Restricted consents to extend the partnership adjustment period under section 6235(b)

Plain-English summary

Under the centralized partnership audit rules (the BBA regime), the IRS and a partnership can agree to extend the deadline for the IRS to adjust partnership-related items, using Form 872-M. A field attorney asked whether the IRS could agree to a "restricted" consent, one limited to a specific issue rather than the whole return. Chief Counsel advised that although Form 872-M says the taxpayer may limit the consent to an agreed issue, they knew of no case where such a limitation was actually used, and there is no legal guidance on restricted consents under the BBA regime. By contrast, section 6501(c)(4)(B), which governs restricted consents for ordinary assessments, expressly gives taxpayers a right to limit the extension and requires notice of it; section 6235(b) contains no such provision. Chief Counsel suggested that if a restricted consent were used, the conditions in IRM 25.6.22.8 and Publication 1035 for section 6501 restricted consents should be followed, and noted the IRS has discretion to refuse a restricted consent that is not to its benefit. On the specific facts, without knowing the outstanding issues, they saw no benefit to using one and wanted to review any proposed language first.

Ruling snapshot

• Question: May the IRS enter into a restricted (issue-limited) consent to extend the partnership adjustment period under section 6235(b)?
• Outcome: advice given (no legal guidance exists; if used, follow the section 6501 restricted-consent conditions, and IRS may decline where it sees no benefit)
• Key authorities: IRC §§ 6235(b), 6501(c)(4); Form 872-M; IRM 25.6.22.8; Publication 1035

Full text (IRS public release)

 ID:        CCA_2024083009050917                            [Third Party Communication:

 UILC:      6235B.00-00                                     Date of Communication: Month DD, YYYY]

Number: 202504015
Release Date: 1/24/2025
From: -------------------
Sent: Friday, August 30, 2024 9:05:09 AM
To: ------------------
Cc: -------------------
Bcc:
Subject: RE: Advice regarding restricted consent to extend the statute of limitations under I.R.C.
6235(b)


Hey ----------,

You sought guidance on restricted consents to extend the period to adjust partnership
related items under IRC section 6235. While Form 872-M does state that the taxpayer
has the right to limit the consent to a mutually agreed-upon issue, we do not know of an
instance where any such limitation was actually agreed to using Form 872-M. We
reached out to our fellow practice groups (PA1/2 and PA3/4) to get their thoughts
because there is no legal guidance addressing restricted consents under the BBA
regime. PA1/2 has subject matter expertise over section 6501(c)(4), which covers
restricted consents to extend the assessment period, and PA3/4 has subject matter
expertise over Appeals.

As mentioned above, while restricted consents are used in another context, ----------------
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--------------------------------------------------------------------------While section 6501(c)(4)(B)
requires notification to the taxpayer of their right to limit an extension of the period to
assess tax under section 6501 to particular issues, section 6235(b) does not contain
similar notification or expressly provide such a taxpayer right. Presuming however
such an option to limit the issues under the extension, IRM 25.6.22.8 and Publication
1035 provides general guidance on restricted consents that should be considered here.
Publication 1035 and IRM 25.6.22.8.2 describe all the conditions necessary for the IRS
to enter into a restricted consent with respect to the period of assessment under section
6501. The restricted consent must include the scope of the restricted consent and other
key language. The IRS should not enter into any restricted consents that fail to meet
these requirements.

Without knowing what issues may still be outstanding in addition to issues involving
legal and professional fees, as well as what potential issues could arise when further
discussing such fees, we are not able to see the benefit of utilizing a restricted consent
in this instance. ----------------------------------------------------------------------------------------------
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------------------------------------------------------------------------------------IRM 25.6.22.8.1(3)
provides that the IRS has the discretion to refuse to execute a restricted consent where
it is not to the Service’s benefit to agree to such an extension. If however the IRS sees
a meaningful benefit, P&A would want to review any specific language before any
approval in an effort to ensure the Service’s interest in being able to adjust any potential
outstanding partnership-related item is intact.

Let us know if you have any questions.

Thanks,

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