Under the BBA audit rules, the IRS no longer chases down individual partners for tax on audit adjustments. Instead, the partnership itself can be on the hook - leaving today’s partners paying for yesterday’s mistakes. This article breaks down how the rules work, including the imputed underpayment, the timing mismatch between the reviewed year and the adjustment year, the push-out election that can shift the burden back to reviewed-year partners, and provides some practice pointers.

In the spotlight: Soroban Capital Partners LP v. Commissioner - a pivotal Tax Court decision that unpacks the nuanced application of the partnership anti-abuse rule. This case dives into whether a partnership structure can be disregarded when it lacks economic substance and serves primarily to generate tax benefits. Our analysis explores the court’s rationale, and the implications for private equity fund structures and for the partners.

The IRS has fundamentally changed how it audits partnerships - and every partnership, no matter how small, needs to pay attention. The Bipartisan Budget Act (BBA) created a centralized audit regime that shifts tax liability to the partnership itself, putting current partners at risk for past errors. This article explains the origin of the BBA, what it replaced, and the key actions every partnership should take to avoid costly surprises under the new audit rules.