On April 8th, 2020, the Internal Revenue Service released Rev. Proc. 2020-23. This revenue procedure allows partnerships otherwise subject to the Bipartisan Budget Act (BBA) to file amended tax returns for 2018 and 2019 by September 30, 2020, in order to take advantage of the retroactive provisions of the recently-enacted Coronavirus Aid, Relief, and Economic Security (CARES) Act.
Beginning January 1, 2018, the TEFRA procedures that once governed audits of partnership tax returns were replaced with the BBA, unless the partnership elects out of the Centralized Partnership Audit Regime (CPAR). The criteria to make the CPAR election can be found at I.R.C. §6221(b). Partnerships that have not or cannot make that election are referred to as BBA partnerships.
The CARES Act provided a number of provisions friendly to partnerships; most notably, the long-awaited technical correction for Qualified Improvement Property (QIP) that makes such property eligible for 100% bonus depreciation.
The QIP change, among others in the CARES Act, is retroactive to 2018. Unfortunately, BBA partnerships are unable to file amended returns; as a result, barring relief, the only way for a BBA partnership could effectuate the positive changes of the CARES Act would be for the partnership to file an administrative adjustment request (AAR) pursuant to I.R.C. §6227. The AAR would be filed as part of the partnership’s 2020 tax return, and as a result, the partners would not reap the benefits of the changes made by the CARES Act until 2021.
This revenue procedure provides relief to BBA partnerships by allowing them to file an amended return for tax years beginning in 2018 or 2019 before September 30, 2020. The BBA partnership may still file an AAR, but as discussed, this would delay the benefit. The BBA partnership is still subject to the audit procedures that were established by the BBA (partnership level audit and liability).
Section 3 and 4 of the revenue procedure provides specific instructions regarding the filing of the amended return. The notable items are:
- BBA partnerships can amend Form 1065 and associated K-1s for the taxable years beginning in 2018 and 2019, prior to the issuance of this revenue procedure by September 30, 2020.
- The “amended return” box must be checked.
- The Form 1065 must clearly indicate it is using this revenue procedure. Write “Filed Pursuant to Rev Proc 2020-23” at the top of the form 1065, and attach a statement to each K-1 with the same notation.
- This can be e-filed or paper-filed.
- If a BBA partnership is under examination for taxable years beginning in 2018 or 2019, the partnership should make available a copy to the revenue agent who is working on their case.
- If an AAR has already been filed, the partners may use the items as adjusted in the AAR on their returns.
- If a partnership is applying the proposed GILTI regulations under §1.951A-5, they may continue to do so for purposes of applying an amended Form 1065. The partnership must provide amended K-1s consistent with those proposed regulations, and notify the partners before September 30, 2020 under the principles of section 5.01 of Notice 2019-46.
By: Tony Nitti, CPA, MST
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