HIGHLIGHTS
What Are Treasury’s Deregulation and Burden Reduction Plans for BBA? by Marie Sapirie The deregulation and burden reduction section of the 2025-2026 priority guidance plan could present both a problem and an opportunity for taxpayers and their advisers. On the one hand, a favorite regulation — or at least one most often relied upon — possibly being deemed unnecessary or altered in the name of deregulation could raise concern. On the other hand, reopening finalized regulations for burden reduction could be a welcome surprise, at least to some taxpayers. What Treasury plans for the regulations under the Bipartisan Budget Act of 2015’s centralized partnership audit regime probably falls into the latter category. If that’s the case, it’s a reminder of the importance of comment letters. After years of work by the IRS and Treasury, the BBA’s audit regime has in place most, if not all, of the regulations it needs to function efficiently. Even so, it has been in the priority guidance plan’s tax administration section for almost five years running, having fallen off the plan only once, in the 2021-2022 plan. The last time the IRS specified what it was working on regarding the BBA was in the 2020-2021 plan. Reading the tea leaves suggests that — between the nearly consistent appearance of BBA guidance in recent guidance plans, the “skinny” nature of the 2025-2026 plan, and the designation under the new deregulation and burden reduction category — the guidance has probably been underway for a while. The influence of the One Big Beautiful Bill Act (P.L. 119-21) on the guidance plan coupled with the intentional reduction in the number of projects in the plan seems to have knocked projects of lower priority or those further from completion off the list. That the BBA survived is a sign that it’s likely a high priority for the IRS. Treatment of Non-Income Adjustments Taxpayers and their advisers who have been through the centralized partnership audit process, filed administrative adjustment requests, or worked on push-out elections have distinct ideas about what they would like to see in new rules.
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TAX NOTES FEDERAL, VOLUME 189, DECEMBER 1, 2025 For more Tax Notes® Federal content, please visit www.taxnotes.com.
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Even more broadly, it’s time for a comprehensive reexamination of the regulations governing the definitions of a U.S. trade or business under section 864 and effectively connected income. These regulations have been mostly unchanged since the year Richard Nixon was elected president, when the U.S. GDP was less than $1 trillion and the U.S. share of global GDP was 38 percent. They are due for revision to reflect the fact that the U.S. economy now accounts for just over one-fourth of global GDP and the U.S. GDP in 2024 was more than $29 trillion, and that the services export share of the economy is more than half of the value of goods exports. Mindy Herzfeld is professor of tax practice at University of Florida Levin College of Law, counsel at Potomac Law Group, and a contributor to Tax Notes.