IRS expands relief for certain late-filed partnership tax returns

The IRS issued Notice 2017-71 on Nov. 30 providing additional relief for partnerships and real estate mortgage investment conduits (REMICs) that inadvertently late-filed certain partnership tax returns or other forms for tax years beginning after Dec. 31, 2015.

In 2015, Congress amended the due dates by which businesses must file tax returns, effective for tax years beginning after Dec. 31, 2015. Under the law change, partnerships must file Form 1065 or an extension by the 15th day of the third month following the close of the tax year. For calendar-year partnerships, this means Form 1065 or Form 7004 must be filed by March 15. Previously, the due date was April 15. A timely filed Form 7004 grants a partnership a six-month extension to file.

Recognizing that many partnerships were not aware of this law change, the IRS issued Notice 2017-47, which grants relief for certain penalties imposed for the first taxable year of any partnership that began after Dec. 31, 2015. The following conditions must be satisfied in order to obtain relief:

  1. The partnership filed Forms 1065, 1065-B, 8804, 8805, 5471, or other forms required to be filed with the IRS, and furnished copies (or Schedules K-1) to the partners, by the date that would have been timely prior to the change in law (the 15th day of the fourth month following the end of the tax year, or April 18, 2017, for calendar year partnerships); or
  2. The partnership filed Form 7004 to request an extension of time to file by the date that would have been timely prior to the change in law and subsequently files the return with the IRS and furnishes copies (or Schedules K-1) to the partners by the 15th day of the ninth month following the end of the tax year, or Sept. 15, 2017, for calendar year partnerships.

Notice 2017-47 did not however, include specific guidance related to regulatory elections that may have been made late as a result of those late-filed partnership tax returns. Notice 2017-71 treats acts by partnerships, REMICs, or any other entity that may be required to file Form 1065, which did file a Form 1065 as otherwise timely prior to the change in law by Congress in 2015, as being timely.

Liz Askey
Managing Director
Tax Practice Policy & Quality
T +1 202 521 1513

Shamik Trivedi
Senior Manager, Washington National Tax Office
T +1 202 521 1511

Tax professional standards statement
This content supports Grant Thornton LLP’s marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. If you are interested in the topics presented herein, we encourage you to contact us or an independent tax professional to discuss their potential application to your particular situation. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this content may be considered to contain written tax advice, any written advice contained in, forwarded with or attached to this content is not intended by Grant Thornton LLP to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.

The information contained herein is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice provided by Grant Thornton LLP to the reader. This material may not be applicable to, or suitable for, the reader’s specific circumstances or needs and may require consideration of tax and nontax factors not described herein. Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this information. Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton LLP assumes no obligation to inform the reader of any such changes. All references to “Section,” “Sec.,” or “§” refer to the Internal Revenue Code of 1986, as amended.