As part of the current Bipartisan Budget Act of 2015, sweeping changes to the partnership audit rules could be imminent. The new rules would greatly simplify the IRS procedures for auditing partnerships and likely increase the audit rate of partnerships. The new rules would replace the current “TEFRA” and “Electing Large Partnership” rules with a new entity-level audit process that would allow the IRS to assess and collect the taxes against the partnership absent certain election out procedures. The new legislation is patterned after the recent H.R. 2821, but thankfully removes the onerous joint and several liability provision in the earlier bill and allows the IRS to reduce the potential tax rate assessed against the partnership to take into account factors such as tax-exempt partners and potential favorable capital gains tax rates. The new rules will simplify the current complex procedures on determining who is authorized to settle on behalf of the partnership and also avoid the IRS’s need to send various notices to all of the partners. Although partnerships with 100 or less partners can elect out of the new rules, such election is not available if there is another partnership as a partner. If passed, new rules are to apply to partnership taxable years beginning after December 31, 2017. Partnership agreements can be expected to need to take into account these changes.