TEFRA Repeal: Essential Changes to Partnership Agreements and Operating Agreements
by Jeramie Fortenberry, JD, LL.M. (Taxation) | Executive Editor, WealthCounsel
The Bipartisan Budget Act of 2015 (P.L. 114-74), signed into law on November 2, 2015, effectively repealed the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA). This move significantly revamps how the Internal Revenue Service (IRS) will audit and collect taxes from partnerships. Analysis of this legislation reveals that it has the potential to affect the majority of small businesses — certainly any with partnership and operating agreements drafted prior to enactment of the Act. It is imperative for attorneys to understand and prepare themselves — and their clients — for these significant changes.
How should you respond to the TEFRA repeal? To prepare your clients and their documents for these changes, please download this Thought Paper. You'll learn about the following:
- The shift of audit adjustments responsibility from the partners to the partnership itself;
- The elimination of the "tax matters partner" role;
- The change to when tax liability is applied; and
- Drafting points on how partnership and operating agreements can be revised to minimize the financial and procedural burden on the partnership