News flash: Government overreaches. The bigger and more powerful the government, or government agency, the worse the overreach.
Not a shock to most of the Hot Air audience, I know.
But as hard as it is to surprise most of us in the conservative alt-media game, or conservatives in general, it can happen.
But a listener to my local radio show flagged a Biden-era policy that caught even my deeply-cynical attention. it's a case study in why DOGE needs to keep taking that rhetorical weed-whacker to the IRS.
As the Biden administration ground its way through its tragicomic last days, career staff at the IRS issued a new regulation to alter how the agency looks at “basis shifting” transactions by business partnerships. The regulation now states that companies, the kind that fuel economic growth and job creation, could be penalized for a decades-old lawful practice.
Strap in for some tax accountant language:
Basis shifting basically involves moving tax basis from one partnership asset to another partnership or partner asset, either within the same entity or a related entity, often with related-party partners. Often, the basis is moved from a nondepreciable to a depreciable asset, or to an asset that is planned to be sold in the very near future.
Under traditional tax planning, if the nondepreciable asset will not be sold anytime soon, a net tax loss is created inside the related-party group. The movement of asset basis in the aggregate will net out to zero, but given the productive nature of the depreciable asset, the tax benefits can be such that only related parties would enter into the transaction. Frequently, that is done through what is called a “basis strip.”
Yes, this is the sort of thing that earns tax accountants the big bucks - and helps entrepreneurs focus their capital on growing their business instead of paying taxes.
On top of the regulation, career liberals at the IRS set up a special pass-through investigation unit to enforce it - a bureaucracy dedicated to making that this common business tax-management tactic gets harassed and criminalized.
A metaphorical Commissioner Gordon should be shining the DOGE-signal onto a passing cloud right about now.
Stephen Moore from The Heritage Foundation recently called out this overreach,
The Biden crackdown treated business partners as tax cheats. When they hired 87,000 agents to harass companies and individuals, nearly 4,000 of these IRS tax collectors were hired to among other things, “expand enforcement focusing on complex partnerships.”
The more than four million business partnerships became an overnight suspect class, as did the tax returns of millions of partners.
To pry money out of these partnerships, the Biden team wanted to create a retroactive tax (which should be illegal) by changing the rules and apply them going back six years in time. So a tax structure that may have been perfectly legal in the past could now trigger investigations, fines, and litigation...These partnership arrangements allow promising small companies to grow into large ones. This uniquely American business structure is a hallmark of U.S. entrepreneurial success — a path for businesses to go from good to great.
According to Moore, the regulation “would deliberately embed uncertainty and subjective IRS interpretations of how taxable assets are treated when one transfers or sells their interest in a business partnership. Basically, the opposite of tax fairness.”
The twist that should shock nobody at all: the IRS didn’t even have the legal authority to issue the new regulation in the first place. Congress did not authorize changes to the tax code to allow for enforcement. But then, this is the IRS. Legit or not, businesses are on the hook to comply, this tax season.
The rule, and the unit, concealed as they are deep in the tax regulations and the opaque language of tax law, flies under the radar - but is a clear standint when it comes to stifling business growth.
DOGE has a busy - maybe superhuman - agenda in rooting out waste and, perhaps above all, regulations that stifle growth and freedom. This regulation, and the nvestigation unit staffed by career Democrats that is enforcing it, deserves some attention - from DOGE, and from House Republicans.
