Since the inauguration, tax practitioners have been trying to make sense of the new executive orders and memorandum coming out of the White House in the president’s first month in office. Within 10 days of each other, the Trump administration has released both a memorandum (on Jan. 20) placing a freeze on all federal rulemaking and a “2 for 1” executive order (on Jan. 30) requiring federal agencies to eliminate two rules for every new rule. What these two actions mean for new guidance on the 2016 partnership audit rules remains to be seen.
Federal rulemaking freeze
The White House memorandum instructs federal agencies not to release any new regulations until the rule is reviewed and approved by a new Trump-appointed agency head. As a result of this memorandum, the much anticipated partnership audit rules that were released on January 19 were withdrawn.
“2 for 1” Executive Order
Shortly thereafter, the Trump administration released its “2 for 1” Executive Order, which requires agencies to identify two regulations to repeal for every new regulation added. The executive order broadly defines “regulation” to include “an agency statement,” whether it’s specific or generally “designed to implement, interpret, or prescribe law or policy.” It specifically excludes regulations concerning the military, national security, and foreign affairs.
The 2 for 1 Executive Order is broad enough to force the IRS to reconsider whether it will reissue its proposed partnership audit regulations. But according to a recent statement by Ossie Borosh, senior counsel for the Office of Tax Legislative Counsel, as reported by Tax Analysts, within the Department of Treasury, the memo, or presumably the executive order, will not cause the proposed regulations to “self-destruct.”
Borosh stated, “I can’t really speak to what’s going to happen in the future, except for one thing: The statute [referring to the enactment of the “Partnership Audit Rules”] does have an effective date, it’s going to kick in in less than a year, and there does need to be rules on how to implement it.”
Unless the partnership audit rules are repealed legislatively – which appears highly unlikely given the broad Congressional support – it seems clear that these regulations will ultimately be issued, and would appear to be a priority given the 2018 effective date of the rules themselves.