IRS advised on extending assessment periods for partnership withholding

Plain-English summary

The IRS advised that withholding under IRC §§ 1441 through 1446 is a partnership item when it is more appropriately determined at the partnership level. It stated that the partnership entity is the taxpayer for this purpose, so the Service should obtain a Form 872 signed by an authorized person, or potentially a Form 872-P signed by the partnership’s tax matters partner. It also discussed when a Form 872-P for a lower-tier TEFRA partnership could extend the assessment period for a middle-tier withholding partnership.

Ruling snapshot

• Question: Which entity and form should be used to extend the assessment period for partnership withholding?
• Outcome: Advice given
• Key authorities: IRC §§ 1441-1446, 6229, and 6231; Treas. Reg. § 301.6231(a)(3)-1(a)(1)(v).

Full text (IRS public release)

ID: CCA_2010060214094554 Number: 201025067
Release Date: 6/25/2010
Office: --------------
UILC: 6229.02-00

From: --------------------------
Sent: Wednesday, June 02, 2010 2:09:48 PM
To: ------------------------------------------
Cc: --------------------
Subject: RE: Withholding Question

If a partnership is required to withhold under sections 1441-1446, that withholding is a partnership item of
that partnership: sections 1441-1446 are provisions of Subtitle A more appropriately determined at the
partnership level than at the partner level. Treas. Reg. 301.6231(a)(3)-1(a)(1)(v).

For these purposes, the partnership entity is the taxpayer. Thus, the Service needs to extend the
limitations period to assess the partnership entity. The Service should obtain a F872 from the partnership
entity, signed by a general partner/managing member, or any person with authority under state law to
bind the partnership entity. Alternatively, to the extent that courts uphold the Service's position that, for
these purposes, the partnership entity is a "partner" as defined by section 6231(a)(2)(B), then a F872P
signed by the TMP of the partnership would extend the limitations period to assess against the
partnership entity the withholding.

If the withholding partnership (X) is a partner in a TEFRA partnership (Y), a F872P re that nonwithholding
TEFRA partnership (Y) (the lower tier) would extend the limitations period to assess against the
withholding partnership(X) (the middle tier) the withholding amount only if the withholding is an affected
item of the lower tier (Y). The primary hazard would be whether the withholding amount is an affected
item of the lower tier (Y).