IRS Rev. Proc. 2021-50
Summary
IRS Rev. Proc. 2021-50, which allows eligible partnerships subject to the centralized partnership audit regime to file amended returns on Form 1065 with the Amended Return box checked, and to furnish amended Schedules K-1 to partners, for taxable years ending after March 27, 2020. Amended returns may be filed under Rev. Proc. 2021-48 or Rev. Proc. 2021-49 if the requirements of section 3 are met, and must be filed, with Schedules K-1 furnished, on or before December 31, 2021. The background describes the Bipartisan Budget Act of 2015, P.L. 114-74, which replaced the TEFRA partnership procedures with the centralized audit regime, and the rules of section 6031. The principal author is Nikki Bossert.
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Part III
Administrative, Procedural, and Miscellaneous
26 CFR 601.601. Rules and regulations.
(Also Part I, §§ 6031, 6222, 6227.)
Rev. Proc. 2021-50
SECTION 1. PURPOSE
This revenue procedure allows eligible partnerships to file amended partnership
returns for taxable years ending after March 27, 2020 using a Form 1065, U.S. Return
of Partnership Income (Form 1065), with the “Amended Return” box checked, and issue
an amended Schedule K-1, Partner’s Share of Income, Deductions, Credits, etc.
(Schedule K-1), to each of its partners. An eligible partnership may file an amended
return under Rev. Proc. 2021-48, 2021-49 I.R.B.___, or Rev. Proc. 2021-49, 2021-49
I.R.B. ___, if the requirements of section 3 of this revenue procedure are met. In order
to take advantage of the option to amend provided in this revenue procedure, amended
partnership returns must be filed, and corresponding Schedules K-1 must be furnished,
on or before December 31, 2021.
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SECTION 2. BACKGROUND
.01 Bipartisan Budget Act of 2015.
(1) Section 1101(a) of the Bipartisan Budget Act of 2015 (BBA), P.L. 114-74, Title
XI (November 2, 2015), replaced subchapter C of chapter 63 of subtitle F of the Internal
Revenue Code (Code) effective for partnership taxable years beginning after
December 31, 2017. Prior to the enactment of the BBA, subchapter C of chapter 63
contained the unified partnership audit and litigation rules enacted by the Tax Equity
and Fiscal Responsibility Act of 1982 (TEFRA), P.L. 97–248 (September 3, 1982), that
were commonly referred to as the TEFRA partnership procedures. Section 1101(c) of
the BBA replaced the TEFRA partnership procedures with a centralized partnership
audit regime that, in general, determines, assesses, and collects tax at the partnership
level. The centralized partnership audit procedures enacted by the BBA are found at
§§ 6221 through 6241 of the Code. The centralized partnership audit procedures apply
to all partnerships, unless the partnership makes a valid election under § 6221(b) not to
have those procedures apply. Partnerships subject to the centralized partnership audit
regime are referred to as BBA partnerships.
(2) Section 6031(a) of the Code requires every partnership to file a return for each
taxable year stating the items of its gross income and the deductions allowable by
subtitle A of the Code and such other information as required by forms and regulations,
including information about the partners in the partnership. For a partnership, the return
required by § 6031(a) is Form 1065, which includes Schedules K-1. Each Schedule K-1
reports a partner’s name, taxpayer identification number, and distributive share of
partnership-related items and other information related to the partner’s interest in the
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partnership. Section 6031(b) requires that a partnership required to file a return under
§ 6031(a) furnish a copy of the Schedule K-1 to each partner that includes such
information as may be required to be shown by regulations. In general, § 6031(b) also
prohibits BBA partnerships from amending the information required to be furnished to
their partners after the due date of the return, unless specifically provided by the
Secretary of the Treasury or her delegate. This revenue procedure exercises that
authority to allow a BBA partnership to file an amended partnership return and furnish
amended Schedules K-1 under the circumstances described in this revenue procedure.
(3) Section 6222(a) of the Code requires partners in a BBA partnership to treat
partnership-related items, as defined in § 6241 and the corresponding regulations,
consistently on the partner’s return with how the BBA partnership treated the items on
its return. This consistency requirement generally applies to all partners. Treatment
with the partnership return generally requires that a partner in a BBA partnership file a
return consistent with the information reported to the partner on the partner’s Schedule
K-1.
.02 PPP Loan Forgiveness Treatment.
(1) Rev. Proc. 2021-49, released on November 18, 2021, provides guidance for
partners and partnerships regarding:
(a) allocations under § 704(b) of the Code of amounts excluded from gross
income (tax-exempt income), as described in sections 2.03 and 2.04 of Rev. Proc.
2021-49, arising from the forgiveness of Payroll Protection Program (PPP) Loans, as
described in section 2.02 of Rev. Proc. 2021-49, certain grant proceeds, or the
subsidized payment of certain principal, interest, and fees;
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(b) allocations under § 704(b) of the Code of deductions resulting from
expenditures attributable to the use of forgiven PPP Loans, certain grant proceeds, or
the subsidized payments of certain interest and fees described in sections 2.03 and
2.04 of Rev. Proc. 2021-49; and
(c) the corresponding adjustments to be made with respect to the partners’ bases
in their partnership interests under § 705 of the Code.
(2) Rev. Proc. 2021-48, released on November 18, 2021, provides that taxpayers
may treat tax-exempt income resulting from the forgiveness of PPP Loans, as described
in section 2.01 of Rev. Proc. 2021-48, as received or accrued: (1) as, and to the extent
that, the taxpayer pays or incurs eligible expenses described in section 2.01(2) of Rev.
Proc. 2021-48, (2) when the taxpayer files an application for forgiveness of the PPP
Loan, or (3) when the PPP Loan forgiveness is granted.
.03 Amended Returns.
(1) This revenue procedure explains how a BBA partnership that wishes to take
advantage of Rev. Proc. 2021-48 or Rev. Proc. 2021-49 may do so without filing an
administrative adjustment request (AAR) under § 6227 of the Code, which is the
process prescribed for a partnership to make partnership adjustments to a partnership
return after it is filed.
(2) This revenue procedure allows BBA partnerships the option to file an amended
return instead of an AAR, though it does not prevent a partnership from filing an AAR to
obtain the benefits of Rev. Proc. 2021-48, Rev. Proc. 2021-49, or any other tax benefits
to which the partnership is entitled. A BBA partnership that files an amended return
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pursuant to this revenue procedure is still subject to the centralized partnership audit
procedures enacted by the BBA.
SECTION 3. AMENDED RETURN OPTION PROVIDED TO ELIGIBLE BBA
PARTNERSHIPS FOR TAXABLE YEARS ENDING AFTER MARCH 27, 2020
.01 Scope. The filing and furnishing option provided by section 3.02 of this revenue
procedure applies to BBA partnerships described in section 3.03 of this revenue
procedure for the taxable years described in section 3.04 of this revenue procedure.
.02 Option to file amended return. BBA partnerships that filed a Form 1065 and
furnished all required Schedules K-1 for taxable years ending after March 27, 2020 and
did so prior to the issuance of this revenue procedure may file amended partnership
returns and furnish corresponding amended Schedules K-1 on or before December 31,
2021. The amended returns must take into account tax changes under Rev. Proc.
2021-48 or Rev. Proc. 2021-49, but eligible BBA partnerships under section 3.03 of this
revenue procedure may make any additional changes on their amended returns.
.03 Eligible BBA partnerships.
(1) The filing and furnishing option provided in section 3.02 of this revenue
procedure is available only to BBA partnerships that filed Forms 1065 and furnished
Schedules K-1 for the partnership taxable years ending after March 27, 2020 and prior
to the issuance of Rev. Proc. 2021-48 or Rev. Proc. 2021-49. Additionally, to be eligible
for the filing and furnishing option in section 3.02 of this revenue procedure, BBA
partnerships must:
(a) Be within the scope of section 3 of Rev. Proc. 2021-49 and meet the
requirements of section 4.02(1), 4.02(2), 4.02(3), or 4.02(4) of Rev. Proc. 2021-49 by
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filing an amended Form 1065 in accordance with procedures in section 6 of Rev. Proc.
2021-49, or
(b) Treat tax-exempt income resulting from the forgiveness of a PPP Loan, at a
time described in section 3.01(1), (2) or (3) of Rev. Proc. 2021-48 by filing an amended
Form 1065 in accordance with procedures in section 3.02 of Rev. Proc. 2021-48, as
applicable.
(2) For purposes of § 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. See section 4.03
of this revenue procedure for a special rule regarding partnerships who have previously
filed AARs for an affected taxable year.
.04 Eligible taxable years. The filing and furnishing option provided in this revenue
procedure applies to any partnership taxable year ending after March 27, 2020 and prior
to the issuance of Rev. Proc. 2021-48 and Rev. Proc. 2021-49.
SECTION 4. PROCEDURE
.01 Filing requirements. To take advantage of the option to file an amended return
provided by section 3 of this revenue procedure, a BBA partnership must file a
Form 1065 (with the “Amended Return” box checked) and furnish corresponding
amended Schedules K-1 to its partners. The BBA partnership must clearly indicate the
application of this revenue procedure on the amended return and write “FILED
PURSUANT TO REV PROC 2021-50” at the top of the amended return and attach a
statement with each amended Schedule K-1 furnished to its partners with the same
notation. The BBA partnership may file electronically or by mail but filing electronically
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may allow for faster processing of the amended return. The BBA partnership filing an
amended return pursuant to this revenue procedure should not include any forms that
are normally only filed with an AAR, such as Form 8985, Pass-Through Statement-
Transmittal/Partnership Adjustment Tracking Report (Required Under Sections 6226
and 6227) or Form 8986, Partner's Share of Adjustment(s) to Partnership-Related
Item(s) (Required Under Sections 6226 and 6227).
.02 Special rule for BBA partnerships whose returns are under examination. If a BBA
partnership is currently under examination for a taxable year ending after March 27,
2020, and wishes to take advantage of the option to file an amended return provided by
section 3 of this revenue procedure, the partnership may only do so if the partnership
sends notice in writing to the revenue agent coordinating the partnership’s examination
that the partnership seeks to use the amended return option described in this revenue
procedure prior to or contemporaneously with filing the amended return as described in
section 4.01 of this revenue procedure. The partnership must also provide the revenue
agent with a copy of the amended return and amended Schedules K-1 upon filing.
.03 Special rule for BBA partnerships who have previously filed an AAR. If a BBA
partnership has previously filed an AAR and wishes to file an amended return pursuant
to this revenue procedure for the same taxable year, the partnership should use the
items as adjusted in the AAR, where applicable, in lieu of any reporting from the
originally filed partnership return.
.04 Special rule for a pass-through partner that is a BBA partnership. If a pass-
through partner (as defined in § 301.6241-1(a)(5) of the Procedure and Administration
Regulations) that is also a BBA partnership receives an amended Schedule K-1 issued
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pursuant to this revenue procedure, the pass-through partner may file an amended
return in lieu of filing an AAR, but only with respect to the items included on the K-1 it
received, using the procedures described in section 4.01 of this revenue procedure.
(1) The time limit to file an amended return, as discussed in sections 3.02 and 5 of
this revenue procedure, is not applicable to pass-through partners within the scope of
this section 4.04 of this revenue procedure.
(2) This section 4.04 also applies to BBA partnerships that received an amended
Schedule K-1 under any other previously issued revenue procedure allowing BBA
partnerships to issue amended Schedules K-1.
SECTION 5. EFFECTIVE DATE
An eligible BBA partnership may apply this revenue procedure for eligible taxable
years by filing amended Forms 1065, and furnishing corresponding amended
Schedules K-1, on or before December 31, 2021.
SECTION 6. DRAFTING INFORMATION
The principal author of this revenue procedure is Nikki Bossert of the Office of the
Associate Chief Counsel (Procedure and Administration). For further information,
please contact 202-317-5185 (not a toll-free call).
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