Venable LLP, Brian J. O’Connor, Norman Lencz, Michael A. Bloom and Christopher S. Davidson: “On November 2, 2015, President Obama signed into law the Bipartisan Budget Act of 2015 (the Act). The Act significantly changes how partnerships (including LLCs taxed as partnerships) are audited by the IRS. . . . As a result of changes made to the Internal Revenue Code by the Act, partnerships may now be directly liable for any tax deficiency resulting from an adjustment to partnership items (e.g., income, gain, loss deduction and/or credit). Thus, the current partners in a partnership could bear economic responsibility for improper tax reporting in prior years, even if one or more of such partners was not a partner in the year in which the improper reporting occurred.”
This article includes the following statement:
“existing partnership agreements should be reviewed to account for these new audit procedures”
I agree. I recommend without exception that all existing LLCs taxed as partnerships amend their Operating Agreements to cover the issues created by the Bipartisan Budget Act of 2015. LLCs that are taxed as partnerships that do not have an Operating Agreement should adopt an Operating Agreement that contains language that deals with the issues created by the BBA.
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