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 factors that could limit a partnership’s ability to get a refund for 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 and part 2 discussed the year in which these methods would be done. This part discusses the limitations and impediments that exist that could hamper a partnership’s ability to get its $2 back. Sections 6235 and 6511 Unlike most other areas of the Internal Revenue Code, BBA has a period of limitations on
making adjustments, not assessment. Outside of BBA, adjustments can be made at any time, it’s just a matter of whether any change in tax related to the change can be assessed or refunded. Under section 6235, no adjustments can be made for the partnership tax year once the period of limitations on making adjustments has expired. But this does not necessarily mean that sections 6501 or 6511 do not apply in BBA. As discussed in part 2, the IU is assessed and collected as if it were a tax under subtitle A. Taxes under subtitle A can only be assessed if the section 6501 period of limitations on assessing is open. Section 6501 applies to taxes imposed by title 26. Although BBA isn’t located in subtitle A (even though it is assessed and collected as if it were a tax under subtitle A), it’s still in title 26. As the IU is assessed and collected as if it was a tax under subtitle A for the adjustment year and is part of Title 26, the IRS still has to assess the IU before the section 6501 period expires for the adjustment year.1 But what about refunds? Similar to section 6501, section 6511 applies to refunds of tax imposed by title 26, which would 2 arguably include the IU. Unlike with the 1982 Tax Equity and Fiscal Responsibility Act, there is nothing that excludes BBA from the rules under section 6511. So, that means the partnership can file a claim for a refund of the IU within three years of the date the return was filed (Which return? The AAR? Adjustment year return? Reviewed year return? See parts 1 and 2.) or two 1
I’m not addressing when the section 6501 period would start for purposes of assessing the IU in the adjustment year. Maybe I will tackle that at a future date. Same with when the period under section 6501(c)(12) begins. 2
Some say the IU is not a tax but just a liability. To me it’s poe-tay-toe, poe-tah-tah, but if that distinction mattered then there would be no way to get a refund of the IU and there would be an unlimited period to assess. So let’s just go with tax.
TAX NOTES FEDERAL, VOLUME 191, MAY 11, 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 3