Page 130 - The TEFRA Partnership Audit Rules Repeal:

ALI CLE Live Video Webcast / “The TEFRA Partnership Audit Rules Repeal: Partnership and Partner Impacts” June 7, 2016, Jerald David August and Terence Floyd Cuff
if each were a statement recipient in determining whether the 100-or-fewer- statements criterion is met.
e. Making Election Out.
Details for making the election out will be provided in regulations. The election out is to be made on a timely-filed return of the partnership taxable year to which the election relates. The election is made on a year by year basis. The election is valid only for that year. This can put pressure on the partnership to file its returns on a timely basis. Regulations might contain provisions that would permit a late election, but permitting late elections is not required by the Code.
This year-by-year election mechanism permits the partnership to elect out for one year but to be subject to the consolidated audit provisions for the next year. A partnership in theory might alternate years between election out and being subject to the consolidated audit regime. This could make a partnership audit of multi-year issues exceedingly cumbersome.
The GENERAL EXPLANATION OF TAX LEGISLATION ENACTED IN 2015 (JCS-1-16, March 2016) specifies that the election must include the name and taxpayer identification number of each partner of the partnership in the manner prescribed by the Internal Revenue Service.
The partnership will be required to notify each of its partners of the election out in the manner prescribed by the Internal Revenue Service.
f. Authority to Adopt Regulations Expanding Electing Partnerships That Contravene the Statutory Language.
It is clear what type of partner is not eligible for the election-out. The General Explanation states, perhaps with Chevron deference,65 that the
65 Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). The application of judicial deference to regulations issued under administrative authority, whether interpretative or statutory, is determined under a two-part test, referred to by many commentators as the Chevron “Two-Step.” The Supreme Court in Chevron opined that the first step is always whether Congress has directly spoken on the precise question in issue. If the intent of Congress is clear, the Supreme Court stated that the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress. This is because the courts are the final authority on issues of statutory construction and are required to reject administrative constructions which are contrary to clear Congressional intent. Chevron “Step- Two” then is where Step One does not apply, i.e., Congress has not directly addressed the precise question at issue; the administrative agency, e.g., the Treasury and the IRS, have the power to formulate policy and fill in any gap left in the law by Congress. See Judulong v. Holder, 132 S Ct. 476 (2011); Morton v. Ruiz, 415 U.S. 199 (1974). Where the statute involved is silent or ambiguous as to the specific issue, the question for the court is whether the
© Terence Floyd Cuff and Jerald David August, 2016
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