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Temporary regulations allow for early opt-in to new partnership audit regime

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Tax Hot Topics: Partnership audit regime opt-inTreasury and the IRS on Aug. 4 issued temporary and proposed regulations that allow certain partnerships to elect into the new partnership audit regime upon an examination, which would allow the partnership to pay any imputed underpayment of tax on behalf of its partners.

The regulations apply to any partnership returns filed for a partnership taxable year beginning after Nov. 2, 2015, and before Jan. 1, 2018. So the earliest a calendar year partnership could early elect to apply the new audit rules under the Bipartisan Budget Act of 2015 (BBA) would be for its 2016 year.  

The regulations do not address substantive issues regarding the application of the new rules under the BBA, and there are a number of unanswered questions regarding application. Additional guidance by the government regarding these unanswered questions will be critical for partnerships to determine whether they should early elect to apply the new rules in the BBA.

For more information, see our Tax Flash.

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