1.
Definitions.
As used in this section and sections 422.25B and 422.25C, unless the context otherwise requires:
a. “Administrative adjustment request” means the same as provided in section 6227 of the Internal Revenue Code.
b. “Audited partnership” means a partnership subject to a final federal partnership adjustment resulting from a partnership level audit.
c. “C corporation” means an entity that elects or is required to be taxed as a corporation under title 26, chapter 1, subchapter A, part 2, of the Internal Revenue Code.
d. “Corporate partner” means a C corporation partner that is subject to tax pursuant to section 422.33.
e. “Direct partner” means a person that holds an interest directly in a partnership or pass-through entity.
f. “Exempt partner” means a partner that is exempt from taxation pursuant to section 422.34.
g. “Federal adjustments report” means the same as defined in section 422.25.
h. “Federal partnership adjustment” means a change to an item or amount required to be determined under the Internal Revenue Code and the regulations thereunder that is used by a partnership and its direct and indirect partners to compute state tax owed for the reviewed year where such change results from a partnership level audit or an administrative adjustment request. A federal partnership adjustment is positive to the extent that it increases Iowa taxable income as determined under this title and is negative to the extent that it decreases Iowa taxable income as determined under this title. A federal adjustment reported on an amended federal return or other similar report filed pursuant to section 6225(c) of the Internal Revenue Code shall not be considered a federal partnership adjustment for purposes of this section.
i. “Federal partnership representative” means the person the partnership designates for the taxable year as the partnership’s representative, or the person the internal revenue service has appointed to act as the federal partnership representative, pursuant to section 6223(a) of the Internal Revenue Code and the regulations thereunder.
j. “Fiduciary partner” means a partner that is a fiduciary that is subject to tax pursuant to sections 422.5 and 422.6.
k. “Final determination date” means any one of the following dates:
(1) In the case of a federal partnership adjustment that arises from a partnership level audit, the first day on which no federal adjustments arising from that audit remain to be finally determined, whether by internal revenue service decision with respect to which all rights of appeal have been waived or exhausted, by agreement, or, if appealed or contested, by a final decision with respect to which all rights of appeal have been waived or exhausted. For agreements required to be signed by the internal revenue service and the audited partnership, the final determination date is the date on which the last party signed the agreement.
(2) In the case of a federal partnership adjustment that results from a timely filed administrative adjustment request, the day on which the administrative adjustment request was filed with the internal revenue service.
l. “Final federal partnership adjustment” means a federal partnership adjustment after the final determination date for that federal partnership adjustment has passed.
m. “Indirect partner” means a partner in a partnership or pass-through entity where such partnership or pass-through entity itself holds an interest directly, or through another indirect partner, in a partnership or pass-through entity.
n. “Individual partner” means a partner who is a natural person that is subject to tax pursuant to section 422.5.
o. “Nonresident partner” means a partner that is not a resident partner as defined in this subsection.
p. “Partner” means a person that holds an interest, directly or indirectly, in a partnership or pass-through entity.
q. “Partnership” means an entity subject to taxation under subchapter K of the Internal Revenue Code and the regulations thereunder and includes but is not limited to a syndicate, group, pool, joint venture, or other unincorporated organization through or by means of which any business, financial operation, or venture is carried on and which is not, within the meaning of this chapter, a trust, estate, or corporation.
r. “Partnership level audit” means an examination by the internal revenue service at the partnership level pursuant to subchapter C of title 26, subtitle F, chapter 63, of the Internal Revenue Code, as enacted by the Bipartisan Budget Act of 2015, Pub. L. No. 114-74, and as amended, which results in final federal partnership adjustments initiated and made by the internal revenue service.
s. “Pass-through entity” means an entity, other than a partnership, that is not subject to tax under section 422.33 for C corporations but excluding an exempt partner. “Pass-through entity” includes but is not limited to S corporations, estates, and trusts other than grantor trusts.
t. “Reallocation adjustment” means a final federal partnership adjustment that changes the shares of items of partnership income, gain, loss, expense, or credit allocated to a partner that holds an interest directly in a partnership or pass-through entity. A positive reallocation adjustment means the portion of a reallocation adjustment that would increase Iowa taxable income for such partners, and a negative reallocation adjustment means the portion of a reallocation adjustment that would decrease Iowa taxable income for such partners.
u. “Resident partner” means any of the following:
(1) For an individual partner, a “resident” as defined in section 422.4.
(2) For a fiduciary partner, one with situs in Iowa.
(3) For all other partners, a partner whose headquarters or principal place of business is located in Iowa.
v. “Reviewed year” means the taxable year of a partnership that is subject to a partnership level audit from which final federal partnership adjustments arise, or otherwise means the taxable year of the partnership or pass-through entity that is the subject of a state partnership audit.
w. “State partnership audit” means an examination by the director at the partnership or pass-through entity level which results in adjustments to partnership or pass-through entity related items or reallocations of income, gains, losses, expenses, credits, and other attributes among such partners for the reviewed year.
x. “Tiered partner” means any partner that is a partnership or pass-through entity.
y. “Unrelated business income” means the income which is defined in section 512 of the Internal Revenue Code and the regulations thereunder.
4.
Reporting and payment requirements for partnerships and their partners subject to final federal partnership adjustments.
a. Unless an audited partnership makes the election in subsection 5, a partnership shall do all of the following for all final federal partnership adjustments no later than ninety days after the final determination date:
(1) File a completed federal adjustments report.
(2) Notify each direct partner of such partner’s distributive share of the adjustments in the manner and form prescribed by the department by rule.
(3) File an amended composite return under section 422.13, Code 2021, or under section 422.16B, as applicable, if one was originally required to be filed, and if applicable for withholding from partners, file an amended withholding report under section 422.16, Code 2021, and pay the additional amount under this title that would have been due had the final federal partnership adjustments been reported properly as required, including any applicable interest and penalties.
b. Unless an audited partnership paid an amount on behalf of the direct partners of the partnership pursuant to subsection 5, all direct partners of the partnership shall do all of the following no later than one hundred eighty days after the final determination date:
(1) File a completed federal adjustments report reporting the direct partner’s distributive share of the adjustments required to be reported to such partners under paragraph “a”.
(2) If the direct partner is a tiered partner, notify all partners that hold an interest directly in the tiered partner of such partner’s distributive share of the adjustments in the manner and form prescribed by the department by rule.
(3) If the direct partner is a tiered partner and subject to section 422.13, Code 2021, or section 422.16B, file an amended composite return under section 422.13, Code 2021, or under section 422.16B, as applicable, if such return was originally required to be filed, and if applicable for withholding from partners file an amended withholding report under section 422.16, Code 2021, if one was originally required to be filed.
(4) Pay any additional amount under this title that would have been due had the final federal partnership adjustments been reported properly as required, including any applicable penalty and interest.
c. Unless a partnership or tiered partner paid an amount on behalf of the partners pursuant to subsection 5, each indirect partner shall do all of the following:
(1) Within ninety days after the time for filing and furnishing statements to tiered partners and their partners as established by section 6226 of the Internal Revenue Code and the regulations thereunder, file a completed federal adjustments report.
(2) If the indirect partner is a tiered partner, within ninety days after the time for filing and furnishing statements to tiered partners and their partners as established by section 6226 of the Internal Revenue Code and the regulations thereunder but within sufficient time for all indirect partners to also complete the requirements of this subsection, notify all of the partners that hold an interest directly in the tiered partner of such partner’s distributive share of the adjustments in the manner and form prescribed by the department by rule.
(3) Within ninety days after the time for filing and furnishing statements to tiered partners and their partners as established by section 6226 of the Internal Revenue Code and the regulations thereunder, if the indirect partner is a tiered partner and subject to section 422.13, Code 2021, or section 422.16B, file an amended composite return under section 422.13, Code 2021, or under section 422.16B, as applicable, if such return was originally required to be filed, and if applicable for withholding from partners, file an amended withholding report under section 422.16, Code 2021, if one was originally required to be filed.
(4) Within ninety days after the time for filing and furnishing statements to tiered partners and the partners of the tiered partners as established by section 6226 of the Internal Revenue Code and the regulations thereunder, pay any additional amount due under this title, including any penalty and interest that would have been due had the final federal partnership adjustments been reported properly as required.