Table of ContentsKey ChangesApplicability and WithdrawalChecklist of Issues to Consider in Partnership or LLC AgreementsThe New Partnership Audit Rules Under the Budget Law Bipartisan Budget Act (BBA) of 2015The Bipartisan Budget Act (BBA) of 2015 was signed into law in November 2015. This new law marks a major change in how the IRS will approach auditing partnerships in the future. This law applies to tax returns filed for partnership tax years beginning in 2018. And repeals the Tax Fairness and Tax Responsibility Act of 1982 (TEFRA) which governed until December 31, 2017 administrative procedures of partnerships. The BBA is implementing a new centralized system for the audit, adjustment, assessment and collection of partnership taxes. Say no to plagiarism. Get a tailor-made essay on “Why Violent Video Games Should Not Be Banned”? Get the original essay Key Changes Partnership Level Assessment – ​​In accordance with the BBA, partnership adjustments will generally be assessed and collected at the partnership level. This represents a major change from current practice which conflicts with the traditional general treatment historically given to partnerships. Generally, the IRS will be able to assess any additional taxes resulting from an audit on the partnership itself. This will eliminate the need to pursue individual partners. The assessment will be made against the partnership in the year the audit is completed, and payment will be made from the partnership's assets in that year. This means that those who were associated in the year the audit ends will bear the economic impact of the assessment – ​​not those who were associated in the year being audited. This potentially problematic situation can actually be resolved either in the partnership/LLC agreement or in a purchase agreement for an acquired interest. Partnership Representative – Each partnership will be required to appoint a partnership representative who will have exclusive authority to represent the partnership before the IRS. and make any decisions relating to certain elections, audits and settlements with the IRS. Under the new audit rules, a “company representative” replaces the role of tax partner (TMP) under the previous rules; who has full authority to act on behalf of the partnership (and therefore effectively the partners) when dealing with the IRS. This power includes the ability to bind the company and the partners with respect to audits and other proceedings, including the power to settle and decide on procedural matters such as extending the limitation period and whether to proceed to a dispute. It is important to note that there is no legal obligation under the IRS rules to allow the partnership representative to keep the partners informed of the status of the audit. Or even warn the partners of the audit. Finally, unlike a TMP, the company representative does not even need to be a partner of the company. If a partnership does not designate a partnership representative, the IRS “may select any person as the partnership representative.” Applicability and Withdrawal The BBA rules will generally apply to all partnerships. But partnerships that meet certain requirements and have 100 or fewer qualified partners will have the opportunity to opt out of the new rules. If they make an election, the partnership and its partners will be authorized to have.