Unhappy Appraisers Suing the IRS

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The IRS does not like conservation easements.  It views them as a form of abusive tax shelter.  Clinic clients don’t deduct conservation easements.  So, I am not writing here from personal experience.  Rather, I have gained this knowledge from reading the tax press and speaking to colleagues.

Obtaining an appraisal fulfills a necessary part of a claim for a charitable deduction of a conservation easement.  In its enforcement actions to end conservation easements, the IRS has taken action that displeases appraisers.  As a consequence, they brought suit against the IRS and certain employees.  The case of Benson v. IRS, No. 2:21-cv-0074 (N.D. Ga. 2022) does not end well for the appraisers because they failed to take the necessary steps to properly initiate a suit against the IRS.  We don’t know what might have happened if they had properly pursued their suit.


The IRS filed a motion to dismiss the complaint brought by the appraisers because they didn’t make proper service of the complaint.  The opinion starts with some background on conservations easements generally and the enforcement efforts of the IRS regarding conservation easements specifically.  As part of its enforcement effort in this area, the IRS subpoenaed substantial documentation from the appraisers involved in these cases which the appraisers alleged placed a significant strain on them.  The IRS also generally found their appraisals untrustworthy.

The appraisers involved in this suit brought alleging intimidation by the IRS and an effort by the IRS to use penalties to prevent them from properly appraising property.  They wanted to make the case a class action on behalf of all appraises working conservation easement cases.  Specifically, they brought five claims:

Plaintiffs first bring a claim under the Administrative Procedures [sic] Act (“APA”). Plaintiffs allege that Defendants have failed to abide by Executive Orders 13981 and 12892, which require transparency when drafting and issuing guidance documents. Plaintiffs allege that they were proximately harmed by “[t]he unauthorized expansion of regulatory powers regarding the administrative review of appraisals for donations of qualified real property” in five ways. First, “[t]he stifling and eliminating effect that Defendants’ refusal to act in a transparent manner in issuing guidance documents or reviewing donations.” Id. Second, “[t]he stifling and eliminating effect of the Defendants’ pattern and practice of ‘unfair surprise’ regarding audit practices, and administrative determinations for donations; and most pertinently unsupported penalty assessments.” Third, the loss of potentially conserved land caused by the elimination of appraisers due to “unsupported penalty assessments.” Fourth, is the cost of bringing this action. Finally, imposing these penalties amounts to an Eighth Amendment violation.

While the parties disagree over the merits of the matters raised, the IRS also sought to dismiss the case on procedural grounds because of a failure of service.  Federal Rule of Civil Procedure (FRCP) 4(c)(1) requires:

[a] summons must be served with a copy of the complaint. The plaintiff is responsible for having the summons and complaint served within the time allowed by Rule 4(m) and must furnish the necessary copies to the person who makes service.

FRCP 4(m) requires:

If a defendant is not served within 90 days after the complaint is filed, the court — on motion or its own after notice to the plaintiff — must dismiss the action without prejudice against that defendant or order that service be made within a specified time. But if the plaintiff shows good cause for the failure, the court must extend the time for service for an appropriate period.

The court noted:

Service of process is a jurisdictional requirement: a court lacks jurisdiction over the person of a defendant when the defendant has not been served.

The court explained how the service on one of the individual defendants failed because it did not meet the rules.  Plaintiffs here not only sued the IRS but sought to use Bivens to sue individual IRS employees involved in the program of pursuing conservation easements.  We discussed Bivens actions previously here and here.  They are difficult actions to bring but because of the failure of service, this case does not address that difficulty.  The court notes that at the time of its opinion here more than 400 days has passed since the filing of the suit without proper service on Ms. Ishee, one of the individual defendants.

In addition to the failure to properly serve Ms. Ishee, plaintiffs did not properly serve the United States.  FRCP 4(i)(2) governs service on the IRS and its employees.  The Court notes:

[t]o serve a United States agency or corporation, or a United States officer or employee sued only in an official capacity, a party must serve the United States and also send a copy of the summons and of the complaint by registered or certified mail to the agency, corporation, officer, or employee.

Thus, to properly serve the IRS, and Melissa L. Ishee, David Ables, Tommy Waldrup, Michelle March, and Ifeoma Okeke (“IRS Agent Defendants”), in their official capacities, Plaintiffs were required to serve the United States and send a copy of the summons and of the complaint to the IRS. To serve the United States, Plaintiffs must

(A)(i) deliver a copy of the summons and of the complaint to the United States attorney for the district where the action is brought — or to an assistant United States attorney or clerical employee whom the United States attorney designates in a writing filed with the court clerk — or

(ii) send a copy of each by registered or certified mail to the civil-process clerk at the United States attorney’s office;

(B) send a copy of each by registered or certified mail to the Attorney General of the United States at Washington, D.C.; and

(C) if the action challenges an order of a nonparty agency or officer of the United States, send a copy of each by registered or certified mail to the agency or officer.

Fed. R. Civ. P. 4(i)(1). The Docket reflects that on August 19, 2021 (139 days after the Complaint was filed) Plaintiffs sent a copy of the summons to the Civil Process Clerk for the United States Attorney’s Office for the Northern District of Georgia. Doc. No. [19]. The Docket does not show that Plaintiffs sent a copy to the Attorney General of the United States.

Because plaintiffs sought to bring a Bivens case, it sued the named persons in their individual capacity; however, it did so in their role as IRS agents.  This required the plaintiffs to serve them individually and to serve the IRS.  Here, the failure to serve the attorney general could not be waived by the individual defendants.  The court also stated that plaintiffs also failed to address the arguments about service made by the defendant.  A possible saving argument here for plaintiff is good cause; however, plaintiff did not make a good cause argument.  So, plaintiff’s dismissal stems not only from the technical failure to send a copy of the complaint to the attorney general but also from their failure to respond to the arguments raised about service or to allege good cause for their failure.

The dismissal here is without prejudice.  Perhaps they will make another run at suing.  The IRS has not given up its full throated enforcement effort against conservation easements.  So, the penalties and other problems these appraisers face have not ended.


  1. Robert Kantowitz says

    Actions against individuals are sometimes the only way to break a logjam of agency misconduct. Alternatively, maybe a federal judge will get sufficiently incensed at the IRS’s overreach as to hold a government trial lawyer in contempt for asserting a theory that the judge has told the lawyers in that case or a previous case is clearly not supported in the law.

  2. Jack Townsend says

    Thanks, Keith. This is a reminder to pay attention to the procedural rules for starting a case.

    There is a more fundamental problem for appraisers. They are at risk only to the extent that their appraisals were abusive – well outside the reasonable valuation ranges allowed. I don’t think that has anything to do with any of the alleged footfaults the Treasury or the IRS may have made in the administrative process of promulgating and implementing the regulations. If, hypothetically, there were no regulations, appraisers could still be at risk for rendering abusive appraisals to “support” deductions to which the taxpayer is not entitled. So, I just wonder why they would have any standing to pursue the claims they attempted to make (as stated in the paragraph from the opinion that you quote).

  3. Kenneth H. Ryesky, Esq. says

    During my IRS days when I did Estate & Gift, there were (and likely still are) particular appraisers who were unofficially blacklisted or whitelisted. One of my cases I referred to the valuation section, and the real estate appraiser told me that he was going to go out and do an appraisal only because of the value and quantity of the multiple parcels of real estate compelled him to do it according to the relevant procedures, but he expected his appraisal to come close to that submitted by the taxpayer, and henceforth, that I should not bother him with any appraisals by the particular appraiser involved if not procedurally necessary; that particular appraiser’s word was highly reliable.

    When I was first detailed for a day to Holtsville to assist in classifying returns, the main guy there told us that there were certain appraisers whose appraisals were reliable, and some whose appraisals should ALWAYS be scrutinized. Thus, the identity of the appraiser can determine whether the tax return is or is not selected for audit.

    Another appraiser story: One of my cases had a decedent who owned a substantial amount of jewelry. The IRS appraiser, who at one time had his own jewelry manufacturing business, took a look at the jewelry inventory list. He spotted an item and said that he wanted to see it. I told him that a safety deposit box opening was slated for a few weeks down the road; he said that he wanted to attend also. Turned out that the item in question, which was listed as being made of silver, was in fact made of platinum.

  4. Jack Townsend says

    Also, worth a read is this:

    Peter Elkind, The Tax Scam That Won’t Die (Propublica 6/17/22)


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