The IRS has issued Rev. Proc. 2021-29, which authorizes the filing of amended returns by a narrow class of eligible BBA partnerships (those subject to the new partnership procedural rules) that were previously prohibited from doing so. This window of opportunity applies to partnership years that began in 2018, 2019 or 2020, and is open through Oct. 15, 2021. After that date, those eligible BBA partnerships must once again follow BBA Administrative Adjustment Request (‘AAR’) procedures (similar relief was granted last year, refer to: our previous alert published on April 8, 2020).
BBA Partnerships are generally prohibited from filing amended returns for tax years beginning after Dec. 31, 2017, unless specifically authorized. This revenue procedure exercises that authority to allow eligible BBA partnerships to file amended partnership returns and furnish amended Schedules K-1 to their partners.
To be eligible to file an amended return under this relief, a partnership must be one of the following: a holder of residential rental property that chooses to change either or both of their method of depreciation or general asset account treatment for such property, pursuant to section 202 of the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (the TCDTRA), or choosing to make a late section 163(j)(7) (real property trade or business) election. Once the tax changes under TCDTRA have been taken into account, or a late section 163(j)(7) election has been made, eligible BBA partnerships may make any changes to their amended returns.
If an eligible BBA partnership would like an alternative to amending a tax return, there are alternative procedures set forth in Rev. Proc. 2021-28 for changing a taxpayer’s method of accounting that might be less burdensome to taxpayers. For more information, please refer to tax alert on Rev. Proc. 2021-28.
In order to take advantage of the option to file an amended return, a BBA partnership must file a Form 1065 (with the "Amended Return" box checked) and furnish corresponding amended Schedules K-1. The BBA partnership must clearly indicate the application of Rev. Proc. 2021-29 on the amended return and write “FILED PURSUANT TO REV PROC 2021-29” at the top of the return and attach a statement with each Schedule K-1 furnished to its partners with the same notation. The amended returns may be filed electronically or by mail.
If a BBA partnership has previously filed an AAR for any the tax years 2018-2020 and wishes to file an amended return for the same taxable year, the partnership should use the items as adjusted in the AAR where applicable, rather than the reporting for the originally filed partnership return.
While this is welcome relief, it is far narrower in scope than the previous relief of Rev. Proc. 2020-23 (now expired). Partnerships considering revisions to a previously filed tax return should consider the applicability of this relief, and consult with their tax advisor, to determine the appropriate procedural avenue to effect the revision.