusive tax shelters, potentially undermining tax enforcement efforts and signaling that the government may eventually offer favorable terms for aggressive tax planning. They may also contend it could reduce the tax base by allowing deductions that might otherwise be fully disallowed.
The bill is moderately complex due to its technical tax language and procedural details, but a careful reading of its 10 pages is sufficient to understand its core mechanisms and implications.
Section 2(b)
Election for Conservation Easement Dispute Resolution
This provision allows partnerships with open tax disputes related to conservation easement deductions (claimed before December 31, 2025) to elect a special settlement. By making this election, the partnership agrees to a specific allowed deduction amount and pays a settlement amount, which resolves all federal income tax liability, including penalties and interest, attributable to the excess deduction.
Supporters argue
Supporters argue this provision offers a practical solution to a complex and resource-intensive problem for both taxpayers and the IRS. It provides a clear path to resolution, avoiding years of costly litigation and uncertainty, and allows taxpayers to move on.
Critics contend
Critics might contend that this provision effectively grants a partial amnesty to those who engaged in what the IRS considers abusive tax schemes, potentially undermining tax enforcement efforts and encouraging future aggressive tax planning.
Tradeoffs
Balances the desire for tax certainty and reduced litigation burden against concerns about perceived leniency for aggressive tax strategies and potential revenue loss.
Section 2(c)
Calculation of Allowed Deduction Cap
This section defines the "settlement limitation amount," which is the maximum deduction allowed under the election. Generally, it is 2.5 times the aggregate capital contributed by ultimate taxpayer partners. For certain contributions meeting specific requirements (e.g., for historic preservation or certified historic structures), it is 3.2 times the capital contributed, excluding any capital derived from loans by organizers.
Section 2(e)
Settlement Payment and Penalty Structure
This provision details how the "settlement amount" is calculated and paid. It comprises a "tax component" (excess deduction multiplied by the highest individual tax rate) and a "penalty component." The penalty component applies a 20% rate for deductions exceeding 150% of the settlement limitation amount, and a 40% rate for deductions exceeding 200% of that amount, without regard to reasonable cause defenses. Interest is waived for amounts paid within 90 days of enactment.
Section 2(f)
Direct Assessment for Non-Participating Partners
If an electing partnership cannot remit the full settlement amount because some ultimate taxpayer partners refuse to contribute their share, this provision allows the partnership to identify these "non-contributing partners." The IRS will then directly assess these partners their allocable share of the settlement amount, plus an additional 25% of their share of the tax component. These partners can contest the computation only after paying the assessed amount and filing a refund claim.
Section 2(g)
Rules for Existing Settlements and Litigation
This section outlines how the election interacts with existing tax proceedings. Partnerships with prior closing agreements or compromises must exclude those resolved matters. Those with pending stipulated decisions in Tax Court can withdraw them to elect. No election is allowed if a court decision is final. Partnerships that made a Section 6226 election (pass-through election for BBA partnerships) must revoke it to use this new election.
Section 3
Clarification of "Contributing Building" for Historic Preservation
This section amends the Internal Revenue Code (Sections 170(h)(4)(C) and 47(c)(3)(A)) to clarify the definition of a "contributing building" within a registered historic district. It specifies that a building is "contributing" if it's identified as such in the National Register nomination or related documentation, or if certified by the Secretary of the Interior. This change applies retroactively for Section 170 purposes to open tax years and prospectively for Section 47 (rehabilitation credit) purposes.
This section mandates that all eligible contributions from partnerships within a "common marketing group" (defined as partnerships where the same principal organizer or manager was responsible for soliciting, structuring, or facilitating the contributions) must be treated as a single eligible contribution for the election. The claimed deduction, settlement limitation, and settlement amount are computed on a combined basis across all such partnerships.
Section 2(d)
Why it matters:This is standard legislative practice for anti-abuse or aggregation rules, ensuring that related entities cannot circumvent the intent of the law by operating separately or fragmenting their operations.
Case for: Proponents argue this prevents organizers of multiple similar schemes from fragmenting their operations to avoid the full impact of the settlement, ensuring a comprehensive resolution for all related transactions.
Case against: Some partnerships might argue that being grouped with others they had limited direct interaction with, simply due to a common promoter, could complicate their individual settlement process or force them into a group decision they don't fully control.
Estimated impact: Potentially aggregates numerous individual partnership disputes into larger, more complex group settlements, increasing the overall financial stakes and administrative burden for the "common marketing group."
The running of any period of limitation on assessment with respect to any tax attributable to an eligible contribution for which an election is made is suspended from the date of filing the election statement until the earlier of 2 years after the date such election becomes effective or the date the election becomes void, and for 90 days thereafter.
Section 2(b)(8)
Why it matters:This is a standard protective measure in tax legislation, ensuring the IRS has sufficient time to pursue cases if a settlement process doesn't fully resolve the underlying issue or if the election is voided.
Case for: Proponents argue this is necessary to protect the government's interests, ensuring that the act of attempting a settlement doesn't inadvertently cause the statute of limitations to expire, leaving the IRS unable to collect if the election is voided.
Case against: Some taxpayers might view this as extending the period of uncertainty, even if they are attempting to resolve their case, potentially prolonging the overall timeline of their tax dispute.
Estimated impact: Extends the IRS's assessment window for potentially thousands of conservation easement cases, providing a safety net for the government.