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New partnership withholding, reporting rules delayed

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Tax Hot Topics newsletter The IRS released guidance (Notice 2021-51) on Aug. 24, 2021, announcing that it plans to postpone the effective date of new international reporting and withholding rules on certain partnership distributions and transfers of publicly traded partnership (PTP) interests.

The notice says the IRS will amend the regulations under Sections 1446(a) and 1446(f) to defer the applicability date to Jan. 1, 2023, for certain provisions related to PTP interests and withholding under Section 1446(f)(4) by partnerships on distributions to transferees if the transferee fails to withhold on the disposition of a partnership interest as required under Section 1446(f)(1).

Final regulations under Section 1446(f) (T.D. 9926) were published in November 2020 relating to the withholding of tax and information reporting with respect to certain dispositions by a foreign person of an interest in a partnership that is engaged in the conduct of a trade or business within the United States. While the final regulations generally had an applicability date of 60 days after the date of publishing in the Federal Register, provisions pertaining to PTPs and partnership withholding obligations were scheduled to go into effect for transfers taking place on or after Jan. 1, 2022. For more details on these regulations, see our prior story.

In response to concerns raised by taxpayers, Notice 2021-51 intends to amend the following:

  • The applicability date listed in Treas. Reg. Sec. 1.1446(f)-4(f), causing the provisions relating to withholding and reporting on transfers of PTP interests under Section 1446(f)(1) apply to transfers that occur on or after Jan. 1, 2023.
  • The applicability date of the modifications to Treas. Reg. Sec. 1.1446-4 (listed in Treas. Reg. Sec. 1.1446-7), so the modifications apply to distributions with respect to PTP interests made on or after Jan. 1, 2023.
  • The applicability date provided in Treas. Reg. Sec. 1.1446(f)-3(f), causing the provisions under Section 1446(f)(4) to apply to transfers that occur on or after Jan. 1, 2023.

Taxpayers may rely on the provisions of Notice 2021-51 regarding the modified applicability dates in advance of the amendments to the regulations.

Contact:
Grace Kim
Principal
Washington National Tax Office
T +1 202 521 1590

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