II 

113TH CONGRESS 

2D SESSION S. 3018 

To amend the Internal Revenue Code of 1986 to reform the rules relating 

to partnership audits and adjustments. 

IN THE SENATE OF THE UNITED STATES 

DECEMBER 16, 2014 

Mr. LEVIN introduced the following bill; which was read twice and referred 

to the Committee on Finance 

A BILL 

To amend the Internal Revenue Code of 1986 to reform 

the rules relating to partnership audits and adjustments. 

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 Auditing 

5 Fairness Act’’. 

6 SEC. 2. PARTNERSHIP AUDITS AND ADJUSTMENTS. 

7 (a) REPEAL OF TEFRA PARTNERSHIP AUDIT

8 RULES.— 


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1 (1) IN GENERAL.—Chapter 63 of the Internal 

2 Revenue Code of 1986 is amended by striking sub3 chapter C. 

4 (2) CLERICAL AMENDMENT.—The table of sub5 chapters for chapter 63 of such Code is amended by 

6 striking the item relating to subchapter C. 

7 (b) REPEAL OF ELECTING LARGE PARTNERSHIP

8 RULES.— 

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

10 of the Internal Revenue Code of 1986 is amended by 

11 striking part IV. 

12 (2) ASSESSMENT RULES RELATING TO ELECT13 ING LARGE PARTNERSHIPS.—Chapter 63 of such 

14 Code is amended by striking subchapter D. 

15 (3) CLERICAL AMENDMENTS.— 

16 (A) The table of parts for subchapter K of 

17 chapter 1 of such Code is amended by striking 

18 the item relating to part IV. 

19 (B) The table of subchapters for chapter 

20 63 of such Code is amended by striking the 

21 item relating to subchapter D. 

22 (4) EFFECTIVE DATE.—The amendments made 

23 by this subsection shall apply to returns filed after 

24 December 31, 2014. 

25 (c) PARTNERSHIP AUDIT REFORM.— 


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1 (1) IN GENERAL.—Chapter 63 of the Internal 

2 Revenue Code of 1986, as amended by this section, 

3 is amended by inserting after subchapter B the fol4 lowing new subchapter: 

5 ‘‘Subchapter C—Treatment of Partnerships 

‘‘PART I—IN GENERAL

‘‘PART II—PARTNERSHIP ADJUSTMENTS

‘‘PART III—PROCEDURE

‘‘PART IV—DEFINITIONS AND SPECIAL RULES

6 ‘‘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. 

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

8 ‘‘(a) IN GENERAL.—Items of income, gain, loss, de9 duction, or credit of a partnership for a partnership tax10 able year (and any partner’s distributive share thereof) 

11 shall be audited, any tax attributable thereto shall be as12 sessed and collected, and the applicability of any penalty, 

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

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

15 at the partnership level pursuant to this subchapter. 

16 ‘‘(b) ELECTION OUT FOR CERTAIN PARTNERSHIPS

17 WITH 100 OR FEWER PARTNERS.—This subchapter shall 

18 not apply with respect to any partnership for any taxable 

19 year if— 


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

2 this subsection for such taxable year, 

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

4 on the last day of such taxable year, 

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

6 an individual, a C corporation (other than a real es7 tate investment trust or a regulated investment com8 pany), any foreign entity that would be treated as a 

9 C corporation were it domestic, or an estate of a de10 ceased partner, 

11 ‘‘(4) the election— 

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

13 such taxable year, and 

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

15 the Secretary) a disclosure of the name and 

16 taxpayer identification number of each partner 

17 of such partnership, and 

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

19 of such election in the manner prescribed by the 

20 Secretary. 

21 For purposes of paragraph (4)(B), the Secretary may pro22 vide for alternative identification of any foreign partners. 


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

2 WITH PARTNERSHIP RETURN. 

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

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

5 gain, loss, deduction, or credit attributable to such part6 nership in a manner which is consistent with the treat7 ment of such income, gain, loss, deduction, or credit on 

8 the partnership return. 

9 ‘‘(b) UNDERPAYMENT DUE TO INCONSISTENT

10 TREATMENT ASSESSED AS MATH ERROR.—Any under11 payment of tax by a partner by reason of failing to comply 

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

13 and collected in the same manner as if such underpayment 

14 were on account of a mathematical or clerical error ap15 pearing on the partner’s return. Paragraph (2) of section 

16 6213(b) shall not apply to any assessment of an under17 payment referred to in the preceding sentence. 

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

19 WITH SECTION.—For addition to tax in the case of part20 ner’s disregard of the requirements of this section, see 

21 part II of subchapter A of chapter 68. 

22 ‘‘SEC. 6223. PARTNERS BOUND BY ACTIONS OF PARTNER23 SHIP. 

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

25 shall designate (in the manner prescribed by the Sec26 retary) a partner (or other person) as the partnership repVerDate Sep 11 2014 23:43 Dec 22, 2014 Jkt 049200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S3018.IS S3018

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1 resentative who shall have the sole authority to act on be2 half of the partnership under this subchapter. In any case 

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

4 may select any partner as the partnership representative. 

5 ‘‘(b) BINDING EFFECT.—A partnership and all part6 ners of such partnership shall be bound— 

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

8 the partnership, and 

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

10 under this subchapter. 

11 ‘‘PART II—PARTNERSHIP ADJUSTMENTS 

‘‘Sec. 6225. Partnership adjustment by Secretary. 

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

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

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

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

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

16 partner’s distributive share thereof— 

17 ‘‘(1) the partnership shall pay any imputed un18 derpayment with respect to such adjustment in the 

19 adjustment year as provided in section 6232, and 

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

21 into account by the partnership in the adjustment 

22 year as a reduction in non-separately stated income 

23 or an increase in non-separately stated loss (which24 ever is appropriate) under section 702(a)(8). 


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1 ‘‘(b) DETERMINATION OF IMPUTED UNDERPAY2 MENTS AND OVERPAYMENTS.—For purposes of this sub3 chapter— 

4 ‘‘(1) IN GENERAL.—Except as provided in sub5 section (c), any imputed underpayment or imputed 

6 overpayment with respect to any partnership adjust7 ment for any reviewed year shall be determined— 

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

9 income, gain, loss, or deduction and multiplying 

10 such net amount by the highest rate of tax in 

11 effect for the reviewed year under section 1 or 

12 11, 

13 ‘‘(B) by treating any net increase or de14 crease in loss under subparagraph (A) as a de15 crease or increase, respectively, in income, and 

16 ‘‘(C) by taking into account any adjust17 ments to items of credit as an increase or de18 crease, as the case may be, in the amount de19 termined under subparagraph (A). 

20 ‘‘(2) ADJUSTMENTS TO DISTRIBUTIVE SHARES

21 OF PARTNERS NOT NETTED.—In the case of any ad22 justment which reallocates the distributive share of 

23 any item from one partner to another, such adjust24 ment shall be taken into account under paragraph 

25 (1) by disregarding— 


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

2 gain, and 

3 ‘‘(B) any increase in any item of deduc4 tion, loss, or credit. 

5 ‘‘(c) MODIFICATION OF IMPUTED UNDERPAY6 MENTS.— 

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

8 shall establish procedures under which the imputed 

9 underpayment amount may be modified consistent 

10 with the requirements of this subsection. 

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

12 procedures shall provide that if— 

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

14 the taxable year of the partners which includes 

15 the end of the reviewed year of the partnership, 

16 ‘‘(B) such returns take into account all ad17 justments under subsection (a) properly allo18 cable to such partners (and for any other tax19 able year with respect to which any tax at20 tribute is affected by reason of such adjust21 ments), and 

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

23 with such return, 


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1 then the imputed underpayment amount shall be de2 termined without regard to the portion of the adjust3 ments so taken into account. 

4 ‘‘(3) REALLOCATION OF DISTRIBUTIVE

5 SHARE.—In the case of any adjustment which reallo6 cates the distributive share of any item from one 

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

8 returns are filed by all partners affected by such ad9 justment. 

10 ‘‘(4) YEAR AND DAY FOR SUBMISSION TO SEC11 RETARY.—Anything required to be submitted pursu12 ant to paragraph (1) shall be submitted to the Sec13 retary not later than the close the 180-day period 

14 beginning on the date on which the notice of a pro15 posed partnership adjustment is mailed under sec16 tion 6231 unless such period is extended with the 

17 consent of the Secretary. 

18 ‘‘(5) DECISION OF SECRETARY.—Any modifica19 tion of the imputed underpayment amount under 

20 this subsection shall be made only upon approval of 

21 such modification by the Secretary. 

22 ‘‘(d) DEFINITIONS AND SPECIAL RULE.—For pur23 poses of this subchapter— 


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

2 year’ means the partnership taxable year to which 

3 the item being adjusted relates. 

4 ‘‘(2) ADJUSTMENT YEAR.—The term ‘adjust5 ment year’ means the partnership taxable year in 

6 which— 

7 ‘‘(A) in the case of an adjustment pursu8 ant to the decision of a court in a proceeding 

9 brought under section 6234, such decision be10 comes final, 

11 ‘‘(B) in the case of an administrative ad12 justment request under section 6226, such ad13 ministrative adjustment request is made, or 

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

15 partnership adjustment is mailed under section 

16 6231. 

17 ‘‘SEC. 6226. ADMINISTRATIVE ADJUSTMENT REQUEST BY 

18 PARTNERSHIP. 

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

20 for an administrative adjustment in the amount of any 

21 item of income, gain, loss, deduction, or credit of the part22 nership for any partnership taxable year, but only to the 

23 extent such adjustment results in an imputed under24 payment. 


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1 ‘‘(b) ADJUSTMENT.—Any adjustment under sub2 section (a) shall be determined and taken into account by 

3 the partnership under rules similar to the rules of section 

4 6225 (other than subsection (c) thereof) for the partner5 ship taxable year in which the administrative adjustment 

6 request is made. 

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

8 not file such a request— 

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

10 ‘‘(A) the date on which the partnership re11 turn for such year is filed, or 

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

13 return for such year (determined without re14 gard to extensions), and 

15 ‘‘(2) after any notice of an administrative pro16 ceeding with respect to the taxable year is mailed 

17 under section 6231. 

18 ‘‘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. 

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

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

21 partnership and the partnership representative— 

22 ‘‘(1) notice of any administrative proceeding 

23 initiated at the partnership level with respect to an 


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1 adjustment of any item of income, gain, loss, deduc2 tion, or credit of a partnership for a partnership tax3 able year, or any partner’s distributive share thereof, 

4 ‘‘(2) notice of any proposed partnership adjust5 ment resulting from such proceeding, and 

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

7 resulting from such proceeding. 

8 Any notice of a final partnership adjustment shall not be 

9 mailed earlier than 180 days after the date on which the 

10 notice of the proposed partnership adjustment is mailed. 

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

12 address of the partnership representative or the partner13 ship (even if the partnership has terminated its existence). 

14 The first sentence shall apply to any proceeding with re15 spect to an administrative adjustment request filed by a 

16 partnership under section 6226. 

17 ‘‘(b) FURTHER NOTICES RESTRICTED.—If the Sec18 retary mails a notice of a final partnership adjustment to 

19 any partnership for any partnership taxable year and the 

20 partnership files a petition under section 6234 with re21 spect to such notice, in the absence of a showing of fraud, 

22 malfeasance, or misrepresentation of a material fact, the 

23 Secretary shall not mail another such notice to such part24 nership with respect to such taxable year. 


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1 ‘‘(c) AUTHORITY TO RESCIND NOTICE WITH PART2 NERSHIP CONSENT.—The Secretary may, with the con3 sent of the partnership, rescind any notice of a partner4 ship adjustment mailed to such partnership. Any notice 

5 so rescinded shall not be treated as a notice of a partner6 ship adjustment for purposes of this subchapter, and the 

7 taxpayer shall have no right to bring a proceeding under 

8 section 6234 with respect to such notice. 

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

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

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

12 manner as if it were a tax imposed for the adjust13 ment year by subtitle A, and 

14 ‘‘(2) shall be paid on or before the return due 

15 date for the adjustment year. 

16 ‘‘(b) LIMITATION ON ASSESSMENT.—Except as oth17 erwise provided in this chapter, no assessment of a defi18 ciency may be made (and no levy or proceeding in any 

19 court for the collection of any amount resulting from such 

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

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

22 which a notice of a final partnership adjustment was 

23 mailed, and 


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

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

3 has become final. 

4 ‘‘(c) PREMATURE ACTION MAY BE ENJOINED.—Not5 withstanding section 7421(a), any action which violates 

6 subsection (b) may be enjoined in the proper court, includ7 ing the Tax Court. The Tax Court shall have no jurisdic8 tion to enjoin any action under this subsection unless a 

9 timely petition has been filed under section 6234 and then 

10 only in respect of the adjustments that are the subject 

11 of such petition. 

12 ‘‘(d) EXCEPTIONS TO RESTRICTIONS ON ADJUST13 MENTS.— 

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

15 CLERICAL ERRORS.— 

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

17 notified that, on account of a mathematical or 

18 clerical error appearing on the partnership re19 turn, an adjustment to a partnership item is re20 quired, rules similar to the rules of paragraphs 

21 (1) and (2) of section 6213(b) shall apply to 

22 such adjustment. 

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

24 a partner in another partnership, any adjust25 ment on account of such partnership’s failure to 


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1 comply with the requirements of section 

2 6222(a) with respect to its interest in such 

3 other partnership shall be treated as an adjust4 ment referred to in subparagraph (A), except 

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

6 apply to such adjustment. 

7 ‘‘(2) PARTNERSHIP MAY WAIVE RESTRIC8 TIONS.—The partnership may at any time (whether 

9 or not any notice of partnership adjustment has 

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

11 the Secretary, waive the restrictions provided in sub12 section (b) on the making of any partnership adjust13 ment. 

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

15 proceeding under section 6234 is begun with respect to 

16 any notice of a final partnership adjustment during the 

17 90-day period described in subsection (b) thereof, the 

18 amount for which the partnership is liable under section 

19 6225 shall not exceed the amount determined in accord20 ance with such notice. 

21 ‘‘SEC. 6233. PENALTIES AND INTEREST. 

22 ‘‘(a) PENALTIES AND INTEREST DETERMINED FROM

23 REVIEWED YEAR.— 


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

2 underpayment with respect to a partnership adjust3 ment for a reviewed year, the partnership— 

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

5 computed under paragraph (2), and 

6 ‘‘(B) shall be liable for any penalty, addi7 tion to tax, or additional amount as provided in 

8 paragraph (3). 

9 ‘‘(2) DETERMINATION OF AMOUNT OF INTER10 EST.—The interest computed under this paragraph 

11 with respect to any partnership adjustment is the in12 terest which would be determined under chapter 

13 67— 

14 ‘‘(A) on the imputed underpayment deter15 mined with respect to such adjustment, and 

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

17 after the return due date for the reviewed year 

18 and ending on the return due date for the ad19 justment year (or, if earlier, the date payment 

20 of the imputed underpayment is made). 

21 Proper adjustments in the amount determined under 

22 the preceding sentence shall be made for adjust23 ments required for partnership taxable years after 

24 the reviewed year and before the adjustment year by 

25 reason of such partnership adjustment. 


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

2 for any penalty, addition to tax, or additional 

3 amount for which it would have been liable if such 

4 partnership had been an individual subject to tax 

5 under chapter 1 for the reviewed year and the im6 puted underpayment were an actual underpayment 

7 (or understatement) for such year. 

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

9 ADJUSTMENT YEAR RETURN.— 

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

11 to pay an imputed underpayment on the date pre12 scribed therefor, the partnership shall be liable— 

13 ‘‘(A) for interest as determined under 

14 paragraph (2), and 

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

16 additional amount as determined under para17 graph (3). 

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

19 this paragraph is the interest that would be deter20 mined by treating the imputed underpayment as an 

21 underpayment of tax imposed in the adjustment 

22 year. 

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

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1 graph are the penalties, additions to tax, or addi2 tional amounts that would be determined— 

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

4 such failure to pay, and 

5 ‘‘(B) by treating the imputed under6 payment as an underpayment of tax for pur7 poses of part II of subchapter A of chapter 68. 

8 ‘‘SEC. 6234. JUDICIAL REVIEW OF PARTNERSHIP ADJUST9 MENT. 

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

11 on which a notice of a final partnership adjustment is 

12 mailed under section 6231 with respect to any partnership 

13 taxable year, the partnership may file a petition for a re14 adjustment for such taxable year with— 

15 ‘‘(1) the Tax Court, 

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

17 the district in which the partnership’s principal place 

18 of business is located, or 

19 ‘‘(3) the Claims Court. 

20 ‘‘(b) JURISDICTIONAL REQUIREMENT FOR BRINGING

21 ACTION IN DISTRICT COURT OR CLAIMS COURT.— 

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

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

24 the United States or the Claims Court only if the 

25 partnership filing the petition deposits with the SecVerDate Sep 11 2014 23:43 Dec 22, 2014 Jkt 049200 PO 00000 Frm 00018 Fmt 6652 Sfmt 6201 E:\BILLS\S3018.IS S3018

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1 retary, on or before the date the petition is filed, the 

2 amount of the imputed underpayment (as of the 

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

4 adjustment was made as provided by the notice of 

5 final partnership adjustment. The court may by 

6 order provide that the jurisdictional requirements of 

7 this paragraph are satisfied where there has been a 

8 good faith attempt to satisfy such requirement and 

9 any shortfall of the amount required to be deposited 

10 is timely corrected. 

11 ‘‘(2) INTEREST PAYABLE.—Any amount depos12 ited under paragraph (1), while deposited, shall not 

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

14 title (other than chapter 67). 

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

16 which a petition is filed in accordance with this section 

17 shall have jurisdiction to determine all items of income, 

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

19 partnership taxable year to which the notice of final part20 nership adjustment relates, the proper allocation of such 

21 items among the partners, and the applicability of any 

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

23 the partnership may be liable under this subchapter. 

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

25 Any determination by a court under this section shall have 


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

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

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

4 The date of any such determination shall be treated as 

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

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

7 an action brought under this section is dismissed other 

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

9 decision of the court dismissing the action shall be consid10 ered as its decision that the notice of final partnership 

11 adjustment is correct, and an appropriate order shall be 

12 entered in the records of the court. 

13 ‘‘SEC. 6235. PERIOD OF LIMITATIONS ON MAKING ADJUST14 MENTS. 

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

16 this section, no adjustment under this subpart for any 

17 partnership taxable year may be made after the date 

18 which is 3 years after the latest of— 

19 ‘‘(1) the date on which the partnership return 

20 for such taxable year was filed, 

21 ‘‘(2) the return due date for the taxable year, 

22 or 

23 ‘‘(3) the date on which the partnership filed an 

24 administrative adjustment request with respect to 

25 such year under section 6226. 


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1 ‘‘(b) EXTENSION BY AGREEMENT.—The period de2 scribed in subsection (a) (including an extension period 

3 under this subsection) may be extended by an agreement 

4 entered into by the Secretary and the partnership before 

5 the expiration of such period. 

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

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

8 fraudulent partnership return with intent to evade 

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

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

11 any partnership omits from gross income an amount 

12 properly includible therein and such amount is de13 scribed in section 6501(e)(1)(A), subsection (a) shall 

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

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

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

17 the adjustment may be made at any time. 

18 ‘‘(4) RETURN FILED BY SECRETARY.—For pur19 poses of this section, a return executed by the Sec20 retary under subsection (b) of section 6020 on be21 half of the partnership shall not be treated as a re22 turn of the partnership. 

23 ‘‘(d) SUSPENSION WHEN SECRETARY MAILS NOTICE

24 OF ADJUSTMENT.—If notice of a final partnership adjust25 ment with respect to any taxable year is mailed under secVerDate Sep 11 2014 23:43 Dec 22, 2014 Jkt 049200 PO 00000 Frm 00021 Fmt 6652 Sfmt 6201 E:\BILLS\S3018.IS S3018

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1 tion 6231, the running of the period specified in sub2 section (a) (as modified by the other provisions of this sec3 tion) shall be suspended— 

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

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

6 filed under such section with respect to such notice, 

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

8 ‘‘(2) for 1 year thereafter. 

9 ‘‘PART IV—DEFINITIONS AND SPECIAL RULES 

‘‘Sec. 6241. Definitions and special rules. 

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

11 ‘‘(a) DEFINITIONS AND SPECIAL RULES.—For pur12 poses of this subchapter— 

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

14 means any partnership required to file a return 

15 under section 6031(a). 

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

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

18 ‘‘(B) any other person whose income tax li19 ability under subtitle A is determined in whole 

20 or in part by taking into account directly or in21 directly income, gain, deduction, or loss of the 

22 partnership. 

23 ‘‘(b) PARTNERSHIP ADJUSTMENT.—The term ‘part24 nership adjustment’ means any adjustment in the amount 


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

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

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

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

5 prescribed for filing the partnership return for such tax6 able year (determined without regard to extensions). 

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

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

9 partner of the partnership shall be jointly and sever10 ally liable for any imputed underpayment and any 

11 penalty, addition to tax, or additional amount attrib12 utable thereto. 

13 ‘‘(2) PERIOD FOR ASSESSMENT OF PART14 NERS.—The period for assessment of an imputed 

15 underpayment with respect to a partner of a part16 nership shall not expire earlier than 3 years after 

17 the date on which an assessment of such imputed 

18 underpayment was made with respect to the partner19 ship. 

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

21 be treated as partner of the partnership if such per22 son is a partner of such partnership at any time 

23 during the reviewed or adjustment year. 


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

2 shall be allowed under subtitle A for any payment required 

3 to be made by a partnership under this subchapter. 

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

5 CREDITS OF FOREIGN PARTNERSHIPS.—Except to the ex6 tent otherwise provided in regulations, in the case of any 

7 partnership the partnership representative of which re8 sides outside the United States or the books of which are 

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

10 or credit shall be allowable to any partner unless section 

11 6031 is complied with for the partnership’s taxable year 

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

13 as the Secretary prescribes by regulations. 

14 ‘‘(g) PARTNERSHIPS HAVING PRINCIPAL PLACE OF

15 BUSINESS OUTSIDE UNITED STATES.—For purposes of 

16 sections 6234, a principal place of business located outside 

17 the United States shall be treated as located in the Dis18 trict of Columbia. 

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

20 UNITED STATES CODE.— 

21 ‘‘(1) SUSPENSION OF PERIOD OF LIMITATIONS

22 ON MAKING ADJUSTMENT, ASSESSMENT, OR COLLEC23 TION.—The running of any period of limitations pro24 vided in this subchapter on making a partnership 

25 adjustment (or provided by section 6501 or 6502 on 


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1 the assessment or collection of any imputed under2 payment determined under this subchapter) shall, in 

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

4 suspended during the period during which the Sec5 retary is prohibited by reason of such case from 

6 making the adjustment (or assessment or collection) 

7 and— 

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

9 days thereafter, and 

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

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

12 apply for purposes of section 6232(b). 

13 ‘‘(2) SUSPENSION OF PERIOD OF LIMITATION

14 FOR FILING FOR JUDICIAL REVIEW.—The running 

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

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

17 suspended during the period during which the part18 nership is prohibited by reason of such case from fil19 ing a petition under section 6234 and for 60 days 

20 thereafter.’’. 

21 (2) CLERICAL AMENDMENT.—The table of sub22 chapters for chapter 63 of such Code is amended by 

23 inserting after the item relating to subchapter B the 

24 following new item: 

‘‘SUBCHAPTER C. TREATMENT OF PARTNERSHIPS’’. 

25 (d) CONFORMING AMENDMENTS.— 


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1 (1) Section 6422 of the Internal Revenue Code 

2 of 1986 is amended by striking paragraph (12). 

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

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

5 and 

6 (B) by striking ‘‘CROSS REFERENCES’’ and 

7 all that follows through ‘‘For period of limita8 tions’’ and inserting ‘‘CROSS REFERENCE.— 

9 For period of limitations’’. 

10 (3) Section 6503(a)(1) of such Code is amended 

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

12 through ‘‘of section 6230(a))’’. 

13 (4) Section 6504 of such Code is amended by 

14 striking paragraph (11). 

15 (5) Section 6511 of such Code is amended by 

16 striking subsection (g). 

17 (6) Section 6512(b)(3) of such Code is amend18 ed by striking the second sentence. 

19 (7) Section 6515 of such Code is amended by 

20 striking paragraph (6). 

21 (8) Section 6601(c) of such Code is amended by 

22 striking the last sentence. 

23 (9) Section 7421(a) of such Code is amended 

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

25 ‘‘6232(c)’’. 


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1 (10) Section 7422 of such Code is amended by 

2 striking subsection (h). 

3 (11) Section 7459(c) of such Code is amended 

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

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

6 (12) Section 7482(b)(1) of such Code is amend7 ed— 

8 (A) by striking ‘‘section 6226, 6228, 6247, 

9 or 6252’’ in subparagraph (E) and inserting 

10 ‘‘section 6234’’, 

11 (B) by striking subparagraph (F), by strik12 ing ‘‘or’’ at the end of subparagraph (E) and 

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

14 end of subparagraph (D), and 

15 (C) by striking ‘‘section 6226, 6228(a), or 

16 6234(c)’’ in the last sentence and inserting 

17 ‘‘section 6234’’. 

18 (13) Section 7485(b) of such Code is amended 

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

20 and inserting ‘‘section 6234’’. 

21 (e) EFFECTIVE DATE.—Except as provided in sub22 section (b)(4), the amendments made by this section shall 

23 apply to returns filed for partnership taxable years ending 

24 after December 31, 2014, except that a partnership may 

25 elect (at such time and in such form and manner as the 


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1 Secretary of the Treasury may prescribe) for such amend2 ments to apply to any return of the partnership filed for 

3 partnership taxable years ending after the date of the en4 actment of this Act and before January 1, 2015. 

Æ 


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