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PROCEDURALLY TAXING tax notes federal

by Jenni Black Jenni Black is a managing director in Citrin Cooperman’s national tax office and the practice leader of the tax procedure and controversy practice. She is also a contributing author for Procedurally Taxing. In this post, Black considers the implications of a court finding that the Bipartisan Budget Act of 2015 violates partners’ due process rights. This post reflects the author’s personal views and not necessarily those of Citrin Cooperman. In part 1 of this post, we examined the Tax Court’s opinion in Jones Bluff in which the court held that a partnership does not have standing to raise the argument that BBA violates partners’ due process rights because they do not have notice and an opportunity to challenge the adjustments before paying any tax on those adjustments. In part 2 of this post, I’ll look what could happen if a court were to find that partners’ due process rights were violated. Would the outcome be what people expect? Picture It. Sicily . . .1 Partner-Level Due Process Claims As an initial matter, should partner due process even be a thing here? Recall our flashback — the only way the partners can be liable for anything under the Bipartisan Budget Act of 2015 is if the partnership makes them liable (or the partner voluntarily files an amended return). The

Sophia Petrillo, Golden Girls.

imputed underpayment (IU) is the partnership’s liability. Sure, there may be ways to collect the IU from the partners if the partnership doesn’t pay, but why does that mean the partners have to be able to challenge that liability? Think about it another way — another partnership liability under the Internal Revenue Code is payroll taxes. Partners have no due process rights in payroll tax proceedings — they do not get notice of it, they can’t participate in the proceeding, and they can’t petition to challenge the IRS’s determination that the partnership is liable for additional employment taxes. And, just like any other partnership liability, the IRS may be able to collect that partnership liability from the partners (for example, under state law). At the end of the day, the thing that pops in my head every time I think about this is — the partners control the partnership. If they control the partnership, why wouldn’t the partnership’s due process be imputed to them? Sure, not all partners are equal. The majority partner who either is, or directs, the partnership representative is challenging the adjustments. Why should that partner also get to challenge the adjustments in a partner-level proceeding? I pity the fool that tries to do that. No soup for you! What about if the partners get to vote on whether the partnership should settle the case and that partner loses? Should they get to challenge the adjustments at their level? There are gradients here — from the majority partner actively managing the partnership audit to a minority indirect partner three tiers up who hasn’t even heard of the partnership under audit. Does one have due process while the other doesn’t? Where’s the line? Nothing in BBA prevents partners from having an agreement in place to notify the partners of the partnership audit and allow them to participate internally and have input into the decisionmaking process. As the concurrence noted in Jones

TAX NOTES FEDERAL, VOLUME 191, JUNE 22, 2026 For more Tax Notes® Federal content, please visit www.taxnotes.com.

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Did I Do That? Jones Bluff and Due Process Under BBA, Part 2

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Jones Bluff LLC v. Commissioner, 166 T.C. No. 6 (2026).

Reg. section 301.6223-2(d)(1) provides that no one other than the partnership (through the partnership representative) can participate in the administrative proceeding without IRS permission. I’d be curious if any partner has asked to participate and been denied. But that wouldn’t impact due process, per se, because it doesn’t restrict the courts. 4

But recall that not all TEFRA partners can file petitions either.

And, if it does, if a partner is aware of the proceeding and fails to move to intervene, has the partner negated their due process argument?

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sure, who the adjustment year partners will be. If the reviewed year partners intervene because the partnership elected to push out and the partnership later revokes its push out election (with the permission of the IRS), what then? Partner intervention is not as simple as it may sound. In fact, it sounds like a circus to me. As I do not want this post to digress (which is just so typically me) into a discussion of what a partner can and cannot raise in a partner-level proceeding (maybe at a later time) or the merits of the due process argument, I’m just going to hand wave (cue the “doodly-doo transition”6) and skip ahead to assuming petitioner in Jones Bluff is 100 percent correct — BBA violates the partners’ due process rights because partners can be subject to liability without being allowed to participate in the audit or petition the court and that the partnership’s due process is not sufficient to count as due process for its partners. Now what? If the partners’ due process rights are being violated because they could be liable for tax without the ability to participate in the audit or litigation, wouldn’t this just mean that section 6226 is unconstitutional?7 Oops? Without section 6226, BBA is very similar to deficiency procedures for individuals and corporations. The partnership has notice and opportunity to be heard both at the administrative level and judicially. That’s due 8 process. But it’s not the partnership’s due process rights that are allegedly being violated — it’s the partners’ due process rights. And if the only reason the partners’ due process rights are being violated is because they have no notice and opportunity to be heard before being liable for any tax, then it just means that the BBA provision— push out — that can make the

Wayne’s World (1992).

I have heard some argue that all of BBA would be unconstitutional because push out is not segregable. I’m not going to spend a lot of time on this, but I will point out a few things. When you boil it down, there are two paths under BBA — the partnership pays or the partners pay. If section 6226 is stripped out of BBA, those paths remain the exact same. Push out only allows the partnership to force the partners to pay, as opposed to amended return modification, which is voluntary. Also, push out was not part of the original bill that became BBA. See Partnership Audit Simplification Act of 2015, H.R. 2821, 114th Cong. (2015). With or without push out, the fork in the road is the same. 8

Courts have held that there is not a constitutional right to a prepayment forum and that a refund forum is adequate for due process purposes. See, e.g., Larson v. United States, 888 F.3d 578, 583-584 (2d Cir. 2018). Under BBA (as with TEFRA before it), the time to petition in a “refund” forum is coterminous with the prepayment forum.

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Bluff, even under the 1982 Tax Equity and Fiscal Responsibility Act, not all partners could petition a court to challenge the adjustments being made at the partnership level. In Jones Bluff the Tax Court held that nothing in BBA prevents partners from raising their own due process claims in later litigation. The court hinted that a partner may be able to raise it in subsequent refund litigation or possibility in a collection due process hearing. The court did not discuss whether the partners could file motions to intervene in the partnership level proceeding (and to my knowledge, none have been filed). After all, it’s not the application of section 6226 that would violate due process, it would be the lack of notice and opportunity to be heard that would violate due process, right? There’s nothing in BBA that says partners can’t intervene in partnership-level proceedings. There’s nothing in BBA that restricts 3 partners in any way, except, arguably, by omission. For example, section 6234 says that the partnership may file a petition in response to a notice of final partnership adjustment. It doesn’t expressly say the partners can’t, but it’s certainly implied, and I do not think failure to expressly say partners can’t file a petition means they can.4 Could partners move to intervene under Tax Court Rule 64? If so — which partners? Does this 5 fix the due process issue? If the partnership elected to push out, would it be the reviewed year partners that could intervene and not the current partners? If the partnership did not elect to push out, which partners could intervene? The IU is assessed and collected against the partnership as if it were a tax under subtitle A for the adjustment year. So, it would seem like the adjustment year partners would be “economically” paying the IU when the partnership cuts a check. But . . . the adjustment year isn’t known until the court’s decision becomes final so, during the proceeding, the court would have no way of knowing, for

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Section 6232(f)(4). The second sentence says section 6232(f)(1)(B) (assessing each partner their proportionate share of the partnership’s balance due) does not apply to any amount after the amount is paid by the partnership. Arguably this could mean that, if the partnership continues to pay, it also reduces the partners’ liability but there is no guidance under this provision. It could also mean that the IRS can only assess the unpaid balance at the time of the assessment and not the amount that was due on notice and demand (although I would have thought that was obvious).

partnership’s liability from the partners require the partners to be able to challenge the liability for purposes of due process? I don’t know. Does it matter if the partnership already challenged the liability and lost? Are there other places in the code that do the same thing? Even if section 6232(f) violates due process because it does not allow partners to challenge the partnership’s liability they are required to pay, there are still other collection tools available to the IRS under federal and state law. Under the cease to exist rules in section 6241(7), partners are liable for a partner-level tax because they have to take into account the adjustments as if a push out election was made. Therefore, it would likely suffer the same fate as section 6226. A deep understanding of BBA is critical to understanding how certain arguments would ultimately play out under BBA. Practitioners should carefully consider whether an argument that benefits one client could also harm many other clients so they can “Cut. It. Out.” before ending up with a result they did not intend. 

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partners liable for tax is unconstitutional, not the parts that make the partnership (who has due process) liable for tax. But what about the special collection rules (sections 6232(f) and 6241(7))? If you recall, under section 6232(f), the partners are liable for their proportionate share of the partnership’s unpaid balance. This amount is assessed against the partners. However, the partnership remains liable for the IU (and related penalties and interest) and any payments by the partners towards their assessment reduces the partnership’s liability (and, arguably, vice versa).9 Section 6232(f) allows the IRS to collect the partnership’s liability from the partners; it does not make the partners liable for partner-level tax. Does collecting the