Elect Out of the Centralized Partnership Audit Regime

 

A partnership can elect out of the centralized partnership audit regime for a tax year if it is an eligible partnership that year.

To make a valid election out, complete:

All elections out are valid unless the IRS determines otherwise. If we determine an election out is invalid, we will notify the partnership in writing.

Eligible Partnerships

Partnerships with 100 or fewer partners for the taxable year can elect out of the centralized partnership audit regime if all partners are eligible partners.

Eligible partners are:

  • Individuals
  • C corporations
  • Foreign entities that would be treated as a C corporation if it were domestic
  • S corporations
  • Estates of deceased partners

To calculate the number of eligible partners, add the number of Schedules K-1 the partnership is required to issue to partners and include all shareholders for any partner that is an S corporation.

Ineligible Partnerships

Partnerships are not eligible to elect out of the centralized partnership audit regime if they are required to issue a Schedule K-1 to partners that are:

  • Partnerships
  • Trusts
  • Foreign entities that would not be treated as a C corporation were it a domestic entity
  • Disregarded entities
  • Estates of individuals other than deceased partners
  • People who hold an interest in the partnership on behalf of another person

Regulations


Return to BBA Centralized Partnership Audit Regime