Part VII — Publication 5346 — Instructions for Form

Under applicable regulations, a partnership may request modification based on partnership adjustments that were included in a closing agreement pursuant to section 7121 entered into by the IRS and the partnership or any relevant partner, or both if appropriate. Any partnership adjustment that is taken into account under such closing agreement and for which any required payment under the closing agreement is made, will not be taken into account in determining the imputed underpayment. Generally, if the IRS approves a modification based on a relevant partner’s closing agreement under this section, additional modifications with respect to that partner will not be approved.

Caution: Closing agreement modification is not permitted for an AAR.

Note: Use Part VII only for partner closing agreements . If the source partnership (rather than the partners, individually) entered into a closing agreement, do not use Part VII. Instead, use Part IX, Other Modifications, to request modification based on the source partnership closing agreement.

Make sure the relevant modifcation type is checked in Item B, otherwise the felds in this part will not be unlocked for completion. Once the relevant box in Item B is checked, you will be able to complete this part.

A. Enter the total number of relevant partners with closing agreements under this modification request . This is a required feld when this type of modification is requested . When the number of partners is entered, the form will populate with the correct number of lines needed for completion.

Columns (1) and (2): Name of Partner & TIN of Partner . Both column 1 and column 2 are required fields for each relevant partner . List the name and Taxpayer Identification Number (TIN) of each direct or indirect partner for which the partnership is requesting modification under this section. Both Columns 1 and 2 are required felds .

Columns (3) through (6) : At least one entry in columns 3 through 6 must be entered for each partner listed .

Column (3): Total Share of Reallocation & Residual Grouping Adjustments (net positive adjustments only) . Enter in the appropriate subcolumn of column 3 (General or Specific – depending on which imputed underpayment the adjustments were included in), the total of each partner’s distributive share of all net positive adjustments (resulting after subgrouping per the NOPPA) within the Reallocation and Residual groupings which were included under the closing agreement. Do not include adjustments to Creditable Expenditures or Credits in this column. Any amounts entered in column 3 should be consistent with the allocation information provided on Form 8980, Item C for such adjustments. Allocations of net negative adjustments resulting after subgroupings within the Reallocation and Residual grouping should be included in column 6.

Column (4): Total Share of Creditable Expenditure Grouping Adjustments (net positive adjustments only) . Enter in the appropriate subcolumn of column 4 (General or Specific – depending on which imputed underpayment the adjustments were included in), the total of each partner’s distributive share of all net positive adjustments (resulting after subgrouping per the NOPPA) within the Creditable Expenditure grouping which were included under the closing agreement. This includes decreases to creditable expenditures (including decreases to Creditable Foreign Tax Expenditures (CFTEs)) that were included in the subgroupings within the Creditable Expenditures grouping. Any amounts entered in column 4 should be consistent with the allocation information provided on Form 8980, Item C for such adjustments. Allocations of any net negative adjustments resulting after subgroupings (representing net increases to creditable expenditures) should be included in column 6.

Column (5): Total Share of Credit Grouping Adjustments (positive and negative adjustments) . Enter in the appropriate subcolumn of column 5 (General or Specific – depending on which imputed underpayment such adjustments were included in), the total of each partner’s distributive share of all credit adjustments (positive and negative) that were included in the Credit Grouping per the NOPPA and which were included under the closing agreement. Any amounts entered in column 5 should be consistent with the allocation information provided on Form 8980, Item C for such adjustments.

Column (6): Total Share of Net Negative Adjustments . Include in column 6, the following amounts, if included under the closing agreement:

The total of all allocations for each specified partner that are net negative adjustments (resulting after subgrouping per the NOPPA) in the

Reallocation and Residual grouping; and

The total of any net negative adjustments (resulting after subgrouping per the NOPPA) in the Creditable Expenditures grouping. A net negative

adjustment in the Creditable Expenditures grouping is a net increase to Creditable Expenditures after subgrouping.

Any amounts entered in column 6 should be consistent with the allocation information provided on Form 8980, Item C, for such adjustments.

Column (7): Amount of Tax Paid . Include in column 7 the amount of tax paid with the partner’s closing agreement. If no tax was paid with the closing agreement, enter zero. This is a required feld . Note: See “ BBA Partner Payments Related to Requested Modifications ” under the General Instructions for information on how partner payments must be identified at the time payments are made.

Column (8): Amount of Penalty Paid . Include in column 8 the amount of any penalty paid with the partner’s closing agreement.

Column (9): Date Paid . Enter the date in which the tax and any penalties were paid.

Column (10): Other Modification Year(s) included in the closing agreement . List any other tax years which were included in the partner’s closing agreement.

Column (11): Amount of Tax Paid for Other Modification Year(s) . For any year listed in column 10, enter in column 11 the amount of tax paid relative to the other modification year included in the partner’s closing agreement.

Part VIII – Foreign Partners: Modification Pursuant to Tax Treaty Claims & Statutory Exemptions Other Than Section 501(a) ( For modification requests involving domestic partners that are tax-exempt and foreign partners that are tax-exempt under section 501(a) : Do not use Part VIII for modification requests involving domestic partners that are tax-exempt and foreign partners that are tax-exempt under section 501(a). Instead, use Part II of Form 8980, and the supporting attachment Form 8983, Certification of Partner Tax-Exempt Status for Modification Under IRC §6225(c)(3)).

Modification Pursuant to Tax Treaty Claims : Under applicable Regulations, a partnership may request modification based on a relevant partner’s distributive share of an adjustment to a partnership-related item if, in the reviewed year if: (1) the relevant partner was a foreign person qualified under an income tax treaty with the United States for a reduction or exemption from tax with respect to such partnership-related item; or (2) the partnership itself was so qualified with respect to such item.

If requesting this modification, complete Part VIII, columns 1 through 3, and columns 4a through 4e. (Do not complete column 5)

Modification Based on Statutory Exemption other than section 501(a) : For modification requests relating to a foreign partner that is exempt by statute due to a Code-based exemption (other than section 501(a)), modification should be requested based on a relevant partner’s distributive share of an adjustment to a partnership-related item by using Part VIII, columns 1 through 3, and columns 5a and 5b. (Do not complete columns 4a through 4e).

A. Total number of relevant partners included under this modification request . This is a required feld when this type of modification is requested . When the number of partners is entered, the form will populate with the correct number of lines needed for completion.

Columns (1) and (2): Name of Partner & TIN of Partner . Both column 1 and column 2 are required fields for each relevant partner . List the full name and Taxpayer Identification Number (TIN) of each relevant foreign partner (direct or indirect) for which the source partnership is requesting modification based on partner tax treaty claims or statutory exemptions other than section 501. Both Columns 1 and 2 are required felds .

For each partner listed in column (1) and (2), complete column (3), and either columns 4a through 4e (for tax treaty claims) or columns 5a and 5b (for statutory exemptions other than Section 501(a)), according to the following instructions:

Column (3a): Total Share of Reallocation & Residual Grouping Adjustments (net positive adjustments only) . Enter in the appropriate subcolumn of column 3 (General or Specific – depending on which imputed underpayment the adjustments were included in), the total of each partner’s distributive share of all net positive adjustments within the Reallocation and Residual groupings (resulting after subgrouping per the NOPPA). Do not include adjustments to Creditable Expenditures or Credits in this column. Any amounts entered in column 3 should be consistent with the allocation information provided on Form 8980, Item C for such adjustments. This is a required feld .

Column (3b): Total Share of Creditable Expenditure Grouping Adjustments (net positive adjustments only) . Enter in the appropriate subcolumn of column 3b (General or Specific – depending on which imputed underpayment the adjustments were included in), the total of each partner’s distributive share of all net positive adjustments (resulting after subgrouping per the NOPPA) within the Creditable Expenditure grouping. This includes decreases to creditable expenditures (including decreases to Creditable Foreign Tax Expenditures (CFTEs) that were included in the subgroupings within the Creditable Expenditures grouping. Any amounts entered in column 3b should be consistent with the allocation information provided on Form 8980, Item C for such adjustments.

Column (3c): Total Share of Credit Grouping Adjustments (positive and negative adjustments) . Enter in the appropriate subcolumn of column 3c (General or Specific – depending on which imputed underpayment such adjustments were included in), the total of each partner’s distributive share of all credit adjustments (positive and negative) that were included in the Credit Grouping per the NOPPA. Any amounts entered in column 3c should be consistent with the allocation information provided on Form 8980, Item C for such adjustments.

Note for Columns (4a) through (5b) : In addition to columns 3a-3c, for each partner listed, you must complete either Columns 4a through 4e (Tax Treaty Modification) or Columns 5a and 5b (Statutory Exemptions) .

TIN of Partner: Re-enter the TIN of the relevant partner that was entered in column 2. This column is a continuation of requested information for the partner. Therefore, make sure the TIN entered here is the same TIN entered in column (2). Once the TIN is entered, continue entering the appropriate information for the partner in columns (4a) through (5b), as applicable . This is a required feld.

Modification For Foreign Partner Tax Treaty Claims (Columns 4a through 4e) Column (4a): Country of Residence . Use the drop-down menu to select the relevant partner’s country of residence.

Column (4b): Treaty Rate . Enter the percentage rate of withholding pertaining to the portion of income for which the tax treaty benefits are claimed, to be entered in column 4e. This field allows numeric characters with a decimal (if applicable).

Column (4c): Treaty article and paragraph . Enter the article and paragraph number of the tax treaty provision for the tax treaty indicated in column 4a.

Column (4d): Type of income pertaining to the treaty benefit identified in column 4c . Enter the description of the specific type of income or item pertaining to the treaty benefit indicated in column 4c.

Column (4e): Enter the portion of Column 3a, 3b, and 3c representing the item for which the partner is claiming tax treaty benefits for payments subject to withholding under chapter 3 . Enter the amount of the partner’s distributive share of partnership adjustment that is subject to the treaty benefit indicated in column 4c.

Example 1 : A partnership originally reported U.S. source dividends as a Return of Capital (ROC). ROC is not subject to Chapter 3 withholding. Upon exam, the IRS determined that the U.S. source dividends were incorrectly characterized as ROC and should have been reported as ordinary dividends. The distributive share of the adjustment of ordinary dividends to Partner A, an individual resident of the United Kingdom, is $1,000. Absent a treaty, Partner A would be subject to the statutory withholding of 30%. However, partner A has a valid Form W-8BEN on file with the partnership/withholding

agent claiming tax treaty benefits as a resident of the UK, which is subjected to the treaty rate of 15%. Since the partnership’s imputed underpayment is calculated at the default tax rate of 37%, the partnership requests modification with regard to foreign Partner A’s tax treaty benefit for U.S. source ordinary dividends at a rate of 15%. The partnership would complete Form 8980, Part VIII, as follows to request the modification based on Partner A:

The partnership should obtain and retain Form W-8BEN from Partner A, in support of the requested modification.

Modification For Foreign Partner Statutory Exemptions (Columns 5a through 5b) Column (5a): IRC section authority for exemption . Enter the specific Internal Revenue Code section supporting the exemption from tax.

Column (5b): Enter the portion of Column (3) representing income exempt by statute . Enter the amount of the partner’s distributive share of partnership adjustments which are subject to the exemption indicated in column 5a.

Example 2 : Foreign Partner B has a distributive share adjustment of $1,000 interest income from Partnership ABC that is eligible for the portfolio exclusion under section 871 regarding interest on certain portfolio debt instruments. Partnership ABC would complete Form 8980, Part VIII, as follows, to request the modification based on Partner B’s Code- based exemption:

Example 3 : Foreign Partner C has a distributive share adjustment of $1,000 interest income from Partnership ABC. Partner C is an international organization within the meaning of section 7701(a)(18) and such income is within the scope of exemption granted by section 892. Partnership ABC would complete Form 8980, Part VIII, as follows, to request the modification based on Partner C’s foreign tax-exempt status:

Partnership ABC should obtain and retain Form W-8EXP from Partner C, in support of the requested modification unless other facts surrounding the payment reasonably indicate that the beneficial owner of the payment is an international organization.

Supporting Documentation for Part VIII . For each relevant partner listed in Part VIII, the partnership should secure the applicable forms (listed below) and any other documentation supporting the facts for each relevant partner’s situation. Such supporting documents will establish that the relevant partner is not a U.S. person, eligibility for treaty benefits involving a reduced rate of, or exemption from, withholding as a resident of a foreign country with which the United States has an income tax treaty, or establish other exempt status and applicable statutory exemptions from tax. If the partnership is not the withholding agent, then such forms should be obtained from the withholding agent and retained by the partnership.

Note: All forms and supporting documentation should be retained by the partnership and should be made available to the IRS upon request. Do not attach such forms to Form 8980 or otherwise send such forms to the IRS. Such supporting forms to support requested modifications in Part VIII may include:

Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals);
Form W-8BEN-E, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Entities);
Form W-8EXP, Certificate of Foreign Government or Other Foreign Organization for United States Tax Withholding and Reporting;
Form W-8IMY, Certificate of Foreign Intermediary, Foreign Flow-Through Entity, or Certain U.S. Branches for United States Tax Withholding

and Reporting;

Form W-8ECI, Certificate of Foreign Person’s Claim That Income Is Effectively Connected With the Conduct of a Trade or Business in the

United States; or

Form 8233, Exemption From Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident

Alien Individual

Requirement for Partner Affidavit of Unchanged Status . If a Form W-8 series form is not already on file with the partnership at the time the modification is requested, or the form is no longer in effect at the time the modification is requested, the partnership should solicit the applicable form from the partner. The partner should complete the current version of the form and sign with a current date. In addition, the partner must sign an “Affidavit of Unchanged Status” to declare the validity of the form, its applicability to the partnership’s reviewed year, and the partner’s entitlement to the reduction in rate or exemption from tax. Such affidavit should be attached to the completed Form W-8 series form and retained by the partnership. The following is an example of an affidavit and the suggested language:

Attachment to Form W-8BEN

Name: Beneficial Owner [from Line One of the Form W-8 BEN]

Under penalties of perjury, I declare that:

I have examined and signed the above Form W-8BEN [or other applicable W-8 series tax form] and the information and certifications contained therein remained the same and unchanged throughout ______________________ [calendar year(s)] taken into account in determining the amount of the requested modification in the reviewed year, and were true, correct and complete for those years; and
With respect to any requested reviewed year modification based on a claim of benefits under an income tax treaty with the United States, that _________________________ [name of the beneficial owner] would have qualified for treaty benefits throughout ______________ [calendar year(s)] taken into account in determining the amount of the requested modification in the reviewed year.

Signature of Beneficial Owner (or individual authorized to sign for beneficial owner)

Print name of signer

Date

Capacity in which acting (if not signed by beneficial owner)