81 FR 51795 - Election Into the Partnership Audit Regime Under the Bipartisan Budget Act of 2015
DEPARTMENT OF THE TREASURY
Internal Revenue Service Federal Register Volume 81, Issue 151 (August 5, 2016)
Internal Revenue Service
Federal Register Volume 81, Issue 151 (August 5, 2016)
| Page Range | 51795-51798 | |
| FR Document | 2016-18638 |
[Federal Register Volume 81, Number 151 (Friday, August 5, 2016)] [Rules and Regulations] [Pages 51795-51798] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-18638] [[Page 51795]] ======================================================================= ----------------------------------------------------------------------- DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 301 [TD 9780] RIN 1545-BN34 Election Into the Partnership Audit Regime Under the Bipartisan Budget Act of 2015 AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Temporary regulations. ----------------------------------------------------------------------- SUMMARY: This document contains temporary regulations pursuant to section 1101(g)(4) of the Bipartisan Budget Act of 2015 regarding an election to apply the new partnership audit regime enacted by that act to certain returns of a partnership. The regulations provide the time, form, and manner for making this election. The regulations affect any partnership that wishes to elect to have the new partnership audit regime apply to its returns filed for certain taxable years beginning before January 1, 2018. DATES: Effective date: These regulations are effective August 5, 2016. Applicability Date: For dates of applicability, see Sec. 301.9100- 22T(e) and (f). FOR FURTHER INFORMATION CONTACT: Jenni M. Black at (202) 317-6834 (not a toll-free number). SUPPLEMENTARY INFORMATION: Background This document contains amendments to the Procedure and Administration Regulations (26 CFR part 301) to provide rules for the time, form, and manner of making the election under section 1101(g)(4) of the Bipartisan Budget Act of 2015, Public Law 114-74 (BBA) with respect to returns filed for partnership taxable years beginning after November 2, 2015 and before January 1, 2018. The BBA was enacted on November 2, 2015, and was amended by the Protecting Americans from Tax Hikes Act of 2015, Public Law 114-113, div. Q (PATH Act) on December 18, 2015. Section 1101(a) of the BBA removes subchapter C of chapter 63 of the Internal Revenue Code (Code) effective for partnership taxable years beginning after December 31, 2017. Subchapter C of chapter 63 contains the unified partnership audit and litigation rules that were enacted as part of the Tax Equity and Fiscal Responsibility Act of 1982, Public Law 97-248 (TEFRA). These partnership audit and litigation rules are commonly referred to as the TEFRA partnership procedures. Section 1101(b) of the BBA also removes subchapter D of chapter 63 of the Code (containing audit rules for electing large partnerships) and part IV of subchapter K of chapter 1 of the Code (prescribing the income tax treatment for electing large partnerships), effective for partnership taxable years beginning after December 31, 2017. Section 1101(c) of the BBA replaces the rules to be removed by sections 1101(a) and (b) with a new partnership audit regime. Section 1101(c) adds a new subchapter C to chapter 63 of the Code, including amended Code sections 6221-6241. The BBA also makes related and conforming amendments to other provisions of the Code. On December 18, 2015, President Obama signed into law the PATH Act. Section 411 of the PATH Act corrects and clarifies certain amendments made by the BBA. The amendments under the PATH Act are effective as if included in section 1101 of the BBA, and therefore, subject to the effective dates in section 1101(g) of the BBA. 1. Overview of the New Partnership Audit Regime Section 6221(a) as added by the BBA provides that, in general, any adjustment to items of income, gain, loss, deduction, or credit of a partnership for a partnership taxable year (and any partner's distributive share thereof) shall be determined, and any tax attributable thereto shall be assessed and collected, at the partnership level. The applicability of any penalty, addition to tax, or additional amount which relates to an adjustment to any such item or share shall also be determined at the partnership level. Section 6221(b) as added by the BBA provides rules for partnerships that are required to furnish 100 or fewer Schedules K-1, Partner's Share of Income, Deductions, Credits, etc., to elect out of this new regime. Generally, a partnership may elect out of the new regime only if each of its partners is an individual, corporation (including certain types of foreign entities), or estate. Special rules apply for purposes of determining the number of partners in the case of a partner that is an S corporation. Section 6221(b)(2)(C) provides that the Secretary by regulation or other guidance may prescribe rules for purposes of the 100-or-fewer-Schedule K-1 requirement similar to the rules for S corporations with respect to any partner that is not an individual, corporation, or estate. Section 6223 as amended by the BBA provides that the partnership shall designate, in the manner prescribed by the Secretary, a partner or other person with a substantial presence in the United States as the partnership representative who shall have the sole authority to act on behalf of the partnership under subchapter C of chapter 63 of the Code, as amended by the BBA. In any case in which such a designation is not in effect, the Secretary may select any person as the partnership representative. A partnership and all partners of such partnership shall be bound by actions taken under subchapter C by the partnership and by any final decision in a proceeding brought under subchapter C with respect to the partnership. Section 6225 as amended by the BBA generally addresses partnership adjustments made by the IRS and the calculation of any resulting imputed underpayment. Section 6225(a) generally provides that the amount of any imputed underpayment resulting from an adjustment must be paid by the partnership. Section 6225(b) describes how an imputed underpayment is determined, and section 6225(c) describes modifications that, if approved by the IRS, may reduce the amount of an imputed underpayment. The PATH Act added to section 6225(c) a special rule addressing certain passive losses of publicly traded partnerships. Section 6226 as amended by the BBA provides an exception to the general rule under section 6225(a)(1) that the partnership must pay the imputed underpayment. Under section 6226, the partnership may elect to have the reviewed year partners take into account the adjustments made by the IRS and pay any tax due as a result of those adjustments. In this case, the partnership is not required to pay the imputed underpayment. Section 6225(d)(1) defines the reviewed year to mean the partnership taxable year to which the item(s) being adjusted relates. Under section 6227 as amended by the BBA, the partnership may request an administrative adjustment, which is taken into account in the partnership taxable year the administrative adjustment request (AAR) is made. The partnership generally has three years from the date of filing the return to make an AAR for that year, but may not make an AAR for a partnership taxable year after the IRS has mailed the partnership a notice of an administrative proceeding initiated with respect to the taxable year. Section 6231 as amended by the BBA describes notices of proceedings and adjustments, including certain time [[Page 51796]] frames for mailing the notices and the authority to rescind any notice of adjustment with the partnership's consent. Section 6232(a) as amended by the BBA provides that any imputed underpayment is assessed and collected in the same manner as if it were a tax imposed for the adjustment year by subtitle A, except that in the case of an AAR that reports an underpayment that the partnership elects to pay, the underpayment shall be paid when the request is filed. Section 6234 as amended by the BBA generally provides that a partnership may seek judicial review of the adjustments within 90 days of the date the notice of final partnership adjustment is mailed. Section 6235 as amended by the BBA provides the period of limitations on making adjustments. Section 6241 as amended by the BBA provides definitions and special rules, including rules addressing bankruptcy and treatment when a partnership ceases to exist. In particular, section 6241(4) as amended by the BBA provides that no deduction is allowed under subtitle A for any payment required to be made by a partnership under the new partnership audit regime. 2. Effective Dates Pursuant to section 1101(g)(1) of the BBA, the amendments made by section 1101, which repeal the TEFRA partnership procedures and the rules applicable to electing large partnerships and which create the new partnership audit regime, generally apply to returns filed for partnership taxable years beginning after December 31, 2017. Section 1101(g)(2) of the BBA provides that, in the case of an AAR under section 6227 as amended by the BBA, the amendments made by section 1101 apply to requests with respect to returns filed for partnership taxable years beginning after December 31, 2017. Similarly, section 1101(g)(3) of the BBA provides that, in the case of an election to use the alternative to payment of the imputed underpayment by the partnership under section 6226 as amended by the BBA, the amendments made by section 1101 apply to elections with respect to returns filed for partnership taxable years beginning after December 31, 2017. Section 1101(g)(4) of the BBA provides that a partnership may elect (at such time and in such form and manner as the Secretary may prescribe) for the amendments made under section 1101 (other than the election out of the new partnership audit regime under section 6221(b) as added by the BBA) to apply to any of its partnership returns filed for partnership taxable years beginning after November 2, 2015 (the date of the enactment of the BBA) and before January 1, 2018. Explanation of Provisions This Treasury decision adopts temporary regulations set forth in Sec. 301.9100-22T to provide the time, form, and manner for a partnership to make an election pursuant to section 1101(g)(4) of the BBA to have the new partnership audit regime apply to any of its partnership returns filed for a partnership taxable year beginning after November 2, 2015 and before January 1, 2018. Section 301.9100- 22T(a) provides the general rule that a partnership may elect at the time and in such form and manner as described in Sec. 301.9100-22T for amendments made by section 1101 of the BBA, except section 6221(b) added by the BBA, to apply to any return of the partnership filed for an eligible taxable year (as defined in Sec. 301.9100-22T(d)). Accordingly, a partnership that elects to apply the new partnership audit regime to a partnership return filed for an eligible taxable year may not elect out of the new rules under the small partnership exception under section 6221(b) as added by BBA, with respect to that return. Section 301.9100-22T(a) further provides that an election made not in accordance with these temporary regulations is not valid, and an election, once made, may only be revoked with consent of the IRS. An election is also not valid if it frustrates the purposes of section 1101 of the BBA, which include the collection of any imputed underpayment that may be due by the partnership under section 6225(a) as amended by the BBA. In addition, partnerships may not request an extension of time for making an election described in Sec. 301.9100- 22T under Sec. 301.9100-3. Section 301.9100-22T(d)(1) generally provides that for purposes of the temporary regulations, an eligible taxable year is any partnership taxable year beginning after November 2, 2015 and before January 1, 2018. Section 301.9100-22T(d)(2) provides exceptions to the definition of an eligible taxable year to avoid proceedings under both the TEFRA partnership procedures and the new partnership audit regime for the same partnership taxable year. To avoid these multiple proceedings, an election under these temporary regulations does not apply if the partnership has taken the affirmative step to apply the TEFRA partnership procedures with respect to the partnership return for that taxable year. This occurs when the tax matters partner has filed a request for an administrative adjustment for the partnership taxable year under section 6227(c) of the TEFRA partnership procedures with respect to a partnership taxable year. Similarly, an election under these temporary regulations also does not apply if a partnership that is not subject to the TEFRA partnership procedures has filed an amended return of partnership income for the partnership taxable year. Under the general rule in Sec. 301.9100-22T(b), an election to have the new partnership audit regime apply must be made when the IRS first notifies the partnership in writing that a partnership return for an eligible taxable year has been selected for examination (a ``notice of selection for examination''). Section 301.9100-22T(b)(1) provides that a partnership that wishes to make an election must do so within 30 days of the date of the notice of selection for examination. The notice of selection for examination referred to in Sec. 301.9100-22T(b) is a notice that precedes the notice of an administrative proceeding required under section 6231(a) as amended by the BBA. Section 301.9100- 22T(b) provides that the IRS will not issue a notice of an administrative proceeding, which cuts off the partnership's time for filing an AAR under section 6227 as amended by the BBA, for at least 30 days after it receives a valid election filed in accordance with Sec. 301.9100-22T(b). During the period of at least 30 days after the IRS receives a valid election and before the IRS mails the notice of an administrative proceeding, the partnership may file an AAR under section 6227 as amended by the BBA. Section 301.9100-22T(b)(2) provides that an election must be in writing and include a statement that the partnership is electing to have the partnership audit regime enacted by the BBA apply to the partnership return identified in the IRS notification of selection for examination. The partnership must write ``Election under Section 1101(g)(4)'' at the top of the statement. The statement must be provided to the individual identified in the notice of selection for examination as the IRS contact for the examination. In addition, the statement must be dated and signed by the tax matters partner, as defined under section 6231(a)(7) of the TEFRA partnership procedures and the applicable regulations, or an individual who has the authority to sign the partnership return for the taxable year under examination under section 6063 of the Code, the regulations thereunder, and applicable forms and instructions. The statement must include the name, [[Page 51797]] taxpayer identification number, address, and telephone number of the individual who signs the statement, as well as the partnership's name, taxpayer identification number, and tax year to which the statement applies. The statement must include representations that the partnership is not insolvent and does not reasonably anticipate becoming insolvent, the partnership is not currently and does not reasonably anticipate becoming subject to a bankruptcy petition under title 11 of the United States Code, and the partnership has sufficient assets, and reasonably anticipates having sufficient assets, to pay the potential imputed underpayment that may be determined during the partnership examination. The statement must also include a representation, signed under penalties of perjury, that the individual signing the statement is duly authorized to make the election under Sec. 301.9100-22T(b) and that, to the best of the individual's knowledge and belief, the statement is true, correct, and complete. A partnership electing into the new partnership audit regime under the BBA will also be required to designate the partnership representative, as defined in section 6223 as amended by the BBA, and provide the partnership representative's name, taxpayer identification number, address and daytime telephone number, and any other information as required in future guidance regarding the partnership representative. The Treasury Department and the IRS expect to issue additional guidance regarding designation of a partnership representative, including who is eligible to be a partnership representative, under section 6223 as amended by the BBA. Section 301.9100-22T(c) provides an exception to the general rule in Sec. 301.9100-22T(b) that a partnership may only elect into the new partnership audit regime after first receiving a notice of selection for examination. This exception provides that a partnership that has not received a notice of selection for examination described in Sec. 301.9100-22T(b) may make an election to have the new partnership audit regime apply to a partnership return for an eligible taxable year if the partnership wishes to file an AAR under section 6227 as amended by the BBA. Once an election is made under Sec. 301.9100-22T(c), all aspects of the new partnership audit regime, except section 6221(b) as added by the BBA, apply to the return filed for the eligible taxable year subject to the election. As with an election under Sec. 301.9100- 22T(b), an election under Sec. 301.9100-22T(c) may not be revoked without consent of the IRS. An election under Sec. 301.9100-22T(c) must be made only in the manner prescribed by the IRS in accordance with the forms and instructions and other guidance issued by the IRS. In no case may an election under Sec. 301.9100-22T(c) be made earlier than January 1, 2018. Consequently, an AAR under section 6227 as amended by the BBA may not be filed before January 1, 2018 (except by partnerships that have been issued a notice of selection for examination pursuant to the procedures discussed above). An AAR filed before that date (other than an AAR filed by a partnership that made a valid election under Sec. 301.9100-22T(b)) will be treated as an AAR by the partnership under section 6227 of the TEFRA partnership procedures, or as an amended return of partnership income for partnerships not subject to the TEFRA partnership procedures, and will prevent the partnership taxable year for which the request, or return, is filed from being an eligible taxable year. See Sec. 301.9100-22T(d)(2). The Treasury Department and the IRS intend to issue guidance regarding AARs under section 6227 as amended by the BBA before January 1, 2018. Special Analyses Certain IRS regulations, including this one, are exempt from the requirements of Executive Order 12866, as supplemented and reaffirmed by Executive Order 13563. Therefore, a regulatory impact assessment is not required. It has also been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to this regulation. These temporary regulations are published pursuant to section 7805(b)(2) of the Code to provide the time, form, and manner for a partnership to make an election pursuant to section 1101(g)(4) of the BBA to have the new partnership audit regime apply to any of its returns filed for a partnership taxable year beginning after November 2, 2015 and before January 1, 2018. Without this necessary guidance, a partnership would not be able to make a valid election pursuant to section 1101(g)(4) of the BBA. For the applicability of the Regulatory Flexibility Act (5 U.S.C. chapter 6), please refer to the Special Analyses section of the cross-reference notice of proposed rulemaking published in the Proposed Rules section of this issue of the Federal Register. Pursuant to section 7805(f) of the Code, these regulations were submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business. Drafting Information The principal author of these temporary regulations is Jenni M. Black of the Office of the Associate Chief Counsel (Procedure and Administration). However, other personnel from the Treasury Department and the IRS participated in their development. List of Subjects in 26 CFR Part 301 Income taxes, Penalties, Reporting and recordkeeping requirements. Amendments to the Regulations Accordingly, 26 CFR part 301 is amended as follows: PART 301--PROCEDURE AND ADMINISTRATION 0 Paragraph 1. The authority citation for part 301 is amended by adding an entry in numerical order to read as follows: Authority: 26 U.S.C. 7805 * * * * * * * * Section 301.9100-22T is also issued under section 1101(g)(4) of Public Law 114-74. * * * * * 0 Par. 2. Section 301.9100-22T is added to read as follows: Sec. 301.9100-22T Time, form, and manner of making the election under section 1101(g)(4) of the Bipartisan Budget Act of 2015 for returns filed for partnership taxable years beginning after November 2, 2015 and before January 1, 2018 (temporary). (a) Election. Pursuant to section 1101(g)(4) of the Bipartisan Budget Act of 2015, Public Law 114-74 (BBA), a partnership may elect at the time and in such form and manner as described in this section for amendments made by section 1101 of the BBA, except section 6221(b) as added by the BBA, to apply to any return of the partnership filed for an eligible taxable year as defined in paragraph (d) of this section. An election is valid only if made in accordance with this section. Once made, an election may only be revoked with the consent of the Internal Revenue Service (IRS). An election is not valid if it frustrates the purposes of section 1101 of the BBA. A partnership may not request an extension of time under Sec. 301.9100-3 for an election described in this section. (b) Election on notification by the IRS--(1) Time for making the election. Except as described in paragraph (c) of this section, an election under this section must be made within 30 days of the date of notification to a partnership, [[Page 51798]] in writing, that a return of the partnership for an eligible taxable year has been selected for examination (a notice of selection for examination). (2) Form and manner of making the election--(i) In general. The partnership makes an election under this section by providing a written statement with the words ``Election under Section 1101(g)(4)'' written at the top that satisfies the requirements of paragraph (b)(2) of this section to the individual identified in the notice of selection for examination as the IRS contact regarding the examination. (ii) Statement requirements. A statement making an election under this section must be in writing and be dated and signed by the tax matters partner, as defined under section 6231(a)(7) (prior to amendment by the BBA), and the applicable regulations, or an individual who has the authority to sign the partnership return for the taxable year under examination under section 6063, the regulations thereunder, and applicable forms and instructions. The fact that an individual dates and signs the statement making the election described in this paragraph (b) shall be prima facie evidence that the individual is authorized to make the election on behalf of the partnership. A statement making an election must include-- (A) The partnership's name, taxpayer identification number, and the partnership taxable year for which the election described in this paragraph (b) is being made; (B) The name, taxpayer identification number, address, and daytime telephone number of the individual who signs the statement; (C) Language indicating that the partnership is electing application of section 1101(c) of the BBA for the partnership return for the eligible taxable year identified in the notice of selection for examination; (D) The information required to properly designate the partnership representative as defined by section 6223 as amended by the BBA, which must include the name, taxpayer identification number, address, and daytime telephone number of the partnership representative and any additional information required by applicable regulations, forms and instructions, and other guidance issued by the IRS; (E) The following representations-- (1) The partnership is not insolvent and does not reasonably anticipate becoming insolvent before resolution of any adjustment with respect to the partnership taxable year for which the election described in this paragraph (b) is being made; (2) The partnership has not filed, and does not reasonably anticipate filing, voluntarily a petition for relief under title 11 of the United States Code; (3) The partnership is not subject to, and does not reasonably anticipate becoming subject to, an involuntary petition for relief under title 11 of the United States Code; and (4) The partnership has sufficient assets, and reasonably anticipates having sufficient assets, to pay a potential imputed underpayment with respect to the partnership taxable year that may be determined under subchapter C of chapter 63 of the Internal Revenue Code as amended by the BBA; and (F) A representation, signed under penalties of perjury, that the individual signing the statement is duly authorized to make the election described in this paragraph (b) and that, to the best of the individual's knowledge and belief, all of the information contained in the statement is true, correct, and complete. (iii) Notice of Administrative Proceeding. Upon receipt of the election described in this paragraph (b), the IRS will promptly mail a notice of administrative proceeding to the partnership and the partnership representative, as required under section 6231(a)(1) as amended by the BBA. Notwithstanding the preceding sentence, the IRS will not mail the notice of administrative proceeding before the date that is 30 days after receipt of the election described in paragraph (b) of this section. (c) Election for the purpose of filing an administrative adjustment request (AAR) under section 6227 as amended by the BBA--(1) In general. A partnership that has not been issued a notice of selection for examination as described in paragraph (b)(1) of this section may make an election with respect to a partnership return for an eligible taxable year for the purpose of filing an AAR under section 6227 as amended by the BBA. Once an election under this paragraph (c) is made, all of the amendments made by section 1101 of the BBA, except section 6221(b) as added by the BBA, apply with respect to the partnership taxable year for which such election is made. (2) Time for making the election. No election under this paragraph (c) may be made before January 1, 2018. (3) Form and manner of making an election. An election under this paragraph (c) must be made in the manner prescribed by the IRS for that purpose in accordance with applicable regulations, forms and instructions, and other guidance issued by the IRS. (4) Effect of filing an AAR before January 1, 2018. Except in the case of an election made in accordance with paragraph (b) of this section, an AAR filed on behalf of a partnership before January 1, 2018, is deemed for purposes of paragraph (d)(2) of this section, to be an AAR filed under section 6227(c) (prior to amendment by the BBA) or an amended return of partnership income, as applicable. (d) Eligible taxable year--(1) In general. For purposes of this section, the term eligible taxable year means any partnership taxable year beginning after November 2, 2015 and before January 1, 2018, except as provided in paragraph (d)(2) of this section. (2) Exception if AAR or amended return filed or deemed filed. Notwithstanding paragraph (d)(1) of this section, a partnership taxable year is not an eligible taxable year for purposes of this section if for the partnership taxable year-- (i) The tax matters partner has filed an AAR under section 6227(c) (prior to amendment by the BBA), (ii) The partnership is deemed to have filed an AAR under section 6227(c) (prior to the amendment by the BBA) in accordance with paragraph (c)(4) of this section, or (iii) An amended return of partnership income has been filed or has been deemed to be filed under paragraph (c)(4) of this section. (e) Applicability date. These regulations are applicable to returns filed for partnership taxable years beginning after November 2, 2015 and before January 1, 2018. (f) Expiration date. This section will expire on August 5, 2019. John M. Dalrymple, Deputy Commissioner for Services and Enforcement. Approved: July 6, 2016. Mark J. Mazur, Assistant Secretary for Tax Policy. [FR Doc. 2016-18638 Filed 8-4-16; 8:45 am] BILLING CODE 4830-01-P
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DEPARTMENT OF THE TREASURY These partnership audit and litigation Section 6223 as amended by the BBA
rules are commonly referred to as the provides that the partnership shall
Internal Revenue Service TEFRA partnership procedures. designate, in the manner prescribed by
Section 1101(b) of the BBA also the Secretary, a partner or other person
26 CFR Part 301 removes subchapter D of chapter 63 of with a substantial presence in the
[TD 9780] the Code (containing audit rules for United States as the partnership
electing large partnerships) and part IV representative who shall have the sole
RIN 1545–BN34 of subchapter K of chapter 1 of the Code authority to act on behalf of the
(prescribing the income tax treatment partnership under subchapter C of
Election Into the Partnership Audit chapter 63 of the Code, as amended by
for electing large partnerships), effective
Regime Under the Bipartisan Budget the BBA. In any case in which such a
for partnership taxable years beginning
Act of 2015 designation is not in effect, the
after December 31, 2017.
AGENCY: Internal Revenue Service (IRS), Section 1101(c) of the BBA replaces Secretary may select any person as the
Treasury. the rules to be removed by sections partnership representative. A
ACTION: Temporary regulations. 1101(a) and (b) with a new partnership partnership and all partners of such
audit regime. Section 1101(c) adds a partnership shall be bound by actions
SUMMARY: This document contains new subchapter C to chapter 63 of the taken under subchapter C by the
temporary regulations pursuant to Code, including amended Code sections partnership and by any final decision in
section 1101(g)(4) of the Bipartisan 6221–6241. The BBA also makes related a proceeding brought under subchapter
Budget Act of 2015 regarding an and conforming amendments to other C with respect to the partnership.
election to apply the new partnership provisions of the Code. Section 6225 as amended by the BBA
audit regime enacted by that act to generally addresses partnership
On December 18, 2015, President
certain returns of a partnership. The adjustments made by the IRS and the
Obama signed into law the PATH Act.
regulations provide the time, form, and calculation of any resulting imputed
Section 411 of the PATH Act corrects
manner for making this election. The underpayment. Section 6225(a)
and clarifies certain amendments made generally provides that the amount of
regulations affect any partnership that by the BBA. The amendments under the
wishes to elect to have the new any imputed underpayment resulting
PATH Act are effective as if included in from an adjustment must be paid by the
partnership audit regime apply to its section 1101 of the BBA, and therefore,
returns filed for certain taxable years partnership. Section 6225(b) describes
subject to the effective dates in section how an imputed underpayment is
beginning before January 1, 2018. 1101(g) of the BBA. determined, and section 6225(c)
DATES:
1. Overview of the New Partnership describes modifications that, if
Effective date: These regulations are
Audit Regime approved by the IRS, may reduce the
effective August 5, 2016.
amount of an imputed underpayment.
Applicability Date: For dates of Section 6221(a) as added by the BBA The PATH Act added to section 6225(c)
applicability, see § 301.9100–22T(e) and provides that, in general, any a special rule addressing certain passive
(f). adjustment to items of income, gain, losses of publicly traded partnerships.
FOR FURTHER INFORMATION CONTACT: loss, deduction, or credit of a Section 6226 as amended by the BBA
Jenni M. Black at (202) 317–6834 (not a partnership for a partnership taxable provides an exception to the general
toll-free number). year (and any partner’s distributive rule under section 6225(a)(1) that the
SUPPLEMENTARY INFORMATION: share thereof) shall be determined, and partnership must pay the imputed
any tax attributable thereto shall be underpayment. Under section 6226, the
Background assessed and collected, at the partnership may elect to have the
This document contains amendments partnership level. The applicability of reviewed year partners take into account
to the Procedure and Administration any penalty, addition to tax, or the adjustments made by the IRS and
Regulations (26 CFR part 301) to additional amount which relates to an pay any tax due as a result of those
provide rules for the time, form, and adjustment to any such item or share adjustments. In this case, the
manner of making the election under shall also be determined at the partnership is not required to pay the
section 1101(g)(4) of the Bipartisan partnership level. Section 6221(b) as imputed underpayment. Section
Budget Act of 2015, Public Law 114–74 added by the BBA provides rules for 6225(d)(1) defines the reviewed year to
(BBA) with respect to returns filed for partnerships that are required to furnish mean the partnership taxable year to
partnership taxable years beginning 100 or fewer Schedules K–1, Partner’s which the item(s) being adjusted relates.
after November 2, 2015 and before Share of Income, Deductions, Credits, Under section 6227 as amended by
January 1, 2018. etc., to elect out of this new regime. the BBA, the partnership may request an
The BBA was enacted on November 2, Generally, a partnership may elect out administrative adjustment, which is
2015, and was amended by the of the new regime only if each of its taken into account in the partnership
Protecting Americans from Tax Hikes partners is an individual, corporation taxable year the administrative
Act of 2015, Public Law 114–113, div. (including certain types of foreign adjustment request (AAR) is made. The
Q (PATH Act) on December 18, 2015. entities), or estate. Special rules apply partnership generally has three years
Section 1101(a) of the BBA removes for purposes of determining the number from the date of filing the return to
subchapter C of chapter 63 of the of partners in the case of a partner that make an AAR for that year, but may not
Internal Revenue Code (Code) effective is an S corporation. Section make an AAR for a partnership taxable
mstockstill on DSK3G9T082PROD with RULES
for partnership taxable years beginning 6221(b)(2)(C) provides that the Secretary year after the IRS has mailed the
after December 31, 2017. Subchapter C by regulation or other guidance may partnership a notice of an
of chapter 63 contains the unified prescribe rules for purposes of the 100- administrative proceeding initiated with
partnership audit and litigation rules or-fewer-Schedule K–1 requirement respect to the taxable year.
that were enacted as part of the Tax similar to the rules for S corporations Section 6231 as amended by the BBA
Equity and Fiscal Responsibility Act of with respect to any partner that is not describes notices of proceedings and
1982, Public Law 97–248 (TEFRA). an individual, corporation, or estate. adjustments, including certain time
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![51798 Federal Register / Vol. 81, No. 151 / Friday, August 5, 2016 / Rules and Regulations
in writing, that a return of the (2) The partnership has not filed, and (4) Effect of filing an AAR before
partnership for an eligible taxable year does not reasonably anticipate filing, January 1, 2018. Except in the case of
has been selected for examination (a voluntarily a petition for relief under an election made in accordance with
notice of selection for examination). title 11 of the United States Code; paragraph (b) of this section, an AAR
(2) Form and manner of making the (3) The partnership is not subject to, filed on behalf of a partnership before
election—(i) In general. The partnership and does not reasonably anticipate January 1, 2018, is deemed for purposes
makes an election under this section by becoming subject to, an involuntary of paragraph (d)(2) of this section, to be
providing a written statement with the petition for relief under title 11 of the an AAR filed under section 6227(c)
words ‘‘Election under Section United States Code; and (prior to amendment by the BBA) or an
1101(g)(4)’’ written at the top that (4) The partnership has sufficient amended return of partnership income,
satisfies the requirements of paragraph assets, and reasonably anticipates as applicable.
(b)(2) of this section to the individual having sufficient assets, to pay a (d) Eligible taxable year—(1) In
identified in the notice of selection for potential imputed underpayment with general. For purposes of this section, the
examination as the IRS contact respect to the partnership taxable year term eligible taxable year means any
regarding the examination. that may be determined under partnership taxable year beginning after
(ii) Statement requirements. A subchapter C of chapter 63 of the November 2, 2015 and before January 1,
statement making an election under this Internal Revenue Code as amended by 2018, except as provided in paragraph
section must be in writing and be dated the BBA; and (d)(2) of this section.
and signed by the tax matters partner, as (F) A representation, signed under (2) Exception if AAR or amended
defined under section 6231(a)(7) (prior penalties of perjury, that the individual return filed or deemed filed.
to amendment by the BBA), and the signing the statement is duly authorized Notwithstanding paragraph (d)(1) of this
applicable regulations, or an individual to make the election described in this section, a partnership taxable year is not
who has the authority to sign the paragraph (b) and that, to the best of the an eligible taxable year for purposes of
partnership return for the taxable year individual’s knowledge and belief, all of this section if for the partnership taxable
under examination under section 6063, the information contained in the year—
the regulations thereunder, and (i) The tax matters partner has filed an
statement is true, correct, and complete.
applicable forms and instructions. The AAR under section 6227(c) (prior to
(iii) Notice of Administrative
fact that an individual dates and signs amendment by the BBA),
Proceeding. Upon receipt of the election (ii) The partnership is deemed to have
the statement making the election described in this paragraph (b), the IRS
described in this paragraph (b) shall be filed an AAR under section 6227(c)
will promptly mail a notice of (prior to the amendment by the BBA) in
prima facie evidence that the individual administrative proceeding to the
is authorized to make the election on accordance with paragraph (c)(4) of this
partnership and the partnership section, or
behalf of the partnership. A statement representative, as required under
making an election must include— (iii) An amended return of
section 6231(a)(1) as amended by the partnership income has been filed or
(A) The partnership’s name, taxpayer
BBA. Notwithstanding the preceding has been deemed to be filed under
identification number, and the
sentence, the IRS will not mail the paragraph (c)(4) of this section.
partnership taxable year for which the
notice of administrative proceeding (e) Applicability date. These
election described in this paragraph (b)
before the date that is 30 days after regulations are applicable to returns
is being made;
(B) The name, taxpayer identification receipt of the election described in filed for partnership taxable years
number, address, and daytime paragraph (b) of this section. beginning after November 2, 2015 and
telephone number of the individual who (c) Election for the purpose of filing before January 1, 2018.
signs the statement; an administrative adjustment request (f) Expiration date. This section will
(C) Language indicating that the (AAR) under section 6227 as amended expire on August 5, 2019.
partnership is electing application of by the BBA—(1) In general. A
partnership that has not been issued a John M. Dalrymple,
section 1101(c) of the BBA for the Deputy Commissioner for Services and
partnership return for the eligible notice of selection for examination as
described in paragraph (b)(1) of this Enforcement.
taxable year identified in the notice of Approved: July 6, 2016.
selection for examination; section may make an election with
respect to a partnership return for an Mark J. Mazur,
(D) The information required to
properly designate the partnership eligible taxable year for the purpose of Assistant Secretary for Tax Policy.
representative as defined by section filing an AAR under section 6227 as [FR Doc. 2016–18638 Filed 8–4–16; 8:45 am]
6223 as amended by the BBA, which amended by the BBA. Once an election BILLING CODE 4830–01–P
must include the name, taxpayer under this paragraph (c) is made, all of
identification number, address, and the amendments made by section 1101
daytime telephone number of the of the BBA, except section 6221(b) as DEPARTMENT OF HOMELAND
partnership representative and any added by the BBA, apply with respect SECURITY
additional information required by to the partnership taxable year for
applicable regulations, forms and which such election is made. Coast Guard
instructions, and other guidance issued (2) Time for making the election. No
by the IRS; election under this paragraph (c) may be 33 CFR Part 165
(E) The following representations— made before January 1, 2018. [Docket Number USCG–2016–0746]
mstockstill on DSK3G9T082PROD with RULES
(1) The partnership is not insolvent (3) Form and manner of making an
and does not reasonably anticipate election. An election under this RIN 1625–AA00
becoming insolvent before resolution of paragraph (c) must be made in the
Safety Zone; M/V Zhenhuan 14 Wando
any adjustment with respect to the manner prescribed by the IRS for that
Terminal Crane Movement; Charleston,
partnership taxable year for which the purpose in accordance with applicable
SC
election described in this paragraph (b) regulations, forms and instructions, and
is being made; other guidance issued by the IRS. AGENCY: Coast Guard, DHS.
VerDate Sep<11>2014 16:05 Aug 04, 2016 Jkt 238001 PO 00000 Frm 00024 Fmt 4700 Sfmt 4700 E:\FR\FM\05AUR1.SGM 05AUR1](https://thefederalregister.org/doc/81_FR_51946/page/4.svg)
Document Created: 2016-08-05 06:43:38
Document Modified: 2016-08-05 06:43:38
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Rules and Regulations | |
| Action | Temporary regulations. | |
| Contact | Jenni M. Black at (202) 317-6834 (not a toll-free number). | |
| FR Citation | 81 FR 51795 | |
| RIN Number | 1545-BN34 | |
| CFR Associated | Income Taxes; Penalties and Reporting and Recordkeeping Requirements |
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