The Tax Equity and Fiscal Responsibility Act (TEFRA) once governed the auditing process for LLCs that are taxed as partnerships. Previously, the IRS could not hold the LLC responsible for federal income tax deficiencies, only the members of the LLC were liable. TEFRA has since been repealed and effective January 1, 2018 the Bipartisan Budget Act of 2015 governs the auditing procedures. This adjustment allows the IRS to collect underpaid taxes directly from the LLC if the LLC is taxed as a partnership rather than a C-corp or S-corp. This important change will require companies to update their operating agreements.