Government Insights into the New Partnership Tax Audit Regime

31 January 2017
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Key takeaways

  • Recently released proposed regulations under the new partnership audit regime (the “BBA Regime”) have been held up by the Trump administration’s “freeze” on pending regulations. Still, the proposed regulations offer valuable insight into Treasury’s and the IRS’s views.
  • The proposed regulations generally interpret the BBA Regime in a taxpayer-unfriendly manner. For example, they enable the IRS to assess a greater amount of tax on the partnership than the underlying partners would have paid, with a burden on the partnership to prove that reductions to the tax assessed are appropriate.
  • Regardless of the fate of the proposed regulations, partnership agreements should contain appropriate provisions dealing with the BBA Regime.