Who Must File — Instruction 8865 (Schedule K-2 & K-3)

Any person that is required to file Form 8865, Schedule K, for a partnership that has items relevant to the determination of U.S. tax under the international provisions of the Internal Revenue Code (the Code) must complete the relevant parts of Schedules K-2 and K-3. See each part and section for a more detailed description of who must file each part and section. Penalties may apply for filing Form 8865 without all required information. The penalties that apply to the Form 8865 and the Schedule K-1 apply to the Schedules K-2 and K-3, respectively. See Penalties in the Instructions for Form 8865.

Category 1 and Category 2 filers must complete Schedule K-1 for any direct interest they hold in the partnership. Category 1 filers are also required to complete Schedule K-1 for

each U.S. person that directly owns a 10% or greater direct interest in the partnership. These partners that are required to complete a Schedule K-1 must also complete a Schedule K-3 if the partnership has items relevant to the determination of U.S. tax under the international provisions. Partners may also receive Schedule K-3 from Category 1 filers who complete a Schedule K-3 on their behalf. Partners should review the Partner’s Instructions for Schedule K-3 (Form 1065) for how to complete partner tax forms for items reported on Schedule K-3 (Form 8865).

Note: Except as otherwise required by statute, regulations, or other IRS guidance, a U.S. person isn’t required to obtain information from direct or indirect partners of the partnership to determine if it needs to file each of these parts.

Note: A U.S. person is only required to complete the relevant portions of the Schedules K-2 and K-3, as applicable. For example, if the partnership doesn’t own an interest in a foreign corporation, the following parts aren’t required: Schedules K-2 and K-3, Part V and Part VI.

Note: Schedules K-2 and K-3 consist of the most common international tax provisions of the Code. However, not all provisions are specifically identified on these schedules. To the extent that an international provision is impacted and isn’t otherwise specifically identified, check box 12 on Schedule K-2, Part I, and Schedule K-3, Part I, and attach a statement to both Schedules K-2 and K-3 (for distributive share).