Crucial partnership relief averts BBA limitations following passage of the CARES Act

As taxpayers and practitioners spent the past two weeks parsing the various items of retroactive tax relief provided by the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), partnerships were left ruing the Centralized Audit Regime implemented by the Bipartisan Budget Act of 2015 (the “BBA”), which precluded them from obtaining current relief.

However, on April 8, 2020, the IRS released Rev. Proc. 2020-23 offering welcome relief to partnerships, essentially allowing them to file amended returns for the 2018 and 2019 taxable years outside of the Administrative Adjustment Request (“AAR”) procedure of the BBA and, most importantly, receiving the benefits of such adjustments currently.


Under the BBA regime, generally effective for partnership taxable years beginning after December 31, 2017, a partnership cannot amend a previously filed return. Rather, the partnership must file an AAR to make changes which are, in most cases, taken into account in the year that the AAR is filed.

When an AAR is filed by the partnership, the affected partners are entitled to their share of any resulting benefit on their current year federal income tax return. This procedural nuance would force partners to wait until they file their 2020 income tax return in 2021 to receive any benefits afforded by the CARES Act or other provisions that were the subject of an AAR submitted now. The application of the BBA in this context clearly put partnerships at a disadvantage.

Rev. Proc. 2020-23

Given this disparate treatment, the IRS released Rev. Proc. 2020-23, which enables partnerships to file amended returns for 2018 and 2019 to take advantage of retroactive CARES Act benefits. Importantly, the granted relief also permits partnerships to file amended returns to make non-CARES Act changes provided the amended return is submitted prior to September 30, 2020.

BBA partnerships looking to file amended returns will use Form 1065, checking the “amended return” box on page 1 and providing amended Schedules K-1 to partners. Additionally, the partnership should mark both the Form 1065 and the amended Schedules K-1 “FILED PURSUANT TO REV. PROC. 2020-23.” Filing may be performed via paper or electronic means.

The Rev. Proc. also notes that if a partnership has already filed an AAR in relation to 2018 (or 2019), it may still file an amended return, but it must use the items as adjusted by the filed AAR.

Additional Considerations

Rev. Proc. 2020-23 specifically addresses amended returns in the context of a partnership subject to GILTI in 2018. Guidance provides partnerships that relied on Notice 2019-46 to apply the Proposed Regulation 1.951A-5(b) hybrid approach may continue to follow this approach when amending the 2018 return provided the new Schedules K-1 issued are consistent with the procedural requirements of Notice 2019-46. Equally, partnerships that applied the final GILTI regulations (aggregate approach) may continue to follow the final regulations provided new Schedules K-1 are consistent with such treatment.

While not explicitly prohibited in the Rev. Proc. 2020-23, it is an open question whether taxpayers would be permitted to amend a partnership return prepared on the proposed regulation hybrid approach for the purpose of adopting the final regulation aggregate approach. Such an amendment may result in a refund for partners not considered US shareholders in their own right.

Please contact your Mazars USA LLP professional for additional information.

Published on April 10, 2020

The information provided here is for general guidance only, and does not constitute the provision of tax advice, accounting services, investment advice, legal advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal or other competent advisers.