AICPA Raises Concerns about Bill to Overhaul IRS Rules Governing Partnership Audits

July 23, 2015

Magnifying glass with "partnership"The American Institute of CPAs (AICPA) outlined its objections to certain provisions of H.R. 2821, the Partnership Audit Simplification Act of 2015, which would overhaul Internal Revenue Service (IRS) rules regarding audits of partnerships.

“We have serious concerns regarding this legislation, as currently drafted,” Troy K. Lewis, chair of the AICPA Tax Executive Committee, wrote, in a July 14 letter.  “The proposal focuses on isolated problems within the audit of large partnerships while failing to address more problematic issues regarding the overall tax simplification and compliance of these entities.”

He noted that the letter highlights some of the major issues initially identified by the Institute, although the AICPA is still in the process of reviewing and analyzing all of its members’ input on potential policy, legal and administrative concerns.  Lewis urged Congress to “consider the issues we have outlined in this letter in order to better focus on developing processes that will do more to improve tax compliance than simply trading certain smaller tax administrative complexities for larger and likely more burdensome complexities in the future.”

The specific areas addressed in the letter are:  

  • Overall increase in U.S. income tax due; 
  • Significant and unprecedented impact on small partnerships;
  • Stifling of investments in partnerships;
  • Inequities resulting from changes in partners; and
  • Significant tax cost/penalties on U.S. taxpayers investing abroad.

Lewis wrote that the AICPA intends to continue its work to provide Congress with comments about additional issues regarding the bill, along with detailed examples and recommended solutions, in the near future.  

“Congress should take the necessary additional time to research and examine legislative provisions for simplifications and improvements to the partnership audit process in order to avoid any inequitable, unfair, and possibly unforeseen consequences to U.S. partnership businesses, both small and large,” Lewis wrote in the letter.