A little-known rule implemented in late 2024, Revenue Ruling 2024-14 (RR 2024-14), has drawn criticism from Tennessee U.S. Senator Marsha Blackburn and business groups for its impact on partnerships, including small businesses and family farms in Tennessee and nationwide. The rule expands IRS authority to audit and penalize partnerships, often retroactively.
To enforce the Biden-era policy, the IRS established a new division, dubbed the “Pass-Through Unit,” tasked with scrutinizing businesses structured as partnerships. RR 2024-14 relies on the economic substance doctrine, which allows IRS agents to evaluate business transactions based on unspecific criteria, potentially leading to penalties even for transactions conducted in good faith.
Consequently, businesses across the nation and in Tennessee are forced to choose between paying steep legal and consulting fees to stay in compliance with vague rules or risk intensive audits.
Blackburn calls the rule a direct threat to main street businesses. In a May 2025 letter co-signed with Senators Barrasso, Daines, and Lankford, Blackburn warned the administration that this IRS initiative was “motivated by ideology rather than principles of sound tax administration.”
The hardworking Americans who operate pass-through businesses deserve an IRS that respects their rights and focuses enforcement efforts on actual non-compliance rather than implementing politically motivated initiatives.
Critics, including business advocates, argue the rule creates an uneven regulatory environment for partnerships. They are pushing for clearer tax guidelines to allow businesses, particularly in Tennessee, to focus on job creation and community support without the burden of intensified audits.
The National Taxpayers Union, The National Association of Manufacturers, and the Small Business and Entrepreneurship Council have joined lawmakers to urge the Trump administration and newly confirmed IRS Commissioner Billy Long dismantle this rule before more damage is done.
Republican insiders told The Washington Reporter in late May that the Pass-Though Unit is “dishing out absurd fines” to companies and “[m]any are afraid to speak publicly because they fear retaliation” from the tax-collecting agency; but that revising the Revenue Ruling is “high on the list of priority fixes for the new Trump team to ensure it no longer undermines President Donald Trump’s pro-growth agenda.”
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Christina Botteri is the Executive Editor at The Tennessee Star and The Star News Network.
Photo “The IRS” by AlphaPhoto CCNC2.0
