The long efforts to put in place the enforcement mechanisms to attack syndicated conservation easements appear to at last be finalized. In October 2024, the Internal Revenue Service issued final regulations targeting syndicated conservation easements. The agency first started identifying claims for substantial conservation easement deductions by investors in syndicated partnerships back in 2016, and issued Notice 2017-10 identifying syndicated conservation easements as abusive and requiring reporting by participants. It also sought help from Congress to specifically disallow the abusive aspects of the transactions.
The syndicated conservation easement industry fought back. The industry won a court case on the basis that the notice issued by the IRS failed to meet Administrative Procedure Act requirements for notice and opportunity for comments. Lobbying efforts stymied the progress of congressional action and included efforts to strip the IRS of enforcement funds. Initial efforts to get taxpayers to accept settlement offers were frustrated by funds available for the defense of the transactions built into the deal structures.
The IRS has challenged $21 billion in deductions claimed by 28,000 syndicated conservation easement investors. Even the Land Trust Alliance, which administers traditional conservation easements, became concerned that the syndicated conservation easement activity would result in the complete loss of the conservation easement deduction. The IRS estimated that the number of syndicated conservation easement deductions grew from 249 deals in 2016, generating $6 billion in charitable deductions, to 296 deals in 2018 producing $9.2 billion in deductions. Traditional conservation easement deductions have resulted in around $1 billion in annual deductions.
Statutory action
After several years of frustration in getting Congress to address syndicated conservation easements, success was achieved with the enactment of Code Sec. 170(h)(7) in 2022. Code Sec 170(h)(7) provides that a contribution by a partnership is not treated as a qualified conservation contribution if the amount of such contribution exceeds 2.5 times the sum of each partner’s interest in the partnership. Exceptions are provided for three-year holding periods, contributions made by family pass-through entities, and contributions made to preserve a certified historic building. Reporting requirements apply to partnerships, S corporations, and other pass-through entities. The statute does not apply retroactively, but only to contributions made after Dec. 29, 2022.
Final regulations
In order to overcome the APA challenges to the syndicated conservation easement notice, the IRS began a process of issuing proposed regulations to meet APA requirements. In November 2022 the IRS issued proposed regulations that disallowed deduction for syndicated conservation easement transactions made by a partnership or an S corporation after Dec. 29, 2022, if the amount of the contribution exceeds 2.5 times the sum of each partner’s or S corporation shareholder’s relevant basis. The regulations also imposed new reporting requirements for the members of the entity who are seeking a deduction based on the transaction — IRS Form 8886, “Reportable Transaction Disclosure Statement.”
The final regulations were issued on Oct. 7, 2024, and are effective Oct. 8, 2024. They address three specified classes of abusive syndicated conservation easement transactions and substantially similar transactions:
1. Transactions involving contributions occurring before Dec. 30, 2022; 2. Transactions for which a charitable contribution deduction is not automatically disallowed by Code Sec. 170(h)(7); and, 3. Transactions that substitute the contribution of a fee simple interest in real property for the contribution of a conservation easement.
The final regulations generally adopt the 2022 proposed regulations with clarifications of the meanings of the terms “substantially similar transactions,” the 2.5 times rule, “conservation easement,” and “participant.” The final regulations also clarify that participants and material advisors must report syndicated conservation easement transactions to the IRS that were completed in tax years that are still open. It is possible that taxpayers could be subject to both the requirements of Code Sec. 170(h)(7) and the final regulations.
A man walks a dog near a wetland conservation area
Lam Yik/Bloomberg
Settlement offers
The IRS initiated its third settlement offer to try to dispose of many of the audits before it in June 2024. The earlier settlement offers had only limited success. However, the final regulations and growing success in the courts may push more syndicated deals into settlement. Only taxpayers who receive a settlement offer letter from the IRS are eligible for the settlement offer. The settlement offers have typically involved agreeing that the deduction for the contribution be disallowed in full; all partners must agree to settle; the partnership must pay the full amount of tax penalties and interest before settlement; partners can deduct the cost of acquiring partnership interests; and penalties can range from 10% to 20% for investor partners and up to 40% for partners active in the transaction. The settlement offers require the cooperation of partners during the resolution of the issue.
It may be difficult for some partnerships to get the consent of all partners in a deal to participate in the settlement and to be willing to cooperate in the resolution.
Criminal and civil enforcement
With Code Sec. 170(h)(7) in place, as well as now the final regulations, the Tax Court has set aside APA concerns and started to deny overvaluation of conservation easements. For example, in Mill Road 36 Henry LLC v. Commissioner, U.S.T.C. Oct. 26, 2023, the court limited the LLC’s deduction to its tax basis and added an accuracy-related penalty. A circuit court case has also rejected the claimed deductions.
Some of the key promoters of syndicated conservation easements, as well as one of the appraisers utilized by the promoters, have been convicted of fraud and falsification of documents and some have already received substantial prison sentences.
Summary
The tools now seem to be in place to curtail the syndicated conservation easement industry. There remains a lot of work for the IRS to resolve all of the transactions still under audit. It remains to be seen how helpful settlement offers will be in disposing of some of these audits.
Big Four firm PwC announced new agentic AI capacities, including a model that proactively identifies areas of value leakage and acts inside the tools teams already use to fix them itself.
The new solution, Agent Powered Performance, combines continuous AI-driven insight with embedded execution to address the problem of businesses only finding problems when they have already hurt performance. By actively monitoring and working inside the client’s existing systems, though, PwC’s agents can actively and autonomously address such issues.
The software, which is supported by PwC’s recently released Agent OS coordination platform, is embedded in enterprise systems to sense where value is leaking, think through the most effective performance strategies using predictive models and industry benchmarks, and act directly in tools like ERP or CRM software to make improvements stick.
The system connects directly into ERP environments, continuously monitors key metrics, and acts inside the tools teams already use. For example, a supply chain agent might detect rising shipping costs and automatically reroute deliveries to reduce spend. Finance agents can spot and correct billing errors before they reach the customer. Clients typically see measurable efficiency gains in the first quarter, with continued improvements over time as the system learns and adapts.
“Too many transformations still rely on one-off pilots and stale data, stretching the gap from insight to impact and suffocating ROI,” said Saurabh Sarbaliya, PwC’s principal for enterprise strategy and value. “Agent Powered Performance flips the economics by distilling PwC’s industry transformation playbooks into AI agents that turn static insights into compounding gains, without rebooting each time.”
Agent Powered Performance is platform-agnostic and built on an open architecture so it can work across different LLMs based on client preferences and task-specific needs. It works with major enterprise platforms including Oracle, SAP, Workday and Guidewire.
By integrating this standard, agent systems registered as MCP servers can be used by any authorized AI agent. This reduces redundant integration work and the overhead of writing custom logic for each new use case. By standardizing how agents invoke tools and handle responses, MCP also simplifies the interface between agents and enterprise systems, which will serve to reduce development time, lower testing complexity, and cut deployment risk. Finally, any interaction between an agent and an MCP server is authenticated, authorized and logged, and access policies are enforced at the protocol level, which means that compliance and control are native to the system—not layered on after the fact.
This means that agents are no longer siloed. Instead, they can operate as part of a coordinated, governed system that can grow as needs evolve, as MCP support provides the interface to external tools and systems. This enables organizations to move beyond isolated pilots toward integrated systems where agents don’t just reason, but act inside real business workflows. It marks a shift from experimentation to adoption, from isolated tools to scalable, governed intelligence.
Research Composer
Finally, a PwC spokesperson said the firm has also launched a new internal tool for its professionals called Research Composer, a patent-pending AI research agent embedded in the firm’s ChatPwC suite, designed to accelerate insight generation by combining web data with PwC-uploaded content.
Professionals will use the Research Composer to produce in-depth, citation-backed reports for either the firm or its clients. The solution is intended to enhance the quality of client work by equipping teams with research and strategic analysis capabilities.
The AI agent prompts users through a step-by-step research workflow, allowing them to shape how reports are packaged—tailoring the output to meet strategic needs. For example, a manager in advisory services might use Research Composer to evaluate white space opportunities across industries or geographies, drawing from internal reports and up-to-date market data.
Eide Bailly, a Top 25 Firm based in Fargo, North Dakota, is growing its presence in the Pacific Northwest by adding Traner Smith, based in Edmonds, Washington, effective June 2, 2025.
Traner Smith’s team includes two partners and 16 staff members and specializes in tax compliance and advisory services. Financial terms of the deal were not disclosed. Eide Bailly ranked No. 19 on Accounting Today‘s 2025 list of the Top 100 Firms, with $704.98 million in annual revenue, approximately 387 partners and over 3,500 employees.
Eide Bailly already has offices in Seattle, but hopes to grow further in the Pacific Northwest. “We’re pleased to welcome the talented team at Traner Smith to Eide Bailly,” said Eide Bailly managing partner and CEO Jeremy Hauk in a statement Monday. “Their expertise with high-net-worth individuals, real estate and privately held businesses aligns well with our strengths, and their client-centric approach is a perfect cultural fit. Having an office in Edmonds, Washington, is a great complement to our existing presence in Seattle. Together, we’re poised to deliver even greater value to families and businesses in the Seattle metro area.”
“Joining Eide Bailly is a natural next step for us — it provides access to deeper technical resources in areas like state and local tax, national tax, succession planning and international tax while allowing us to continue the personalized service our clients value,” said Kevin Smith, a partner at Traner Smith, in a statement.
“With this expanded support and platform, we’re excited to grow our reach, elevate what we do best, and help more clients than ever before,” said Shane Summer, another partner at Traner Smith, in a statement.
Eide Bailly has announced several other mergers in recent weeks. Earlier this month, it added Hamilton Tharp, a firm based in Solana Beach, California, and Roycon, a Salesforce consulting firm in Austin, Texas. In late April, it merged in Volpe Brown & Co., in North Canton, Ohio. Eide Bailly expanded to Ohio last year by merging in Apple Growth Partners. Last year, Eide Bailly also sold its wealth management practice to Sequoia Financial Group. The deal with Sequoia appears to be fueling the recent M&A activity. As part of the deal, Eide Bailly Advisors became part of Sequoia Financial, while Eide Bailly received an equity investment in Sequoia.
Top 100 firm BMSS announced an investment in Knuula, an engagement letter and client documents software provider. The investment from BMSS came after successfully implementing Knuula over the past year to streamline its engagement letter process. It was after doing so that the firm’s leadership came to believe that Knuula could create complex client documents at an enormous scale, which was a huge need for the broader accounting industry. BMSS thought this presented a great opportunity to guide Knuula and help facilitate its growth.
“We began working with Knuula in Spring 2024 to streamline our engagement letter process,” said Don Murphy, Managing Member of BMSS. “It quickly became clear that Knuula was not only a strong solution for us, but also an ideal partner in advancing industry-wide automation.”
While the specific terms of the deal were not disclosed, a spokesperson with Knuula said that, after this investment, BMSS and a collection of 21 of their partners now own 13% of the company. The investment represents not some passive revenue deal but an active collaboration between the two companies, with the spokesperson saying they will be working closely together on things like product development, new features, improvements, and networking.
The deal comes about a year after Knuula integrated with QuickFee, a receivables management platform for professional service providers, which allowed users to have engagement letters directly connecting to their QuickFee billing platform, tying the execution of the letter directly to the billing process.
“We’ve long sought to partner with a firm focused on strategic innovation in the accounting space,” said Jamie Peebles, founder of Knuula. “To develop a perfect solution for large firms, it is ideal to have a partner that is willing to work closely together and iterate quickly. This requires constant feedback between our two teams. The IT team from BMSS worked with our development team constantly and helped us iterate rapidly. We also had consistent input from partners, manager, and administrative staff to help us make valuable changes to Knuula. BMSS was a perfect partner for us.”