New Partnership Basis Rule: What Accounting Firms Must Report

The Treasury Department has finalized a rule that identifies certain partnership related-party basis adjustment transactions, and substantially similar transactions, as transactions of interest — a category of reportable transaction under the federal tax rules. Published as 90 FR 2958 and effective January 14, 2025, the rule does not change how a partnership's basis adjustments are taxed; it changes who has to tell the IRS about them, and what happens if they don't. For accounting firms, that shift in reporting exposure — for clients, and in some cases for the firm itself — is the detail worth reading closely before the next affected transaction lands on a desk.

This brief explains, in plain English, what the rule designates, who carries a disclosure duty under it, what accounting firms handling partnership work should do given that the rule is already in force, and how a firm can keep a designation like this from getting lost during a busy filing season. It leads with the obligation and the citation, not with any product, and every date, citation, and figure below is sourced to the Federal Register text.

Key Takeaways

• The Treasury Department has issued final regulations, cited as 90 FR 2958, identifying certain partnership related-party basis adjustment transactions — and substantially similar transactions — as transactions of interest, a type of reportable transaction. The rule has been in effect since January 14, 2025.

• Material advisors and certain participants in these transactions are required to file disclosures with the IRS and are subject to penalties for failure to disclose, per 90 FR 2958.

• The rule revises 26 CFR Part 1 and carries RIN 1545-BR07.

• Accounting firms that advise on partnership structuring should confirm whether their own advice work could make the firm a material advisor under the rule, which carries its own, separate disclosure duty, per 90 FR 2958.

• This post is informational only and is not legal or tax advice; consult a qualified attorney or tax advisor before acting on any specific transaction.

What this rule actually does

The final regulations identify certain partnership related-party basis adjustment transactions, and transactions that are substantially similar to them, as transactions of interest under 90 FR 2958. "Transaction of interest" is a defined category of reportable transaction, and being placed in that category is itself the operative event: it triggers a disclosure duty for the people involved, independent of whether the transaction is later found to be improper. The rule does not say a covered transaction is disallowed or recharacterized — it says the government wants a record of it.

That distinction matters for how accounting firms should read this rule, per 90 FR 2958. It is not, on its face, a change to how partnership basis adjustments are computed or taxed. It is a reporting-and-visibility rule: the Treasury Department has decided that this pattern of related-party basis adjustments is common enough, or opaque enough, to warrant putting it on the record. The mechanism for doing that is the disclosure obligation described below, and the consequence for skipping it is the penalty exposure the rule also describes.

The rule took effect January 14, 2025, the same date it was published, and has applied to covered transactions since that date, as stated in 90 FR 2958. It revises the regulations at 26 CFR Part 1 and is tracked under RIN 1545-BR07. Below is a quick-reference summary of the rule's own identifying details, drawn only from the Federal Register text.

Because the effective date and the published date are the same, the rule did not build in a separate lead time before the disclosure duty applies to a covered transaction, per 90 FR 2958. That makes the "who is affected" question below the most operationally important part of this brief for a firm that has any partnership clients doing basis-adjustment planning.

Who is affected

The rule's reach follows directly from the categories named in its own text: participants in a covered transaction, and the material advisors who help structure or advise on it. Read together with 90 FR 2958, that means an accounting firm can be pulled into this rule in two different ways — through a client's transaction, or through the firm's own advisory role.

The rule's own language treats "certain participants" and "material advisors" as two separate categories with two separate filing duties, per 90 FR 2958. A firm that only ever advises — and never itself holds a partnership interest in the transaction — can still be a material advisor for purposes of this rule. That is worth flagging internally, because the instinct at many firms is to check only whether the client has a filing duty, not whether the engagement itself created one for the firm.

What accounting firms should do now

The most useful thing a firm can take from this rule is that a partnership related-party basis adjustment has been a reporting question, not just a computational one, since January 14, 2025 — and that reporting question is triggered by the transaction itself, not by a single calendar deadline that is still ahead. The rule requires participants and material advisors to disclose covered transactions to the IRS, per 90 FR 2958; it does not make the underlying basis adjustment itself improper.

A sensible, sourced approach looks like this. First, build a simple internal flag for any partnership engagement involving a related-party basis adjustment, so the question "could this be a transaction of interest under 90 FR 2958?" gets asked before the return is finalized, not after. Second, separate the client-facing question (does the partnership or partner have a disclosure duty as a participant?) from the firm-facing question (does the firm's own advisory role make it a material advisor?), because the rule treats those as two distinct obligations. Third, keep the engagement file documented with the basis for whichever conclusion the firm reaches, since the rule ties penalty exposure to the failure to disclose. Fourth, keep a current copy of 90 FR 2958 and the affected text at 26 CFR Part 1 on hand for the team doing the review, since the primary source is the controlling document, not a summary like this one.

Throughout, the operative framing is that the rule requires covered participants and material advisors to disclose — this is a description of the regulation as published, not a personalized instruction to any one firm or client, and it is not a substitute for advice from your own counsel.

Operationalizing the review at volume

The hard part for most firms is not spotting one flagged transaction — it is making sure the question gets asked on every partnership engagement, every filing season, without relying on one reviewer remembering that this designation exists. That is a workflow problem, and it is where US Tech Automations fits. Configured against a firm's own engagement intake, the platform can route any partnership related-party basis-adjustment engagement to a checklist step tied to 90 FR 2958 and RIN 1545-BR07, flag it for a named reviewer, and keep a record of which engagements were checked and which weren't. You can see how that kind of workflow is structured on the US Tech Automations agentic workflows page.

The second half of the work is keeping the disclosure decision itself documented and consistent across preparers. A configured workflow can pull the relevant engagement details into a standard review note, keep the participant question and the material-advisor question distinct, and escalate anything that looks like a covered transaction to the reviewing partner before the return goes out the door. The goal is not to replace a preparer's judgment on whether a given transaction is covered — it is to make sure that judgment gets exercised deliberately, every time, instead of by default.

How this fits the broader regulatory window

This rule does not exist in isolation. It is one of 259 U.S. federal rules sealed in our point-in-time index of rules published July 1, 2024 – July 5, 2026 by 10 agencies governing our covered industries. A single transaction-of-interest designation is straightforward to read once; the harder problem for an accounting firm is that partnership, estate, and business tax rules move on their own separate schedules, each with its own citation, its own CFR part, and its own disclosure or filing consequence. A firm that only checks for a rule like this after a client transaction surfaces it will always be reviewing engagements after the fact rather than before.

The practical takeaway is that a related-party basis adjustment is now something to check for before an engagement is finalized, not something to research only if a client happens to ask. Firms that want a structured way to keep watching this rule and adjacent partnership and basis-reporting rules as they move can see current US Tech Automations plans.

Frequently asked questions

What is the effective date of this Treasury Department rule?

The rule is effective January 14, 2025, the same date it was published, as stated in 90 FR 2958.

Which part of the Code of Federal Regulations does this rule affect?

The rule revises the regulations at 26 CFR Part 1 and is tracked under RIN 1545-BR07.

What does it mean for a transaction to be labeled a "transaction of interest"?

It means the transaction falls into a defined category of reportable transaction under the Treasury Department's regulations. Per 90 FR 2958, that label triggers a disclosure duty for participants and material advisors; it is not, by itself, a finding that the transaction is improper.

Who has to disclose a covered transaction to the IRS?

Certain participants in the transaction and any material advisors involved in it. Both categories are required to file disclosures with the IRS, and the rule treats the two filing duties separately, per 90 FR 2958.

What happens if a participant or material advisor doesn't disclose?

The rule states that participants and material advisors are subject to penalties for failure to disclose. See 90 FR 2958 for the rule's own statement of that consequence.

Does this brief state the exact dollar penalties for not disclosing?

No. This brief only states figures that are verified against the Federal Register snapshot behind it, and specific penalty mechanics are not part of that closed set. For the exact penalty structure, read 90 FR 2958 directly or ask a qualified tax advisor.

Related guidance

For related accounting and tax-compliance deadline coverage, see our notes on returns relating to sales or exchanges of certain partnership interests, the consistent basis reporting correction for estates, and the stock repurchase excise tax correction.

Disclaimer

This article is provided for informational purposes only and does not constitute legal or tax advice. Reading it does not create an attorney-client relationship. Regulatory requirements are fact-specific, and you should consult a qualified attorney or tax advisor before acting on any matter discussed here. Every date, citation, RIN, CFR reference, and figure in this post is copied verbatim from the Federal Register and eCFR as of the snapshot date. Nothing is estimated, modeled, or extrapolated. This is not legal or tax advice.

Last reviewed: July 5, 2026.

Source: U.S. Federal Register (90 FR 2958); current text via eCFR, 26 CFR Part 1.