Page 12 - The TEFRA Partnership Audit Rules Repeal:
P. 12
Why the Need for New Partnership Audit Rules?
September 2014
• Government Accountability Office (GAO) Report—“Large partnerships: With growing number of partnerships, IRS needs to improve audit efficiency”
− “Large” partnerships (defined as 100 or more partners and $100 million or more in assets) have more than tripled to over 10,000 between 2002 and 2011 (Source: GAO, p. 13)
− In 2011, almost two-thirds of large partnerships had more than 1,000 direct and indirect partners and more than three-fourths had six or more tiers (Source: GAO, p. 16)
− Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) exams are very inefficient
− The Electing Large Partnership (ELP) procedures didn’t cure the problem (Source: GAO, p. 31)
− IRS audits relatively few large, complex partnerships due, in part, to the administrative burdens presented under TEFRA and the ELP procedures (Source: GAO, p. 20, Table 4)
• 2012 data:
̶ Only 84 field audits of the 10,143 large partnership returns = 0.8%
exam rate
̶ Exam rate for similarly sized C-corporations = 27.1%
− Most IRS audits of large partnerships closed without adjustment (Source: GAO, p. 21, Table 5)
• 2012 data:
− 66.7% of large partnership audits resulted in no changes − 27.2% no change rate for similarly sized C-corporations
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