Congress Begins Taking Action to Nullify Biden-Era Tax Regulations

On March 11, 2025, the House of Representatives passed a joint resolution (H.J.Res. 25) to disapprove of the IRS’s regulations relating to “Gross Proceeds Reporting by Brokers That Regularly Provide Services Effectuating Digital Asset Sales.” These regulations, which were finalized on December 30, 2024 (89 Fed. Reg. 106928), would have required “front-end service” providers of decentralized finance (DeFi) platforms to be treated as “brokers,” and thus subject to rules requiring them to file information returns regarding the gross proceeds and cost basis of their customers. The DeFi regulations were intended to address the tax compliance challenges posed by the growing use of cryptocurrencies and other digital assets, but faced strong opposition from the DeFi industry and some lawmakers.

The House’s joint resolution was identical to a joint resolution (S.J.Res. 3) that the Senate passed with bipartisan support earlier in March. However, the House returned the Senate’s joint resolution back to the Senate due to concerns that the joint resolution could impact federal revenues. Thus, any CRA joint resolution invalidating the DeFi regulations must originate in the House under Article I, Section 7 of the Constitution. Given that the Senate had already approved its own CRA joint resolution on the DeFi regulations, we would expect the Senate to approve the House’s version and send it to President Trump’s desk. The Trump administration has signaled that it supports Congress’s CRA efforts to invalidate the DeFi regulations.

On February 27, 2025, another joint resolution (H.J.Res. 65) was introduced in the House to disapprove of the IRS’s regulations on “Rules for Supervisory Approval of Penalties.” These regulations, published on December 23, 2024 (89 Fed. Reg. 104419), purport to clarify the timing and scope of the requirement for supervisory approval of penalties under section 6751(b) of the Internal Revenue Code. That section provides that no penalty can be assessed unless the initial determination of such assessment is personally approved in writing by the immediate supervisor of the individual making such determination. The IRS regulations interpret this provision in what many consider to be a taxpayer unfriendly manner by allowing supervisory approval to occur any time before a notice of deficiency is issued, or in the case of “assessable penalties,” up until the minute the IRS assesses the penalties. This interpretation contradicts Tax Court precedent, which holds that for supervisory approval of a penalty to be timely, approval must occur before the IRS formally communicates its intention to assert the penalty in writing to the taxpayer. We recently filed an amicus brief in the Fifth Circuit in the case Swift v. Comm’r, Case No. 24-60270, advocating that the Fifth Circuit adopt the Tax Court’s standard for supervisory approval timeliness, and not the standard advocated for by the IRS. A decision by the U.S. Court of Appeals for the Fifth Circuit would be binding precedent for taxpayers in Louisiana, Mississippi, and Texas.

The joint resolution to disapprove of the supervisory approval regulations was sponsored by Rep. Glenn Grothman (R-WI) and co-sponsored by seven other Republican members. The resolution was introduced on the heels of bipartisan draft legislation released by the Senate Finance Committee on January 30, 2025, that would clarify section 6751(b) by amending the text of the statute to unequivocally require that supervisory approval of a penalty occur before the taxpayer is provided with “written notice” that “a specific penalty applies to such taxpayer for a specific amount.” In a press release accompanying the release of the draft legislation, Chairman Mike Crapo (R-Idaho) and Ranking Member Ron Wyden (D-Oregon) explained that the “draft legislation suggests practical ways to improve the taxpayer experience,” and that it was “designed to facilitate communication between the agency and taxpayers, streamline processes for tax compliance and disputes and ensure taxpayers have access to timely expert assistance.”

As of the date of this article, the joint resolution to disapprove of the IRS’s regulations on supervisory approval of penalties has not been voted on by the House or the Senate. However, it is possible that it could gain traction in the coming weeks, especially if the Senate Finance Committee advances its draft bill.

Moreover, other IRS regulations that were finalized in the last days of the Biden administration could come under scrutiny by Congress under the CRA, such as the regulations designating certain partnership related-party basis adjustment transactions as transactions of interest (90 Fed. Reg. 2958) and the regulations identifying certain micro-captive transactions as listed transactions and transactions of interest (90 Fed. Reg. 3534). Taxpayers and practitioners have raised concerns about the retroactive application of regulatory reporting requirements and their impact on ordinary business transactions. See our prior coverage on regulations concerning partnership related-party basis adjustment transactions available here.

The CRA provides a powerful tool for Congress to overturn agency rules that it deems to be contrary to the public interest or the legislative intent. However, the CRA also has its limitations, such as the narrow window of time for congressional action and the need for presidential approval or veto override before a regulation is nullified. We will continue to monitor CRA joint resolutions in the current Congress. For further guidance or assistance with specific regulatory and legislative tax updates, please contact our tax team.