Georgia tax professionals plead guilty in $1.2B tax scheme

Two Georgia men have pleaded guilty for taking part in a wide-ranging tax scheme involving the sale of fraudulent syndicated conservation easement (SCE) tax shelters.

According to federal court documents, Stein Agee of Canton and Corey Agee of Atlanta, partners at a Sandy Springs accounting firm, promoted fraudulent tax shelters between at least 2013 and the end of last year designed to generate deductions for high-income taxpayers through partnerships purported to be making real estate investments.

In reality, the partnerships were a sham, lacking economic substance and serving no legitimate business purpose.

The placement of conservation easements over the real estate was a foregone conclusion, which enabled the investors to fraudulently shelter their income from the IRS with no economic risk and to claim substantial tax deductions to which they were not entitled. The Agees and their co-conspirators promised investors that for every $1 invested in the partnership, the investor would receive more than $4 in charitable tax deductions.

“The defendants’ and their co-conspirators' criminal conduct enabled their clients to claim more than $1.2 billion in fraudulent tax deductions and generated hundreds of millions of dollars of tax loss to the United States,” said Richard E. Zuckerman, principal deputy assistant attorney general in the Justice Department's Tax Division. “Taxpayers engaging in such schemes, and the lawyers, accountants, appraisers and other professionals that enable them, should understand that they will be held fully to account for their fraudulent conduct.”

“Each year, millions of law-abiding Americans painstakingly file accurate tax returns and pay timely their tax obligations,” added U.S. Attorney R. Andrew Murray for the Western District of North Carolina. “As the defendants admitted in court … their tax shelter scheme helped wealthy clients skirt their tax responsibilities and avoid paying their fair share.” When legitimately created and used in compliance with the Internal Revenue Code, conservation easements can both protect the environment and provide tax incentives. Abusive SCEs are designed to game the system and generate inflated and unwarranted tax deductions.

The Agees both pleaded guilty to one count of conspiracy to defraud the IRS, which carries a maximum penalty of five years in prison. They also face a period of supervised release, restitution, and year.

monetary penalties.