On November 2, 2015, President Obama signed into law the "Bipartisan Budget Act of 2015" (P.L. 114-74). Among other things, the act eliminates the TEFRA unified partnership rules and the electing large partnership rules, and replaces them with streamlined partnership audit rules. The new rules apply to all tax returns filed for taxable years beginning after December 31, 2017, though a partnership may elect to have the rules apply to any return of the partnership filed for tax years beginning after November 2, 2015, and before January 1, 2018. The rules apply to all entities treated as partnerships for income tax purposes.

Consistent with prior law, the tax treatment of partnership items of income, gain, loss, deduction, or credit (and any partner's distributive share thereof) is determined at the partnership level. Also consistent with prior law, a partner may file a tax return that is inconsistent with the return filed by the partnership, provided certain conditions are satisfied. However, the IRS may now determine and assess any adjustment, penalty, and interest at the partnership level, thereby eliminating the need for the IRS to collect from individual partners. In certain circumstances, the partnership can elect to satisfy the assessment at the partner level. Once such an election is made, it may only be revoked with the consent of the Secretary of the Treasury.

The act also eliminates the concept of a "tax matters partner" and replaces it with a "partnership representative" (who may be a partner or another person designated by the partnership or, in the absence of a designation, any person selected by the Secretary of the Treasury) who has the sole authority to act on behalf of the partnership. Unlike existing law, the partnership representative is not required by statute to keep partners informed of IRS notices or pending adjustments, nor is the IRS required to provide any notices to individual partners. In addition, partners do not have a statutory right to participate in partnership proceedings. Finally, a partnership and all partners of such partnership will be bound by any actions taken by the partnership and by any final decision in a proceeding brought under the new partnership audit provisions.

Partnerships with fewer than 100 partners may elect out of the new regime so long as each such partner is an individual, a C corporation, a foreign entity that would be treated as a C corporation if it were a domestic entity, an S corporation, or is the estate of a deceased partner, and certain other conditions are satisfied.