H.R. 9398: Historic Preservation and Land Conservation Certainty Act

This bill would create a one-time option for certain partnerships involved in conservation easement tax deductions to settle open tax disputes with the IRS. In plain terms, it gives partnerships that claimed these deductions in tax years ending on or before December 31, 2024, a 180-day window after enactment to make an election to resolve related federal income tax issues if the matter is still open or under IRS review, appeal, or litigation.

What the settlement option does

If a partnership chooses this option, it would file an election statement and pay a calculated settlement amount. In return:

• The deduction allowed for the conservation contribution would be limited to a specified amount called the settlement limitation amount.
• Payment of the settlement amount would generally resolve federal income tax liability, including penalties and interest, for the part of the claimed deduction that exceeds that limit.
• The partnership, its partners, related pass-through entities, and the ultimate taxpayers receiving the deduction would generally waive the right to contest the settlement figures, except for limited review of calculation errors.

The bill defines the settlement amount as the sum of:

• a tax component, based on the excess deduction multiplied by the highest tax rate in effect for the relevant years; and
• a penalty component, based on IRS accuracy-related penalty rules.

The partnership would generally need to pay the full amount when filing the election. If some partners do not contribute their share, the bill sets out rules allowing the unpaid amounts to be assessed directly against those non-contributing partners.

Common marketing groups

The bill also creates special rules for partnerships that were part of the same common marketing group—meaning groups of partnerships where the same organizer, manager, promoter, or related person helped structure or market the transactions. In those cases, the bill treats the eligible contributions as a single combined matter for purposes of the election, and the group can act through a designated partnership. The members of the group would be jointly and severally liable for the settlement amount until it is paid.

Limits and review

The IRS could review the election only to check computational accuracy—for example, whether the deduction amount, basis, settlement limitation, tax component, or penalty component was calculated correctly. The bill does not allow the IRS, in this process, to revisit the underlying fair market value or other substantive tax issues for the settled contribution.

If there is a calculation dispute, the partnership can seek administrative review or go to Tax Court on the computation question. If an additional amount is later determined, the election can stay in effect if that amount is paid within the allowed time.

The bill also says no election can be made if the case has already reached a final court decision, and it coordinates with prior settlements and certain existing partnership tax procedures.

Changes to conservation easement and historic preservation rules

Separately, the bill changes the tax rules for certain conservation contributions tied to historic districts. It updates the definition of qualifying property so that, in some cases, a building can qualify if it is a “contributing building” in a historic district as shown in National Register records, maps, inventories, or other approved district documentation, rather than relying only on a separate certification by the Secretary of the Interior.

It also makes related conforming changes to the tax credit rules under section 47, and it applies these changes to certain open tax years and pending cases, with some limits based on whether a tax year is already closed under the statute of limitations.

Relevant Companies

• None found