Publicly Traded Partnership — 2026 Publ 515 (PDF)

A PTP that has ECTI must pay withholding tax under section 1446(a) on any distributions of that income made to its foreign partners. A PTP must use Forms 1042 and 1042-S (income code 27) to report withholding from PTP distributions. The rate of withholding is 37% for noncorporate partners and 21% for corporate partners under section 1446(a).

A PTP is any partnership an interest in which is regularly traded on an established securities market or is readily tradable on a secondary market. These rules do not apply to a PTP treated as a corporation under section 7704.

Foreign partner. The partnership determines whether a partner is a foreign partner using the rules discussed earlier under foreign partner.

Nominee. The withholding agent under section 1446(a) can be the PTP or a nominee. Starting in 2023, a nominee for section 1446(a) purposes is a person receiving a PTP distribution on behalf of a foreign person and that is a domestic person, a U.S. branch of a foreign corporation that is treated as a U.S. person, or a QI that assumes primary withholding responsibility for the distribution. See Regulations section 1.1446-4(b)(3) (describing nominees and their withholding requirements). For purposes of section 1446(a) withholding, a nominee generally determines whether a partner is a foreign partner under the same requirements applicable to a PTP. See Foreign partner directly above. A nominee for a PTP distribution must, in addition to withholding on the distribution to the extent required under section 1446(a), withhold on amounts attributable to the distribution that are subject to withholding under chapters 3 and 4, in addition to withholding under section 1446(f) on an amount realized on the distribution. See Ordering rules and Section 1446(f): PTP Interests , later. A nominee determines each amount subject to withholding on a PTP distribution based on a qualified notice issued by the PTP making the distribution or, in the absence of a qualified notice (or when a qualified notice does not specify each amount attributable to the distribution), based on the withholding default rule in section 1.1446-4(d). A PTP or a nominee for a PTP distribution is not generally required to withhold on the distribution, however, when it pays the distribution to a nominee for the distribution. In such a case, the PTP or nominee is required to report the nominee to which it pays the distribution as the recipient for Form 1042-S reporting. If a PTP or nominee pays a PTP distribution to an NQI, however, the PTP or nominee must generally determine its withholding based on a withholding statement and partner documentation provided by the NQI with respect to the distribution. An NQI for this purpose includes a U.S. branch that is not acting as a U.S. person for a PTP distribution. See the Instructions for Form W-8IMY for additional information on payments of PTP distributions made to NQIs. If a PTP or nominee for a PTP distribution pays the distribution to a QI not acting as a nominee for the distribution, the PTP or nominee can

66 Publication 515 (2026)

determine its withholding based on withholding rate pool information provided by the QI or partner information provided by a QI that acts as a disclosing QI. See Revenue Procedure 2022-43 for information on the withholding and other requirements of QIs acting as nominees or as disclosing QIs for PTP distributions (starting January 1, 2023). See the Instructions for Form 1042-S for the reporting of a PTP distribution paid to an account holder of a disclosing QI and when a nominee for a PTP distribution is required to report information about the PTP making a distribution on a Form 1042-S.

Distributions subject to withholding. The partnership or nominee must withhold tax on any actual distributions of money or property to foreign partners. The amount of the distribution includes the amount of any tax under section 1446(a) required to be withheld. In the case of a partnership that receives a partnership distribution from another partnership (a tiered partnership), the distribution also includes the tax withheld from that distribution.

If the distribution is in property other than money, the partnership cannot release the property until it has enough funds to pay over the withholding tax.

A PTP or nominee may also be required to withhold on portions of a distribution that are subject to other withholding regimes (such as section 1441, 1442, 1445, or 1446(f)), or that are exempt from withholding. The PTP will generally indicate on a published qualified notice the extent to which a distribution is allocable to a type of income subject to withholding. If a PTP does not include this information on a qualified notice, a withholding agent must apply presumption rules, generally resulting in withholding at the highest rate (depending on the partner’s classification).

With respect to distributions made with respect to a USRPI, if the PTP or nominee complies with these section 1446(a) withholding requirements, it is treated as satisfying the requirements discussed later under U.S. Real Property Interest . These distributions include:

Amounts subject to withholding under section 1445(e) (1) on distributions pursuant to an election under Regulations section 1.1445-5(c)(3), and
Amounts not subject to withholding under section 1445 because the distributee is a partnership or is a foreign corporation that has made an election to be treated as a domestic corporation.

Ordering rules. Partnership distribution consisting of income subject to various withholding regimes are considered to be paid out of the following types of income in the order listed.

Amounts attributable to income described in section 1441 or 1442 that are not effectively connected with the conduct of a trade or business in the United States and are subject to withholding under Regulations section 1.1441-2(a).
Amounts attributable to income described in section 1441 or 1442 that are not effectively connected with the conduct of a trade or business in the United

States and are not subject to withholding under Regulations section 1.1441-2(a).

Amounts attributable to income effectively connected with the conduct of a trade or business in the United States and not subject to withholding under Regulations section 1.1446-1 through 1.1446-6.
Amounts subject to withholding under Regulations section 1.1446-1 through 1.1446-6.
Other amounts not listed above (including amounts subject to section 1446(f).

Depositing taxes a PTP withholds under section 1446. The general rules for making payments of taxes withheld under section 1446(a) do not apply to PTP distributions. Instead, apply the rules discussed earlier, under depositing withheld taxes.