CCA 200917038: Unfiled withholding return did not use adjustment-request procedures

Plain-English summary

The IRS advised a partnership to file its outstanding withholding returns. An administrative adjustment request applies to a previously filed return, so that procedure did not apply to an unfiled withholding return. If the partnership filed and paid the withholding tax, the payment would automatically count as a distribution to the foreign entity. No further filing was needed, but the partnership should reduce the foreign partner's capital account by the distribution amount.

Ruling snapshot

• Question: Did an unfiled withholding return require an administrative adjustment request, and how should payment affect the foreign partner?
• Outcome: Advice given: file the return without an AAR and reduce the foreign partner's capital account for the deemed distribution.
• Key authorities: IRC § 6227.

Full text (IRS public release)

ID: CCA_2009032414543037 Number: 200917038
Release Date: 4/24/2009
Office: --------------
UILC: 6227.00-00

From: -------------------
Sent: Tuesday, March 24, 2009 2:54:33 PM
To: --------------------
Cc: ---------------------------------------------------------------------------------------------------
Subject: RE:

1. Have withholding returns filed now. That should end the matter. An AAR would only relate to a
   previously filed return so AAR procedures would not apply to an unfiled withholding tax return.

2. If the partnership files a withholding tax return and pays withholding tax, that would automatically be a
   deemed distribution of the paid tax to the foreign entity. There should be no need for any further filing.
   But the partnership should reflect a reduced capital account going forward for the foreign partner in the
   amount of the distribution.