Litigating BBA Modification Denials: Open Questions, Potential Chaos POSTED ON NOV. 15, 2024
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. JENNI BLACK
In this post, Black explores unanswered questions facing partnerships that want to litigate the IRS’s denial of their requests to modify the calculation of imputed underpayments under the Bipartisan Budget Act’s partnership audit rules. Those familiar with the centralized partnership audit rules enacted by the Bipartisan Budget Act (no, it’s not called CPAR — it’s always been BBA and we’re not changing it now), know the calculation of the imputed underpayment (IU) (the partnership-level liability computed on adjustments to partnership-related items (PRIs) the partnership must pay unless it elects to push out the adjustments) will generally be much higher than the tax that would have been owed by the partners if the items were reported correctly. Because of this, Congress built into the BBA options for the partnership to either pay a lower IU (modification) or pay no IU by pushing out the adjustments to the partners for them to pay tax on (push out). This article will focus solely on modification. By way of quick overview, modification (as it is colloquially referred to) is a process by which the partnership can bring in partner-level tax attributes or have partners take into account their share of the adjustments (and pay any applicable tax) to lower the amount of the IU the