The Bipartisan Budget Act of 2015 (Public Law No. 114-74) was signed into law on November 2, 2015. In part, the law replaced the auditing and tax collection procedures for partnerships under the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) and the electing large partnership rules with the centralized partnership audit regime. The centralized partnership audit regime, also referred to as BBA or PBBA, is generally effective for tax years beginning January 2018.
Partnerships that file returns for tax years starting January 2018 must follow rules under the BBA. Partnerships under the BBA must follow certain filing requirements including designating a partnership representative or, if eligible, elect out of the regime on a timely filed return. Under the BBA, the IRS generally assesses and collects any understatement of tax (called an imputed underpayment or IU) at the partnership level. Partnerships may request to modify the IU and may elect to push out the adjustments underlying the IU instead of paying.
Filing Requirements
Partnerships under the BBA centralized partnership audit regime must take certain actions when filing or making changes to a return. These include:
- Designating a Partnership Representative (PR)
- Option to elect out of the centralized partnership audit regime, if eligible
- Filing an Administrative Adjustment Request to change a prior return
BBA Partnership Audit
Notices to expect from the IRS and actions to take during a BBA partnership audit, also called an examination.
Regulations and Interim Guidance
Regulations under Internal Revenue Code sections 6221 to 6241 (after 2017) and Interim Guidance for the BBA centralized partnership audit regime.
Regulations
Centralized Partnership Audit Regime, Final regulation (TD 9844)
Election Out of the Centralized Partnership Audit Regime, Final regulation (TD 9829)
Centralized Partnership Audit Regime: Adjusting Tax Attributes, Proposed regulation (REG-118067-17)
Interim Guidance
Interim Guidance on the Centralized Partnership Audit Regime Field Exam Procedures PDF
Appeals Interim Procedures on the Bipartisan Budget Act (AP-08-1019-0013) PDF
TEFRA and BBA: High Level Comparison
| Partnership Procedures | TEFRA | BBA |
|---|---|---|
| Partnership point of contact for examination | Tax Matters Partner | Partnership Representative |
| Partner participation rights during examination | Partners have the ability to participate in the examination and challenge partnership adjustments | Partners have no participation right to challenge partnership adjustment |
| Partner consistency of reporting | Partners must report items consistently with the partnership | Partners must report items consistently with the partnership |
| Notice requirements | Notice requirements (NBAP, FPAA) | Notice requirements (NAP, NOPPA, FPA) |
| Items adjusted during examination | Partnership item/Affected item | Partnership related item (PRI) |
| Where adjustments/assessments occur | Adjustments at the partnership level/tax assessment at the partner level | Adjustment and assessment at the partnership level (imputed underpayment) |
| Distinct phases of examination | Field examination | Field examination phase |
| Not applicable | Modification phase (optional) | |
| FPAA phase | FPA phase | |
| Not applicable | Push-out phase (optional) |