Reconciling State and Federal Audits After New IRS Partnership Audit Regulations: Tax Reporting Challenges

MTC Model Partnership Audit Reporting Statute; State Tax Audit, Assessment and Collection Procedures

Recording of a 90-minute premium CLE/CPE webinar with Q&A

Conducted on Tuesday, November 13, 2018

Recorded event now available

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Course Materials

This CLE/CPE course will provide tax professionals with an up-to-date look at the impact of the new IRS partnership audit rules on state tax regulations, audits, assessments and collection procedures. The panel will discuss recently released IRS final regulations, an overview of the new partnership audit processes in detail, and challenges associated with state reporting obligations resulting from federal audits.


The new IRS partnership audit rules have significant implications for the state and local taxation of partnerships and their partners. In response to these new federal rules, tax practitioners must prepare for the wave of challenges in state tax audits, assessments and collection procedures as states issue new regulations regarding partnership audits and collections.

The new federal rules are procedural and not substantive tax law and therefore not automatically adopted by states that conform to Internal Revenue Code provisions on taxable income. The majority of states follow federal tax law, which treats partnerships as pass-through entities, and the partners are responsible for paying income tax. The differences in federal and state tax regimes cause inconsistency in tax administration, especially for partnerships doing business in some states with differing procedures for handling partnership audits.

States such as Arizona, California, Georgia, and others have adopted special procedures in response to the new federal regulations that address concerns by taxpayers about partnership audits, assessments and collections. The Multistate Tax Commission has provided model partnership audit reporting statutes to streamline how taxpayers should report federal adjustments to states resulting from the partnership audit rules.

Tax professionals must address the state tax law challenges that arise from the new federal partnership audit rules. Proper tax planning must entail some factors that typically don’t occur on the federal tax level, such as the apportionment of income of a multistate partnership, treatment of state tax credits and other incentives, and items relating to taxable nexus.

Listen as our panel discusses primary components of the new federal partnership audit rules, the impact on state tax administration, and new state tax regulations for partnership audit reporting.



  1. IRS final partnership audit regulations
  2. Constitutional limitations
    1. Nexus
    2. Nonresident and out-of-state partnerships
    3. Discrimination
    4. Fair apportionment
  3. MTC model partnership audit reporting statute and recent state regulations
  4. Challenges with push-out election, tiered structures and new QBI deduction
  5. Key planning techniques and best practices for tax professionals


The panel will review these and other critical issues concerning the impact of the new IRS partnership audit rules on state tax administration:

  • Critical components of the IRS final partnership audit regulations
  • Understanding constitutional limitations such as nexus, residency, discrimination and fair apportionment
  • The MTC model partnership audit reporting statute
  • Recently enacted and pending state regulations addressing state tax audit, procedures and collections
  • Issues with the push-out election, tiered structures and the new QBI deduction in state tax administration
  • Best practices for tax professionals in handling state tax reporting of federal audits and reassessments


Dobay, Nikki
Nikki E. Dobay

Senior Tax Counsel
Council On State Taxation

Ms. Dobay is dedicated to preserving and promoting equitable and nondiscriminatory state taxation of...  |  Read More

Kmiecik, Mark
Mark G. Kmiecik

Davis & Kuelthau

Mr. Kmiecik is a corporate attorney and advises clients on international, federal, state, and local tax matters,...  |  Read More

Nicely, Fredrick
Fredrick J. Nicely

Senior Tax Counsel
Council On State Taxation

Mr. Nicely is Senior Tax Counsel for the Council On State Taxation (“COST”). Before joining COST, Mr....  |  Read More

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