SECTION 1. PURPOSE

This notice announces transition relief for taxable years that begin in 2021 with respect to new Schedules K-2 and K-3 required for Forms 1065, U.S. Return of Partnership Income, 1120-S, U.S. Income Tax Return for an S Corporation, and 8865, Return of U.S. Persons With Respect to Certain Foreign Partnerships. Section 2 provides background on these new schedules and the penalties that may apply for failure to furnish complete and correct information with respect to such schedules. Section 3 provides transition relief from these penalties for any incorrect or incomplete reporting on the Schedules K-2 and K-3 if the filer establishes to the satisfaction of the Commissioner that it made a good faith effort to comply with the new reporting requirements.