IRS Revenue Procedure Allows Amended Partnership Returns, Addressing Form 8609 Concern

Published by Dirk Wallace, Mark Shelburne on Wednesday, April 8, 2020 - 12:00am

The Internal Revenue Service (IRS) today issued Revenue Procedure 2020-23 that allows taxpayers to amend Bipartisan Budget Act of 2015(BBA) partnership returns by Sept.30, 2020 to take advantage of Coronavirus Aid, Relief, and Economic Security (CARES) Act provisions as well as “any other tax attributes to which the partnership is entitled by law.” The latter aspect will help certain low-income housing tax credit (LIHTC) properties.

As described in an earlier post, the BBA created the centralized partnership audit regime (CPAR). In addition to other provisions, CPAR created a new process for amending or making changes to certain federal partnership returns effective for tax years beginning after Dec. 31, 2017. The result is, before the newly issued guidance, most partnerships were no longer allowed to amend a return after its extended due date. Instead, a partnership now does what is called an administrative adjustment request (AAR).

The connection to LIHTCs is the Form 8609. In the past when a partnership did not have the Forms 8609 for a property by their extended due date, the partnership would file its return with zero LIHTCs and amend the return upon receipt to claim the LIHTCs for the applicable tax year. However, under CPAR, the investor will have to claim the LIHTCs on the return for the year in which the AAR is filed. The consequence of realizing tax benefits later than anticipated is a reduction in the equity investment, causing a gap in a property’s funding sources.

Rev. Proc. 2020-23 alleviates this problem for 2018 returns as a BBA partnership is now able to amend its 2018 return and claim LIHTCs rather than file an AAR. If a partnership has already filed an AAR, it is still eligible to file a 2018 amended return. “For purposes of section 6222, the amended return replaces any prior return (including any AAR filed by the partnership) for the taxable year for purposes of determining the partnership’s treatment of partnership-related items.” However, in order to be eligible to amend a 2018 or 2019 return, the return needed to be filed before Rev. Proc. 2020-23 was issued. As such the guidance will not benefit many 2019 returns.

Various parties, including Novogradac and the LIHTC Working Group, are working on a solution for 2020 and not yet filed 2019 returns. In the meantime, LIHTC property owners should do everything possible to submit complete cost certifications to the agency as quickly as possible.