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Obama Signs Two-Year Budget Bill

by Mike Godfrey,, Washington

03 November 2015

On November 2, President Barack Obama signed the Bipartisan Budget Bill of 2015, which includes increased appropriated spending for the 2016 and 2017 fiscal years, a suspension of the US debt limit until March 2017, and revenue provisions related to tax compliance.

The tax compliance provisions confirm a change to the rules for auditing large partnerships, including private equity and hedge funds, by the Internal Revenue Service (IRS). These measures are intended to raise additional revenue of USD11bn to fund part of the total budgetary cost of USD86bn over the next 10 years.

The IRS has previously experienced serious difficulties in auditing large partnerships – those with 100 or more partners and assets exceeding USD100m – largely because of their structural complexity. In 2011, nearly two-thirds had more than 1,000 direct or indirect partners and six or more tiers.

Currently, all partnerships are taxed on a pass-through basis, with income reported on partners' income tax returns. Under the new legislation, partnership audit rules would be streamlined into a single set of rules for auditing partnerships and their partners at the partnership level.

Under this streamlined audit approach, the IRS would examine the partnership's items of income, gain, loss, deduction, credit, and partners' distributive shares for a particular year of the partnership.

On October 30, after hearing that the bipartisan bill had passed through Congress, President Obama had applauded the budget deal that "locks in two years of funding," adding that "it is paid for in a responsible, balanced way – in part with a measure to ensure that partnerships like hedge funds pay what they owe in taxes just like everybody else."

TAGS: individuals | compliance | tax | business | private equity | tax compliance | law | hedge funds | budget | legislation | United States | individual income tax

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