According to Accounting Today, the IRS’s proposal to withdraw a Biden-era rule targeting partnership basis-shifting transactions is being met with cautious approval from tax professionals. However, the door isn’t fully closed. 

The rule, issued in the final days of the previous administration, would have classified many basis-shifting arrangements as “transactions of interest” (TOI), subjecting them to heightened scrutiny. That guidance drew criticism from the AICPA and others, who said the retroactive reporting requirements were unclear and overly burdensome for businesses engaged in otherwise routine transactions. 

April's withdrawal proposal, citing Trump’s executive order creating the Department of Government Efficiency, emphasized taxpayer concerns around complexity and compliance costs. Still, the revenue ruling underpinning the IRS’s concerns—2024-14—remains in place, meaning partnerships and advisors aren’t out of the woods yet. 

“Continued diligence is required,” Grant Thornton wrote in a recent blog, pointing to the lingering enforcement risks under economic substance and anti-abuse doctrines. 

Some critics argue the rollback reopens loopholes for wealthy taxpayers. Sen. Ron Wyden called it “welfare for billionaire tax cheats,” warning that the regulation’s removal could enable aggressive tax avoidance by large partnerships. 

Meanwhile, groups like National Taxpayers Union say the IRS should refocus on providing clear, consistent guidance instead of chasing ill-defined revenue streams. 

The IRS has not yet announced whether it will withdraw Revenue Ruling 2024-14, which addresses similar basis-shifting concerns. As a result, even though the proposed rule is being repealed, related guidance remains in effect. 

A notice of proposed rule making is expected in the coming months, which will formally outline the agency’s updated position on partnership basis-shifting transactions and clarify the status of remaining enforcement mechanisms.