# Bulletin No. 2024–43

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/agency%3Airs%3Ac96058fe5591a6a1

## Record

- **Collection:** Agency decision
- **Document type:** Agency decision

## Text

HIGHLIGHTS
OF THIS ISSUE




Bulletin No. 2024–43
October 21, 2024

These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.

EMPLOYEE PLANS
Notice 2024-73, page 1007.

This notice provides guidance regarding discrete issues
related to the application of the nondiscrimination rules of
section 403(b)(12) with respect to the ERISA long-term,
part-time (LTPT) employee rules for a section 403(b) plan.
The ERISA LTPT rules were added under section 125 of
the SECURE 2.0 Act of 2022 and are effective for plan
years beginning after December 31, 2024. This notice also
(1) provides that the Department of the Treasury and the
Internal Revenue Service anticipate issuing proposed regulations with respect to section 403(b)(12)(D) and guidance
with respect to sections 202(c) and 203(b)(4) of ERISA, (2)
announces that the final regulation that the Treasury Department and the IRS intend to issue related to long term, part
time employees under section 401(k) plans will apply no
earlier than to plan years that begin on or after January 1,
2026, and (3) asks for comments on the content of this
notice.

EXEMPT ORGANIZATIONS
Announcement 2024-35, page 1013.

Revocation of IRC 501(c)(3) Organizations for failure to
meet the code section requirements. Contributions made to
the organizations by individual donors are no longer deductible under IRC 170(b)(1)(A).

INCOME TAX
Notice 2024-70, page 1001.

This notice explains the circumstances under which the
four-year replacement period under section 1033(e)(2) is

Finding Lists begin on page ii.

extended for livestock sold on account of drought. The
Appendix to this notice contains a list of counties that experienced exceptional, extreme, or severe drought conditions
during the 12-month period ending August 31, 2024. Taxpayers may use this list to determine if any extension is
available.

Rev. Proc. 2024-38, page 1010.

This revenue procedure provides guidance on the effect on
the income requirements under §§ 142(d) and 42 of the
alternative income eligibility requirements for the Department of Housing and Urban Development–Veterans Affairs
Supportive Housing (HUD–VASH) program set forth in the
notice published by HUD in the Federal Register on August
13, 2024, 89 FR 65769.

Rev. Rul. 2024-22, page 980.

The revenue ruling holds that Bourse de Montréal (MX),
a regulated exchange of Québec, Canada, is a “qualified
board or exchange” within the meaning of section 1256(g)
(7)(C).

Rev. Rul. 2024-23, page 981.

The revenue ruling holds that European Energy Exchange,
a regulated exchange of Germany, is a “qualified board or
exchange” within the meaning of section 1256(g)(7)(C).

T.D. 10007, page 981.

This document contains final regulations that identify certain syndicated conservation easement transactions and
substantially similar transactions as listed transactions, a
type of reportable transaction. Material advisors and certain participants in these listed transactions are required
to file disclosures with the IRS and are subject to penalties
for failure to disclose. The regulations affect participants in
these transactions as well as material advisors.

SPECIAL ANNOUNCEMENT
Notice 2024-72, page 1005.

This notice grants relief under section 7508A to taxpayers
affected by terrorist attacks throughout 2023 and 2024
in the State of Israel. The notice postpones deadlines for
certain time-sensitive taxpayer acts (e.g., filing and paying
taxes) and government acts (e.g., assessing and collecting

taxes) for affected taxpayers for a full year, until September
30, 2025. The “covered area” includes the State of Israel,
the West Bank and Gaza. The notice also identifies categories of affected taxpayers and provides a non-exhaustive
list of the acts postponed. The separate determination of
terroristic action and grant of relief in this notice will also
postpone acts that were postponed by Notice 2023-71 until
September 30, 2025 for taxpayers eligible for relief under
both notices.

The IRS Mission
Provide America’s taxpayers top-quality service by helping
them understand and meet their tax responsibilities and
enforce the law with integrity and fairness to all.

Introduction
The Internal Revenue Bulletin is the authoritative instrument
of the Commissioner of Internal Revenue for announcing official rulings and procedures of the Internal Revenue Service
and for publishing Treasury Decisions, Executive Orders, Tax
Conventions, legislation, court decisions, and other items of
general interest. It is published weekly.
It is the policy of the Service to publish in the Bulletin all substantive rulings necessary to promote a uniform application
of the tax laws, including all rulings that supersede, revoke,
modify, or amend any of those previously published in the
Bulletin. All published rulings apply retroactively unless otherwise indicated. Procedures relating solely to matters of internal management are not published; however, statements of
internal practices and procedures that affect the rights and
duties of taxpayers are published.
Revenue rulings represent the conclusions of the Service
on the application of the law to the pivotal facts stated in
the revenue ruling. In those based on positions taken in rulings to taxpayers or technical advice to Service field offices,
identifying details and information of a confidential nature are
deleted to prevent unwarranted invasions of privacy and to
comply with statutory requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned

against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—1986 Code.
This part includes rulings and decisions based on provisions
of the Internal Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B,
Legislation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative
Rulings. Bank Secrecy Act Administrative Rulings are issued
by the Department of the Treasury’s Office of the Assistant
Secretary (Enforcement).
Part IV.—Items of General Interest.
This part includes notices of proposed rulemakings, disbarment and suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.

The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.

October 21, 2024 

Bulletin No. 2024–43

Part I
Section 1256.—Section
1256 Contracts Marked to
Market

(7)(C). The Mercantile Division of the
Montréal Exchange was an exchange
associated with MX that has ceased operations and is now dormant.

(Also §§ 446, 481, 7805; 1.446-1, 301.7805-1).

LAW

Rev. Rul. 2024-22

Section 1256(g)(7) provides that the
term “qualified board or exchange” means:
(A) a national securities exchange
that is registered with the Securities and
Exchange Commission,
(B) a domestic board of trade designated as a contract market by the CFTC,
or
(C) any other exchange, board of trade,
or other market that the Secretary of the
Treasury or her delegate determines has
rules adequate to carry out the purposes of
§ 1256.

ISSUE
Is Bourse de Montréal (MX), which is
a regulated exchange of Québec, Canada,
a qualified board or exchange within the
meaning of § 1256(g)(7)(C) of the Internal Revenue Code (Code)1?
FACTS
MX is a regulated exchange of Québec, Canada. On December 23, 2011, the
Commodity Futures Trading Commission
(CFTC) published final rules regarding
the registration with the CFTC of foreign boards of trade (FBOT). See Registration of Foreign Boards of Trade, 76
FR 80674 (Dec. 23, 2011), codified at
17 CFR Part 48. The effective date for the
final rules was February 21, 2012. Under
the CFTC FBOT registration system, the
CFTC may issue an Order of Registration
to an FBOT, allowing the FBOT to provide direct access to its electronic trading and order matching system from the
United States. On August 25, 2015, the
CFTC granted an Order of Registration
to MX under the CFTC FBOT registration system. An FBOT’s status under the
CFTC FBOT registration system is posted
online by the CFTC.
Rev. Rul. 86-7, 1986-1 C.B. 295, determined that the Mercantile Division of the
Montréal Exchange is a qualified board or
exchange within the meaning of § 1256(g)

1

HOLDING
The Internal Revenue Service (IRS)
determines that MX, which is a regulated
exchange of Québec, Canada, is a qualified board or exchange within the meaning of § 1256(g)(7)(C) as long as MX
holds a valid Order of Registration under
the CFTC FBOT registration system.
Effect on other revenue rulings
Rev. Rul. 86-7 is obsoleted.

that are not covered by the exception in
§ 1256(b)(2).
Under the authority of § 7805(b)(8),
the IRS will not challenge a position taken
prior to November 1, 2024, with respect to
a transaction occurring prior to such date,
by a taxpayer that reasonably relied on the
conclusion in Rev. Rul. 86-7.
CHANGE IN METHOD OF
ACCOUNTING
A change in the treatment of MX Contracts to comply with this revenue ruling is
a change in method of accounting within
the meaning of §§ 446 and 481 and the
regulations thereunder. The Commissioner
grants consent to a taxpayer to change its
method of accounting for MX Contracts
entered into on or after November 1, 2024,
to the § 1256 mark-to-market method for
the first taxable year during which the taxpayer holds such contracts. The requirement to file a Form 3115, Application for
Change in Accounting Method, in § 1.4461(e)(3)(i) of the Income Tax Regulations
is waived. The change is made on a cut-off
basis and is inapplicable to MX Contracts
that were entered into before November
1, 2024. Because the change is made on a
“cut-off” basis, there is no potential omission or duplication of income or deductions, and an adjustment under § 481 is
neither permitted nor required.

PROSPECTIVE APPLICATION

DRAFTING INFORMATION

Under the authority of § 7805(b)(8),
this revenue ruling is effective for MX
Contracts entered into on or after November 1, 2024. In the preceding sentence, the
term “MX Contracts” means futures contracts and futures contract options that are
traded on or subject to the rules of MX,
that are described in § 1256(g)(1)(A), and

The principal author of this revenue
ruling is Jonathan A. LaPlante of the
Office of Associate Chief Counsel (Financial Institutions & Products). For further
information regarding this revenue ruling, contact Jonathan A. LaPlante at (202)
317-5102 (not a toll-free number).

Unless otherwise specified, all “Section” or “§” references are to sections of the Code.

October 21, 2024

980

Bulletin No. 2024–43

Section 1256.—Section
1256 Contracts Marked to
Market

rules adequate to carry out the purposes of
§ 1256.

ment under § 481 is neither permitted nor
required.

HOLDING

DRAFTING INFORMATION

(Also §§ 446, 481, 7805, 1.446-1, 301.7805-1).

The Internal Revenue Service determines that European Energy Exchange,
which is a regulated exchange of Germany, is a qualified board or exchange
within the meaning of § 1256(g)(7)(C) as
long as European Energy Exchange holds
a valid Order of Registration under the
CFTC FBOT registration system.

The principal author of this revenue
ruling is Shawn Tetelman of the Office of
Associate Chief Counsel (Financial Institutions & Products). For further information regarding this revenue ruling, contact
Shawn Tetelman at (202) 317-7053 (not a
toll-free number).

Rev. Rul. 2024-23
ISSUE
Is European Energy Exchange, which
is a regulated exchange of Germany, a
qualified board or exchange within the
meaning of § 1256(g)(7)(C) of the Internal Revenue Code (Code)1?
FACTS
European Energy Exchange is a regulated exchange of Germany. On December
23, 2011, the Commodity Futures Trading
Commission (CFTC) published final rules
regarding the registration with the CFTC of
foreign boards of trade (FBOT). See Registration of Foreign Boards of Trade, 76 FR
80674 (Dec. 23, 2011), codified at 17 CFR
Part 48. The effective date for the final rules
was February 21, 2012. Under the CFTC
FBOT registration system, the CFTC may
issue an Order of Registration to an FBOT,
allowing the FBOT to provide direct access
to its electronic trading and order matching
system from the United States. On November 5, 2019, the CFTC granted an Order of
Registration to European Energy Exchange
under the CFTC FBOT registration system.
An FBOT’s status under the CFTC FBOT
registration system is posted online by the
CFTC.
LAW
Section 1256(g)(7) provides that the
term “qualified board or exchange” means:
(A) a national securities exchange
that is registered with the Securities and
Exchange Commission,
(B) a domestic board of trade designated as a contract market by the CFTC,
or
(C) any other exchange, board of trade,
or other market that the Secretary of the
Treasury or her delegate determines has

1

PROSPECTIVE APPLICATION
Under the authority of § 7805(b)(8),
this revenue ruling is effective for European Energy Exchange Contracts entered
into on or after November 1, 2024. In
the preceding sentence, the term “European Energy Exchange Contracts” means
futures contracts and futures contract
options that are traded on or subject to
the rules of European Energy Exchange,
that are described in § 1256(g)(1)(A), and
that are not covered by the exception in
§ 1256(b)(2).
CHANGE IN METHOD OF
ACCOUNTING
A change in the treatment of European
Energy Exchange Contracts to comply
with this revenue ruling is a change in
method of accounting within the meaning of §§ 446 and 481 and the regulations
thereunder. The Commissioner grants
consent to a taxpayer to change its method
of accounting for European Energy
Exchange Contracts entered into on or
after November 1, 2024, to the § 1256
mark-to-market method for the first taxable year during which the taxpayer holds
such contracts. The requirement to file a
Form 3115, Application for Change in
Accounting Method, in § 1.446-1(e)(3)(i)
of the Income Tax Regulations is waived.
The change is made on a cut-off basis
and is inapplicable to European Energy
Exchange Contracts that were entered into
before November 1, 2024. Because the
change is made on a “cut-off” basis, there
is no potential omission or duplication
of income or deductions, and an adjust-

26 CFR 1.6011-9: Syndicated conservation easement listed transactions

T.D. 10007
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 1
Syndicated Conservation
Easement Transactions as
Listed Transactions
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations.
SUMMARY: This document contains
final regulations that identify certain syndicated conservation easement transactions and substantially similar transactions
as listed transactions, a type of reportable
transaction. Material advisors and certain
participants in these listed transactions are
required to file disclosures with the IRS
and are subject to penalties for failure to
disclose. The regulations affect participants in these transactions as well as material advisors.
DATES: Effective date: These regulations
are effective on October 8, 2024.
Applicability date: For applicability
dates, see §1.6011-9(h).
FOR FURTHER INFORMATION
CONTACT: Concerning any provisions

Unless otherwise specified, all “Section” or “§” references are to sections of the Code.

Bulletin No. 2024–43

981

October 21, 2024

in the final regulations within the jurisdiction of the Associate Chief Counsel
(Income Tax & Accounting), Joshua S.
Klaber, (202) 317-4624, and Eugene Kirman, (202) 317-5149, and concerning any
provisions in the final regulations within
the jurisdiction of the Associate Chief
Counsel (Passthroughs & Special Industries), Charles Wien, (202) 317-5279 (not
toll-free numbers).
SUPPLEMENTARY INFORMATION:
Authority
This document amends the Income
Tax Regulations (26 CFR part 1) by adding final regulations under section 6011
of the Internal Revenue Code (Code) to
identify certain syndicated conservation
easement transactions and substantially
similar transactions as listed transactions,
a type of reportable transaction (final regulations).
Section 6001 of the Code provides
an express delegation of authority to the
Secretary of the Treasury or her delegate
(Secretary), requiring every taxpayer to
keep the records, render the statements,
make the returns, and comply with the
rules and regulations that the Secretary
deems necessary to demonstrate tax liability and prescribes, either by notice served
or by regulations.
Section 6011 of the Code provides an
express delegation of authority to the Secretary, requiring every taxpayer to “make a
return or statement according to the forms
and regulations prescribed by the Secretary” and “include therein the information
required by such forms or regulations.”
In addition, section 6707A(c)(1) of
the Code, in defining the term “reportable transaction” relating to the imposition of penalties under section 6707A(a)
on “[a]ny person who fails to include on
any return or statement any information
with respect to a reportable transaction
which is required under section 6011 to be
included with such return or statement,”
provides an express delegation of authority to the Secretary, stating that, “[t]he
term ‘reportable transaction’ means any
transaction with respect to which information is required to be included with
a return or statement because, as determined under regulations prescribed under

October 21, 2024

section 6011, such transaction is of a type
which the Secretary determines as having
a potential for tax avoidance or evasion.”
Section 6707A(c)(2), in defining the term
“listed transaction” provides an express
delegation of authority to the Secretary,
stating that, “[t]he term ‘listed transaction’
means a reportable transaction which is
the same as, or substantially similar to, a
transaction specifically identified by the
Secretary as a tax avoidance transaction
for purposes of section 6011.”
The final regulations are also issued
under the express delegation of authority
under section 7805(a) of the Code.
Background
I. The Proposed Regulations
On December 8, 2022, the Department of the Treasury (Treasury Department) and the IRS published a notice of
proposed rulemaking (REG-106134-22)
in the Federal Register (87 FR 75185)
proposing regulations that would identify certain syndicated conservation
easement transactions and substantially
similar transactions as “listed transactions” for purposes of §1.6011-4(b)(2)
and sections 6111 and 6112 of the Code
(proposed regulations). The provisions of
the proposed regulations are explained in
greater detail in the preamble to the proposed regulations. The Treasury Department and the IRS received 26 comments
in response to the proposed regulations and notice of public hearing that
are the subject of this final rulemaking.
The comments are available for public
inspection at https://www.regulations.
gov or upon request. A public hearing
on the proposed regulations was held by
teleconference on March 1, 2023, at 10
a.m. Eastern Time, at which five speakers
provided testimony.
After full consideration of the comments received and the testimony provided, these final regulations adopt the
proposed regulations with certain revisions described in the Summary of Comments and Explanation of Revisions.
II. Section 605 of the SECURE 2.0 Act
The SECURE 2.0 Act of 2022
(SECURE 2.0 Act), enacted as Division

982

T of the Consolidated Appropriations Act,
2023, Public Law 117-328, 136 Stat. 4459
(December 29, 2022), was enacted just 15
days after publication of the proposed regulations. Section 605(a) of the SECURE
2.0 Act added section 170(h)(7)(A) to the
Code, which provides that a contribution
by a partnership (whether directly or as
a distributive share of a contribution of
another partnership) is not treated as a
qualified conservation contribution for
purposes of section 170 if the amount of
such contribution exceeds 2.5 times the
sum of each partner’s relevant basis in
such partnership, as defined in section
170(h)(7)(B). Section 170(h)(7)(F) states
that the rules of section 170(h)(7) apply
equally to S corporations and other passthrough entities.
Section 605(a) of the SECURE 2.0
Act also added section 170(h)(7)(C)
through (E) to the Code, which provide
three exceptions to the general disallowance rule in section 170(h)(7)(A). Section 170(h)(7)(C) creates an exception
for contributions by a pass-through entity
that satisfy a three-year holding period;
section 170(h)(7)(D) creates an exception
for contributions made by family passthrough entities; and section 170(h)(7)
(E) creates an exception for contributions
made to preserve a building that is a certified historic structure (as defined in section 170(h)(4)(C)).
Section 605(b) of the SECURE 2.0
Act added section 170(f)(19) to the Code,
creating additional reporting requirements
for any qualified conservation contribution (1) the conservation purpose of which
is the preservation of any building which
is a certified historic structure (as defined
in section 170(h)(4)(C)), (2) which is
made by a partnership (whether directly
or as a distributive share of a contribution of another partnership), and (3) the
amount of which exceeds 2.5 times the
sum of each partner’s relevant basis (as
defined in section 170(h)(7)) in the partnership making the contribution. Section
170(f)(19)(C) states that, except as may be
otherwise provided by the Secretary, the
rules of section 170(f)(19) apply to S corporations and other pass-through entities
in the same manner as such rules apply to
partnerships.
Section 170(f)(19)(A) provides that no
deduction is allowed for such a contribu-

Bulletin No. 2024–43

tion unless the entity making the contribution (1) includes on its return for the
taxable year in which the contribution
is made a statement that the entity made
such a contribution and (2) provides such
information about the contribution as the
Secretary may require.
Section 605(c) of the SECURE 2.0 Act
provides that no inference is intended as to
the appropriate treatment of contributions
made in taxable years ending on or before
the date of the SECURE 2.0 Act’s enactment (December 29, 2022), or as to any
contribution for which a deduction is not
disallowed by reason of section 170(h)(7).
On November 20, 2023, the Treasury Department and the IRS published
a notice of proposed rulemaking (REG112916-23) in the Federal Register (88
FR 80910) proposing regulations concerning the statutory disallowance rule
enacted by the SECURE 2.0 Act, including the calculation of relevant basis. On
June 28, 2024, the Treasury Department
and the IRS finalized these regulations in
TD 9999 (89 FR 54284).
Summary of Comments and
Explanation of Revisions
This Summary of Comments and
Explanation of Revisions summarizes
all significant comments addressing the
proposed regulations, and describes and
responds to comments concerning: (1)
the listed transaction system generally;
(2) conservation easements generally; (3)
the continued necessity of finalizing these
regulations following passage of section
605 of the SECURE 2.0 Act; (4) the elements of the listed transaction identified in
these final regulations; and (5) the role of
donee organizations under these final regulations.
Comments outside the scope of this
rulemaking are not adopted.
I. Comments Addressing the General
Rules of the Listed Transaction System
Many comments addressed rules that
apply generally to any listed transaction.
While these comments are outside the
scope of this rulemaking, the Treasury
Department and the IRS have nonetheless
considered these comments in finalizing
these regulations.

Bulletin No. 2024–43

A. Requirement to report for currently
“open” periods upon identification of a
listed transaction
Several commenters argued that the proposed regulations’ listed transaction designation is impermissibly retroactive because
taxpayers who previously filed tax returns
(or amended tax returns) reflecting their
participation in syndicated conservation
easement transactions but that did not disclose their participation pursuant to Notice
2017-10 will be required to disclose those
transactions once these final regulations are
published in the Federal Register. The commenters opined that this so-called retroactive reach of the proposed listed transaction
designation is unfair and likely a violation
of law under various theories, including that
it may be a taking under the Fifth Amendment or constitute involuntary servitude
under the Thirteenth Amendment, and that
it undermines the purpose of the Administrative Procedure Act’s (APA) notice and
comment process. Several commenters
noted that the Tax Court has not determined
whether a listed transaction designation can
be applied retroactively; thus, their theory
has not been resolved judicially.
The reporting rules for listed transactions are outside the scope of these final
regulations, which merely identify a
listed transaction. The reporting rules for
listed transactions are found in §1.60114, which was issued pursuant to notice
and comment and finalized most recently
in TD 9350 (72 FR 43146), published in
2007 and which is not amended by these
final regulations. Section 1.6011-4(e)
(2)(i) requires reporting of transactions
entered into prior to the publication of
guidance identifying a transaction as a
listed transaction if the statute of limitations for assessment of tax is still open
when the transaction becomes a listed
transaction. While the reporting mandated
by §1.6011-4 may be with respect to prior
periods, the disclosure obligation is itself
not retroactive – it is a current reporting
obligation. Thus, the comments regarding an impermissible retroactive burden
required by §1.6011-4 are without merit.
B. Determining an “open year”
Several commenters requested additional guidance on what constitutes an

983

“open year” for purposes of reporting
the listed transaction. These commenters
opined that the final regulations should not
be able to hold open (or re-open) a statute
of limitations for a return that was filed
before the relevant transaction became a
listed transaction. One commenter stated
that such a rule would result in taxpayers
currently under audit and disputing penalties based on an expired statute of limitations finding one legal basis of their case
evaporated, undoing months or years of
analysis and evaluation.
Guidance on open years for purposes
of applying §1.6011-4 is outside the scope
of these final regulations, which merely
identify a listed transaction. However, if
a taxpayer who is required to disclose a
listed transaction for a taxable year for
which the statute of limitations has not
expired prior to the identification of the
listed transaction fails to do so, then the
taxpayer’s statute of limitations will continue to stay open for that taxable year
as provided in section 6501(c)(10) of the
Code. Section 6501(c)(10) provides that,
if a taxpayer fails to include on any return
or statement for any taxable year any
information with respect to a listed transaction (as defined in section 6707A(c)(2)
of the Code) which is required under section 6011 to be included with such return
or statement, the time for assessment of
any tax imposed by the Code with respect
to such transaction does not expire before
the date that is one year after the earlier
of (1) the date the taxpayer provides the
required information or (2) the date that
a material advisor meets the requirements
of section 6112 with respect to a request
by the Secretary under section 6112(b)
relating to such transaction with respect to
such taxpayer. Section 301.6501(c)-1(g)
(3)(iii) of the Procedure and Administration Regulations (26 CFR part 301),
which was issued pursuant to notice and
comment and finalized most recently in
TD 9718 (80 FR 16973), published in
2015, and which is not amended by these
final regulations, provides (1) that the taxable years to which the failure to disclose
relates include each taxable year that the
taxpayer participated (as defined under
section 6011 and the regulations thereunder) in a transaction that was identified
as a listed transaction and for which the
taxpayer failed to disclose the listed trans-

October 21, 2024

action as required under section 6011, and
(2) if the taxable year in which the taxpayer participated in the listed transaction is different from the taxable year in
which the taxpayer is required to disclose
the listed transaction under section 6011,
the taxable years to which the failure to
disclose relates include each taxable year
for which the taxpayer participated in the
transaction.
Several commenters asked for guidance
as to what constitutes an “open” tax year for
taxpayers that took the position they were
not required to file a Form 8886, Reportable Transaction Disclosure Statement,
because Notice 2017-10 was invalidated.
This requested guidance is also outside the
scope of these final regulations for the reasons discussed in the prior paragraph.
C. Abating section 6707A penalties
One commenter expressed concern that
there are no adequate procedures or policies for abating section 6707A penalties
with respect to listed transactions. This
comment is outside the scope of these
final regulations as the regulations merely
identify a listed transaction. The rules
concerning section 6707A penalties are
found in §301.6707A-1, which was issued
pursuant to notice and comment and finalized most recently in TD 9853 (84 FR
11217), published in 2019 and which is
not amended by these final regulations.
D. Material advisors
The proposed regulations provided no
special rules for material advisors. However, the effect of identifying a listed
transaction is, in part, to require certain
disclosures from material advisors.
One commenter asked that the final
regulations provide guidance to appraisers
on the application of any material advisor
requirements, and suggested that, if an
appraiser is engaged after an easement is
put in place, the appraiser should not be
considered a material advisor.
The requested guidance is outside the
scope of these final regulations; however,
the Treasury Department and the IRS
note that the definition of material advisor is found in §301.6111-3(b), which
was issued pursuant to notice and comment and finalized in TD 9351 (72 FR

October 21, 2024

43157), published in 2007 and which is
not amended by these final regulations. A
material advisor is a person who makes a
“tax statement,” as defined in §301.61113(b)(2)(ii), and derives gross income
in excess of the “threshold amount,” as
defined in §301.6111-3(b)(3) (generally,
$10,000 for listed transactions). Section
301.6111-3 contains no exception for
providing advice “after” the transaction
is entered into. Section 301.6111-3(b)(4)
(i) provides that a person will be treated
as becoming a material advisor when all
of the following events have occurred (in
no particular order): (1) the person provides material aid, assistance, or advice
as described in §301.6111-3(b)(2); (2) the
person directly or indirectly derives gross
income in excess of the threshold amount
as described in §301.6111-3(b)(3); and
(3) the transaction is entered into by the
taxpayer to whom or for whose benefit the
person provided the tax statement, or in the
case of a tax statement provided to another
material advisor, when the transaction is
entered into by a taxpayer to whom or for
whose benefit that material advisor provided a tax statement. Thus, an appraiser
that is engaged after an easement is put in
place can be a material adviser based on
statements or actions after an easement is
put in place.
A few commenters argued that the
“retroactivity component” to material
advisors (due to required disclosures) is
impermissible or burdensome. This comment is without merit and outside the
scope of these final regulations; however,
the Treasury Department and the IRS note
that §301.6111-3(b)(4)(iii) provides that,
if a transaction that was not a reportable
transaction is identified as a listed transaction in published guidance after the
occurrence of the events described in
§301.6111-3(b)(4)(i), the person will be
treated as becoming a material advisor on
the date the transaction is identified as a
listed transaction. As the resulting obligations imposed are limited to actions the
person must take thereafter, the requirement is not retroactive.
II. Comments Concerning Conservation
Easements Generally
Several commenters addressed aspects
of conservation easements that are out-

984

side the scope of these final regulations
but have nonetheless been considered in
adopting these final regulations. This part
II of this Summary of Comments and
Explanation of Revisions describes and
responds to comments relating to: (1) the
consistency of these final regulations with
the congressional intent to conserve land;
(2) overvaluation abuse in abusive syndicated conservation easement transactions;
(3) whether disclosure of the listed transactions is needed since taxpayers must file
Form 8283, Noncash Charitable Contributions; and (4) requests for enforcement
data on syndicated conservation easement
transactions.
A. Supporting conservation while
combatting abuse
One commenter noted that abusive
syndicated conservation easement transactions are antithetical to the concept of
charity that section 170(h) was designed
to enable. The Treasury Department and
the IRS agree.
However, several commenters opined
that identification of syndicated conservation easement transactions as listed transactions is inconsistent with congressional
intent to promote conservation. These
commenters argued that the proposed
regulations disincentivize conservation
by increasing the audit risk of taxpayers
involved in syndicated conservation easement transactions and that the uncertainty
relating to what is considered a “substantially similar” transaction has a chilling
effect. These commenters further argued
that the proposed regulations go beyond
the scope of section 170(h)(7), violate the
separation of powers, and are contrary to
the priorities of the Administration.
The Treasury Department and the IRS
do not agree with the comments criticizing the identification of syndicated conservation easement transactions as listed
transactions. Contrary to the commenters’
assertions, Congress has made it clear that
it is concerned with abusive syndicated
conservation easement transactions. See,
e.g., Syndicated Conservation-Easement
Transactions, S. Prt. 116-44 (August
2020). The minimal impact on taxpayers
who claim legitimate charitable contribution deductions for qualified conservation
contributions and who may decide to file a

Bulletin No. 2024–43

protective disclosure is far outweighed by
the benefit of requiring disclosure for the
identified transactions. In addition, combatting abusive tax shelters is a priority for
the Federal government.
B. Valuation abuse
Several commenters noted that the
central problem with abusive syndicated
conservation easements is inaccurate,
inflated, and flawed appraisals and the
associated overvaluation of conservation
easements. A few commenters asked that
these final regulations be replaced with
“meaningful guidance” on valuation or
appraisal methodology, including modifications to the rules for qualified appraisals
under §1.170A-17 and guidance on how
to determine the highest and best use of
properties for purposes of easement valuation. One commenter suggested that
the IRS litigate fraudulent appraisal practices as an alternative to “questioning the
long-standing conservation practices of
donee organizations.” One commenter
suggested establishing an enhanced
appraisal process similar to the process
the IRS has established for the art community.
Any guidance on valuation is outside
the scope of these final regulations, which
are limited to identifying a listed transaction. The purpose of these final regulations is to require taxpayers and material
advisors to report transactions for which
the claimed value of a syndicated conservation easement contribution strongly
indicates overvaluation and thus tax
avoidance. The Treasury Department and
the IRS have challenged and will continue
to challenge abusive appraisal practices
and overvaluation.
C. Disclosures
Some commenters questioned why the
IRS needs to identify certain syndicated
conservation easements as a listed transaction when contributions of conservation
easements are already disclosed on the
Form 8283, which contains, among other
information, the easement’s appraised
value, when and how the property was
acquired, the donor’s cost or adjusted
basis, the amount deducted, and the date
of the contribution. The commenters noted

Bulletin No. 2024–43

that the Form 8283 must be prepared completely and accurately because a deduction will be disallowed if any information
is missing.
The Form 8283, which is filed as a part
of a taxpayer’s tax return, does not include
all the information contained on Form
8886. It also does not alert the Office of
Tax Shelter Analysis to the taxpayer’s participation in an abusive transaction, nor
does it trigger disclosure and other obligations of material advisors to the transaction. Accordingly, these comments are
not adopted.
D. Requests for enforcement data
Some commenters, citing to an issue in
the remand of CIC Services, LLC v. IRS,
592 F. Supp. 3d 677 (E.D. Tenn. 2022),
asserted that the proposed regulations
are arbitrary and capricious because, in
their opinion, the APA requires numerical data on syndicated conservation easement transactions as part of the rationale
for identifying a listed transaction. The
commenters requested the number of
past syndicated conservation easement
transactions, the number of syndicated
conservation easement transactions challenged, the status and/or outcome of every
current syndicated conservation easement
challenge, the number of syndicated conservation easement transactions deemed
abusive by courts, the dollar amounts
involved in syndicated conservation easement transactions, the number of taxpayers affected by syndicated conservation
easement transactions, the nature and
amount of the contributions involved, the
value and acreage of the property conserved by syndicated conservation easement transactions, and the effect of syndicated conservation easement transactions
on nature and wildlife.
CIC Services and other authorities do
not require the public release of enforcement data, or the other analysis commenters requested, as a part of rulemaking.
Section 6011 and the regulations thereunder require that the IRS (1) determine that
a transaction is a tax avoidance transaction
and (2) identify the transaction as a listed
transaction by notice, regulation, or other
form of published guidance. The Treasury
Department and the IRS have consistently
maintained, since the issuance of Notice

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2017-10, that certain syndicated conservation easement transactions are tax avoidance transactions and have identified them
as such by notice or regulation. An offer
to potentially be allocated a charitable
contribution deduction that is at least 2.5
times one’s investment, likely resulting in
a positive after-tax financial benefit from
what is supposed to be a charitable contribution, is strongly indicative of a tax
avoidance transaction and has been identified by Congress as such. See, e.g., section
170(h)(7). Further, the data requested by
commenters is unrelated to whether the
identified transactions are tax avoidance
transactions.
III. Comments Regarding the Necessity
of These Final Regulations in Light of
Section 605 of the SECURE 2.0 Act
Several commenters questioned the
need for the proposed regulations to be
adopted as final regulations, given the
enactment in December of 2022 of section
605 of the SECURE 2.0 Act, which added
section 170(h)(7) to the Code to disallow
a deduction for “the vast majority” of the
abusive syndicated conservation easement
transactions identified in the proposed
regulations. Commenters asked that, in
light of the legislation, the proposed regulations either be withdrawn or be revised
to take a “more surgical approach” that is
in accordance with the new statute (and
addresses other concerns).
Some of these commenters opined that
the proposed regulations were overbroad
and inconsistent with congressional intent,
in part because the proposed regulations
did not include the three exceptions to section 170(h)(7)(A) that Congress included
in section 170(h)(7)(C) through (E).
These commenters argued that syndicated
conservation easement transactions that
meet an exception to section 170(h)(7)(A)
should also be excepted from the definition of the listed transaction identified in
the proposed regulations.
Other commenters supported adopting
final regulations to help the IRS identify
promoters, material advisors, and donee
organizations involved in abusive syndicated conservation easement transactions.
The commenters noted that section 605 of
the SECURE 2.0 Act is prospective only.
These commenters, however, suggested a

October 21, 2024

few modifications to the proposed rules,
which are discussed later in this part III
and in part IV of this Summary of Comments and Explanation of Revisions.
The Treasury Department and the IRS
have concluded that it is in the interest of
sound tax administration to continue to
identify abusive syndicated conservation
easement transactions as listed transactions, notwithstanding passage of section
605 of the SECURE 2.0 Act. However, in
adopting the proposed regulations as final
regulations, the Treasury Department and
the IRS have made several modifications
to the proposed rules, as described in this
Summary of Comments and Explanation
of Revisions. Thus, these final regulations
are consistent with the commenters’ recommendation that the final regulations
take “a more surgical approach” to the
definition of the syndicated conservation
easement listed transaction following the
enactment of section 170(h)(7).
Specifically, these final regulations
cover three major classes of abusive syndicated conservation easement transactions (and substantially similar transactions): (1) those that involve contributions
occurring before December 30, 2022; (2)
those for which a charitable contribution
deduction is not automatically disallowed
by section 170(h)(7); and (3) those that
substitute the contribution of a fee simple
interest in real property for the contribution of a conservation easement.
A. Transactions occurring before
December 30, 2022
Section 170(h)(7)(A) does not apply to
contributions made on or before December 29, 2022. As a result, these final regulations are necessary to obtain reporting
of transactions that are the same as, or
substantially similar to, syndicated conservation easement transactions in cases
in which the conservation easements
were contributed before December 30,
2022, and the taxpayers did not disclose
the transaction pursuant to Notice 201710. Thus, these final regulations impose
reporting requirements on taxpayers who
had not previously disclosed their participation in transactions that are the same
as, or substantially similar to, syndicated
conservation easement transactions to the
extent that a taxpayer’s participation in the

October 21, 2024

transaction occurred in one or more taxable years as to which the statute of limitations had not run as of the date these
final regulations identify the transaction as
a listed transaction.
Some commenters contended that,
since many taxpayers have already
reported their transactions under Notice
2017-10, the IRS already has the information reporting targeted by the proposed
regulations. The Treasury Department and
the IRS agree that, in such cases, duplicative reporting under these final regulations
is unnecessary. Accordingly, these final
regulations explicitly provide that taxpayers who fully disclosed their participation in syndicated conservation easement
transactions pursuant to Notice 2017-10
do not need to disclose again under these
final regulations for any taxable years
covered by the prior disclosure.
B. Transactions not automatically
disallowed by section 170(h)(7)
The final regulations do not include
an exception for transactions that are
excluded from the automatic disallowance
rule in section 170(h)(7). Of note, the
SECURE 2.0 Act, which was enacted after
the proposed regulations were issued, does
not provide that the exceptions to section
170(h)(7)(A) contained in section 170(h)
(7)(C) through (E) are also exceptions for
purposes of the listed transaction rules.
To the contrary, section 605(c)(2) of the
SECURE 2.0 Act explicitly states: “No
inference is intended as to the appropriate
treatment of …any contribution for which
a deduction is not disallowed by reason of
section 170(h)(7) of the Internal Revenue
Code of 1986, as added by this section.”
Thus, Congress has indicated that the fact
that such transactions are not automatically disallowed does not mean that such
transactions could not be abusive.
There are at least two types of conservation easement transactions for which
a charitable contribution deduction is
not automatically disallowed by section
170(h)(7) that are appropriately considered listed transactions. First, transactions
satisfying any of the three exceptions
found in section 170(h)(7)(C) through
(E) that also contain all the elements of
a transaction identified as a listed transaction under these final regulations con-

986

tinue to be transactions that the Treasury
Department and the IRS view as likely
to be abusive. Thus, the final regulations
do not include any exceptions for transactions described in section 170(h)(7)(C)
through (E).
Second, any syndicated conservation
easement transaction for which a charitable contribution deduction is not automatically disallowed by section 170(h)(7)
because the amount of the partnership’s
contribution does not exceed 2.5 times the
sum of each partner’s relevant basis in the
partnership is nevertheless a listed transaction with respect to any partner who
received promotional materials offering
the possibility of being allocated a share
of the contribution that equals or exceeds
2.5 times that partner’s investment.
C. Transactions that involve other
contributions of real property
The preamble to the proposed regulations stated that transactions in which the
contributed property is described in section 170(h)(2)(A) or (B), or is a fee interest in real property, are transactions substantially similar to the listed transaction
identified in proposed §1.6011-9(b). Several commenters noted that this language
appears to imply that any transaction that
meets the elements of the listed transaction identified in the proposed regulations,
but that consists of the contribution of
real property, is substantially similar to
the listed transaction identified in the proposed regulations.
One commenter supported the inclusion
of fee simple contributions in the preamble to the proposed regulations and asked
that fee simple transactions be expressly
identified in the regulatory text of the final
regulations. Another commenter asked
that the final regulations “clarify” whether
fee simple contributions are considered
substantially similar to syndicated conservation easement transactions, stating that
“the preamble language is not law.” However, several other commenters questioned
why contributions of fee simple interests
in property would be considered transactions that are substantially similar to the
syndicated conservation easement transaction identified in the proposed regulations. One commenter contended that the
tax consequences, specifically taxpayer

Bulletin No. 2024–43

contribution base limitations and carryover periods, are different for fee simple
contributions and conservation easement
contributions.
The Treasury Department and IRS
continue to believe that a transaction that
meets the elements of the listed transaction identified in these final regulations,
but consists of the contribution of a fee
simple interest rather than of a conservation easement, is substantially similar to
the listed transaction identified in these
final regulations. The commenters questioning the treatment of contributions of
fee simple interests as substantially similar transactions failed to address the broad
definition of substantially similar found in
§1.6011-4(c)(4), which was issued after
notice and comment; that Congress specifically adopted the term “substantially
similar” in its subsequent enactment of
section 6707A(c)(2); and that Congress
specifically referenced the definition in
§1.6011-4(c)(4) when explaining that provision. See Footnote 232 of House Report
108-548(I), 108th Cong., 2nd Sess. 2004,
at 261 (June 16, 2004) (House Report)
(emphasis added):
The provision states that, except as provided in regulations, a listed transaction
means a reportable transaction, which
is the same as, or substantially similar
to, a transaction specifically identified
by the Secretary as a tax avoidance
transaction for purposes of section
6011. For this purpose, it is expected
that the definition of “substantially
similar” will be the definition used in
Treas. Reg. sec. 1.6011–4(c)(4). However, the Secretary may modify this
definition (as well as the definitions
of “listed transaction” and “reportable
transactions”) as appropriate.
In particular, despite the differing taxpayer contribution base limitations and
carryover periods between a fee simple
donation and a conservation easement
donation, the transactions can result in
similar types of tax consequences and be
either factually similar or based on the
same or a similar tax strategy.
In sum, the Treasury Department and
the IRS agree that any contribution of
real property (including contributions
of fee simple interests and contributions

Bulletin No. 2024–43

described in section 170(h)(2)(A) or (B))
that meets the elements of the listed transaction identified in the proposed regulations is a transaction that is substantially
similar to the listed transaction identified
in the proposed regulations. Accordingly, §1.6011-9(c)(7) of these final regulations explicitly states that a transaction
that meets all the elements described in
§1.6011-9(b), except that the transaction
involves the contribution of a fee simple
interest or the contribution of a real property interest described in section 170(h)
(2)(A) or (B) instead of a conservation
easement, is substantially similar (within
the meaning of §1.6011-4(c)(4)) to the
transaction described in §1.6011-9(b).
The final regulations contain an example showing a transaction involving the
contribution of a fee simple interest that
is substantially similar to the transaction
described in §1.6011-9(b).
D. Other substantially similar
transactions
Multiple commenters raised general
concerns about the potential scope of
transactions that are “substantially similar” to the listed transaction identified in
the proposed regulations. Several of those
commenters opined that the substantially
similar rule is void for vagueness or overbroad, and some commenters requested
that the term be made more specific. Several commenters asked whether the 2.5
times rule in proposed §1.6011-9(b)(1) is
a bright-line rule; in other words, whether
transactions for which the highest estimate of charitable contribution deduction
in the promotional materials is less than
2.5 times a taxpayer’s investment could be
substantially similar to the listed transaction identified in these regulations.
As previously discussed, the term “substantially similar” is part of the statutory
definition of a listed transaction in section
6707A(c)(2); furthermore, the regulatory
definition found in §1.6011-4(c)(4) was
adopted after notice and comment and
has been viewed favorably by Congress.
Under §1.6011-4(c)(4), whether a transaction is “substantially similar” to a syndicated conservation easement transaction
depends on the tax consequences, the
tax strategy, and other facts and circumstances related to the transaction. Section

987

1.6011-4(c)(4) further provides that the
term substantially similar must be broadly
construed in favor of disclosure.
The “substantially similar” rule provides an important backstop against advisors’ and promoters’ attempts to avoid
the reporting requirements. Consistent
with that objective, these final regulations
generally do not circumscribe the types
of transactions that may be substantially
similar to the listed transaction identified
in these final regulations. Nonetheless,
as discussed in part IV.A.3. of this Summary of Comments and Explanation of
Revisions, these final regulations do provide that the 2.5 times rule is a brightline rule. Thus, transactions in which the
promotional materials offer investors the
possibility of being allocated a charitable
contribution deduction of anything less
than 2.5 times a taxpayer’s investment
generally are not substantially similar to
the listed transaction identified in these
final regulations. However, if the taxpayer
is nonetheless allocated a charitable contribution deduction that equals or exceeds
2.5 times the taxpayer’s investment, the
rebuttable presumption in §1.6011-9(d)(3)
would apply.
Several commenters asked whether
transactions that involve contributions
other than real property, such as those that
involve contributions of artwork or other
non-cash items, are listed transactions.
The Treasury Department and the IRS
have determined that such transactions
are not “substantially similar” for purposes of these final regulations because
this listed transaction relates to contributions of real property, not of personal
property. The Treasury Department and
the IRS will continue to evaluate whether
the transactions raised by commenters are
tax avoidance transactions and may propose to identify such transactions as listed
transactions in future guidance.
A few commenters asked whether
transactions that do not involve a contribution by a pass-through entity (such as a
transaction involving a contribution by an
individual or a corporation) are “substantially similar” transactions. The Treasury
Department and the IRS have determined
that transactions that do not involve a
contribution by a pass-through entity are
not considered substantially similar transactions; however, these transactions like-

October 21, 2024

wise could be proposed to be identified as
tax avoidance transactions in future guidance.
One commenter asked whether transactions that involve deductions other than
under section 170 (that is, transactions
involving the “use of different Code provisions”), are considered “substantially
similar” to the syndicated conservation
easement transaction identified in the
proposed regulations. It is possible that
a pass-through entity could use a deduction other than allowed under section 170
to obtain the same or a similar type of
tax consequences, and that such transaction would either be factually similar or
based on the same or similar tax strategy
to the listed transaction identified in these
final regulations. Therefore, the Treasury
Department and IRS conclude it is possible that a transaction that abuses the application of a section of the Code other than
section 170, for example, section 642(c),
could be a substantially similar transaction. Under §1.6011-4(f)(1), taxpayers
who are uncertain whether a particular
transaction is substantially similar to a
syndicated conservation easement transaction may request a private letter ruling
from the IRS.
Several commenters expressed concern
that, given the uncertainty about whether
a particular transaction would be substantially similar to a listed transaction, the
regulations could have a chilling effect on
the willingness of qualified organizations
to accept contributions of conservation
easements if the section 4965 carveout
were eliminated in the final regulations.
As described in part V of this Summary of
Comments and Explanation of Revisions,
these final regulations maintain the section
4965 carveout for qualified organizations,
which addresses those concerns.
IV. Comments Regarding Elements of
the Listed Transaction Identified in the
Proposed Regulations
Several comments focused on the elements of the listed transaction identified
in the proposed regulations. This part
IV describes and responds to these comments, specifically comments regarding
(1) the 2.5 times rule; (2) application of
the 2.5 times rule; (3) timing rules; and (4)
definitions.

October 21, 2024

A. The 2.5 times rule
Commenters addressed the rationale
for the 2.5 times multiple, interaction with
the 2.5 times rule in section 170(h)(7), and
whether 2.5 times is a bright line.
1. Rationale for the 2.5 times multiple
Several commenters questioned the
rationale for the 2.5 times multiple in the
proposed regulations. Some commenters
argued that, depending on the top marginal tax rate, a 2.5 times multiple would
result in minimal, if any, tax benefit to
the investor. One commenter opined that,
because there is no explanation for how
the multiple was determined, there is no
way to determine whether this criterion is
reasonable.
The Treasury Department and the IRS
have concluded, consistent with Notice
2017-10, that once a transaction offers
the possibility of a charitable contribution deduction that equals or exceeds an
amount that is 2.5 times the amount of the
taxpayer’s investment, the transaction is
a tax avoidance transaction that justifies
a reporting obligation. At this 2.5 times
threshold, a taxpayer in the highest current
marginal tax bracket claiming a charitable contribution deduction for a qualified
conservation contribution will approximately break even before considering
State tax benefits, and, for any amounts
above 2.5 times, will have an economic
gain directly from making the charitable
contribution deduction. This multiple is
also aligned with the 2.5 times threshold
established by Congress in section 605
of the SECURE 2.0 Act, which disallows
certain deductions at the partnership level
for contributions exceeding 2.5 times the
sum of each partner’s relevant basis. Thus,
the Treasury Department and the IRS conclude that it is reasonable and in the sound
interest of tax administration to adopt the
2.5 times threshold as proposed.
2. Interaction with the 2.5 times rule in
section 170(h)(7)
Several commenters addressed the
interaction of the 2.5 times rule with
section 170(h)(7) and asked whether
only transactions in which the charitable contribution deduction promised in

988

the promotional materials is exactly 2.5
times the investment need to be disclosed
(because transactions in which the deduction amount exceeds 2.5 times the investment are generally disallowed by section
170(h)(7)). Under these final regulations,
both transactions in which the charitable
contribution deduction promised in the
promotional materials is exactly 2.5 times
the investment and transactions in which
the charitable contribution deduction
promised in the promotional materials
exceeds 2.5 times the investment must be
disclosed.
As discussed in part III of this Summary of Comments and Explanation of
Revisions, certain transactions for which
a deduction is not disallowed by section
170(h)(7) are nevertheless considered
listed transactions.
3. Whether 2.5 times is a bright line
As noted in part III.D. of this Summary
of Comments and Explanation of Revisions, several commenters asked whether
2.5 times is a bright line; in other words,
whether transactions for which the highest estimate of charitable contribution
deduction in the promotional materials
is less than 2.5 times a taxpayer’s investment could be considered substantially
similar transactions. One of these commenters encouraged the IRS to clarify
that the 2.5 times rule is not intended to
create or imply a safe harbor for excessive valuations below the 2.5 times
threshold and that the 2.5 times rule does
not implicitly approve charitable contribution deduction amounts less than 2.5
times a taxpayer’s investment. This commenter noted that, regardless of whether
a contribution is a listed transaction
pursuant to §1.6011-4(b)(2), it remains
subject to all the relevant requirements
of law, including those regarding valuation and substantiation of that valuation
by means of a qualified appraisal by a
qualified appraiser pursuant to §1.170A17 that is subject to review by the IRS
for its accuracy. A few commenters asked
the IRS to pick an actual number (for
example, 2.0, 2.25, 2.45, or 2.49 times)
at which a transaction will incur greater
IRS scrutiny.
The Treasury Department and the IRS
agree that taxpayers need some certainty

Bulletin No. 2024–43

on which transactions need to be disclosed
to the IRS. The Treasury Department and
the IRS have determined that a transaction in which the promotional materials offer the taxpayer the possibility of
being allocated a charitable contribution
deduction of only an amount less than 2.5
times the taxpayer’s investment and for
which the taxpayer is actually allocated
a charitable contribution deduction of an
amount less than 2.5 times the taxpayer’s investment (so that the rebuttable
presumption in §1.6011-9(d)(3) does
not apply) generally is not “substantially
similar” to the listed transaction identified in these final regulations. This determination takes into account both the need
for taxpayer certainty on reporting obligations and the possibility of being allocated a charitable contribution deduction
the amount of which is less than 2.5 times
the amount of the taxpayer’s investment
presents less risk of the type of net-positive financial benefit to investors that
exists at and above the 2.5 times threshold. This bright-line rule does not imply
that valuations giving rise to an amount
less than 2.5 times a taxpayer’s investment are properly valued. The Treasury
Department and the IRS agree with the
commenter that, regardless of whether a
contribution is a reportable transaction
pursuant to §1.6011-4, it remains subject
to all the relevant requirements of law.
For example, a claimed charitable contribution deduction amount that is 2.0
times the partner’s investment may still
be overvalued or unsubstantiated, and
the valuation remains subject to review
by the IRS for accuracy.
In view of the foregoing, these final
regulations add new §1.6011-9(d)(1) to
state that the 2.5 times threshold is a bright
line. However, this new rule also provides
that, if a pass-through entity engages in a
series of transactions (for example, contribution of an easement followed by contribution of a fee simple interest) with a
principal purpose of avoiding the application of this bright-line rule, the series of
transactions may be disregarded, or the
arrangement may be recharacterized in
accordance with its substance. Whether a
series of transactions has a principal purpose of avoiding the application of this
bright-line rule is determined based on all
the facts and circumstances.

Bulletin No. 2024–43

B. Application of the 2.5 times rule
The proposed regulations contained
three rules to address potential avoidance
of the 2.5 times rule. Taxpayers commented on each of these rules.
1. Multiple suggested deduction amounts
The proposed regulations contained a
rule that, if the promotional materials suggest or imply a range of possible charitable
contribution deduction amounts that may
be allocated to the taxpayer, the highest
suggested or implied deduction amount
will determine whether the 2.5 times rule
is met. In addition, if one piece of promotional materials (for example, an appraisal
or oral statement) suggests or implies
a higher charitable contribution deduction amount than suggested or implied
by other promotional materials, then the
highest suggested charitable contribution
deduction amount determines whether
the 2.5 times rule is met. As the preamble to the proposed regulations explained,
this rule is intended to prevent promoters
from circumventing the 2.5 times rule by
having promotional materials contain language that is inconsistent as to the amount
of the potential charitable contribution
deduction.
One commenter stated that the proposed rule “does not apply to ambiguities in the taxpayer’s materials, it allows
the Treasury to create ambiguities in the
taxpayer’s materials.” However, another
commenter asked whether a transaction
that meets the elements of the listed transaction identified in the proposed regulations, except that the partnership merely
promises that the investment will “grow
by” 2.5 times without mentioning a charitable contribution deduction, is considered a “substantially similar” transaction.
The intent of the rule is to prevent promoters from circumventing the 2.5 times rule
by creating ambiguous promotional materials, and the transaction described in the
preceding sentence would be a substantially similar transaction. Thus, these final
regulations adopt the rule as proposed.
2. Rebuttable presumption
The proposed regulations included a
rebuttable presumption deeming the 2.5

989

times rule to be met if (1) the pass-through
entity donates a conservation easement
within three years following a taxpayer’s
investment in the pass-through entity, (2)
the pass-through entity allocates a charitable contribution deduction to the taxpayer
the amount of which equals or exceeds
two and one-half times the amount of the
taxpayer’s investment, and (3) the taxpayer claims a deduction the amount of
which equals or exceeds two and one-half
times the amount of the taxpayer’s investment. The proposed regulations provided
that this presumption may be rebutted if
the taxpayer establishes to the satisfaction
of the Commissioner that none of the promotional materials contained a suggestion
or implication that investors might be allocated a charitable contribution deduction
the amount of which equals or exceeds an
amount that is two and one-half times the
amount of their investment in the passthrough entity.
Several commenters objected to the
rebuttable presumption rule, stating that
it is “arbitrary and capricious;” that taxpayers cannot prove a negative (particularly with respect to oral representations);
that any attempt to prove in court that oral
representations were not made is hearsay;
that the regulations do not speak to how a
taxpayer is able to rebut the presumption;
that it seems to be attempting to switch the
penalty burden from the IRS to taxpayers;
and that the IRS has demonstrated to taxpayers that it will neither be fair nor listen to reasonable evidence in syndicated
conservation easement tax disputes. Commenters asked for guidance on how taxpayers may be able to rebut the rebuttable
presumption.
The Treasury Department and the IRS
conclude that the rebuttable presumption is reasonable because it is unlikely
that a taxpayer would claim a deduction
for 250 percent of their investment in a
pass-through entity within three years
of making that investment and not have
received promotional materials offering
the possibility to do so. This presumption
is needed to address transactions with
respect to which taxpayers and promoters are not forthcoming about the content
or receipt of the promotional materials.
While the Treasury Department and the
IRS decline to provide a specific method
to rebut the presumption in these final

October 21, 2024

regulations because such rebuttal would
necessarily be dependent on the taxpayer’s specific facts and circumstances, the
Treasury Department and the IRS expect
that, in appropriate cases, taxpayers will
be able to establish to the satisfaction of
the Commissioner that none of the promotional materials contained a suggestion or
implication that investors might be allocated a charitable contribution deduction
the amount of which equals or exceeds an
amount that is two and one-half times the
amount of their investment in the passthrough entity. For example, a taxpayer
may be able to rebut the presumption
by establishing that the partnership was
not open to other investors (and thus the
only promotional materials were documents needed to execute the transaction)
or that similar properties in the same area
had increased significantly in value in
the period between the time the taxpayer
invested in the partnership and the date the
conservation easement was contributed.
Contrary to commenters’ assertions,
nothing in the proposed regulations suggested that the Commissioner will disregard evidence rebutting the presumption.
Section 7803(a)(3)(D) and (J) of the Code
require the Commissioner to ensure that
employees of the IRS are familiar, and
act in accordance, with taxpayer rights,
including the right to challenge the position of the IRS, the right to be heard, and
the right to a fair and just tax system. Furthermore, the phrase “to the satisfaction
of the Commissioner” does not preclude
future judicial review, and the Commissioner bears the burden of demonstrating that each of the other elements of the
listed transaction has been fulfilled and
may have the burden of production under
section 7491(c) of the Code in a court proceeding regarding the imposition of a penalty, depending on the party against whom
it is asserted. In the view of the Treasury
Department and the IRS, evidence regarding oral promotional materials generally
would not constitute inadmissible hearsay because the oral promotional materials would not be offered for the truth of
the matters asserted therein, but rather as
evidence of what was stated. See Fed. R.
Evid. 801(c)(2).
Some commenters asked whether the
rebuttable presumption implies that taxpayers do not need to report if (1) at least

October 21, 2024

three years have passed between the taxpayer’s investment in the pass-through
entity and the pass-through’s contribution
of a conservation easement or (2) if the
deduction amount is less than 2.5 times
the amount of an investor’s investment.
The rebuttable presumption does not carry
either of these implications.
The Treasury Department and the IRS
have decided to retain the rebuttable presumption in the final regulations because
the administrative need for a rebuttable
presumption outweighs the concerns
raised by the commenters. Taxpayers and
promoters are the persons with access to
and knowledge of the promotional materials involved in their transactions. Taxpayers should not be able to escape the
requirements of these final regulations
because their syndicators were effective
in masking their promises. Accordingly,
the final regulations retain the rebuttable
presumption rule.
3. Determining the amount of a
taxpayer’s investment in the pass-through
entity
The proposed regulations contained an
anti-stuffing rule providing that, for purposes of determining whether a transaction is a listed transaction, the amount of a
taxpayer’s investment in the pass-through
entity is limited to the portion of the taxpayer’s investment that is attributable to
the portion of the real property on which
a conservation easement is placed and
that produces the charitable contribution
deduction.
A few commenters noted that the term
“investment” in proposed §1.6011-9(b)
(1) is not defined, while one commenter
stated that the anti-stuffing rule found in
proposed §1.6011-9(d)(3) provides the
taxpayer’s investment for purposes of the
2.5 times rule. Several commenters stated
that the anti-stuffing rule in the proposed
regulations is inconsistent with the relevant basis rule in section 170(h)(7)(B),
and others suggested that the anti-stuffing
rule in the proposed regulations should
be replaced with the relevant basis rule in
section 170(h)(7)(B).
The Treasury Department and the IRS
note that the term “investment” is not
generally defined within the Code. However, the Treasury Department and the

990

IRS agree with the commenter stating that
the anti-stuffing rule found in proposed
§1.6011-9(d)(3) provides the taxpayer’s
investment for purposes of the 2.5 times
rule. Further, in response to comments that
relevant basis should also be permitted to
be used to determine investment, these
final regulations provide that a taxpayer
may determine the amount of their investment in the pass-through entity using one
of the methods provided in §1.6011-9(d)
(4), which identifies the anti-stuffing
method and, for contributions occurring
on or after December 30, 2022, adds the
relevant basis method in section 170(h)
(7)(B) as another method to determine the
amount of the taxpayer’s investment in
the pass-through entity. No other methods
may be used.
In response to commenters asserting
that relevant basis should replace the
anti-stuffing rule, the relevant basis computations under section 170(h)(7) do not
apply to all transactions for which disclosure is required under these final regulations (such as to contributions before
the effective date of section 170(h)(7) in
taxable years for which the statute of limitations is still open); thus, these final regulations retain the anti-stuffing method as
one method to determine investment for
purposes of the 2.5 times rule.
i. Anti-stuffing method
As mentioned before in part IV.B.3 of
this Summary of Comments and Explanation of Revisions, several commenters
addressed the anti-stuffing rule found in
the proposed regulations, which these
final regulations rename the “anti-stuffing
method” to determine investment for purposes of the 2.5 times rule. For example,
one commenter requested clarification on
how to determine the portion of the investment that is “attributable” to the real property on which the conservation easement
is placed. Another commenter stated that
the proposed anti-stuffing rule may give
rise to constitutional challenges because
it requires the separation of investment
assets, creating more cost for investment
managers and for investors, which they
contended is a limitation on interstate
commerce, a power reserved only for the
legislative branch. One commenter opined
that the anti-stuffing rule will be impos-

Bulletin No. 2024–43

sible to apply in practice; the commenter
noted that the example of the anti-stuffing
rule in the proposed regulations involved
marketable securities with an identifiable
fair market value and questioned how to
apply the anti-stuffing rule if the passthrough entity holds multiple pieces of
property. Another commenter stated that
the example in the proposed regulations
illustrating the anti-stuffing rule was
merely an example of the basis allocation
rules under section 755 of the Code and
that allocation rules under section 755 do
not require additional explanation.
The Treasury Department and the IRS
conclude that the anti-stuffing rule provides a reasonable method to determine the
taxpayer’s investment in the pass-through
entity by looking only to amounts attributable to the property generating the charitable contribution deduction. In response to
comments requesting additional guidance
on the determination of the amount of a
taxpayer’s investment, these final regulations provide that, under the anti-stuffing method, if an investor uses non-cash
assets to acquire its interest in the passthrough entity, then the fair market value
of such assets, rather than their basis, is
the relevant measure. In particular, under
§1.6011-9(d)(4)(ii) of these final regulations, the amount of a taxpayer’s investment in the pass-through entity is the portion of the cash and fair market value of
the assets the taxpayer uses to acquire its
interest in the pass-through entity that is
attributable to the real property on which
a conservation easement is placed (or the
portion thereof, if an easement is placed
on a portion of the real property) and
that produces the charitable contribution
deduction described in §1.6011-9(b)(3).
The Treasury Department and the
IRS disagree that the anti-stuffing rule is
impossible to apply in practice. Syndicated conservation easement transactions
often involve scenarios similar to the
example provided in the proposed regulations, in which the pass-through entity
owns only cash and marketable securities
in addition to its real property. Moreover,
these regulations apply to transactions
in which the promotional materials offer
the possibility of charitable contribution
deductions, and thus the parties involved
will have necessarily considered the possible allocation of charitable contribution

Bulletin No. 2024–43

deductions based on the taxpayer’s cost of
acquiring the interest in the pass-through
entity. Accordingly, in the view of the
Treasury Department and the IRS, it is not
unduly burdensome to require the parties
to determine the amount of the taxpayer’s
acquisition cost that is allocable to the
property giving rise to the charitable contribution deduction that is being offered.
ii. Relevant basis method
The Treasury Department and the IRS
recognize that partnerships and S corporations that engage in syndicated conservation easement transactions occurring
on or after December 30, 2022, will need
to calculate relevant basis for purposes of
section 170(f)(19), and, in addition, each
investor will need to calculate the amount
of the investor’s investment for purposes
of these listed transaction regulations. To
mitigate the burden of potentially duplicative calculations, these final regulations
add an alternative method to determine the
amount of a taxpayer’s investment. These
final regulations provide that, for contributions occurring on or after December
30, 2022, taxpayers may use their relevant
basis, as determined under section 170(h)
(7)(B) and the regulations thereunder, as
the amount of their investment for purposes of §1.6011-9(b)(1).
4. Modification of the determination of
investment for qualified conservation
contributions protecting historic
structures
One commenter stated that the proposed anti-stuffing rule did not adequately
consider the difference between qualified
conservation contributions protecting historic structures and those protecting natural open space or settings. This commenter
stated that, because historic preservation
projects protect the historic character of
a building, they often require additional
investment for rehabilitation; however, the
proposed rule did not consider cash raised
for, and invested into, the preservation,
rehabilitation and maintenance of certified
historic structures in the calculation of the
investment. The commenter further stated
that the proposed regulations did not
account for additional monies that need to
be invested in a project after an easement

991

is placed to ensure that the conservation
purpose is protected in perpetuity. The
commenter stated that cash, if invested
in the real property, should be considered
part of the taxpayer’s investment in the
real property when applying the 2.5 times
rule.
The Treasury Department and the IRS
conclude that the commenter’s proposed
changes to the anti-stuffing method are not
warranted. In general, one key element in
determining whether a transaction constitutes a syndicated conservation easement
listed transaction is the ratio of the amount
of the charitable contribution deduction
allocation that an investor is offered to
the amount the investor pays to obtain
that charitable contribution deduction
allocation. To that end, the anti-stuffing
method measures the amount of the taxpayer’s cost of acquiring the interest in the
pass-through entity that is attributable to
the real property on which a conservation
easement is placed (or the portion thereof,
if an easement is placed on a portion of
the real property) and that gives rise to the
charitable contribution deduction. Charitable contribution deductions are based
on either the fair market value or adjusted
basis of the property that is contributed as
of the time of the contribution. See, e.g.,
section 170(e). Therefore, in the view of
the Treasury Department and the IRS, it is
inappropriate, in determining the amount
of a taxpayer’s investment, to look to the
amounts expended on the property after
the time of the charitable contribution.
In general, every taxpayer that contributes a conservation easement will be
required to expend some amounts on the
property after the contribution, such as
for property taxes. However, amounts of
cash that are held for expenditures after
the date the conservation easement is
contributed, whether for property taxes,
repairs, or anything else related to the
property, are not as directly related to the
resultant charitable contribution deduction that a taxpayer claims as the expenditures related to the property that precede
the conservation easement contribution.
The Treasury Department and the IRS
have concluded that it is appropriate
for the anti-stuffing method to maintain
its focus on the amounts invested in the
property giving rise to the deduction as of
the time of the charitable contribution. In

October 21, 2024

addition, the Treasury Department and the
IRS have concluded that a rule that treats
certain cash holdings as attributable to the
real property if they are “earmarked” for
future expenditures related to the property
would be difficult to administer. Such a
rule would require factually intensive estimations and projections about the amount
of future expenditures that would be necessary to fulfill the purposes of the conservation easement (as opposed to merely
enhancing the value of the building). For
these reasons, the Treasury Department
and the IRS have concluded that the final
regulations should not adopt this comment. Therefore, the final regulations
add a clarification to §1.6011-9(d)(4)(ii),
which states that assets retained to pay for
costs related to the operation and maintenance of the real property on which the
conservation easement is placed, including costs that may be incurred in future
years, are not attributable to the contributed real property.
The Treasury Department and the IRS
will continue to consider whether any
additional clarifications or modifications
to the anti-stuffing method or the alternative relevant basis method of determining
the amount of the taxpayer’s investment
in the pass-through entity would be beneficial in the context of qualified conservation contributions protecting historic
structures.
C. Timing rules
Comments addressed both the timing
of the pass-through entity’s acquisition of
the real property and whether holding the
real property for a period of time before
the contribution of the conservation easement is made should result in the transaction being excluded from the listed transaction identified in these regulations.
1. Timing of the pass-through entity’s
acquisition of the real property
Proposed §1.6011-9(b)(2) provided
that one of the steps of a syndicated conservation easement is that the taxpayer
acquires an interest directly, or indirectly
through one or more tiers of pass-through
entities, in the pass-through entity that
owns real property (that is, becomes an
investor in the entity). A few commenters

October 21, 2024

asked whether this step is met with respect
to investors who acquire an interest in an
entity that does not hold real estate at the
time the interest in the pass-through entity
is acquired. One of these commenters
requested that the IRS clearly state if it
intends proposed §1.6011-9(b)(2) to be
met in the case of an investor who acquires
an interest in a pass-through entity that
subsequently acquires real estate or an
interest in a pass-through entity holding
real estate. The commenter also stated
that, if the real property is purchased after
the investor invests in the pass-through
entity, the transaction would fall outside of
the anti-stuffing rule and therefore would
be less likely to trigger the 2.5 times rule
(because the amount of the taxpayer’s
investment would never be reduced by the
anti-stuffing rule).
The Treasury Department and the IRS
note that the proposed regulations clearly
stated that the transaction falls within the
definition of a syndicated conservation
easement transaction “regardless of the
order” in which the steps occur; therefore,
the proposed regulations already encompassed the scenario in which a taxpayer
acquires an interest in the pass-through
entity before the pass-through entity
acquires the real property. However, for
additional clarity, these final regulations
make that point explicit in §1.6011-9(b)
(2).
The Treasury Department and the IRS
do not agree with the commenter that, if
the real property is purchased after the
investor invests in the pass-through entity,
the transaction falls outside of the reach
of the anti-stuffing method. The proposed
and final regulations specifically provide
that the order in which the four steps of
a syndicated conservation easement transaction occur is not relevant. In response
to this comment, an example in these
final regulations illustrates the application of the anti-stuffing method if the
pass-through entity acquires the real property after a taxpayer invests in the passthrough entity.
2. Holding periods
The proposed regulations did not
contain any exceptions from the disclosure requirements for property held on
a long-term basis. Several commenters

992

asked that the final regulations include
an exception for such transactions.
One commenter questioned why investors who have held interests in a passthrough entity for over one year would
be required to report the syndicated conservation easement transaction because
such investors would not need to rely
on a tacked holding period to avoid the
limitations of section 170(e). One commenter contended that contributions of
land held for less than three years will
generally not be made. Several commenters observed that contributions with
a long-term holding period are excepted
from the disallowance rule of section
170(h)(7)(A) pursuant to section 170(h)
(7)(C). One commenter opined that a
hypothetical transaction in which the
promotional materials state that the property will be worth more than 2.5 times
the taxpayer’s investment in ten years
should not give rise to a listed transaction. This commenter asked that the final
regulations specify the amount of time
that must elapse between the purchase of
the property interest and the contribution
of the easement for a transaction to be
listed. Another commenter asked about a
taxpayer that inherited land that is then in
his possession for over twenty years and
decides to donate the land for the benefit
and protection of the environment.
The Treasury Department and the IRS
conclude that it is not necessary to modify
the proposed rules to provide an exception
for property that has been held for a period
of time. First, tax abuse in syndicated conservation easement transactions is not
limited to mismatches between an investor’s holding period in its interest in the
pass-through entity and the pass-through
entity’s holding period in the real property
on which the conservation easement is
placed. For example, even for transactions
in which investors may otherwise be eligible to claim a deduction of the fair market
value of the conservation easement, the
deduction is nonetheless abusive if the
easement is improperly overvalued.
Second, as discussed in part III.B. of
this Summary of Comments and Explanation of Revisions, the exception to the
disallowance rule in section 170(h)(7) for
contributions outside of a three-year holding period does not necessitate a similar
exception in these final regulations, and

Bulletin No. 2024–43

these final regulations do not provide an
exception for syndicated conservation
easements that are described in section
170(h)(7)(C).
Third, notwithstanding the commonly
anticipated appreciation of real property
values over time, it is not the case that
property values always increase. The
period a property is held is one element of
a fact-intensive inquiry into whether the
property has been overvalued. Attempting to craft an exception based on a holding period would result in a rule that is
over-inclusive and/or under-inclusive,
depending on the specific facts. The proposed hypotheticals for property held for
ten or twenty years seems unlikely to meet
all elements of the listed transaction identified in these regulations (for example, it
might not be held in a pass-through entity
or involve promotional materials). Therefore, the final regulations do not include
an exception for long-term holding periods.
D. Definitions
Commenters addressed the definitions
of (1) charitable contribution deduction,
(2) conservation easement, (3) participant,
(4) promotional materials, and (5) syndicated conservation easement transaction.
1. Charitable contribution deduction
The proposed regulations defined
“charitable contribution deduction” as “a
deduction under section 170 of the Internal Revenue Code (Code), which includes
a deduction arising from a qualified conservation contribution as defined in section 170(h)(1).”
One commenter stated that this definition is inconsistent with the listed transaction identified in the proposed regulations, which is limited to contributions of
conservation easements. This commenter
suggested that the definition should be
limited to “the deduction arising from
a qualified conservation contribution as
defined in section 170(h)(1).”
The Treasury Department and the IRS
decline to adopt this suggestion, because
some substantially similar transactions
will involve real property contributions
other than qualified conservation contributions.

Bulletin No. 2024–43

2. Conservation easement
The proposed regulations defined a
“conservation easement” as “a restriction, within the meaning of section
170(h)(2)(C), exclusively for conservation purposes, within the meaning of section 170(h)(1)(C) and section 170(h)(4),
granted in perpetuity, on the use that may
be made of the specified property.” One
commenter stated that, in all cases that
the commenter defended, the IRS had
taken the position that the conservation
easement did not meet one or more of the
requirements in this definition. The commenter opined that, if an investor fails
to disclose a syndicated conservation
easement transaction, the pass-through’s
return is selected for audit, and the IRS
determines that the donated conservation
easement fails to meet one or more elements of the definition in the proposed
regulations, then the investor would
not have had any reporting obligation
because the investor had not claimed a
deduction for a “conservation easement”
as that term was defined in the proposed
regulations. The commenter added that
if this was not the intent of the proposed
regulation, then the final regulation
should clearly so state.
The Treasury Department and the IRS
note that the third element of the listed
transaction identified in these regulations
is that “the pass-through entity that owns
the real property contributes an easement
on such real property, which it treats as a
conservation easement, to a qualified organization and allocates, directly or through
one or more tiers of pass-through entities,
a charitable contribution deduction to the
taxpayer” (emphasis added), and that the
fourth element of the listed transaction
is that “the taxpayer claims a charitable
contribution deduction with respect to
the contribution of the real property interest on the taxpayer’s Federal income tax
return.” In the commenter’s hypothetical,
the taxpayer’s treatment of the contribution as a conservation easement and claim
of a charitable contribution deduction
with respect to the conservation easement
makes the transaction a listed transaction.
Whether the IRS asserts that the conservation easement is invalid and whether the
charitable contribution deduction claimed
on the taxpayer’s Federal income tax

993

return is ultimately allowed do not affect
this outcome.
To more clearly track the language in
section 170(h), the final regulations modify the definition of conservation easement
to provide that it is a restriction (granted in
perpetuity) on the use that may be made
of the real property, within the meaning of
section 170(h)(2)(C), exclusively for conservation purposes, within the meaning of
section 170(h)(1)(C) and (h)(4).
3. Participant
The proposed regulations stated that a
taxpayer participating, within the meaning of §1.6011-4(c)(3)(i)(A), in a syndicated conservation easement transaction described in proposed §1.6011-9(b)
includes (1) an owner of a pass-through
entity, (2) a pass-through entity (any tier,
if multiple tiers are involved in the transaction), and (3) any other taxpayer whose
tax return reflects tax consequences or
a tax strategy arising from the syndicated conservation easement transaction
described in the proposed regulations. The
proposed regulations provided, consistent with Notice 2017-10, that a qualified
organization to which a syndicated conservation easement described in proposed
§1.6011-9(b) is donated is not treated as
a participant under §1.6011-4(c)(3)(i)(A)
with respect to the listed transaction.
One commenter stated that it is unclear
whether a participant who reports the
tax consequences of a transaction that is
substantially similar to a syndicated conservation easement transaction is a member of the class of participants described
under proposed §1.6011-9(e)(2). The
commenter opined that the plain language
of the proposed regulation referred only to
taxpayers who have the tax consequences
of a syndicated conservation easement
transaction. To address this comment, the
final regulations clarify that the class of
participants includes participants in transactions that are the same as, or substantially similar to, syndicated conservation
easement transactions.
One commenter requested additional
guidance on the meaning of the term “arising from” in proposed §1.6011-9(e)(2)
(iii), stating that it is ambiguous whether
an IRS attorney that was hired to enforce
syndicated conservation easement trans-

October 21, 2024

actions would be required to report the
transaction because his or her income
“arose from” the conservation easement
transaction. The Treasury Department and
the IRS conclude that further clarification
is not needed.
4. Promotional materials
The proposed regulations stated that
“promotional materials” include materials described in §301.6112-1(b)(3)(iii)(B)
and any other written or oral communication regarding the transaction provided
to investors, such as marketing materials,
appraisals (including preliminary appraisals, draft appraisals, and the appraisal
that is attached to the taxpayer’s return),
websites, transactional documents such
as the deed of conveyance, private placement memoranda, tax opinions, operating agreements, subscription agreements,
statements of the anticipated value of the
conservation easement, and statements of
the anticipated amount of the charitable
contribution deduction.
One commenter supported this definition, but several commenters thought it
was overbroad, stating that it would be
effectively impossible for a taxpayer to
prove that he or she did not receive promotional materials. Some commenters
objected to particular types of communication being included within the scope
of promotional materials. Specifically,
commenters expressed concern regarding oral communications, websites, and
documents required by law. For example,
one commenter stated that, since promotional materials are described to include
“websites” and “oral communication,”
every taxpayer would theoretically have
received “promotional materials” relating to conservation easement donations
because every taxpayer has access to
the internet. In addition, one commenter
stated that, under the proposed regulations, promotional materials would
include an oral communication made to
any other investor. The commenter also
stated that any one oral communication,
regardless of accuracy, would “render the
deduction unavailable” to all investors.

The commenter recommended that the
final regulations remove all references to
oral communications.
In response, the Treasury Department
and the IRS note that receipt of promotional materials by one investor does not
automatically trigger receipt of such materials by other investors (although it is circumstantial evidence that may be relevant
to showing receipt of promotional materials by other investors). In addition, the
broad definition of promotional materials
does not mean that the 2.5 times rule will
always be met; the quantity of promotional materials is not directly relevant to
whether the promotional materials offer
the investor the possibility of being allocated a charitable contribution deduction
that equals or exceeds an amount that is
two and one-half times the amount of the
taxpayer’s investment in the pass-through
entity. Moreover, even if the 2.5 times
rule is met, the effect is not to render the
deduction unavailable to all investors but
to meet one element of this listed transaction. The Treasury Department and the
IRS conclude that a broad definition of
promotional materials is warranted; otherwise, taxpayers may contend that they do
not meet the elements of the listed transaction identified in these final regulations
because promoters made offers via oral
communications, websites, or other documents.
Some commenters noted that Congress
did not mention promotional materials in
section 170(h)(7) and asked that the final
regulations explain the requirement’s significance in the listed transaction. The
Treasury Department and the IRS conclude that the lack of reference to promotional materials in section 170(h)(7)
is of no significance to this listed transaction, given that the purpose and scope
of section 170(h)(7), which is to disallow
a deduction, are different from those of
these regulations, which is for the IRS to
identify tax avoidance transactions.
One commenter noted that a taxpayer can claim a greatly inflated deduction regardless of whether the taxpayer
receives promotional materials and stated
that the promotional material require-

ment appears to be unnecessary and
could be removed altogether. The Treasury Department and the IRS have determined that promotional materials are an
important attribute of the listed transaction identified in these final regulations
because the existence of promotional
materials offering investors the possibility of a charitable contribution deduction
that equals or exceeds an amount that is
2.5 times the amount of the taxpayer’s
investment, on its own, is an element
that illustrates tax avoidance. Thus, the
final regulations adopt the proposed definition of promotional materials without
changes.
One commenter stated that the broad
definition of promotional materials does
not promote compliance with the law
if an attorney that created promotional
materials, such as the deed of conveyance, is considered a material advisor to
the transaction. This commenter asked
for clarity on how the definition of promotional materials in the proposed regulations relates to the definition of a material advisor.
As discussed in part I.D. of this Summary of Comments and Explanation of
Revisions, these final regulations do not
change the description of a material advisor provided in §301.6111-3(b). A material advisor is a person who makes a tax
statement, as defined in §1.6111-3(b)(2)
(ii), and derives gross income in excess
of the threshold amount, as defined in
§301.6111-3(b)(3) (generally, $10,000
for listed transactions). In general, a
deed of conveyance would not be a “tax
statement” under §301.6111-3(b)(2)(ii)
because it is not a statement “that relates
to a tax aspect of a transaction that causes
the transaction to be a reportable transaction.” In addition, in general, the deed
does not contain any statements related to
a tax aspect of the transaction that causes
the transaction to be reportable, such as
stating that an investor may be eligible
to claim a deduction amount of 2.5 times
the investor’s investment.1 As a result, the
final regulations make no modifications to
the definition of promotional materials in
response to the comment.

As noted above, a transactional document such as a deed of conveyance is considered to be a promotional material. Although the deed by itself, typically, would not offer the investor the
possibility of being allocated a charitable contribution deduction that equals or exceeds an amount that is two and one-half times the amount of the taxpayer’s investment in the pass-through
entity, whether all of the promotional materials, taken as a whole, make such an offer is a factual determination.
1

October 21, 2024

994

Bulletin No. 2024–43

5. Syndicated conservation easement
transaction
One commenter stated that “syndication itself is not bad and is often encouraged by the government” (such as in the
context of historic tax credits, low-income
housing tax credits, and new market tax
credits). The commenter opined that
the proposed regulations sow confusion
because the focus should be on abuse, not
on syndication.
The Treasury Department and the IRS
agree with the commenter that syndication in itself is not necessarily abusive.
However, the Treasury Department and
the IRS do not agree with the commenter
that the definition of syndicated conservation easement transaction in §1.60119(b) needs to explicitly use the word
“abusive.” The identification of a listed
transaction occurs only after the Treasury
Department and the IRS have determined
that the transaction is a tax avoidance
transaction. If a syndicated conservation
easement transaction does not meet the
elements of the transaction defined in
§1.6011-9(b), such as that the partnership’s promotional materials do not offer
investors the possibility of being allocated a charitable contribution deduction
the amount of which equals or exceeds
an amount that is 2.5 times the amount
of the taxpayer’s investment in the partnership (and the partnership does not in
fact allocate a charitable contribution
deduction the amount of which equals or
exceeds an amount that is 2.5 times the
amount of the taxpayer’s investment in
the partnership), then the transaction is
not a listed transaction.
V. Comments Addressing the Role of
Qualified Organizations in the Listed
Transaction
Commenters addressed both the section 4965 carveout found in the proposed
regulations and the lack of a carveout to
the definition of material advisor in the
proposed regulations for qualified organizations.

A. Section 4965 carveout
The proposed regulations included,
consistent with Notice 2017-10, the section 4965 carveout to exclude a qualified
organization2 from treatment as a party to
a syndicated conservation easement transaction under section 4965 but requested
comments on whether the final regulations
should eliminate or limit the section 4965
carveout.
Several commenters advocated for
maintaining the section 4965 carveout
for various reasons, including that section
170(h)(7)(A) will disallow deductions for
most transactions that these regulations
seek to deter, that receipt of a donated
conservation easement generally would
not constitute “net income” or “proceeds”
within the meaning of section 4965, and
that limiting or eliminating the section
4965 carveout could discourage qualified
organizations from accepting contributions
of conservation easements (particularly
due to uncertainty as to what constitutes a
“substantially similar” transaction). With
respect to the Treasury Department and
the IRS’s request for comments on limiting the carveout to qualified organizations
that conduct an adequate amount of due
diligence (and on what would constitute
adequate due diligence for this purpose),
several commenters argued that qualified
organizations are not equipped to exercise
the due diligence that could be required to
qualify for a more limited carveout. Several commenters also claimed that because
only a “small number” of qualified organizations continue to facilitate syndicated
conservation easement transactions, it
would be unfairly burdensome to all other
qualified organizations if the section 4965
carveout were limited or eliminated.
Given the addition of section 170(h)(7)
to the Code, which disallows charitable
contribution deductions for some of the
most overvalued syndicated conservation
easements, as well as other considerations
raised by the commenters, the Treasury
Department and the IRS have concluded
that it is appropriate to maintain the section 4965 carveout in these final regula-

tions. However, the Treasury Department
and the IRS will consider proposing to
eliminate or limit the section 4965 carveout in future regulations if qualified organizations continue to facilitate the syndicated conservation easement transactions
(or substantially similar transactions)
described in these regulations.
B. Donee material advisors
As discussed in part I.D. of this Summary of Comments and Explanation of
Revisions, the proposed regulations provided no special rules for material advisors and noted that this differed from the
approach taken in Notice 2017-29 (modifying Notice 2017-10), which provided
that a donee described in section 170(c)
is not treated as a material advisor under
section 6111. The proposed regulations
requested comments on whether qualified
organizations are receiving fees for providing material aid, assistance, or advice
with respect to the syndicated conservation easement transactions described in
the proposed regulations, the nature of the
services being provided, and why a carveout from the definition of material advisor
for qualified organizations is needed.
Several commenters requested that the
carveout for qualified organizations found
in Notice 2017-29 be reinstated, claiming
that the six-year look back period would
be burdensome, that the IRS is already
privy to information necessary to identify
potentially abusive syndicated conservation easement transactions via reporting
by other material advisors, and that eliminating the carveout for qualified organizations will discourage qualified organizations from accepting legitimate syndicated
conservation easements due to confusion
and fear of audits, potential penalties, and
litigation. On the other hand, no commenter explained how a qualified organization, acting solely in its capacity as a
qualified organization, could be considered a material advisor. To the contrary,
several commenters asserted that donee
organizations do not fit the definition of
“material advisor.”

A donation of a qualified conservation contribution must be made to a “qualified organization,” generally defined in section 170(h)(3), which includes donations to governmental units,
certain public charities, and Type I supporting organizations thereto. Under section 4965(c), the term “tax-exempt entity” includes, among others, entities and governmental units described
in sections 501(c) and 170(c) (other than the United States). Thus, absent the section 4965 carveout, tax-exempt entities that would be affected are donees that are qualified organizations
described in section 170(h)(3), other than the United States, that accept a conservation easement as part of the syndicated conservation easement transaction described in these regulations.
2

Bulletin No. 2024–43

995

October 21, 2024

A person is a material advisor with
respect to a transaction if the person: (1) provides material aid, assistance, or advice with
respect to organizing, managing, promoting, selling, implementing, insuring, or carrying out any reportable transaction; and (2)
directly or indirectly derives gross income
in excess of the threshold amount defined
in §301.6011-3(b)(3) for the material aid,
assistance, or advice. See §301.6111-3(b)
(1). “Gross income” includes all fees for a
tax strategy, for services for advice (whether
or not tax advice), and for the implementation of a reportable transaction, but a “fee”
does not include amounts paid to a person, including an advisor, in that person’s
capacity as a party to the transaction. See
§301.6111-3(b)(3)(ii). A person provides
material aid, assistance, or advice if the person makes or provides a tax statement to or
for the benefit of certain taxpayers who are
required to make a disclosure under section
6011 (including for participation in a listed
transaction) or other material advisors. See
§301.6111-3(b)(2)(i). “Tax statement,” for
these purposes, is any statement (including
another person’s statement), oral or written,
that relates to a tax aspect of a transaction
that causes the transaction to be a reportable
transaction. See §301.6111-3(b)(2)(ii)(A).
In a typical conservation easement
transaction, the qualified organization
signs the Form 8283 (Section B) and provides a contemporaneous written acknowledgement of the contribution. See section
170(f)(8). The qualified organization may
also receive separate cash contributions
from the donor to monitor and enforce
the easement in perpetuity. The qualified
organization might also make representations to the donor that it is a qualified
organization. Signing the Form 8283 and
the contemporaneous written acknowledgement and making representations
Notice 2017-10
All Filings 2017 to 2021
Respondents by Size
Receipts
Under 5M
5M to 10M
10M to 15M
15M to 20M
20M to 25M
Over 25M

October 21, 2024

regarding the donee’s status as a qualified
organization are not considered to be making a tax statement under §301.6111-3(b)
(2)(ii)(A). Therefore, a donee does not
provide material, aid, assistance, or advice
under §301.6111-3 merely by signing the
Form 8283 (Section B) and the contemporaneous written acknowledgement.
The Treasury Department and the IRS
conclude that a qualified organization
acting solely in its capacity as a qualified
organization by, for example, accepting a
conservation easement and separate payments or contributions to monitor and
enforce that easement, provided such payments or contributions are in fact used for
such purpose, would not be considered a
material advisor. The Treasury Department and the IRS further conclude that if
a qualified organization engages in activities that would result in the organization
meeting the requirements to be considered
a material advisor, then such organization
should be subject to the material advisor
rules, including the penalties for failure
to disclose. Thus, the final regulations
include no special carveout to material
advisor status for qualified organizations.

with the Paperwork Reduction Act (44
U.S.C. 3507(c)) under control numbers
1545-1800 and 1545-0865.
To the extent there is a change in burden as a result of these final regulations,
the change in burden will be reflected in
the updated burden estimates for the Forms
8886 and 8918. The requirement to maintain
records to substantiate information on Forms
8886 and 8918 is already contained in the
burden associated with the control number
for the forms and remains unchanged.
An agency may not conduct or sponsor,
and a person is not required to respond
to, a collection of information unless the
collection of information displays a valid
OMB control number.
II. Regulatory Flexibility Act

The collection of information contained in these final regulations is reflected
in the collection of information for Forms
8886 and 8918 that have been reviewed
and approved by the Office of Management and Budget (OMB) in accordance

The Regulatory Flexibility Act (RFA) (5
U.S.C. chapter 6) requires agencies to “prepare and make available for public comment
an initial regulatory flexibility analysis,”
which will “describe the impact of the rule
on small entities.” 5 U.S.C. 603(a). Section
605(b) of the RFA allows an agency to certify a rule if the rulemaking is not expected
to have a significant economic impact on a
substantial number of small entities.
The Secretary of the Treasury hereby certifies that these final regulations will not have
a significant economic impact on a substantial number of small entities pursuant to the
RFA. As previously explained, the basis for
these final regulations is Notice 2017-10,
2017-4 I.R.B. 544 (modified by Notice 201729, 2017-20 I.R.B. 1243, and Notice 201758, 2017-42 I.R.B. 326). The following chart
sets forth the gross receipts of respondents
to Notice 2017-10 that report Federal tax
information using Form 1065, U.S. Return of
Partnership Income, and Form 1120-S, U.S.
Income Tax Return for an S corporation:

Respondents
93.3%
3.1%
1.2%
0.6%
0.6%
1.2%

Filings
88.3%
5.2%
2.9%
0.4%
0.7%
2.5%

Effect on Other Documents
Notice 2017-10 is obsoleted for transactions occurring after October 8, 2024.
Special Analyses
I. Paperwork Reduction Act

996

Bulletin No. 2024–43

This chart shows that the majority of
respondents to Notice 2017-10 reported
gross receipts under $5 million. Even
assuming that these respondents constitute a substantial number of small entities, the final regulations will not have
a significant economic impact on these
entities because the final regulations
implement sections 6111 and 6112 and
§1.6011-4 by specifying the manner in
which and time at which an identified
transaction must be reported. Accordingly, because the final regulations are
limited in scope to time and manner of
information reporting and definitional
information, the economic impact of the
final regulations is expected to be minimal. Further, the Treasury Department
and the IRS expect the reporting burden to
be low; the information sought is necessary for regular annual return preparation
and ordinary recordkeeping. The estimated burden for any taxpayer required
to file Form 8886 is approximately 10
hours, 16 minutes for recordkeeping, 4
hours, 50 minutes for learning about the
law or the form, and 6 hours, 25 minutes
for preparing, copying, assembling, and
sending the form to the IRS. The IRS’s
Research, Applied Analytics, and Statistics division estimates that the appropriate wage rate for this set of taxpayers is
$102.08 (2022 dollars) per hour. Thus, it
is estimated that a respondent will incur
costs of approximately $2,127.00 per
filing. Disclosures received to date by
the Treasury Department and the IRS in
response to the reporting requirements of
Notice 2017-10 indicate that this small
amount will not pose any significant economic impact for those taxpayers now
required to disclose under the final regulations.
Some commenters asserted that the
hourly rate estimate of $98.87 (2021) in
the proposed regulations is much lower
than what professionals charge to prepare
Form 8886. Given the availability of more
recent data, the hourly rate estimate is
revised in the final regulations to $102.08
(2022). The new number still does not
address the substantial differences from
the commenters’ estimates. The differences are likely attributable to the different methodologies used. The commenters likely used the hourly rate that an
independent professional would charge a

Bulletin No. 2024–43

retail customer to prepare a Form 8886.
The Treasury Department and the IRS
used the hourly cost that a business owner
would pay to employ such a professional.
This method was determined based on
the comments received from stakeholders
objecting to reporting of the retail hourly
rate at earlier points.
One commenter asked for the data
source for the hourly rate estimate. The
source data used by our data unit comes
from the Bureau of Labor Statistics.
Some commenters asserted that the
estimate of the time to prepare Form
8886 is too low as provided because (1)
the estimate ignores the time necessary
to comply with the reporting requirement
for the years to which the requirement
applies retroactively and (2) the estimate
does not properly account for some of the
time spent, such as learning new topics. At
this time, the Treasury Department and the
IRS did not find a practical way to adjust
the time estimate in response to these
comments due to (1) the uncertainties
involved and (2) with respect to the prior
years, the effect of revealing our underreporting estimates on enforcement.
For the reasons stated, a regulatory
flexibility analysis under the RFA is not
required. Pursuant to section 7805(f) of
the Code, the proposed rule preceding this
rulemaking was submitted to the Chief
Counsel for the Office of Advocacy of the
Small Business Administration for comment on its impact on small business, and
no comments were received.
III. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates
Reform Act of 1995 (UMRA) requires
that agencies assess anticipated costs and
benefits and take certain other actions
before issuing a final rule that includes
any Federal mandate that may result in
expenditures in any one year by a State,
local, or Tribal government, in the aggregate, or by the private sector, of $100
million (updated annually for inflation).
One commenter argued that it is at least
possible that the UMRA trigger of $100
million could be triggered because of the
potential burdens of updating State or
local regulations concerning the acceptance of land donations, harmonizing
information reporting with the require-

997

ments of the regulations, and cooperation
with examination proceedings. The Treasury Department and the IRS have considered this comment and conclude that it is
not persuasive, particularly in light of the
continuing carve-out for donees in these
final regulations. This final rule does not
include any Federal mandate that may
result in expenditures by State, local, or
Tribal governments, or by the private sector in excess of that threshold.
IV. Executive Order 13132: Federalism
Executive Order 13132 (Federalism)
prohibits an agency from publishing any
rule that has federalism implications if
the rule either imposes substantial, direct
compliance costs on State and local governments, and is not required by statute,
or preempts State law, unless the agency
meets the consultation and funding
requirements of section 6 of the Executive order. One commenter suggested
that, if the Treasury Department and the
IRS decide to eliminate the carveout for
donees described in section 170(c) from
being treated as a party to the transaction
under section 4965, then the final regulations will have federalism implications
under Executive Order 13132. The final
regulations maintain the section 4965 carveout. This final rule does not have federalism implications and does not impose
substantial direct compliance costs on
State and local governments or preempt
State law within the meaning of the Executive order.
V. Regulatory Planning and Review
Pursuant to the Memorandum of Agreement, Review of Treasury Regulations
under Executive Order 12866 (June 9,
2023), tax regulatory actions issued by the
IRS are not subject to the requirements of
section 6(b) of Executive Order 12866, as
amended. Therefore, a regulatory impact
assessment is not required.
VI. Congressional Review Act
Pursuant to the Congressional Review
Act (5 U.S.C. 801 et seq.), the Office of
Information and Regulatory Affairs designated this rule as not a major rule, as
defined by 5 U.S.C. 804(2).

October

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Airs%3Ac96058fe5591a6a1. Public record. Not legal advice.