The IRS has issued guidance to Appeals Employees regarding procedures that will be used in cases involving the Bipartisan Budget Act of 2015’s (BBA) revision to the partnership audit rules.[1]

The memorandum consists of a summary of procedural changes, followed by interim guidance until IRM 18.9 is revised along with an appendix containing the interim procedures and a glossary of BBA terms.. The interim guidance has an expiration date of October 18, 2021.

The memorandum provides the following explanation of the purpose of the guidance:

Purpose: This memorandum provides interim guidance to Appeals employees on new case procedures for different phases of the BBA centralized partnership audit regime, including the following:

• Early Election into BBA;

• Administrative Adjustment Request (AAR);

• Notice of Proposed Partnership Adjustment (NOPPA);

• Modification Disputes; and,

• Notice of Final Partnership Adjustment (FPA).[2]

The memorandum summaries the new procedures as follows:

Procedural Change:

For tax years beginning after November 2, 2015, and before January 1, 2018, eligible partnerships may elect into BBA within 30 days of the date the IRS first notifies the partnership in writing that the return has been selected for examination. Either the Tax Matters Partner (TMP) or an individual authorized to sign the partnership return for the taxable year under examination is authorized to make the election by completing the Form 7036, Election under Section 1101(g)(4) of the Bipartisan Budget Act of 2015. IRS examiner will issue Letter 5893, Notice of Administrative Proceeding, to the Partnership at least 30 days after a valid election is received by the IRS.
After January 1, 2018, this election may also be made when filing an Administrative Adjustment Request (AAR) under Section 6227 as amended by BBA for tax periods beginning after November 2, 2015 and before January 1, 2018.
If an early election into BBA was requested or the entity is covered under BBA for tax years beginning on or after January 1, 2018, BBA cases will have Appeals rights.
If there is a dispute on any BBA case, the examiner will issue a 30-day BBA letter (Letter 5891) with a summary report for the taxpayer to request an Appeals hearing. The dispute may cover the substantive audit issues, penalties and/or imputed underpayment adjustment groupings and subgroupings disputes.
At the end of the Appeals process and issuance of the Notice of Proposed Partnership Adjustment (NOPPA) for all disputed tax issues (resolved and unresolved), Appeals will send the BBA case to Ogden BBA Unit for processing.
In response to the NOPPA, the partnership may request modification. If there is a dispute regarding modification, the taxpayer will have an opportunity to appeal this dispute. Appeals will not reconsider an unagreed previous disputed tax issue if the entire case is later returned to Appeals for modification hearing.
LB&I will issue the Notice of Final Partnership Adjustment (FPA) notice. The FPA allows the partnership to either request a push out the adjustments for its partners to take into account, petition for judicial review of the adjustments, or both. Under normal circumstances Appeals will not issue the FPA.[3]

Attached is a 21 page appendix that contains interim procedures under IRM 18.19.14 and an appendix of BBA terms.

[1] Memorandum AP-08-1019-0013, October 18, 2019, https://www.irs.gov/pub/foia/ig/appeals/ap-08-1019-0013.pdf, retrieved October 22, 2019

[2] Memorandum AP-08-1019-0013, October 18, 2019, https://www.irs.gov/pub/foia/ig/appeals/ap-08-1019-0013.pdf, retrieved October 22, 2019, p. 1

[3] Memorandum AP-08-1019-0013, October 18, 2019, https://www.irs.gov/pub/foia/ig/appeals/ap-08-1019-0013.pdf, retrieved October 22, 2019, pp. 1-2