The American Institute of CPAs (AICPA) has submitted to Congress a set of recommended legislative changes to the new Partnership Audit Regime enacted as part of the Bipartisan Budget Act of 2015. The changes are designed to clarify the operation of provisions in the legislation related to the “push-out” election, the filing of amended returns by partners in certain circumstances and the interaction of audit changes with certain other code sections.
“The Act contains a number of provisions that are unclear, confusing or difficult to administer in a fair and efficient manner,” the AICPA letter signed by Annette Nellen, CPA, CGMA, Esq., chair of the AICPA Tax Executive Committee, stated, while acknowledging the intent of Congress to “streamline the ability of the Internal Revenue Service (IRS) to audit, assess and collect underpayments of tax from partnerships and their partners.” The AICPA wrote that the “suggested changes are necessary to clarify the operation of certain provisions of the Act, correct inconsistencies, improve the Regime’s fairness and simplify its administration.”
The AICPA explained that the law allows certain partnerships to opt-out of the Regime and for certain partnerships to push-out the responsibility for payment of any assessment imposed by the IRS to the partners.
The AICPA wrote that it has already submitted a series of recommendations to the U.S. Department of the Treasury and the IRS for use in developing regulations to implement the Regime. However, the AICPA stated that it believes several issues require Congressional action to “ensure the development of a fair, equitable and workable Regime.”
The AICPA’s eight legislative recommendations cover the following areas:
- Expanding the push-out election to allow affected taxpayers to also push out;
- Revising the push-out election to allow decreases in tax;
- Allowing modifications of imputed underpayments for affected taxpayers;
- Clarifying the impact on intervening years for amended returns;
- Allowing affected taxpayers to amend returns;
- Providing a convenient option for tax-exempt partners to verify their tax status upon reallocation of distributive share; and
- Clarifying limitations on net operating losses.