The Bipartisan Budget Act of 2015, which gave the United States a little more breathing room on its debt obligations, has also created a time-saving and revenue-raising change to the audits of large partnerships. Very large partnerships.

The IRS has been adhering to rules established by the Tax Equity and Fiscal Responsibility Act (TEFRA) of 1982, which instructed them to pass along audit adjustments to the individual partners, unless the firm elected to be taxed at the entity level, which few did.

However, the complexity of large partnerships—particularly hedge funds and private equity firms, to name two categories with thousands of partners, even partnerships within partnerships—made audits problematic in part because of the confusion over which entity in a tiered structure was actually generating the income or loss. In a White House blog on the budget act, the new rule has been hailed as “a substantial step toward ensuring that larger partnerships can no longer avoid paying the taxes that they owe.”

One hurdle for the IRS was that large partnership audits couldn’t get off the ground without its expending the time and effort to identify a “tax matters partner,” cutting back on the amount of time available to spend on an actual audit. Since the designation of this partner is not included with tax filings, the hunt to name this partner weighed down the process. Moreover, IRS officials stated that the process of determining each partner’s share of the adjustment was paper- and labor-intensive. With hundreds of partners’ returns requiring adjustment, the costs involved limited the number of audits the IRS could conduct. Adjusting the partners’ returns would reduce these costs but, without legislative action, the IRS’s ability to do so was limited.

Even if the audit were successfully completed and an adjustment identified, apportioning the liability among the partners was often an exercise in frustration, as Forms 1065, Schedule K-1s and partners’ 1040s must be linked together in a process that the Government Accountability Office (GAO) considered “largely manual and paper driven.”

The budget act, which was signed into law last November, is an attempt to ameliorate these problems by considering the partnership as a single entity responsible for the tax, at least in firms of 100 or more partners.

Benjamin Beskovic, a member of the Partnerships and LLCs Committee who specializes in partnership taxation matters, said, “This is, to be honest, a huge change.” He offered the example of someone who was a partner for five years and then left the firm. The IRS audits that partnership and makes adjustments for the years that person was a partner.

“They’re not going after me anymore—the adjustment is made at the partnership level, so there will probably be a whole lot of dealings between partnerships and its partners. Probably, the operating agreements will need to be amended, specific language has to be put in place possibly—I mean, how does the partnership get that money from me, since I am no longer a partner but the current partners are on the hook for putting up that adjustment?” he said.

Eric Kea, another specialist in partnership taxation, had a more subdued reaction.

“A bunch of my clients that are partnerships, after these articles came out, said, ‘How will this impact us?’ and the response is not much at all, other than, in theory, there will be more partnership audits. But that’s in theory, and we’ll see what happens,” he said.

He pointed out that the law has many exceptions written into it. Those with fewer than 100 partners can opt out of the new rules, in which case the partnership and partners would be audited under the general rules applicable to individual taxpayers, according to the congressional summary of the bill. The partnership can also ask to change the adjustment, based on partner-specific information, such as who a partner is (for example, a partner might be a tax-exempt organization), or what kind of income is subject to the adjustment, whether ordinary, dividends or capital gains.

“This means the IRS has to look at the makeup of the partners, take into account how much income would have to be allocated to them, and then adjust the audit results,” Kea said. “This is counterintuitive to what the law was supposed to do. It is generally believed by practitioners that a big reason why the IRS doesn’t audit partnerships is because they do not understand partnerships and cannot handle difficult allocation provisions of agreements.”

Jorge L. Otoya, another member of the Partnerships and LLCs Committee with experience in complex partnership transactions, felt it would be impractical for a large partnership to use a lot of these exceptions. In order for these exceptions to apply, he said, the partners are going to have to amend their partnership returns.

 “Having 1,000 partners amend their return…just doesn’t make sense. It’s just not going to happen. So from a practical perspective, I don’t think those exceptions really help large partnerships, and that’s the reason why this bill is scored as a revenue raiser,” he said.

According to WhiteHouse.gov, that newly tapped revenue could amount to $11 billion over the next 10 years.