The American Institute of CPAs has written a letter to Congress suggesting legislative changes in the new partnership audit regime ushered in by last year’s bipartisan budget deal.
The modifications aim to clarify the operation of provisions in the Bipartisan Budget Act of 2015 related to the “push-out” election, the filing of amended returns by partners under some circumstances and the interaction of audit changes with certain other code sections.
“The Act contains a number of provisions that are unclear, confusing or difficult to administer in a fair and efficient manner,” wrote AICPA Tax Executive Committee chair Annette Nellen in the letter Thursday.
However, she noted that the AICPA appreciates Congress’s efforts to streamline the ability of the Internal Revenue Service to audit, assess and collect underpayments of tax from partnerships and their partners.
The AICPA said the suggested changes would clarify the operation of certain provisions of the legislation, correct some inconsistencies, and improve the fairness and administration of the new partnership audit regime.
The new audit regime is supposed to make it easier for the IRS to audit large, complex partnerships such as private equity firms, hedge funds and CPA firms. However, the way the law was drafted also introduces some new complexities, and IRS Commissioner John Koskinen expressed some skepticism at an AICPA tax conference this week about its usefulness.
The law allows some partnerships to opt-out of the new audit regime or push out responsibility for payment of any assessment imposed by the IRS to partners.
The AICPA has already submitted a set of recommendations to the Treasury Department and the IRS for developing regulations to implement the new regime. However, the AICPA believes some issues require congressional action to “ensure the development of a fair, equitable and workable Regime.”
The AICPA’s eight legislative recommendations include the following areas:
• Expanding the push-out election to allow affected taxpayers to also push out;
• Revising the push-out election to allow decreases in tax;
• Allowing modifications of imputed underpayments for affected taxpayers;
• Clarifying the impact on intervening years for amended tax returns;
• Permitting affected taxpayers to amend returns;
• Providing a convenient option for tax-exempt partners to verify their tax status upon reallocation of distributive share; and
• Clarifying limitations on net operating losses.
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