Kelly, Smucker send letter to Commissioner Long calling for removal of Biden-Era IRS revenue ruling
WASHINGTON, D.C. -- Today, U.S. Representatives Mike Kelly (R-PA), Chairman of the Ways & Means Subcommittee on Tax, and Lloyd Smucker (R-PA), a member of the Ways & Means Committee, and 18 other members of the tax-writing Ways and Means Committee sent a letter to Internal Revenue Services (IRS) Commissioner Billy Long urging its reconsideration of Revenue Ruling 2024-14, unsupported Biden-era guidance that has created unnecessary confusion for taxpayers and threatens enforcement actions by drawing into question routine business transactions.
Revenue Ruling 2024-14 was announced last year as part of a broader effort by the Biden Administration to crack down on partnership “basis-shifting” transactions. Specifically, the ruling broadly applies the economic substance doctrine, an enforcement tool to combat tax avoidance and ensure that transactions are driven by legitimate business purposes, rather than simply reducing tax liability. By extending the scope of this enforcement tool beyond past precedent, the IRS overreached and cast doubt over the legality of routine partnership transactions.
“Main Street businesses are the backbone of our communities. They should be able to focus on providing quality services to American families and not worry about being targeted by the heavy-handed IRS. I am proud to lead this letter voicing our concerns alongside my Pennsylvania colleague Rep. Smucker and our fellow Ways and Means Committee Republicans,” Rep. Kelly said. “I look forward to working with IRS Commissioner Long and the Trump Administration as we look to overturn these political weaponization tools against small businesses enacted under the Biden regime.”
“American taxpayers and businesses deserve clear and consistent tax rules that allow them to confidently comply with the law,” said Rep. Smucker. “Reconsidering this relic of the Biden administration’s IRS would remove a contradictory compliance burden and help instill a more predictable tax code. The Trump administration has secured historic tax reforms for the American people. We are hopeful that it will remain committed to restoring fairness. We respectfully urge the IRS to rescind this Biden-era regulation, eliminate uncertainty, and restore greater trust in the American tax code.”
“[T]he ruling assumes that related-party transactions inherently lack a legitimate business purpose,” the letter reads. “This assumption is at odds with long-established tax law and the reality of how businesses operate. Related-party transactions are routine in a variety of industries, including manufacturing, investment, and distribution, and are governed by provisions such as section 482 that are specifically designed to ensure fair treatment while recognizing their legitimacy.
“We believe that withdrawing Revenue Ruling 2024-14 and rejecting its flawed legal analysis would be an important next step toward restoring clarity and consistency in the tax code.
“We appreciate the current administration’s steps to improve tax regulation, including the recent withdrawal of REG-124593-23, which would have designated related-party basis adjustments as “transactions of interest.”
Read the full letter here.