For over 50 years, Bloomberg Tax’s renowned flagship daily news service, Daily Tax Report® has helped leading practitioners and policymakers stay on the cutting edge of taxation and...
May 9 — States may exacerbate the complexities accompanying the new IRS partnership audit rules should they adopt varying approaches to the overhauled federal regime, leading practitioners say.
“What we don't want is 50 different state responses,” Bruce P. Ely, with Bradley Arant Boult Cummings LLP, said May 6 during a panel at an American Bar Association Section of Taxation meeting. “And we don't want all the snowflakes to be different.”
Enacted as part of the Bipartisan Budget Act of 2015, and effective for taxable years after Dec. 31, 2017, the rules provide that Internal Revenue Service partnership audits will be assessed and collected at the partnership level (225 DTR H-1, 11/23/15).
Federal financial projections estimate that the new administrative procedures will generate $9.3 billion over 10 years (83 DTR G-3, 4/29/16).
With potentially 50 nuanced reactions to the federal procedures, Steve Wlodychak of EY LLP’s Indirect (State and Local Tax) Practice noted that the collective movement in the “laboratories of democracy” may stir a greater change.
“This whole area here has probably opened up a whole ability to re-think how do we want to tax partnerships,” he said.
Ely expects a technical corrections bill from Congress within the next year to clarify components of the original legislation.
At the state level, there is discussion of a working group between the American Institute of CPAs, the American Bar Association SALT committee, the Multistate Tax Commission and potentially the Council On State Taxation to assist states in navigating and responding to the regime.
Alongside the MTC, which has initiated a uniformity effort on the partnership rules, MTC Counsel Bruce Fort also identified working groups in California and New York that are evaluating their state-specific responses.
The many complications, which include concerns related to apportionment and nexus, raise three primary questions highlighted by the panel:
Wlodychak observed that as the IRS steps up partnership audits, there will be a significant increase in states' receipt of information through sharing arrangements with the IRS.
However, the question remains whether the states are equipped to handle the information. Wlodychak noted that only California maintains a state audit manual.
But as practitioners gauge the impact of the federal rules, and consider state responses, the panelists echoed the call for partnerships to start reviewing their operating agreements to determine where revisions might be necessary (08 DTR S-12, 1/13/16).
To contact the reporter on this story: Jennifer McLoughlin in Washington at email@example.com
To contact the editor responsible for this story: Ryan Tuck at firstname.lastname@example.org
The panel's PowerPoint presentation is at http://src.bna.com/eMV.
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)