Abstract
The Bipartisan Budget Act of 2015 (the “BBA”) made substantial changes to the audit procedures for passthrough entities. The BBA repealed the prior rules for partnership audits and replaced them with a centralized regime that, in general, assesses and collects tax at the partnership level. Tax professionals have expressed concern that assessment and collection of tax at the partnership level is inconsistent with the long-standing rules of taxation of passthrough entities, and may have unpredictable and incongruous consequences. Not surprisingly, one of the first questions that partners and practitioners asked was “how do we get out this?” Treasury and the IRS, however, want most partnerships to be covered by the BBA, and thus the election out rules have been a controversial aspect of the BBA.
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