Partnership penalties differ under collection and push-out rules

Plain-English summary

Chief Counsel explained that partnership-level penalties are handled differently under Section 6232(f) and the partnership push-out rules. Under Section 6232(f), partners become liable for the unpaid partnership balance, including the imputed underpayment, penalties, and interest, allocated according to their proportionate shares. The penalty in that setting has already been assessed at the partnership level. Under a push out, the applicability of a penalty and the adjustments to which it applies go to the reviewed-year partners. Each partner then computes the penalty using the partner's own change in tax, facts, circumstances, and applicable thresholds.

Ruling snapshot

• Question: How are penalties handled when partners owe an unpaid partnership balance under Section 6232(f), compared with a partnership push out?
• Outcome: advice given
• Key authorities: IRC §§ 6232(f), 6662

Full text (IRS public release)

 ID:        CCA_2024032913553848               [Third Party Communication:

 UILC:      6232.00-00 R 1988                  Date of Communication: Month DD, YYYY]

Number: 202417018
Release Date: 4/26/2024
From: --------------------
Sent: Thursday, January 11, 2024 8:33:24 AM
To: -----------------------
Cc:
Bcc:
Subject: RE: Penalty question


Hi -----------,

Not a bother at all!

Penalties are handled differently under section 6232(f) and push out. Under section
6232(f) the partners are liable for what the partnership has not paid. It takes the balance
of what the partnership owes (the imputed underpayment, penalties, interest) and splits
it amongst the partners based on their proportionate share. So in that case, the penalty
has already been assessed at the partnership level (the imputed underpayment x the
penalty rate).

For push out, it’s like TEFRA, the applicability of the penalty and what adjustments it
applies to are pushed out to the reviewed year partners. For example, that the section
6662 substantial understatement penalty of 20% applies to the adjustment to X. When
the partners compute what their change in tax would have been if they had reported to
begin with, they will compute the penalty as well, based on the partner’s own facts and
circumstances (including any thresholds, etc.).

Please let me know if you have any questions.

Thanks,
Jenni

Jenni Black (she/her)
Senior Counsel
CC:PA:06
Phone: (202) 317-5216