Investors Sued Insurers Over Denied Tax Deductions
Taxpayers who purchased insurance for conservation easement deductions are suing as the IRS denies claims.
Updated on Oct. 6, 2026 in Taxes
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At least 20 lawsuits have been filed by investor partnerships against insurance companies following the rejection of syndicated conservation easement tax deductions. The IRS has identified these transactions as tax avoidance schemes, creating over $36 billion in disputed federal tax deductions.
Why it matters
The conflict highlights the financial risk for 28,000 investors who utilized these tax maneuvers to seek deductions far exceeding their original investments. As the IRS enforces penalties, investors are turning to insurance policies that were intended to cover losses from adverse tax proceedings.
Insurance companies issued policies covering an estimated $1 billion in limits against these claims. Investors now face a 21% tax on disallowed contributions plus a 5% misstatement penalty.
The players
Internal Revenue Service
The federal agency responsible for tax collection and enforcement that has aggressively targeted syndicated conservation easement deductions.
Jack Fisher
An accountant sentenced to prison in 2024 for his role in promoting syndicated conservation easement transactions.
James Sinnott
An attorney sentenced to prison in 2024 for his involvement in facilitating tax avoidance schemes.
The details
Promoters structured these transactions by purchasing land, inflating its value via appraisals, and selling shares of the resulting conservation tax deductions to investors. When the IRS disallowed these deductions, investors sought to trigger insurance policies purchased to protect against such losses. The disputes are currently concentrated in tax courts, with cases involving specific land parcels, such as one in Alabama where a $10.3 million investment was linked to an appraised value of $53.6 million.
Timeline
1980: Provision allowing conservation land donation deductions was made permanent.
2016: IRS first identified these transactions as tax avoidance schemes.
2019: The IRS added these transactions to its Dirty Dozen list.
2022: Federal law effectively shut down the maneuver.
May 2026: Total of 1,140 cases remained in Tax Court or under audit.
Money Landscape
The crackdown on syndicated conservation easements represents one of the largest IRS enforcement efforts against tax avoidance schemes in recent decades. It follows a multi-year trajectory where federal scrutiny intensified from initial identification to the total legislative prohibition in 2022.
Taxpayers involved in syndicated conservation easements should review their prior returns and potential penalty exposure with a qualified tax professional. Because the IRS has applied both interest and penalties, investors should determine if they are currently under audit or named in existing litigation.
The takeaway
Tax avoidance strategies that rely on heavily inflated valuations face extreme scrutiny and are rarely sustainable over time. Review your own tax filings with a professional to ensure that any charitable deductions are supported by independent and verified documentation.
Further reading
For broader information on tax liability and enforcement, visit our Taxes section.
Source note: This article includes information reported by Business Insurance.
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