Today, April 8, 2020, the IRS released Rev. Proc. 2020-23 which will allow partnerships to amend their 2018 and 2019 tax returns, allowing partnerships to retroactively take advantage of new tax breaks for years in which they have already filed.
The CARES Act included a technical correction that retroactively changed the recovery period for qualified improvement property (QIP) from 39 years to 15 years, thereby allowing it to qualify for bonus depreciation. However, partnerships subject to the centralized audit regime (BBA Partnerships) cannot file amended returns to take advantage of the retroactive legislation. Instead, they would generally be required to file an Administrative Adjustment Request (AAR) which would result in only the partners’ being able to receive any benefit from the CARES Act QIP retroactive relief on the current year (2020) federal income tax return, delaying the relief for the partners’ until 2021 (when they would file their 2020 returns). Therefore, on April 8, 2020, the IRS released Rev. Proc. 2020-23 to provide relief to those affected partnerships and provides the following:
The Rev. Proc. provides that the amended returns for 2018 and 2019 can take into account tax changes brought about by the CARES Act as well as any other tax attributes to which the partnership is entitled by law.
Many tax professionals were hoping that the IRS would also issue guidance to allow businesses who made the irrevocable electing real property trade or business election to reassess their election (due to the QIP changes). On April 10th, the IRS provided that relief in Rev. Proc. 2020-22 allowing taxpayers who made the electing real property trade or business election in 2018, 2019, or 2020 to withdraw that election. Generally, taxpayers wishing to withdraw the election must file an amended Federal income tax return, amended Form 1065, or Administrative Adjustment Request (as applicable) for the taxable year in which the election was made.
We will continue to keep you apprised as additional information and guidance is provided. If you have specific questions, please reach out to your blum partner or contact us here.
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