What's New

Guidance under section 1446(f). The Tax Cuts and Jobs Act (TCJA) added section 1446(f), which generally requires that if any portion of a gain on any disposition of an interest in a partnership would be treated under section 864(c)(8) as effectively connected gain, the transferee purchasing an interest in such a partnership from a non-U.S. transferor must withhold a tax equal to 10% of the amount realized on the disposition unless an exception to withholding applies. Section 1446(f) generally applies to transfers occurring on or after January 1, 2018. T.D. 9926 (84 FR 76910), published on November 30, 2020, contains final regulations (section 1446(f) regulations) relating to the withholding and reporting requirements under section 1446(f), including those that apply to brokers effecting transfers of interests in publicly traded partnerships (PTPs). The section 1446(f) regulations also revise certain requirements under section 1446(a) relating to withholding and reporting on distributions made by PTPs, and expand the entities permitted to act as nominees for PTP distributions to include certain qualified intermediaries (QIs) and certain U.S. branches. Withholding on transfers of interests in PTPs and the revisions included in the section 1446(f) regulations relating to withholding on PTP distributions under section 1446(a) apply to transfers and distributions that occur on or after January 1, 2023. See Notice 2021-51, 2021-36 I.R.B. 361. The provisions of the section 1446(f) regulations relating to withholding and reporting on transfers of interests in partnerships that are not PTPs generally apply to transfers occurring after January 29, 2021. Forms W-8 and their accompanying instructions (excluding Form W-8EXP) were updated (Rev. October 2021) to incorporate the use of those forms by brokers and transferors of partnership interests receiving payments of amounts realized for purposes of section 1446(f) and by partners and brokers receiving PTP distributions. These instructions address certain requirements of brokers and other withholding agents that

Department of the Treasury Internal Revenue Service

make those payments in connection with their reliance on Forms W-8.

Section 871(m) regulations and qualified securities lenders (QSLs). Notice 2020-2 , 2020-3 I.R.B. 327, further extended the transition relief provided in Notice 2018-72, 2018-40 I.R.B. 522, for certain provisions of the section 871(m) regulations, generally for 2021 and 2022. Notice 2020-2 also further extended the period that a withholding agent may apply the transition rules to act as a QSL described in obsoleted Notice 2010-46, 2010-24 I.R.B. 757, Part III, for substitute dividend payments made in 2021 and 2022. As a result, the updated Form W-8IMY (Rev. October 2021) includes chapter 3 status certifications for entities acting as QSLs (applicable to either a QI or other entity acting as a QSL). The updated Instructions for Form W-8IMY also clarify when a QI may continue to claim status as a QSL in a case in which it is also a qualified derivatives dealer (QDD) (as provided in the QI agreement) and include certain other clarifying changes relevant to section 871(m) and QSL status.

FTIN not legally required. Certain Forms W-8 were updated (Rev. October 2021) to include a new line, “FTIN not legally required,” for account holders otherwise required to provide a foreign taxpayer identification number (FTIN) on the form to indicate that they are not legally required to obtain an FTIN from their jurisdiction of residence.

Nonqualified intermediary (NQI) that provides an al- ternative withholding statement. The Form W-8IMY and its instructions were updated (Rev. October 2021) to allow an NQI that is to provide alternative withholding statements and beneficial owner withholding certificates for payments associated with this form to represent on the form that the information on the withholding certificates will be verified for consistency as required under Regulations section 1.1441-1(e)(3)(iv)(C)(3) (added in T.D. 9890). A similar allowance applies to a nonwithholding foreign partnership or a nonwithholding foreign trust that provides an alternative withholding statement.

Electronic signature. The accompanying instructions for certain Forms W-8 were updated (Rev. October 2021) to reference additional guidance included in final regulations issued under chapter 3 (T.D. 9890) concerning reliance on withholding certificates with electronic signatures. See Regulations section 1.1441-1(e)(4)(i)(B) (added in T.D. 9890).

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Section 6050Y reporting. The accompanying instructions for certain Forms W-8 were updated (Rev. October 2021) to reference the use of the forms by a foreign person that is a seller of a life insurance contract (or interest therein) or a foreign person that is a recipient of a reportable death benefit for purposes of reporting under section 6050Y.