Every business decision hinges on one thing above all: certainty. When the rules of the road — on tariffs, tax rates, and regulations — are clear, job creators can proceed with confidence. When they’re not, activity stalls. Thankfully, businesses received some good news this summer with the enactment of the One Big Beautiful Bill Act. If only the Internal Revenue Service would stop bringing that good news down. 

The IRS often takes contradictory — sometimes retroactive — stances in rulemaking and in the courts that confound even the most flexible and perceptive business tax planning. From its stance against small business insurance to its sudden shift on partnerships, the government sends mixed signals to the private sector that puts billions of dollars’ worth of investments at risk. 

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The latest example is in merger policy, where the IRS is appealing AbbVie v. Commissioner and muddying tax administration.

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The issue at hand is whether a merger “break fee” is a tax-deductible expense, especially when a company’s board (as in the case of AbbVie) rejects such a merger. In AbbVie’s instance, $572 million in deficiency hangs in the balance, but there are much larger issues here: whether American companies, seeking their most efficient structures for consumers and middle-class investors, can count on the government to recognize all the time, effort, and money spent as an ordinary cost of doing business. 

While AbbVie was finalizing the details of its merger, the Obama Treasury Department abruptly changed the rules, making merger deals with foreign companies far less attractive. From AbbVie’s standpoint, those last-minute rule changes undermined the very benefits it had expected from the transaction. Faced with this new reality, the Board rejected the deal. AbbVie paid the break fee and properly deducted it on its 2015 taxes.

Not so fast, said the IRS. It challenged AbbVie’s deduction, insisting in court that the fee was a capital loss subject to far less favorable treatment. Thankfully, the U.S. Tax Court rejected that argument in its June 17 ruling, affirming that such expenses are deductible. 

The company involved in this drama could be an auto manufacturer, a data center, or a retailer. What’s at stake here is consistency and transparency in tax administration. It’s like two people playing a game: one follows the rules and the other changes them as he goes along. That’s exactly what happens when a tax agency tries to rewrite the rules and demand payment after a business follows the law.

From an objective standpoint, deductibility of break fees is sound tax policy. It is a genuine loss when unforeseen issues pop up in a deal. When firms located here are trying to grow, employ more people, and give better returns to millions of investors, why should they be penalized with higher taxes? That’s un-American.

This is why the Tax Court’s opinion is so important for all companies and the workers, consumers, and investors involved. Greater certainty in deal-exit scenarios allows boards to be more confident in pursuing transactions without fear of harmful tax consequences. It also frees up capital sooner that can be reinvested into hiring, wage increases, expansion, or returning value to shareholders.

Unfortunately, the IRS is appealing the Tax Court’s decision, which, if successful, would hurt the millions of Americans who are counting on tax clarity in business and investment. Investing requires certainty, and break-up fees should be easy to project and plan for when conducting high-stakes business. Penalizing companies that incur those costs discourages future risk-taking, research and development, and combinations of synergies that make businesses better.

To President Donald Trump’s credit, his agenda has included a less hostile approach to mergers and acquisitions than the Biden administration, recognizing that these business deals can unlock efficiencies for consumers and the broader economy.

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Yet, the appeal in the AbbVie case raises questions as to whether part of the government is undermining parts of Trump’s pro-growth agenda. On one hand, the Federal Trade Commission and Department of Justice’s Antitrust Division seem to be more open-minded to deals that serve America, but on the other hand, the IRS’s guidance may influence business decisions in a negative way. 

The IRS’s appeal has yet to be scheduled, but the sooner this case is finalized, the better it will be for all businesses. The One Big Beautiful Bill Act can only do so much — the IRS has to do some of the lifting too, by dropping its appeal and upholding long-standing precedent. 

Thomas Aiello is Senior Director of Government Affairs at National Taxpayers Union.