In a revenue procedure, IRS has granted partnerships that are subject to the centralized partnership audit regime, relief from Code Sec. 6031(b)‘s prohibition against amending, after the due date of the partnership return, the information that they provide to their partners on Schedule K-1.
Background. The Bipartisan Budget Act of 2015 (BBA) replaced the previous partnership audit and litigation rules, i.e., the TEFRA partnership procedures, with a centralized partnership audit regime that, in general, determines, assesses, and collects tax at the partnership level. Partnerships subject to the centralized partnership audit regime are referred to as BBA partnerships.
Code Sec. 6031(a) requires every partnership to file a return for each tax year. Code Sec. 6031(b) requires that partnerships furnish a copy of Schedule K-1 to each partner; that schedule includes such information as may be required to be shown by regs. In general, Code Sec. 6031(b) also prohibits BBA partnerships from amending the information required to be furnished to its partners after the due date of the return.
Code Sec. 6072(b) provides that the deadline for filing Form 1065 and furnishing Schedules K-1 to partners is generally the fifteenth day of the third month after the end of the partnership’s tax year. Code Sec. 6081(a) permits IRS to grant a reasonable extension of time, generally no more than six months, for filing any return, statement, or other required document. Generally, to receive an extension of time to file a return, Reg. § 1.6081-2(b) provides that a partnership must submit an application before the date prescribed for filing the Form 1065.
For calendar-year partnerships that timely request a six-month extension, the extended deadline is September 15. A partnership that files its Form 1065 and furnishes Schedules K-1 to its partners prior to the deadline for filing the Form 1065 (including extensions) may file a superseding Form 1065 and furnish corresponding Schedules K-1 to its partners prior to the deadline, including extensions. (Joint Committee on Taxation, General Explanation of Tax Legislation Enacted in 2015 (March 2016)) A timely filed superseding Form 1065 is considered the original return of the partnership. (Rev Rul 78-256, 1978-1 C.B. 438; amended corporate return filed before due date including extensions is the corporation’s return for that tax year for purposes of estimated tax penalties).
Tax years of partnerships beginning in 2018 were the first tax years for which the centralized partnership audit regime was mandatory and the first tax years for which restrictions on amending Schedules K-1 under Code Sec. 6031(b)were effective.
IRS provides Code Section 6031(b) relief. IRS has now provided relief from the rule of Code Sec. 6031(b).
IRS notes that certain BBA partnerships timely filed Form 1065 for the 2018 tax year and timely furnished Schedules K-1 to their partners. Some partnerships that already filed Form 1065 for the 2018 tax year may have made errors, including not properly reporting all of the required information on the Schedules K-1. These BBA partnerships, having timely filed, did not request an extension of the deadline to file and, due to the restrictions on amending Schedules K-1 under Code Sec. 6031(b), may not amend the Schedules K-1, including for the 2018 tax year. The ability of the partners of such BBA partnerships to amend their own returns for the 2018 tax year is not affected by the restrictions under Code Sec. 6031(b); however, if the partner is a BBA partnership, the restrictions under Code Sec. 6031(b) may apply.
To remedy this situation, IRS will treat the timely filing of Form 1065 by a BBA partnership described in the next paragraph as a timely and appropriately filed request for a six-month extension of the deadline to file the Form 1065. BBA partnerships that timely filed a Form 1065 and timely furnished all required Schedules K-1 (without regard to the extensions of time provided by this revenue procedure) may file a superseding Form 1065 and furnish corresponding Schedules K-1 before the expiration of the extended deadline.
The relief is available only to BBA partnerships that timely filed Form 1065 and timely furnished Schedules K-1 prior to application of this revenue procedure and also file a superseding Form 1065 and furnish corresponding Schedules K-1 on or before the date that is six months after the non-extended deadline. For purposes of Code Sec. 6222 (“Partner’s return must be consistent with partnership return”), the superseding return replaces any prior return for the tax year for purposes of determining the partnership’s treatment of partnership-related items.
To take advantage of the relief, the partnership should file a superseding Form 1065 and furnish corresponding Schedules K-1 in the same manner as the original return and Schedules K-1 and write on the top of the superseding Form 1065 “SUPERSEDING FORM 1065 PURSUANT TO REVENUE PROCEDURE 2019-32.”
Effective date. The filing and furnishing extensions provided in the revenue procedure apply only to partnership tax years that ended prior to the issuance of the revenue procedure and for which the extended due date for such partnership tax year is after July 25, 2019.