The American Institute of CPAs (AICPA) is working with the Multistate Tax Commission (MTC) and other professional groups to draft model state legislation to address state conformity to federal partnership audit rules. The Multistate Tax Commission’s Uniformity Committee will consider an updated version of this model legislation in July.
Congress enacted the Bipartisan Budget act of 2015 with changes to the partnership audit rules set forth by the Internal Revenue Code (IRC). The new regime took effect on January 1, 2018 and centralizes the IRS’s ability to audit, assess and collect any determined underpayment directly from a partnership at the entity level, subject to certain available elections.
While most states are waiting for this model legislation before further acting on partnership audit rules, some states moved forward with legislation in 2018. Supported by strong efforts from the Georgia Society of CPAs, Georgia Governor Nathan Deal recently signed legislation to align the assessment and collection procedures used by the Georgia Department of Revenue (DOR) with the IRS’s partnership audit regime. The legislation is similar to the Federal regime in several ways. For example, a Designated State Partnership Representative will act as a point of contact with the DOR and have full authority to make all necessary elections and related decisions.
Don Cook, Vice President for Legislative Affairs at the Georgia Society of CPAs, said, “Passing the legislation here in Georgia was no small task. The bill made it through with no amendments. That victory speaks to a united group effort and shows that when our members as thought leaders come together with their state society as an advocate we can get things done.”
California and Minnesota have also introduced legislation in 2018 to address partnership audit conformity. In the meantime, AICPA continues to work with the MTC and others to move forward with draft legislation.