PROCEDURALLY TAXING tax notes federal
by Jenni Black Jenni Black is a managing director in Citrin Cooperman’s National Tax Office and the practice leader of the Tax Procedure and Controversy practice. She has over two decades of combined legal and accounting experience and has extensive experience dealing with complex tax issues, including partnership audit procedures under the Tax Equity and Fiscal Responsibility Act of 1982 and the Bipartisan Budget Act of 2015. In this post, Black discusses the possible forums for judicial review if the IRS determines a push-out election is invalid. As discussed in my previous post, the AAR 1 push-out election is a partnership-related item (PRI) and PRIs can only be adjusted at the partnership level under the Bipartisan Budget Act, absent an exception, none of which apply here. Therefore, if the IRS determines the AAR pushout election is invalid, the IRS must open an exam of the partnership and issue a notice of final partnership adjustment (FPA). When the partnership receives an FPA, it may challenge the adjustments contained in the FPA (for example, the determination that the AAR push-out election is invalid) in the U.S. Tax Court, or in the U.S.
district courts or Court of Federal Claims (so long 2 as the jurisdictional deposit is made). However, if the administrative adjustment request (AAR) contains adjustments that do not result in an imputed underpayment (ATDNR), there is no AAR push-out election with respect to those adjustments.3 Unlike in an exam, ATDNR in an AAR must be pushed out to the reviewed year 4 partners. Period. There is no other option. Regardless of how badly the partnership messes up the push-out, the ATDNR are still pushed out. The ATDNR do not pass Go and do not collect $200. 5 For exam push-out elections, determining how the partnership can challenge an IRS determination that its push-out election is invalid is more complicated. As previously mentioned, the restrictions on assessing an imputed underpayment (IU) resulting from the exam were lifted when the IRS issued the FPA, or when the court’s opinion became final. Deficiency procedures do not apply to IUs6 and there is nothing else in the Internal Revenue Code that would require the IRS to take further steps to assess an IU that has already been determined. Thus, if the IRS determines the exam push-out election is invalid, there seems to be nothing stopping the IRS from assessing the IU determined in the FPA or court, as applicable. So what forums are available to the partnership to
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Section 6234. In an FPA determining the AAR push-out election is invalid, the IRS could also adjust any other PRIs for the partnership’s tax year, including the amount of the IU included on the AAR. 3 4
Section 6227(b) (flush language); reg. section 301.6227-2(d). Section 6227(b) (flush language).
5
1
For purposes of this post, an “AAR push-out election” is an election made under section 6227(b)(2).
For purposes of this post, an “exam push-out election” is an election made under section 6226(a). 6
Section 6232(a)(1).
TAX NOTES FEDERAL, VOLUME 186, JANUARY 27, 2025 For more Tax Notes® Federal content, please visit www.taxnotes.com.
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Challenging the Validity of a Push-Out Election Under BBA: Forums for Review, Part 2