Primer on the New Pass-Through Entity Reporting Landscape

The Tax Cuts & Jobs Act introduced the base erosion and anti-abuse tax, global intangible low-taxed income, foreign derived intangible income, and the participation exemption regime. Prior to the IRS releasing Schedule K-2, for reporting a partner’s international distributive share items, and Schedule K-3, for reporting a partner’s share of international income, deductions, and credits, the tax reporting regime lacked structure. Releasing these forms provides a significant improvement in meeting the challenges of reporting for international matters for pass-through entities.

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Related Content

• Partnerships and LLCs: Reporting and Procedural Requirements
  Discover more about the major reporting and procedural requirements for partnership and limited liability company (LLC) entities by reading this practice note. Even though partnerships and LLCs are flow-through entities that the law does not tax directly, most of these entities must file yearly informational returns that report the partnership’s or LLC’s items of income, gain, loss, deduction, and credit.
• Advanced Taxation Issues for Partnerships and LLCs
  Read more about the unique features of partnerships and LLCs in this practice note, which introduces the new partnership audit rules. The practice note then provides a discussion of the more advanced issues in partnership taxation, including the ability to allocate items of income, gain, loss, deduction, and credit; partnership distributions and liabilities; and I.R.C. Section 754 elections, partnership terminations, and liquidation.
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  Learn more about pass-through entities by reading this practice note that discusses their tax characteristics. It addresses partnerships, multi-member series LLCs, S corporations, real estate investment trusts, and regulated investment companies. 
• IRS Grants Penalty Relief to Pass-Throughs on Int’l Tax Forms
  Learn that, in I.R.S. Notice 2021-39, the IRS provided penalty relief for pass-through entities such as partnerships and S corporations, provided that the entities can show a good faith effort to follow new reporting requirements on international tax matters.

Practical Guidance Updates
Featuring the latest updates from your Practical Guidance account.  

• Tax Key Legal Developments Tracker (Federal)
  Stay informed on new developments.
  • Business Entities
    IRS issues final regulations under I.R.C. Sections 250 and 951A addressing the calculation of qualified business asset investment (“QBAI”) for qualified improvement property (“QIP”) under the alternative depreciation system (“ADS”). TD 9956 also contains final regulations with transition rules relating to the impact on loss accounts of net operating loss (NOL) carrybacks allowed by reason of the CARES Act. 86 Fed. Reg. 52,971 (Sept. 24, 2021).
  • IRS issues final regulations under R.C. Section 301. These regulations update existing regulations under section 301 to reflect statutory changes made by the Technical and Miscellaneous Revenue Act of 1988, which changes provide that the amount of a distribution of property made by a corporation to its shareholder is the fair market value of the distributed property. The regulations affect shareholders that receive a distribution of property from a corporation. 86 Fed. Reg. 52,612 (Sept. 22, 2021).
  • State and Local Tax
    IRS issues final regulations establishing a new user fee of $67 for persons requesting the issuance of an estate tax closing letter (formerly known as IRS Letter 627). The final regulations adopt, without significant change, proposed regulations issued in late December 2020. 85 Fed. Reg. 86,871 (Dec. 31. 2020). The IRS said it would begin charging the fee on October 28, 2021. Closing letter requests must be made using Pay.gov. 86 Fed. Reg 53,539 (Sept. 28. 2021).
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• New and Recently Updated Practical Guidance Content
  • Int’l Biz Challenges Come Into View as Dems Advance Tax Plan
  • House Dems Float $2.9T in Tax Increases to Pay for Budget

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