IRS Issues First Partnership Audit Regulations

On August 4, 2016, the Treasury Department issued its first temporary regulations under the new partnership audit and collection regime found in the Bipartisan Budget Act of 2015 ("BBA").  For partnership tax procedure practitioners, the regulations are interesting reading.  The new regulations provide insights into the internal deliberations and policy goals at Treasury and IRS headquarters.

The new regulations relate to the "early opt-in" option—that is, despite the January 1, 2018 effective date, the BBA provides that partnerships and LLCs may opt-in to the new regime before the January 1, 2018 date.  The preamble addresses what I've mentioned on panels before the ABA Tax Section and the DC Bar Tax Section—that a partnership possibly "could" do an "early opt-in" to the new regime so that it could opt-out of the regime under section 6221(b). Therefore, the audit of the partnership with less than 100 partners would have to be conducted under the pre-TEFRA rules.