New York Prepares to Adopt Federal Partnership Audit Regime

New York is headed toward conformity with the federal centralized partnership audit regime under a proposal embedded in Gov. Kathy Hochul’s (D) fiscal year 2026 budget.

The proposal would require partnerships subject to federal partnership audit adjustments to their taxable income or tax liability to report the adjustments to New York. The reporting requirement, retroactive to 2018, would also apply to taxpayers that self-report adjustments via administrative adjustment requests, often described as AARs.

The change would relieve confusion over the state’s reporting requirements since the IRS launched the audit initiative in 2018, said Darren Dopp, director of external affairs for ...