Former IRS deputy Holly Paz has been placed on administrative leave following allegations that her team has become politicized and is targeting conservative businesses. Lawmakers have raised concerns about the potential for ideological bias in the pass-through business compliance unit, which was created under the Biden administration’s Commissioner Danny Werfel.
During her tenure under the Obama administration, the IRS faced significant scrutiny for targeting conservative groups, particularly those associated with the Tea Party movement. This led to congressional investigations, where it was revealed that the IRS had wrongly scrutinized tax-exempt applications related to terms like ‘Tea Party’ and ‘9/12.’ The Treasury’s inspector general later confirmed that inappropriate criteria were used to target conservative groups, highlighting systemic bias within the agency.
Under the Biden administration, Commissioner Danny Werfel established a new work unit focused on auditing pass-through entities and Main Street businesses. Holly Paz, who was Lerner’s deputy, was assigned to lead this unit. However, by 2025, lawmakers, including Sen. Marsha Blackburn, R-Tenn., warned that the pass-through business compliance unit had transformed to be ‘motivated by ideology rather than principles of sound tax administration.’
‘Pass-through entities form the bulk of Main Street businesses across the country. This includes countless family businesses, professional services firms, and real estate ventures that serve as the backbone of our local economies,’ Blackburn and Senate Majority Whip John Barrasso, R-Wyo., wrote to the Treasury in May.
Senator Joni Ernst, R-Iowa, also raised concerns, noting that Paz’s team had made tongue-in-cheek political comments, including their stated wish to ‘make basis great again’ — a phrase referencing President Donald Trump’s MAGA slogan. Rep. Lloyd Smucker, R-Pa., wrote to IRS Commissioner Billy Long in July, highlighting the extended scope of the Biden-era ‘basis-shifting transaction rule’ and calling for its reconsideration to alleviate the burden on Main Street businesses.
Chuck Flint, a former top aide to Blackburn and president of the Alliance for IRS Accountability, told Fox News Digital that Paz’s past targeting of conservative groups makes her ‘unfit for government service.’ He emphasized that her role as a former Lerner deputy ‘places a cloud over the IRS.’
Blackburn also warned that an IRS news release referencing targeting ‘complex arrangements’ lacked clear definitions, potentially leading to the unfair targeting of legitimate business structures. She pointed out that the announcement explicitly stated the changes were designed to ‘achieve its goal of increased audit rates in this complex area,’ suggesting an agenda-driven approach to enforcement.
Ernst further criticized the new auditors, noting they were reportedly acting independently, duplicating existing IRS processes, and wasting taxpayer money. She highlighted the use of a new template for requesting taxpayer information titled ‘The Art of the IDR,’ which treats taxpayers as guilty until proven innocent. Ernst argued that the Biden administration picked up where Lois Lerner and her team left off, creating a new work unit under Paz’s leadership that subjects businesses to potentially two separate IRS examinations in the same year.
The controversy over the IRS’s approach to tax administration has been ongoing for years, dating back to the Obama-era controversy. The House Oversight Committee investigated the IRS’s targeting of conservative groups, with Reps. Jim Jordan and Darrell Issa demanding clarity on issues raised during a transcribed interview involving statements about ‘intervention’ against Tea Party groups. A 2015 report by the Senate Finance Committee found that while some liberal terminology was also flagged, groups on both sides of the political spectrum were treated similarly in their efforts to secure tax-exempt status.
Fox News Digital reached out to Treasury, the IRS, and an email connected to Paz for comment but did not receive a response.