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On April 8, 2020, the Internal Revenue Service (IRS) released Rev. Proc. 2020-23 indicating eligible partnerships will have the ability to file amended returns in lieu of filing an administrative adjustment request (AAR) to take advantage of the Coronavirus Aid, Relief, and Economic Security (CARES) Act legislation.
One of the key provisions of the CARES Act provides immediate current cash flow benefits and relief to taxpayers by a long sought-after fix to a legislative glitch. Based on a technical correction under the new legislation, qualified improvement property (QIP) placed in service in 2018 and after is now 15-year property and is eligible for 100% bonus depreciation. It also changes the alternative depreciation system recovery period for QIP to 20 years, from 40 years. Additionally, the new law also increased the business interest deduction limitation from 30% to 50% of adjusted taxable income for tax years 2019 and 2020, while providing special rules for partnerships.
Typically, partnerships subject to a centralized audit regime of the Bipartisan Budget Act of 2015, otherwise known as BBA partnerships, normally would be prohibited from filing an amended return after they have filed Form 1065. The partners of an entity that filed an AAR would only be able to receive benefits from relief on the current tax year’s federal income tax return, meaning the partners generally would not be able to take advantage of CARES Act benefits from an AAR until they file their current-year returns, which could be in 2021.
Based on the IRS’ new guidance, eligible partnerships, including BBA partnerships, will be able to file amended partnership returns for the tax years beginning 2018 and 2019 using Form 1065 and indicate it is an amended return. Amended Schedule K-1s must be issued by the entities to its partners. Eligible partnerships must file such amended Forms 1065, and furnish Schedules K-1, before September 30, 2020.
We stand ready to help your partnership take advantage of these significant tax savings opportunities. Contact your Doeren Mayhew tax advisor to discuss amending your returns.
This publication is distributed for informational purposes only, with the understanding that Doeren Mayhew is not rendering legal, accounting, or other professional opinions on specific facts for matters, and, accordingly, assumes no liability whatsoever in connection with its use. Should the reader have any questions regarding any of the news articles, it is recommended that a Doeren Mayhew representative be contacted.
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