CHAPTER 63 - ASSESSMENT
Title 26 > CHAPTER 63
Sections (25)
§ 6201 Assessment authority
(a) Authority of Secretary The Secretary is authorized and required to make the inquiries, determinations, and assessments of all taxes (including interest, additional amounts, additions to the tax, and assessable penalties) imposed by this title, or accruing under any former internal revenue law, which have not been duly paid by stamp at the time and in the manner provided by law. Such authority shall extend to and include the following: The Secretary shall assess all taxes determined by the taxpayer or by the Secretary as to which returns or lists (or payments under section 6225(c)(2)(B)(i)) are made under this title. Whenever any article upon which a tax is required to be paid by means of a stamp is sold or removed for sale or use by the manufacturer thereof or whenever any transaction or act upon which a tax is required to be paid by means of a stamp occurs without the use of the proper stamp, it shall be the duty of the Secretary, upon such information as he can obtain, to estimate the amount of tax which has been omitted to be paid and to make assessment therefor upon the person or persons the Secretary determines to be liable for such tax. In any case in which a check or money order received under authority of section 6311 as payment for stamps is not duly paid, the unpaid amount may be immediately assessed as if it were a tax imposed by this title, due at the time of such receipt, from the person who tendered such check or money order. If on any return or claim for refund of income taxes under subtitle A there is an overstatement of the credit for income tax withheld at the source, or of the amount paid as estimated income tax, the amount so overstated which is allowed against the tax shown on the return or which is allowed as a credit or refund may be assessed by the Secretary in the same manner as in the case of a mathematical or clerical error appearing upon the return, except that the provisions of section 6213(b)(2) (relating to abatement of mathematical or clerical error assessments) shall not apply with regard to any assessment under this paragraph. The Secretary shall assess and collect the amount of restitution under an order pursuant to section 3556 of title 18 , United States Code, for failure to pay any tax imposed under this title in the same manner as if such amount were such tax. An assessment of an amount of restitution under an order described in subparagraph (A) shall not be made before all appeals of such order are concluded and the right to make all such appeals has expired. The amount of such restitution may not be challenged by the person against whom assessed on the basis of the existence or amount of the underlying tax liability in any proceeding authorized under this title (including in any suit or proceeding in court permitted under section 7422).
(b) Amount not to be assessed No unpaid amount of estimated income tax required to be paid under section 6654 or 6655 shall be assessed. No unpaid amount of Federal unemployment tax for any calendar quarter or other period of a calendar year, computed as provided in section 6157, shall be assessed.
(c) Compensation of child Any income tax under chapter 1 assessed against a child, to the extent attributable to amounts includible in the gross income of the child, and not of the parent, solely by reason of section 73(a), shall, if not paid by the child, for all purposes be considered as having also been properly assessed against the parent.
(d) Required reasonable verification of information returns In any court proceeding, if a taxpayer asserts a reasonable dispute with respect to any item of income reported on an information return filed with the Secretary under subpart B or C of part III of subchapter A of chapter 61 by a third party and the taxpayer has fully cooperated with the Secretary (including providing, within a reasonable period of time, access to and inspection of all witnesses, information, and documents within the control of the taxpayer as reasonably requested by the Secretary), the Secretary shall have the burden of producing reasonable and probative information concerning such deficiency in addition to such information return.
(e) Deficiency proceedings For special rules applicable to deficiencies of income, estate, gift, and certain excise taxes, see subchapter B.
§ 6202 Establishment by regulations of mode or time of assessment
If the mode or time for the assessment of any internal revenue tax (including interest, additional amounts, additions to the tax, and assessable penalties) is not otherwise provided for, the Secretary may establish the same by regulations. ( Aug. 16, 1954, ch. 736 , 68A Stat. 768 ; Pub. L. 94–455, title XIX, § 1906(b)(13)(A) , Oct. 4, 1976 , 90 Stat. 1834 .)
§ 6203 Method of assessment
The assessment shall be made by recording the liability of the taxpayer in the office of the Secretary in accordance with rules or regulations prescribed by the Secretary. Upon request of the taxpayer, the Secretary shall furnish the taxpayer a copy of the record of the assessment. ( Aug. 16, 1954, ch. 736 , 68A Stat. 768 ; Pub. L. 94–455, title XIX, § 1906(b)(13)(A) , Oct. 4, 1976 , 90 Stat. 1834 .)
§ 6204 Supplemental assessments
(a) General rule The Secretary may, at any time within the period prescribed for assessment, make a supplemental assessment whenever it is ascertained that any assessment is imperfect or incomplete in any material respect.
(b) Restrictions on assessment For restrictions on assessment of deficiencies in income, estate, gift, and certain excise taxes, see section 6213.
§ 6205 Special rules applicable to certain employment taxes
(a) Adjustment of tax If less than the correct amount of tax imposed by section 3101, 3111, 3201, 3221, or 3402 is paid with respect to any payment of wages or compensation, proper adjustments, with respect to both the tax and the amount to be deducted, shall be made, without interest, in such manner and at such times as the Secretary may by regulations prescribe. For purposes of this subsection, in the case of remuneration received from the United States or a wholly-owned instrumentality thereof during any calendar year, each head of a Federal agency or instrumentality who makes a return pursuant to section 3122 and each agent, designated by the head of a Federal agency or instrumentality, who makes a return pursuant to such section shall be deemed a separate employer. For purposes of this subsection, in the case of remuneration received during any calendar year from the Government of Guam, the Government of American Samoa, a political subdivision of either, or any instrumentality of any one or more of the foregoing which is wholly owned thereby, the Governor of Guam, the Governor of American Samoa, and each agent designated by either who makes a return pursuant to section 3125 shall be deemed a separate employer. For purposes of this subsection, in the case of remuneration received during any calendar year from the District of Columbia or any instrumentality which is wholly owned thereby, the Mayor of the District of Columbia and each agent designated by him who makes a return pursuant to section 3125 shall be deemed a separate employer. For purposes of this subsection, in the case of remuneration received from a State or any political subdivision thereof (or any instrumentality of any one or more of the foregoing which is wholly owned thereby) during any calendar year, each head of an agency or instrumentality, and each agent designated by either, who makes a return pursuant to section 3125 shall be deemed a separate employer.
(b) Underpayments If less than the correct amount of tax imposed by section 3101, 3111, 3201, 3221, or 3402 is paid or deducted with respect to any payment of wages or compensation and the underpayment cannot be adjusted under subsection (a) of this section, the amount of the underpayment shall be assessed and collected in such manner and at such times (subject to the statute of limitations properly applicable thereto) as the Secretary may by regulations prescribe.
§ 6206 Special rules applicable to excessive claims under certain sections
Any portion of a refund made under section 6416(a)(4) and any portion of a payment made under section 6420, 6421, 6427, or 6435 which constitutes an excessive amount (as defined in section 6675(b)), and any civil penalty provided by section 6675, may be assessed and collected as if it were a tax imposed by section 4081 (with respect to refunds under section 6416(a)(4) and payments under sections 6420, 6421, and 6435), or 4041 or 4081 (with respect to payments under section 6427) and as if the person who made the claim were liable for such tax. The period for assessing any such portion, and for assessing any such penalty, shall be 3 years from the last day prescribed for the filing of the claim under section 6416(a)(4), 6420, 6421, 6427, or 6435, as the case may be. (Added Apr. 2, 1956, ch. 160, § 4(b)(1) , 70 Stat. 90 ; amended June 29, 1956, ch. 462 , title II, § 208(d)(1), 70 Stat. 396 ; Pub. L. 89–44, title II, § 202(c)(2)(A) , June 21, 1965 , 79 Stat. 139 ; Pub. L. 91–258, title II, § 207(d)(3) , May 21, 1970 , 84 Stat. 248 ; Pub. L. 97–424, title V, § 515(b)(3)(A) , Jan. 6, 1983 , 96 Stat. 2181 ; Pub. L. 100–203, title X, § 10502(d)(5) , Dec. 22, 1987 , 101 Stat. 1330–444 ; Pub. L. 103–66, title XIII, § 13242(d)(14) , Aug. 10, 1993 , 107 Stat. 524 ; Pub. L. 108–357, title VIII, § 853(d)(2)(F) , Oct. 22, 2004 , 118 Stat. 1613 ; Pub. L. 109–59, title XI, § 11163(d)(1) , Aug. 10, 2005 , 119 Stat. 1974 ; Pub. L. 119–21, title VII, § 70525(b)(1) , July 4, 2025 , 139 Stat. 282 .)
§ 6207 Cross references
For prohibition of suits to restrain assessment of any tax, see section 7421. For prohibition of assessment of taxes against insolvent banks, see section 7507. For assessment where property subject to tax has been sold in a distraint proceeding without the tax having been assessed prior to such sale, see section 6342. For assessment with respect to taxes required to be paid by chapter 52, see section 5703. For assessment in case of distilled spirits removed from place where distilled and not deposited in bonded warehouse, see section 5006(c). For period of limitation upon assessment, see chapter 66. ( Aug. 16, 1954, ch. 736 , 68A Stat. 769 , § 6206; renumbered § 6207, Apr. 2, 1956, ch. 160, § 4(b)(1) , 70 Stat. 90 ; amended Pub. L. 85–859, title II, § 204(2) , (3), Sept. 2, 1958 , 72 Stat. 1428 ; Pub. L. 94–455, title XIX, § 1906(a)(14) , Oct. 4, 1976 , 90 Stat. 1825 .)
§ 6211 Definition of a deficiency
(a) In general For purposes of this title in the case of income, estate, and gift taxes imposed by subtitles A and B and excise taxes imposed by chapters 41, 42, 43, and 44 the term “deficiency” means the amount by which the tax imposed by subtitle A or B, or chapter 41, 42, 43, or 44 exceeds the excess of— the sum of the amount shown as the tax by the taxpayer upon his return, if a return was made by the taxpayer and an amount was shown as the tax by the taxpayer thereon, plus the amounts previously assessed (or collected without assessment) as a deficiency, over— the amount of rebates, as defined in subsection (b)(2), made.
(b) Rules for application of subsection (a) For purposes of this section— The tax imposed by subtitle A and the tax shown on the return shall both be determined without regard to payments on account of estimated tax, without regard to the credit under section 31, without regard to the credit under section 33, and without regard to any credits resulting from the collection of amounts assessed under section 6851 or 6852 (relating to termination assessments). The term “rebate” means so much of an abatement, credit, refund, or other repayment, as was made on the ground that the tax imposed by subtitle A or B or chapter 41, 42, 43, or 44 was less than the excess of the amount specified in subsection (a)(1) over the rebates previously made. The computation by the Secretary, pursuant to section 6014, of the tax imposed by chapter 1 shall be considered as having been made by the taxpayer and the tax so computed considered as shown by the taxpayer upon his return. For purposes of subsection (a)— any excess of the sum of the credits allowable under sections 21 by reason of subsection (g) thereof, 24 by reason of subsections (d) and (i)(1) thereof, 25A by reason of subsection (i) thereof, 32, 34, 35, 36, 36B, 6428, 6428A, 6428B, and 7527A over the tax imposed by subtitle A (determined without regard to such credits), and any excess of the sum of such credits as shown by the taxpayer on his return over the amount shown as the tax by the taxpayer on such return (determined without regard to such credits), shall be taken into account as negative amounts of tax.
(c) Coordination with subchapter C In determining the amount of any deficiency for purposes of this subchapter, adjustments to partnership-related items shall be made only as provided in subchapter C.
§ 6212 Notice of deficiency
(a) In general If the Secretary determines that there is a deficiency in respect of any tax imposed by subtitles A or B or chapter 41, 42, 43, or 44 he is authorized to send notice of such deficiency to the taxpayer by certified mail or registered mail. Such notice shall include a notice to the taxpayer of the taxpayer’s right to contact a local office of the taxpayer advocate and the location and phone number of the appropriate office.
(b) Address for notice of deficiency In the absence of notice to the Secretary under section 6903 of the existence of a fiduciary relationship, notice of a deficiency in respect of a tax imposed by subtitle A, chapter 12, chapter 41, chapter 42, chapter 43, or chapter 44 if mailed to the taxpayer at his last known address, shall be sufficient for purposes of subtitle A, chapter 12, chapter 41, chapter 42, chapter 43, chapter 44, and this chapter even if such taxpayer is deceased, or is under a legal disability, or, in the case of a corporation, has terminated its existence. In the case of a joint income tax return filed by husband and wife, such notice of deficiency may be a single joint notice, except that if the Secretary has been notified by either spouse that separate residences have been established, then, in lieu of the single joint notice, a duplicate original of the joint notice shall be sent by certified mail or registered mail to each spouse at his last known address. In the absence of notice to the Secretary under section 6903 of the existence of a fiduciary relationship, notice of a deficiency in respect of a tax imposed by chapter 11, if addressed in the name of the decedent or other person subject to liability and mailed to his last known address, shall be sufficient for purposes of chapter 11 and of this chapter.
(c) Further deficiency letters restricted If the Secretary has mailed to the taxpayer a notice of deficiency as provided in subsection (a), and the taxpayer files a petition with the Tax Court within the time prescribed in section 6213(a), the Secretary shall have no right to determine any additional deficiency of income tax for the same taxable year, of gift tax for the same calendar year, of estate tax in respect of the taxable estate of the same decedent, of chapter 41 tax for the same taxable year, of chapter 43 tax for the same taxable year, of chapter 44 tax for the same taxable year, of section 4940 tax for the same taxable year, or of chapter 42 tax, (other than under section 4940) with respect to any act (or failure to act) to which such petition relates, except in the case of fraud, and except as provided in section 6214(a) (relating to assertion of greater deficiencies before the Tax Court), in section 6213(b)(1) (relating to mathematical or clerical errors), in section 6851 or 6852 (relating to termination assessments), or in section 6861(c) (relating to the making of jeopardy assessments). For assessment as a deficiency notwithstanding the prohibition of further deficiency letters, in the case of— Deficiency attributable to change of treatment with respect to itemized deductions, see section 63(e)(3). Deficiency attributable to gain on involuntary conversion, see section 1033(a)(2)(C) and (D). Deficiency attributable to activities not engaged in for profit, see section 183(e)(4). For provisions allowing determination of tax in title 11 cases, see section 505(a) of title 11 of the United States Code.
(d) Authority to rescind notice of deficiency with taxpayer’s consent The Secretary may, with the consent of the taxpayer, rescind any notice of deficiency mailed to the taxpayer. Any notice so rescinded shall not be treated as a notice of deficiency for purposes of subsection (c)(1) (relating to further deficiency letters restricted), section 6213(a) (relating to restrictions applicable to deficiencies; petition to Tax Court), and section 6512(a) (relating to limitations in case of petition to Tax Court), and the taxpayer shall have no right to file a petition with the Tax Court based on such notice. Nothing in this subsection shall affect any suspension of the running of any period of limitations during any period during which the rescinded notice was outstanding.
§ 6213 Restrictions applicable to deficiencies; petition to Tax Court
(a) Time for filing petition and restriction on assessment Within 90 days, or 150 days if the notice is addressed to a person outside the United States, after the notice of deficiency authorized in section 6212 is mailed (not counting Saturday, Sunday, or a legal holiday in the District of Columbia as the last day), the taxpayer may file a petition with the Tax Court for a redetermination of the deficiency. Except as otherwise provided in section 6851, 6852, or 6861 no assessment of a deficiency in respect of any tax imposed by subtitle A, or B, chapter 41, 42, 43, or 44 and no levy or proceeding in court for its collection shall be made, begun, or prosecuted until such notice has been mailed to the taxpayer, nor until the expiration of such 90-day or 150-day period, as the case may be, nor, if a petition has been filed with the Tax Court, until the decision of the Tax Court has become final. Notwithstanding the provisions of section 7421(a), the making of such assessment or the beginning of such proceeding or levy during the time such prohibition is in force may be enjoined by a proceeding in the proper court, including the Tax Court, and a refund may be ordered by such court of any amount collected within the period during which the Secretary is prohibited from collecting by levy or through a proceeding in court under the provisions of this subsection. The Tax Court shall have no jurisdiction to enjoin any action or proceeding or order any refund under this subsection unless a timely petition for a redetermination of the deficiency has been filed and then only in respect of the deficiency that is the subject of such petition. Any petition filed with the Tax Court on or before the last date specified for filing such petition by the Secretary in the notice of deficiency shall be treated as timely filed.
(b) Exceptions to restrictions on assessment If the taxpayer is notified that, on account of a mathematical or clerical error appearing on the return, an amount of tax in excess of that shown on the return is due, and that an assessment of the tax has been or will be made on the basis of what would have been the correct amount of tax but for the mathematical or clerical error, such notice shall not be considered as a notice of deficiency for the purposes of subsection (a) (prohibiting assessment and collection until notice of the deficiency has been mailed), or of section 6212(c)(1) (restricting further deficiency letters), or of section 6512(a) (prohibiting credits or refunds after petition to the Tax Court), and the taxpayer shall have no right to file a petition with the Tax Court based on such notice, nor shall such assessment or collection be prohibited by the provisions of subsection (a) of this section. Each notice under this paragraph shall set forth the error alleged and an explanation thereof. Notwithstanding section 6404(b), a taxpayer may file with the Secretary within 60 days after notice is sent under paragraph (1) a request for an abatement of any assessment specified in such notice, and upon receipt of such request, the Secretary shall abate the assessment. Any reassessment of the tax with respect to which an abatement is made under this subparagraph shall be subject to the deficiency procedures prescribed by this subchapter. In the case of any assessment referred to in paragraph (1), notwithstanding paragraph (1), no levy or proceeding in court for the collection of such assessment shall be made, begun, or prosecuted during the period in which such assessment may be abated under this paragraph. If the Secretary determines that the amount applied, credited, or refunded under section 6411 is in excess of the overassessment attributable to the carryback or the amount described in section 1341(b)(1) with respect to which such amount was applied, credited, or refunded, he may assess without regard to the provisions of paragraph (2) the amount of the excess as a deficiency as if it were due to a mathematical or clerical error appearing on the return. Any amount paid as a tax or in respect of a tax may be assessed upon the receipt of such payment notwithstanding the provisions of subsection (a). In any case where such amount is paid after the mailing of a notice of deficiency under section 6212, such payment shall not deprive the Tax Court of jurisdiction over such deficiency determined under section 6211 without regard to such assessment. If the taxpayer is notified that an assessment has been or will be made pursuant to section 6201(a)(4)— such notice shall not be considered as a notice of deficiency for the purposes of subsection (a) (prohibiting assessment and collection until notice of the deficiency has been mailed), section 6212(c)(1) (restricting further deficiency letters), or section 6512(a) (prohibiting credits or refunds after petition to the Tax Court), and subsection (a) shall not apply with respect to the amount of such assessment.
(c) Failure to file petition If the taxpayer does not file a petition with the Tax Court within the time prescribed in subsection (a), the deficiency, notice of which has been mailed to the taxpayer, shall be assessed, and shall be paid upon notice and demand from the Secretary.
(d) Waiver of restrictions The taxpayer shall at any time (whether or not a notice of deficiency has been issued) have the right, by a signed notice in writing filed with the Secretary, to waive the restrictions provided in subsection (a) on the assessment and collection of the whole or any part of the deficiency.
(e) Suspension of filing period for certain excise taxes The running of the time prescribed by subsection (a) for filing a petition in the Tax Court with respect to the taxes imposed by section 4941 (relating to taxes on self-dealing), 4942 (relating to taxes on failure to distribute income), 4943 (relating to taxes on excess business holdings), 4944 (relating to investments which jeopardize charitable purpose), 4945 (relating to taxes on taxable expenditures), 4951 (relating to taxes on self-dealing), or 4952 (relating to taxes on taxable expenditures), 4955 (relating to taxes on political expenditures), 4958 (relating to private excess benefit), 4971 (relating to excise taxes on failure to meet minimum funding standard), 4975 (relating to excise taxes on prohibited transactions) shall be suspended for any period during which the Secretary has extended the time allowed for making correction under section 4963(e).
(f) Coordination with title 11 In any case under title 11 of the United States Code, the running of the time prescribed by subsection (a) for filing a petition in the Tax Court with respect to any deficiency shall be suspended for the period during which the debtor is prohibited by reason of such case from filing a petition in the Tax Court with respect to such deficiency, and for 60 days thereafter. For purposes of the second and third sentences of subsection (a), the filing of a proof of claim or request for payment (or the taking of any other action) in a case under title 11 of the United States Code shall not be treated as action prohibited by such second sentence.
(g) Definitions For purposes of this section— The term “return” includes any return, statement, schedule, or list, and any amendment or supplement thereto, filed with respect to any tax imposed by subtitle A or B, or chapter 41, 42, 43, or 44. The term “mathematical or clerical error” means— an error in addition, subtraction, multiplication, or division shown on any return, an incorrect use of any table provided by the Internal Revenue Service with respect to any return if such incorrect use is apparent from the existence of other information on the return, an entry on a return of an item which is inconsistent with another entry of the same or another item on such return, an omission of information which is required to be supplied on the return to substantiate an entry on the return, an entry on a return of a deduction or credit in an amount which exceeds a statutory limit imposed by subtitle A or B, or chapter 41, 42, 43, or 44, if such limit is expressed— as a specified monetary amount, or as a percentage, ratio, or fraction, and if the items entering into the application of such limit appear on such return, an omission of a correct taxpayer identification number required under section 32 (relating to the earned income credit) to be included on a return, an entry on a return claiming the credit under section 32 with respect to net earnings from self-employment described in section 32(c)(2)(A) to the extent the tax imposed by section 1401 (relating to self-employment tax) on such net earnings has not been paid, an omission of a correct TIN required under section 21 (relating to expenses for household and dependent care services necessary for gainful employment) or section 151 (relating to allowance of deductions for personal exemptions), an omission of a correct TIN required under section 24 (relating to child tax credit) to be included on a return, an omission of a correct social security number or employer identification number required under section 25A(g)(1) (relating to higher education tuition and related expenses) to be included on a return, an omission of information required by section 32(k)(2) (relating to taxpayers making improper prior claims of earned income credit) or an entry on the return claiming the credit under section 32 for a taxable year for which the credit is disallowed under subsection (k)(1) thereof, the inclusion on a return of a TIN required to be included on the return under section 21, 24, 32, 6428, or 6428A if— such TIN is of an individual whose age affects the amount of the credit under such section, and the computation of the credit on the return reflects the treatment of such individual as being of an age different from the individual’s age based on such TIN, the entry on the return claiming the credit under section 32 with respect to a child if, according to the Federal Case Registry of Child Support Orders established under section 453(h) of the Social Security Act, the taxpayer is a noncustodial parent of such child, an omission of any increase required under section 36(f) with respect to the recapture of a credit allowed under section 36, the inclusion on a return of an individual taxpayer identification number issued under section 6109(i) which has expired, been revoked by the Secretary, or is otherwise invalid, an omission of information required by section 24(g)(2) or an entry on the return claiming the credit under section 24 for a taxable year for which the credit is disallowed under subsection (g)(1) thereof, an omission of information required by section 25A(b)(4)(B) or an entry on the return claiming the American Opportunity Tax Credit for a taxable year for which such credit is disallowed under section 25A(b)(4)(A), an omission of information or documentation required under section 25C(b)(6)(B) (relating to home energy audits) to be included on a return, an omission of a correct product identification number required under section 25C(h) (relating to credit for nonbusiness energy property) to be included on a return, an omission of a correct vehicle identification number required under section 30D(f)(9) (relating to credit for new clean vehicles) to be included on a return, an omission of a correct vehicle identification number required under section 25E(d) (relating to credit for previously-owned clean vehicles) to be included on a return, an omission of a correct vehicle identification number required under section 45W(e) (relating to commercial clean vehicle credit) to be included on a return, an omission of a correct social security number required under section 151(d)(5)(C) (relating to deduction for seniors), an omission of a correct social security number required under section 108(f)(5)(C) (relating to discharges on account of death or disability), an omission of a correct social security number required under section 224(e) (relating to deduction for qualified tips), an omission of a correct social security number required under section 225(d) (relating to deduction for qualified overtime), and an omission of a correct social security number required under section 6434(e)(1) (relating to the Trump accounts contribution pilot program). A taxpayer shall be treated as having omitted a correct TIN for purposes of the preceding sentence if information provided by the taxpayer on the return with respect to the individual whose TIN was provided differs from the information the Secretary obtains from the person issuing the TIN.
(h) Cross references For assessment as if a mathematical error on the return, in the case of erroneous claims for income tax prepayment credits, see section 6201(a)(3). For assessments without regard to restrictions imposed by this section in the case of— Recovery of foreign income taxes, see section 905(c). Recovery of foreign estate tax, see section 2016. For provisions relating to application of this subchapter in the case of certain partnership items, etc., see section 6230(a). 1
§ 6214 Determinations by Tax Court
(a) Jurisdiction as to increase of deficiency, additional amounts, or additions to the tax Except as provided by section 7463, the Tax Court shall have jurisdiction to redetermine the correct amount of the deficiency even if the amount so redetermined is greater than the amount of the deficiency, notice of which has been mailed to the taxpayer, and to determine whether any additional amount, or any addition to the tax should be assessed, if claim therefor is asserted by the Secretary at or before the hearing or a rehearing.
(b) Jurisdiction over other years and quarters The Tax Court in redetermining a deficiency of income tax for any taxable year or of gift tax for any calendar year or calendar quarter shall consider such facts with relation to the taxes for other years or calendar quarters as may be necessary correctly to redetermine the amount of such deficiency, but in so doing shall have no jurisdiction to determine whether or not the tax for any other year or calendar quarter has been overpaid or underpaid. Notwithstanding the preceding sentence, the Tax Court may apply the doctrine of equitable recoupment to the same extent that it is available in civil tax cases before the district courts of the United States and the United States Court of Federal Claims.
(c) Taxes imposed by section 507 or chapter 41, 42, 43, or 44 The Tax Court, in redetermining a deficiency of any tax imposed by section 507 or chapter 41, 42, 43, or 44 for any period, act, or failure to act, shall consider such facts with relation to the taxes under chapter 41, 42, 43, or 44 for other periods, acts, or failures to act as may be necessary correctly to redetermine the amount of such deficiency, but in so doing shall have no jurisdiction to determine whether or not the taxes under chapter 41, 42, 43, or 44 for any other period, act, or failure to act have been overpaid or underpaid. The Tax Court, in redetermining a deficiency of any second tier tax (as defined in section 4963(b)), shall make a determination with respect to whether the taxable event has been corrected.
(d) Final decisions of Tax Court For purposes of this chapter, chapter 41, 42, 43, or 44, and subtitles A or B the date on which a decision of the Tax Court becomes final shall be determined according to the provisions of section 7481.
(e) Cross reference For provision giving Tax Court jurisdiction to order a refund of an overpayment and to award sanctions, see section 6512(b)(2).
§ 6215 Assessment of deficiency found by Tax Court
(a) General rule If the taxpayer files a petition with the Tax Court, the entire amount redetermined as the deficiency by the decision of the Tax Court which has become final shall be assessed and shall be paid upon notice and demand from the Secretary. No part of the amount determined as a deficiency by the Secretary but disallowed as such by the decision of the Tax Court which has become final shall be assessed or be collected by levy or by proceeding in court with or without assessment.
(b) Cross references For assessment or collection of the amount of the deficiency determined by the Tax Court pending appellate court review, see section 7485. For dismissal of petition by Tax Court as affirmation of deficiency as determined by the Secretary, see section 7459(d). For decision of Tax Court that tax is barred by limitation as its decision that there is no deficiency, see section 7459(e). For assessment of damages awarded by Tax Court for instituting proceedings merely for delay, see section 6673. For rules applicable to Tax Court proceedings, see generally subchapter C of chapter 76. For extension of time for paying amount determined as deficiency, see section 6161(b).
§ 6216 Cross references
For procedures relating to receivership proceedings, see subchapter B of chapter 70. For procedures relating to jeopardy assessments, see subchapter A of chapter 70. For procedures relating to claims against transferees and fiduciaries, see chapter 71. For procedures relating to partnership items, see subchapter C. ( Aug. 16, 1954, ch. 736 , 68A Stat. 773 ; Pub. L. 96–589, § 6(i)(9) , Dec. 24, 1980 , 94 Stat. 3411 ; Pub. L. 97–248, title IV, § 402(c)(3) , Sept. 3, 1982 , 96 Stat. 667 .)
§ 6221 Determination at partnership level
(a) In general Any adjustment to a partnership-related item shall be determined, and any tax attributable thereto shall be assessed and collected, and the applicability of any penalty, addition to tax, or additional amount which relates to an adjustment to any such item shall be determined, at the partnership level, except to the extent otherwise provided in this subchapter.
(b) Election out for certain partnerships with 100 or fewer partners, etc. This subchapter shall not apply with respect to any partnership for any taxable year if— the partnership elects the application of this subsection for such taxable year, for such taxable year the partnership is required to furnish 100 or fewer statements under section 6031(b) with respect to its partners, each of the partners of such partnership is an individual, a C corporation, any foreign entity that would be treated as a C corporation were it domestic, an S corporation, or an estate of a deceased partner, the election— is made with a timely filed return for such taxable year, and includes (in the manner prescribed by the Secretary) a disclosure of the name and taxpayer identification number of each partner of such partnership, and the partnership notifies each such partner of such election in the manner prescribed by the Secretary. In the case of a partner that is an S corporation— the partnership shall only be treated as meeting the requirements of paragraph (1)(C) with respect to such partner if such partnership includes (in the manner prescribed by the Secretary) a disclosure of the name and taxpayer identification number of each person with respect to whom such S corporation is required to furnish a statement under section 6037(b) for the taxable year of the S corporation ending with or within the partnership taxable year for which the application of this subsection is elected, and the statements such S corporation is required to so furnish shall be treated as statements furnished by the partnership for purposes of paragraph (1)(B). For purposes of paragraph (1)(D)(ii), the Secretary may provide for alternative identification of any foreign partners. The Secretary may by regulation or other guidance prescribe rules similar to the rules of subparagraph (A) with respect to any partners not described in such subparagraph or paragraph (1)(C).
§ 6222 Partner’s return must be consistent with partnership return
(a) In general A partner shall, on the partner’s return, treat any partnership-related item in a manner which is consistent with the treatment of such item on the partnership return.
(b) Underpayment due to inconsistent treatment assessed as math error Any underpayment 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 appearing on the partner’s return. Paragraph (2) of section 6213(b) shall not apply to any assessment of an underpayment referred to in the preceding sentence.
(c) Exception for notification of inconsistent treatment In the case of any item referred to in subsection (a), if— the partnership has filed a return but the partner’s treatment on the partner’s return is (or may be) inconsistent with the treatment of the item on the partnership return, or the partnership has not filed a return, and the partner files with the Secretary a statement identifying the inconsistency, subsections (a) and (b) shall not apply to such item. A partner shall be treated as having complied with subparagraph (B) of paragraph (1) with respect to an item if the partner— demonstrates to the satisfaction of the Secretary that the treatment of the item on the partner’s return is consistent with the treatment of the item on the statement furnished to the partner by the partnership, and elects to have this paragraph apply with respect to that item.
(d) Final decision on certain positions not binding on partnership Any final decision with respect to an inconsistent position identified under subsection (c) in a proceeding to which the partnership is not a party shall not be binding on the partnership.
(e) Addition to tax for failure to comply with section For addition to tax in the case of a partner’s disregard of the requirements of this section, see part II of subchapter A of chapter 68.
§ 6223 Partners bound by actions of partnership
(a) Designation of partnership representative Each partnership shall designate (in the manner prescribed by the Secretary) a partner (or other person) with a substantial presence in the United States as the partnership representative who shall have the sole authority to act on behalf of the partnership under this subchapter. In any case in which such a designation is not in effect, the Secretary may select any person as the partnership representative.
(b) Binding effect A partnership and all partners of such partnership shall be bound— by actions taken under this subchapter by the partnership, and by any final decision in a proceeding brought under this subchapter with respect to the partnership.
§ 6225 Partnership adjustment by Secretary
(a) In general In the case of any adjustments by the Secretary to any partnership-related items with respect to any reviewed year of a partnership— if such adjustments result in an imputed underpayment, the partnership shall pay an amount equal to such imputed underpayment in the adjustment year as provided in section 6232, and if such adjustments do not result in an imputed underpayment, such adjustments shall be taken into account by the partnership in the adjustment year.
(b) Determination of imputed underpayments For purposes of this subchapter— Except as otherwise provided in this section, any imputed underpayment with respect to any reviewed year shall be determined by the Secretary by— appropriately netting all partnership adjustments with respect to such reviewed year, and applying the highest rate of tax in effect for the reviewed year under section 1 or 11. In the case of any adjustment which reallocates the distributive share of any item from one partner to another, such adjustment shall be taken into account by disregarding so much of such adjustment as results in a decrease in the amount of the imputed underpayment. For purposes of paragraph (1)(A), partnership adjustments for any reviewed year shall first be separately determined (and netted as appropriate) within each category of items that are required to be taken into account separately under section 702(a) or other provision of this title. If any adjustment would (but for this paragraph)— result in a decrease in the amount of the imputed underpayment, and could be subject to any additional limitation under the provisions of this title (or not allowed, in whole or in part, against ordinary income) if such adjustment were taken into account by any person, such adjustment shall not be taken into account under paragraph (1)(A) except to the extent otherwise provided by the Secretary.
(c) Modification of imputed underpayments The Secretary shall establish procedures under which the imputed underpayment amount may be modified consistent with the requirements of this subsection. Such procedures shall provide that if— one or more partners file returns for the taxable year of the partners which includes the end of the reviewed year of the partnership (and for any taxable year with respect to which any tax attribute is affected by reason of any adjustment referred to in clause (ii)), such returns take into account all adjustments under subsection (a) properly allocable to such partners (and the effect of such adjustments on any tax attributes), and payment of any tax due is included with such returns, then the imputed underpayment amount shall be determined without regard to the portion of the adjustments so taken into account. Such procedures shall provide that, with respect to any partner referred to in subparagraph (A), the requirements of subparagraph (A) shall be treated as satisfied with respect to adjustments properly allocable to such partner if, in lieu of filing the returns described in such subparagraph— the amounts described in subparagraph (A)(iii) are paid by the partner, the partner agrees to take into account, in the form and manner prescribed by the Secretary, the adjustments to the tax attributes of such partner referred to in subparagraph (A)(ii), and such partner provides, in the form and manner specified by the Secretary (including, if the Secretary so specifies, in the same form as on an amended return), such information as the Secretary may require to carry out this subparagraph. In the case of any adjustment which reallocates the distributive share of any item from one partner to another, this paragraph shall apply with respect to any such partner only if the requirements of subparagraph (A) or (B) are satisfied with respect to all partners affected by such adjustment. In the case of adjustments referred to in subparagraph (A)(ii), sections 6501 and 6511 shall not apply with respect to any return filed for purposes of subparagraph (A)(i) or any amount paid under subparagraph (A)(iii) or (B)(i). The adjustments to the tax attributes of any partner provided for in subparagraph (A)(ii) or (B)(ii) shall be binding with respect to the taxable year of the partner which includes the end of the reviewed year of the partnership and any taxable years for which any tax attribute is affected by such adjustment. Any failure to so treat any such tax attribute shall be treated for purposes of this title in the same manner as a failure to treat a partnership-related item in a manner which is consistent with the treatment of such item on the partnership return within the meaning of section 6222. In the case of any partnership any partner of which is a partnership, subparagraph (A) or (B) may apply with respect to any partner (hereafter in this subparagraph referred to as the “relevant partner”) in the chain of ownership of such partnerships if— such information as the Secretary may require is furnished to the Secretary for purposes of carrying out this paragraph with respect to such partnerships (including any information the Secretary may require with respect to any chain of ownership of the relevant partner), and to such extent as the Secretary may require, each partnership in the chain of ownership between the relevant partner and the audited partnership satisfies the requirements of subparagraph (A) or (B). For purposes of clause (i), an S corporation and its shareholders shall be treated in the same manner as a partnership and its partners. An administrative adjustment request under section 6227 and a partnership adjustment tracking report under section 6226(b)(4)(A) shall not be treated as a return for purposes of this paragraph. Such procedures shall provide for determining the imputed underpayment without regard to the portion of the adjustment that the partnership demonstrates is allocable to a partner that would not owe tax by reason of its status as a tax-exempt entity (as defined in section 168(h)(2)). Such procedures shall provide for taking into account a rate of tax lower than the rate of tax described in subsection (b)(1)(A) with respect to any portion of the adjustment that the partnership demonstrates is allocable to a partner which— is a C corporation, or in the case of a capital gain or qualified dividend, is an individual. In no event shall the lower rate determined under the preceding sentence be less than the highest rate in effect with respect to the income and taxpayer described in clause (i) or clause (ii), as the case may be. For purposes of clause (ii), an S corporation shall be treated as an individual. Except as provided in clause (ii), the portion of the imputed underpayment to which the lower rate applies with respect to a partner under subparagraph (A) shall be determined by reference to the partners’ distributive share of items to which the imputed underpayment relates. If the imputed underpayment is attributable to the adjustment of more than 1 item, and any partner’s distributive share of such items is not the same with respect to all such items, then the portion of the imputed underpayment to which the lower rate applies with respect to a partner under subparagraph (A) shall be determined by reference to the amount which would have been the partner’s distributive share of net gain or loss if the partnership had sold all of its assets at their fair market value as of the close of the reviewed year of the partnership. In the case of a publicly traded partnership (as defined in section 469(k)(2)), such procedures shall provide— for determining the imputed underpayment without regard to the portion of the adjustment that the partnership demonstrates is attributable to a net decrease in a specified passive activity loss which is allocable to a specified partner, and for the partnership to take such net decrease into account as an adjustment in the adjustment year with respect to the specified partners to which such net decrease relates. For purposes of this paragraph, the term “specified passive activity loss” means, with respect to any specified partner of such publicly traded partnership, the lesser of— the passive activity loss of such partner which is separately determined with respect to such partnership under section 469(k) with respect to such partner’s taxable year in which or with which the reviewed year of such partnership ends, or such passive activity loss so determined with respect to such partner’s taxable year in which or with which the adjustment year of such partnership ends. For purposes of this paragraph, the term “specified partner” means any person if such person— is a partner of the publicly traded partnership referred to in subparagraph (A), is described in section 469(a)(2), and has a specified passive activity loss with respect to such publicly traded partnership, with respect to each taxable year of such person which is during the period beginning with the taxable year of such person in which or with which the reviewed year of such publicly traded partnership ends and ending with the taxable year of such person in which or with which the adjustment year of such publicly traded partnership ends. The Secretary may by regulations or guidance provide for additional procedures to modify imputed underpayment amounts on the basis of such other factors as the Secretary determines are necessary or appropriate to carry out the purposes of this subsection. Anything required to be filed or submitted under this subsection shall be submitted to the Secretary not later than the close of the 270-day period beginning on the date on which the notice of a proposed partnership adjustment is mailed under section 6231 unless such period is extended with the consent of the Secretary. Any modification of the imputed underpayment amount under this subsection shall be made only upon approval of such modification by the Secretary. The Secretary shall establish procedures under which the adjustments described in subsection (a)(2) may be modified in such manner as the Secretary determines appropriate.
(d) Definitions For purposes of this subchapter— The term “reviewed year” means the partnership taxable year to which the item being adjusted relates. The term “adjustment year” means the partnership taxable year in which— in the case of an adjustment pursuant to the decision of a court in a proceeding brought under section 6234, such decision becomes final, in the case of an administrative adjustment request under section 6227, such administrative adjustment request is made, or in any other case, notice of the final partnership adjustment is mailed under section 6231.
§ 6226 Alternative to payment of imputed underpayment by partnership
(a) In general If the partnership— not later than 45 days after the date of the notice of final partnership adjustment, elects the application of this section with respect to an imputed underpayment, and at such time and in such manner as the Secretary may provide, furnishes to each partner of the partnership for the reviewed year and to the Secretary a statement of the partner’s share of any adjustment to a partnership-related item (as determined in the notice of final partnership adjustment), section 6225 shall not apply with respect to such underpayment (and no assessment of tax, levy, or proceeding in any court for the collection of such underpayment shall be made against such partnership) and each such partner shall take such adjustment into account as provided in subsection (b). The election under paragraph (1) shall be made in such manner as the Secretary may provide and, once made, shall be revocable only with the consent of the Secretary.
(b) Adjustments taken into account by partner Except as provided in paragraph (4), each partner’s tax imposed by chapter 1 for the taxable year which includes the date the statement was furnished under subsection (a) shall be adjusted by the aggregate of the correction amounts determined under paragraph (2) for the taxable years referred to therein. The correction amounts determined under this paragraph are— in the case of the taxable year of the partner which includes the end of the reviewed year, the amount by which the tax imposed under chapter 1 would increase or decrease if the partner’s share of the adjustments described in subsection (a) were taken into account for such taxable year, and in the case of any taxable year after the taxable year referred to in subparagraph (A) and before the taxable year referred to in paragraph (1), the amount by which the tax imposed under chapter 1 would increase or decrease by reason of the adjustment to tax attributes under paragraph (3). Any tax attribute which would have been affected if the adjustments described in subsection (a) were taken into account for the taxable year referred to in paragraph (2)(A) shall— in the case of any taxable year referred to in paragraph (2)(B), be appropriately adjusted for purposes of applying such paragraph, and in the case of any subsequent taxable year, be appropriately adjusted. If a partner which receives a statement under subsection (a)(2) is a partnership or an S corporation, such partner shall, with respect to the partner’s share of the adjustment— file with the Secretary a partnership adjustment tracking report which includes such information as the Secretary may require, and furnish statements under rules similar to the rules of subsection (a)(2), or if no such statements are furnished, compute and pay an imputed underpayment under rules similar to the rules of section 6225 (other than paragraphs (2), (7), and (9) of subsection (c) thereof). For purposes of subparagraph (A), with respect to a partner’s share of the adjustment, the partnership adjustment tracking report shall be filed, and the imputed underpayment shall be paid or statements shall be furnished, not later than the due date for the return for the adjustment year of the audited partnership. In the case of a partnership which has elected the application of section 6221(b) with respect to the taxable year of the partnership which includes the end of the reviewed year of the audited partnership, this paragraph shall apply notwithstanding such election. For purposes of this paragraph, the term “audited partnership” means, with respect to any partner described in subparagraph (A), the partnership in the chain of ownership originally electing the application of this section. The Secretary shall prescribe such rules as may be necessary with respect to trusts which receive a statement under subsection (a)(2).
(c) Penalties and interest Notwithstanding subsections (a) and (b), any penalties, additions to tax, or additional amount shall be determined as provided under section 6221 and the partners of the partnership for the reviewed year shall be liable for any such penalty, addition to tax, or additional amount. In the case of an imputed underpayment with respect to which the application of this section is elected, or which is described in subsection (b)(4)(A)(ii)(I), interest shall be determined— at the partner level, from the due date of the return for the taxable year to which the increase is attributable (determined by taking into account any increases attributable to a change in tax attributes for a taxable year under subsection (b)(2)), and at the underpayment rate under section 6621(a)(2), determined by substituting “5 percentage points” for “3 percentage points” in subparagraph (B) thereof.
(d) Judicial review For the time period within which a partnership may file a petition for a readjustment, see section 6234(a).
§ 6227 Administrative adjustment request by partnership
(a) In general A partnership may file a request for an administrative adjustment in the amount of one or more partnership-related items for any partnership taxable year.
(b) Adjustment Any such adjustment under subsection (a) shall be determined and taken into account for the partnership taxable year in which the administrative adjustment request is filed— by the partnership under rules similar to the rules of section 6225 (other than paragraphs (2), (7), and (9) of subsection (c) thereof) for the partnership taxable year in which the administrative adjustment request is filed, or by the partnership and partners under rules similar to the rules of section 6226 (determined without regard to the substitution described in subsection (c)(2)(C) thereof). In the case of an adjustment that would not result in an imputed underpayment, paragraph (1) shall not apply and paragraph (2) shall apply with appropriate adjustments.
(c) Period of limitations A partnership may not file such a request more than 3 years after the later of— the date on which the partnership return for such year is filed, or the last day for filing the partnership return for such year (determined without regard to extensions). In no event may a partnership file such a request after a notice of an administrative proceeding with respect to the taxable year is mailed under section 6231.
(d) Coordination with adjustments related to foreign tax credits The Secretary shall issue regulations or other guidance which provide for the proper coordination of this section and section 905(c).
§ 6231 Notice of proceedings and adjustment
(a) In general The Secretary shall mail to the partnership and the partnership representative— 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, notice of any proposed partnership adjustment resulting from such proceeding, and 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 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). 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. 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.
§ 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— subchapter B of chapter 63 shall not apply, and 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— the close of the 90th day after the day on which a notice of a final partnership adjustment was mailed, and 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 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. 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. 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 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— section 6621(a)(2)(B) shall be applied by substituting “5 percentage points” for “3 percentage points” with respect to such amount, and 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)). For purposes of this subsection, the term “specified similar amount” means— 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 any amount assessed under paragraph (1)(B) upon a partner which is a partnership. 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. 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. For purposes of this subsection, an S corporation and its shareholders shall be treated in the same manner as a partnership and its partners. Subchapter B shall not apply to any assessment or collection under this paragraph. 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.
§ 6233 Interest and penalties
(a) Interest and penalties determined from reviewed year Except to the extent provided in section 6226(c), in the case of a partnership adjustment for a reviewed year— interest shall be computed under paragraph (2), and the partnership shall be liable for any penalty, addition to tax, or additional amount as provided in paragraph (3). The interest computed under this paragraph with respect to any partnership adjustment is the interest which would be determined under chapter 67 for the period beginning on the day after the return due date for the reviewed year and ending on the return due date for the adjustment year (or, if earlier, the date payment of the imputed underpayment is made). Proper adjustments in the amount determined under the preceding sentence shall be made for adjustments required for partnership taxable years after the reviewed year and before the adjustment year by reason of such partnership adjustment. 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 chapter 1 for the reviewed year and the imputed underpayment were an actual underpayment (or understatement) for such year.
(b) Interest and penalties with respect to adjustment year return In the case of any failure to pay an imputed underpayment on the date prescribed therefor, the partnership shall be liable— for interest as determined under paragraph (2), and for any penalty, addition to tax, or additional amount as determined under paragraph (3). 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. Penalties, additions to tax, or additional amounts determined under this paragraph are the penalties, additions to tax, or additional amounts that would be determined— by applying section 6651(a)(2) to such failure to pay, and by treating the imputed underpayment as an underpayment of tax for purposes of part II of subchapter A of chapter 68.
(c) Deposit to suspend interest For rules allowing deposits to suspend running of interest on potential underpayments, see section 6603.
§ 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— the Tax Court, the district court of the United States for the district in which the partnership’s principal place of business is located, or the Court of Federal Claims.
(b) Jurisdictional requirement for bringing action in district court or Court of Federal Claims 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. Any amount deposited under paragraph (1), while deposited, shall not be treated as a payment of tax for purposes of this title (other than chapter 67).
(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.
§ 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— the date which is 3 years after the latest of— the date on which the partnership return for such taxable year was filed, the return due date for the taxable year, or the date on which the partnership filed an administrative adjustment request with respect to such year under section 6227, or 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 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. In the case of a false or fraudulent partnership return with intent to evade tax, the adjustment may be made at any time. 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”. 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. 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. 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). 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).
§ 6241 Definitions and special rules
For purposes of this subchapter— The term “partnership” means any partnership required to file a return under section 6031(a). The term “partnership adjustment” means any adjustment to a partnership-related item. The term “partnership-related item” means— any item or amount with respect to the partnership (without regard to whether or not such item or amount appears on the partnership’s return and including an imputed underpayment and any item or amount relating to any transaction with, basis in, or liability of, the partnership) which is relevant (determined without regard to this subchapter) in determining the tax liability of any person under chapter 1, and any partner’s distributive share of any item or amount described in clause (i). The term “return due date” means, with respect to the taxable year, the date prescribed for filing the partnership return for such taxable year (determined without regard to extensions). No deduction shall be allowed under subtitle A for any payment required to be made by a partnership under this subchapter. For purposes of section 6234, a principal place of business located outside the United States shall be treated as located in the District of Columbia. The running of any period of limitations provided in this subchapter on making a partnership adjustment (or provided by section 6501 or 6502 on the assessment or collection of any imputed underpayment determined under this subchapter) shall, in a case under title 11 of the United States Code, be suspended during the period during which the Secretary is prohibited by reason of such case from making the adjustment (or assessment or collection) and— for adjustment or assessment, 60 days thereafter, and for collection, 6 months thereafter. A rule similar to the rule of section 6213(f)(2) shall apply for purposes of section 6232(b). The running of the period specified in section 6234 shall, in a case under title 11 of the United States Code, be suspended during the period during which the partnership is prohibited by reason of such case from filing a petition under section 6234 and for 60 days thereafter. If a partnership ceases to exist before a partnership adjustment under this subchapter takes effect, such adjustment shall be taken into account by the former partners of such partnership under regulations prescribed by the Secretary. If a partnership return is filed by an entity for a taxable year but it is determined that the entity is not a partnership (or that there is no entity) for such year, then, to the extent provided in regulations, the provisions of this subchapter are hereby extended in respect of such year to such entity and its items and to persons holding an interest in such entity. This subchapter shall not apply with respect to any tax imposed (including any amount required to be deducted or withheld) under chapter 2, 2A, 3, or 4, except that any partnership adjustment determined under this subchapter for purposes of chapter 1 shall be taken into account for purposes of determining any such tax to the extent that such adjustment is relevant to such determination. In the case of any tax imposed (including any amount required to be deducted or withheld) under chapter 3 or 4, which is determined with respect to an adjustment described in subparagraph (A), such tax— shall be so determined with respect to the reviewed year, and shall be so imposed (or so required to be deducted or withheld) with respect to the adjustment year. For special rule with respect to limitation on assessment of taxes under chapter 2 or 2A which are attributable to any partnership adjustment, see section 6501(c)(12). Notwithstanding section 6011(e), the Secretary may require that anything required to be filed or submitted under section 6225(c), or to be furnished to or filed with the Secretary under section 6226, be so filed, submitted, or furnished by magnetic media or in other machine-readable form. In the case of partnership-related items which involve special enforcement matters, the Secretary may prescribe regulations pursuant to which— this subchapter (or any portion thereof) does not apply to such items, and such items are subject to such special rules (including rules related to assessment and collection) as the Secretary determines to be necessary for the effective and efficient enforcement of this title. For purposes of subparagraph (A), the term “special enforcement matters” means— failure to comply with the requirements of section 6226(b)(4)(A)(ii), assessments under section 6851 (relating to termination assessments of income tax) or section 6861 (relating to jeopardy assessments of income, estate, gift, and certain excise taxes), criminal investigations, indirect methods of proof of income, foreign partners or partnerships, and other matters that the Secretary determines by regulation present special enforcement considerations. Except as otherwise provided by the Secretary, in the case of any controlled foreign corporation (as defined in section 957 or 953(c)(1)) which is a partner of a partnership, each United States shareholder (as defined in section 951(b) or 953(c)(1)) with respect to such controlled foreign corporation shall be treated for purposes of this subchapter as a partner of such partnership. For purposes of the preceding sentence, any distributive share of any such United States shareholder with respect to such partnership shall, except as otherwise provided by the Secretary, be equal to such United States shareholder’s pro rata share with respect to such controlled foreign corporation (determined under rules similar to the rules of section 951(a)(2)). For purposes of subparagraph (A), in the case of a passive foreign investment company (as defined in section 1297), each taxpayer that makes an election under section 1295 with respect to such company shall be treated in the same manner as United States shareholders under subparagraph (A), except that such taxpayer’s pro rata share with respect to the passive foreign investment company shall be determined under rules similar to the rules of section 1293(b). The Secretary shall issue such regulations or other guidance as is necessary or appropriate to carry out the purposes of this paragraph, including regulations which apply the rules of subparagraph (A) in similar circumstances or with respect to similarly situated persons. (Added Pub. L. 114–74, title XI, § 1101(c)(1) , Nov. 2, 2015 , 129 Stat. 636 ; amended Pub. L. 115–141, div. U, title II , §§ 201(a), (b)(1), 206(c), ( l ), (m), (p)(7), Mar. 23, 2018 , 132 Stat. 1171 , 1172, 1178, 1180–1182.)