On November 2, 2015 President Obama signed into law H.R. 1314, the Bipartisan Budget Act of 2015 ("the Budget Act"). Generally effective for returns filed for partnership tax years beginning after 2017, the Budget Act repeals the unified audit rules established by TEFRA of 1982 and the special rules for electing large partnerships and replaces them with a single system of centralized audit, adjustment, and collection of tax for ALL partnerships, except for a certain eligible partnerships that affirmatively elect out of the regime for a tax year. It is anticipated that these changes will require most partnerships to consider the impact of the new law on their agreements and transactions. In addition, the new law will need to be taken into account in connection with partnership due diligence.
Proposed and temporary regulations were issued in early May 2016, relating to the employment tax treatment of employees of a disregarded entity that is wholly owned by a partnership. If the employees of the disregarded entity are also partners in the partnership that owns it, the new regulations may require immediate changes to the withholding and benefits treatment of those individuals.
The New Partnership Audit Rules - An Executive Summary
Taxpayers need to understand and consider the new rules.
New rules have created a new world for partnership audits and triggered an avalanche of economic, business, legal, an investor relations ramifications.
Read KPMG’s description of the partnership tax provisions:
A Whole New World for Partnership Audits - December 9, 2015 replay on the enacted law on partnership audits and the impact it may have on partnership agreements, due diligence, and financial statements -