Ezel / IRS Rulings / 202625023
Chief Counsel Advice 202625023 Released June 18, 2026 Advice

How to compute the accuracy-related penalty on a BBA partnership imputed underpayment

Not precedent. Under 26 U.S.C. § 6110(k)(3), this written determination may not be used or cited as precedent. It resolved one taxpayer's situation on its specific facts, and identifying details were redacted by the IRS before release. The official IRS release (linked on this page as a PDF) is the authoritative source.
About this page: The plain-English summary and ruling snapshot below were written by Ezel based on the official IRS release. The full text is the IRS's own document.
View official IRS release (PDF)

Plain-English summary

This is an internal IRS Chief Counsel email answering a question about the centralized partnership audit regime created by the Bipartisan Budget Act (BBA). When the IRS audits a partnership under that regime and finds an error, it calculates an "imputed underpayment" at the partnership level. The question was how to figure the accuracy-related penalty (for example, a substantial-understatement penalty) on that amount. The answer: for penalty purposes, the partnership is treated as an individual taxpayer for the year under review, and the imputed underpayment is treated as the underpayment or understatement of tax (I.R.C. § 6233(a)(3)). To test whether an understatement is "substantial" under § 6662(d)(1)(A), you compute the tax that would result by treating the partnership's net income or loss (as adjusted) as taxable income under the ordinary individual rate table in § 1(c), ignoring the capital-gains rates in § 1(h), per Treas. Reg. § 301.6233(a)-1(c)(2)(iv)(B). The email points to a worked example in the Internal Revenue Manual (IRM 20.1.5.21.3.2). This is informal advice, not a ruling.

Ruling snapshot

  • Question: How is the accuracy-related penalty computed on a BBA partnership's imputed underpayment?
  • Outcome: Advice given (no ruling or determination).
  • Key authorities: I.R.C. § 6233(a)(3); I.R.C. § 6662(d)(1)(A); I.R.C. § 1(c) and (h); Treas. Reg. § 301.6233(a)-1(c)(2)(iv)(B); IRM 20.1.5.21.3.2.

Full text (IRS public release)

ID: CCA_2026042208443600
[Third Party Communication:
Date of Communication: Month DD, YYYY]

UILC: 6233.00-00, 6662.00-00

Number: 202625023
Release Date: 6/18/2026

From: -----------------
Sent: Wednesday, April 22, 2026 8:44:36 AM
To: --------------------
Cc: ----------------------------------------------
Bcc:
Subject: RE: BBA Passthrough Penalty Question

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

For purposes of computing accuracy-related penalties, the partnership is treated as an individual subject to tax for the reviewed year. I.R.C. § 6233(a)(3). The imputed underpayment would be treated as the underpayment or understatement of tax for the reviewed year, and penalties are determined based on the amount of the imputed underpayment. Id. To determine whether the understatement is substantial under section 6662(d)(1)(A), the amount of tax to be shown on the return is the tax that would result by treating the net income or loss of the partnership for the reviewed year reflecting any adjustments as taxable income described in I.R.C. § 1(c) (determined without regard to I.R.C. § 1(h)). Treas. Reg. § 301.6233(a)-1(c)(2)(iv)(B). IRM 20.1.5.21.3.2 provides a helpful example of the calculation.

If you have any questions or would like to discuss, please don't hesitate to let us know.

Thanks,

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