82 FR 60144 - Centralized Partnership Audit Regime: Rules for Election Under Sections 6226 and 6227, Including Rules for Tiered Partnership Structures, and Administrative and Procedural Provisions
DEPARTMENT OF THE TREASURY
Internal Revenue Service Federal Register Volume 82, Issue 242 (December 19, 2017)
Internal Revenue Service
Federal Register Volume 82, Issue 242 (December 19, 2017)
| Page Range | 60144-60167 | |
| FR Document | 2017-27071 |
[Federal Register Volume 82, Number 242 (Tuesday, December 19, 2017)] [Proposed Rules] [Pages 60144-60167] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2017-27071] [[Page 60144]] ----------------------------------------------------------------------- DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 301 [REG-120232-17; REG-120233-17] RIN 1545-BO03; RIN 1545-BO04 Centralized Partnership Audit Regime: Rules for Election Under Sections 6226 and 6227, Including Rules for Tiered Partnership Structures, and Administrative and Procedural Provisions AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Notice of proposed rulemaking. ----------------------------------------------------------------------- SUMMARY: This document contains proposed regulations implementing section 1101 of the Bipartisan Budget Act of 2015 (BBA), which was enacted into law on November 2, 2015. Section 1101 of the BBA repeals the current rules governing partnership audits and replaces them with a new centralized partnership audit regime that, in general, assesses and collects tax at the partnership level. These proposed regulations provide rules addressing how pass-through partners take into account adjustments under the alternative to payment of the imputed underpayment described in section 6226 and under rules similar to section 6226 when a partnership files an administrative adjustment request under section 6227. To make corresponding changes, these proposed regulations amend portions of the previously proposed regulations under sections 6226 and 6227. Additionally, these proposed regulations provide rules regarding assessment and collection, penalties and interest, and period of limitations under the new centralized partnership audit regime. The proposed regulations also address the rules for seeking judicial review of partnership adjustments. DATES: Written or electronic comments and requests for a public hearing must be received by March 19, 2018. ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-120232-17; REG- 120233-17), room 5207, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be hand delivered Monday through Friday between the hours of 8:00 a.m. and 4:00 p.m. to CC:PA:LPD:PR (REG-120232-17; REG-120233-17), Courier's Desk, Internal Revenue Service, 1111 Constitution Avenue NW, Washington, DC 20224, or sent electronically via the Federal eRulemaking Portal at www.regulations.gov (IRS REG-120232-17; REG-120233-17). FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations under sections 6225, 6231, and 6234 of the Internal Revenue Code, Joy E. Gerdy-Zogby of the Office of Associate Chief Counsel (Procedure and Administration), (202) 317-6834; concerning the proposed regulations under sections 6227, 6232, and 6233, Steven L. Karon of the Office of Associate Chief Counsel (Procedure and Administration), (202) 317-6834; concerning the proposed regulations under sections 6226 and 6235, Jennifer M. Black of the Office of Associate Chief Counsel (Procedure and Administration), (202) 317-6834; concerning the submission of comments and a request for a public hearing, Regina Johnson, (202) 317- 6901 (not toll-free numbers). SUPPLEMENTARY INFORMATION: Background This document contains proposed amendments to the Procedure and Administration Regulations (26 CFR part 301) under Subpart--Tax Treatment of Partnership Items regarding how pass-through partners (as defined in proposed Sec. 301.6241-1(a)(5)) take into account adjustments under the alternative to payment of the imputed underpayment described in section 6226 under the new centralized partnership audit regime and under rules similar to section 6226 when a partnership files an administrative adjustment request (AAR) under section 6227. This document also contains proposed regulations regarding assessment and collection, penalties and interest, periods of limitations, and judicial review under the new centralized partnership audit regime. The new regime was enacted into law by section 1101 of the BBA, Public Law 114-74, as amended by the Protecting Americans from Tax Hikes Act of 2015, Public Law 114-113, div. Q. The provisions of section 1101 of the BBA are generally effective for partnership taxable years beginning after December 31, 2017. See the temporary regulations (TD 9780, 81 FR 51795) and the notice of proposed rulemaking (REG- 105005-16, 81 FR 51835) published in the Federal Register on August 5, 2016, regarding the election into the centralized partnership audit regime for taxable years beginning after November 2, 2015 and before January 1, 2018. On June 14, 2017, a notice of proposed rulemaking (REG-136118-15) was published in the Federal Register (82 FR 27334) (June 14 NPRM) implementing the new centralized partnership audit regime. The June 14 NPRM contained rules regarding the scope and election out of the new regime, consistent treatment by partners, the partnership representative, partnership adjustments made by the IRS and determination of the amount of the partnership's liability (referred to as the imputed underpayment), AARs, and the election for partners to take the partnership adjustments into account (sections 6221 through 6227 and section 6241 of the Internal Revenue Code (Code)). The rules regarding how pass-through partners take into account adjustments under the alternative to payment of the imputed underpayment described in section 6226 and under rules similar to section 6226 under section 6227 were reserved in the June 14 NPRM. This document contains those proposed rules and also re-proposes certain rules under section 6226, including the imposition and computation of penalties that relate to partnership adjustments. This document also contains proposed regulations that supplement the June 14 NPRM by implementing the administrative and procedural provisions of the new centralized partnership audit regime (sections 6231 through 6235). For proposed rules regarding international provisions under the centralized partnership audit regime, see (REG-119337-17) published in the Federal Register on November 30, 2017 (82 FR 56765) (November 30 NPRM). 1. Pass-Through Partners and the Section 6226 Push Out Election Under section 6225, a partnership subject to the centralized partnership audit regime is generally required to pay an imputed underpayment with respect to adjustments to the partnership's items of income, gain, loss, deduction, or credit, and any partner's distributive share thereof. However, a partnership may elect under section 6226 to have its partners for the year under audit (the reviewed year partners) take the adjustments into account. Proposed Sec. 301.6226-1 (June 14 NPRM) provides rules relating to the election under section 6226 by a partnership to have its partners take into account the partnership adjustments in lieu of paying the imputed underpayment determined under section 6225 (the push out election). Proposed Sec. Sec. 301.6226-2 and 301.6226-3 (June 14 NPRM) provide rules for statements the partnership must send to its partners for the reviewed year (as defined in proposed Sec. 301.6241-1(a)(8) (June 14 NPRM)) and the computation and payment of the partners' liabilities [[Page 60145]] as a result of taking into account the adjustments. Under proposed Sec. 301.6226-1(b)(2) (June 14 NPRM), if a partnership makes the election under section 6226 to push out the adjustments, the partnership is not required to pay the imputed underpayment but is instead required to furnish statements to ``each partner of the partnership for the reviewed year.'' Those reviewed year partners are then required to take the adjustments into account as provided under section 6226(b). The June 14 NPRM provides guidance on how a direct partner that is not a pass-through partner (generally defined under proposed Sec. 301.6241-1(a)(5) (June 14 NPRM) as a partnership, an S corporation, certain trusts, and a decedent's estate) takes the adjustments into account under section 6226(b). The June 14 NPRM reserved, however, on the issue of how the adjustments are taken into account in the case of tiered partnership structures by partners that are pass-through partners. The preamble to the June 14 NPRM noted that the Treasury Department and the IRS were considering an approach under section 6226 for tiered partnerships to ``push'' the adjustments beyond the first tier partners that would be the subject of other proposed regulations to be published in the near future. These are those proposed regulations. In the June 14 NPRM, the Treasury Department and the IRS sought comments on how the IRS might administer the requirements of section 6226 in tiered structures, including comments on reducing noncompliance and collection risk in tiered structures, while at the same time reducing costs of effective tax administration. The Treasury Department and the IRS received numerous comments addressing the push out election for tiered structures which uniformly requested that pass-through partners be allowed to push out the adjustments under section 6226 beyond the first tier and through to the ultimate taxpaying partners or owners. Partnerships, as such, are not subject to tax under chapter 1 of the Code with respect to items of income, gain, loss, deduction, and credit. Rather, these items of the partnership are allocated to its partners who then take them into account based on the partners' tax characteristics, including entity classification. The June 14 NPRM describes generally how adjustments to items of income, gain, loss, deduction, or credit made with respect to a partnership subject to the TEFRA partnership procedures flow through to the partnership's direct and indirect partners for assessment and collection of the resulting tax. Under certain circumstances, the assessment and collection of such tax required the IRS to follow deficiency procedures after the partnership-level proceeding. The enactment of the centralized partnership audit regime changed this paradigm by introducing the imputed underpayment, an entity-level liability, that is calculated based on the adjustments to a partnership's items of income, gain, loss, deduction, or credit, and that is assessed and collected at the partnership level, rather than being assessed and collected from the ultimate partners. Section 6226 provides an alternative to the entity-level imputed underpayment, allowing a partnership to elect under section 6226(a) to push the adjustments out to its partners. In lieu of the partnership paying the imputed underpayment, section 6226(a) provides that when a push out election is made the reviewed year partners ``shall take such adjustments into account'' as provided in section 6226(b). The language of section 6226(b), however, does not distinguish between partners that are subject to chapter 1 income taxes (for example, individuals and C corporations) and pass-through partners (for example, partnerships and S corporations), which are generally not subject to such taxes. Accordingly, the precise question of how a pass-through partner takes into account the adjustments when a partnership elects to push out the adjustments to its partners is not addressed by section 6226(b). As discussed in the preamble to the June 14 NPRM, section 6226(b) could be interpreted to treat direct pass-through partners like individuals, allowing the IRS to collect the resulting tax from those direct pass-through partners without allowing them to push out the adjustments past the first tier. See June 14 NPRM, 82 FR at 27364 (citing Joint Comm. on Taxation, JCS-1-16, General Explanations of Tax Legislation Enacted in 2015, 70 (2016) (JCS-1-16)). Alternatively, section 6226(b) could be interpreted to allow a pass-through partner to take adjustments into account by passing the adjustments along to its reviewed year partners through the tiers until reaching an ultimate tax-paying owner. See June 14 NPRM, 82 FR at 27364-65. Technical corrections to the centralized partnership audit regime introduced in the last Congress, but not enacted, would have allowed pass-through partners to take adjustments into account under section 6226(b) by either paying an entity-level imputed underpayment or passing the adjustments along to their reviewed year partners. See June 14 NPRM, 82 FR at 27365 (citing the Tax Technical Corrections Act of 2016, H.R. 6439, 114th Cong. (2016)). After considering all of the comments, the Treasury Department and the IRS have determined that adjustments pushed out to partners pursuant to an election under section 6226 should be permitted to be pushed out through the tiers to the ultimate tax-paying owners. Accordingly, these proposed regulations provide rules for pushing the adjustments through tiers of partners that are pass-through partners. Under proposed Sec. 301.6241-1(a)(5) (June 14 NPRM), a ``pass-through partner'' means a partnership (regardless of whether the partnership made a valid election under section 6221(b) to elect out of the centralized partnership audit regime), an S corporation, certain trusts, and a decedent's estate. As discussed more fully in the Explanation of Provisions section of this preamble, the proposed regulations provide rules for pushing the adjustments beyond the first tier. Under these rules, each pass-through partner in an ownership chain is given a choice to either push the adjustments to its partners, shareholders, or beneficiaries or pay tax with respect to the adjustments. This optionality is consistent with the framework of the centralized partnership audit regime where the partnership under audit, or the partnership initiating its own adjustments in an AAR, has the choice of either paying a tax amount with respect to the adjustments or pushing the adjustments out to its partners. It also provides maximum flexibility for each pass-through partner in the chain to determine the best course for that partner based on its own facts and circumstances. The proposed regulations also provide a compliance mechanism to ensure that the section 6226 election does not negatively impact tax administration. As discussed in the June 14 NPRM, the centralized partnership audit regime is designed to improve the IRS's ability not only to audit partnerships, including large, tiered partnerships, but also to efficiently collect the tax due as a result of the audit. The centralized partnership audit regime has two main collection mechanisms. First, section 6225 creates a default entity-level imputed underpayment that the partnership must pay. Second, as an alternative to payment of the imputed underpayment by the partnership under section 6225, section 6226 allows the partnership to move the collection point [[Page 60146]] from the partnership to its partners for the reviewed year. If a partnership complies with section 6226, the imputed underpayment determined under section 6225 is extinguished. Section 6226(a). Section 6226 does not, however, extinguish the tax obligation with respect to the adjustments underlying the imputed underpayment. Instead, the partnership's partners for the reviewed year must also satisfy the requirements of section 6226 with respect to the adjustments. Once the partnership allocates the adjustments to each reviewed year partner and sends the required statements under section 6226(a), the partners are required to take the adjustments into account and, in the case of partners that are not pass-through partners, pay the resulting tax through self-reporting. Section 6226(b). Thus, section 6226 moves assessment and collection from the partnership subject to the administrative proceeding to its partners. Because section 6226 is a collection provision, the IRS must be able to collect any tax due as a result of the adjustments made at the partnership level, even if those adjustments are pushed out through multiple tiers of pass-through partners. Therefore, under a regime where the partnership is allowed to push adjustments through the tiers, there must be a feature that ensures compliance by each pass-through partner in the chain of ownership. Without such a feature, non- compliant entities in the tiers, and the current partners who control those entities, could frustrate collection of the tax due as a result of the partnership audit, and the section 6226 election would become a means for avoidance of tax due with respect to adjustments determined in the audit, undermining the centralized partnership audit regime enacted under the BBA. Therefore, these proposed regulations provide a mechanism to address pass-through partners in the tiers that fail to comply with the requirement to either push the adjustments out to their owners or pay the tax resulting from the adjustments allocable to that partner. That mechanism is to collect the tax due from the non-compliant pass-through partner. This balances the ability for the tiered structure to push out the partnership adjustments to the partnership's ultimate reviewed year partners while ensuring collection under section 6226. In cases where the pass-through partner chooses (or, in the case of non-compliance, is required) to pay, the proposed regulations rely on existing rules to determine how an entity that generally does not pay chapter 1 tax would determine the amount due if that entity were to take the adjustments into account. Under these proposed rules, the pass-through partner calculates an amount in the same manner as the imputed underpayment under section 6225 is computed with respect to the partnership under audit, with some refinements, as described in more detail in the Explanation of Provisions section of this preamble, to reflect the fact that the adjustments are taken into account pursuant to a section 6226 election. 2. Pass-Through Partners and Administrative Adjustment Requests The June 14 NPRM also reserved on how pass-through partners in a partnership that files an AAR take the adjustments into account under ``rules similar to the rules of section 6226.'' As discussed more fully in the Explanation of Provisions section of this preamble, these proposed regulations provide for rules similar to the regulations under section 6226, with some minor changes to reflect the fact that an AAR permits taxpayers to receive refunds of any tax overpaid and to reflect that an AAR occurs outside of an examination. 3. Penalties in the Case of a Section 6226 Push Out Election In the June 14 NPRM, the proposed regulations provide that defenses to any penalties, additions to tax, or additional amounts must be raised by the partnership during the partnership-level proceeding under the centralized partnership audit regime, regardless of whether the defense relates to facts and circumstances of the partnership or any other person, including a partner in the partnership. Additionally, those proposed regulations provide that penalties are calculated at the partnership level, even if the partnership makes an election under section 6226. As described more fully in the Explanation of Provisions section of this preamble, those rules are not consistent with the penalty rules proposed in these proposed regulations and, therefore, the rules proposed in the June 14 NPRM are being revised accordingly. 4. Section 6226 Push Out Election and the Safe Harbor Amount In the June 14 NPRM, the proposed regulations under section 6226 provide a safe harbor amount and interest safe harbor amount that partners can pay in lieu of computing the tax and interest the partner owes as a result of taking the adjustments into account in the year under audit and determining the effect of this computation on tax attributes in subsequent years. These safe harbor amounts were intended to reduce the burden of the complex calculation of the tax and interest due for the reviewed year and the intervening years. These rules were crafted in light of the proposed regulations under section 6226 in the June 14 NPRM, which did not yet provide rules for pushing the adjustments out through multiple tiers of pass-through partners. During the process of developing the rules to permit push out through multiple tiers of pass-through partners, it became apparent that the safe harbor rules no longer reduced burden. In fact, incorporating the safe harbor rules into the rules for pushing through the tiers became more complex and cumbersome than if the safe harbor amounts did not exist. In particular, the safe harbor amounts increased the reporting burden on a pass-through partner that elected to push the adjustments to its partners without a meaningful reduction in burden on the recipient partners. Accordingly, for these reasons, the proposed regulations regarding the safe harbor amount and the interest safe harbor amount have been amended to remove these provisions. 5. Administrative and Procedural Provisions Under the Centralized Partnership Audit Regime Section 6231(a) provides that the Secretary shall mail to the partnership and the partnership representative (1) notice of any administrative proceeding (NAP) initiated at the partnership level with respect to an adjustment of any item of income, gain, loss, deduction, or credit of a partnership for a partnership taxable year, or any partner's distributive share thereof; (2) notice of any proposed partnership adjustment (NOPPA) resulting from such proceeding; and (3) notice of any final partnership adjustment (FPA) resulting from such proceeding. These three notices also apply to any proceeding with respect to an AAR filed by a partnership. Section 6231(a) further provides that any FPA shall be mailed no earlier than 270 days after the date on which the notice of the proposed partnership adjustment is mailed and such notices are sufficient if mailed to the last known address of the partnership representative or the partnership, even if the partnership has terminated its existence. Section 6225(a)(1) provides that in the case of any adjustment by the Secretary in the amount of any item of income, gain, loss, deduction, or credit of a partnership, or any partner's distributive share thereof, the partnership shall pay any imputed underpayment with respect to such [[Page 60147]] adjustment in the adjustment year (as defined in proposed Sec. 301.6241-1(a)(1) (June 14 NPRM)) as provided in section 6232. Section 6232(a) provides that any imputed underpayment shall be assessed and collected in the same manner as if it were a tax imposed for the adjustment year by subtitle A of the Code, except that in the case of an AAR to which section 6227(b)(1) applies, the underpayment shall be paid when the AAR is filed. Section 6232(b) provides that except as otherwise provided in chapter 63 of the Code, no assessment of a deficiency may be made (and no levy or proceeding in any court for the collection of any amount resulting from such adjustment may be made, begun, or prosecuted) before (1) the close of the 90th day after the day on which an FPA was mailed and (2) if a petition for readjustment is filed under section 6234 with respect to such notice, the decision of the court has become final. A partnership may, at any time (whether or not any notice of partnership adjustment has been issued), by a signed notice in writing filed with the Secretary waive this restriction on the making of any partnership adjustment. Section 6232(d)(2). Section 6232(c) provides that notwithstanding section 7421(a) (regarding prohibition on suits to restrain assessment or collection), any action that violates section 6232(b) may be enjoined in the proper court, including the Tax Court. The Tax Court shall have no jurisdiction to enjoin any action under subsection 6232(c) unless a timely petition for readjustment has been filed under section 6234. If a timely petition has been filed, the Tax Court has jurisdiction only with respect to the adjustments that are the subject of such petition. Section 6232(d) provides exceptions to the restrictions on making partnership adjustments. Section 6232(d)(1)(A) provides the general rule that if a partnership is notified that, on account of a mathematical or clerical error appearing on the partnership return, an adjustment to an item is required, rules similar to the rules of paragraphs (1) and (2) of section 6213(b) (relating to assessments on account of mathematical or clerical errors and abatement of such assessments) shall apply to such adjustments. Section 6232(d)(1)(B) provides a special rule that if a partnership is a partner in another partnership, any adjustment on account of such partnership's failure to comply with the requirements of section 6222(a) (requiring that a partner, on its return, treat items attributable to a partnership in a manner that is consistent with the treatment of such item on the partnership return) with respect to its interest in such other partnership shall be treated as an adjustment referred to in section 6232(d)(1)(A) except that paragraph (2) of section 6213(b) (providing the ability to request an abatement of an assessment on account of a mathematical or clerical error) shall not apply to such adjustment. Section 6232(e) provides that if no proceeding under section 6234 is begun with respect to any FPA during the 90-day period described in section 6232(b), the amount for which the partnership is liable under section 6225 shall not exceed the amount determined in accordance with such FPA. Section 6233 provides rules related to interest and penalties with respect to imputed underpayments. Except to the extent provided in section 6226(c) (providing rules for penalties and interest where the partnership elects under section 6226 the alternative to payment of the imputed underpayment), the interest computed with respect to any partnership adjustment for a reviewed year is the interest that would be determined under chapter 67 of the Code for the period beginning on the day after the return due date for the reviewed year and ending on the return due date for the adjustment year or, if earlier, the date payment of the imputed underpayment is made. Proper adjustments in the amount of interest determined shall be made for adjustments required for partnership taxable years after the reviewed year and before the adjustment year by reason of such partnership adjustment. Section 6233(a)(1) and (2). Except to the extent provided in section 6226(c), the partnership shall be liable for any penalty, addition to tax, or additional amount imposed with respect to any partnership adjustment for a reviewed year. Any such penalty, addition to tax, or additional amount will be determined at the partnership level as if the partnership had been an individual subject to tax under chapter 1 of subtitle A of the Code for the reviewed year and the imputed underpayment were an actual underpayment (or understatement) for such year. Section 6233(a)(1) and (3). Section 6233(a)(2) provides that interest with respect to a partnership adjustment for a reviewed year shall also take into account adjustments required by reason of such partnership adjustment for partnership taxable years after the reviewed year and before the adjustment year. The meaning of this provision is not clear because unless multiple years are audited, there may be no adjustments required for taxable years other than the reviewed year. Because of this, the proposed regulations do not address this language from the statute. The IRS and the Treasury Department request comments about when and how this language in section 6233(a)(2) may have effect. In the case of any failure to pay an imputed underpayment on the date prescribed therefor, the partnership shall be liable for interest determined by treating the imputed underpayment as an underpayment of tax imposed in the adjustment year. Section 6233(b)(1) and (2). In the case of any failure to pay an imputed underpayment on the date prescribed therefor, the partnership shall be liable for penalties, additions to tax, or additional amounts determined by applying section 6651(a)(2) to such failure to pay and by treating the imputed underpayment as an underpayment of tax for purposes of part II of subchapter A of chapter 68 of the Code (relating to accuracy-related and fraud penalties). Section 6233(b)(1) and (3). Section 6234(a) provides that within 90 days after the date on which an FPA is mailed under section 6231 with respect to any partnership taxable year, the partnership may file a petition for readjustment for such taxable year with the Tax Court, the district court of the United States for the district in which the partnership's principal place of business is located, or the Court of Federal Claims. A petition for readjustment under section 6234 may be filed in a district court of the United States or the Court of Federal Claims only if the partnership filing the petition deposits with the Secretary, on or before the date the petition is filed, the amount of the imputed underpayment (as of the date of the filing of the petition) if the partnership adjustment was made as provided by the FPA. Section 6234(b)(1). The court may by order provide that the jurisdictional requirements of section 6234(b)(1) have been satisfied where there has been a good faith attempt to satisfy such requirement and any shortfall of the amount required to be deposited is timely corrected. Any such amount deposited shall not, while deposited, be treated as a payment of tax for purposes of the Code (other than chapter 67 of the Code regarding interest). Section 6234(b)(2). Under section 6234(c), a court with which a petition has been filed in accordance with section 6234 has jurisdiction to determine all items of income, gain, loss, deduction, or credit of the partnership for the partnership [[Page 60148]] taxable year to which the notice of final partnership adjustment relates as well as the proper allocation of such items among the partners and the applicability of any penalty, addition to tax, or additional amount for which the partnership may be liable under subchapter C of chapter 63 of the Code. Any determination by a court under section 6234 will have the force and effect of a decision of the Tax Court or a final judgment or decree of the district court or the Court of Federal Claims, as the case may be, and shall be reviewable as such. The date of any such determination shall be treated as being the date of the court's order entering the decision. Section 6234(d). Section 6234(e) provides that if an action brought under section 6234 is dismissed other than by reason of a rescission under section 6231(c), the decision of the court dismissing the action shall be considered as its decision that the FPA is correct, and an appropriate order shall be entered in the records of the court. Section 6235 provides the period of limitations on making adjustments under the centralized partnership audit regime. Under section 6235(a), the general rule is that no adjustment for any partnership taxable year may be made after the later of three dates. The first date is the date that is three years after the latest of (a) the date on which the partnership return for such taxable year was filed, (b) the return due date for the taxable year, or (c) the date on which the partnership filed an AAR under section 6227 with respect to such year. The second date is, in the case of any modification of the imputed underpayment under section 6225(c), the date that is 270 days (plus the number of days of any extension consented to by the Secretary under section 6225(c)(7)) after the date on which everything required to be submitted for purposes of modification is so submitted. The third date is, in the case of any NOPPA issued under section 6231(a)(2), the date that is 330 days (plus the number of days of any extension consented to by the Secretary under section 6225(c)(7)) after the date of such notice. Pursuant to section 6235(b), the period described in section 6235(a) (including an extension period under section 6235(b)) may be extended by agreement entered into by the Secretary and the partnership before the expiration of such period. Section 6235(c) provides special rules in the case of fraud and other situations. In the case of a false or fraudulent partnership return with intent to evade tax or in the case of a failure by a partnership to file a return for a taxable year, an adjustment may be made at any time. Section 6235(c)(1) and (3). If any partnership omits from gross income an amount properly includable in gross income and such amount is described in section 6501(e)(1)(A) (describing situations where more than 25 percent of gross income has been omitted and situations where more than $5,000 of gross income attributable to one or more assets to which information is required to be reported under section 6038D has been omitted), the period under section 6235(a) is applied by substituting ``six'' years for ``three'' years. Section 6235(c)(2). For purposes of section 6235, a return executed by the Secretary under section 6020(b) (concerning returns executed by the Secretary where a person fails to file a return required by the Code or regulations) on behalf of a partnership shall not be treated as a return of the partnership. Section 6235(c)(4). If an FPA with respect to any taxable year is mailed under section 6231, the period of limitations on making adjustments under section 6235(a) shall be suspended for the 90-day period during which an action may be brought under section 6234 (and, if a petition is filed under section 6234 with respect to such FPA, until the decision of the court becomes final) and for one year thereafter. Section 6235(d). Explanation of Provisions 1. Pass-Through Partners and the Section 6226 Push Out Election Proposed Sec. 301.6226-3(e)(1) provides that if a pass-through partner is furnished a statement described in proposed Sec. 301.6226-2 (June 14 NPRM) (including a statement described in proposed Sec. 301.6226-3(e)(3)(i)), the pass-through partner must take into account the adjustments reflected on that statement by either furnishing statements to its partners that held an interest in the pass-through partner at any time during the taxable year to which the adjustments relate or by paying an amount calculated like an imputed underpayment on the adjustments reflected in the statement plus any applicable penalties and interest. As provided in proposed Sec. 301.6226- 3(e)(3)(i) and (iv), any statements furnished under these provisions are treated as statements described in proposed Sec. 301.6226-2 (June 14 NPRM), and any pass-through partner receiving a statement under proposed Sec. 301.6226-3(e)(3)(i) must also take the adjustments reflected on the statement into account by furnishing statements to its partners or paying an amount calculated like an imputed underpayment. Thus, there is an iterative application of the rules under proposed Sec. 301.6226-3(e) for tiered partnership structures allowing the adjustments to be passed along through the tiers to the ultimate non- pass-through partners who then must take the adjustments into account under proposed Sec. 301.6226-3(a) and (b) (June 14 NPRM). Under proposed Sec. 301.6226-3(e)(2), if a pass-through partner fails to timely take into account the adjustments in accordance with proposed Sec. 301.6226-3(e)(3) or (e)(4), the pass-through partner must take into account the adjustments by paying an amount calculated like an imputed underpayment plus any applicable penalties and interest, in accordance with the rules provided under proposed Sec. 301.6226-3(e)(4). As discussed in the Background section of this preamble, this rule is necessary to prevent tiered structures from electing to push out the adjustments to inappropriately shift the burden of collecting the tax due back to the IRS and to avoid paying the tax owed after completion of a partnership audit. Such behavior would frustrate the orderly administration of the election under section 6226 and the collection efforts of the IRS. Without imposing an entity-level liability against those pass-through entities that fail to pay or push out, there would be a disincentive to take any action upon receipt of a push out statement causing the push out election to become a potential vehicle for non-compliance and abuse. Such a result undermines the efficiencies and increased collections intended by enactment of the centralized partnership audit regime. The additional burden placed on the IRS of locating the partners of pass-through partners, determining the proper allocation of adjustments, and assessing the resulting tax, if any, would frustrate tax administration in the same manner as the TEFRA partnership procedures, which were administratively untenable. The rule that requires a pass-through partner to pay an amount calculated like an imputed underpayment if it fails to take the adjustments into account significantly alleviates administrative burden, comports with an iterative application of section 6226, and furthers the purpose of the statute by eliminating the ability for a partner to increase costs and inefficiencies of tax administration by failing to comply with the statute. Proposed Sec. 301.6226-3(e)(3) provides the rules for a pass- through partner to take into account the adjustments in the statements furnished to it under proposed Sec. 301.6226-2 (June 14 NPRM) [[Page 60149]] by furnishing statements to its own partners. Under proposed Sec. 301.6226-3(e)(3)(i), a pass-through partner takes the adjustments into account by furnishing statements to each person who was a partner in the pass-through partner at any time during the taxable year of the pass-through partner to which the adjustments in the statement relate (the ``affected partner''). The statements furnished to the affected partners must include all of the information prescribed by proposed Sec. 301.6226-3(e)(3)(iii), and the pass-through partner must file the statements with the IRS, along with a transmittal that includes a summary of the statements and any other information required by forms, instructions, and other guidance. Additionally, the rules applicable to statements furnished under proposed Sec. 301.6226-2 (June 14 NPRM) are generally applicable to statements furnished under proposed Sec. 301.6226-3(e)(3)(i). For example, the rules regarding the address used for the statements mailed to affected partners (proposed Sec. 301.6226-2(b)(2) (June 14 NPRM)) and the correction of statements (proposed Sec. 301.6226-2(d) (June 14 NPRM)) apply to statements furnished under proposed Sec. 301.6226-3(e)(3)(i). However, there are different rules regarding the time for filing and furnishing the statements under proposed Sec. 301.6226-3(e)(3)(i), the content of those statements, and how partners of the pass-through partner take the adjustments into account because the partner of the pass-through partner is not receiving the statement directly from the source partnership. Under proposed Sec. 301.6226-3(e)(3)(ii), statements must be furnished no later than the extended due date for the return for the adjustment year of the partnership that made the election under proposed Sec. 301.6226-1 (June 14 NPRM). For purposes of determining the due date for the statements, the extended due date for the return for the adjustment year of the partnership that made the election under proposed Sec. 301.6226-1 (June 14 NPRM) is the extended due date under section 6081, regardless of whether the partnership that made the election under proposed Sec. 301.6226-1 (June 14 NPRM) is required to file a return for the adjustment year and regardless of whether an extension was actually requested. For example, if the adjustment year of the partnership that made the election under proposed Sec. 301.6226-1 (June 14 NPRM) ended on December 31, 2020, the pass-through partner would be required to furnish statements to its affected partners no later than September 15, 2021, the due date, including extensions, of a partnership return for a taxable year ending December 31, 2020. If a pass-through partner fails to issue statements by the due date under proposed Sec. 301.6226-3(e)(3)(ii), the pass-through partner has failed to take into account the adjustments as described in proposed Sec. 301.6226-3(e)(3). The statements furnished to the affected partners must contain all of the information described in proposed Sec. 301.6226-3(e)(3)(iii) and any other information required by the forms, instructions, or other guidance prescribed by the IRS. This information is necessary for an affected partner to take into account the adjustments reflected in the statement furnished to the partner under these provisions in the correct year, to identify the source of the adjustments, and for any affected partner that is also a pass-through partner to be able to take into account the adjustments under these provisions by the applicable due dates. Proposed Sec. 301.6226-3(e)(3)(iv) provides that the statements furnished to the affected partners in accordance with proposed Sec. 301.6226-3(e)(3) are treated as if they were statements furnished under proposed Sec. 301.6226-2 (June 14 NPRM). Accordingly, an affected partner must take into account the adjustments as if the affected partner were a reviewed year partner. Under certain circumstances, the statements furnished to the affected partners may not be furnished until after the unextended due date of the affected partners' returns for the reporting year. To account for this situation, proposed Sec. 301.6226-3(e)(3)(iv) provides that the IRS will not impose any additions to tax under section 6651 related to any additional reporting year tax if the affected partner reports and pays any additional reporting year tax within 30 days of the due date for furnishing the statements to the affected partners under proposed Sec. 301.6226- 3(e)(3)(ii). Finally, proposed Sec. 301.6226-3(e)(3)(v) provides special rules for adjustments subject to withholding under chapters 3 and 4 of the Code. Consistent with the regulations proposed in the November 30 NPRM (regarding certain international tax rules under the centralized partnership audit regime), under proposed Sec. 301.6226-3(e)(3)(v), if a pass-through partner takes the adjustments into account by furnishing statements under proposed Sec. 301.6226-3(e)(3), the pass-through partner must comply with proposed Sec. 301.6226-2(h)(3) (November 30 NPRM) (providing rules for the payment of tax under chapters 3 and 4 when adjustments are pushed out), and an affected partner must comply with proposed Sec. 301.6226-3(f) (November 30 NPRM) (providing rules for partners subject to withholding under chapters 3 and 4) as if the pass-through partner were the partnership that made the election under proposed Sec. 301.6226-1 (June 14 NPRM) and the affected partner were the reviewed year partner. Proposed Sec. 301.6226-3(e)(4) provides rules for pass-through partners that take into account the adjustments reflected in a statement furnished under proposed Sec. 301.6226-2 (June 14 NPRM) by making a payment. Under proposed Sec. 301.6226-3(e)(4), a pass-through partner takes the adjustments into account by paying an amount computed like an imputed underpayment under section 6225 and any penalties and interest and by providing to the IRS the information required by forms, instructions, or other guidance. Under proposed Sec. 301.6226-3(e)(4)(ii), all amounts required to be paid by a pass-through partner must be paid no later than the extended due date for the return for the adjustment year of the partnership that made the election under proposed Sec. 301.6226-1 (June 14 NPRM). The due date for paying the amounts required under proposed Sec. 301.6226-3(e)(4)(i) is the same as the due date for furnishings statements to partners under proposed 301.6226- 3(e)(3)(iii). If a pass-through partner fails to pay and submit the required information by the due date, the pass-through partner has failed to take into account the adjustments as described in proposed Sec. 301.6226-3(e)(4). Proposed Sec. 301.6226-3(e)(4)(iii) provides that the amount required to be paid by the pass-through partner is calculated in the same manner as an imputed underpayment under section 6225 and proposed Sec. 301.6225-1 (June 14 NPRM) as if the adjustments reflected on the statement furnished to the pass-through partner were partnership adjustments for the first affected year. The pass-through partner must calculate a payment amount for the first affected year as well as a payment amount for any intervening year by treating the pass-through partner's share of partnership tax attributes for each intervening year as partnership adjustments for that intervening year. In addition, the pass-through partner can take into account modifications approved by the IRS during the audit of the partnership that made the election under proposed Sec. 301.6226-1 (June 14 NPRM) and reflected on the statement when determining the payment amount. This will result in a payment amount that [[Page 60150]] more closely approximates the tax that would have been due by the partners of the pass-through partner had the adjustments been reported correctly on the reviewed year return. For instance, if the IRS approved a modification for an indirect partner (as defined in proposed Sec. 301.6241-1(a)(4) (June NPRM)) that is a tax-exempt entity, the payment amount computed like an imputed underpayment would be calculated by excluding the adjustments attributable to that tax-exempt indirect partner. Proposed Sec. 301.6226-2(e) (June 14 NPRM) provides that the only modifications that must be included on statements are modifications based on an amended return filed or a closing agreement entered into by the reviewed year partner. Proposed Sec. 301.6226-2(e)(5) (June 14 NPRM) is amended. Newly proposed Sec. 301.6226-2(e)(5) expands this rule to require that all modifications approved with respect to the reviewed year partner (including any indirect partner that holds its interest in the partnership making the push out election through that reviewed year partner) be included on the statement. This proposed rule was changed to facilitate the calculation of the payment amount under the rules for push out to pass-through partners under proposed Sec. 301.6226-3(e)(4)(iii). To further effectuate this change, proposed Sec. 301.6226-2(f)(2) (June 14 NPRM) is also amended in this notice of proposed rulemaking. A pass-through partner that takes the adjustments into account in accordance with proposed Sec. 301.6226-3(e)(4) must also calculate and pay any applicable penalties, additions to tax, and additional amounts. The statement furnished to the pass-through partner must provide information about any penalties applicable to the adjustments allocated to that partner. The pass-through partner calculates the penalties, additions to tax, or additional amounts as if the payment amount required under proposed Sec. 301.6226-3(e)(4)(i)(A) were an imputed underpayment due in the first affected year or any intervening year, as applicable. The pass-through partner must also pay any interest in accordance with proposed Sec. 301.6226-3(d) (June 14 NPRM) as if the amount required under proposed Sec. 301.6226-3(e)(4)(i)(A) were due in the first affected year or any intervening year, as applicable. In calculating the payment amount as if it were an imputed underpayment, there could be adjustments that would not result in an imputed underpayment (as defined in proposed Sec. 301.6225-1(c)(2) (June 14 NPRM)). In these cases, the pass-through partner takes into account the adjustments that do not result in an imputed underpayment in a manner similar to the rule in proposed Sec. 301.6225-3 (June 14 NPRM), but in the taxable year of the partnership that includes the date the partnership makes a payment under proposed Sec. 301.6226- 3(e)(4)(i), or if the partnership has no liability when taking the adjustments into account under proposed Sec. 301.6226-3(e)(4), in the taxable year that includes the date the partnership is furnished the statement. Proposed Sec. 301.6226-3(e)(4)(vi) provides rules for coordination with chapters 3 and 4 of the Code. If a pass-through partner pays an amount as described in proposed Sec. 301.6226-3(e)(4)(i), proposed Sec. 301.6225-1(a)(4) (November 30 NPRM) applies to the pass-through partner as if the pass-through partner were the partnership that made the election under proposed Sec. 301.6226-1 (June 14 NPRM). Accordingly, payment of the amount by the pass-through partner means the pass-through partner is treated as having paid the amount required to be withheld with respect to those adjustments under chapters 3 and 4 for purposes of applying Sec. Sec. 1.1463-1 and 1.1474-4. Proposed Sec. 301.6226-3(e)(5) clarifies that for purposes of the rules applicable to pass-through partners, S corporations, certain trusts, and estates are treated as a partnership, and their shareholders and beneficiaries are treated as partners. Imposing an amount calculated like an imputed underpayment on all non-compliant pass-through partners is consistent with the iterative application of section 6226 and ensures that the collection burden of a section 6226 election is not inappropriately shifted to the IRS. Accordingly, the rules of proposed Sec. 301.6226-3(e) generally apply equally to all pass-through partners, whether they are partnerships, S corporations, certain type of trusts, or estates. The term ``pass-through partner'' as defined in proposed Sec. 301.6241-1(a)(5) (June 14 NPRM), includes entities that are subject to chapter 1 tax under certain circumstances. For example, certain S corporations are liable for the built-in gains tax under section 1374. Trusts and estates may also be required to take certain items into account at the entity level and pay tax under certain circumstances, but in other circumstances trusts and estates do not take items into account at the entity level. Instead, the items flow through to their beneficiaries. To account for this, proposed Sec. 301.6226-3(e)(6) provides a specific rule to address how these types of entities take into account the adjustments. Under proposed Sec. 301.6226-3(e)(6), a pass-through partner must calculate any additional reporting year tax under proposed Sec. 301.6226-3(b) (June 14 NPRM) in the same manner as any other non-pass-through partner. Additionally, if the pass-through partner would be required under chapter 1 to pay tax on only a portion of the adjustments (or a portion of a single adjustment) and flow some or all of the remaining adjustments to its owners or beneficiaries, the proposed regulations accommodate this situation by requiring the pass- through partner to furnish statements to its partners reflecting the adjustments that are properly taken into account by the pass-through partner's owners. For instance, if a trust is a pass-through partner and could be subject to tax under chapter 1 with respect to a partnership adjustment, the trust must calculate and pay its additional reporting year tax as if it were a non-pass through partner. In addition, if it would also be required under ordinary trust reporting rules to report adjustments to its beneficiaries as a result of taking the adjustments into account, the trust must report those adjustments to its beneficiaries who also must take the adjustments into account under proposed Sec. 301.6226-3 (June 14 NPRM). Finally, proposed Sec. 301.6226-3(e)(6) clarifies that if a pass-through partner that is subject to tax under chapter 1 fails to comply with the provisions of proposed Sec. 301.6226-3(e)(6), the rules of proposed Sec. 301.6226- 3(e)(2) apply, and the pass-through partner will be required to take into account the adjustments under proposed Sec. 301.6226-3(e)(4). Proposed Sec. 301.6226-3(j) clarifies that in the case of a disregarded entity or a trust that is a wholly-owned trust (if the trust reports the owner's information to payors under Sec. 1.671- 4(b)(2)(i)(A)), the owner of the disregarded entity or the trust must take into account the partnership adjustments. For instance, in the case of a disregarded entity wholly-owned by a C corporation, the C corporation must take into account the adjustments reflected on a statement furnished to the disregarded entity under proposed Sec. 301.6226-2 (June 14 NPRM). Accordingly, a partner that is a disregarded entity or wholly-owned trust is disregarded for purposes of taking the adjustments into account under proposed Sec. 301.6226-3(j). In addition to proposing Sec. 301.6226-3(e), this notice of proposed rulemaking also adds examples in proposed Sec. 301.6226-3(g) to illustrate the concepts of proposed Sec. 301.6226-3(e). [[Page 60151]] 2. Adjustments Requested in an Administrative Adjustment Request Taken Into Account by a Pass-Through Partner These proposed regulations also provide rules for pass-through partners to take into account adjustments requested in an AAR if the partnership elects to have its partners take into account the adjustments (or if the partnership is required to have its partners take into account the adjustments). The proposed regulations generally follow the rules in proposed Sec. 301.6226-3(e), with modifications to accommodate the rules applicable to AARs. 3. Penalties, Additions to Tax, and Additional Amounts in the Case of Section 6226 Push Out Election Proposed Sec. 301.6226-3(i) provides the rules for the calculation of penalties, additions to tax, and additional amounts by the partner when a partnership has made an election under section 6226. The applicability of any penalties, additions to tax, and additional amounts with respect to a partnership adjustment are determined at the partnership level in accordance with section 6221(a). Under proposed Sec. 301.6226-3(i)(2), when each partner takes the adjustments into account under section 6226 and proposed Sec. 301.6226-3 (June 14 NPRM), the partner must compute any penalties, additions to tax, or additional amounts applying any applicable rules or thresholds based on the particular facts and circumstances of that partner as if each correction amount were an underpayment or understatement for the first affected year (or intervening year, if applicable). Changes were made to other provisions in the June 14 NPRM to conform to the addition of proposed Sec. 301.6226-3(i). Proposed Sec. 301.6226-3(i)(3) provides that a partner may assert a defense against a penalty based on a defense that is personal to the partner (partner-level defense), such as reasonable cause or good faith, by first paying the tax and penalty due and then filing a claim for refund that asserts the partner's specific penalty defense. Proposed Sec. 301.6226-2(e)(7) (June 14 NPRM) is amended in this notice of proposed rulemaking. Under proposed Sec. 301.6226-2(e)(7) (as modified in these proposed regulations), instead of providing the reviewed year partner's share of any penalties, additions to tax, or additional amounts on the statement furnished to the reviewed year partner under proposed Sec. 301.6226-2 (June 14 NPRM), the partnership provides the applicability of any penalty, additions to tax, or additional amounts and the adjustments to which those penalties, additions to tax, or additional amounts relate. Under this proposed rule, the partnership furnishes the reviewed year partner the reviewed year partner's share of the adjustments to which the penalties, additions to tax, and additional amounts relate and other information such as the applicable rate of any penalty and the Code section under which the penalty, addition to tax, or additional amount was imposed. Proposed Sec. 301.6226-3(b)(4) (June 14 NPRM) is amended by removing the last sentence from the June 14 NPRM, which read ``A deficiency dividend deduction under this paragraph (b)(4) and section 860(a) has no effect on a QIE's liability for any penalties reflected in a statement described in Sec. 301.6226-2(a).'' This change reflects that, under proposed Sec. 301.6226-3(i), a partner who is furnished a statement under proposed Sec. 301.6226-2 (June 14 NPRM) is not furnished its share of the penalty amount determined at the partnership level but instead must calculate the penalty utilizing the normal penalty rules applicable under the Code. Proposed Sec. 301.6226-3(a) (June 14 NPRM) is amended below. The amended Sec. 301.6226-3(a) changes the requirement that reviewed year partners pay the reviewed year partner's share of any penalties, additions to tax, or additional amounts, to a requirement that the reviewed year partner must calculate and pay any penalties, additions to tax, or additional amounts as determined under proposed Sec. 301.6226-3(i). In addition, proposed Sec. 301.6226-3(d)(3) (June 14 NPRM) regarding interest on penalties is amended below. Amended Sec. 301.6226-3(d)(3) conforms to the addition of proposed Sec. 301.6226- 3(i) by providing that the reviewed year partner calculates and pays interest on any penalties, additions to tax, or additional amounts calculated by the partner instead of on the share of penalties, additions to tax, or additional amounts reflected in the statement furnished to the partner. Finally, Example 1 in proposed Sec. 301.6226-3(g) (June 14 NPRM) and Example 6 in proposed Sec. 301.6226-3(g) (November 30 NPRM) are amended below with changes that conform to proposed Sec. 301.6226- 3(i). 4. Changes to the June 14 NPRM to Reflect the Removal of the Safe Harbor As described in the Background section of this preamble, these proposed regulations amended proposed Sec. 301.6226-2(g) (June 14 NPRM) and proposed Sec. 301.6226-3(c) and (d)(2) (June 14 NPRM) which concern the calculation of, and the election to pay, the safe harbor amount and interest safe harbor amount. In addition, these proposed regulations make conforming changes to the proposed rules in the June 14 NPRM to reflect the removal of the safe harbor amount and interest safe harbor amount. Proposed Sec. Sec. 301.6226-1(d), 301.6226-3(a), and 301.6227-3(b)(1) (June 14 NPRM) are amended below. Finally, Examples 1, 2, 3, 4, and 5 in proposed Sec. 301.6226-3(g) (June 14 NPRM) and Example 6 in proposed Sec. 301.6226-3(g) (November 30 NPRM) are amended to reflect the removal of the safe harbor and interest safe harbor. See Examples 1, 2, 3, 4, 5 and 6 of proposed Sec. 301.6226- 3(g). 5. Notices of Proceedings and Adjustments Proposed Sec. 301.6231-1 provides rules with respect to the NAP described in section 6231(a)(1), the NOPPA described in section 6231(a)(2), and the FPA described in section 6231(a)(3). Under proposed Sec. 301.6231-1(c), such notices are sufficient if mailed to the last known address of the partnership and the partnership representative. An FPA may not be mailed earlier than 270 days after the date on which the NOPPA was mailed. Proposed Sec. 301.6231-1(b)(2) permits a partnership to waive this restriction to allow the IRS to mail the FPA before the expiration of the 270-day period. Nothing in the centralized partnership audit regime limits the period for IRS to propose adjustments, and section 6231 does not restrict when a NOPPA may be mailed by the IRS. However, a reasonable time limit within which partnership adjustments must be proposed under the centralized partnership audit regime will provide certainty to partnerships and the IRS. Partnerships will know when a taxable year is no longer subject to audit, and the IRS will be better able to allocate resources for examinations under the centralized partnership audit regime. Accordingly, proposed Sec. 301.6231-1(b)(1) imposes a time limit on when adjustments may be proposed for a particular taxable year by providing that a NOPPA may not be mailed after the expiration of the period described in section 6235(a)(1), including any extensions of that period and after applying any of the special rules in section 6235(c) (providing additional time for situations where no return is filed, fraud, etc.). Once a NOPPA is mailed, the time period for mailing the FPA in order to make a final partnership adjustment is generally governed by section 6235(a)(2) or (3). [[Page 60152]] Proposed Sec. 301.6231-1(f) and (g) provide rules for withdrawal of a NAP or a NOPPA and rescission of an FPA. Section 6231(c) provides that rescission of ``any notice of a partnership adjustment'' requires consent of the partnership. Because the NAP merely notifies the partnership of the initiation of an examination and the NOPPA only proposes an adjustment, neither of these notices is a notice of a partnership adjustment for purposes of the consent requirement in section 6231(c). Accordingly, proposed Sec. 301.6231-1(g) requires consent of the partnership before rescission of an FPA, but proposed Sec. 301.6231-1(f) does not require consent of the partnership before withdrawing a NAP or a NOPPA. In the November 30 NPRM, the Treasury Department and the IRS discussed the coordination of the special rules in section 905(c) (relating to certain adjustments to foreign tax credits) with the centralized partnership audit regime. The Treasury Department and the IRS specifically requested comments regarding whether the AAR process can be utilized for purposes of satisfying the notification requirements of section 905(c) with respect to foreign tax redeterminations relating to a foreign tax reported by a partnership as a creditable foreign tax expenditure. If the AAR process can be used, section 905(c) would possibly represent an exception to the normal timing rules discussed in the Explanation of Provisions section of this preamble, just as it represents a departure from the ordinary timing rules in circumstances outside the scope of the centralized partnership audit regime. If the AAR process can be adopted for section 905(c) purposes, these proposed regulations may be modified in separate guidance to account for that process. 6. Assessment, Collection, and Payment of Imputed Underpayments Proposed Sec. 301.6232-1(a) restates the rule in section 6232(a) that any imputed underpayment determined under the centralized partnership audit regime must be assessed and collected as if the imputed underpayment were a tax imposed by subtitle A of the Code for the adjustment year. However, proposed Sec. 301.6232-1(a) also clarifies that because the centralized partnership audit regime under subchapter C of chapter 63 applies, the deficiency procedures under subchapter B of chapter 63 do not apply to an assessment of an imputed underpayment. Section 6232(b) and proposed Sec. 301.6232-1(c) explicitly provide the limitations on assessments under the centralized partnership audit regime. Generally, an imputed underpayment determined by the IRS may be assessed only after the IRS sends an FPA, and the partnership has a chance to seek judicial review. Proposed Sec. 301.6232-1(d)(1) describes exceptions to the restrictions on assessment, including the rules for assessment of amounts attributable to partnership adjustments on account of mathematical or clerical errors or where a partnership-partner (as defined in proposed Sec. 301.6241-1(a)(7) (June 14 NPRM)) is treated as if it had a mathematical or clerical error on its return because it failed to treat items consistently with the partnership's treatment of the items pursuant to section 6222(a). Any resulting assessment of an imputed underpayment attributable to that adjustment is not subject to the limitations under section 6232(b) and proposed Sec. 301.6232-1(c), and therefore may be assessed without the issuance of an FPA. Under proposed Sec. 301.6232-1(d)(1)(ii)(A), the partnership generally has 60 days to request abatement of the assessment attributable to the mathematical or clerical error, and the IRS must abate the assessment. Consistent with section 6232(d), under proposed Sec. 301.6232-1(d)(1)(ii)(B), this rule does not apply if the assessment is attributable to an adjustment of an inconsistent item on a partnership-partner's return. However, the IRS intends to develop pre-assessment processes to provide the partnership-partner with an opportunity to correct the inconsistency by filing an AAR under section 6227 or, in situations where the partnership-partner has made an election under section 6221(b), an amended partnership return. Therefore, proposed Sec. 301.6232-1(d)(1)(ii)(B) provides that prior to assessment a partnership-partner that has failed to comply with section 6222(a) may correct the inconsistency by filing an AAR under section 6227 or an amended partnership return, as appropriate. Additionally, proposed Sec. 301.6232-1(d)(1)(ii)(B) authorizes a partnership-partner that has elected out of the centralized partnership audit regime under section 6221(b) to furnish amended statements to its partners. This rule provides the consent required by section 6031(b), which prohibits a partnership from amending information required to be furnished by the partnership to its partners after the due date of the return, except as provided by the IRS. Proposed Sec. 301.6232-1(d)(1)(iii) addresses the situation in which a partnership-partner that elected out of the centralized partnership audit regime pursuant to section 6221(b) for the reviewed year has failed to comply with section 6222(a). Under proposed Sec. 301.6232-1(d)(1)(iii), any tax resulting from an adjustment due to such partnership-partner's failure to comply with section 6222(a) may be assessed against the partners (or indirect partners) of the partnership-partner. The tax may be assessed in the same manner as if the tax were on account of a mathematical or clerical error appearing on the partner's or indirect partner's return. In accordance with section 6232(d)(1)(B), the procedures under section 6213(b)(2) for requesting abatement of such an assessment will not apply. 7. Interest and Penalties Related to Imputed Underpayments A. Interest and Penalties Determined From the Reviewed Year Proposed Sec. 301.6233(a)-1(a) provides that except to the extent provided in section 6226(c) and the regulations thereunder, in the case of a partnership adjustment for a reviewed year of the partnership, a partnership is liable for interest as computed under proposed Sec. 301.6233(a)-1(b) and for any penalty, addition to tax, or additional amount as determined in proposed Sec. 301.6233(a)-1(c). Proposed Sec. 301.6233(a)-1(b) provides that interest with respect to an imputed underpayment is the interest that would be imposed under chapter 67 of the Code if the imputed underpayment were treated as an underpayment of tax for the reviewed year. Proposed Sec. 301.6233(a)- 1(b) further provides that interest on such imputed underpayment begins on the day after the due date of the partnership return for the reviewed year and ends on the earlier of the date prescribed for payment (as described in proposed Sec. 301.6232-1(b)), the return due date of the partnership return for the adjustment year, or the date the imputed underpayment is fully paid by the partnership. Proposed Sec. 301.6233(a)-1(c)(1) provides that the penalties, additions to tax, or additional amounts determined with respect to a partnership adjustment are those penalties, additions to tax, or additional amounts that would be imposed under part II of subchapter A of chapter 68 of the Code by treating the imputed underpayment as an underpayment (or understatement) of tax for the reviewed year and by treating the partnership as if it had been an individual subject to tax imposed by chapter 1 of subtitle A of the Code for the reviewed year. [[Page 60153]] Proposed Sec. 301.6233(a)-1(c)(2) coordinates the rules for determining penalties related to imputed underpayments with the accuracy-related and fraud penalties under sections 6662, 6662A, and 6663. Proposed Sec. 301.6233(a)-1(c)(2)(ii) provides rules to determine the portion of an imputed underpayment subject to penalties when there is at least one adjustment with respect to which no penalty has been imposed and at least one with respect to which a penalty has been imposed, or where there are at least two adjustments with respect to which penalties have been imposed and the penalties have been imposed at different rates. The rules under proposed Sec. 301.6233(a)- 1(c)(2)(ii) extend the existing ordering rules under Sec. 1.6664-3 to partnerships subject to the centralized partnership audit regime. Proposed Sec. 301.6233(a)-1(c)(2)(ii)(B) provides that when computing the portion of the imputed underpayment subject to penalties under sections 6662, 6662A, and 6663, partnership adjustments that did not result in the imputed underpayment are not taken into account. To determine the portion of the imputed underpayment subject to a penalty, partnership adjustments are first grouped together according to whether the adjustments are subject to penalty and if so, by rate of penalty. Negative adjustments as defined in proposed Sec. 301.6233(a)- 1(c)(2)(ii)(C) are included in these groupings according to the allocation rule in proposed Sec. 301.6233(a)-1(c)(2)(ii)(D) and are netted against the positive adjustments within each grouping to the extent provided in proposed Sec. 301.6233(a)-1(c)(2)(ii)(E). After grouping the partnership adjustments, each non-credit adjustment within a grouping is multiplied by the rate that applied to such adjustment when determining the imputed underpayment. After the appropriate rate is applied to each adjustment, the results within a grouping are totaled. The total within each grouping is then adjusted to account for any credit adjustments. The result is the portion of the imputed underpayment that is subject to the penalty rate corresponding to the grouping. Proposed Sec. 301.6233(a)-1(c)(2)(ii)(F) through (iv) provide clarifying rules for applying the penalties for fraud under section 6663, reportable transaction understatements under section 6662A, and substantial understatements of tax under section 6662(d) to imputed underpayments determined under the centralized partnership audit regime. Proposed Sec. 301.6233(a)-1(c)(2)(v) provides rules for application of the reasonable cause and good faith exception to the penalties under sections 6662, 6662A, and 6663. See sections 6664(c) and (d). Proposed Sec. 301.6233(a)-1(c)(2)(v) provides that for these purposes the partnership is treated as the taxpayer and, therefore, the facts and circumstances taken into account in determining whether the partnership has established reasonable cause and good faith are those facts and circumstances applicable to the partnership. This may include facts and circumstances with respect to partners or other individuals acting on behalf of the partnership. In addition, proposed Sec. 301.6233(a)-1(c)(2)(v) provides that any partner-level defense, for example a reasonable cause defense that is based on the personal circumstances of the partner, will not be considered in a partnership- level proceeding except in accordance with the amended return and closing agreement modification procedures set forth in the regulations under section 6225(c) and proposed Sec. 301.6225-2 (June 14 NPRM). B. Interest and Penalties From the Adjustment Year Proposed Sec. 301.6233(b)-1(a) provides rules that apply when a partnership fails to pay an imputed underpayment by the date prescribed for such payment. In the case of such a failure, proposed Sec. 301.6233(b)-1(a) provides that the partnership is liable for interest, as well as any penalties, additions to tax, and additional amounts as determined under proposed Sec. 301.6233(b)-1(b) and (c). Proposed Sec. 301.6233(b)-1(b) clarifies that these rules apply to the portion of an imputed underpayment resulting from partnership adjustments determined by the IRS under section 6225(a)(1) that is unpaid after the date prescribed for payment under proposed Sec. 301.6232-1(b) (the date stated in a notice and demand) and to the portion of an imputed underpayment resulting from adjustments requested by the partnership in an AAR under section 6227 that is unpaid after the date the AAR is filed. 8. Judicial Review of Partnership Adjustments Proposed Sec. 301.6234-1 provides rules relating to judicial review of partnership adjustments. Proposed Sec. 301.6234-1(b) and (c) describe the jurisdictional deposit requirement for partnerships that wish to bring an action in a United States district court or the Court of Federal Claims and explain how the jurisdictional deposit is treated for purposes of the Code. Under proposed Sec. 301.6234-1(c), although the deposit is not generally treated as a payment of tax, the deposit will stop additional interest from accruing under section 6233(a) on the imputed underpayment. In addition, interest will be allowed and paid in accordance with section 6611. The Treasury Department and the IRS request comments on when interest under section 6611 should begin to run in this context. In response to Notice 2016-23, 2016-13 I.R.B. 490 (March 28, 2016), which requested comments on the new centralized audit regime, one commenter requested that the IRS clarify that only a dismissal on the merits and with prejudice be considered a dismissal within the meaning of section 6234(e). This comment was not adopted. Section 6234 explicitly provides that any decision of the court dismissing the action ``shall be considered as [the court's] decision that the [FPA] is correct.'' The only exception provided in section 6234 is in the case of a dismissal by reason of the rescission of an FPA under section 6231(c). See also JCS-1-16, at 75 (stating that ``a decision to dismiss the proceeding (other than a dismissal because the [FPA] was rescinded under section 6231(c)), is a judgment on the merits upholding the final partnership adjustments''). Accordingly, proposed Sec. 301.6234-1(e) reflects the language in section 6234(e) without the limitation suggested in the comment. 9. Period of Limitations on Making Adjustments Proposed Sec. 301.6235-1 reflects the rules in section 6235 regarding the period within which the IRS must mail an FPA to make a partnership adjustment for a partnership taxable year. Under these rules, an FPA generally must be mailed before the later of: (1) Three years from the later of the date the partnership return is filed or due, or the date an AAR with respect to the year is filed (see proposed Sec. 301.6235-1(a)(1)); (2) 270 days after the date everything required for a modification is submitted plus any extension of time granted by the IRS with respect to a request for modification under section 6225(c)(7) (see proposed Sec. 301.6235-1(b)); or (3) 330 days after the date of the NOPPA plus any extension of time granted by the IRS with respect to a request for modification under section 6225(c)(7) (see proposed Sec. 301.6235-1(c)). The 3-year period described under proposed Sec. 301.6235-1(a)(1) (plus any extensions of the period under proposed Sec. 301.6235-1(d) and taking into account any special rules under section 6235(c)) is also the time period within which the [[Page 60154]] IRS must mail a NOPPA. See proposed Sec. 301.6231-1(b)(1). The proposed regulations do not currently incorporate any rules outside of subchapter C of chapter 63 of the Code that might extend this period. As discussed in the Explanation of Provisions section of this preamble and in the November 30 NPRM, if the AAR process can be used to coordinate sections 905(c) and the adjustment rules under the centralized partnership audit regime, the proposed regulations may need to be modified to account for redeterminations under section 905(c). The Treasury Department and the IRS request comments on whether additional guidance would be helpful with respect to any other specific provision, outside of subchapter C of chapter 63 of the Code, which might extend the adjustment period under the centralized partnership audit regime. Once a NOPPA is mailed, proposed Sec. 301.6235-1(c) provides that the IRS will have at least 330 days from the date of the NOPPA to make a partnership adjustment regardless of whether the partnership requests modification of the imputed underpayment. If the partnership requests modification of an imputed underpayment, proposed Sec. 301.6235-1(b) provides that the IRS will have at least 270 days from the date on which everything required to be submitted pursuant to section 6225(c) is so submitted to the IRS to make a partnership adjustment. Proposed Sec. 301.6235-1(b)(2) provides that, for purposes of section 6235(a)(2), the date on which everything required to be submitted pursuant to section 6225(c) is so submitted to the IRS is the earlier of: (1) The date on which the time for submitting the modification request and information (as described in proposed Sec. 301.6225-2(c)(3)(i) (June 14 NPRM)) ends (including extensions); or (2) the date on which the partnership and the IRS agree to waive the 270-day period under proposed Sec. 301.6231-1(b)(2)(ii) (June 14 NPRM) before an FPA can be mailed. Therefore, once a NOPPA has been mailed, the IRS will have 330 days from the date the NOPPA is mailed to make a partnership adjustment and in general may have up to 540 days (270 days in the modification period and 270 days from the end of the modification period) from the date the NOPPA is mailed if there are no extensions or waivers executed by the taxpayer. Proposed Sec. 301.6235-1(d) provides that any of the periods described in proposed Sec. 301.6235-1(a), (b), and (c) may be extended by an agreement, in writing, entered into by the partnership and the IRS before the expiration of such period. A partnership and the IRS may also agree to extend a period of time that has already been extended under proposed Sec. 301.6235-1(d). 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. Because the proposed regulations would not impose a collection of information on small entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply. Pursuant to section 7805(f) of the Code, this notice of proposed rulemaking has been submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business. Statement of Availability of IRS Documents IRS Revenue Procedures, Revenue Rulings, Notices and other guidance cited in this preamble are published in the Internal Revenue Bulletin (or Cumulative Bulletin) and are available from the Superintendent of Documents, U.S. Government Publishing Office, Washington, DC 20402, or by visiting the IRS website at www.irs.gov. Comments and Requests for Public Hearing Before these proposed regulations are adopted as final regulations, consideration will be given to any electronic and written comments that are submitted timely to the IRS as prescribed in this preamble under the ADDRESSES heading. The Treasury Department and the IRS request comments on all aspects of the proposed rules. All comments will be available at www.regulations.gov or upon request. A public hearing will be scheduled if requested in writing by any person that timely submits written comments. If a public hearing is scheduled, then notice of the date, time, and place for the public hearing will be published in the Federal Register. Drafting Information The principal authors of these proposed regulations are Jennifer M. Black, Joy E. Gerdy-Zogby, Brittany Harrison, and Steven L. Karon 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 Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income taxes, Penalties, Reporting and recordkeeping requirements. Proposed Amendments to the Regulations Accordingly, 26 CFR part 301 is proposed to be amended as follows: PART 301--PROCEDURE AND ADMINISTRATION 0 Paragraph 1. The authority citation for part 301 continues to be read in part as follows: Authority: 26 U.S.C. 7805 * * * Sec. 301.6221(a)-1 [Amended] 0 Par. 2. Section 301.6221(a)-1, as proposed to be amended at 82 FR 27334 (June 14, 2017), is further amended by removing and reserving paragraph (c). 0 Par. 3. Section 301.6225-2, as proposed to be amended at 82 FR 27334 (June 14, 2017), is further amended by adding paragraph (d)(2)(viii) to read as follows: Sec. 301.6225-2 Modification of imputed underpayment. * * * * * (d) * * * (2) * * * (viii) Penalties. The applicability of any penalties, additions to tax, or additional amounts that relate to a partnership adjustment is determined at the partnership level in accordance with section 6221(a). However, the amount of penalties, additions to tax, and additional amounts a reviewed year partner (or indirect partner) must pay under paragraph (d)(2)(ii) of this section for the first affected year (as defined in Sec. 301.6226-3(b)(2)) and for any modification year (as described in paragraph (d)(2)(iv) of this section) is based on the underpayment or understatement of tax, if any, that results from taking into account the adjustments in the first affected year or the modification year, as applicable. For instance, if after taking into account the adjustments, the partner would not have an underpayment, or has an understatement that falls below the applicable threshold for the imposition of a penalty, in the first affected year or any modification year, no penalty would be due from that partner for such year. A partner's claim that there is reasonable cause under section 6664(c) (or other partner-level defense as described in Sec. 301.6226-3(i)(3)) for an underpayment or understatement described in this paragraph (d)(2)(viii) may be submitted with an amended [[Page 60155]] return filed under paragraph (d)(2) of this section, but only if the partner pays all tax, penalties, and interest due in accordance with paragraph (d)(2)(ii) of this section. * * * * * 0 Par. 4. Section 301.6226-1, as proposed to be amended at 82 FR 27334 (June 14, 2017), is further amended by revising paragraph (d) to read as follows: Sec. 301.6226-1 Election for an alternative to the payment of the imputed underpayment. * * * * * (d) Binding nature of statements. The election under this section, which includes filing and furnishing statements described in Sec. 301.6226-2, are actions of the partnership under section 6223 and the regulations thereunder and, unless determined otherwise by the IRS, the partner's share of the adjustments and the applicability of any penalties, additions to tax, and additional amounts as set forth in the statement are binding on the partner pursuant to section 6223. Accordingly, a partner may not treat items reflected on a statement described in Sec. 301.6226-2 on the partner's return inconsistently with how those items are treated on the statement that is filed with the IRS. See Sec. 301.6222-1(c)(2) (regarding items the treatment of which a partner is bound to under section 6223). * * * * * 0 Par. 5. Section 301.6226-2, as proposed to be amended at 82 FR 27334 (June 14, 2017), is further amended by: 0 a. Revising paragraphs (e)(5) and (7). 0 b. Removing and reserving paragraph (e)(8). 0 c. Revising paragraph (f)(2). 0 d. Removing paragraph (f)(3). 0 e. Removing and reserving paragraph (g). The revisions read as follows: Sec. 301.6226-2 Statements furnished to partners and filed with the IRS. * * * * * (e) * * * (5) Modifications approved by the IRS with respect to the reviewed year partner (or with respect to any indirect partner (as defined in Sec. 301.6241-1(a)(4)) that holds its interest in the partnership through its interest in the reviewed year partner); * * * * * (7) The applicability of any penalty, addition to tax, or additional amount determined at the partnership level that relates to any adjustments allocable to the reviewed year partner and the adjustments to which the penalty, addition to tax, or additional amount relates, the section of the Internal Revenue Code under which each penalty, addition to tax, or additional amount is imposed, and the applicable rate of each penalty, addition to tax, or additional amount determined at the partnership level; * * * * * (f) * * * (2) Treatment of modifications disregarded. Any modifications approved by the IRS with respect to the reviewed year partner (or with respect to any indirect partner (as defined in Sec. 301.6241-1(a)(4)) that holds its interest in the partnership through its interest in the reviewed year partner) under Sec. 301.6225-2 are disregarded for purposes of determining each partner's share of the adjustments under paragraph (f)(1) of this section. * * * * * 0 Par. 6. Section 301.6226-3, as proposed to be amended at 82 FR 27334 (June 14, 2017), is further amended by: 0 a. Revising paragraphs (a) and (b)(4). 0 b. Removing and reserving paragraphs (c) and (d)(2). 0 c. Revising paragraphs (d)(3), (e), and (g). 0 d. Adding paragraphs (i) and (j). The revisions and additions read as follows: Sec. 301.6226-3 Adjustments Taken Into Account by Partners. (a) Tax imposed by chapter 1 increased by additional reporting year tax. The tax imposed by chapter 1 of subtitle A of the Internal Revenue Code (chapter 1 tax) for each reviewed year partner (as defined in Sec. 301.6241-1(a)(9)) for the taxable year that includes the date a statement was furnished in accordance with Sec. 301.6226-2 (the reporting year) is increased by the additional reporting year tax. The additional reporting year tax is the aggregate of the adjustment amounts (determined in accordance with paragraph (b) of this section). In addition to being liable for the additional reporting year tax, a reviewed year partner must also calculate and pay for the reporting year any penalties, additions to tax, and additional amounts (as determined under paragraph (i) of this section). Finally, a reviewed year partner must also calculate and pay for the reporting year any interest (as determined under paragraph (d) of this section). (b) * * * (4) Coordination of sections 860 and 6226. If a qualified investment entity (QIE) within the meaning of section 860(b) receives a statement described in Sec. 301.6226-2(a) and correctly makes a determination within the meaning of section 860(e)(4) that one or more of the adjustments reflected in the statement is an adjustment within the meaning of section 860(d) with respect to that QIE for a taxable year, the QIE may distribute deficiency dividends within the meaning of section 860(f) for that taxable year and avail itself of the deficiency dividend procedures set forth in section 860. If the QIE utilizes the deficiency dividend procedures with respect to adjustments in a statement described in Sec. 301.6226-2(a), the QIE may claim a deduction for deficiency dividends against the adjustments furnished to the QIE in the statement in calculating any correction amounts under paragraphs (b)(2) and (3) of this section, and interest on such correction amounts under paragraph (d) of this section, to the extent that the QIE makes deficiency dividend distributions under section 860(f) and complies with all requirements of section 860 and the regulations thereunder. * * * * * (d) * * * (3) Interest on penalties. Interest on any penalties, additions to tax, or additional amounts determined under paragraph (i) of this section is calculated at the rate set forth in paragraph (d)(4) of this section from the due date (without extension) of the reviewed year partner's return for the first affected year (as defined in paragraph (b)(2) of this section) until the amount is paid. * * * * * (e) Pass-through partners--(1) In general. Expect as provided in paragraph (e)(6) of this section, if a pass-through partner (as defined in Sec. 301.6241-1(a)(5)) is furnished a statement described in Sec. 301.6226-2 (including a statement described in paragraph (e)(3)(i) of this section) with respect to adjustments of a partnership that made an election under Sec. 301.6226-1, the pass-through partner must take into account the adjustments reflected on that statement in accordance with either paragraph (e)(3) or (4) of this section. (2) Failure to take into account adjustments. If any pass-through partner fails to take into account the adjustments reflected on a statement described in Sec. 301.6226-2 in accordance with paragraph (e)(3), (4), or (6) of this section, the pass-through partner must pay an amount that is calculated like an imputed underpayment, as well as any penalties, additions to tax, additional amounts, and interest with respect to such adjustments as described under paragraph (e)(4) of this section. (3) Furnishing statements to partners--(i) In general. A pass- through partner described in paragraph (e)(1) of [[Page 60156]] this section takes into account the adjustments under paragraph (e)(3) of this section by furnishing a statement that includes the items required by paragraph (e)(3)(iii) of this section to the partners that held an interest in the pass-through partner at any time during the taxable year of the pass-through partner to which the adjustments in the statement furnished to the pass-through partner relate (affected partner). The statements described in this paragraph (e)(3)(i) must be filed with the IRS, along with a transmittal that includes a summary of all statements filed under this paragraph (e)(3)(i), and such other information as required in forms, instructions, and other guidance, by the due date prescribed in paragraph (e)(3)(ii) of this section. Except as otherwise provided in paragraphs (e)(3)(ii), (iii), and (v) of this section, the rules applicable to statements described in Sec. 301.6226-2 are applicable to statements described in this paragraph (e)(3)(i). (ii) Time for filing and furnishing the statements. The pass- through partner must file with the IRS and furnish to its affected partners the statements described in paragraph (e)(3)(i) of this section no later than the extended due date for the return for the adjustment year (as defined in Sec. 301.6241-1(a)(1)) of the partnership that made the election under Sec. 301.6226-1. For purposes of the preceding sentence, the extended due date is the extended due date under section 6081 regardless of whether the partnership that made the election under Sec. 301.6226-1 is required to file a return for the adjustment year or timely files a request for an extension under section 6081 and the regulations thereunder. (iii) Contents of statements. Each statement described in paragraph (e)(3)(i) of this section must include the following information-- (A) The name and correct taxpayer identification number (TIN) of the partnership that made the election under Sec. 301.6226-1 with respect to the adjustments reflected on the statements described in paragraph (e)(3)(i) of this section; (B) The adjustment year of the partnership described in paragraph (e)(3)(iii)(A) of this section; (C) The extended due date for the return for the adjustment year of the partnership described in paragraph (e)(3)(iii)(A) of this section (as described in paragraph (e)(3)(ii) of this section); (D) The date on which the partnership described in paragraph (e)(3)(iii)(A) of this section furnished its statements required under Sec. 301.6226-2(b); (E) The name and correct TIN of the partnership that furnished the statement to the pass-through partner if different from the partnership described in paragraph (e)(3)(iii)(A) of this section; (F) The name and correct TIN of the pass-through partner; (G) The pass-through partner's taxable year to which the adjustments reflected on the statements described in paragraph (e)(3)(i) of this section relates; (H) The name and correct TIN of the affected partner to whom the statement is being furnished; (I) The current or last address of the affected partner that is known to the pass-through partner; (J) The affected partner's share of items as originally reported to such partner under section 6031(b) and, if applicable, section 6227, for the taxable year to which the adjustments reflected on the statement furnished to the pass-through partner relate; (K) The affected partner's share of partnership adjustments determined under Sec. 301.6226-2(f)(1) as if the affected partner were the reviewed year partner and the partnership were the pass-through partner; (L) Modifications approved by the IRS with respect to the affected partner or an indirect partner (as defined in Sec. 301.6241-1(a)(4)) that holds its interest in the partnership that made the election under Sec. 301.6226-1 through the affected partner; (M) The affected partner's share of any amounts attributable to adjustments to tax attributes (as defined in Sec. 301.6241-1(a)(10)) for any intervening year (as defined in paragraph (b)(3) of this section) resulting from the adjustments in the reviewed year with respect to the partnership described in paragraph (e)(3)(iii)(A) of this section; (N) The applicability of any penalties, additions to tax, or additional amounts that relate to any adjustments allocable to the affected partner (as determined under Sec. 301.6226-2(f)(3)) and the adjustments allocated to the affected partner to which such penalties, additions to tax, or additional amounts relate, the section of the Internal Revenue Code under which each penalty, addition to tax, or additional amount is imposed, and the applicable rate of each penalty, addition to tax, or additional amount; and (O) Any other information required by forms, instructions, and other guidance prescribed by the IRS. (iv) Affected partner must take into account the adjustments. A statement furnished to an affected partner in accordance with paragraph (e)(3) of this section is treated as if it were a statement described in Sec. 301.6226-2. An affected partner that is a pass-through partner must take into account its share of the adjustments reflected on such a statement in accordance with paragraph (e) of this section. An affected partner that is not a pass-through partner must take into account its share of the adjustments reflected on such a statement in accordance with this section by treating references to ``reviewed year partner'' as ``affected partner''. For purposes of this paragraph (e)(3)(iv), an affected partner that is not a pass-through partner takes into account the adjustments in accordance with this section by determining its reporting year based on the date upon which the partnership that made the election under Sec. 301.6226-1 furnished its statements to its reviewed year partners (as described in paragraph (a) of this section). No addition to tax under section 6651 related to any additional reporting year tax will be imposed if an affected partner that is not a pass-through partner reports and pays the additional reporting year tax within 30 days of the extended due date for the return for the adjustment year of the partnership that made the election under Sec. 301.6226-1 (as described in paragraph (e)(3)(ii) of this section). (v) Adjustments subject to chapters 3 and 4 of the Internal Revenue Code. If a pass-through partner furnishes statements to its affected partners in accordance with paragraph (e)(3) of this section, the pass- through partner must comply with the requirements of Sec. 301.6226- 2(h)(3), and an affected partner must comply with the requirements of paragraph (f) of this section. For purposes of applying both Sec. 301.6226-2(h)(3) and paragraph (f) of this section, as appropriate, references to the ``partnership'' should be replaced with references to the ``pass-through partner''; references to the ``reviewed year partner'' should be replaced with references to the ``affected partner''; references to the statement required under paragraph (a) of this section and its due date should be replaced with references to the statement required under paragraph (e)(3)(i) of this section and its due date described in paragraph (e)(3)(ii) of this section; and references to the ``reporting year'' should be read in accordance with paragraph (e)(3)(iv) of this section. (4) Pass-through partner makes a payment--(i) In general. A pass- through partner that is furnished a statement described in Sec. 301.6226-2 takes into account the adjustments reflected on that statement under paragraph (e)(4) of this section when the pass-through partner-- [[Page 60157]] (A) Pays an amount computed under paragraph (e)(4)(iii) of this section; (B) Pays any penalties, additions to tax, and additional amounts and interest computed under paragraph (e)(4)(iv) of this section; and (C) Provides the IRS with information related to such payment as required by forms, instructions, and other guidance. (ii) Time of payment. A pass-through partner must report and pay the amounts described in paragraphs (e)(4)(i)(A) and (B) of this section in accordance with forms, instructions, and other guidance no later than the extended due date for the return for the adjustment year of the partnership that made the election under Sec. 301.6226-1. For purposes of the preceding sentence, the extended due date is the extended due date under section 6081 regardless of whether the partnership that made the election under Sec. 301.6226-1 is required to file a return for the adjustment year or timely filed a request for an extension under section 6081 and the regulations thereunder. (iii) Computation of payment amount. The payment required under paragraph (e)(4)(i)(A) of this section is computed in the same manner as an imputed underpayment is calculated under section 6225 and Sec. 301.6225-1 by treating the adjustments reflected on the statement furnished to the pass-through partner under Sec. 301.6226-2 as partnership adjustments (as defined in Sec. 301.6241-1(a)(6)) for the first affected year. Separate calculations must also be made for each intervening year by treating the pass-through partner's share of partnership tax attributes for each intervening year as partnership adjustments for that intervening year. The sum of the amounts calculated for the first affected year and each intervening year under this paragraph (e)(4)(iii) is the payment required under paragraph (e)(4)(i)(A) of this section. Any modification approved by the IRS under Sec. 301.6225-2 with respect to the pass-through partner (including any modifications with respect to an indirect partner that holds its interest in the partnership that made the election under Sec. 301.6226-1 through its interest in the pass-through partner) reflected on the statement furnished to the pass-through partner under Sec. 301.6226-2 (or paragraph (e)(3) of this section) is taken into account in calculating the amounts under this paragraph (e)(4)(iii). (iv) Penalties and interest--(A) Penalties. A pass-through partner must compute and pay any applicable penalties, additions to tax, and additional amounts on the amounts calculated under paragraph (e)(4)(iii) of this section as if such amounts were actual imputed underpayments for the pass-through partner's first affected year or any intervening year, as applicable. See Sec. 301.6233-1(c). (B) Interest. A pass-through partner must pay interest on the amounts calculated under paragraph (e)(4)(iii) of this section in accordance with paragraph (d) of this section as if such amounts were amounts due for the first affected year or any intervening year, as applicable. (v) Adjustments that do not result in an imputed underpayment. Adjustments taken into account under paragraph (e)(4) of this section that would not result in an imputed underpayment (as defined in Sec. 301.6225-1(c)(2)) if the amounts calculated under paragraph (e)(4)(iii) of this section were actual imputed underpayments are taken into account by the pass-through partner in accordance with Sec. 301.6225-3 in the taxable year of the pass-through partner that includes the date the payment required under paragraph (e)(4)(i)(A) of this section is made or, if no payment is required under paragraph (e)(4)(i)(A) of this section, the date the statement described in Sec. 301.6226-2 (or paragraph (e)(3)(i) of this section) is furnished to the pass-through partner. (vi) Coordination with chapters 3 and 4 of the Code. If a pass- through partner pays an amount computed under paragraph (e)(4)(iii) of this section, Sec. 301.6225-1(a)(4) applies to the pass-through partner by substituting ``pass-through partner'' for ``partnership'' where Sec. 301.6225-1(a)(4) refers to the partnership that made the election under Sec. 301.6226-1. (5) Treatment of pass-through partners that are not partnerships-- (i) S corporations. For purposes of paragraph (e) of this section, an S corporation is treated as a partnership and its shareholders are treated as partners. (ii) Trusts and estates. Except as provided in paragraph (j) of this section, for purposes of paragraph (e) of this section, a trust and its beneficiaries, and an estate and its beneficiaries are treated in the same manner as a partnership and its partners. (6) Pass-through partners subject to chapter 1 tax. A pass-through partner that is subject to tax under chapter 1 of the Code for the first affected year or any intervening year on the adjustments (or a portion of the adjustments) reflected on the statement furnished to such partner under Sec. 301.6226-2 (or paragraph (e)(3) of this section) takes the adjustments into account under this paragraph (e)(6) when the pass-through partner calculates and pays the additional reporting year tax as determined under paragraph (b) of this section and furnishes statements to its partners in accordance with paragraph (e)(3) of this section. Notwithstanding the prior sentence, a pass- through partner is only required to include on a statement under paragraph (e)(3) of this section the adjustments that would be required to be included on statements furnished to owners or beneficiaries under sections 6037 and 6034A, as applicable, if the pass-through partner had correctly reported the items for the year to which the adjustments relate. If the pass-through partner fails to comply with the requirements of this paragraph (e)(6), the provisions of paragraph (e)(2) of this section apply. * * * * * (g) Examples. The following examples illustrate the rules of this section. For purposes of these examples, each partnership is subject to subchapter C of chapter 63 of the Code, each partnership and partner has a calendar year taxable year, no modifications are requested by any partnership under Sec. 301.6225-2 (unless otherwise stated), no penalties, additions to tax, or additional amounts are determined at the partnership level (unless otherwise stated), all persons are U.S. persons (unless otherwise stated), and the highest rate of income tax in effect for all taxpayers is 40 percent for all relevant periods. Example 1. On its partnership return for the 2020 tax year, Partnership reported ordinary income of $1,000 and charitable contributions of $400. On June 1, 2023, the IRS mails a notice of final partnership adjustment (FPA) to Partnership for Partnership's 2020 year disallowing the charitable contribution in its entirety and determining that a 20 percent accuracy-related penalty under section 6662(b) applies to the disallowance of the charitable contribution. Partnership makes a timely election under section 6226 in accordance with Sec. 301.6226-1 with respect to the imputed underpayment in the FPA for Partnership's 2020 year and files a timely petition in the Tax Court challenging the partnership adjustments. The Tax Court determines that Partnership is not entitled to any of the claimed $400 in charitable contributions and upholds the applicability of the penalty. The decision regarding Partnership's 2020 tax year becomes final on December 15, 2025. Pursuant to Sec. 301.6226-2(b), the partnership adjustments are finally determined on December 15, 2025. On February 2, 2026, Partnership files the statements described under Sec. 301.6226-2 with the IRS and furnishes to partner A, an individual who was a partner in Partnership during 2020, a statement described in Sec. 301.6226-2. A had a 25 percent interest in Partnership during all of 2020 and was allocated 25 percent of all items from Partnership for that year. The statement shows A's share of ordinary income reported on Partnership's return for the reviewed year [[Page 60158]] of $250 and A's share of the charitable contribution reported on Partnership's return for the reviewed year of $100. The statement also shows no adjustment to A's share of ordinary income, but does show an adjustment to A's share of the charitable contribution, a reduction of $100 resulting in $0 charitable contribution allocated to A from Partnership for 2020. In addition, the statement reports that a 20 percent accuracy-related penalty under section 6662(b) applies. A must pay the additional reporting year tax as determined in accordance with paragraph (b) of this section, in addition to A's penalties and interest. A computes his additional reporting year tax as follows. First, A determines the correction amount for the first affected year (the 2020 taxable year) by taking into account A's share of the partnership adjustment (<100> reduction in charitable contribution) for the 2020 taxable year. A determines the amount by which his chapter 1 tax for 2020 would have increased if the $100 adjustment to the charitable contribution from Partnership were taken into account for that year. There is no adjustment to tax attributes in A's intervening years as a result of the adjustment to the charitable contribution for 2020. Therefore, A's aggregate of the adjustment amounts is the correction amount for 2020, A's first affected year. In addition to the aggregate of the adjustment amounts being added to the chapter 1 tax that A owes for 2026, the reporting year, A must calculate a 20 percent accuracy-related penalty on A's underpayment attributable to the $100 adjustment to the charitable contribution, as well as interest on the correction amount for the first affected year and the penalty determined in accordance with paragraph (d) of this section. Interest on the correction amount for the first affected tax year runs from April 15, 2021, the due date of A's 2020 return (the first affected tax year) until A pays this amount. In addition, interest runs on the penalty from April 15, 2021, the due date of A's 2020 return for the first affected year until A pays this amount. On his 2026 income tax return, A must report the additional reporting year tax determined in accordance with paragraph (b) of this section, which is the correction amount for 2020, plus the accuracy-related penalty determined in accordance with paragraph (i) of this section, and interest determined in accordance with paragraph (d) of this section on the correction amount for 2020 and the penalty. Example 2. On its partnership return for the 2020 tax year, Partnership reported an ordinary loss of $500 million. On June 1, 2023, the IRS mails an FPA to Partnership for the 2020 taxable year determining that $300 million of the $500 million in ordinary loss should be recharacterized as a long-term capital loss. Partnership has no long-term capital gain for its 2020 tax year. The FPA for Partnership's 2020 tax year reflects an adjustment of an increase in ordinary income of $300 million (as a result of the disallowance of the recharacterization of $300 million from ordinary loss to long- term capital loss) and an imputed underpayment related to that adjustment, as well as an adjustment of an additional $300 million in long-term capital loss for 2020 which does not result in an imputed underpayment pursuant to under Sec. 301.6225-1(c)(2)(ii). Partnership makes a timely election under section 6226 in accordance with Sec. 301.6226-1 with respect to the imputed underpayment in the FPA and does not file a petition for readjustment under section 6234. Accordingly, under Sec. 301.6226-1(b)(2) and Sec. 301.6225- 3(b)(6), the adjustment year partners (as defined in Sec. 301.6241- 1(a)(2)) do not take into account the $300 million long-term capital loss that does not result in an imputed underpayment. Rather, the reviewed year partners will take into account the $300 million long- term capital loss. The time to file a petition expires on August 30, 2023. Pursuant to Sec. 301.6226-2(b), the partnership adjustments become finally determined on August 30, 2023. On September 30, 2023, Partnership files with the IRS statements described in Sec. 301.6226-2 and furnishes statements to all of its reviewed year partners in accordance with Sec. 301.6226-2. One partner of Partnership in 2020, B (an individual), had a 25 percent interest in Partnership during all of 2020 and was allocated 25 percent of all items from Partnership for that year. The statement filed with the IRS and furnished to B shows B's allocable share of the ordinary loss reported on Partnership's return for the 2020 taxable year as $125 million. The statement also shows an adjustment to B's allocable share of the ordinary loss in the amount of <$75 million>, resulting in a corrected ordinary loss allocated to B of $50 million for taxable year 2020 ($125 million originally allocated to B less $75 million which is B's share of the adjustment to the ordinary loss). In addition, the statement shows an increase to B's share of long-term capital loss in the amount of $75 million (B's share of the adjustment that did not result in the imputed underpayment with respect to Partnership). B must pay the additional reporting year tax as determined in accordance with paragraph (b) of this section. B computes his additional reporting year tax as follows. First, B determines the correction amount for the first affected year (the 2020 taxable year) by taking into account B's share of the partnership adjustments (a $75 million reduction in ordinary loss and an increase of $75 million in long-term capital loss) for the 2020 taxable year. B determines the amount by which his chapter 1 tax for 2020 would have increased if the $75 million adjustment to ordinary loss and the $75 million adjustment to long-term capital loss from Partnership were taken into account for that year. Second, B determines if there is any increase in chapter 1 tax for any intervening year as a result of the adjustment to the ordinary and capital losses for 2020. B's aggregate of the adjustment amounts is the correction amount for 2020, B's first affected year plus any correction amounts for any intervening years. B is also liable for any interest on the correction amount for the first affected year and for any intervening year as determined in accordance with paragraph (d) of this section. Example 3. On its partnership return for the 2020 tax year, Partnership, a domestic partnership, reported U.S. source dividend income of $2,000. On June 1, 2023, the IRS mails an FPA to Partnership for Partnership's 2020 year increasing the amount of U.S. source dividend income to $4,000 and determining that a 20 percent accuracy-related penalty under section 6662(b) applies to the increase in U.S. source dividend income. Partnership makes a timely election under section 6226 in accordance with Sec. 301.6226-1 with respect to the imputed underpayment in the FPA for Partnership's 2020 year and does not file a petition for readjustment under section 6234. The time to file a petition expires on August 30, 2023. Pursuant to Sec. 301.6226-2(b), the partnership adjustments become finally determined on August 30, 2023. On September 30, 2023, Partnership files the statements described under Sec. 301.6226-2 with the IRS and furnishes to partner C, a nonresident alien individual who was a partner in Partnership during 2020 (and remains a partner in Partnership in 2023), a statement described in Sec. 301.6226-2. C had a 50 percent interest in Partnership during all of 2020 and was allocated 50 percent of all items from Partnership for that year. The statement shows C's share of U.S. source dividend income reported on Partnership's return for the reviewed year of $1,000 and an adjustment to U.S. source dividend income of $1,000. In addition, the statement reports that a 20 percent accuracy-related penalty under section 6662(b) applies. Under Sec. 301.6226-2(h)(3)(i), because the additional $1,000 in U.S. source dividend income allocated to C is an amount subject to withholding (as defined in Sec. 301.6226-2(h)(3)(i)), Partnership must pay the amount of tax required to be withheld on the adjustment. See Sec. Sec. 1.1441-1(b)(1) and 1.1441-5(b)(2)(i)(A) of this chapter. Under Sec. 301.6226-2(h)(3)(ii), Partnership may reduce the amount of withholding tax it must pay because it has valid documentation from 2020 that establishes that C was entitled to a reduced rate of withholding in 2020 on U.S. source dividend income of 10 percent pursuant to a treaty. Partnership withholds $100 of tax from C's distributive share, remits the tax to the IRS, and files the necessary return and information returns required by Sec. 1.1461-1 of this chapter. On his 2023 return, C must report the additional reporting year tax determined in accordance with paragraph (b) of this section, the accuracy-related penalty determined in accordance with paragraph (i) of this section, and interest determined in accordance with paragraph (d) of this section on the correction amount for the first affected year, the correction amount for any intervening year, and the penalty. Under paragraph (f) of this section, C may claim the $100 withholding tax paid by Partnership pursuant to Sec. 301.6226-2(h)(3)(i) as a credit under section 33 against C's income tax liability on his 2023 return. Example 4. On its partnership return for the 2020 tax year, Partnership reported ordinary income of $100 million and a long-term capital gain of $40 million. Partnership had four equal partners during the 2020 tax year: E, F, G, and H, all of whom were individuals. On its partnership return for the 2020 tax year, the entire long-term capital gain was allocated to partner E and the ordinary income was allocated to all partners based on their equal (25 percent) interest in [[Page 60159]] Partnership. The IRS initiates an administrative proceeding with respect to Partnership's 2020 taxable year and determines that the long-term capital gain should have been allocated equally to all four partners and that Partnership should have recognized an additional $10 million in ordinary income. On June 1, 2023, the IRS mails an FPA to Partnership reflecting the reallocation of the $40 million long-term capital gain so that F, G, and H each have $10 million increase in long-term capital gain and E has a $30 million reduction in long-term capital gain for 2020. In addition, the FPA reflects the partnership adjustment increasing ordinary income by $10 million. The FPA reflects a general imputed underpayment with respect to the increase in ordinary income and a specific imputed underpayment with respect to the increase in long-term capital gain allocated to F, G, and H. In addition, the FPA reflects a $30 million partnership adjustment that does not result in an imputed underpayment, that is, the reduction of $30 million in long-term capital gain with respect to E. Partnership makes a timely election under section 6226 in accordance with Sec. 301.6226-1 with respect to the specific imputed underpayment relating to the reallocation of long-term capital gain. Partnership does not file a petition for readjustment under section 6234. The time to file a petition expires on August 30, 2023. Pursuant to Sec. 301.6226-2(b), the partnership adjustments become finally determined on August 30, 2023. Partnership timely pays and reports the general imputed underpayment relating to the partnership adjustment to ordinary income. On September 30, 2023, Partnership files with the IRS statements described in Sec. 301.6226-2 and furnishes statements to its partners reflecting their share of the partnership adjustments as finally determined in the FPA that relate to the specific imputed underpayment, that is, the reallocation of long-term capital gain. The statements for F, G, and H each reflect a partnership adjustment of an additional $10 million of long-term capital gain for 2020. The statement for E reflects a partnership adjustment of a reduction of $30 million of long-term capital gain for 2020. All partners must pay the additional reporting year tax as determined in accordance with paragraph (b) of this section in the partners' reporting year, which is 2023. They compute their additional reporting year tax as follows. First, they determine the correction amount for the first affected year (the 2020 taxable year) by taking into account their share of the partnership adjustments for the 2020 taxable year. They each determine the amount by which their chapter 1 tax for 2020 would have increased if the adjustment to long-term capital gain from Partnership were taken into account for that year. Second, they determine if there is any increase in chapter 1 tax for any intervening year as a result of the adjustment to the long-term capital gain for 2020. Their aggregate of the adjustment amounts is the correction amount for 2020, their first affected year plus any correction amounts for any intervening years. They are also liable for any interest on the correction amount for the first affected year and for any intervening year as determined in accordance with paragraph (d) of this section. In accordance with paragraph (b) of this section, the correction amounts may not be less than zero. Accordingly, E's additional reporting year tax is zero because E only has a reduction in capital gain which would not result in an increase in chapter 1 tax. Example 5. On its partnership return for the 2020 taxable year, Partnership reported a long-term capital loss of $5 million. During an administrative proceeding with respect to Partnership's 2020 taxable year, the IRS mails a notice of proposed partnership adjustment (NOPPA) in which it proposes to disallow $2 million of the reported $5 million long-term capital loss. F, a C corporation partner with a 50 percent interest in Partnership, received 50 percent of all long-term capital losses for 2020. As part of the modification process described in Sec. 301.6225-2(d)(2), F files an amended return for 2020 taking into account F's share of the partnership adjustment ($1 million reduction in long-term capital loss) and pays the tax owed for 2020, including interest. Also as part of the modification process, F also files amended returns for 2021 and 2022 and paid additional tax (and interest) for these years because the reduction in long-term capital loss for 2020 affected the tax due from F for 2021 and 2022. See Sec. 301.6225- 2(d)(2)(iv). The reduction of the long-term capital loss in 2020 did not affect any other taxable year of F. The IRS approves the modification with respect to F and on June 1, 2023, mails an FPA to Partnership for Partnership's 2020 year reflecting the partnership adjustment reducing the long-term capital loss in the amount of $2 million. The FPA also reflects the modification to the imputed underpayment based on the amended returns filed by F taking into account F's share of the reduction in the long-term capital loss. Partnership makes a timely election under section 6226 in accordance with Sec. 301.6226-1 with respect to the imputed underpayment in the FPA for Partnership's 2020 year and files a timely petition in the Tax Court challenging the partnership adjustments. The Tax Court upholds the determinations in the FPA and the decision regarding Partnership's 2020 tax year becomes final on December 15, 2025. Pursuant to Sec. 301.6226-2(b), the partnership adjustments are finally determined on December 15, 2025. On February 1, 2026, Partnership files the statements described under Sec. 301.6226-2 with the IRS and furnishes to its partners statements reflecting their shares of the partnership adjustment. The statement issued to F reflects F's share of the partnership adjustment for Partnership's 2020 taxable year as finally determined by the Tax Court. The statement shows F's share of the long-term capital loss adjustment for the reviewed year of $1 million and the $1 million reduction in long-term capital losses taken into account by F as part of the amended return modification. Accordingly, in accordance with paragraph (b) of this section, when F computes its correction amounts for the first affected year (the 2020 taxable year) and the intervening years (the 2021 through 2026 taxable years), F computes any additional chapter 1 tax for those years using the returns for the 2020, 2021, and 2022 taxable years as amended during the modification process. Example 6. Partnership has two equal partners for the 2020 tax year: I (an individual) and J (a partnership). For the 2020 tax year, J has two equal partners--K and L--both individuals. On June 1, 2023, the IRS mails a notice of final partnership adjustment (FPA) to Partnership for Partnership's 2020 year increasing Partnership's ordinary income by $500,000 and asserting an imputed underpayment of $200,000. Partnership makes a timely election under section 6226 in accordance with Sec. 301.6226-1 with respect to the imputed underpayment in the FPA for Partnership's 2020 year and does not file a petition for readjustment under section 6234. The time to file a petition expires on August 30, 2023. Pursuant to Sec. 301.6226-1(b), the partnership adjustments become finally determined on August 30, 2023. Therefore, Partnership's adjustment year is 2023, the due date of the adjustment year return is March 15, 2024, and if requested, the extended due date for the adjustment year return is September 16, 2024. On October 12, 2023, Partnership timely files with the IRS statements described in Sec. 301.6226-2 and timely furnishes statements to its partners reflecting their share of the partnership adjustments as finally determined in the FPA. The statements to I and J each reflect a partnership adjustment of $250,000 of ordinary income. I takes its share of the adjustments reflected on the statements furnished by Partnership into account on I's return for the 2023 tax year in accordance with paragraph (b) of this section. On April 1, 2024, J takes the adjustments into account under paragraph (e)(3) of this section by timely filing the information required by that section with the IRS and furnishing statements to K and L reflecting each partner's share of the adjustments reflected on the statements Partnership furnished to J. K and L must take their share of adjustments reflected on the statements furnished by J into account on their returns for the 2023 tax year in accordance with paragraph (b) of this section by treating themselves as reviewed year partners for purposes of that paragraph. Example 7. On its partnership return for the 2020 tax year, Partnership reported that it placed Asset, which had a depreciable basis of $210,000, into service in 2020 and depreciated Asset over 5 years, using the straight-line method. Accordingly, Partnership claimed depreciation of $42,000 in each year related to Asset. Partnership has two equal partners for the 2020 tax year: M (a partnership) and N (an S corporation). For the 2020 tax year, N has one shareholder, O, who is an individual. On June 1, 2023, the IRS mails an FPA to Partnership for Partnership's 2020 year. In the FPA, the IRS determines that Asset should have been depreciated over 7 years instead of 5 years and adjusts the depreciation for the 2020 tax year to $30,000 instead of $42,000 resulting in a $12,000 adjustment. This adjustment results in an imputed underpayment of $4,800. Partnership makes a timely election under section 6226 in accordance with Sec. 301.6226-1 with respect to the imputed underpayment in the FPA for Partnership's 2020 year and does not file a petition for readjustment under section 6234. The time to [[Page 60160]] file a petition expires on August 30, 2023. Pursuant to Sec. 301.6226-1(b), the partnership adjustments become finally determined on August 30, 2023. On October 12, 2023, Partnership timely files with the IRS statements described in Sec. 301.6226-2 and furnishes statements to its partners reflecting their share of the partnership adjustments as finally determined in the FPA. The statements to M and N reflect a partnership adjustment of $6,000 of ordinary income for the 2020 tax year as well as a $6,000 increase in ordinary income for each of the 2021 and 2022 tax years relating to the change to the depreciable life of Asset. On February 1, 2024, N takes the adjustments into account under paragraph (e)(3) of this section by issuing a statement to O reflecting her share of the adjustments reported to N on the statement it received from Partnership. Although not due until September 15, 2024 (the extended due date of the adjustment year return of Partnership), on March 22, 2024, M takes the adjustments into account under paragraph (e)(4) of this section by paying an amount calculated like an imputed underpayment equal to $7,200 (($6,000 for 2020 + $6,000 for 2021 + $6,000 for 2022) x 40 percent) on the adjustments reflected on the statement it received from Partnership including M's share of the partnership tax attributes plus interest on the amount calculated in accordance with paragraph (e)(4)(iv)(B) of this section. On her 2023 return, O takes the adjustments into account under this section. Therefore, O reports and pays the additional reporting year tax determined in accordance with paragraph (b) of this section, which is the correction amount for 2020 plus the correction amount for 2021 (related to the adjustment to tax attributes) plus the correction amount for 2022 (related to the adjustment to tax attributes), and pays interest determined in accordance with paragraph (d) of this section on the correction amounts for each of those years. Example 8. On its partnership return for the 2020 tax year, Partnership reported $1 million of ordinary loss. Partnership has two equal partners for the 2020 tax year: P and Q, both S corporations. For the 2020 tax year, P had one shareholder, R, an individual. For the 2020 tax year, Q had two shareholders, S and T, both individuals. On June 1, 2023, the IRS mails a notice of final partnership adjustment (FPA) to Partnership for Partnership's 2020 year determining $500,000 of the $1 million of ordinary loss should be recharacterized as $500,000 of long-term capital loss and $500,000 of the ordinary loss should be disallowed. The FPA asserts an imputed underpayment of $400,000 ($1 million x 40 percent) on the $1 million reduction to ordinary loss and reflecting an adjustment that does not result in an imputed underpayment of a $500,000 capital loss. Partnership makes a timely election under section 6226 in accordance with Sec. 301.6226-1 with respect to the imputed underpayment in the FPA for Partnership's 2020 year and does not file a petition for readjustment under section 6234. The time to file a petition expires on August 30, 2023. Pursuant to Sec. 301.6226-1(b), the partnership adjustments become finally determined on August 30, 2023. On October 12, 2023, Partnership timely files with the IRS statements described in Sec. 301.6226-2 and furnishes statements to its partners reflecting their share of the partnership adjustments as finally determined in the FPA. The statements to P and Q each reflect a partnership adjustment of $500,000 increase in ordinary income and an increase in capital loss of $250,000 in accordance with Sec. 301.6225-3(b)(6). P takes the adjustments into account under paragraph (e)(3) of this section by timely furnishing a statement to R. Q takes the adjustments into account under paragraph (e)(4) of this section by paying an amount calculated like an imputed underpayment under paragraph (e)(4)(iii) of this section, as well as interest determined under paragraph (e)(4)(iv)(B) of this section on the amount. After applying the rules set forth in Sec. 301.6225-1 regarding the netting and grouping of adjustments, Q calculates an amount of $200,000 which is equal to the residual grouping of $500,000 multiplied by 40 percent. The residual grouping contains the $500,000 attributable to the adjustment to ordinary income. Q also has one adjustment that does not result in an imputed underpayment--the $250,000 increase to capital loss. On its 2023 return, Q reports and allocates the $250,000 capital loss to its shareholders for its 2023 taxable year as a capital loss as provided in Sec. 301.6225-3. Q must report and pay the amounts due under paragraph (e)(4) of section no later than September 15, 2024, the extended due date of Partnership's return for the 2023 year, which is the adjustment year. Example 9. On its partnership return for the 2020 tax year, Partnership reported a $1 million long-term capital gain on the sale of Stock. Partnership has two equal partners for the 2020 tax year: U (an individual) and V (a partnership). For the 2020 tax year, V has two equal partners: W (an individual) and X (a partnership). For the 2020 tax year, X has two equal partners: Y and Z, both of which are C corporations. On June 1, 2023, the IRS mails a NOPPA to Partnership for Partnership's 2020 year proposing a $500,000 increase in the long-term capital gain from the sale of Stock and an imputed underpayment of $200,000 ($500,000 x 40 percent). On July 17, 2023, Partnership timely submits a request to modify the rate used in calculating the imputed underpayment under Sec. 301.6225- 2(d)(4). Partnership submits sufficient information demonstrating that $375,000 of the $500,000 adjustment is allocable to individuals (50 percent of the $500,000 adjustment allocable to U and 25 percent of the $500,000 adjustment allocable to W) and the remaining $125,000 is allocable to C corporations (the indirect partners Y and Z). The IRS approves the modification and the imputed underpayment is reduced to $118,750 (($375,000 x 20 percent) + ($125,000 x 35 percent)). See Sec. 301.6225-2(b)(3). On February 28, 2024, the IRS mails an FPA to Partnership for Partnership's 2020 year determining a $500,000 increase in the long-term capital gain on the sale of Stock and asserting an imputed underpayment of $118,750 after the approved modifications. Partnership makes a timely election under section 6226 in accordance with Sec. 301.6226-1 with respect to the imputed underpayment in the FPA for Partnership's 2020 year and does not file a petition for readjustment under section 6234. The time to file a petition expires on May 28, 2024. Pursuant to Sec. 301.6226- 1(b), the partnership adjustments become finally determined on May 28, 2024. On July 26, 2024, Partnership timely files with the IRS statements described in Sec. 301.6226-2 and furnishes statements to its partners reflecting their share of the partnership adjustments as finally determined in the FPA. The statements to U and V each reflect a partnership adjustment of a $250,000 increase in long-term capital gain. V takes the adjustments into account under paragraph (e)(4) of this section by paying an amount calculated like an imputed underpayment under paragraph (e)(4)(iii) of this section, as well as interest determined under paragraph (e)(4)(iv)(B) of this section on the amount. On February 3, 2025, V takes the adjustments into account under paragraph (e)(4) of this section by paying an amount equal to $68,750 (($125,000 x 35 percent for the adjustments allocable to X) + ($125,000 x 20 percent for the adjustments allocable to W)) which includes the rate modifications approved by the IRS with respect to Y and Z. V must also pay any interest on the amount as determined in accordance with paragraph (e)(4)(iv)(B) of this section. V must report and pay the amounts due under paragraph (e)(4) of this section no later than September 15, 2025, the extended due date of Partnership's return for the 2024 year, which is the adjustment year. * * * * * (i) Penalties--(1) In general. In the case of a partnership that makes an election under section 6226, the applicability of penalties, additions to tax, and additional amounts that relate to a partnership adjustment are determined at the partnership level in accordance with section 6221(a). The partnership's reviewed year partners are liable for such penalties, additions to tax, and additional amounts as determined under paragraph (i)(2) of this section. (2) Determining the amount of each reviewed year partner's penalties. To determine a reviewed year partner's penalties, additions to tax, and additional amounts for the reporting year, each reviewed year partner computes the penalty, addition to tax, or additional amount imposed with respect to the correction amount (or portion thereof) calculated under paragraph (b) of this section for the first affected year or intervening year, as applicable. The reviewed year partner calculates the penalty, addition to tax, or additional amount as if the correction amount were an underpayment or understatement for the first affected year or intervening year, as applicable. If after taking into account the adjustments in accordance [[Page 60161]] with this section, the reviewed year partner would not have an underpayment, or has an understatement that falls below the applicable threshold for the imposition of a penalty, no penalty would be due from that reviewed year partner for the reporting year under this paragraph (i)(2). For penalties in the case of a pass-through partner that makes a payment under paragraph (e)(4) of this section, see paragraph (e)(4)(iv) of this section. (3) Partner-level defenses to penalties. A partner claiming that a penalty, addition to tax, or additional amount that relates to an adjustment reflected on a statement described in Sec. 301.6226-2 (or paragraph (e)(3)(i) of this section) would not be due because of a partner-level defense must first pay the penalty and file a claim for refund. Partner-level defenses are limited to those that are personal to the partner (for example, a reasonable cause and good faith defense under section 6664(c) that is based on the facts and circumstances applicable to the partner). (j) Treatment of disregarded entities and wholly-owned trusts. In the case of a reviewed year partner that is an entity described in Sec. 301.7701-2(c)(2)(i) or a trust that is wholly owned by only one person, whether the grantor or another person, and where the trust reports the owner's information to payors under Sec. 1.671- 4(b)(2)(i)(A) of this chapter and that is furnished a statement described in Sec. 301.6226-2 (or paragraph (e)(3)(i) of this section), the owner of the disregarded entity or wholly-owned trust must take into account the adjustments reflected on that statement in accordance with this section as if the owner were the reviewed year partner. 0 Par. 7. Section 301.6227-3, as proposed to be amended at 82 FR 27334 (June 14, 2017), is further amended by revising paragraphs (b)(1) and (c) to read as follows: Sec. 301.6227-3 Adjustments requested in an administrative adjustment request taken into account by reviewed year partners. * * * * * (b) * * * (1) In general. A reviewed year partner that is furnished a statement described in paragraph (a) of this section must treat the statement as if it were issued under section 6226(a)(2) and, on or before the due date for the reporting year must pay the additional reporting year tax (as defined in Sec. 301.6226-3(a)), if any, determined after taking into account that partner's share of the adjustments requested in the AAR in accordance with Sec. 301.6226-3. For purposes of paragraph (b) of this section, the rule under Sec. 301.6226-3(d)(4) (regarding the increased rate of interest) does not apply and the last sentence in Sec. 301.6226-3(b)(1) (regarding the prohibition on correction amounts being less than zero) is disregarded. Nothing in this section entitles any partner to a refund of tax imposed by chapter 1 of subtitle A of the Internal Revenue Code (chapter 1 tax) to which such partner is not entitled. For instance, a partnership- partner (as defined in Sec. 301.6241-1(a)(7)) may not claim a refund with respect to its share of any adjustment. * * * * * (c) Reviewed year partners that are pass-through partners--(1) In general. Except as provided in paragraphs (c)(2) and (3) of this section, if a statement described in paragraph (a) of this section (including a statement described in this paragraph (c)(1)) is furnished to a pass-through partner (as defined in Sec. 301.6241-1(a)(5)), the pass-through partner must take into account the adjustments reflected on that statement in accordance with Sec. 301.6226-3(e) by treating the partnership that filed the AAR as the partnership that made an election under Sec. 301.6226-1. For purposes of this paragraph (c)(1), the statement furnished to the pass-through partner by the partnership filing the AAR is treated as if it were a statement issued under section 6226(a)(2) and described in Sec. 301.6226-2. (2) Adjustments that do not result in an imputed underpayment. If the adjustments requested in an AAR do not result in an imputed underpayment (as described in Sec. 301.6227-2(d)), Sec. 301.6226- 3(e)(2) does not apply, and the pass-through partner must take into account the adjustments reflected on the statement described in paragraph (a) or (c)(1) of this section in accordance with Sec. 301.6226-3(e)(3). (3) Contents of statements. Each statement described in paragraph (c)(1) of this section must include the following information-- (i) The name and correct taxpayer identification number (TIN) of the partnership that filed the AAR with respect to the adjustments reflected on the statements described in paragraph (c)(1) of this section; (ii) The adjustment year of the partnership described in paragraph (c)(3)(i) of this section; (iii) The extended due date for the return for the adjustment year of the partnership described in paragraph (c)(3)(i) of this section (as described in Sec. 301.6226-3(e)(3)(ii)); (iv) The date on which the partnership described in paragraph (c)(3)(i) of this section furnished its statements required under Sec. 301.6227-2(d); (v) The name and correct TIN of the partnership that furnished the statement to the pass-through partner if different from the partnership described in paragraph (c)(3)(i) of this section; (vi) The name and correct TIN of the pass-through partner; (vii) The pass-through partner's taxable year to which the adjustments set forth in the statement described in paragraph (c)(1) of this section relate; (viii) The name and correct TIN of the affected partner (as defined in Sec. 301.6226-3(e)(3)(i)) to whom the statement is being furnished; (ix) The current or last address of the affected partner that is known to the pass-through partner; (x) The affected partner's share of items as originally reported to such partner under section 6031(b) and, if applicable, section 6227, for the taxable year to which the adjustments reflected on the statement furnished to the pass-through partner relate; (xi) The affected partner's share of partnership adjustments determined under Sec. 301.6227-2(e)(2) as if the affected partner were the reviewed year partner and the partnership were the pass-through partner; and (xii) Any other information required by forms, instructions, and other guidance prescribed by the IRS. (4) Partners of the pass-through partner must take into account the adjustments. For purposes of paragraph (c) of this section, when taking into account the adjustments as described in Sec. 301.6226- 3(e)(3)(iv), the rules under Sec. 301.6226-3(d)(4) (regarding the increased rate of interest) do not apply, and the last sentence in Sec. 301.6226-3(b)(1) (regarding the prohibition on correction amounts being less than zero) is disregarded. Therefore, an affected partner may reduce chapter 1 tax for the reporting year by the amount determined in accordance with Sec. 301.6226-3. * * * * * 0 Par. 8. Section 301.6231-1 is added to read as follows: Sec. 301.6231-1 Notice of proceedings and adjustments. (a) Notices to which this section applies. In the case of any administrative proceeding under subchapter C of chapter 63 of the Internal Revenue Code (subchapter C of chapter 63), including an administrative proceeding with respect to an administrative adjustment request (AAR) filed by a partnership under section 6227, the following notices must be mailed to the partnership and the [[Page 60162]] partnership representative (as described in section 6223 and Sec. 301.6223-1)-- (1) Notice of any administrative proceeding initiated at the partnership level with respect to an adjustment of any item of income, gain, loss, deduction, or credit (as defined in Sec. 301.6221(a)- 1(b)(1)) of a partnership for a partnership taxable year, or any partner's distributive share (as described in Sec. 301.6221(a)- 1(b)(2)) thereof, under subchapter C of chapter 63 (notice of administrative proceeding (NAP)); (2) Notice of any proposed partnership adjustment resulting from an administrative proceeding under subchapter C of chapter 63 (notice of proposed partnership adjustment (NOPPA)); and (3) Notice of any final partnership adjustment resulting from an administrative proceeding under subchapter C of chapter 63 (notice of final partnership adjustment (FPA)). (b) Time for mailing notices--(1) Notice of proposed partnership adjustment. A NOPPA is timely if it is mailed before the expiration of the period for making adjustments under section 6235(a)(1) (including any extensions under section 6235(b) and any special rules under section 6235(c)). (2) Notice of final partnership adjustment. An FPA may not be mailed earlier than 270 days after the date on which the NOPPA is mailed unless the partnership agrees, in writing, with the Internal Revenue Service (IRS) to waive the 270-day period. See Sec. 301.6225- 2(c)(3)(iii) for the effect of a waiver under this paragraph (b)(2) on the 270-period for requesting a modification under section 6225(c). See Sec. 301.6232-1(d)(2) for the rules regarding a waiver of the limitations on assessment under Sec. 301.6232-1(c). (c) Last known address. A notice described in paragraph (a) of this section is sufficient if mailed to the last known address of the partnership representative and the partnership (even if the partnership or partnership representative has terminated its existence). (d) Notice mailed to partnership representative--(1) In general. A notice described in paragraph (a) of this section will be treated as mailed to the partnership representative if the notice is mailed to the partnership representative that is reflected in the IRS records as of the date the letter is mailed. (2) No partnership representative in effect. In any case in which no partnership representative designation is in effect in accordance with Sec. 301.6223-1(f)(2), a notice described in paragraph (a) of this section mailed to ``PARTNERSHIP REPRESENTATIVE'' at the last known address of the partnership satisfies the requirements of section 6231(a). (e) Restrictions on additional FPAs after petition filed. The IRS may mail more than one FPA to any partnership for any partnership taxable year. However, except in the case of fraud, malfeasance, or misrepresentation of a material fact, the IRS may not mail an FPA to a partnership with respect to a partnership taxable year after the partnership has filed a timely petition for readjustment under section 6234 with respect to an FPA issued with respect to such partnership taxable year. (f) Withdrawal of NAP or NOPPA. The IRS may, without consent of the partnership, withdraw any NAP or NOPPA. A NAP or NOPPA that has been withdrawn by the IRS has no effect for purposes of subchapter C of chapter 63. For instance, if the IRS withdraws a NAP with respect to a partnership taxable year, the prohibition under section 6227(c) on filing an AAR after the mailing of a NAP no longer applies with respect to such taxable year. (g) Rescission of FPA. The IRS may, with the consent of the partnership, rescind any FPA. An FPA that is rescinded is not an FPA for purposes of subchapter C of chapter 63, and the partnership cannot bring a proceeding under section 6234 with respect to such FPA. (h) Applicability date--(1) In general. Except as provided in paragraph (h)(2) of this section, this section applies to partnership taxable years beginning after December 31, 2017. (2) Election under Sec. 301.9100-22T in effect. This section applies to any partnership taxable year beginning after November 2, 2015 and before January 1, 2018 for which a valid election under Sec. 301.9100-22T is in effect. 0 Par. 9. Section 301.6232-1 is added to read as follows: Sec. 301.6232-1 Assessment, collection, and payment of imputed underpayment. (a) In general. An imputed underpayment determined under subchapter C of chapter 63 of the Internal Revenue Code (Code) is assessed and collected in the same manner as if the imputed underpayment were a tax imposed by subtitle A of the Code for the adjustment year (as defined in Sec. 301.6241-1(a)(1)) except that the deficiency procedures under subchapter B of chapter 63 of the Code do not apply to an assessment of an imputed underpayment. Accordingly, no notice under section 6212 is required for, and the restrictions under section 6213 do not apply to, the assessment of any imputed underpayment. See paragraph (c) of this section for limitations on assessment and paragraph (d) of this section for exceptions to restrictions on adjustments. (b) Payment of the imputed underpayment. Upon receipt of notice and demand from the Internal Revenue Service (IRS), an imputed underpayment must be paid by the partnership at the place and time stated in the notice. In the case of an adjustment requested in an administrative adjustment request (AAR) under section 6227(b)(1) that is taken into account by the partnership under Sec. 301.6227-2(b), payment of the imputed underpayment is due on the date the AAR is filed. The IRS may assess the amount of the imputed underpayment reflected on the AAR on the date the AAR is filed. For interest with respect to an imputed underpayment, see Sec. 301.6233(a)-1(b). (c) Limitation on assessment. Except as otherwise provided by this section, no assessment of an imputed underpayment may be made (and no levy or proceeding in any court for the collection of an imputed underpayment may be made, begun, or prosecuted) before-- (1) The close of the 90th day after the day on which a notice of a final partnership adjustment (FPA) was mailed under section 6231(a)(3); and (2) If a petition for readjustment is filed under section 6234 with respect to such FPA, the decision of the court has become final. (d) Exceptions to restrictions on adjustments and assessments--(1) Adjustments treated as mathematical or clerical errors--(i) In general. A notice to a partnership that, on account of a mathematical or clerical error appearing on the partnership return or as a result of a failure by a partnership-partner (as defined in Sec. 301.6241-1(a)(7)) to comply with section 6222(a), the IRS has adjusted or will adjust items of income, gain, loss, deduction, or credit (as defined in Sec. 301.6221(a)-1(b)(1)) to correct the error or to make the items consistent under section 6222(a) and has assessed or will assess any imputed underpayment (determined in accordance with Sec. 301.6225-1) resulting from the adjustment is not considered an FPA under section 6231(a)(3). A petition for readjustment under section 6234 may not be filed with respect to such notice. The limitations under section 6232(b) and paragraph (c) of this section do not apply to an assessment under this paragraph (d)(1)(i). For the definition of mathematical or clerical error generally, see section 6213(g)(2). For application of mathematical or [[Page 60163]] clerical error in the case of inconsistent treatment by a partner that fails to give notice, see Sec. 301.6222-1(b). (ii) Request for abatement--(A) In general. Except as provided in paragraph (d)(1)(ii)(B) of this section, a partnership that is mailed a notice described in paragraph (d)(1)(i) of this section may file with the IRS, within 60 days after the date of such notice, a request for abatement of any assessment of an imputed underpayment specified in such notice. Upon receipt of the request, the IRS must abate the assessment. Any subsequent assessment of an imputed underpayment with respect to which abatement was made is subject to the provisions of subchapter C of chapter 63 of the Code, including the limitations under paragraph (c) of this section. (B) Adjustments with respect to inconsistent treatment by a partnership-partner. If an adjustment that is the subject of a notice described in paragraph (d)(1)(i) of this section is due to the failure of a partnership-partner to comply with section 6222(a), paragraph (d)(1)(ii)(A) of this section does not apply, and abatement of any assessment specified in such notice is not available. However, prior to assessment, a partnership-partner that has failed to comply with section 6222(a) may correct the inconsistency by filing an administrative adjustment request under section 6227 or filing an amended partnership return and furnishing amended statements, as appropriate. (iii) Partnerships that have an election under section 6221(b) in effect. In the case of a partnership-partner that has an election under section 6221(b) in effect for the reviewed year (as defined in Sec. 301.6241-1(a)(8)), any tax resulting from an adjustment due to the partnership-partner's failure to comply with section 6222(a) may be assessed with respect to the reviewed year partners (as defined in Sec. 301.6241-1(a)(9)) of the partnership-partner (or indirect partners of the partnership-partner, as defined in Sec. 301.6241- 1(a)(4)). Such tax may be assessed in the same manner as if the tax were on account of a mathematical or clerical error appearing on the reviewed year partner's or indirect partner's return, except that the procedures under section 6213(b)(2) for requesting an abatement of such assessment do not apply. (2) Partnership may waive limitations. A partnership may at any time by a signed notice in writing filed with the IRS waive the limitations under paragraph (c) of this section (whether or not an FPA has been mailed under section 6231(a)(3) by the IRS at the time of the waiver). (e) Limit on amount of imputed underpayment where no proceeding is begun. If no proceeding under section 6234 is begun with respect to an FPA mailed under section 6231(a)(3) before the close of the 90th day after the day on which such FPA was mailed, the amount for which the partnership is liable under section 6225 with respect to such FPA cannot exceed the amount determined in such FPA. (f) Applicability date--(1) In general. Except as provided in paragraph (f)(2) of this section, this section applies to partnership taxable years beginning after December 31, 2017. (2) Election under Sec. 301.9100-22T in effect. This section applies to any partnership taxable year beginning after November 2, 2015 and before January 1, 2018 for which a valid election under Sec. 301.9100-22T is in effect. 0 Par. 10. Section 301.6233(a)-1 is added to read as follows: Sec. 301.6233(a)-1 Interest and penalties determined from reviewed year. (a) Interest and penalties with respect to the reviewed year. Except to the extent provided in section 6226(c) and the regulations thereunder, in the case of a partnership adjustment (as defined in Sec. 301.6241-1(a)(6)) for a reviewed year (as defined in Sec. 301.6241-1(a)(8)), a partnership is liable for-- (1) Interest computed in accordance with paragraph (b) of this section; and (2) Any penalty, addition to tax, or additional amount as provided under paragraph (c) of this section. (b) Computation of interest with respect to partnership adjustments for the reviewed year. The interest imposed on an imputed underpayment resulting from partnership adjustments for the reviewed year is the interest that would be imposed under chapter 67 of the Internal Revenue Code (Code) if the imputed underpayment were treated as an underpayment of tax for the reviewed year. The interest imposed on an imputed underpayment under this paragraph (b)(1) begins on the day after the due date of the partnership return (without regard to extension) for the reviewed year and ends on the earlier of-- (1) The date prescribed for payment (as described in Sec. 301.6232-1(b)); (2) The due date of the partnership return (without regard to extension) for the adjustment year (as defined in Sec. 301.6241- 1(a)(1)); or (3) The date the imputed underpayment is fully paid. (c) Penalties with respect to partnership adjustments for the reviewed year--(1) In general. In accordance with section 6221(a), the applicability of any penalties, additions to tax, and additional amounts that relate to a partnership adjustment for the reviewed year is determined at the partnership level as if the partnership had been an individual subject to tax imposed by chapter 1 of subtitle A of the Code for the reviewed year, and the imputed underpayment were an actual underpayment of tax or understatement for such year. Nothing in this paragraph (c)(1) affects the application of any penalty, addition to tax, or additional amount that may apply to the partnership or to any reviewed year partner (as defined in Sec. 301.6241-1(a)(9)) or to any indirect partner (as defined in Sec. 301.6241-1(a)(4)) that is unrelated to a partnership adjustment under subchapter C of chapter 63 of the Code. (2) Coordination with accuracy-related and fraud penalty provisions--(i) In general. In the case of penalties imposed under section 6662, section 6662A, and section 6663 with respect to partnership adjustments in accordance with paragraph (c)(1) of this section, the rules described in paragraphs (c)(2)(ii), (iii), (iv), and (v) of this section apply. (ii) Determining the portion of the imputed underpayment to which a penalty applies--(A) In general. In the case of penalties imposed under section 6662, section 6662A, and section 6663, paragraph (c)(2)(ii) of this section applies if-- (1) There is at least one adjustment with respect to which no penalty has been imposed and at least one adjustment with respect to which a penalty has been imposed; or (2) There are at least two adjustments with respect to which penalties have been imposed and the penalties have different rates. (B) Calculating the portion of the imputed underpayment to which the penalty applies. In computing the portion of an imputed underpayment to which a penalty applies, adjustments that do not result in the imputed underpayment (as described in Sec. 301.6225-1(c)(2)) are not taken into account. The portion of an imputed underpayment to which a penalty applies is calculated as follows-- (1) All the partnership adjustments that resulted in the imputed underpayment are grouped together according to whether they are adjustments with respect to which a penalty has been imposed and, if so, according to rate of penalty. Negative adjustments as defined in paragraph (c)(2)(ii)(C) of this section are grouped [[Page 60164]] in accordance with paragraphs (c)(2)(ii)(D) and (E) of this section. (2) Within each grouping described in paragraph (c)(2)(ii)(B)(1) of this section, multiply the portion of each non-credit partnership adjustment by the rate that applied to such portion when calculating the imputed underpayment. See Sec. Sec. 301.6225-1(c)(1)(i); 301.6225- 2(b)(3)(iii)(B), (d)(4). (3) Within each grouping, add the amounts that were calculated under paragraph (c)(2)(ii)(B)(2) of this section. (4) Within each grouping, increase or decrease the amounts that were calculated under paragraph (c)(2)(ii)(B)(3) of this section by any credit adjustments. (C) Negative adjustments. An adjustment that resulted in the imputed underpayment that is an increase in an item of loss, deduction, or credit or a decrease to an item of income or gain is a negative adjustment. (D) Grouping of negative adjustments. Negative adjustments are grouped under paragraph (c)(2)(ii)(B)(1) of this section in the following order-- (1) Partnership adjustments with respect to which no penalties have been imposed; (2) Adjustments with respect to which a penalty has been imposed at a 20 percent rate; (3) Adjustments with respect to which a penalty has been imposed at a 30 percent rate; (4) Adjustments with respect to which a penalty has been imposed at a 40 percent rate; (5) Adjustments with respect to which a penalty has been imposed at a 75 percent rate. (E) Negative adjustments that reduce a grouping to zero. If when allocating the negative adjustments under paragraph (c)(2)(ii)(D) of this section, the amount calculated in paragraph (c)(2)(ii)(B) of this section for a particular grouping equals zero, any remaining negative adjustments (or portion thereof) that would otherwise reduce the amount to less than zero are allocated to the next grouping in sequential order under paragraph (c)(2)(ii)(D) of this section. (F) Fraud penalties under section 6663. If any portion of an imputed underpayment is determined by the IRS to be attributable to fraud, the entire imputed underpayment is treated as attributable to fraud. This paragraph (c)(2)(ii)(F) does not apply to any portion of the imputed underpayment the partnership establishes by a preponderance of the evidence is not attributable to fraud. (iii) Substantial understatement penalty under section 6662(d)--(A) In general. For purposes of application of the penalty under section 6662(d) (substantial understatement of income tax), the imputed underpayment is treated as an understatement under section 6662(d)(2). To determine whether an imputed underpayment treated as an understatement under this paragraph (c)(3)(iii)(A) is a substantial understatement under section 6662(d)(1), the rules of section 6662(d)(1)(A) apply by treating the amount described in paragraph (c)(3)(iii)(B) of this section as the tax required to be shown on the return for the taxable year under section 6662(d)(1)(A)(i). (B) Amount of tax required to be shown on the return. The amount described in this paragraph (c)(3)(iii)(B) is the tax that would result by treating the net ordinary business income or loss of the partnership for the reviewed year, reflecting any partnership adjustments as finally determined, as taxable income described in section 1(c) (determined without regard to section 1(h)). (iv) Reportable transaction understatement under section 6662A. For purposes of application of the penalty under section 6662A (reportable transaction understatement penalty), the portion of an imputed underpayment attributable to an item described under section 6662A(b)(2) is treated as a reportable transaction understatement under section 6662A(b). (v) Reasonable cause and good faith. For purposes of determining whether a partnership satisfies the reasonable cause and good faith exception under section 6664(c) or (d) with respect to a penalty under section 6662, section 6662A, or section 6663, the partnership is treated as the taxpayer. See Sec. 1.6664-4 of this chapter. Accordingly, the facts and circumstances taken into account to determine whether the partnership has established reasonable cause and good faith are the facts and circumstances applicable to the partnership. A partner-level defense (as described in Sec. 301.6226- 3(i)(3)) may not be raised in a proceeding of the partnership except as provided under the modification procedures set forth in Sec. 301.6225- 2(d)(2) (amended returns) or in Sec. 301.6225-2(d)(8) (partner closing agreements). (3) Examples. The following examples illustrate the rules of paragraph (c) of this section. For purposes of these examples, each partnership has a calendar taxable year, and the highest tax rate in effect for all taxpayers is 40 percent for all relevant periods. Example 1. One adjustment with respect to which a penalty is imposed. In an administrative proceeding with respect to Partnership's 2018 partnership return, the IRS determines that Partnership understated ordinary income by $100. The $100 understatement is due to negligence or disregard of rules or regulations under section 6662(c), and a 20-percent accuracy-related penalty applies under section 6662(a). The IRS also determines that Partnership understated long-term capital gain by $300, but no penalty applies with respect to that adjustment. Partnership does not request modification of the imputed underpayment under section 6225 and does not raise any penalty defenses prior to issuance of the notice of final partnership adjustment (FPA). In the FPA, the IRS determines that the imputed underpayment is $160 (($100 + $300) x 40 percent). In determining the penalty, the $100 adjustment (to which the 20-percent penalty relates) is grouped separately from the $300 adjustment (to which no penalty applies). The portion of the imputed underpayment to which the 20-percent penalty applies is $40 ($100 x 40 percent), and the penalty is $8 ($40 x 20 percent). Example 2. More than one adjustment with respect to which the same rate of penalty is imposed. The facts are the same as in Example 1 of this paragraph (c)(3), except that the IRS determines that Partnership also overstated its credits by $10. The overstatement of credits is due to negligence or disregard of rules or regulations under section 6662(c), and a 20-percent accuracy- related penalty applies under section 6662(a). Because the Partnership did not request modification, the imputed underpayment is $170 (($100 + $300) x 40 percent) + $10). In determining the penalty, the $10 credit adjustment and the $100 understatement of income, both of which are adjustments with respect to which the 20- percent accuracy-related penalty is imposed, are grouped together. Accordingly, the portion of the imputed underpayment to which the 20-percent accuracy-related penalty applies is $50 (($100 x 40 percent) + $10), and the penalty is $10 ($50 x 20 percent). Example 3. Negative adjustment. The facts are the same as in Example 2 of this paragraph (c)(3), except that there is also an adjustment that reduces ordinary income by $50. In calculating the imputed underpayment under Sec. 301.6225-1, the $50 decrease to ordinary income is netted with the $100 increase in ordinary income. Therefore, the $50 decrease in ordinary income is an adjustment that resulted in the imputed underpayment and therefore a negative adjustment described in paragraph (c)(2)(ii)(C) of this section. Because Partnership did not request modification, the imputed underpayment is $150 (($100-$50) + $300) x 40 percent) + $10). To determine the portion of the imputed underpayment to which the 20- percent accuracy-related penalty applies, the $50 reduction to ordinary income is grouped with the $300 adjustment to long-term capital gain (in accordance with paragraph (c)(2)(ii)(D) of this section). Accordingly, the portion of the imputed underpayment to which the 20-percent accuracy-related penalty applies is $50 (($100 x 40 percent) + $10), and the penalty is $10 ($50 x 20 percent). [[Page 60165]] Example 4. Two adjustments with respect to which penalties of different rates have been imposed. The facts are the same as in Example 3 of this paragraph (c)(3), except that the $300 adjustment to long-term capital gain is due to a gross valuation misstatement. A 40-percent accuracy-related penalty under section 6662(a) and (h) applies to the portion of the imputed underpayment attributable to the gross valuation misstatement. The imputed underpayment is $150 (($100-$50) + $300) x 40 percent) + $10). Under paragraph (c)(2)(ii)(B) of this section, the adjustment to long-term capital gain (the adjustment to which the 40-percent penalty relates) and the adjustments to ordinary income and credits (the adjustments to which the 20-percent penalty relates) are grouped separately. In accordance with paragraph (c)(2)(ii)(D) of this section, because there are no partnership adjustments with respect to which no penalties have been imposed, the $50 reduction in ordinary income (the negative adjustment) is allocated to the grouping of adjustments with respect to which the 20-percent penalty is imposed. The amount described under paragraph (c)(2)(ii)(B) of this section with respect to the 20-percent penalty grouping is $30 (($100 x 40 percent)-($50 x 40 percent) + 10). Therefore, the portion of the imputed underpayment to which the 20 percent accuracy-related penalty applies is $30 and the penalty is $6 ($30 x 20 percent). The portion of the imputed underpayment to which the 40-percent gross valuation misstatement penalty applies is $120 ($300 x 40 percent), and the penalty is $48 ($120 x 40 percent). The accuracy-related penalty under section 6662(a) is $54. Example 5. Modification with respect to tax-exempt partner. The IRS initiates an administrative proceeding with respect to Partnership's 2019 taxable year. Partnership has four equal partners during its 2019 taxable year: Two partners are partnerships, A and B; one partner is a tax-exempt entity, C; and the fourth partner is an individual, D. The IRS timely mails a notice of proposed partnership adjustment (NOPPA) to Partnership for its 2019 taxable year proposing a single partnership adjustment increasing Partnership's ordinary income by $400,000. The $400,000 increase in income is due to negligence or disregard of rules or regulations under section 6662(c). A 20-percent accuracy-related penalty under section 6662(a) and (c) applies to the portion of the imputed underpayment attributable to the negligence or disregard of the rules or regulations. In the NOPPA, the IRS determines an imputed underpayment of $160,000 ($400,000 x 40 percent); the portion of the imputed underpayment to which the 20-percent penalty applies is $32,000 ($160,000 x 20 percent). Partnership requests modification under Sec. 301.6225-2(d)(3) (regarding tax-exempt partners) with respect to the amount of additional income allocated to C, and the IRS approves the request. After modification of the imputed underpayment, the imputed underpayment is $120,000 (($400,000- $100,000) x 40 percent), and the penalty is $24,000 ($120,000 x 20 percent). Example 6. Amended return modification. The facts are the same as in Example 5 of this paragraph (c)(3), except in addition to the modification with respect to C's tax-exempt status, Partnership requests a modification under Sec. 301.6225-2(d)(2) (regarding amended returns) with respect to the $100,000 of additional income allocated to D. In accordance with the rules under Sec. 301.6225- 2(d)(2), D files an amended return for D's 2019 taxable year taking into account $100,000 of additional ordinary income. In addition, in accordance with Sec. 301.6225-2(d)(2)(viii), D takes into account on D's return the 20-percent accuracy-related penalty for negligence or disregard of rules or regulations that relates to the ordinary income adjustment. D's tax attributes for other taxable years are not affected. The IRS approves the modification. As a result, Partnership's total netted partnership adjustment under Sec. 301.6225-1(c)(3) is $200,000 ($400,000 less $100,000 allocable to C and $100,000 taken into account by D). The imputed underpayment, after modification, is $80,000 ($200,000 x 40 percent), and the penalty is $16,000 ($80,000 x 20 percent). (d) Applicability date--(1) In general. Except as provided in paragraph (d)(2) of this section, this section applies to partnership taxable years beginning after December 31, 2017. (2) Election under Sec. 301.9100-22T in effect. This section applies to any partnership taxable year beginning after November 2, 2015 and before January 1, 2018 for which a valid election under Sec. 301.9100-22T is in effect. 0 Par. 11. Section 301.6233(b)-1 is added to read as follows: Sec. 301.6233(b)-1 Interest and penalties with respect to the adjustment year return. (a) Interest and penalties with respect to failure to pay imputed underpayment on the date prescribed. In the case of any failure to pay an imputed underpayment on the date prescribed for such payment (as described in Sec. 301.6232-1(b)), a partnership is liable for-- (1) Interest as determined under paragraph (c) of this section; and (2) Any penalty, addition to tax, or additional amount as determined under paragraph (d) of this section. (b) Imputed underpayments to which this section applies. This section applies to the portion of an imputed underpayment determined by the IRS under section 6225(a)(1), or an imputed underpayment resulting from adjustments requested by a partnership in an administrative adjustment request under section 6227, that is not paid by the date prescribed for payment under Sec. 301.6232-1(b). (c) Interest. Interest determined under this paragraph (c) is the interest that would be imposed under chapter 67 of the Internal Revenue Code (Code) by treating any unpaid amount of the imputed underpayment as an underpayment of tax imposed for the adjustment year (as defined in Sec. 301.6241-1(a)(1)). The interest under this paragraph (c) begins on the date prescribed for payment (as described in Sec. 301.6232-1(b)) and ends on the date payment of the imputed underpayment is made. (d) Penalties. If a partnership fails to pay an imputed underpayment by the date prescribed for payment (as described in Sec. 301.6232-1(b)), section 6651(a)(2) applies to such failure, and any unpaid amount of the imputed underpayment is treated as if it were an underpayment of tax for purposes of part II of subchapter A of chapter 68 of the Code. For purposes of this section, the penalty under 6651(a)(2) is applied by treating the unpaid amount of the imputed underpayment as the unpaid amount shown as tax on a return required under subchapter A of chapter 61 of the Code. (e) Applicability date--(1) In general. Except as provided in paragraph (e)(2) of this section, this section applies to partnership taxable years beginning after December 31, 2017. (2) Election under Sec. 301.9100-22T in effect. This section applies to any partnership taxable year beginning after November 2, 2015 and before January 1, 2018 for which a valid election under Sec. 301.9100-22T is in effect. 0 Par. 12. Section 301.6234-1 is added to read as follows: Sec. 301.6234-1 Judicial review of partnership adjustment. (a) In general. Within 90 days after the date on which a notice of a final partnership adjustment (FPA) with respect to any partnership taxable year is mailed under section 6231(a)(3), a partnership may file a petition for a readjustment of any partnership adjustment (as defined in Sec. 301.6241-1(a)(6)) reflected in the FPA for such taxable year (without regard to whether an election under section 6226 has been made with respect to any imputed underpayment reflected in such FPA) with-- (1) The Tax Court; (2) The district court of the United States for the district in which the partnership's principal place of business is located; or (3) The Court of Federal Claims. (b) Jurisdictional requirement for bringing action in district court or Court of Federal Claims. A petition for readjustment under this section with respect to any partnership adjustment may be filed in a district court of the United States or the Court of Federal Claims only if the partnership filing the petition deposits with the Internal [[Page 60166]] Revenue Service (IRS), on or before the date the petition is filed, the amount of any imputed underpayment resulting from the partnership adjustment. (c) Treatment of deposit as payment of tax. Any amount deposited in accordance with paragraph (b) of this section, while deposited, will not be treated as a payment of tax for purposes of the Internal Revenue Code (Code). Notwithstanding the preceding sentence, an amount deposited in accordance with paragraph (b) of this section will be treated as a payment of tax for purposes of chapter 67 of the Code (relating to interest). Interest will be allowed and paid in accordance with section 6611. (d) Effect of decision dismissing action. If an action brought under this section is dismissed other than by reason of a rescission of the FPA under section 6231(c) and Sec. 301.6231-1(g), the decision of the court dismissing the action is considered as its decision that the FPA is correct. (e) Amount deposited may be applied against assessment. If the limitations on assessment under section 6232(b) and Sec. 301.6232-1(c) no longer apply with respect to an imputed underpayment for which a deposit under paragraph (b) of this section was made, the IRS may apply the amount deposited against any such imputed underpayment that is assessed. (f) Applicability date--(1) In general. Except as provided in paragraph (f)(2) of this section, this section applies to partnership taxable years beginning after December 31, 2017. (2) Election under Sec. 301.9100-22T in effect. This section applies to any partnership taxable year beginning after November 2, 2015 and before January 1, 2018 for which a valid election under Sec. 301.9100-22T is in effect. 0 Par. 13. Section 301.6235-1 is added to read as follows: Sec. 301.6235-1 Period of limitations on making adjustments. (a) In general. Except as provided in section 6235(c) and (d) and paragraph (b) of this section (regarding extensions), no partnership adjustment (as defined in Sec. 301.6241-1(a)(6)) for any partnership taxable year may be made after the later of the date that is-- (1) 3 years after the latest of-- (i) The date on which the partnership return for such taxable year was filed; (ii) The return due date (as defined in section 6241(3)) for the taxable year; or (iii) The date on which the partnership filed an administrative adjustment request with respect to such taxable year under section 6227; or (2) The date described in paragraph (b) of this section with respect to a request for modification; or (3) The date described in paragraph (c) of this section with respect to a notice of proposed partnership adjustment. (b) Modification requested under section 6225(c)--(1) In general. For purposes of paragraph (a)(2) of this section, in the case of any request for modification of any imputed underpayment under section 6225(c), the date by which the Internal Revenue Service (IRS) may make a partnership adjustment is the date that is 270 days (plus the number of days of an extension of the modification period (as described in Sec. 301.6225-2(c)(3)(i)) agreed to by the IRS under section 6225(c)(7) and Sec. 301.6225-2(c)(3)(ii)) after the date on which everything required to be submitted to the IRS pursuant to section 6225(c) is so submitted. (2) Date on which everything is required to be submitted--(i) In general. For purposes of paragraph (b)(1) of this section, the date on which everything required to be submitted to the IRS pursuant to section 6225(c) is so submitted is the earlier of-- (A) The date the modification period ends (including extensions) as described in Sec. 301.6225-2(c)(3)(i) and (ii); or (B) The date the modification period expires as a result of a waiver of the prohibition on mailing a notice of final partnership adjustment (FPA) under Sec. 301.6231-1(b)(2). See Sec. 301.6225- 2(c)(3)(iii). (ii) Incomplete submission has no effect. A determination by the IRS that the information submitted as part of a request for modification is incomplete has no effect on the applicability of paragraph (b)(2) of this section. (c) Notice of proposed partnership adjustment. For purposes of paragraph (a)(3) of this section, the date by which the IRS may make a partnership adjustment is the date that is 330 days (plus the number of days of an extension of the modification period (as described in Sec. 301.6225-2(c)(3)(i)) agreed to by the IRS under section 6225(c)(7) and Sec. 301.6225-2(c)(3)(ii)) after the date the last notice of proposed partnership adjustment (NOPPA) is mailed under section 6231(a)(2), regardless of whether modification is requested by the partnership under section 6225(c). (d) Extension by agreement. The periods described in paragraphs (a), (b), and (c) of this section (including any extension of those periods pursuant to this paragraph (d)) may be extended by an agreement, in writing, entered into by the partnership and the IRS before the expiration of such period. (e) Examples. The following examples illustrate the rules of this section. For purposes of these examples, each partnership has a calendar taxable year. Example 1. Partnership timely files its partnership return for the 2020 taxable year on March 1, 2021. On September 1, 2023, Partnership files an administrative adjustment request (AAR) under section 6227 with respect to its 2020 taxable year. As of September 1, 2023, the IRS has not initiated an administrative proceeding under subchapter C of chapter 63 of the Internal Revenue Code with respect to Partnership's 2020 taxable year. Therefore, as of September 1, 2023, under paragraph (a)(1) of this section, the period for making partnership adjustments with respect to Partnership's 2020 taxable year expires on September 1, 2026. Example 2. Partnership timely files its partnership return for the 2020 taxable year on the due date, March 15, 2021. On February 1, 2023, the IRS mails to Partnership and the partnership representative of Partnership (PR) a notice of administrative proceeding under section 6231(a)(1) with respect to Partnership's 2020 taxable year. Assuming no AAR has been filed with respect to Partnership's 2020 taxable year and the IRS has not yet mailed a NOPPA under section 6231(a)(2) with respect to Partnership's 2020 taxable year, the period for making partnership adjustments for Partnership's 2020 taxable year expires on the date determined under paragraph (a)(1) of this section, March 15, 2024. Example 3. The facts are the same as in Example 2 of this paragraph (e), except that on June 1, 2023, pursuant to Sec. 301.6235-1(d), PR signs an agreement extending the period for making partnership adjustments under section 6235(a)(1) for Partnership's 2020 taxable year to December 31, 2025. In addition, on June 2, 2025, the IRS mails to Partnership and PR a timely NOPPA under section 6231(a)(2). Pursuant to Sec. 301.6225-2(c)(3)(i), the modification period expires on February 27, 2026 (270 days after June 2, 2025, the date the NOPPA is mailed), but PR does not submit a request for modification on or before this date. Under paragraph (c) of this section, the date for purposes of paragraph (a)(3) of this section is April 28, 2026, the date that is 330 days from the mailing of the NOPPA. Because April 28, 2026 is later than the date under paragraph (a)(1) of this section (December 31, 2025, as extended under paragraph (d) of this section), and because no modification was requested, paragraph (a)(2) of this section is not applicable, April 28, 2026 is the date on which the period for making partnership adjustments expires under section 6235. Example 4. The facts are the same as in Example 3 of this paragraph (e), except that PR notifies the IRS that Partnership will be requesting modification. On January 5, 2026, PR and the IRS agree to extend the modification period pursuant to section 6225(c)(7) and Sec. 301.6225-2(c)(3)(ii) for 45 days--from February 27, 2026 to April 13, [[Page 60167]] 2026. PR submits the request for modification to the IRS on April 13, 2026. Therefore, the date determined under paragraph (b) of this section is February 22, 2027, which is 270 days after the date everything required to be submitted was so submitted pursuant to paragraph (b)(2) of this section plus the additional 45-day extension of the modification period agreed to by PR and the IRS. Because February 22, 2027 is later than the date under paragraph (a)(1) of this section (December 31, 2025, as extended under paragraph (d) of this section) and the date under paragraph (a)(3) of this section (June 12, 2026, which is 330 days from the date the NOPPA was mailed plus the 45-day extension under section 6225(c)(7)), February 22, 2027 is the date on which the period for making partnership adjustments expires under section 6235. Example 5. The facts are the same as in Example 4 of this paragraph (e), except that PR does not request an extension of the modification period. On February 1, 2026, PR submits a request for modification and PR, and the IRS agree in writing to waive the prohibition on mailing an FPA pursuant to Sec. 301.6231-1(b)(2). Pursuant to Sec. 301.6225-2(c)(3)(iii), the modification period expires as of February 1, 2026, rather than February 27, 2026. Accordingly, under paragraph (b)(2) of this section, the date on which everything required to be submitted pursuant to section 6225(c) is so submitted is February 1, 2026, and the 270-day period described in paragraph (b)(1) of this section begins to run on that date. Therefore, the date for purposes of paragraph (a)(2) of this section is October 29, 2026, which is 270 days after February 1, 2026, the date on which everything required to be submitted under section 6225(c) is so submitted. Because October 29, 2026 is later than the date under paragraph (a)(1) of this section (December 31, 2025, as extended under paragraph (d) of this section) and the date under paragraph (a)(3) of this section (April 28, 2026), October 29, 2026 is the date on which the period for making partnership adjustments expires under section 6235. Example 6. The facts are the same as in Example 5 of this paragraph (e), except PR completes its submission of information to support a request for modification on July 1, 2025, but does not execute a waiver pursuant to Sec. 301.6231-1(b)(2). Therefore, pursuant to paragraph (b)(2) of this section, February 26, 2026, the date the modification period expires, is the date on which everything required to be submitted pursuant to section 6225(c) is so submitted. As a result, the 270-day period described in paragraph (b)(1) of this section expires on November 23, 2026. Because November 23, 2026 is later than the date under paragraph (a)(1) of this section (December 31, 2025, as extended under paragraph (d) of this section) and the date under paragraph (a)(3) of this section (April 28, 2026), November 23, 2026 is the date on which the period for making partnership adjustments expires under section 6235. (f) Applicability date--(1) In general. Except as provided in paragraph (f)(2) of this section, this section applies to partnership taxable years beginning after December 31, 2017. (2) Election under Sec. 301.9100-22T in effect. This section applies to any partnership taxable year beginning after November 2, 2015 and before January 1, 2018 for which a valid election under Sec. 301.9100-22T is in effect. Kirsten Wielobob, Deputy Commissioner for Services and Enforcement. [FR Doc. 2017-27071 Filed 12-15-17; 11:15 am] BILLING CODE 4830-01-P
![60144 Federal Register / Vol. 82, No. 242 / Tuesday, December 19, 2017 / Proposed Rules
DEPARTMENT OF THE TREASURY www.regulations.gov (IRS REG–120232– implementing the new centralized
17; REG–120233–17). partnership audit regime. The June 14
Internal Revenue Service FOR FURTHER INFORMATION CONTACT: NPRM contained rules regarding the
Concerning the proposed regulations scope and election out of the new
26 CFR Part 301 under sections 6225, 6231, and 6234 of regime, consistent treatment by
[REG–120232–17; REG–120233–17] the Internal Revenue Code, Joy E. partners, the partnership representative,
Gerdy-Zogby of the Office of Associate partnership adjustments made by the
RIN 1545–BO03; RIN 1545–BO04 IRS and determination of the amount of
Chief Counsel (Procedure and
Administration), (202) 317–6834; the partnership’s liability (referred to as
Centralized Partnership Audit Regime: the imputed underpayment), AARs, and
Rules for Election Under Sections 6226 concerning the proposed regulations
under sections 6227, 6232, and 6233, the election for partners to take the
and 6227, Including Rules for Tiered partnership adjustments into account
Partnership Structures, and Steven L. Karon of the Office of
Associate Chief Counsel (Procedure and (sections 6221 through 6227 and section
Administrative and Procedural 6241 of the Internal Revenue Code
Provisions Administration), (202) 317–6834;
concerning the proposed regulations (Code)). The rules regarding how pass-
AGENCY: Internal Revenue Service (IRS), under sections 6226 and 6235, Jennifer through partners take into account
Treasury. M. Black of the Office of Associate Chief adjustments under the alternative to
ACTION: Notice of proposed rulemaking. Counsel (Procedure and payment of the imputed underpayment
Administration), (202) 317–6834; described in section 6226 and under
SUMMARY: This document contains concerning the submission of comments rules similar to section 6226 under
proposed regulations implementing and a request for a public hearing, section 6227 were reserved in the June
section 1101 of the Bipartisan Budget Regina Johnson, (202) 317–6901 (not 14 NPRM. This document contains
Act of 2015 (BBA), which was enacted toll-free numbers). those proposed rules and also re-
into law on November 2, 2015. Section proposes certain rules under section
SUPPLEMENTARY INFORMATION:
1101 of the BBA repeals the current 6226, including the imposition and
rules governing partnership audits and Background computation of penalties that relate to
replaces them with a new centralized partnership adjustments. This document
This document contains proposed
partnership audit regime that, in also contains proposed regulations that
amendments to the Procedure and
general, assesses and collects tax at the supplement the June 14 NPRM by
Administration Regulations (26 CFR
partnership level. These proposed implementing the administrative and
part 301) under Subpart—Tax
regulations provide rules addressing procedural provisions of the new
Treatment of Partnership Items
how pass-through partners take into centralized partnership audit regime
regarding how pass-through partners (as
account adjustments under the (sections 6231 through 6235). For
defined in proposed § 301.6241–1(a)(5)) proposed rules regarding international
alternative to payment of the imputed
take into account adjustments under the provisions under the centralized
underpayment described in section
alternative to payment of the imputed partnership audit regime, see (REG–
6226 and under rules similar to section
underpayment described in section 119337–17) published in the Federal
6226 when a partnership files an
6226 under the new centralized Register on November 30, 2017 (82 FR
administrative adjustment request under
partnership audit regime and under 56765) (November 30 NPRM).
section 6227. To make corresponding
rules similar to section 6226 when a
changes, these proposed regulations 1. Pass-Through Partners and the
partnership files an administrative
amend portions of the previously Section 6226 Push Out Election
adjustment request (AAR) under section
proposed regulations under sections
6227. This document also contains Under section 6225, a partnership
6226 and 6227. Additionally, these
proposed regulations regarding subject to the centralized partnership
proposed regulations provide rules
assessment and collection, penalties and audit regime is generally required to pay
regarding assessment and collection,
interest, periods of limitations, and an imputed underpayment with respect
penalties and interest, and period of
judicial review under the new to adjustments to the partnership’s
limitations under the new centralized
centralized partnership audit regime. items of income, gain, loss, deduction,
partnership audit regime. The proposed
The new regime was enacted into law or credit, and any partner’s distributive
regulations also address the rules for
by section 1101 of the BBA, Public Law share thereof. However, a partnership
seeking judicial review of partnership
114–74, as amended by the Protecting may elect under section 6226 to have its
adjustments.
Americans from Tax Hikes Act of 2015, partners for the year under audit (the
DATES: Written or electronic comments Public Law 114–113, div. Q. The reviewed year partners) take the
and requests for a public hearing must provisions of section 1101 of the BBA adjustments into account.
be received by March 19, 2018. are generally effective for partnership Proposed § 301.6226–1 (June 14
ADDRESSES: Send submissions to: taxable years beginning after December NPRM) provides rules relating to the
CC:PA:LPD:PR (REG–120232–17; REG– 31, 2017. See the temporary regulations election under section 6226 by a
120233–17), room 5207, Internal (TD 9780, 81 FR 51795) and the notice partnership to have its partners take into
Revenue Service, P.O. Box 7604, Ben of proposed rulemaking (REG–105005– account the partnership adjustments in
Franklin Station, Washington, DC 16, 81 FR 51835) published in the lieu of paying the imputed
20044. Submissions may be hand Federal Register on August 5, 2016, underpayment determined under
sradovich on DSK3GMQ082PROD with PROPOSALS
delivered Monday through Friday regarding the election into the section 6225 (the push out election).
between the hours of 8:00 a.m. and 4:00 centralized partnership audit regime for Proposed §§ 301.6226–2 and 301.6226–
p.m. to CC:PA:LPD:PR (REG–120232– taxable years beginning after November 3 (June 14 NPRM) provide rules for
17; REG–120233–17), Courier’s Desk, 2, 2015 and before January 1, 2018. statements the partnership must send to
Internal Revenue Service, 1111 On June 14, 2017, a notice of its partners for the reviewed year (as
Constitution Avenue NW, Washington, proposed rulemaking (REG–136118–15) defined in proposed § 301.6241–1(a)(8)
DC 20224, or sent electronically via the was published in the Federal Register (June 14 NPRM)) and the computation
Federal eRulemaking Portal at (82 FR 27334) (June 14 NPRM) and payment of the partners’ liabilities
VerDate Sep<11>2014 16:10 Dec 18, 2017 Jkt 244001 PO 00000 Frm 00019 Fmt 4702 Sfmt 4702 E:\FR\FM\19DEP1.SGM 19DEP1](https://thefederalregister.org/doc/82_FR_60386/page/1.svg)
![Federal Register / Vol. 82, No. 242 / Tuesday, December 19, 2017 / Proposed Rules 60153
Proposed § 301.6233(a)–1(c)(2) reasonable cause and good faith tax, the deposit will stop additional
coordinates the rules for determining exception to the penalties under interest from accruing under section
penalties related to imputed sections 6662, 6662A, and 6663. See 6233(a) on the imputed underpayment.
underpayments with the accuracy- sections 6664(c) and (d). Proposed In addition, interest will be allowed and
related and fraud penalties under § 301.6233(a)–1(c)(2)(v) provides that for paid in accordance with section 6611.
sections 6662, 6662A, and 6663. these purposes the partnership is treated The Treasury Department and the IRS
Proposed § 301.6233(a)–1(c)(2)(ii) as the taxpayer and, therefore, the facts request comments on when interest
provides rules to determine the portion and circumstances taken into account in under section 6611 should begin to run
of an imputed underpayment subject to determining whether the partnership in this context.
penalties when there is at least one has established reasonable cause and In response to Notice 2016–23, 2016–
adjustment with respect to which no good faith are those facts and 13 I.R.B. 490 (March 28, 2016), which
penalty has been imposed and at least circumstances applicable to the requested comments on the new
one with respect to which a penalty has partnership. This may include facts and centralized audit regime, one
been imposed, or where there are at circumstances with respect to partners commenter requested that the IRS
least two adjustments with respect to or other individuals acting on behalf of clarify that only a dismissal on the
which penalties have been imposed and the partnership. In addition, proposed merits and with prejudice be considered
the penalties have been imposed at § 301.6233(a)–1(c)(2)(v) provides that a dismissal within the meaning of
different rates. The rules under any partner-level defense, for example a section 6234(e). This comment was not
proposed § 301.6233(a)–1(c)(2)(ii) reasonable cause defense that is based adopted. Section 6234 explicitly
extend the existing ordering rules under on the personal circumstances of the provides that any decision of the court
§ 1.6664–3 to partnerships subject to the partner, will not be considered in a dismissing the action ‘‘shall be
centralized partnership audit regime. partnership-level proceeding except in considered as [the court’s] decision that
Proposed § 301.6233(a)–1(c)(2)(ii)(B) accordance with the amended return the [FPA] is correct.’’ The only
provides that when computing the and closing agreement modification exception provided in section 6234 is in
portion of the imputed underpayment procedures set forth in the regulations the case of a dismissal by reason of the
subject to penalties under sections 6662, under section 6225(c) and proposed rescission of an FPA under section
6662A, and 6663, partnership § 301.6225–2 (June 14 NPRM). 6231(c). See also JCS–1–16, at 75
adjustments that did not result in the
B. Interest and Penalties From the (stating that ‘‘a decision to dismiss the
imputed underpayment are not taken
Adjustment Year proceeding (other than a dismissal
into account. To determine the portion
Proposed § 301.6233(b)–1(a) provides because the [FPA] was rescinded under
of the imputed underpayment subject to
rules that apply when a partnership fails section 6231(c)), is a judgment on the
a penalty, partnership adjustments are
to pay an imputed underpayment by the merits upholding the final partnership
first grouped together according to
date prescribed for such payment. In the adjustments’’). Accordingly, proposed
whether the adjustments are subject to
penalty and if so, by rate of penalty. case of such a failure, proposed § 301.6234–1(e) reflects the language in
Negative adjustments as defined in § 301.6233(b)–1(a) provides that the section 6234(e) without the limitation
proposed § 301.6233(a)–1(c)(2)(ii)(C) are partnership is liable for interest, as well suggested in the comment.
included in these groupings according as any penalties, additions to tax, and 9. Period of Limitations on Making
to the allocation rule in proposed additional amounts as determined Adjustments
§ 301.6233(a)–1(c)(2)(ii)(D) and are under proposed § 301.6233(b)–1(b) and
netted against the positive adjustments (c). Proposed § 301.6233(b)–1(b) clarifies Proposed § 301.6235–1 reflects the
within each grouping to the extent that these rules apply to the portion of rules in section 6235 regarding the
provided in proposed § 301.6233(a)– an imputed underpayment resulting period within which the IRS must mail
1(c)(2)(ii)(E). After grouping the from partnership adjustments an FPA to make a partnership
partnership adjustments, each non- determined by the IRS under section adjustment for a partnership taxable
credit adjustment within a grouping is 6225(a)(1) that is unpaid after the date year. Under these rules, an FPA
multiplied by the rate that applied to prescribed for payment under proposed generally must be mailed before the
such adjustment when determining the § 301.6232–1(b) (the date stated in a later of: (1) Three years from the later of
imputed underpayment. After the notice and demand) and to the portion the date the partnership return is filed
appropriate rate is applied to each of an imputed underpayment resulting or due, or the date an AAR with respect
adjustment, the results within a from adjustments requested by the to the year is filed (see proposed
grouping are totaled. The total within partnership in an AAR under section § 301.6235–1(a)(1)); (2) 270 days after
each grouping is then adjusted to 6227 that is unpaid after the date the the date everything required for a
account for any credit adjustments. The AAR is filed. modification is submitted plus any
result is the portion of the imputed extension of time granted by the IRS
8. Judicial Review of Partnership with respect to a request for
underpayment that is subject to the
Adjustments modification under section 6225(c)(7)
penalty rate corresponding to the
grouping. Proposed § 301.6234–1 provides rules (see proposed § 301.6235–1(b)); or (3)
Proposed § 301.6233(a)–1(c)(2)(ii)(F) relating to judicial review of partnership 330 days after the date of the NOPPA
through (iv) provide clarifying rules for adjustments. Proposed § 301.6234–1(b) plus any extension of time granted by
applying the penalties for fraud under and (c) describe the jurisdictional the IRS with respect to a request for
sradovich on DSK3GMQ082PROD with PROPOSALS
section 6663, reportable transaction deposit requirement for partnerships modification under section 6225(c)(7)
understatements under section 6662A, that wish to bring an action in a United (see proposed § 301.6235–1(c)). The 3-
and substantial understatements of tax States district court or the Court of year period described under proposed
under section 6662(d) to imputed Federal Claims and explain how the § 301.6235–1(a)(1) (plus any extensions
underpayments determined under the jurisdictional deposit is treated for of the period under proposed
centralized partnership audit regime. purposes of the Code. Under proposed § 301.6235–1(d) and taking into account
Proposed § 301.6233(a)–1(c)(2)(v) § 301.6234–1(c), although the deposit is any special rules under section 6235(c))
provides rules for application of the not generally treated as a payment of is also the time period within which the
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![60154 Federal Register / Vol. 82, No. 242 / Tuesday, December 19, 2017 / Proposed Rules
IRS must mail a NOPPA. See proposed such period. A partnership and the IRS List of Subjects in 26 CFR Part 301
§ 301.6231–1(b)(1). may also agree to extend a period of Employment taxes, Estate taxes,
The proposed regulations do not time that has already been extended Excise taxes, Gift taxes, Income taxes,
currently incorporate any rules outside under proposed § 301.6235–1(d). Penalties, Reporting and recordkeeping
of subchapter C of chapter 63 of the requirements.
Code that might extend this period. As Special Analyses
discussed in the Explanation of Certain IRS regulations, including this Proposed Amendments to the
Provisions section of this preamble and one, are exempt from the requirements Regulations
in the November 30 NPRM, if the AAR of Executive Order 12866, as Accordingly, 26 CFR part 301 is
process can be used to coordinate supplemented and reaffirmed by proposed to be amended as follows:
sections 905(c) and the adjustment rules Executive Order 13563. Therefore, a
under the centralized partnership audit regulatory impact assessment is not PART 301—PROCEDURE AND
regime, the proposed regulations may required. Because the proposed ADMINISTRATION
need to be modified to account for regulations would not impose a
redeterminations under section 905(c). ■ Paragraph 1. The authority citation
collection of information on small
The Treasury Department and the IRS for part 301 continues to be read in part
entities, the Regulatory Flexibility Act
request comments on whether as follows:
(5 U.S.C. chapter 6) does not apply.
additional guidance would be helpful Authority: 26 U.S.C. 7805 * * *
with respect to any other specific Pursuant to section 7805(f) of the
provision, outside of subchapter C of Code, this notice of proposed § 301.6221(a)–1 [Amended]
chapter 63 of the Code, which might rulemaking has been submitted to the ■ Par. 2. Section 301.6221(a)–1, as
extend the adjustment period under the Chief Counsel for Advocacy of the Small proposed to be amended at 82 FR 27334
centralized partnership audit regime. Business Administration for comment (June 14, 2017), is further amended by
Once a NOPPA is mailed, proposed on its impact on small business. removing and reserving paragraph (c).
§ 301.6235–1(c) provides that the IRS Statement of Availability of IRS ■ Par. 3. Section 301.6225–2, as
will have at least 330 days from the date Documents proposed to be amended at 82 FR 27334
of the NOPPA to make a partnership (June 14, 2017), is further amended by
adjustment regardless of whether the IRS Revenue Procedures, Revenue adding paragraph (d)(2)(viii) to read as
partnership requests modification of the Rulings, Notices and other guidance follows:
imputed underpayment. cited in this preamble are published in
If the partnership requests § 301.6225–2 Modification of imputed
the Internal Revenue Bulletin (or underpayment.
modification of an imputed Cumulative Bulletin) and are available
underpayment, proposed § 301.6235– from the Superintendent of Documents, * * * * *
1(b) provides that the IRS will have at U.S. Government Publishing Office, (d) * * *
least 270 days from the date on which (2) * * *
Washington, DC 20402, or by visiting (viii) Penalties. The applicability of
everything required to be submitted the IRS website at www.irs.gov.
pursuant to section 6225(c) is so any penalties, additions to tax, or
submitted to the IRS to make a Comments and Requests for Public additional amounts that relate to a
partnership adjustment. Proposed Hearing partnership adjustment is determined at
§ 301.6235–1(b)(2) provides that, for the partnership level in accordance with
purposes of section 6235(a)(2), the date Before these proposed regulations are section 6221(a). However, the amount of
on which everything required to be adopted as final regulations, penalties, additions to tax, and
submitted pursuant to section 6225(c) is consideration will be given to any additional amounts a reviewed year
so submitted to the IRS is the earlier of: electronic and written comments that partner (or indirect partner) must pay
(1) The date on which the time for are submitted timely to the IRS as under paragraph (d)(2)(ii) of this section
submitting the modification request and prescribed in this preamble under the for the first affected year (as defined in
information (as described in proposed ADDRESSES heading. The Treasury § 301.6226–3(b)(2)) and for any
§ 301.6225–2(c)(3)(i) (June 14 NPRM)) Department and the IRS request modification year (as described in
ends (including extensions); or (2) the comments on all aspects of the proposed paragraph (d)(2)(iv) of this section) is
date on which the partnership and the rules. All comments will be available at based on the underpayment or
IRS agree to waive the 270-day period www.regulations.gov or upon request. A understatement of tax, if any, that
under proposed § 301.6231–1(b)(2)(ii) public hearing will be scheduled if results from taking into account the
(June 14 NPRM) before an FPA can be requested in writing by any person that adjustments in the first affected year or
mailed. Therefore, once a NOPPA has timely submits written comments. If a the modification year, as applicable. For
been mailed, the IRS will have 330 days public hearing is scheduled, then notice instance, if after taking into account the
from the date the NOPPA is mailed to of the date, time, and place for the adjustments, the partner would not have
make a partnership adjustment and in public hearing will be published in the an underpayment, or has an
general may have up to 540 days (270 Federal Register. understatement that falls below the
days in the modification period and 270 Drafting Information applicable threshold for the imposition
days from the end of the modification of a penalty, in the first affected year or
period) from the date the NOPPA is The principal authors of these any modification year, no penalty
sradovich on DSK3GMQ082PROD with PROPOSALS
mailed if there are no extensions or proposed regulations are Jennifer M. would be due from that partner for such
waivers executed by the taxpayer. Black, Joy E. Gerdy-Zogby, Brittany year. A partner’s claim that there is
Proposed § 301.6235–1(d) provides Harrison, and Steven L. Karon of the reasonable cause under section 6664(c)
that any of the periods described in Office of the Associate Chief Counsel (or other partner-level defense as
proposed § 301.6235–1(a), (b), and (c) (Procedure and Administration). described in § 301.6226–3(i)(3)) for an
may be extended by an agreement, in However, other personnel from the underpayment or understatement
writing, entered into by the partnership Treasury Department and the IRS described in this paragraph (d)(2)(viii)
and the IRS before the expiration of participated in their development. may be submitted with an amended
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![Federal Register / Vol. 82, No. 242 / Tuesday, December 19, 2017 / Proposed Rules 60167
2026. PR submits the request for modification (2) Election under § 301.9100–22T in Pennsylvania Ave. NW, Washington, DC
to the IRS on April 13, 2026. Therefore, the effect. This section applies to any 20460–0001; main telephone number:
date determined under paragraph (b) of this partnership taxable year beginning after (703) 305–7090; email address:
section is February 22, 2027, which is 270
November 2, 2015 and before January 1, RDFRNotices@epa.gov.
days after the date everything required to be
submitted was so submitted pursuant to 2018 for which a valid election under SUPPLEMENTARY INFORMATION:
paragraph (b)(2) of this section plus the § 301.9100–22T is in effect.
I. General Information
additional 45-day extension of the Kirsten Wielobob,
modification period agreed to by PR and the A. Does this action apply to me?
IRS. Because February 22, 2027 is later than Deputy Commissioner for Services and
the date under paragraph (a)(1) of this section Enforcement. You may be potentially affected by
(December 31, 2025, as extended under [FR Doc. 2017–27071 Filed 12–15–17; 11:15 am] this action if you are an agricultural
paragraph (d) of this section) and the date BILLING CODE 4830–01–P producer, food manufacturer, or
under paragraph (a)(3) of this section (June pesticide manufacturer. The following
12, 2026, which is 330 days from the date the list of North American Industrial
NOPPA was mailed plus the 45-day Classification System (NAICS) codes is
extension under section 6225(c)(7)), February ENVIRONMENTAL PROTECTION
AGENCY not intended to be exhaustive, but rather
22, 2027 is the date on which the period for
provides a guide to help readers
making partnership adjustments expires
under section 6235. 40 CFR Part 180 determine whether this document
Example 5. The facts are the same as in applies to them. Potentially affected
[EPA–HQ–OPP–2016–0639; FRL–9971–11] entities may include:
Example 4 of this paragraph (e), except that
PR does not request an extension of the • Crop production (NAICS code 111).
modification period. On February 1, 2026, PR
Receipt of a Pesticide Petition Filed for • Animal production (NAICS code
submits a request for modification and PR, Residues of Aluminum tris (O- 112).
and the IRS agree in writing to waive the ethylphosphonate) In or On Fruit, • Food manufacturing (NAICS code
prohibition on mailing an FPA pursuant to Citrus, Group 10–10 311).
§ 301.6231–1(b)(2). Pursuant to § 301.6225– • Pesticide manufacturing (NAICS
2(c)(3)(iii), the modification period expires as AGENCY: Environmental Protection
Agency (EPA). code 32532).
of February 1, 2026, rather than February 27,
2026. Accordingly, under paragraph (b)(2) of ACTION: Notification of filing of petition B. What should I consider as I prepare
this section, the date on which everything and request for comment. my comments for EPA?
required to be submitted pursuant to section
6225(c) is so submitted is February 1, 2026, SUMMARY: This document announces the 1. Submitting CBI. Do not submit this
and the 270-day period described in Agency’s receipt of an initial filing of a information to EPA through
paragraph (b)(1) of this section begins to run pesticide petition requesting the regulations.gov or email. Clearly mark
on that date. Therefore, the date for purposes the part or all of the information that
modification of regulations for residues
of paragraph (a)(2) of this section is October you claim to be CBI. For CBI
29, 2026, which is 270 days after February 1, of pesticide chemicals in or on various
commodities. information in a disk or CD–ROM that
2026, the date on which everything required you mail to EPA, mark the outside of the
to be submitted under section 6225(c) is so DATES: Comments must be received on
submitted. Because October 29, 2026 is later
disk or CD–ROM as CBI and then
or before January 18, 2018.
than the date under paragraph (a)(1) of this identify electronically within the disk or
ADDRESSES: Submit your comments, CD–ROM the specific information that
section (December 31, 2025, as extended
under paragraph (d) of this section) and the identified by docket identification (ID) is claimed as CBI. In addition to one
date under paragraph (a)(3) of this section number EPA–HQ–OPP–2016–0639, by complete version of the comment that
(April 28, 2026), October 29, 2026 is the date one of the following methods: includes information claimed as CBI, a
on which the period for making partnership • Federal eRulemaking Portal: http:// copy of the comment that does not
adjustments expires under section 6235. www.regulations.gov. Follow the online contain the information claimed as CBI
Example 6. The facts are the same as in instructions for submitting comments. must be submitted for inclusion in the
Example 5 of this paragraph (e), except PR Do not submit electronically any
completes its submission of information to
public docket. Information so marked
information you consider to be will not be disclosed except in
support a request for modification on July 1,
Confidential Business Information (CBI) accordance with procedures set forth in
2025, but does not execute a waiver pursuant
to § 301.6231–1(b)(2). Therefore, pursuant to or other information whose disclosure is 40 CFR part 2.
paragraph (b)(2) of this section, February 26, restricted by statute. 2. Tips for preparing your comments.
2026, the date the modification period • Mail: OPP Docket, Environmental When preparing and submitting your
expires, is the date on which everything Protection Agency Docket Center (EPA/ comments, see the commenting tips at
required to be submitted pursuant to section DC), (28221T), 1200 Pennsylvania Ave. http://www.epa.gov/dockets/
6225(c) is so submitted. As a result, the 270- NW, Washington, DC 20460–0001. comments.html.
day period described in paragraph (b)(1) of • Hand Delivery: To make special 3. Environmental justice. EPA seeks to
this section expires on November 23, 2026. arrangements for hand delivery or
Because November 23, 2026 is later than the achieve environmental justice, the fair
delivery of boxed information, please treatment and meaningful involvement
date under paragraph (a)(1) of this section
(December 31, 2025, as extended under follow the instructions at http:// of any group, including minority and/or
paragraph (d) of this section) and the date www.epa.gov/dockets/contacts.html. low-income populations, in the
under paragraph (a)(3) of this section (April Additional instructions on development, implementation, and
sradovich on DSK3GMQ082PROD with PROPOSALS
28, 2026), November 23, 2026 is the date on commenting or visiting the docket, enforcement of environmental laws,
which the period for making partnership along with more information about regulations, and policies. To help
adjustments expires under section 6235. dockets generally, is available at http:// address potential environmental justice
(f) Applicability date—(1) In general. www.epa.gov/dockets. issues, the Agency seeks information on
Except as provided in paragraph (f)(2) of FOR FURTHER INFORMATION CONTACT: any groups or segments of the
this section, this section applies to Michael L. Goodis, Registration Division population who, as a result of their
partnership taxable years beginning (7505P), Office of Pesticide Programs, location, cultural practices, or other
after December 31, 2017. Environmental Protection Agency, 1200 factors, may have atypical or
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Document Created: 2017-12-19 01:31:07
Document Modified: 2017-12-19 01:31:07
| 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 | Proposed Rules | |
| Action | Notice of proposed rulemaking. | |
| Dates | Written or electronic comments and requests for a public hearing must be received by March 19, 2018. | |
| Contact | Concerning the proposed regulations under sections 6225, 6231, and 6234 of the Internal Revenue Code, Joy E. Gerdy-Zogby of the Office of Associate Chief Counsel (Procedure and Administration), (202) 317-6834; concerning the proposed regulations under sections 6227, 6232, and 6233, Steven L. Karon of the Office of Associate Chief Counsel (Procedure and Administration), (202) 317-6834; concerning the proposed regulations under sections 6226 and 6235, Jennifer M. Black of the Office of Associate Chief Counsel (Procedure and Administration), (202) 317-6834; concerning the submission of comments and a request for a public hearing, Regina Johnson, (202) 317- 6901 (not toll-free numbers). | |
| FR Citation | 82 FR 60144 | |
| RIN Number | 1545-BO03 and 1545-BO04 | |
| CFR Associated | Employment Taxes; Estate Taxes; Excise Taxes; Gift Taxes; Income Taxes; Penalties and Reporting and Recordkeeping Requirements |
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