The IRS Office of Chief Counsel concluded in a program manager technical advice memorandum (PMTA 2020-001
) that a 1984 revenue procedure was not obsoleted by the Bipartisan Budget Act of 2015 (BBA) and continues to apply in providing relief from late-filing penalties for certain small partnerships.
Rev. Proc. 84-35 provided that the Section 6698 penalty relating to the failure to file a partnership tax return, would not apply to small partnerships, defined as those that had 10 or fewer partners, each of whom is a natural person (other than a nonresident alien) or an estate, and each partner’s share of each partnership item is the same as such partner’s share of every other item. Rev. Proc. 84-35 defined a small partnership by looking to Section 6231(a)(1)(B), which was enacted as part of the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), and references the “small partnership exception” to the TEFRA procedures.
In 2015, with the enactment of the BBA, Congress repealed Section 6231(a)(1)(B). The issue posed to the Office of Chief Counsel was whether Rev. Proc. 84-35 was still in effect, considering the repeal of this provision. The Office of Chief Counsel determined that despite the repeal of the small partnership exception, that provision was in effect when Rev. Proc. 84-35 was originally issued, and “[thus], it is irrelevant that there does not exist any current Section 6231(a)(1)(B) that is generally effective and applicable to partnerships seeking relief under Revenue Procedure 84-35.” In addition, the legislative history of Section 6698 provided the basis for Rev. Proc. 84-35, and that statute was not affected by the repeal of TEFRA and the enactment of the BBA.
Partnerships that have late-filed Form 1065, that qualify as “small partnerships” under Rev. Proc. 84-35, should consider requesting relief from the IRS under that guidance, should they receive a notice proposing or assessing penalties under Section 6698.
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