Democratic lawmakers sent separate letters to Treasury Secretary Scott Bessent on April 21, 2026, opposing two Treasury Department proposals: one to eliminate reporting requirements for certain related-party partnership basis adjustment transactions and another to classify the refundable portions of specific tax credits as “federal public benefits.”
Senators Oppose Removing Partnership Basis Adjustment Reporting
Senator Elizabeth Warren (D-MA) and five Senate colleagues urged Secretary Bessent and Assistant Secretary for Tax Policy Kenneth Kies to withdraw a March 6, 2026, notice of proposed rulemaking (NPRM) that would eliminate a reporting requirement for related-party partnership basis adjustment transactions.
In their letter, the senators wrote that the NPRM “will remove a simple reporting requirement, which will neutralize one of the few remaining tools available to the IRS to spot abusive partnership transactions.”
Under longstanding IRS rules, partners and partnerships may (and in certain cases must) adjust the tax basis of property following certain transactions. Some businesses and high-net-worth individuals, the senators contended, have used complex partnership structures to apply these basis-shifting rules and create “significant tax savings without real costs or changes in economic position.”
In response, the Biden administration required large partnerships to proactively report basis-shifting transactions to the IRS, increased audits of complex partnerships, and hired staff to conduct those audits. Combined, those efforts were estimated to raise approximately $100 billion over a decade, according to a Washington Post report the senators cited.
Partnership audits have decreased by 80 to 90% since 2024, the senators wrote, citing a tax lawyer representing large partnerships before the IRS, and the Trump administration has also fired or pushed out IRS employees hired to examine partnerships, according to the letter.
In the senators’ view, the Biden-era reporting requirement “effectively sent up a red flag for the IRS to examine, an especially important signal for an agency with limited resources.” A March 18 Treasury Inspector General for Tax Administration (TIGTA) report highlighted the need for improved partnership reporting requirements, rather than a repeal, the senators argued. The senators wrote that “removing this reporting requirement will enable tax dodging by some of the wealthiest Americans, further tilting our tax code in favor of the rich and powerful.”
Senator Ron Wyden (D-OR), Finance Committee ranking member, joined the letter along with Democratic Senators Andy Kim (NJ), Chris Van Hollen (MD), Peter Welch (VT), and Sheldon Whitehouse (RI).
House Members Oppose Treasury Refundable Credit Reclassification
Nine Democratic House members raised concerns over a Treasury plan to classify the refundable portions of four tax credits as “federal public benefits” under the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA). Treasury announced the plan in a November 20, 2025, press release, a move that would subject those credits to PRWORA’s eligibility requirements for certain noncitizens.
In a letter to Secretary Bessent, the representatives stated they are “alarmed that the Department of Treasury is planning to usurp Congressional authority and issue regulations that contradict clearly defined statutes” in the Tax Code.
Under Treasury’s announced plan, the Earned Income Tax Credit, the Additional Child Tax Credit, the American Opportunity Tax Credit, and the Saver’s Match Credit would all be affected.
Congress has modified these credits since PRWORA’s enactment, most recently through the One Big Beautiful Bill Act in 2025, but has “never made the changes that Treasury is now proposing,” the representatives wrote. From this, they argue that Congress “clearly did not intend to import PRWORA’s limits on eligibility for federal public benefits to noncitizens into these credits.”
Additionally, the representatives noted that PRWORA’s statutory list of “Federal public benefits,” which includes retirement, welfare, health, disability, public or assisted housing, postsecondary education, food assistance, and unemployment benefits, does not include “tax credits.” Congress was aware of federal income taxes since the 16th Amendment’s ratification in 1913 and could have included “tax credits” in that list when PRWORA was enacted in 1996 or in any subsequent modification, they argued.
Representative Gwen S. Moore (D-WI) and Representative Linda T. Sánchez (D-CA) signed the letter, along with Democratic Representatives Donald S. Beyer Jr. (VA), Judy Chu (CA), Danny K. Davis (IL), Suzan K. DelBene (WA), Jimmy Gomez (CA), Terri A. Sewell (AL), and Thomas R. Suozzi (NY).
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