During the Q&A portion of this past seminar season, several Forum attendees queried whether the IRS may issue guidance that would permit taxpayers to withdraw an election made under §163(j)(7) (i.e., an electing real property trade or business election or an electing farming business election), as well as guidance concerning the ability to withdraw an election out of bonus depreciation because of the changes made by OBBBA. Recall that effective for tax years beginning on or after January 1, 2022, OBBBA reinstated a favorable provision that adds back depreciation and amortization to adjusted taxable income (“ATI”) for determining the adjusted taxable income limitation under §163(j) and restored 100% bonus depreciation under §168(k).
The IRS heard these concerns and on March 18, 2026, issued Rev. Proc. 2026-17, 2026-15 IRB __. The revenue procedure provides the needed direction and transition relief following these statutory changes made by OBBBA. More specifically, the revenue procedure permits a taxpayer who previously made an election under §163(j)(7) for a tax year beginning in 2022, 2023 or 2024 to withdraw such election. The guidance also permits a taxpayer to withdraw an election out of §168(k) for the same tax years. To implement this relief, a taxpayer must file an amended return for 2022, 2023 and 2024, as applicable (as well as any other affected tax year) – including a taxpayer who received an amended Schedule K-1 from a pass-through entity – and follow the procedures set forth in the revenue procedure.
If the taxpayer is a partnership subject to the BBA, the partnership may file an AAR (or multiple AARs) to reflect the change, or, instead, the partnership may file an amended partnership tax return(s) and issue amended Schedule K-1s to its partners. (Note that this is temporary relief from the general rule that a BBA partnership cannot file an amended partnership return.) All amended returns or AARs must be filed by the earlier of (i) October 15, 2026, or (ii) the end of the applicable period of limitations on assessment for the taxable year for which the amended return is being filed (or, in the case of a partnership filing an AAR, the last day of the §6227(c) period during which the partnership may file an AAR for the taxable year for which the election was made).
Free Webinar & Spring “Fundamentals” Registration Open
We’re pleased to announce our first complimentary webinar of 2026 will take place on April 29 at 12 noon CST. The hour long program will focus on issues related to the disposition of a partnership interest and is offered free of charge with advance registration. Also on tap for Spring are two virtual sessions of our newly enhanced Fundamentals of Flow-Through® program, which contain live Q&A sessions. They’re scheduled for May 19-21 and June 23-25; Early Bird registration now available!