IRS Rejects BBA Push-Out Package and Denies §9100 Relief for Procedural Errors

IRS Rejects BBA Partnership Push-Out Package for Procedural Errors

The IRS formally denied a partnership’s request for relief under Section 9100 to validate a Bipartisan Budget Act (BBA) push-out package, citing two procedural failures: the package was submitted in the wrong format and included incomplete Forms 8986. The denial, issued in Chief Counsel Advice (CCA) 2026-XX, underscores the IRS’s strict enforcement of electronic filing mandates under Treasury Regulation §301.6226-2(c) and Section 6241(10), which empowers the Secretary to require machine-readable submissions for BBA audit filings. The partnership’s push-out election, which sought to shift audit adjustments to its partners rather than paying an imputed underpayment at the entity level, was invalidated entirely due to these defects, leaving the partnership exposed to potential entity-level tax liability under Section 6225.

The Push-Out Package: What Went Wrong?

The IRS rejected the partnership’s push-out package for two procedural failures: electronic filing format violations and incomplete disclosure of partner-level adjustments on Form 8986.

Improper Format

Under Treasury Regulation §301.6226-2(c), partnerships must file Forms 8985 and 8986 electronically via the IRS Modernized e-File (MeF) system, and §6241(10) empowers the Secretary to require machine-readable submissions. The IRS mandates that BBA audit forms be submitted in their original, fillable PDF format—not printed, scanned, or converted to non-fillable formats. The taxpayer violated these rules by using outdated versions of Forms 8985 and 8986 incompatible with MeF validation and submitting the forms as non-fillable, scanned images the IRS system could not process. The IRS warned that such submissions would be rejected, and the partnership’s failure to comply with the fillable PDF mandate rendered the package procedurally defective.

Incomplete Forms 8986

Even if the electronic filing format had been correct, the partnership’s Forms 8986 failed to meet content requirements under Treasury Regulation §301.6226-2(e) in four respects: missing partner names and TINs (§301.6226-2(e)(1)), missing partner addresses (§301.6226-2(e)(2)), missing partner shares of items as originally reported on Schedule K-1 (§301.6226-2(e)(3)), and missing partner shares of adjustments (§301.6226-2(e)(4)). Without this information, the IRS could not verify adjustments or ensure proper partner reporting, invalidating the push-out election.

Why §9100 Relief Was Denied: Three Strikes Against the Taxpayer

The IRS denied §9100 relief for three reasons. First, Treasury Reg. §301.9100-1(d)(2) precludes relief where alternative remedies exist. Here, Treasury Reg. §301.6226-2(d)(3) provided such relief by authorizing the IRS to require corrections or additional information. Since the partnership failed to furnish required breakdowns of adjustments or partner allocations, the IRS could compel corrections under this framework, rendering §9100 relief unnecessary.

Second, the taxpayer failed to meet the "reasonable action and good faith" requirements of §301.9100-3(b). The IRS record showed the taxpayer knew of the rejection but delayed requesting §9100 relief for months, demonstrating a lack of diligence. The regulation requires proof of reasonable cause for delay and good faith efforts to comply, neither of which the taxpayer could substantiate.

Third, the taxpayer’s request for §9100 relief was untimely under §301.9100(c), which limits discretionary relief to a 6-month extension from the original deadline. The push-out package was due under §301.6226-2(b), allowing an extension only until six months later. The taxpayer’s submission, postmarked 47 days past this window, fell outside the permissible period. The IRS strictly enforces these time constraints to prevent open-ended delays in partnership audit procedures.

IRS Discretion and the Path Forward for Taxpayers

The IRS acknowledged that while §9100 relief was unavailable due to the untimely push-out package, §6226 regulations do not impose a deadline for submitting corrected statements. This allows the IRS discretion to accept further corrections after initial rejection, provided the partnership addresses procedural deficiencies.

For the taxpayer, this means a revised Form 8986 may still be submitted, but the IRS’s acceptance is not guaranteed. The agency’s discretion is particularly limited where the original filing’s untimeliness undermined audit integrity. While §9100 relief is unavailable for late filings, the lack of a statutory deadline for corrections creates limited flexibility—one the IRS may exercise sparingly.

This discretionary pathway has critical implications for other BBA partnerships. Those with missed deadlines or defective push-out packages may find relief not through statutory extensions but via the IRS’s willingness to accept corrected filings, provided they are submitted promptly and comply with all requirements. The IRS’s approach highlights the need for strict adherence to electronic submission protocols and meticulous Form 8986 preparation, as minor errors (e.g., incorrect partner allocations or missing data) can trigger rejections that are difficult to remedy.

Tax practitioners should note that this ruling is non-precedential and does not bind the IRS in future cases, though it signals heightened scrutiny of push-out packages with procedural flaws. The IRS’s willingness to accept corrected submissions should not be interpreted as leniency; it reflects a procedural nuance requiring careful navigation. The agency’s emphasis on electronic filing requirements and Form 8986 accuracy suggests future push-out packages will face rigorous validation, with little tolerance for errors that could delay or invalidate the election. Partnerships and advisors should prioritize real-time validation and robust documentation to support corrections.

Key Takeaways for BBA Partnerships and Tax Practitioners

• Strict compliance with electronic filing and Form 8986 requirements is mandatory. The IRS rejected the push-out package for using outdated formats and non-electronic submissions under §301.6226-2(c) and §6241(10). Partnerships must file Form 8986 in its original, fillable PDF format via the IRS Modernized e-File (MeF) system. No exceptions apply unless the IRS grants a waiver for undue hardship.
• §9100 relief is not a safety net for missed deadlines. The IRS denied relief because the taxpayer failed to meet the "reasonable action and good faith" standard under §301.9100-3(b) and filed too late under §301.9100(c). Partnerships should proactively monitor deadlines and file corrections immediately upon rejection.
• Do not rely on IRS discretion for procedural errors. While the IRS may accept corrected submissions, partnerships should not gamble on this flexibility. The burden of proof for excusable neglect falls on the taxpayer. Submit push-out packages early, retain detailed documentation, and avoid last-minute filings.

Actionable Steps:

1. Use IRS-approved software (e.g., Thomson Reuters, CCH) to validate Form 8986 before submission.
2. Cross-check partner TINs against IRS records to prevent mismatches.
3. Set automated reminders for the 45-day push-out election deadline and Form 8986 filing.
4. Maintain a digital audit trail of all communications with the IRS, including rejection notices and correction requests.
5. If the IRS rejects a push-out package, file corrected forms within 10 business days and request written confirmation of acceptance.
6. For partnerships with complex allocations, consider mock MeF submissions to identify potential errors before the actual filing deadline.