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 David McAfee
A national advocate of business taxpayers is encouraging states to postpone changes to their partnership audit regime until 2019.
States have their hands full dealing with federal changes to the tax code, so they should put partnership audit regime amendments on the back burner until next year, according to Fred Nicely, senior tax counsel at the Council On State Taxation, a Washington-based trade association representing almost 600 multistate corporations. All states will have to conform eventually, but they don’t need to go into “panic mode,” he said.
Every state that has an individual or corporate income tax is “going to have to have a law change, at the state level, to be able to conform to the federal law changes,” Nicely said Feb. 10 at the American Bar Association’s Section of Taxation in San Diego.
“Most of the states may conform to the federal tax base, but when it comes to your assessment and collection powers, the states are all independent from the IRS on that, and that’s what we’re dealing with here--the federal audit procedure changes,” he said. “That’s something that the states can address next year. This year, I know a lot of states are focused on the impact of federal tax reform.”
It’ll probably be 2020 before the Internal Revenue Service actually conducts audits under the new regime, he said.
The Bipartisan Budget Act of 2015 replaced a partner-by-partner audit system with a centralized audit approach that, in general, assesses and collects tax at the partnership level. The Internal Revenue Service and Department of Treasury are aiming to release all of the guidance implementing the new federal audit process by this summer, a counsel in the Treasury Department’s Office of Tax Policy said during another panel at the ABA meeting.
Nicely cited New York as a recent example of a state in which tax administrators and legislators are opting not to rush in and do something on audit regimes immediately. Officials said the state is “probably not going to try to push something this year,” he said.
“I think there was another state we reached out to, Oregon, that is going to hold off,” Nicely added. “Minnesota is a state that we’re working on, trying to get them to delay, but some states--like California--have said they do want to move forward.”
COST’s interest in this issue isn’t limited to the partnership audit regime. The group also wants to improve the reporting process that C-corporations, and even individuals, have to use. COST wants to “address the big picture,” and changes to audit regimes make this a good time to do so, Nicely said.
“We want broad overall improvement with how the states deal with federal adjustments,” he said. “When you have a federal adjustment, and it has to be reported at the state level, a lot of the states do not have good administrative practices.”
COST is among several “interested parties” working with the Multistate Tax Commission on a model partnership audit statute that responds in part to the federal partnership regime. The other parties are the Tax Executives Institute Inc., the Institute for Professionals in Taxation, the American Institute of CPAs, and a task force of the American Bar Association tax section’s State and Local Tax Committee.
The interested parties proposed a model state law to promote uniformity when it comes to conformity with the federal regime and partnership audits. The draft model addresses both procedures for reporting federal income tax changes and procedures for reporting changes under the federal partnership audit regime.
To contact the reporter on this story: David McAfee in Los Angeles at dmcAfee@bloomberglaw.com
To contact the editor responsible for this story: Ryan C. Tuck at email@example.com
Copyright © 2018 Tax Management 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 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)