§6226 — Title 26 Internal Revenue Code | U.S. Code

Summary

When the IRS audits a partnership and finds it underpaid, the partnership normally pays the extra tax itself. Instead, it can elect to push the adjustments out to the people who were partners in the year under audit. The partnership must make this choice within 45 days after the final adjustment notice and send each of those partners, and the IRS, a statement of their share of the changes. Each partner then adjusts their own tax for the year they get the statement, based on what they would have owed in the audited year and the years after it. If a partner is itself a partnership or an S corporation, it must file a tracking report and either pass the adjustment on to its own owners or pay the tax itself. Partners remain responsible for any penalties. Interest is figured at the partner level at a higher rate: 5 percentage points above the base rate instead of the usual 3. These rules apply to partnership tax years beginning after December 31, 2017.

Title 26, §6226

Internal Revenue Code — Source: USLM XML via OLRC

(a)If the partnership—

(1)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

(2)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),

(b)(1)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.

(2)The correction amounts determined under this paragraph are—

(A)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

(B)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).

(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—

(A)in the case of any taxable year referred to in paragraph (2)(B), be appropriately adjusted for purposes of applying such paragraph, and

(B)in the case of any subsequent taxable year, be appropriately adjusted.

(4)(A)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—

(i)file with the Secretary a partnership adjustment tracking report which includes such information as the Secretary may require, and

(ii)(I)furnish statements under rules similar to the rules of subsection (a)(2), or

(II)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).

(B)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.

(C)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.

(D)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.

(E)The Secretary shall prescribe such rules as may be necessary with respect to trusts which receive a statement under subsection (a)(2).

(c)(1)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.

(2)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—

(A)at the partner level,

(B)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

(C)at the underpayment rate under section 6621(a)(2), determined by substituting “5 percentage points” for “3 percentage points” in subparagraph (B) thereof.

(d)For the time period within which a partnership may file a petition for a readjustment, see section 6234(a).

Notes & Related Subsidiaries

Editorial Notes

Prior Provisions

A prior section 6226, added Pub. L. 97–248, title IV, § 402(a), Sept. 3, 1982, 96 Stat. 653; amended Pub. L. 97–448, title III, § 306(c)(1)(A), Jan. 12, 1983, 96 Stat. 2406; Pub. L. 102–572, title IX, § 902(b)(2), Oct. 29, 1992, 106 Stat. 4516; Pub. L. 105–34, title XII, §§ 1238(b)(1), 1239(b), 1240(a), Aug. 5, 1997, 111 Stat. 1026–1028, related to judicial review of final partnership administrative adjustments, prior to repeal by Pub. L. 114–74, title XI, § 1101(a), Nov. 2, 2015, 129 Stat. 625.

Amendments

2018—Subsec. (a). Pub. L. 115–141, § 206(d), inserted “(and no assessment of tax, levy, or proceeding in any court for the collection of such underpayment shall be made against such partnership)” after “section 6225 shall not apply with respect to such underpayment” in concluding provisions. Subsec. (a)(2). Pub. L. 115–141, § 201(c)(4), substituted “any adjustment to a partnership-related item” for “any adjustment to income, gain, loss, deduction, or credit”. Subsec. (b)(1). Pub. L. 115–141, § 206(e)(2), substituted “correction amounts” for “adjustment amounts”. Pub. L. 115–141, § 206(e)(1), substituted “adjusted” for “increased”. Pub. L. 115–141, § 204(b)(1), substituted “Except as provided in paragraph (4), each partner’s” for “Each partner’s”. Subsec. (b)(2). Pub. L. 115–141, § 206(e)(5), substituted “Correction amounts” for “Adjustment amounts” in heading. Pub. L. 115–141, § 206(e)(3), substituted “increase or decrease” for “increase” in subpars. (A) and (B). Pub. L. 115–141, § 206(e)(2), substituted “correction amounts” for “adjustment amounts” in introductory provisions. Subsec. (b)(2)(A). Pub. L. 115–141, § 206(e)(4), substituted “and” for “plus” at end. Subsec. (b)(4). Pub. L. 115–141, § 204(a), added par. (4). Subsec. (c)(2). Pub. L. 115–141, § 204(b)(2), inserted “or which is described in subsection (b)(4)(A)(ii)(I),” after “is elected,” in introductory provisions. 2015—Subsec. (d). Pub. L. 114–113 added subsec. (d).

Statutory Notes and Related Subsidiaries

Effective Date

of 2018 AmendmentAmendment by Pub. L. 115–141 effective as if included in section 1101 of Pub. L. 114–74, see section 207 of Pub. L. 115–141, set out as a note under section 6031 of this title.

Effective Date

of 2015 AmendmentAmendment by Pub. L. 114–113 effective as if included in section 1101 of Pub. L. 114–74, see section 411(e) of Pub. L. 114–113, set out as a note under section 6031 of this title.

Effective Date

Section applicable to returns filed for partnership taxable years beginning after Dec. 31, 2017, with certain exceptions, see section 1101(g) of Pub. L. 114–74, set out as a note under section 6221 of this title.

§6226 Alternative to Payment of Imputed Underpayment by Partnership

Summary

Title 26, §6226

Notes & Related Subsidiaries

Editorial Notes

Prior Provisions

Amendments

Statutory Notes and Related Subsidiaries

Effective Date

Effective Date

Effective Date

Citations & Metadata