(1) Notwithstanding ORS § 314.380, and except for adjustments required to be reported for federal purposes pursuant to section 6225(a)(2) of the Internal Revenue Code, partnerships and partners shall report the adjustments arising from a partnership-level audit or an administrative adjustment request and make payments as required under this section.

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(2)(a) A partnership‘s federal partnership representative shall act as the partnership’s Oregon partnership representative for the reviewed year, unless the partnership designates, in the time and manner prescribed by the Department of Revenue by rule or through forms and instructions, another Oregon partnership representative. If the partnership representative is an entity, the entity representative shall act through a designated individual in the manner provided by the department by rule or through forms and instructions.

(b) The Oregon partnership representative for the reviewed year is responsible for any action required or permitted to be taken under this section, including providing the adjustments report to the Department of Revenue and making any election outlined under this section. With respect to an action required or permitted to be taken by the partnership under this section, the Oregon partnership representative for the reviewed year has the sole authority to act on behalf of the partnership, and the direct partners and indirect partners of the partnership are bound by those actions.

(c) With respect to representation in any conference before the department or before the Oregon Tax Court, if the designated partnership representative qualifies as a tax matters partner under ORS § 305.242 (2), the partnership representative shall serve as the tax matters partner, unless the partnership representative designates another person who qualifies as a tax matters partner under ORS § 305.242 (2). If the designated partnership representative does not qualify to be the tax matters partner under ORS § 305.242 (2), the partnership representative shall designate a person that qualifies to be a tax matters partner under ORS § 305.242 (2). For purposes of any conference before the department or proceeding before the tax court, the partnership and all partners of the partnership shall be bound by the actions of the designated partnership representative or other person designated to act as the tax matters partner under this paragraph.

(3) Adjustments subject to the requirements of this section, except for those subject to an election under subsection (4) of this section, shall be reported as follows:

(a) Not later than 180 days after the date of the federal notice of final partnership adjustment or 90 days after the date on which the amended federal return, federal refund claim or other similar report, including any report made under section 6225(c) of the Internal Revenue Code, or administrative adjustment request was filed, whichever is later, the partnership shall:

(A) File with the department a completed adjustments report in the form and manner prescribed by the department that is sufficiently detailed to allow computation of the tax change resulting from the adjustment;

(B) Concede the accuracy of the determination of the Internal Revenue Service or state wherein the taxpayer believes the determination to be erroneous;

(C) Submit with the adjustments report any other information required by the department;

(D) Notify the partnership’s direct partners of their distributive share of adjustments, including information as required by the department;

(E) File an amended composite return for direct partners that are nonresident partners as required under ORS § 314.778; and

(F) Pay any additional personal income tax and corporate income or excise tax that would have been due had the adjustments been reported properly as required on the composite return.

(b) Not later than 270 days after the date of the federal notice of final partnership adjustment or 180 days after the date on which the amended federal return, federal refund claim or other similar report, including any report made under section 6225(c) of the Internal Revenue Code, or administrative adjustment request was filed, whichever is later, each direct partner that is subject to the tax imposed under ORS Chapter 316, 317 or 318 shall:

(A) File with the department an adjustments report or an original or amended Oregon tax return reporting the direct partner’s distributive share of the adjustments reported to them under this subsection; and

(B) Pay any additional amount of tax that would have been due had the adjustments been reported properly, plus any interest and penalty due under ORS § 305.220 or 314.400.

(4) An audited partnership may make an election to pay at the partnership level. Subject to the limitations in subsection (5) of this section, an audited partnership making an election under this subsection shall:

(a) Not later than 180 days after the date of the federal notice of final partnership adjustment, file with the department a completed adjustments report, including partner information and any other information required by the department, and notify the department that it is making the election under this subsection; and

(b) Not later than 270 days after the date of the federal notice of final partnership adjustment, pay an amount, in lieu of taxes owed by the direct and indirect partners of the partnership, to be determined as follows:

(A) For the total distributive shares of adjustments made to direct partners that are corporate partners, apportion and allocate any adjustments as provided under this chapter and multiply the resulting amount by the highest marginal tax rate applicable to taxpayers subject to the tax imposed under ORS Chapter 317 or 318 for the reviewed year;

(B) For the total distributive shares of adjustments made to direct partners that are nonresident partners subject to tax under ORS Chapter 316, determine the amount of any adjustment that is income from Oregon sources under ORS Chapter 316 and multiply the resulting amount by the highest marginal tax rate applicable to taxpayers for the tax year under ORS Chapter 316;

(C) For the total distributive shares of adjustments made to tiered partners:

(i) Determine the amount of any adjustment that is of a type that would be subject to sourcing to Oregon by a nonresident partner under ORS Chapter 316 and determine the portion of this amount that would be sourced to Oregon;

(ii) Determine the amount of any adjustment that is of a type that would not be subject to sourcing to Oregon by a nonresident partner under ORS Chapter 316;

(iii) Determine the portion of the amount in sub-subparagraph (ii) of this subparagraph that can be established, as prescribed by the department by rule, to be properly allocable to indirect partners that are nonresident partners or other partners not subject to tax on the adjustments; and

(iv) Multiply the total of the amounts in sub-subparagraphs (i) and (ii) of this subparagraph, reduced by the amount determined in sub-subparagraph (iii) of this subparagraph, by the highest marginal tax rate under ORS Chapter 316;

(D) For the total distributive shares of adjustments made to direct partners that are resident partners, multiply the amount of the adjustments by the highest marginal tax rate under ORS Chapter 316; and

(E) Add the amounts determined in subparagraphs (A) to (D) of this paragraph and any interest and penalty as provided in ORS § 305.220 or 314.400.

(5) Adjustments subject to the election in subsection (4) of this section do not include:

(a) The distributive share of adjustments that under this chapter or ORS Chapter 317 or 318 must be included in the apportionable income of any direct partner that is a corporate partner unless the corporate partner states in writing to the partnership representative that its distributive share of the adjustments is not required to be included in its apportionable income;

(b) The distributive share of adjustments that under this chapter or ORS Chapter 317 or 318 must be included in the apportionable income of any indirect partner that is a corporate partner, provided that the audited partnership can reasonably determine this;

(c) The distributive share of adjustments made to a direct partner that is exempt from tax under ORS § 316.277 or 317.080, other than any distributive share that is unrelated business taxable income of the partner; or

(d) Any adjustments arising from an administrative adjustment request.

(6) For purposes of subsection (5) of this section, a corporate partner’s distributive share is presumed to be included in the partner’s own apportionable income unless the partner provides the statement described in subsection (5)(a) of this section to the partnership representative.

(7)(a) An audited partnership that makes an election under subsection (4) of this section consents to be subject to the administrative provisions of this chapter and ORS Chapter 305.

(b) The department may adopt rules to prevent double taxation or double deduction of any amount included in the computation of income under this section.

(8) The direct and indirect partners of an audited partnership that are tiered partners and all partners of those tiered partners that are subject to tax imposed under ORS Chapter 316, 317 or 318 are subject to the reporting and payment requirements of subsection (3) of this section. The tiered partners are entitled to make the elections provided in subsection (4) of this section. The tiered partners or their partners shall make the required reports and payments not later than 90 days after the time for filing and furnishing statements to tiered partners and their partners as established under section 6226 of the Internal Revenue Code and the regulations thereunder. The department may adopt rules to establish procedures and interim time periods for the reports and payments required by tiered partners and their partners and for making the elections under subsection (4) of this section.

(9)(a) The department may adopt rules allowing an extension of time for an audited partnership and its tiered partners or direct partners to file reports of adjustments required under this section.

(b) Notwithstanding paragraph (a) of this subsection, the tax shall be paid to the department on the date fixed by this section without regard to extensions.

(c) Any extension granted under this section extends the final date prescribed by law for assessing any additional tax arising from the adjustments.

(10)(a) An election made pursuant to subsection (4) of this section is irrevocable.

(b) If reported properly and paid by the audited partnership or tiered partner, the amount determined in subsection (4)(b) of this section shall be treated as paid in lieu of taxes owed by its direct and indirect partners, to the extent applicable, on the same adjustments. Direct partners or indirect partners may not take any deduction or credit for the amount or claim a refund of the amount.

(c) Nothing in this subsection precludes a direct partner that is a resident partner or nonresident partner from claiming a credit for any amounts paid by the audited partnership or tiered partner on the direct partner’s behalf to another state or local tax jurisdiction in accordance with the provisions of ORS § 316.082 or 316.131.

(11) Nothing in this section prevents the department from assessing direct partners or indirect partners for taxes owed, using the best information available, in the event that a partnership or tiered partner fails to timely make any report or payment required by this section for any reason, or from collecting from direct partners or indirect partners. [2019 c.132 § 3]

[1989 c.625 § 43; 1991 c.457 § 22; 1997 c.839 § 60; renumbered 314.763 in 2019]