§ 1.1446(f)-1 — General rules.

§ 1.1446(f)-1 General rules.

(a) Overview. This section and §§ 1.1446(f)-2 through 1.1446(f)-5 provide rules for withholding, reporting, and paying tax under section 1446(f) upon the sale, exchange, or other disposition of certain interests in partnerships. This section provides definitions and general rules that apply for purposes of section 1446(f). Section 1.1446(f)-2 provides withholding rules for the transfer of a non-publicly traded partnership interest under section 1446(f)(1). Section 1.1446(f)-3 provides rules that apply when a partnership is required to withhold under section 1446(f)(4) on distributions made to the transferee in an amount equal to the amount that the transferee failed to withhold plus interest. Section 1.1446(f)-4 provides special rules for the sale, exchange, or disposition of publicly traded partnership interests, for which the withholding obligation under section 1446(f)(1) is generally imposed on certain brokers that act on behalf of the transferor. Section 1.1446(f)-5 provides rules that address the liability for failure to withhold under section 1446(f) and rules regarding the liability of a transferor's or transferee's agent.

(b) Definitions. This paragraph (b) provides definitions that apply for purposes of this section and §§ 1.1446(f)-2 through 1.1446(f)-5.

(1) The term broker means any person, foreign or domestic, that, in the ordinary course of a trade or business during the calendar year, stands ready to effect sales made by others, and that, in connection with a transfer of a PTP interest, receives all or a portion of the amount realized on behalf of the transferor. The term broker includes a clearing organization (as defined in § 1.1471-1(b)(21)). In the case of a U.S. clearing organization clearing or settling sales of PTP interests, however, see § 1.1446(f)-4(a)(3) for an exception from the requirement to withhold on a sale of a PTP interest. The term broker does not include an escrow agent that does not effect sales other than transactions that are incidental to the purpose of escrow (such as sales to collect on collateral).

(2) The term controlling partner means a partner that, together with any person that bears a relationship described in section 267(b) or 707(b)(1) to the partner, owns directly or indirectly a 50 percent or greater interest in the capital, profits, deductions, or losses of the partnership at any time within the 12 months before the determination date (see paragraph (c)(4) of this section).

(3) The term effect has the meaning provided in § 1.6045-1(a)(10).

(4) The term foreign person means a person that is not a United States person, including a QI branch of a U.S. financial institution (as defined in § 1.1471-1(b)(109)).

(5) The term PTP interest means an interest in a publicly traded partnership if the interest is publicly traded on an established securities market or is readily tradable on a secondary market (or the substantial equivalent thereof).

(6) The term publicly traded partnership has the same meaning as in section 7704 and §§ 1.7704-1 through 1.7704-4 but does not include a publicly traded partnership treated as a corporation under that section.

(7) The term TIN means the tax identifying number assigned to a person under section 6109.

(8) The term transfer means a sale, exchange, or other disposition, and includes a distribution from a partnership to a partner, as well as a transfer treated as a sale or exchange under section 707(a)(2)(B).

(9) The term transferee means any person, foreign or domestic, that acquires a partnership interest through a transfer, and includes a partnership that makes a distribution.

(10) Except as otherwise provided in this paragraph, the term transferor means any person, foreign or domestic, that transfers a partnership interest. In the case of a trust, to the extent all or a portion of the income 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 such other person.

(11) The term transferor's agent or transferee's agent means any person who represents the transferor or transferee (respectively) in any negotiation with another person relating to the transaction or in settling the transaction. A person will not be treated as a transferor's agent or a transferee's agent solely because it performs one or more of the activities described in § 1.1445-4(f)(3) (relating to activities of settlement officers and clerical personnel).

(12) The term United States person or U.S. person means a person described in section 7701(a)(30).

(c) General rules of applicability—(1) In general. This paragraph (c) provides general rules that apply for purposes of this section and §§ 1.1446(f)-2 through 1.1446(f)-5.

(2) Certifications—(i) In general. This paragraph (c)(2) provides rules that are applicable to certifications described in this section and §§ 1.1446(f)-2 through 1.1446(f)-5, except as otherwise provided therein, or as may be prescribed by the Commissioner in forms or instructions or in publications or guidance published in the Internal Revenue Bulletin (see §§ 601.601(d)(2) and 601.602 of this chapter). A certification must provide the name and address of the person providing it. A certification must also be signed under penalties of perjury and, if the certification is provided by the transferor, must include a TIN if the transferor has, or is required to have, a TIN. A transferee (or other person required to withhold) may not rely on a certification if it knows that a transferor has, or is required to have, a TIN, and that TIN has not been provided with the certification. 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. Documents associated with the certification form an integral part of the certification, and the penalties of perjury statement provided on the certification also applies to the associated documents. A certification (other than the certification described in § 1.1446(f)-2(d)(2)) may not be relied upon if it is obtained earlier than 30 days before the transfer or any time after the transfer.

(ii) Penalties of perjury. A certification signed under penalties of perjury must provide the following: “Under penalties of perjury, I declare that I have examined the information on this document, and to the best of my knowledge and belief, it is true, correct, and complete.”

(iii) Authority to sign certifications on behalf of a business entity. A certification provided by a business entity must be signed by an individual who is an officer, director, general partner, or managing member of the entity, or other individual that has authority to sign for the entity under local law.

(iv) Electronic submission. A certification may be sent electronically, including as text in an email, an image embedded in an email, or a Portable Document Format (.pdf) attached to an email. An electronic certification, however, may not be relied upon if the person receiving the submission knows that the certification was transmitted by a person not authorized to do so by the person required to execute the certification.

(v) Retention period. Any person that relies on a certification pursuant to this section and §§ 1.1446(f)-2 through 1.1446(f)-5 must retain the certification (including any documentation) for as long as it may be relevant to the determination of its withholding obligation under section 1446(f) or its withholding tax liability under section 1461.

(vi) Submission to IRS. The recipient of a certification is not required to mail a copy to the IRS, except as provided in § 1.1446(f)-2(b)(7) and (c)(4)(vi) (involving certifications relating to an income tax treaty), or as may be prescribed by the Commissioner in forms or instructions or in publications or guidance published in the Internal Revenue Bulletin (see §§ 601.601(d)(2) and 601.602 of this chapter).

(vii) Grantor trusts. A certification provided by a transferor that is a grantor or other owner of a grantor trust must identify the portion of the amount realized that is attributable to the grantor or other owner. A certification provided by a foreign grantor trust on behalf of a transferor that is a grantor or owner must also include a Form W-8IMY, Certificate of Foreign Intermediary, Foreign Flow-Through Entity, or Certain U.S. Branches for United States Tax Withholding and Reporting), (or similar statement for a domestic grantor trust with a foreign grantor or owner), that includes a withholding statement that provides the percentage of the amount realized allocable to each grantor or owner of the trust, and any applicable certification for each grantor or owner. In the case of a certification so provided, a grantor or owner of the trust is treated as having provided the certification to the transferee (or broker).

(3) Books and records. A partnership that relies on its books and records pursuant to this section and §§ 1.1446(f)-2 through 1.1446(f)-5 (including for purposes of providing a certification or other statement) must identify in its books and records the date on which the transfer occurred, the information on which the partnership relied, and the provisions of this section and §§ 1.1446(f)-2 through 1.1446(f)-5 supporting an exception from, or adjustment to, the partnership's obligation to withhold. The identification required by this paragraph (c)(3) must be made no later than 30 days after the date of the transfer. The partnership must retain the identified information in its books and records for the longer of five calendar years following the close of the last calendar year in which it relied on the information or for as long as it may be relevant to the determination of its withholding obligation under section 1446(f) or its withholding tax liability under section 1461.

(4) Determination date—(i) In general. This paragraph (c)(4) provides rules for the determination date. The same determination date must be used for all purposes with respect to a transfer. Any statement, certification, or books and records with regard to a transfer must state the determination date. The determination date of a transfer must be one of the following—

(A) The date of the transfer;

(B) Any date that is no more than 60 days before the date of the transfer; or

(C) The date that is the later of—

(1) The first day of the partnership's taxable year in which the transfer occurs, as determined under section 706; or

(2) The date, before the date of the transfer, of the most recent event described in § 1.704-1(b)(2)(iv)(f)(5) or (b)(2)(iv)(s)(1) (revaluation event), irrespective of whether the capital accounts of the partners are adjusted in accordance with § 1.704-1(b)(2)(iv)(f).

(ii) Controlling partner. The determination date for a transferor that is a controlling partner is determined without regard to paragraph (c)(4)(i)(C) of this section.

(5) IRS forms and instructions. Any reference to an IRS form includes its successor form. Any form must be filed in the manner prescribed by the Commissioner in forms or instructions or in publications or guidance published in the Internal Revenue Bulletin (see §§ 601.601(d)(2) and 601.602 of this chapter).

(d) Coordination with section 1445. A transferee that is otherwise required to withhold under section 1445(e)(5) or § 1.1445-11T(d)(1) with respect to the amount realized, as well as under section 1446(f)(1), will be subject to the payment and reporting requirements of section 1445 only, and not section 1446(f)(1), with respect to that amount. However, if the transferor has applied for a withholding certificate under the last sentence of § 1.1445-11T(d)(1), the transferee must withhold the greater of the amounts required under section 1445(e)(5) or 1446(f)(1). A transferee that has complied with the withholding requirements under either section 1445(e)(5) or 1446(f)(1), as applicable under this paragraph (d), will be deemed to satisfy the withholding requirement.

(e) Applicability date. This section applies to transfers that occur on or after January 29, 2021.

[T.D. 9926, 85 FR 76935, Nov. 30, 2020]