The release of v8.6.0 introduced the ability to configure via tsconfig.json. However, it looks like in the process the ability to use TS_NODE_COMPILER_OPTIONS was either removed or broken, resulting in broken builds for us.

Since v8.6.0 was a minor semver release and did not have a "Breaking Changes" section in the release notes, I did not anticipate any breaking changes in this release. If the change was intentional, I suggest adding a "Breaking Changes" section to the release notes, otherwise a patch release that restores the behavior would be appreciated! In the meantime I've moved to using tsconfig.json, so this would just be for other users who find themselves in the same situation I found myself in.