IRS Permits Amended Returns for BBA Partnerships to Claim CARES Act Tax Relief
April 8, 2020 by Joshua Smeltzer
The Bipartisan Budget Act of 2015 (BBA) replaced audit procedures for certain partnerships beginning after December 31, 2017. Before BBA, most partnerships were audited under the unified partnership audit and litigation rules enacted under the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA). The BBA procedures apply to all partnerships unless a valid election is made to not have those procedures apply.
Partnerships under the BBA procedures must file a return and furnish a copy of the Schedule K-1 to each partner that includes information covered in the regulations. Also, the BBA generally prohibits amending the information required for partners after the due date of the return. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) provides certain retroactive tax relief such as the ability to carryback Net Operating Losses (NOLs) from 2018, 2019, or 2020 to the preceding five years. These carryback losses were removed by the Tax Cuts and Jobs Act (TCJA). Without the opportunity to amend returns BBA partnerships would be required to file Administrative Adjustment Requests (AARs) and the benefits from the relief would only apply to the current taxable year’s return. Revenue Procedure 2020-23, released April 8, 2020, provides BBA partnerships that have filed a Form 1065 with the option to file amended returns to take into account tax changes under the CARES Act.
Only partnerships that filed Forms 1065 for 2018 and 2019, prior to the issuance of Rev. Proc. 2020-23, are eligible to make amendments to account for the CARES Act provisions. The amended return will replace any prior return and AAR regarding the treatment of partnership returns.
What to File
A BBA partnership must file a Form 1065 and check the box for “Amended Return” and include amended Schedules K-1. They must also clearly note at the top of the amended return and a statement with each Schedule K-1 that it is “FILED PURSUANT TO REV PROC 2020-23.”
What to do if the BBA Partnership is under examination
BBA Partnerships under examination for 2018 and 2019 must follow the amended return procedure indicated above but also send notice, prior to or contemporaneously to the amended return filing, to the revenue agent assigned to the examination that it intends to seek amendment. Once the amended filing is completed a copy of the amended return should be provided to the revenue agent.
What to do if the BBA Partnership already filed an AAR
If an AAR has already been filed, the IRS indicates that the partnership should use the items as adjusted in the AAR instead of any reporting from the originally filed partnership return.
Coordination with GILTI regulations. Rev. Proc. 2020-23 advises taxpayers applying the rules of the proposed GILTI regulations under proposed §1.951A-5 to continue to apply those rules for purposes of filing an amended Form 1065 under the Revenue Procedure. The IRS refers taxpayers for which this applies to refer to IRS Notice 2019-46.
If you have questions about filing an amended Form 1065 to take advantage of CARES Act tax relief, please contact me at Joshua@Brownfoxlaw.com or 214-396-5962.