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Proposed regulations: Tax withholding, information reporting concerning partnerships with foreign partners

Tax withholding, information reporting

The U.S. Treasury Department and IRS today released for publication in the Federal Register proposed regulations (REG-105476-18) concerning tax withholding and information reporting with respect to certain dispositions of interests in partnerships engaged in the conduct of a trade or business within the United States.


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The proposed regulations [PDF 409 KB] reflect measures enacted by the 2017 tax law (Pub. L. No. 115-97, that is often referred to as the “Tax Cuts and Jobs Act”) and affect certain foreign persons that recognize gain or loss from the sale or exchange of an interest in a partnership that is engaged in the conduct of a trade or business within the United States, and persons that acquire those interests.

The proposed regulations also affect partnerships that, directly or indirectly, have foreign persons as partners.

In brief, these proposed regulations (according to the preamble):

  • Provide rules for withholding, reporting, and paying tax under section 1446(f) upon the sale, exchange, or other disposition of an interest in a partnership described in section 864(c)(8) and Prop. Reg. section 1.864(c)(8)-1
  • When finalized, would adopt many of the rules that were described in Notice 2018-29, with certain modifications provided in response to comments
  • Provide reporting rules relating to section 864(c)(8) and rules implementing withholding under section 1446(f)(4)
  • Contain rules clarifying the reporting rules applicable to transfers of partnership interests subject to section 6050K
  • Provide rules implementing withholding by brokers on transfers of certain interests in publicly traded partnerships subject to section 1446(f)(1), and make related changes to the reporting rules and procedures for adjusting withholding under sections 1461, 1463, and 1464
  • Make changes to the rules regarding withholding on distributions by publicly traded partnerships under Reg. section 1.1446-4, including the rules that apply to qualified notices and nominees
  • Provide rules coordinating withholding under section 1446(f) with other withholding regimes to prevent over-withholding of tax

The proposed regulations are scheduled to appear in the Federal Register on May 13, 2019. Comments and requests for a public hearing are due 60 days after May 13, 2019.

The purpose of this report is to provide text of these proposed regulations. Initial impressions about these proposed regulations will be provided in a future edition of TaxNewsFlash.

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