(a) In general. A partnership that makes an election under §301.6226-1 must furnish to each reviewed year partner (as defined in §301.6241-1(a)(9)) and file with the Internal Revenue Service (IRS) a statement that includes the items required by paragraphs (e) and (f) of this section with respect to each reviewed year partner's share of partnership adjustments (as defined in §301.6241-1(a)(6)) associated with the imputed underpayment for which an election under §301.6226-1 is made. The statements furnished to the reviewed year partners under this section are in addition to, and must be filed and furnished separate from, any other statements required to be filed with the IRS and furnished to partners, including any statements under section 6031(b). A separate statement under this section must be furnished to each reviewed year partner with respect to each reviewed year (as defined in §301.6241-1(a)(8)) subject to an election under §301.6226-1. A failure to furnish a correct statement in accordance with this section is subject to penalty under section 6722. See section 6724(d)(2).

(b) Time and manner for furnishing the statements to partners—(1) In general. The statements described in paragraph (a) of this section must be furnished to the reviewed year partners no later than 60 days after the date all of the partnership adjustments to which the statement relates are finally determined. The partnership adjustments are finally determined upon the later of:

(i) The expiration of the time to file a petition under section 6234; or

(ii) If a petition under section 6234 is filed, the date when the court's decision becomes final.

(2) Address used for reviewed year partners. The partnership must furnish the statements described in paragraph (a) of this section to each reviewed year partner in accordance with the forms, instructions, and other guidance prescribed by the IRS. If the partnership mails the statement, it must mail the statement to the current or last address of the reviewed year partner that is known to the partnership. If a statement is returned to the partnership as undeliverable, the partnership must undertake reasonable diligence to identify a correct address for the reviewed year partner to which the statement relates and, if a correct address is identified, mail the statement to the reviewed year partner at the correct address.

(3) Examples. The following examples illustrate the rules of this paragraph (b).

(i) Example 1. During Partnership's 2020 taxable year, A, an individual, was a partner in Partnership and had an address at 123 Main St. On February 1, 2021, A sells his interest in Partnership and informs Partnership that A moved to 456 Broad St. On March 15, 2021, Partnership mails A's statement under section 6031(b) for the 2020 taxable year to 456 Broad St. On June 1, 2023, A moves again but does not inform Partnership of A's new address. In 2023, the IRS initiates an administrative proceeding with respect to Partnership's 2020 taxable year and mails a notice of final partnership adjustment (FPA) to Partnership for that year that includes a single imputed underpayment. Partnership makes a timely election under section 6226 in accordance with §301.6226-1 with respect to the imputed underpayment and on May 31, 2024, timely mails a statement described in paragraph (a) of this section to A at 456 Broad St. Although the statement was mailed to the last address for A that was known to Partnership, it is returned to Partnership as undeliverable because unknown to Partnership, A had moved. After undertaking reasonable diligence to obtain the correct address of A, Partnership is unable to ascertain the correct address. Therefore, pursuant to paragraph (b)(2) of this section, Partnership properly furnished the statement to A when it mailed the statement to 456 Broad St.

(ii) Example 2. The facts are the same as in Example 1 in paragraph (b)(3)(i) of this section, except that A lives at 789 Forest Ave during all of 2024 and reasonable diligence would have revealed that 789 Forest Ave is the correct address for A, but Partnership did not undertake such diligence. Because the statement was returned as undeliverable and Partnership did not undertake reasonable diligence to obtain the correct address for A, Partnership failed to properly furnish the statement with respect to A pursuant to paragraph (b)(2) of this section.

(iii) Example 3. Partnership is a calendar year taxpayer. The IRS initiates an administrative proceeding with respect to Partnership's 2020 taxable year. On January 1, 2024, the IRS mails an FPA with respect to the 2020 taxable year to Partnership that includes a single imputed underpayment. Partnership makes a timely election under section 6226 in accordance with §301.6226-1 with respect to the imputed underpayment. Partnership timely files a petition for readjustment under section 6234 with the Tax Court. The IRS prevails, and the Tax Court sustains all of the adjustments in the FPA with respect to the 2020 taxable year. The time to appeal the Tax Court decision expires, and the Tax Court decision becomes final on April 10, 2025. Under paragraph (b)(1)(ii) of this section, the adjustments in the FPA are finally determined on April 10, 2025, and Partnership must furnish the statements described in paragraph (a) of this section to its reviewed year partners and electronically file the statements with the IRS no later than June 9, 2025. See paragraph (c) of this section for the rules regarding filing the statements with the IRS.

(c) Time and manner for filing the statements with the IRS. No later than 60 days after the date the partnership adjustments are finally determined (as described in paragraph (b)(1) of this section), the partnership must electronically file with the IRS the statements that the partnership furnishes to each reviewed year partner under this section, along with a transmittal that includes a summary of the statements filed and such other information required in forms, instructions, and other guidance prescribed by the IRS.

(d) Correction of statements—(1) In general. A partnership corrects an error in a statement furnished under paragraph (b) of this section or filed under paragraph (c) of this section by filing the corrected statement with the IRS in the manner prescribed in paragraph (c) of this section and furnishing a copy of the corrected statement to the reviewed year partner to whom the statement relates in accordance with the forms, instructions, and other guidance prescribed by the IRS.

(2) Error discovered by partnership—(i) Discovery within 60 days of statement due date. If a partnership discovers an error in a statement within 60 days of the due date for furnishing the statements to partners and filing the statements with the IRS (as described in paragraphs (b) and (c) of this section and §301.6226-3(e)(3)(ii)), the partnership must correct the error in accordance with paragraph (d)(1) of this section and does not have to seek consent of the IRS prior to doing so.

(ii) Error discovered more than 60 days after statement due date. If a partnership discovers an error more than 60 days after the due date for furnishing the statements to partners and filing the statements with the IRS (as described in paragraphs (b) and (c) of this section and §301.6226-3(e)(3)(ii)), the partnership may only correct the error after receiving consent of the IRS in accordance with the forms, instructions, and other guidance prescribed by the IRS. The partnership may not furnish corrected statements unless it receives consent of the IRS to make the correction.

(3) Error discovered by the IRS. If the IRS discovers an error in the statements furnished or filed under paragraphs (b) and (c) of this section and §301.6226-3(e)(3) or the IRS cannot determine whether the statements furnished or filed by the partnership are correct because of a failure by the partnership to comply with any requirement under this section or §301.6226-3(e), the IRS may require the partnership to correct such errors in accordance with paragraph (d)(1) of this section or to provide additional information as necessary. Failure by the partnership to correct an error or to provide information when required by the IRS may be treated by the IRS as a failure to properly furnish correct statements to partners and file the correct statements with the IRS as described in paragraphs (b) and (c) of this section or in §301.6226-3(e)(3). Whether the IRS requires the partnership to correct any errors discovered by the IRS or provide additional information is discretionary on the part of the IRS and the IRS is under no obligation to require the partnership to provide additional information or to correct any errors discovered or brought to the IRS's attention at any time.

(4) Adjustments in the corrected statements taken into account by the reviewed year partners. The adjustments included on a corrected statement are taken into account by a reviewed year partner in accordance with §301.6226-3 for the reporting year (as defined in §301.6226-3(a)).

(e) Content of the statements. Each statement described in paragraph (a) of this section must include the following correct information:

(1) The name and TIN (or alternative form of identification as prescribed by forms, instructions, or other guidance) of the reviewed year partner to whom the statement is being furnished;

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

(3) The reviewed year partner's share of items as originally reported for the reviewed year to the partner on statements furnished to the partner under section 6031(b) and, if applicable, section 6227;

(4) The reviewed year partner's share of partnership adjustments determined under paragraph (f)(1) of this section;

(5) Modifications approved by the IRS with respect to the reviewed year partner (or with respect to any indirect partner (as defined in §301.6241-1(a)(4)) that holds its interest in the partnership through its interest in the reviewed year partner);

(6) The applicability of any penalty, addition to tax, or additional amount determined at the partnership level that relates to any adjustments allocable to the reviewed year partner and the adjustments to which the penalty, addition to tax, or additional amount relates, the section of the Internal Revenue Code (Code) under which each penalty, addition to tax, or additional amount is imposed, and the applicable rate of each penalty, addition to tax, or additional amount determined at the partnership level;

(7) The date the statement is furnished to the reviewed year partner;

(8) The partnership taxable year to which the adjustments relate; and

(9) Any other information required by forms, instructions, and other guidance prescribed by the IRS.

(f) Determination of each partner's share of adjustments—(1) Adjustments and other amounts—(i) In general. Except as described in paragraph (f)(1)(ii) or (iii) or (f)(2) of this section, the adjustments set forth in the statement described in paragraph (a) of this section are reported to the reviewed year partner in the same manner as each adjusted partnership-related item was originally allocated to the reviewed year partner on the partnership return for the reviewed year.

(ii) Adjusted partnership-related item not reported on the partnership's return for the reviewed year. Except as described in paragraph (f)(1)(iii) of this section, if the adjusted partnership-related item was not reported on the partnership return for the reviewed year, each reviewed year partner's share of the adjustments must be determined in accordance with how such partnership-related items would have been allocated under rules that apply with respect to partnership allocations, including under the partnership agreement.

(iii) Adjustments that specifically allocate items. If an adjustment involves an allocation of a partnership-related item to a specific partner or in a specific manner, including a reallocation of such an item, the reviewed year partner's share of the adjustment set forth in the statement is determined in accordance with the adjustment as finally determined (as described in paragraph (b)(1) of this section).

(2) Treatment of modifications disregarded. Any modifications approved by the IRS with respect to the reviewed year partner (or with respect to any indirect partner that holds its interest in the partnership through its interest in the reviewed year partner) under §301.6225-2 are disregarded for purposes of determining each partner's share of the adjustments under paragraph (f)(1) of this section.

(g) Coordination with other provisions under subtitle A of the Code—(1) Statements furnished to qualified investment entities described in section 860. If a reviewed year partner is a qualified investment entity within the meaning of section 860(b) and the partner receives a statement described in paragraph (a) of this section, the partner may be able to avail itself of the deficiency dividend procedure described in §301.6226-3(b)(4).

(2) Liability for tax under section 7704(g)(3). An election under this section has no effect on a partnership's liability for any tax under section 7704(g)(3) (regarding the exception for electing 1987 partnerships from the general rule that certain publicly traded partnerships are treated as corporations).

(3) Adjustments subject to chapters 3 and 4 of the Internal Revenue Code. A partnership that makes an election under §301.6226-1 with respect to an imputed underpayment must pay the amount of tax required to be withheld under chapter 3 or chapter 4, if any, in accordance with §301.6241-6(b)(4).

(h) Applicability date—(1) In general. Except as provided in paragraph (h)(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 6549, Feb. 27, 2019]