Internal Revenue Bulletin 2020-51 (PDF rendition): IRS Notices

Preserve advance releases and the authoritative Internal Revenue Bulletin rendition; directory timestamps are file-publication metadata, not legal effective dates. HTML bulletins begin June 2003; earlier available issues require full PDF parsing. Whole bulletin rendition: numbered items are identified below; other legal material and publisher context remain included. This is not a new standalone advance release.

Bulletin No. 2020–51
December 14, 2020
HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
ADMINISTRATIVE
REG-123652-18, page 1652.
This notice of proposed rulemaking contains proposed
regulations that implement the special enforcement pro-
visions described in section 6241(11) of the centralized
partnership audit regime enacted by the BBA in Novem-
ber 2015. The Tax Technical Corrections Act of 2018
(TTCA), which was enacted into law on March 23, 2018 as
part of the Consolidated Appropriations Act, 2018, add-
ed, among other things, section 6241(11) to the Code.
Section 6241(11) provides authority for the Secretary to
issue regulations that determine that the centralized part-
nership audit regime, or portions of it, do not apply to
certain items if such items involve special enforcement
matters. Section 6241(11) also authorizes the IRS to pre-
scribe regulations adopting special rules related to such
items. This notice of proposed rulemaking adds proposed
§301.6241-7, provides rules regarding special enforce-
ment matters under section 6241(11). In addition, this no-
tice of proposed rulemaking includes some amendments
to some of the final regulations under BBA to conform
to the addition of the regulations implementing section
6241(11), to account the addition of section 6232(f) in the
TTCA, to implement one of the items in Notice 2019-06,
and to make some clarifying amendments to the previous-
ly finalized rules.
EMPLOYEE PLANS
NOTICE 2020-85, page 1645.
This notice sets forth the updated mortality improvement
rates and static mortality tables that are used for purposes
of determining minimum funding requirements under § 430(h)
(3) for 2022 and minimum present value under § 417(e)(3)
for distributions with annuity starting dates that occur during
stability periods beginning in the 2022 calendar year.
EXCISE TAX
NOTICE 2020-84, page 1645.
Sections 4375 and 4376, added to the Code by the Afford-
able Care Act, impose a fee on issuers of specified health in-
surance policies and plan sponsors of applicable self-insured
health plans to help fund the Patient-Centered Outcomes Re-
search Trust Fund (PCORTF). The fee originally expired on
October 1, 2019, but was extended by the Further Consoli-
dated Appropriations Act, 2020, Pub. L. 116-94, 133 Stat.
2534 (2019). This notice provides that the adjusted applica-
ble dollar amount that applies for determining the PCORTF
fee for policy years and plan years ending on or after Octo-
ber 1, 2020 and before October 1, 2021 is equal to $2.66.
This adjusted applicable dollar amount has been determined
using the percentage increase in the projected per capita
amount of the National Health Expenditures published by
HHS in March 2020.
INCOME TAX
T.D. 9926, page 1602.
This document contains final regulations implementing cer-
tain sections of the Internal Revenue Code, including sec-
tions added to the Internal Revenue Code by the Tax Cuts and
Jobs Act, that relate to the withholding of tax and information
reporting with respect to certain dispositions of interests in
partnerships engaged in the conduct of a trade or business
within the United States. The final regulations affect certain
foreign persons that recognize gain or loss from the sale or
exchange of an interest in a partnership that is engaged in
such conduct. TD 9926. Published November 30, 2020.
Finding Lists begin on page ii.

The IRS Mission
Provide America’s taxpayers top-quality service by helping
them understand and meet their tax responsibilities and en-
force the law with integrity and fairness to all.
Introduction
The Internal Revenue Bulletin is the authoritative instrument
of the Commissioner of Internal Revenue for announcing of-
ficial rulings and procedures of the Internal Revenue Service
and for publishing Treasury Decisions, Executive Orders, Tax
Conventions, legislation, court decisions, and other items of
general interest. It is published weekly.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application
of the tax laws, including all rulings that supersede, revoke,
modify, or amend any of those previously published in the
Bulletin. All published rulings apply retroactively unless other-
wise indicated. Procedures relating solely to matters of inter-
nal management are not published; however, statements of
internal practices and procedures that affect the rights and
duties of taxpayers are published.
Revenue rulings represent the conclusions of the Service
on the application of the law to the pivotal facts stated in
the revenue ruling. In those based on positions taken in rul-
ings to taxpayers or technical advice to Service field offices,
identifying details and information of a confidential nature are
deleted to prevent unwarranted invasions of privacy and to
comply with statutory requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—1986 Code.
This part includes rulings and decisions based on provisions
of the Internal Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B,
Legislation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative
Rulings. Bank Secrecy Act Administrative Rulings are issued
by the Department of the Treasury’s Office of the Assistant
Secretary (Enforcement).
Part IV.—Items of General Interest.
This part includes notices of proposed rulemakings, disbar-
ment and suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.
The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
December 14, 2020 Bulletin No. 2020–51

Part I
T.D. 9926
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 1
Withholding of Tax and
Information Reporting with
Respect to Interests in
Partnerships Engaged in a
U.S. Trade or Business
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final rule.
SUMMARY: This document contains
final regulations that provide guidance
related to the withholding of tax and
information reporting with respect to
certain dispositions of interests in part-
nerships engaged in a trade or business
within the United States. The final regu-
lations affect certain foreign persons that
recognize gain or loss from the sale or
exchange of an interest in a partnership
that is engaged in a trade or business
within the United States, and persons
that acquire those interests. The final
regulations also affect partnerships that,
directly or indirectly, have foreign per-
sons as partners.
DATES: Effective date: These regulations
are effective on November 30, 2020.
Applicability dates: For dates of ap-
plicability, see §§1.864(c)(8)-2(e),
1.1445-2(e), 1.1445-5(h), 1.1445-8(j),
1.1446-7, 1.1446(f)-1(e), 1.1446(f)-2(f),
1.1446(f)-3(f), 1.1446(f)-4(f), 1.1446(f)-
5(d), 1.1461-1(i), 1.1461-2(d), 1.1461-3,
1.1463-1, 1.1464-1(c), 1.6050K-1(h), and
1.6302-2(g).
FOR FURTHER INFORMATION CON-
TACT: In general, Chadwick Rowland or
Ronald M. Gootzeit (202) 317-6937; con-
cerning §1.1446(f)-4, Charles Rioux (202)
317-6933 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Background
Section 1446(f), which was added to
the Internal Revenue Code (the Code)
by the Tax Cuts and Jobs Act, Public
Law 115-97 (2017) (the Act), provides
rules for withholding on the transfer of
a partnership interest described in sec-
tion 864(c)(8). On December 29, 2017,
the Department of the Treasury (the
Treasury Department) and the IRS re-
leased Notice 2018-08, 2018-7 I.R.B.
352, which temporarily suspended the
requirement to withhold on amounts
realized in connection with the sale,
exchange, or disposition of certain in-
terests in a publicly traded partnership
that are publicly traded on an established
securities market or readily tradable on
a secondary market (or the substantial
equivalent thereof) (PTP interests). On
April 2, 2018, the Treasury Department
and the IRS released Notice 2018-29,
2018-16 I.R.B. 495, which provided
temporary guidance and announced an
intent to issue proposed regulations un-
der section 1446(f) with respect to the
sale, exchange, or disposition of certain
interests in non-publicly traded partner-
ships. On May 13, 2019, the Treasury
Department and the IRS published pro-
posed regulations (REG-105476-18) pri-
marily under section 1446(f) relating to
the withholding of tax and information
reporting in the Federal Register (84
FR 21198) (the proposed regulations).
The proposed regulations implemented
section 1446(f) by providing guidance
related 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 en-
gaged in a trade or business within the
United States. In general, the proposed
regulations provided rules that apply
to transfers of interests in non-publicly
traded partnerships (non-PTP interests)
and transfers of PTP interests.
Section 864(c)(8) was also added to the
Code by the Act. On December 27, 2018,
the Treasury Department and the IRS
published proposed regulations (REG-
113604-18) under section 864(c)(8) in
the Federal Register (83 FR 66647) (the
proposed section 864(c)(8) regulations).
The proposed section 864(c)(8) regula-
tions provided rules for determining the
amount of gain or loss treated as effec-
tively connected with the conduct of a
trade or business within the United States
(effectively connected gain or effectively
connected loss) under section 864(c)(8),
including certain rules that coordinate
section 864(c)(8) with other relevant sec-
tions of the Code. On November 6, 2020,
the Treasury Department and the IRS pub-
lished final regulations (TD 9919) under
section 864(c)(8) in the Federal Register
(85 FR 70958) (the final section 864(c)(8)
regulations).
All written comments received in re-
sponse to the proposed regulations are
available at www.regulations.gov or upon
request. Additionally, a public hearing
was scheduled for August 26, 2019, but
it was not held because there were no re-
quests to speak.
Summary of Comments and
Explanation of Revisions
I. Overview
The final regulations retain the basic
approach and structure of the proposed
regulations with certain revisions based
on comments received. This Summary of
Comments and Explanation of Revisions
discusses the comments received with
respect to the proposed regulations and
any revisions made in response to those
comments, as well as other revisions
made that were not directly in response
to those comments. Sections VI.A and
VII.C of this Summary of Comments
and Explanation of Revisions also de-
scribe certain requirements specific to
entities acting as qualified intermediar-
ies for section 1446 withholding purpos-
es that are anticipated to be included in
a revised qualified intermediary agree-
December 14, 2020 1602 Bulletin No. 2020–51

ment and that are not included in these
final regulations.
1
II. Reporting Requirements for Foreign
Transferors and Partnerships with
Foreign Transferors
Proposed §1.864(c)(8)-2 provided
rules that facilitate the transfer of infor-
mation between a foreign partner and the
partnership whose interest is transferred
for purposes of determining the transfer-
or’s tax liability under section 864(c)(8).
These rules required a notifying trans-
feror (generally, any foreign person and
certain domestic partnerships that have a
foreign person as a direct or indirect part-
ner) that transfers (within the meaning of
proposed §1.864(c)(8)-1(g)(5)) an interest
in a partnership (other than certain PTP
interests) in a transaction described in
section 864(c)(8) to notify the partnership
within 30 days of the transfer. Proposed
§1.864(c)(8)-2(a). After receiving the no-
tification from a notifying transferor, a
specified partnership (generally, a partner-
ship that is engaged in a trade or business
within the United States or a partnership
that owns, directly or indirectly, an inter-
est in a partnership so engaged) is required
to furnish to a notifying transferor the in-
formation necessary for the transferor to
comply with section 864(c)(8) by the due
date of the Schedule K-1 (Form 1065),
Partner’s Share of Income, Deductions,
Credits, etc., for the tax year of the part-
nership in which the transfer occurred.
Proposed §1.864(c)(8)-2(b).
While the final section 864(c)(8) regu-
lations generally require a three-year look-
back period for purposes of determining
the foreign source portion of deemed sale
gain or loss attributable to a partnership’s
inventory property or intangibles, the reg-
ulations also allow, in certain cases, the
relevant foreign source portion of deemed
sale gain or loss to be determined by ref-
erence to the source of the partnership’s
income occurring after the date, if any, on
which a material change in circumstances
occurs. §1.864(c)(8)-1(c)(2)(ii)(E). The
final regulations provide that a specified
partnership must include in the statement
provided to the notifying transferor infor-
mation regarding whether the transferor’s
deemed sale EC gain or loss (as described
in §1.864(c)(8)-1(c)(2)) was determined
under the material change in circumstanc-
es rule provided in §1.864(c)(8)-1(c)(2)
(ii)(E). §1.864(c)(8)-2(b)(2)(ii).
The final regulations also revise the
definition of specified partnership to re-
move unnecessary language on publicly
traded partnerships. See §1.864(c)(8)-1(d)
(2).
III. Scope of the Withholding Obligation
under Section 1446(f)
The general approach in the proposed
regulations required withholding on the
transfer of a partnership interest unless an
exception or adjustment to withholding
applied. See proposed §§1.1446(f)-2(a)
and 1.1446(f)-4(a). Comments suggested
that proposed §1.1446(f)-2(a) was overly
broad in that it could impose a withhold-
ing obligation on any transfer of a part-
nership interest, regardless of whether
the partnership in question has any assets
in, or any other connection to, the Unit-
ed States, or whether a transfer of an in-
terest in the partnership would result in
tax on gain under section 864(c)(8), and
so required a transferee to withhold in a
number of circumstances where section
1446(f)(1)’s statutory language does not.
To address this issue, the comments sug-
gested various exceptions to withholding.
One comment requested that the final
regulations provide that even if a trans-
feree does not obtain a certification al-
lowing an exception to withholding, the
transferee should not be considered to
have failed to withhold if the transferee
demonstrates that the transfer did not re-
sult in any gain under section 864(c)(8).
The comment also suggested that in such
a case, the transferee should be excused
from any penalties that would otherwise
apply. In addition, the comment suggest-
ed an exception to withholding when
the transferee can demonstrate that no
deemed sale EC gain would be allocated
to the transferor. Another comment sug-
gested adding an exception to withholding
when the transferee can demonstrate that
the partnership is not engaged in a trade or
business within the United States.
One comment suggested limiting the
scope of withholding by allowing a trans-
feree to rely on a certification from the
partnership providing that it has not been
required to file a Form 1065, U.S. Return
of Partnership Income, for some num-
ber of past years, and it does not expect
to be required to file a Form 1065 for the
taxable year in which the transfer occurs.
The comment suggested, however, that
the partnership should not be required to
provide this certification at the time of the
transfer.
One comment generally requested that
the final regulations expand the scope of
the withholding obligation under section
1446(f). Specifically, the comment re-
quested that the final regulations limit the
number of exceptions and adjustments
to withholding and, for any exception or
adjustment to withholding retained in the
final regulations, the comment requested
that the final regulations increase the re-
quirements necessary to qualify for such
an exception or adjustment.
The final regulations retain the gener-
al rule in proposed §1.1446(f)-2(a) that
requires withholding on the transfer of a
partnership interest unless an exception or
adjustment to withholding applies. While
the statutory language of section 1446(f)
(1) imposes a withholding requirement
when a portion of the gain from a transfer
would be treated under section 864(c)(8)
as effectively connected gain, a transferee
will not know whether a transfer results in
tax on gain under section 864(c)(8) with-
out information from either the transferor
or the partnership. These rules, therefore,
require that the transferee presume that a
transfer is subject to withholding unless it
obtains a certification from the transferor
establishing otherwise (or, if the partner-
ship is the transferee because it makes a
distribution, by relying on information in
its books and records to make such deter-
mination). A transferee that obtains and
1
The final regulations also include certain conforming changes to regulations under sections 1445 and 1446 to reflect the rate changes made by section 13001(b)(3)(A)-(D) of the Act and the
due date changes made by section 2006 of the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 (the Surface Transportation Act), Public Law 114-41 (2015).
Although the changes to these regulations are applicable based on the date of publication of this document in the Federal Register, the same result applies before that date as of the relevant
effective dates of the Act and the Surface Transportation Act.
Bulletin No. 2020–51 1603 December 14, 2020

December 14, 2020 1604 Bulletin No. 2020–51
properly relies on this certification (or,
when the partnership is the transferee, its
books and records) will generally not be
subject to any withholding tax liability,
even if the transfer results in tax on gain
under section 864(c)(8). See, however,
§1.1446(f)-3(a) and section V.A. of this
Summary of Comment and Explanation
of Revisions regarding a partnership’s ob-
ligation to withhold on distributions made
to a transferee for cases in which the part-
nership receives a certification from the
transferee that it knows, or has reason to
know, is incorrect or unreliable.
However, in response to comments, the
final regulations add a rule in §1.1446(f)-
5(b) that provides that any person re-
quired to withhold under section 1446(f)
is not liable for failure to withhold, or any
interest, penalties, or additions to tax, if it
establishes to the satisfaction of the Com-
missioner that the transferor had no gain
under section 864(c)(8) subject to tax on
the transfer. Accordingly, while the gen-
eral scope of the withholding obligation
under §1.1446(f)-2(a) is retained in these
final regulations, the consequences for
failing to comply with the obligation are
modified when the transferor had no gain
under section 864(c)(8) subject to tax on
the transfer. As this rule applies for all
purposes of section 1446(f), it also mod-
ifies the consequences for a partnership
that fails to comply with its withholding
obligation under §1.1446(f)-3 or a broker
that fails to comply with its withhold-
ing obligation under §1.1446(f)-4 on the
transfer of a PTP interest. The final reg-
ulations also add an exception to with-
holding if the partnership certifies to the
transferee that it is not engaged in a trade
or business within the United States.
See section IV.A.3.ii of this Summary
of Comments and Explanation of Revi-
sions. The same exception is added for
a publicly traded partnership that is not
engaged in a trade or business within the
United States. See section VI.B.2 of this
Summary of Comments and Explanation
of Revisions.
IV. Withholding on the Transfer of a Non-
PTP Interest
In general, section 1446(f)(1) provides
that a transferee of a partnership interest
must withhold a tax equal to 10 percent
of the amount realized on any disposi-
tion that results in effectively connected
gain under section 864(c)(8). Proposed
§1.1446(f)-2(a) implemented this rule by
providing that a transferee is required to
withhold under section 1446(f)(1) a tax
equal to 10 percent of the amount realized
on any transfer of a partnership interest
(other than a PTP interest) unless an ex-
ception to withholding, or an adjustment
to the amount to withhold, applies under
proposed §1.1446(f)-2(b) or (c), respec-
tively. Proposed §1.1446(f)-2(d)(1) pro-
vided rules for reporting and paying the
amount of any tax withheld and proposed
§1.1446(f)-2(e) provided rules regarding
the effect of withholding on a transferor.
For a discussion of the rules that apply to
a transfer of a PTP interest, see section VI
of this Summary of Comments and Expla-
nations of Revisions.
A. Exceptions to withholding
Proposed §1.1446(f)-2(b)(2) through
(7) provided six exceptions to withholding
by a transferee under section 1446(f)(1).
The applicability of these exceptions was
determined in one of three ways: self-cer-
tification by the transferor (that is, the
transferee relies on a certification received
from the transferor); certification by the
partnership (for purposes of the excep-
tion to withholding provided in proposed
§1.1446(f)-2(b)(4)(i)); or reliance on the
books and records of the partnership (for
cases in which a partnership is a transferee
because it makes a distribution). These fi-
nal regulations modify certain exceptions
to withholding in response to comments
received.
1. Non-foreign Status Exception
Proposed §1.1446(f)-2(b)(2) provid-
ed for an exception to withholding if the
transferor of an interest in a partnership
provides a certification of non-foreign
status to the transferee (the Non-foreign
Status Exception). One comment request-
ed that the final regulations expand the
Non-foreign Status Exception to match
similar rules provided in §§1.1445-2(b)
and 1.1446-1(c)(3) that allow for reliance
upon means other than a certification or
statement to ascertain the non-foreign sta-
tus of the transferor.
The final regulations do not adopt this
recommendation. While the provisions
cited in the comment generally allow for
reliance on means other than a certifica-
tion or statement to ascertain non-for-
eign status, those provisions provide that
the transferee or partnership remains
liable under section 1461 if the determi-
nation of non-foreign status is incorrect.
See §§1.1445-2(b)(1) (last sentence) and
1.1446-1(c)(3). As described in section III
of this Summary of Comments and Ex-
planation of Revisions, §1.1446(f)-5(b)
provides similar flexibility in that it would
allow a transferee that did not rely on a
certification of non-foreign status to show
that the transferor had no gain under sec-
tion 864(c)(8) subject to tax on the trans-
fer because the transferor is not a foreign
person; in such a case, no interest, penal-
ties, or additions to tax will apply under
the rules of these final regulations.
The comment also made the same rec-
ommendation regarding the Non-Foreign
Status Exception provided in proposed
§1.1446(f)-4(b)(2) as it applied to trans-
fers of PTP interests. The final regulations
do not adopt this recommendation for the
reasons described in the preceding para-
graph.
2. No Realized Gain Exception
i. In general
Proposed §1.1446(f)-2(b)(3) provided
an exception to withholding if the trans-
feree relies on a certification from the
transferor that states that the transfer of
the partnership interest would not result
in any realized gain, including ordinary
income arising from the application of
section 751 and §1.751-1 (the No Gain
Exception). One comment suggested that
a transferor realizing an overall loss on a
transfer should be eligible for the No Gain
Exception, even if the transferor realizes
ordinary income under section 751 and
§1.751-1. The final regulations do not
adopt this comment because the comment
is inconsistent with the basic computation
of outside gain and outside loss provid-
ed in §1.864(c)(8)-1(b)(2). As explained
in Section I.B of the Explanation of Pro-
visions in the preamble to the proposed
section 864(c)(8) regulations, the amount
of gain or loss determined under section

Bulletin No. 2020–51 1605 December 14, 2020
741 (before application of section 751) is
not a limitation on the amount of gain or
loss characterized as effectively connect-
ed with the conduct of a trade or business
within the United States. 83 FR 66648;
see also §§1.751-1(a) and 1.864(c)(8)-1(i)
(Example 3). Thus, because a transferor
can realize ordinary income under section
751 that is characterized as effectively
connected with the conduct of a trade or
business within the United States under
section 864(c)(8) even if the transferor re-
alizes an overall loss with respect to the
partnership interest, it would be inappro-
priate for the No Gain Exception to apply
merely because the transferor does not
realize an overall gain with respect to the
transfer of the partnership interest.
ii. Ordinary income arising from the
deemed sale of section 751 property
A comment explained that many trans-
ferors would be unable to use the No Gain
Exception, even if they would otherwise
qualify, because transferors need infor-
mation from the partnership regarding
the partnership’s unrealized receivables
or inventory items (section 751 proper-
ty) and the relevant deemed sale com-
putations associated with that property.
While the proposed regulations require
a partnership to provide the information
necessary to make these computations on
Form 8308, Report of a Sale or Exchange
of Certain Partnership Interests, proposed
§1.6050K-1(c) did not accelerate the date
on which the partnership must provide
Form 8308 to the transferor.
2
Thus, the
comment suggested that a transferor may
not have the information necessary at the
time of transfer to use the No Gain Excep-
tion. To address this issue, the comment
requested certain regulatory safe harbors
that would allow a transferor to use the No
Gain Exception at the time of the deemed
sale, including a rule that would allow a
transferor to make reasonable assump-
tions regarding the presence and value of
section 751 property based on information
at hand (for example, information used by
the partnership in preparing a recent Form
8308).
These final regulations modify the No
Gain Exception to address the concerns
raised in the comment, but do not adopt the
solution suggested in the comment. Spe-
cifically, §1.1446(f)-2(b)(3)(ii) provides
that a transferor may rely on a certification
from the partnership stating that, as of the
determination date (as determined under
the rules of §1.1446(f)-1(c)(4)), the trans-
fer of the partnership interest would not
result in any ordinary income arising from
the application of section 751 and §1.751-
1. This certification, in turn, is attached
to, and forms part of, the general certifi-
cation provided by the transferor to the
transferee as part of the No Gain Excep-
tion. By adopting this approach, instead
of the one suggested by the comment, the
underlying issues raised in the comment
are addressed in a manner consistent with
the rest of the exceptions to withholding
provided in §1.1446(f)-2(b), which gen-
erally allow determinations regarding the
applicability of an exception to be made as
of the determination date. This approach
allows a partnership that holds section 751
property to provide the same information
to transferors that use the same determi-
nation date; therefore, this approach pro-
vides an administrable, clear solution that
taxpayers can consistently apply, while
also taking into account the unique nature
of section 751 property.
3. 10-percent EC Gain Exception
i. In general
Proposed §1.1446(f)-2(b)(4) provided
an exception to withholding if the trans-
feree relies on a certification from the
partnership stating that if the partnership
sold all of its assets at fair market value
on the determination date, the amount of
net effectively connected gain resulting
from the deemed sale would be less than
10 percent of the total net gain from the
deemed sale (the EC Gain Exception).
The EC Gain Exception also applied to
a partnership that is a transferee because
it makes a distribution, in which case the
partnership can rely on its books and re-
cords as of the determination date to de-
termine if the EC Gain Exception applies.
One comment suggested that the EC Gain
Exception should refer to the transferor’s
distributive share of net effectively con-
nected gain and should take into account,
when applicable, the transferor’s eligibili-
ty for benefits under an income tax treaty,
rather than the aggregate amount of net ef-
fectively connected gain that would be re-
alized by the partnership upon the deemed
sale described in section 864(c)(8) and
proposed §1.864(c)(8)-1. With respect
to treaty benefits, however, the comment
acknowledged that the maximum tax lia-
bility certification provided in §1.1446(f)-
2(c)(4) could provide the same result.
The final regulations adopt this com-
ment in part. Specifically, §1.1446(f)-2(b)
(4)(i)(A)(2) provides, in relevant part, that
a transferee may rely on a certification
from the partnership that states that if the
partnership sold all of its assets at fair mar-
ket value on the determination date in the
manner described in §1.864(c)(8)-1(c), the
transferor’s distributive share of net effec-
tively connected gain from the partnership
would be either zero or less than 10 per-
cent of the transferor’s distributive share
of the total net gain from the partnership.
Accordingly, this modification applies to
situations in which the transferor would
not have a distributive share of net effec-
tively connected gain (including by reason
of having a distributive share of net effec-
tively connected loss). This modification,
therefore, generally adopts the suggestion
provided in the comment to account for
the transferor’s distributive share of net
effectively connected gain. Additionally,
these final regulations retain the rules pro-
vided in proposed §1.1446(f)-2(b)(4)(i)
(A) and (B) to allow partnerships to make
the relevant determination at the partner-
ship level as of the determination date,
without regard to the transferor’s distrib-
utive share of net effectively connected
gain. §1.1446(f)-2(b)(4)(i)(A)(1). For this
purpose, however, the final regulations
simplify the partnership-level exception
to withholding by combining proposed
§1.1446(f)-2(b)(4)(i)(A) and (B) into a
single rule; this simplification is intended
to be non-substantive.
2
Under §1.6050K-1(c), the partnership must provide Form 8308 to the transferor by January 31 of the calendar year following the calendar year in which the relevant exchange occurred or,
if later, 30 days after the partnership is notified of the exchange.

December 14, 2020 1606 Bulletin No. 2020–51
These final regulations do not adopt the
suggestion in the comment regarding the
transferor’s eligibility for benefits under
an income tax treaty. With respect to trea-
ty benefits, the Treasury Department and
the IRS believe that existing exceptions
and adjustments, including modifications
provided in this rulemaking, adequately
address that aspect of the comment. See,
e.g., §1.1446(f)-2(b)(7) (exception to
withholding when a treaty claim covers all
of the gain from the transfer); §1.1446(f)-
2(c)(2)(iv) and section IV.B.3 of this
Summary of Comments and Explanation
of Revisions (modified amount realized
procedures for transferors that are foreign
partnerships); and §1.1446(f)-2(c)(4) (ad-
justments to the amount to withhold based
on the transferor’s maximum tax liability).
ii. Partnership not engaged in a trade or
business within the United States
Section 864(c)(8), by its terms, applies
only to a transfer of an interest in a partner-
ship that is engaged in a trade or business
within the United States (a USTB partner-
ship). See section 864(c)(8)(A); see also
§1.864(c)(8)-1(b)(1). When a partnership
holds U.S. real property interests and is
also subject to section 864(c)(8) because it
is engaged in a trade or business within the
United States, the computations provided
in §1.864(c)(8)-1(c) take into account any
U.S. real property interests held by the
partnership. §1.864(c)(8)-1(d). Alterna-
tively, for a partnership that is not a USTB
partnership (for example, the partnership’s
only assets consist of foreign business as-
sets and U.S. real property interests that
are not used in a trade or business within
the United States, such as shares of a Unit-
ed States real property holding corpora-
tion), §1.864(c)(8)-1(d) provides that the
rules of section 864(c)(8) and §1.864(c)
(8)-1 do not apply to a transfer of an in-
terest in that partnership. One comment
requested that the final regulations coordi-
nate section 1446(f)(1) withholding with
the rule provided in §1.864(c)(8)-1(d) by
clarifying that, for a partnership that is
not described in §1.1445-11T(d)(1), the
EC Gain Exception applies to situations
in which the partnership would not have
effectively connected gain as of the deter-
mination date without the application of
section 897(a). The comment noted that
under the proposed regulations, no excep-
tion to withholding is provided for a trans-
fer that would not be subject to section
864(c)(8) because the partnership is not a
USTB partnership.
The Treasury Department and the IRS
agree that a transfer of an interest in a part-
nership that is not engaged in a trade or
business in the United States is not subject
to section 864(c)(8) and, therefore, should
be excepted from withholding under sec-
tion 1446(f). Accordingly, §1.1446(f)-2(b)
(4)(i)(B) provides that the transferee may
rely on a certification from the partner-
ship stating that the partnership was not
engaged in a trade or business within the
United States at any time during the tax-
able year of the partnership through the
date of transfer (that is, the partnership
was not a USTB partnership at any time
during the period beginning on the first
day of the partnership’s taxable year in
which the transfer occurs and ending on
the close of the date of transfer). While
this modification takes into account the
general scenario described in the com-
ment (that is, the partnership only holds
foreign business assets and U.S. real prop-
erty interests that are not part of a trade or
business and thus is not a USTB partner-
ship), this modification also applies to any
situation in which a partnership whose
interest is transferred is not a USTB part-
nership during the relevant period, regard-
less of whether that partnership holds U.S.
real property interests. For USTB partner-
ships that hold U.S. real property interests,
deemed sale gain attributable to U.S. real
property interests continues to be treated
as effectively connected gain for purpos-
es of the 10-percent prong of the EC Gain
Exception provided in §1.1446(f)-2(b)
(4)(i)(A). Finally, for partnerships that
are described in §1.1445-11T(d)(1), see
§1.1446(f)-1(d).
Similar changes are made to the EC
Gain Exception as it applies to transfers of
PTP interests. See section VI.B.2 of this
Summary of Comments and Explanation
of Revisions and §1.1446(f)-4(b)(3).
4. 10-percent ECI Exception
Proposed §1.1446(f)-2(b)(5) provided
an exception to withholding if the transfer-
ee relies on a certification from the trans-
feror providing, in relevant part, that the
transferor was a partner in the partnership
for the immediately prior taxable year and
the two preceding taxable years and the
transferor’s allocable share of effectively
connected taxable income (determined
under §1.1446-2) (ECTI) was less than
10 percent of the transferor’s total distrib-
utive share of net income received from
the partnership, and less than $1 million,
in each of those years. For this purpose,
proposed §1.1446(f)-2(b)(5) provided that
the transferor’s allocable share of ECTI
is determined by reference to Form 8805,
Foreign Partner’s Information Statement
of Section 1446 Withholding Tax, unless
the transferor was allocated an allocable
share of loss that is effectively connected
with the conduct of a trade or business
within the United States, or had deduc-
tions that are properly allocated and ap-
portioned to income effectively connected
with the conduct of a trade or business
within the United States, in which case it
is treated as having an allocable share of
ECTI for that year of zero. See proposed
§1.1446(f)-2(b)(5)(iii). As a result, the ex-
ception provided in proposed §1.1446(f)-
2(b)(5) could be used only if a transferor
was allocated either a positive amount of
ECTI (as reported on Form 8805) or an
effectively connected loss (such that no
Form 8805 was provided) in each year.
Additionally, under proposed §1.1446(f)-
2(b)(5)(iv), a transferor could not provide
the certification required for the exception
if the transferor did not have a distribu-
tive share of net income from the partner-
ship for each year described in proposed
§1.1446(f)-2(b)(5)(i)(A). Finally, the pro-
posed regulations provided that a transfer-
ee may not rely on a certification provided
by the transferor if the transferor was not
a partner in the partnership for each year
described in proposed §1.1446(f)-2(b)(5)
(i)(A).
Comments explained that in some cas-
es partnership investments are structured
to minimize the risk that a foreign partner
will have effectively connected income or
loss; and, for this purpose, a foreign partner
in such a structure will not have an alloca-
ble share of ECTI or effectively connected
loss under the partnership agreement. As
a result, if that foreign partner transfers
its interest in the partnership, it would not
qualify for the exception to withholding
provided in proposed §1.1446(f)-2(b)(5)

Bulletin No. 2020–51 1607 December 14, 2020
because it would not receive a Form 8805
nor have an effectively connected loss
for each of the taxable years described
in proposed §1.1446(f)-2(b)(5)(i)(A). To
address this issue, one of the comments
suggested that the final regulations modi-
fy proposed §1.1446(f)-2(b)(5) to provide
relief to transferors with neither an alloca-
ble share of ECTI nor an effectively con-
nected loss.
The same comment suggested that, for
situations in which a foreign partner is al-
located effectively connected items, the
exception should look to allocations of
gross amounts rather than net amounts in
order to more accurately reflect the part-
nership’s capacity to produce effectively
connected income or gain. The comment
explained that this change would serve as
a more accurate proxy for the tax conse-
quences that would occur under section
864(c)(8) by reason of the transfer. For
example, a partnership may generate sig-
nificant amounts of losses or deductions
during the relevant period resulting in
small amounts of net ECTI, but neverthe-
less hold assets with significant amounts
of built-in gain that would be treated as
effectively connected gain on a deemed
sale. In that case, the transferor would be
able to use the exception to withholding
provided in proposed §1.1446(f)-2(b)(5)
even though the transferor may realize a
significant amount of gain under section
864(c)(8) by reason of the transfer. Final-
ly, with respect to the period during which
the transferor was required to be a partner
in the partnership, the comment recom-
mended changing the period provided in
proposed §1.1446(f)-2(b)(5)(i)(A) to al-
low for an exception to withholding when
the transferor was not a partner in the part-
nership for the transferor’s immediately
prior taxable year and the two preceding
taxable years (the look-back period), pro-
vided the transferor was a partner in the
partnership long enough to receive at least
one Schedule K-1 (Form 1065).
In response to comments, these final
regulations modify the exception to with-
holding under §1.1446(f)-2(b)(5). Under
the exception in these final regulations
(the ECI Exception), a transferor may
qualify if its distributive share of gross ef-
fectively connected income from the part-
nership for each taxable year within the
look-back period was less than $1 million
and less than 10 percent of the transferor’s
total distributive share of gross income
from the partnership for that year, with
both amounts reflected on a Schedule K-1
(Form 1065) (or other statement furnished
to the partner) received from the partner-
ship for each year. Because the ECI Ex-
ception looks to the transferor’s share of
effectively connected income (as report-
ed on a Schedule K-1 or other statement
furnished to the partner), rather than its
allocable share of ECTI, a transferor that
is not allocated any effectively connected
income or loss in any relevant year can
still use the exception even if it has not re-
ceived a Form 8805 for that year. The ECI
Exception also adopts the suggestion in the
comment to look to gross amounts of in-
come, rather than net amounts of income,
for purposes of determining whether the
transferor’s distributive share of effective-
ly connected income was less than 10 per-
cent of the transferor’s total distributive
share of income from the partnership. As
suggested by the comment, this change is
intended to provide a more accurate proxy
for the tax consequences that would arise
under section 864(c)(8) by reason of the
transfer. Consistent with this change, the
rule provided in proposed §1.1446(f)-2(b)
(5)(iv) is modified to state that a transferor
cannot provide the certification required
for the ECI Exception if the transferor did
not have a distributive share of gross in-
come from the partnership in each of the
relevant years. §1.1446(f)-2(b)(5)(iii).
Therefore, a transferor will generally be
able to use the ECI Exception even if it
is allocated a distributive share of net loss
from the partnership for the relevant tax-
able year.
These final regulations do not adopt
the recommendation in the comment
with respect to the relevant holding peri-
od because the Treasury Department and
the IRS have determined that reducing a
transferor’s required length of time to be
a partner in a partnership for purposes of
the ECI Exception would not provide an
adequate indication of the amount of the
transferor’s effectively connected gain re-
alized in connection with the transfer.
5. Claims for Treaty Benefits
Under the proposed regulations, a
transferor may claim an exception or ad-
justment to withholding when it qualifies
for treaty benefits with respect to a trans-
fer of a partnership interest (including a
transfer of a PTP interest). See proposed
§§1.1446(f)-2(b)(7) and 1.1446(f)-4(b)
(6). These rules required that the certifi-
cation to claim treaty benefits include an
applicable withholding certificate that
contains the information necessary to sup-
port the claim. Comments requested clar-
ification of the information required to be
provided on Form W-8BEN, Certificate
of Foreign Status of Beneficial Owner for
United States Tax Withholding and Report-
ing (Individuals), or Form W-8BEN-E,
Certificate of Status of Beneficial Owner
for United States Tax Withholding and Re-
porting (Entities) in order to claim treaty
benefits for purposes of section 1446(f).
To address the comments, the IRS in-
tends to revise the instructions to Forms
W-8BEN and W-8BEN-E to describe the
information required to be provided for
making a treaty claim for purposes of sec-
tion 1446(f), including a treaty claim made
with respect to a transfer of a PTP interest.
To make the rules regarding claims for
treaty benefits more administrable, these
final regulations allow a transferor to use
the applicable withholding certificate as
the certification for making a claim for
benefits under an income tax treaty.
6. Additional Comments Regarding
Exceptions to Withholding
i. Disguised sales
Proposed §1.864(c)(8)-1(g)(5) defined
a transfer for purposes of the section
864(c)(8) proposed regulations as includ-
ing a transfer treated as a sale or exchange
under section 707(a)(2)(B) (a disguised
sale). One comment requested an excep-
tion from section 1446(f) withholding for
certain transactions that occur in connec-
tion with the formation and initial funding
of an investment partnership, as well as
redemptions and admissions of new part-
ners over time, that could be characterized
as disguised sales of partnership interests.
The comment acknowledged that address-
ing the substantive issue regarding what
constitutes a disguised sale of a partner-
ship interest is beyond the scope of this
rulemaking. Nonetheless, the comment
recommended an exception from section

December 14, 2020 1608 Bulletin No. 2020–51
1446(f) withholding for certain transac-
tions involving the formation and funding
of a partnership and redemptions and ad-
missions of new partners over time. The
final regulations do not adopt the recom-
mendation provided in this comment. If a
contributing partner is treated as acquir-
ing a partnership interest from a foreign
person for Federal income tax purposes,
it is appropriate to impose a withholding
obligation on the contributing partner to
ensure the collection of tax on gain under
section 864(c)(8). Further, as the comment
noted, the issue of what constitutes a dis-
guised sale of a partnership interest and
the tax consequences flowing from that
treatment are not unique to the application
of these final regulations. After studying
the issue, the Treasury Department and the
IRS have determined that adding an ex-
ception to withholding to take certain cas-
es into account would require a determi-
nation, at least in part, of what constitutes
a disguised sale of a partnership interest
in this context, and the issue is, therefore,
outside the scope of this rulemaking.
ii. Withholding foreign partnerships and
withholding foreign trusts
Comments requested an exception
to withholding for transferors that are
withholding foreign partnerships (WPs)
and withholding foreign trusts (WTs) if
they assume withholding under section
1446(f). WPs and WTs are foreign part-
nerships and trusts that enter into agree-
ments with the IRS to assume primary
withholding and reporting responsibilities
on payments subject to withholding un-
der chapters 3 and 4 with respect to their
partners, owners, or beneficiaries (as ap-
plicable). One of the comments suggested
that without such a rule, partners of a WP
would be subject to duplicative withhold-
ing.
The final regulations do not adopt the
suggestions contained in these comments.
First, a rule allowing WPs and WTs to as-
sume withholding under section 1446(f)
would create complexity and require ex-
tensive coordination with the existing
provisions for withholding and reporting
in the agreements that WPs and WTs have
entered into with the IRS. The comments
do not provide any suggestions on how to
address the many issues that would arise
if such a rule were adopted. Further, the
comments do not indicate that such a rule
would have a material impact on taxpay-
ers that would justify the allocation of re-
sources necessary to provide guidance to
these taxpayers. Second, any concerns re-
garding duplicative withholding were al-
ready addressed under the proposed regu-
lations, which allow a foreign partnership
to credit any withholding under section
1446(f) against its own section 1446(a)
withholding liability. See §§1.1446(f)-
2(e)(2)(ii) and 1.1446(f)-4(e)(2)(ii).
iii. Earnout payments
A comment noted that a transfer of a
partnership interest may be subject to an
earnout provision that entitles the trans-
feror to future payments based on the
achievement of specific goals. The com-
ment requested guidance clarifying that
these future payments will be subject to
an exception to withholding to the extent
that the original transfer qualified for an
exception to withholding. Under the pro-
posed regulations, an exception to with-
holding in §1.1446(f)-2 eliminates any
requirement to withhold on the amount
realized from the transfer of a partnership
interest. Thus, if an exception to withhold-
ing applies at the time of the transfer of a
partnership interest, it will also apply to
any future payments made to the transfer-
or that are treated as an amount realized
from such transfer. As a result, no change
is needed in response to this comment.
B. Determining the amount to withhold
If an exception to withholding under
proposed §1.1446(f)-2(b) does not apply,
proposed §1.1446(f)-2(c)(1) provided
that a transferee is required to withhold
10 percent of the amount realized on the
transfer of the partnership interest. Pro-
posed §1.1446(f)-2(c) provided guidance
for determining the amount to withhold
and provided certain procedures that al-
low for adjustments to the amount to
withhold that are intended to better reflect
the transferor’s tax liability on gain under
section 864(c)(8). A transferee may use
these adjustment procedures when it relies
on a certification from the transferor (or,
if applicable, from the partnership). The
procedures for determining the amount
to withhold, therefore, employ the same
self-certification procedure provided in
proposed §1.1446(f)-2(b). See generally
section IV.A of this Summary of Com-
ments and Explanation of Revisions.
1. Definition of Amount Realized
Proposed §1.1446(f)-2(c)(2)(i) pro-
vided generally that the amount realized
on a transfer of a partnership interest is
determined, in part, under section 752
(including §§1.752-1 through 1.752-7);
accordingly, the amount realized includes
any reduction in the transferor’s share of
partnership liabilities. One comment re-
quested that the final regulations modify
the amount realized definition to exclude
any reduction to the transferor’s share
of partnership liabilities. The comment
pointed to the potential liquidity concerns
that could occur when the amount of lia-
bilities assumed exceeds the cash or other
property exchanged in the transfer. The
Treasury Department and the IRS have
determined that it is inappropriate to ex-
clude a reduction in a transferor’s share
of partnership liabilities from amount re-
alized. Further, proposed §1.1446(f)-2(c)
(3), which is retained in these final regu-
lations, addresses the liquidity concerns
raised in this comment. That provision
determines the amount to withhold with-
out regard to any decrease in the trans-
feror’s share of partnership liabilities, but
only if the amount otherwise required to
be withheld would exceed the amount re-
alized (determined without regard to any
decrease in the transferor’s share of part-
nership liabilities).
2. Modified Amount Realized for
Transfers by Foreign Partnerships
Proposed §1.1446(f)-2(c)(2)(iv) pro-
vided a procedure to determine the
amount realized when the transferor of a
partnership interest is a foreign partner-
ship. Specifically, when a foreign partner-
ship transfers an interest in a partnership,
proposed §1.1446(f)-2(c)(2)(iv) provided
that the transferee of the interest may rely
on a certification provided by the trans-
feror partnership that provides a modified
amount realized. The modified amount
realized is determined by multiplying the
amount realized on the transfer (as deter-

Bulletin No. 2020–51 1609 December 14, 2020
mined under proposed §1.1446(f)-2(c)
(2)) by the percentage of the gain from
the transfer that would be allocated to
presumed foreign taxable persons, which
include any direct or indirect partners of
the transferor partnership that have not
provided a certification of non-foreign sta-
tus. Proposed §1.1446(f)-2(c)(2)(iv)(B).
To make the certification, the transferor
partnership must provide to the transferee
a Form W-8IMY, Certificate of Foreign
Intermediary, Foreign Flow-Through En-
tity, or Certain U.S. Branches for United
States Tax Withholding and Reporting,
a withholding statement allocating the
gain to each partner, and a certification
of non-foreign status for each partner that
is treated as a U.S. person. See proposed
§1.1446(f)-2(c)(2)(iv)(C). If the transferee
may rely on the certification, the modified
amount realized is treated as the amount
realized on the transfer.
One comment recommended that the
final regulations expand this approach for
determining the modified amount realized
on a transfer to take into account situa-
tions in which a foreign partner (direct
or indirect) in the transferor partnership
is eligible for treaty benefits. These final
regulations adopt this recommendation.
Accordingly, these final regulations mod-
ify proposed §1.1446(f)-2(c)(2)(iv) to al-
low for a reduction of the amount realized
when a transferor that is a foreign partner-
ship has a direct or indirect partner that is
not subject to tax on gain from a transfer
pursuant to an applicable U.S. income
tax treaty. Specifically, this modification
provides that a treaty-eligible partner is
not a presumed foreign taxable person
for purposes of determining the modified
amount realized under §1.1446(f)-2(c)(2)
(iv). A foreign partnership that provides
a certification of modified amount real-
ized must include, in addition to the Form
W-8IMY and a withholding statement, the
certification of treaty benefits (on a Form
W-8BEN or Form W-8BEN-E) from each
direct or indirect partner that is not a pre-
sumed foreign taxable person. §1.1446(f)-
2(c)(2)(iv)(C).
Similar changes are made to the mod-
ified amount realized procedure for trans-
fers of PTP interests. See section VI.C.1
of this Summary of Comments and Expla-
nation of Revisions and §1.1446(f)-4(c)
(2)(ii).
3. Certification of Maximum Tax
Liability
Proposed §1.1446(f)-2(c)(4) provid-
ed a procedure to determine the amount
to withhold under section 1446(f)(1) and
proposed §1.1446(f)-2(a) that is intend-
ed to estimate the amount of tax that the
transferor is required to pay on gain un-
der section 864(c)(8). Specifically, the
procedure allows a transferee to withhold
based on a certification received from the
transferor containing certain information
relating to the transferor and the transfer,
including the transferor’s maximum tax
liability (as determined under proposed
§1.1446(f)-2(c)(4)(ii)) on the transfer. A
transferee may rely on a certification re-
ceived from a transferor that is a foreign
corporation, a nonresident alien individu-
al, or a foreign partnership regarding the
transferor’s maximum tax liability. Pro-
posed §1.1446(f)-2(c)(4)(i). A transferor
that is a foreign partnership is treated as a
nonresident alien individual for purposes
of determining the transferor’s maximum
tax liability. Id. A comment pointed out
that this rule adopts an entity approach
with respect to determining a foreign
partnership’s maximum tax liability that
presumes the partnership is liable for tax
on its full distributive share of the effec-
tively connected items from the trans-
fer at individual tax rates, regardless of
whether any partners in the partnership
are United States persons. The comment
suggested that the final regulations modify
this rule for determining a foreign partner-
ship’s maximum tax liability based on the
look-through principles used in proposed
§1.1446(f)-2(c)(2)(iv); that is, this modi-
fication would allow a foreign partnership
to be treated as a United States person to
the extent that its partners provide certifi-
cations of non-foreign status or to the ex-
tent that its partners would be eligible for
treaty benefits.
These final regulations do not adopt
the suggestion contained in this comment.
The Treasury Department and the IRS
have determined that adopting this sug-
gestion could result in significant com-
plexity and would increase the administra-
tive burden on a transferee that receives a
certification of maximum tax liability. The
approach suggested in the comment also
raises potentially broader issues, includ-
ing computational issues, that are outside
the scope of these final regulations. Final-
ly, the Treasury Department and the IRS
have determined that the modifications
to §1.1446(f)-2(c)(2)(iv), which allows
claims for treaty benefits to be taken into
account for purposes of determining the
modified amount realized, provide suffi-
cient relief in many of the cases in which
the concerns raised in this comment would
arise. See section IV.B.2 of this Summary
of Comments and Explanation of Revi-
sions.
In response to informal comments,
these final regulations modify the pro-
posed regulations to allow transferors that
are foreign trusts to use the maximum tax
liability procedure in §1.1446(f)-2(c)(4)
to reduce the amount to withhold. Similar
to the approach taken with respect to for-
eign partnerships, these rules treat the for-
eign trust as a nonresident alien individual
for purposes of computing its maximum
tax liability under §1.1446(f)-2(c)(4).
C. Other comments and changes to the
proposed regulations
1. Determining Basis
A comment asserted that it is often dif-
ficult for the transferor of a partnership
interest to know its basis in the transferred
interest at the time of transfer; that is, re-
gardless of the §1.706-4 method used, a
transferor usually has to wait to receive its
Schedule K-1 (Form 1065) for the taxable
year of the transfer before determining its
basis accurately. As a result, the comment
recommended a rule that would allow
transferors and transferees to calculate the
basis of a transferred partnership interest
(solely for purposes of section 1446(f)) by
reference to reasonable assumptions that
can be made with certainty at the time of
the transfer.
The Treasury Department and the IRS
have determined that the concern raised
by the comment was already sufficient-
ly addressed in the proposed regulations.
Specifically, the determination date rules
of §1.1446(f)-1(c)(4), which appeared in
the proposed regulations and are retained
in the final regulations, provide substan-
tial flexibility with respect to making cer-
tain determinations under section 1446(f)
(1). For example, a transferor (other than

December 14, 2020 1610 Bulletin No. 2020–51
a controlling partner) could determine
its adjusted basis in the transferred part-
nership interest as of the first day of the
partnership’s taxable year in which the
transfer occurs. See §§1.1446(f)-1(c)(4)(i)
(C)(1) and 1.1446(f)-2(c)(4)(iii)(B). Addi-
tionally, the No Realized Gain exception
provided in §1.1446(f)-2(b)(3) similarly
allows the transferor to make the relevant
determinations as of the determination
date.
2. Qualified Foreign Pension Funds
Section 1446(f)(5) provides that any
term used in both section 1446(f) and sec-
tion 1445 will have the meaning provided
in section 1445. Section 1445(f)(3) defines
a foreign person as any person other than
(i) a United States person and (ii) except
as otherwise provided by the Secretary,
an entity with respect to which section
897 does not apply due to section 897(l).
Section 897(l), in turn, excludes qualified
foreign pension funds (QFPFs) from the
application of section 897. Accordingly,
QFPFs are not treated as foreign persons
under section 1445.
Section 1446(f)(6) provides the Secre-
tary of the Treasury authority to prescribe
regulations that are necessary to carry out
the purposes of section 1446(f). Pursuant
to this authority, the proposed regulations
provided a definition of foreign person
that applies for purposes of the regula-
tions under section 1446(f). Specifically,
proposed §1.1446(f)-1(b)(4) defined a for-
eign person as a person that is not a United
States person. Proposed §1.1446(f)-1(b)
(13) defined a United States person as a
person described in section 7701(a)(30).
Because QFPFs are not persons described
in section 7701(a)(30), they are foreign
persons for purposes of §§1.1446(f)-1
through 1.1446(f)-5.
One comment requested that these final
regulations clarify that QFPFs are foreign
persons for purposes of section 1446(f).
The Treasury Department and the IRS
have determined that the proposed regula-
tions provided sufficient clarity regarding
the treatment of QFPFs by specifically de-
fining the term foreign person for purpos-
es of §§1.1446(f)-1 through 1.1446(f)-5.
The final regulations, therefore, adopt the
relevant definitions provided in the pro-
posed regulations with respect to QFPFs.
3. Valuation of Partnership Property
One comment described a situation in
which the transferor and transferee of a
partnership interest value partnership as-
sets differently than the partnership does.
The comment recommended, where rele-
vant, a clarification to the final regulations
allowing for a valuation of partnership
assets based on the transferor’s amount
realized on a per transfer basis, provid-
ed that any valuation is supported by an
arm’s length price on which the transferor
and transferee have agreed to execute the
transaction. The final regulations do not
adopt this recommendation. Valuation is-
sues are not unique to the application of
these final regulations; therefore, provid-
ing an explicit valuation rule in these final
regulations that would take into account
the situation described in the comment
goes beyond the scope of this rulemaking.
4. Credit for Amounts Withheld on
Partnerships, Trusts, or Estates
The proposed regulations provided
rules prescribing the manner in which a
credit for an amount withheld under sec-
tion 1446(f) may be claimed by a foreign
individual, corporation, or partnership.
The proposed regulations provided in
§1.1446-3(c)(4) that a foreign partner-
ship that was withheld upon under section
1446(f) could credit the amount with-
held against its tax liability under section
1446(a) to the extent the amount is allo-
cable to foreign partners. The Treasury
Department and the IRS intend to amend
the instructions to Forms 8804, 8805,
and 8813 to provide that to obtain a cred-
it against its section 1446(a) liability, a
foreign partnership withheld upon under
section 1446(f) on the sale of its non-PTP
interest must attach to its Form 8804, An-
nual Return for Partnership Withholding
Tax (Section 1446), a stamped copy of
Form 8288-A, Statement of Withholding
on Dispositions by Foreign Persons of
U.S. Real Property Interests.
These final regulations provide guid-
ance for foreign trusts or estates that are
withheld upon under section 1446(f). Spe-
cifically, §1.1446(f)-2(e)(2)(ii) provides
that a foreign trust or estate may claim a
credit for an amount withheld under sec-
tion 1446(f) in accordance with §1.1462-
1. Thus, the trust or estate may claim a
credit to the extent it is ultimately liable
for tax on the gain under section 864(c)
(8). Similar guidance is provided for for-
eign trusts or estates claiming credit for
amounts withheld on transfers of PTP in-
terests. See §1.1446(f)-4(e)(2)(ii).
5. Certifications Provided by Grantor
Trusts
Under proposed §1.1446(f)-1(c)(2)
(vii), a certification provided by a trans-
feror that is a grantor or other owner of a
grantor trust was required to identify the
portion of the amount realized attributable
to the grantor or owner. These final regu-
lations retain this rule, but also include a
mechanism for the grantor trust to provide
the certification on behalf of the transfer-
or to a transferee. Under this allowance,
a foreign grantor trust may provide to the
transferee a Form W-8IMY, a withholding
statement that provides the percentage
of the amount realized allocable to each
grantor or owner of the trust, and any ap-
plicable certification for each grantor or
owner. A domestic grantor trust that has a
foreign grantor or other owner may pro-
vide a similar statement in lieu of Form
W-8IMY. The allowance described in this
paragraph may also be applied in the con-
text of a grantor or other owner of a grant-
or trust transferring a PTP interest.
V. Partnership’s Requirement to Withhold
under Section 1446(f)(4) on Distributions
to Transferee
Section 1446(f)(4) provides that if a
transferee fails to withhold any amount
required to be withheld under section
1446(f)(1), the partnership must deduct
and withhold from distributions to the
transferee a tax in an amount equal to the
amount the transferee failed to withhold
(plus interest). Proposed §1.1446(f)-3
provided rules that implement a partner-
ship’s requirement to withhold under sec-
tion 1446(f)(4), including rules for deter-
mining when a partnership is required to
withhold and report under section 1446(f)
(4), rules for determining if an excep-
tion to withholding applies, and rules for
determining the amount required to be
withheld (including the computation of
interest). Proposed §1.1446(f)-3 also pro-

Bulletin No. 2020–51 1611 December 14, 2020
vided rules regarding the effect of section
1446(f)(4) withholding on the transferee
and transferor, including procedures that
require the partnership to make any claim
(on behalf of the transferee) for credit or
refund for amounts overwithheld under
section 1446(f)(4).
A. Scope of withholding obligation under
§1.1446(f)-3
Proposed §1.1446(f)-3(a)(1) provided
that if a transferee fails to withhold any
amount required to be withheld under
proposed §1.1446(f)-2, the partnership
whose interest was transferred must with-
hold from any distributions made to the
transferee in accordance with the rules
provided in proposed §1.1446(f)-3. To
determine its withholding obligation un-
der proposed §1.1446(f)-3, if any, a part-
nership may rely on information provided
in a certification received from the trans-
feree described in proposed §1.1446(f)-
2(d)(2) (a certification of withholding)
unless it knows, or has reason to know,
that the certification is incorrect or un-
reliable. Proposed §1.1446(f)-3(a)(1).
The proposed regulations, therefore, re-
quired the partnership to review any cer-
tification of withholding received from
the transferee, including any underlying
certification from a transferor claiming
an exception or adjustment to withhold-
ing, because the partnership could have
information suggesting that the certifi-
cation is incorrect or unreliable, and that
information may not be available to the
transferee (for example, if the informa-
tion was contained in the partnership’s
books and records). See generally section
IV.B of the Explanation of Provisions
section of the preamble to the proposed
regulations. The transferee must provide
the certification of withholding to the
partnership within 10 days after the date
of the transfer and deposit any tax due
under section 1446(f)(1) within 20 days
after the date of the transfer. Proposed
§1.1446(f)-2(d). If a partnership does not
receive, or cannot rely on, a certification
of withholding, it must withhold on the
entire amount of each distribution made
to the transferee until it may rely on a
certification of withholding to determine
that it has satisfied its section 1446(f)(4)
liability. Proposed §1.1446(f)-3(c).
1. Partnership’s Review of a Certification
of Withholding
A comment stated that the rule in
proposed §1.1446(f)-3(a)(1) is problem-
atic as it may require a partnership to
withhold under section 1446(f)(4) on a
transferee that has fully complied with
its withholding obligations under section
1446(f)(1) by properly relying on a cer-
tification from the transferor to reduce
or eliminate withholding. This situation
could occur, for example, if the partner-
ship receives an underlying certification
that a transferee has properly relied on,
and the partnership has information in its
possession indicating that the informa-
tion contained in the certification is in-
correct or unreliable. The comment there-
fore asserted that this rule is inconsistent
with the statute, which imposes section
1446(f)(4) withholding when a transfer-
ee fails to withhold any amount required
to be withheld under section 1446(f)(1).
The comment also stated that the rule in
proposed §1.1446(f)-3(a)(1) essentially
holds the transferee strictly liable for any
underwithholding, which is inconsistent
with the approaches taken in other with-
holding regimes, such as those provided
under sections 1441 through 1443 and
section 1445. Therefore, the comment
recommended that the final regulations
eliminate a partnership’s requirement to
withhold under section 1446(f)(4) when
a transferee properly relies on a certifica-
tion to reduce or eliminate the withhold-
ing tax.
The Treasury Department and the
IRS have determined that the approach
provided in proposed §1.1446(f)-3(a)
(1) is consistent with the language and
purpose of section 1446(f), and thus the
approach is retained in the final regula-
tions. Unlike the withholding regimes
under sections 1441 through 1443 and
1445, section 1446(f) explicitly provides
a withholding obligation on a secondary
party to the transfer, the partnership. Sec-
tion 1446(f)(4) states that if a transferee
fails to withhold any amount required
to be withheld under section 1446(f)(1),
the partnership must withhold from dis-
tributions to the transferee in an amount
equal to the amount the transferee failed
to withhold (plus any interest). Under
section 1446(f)(1), a transferee is gen-
erally required to withhold 10 percent of
the amount realized on a transfer subject
to section 864(c)(8). While the proposed
regulations allow the amount required to
be withheld under section 1446(f)(1) to
be reduced when a transferee relies on
a claim for an exception or adjustment
to withholding, this allowance is condi-
tioned on proper review and acceptance
of the claim by the partnership. If the
conditions of the proposed regulations
are not met, a transferee is required to
withhold at the statutory rate under sec-
tion 1446(f)(1) or will be subject to with-
holding under section 1446(f)(4).
To limit when withholding under sec-
tion 1446(f)(4) is imposed on a transferee
that properly relied on a certification from
a transferor, the proposed regulations
provided sufficient time for a transferee
to consult with the partnership regarding
the accuracy of the certification. Specif-
ically, the proposed regulations require
the transferee to provide a certification
of withholding to the partnership within
10 days after the transfer and to deposit
any withheld tax with the IRS within 20
days of the transfer. Therefore, a transfer-
ee may choose to withhold 10 percent of
the amount realized on the transfer, and
depending on the outcome of its consul-
tation with the partnership, either repay
the withheld amount to the transferor or
deposit it with the IRS.
The final regulations adopt these rules
from the proposed regulations and add a
rule to limit the instances of withholding
under section 1446(f)(4) on certain trans-
ferees, and to reduce the compliance bur-
den on such transferees. This rule allows
a partnership to determine that it does
not have a withholding obligation under
§1.1446(f)-3 if it already possesses a Form
W-9, Request for Taxpayer Identification
Number and Certification, for the trans-
feror that meets the requirements provided
in §1.1446(f)-2(b)(2) to establish non-for-
eign status, even if the transferee does not
provide a certification of withholding to
the partnership under §1.1446(f)-2(d)(2).
See §1.1446(f)-3(a)(1). Consistent with
the general rules for partnerships that rely
on information in their books and records,
a partnership may not apply this rule when
it knows, or has reason to know, that the
Form W-9 that it possesses is incorrect or
unreliable.

December 14, 2020 1612 Bulletin No. 2020–51
2. Partnership’s Discretion to Withhold
A comment also questioned the ap-
plication of proposed §1.1446(f)-3(a)(1)
if the partnership receives a certification
from the transferee and the partnership
does not know or have reason to believe
that the certification is incorrect or unre-
liable. Specifically, the comment noted
that proposed §1.1446(f)-3(a) states that
a partnership may rely on a certification
of withholding, which suggests that reli-
ance on the certification is permissive and
not mandatory. The comment suggested
that, as a result, a partnership may choose
to disregard a certification received from
a transferee, and thus withhold on distri-
butions to the transferee, even if the part-
nership does not know, and has no reason
to believe, that the information contained
in the statement is incorrect or unreliable.
The comment noted that the resulting bur-
den on the transferee is exacerbated be-
cause only the partnership, rather than the
transferee, can directly obtain a refund of
amounts withheld on distributions to the
transferee under section 1446(f)(4). The
comment recommended, therefore, that
the final regulations clarify that a partner-
ship must (rather than may) rely on a cer-
tification received from a transferee if the
partnership does not know or have reason
to know that the information contained in
the certification is incorrect or unreliable.
The final regulations do not adopt this
comment. The approach taken in the pro-
posed regulations is consistent with other
withholding regimes, which allow a with-
holding agent discretion in determining
whether to rely on documentation that
supports a claim for a reduced amount
of withholding or an exception to with-
holding. See, e.g., §1.1441-1(b)(1). This
discretion is afforded to the withholding
agent because it is generally the party lia-
ble for any failure to withhold under sec-
tion 1461. Further, because a withholding
agent is liable under section 1461 only
for underwithholding, it is unclear how a
withholding agent that failed to reduce (or
eliminate) the amount of withholding un-
der such a rule could be held liable. Final-
ly, because transferees are partners in the
partnership, partnerships generally would
have an incentive to review and accept
valid certifications of withholding pro-
vided by transferees, rather than withhold
unnecessarily on them. For these reasons,
the final regulations allow the partnership
to determine whether to rely on a certifi-
cation of withholding for purposes of sec-
tion 1446(f)(4).
These final regulations do, however,
modify the proposed regulations to allow
the transferee, rather than the partnership,
to obtain a refund of overwithholding for
amounts withheld under section 1446(f)
(4). As suggested by the comment, this
modification mitigates some of the effect
of any overwithholding. See section V.C
of this Summary of Comments and Expla-
nation of Revisions.
B. Removal of withholding under
section 1446(f)(4) by publicly traded
partnerships
Under proposed §1.1446(f)-4(b)(3)
and (4), a broker was not required to with-
hold on a transfer of a PTP interest when
the publicly traded partnership claims
on a qualified notice that an exception
applies based on either of the following
statements: (i) a statement that less than
10 percent of the total gain on a deemed
sale of the publicly traded partnership’s
assets would be effectively connected
gain, or no gain would have been effec-
tively connected gain (the 10-percent ex-
ception); or (ii) a statement that the entire
amount of a distribution is a qualified
current income distribution, defined as a
distribution that does not exceed the net
income of the publicly traded partnership
since the date of the last distribution (the
qualified current income exception). Un-
der the proposed regulations, a publicly
traded partnership was required to with-
hold under section 1446(f)(4) only if the
partnership posted a qualified notice that
falsely stated that one of those exceptions
to withholding under section 1446(f)(1)
applied to a transfer (including a transfer
that is a distribution), and a broker under-
withheld in reliance on the qualified no-
tice. The requirement for a publicly trad-
ed partnership to withhold under section
1446(f)(4) was included to ensure that
publicly traded partnerships exercise due
diligence when representing information
on a qualified notice related to either ex-
ception given that a broker may rely on
the notice to apply an exception to with-
holding under section 1446(f)(1).
Comments suggested that publicly
traded partnerships would be unlikely to
claim the exceptions to withholding on a
qualified notice due to the consequences
of issuing a false qualified notice, and that
this would result in overwithholding on
transfers of PTP interests. Further, com-
ments pointed out that it would be difficult
for publicly traded partnerships to deter-
mine the amount of underwithholding by
brokers relying on a false qualified notice
because publicly traded partnerships gen-
erally do not have information on trans-
fers effected through brokers. A comment
noted that a false qualified notice may re-
sult in a large amount of underwithholding
because a broker may rely on the qualified
notice for all transfers made between the
time the notice is issued and the date of
the next qualified notice (which is usually
provided quarterly).
A comment also noted concerns with
the rule in proposed §1.1446(f)-3(c)(1)(ii)
(C), which requires publicly traded part-
nerships to continue withholding on dis-
tributions under section 1446(f)(4) even
when the transferee no longer owns an
interest in the partnership. The comment
noted that this rule could negatively affect
market values of PTP interests because
every person acquiring a PTP interest
would be subject to the risk that future
distributions may be reduced or even
eliminated, even if the qualified notice has
not yet been declared false. The comment
suggested taking the approach in the pro-
posed regulations that applied to transfers
of non-PTP interests, which would allow
the partnership to stop withholding on dis-
tributions when the transferee no longer
owns an interest in the partnership, unless
the partnership has actual knowledge that
any successor to the transferee is related to
the transferee or transferor.
In addition, a comment raised a prac-
tical concern about the timing of the
withholding required under proposed
§1.1446(f)-3(c)(1)(i), which requires
withholding to begin on the later of the
date that is 30 days after the date of trans-
fer, or 15 days after the date on which the
partnership acquires actual knowledge
that the transfer has occurred. The com-
ment noted that a publicly traded partner-
ship would be unable to withhold until it
knows that it has issued a false qualified
notice, and the comment therefore re-

Bulletin No. 2020–51 1613 December 14, 2020
quested that any withholding obligation
begin after the publicly traded partnership
acquires knowledge that the qualified no-
tice is incorrect.
The comments regarding the appli-
cation of section 1446(f)(4) to publicly
traded partnerships also included sugges-
tions to address the concerns raised with
respect to the withholding requirement.
Several comments suggested removing
the requirement for a publicly traded part-
nership to withhold under section 1446(f)
(4) entirely. One comment suggested re-
placing the withholding requirement for a
false qualified notice with an information
reporting penalty (or other quantifiable
penalty). Another comment suggested
instead imposing a penalty on a preparer
of a qualified notice if the preparer acts in
bad faith or without a requisite standard of
care. Other comments requested clarifica-
tion on whether a “false” qualified notice
is limited to a willfully false notice rather
than any erroneous qualified notice.
The Treasury Department and the IRS
have determined that a publicly trad-
ed partnership should not be required to
withhold under section 1446(f)(4). This
withholding would have necessarily im-
pacted the distributions made to a trans-
feree (or subsequent transferee) who bears
no responsibility for the underwithhold-
ing resulting from an erroneous qualified
notice (unlike the case of a transfer of a
non-PTP interest). Rather, as it is the part-
nership that determines the contents of its
qualified notice, the partnership should
bear the consequences resulting from its
representations on the notice rather than
any specific transferee. As a result, these
final regulations remove the requirement
in the proposed regulations that a public-
ly traded partnership withhold on a trans-
feree under §1.1446(f)-3 and add instead
provisions imposing liability for under-
withholding under section 1461 on the
partnership that issued the qualified no-
tice. See §1.1446(f)-4(b)(3)(i) and (c)(2)
(iii) and sections VI.B.2 and VI.C.2 of this
Summary of Comments and Explanation
of Revisions. By removing the require-
ment for the partnership to withhold under
section 1446(f)(4) on any transferees, this
modification also addresses the comments
noting concerns that withholding on spe-
cific transferees could negatively affect
the market values of PTP interests. This
modification also alleviates the need to
address those comments concerning when
withholding under section 1446(f)(4)
would begin to apply.
These final regulations do not apply
information reporting penalties in lieu of
imposing a section 1461 liability on a pub-
licly traded partnership. The comment to
impose an information reporting penalty
in lieu of a withholding requirement was
not adopted in these final regulations due
to concerns that a qualified notice may
not be treated as an information return or
a payee statement under section 6724(d)
for purposes of applying penalties under
section 6721 or 6722.
With respect to the comments sug-
gesting that a publicly traded partnership
would be unable to obtain the information
necessary to determine the underwith-
holding resulting from a broker’s reliance
on a qualified notice, for this determina-
tion, the Treasury Department and the IRS
note that a publicly traded partnership
should be able to obtain information on
transfers of PTP interests from nominees
holding interests in the partnership un-
der §1.6031(c)-1T (generally requiring a
nominee to provide certain information
about persons for whom it holds interests
in the partnership, including information
on transfers of partnership interests).
C. Credits and refunds for amounts
withheld under section 1446(f)(4)
Proposed §1.1446(f)-3(e)(2) provides
that a transferee may not obtain a refund
if the amount of tax withheld under pro-
posed §1.1446(f)-3 exceeds the trans-
feree’s withholding tax liability under
proposed §1.1446(f)-2; instead, only the
partnership may claim a refund on behalf
of the transferee for the excess amount
withheld under proposed §1.1446(f)-3.
The preamble to the proposed regulations
provided that the purpose of this rule is to
make the refund process more administra-
ble and requested comments on this issue.
Comments requested that the transfer-
ee be allowed to directly claim a refund
for the excess amount withheld under
§1.1446(f)-3. The comments explained
that it would be neither practical, nor rea-
sonable, to expect the partnership to claim
the refund on behalf of the transferee in
most circumstances. Thus, if the partner-
ship does not seek a refund on behalf of
the transferee for the excess amount with-
held, the transferee may have no way to
obtain the overwithheld amounts from the
IRS.
One comment requested clarification
regarding the manner in which proposed
§1.1446(f)-3(e)(2) measures the excess
of the amount of tax withheld under
§1.1446(f)-3 over the transferee’s with-
holding tax liability under §1.1446(f)-2.
The comment suggested, for example,
computing the excess amount as the dif-
ference between the sum of any withhold-
ing under §§1.1446(f)-2 and 1.1446(f)-3,
plus any tax on gain paid by reason of
§1.864(c)(8)-1, and the total tax liabili-
ty of the foreign transferor (as defined in
§1.864(c)(8)-1(g)(3)) for the year in which
the transfer occurred. Alternatively, the
comment suggested computing the excess
amount as the difference between the sum
of any withholding under §§1.1446(f)-2
and 1.1446(f)-3 and the tax liability of the
foreign transferor under §1.864(c)(8)-1 on
the transfer.
The Treasury Department and the IRS
agree with these comments and modify
these final regulations to allow a transfer-
ee to directly claim and obtain a refund
for the excess amount withheld under
§1.1446(f)-3. Specifically, these final reg-
ulations modify §1.1446(f)-3, in relevant
part, to provide that a transferee may ob-
tain a refund of the excess amount if it has
made payments in excess of the tax which
is properly due by the transferee for the
tax period. Accordingly, under these final
regulations, the partnership is not per-
mitted to claim a refund on behalf of the
transferee for the excess amount withheld
under §1.1446(f)-3.
The final regulations also clarify
that the excess amount withheld under
§1.1446(f)-3 is the amount of tax and in-
terest withheld under §1.1446(f)-3 that
exceeds the transferee’s withholding tax
liability under §1.1446(f)-2 and any inter-
est owed by the transferee with respect to
such liability. §1.1446(f)-3(e)(2). This rule
retains the general approach in the pro-
posed regulations that computes the ex-
cess amount as the difference between the
amount withheld under §1.1446(f)-3 and
the transferee’s withholding tax liability
under §1.1446(f)-2, but clarifies that both
amounts are computed by including inter-

December 14, 2020 1614 Bulletin No. 2020–51
est, and a refund may be claimed only to
the extent that the excess amount produc-
es an overpayment. While the final regu-
lations do not explicitly adopt either of
the specific suggestions made in the com-
ment, this approach is generally consistent
with the alternative suggestion described
in the comment as the final regulations
also allow a transferee to establish that it
has a reduced withholding tax liability un-
der §1.1446(f)-2 based on the amount of
tax due by the foreign transferor on gain
subject to §1.864(c)(8)-1, or that tax has
already been paid by the foreign transfer-
or. See §1.1446(f)-5(b) and section IV.A
of this Summary of Comments and Ex-
planation of Revisions. In order to coordi-
nate a partnership’s obligation to withhold
with the transferee’s withholding liability,
these final regulations modify §1.1446(f)-
2(d)(2) to provide that a transferee’s with-
holding tax liability under §1.1446(f)-2 is
not satisfied if a partnership knows or has
reason to know that a certification relied
on by the transferee to reduce or eliminate
withholding is incorrect or unreliable. See
section V.A.1 of this Summary of Com-
ments and Explanation of Revisions.
D. Liability of a related person to the
transferee
The proposed regulations generally
did not require a partnership to continue
withholding under section 1446(f)(4) on
distributions made after the transferee dis-
posed of its interest. However, if the in-
terest were transferred to a person that is
related to the transferee or the transferor
from which the transferee acquired its in-
terest (that is, a subsequent transferee that
bears a relationship described in sections
267(b) or 707(b)(1) with respect to the
relevant party), and if the partnership had
actual knowledge of the subsequent trans-
feree’s relationship to the relevant party,
proposed §1.1446(f)-3(c)(1)(ii)(C) re-
quired the partnership to withhold on dis-
tributions made to the subsequent trans-
feree. This rule was intended to prevent a
transferee (or any subsequent transferee)
from avoiding withholding under section
1446(f)(4) by transferring its interest to a
related person. Consistent with this intent,
the final regulations clarify that a related
person is treated as liable for tax under
section 1461 to the same extent to which
the transferee is liable under §1.1446(f)-2.
This clarification is meant to prevent the
related person that is withheld upon under
section 1446(f)(4) from making a claim for
a credit or refund of the withheld amount.
These final regulations, therefore, ensure
that a credit or refund is permitted only for
an amount that exceeds the amount that
the transferee failed to withhold.
VI. Withholding on the Transfer of a PTP
Interest by a Foreign Person
Proposed §1.1446(f)-4(a) implemented
the withholding requirement under sec-
tion 1446(f) on transfers of PTP interests.
Under this rule, any broker that effects a
transfer of a PTP interest on behalf of a
foreign partner and receives the amount
realized on behalf of the transferor is gen-
erally required to withhold a tax equal
to 10 percent of the amount realized.
Proposed §1.1446(f)-4(b) provided cer-
tain exceptions to this requirement, and
proposed §1.1446(f)-4(c) provided rules
for determining the amount realized for
purposes of withholding on a transfer
of a PTP interest. Proposed revisions to
§1.1461-1 provided rules for a broker to
report the amount realized and tax with-
held from a transfer of a PTP interest.
A. Scope of withholding obligation
1. Qualified Intermediary Agreement
The preamble to the proposed regula-
tions stated that the Treasury Department
and the IRS intend to modify the qualified
intermediary agreement (QI agreement)
set forth in Revenue Procedure 2017-15,
2017-3 I.R.B. 437, to allow qualified in-
termediaries (QIs) to assume primary
withholding responsibilities on amounts
realized under section 1446(f) and on dis-
tributions by publicly traded partnerships
under section 1446(a). Comments request-
ed that the revisions to the QI agreement
be set forth in proposed form before the
modified QI agreement is published. In
response to those comments, this section
VI of this Summary of Comments and Ex-
planation of Revisions describes certain
requirements specific to QIs to preview
several intended revisions to the QI agree-
ment that relate to §1.1446(f)-4. Addi-
tionally, section VII of this Summary of
Comments and Explanation of Revisions
describes certain requirements included
in §1.1446-4 of these final regulations
that apply to QIs that receive distributions
made by publicly traded partnerships.
Since the QI agreement expires at the end
of the 2022 calendar year, provisions re-
lated to these final regulations applicable
to QIs will be incorporated into a revised
QI agreement effective for the 2023 cal-
endar year. As the provisions of these fi-
nal regulations that relate to withholding
with respect to transfers of PTP interests
and distributions by publicly traded part-
nerships apply to QIs starting January 1,
2022, the requirements for QIs related to
section 1446(a) and (f) for the 2022 cal-
endar year will be set forth in a rider to
the QI agreement. See section VIII of this
Summary of Comments and Explanation
of Revisions for a discussion of the appli-
cability dates of these final regulations. A
QI will not be required to include in a peri-
odic review for the 2022 calendar year any
review procedures with respect to the QI’s
compliance with sections 1446(a) and (f);
therefore, the rider will not include any re-
view procedures related to those sections,
nor will the rider include any new certi-
fications or information for purposes of
Appendix I of the QI agreement for a QI
with a certification period ending Decem-
ber 31, 2022.
2. Transfers of PTP Interests that are
Cleared and Settled at a Clearing
Organization
The proposed regulations generally de-
fined a broker as any person that, in the
ordinary course of business, stands ready
to effect sales made by others, and that, in
connection with a transfer of a PTP inter-
est, receives all or a portion of the amount
realized on behalf of the transferor. Pro-
posed §1.1446(f)-1(b)(1). The proposed
regulations provided that the term broker
includes a clearing organization that ef-
fects the transfer of a PTP interest on be-
half of the transferor. Id. In addition, the
proposed regulations generally provided
that a broker that pays the amount realized
to a foreign broker is required to withhold
unless the foreign broker is a QI that as-
sumes primary withholding responsibility
or is a U.S. branch treated as a U.S. per-
son. Proposed §1.1446(f)-4(a).

Bulletin No. 2020–51 1615 December 14, 2020
The Treasury Department and the IRS
received comments requesting various ex-
clusions and special rules for brokers ef-
fecting trades that are cleared and settled
at a clearing organization. One comment
requested that U.S. clearing organizations
be excluded from the definition of broker
in §1.1446(f)-1(b)(1) in connection with
their roles in the clearance and settlement
of sales of PTP interests. The comment
noted that U.S. clearing organizations per-
form a critical role in ensuring the func-
tioning of the U.S. capital markets, and
that imposing withholding requirements
on U.S. clearing organizations may be
disruptive to the market for trading PTP
interests.
The comment also explained that with-
in U.S. clearing organizations, trades of
securities (including PTP interests) are
frequently processed through a netting
system, whereby each security and relat-
ed money settlement obligation is netted
to one net security and payment position
per broker, with the clearing organization
as the central counterparty. The netting
system creates efficiencies that ensure the
prompt clearance and settlement of securi-
ties transactions and increases liquidity in
the market. The comment noted that this
netting process is critical to orderly and
efficient trading in the capital markets, and
that withholding under section 1446(f) on
a gross basis may cause netting to be im-
pacted with respect to the clearance and
settlement of PTP interests. The comment
also noted that the Treasury Department
and the IRS have historically recognized
this issue by creating exceptions or special
rules for clearing organizations in similar
contexts. See §§1.1473-1(a)(3)(i)(C) and
1.6045-1(b), Example 2(vii).
The comment further explained that
a U.S. clearing organization may also
process bilateral transactions between
members of the clearing organization for
which the cash and securities exchanged
are not netted by the clearing organization
as described in the preceding paragraph.
These transactions may include, among
others, the transfer of cash and securities
between a seller’s broker and custodian
in order to settle a trade. For example, a
member broker effecting a sale of a PTP
interest for a seller may make a payment
of the gross proceeds to the custodian for
the seller when the seller engages a bro-
ker that is not its custodian to effect the
sale of the PTP interest through a clear-
ing organization. The comment requested
that withholding on such transactions be
the responsibility of the member making
the gross payment and not the clearing
organization. The comment stated that the
members of a U.S. clearing organization
are in the better position to withhold on
such transactions because they possess
the information about the transaction nec-
essary to determine whether withholding
is required, whereas the role of the clear-
ing organization in such cases is gener-
ally limited to transferring securities and
cash based on instructions provided by the
members.
Another comment requested a special
rule for so-called “delivery versus pay-
ment” transactions. The comment not-
ed that regulations under section 6045
(which require reporting by brokers of
gross proceeds from sales of securities by
U.S. nonexempt recipients) provide that
in the case of a sale of securities through
a “cash on delivery” or “delivery versus
payment” account (or other similar ac-
count or transaction), only the broker that
receives the gross proceeds from the sale
against delivery of the securities sold is re-
quired to report the sale. See §1.6045-1(c)
(3)(iv). The comment requested that in the
case of a “delivery versus payment” trans-
action, for purposes of section 1446(f),
only the custodian for the seller should re-
port and withhold on the sale, and not the
broker paying the gross proceeds to the
custodian. The comment noted that with-
out such a rule for section 1446(f), certain
brokers that are not currently document-
ing and reporting payments of gross pro-
ceeds for purposes of section 6045 would
be required to create systems to document
and, if necessary, withhold on and report
payments to a custodian holding a PTP
interest on behalf of a transferor and re-
ceiving the amount realized for purposes
of section 1446(f).
The comment also noted that because
brokers are not currently required to ob-
tain documentation on custodians to
which they make payments in connection
with “delivery versus payment” transac-
tions, a custodian may not be willing to
provide documentation to the broker or
accept less than the entire amount of gross
proceeds from the sale, causing the trade
to “fail” (in other words, the trade would
not be settled with respect to the transferor
holding the PTP interest through the cus-
todian). However, the comment acknowl-
edged that if the withholding responsibil-
ity is only on the custodian, there is a risk
that a custodian would be a nonqualified
intermediary (NQI) and would not docu-
ment or withhold on the transferor under
section 1446(f). The comment suggested
that this risk could be mitigated by requir-
ing a clearing organization to withhold on
these sales, and noted that U.S. clearing
organizations already collect documenta-
tion on their members that are custodians
for purposes of meeting other withholding
requirements.
These final regulations retain the rule
in the proposed regulations that a broker
includes a clearing organization. How-
ever, the final regulations provide that a
broker that is a U.S. clearing organization
is not required to withhold on an amount
realized on trades of PTP interests that are
netted and that have a U.S. clearing orga-
nization as the central counterparty. The
Treasury Department and the IRS have
determined a U.S. clearing organization
should not be required to withhold on
such transactions under section 1446(f) at
this time. The Treasury Department and
the IRS understand that withholding by a
U.S. clearing organization on a gross ba-
sis on such trades may be disruptive to the
efficiency and liquidity of the trading of
PTP interests in the capital markets. The
Treasury Department and the IRS also
understand that there are no NQI direct
clearing members that participate direct-
ly in the net settlement system at a U.S.
clearing organization at the present time.
Therefore, there is no risk of underwith-
holding due to this exception based on
current market practice. Further, the Trea-
sury Department and the IRS understand
that it is highly unlikely that a NQI would
become such a member in the future be-
cause of restrictions in U.S. securities and
banking laws on foreign banks and bro-
kers, as well as the practical barriers to
becoming a direct clearing member at a
U.S. clearing organization. After carefully
weighing the burdens and benefits of the
possible approaches, the Treasury Depart-
ment and the IRS have determined that
the risk of any possible market disruption
outweighs any benefit of imposing a with-

December 14, 2020 1616 Bulletin No. 2020–51
holding requirement on a U.S. clearing or-
ganization in these final regulations at the
present time on trades settled through a
net settlement system at the U.S. clearing
organization.
However, in order to ensure that with-
holding on sales of PTP interests that have
undergone a netting process at a U.S.
clearing organization is satisfied by the
member brokers and that there are no NQI
direct clearing members participating in
the net settlement system with respect to
PTP interests, a U.S. clearing organization
is required in these final regulations to
report such sales (on a non-netted basis)
for each direct clearing member on Form
1042-S, Foreign Person’s U.S. Source In-
come Subject to Withholding (unless an
exception applies). If this reporting on
Form 1042-S indicates that an NQI is a
direct clearing member of a U.S. clearing
organization, the Treasury Department
and the IRS will issue proposed guidance
that would revise these final regulations to
require withholding by the U.S. clearing
organization on such NQIs.
With respect to transfers of cash and
securities on a gross basis by a U.S. clear-
ing organization at the instruction of its
members in order to settle a trade of a
PTP interest, these final regulations do not
require withholding and reporting by the
U.S. clearing organization. However, the
Treasury Department and the IRS decline
to adopt an exclusion from withholding
and reporting with respect to brokers (oth-
er than U.S. clearing organizations) for
“delivery versus payment” transactions.
Therefore, under these final regulations,
a broker paying an amount realized to a
foreign custodian is required to withhold
and report on the amount realized (unless
an exception applies). This determina-
tion follows from concerns with cases in
which brokers may pay amounts realized
to custodians that are NQIs. To address the
concerns raised in the comments about the
difficulty of obtaining documentation on
custodians in order to determine whether
withholding or reporting applies, these
final regulations permit a U.S. clearing
organization to provide documentation
on a member custodian to a member bro-
ker paying an amount realized to such
custodian, subject to the notification and
opt-out requirements described in the fi-
nal regulations, and a broker may rely on
such documentation. See §1.1446(f)-4(a)
(4). The Treasury Department and the IRS
understand that it is possible for brokers
to create a mechanism for imposing with-
holding on amounts realized paid to cus-
todians that are NQIs (and thus avoiding
failed trades).
3. Documentation of Non-foreign Status
of Broker
The proposed regulations provided
that a broker must treat another broker
as a foreign person unless it obtains doc-
umentation (including a certification of
non-foreign status) establishing that the
other broker is a U.S. person. See pro-
posed §1.1446(f)-4(a)(2)(iv).
One comment requested that the pre-
sumption rules under §1.1441-1(b)(3)(iii)
that apply to a payment subject to with-
holding under sections 1441 and 1442
also apply for purposes of section 1446(f)
when a broker does not obtain documen-
tation on another broker. In certain cases,
this change would allow a broker to treat
another broker, including a custodian,
to which it pays an amount realized as a
non-foreign person even when it does not
obtain the documentation of non-foreign
status required under the proposed regu-
lations. This suggestion is not adopted in
these final regulations. The presumption
rules in §1.1441-1(b)(3)(iii) are generally
aimed at withholding agents that have an
ongoing relationship with the payee and
make periodic payments to the payee and,
therefore, are likely to have some infor-
mation on the payee in the withholding
agent’s account files or in documentation
associated with a payment. Furthermore,
many withholding agents that are required
to withhold under sections 1441 and 1442
are generally subject to anti-money laun-
dering/know your customer (AML/KYC)
obligations that require the collection of
customer information on account open-
ing. Therefore, in most instances where
the presumption rules in §1.1441-1(b)(3)
(iii) apply, the presumption would be for-
eign status. Those rules would not be ap-
propriate in a transactional context where
a broker may not have an ongoing rela-
tionship with another broker to which it
pays an amount realized. The application
of such rules to brokers required to with-
hold on sales of PTP interests under sec-
tion 1446(f) in those cases would gener-
ally result in a presumption of U.S. status,
which would disincentivize brokers from
collecting tax documentation on another
broker to which it pays an amount real-
ized. Further, the Treasury Department
and the IRS understand that there are a
limited number of custodians for which a
broker would need to obtain documenta-
tion. Accordingly, documenting a broker
as a U.S. person would generally be a one-
time event because a Form W-9 generally
has indefinite validity (absent a change in
circumstances).
However, in order to provide additional
flexibility in cases in which a broker may
have an existing relationship with anoth-
er broker, these final regulations permit
a broker to rely on documentation that it
already possesses from the payee broker
(rather than requiring new documentation
for each transaction when the same payee
broker is used). Additionally, these final
regulations provide a further allowance
for a broker to rely on documentation re-
quired for transfers of PTP interests that is
collected by a clearing organization. See
section VI.A.2 of this Summary of Com-
ments and Explanation of Revisions.
These final regulations also include a
technical correction to the definition of
foreign person to account for certain QIs
that are not foreign entities. The term for-
eign person is defined in these final reg-
ulations to include QI branches of U.S.
financial institutions. See §1.1446(f)-1(b)
(4). This definition is consistent with the
definition of foreign person for purposes
of sections 1441 through 1443, 1461, and
the regulations under those sections. See
§1.1441-1(c)(2)(i).
4. QIs Assuming Section 1446(f)
Withholding Responsibility
Under proposed §1.1446(f)-4, a broker
was not required to withhold on an amount
realized paid to another broker that is a QI
that represents on its withholding certifi-
cate (as described in §1.1441-1(e)(3)(ii))
its assumption of primary withholding
responsibility for chapter 3 withholding.
With respect to a distribution made by a
publicly traded partnership, the proposed
regulations provided a similar allowance
for a QI to assume primary withholding
responsibility under section 1446(a) by

Bulletin No. 2020–51 1617 December 14, 2020
acting as a nominee for the distribution.
See proposed §1.1446-4(b)(3).
The QI agreement generally permits
a QI to assume primary withholding re-
sponsibilities on an account-by-account
basis rather than on all payments made by
a withholding agent to a QI. Comments
requested generally similar flexibility for
QIs assuming withholding responsibilities
under sections 1446(a) and 1446(f), not-
ing that the proposed regulations do not
clearly state whether a QI would need to
assume section 1446 withholding respon-
sibilities as part of its overall withholding
responsibilities. One comment noted the
different system-related considerations in
withholding on sale proceeds as opposed
to withholding on payments of periodic
income. To better match systems capabil-
ities of withholding agents and QIs and
provide for a more efficient withholding
process, comments therefore requested
that the regulations be clarified to permit
a QI to assume primary withholding re-
sponsibilities under section 1446(a) and
(f) regardless of whether the QI assumes
primary withholding responsibilities for
other payments subject to withholding
under chapters 3 and 4. A comment re-
quested that a QI be permitted to assume
withholding responsibility under section
1446(a) but not section 1446(f), and vice
versa. Another comment requested that a
QI be permitted to assume withholding re-
sponsibility under section 1446(f) result-
ing from a sale of a PTP interest indepen-
dent of whether the QI assumes primary
withholding responsibility under section
1446(f) on distributions made by the pub-
licly traded partnership.
The Treasury Department and the IRS
agree that QIs should be permitted appro-
priate flexibility to make appropriate ar-
rangements to assume, or not assume, cer-
tain withholding responsibilities. These
final regulations allow a QI to assume
primary withholding responsibility under
section 1446(f) on a payment-by-payment
basis. For example, a QI may assume pri-
mary withholding responsibility under
section 1446(f) for a sale of a PTP inter-
est but not a distribution, and vice versa.
Further, a QI is permitted to assume (or
not assume) primary withholding respon-
sibility under section 1446(f) on a sale of
a PTP interest regardless of whether the
QI assumes primary withholding respon-
sibilities under sections 1441 and 1442.
However, under these final regulations
a QI that assumes withholding respon-
sibilities on any portion of a distribution
from a publicly traded partnership will be
required to assume withholding responsi-
bilities for the entire distribution (in other
words, a QI must either assume withhold-
ing responsibilities on the distribution for
purposes of chapter 3 (including section
1446(a) and (f)) and chapter 4, or not as-
sume withholding responsibilities for any
of those purposes). See §§1.1446(f)-4(a)
(8) and 1.1446-4(b)(3). This requirement
will make withholding and reporting on
distributions with respect to PTP interests
more efficient because one party will per-
form the withholding and reporting on a
distribution. The Treasury Department
and the IRS intend for the revised QI
agreement to incorporate the requirements
for a QI that assumes primary withholding
responsibility under section 1446(a) or (f).
Similar changes to those described
above for QIs are included in these final
regulations with respect to payments of
amounts realized made to U.S. branches
that agree to act as U.S. persons under
section 1446(a) or (f). Additionally, these
final regulations clarify in §1.1446(f)-
4(a)(2)(i)(B) that the requirements for a
U.S. branch withholding certificate under
§1.1441-1(e)(3)(v) apply without regard
to the requirement that the certificate in-
clude a representation that the income is
not effectively connected with the conduct
of a trade or business within the United
States.
5. QIs Not Assuming Section 1446
Withholding Responsibility
Under the current QI agreement, a QI is
not required to assume primary withhold-
ing responsibilities under chapters 3 and
4. In such cases, a QI provides withhold-
ing rate pool information on its account
holders that are foreign persons (rather
than specific information about each such
account holder) to the withholding agent
sufficient for the withholding agent to de-
termine the amounts to withhold. The pro-
posed regulations permitted an exception
to withholding on an amount realized paid
to a QI only when the QI assumes primary
withholding responsibility, but provided
no special rules for when a QI does not
assume withholding responsibility under
section 1446(f). Comments requested that
a QI be permitted to not assume primary
withholding responsibility under section
1446(f) if it provides to the broker paying
an amount realized a withholding state-
ment that allocates the amount realized to
account holders of the QI selling their PTP
interests in withholding rate pools, similar
to the allowance for a QI to pass up with-
holding rate pools for purposes of section
1441. See §1.1441-1(b)(2)(vii)(C) and (e)
(5)(v)(C). In addition, for accounts not
designated by a QI as accounts for which
it acts under the QI agreement, a com-
ment requested that the final regulations
also permit a QI not assuming primary
withholding responsibility under section
1446(f) to represent its status as a QI and
provide to the broker a withholding state-
ment allocating the amount realized to
each account holder of the QI selling its
PTP interest in the same transaction, along
with specific account holder documenta-
tion, sufficient for the broker to determine
the amount to withhold. This allowance
would avoid any additional withholding
that might apply were the QI instead re-
quired to represent its status as an NQI in
those cases, as described in section VI.A.6
of this Summary of Comments and Expla-
nation of Revisions, and would relieve a
QI from filing a Form 1042-S in such a
case. Comments also requested that a QI
be permitted to report on Form 1042-S
on a pooled basis (rather than to specific
recipients) for section 1446(f) purposes to
the same extent permitted for other pay-
ments covered by the QI agreement.
In response to these comments, the
final regulations provide that a broker
may determine the amount to withhold
under section 1446(f) on an amount re-
alized paid to a QI that does not assume
primary withholding responsibility under
section 1446(f) based on aggregate infor-
mation (in other words, in withholding
rate pools) about the account holders of
the QI that are transferring PTP interests.
See §1.1446(f)-4(a)(7). Under these final
regulations, a broker may rely on a QI’s
allocation of an amount realized to a pool
of foreign transferors subject to 10-per-
cent withholding, a pool of foreign trans-
ferors that are excepted from withholding
under §1.1446(f)-4(b), and, to the extent
permitted under chapter 4, U.S. transfer-

December 14, 2020 1618 Bulletin No. 2020–51
ors included in a chapter 4 withholding
rate pool of U.S. payees. This allowance
provides parity with sections 1441 and
1442 with respect to a QI’s requirements
for its withholding statements (and associ-
ated documentation) and will provide QIs
and brokers making payments of amounts
realized to QIs greater flexibility in meet-
ing their section 1446(f) requirements.
Additionally, under these final regulations
a broker may also rely on specific payee
information provided by a QI with respect
to foreign transferors (rather than pooled
information), thereby permitting the bro-
ker to withhold based on this information
rather than treating the QI as an NQI in
such a case (as would generally be the
case for other amounts subject to with-
holding under chapter 3). See §1.1446(f)-
4(a)(7)(iii). A broker may also withhold
as described in the preceding sentence for
purposes of section 1446(a) under these
final regulations in order to coordinate the
rules applicable to QIs under both sections
1446(a) and (f). See §1.1446-4(e) and sec-
tion VII.C of this Summary of Comments
and Explanation of Revisions. These fi-
nal regulations also provide that in cases
where a QI passes up specific payee infor-
mation for a partner receiving a distribu-
tion or an amount realized, the nominee or
broker shall treat the partner (that is, the
QI’s account holder) as the recipient for
purposes of reporting on Form 1042-S.
See §1.1461-1(c)(1)(ii)(A)(8).
The revised QI agreement incorporates
the allowances described in the preceding
paragraph, including an allowance reliev-
ing a QI from filing a Form 1042-S to the
extent that it has provided specific payee
information to a broker that has issued a
Form 1042-S to one or more account hold-
ers of the QI (although such a case will be
within the scope of a QI’s activities under
the QI agreement). In addition, as request-
ed by comments, the revised QI agreement
will permit a QI to report on Form 1042-S
on a pooled basis (rather than to specific
recipients) for amounts subject to with-
holding under section 1446(a) or (f) to the
same extent generally permitted for other
payments to foreign account holders under
the QI agreement. To ensure that account
holders that are foreign partners will have
the information necessary to satisfy their
own U.S. income tax reporting require-
ments, the requirements of §1.6031(c)-1T
will be incorporated into the QI agree-
ment. See §§1.6012-1(b)(1), 1.6012-2(g)
(1), and 1.6031(a)-1. Since foreign part-
ners are required to file U.S. income tax
returns to report their effectively connect-
ed income and may request Forms 1042-
S from QIs to support amounts withheld
that are reported on their returns, these
partners are able to obtain refunds of taxes
overwithheld under section 1446(f) when
making their required filings. Therefore,
the revised QI agreement will not allow
a QI to use the collective refund proce-
dures for amounts withheld under section
1446(a) or (f) with respect to its account
holders that are foreign partners.
6. Withholding under Section 1446(f) on
Payments to NQIs
As discussed in section VI.A.5 of this
Summary of Comments and Explanation
of Revisions, these final regulations per-
mit a broker to determine its withholding
obligation under section 1446(f) by rely-
ing on certain account holder information
provided by a QI that does not assume
primary withholding responsibility. One
comment requested a similar allowance
that would permit a broker to rely on a
certification from an NQI for calculating
the broker’s withholding under section
1446(f) in a case in which the NQI pro-
vides specific partner information to the
broker (thus avoiding withholding on
the full amount paid to the NQI in cer-
tain cases). The comment noted that re-
quiring withholding on amounts realized
allocable to U.S. partners that are NQI
account holders would result in excessive
withholding. Another comment noted that
the requested allowance would relieve an
NQI from reporting on Form 1042-S as
its broker would have the information to
report the amount realized that is allocat-
ed to each foreign partner in the publicly
traded partnership. See §1.1461-1(c)(1)
(ii)(A)(8) (requiring reporting of amounts
realized paid to foreign partners of public-
ly traded partnerships).
Even though overwithholding could
occur in certain cases absent the request-
ed change, the Treasury Department and
the IRS have determined that a broker
should not be relieved of withholding at
the full amount under section 1446(f) on
amounts realized that are paid to NQIs
(except when the NQI maintains a U.S.
branch that assumes the withholding).
This determination reflects the view that
in general NQIs are not required to ac-
count to the IRS with respect to their
compliance with the withholding and re-
porting requirements of section 1446(f).
As in the proposed regulations, therefore,
a broker will be required to withhold at
the full 10-percent rate on an amount re-
alized paid to an NQI when no exception
to withholding applies under these final
regulations. However, a partner that is an
account holder of an NQI that is subject to
withholding under section 1446(f) will be
entitled to claim a credit under section 33
for the amount withheld when the partner
is provided a Form 1042-S supporting the
claim from the NQI (or as otherwise pro-
vided in IRS forms or instructions). See
§1.1446(f)-4(e)(2).
7. Broker’s Determination of Prior
Broker Withholding under Section
1446(f)
Under proposed §1.1446(f)-4(a)(2)
(iii), a broker is not required to withhold
on an amount realized from the sale of a
PTP interest when it knows that the with-
holding obligation has been satisfied by
another broker. A comment requested a
specific documentation rule (such as a cer-
tification from the paying broker) to pro-
vide more certainty to the receiving bro-
ker that the withholding requirement has
been satisfied with respect to the payment.
The regulations under section 1441
provide a standard different than that in-
cluded in the proposed regulations for
when a withholding agent may treat a pay-
ment as already subjected to withholding
(thus avoiding duplicative withholding).
That rule provides that an NQI receiving
a payment from a withholding agent is not
required to withhold when the NQI has
provided a Form W-8IMY, withholding
statement, and attached documentation to
the withholding agent and does not know
or have reason to know that another with-
holding agent failed to withhold the cor-
rect amount. See §1.1441-1(b)(6). In the
case of a QI receiving the payment, how-
ever, §1.1441-1(b)(6) provides that a QI
determines its withholding requirement
in accordance with the QI agreement. To
address the concern raised in the com-

Bulletin No. 2020–51 1619 December 14, 2020
ment regarding the difficulty for a broker
to show that withholding was applied by
another broker, these final regulations
amend that requirement by incorporat-
ing a standard generally similar to that
in §1.1441-1(b)(6). See §1.1446(f)-4(a)
(4). Therefore, a broker acting as an in-
termediary for an amount realized is not
required to withhold when it receives
the amount from another broker unless
it knows, or has reason to know, that the
paying broker did not withhold on the full
amount required (or, in the case of a QI
receiving the amount realized, as required
in accordance with the QI agreement).
8. Withholding Date for Sales of PTP
Interests
A comment requested that the date for
withholding with respect to a sale of a
PTP interest should be the settlement date
(as opposed to the trade date), consistent
with the rule in §31.3406(a)-4(b)(1) for
when backup withholding under section
3406 is required on certain payments of
amounts reportable under section 6045.
In response to this comment, these final
regulations include a cross-reference to
§31.3406(a)-4(b)(1) to clarify the date
of withholding under section 1446(f) for
a transfer of a PTP interest other than a
distribution.
B. Exceptions to withholding
Proposed §1.1446(f)-4(b) provided
exceptions to the withholding require-
ment that applies to a broker paying an
amount realized from the transfer of a
PTP interest, including exceptions that
apply to distributions by publicly traded
partnerships and exceptions dependent on
certifications obtained from transferors.
These final regulations modify certain of
these exceptions and add an exception for
certain transferors (the ECI exception).
These final regulations also remove the
exception to withholding for a qualified
current income distribution in proposed
§1.1446(f)-4(b)(4), and replace that ex-
ception with a provision for determining
the amount realized in the case of a dis-
tribution by a publicly traded partnership
such that withholding is required only to
the extent a distribution is not attributable
to net income. A QI will be permitted to
apply these same exceptions to withhold-
ing under the revised QI agreement.
1. ECI Exception
Comments requested an exception to
withholding if a valid Form W-8ECI, Cer-
tificate of Foreign Person’s Claim that
Income is Effectively Connected with the
Conduct of Trade or Business in the Unit-
ed States, is provided under certain new
conditions. The comments explained that
certain foreign persons not eligible for the
section 864(b) trading safe harbor, such
as dealers in securities, buy and sell PTP
interests as part of their trade or business
in the United States, such that gain or loss
on the transfer of the PTP interests would
be effectively connected with the conduct
of a trade or business within the United
States without regard to section 864(c)
(8). The comments requested a limited ex-
ception for non-U.S. persons that provide
a Form W-8ECI and specify on the form
that the gain from the sale, exchange, or
other disposition of the PTP interest is ef-
fectively connected with the conduct of a
trade or business within the United States
without regard to the application of sec-
tion 864(c)(8).
The Treasury Department and the IRS
have determined that it is appropriate to
provide relief from withholding for trans-
ferors that certify on a Form W-8ECI that
the transferor is a dealer in securities (as
defined in section 475(c)(1)) and that any
gain from the transfer of a PTP interest
is effectively connected with the conduct
of a trade or business within the United
States without regard to section 864(c)(8).
The final regulations add this exception in
§1.1446(f)-4(b)(6).
2. 10-Percent Exception
The proposed regulations provided that
a broker may rely on a qualified notice
stating that the exception to withholding
described in proposed §1.1446(f)-4(b)(3)
(the 10-percent exception) applies. The
proposed regulations required that this
exception apply as of the PTP designated
date for a transfer of a PTP interest. The
PTP designated date was defined as the
date for a deemed sale determination that
is designated by a publicly traded partner-
ship in a qualified notice, provided that the
date is not earlier than 92 days before the
date that the publicly traded partnership
posts the qualified notice. In addition, the
proposed regulations limited reliance on a
qualified notice depending on the date of
posting. Specifically, a broker may in gen-
eral only rely on the most recent qualified
notice that is posted by the publicly traded
partnership within the 92-day period end-
ing on the date of the transfer.
One comment requested that, for pur-
poses of the exception, a broker be permit-
ted to rely on the qualified notice for 183
days from the date of posting by the pub-
licly traded partnership instead of the 92-
day period provided in the proposed regu-
lations. This comment noted that qualified
notices issued with respect to distributions
that are made late in the year complicate
the withholding and reporting process.
As noted in the preamble to the pro-
posed regulations, the 92-day period
was provided to limit the availability of
the 10-percent exception to situations in
which a publicly traded partnership has
designated a deemed sale date occurring
within the most recent calendar quarter
given that publicly traded partnerships
are in a position to determine the value of
their assets quarterly. The proposed regu-
lations limit reliance on a qualified notice
to a notice posted within the 92-day peri-
od ending on the date of transfer in order
to ensure that the broker is using the most
recent information available. Therefore,
these final regulations retain the 92-day
period for purposes of the 10-percent ex-
ception.
A comment stated that the 10-percent
exception should only account for the
publicly traded partnership’s effectively
connected gain under section 864(c)(8),
without taking into account any effec-
tively connected gain under section 897.
According to the comment, this would
ensure that the transfer of an interest in a
partnership that is not engaged in a trade
or business within the United States, but
that holds U.S. real property interests, is
not subject to withholding under section
1446(f). This comment is not adopted be-
cause it is appropriate to account for effec-
tively connected gain under section 897
when applying the 10-percent exception.
However, to address the concern raised in
the comment, these final regulations add
an exception to withholding similar to the

December 14, 2020 1620 Bulletin No. 2020–51
one described in section IV.A.3.ii of this
Summary of Comments and Explanation
of Revisions that applies when a non-pub-
licly traded partnership certifies that it is
not engaged in a trade or business with-
in the United States (including when the
partnership is not engaged in a trade or
business within the United States and only
holds U.S. real property interests that are
not part of a trade or business). A publicly
traded partnership states that this excep-
tion applies by providing on a qualified
notice that it is not engaged in a trade or
business within the United States.
Finally, these final regulations add a
provision for certain cases in which a
publicly traded partnership is liable under
section 1461 for underwithholding by a
broker on a transfer when the partnership
issues a qualified notice that incorrectly
states the applicability of the 10-percent
exception. However, this liability applies
only when the publicly traded partnership
fails to make a reasonable estimate of the
amounts required for determining the ap-
plicability of the 10-percent exception.
See §1.1446(f)-4(b)(3)(i); see also section
V.B of this Summary of Comments and
Explanation of Revisions.
C. Determining the amount to withhold
If an exception to withholding under
proposed §1.1446(f)-4(b) does not apply,
proposed §1.1446(f)-4(c) provided rules
for a broker to determine the amount re-
alized for purposes of computing the
amount to withhold on the transfer of a
PTP interest. Proposed §1.1446(f)-4(c) in-
cluded a general rule for determining the
amount realized based on the amount of
gross proceeds paid on the transfer (as de-
fined in §1.6045-1(d)(5)) and a procedure
for modifying the amount realized when
the transferor is a foreign partnership that
has domestic partners.
1. Modified Amount Realized for
Transfers by Foreign Partnerships
Proposed §1.1446(f)-4(c)(2) provided,
in the event of a transfer of a PTP inter-
est by a foreign partnership, a procedure
that allows a broker to reduce the amount
realized on the transfer to the extent the
amount realized is allocable to partners
that are U.S. persons. A foreign partner-
ship may claim this modified amount re-
alized by providing a Form W-8IMY, a
withholding statement allocating the per-
centage of gain from the transfer allocable
to each direct or indirect partner that is a
U.S. person or a presumed foreign person,
and a certification of non-foreign status for
each partner that is a U.S. person. As de-
scribed in section IV.B.2 of this Summary
of Comments and Explanation of Revi-
sions, these final regulations expand the
analogous procedure under §1.1446(f)-
2(c)(2)(iv) that applies to transfers of
non-PTP interests to take into account sit-
uations in which a foreign partner (direct
or indirect) in the transferor partnership is
eligible for treaty benefits. In response to
a comment, the same modification is made
in these final regulations for transfers of
PTP interests.
Another comment requested an al-
lowance for the transferor partnership to
provide to the broker the aggregate per-
centage of gain allocable to its partners
that are U.S. persons as opposed to the
requirement to include on the withholding
statement the percentage of gain allocable
to each partner that is a U.S. person. The
comment reflects a concern that a broker
using the procedure under the proposed
regulations may be considered to have
actual knowledge of the extent to which
proceeds from the transfer are paid to
each partner that is a U.S. person, thereby
resulting in a requirement for the broker
to report these gross proceeds under sec-
tion 6045. See §§1.6045-1(g)(1)(i) and
1.6049-5(d)(3)(i).
The Treasury Department and the IRS
have determined that any additional re-
porting under section 6045 that results
from this requirement is an appropriate
consequence of the rule. Additionally, this
rule provides information useful to the
IRS. See, however, §§1.6049-4(c)(4) and
1.6045-1(g)(1)(iv) (providing coordina-
tion of chapter 61 reporting with reporting
by certain foreign financial institutions
under chapter 4).
Under the revised QI agreement, a QI
will be permitted to adjust an amount re-
alized in accordance with the procedures
described in this section VI.C.1 of this
Summary of Comments and Explanation
of Revisions with respect to any direct
account holder of the QI that is a foreign
partnership or a direct account holder of
another QI that is a foreign partnership
to which the first-mentioned QI pays the
amount realized.
2. Determining Amount Realized with
Respect to Distributions
Under the proposed regulations, in the
event of a distribution by a publicly trad-
ed partnership that is treated as a transfer
for purposes of section 1446(f), the entire
amount of a distribution was treated as the
amount realized. Proposed §1.1446(f)-
4(c)(2). In general, under section 731(a),
a partner recognizes gain on a distribution
from a partnership to the extent that any
money distributed exceeds the partner’s
basis in its interest in the partnership. Un-
der section 705(a)(1), a partner’s basis in
its interest is increased by its distributive
share of income for the taxable year. Pro-
posed §1.1446(f)-4(b)(4) provided an ex-
ception to a broker’s requirement to with-
hold on a distribution by a publicly traded
partnership if the entire amount of the
distribution is designated on the publicly
traded partnership’s qualified notice (as
defined in §1.1446-4(b)(4)) as a qualified
current income distribution. The proposed
regulations defined a qualified current
income distribution as a distribution that
does not exceed the net income that the
publicly traded partnership earned since
the record date of the publicly traded part-
nership’s last distribution. This exception
was intended to eliminate withholding
under section 1446(f)(1) on a distribution
by a publicly traded partnership when the
partner would not likely recognize gain
from the distribution under section 731(a)
due to the basis increase under section
705(a)(1) for partnership income allocable
to a partner.
Comments suggested various alter-
natives to the qualified current income
distribution exception. Two comments
requested that withholding under section
1446(f) not apply to any distributions by a
publicly traded partnership. One of those
comments asserted that any unrealized
effectively connected gain attributable to
assets of the publicly traded partnership
would eventually be taxed through with-
holding under either section 1446(a) when
the publicly traded partnership disposes of
those assets or section 1446(f) when the
partner sells its PTP interest. Certain com-

Bulletin No. 2020–51 1621 December 14, 2020
ments suggested modifying the require-
ments for the exception. One comment
suggested that, for purposes of applying
the exception, a broker should be permit-
ted to treat a distribution as made out of
current net income unless the qualified no-
tice states otherwise. This comment noted
that publicly traded partnerships may not
publish qualified notices designating the
distribution as a qualified current income
distribution due to concerns about liabil-
ity under proposed §1.1446(f)-3(b)(2)(ii)
if the qualified notice is false. Another
comment suggested modifying the quali-
fied current income distribution exception
so that withholding under section 1446(f)
(1) would not apply to the extent that cu-
mulative distributions by a publicly traded
partnership do not exceed its cumulative
net income earned over time.
Other comments focused on alterna-
tives for coordinating withholding under
section 1446(f) on distributions by pub-
licly traded partnerships with withholding
under other sections of the Code, noting
that a distribution by a publicly traded
partnership would be subject to withhold-
ing under section 1446(f) as well as with-
holding under sections 1441, 1442, 1443,
and 1446(a) (to the extent applicable)
when the qualified current income dis-
tribution exception would not apply. For
example, a comment suggested reducing
the tax liability under section 1446(a) by
amounts withheld under section 1446(f)
dollar-for-dollar, or exempting distri-
butions from withholding under section
1446(f) to the extent those distributions
are subject to withholding under section
1446(a) (or vice versa). Another comment
requested more broadly that withholding
under section 1446(f) not apply to a dis-
tribution made by a publicly traded part-
nership when withholding under section
1441, 1442, 1443, or 1446(a) applies to
the payment.
Section 1446(f)(1) requires withhold-
ing if any portion of the gain on a disposi-
tion of an interest in a partnership would
be treated under section 864(c)(8) as ef-
fectively connected gain. Section 1446(f)
ensures that tax is collected on gain un-
der section 864(c)(8). The Treasury De-
partment and IRS have determined that
eliminating withholding entirely on dis-
tributions by publicly traded partnerships
would undermine the purpose of section
1446(f) in certain cases. For example,
there may not be a subsequent sale of the
PTP interest subject to withholding under
section 1446(f), particularly if the distri-
bution is in redemption of the PTP inter-
est. Alternatively, the value of a publicly
traded partnership’s assets (or the amount
of unrealized effectively connected gain)
may change between the date of a distri-
bution and either the date on which the
partnership sells the assets or the date on
which the partner sells its PTP interest.
The Treasury Department and the IRS
do not agree with the comments request-
ing an offset against section 1446(f) with-
holding for amounts withheld under sec-
tion 1446(a). Section 1446(a) withholding
applies to effectively connected taxable
income earned by the partnership that is
allocated and distributed to its partners.
In contrast, section 1446(f) withholding
applies to ensure the collection of tax on
the built-in gain of the partnership’s assets
under section 864(c)(8). Thus, each with-
holding regime applies to a separate item
of taxable income.
For these reasons, the final regulations
continue to require withholding under sec-
tion 1446(f) on a distribution made with
respect to a PTP interest. However, be-
cause the exception for a qualified current
income distribution provided relief only
when a publicly traded partnership made a
distribution entirely out of current net in-
come, these final regulations replace this
exception with a procedure in §1.1446(f)-
4(c)(2)(iii) for adjusting the amount re-
alized to the amount of a distribution in
excess of cumulative net income. Thus,
if a portion of a distribution made by a
publicly traded partnership is attributable
to an amount in excess of cumulative net
income, a broker is required to withhold
only on this portion for purposes of section
1446(f), rather than on the entire amount
of the distribution. Also, in response to a
comment, this rule looks to the amount
in excess of the cumulative net income,
rather than the current net income (as was
required under the proposed regulations).
The cumulative net income is the net in-
come earned by the partnership since the
formation of the partnership that has not
been previously distributed by the part-
nership. As a result of this change, these
final regulations remove the general rule
included in the proposed regulations that
defined the amount realized from a PTP
distribution as the amount of cash and the
fair market value of property distributed
or to be distributed.
Under the final regulations, the public-
ly traded partnership identifies the portion
of a distribution attributable to an amount
in excess of cumulative net income on
a qualified notice. If a broker properly
withholds based on the qualified notice
(applying the rules of §1.1446-4(d)(1) to
the distribution), the broker is not liable
for any underwithholding on any amount
attributable to an amount in excess of cu-
mulative net income. Instead, if a publicly
traded partnership issues a qualified notice
that causes a broker to underwithhold with
respect to an amount in excess of cumula-
tive net income, the partnership is liable
under section 1461 for any underwith-
holding on such amount.
D. Form 1042-S reporting under section
1446(f)
The proposed regulations included re-
quirements for reporting with respect to
transfers of PTP interests on Form 1042-
S. As part of these requirements, a broker
is generally required to report on Form
1042-S a payment of an amount realized
from the transfer of a PTP interest made to
a foreign transferor or broker.
One comment requested clarification
that reporting on Form 1042-S is per-
formed on an aggregate basis (that is, a
broker reports on a single Form 1042-S all
transfers of PTP interests with respect to
a customer for a calendar year). The pro-
posed regulations added to §1.1461-1(c)
(1)(i) the general requirement that a broker
report on Form 1042-S amounts realized
as determined under section 1446(f). Sec-
tion 1.1461-1(c)(1)(i) generally provides
that a Form 1042-S shall be prepared for
each recipient of an amount subject to re-
porting and for each single type of income
payment, in such manner as the form and
accompanying instructions prescribe. The
IRS intends to amend the instructions to
Form 1042-S to clarify that aggregate re-
porting is used with respect to amounts re-
alized by a transferor on transfers of PTP
interests.
As described in section VI.A.6 of this
Summary of Comments and Explanation
of Revisions, these final regulations re-

December 14, 2020 1622 Bulletin No. 2020–51
quire a broker to withhold on an amount
realized paid to an NQI effecting a trans-
fer of a PTP interest for an account holder.
A comment requested that the regulations
clarify how a broker reports the payment
to the NQI, and suggested that the broker
report the amount as paid to an unknown
account holder, with the NQI reported
as an intermediary for the amount (rath-
er than as the recipient). The Treasury
Department and the IRS agree with the
manner of reporting noted in this com-
ment, which is already generally reflected
in §1.1461-1(c)(1)(ii)(B)(1) and (c)(4)(ii)
(A) (addressing payments to persons that
are not recipients, including NQIs) and
§1.1461-1(c)(1)(ii)(B)(5) (excluding as
a recipient a broker withheld upon under
§1.1446(f)-4(a)(2)(i)). In response to this
comment, the IRS also intends to amend
the instructions to Form 1042-S to indi-
cate the reporting that applies in this case.
A comment requested clarification
that a foreign partnership subject to with-
holding under §1.1446(f)-4 may use the
Form 1042-S that it receives from the
broker to substantiate the foreign partner-
ship’s credit of such withholding against
its tax liability under section 1446(a). In
response to this comment, the Treasury
Department and the IRS intend to amend
the instructions to Forms 8804, 8805 and
8813 to provide that a foreign partner-
ship withheld upon under section 1446(f)
on the transfer of a PTP interest must at-
tach Form 1042-S in order to credit such
amount against its liability under section
1446(a).
As discussed in section VI.A.2 of this
Summary of Comments and Explanation
of Revisions, under these final regula-
tions a U.S. clearing organization will be
required to report on Form 1042-S the
non-netted amounts realized by a foreign
broker with respect to sales of PTP inter-
ests that are cleared and settled on a net
basis through the clearing organization.
Finally, under §1.1461-1(a)(1), a with-
holding agent that withholds tax pursuant
to chapter 3 is required to deposit the tax
as provided in §1.6302-2(a). Consistent
with the proposed regulations, these fi-
nal regulations amend §1.1461-1(a)(1)
to incorporate the requirement to deposit
tax withheld under section 1446(f). These
final regulations include a conforming
change to §1.6302-2(a)(1)(i) to provide
that the requirement to deposit tax under
§1.6302-2 applies to a broker or public-
ly traded partnership for purposes of sec-
tion 1446(f), and to a nominee or publicly
traded partnership for purposes of section
1446(a).
E. Synthetic interests
A comment requested clarification
that the proposed regulations apply only
to physical interests in publicly traded
partnerships and not synthetic interests.
A subsequent comment submitted by the
same commenter suggested that the final
regulations clarify this point by explic-
itly defining the term “interest” as “an
interest as a partner in the partnership.”
The question of when a contract or oth-
er financial instrument denominated as a
synthetic interest in a partnership interest
may be treated as ownership of a partner-
ship interest is beyond the scope of these
regulations.
VII. Amendments to Existing
Section 1446 Regulations Relating
to Distributions by Publicly Traded
Partnerships
A. Method of providing a qualified notice
The proposed regulations contained
changes to the existing qualified notice
rules and rules for nominees that apply
to distributions of effectively connected
income, gain, or loss made by publicly
traded partnerships to foreign partners.
Proposed §1.1446-4(b)(4) revised the
method for a publicly traded partnership
to provide a qualified notice to a nominee
by requiring that the notice be posted in
a readily accessible format in an area of
the primary public website of the public-
ly traded partnership that is dedicated to
this purpose. Two comments requested
that a requirement be added to require the
publicly traded partnership to furnish a
copy of the qualified notice to the public-
ly traded partnership’s registered holders
that are nominees. PTP interests are gen-
erally immobilized at a central deposito-
ry and registered in the name of the de-
pository’s nominee. The comments state
that furnishing the qualified notice to the
publicly traded partnership’s registered
holders that are nominees would facilitate
the dissemination of information provided
on the qualified notice to relevant market
participants. Another comment noted the
burden on brokers to find qualified notic-
es posted on publicly traded partnerships’
websites and suggested requiring all qual-
ified notices to be posted on a central pub-
lic website.
The Treasury Department and the IRS
have determined that the delivery require-
ments for qualified notices should be
aimed at ensuring that all relevant mar-
ket participants receive the information
necessary to comply with their withhold-
ing and reporting obligations. Therefore,
these final regulations include a require-
ment for a publicly traded partnership to
provide a qualified notice to any registered
holder that is a nominee for a distribution.
Because the requirements provided will
generally ensure that brokers receive the
information necessary to meet their with-
holding obligations under §1.1446(f)-4,
these final regulations do not adopt the
comment to require publicly traded part-
nerships to post their qualified notices to a
central website.
B. Default withholding rule
The proposed regulations also added
a default withholding rule (the default
withholding rule) for cases in which a
qualified notice fails to provide suffi-
cient detail for a nominee to determine
the amounts subject to withholding on a
publicly traded partnership distribution
(a deficient qualified notice). Under this
rule, to the extent that a deficient quali-
fied notice fails to specify the type of in-
come from which a distribution is made,
the nominee must withhold at the highest
rate specified in section 11(b) or 881 for
a partner that is a foreign corporation,
or the highest rate specified in section 1
or 871 for a foreign partner that is not a
corporation. See proposed §1.1446-4(d).
One comment requested that a broker be
permitted to adjust the rate of withhold-
ing under the default withholding rule
by considering the status of a partner for
purposes of taking into account a lower
treaty rate.
The Treasury Department and the IRS
have concluded that a nominee applying
the default withholding rule should with-
hold based on the statutory withholding

Bulletin No. 2020–51 1623 December 14, 2020
rates determined under the proposed
regulations, without regard to any lower
rate that might apply under an applica-
ble income tax treaty. Determinations by
nominees of lower rates that might other-
wise apply under a treaty would depend
on information from publicly traded part-
nerships about the characterization of the
income attributable to the distribution.
Because this information would not be
provided to the nominee on a qualified
notice, these final regulations clarify that
a lower treaty rate is not considered for
purposes of determining the amount to
withhold under the default withholding
rule.
The comment also requested that the
final regulations clarify that a nominee is
required to apply the default withholding
rule to a distribution for which no qual-
ified notice is issued. Proposed §1.1446-
4(d) modified the existing rule to provide
that a nominee is a withholding agent for
the entire distribution that it receives from
a publicly traded partnership (rather than
only to the extent of the amount specified
on a qualified notice). These final regula-
tions add language to clarify that a nom-
inee must apply the default withholding
rule when a publicly traded partnership
fails to issue a qualified notice for a dis-
tribution under §1.1446-4(b)(4) of these
final regulations.
The default withholding rule in the pro-
posed regulations did not address a case in
which a nominee has no information about
the status of a partner, including whether
the partner is a corporation for determin-
ing the withholding rate on effectively
connected income paid to the partner. As
a result, these final regulations add that if
a nominee cannot determine the status of
a partner as a corporation, for purposes of
the default withholding rule the nominee
is required to use the higher of the fol-
lowing rates: (1) the rate of withholding
applicable to a foreign person that is a cor-
poration, and (2) the rate of withholding
applicable to a foreign person that is not
a corporation.
C. Modifications related to QIs
The proposed regulations expanded the
definition of a nominee to include a QI
that assumes primary withholding respon-
sibility for a distribution and a U.S. branch
of a foreign person that agrees to be treat-
ed as a U.S. person for withholding on a
distribution from a publicly traded part-
nership. To address cases in which a dis-
tribution by a publicly traded partnership
is paid through multiple nominees that
might each be required to withhold under
proposed §1.1446-4(d), these final regula-
tions add an exception to withholding for
a nominee paying the distribution to a QI
or U.S. branch that is also a nominee for
the distribution.
Under the QI agreement, a QI may
choose not to assume primary withhold-
ing responsibilities and in certain of those
cases may provide withholding rate pools,
rather than specific payee documentation,
to the withholding agent that makes a
payment to the QI. Because the QI agree-
ment applies only to amounts subject to
withholding under chapter 3 (defined as
sections 1441 through 1443), chapter 4
(sections 1471 through 1474), or sec-
tion 3406, the IRS intends to update the
QI agreement to extend this treatment to
amounts subject to withholding under sec-
tion 1446(a) to the same extent generally
permitted for payments received by QIs on
behalf of their foreign account holders un-
der the QI agreement. To coordinate with
the intended updates to the QI agreement,
these final regulations allow a publicly
traded partnership or nominee paying a
distribution under section 1446(a) to a QI
that does not assume primary withholding
responsibilities to rely on an allocation of
the distribution to an applicable withhold-
ing rate pool provided by the QI by speci-
fying the withholding rate pools permitted
for withholding under section 1446(a).
In addition, these final regulations al-
low a broker to withhold under section
1446(a) based on specific payee docu-
mentation provided by a QI. See §1.1446-
4(e) and section VI.A.5 of this Summary
of Comments and Explanations of Revi-
sions. Additionally, as discussed in section
VI.A.4 of this Summary of Comments and
Explanations of Revisions, these final reg-
ulations require a QI or U.S. branch that
acts as a nominee under section 1446(a)
for a distribution made by a publicly trad-
ed partnership to assume all other required
withholding responsibilities with respect
to the distribution. These provisions (as
applicable to QIs) will be incorporated
into the revised QI agreement.
VIII. Applicability Dates
The proposed regulations generally
provided that the regulations would apply
60 days after final regulations are issued.
Comments requested additional time be-
fore withholding on transfers of PTP in-
terests is required, noting that the rules in
the proposed regulations would require
brokers to update systems, processes, and
procedures. The comments generally re-
quested an extension of the applicability
date to 18 months following the finaliza-
tion of all guidance with respect to this
requirement. Another comment requested
that the same extension apply to QIs, not-
ing the time required for QIs to review the
regulations and anticipated revisions to
the QI agreement, and to implement the
necessary updates to their systems and
procedures.
The provisions in these final regulations
relating to transfers of PTP interests apply
to transfers that occur on or after January
1, 2022. See §§1.1446(f)-4(f), 1.1461-1(i),
1.1461-2(d), and 1.1464-1(c). Similarly,
§1.6302-2(g) applies to tax required to be
withheld on or after January 1, 2022 with
respect to section 1446(f). The provisions
included in these final regulations that are
applicable to QIs will apply beginning Jan-
uary 1, 2022. See section VI.A.1 of this
Summary of Comments and Explanations
of Revisions. The Treasury Department
and the IRS have determined that this ap-
plicability date should provide sufficient
time for taxpayers to prepare to implement
the regulations relating to transfers of PTP
interests. Additionally, certain allowances
in the final regulations, such as the allow-
ances for brokers to rely on documentation
from clearing organizations in certain cases
and documentation already in the broker’s
possession, should reduce the time needed
for brokers to update their systems. See
section VI.A.3 of this Summary of Com-
ments and Explanation of Revisions.
Other provisions in the final regulations
that require systems adjustments by pub-
licly traded partnerships, such as the pro-
cedures for qualified notices, are similarly
applicable on January 1, 2022. Specifically,
the requirements with respect to public-
ly traded partnership distributions under
§1.1446-4 of these final regulations apply
to distributions made on or after January
1, 2022. See §1.1446-7. In addition, the

December 14, 2020 1624 Bulletin No. 2020–51
requirements with respect to distributions
that are attributable to dispositions of U.S.
real property interests under §1.1445-8(f)
apply to distributions made on or after Jan-
uary 1, 2022. See §1.1445-8(j).
Further, in order to provide partner-
ships with time to implement withholding
under section 1446(f)(4), §1.1446(f)-3
applies to transfers that occur on or after
January 1, 2022. See §1.1446(f)-3(f).
As contemplated in the proposed reg-
ulations, §1.864(c)(8)-2(a) applies to
transfers that occur on or after November
30, 2020, §§1.864(c)(8)-2(b) and (c) and
1.6050K-1(c)(2) and (3) apply to returns
filed on or after November 30, 2020, and
§1.864(c)(8)-2(d) applies beginning on
November 30, 2020. See §§1.864(c)(8)-
2(e) and 1.6050K-1(h). Sections 1.1445-
2(b)(2)(v) and 1.1445-5(b)(3)(iv) apply
to the use of Forms W-9 for certifications
of non-foreign status provided on or after
May 7, 2019, except that a taxpayer may
choose to apply those provisions with re-
spect to certifications provided before that
date. See §§1.1445-2(e) and 1.1445-5(h).
The conforming changes in §§1.1445-5
and 1.1445-8 resulting from the rate chang-
es made by the Act apply to distributions on
or after November 30, 2020. The conform-
ing changes in §§1.1446-3 and 1.1446-4 re-
sulting from the rate changes made by the
Act and the change to the due date of Form
8804 made by the Surface Transportation
Act apply to partnership taxable years be-
ginning on or after November 30, 2020. Al-
though the applicability date of the changes
to the regulations described in this para-
graph is based on the date of publication of
this document in the Federal Register, the
same results apply before that date as of the
relevant effective dates of the Act and the
Surface Transportation Act.
The remaining provisions in these fi-
nal regulations are generally applicable
to transfers that occur on or after Janu-
ary 29, 2021, as contemplated in the pro-
posed regulations. See §§1.1446(f)-1(e),
1.1446(f)-2(f), 1.1446(f)-5(d), 1.1461-3,
and 1.1463-1(a).
Effect on Other Documents
Notice 2018-08 (2018-7 I.R.B. 352)
is obsolete as of January 1, 2022. Notice
2018-29 (2018-16 I.R.B. 495), other than
section 11, is obsolete as of January 29,
2021. Section 11 of Notice 2018-29 is ob-
solete as of January 1, 2022. Accordingly,
the withholding requirements for transfers
of PTP interests and withholding under
section 1446(f)(4) remain suspended for
transfers occurring before January 1, 2022.
Statement of Availability of IRS
Documents
IRS Revenue Procedures, Revenue
Rulings, notices, and other guidance cited
in this document are published in the In-
ternal Revenue Bulletin and are available
from the Superintendent of Documents,
U.S. Government Publishing Office,
Washington, DC 20402, or by visiting the
IRS website at http://www.irs.gov.
Special Analyses
I. Regulatory Planning and Review
These regulations are not subject to re-
view under section 6(b) of Executive Or-
der 12866 pursuant to the Memorandum
of Agreement (April 11, 2018) between
the Treasury Department and the Office
of Management and Budget regarding re-
view of tax regulations.
II. Paperwork Reduction Act
The collections of information in these
final regulations are in §1.864(c)(8)-2
regarding reporting for transactions de-
scribed in section 864(c)(8) and §1.864(c)
(8)-1; §§1.1446(f)-1 through 1.1446(f)-4
regarding the withholding, reporting, and
paying of tax under section 1446(f) follow-
ing the transfer of an interest described in
section 864(c)(8) and §1.864(c)(8)-1; and
§1.6050K-1(c) regarding reporting of sec-
tion 751(a) exchanges. Section II.A of this
Special Analyses describes the changes
made in these final regulations to the col-
lections of information in the proposed reg-
ulations that will be conducted using IRS
forms. Section II.B of this Special Analyses
describes the changes made in these final
regulations to the collections of informa-
tion in the proposed regulations that will
not be conducted using IRS forms.
A. Collections of Information Conducted
Using IRS Forms
These final regulations include an ex-
ception from withholding for amounts
realized paid to certain foreign banks and
securities dealers. §1.1446(f)-4(b)(6). The
collection of information in §1.1446(f)-
4(b)(6) is provided by the transferor by
submitting a certification as part of Form
W-8ECI, Certificate of Foreign Person’s
Claim that Income is Effectively Connect-
ed with the Conduct of Trade or Business
in the United States, to the broker and is
optional. The information will be used by
the broker to determine whether an ex-
ception to withholding applies if the gain
from the transfer of a PTP interest is ef-
fectively connected with the conduct of a
trade or business within the United States
without regard to section 864(c)(8).
The Treasury Department and the IRS in-
tend that the information collection require-
ment described in this section II.A will be
set forth on Form W-8ECI. As a result, for
purposes of the Paperwork Reduction Act,
44 U.S.C. 3501 et seq. (PRA), the reporting
burden associated with the collection of in-
formation in this form will be reflected in the
PRA submission associated with the form.
The current status of the PRA submission
for Form W-8ECI is provided in the Current
Status of PRA Submissions table.
Current Status of PRA Submissions
Type of FilerOMB Number(s)Status
Form W-8ECI
Business (NEW Model)1545-0123Approved 01/30/2019 until 01/30/21.
https://www.reginfo.gov/public/do/PRAOMBHistory?ombControlNumber=1545-0123#
All other filers (Legacy system)1545-1621Approved 12/19/2018 until 12/31/2021.
Link: https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=201708-1545-002

Bulletin No. 2020–51 1625 December 14, 2020
B. Collections of Information Not
Included on IRS Forms
These final regulations contain collec-
tions of information that are not on exist-
ing or new IRS forms, and include minor
modifications to the collections of infor-
mation in the proposed regulations relat-
ing to certain certifications that may be
provided to obtain an exception to with-
holding or an adjustment to the amount to
withhold. See §1.1446(f)-2(b)(4) and (5)
and (c)(2). See sections IV.A.3, VI.A.4,
and IV.B.2 of the Summary of Comments
and Explanation of Revisions for explana-
tions of the changes to these certifications.
Section II.B of the Special Analyses
of the proposed regulations provided es-
timates of the cost of certain collections
of information contained in the proposed
regulations. A comment suggested that
the cost of collections of information for
a broker was too high. However, the com-
ment misinterpreted the data provided in
section II.B of the Special Analyses of the
proposed regulations. The estimated total
annual monetized cost provided in section
II.B of the Special Analyses of the pro-
posed regulations was the estimated cost
of all collections of information not on
existing or new IRS forms for all respon-
dents (generally transferors of partnership
interests), not the estimated cost of com-
pliance for a broker.
The collections of information con-
tained in these final regulations have been
reviewed and approved by the Office of
Management and Budget in accordance
with the PRA under control number 1545-
2292.
An agency may not conduct or sponsor,
and a person is not required to respond to,
a collection of information unless it dis-
plays a valid control number assigned by
the Office of Management and Budget.
Books or records relating to a collec-
tion of information must be retained as
long as their contents may become mate-
rial in the administration of any internal
revenue law. Generally, tax returns and tax
return information are confidential, as re-
quired by 26 U.S.C. 6103.
III. Regulatory Flexibility Act
It is hereby certified that these final
regulations will not have a significant eco-
nomic impact on a substantial number of
small entities within the meaning of sec-
tion 601(6) of the Regulatory Flexibility
Act (5 U.S.C. chapter 6).
The final regulations affect (i) foreign
persons that recognize gain or loss from
the sale or exchange of an interest in a
partnership that is engaged in a trade or
business within the United States (who are
not subject to the Regulatory Flexibility
Act), (ii) U.S. persons that are transferors
providing Forms W-9 to transferees to cer-
tify that they are not foreign persons, (iii)
persons who acquire interests in partner-
ships engaged in a trade or business with-
in the United States, (iv) partnerships that,
directly or indirectly, have foreign persons
as partners, and (v) brokers that effect
transfers of interests in publicly traded
partnerships.
The Treasury Department and the IRS
do not have data readily available to as-
sess the number of small entities poten-
tially affected by the final regulations.
However, entities potentially affected by
these final regulations are generally not
small entities, because of the resources
and investment necessary to acquire a
partnership interest from a foreign person
or, in the case of a partnership, to, directly
or indirectly, have foreign persons as part-
ners. Therefore, the Treasury Department
and the IRS have determined that there
will not be a substantial number of do-
mestic small entities affected by the final
regulations. Consequently, the Treasury
Department and the IRS certify that the fi-
nal regulations will not have a significant
economic impact on a substantial number
of small entities.
Pursuant to section 7805(f) of the
Code, the proposed regulations preceding
these final regulations were submitted to
the Chief Counsel for Advocacy of the
Small Business Administration for com-
ment on their impact on small businesses,
and no comments were received.
IV. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates
Reform Act of 1995 (UMRA) requires
that agencies assess anticipated costs and
benefits and take certain other actions be-
fore issuing a final rule that includes any
Federal mandate that may result in expen-
ditures in any one year by a state, local,
or tribal government, in the aggregate, or
by the private sector, of $100 million in
1995 dollars, updated annually for infla-
tion. This rule does not include any Fed-
eral mandate that may result in expendi-
tures by state, local, or tribal governments,
or by the private sector in excess of that
threshold.
V. Executive Order 13132: Federalism
Executive Order 13132 (titled “Federal-
ism”) prohibits an agency from publishing
any rule that has federalism implications if
the rule either imposes substantial, direct
compliance costs on state and local gov-
ernments, and is not required by statute,
or preempts state law, unless the agency
meets the consultation and funding require-
ments of section 6 of the Executive order.
This final rule does not have federalism im-
plications and does not impose substantial
direct compliance costs on state and local
governments or preempt state law within
the meaning of the Executive order.
Drafting Information
The principal authors of these regula-
tions are Chadwick Rowland, Subin Seth,
Ronald M. Gootzeit, and Charles Rioux,
Office of the Associate Chief Counsel
(International). However, other person-
nel from the Treasury Department and the
IRS participated in their development.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and record-
keeping requirements
Amendments to the Regulations
For the reasons set out in the preamble,
26 CFR part 1 is amended as follows:
PART 1— INCOME TAXES
Paragraph 1. The authority citation for
part 1 is amended by:
1. Adding a sectional authority for
§1.864(c)(8)-2 in numerical order.
2. Revising the sectional authorities for
§§1.1445-5 and 1.1445-8.
3. Adding sectional authorities for
§§1.1446-3, 1.1446-4, and 1.1446(f)-1
through 1.1446(f)-5 in numerical order.

December 14, 2020 1626 Bulletin No. 2020–51
4. Revising the sectional authority for
§1.6050K-1.
The additions and revisions read in part
as follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.864(c)(8)-2 also issued under
26 U.S.C. 864(c)(8)(E), 6001 and 6031(b).
* * * * *
Section 1.1445-5 also issued under 26
U.S.C. 1445(e)(7).
Section 1.1445-8 also issued under 26
U.S.C. 1445(e)(7).
Section 1.1446-3 also issued under 26
U.S.C. 1446(g).
Section 1.1446-4 also issued under 26
U.S.C. 1446(g).
Section 1.1446(f)-1 also issued under
26 U.S.C. 1446(f)(6) and 1446(g).
Section 1.1446(f)-2 also issued under
26 U.S.C. 1446(f)(6) and 1446(g).
Section 1.1446(f)-3 also issued under
26 U.S.C. 1446(f)(6) and 1446(g).
Section 1.1446(f)-4 also issued under
26 U.S.C. 1446(f)(6) and 1446(g).
Section 1.1446(f)-5 also issued under
26 U.S.C. 1446(f)(6) and 1446(g).
* * * * *
Section 1.6050K-1 also issued under
26 U.S.C. 6050K(a).
* * * * *
Par. 2. Section 1.864(c)(8)-2 is added
to read as follows:
§1.864(c)(8)-2 Notification and reporting
requirements.
(a) Notification by foreign transfer-
or—(1) In general. Except as provided in
paragraph (a)(2) of this section, a notify-
ing transferor that transfers an interest in a
specified partnership must notify the part-
nership of the transfer in writing within
30 days after the transfer. The notification
must include—
(i) The names and addresses of the
notifying transferor and the transferee or
transferees;
(ii) The U.S. taxpayer identification
number (TIN) of the notifying transferor
and, if known, of the transferee or trans-
ferees; and
(iii) The date of the transfer.
(2) Exceptions—(i) Certain interests in
publicly traded partnerships. Paragraph
(a)(1) of this section does not apply to a
notifying transferor that transfers an in-
terest in a publicly traded partnership if
the interest is publicly traded on an estab-
lished securities market or is readily trad-
able on a secondary market (or the sub-
stantial equivalent thereof).
(ii) Certain distributions. Paragraph (a)
(1) of this section does not apply to a noti-
fying transferor that is treated as transfer-
ring an interest in a specified partnership
because it received a distribution from
that specified partnership.
(3) Section 6050K. The notification de-
scribed in paragraph (a)(1) of this section
may be combined with or provided at the
same time as the notification described in
§1.6050K-1(d), provided that it satisfies
the requirements of both sections.
(4) Other guidance. The notifica-
tion described in paragraph (a)(1) of this
section must also include any informa-
tion prescribed by the Commissioner in
forms or instructions or in publications or
guidance published in the Internal Rev-
enue Bulletin (see §§601.601(d)(2) and
601.602 of this chapter).
(b) Reporting by specified partnerships
with notifying transferor—(1) In gener-
al—(i) Requirement to provide statement.
A specified partnership must provide to
a notifying transferor the statement de-
scribed in paragraph (b)(2) of this section
if—
(A) The partnership receives the notice
described in paragraph (a) of this section,
or otherwise has actual knowledge that
there has been a transfer of an interest in
the partnership by a notifying transferor;
and
(B) At the time of the transfer, the no-
tifying transferor would have had a dis-
tributive share of deemed sale EC gain or
deemed sale EC loss within the meaning
of §1.864(c)(8)-1(c).
(ii) Distributions. For purposes of
paragraph (b)(1)(i)(B) of this section, a
specified partnership that is a transferee
because it makes a distribution is treated
as having actual knowledge of that trans-
fer.
(2) Contents of statement. The state-
ment required to be furnished by the spec-
ified partnership under paragraph (b)(1) of
this section must include—
(i) The items described in §1.864(c)
(8)-1(c)(3)(ii) (foreign transferor’s ag-
gregate deemed sale EC items, which in-
cludes items derived from lower-tier part-
nerships);
(ii) Whether the items described in
paragraph (b)(2)(i) of this section were
determined (in whole or in part) under
§1.864(c)(8)-1(c)(2)(ii)(E) (material
change in circumstances rule for deter-
mining deemed sale EC gain or deemed
sale EC loss from a deemed sale of the
partnership’s inventory property or intan-
gibles); and
(iii) Any other information as may be
prescribed by the Commissioner in forms,
instructions, publications, or guidance
published in the Internal Revenue Bulletin
(see §§601.601(d)(2) and 601.602 of this
chapter).
(3) Time for furnishing statement. The
specified partnership must furnish the re-
quired information on or before the due
date (with extensions) for issuing Sched-
ule K-1 (Form 1065), Partner’s Share
of Income, Deductions, Credits, etc., or
other statement required to be furnished
under §1.6031(b)-1T, to the notifying
transferor for the year of the transfer. See
§1.6031(b)-1T(b).
(4) Manner of furnishing statement.
The statement required to be furnished
under paragraph (b)(1) of this section
must be provided on Schedule K-1
(Form 1065), Partner’s Share of In-
come, Deductions, Credits, etc., or other
statement required to be furnished under
§1.6031(b)-1T.
(5) Partnership notifying transferor.
For purposes of this paragraph (b), a spec-
ified partnership must treat a notifying
transferor that is a partnership as a nonres-
ident alien individual.
(c) Statement may be provided to
agent. A specified partnership may pro-
vide a statement required under paragraph
(b)(2) of this section to a person other than
the notifying transferor if the person is de-
scribed in §1.6031(b)-1T(c).
(d) Definitions. The following defini-
tions apply for purposes of this section.
(1) Notifying transferor. The term no-
tifying transferor means any foreign per-
son, any domestic partnership that has
a foreign person as a direct partner, and
any domestic partnership that has actual
knowledge that a foreign person indirectly
holds, through one or more partnerships,
an interest in the domestic partnership.
(2) Specified partnership. The term
specified partnership means a partnership
that is engaged in a trade or business with-

Bulletin No. 2020–51 1627 December 14, 2020
in the United States or that owns (directly
or indirectly) an interest in a partnership
that is engaged in a trade or business with-
in the United States.
(3) Transfer. The term transfer has the
meaning provided in §1.864(c)(8)-1(g)(5).
(e) Applicability dates. Paragraph (a)
of this section applies to transfers that oc-
cur on or after November 30, 2020. Para-
graphs (b) and (c) of this section apply
to returns filed on or after November 30,
2020. Paragraph (d) of this section applies
beginning on November 30, 2020.
Par. 3. Section 1.1445-2 is amended by
adding paragraph (b)(2)(v) and a sentence
to the end of paragraph (e) to read as fol-
lows:
§1.1445-2 Situations in which
withholding is not required under section
1445(a).
* * * * *
(b) * * *
(2) * * *
(v) Form W-9. For purposes of para-
graph (b)(2)(i) of this section, a certifica-
tion of non-foreign status includes a valid
Form W-9, Request for Taxpayer Identi-
fication Number and Certification, or its
successor, submitted to the transferee by
the transferor.
* * * * *
(e) * * * Paragraph (b)(2)(v) of this
section applies to certifications provided
on or after May 7, 2019, except that a tax-
payer may choose to apply paragraph (b)
(2)(v) of this section with respect to cer-
tifications provided before May 7, 2019.
Par. 4. Section 1.1445-5 is amended by:
1. Adding paragraph (b)(3)(iv).
2. In each paragraph listed in the first
column in the table, removing the lan-
guage in the second column and adding in
its place the language in the third column
as set forth below:
ParagraphRemoveAdd
(c)(1)(ii) first sentenceA partnership must withhold a tax equal to 35
percent (or the highest rate specified in section
1445(e)(1))
A partnership must withhold a tax equal to the
rate specified in section 1445(e)(1) multiplied by
the amount
(c)(1)(iii)(A) third sentenceThe fiduciary must withhold 35 percent (or the
highest rate specified in section 1445(e)(1))
The fiduciary must withhold a tax equal to the
rate specified in section 1445(e)(1) multiplied by
the amount
(c)(1)(iv)The trustee or equivalent fiduciary of a trust that
is subject to the provisions of subpart E of part 1
of subchapter J (sections 671 through 679) must
withhold a tax equal to 35 percent (or the highest
rate specified in section 1445(e)(1))
The trustee or equivalent fiduciary of a trust that
is subject to the provisions of subpart E of part 1
of subchapter J ( sections 671 through 679) must
withhold a tax equal to the rate specified in sec-
tion 1445(e)(1) multiplied by the amount
(c)(3)(ii)A partnership or trust electing to withhold under
this § 1.1445–5(c)(3) shall withhold from each
distribution to a foreign person an amount equal
to 35 percent (or the highest rate specified in sec-
tion 1445(e)(1))
A partnership or trust electing to withhold under
this paragraph (c)(3) shall withhold from each
distribution to a foreign person an amount equal
to the rate specified in section 1445(e)(1) multi-
plied by
(d)(1) first sentenceA foreign corporation that distributes a U.S. real
property interest must deduct and withhold a tax
equal to 35 percent (or the rate specified in sec-
tion 1445(e)(2))
A foreign corporation that distributes a U.S. real
property interest must deduct and withhold a tax
equal to the rate specified in section 1445(e)(2)
multiplied by
3. Adding a sentence to the end of para-
graph (c)(1)(iii)(B) introductory text.
4. Adding two sentences to the end of
paragraph (h).
The additions read as follows:
§1.1445-5 Special rules concerning
distributions and other transactions by
corporations, partnerships, trusts, and
estates.
* * * * *
(b) * * *
(3) * * *
(iv) Form W-9. For purposes of para-
graph (b)(3)(i) of this section, a certifica-
tion of non-foreign status includes a valid
Form W-9, Request for Taxpayer Identi-
fication Number and Certification, or its
successor, submitted to the transferee by
the transferor.
* * * * *
(c) * * *
(1) * * *
(iii) * * *
(B) * * * In 1994, the relevant rate of
withholding (that is, the rate specified in
section 1445(e)(1)) was 35%.
* * * * *
(h) * * * Paragraph (b)(3)(iv) of this
section applies to certifications provided
on or after May 7, 2019, except that a tax-
payer may choose to apply paragraph (b)
(3)(iv) of this section with respect to cer-
tifications provided before May 7, 2019.
Paragraphs (c) and (d) of this section ap-
ply to distributions on or after November
30, 2020.
Par. 5. Section 1.1445-8 is amended by
revising paragraphs (c)(2)(i) and (f) and
adding paragraph (j) to read as follows:

December 14, 2020 1628 Bulletin No. 2020–51
§1.1445-8 Special rules regarding
publicly traded partnerships, publicly
traded trusts and real estate investment
trusts (REITs).
* * * * *
(c) * * *
(2) * * *
(i) In general. The amount to be with-
held with respect to a distribution by a
REIT, under this section shall be equal
to the highest rate specified in section
1445(e)(1) multiplied by the amount de-
scribed in paragraph (c)(2)(ii) of this sec-
tion.
* * * * *
(f) Qualified notice. A qualified notice
for purposes of paragraph (b)(3)(iv) of this
section is a notice provided in the manner
described in §1.1446-4(b)(4) by a partner-
ship, trust, or REIT regarding a distribu-
tion that is attributable to the disposition
of a United States real property interest.
In the case of a REIT, a qualified notice is
only a notice of a distribution, all or any
portion of which the REIT actually desig-
nates, or characterizes in accordance with
paragraph (c)(2)(ii)(C) of this section, as
a capital gain dividend in the manner de-
scribed in §1.1446-4(b)(4), with respect to
each share or certificate of beneficial in-
terest. A deemed designation under para-
graph (c)(2)(ii)(A) of this section may not
be the subject of a qualified notice under
this paragraph (f). A person described in
paragraph (b)(3) of this section is treat-
ed as receiving a qualified notice when
the notice is provided in accordance with
§1.1446-4(b)(4).
* * * * *
(j) Applicability dates. Paragraph (c)(2)
(i) of this section applies to distributions
on or after November 30, 2020. Paragraph
(f) of this section applies to distributions
made on or after January 1, 2022. For dis-
tributions made before January 1, 2022,
see §1.1445-8(f) as contained in 26 CFR
part 1, revised as of April 1, 2020.
Par. 6. Section 1.1446-0 is amended by:
1. Adding an entry for §1.1446-3(c)(4).
2. Revising the entry §1.1446-4(d).
3. Adding entries for §1.1446-4(d)(1)
and (2).
4. Revising the entry §1.1446-7.
The additions and revisions read as fol-
lows:
§1.1446-0 Table of contents.
* * * * *
§1.1446-3 Time and manner of
calculating and paying over the 1446 tax.
* * * * *
(c) * * *
(4) Coordination with section 1446(f).
* * * * *
§1.1446-4 Publicly traded partnerships.
* * * * *
(d) Rules for nominees required to
withhold tax under section 1446.
(1) In general.
(2) Exception to nominee’s withhold-
ing.
* * * * *
§1.1446-7 Applicability dates.
Par. 7. Section 1.1446-3 is amended:
1. In the first sentence of paragraph (a)
(2)(i), by removing “section 11(b)(1)” and
adding in its place “section 11(b)”.
2. By adding paragraph (c)(4).
3. In paragraph (d)(2)(vi), by designat-
ing Examples 1 through 3 as paragraphs
(d)(2)(vi)(A) through (C), respectively.
4. In each newly designated paragraph
listed in the first column in the table, by
removing the language in the second col-
umn and adding in its place the language
in the third column as set forth below:
ParagraphRemoveAdd
(d)(2)(vi)(A) tenth, twelth, and thirteenth sentences$35$37
(d)(2)(vi)(B) first sentence
Example 1paragraph (d)(2)(vi)(A) of this section (Example 1)
(d)(2)(vi)(C) first sentence
Example 1paragraph (d)(2)(vi)(A) of this section (Example 1)
(d)(2)(vi)(C) fifth sentence$35$37
5. In newly designated paragraph (d)(2)
(vi)(A), by revising the eighth sentence.
6. In newly designated paragraph (d)
(2)(vi)(B), by revising the third and fourth
sentences.
7. In newly designated paragraph (d)
(2)(vi)(C), by revising the sixth sentence.
8. In paragraph (e)(4), by designating
Examples 1 through 3 as paragraphs (e)(4)
(i) through (iii), respectively.
9. In newly designated paragraphs (e)
(4)(i) through (iii), by further redesignat-
ing the paragraphs in the first column in
this table as the paragraphs in the second
column as set forth below:
Old ParagraphsNew Paragraphs
(e)(4)(i)(i) through (viii)(e)(4)(i)(A) through (H)
(e)(4)(ii)(i) through (v)(e)(4)(ii)(A) through (E)
(e)(4)(iii)(i) through (v)(e)(4)(iii)(A) through (E)

Bulletin No. 2020–51 1629 December 14, 2020
10. In each newly redesignated para-
graph listed in the first column in this
table, by removing the language in the
second column and adding in its place the
language in the third column as set forth
below:
ParagraphRemoveAdd
(e)(4)(i)(B) second sentence$8.75 (.25 X ($100 X .35))$9.25 (.25 X ($100 X .37))
(e)(4)(i)(B) fifth sentence $35$37
(e)(4)(i)(E) third sentence$8.75$9.25
(e)(4)(i)(F) first sentence$35$37
(e)(4)(i)(G) second sentence$35$37
(e)(4)(ii) introductory text
Example 1paragraph (e)(4)(i)(A) of this section (Example 1)
(e)(4)(iii) introductory text
Example 2
paragraph (e)(4)(ii) introductory text of this sec-
tion (Example 2)
(e)(4)(iii) introductory textAprilMarch
(e)(4)(iii)(A)AprilMarch
(e)(4)(iii)(B) first sentence
Example 1 and Example 2paragraphs (e)(4)(i) and (ii) of this section (Exam-
ples 1 and 2), respectively,
(e)(4)(iii)(B) second sentenceAprilMarch
(e)(4)(iii)(C) first and second sentencesAprilMarch
(e)(4)(iii)(D) first through third sentencesAprilMarch
(e)(4)(iii)(D) first sentence$35$37
11. By removing paragraph (g).
The addition reads as follows:
§1.1446-3 Time and manner of
calculating and paying over the 1446 tax.
* * * * *
(c) * * *
(4) Coordination with section 1446(f).
A partnership that is directly or indirect-
ly subject to withholding under section
1446(f)(1) during its taxable year may
credit the amount withheld under section
1446(f)(1) against its section 1446 tax
liability for that taxable year only to the
extent the amount is allocable to foreign
partners.
(d) * * *
(2) * * *
(vi) * * *
(A) * * * PRS pays installments of
1446 tax based upon its estimates and
timely pays a total of $37 of 1446 tax over
the course of the partnership’s taxable
year ($100 ECTI × .37). * * *
(B) * * * Pursuant to paragraph (d)(2)
(iii) of this section, FT may claim a $14.8
credit under section 33 for the 1446 tax
PRS paid ($40/$100 multiplied by $37).
NRA is required to include the $60 of the
ECTI in gross income under section 652
(as ECTI) and may claim a $22.2 credit
under section 33 for the 1446 tax PRS
paid ($37 less $14.8 or $60/$100 multi-
plied by $37).
(C) * * * NRA is required to include
$100 of the ECTI in gross income under
section 662 (as ECTI) and may claim a
$37 credit under section 33 for the 1446
tax paid by PRS ($37 less $0).
* * * * *
Par. 8. Section 1.1446-4 is amended
by:
1. Revising paragraphs (b)(3) and (4).
2. Removing the second sentence of
paragraph (c).
3. Revising paragraphs (d) and (e).
4. Revising the last seven sentences of
paragraph (f)(1).
5. Revising paragraph (f)(3).
The revisions and addition read as fol-
lows:
§1.1446-4 Publicly traded partnerships.
* * * * *
(b) * * *
(3) Nominee. For purposes of this sec-
tion, the term nominee means a person
that holds an interest in a publicly traded
partnership on behalf of a foreign person
and that is either a U.S. person, a qualified
intermediary (as defined in §1.1441-1(e)
(5)(ii)) that assumes primary withhold-
ing responsibility for the distribution, or a
U.S. branch of a foreign person that agrees
to be treated as a U.S. person (as described
in §1.1441-1(b)(2)(iv)) with respect to the
distribution. For purposes of this para-
graph (b)(3), a U.S. branch or a qualified
intermediary is a nominee only if it as-
sumes primary withholding responsibili-
ty for the distribution for all purposes of
chapters 3 and 4 of subtitle A of the Code.
(4) Qualified notice. For purposes of
this section, a qualified notice is a notice
from a publicly traded partnership that
states the amount of a distribution that is
attributable to each type of income de-
scribed in paragraphs (f)(3)(i) through
(v) of this section. A qualified notice may
also include the information described in
§1.1446(f)-4(b)(3) (relating to the 10-per-
cent exception to withholding under sec-
tion 1446(f)(1)) and the information de-
scribed in §1.1446(f)-4(c)(2)(iii) (relating
to an adjustment to the amount realized
for withholding under section 1446(f)(1)).
The notice must be posted in a readily ac-
cessible format in an area of the primary
public website of the publicly traded part-
nership that is dedicated to this purpose,
and a copy of the notice must be delivered
to any registered holder that is a nominee.
A qualified notice must be posted and
delivered to the registered holder by the

December 14, 2020 1630 Bulletin No. 2020–51
date required for providing notice with re-
spect to distributions described in 17 CFR
240.10b-17(b)(1) or (3) issued pursuant to
the Securities Exchange Act of 1934 (15
U.S.C. 78a) and contain the information
described therein as it would relate to the
distribution. The publicly traded partner-
ship must keep the notice accessible to the
public for ten years on its primary public
website or the primary public website of
any successor organization. No specific
format is required unless otherwise pre-
scribed 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). See paragraph (d) of this section
regarding when a nominee is considered
to have received a qualified notice.
* * * * *
(d) Rules for nominees required to
withhold tax under section 1446—(1) In
general. A nominee that receives a distri-
bution from a publicly traded partnership
(or another nominee) that is to be paid to
(or for the account of) any foreign person
is treated as a withholding agent under this
section. A nominee that fails to withhold
pursuant to this section is subject to lia-
bility under section 1461, as well as ap-
plicable penalties and interest, as if the
nominee were the partnership responsible
for withholding. A nominee that receives
a qualified notice that meets the require-
ments in paragraph (b)(4) of this section
must withhold based on the amounts spec-
ified on the qualified notice. A nominee is
treated as receiving a qualified notice on
the date that the notice is posted to the
publicly traded partnership’s website or
is received by the nominee in accordance
with paragraph (b)(4) of this section. If a
nominee properly withholds based on the
amounts specified on a qualified notice,
the nominee is not liable for any under-
withholding on amounts that are effective-
ly connected income, gain, or loss. Rather,
the publicly traded partnership that issued
the qualified notice is liable under sec-
tion 1461 for underwithholding on such
amounts. If a nominee does not receive
a qualified notice that meets the require-
ments in paragraph (b)(4) of this section,
or to the extent the qualified notice does
not specify an amount, the nominee must
withhold on the full amount of the distri-
bution with respect to—
(i) A foreign partner that is a corpora-
tion, at the greater of the highest rate of
tax specified in section 11(b) or 881 (with-
out regard to any reduction in the rate of
tax permitted under an applicable income
tax treaty);
(ii) A foreign partner that is not a cor-
poration, at the greater of the highest rate
of tax specified in section 1 or 871 (with-
out regard to any reduction in the rate of
tax permitted under an applicable income
tax treaty); or
(iii) A foreign partner whose classifica-
tion cannot be determined, at the higher
of the rate determined under paragraph (d)
(1)(i) or (ii) of this section.
(2) Exception to nominee’s withhold-
ing. A nominee is not required to withhold
under paragraph (d)(1) of this section to
the extent that it makes a payment of a
distribution to a qualified intermediary
or U.S. branch that is also a nominee for
the distribution under paragraph (b)(3) of
this section. For purposes of the preceding
sentence, a nominee may treat a qualified
intermediary or U.S. branch as a nominee
for a distribution based on, respectively, a
valid qualified intermediary withholding
certificate described in §1.1441-1(e)(3)(ii)
or a valid U.S. branch withholding certif-
icate described in §1.1446(f)-4(a)(2)(ii)
(B) on which the qualified intermediary
or U.S. branch represents that it assumes
primary withholding responsibility with
respect to the distribution.
(e) Determining foreign status of part-
ners. Except as provided in this para-
graph (e), the rules of §1.1446-1 shall ap-
ply in determining whether a partner of
a publicly traded partnership is a foreign
partner for purposes of the 1446 tax. A
partnership or nominee obligated to with-
hold under this section shall be entitled
to rely on any of the forms acceptable
under §1.1446-1 that it receives from
persons on whose behalf it holds inter-
ests in the partnership to the same extent
a partnership is entitled to rely on such
forms under those rules. If a partnership
or nominee pays a distribution to an enti-
ty that provides a valid qualified interme-
diary withholding certificate described
in §1.1441-1(e)(3)(ii) indicating that the
entity does not assume primary withhold-
ing responsibility for the distribution, for
withholding under this section the part-
nership or nominee may instead rely on
a withholding statement that allocates the
distribution to—
(1) A chapter 3 withholding rate pool
(as described in §1.1441-1(e)(5)(v)(C))
consisting of account holders that are for-
eign persons subject to withholding at the
highest rate of tax specified in section 1;
(2) A chapter 3 withholding rate pool
(as described in §1.1441-1(e)(5)(v)(C))
consisting of account holders that are
foreign persons subject to withholding at
the highest rate of tax specified in section
11(b);
(3) A chapter 3 withholding rate pool
(as described in §1.1441-1(e)(5)(v)(C))
consisting of account holders that are for-
eign persons not subject to withholding; or
(4) Each account holder for which a
form acceptable under §1.1446-1 is pro-
vided.
(f) * * *
(1) * * * LTP makes a distribution
subject to section 1446 of $100 to UTP
during its taxable year beginning January
1, 2020, and withholds 37 percent (the
highest rate in section 1) ($37) of that
distribution under section 1446. UTP re-
ceives a net distribution of $63 which it
immediately redistributes to its partners.
UTP has a liability to pay 37 percent of
the total actual and deemed distribution it
makes to its foreign partners as a section
1446 withholding tax. UTP may credit the
$37 withheld by LTP against this liability
as if it were paid by UTP. See §§1.1462-
1(b) and 1.1446-5(b)(1). When UTP dis-
tributes the $63 it actually receives from
LTP to its partners, UTP is treated for pur-
poses of section 1446 as if it made a distri-
bution of $100 to its partners ($63 actual
distribution and $37 deemed distribution).
UTP’s partners (U.S. and foreign) may
claim a credit against their U.S. income
tax liability for their allocable share of the
$37 of 1446 tax paid on their behalf.
* * * * *
(3) Ordering rule relating to distribu-
tions. Distributions from publicly traded
partnerships are deemed to be paid out of
the following types of income in the order
indicated—
(i) Amounts attributable to income de-
scribed in section 1441 or 1442 that are
not effectively connected with the con-
duct of a trade or business in the United
States and are subject to withholding un-
der §1.1441-2(a);

Bulletin No. 2020–51 1631 December 14, 2020
(ii) Amounts attributable to income de-
scribed in section 1441 or 1442 that are
not effectively connected with the conduct
of a trade or business in the United States
and are not subject to withholding under
§1.1441-2(a);
(iii) Amounts attributable to income
effectively connected with the conduct
of a trade or business in the United States
that are not subject to withholding under
§§1.1446-1 through 1.1446-6;
(iv) Amounts subject to withholding
under §§1.1446-1 through 1.1446-6; and
(v) Amounts not listed in paragraphs (f)
(3)(i) through (iv) of this section.
* * * * *
Par. 9. Section 1.1446-6 is amended by
adding a sentence after the first sentence
of paragraph (e)(1) to read as follows:
§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.
* * * * *
(e) * * *
(1) * * * In 2008, the relevant rate of
withholding for foreign partners that were
not corporations (that is, the highest rate
in section 1 as specified in §1.1446-3(a)
(2)(i)) was 35%, and the due date for fil-
ing Form 8804 for domestic calendar year
partnerships (that is, the date specified in
§1.1446-3(d)(1)(iii)) was April 15. * * *
* * * * *
Par. 10. Section 1.1446-7 is amended
by revising the section heading and add-
ing six sentences at the end of the para-
graph to read as follows:
§1.1446-7 Applicability dates.
* * * Section 1.1446-3 generally ap-
plies to returns filed on or after January
30, 2020 and §1.1446-3T (as contained
in 26 CFR part 1, revised as of April 1,
2019) generally applies to returns filed
before January 30, 2020. The addition
of §1.1446-3(c)(4) applies to transfers of
partnership interests that occur on or after
January 29, 2021, except that a taxpayer
may choose to apply §1.1446-3(c)(4) to
transfers of partnership interests that oc-
cur on or after January 1, 2018. Sections
1.1446-3(a)(2)(i), (d)(2)(vi), and (e)(4)
and 1.1446-4(f)(1) apply to partnership
taxable years beginning on or after No-
vember 30, 2020. For partnership taxable
years beginning before November 30,
2020, see those sections as in effect and
contained in 26 CFR part 1, revised as of
April 1, 2020. Section 1.1446-4(b)(3) and
(4), (c), (d), (e), and (f)(3) apply to distri-
butions made on or after January 1, 2022.
For distributions made before January 1,
2022, see §§1.1446-4(b)(3) and (4), (c),
(d), (e), and (f)(3), as contained in 26 CFR
part 1, revised as of April 1, 2020.
Par. 11. Sections 1.1446(f)-1 through
1.1446(f)-5 are added to read as follows:
§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 pay-
ing tax under section 1446(f) upon the
sale, exchange, or other disposition of
certain interests in partnerships. This sec-
tion 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 re-
quired 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) pro-
vides 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 de-
fined in §1.1471-1(b)(21)). In the case of a
U.S. clearing organization clearing or set-
tling 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 ef-
fect 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 sec-
tion 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 estab-
lished securities market or is readily trad-
able on a secondary market (or the sub-
stantial equivalent thereof).
(6) The term publicly traded partner-
ship 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 identi-
fying number assigned to a person under
section 6109.
(8) The term transfer means a sale, ex-
change, or other disposition, and includes
a distribution from a partnership to a part-
ner, as well as a transfer treated as a sale or
exchange under section 707(a)(2)(B).
(9) The term transferee means any per-
son, foreign or domestic, that acquires a
partnership interest through a transfer, and
includes a partnership that makes a distri-
bution.
(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

December 14, 2020 1632 Bulletin No. 2020–51
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 (re-
spectively) in any negotiation with anoth-
er person relating to the transaction or in
settling the transaction. A person will not
be treated as a transferor’s agent or a trans-
feree’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 provid-
ed 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 chap-
ter). 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 per-
son required to withhold) may not rely on
a certification if it knows that a transfer-
or 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 certifica-
tion, such as statements from the partner-
ship, IRS forms, withholding certificates,
withholding statements, certifications, or
other documentation. Documents associ-
ated with the certification form an integral
part of the certification, and the penalties
of perjury statement provided on the cer-
tification 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 offi-
cer, director, general partner, or managing
member of the entity, or other individual
that has authority to sign for the entity un-
der local law.
(iv) Electronic submission. A certifica-
tion 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 submis-
sion 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 un-
der 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) (involv-
ing certifications relating to an income
tax treaty), or as may be prescribed by
the Commissioner in forms or instruc-
tions or in publications or guidance pub-
lished in the Internal Revenue Bulletin
(see §§601.601(d)(2) and 601.602 of this
chapter).
(vii) Grantor trusts. A certification pro-
vided by a transferor that is a grantor or
other owner of a grantor trust must identi-
fy the portion of the amount realized that
is attributable to the grantor or other own-
er. 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 En-
tity, or Certain U.S. Branches for United
States Tax Withholding and Reporting),
(or similar statement for a domestic grant-
or trust with a foreign grantor or owner),
that includes a withholding statement that
provides the percentage of the amount re-
alized allocable to each grantor or owner
of the trust, and any applicable certifica-
tion for each grantor or owner. In the case
of a certification so provided, a grantor or
owner of the trust is treated as having pro-
vided the certification to the transferee (or
broker).
(3) Books and records. A partnership
that relies on its books and records pur-
suant to this section and §§ 1.1446(f)-2
through 1.1446(f)-5 (including for pur-
poses 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 with-
holding obligation under section 1446(f)
or its withholding tax liability under sec-
tion 1461.
(4) Determination date—(i) In general.
This paragraph (c)(4) provides rules for
the determination date. The same determi-
nation 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 deter-
mination 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

Bulletin No. 2020–51 1633 December 14, 2020
(2) The date, before the date of the
transfer, of the most recent event de-
scribed in §1.704-1(b)(2)(iv)(f)(5) or (b)
(2)(iv)(s)(1) (revaluation event), irrespec-
tive of whether the capital accounts of the
partners are adjusted in accordance with
§1.704-1(b)(2)(iv)(f).
(ii) Controlling partner. The determi-
nation date for a transferor that is a con-
trolling 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 suc-
cessor 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 Rev-
enue 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 withhold-
ing certificate under the last sentence of
§1.1445-11T(d)(1), the transferee must
withhold the greater of the amounts re-
quired under section 1445(e)(5) or 1446(f)
(1). A transferee that has complied with
the withholding requirements under ei-
ther section 1445(e)(5) or 1446(f)(1), as
applicable under this paragraph (d), will
be deemed to satisfy the withholding re-
quirement.
(e) Applicability date. This section ap-
plies to transfers that occur on or after Jan-
uary 29, 2021.
§1.1446(f)-2 Withholding on the transfer
of a non-publicly traded partnership
interest.
(a) Transferee’s obligation to withhold.
Except as otherwise provided in this sec-
tion, a transferee is required to withhold
under section 1446(f)(1) a tax equal to
10 percent of the amount realized on any
transfer of a partnership interest. This
section does not apply to a transfer of a
PTP interest that is effected through one
or more brokers, including a distribution
made with respect to a PTP interest held
in an account with a broker. For rules re-
garding those transfers, see §1.1446(f)-4.
(b) Exceptions to withholding—(1) In
general. A transferee is not required to
withhold under this section if it properly
relies on a certification or its books and
records as described in this paragraph (b).
A transferee may not rely on a certification
if it has actual knowledge that the certifi-
cation is incorrect or unreliable. A partner-
ship that is a transferee because it makes
a distribution may not rely on its books
and records if it knows, or has reason to
know, that the information is incorrect or
unreliable.
(2) Certification of non-foreign status
by transferor. A transferee may rely on a
certification of non-foreign status from the
transferor that states that the transferor is
not a foreign person, states the transfer-
or’s name, TIN, and address, and is signed
under penalties of perjury. For purposes
of this paragraph (b)(2), a certification of
non-foreign status includes a valid Form
W-9, Request for Taxpayer Identification
Number and Certification. For purposes
of this paragraph (b)(2), a transferee may
rely on a valid Form W-9 from the trans-
feror that it already possesses if the form
meets the requirements of this paragraph
(b)(2).
(3) No realized gain by transferor—
(i) In general. A transferee (other than a
partnership that is a transferee because it
makes a distribution) may rely on a cer-
tification from the transferor that states
that the transfer of the partnership interest
would not result in any realized gain (in-
cluding ordinary income arising from the
application of section 751 and §1.751-1)
to the transferor as of the determination
date (see §1.1446(f)-1(c)(4)). See para-
graph (b)(6) of this section for rules that
apply when the transferor realizes gain but
is not required to recognize the gain under
a provision of the Internal Revenue Code.
(ii) No section 751 income. For purpos-
es of paragraph (b)(3)(i) of this section, a
transferor may rely on a certification from
the partnership stating that the transfer of
the partnership interest would not result
in any ordinary income arising from the
application of section 751 and §1.751-1
to the transferor as of the determination
date. The certification from the partner-
ship must be attached to, and forms part
of, the certification of no realized gain that
the transferor provides to the transferee.
(iii) Partnership distributions. A part-
nership that is a transferee because it
makes a distribution may rely on its books
and records, or on a certification from the
transferor, to determine that the distribu-
tion would not result in any realized gain
to the transferor as of the determination
date.
(4) Less than 10 percent effectively
connected gain—(i) In general. A trans-
feree (other than a partnership that is a
transferee because it makes a distribution)
may rely on a certification from the part-
nership that states that—
(A) If the partnership sold all of its as-
sets at fair market value as of the deter-
mination date in the manner described in
§1.864(c)(8)-1(c), either—
(1) The partnership would have no
gain that would have been effectively
connected with the conduct of a trade or
business within the United States, or, if
the partnership would have a net amount
of such gain, the amount of the partner-
ship’s net gain that would have been ef-
fectively connected with the conduct of a
trade or business within the United States
would be less than 10 percent of the total
net gain; or
(2) The transferor would not have a
distributive share of net gain from the
partnership that would have been effec-
tively connected with the conduct of a
trade or business in the United States, or,
if the transferor would have a distributive
share of such gain from the partnership,
the transferor’s distributive share of net
gain from the partnership that would have
been effectively connected with the con-
duct of a trade or business within the Unit-
ed States would be less than 10 percent of
the transferor’s distributive share of the
total net gain from the partnership; or
(B) The partnership was not engaged
in a trade or business within the United
States at any time during the taxable year
of the partnership through the date of
transfer.
(ii) Partnership distributions. A part-
nership that is a transferee because it
makes a distribution may rely on its books
and records to determine that paragraph
(b)(4)(i)(A) of this section is satisfied as
of the determination date or paragraph (b)
(4)(i)(B) of this section is satisfied for the

December 14, 2020 1634 Bulletin No. 2020–51
taxable year of the partnership through the
date of transfer.
(5) Less than 10 percent effective-
ly connected income—(i) In general. A
transferee (other than a partnership that is
a transferee because it makes a distribu-
tion) may rely on a certification from the
transferor that states that—
(A) The transferor was a partner in the
partnership throughout the look-back peri-
od described in paragraph (b)(5)(ii) of this
section;
(B) The transferor’s distributive share
of gross effectively connected income
from the partnership, as reported on a
Schedule K-1 (Form 1065), Partner’s
Share of Income, Deductions, Credits,
etc., or other statement required to be fur-
nished under §1.6031(b)-1T, including
any gross effectively connected income
included in the distributive share of a part-
ner that bears a relationship to the trans-
feror described in section 267(b) or 707(b)
(1), was less than $1 million for each of
the taxable years within the look-back pe-
riod described in paragraph (b)(5)(ii) of
this section;
(C) The transferor’s distributive share
of gross effectively connected income
from the partnership, as reported on a
Schedule K-1 (Form 1065), or other
statement required to be furnished un-
der §1.6031(b)-1T, for each of the tax-
able years within the look-back period
described in paragraph (b)(5)(ii) of this
section, was less than 10 percent of the
transferor’s total distributive share of
gross income from the partnership for that
year as determined under subchapter K of
the Internal Revenue Code (as provided
on a Schedule K-1 (Form 1065) or other
statement required to be furnished under
§1.6031(b)-1T); and
(D) The transferor’s distributive share
of income or gain from the partnership
that is effectively connected with the con-
duct of a trade or business within the Unit-
ed States or deductions or losses properly
allocated and apportioned to that income
in each of the taxable years within the
look-back period described in paragraph
(b)(5)(ii) of this section has been reported
on a Federal income tax return (either filed
by the transferor or, in the case of transfer-
or that is a partnership, filed by its direct
or indirect nonresident alien individual or
foreign corporate partners) on or before
the due date (including extensions), and
all amounts due with respect to the report-
ed amounts have been timely paid to the
IRS, provided that the return was required
to be filed when the transferor furnishes
the certification (taking into account any
extensions of time to file).
(ii) Look-back period—(A) In gener-
al. The transferor’s look-back period is
the transferor’s immediately prior taxable
year and the two preceding taxable years.
(B) Immediately prior taxable year.
The transferor’s immediately prior taxable
year is the transferor’s most recent taxable
year–
(1) With or within which a taxable year
of the partnership ended; and
(2) For which a Schedule K-1 (Form
1065) was due (including extensions) or
furnished (if earlier) before the transfer.
(C) Limitation. A transferee may not
rely on a certification that is provided be-
fore the transferor’s receipt of the Sched-
ule K-1 (Form 1065) described in para-
graph (b)(5)(ii)(B) of this section.
(iii) No distributive share of gross in-
come. A transferor that did not have a
distributive share of gross income in any
year described in paragraph (b)(5)(ii)(A)
of this section cannot provide the certifi-
cation described in this paragraph (b)(5).
(iv) Partnership distributions. A part-
nership that is a transferee by reason
of making a distribution may rely on its
books and records to determine that the
requirements in paragraphs (b)(5)(i)(A)
through (C) of this section have been sat-
isfied (subject to the rules in paragraphs
(b)(5)(ii) and (iii) of this section). The
partnership must also obtain a represen-
tation from the transferor stating that the
requirement in paragraph (b)(5)(i)(D) of
this section has been satisfied.
(6) Certification of nonrecognition by
transferor—(i) In general. A transferee
may rely on a certification from the trans-
feror that states that by reason of the oper-
ation of a nonrecognition provision of the
Internal Revenue Code the transferor is
not required to recognize any gain or loss
with respect to the transfer. The certifica-
tion must briefly describe the transfer and
provide the relevant law and facts relating
to the certification.
(ii) Partial nonrecognition. Paragraph
(b)(6)(i) of this section does not apply
if only a portion of the gain realized on
the transfer is subject to a nonrecognition
provision. However, see paragraph (c)(4)
(v) of this section for rules applicable to
a transferor’s claim for partial nonrecog-
nition.
(7) Income tax treaties—(i) In gener-
al. A transferee may rely on a certifica-
tion from the transferor that states that
the transferor is not subject to tax on any
gain from the transfer pursuant to an in-
come tax treaty in effect between the
United States and a foreign country if the
requirements of this paragraph (b)(7) are
met. The transferor makes the certification
on a withholding certificate (on a Form
W-8BEN, Certificate of Foreign Status
of Beneficial Owner for United States Tax
Withholding and Reporting (Individuals),
or Form W-8BEN-E, Certificate of Status
of Beneficial Owner for United States Tax
Withholding and Reporting (Entities)) that
meets the requirements for validity under
§1.1446-1(c)(2)(iv) (or an applicable sub-
stitute form that meets the requirements
under §1.1446-1(c)(5)) and that contains
the information necessary to support the
claim for treaty benefits. A transferee may
rely on a certification of treaty benefits
only if, within 30 days after the date of the
transfer, the transferee mails a copy of the
certification to the Internal Revenue Ser-
vice, at the address provided in §1.1445-
1(g)(10), together with a cover letter pro-
viding the name, TIN, and address of the
transferee and the partnership in which an
interest was transferred.
(ii) Treaty claim for less than all of the
gain. Paragraph (b)(7)(i) of this section
does not apply if treaty benefits apply to
only a portion of the gain from the trans-
fer. However, see paragraph (c)(4)(vi) of
this section for rules applicable to situa-
tions in which treaty benefits apply to only
a portion of the gain.
(iii) Exclusive means to claim an ex-
ception from withholding based on treaty
benefits. A transferor claiming treaty ben-
efits with respect to all of the gain from
the transfer must use the exception in this
paragraph (b)(7) and not any other excep-
tion or determination procedure in para-
graphs (b) and (c) of this section to claim
an exception to withholding by reason of
a claim of treaty benefits.
(c) Determining the amount to with-
hold—(1) In general. A transferee that is
required to withhold under this section

Bulletin No. 2020–51 1635 December 14, 2020
must withhold 10 percent of the amount
realized on the transfer of the partnership
interest, except as otherwise provided in
this paragraph (c). Any procedures in this
paragraph (c) apply solely for purposes of
determining the amount to withhold un-
der section 1446(f)(1) and this section. A
transferee may not rely on a certification
if it has actual knowledge that the certifi-
cation is incorrect or unreliable. A partner-
ship that is a transferee because it makes
a distribution may not rely on its books
and records if it knows, or has reason to
know, that the information is incorrect or
unreliable.
(2) Amount realized—(i) In gener-
al. The amount realized on the transfer
of the partnership interest is determined
under section 1001 (including §§1.1001-
1 through 1.1001-5) and section 752
(including §§1.752-1 through 1.752-7).
Thus, the amount realized includes the
amount of cash paid (or to be paid), the
fair market value of other property trans-
ferred (or to be transferred), the amount of
any liabilities assumed by the transferee
or to which the partnership interest is sub-
ject, and the reduction in the transferor’s
share of partnership liabilities. In the case
of a distribution, the amount realized is
the sum of the amount of cash distributed
(or to be distributed), the fair market value
of property distributed (or to be distribut-
ed), and the reduction in the transferor’s
share of partnership liabilities.
(ii) Alternative procedures for trans-
feree to determine share of partnership
liabilities—(A) In general. A transferee
(other than a partnership that is a trans-
feree because it makes a distribution), as
an alternative to determining the share of
partnership liabilities under paragraph (c)
(2)(i) of this section, may use the proce-
dures of this paragraph (c)(2)(ii) to deter-
mine the extent to which a reduction in
partnership liabilities is included in the
amount realized.
(B) Certification of liabilities by trans-
feror. Except as otherwise provided in this
section, a transferee may rely on a certifi-
cation from a transferor, other than a con-
trolling partner, that provides the amount
of the transferor’s share of partnership lia-
bilities reported on the most recent Sched-
ule K-1 (Form 1065) issued by the part-
nership. If the transferor’s actual share of
liabilities at the time of the transfer differs
from the amount reported on that Sched-
ule K-1 (Form 1065), the certification will
not be treated as incorrect or unreliable
if the transferor also certifies that it does
not have actual knowledge of any events
occurring after receiving the Schedule
K-1 (Form 1065) and before the date of
the transfer that would cause the amount
of the transferor’s share of partnership lia-
bilities at the time of the transfer to differ
by more than 25 percent from the amount
shown on the Schedule K-1 (Form 1065).
A transferee may not rely on a certification
if the last day of the partnership taxable
year for which the Schedule K-1 (Form
1065) was provided was more than 22
months before the date of the transfer.
(C) Certification of liabilities by part-
nership. A transferee may rely on a certi-
fication from a partnership that provides
the amount of the transferor’s share of
partnership liabilities on the determina-
tion date. If the transferor’s actual share
of liabilities at the time of the transfer
differs from the amount on the certifica-
tion, the certification will not be treated as
incorrect or unreliable if the partnership
also certifies that it does not have actual
knowledge of any events occurring after
the determination date and before the date
on which the partnership provides the
certification to the transferee that would
cause the amount of the transferor’s share
of partnership liabilities at the time of the
transfer to differ by more than 25 percent
from the amount shown on the certifica-
tion by the partnership for the determina-
tion date.
(iii) Partnership’s determination of
partnership liabilities for distributions. A
partnership that is a transferee because it
makes a distribution may rely on its books
and records to determine the extent to
which the transferor’s share of partnership
liabilities on the determination date are in-
cluded in the amount realized. The infor-
mation in the books and records will not
be treated as incorrect or unreliable unless
the partnership has actual knowledge, on
or before the date of the distribution, of
any events occurring after the determina-
tion date that would cause the amount of
the transferor’s share of partnership lia-
bilities at the time of the transfer to differ
by more than 25 percent from the amount
determined by the partnership as of the de-
termination date.
(iv) Certification by a foreign partner-
ship of modified amount realized—(A) In
general. When a transferor is a foreign
partnership, a transferee may use the pro-
cedures of this paragraph (c)(2)(iv) to de-
termine the amount realized. For purposes
of this paragraph (c)(2)(iv)(A), the trans-
feree may treat the modified amount real-
ized as the amount realized to the extent
that it may rely on a certification from the
transferor providing the modified amount
realized.
(B) Determining modified amount re-
alized. The modified amount realized is
determined by multiplying the amount
realized (as determined under this para-
graph (c)(2), without regard to this
paragraph (c)(2)(iv)) by the aggregate
percentage computed as of the determi-
nation date. The aggregate percentage is
the percentage of the gain (if any) arising
from the transfer that would be allocated
to presumed foreign taxable persons. For
purposes of this paragraph (c)(2)(iv)(B),
a presumed foreign taxable person is any
direct or indirect partner of the transferor
that has not provided either a certifica-
tion of non-foreign status that meets the
requirements of paragraph (b)(2) of this
section or a certification of treaty benefits
that states that the partner is not subject to
tax on any gain from the transfer pursuant
to an income tax treaty in effect between
the United States and a foreign country. A
valid certification of treaty benefits must
meet the requirements of paragraph (b)
(7) of this section (as applied to the part-
ner claiming treaty benefits), including
the requirement that the transferee mail a
copy of the certification to the IRS within
the time prescribed. For purposes of this
paragraph (c)(2)(iv), an indirect partner
is a person that owns an interest in the
transferor indirectly through one or more
foreign partnerships.
(C) Certification. The certification is
made by providing a withholding cer-
tificate (on Form W-8IMY, Certificate
of Foreign Intermediary, Foreign Flow-
Through Entity, or Certain U.S. Branch-
es for United States Tax Withholding and
Reporting) that includes a withholding
statement that provides the percentage of
gain allocable to each direct or indirect
partner and that provides whether each
such person is a United States person, a
foreign partner eligible for treaty benefits,

December 14, 2020 1636 Bulletin No. 2020–51
or a presumed foreign taxable person. The
certification must also include the certifi-
cation of non-foreign status or the certifi-
cation of treaty benefits from each direct
or indirect partner that is not a presumed
foreign taxable person.
(3) Lack of money or property or lack
of knowledge regarding liabilities. The
amount to withhold equals the amount
realized determined without regard to any
decrease in the transferor’s share of part-
nership liabilities if—
(i) The amount otherwise required
to be withheld under this paragraph (c)
would exceed the amount realized deter-
mined without regard to the decrease in
the transferor’s share of partnership lia-
bilities; or
(ii) The transferee is unable to deter-
mine the amount realized because it does
not have actual knowledge of the transfer-
or’s share of partnership liabilities (and
has not received or cannot rely on a cer-
tification described in paragraph (c)(2)(ii)
(B) or (C) of this section).
(4) Certification of maximum tax lia-
bility—(i) In general. A transferee may
use the procedures of this paragraph (c)
(4) for determining the amount to with-
hold for purposes of section 1446(f)
(1) and paragraph (a) of this section. A
transferee (other than a partnership that
is a transferee because it makes a distri-
bution) may rely on a certification from
a transferor that is a foreign corporation,
a nonresident alien individual, a foreign
partnership, or a foreign trust regarding
the transferor’s maximum tax liability as
described in paragraph (c)(4)(ii) of this
section. A partnership that is a transfer-
ee because it makes a distribution may
instead rely on its books and records
to determine the transferor’s maximum
tax liability if the books and records in-
cludes the information required by para-
graphs (c)(4)(iii) and (iv) of this section.
A transferor that is a foreign partnership
or a foreign trust is treated as a nonresi-
dent alien individual for purposes of de-
termining the transferor’s maximum tax
liability.
(ii) Maximum tax liability For purposes
of this paragraph (c)(4), the term maxi-
mum tax liability means the amount of the
transferor’s effectively connected gain (as
determined under paragraph (c)(4)(iii)(E)
of this section) multiplied by the applica-
ble percentage, as defined in §1.1446-3(a)
(2).
(iii) Required information. The certifi-
cation must include—
(A) A statement that the transferor is ei-
ther a nonresident alien individual, a for-
eign corporation, a foreign partnership, or
a foreign trust;
(B) The transferor’s adjusted basis in
the transferred interest on the determina-
tion date;
(C) The transferor’s amount realized
(determined in accordance with paragraph
(c)(2) of this section) on the determination
date;
(D) Whether the transferor remains a
partner immediately after the transfer;
(E) The amount of outside ordinary
gain and outside capital gain that would
be recognized and treated as effectively
connected gain under §1.864(c)(8)-1(b)
on the determination date (effectively
connected gain);
(F) The transferor’s maximum tax lia-
bility on the determination date;
(G) A representation from the trans-
feror that the transferor determined the
amounts described in paragraph (c)(4)(iii)
(E) of this section based on the statement
described in paragraph (c)(4)(iv) of this
section, if applicable; and
(H) A representation from the transfer-
or that it has provided the transferee with
a copy of the statement described in para-
graph (c)(4)(iv) of this section.
(iv) Partnership statement. A transfer-
or may make the representation in para-
graph (c)(4)(iii)(G) of this section only if
the partnership provides to the transferor
a statement (that meets the requirements
for a certification under the general rules
for applicability in §1.1446(f)-1(c)) that
includes—
(A) The partnership’s name, address,
and TIN; and
(B) The transferor’s aggregate deemed
sale EC ordinary gain, within the mean-
ing of §1.864(c)(8)-1(c)(3)(ii)(A) (if any)
and the transferor’s aggregate deemed
sale EC capital gain, within the meaning
of §1.864(c)(8)-1(c)(3)(ii)(B) (if any), in
each case, on the determination date.
(v) Partial nonrecognition. If a nonrec-
ognition provision applies to only a por-
tion of the gain realized on the transfer, a
certification described in paragraph (c)(4)
(i) may be relied upon only if the certifica-
tion also includes the information required
in paragraph (b)(6) of this section (substi-
tuting “a portion of the gain or loss” for
“any gain or loss” in paragraph (b)(6)(i)
of this section).
(vi) Income tax treaties. If only a por-
tion of the gain on the transfer is not sub-
ject to tax pursuant to an income tax treaty
in effect between the United States and a
foreign country, a certification described
in paragraph (c)(4)(i) of this section may
be relied upon only if the requirements of
paragraph (b)(7)(i) of this section have
been met, including the requirement to ob-
tain the applicable withholding certificate
indicating that the gain from the transfer
is not subject to tax pursuant to an income
tax treaty (substituting “a portion of the
gain” for “any gain” in paragraph (b)(7)
(i) of this section), and the requirement to
mail a copy of the withholding certificate
to the IRS.
(d) Reporting and paying withheld
amounts—(1) In general. A transferee
required to withhold under this section
must report and pay any tax withheld by
the 20th day after the date of the transfer
using Forms 8288, U.S. Withholding Tax
Return for Dispositions by Foreign Per-
sons of U.S. Real Property Interests, and
8288-A, Statement of Withholding on Dis-
positions by Foreign Persons of U.S. Real
Property Interests, in accordance with
the instructions to those forms. The IRS
will stamp Form 8288-A to show receipt
and mail a stamped copy to the transfer-
or (at the address reported on the form).
See paragraph (e)(2) of this section for the
procedures for the transferor to claim a
credit for amounts withheld. Forms 8288
and 8288-A must include the TINs of both
the transferor and the transferee. If any re-
quired TIN is not provided, the transferee
must still report and pay any tax withheld
on Form 8288.
(2) Certification of withholding to part-
nership for purposes of section 1446(f)(4).
A transferee (other than a partnership that
is a transferee because it makes a distribu-
tion) must certify to the partnership the ex-
tent to which it has satisfied its obligation
to withhold under this section no later than
10 days after the transfer. The certification
must either include a copy of Form 8288-
A that the transferee files with respect to
the transfer, or state the amount realized
and the amount withheld on the transfer.

Bulletin No. 2020–51 1637 December 14, 2020
The certification must also include any
certifications that the transferee relied
on to apply an exception to withholding
under paragraph (b) of this section or to
determine the amount to withhold under
paragraph (c) of this section. A transfer-
ee that relied on a certification to apply an
exception or adjustment to withholding
remains liable under this section when the
partnership knows, or has reason to know,
that the certification is incorrect or unre-
liable. See §1.1446(f)-3 for rules regard-
ing a partnership’s obligation to withhold
on distributions to a transferee when this
certification establishes only partial satis-
faction of the required amount, is not pro-
vided, or cannot be relied upon.
(e) Effect of withholding on transfer-
or—(1) In general. The withholding of tax
by a transferee under this section does not
relieve a foreign person from filing a U.S.
tax return with respect to the transfer. See
§§1.6012-1(b)(1), 1.6012-2(g)(1), and
1.6031(a)-1. Further, the withholding of
tax by a transferee does not relieve a non-
resident alien individual or foreign corpo-
ration subject to tax on gain by reason of
section 864(c)(8) from paying any tax due
with the return that has not been fully sat-
isfied through withholding.
(2) Manner of obtaining credit—(i) In-
dividuals or corporations. Except as pro-
vided in paragraph (e)(3) of this section,
an individual or corporation may claim
a credit under section 33 for the amount
withheld under this section by attaching
to its applicable return the stamped copy
of Form 8288-A provided to it under para-
graph (d)(1) of this section.
(ii) Partnerships, trusts, or estates.
For a rule allowing a foreign partnership
that is a transferor to claim a credit for the
amount withheld under this section against
its tax liability under section 1446(a), see
§1.1446-3(c)(4). For the rule providing
the extent to which a foreign trust or estate
may claim a credit for an amount withheld
under this section, see §1.1462-1. Except
as provided in paragraph (e)(3) of this sec-
tion, a foreign partnership, trust, or estate
claiming a credit for an amount withheld
must attach to its applicable return the
stamped copy of Form 8288-A provided
to it under paragraph (d)(1) of this section.
A foreign trust or estate must also provide
any other information required in forms or
instructions to any beneficiary or owner
that is liable for tax on any of the gain un-
der section 864(c)(8).
(3) Failure to receive Form 8288-A. If
a stamped copy of Form 8288-A has not
been provided to the transferor by the IRS,
the transferor may establish the amount of
tax withheld by the transferee by attach-
ing to its return substantial evidence of the
amount. The transferor must attach to its
return a statement that includes all of the
information otherwise required to be pro-
vided on Form 8288-A.
(f) Applicability date. This section ap-
plies to transfers that occur on or after Jan-
uary 29, 2021.
§1.1446(f)-3 Partnership’s requirement
to withhold under section 1446(f)(4) on
distributions to transferee.
(a) Partnership’s obligation to with-
hold amounts not withheld by the trans-
feree—(1) In general. If a transferee fails
to withhold any amount required to be
withheld under §1.1446(f)-2, the partner-
ship in which the interest was transferred
must withhold from any distributions with
respect to the transferred interest pursuant
to this section. To determine its withhold-
ing obligation under this paragraph (a)(1),
a partnership may rely on a certification
received from the transferee described
in §1.1446(f)-2(d)(2) unless it knows, or
has reason to know, that the certification
is incorrect or unreliable. A partnership
that already possesses a certification of
non-foreign status (including a Form
W-9) for the transferor that meets the re-
quirements provided in §1.1446(f)-2(b)
(2) may instead rely on this certification
to determine that it has no withholding
obligation under this paragraph (a)(1) un-
less it knows, or has reason to know, that
the certification is incorrect or unreliable.
A partnership that receives a certifica-
tion described in §1.1446(f)-2(d)(2) that
is inconsistent with the information on
the certification of non-foreign status in
its possession is treated as having actual
knowledge, or reason to know, that the
certification of non-foreign status is incor-
rect or unreliable.
(2) Notification by IRS. A partnership
that receives notification from the IRS
that a transferee has provided incorrect
information regarding the amount realized
or amount withheld on the certification
described in §1.1446(f)-2(d)(2), or has
failed to pay the IRS the amount report-
ed as withheld on the certification, must
withhold the amount prescribed in the no-
tification on distributions with respect to
the transferred interest made on or after
the date that is 15 days after it receives
the notification. The IRS will not issue a
notification on the basis that the amount
realized on the certification described in
§1.446(f)-2(d)(2) is incorrect if it deter-
mines that the transferee properly relied
on a certification that included the incor-
rect information to compute the amount
realized pursuant to §1.1446(f)-2(c)(2).
(3) Subsequent transferees. A partner-
ship is not required to withhold under
paragraph (a)(1) or (2) of this section on
distributions that are made after the date
on which the transferee disposes of the
transferred interest, unless the partnership
has actual knowledge that any person that
acquires the transferee’s interest in the
partnership is a related person, i.e., a per-
son that bears a relationship described in
section 267(b) or 707(b)(1) with respect to
the transferee or the transferor from which
the transferee acquired the interest. A re-
lated person that acquires the transferee’s
interest is treated as liable for tax under
section 1461 to the same extent that the
transferee is liable for its failure to with-
hold under §1.1446(f)-2.
(b) Exceptions to withholding—(1)
Withholding has been satisfied by trans-
feree. A partnership is not required to
withhold under paragraph (a)(1) of this
section if it relies on a certification de-
scribed in §1.1446(f)-2(d)(2) received
from the transferee (within the time pre-
scribed in §1.1446(f)-2(d)(2)) that states
that an exception to withholding de-
scribed in §1.1446(f)-2(b) applies or that
the transferee withheld the full amount re-
quired to be withheld (taking into account
any adjustments under §1.1446(f)-2(c))
under §1.1446(f)-2.
(2) PTP interests. A partnership is not
required to withhold under this section on
distributions made with respect to a PTP
interest.
(3) Distributing partnerships. A part-
nership that is a transferee because it
makes a distribution is not required to
withhold under this section.
(c) Withholding rules—(1) Timing of
withholding—(i) In general. A partnership

December 14, 2020 1638 Bulletin No. 2020–51
required to withhold under paragraph (a)
(1) of this section must withhold on distri-
butions made with respect to a transferred
interest beginning on the later of—
(A) The date that is 30 days after the
date of transfer; or
(B) The date that is 15 days after the
date on which the partnership acquires
actual knowledge that the transfer has oc-
curred.
(ii) Satisfaction of withholding obliga-
tion. A partnership is treated as satisfying
its withholding obligation under para-
graph (a)(1) of this section and may stop
withholding on distributions with respect
to a transferred interest on the earlier of—
(A) The date on which the partner-
ship completes withholding and paying
the amount required to be withheld under
paragraph (c)(2) of this section; or
(B) The date on which the partner-
ship receives and may rely on a certifi-
cation from the transferee described in
§1.1446(f)-2(d)(2) (without regard to
whether the certification is received by the
time prescribed in §1.1446(f)-2(d)(2)) that
claims an exception to withholding under
§1.1446(f)-2(b).
(2) Amount to withhold—(i) In gener-
al. A partnership required to withhold un-
der paragraph (a)(1) of this section must
withhold the full amount of each distribu-
tion made with respect to the transferred
interest until it has withheld—
(A) A tax of 10 percent of the amount
realized (determined solely under
§1.1446(f)-2(c)(2)(i)) on the transfer, re-
duced by any amount withheld by the
transferee; plus
(B) Any interest computed under para-
graph (c)(2)(ii) of this section.
(ii) Computation of interest. The
amount of interest required to be with-
held under paragraph (a)(1) of this sec-
tion is the amount of interest that would
be required to be paid under section 6601
and §301.6601-1 of this chapter if the
amount that should have been withheld
by the transferee was considered an un-
derpayment of tax. For purposes of this
paragraph (c)(2)(ii), interest is payable
between the date that is 20 days after the
date of the transfer and the date on which
the tax due under paragraph (a)(1) of this
section is paid to the IRS.
(iii) Certifications required. For pur-
poses of paragraph (c)(2)(i)(A) of this
section, a partnership must determine the
amount realized on the transfer and any
amount withheld by the transferee based
on a certification from the transferee de-
scribed in §1.1446(f)-2(d)(2), without re-
gard to whether the certification is received
by the time prescribed in §1.1446(f)-2(d)
(2). A partnership that does not receive
or cannot rely on a certification from the
transferee described in §1.1446(f)-2(d)(2)
must withhold tax equal to the full amount
of each distribution made with respect to a
transferred interest until it receives a certi-
fication that it can rely on.
(3) Coordination with other withhold-
ing provisions. Any amount required to be
withheld on a distribution under any other
provision of the Internal Revenue Code is
not also required to be withheld under sec-
tion 1446(f)(4) or this section.
(d) Reporting and paying withheld
amounts. The partnership must report and
pay the tax withheld using Forms 8288,
U.S. Withholding Tax Return for Dispo-
sitions by Foreign Persons of U.S. Real
Property Interests, and 8288-C, Statement
of Withholding Under Section 1446(f)(4)
for Withholding on Dispositions by For-
eign Persons of Partnership Interests, as
provided in forms, instructions, or other
guidance.
(e) Effect of withholding on transferor
and transferee—(1) Transferor. The with-
holding of tax by a partnership under this
section does not relieve a foreign person
from filing a U.S. income tax return with
respect to the transfer. See §§1.6012-1(b)
(1), 1.6012-2(g)(1), and 1.6031(a)-1. Fur-
ther, the withholding of tax by a partner-
ship does not relieve a nonresident alien
individual or foreign corporation subject
to tax on gain by reason of section 864(c)
(8) from paying any tax due with the return
that has not been fully satisfied through
withholding. An individual or corporation
is not allowed a credit under section 33 for
amounts withheld on distributions to the
transferee under this section. See, how-
ever, §§1.1446(f)-5(a) and 1.1463-1(a),
which generally provide that tax will not
be recollected if paid by another person.
(2) Transferee. A transferee is treated
as satisfying its withholding tax liabili-
ty under §1.1446(f)-2 to the extent that
a partnership withholds tax (which does
not include interest) under this section.
Interest computed under paragraph (c)(2)
(ii) of this section that is withheld by the
partnership from the transferee is treated
as interest paid by the transferee with re-
spect to its withholding tax liability under
§1.1446(f)-2. An excess amount under this
section is the amount of tax and interest
withheld under this section that exceeds
the transferee’s withholding tax liability
under §1.1446(f)-2 plus any interest owed
by the transferee with respect to such lia-
bility. A transferee may claim a refund for
the excess amount if payments have been
made in excess of the tax which is proper-
ly due by the transferee for the tax period.
(f) Applicability date. This section ap-
plies to transfers that occur on or after Jan-
uary 1, 2022.
§1.1446(f)-4 Withholding on the transfer
of a publicly traded partnership interest.
(a) Obligation to withhold on a trans-
fer of a PTP interest—(1) In general. If
a transfer of a PTP interest is effected
through one or more brokers (as defined
in §1.1446(f)-1(b)(1)), the transferee is
not required to withhold under section
1446(f)(1) and §1.1446(f)-2. Rather, any
broker required to withhold under para-
graph (a)(2) of this section must withhold
a tax equal to 10 percent of the amount
realized (as defined in paragraph (c)(2)
of this section) on the transfer of a PTP
interest, except as otherwise provided in
this section. For cases in which a publicly
traded partnership is liable for withhold-
ing under this section, see paragraphs (b)
(3)(i) and (c)(2)(iii) of this section.
(2) Broker’s requirement to withhold—
(i) In general. Except as otherwise provid-
ed in this section, a broker is required to
withhold under this section if it pays an
amount realized to another broker that it
is required to treat as a foreign person, or
if a broker pays an amount realized to a
foreign transferor that is its customer.
(ii) Payments to foreign brokers. A bro-
ker that pays an amount realized from the
transfer of a PTP interest to another bro-
ker that it is required to treat as a foreign
person must withhold under this section
unless the first-mentioned broker obtains
documentation on which it may rely es-
tablishing that the second-mentioned bro-
ker is described in paragraph (a)(2)(ii)(A)
or (B) of this section. A broker must treat
any broker to which it pays an amount re-

Bulletin No. 2020–51 1639 December 14, 2020
alized from the transfer of a PTP interest
as a foreign person unless it obtains, or
already possesses, documentation (includ-
ing a certification of non-foreign status)
on which it may rely that establishes that
the other broker is a U.S. person. A broker
may rely on documentation described in
this paragraph (a)(2)(ii), or in paragraph
(a)(2)(ii)(A) or (B) of this section, unless
it has actual knowledge that the documen-
tation is unreliable or incorrect.
(A) A broker is described in this para-
graph (a)(2)(ii)(A) if it is a qualified in-
termediary (as defined in §1.1441-1(e)(5)
(ii)) that provides a valid qualified inter-
mediary withholding certificate (as de-
scribed in §1.1441-1(e)(3)(ii)) that states
that it assumes primary withholding re-
sponsibility for the payment.
(B) A broker is described in this para-
graph (a)(2)(ii)(B) if it is a U.S. branch of
a foreign person (as described in §1.1441-
1(b)(2)(iv)) that provides a valid U.S.
branch withholding certificate (as de-
scribed in §1.1441-1(e)(3)(v), but without
regard to the requirement in §1.1441-1(e)
(3)(v) that the certificate state that the
amount is not effectively connected with a
trade or business within the United States)
that states that the U.S. branch agrees to
be treated as a U.S. person with respect to
the payment.
(iii) Payments to foreign transferors
that are customers of the broker. A broker
that pays an amount realized to a foreign
transferor that is its customer (as defined
in §1.6045-1(a)(2)) from the transfer of a
PTP interest is required to withhold un-
der this section unless an exception under
paragraph (b) of this section applies.
(3) Exception from certain withholding
by U.S. clearing organizations. A broker
that is a U.S. clearing organization clear-
ing or settling a sale of a PTP interest is
not required to withhold on the amount
realized from the sale. However, see
§1.1461-1(c)(2)(i)(R)(2) for the require-
ment that a U.S. clearing organization
acting as a central counterparty report on
Form 1042-S sales of PTP interests that it
clears and settles on a net basis.
(4) Exception when withholding al-
ready satisfied. A broker that receives from
another broker an amount realized from
the transfer of a PTP interest is required
to withhold under this section unless the
other broker has withheld the full amount
required. A broker that receives from an-
other broker an amount realized from the
transfer of a PTP interest may treat the
withholding as having been satisfied on
the full amount required unless it knows
or has reason to know that the withholding
obligation has not already been satisfied.
A broker that is a qualified intermediary
determines its withholding requirement
for purposes of this paragraph (a)(4) in
accordance with its qualified intermediary
agreement.
(5) Documentation obtained from
another person to determine a broker’s
status. A U.S. clearing organization may
act as an agent for a broker receiving an
amount realized from another broker that
is a member of the clearing organization
for purposes of furnishing valid docu-
mentation described in paragraph (a)(2)
of this section of the first-mentioned bro-
ker’s status to such other broker, provid-
ed the clearing organization notifies the
first-mentioned broker and such broker
has the ability to opt out. A broker that
obtains documentation from a clearing
organization under this paragraph (a)(5)
for a broker to which the first-mentioned
broker is paying an amount realized may
rely on such documentation unless it has
actual knowledge that the documentation
is incorrect or unreliable.
(6) Date of withholding with respect to
a transfer other than a distribution. For a
transfer of a PTP interest that is not a dis-
tribution, a broker is required to apply the
principles of §31.3406(a)-4(b)(1) of this
chapter to determine the date on which to
withhold under this section.
(7) Payments to qualified intermediar-
ies not assuming primary withholding re-
sponsibility. With respect to the transfer of
a PTP interest, if a broker pays the amount
realized to a foreign person that the bro-
ker may treat as a qualified intermediary
(as defined in §1.1441-1(e)(5)(ii)) that
does not assume primary withholding re-
sponsibility for the payment based on a
valid qualified intermediary withholding
certificate described in §1.1441-1(e)(3)
(ii) upon which the broker may rely un-
der paragraph (a)(2) of this section, the
broker may withhold as provided in this
paragraph (a)(7). Under this paragraph
(a)(7), a broker may withhold under this
section by reference to the amount of the
payment that the broker can reliably deter-
mine, based on the withholding statement
provided with the withholding certificate,
is allocable to—
(i) Foreign transferors included in a
chapter 3 withholding rate pool (as de-
scribed in §1.1441-1(e)(5)(v)(C)) that are
subject to a 10 percent rate of withholding
on the payment of the amount realized;
(ii) Foreign transferors included in a
chapter 3 withholding rate pool (as de-
scribed in §1.1441-1(e)(5)(v)(C)) that
qualify for an exception from withholding
on the payment of the amount realized un-
der paragraph (b) of this section;
(iii) Each foreign transferor for which
a form acceptable under §1.1446-1 is pro-
vided; or
(iv) U.S. transferors, based on a valid
Form W-9 provided for each such trans-
feror to the extent that the transferor is
not included in a chapter 4 withholding
rate pool of U.S. payees (as described in
§1.1441-1(e)(5)(v)(C), to the extent per-
mitted for purposes of chapter 4 of the In-
ternal Revenue Code).
(8) Qualified intermediary or U.S.
branch withholding requirement. A broker
that is a qualified intermediary (as defined
in §1.1441-1(e)(5)(ii)) or U.S. branch
must assume primary withholding respon-
sibility under this section for a distribu-
tion from a publicly traded partnership for
which the qualified intermediary or U.S.
branch acts as a nominee for purposes of
section 1446(a). See §1.1446-4(b)(3).
(b) Exceptions to withholding—(1) In
general. A broker is not required to with-
hold under this section if it properly relies
on a certification described in paragraph
(b)(2), (5), or (6) of this section, a qual-
ified notice described in paragraph (b)
(3) of this section, or if the exception de-
scribed in paragraph (b)(4) of this section
applies. A broker may not rely on a certifi-
cation described in this paragraph (b) if it
has actual knowledge that the certification
is incorrect or unreliable.
(2) Certification of non-foreign status.
A broker may rely on a certification of
non-foreign status that it obtains from the
transferor. A certification of non-foreign
status under this section means a Form
W-9, Request for Taxpayer Identification
Number and Certification, or valid sub-
stitute form, that meets the requirements
of §1.1441-1(d)(2). For purposes of this
paragraph (b)(2), a broker may rely on a

December 14, 2020 1640 Bulletin No. 2020–51
valid form that it already possesses from
the transferor. A broker may instead rely
on certification from a second broker (as
defined in §1.6045-1(a)(1)) that acts as an
agent for the transferor when the second
broker does not receive the amount real-
ized from the transfer of the PTP interest.
This certification must state that the sec-
ond broker has collected a valid certifi-
cation of non-foreign status (within the
meaning of this paragraph (b)(2)) from the
transferor, and it must include the trans-
feror’s TIN and status as a foreign or U.S.
person.
(3) Less than 10 percent effectively
connected gain by partnership—(i) In
general. A broker may rely on a qualified
notice described in paragraph (b)(3)(iii)
of this section that states that the 10-per-
cent exception applies, as determined un-
der paragraph (b)(3)(ii) of this section. In
a case in which a broker properly relies
on a qualified notice under paragraph (b)
(1) of this section that results in under-
withholding on a transfer of a PTP inter-
est, the publicly traded partnership that
issued the notice is solely liable for the
underwithheld tax under section 1461.
A publicly traded partnership’s liabili-
ty referenced in the preceding sentence,
however, applies only when the publicly
traded partnership fails to make a rea-
sonable estimate of the amounts required
for determining the applicability of the
10-percent exception.
(ii) 10-percent exception—(A) In gen-
eral. The 10-percent exception applies to
a transfer if, on the PTP designated date
described in paragraph (b)(3)(ii)(B) of this
section—
(1) If the publicly traded partnership
sold all of its assets at fair market value
in the manner described in §1.864(c)(8)-
1(c), either—
(i) The amount of net gain that would
have been effectively connected with the
conduct of a trade or business within the
United States would be less than 10 per-
cent of the total net gain; or
(ii) No gain would have been effective-
ly connected with the conduct of a trade or
business in the United States; or
(2) The partnership was not engaged
in a trade or business within the United
States at any time during the taxable year
of the partnership through the PTP desig-
nated date.
(B) PTP designated date. The PTP des-
ignated date for a transfer is any date for
a deemed sale determination that is desig-
nated by the publicly traded partnership in
a qualified notice described in paragraph
(b)(3)(iii) of this section, provided that
the PTP designated date occurs on or af-
ter the date that is 92 days before the date
on which the publicly traded partnership
posted the qualified notice naming the
PTP designated date.
(iii) Qualified notice—(A) In general.
Except as provided in paragraphs (b)(3)
(iii)(B) and (C) of this section, a qualified
notice described in this paragraph (b)(3)
(iii) is the most recent qualified notice
(within the meaning of §1.1446-4(b)(4))
posted by the publicly traded partnership.
(B) Qualified notice posting date re-
quirement. A qualified notice is described
in this paragraph (b)(3)(iii) only if the
publicly traded partnership has posted it
within the 92-day period ending on the
date of the transfer. For a transfer that is a
distribution by the publicly traded partner-
ship, the qualified notice is described in
paragraph (b)(3)(iii) of this section only if
the qualified notice is posted with respect
to the distribution.
(C) Recent posting of qualified notice.
If the most recent qualified notice posted
by the publicly traded partnership was
posted during the 10-day period ending
on the date of the transfer, a broker may
instead rely on the immediately preceding
qualified notice (within the meaning of
§1.1446-4(b)(4)) posted by the publicly
traded partnership, provided that it satis-
fies the condition described in paragraph
(b)(3)(iii)(B) of this section.
(4) Amount subject to withholding
under section 3406. A broker is not re-
quired to withhold under this section if the
amount realized from the transfer of the
PTP interest is subject to withholding un-
der §31.3406(b)(3)-2 of this chapter.
(5) Income tax treaties. A broker may
rely on a certification from the transferor
that states that the transferor is not sub-
ject to tax on any gain from the transfer
pursuant to an income tax treaty in effect
between the United States and a foreign
country if the requirements of this para-
graph (b)(5) are met. The transferor makes
the certification on a withholding certifi-
cate (on a Form W-8BEN, Certificate of
Foreign Status of Beneficial Owner for
United States Tax Withholding and Report-
ing (Individuals), or Form W-8BEN-E,
Certificate of Status of Beneficial Owner
for United States Tax Withholding and Re-
porting (Entities)) that meets the require-
ments for validity under §1.1446-1(c)(2)
(iv) (or an applicable substitute form that
meets the requirements under §1.1446-
1(c)(5)) and that contains the information
necessary to support the claim for treaty
benefits. For purposes of this paragraph
(b)(5), a broker may rely on a withholding
certificate that it already possesses from
the transferor that meets the requirements
of this paragraph (b)(5) unless it has actual
knowledge that the information is incor-
rect or unreliable. The exception in this
paragraph (b)(5) does not apply if treaty
benefits apply to only a portion of the gain
from the transfer.
(6) Foreign dealers that provide Form
W-8ECI. A broker may rely on a certifi-
cation provided by a transferor that cer-
tifies that it is a dealer in securities (as
defined in section 475(c)(1)) and that any
gain from the transfer of the PTP interest
is effectively connected with the conduct
of a trade or business within the United
States without regard to the provisions
of section 864(c)(8). The certification de-
scribed in the preceding sentence is made
on a 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, that
meets the requirements for validity under
§1.1446-1(c)(2)(iv) (or an applicable sub-
stitute form that meets the requirements
under §1.1446-1(c)(5)) and that contains
any other information required in the in-
structions to the form. A broker may rely
on a withholding certificate that it already
possesses from the transferor that meets
the requirements of this paragraph (b)(6)
unless it has actual knowledge that the in-
formation is incorrect or unreliable.
(c) Determining the amount to with-
hold—(1) In general. A broker that is
required to withhold under this section
must withhold 10 percent of the amount
realized on the transfer of the PTP interest,
except as provided in this paragraph (c).
Any procedures in this paragraph (c) ap-
ply solely for purposes of determining the
amount to withhold under section 1446(f)
(1) and this section. A broker may not rely
on a certification described in this para-

Bulletin No. 2020–51 1641 December 14, 2020
graph (c) if it has actual knowledge that
the certification is incorrect or unreliable.
(2) Amount realized—(i) In general.
Solely for purposes of this section, the
amount realized is the amount of gross
proceeds (as defined in §1.6045-1(d)(5))
paid or credited upon the transfer to the
customer or other broker (as applicable),
or, in the case of a distribution, the amount
determined under paragraph (c)(2)(iii) of
this section.
(ii) Certification by a foreign partner-
ship of modified amount realized—(A) In
general. When a transferor is a foreign
partnership, a broker may use the proce-
dures of this paragraph (c)(2)(ii) to deter-
mine the amount realized. For purposes
of this paragraph (c)(2)(ii)(A), the broker
may treat the modified amount realized as
the amount realized to the extent it may
rely on a certification from the transferor
providing the modified amount realized.
(B) Determining modified amount re-
alized. The modified amount realized is
determined by multiplying the amount re-
alized (as determined under this paragraph
(c)(2), without regard to this paragraph (c)
(2)(ii)) by the aggregate percentage com-
puted as of the determination date (see
§1.1446(f)-1(c)(4)). The aggregate per-
centage is the percentage of the gain (if
any) arising from the transfer that would
be allocated to presumed foreign taxable
persons. For purposes of this paragraph
(c)(2)(ii)(B), a presumed foreign taxable
person is any direct or indirect partner of
the transferor that has not provided either
a certification of non-foreign status that
meets the requirements of paragraph (b)
(2) of this section or a certification of trea-
ty benefits that states that the partner is not
subject to tax on any gain from the transfer
pursuant to an income tax treaty in effect
between the United States and a foreign
country. A valid certification of treaty ben-
efits must meet the requirements of para-
graph (b)(5) of this section (as applied to
the partner claiming treaty benefits). For
purposes of this paragraph (c)(2)(ii), an
indirect partner is a person that owns an
interest in the transferor indirectly through
one or more foreign partnerships.
(C) Certification. The certification is
made by providing a withholding cer-
tificate (on Form W-8IMY, Certificate
of Foreign Intermediary, Foreign Flow-
Through Entity, or Certain U.S. Branch-
es for United States Tax Withholding and
Reporting) that includes a withholding
statement that provides the percentage of
gain allocable to each direct or indirect
partner and that provides whether each
such person is a United States person, a
foreign partner eligible for treaty benefits,
or a presumed foreign taxable person. The
certification must also include the certifi-
cation of non-foreign status or the certifi-
cation of treaty benefits from each direct
or indirect partner that is not a presumed
foreign taxable person. For purposes of
this paragraph (c)(2)(ii), a broker may
rely on a withholding certificate and with-
holding statement that it already possesses
from the partnership unless it has actual
knowledge that the information is incor-
rect or unreliable.
(iii) Determination of amount realized
on a distribution. The amount realized on
a distribution from a publicly traded part-
nership is the amount of the distribution
reduced by the portion of the distribution
that is attributable to the cumulative net
income of the partnership. The cumulative
net income is the net income earned by the
publicly traded partnership since its forma-
tion that has not been previously distrib-
uted by the partnership. A publicly traded
partnership identifies such excess portion
of the distribution as an amount in excess
of cumulative net income on a qualified
notice (within the meaning of §1.1446-4(b)
(4)) posted with respect to the distribution.
If a broker properly withholds based on
the qualified notice (applying the rules of
§1.1446-4(d)(1) to the distribution), the
broker is not liable for any underwithhold-
ing on any amount attributable to an amount
in excess of cumulative net income. Rather,
the publicly traded partnership that issued
the qualified notice is solely liable for the
underwithheld tax under section 1461 on
such amount that results from a broker’s
reliance on the notice.
(d) Reporting and paying withheld
amounts. A broker that is required to with-
hold under this section must pay the with-
held tax pursuant to the deposit rules in
§1.6302-2. For rules regarding reporting
on Forms 1042, Annual Withholding Tax
Return for U.S. Source Income of Foreign
Persons, and 1042-S, Foreign Person’s
U.S. Source Income Subject to Withhold-
ing, that apply to a broker that withholds
under this section, see §1.1461-1(b) and
(c). For rules regarding when an amount
realized on the transfer of a PTP interest
is reportable on a Form 1042-S (including
in certain cases in which withholding is
not required), see §1.1461-1(c)(2)(i)(Q)
and (R). A broker that pays the amount re-
alized to a foreign partnership must issue
a Form 1042-S directly to the partnership
rather than issuing a form to each of the
partners of the partnership. See §1.1461-
1(c)(1)(ii)(A)(8) (treating the foreign part-
nership as a recipient for reporting pur-
poses). A broker making a payment to a
U.S. branch treated as a U.S. person must
not treat the branch as a U.S. person for
purposes of reporting the payment made
to the branch. Therefore, a payment to that
U.S. branch must be reported on Form
1042-S. See §1.1461-1(c). A Form 1042-S
issued directly to the transferor must in-
clude the TIN of the transferor unless the
broker does not know the TIN at the time
of issuance.
(e) Effect of withholding on transfer-
or—(1) In general. The withholding of
tax under this section does not relieve a
foreign person from filing a U.S. tax return
with respect to the transfer. See §§1.6012-
1(b)(1), 1.6012-2(g)(1), and 1.6031(a)-1.
Further, the withholding of tax by a broker
does not relieve a nonresident alien indi-
vidual or foreign corporation subject to
tax on gain by reason of section 864(c)(8)
from paying any tax due with the return
that has not been fully satisfied through
withholding.
(2) Manner of obtaining credit—(i) In-
dividuals and corporations. An individual
or corporation may claim a credit under
section 33 for the amount withheld under
this section by attaching to its applicable
return a copy of a Form 1042-S that in-
cludes its TIN (or as otherwise provided
in IRS forms or instructions).
(ii) Partnerships, trusts, or estates.
For a rule allowing a foreign partnership
that is a transferor to claim a credit for
the amount withheld under this section
against its obligation to withhold under
section 1446(a), see §1.1446-3(c)(4). For
the rule providing the extent to which a
foreign trust or estate may claim a credit
for an amount withheld under this sec-
tion, see §1.1462-1. A foreign partnership,
trust, or estate claiming a credit for an
amount withheld must attach to its appli-
cable return the Form 1042-S provided to

December 14, 2020 1642 Bulletin No. 2020–51
it under paragraph (d) of this section (or
as otherwise provided in IRS forms or in-
structions). A foreign trust or estate must
also provide any information required in
forms or instructions to any beneficiary or
owner that is liable for tax on any of the
gain under section 864(c)(8).
(f) Applicability date. This section ap-
plies to transfers that occur on or after Jan-
uary 1, 2022.
§1.1446(f)-5 Liability for failure to
withhold.
(a) Liability for failure to withhold.
Every person required to withhold and
pay tax under section 1446(f), but that
fails to do so, is liable for the tax under
section 1461, plus any applicable inter-
est, penalties, or additions to tax. A part-
nership that failed to withhold and pay
tax under §1.1446(f)-3 is liable only for
the amount of tax that it failed to collect
(but not any interest computed on that
amount under §1.1446(f)-3(c)(2)(ii)),
plus any interest, penalties, or additions
to tax with regard to the partnership’s
failure to withhold.
(b) Tax liability otherwise satisfied.
Under section 1463, if the tax required to
be withheld under section 1446(f) is paid
by another person required to withhold
under section 1446(f), or by the nonresi-
dent alien individual or foreign corpora-
tion subject to tax on gain resulting from
section 864(c)(8), the tax will not be rec-
ollected. The person required to withhold
must establish proof of payment by anoth-
er person required to withhold or by the
nonresident alien individual or foreign
corporation subject to the tax on gain re-
sulting from section 864(c)(8). The per-
son required to withhold may show that
a reduced rate of withholding was appro-
priate by establishing the amount of tax
due by the foreign transferor (as defined
in §1.864(c)(8)-1(g)(3)) on gain resulting
from section 864(c)(8). The person re-
quired to withhold under section 1446(f)
is not relieved from liability for any in-
terest, penalties, or additions to tax that
would otherwise apply. However, if the
person required to withhold establishes to
the satisfaction of the Commissioner that
no gain on the transfer is treated as effec-
tively connected with the conduct of a
trade or business within the United States
under section 864(c)(8), no interest, pen-
alties, or additions to tax will apply.
(c) Liability of agents—(1) Duty to
provide notice of false certification. A
transferee’s or transferor’s agent (other
than a broker required to withhold un-
der §1.1446(f)-4) must provide notice to
a transferee (or other person required to
withhold) if that person is furnished with
a certification described in §§1.1446(f)-1
through 1.1446(f)-4 that the agent knows
is false. A person required to withhold may
not rely on a certification if it receives the
notice described in this paragraph (c)(1).
(2) Procedural requirements. Any
agent who is required to provide notice
under paragraph (c)(1) of this section
must do so in writing (including by elec-
tronic submission) as soon as possible
after learning of the false certification. If
the agent first learns of the false certifi-
cation before the date of transfer, notice
must be given by the third day following
that discovery but no later than the date of
transfer (before the transferee’s payment
of consideration). If an agent first learns of
a false certification after the date of trans-
fer, notice must be given by the third day
following that discovery. The notice must
also explain the possible consequences to
the recipient of a failure to withhold. The
notice need not disclose the information
on which the agent’s statement is based.
The agent must also furnish a copy of the
notice to the IRS by the date on which the
notice is required to be given to the recip-
ient. The copy of the notice must be deliv-
ered to the address provided in §1.1445-
1(g)(10) and must be accompanied by a
cover letter stating that the copy is being
filed pursuant to the requirements of this
paragraph (c)(2).
(3) Failure to provide notice. Any
agent who is required to provide notice
under paragraph (c)(1) of this section,
but fails to do so in the manner required
in paragraph (c)(2) of this section, is lia-
ble for the tax that the person who should
have been provided notice in accordance
with paragraph (c)(2) of this section was
required to withhold under section 1446(f)
if the notice had been given.
(4) Limitation on liability. An agent’s
liability under paragraph (c)(3) of this sec-
tion is limited to the amount of compensa-
tion that the agent derives from the trans-
action. In addition, an agent that assists
in the preparation of, or fails to disclose
knowledge of, a false certification may be
liable for civil and criminal penalties.
(d) Applicability date. This section
applies to transfers that occur on or after
January 29, 2021.
Par. 12. Section 1.1461-1 is amended:
1. By revising the fourth and fifth sen-
tences of paragraph (a)(1) and removing
the sixth sentence.
2. By revising the second sentence and
removing the third sentence of paragraph
(c)(1)(i).
3. By revising paragraph (c)(1)(ii)(A)
(8).
4. By removing the word “and” at the
end of paragraph (c)(1)(ii)(B)(3).
5. By removing the period at the end
of paragraph (c)(1)(ii)(B)(4) and adding “;
and” in its place.
6. By adding paragraph (c)(1)(ii)(B)
(5).
7. In paragraph (c)(2)(i) introductory
text, by revising the first sentence and re-
moving the second sentence.
8. In paragraph (c)(2)(i)(N), by remov-
ing the word “and” from the end of the
paragraph.
9. In paragraph (c)(2)(i)(O), by remov-
ing the period at the end of the paragraph
and adding a semicolon in its place.
10. By adding paragraphs (c)(2)(i)(P),
(Q), and (R).
11. By adding a sentence at the end of
paragraph (c)(4)(ii)(A).
12. Revising paragraph (i).
The revisions and additions read as fol-
lows:
§1.1461-1 Payment and returns of tax
withheld.
(a) * * *
(1) * * * With respect to withhold-
ing under section 1446, this section shall
apply only to publicly traded partner-
ships and nominees that withhold under
§1.1446-4 and brokers and publicly trad-
ed partnerships that withhold (or are oth-
erwise liable for underwithholding) under
§1.1446(f)-4 on transfers of publicly trad-
ed partnership interests. See §1.1461-3
regarding withholding tax liabilities under
sections 1446(a) and 1446(f) and penalties
that apply for failure to withhold under ei-
ther of those sections.
* * * * *

Bulletin No. 2020–51 1643 December 14, 2020
(c) * * *
(1) * * *
(i) * * * Notwithstanding the preceding
sentence, any person that withholds or is
required to withhold an amount under sec-
tion 1441, 1442, or 1443 or §1.1446-4(a)
(applicable to publicly traded partnerships
required to pay tax under section 1446(a)
on distributions) or §1.1446(f)-4(a) (ap-
plicable to brokers required to withhold
on transfers of publicly traded partnership
interests) must file a Form 1042-S for the
payment withheld upon whether or not
that person is engaged in a trade or busi-
ness and whether or not the payment is an
amount subject to reporting. * * *
(ii) * * *
(A) * * *
(8) A partner (including a foreign part-
nership or a partner for which a qualified
intermediary provides partner-specific
documentation under §1.1446-4(e)) re-
ceiving a distribution from a publicly
traded partnership subject to withholding
under section 1446(a) and §1.1446-4 on
distributions of effectively connected in-
come, and a partner (including a foreign
partnership or a partner for which a quali-
fied intermediary provides partner-specif-
ic documentation under §1.1446(f)-4(a)
(7)) receiving an amount realized from
a transfer of a publicly traded partner-
ship interest under section 1446(f)(1) and
§1.1446(f)-4.
* * * * *
(B) * * *
(5) A foreign broker withheld upon un-
der §1.1446(f)-4(a)(2)(ii) by another bro-
ker paying an amount realized from the
transfer of a PTP interest.
* * * * *
(2) * * *
(i) * * * Subject to the exceptions de-
scribed in paragraph (c)(2)(ii) of this sec-
tion, amounts subject to reporting on Form
1042-S are amounts paid to a foreign pay-
ee or partner (including persons presumed
to be foreign) that are amounts subject to
withholding as defined in §1.1441-2(a),
distributions of effectively connected in-
come under §1.1446-4, or amounts real-
ized from transfers of PTP interests under
§1.1446(f)-4. * * *
(P) The amount of any distribution
made by a publicly traded partnership that
is an amount subject to withholding under
§1.1446-4, or that is paid to a qualified in-
termediary or a U.S. branch of a foreign
person that agrees to be treated as a U.S.
person;
(Q) Except with respect to a broker that
is a U.S. clearing organization, an amount
realized on the transfer of a PTP interest
under §1.1446(f)-4 (unless an exception
to withholding applies under §1.1446(f)-
4(b)(2) through (4)); and
(R) In the case of a broker that is a U.S.
clearing organization—
(1) An amount realized (as determined
under §1.1446(f)-4(c)(2)(iii)) on a dis-
tribution made by a publicly traded part-
nership for which withholding is required
under §1.1446(f)-4(a); and
(2) An amount realized on the sale of
a PTP interest cleared and settled through
a net settlement system maintained by the
clearing organization acting as a central
counterparty in the sale (with the report-
ing on the non-netted amount), unless an
exception to withholding would apply un-
der §1.1446(f)-4(b)(2) or (3).
* * * * *
(4) * * *
(ii) * * *
(A) * * * For a payment to a foreign
partnership on the transfer of a public-
ly traded partnership interest subject to
§1.1446(f)-4(a), see paragraph (c)(1)(ii)
(A)(8) of this section (treating the foreign
partnership as a recipient).
* * * * *
(i) Applicability date. This section ap-
plies to payments made on or after Janu-
ary 1, 2022. For payments made before
January 1, 2022, see this section as in ef-
fect and contained in 26 CFR part 1, as
revised April 1, 2020.
Par. 13. Section 1.1461-2 is amended
by:
1. Revising paragraph (a)(1).
2. Revising the first sentence and re-
moving the last sentence of paragraph (b).
3. Revising paragraph (d).
The revisions read as follows:
§1.1461-2 Adjustments for
overwithholding or underwithholding of
tax.
(a) * * *
(1) In general. Except as otherwise
provided in this paragraph (a)(1), a with-
holding agent that has overwithheld under
chapter 3 of the Internal Revenue Code,
and made a deposit of the tax as provid-
ed in §1.6302-2(a), may adjust the over-
withheld amount either pursuant to the
reimbursement procedure described in
paragraph (a)(2) of this section or pur-
suant to the set-off procedure described
in paragraph (a)(3) of this section. The
rules in the preceding sentence do not ap-
ply to partnerships or nominees required
to withhold under section 1446(a), other
than on a distribution by a publicly traded
partnership subject to withholding under
§1.1446-4(a) and a payment of an amount
realized on the transfer of an interest in
a publicly traded partnership subject to
§1.1446(f)-4.
* * * * *
(b) * * * A withholding agent may with-
hold from future payments (including dis-
tributions of effectively connected income
subject to withholding under §1.1446-4
and the amount realized from the transfer
of an interest in a publicly traded partner-
ship subject to §1.1446(f)-4) made to a
beneficial owner the tax that should have
been withheld from previous payments to
that beneficial owner under chapter 3 of
the Code. * * *
(d) Applicability date. This section ap-
plies to payments made on or after Janu-
ary 1, 2022. For payments made before
January 1, 2022, see this section as in ef-
fect and contained in 26 CFR part 1, as
revised April 1, 2020.
Par. 14. Section 1.1461-3 is amended
by revising the first sentence and last sen-
tence of the paragraph to read as follows:
§1.1461-3 Withholding under section
1446.
For rules relating to the withhold-
ing tax liability of a partnership, nomi-
nee, or transferee under section 1446,
see §§1.1446-1 through 1.1446-7 and
1.1446(f)-1 through 1.1446(f)-5. *
* * The references in this section to
§§1.1446-1 through 1.1446-7 apply to
partnership taxable years beginning after
May 18, 2005, or such earlier time as the
regulations under §§1.1446-1 through
1.1446-5 apply by reason of an election
under §1.1446-7, and the references in
this section to §§1.1446(f)-1 through
1.1446(f)-5 shall apply with respect to
returns for transfers that occur on or after
January 29, 2021.

December 14, 2020 1644 Bulletin No. 2020–51
Par. 15. Section 1.1463-1 is amended
by revising the fourth and fifth sentences
of paragraph (a) to read as follows:
§1.1463-1 Tax paid by recipient of
income.
(a) * * * See §§1.1446-3(e) and (f) and
1.1446(f)-5(a) for application of the rule
of this paragraph (a), and for additional
rules, in which the withholding tax was
required to be paid under section 1446.
The references in the previous sentence
to §1.1446-3(e) and (f) apply to partner-
ship taxable years beginning after May 18,
2005, or such earlier time as the regula-
tions under §§1.1446-1 through 1.1446-
5 apply by reason of an election under
§1.1446-7, and the reference in the previ-
ous sentence to §1.1446(f)-5(a) shall ap-
ply to the tax required to be withheld un-
der section 1446(f) for transfers that occur
on or after January 29, 2021.
* * * * *
Par. 16. Section 1.1464-1 is amended
by revising the last sentence of paragraph
(a) and paragraph (c) to read as follows:
§1.1464-1 Refunds or credits.
(a) * * * With respect to section 1446(a),
this section applies only to a publicly
traded partnership or nominee described
in §1.1446-4 and, with respect to section
1446(f), only to a publicly traded partner-
ship or broker described in §1.1446(f)-4.
* * * * *
(c) Applicability date. The last sentence
of paragraph (a) of this section applies to
nominees and publicly traded partnerships
described in §1.1446-4 for partnership
taxable years beginning after April 29,
2008, and to brokers required to withhold
and publicly traded partnerships liable for
underwithholding under §1.1446(f)-4 on
transfers that occur on or after January 1,
2022.
Par. 17. Section 1.6050K-1 is amended
by:
1. Redesignating paragraphs (c) intro-
ductory text and (c)(1) through (3) as the
paragraphs (c)(1) introductory text and (c)
(1)(i) through (iii), respectively.
2. Adding a heading to newly redesig-
nated paragraph (c)(1).
3. Adding paragraphs (c)(2) and (3), (d)
(3), and (h).
The additions read as follows:
§1.6050K-1 Returns relating to sales
or exchanges of certain partnership
interests.
* * * * *
(c) * * *
(1) In general. * * *
(2) Information to be provided to trans-
ferors. The statement a partnership must
provide to a transferor partner pursuant
to paragraph (c)(1) of this section must
also include the information necessary for
the transferor to make the transferor’s re-
quired statement under §1.751-1(a)(3).
(3) Transfers of partnership interests
by foreign persons. For additional infor-
mation required to be provided by the
partnership if section 864(c)(8) applies to
the transfer of a partnership interest by a
foreign person, see §1.864(c)(8)-2(b).
(d) * * *
(3) Transfers of partnership interests
by foreign persons. For notifications re-
quired by foreign transferors of partner-
ship interests, see §1.864(c)(8)-2(a).
* * * * *
(h) Applicability date. Paragraphs (c)
(2) and (3) of this section apply to re-
turns filed on or after November 30, 2020.
Paragraph (d)(3) of this section applies to
transfers that occur on or after November
30, 2020.
Par. 18. Section 1.6302-2 is amended
by:
1. Revising the last sentence of para-
graph (a)(1)(i).
2. Revising the heading and second
sentence of paragraph (g).
The revisions read as follows:
§1.6302-2 Deposit rules for tax withheld
on nonresident aliens and foreign
corporations.
(a) * * *
(1) * * *
(i) * * * With respect to section 1446(a),
this section applies only to a publicly
traded partnership or nominee described
in §1.1446-4 and, with respect to section
1446(f), only to a publicly traded partner-
ship or broker described in §1.1446(f)-4.
* * * * *
(g) Applicability dates. * * * In the last
sentence of paragraph (a)(1)(i) of this sec-
tion, the reference to §1.1446-4 shall ap-
ply to partnership taxable years beginning
after April 29, 2008, and the reference to
§1.1446(f)-4 shall apply to tax required to
be withheld on or after January 1, 2022.
Sunita Lough,
Deput-y Commissioner for Services
and Enforcement.
Approved: October 1, 2020.
David J. Kautter,
Assistant Secretary of the Treasury
(Tax Policy).
(Filed by the Office of the Federal Register on
November 27, 2020, 8:45 a.m., and published in the
issue of the Federal Register for November 30, 2020,
85 F.R. 76910)

Bulletin No. 2020–51 1645 December 14, 2020
Part III
Sections 4375 & 4376 –
Insured and Self-Insured
Health Plans
Adjusted Applicable Dollar
Amount for Fee Imposed by
§§ 4375 and 4376
Notice 2020-84
I. PURPOSE
This notice provides the adjusted ap-
plicable dollar amount to be multiplied by
the average number of covered lives for
purposes of calculating the fee imposed
by §§ 4375 and 4376 of the Internal Rev-
enue Code for policy years and plan years
that end on or after October 1, 2020, and
before October 1, 2021.
II. BACKGROUND
Section 4375 imposes a fee on the is-
suer of a specified health insurance poli-
cy for each policy year ending after Sep-
tember 30, 2012, and before October 1,
2029. Section 4376 imposes a fee on the
plan sponsor of an applicable self-insured
health plan for each plan year ending af-
ter September 30, 2012, and before Oc-
tober 1, 2029. The fee originally expired
on October 1, 2019, but was extended by
the Further Consolidated Appropriations
Act, 2020, Pub. L. 116-94, 133 Stat. 2534
(2019). The fee imposed by §§ 4375 and
4376 helps to fund the Patient-Centered
Outcomes Research Trust Fund (PCORTF)
and is calculated using the average number
of lives covered under the policy or plan
and the applicable dollar amount for that
policy year or plan year. Under §§ 4375(a)
and 4376(a), the applicable dollar amount
is $2 for policy and plan years ending on or
after October 1, 2013, and before October
1, 2014.
1
Treas. Reg. §§ 46.4375-1(c)(4)
and 46.4376-1(c)(3).
Under §§ 4375(d) and 4376(d) and
Treas. Reg. §§ 46.4375-1(c)(4) and
46.4376-1(c)(3), the applicable dollar
amount for policy years and plan years
ending in any Federal fiscal year begin-
ning on or after October 1, 2014 is in-
creased based on increases in the project-
ed per capita amount of National Health
Expenditures.
Specifically, the applicable dollar
amount is the sum of –
(i) The applicable dollar amount for the
policy year or plan year ending in the
previous Federal fiscal year; plus
(ii) The amount equal to the product of –
(A) The applicable dollar amount for
the policy year or plan year end-
ing in the previous Federal fiscal
year; and
(B) The percentage increase in the
projected per capita amount of
the National Health Expendi-
tures most recently released by
the Department of Health and
Human Services (HHS) before
the beginning of the Federal fis-
cal year.
Notice 2020-44, 2020-26 I.R.B. 989,
provides that the adjusted applicable dol-
lar amount for policy years and plan years
that end on or after October 1, 2019, and
before October 1, 2020, is $2.54.
III. ADJUSTED APPLICABLE
DOLLAR AMOUNT
The applicable dollar amount that must
be used to calculate the fee imposed by §§
4375 and 4376 for policy years and plan
years that end on or after October 1, 2020,
and before October 1, 2021, is $2.66. The
increase from the prior amount is calculat-
ed by multiplying the adjusted applicable
dollar amount for policy years and plan
years ending in the previous Federal fis-
cal year, $2.54, by the percentage increase
of the projected per capita amount of Na-
tional Health Expenditures published by
HHS on March 19, 2020. See: https://
www.cms.gov/Research-Statistics-Da-
ta-and-Systems/Statistics-Trends-and-Re-
ports/NationalHealthExpendData/Nation-
alHealthAccountsProjected.html, Table
3. The percentage increase is calculated
after adjustment to reflect updates to the
data used to calculate the prior amount,
$2.54, which was based on the per capita
amounts of National Health Expenditures
for 2019 and 2020 published by HHS on
February 19, 2019.
IV. EFFECTIVE DATE
This notice is effective for policy years
and plan years ending on or after Octo-
ber 1, 2020.
V. DRAFTING INFORMATION
The principal author of this notice is
William Fischer of the Office of Associ-
ate Chief Counsel (Employee Benefits,
Exempt Organizations, and Employment
Taxes). For further information regarding
this notice, contact Mr. Fischer at (202)
317-5500 (not a toll-free number).
Updated Mortality
Improvement Rates and
Static Mortality Tables for
Defined Benefit Pension
Plans for 2022
Notice 2020-85
PURPOSE
This notice specifies updated mortality
improvement rates and static mortality ta-
bles to be used for defined benefit pension
plans under § 430(h)(3)(A) of the Internal
Revenue Code (Code) and section 303(h)
(3)(A) of the Employee Retirement In-
come Security Act of 1974, Pub. L. No.
93-406, as amended (ERISA). These up-
dated mortality improvement rates and
static tables, which are being issued pur-
suant to the regulations under § 430(h)(3)
(A), apply for purposes of calculating the
funding target and other items for valua-
tion dates occurring during the 2022 cal-
endar year.
1
The applicable dollar amount is $1 for policy and plan years ending before October 1, 2013.

December 14, 2020 1646 Bulletin No. 2020–51
This notice also includes a modified
unisex version of the mortality tables
for use in determining minimum present
value under § 417(e)(3) of the Code and
section 205(g)(3) of ERISA for distribu-
tions with annuity starting dates that occur
during stability periods beginning in the
2022 calendar year.
BACKGROUND
Section 412 of the Code provides min-
imum funding requirements that generally
apply for defined benefit plans. Section
412(a)(2) provides that § 430 sets forth
the minimum funding requirements that
apply to defined benefit plans that are not
multiemployer plans or CSEC plans. Sec-
tion 430(a) defines the minimum required
contribution for such a plan by reference
to the plan’s funding target for the plan
year. Under § 430(d)(1), a plan’s funding
target for a plan year generally is the pres-
ent value of all benefits accrued or earned
under the plan as of the first day of that
plan year.
Section 430(h)(3) provides rules re-
garding the mortality tables that general-
ly are used under § 430. Under § 430(h)
(3)(A), except as provided in § 430(h)(3)
(C) or (D), the Secretary is to prescribe by
regulation mortality tables to be used in
determining any present value or making
any computation under § 430. Those ta-
bles are to be based on the actual experi-
ence of pension plans and projected trends
in that experience. Section 430(h)(3)(B)
requires the Secretary to revise any table
in effect under § 430(h)(3)(A) at least ev-
ery 10 years to reflect the actual experi-
ence of pension plans and projected trends
in that experience.
Section 430(h)(3)(C) provides that,
upon request by a plan sponsor and ap-
proval by the Secretary, substitute mor-
tality tables that meet the applicable
requirements may be used in lieu of the
standard mortality tables provided under
§ 430(h)(3)(A). Section 430(h)(3)(D)
provides for the use of separate mortality
tables with respect to certain individuals
who are entitled to benefits on account of
disability.
Mortality Tables for Purposes of § 430
Section 1.430(h)(3)-1 provides rules
regarding the mortality tables used under
§ 430(h)(3)(A) for plan years beginning
on or after January 1, 2018. The mortal-
ity tables used under § 430(h)(3)(A) are
based on the tables in the RP-2014 Mor-
tality Tables Report,
1
adjusted for mortali-
ty improvement. Section 1.430(h)(3)-1(d)
sets forth base mortality tables with a base
year of 2006.
Section 1.430(h)(3)-1(a) permits plan
sponsors to apply the projection of mor-
tality improvement in either of two ways:
through use of static tables that are updat-
ed annually to reflect expected improve-
ments in mortality or through use of gen-
erational tables. Section 1.430(h)(3)-1(a)
(2)(i)(C) provides that, for valuation dates
occurring in years after 2018, updated
mortality improvement rates that take into
account new data for mortality improve-
ment trends of the general population,
along with static mortality tables that re-
flect those updated mortality improvement
rates, will be provided through guidance
published in the Internal Revenue Bulle-
tin. Notice 2019-26, 2019-15 I.R.B. 943
and Notice 2019-67, 2019-52 I.R.B. 1510,
provide mortality improvement rates and
static mortality tables that apply for val-
uation dates occurring during 2020 and
2021, respectively.
2
Section 1.430(h)(3)-2 provides rules
for the use of substitute mortality tables
that are based on the mortality experience
of the plan. Pursuant to § 1.430(h)(3)-2(c)
(3)(ii), substitute mortality tables are de-
veloped using the mortality improvement
rates used under § 1.430(h)(3)-1.
Application of These Tables for Other
Funding Rules
Section 431 provides the minimum
funding standards for multiemployer
plans described in § 414(f) that are subject
to § 412. Section 431(c)(6)(D)(iv) pro-
vides that the Secretary may by regulation
prescribe mortality tables to be used in
determining current liability for purposes
of § 431(c)(6)(B). Section 1.431(c)(6)-1
provides that the same mortality assump-
tions that apply for purposes of § 430(h)
(3)(A) and § 1.430(h)(3)-1(a)(2) are used
to determine a multiemployer plan’s cur-
rent liability for purposes of applying the
full-funding rules of § 431(c)(6). For this
purpose, a multiemployer plan may ap-
ply either the static mortality tables or the
generational mortality tables (as updated
pursuant to §1.430(h)(3)-1(a)(2)(i)(C) and
(a)(3)).
Section 433 provides the minimum
funding standards for CSEC plans de-
scribed in § 414(y). Section 433(h)(3)
(B)(i) provides that the Secretary may by
regulation prescribe mortality tables to
be used in determining current liability
for purposes of § 433(c)(7)(C). Section
1.433(h)(3)-1(a) provides that the mortal-
ity tables described in § 430(h)(3)(A) are
to be used to determine current liability
under § 433(c)(7)(C).
Application of Mortality Tables for
Minimum Present Value Requirements
under § 417(e)(3)
Section 417(e)(3) generally provides
that the present value of certain acceler-
ated forms of benefit under a qualified
pension plan (including single-sum distri-
butions) must not be less than the present
value of the accrued benefit using applica-
ble interest rates and the applicable mor-
tality table. Section 417(e)(3)(B) defines
the term “applicable mortality table” as
the mortality table specified for the plan
year under § 430(h)(3)(A) (without regard
to § 430(h)(3)(C) or (D)), modified as ap-
propriate by the Secretary.
Rev. Rul. 2007-67, 2007-2 CB 1047,
provides that, except as otherwise stated
in future guidance, the applicable mortal-
ity table under § 417(e)(3) is a static mor-
tality table set forth in published guidance
that is developed based on a fixed blend
of 50 percent of the static male combined
mortality rates and 50 percent of the stat-
ic female combined mortality rates used
under § 1.430(h)(3)-1. Rev. Rul. 2007-67
also provides that the applicable mortality
table for a calendar year applies to distri-
butions with annuity starting dates that
1
The RP-2014 Mortality Tables Report, as revised November 2014, is available at https://www.soa.org/Files/Research/Exp-Study/research-2014-rp-report.pdf.
2
Notice 2018-2, 2018-2 I.R.B. 281, provides mortality improvement rates and static mortality tables that apply for valuation dates occurring during 2019.

Bulletin No. 2020–51 1647 December 14, 2020
occur during stability periods that begin
during that calendar year.
MORTALITY IMPROVEMENT RATES
FOR 2022
The mortality improvement rates for
valuation dates occurring during 2022 are
the mortality improvement rates in the
Mortality Improvement Scale MP-2020
Report (issued by the Retirement Plans
Experience Committee (RPEC) of the So-
ciety of Actuaries and available at https://
www.soa.org/globalassets/assets/files/re-
sources/experience-studies/2020/mortali-
ty-improvement-scale-mp-2020.pdf).
STATIC MORTALITY TABLES FOR 2022
The static mortality tables that apply
under § 430(h)(3)(A) for valuation dates
occurring during 2022 are set forth in the
appendix to this notice. The mortality rates
in these tables have been developed from
the methodology and base mortality rates
set forth in § 1.430(h)(3)-1(c) and (d) using
the mortality improvement rates specified
in the previous section of this notice.
The static mortality table that applies
under § 417(e)(3) for distributions with
annuity starting dates occurring during
stability periods beginning in 2022 is set
forth in the appendix to this notice in the
column labeled “Unisex.” The mortali-
ty rates in this table are derived from the
mortality tables specified under § 430(h)
(3)(A) for 2022 in accordance with the
procedures set forth in Rev. Rul. 2007-67.
Drafting Information
The principal authors of this notice are
Arslan Malik and Linda S. F. Marshall of
the Office of the Associate Chief Coun-
sel (Employee Benefits, Exempt Orga-
nizations, and Employment Taxes). For
further information regarding this notice,
contact Arslan Malik or Linda Marshall at
(202) 317-6700 (not a toll-free number).

December 14, 2020 1648 Bulletin No. 2020–51
APPENDIX
Mortality Tables for 2022
Valuation Dates Occurring During 2022 and
Distributions Subject to § 417(e)(3) with Annuity Starting Dates During
Stability Periods Beginning in 2022
MaleMaleMale FemaleFemaleFemaleUnisex
Age
2022
Non-Annuitant
Table
2022
Annuitant
Table
2022 Optional
Combined
Table for
Small Plans
2022
Non-Annuitant
Table
2022
Annuitant
Table
2022 Optional
Combined
Table for
Small Plans
2022 Table for
Distributions
Subject to
§ 417(e)(3)
0 0.0026780.0026780.002678 0.0023440.0023440.0023440.002511
1 0.0001570.0001570.000157 0.0001470.0001470.0001470.000152
2 0.0001080.0001080.000108 0.0000980.0000980.0000980.000103
3 0.0000910.0000910.000091 0.0000740.0000740.0000740.000083
4 0.0000720.0000720.000072 0.0000560.0000560.0000560.000064
5 0.0000640.0000640.000064 0.0000510.0000510.0000510.000058
6 0.0000580.0000580.000058 0.0000480.0000480.0000480.000053
7 0.0000520.0000520.000052 0.0000450.0000450.0000450.000049
8 0.0000440.0000440.000044 0.0000420.0000420.0000420.000043
9 0.0000360.0000360.000036 0.0000400.0000400.0000400.000038
10 0.0000310.0000310.000031 0.0000380.0000380.0000380.000035
11 0.0000330.0000330.000033 0.0000390.0000390.0000390.000036
12 0.0000500.0000500.000050 0.0000460.0000460.0000460.000048
13 0.0000670.0000670.000067 0.0000530.0000530.0000530.000060
14 0.0000840.0000840.000084 0.0000590.0000590.0000590.000072
15 0.0001010.0001010.000101 0.0000650.0000650.0000650.000083
16 0.0001190.0001190.000119 0.0000710.0000710.0000710.000095
17 0.0001380.0001380.000138 0.0000760.0000760.0000760.000107
18 0.0001590.0001590.000159 0.0000810.0000810.0000810.000120
19 0.0001810.0001810.000181 0.0000840.0000840.0000840.000133
20 0.0002020.0002020.000202 0.0000850.0000850.0000850.000144
21 0.0002300.0002300.000230 0.0000880.0000880.0000880.000159
22 0.0002580.0002580.000258 0.0000910.0000910.0000910.000175
23 0.0002790.0002790.000279 0.0000960.0000960.0000960.000188
24 0.0002940.0002940.000294 0.0001010.0001010.0001010.000198
25 0.0002880.0002880.000288 0.0001050.0001050.0001050.000197
26 0.0002870.0002870.000287 0.0001110.0001110.0001110.000199
27 0.0002910.0002910.000291 0.0001180.0001180.0001180.000205
28 0.0003000.0003000.000300 0.0001260.0001260.0001260.000213
29 0.0003140.0003140.000314 0.0001350.0001350.0001350.000225
30 0.0003310.0003310.000331 0.0001470.0001470.0001470.000239
31 0.0003530.0003530.000353 0.0001600.0001600.0001600.000257
32 0.0003760.0003760.000376 0.0001750.0001750.0001750.000276
33 0.0004010.0004010.000401 0.0001910.0001910.0001910.000296
34 0.0004230.0004230.000423 0.0002060.0002060.0002060.000315

Bulletin No. 2020–51 1649 December 14, 2020
MaleMaleMale FemaleFemaleFemaleUnisex
Age
2022
Non-Annuitant
Table
2022
Annuitant
Table
2022 Optional
Combined
Table for
Small Plans
2022
Non-Annuitant
Table
2022
Annuitant
Table
2022 Optional
Combined
Table for
Small Plans
2022 Table for
Distributions
Subject to
§ 417(e)(3)
35 0.0004430.0004430.000443 0.0002220.0002220.0002220.000333
36 0.0004600.0004600.000460 0.0002360.0002360.0002360.000348
37 0.0004770.0004770.000477 0.0002510.0002510.0002510.000364
38 0.0004950.0004950.000495 0.0002680.0002680.0002680.000382
39 0.0005160.0005160.000516 0.0002860.0002860.0002860.000401
40 0.0005390.0005390.000539 0.0003040.0003040.0003040.000422
41 0.0005650.0005720.000565 0.0003240.0003220.0003240.000445
42 0.0005970.0006500.000597 0.0003460.0003660.0003460.000472
43 0.0006370.0007710.000639 0.0003710.0004340.0003710.000505
44 0.0006850.0009320.000689 0.0004000.0005270.0004000.000545
45 0.0007410.0011330.000750 0.0004330.0006450.0004350.000593
46 0.0008080.0013750.000823 0.0004710.0007900.0004760.000650
47 0.0008820.0016600.000907 0.0005140.0009650.0005250.000716
48 0.0009670.0019910.001004 0.0005620.0011720.0005820.000793
49 0.0010620.0023750.001115 0.0006150.0014160.0006490.000882
50 0.0011680.0028170.001243 0.0006770.0017010.0007280.000986
51 0.0012870.0030170.001373 0.0007460.0017990.0008080.001091
52 0.0014230.0032340.001547 0.0008280.0019240.0009100.001229
53 0.0015660.0034500.001746 0.0009200.0020760.0010290.001388
54 0.0017290.0036830.001981 0.0010260.0022620.0011730.001577
55 0.0019150.0039390.002333 0.0011460.0024790.0013990.001866
56 0.0021370.0042320.002802 0.0012780.0027310.0016930.002248
57 0.0024000.0045640.003218 0.0014220.0030170.0019650.002592
58 0.0027140.0049390.003693 0.0015780.0033390.0022610.002977
59 0.0030880.0053650.004223 0.0017450.0036950.0025950.003409
60 0.0035250.0058420.004830 0.0019200.0040810.0029910.003911
61 0.0040290.0063690.005512 0.0021060.0045000.0034960.004504
62 0.0046060.0069510.006272 0.0023020.0049470.0040470.005160
63 0.0052680.0076030.007113 0.0025150.0054320.0047090.005911
64 0.0060160.0083250.007945 0.0027480.0059610.0053320.006639
65 0.0068380.0090970.008833 0.0029970.0065250.0060140.007424
66 0.0076660.0099560.009801 0.0033380.0071590.0068220.008312
67 0.0085650.0108880.010774 0.0037160.0078580.0075960.009185
68 0.0095650.0119340.011848 0.0041440.0086510.0084360.010142
69 0.0106870.0131190.013049 0.0046340.0095570.0093730.011211
70 0.0119350.0144460.014381 0.0051890.0105840.0104010.012391
71 0.0133380.0159490.015888 0.0058240.0117550.0115740.013731
72 0.0149320.0176670.017610 0.0065520.0130940.0129170.015264
73 0.0167220.0196090.019556 0.0073790.0146050.0144340.016995
74 0.0187520.0218240.021776 0.0083290.0163360.0161730.018975
75 0.0210540.0243570.024314 0.0094120.0183000.0181490.021232

December 14, 2020 1650 Bulletin No. 2020–51
MaleMaleMale FemaleFemaleFemaleUnisex
Age
2022
Non-Annuitant
Table
2022
Annuitant
Table
2022 Optional
Combined
Table for
Small Plans
2022
Non-Annuitant
Table
2022
Annuitant
Table
2022 Optional
Combined
Table for
Small Plans
2022 Table for
Distributions
Subject to
§ 417(e)(3)
76 0.0236440.0272360.027199 0.0106500.0205460.0204110.023805
77 0.0265530.0305060.030475 0.0120700.0231280.0230150.026745
78 0.0298130.0342240.034201 0.0136890.0260910.0260070.030104
79 0.0334460.0384330.038420 0.0155280.0294890.0294420.033931
80 0.0374950.0432050.043205 0.0176210.0334050.0334050.038305
81 0.0395050.0484550.048455 0.0194450.0377440.0377440.043100
82 0.0432210.0544380.054438 0.0229070.0427120.0427120.048575
83 0.0487050.0612540.061254 0.0280590.0484100.0484100.054832
84 0.0560150.0690370.069037 0.0349570.0549320.0549320.061985
85 0.0652130.0778490.077849 0.0436470.0623320.0623320.070091
86 0.0763350.0877850.087785 0.0541660.0707040.0707040.079245
87 0.0893900.0989330.098933 0.0665180.0800860.0800860.089510
88 0.1044990.1114470.111447 0.0807540.0905280.0905280.100988
89 0.1216190.1253570.125357 0.0969040.1021070.1021070.113732
90 0.1408330.1408330.140833 0.1149810.1149810.1149810.127907
91 0.1571510.1571510.157151 0.1288610.1288610.1288610.143006
92 0.1739720.1739720.173972 0.1435530.1435530.1435530.158763
93 0.1909040.1909040.190904 0.1589680.1589680.1589680.174936
94 0.2078160.2078160.207816 0.1748350.1748350.1748350.191326
95 0.2244970.2244970.224497 0.1910510.1910510.1910510.207774
96 0.2425470.2425470.242547 0.2083750.2083750.2083750.225461
97 0.2611410.2611410.261141 0.2264410.2264410.2264410.243791
98 0.2802400.2802400.280240 0.2450680.2450680.2450680.262654
99 0.2999870.2999870.299987 0.2643780.2643780.2643780.282183
100 0.3200710.3200710.320071 0.2842000.2842000.2842000.302136
101 0.3403470.3403470.340347 0.3043640.3043640.3043640.322356
102 0.3606860.3606860.360686 0.3246580.3246580.3246580.342672
103 0.3807470.3807470.380747 0.3451050.3451050.3451050.362926
104 0.4003800.4003800.400380 0.3651970.3651970.3651970.382789
105 0.4186800.4186800.418680 0.3848730.3848730.3848730.401777
106 0.4364270.4364270.436427 0.4039960.4039960.4039960.420212
107 0.4533250.4533250.453325 0.4221700.4221700.4221700.437748
108 0.4690180.4690180.469018 0.4394660.4394660.4394660.454242
109 0.4839200.4839200.483920 0.4557490.4557490.4557490.469835
110 0.4976700.4976700.497670 0.4708920.4708920.4708920.484281
111 0.5024690.5024690.502469 0.4849850.4849850.4849850.493727
112 0.5016600.5016600.501660 0.4979560.4979560.4979560.499808
113 0.5009040.5009040.500904 0.5031660.5031660.5031660.502035
114 0.5001510.5001510.500151 0.5013030.5013030.5013030.500727
115 0.4993000.4993000.499300 0.4995500.4995500.4995500.499425
116 0.4996000.4996000.499600 0.4997500.4997500.4997500.499675

Bulletin No. 2020–51 1651 December 14, 2020
MaleMaleMale FemaleFemaleFemaleUnisex
Age
2022
Non-Annuitant
Table
2022
Annuitant
Table
2022 Optional
Combined
Table for
Small Plans
2022
Non-Annuitant
Table
2022
Annuitant
Table
2022 Optional
Combined
Table for
Small Plans
2022 Table for
Distributions
Subject to
§ 417(e)(3)
117 0.4998000.4998000.499800 0.4998500.4998500.4998500.499825
118 0.4999500.4999500.499950 0.5000000.5000000.5000000.499975
119 0.5000000.5000000.500000 0.5000000.5000000.5000000.500000
120 1.0000001.0000001.000000 1.0000001.0000001.0000001.000000

December 14, 2020 1652 Bulletin No. 2020–51
Part IV
26 CFR Part 301
Notice of Proposed
Rulemaking
Treatment of Special
Enforcement Matters
REG-123652-18
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking.
SUMMARY: This document contains pro-
posed regulations to except certain part-
nership-related items from the centralized
partnership audit regime that was created
by the Bipartisan Budget Act of 2015, and
sets forth alternative rules that will apply.
The centralized partnership audit regime
does not apply to a partnership-related
item if the item involves a special en-
forcement matter described in these reg-
ulations. Additionally, these regulations
propose changes to the regulations to ac-
count for changes to the Internal Revenue
Code (Code). Finally, these proposed reg-
ulations also make related and clarifying
amendments to the final regulations under
the centralized partnership audit regime.
The proposed regulations would affect
partnerships and partners to whom special
enforcement matters apply.
DATES: Written or electronic comments
must be received by January 25, 2021.
ADDRESSES: Commenters are strongly
encouraged to submit public comments
electronically. Submit electronic submis-
sions via the Federal eRulemaking Portal
at www.regulations.gov (indicate IRS and
REG-123652-18) by following the online
instructions for submitting comments.
Once submitted to the Federal eRulemak-
ing Portal, comments cannot be edited
or withdrawn. The IRS expects to have
limited personnel available to process
public comments that are submitted on
paper through mail. Until further notice,
any comments submitted on paper will
be considered to the extent practicable.
The Department of the Treasury (Trea-
sury Department) and the IRS will pub-
lish for public availability any comment
submitted electronically, and to the extent
practicable on paper, to its public docket.
Send paper submissions to: CC:PA:LP-
D:PR (REG-123652-18), room 5203,
Internal Revenue Service, PO Box 7604,
Ben Franklin Station, Washington, D.C.
20044.
FOR FURTHER INFORMATION CON-
TACT: Concerning the proposed regula-
tions, Jennifer M. Black of the Office of
Associate Chief Counsel (Procedure and
Administration), (202) 317-6834; and
concerning submissions of comments
and/or requests for a public hearing, Regi-
na Johnson, (202) 317-5177 (not toll-free
numbers).
SUPPLEMENTARY INFORMATION:
Background
This document contains proposed
amendments to the Procedure and Admin-
istration Regulations (26 CFR part 301)
regarding special enforcement matters
under section 6241(11) of the Code and
the collection of amounts due under the
centralized partnership audit regime pur-
suant to section 6241(7) of the Code. Sec-
tion 6241(11) was enacted by section 206
of the Tax Technical Corrections Act of
2018, contained in Title II of Division U
of the Consolidated Appropriations Act of
2018, Public Law 115-141 (TTCA). This
document also contains several proposed
amendments to the final regulations on the
centralized partnership audit regime pub-
lished in TD 9844 (84 FR 6468) on Feb-
ruary 27, 2019.
Section 1101(a) of the Bipartisan Bud-
get Act of 2015, Public Law 114-74 (BBA)
amended chapter 63 of the Code (chapter
63) by removing former subchapter C of
chapter 63 effective for partnership tax-
able years beginning after December 31,
2017. Former subchapter C of chapter 63
contained the unified partnership audit
and litigation rules enacted by the Tax
Equity and Fiscal Responsibility Act of
1982, Public Law 97-248 (TEFRA) that
were commonly referred to as the TEFRA
partnership procedures or simply, TEFRA.
Section 1101(b) of the BBA removed sub-
chapter D of chapter 63 and amended
chapter 1 of the Code (chapter 1) by re-
moving part IV of subchapter K of chapter
1, rules applicable to electing large part-
nerships, effective for partnership taxable
years beginning after December 31, 2017.
Section 1101(c) of the BBA replaced the
TEFRA partnership procedures and the
rules applicable to electing large partner-
ships with a centralized partnership audit
regime that determines adjustments and,
in general, determines, assesses, and col-
lects tax at the partnership level. Section
1101(g) of the BBA set forth the effective
dates for these statutory amendments,
which are effective generally for returns
filed for partnership taxable years begin-
ning after December 31, 2017. On De-
cember 18, 2015, section 1101 of the BBA
was amended by the Protecting Americans
from Tax Hikes Act of 2015, Public Law
114-113 (PATH Act). The amendments
under the PATH Act are effective as if in-
cluded in section 1101 of the BBA, and
therefore, subject to the effective dates in
section 1101(g) of the BBA.
Enacted on March 23, 2018, the TTCA
made a number of technical corrections to
the centralized partnership audit regime,
including adding sections 6241(11) (re-
garding the treatment of special enforce-
ment matters) and 6232(f) (regarding the
collection of the imputed underpayment
and other amounts due from partners of
the partnership in the event the amounts
are not paid by the partnership) to the
Code. The amendments to subchapter C
of chapter 63 included in the TTCA are
effective as if included in section 1101
of the BBA, and therefore, subject to the
effective dates in section 1101(g) of the
BBA.
On January 2, 2018, the Treasury De-
partment and the IRS published in the
Federal Register (82 FR 28398) final
regulations under section 6221(b) provid-
ing rules for electing out of the centralized
partnership audit regime (TD 9829).
On August 9, 2018, the Treasury De-
partment and the IRS published in the Fed-
eral Register (83 FR 39331) final regula-
tions under section 6223 providing rules

Bulletin No. 2020–51 1653 December 14, 2020
relating to partnership representatives and
final regulations under §301.9100-22 pro-
viding rules for electing into the central-
ized partnership audit regime for taxable
years beginning on or after November 2,
2015, and before January 1, 2018. Cor-
responding temporary regulations under
§301.9100-22T were also withdrawn (TD
9839).
On February 27, 2019, the Treasury
Department and the IRS published in the
Federal Register (84 FR 6468) final reg-
ulations implementing sections 6221(a),
6222, and 6225 through 6241 of the cen-
tralized partnership audit regime (TD
9844).
Under section 6241(11), in the case of
partnership-related items involving spe-
cial enforcement matters, the Secretary
of the Treasury or his delegate (Secre-
tary) may prescribe regulations provid-
ing that the centralized partnership audit
regime (or any portion thereof) does not
apply to such items and that such items
are subject to special rules as the Secre-
tary determines to be necessary for the
effective and efficient enforcement of the
Code. For purposes of section 6241(11),
the term “special enforcement matters”
means: (1) failure to comply with the re-
quirements of section 6226(b)(4)(A)(ii)
(regarding the requirement for a partner-
ship-partner or S corporation partner to
furnish statements or compute and pay
an imputed underpayment); (2) assess-
ments under section 6851 (relating to ter-
mination assessments of income tax) or
section 6861 (relating to jeopardy assess-
ments of income, estate, gift, and certain
excise taxes); (3) criminal investigations;
(4) indirect methods of proof of income;
(5) foreign partners or partnerships; and
(6) other matters that the Secretary de-
termines by regulation present special
enforcement considerations.
Explanation of Provisions
On January 14, 2019, the IRS pub-
lished in the Internal Revenue Bulletin
Notice 2019-06, 2019-03 IRB 353 (Notice
2019-06), informing taxpayers that the
Treasury Department and the IRS intend-
ed to propose regulations addressing two
special enforcement matters under section
6241(11). These regulations propose the
rules addressed in Notice 2019-06 and
several other rules regarding special en-
forcement matters under section 6241(11).
These regulations also propose sev-
eral changes to regulations finalized in
TD 9844 to provide clarity regarding
certain provisions. Changes are required
to the regulations finalized in TD 9844
to address the treatment of chapter 1 tax-
es, penalties, additions to tax, additional
amounts, and any imputed underpayments
previously reported by the partnership
adjusted as part of an examination under
the centralized partnership audit regime
to correspond to the addition of proposed
§301.6241-7(g), which is discussed in part
5.F of this Explanations of Provisions.
Additional edits are proposed to modify
the rules implementing section 6241(7)
regarding the treatment of adjustments
when a partnership ceases to exist to ac-
count for the addition of section 6232(f)
to the Code. Finally, minor clarifying edits
are proposed.
In addition to the changes listed above,
certain regulations have been reordered
or renumbered, typographical errors have
been corrected, and nonsubstantive edito-
rial changes have been made.
1. Election Out of the Centralized
Partnership Audit Regime
Certain partnerships may elect out of the
centralized partnership audit regime under
section 6221(b). Section 301.6221(b)-1
provides the rules for electing out of the
centralized partnership audit regime, in-
cluding determining whether a partnership
is eligible to elect out of the centralized
partnership audit regime. A partnership is
eligible to make an election out if it has
100 or fewer partners for the taxable year,
each partner in the partnership is an eli-
gible partner, the election is timely made
in the manner prescribed by the Secretary,
and the partnership notifies its partners of
the election in the manner prescribed by
the Secretary. Section 301.6221(b)-1(b)
(2)(i) generally provides that a partnership
has 100 or fewer partners if the partnership
is required to furnish 100 or fewer state-
ments under section 6031(b) for the tax-
able year. As part of determining whether
a partnership has 100 or fewer partners,
section 6221(b)(2)(A) and §301.6221(b)-
1(b)(2)(ii) require a partnership with a
partner that is an S corporation (as defined
in section 1361(a)(1)) to take into account
each statement required to be furnished by
the S corporation to its shareholders under
section 6037(b) for the taxable year of the
S corporation ending with or within the
partnership’s taxable year.
Eligible partners are those per-
sons prescribed in section 6221(b)(1)
(C) and §301.6221(b)-1(b)(3)(i). Un-
der §301.6221(b)-1(b)(3)(ii)(D) a part-
ner is not an eligible partner if the part-
ner is a “disregarded entity described
in §301.7701-2(c)(2)(i).” Proposed
§301.6221(b)-1(b)(3)(ii)(D) changes “dis-
regarded entity described in §301.7701-
2(c)(2)(i)” to “a wholly-owned entity
disregarded as separate from its owner for
Federal income tax purposes” and would
include, for example, a qualified REIT
subsidiary (as defined in section 856(i)
(2)) or grantor trust. This change is made
to be consistent with the description of a
disregarded entity used elsewhere in the
regulations under the centralized partner-
ship audit regime. See, e.g., §§301.6225-
2; 301.6226-3; 301.6241-1.
The proposed regulations also add
§301.6221(b)-1(b)(3)(ii)(G), which ad-
dresses partnerships with qualified sub-
chapter S subsidiaries (QSubs) as part-
ners to remove any ambiguity regarding
whether a partnership with a QSub as a
partner can elect out of the centralized
partnership audit regime. A QSub is de-
fined in section 1361(b)(3)(B) as any do-
mestic corporation that is not an ineligible
corporation (as defined in section 1361(b)
(2)) if 100 percent of the stock of such cor-
poration is held by an S corporation and
the S corporation elects to treat such cor-
poration as a QSub. See §1.1361-4(a)(1).
However, section 1361(b)(3)(A) provides
that, “[e]xcept as provided in regulations
prescribed by the Secretary, for purposes
of this title” (that is, the Code): (i) a cor-
poration that is a QSub is not treated as
a separate corporation, and (ii) all assets,
liabilities, and items of income, deduc-
tion, and credit, of a QSub are treated as
assets, liabilities, and such items (as the
case may be) of its parent S corporation.
Further, section 1361(b)(3)(E) provides
that, except to the extent provided by the
Secretary, the rules of section 1361(b)(3)
do not apply with respect to the provisions
of part III of subchapter A of chapter 61
of the Code (relating to information re-

December 14, 2020 1654 Bulletin No. 2020–51
porting). That is, a QSub is treated as a
separate corporation for information re-
porting purposes. See §1.1361-4(a)(9).
Section 6031(b), one of the provisions
of part III of subchapter A of chapter 61,
provides that each partnership required to
file a return must furnish to each person
who is a partner or who holds an interest
in the partnership as a nominee for anoth-
er person at any time during a partnership
taxable year a copy of the information re-
quired to be shown on the return as may be
required by regulations. Thus, if a QSub is
treated as a partner in a partnership, then
under section 6031(b) the partnership is
required to furnish a statement containing
its return information to the QSub.
Notice 2019-06 states that partnership
structures with QSubs as partners present
special enforcement concerns because al-
lowing a partnership with a QSub partner
to elect out of the centralized partnership
audit regime would enable a partnership
to elect out in situations where there are
over 100 ultimate taxpayers. If a partner-
ship elects out of the centralized partner-
ship audit regime, any adjustments must
be made in examinations of the ultimate
taxpayers who own interests in the part-
nership. To limit the number of examina-
tions the IRS must conduct, Congress de-
termined that only partnerships with 100
or fewer partners could elect out of the
centralized partnership audit regime. Sec-
tion 6221(b). In addition, under section
6221(b), partnerships with partners that
are flow-through entities, except for part-
ners that are S corporations, are ineligible
to elect out of the centralized partnership
audit regime. For partnerships with S cor-
poration partners, the shareholders of the
S corporation partner are counted in deter-
mining if the partnership has 100 or fewer
partners. Section 6221(b)(2)(A). Accord-
ingly, if such partnerships elect out of the
centralized partnership audit regime, this
will generally result in there being less
than 101 ultimate taxpayers to potentially
examine. However, as described above, if
partnerships with QSubs as partners are
eligible to elect out, this may result in the
IRS having to examine more than 100 ul-
timate taxpayers for a particular partner-
ship.
For example, in contrast to S corpora-
tions, if a QSub was an eligible partner
for purposes of section 6221, because
a QSub is not an S corporation, the spe-
cial rules for S corporations under section
6221(b)(2)(A) and §301.6221(b)-1(b)(2)
(ii) would not apply to a QSub partner.
These special rules require the partner-
ship to count the number of statements
required to be furnished by the S corpo-
ration partner in determining if the part-
nership has 100 or fewer partners for the
taxable year. Therefore, in a situation
where a partnership that has a QSub as a
partner and 99 other individual partners
for purposes of section 6031(b), the stock
of the S corporation that wholly owned the
stock of the QSub could be owned by well
over 100 ultimate taxpayers who satisfy
the requirements of section 1361(b)(1)
(A) (limiting the number of shareholders
of an S corporation to 100) by reason of
section 1361(c)(1) (treating members of a
family as one shareholder for purposes of
section 1361(b)(1)(A)). Allowing such a
partnership to elect out of the centralized
partnership regime would clearly frustrate
the efficiencies the regime was intended to
create.
To avoid this result and the attendant
special enforcement concerns, Notice
2019-06 states that the Treasury Depart-
ment and the IRS intend to propose regu-
lations under section 6241(11)(B)(vi) pro-
viding that the ability to elect out of the
centralized partnership audit regime under
section 6221(b) generally does not apply
to a partnership with a QSub as a partner.
Notice 2019-06 states that the proposed
regulations would apply a rule similar to
the rules for S corporations under section
6221(b)(2)(A), which would require an
S corporation holding the QSub stock to
disclose the name and taxpayer identifica-
tion number of each person with respect
to whom the S corporation is required to
furnish a statement under section 6037(b)
for the taxable year of the S corporation
ending with or within the partnership tax-
able year. Such statements are treated as
if they were furnished by the partnership.
See section 6221(b)(2)(A)(ii). Therefore,
under Notice 2019-06, each statement
furnished by the partnership to the S cor-
poration, and by the S corporation to its
shareholders, would be included in deter-
mining if the partnership has 100 or fewer
partners for the taxable year for purposes
of the election out of the centralized part-
nership audit regime.
In determining whether a QSub is an
eligible partner under section 6221(b),
Notice 2019-06 cites to section 1361(a)
(2), which provides that a corporation,
other than an S corporation (as defined in
section 1361(b)(1)), is a C corporation.
Comments to the centralized partnership
audit regime and Notice 2019-06 revealed
a lack of consensus regarding how section
1361 should be interpreted.
A comment relating to rules for electing
out of the centralized partnership audit re-
gime requested guidance confirming that
a partner’s status as a QSub does not pre-
vent a partnership from electing out of the
centralized partnership audit regime based
on the belief that current law under section
1361 treats a QSub as an eligible partner
(that is, a C corporation) and so requires
this result. Further, the comment stated that
a QSub is not a disregarded entity as de-
scribed in §301.7701-2(c)(2)(i) and even if
a QSub is ignored for most Federal tax pur-
poses, such treatment is afforded by section
1361(b)(3)(A)(i) and not §301.7701-2(c)
(2)(i). Section 301.7701-2(c)(2)(i) provides
that a business entity that has a single own-
er and is not a “per se” corporation under
§301.7701-2(b) is disregarded as an entity
separate from its owner. Thus, the com-
ment concluded that a QSub could never be
the type of disregarded entity that Treasury
regulations identify as an ineligible partner.
In contrast, another comment in re-
sponse to Notice 2019-06 stated that No-
tice 2019-06 incorrectly states that, be-
cause a QSub is not an S corporation, it is
a C corporation and therefore, an eligible
partner under section 6221(b). The com-
ment provided the rationale that, when a
corporation makes a QSub election, it is
treated under section 1361(b)(3)(A) as
if it liquidated into its parent S corpora-
tion and accordingly, no longer exists, for
purposes of the Code, as a separate entity
for Federal tax purposes (even though for
state law purposes, such as limited lia-
bility, it still exists). Therefore, the com-
ment stated that a QSub is not a partner
under section 6221(b) and concluded that
the parent S corporation is treated as the
partner and that the S corporation, not the
QSub, should provide its shareholder in-
formation to the partnership under section
6221(b)(2) for purposes of determining
whether the partnership may elect out of
the centralized partnership audit regime.

Bulletin No. 2020–51 1655 December 14, 2020
Although Notice 2019-06 states that
the proposed regulations would have ap-
plied a rule similar to the rules for S cor-
porations under section 6221(b)(2)(A) to
partnerships with a QSub as a partner,
the Treasury Department and the IRS
have reconsidered that approach. Under
§301.6221(b)-1(b)(3)(ii), partnerships that
have disregarded entities as partners may
not elect out of the centralized partnership
audit regime. QSubs are treated similarly
to disregarded entities for most purposes
under the Code in that both QSubs and
disregarded entities do not file income tax
returns but instead report their items of
income and loss on the returns of the per-
son who wholly owns the entity. Thus, as
described earlier in this part and in Notice
2019-06, the Treasury Department and
the IRS have determined that partnership
structures with QSubs as partners present
special enforcement concerns because al-
lowing a partnership with a QSub partner
to elect out of the centralized partnership
audit regime would enable a partnership
to elect out in situations where there are
over 100 ultimate taxpayers, thereby frus-
trating the efficiencies the regime was
intended to create. To make clear to tax-
payers that a QSub cannot be used to fa-
cilitate the election out of the centralized
partnership audit regime by a partnership
with greater than 100 ultimate taxpayers,
the Treasury Department and the IRS
have determined it is necessary for the
proposed regulations to address such a
special enforcement concern by treating
QSubs as ineligible partners for purposes
of section 6221. Accordingly, proposed
§301.6221(b)-1(b)(3)(ii)(G) provides
that a QSub is not an eligible partner for
purposes of making an election out of the
centralized partnership audit regime under
section 6221(b). Therefore, if a QSub is a
partner in a partnership and required to be
furnished a statement by the partnership
under section 6031(b), that partnership
will not be eligible to make an election
under section 6221(b) to elect out of the
centralized partnership audit regime.
2. Imputed Underpayments, Chapter 1
Taxes, Penalties, Additions to Tax, and
Additional Amounts
If the IRS adjusts a partnership’s chap-
ter 1 taxes, penalties, additions to tax, or
similar amounts utilizing the centralized
partnership audit regime, there must be a
mechanism for including these amounts in
the imputed underpayment and account-
ing for these amounts if the partnership
elects to push out the adjustments under
section 6226. In addition, there must also
be a mechanism to account for any ad-
justments to a previously determined im-
puted underpayment. Accordingly, these
proposed rules apply to the calculation of
the imputed underpayment during an IRS
examination and to adjustments to the im-
puted underpayment as calculated by the
partnership. For example, the rules apply
to the filing of an administrative adjust-
ment request (AAR) when the partner-
ship-partner computes and pays an imput-
ed underpayment. For proposed changes
related to §301.6241-3, see part 4, Cease
to Exist.
A. Inclusion of Adjustments to an
Imputed Underpayment and the
Partnership’s Chapter 1 Taxes, Penalties,
Additions to Tax, or Additional Amounts
in an Imputed Underpayment
Section 301.6225-1 provides rules for
how to calculate the imputed underpay-
ment. First, all adjustments are placed
into groups of similar adjustment types
and netted appropriately, resulting in net
positive or negative adjustments (as de-
scribed in §301.6225-1(e)(4)(i)). Most net
positive adjustments to items of income,
gain, loss, and deduction are then added
together to create a total netted partner-
ship adjustment and a tax rate is then ap-
plied. That amount is then increased or
decreased by any adjustments to credits.
Credits are not included in earlier steps of
the imputed underpayment calculation be-
cause credits generally adjust a taxpayer’s
amount of tax owed on a dollar-for-dollar
basis after a tax rate has been applied. If
adjustments to credits were taken into ac-
count as part of the total netted partner-
ship adjustment before the tax rate was
applied, the value of the credits would be
reduced by the tax rate applied and, be-
cause of that reduction, would no longer
operate as an increase or decrease in tax
on a dollar-for-dollar basis.
Proposed §301.6225-1 modifies the
final regulations under §301.6225-1 to
provide a mechanism for including the
partnership’s chapter 1 taxes, penalties,
additions to tax, or additional amounts,
as well as any adjustment to a previously
determined imputed underpayment (chap-
ter 1 liabilities), in the calculation of the
imputed underpayment. Under proposed
§301.6225-1(c)(3), any adjustments to the
partnership’s chapter 1 liabilities will be
placed in the credit grouping and treated
similarly to credit adjustments for purpos-
es of calculating the imputed underpay-
ment. Adjustments to these amounts are
placed into the credit grouping because,
similar to credits, they change the amount
the partnership owes on a dollar-per-dol-
lar basis. Multiplying these adjustments
to chapter 1 liabilities by a tax rate after
the amount has been calculated would be
inappropriate because, like credits, these
amounts increase or decrease the amount
owed on a dollar-per-dollar basis. If these
chapter 1 liabilities were included with the
other partnership adjustments, they would
be multiplied by a tax rate, which would
inappropriately reduce the amount of the
partnership’s chapter 1 liabilities. Thus,
treating adjustments to chapter 1 liabilities
similarly to credit adjustments allows for
appropriate increases or decreases to the
imputed underpayment.
The proposed addition to §301.6225-
1(d)(2)(ii) provides that a decrease in a
chapter 1 liability is treated as a negative
adjustment. Because §301.6225-1(d)(2)
(iii) provides that a positive adjustment
is any adjustment that is not a negative
adjustment as defined in §301.6225-1(d)
(2)(ii), the proposed addition to the defi-
nition of a negative adjustment has the
result of making an increase in a chapter
1 liability a positive adjustment. Because
§301.6225-1(e)(4) defines net positive
adjustments and net negative adjustments
with respect to the definitions of positive
and negative adjustments, the proposed
addition to §301.6225-1(d)(2)(ii) affects
those definitions as well.
In general, net positive adjustments are
used to calculate the imputed underpay-
ment, and net negative adjustments are ad-
justments that do not result in an imputed
underpayment as described in §301.6225-
1(f). An exception to that rule is the
treatment of credit adjustments. Both net
positive and net negative adjustments to
credits may be included in the calculation
of the imputed underpayment to increase

December 14, 2020 1656 Bulletin No. 2020–51
or decrease the imputed underpayment
amount after the tax rate is applied to oth-
er adjustments. See §301.6225-1(b)(1)(v)
and (e)(3)(ii). If a net negative adjustment
applied to the imputed underpayment re-
duces the amount of the imputed under-
payment to zero or below zero, the imput-
ed underpayment adjustments are treated
as adjustments that do not result in an
imputed underpayment under §301.6225-
1(f)(1)(ii). These adjustments would then
be taken into account by the partnership
on the adjustment year return pursuant to
§301.6225-3 or by the reviewed year part-
ners pursuant to §301.6226-3.
This rule does not operate well, howev-
er, when the adjustment that has reduced
the imputed underpayment below zero is
a net negative adjustment to chapter 1 li-
abilities because the chapter 1 liabilities
at issue are adjustments to the liability
of the partnership, not the partners, and
they are thus neither properly allocat-
ed to the partners after they are reported
on the partnership’s next filed return nor
properly pushed out to the partners under
section 6226. These amounts could be
used to offset another chapter 1 liability of
the partnership, but partnerships may not
have those types of items on their returns
each year because partnerships are often
not liable for tax under chapter 1. Treating
these amounts similarly to other adjust-
ments could result in an amount reported
on the partnership’s return that would not
result in an overpayment to the partnership
and for which there may not be an item to
offset in the adjustment year. Accordingly,
for partnerships to take advantage of a net
negative adjustment to these chapter 1 lia-
bilities, a special rule is required.
The proposed addition to §301.6225-
1(e)(3)(ii), along with proposed
§301.6225-1(f)(1)(ii) and (f)(3), provides
two special rules for the treatment of a net
negative adjustment to chapter 1 liabil-
ities. Under the first rule, a net negative
adjustment to a credit is normally treated
as an adjustment that does not result in an
imputed underpayment under §301.6225-
1(f)(1)(i), unless the IRS makes a deter-
mination to have it offset the imputed
underpayment. The proposed addition to
§301.6225-1(e)(3)(ii) states that a net neg-
ative adjustment to one of the chapter 1
liabilities is not an adjustment described
in §301.6225-1(f).
The second rule creates an exception
to §301.6225-1(f)(1)(ii), which provides
that if the calculation of the imputed un-
derpayment under §301.6225-1(b)(1) re-
sults in a number that is zero or less than
zero, the partnership adjustments associat-
ed with that calculation are treated as ad-
justments that do not result in an imputed
underpayment. Proposed §301.6225-1(f)
(3) provides a new method for calculating
the imputed underpayment if the imputed
underpayment calculation results in zero
or less than zero and includes a net neg-
ative adjustment to one of the chapter 1
liabilities at issue. This new calculation
provides that the imputed underpayment
be recalculated using all partnership ad-
justments under §301.6225-1(b)(1) except
for the net negative adjustments to the
chapter 1 liabilities. Once that calculation
is complete, if the imputed underpayment
is a number greater than zero, the imput-
ed underpayment may be reduced, but not
below zero, using the net negative adjust-
ment to the chapter 1 liabilities at issue.
If this happens, the adjustments that went
into the calculation are not adjustments
that do not result in an imputed under-
payment because the partnership has ef-
fectively paid the imputed underpayment
calculated on these adjustments through
the application of the net negative adjust-
ment to chapter 1 liabilities (or a portion
thereof). Any remaining portion of the net
negative adjustment to chapter 1 liabilities
is not an adjustment that does not result
in an imputed underpayment. If, however,
the imputed underpayment is already zero
or less than zero, the net negative adjust-
ments to the chapter 1 liabilities are not
added back to the imputed underpayment
calculation, and the net negative adjust-
ments to the chapter 1 liabilities are not
treated as adjustments that do not result in
an imputed underpayment.
If there is an additional amount of the
net negative adjustment to chapter 1 lia-
bilities that was not included in the im-
puted underpayment calculation (that is,
there was excess after the imputed under-
payment was reduced to zero or if the im-
puted underpayment was zero or less than
zero regardless of the net negative adjust-
ment to chapter 1 liabilities), the partner-
ship may be able to recoup that amount to
offset a prior payment. For instance, if the
adjustment related to an amount previous-
ly paid by the partnership, the partnership
may file a claim for refund of the amount
in accordance with section 6511. Alterna-
tively, if the amount has not been previ-
ously paid by the partnership, the remain-
ing net negative adjustment to a chapter 1
liability will reduce the amount of chapter
1 tax, penalty, additional amount, addition
to tax, or imputed underpayment owed by
the partnership.
B. Exception to the Section 6226 Push
Out Election
Proposed §301.6226-2(g)(4) provides
that a partnership that makes an election
under section 6226 (sometimes called a
“push out election”) must pay any chap-
ter 1 taxes, penalties, additions to tax, and
additional amounts or the amount of any
adjustment to an imputed underpayment
at the time statements are furnished to its
partners in accordance with §301.6226-
2. Because these amounts are the part-
nership’s liability, partnerships are not
permitted to push out any adjustments to
these items when making the push out
election.
3. Adjustments to Items that are Not Items
of Income, Gain, Loss, Deduction, or
Credit
The final regulations implementing
section 6225 do not expressly explain how
adjustments to items that are not items of
income, gain, loss, deduction, or credit
(collectively referred to as “non-income
items”) are taken into account 1) in the
calculation of the imputed underpayment;
2) as adjustments that do not result in an
imputed underpayment; or 3) if the part-
nership elects to push out the adjustments
to its reviewed year partners. Examples
of non-income items include the partner-
ship’s assets, liabilities, and capital ac-
counts. Accordingly, amendments are pro-
posed to the final regulations to clarify the
treatment of adjustments to non-income
items.
Under section 6241(2)(A) and
§301.6241-1(a)(6)(i), a partnership ad-
justment is any adjustment to a partner-
ship-related item. Under section 6241(2)
(B) and §301.6241-1(a)(6)(ii), a partner-
ship-related item is any item or amount
that is relevant in determining the chapter

Bulletin No. 2020–51 1657 December 14, 2020
1 liability of any person that is reflected,
or required to be reflected, on the partner-
ship’s return under section 6031 for the
taxable year or required to be maintained
in the partnership’s books and records,
any partner’s distributive share of such
items, and the imputed underpayment.
Accordingly, adjustments to non-income
items that meet this definition are partner-
ship-related items. See, e.g., §301.6241-
1(a)(6)(ii)(C)-(E). Under §301.6225-1(a)
(1), all partnership adjustments, including
adjustments to non-income items, are tak-
en into account in determining whether
the adjustments result in an imputed un-
derpayment.
In some cases, adjustments to non-in-
come items will be related to adjustments
to items of income, gain, loss, deduction,
or credit (for example, if an item was
expensed that was required to be capital-
ized). Under §301.6225-1(b)(4), the IRS
may treat an adjustment as zero solely for
purposes of calculating an imputed un-
derpayment if that adjustment is reflected
in one or more partnership adjustments.
Accordingly, the IRS could, if appropri-
ate, treat an adjustment to a non-income
item as zero solely for purposes of cal-
culating the imputed underpayment if the
effect of the adjustment is already reflect-
ed in an adjustment to an item of income,
gain, loss, deduction, or credit. However,
§301.6225-1(b)(4) only provides this au-
thority to the IRS. Accordingly, an addi-
tion is proposed to §301.6225-1(b)(4) to
provide that, generally, an adjustment to
a non-income item that is related to, or
results from, an adjustment to an item of
income, gain, loss, deduction, or credit is
treated as zero as part of the calculation of
an imputed underpayment unless the IRS
determines that the adjustment should be
included in the imputed underpayment.
This proposed addition not only clarifies
the rule in §301.6225-1(b)(4) but also
extends the rule in §301.6225-1(b)(4) to
persons other than the IRS. Consequent-
ly, when filing an AAR a partnership may
treat an adjustment to a non-income item
as zero if the adjustment is related to, and
the effect is reflected in, an adjustment to
an item of income, gain, loss, deduction, or
credit unless the IRS subsequently deter-
mines, in an examination of the AAR, that
both adjustments should be included in the
calculation of the imputed underpayment.
As discussed in part 2.A of this Expla-
nation of Provisions, §301.6225-1(d)(2)
(iii)(A) defines a “positive adjustment” as
any adjustment that is not a negative ad-
justment. An adjustment to a non-income
item, by definition, is not an adjustment to
an item of income, gain, loss, deduction,
credit, or chapter 1 liability, therefore, and
is a positive adjustment. However, as with
any other adjustment, an adjustment to a
non-income item may be an adjustment
that does not result in an imputed under-
payment, as defined in §301.6225-1(f), if
the adjustment is included in a calculation
that results in an amount that is zero or
less than zero.
Proposed §301.6225-3(b)(8) clarifies
the rules for taking into account adjust-
ments to non-income items if they are
adjustments that do not result in an im-
puted underpayment. Under proposed
§301.6225-3(b)(8), a partnership takes
into account adjustments to non-income
items in the adjustment year by adjust-
ing the item on its adjustment year return
to be consistent with the adjustment (for
example, in amount, character, or classifi-
cation). However, this only applies to the
extent the item would appear on the ad-
justment year return without regard to the
adjustment. If the item already appears on
the partnership’s adjustment year return as
a non-income item or the item appeared
as a non-income item on any return of the
partnership for a taxable year between the
reviewed year and the adjustment year, the
partnership does not create a new item on
the partnership’s adjustment year return.
For example, if the adjustment results in
the addition of a liability in the reviewed
year but the partnership had reported the
liability on its return for the year immedi-
ately following the reviewed year and the
liability was paid off prior to the adjust-
ment year, then the adjustment to the lia-
bility does not create a new liability in the
adjustment year and the adjustment is dis-
regarded when the partnership takes into
account the adjustments that did not result
in an imputed underpayment on its adjust-
ment year return. Accordingly, the part-
nership takes into account the adjustment
to the non-income item by, for example,
changing the character or amount of the
item on the adjustment year return con-
sistent with the adjustment to the non-in-
come item. Proposed §301.6225-3(d)(3)
provides an example of the application of
this rule.
4. Cease to Exist
Section 6241(7) provides that if a part-
nership ceases to exist prior to the partner-
ship adjustments taking effect, the adjust-
ments are taken into account by the former
partners of the partnership. To utilize the
provisions of section 6241(7) the part-
nership must first have ceased to exist, as
defined in proposed §301.6241-3(b), prior
to the adjustments taking effect. In addi-
tion to the provisions of section 6241(7),
if a partnership has ceased to exist, section
6232(f) provides rules that allow the IRS
to assess a former partner for that part-
ner’s proportionate share of any amounts
owed by the partnership under the central-
ized partnership audit regime.
A. When Partnership Adjustments Take
Effect
Section 301.6241-3(c) provides that
the partnership adjustments take effect
when there is full payment of the tax and
other amounts owed as a result of the
partnership adjustments. If the partner-
ship ceases to exist prior to the amounts
due being fully paid, the former partners
must take into account the adjustments.
This interpretation could potentially pre-
clude the use of section 6232(f) because
if there is an amount due from the partner-
ship any determination that a partnership
has ceased to exist will trigger the rules
under section 6241(7) as it would occur
prior to the adjustments taking effect (i.e.,
full payment).
Section 6232(f) expressly provides
for rules that govern the use of section
6232(f) in situations when a partnership
has ceased to exist. Accordingly, it would
be inconsistent with the intent of Congress
to define when the adjustments take effect
in a way that precludes the use of section
6232(f) when a partnership has ceased to
exist. Therefore, proposed §301.6241-3
amends §301.6241-3(b) to provide that a
partnership adjustment takes effect when
the adjustments become finally deter-
mined as described in §301.6226-2(b)(1);
when the partnership and IRS enter into
a settlement agreement regarding the ad-
justment; or, for adjustments reflected in

December 14, 2020 1658 Bulletin No. 2020–51
an AAR, when the AAR is filed. After
this amendment, the rules under section
6241(7) would apply prior to the adjust-
ments taking effect and the rules under
section 6232(f) would apply once the ad-
justments have taken effect.
As a result of this change, the proposed
regulations contain additional conforming
changes to other provisions in §301.6241-
3. Proposed §301.6241-3(b)(1)(ii) was
modified to provide that a partnership
ceases to exist if the IRS determines that
the partnership does not have the ability
to pay in full any amount that the part-
nership may become liable for under the
centralized partnership audit regime. Pre-
viously, §301.6241-3(b)(1)(ii) provided
that the partnership ceases to exist if the
IRS determines that the partnership does
not have the ability to pay any amounts
due under the centralized partnership au-
dit regime. As proposed §301.6241-3 only
applies prior to the adjustments becoming
finally determined, the partnership would
not have an amount due under the central-
ized partnership audit regime at that time.
Because the partnership would not have
an amount due, §301.6241-3 is incom-
patible with section 6232(f). Accordingly,
proposed §301.6241-3 reconciles section
6232(f) with section 6241(7) in a way that
gives meaning to both sections.
Additionally, proposed §301.6241-3
would remove §301.6241-3(b)(2). Sec-
tion 301.6241-3(b)(2) provides situa-
tions for when the IRS will not determine
that a partnership ceases to exist. Under
§301.6241-3(b)(2), the IRS would not
make such determination if the partner-
ship has a valid election under section
6226 in effect, if a pass-through partner
receives a statement under section 6226
and furnishes statements to its partners, or
if the partnership has not paid any amount
due under the centralized partnership
audit regime, but was able to pay such
amount. As all these exceptions cover sit-
uations where the partnership adjustments
have already been finally determined, this
provision is no longer necessary. Simi-
larly, §301.6241-3(c)(2) regarding partial
payments by the partnership is also pro-
posed to be removed because it is impos-
sible to have an amount due until after the
adjustments become finally determined.
Accordingly, after the changes introduced
by proposed §301.6241-3, there would be
nothing upon which to make a partial pay-
ment before the adjustments take effect.
Finally, §301.6241-3(e)(2)(ii) is pro-
posed to be modified to provide that state-
ments under §301.6241-3 must be fur-
nished to the former partners and filed with
the IRS no later than 60 days after the later
of the date the IRS notifies the partnership
that it has ceased to exist or the date the
adjustments take effect, as described in
§301.6241-3(c). Section 301.6241-3(e)(2)
(ii) provides that statements must be fur-
nished no later than 30 days after the date
the IRS notifies the partnership that the
partnership has ceased to exist. Now, with
the proposed change to when adjustments
take effect, the IRS may determine that a
partnership has ceased to exist prior to the
date the adjustments become finally deter-
mined. To prevent confusion, statements
should not be issued until the adjustments
become final. Section 301.6241-3(e)(2)
(ii) is proposed to be adjusted accordingly.
The proposed change from 30 days to 60
days for furnishing statements is intend-
ed to conform the rules for statements in
§301.6241-3 with those in §301.6226-2.
B. Former Partners
As described previously, if a partner-
ship ceases to exist prior to the adjust-
ments taking effect, the former partners of
the partnership must take the adjustments
into account. Section 301.6241-3(d) de-
fines former partners as the partners from
the adjustment year of the partnership or,
if there were no adjustment year partners,
the partners from the partnership taxable
year for which a final partnership return
is filed. Proposed §301.6241-3(d) mod-
ifies the definition of former partners to
be partners of the partnership during the
last taxable year for which a partnership
return or AAR was filed or the most re-
cent persons determined to be the partners
of the partnership in a final determination
(for example, final court decision, default-
ed notice of final partnership adjustment
(FPA), or settlement agreement). As dis-
cussed previously, proposed §301.6241-
3 applies prior to the adjustments taking
effect. Because the adjustment year does
not exist until the adjustments become
final, proposed §301.6241-3 would not
apply after that point. Accordingly, the
definition of former partners is modified
to reflect the partners that are the partners
of the partnership before the partnership
adjustments take effect.
Finally, the examples under §301.6241-
3(f) are modified to reflect the changes to
§301.6241-3 previously described in this
Explanation of Provisions.
5. Miscellaneous Amendments to
Regulations Finalized in TD 9844
In addition to the amendments de-
scribed above, two other miscellaneous
clarifications to the regulations finalized
in TD 9844 are being proposed in these
regulations.
First, under §301.6225-2(d)(2)(vi)(A),
as part of a request for modification of an
imputed underpayment a pass-through
partner may file an amended return, take
into account its share of the partnership
adjustments, and determine and pay an
amount calculated in the same manner as
the amount computed under §301.6226-
3(e)(4)(iii). In calculating the amount
due under §301.6225-2(d)(2)(vi)(A), a
pass-through partner may, as described
in §301.6225-2(d)(2)(vi)(B), take into
account any modifications approved with
respect to its direct and indirect partners.
Under §301.6226-3(e)(4)(iii), a pass-
through partner calculates an imputed
underpayment on its allocable share of
the adjustments, taking into account any
modifications approved with respect to its
direct and indirect partners. Accordingly,
§301.6225-2(d)(2)(vi)(B) is redundant in
that, under §301.6225-2(d)(2)(vi)(A), a
pass-through partner computes the amount
due by reference to §301.6226-3(e)(4)
(iii), which also allows a pass-through
partner to take into account modifications
approved with respect to its direct and in-
direct owners when computing its amount
due. Therefore, the proposed regulations
propose to remove §301.6225-2(d)(2)(vi)
(B) as in the final regulations and replace
it as described below. Also, additional lan-
guage is added to the end of §301.6225-
2(d)(2)(vi)(A) by the proposed regulations
to clarify the reference to §301.6226-3(e)
(4)(iii) for the needs of a partnership-part-
ner pursuing modification under section
6225.
Section 301.6225-2(d)(2)(vi)(A) is si-
lent as to how the pass-through partner
would take into account any adjustments

Bulletin No. 2020–51 1659 December 14, 2020
that do not result in an imputed under-
payment. Under §301.6226-3(e)(4)(v), a
pass-through partner who pays an imput-
ed underpayment takes into account any
adjustments that did not result in an im-
puted underpayment in accordance with
§301.6225-3 in the taxable year of the
pass-through partner that includes the date
the imputed underpayment is paid. Under
§301.6226-3(e)(4)(v), if there are only ad-
justments that do not result in an imputed
underpayment, the pass-through partner
takes into account those adjustments in
the taxable year of the pass-through part-
ner that includes the date the statement un-
der section 6226 is furnished to that pass-
through partner.
The Treasury Department and the
IRS have determined that a pass-through
partner that pays an amount as part of an
amended return submitted for purposes
of modifying an imputed underpayment
should take into account any adjustments
that do not result in an imputed under-
payment in the taxable year the amount is
paid by the pass-through partner. Howev-
er, unlike under §301.6226-3(e)(4)(v), a
pass-through partner should not be able to
take adjustments that do not result in an
imputed underpayment into account as
part of a request for modification unless
the partnership pays an amount on the
corresponding adjustments that resulted
in an imputed underpayment. If there are
solely adjustments that do not result in an
imputed underpayment, those adjustments
should be subject to modification by the
ultimate taxpayers who reported the orig-
inal amounts and not by any new partners
of the pass-through partner. Accordingly,
proposed §301.6225-3(d)(2)(vi)(B) pro-
vides that a pass-through partner that is
paying an amount as part of an amended
return filed during modification takes into
account any adjustments that do not result
in an imputed underpayment in the tax-
able year of the pass-through partner that
includes the date the payment is made.
This provision, however, does not apply
if no payment is made by the partnership
because no payment is required.
Finally, under §301.6225-3(b)(1), a
partnership adjustment that does not re-
sult in an imputed underpayment is taken
into account as a reduction in non-sepa-
rately stated income or as an increase in
non-separately stated loss for the adjust-
ment year. However, not all adjustments
that do not result in an imputed underpay-
ment are negative adjustments. For ex-
ample, adjustments may not result in an
imputed underpayment because, after the
application of adjustments to credits, the
imputed underpayment is zero or less than
zero. In those cases, it would be inappro-
priate for a positive adjustment to reduce
non-separately stated income or increase
non-separately stated loss. Accordingly,
the proposed change to §301.6225-3(b)(1)
clarifies that adjustments that do not re-
sult in an imputed underpayment, except
as provided in §301.6225-3(b)(2) through
(7), can increase or decrease non-separate-
ly stated income or loss, as appropriate,
depending on whether the adjustment is to
an item of income or loss.
6. Special Enforcement Matters
Proposed §301.6241-7(a) provides the
general rule that the partnership-related
items described in proposed §301.6241-7
involve special enforcement matters.
A. Partnership-Related Item Components
of Non-Partnership-Related Items
Section 6221(a) requires that any ad-
justment to a partnership-related item
must be determined at the partnership
level under the centralized partnership
audit regime, except to the extent other-
wise provided in subchapter C of chapter
63. Section 6241(2)(B) defines a partner-
ship-related item as any item or amount
with respect to the partnership which is
relevant in determining the tax liability
of any person under chapter 1, including
any distributive share of such an item or
amount.
Generally, adjusting partnership-relat-
ed items in a centralized proceeding at
the partnership level is the most efficient
way to determine adjustments to partner-
ship-related items. Under the centralized
partnership audit procedures, the IRS can
then efficiently assess and collect any tax
associated with the adjustments. Requiring
the IRS to adjust certain partnership-re-
lated items at the partnership level in a
centralized proceeding, however, would
interfere with the efficient enforcement
of the Code. These circumstances present
special enforcement considerations.
Specifically, the Treasury Department
and the IRS have determined that special
enforcement considerations are present-
ed where the partnership’s treatment of a
partnership-related item on its return or in
its books and records is based in whole,
or in part, on information provided by a
person other than the partnership. In these
circumstances, it is more efficient for the
IRS and the partner if the IRS makes an
adjustment to a partnership-related item
during an examination of the partner rath-
er than opening a separate examination of
the partnership to first adjust the partner-
ship-related item at issue in the examina-
tion of the partner. It also is likely that the
partnership is not in the best position to
substantiate the information upon which
the partnership’s treatment of that part-
nership-related item is based and may not
have detailed or adequate records regard-
ing the information. In situations in which
the number of partners potentially impact-
ed by an adjustment is limited, adjusting
the partnership-related items in direct
examinations of those partners does not
raise inefficiency or inconsistency con-
cerns that the centralized partnership audit
regime is designed to alleviate. As a result,
it may be a more efficient use of both IRS
and taxpayer resources to examine and ad-
just that partnership-related item in an ex-
amination of the person who provided this
information. The IRS anticipates making
these adjustments in cases in which the
adjustments are likely only relevant to a
single partner or a small group of partners
and are unlikely to involve items that are
allocable to all partners generally or that
impact the partnership as a whole.
For example, if a partner contributes
a non-depreciable asset to a partnership
in exchange for a partnership interest,
any issues regarding the basis in the as-
set may be more easily identified in an
examination of the partner who contrib-
utes the asset than in an examination of
the partnership. Because the asset is not
depreciable the partnership does not take
any depreciation deductions with respect
to the asset. Proper deductions are likely
to be the focus of an examination of the
partnership, but the basis of the asset is not
until the partnership disposes of the asset.
In contrast, the contribution of the asset
itself is a partnership-related item, and
the basis of the asset that is contributed is

December 14, 2020 1660 Bulletin No. 2020–51
taken into account in determining the part-
ner’s basis in the partnership interest (not
a partnership-related item). The partner’s
basis in the partnership interest may affect
the ability of the partner to claim a dis-
tributive share of deductions or losses or
the computation of gain or loss the partner
would recognize on the sale of the part-
nership interest, items that are commonly
reviewed in an examination of a partner.
These types of partnership-related items
are therefore more likely to be identified
during examinations of a single partner or
a small group of partners, not during an
examination of the partnership alone.
The ability to adjust certain partner-
ship-related items at the partner level un-
der these circumstances should be benefi-
cial to partnerships and partners, as well as
the IRS. For partnerships, this special rule
alleviates the need to open an examination
of the partnership under the centralized
partnership audit procedures solely to ad-
just the partnership-related items based on
information provided by the partner who
is already independently under examina-
tion. This relieves the partnership from
having to expend resources during an ex-
amination for items related primarily to
the partner who provided the information.
This rule allows those partners whose
non-partnership-related items are being
adjusted during an examination of their
return to more fully control and partici-
pate in any adjustments or determinations
that need to be made to partnership-re-
lated items that underlie or affect the
non-partnership-related item that is being
adjusted. Further, after adjustments to cer-
tain partnership-related items impacting a
single partner or a small group of partners
are made there are cases in which it may
not be necessary to adjust any other part-
nership-related item of the partnership,
and an examination at the partnership lev-
el would be unnecessary. Adjusting these
partnership-related items (or portions
thereof) outside of subchapter C of chap-
ter 63 also allows the IRS to effectively
and efficiently focus on a single partner or
a small group of partners with respect to
a limited set of partnership-related items
without unduly burdening the partnership.
Therefore, under proposed §301.6241-
7(b), the IRS may determine that subchap-
ter C of chapter 63 does not apply to an
adjustment or determination of a part-
nership-related item if an adjustment or
determination of that partnership-related
item is part of, or underlies, an adjustment
to a non-partnership-related item during
an examination of a person other than the
partnership. However, this rule only ap-
plies if the treatment of the partnership-re-
lated item on the return of the partnership
(or in its books and records) is based in
whole or in part on information provided
by the person under examination. Accord-
ingly, if the IRS determines that subchap-
ter C of chapter 63 (of a portion thereof)
does not apply, the IRS may adjust, or
make determinations regarding, partner-
ship-related items that underlie, or are
part of adjustments or determinations re-
garding a non-partnership-related item of
the person under examination. Proposed
§301.6241-7(b)(2) provides an example
that illustrates this provision.
B. Termination and Jeopardy
Assessments
Section 6241(11)(B)(ii) provides that
assessments under section 6851 (relating
to termination assessments of income tax)
or section 6861 (relating to jeopardy as-
sessments of income, estate, gift, and cer-
tain excise taxes) are special enforcement
matters. Consequently, the Secretary may
prescribe rules under which subchapter C
of chapter 63 (or a portion thereof) does
not apply to partnership-related items al-
locable to a partner or indirect partner sub-
ject to a termination or jeopardy assess-
ment and those partnership-related items
are subject to special rules as is necessary
for the effective and efficient enforcement
of the Code. Section 6241(11)(A).
In termination and jeopardy assess-
ment situations, the IRS makes an im-
mediate assessment against a taxpayer to
collect tax where the collection of tax is in
jeopardy. In these special circumstances,
the IRS needs to be able to make a full
assessment of any amounts determined to
be owed or risk being unable to collect tax
in the future.
To address this special enforcement
matter, proposed §301.6241-7(c) provides
that for any taxable year of a partner or
indirect partner for which an assessment
of income tax under section 6851 or sec-
tion 6861 is made, the IRS may adjust any
partnership-related item with respect to
such partner or indirect partner as part of
making that assessment without regard to
subchapter C of chapter 63. When mak-
ing a termination or jeopardy assessment
against a partner or indirect partner, the
IRS will be able to protect the govern-
ment’s interest quickly with respect to a
particular partner or indirect partner with-
out having to conduct a proceeding under
subchapter C of chapter 63 at the partner-
ship level.
C. Criminal Investigations
Section 6241(11)(B)(iii) provides that
criminal investigations constitute a special
enforcement matter. As such, the Secretary
may prescribe rules under which subchap-
ter C of chapter 63 (or a portion thereof)
does not apply to partnership-related
items with respect to a taxpayer subject to
criminal investigation and these partner-
ship-related items are subject to special
rules as is necessary for the effective and
efficient enforcement of the Code. Section
6241(11)(A). The IRS needs to preserve
flexibility in addressing potential adjust-
ments so as to not interfere with criminal
investigations.
To address this special enforcement
matter, proposed §301.6241-7(d) pro-
vides that the IRS may adjust any partner-
ship-related item with respect to any part-
ner or indirect partner for any taxable year
of a partner or indirect partner for which
the partner or indirect partner is under
criminal investigation without regard to
subchapter C of chapter 63.
D. Indirect Methods of Proof
Section 6241(11)(B)(iv) provides that
indirect methods of proof of income con-
stitute a special enforcement matter. As
such, the Secretary may prescribe rules
under which subchapter C of chapter 63
(or a portion thereof) does not apply to
partnership-related items with respect to
a taxpayer whose income is subject to an
indirect method of proof and these part-
nership-related items are subject to special
rules as is necessary for the effective and
efficient enforcement of the Code. Section
6241(11)(A).
When using an indirect method of
proving a person’s income, the IRS may
not be able to determine whether the in-

Bulletin No. 2020–51 1661 December 14, 2020
come is derived from partnership-relat-
ed items of a partnership subject to the
centralized partnership audit regime.
Accordingly, the IRS must be able to
determine a person’s income without
determining whether any of the income
identified using an indirect method of
proof are partnership-related items that
must be adjusted under the centralized
partnership audit regime. Requiring the
IRS to determine what amount of income
identified using an indirect method of
proof is attributable to a partnership-re-
lated item would frustrate the adminis-
tration of the Code by making it nearly
impossible to utilize an indirect method
of proof because the source of the specif-
ic income is generally not readily appar-
ent when an indirect method of proof is
being utilized.
To address this special enforcement
matter, proposed §301.6241-7(e)(1) pro-
vides that the IRS may adjust any partner-
ship-related item as part of a determina-
tion of any deficiency (or portion thereof)
of the partner or indirect partner that is
based on an indirect method of proof with-
out regard to subchapter C of chapter 63.
E. Controlled Partnerships and the
Partner’s Period of Limitations
Under section 6221, any adjustments
to partnership-related items must be made
at the partnership level. Section 6235 sets
the period of limitations in which those
adjustments to partnership-related items
must be made. Although the items of a
partnership are reported on the partner-
ship’s return, a partnership itself does not
pay income tax. See section 701. The true
tax impact and completeness of the part-
nership’s reporting may not be apparent
except by reviewing the partners’ returns
that report the partnership-related items.
Additionally, in allocating resources and
determining whether to open an examina-
tion, the IRS may identify issues either
by reviewing the partners’ returns or the
partnership’s return. Certain partnership
issues may only become apparent at a
future date or during an examination of
a partner, which can frustrate the IRS’s
ability to allocate resources and examine
taxpayers timely, especially in situations
where the partnership structure includes
many related and controlled entities.
Many partnerships, through many re-
lated and controlled entities, are ultimately
controlled by a single or small number of
individuals. The ultimate tax impact of the
partnership’s reporting would not be evi-
dent until the items were traced through a
network of entities until they reach the sin-
gle, or small group, of ultimate taxpayers.
Many of these structures are examined as
a group or as part of an examination of the
controlling individual. In these situations,
the existence of the partnership or the ul-
timate tax impact may not be known until
the period of limitations on making ad-
justments to the partnership has expired,
even though the controlling taxpayer may
still be under examination. In those cas-
es, the most efficient way to examine the
partnership’s reporting might be as part of
a consolidated examination or during the
examination of the controlling individual.
In these cases, all of the related and con-
trolled entities and their transactions can
be considered together, benefiting both the
IRS and the taxpayer by eliminating the
need for separate examinations. These sit-
uations also present special enforcement
considerations.
Specifically, the Treasury Department
and the IRS have determined that special
enforcement considerations are presented
when the period of limitations on making
adjustments to the partnership has expired
for a taxable year but a controlling part-
ner’s period of limitations on assessment
of chapter 1 tax has not expired or where
the partner has voluntarily agreed to ex-
tend the period of limitation. When exam-
ining a partner that has control of a part-
nership through multiple tiered entities it
may not be evident that an adjustment to
an item on the controlling partner’s return
requires an adjustment to a partnership-re-
lated item until the controlling partner’s
interest is finally traced to a partnership. It
may not be possible for this tracing to be
completed before the period of limitations
to make adjustments to the partnership
has expired. In these circumstances, it is
necessary for the effective and efficient
enforcement of the Code to make adjust-
ments or determinations regarding part-
nership-related items at the partner level
during an examination of the controlling
partner who has an open period to assess
chapter 1 tax with respect to that item or
amount. The same principles apply with
respect to a partner who has consented to
extend the period of limitations.
Under proposed §301.6241-7(f), the
IRS may only make adjustments or deter-
minations as to partnership-related items
without regard to subchapter C of chapter
63 if the partner has control of the part-
nership or if the partner has voluntari-
ly agreed to extend his or her period of
limitations on making assessments under
section 6501. The extension agreement
must expressly provide that the partner
is extending the time to adjust and assess
any tax attributable to partnership-related
items for the taxable year.
To determine if a direct or indirect
partner has control of the partnership, pro-
posed §301.6241-7(f)(1) incorporates the
rules under sections 267(b) and 707(b).
Accordingly, a direct or indirect partner
will be deemed to be in control of the part-
nership if the partner is related to the part-
nership under sections 267(b) or 707(b).
F. Penalties and Taxes Imposed on the
Partnership Under Chapter 1
Except as otherwise provided under
subchapter C of section 63, under section
6221(a), adjustments to partnership-relat-
ed items and the applicability of any pen-
alty, addition to tax, or additional amount
that relates to an adjustment to partner-
ship-related items must be determined
at the partnership level. To be a partner-
ship-related item, the item must be rele-
vant in determining the tax liability of any
person under chapter 1. Section 6241(2)
(B)(i); §301.6241-1(a)(6)(iv). A tax, pen-
alty, addition to tax, or additional amount
that is imposed on, and which is the lia-
bility of, the partnership under chapter 1
could qualify as a partnership-related item
that would need to be adjusted under the
centralized partnership audit regime.
The purpose of the centralized partner-
ship audit regime is to create a centralized
and efficient means of examining partner-
ships instead of examining partners. This
purpose would not be served if these chap-
ter 1 taxes and penalties were adjusted in
an examination under this regime because
these taxes and penalties are imposed on
the partnership itself and are not the li-
ability of the partners. As a liability of
the partnership, these chapter 1 penalties
and taxes are incompatible with the cen-

December 14, 2020 1662 Bulletin No. 2020–51
tralized partnership audit regime, which
is designed to approximate the chapter
1 liability on the adjustments that would
have been owed by the partners, not the
partnership. On the other hand, when a
liability is owed by the partnership itself,
the partnership’s exact liability should be
determined and paid by that partnership.
As such, the centralized partnership audit
regime is generally not compatible with
chapter 1 penalties and taxes imposed on
partnerships. However, there could be sit-
uations where an adjustment to a chapter
1 tax or penalty owed by the partnership
would be more appropriately adjusted at
the partnership level, such as when the ad-
justment relates to, or results from, other
adjustments being made at the partnership
level. Accordingly, for the reasons stated
above, the Treasury Department and the
IRS have determined that special enforce-
ment considerations are presented where a
tax, penalty, addition to tax, or additional
amount is imposed on, and is the liability
of, a partnership under chapter 1.
Therefore, under proposed §301.6241-
7(g), the IRS may determine that the cen-
tralized partnership audit regime does not
apply to any taxes, penalties, additions to
tax, or additional amounts imposed on a
partnership under chapter 1 and to any de-
termination made to determine whether the
partnership meets the requirements for the
tax or penalty, addition to tax, or addition-
al amount. Accordingly, these taxes and
penalties may be determined outside the
centralized partnership audit regime in the
same manner as they would be determined
and imposed for entities not subject to the
centralized partnership audit regime, such
as corporations. Additionally, if the IRS is
determining any chapter 1 tax or penalty
imposed on the partnership outside of the
centralized partnership audit regime, the
IRS may also adjust any partnership-re-
lated item, outside of the centralized
partnership audit regime, as part of any
determination necessary to determine the
amount and applicability of the chapter
1 tax or penalty. This rule does not apply
to determinations surrounding the actual
payment of the chapter 1 tax or penalty,
such as whether the payment is deductible
and any determinations regarding how the
payment must be allocated amongst the
partners. For the rules for when a chapter
1 tax or penalty is determined under the
centralized partnership audit regime, see
part 2 of this Explanation of Provisions.
G. Determining that Subchapter C of
Chapter 63 Does Not Apply
Proposed §301.6241-7(h)(1) provides
that if the IRS determines that all or some
of the rules under the centralized partner-
ship audit regime do not apply to a part-
nership-related item (or portion thereof)
under the rules described in paragraphs
(b) (partnership-related items underlying
adjustments to non-partnership-related
items), (c) (termination and jeopardy as-
sessments), (d) (criminal investigations),
(e) (indirect methods of proof of income),
(f) (controlled partnerships and extensions
of the partner’s period of limitations), or
(g) (penalties and taxes imposed on the
partnership under chapter 1), then the
IRS will notify, in writing, the taxpay-
er to whom the adjustments are being
made. The Treasury Department and the
IRS request comments on the timing of
notices to be provided under proposed
§301.6241-7(h)(1) including comments
regarding whether the timing should be
different based on the specific provision
that is applicable.
Proposed §301.6241-7(h)(2) provides
that any final decision with respect to any
partnership-related item adjusted outside
of the centralized partnership audit regime
is not binding on the partnership, any part-
ner, or any indirect partner that is not a
party to the proceeding because there is
no provision which would make them lia-
ble for any adjustments in a proceeding to
which they are not a party.
H. Coordination with Adjustments Made
at the Partnership Level
If the IRS makes adjustments to part-
nership-related items in an examination
of a person other than the partnership and
adjustments are made to the same part-
nership-related items in an examination
of the partnership, there is a potential for
the same adjustments to be subject to tax
at both the partner and partnership level.
Proposed §301.6241-7(i) sets forth a rule
that would prevent taxing the same part-
nership-related item twice. Under this
rule, if a deficiency is calculated or an
adjustment is proposed by the IRS that
includes amounts based on adjustments to
partnership-related items and the person
can establish that specific amounts includ-
ed within the deficiency or adjustment
were previously taxed to the partner in one
of two sets of circumstances, the amounts
will not be included in the deficiency or
adjustment.
First, the partner or indirect partner can
exclude amounts previously taken into
account by the partner or indirect partner
under the centralized partnership audit
regime. For example, the partner could
demonstrate that the amounts were taken
into account through an amended return
modification, the alternative to amended
return modification, or through a push out
election.
Second, a partner can exclude amounts
included in an imputed underpayment
that was paid by a partnership (or pass-
through partner) in which the partner was
a reviewed year partner or indirect partner.
The amounts included as part of an imput-
ed underpayment may only be excluded
from the deficiency or adjustment if the
amount included in the imputed under-
payment exceeds the amount reported by
the partnership to the partner (for exam-
ple, on a Schedule K-1 or statement under
section 6227) or is otherwise included in
the deficiency or adjustment determined
by the IRS (for example, as part of the de-
ficiency based on a means other than an
indirect method of proof). In other words,
a partner may only exclude amounts in-
cluded in an imputed underpayment paid
by a partnership if the partner was taxed
on the original amounts reported by the
partnership to the partner. This puts the
partner in parity with other partners in the
partnership that are not subject to a special
rule. Those partners are required to report
consistently with the statements furnished
by the partnership to the partner and are
not taxed on any additional amounts in-
cluded in an imputed underpayment paid
by a partnership.
I. Applicability Dates
If this proposed rule is finalized, the re-
visions to the regulations finalized in TD
9829 and TD 9844 will be applicable on
November 20, 2020.
Proposed §301.6241-7(j) provides
the applicability dates for the rules con-

Bulletin No. 2020–51 1663 December 14, 2020
tained in proposed §301.6241-7. Pro-
posed §301.6241-7(j) provides that, ex-
cept for the rules contained in proposed
§301.6241-7(b) (partnership-related
items that underlie non-partnership-relat-
ed items), the rules contained in proposed
§301.6241-7 apply to partnership taxable
years ending after November 20, 2020 or
any examination or investigation begin-
ning after [DATE THE FINAL RULE
IS FILED FOR PUBLIC INSPEC-
TION AT THE OFFICE OF THE
FEDERAL REGISTER]. Proposed
§301.6241-7(j) provides that the rules
contained in proposed §301.6241-7(b)
apply to partnership taxable years begin-
ning after December 20, 2018, or to any
examinations or investigations beginning
after [DATE THE FINAL RULE IS
FILED FOR PUBLIC INSPECTION
AT THE OFFICE OF THE FEDERAL
REGISTER].
Section 7805(b)(7) permits the Secre-
tary to allow taxpayers to elect to apply a
regulation retroactively. Accordingly, pro-
posed §301.6241-7(j) contains a provision
that provides that, notwithstanding the
applicability dates provided in proposed
§301.6241-7(j), the IRS and a partner may
agree to apply any provision of proposed
§301.6241-7 to any taxable year of a part-
ner that corresponds to a partnership tax-
able year that is subject to the centralized
partnership audit regime.
Special Analyses
This regulation is not subject to review
under section 6(b) of Executive Order
12866 pursuant to the Memorandum of
Agreement (April 11, 2018) between the
Treasury Department and the Office of
Management and Budget regarding re-
view of tax regulations.
In accordance with the Regulatory
Flexibility Act (5 U.S.C. 601 et seq.) it
is hereby certified that this proposed rule
will not have a significant economic im-
pact on a substantial number of small en-
tities.
The proposed rules directly affect any
partnership subject to the centralized part-
nership audit regime under subchapter C
of chapter 63. As all partnerships are sub-
ject to the centralized partnership audit
regime unless they make a valid election
out of the regime, the proposed rules are
expected to affect a substantial number
of small entities. However, the IRS has
determined that the economic impact on
small entities affected by the proposed
rule would not be significant.
The proposed rules under §301.6241-7
implement section 6241(11) and allow the
IRS, for partnership-related items that in-
volve special enforcement matters, to pro-
vide that the centralized partnership audit
regime (or a portion thereof) does not ap-
ply to such partnership-related items and
that such items are subject to special rules
as is necessary for the efficient and effec-
tive enforcement of the Code. As such,
except for one circumstance, the proposed
rules provide for certain situations where
partnership-related items may be adjusted
outside of the centralized partnership audit
regime. In all but one of these situations,
if the rules in proposed §301.6241-7 were
utilized, then the adjustments would be
made to partners of the partnership, rather
than the partnership itself and, thus, uti-
lizing the proposed rules would not have
an impact on small entities. Additionally,
many small entities may be eligible to
elect out of the centralized partnership au-
dit regime under section 6221(b). Accord-
ingly, if a small entity is eligible to elect
out, they may choose to elect out of the
regime at which point the rules contained
in proposed §301.6241-7 would be inap-
plicable to those entities.
Finally, the proposed rules under
§301.6241-7 address the process for con-
ducting an examination and do not have a
significant economic impact on small enti-
ties as the rules do not affect entities’ sub-
stantive tax, such as the requirement to in-
clude items in income or the deductibility
of items. The proposed rules promulgated
under other Code sections simply clarify
sections of regulations previously pub-
lished. Accordingly, any significant eco-
nomic impact on small entities will result
from the application of the substantive tax
provisions and will not be as a result of
the procedural rules contained in proposed
§301.6241-7.
The Secretary hereby certifies that the
proposed rule will not have a significant
economic impact on a substantial number
of small entities. The Treasury Depart-
ment and the IRS invite comment from
members of the public about potential im-
pacts on small entities.
Pursuant to section 7805(f) of the
Code, this notice of proposed rulemaking
has been submitted to the Chief Counsel
for the Office of Advocacy of the Small
Business Administration for comment on
its impact on small business.
Statement of Availability of IRS
Documents
IRS Revenue Procedures, Revenue
Rulings, Notices, and other guidance cit-
ed in this preamble are published in the
Internal Revenue Bulletin (or Cumulative
Bulletin) and are available from the Su-
perintendent of Documents, U.S. Govern-
ment Publishing Office, Washington, DC
20402, or by visiting the IRS website at
www.irs.gov.
Comments and Requests for Public
Hearing
Before these proposed amendments
to the regulations are adopted as final
regulations, consideration will be given
to comments that are submitted timely
to the IRS as prescribed in the preamble
under the “ADDRESSES” section. The
Treasury Department and the IRS request
comments on all aspects of the proposed
regulations. Any electronic comments
submitted, and to the extent practicable
any paper comments submitted, will be
made available at www.regulations.gov or
upon request.
A public hearing will be scheduled if
requested in writing by any person who
timely submits electronic or written com-
ments. Requests for a public hearing are
also encouraged to be made electronically.
If a public hearing is scheduled, notice of
the date and time for the public hearing
will be published in the Federal Register.
Announcement 2020-4, 2020-17 I.R.B 1,
provides that until further notice, public
hearings conducted by the IRS will be
held telephonically. Any telephonic hear-
ing will be made accessible to people with
disabilities.
Drafting Information
The principal author of these proposed
regulations is Jennifer M. Black of the
Associate Chief Counsel (Procedure and
Administration). However, other person-

December 14, 2020 1664 Bulletin No. 2020–51
nel from the Treasury Department and the
IRS participated in the development of the
proposed regulations.
List of Subjects in 26 CFR Part 301
Employment taxes, Estate taxes, Ex-
cise taxes, Gift taxes, Income taxes, Pen-
alties, Reporting and recordkeeping re-
quirements.
Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 301 is pro-
posed to be amended as follows:
PART 301—PROCEDURE AND
ADMINISTRATION
Par. 1. The authority citation for part
301 is amended by adding entries in nu-
merical order to read in part as follows:
Authority: 26 U.S.C. 7805.
* * * * *
Section 301.6221(b)-1 also issued un-
der sections 6221 and 6241.
* * * * *
Section 301.6241-7 also issued under
section 6241.
* * * * *
Par. 2. Section 301.6221(b)-1 is
amended by revising paragraphs (b)(3)(ii)
(D) and (F), adding paragraph (b)(3)(ii)
(G), and adding a sentence to the end of
paragraph (f) to read as follows:
§301.6221(b)-1 Election out for certain
partnerships with 100 or fewer partners.
* * * * *
(b) * * *
(3) * * *
(ii) * * *
(D) A wholly owned entity disregarded
as separate from its owner for Federal in-
come tax purposes,
* * * * *
(F) Any person who holds an interest in
the partnership on behalf of another per-
son, or
(G) A qualified subchapter S subsidi-
ary, as defined in section 1361(b)(3)(B).
* * * * *
(f) * * * Notwithstanding the preceding
sentence, paragraph (b)(3)(ii)(D), (F), and
(G) of this section are applicable on No-
vember 20, 2020.
§301.6223-1 [Amended]
Par. 3. Section 301.6223-1 is amended
by removing “B” and “B’s” and adding
“PR” and “PR’s” in its place, respective-
ly, wherever either appears in Examples 1
and 2 in paragraph (e)(8).
Par. 4. Section 301.6225-1 is amended:
1. By revising the paragraph (b)(3)
subject heading;
2. By adding a sentence to the end of
paragraph (b)(4);
3. By adding a sentence to the end of
paragraph (c)(3);
4. By revising paragraph (d)(2)(ii);
5. By removing reserved paragraph (d)
(3)(iii)(C);
6. By adding a sentence to the end of
paragraph (e)(3)(ii);
7. By revising paragraph (f)(1)(ii);
8. By adding paragraph (f)(3);
9. By adding paragraphs (h)(13) and
(14); and
10. By adding a sentence to the end of
paragraph (i)(1).
The revisions and additions read as fol-
lows:
§301.6225-1 Partnership adjustment by
the Internal Revenue Service.
* * * * *
(b) * * *
(3) Adjustments to items for which tax
has been collected under chapters 3 and
4 of the Internal Revenue Code (Code). *
* *
(4) * * * If an adjustment to an item of
income, gain, loss, deduction, or credit is
related to, or results from, an adjustment
to an item that is not an item of income,
gain, loss, deduction, or credit, the ad-
justment to the item that is not an item
of income, gain, loss, deduction, or cred-
it will generally be treated as zero solely
for purposes of calculating the imputed
underpayment unless the IRS determines
that the adjustment should be included in
the imputed underpayment.
* * * * *
(c) * * *
(3) * * * Each adjustment to any tax,
penalty, addition to tax, or additional
amount for the taxable year for which the
partnership is liable under chapter 1 of
the Code (chapter 1) and each adjustment
to an imputed underpayment calculated
by the partnership is placed in the credit
grouping.
* * * * *
(d) * * *
(2) * * *
(ii) Negative adjustment. A negative
adjustment is any adjustment that is a de-
crease in an item of income; a partnership
adjustment treated under paragraph (d)(2)
(i) of this section as a decrease in an item
of income; an increase in an item of credit;
a decrease in an item of tax, penalty, addi-
tion to tax, or additional amount for which
the partnership is liable under chapter 1;
or a decrease to an imputed underpayment
calculated by the partnership for the tax-
able year.
* * * * *
(e) * * *
(3) * * *
(ii) * * * A net negative adjustment to a
tax, penalty, addition to tax, or additional
amount for which the partnership is liable
under chapter 1 or an adjustment to any
imputed underpayment calculated by the
partnership for the taxable year is not an
adjustment described in paragraph (f) of
this section.
* * * * *
(f) * * *
(1) * * *
(ii) The calculation under paragraph (b)
(1) of this section results in an amount that
is zero or less than zero, unless paragraph
(f)(3) of this section applies.
* * * * *
(3) Exception to treatment as an ad-
justment that does not result in an imput-
ed underpayment—(i) Application of this
paragraph (f)(3). If the calculation under
paragraph (b)(1) of this section results in
an amount that is zero or less than zero
due to the inclusion of a net negative ad-
justment to a tax, penalty, addition to tax,
or additional amount for which the part-
nership is liable under chapter 1 or an
adjustment to any imputed underpayment
calculated by the partnership for the tax-
able year, this paragraph (f)(3) applies,
and paragraph (f)(1) of this section does
not apply except as provided in paragraph
(f)(3)(ii)(C) of this section.
(ii) Recalculation if paragraph (f)(3)
of this section applies—(A) In general.

Bulletin No. 2020–51 1665 December 14, 2020
If this paragraph (f)(3) applies, the im-
puted underpayment is recalculated under
paragraph (b)(1) of this section without
regard to a net negative adjustment to a
tax, penalty, addition to tax, or additional
amount for which the partnership is liable
under chapter 1 or an adjustment to any
imputed underpayment calculated by the
partnership for the taxable year. The net
negative adjustment that was excluded
from the imputed underpayment recalcu-
lation is then treated in one of two ways
under paragraphs (f)(3)(ii)(B) and (C) of
this section depending on the results of the
recalculation.
(B) Recalculation is greater than
zero. If the result of the recalculation
under paragraph (f)(3)(ii) of this sec-
tion is greater than zero, the IRS may
apply the portion of the net negative ad-
justment(s) that was excluded from the
recalculation to reduce the imputed un-
derpayment to zero, but not below zero.
In this case, the imputed underpayment
is zero but the adjustments included in
the recalculation and the remaining net
negative adjustment(s) excluded from
the recalculation under paragraph (f)
(3)(ii)(A) of this section are not adjust-
ments that do not result in an imputed
underpayment subject to treatment as
described in paragraph (f)(2) of this sec-
tion. See paragraph (h)(13) of this sec-
tion (Example 13).
(C) Recalculation is zero or less than
zero. If the result of the recalculation un-
der paragraph (f)(3)(ii) of this section is
zero or less than zero, the adjustments
included in the recalculation are treated
as adjustments that do not result in an im-
puted underpayment under paragraph (f)
(1)(ii) of this section. The net negative ad-
justment(s) that was excluded from the re-
calculation is not an adjustment that does
not result in an imputed underpayment
subject to treatment as described in para-
graph (f)(2) of this section. See paragraph
(h)(14) of this section (Example 14).
* * * * *
(h) * * *
(13) Example 13. The IRS initiates an admin-
istrative proceeding with respect to Partnership’s
2019 partnership return and makes adjustments as
follows: net positive adjustment of $100 ordinary
income, net negative adjustment of $20 in credits,
and a net negative adjustment of $25 to a chapter 1
tax liability of the partnership. The IRS determines
that the net negative adjustment in credits should be
taken into account in the calculation of the imput-
ed underpayment in accordance with paragraph (b)
(1)(v) of this section. Pursuant to paragraph (b)(1)
of this section, the $100 net positive adjustment to
ordinary income is multiplied by 40 percent (high-
est tax rate in effect), which results in $40. The ad-
justments in the credits grouping are then applied,
which include the adjustment to credits and the
adjustment to the chapter 1 tax liability. Applying
the credits results in an amount less than zero as
described in paragraph (f)(3)(i) of this section ($40
- $20 -$25 = -$5). Pursuant to paragraph (f)(3)(ii) of
this section, the imputed underpayment is recalcu-
lated without regard to the adjustment to the chapter
1 tax liability, resulting in a recalculation amount
greater than zero as described in paragraph (f)(3)
(ii)(B) of this section ($40 - $20 = $20). Pursuant to
paragraph (f)(3)(ii)(B) of this section, the IRS may
apply a portion of the adjustment to chapter 1 tax
liability to reduce the recalculation to zero but not
below zero. In this case, the recalculation amount
would be reduced to zero using $20 of the $25
adjustment to chapter 1 tax liability. Because the
imputed underpayment was reduced to zero, pursu-
ant to paragraph (f)(3)(ii)(B), the adjustments that
went into the recalculation are not adjustments that
do not result in an imputed underpayment. These
adjustments are the $100 adjustment to ordinary
income and the $20 adjustment to credits. The re-
maining $5 adjustment to the chapter 1 tax liability
of the partnership is an adjustment that is treated as
described in paragraph (e)(3)(ii) of this section and
is therefore not taken into account on the partner-
ship’s adjustment year return.
(14) Example 14. The facts are the same as in
paragraph (h)(13) of this section (Example 13), but
the negative adjustment to credits is $50 instead of
$20. Applying the credits results in an amount less
than zero as described in paragraph (f)(3)(i) of this
section ($40 - $50 -$25 = -$35). Pursuant to para-
graph (f)(3)(ii) of this section, the imputed underpay-
ment is recalculated without regard to the adjustment
to the chapter 1 tax liability, resulting in a recalcula-
tion amount less than zero as described in paragraph
(f)(3)(ii)(C) of this section ($40 - $50 = -$10). Pur-
suant to paragraph (f)(3)(ii)(C) of this section, the
partnership adjustments resulting in the -$10 recal-
culation amount are adjustments that do not result
in an imputed underpayment treated in accordance
with paragraph (f)(1)(ii) of this section, and the $25
adjustment to chapter 1 tax liability is not treated as
such an adjustment and is therefore not taken into
account on the partnership’s adjustment year return.
(i) * * *
(1) * * * Notwithstanding the preced-
ing sentence, paragraphs (b)(4), (c)(3), (d)
(2)(ii), (d)(3)(iii)(C), (e)(3)(ii), (e)(3)(iii)
(B), (f)(1)(ii), (f)(3), and (h)(13) and (14)
of this section are applicable on Novem-
ber 20, 2020.
Par. 5. Section 301.6225-2 is amended:
1. In paragraph (d)(2)(vi)(A), by re-
moving the period and the end of the para-
graph and adding in its place “, by treating
any approved modifications and partner-
ship adjustments allocable to the pass-
through partner as items reflected on the
statement furnished to the pass-through
partner.”;
2. By revising paragraph (d)(2)(vi)(B);
and
3. By adding a sentence to the end of
the paragraph (g)(1).
The additions and revisions read as fol-
lows:
§301.6225-2 Modification of imputed
underpayment.
* * * * *
(d) * * *
(2) * * *
(vi) * * *
(B) Adjustments that do not result in an
imputed underpayment. If a pass-through
partner takes into account its share of the
adjustments by paying an amount de-
scribed in paragraph (d)(2)(vi)(A) of this
section and there are any adjustments that
do not result in an imputed underpayment
(as defined in §301.6225-1(f)), those ad-
justments are taken into account by the
pass-through partner in accordance with
§301.6225-3 in the taxable year of the
pass-through partner that includes the date
the payment described in paragraph (d)(2)
(iv)(A) of this section is paid. This para-
graph does not apply if, after making the
calculation described in paragraph (d)(2)
(iv)(A) of this section, no amount exists
and therefore no payment is required un-
der paragraph (d)(2)(iv)(A) of this section.
* * * * *
(g) * * *
(1) * * * Notwithstanding the preced-
ing sentence, paragraph (d)(2)(vi)(B) of
this section is applicable on November 20,
2020.
Par. 6. Section 301.6225-3 is amended:
1. In paragraph (b)(1) by removing “a
reduction in non-separately stated income
or as an increase in non-separately stat-
ed loss” and adding in its place “part of
non-separately stated income or loss”;
2. By adding paragraphs (b)(8) and (d)
(3); and
3. By adding a sentence to the end of
paragraph (e)(1).

December 14, 2020 1666 Bulletin No. 2020–51
The additions read as follows:
§301.6225-3 Treatment of partnership
adjustments that do not result in an
imputed underpayment.
* * * * *
(b) * * *
(8) Adjustments to items that are not
items of income, gain, loss, deduction,
or credit. The partnership takes into ac-
count an adjustment that does not result
in an imputed underpayment that resulted
from an adjustment to an item that is not
an item of income, gain, loss, deduction,
or credit by adjusting the item on its ad-
justment year return but only to the extent
the item would appear on the adjustment
year return without regard to the adjust-
ment. If the item is already reflected on
the partnership’s adjustment year return
as an item that is not an item of income,
gain, loss, deduction, or credit, or in any
year between the reviewed year and the
adjustment year, a partnership should not
create a new item in the amount of the ad-
justment on the partnership’s adjustment
year return.
* * * * *
(d) * * *
(3) Example 3. On its partnership return for the
2020 taxable year, Partnership placed Asset into ser-
vice, reporting that Asset, a non-depreciable asset,
had a basis of $100. During an administrative pro-
ceeding with respect to Partnership’s 2020 taxable
year, the IRS determines that Asset has a basis of $90
instead of $100. The IRS also determines that Part-
nership has a negative adjustment to credits of $4.
There are no other adjustments for the 2020 partner-
ship taxable year. Under paragraph (d)(2) of this sec-
tion, the adjustment to the basis of an asset is not an
adjustment to an item of income. Therefore, the $10
adjustment to the basis of Asset is treated as a $10
positive adjustment. The IRS determines that the net
negative adjustment to credits should be taken into
account as part of the calculation of the imputed un-
derpayment. The total netted partnership adjustment
is $10, which, after applying the highest rate and de-
creasing the product by the $4 adjustment to credits
results in an imputed underpayment of $0. Accord-
ingly, both adjustments are adjustments that do not
result in an imputed underpayment under paragraph
(f) of this section. The adjustment year is 2022 and
Partnership still owns Asset. Under paragraph (b)(8)
of this section, the partnership takes into account the
$10 adjustment to Asset on its 2022 return by reduc-
ing its basis in Asset by $10.
(e) * * *
(1) * * * Notwithstanding the preced-
ing sentence, paragraphs (b)(8) and (d)(3)
of this section are applicable on Novem-
ber 20, 2020.
* * * * *
Par. 7. Section 301.6226-2 is amended
by removing “Internal Revenue” from the
paragraph (g)(3) subject heading, adding
paragraph (g)(4), and adding a sentence to
the end of paragraph (h)(1).
The additions read as follows:
§301.6226-2 Statements furnished to
partners and filed with the IRS.
* * * * *
(g) * * *
(4) Liability for chapter 1 taxes and
penalties. A partnership that makes an
election under §301.6226-1 with respect
to an imputed underpayment must pay
any taxes, penalties, additions to tax, ad-
ditional amounts, or the amount of any ad-
justments to any imputed underpayment
calculated by the partnership that is deter-
mined under subchapter C of chapter 63
for which the partnership is liable under
chapter 1 of the Code or subchapter C of
chapter 63 at the time the partnership fur-
nishes statements to its partners in accor-
dance with paragraph (b) of this section.
Any adjustments to such items are not
included in the statements the partnership
furnishes to its partners or files with the
IRS under this section.
(h) * * *
(1) * * * Notwithstanding the prior sen-
tence, paragraph (c)(1) of this section is
applicable on November 20, 2020.
* * * * *
Par. 8. Section 301.6241-3 is amended:
1. By revising paragraph (b)(1)(ii);
2. By removing paragraph (b)(2);
3. By redesignating paragraphs (b)(3)
and (4) as paragraphs (b)(2) and (3) re-
spectively; and
4. By revising paragraphs (c), (d), (e)
(2)(ii), (f)(1) and (2), and (g).
The revisions read as follows:
§301.6241-3 Treatment where a
partnership ceases to exist.
* * * * *
(b) * * *
(1) * * *
(ii) The partnership does not have the
ability to pay, in full, any amount that may
be due under the provisions of subchapter
C of chapter 63 for which the partnership
is or may become liable. For purposes of
this section, a partnership does not have
the ability to pay if the IRS determines
that the partnership is currently not col-
lectible based on the information the IRS
has at the time of such determination.
* * * * *
(c) Partnership adjustment takes effect.
For purposes of this section, a partnership
adjustment under subchapter C of chapter
63 takes effect when the adjustment be-
comes finally determined as described in
§301.6226-2(b)(1); when the partnership
and the IRS enter into a settlement agree-
ment regarding the adjustment; or, for ad-
justments appearing on an administrative
adjustment request (AAR), when the re-
quest is filed.
(d) Former partners—(1) In gener-
al. Except as described in paragraph (d)
(2) of this section, the term former part-
ners means the partners of the partnership
during the last taxable year for which a
partnership return under section 6031 or
AAR was filed for such partnership or
the most recent persons determined to be
partners of the partnership in a final deter-
mination (for example, a defaulted notice
of final partnership adjustment, final court
decision, or settlement agreement) bind-
ing upon the partnership.
(2) Partnership-partner ceases to exist.
If any former partner is a partnership-part-
ner that the IRS has determined ceased to
exist, the former partners for purposes of
this section are the partners of such part-
nership-partner during the last partnership
taxable year for which a partnership re-
turn of the partnership-partner under sec-
tion 6031 or AAR was filed or the most
recent persons determined to be partners
of the partnership-partner in a final deter-
mination (for example, a defaulted notice
of final partnership adjustment, final court
decision, or settlement agreement) bind-
ing upon the partnership-partner.
(e) * * *
(2) * * *
(ii) The partnership must furnish state-
ments to the former partners and file the
statements with the IRS no later than 60
days after the later of the date of the noti-
fication to the partnership that the IRS has
determined that the partnership has ceased
to exist or the date the adjustment takes
effect, as described in paragraph (c) of this
section.
* * * * *

Bulletin No. 2020–51 1667 December 14, 2020
(f) * * *
(1) Example 1. The IRS initiates a proceeding
under subchapter C of chapter 63 with respect to the
2020 partnership taxable year of Partnership. During
2023, in accordance with section 6235(b), Partner-
ship extends the period of limitations on adjustments
under section 6235(a) until December 31, 2025.
However, on July 31, 2024, Partnership terminates
within the meaning of section 708(b)(1). Based on
the prior termination under section 708(b)(1), the
IRS determines that Partnership ceased to exist, as
defined in paragraph (b) of this section, on Septem-
ber 16, 2024. On February 1, 2025, the IRS mails
Partnership a notice of final partnership adjustment
(FPA) that determines partnership adjustments that
result in a single imputed underpayment. Partnership
does not timely file a petition under section 6234
and does not make a valid election under section
6226. Partnership files its final return of partnership
income on October 15, 2024 listing A and B, both
individuals, as the partners for its final taxable year
ending July 31, 2024. Accordingly, under paragraph
(d)(1) of this section, A and B are former partners.
Therefore, A and B are required to take their share of
the partnership adjustments determined in the FPA
into account under paragraph (e) of this section.
(2) Example 2. The IRS initiates a proceeding
under subchapter C of chapter 63 with respect to the
2020 partnership taxable year of P, a partnership.
G, a partnership that has an election under section
6221(b) in effect for the 2020 taxable year, is a part-
ner of P during 2020 and for every year thereafter.
On February 3, 2025, the IRS mails P an FPA that
determines partnership adjustments that result in a
single imputed underpayment. P does not timely file
a petition under section 6234 and does not make a
timely election under section 6226. On March 21,
2025, the IRS determines that P has ceased to ex-
ist because P did not make an election under section
6226, P is currently not collectible, and the IRS does
not expect P will be able to pay any imputed under-
payment. G terminated under section 708(b)(1) on
December 31, 2024. On March 3, 2025, the IRS de-
termines that G ceased to exist in 2024 for purposes
of this section in accordance with paragraph (b) of
this section. J and K, individuals, were the only part-
ners of G during 2024. Therefore, under paragraph
(d)(2) of this section, J and K, the partners of G
during G’s 2024 partnership taxable year, are the for-
mer partners of G for purposes of this section. There-
fore, J and K are required to take into account their
share of the adjustments contained in the statement
furnished by P to G in accordance with paragraph (e)
of this section.
(g) Applicability date. This section
applies to any determinations made after
November 20, 2020.
Par. 9. Section 301.6241-7 is added to
read as follows:
§301.6241-7 Treatment of special
enforcement matters.
(a) Items that involve special enforce-
ment matters. In accordance with section
6241(11)(B) of the Internal Revenue Code
(Code), the partnership-related items
(as defined in §301.6241-1(a)(6)(ii)) de-
scribed in this section have been deter-
mined to involve special enforcement
matters.
(b) Partnership-related items under-
lying non-partnership-related items—(1)
In general. The Internal Revenue Service
(IRS) may determine that the rules of sub-
chapter C of chapter 63 of the Code (sub-
chapter C of chapter 63) do not apply to an
adjustment to a partnership-related item of
a partnership if—
(i) An examination is being conducted
of a person other than the partnership;
(ii) A partnership-related item is adjust-
ed, or a determination regarding a partner-
ship-related item is made, as part of, or
underlying, an adjustment to a non-part-
nership-related item of the person whose
return is being examined; and
(iii) The treatment of the partner-
ship-related item on the return of the part-
nership under section 6031(b) or in the
partnership’s books and records is based
in whole or in part on information pro-
vided by the person whose return is being
examined.
(2) Example. The following example
illustrates the provisions of paragraph (b)
of this section. For purposes of this ex-
ample, the partnership has no liabilities,
is subject to subchapter C of chapter 63,
and the partnership and partner each has
a calendar year taxable year. On June 1,
2018, A acquires an interest in Partnership
by contributing Asset to Partnership in a
section 721 contribution (Contribution).
Partnership claims a basis in Asset of $50
under section 723 equal to A’s purported
adjusted basis in Asset as of June 1, 2018,
based on information A provided to Part-
nership. There is no activity in Partnership
that gives rise to any other partnership-re-
lated items between June 1, 2018 and June
2, 2019. On June 2, 2019, A sells A’s in-
terest in Partnership to B for $100 in cash
and reports a gain of $50 based on A’s pur-
ported adjusted basis in Partnership of $50
under section 722 (reflecting solely A’s
purported adjusted basis in Asset immedi-
ately prior to the Contribution). The IRS
opens an examination of A and determines
that A’s adjusted basis in Asset immediate-
ly prior to the Contribution should have
been $30 instead of the $50 claimed by A.
As a result, A’s basis in Asset immediately
prior to the Contribution is reduced from
$50 to $30 and A’s adjusted basis in A’s
interest in Partnership under section 722
is reduced from $50 to $30. Because A’s
adjusted basis in A’s interest in Partner-
ship is reduced to $30, the total gain from
the sale of A’s interest in Partnership is
increased to $70 ($50 as originally report-
ed plus $20 as adjusted by the IRS). The
amount of Partnership’s adjusted basis in
Asset, which is the property transferred by
A in the Contribution, is based on infor-
mation provided by A to Partnership; the
adjustment to A’s pre-Contribution adjust-
ed basis in Asset, which is a non-partner-
ship-related item, results in an adjustment
to the adjusted basis of the property (that
is, Asset) transferred to Partnership in the
Contribution, which is a partnership-re-
lated item; and the Contribution underlies
the adjustment to A’s basis in A’s inter-
est Partnership, which is a non-partner-
ship-related item. As a result, the IRS may
determine that the rules of subchapter C of
chapter 63 do not apply to the Contribu-
tion and may adjust, during an examina-
tion of A, the Contribution as it relates to
the adjusted basis in Asset transferred in
the Contribution.
(c) Termination and jeopardy assess-
ment. For any taxable year of a partner or
indirect partner for which an assessment
of income tax under section 6851 or sec-
tion 6861 is made, the IRS may adjust any
partnership-related item with respect to
such partner or indirect partner as part of
making an assessment of income tax un-
der section 6851 or section 6861 without
regard to subchapter C of chapter 63.
(d) Criminal investigations. For any
taxable year of a partner or indirect part-
ner for which the partner or indirect part-
ner is under criminal investigation, the
IRS may adjust any partnership-related
item with respect to such partner or indi-
rect partner without regard to subchapter
C of chapter 63.
(e) Indirect methods of proof of in-
come. The IRS may adjust any partner-
ship-related item as part of a determina-
tion of any deficiency (or portion thereof)
of the partner or indirect partner that is
based on an indirect method of proof of
income without regard to subchapter C of
chapter 63.
(f) Controlled partnerships and exten-
sions of the partner’s period of limitations. If

December 14, 2020 1668 Bulletin No. 2020–51
the period of limitations under section 6235
on making partnership adjustments has ex-
pired for a taxable year, the IRS may adjust
any partnership-related item that relates to
any item or amount for which the partner’s
period of limitations on assessment of tax
imposed by chapter 1 of the Code (chapter
1) has not expired for the taxable year of the
partner or indirect partner, without regard to
subchapter C of chapter 63 if—
(1) The direct or indirect partner is
deemed to have control of a partnership if
such partner is related to the partnership
under sections 267(b) or 707(b); or
(2) Under section 6501(c)(4), the direct
or indirect partner agrees, in writing, to
extend the partner’s section 6501 period
of limitations on assessment for the tax-
able year but only if the agreement ex-
pressly provides that the partner is extend-
ing the time to adjust and assess any tax
attributable to partnership-related items
for the taxable year.
(g) Penalties and taxes imposed on
the partnership under chapter 1. The IRS
may adjust any tax, penalties, additions
to tax, or additional amounts imposed on,
and which are the liability of, the part-
nership under chapter 1 without regard to
subchapter C of chapter 63. The IRS may
also adjust any partnership-related item,
without regard to subchapter C of chapter
63, as part of any determinations made to
determine the amount and applicability of
the tax, penalty, addition to tax, or addi-
tional amount being determined without
regard to subchapter C of chapter 63. Any
determinations under this paragraph (g)
will be treated as a determination under a
chapter of the Code other than chapter 1
for purposes of §301.6241-6.
(h) Determination that subchapter C of
chapter 63 does not apply—(1) Notifica-
tion. If the IRS determines, in accordance
with paragraph (b), (c), (d), (e), (f), or (g)
of this section, that some or all of the rules
under subchapter C of chapter 63 do not
apply to any partnership-related item (or
portion thereof), then the IRS will notify,
in writing, the taxpayer to whom the ad-
justments are being made.
(2) Effect on adjustments made under
subchapter C of chapter 63. Any final de-
cision with respect to any partnership-re-
lated item adjusted in a proceeding not
under subchapter C of chapter 63 is not
binding on any person that is not a party
to the proceeding.
(i) Coordination with adjustments
made at the partnership level. This sec-
tion will not apply to the extent the
partner can demonstrate adjustments to
partnership-related items included in the
deficiency or an adjustment by the IRS
were—
(1) Previously taken into account under
subchapter C of chapter 63 by the person
being examined; or
(2) Included in an imputed under-
payment paid by a partnership (or pass-
through partner) for any taxable year in
which the partner was a reviewed year
partner or indirect partner but only if the
amount included in the deficiency or ad-
justment exceeds the amount reported
by the partnership to the partner that was
either reported by the partner or indirect
partner or is otherwise included in the de-
ficiency or adjustment determined by the
IRS.
(j) Applicability date—(1) In gener-
al. Except for paragraph (b) of this sec-
tion, this section applies to partnership
taxable years ending after November
20, 2020, or any examination or inves-
tigation begun after November 20, 2020.
Notwithstanding the preceding sentence,
any provision of this section except for
paragraph (b) of this section may apply
to any taxable year of a partner that re-
lates to a partnership taxable year sub-
ject to subchapter C of chapter 63 that
ended before November 20, 2020, upon
agreement between the partner under ex-
amination and the IRS.
(2) Partnership-related items under-
lying non-partnership-related items.
Paragraph (b) of this section applies to
partnership taxable years beginning after
December 20, 2018, or any examination
or investigation begun after November
20, 2020. Notwithstanding the preceding
sentence, paragraph (b) of this section
may apply to any taxable year of a partner
that relates to a partnership taxable year
subject to subchapter C of chapter 63 that
ended before December 20, 2018, upon
agreement between the partner under ex-
amination and the IRS.
Sunita Lough,
Deputy Commissioner for Services
and Enforcement.
(Filed by the Office of the Federal Register on
November 20, 2020, 11:15 a.m., and published in the
issue of the Federal Register for November 24, 2020,
85 F.R. 74940)

Bulletin No. 2020–51 i December 14, 2020
Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the
effect:
Amplified describes a situation where
no change is being made in a prior pub-
lished position, but the prior position is
being extended to apply to a variation of
the fact situation set forth therein. Thus, if
an earlier ruling held that a principle ap-
plied to A, and the new ruling holds that
the same principle also applies to B, the
earlier ruling is amplified. (Compare with
modified, below).
Clarified is used in those instances
where the language in a prior ruling is be-
ing made clear because the language has
caused, or may cause, some confusion. It
is not used where a position in a prior rul-
ing is being changed.
Distinguished describes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modified is used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A
and B, the prior ruling is modified because
it corrects a published position. (Compare
with amplified and clarified, above).
Obsoleted describes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transactions.
This term is most commonly used in a ruling
that lists previously published rulings that
are obsoleted because of changes in laws or
regulations. A ruling may also be obsoleted
because the substance has been included in
regulations subsequently adopted.
Revoked describes situations where the
position in the previously published ruling
is not correct and the correct position is
being stated in a new ruling.
Superseded describes a situation where
the new ruling does nothing more than
restate the substance and situation of a
previously published ruling (or rulings).
Thus, the term is used to republish under
the 1986 Code and regulations the same
position published under the 1939 Code
and regulations. The term is also used
when it is desired to republish in a single
ruling a series of situations, names, etc.,
that were previously published over a
period of time in separate rulings. If the
new ruling does more than restate the sub-
stance of a prior ruling, a combination of
terms is used. For example, modified and
superseded describes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previous-
ly published ruling in a new ruling that is
self contained. In this case, the previously
published ruling is first modified and then,
as modified, is superseded.
Supplemented is used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names
in subsequent rulings. After the original
ruling has been supplemented several
times, a new ruling may be published that
includes the list in the original ruling and
the additions, and supersedes all prior rul-
ings in the series.
Suspended is used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of cas-
es in litigation, or the outcome of a Ser-
vice study.
Abbreviations
The following abbreviations in current use
and formerly used will appear in material
published in the Bulletin.
A—Individual.
Acq.—Acquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cumulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Cooperative.
Ct.D.—Court Decision.
CY—County.
D—Decedent.
DC—Dummy Corporation.
DE—Donee.
Del. Order—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Employer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduciary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Foreign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Federal Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grantee.
GP—General Partner.
GR—Grantor.
IC—Insurance Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited Partner.
LR—Lessor.
M—Minor.
Nonacq.—Nonacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Personal Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Partnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Real Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsidiary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Transferee.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpayer.
TR—Trust.
TT—Trustee.
U.S.C.—United States Code.
X—Corporation.
Y—Corporation.
Z—Corporation.

December 14, 2020 ii Bulletin No. 2020–51
Numerical Finding List
1
Bulletin 2020–51
Announcements:
2020-8, 2020-32 I.R.B. 244
2020-9, 2020-32 I.R.B. 244
2020-10, 2020-33 I.R.B. 385
2020-11, 2020-33 I.R.B. 385
2020-13, 2020-35 I.R.B. 492
2020-14, 2020-36 I.R.B. 549
2020-15, 2020-38 I.R.B. 577
2020-16, 2020-38 I.R.B. 578
2020-17, 2020-40 I.R.B. 794
2020-12, 2020-41 I.R.B. 893
2020-40, 2020-45 I.R.B. 999
2020-47, 2020-19 I.R.B. 1070
Notices:
2020-43, 2020-27 I.R.B. 1
2020-45, 2020-27 I.R.B. 3
2020-46, 2020-27 I.R.B. 7
2020-47, 2020-27 I.R.B. 7
2020-49, 2020-27 I.R.B. 8
2020-50, 2020-28 I.R.B. 35
2020-48, 2020-29 I.R.B. 72
2020-51, 2020-29 I.R.B. 73
2020-52, 2020-29 I.R.B. 79
2020-53, 2020-30 I.R.B. 151
2020-54, 2020-31 I.R.B. 226
2020-56, 2020-32 I.R.B. 239
2020-57, 2020-32 I.R.B. 240
2020-58, 2020-34 I.R.B. 419
2020-55, 2020-35 I.R.B. 467
2020-61, 2020-35 I.R.B. 468
2020-62, 2020-35 I.R.B. 476
2020-63, 2020-35 I.R.B. 491
2020-60, 2020-36 I.R.B. 514
2020-64, 2020-36 I.R.B. 519
2020-65, 2020-38 I.R.B. 567
2020-68, 2020-38 I.R.B. 567
2020-69, 2020-39 I.R.B. 604
2020-59, 2020-40 I.R.B. 782
2020-66, 2020-40 I.R.B. 785
2020-71, 2020-40 I.R.B. 786
2020-72, 2020-40 I.R.B. 789
2020-73, 2020-41 I.R.B. 886
2020-74, 2020-41 I.R.B. 887
2020-70, 2020-43 I.R.B. 913
2020-77, 2020-45 I.R.B. 988
2020-79, 2020-46 I.R.B. 1014
2020-76, 2020-47 I.R.B. 1058
2020-80, 2020-47 I.R.B. 1060
2020-75, 2020-49 I.R.B. 1453
2020-82, 2020-49 I.R.B. 1458
2020-82, 2020-49 I.R.B. 1458
2020-83, 2020-50 I.R.B. 1497
Notices:—Continued
2020-84, 2020-51 I.R.B. 1645
2020-85, 2020-51 I.R.B. 1645
Proposed Regulations:
REG-119307-19, 2020-28 I.R.B. 44
REG-112339-19, 2020-30 I.R.B. 155
REG-117589-18, 2020-30 I.R.B. 184
REG-125716-18, 2020-30 I.R.B. 197
REG-123027-19, 2020-31 I.R.B. 229
REG-130081-19, 2020-32 I.R.B. 246
REG-127732-19, 2020-33 I.R.B. 385
REG-111879-20, 2020-34 I.R.B. 421
REG-112042-19, 2020-34 I.R.B. 422
REG-132766-18, 2020-34 I.R.B. 436
REG-132434-17, 2020-35 I.R.B. 508
REG-116475-19, 2020-37 I.R.B. 553
REG-107911-18, 2020-40 I.R.B. 795
REG-110059-20, 2020-42 I.R.B. 904
REG-119890-18, 2020-47 I.R.B. 1063
REG-122462-20, 2020-48 I.R.B. 1137
REG-101657-20, 2020-49 I.R.B. 1466
REG-123652-18, 2020-51 I.R.B. 1652
Revenue Procedures:
2020-16, 2020-27 I.R.B. 10
2020-31, 2020-27 I.R.B. 12
2020-35, 2020-29 I.R.B. 82
2020-36, 2020-32 I.R.B. 243
2020-37, 2020-33 I.R.B. 381
2020-38, 2020-36 I.R.B. 522
2020-39, 2020-36 I.R.B. 546
2020-40, 2020-38 I.R.B. 575
2020-41, 2020-40 I.R.B. 793
2020-42, 2020-41 I.R.B. 891
2020-43, 2020-45 I.R.B. 991
2020-44, 2020-45 I.R.B. 991
2020-46, 2020-45 I.R.B. 995
2020-45, 2020-46 I.R.B. 1016
2020-47, 2020-48 I.R.B. 1121
2020-49, 2020-48 I.R.B. 1122
2020-50, 2020-48 I.R.B. 1122
2020-48, 2020-49 I.R.B. 1459
2020-51, 2020-50 I.R.B. 1599
Revenue Rulings:
2020-14, 2020-28 I.R.B. 33
2020-15, 2020-32 I.R.B. 233
2020-16, 2020-37 I.R.B. 550
2020-17, 2020-37 I.R.B. 552
2020-18, 2020-39 I.R.B. 584
2020-19, 2020-40 I.R.B. 611
2020-20, 2020-41 I.R.B. 880
2020-21, 2020-41 I.R.B. 882
2020-22, 2020-45 I.R.B. 963
2020-24, 2020-45 I.R.B. 965
Revenue Rulings:—Continued
2020-23, 2020-47 I.R.B. 1028
2020-25, 2020-48 I.R.B. 1109
2020-26, 2020-50 I.R.B. 1550
2020-27, 2020-50 I.R.B. 1552
Treasury Decisions:
9899, 2020-29 I.R.B. 62
9900, 2020-30 I.R.B. 143
9903, 2020-32 I.R.B. 235
9901, 2020-33 I.R.B. 266
9902, 2020-33 I.R.B. 349
9904, 2020-34 I.R.B. 413
9907, 2020-38 I.R.B. 559
9906, 2020-39 I.R.B. 579
9905, 2020-40 I.R.B. 614
9915, 2020-41 I.R.B. 882
9908, 2020-42 I.R.B. 894
9920, 2020-43 I.R.B. 909
9910, 2020-44 I.R.B. 915
9924, 2020-44 I.R.B. 943
9911, 2020-45 I.R.B. 966
9913, 2020-45 I.R.B. 975
9927, 2020-47 I.R.B. 1031
9918, 2020-45 I.R.B. 979
9914, 2020-46 I.R.B. 1000
9919, 2020-48 I.R.B. 1073
9931, 2020-48 I.R.B. 1087
9922, 2020-49 I.R.B. 1139
9929, 2020-49 I.R.B. 1220
9930, 2020-49 I.R.B. 1400
9923, 2020-50 I.R.B. 1554
9926, 2020-51 I.R.B. 1602
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2019–27 through 2019–52 is in Internal Revenue Bulletin
2019–52, dated December 27, 2019.

Bulletin No. 2020–51 iii December 14, 2020
Finding List of Current Actions on
Previously Published Items
1
Bulletin 2020–51
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2019–27 through 2019–52 is in Internal Revenue Bulletin
2019–52, dated December 27, 2019.

Internal Revenue Service
Washington, DC 20224
Official Business
Penalty for Private Use, $300
INTERNAL REVENUE BULLETIN
The Introduction at the beginning of this issue describes the purpose and content of this publication. The weekly Internal Revenue
Bulletins are available at www.irs.gov/irb/.
We Welcome Comments About the Internal Revenue Bulletin
If you have comments concerning the format or production of the Internal Revenue Bulletin or suggestions for improving it,
we would be pleased to hear from you. You can email us your suggestions or comments through the IRS Internet Home Page
www.irs.gov) or write to the Internal Revenue Service, Publishing Division, IRB Publishing Program Desk, 1111 Constitution Ave.
NW, IR-6230 Washington, DC 20224.