Appeals Memo Expands Guidance on Partnership Audit Procedures

October 18, 2019

Expiration Date: 10/18/2021
Affected IRM: 8.19

MEMORANDUM FOR
APPEALS EMPLOYEES

FROM:
Joseph Ali, Acting Director for Jennifer L. Vozne
Acting Director, Specialized Examination Programs and Referrals

SUBJECT:
Bipartisan Budget Act of 2015¹ — Appeals Procedures

This memorandum provides guidance on the Bipartisan Budget Act of 2015 (BBA) until IRM 8.19 is revised.² Please ensure that this information is distributed to all affected employees within your organization.

Purpose: This memorandum provides interim guidance to Appeals employees on new case procedures for different phases of the BBA centralized partnership audit regime, including the following:

• Early Election into BBA;

• Administrative Adjustment Request (AAR);

• Notice of Proposed Partnership Adjustment (NOPPA);

• Modification Disputes; and,

• Notice of Final Partnership Adjustment (FPA).

Background/Source(s) of Authority: Section 1101 of the Bipartisan Budget Act of 2015 (BBA) as amended by the Protecting Americans from Tax Hikes Act of 2015 (PATH Act) and sections 201 through 207 of the Tax Technical Corrections Act of 2018 (TTCA) repealed TEFRA partnership procedures and electing large partnership provisions and replaced them with an entirely new centralized partnership audit regime. Previously, tax, penalty, and interest adjustments were passed through to the partners. Now, the new partnership audit regime generally provides for determination of adjustments, assessment, and collection of tax attributable to such adjustments at the partnership level. This Interim Guidance supplements previously issued BBA guidance, AP-08-0319-0005.

Procedural Change:

• For tax years beginning after November 2, 2015, and before January 1, 2018, eligible partnerships may elect into BBA within 30 days of the date the IRS first notifies the partnership in writing that the return has been selected for examination. Either the Tax Matters Partner (TMP) or an individual authorized to sign the partnership return for the taxable year under examination is authorized to make the election by completing the Form 7036, Election under Section 1101(g)(4) of the Bipartisan Budget Act of 2015. IRS examiner will issue Letter 5893, Notice of Administrative Proceeding, to the Partnership at least 30 days after a valid election is received by the IRS.

• After January 1, 2018, this election may also be made when filing an Administrative Adjustment Request (AAR) under Section 6227 as amended by BBA for tax periods beginning after November 2, 2015 and before January 1, 2018.

• If an early election into BBA was requested or the entity is covered under BBA for tax years beginning on or after January 1, 2018, BBA cases will have Appeals rights.

• If there is a dispute on any BBA case, the examiner will issue a 30-day BBA letter (Letter 5891) with a summary report for the taxpayer to request an Appeals hearing. The dispute may cover the substantive audit issues, penalties and/or imputed underpayment adjustment groupings and subgroupings disputes.

• At the end of the Appeals process and issuance of the Notice of Proposed Partnership Adjustment (NOPPA) for all disputed tax issues (resolved and unresolved), Appeals will send the BBA case to Ogden BBA Unit for processing.

• In response to the NOPPA, the partnership may request modification. If there is a dispute regarding modification, the taxpayer will have an opportunity to appeal this dispute. Appeals will not reconsider an unagreed previous disputed tax issue if the entire case is later returned to Appeals for modification hearing.

• LB&I will issue the Notice of Final Partnership Adjustment (FPA) notice. The FPA allows the partnership to either request a push out the adjustments for its partners to take into account, petition for judicial review of the adjustments, or both. Under normal circumstances Appeals will not issue the FPA.

Affected IRMs: 8.19.14, 8.20.5, 8.20.6, and 8.20.7

Effect on Other Documents: This guidance will be incorporated into IRM 8.19 within two years from the date of this memorandum.

Please ensure that this information is distributed to all affected employees within your organization.

Effective Date: This guidance is effective as of the date of this memorandum.

Contact: If you have questions or need additional information, please contact James Boulukos or Michael McLane, TG Technical Specialist, or Jon Wadsworth, Appeals TEFRA Team.

Attachment:
IRM 8.19.14 — Bipartisan Budget Act of 2015 Procedures

cc:
www.irs.gov