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IRS Launches Helpful Learning Resource on the New Rules Governing Partnership Audits

By Anthony P. Daddino on September 2, 2020

Yesterday the IRS launched a new website for taxpayers and tax practitioners seeking information on the centralized partnership audit regime.  As many of you will recall, in 2015 Congress exchanged one set of overly-complicated audit rules applicable to partnerships, known as TEFRA, with a different but comparably complicated set of partnership audit rules known as BBA (after the enacting legislation, the Bipartisan Budget Act).  The new audit regime is generally effective for tax years beginning January 2018.

The most striking change between these two regimes is that under the BBA, the IRS generally assesses and collects any understatement of tax (called an imputed underpayment) at the partnership level. A partnership is subject to BBA unless it is an eligible partnership and makes an annual election out of BBA on a timely filed Form 1065. An eligible partnership is one with 100 or fewer partners, all of whom are either individuals, C corporations, foreign entities that would be treated as a C corporation if it were domestic, S corporations or estates of deceased partners. Partnerships under the BBA must follow certain filing requirements including designating a partnership representative.

The new webpage is intended to be a one-stop location for anything BBA-related, including regulations and other guidance and instructions related to the Partnership Representative (PR), electing out of the centralized audit regime, Administrative Adjustment Requests (AARs) and what to expect during a BBA administrative proceeding.  The new website may be found here (New Website). 

This new website follows the release of an IRS Roadmap diagramming the centralized partnership audit process.   In a recent Blog post, MC Talks Tax linked to a copy of the Roadmap as well as linked to numerous prior Blog posts addressing various issues and developments related to the new partnership audit regime (Prior Blog Post).

Based on this author’s experience, the IRS launched this website not only for taxpayers and their professionals, but IRS employees as well.  Having recently represented in an IRS examination a partnership that opted into this new regime, it is clear that IRS Exam personnel are likewise struggling to understand the new audit regime and the mechanics by which a dispute moves forward. 

If you have any questions about the new partnership audit rules or any other tax-related matter, please do not hesitate to contact me at (214) 749-2464 or adaddino@meadowscollier.com.