IRS Releases Updated Draft Partnership Return

On July 14, 2020, the IRS and Treasury released proposed redesigned tax Form 1065, U.S. Return of Partnership Income.  The 2017 Tax Cuts and Jobs Act added to the already messy process of partnership tax filing by creating a new class of foreign income (global intangible low-taxed income, or GILTI) and a deduction for foreign-derived intangible income (FDII). The updated form seeks to standardize and streamline the reporting of items of international tax relevance for both partnerships and partners.

Currently, partners are required to report international tax information on multiple forms based on information they receive from the partnership in narrative statements attached to Schedule K-1. Those statements are compiled in a variety of formats and may be burdensome for partners to use in preparing their own returns. The IRS and Treasury released two new draft sections: Schedule K-2, which will include international tax income of the partnership, and K-3, which will