On March 24, 2026, we published an article about Rev. Proc. 2026-17, and, today, we are supplementing that article to emphasize a short window of opportunity for certain BBA partnerships. This window of opportunity allows BBA partnerships to withdraw an election made under (i) §163(j)(7)(B) to be an electing real property trade or business, (ii) §163(j)(7)(C) to be an electing farming business, or (iii) an election under Reg. §1.163(j)-1(b)(15)(ii) to be an excepted regulated utility trade or business (a “§163(j)(7) Election”) by opting to file an amended partnership return, rather than filing an AAR for §163(j)(7) Elections made for 2022, 2023 and 2024 tax years.

Before we get into more detail about this short window of opportunity for certain BBA partnerships, recall that Rev. Proc. 2026 17 provides guidance and transition relief that allows taxpayers to withdraw a §163(j)(7) Election that was made in 2022, 2023 or 2024. A taxpayer might want to withdraw such an election because of changes made by OBBBA that 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 also restored 100% bonus depreciation under §168(k). Taxpayers withdrawing this election may also make a late §168(k)(7) election to opt out of bonus depreciation with respect to a class of depreciable property that includes property affected by the withdrawal of the §163(j)(7) election.

Now for more on the window of opportunity. In addition to withdrawing the §163(j)(7) Election (and possibly opting out of bonus depreciation), a partnership can correct any errors that were made on the 2022, 2023 or 2024 tax return that reflected the making of a §163(j)(7) Election. The revenue procedure states that a taxpayer may withdraw the §163(j)(7) Election by filing an amended return on or before 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. Amended Schedules K-1 also must be issued by the same date. In the case of a BBA partnership filing an AAR, similar filing due date rules exist, but keep in mind that a new three-year statute of limitations begins when an AAR is filed. However, the revenue procedure specifically states that a BBA partnership may “opt to file an amended Form 1065 and furnish amended Schedules K-1 instead of filing an AAR,” which will not result in the start of a new three-year statute of limitations – a much better result.

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