IRS Should Disband Unit That Targets Pass-Throughs, Group Says
May 20, 2025 2:22PM ET
Michael Rapoport
Reporter
The IRS should disband its new unit devoted to pass-through entities and partnerships because it unfairly places onerous tasks onto taxpayers, a business group said.
The unit, which started operating last October, is pursuing enforcement campaigns against law-abiding taxpayers and is “contributing to the overreaching and unduly burdensome administrative state” that President Donald Trump’s administration is trying to curtail, the National Association of Manufacturers said in a May 8 comment letterthat the Treasury Department made public Tuesday.
Housed inside the IRS’s Large Business and International Division, the pass-through unit was set up under former President Joe Biden. The IRS said at the time that the intent was to crack down on abuses by wealthy individuals who route income through partnerships and other pass-through entities to shield themselves from taxes.
But the pass-through unit has interpreted itself as having extensive power and is “operating as if it is outside the scope of the law,” the NAM said.
The group also asked the IRS to withdraw a revenue ruling from last year, Revenue Ruling 2024-14, aimed at stopping partnerships’ use of “basis-shifting” transactions among related parties to avoid taxes. The ruling, too, is creating unfair burdens for taxpayers, the NAM said.
Treasury had left the revenue ruling standing in April when it withdrew other guidance on partnerships’ basis-shifting. Basis-shifting involves one shareholder moving its investment in another entity to a related party, a move which the IRS has said can create improper tax deductions.
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To contact the reporter on this story: Michael Rapoport in New Jersey at mrapoport@bloombergindustry.com
To contact the editor responsible for this story: Martha Mueller Neff at mmuellerneff@bloomberglaw.com