Highlights of the Final Partnership Audit Rules

The IRS released final regulations (T.D. 9844) December 22, 2018, which implement the centralized partnership audit regime enacted by the Bipartisan Budget Act of 2015 and subsequently amended by the Tax Technical Corrections Act of 2018. This report highlights some of the more significant changes and clarifications made to the partnership audit rules that were included in the final regulations and details some of the gaps practitioners should watch for.

Generally, the final regulations are substantially similar to the proposed regulations released on August 17, 2018, which withdrew and re-proposed certain portions of previous proposed regulations implementing the new audit regime. However, there are several noteworthy differences, particularly regarding the consistency requirement, what items are subject to review, and the computation and modification of the imputed underpayment.

The final regulations generally apply to partnership tax years beginning after December 31, 2017, and ending after August 12, 2018.