Following the recent decision by a federal court to strike down a controversial Internal Revenue Service “facts and circumstances” test for nonprofit tax-exempt status, lawmakers are intensifying scrutiny of IRS standards that conservatives say are still in place and continue to weaponize the organization against American businesses.
Earlier this summer, Florida Representatives Aaron Bean, Greg Steube, and Vern Buchanan called on the Internal Revenue Service (IRS) to withdraw Revenue Ruling 2024-14, a policy they say injects dangerous uncertainty into the tax code and unfairly targets law-abiding businesses. But months later, and with Scott Bessent now leading the IRS, no action has been taken.
In a letter sent to then-Acting IRS Commissioner Billy Long, the lawmakers expressed deep concern over the ruling's application of the economic substance doctrine, calling it a "flawed interpretation" that lacks clear statutory basis and undermines long-established tax law.
“The result in the ruling is that the partnership tax laws are set aside to require the taxpayer to make basis adjustments that would not occur when applying the letter of the law,” the letter reads. “For so long as the ruling remains, taxpayers must guess between two mutually exclusive outcomes.”
The lawmakers also took issue with the ruling’s assumption that related-party transactions inherently lack legitimate business purpose — a position they argue is inconsistent with both precedent and business reality. Such transactions, they noted, are common in industries ranging from manufacturing to finance, and are already subject to existing oversight under tax code provisions like section 482.
In a statement to The Floridian, Rep. Bean emphasized his concern that “unelected bureaucrats” within the government agency.
Taxpayers and business owners deserve tax rules rooted in clarity, not partisan politics. This Biden-era ruling is a misguided attempt to turn routine, lawful transactions into targets for audits, fines, and costly lawsuits,” stated Rep. Bean. “ It bypasses Congress, undermines the rule of law, and expands IRS power at the expense of taxpayer rights, all driven by unelected bureaucrats. The Trump Administration is making real progress in rolling back burdensome regulations, and keeping this ruling in place threatens to undo that. I’ll keep fighting for its full repeal.”
The lawmakers applauded the administration’s previous decision to withdraw REG-124593-23, a proposed regulation that would have flagged related-party basis adjustments as “transactions of interest.” That move, they said, demonstrated a “welcome commitment to thoughtful, balanced tax administration.”
Following the appointment of new IRS Commissioner Scott Bessent, momentum on this front appears to have stalled. Despite expectations that Bessent would bring a more balanced, transparent approach to tax enforcement, the IRS has yet to withdraw or revise Revenue Ruling 2024-14.
Tax professionals and business groups have echoed the concerns, warning that the ruling forces taxpayers into an impossible position, caught between statutory law and an overreaching interpretation that may not hold up under legal scrutiny.
“It’s time for the IRS under Commissioner Bessent to act,” a source familiar with the issue said. “The longer this ruling remains in place, the more confusion and risk it creates for American businesses trying to operate in good faith. It also means the IRS is still being weaponized under President Trump, which of course is unacceptable.”
The expectation in Washington is that pressure will continue to build on the IRS to revisit the ruling, and for Commissioner Bessent to make good on promises of a more modern and fair tax administration.
