S.2095 - Preventing Abusive Routine Tax Nonsense Enabled by Rip-offs Shelters and Havens and Instead Promoting Simplicity Act; PARTNERSHIPS Act (119th Congress)
Summary
S.2095, the "PARTNERSHIPS Act," aims to amend the Internal Revenue Code of 1986 to improve rules related to partners and partnerships. The bill targets abusive tax shelters and promotes simplification of partnership tax law. It includes provisions affecting the determination of a partner's distributive share, allocation of built-in gains, treatment of revalued property, and partnership terminations.
Expected Effects
The Act will likely lead to more complex calculations for partnership taxation, especially for larger partnerships. It aims to close loopholes and prevent tax avoidance, potentially increasing tax revenue. The changes could also affect investment strategies and partnership agreements.
Potential Benefits
- Reduced Tax Avoidance: Closes loopholes used by partnerships to avoid taxes.
- Fairer Tax System: Ensures that partners pay taxes more equitably based on their economic agreement.
- Simplified Rules: Aims to simplify some aspects of partnership taxation, although some provisions add complexity.
- Increased Tax Revenue: Could increase government revenue by preventing tax avoidance.
- Codification of Anti-Abuse Rule: Provides a statutory basis for challenging abusive partnership transactions.
Most Benefited Areas:
Potential Disadvantages
- Increased Complexity: Introduces new rules and calculations, potentially increasing compliance costs for partnerships.
- Potential for Disputes: The "consistent percentage method" and "net liquidation amount" calculations could lead to disputes among partners.
- Impact on Investment Strategies: May affect the attractiveness of certain partnership structures for investment.
- Administrative Burden: The IRS will need to issue regulations and guidance to implement the new rules, creating an administrative burden.
- Unintended Consequences: Complex tax legislation can sometimes have unintended consequences that are difficult to predict.
Constitutional Alignment
The bill primarily deals with taxation, which falls under the purview of Congress as outlined in Article I, Section 8 of the Constitution, granting Congress the power to lay and collect taxes. The bill does not appear to infringe upon any individual rights or liberties protected by the Constitution or its amendments. The complexity of the tax code, even with attempts at simplification, raises questions about due process, but the bill itself doesn't directly violate those principles.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).