PROCEDURALLY TAXING tax notes federal
by Jenni Black Jenni Black is a managing director in Citrin Cooperman’s national tax office and the practice leader of the tax procedure and controversy practice. In this post, Black continues her discussion of inconsistent treatment under the Bipartisan Budget Act of 2015 by considering how the rules apply to a partner filing inconsistently if that partner is not a partnership. This post reflects the author’s personal views and not necessarily those of Citrin Cooperman. As discussed in part 1 of this article, one of the key features of the centralized partnership audit regime enacted by the Bipartisan Budget Act of 2015 is that partners must report partnershiprelated items (PRIs) on their returns consistent with how the partnership treated those same PRIs. This means the partner must report the item in the same amount, character, and timing as the partnership. Part 1 of this article discussed what happens if a partnership-partner in a BBA partnership files inconsistently from the BBA partnership, the disparities that exist depending on whether the partnership-partner is subject to BBA or not, and the open question regarding what happens with adjustments that do not result in an imputed underpayment (ATDNR). Part 2 of this article continues the discussion of things that make you go “hmmm” regarding inconsistent treatment under BBA by looking at how the rules under section 6222 would work if the partner in the BBA partnership is a pass-through partner but
is not a partnership and the open questions surrounding them. Section 6222 provides that the IRS “shall” assess “any” underpayment of tax due to a partner’s failure to file consistently with the BBA partnership as if the underpayment was on account of a mathematical or clerical error. Section 6232(d) and reg. section 301.6232-1(d) provide special rules for adjusting partnership-partners if the partnership-partner files inconsistently from a BBA partnership and does not file a notice of inconsistent treatment. But those are the only rules. There are no rules, either in the statute or regulations, dealing with inconsistencies of nonpartnership pass-through partners (for example, S corporations, trusts, estates). Unlike in other areas of BBA, there is nothing in section 6232(d) that applies the rules for partnership-partners to other pass-through partners that are not partnerships.1 While for taxpaying pass-through partners, the rules for inconsistent treatment should be the same as with individual or C corporation partners (that is, any underpayment of tax resulting from the inconsistent treatment can be directly assessed), how would these rules work in cases of pass-through partners that are not partnerships and who do not pay tax (that is, S corporations, trusts, and estates that do not pay tax so who have no underpayment of tax due to the failure to file consistently)? Hmmmm. As the statute and regulations are completely silent on how to adjust pass-through partners that
1
See IRC sections 6226(b)(4) (applying the rules for push out in tiered structures to partnerships and S corporations); 6232(f)(5) (“for purposes of this subsection, an S corporation and its shareholders shall be treated in the same manner as a partnership and its partners” applying the rules for assessing partners if the partnership does not pay to S corporations and their shareholders. However, as it only applies to this “subsection” it only applies to section 6232(f) and not section 6232(d)).
TAX NOTES FEDERAL, VOLUME 188, SEPTEMBER 1, 2025 For more Tax Notes® Federal content, please visit www.taxnotes.com.
1487
© 2025 Tax Analysts. All rights reserved. Tax Analysts does not claim copyright in any public domain or third party content.
Inconsistently Inconsistent: Open Questions On Inconsistent Treatment Under BBA, Part 2