IRS Proposal To Withdraw Basis-Adjustment Disclosure Rules Moves To White House Review

The IRS's plan to revoke recently issued disclosure regulations relating to partnership basis-adjustment transactions has advanced to White House review, advancing the current administration's goal of reversing the prior administration's crackdown. According to the Office of Information and Regulatory Affairs (OIRA), the proposed regulations were received for review on Thursday, December 4, 2025.

The regulations at issue, finalized in January, had designated certain partnership basis-adjustment transactions as "transactions of interest." The designation triggered disclosure obligations for material advisers and certain transaction participants, requiring them to report such arrangements to the IRS. In April, however, the IRS announced that it intended to withdraw the rules as part of a broader reevaluation of partnership basis-shifting transactions.

Basis adjustments reflect changes in the value of a taxpayer's investment in a partnership or other entity. Under the prior Biden administration, the IRS had pursued heightened scrutiny of related-party basis-shifting, transactions in which one partner's or shareholder's basis is shifted to another party, potentially generating tax deductions the IRS viewed as artificial and questionable. The disclosure regime adopted earlier this year was one element of that enforcement effort.

Taxpayers and practitioners, however, raised significant concerns about the breadth and impact of the disclosure rules. Following a change in administration, Treasury and the IRS signaled a shift away from the prior crackdown, culminating in the move to rescind the January regulations. The withdrawal proposal now undergoing OIRA review is expected to formalize that change and eliminate the transaction of interest designation for basis-adjustment transactions. If finalized, the revocation would remove the associated disclosure requirements.

While taxpayers may experience reduced compliance obligations as a result of the removal of these regulations, taxpayers involved in partnership transactions should be aware of the potential for scrutiny regarding basis-shifting activities as the IRS has indicated that many of these transactions lack economic substance and could be challenged.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.