On April 8, 2020, the IRS released Rev. Proc. 2020-23 allowing partnerships the option to file amended tax returns for tax years beginning in 2018 and 2019. Prior to the issuance of this revenue procedure, most partnerships were no longer able to file amended returns, and instead were required to file an administrative adjustment request (AAR) to report any changes to a previously filed return. Partners of such a partnership would then reflect the tax impact of these changes in the tax year the AAR is filed – not the tax year being adjusted, unless the partnership agrees to pay an entity-level imputed tax. As a result, partners of partnerships would not have been able to take advantage of the tax benefits provided in the CARES Act until the filing of their 2020 tax year returns in 2021, absent this relief. Allowing amended partnership returns will allow partners of partnership to potentially obtain CARES Act-related refunds much sooner.
Partnerships that have, prior to April 8, 2020, filed Form 1065 and furnished all required Schedule K-1s for taxable years beginning in 2018 or 2019 are eligible to file an amended return for those tax years. Amended 2018 or 2019 partnership returns do not have to be specifically related to the CARES Act, and may encompass amendments to other tax attributes. The window to file a 2018 or 2019 amended return under this revenue procedure ends on Sept. 30, 2020.
Although partnerships will be able to take advantage of bonus depreciation for qualified improvement property retroactively, there is still uncertainty regarding whether a partnership may revoke a previously made real property trade or business election for section 163(j) purposes—an election that generally precludes the availability of bonus depreciation. We will provide updates to this alert as more details become available.