Is the Statute Extension Valid for a BBA Partnership?
On January 31, 2025, the IRS Office of Chief Counsel released CCA 202505027 invalidating an agreement to extend the statute of limitations where an individual who signed the extension was different than the individual designated as the Partnership Representative (“PR”) on the Form 1065 filed with IRS (or the Designated Individual (“DI”) if an entity is the PR). Generally, the statute of limitations is three years from the date the return is filed or its original due date, whichever comes later. (§6235(a).) Code §6235(b) allows a taxpayer to extend the statute of limitations by agreement with the IRS, and if the taxpayer is a partnership subject to the BBA, Form 872-M,
BBA Consent to Extend Time for Making Adjustments to Partnership-Related Items, is used to extend the statute to a specified date agreed to by the IRS and the partnership.
According to the CCA, the IRS and the partnership agreed to extend the statute of limitations under §6235(b), and Form 872-M was signed by the PR/DI of the partnership. However, the PR/DI of the partnership who signed the Form 872-M was not the same individual designated on Form 1065 when the tax return was filed, and Form 8979 was never used to change the PR/DI designation for the year under exam. Therefore, Form 872-M was held to be invalid, and the period of limitations expired prior to the IRS issuing Letter 5892,
Notice of Proposed Adjustment (“NOPPA”).
By way of example, RED LP is a partnership that is subject to the BBA and is under IRS exam for its 2020 tax year. Abbie was designated as the PR on Form 1065 when RED LP filed its return for the 2020 tax year on March 15, 2021. However, tax returns filed for tax years after 2020 designated Ben as the PR. Prior to the expiration of the three-year statute of limitations on March 15, 2024, for the 2020 partnership return, Ben agreed to extend the statute of limitations until March 15, 2025, by executing Form 872-M. After March 15, 2024, RED LP’s CPA noticed that Ben, not Abbie, signed the statute extension on Form 872-M. Thus, the Form 872-M executed by Ben was invalid because Ben was not the PR designated on the Form 1065 for the 2020 tax year, nor was Form 8979 used to change the PR designation to Ben for the year under audit. Because the executed Form 872-M was invalid, the statute of limitations passed prior to the IRS issuing Letter 5892 (i.e., the NOPPA) thereby concluding the IRS exam.
So, depending on the situation, IRS or taxpayers beware!