New IRS Partnership Audit Rules for Private Equity and Hedge Funds

Partnership Level Tax, Push-Out Elections, Partnership Representative Provisions and More

Recording of a 90-minute premium CLE webinar with Q&A


Conducted on Thursday, January 10, 2019

Recorded event now available

or call 1-800-926-7926
Program Materials

This CLE webinar will examine the new IRS partnership audit rules and their impact on private equity and investment funds. The panel will discuss the changes that should be made now in partnership and LLC agreements in contemplation of the new rules, the elections available to smaller partnerships to avoid the new partnership level audits, and "push-out" elections which will allow for adjustments for changes in ownership.

Description

For partnerships, including LLCs taxed as partnerships, the new audit rules are a game-changer. Enacted under the Bipartisan Budget Act of 2015, the rules impact most partnerships, regardless of size, since Jan. 1, 2018. Under the new regulations, the IRS will assess and collect taxes at the partnership level as opposed to the individual partner level. Any adjustments to the partnership's income, gains, losses or deductions will be assessed in the year in which a tax audit occurs.

For private equity and hedge funds, in which ownership changes may occur due to redemptions, investor defaults or other events, the assessment of a partnership-level tax in the year in which an audit concludes may cause current partners to be subject to tax liability for periods they may not have been partners or held a different ownership percentage.

PE funds can make a "push-out" election within 45 days of a final adjustment but may also need to amend their partnership agreements to address these contingencies.

Going forward, PE funds must select a partnership representative with broad authority to bind the partnership and its partners to agreements with the IRS. Partners will no longer have the right to participate in a partnership audit. LLC agreements must clearly define the responsibilities of, and indemnities available to, this representative.

Listen as our authoritative panel discusses the new partnership audit rules with particular focus on their impact on private equity and other investment funds. The panel will discuss provisions that should be included in partnership or LLC agreements to address the new audit regime and the opt-outs and exclusions available.

READ MORE

Outline

  1. The Bipartisan Budget Act of 2015 and phase-in of the new partnership audit rules
  2. Exceptions and opt-out rules
  3. Implications of partnership level tax vs. individual partner level tax
  4. Issues for private equity and other investment funds
  5. Partnership representative—new final regulations issued under Section 6223
  6. Suggested amendments to existing partnership or LLC agreements

Benefits

The panel will review these and other key issues:

  • What options are available to smaller partnerships and LLCs that wish to opt out of the partnership-level taxation requirement?
  • How should private equity funds address tax inequities resulting from changes in ownership from one year to the next?
  • What amendments should be made to include a "partnership representative" in existing partnership or LLC documents?

Faculty

Bird, Christopher
Christopher T. Bird

Atty
Pepper Hamilton

Mr. Bird is a business tax lawyer with eight years of experience at large international law firms. His practice...  |  Read More

Klinzing, Morgan
Morgan L. Klinzing

Atty
Pepper Hamilton

Ms. Klinzing focuses her practice on the federal income tax aspects of U.S and international mergers and acquisitions....  |  Read More

Stauber, David
David Stauber

Of Counsel
Pepper Hamilton

Mr. Stauber focuses his practice on the federal income tax aspects of mergers and acquisitions, fund formation, and...  |  Read More

Other Formats
— Anytime, Anywhere

Strafford will process CLE credit for one person on each recording. All formats include program handouts. To find out which recorded format will provide the best CLE option, select your state:

CLE On-Demand Video

$347

Download

$347