Instructions For Forms 8804, 8805, And 8813 (2015) (Page 5 of 8) in pdf

number of failures to furnish correct

treated as distributions made to that

The former is an “upper-tier partnership”

Forms 8805.

partner on the earliest of the following.

and the latter is a “lower-tier

partnership.” An upper-tier partnership

1. The day on which this tax was

There can also be a higher penalty

that owns a partnership interest in a

paid by the partnership.

imposed when the failure is due to

lower-tier partnership is allowed a credit

intentional disregard of the requirement

2. The last day of the partnership's

against its own section 1446 withholding

to furnish timely correct information

tax year for which the amount was paid.

tax liability for any section 1446

returns.

3. The last day on which the partner

withholding tax paid by the lower-tier

owned an interest in the partnership

partnership for that partnership interest.

A partnership can seek a waiver of

during that year.

the penalty if the partnership can

If an upper-tier partnership provides

establish it had reasonable cause for

However, the amount of section 1446

appropriate documentation to a

the failure.

withholding tax paid during a tax year by

lower-tier partnership, the lower-tier

the partnership is generally treated as

Late Payment of Tax

partnership may look through the

an advance or draw under Regulations

partnership to the partners of such

The penalty for not paying tax when due

section 1.731-1(a)(1)(ii) to the extent of

upper-tier partnership in determining its

is usually

of 1% of the unpaid tax for

the partner's share of income for the

section 1446 withholding tax due. The

each month or part of a month the tax is

partnership year. See Regulations

look-through may apply only with

unpaid. The penalty cannot exceed 25%

section 1.1446-3(d)(2)(v) for more

respect to the portion of the upper-tier

of the unpaid tax. The penalty will not

details.

partnership's allocation that is allocable

apply if the partnership can show

to partners of such partnership for which

reasonable cause for paying late.

A partner that wishes to claim a credit

appropriate documentation has been

against its U.S. income tax liability for

If you receive a notice about penalty

received by the lower-tier partnership.

amounts withheld and paid under

and interest after you file Form 8804,

For more information, see Regulations

section 1446 must attach Copy C of

send us an explanation and we will

section 1.1446-5(c) for upper-tier

Form 8805 to its U.S. income tax return

determine if you meet reasonable-cause

foreign partnerships and Regulations

for the tax year in which it claims the

criteria. Do not attach an explanation

section 1.1446-5(e) for upper-tier

credit.

when you file Form 8804.

domestic partnerships. See Regulations

See Regulations section 1.1446-3(d)

section 1.1446-5(b) for reporting

Failure To Withhold and Pay

(2) for additional information.

requirements.

Over Tax

Publicly Traded

Note. The look-through rules referred

Any person required to withhold,

to above apply only for purposes of the

Partnerships (PTP)

account for, and pay over the

lower-tier partnership's computation of

withholding tax under section 1446, but

A PTP is any partnership whose

its section 1446 withholding tax liability.

who fails to do so, may be subject to a

interests are regularly traded on an

It does not affect the upper-tier

civil penalty under section 6672. The

established securities market

partnership's reporting requirements

civil penalty is equal to the amount that

(regardless of the number of its

with respect to Forms 8804 and 8805 as

should have been withheld and paid

partners). However, it does not include

set forth in the next paragraph and

over.

a PTP treated as a corporation under

elsewhere in these instructions.

Other Penalties

the general rule of section 7704(a).

An upper-tier partnership that has

Penalties may also be imposed, absent

A PTP that has effectively connected

had section 1446 withholding tax

reasonable cause and good faith, for

income, gain, or loss must withhold tax

payments made on its behalf by a

failing to accurately report the amount of

on distributions of that income made to

lower-tier partnership will receive a copy

tax required to be shown on a return, if

its foreign partners. The rate is 39.6%

of Form 1042-S or Form 8805 from the

any portion of the resulting

for non-corporate foreign partners, and

lower-tier partnership. The upper-tier

underpayment is attributable to

35% for corporate partners. The PTP

partnership must in turn file these forms

negligence, substantial understatement

may not consider preferential rates

with its Form 8804 and treat the amount

of income tax, valuation misstatement,

when computing the section 1446

withheld by the lower-tier partnership as

or fraud. See sections 6662 and 6663.

withholding tax for a partner. The

a credit against its own liability to

partnership uses Form 1042, Annual

withhold under section 1446. This credit

Treatment of Partners

Withholding Tax Return for U.S. Source

is allowed on line 6b or line 6c of the

Income of Foreign Persons; Form

A partnership's payment of section 1446

Form 8804 filed by the upper-tier

1042-S, Foreign Person's U.S. Source

withholding tax on ECTI allocable to a

partnership. The upper-tier partnership

Income Subject to Withholding; and

foreign partner generally relates to the

must also provide to its partners the

Form 1042-T, Annual Summary and

partner's U.S. income tax liability for the

information described in Reporting to

Transmittal of Forms 1042-S, to report

partner's tax year in which the partner is

Partners, earlier. These statements and

withholding from distributions instead of

subject to U.S. tax on that income.

forms will enable those partners to

following these instructions. It also must

obtain appropriate credit for tax withheld

Amounts paid by the partnership

comply with the regulations under

under section 1446.

under section 1446 on ECTI allocable to

section 1461 and Regulations section

a partner are allowed to the partner as a

See Regulations section 1.1446-5 for

1.6302-2.

credit under section 33. The partner

additional information.

may not claim an early refund of

Tiered Partnerships

withholding tax paid under section 1446.

The term “tiered partnership” describes

Amounts paid by a partnership under

the situation in which a partnership

section 1446 for a partner are to be

owns an interest in another partnership.

Instructions for Forms 8804, 8805, and 8813 (2015)

Instructions For Forms 8804, 8805, And 8813 (2015) Page 5

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