2023 Louisiana Laws › Revised Statutes › Title 47 - Revenue and Taxation › §47:201.2. Reporting adjustments to federal taxable income and federal partnership audit adjustments

RS 47:201.2 - Reporting adjustments to federal taxable income and federal partnership audit adjustments
A. For purposes of this Section, the following words and phrases shall have the following meanings:
(1) "Administrative adjustment request" means an administrative adjustment request filed by a partnership pursuant to Section 6227 of the Internal Revenue Code.
(2) "Audited partnership" means a partnership subject to a partnership level audit resulting in a federal adjustment.
(3) "Corporate partner" means a partner that is subject to corporation income tax pursuant to Part II-A of this Chapter.
(4) "Department" means the Department of Revenue.
(5) "Direct partner" means a partner that holds an interest directly in a partnership or pass-through entity.
(6) "Exempt partner" means a partner that is otherwise exempt from taxation under this Chapter that is subject to tax on unrelated business taxable income.
(7) "Federal adjustment" means a change to an item or amount determined under the Internal Revenue Code that is used by a taxpayer to compute Louisiana income tax due whether that change results from action by the IRS, including a partnership level audit, or the filing of an amended federal return, federal refund claim, or an administrative adjustment request by the taxpayer. A federal adjustment is positive to the extent that it increases state taxable income as determined under this Chapter and is negative to the extent that it decreases state taxable income as determined under this Chapter.
(8) "Federal adjustments report" includes methods or forms required and prescribed by the secretary for use by a taxpayer to report final federal adjustments, including an amended Louisiana income tax return, information return, or a uniform multistate report.
(9) "Federal partnership representative" means the person the partnership designates for the taxable year as the partnership's representative or the person the IRS has appointed to act as the federal partnership representative pursuant to Section 6223(a) of the Internal Revenue Code.
(10) "Final determination date" means the following:
(a) Except as provided in Subparagraph (b) of this Paragraph, if the federal adjustment arises from an IRS audit or other action by the IRS, the final determination date is the first day on which no federal adjustments arising from that audit or other action remain to be finally determined, whether by IRS decision with respect to which all rights of appeal have been waived or exhausted, by agreement, or, if appealed or contested, by a final decision with respect to which all rights of appeal have been waived or exhausted. For agreements required to be signed by the IRS and the taxpayer, the final determination date is the date on which the last party signed the agreement.
(b) For federal adjustments arising from an IRS audit or other action by the IRS, if the taxpayer filed as a member of a federal consolidated return or combined Louisiana return as required by the secretary pursuant to R.S. 47:287.480(3), the final determination date means the first day on which no related federal adjustments arising from that audit remain to be finally determined, as described in Subparagraph (a) of this Paragraph, for the entire group.
(c) If the federal adjustment results from filing an amended federal return, a federal refund claim, or an administrative adjustment request, or if it is a federal adjustment reported on an amended federal return or other similar report filed pursuant to Section 6225(c) of the Internal Revenue Code, the final determination date means the day on which the amended return, refund claim, administrative adjustment request, or other similar report was filed.
(11) "Final federal adjustment" means a federal adjustment after the final determination date for that federal adjustment has passed.
(12) "Indirect partner" means a partner in a partnership or pass-through entity that itself holds an interest directly, or through another indirect partner, in a partnership or pass-through entity.
(13) "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended, and applicable regulations as promulgated by the United States Department of the Treasury.
(14) "IRS" means the Internal Revenue Service of the United States Department of the Treasury.
(15) "Nonresident partner" means an individual, trust, or estate partner that is not a resident partner.
(16) "Partner" means a person that holds an interest directly or indirectly in a partnership or other pass-through entity.
(17) "Partnership" means an entity subject to taxation under Subchapter K of Chapter 1 of Subtitle A of the Internal Revenue Code.
(18) "Partnership level audit" means an examination by the IRS at the partnership level pursuant to Subchapter C of Chapter 63 of Subtitle F of the Internal Revenue Code, as enacted by the Bipartisan Budget Act of 2015, P.L. 114-74, that results in federal adjustments.
(19) "Pass-through entity" means an entity, other than a partnership, that is not subject to tax under this Chapter.
(20) "Reallocation adjustment" means a federal adjustment resulting from a partnership level audit or an administrative adjustment request that changes the shares of one or more items of partnership income, gain, loss, expense, or credit allocated to direct partners. A positive reallocation adjustment means the portion of a reallocation adjustment that would increase federal income for one or more direct partners, and a negative reallocation adjustment means the portion of a reallocation adjustment that would decrease federal income for one or more direct partners pursuant to Section 6225 of the Internal Revenue Code.
(21) "Resident partner" means an individual, trust, or estate partner that is a resident of Louisiana for the relevant tax period. For individuals, the term "resident" has the same meaning as in R.S. 47:31. For trusts and estates, the term "resident" has the same meaning as in R.S. 47:300.10.
(22) "Reviewed year" means the taxable year of a partnership that is subject to a partnership level audit from which federal adjustments arise.
(23) "Secretary" means the secretary of the Department of Revenue.
(24) "Taxpayer" has the same meaning as in R.S. 47:2 and, unless the context clearly indicates otherwise, includes a partnership subject to a partnership level audit or a partnership that has made an administrative adjustment request, as well as a tiered partner of that partnership.
(25) "Tiered partner" means any partner that is a partnership or pass-through entity.
(26) "Unrelated business taxable income" has the same meaning as in Section 512 of the Internal Revenue Code.
B. Reporting adjustments to federal taxable income, general rule.
Except in the case of final federal adjustments that are required to be reported by a partnership and its partners using the procedures in Subsection C of this Section, a taxpayer shall report and pay any Louisiana income tax due with respect to final federal adjustments arising from an audit or other action by the IRS or reported by the taxpayer on a timely filed amended federal income tax return, including a return or other similar report filed pursuant to Section 6225(c)(2) of the Internal Revenue Code, or to a federal claim for refund by filing a federal adjustments report with the secretary for the reviewed year and, if applicable, paying the additional Louisiana income tax owed by the taxpayer no later than one hundred eighty days after the final determination date.
C. Reporting federal adjustments, partnership level audit and administrative adjustment request. Except for negative federal adjustments required under federal law or regulations to be taken into account by the partnership in the partnership return for the adjustment or other year, and the distributive share of adjustments that have been reported as required pursuant to Subsection B of this Section, partnerships and partners shall report final federal adjustments arising from a partnership level audit or an administrative adjustment request and make payments as required pursuant to this Subsection.
(1) State partnership representative.
(a) With respect to an action required or permitted to be taken by a partnership under this Subsection or a proceeding under Chapter 17 or 18 of this Subtitle with respect to that action, the state partnership representative for the reviewed year shall have the sole authority to act on behalf of the partnership, and the partnership's direct partners and indirect partners shall be bound by those actions.
(b) The state partnership representative for the reviewed year is the partnership's federal partnership representative unless the partnership designates in writing another person as its state partnership representative.
(c) The secretary may establish reasonable qualifications for and procedures for designating a person, other than the federal partnership representative, to be the state partnership representative.
(2) Reporting and payment requirements for partnerships subject to a final federal adjustment and their direct partners. Final federal adjustments subject to the requirements of this Subsection, except for those subject to a properly made election under Paragraph (3) of this Subsection, shall be reported as follows:
(a) No later than ninety days after the final determination date, the partnership shall both:
(i) File a completed federal adjustments report, including information as required by the secretary, with the department.
(ii) Notify each of its direct partners of their distributive share of the final federal adjustments including information as required by the secretary.
(b) No later than one hundred eighty days after the final determination date, each direct partner that is taxed under this Chapter shall both:
(i) File a federal adjustments report reporting their distributive share of the adjustments reported to them under Item (a)(ii) of this Paragraph as required under this Chapter.
(ii) Pay any additional amount of tax due as if final federal adjustments had been properly reported, plus any penalty and interest due under Part IV of Chapter 18 of this Subtitle, and less any credit for related amounts paid or withheld and remitted on behalf of the direct partner by the partnership.
(3) Partnership election to pay on behalf of partners. Subject to the limitations in Subparagraph (c) of this Paragraph, an audited partnership making an election under this Paragraph shall:
(a) No later than ninety days after the final determination date, file a completed federal adjustments report, including information as required by the secretary, and notify the department that it is making the election under this Paragraph.
(b) No later than one hundred eighty days after the final determination date, pay an amount, determined as follows, in lieu of taxes owed by its direct and indirect partners:
(i) Exclude from final federal adjustments the distributive share of these adjustments reported to a direct exempt partner not subject to tax under R.S. 47:287.501 with the exception of unrelated business taxable income.
(ii) For the total distributive shares of the remaining final federal adjustments reported to direct corporate partners subject to tax under Part II-A of this Chapter and to direct exempt partners subject to tax under this Chapter on unrelated business taxable income, apportion and allocate the adjustments as provided under Part II-A of this Chapter, and multiply the resulting amount by the highest tax rate under R.S. 47:287.12.
(iii) For the total distributive shares of the remaining final federal adjustments reported to nonresident direct partners subject to tax under Parts III and VI of this Chapter, determine the amount of the adjustments which is Louisiana source income under Subpart F of this Part, and multiply the resulting amount by the highest tax rate under R.S. 47:32 for individuals and R.S. 47:300.1 for trusts and estates.
(iv) For the total distributive shares of the remaining final federal adjustments reported to tiered partners:
(aa) Determine the amount of the adjustments which is of a type that it would be subject to sourcing to the state under Subpart F of this Part and then determine the portion of this amount that would be sourced to the state applying the provisions of this Section.
(bb) Determine the amount of the adjustments which is of a type that it would not be subject to sourcing to Louisiana by a nonresident partner under R.S. 47:290(B).
(cc) Determine the portion of the amount determined in Subitem (bb) of this Item that can be established, under regulation issued by the secretary, to be properly allocable to nonresident indirect partners or other partners not subject to tax on the adjustments; or that can be excluded under procedures for modified reporting and payment method allowed under Paragraph (5) of this Subsection.
(v) Multiply the total of the amounts determined in Subitems (iv)(aa) and (bb) of this Subparagraph reduced by the amount determined in Subitem (iv)(cc) of this Subparagraph by the highest tax rate under R.S. 47:32 for individuals and R.S. 47:300.1 for trusts and estates.
(vi) For the total distributive shares of the remaining final federal adjustments reported to resident direct partners subject to tax under Parts III and VI of this Chapter, multiply that amount by the highest tax rate under R.S. 47:32 for individuals and R.S. 47:300.1 for trusts and estates.
(vii) Add the amounts determined in Items (ii), (iii), (v), and (vi) of this Subparagraph, along with penalty and interest as provided in Part IV of Chapter 18 of this Subtitle.
(c) Final federal adjustments subject to the election in this Paragraph exclude both:
(i) The distributive share of final audit adjustments that under Subpart D of Part I of this Chapter are required to be included in the unitary business income of any direct or indirect corporate partner, provided that the audited partnership can reasonably determine this.
(ii) Any final federal adjustments resulting from an administrative adjustment request.
(d) An audited partnership not otherwise subject to any reporting or payment obligation to Louisiana that makes an election under this Paragraph consents to be subject to Louisiana laws related to reporting, assessment, payment, and collection of Louisiana income tax calculated under this election.
(4) Tiered partners. The direct and indirect partners of an audited partnership that are tiered partners, and all of the partners of those tiered partners that are subject to tax under this Chapter, where applicable, are subject to the reporting and payment requirements of Paragraph (2) of this Subsection and the tiered partners are entitled to make the election provided in Paragraphs (3) and (5) of this Subsection. The tiered partners or their partners shall make required reports and payments no later than ninety days after the time for filing and furnishing statements to tiered partners and their partners as established under Section 6226 of the Internal Revenue Code and the regulations thereunder. The secretary may promulgate rules and regulations to establish procedures and interim time periods for the reports and payments required by tiered partners and their partners and for making the elections under this Subsection.
(5) Modified reporting and payment method. Under procedures adopted by and subject to the approval of the secretary, an audited partnership or tiered partner may enter into an agreement with the department to utilize an alternative reporting and payment method, including applicable time requirements or any other provision of this Subsection, if the audited partnership or tiered partner demonstrates that the requested method will reasonably provide for the reporting and payment of taxes, penalties, and interest due under the provisions of this Subsection, or if the audited partnership or tiered partner can show that their direct partners have agreed to allow a refund of the state income tax to be issued to the entity. Application for approval of an alternative reporting and payment method shall be made by the audited partnership or tiered partner within the time for election as provided in Paragraph (3) or (4) of this Subsection.
(6) Effect of election by an audited partnership or tiered partner and payment of amount due.
(a) An election made pursuant to Paragraph (3) or (5) of this Subsection is irrevocable, unless the secretary in her discretion determines otherwise.
(b) If properly reported and paid by the audited partnership or tiered partner, the amount determined in Subparagraph (3)(b) of this Subsection, or similarly under an optional election under Paragraph (5) of this Subsection, will be treated as paid in lieu of income taxes owed by its direct and indirect partners, to the extent applicable, on the same final federal adjustments. The direct partners or indirect partners may not take any deduction or credit for this amount or claim a refund of the amount in this state. Nothing in this Subparagraph shall preclude a direct resident partner from claiming a credit against taxes paid to this state pursuant to the provisions of this Chapter for any amounts paid by the audited partnership or tiered partner on the resident partner's behalf to another state in accordance with the provisions of R.S. 47:33.
(7) Failure of audited partnership or tiered partner to report or pay. Nothing in this Subsection prevents the department from assessing direct partners or indirect partners for taxes they owe, using the best information available, if a partnership or tiered partner fails to timely make any report or payment required by this Subsection for any reason.
D. De minimis exception. The secretary may promulgate rules and regulations to establish a de minimis amount upon which a taxpayer shall not be required to comply with Subsections B and C of this Section.
E. Prescriptive period for assessments of additional tax, interest, and penalties arising from adjustments to federal taxable income. The department shall assess additional tax, interest, and penalties arising from final federal adjustments arising from an audit by the IRS, including a partnership level audit, or reported by the taxpayer on an amended federal income tax return, or as part of an administrative adjustment request by the following dates:
(1) Timely reported federal adjustments. If a taxpayer files with the department a federal adjustments report or an amended Louisiana income tax return as required within the period specified in Subsections B and C of this Section, the department may assess any amounts, including in-lieu-of amounts, taxes, interest, and penalties arising from those federal adjustments if the department issues a notice of the assessment in accordance with R.S. 47:1561(A)(1) to the taxpayer on or before either of the following dates:
(a) The expiration of the prescriptive period specified in Article VII, Section 16 of the Constitution of Louisiana.
(b) The expiration of the one-year period following the date of filing with the department of the federal adjustments report.
(2) Untimely reported federal adjustments. If the taxpayer fails to file the federal adjustments report within the period specified in Subsection B or C of this Section, as appropriate, or the federal adjustments report filed by the taxpayer omits final federal adjustments or understates the correct amount of tax owed, the department may assess amounts or additional amounts including in-lieu-of amounts, taxes, interest, and penalties arising from the final federal adjustments, if it mails a notice of the assessment in accordance with R.S. 47:1561(A)(1) to the taxpayer by a date that is the latest of:
(a) The expiration of the prescriptive period specified in Article VII, Section 16 of the Constitution of Louisiana.
(b) The expiration of the one-year period following the date the federal adjustments report was filed with the department.
(c) Absent fraud, the expiration of the six-year period following the final determination date.
F. Estimated tax payments during the course of a federal audit. A taxpayer may make estimated payments to the department, following the process prescribed by the department, of the state tax expected to result from a pending IRS audit prior to the due date of the federal adjustments report. The estimated tax payments shall be credited against any tax liability ultimately found to be due to the state attributable to the federal adjustments report and shall limit the accrual of interest pursuant to R.S. 47:1601 on that amount. If the estimated tax payments exceed the final state tax liability attributable to the federal adjustments report, the taxpayer is entitled to a refund, subject to the credit and offset provisions of R.S. 47:1622, provided the taxpayer files a federal adjustments report or claim for refund of an overpayment of tax pursuant to R.S. 47:1621 no later than one year following the final determination date. Interest pursuant to R.S. 47:1624 shall be computed and allowed only on estimated tax payments beginning ninety days after the taxpayer files a federal adjustments report or claim for refund of an overpayment of tax pursuant to R.S. 47:1621.
G. Claims for refund of an overpayment of tax arising from final federal adjustments made by the IRS or by an administrative adjustment request.
(1) Except for negative final federal adjustments required by federal law or regulations to be taken into account by the partnership in the partnership return for the adjustment or other year, a taxpayer may file a claim for a refund of tax arising from final federal adjustments on or before the later of:
(a) The expiration of the last day for filing a claim for refund of tax pursuant to R.S. 47:1623, including any extensions under Subsection H of this Section.
(b) One year from the date a federal adjustments report prescribed in Subsection B or C of this Section, as applicable, was due to the department, including any extensions pursuant to Subsection H of this Section. The federal adjustments report shall serve as the means for the taxpayer, including a partnership and its tiered partners, direct partners, and indirect partners, to report additional tax due, report a claim for refund of tax, and make other adjustments, including to its net operating losses, resulting from adjustments to the taxpayer's federal taxable income.
(2) Any overpayment refunded to the partnership under Subsection C of this Section is in lieu of any state income tax refund that would otherwise be owed to the partners.
H. Scope of adjustments and extensions of time.
(1) Unless otherwise agreed in writing by the taxpayer and the secretary, any adjustments by the department or by the taxpayer made after the expiration of the prescriptive period provided in Article VII, Section 16 of the Constitution of Louisiana are limited to changes to the taxpayer's tax liability arising from federal adjustments.
(2) The time periods provided for in Subsections B and C of this Section may be extended either:
(a) Automatically, upon written notice to the department, by sixty days for an audited partnership or tiered partner that has ten thousand or more direct partners.
(b) By written agreement between the taxpayer and the secretary.
(3) Any extension granted under this Subsection for filing the federal adjustments report extends the last day prescribed by law for assessing any additional tax arising from the adjustments to federal taxable income and the period for filing a claim for refund of taxes pursuant to R.S. 47:1623.
I. Nothing in this Section shall be interpreted or construed to alter or limit the secretary's duty and authority to determine the correct amount of tax pursuant to R.S. 47:1541 and the correct amount reportable pursuant to the Internal Revenue Code for federal taxable income or federal adjusted gross income purposes.
J. The department may provide by rule for similar procedures for audits and investigations conducted pursuant to the secretary's authority under Chapter 18 of this Subtitle.
Acts 2021, No. 287, §1, eff. June 14, 2021; Acts 2022, No. 595, §1.