Reminder: September 29, 2020 is the deadline for partnerships that are subject to the Bipartisan Budget Act of 2015 (BBA)’s centralized partnership audit procedures, to file an amended 2018 and/or 2019 Form 1065, to take into account tax changes brought about by the Coronavirus Aid, Relief, and Economic Security Act (CARES) Act as well as any other tax attributes to which the partnership is entitled by law.
Background.
The BBA created centralized partnership audit procedures. Partnerships subject to the centralized partnership audit regime are referred to as BBA partnerships.
Subject to limited exceptions, Code Sec. 6031(b) prohibits BBA partnerships from amending the information required to be furnished to their partners after the due date of the return, unless specifically provided by the Secretary of the Treasury or his delegate.
The CARES Act provides retroactive tax relief that affects partnerships. For example, it contains retroactive provisions for depreciation relief for “qualified investment property” (CARES Act Sec. 2307) and for an increase in the business interest deduction limitation from 30% to 50%. (CARES Act Sec. 2306)
Revenue Procedure 2020-23.
Rev Proc 2020-23, 2020-18 IRB (the Revenue Procedure), allows BBA partnerships to file amended partnership returns and issue amended Schedules K-1 under the circumstances described below.
IRS reasoned that, without the option to file amended returns, BBA partnerships that already filed their Forms 1065 for the affected years generally would be unable to take advantage of the CARES Act relief for partnerships except by filing Administrative Adjustment Requests (AARs) pursuant to Code Sec. 6227. Filing an AAR would result in the partners’ only being able to receive any benefits from that relief on the current tax year’s federal income tax return. Thus, if an AAR were filed, the partners generally would not be able to take advantage of CARES Act benefits from an AAR until they file their current year returns, which could be in 2021. This process would significantly delay the relief provided in the CARES Act intended to apply to the affected tax years and provide an immediate benefit to taxpayers.
The Revenue Procedure provides that BBA partnerships that filed a Form 1065 and furnished all required Schedules K-1 for the tax years beginning in 2018 or 2019 prior to the issuance of the Revenue Procedure may file amended partnership returns and furnish corresponding Schedules K-1 before September 30, 2020. The amended returns may take into account tax changes brought about by the CARES Act as well as any other tax attributes to which the partnership is entitled by law.
For additional details regarding the Revenue Procedure, including procedures for filing the amended returns, see 2018, 2019 partnership Forms 1065s may be amended to reflect CARES Act.
To continue your research on the BBA centralized partnership audit rules, see FTC 2d/FIN ¶ T-2400 et seq.
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