The IRS reissued the proposed regulations on the new partnership audit rules that were released in January but subsequently withdrawn in response to the Trump Administration’s freeze on new regulations. As noted by Mary A. McNulty in a Tax Notes Today article (subscription required) published today, the partnership audit regulations are helpful to taxpayers, rather than burdensome regulations that the Trump administration wants to avoid. These are the regulations that taxpayers need to fill in gaps in the statutes passed by Congress, she said.
The proposed regulations contain very few changes from those released in January. The changes include a clarification in the preamble that the rules apply to foreign and domestic partnerships, a clarification on the reservation and request for comments on multi-tier push-outs, a reference to Executive Order 13789, and the removal of an example that illustrated the calculation of the imputed underpayment in a situation in which an adjustment reallocates an item from one partner to another. The clarified request for comment on multi-tier push-outs is an encouraging sign that the IRS and Treasury are considering implementing the push-out election in multi-tiered partnerships. The regulations are available here and are summarized in a prior post available here.
The new partnership audit rules are effective for partnership tax years beginning after 2017. The IRS has imposed a short comment period (August 14, with the hearing on September 18), which signals their goal of moving quickly and issuing final regulations by year end. However, the AICPA and possibly the ABA Tax Section are seeking legislation that would delay the effective date by one year.
If you have any questions about the proposed regulations or partnership audits, please contact one of us or any of the other Tax lawyers at Thompson & Knight.