You Must Update Your Operating Agreements In Light Of The New Partnership Rules

YOU MUST UPDATE YOUR OPERATING AGREEMENTS IN LIGHT OF THE NEW PARTNERSHIP RULES (THIS INCLUDES PARTNERSHIP AGREEMENTS)
By: Amy K. Fliam

The Bipartisan Budget Act of 2015 (P.L. 114-74), signed into law on November 2, 2015, (the “2015 Act”) instituted significant changes to the partnership audit process, including the following changes which are effective for partnership taxable years beginning after December 31, 2017:

  • Entity level taxation. IRS will not assess individual partners, but will assess the partnership for what the 2015 Act terms the partnership’s “imputed underpayment.”
  • Assessment against the partnership. The assessment against the partnership for any imputed underpayment will be the year of adjustment not the year to which the adjustments related. This means that current partners may be liable for erroneous tax benefits garnered by former partners.
  • Partnership representative. The 2015 Act introduces a new empowered “partnership representative” to replace of the “tax matters partner” authorized by the Tax Equity and Fiscal Responsibility Act of 1982 (“TEFRA”).

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