IRS Notice 2022-52: What Are the Disclosure Rules?

In October 2024, the U.S. Department of the Treasury and the IRS issued final regulations (T.D. 10007) that identify certain syndicated conservation easement (SCE) transactions as “listed transactions.” The IRS has long expressed concern that these arrangements are used to generate inflated tax deductions for investors. By designating these SCEs as listed transactions, the IRS imposes disclosure requirements on both the investors who participate and the advisors who promote or manage them.

This action provides a solid legal foundation for IRS enforcement, following a period where its prior procedures were challenged in court. The final regulations aim to increase transparency and provide the IRS with the information needed to scrutinize transactions designed for tax avoidance rather than genuine land conservation. The new rules also render the prior guidance in Notice 2017-10 obsolete.

Identifying the Listed Transaction

A syndicated conservation easement transaction is a listed transaction if it meets specific criteria. A primary feature relates to promotional materials suggesting that an investor could expect a charitable contribution deduction worth at least two and a half times their investment.

This 2.5-to-1 deduction-to-investment ratio is a red flag for the IRS. The SECURE 2.0 Act of 2022 introduced a law that disallows a charitable deduction for contributions from a pass-through entity, like a partnership, if the deduction amount exceeds 2.5 times a partner’s basis in that entity. The final regulations work in conjunction with this law.

The transaction’s structure is the other defining element. The arrangement involves a pass-through entity that accepts investments, acquires property, and donates a conservation easement to a qualified organization. The large charitable deduction is then passed through to the investors.

The combination of the promised high-return deduction and the use of a syndicated pass-through entity defines the listed transaction. The IRS’s focus is on transactions where the primary purpose appears to be generating a tax benefit disproportionate to the investment and conservation value. Transactions that are substantially similar are also covered by these rules.

Required Disclosures for Participants

An individual, trust, or business entity that has invested in an SCE identified as a listed transaction has a disclosure obligation to the IRS. This disclosure is made using Form 8886, Reportable Transaction Disclosure Statement. Failure to file this form can result in significant penalties.

When completing Form 8886, participants must provide specific details about the transaction. This includes identifying the transaction by its official name, the tax year of participation, and the amount of the expected tax deduction or other tax benefits claimed.

The official Form 8886 can be downloaded from the IRS website, and participants should use the most current version of the form. The form is not an admission of wrongdoing but a required transparency measure.

Obligations for Material Advisors

The disclosure requirements under the final regulations extend to the individuals and firms who organize and promote these transactions. These parties are known as “material advisors.” A material advisor can include promoters, appraisers, accountants, and attorneys who provide assistance or advice regarding the transaction and receive a minimum fee for their services.

Material advisors have a separate reporting duty. They must file Form 8918, Material Advisor Disclosure Statement, with the IRS. This form requires advisors to provide a detailed description of the syndicated conservation easement transaction they promoted. They must also describe the potential tax consequences of the transaction and maintain a list of all investors or participants they advised.

This obligation allows the IRS to understand the transaction’s mechanics and to cross-reference this information with the disclosures made by participants on Form 8886. Like participants, material advisors face substantial penalties for failing to meet their disclosure obligations.

Filing Procedures and Deadlines

Filing deadlines are specified within the regulations. A participant must file Form 8886 for each taxable year of participation. This form must be attached to the income tax return for that year.

In addition to attaching the form to the tax return, a separate copy of the disclosure statement must be sent to the IRS Office of Tax Shelter Analysis (OTSA) at the following address: Internal Revenue Service, OTSA Mail Stop 4915, 1973 Rulon White Blvd., Ogden, UT 84201.

Material advisors must also send their completed Form 8918 directly to OTSA. The deadline for this filing is the last day of the month that follows the end of the calendar quarter in which the person became a material advisor.