- Form UA-1 , Unified Audit Opt-Out
- Regulation 830 CMR 62C.24A.1 , Unified Audit Procedures for Pass-Through Entities
- Frequently Asked Questions
- What is a “unified audit procedure”?
- Who is the “Tax Matters Partner” and what is the TMP’s role?
- Do all members of the pass-through entity under audit have to participate in the unified audit?
- How are tiered structures audited?
- What rights do Notice Members have?
- How are appeals conducted?
A “unified audit procedure” is a separate audit, assessment, and appeal procedure conducted at the level of the entity, rather than at the level of the entity’s members. This streamlined procedure applies to partnerships, S corporations, and certain trusts.
The “Tax Matters Partner,” or TMP, is designated by the pass-through entity, whether it is a partnership, S corporation, or trust, to act as its representative to the Department of Revenue (DOR). DOR will notify the TMP when a unified audit has commenced. During the unified audit, the TMP has the authority, on behalf of the entity, to request a settlement, to agree to extend the statute of limitations, to request a conference, or to appeal a determination of pass-through entity items. The TMP also has the responsibility, according to the terms of the partnership or other agreement governing the pass-through entity, to inform the members of the entity about the progress of the unified audit.
No, members may elect not to participate in the unified audit. To elect not to participate, a member must notify DOR within 90 days of the date the Notice of Unified Audit was sent to the TMP. (Members make this election on Form UA-1, which is available on DOR’s website, found at: www.mass.gov/dor/.) Members who elect not to participate should be aware that they may not participate in any settlement negotiated between the TMP and DOR. Further, the statute of limitations for assessment of any member’s item originating with the audited entity, and any affected item, does not expire until one year after the final determination regarding the entity has been reached, regardless of whether the member participated in the unified audit.
A tiered structure is an entity ownership structure in which a pass-through entity is a member of another pass-through entity. The pass-through entity that originates an item of income, gain, loss, deduction or credit is called the “source pass-through entity,” and is the subject of the unified audit. Intermediate pass-through entities between the source pass-through entity and taxable members are called “pass-through members.” In a tiered structure the taxable members are “indirect owners” of the source pass-through entity. Upon completion of the unified audit, DOR will send a Notice of Computational Adjustment to indirect owners affected by the computational adjustment as they are identified in the course of DOR’s examination.
“Notice Members” are direct members of the source pass-through entity who have a profits interest of 1% or more for any of the years under audit. DOR will generally inform Notice Members, as identified by the TMP, of the unified audit proceeding. A Notice Member may request a conference with DOR after the Notice of Proposed Adjustments has been issued, even if the Tax Matters Partner has not done so.
The TMP may request an appeal within 60 days after a Notice of Determination has been issued. A final determination will be reached after the appeal period ends or, if appealed, a final judicial decision has been rendered. Assessments of each member will be made after the unified audit determination becomes a final determination.