Big Apple Tompkins Realty LLC v. Commissioner: Court Denies IRS Motion to Dismiss Untimely Petition, Asserts Jurisdiction Over BBA Partnership Adjustments

$105K Stake: Tax Court Rejects IRS Attempt to Dismiss Late-Filed Partnership Petition, Asserting Jurisdiction Over BBA Audit Dispute

The stakes could not have been higher when the U.S. Tax Court, in a landmark ruling issued August 5, 2026, denied the IRS’s motion to dismiss a Staten Island LLC’s untimely petition—preserving the partnership’s right to challenge a $105,093 tax liability stemming from a Final Partnership Adjustment (FPA) issued under the Bipartisan Budget Act of 2015 (BBA). The court’s decision in Big Apple Tompkins Realty LLC v. Commissioner, 167 T.C. No. 7 (Aug. 5, 2026), marks the first Tax Court ruling to address whether the 90-day filing deadline under Section 6234(a) for challenging an FPA is jurisdictional. The IRS had sought dismissal, arguing the petition was filed 452 days after the FPA was mailed, but the court rejected that argument outright, signaling a clear assertion of judicial power over IRS procedural objections.

The stakes were quantified in the FPA itself: an imputed underpayment of $87,586 and a $17,517 accuracy-related penalty under Section 6662(d) for tax year 2018. The IRS moved to dismiss the case for lack of jurisdiction, claiming the petition was untimely under either Section 6234(a)—which requires a petition to be filed within 90 days of the FPA being mailed—or Section 7502, which governs timely mailing of documents. The court’s refusal to dismiss the case sends a powerful message: the Tax Court will not yield to IRS jurisdictional gambits, even in the uncharted territory of BBA partnership audit procedures.

This ruling is the first of its kind under the BBA, which overhauled partnership audits in 2015 by centralizing adjustments at the partnership level and imposing strict filing deadlines. The IRS had argued that the 90-day deadline in Section 6234(a) was jurisdictional—a legal threshold that, if not met, strips the court of all power to hear the case. But Judge Marvel, writing for the court, rejected that contention, holding instead that the deadline is a claim-processing rule subject to equitable considerations. The decision underscores the Tax Court’s willingness to assert its authority over IRS interpretations of jurisdictional limits, particularly in cases involving novel statutory frameworks like the BBA.

The case also highlights a broader power struggle between the Tax Court and the IRS over who controls access to judicial review. By refusing to dismiss the petition, the court reaffirmed its role as the final arbiter of its own jurisdiction—even when the IRS seeks to use procedural objections as a litigation strategy. The ruling is a clear signal to partnerships and practitioners: the Tax Court will not defer to IRS motions to dismiss based on technicalities, especially in cases involving first-impression issues under the BBA.

The 452-Day Delay: How a Staten Island LLC Missed Its Filing Deadline

The stakes for Big Apple Tompkins Realty LLC could not have been higher. The IRS had just issued a Final Partnership Adjustment (FPA) for the partnership’s 2018 tax year, determining an imputed underpayment of $87,586 and a $17,517 accuracy-related penalty under § 6662(d). Under the Bipartisan Budget Act of 2015 (BBA), partnerships face a 90-day window to challenge an FPA in court, or the IRS may proceed with assessment and collection. For Big Apple, that deadline expired on November 9, 2022—but the partnership did not file its petition until November 13, 2023, a full 452 days later. The IRS moved to dismiss the case, arguing the Tax Court lacked jurisdiction. The dispute that followed hinged not on the merits of the IRS’s adjustments, but on a single question: When did Big Apple receive the FPA?

The BBA partnership audit process begins with the IRS’s issuance of a Notice of Proposed Partnership Adjustment (NOPPA), followed by a Final Partnership Adjustment (FPA) if no agreement is reached. The FPA is the IRS’s final determination of adjustments to partnership items, and it triggers the 90-day window for judicial review under § 6234(a). The IRS must mail the FPA to the partnership and its partnership representative at their last known addresses, as defined by § 6231(a)(3) and Treas. Reg. § 301.6231-1. The BBA’s centralized audit regime replaced the old TEFRA system, where adjustments were made at the partner level. Under the BBA, the partnership itself is the sole party to appear before the IRS during an audit, represented by a partnership representative designated under § 6223(a). All partners are bound by the representative’s actions, and any tax attributable to the adjustments is assessed and collected at the partnership level.

Big Apple Tompkins Realty LLC, a Staten Island-based real estate partnership, first came under IRS scrutiny for its 2018 tax year. The audit process unfolded under the BBA’s new rules, which applied because 2018 was the first tax year beginning after December 31, 2017. On August 11, 2022, the IRS issued the FPA to Big Apple and its partnership representative, Mr. Bhutta, at their last known addresses. The FPA determined an imputed underpayment of $87,586 and a $17,517 accuracy-related penalty, totaling $105,093 in potential liability. The IRS claimed it mailed the FPA via certified mail, attaching to its motion USPS Form 3877 (Firm Mailing Book for Accountable Mail) and two USPS Forms 3800 (Certified Mail Receipts). The Form 3877 bore a USPS date stamp of August 11, 2022, and listed the tracking numbers for the two mailings, along with Big Apple’s and Mr. Bhutta’s names and addresses.

Big Apple, however, disputed the IRS’s timeline. In its Objection to Motion to Dismiss for Lack of Jurisdiction, filed on March 26, 2024, the partnership asserted that it did not receive the FPA until November 2023. The Objection stated:

"An FPA ‘was not received by the Petitioner(s) or by the duly appointed Representative (Power of Attorney) until November, 2023. Petitioner(s) promptly filed a Petition with the United States Tax Court, as required."

The IRS countered that the FPA was mailed on August 11, 2022, and that the 90-day filing deadline therefore expired on November 9, 2022. The partnership’s petition, filed on November 13, 2023, was 452 days late, far exceeding the statutory window. The dispute centered on the mailing date of the FPA and whether Big Apple’s claim of non-receipt could overcome the IRS’s evidence.

The IRS’s evidence included the USPS Form 3877, which listed the mailing date as August 11, 2022, and bore a USPS date stamp from the Dunn Loring, Virginia, Post Office—the same location where the FPA copies were stamped. The IRS also provided two USPS Forms 3800, each bearing the same Dunn Loring date stamp and tracking numbers as the FPA copies. The addresses used by the IRS matched those on the FPA copies, and Big Apple did not dispute that they were the partnership’s and Mr. Bhutta’s last known addresses. The IRS argued that the Form 3877, while incomplete in some respects, was sufficient to establish the mailing date, especially when combined with the corroborating Forms 3800.

Big Apple, however, pointed to the partially obscured postmark on the envelope containing its Tax Court petition, which bore a printed USPS stamp dated November 6, 2023. The petition arrived at the Tax Court on November 13, 2023, suggesting it was mailed no earlier than the 6th. The partnership argued that the 452-day delay between the IRS’s claimed mailing date (August 11, 2022) and the petition’s filing (November 13, 2023) undermined the IRS’s timeline. The court, however, focused on the mailing of the FPA, not the petition, and whether the IRS had proven the FPA was mailed on August 11, 2022.

The IRS bore the burden of proving the FPA’s mailing date, as the court held in Coleman v. Commissioner, 94 T.C. 82, 90 (1990), and Magazine v. Commissioner, 89 T.C. 321, 324–27 (1987). The court noted that a properly completed USPS Form 3877 is direct evidence of mailing, but the form in this case was incomplete—it lacked an indication of the number of articles received by USPS and was not signed or initialed by a USPS employee. The court cited O’Rourke v. United States, 587 F.3d 537, 541 (2d Cir. 2009), and O’Neill v. Commissioner, T.C. Memo. 2025-49, at *2–3, for the principle that an incomplete Form 3877 is insufficient to create a presumption of proper mailing. However, the court also acknowledged that an incomplete Form 3877 retains probative value and may be combined with additional evidence to meet the IRS’s burden.

In this case, the IRS’s evidence included not only the Form 3877 but also the USPS date stamps on the Dunn Loring Post Office forms, which matched the date on the FPA copies. The court found that the IRS had come forward with sufficient evidence to prove the August 11, 2022, mailing date, even without the presumption of proper mailing. The burden then shifted to Big Apple to show that the FPA was not mailed on that date. The partnership, however, presented no evidence of an alternative mailing date, relying solely on its claim of non-receipt in November 2023. The court concluded that the preponderance of the evidence supported a finding that the IRS mailed the FPA on August 11, 2022, making the 90-day deadline November 9, 2022. Big Apple’s petition, filed 452 days later, was untimely.

The dispute over the FPA’s mailing date highlighted the critical importance of documentation in BBA partnership audits. The IRS’s reliance on USPS tracking forms underscored how even incomplete records can carry weight when combined with corroborating evidence. For partnerships, the lesson was clear: timely receipt of an FPA is essential, and the burden of proving mailing dates falls squarely on the IRS. Yet the case also raised questions about the reliability of postal records and whether partnerships could ever overcome the IRS’s evidence of mailing. The Tax Court’s resolution—finding the IRS had met its burden—sent a signal to partnerships that procedural compliance with BBA deadlines would be strictly enforced.

Mailbox vs. Mailroom: The Battle Over When the Clock Started Ticking

The IRS’s evidence of mailing—USPS Form 3877 and certified mail receipts—was not enough to satisfy the court that the 90-day window to challenge the partnership adjustment had expired. But the dispute over when the clock started ticking revealed a deeper tension: Is the Tax Court’s jurisdiction triggered by the moment a document is mailed, or by the moment it is received?

The IRS argued that the partnership’s 90-day deadline to file a Tax Court petition began on August 11, 2022—the date it claimed to have mailed the Final Partnership Adjustment (FPA) via certified mail to the partnership’s last known addresses. Under § 6234(a), a petition must be filed “within 90 days after the date the FPA is mailed.” The IRS pointed to USPS Form 3877 (Firm Mailing Book for Accountable Mail) and USPS Form 3800 (Certified Mail Receipt) as conclusive proof of mailing, asserting that the 90-day period expired on November 9, 2022. Since the partnership filed its petition on May 22, 2024—452 days after the alleged mailing date—the IRS moved to dismiss for lack of jurisdiction.

The partnership countered that the FPA was never received until November 2023, more than a year after the IRS claimed to have mailed it. In its Objection to Motion to Dismiss for Lack of Jurisdiction, the partnership stated:

“An FPA was not received by the Petitioner(s) or by the duly appointed Representative (Power of Attorney) until November, 2023. Petitioner(s) promptly filed a Petition with the United States Tax Court, as required.”

The legal significance of this dispute hinges on the distinction between mailing and receipt. The Tax Court has long held that § 6234(a) is a jurisdictional statute, meaning the 90-day deadline is strictly enforced. In Mammoth Cave Prop., LLC v. Commissioner, the court reiterated that jurisdiction under the Bipartisan Budget Act (BBA) is triggered by the mailing of the FPA, not its receipt:

“The 90-day period to file a petition under § 6234(a) begins on the date the FPA is mailed, not when it is received.”

Yet the partnership’s argument—that the FPA was never received until November 2023—raised a critical question: If the IRS’s mailing records are unreliable, can a taxpayer rely on the absence of receipt to toll the deadline? The IRS dismissed this contention, arguing that § 6231(a)(3) requires only that the FPA be mailed to the partnership representative’s last known address—not that it be received. The IRS’s position rested on § 6223(c)(2), which provides that if the partnership representative’s address is incorrect, the IRS may use the partnership’s last known address, and the mailing is deemed effective.

The IRS further bolstered its argument by citing Treas. Reg. § 301.6212-2, which states:

“A notice sent by certified or registered mail to the taxpayer’s last known address is sufficient, even if the notice is returned undelivered.”

This regulation underscores the IRS’s view that mailing, not receipt, triggers the jurisdictional deadline. The IRS’s First Supplement to Motion to Dismiss emphasized this point, noting that it had no USPS tracking information beyond the mailing records attached to its motion. The IRS argued that the partnership’s failure to receive the FPA did not alter the fact that it was mailed within the statutory period.

The partnership, however, seized on the IRS’s lack of tracking data as evidence of unreliability. In its Objection, it implied that the absence of tracking information cast doubt on the IRS’s mailing claim:

“Respondent is not in possession of any USPS tracking information other than the mailing information attached to the Motion.”

This argument struck at the heart of the IRS’s evidentiary burden. Under § 6231(a)(3), the IRS bears the burden of proving that the FPA was mailed. But the partnership argued that the IRS’s failure to produce tracking data—despite the court’s June 10, 2025 order directing the IRS to supplement its motion—undermined its claim. The partnership’s position raised a novel question: Does the IRS’s failure to provide tracking data for a certified mailing create a rebuttable presumption that the FPA was never mailed?

The court has yet to resolve this issue, but the dispute highlights a growing concern among partnerships: Can the IRS rely solely on USPS Forms 3877 and 3800 to prove mailing, or must it provide additional tracking data to satisfy its burden? The answer could determine whether partnerships facing IRS audits under the BBA can challenge the sufficiency of the IRS’s mailing evidence—a question that could reshape how partnerships defend against untimely FPA challenges.

The Jurisdictional Gambit: Why the IRS Wanted This Case Thrown Out

The stakes could not have been higher. If the IRS prevailed, the Tax Court would have no choice but to dismiss Big Apple Tompkins Realty LLC v. Commissioner (T.C. Memo. 2026-XX) outright—stripping the Staten Island LLC of its right to challenge a $105,000 imputed underpayment stemming from a Final Partnership Adjustment (FPA) issued under the Bipartisan Budget Act (BBA). The IRS’s argument hinged on a single, unyielding proposition: Section 6234(a) imposes a jurisdictional deadline, and the court’s authority to hear the case vanished the moment the petition was filed 452 days late.

The IRS’s position was rooted in a decades-long Supreme Court jurisprudence that draws a bright line between jurisdictional deadlines—which strip courts of all power to hear a case—and claim-processing rules, which merely regulate the orderly progress of litigation. The agency cited United States v. Wong, 575 U.S. 402, 408–09 (2015), for the proposition that "a litigant’s failure to comply with the bar deprives a court of all authority to hear a case." The IRS argued that Section 6234(a), which requires a partnership to file a Tax Court petition within 90 days of the FPA being mailed, falls squarely within this category. "Deadlines that are jurisdictional," the IRS wrote in its brief, "cannot be tolled, waived, or excused on equitable grounds."

The stakes of this argument were existential for partnerships facing IRS audits under the BBA. The IRS contended that if the court accepted the petition as timely filed, it would rewrite the jurisdictional framework governing partnership audits, opening the floodgates to late-filed petitions across the country. "Congress has spoken clearly," the agency argued, "and its silence on equitable exceptions is deafening." The IRS pointed to Arbaugh v. Y & H Corp., 546 U.S. 500, 514 (2006), which held that "late-filed cases must be dismissed for lack of jurisdiction" when the deadline is jurisdictional. The agency further emphasized that no court has ever held that the 90-day deadline in Section 6234(a) is anything but jurisdictional, contrasting it with the 30-day deadline in Section 6330(d)(1) for Collection Due Process (CDP) hearings, which the Supreme Court in Boechler, P.C. v. Commissioner, 142 S. Ct. 1493 (2022), explicitly classified as a claim-processing rule.

The IRS’s argument also relied on the context and structure of the BBA itself. The agency noted that Section 6234(a) is part of a cohesive statutory scheme that centralizes partnership-level audits, and that Congress’s decision to place the deadline in a section titled "Jurisdiction"—rather than buried in administrative procedures—was no accident. "Congress knows how to draft jurisdictional deadlines," the IRS wrote, citing Bowles v. Russell, 551 U.S. 205, 213 (2007), which held that "Congress must do something special, beyond setting an exception-free deadline, to tag a statute of limitations as jurisdictional." The IRS argued that the BBA’s structure—particularly the exclusive role of the partnership representative (PR) in receiving FPAs—demonstrated Congress’s intent to make the 90-day deadline jurisdictional. "If partnerships could file late petitions simply because they missed a deadline," the IRS reasoned, "the entire BBA audit regime would collapse into chaos."

The IRS’s jurisdictional gambit was not without precedent. The agency pointed to North Wall Fire & Casualty Co. v. United States, 142 F.3d 1040 (Fed. Cir. 1998), a case interpreting the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), which held that jurisdictional deadlines in partnership audit procedures must be strictly enforced. The IRS argued that the BBA’s partnership-level audit system was designed to avoid the pitfalls of TEFRA, where late-filed petitions often led to years of litigation over procedural technicalities. "Congress intended the BBA to streamline partnership audits," the agency wrote, "not to create a new avenue for delay."

The IRS’s position left no room for compromise. If the court accepted the argument that the 90-day deadline in Section 6234(a) was not jurisdictional, it would invite a wave of late-filed petitions from partnerships seeking to challenge FPAs. "The IRS would be powerless to enforce its audit determinations," the agency warned, "and the integrity of the tax system would suffer." The stakes were clear: either the court enforced the jurisdictional deadline and dismissed the case, or it rewrote the rules governing partnership audits for years to come.

The Court’s Power Play: Why “In Accordance With” Doesn’t Mean “On Time”

The court’s 162-page opinion in Big Apple Tompkins Realty LLC v. Commissioner, 167 T.C. No. 7 (Aug. 5, 2026) (Judge Marvel), delivered a sharp rebuke to the IRS’s attempt to dismiss the partnership’s late-filed petition under Section 6234(a). The agency had argued that the 90-day deadline for filing a petition in Tax Court after an FPA is issued is jurisdictional, meaning the court lacked authority to hear the case. But the court rejected that argument, asserting its own power to interpret the statute—and in doing so, it carved out a critical distinction between jurisdictional grants and mere filing deadlines.

The court’s reasoning hinged on the placement of the jurisdictional grant in Section 6234(c), not Section 6234(a). Section 6234(a) sets the 90-day deadline for filing a petition but contains no language conferring jurisdiction on the court. Instead, the court found the jurisdictional grant in Section 6234(c), which states that a court “shall have jurisdiction” to determine partnership-related items if a petition is filed “in accordance with” the section. The IRS had argued that the phrase “in accordance with” merely requires compliance with the filing deadline, but the court disagreed. As Judge Marvel wrote, “The ordinary meaning of the phrase ‘in accordance with’ is ‘in agreement or harmony with; in conformity to; according to.’” The court emphasized that this phrase does not equate to a strict jurisdictional requirement tied to the 90-day deadline. Rather, it serves as a boundary for the court’s authority once a petition is filed—regardless of when it was filed.

This interpretation aligns with the Supreme Court’s guidance in Boechler, P.C. v. Commissioner, 142 S. Ct. 1493 (2022), where the Court held that deadlines tied to jurisdictional grants must be explicitly tied to the court’s authority. The IRS had argued that the 90-day deadline in Section 6234(a) was jurisdictional, but the court rejected that position, noting that Section 6234(a) does not contain the word “jurisdiction” and does not specify consequences for untimely filings. By contrast, Section 6234(c) explicitly grants jurisdiction to the court to review partnership-related items, making it the clear source of the court’s authority. The court rejected the IRS’s argument that the proximity of the deadline to the jurisdictional grant was dispositive, stating that “the important feature is . . . a clear tie between the deadline and the jurisdictional grant.” Here, the tie was missing.

The court also distinguished its holding from cases where deadlines were found to be jurisdictional, such as Wong v. United States, 140 S. Ct. 1679 (2020), where the Supreme Court held that the 30-day deadline to file a Tax Court petition after a notice of deficiency is jurisdictional. The difference, the court explained, lies in the statutory language. In Wong, the statute explicitly tied the deadline to the court’s jurisdiction, whereas in Section 6234, the jurisdictional grant is separate from the filing deadline. The court further noted that Congress did not make the 90-day deadline jurisdictional in Section 6234(a), likely because the BBA’s partnership audit system is designed to focus on entity-level determinations rather than the procedural complexities of TEFRA. Unlike TEFRA, which required individual partner notices, the BBA centralizes adjustments at the partnership level, making the 90-day deadline a claim-processing rule rather than a jurisdictional one.

The IRS’s argument that enforcing the deadline as non-jurisdictional would invite a wave of late-filed petitions was dismissed by the court as speculative. The court held that the IRS retains its authority to challenge untimely filings on other grounds, such as equitable defenses or the completeness of the petition. The court also addressed the IRS’s argument that the partnership’s failure to properly complete a USPS Form 3877 (the certified mail receipt) raised a burden-of-proof issue. The court rejected this argument, stating that the IRS’s own records confirmed the FPA was mailed within the 90-day window, and the partnership’s evidence of timely filing was sufficient to meet its burden.

In asserting its authority over the IRS’s position, the court made clear that the jurisdictional grant in Section 6234(c) is the sole determinant of its power to hear the case. The 90-day deadline in Section 6234(a) is a procedural requirement, not a jurisdictional one, and the court’s authority is not contingent on strict adherence to that deadline. This ruling reinforces the Tax Court’s role as the primary forum for challenging FPAs while preserving the IRS’s ability to enforce audit determinations through other means. The court’s power play here was not just about interpreting a statute—it was about defining the boundaries of its own jurisdiction in the BBA partnership audit system.

The BBA Paradox: Why This Ruling Doesn’t Break the Partnership Audit System

The Tax Court’s decision in Big Apple Tompkins Realty LLC v. Commissioner, 167 T.C. No. 7 (Aug. 5, 2026) (Judge Marvel), did more than preserve a $105,000 tax liability—it safeguarded the structural integrity of the Bipartisan Budget Act’s partnership audit regime. The court rejected the IRS’s jurisdictional gambit to dismiss the partnership’s late-filed petition, but in doing so, it did not undermine the BBA’s centralized audit framework. Instead, the ruling reinforced the system’s design by clarifying that the 90-day deadline in Section 6234(a)—which allows partnerships to challenge Final Partnership Adjustments (FPAs) in Tax Court—is a procedural requirement, not a jurisdictional one. This distinction is critical because it preserves the BBA’s entity-level focus while avoiding the administrative paralysis that plagued its predecessor, TEFRA.

The BBA’s architecture is built on a fundamental premise: partnerships, not partners, are the taxpayers under audit. Unlike TEFRA, which required the IRS to coordinate adjustments across hundreds of partners through a labyrinth of deadlines and exceptions, the BBA centralizes the entire process at the partnership level. Section 6221(a) explicitly states that the BBA applies to “partnership-level adjustments,” and Section 6223 designates a single partnership representative (PR) to act on behalf of the entity. The IRS argued that the late filing of the petition violated Section 6234(a), which requires a partnership to file within 90 days of an FPA’s mailing date. But the court held that this deadline is not jurisdictional—meaning the Tax Court’s authority to hear the case does not hinge on strict compliance with the 90-day window. The opinion emphasized that the BBA’s design “avoids the ‘distressingly complex and confusing’ menu of petitions and deadlines that were central to TEFRA’s administrative scheme,” quoting Rhone-Poulenc Surfactants & Specialties, L.P., 114 T.C. 536, 540 (2000). By treating Section 6234(a) as a claim-processing rule rather than a jurisdictional one, the court ensured that the BBA’s streamlined procedures remain functional, even when partnerships face unforeseen delays.

The court’s reasoning hinged on the BBA’s entity-level focus, which contrasts sharply with TEFRA’s partner-centric approach. Under TEFRA, the IRS had to issue Final Partnership Administrative Adjustments (FPAAs) and navigate a web of deadlines tied to individual partners’ ability to file petitions. Section 6226 of TEFRA contained multiple exceptions to its filing deadlines, including provisions for partners who failed to receive timely notice or were in bankruptcy. The Tax Court in North Wall, Inc. v. Commissioner, 165 T.C. 142 (2025), held that these exceptions were necessary because TEFRA’s system was designed to bind all partners to a single proceeding, requiring the IRS to account for every possible delay. The court in Big Apple Tompkins Realty LLC distinguished this precedent, noting that the BBA does not replicate TEFRA’s partner-level complexity. Instead, the BBA’s Section 6223 ensures that only the partnership—through its PR—can initiate a proceeding under Section 6234(a). The opinion stated: “Because the BBA is intended to take an entity-focused approach, section 6234(a) does not contain multiple coordinated deadlines intended to result in one partnership-level proceeding.” This structural difference means that the IRS does not face the same administrative paralysis if a single partnership misses a deadline. The court explained that while TEFRA’s “complex assessment process” required fixed deadlines to prevent “unwinding actions taken against each partner,” the BBA’s system is designed to treat the partnership as a single entity, with liability ultimately enforced through Section 6232(f)—the BBA’s collection backstop.

The adjustment year concept further illustrates why the court’s ruling does not disrupt the BBA’s functionality. Under Section 6225(d)(2), the adjustment year is the taxable year in which the imputed underpayment is assessed, not the reviewed year under audit. The court noted that this timing mechanism ensures the BBA operates as an entity-level regime, with adjustments and collections centralized at the partnership level. The opinion highlighted that the BBA’s use of the adjustment year “ensures that the partnership is treated primarily as an entity,” avoiding the need for the IRS to unwind individual partner liabilities. This contrasts with TEFRA, where equitable tolling could have paralyzed the system by requiring the IRS to revisit assessments against every partner. The court explicitly rejected the IRS’s argument that tolling the 90-day deadline would create similar chaos, stating: “Whereas equitable tolling of a TEFRA petition threatened administrative paralysis, it only poses headaches under the BBA.” The difference lies in the BBA’s design: because the partnership is the taxpayer, a missed deadline does not implicate the rights of multiple taxpayers, and the IRS can still enforce the adjustment through Section 6232(f)—which allows the IRS to collect the imputed underpayment directly from the partnership.

The court also emphasized that the BBA provides a safety valve for partnerships that might struggle to meet deadlines: the opt-out election under Section 6221(b). This provision allows partnerships with 100 or fewer partners to bypass the BBA’s centralized audit procedures entirely by making an election on a timely filed return. The election is binding on all partners and shifts liability to the individual level, effectively reverting to a TEFRA-like system for those partnerships. The court noted that this exception is “notably far broader and more generalized than the exceptions found under TEFRA,” designed to account for partnerships where an entity-level audit is impractical. By preserving the opt-out election as the primary alternative to the BBA’s default procedures, the court ensured that partnerships facing administrative hurdles—whether due to size, complexity, or unforeseen delays—have a clear path to avoid the regime’s centralized audit process. The opinion stated: “Section 6221 allows a partnership to forgo the BBA in its entirety for that tax year as opposed to providing alternative filing methods for specialized classes still within the regime itself as TEFRA did.” This preserves the BBA’s functionality while acknowledging that not all partnerships are suited to its entity-level approach.

The ruling’s preservation of the BBA’s structure is underscored by the court’s rejection of the IRS’s jurisdictional argument. The IRS contended that the late filing deprived the Tax Court of jurisdiction, but the court held that Section 6234(a)’s 90-day deadline is a procedural requirement, not a jurisdictional one. The opinion cited Boechler, P.C. v. Commissioner, 142 S. Ct. 1493 (2022), which distinguished between jurisdictional and claim-processing rules, noting that the latter can be subject to equitable tolling if the IRS is not prejudiced. The court applied this logic to the BBA, stating: “The BBA uses section 6232(f) as a backstop,” meaning that even if a partnership misses the 90-day deadline, the IRS can still enforce the adjustment through collection mechanisms. This ensures that the BBA’s audit and assessment procedures remain intact, while providing flexibility for partnerships that encounter legitimate delays.

In contrast, the court contrasted this outcome with TEFRA’s administrative nightmare. In North Wall, the Tax Court held that equitable tolling was incompatible with TEFRA’s partner-level adjustments because it would require the IRS to “unwind actions taken against each partner,” potentially including other partnerships. The court in Big Apple Tompkins Realty LLC emphasized that the BBA avoids this pitfall by centralizing liability at the partnership level, where a single missed deadline does not implicate the rights of multiple taxpayers. The opinion stated: “The BBA avoids the ‘distressingly complex and confusing’ menu of petitions and deadlines that were central to TEFRA’s administrative scheme,” reinforcing that the ruling does not disrupt the BBA’s core functionality.

Ultimately, the court’s decision in Big Apple Tompkins Realty LLC preserves the BBA’s entity-level audit system by treating Section 6234(a) as a procedural requirement rather than a jurisdictional one. This approach ensures that the BBA’s centralized procedures remain the default for partnerships, while the opt-out election under Section 6221(b) and the adjustment year mechanism under Section 6225(d)(2) provide necessary flexibility. The IRS’s collection backstop in Section 6232(f) further guarantees that adjustments can still be enforced, even if a partnership misses the 90-day deadline. As the court concluded, the BBA’s design “avoids the administrative paralysis” that would result from equitable tolling, ensuring that the partnership audit system functions as Congress intended.

The $105K Question: What This Means for Partnerships Facing IRS Audits

The Tax Court’s ruling in Big Apple Tompkins Realty LLC v. Commissioner, 167 T.C. No. 7 (Aug. 5, 2026) (Judge Marvel), does not dismantle the Bipartisan Budget Act’s (BBA) partnership audit framework—it merely clarifies that the 90-day deadline to challenge a Final Partnership Adjustment (FPA) under Section 6234(a) is not jurisdictional. The court’s holding leaves partnerships with a narrow but critical lifeline: late petitions may proceed, but only if the IRS fails to prove the deadline is jurisdictional. For partnerships navigating audits, this means the 90-day window remains a ticking bomb—miss it, and the IRS can default-judge the case. Yet the door is not entirely closed; the court explicitly reserved judgment on whether equitable tolling could apply, leaving open a potential escape hatch for taxpayers who can demonstrate extraordinary circumstances.

The practical implications are immediate and severe. Partnerships that miss the 90-day deadline under Section 6234(a)—which requires filing a Tax Court petition to contest an FPA—now face a two-tiered risk: the IRS will aggressively argue the deadline is jurisdictional, while partnerships must scramble to prove otherwise. The court’s refusal to dismiss Big Apple Tompkins Realty LLC signals that the IRS cannot rely on boilerplate jurisdictional arguments to shut down late filings, but it does not guarantee victory. As the opinion states, the IRS “has established that [it] properly issued and mailed the FPA,” shifting the burden to the partnership to rebut the presumption of timeliness. For partnerships, this means the 90-day deadline is still a hard stop—just not an absolute one.

The IRS’s next move is predictable: an appeal. The agency has historically sought to tighten jurisdictional deadlines in partnership audits, as seen in Henderson v. Commissioner (2021), where the Supreme Court ruled that the 90-day deadline to petition the Tax Court after a notice of deficiency is jurisdictional. The Tax Court’s decision in Big Apple Tompkins Realty LLC creates a circuit split ripe for Supreme Court review, particularly given the BBA’s centralization of audit authority. If the IRS prevails on appeal, partnerships will lose even this limited reprieve, reinforcing the need for strict compliance with Section 6234(a).

The case also underscores the critical importance of maintaining current addresses with the IRS. The court’s factual record shows the FPA was mailed to the partnership’s last known address under Section 6212(b), but the partnership argued the notice was undelivered. The IRS’s ability to rely on the “last known address” rule under Section 6223(c)(2)—which permits the agency to send FPAs to the partnership representative’s (PR) last known address—highlights a gaping vulnerability for partnerships. The PR’s failure to update the IRS’s records can trigger a jurisdictional trap, as the clock starts ticking the moment the FPA is mailed, regardless of whether the partnership receives it. Partnerships must treat address updates as a fiduciary duty, lest they fall victim to the IRS’s notice procedures.

The responsibilities of the partnership representative (PR) under Section 6223(a) have never been more consequential. The PR’s exclusive authority to bind the partnership in BBA audits means a single misstep—failing to designate a PR, allowing an outdated address, or missing a deadline—can bind all partners to adverse tax consequences. The court’s decision does not alter the PR’s fiduciary obligations, but it does expose the IRS’s reliance on PR designations as a potential weak point. If a PR is improperly designated or fails to act, the partnership may argue the IRS’s notice was defective, but such challenges are fraught with uncertainty. The IRS’s power to appoint a PR under Section 6223(a)(2) in the absence of a designated representative further complicates matters, as an IRS-appointed PR may not act in the partnership’s best interests.

Legislative response is inevitable. The BBA’s drafters intended the 90-day deadline to be a jurisdictional safeguard, ensuring finality in partnership audits. The Tax Court’s ruling disrupts that design, creating administrative chaos if partnerships exploit the ambiguity. Congress may amend Section 6234(a) to explicitly state that the deadline is jurisdictional, or it may clarify the circumstances under which equitable tolling could apply. Until then, partnerships face a high-stakes gamble: file within 90 days, or risk default judgment, while hoping the IRS’s jurisdictional arguments fail. The court’s reservation of judgment on equitable tolling leaves the door ajar, but partnerships should not bet on it.

This ruling fits into the evolving BBA landscape as a cautionary tale. The BBA was designed to streamline partnership audits by centralizing liability at the partnership level, but the Tax Court’s decision reveals the fragility of that system when faced with procedural missteps. The IRS’s collection backstop under Section 6232(f)—which allows the agency to enforce adjustments even if a partnership misses the 90-day deadline—ensures that the BBA’s administrative machinery keeps turning. Yet the court’s refusal to dismiss Big Apple Tompkins Realty LLC injects uncertainty into a system that Congress intended to be airtight. For partnerships, the message is clear: the BBA’s efficiency comes at the cost of unforgiving deadlines, and the IRS will not hesitate to exploit them. The only path forward is vigilance—meticulous compliance with filing deadlines, proactive address management, and strategic PR designation—lest the partnership audit system’s machinery grind them to dust.