The increasing use of partnerships has posed administrative challenges for the Internal Revenue Service (“IRS”). In an attempt to combat these challenges, Congress enacted section 1101 of the Bipartisan Budget Act of 2015 (“BBA”), which repealed longstanding TEFRA audit rules for partnerships and replaced them with a new centralized partnership audit regime. On January 18, 2017, the US Treasury Department and the IRS announced proposed regulations to address the implementation of section 1101. This Legal Update offers an overview of the key changes to the partnership audit rules introduced in the BBA, summarizes the most significant procedural elements of the proposed regulations, and presents critical considerations for taxpayers to bear in mind as the new regime unfolds.
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