NAREIT sent comments on April 15 to the Internal Revenue Service regarding the implementation of the Bipartisan Budget Act of 2015 (BBA), which reformed the partnership audit and collection process.

The BBA sets out two avenues by which adjustment items properly allocable to partners may be recognized at the partner level rather than at the partnership level under the new audit rules. The BBA also sets out rules related to the calculation of interest amounts due.

NAREIT requested guidance confirming that when a REIT is a partner in a  partnership subject to the new audit provisions, the partner REIT may use the existing deficiency dividend procedures set out in section 860 with respect to any resulting adjustment to REIT taxable income arising from either: 1) the filing of a return by the REIT in accordance with new section 6225(c); or, 2) the calculation of the REIT’s reviewed year adjusted taxable income under the alternative method set out in new section 6226. Also, NAREIT requested that the date of receipt by the REIT of a partnership statement with adjustment amounts be deemed the determination date for purposes of counting the 90-day deadline for making a deficiency distribution to shareholders under section 860(f)(1).  

NAREIT also requested confirmation that any interest due with respect to adjustments under these provisions is determined under the existing deficiency dividend rules rather than under the partnership audit rules, and in all events, that the REIT does not bear double interest on a given deficiency.

Finally, NAREIT requested that guidance acknowledge Congressional intent that a REIT does not prevent an otherwise eligible partnership with 100 or fewer partners from being able to elect out of the new audit provisions and that the REIT rather than the REIT shareholder is counted as the partner for this purpose.

(Contact: Cathy Barre at cbarre@nareit.com)

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