KPMG report: Final regulations, withholding and reporting obligations on dispositions of certain partnership interests

Withholding and reporting obligations

The IRS on October 7, 2020, posted on its website a version of final regulations (T.D. 9926) regarding withholding and reporting obligations with respect to dispositions of certain partnership interests under section 1446 and related sections of the Code.


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Sections 864(c)(8) and 1446(f) were added to the Code by the 2017 tax law (Pub. L. No. 115-97), or the law that is often referred to as the “Tax Cuts and Jobs Act” (TCJA). Section 864(c)(8) provides rules for determining the amount of gain or loss that is treated as effectively connected with a U.S. trade or business when a non-U.S. person sells an interest in a partnership that is engaged in a trade or business in the United States.  Section 1446(f) provides withholding and reporting rules applicable to the transfer of partnership interests described in section 864(c).

  • Notice 2018-08 (December 2017) provided a temporary suspension of the requirement to withhold on amounts realized in connection with dispositions by a foreign person of certain interests in publicly traded partnerships. 
  • Notice 2018-29 (April 2018) generally provided temporary guidance with respect to dispositions by a foreign person of interests in non-publicly traded partnerships.
  • Proposed regulations under section 1446(f) were published in May 2019, which generally set forth guidance related to withholding and reporting obligations with respect to dispositions by a foreign person of interests in partnerships (both publicly traded and non-publicly traded) that are engaged in a trade or business in the United States.  

The final regulations retain the basic approach and structure of the proposed regulations but include several modifications and clarifications based on industry comments received. 

Read an October 2020 report [PDF 972 KB] prepared by KPMG LLP, providing initial impressions of the key modifications addressed by the final regulations. Modifications affecting interests in non-publicly traded partnerships are addressed first, followed by modifications affecting interests in publicly traded partnerships.

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