April 6, 2026
Internal Revenue Service
Attn: CC:PA:01:PR (REG–108921–25)
Room 5503, P.O. Box 7604
Ben Franklin Station
Washington, DC 20044
Re: Comments on IRS REG–108921–25, Removal of Final Regulations Identifying Certain Partnership Related-Party Basis Adjustment Transactions as Transactions of Interest
On behalf of National Taxpayers Union (NTU), the nation’s oldest taxpayer advocacy organization, I write with this submission to your notice and request for public comments regarding Internal Revenue Service (IRS) REG–108921–25. NTU strongly supports this proposal, which would repeal § 1.6011-18,[1] and commends the Treasury Department and IRS for taking a prudent policy direction.
Introduction
NTU is the nation’s oldest taxpayer advocacy organization, founded in 1969. For nearly as long, our experts and advocates have engaged federal policymakers on important questions surrounding tax administration, taxpayer rights, and IRS services. NTU served on the National Commission on Restructuring the IRS in 1996 and 1997, which later became the basis for the 1998 IRS Restructuring and Reform Act (RRA). More recently, we provided technical assistance to Congress for what became the Taxpayer First Act (TFA) of 2019 and worked with stakeholders across government to ensure its enactment into law.
In 2023, our research affiliate, National Taxpayers Union Foundation, initiated the Taxpayers for IRS Transformation (Taxpayers FIRST) project, which draws on experts from government, academia, and the private sector to assist IRS officials and policymakers with strategic and operational changes to the tax administration system.[2]
Comments
I. REG–108921–25 Would Complete the Important Task of Resetting a Controversial Body of Guidance and Is Fully Consistent with Recent Executive Orders on Regulatory Policy
As the current rulemaking, also known as the “Removal NPRM,” notes in its preamble, the action being taken here is in accordance with recent Executive Orders (EOs) on regulatory policy, particularly EO 14192. NTU wholeheartedly agrees with Treasury and IRS’s assessment, and we would contend that the decision to remove § 1.6011-18 comports with several precepts of sound regulatory policy, including:
Solid cost-benefit analysis. EOs 12866 and 13563 require more rigorous cost-benefit analysis of regulations, so that, “if regulation is necessary,” officials will “select regulatory approaches that maximize net benefits.” Given the uncertainty surrounding net benefit, and indeed the possibility of net cost, surrounding § 1.6011-18 (see Comment II below), IRS and Treasury could, in our opinion, employ EOs 12866 and 13563 as justification for the Removal NPRM and for development of a new regulatory and reporting approach toward partnership basis transactions. As NTU noted in comments from August 2024, “it is sensible from a cost-benefit standpoint for both stakeholders inside and outside of government to pause making further guidance in this area final.” Nonetheless, EO 14192, on its own, provides sufficient impetus in identifying flawed rulemakings whose repeal can offset new regulatory initiatives.
Respect for the Constitution. One analysis of REG-1245930-23 (which later became § 1.6011-18) warned that, “even if the transaction that resulted in the positive adjustment occurred in the early 2010s, it is possible that the participant would have to attach a Form 8886 to its tax return once the Proposed TOI Regulations become final in the 2020s.”[3] NTU’s 2024 comments on the proposed regulation raised not only “practical burdens of retroactivity on taxpayers” but also “systemic, negative impacts” from a rulemaking that appeared to require serious “forensic accounting” well beyond the normal “look-back” processes of audits.[4] The Removal NPRM avoids this potentiality, and, with it, the prospect of further challenges based on evolving jurisprudence on retroactive tax laws.
Clarity and stability for stakeholders. Citing other commenters, NTU’s original comments on REG-124593-23 raised the concern that “transactions involving unrelated partners that are facilitated by a ‘tax-indifferent’ party” could trigger “the new reporting obligations” and “one unrelated partner’s perfectly normal net operating loss or capital loss carryforward could set the new rules into motion.” Thus, “it [was] not difficult to imagine a host of unsuspecting individuals being required to submit Forms 8886 or 8918 under the new regulation but being snared by penalties for unintentionally failing to do so.”[5] The Removal NPRM eases this uncertainty, and allows the IRS and Treasury the option to consider more carefully drafted reporting regulations in this area of tax law.
II. Treasury and IRS Should Be Applauded for Seeking More Accurate Estimates of Compliance Burdens and Conducting More Realistic Cost-Benefit Analysis
Utilizing time-to-completion statistics as well as number of participants yields an annual compliance cost of $163 million linked to the two forms that would be most commonly used to comply with Transaction of Interest reporting; Treasury and IRS have invited “comments on the magnitude of this estimate.”
NTU was truly gratified to note that Treasury and IRS had accepted our alternative view of the average hourly wage associated with filing Form 8886 and 8819 at $177.29 ($190.33 in 2024 dollars) as opposed to the original estimate of $102 in REG-124593-23.[6] This Removal NPRM therefore deserves applause for embracing more realistic compliance cost calculations.
How can future estimates be made even more complete? One way is to attempt to measure more thoroughly the second-order cost impacts of tax compliance that authors such as Fichtner and Payne have discussed in their own research.[7]
As an example, REG–108921–25 assumes 2.2 material advisors for each transaction requiring the reporting of a basis adjustment. No doubt this assumption might include individuals of varying skill levels or involvement in the partnership or its tax advisory firm. But what of individuals whom those material advisors might contact to provide confirmation or clarification of facts reported on Form 8886 and Form 8819? What of the individuals who would be expected to maintain even more fulsome records going forward to meet the demands of potential future Transaction of Interest Reporting situations? Payne’s research suggests that, in self-reporting their own compliance burdens, taxpayers tend to overestimate the time they spend on completing forms, while underestimating the time they spend on recordkeeping. What of partnership participants who, reading of the changes required under REG-124593-23, expended time and money consulting with tax advisors or preparing forensic accounting to “audit-proof” their finances, even if their transactions were completely benign and innocent? Those involved with enforcing the nation’s tax laws might encourage such diligence and welcome its impact on tax compliance, but extraneous or unnecessary effort has an opportunity cost: lost productivity and expense that could otherwise be invested in growing the economy for all.
Without access to all the details that went into the Removal NPRM’s calculation of 2.2 material advisors per basis adjustment transaction, it is possible that the individuals we mention in the paragraph above have already been taken into account. Whether or not they have been factored into the calculations, NTU would urge Treasury and IRS to initiate a technical conversation which, while outside the boundaries of this rulemaking, will have an increasingly important impact on “paperwork” burden estimates in years to come. The so-called “gig economy” and digital currency transactions have been a feature of our economy for quite some time, and are a portent of the future: clearly, tax compliance will involve the collection, storage, and classification of increasingly copious and fast-moving data. This will necessitate new methods of estimating how individuals and systems outside of the government will manage this trend.
We hasten to add that the use of Artificial Intelligence (AI) in government tax administration, while well underway, is little understood in its impact upon the taxpayers interacting with it. Meanwhile, private sector practitioners are embracing AI for numerous tasks, ranging from initial preparation of client profiles to intake management of information requests from the government. To what degree does this technology affect “paperwork” burdens that would normally fall on the shoulders of human employees?
NTU respects and admires the work that Research, Applied Analytics and Statistics Division, the Electronic Tax Administration Advisory Committee, IRS Advisory Council, the Taxpayer Advocate, and others have already done in contending with this question, but more methodical engagement with the private sector could sharpen the picture of compliance burdens in areas involving large volumes of taxpayer information. Systematic practitioner surveys, regulatory sandboxes, and the use of AI itself to calculate time and expense costs for compliance, would be of great benefit to both taxpayers and the government in designing better regulation going forward.
III. Many Members of the Advocacy Community Who Feared Wider Taxpayer Rights Ramifications Are Relieved to See the Actions Taken Under the Removal NPRM
In March of 2025, an NTU-led coalition of eight taxpayer advocacy organizations wrote to Secretary Bessent that:
[T]he IRS’s listed transaction and transaction of interest authority (TOI) has been stretched to inflict near-total audit coverage on certain parts of the tax filing population, such as thousands of small businesses that utilize captive insurance to manage financial risks. The impacts on IRS examinations, Tax Court workloads, and taxpayers who relied on long-established statutes and guidance have been tremendously harmful. As another example, extending TOI status to common partnership basis matters, and invoking the Economic Substance Doctrine [ESD] for activities long understood to have such substance, are creating severe uncertainty among taxpayers and practitioners.[8]
Describing REG-124593-23 in the context of other guidance as well as a special government unit to aggressively assert the ESD against partnerships, the signatories wrote that the IRS was “creating the next crisis for taxpayer rights and government enforcement resources with this arbitrary campaign.” The Removal NPRM is a major, helpful step forward in restoring balance in government tax enforcement, and in restoring the confidence among many taxpayer-focused groups that their voices are heard and respected in regulatory policy development.
Conclusion
NTU is grateful to the IRS and Treasury for recognizing the multiple challenges surrounding implementation of § 1.6011-18 and surrounding guidance. Its removal will not only foster sound tax administration, it will also facilitate economic growth and protect taxpayers’ rights.
Thank you for your consideration, and we are at your service for any questions you may have.
Sincerely,
Pete Sepp, President
[1] Typically, NTU has referred to REG-1245930-23 as intricately linked with other guidance elements, such as Notice 2024-54 and Revenue Ruling 2024-14, and comprising the totality of guidance described in FS-2024-21. Repeal of Revenue Ruling 2024-14 has been a priority for NTU since 2025.
[2] For additional information, see: https://www.taxpayers-first.org/.
[3] See: Treasury and IRS issue guidance on certain partnership related-party basis adjustment transactions
[5] Ibid.
[6] Ibid.
[7] See: Payne, James L. Costly Returns: The Burdens of the U.S. Tax System (ICS Press, 1993). Payne estimates that opportunity costs of tax compliance add 65 cents to every dollar of federal income tax extracted from the economy. See also: Fichtner, Jason, et al., Tax Administration: Compliance, Complexity, and Capacity, Bipartisan Policy Center, April 2019. Tax-Administration-Compliance-Complexity-Capacity.pdf.
[8] See: CoalitionLetter.pdf.