Five Questions With Crowe Tax Principal Rochelle Hodes

Bloomberg Tax Insights & Commentary is featuring a recurring questionnaire of prominent tax professionals who are willing to share their thoughts about their work and the practice of tax these days. Today we feature Rochelle Hodes, a principal in Washington National Tax at Crowe and former associate tax legislative counsel in the US Treasury’s Office of Tax Policy.

What is the biggest challenge that tax practitioners are facing in 2026?

Understanding the IRS’s current priorities and how it intends to achieve its desired outcomes. Effective tax practitioners leverage their technical expertise as well as their knowledge of the IRS to anticipate how the agency approaches its mission. They use that insight to help taxpayers understand and comply with their tax obligations and resolve tax issues if any arise.

While the IRS has undergone significant changes over the past year—including a new organizational structure and a substantial staff reduction—only limited information about these changes has been made public.

For instance, while the 2025-2026 priority guidance plan said implementation of the 2025 federal tax package (known as the One Big Beautiful Bill Act), deregulation, and burden reduction are priorities, less is known about current enforcement priorities or focus areas for tax administration. Similarly, while the IRS has released information about its most senior leaders, less is known about whether there are changes within the specific operating divisions.

Without this information, tax practitioners, and therefore taxpayers, remain unclear about what the IRS expects from them to fully comply with the tax laws and how to best resolve issues if they arise. This uncertainty can affect compliance and increase burden and cost for both taxpayers and the IRS.

What tax case is no one watching that they should be?

I believe most tax cases that are important to watch are being closely followed. More interesting to me are the cases I anticipate will be brought soon.

One issue that is ripe for litigation is the “non-income item” concept under the centralized partnership audit regime enacted by the Bipartisan Budget Act of 2015. First referenced in a 2020 notice of proposed rulemaking preamble, it’s a regulatory creation that results in the IRS asserting a tax liability that, more often than not, is completely divorced from any potential tax liability that audit year partners should have paid.

This overstated tax liability is the result of tax imposed on unrealized (effectively phantom) tax benefits that could be several times higher than anything that should have been paid if adjusted items were taken into account by the partnership.

What’s the biggest lesson you learned in your early years of practice?

It’s the benefit of mentors, both formal and informal. I’m indebted to those who shared their wisdom and showed me patience and grace to make mistakes while developing the skills I needed to become a better professional and person and to grow my career.

Mentors often are the champions who open doors to new and important opportunities, but they also provide informal support and encouragement. We often think of mentors as individuals who are more experienced and more senior in the workplace hierarchy, but they aren’t limited to those individuals.

I’ve benefited from supervisors who directly influenced the forward movement of my career as well as from the advice and experience of peers, individuals I’ve met through networking and professional activities, and even friends and relatives. I’ve tried to show my gratitude for those who helped me by trying to remember to pay it forward by lending an ear, providing advice to others, and opening doors for the next generation.

What is one section of the tax code that you’d like to change?

Section 6664(c)(2), which denies availability of reasonable cause to avoid imposition of the 40% accuracy-related penalty for undisclosed noneconomic substance transactions.

Generally, a taxpayer can avoid an accuracy-related penalty under Section 6662, or the fraud penalty under Section 6663, by showing that there was reasonable cause for the underpayment and the taxpayer acted in good faith.

The purpose of civil penalties is to encourage voluntary compliance. Reasonable cause provides a safety valve to ensure that a civil tax penalty is enough to deter undesirable behavior without punishing taxpayers who, despite exercising ordinary care and prudence, nevertheless underpaid the tax. This safety valve becomes even more important the higher a penalty is or the more complex and uncertain the rules that triggers the penalty are.

In the case of the economic substance penalty, however, a reasonable cause defense isn’t allowed, eliminating the safety valve, despite that the penalty is 40%— double the typical accuracy-related penalty—and that the rules regarding penalty triggers are vague and uncertain. For instance, the penalty applies to transactions that lack economic substance under Section 7701(o) (a complex and uncertain rule) or fail to meet the requirements of “any similar rule of law.”

What was the last thing you believed beyond a reasonable doubt?

After nearly 40 years as a tax practitioner in both the government and private practice, I believe that 99% of US taxpayers want to comply with their tax obligations. The US tax system is built on voluntary compliance, which consistently has been at a relatively high 85%. The key to voluntary compliance is having rules taxpayers can understand and follow and a tax system they perceive as fair.

Given the complexity of the tax code, timely guidance is crucial for taxpayers to understand their tax obligations. While regulations generally are the preferred form of guidance (because they allow for notice and public comment) a Treasury statement or an IRS notice, revenue ruling, revenue procedure, or even a set of frequently asked questions is helpful.

Clear, effective guidance, accompanied by strong compliance monitoring and enforcement, can put the IRS in the best position to ensure voluntary compliance and stop scofflaws from purposely defying the tax laws. Less effective guidance often is overly detailed and involves dense rules that attempt to contemplate every conceivable way a noncompliant taxpayer might intentionally game the system. Such guidance takes significant resources and time to craft, and delays can deprive compliant taxpayers of the rules they need when they need them the most.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Write for Us: Author Guidelines