CCA 200911019: An off-Code law added one dollar to the 2008 partnership return penalty

Plain-English summary

Public Law 110-141 added one dollar to the section 6698(b)(1) penalty for failure to file a partnership return. The increase applied only to a taxable year beginning in 2008 and did not apply to S corporation returns. Section 6698 continued to state an $89 penalty because the public law did not amend the Code. The $90 total resulted from applying the separate off-Code requirement together with the Code penalty.

Ruling snapshot

• Question: How did Public Law 110-141 affect the section 6698 partnership return penalty?
• Outcome: Advice given: it added one dollar for taxable years beginning in 2008 without changing the Code text.
• Key authorities: IRC § 6698(b)(1); Pub. L. 110-141.

Full text (IRS public release)

ID: CCA_2009020210173153 Number: 200911019
Release Date: 3/13/2009
Office: ----------------------------
UILC: 6698.00-00

From: --------------------
Sent: Monday, February 02, 2009 10:17:33 AM
To: -------------------------------------------
Cc: ---------------------------------------------------------------------------------------------------------------------------
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Subject: RE: IRC §6698 Penalty

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Your understanding is correct. P.L. 110-141 is an off-code provision that adds $1 to the § 6698(b)(1) Failure to File a Partnership Return penalty. The $1 addition does not apply to S Corporation returns. The $1 increase also only applies to a taxable year beginning in 2008.

The § 6698 penalty will not state $90. The $90 figure is only reached by taking the $89 penalty and adding the $1 from the off-code provision. The Code has not changed because P.L. 110-141 did not amend the code. Instead, P.L. 110-141 added a separate off-code requirement that operates simultaneously with the code.

While I have not seen anything in the legislative history to explain why the code was not amended in this specific case, small penalty increases can be by-products of the pay-as-you-go system. The penalty increase may have been added to off-set a spending increase or tax cut in another provision. However, again, I do not know what the reasoning was in this case.

I hope this answers your questions. If there is anything else I can do to help you or if you have any other questions please feel free to contact me.

Have a good day,
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