Investor Partnerships Sued Insurers Over Denied Tax Claims
Investors sought to recoup losses after the IRS disallowed billions in syndicated conservation easement tax deductions.
Updated on Oct. 6, 2026 in Taxes
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Investor partnerships filed at least 20 lawsuits against insurance companies following the IRS crackdown on syndicated conservation easement transactions. These legal actions arise after authorities disallowed over $36 billion in disputed deductions.
Why it matters
The disputes stem from a tax avoidance scheme where promoters inflated land values to generate oversized charitable deductions for investors. Many investors purchased tax liability insurance to cover potential losses from these adverse IRS proceedings.
Insurers wrote policies covering approximately $1 billion in liability limits for these transactions. The IRS challenged over $36 billion in deductions, often proposing a 21% tax on the disallowed amount plus a 5% misstatement penalty.
The players
Internal Revenue Service
This federal agency is responsible for tax collection and enforcing tax law in the United States.
Jack Fisher
He is an accountant who was sentenced to federal prison in 2024 for his role in the tax schemes.
James Sinnott
He is an attorney who was sentenced to federal prison in 2024 for his involvement in these transactions.
The details
Promoters purchased land parcels, hired appraisers to artificially inflate their market value, and sold shares of conservation deductions to thousands of investors. Investors relied on tax liability insurance policies to protect against IRS penalties after the agency categorized these maneuvers as avoidance schemes in 2016.
Timeline
The federal law allowing permanent conservation donation deductions dates back to 1980.
The IRS identified the transactions as tax avoidance schemes in 2016.
The IRS added these transactions to its Dirty Dozen list in 2019.
A Senate Finance Committee hearing regarding the transactions occurred in 2020.
Federal law effectively shut down the maneuver in 2022.
Market Dynamics
The transition from widespread use of syndicated conservation easements to aggressive IRS enforcement mirrors broader shifts in how the agency targets complex tax avoidance strategies. This legal battle signals a long-term unwinding of a multi-billion dollar industry that thrived on regulatory loopholes.
Retail investors who participated in these schemes face potential tax bills and penalties if their deductions are disallowed. These lawsuits highlight the significant financial risks involved in using specialized insurance products to cover aggressive tax planning strategies.
The takeaway
Taxpayers should exercise extreme caution when presented with investment opportunities promising charitable deductions that significantly exceed the initial capital investment. These cases demonstrate that insurance policies may not guarantee protection when the underlying tax positions are deemed illegal by authorities.
Further reading
Learn more about federal tax enforcement by visiting the Taxes section.
Source note: This article includes information reported by Business Insurance.
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