Conservation Easements: Appraisal Requirements for Tax Deduction Claims
What a Conservation Easement Is
A conservation easement is a voluntary, legally binding restriction recorded against a property's deed, permanently limiting how the land may be used. The landowner retains title and continues to own, use, and occupy the property, but gives up certain development or use rights — typically the right to subdivide, build beyond an agreed footprint, clear timber, or convert agricultural land to other uses. Those rights are transferred to a qualified land trust or government entity, which holds and enforces the restriction in perpetuity.
To qualify for a federal charitable deduction under IRC Section 170(h), the easement must be a “qualified real property interest” granted in perpetuity to a “qualified organization”, and it must be exclusively for conservation purposes as defined in the statute: preserving land for outdoor recreation or education by the general public, protecting a relatively natural habitat of fish, wildlife, or plants, preserving open space (including farmland and forest land) pursuant to a clearly delineated federal, state, or local governmental conservation policy or for scenic enjoyment, or preserving a historically important land area or certified historic structure. Meeting the technical definition of “conservation purpose” is a threshold requirement — it does not by itself establish the value of what was given up, which is where the appraisal comes in.
The “Qualified Appraisal” Requirement
Any noncash charitable contribution deduction over $5,000 requires a qualified appraisal prepared by a qualified appraiser, under IRC Section 170(f)(11) and Treasury Regulation § 1.170A-17. For conservation easements — where claimed deductions routinely run into six and seven figures — this requirement is applied strictly, and the IRS has shown it will disallow a deduction outright over technical noncompliance, independent of whether the underlying value claim has merit.
The appraiser must:
• Hold verifiable education and experience valuing the specific type of property at issue (raw land, agricultural land, timberland, or a historic structure — general residential or commercial appraisal credentials are not automatically sufficient).
• Regularly perform appraisals for compensation.
• Not be the donor, the donee, a party to the transaction, an employee of any of those parties, or barred from practice before the IRS.
• Prepare the appraisal in accordance with the substance and principles of USPAP.
Timing and filing rules matter as much as the appraiser's qualifications:
• The appraisal must be prepared no earlier than 60 days before the date of contribution, and completed no later than the due date (including extensions) of the return on which the deduction is first claimed.
• A completed appraisal summary — Form 8283, Section B — must be signed by the appraiser and by an authorized official of the donee organization, and attached to the return.
• The full appraisal report does not have to be filed with the return, but it must exist, be contemporaneous, and be produced on request — the IRS has disallowed deductions where the taxpayer could not produce a timely, complete appraisal even when the claimed value was otherwise defensible.
Practical read: procedural defects — a late appraisal, a missing signature, an appraiser without the right subject-matter background — are an easy, no-judgment-call basis for the IRS to deny a deduction in full. Get this part right before spending time refining the value conclusion.
The Before-and-After Valuation Method
The IRS and the courts value a conservation easement as the difference between the fair market value of the property before the restriction and its fair market value after, under Treasury Regulation § 1.170A-14(h)(3). Both halves of that calculation carry specific, and frequently litigated, requirements.
BEFORE Value: must reflect the property's highest and best use — but the regulation requires an objective assessment of how immediate or remote the likelihood is that the property would actually be developed to that use absent the easement, not merely a use that is legally or physically possible. Existing zoning, wetlands, access constraints, and market demand all bear on whether a claimed highest and best use is realistic or aspirational.
AFTER Value: must account for the specific restrictions imposed, while recognizing any remaining uses the easement still permits that increase value above the property's current use (for example, continued farming, limited additional building rights, or timber harvest under a management plan).
This is the single most common point of failure in easement appraisals, and the Eleventh Circuit's decision in Savannah Shoals, LLC v. Commissioner (July 16, 2026) is a current, instructive example. The taxpayer claimed a $23 million deduction on a 103-acre Georgia property, based on a highest-and-best-use opinion that the land would be developed as an aggregate quarry. The Tax Court found the quarry use was not financially feasible — limited local demand, transportation costs, and existing competing quarries made it commercially unrealistic — and instead valued the property using a contemporaneous arm's-length sale of an interest in the property and comparable sales data: $580,000 before the easement, $100,000 after, for an allowed deduction of $480,000. That is roughly a 98% reduction from the amount claimed. The Eleventh Circuit affirmed both the valuation and the 40% gross valuation misstatement penalty.
The lesson generalizes well beyond quarries: a highest-and-best-use conclusion has to be supported by market feasibility evidence — demand studies, absorption data, comparable transactions — not just a demonstration that the use is legally permitted. An appraiser (or a client-supplied theory of value) that skips this step is not producing a defensible opinion; it is producing audit bait.
Why IRS Scrutiny Has Increased
IRS attention to conservation easements has intensified sharply over the past decade, driven mainly by syndicated conservation easement transactions — structures in which promoters sell interests in a partnership that owns land, then donate an easement over that land and pass an outsized deduction through to investors, often several multiples of what investors paid in. The IRS designated these as “listed transactions” requiring special disclosure in Notice 2017-10.
That enforcement effort has had a genuinely mixed legal history, and the details matter if you're advising a client who was in one of these deals. In Green Valley Investors, LLC v. Commissioner, courts held that Notice 2017-10 was issued without the notice-and-comment process the Administrative Procedure Act requires, which undercut the IRS's original procedural basis for treating these as listed transactions. That is a procedural win on how the IRS labeled the transactions — it did nothing to rehabilitate the underlying valuations. On the merits, the Tax Court has continued to reject the great majority of claimed deductions in syndicated cases, with reported outcomes striking down well over 90% of the value claimed in case after case. As of early 2026, roughly 700 of these cases remain active in Tax Court with another 400 in examination or at IRS Appeals, and the IRS opened what it has described as a final settlement initiative in January 2026 — full disallowance of the deduction with reduced (not eliminated) penalties, on terms most practitioners view as worse than earlier offers, which saw only about 40% taxpayer uptake.
Congress has since closed the primary economic loophole prospectively. The Charitable Conservation Easement Program Integrity Act, enacted December 29, 2022 as IRC Section 170(h)(4)(C), disallows a partnership's qualified conservation contribution to the extent the deduction allocated to a partner exceeds 2.5 times that partner's adjusted basis in the partnership, with exceptions for partnerships held more than three years and for family partnerships. This does not touch appraisal methodology, but it removes most of the tax-arbitrage motive that made syndicated deals attractive, and signals where enforcement priority sits.
Net effect for a legitimate, non-syndicated donor: the IRS is looking harder at every easement file, the burden of proof effectively sits with the taxpayer on valuation, and an appraisal that would have passed a light-touch review a decade ago may not survive exam today.
What Makes an Easement Appraisal Defensible
A defensible conservation easement appraisal is built on documentation, not on a confident number. At minimum, it should include:
• A clearly documented before-and-after analysis under §1.170A-14(h)(3), with the reasoning for the before-value highest and best use tied to objective market evidence of feasibility and likelihood, not just legal permissibility.
• Market-derived comparable sales for both the before and after scenarios — actual transactions of similar property, not speculative development pro formas standing alone.
• A specific, line-by-line accounting of what the easement actually restricts, tied to the deed language rather than generic boilerplate about “conservation restrictions.”
• Review of the deed's extinguishment and proceeds provisions — how sale or condemnation proceeds are split between donor and donee if the easement is ever judicially extinguished. This is not just a legal drafting issue; it directly affects whether the contribution is treated as “protected in perpetuity.” It is also an area of live circuit conflict: the Sixth Circuit upheld the IRS's extinguishment-proceeds regulation in Oakbrook Land Holdings v. Commissioner, while the Eleventh Circuit in Hewitt v. Commissioner found the IRS's application of that same regulation — barring the donor from subtracting the value of post-donation improvements before splitting proceeds — arbitrary and capricious. Where a case lands can turn on which circuit it's filed in, which is exactly why the appraiser and the drafting attorney need to coordinate, not work in silos.
• A qualified appraiser with demonstrable, subject-specific experience — timberland, agricultural land, or historic structures each call for different expertise than a generic land appraisal.
Red Flags That Sink a Deduction on Exam
• A claimed highest and best use (mining, quarrying, dense residential subdivision, resort development) unsupported by a market feasibility study — the single most common failure point, and the one that cost Savannah Shoals roughly 98% of its claimed deduction.
• A before-value conclusion that is wildly out of step with a recent arm's-length sale of the same or a comparable interest in the property.
• Reliance on projected income or development pro formas in place of comparable sales evidence.
• An appraiser without direct, provable experience in the relevant property type.
• An appraisal completed outside the 60-day-before-to-return-due-date window, or a Form 8283 Section B missing a required signature.
• Involvement in a syndicated partnership structure where the deduction claimed is a large multiple of investor contribution — this alone now draws heightened scrutiny regardless of the appraisal's technical quality.
Bottom Line
A conservation easement can be sound land-use and estate planning, and the charitable deduction can be legitimate and substantial. But the IRS's current enforcement posture means the appraisal is the load-bearing wall of the entire deduction claim. The practical sequence: engage a qualified appraiser with direct subject-matter experience before the transaction closes, insist on a before-and-after analysis grounded in real market evidence rather than a favorable legal theory, and have the appraiser and the drafting attorney coordinate on the deed's conservation-purpose and extinguishment language rather than treating valuation and legal drafting as separate workstreams. Every current case discussed here — Green Valley, Oakbrook, Hewitt, Savannah Shoals — turned on exactly one of these three things going wrong.
This article is for general information only and does not constitute legal, tax, or appraisal advice for a specific transaction. Donors considering a conservation easement should engage qualified appraisal, legal, and tax professionals before proceeding.
Dunkin Real Estate Advisors provides USPAP-compliant conservation easement appraisals built to withstand IRS scrutiny. Contact us to discuss your easement valuation needs.
