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.
The Tax Adviser Articles
- Partnerships can file amended returns to get CARES Act benefits, April 8, 2020
- Centralized partnership audit regime: Appeals procedures, April 1, 2020
- Why states should adopt the MTC model for federal partnership audits, March 1, 2020
- Current developments in partners and partnerships, Feb. 1, 2020
- Push-out elections and administrative adjustment requests, Jan. 1, 2020
- Issues and considerations in appointing a partnership representative, Jan. 1, 2019
Regulations and Other IRS Guidance
- Rev. Proc. 2020-23 (April 2020)
- Bipartisan Budget Act of 2015 – Appeals Procedures (October 2019)
- Revenue Procedure 2019-32 – Six-Month Extension to File Form 1065 and Furnish Schedules K-1 Granted to Eligible Partnerships (July 2019)
- 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)
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) and testimony (August 2018)
- AICPA Updated Position Paper on State Conformity to the IRS Centralized Partnership Audit Regime (and one-pager) (September 2018)
- AICPA Comments on Proposed Regulations Regarding the Centralized Partnership Audit Regime: Adjusting Tax Attributes (May 2018)
- AICPA Request to Congress for Delay of Effective Date of BBA Partnership Audit Provisions (January 2018)
Reviewed April 15, 2020