PART III—PROCEDURE
Editorial Notes
Amendments
2018—
§6231. Notice of proceedings and adjustment
(a) In general
The Secretary shall mail to the partnership and the partnership representative—
(1) notice of any administrative proceeding initiated at the partnership level with respect to an adjustment of any partnership-related item for any partnership taxable year, or any partner's distributive share thereof,
(2) notice of any proposed partnership adjustment resulting from such proceeding, and
(3) notice of any final partnership adjustment resulting from such proceeding.
Any notice of a final partnership adjustment shall be sufficient if mailed to the last known address of the partnership representative or the partnership (even if the partnership has terminated its existence). The first sentence shall apply to any proceeding with respect to an administrative adjustment request filed by a partnership under section 6227.
(b) Timing of notices
(1) Notice of proposed partnership adjustment
Any notice of a proposed partnership adjustment shall not be mailed later than the date determined under section 6235 (determined without regard to paragraphs (2) and (3) of subsection (a) thereof).
(2) Notice of final partnership adjustment
(A) In general
Except to the extent that the partnership elects to waive the application of this subparagraph, any notice of a final partnership adjustment shall not be mailed earlier than 270 days after the date on which the notice of the proposed partnership adjustment is mailed.
(B) Statute of limitations on adjustment
For the period of limitations on making adjustments, see section 6235.
(c) Further notices restricted
If the Secretary mails a notice of a final partnership adjustment to any partnership for any partnership taxable year and the partnership files a petition under section 6234 with respect to such notice, in the absence of a showing of fraud, malfeasance, or misrepresentation of a material fact, the Secretary shall not mail another such notice to such partnership with respect to such taxable year.
(d) Authority to rescind notice with partnership consent
The Secretary may, with the consent of the partnership, rescind any notice of a partnership adjustment mailed to such partnership. Any notice so rescinded shall not be treated as a notice of a partnership adjustment for purposes of this subchapter, and the taxpayer shall have no right to bring a proceeding under section 6234 with respect to such notice.
(Added
Editorial Notes
Prior Provisions
A prior section 6231, added
Amendments
2018—Subsec. (a).
Subsec. (a)(1).
Subsecs. (b) to (d).
Statutory Notes and Related Subsidiaries
Effective Date of 2018 Amendment
Amendment by
Effective Date
Section applicable to returns filed for partnership taxable years beginning after Dec. 31, 2017, with certain exceptions, see section 1101(g) of
Special Rule for Certain International Satellite Partnerships
§6232. Assessment, collection, and payment
(a) In general
Any imputed underpayment shall be assessed and collected in the same manner as if it were a tax imposed for the adjustment year by subtitle A, except that—
(1) subchapter B of
(2) in the case of an administrative adjustment request to which section 6227(b)(1) applies, the underpayment shall be paid and may be assessed when the request is filed.
(b) Limitation on assessment
Except as otherwise provided in this subtitle (other than subchapter B of this chapter), no assessment of an imputed underpayment may be made (and no levy or proceeding in any court for the collection of any amount resulting from such adjustment may be made, begun or prosecuted) before—
(1) the close of the 90th day after the day on which a notice of a final partnership adjustment was mailed, and
(2) if a petition is filed under section 6234 with respect to such notice, the decision of the court has become final.
The preceding sentence shall not apply in the case of a specified similar amount (as defined in subsection (f)(2)).
(c) Premature action may be enjoined
Notwithstanding section 7421(a), any action which violates subsection (b) may be enjoined in the proper court, including the Tax Court. The Tax Court shall have no jurisdiction to enjoin any action under this subsection unless a timely petition has been filed under section 6234 and then only in respect of the adjustments that are the subject of such petition.
(d) Exceptions to restrictions on adjustments
(1) Adjustments arising out of math or clerical errors
(A) In general
If the partnership is notified that, on account of a mathematical or clerical error appearing on the partnership return, an adjustment to an item is required, rules similar to the rules of paragraphs (1) and (2) of section 6213(b) shall apply to such adjustment.
(B) Special rule
If a partnership is a partner in another partnership, any adjustment on account of such partnership's failure to comply with the requirements of section 6222(a) with respect to its interest in such other partnership shall be treated as an adjustment referred to in subparagraph (A), except that paragraph (2) of section 6213(b) shall not apply to such adjustment.
(2) Partnership may waive restrictions
The partnership may at any time (whether or not any notice of partnership adjustment has been issued), by a signed notice in writing filed with the Secretary, waive the restrictions provided in subsection (b) on the making of any partnership adjustment.
(e) Limit where no proceeding begun
If no proceeding under section 6234 is begun with respect to any notice of a final partnership adjustment during the 90-day period described in subsection (b), the amount for which the partnership is liable under section 6225 shall not exceed the amount determined in accordance with such notice.
(f) Failure to pay imputed underpayment
(1) In general
If any amount of any imputed underpayment to which section 6225 applies or any specified similar amount (or any interest or penalties with respect to any such amount) has not been paid by the date which is 10 days after the date on which the Secretary provides notice and demand for such payment—
(A) section 6621(a)(2)(B) shall be applied by substituting "5 percentage points" for "3 percentage points" with respect to such amount, and
(B) the Secretary may assess upon each partner of the partnership (determined as of the close of the adjustment year or, if the partnership has ceased to exist as of such time, the former partners of the partnership as determined for purposes of section 6241(7)) a tax equal to such partner's proportionate share of such amount (including any such interest or penalties, determined after application of subparagraph (A)).
(2) Specified similar amount
For purposes of this subsection, the term "specified similar amount" means—
(A) the amount described in subclause (II) of section 6226(b)(4)(A)(ii) (including any failure to satisfy the requirement of subclause (I) of such section which is treated as a failure to pay such amount under section 6651(i)), and
(B) any amount assessed under paragraph (1)(B) upon a partner which is a partnership.
(3) Proportionate share
For purposes of paragraph (1), a partner's proportionate share is such percentage as the Secretary may determine on the basis of such partner's distributive share. The Secretary shall make determinations under the preceding sentence such that the aggregate proportionate shares so determined total 100 percent.
(4) Coordination with partnership liability
The liability of the partnership for any amount with respect to which a partner is made liable under paragraph (1) shall be reduced upon payment by the partner of such amount. Paragraph (1)(B) shall not apply with respect to any amount after the date on which such amount is paid by the partnership.
(5) S corporations
For purposes of this subsection, an S corporation and its shareholders shall be treated in the same manner as a partnership and its partners.
(6) Rules related to assessment and collection
(A) Deficiency procedures not applicable
Subchapter B shall not apply to any assessment or collection under this paragraph.
(B) Limitation on assessment
Except as otherwise provided in this subtitle, no assessment may be made (or proceeding in court begun without assessment) with respect to any partner with respect to an amount under paragraph (1) after the date which is 2 years after the date on which the Secretary provides the notice and demand referred to in paragraph (1) with respect to such amount.
(Added
Editorial Notes
Prior Provisions
A prior section 6232, added
Amendments
2018—Subsec. (a).
Subsec. (b).
Subsec. (d)(1)(A).
Subsec. (e).
Subsec. (f).
Statutory Notes and Related Subsidiaries
Effective Date of 2018 Amendment
Amendment by
Effective Date
Section applicable to returns filed for partnership taxable years beginning after Dec. 31, 2017, with certain exceptions, see section 1101(g) of
§6233. Interest and penalties
(a) Interest and penalties determined from reviewed year
(1) In general
Except to the extent provided in section 6226(c), in the case of a partnership adjustment for a reviewed year—
(A) interest shall be computed under paragraph (2), and
(B) the partnership shall be liable for any penalty, addition to tax, or additional amount as provided in paragraph (3).
(2) Determination of amount of interest
The interest computed under this paragraph with respect to any partnership adjustment is the interest which would be determined under
(3) Penalties
Any penalty, addition to tax, or additional amount shall be determined at the partnership level as if such partnership had been an individual subject to tax under
(b) Interest and penalties with respect to adjustment year return
(1) In general
In the case of any failure to pay an imputed underpayment on the date prescribed therefor, the partnership shall be liable—
(A) for interest as determined under paragraph (2), and
(B) for any penalty, addition to tax, or additional amount as determined under paragraph (3).
(2) Interest
Interest determined under this paragraph is the interest that would be determined by treating the imputed underpayment as an underpayment of tax imposed in the adjustment year.
(3) Penalties
Penalties, additions to tax, or additional amounts determined under this paragraph are the penalties, additions to tax, or additional amounts that would be determined—
(A) by applying section 6651(a)(2) to such failure to pay, and
(B) by treating the imputed underpayment as an underpayment of tax for purposes of part II of subchapter A of
(c) Deposit to suspend interest
For rules allowing deposits to suspend running of interest on potential underpayments, see section 6603.
(Added
Editorial Notes
Prior Provisions
A prior section 6233, added
Amendments
2018—Subsec. (c).
Statutory Notes and Related Subsidiaries
Effective Date of 2018 Amendment
Amendment by
Effective Date
Section applicable to returns filed for partnership taxable years beginning after Dec. 31, 2017, with certain exceptions, see section 1101(g) of
§6234. Judicial review of partnership adjustment
(a) In general
Within 90 days after the date on which a notice of a final partnership adjustment is mailed under section 6231 with respect to any partnership taxable year, the partnership may file a petition for a readjustment for such taxable year with—
(1) the Tax Court,
(2) the district court of the United States for the district in which the partnership's principal place of business is located, or
(3) the Court of Federal Claims.
(b) Jurisdictional requirement for bringing action in district court or Court of Federal Claims
(1) In general
A readjustment petition under this section may be filed in a district court of the United States or the Court of Federal Claims only if the partnership filing the petition deposits with the Secretary, on or before the date the petition is filed, the amount of (as of the date of the filing of the petition) the imputed underpayment, penalties, additions to tax, and additional amounts with respect to such imputed underpayment if the partnership adjustment was made as provided by the notice of final partnership adjustment. The court may by order provide that the jurisdictional requirements of this paragraph are satisfied where there has been a good faith attempt to satisfy such requirement and any shortfall of the amount required to be deposited is timely corrected.
(2) Interest payable
Any amount deposited under paragraph (1), while deposited, shall not be treated as a payment of tax for purposes of this title (other than
(c) Scope of judicial review
A court with which a petition is filed in accordance with this section shall have jurisdiction to determine all partnership-related items for the partnership taxable year to which the notice of final partnership adjustment relates, the proper allocation of such items among the partners, and the applicability of any penalty, addition to tax, or additional amount for which the partnership may be liable under this subchapter.
(d) Determination of court reviewable
Any determination by a court under this section shall have the force and effect of a decision of the Tax Court or a final judgment or decree of the district court or the Court of Federal Claims, as the case may be, and shall be reviewable as such. The date of any such determination shall be treated as being the date of the court's order entering the decision.
(e) Effect of decision dismissing action
If an action brought under this section is dismissed other than by reason of a rescission under section 6231(c),1 the decision of the court dismissing the action shall be considered as its decision that the notice of final partnership adjustment is correct, and an appropriate order shall be entered in the records of the court.
(Added
Editorial Notes
References in Text
Section 6231(c), referred to in subsec. (e), was redesignated section 6231(d) by
Prior Provisions
A prior section 6234, added
Amendments
2018—Subsec. (b)(1).
Subsec. (c).
2015—
Statutory Notes and Related Subsidiaries
Effective Date of 2018 Amendment
Amendment by
Effective Date of 2015 Amendment
Amendment by
Effective Date
Section applicable to returns filed for partnership taxable years beginning after Dec. 31, 2017, with certain exceptions, see section 1101(g) of
1 See References in Text note below.
§6235. Period of limitations on making adjustments
(a) In general
Except as otherwise provided in this section or section 905(c), no adjustment under this subchapter for any partnership taxable year may be made after the later of—
(1) the date which is 3 years after the latest of—
(A) the date on which the partnership return for such taxable year was filed,
(B) the return due date for the taxable year, or
(C) the date on which the partnership filed an administrative adjustment request with respect to such year under section 6227, or
(2) in the case of any modification of an imputed underpayment under section 6225(c), the date that is 270 days (plus the number of days of any extension consented to by the Secretary under paragraph (7) thereof) after the date on which everything required to be submitted to the Secretary pursuant to such section is so submitted, or
(3) in the case of any notice of a proposed partnership adjustment under section 6231(a)(2), the date that is 330 days (plus the number of days of any extension consented to by the Secretary under section 6225(c)(7)) after the date of such notice.
(b) Extension by agreement
The period described in subsection (a) (including an extension period under this subsection) may be extended by an agreement entered into by the Secretary and the partnership before the expiration of such period.
(c) Special rule in case of fraud, etc.
(1) False return
In the case of a false or fraudulent partnership return with intent to evade tax, the adjustment may be made at any time.
(2) Substantial omission of income
If any partnership omits from gross income an amount properly includible therein and such amount is described in subparagraph (A) or (C) of section 6501(e)(1), subsection (a) shall be applied by substituting "6 years" for "3 years".
(3) No return
In the case of a failure by a partnership to file a return for any taxable year, the adjustment may be made at any time.
(4) Return filed by Secretary
For purposes of this section, a return executed by the Secretary under subsection (b) of section 6020 on behalf of the partnership shall not be treated as a return of the partnership.
(5) Information required to be reported
In the case of a partnership that is required to report any information described in section 6501(c)(8), the time for making any adjustment under this subchapter with respect to any tax return, event, or period to which such information relates shall not expire before the date that is determined under section 6501(c)(8).
(6) Listed transactions
If a partnership fails to include on any return or statement any information with respect to a listed transaction as described in section 6501(c)(10), the time for making any adjustment under this subchapter with respect to such transaction shall not expire before the date that is determined under section 6501(c)(10).
(Added
Editorial Notes
Amendments
2018—Subsec. (a).
Subsec. (a)(3).
Subsec. (c)(2).
Subsec. (c)(5), (6).
Subsec. (d).
"(1) for the period during which an action may be brought under section 6234 (and, if a petition is filed under such section with respect to such notice, until the decision of the court becomes final), and
"(2) for 1 year thereafter."
2015—Subsec. (a)(2).
Subsec. (a)(3).
Statutory Notes and Related Subsidiaries
Effective Date of 2018 Amendment
Amendment by
Effective Date of 2015 Amendment
Amendment by
Effective Date
Section applicable to returns filed for partnership taxable years beginning after Dec. 31, 2017, with certain exceptions, see section 1101(g) of