IRS Allows LIHTC Partnerships to Amend Tax Returns

The IRS recently released Revenue Procedure 2020-23, which allows the amending of Bipartisan Budget Act (BBA) partnership tax returns once Form 8609s are received for 2018 tax returns, as long as the partnership files an amended return by Sept. 30, 2020. In other words, the IRS guidance allows partnership tax returns to be amended as long as those amendments are submitted by Sept. 30.

The guidance allows partnerships to qualify and amend tax returns to claim the 100 percent bonus depreciations for qualified property improvements allowed under phase 3 of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. But, more importantly, the guidance also states that amended returns could be filed for “any other tax attributes to which the partnership is entitled by law.”

Often, partnerships file their tax returns before they receive their Form 8609 from their credit allocating agency. IRS Form 8609 allows taxpayers to claim the low-income housing tax credits. However, filing before receiving Form 8609 wasn’t widely viewed as a problem until 2018, because before that year, partnerships would file a return with zero low-income housing tax credits and then be able amend their return after receiving their Form 8609.

This practice changed with the Bipartisan Budget Act, which forbade partnerships from amending a tax return after its extended due date. Instead, partnerships had to make an administrative adjustment request (AAR). This meant that LIHTC credits would be earned in the year the AAR was filed and not the year the original partnership return was filed. As a result, credits were often claimed a year or more after they were earned.

With this IRS guidance, LIHTC owner partnerships can amend and can claim credits on their 2018 returns, even if they previously filed an AAR once their Form 8609 was received, as long as they get their IRS Form 8609 and file an amended tax return by Sept. 30, 2020.