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 is also a contributing author for Procedurally Taxing. In this post, Black discusses how to determine the tax year for which a partnership can get a refund of a prior, incorrectly calculated imputed underpayment under the Bipartisan Budget Act of 2015. This post reflects the author’s personal views and not necessarily those of Citrin Cooperman. Under the centralized partnership audit regime enacted by the Bipartisan Budget Act of 2015, a partnership files an administrative adjustment request (AAR) to correct its previously filed return. We’ve been discussing the ways in which a partnership could adjust (and be refunded) an imputed underpayment (IU) contained on a previously filed AAR if it made errors in the calculation. Part 1 of this article discussed the methods a partnership might use to adjust the IU on the prior AAR. This part discusses what year the adjustment to the IU (our $2) is for. For What Year is the AAR Filed? Now that we’ve determined that an AAR is likely the way to adjust an IU reported on a previously filed AAR, for what year is the AAR
filed? Under section 6232(a), the IU is assessed and collected as if it were a tax imposed by subtitle A for the adjustment year (for an AAR, the tax year in which the AAR is filed), not the reviewed year (the tax year to which the adjustments relate). Does this mean that the AAR is filed for the adjustment year? As BBA has no rules for partnerships to correct IUs from previously filed AARs, BBA does not answer this question. But if you want to know what I think (and why would you be reading this article otherwise?), I say the AAR is filed for the reviewed year. Why? The IU is calculated on adjustments made to 1 the partnership’s reviewed year return. Practically, the IU being for the reviewed year (even if assessed and collected “as if” it was a tax in the adjustment year) makes the most sense. If the IU is a tax for the adjustment year, whether the partnership could correct the IU would depend on facts unrelated to anything in the reviewed year. For example, under section 6227(c) (flush language), a partnership cannot file an AAR if a notice of administrative proceeding (NAP) has been issued for the tax year. This means that, if the IRS audited the adjustment year return and issued an NAP, the partnership would be unable to file an AAR to correct an IU reported on the AAR for the reviewed year, even though the audit of the adjustment year is completely unrelated to the AAR filed for the reviewed year. In addition, if the IU was a tax for the adjustment year, if the IRS examines the AAR, it may have to open two audits — one for the reviewed year to examine the adjustments, and one for the adjustment year for any calculation issues with the IU. If the IRS has to open an exam
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Section 6225.
TAX NOTES FEDERAL, VOLUME 191, MAY 4, 2026 For more Tax Notes® Federal content, please visit www.taxnotes.com.
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I Want My Two Dollars: Correcting a Prior Imputed Underpayment, Part 2