New Partnership Representative Final Regulations Under Section 6223 Centralized Audit Regime

Description

As part of a flurry of regulatory guidance, the IRS on Aug. 6, 2018, finalized regulations governing the designation of partnership representatives for purposes of the centralized partnership audit regime. The final regulations make some significant changes to previously proposed regs, so tax advisers should have a solid understanding of the scope of a partnership representative’s role to avoid adverse tax consequences.

Section 6223 requires partnerships to designate a “partnership representative who shall have the sole authority to act on behalf of the partnership” on matters related to IRS examinations of the partnership. The requirement created confusion among practitioners, as indicated in the comment period for the proposed regulations.

The final guidance takes many of the comments into account, including allowing a disregarded entity (DRE) to serve as a representative of the partnership, but only with the selection of a “designated individual” to act on behalf of the representative DRE. Critically, the Service also removed the capacity to act requirement for designated representatives.

The final regulations also offer extensive guidance on the process of removing or replacing a partnership representative. Taken as a whole, the regs provide a roadmap for tax professionals to advise partnership clients on ensuring that the partnership representative can appropriately respond to the partnership’s potential tax issues.

Listen as our experienced panel provides a thorough and practical guide to the strategies and mechanics of electing out of the centralized partnership audit rules.