Ropes & Gray LLP: “On Monday, November 2, President Obama signed the Bipartisan Budget Act of 2015 (the “BBA”) into law, effecting sweeping changes to the rules governing audits of entities treated as partnerships for U.S. federal income tax purposes. The new rules can be expected to increase partnership audit rates by making audits and related tax assessments more efficient for the IRS, including by imposing an entity-level tax on the partnership on audit adjustments, absent an election (described below) to shift tax liability to partners. The new rules constitute a stark change from existing law“
The authors said the partners of a partnership and the members of an LLC taxed as a partnership should take the following action:
“Revision of partnership agreement provisions addressing the sharing among the partners of any partnership-level tax and related items.”
The authors described six other issues that partnerships and LLCs taxed as partnerships must consider.