Monthly Archives: May 2018

Issue: May 29, 2018

New Audit Rules: Part 1 – Who Can Opt Out?

There are changes coming, effective this tax year, that require all entities taxed as partnerships to contemplate many issues that they haven’t needed to in the past.  In this multi-part series, we will outline several provisions in the new IRS audit rules that impact these entities.  These changes directly affect both general and limited partnerships as well as limited liability companies that are taxed as partnerships.

The new rules were enacted by Congress in the Bipartisan Budget Act of 2015 (“BBA”) and are sometimes referred to as the BBA audit rules. 

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Issue: May 29, 2018

New Audit Rules: Part 2 – The Partnership Representative

The Bipartisan Budget Act of 2015 (“BBA”) provides that partnerships and LLCs taxed as partnerships must appoint a Partnership Representative (“PR”).  The PR need not be a partner or a member and will have substantially broader powers than the old Tax Matters Partner in connection with partnership audits.

The new audit rules provide that the PR has almost complete authority to act on behalf of the partnership or LLC (and therefore, effectively, the partners and members) when dealing with the IRS, without any requirement that the PR keep the partners, the members or the managers advised as to anything, even the very existence of the ongoing audit. 

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Issue: May 29, 2018

New Audit Rules: Part 3 – Who Pays the Tax?

This is the third of our articles dealing with the new audit rules established for partnerships for tax years beginning after December 31, 2017.  This article deals with whether, after an audit resulting in the need for additional payment to the IRS, to (a) apply the default rule of taxing the partnership during the year of the audit (the “audit year”) so that the then-current members bear the tax burden, or (b) elect to “push out” the tax to those who were partners during the year being audited (the “review year”).

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