The Bipartisan Budget Act of 2015 (2015 Budget Act) repealed the long-standing “TEFRA” (Tax Equity and Fiscal Responsibility Act of 1982) rules, small partnership exception and electing large partnership rules. In their place, the 2015 Budget Act streamlines the rules governing federal income audits and judicial proceedings involving partnerships into a single set of rules that generally apply at the partnership level, subject to a limited electable exception. This new “streamlined audit approach” is expected to facilitate IRS audits of large partnerships, including hedge funds and other private funds, starting in 2018. In a two-part guest series, David A. Roby, Jr., a partner at Sutherland Asbill & Brennan, explores the streamlined audit approach and its implications for hedge fund and other private fund managers. This second part examines how the revised partnership audit rules will impact hedge funds and other private funds. The first part discussed current partnership tax principles and audit procedures and explored the reasons for revising the applicable rules. For insight from Roby’s colleague Yasho Lahiri, see our two-part series “How Can Hedge Fund Managers Market Their Funds Using Case Studies Without Violating the Cherry Picking Rule?”: Part One (Dec. 5, 2013); and Part Two (Dec. 12, 2013).