With the annual deadline for US partnerships to appoint a US-based partnership representative fast approaching, recent regulatory guidance from the IRS outlines its increased focus on tax abuse through partnership arrangements, highlighting the benefits of appointing a partnership representative with the experience and capability to successfully deal with an IRS audit.
Complex US Partnerships Under Scrutiny
A partnership representative may be required to engage with the IRS and manage the audit process, which requires an in-depth understanding and familiarity with its procedures.
Earlier this year, the IRS announced it has accelerated efforts to stop tax abuse by partnerships through transactions lacking economic substance, establishing new teams to expand audits of partnerships, which will be held to a higher standard than ever before, with complex partnership arrangements facing the greatest scrutiny.
The Bipartisan Budget Act of 2015 ("BBA") requires US partnerships each year to appoint a US-based partnership representative, which is contactable by the IRS. With the number of partnerships, including hedge funds and private equity funds being audited expected to surge, it is imperative that any US partnership representative has direct experience with the IRS audit process to manage what can be a very challenging situation for an investment manager. The IRS has said audit rates on large, complex partnerships with assets over $10 million will increase nearly ten-fold by tax year 20261. For the 2023 tax return, the deadline for partnerships that filed an extension to make an election to the Internal Revenue Service is 15 September 2024.
Maples Group Partnership Representative Services
The Maples Group maintains a substantial presence in the US with its Delaware office, providing partnership representative services through individuals with specialist investment fund expertise. Our team has direct experience of successfully working through IRS partnership audits under the BBA regime, having recently completed two audits on behalf of clients, with no adjustments required.
Acting as partnership representative, the Maples Group will work with the partnership's general partner or managing member, administrators and US tax advisors, to ensure all necessary obligations are fulfilled to the highest standards. We ensure our professionals have the time and resources to focus exclusively on partnership representative services and in an audit scenario, working in conjunction with a manager's tax advisors, we promptly deal with all requests from the IRS to achieve a positive outcome. If you have any questions about partnership representative services and IRS partnership audits under the BBA regime, please get in touch with one of the professionals below or your usual Maples Group contact.
Footnote
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.