Part IX. Partner’s — 2025 Inst 1065 (Schedule K-3) (PDF)

If you’re a corporate partner of a partnership, use this part from the partnership to determine your BEAT liability, if any. The BEAT is generally levied on certain large corporations that have deductions and certain other similar items paid or accrued to foreign related parties that are 3% of their total deductions or higher (2% in the case of certain banks or registered securities dealers), a determination referred to as the "base erosion percentage test." Corporate partners that are applicable taxpayers under Regulations section 1.59A-2 may be subject to the BEAT. See Regulations section 1.59A-7 for further information regarding the application of section 59A to partnerships, and the Instructions for Form 8991 to determine whether a corporate partner is an applicable taxpayer subject to the BEAT. Certain small partners aren’t required to include the partner’s amount of base erosion tax benefits resulting from a base erosion payment made by a partnership. See Regulations section 1.59A-7(d)(2) for further information regarding the application of the exception for small partners.

Section 1—Applicable Taxpayer

Lines 1 Through 4

The amounts shown on lines 1 through 4 reflect the partner’s distributive share of gross receipts from the partnership’s business or rental activities. The partner should use the information from lines 2 through 4 to complete Form 8991, Part I, line 1b.

Line 1. Gross receipts for section 59A(e). This is the partner’s distributive share of gross receipts for the tax year as described in Temporary Regulations section 1.448-1T(f)(2)(iv).

Line 5. Amounts included in the denominator of the base erosion percentage as described in Regulations section 1.59A-2(e)(3)(i)(B). This is the partner’s distributive share of

the partnership’s deductions to be included in the denominator of the partner’s base erosion percentage. For a description of deductions that aren’t included in the denominator, see Regulations section 1.59A-2(e)(3)(ii).

Section 2—Base Erosion Payments and Base Erosion Tax Benefits

Lines 6 Through 19

The partner should use the information from lines 7 through 16 to complete Form 8991, Schedule A, lines 2 through 11.

Line 7. Cost sharing transaction payments. Include the amounts from columns (b) and (c) on Form 8991, Schedule A, line 2.

Line 8. Purchase or creations of property rights for intangi- bles (patents, trademarks, etc.). This is the partner’s distributive share of amounts paid or accrued to a foreign person that’s a related party of the partner in connection with the acquisition or creation of intangible property rights (patents, copyrights, trademarks, trade secrets, etc.) that’s subject to the allowance for depreciation (or amortization in lieu of depreciation). Include the amounts from columns (b) and (c) on Form 8991, Schedule A, line 3.

Line 9. Rents, royalties, and license fees. Include the amounts from columns (b) and (c) on Form 8991, Schedule A, line 4.

Line 10a. Compensation/consideration paid for services NOT excepted by section 59A(d)(5). Include the amounts from columns (b) and (c) on Form 8991, Schedule A, line 5a.

Line 10b. Compensation/consideration paid for services excepted by section 59A(d)(5). Include the amount from column (a) on Form 8991, Schedule A, line 5b.

Line 11. Interest expense. If you’re a foreign corporate partner, the partnership completed Worksheet A for your distributive share of items. Use the information to help complete your Form 8991.

Partner's Instructions for Schedule K-3 (Form 1065) (2025) 17

Worksheet A

Foreign Partner’s Distributive Share of Interest Paid or Accrued by the Partnership

(a) (b) (c)

Total interest paid or accrued in the current year

Interest paid or accrued to foreign related parties of the foreign partner in the current year

Interest expense paid or accrued to foreign related parties of the foreign partner that is allowed as a deduction in the current year

(1) Foreign partner’s distributive share of interest expense on liabilities described in Regulations section 1.882-5(a)(1)(ii)(A) or (B)

(2) Foreign partner’s distributive share of interest paid on U.S.-booked liabilities under Regulations section 1.882-5(d)(2)(vii)

(3) Foreign partner’s distributive share of interest paid on all other liabilities of the partnership

Totals. Combine lines (1) through (3)

Column (a). This is the partner’s distributive share of all interest paid or accrued by the partnership for the tax year (excluding interest paid or accrued in a prior year treated as paid or accrued in the current year under section 163(j) or similar provisions).

Column (b). This is the partner’s distributive share of all interest expense paid or accrued by the partnership for the tax year (excluding interest paid or accrued in a prior year treated as paid or accrued in the current year under section 163(j) or similar provisions) that is paid or accrued to a foreign person that is a related party of the partner.

Column (c). This is the partner’s base erosion tax benefit attributable to interest expense paid or accrued by the partnership that is allowed as a deduction in the current tax year. See Regulations section 1.59A-3(b)(4) for more information on how a foreign corporation with a U.S. trade or business or permanent establishment determines the amount of interest that is a base erosion tax benefit.

For domestic corporate partners, include the total amount from line 11 in columns (a-1), (a-2), (b-1), and (b-2) of Form 8991, Schedule A, line 6. For foreign corporate partners, the amounts in columns (b) and (c) of Worksheet A, are used to determine the amounts to be included in columns (a-1), (a-2), (b-1), and (b-2) of Form 8991, Schedule A, line 6.

Line 12. Payments for the purchase of tangible personal property. Include the amounts from columns (b) and (c) on Form 8991, Schedule A, line 7.

Line 13. Premiums and/or other considerations paid or ac- crued for insurance and reinsurance as covered by sec- tions 59A(d)(3) and (c)(2)(A)(iii). Include the amounts from columns (b) and (c) on Form 8991, Schedule A, line 8.

Line 14a. Nonqualified derivative payments. The amounts on this line are reported on Form 8991, Schedule A, line 9.

Column (a). This is the partner’s distributive share of all amounts paid or accrued by the partnership attributable to derivative contracts as defined in section 59A(h)(4).

Column (b). This is the partner’s distributive share of amounts paid or accrued by the partnership to a foreign person that is a related party of the partner attributable to derivative contracts that aren’t eligible for the qualified derivative payments exception under Regulations section 1.59A-6 (nonqualified derivative payments).

Line 14b. Qualified derivative payments excepted by sec- tion 59A(h). This is the partner’s distributive share of qualified derivative payments excepted by section 59A(h). Generally, a qualified derivative payment is any payment made by the taxpayer pursuant to a derivative contract, provided that the taxpayer (a) recognizes gain or loss on the derivative contract as if it were sold for its FMV on the last business day of the tax year; (b) treats the gain or loss as ordinary; and (c) treats the character of all other items of income, deduction, gain, or loss with respect to a payment pursuant to the derivative as ordinary. A payment isn’t a qualified derivative payment if the payment would be treated as a base erosion payment if it were not made pursuant to a derivative (such as interest, royalty, or services income). With respect to a contract with both derivative and nonderivative components, a payment isn’t a qualified derivative payment if it’s properly allocable to the nonderivative component.

Enter the amount from line 14b on Form 8991, Schedule A, line 9b. This meets the reporting requirements of Regulations sections 1.59A-6(b)(2) and 1.6038A-2(b)(7)(ix).

Line 15. Payments reducing gross receipts made to surro- gate foreign corporation. Include the amounts from columns (b) and (c) on Form 8991, Schedule A, line 10.

Line 16. Other payments—specify. Include the amounts from columns (b) and (c) on Form 8991, Schedule A, line 11.

Line 17, column (c). Base erosion tax benefits related to payments included on lines 6 through 16, on which tax is imposed by section 871, 881, or 884(f), with respect to which tax has been withheld under section 1441 or 1442 at the 30% statutory withholding tax rate or subject to tax under Regulations section 1.884-4(a)(2)(ii) at the 30% statutory rate. Include the amount from column (c) on Form 8991, Schedule A, line 13.

Line 18, column (c). Portion of base erosion tax benefits included on lines 6 through 16, on which tax is imposed by section 871 or 881, with respect to which tax has been withheld under section 1441 or 1442 at a reduced withholding rate pursuant to an income tax treaty or subject to a reduced rate of tax under Regulations section 1.844-4(a)(2)(ii). Multiply the amount of the base erosion tax benefit by a fraction equal to the rate of tax imposed under the treaty over the 30% (0.30) statutory rate. Include the amount from column (c) on Form 8991, Schedule A, line 14. For more information regarding this computation, see the Instructions for Worksheet for Schedule A, Line 14 in the Instructions for Form 8991.

Line 19, column (c). Total base erosion tax benefits. The partner should use the information from Section 1, lines 1 through 5, and column (c) of Section 2, line 19, to assist in the

Column (c). This is the partner’s base erosion tax benefit attributable to nonqualified derivative payments paid or accrued by the partnership to a foreign person that is a related party of the partner.

18 Partner's Instructions for Schedule K-3 (Form 1065) (2025)

partner’s determination of whether the partner is an applicable taxpayer and to complete the applicable lines on Form 8991 and Schedule A.