The new partnership tax audit rules enacted by Congress on November 2, 2015 could have a dramatic impact on partnerships and their partners (including limited liability companies taxed as partnerships (“LLCs”) and their members). The new rules will apply to audits of tax returns for tax years beginning after December 31, 2017.
The “tax matters partner” provision found in virtually all partnership and LLC operating agreements will not work for tax years when the new partnership audit rules will automatically apply. Thus, this provision will have to be amended at some point. The only question is when. Partnerships and LLCs should not wait until the commencement of an audit to amend their partnership or operating agreements.
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