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IRS Eases Foreign Partnership Withholding Consequences (1)

Oct. 7, 2020, 8:39 PM; Updated: Oct. 7, 2020, 10:04 PM

The IRS has modified the consequences for foreign partnerships who fail to comply with obligations under withholding tax rules.

Withholding requirements under Section 1446(f) apply to gains from sale, distribution, or exchanges of partnership stakes involving foreign investors.

The final regulations (T.D. 9926, RIN: 1545-BO60), released on Wednesday, add a rule saying a person required to withhold under Section 1446(f) is not liable for failure to withhold, if they can establish that the transferor didn’t have any gain under tax code Section 864(c)(8).

Introduced in the 2017 tax overhaul, Section 864(c)(8) describes when foreign partners have...

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