Effective for tax years beginning after December 31, 2017, new
IRS audit rules ("New Rules") require partnerships to
appoint a "partnership representative" ("PR")
for each tax year to manage the audit process with the IRS. The PR
wields considerable authority and must have a substantial presence
in the US, which could prove problematic for non-US fund managers
without suitable US employees who can fill the role.
The PR role
The PR role replaces and greatly expands upon the "tax
matters partner" position under prior law. Like the old tax
matters partner, the PR serves as designated liaison for the
partnership with the IRS during audits. The PR, however, has
significantly greater authority, including the power to bind the
partnership and all former and current partners with respect to the
audit process. So, for example, the PR could enter into an audit
settlement agreement with the IRS which would bind the partnership,
its partners and any indirect partners who have
