One of the features of the new centralized partnership audit regime that was enacted as part of the Bipartisan Budget Act of 2015 is that once a partnership return is filed that is covered by the program, any later change does not lead to the partners amending their return for the year of change. Rather, after the return is filed the partnership files an administrative adjustment request (AAR) and either:
Pays tax with the request, computed under the CPAR rules to compute tax due on the imputed adjustment or
If the partnership elects the alternative to the imputed adjustment, the partners report the additional tax, penalties and interest on their return for the year the AAR is filed.
As the IRS explains in Revenue Procedure 2019-32, issued to relax this rule somewhat in this first year of filing CPAR covered partnership returns as described later in this article:
A partnership that files its Form 1065 and furnishes Schedules K-1 to its partners prior to the deadline for filing the Form 1065 (including extensions) may file a superseding Form 1065 and furnish corresponding Schedules K-1 to its partners prior to the deadline, including extensions. Joint Committee on Taxation, General Explanation of Tax Legislation Enacted in 2015 (March 2016) (JCT Bluebook), JCS-1-16, at 82 (“Schedules K-1 . . . may not be amended after the due date of the partnership return . . . [but] [t]he due date takes into account the permitted extension period.”). A timely filed superseding Form 1065 is considered the original return of the partnership. See, e.g., Haggar Co. v. Helvering, 308 U.S. 389, 395-96 (1940); Rev. Rul. 78-256, 1978-1 C.B. 438 (amended corporate return filed before due date including extensions is the corporation’s return for that taxable year for purposes of estimated tax penalties).
But the superseding return option isn’t going to be available any longer if a partnership filed its return without filing for an extension of time to file its return. Now some of those partnership realize there are issues on their returns and would like to provide their partners with revised K-1s that could be used to prepare the individual partners’ returns, rather than going down the AAR route.
The IRS has issued this Revenue Procedure primarily to allow those partnerships that filed by March 15, 2019 and did not request an extension the right to file a superseding return by September 15, 2019, though it does cover additional fiscal years.
The ruling applies to the following partnership tax years:
The filing and furnishing extensions provided in this revenue procedure apply only to partnership taxable years that ended prior to the issuance of this revenue procedure and for which the extended due date for such partnership taxable year is after July 25, 2019.
Thus, the ruling would cover not only calendar year returns, but also short year fiscal year returns ending after October 31, 2018 that began in 2018.
The relief granted is described as follows:
The IRS will treat the timely filing of Form 1065 by a BBA partnership described in section 3.03 of this revenue procedure as a timely and appropriately filed request for a six-month extension of the deadline to file the Form 1065. BBA partnerships that timely filed a Form 1065 and timely furnished all required Schedules K-1 (without regard to the extensions of time provided by this revenue procedure) may file a superseding Form 1065 and furnish corresponding Schedules K-1 before the expiration of the extended deadline.
Eligible partnerships are described as follows:
The filing and furnishing extensions provided in section 3.02 of this revenue procedure are available only to BBA partnerships that timely filed Form 1065 and timely furnished Schedules K-1 prior to application of this revenue procedure and also file a superseding Form 1065 and furnish corresponding Schedules K-1 on or before the date that is six-months after the non-extended deadline. For purposes of section 6222, the superseding return replaces any prior return for the taxable year for purposes of determining the partnership’s treatment of partnership-related items.
Partnerships taking advantage of this procedure take the following steps:
To take advantage of the relief provided by section 3 of this revenue procedure, file a superseding Form 1065 and furnish corresponding Schedules K-1 in the same manner as the original return and Schedules K-1 and write on the top of the superseding Form 1065 “SUPERSEDING FORM 1065 PURSUANT TO REVENUE PROCEDURE 2019-32.”
The relief is better than nothing, but it’s important to note that it’s only good for one year and it does nothing for partnerships that filed an extension—just those who rushed to file without an extension.
 IRC §6226