Holland & Knight LLP, William B. Sherman and Daniel L. Janovitz: “The Bipartisan Budget Act of 2015 (P.L. 114-74) includes a complete overhaul of the procedures that apply to Internal Revenue Service (IRS) audits of partnerships, including limited liability companies (LLCs) taxed as partnerships and their partners. . . . . Issues that Partnerships Need to Address . . . . 1. Existing partnership and LLC operating agreements should be reviewed, and amendments will need to be drafted to address aspects of the new rules, including:
- designating the partnership representative in place of the TMP
- determining the partner(s) that will control the decision to opt out of the new regime
- preventing assignments of partner interests to persons that would preclude the ability to opt-out
- addressing the payment of entity-level tax
- committing to making certain elections in the event of an audit adjustment
- addressing circumstances where partners agree to “adjusted information returns” in lieu of entity-level tax
2. Negotiations will be necessary to determine the appropriate partnership representative and the contractual limitations on the authority of such representative.