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. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Partnership Audit 
Simplification Act of 2015’’. 
SEC. 2. PARTNERSHIP AUDITS AND ADJUSTMENTS. 
(a) REPEAL
OF
TEFRA PARTNERSHIP
AUDIT 
RULES.—Chapter 63 of the Internal Revenue Code of 
1986 is amended by striking subchapter C (and by strik-
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ing the item relating to such subchapter in the table of 
subchapters for such chapter). 
(b) REPEAL
OF ELECTING LARGE PARTNERSHIP 
RULES.— 
(1) IN GENERAL.—Subchapter K of chapter 1 
of such Code is amended by striking part IV (and 
by striking the item relating to such part in the 
table of parts for such subchapter). 
(2) ASSESSMENT RULES RELATING TO ELECT-
ING
LARGE
PARTNERSHIPS.—Chapter 63 of such 
Code is amended by striking subchapter D (and by 
striking the item relating to such subchapter in the 
table of subchapters for such chapter). 
(c) PARTNERSHIP AUDIT REFORM.— 
(1) IN GENERAL.—Chapter 63 of such Code, as 
amended by the preceding provisions of this section, 
is amended by inserting after subchapter B the fol-
lowing new subchapter: 
‘‘Subchapter C—Treatment of Partnerships 
‘‘PART I—IN GENERAL 
‘‘PART II—PARTNERSHIP ADJUSTMENTS 
‘‘PART III—PROCEDURE 
‘‘PART IV—DEFINITIONS AND SPECIAL RULES 
‘‘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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‘‘SEC. 6221. DETERMINATION AT PARTNERSHIP LEVEL. 
‘‘(a) IN GENERAL.—Items of income, gain, loss, de-
duction, or credit of a partnership for a partnership tax-
able year (and any partner’s distributive share thereof) 
shall be audited, any tax attributable thereto shall be as-
sessed and collected, and the applicability of any penalty, 
addition to tax, or additional amount which relates to an 
adjustment to any such item or share shall be determined, 
at the partnership level pursuant to this subchapter. 
‘‘(b) ELECTION OUT FOR CERTAIN PARTNERSHIPS 
WITH 100 OR FEWER PARTNERS.—This subchapter shall 
not apply with respect to any partnership for any taxable 
year if— 
‘‘(1) the partnership elects the application of 
this subsection for such taxable year, 
‘‘(2) the partnership has 100 or fewer partners 
on the last day of such taxable year, 
‘‘(3) each of the partners of such partnership is 
an individual, a C corporation (other than a real es-
tate investment trust or a regulated investment com-
pany), any foreign entity that would be treated as a 
C corporation were it domestic, or an estate of a de-
ceased partner, 
‘‘(4) the election— 
‘‘(A) is made with a timely filed return for 
such taxable year, and 
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‘‘(B) includes (in the manner prescribed by 
the Secretary) a disclosure of the name and 
taxpayer identification number of each partner 
of such partnership, and 
‘‘(5) the partnership notifies each such partner 
of such election in the manner prescribed by the 
Secretary. 
For purposes of paragraph (4)(B), the Secretary may pro-
vide for alternative identification of any foreign partners. 
‘‘SEC. 6222. PARTNER’S RETURN MUST BE CONSISTENT 
WITH PARTNERSHIP RETURN. 
‘‘(a) IN GENERAL.—A partner of any partnership 
shall, on the partner’s return, treat each item of income, 
gain, loss, deduction, or credit attributable to such part-
nership in a manner which is consistent with the treat-
ment of such income, gain, loss, deduction, or credit on 
the partnership return. 
‘‘(b) UNDERPAYMENT
DUE
TO
INCONSISTENT 
TREATMENT ASSESSED AS MATH ERROR.—Any under-
payment of tax by a partner by reason of failing to comply 
with the requirements of subsection (a) shall be assessed 
and collected in the same manner as if such underpayment 
were on account of a mathematical or clerical error ap-
pearing on the partner’s return. Paragraph (2) of section 
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6213(b) shall not apply to any assessment of an under-
payment referred to in the preceding sentence. 
‘‘(c) ADDITION TO TAX FOR FAILURE TO COMPLY 
WITH SECTION.—For addition to tax in the case of part-
ner’s disregard of the requirements of this section, see 
part II of subchapter A of chapter 68. 
‘‘SEC. 6223. PARTNERS BOUND BY ACTIONS OF PARTNER-
SHIP. 
‘‘(a) DESIGNATION OF PARTNER.—Each partnership 
shall designate (in the manner prescribed by the Sec-
retary) a partner (or other person) as the partnership rep-
resentative who shall have the sole authority to act on be-
half of the partnership under this subchapter. In any case 
in which such a designation is not in effect, the Secretary 
may select any partner as the partnership representative. 
‘‘(b) BINDING EFFECT.—A partnership and all part-
ners of such partnership shall be bound— 
‘‘(1) by actions taken under this subchapter by 
the partnership, and 
‘‘(2) by any decision in a proceeding brought 
under this subchapter. 
‘‘PART II—PARTNERSHIP ADJUSTMENTS 
‘‘Sec. 6225. Partnership adjustment by Secretary. 
‘‘Sec. 6226. Administrative adjustment request by partnership. 
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‘‘SEC. 6225. PARTNERSHIP ADJUSTMENT BY SECRETARY. 
‘‘(a) IN GENERAL.—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— 
‘‘(1) the partnership shall pay any imputed un-
derpayment with respect to such adjustment in the 
adjustment year as provided in section 6232, and 
‘‘(2) any imputed overpayment shall be taken 
into account by the partnership in the adjustment 
year as a reduction in non-separately stated income 
or an increase in non-separately stated loss (which-
ever is appropriate) under section 702(a)(8). 
‘‘(b) DETERMINATION
OF
IMPUTED
UNDERPAY-
MENTS AND OVERPAYMENTS.—For purposes of this sub-
chapter— 
‘‘(1) IN GENERAL.—Except as provided in sub-
section (c), any imputed underpayment or imputed 
overpayment with respect to any partnership adjust-
ment for any reviewed year shall be determined— 
‘‘(A) by netting all adjustments of items of 
income, gain, loss, or deduction and multiplying 
such net amount by the highest rate of tax in 
effect for the reviewed year under section 1 or 
11, 
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‘‘(B) by treating any net increase or de-
crease in loss under subparagraph (A) as a de-
crease or increase, respectively, in income, and 
‘‘(C) by taking into account any adjust-
ments to items of credit as an increase or de-
crease, as the case may be, in the amount de-
termined under subparagraph (A). 
‘‘(2) ADJUSTMENTS TO DISTRIBUTIVE SHARES 
OF PARTNERS NOT NETTED.—In the case of any ad-
justment which reallocates the distributive share of 
any item from one partner to another, such adjust-
ment shall be taken into account under paragraph 
(1) by disregarding— 
‘‘(A) any decrease in any item of income or 
gain, and 
‘‘(B) any increase in any item of deduc-
tion, loss, or credit. 
‘‘(c) 
MODIFICATION
OF
IMPUTED
UNDERPAY-
MENTS.— 
‘‘(1) METHOD
IN
GENERAL.—The Secretary 
shall establish procedures under which the imputed 
underpayment amount may be modified consistent 
with the requirements of this subsection. 
‘‘(2) AMENDED RETURNS OF PARTNERS.—Such 
procedures shall provide that if— 
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‘‘(A) one or more partners file returns for 
the taxable year of the partners which includes 
the end of the reviewed year of the partnership, 
‘‘(B) such returns take into account all ad-
justments under subsection (a) properly allo-
cable to such partners (and for any other tax-
able year with respect to which any tax at-
tribute is affected by reason of such adjust-
ments), and 
‘‘(C) payment of any tax due is included 
with such return, 
then the imputed underpayment amount shall be de-
termined without regard to the portion of the adjust-
ments so taken into account. 
‘‘(3) 
REALLOCATION
OF
DISTRIBUTIVE 
SHARE.—In the case of any adjustment which reallo-
cates the distributive share of any item from one 
partner to another, paragraph (2) shall apply only if 
returns are filed by all partners affected by such ad-
justment. 
‘‘(4) YEAR AND DAY FOR SUBMISSION TO SEC-
RETARY.—Anything required to be submitted pursu-
ant to paragraph (1) shall be submitted to the Sec-
retary not later than the close the 270-day period 
beginning on the date on which the notice of a pro-
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posed partnership adjustment is mailed under sec-
tion 6231 unless such period is extended with the 
consent of the Secretary. 
‘‘(5) DECISION OF SECRETARY.—Any modifica-
tion of the imputed underpayment amount under 
this subsection shall be made only upon approval of 
such modification by the Secretary. 
‘‘(d) DEFINITIONS AND SPECIAL RULE.—For pur-
poses of this subchapter— 
‘‘(1) REVIEWED
YEAR.—The term ‘reviewed 
year’ means the partnership taxable year to which 
the item being adjusted relates. 
‘‘(2) ADJUSTMENT
YEAR.—The term ‘adjust-
ment year’ means the partnership taxable year in 
which— 
‘‘(A) in the case of an adjustment pursu-
ant to the decision of a court in a proceeding 
brought under section 6234, such decision be-
comes final, 
‘‘(B) in the case of an administrative ad-
justment request under section 6226, such ad-
ministrative adjustment request is made, or 
‘‘(C) in any other case, notice of the final 
partnership adjustment is mailed under section 
6231. 
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‘‘SEC. 6226. ADMINISTRATIVE ADJUSTMENT REQUEST BY 
PARTNERSHIP. 
‘‘(a) IN GENERAL.—A partnership may file a request 
for an administrative adjustment in the amount of any 
item of income, gain, loss, deduction, or credit of the part-
nership for any partnership taxable year, but only to the 
extent the adjustment results in an imputed under-
payment. 
‘‘(b) ADJUSTMENT.—Any such adjustment under 
subsection (a) shall be determined and taken into account 
by the partnership under rules similar to the rules of sec-
tion 6225 (other than subsection (c) thereof) for the part-
nership taxable year in which the administrative adjust-
ment request is made. 
‘‘(c) PERIOD OF LIMITATIONS.—A partnership may 
not file such a request— 
‘‘(1) more than 3 years after the later of— 
‘‘(A) the date on which the partnership re-
turn for such year is filed, or 
‘‘(B) the last day for filing the partnership 
return for such year (determined without re-
gard to extensions), and 
‘‘(2) after any notice of an administrative pro-
ceeding with respect to the taxable year is mailed 
under section 6231. 
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