26 CFR § 301.6226-1 - Election for an alternative to the payment of the imputed underpayment.

§ 301.6226-1 Election for an alternative to the payment of the imputed underpayment.

(a)In general. A partnership may elect under this section an alternative to the payment by the partnership of an imputed underpayment determined under section 6225. In addition, a partnership making a valid election under paragraph (c) of this section is no longer liable for the imputed underpayment (as defined in § 301.6241-1(a)(3)) to which the election applies. If a notice of final partnership adjustment (FPA) mailed under section 6231 includes more than one imputed underpayment (as described in § 301.6225-1(g)), a partnership may make an election under this section with respect to one or more imputed underpayments included in the FPA.

(b)Effect of election -

(1)Reviewed year partners. If a partnership makes a valid election under this section with respect to any imputed underpayment, the reviewed year partners (as defined in § 301.6241-1(a)(9)) must take into account their share of the partnership adjustments (as defined in § 301.6241-1(a)(6)) that are associated with that imputed underpayment and are liable for any tax, penalties, additions to tax, additional amounts, and interest as described in § 301.6226-3. See § 301.6226-2(f) regarding the determination of each reviewed year partner's share of the partnership adjustments, including the effect of any modification approved by the Internal Revenue Service (IRS) under § 301.6225-2.

(2)Partnership. A partnership making a valid election under this section is not liable for the imputed underpayment to which the election applies (and no assessment of tax, levy, or proceeding in any court for the collection of such imputed underpayment may be made against such partnership). Any adjustments that do not result in an imputed underpayment described in § 301.6225-1(f) that are associated with an imputed underpayment (as described in § 301.6225-1(g)) for which an election under this section is made are not taken into account by the partnership in the adjustment year (as defined in § 301.6241-1(a)(1)) and instead each reviewed year partners' share of the adjustments determined in accordance with § 301.6226-2(f) must be included on the statement described in § 301.6226-2.

(c)Time, form, and manner for making the election -

(1)In general. An election under this section is valid only if all of the provisions of this section and § 301.6226-2 (regarding statements filed with the IRS and furnished to reviewed year partners) are satisfied. An election under this section is valid until the IRS determines that the election is invalid. An election under this section may only be revoked with the consent of the IRS.

(2)Time for making the election. An election under this section must be filed within 45 days of the date the FPA is mailed by the IRS. The time for filing such an election may not be extended.

(3)Form and manner of the election -

(i)In general. An election under this section must be signed by the partnership representative and filed in accordance with forms, instructions, and other guidance prescribed by the IRS and include the information specified in paragraph (c)(3)(ii) of this section.

(ii)Contents of the election. An election under this section must include the following correct information -

(A) The name, address, and taxpayer identification number (TIN) of the partnership;

(B) The taxable year to which the election relates;

(C) A copy of the FPA to which the election relates;

(D) In the case of an FPA that includes more than one imputed underpayment, identification of the imputed underpayment to which the election applies;

(E) The name and TIN (or alternative form of identification as prescribed by forms, instructions, or other guidance) of each reviewed year partner of the partnership;

(F) The current or last address of each reviewed year partner that is known to the partnership; and

(G) Any other information prescribed by the IRS in forms, instructions, and other guidance.

(d)Determining an election is invalid. The IRS may determine an election to be invalid without first notifying the partnership or providing the partnership an opportunity to correct any failure to satisfy all of the provisions of this section and § 301.6226-2. If an election under this section is determined by the IRS to be invalid, the IRS will notify the partnership and the partnership representative within 30 days of the determination that the election is invalid and the reason for the determination that the election is invalid. If the IRS makes a determination that an election under this section is invalid, section 6225 applies with respect to the imputed underpayment as if the election was never made, the IRS may assess the imputed underpayment against the partnership (without regard to the limitations under section 6232(b)), and the partnership must pay the imputed underpayment under section 6225 and any penalties and interest under section 6233. The IRS may not determine that an election is invalid based on errors timely corrected by the partnership in accordance with § 301.6226-2(d).

(e)Binding nature of statements. The election under this section, which includes filing and furnishing statements described in § 301.6226-2, are actions of the partnership under section 6223 and, unless determined otherwise by the IRS, the partner's share of the adjustments and the applicability of any penalties, additions to tax, and additional amounts as set forth in the statement are binding on the partner pursuant to section 6223. Accordingly, a partner may not treat any partnership-related items (as defined in § 301.6241-1(a)(6)(ii)) reflected on a statement described in § 301.6226-2 on the partner's return inconsistently with how those items are treated on the statement that is filed with the IRS. See § 301.6222-1(c)(2) (regarding partnership-related items the treatment of which a partner is bound to under section 6223).

(f)Coordination with section 6234 regarding judicial review. Nothing in this section affects the rules regarding judicial review of a partnership adjustment. Accordingly, a partnership that makes an election under this section is not precluded from filing a petition under section 6234(a). See § 301.6226-2(b)(3)(iii).

(g)Applicability date -

(1)In general. Except as provided in paragraph (g)(2) of this section, this section applies to partnership taxable years beginning after December 31, 2017, and ending after August 12, 2018.

(2)Election under § 301.9100-22 in effect. This section applies to any partnership taxable year beginning after November 2, 2015, and before January 1, 2018, for which a valid election under § 301.9100-22 is in effect.

[T.D. 9844, 84 FR 6548, Feb. 27, 2019]