2023 Indiana Code › Title 6. Taxation › Article 3. State Income Taxes › Chapter 4.5. Partnership Audit and Administrative Adjustments › 6-3-4.5-9. Partnership Level Audit; Final Federal Adjustments; Election by an Audited Partnership; Consent to Indiana Law

Note: This version of section amended by P.L.1-2023, SEC.16, effective 1-1-2022. See also following version of this section amended by P.L.201-2023, SEC.98, effective 1-1-2024.
Sec. 9. (a) Partnerships and partners shall report final federal adjustments arising from a partnership level audit or an administrative adjustment request and make payments as required under this section.
(b) Final federal adjustments subject to the requirements of this section, except those subject to a properly made election under subsection (c), shall be reported as follows:
(1) Not later than the applicable deadline, the partnership shall:
(A) file an amended partnership return for the review year and any other taxable year affected by the final federal adjustments with the department as provided in section 8 of this chapter and provide any other information required by the department;
(B) notify each of its direct partners of their distributive share of the final federal adjustments as provided in section 8 of this chapter for all affected taxable years for which the partnership filed an amended partnership return by an amended statement or a report in the form and manner prescribed by the department;
(C) file an amended composite return for direct partners and an amended withholding return for direct partners for the review year and any affected taxable years as otherwise required by IC 6-3-4-12 or IC 6-5.5-2-8 and pay any tax due for the taxable years; and
(D) if the partnership is an electing entity, file an amended return under IC 6-3-2.1 for the review year and any affected taxable year and pay any tax due for the taxable year.
(2) Each direct partner that is subject to tax under IC 6-3, IC 6-3.6, or IC 6-5.5 shall, on or before the applicable deadline:
(A) file an amended return as provided in section 8 of this chapter reporting their distributive share of the adjustments reported to them under subdivision (1)(B) for the taxable year in which affected taxable year attributes would be reported by the direct partner as provided in section 8 of this chapter; and
(B) pay any additional amount of tax due as if final federal partnership adjustments had been properly reported, less any credit for related amounts paid or withheld and remitted on behalf of the direct partner.
(3) Each tiered partner shall treat any final federal partnership adjustments under this section in a manner consistent with the treatment of tiered partners under section 8 of this chapter.
(c) Except as provided in subsection (d), an audited partnership making an election under this subsection shall:
(1) not later than the applicable deadline, file an amended partnership return for the review year and for any other affected taxable year elected by the audited partnership, including information as required by the department, and notify the department that it is making the election under this subsection; and
(2) not later than ninety (90) days after the applicable deadline, pay an amount, determined as follows, in lieu of taxes owed by its direct or indirect partners:
(A) Exclude from final federal adjustments the distributive share of these adjustments reported to a direct exempt partner that is not unrelated business income.
(B) For the total distributive shares of the remaining final federal adjustments reported to direct corporate partners and to direct exempt partners, apportion and allocate such adjustments as provided under IC 6-3-2-2 or IC 6-3-2-2.2 (in the case of the adjusted gross income tax) or IC 6-5.5-4 (in the case of the financial institutions tax), and multiply the resulting amount by the tax rate for the taxable year under IC 6-3-2-1(c), IC 6-3-2-1.5, or IC 6-5.5-2-1, as applicable.
(C) For the total distributive shares of the remaining final federal adjustments reported to nonresident direct partners other than tiered partners or corporate partners, determine the amount of such adjustments which is Indiana source income under IC 6-3-2-2 or IC 6-3-2-2.2, and multiply the resulting amount by the tax rate under IC 6-3-2-1(b), and if applicable IC 6-3.6. If a partnership is unable to determine whether a nonresident is subject to tax under IC 6-3.6, or to determine in what county the nonresident is subject to tax under IC 6-3.6, tax shall also be imposed at the highest rate for which a county imposes a tax under IC 6-3.6 for the taxable year.
(D) For the total distributive shares of the remaining final federal adjustments reported to tiered partners:
(i) determine the amount of any adjustment that is of a type that it would be subject to sourcing in Indiana under IC 6-3-2-2, IC 6-3-2-2.2, or IC 6-5.5-4, as applicable, and determine the portion of this amount that would be sourced to Indiana;
(ii) determine the amount of any adjustment that is of a type that it would not be subject to sourcing to Indiana by a nonresident partner under IC 6-3-2-2, IC 6-3-2-2.2, or IC 6-5.5-4, as applicable;
(iii) determine the portion of the amount determined under item (ii) that can be established, as prescribed by the department by rule under IC 4-22-2, to be properly allocable to nonresident indirect partners or other partners not subject to tax on the adjustments; and
(iv) multiply the sum of the amounts determined in items (i) and (ii) reduced by the amount determined in item (iii) by the highest combined rate for the taxable year under IC 6-3-2-1(b) and IC 6-3.6 for any county, the rate under IC 6-3-2-1(c), or the rate under 6-5.5-2-1 for the taxable year, whichever is highest.
(E) For the total distributive shares of the remaining final federal adjustments reported to resident individual, estate, or trust direct partners, multiply that amount by the tax rate under IC 6-3-2-1(b) and IC 6-3.6. If a partnership does not reasonably ascertain the county of residence for an individual direct partner, the rate under IC 6-3.6 for that partner shall be treated as the highest rate imposed in any county under IC 6-3.6 for the taxable year.
(F) Add an amount equal to any credit reduction under IC 6-3-3, IC 6-3.1, and IC 6-5.5 attributable as a result of final federal adjustments.
(G) Add the amounts determined in clauses (B), (C), (D)(iv), (E), and (F). For purposes of determining interest and penalties, the due date of payment shall be the due date of the partnership's return under IC 6-3-4-10 for the taxable year, determined without regard to any extensions.
(d) Final federal adjustments subject to an election under subsection (c) shall not include:
(1) the distributive share of final federal adjustments that would constitute income derived from a partnership to any direct or indirect partner that is a corporation taxable under IC 6-3-2-1(c), IC 6-3-2-1.5, or IC 6-5.5-2-1 and is considered unitary to the partnership; or
(2) any other circumstances that the department determines would result in avoidance or evasion of any tax otherwise due from one (1) or more partners under IC 6-3 or IC 6-5.5.
(e) No election under subsection (c) may be made for federal audit adjustments received by the department after April 30, 2023.
(f) Notwithstanding IC 6-3-4-11, an audited partnership not otherwise subject to any reporting or payment obligations to Indiana that makes an election under subsection (c) consents to be subject to Indiana law related to reporting, assessment, payment, and collection of Indiana tax calculated under the election.
As added by P.L.159-2021, SEC.18. Amended by P.L.137-2022, SEC.46; P.L.138-2022, SEC.7; P.L.178-2022(ts), SEC.8; P.L.1-2023, SEC.16.