The centralized partnership audit regime under the Bipartisan Budget Act of 2015 (BBA) became effective for partnerships with tax years beginning after Dec. 31, 2017. The new regime significantly impacts how the IRS will audit partnership returns and collect any resulting taxes.
Under the new regime, audit decisions on behalf of the partnership are made by a key individual, referred to as the partnership representative. The partnership representative has the sole authority to act on behalf of the partnership and its partners. This is a significant change from the role of the tax matters partner under the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA).
Based on the number and types of partners in a partnership, there are opt-out provisions. And, there are other optional provisions that must be carefully considered, such as a partnership may elect to “push out” adjustments to reviewed-year partners.
There are many complexities of the new audit regime and it’s important for practitioners to understand the new rules and advise clients accordingly.
- Risk Alert – Should a CPA Agree to be a Partnership Representative?
- Partnership Audit Changes Video
- Current Developments in Partners and Partnerships, The Tax Adviser, Feb. 2019
- A Uniform State Approach to the New Federal Partnership Audit Regime, The Tax Adviser, Dec. 2018
Regulations and Other IRS Guidance
- Final Regulations – Implementing the Centralized Partnership Audit Regime (February 2019)
- Notice 2019-06 – Guidance on Special Enforcement Matters Under the Centralized Partnership Audit Regime (December 2018)
- Final Regulations – Partnership Representative Under the Centralized Partnership Audit Regime and Election to Apply the Centralized Partnership Audit Regime (August 2018)
- Proposed Regulations – Centralized Partnership Audit Regime: Adjusting Tax Attribute (February 2018)
- Final Regulations – Election Out of the Centralized Partnership Audit Regime (January 2018)
- Proposed Regulations – Centralized Partnership Audit Regime: International Tax Rule (November 2017)
The AICPA is actively advocating for the profession on this issue and has submitted the following comment letters on the partnership audit regime:
- Multistate Tax Commission’s Model Uniform Statute for Reporting Adjustments to Federal Taxable Income and Federal Partnership Audit Adjustments and Hearing Officer Report (January 2019)
- AICPA Comments on the Centralized Partnership Audit Regime (October 2018)
- AICPA Updated Position Paper on State Conformity to the IRS Centralized Partnership Audit Regime (and one-pager) (September 2018)
- AICPA Request for Delay of Effective Date of BBA Partnership Audit Provisions (January 2018)
- Testimony on Centralized Partnership Audit Regime (September 2017)
- AICPA Comment Letter on Centralized Partnership Audit Regime (August 2017)
- Request for Delay in Effective Date on Partnership Audit Provisions (June 2017)
- Position Paper on State Conformity to Federal Partnership Audit Rules (March 2017)
- Letter on Technical Corrections Act of 2016 (November 2016)
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Reviewed March 15, 2019