The procedural rules governing federal income tax audits and judicial proceedings of partnerships and other entities classified as partnerships for federal income tax purposes were amended last November under the Bipartisan Budget Act of 2015 (2015 Budget Act). Scheduled to take effect in 2018, this new “streamlined audit approach” is expected to make it easier for the Internal Revenue Service to audit large partnerships, including hedge funds and other private funds. In a two-part guest series, David A. Roby, Jr., a partner at Sutherland Asbill & Brennan, explores the new approach and its implications for hedge fund and other private fund managers. This first part discusses current partnership tax principles and audit procedures and explores the reasons for revising the applicable rules. The second article will examine the revised partnership audit rules under the 2015 Budget Act and their impact on hedge funds and other private funds. For more on the streamlined audit approach, see “How to Draft Key Hedge Fund Documents to Take New Partnership Rules Into Account” (Feb. 11, 2016). For insight from Roby’s colleague John Walsh, see “Current and Former Regulators Advise Hedge Fund Managers on How to Prepare for SEC Exams” (Feb. 18, 2016); “Insights on SEC Priorities for 2015” (Apr. 23, 2015); and “Three Steps in Responding to an SEC Examination Deficiency Letter and Other Practical Guidance for Hedge Fund Managers” (Feb. 13, 2014).