The IRS has released additional proposed regulations (REG-119337-17) on the Centralized Partnership Audit Regime (CPAR) that was created by the Bipartisan Budget Act of 2015. These regulations, which add to the proposed regulations issued in June, address the impact of various international tax provisions on CPAR exams.

Specifically, these regulations look at the relationship of CPAR to the existing withholding obligations for certain foreign partners. The proposed regulations make it clear that, generally, such withholding obligations are not covered by CPAR, but remind the reader that the IRS has taken the position in the June proposed regulations that he agency retains the right to separately examine the partnership and/or partners for any tax not covered by CPAR.

The proposed regulations do contain provisions meant to integrate CPAR and withholding exams, insuring that the same tax is not collected twice. As well, the regulations require that if a partnership makes the “push out” election under IRC §6226, the partnership will be obligated to withhold on the revised income to the extent that withholding would have been required had the item been reported on the original return.

As well, the regulations provide that if a reviewed year partner is no longer a partner when the exam concludes, the partnership will be required to pay the amount that would otherwise have been considered withholding.

The proposed regulations also contain information regarding the interaction of a CPAR examination and the foreign tax credit amounts that may have been claimed by the partners based on the information originally provided by the partnership.