United States

Early election of new partnership audit rules

Should your business make an early election in 2017?


The new partnership audit rules were enacted as part of the Bipartisan Budget Act of 2015 and are effective for partnership tax years beginning on or after Jan. 1, 2018. The new rules replace the unified partnership audit rules under The Tax Equity and Fiscal Responsibility Act of 1982 (also referred to as TEFRA).  Partnerships that have received notification of an IRS audit for tax years ending on or before Dec. 31, 2017, have the option to early-elect application of the rules to the IRS examination of the partnership.

The decision to early-elect the new rules to an IRS examination is complex and is time sensitive (30 days from the notice of selection for examination.)   The Tax Matters Partner should discuss this decision with partnership managers and tax advisors. In this short discussion—a breakout of our Tax controversy update: Hot topics for 2017 webcast—we share some important perspectives for partnerships that may be considering early election related to a potential IRS examination for tax years prior to the effective date of the new partnership audit rules. 

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