IRC 1446 Withholding Requirements for Foreign Partner's Effectively Connected Income: Forms 8804 and 8288

Special Rules for Real Estate Partnerships, Partner-Level Adjustments, Overpayment Rules, Remedying Prior Noncompliance

Note: CLE credit is not offered on this program

A live 110-minute CPE webinar with interactive Q&A


Wednesday, February 20, 2019 (in 3 days)

1:00pm-2:50pm EST, 10:00am-11:50am PST

or call 1-800-926-7926

This webinar will provide an in-depth practical guide to reporting partnership withholdings for non-U.S. partners on U.S. effectively-connected income (ECI) under IRC Sections 1445 and 1446. The webinar will go beyond the basics of the ECI rules to offer line-by-line guidance on calculating required withholding amounts and completing Forms 8804, 8805 and 8288. The panel will differentiate between reporting duties on Form 1042-S and the essential filing requirements for U.S. partnerships and will discuss elements unique and specific to real estate partnerships with non-U.S. members.

Description

For most foreign investors in U.S. enterprises, particularly real estate, the preferred investment structure is generally a tax-transparent entity such as a U.S. or foreign limited partnership, LLC, or a similar offshore investment vehicle treated as a partnership for U.S. income tax purposes. This requires U.S. tax advisers serving these entities to have practical knowledge of the withholding rules specific to any partnership, domestic or foreign, which has foreign partners.

U.S. tax law provides several different withholding regimes for foreign partners, depending on the type of income the partnership receives and the way the partnership conducts its activities. For partnerships and partners who receive fixed or determinable annual or periodical (FDAP) income from U.S. sources, income tax is generally withheld at source. For partnerships engaged in a U.S. trade or business, their income typically will be deemed effectively-connected income (ECI), which generates unique reporting and withholding duties for the partnership. In addition, a special regime applies to ECI attributable to gains from the sale of U.S. real property interests.

Partnership tax advisers must be able to go beyond the basics of identifying whether a partnership with foreign partners has ECI to calculate required withholdings and ensure proper filings and remittances. This generally involves navigating a series of filings from identifying foreign partners to the IRS, calculating effectively connected taxable income (ECTI), calculating tax on that ECTI, identifying possible treaty exceptions to withholding duties, and recognizing and filing the appropriate forms.

Listen as our experienced panel provides a comprehensive and practical guide to the tax planning and reporting issues specific to partnerships with foreign partners.

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Outline

  1. Identifying foreign partners and offshore partnership structures
  2. Determining FDAP income and discussing the reporting requirements on Forms 1042,1042-S, and Schedule K-1 as they apply to partnerships with foreign partners
  3. Calculating effectively-connected taxable income (ECTI)
    1. Section 1446 tax liability
    2. Reporting ECTI on Form 8804, 8805, 8813, and Schedule K-1
  4. Rules and requirements specific to U.S. real estate holdings
    1. Determining what is a U.S. real property interest for purposes of Section 897
    2. Section 1445 withholding requirements on dispositions of U.S. real property interests
    3. Section 864(c)(8)(C) and 897 coordination provisions subjecting certain gains on sale of foreign partnership interests to the Foreign Investment in Real Property Tax Act (FIRPTA) withholding provisions rather treating such gains as ECTI subject to withholding under Section 1446
    4. Form 8288
    5. Affidavits and exemptions

Benefits

The panel will discuss these and other relevant topics:

  • What goes into the calculation of the withholding amount under Sections 864(c)(8), 1445 and 1446(f)
  • Non-foreign person affidavit to avoid withholding requirement
  • Differentiating between various form reporting requirements
  • How to remedy prior withholding noncompliance
  • Line-by-line reporting on Forms 8804, 8805 and 8288

Faculty

Broome, Gregory
Gregory P. Broome

Partner
Wilson Sonsini Goodrich & Rosati

Mr. Broome’s practice focuses on partnership and corporate taxation matters, including significant experience in...  |  Read More

Dougherty, Alison
Alison N. Dougherty, J.D., LL.M.

Tax Director
Wagner Duys & Wood

Ms. Dougherty specializes in U.S. international tax reporting, compliance, consulting, planning, and structuring as a...  |  Read More

Kennedy-C. Edward
C. Edward Kennedy, Jr., CPA, JD
Managing Director
C. Edward Kennedy Jr.

Mr. Kennedy has more than 36 years of experience dealing with a variety of international tax matters, specializing in...  |  Read More

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