IRS accused of backdating penalties 

The Internal Revenue Service is accused of backdating proposed penalties against three businesses, according to filings with the U.S. Tax Court. 

According to tax court filings, the three businesses allege an IRS supervisor knowingly backdated approvals for proposed penalties against the three businesses.

In a partnership known as a conservation easement, a landowner can give up the development right on the land in exchange for compensation and tax incentives, including the ability to claim charitable deduction, according to the IRS.  

The petitions from each of the businesses — Basswood Partners, LLC; Delwood Partners, LLC; and Natural Aggregates Partners — state the businesses each reported charitable deductions related to a conservation easement agreement. The three businesses were later hit with millions of dollars’ worth of penalties in connection with the deductions, the petitions said. 

According to tax court filings, a revenue agent on July 12, 2021, emailed a supervisor asking for approval of the penalties against the three businesses. Two days later, his supervisor approved the penalties. The court filings state the supervisor did not list the specific penalties “nor the basis for the assertion of any Penalties.” 

Nearly eight months later, on March 11, 2022, the revenue agent allegedly asked the same supervisor to sign penalty approval sheets for the audit, and asked the supervisor to sign with the date July 14, 2021, or a “little thereafter,” not the date of March 11, 2022. 

Court filings state the supervisor then returned the penalty consideration lead sheets with the date of July 14, 2021, and admitted to backdating the sheets.

In a court filing last week, Michael Todd Welty, the attorney representing the three businesses, requested the IRS admit to the allegations within 30 days, as well as acknowledge the “genuineness” of the petitioner’s documents, which include copies of email exchanges between the IRS revenue agent and supervisor. 

In a statement shared with The Hill, the IRS said it has been “deeply concerned about aggressive use of syndicated conservation easements.”

The agency said it wants to ensure the easements are not being “abused by high-wealth taxpayers.”

“However, the IRS rejects any suggestion that the agency has created a culture where we are taking a ‘no-holds-barred’ approach to these cases. To the contrary, the IRS’s culture stresses our commitment to taxpayer rights as well as the law, and our work is guided by that,” the statement said.

Updated: 5:39 p.m.