Announcement 2019-07

The Internal Revenue Service has revoked its determination that the organizations listed below qualify as organizations described in sections 501(c)(3) and 170(c)(2) of the Internal Revenue Code of 1986.

Generally, the IRS will not disallow deductions for contributions made to a

listed organization on or before the date of announcement in the Internal Revenue Bulletin that an organization no longer qualifies. However, the IRS is not precluded from disallowing a deduction for any contributions made after an organization ceases to qualify under section 170(c)(2) if the organization has not timely filed a suit for declaratory judgment under section 7428 and if the contributor (1) had knowledge of the revocation of the ruling or determination letter, (2) was aware that such revocation was imminent, or (3) was in part responsible for or was aware of the activities or omissions of the organization that brought about this revocation.

If on the other hand a suit for declaratory judgment has been timely filed, contributions from individuals and organizations described in section 170(c)(2) that are otherwise allowable will continue to be deductible. Protection under section 7428(c) would begin on July 1, 2019 and would end on the date the court first determines the organization is not described in section 170(c)(2) as more particularly set for in section 7428(c)(1). For individual contributors, the maximum deduction protected is $1,000, with a husband and wife treated as one contributor. This benefit is not extended to any individual, in whole or in part, for the acts or omissions of the organization that were the basis for revocation.

NAME OF ORGANIZATION Effective Date of Revocation LOCATION Evansville Otters Booster Club Inc 1/1/2015 Evansville, IN Firemen’s Benevolent Association of the Village of Leroy Inc 4/1/2015 LeRoy, NY Fit Kids 1/1/2015 Forney, TX Franklin County Memorial Hospital 1/1/2010 Meadville, MS Global Multicultural Business 1/1/2015 Boca Raton, FL Grace Heritage Corporation 1/1/2010 Davie, FL Greater Ontario Convention and Visitors Bureau 7/1/2014 Ontario, CA Grooming for Greatness Youth & Family Services 1/1/2016 Peachtree, GA Homeward Society Foster Family Agency 1/1/2015 Agoura Hills, CA Indiana Endowment Fund 1/1/2011 Fort Branch, IN International Medical Interpreters 1/1/2014 Lexington, MA Kingdom Victories Outreach Ministries 1/1/2016 Inkster, MI Kokopelli Concepts Housing Association Inc 1/1/2015 Houston, TX Lebanon Stem Foundation Inc 1/1/2015 Lebanon, IN Light of the World Inc 1/1/2015 Unionville, CT Magans Light 1/1/2016 Forth Worth, TX Magnolia Regional Health Center 10/1/2009 Corinth, MS Marcs Place Inc 1/1/2015 Lake City, AR Middle Tennessee Clean Fuels Inc 12/31/2015 Nashville, TN National Association of College Auxiliary Services 1/1/2013 Charlottesville, VA New School Baseball Academy 1/1/2014 Mission Viejo, CA No Child Unloved 1/1/2015 Gifford, IL Northern Illinois Home Medical Supply NFP 1/1/2014 Sterling, IL NW Somaliland Society 1/1/2014 Lynnwood, WA Perkinsville Fundraisers Inc 7/1/2014 Springfield, VT Professional Fire Fighters of Arizona 1/1/2015 Phoenix, AZ

July 1, 2019 62 Bulletin No. 2019–27

Project Walk Recovery Foundation Inc 1/1/2014 Carlsbad, CA Rehobooth McKinley Christian Health Inc 1/1/2014 Gallup, NM Rescue A Vet 1/1/2015 Cleveland, OH SDQ Foundation 3/27/2012 Houston, TX Sigma Theta Tau International Inc 1/1/2014 Mayaguez, PR Sims Chiropractic Clinic Ministering Health 1/1/2014 Gunnison, CO Society For Mind Brain Sciences 1/1/2014 Santa Monica, CA Somerset County Farmers’ Market Inc 1/1/2016 Somerset, PA Sons of the American Legion 9/22/2014 Blessing, TX Sustainable Travel International 1/1/2013 Boulder, CO The Breast Cancer Society Inc 1/1/2014 Nashville, TN The Center for Optimal Adult Development 12/31/2015 Austin, TX The Redi Foundation Inc 6/1/2014 Boca Raton, FL The Wright Touch Athletics 1/1/2014 Country Club Hills, IL Thirty Thousand Feet Booster Club 1/1/2015 Travis AFB, CA Trust and Faith Community Outreach Inc 1/1/2015 Ocoee, FL University Urology Foundation Inc 1/1/2015 Louisville, KY Uplift Individuals in Christ 1/1/2015 Ft. Washington, MD Usangule Food For Thought Inc 1/1/2015 Palo Alto, CA VMU-1 Wardroom Fund 1/1/2015 Yuma, AZ We Adopt Kids 1/1/2016 Carson City, NV Western Conservatory of the Arts & Sciences 1/1/2014 Nunnelly, TN Wingate Community Improvement Inc 1/1/2015 Wingate, IN You Are Loved Inc 1/1/2016 Mandeville, LA Yuen Foundation Incorporated 1/1/2015 Washington, DC

Notice of Proposed Rulemaking

Withholding of Tax and Information Reporting with Respect to Interests in Partnerships Engaged in the Conduct of a U.S. Trade or Business

REG-105476-18

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking.

SUMMARY: This document contains proposed regulations implementing certain sections of the Internal Revenue Code, including sections added to the Internal Revenue Code by the Tax Cuts and Jobs Act, that relate to the withholding of tax and information reporting with respect to certain dispositions of interests in partnerships engaged in the conduct of a trade or business within the United States. The proposed regulations affect certain foreign persons that recognize gain or loss from the sale or exchange of an interest in a partnership that is engaged in the conduct of a trade or business within the United States, and persons that acquire those interests. The proposed regulations also affect partnerships that, directly or indirectly, have foreign persons as partners.

DATES: Written or electronic comments and requests for a public hearing must be received by July 12, 2019.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-105476-18), Internal Revenue Service, Room 5203, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be hand-delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-105476-18), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue NW., Washington, DC 20224, or sent electronically via the Federal eRulemaking Portal at http:// www.regulations.gov (IRS REG-10547618).

Bulletin No. 2019–27 63 July 1, 2019

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, Chadwick Rowland, 202-317-6937; concerning submissions of comments or requests for a public hearing, Regina L. Johnson (202) 317-6901 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background

I. Section 1446(f)

Section 1446(f), which was added to the Internal Revenue Code (the “Code”) by section 13501 of the Tax Cuts and Jobs Act, Public Law 115-97 (2017) (the “Act”), provides rules for withholding on the transfer of a partnership interest described in section 864(c)(8). Section 1446(f)(1) provides that, except as otherwise provided in section 1446(f), if a portion of the gain (if any) on any disposition of an interest in a partnership would be treated under section 864(c)(8) as effectively connected with the conduct of a trade or business within the United States, the transferee is required to deduct and withhold a tax equal to 10 percent of the amount realized on the disposition.

Section 1446(f)(2)(A) provides an exception to the general withholding requirement described in section 1446(f)(1) if the transferor furnishes an affidavit to the transferee stating, under penalties of perjury, the transferor’s United States taxpayer identification number and that the transferor is not a foreign person. Section 1446(f)(2)(B)(i) provides that the exception to withholding described in section 1446(f)(2)(A) will not apply if the transferee has actual knowledge that the affidavit furnished is false, or if the transferee receives a notice from a transferor’s agent or transferee’s agent that the affidavit is false.

Section 1446(f)(3) provides that, at the request of the transferor or transferee, the Secretary may prescribe a reduced amount to be withheld under this section if the Secretary determines that reducing the amount to be withheld will not jeopardize the collection of tax on gain treated under section 864(c)(8) as effectively connected with the conduct of a trade or business within the United States.

Section 1446(f)(4) provides that if a transferee fails to withhold any amount required to be withheld under section 1446(f)(1) then the partnership must deduct and withhold from distributions to the transferee a tax in an amount equal to the amount the transferee failed to withhold, plus interest.

Section 1446(f)(6) generally provides that the Secretary shall prescribe such regulations as may be necessary to carry out the purposes of section 1446(f), including regulations providing for exceptions from the provisions of section 1446(f). Section 1446(f) is effective for sales, exchanges, and other dispositions after December 31, 2017. On December 29, 2017, the Department of the Treasury (the “Treasury Department”) and the Internal Revenue Service (the “IRS”) released Notice 2018-08, 2018-7 I.R.B. 352, which temporarily suspends the requirement to withhold on amounts realized in connection with the sale, exchange, or disposition of certain interests in a publicly traded partnership not treated as a corporation under section 7704 and the regulations thereunder. On April 2, 2018, the Treasury Department and the IRS released Notice 2018-29, 2018-16 I.R.B. 495, which provides temporary guidance and announces an intent to issue proposed regulations under section 1446(f) with respect to the sale, exchange, or disposition of certain interests in non-publicly traded partnerships. Notice 2018-29, and section 1446(f)(1) generally, rely on the principles contained within the section 1445 withholding regime. Under section 1445, if a foreign person disposes of a United States real property interest (“U.S. real property interest”), as defined in section 897(c), a withholding obligation is imposed on the transferee of the interest.

On December 27, 2018, the Treasury Department and the IRS published in the Federal Register a notice of proposed rulemaking at 83 FR 66647 (REG113604-18) under section 864(c)(8) (the “proposed section 864(c)(8) regulations”). The proposed section 864(c)(8) regulations provide rules for determining the amount of gain or loss treated as effectively connected with the conduct of a trade or business within the United States (“effectively connected gain” or “effective

ly connected loss”) described in section 864(c)(8), including rules coordinating section 864(c)(8) with sections 741 and 751 (relating to the character of gain or loss realized in connection with the sale or exchange of an interest in a partnership). They also provide rules for coordination of section 864(c)(8) with section 897 (relating to amounts treated as effectively connected gain or loss with respect to U.S. real property interests), tiered partnerships, and U.S. income tax treaties.

II.  Rules for Withholding under Section

1446(a) on Distributions by Publicly Traded Partnerships

Generally, withholding under section 1446(a) is required by a partnership when effectively connected taxable income (“ECTI”) is allocable to a foreign person. See §§1.1446-2 and 1.1446-3. However, withholding on ECTI earned by a publicly traded partnership is required when the ECTI is distributed to the foreign person. See §1.1446-4. Often, an interest in the publicly traded partnership is held by a nominee, such as a domestic financial institution that holds the publicly traded partnership interest as a custodian for a foreign partner. Section 1.1446-4 provides rules for applying the withholding tax under section 1446(a) to distributions by publicly traded partnerships. Under those rules, when a publicly traded partnership provides a qualified notice (within the meaning of §1.1446-4(b)(4)), a nominee, which must be a domestic person, may be treated as a withholding agent with respect to a distribution. See §1.1446-4(b)(4) and 1.1446-4(d). The qualified notice must be given in accordance with notice requirements with respect to dividends under regulations under the Securities Exchange Act of 1934. Section 1.1445-8(f) provides similar qualified notice rules that apply to certain distributions subject to withholding when attributable to the disposition of a U.S. real property interest.

Section 1.1446-4(f)(3) provides an ordering rule for situations in which the distribution is attributable to multiple types of income (such as amounts attributable to income described in section 1441 or 1442 or amounts subject to withholding under section 1446). However, no rule is provided for situations in which a qualified no

July 1, 2019 64 Bulletin No. 2019–27

tice does not provide information regarding the types of income being distributed.

Explanation of Provisions

The proposed regulations provide rules for withholding, reporting, and paying tax under section 1446(f) upon the sale, exchange, or other disposition of an interest in a partnership described in section 864(c)(8) and proposed §1.864(c)(8)-1. ¹⁴ The proposed regulations would, when finalized, adopt many of the rules that were described in Notice 2018-29, with certain modifications provided, in part, in response to comments. In addition, the proposed regulations provide reporting rules relating to section 864(c)(8) and rules implementing withholding under section 1446(f)(4). They also contain rules clarifying the reporting rules applicable to transfers of partnership interests subject to section 6050K. Further, the proposed regulations provide rules implementing withholding by brokers on transfers of certain interests in publicly traded partnerships subject to section 1446(f)(1), and make related changes to the reporting rules and procedures for adjusting withholding under sections 1461, 1463, and 1464. They also make changes to the rules regarding withholding on distributions by publicly traded partnerships under §1.1446-4, including the rules that apply to qualified notices and nominees. Finally, the proposed regulations provide rules coordinating withholding under section 1446(f) with other withholding regimes to prevent overwithholding of tax.

I.  Reporting Requirements for Foreign

Transferors and Partnerships with Foreign Transferors

A partnership that is engaged in the conduct of a trade or business within the United States is required to file an annual information return, Form 1065, U.S. Re- turn of Partnership Income, and also provide information to its partners on Schedule K-1 (Form 1065), Partner’s Share of Income, Deductions, Credits, etc., with respect to each partner’s distributive share of partnership items and other informa

tion. See section 6031 and §§1.6031(a)1 and 1.6031(b)-1T. Domestic partners generally report the information from the Schedule K-1 (Form 1065) on their income tax return, typically Form 1040, U.S. Individual Income Tax Return, for an individual, or Form 1120, U.S. Corporation Income Tax Return, for a corporation. A foreign partner with a U.S. income tax return filing obligation generally files Form 1040NR, U.S. Nonresident Alien Income Tax Return, or Form 1120-F, U.S. Income Tax Return of a Foreign Corporation .

A partner (foreign or domestic) that transfers an interest in a partnership in an exchange described in section 751(a) (relating to an exchange of an interest in a partnership that holds unrealized receivables or inventory) generally has an obligation both to inform the partnership of the transfer and to include a statement with respect to the exchange on the partner’s income tax return under §1.751-1(a)(3). See section 6050K(c) and §1.6050K-1(d). A partnership also has an obligation to provide information with respect to the exchange to the transferee and transferor under section 6050K(c) and §1.6050K-1(c). See also Form 8308, Report of a Sale or Exchange of Certain Partnership Interests .

Because section 864(c)(8) requires a deemed sale at the partnership level to determine a foreign partner’s effectively connected gain or loss, a foreign person that transfers its partnership interest generally will not be able to compute its income tax liability under section 864(c)(8) unless the partnership provides certain information to the foreign partner. The proposed regulations therefore provide rules that facilitate the transfer of information between a foreign partner and the partnership for purposes of section 864(c)(8).

The proposed regulations generally provide that a notifying transferor (generally, any foreign person and certain domestic partnerships that have a foreign person as a direct or indirect partner) that transfers (within the meaning of proposed §1.864(c)(8)-1(g)(5)) an interest in a partnership (other than certain interests in a publicly traded partnership) in a transaction described in section 864(c)(8) must notify the partnership within 30 days of

the transfer by providing a statement that includes information relevant to the partnership for making calculations under section 864(c)(8), including the date on which the notifying transferor transferred its interest, and other identifying information regarding the transferor and transferee. See proposed §1.864(c)(8)-2(a). This rule generally parallels §1.6050K-1, including the content of the information and when it must be provided.

Proposed §1.864(c)(8)-2(b) requires a specified partnership (generally, a partnership that is engaged in the conduct of a trade or business within the United States or a partnership that owns, directly or indirectly, an interest in a partnership so engaged) to furnish to a notifying transferor the information necessary for the transferor to comply with section 864(c) (8) by the due date of the Schedule K-1 (Form 1065) for the tax year of the partnership in which the transfer occurred. Proposed §1.864(c)(8)-2(b) applies if a specified partnership receives the notification described in proposed §1.864(c)(8)2(a), or otherwise knows that a relevant transfer has occurred, and the notifying transferor would have had a distributive share of deemed sale EC gain or deemed sale EC loss (within the meaning of proposed §1.864(c)(8)-1(c)) at the time of the transfer. For these purposes, a notifying transferor that is a partnership is treated as a nonresident alien. Proposed §1.864(c) (8)-2(b) provides that, for purposes of the reporting requirements described in proposed §1.864(c)(8)-2, a partnership that makes a distribution to a transferor that qualifies as a transfer under section 864(c) (8) and proposed §1.864(c)(8)-1(b) will be treated as having actual knowledge that a transfer occurred, thereby triggering the reporting requirement of proposed §1.864(c)(8)-2(b) to the extent that the transferee would have had a distributive share of deemed sale EC gain or deemed sale EC loss within the meaning of proposed §1.864(c)(8)-1(c).

Relatedly, the proposed regulations clarify that the information a partnership must provide under section 6050K upon being notified of a transfer includes the information necessary for a transferor

14§ 1.864(c)(8)-1 was proposed to be added on December 27, 2018; 83 FR 66647, 66651.

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to make the transferor’s required statement under §1.751-1(a)(3). See proposed §1.6050K-1(c)(2).

II.  Definitions and General Rules of

Applicability

A. Definitions

For purposes of the proposed regulations under section 1446(f), the term “transfer” means a sale, exchange, or other disposition, and includes a distribution from a partnership to a partner. See proposed §1.1446(f)-1(b)(9). A “transferee” is any person, foreign or domestic, that acquires a partnership interest through a transfer. See proposed §1.1446(f)-1(b)(10). The term “transferor” generally means any person, foreign or domestic, that transfers a partnership interest, and therefore refers to the person that directly owns the interest in the partnership. For a trust, to the extent all or a portion of the trust is treated as owned by the grantor or another person under sections 671 through 679 (such trust, “a grantor trust”), the term “transferor” means the grantor or other person. See proposed §1.1446(f)-1(b)(11). See also Rev. Rul. 8513, 1985-1 C.B. 184.

B. Certifications and Books and Records

Similar to the approach described in Notice 2018-29, the proposed regulations provide various exceptions to withholding and procedures for determining the amount to withhold. Under these rules, the person required to withhold may generally rely on information provided in certifications that it receives or that is contained in its own books and records. The general rules of applicability provide the requirements for providing a valid certification and for retaining certifications or information in books and records. See proposed §1.1446(f)-1(c)(2). A certification includes any documents associated with the certification, such as statements from the partnership, IRS forms, withholding certificates, withholding statements, certifications, or other documentation. Id.

C. Determination Dates