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ARTICLE · 10 NOVEMBER 2015

Partnership Audit Reform Passed Into Law

Ropes & Gray LLP
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On Monday, November 2, President Obama signed the Bipartisan Budget Act of 2015 into law, effecting sweeping changes to the rules governing audits of entities treated as partnerships for U.S. federal income tax purposes.

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Ropes & Gray LLP'S Tax Controversy Practice Group
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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 and, pending additional guidance from the Treasury, leave many important questions unanswered.

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