# Prop. Treas. Reg. § 1.1446-6: Special rules to reduce a partnership's 1446 tax with respect to a foreign partner's allocable share of effectively connected taxable income .

Proposed regulation, not in force. REG-115420-18, 86 FR 19585, published 2021-04-14 <https://www.federalregister.gov/documents/2021/04/14/2021-06143/requirements-for-certain-foreign-persons-and-certain-foreign-owned-partnerships-investing-in>. Interprets 26 U.S.C. § 1446.

Par. 9. Section 1.1446-6 is amended by: 1. Revising paragraph (a)(1). 2. Revising the first sentence of paragraph (a)(2). 3. Adding a sentence at the end of paragraph (c)(1). 4. Adding paragraph (c)(1)(iv). 5. Adding a sentence at the end of paragraph (c)(2)(i). 6. Revising the seventh sentence of paragraph (d)(3)(i). 7. Adding a sentence at the end of paragraph (f). The revisions and additions read as follows:

(a) In general —(1) Purpose and scope. This section provides rules regarding when a partnership required to pay withholding tax under section 1446 (1446 tax), or an installment of 1446 tax, may consider certain partner-level deductions and losses and eligibility certificates under § 1.1400Z2(a)-2(d) in computing its 1446 tax obligation under § 1.1446-3. This section also provides rules regarding when a partnership is not required to pay a de minimis amount of 1446 tax due with respect to a nonresident alien individual partner. A partnership determines the applicability of the rules of this section on a partner-by-partner basis for each installment period and when completing its Form 8804, “Annual Return for Partnership Withholding Tax (Section 1446),” and paying 1446 tax for the partnership taxable year. Except with respect to certain state and local taxes paid by the partnership on behalf of the partner, to apply the rules of this section with respect to a foreign partner, the partnership must receive a certificate described in § 1.1446-6(c)(1)(i) and (ii) from such partner for each partnership taxable year or an eligibility certificate described in § 1.1400Z2(a)-2(d) for each security-required gain (as defined in § 1.1400Z2(a)-2(c)(1)). Paragraph (b) of this section identifies the foreign partners to which this section applies. Paragraph (c) of this section identifies the deductions and losses and security-required gains that a foreign partner may certify to the partnership as well as the state and local taxes paid by the partnership on behalf of the foreign partner that can be taken into account without a certification, and establishes an exception that permits a partnership to not pay a de minimis amount of 1446 tax with respect to a nonresident alien partner. Paragraph (c) of this section also sets forth the requirements for a valid certificate. Paragraphs (a)(2) and (d) of this section establish when a partnership may rely on and consider a foreign partner's certificate in computing its 1446 tax, and the effects of relying on such a certificate. Paragraph (d) of this section also describes the effects of a partnership relying on a certificate (including an updated certificate) and the reporting requirements of a partnership with respect to a certificate. Paragraph (e) of this section sets forth examples that illustrate the rules of this section. Paragraph (f) of this section provides the Effective/Applicability date. Paragraph (g) of this section provides a transition rule.

(2) Reasonable reliance on a certificate. Subject to § 1.1446-2 and the rules of this section, a partnership receiving a certificate (including an updated certificate or status update under paragraph (c)(2)(ii)(B) of this section) of deductions and losses or an eligibility certificate from a partner provided in accordance with the provisions of this section may reasonably rely on the certificate of deductions and losses (to the extent of the certified deductions and losses or other representations set forth in the certificate) or eligibility certificate (to the extent of the permitted deferral amount determined in § 1.1400Z2(a)-2(d)(7)) until such time that it has actual knowledge or reason to know that the certificate is defective or that the time for receiving an updated certificate or status update from the partner under paragraph (c)(2)(ii)(B) of this section has expired. * * *

* * * * *

(c) * * *

(1) * * * Under paragraph (c)(1)(iv) of this section, a partnership may take into account eligibility certificates submitted by a foreign partner with respect to security-required gains.

* * * * *

(iv) Consideration of eligibility certificates. A partner that is a nonresident alien or foreign corporation that satisfies the requirements of § 1.1400Z2(a)-1(a)(3) may provide a copy of an eligibility certificate, as defined in § 1.1400Z2(a)-2(d)(1), for each of the partner's security-required gains, as defined in § 1.1400Z2(a)-2(c)(1).

* * * * *

(2) * * *

(i) * * * A partner's certification under paragraph (c)(1)(iv) of this section shall be the eligibility certificate described in § 1.1400Z2(a)-2(d)(1).

* * * * *

(d) * * *

(3) * * *

(i) * * * For an installment period other than the first installment period for which the partnership considers a foreign partner's certificate or updated certificate, the partnership may, instead of attaching any partner's certificate, attach to Form 8813 a list containing the name, TIN, the amount of certified deductions and losses, the amount of gain excluded resulting from an eligibility certificate, and the amount of state and local taxes the partnership may consider under paragraph (c)(1)(iii) of this section for each foreign partner whose certificate was relied upon.

* * * * *

(f) * * * Paragraph (c)(1)(iv) of this section and the references in paragraphs (a)(1), (a)(2), (c)(1), and (d)(3)(i) of this section to eligibility certificates, covered transfers and security-required gains, apply to any covered transfers (as defined in § 1.1400Z2(a)-2(c)(2)) occurring after [DATE OF PUBLICATION OF FINAL RULE].

* * * * *