Many partners assume that once three years pass from April 15, the year is closed. For a partnership under the Bipartisan Budget Act (BBA) audit rules, that assumption can be expensive. The partnership return has its own clock, it is set by a different Code section, and several ordinary events can push it out.
That clock is IRC Section 6235. Here is how it works.
It is a deadline to adjust, not to assess
IRM 4.31.9.8.4.1 makes a point worth repeating: the IRC 6235 period limits the time to make partnership adjustments, not the time to assess. Under the BBA regime, the statute is controlled at the partnership level, as IRM 4.31.9.8.4 explains. The BBA rules, including IRC 6235, apply to returns filed for partnership tax years beginning after December 31, 2017.
IRC 6235(a) says no adjustment for a partnership taxable year may be made after the later of three dates.
Date one: the 3-year rule in IRC 6235(a)(1)
The base period ends 3 years after the latest of:
- the date the partnership return was filed,
- the return due date for the year, or
- the date the partnership filed an administrative adjustment request (AAR) for that year under IRC 6227.
Notice the third item. Filing an AAR restarts the 3-year period from the AAR filing date. Treas. Reg. 301.6235-1(e) gives the example of a 2020 return filed on March 1, 2021, followed by an AAR filed on September 1, 2023. The adjustment period for 2020 then runs to September 1, 2026. Before you file one, read the administrative adjustment request.
Also notice the first item. A late return starts the clock on the day it is actually filed. If the partnership return is years late, the IRS's window to adjust it is measured from that late filing, which is one more reason to deal with unfiled partnership and S corporation returns sooner rather than later.
The NOPPA, the formal notice of proposed adjustments, must be mailed within this (a)(1) period. IRC 6231(b)(1) and Treas. Reg. 301.6231-1(b)(1) say so.
Date two: modification requests under IRC 6235(a)(2)
If the partnership requests modification of the imputed underpayment, the IRS gets until 270 days (plus any agreed extension of the modification period) after everything required for the modification has been submitted. Treas. Reg. 301.6235-1(b)(2) fixes that submission date as the earlier of the end of the modification period, including extensions, or the date the period ends because the partnership waived it. An incomplete submission does not change that date.
In Example 6 of Treas. Reg. 301.6235-1(e), the partnership finishes its modification submission early but does not sign a waiver. The submission date is therefore the end of the 270-day modification period, and the adjustment period runs 270 days beyond that. Submitting early, by itself, does not shorten the IRS's time. See reducing the imputed underpayment through modifications.
Date three: 330 days after the NOPPA under IRC 6235(a)(3)
Once a NOPPA is mailed, the IRS has at least 330 days after the date of that notice (plus any agreed extension of the modification period) to make the adjustment. Under Treas. Reg. 301.6235-1(c), this applies whether or not the partnership requests modification, and it is measured from the last NOPPA mailed.
Example 3 of Treas. Reg. 301.6235-1(e) shows the effect. The (a)(1) date had been extended to December 31, 2025. The NOPPA was mailed June 2, 2025, and no modification was requested. The 330-day date of April 28, 2026 was later than the extended (a)(1) date, so the IRS had until April 28, 2026.
The three dates at a glance
| Provision | Period | Triggered by |
|---|---|---|
| IRC 6235(a)(1) | 3 years after the latest of filing, due date, or AAR | Every partnership year under the BBA |
| IRC 6235(a)(2) | 270 days after a completed modification submission, plus agreed extensions | A modification request |
| IRC 6235(a)(3) | 330 days after the NOPPA, plus agreed extensions of the modification period | Mailing of a NOPPA |
Extending the period by agreement: Form 872-M
IRC 6235(b) allows the IRS and the partnership to extend the period by agreement entered into before it expires. IRM 4.31.9.8.4.3 says the form is Form 872-M, Consent to Extend the Time to Make Partnership Adjustments, and that it can extend the (a)(1), (a)(2), or (a)(3) date.
Who signs matters. Under IRM 4.31.9.8.4.3, the partnership representative signs, or the designated individual if the representative is an entity. The IRM states that the power of attorney should not sign the extension. A separate Form 872-M is secured for each tax year. The request usually arrives with Letter 907-M.
When will you be asked? IRM 4.31.9.8.4.2 tells examiners to request an extension if the (a)(1) date will expire within 14 months, assuming the case is not a no-change. If the partnership refuses, the examiner begins closing the examination. And if the partnership wants to go to Appeals, IRM 4.31.9.10.2 calls for at least 18 months on the (a)(1) date when the case reaches Technical Services.
An extension is a strategic decision for the partnership representative. Refusing can force an unfavorable NOPPA on a thin record. Agreeing gives the IRS more time. There is no universal right answer, which is one reason the partnership representative's role carries real risk.
When the period is longer, or never ends
IRC 6235(c) sets out exceptions. IRM 4.31.9.8.4.1 summarizes them in a table, and the statute says:
- Fraud. For a false or fraudulent partnership return with intent to evade tax, the adjustment may be made at any time.
- Substantial omission of income. If the partnership omits gross income described in IRC 6501(e)(1)(A) or (C), the 3 years becomes 6 years.
- No return. If the partnership fails to file a return, the adjustment may be made at any time. A return the IRS prepares under IRC 6020(b) does not count as the partnership's return.
- Foreign information reporting. If the partnership is required to report information described in IRC 6501(c)(8), the period does not expire before the date set by that section.
- Listed transactions. If the partnership fails to include required information about a listed transaction described in IRC 6501(c)(10), the period does not expire before the date set by that section.
The no-return rule deserves emphasis. A partnership that never filed for a year has no BBA statute running for that year at all. Filing late can still draw a penalty under IRC 6698, discussed in the Form 1065 late filing penalty, but it is what starts the clock.
What IRC 6235 does not control
Two limits are worth knowing.
First, IRM 4.31.9.8.4 reminds examiners that partner statutes for self-employment tax and net investment income tax are not controlled by the IRC 6235(a) statute. Those partner-level taxes run on their own clocks.
Second, if a partnership validly elects out of the BBA regime under IRC 6221(b), IRC 6221(b)(1) says the subchapter does not apply for that year. That means IRC 6235 is not the governing clock for that partnership year.
After the adjustment: collection clocks
Once a final partnership adjustment is made, IRC 6232(b) bars assessment until 90 days after the final notice is mailed and, if a petition is filed, until the court's decision is final. If the partnership then fails to pay within 10 days of notice and demand, IRC 6232(f) lets the IRS assess the partners for their proportionate shares, but only within 2 years after that notice and demand under IRC 6232(f)(6)(B).
If the IRS is asking your partnership to sign a Form 872-M, or you are not sure whether a year is still open, the Law Offices of Darrin T. Mish, P.A. in Tampa, Florida can review the dates with you. Call 813-229-7100.
Statutes of limitation reward people who can count. IRC 6235 just gives you more to count.
Frequently asked questions
How long does the IRS have to audit a BBA partnership return?
Under IRC 6235(a)(1), generally 3 years after the latest of the date the return was filed, the return due date, or the date the partnership filed an administrative adjustment request for that year. The period can be longer once a NOPPA is mailed or the partnership requests modification, under IRC 6235(a)(2) and (a)(3), or if it is extended by agreement.
Does filing an AAR extend the statute of limitations?
Yes. IRC 6235(a)(1)(C) includes the date the partnership filed an administrative adjustment request under IRC 6227 as one of the dates the 3-year period can run from. Treas. Reg. 301.6235-1(e) illustrates this with a 2020 return filed in March 2021 and an AAR filed September 1, 2023, which keeps 2020 open to adjustment until September 1, 2026.
Who signs Form 872-M to extend the partnership statute?
IRM 4.31.9.8.4.3 says the partnership representative signs Form 872-M, or the designated individual if the partnership representative is an entity. The IRM states that a power of attorney should not sign the extension. Under IRC 6235(b), the agreement must be entered into before the period expires, and the IRM calls for a separate form for each tax year.
What if the partnership never filed a return?
IRC 6235(c)(3) says that if a partnership fails to file a return for a taxable year, the adjustment may be made at any time. IRC 6235(c)(4) adds that a return the IRS executes under IRC 6020(b) on the partnership's behalf is not treated as the partnership's return. Filing the return is what starts the regular 3-year period.
This guide is general information about federal tax law, not legal advice for your situation. Reading it does not create an attorney-client relationship.