Tax Group Studying Model State Statute for Partnership Audits

Daily Tax Report: State provides authoritative coverage of state and local tax developments across the 50 U.S. states and the District of Columbia, tracking legislative and regulatory updates,...

By Che Odom

The Multistate Tax Commission is working through the practitioner-proposed model statute that in part responds to the new federal partnership audit regime.

MTC staff authored a July 19th report, addressed to the partnership work group and Uniformity Committee, that highlights observations and questions regarding the draft uniform state statute presented by several “interested parties.” The draft statute addresses both procedures for reporting federal income tax changes and procedures for reporting changes under the federal partnership audit regime.

The report further compares the draft statutory provisions with a list setting forth state-specific issues raised by both the MTC partnership work group and the interested parties—which include the American Institute of CPAs, Council On State Taxation (COST), Tax Executives Institute, Institute for Professionals in Taxation, and a task force of the American Bar Association tax section’s State and Local Taxes Committee.

During the MTC partnership work group’s July 20 teleconference, the ABA task force co-chair Bruce P. Ely said the group will review the MTC report as the Aug. 6 deadline approaches to submit comments on the IRS proposed regulations implementing the federal regime.

The proposed regulations (REG-136118-15, RIN:1545-BN77) released June 13 are similar to a January proposal that was withdrawn when the White House announced a regulatory freeze shortly after President Donald Trump’s inauguration. The document navigates the new centralized partnership audit process enacted through the Bipartisan Budget Act of 2015 ( Pub. L. No. 114-74), set to take effect in 2018.

IRS Comments Coming

Ely, a tax partner with Bradley Arant Boult Cummings LLP, has told Bloomberg BNA that the ABA Section of Taxation is preparing comments on the proposed regulations, with three committees focusing on specific aspects of the rules. He said the State and Local Taxes Committee’s comments may be “focused more on items or issues that need to be added to the proposed regulations rather than needed changes to the proposed regulations.”

Helen Hecht, general counsel for the MTC, said during the July 20 call that she is compiling comments to submit to the IRS. She encouraged states to contribute their questions and comments directly to her so that they can be submitted together.

The MTC has also set up a comment section on its website for states to submit thoughts on the draft leading up to the MTC’s Annual Meeting from July 31-Aug. 3 in Louisville, KY.

To contact the reporter on this story: Che Odom in Washington at

To contact the editor responsible for this story: Jennifer McLoughlin at

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