SECTION 2. BACKGROUND

.01 Bipartisan Budget Act of 2015. (1) Section 1101(a) of the Bipartisan Budget Act of 2015 (BBA), P.L. 114-74, Title XI (November 2, 2015), replaced subchapter C of chapter 63 of subtitle F of the Internal Revenue Code (Code) effective for partnership taxable years beginning after December 31, 2017. Prior to the enactment of the BBA, subchapter C of chapter 63 contained the unified partnership audit and litigation rules enacted by the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), P.L. 97–248 (September 3, 1982), that were commonly referred to as the TEFRA partnership procedures. Section 1101(c) of the BBA replaced the TEFRA partnership procedures with a centralized partnership audit regime that, in general, determines, assesses, and collects tax at the partnership level. The centralized partnership audit procedures enacted by the BBA are found at §§ 6221 through 6241 of the Code. The centralized partnership audit procedures apply to all partnerships, unless the partnership makes a valid election under § 6221(b) not to have those

procedures apply. Partnerships subject to the centralized partnership audit regime are referred to as BBA partnerships.

(2) Section 6031(a) of the Code requires every partnership to file a return for each taxable year stating the items of its gross income and the deductions allowable by subtitle A of the Code and such other information as required by forms and regulations, including information about the partners in the partnership. For a partnership, the return required by § 6031(a) is Form 1065, which includes Schedules K-1. Each Schedule K-1 reports a partner’s name, taxpayer identification number, and distributive share of partnership-related items and other information related to the partner’s interest in the partnership. Section 6031(b) requires that a partnership required to file a return under § 6031(a) furnish a copy of the Schedule K-1 to each partner that includes such information as may be required to be shown by regulations. In general, § 6031(b) also prohibits BBA partnerships from amending the information required to be furnished to their partners after the due date of the return, unless specifically provided by the Secretary of the Treasury or her delegate. This revenue procedure exercises that authority to allow a BBA partnership to file an amended partnership return and furnish amended Schedules K-1 under the circumstances described in this revenue procedure.

(3) Section 6222(a) of the Code requires partners in a BBA partnership to treat partnership-related items, as defined in § 6241 and the corresponding regulations, consistently on the partner’s return with how the BBA partnership treated the items on its return. This consistency requirement generally applies to all partners. Treatment with the partnership return generally requires that a partner in a BBA partnership file a return consistent with the information reported to the partner on the partner’s Schedule K-1.

.02 PPP Loan Forgiveness Treatment . (1) Rev. Proc. 2021-49, released on November 18, 2021, provides guidance for partners and partnerships regarding:

(a) allocations under § 704(b) of the Code of amounts excluded from gross income (tax-exempt income), as described in sections 2.03 and 2.04 of Rev. Proc. 2021-49, arising from the forgiveness of Paycheck Protection

December 6, 2021 844 Bulletin No. 2021–49

revenue procedure applies to BBA partnerships described in section 3.03 of this revenue procedure for the taxable years described in section 3.04 of this revenue procedure.

.02 Option to file amended return . BBA partnerships that filed a Form 1065 and furnished all required Schedules K-1 for taxable years ending after March 27, 2020 and did so prior to the issuance of this revenue procedure may file amended partnership returns and furnish corresponding amended Schedules K-1 on or before December 31, 2021. The amended returns must take into account tax changes under Rev. Proc. 2021-48 or Rev. Proc. 2021-49, but eligible BBA partnerships under section 3.03 of this revenue procedure may make any additional changes on their amended returns.

.03 Eligible BBA partnerships . (1) The filing and furnishing option provided in section 3.02 of this revenue procedure is available only to BBA partnerships that filed Forms 1065 and furnished Schedules K-1 for the partnership for taxable years ending after March 27, 2020 and prior to the issuance of Rev. Proc. 2021-48 or Rev. Proc. 2021-49. Additionally, to be eligible for the filing and furnishing option in section 3.02 of this revenue procedure, BBA partnerships must:

(a) Be within the scope of section 3 of Rev. Proc. 2021-49 and meet the requirements of section 4.02(1), 4.02(2), 4.02(3), or 4.02(4) of Rev. Proc. 2021-49 by filing an amended Form 1065 in accordance with procedures in section 6 of Rev. Proc. 2021-49, or (b) Treat tax-exempt income resulting from the forgiveness of a PPP Loan, at a time described in section 3.01(1), (2) or (3) of Rev. Proc. 2021-48 by filing an amended Form 1065 in accordance with procedures in section 3.02 of Rev. Proc. 2021-48, as applicable. (2) For purposes of § 6222, the amended return replaces any prior return (including any AAR filed by the partnership) for the taxable year for purposes of determining the partnership’s treatment of partnership-related items. See section 4.03 of this revenue procedure for a special rule regarding partnerships who have previously filed AARs for an affected taxable year.

.04 Eligible taxable years . The filing and furnishing option provided in this revenue procedure applies to any partnership taxable year ending after March 27, 2020 and prior to the issuance of Rev. Proc. 2021-48 and Rev. Proc. 2021-49.