Daily Tax Update - October 28, 2015: Bipartisan Budget Agreement Includes Partnership Tax Provisions

Bipartisan Budget Agreement Includes Partnership Tax Provisions:  Today, House leaders have offered the Bipartisan Budget Act of 2015 as an amendment to H.R. 1314.  The bill, which represents a compromise between the Obama Administration and Congressional Republicans, would raise the debt ceiling until March 15, 2017 and increase authorized federal spending over the next two years by about $80 billion.   Also included in the bill are changes to partnership tax provisions.  The bill would repeal the existing Tax Equity and Fiscal Responsibility Act (TEFRA) and electing large partnership (ELP) rules and replace them with a single set of rules for a partnership-level audit.  The changes are similar to ones proposed by former Ways and Means Chair Dave Camp in the Tax Reform Act of 2014 and by the Obama administration in its 2015 revenue proposals.

Aaron Nocjar, partner in Steptoe’s Washington office, commented, “The universe of partnership structures presently captured by the TEFRA or ELP rules will not be the same as the universe of partnership structures that may be covered by these new partnership audit and assessment rules.  So, there will be current structures that were once covered by unified audit rules that no longer will be, and there will be current structures that had not been covered by unified audit rules that will now be so covered.  Among other due diligence items, partnership agreements will need to be reviewed carefully to ensure that the original business expectations of the partners are preserved.”  

The bill also would make changes presumably aimed at undercutting taxpayer arguments that, under certain circumstances, section 704(e) overrides the common law general facts and circumstances test of whether a person constitutes a partner of a partnership. According to the Congressional Budget Office, these partnership tax provisions would generate an estimated $11.2 billion in additional revenue over the 10-year budget window.  For more information, please contact Aaron Nocjar at anocjar@steptoe.com or +1 202 429 6211.  

Treasury Publishes List of Countries Requiring Cooperation With International Boycotts:  Today, the Treasury Department published its list of countries that require or may require participation in, or cooperation with, an international boycott (within the meaning of section 999(b)(3)).  The list is unchanged.

Reporting Deadlines - and Penalties - Under the ACA are Approaching Quickly The Affordable Care Act (ACA) requires insurers and certain large employers to file new information returns in connection with employer-provided healthcare coverage.  A failure to comply may result in substantial penalties.  The new information returns require a significant amount of monthly data on each employee (and the employee’s dependents), including employment data, whether the employee received an offer of coverage, and whether the employee and the employee’s dependents are enrolled in coverage. 

Many employers, insurers, and vendors (and even the IRS) are experiencing difficulties in collecting this information and preparing the systems and procedures necessary to report it.  With the filing deadline fast approaching, some companies now face significant obstacles to filing complete and accurate information returns.  The IRS has announced that it will waive penalties for 2015 for reporting entities that make a “good faith effort” to comply, but this raises important questions.  What level of compliance constitutes a “good faith effort” to file the new information returns?  Can an incomplete or inaccurate form still result in a good faith effort?  And what if the good faith effort standard is not satisfied?

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