Decades-long sentences and close to $1 billion in ordered restitution handed out in federal court this week in a fraudulent charitable deductions and land rights case could finally put the brakes on a controversial tax transaction while making it easier for the IRS to win related cases in US Tax Court.
Jack Fisher, a 71-year-old real estate developer, was sentenced Tuesday to 25 years in prison and ordered to pay $458 million in restitution for cheating the IRS using inflated tax deductions in the US District Court for the Northern District of Georgia. His co-defendant, James Sinnott, was sentenced to 23 years in prison in addition to $444 million in restitution.
Fisher and Sinnott were involved in syndicated easements, involving promoters who organize partnerships to buy land, then donate away rights to develop the land to generate huge tax deductions. The government said at Fisher’s trial that he used inflated appraisals and forged documents, starting his scheme in 2008. The scale of the fraudulent deductions expanded in 2013, when Sinnott joined the scheme, the Justice Department said.
The Land Trust Alliance, a nonprofit that opposes syndicated easements, has said that investors claimed nearly $36 billion in unwarranted deductions from 2010 to 2018. President Biden signed bipartisan legislation to stop syndicated deals at the end of 2022.
Tuesday’s sentence was a rare victory for the government in a practice that it has long struggled to contain. And Fisher’s guilty verdict and long sentence could change the tide with other possible prosecutions and cases that the Internal Revenue Service is fighting in Tax Court.
“His criminal conviction and the confessions of his associates could make winning Tax Court cases against those deals a whole lot easier for the IRS, which has, in general, found dealing with syndicated conservation easement transactions difficult and enormously time-consuming,” said Russell Shay, a public policy consultant who has tracked syndicated conservation easements for over a decade.
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“Some of the Tax Court cases have dragged on for a decade, and they still have hundreds of them in the queue,” Shay said.
Giving Pause
Shay said the IRS needs to find a way to review returns, and win cases in Tax Court based on valuation. “They let syndicated conservation easements grow from a cottage industry to a significant drain on the Treasury over more than a decade after they first knew about them,” he said.
When asked for comment, an IRS spokesperson pointed to a statement from Jim Lee, the chief of IRS Criminal Investigation, who said Tuesday that agents will use their financial expertise to go after abusive tax shelters.
“As this complex investigation continues to evolve, today’s judicial actions illustrate our resolve to hold responsible every individual involved in tax evasion schemes,” Lee said.
The long prison sentences and the huge amounts of restitution money involved should give significant pause to those who have continued to promote syndicated transactions in other forms, said Nancy McLaughlin, a law professor at the University of Utah who focuses on easements and tax incentives.
“It also should give promoters being sued by investors pause, as the DOJ’s case against Fisher exposed the blatant valuation abuses involved in these transactions,” she said.
Sean Akins, an attorney for Covington & Burling, who represented EcoVest Capital Inc., a company that promoted syndicated easements, in a civil case brought by the government, said that some individuals have continued to sponsor syndicated deals or similar products.
The sentence and the restitution were a wake-up call to anyone still engaging in the activity following the passage of the bill to curb the transactions, Akins said.
The case against EcoVest was settled in March 2023 with the company agreeing not to promote easement deals without admitting to any wrongdoing. The government alleged in the case that the company reaped $3 billion in improper and over-valued tax deductions.
“These actors would be well-advised to seek competent and experienced legal representation sooner rather than later in order to avoid finding themselves in a position similar to Fisher and Sinnott,” Akins said.
The case is US v. Lewis, C.C.D. Ga., 21-cr-00231, sentencing 1/9/24