Part I. Check the Appropriate Box

An AAR can be filed by a partnership subject to BBA proceedings (BBA AAR) or a REMIC subject to BBA proceedings.

If you’re a BBA partnership that has received a notice of administrative proceeding, you may not file an AAR. Also, a partner may not file an AAR on behalf of the BBA partnership in which it is a partner unless doing so in its capacity as the PR for that partnership.

For Partnership Tax Years Beginning After 2017

BBA AAR. All partnerships with tax years beginning after 2017 are subject to the centralized partnership audit regime unless an eligible partnership makes a valid election under section 6221(b) to elect out of the centralized partnership audit regime. Partnerships that are subject to the centralized partnership audit procedures of sections 6221 through 6241 are referred to as “BBA partnerships.” An AAR filed by a BBA partnership is a BBA AAR.

Note: REMICs with two or more residual interest holders and that didn’t make a valid election under section 6221(b) are also defined as “BBA partnerships.”

Non-BBA. A partnership with a tax year beginning after 2017 that isn’t subject to BBA proceedings because it has made a valid election under section 6221(b) is referred to as a “non-BBA partnership.”

Note: REMICs with one residual interest holder or that made a valid election under section 6221(b) are also defined as “non-BBA partnerships.”

Partnership-Partner Modification Amended Return Related to Modification of Audited BBA Partnership’s IU

A partner that is itself a partnership (partnership-partner) that is filing an amended return as part of modification of the IU under section 6225(c)(2) should check this box.

Section 1—BBA AAR For additional information on filing BBA AARs, go to IRS.gov/BBAAAR .

Item A

If “Yes” is checked, complete Form 8979 and attach it to the AAR. See the Instructions for Form 8979, Partnership Representative Designation or Resignation, for more information.

Note: If you’re a BBA partnership, you may not file an AAR solely for the purpose of changing the PR.

Item B

BBA partnerships filing an AAR will need to determine if the partnership adjustments result in an IU. See Figuring the Imputed Underpayment (IU) , later, for information as to how to figure the IU. The BBA partnership should consider all available guidance issued by the IRS in making a determination of whether or not the AAR results in an IU. Also, see Part IV , later, for discussion of the IU.

Item C1

If the adjustments contained in the BBA AAR result in an IU, the partnership must pay the IU at the same time the AAR is filed. However, under section 6227(b)(2), the partnership can elect to have its reviewed year partners take the adjustments into account. This is an election to push out the adjustments to the partners as an alternative to payment of the IU. See section 6226(a)(2) for details. If this valid election is made, the partnership is no longer liable for the IU.

Caution: If the partnership’s election under section 6227(b)(2) to push out the adjustments to the partners is determined to be invalid, the partnership will still remain liable for the IU.

Item C2

The partnership will need to furnish a Form 8986 to each reviewed year partner reflecting the partner’s share of adjustments for when the adjustments don’t result in an IU (for example, the adjustments in the BBA AAR result in an IU of zero or less than zero; or there is a net negative adjustment). The partnership is also required to file with the AAR all Forms 8986 furnished to partners and Form 8985. See the instructions for these forms for further information.

Note: The BBA partnership doesn’t furnish Schedules K-1 to its partners when filing a BBA AAR. Instead, it will provide Forms 8986.

Note: A partnership that makes an election under section 6227(b)(2) to push out adjustments to its partners must nevertheless pay any taxes, penalties, additions to tax, additional amounts, or the amount of any adjustments to any IU previously reported by the partnership (for example, when correcting an IU previously reported on an AAR) for which the partnership is liable under chapter 1 of the Code or the BBA (subchapter C of chapter 63) at the time the partnership furnishes statements to its partners. Any adjustments to such items aren’t included in the statements the partnership furnishes to its partners and

Instructions for Form 1065-X (Rev. 10-2025) 5

files with the IRS. These items aren’t allocable to partners; rather, they are entity-level liabilities of the partnership and shouldn’t be pushed out to partners but paid by the partnership.

Item D

Each reviewed year partner is required to take into account its share of adjustments requested in a BBA AAR if the partnership adjustments result in a positive IU and the partnership makes the alternative to payment election discussed under Item C1, earlier. Additionally, each reviewed year partner is required to take into account its share of any adjustments requested in a BBA AAR resulting in an IU of zero or less than zero, or that don’t result in an IU. The determination of whether or not an adjustment results in an IU amount is discussed under Item B, earlier.

The partnership is required to furnish each reviewed year partner with a Form 8986 reporting its share of the BBA AAR adjustments. See Forms 8985 and 8986, later, for more information. The PR must attest to the partnership’s compliance with this requirement. The PR will sign Form 1065-X under item D to declare, under penalties of perjury, that all statements have been provided to the reviewed year partners, as required by these instructions.

Item E

Under section 6227(b)(1), the partnership may modify the IU resulting from adjustments reported in a BBA AAR in accordance with the provisions under section 6225(c), disregarding the provisions under paragraphs (2), (7), and (9). Any modification made to the IU under section 6227(b)(1) must be disclosed and fully explained on Form 8980 and included with the AAR.

Note: If the partnership makes a valid election to push out the adjustments to the partners as an alternative to payment of the IU, any modifications applied to the IU are disregarded.

Caution: However, if the partnership’s election to push out the adjustments rather than pay an IU is determined to be invalid, the partnership will still be liable for the IU. In such a case where the partnership filed Form 8980 to request permitted modifications be applied to the IU calculation, those modifications will be considered in determining the IU.

Section 2—Partnership-Partner Modification Amended Return Filed as Part of Modification of an IU for an Audited BBA Partnership Section 6225(c)(2) allows a BBA partnership under examination to request specific types of modifications of an IU proposed by the IRS. One type of modification applies when a partner or indirect partner, including a partnership-partner, files an amended return for the tax year of the partner which includes the end of the reviewed year of the BBA partnership under examination. See Form 8980, Item E, Part I; and Pub. 5346.

A BBA partnership under examination will be assigned a unique audit control number. A partnership-partner using Form 1065-X to file an amended return as part of a modification under section 6225(c)(2) must include in Section 2 of Form 1065-X the name, EIN, reviewed year, and audit control number of the BBA partnership under examination to which the amended return relates. In addition, the partnership-partner shouldn’t furnish amended Schedules K-1 or K-3, or Forms 8986, to its partners, but instead must pay an amount computed like an IU on the adjustments allocable to it, plus any penalties and interest. See Part IV , later, for payment instructions.