26 U.S.C. § 6226 — Alternative to payment of imputed underpayment by partnership
submitted 11 years ago by Pub. L. 114-74 to r/title-26-INTERNAL-REVENUE-CODE · 855 words · no verdicts yet
A partnership may elect within 45 days to pass a final partnership adjustment through to partners instead of paying the imputed underpayment itself. Partners then account for correction amounts and attribute changes, with special rules for tiered partnerships, S corporations, interest, penalties, and judicial review.
(a) Election. If, within 45 days after the final-adjustment notice, the partnership* elects this section for an imputed underpayment and gives each reviewed-year partner* and the Secretary* a required statement of that partner’s share of each adjustment, section 6225 does not apply to that underpayment and no collection assessment, levy*, or court proceeding may be made against the partnership for it. Each partner must account for the adjustment under subsection (b). The election is made as the Secretary provides and can be revoked only with the Secretary’s consent.
(b) Partner accounting. (1) Except under paragraph (4), the partner’s chapter 1 tax for the year containing the statement date is adjusted by the correction amounts for the years below. (2) A correction amount is the increase or decrease in chapter 1 tax that would result from taking the partner’s adjustment share into account in (A) the year containing the reviewed year’s end, or (B) each later year before the statement year, because tax attributes were adjusted. (3) Attributes that would have been affected in the reviewed year* must be adjusted for each intervening and later year. (4) If the recipient is a partnership or S corporation*, it must file a tracking report and either give similar statements or, if it gives none, calculate and pay an imputed underpayment under rules similar to section 6225, except its subsection (c)(2), (7), and (9). These filings, payments, or statements are due by the audited partnership’s adjustment-year return due date*. The rule applies even if the recipient partnership elected section 6221(b). “Audited partnership” means the chain partnership that first elected this section. The Secretary must make rules for trusts.
(c) Penalties and interest. Penalties and additions are determined under section 6221, and reviewed-year partners are liable. Interest is determined at partner level from the return due date for the year to which the increase is attributable, including attribute-change increases, at the section 6621(a)(2) rate with 5 substituted for 3 percentage points.
(d) Judicial review. The time for a readjustment petition is in section 6234(a).
If the partnership*—
not later than 45 days after the date of the notice of final partnership adjustment*, elects the application of this section with respect to an imputed underpayment, and
at such time and in such manner as the Secretary* may provide, furnishes to each partner* of the partnership for the reviewed year* and to the Secretary a statement of the partner’s share of any adjustment to a partnership-related item* (as determined in the notice of final partnership adjustment),
section 6225 shall not apply with respect to such underpayment (and no assessment of tax, levy*, or proceeding in any court for the collection of such underpayment shall be made against such partnership) and each such partner shall take such adjustment into account as provided in subsection (b). The election under paragraph (1) shall be made in such manner as the Secretary may provide and, once made, shall be revocable only with the consent of the Secretary.
Except as provided in paragraph (4), each partner’s tax imposed by chapter 1 for the taxable year* which includes the date the statement was furnished under subsection (a) shall be adjusted by the aggregate of the correction amounts determined under paragraph (2) for the taxable years referred to therein.
The correction amounts determined under this paragraph are—
in the case of the taxable year of the partner which includes the end of the reviewed year, the amount by which the tax imposed under chapter 1 would increase or decrease if the partner’s share of the adjustments described in subsection (a) were taken into account for such taxable year, and
in the case of any taxable year after the taxable year referred to in subparagraph (A) and before the taxable year referred to in paragraph (1), the amount by which the tax imposed under chapter 1 would increase or decrease by reason of the adjustment to tax attributes under paragraph (3).
Any tax attribute which would have been affected if the adjustments described in subsection (a) were taken into account for the taxable year referred to in paragraph (2)(A) shall—
in the case of any taxable year referred to in paragraph (2)(B), be appropriately adjusted for purposes of applying such paragraph, and
in the case of any subsequent taxable year, be appropriately adjusted.
If a partner which receives a statement under subsection (a)(2) is a partnership or an S corporation*, such partner shall, with respect to the partner’s share of the adjustment—
file with the Secretary a partnership adjustment tracking report which includes such information as the Secretary may require, and
furnish statements under rules similar to the rules of subsection (a)(2), or
if no such statements are furnished, compute and pay an imputed underpayment under rules similar to the rules of section 6225 (other than paragraphs (2), (7), and (9) of subsection (c) thereof).
For purposes of subparagraph (A), with respect to a partner’s share of the adjustment, the partnership adjustment tracking report shall be filed, and the imputed underpayment shall be paid or statements shall be furnished, not later than the due date for the return for the adjustment year* of the audited partnership.
In the case of a partnership which has elected the application of section 6221(b) with respect to the taxable year of the partnership which includes the end of the reviewed year of the audited partnership, this paragraph shall apply notwithstanding such election.
For purposes of this paragraph, the term “audited partnership” means, with respect to any partner described in subparagraph (A), the partnership in the chain of ownership originally electing the application of this section.
The Secretary shall prescribe such rules as may be necessary with respect to trusts which receive a statement under subsection (a)(2).
Notwithstanding subsections (a) and (b), any penalties, additions to tax, or additional amount shall be determined as provided under section 6221 and the partners of the partnership for the reviewed year shall be liable for any such penalty, addition to tax, or additional amount.
In the case of an imputed underpayment with respect to which the application of this section is elected, or which is described in subsection (b)(4)(A)(ii)(I), interest shall be determined—
at the partner level,
from the due date of the return for the taxable year to which the increase is attributable (determined by taking into account any increases attributable to a change in tax attributes for a taxable year under subsection (b)(2)), and
at the underpayment rate under section 6621(a)(2), determined by substituting “5 percentage points” for “3 percentage points” in subparagraph (B) thereof.
For the time period within which a partnership may file a petition for a readjustment, see section 6234(a).
Source credit: (Added Pub. L. 114–74, title XI, § 1101(c)(1), Nov. 2, 2015, 129 Stat. 630; amended Pub. L. 114–113, div. Q, title IV, § 411(b)(1), Dec. 18, 2015, 129 Stat. 3122; Pub. L. 115–141, div. U, title II, §§ 201(c)(4), 204, 206(d), (e), Mar. 23, 2018, 132 Stat. 1173, 1176, 1178.)
- 2015Enacted · Pub. L. 114-74 · 129 Stat. 630
- 2015Amended · Pub. L. 114-113 · 129 Stat. 3122
- 2018Amended · Pub. L. 115-141 · 132 Stat. 1173, 1176, 1178
A history note hasn’t been published yet. The record shows enactment by Pub. L. 114-74 on 2015-11-02.
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