For over 50 years, Bloomberg BNA’s renowned flagship daily news service, Daily Tax Report® has helped leading practitioners and policymakers stay on the cutting edge of taxation and...
Jan. 29 — The IRS might need some time to figure out how to audit partnerships with fewer than 100 partners after the Tax Equity and Fiscal Responsibility Act rules no longer apply, a top agency official said.
“Since validly electing partnerships will fall into pre-TEFRA rules, these are uncharted waters for partnerships of this size,” Internal Revenue Service Chief Counsel William J. Wilkins said Jan. 29 at the American Bar Association Section of Taxation midyear conference in Los Angeles.
The new regime, unveiled in October and set to take effect in 2018, makes it easier for the IRS to audit partnerships by collecting tax adjustments at the entity level, rather than from individual partners. The rules apply to partnerships with 100 or more members. Partnerships with fewer partners can opt out, so long as all the partners are individuals, estates, C corporations or S corporations (208 DTR G-2, 10/28/15).
More Eligibility, Please
Some practitioners pushed the IRS to include grantor trusts or partnerships with limited numbers of partners to the list, so that more partnerships aren't required to follow the new rules.
“It might take a while to get comfortable with managing this group of non-TEFRA partnerships before there is a comfort level with adding new categories of eligible partners,” Wilkins said.
The government is beginning the process of writing regulations to implement the regime. The IRS will issue a request for comments in the near term, said Ossie Borosh, an attorney-adviser in the Treasury Department's Office of Tax Legislative Counsel.
The first piece of guidance the IRS will publish will address how to elect to begin using the new regime before the rules fully go into effect in 2018, Wilkins said.
‘Less Than Meets the Eye.'
“I would advise everyone to read the early election language, and the surrounding effective date language, very carefully,” Wilkins said. “This election is less than meets the eye on first glance.”
There are several provisions, including the administrative adjustment request mechanism and the ability to push out the adjustment to the partners, that aren't available until the general effective date. It is widely thought that very few partnerships will opt in to the regime early.
“I would particularly urge you to not treat IRS burdens as a free good,” Wilkins said. “We need a system that works, and both tax collector and the taxpayers will need to tolerate some roughness and risk in order for that to occur.”
To contact the reporter on this story: Laura Davison in Los Angeles at firstname.lastname@example.org
To contact the editor responsible for this story: Brett Ferguson at email@example.com
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 firstname.lastname@example.org.
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 email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)