NOPPA: 270-Day Modification, Form 8980, and Push-Out Election

A Notice of Proposed Partnership Adjustment (NOPPA) is the IRS’s opening position on changes to your partnership return, and a proper NOPPA response starts a 270-day clock during which you can file modification requests that reduce, and sometimes eliminate, the proposed tax.¹ The notice is not a bill. Ignore it, though, and the IRS will calculate what you owe at the highest individual income tax rate, charge interest running all the way back to the year audited, and collect it from the partnership itself.

Only the Partnership Representative Can Respond

Under the centralized partnership audit regime that governs tax years beginning after December 31, 2017, the partnership representative has sole authority to act during an audit. Every partner is bound by what the representative decides, including whether to agree to the NOPPA, request modifications, enter a settlement, or waive the right to a final adjustment notice.²

Interest does not start on the day the NOPPA arrives. It begins the day after the due date of the partnership return for the reviewed year.⁴ An audit of a 2020 return that drags into 2026 carries six years of interest. Accuracy-related and fraud penalties are also determined at the partnership level.

One more piece of the math matters before you plan a response: any amount the partnership pays for the imputed underpayment, including interest and penalties, is nondeductible and reduces partner capital accounts as a nondeductible expenditure.⁵ So the partnership pays at 37% on income that may have flowed to partners in far lower brackets, and gets no offsetting deduction. That is why the 270-day window is worth using aggressively.

The 270-Day Modification Window

Modification is the primary tool for cutting the proposed tax. The representative submits requests showing that the imputed underpayment should be lower based on the actual tax characteristics of the reviewed-year partners or on actions those partners take.¹ The IRS cannot mail a final adjustment notice until 270 days have passed, so the window is guaranteed.⁶ The period can be extended if the IRS agrees, which happens in complex audits. Late requests are rejected.

Several modification types are available:

Rate modification. If the partners include C corporations taxed at 21% or individuals in brackets below 37%, request that the imputed underpayment be recomputed at the lower rate for those partners’ shares. Rate modifications tend to produce the largest reductions in practice; a partnership with a 50% corporate partner can cut nearly half its imputed underpayment by moving that share to 21%.
Amended return modification. Individual partners file amended returns for the reviewed year and pay the tax attributable to their share, which removes those amounts from the partnership-level calculation. The amended returns must actually be filed and the tax paid before the 270-day window closes. Promises of future filings will not do.
Tax-exempt partner modification. If a partner is a tax-exempt organization, its share generates no tax and can be excluded from the calculation.
Closing agreement modification. A partner signs a binding closing agreement with the IRS to pay their share directly.

How to File Form 8980

Form 8980 is the vehicle for modification requests.⁷ The representative identifies which adjustments are being contested, states the modification type, explains the basis, and attaches supporting documentation.³

Rate modifications require evidence of each partner’s tax status: filed returns, organizational documents for entities, or IRS determination letters for tax-exempt partners. Amended return modifications require proof the partner filed and paid. If you plan to use the amended return route, you also need names, taxpayer identification numbers, and reviewed-year allocation shares for every partner who held an interest that year. Tracking down former partners is often the hardest practical part of the whole process.

Submission is electronic, through the BBA Online Form Submission Service (OFSS). The form must be uploaded in its original fillable PDF format and signed with the representative’s five-digit e-services PIN. The system generates a Receipt ID, but that only confirms the file was received. You have to check the submission status separately to confirm acceptance, because a rejected submission does not count as filed.⁸ A rejected form that is not corrected and resubmitted before day 270 is treated as never filed.

Requesting an Appeals Conference

You can also request a conference with the IRS Independent Office of Appeals, and this often runs in parallel with the modification track. The IRS typically provides a written protest period, generally 30 days from the date of the letter offering the Appeals opportunity.⁹ An Appeals officer can weigh the government’s litigation risk and settle on that basis, which the examining agent cannot do. Appeals is most useful when the disagreement is about legal interpretation rather than missing documentation.

The Push-Out Election as an Alternative

If modification will not get the number where it needs to be, the partnership can shift the liability to the reviewed-year partners instead of paying at the entity level. This push-out election is made on Form 8988 and must be submitted electronically within 45 days of the Notice of Final Partnership Adjustment. The 45 days cannot be extended.¹⁰

After the IRS returns a countersigned Form 8988, the partnership has 60 days from the date the audit matters become final to furnish push-out statements (Form 8986) to each reviewed-year partner and file the transmittal (Form 8985) with the IRS. Matters become final when the 90-day court petition window expires or when a court issues its final determination. Missing the 60-day deadline invalidates the entire election and puts the full imputed underpayment back on the partnership.¹⁰

Push-out works best when reviewed-year partners sit in lower brackets than the default 37%. The tradeoffs: partners owe interest on their additional tax at their own rate, and the partnership loses control once the statements go out, since each partner handles their own liability from there.

What Happens After Day 270

Once the modification period expires and any administrative proceedings conclude, the IRS issues a Notice of Final Partnership Adjustment (FPA). The FPA reflects the final adjustments after considering any modifications the IRS approved.⁶ This is the document that creates an actual liability if left unchallenged.

The partnership has 90 days from the FPA mailing date to petition for judicial review in one of three courts: the U.S. Tax Court, the federal district court where the partnership’s principal place of business is located, or the U.S. Court of Federal Claims.¹¹ Tax Court is the usual choice because the partnership does not have to pay the disputed amount before filing. District court and the Court of Federal Claims generally require payment first, followed by a refund suit. Once an FPA has been mailed for a particular year and the partnership petitions a court, the IRS generally cannot mail another FPA for that year absent fraud or misrepresentation.⁶ Miss the 90 days, and the adjustments become final and collectible.

If You Already Opted Out of BBA

One boundary worth knowing. Partnerships with 100 or fewer partners can elect out of the centralized regime entirely, provided all partners are eligible types: individuals, C corporations, S corporations, estates of deceased partners, and certain foreign entities treated as C corporations domestically.¹² The election is made annually on the timely filed partnership return, and shareholders of any S corporation partner count toward the 100-partner limit. If your partnership validly elected out for the reviewed year, the IRS audits partners individually and the NOPPA/modification framework described above does not apply.

1
Office of the Law Revision Counsel. 26 U.S. Code 6225 – Partnership Adjustment by Secretary
2
Internal Revenue Service. 4.31.9 Centralized Partnership Audit Regime (BBA) Field Examination Procedures
4
eCFR. 26 CFR 301.6233(a)-1 – Interest and Penalties Determined From Reviewed Year
5
eCFR. 26 CFR 301.6241-4 – Payments Nondeductible
6
Office of the Law Revision Counsel. 26 U.S. Code 6231 – Notice of Proceedings and Adjustment
7
Internal Revenue Service. About Form 8980, Partnership Request for Modification of Imputed Underpayments Under IRC Section 6225(c)
8
Internal Revenue Service. Electronic Submission of Forms by Audited BBA Partnerships and Their Pass-Through Partners
9
Internal Revenue Service. Preparing a Request for Appeals
10
Internal Revenue Service. BBA Partnership Audit Process
11
Office of the Law Revision Counsel. 26 U.S. Code 6234 – Judicial Review of Partnership Adjustment
12
Internal Revenue Service. Elect Out of the Centralized Partnership Audit Regime