Alert

IRS Delays Certain Partnership Reporting Requirements

December 19, 2019

Last week the IRS issued Notice 2019-6 (the “Notice”), which provides that the requirement to report partners’ capital accounts on the tax basis method will not be effective for partnership taxable years beginning in 2019. Instead, the reporting requirement will be effective for partnership taxable years beginning in 2020. For 2019, partnerships must report partner capital accounts consistent with the reporting requirements contained in the 2018 Form 1065 and accompanying instructions, which allows tax basis, section 704(b), GAAP, or any other method. However, negative tax basis capital accounts must be reported on a partner-by-partner basis on line 20 of Schedule K-1, using Code AH.

The Notice also clarifies the requirement for partnerships to report a partner’s share of net unrecognized section 704(c) gain or loss for partnership taxable years beginning in 2019. Publicly traded partnerships are exempted from this requirement until further notice. Finally, the Notice provides that the requirement for partnerships to report to partner’s information about separate section 465 at-risk activities will not be effective until partnership taxable years beginning in 2020. The Notice explains that partnerships that follow these provisions will not be subject to any penalty for reporting in accordance with the Notice.