Guidance Helps Partnerships Take Advantage of CARES Act Relief

Guidance Helps Partnerships Take Advantage of CARES Act Relief

Internal Revenue Service

The IRS has issued guidance (Rev. Proc. 2020-23) allowing eligible partnerships to file amended returns for tax years beginning in 2018 and 2019 using a Form 1065, “U.S. Return of Partnership Income,” and to issue an amended Schedule K-1, “Partner’s Share of Income, Deductions, Credits, etc.,” to each of its partners instead of filing an administrative adjustment request (AAR). <a href="/research/federal/usc26/6031#cqh2-0000004" resolve="/lr/resolve//cqh2#cqh2-0000004">Section 6031(b)</a> generally prohibits partnerships subject to the centralized audit regime, or Bipartisan Budget Act (BBA) partnerships, from amending the information required to be provided to their partners after the due date of Form 1065, unless specifically allowed by Treasury. The Coronavirus Aid, Relief, and Economic Security (CARES) Act provides retroactive tax relief that affects partnerships, including relief for tax years ending in 2018 and 2019. Without the option to file amended returns, BBA partnerships that already filed their Forms 1065 for the affected years generally are unable to take advantage of the CARES Act relief except by filing AARs. However, filing an AAR would only allow the partners to benefit from that relief on the current tax year’s federal income tax return. Thus, 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. That process would significantly delay the CARES Act relief that was meant to provide an immediate benefit to taxpayers. Thus, Rev. Proc. 2020-23 allows a BBA partnership to file an amended partnership return and issue amended Schedules K-1 under circumstances described in the guidance. Rev. Proc. 2020-23 allows BBA partnerships to file an amended return instead of an AAR, but it does not prevent them from filing an AAR to obtain the benefits of the CARES Act or any other tax benefits to which the partnership is entitled. A BBA partnership that files an amended return under the guidance is still subject to the centralized partnership audit procedures enacted by the BBA. BBA partnerships that filed a Form 1065 and furnished all required Schedules K-1 for tax years beginning in 2018 or 2019 before the issuance of Rev. Proc. 2020-23, may file amended partnership returns and furnish corresponding Schedules K-1 before September 30, 2020. The amended returns may take into account tax changes made by the CARES Act and any other tax attributes to which the partnership is entitled by law. For purposes of <a href="/research/federal/usc26/6222" resolve="/lr/resolve//cp59">section 6222</a>, the amended return replaces any prior return (including any AAR filed by the partnership) for the tax year for purposes of determining the partnership’s treatment of partnership-related items. The guidance describes how to take advantage of the option to file an amended return and provides special rules for partnerships whose returns are under examination and for partnerships that have previously filed AARs for an affected tax year. Rev. Proc. 2020-23 also provides guidance for a partnership that has applied rules in a provision of proposed regulations (<a href="/lr/resolve//28f7p">REG-104390-18</a>) on global intangible low-taxed income as provided for in <a href="/lr/resolve//29vzx">Notice 2019-46</a>.

The IRS has issued guidance (Rev. Proc. 2020-23) allowing eligible partnerships to file amended returns for tax years beginning in 2018 and 2019 using a Form 1065, “U.S. Return of Partnership Income,” and to issue an amended Schedule K-1, “Partner’s Share of Income, Deductions, Credits, etc.,” to each of its partners instead of filing an administrative adjustment request.

The IRS has issued guidance (Rev. Proc. 2020-23) allowing eligible partnerships to file amended returns for tax years beginning in 2018 and 2019 using a Form 1065, “U.S. Return of Partnership Income,” and to issue an amended Schedule K-1, “Partner’s Share of Income, Deductions, Credits, etc.,” to each of its partners instead of filing an administrative adjustment request (AAR). Section 6031(b) generally prohibits partnerships subject to the centralized audit regime, or Bipartisan Budget Act (BBA) partnerships, from amending the information required to be provided to their partners after the due date of Form 1065, unless specifically allowed by Treasury. The Coronavirus Aid, Relief, and Economic Security (CARES) Act provides retroactive tax relief that affects partnerships, including relief for tax years ending in 2018 and 2019. Without the option to file amended returns, BBA partnerships that already filed their Forms 1065 for the affected years generally are unable to take advantage of the CARES Act relief except by filing AARs. However, filing an AAR would only allow the partners to benefit from that relief on the current tax year’s federal income tax return. Thus, 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. That process would significantly delay the CARES Act relief that was meant to provide an immediate benefit to taxpayers. Thus, Rev. Proc. 2020-23 allows a BBA partnership to file an amended partnership return and issue amended Schedules K-1 under circumstances described in the guidance. Rev. Proc. 2020-23 allows BBA partnerships to file an amended return instead of an AAR, but it does not prevent them from filing an AAR to obtain the benefits of the CARES Act or any other tax benefits to which the partnership is entitled. A BBA partnership that files an amended return under the guidance is still subject to the centralized partnership audit procedures enacted by the BBA. BBA partnerships that filed a Form 1065 and furnished all required Schedules K-1 for tax years beginning in 2018 or 2019 before the issuance of Rev. Proc. 2020-23, may file amended partnership returns and furnish corresponding Schedules K-1 before September 30, 2020. The amended returns may take into account tax changes made by the CARES Act and any other tax attributes to which the partnership is entitled by law. For purposes of section 6222, the amended return replaces any prior return (including any AAR filed by the partnership) for the tax year for purposes of determining the partnership’s treatment of partnership-related items. The guidance describes how to take advantage of the option to file an amended return and provides special rules for partnerships whose returns are under examination and for partnerships that have previously filed AARs for an affected tax year. Rev. Proc. 2020-23 also provides guidance for a partnership that has applied rules in a provision of proposed regulations (REG-104390-18) on global intangible low-taxed income as provided for in Notice 2019-46.

Sec. 6031 Return of partnership income

Sec. 6222 Partner's return must be consistent with partnership return or Secretary notified of inconsistency

Sec. 6227 Administrative adjustment request by partnership

Search Connectors

Retrieving Documents With a Tax Analysts’ Citation:

Field Restricted Searching:

Guidance Helps Partnerships Take Advantage of CARES Act Relief