State Implications of the IRS Centralized Partnership Audit Regime

Bradley partner Bruce Ely teamed up with Dale Kim of PwC, Kelvin  Lawrence of Dinsmore & Shohl, LLP, and Chris Barber of the Multistate Tax Commission (MTC) to produce a detailed summary of the relatively new IRS Comprehensive Partnership Audit Regime (CPAR) and its interaction with state partnership audit rules (or the lack thereof). As the IRS ramps up its audits of “large” partnerships and we witness the resulting flurry of litigation being filed in the U.S. Tax Court and the IRS Appeals Office, the implications to the states in which these partnerships do business and the states in which the partners reside or do business are many and perhaps yet to be understood.

The expert authors outline and compare the MTC’s response to CPAR, commonly referred to as the MTC Model Partnership Audit/RAR Statute, of which Bruce and Bradley partner Will Thistle were co-authors. The article also discusses the interaction with state PTE-level taxes and composite return/withholding tax statutes and is a follow-up to the authors’ panel presentation last December as part of the annual NYU Institute on State and Local Taxation. Mr. Ely is a former co-chair of the Institute and both he and Mr. Lawrence serve on its Advisory Board.