On April 8, the IRS released guidance through Revenue Procedure 2020-23 that will allow partnerships to take advantage of certain tax benefits granted by the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. The CARES Act grants certain businesses tax relief in the way of bonus depreciation deductions and an increased business interest deduction limit. This tax relief has been applied retroactively to affect 2018 and 2019 tax years. Partnerships will be allowed to file amended returns for the 2018 and 2019 tax years without first making a request for IRS approval for such changes.
Under the Bipartisan Budget Act of 2017 (the “BBA”), partnerships which have not elected out of the centralized partnership regime are required to file a tax return for the tax year while also furnishing to its partners tax information regarding the partnership, including each partner’s Schedule K-1. Under the BBA, a Schedule K-1 could not be amended without prior IRS approval once the partnership’s tax return due date has passed. This created an inconsistency with the CARES Act, causing a partnership to be unable to take advantage of retroactive tax benefits without first jumping over a number of IRS procedural hurdles.
To alleviate the stress the ongoing COVID-19 pandemic has brought to partnerships, Revenue Procedure 2020-23 allows partnerships that have filed a tax return for tax years beginning in 2018 or 2019 to file amended partnership returns and furnish amended Schedule K-1s to partners before September 30, 2020. The amended returns may take into account tax changes brought about by the CARES Act affecting a partnership’s tax attributes.