New Partnership Audit Rules May Require Amendments to Alternative Entity Governing Documents

New rules for partnership tax audits (the “New Rules”) included in the Bipartisan Budget Act of 2015 shall become effective for partnership tax returns filed for tax years beginning after December 31, 2017.

The New Rules may require amendments to the governing documents of partnerships, limited liability companies and other entities taxed as partnerships for federal income tax purposes.

Generally, the New Rules provide that: (i) adjustments to tax items shall be made at the partnership level and (ii) the partnership, rather than the partners, shall be liable for any resulting underpayment.

The New Rules also replace the “tax matters partner” concept with a “partnership representative” concept that provides the partnership representative with much broader authority than a tax matters partner has under existing rules.

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Tarik J. Haskins, “New Partnership Audit Rules May Require Amendments to Alternative Entity Governing Documents,” Month-In-Brief: Corporations, LLCs & Partnerships, ABA Business Law Today (January 2018).