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Happy Holidays! IRS Gifts us with Alternative Rules under the Centralized Partnership Audit Regime

December 20, 2022

The Bipartisan Budget Act of 2015 (BBA) (Pub. L. No. 114-74) changed the audit and collection procedures for partnerships, effective for tax years beginning after December 31, 2017. Congress intended that the BBA would simplify partnership audit procedures (at least from the IRS’s perspective) and thus increase collections. IRS recently released final regulations under I.R.C. § 6241(11), which excepts certain partnership-related items from the centralized partnership audit regime created by the BBA and which sets forth alternative rules that will apply to the examination of excepted items by the IRS. 87 Fed. Reg. 75,473 (Dec. 9, 2022).

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  • Partnerships and LLCs: Audit Regime
    Learn more about the critical provisions of the partnership audit regime under the BBA, I.R.C. § 6221 et seq., and of the possible consequences that partners and partnerships may wish to avoid. This practice note also suggests ways in which partnership agreements be drafted to help achieve the economic results intended, while avoiding the possible consequences of the BBA audit legislation.

Practical Guidance Updates 
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  • Tax Key Legal Developments Tracker (Federal)
    Stay informed on new developments: 
    • Business Entities. Treasury and IRS issue final regulations that except certain partnership-related items from the centralized partnership audit regime created by the Bipartisan Budget Act of 2015, which set forth alternative rules applying to IRS’s examination of excepted items. 87 Fed. Reg. 75,473 (Dec. 9, 2022).
    • Excise Taxes and Credits. IRS issues Proc. 2022-42, which sets forth procedures for manufacturers and sellers of clean vehicles to follow under I.R.C. § 30D(d)(3) for vehicles to be eligible for clean vehicle tax incentives as enacted or amended under the Inflation Reduction Act of 2022, including tax credits for new and previously owned clean vehicles and commercial clean vehicles.
    • Practice, Procedure and Controversy. IRS issues Revenue Ruling 2022-23 setting forth the rates of interest regarding tax underpayments and overpayments for the calendar quarter beginning January 1, 2023, at (1) 7% for overpayments (6% for corporations, 4.5% for the portion of a corporate overpayment exceeding $10,000); (2) 7% for underpayments; and (3) 9% for large corporate underpayments.
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