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How, When and Where a Partnership Can Elect into the New Partnership Audit Regime

By Todd Radde
Taylor English Duma LLP
Aug 15, 2016

On August 4, 2016, the IRS published a temporary regulation for partnerships wanting to elect into the new partnership audit procedural rules that were enacted in the Bipartisan Budget Act of 2015 on November 2, 2015. Treas. Reg. §301.9100-22T.The regulation provides guidance on how, when and where a partnership can elect into the new partnership audit regime.The regulation is effective from August 5, 2016, through August 5, 2019.

If a partnership chooses to early elect into the new partnership audit regime, the partnership must provide a written statement with the words “Election under Section 1101(g)(4)” written at the top of the statement.The statement must also include:

  • The partnership’s name, taxpayer identification number, and the partnership taxable year for which the election is being made;
  • The name, taxpayer identification number, address, and daytime telephone number of the individual who signs the statement;
  • An affirmative statement that the partnership is electing the application of Section 1101(c) of the Bipartisan Budget Act of 2015 for the partnership return for the eligible taxable year identified in the notice of selection for examination;
  • The name, taxpayer identification number, address, and daytime telephone number of the partnership representative, as defined by Internal Revenue Code (IRC) §6223 of the Bipartisan Budget Act of 2015, and any additional information required by the applicable regulations, forms and instructions, and other guidance issued by the IRS;
  • The statement must also contain the following representations:
  • The partnership is not insolvent and does not reasonably anticipate becoming insolvent before the resolution of any adjustment with respect to the partnership taxable year for which the election is being made;
  • The partnership has not filed, and does not reasonably anticipate filing, voluntarily, a petition for relief under Title 11 of the United States Code;
  • The partnership is not subject to, and does not reasonably anticipate becoming subject to, an involuntary petition for relief under Title 11 of the United States Code; and
  • The partnership has sufficient assets, and reasonably anticipates having sufficient assets, to pay a potential imputed underpayment with respect to the partnership taxable year that may be determined under Subchapter C of Chapter 63 of the Internal Revenue Code as amended by the Bipartisan Budget Act of 2015.
  • The statement is signed under penalties of perjury, that the individual signing the statement is duly authorized to make the election and that, to the best of the individual’s knowledge and belief, all of the information contained in the statement is true, correct, and complete.

The statement must be dated and signed by the tax matters partner, as defined under IRC §6231(a)(7) prior to amendment by the Bipartisan Budget Act of 2015 and the applicable regulations, or an individual who has the authority to sign the partnership return for the taxable year under examination under IRC §6063, the regulations thereunder, and applicable forms and instructions.

The partnership must make this election within 30 days of the date of notification to the partnership, in writing, that a tax return of the partnership for an eligible taxable year has been selected for examination by a notice of selection of examination.An eligible taxable year means any partnership taxable year that begins after November 2, 2015, and before January 1, 2018, with a few exceptions.Those exceptions are: if the tax matters partner has filed an administrative adjustment request under IRC 6227(c) (prior to amendment by the Bipartisan Budget Act of 2015), the partnership is deemed to have filed an administrative adjustment request under IRC §6227(c) (prior to amendment by the Bipartisan Budget Act of 2015), or an amended return of partnership income has been filed or has been deemed to be filed for the partnership taxable year.

Upon the receipt of a valid election, the IRS will mail, not before the date that is 30 days after the receipt valid election, a notice of administrative proceedings to the partnership and the partnership representative.

A partnership that has not been issued a notice of selection for examination can still make an election with respect to a partnership for an eligible taxable year for the purpose of filing an administrative adjustment request under IRC §6227 as amended by the Bipartisan Budget Act of 2015.No election for an administrative adjustment request can be made before January 1, 2018.If an administrative adjustment request is filed before January 1, 2018, it is deemed to have been filed under IRC §6227(c) (prior to amendment by the Bipartisan Budget Act of 2015).