SECTION 6. EXCEPTIONS TO

SECTION 1446(f) WITHHOLDING ON DISPOSITIONS OF NON- PUBLICLY TRADED PARTNERSHIP INTERESTS

.01 Certifying Non-Foreign Status

Section 1446(f)(2) provides that no person shall be required to deduct and withhold any amount under section 1446(f)(1) with respect to any disposition of an interest in a partnership if the transferor furnishes to the transferee an affidavit by the transferor stating, under penalty of perjury, the transferor’s U.S. TIN and that the transferor is not a foreign person. Thus, unless the transferee receives the required affidavit, it must presume that the transferor is foreign for purposes of withholding under section 1446(f)(1).

The Treasury Department and the IRS intend to issue regulations applying rules substantially similar to § 1.1445–2(b), except § 1.1445–2(b)(2)(ii), for making a certification of non-foreign status for purposes of applying section 1446(f)(2). Section 1.1445–2(b) provides rules pursuant to which a transferor of a U.S. real property interest can provide a certification of non-foreign status to inform the transferee that withholding is not required. Until regulations on certifications of non-foreign status under section 1446(f) are issued, a transferor may furnish the certification de

scribed in § 1.1445–2(b), as modified to take into account section 1446(f) to satisfy the requirements of section 1446(f)(2). Further, a transferor may submit a Form W–9 for this purpose if: (i) it includes the name and U.S. TIN of the transferor; (ii) it is signed and dated by the transferor; and (iii) the jurat has not been deleted. A transferee may generally rely on a Form W–9 that it has previously received from the transferor if it meets these requirements. Until further notice, the certification of non-foreign status or Form W–9 the transferor provides to the transferee should not be furnished to the IRS. See section 1446(f)(2)(B)(ii). If the transferee has actual knowledge that the certification or Form W–9 is false, or the transferee receives a notice (as described in section 1445(d)) from a transferor’s agent or transferee’s agent that it is false, it may not be relied upon. See section 1446(f)(2)(B)(i).

.02 Transferee Receives a Certification of No Realized Gain

The Treasury Department and the IRS intend to issue regulations providing that, if the transferee receives a certification, issued by the transferor (signed under penalties of perjury and including a U.S. TIN, to the extent required under section 4.01 of this notice), stating that the transfer of its partnership interest will not result in realized gain, a transferee may generally rely on the certification and be relieved from liability for withholding under section 1446(f). The transferee may not rely on the certification and is not relieved from withholding if it has knowledge that the certification is false under the principles of § 1.1445–2(b)(4). Pending the issuance of other guidance, the transferor should not submit to the IRS Form 8288–B for this purpose. If gain is realized in a transfer but not recognized as a result of a nonrecognition provision, the transferee cannot apply this section 6.02. In this circumstance, see section 6.05 of this notice.

.03 Transferee Receives a Certification that Transferor Had Less than 25 Percent Effectively Connected Taxable Income in Three Prior Taxable Years

The Treasury Department and the IRS intend to issue regulations providing that

no withholding is required under section 1446(f)(1) upon the transfer of a partnership interest if no earlier than 30 days before the transfer the transferee receives from the transferor a certification (signed under penalties of perjury and including a U.S. TIN, to the extent required under section 4.01 of this notice) that for the transferor’s immediately prior taxable year and the two taxable years that precede it the transferor was a partner in the partnership for the entirety of each of those years, and that the transferor’s allocable share of effectively connected taxable income (ECTI) (as determined under § 1.1446–2) for each of those taxable years was less than 25 percent of the transferor’s total distributive share of income for that year. For this purpose, the transferor’s immediately prior taxable year is the most recent taxable year of the transferor that includes the partnership taxable year that ends with or within the transferor’s taxable year and for which both a Form 8805, Foreign Partner’s In- formation Statement of Section 1446 Withholding Tax, and a Schedule K-1 (Form 1065) were due (including extensions) or filed (if earlier) by the time of the transfer. In no event may a transferee rely on a certification provided prior to the transferor’s receipt of the relevant Forms 8805 and Schedules K-1 (Form 1065). For purposes of this rule, a transferor that had a distributive share of deductions and expenses attributable to the partnership’s U.S. trade or business but no ECTI allocated to it in a year must treat its allocable share of ECTI for that year as zero. A transferor that did not have a distributive share of income in any of its three immediately prior taxable years during which the partnership had effectively connected income cannot provide this certification. A transferee may not rely on the certification and is not relieved from withholding if it has actual knowledge that the certification is false. When a partnership is a transferee by reason of making a distribution, this section 6.03 does not apply.

.04 Transferee Receives a Certification from Partnership of Less than 25 Percent Effectively Connected Gain Under Section 864(c)(8)

The Treasury Department and the IRS intend to issue regulations providing that

April 16, 2018 498 Bulletin No. 2018–16

no withholding is required under section 1446(f)(1) upon the transfer of a partnership interest if the transferee is provided a certification, issued by the partnership and signed under penalties of perjury no earlier than 30 days before the transfer, certifying that if the partnership had sold all of its assets at their fair market value, the amount of gain that would have been effectively connected with the conduct of a trade or business within the United States would be less than 25 percent of the total gain. For purposes of this section 6.04, effectively connected gain includes gain treated as effectively connected with a trade or business in the United States under section 897. Principles similar to the rules of § 1.1445–11T(d)(2)(ii) and (iii) apply to certifications furnished pursuant to this section 6.04. When a partnership is a transferee by reason of making a distribution, the transferee partnership must retain a record of the documentation relied upon to determine the amount of gain (if any), and the portion of the gain that would have been effectively connected with the conduct of a trade or business in the United States (if any). This documentation must be retained for the period described in section 4.04 of this notice.

.05 Nonrecognition Transactions

The Treasury Department and the IRS intend to issue regulations providing that no withholding is required under section 1446(f)(1) upon the transfer of a partnership interest if the transferee receives from the transferor a notice that satisfies the requirements of § 1.1445–2(d)(2), treating references to section 1445(a) as references to section 1446(f), and references to “U.S. real property interest” as “partnership interest”, except as provided in this section 6.05. A transferee should not mail a copy of the transferor’s notice to the IRS as described in § 1.1445– 2(d)(2)(i)(B). The Treasury Department and the IRS are studying the appropriate treatment of nonrecognition transactions under section 864(c)(8). Until guidance providing for the treatment of nonrecognition transactions under section 864(c)(8) is issued, a transfer in which the transferor is not required to recognize any gain or loss by reason of a nonrecognition provision of the Code (without regard to section 864(c)(8)) will be eligible for the exception from with

holding provided in this section 6.05. When a partnership is a transferee by reason of making a distribution in which no gain is recognized, the transferee partnership is not required to withhold and the transferor is not required to provide a notice to the transferee partnership.

.06 Rules for Agents

Section 1446(f)(2)(C) provides that the rules of section 1445(d) shall apply to a transferor’s agent or transferee’s agent with respect to any affidavit of nonforeign status in the same manner as such rules apply with respect to the disposition of a United States real property interest under such section. The Treasury Department and the IRS intend to issue regulations providing that the principles of § 1.1445–4 apply for agents to fulfill their responsibilities with respect to any certification provided for purposes of section 1446(f).