New IRS initiative will spell disaster for Montana businesses

Small business owners in Montana know firsthand how government overreach stifles economic growth and burdens entrepreneurs. The IRS’s latest rule targeting business partnerships is yet another example of Washington, D.C. bureaucrats placing unreasonable strain on small businesses.  

Implemented in the 11th hour by the outgoing administration, this rule is a last-ditch effort to push through a failed Biden regulatory agenda. Rather than modernizing outdated processes, the IRS is imposing more regulations, forcing businesses to navigate complex reporting requirements.

Montana’s economic success relies on its small businesses, which constitute 99.3% of our businesses and employ over 65% of our workforce. Unlike large corporations with legal teams, small businesses lack the resources to push back against pervasive IRS overreach. 

Compliance with this new rule isn’t just an administrative hassle — it’s a costly disruption that diverts time, money, and personnel away from business expansion.

This last-minute attempt to expand IRS authority is a further escalation of the Biden administration’s crackdown on business partnerships. In 2023, the IRS established a special unit to focus on small business partnerships. This unit operates outside the standard IRS audit structure, creating a parallel process that confuses taxpayers and disrupts operations. Business owners now face conflicting guidance from multiple audit teams, none of which provide clear resolutions.

This audit unit is a weaponized arm of the federal government, functioning with ideological bias rather than sound tax policy.  Internal descriptions of its work reveal a disturbing pattern — its members view those who lawfully utilize basis adjustments as “evil.” This blatant targeting of taxpayers based on political leanings is an abuse of power that further burdens honest business owners and undermines trust in the tax system.

President Trump has rightly taken steps to end the weaponization of federal agencies, issuing an executive order titled “Ending the Weaponization of the Federal Government” to dismantle politically motivated enforcement efforts. Under this directive, agencies must cease investigations, prosecutions, and civil enforcement actions that target Americans based on ideological differences. The IRS pass-through audit team falls squarely within this mandate and should be immediately disbanded.

Additionally, Trump’s executive order on a federal hiring freeze underscores the need for agencies to maximize efficiency and eliminate waste. The IRS pass-through audit team does the opposite — operating in an unnecessary parallel structure, demanding redundant paperwork, and issuing misguided rulings that harm compliant taxpayers. This unit exemplifies bureaucratic inefficiency and is an affront to taxpayers who expect the government to work for them, not against them.

The Trump administration should take immediate steps to disband the IRS pass-through audit unit, and Congress must ensure this abuse of power is permanently curtailed. And they should cancel the pending IRS rules on business partnerships.

Montana’s Sens. Steve Daines and Tim Sheehy must recognize the devastating impact this rogue audit team will have on our state’s economy and fight to eliminate it. Small business owners should not bear the brunt of politically motivated overreach while the IRS fails to address its own inefficiencies.

The IRS should not have the power to unilaterally impose rules that create unnecessary burdens on small businesses. We need policies that encourage investment, job creation, and economic stability, not more red tape that hinders entrepreneurs. It’s time for lawmakers to stand up for small businesses, rein in the IRS, and put an end to regulations that do more harm than good — starting with the immediate disbanding of the IRS pass-through audit unit.

Dan Bartel is a former Montana Senator who served on the Senate Finance and Claims Committee. He lives in Lewistown.