AICPA Requests Delay in Effective Date for New Partnership Audit Regime

June 20, 2017

The American Institute of CPAs (AICPA) requested on June 13 that the U.S. Department of the Treasury and the Internal Revenue Service (IRS) work with Congress to pass legislation to delay by one year the effective date of the new “Centralized Partnership Audit Regime.”  The current effective date is December 31, 2017. 

That same day, in a move that came sooner than anticipated, the Treasury and IRS reissued the proposed partnership audit regulations, which are nearly identical to the proposed regulations that were withdrawn following the freeze on regulatory projects implemented in January by President Donald Trump. 

Jonathan Horn, AICPA senior manager for tax policy and advocacy, said in media interviews on June 13 with Bloomberg BNA and Tax Notes, “We still believe our request for the delay is appropriate.  This is a substantial sea change in the way partnerships are audited and assessments are collected.” 

Annette Nellen, CPA, CGMA, Esq., chair of the AICPA Tax Executive Committee, wrote in the AICPA’s letter, “This new Regime represents a significant departure from previous law.  It will require a substantial effort on the part of Treasury, the IRS, the tax practitioner community and the affected taxpayers (which includes virtually every partnership and their partners) to develop and comply with new rules, regulations and procedures to establish a fair, equitable and administrable Regime.”

Nellen noted that the process of developing the necessary framework to operate the Regime is still in a very early stage.  “The AICPA believes that it is unlikely that all the procedures and guidance necessary for taxpayers to make informed decisions regarding its provisions will be established before the current effective date at the end of this year,” she stated.

The letter identified the following issues that support a delay in effective date:

  • Withdrawn (and now reissued) regulations contained significant gaps;
  • Proposed technical corrections bill would clarify and modify elements of the Regime;
  • Impact on financial reporting standards remains unclear;
  • Partnerships need to amend or draft their partnership agreements for the new Regime; and
  • Impact on state tax law remains uncertain.