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. She is also a contributing author for Procedurally Taxing. In this post, Black considers what it means for an item or amount to be a partnership-related item, including whether something is relevant for determining chapter 1 liability. This post reflects the author’s personal views and not necessarily those of Citrin Cooperman. The centralized partnership audit regime enacted by the Bipartisan Budget Act of 2015 is a procedural regime under which adjustments are made to partnership-related items (PRIs). To be a PRI, an item or amount must be (1) with respect to the partnership, and (2) relevant to determining 1 the tax liability of any person under chapter 1. The definition of PRI is broad and would include not only items of income, gain, loss, deduction, or credit but items that are not that, such as adjustments to items on a balance sheet or informational items (non-income items). Part 1 of this post discusses what it means for an item or amount to be a PRI, including whether 1
Section 6241(2)(B) defines the term “partnership-related item” as “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 [above].”
something is relevant in determining the chapter 1 liability of any person (that is, one of the two factors in determining whether something is a PRI). In a post-Loper Bright world, everyone is focused on what the “best” interpretation of a statute is (and everyone has become an armchair quarterback regarding what that “best” interpretation is). The “best” interpretation of a statute must take into account context and not just 2 read the words of the statute in a vacuum. This means looking at the statute’s place in the Internal Revenue Code, why the statute is there, and the statute’s relationship to other statutes to which it relates. Above all, the “best” interpretation must be workable. So, in the words of Tina Turner, what interpretation of the definition of PRI is “simply the best, better than all the rest”? As stated previously, the definition of PRI has two parts to it: An item or amount must be “with respect to the partnership” and it must be relevant in determining the chapter 1 liability of any person outside of BBA. Reg. section 301.62411(a)(6)(iii) provides that an item or amount is with respect to the partnership if the item is on the partnership return (or required to be there if it isn’t) or required to be maintained in the partnership’s books and records. The partner’s reporting of the item or amount on the partner’s return is not with respect to the partnership if it is based on the partner’s facts and circumstances (for example, the partnership’s noncash charitable contribution is with respect to the partnership but whether the partner can deduct it is not). Under section 6241(2)(B)(i), an item or amount is 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
2
See North Wall Holdings LLC v. Commissioner, 165 T.C. No. 9, 3, 11 (2025).
TAX NOTES FEDERAL, VOLUME 190, MARCH 23, 2026 For more Tax Notes® Federal content, please visit www.taxnotes.com.
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Partnership-Related Items: Staying Relevant