A conservation easement is a way for landowners to retain ownership and use of their property, while also ensuring that the property’s resources are protected for future generations. In many cases, the easements are donated to nonprofit organizations, providing a nice tax break.
Conservation easements also are sometimes used to evade taxes. In fact, bogus arrangements are regularly included in the Internal Revenue Service’s annual Dirty Dozen list of tax scams.
In addition to warning taxpayers about abusive conservation easements, the IRS also is intent on stopping, and bringing to justice, those who promote these tax avoidance schemes.
Jail time for Georgia men: The latest to be caught are two Atlanta-area accountants, who this week were each sentenced to 20 months in prison for their roles in the promotion and sale of abusive syndicated conservation easement tax shelters.
The two men earlier pleaded guilty to their roles in a wide-ranging syndicated conservation easement tax scheme involving fraudulent charitable tax deductions.
Some of the co-defendants also charged in the easement scheme earlier this year received even steeper jail sentences — 25 and 23 years — following their convictions. The Department of Justice said their fraudulent promotion generated more than $1.3 billion in fraudulent syndicated conservation easement tax deductions, leading to a federal tax loss of more than $450 million.
Latest sentencings: Victor Smith, a CPA and founding partner of an Atlanta-based accounting firm, was part of the scheme beginning at least in 2014 and through at least 2019, according to court documents and statements made during this week’s sentencing hearing. Smith promoted and sold tax deductions to his wealthy clients in the form of units in illegal syndicated conservation easement tax shelters organized and created by co-defendants in the scheme.
Smith, along with his firm, sold approximately $14 million in false tax deductions to their clients, causing a tax loss to the IRS of about $4.8 million. He earned $491,400 in commissions for his role in the scheme.
William Tomasello, also a CPA at another accounting firm, also promoted and sold units to his wealthy clients in these same syndicated conservation easement tax shelters. Court documents and testimony showed that from at least 2015 and through at least 2019, Tomasello sold approximately $8.5 million in false deductions, causing a tax loss to the IRS of about $2.3 million. He earned approximately $525,072 in commissions.
Department of Justice Tax Division officials and trial attorneys said Smith and Tomasello both knew that, contrary to law, these syndicated conservation easement tax shelters lacked economic substance and that their wealthy clients participated in these sham investments only to obtain a tax deduction and received only a tax benefit for their participation in the tax shelters.
Smith and Tomasello also knowingly instructed and caused their clients to falsely backdate documents, such as subscription agreements and checks, related to the illegal tax shelters, according to federal prosecutors.
More than jail time: In addition to their prison sentences, U.S. District Court Judge Timothy C. Batten Sr. for the Northern District of Georgia tacked on some additional terms at sentencing.
He ordered Smith to serve two years of supervised release, and to pay $4,878,990.90 in restitution. Judge Batten ordered Tomasello to serve three years of supervised release, to perform 120 hours of community service, and to pay $2,386,816.04 in restitution.
Joining the Justice Department in investigation the conservation easement scheme were agents from the U.S. Postal Inspection Service and IRS Criminal Investigation.
Tax Felon Friday: Conservation easements obviously target a specific taxpaying demographic. But there are plenty of other tax evasion schemes that target almost every taxpayer.
Currently, for example, tax scammers are using the recent deadly and devastating natural catastrophes to try to con people into giving to fake disaster relief charities.
When it comes to taxes, the old saying that if something sounds too good to be true, it generally is usually applies. So, if you’re offered a great, money-saving tax tactic to reduce what you owe the U.S. Treasury, take time to investigate.
If you want to catch up on all sorts of tax scammers and other tax code miscreants, the ol' blogs' special Tax Felon Friday page is a good place to start.
And if you want more tax crime posts, notably those that were published long before I gave them a special end-of-week feature, you can peruse, what else, the tax crimes category. You'll find this post at the top of that collection right now, so just scroll down for more.
You also might find these items of interest:
- Bad tax shelter advice (and more) leads to Florida man's federal indictment
- IRS warns of fake Self Employment Tax Credit claims touted on social media
- Offer in Compromise tax debt deals are real, but beware aggressive OIC promoters
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