US Federal Senate Bill SB2094

US Federal 2025-2026 Regular Session

• Introduced: 6/17/25
• Refer: 6/17/25

Caption

Basis Shifting is a Rip-off Act

Summary

SB2094, titled the “Basis Shifting is a Rip-off Act,” would amend the Internal Revenue Code to target tax avoidance strategies involving partnerships and related parties. The bill focuses on so-called basis-shifting transactions, where taxpayers use partnership distributions or transfers of partnership interests to move tax basis in ways that can reduce or defer taxable gain. It would revise the partnership distribution rules in section 731, add special rules for related-party partnerships, and create new rules under section 743 for transfers of partnership interests involving related persons. The bill also creates a small-business exception for partnerships that meet the gross receipts test under section 448(c), with limits designed to prevent repeated use of the exception by partnerships that later fail the test or by tax shelters. In addition, it directs the Treasury Secretary to issue regulations to address substantially similar transactions, including those involving tax-indifferent parties, and it applies the new rules to distributions and transfers occurring after June 11, 2025. The bill further adds a new accuracy-related penalty provision, increasing the penalty rate to 40 percent for understatements attributable to these related-party partnership distribution rules.

Impact

If enacted, the bill would change how partnership basis adjustments are handled when related persons are involved, effectively limiting tax benefits from basis-shifting transactions and requiring gain recognition in situations that previously may not have triggered tax. It would amend sections 731, 734, 743, and 6662 of the Internal Revenue Code, affecting partnerships, partners, transferees of partnership interests, and tax practitioners advising on partnership structuring. The measure would also give Treasury broad regulatory authority to address similar avoidance transactions and impose a higher penalty for related-party partnership distribution understatements.

Sentiment

The available record shows no committee transcript and no votes, so there is no documented debate or recorded opposition in the provided materials. Based on the bill text and title, the measure is framed as an anti-abuse tax bill aimed at curbing perceived loopholes, suggesting a generally enforcement-oriented purpose. The absence of voting history or discussion means sentiment cannot be measured from the record beyond the bill’s clear policy intent.

Contention

The main point of contention likely concerns the scope of the anti-abuse rules and how broadly they reach ordinary partnership activity versus aggressive tax planning. The bill includes a small-business exception, indicating sensitivity to concerns that routine family-owned or closely held partnerships could be swept in, while the related-party and tax-shelter carveouts suggest an effort to narrow the target to avoidance transactions. Another possible point of dispute is the increased 40 percent penalty and the Treasury’s broad regulatory authority, both of which could be viewed by critics as overly punitive or expansive, while supporters would likely see them as necessary to deter basis-shifting schemes.