Week in Insights: Conservation Easement Scrutiny May Hurt History

Demand for one type of real estate space can outpace another as industries collapse and markets shift—potentially placing historic buildings on the chopping block. Conservation easements could help protect them if the IRS and the US Tax Court adopt a more hands-off approach.

The US has too much commercial real estate and too little residential housing. The resulting push to convert the former into the latter could mean historic structures that don’t fit neatly into new development plans are razed rather than preserved.

It’s happened before. The decline of agricultural estates in Great Britain from the 18th through the 20th centuries led to the demolition of thousands of country houses. These grand architectural gems had stood for centuries, and historians look back on that period as a tragic cultural loss.

Conservation easements are a potential safeguard for historic commercial properties. These tax agreements entail property owners volunteering to be restricted in how they change buildings in exchange for preferential tax treatment. The logic is that if demolishing a building is in the owner’s best economic interest, tax benefits may be able to make up the difference.

But the IRS has recently begun scrutinizing historic easements due to abuse, often challenging their validity based on valuation disputes.

Fraudulent claims should be rejected. But if preservation easement rules become so strict that even good-faith applicants can’t be certain of approval, property owners would need to consider the administrative headache of getting the tax benefits—in addition to calculating the cost of preserving a historic property. That might convince some to favor demolition instead.

Historic preservation is vital to maintaining the character and cultural fabric of cities. The IRS and courts should take a lighter touch when evaluating historic preservation easements, ensuring that legitimate efforts aren’t caught in a bureaucratic morass.

—Andrew Leahey

The former rectory cottage of Greystones, believed to be haunted by the spirit of a monk who once lived at the house.

Photographer: Carl Court/Getty Images

Welcome to the Week in Insights for Bloomberg Tax’s latest analysis and news commentary. This week, experts analyzed how the Trump administration should approach the OECD’s global tax deal, ways tax authorities can better use beneficial ownership data, and more.

A View From the Trenches

Clay Hodges, Moss Adams

The 2025 tax season presents unique challenges for tax professionals, particularly in the realm of tax controversy.

With so much turmoil at the IRS, practitioners must adapt to slower response times, more audit backlogs, and heightened taxpayer anxiety. Managing client expectations in this evolving landscape requires clear communication, strategic planning, and a proactive approach.

Tax professionals must educate clients about the realities of IRS staffing shortages and the delays that come with them. Setting realistic expectations for audits, appeals, and general correspondence is crucial.

Practitioners should emphasize the importance of timely filings and complete documentation to avoid unnecessary disputes. They should encourage their clients to resolve issues at the lowest possible level within the IRS, minimizing the need for prolonged litigation.

Dealing with the IRS effectively during tax season requires a mix of persistence and patience. Tax professionals should rely on proven strategies, such as escalating matters through the IRS Taxpayer Advocate Service when necessary, using digital resources such as e-services for quicker responses, and maintaining meticulous records of all interactions.

With the workload and pressure of tax season, stress management is crucial. Many tax professionals combat burnout by setting boundaries with clients, taking short but frequent breaks, and delegating tasks. Exercise, meditation, and unplugging from work after hours can help maintain mental clarity.

Incorporating balance into daily routines can sustain long-term success in the field. By staying informed, advocating for clients, and prioritizing well-being, tax pros can manage this tax season and future tax seasons effectively.

Author Information

Clay Hodges specializes in tax controversy and strategic planning, representing taxpayers under audit at the federal and state levels.

Insights

Three Things Tax Preparers Should Tell Their Clients This Season

AB Tax Law’s Adam Brewer says tax preparers should consider the “trinity of foreign accounts compliance” when working with clients this tax season.

Tax Authorities Deserve Full Benefits of Transparency Reforms

Open Ownership’s Thom Townsend says information about the real owners of companies can help governments identify red flags for tax avoidance and evasion, carry out investigations, and ultimately boost tax revenue.

India’s Government Moves to Simplify, Streamline Tax Compliance

AZB & Partners’ Aditya Singh Chandel, Suhail Bansal, and Meghna Mittal explain how taxpayers can benefit from India’s tax reforms but add there are potential challenges to consider.

Targeting the IRS Shows DOGE’s Stated Purpose Is Just a Pretext

CBPP’s Chuck Marr says the Trump administration’s IRS firings and attempts to cut funding should prompt Congress to step in on the agency’s behalf.

New IRS Research Tax Credit Rules Sparks a Tax Season Scramble

Moss Adams’ Travis Riley and Josh Harbin explain how practitioners and their clients can comply with new requirements on Form 6765 to claim research tax credits for the 2024 tax filing season.

Tax Issues Loom for Employers Fielding Late Enrollment Requests

Ivins, Phillips & Barker’s Alex Maged and Percy Lee examine employer benefit plan rules, saying that delayed enrollment requests can cause tax status loss and breach-of-contract issues, among other problems.

Trump Must Approach Global Tax Deal With Scalpels, Not Buzzsaws

Tax Foundation’s Daniel Bunn says President Donald Trump should take a pragmatic approach to the global minimum tax that avoids a chaotic outcome.

Businesses Must Integrate ESG Strategies to Meet New Challenges

KPMG’s Stephan Freismuth says that environmental, social, and governance principles should still be a priority for business and need to be an integral part of policy across corporate departments.

Big Law’s Silence on Trump Attacking Firms Should Scare Us All

Zimmer Citron & Clarke’s David Zimmer and Edwina Clarke say major law firms need to band together and speak out against Trump targeting lawyers—their fiduciary duty to clients complicates the issue, but it’s no excuse for silence.

Lawyers Must Not Stay Quiet in Face of Trump Attack on Firms

Former Fordham Law School dean Matthew Diller says President Donald Trump’s actions targeting the legal profession will force attorneys to consider their role in upholding democracy.

Columnist Corner

Technically Speaking design by Jonathan Hurtarte/Bloomberg Tax

Instead of eliminating grocery taxes, states should offer income-based exemptions or allow municipalities to retain the taxes and reinvest the revenue into low-income assistance programs, Andrew Leahey says in his latest Technically Speaking column.

Without a plan to offset lost revenue, a full repeal of grocery taxes would be a short-term political win that could bring long-term consequences, Andrew writes, concluding that “the public interest is best served through tax relief that’s sustainable—not merely expedient.” Read More

News Roundup

IRS Job Cuts to Bring Delays in Legal Work, Curbs to Easy Filing

The Trump administration’s latest plan to pare back the IRS would slow the agency’s legal work and constrain taxpayers’ ability to file returns easily, practitioners and other observers say.

SALT Cap Bypass Appeal Challenges Move to Boost Federal Coffers

Three states challenging a Treasury rule that curbs their programs to circumvent the $10,000 cap on state and local tax deductions are set to argue in federal appeals court on Thursday in a case that could lower federal tax revenue to the benefit of high earners.

Tax Bill’s ‘Magic Math’ Approaches Inflection Point in Congress

Republican pursuits of a controversial scoring method pivotal to plans to extend a suite of expiring tax cuts are approaching a make-or-break moment on Capitol Hill in coming weeks.

Pepsi Loses Bid to Overturn Illinois Tax Avoidance Ruling

PepsiCo Inc. should have included its snack food subsidiary Frito-Lay’s income on its Illinois tax returns because the latter doesn’t qualify as an exempt foreign corporation, a state appeals court affirmed Wednesday.

Tax Management International Journal

IRS Clarifies “Foreign Derived” Service Income for FDII Regime

The extent to which services provided by a domestic corporation to a related foreign business recipient benefits its foreign operations and how service income may be characterized as being foreign derived for FDII purposes is clarified in a recent PLR, say K&L Gates partners.

Career Moves

Oliver Currall joined Fried Frank as a partner in its tax department in London, the firm announced Monday.

Charles Callahan III joined Bradley as a partner in its tax and trusts and estates practice groups in Tampa, Fla.

Jeremy Curtis joined Edwin Coe as a partner in its private client team.

If you’re changing jobs or being promoted, send your submission to TaxMoves@bloombergindustry.com for consideration.