The Bipartisan Budget Act of 2015 (BBA) drastically altered the procedural landscape for partnership audits, replacing the TEFRA regime with a centralized partnership audit framework. As the IRS increases enforcement, particularly concerning syndicated conservation easements, tax professionals must understand how the Tax Court interprets the BBA’s strict notice requirements and the corresponding statute of limitations. The recent Tax Court opinion in Mammoth Cave Property, LLC v. Commissioner, 166 T.C. No. 4 (2026), provides critical guidance on how administrative defects in IRS notices impact the period of limitations on making adjustments under I.R.C. § 6235.

Facts of the Case

Mammoth Cave Property, LLC (Petitioner) is a limited liability company treated as a partnership subject to the BBA centralized partnership audit regime. For the 2018 tax year, Petitioner timely filed its Form 1065 on September 16, 2019. On its original return, the partnership designated Mammoth Cave JV, LLC (MCJV) as its partnership representative and Timothy Pollock as the designated individual. The address provided was in Welsh, Louisiana.

On October 22, 2020, the IRS issued a Notice of Administrative Proceeding (NAP) to the Welsh address, initiating an audit into a charitable contribution deduction claimed by the partnership. Subsequently, Petitioner filed Form 8979 to revoke MCJV as its partnership representative and designate Mammoth Cave Manager, LLC (MCML) as the new partnership representative, with Matthew Mills appointed as the new designated individual. The IRS accepted this change effective April 2, 2021.

In January 2022, Mr. Mills submitted Form 8822-B to change both the partnership’s and MCML’s addresses to a new location in Dexter, Missouri. However, this form was sent to the Ogden service center alongside 31 other forms, and a copy was not provided directly to the examining revenue agent. Due to processing backlogs, the IRS did not process this address change until August 24, 2022.

On July 11, 2022, the IRS mailed a Notice of Proposed Partnership Adjustment (NOPPA) to Petitioner and its attorneys. However, the IRS addressed the NOPPA to the former partnership representative, MCJV, at the old Welsh address, but notably directed it to the attention of Matthew Mills, the current designated individual.

Following the receipt of the NOPPA, Petitioner utilized the old Welsh address on subsequent filings, including Form 8984 requesting an extension of time to modify the imputed underpayment, and Form 8980 submitting the actual modification request on June 6, 2023. Ultimately, the IRS issued a Notice of Final Partnership Adjustment (FPA) to the updated Dexter address on January 5, 2024.

The Taxpayer’s Request for Relief

Petitioner filed a Motion for Summary Judgment with the Tax Court, arguing that the FPA issued on January 5, 2024, was invalid because the statutory period of limitations on making adjustments had expired. Petitioner contended that the NOPPA issued on July 11, 2022, was procedurally defective because it was addressed to the former partnership representative (MCJV) rather than the current one (MCML), and it was sent to the outdated Welsh address.

Petitioner advanced the position that because the NOPPA was not sent to the correct partnership representative, it was not properly issued. Consequently, Petitioner argued that the defective NOPPA failed to extend the standard three-year statute of limitations under I.R.C. § 6235(a)(1), rendering the subsequent FPA untimely.

The Court’s Analysis of the Law

The Tax Court initiated its analysis by reviewing the statutory framework of the BBA. Under the BBA, the IRS must issue three principal notices during an audit: a NAP, a NOPPA, and an FPA. I.R.C. § 6231(a) requires that the Secretary "shall mail to the partnership and the partnership representative" each of these notices.

The Court then examined the role of the partnership representative. I.R.C. § 6223(a) dictates that the partnership representative "shall have the sole authority to act on behalf of the partnership under this subchapter." When an entity is designated as the partnership representative, Treas. Reg. § 301.6223-1(b)(3)(i) requires the appointment of a designated individual who serves as "the sole individual through whom the partnership representative will act for all purposes under subchapter C of chapter 63." Furthermore, Treas. Reg. § 301.6223-2(d)(2)(ii) establishes that the designated individual has "the sole authority to bind the partnership representative and therefore the partnership".

Crucially, the Court analyzed the statute of limitations under I.R.C. § 6235. The general rule under I.R.C. § 6235(a)(1) requires adjustments to be made within 3 years of the later of the return filing date or the due date. However, the Court focused heavily on the specific extension provided when a partnership seeks to modify an imputed underpayment. I.R.C. § 6235(a)(2) states that the period is extended "in the case of any modification of an imputed underpayment under section 6225(c), the date that is 270 days . . . after the date on which everything required to be submitted to the Secretary pursuant to such section is so submitted". Partnerships are granted 270 days from the mailing of the NOPPA to submit this modification, unless an extension is granted with the consent of the Commissioner under I.R.C. § 6225(c)(7) and Treas. Reg. § 301.6225-2(c)(3)(ii).

Finally, addressing the procedural defects of the NOPPA, the Court drew heavily on precedent from the TEFRA regime. The Court cited Clovis I v. Commissioner, 88 T.C. 980, 982 (1987), observing that "whatever form a FPAA takes, it must minimally give notice to the taxpayer that [the Commissioner] has finally determined adjustments to the partnership return." The Court found that this "minimal notice" standard logically extends to BBA notices.

Application of the Law to the Facts

Applying the statute to the timeline, the Court noted that the 2018 return was filed on September 16, 2019, meaning the initial three-year assessment window under I.R.C. § 6235(a)(1) would expire in September 2022. The IRS mailed the NOPPA on July 11, 2022, comfortably within this window.

Following the NOPPA, Petitioner requested and received a 60-day extension to file a modification of the imputed underpayment. Petitioner timely submitted this modification on June 6, 2023. Activating the rules of I.R.C. § 6235(a)(2), the Court determined that "the deadline for issuing the FPA was at least 270 days from the extended modification date of June 6, 2023." Because the IRS mailed the FPA on January 5, 2024, it was issued well before the expiration of that 270-day window.

The Court thoroughly rejected Petitioner’s argument that the NOPPA was invalid due to being addressed to the former entity partnership representative. The Court emphasized that the NOPPA was addressed to the attention of Mr. Mills. The Court ruled: "As MCML’s designated individual, Mr. Mills was the ’sole individual’ through whom the partnership representative could act with respect to the proposed adjustments. . . . Such a mailing was ‘to . . . the partnership representative’ within the meaning of section 6231(a)."

Regarding the outdated address, the Court noted that actual receipt cures mailing defects. The Court pointed out that despite the formal address change submitted in January 2022, Petitioner and its attorneys "continued to list and use the Welsh address as the current address for the partnership representative for more than a year after mailing the change of address request." Because the actual designated individual and the partnership’s attorneys received the NOPPA and subsequently acted upon it by filing for modifications, the taxpayer suffered no prejudice. As the Court articulated, "Even if we were to conclude that the NOPPA was not sent to the right address, actual receipt and petitioner’s actions would cure the defect in mailing."

Conclusions of the Court

The Tax Court concluded that "The NOPPA issued by respondent on July 11, 2022, was valid, and the FPA issued to petitioner was timely pursuant to section 6235(a)(2)." The Court held that despite administrative errors on the face of the NOPPA—namely listing the former entity partnership representative and an outdated address—the notice successfully fulfilled its statutory purpose. The fact that the NOPPA reached the correct designated individual triggered the BBA modification timeline under I.R.C. § 6225(c), which subsequently extended the statute of limitations under I.R.C. § 6235(a)(2). Accordingly, the Court denied the Petitioner’s Motion for Summary Judgment, allowing the IRS’s final partnership adjustments to stand for judicial review.

Prepared with assistance from NotebookLM.