Wednesday, January 2, 2019

Centralized Partnership Audit Regime (CPAR) Update -- Looking for Reviewer Volunteers (1/2/19)

I am in the process of finishing up a substantial revision of my discussion of the relatively new Centralized Partnership Audit Regime ("CPAR") (Code Sections 6221 through 6241) applicable for audit years after 2017.  I would greatly appreciate it if anyone would be willing to read and comment on a draft.  You can contact me at  (I can provide the draft in WordPerfect, MS Word and Adobe pdf.)

For others who are thinking about getting into the CPAR, I offer the following from Introduction to this new discussion:
III. The Centralized Partnership Audit Regime (“CPAR”) After 2017.
A. Introductory Caveat Regarding Code and Regulations Sections.
Reminder:  All Code section citations in this section III are to the CPAR in the Internal Revenue Code applicable for years after 2017.  The PAR replaced the TEFRA Code sections, some of which have the same numbers.  Students and practitioners should be careful to ensure that they refer to the CPAR Code sections and, where applicable, the Regulations under the CPAR Code sections.  All references to the Regulations in this section are to the regulations promulgated under the CPAR Code sections. 
Students and practitioners should assure that the statutes and regulations they refer to incorporate all changes to these provisions (a good practice always, but particularly with major new regimes such as CPAR that require corrections and refinements).  The latest statute changes I incorporate in this discussion occurred in 2018 in Tax Technical Corrections Act of 2018, contained in Title II of Division U of the Consolidated Appropriations Act of 2018, Public Law 115-141 (“TTCA”).  For this purpose, I have used the Code sections offered on the web by the Office of Law Revision Counsel (the link is here).  The latest regulations I have incorporated in the discussion was by T. D. 9844, published in December 2018. 
B. Introduction to the CPAR.
1. General - Audit Adjustments Assessed and Collected at Partnership Level. 
Effective for tax years beginning after 2017, the Code provides a new regime for partnership audits and litigation. This regime is called the Centralized Partnership Audit Regime (“CPAR”), and is contained in§§ 6221-6241 of the Code.
A partnership is generally required to file a partnership return (Forms 1065) each year reporting entity level results of partnership activity and report on Schedules K-1 to partners and to the IRS each partners’ allocable share of partnership items and related items so that the partners report the appropriate tax consequences at the partner level.  This long-time requirement was retained under TEFRA and is retained under CPAR.  As with TEFRA, CPAR applies to audit and related activities after the the partnership year (the reviewed year).  In general, the CPAR carries forward the prior practice of making audit adjustments for partnership-related items in the reviewed year at the partnership level but imposes the tax consequences of the adjustments upon the partnership (rather than the partners) in the year the adjustments are made (the adjustment year).  There are many complexities in implementing the CPAR and there are some situations in which this general regime for partnership level payment will not apply so that the tax consequences, including assessment and payment, apply at the partner level.  But, in broad strokes, the default rule is that CPAR allows one assessment of the tax, penalties and interest at the partnership level and one “taxpayer”–the partnership– from whom to collect the amounts assessed. 
In the text in this section, I provide only a relatively high-level summary addressed to the student of tax procedure.  I provide some detail in the footnotes, but not enough that practitioners should rely either upon the text summary or the footnotes for the detail necessary to actually practice in this CPAR area. 
2. CPAR Code and Regulations Sections and Citations in Text. 
In the text, I generally cite only the major Code section when introducing a topic.  I will not cite subsections in the text, but will provide subsections in the footnotes (along with other explanatory material).  I do offer the following list of the Code sections for CPAR and their titles: 
§ 6221 - Determination at partnership level
§ 6222 - Partner’s return must be consistent with partnership return
§ 6223 - Partners bound by actions of partnership
§ 6225 - Partnership adjustment by Secretary
§ 6226 - Alternative to payment of imputed underpayment by partnership
§ 6227 - Administrative adjustment request by partnership
§ 6231 - Notice of proceedings and adjustment
§ 6232 - Assessment, collection, and payment
§ 6233 - Interest and penalties
§ 6234 - Judicial review of partnership adjustment
§ 6235 - Period of limitations on making adjustments
§ 6241 - Definitions and special rules 
The Regulations (all of which have not yet been finalized) will not be cited in the text but will be cited in the footnotes.  The regulations format is the format for procedural regulations.  The following is an example of the first CPAR regulation: Regs. § 301.6221-1, titled “Tax treatment determined at partnership level.”

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