December 24, 2018

Avoid being drawn into Centralized Partnership Audit Regime

In our previous newsletter, we went over the elimination of the position of Tax Matters Partner, and its replacement of Partnership Representative. In this memo, the second in a multi-part series, we intend to introduce you to the ways in which Partnerships can avoid being drawn into CPAR (Centralized Partnership Audit Regime).

Recap: The New Regime In an effort to increase the efficiency of Partnership examinations, the Bipartisan Budget Act of 2015 repealed the previous rules regarding the auditing of partnerships: the TEFRA partnership audit rules and the electing large partnership audit rules. Although the new rules will be implemented in tax years beginning or after January 1st, 2018, taxpayers can now elect to be subject to the rules now. Under the new rules under IRC §6221(a), at the end of an exam, rather than having the Auditors assess the increase of tax at the Partner level, the new rules will levy the tax at the Partnership level. While these changes are beneficial to the IRS, taxpayers will be at a disadvantage. However, there are ways out of this.