On June 13, 2017, the IRS re-released proposed regulations (REG-136118-15) on implementing the new partnership audit regime enacted by the Bipartisan Budget Act of 2015 (BBA). The regulations were initially released on January 18, 2017, but were withdrawn before publication by the then-incoming Trump administration as part of its review of all pending regulations. The regulations, which the IRS has re-issued in substantially identical form, are now scheduled to be published in the Federal Register on June 14, 2017. The reissuance signals the IRS's intent to finalize these regulations.

The new regime enacted by the BBA allows the IRS to assess and collect tax at the partnership level under new centralized audit procedures. The proposed regulations provide additional guidance on the applicable procedures, the determination of the amount of taxes, interest and penalties owed, and other consequences of an adjustment to a partnership tax return. Among other provisions, the regulations include procedures for opting out of the new regime, designating a partnership representative, filing administrative adjustment requests, and determining amounts owed by a partnership or its partners from adjustments following partnership exam.

The proposed regulations would affect partnerships for tax years beginning after December 31, 2017, and any partnerships that elect to apply the centralized partnership audit regime for tax years beginning after November 2, 2015 and before January 1, 2018. For tiered partnerships, the IRS is considering an approach under Section 6226 that would allow for pushing adjustments beyond the first tier. That approach will be outlined in forthcoming regulations.

For a detailed discussion of the proposed regulations, see Tax Alert 2017-168.