Centralized Partnership Audit Rule – “Push Out” Election


Form 8988, Election for Alternative to Payment of the Imputed Underpayment – IRC Section 6226
Form 8989, Request to Revoke the Election for Alternative to Payment of the Imputed Underpayment

The IRS has issued new forms 8988 and 8989, to be used by partnerships to make or revoke, respectively, the partnership audit rule election to “push out” partnership adjustments to their partners, under the centralized partnership audit regime effective January 1, 2018.

Under the centralized partnership audit rule, adjustments to partnership-related items are determined at the partnership level. The tax attributable to those adjustments is also assessed and collected at the partnership level in the form of an imputed underpayment determined pursuant to Internal Revenue Code (IRC) Section 6225.

A partnership may elect the alternative to payment of the imputed underpayment under which it “pushes out” the adjustments determined at the partnership level, in which case the tax attributable to the adjustments is assessed and collected from the partnership’s partners. The election must be made within 45 days of the date on which the final partnership adjustment (FPA) is mailed by the IRS. This 45-day period cannot be extended and, once made, the election may only be revoked with the consent of the IRS.

A partnership may make an election with respect to one or more imputed underpayments identified in an FPA. For example, where the FPA includes a general imputed underpayment and one or more specific imputed underpayments, the partnership may make an election with respect to any or all of the imputed underpayments. A partnership that makes the election must furnish statements to its reviewed-year partners (and file those statements with the IRS) no later than 60 days after the date all of the partnership adjustments to which the statement relates are finally determined.

The IRS has now issued Form 8988 for making the election. In completing Form 8988, the partnership must:

  • attach a copy of the Notice of Final Partnership Adjustment and indicate the date of that notice;
  • attach a schedule listing each reviewed-year direct partner’s name, address and Taxpayer Identification Number (TIN) and indicate the number of reviewed-year partners;
  • indicate whether it is making the election for a general imputed underpayment or a specific imputed underpayment;
  • acknowledge that it must furnish statements to its reviewed-year partners and file a copy of the statements with IRS;
  • acknowledge that election may only be revoked with the consent of IRS.

Also, the IRS has now issued Form 8988 for revoking the election. The partnership must indicate whether it is revoking the election for a general imputed underpayment for a specific imputed underpayment.

The instructions to the form note the following:

  1. IRS will not approve a request to revoke an election made under IRC Section 6226 after the partnership has furnished statements to its reviewed-year partners. Accordingly, any request to revoke the prior election must be submitted and approved prior to the statements being furnished to the reviewed-year partners.
  2. In submitting the request to revoke the prior election, the partnership should understand that it is liable for the imputed underpayment under IRC Section 6225 as if the original election was never made.

Therefore, the partnership must pay the imputed underpayment under IRC Section 6225 as well as any penalties and interest under IRC Section 6233.

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