I 

114TH CONGRESS 

1ST SESSION H. R. 2821 

To amend the Internal Revenue Code of 1986 to reform partnership audit 

rules. 

IN THE HOUSE OF REPRESENTATIVES 

JUNE 18, 2015 

Mr. RENACCI (for himself and Mr. KIND) introduced the following bill; which 

was referred to the Committee on Ways and Means 

A BILL 

To amend the Internal Revenue Code of 1986 to reform 

partnership audit rules. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Partnership Audit 

5 Simplification Act of 2015’’. 

6 SEC. 2. PARTNERSHIP AUDITS AND ADJUSTMENTS. 

7 (a) REPEAL OF TEFRA PARTNERSHIP AUDIT

8 RULES.—Chapter 63 of the Internal Revenue Code of 

9 1986 is amended by striking subchapter C (and by strikVerDate Sep 11 2014 21:56 Jun 22, 2015 Jkt 049200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H2821.IH H2821

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1 ing the item relating to such subchapter in the table of 

2 subchapters for such chapter). 

3 (b) REPEAL OF ELECTING LARGE PARTNERSHIP

4 RULES.— 

5 (1) IN GENERAL.—Subchapter K of chapter 1 

6 of such Code is amended by striking part IV (and 

7 by striking the item relating to such part in the 

8 table of parts for such subchapter). 

9 (2) ASSESSMENT RULES RELATING TO ELECT10 ING LARGE PARTNERSHIPS.—Chapter 63 of such 

11 Code is amended by striking subchapter D (and by 

12 striking the item relating to such subchapter in the 

13 table of subchapters for such chapter). 

14 (c) PARTNERSHIP AUDIT REFORM.— 

15 (1) IN GENERAL.—Chapter 63 of such Code, as 

16 amended by the preceding provisions of this section, 

17 is amended by inserting after subchapter B the fol18 lowing new subchapter: 

19 ‘‘Subchapter C—Treatment of Partnerships 

‘‘PART I—IN GENERAL

‘‘PART II—PARTNERSHIP ADJUSTMENTS

‘‘PART III—PROCEDURE

‘‘PART IV—DEFINITIONS AND SPECIAL RULES

20 ‘‘PART I—IN GENERAL 

‘‘Sec. 6221. Determination at partnership level. 

‘‘Sec. 6222. Partner’s return must be consistent with partnership return. 

‘‘Sec. 6223. Designation of partnership representative. 


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1 ‘‘SEC. 6221. DETERMINATION AT PARTNERSHIP LEVEL. 

2 ‘‘(a) IN GENERAL.—Items of income, gain, loss, de3 duction, or credit of a partnership for a partnership tax4 able year (and any partner’s distributive share thereof) 

5 shall be audited, any tax attributable thereto shall be as6 sessed and collected, and the applicability of any penalty, 

7 addition to tax, or additional amount which relates to an 

8 adjustment to any such item or share shall be determined, 

9 at the partnership level pursuant to this subchapter. 

10 ‘‘(b) ELECTION OUT FOR CERTAIN PARTNERSHIPS

11 WITH 100 OR FEWER PARTNERS.—This subchapter shall 

12 not apply with respect to any partnership for any taxable 

13 year if— 

14 ‘‘(1) the partnership elects the application of 

15 this subsection for such taxable year, 

16 ‘‘(2) the partnership has 100 or fewer partners 

17 on the last day of such taxable year, 

18 ‘‘(3) each of the partners of such partnership is 

19 an individual, a C corporation (other than a real es20 tate investment trust or a regulated investment com21 pany), any foreign entity that would be treated as a 

22 C corporation were it domestic, or an estate of a de23 ceased partner, 

24 ‘‘(4) the election— 

25 ‘‘(A) is made with a timely filed return for 

26 such taxable year, and 


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1 ‘‘(B) includes (in the manner prescribed by 

2 the Secretary) a disclosure of the name and 

3 taxpayer identification number of each partner 

4 of such partnership, and 

5 ‘‘(5) the partnership notifies each such partner 

6 of such election in the manner prescribed by the 

7 Secretary. 

8 For purposes of paragraph (4)(B), the Secretary may pro9 vide for alternative identification of any foreign partners. 

10 ‘‘SEC. 6222. PARTNER’S RETURN MUST BE CONSISTENT 

11 WITH PARTNERSHIP RETURN. 

12 ‘‘(a) IN GENERAL.—A partner of any partnership 

13 shall, on the partner’s return, treat each item of income, 

14 gain, loss, deduction, or credit attributable to such part15 nership in a manner which is consistent with the treat16 ment of such income, gain, loss, deduction, or credit on 

17 the partnership return. 

18 ‘‘(b) UNDERPAYMENT DUE TO INCONSISTENT

19 TREATMENT ASSESSED AS MATH ERROR.—Any under20 payment of tax by a partner by reason of failing to comply 

21 with the requirements of subsection (a) shall be assessed 

22 and collected in the same manner as if such underpayment 

23 were on account of a mathematical or clerical error ap24 pearing on the partner’s return. Paragraph (2) of section 


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1 6213(b) shall not apply to any assessment of an under2 payment referred to in the preceding sentence. 

3 ‘‘(c) ADDITION TO TAX FOR FAILURE TO COMPLY

4 WITH SECTION.—For addition to tax in the case of part5 ner’s disregard of the requirements of this section, see 

6 part II of subchapter A of chapter 68. 

7 ‘‘SEC. 6223. PARTNERS BOUND BY ACTIONS OF PARTNER8 SHIP. 

9 ‘‘(a) DESIGNATION OF PARTNER.—Each partnership 

10 shall designate (in the manner prescribed by the Sec11 retary) a partner (or other person) as the partnership rep12 resentative who shall have the sole authority to act on be13 half of the partnership under this subchapter. In any case 

14 in which such a designation is not in effect, the Secretary 

15 may select any partner as the partnership representative. 

16 ‘‘(b) BINDING EFFECT.—A partnership and all part17 ners of such partnership shall be bound— 

18 ‘‘(1) by actions taken under this subchapter by 

19 the partnership, and 

20 ‘‘(2) by any decision in a proceeding brought 

21 under this subchapter. 

22 ‘‘PART II—PARTNERSHIP ADJUSTMENTS 

‘‘Sec. 6225. Partnership adjustment by Secretary. 

‘‘Sec. 6226. Administrative adjustment request by partnership. 


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1 ‘‘SEC. 6225. PARTNERSHIP ADJUSTMENT BY SECRETARY. 

2 ‘‘(a) IN GENERAL.—In the case of any adjustment 

3 by the Secretary in the amount of any item of income, 

4 gain, loss, deduction, or credit of a partnership, or any 

5 partner’s distributive share thereof— 

6 ‘‘(1) the partnership shall pay any imputed un7 derpayment with respect to such adjustment in the 

8 adjustment year as provided in section 6232, and 

9 ‘‘(2) any imputed overpayment shall be taken 

10 into account by the partnership in the adjustment 

11 year as a reduction in non-separately stated income 

12 or an increase in non-separately stated loss (which13 ever is appropriate) under section 702(a)(8). 

14 ‘‘(b) DETERMINATION OF IMPUTED UNDERPAY15 MENTS AND OVERPAYMENTS.—For purposes of this sub16 chapter— 

17 ‘‘(1) IN GENERAL.—Except as provided in sub18 section (c), any imputed underpayment or imputed 

19 overpayment with respect to any partnership adjust20 ment for any reviewed year shall be determined— 

21 ‘‘(A) by netting all adjustments of items of 

22 income, gain, loss, or deduction and multiplying 

23 such net amount by the highest rate of tax in 

24 effect for the reviewed year under section 1 or 

25 11, 


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1 ‘‘(B) by treating any net increase or de2 crease in loss under subparagraph (A) as a de3 crease or increase, respectively, in income, and 

4 ‘‘(C) by taking into account any adjust5 ments to items of credit as an increase or de6 crease, as the case may be, in the amount de7 termined under subparagraph (A). 

8 ‘‘(2) ADJUSTMENTS TO DISTRIBUTIVE SHARES

9 OF PARTNERS NOT NETTED.—In the case of any ad10 justment which reallocates the distributive share of 

11 any item from one partner to another, such adjust12 ment shall be taken into account under paragraph 

13 (1) by disregarding— 

14 ‘‘(A) any decrease in any item of income or 

15 gain, and 

16 ‘‘(B) any increase in any item of deduc17 tion, loss, or credit. 

18 ‘‘(c) MODIFICATION OF IMPUTED UNDERPAY19 MENTS.— 

20 ‘‘(1) METHOD IN GENERAL.—The Secretary 

21 shall establish procedures under which the imputed 

22 underpayment amount may be modified consistent 

23 with the requirements of this subsection. 

24 ‘‘(2) AMENDED RETURNS OF PARTNERS.—Such 

25 procedures shall provide that if— 


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1 ‘‘(A) one or more partners file returns for 

2 the taxable year of the partners which includes 

3 the end of the reviewed year of the partnership, 

4 ‘‘(B) such returns take into account all ad5 justments under subsection (a) properly allo6 cable to such partners (and for any other tax7 able year with respect to which any tax at8 tribute is affected by reason of such adjust9 ments), and 

10 ‘‘(C) payment of any tax due is included 

11 with such return, 

12 then the imputed underpayment amount shall be de13 termined without regard to the portion of the adjust14 ments so taken into account. 

15 ‘‘(3) REALLOCATION OF DISTRIBUTIVE

16 SHARE.—In the case of any adjustment which reallo17 cates the distributive share of any item from one 

18 partner to another, paragraph (2) shall apply only if 

19 returns are filed by all partners affected by such ad20 justment. 

21 ‘‘(4) YEAR AND DAY FOR SUBMISSION TO SEC22 RETARY.—Anything required to be submitted pursu23 ant to paragraph (1) shall be submitted to the Sec24 retary not later than the close the 270-day period 

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1 posed partnership adjustment is mailed under sec2 tion 6231 unless such period is extended with the 

3 consent of the Secretary. 

4 ‘‘(5) DECISION OF SECRETARY.—Any modifica5 tion of the imputed underpayment amount under 

6 this subsection shall be made only upon approval of 

7 such modification by the Secretary. 

8 ‘‘(d) DEFINITIONS AND SPECIAL RULE.—For pur9 poses of this subchapter— 

10 ‘‘(1) REVIEWED YEAR.—The term ‘reviewed 

11 year’ means the partnership taxable year to which 

12 the item being adjusted relates. 

13 ‘‘(2) ADJUSTMENT YEAR.—The term ‘adjust14 ment year’ means the partnership taxable year in 

15 which— 

16 ‘‘(A) in the case of an adjustment pursu17 ant to the decision of a court in a proceeding 

18 brought under section 6234, such decision be19 comes final, 

20 ‘‘(B) in the case of an administrative ad21 justment request under section 6226, such ad22 ministrative adjustment request is made, or 

23 ‘‘(C) in any other case, notice of the final 

24 partnership adjustment is mailed under section 

25 6231. 


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1 ‘‘SEC. 6226. ADMINISTRATIVE ADJUSTMENT REQUEST BY 

2 PARTNERSHIP. 

3 ‘‘(a) IN GENERAL.—A partnership may file a request 

4 for an administrative adjustment in the amount of any 

5 item of income, gain, loss, deduction, or credit of the part6 nership for any partnership taxable year, but only to the 

7 extent the adjustment results in an imputed under8 payment. 

9 ‘‘(b) ADJUSTMENT.—Any such adjustment under 

10 subsection (a) shall be determined and taken into account 

11 by the partnership under rules similar to the rules of sec12 tion 6225 (other than subsection (c) thereof) for the part13 nership taxable year in which the administrative adjust14 ment request is made. 

15 ‘‘(c) PERIOD OF LIMITATIONS.—A partnership may 

16 not file such a request— 

17 ‘‘(1) more than 3 years after the later of— 

18 ‘‘(A) the date on which the partnership re19 turn for such year is filed, or 

20 ‘‘(B) the last day for filing the partnership 

21 return for such year (determined without re22 gard to extensions), and 

23 ‘‘(2) after any notice of an administrative pro24 ceeding with respect to the taxable year is mailed 

25 under section 6231. 


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1 ‘‘PART III—PROCEDURE 

‘‘Sec. 6231. Notice of proceedings and adjustment. 

‘‘Sec. 6232. Assessment, collection, and payment. 

‘‘Sec. 6233. Penalties and interest. 

‘‘Sec. 6234. Judicial review of partnership adjustment. 

‘‘Sec. 6235. Period of limitations on making adjustments. 

2 ‘‘SEC. 6231. NOTICE OF PROCEEDINGS AND ADJUSTMENT. 

3 ‘‘(a) IN GENERAL.—The Secretary shall mail to the 

4 partnership and the partnership representative— 

5 ‘‘(1) notice of any administrative proceeding 

6 initiated at the partnership level with respect to an 

7 adjustment of any item of income, gain, loss, deduc8 tion, or credit of a partnership for a partnership tax9 able year, or any partner’s distributive share thereof, 

10 ‘‘(2) notice of any proposed partnership adjust11 ment resulting from such proceeding, and 

12 ‘‘(3) notice of any final partnership adjustment 

13 resulting from such proceeding. 

14 Any notice of a final partnership adjustment shall not be 

15 mailed earlier than 270 days after the date on which the 

16 notice of the proposed partnership adjustment is mailed. 

17 Such notices shall be sufficient if mailed to the last known 

18 address of the partnership representative or the partner19 ship (even if the partnership has terminated its existence). 

20 The first sentence shall apply to any proceeding with re21 spect to an administrative adjustment request filed by a 

22 partnership under section 6226. 


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1 ‘‘(b) FURTHER NOTICES RESTRICTED.—If the Sec2 retary mails a notice of a final partnership adjustment to 

3 any partnership for any partnership taxable year and the 

4 partnership files a petition under section 6234 with re5 spect to such notice, in the absence of a showing of fraud, 

6 malfeasance, or misrepresentation of a material fact, the 

7 Secretary shall not mail another such notice to such part8 nership with respect to such taxable year. 

9 ‘‘(c) AUTHORITY TO RESCIND NOTICE WITH PART10 NERSHIP CONSENT.—The Secretary may, with the con11 sent of the partnership, rescind any notice of a partner12 ship adjustment mailed to such partnership. Any notice 

13 so rescinded shall not be treated as a notice of a partner14 ship adjustment for purposes of this subchapter, and the 

15 taxpayer shall have no right to bring a proceeding under 

16 section 6234 with respect to such notice. 

17 ‘‘SEC. 6232. ASSESSMENT, COLLECTION, AND PAYMENT. 

18 ‘‘(a) IN GENERAL.—Any imputed underpayment— 

19 ‘‘(1) shall be assessed and collected in the same 

20 manner as if it were a tax imposed for the adjust21 ment year by subtitle A, and 

22 ‘‘(2) shall be paid on or before the partnership 

23 return due date for the adjustment year. 

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1 ciency may be made (and no levy or proceeding in any 

2 court for the collection of any amount resulting from such 

3 adjustment may be made, begun or prosecuted) before— 

4 ‘‘(1) the close of the 90th day after the day on 

5 which a notice of a final partnership adjustment was 

6 mailed, and 

7 ‘‘(2) if a petition is filed under section 6234 

8 with respect to such notice, the decision of the court 

9 has become final. 

10 ‘‘(c) PREMATURE ACTION MAY BE ENJOINED.—Not11 withstanding section 7421(a), any action which violates 

12 subsection (b) may be enjoined in the proper court, includ13 ing the Tax Court. The Tax Court shall have no jurisdic14 tion to enjoin any action under this subsection unless a 

15 timely petition has been filed under section 6234 and then 

16 only in respect of the adjustments that are the subject 

17 of such petition. 

18 ‘‘(d) EXCEPTIONS TO RESTRICTIONS ON ADJUST19 MENTS.— 

20 ‘‘(1) ADJUSTMENTS ARISING OUT OF MATH OR

21 CLERICAL ERRORS.— 

22 ‘‘(A) IN GENERAL.— If the partnership is 

23 notified that, on account of a mathematical or 

24 clerical error appearing on the partnership re25 turn, an adjustment to a item is required, rules 


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1 similar to the rules of paragraphs (1) and (2) 

2 of section 6213(b) shall apply to such adjust3 ment. 

4 ‘‘(B) SPECIAL RULE.—If a partnership is 

5 a partner in another partnership, any adjust6 ment on account of such partnership’s failure to 

7 comply with the requirements of section 

8 6222(a) with respect to its interest in such 

9 other partnership shall be treated as an adjust10 ment referred to in subparagraph (A), except 

11 that paragraph (2) of section 6213(b) shall not 

12 apply to such adjustment. 

13 ‘‘(2) PARTNERSHIP MAY WAIVE RESTRIC14 TIONS.—The partnership may at any time (whether 

15 or not any notice of partnership adjustment has 

16 been issued), by a signed notice in writing filed with 

17 the Secretary, waive the restrictions provided in sub18 section (b) on the making of any partnership adjust19 ment. 

20 ‘‘(e) LIMIT WHERE NO PROCEEDING BEGUN.—If no 

21 proceeding under section 6234 is begun with respect to 

22 any notice of a final partnership adjustment during the 

23 90-day period described in subsection (b) thereof, the 

24 amount for which the partnership is liable under section 


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1 6225 shall not exceed the amount determined in accord2 ance with such notice. 

3 ‘‘SEC. 6233. PENALTIES AND INTEREST. 

4 ‘‘(a) PENALTIES AND INTEREST DETERMINED FROM

5 REVIEWED YEAR.— 

6 ‘‘(1) IN GENERAL.—In the case of an imputed 

7 underpayment with respect to a partnership adjust8 ment for a reviewed year, the partnership— 

9 ‘‘(A) shall pay to the Secretary interest 

10 computed under paragraph (2), and 

11 ‘‘(B) shall be liable for any penalty, addi12 tion to tax, or additional amount as provided in 

13 paragraph (3). 

14 ‘‘(2) DETERMINATION OF AMOUNT OF INTER15 EST.—The interest computed under this paragraph 

16 with respect to any partnership adjustment is the in17 terest which would be determined under chapter 

18 67— 

19 ‘‘(A) on the imputed underpayment deter20 mined with respect to such adjustment, 

21 ‘‘(B) for the period beginning on the day 

22 after the return due date for the reviewed year 

23 and ending on the return due date for the ad24 justment year (or, if earlier, the date payment 

25 of the imputed underpayment is made). 


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1 Proper adjustments in the amount determined under 

2 the preceding sentence shall be made for adjust3 ments required for partnership taxable years after 

4 the reviewed year and before the adjustment year by 

5 reason of such partnership adjustment. 

6 ‘‘(3) PENALTIES.—A partnership shall be liable 

7 for any penalty, addition to tax, or additional 

8 amount for which it would have been liable if such 

9 partnership had been an individual subject to tax 

10 under chapter 1 for the reviewed year and the im11 puted underpayment were an actual underpayment 

12 (or understatement) for such year. 

13 ‘‘(b) INTEREST AND PENALTIES WITH RESPECT TO

14 ADJUSTMENT YEAR RETURN.— 

15 ‘‘(1) IN GENERAL.—In the case of any failure 

16 to pay an imputed underpayment on the date pre17 scribed therefor, the partnership shall be liable— 

18 ‘‘(A) for interest as determined under 

19 paragraph (2), and 

20 ‘‘(B) for any penalty, addition to tax, or 

21 additional amount as determined under para22 graph (3). 

23 ‘‘(2) INTEREST.—Interest determined under 

24 this paragraph is the interest that would be deter25 mined by treating the imputed underpayment as an 


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1 underpayment of tax imposed in the adjustment 

2 year. 

3 ‘‘(3) PENALTIES.—Penalties, additions to tax, 

4 or additional amounts determined under this para5 graph are the penalties, additions to tax, or addi6 tional amounts that would be determined— 

7 ‘‘(A) by applying section 6651(a)(2) to 

8 such failure to pay. 

9 ‘‘(B) by treating the imputed under10 payment as an underpayment of tax for pur11 poses of part II of subchapter A of chapter 68. 

12 ‘‘SEC. 6234. JUDICIAL REVIEW OF PARTNERSHIP ADJUST13 MENT. 

14 ‘‘(a) IN GENERAL.—Within 90 days after the date 

15 on which a notice of a final partnership adjustment is 

16 mailed under section 6231 with respect to any partnership 

17 taxable year, the partnership may file a petition for a re18 adjustment for such taxable year with— 

19 ‘‘(1) the Tax Court, 

20 ‘‘(2) the district court of the United States for 

21 the district in which the partnership’s principal place 

22 of business is located, or 

23 ‘‘(3) the Claims Court. 

24 ‘‘(b) JURISDICTIONAL REQUIREMENT FOR BRINGING

25 ACTION IN DISTRICT COURT OR CLAIMS COURT.— 


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1 ‘‘(1) IN GENERAL.—A readjustment petition 

2 under this section may be filed in a district court of 

3 the United States or the Claims Court only if the 

4 partnership filing the petition deposits with the Sec5 retary, on or before the date the petition is filed, the 

6 amount of the imputed underpayment (as of the 

7 date of the filing of the petition) if the partnership 

8 adjustment was made as provided by the notice of 

9 final partnership adjustment. The court may by 

10 order provide that the jurisdictional requirements of 

11 this paragraph are satisfied where there has been a 

12 good faith attempt to satisfy such requirement and 

13 any shortfall of the amount required to be deposited 

14 is timely corrected. 

15 ‘‘(2) INTEREST PAYABLE.—Any amount depos16 ited under paragraph (1), while deposited, shall not 

17 be treated as a payment of tax for purposes of this 

18 title (other than chapter 67). 

19 ‘‘(c) SCOPE OF JUDICIAL REVIEW.—A court with 

20 which a petition is filed in accordance with this section 

21 shall have jurisdiction to determine all items of income, 

22 gain, loss, deduction, or credit of the partnership for the 

23 partnership taxable year to which the notice of final part24 nership adjustment relates, the proper allocation of such 

25 items among the partners, and the applicability of any 


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1 penalty, addition to tax, or additional amount for which 

2 the partnership may be liable under this subchapter. 

3 ‘‘(d) DETERMINATION OF COURT REVIEWABLE.— 

4 Any determination by a court under this section shall have 

5 the force and effect of a decision of the Tax Court or a 

6 final judgment or decree of the district court or the Claims 

7 Court, as the case may be, and shall be reviewable as such. 

8 The date of any such determination shall be treated as 

9 being the date of the court’s order entering the decision. 

10 ‘‘(e) EFFECT OF DECISION DISMISSING ACTION.—If 

11 an action brought under this section is dismissed other 

12 than by reason of a rescission under section 6231(c), the 

13 decision of the court dismissing the action shall be consid14 ered as its decision that the notice of final partnership 

15 adjustment is correct, and an appropriate order shall be 

16 entered in the records of the court. 

17 ‘‘SEC. 6235. PERIOD OF LIMITATIONS ON MAKING ADJUST18 MENTS. 

19 ‘‘(a) IN GENERAL.—Except as otherwise provided in 

20 this section, no adjustment under this subpart for any 

21 partnership taxable year may be made after the later of— 

22 ‘‘(1) the date which is 3 years after the latest 

23 of— 

24 ‘‘(A) the date on which the partnership re25 turn for such taxable year was filed, 


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1 ‘‘(B) the return due date for the taxable 

2 year, or 

3 ‘‘(C) the date on which the partnership 

4 filed an administrative adjustment request with 

5 respect to such year under section 6226, or 

6 ‘‘(2) in the case of any modification of an im7 puted underpayment under section 6225(c), the date 

8 that is 270 days (plus the number of days of any ex9 tension consented to by the Secretary under para10 graph (4) thereof) after the date on which every11 thing required to be submitted to the Secretary pur12 suant to such section is so submitted. 

13 ‘‘(b) EXTENSION BY AGREEMENT.—The period de14 scribed in subsection (a) (including an extension period 

15 under this subsection) may be extended by an agreement 

16 entered into by the Secretary and the partnership before 

17 the expiration of such period. 

18 ‘‘(c) SPECIAL RULE IN CASE OF FRAUD, ETC.— 

19 ‘‘(1) FALSE RETURN.—In the case of a false or 

20 fraudulent partnership return with intent to evade 

21 tax, the adjustment may be made at any time. 

22 ‘‘(2) SUBSTANTIAL OMISSION OF INCOME.—If 

23 any partnership omits from gross income an amount 

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1 scribed in section 6501(e)(1)(A), subsection (a) shall 

2 be applied by substituting ‘6 years’ for ‘3 years’. 

3 ‘‘(3) NO RETURN.—In the case of a failure by 

4 a partnership to file a return for any taxable year, 

5 the adjustment may be made at any time. 

6 ‘‘(4) RETURN FILED BY SECRETARY.—For pur7 poses of this section, a return executed by the Sec8 retary under subsection (b) of section 6020 on be9 half of the partnership shall not be treated as a re10 turn of the partnership. 

11 ‘‘(d) SUSPENSION WHEN SECRETARY MAILS NOTICE

12 OF ADJUSTMENT.—If notice of a final partnership adjust13 ment with respect to any taxable year is mailed under sec14 tion 6231, the running of the period specified in sub15 section (a) (as modified by the other provisions of this sec16 tion) shall be suspended— 

17 ‘‘(1) for the period during which an action may 

18 be brought under section 6234 (and, if a petition is 

19 filed under such section with respect to such notice, 

20 until the decision of the court becomes final), and 

21 ‘‘(2) for 1 year thereafter. 

22 ‘‘PART IV—DEFINITIONS AND SPECIAL RULES 

‘‘Sec. 6241. Definitions and special rules. 


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1 ‘‘SEC. 6241. DEFINITIONS AND SPECIAL RULES. 

2 ‘‘(a) DEFINITIONS AND SPECIAL RULES.—For pur3 poses of this subchapter— 

4 ‘‘(1) PARTNERSHIP.—The term ‘partnership’ 

5 means any partnership required to file a return 

6 under section 6031(a). 

7 ‘‘(2) PARTNER.—The term ‘partner’ means— 

8 ‘‘(A) a partner in the partnership, and 

9 ‘‘(B) any other person whose income tax li10 ability under subtitle A is determined in whole 

11 or in part by taking into account directly or in12 directly income, gain, deduction, or loss of the 

13 partnership. 

14 ‘‘(b) PARTNERSHIP ADJUSTMENT.—The term ‘part15 nership adjustment’ means any adjustment in the amount 

16 of any item of income, gain, loss, deduction, or credit of 

17 a partnership, or any partner’s distributive share thereof. 

18 ‘‘(c) RETURN DUE DATE.—The term ‘return due 

19 date’ means, with respect to the taxable year, the date 

20 prescribed for filing the partnership return for such tax21 able year (determined without regard to extensions). 

22 ‘‘(d) JOINT AND SEVERAL LIABILITY.— 

23 ‘‘(1) IN GENERAL.—The partnership and any 

24 partner of the partnership shall be jointly and sever25 ally liable for any imputed underpayment and any 


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1 penalty, addition to tax, or additional amount attrib2 utable thereto. 

3 ‘‘(2) PERIOD FOR ASSESSMENT OF PART4 NERS.—The period for assessment of an imputed 

5 underpayment with respect to a partner of a part6 nership shall not expire earlier than 3 years after 

7 the date on which an assessment of such imputed 

8 underpayment was made with respect to the partner9 ship. 

10 ‘‘(3) DETERMINING PARTNERS.—A person shall 

11 be treated as partner of the partnership if such per12 son is a partner of such partnership at any time 

13 during the reviewed or adjustment year. 

14 ‘‘(e) PAYMENTS NONDEDUCTIBLE.—No deduction 

15 shall be allowed under subtitle A for any payment required 

16 to be made by a partnership under this subchapter. 

17 ‘‘(f) SPECIAL RULE FOR DEDUCTIONS, LOSSES, AND

18 CREDITS OF FOREIGN PARTNERSHIPS.—Except to the ex19 tent otherwise provided in regulations, in the case of any 

20 partnership the partnership representative of which re21 sides outside the United States or the books of which are 

22 maintained outside the United States, no deduction, loss, 

23 or credit shall be allowable to any partner unless section 

24 6031 is complied with for the partnership’s taxable year 


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1 in which such deduction, loss, or credit arose at such time 

2 as the Secretary prescribes by regulations. 

3 ‘‘(g) PARTNERSHIPS HAVING PRINCIPAL PLACE OF

4 BUSINESS OUTSIDE UNITED STATES.—For purposes of 

5 sections 6234, a principal place of business located outside 

6 the United States shall be treated as located in the Dis7 trict of Columbia. 

8 ‘‘(h) PARTNERSHIPS IN CASES UNDER TITLE 11 OF

9 UNITED STATES CODE.— 

10 ‘‘(1) SUSPENSION OF PERIOD OF LIMITATIONS

11 ON MAKING ADJUSTMENT, ASSESSMENT, OR COLLEC12 TION.—The running of any period of limitations pro13 vided in this subchapter on making a partnership 

14 adjustment (or provided by section 6501 or 6502 on 

15 the assessment or collection of any imputed under16 payment determined under this subchapter) shall, in 

17 a case under title 11 of the United States Code, be 

18 suspended during the period during which the Sec19 retary is prohibited by reason of such case from 

20 making the adjustment (or assessment or collection) 

21 and— 

22 ‘‘(A) for adjustment or assessment, 60 

23 days thereafter, and 

24 ‘‘(B) for collection, 6 months thereafter. 


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1 A rule similar to the rule of section 6213(f)(2) shall 

2 apply for purposes of section 6232(b). 

3 ‘‘(2) SUSPENSION OF PERIOD OF LIMITATION

4 FOR FILING FOR JUDICIAL REVIEW.—The running 

5 of the period specified in section 6234 shall, in a 

6 case under title 11 of the United States Code, be 

7 suspended during the period during which the part8 nership is prohibited by reason of such case from fil9 ing a petition under section 6234 and for 60 days 

10 thereafter. 

11 ‘‘(i) TREATMENT WHERE PARTNERSHIP CEASES TO

12 EXIST.—If a partnership ceases to exist before a partner13 ship adjustment under this subchapter takes effect, such 

14 adjustment shall be taken into account by the former part15 ners of such partnership under regulations prescribed by 

16 the Secretary.’’. 

17 (2) CLERICAL AMENDMENT.—The table of sub18 chapters for chapter 63 of such Code, as amended 

19 by the preceding provisions of this section, is amend20 ed by inserting after the item relating to subchapter 

21 B the following new items: 

‘‘SUBCHAPTER C. TREATMENT OF PARTNERSHIPS.’’. 

22 (d) CONFORMING AMENDMENTS.— 

23 (1) Section 6031(b) of such Code is amended 

24 by striking the last sentence. 


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1 (2) Section 6422 of such Code is amended by 

2 striking paragraph (12). 

3 (3) Section 6501(n) of such Code is amended 

4 by striking paragraphs (2) and (3) and by striking 

5 ‘‘CROSS REFERENCES’’ and all that follows through 

6 ‘‘For period of limitations’’ and inserting ‘‘CROSS

7 REFERENCE.—For period of limitations’’. 

8 (4) Section 6503(a)(1) of such Code is amended 

9 by striking ‘‘(or section 6229’’ and all that follows 

10 through ‘‘of section 6230(a))’’. 

11 (5) Section 6504 of such Code is amended by 

12 striking paragraph (11). 

13 (6) Section 6511 of such Code is amended by 

14 striking subsection (g). 

15 (7) Section 6512(b)(3) of such Code is amend16 ed by striking the second sentence. 

17 (8) Section 6515 of such Code is amended by 

18 striking paragraph (6). 

19 (9) Section 6601(c) of such Code is amended by 

20 striking the last sentence. 

21 (10) Section 7421(a) of such Code is amended 

22 by striking ‘‘6225(b), 6246(b)’’ and inserting 

23 ‘‘6232(c)’’. 

24 (11) Section 7422 of such Code is amended by 

25 striking subsection (h). 


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1 (12) Section 7459(c) of such Code is amended 

2 by striking ‘‘section 6226’’ and all that follows 

3 through ‘‘or 6252’’ and inserting ‘‘section 6234’’. 

4 (13) Section 7482(b)(1) of such Code is amend5 ed— 

6 (A) in subparagraph (E), by striking ‘‘sec7 tion 6226, 6228, 6247, or 6252’’ and inserting 

8 ‘‘section 6234’’, 

9 (B) by striking subparagraph (F), by strik10 ing ‘‘or’’ at the end of subparagraph (E) and 

11 inserting a period, and by inserting ‘‘or’’ at the 

12 end of subparagraph (D), and 

13 (C) in the last sentence, by striking ‘‘sec14 tion 6226, 6228(a), or 6234(c)’’ and inserting 

15 ‘‘section 6234’’. 

16 (14) Section 7485(b) of such Code is amended 

17 by striking ‘‘section 6226, 6228(a), 6247, or 6252’’ 

18 and inserting ‘‘section 6234’’. 

19 (e) EFFECTIVE DATE.— 

20 (1) IN GENERAL.—Except as provided in para21 graph (2), the amendments made by this section 

22 shall apply to returns filed for partnership taxable 

23 years ending after December 31, 2018. 

24 (2) ELECTION.—A partnership may elect (at 

25 such time and in such form and manner as the SecVerDate Sep 11 2014 21:56 Jun 22, 2015 Jkt 049200 PO 00000 Frm 00027 Fmt 6652 Sfmt 6201 E:\BILLS\H2821.IH H2821

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1 retary of the Treasury may prescribe) for the 

2 amendments made by this section (other than the 

3 election under section 6221(b) of such Code (as 

4 added by this Act)) to apply to any return of the 

5 partnership filed for partnership taxable years end6 ing after the date of the enactment of this Act and 

7 before January 1, 2019. 

Æ 


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