The United States Court of Appeals for the Fifth Circuit—which covers Texas, Louisiana, and Mississippi—is one of the most active circuits in tax litigation. Its decisions are binding precedent for taxpayers in these three states and frequently influence tax law nationally. The first half of 2025 has produced several significant decisions that business owners and tax practitioners should be aware of.
Conservation Easement Enforcement Continues
The Fifth Circuit has continued to uphold IRS challenges to syndicated conservation easement transactions. In a series of cases building on its prior decisions, the court has affirmed Tax Court findings that inflated appraisals of conservation easements constitute gross valuation misstatements subject to the 40 percent penalty under IRC § 6662(h). The court has been particularly skeptical of easements where the claimed value of the conservation restriction far exceeds the purchase price of the underlying land.[1]
For Mississippi taxpayers who participated in syndicated conservation easement transactions, these decisions underscore the litigation risk. The IRS has identified syndicated easements as a "listed transaction" requiring disclosure, and the penalty exposure for participants is substantial. Taxpayers who have not yet been audited should consult with a tax controversy advisor about potential voluntary disclosure options.
Partnership Audit Regime Interpretation
The Fifth Circuit addressed procedural issues under the centralized partnership audit regime (BBA), providing guidance on the scope of the partnership representative's authority and the requirements for push-out elections under Section 6226. The court emphasized that the statutory deadlines for push-out elections are jurisdictional—meaning they cannot be extended by the court—and that partners who fail to comply with the election requirements are bound by the partnership-level determination.[2]
IRS Summons and Third-Party Recordkeeper Disputes
Several Fifth Circuit decisions addressed the IRS's authority to issue summonses to third-party recordkeepers, including banks, cryptocurrency exchanges, and financial advisors. The court reaffirmed the broad scope of the IRS's summons authority under Section 7602 while also recognizing limits when the summons is used for an improper purpose or when the taxpayer's rights under Section 7609 (third-party recordkeeper notice requirements) are not observed.[3]
Penalty Cases and Reasonable Cause
The Fifth Circuit decided several cases involving the reasonable cause defense to accuracy-related penalties. The court continued to hold that reliance on a tax professional's advice can constitute reasonable cause, but only when the taxpayer provides the professional with complete and accurate information, the professional is competent in the relevant area of tax law, and the taxpayer actually relies on the professional's advice in good faith. Taxpayers who provide incomplete information to their advisors—or who shop for favorable opinions—cannot claim reasonable cause.[4]
Implications for Mississippi Taxpayers
Fifth Circuit decisions are directly binding in Mississippi, and the trends in this circuit should inform tax planning and compliance decisions for Mississippi businesses. The court's continued skepticism of aggressive tax positions—particularly in the conservation easement and penalty areas—counsels in favor of conservative positions supported by thorough documentation and competent professional advice.
Taxpayers facing IRS examinations or considering positions that may be challenged should evaluate the current Fifth Circuit landscape as part of their tax controversy strategy. The forum in which a dispute will be litigated—and the precedent that applies—can determine the outcome.[5]