The IRS Told a Federal Judge It Approved a $15,200,000 Penalty On Time. The Signature Was Backdated — and a Watchdog Just Found Six More Like It.
In August 2023, a U.S. Tax Court judge caught IRS lawyers misrepresenting when one of the agency's own revenue agents had actually signed off on a $15,200,000 penalty. The approval had been backdated. The IRS conceded the penalty and got sanctioned for it.
That should have been an isolated embarrassment. On May 1, 2026, the Treasury Inspector General for Tax Administration reported it wasn’t. Auditors reviewed 1,268 conservation-easement cases the IRS had built using the same aggressive playbook and found six more with backdated approvals, forcing the agency to concede over $68,000,000 in penalties it never should have tried to collect.
Fox News contributor Steve Moore wrote about this campaign on August 6, calling it a “tax-code witch hunt” run by an IRS acting as “judge, jury and executioner.” That is Moore’s characterization — but the paper trail beneath it is real, spans four presidential administrations, and includes a rule the IRS never lawfully issued.
- $68,000,000 in penalties the IRS conceded after admitting it backdated supervisor-approval paperwork in seven Tax Court cases — TIGTA Report 2026-30-0021, May 1, 2026
- 13 of 829 docketed conservation-easement cases the IRS's own review found lacked valid penalty sign-off once auditors went looking — TIGTA Report 2026-30-0021
- 93 percent of Tax Court conservation-easement cases in which the IRS claimed the donated land was worth nothing at all — National Taxpayers Union Foundation, April 2026
- 25 years the prison sentence for the lead promoter of a $1.3 billion conservation-easement fraud scheme — the genuine crime underneath this campaign — U.S. Department of Justice, January 2024
Federal law is specific on this point. Under Section 6751(b) of the tax code, an IRS employee cannot propose most penalties without a supervisor’s written, timely sign-off — a safeguard against using penalties as audit leverage. In LakePoint Land II, LLC v. Commissioner, the Tax Court found IRS counsel knew or should have known by November 2022 that the agency’s representations about when that sign-off happened were false, and sat on the correction for months. The court sanctioned the IRS under Section 6673(a)(2), and the agency walked away from the full $15,200,000 penalty rather than defend it further.
That single sanction triggered an agency-wide look-back. TIGTA and IRS Chief Counsel reviewed 1,268 syndicated conservation-easement cases — 829 already in Tax Court, 439 still in audit — for Section 6751(b) compliance. Thirteen of the docketed cases lacked valid supervisory approval; seven had approval documents backdated to look compliant after the fact. TIGTA also flagged modified documents carrying unchanged digital signatures and penalty positions added later with no approval on file at all.
The IRS did not dispute the findings. Jarod Koopman, the IRS’s Chief Tax Compliance Officer, said the agency “remains committed to strengthening documentation practices” and agreed to all five TIGTA recommendations, including an explicit instruction that backdating approval documents is never acceptable. He noted 13 flawed cases out of 1,268 is “a small percentage” — true, though it is also thirteen cases in which taxpayers were told, under penalty of law, that a safeguard had been followed when it hadn’t.
The backdating scandal sits on top of a decade-long enforcement campaign that began with a paperwork shortcut. On December 23, 2016, IRS Commissioner John Koskinen (D), an Obama appointee, issued Notice 2017-10, branding an entire category of conservation-easement transactions “listed transactions” — the IRS’s highest-risk designation for abusive tax shelters — retroactive to 2010. The notice skipped the public comment process required for new rules. Six years later, on November 9, 2022, the Tax Court agreed that was illegal: in Green Valley Investors, it held Notice 2017-10 invalid under the Administrative Procedure Act, following the Sixth Circuit’s reasoning in Mann Construction that the IRS cannot impose binding new obligations without notice-and-comment rulemaking.
The procedural defect did not slow enforcement down; it happened concurrently with it. Commissioner Chuck Rettig (R), Trump’s first-term appointee, announced in November 2019 that the IRS was launching a “significant increase in enforcement actions” against syndicated easements across three divisions, warning that criminal referrals were on the table. Commissioner Danny Werfel (D), confirmed by the Senate in March 2023 as President Biden’s appointee, kept the campaign running and put abusive conservation easements back on the IRS’s 2023 “Dirty Dozen” list, saying the agency was “focusing its new compliance efforts on” complex partnerships and “overvalued conservation easement contributions.” The posture survived a change in the White House, a change in commissioners, and a court ruling that its own founding document was never lawfully issued.
None of this means the IRS invented a problem. A syndicated conservation easement works by pooling investors into a partnership, buying land, obtaining an appraisal for far more than the purchase price, donating a conservation easement on the land, and passing an inflated charitable deduction through to the investors — often four or more dollars in deductions for every dollar invested. Senate Finance Chairman Chuck Grassley (R-IA) and Ranking Member Ron Wyden (D-OR) spent sixteen months investigating these deals and, in a bipartisan 2020 report, called them “nothing more than retail tax shelters that let taxpayers buy tax deductions.” The Justice Department made the criminal case: Georgia CPA Jack Fisher and attorney James Sinnott sold investors more than $1,300,000,000 in fraudulent deductions on appraisals often ten times what they’d paid for the land, costing the IRS more than $450,000,000. A judge sentenced Fisher to 25 years and Sinnott to 23 in January 2024, ordering $458,000,000 and $444,000,000 in restitution.
The trouble is that the IRS then treated nearly every taxpayer who claimed one of these deductions the way it treated Fisher and Sinnott. A National Taxpayers Union Foundation review of 798 Tax Court cases, published in April 2026, found the IRS claimed the land was worth zero in 93 percent of them and imposed the maximum 40 percent penalty in 99 percent — a blanket posture the report’s authors called “a sign of systemic failure,” not toughness, that has left cases languishing an average of four and a half years while swamping the Tax Court’s docket.
“A strategy that requires nearly every disputed case to be litigated to the end is not a sign of toughness; it is a sign of systemic failure.”
Joe Bishop-Henchman & Pete Sepp, National Taxpayers Union Foundation, April 2026
Lawmakers in both parties have already responded twice. President Biden signed the SECURE 2.0 Act on December 29, 2022, incorporating a Grassley-Wyden provision that caps future syndicated easement deductions at 2.5 times a partner’s basis — closing the loophole that made four-to-one deductions possible. Separately, the backdating scandal produced its own fix: the Fair and Accountable IRS Reviews Act, sponsored by Rep. Glenn Grothman (R-WI), cleared the House Ways and Means Committee 44–0 in September 2025 and passed the full House by voice vote that December.
The bill writes into statute exactly what LakePoint Land II exposed as missing: it defines an employee’s “immediate supervisor” as the person the employee actually reports to, and requires that supervisor’s written approval before any penalty reaches a taxpayer. Ways and Means Chairman Jason Smith (R-MO) framed the stakes bluntly: “Taxpayers Deserve Protections from Rogue IRS Agents Unfairly Imposing Penalties.” The bill has not yet cleared the Senate.
The IRS opened a new 90-day settlement window on May 13, 2026, for the roughly 1,100 conservation-easement cases still pending — about 740 in Tax Court, 400 more in examination — easing the upfront-payment requirement for nearly 450 of them. Grassley and Sen. Steve Daines (R-MT) wrote Treasury Secretary Scott Bessent (R) on May 28 urging him to “faithfully enforce” those terms, then pressed the point in person less than a week later when Bessent testified before the Senate Finance Committee on June 3.
“I think the department is doing the right thing, but I think you’re getting pressure to change,” Grassley told Bessent, urging him to “stand by recent settlement offers — and ignore those who I think are lobbying you to water it down.” A telling split: the Senate’s lead fraud investigator still wants the settlements enforced, even as a watchdog spent the prior month documenting the kind of shortcut — a backdated signature standing in for a safeguard Congress wrote into law — that Moore calls a witch hunt and TIGTA calls a documentation failure. Both can describe the same file.
IRS Commissioner John Koskinen (D), an Obama appointee, issues Notice 2017-10, branding syndicated conservation-easement transactions — retroactive to 2010 — as “listed transactions” without notice-and-comment rulemaking.
Commissioner Chuck Rettig (R), Trump's first-term appointee, announces a coordinated, cross-division surge in audits and litigation against the same transactions.
Senate Finance Chairman Chuck Grassley (R-IA) and Ranking Member Ron Wyden (D-OR) release a bipartisan report calling syndicated conservation easements “retail tax shelters,” built on a 16-month investigation.
The Tax Court rules in Green Valley Investors that Notice 2017-10 is invalid because the IRS never ran it through Administrative Procedure Act rulemaking.
President Biden signs the SECURE 2.0 Act, capping future syndicated conservation-easement deductions at 2.5 times a partner's basis — the bipartisan legislative fix.
In LakePoint Land II, the Tax Court finds IRS counsel misrepresented when a penalty-approval form was actually signed; the IRS concedes a $15.2 million penalty and is sanctioned.
TIGTA reports the IRS backdated penalty approvals in seven more docketed cases, conceding over $68 million after reviewing 1,268 files agency-wide.
A federal watchdog confirmed in May 2026 that IRS employees backdated tax-penalty approvals in at least seven cases, forcing the agency to concede over $68,000,000it should never have pursued — the second time in three years a court or inspector general caught the same conduct. The campaign that produced those cases rests on a 2016 notice a Tax Court later ruled the IRS never had authority to issue, and it survived Republican and Democratic commissioners alike. Genuine fraud by shelter promoters is documented and prosecuted; Steve Moore’s “witch hunt” framing is his opinion. The backdated paperwork is not anyone’s opinion — it is what a federal watchdog found.
