By TYLER NESS
Guest Columnist
When Washington bureaucrats overstep their authority, it’s usually the smaller businesses that bear the brunt of enforcement. The IRS’s recent Revenue Ruling 2024-14 is the latest example of this trend, giving unelected bureaucrats unprecedented power to challenge and penalize legitimate business decisions.
This ruling effectively rips up decades of settled tax law, granting IRS agents sweeping power to retroactively declare that a routine, lawful transaction suddenly “lacks economic substance.” Even transactions that are fully compliant and documented can be challenged at will, all because of a vague and subjective interpretation of the tax code’s supposed “intent.”
This implies that every investment, expansion, or partnership – no matter how carefully planned or how essential to a business’s growth – can become a potential target, leaving Hoosier businesses at the mercy of IRS agents acting as judge and jury.
Hoosier small business owners know firsthand how paralyzing this kind of uncertainty can be. Every time they consider investing in new equipment or expanding their workforce, they’re forced to weigh the risk that an IRS agent could swoop in years later and second-guess the very decisions that keep their doors open and employees working. This environment of anxiety stifles entrepreneurship and innovation – instead forcing them to operate under a constant cloud of suspicion.
The IRS’s pass-through audit unit – originally established by the Biden Administration to root out abusive tax shelters – has morphed into an unchecked enforcement arm that treats law-abiding business owners like criminals-in-waiting. It’s the very definition of government overreach. Meanwhile, Indiana’s manufacturers, farmers, and other businesses are already fighting headwinds from tariffs, rising hiring costs, and suffocating regulatory red tape. This latest IRS power grab is a burden we simply can’t shoulder alone, and it threatens to undermine job creation and economic growth.
Not only is this revenue ruling detrimental to Hoosier businesses, but it directly violates President Trump’s pro-growth agenda. In April, the Treasury Department and the IRS withdrew the TOI Regulations and Notice 2024-54, acknowledging that these regulations conflicted with President Trump’s Executive Order 14219 on Ensuring Lawful Governance and the “Department of Government Efficiency” Deregulatory Initiative. The IRS admitted that these regulations would “impose complex, burdensome, and retroactive technical rules on many ordinary-course and tax-compliant business activities, creating costly compliance obligations and uncertainty for businesses.”
Revenue Ruling 2024-14 imposes precisely that same kind of costly, burdensome, and retroactive approach, contradicting the President’s clear directive. I encourage Indiana’s elected officials, like Senator Todd Young, to protect our state’s job creators from this destructive policy and bloated federal government bureaucracy.
Luckily, the solutions are all too simple:
First, enforcement by the pass-through audit unit should be paused until clear, fair guidelines are established that respect law-abiding taxpayers.
Second, the Treasury Department should immediately rescind Revenue Ruling 2024-14 to prevent the IRS from rewriting the tax code at will.
Indiana’s business community deserves the same predictability and respect under the law that larger corporations enjoy. Indiana needs a tax system that fosters growth, not one that uses subjective interpretations to punish legitimate activity.
Tyler Ness formerly served as legislative director for former Indiana Governor Eric Holcomb and as chief of staff in the Indiana Department of Transportation.