Page 131 - 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
Internal Revenue Service can expand the statute’s eligibility limitations by regulation. The courts may find Section 6221(b)(1)(C) to be unambiguous on its face and may deny the Internal Revenue Service the ability to expand the qualification of the election out rule.66 The statute (in listing permitted partners for an election out) refers to: “(C) each of the partners of such partnership is an individual, a C corporation, any foreign entity that would be treated as a C corporation were it domestic, an S corporation, or an estate of a deceased partner.” The statute does not refer to a partnership as a permitted partner.
g. Alternative Identification of Foreign Partners.
The GENERAL EXPLANATION OF TAX LEGISLATION ENACTED IN 2015 (JCS-1-16, March 2016) suggests the possibility of permitting alternative form of identification of any foreign partners for purposes of the requirement of disclosure of the name and taxpayer identification number of each partner by the partnership. This alternative designation might apply for foreign partners who do not have United States taxpayer identification numbers.
h. Partnership Disclosure of Names and TINs.
Election out filings will require the partnership to disclose to the Internal Revenue Service the name and taxpayer identification number of each person with respect to which a statement (comparable to the partner statement under Section 6031(b)) is required to be furnished and of other persons with an interest (direct or indirect) in the partnership. The partnership agreement should provide a means for the partnership to obtain this information and to maintain current information.
The partnership must notify each the partner of the election in the manner prescribed by the Internal Revenue Service (presumably in regulations). The election is made annually on timely filed return.
agency’s answer is based on a permissible construction of the statute. National Cable & Telecommunications. Association v. Brand X Internet Services, 545 U.S. 967 (2005). In such instances the legislative regulations are given controlling weight by the courts unless they are arbitrary, capricious, or manifestly contrary to the statute. But see Motor Vehicle Manufacturers Association v. State Farm Mutual Automobile Insurance Company, 463 U.S. 29 (2009); National Muffler Dealers Association, Inc. v. United States, 440 U.S. 472 (1979). For a recent Tax Court decision which invalidating a Treasury regulation, inter alia, for violating the notice-and- comment protocols under the Administrative Procedures Act see Altera Corp. and Subsidiaries v. Commissioner, 145 T.C. No. 3 (2015), appeal pending before 9th Circuit. See August, “Altera and Cost-sharing Requirements Under Section 482—Another Tax Court Rebuke to the IRS”, __BE__ (WG&L) (Jan/Feb. 2016).
66 Were the Service to expand the eligibility requirements, would the taxpayer making the election be entitled to rely upon the validity of the regulation under an estoppel doctrine?
© Terence Floyd Cuff and Jerald David August, 2016
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