Repeal of the TEFRA Entity Level Audit Rules Under the Bipartisan Budget Act of 2015
P. 1

JERALD DAVID AUGUST is a Partner at Kostelanetz & Fink, LLP in New York, New York.
Repeal of the TEFRA Entity Level Audit Rules Under
the Bipartisan Budget Act
of 2015: The Adoption of a New Paradigm for Assessing and Collecting Income Taxes from Partnerships
By Jerald David August
Jerald David August examines the new partnership audit regime.
The Bipartisan Budget Act of 2015, which President Obama signed into law on November, 2015, repealed the complex and much-criticized TEFRA partnership entity-level audit (ELA) rules, including the electing large part- nership rules.1 On December 18, 2015, Congress passed, and President Obama signed into law, the Protecting Americans from Tax Hikes (PATH) Act of 2015. This act sets forth certain corrections to the new audit rules.2 The TEFRA ELA provisions (which were enacted in 1982) were replaced with a set of “streamlined” entity-level audit (SELA) rules.3 The new SELA rules reflect Congress’ somewhat immediate response to a recent report from the GAO office (GAO-14-732 (Sept. 18, 2014)) that the audits of large partnerships, many of which are multi-tiered in ownership structure, had shrunk to an unacceptably low rate.
Overview of New Partnership Audit Rules
The new partnership audit regime or TEFRA SELA substantially departs from the existing TEFRA ELA rules which provisions continue to apply until partner- ship tax years beginning after December 31, 2017.4 The fundamental principle of the new TEFRA SELA rules is that the partnership is liable for the payment of taxes (referred to as the “imputed underpayment”), including penalties and
AUGUST–SEPTEMBER 2016
© 2016 J.D. AUGUST 55


































































































   1   2   3   4   5