Notice 2018-29

Please include “Notice 2018 –28” on the
cover page.
Submissions may be hand delivered
Monday through Friday between the
hours of 8 a.m. and 4 p.m. to:
Internal Revenue Service
Courier’s Desk
1111 Constitution Ave., N.W.
Washington, DC 20224
Attn: CC:PA:LPD:PR
(Notice 2018 –28)
Submissions may also be sent electronically to the following e-mail address:
[email protected].
Please include “Notice 2018 –28” in the
subject line.
SECTION 10. DRAFTING AND
GENERAL CONTACT
INFORMATION
The principal authors of this notice are
Zachary King and Charles Gorham of the
Office of the Associate Chief Counsel (Income Tax and Accounting). Other personnel from the Treasury Department and the
IRS participated in its development. For
further information regarding this notice,
contact Mr. King or Mr. Gorham at (202)
317-7003 (not a toll-free number).

Guidance Regarding the
Implementation of New
Section 1446(f) for
Partnership Interests That
Are Not Publicly Traded
Notice 2018 –29
SECTION 1. OVERVIEW
This notice announces that the Department of the Treasury (“Treasury Department”) and the Internal Revenue Service
(“IRS”) intend to issue regulations under
new section 1446(f) of the Internal Revenue Code (“Code”) regarding the disposition of a partnership interest that is not
publicly traded. This notice also provides
interim guidance that taxpayers may rely
on pending the issuance of regulations.
New section 1446(f) was added by section
13501 of “An Act to provide for reconciliation pursuant to titles II and V of the
concurrent resolution on the budget for
fiscal year 2018,” P.L. 115–97 (the

Bulletin No. 2018 –16

“Act”), which was enacted on December
22, 2017. Section 13501 of the Act also
added new section 864(c)(8).
SECTION 2. BACKGROUND AND
SUMMARY OF COMMENTS
In general, section 864(c)(8) provides
that gain or loss from the sale, exchange,
or other disposition of a partnership interest by a nonresident alien or foreign corporation is effectively connected with the
conduct of a trade or business in the
United States to the extent that the person
would have had effectively connected
gain or loss had the partnership sold all of
its assets at fair market value. Section
864(c)(8) applies to sales, exchanges, or
other dispositions occurring on or after
November 27, 2017. See Rev. Rul. 91–32,
1991–1 C.B. 107, for the IRS’s position
with respect to sales, exchanges, or other
dispositions of an interest in a partnership
by a nonresident alien individual or foreign corporation occurring before November 27, 2017.
In general, section 1446(f)(1) provides
that if any portion of the gain on any
disposition of an interest in a partnership
would be treated under section 864(c)(8)
as effectively connected with the conduct
of a trade or business within the United
States, then the transferee must deduct and
withhold a tax equal to 10 percent of the
amount realized on the disposition. Under
an exception in section 1446(f)(2), however, withholding is generally not required
if the transferor furnishes an affidavit to
the transferee stating, among other things,
that the transferor is not a foreign person.
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 shall be required to deduct and withhold from distributions to the transferee a tax in an
amount equal to the amount the transferee
failed to withhold (plus interest under the
Code on such amount).
Section 1446(f)(6) authorizes the Secretary to prescribe such regulations or
other guidance as may be necessary to
carry out the purposes of section 1446(f),
including regulations providing for exceptions from the provisions of section
1446(f). Furthermore, section 1446(g) authorizes the Secretary to prescribe such
regulations as may be necessary to carry

495

out the purposes of section 1446 generally. Section 1446(f) applies to sales, exchanges, or other dispositions occurring
after December 31, 2017.
On December 29, 2017, the Treasury
Department and IRS advance released
Notice 2018 – 08, 2018 –7 I.R.B. 352
(“PTP Notice”). The PTP Notice suspended the requirement to withhold on
dispositions of certain interests in publicly
traded partnerships (“PTPs”) in response
to stakeholder concerns that applying section 1446(f) to PTPs without guidance
presented significant practical problems.
The PTP Notice also requested comments
on the implementation of section 1446(f),
including whether a temporary suspension
of section 1446(f) for partnership interests
that are not publicly traded (“non-PTP
interests”) was needed. Several comments
were received.
Comments in response to the PTP Notice requested guidance minimizing the
application of section 1446(f) until further
guidance was issued, including suspension of section 1446(f) for non-PTP interests. This notice does not suspend the
application of section 1446(f) for nonPTP interests in all cases, but does include
guidance under section 1446(f) designed to
allow for an effective and orderly implementation, including minimizing occasions
of overwithholding. The rules in this notice
(including section 6) that modify or suspend
withholding under section 1446(f) do not
affect the transferor’s tax liability under section 864(c)(8). See section 4.06 of this notice.
Comments stated that applying section
1446(f) to dispositions of non-PTP interests presents significant practical problems. Comments stated that a transferee is
obligated to withhold with respect to dispositions occurring after December 31,
2017, but without forms, instructions or
other guidance, it is unclear when or how
to deposit the withheld amounts. To address this concern, section 5 of this notice
provides interim guidance on reporting
and paying over the amount required to be
withheld under section 1446(f)(1). This
guidance generally adopts the forms and
procedures relating to withholding on dispositions of U.S. real property interests
under section 1445 and the regulations
thereunder.

April 16, 2018

Comments requested guidance on the
procedures for the transferor to furnish an
affidavit of non-foreign status to the transferee as described in section 1446(f)(2) to
be relieved from withholding. Section
6.01 of this notice provides this guidance
by generally adopting the rules in the section 1445 regulations for similar situations.
Section 1446(f) applies only when
there is gain on a disposition of an interest
in a partnership. To prevent withholding
when no gain occurs on a disposition,
section 6.02 of this notice provides that if
a transferee receives a certification from a
transferor that the disposition will not result in gain, then the transferee generally
is not required to withhold under section
1446(f).
Comments requested relief from withholding obligations when the amount of
effectively connected gain under section
864(c)(8) is zero or a small amount. One
comment recommended a rule providing
relief based on the value of the assets
producing effectively connected income, modeled on § 1.1445–11T. Section 1.1445–11T provides an exception
from the requirement that a transferee
withhold on the transfer of an interest in
a partnership that holds U.S. real property interests. The transferee is relieved
from withholding under this exception if
the partnership provides the transferee a
statement certifying that fifty percent or
more of the value of the gross assets
does not consist of U.S. real property
interests, or that ninety percent or more
of the value of the gross assets of the
partnership does not consist of U.S. real
property interests plus cash or cash
equivalents. Instead of adopting a rule
based on the test in § 1.1445–11T, sections 6.03 and 6.04 of this notice provide two rules that relieve the transferee
from withholding in circumstances similar to those described by the comments.
Section 6.03 of this notice provides
generally that, if a transferor certifies to a
transferee that for each of the past three
years the transferor’s effectively connected taxable income from the partnership was less than 25 percent of the transferor’s total income from the partnership,
the transferee is not required to withhold.
This rule is designed to provide a simple
approach, obviating the need for the part-

April 16, 2018

nership to make the computation required
by section 864(c)(8) or to otherwise provide information to the transferor or transferee at the time of the transaction. However, in certain cases transferees may not
be able to obtain this certification, so section 6.04 of this notice provides a separate
rule relieving a transferee of its withholding obligation under section 1446(f)(1)
when the transferee receives a certification from the partnership that the partnership’s effectively connected gain under
section 864(c)(8) would be less than 25
percent of the total gain on the deemed
sale of all its assets. The Treasury Department and the IRS intend to provide future
guidance that will reduce the threshold for
withholding below 25 percent for both of
these rules. Other limitations are also under consideration. The Treasury Department and the IRS expect that any such
reduction in the threshold for withholding
would be effective at the same time as
guidance providing for withholding certificates or otherwise providing for withholding determined by reference to gain
recognized under section 1446(f)(3).
A comment recommended guidance providing that no gain or loss be recognized
under section 864(c)(8) in certain dispositions that would otherwise be considered
nonrecognition transactions, provided
that gain or loss is preserved. Specifically, the comment suggested alternative rules, one considering whether the
gain or loss is preserved in the U.S. tax
base, and the other considering whether
the gain or loss is preserved in the hands
of the transferee. The Treasury Department and the IRS are studying the appropriate treatment of nonrecognition
transactions under section 864(c)(8),
and comments are requested on this issue, including the relationship between
nonrecognition transactions under sections 864(c)(8) and 897. See § 1.897–
6T. Until this guidance is provided, section 6.05 of this notice provides that no
withholding is required under section
1446(f) in a transaction in which no gain
is recognized.
Section 1446(f)(1) applies to the
amount realized on the disposition of a
partnership interest. The amount realized
includes a reduction in the transferor’s share
of partnership liabilities and other liabilities
to which the partnership interest is subject.

496

See §§ 1.752–1(h) and 1.1001–2. Section 7
of this notice provides two rules for determining the amount of partnership liabilities
that are included in the amount realized.
Section 7.02 of this notice provides that a
transferee may generally rely on a transferor’s most recently issued Schedule K-1
(Form 1065), Partner’s Share of Income,
Deductions, Credits, etc., for purposes of
determining the transferor’s share of partnership liabilities included in the amount
realized for purposes of section 1446(f). Alternatively, section 7.03 provides that a
transferee may generally rely on a certification from the partnership providing the
amount of the transferor’s share of partnership liabilities.
Comments stated that when the amount
realized includes a reduction in liabilities,
the amount the transferee may be required
to withhold could exceed the cash or other
property the transferee pays to the transferor. Further, in some situations, a transferor may not provide any information to
the transferee about its share of partnership liabilities, making a determination of
the total amount realized difficult. To address these issues, section 8 of this notice
provides that in certain cases, the total
amount of withholding is generally limited to the total amount of cash and property to be transferred. The Treasury Department and the IRS expect that the
exception in section 8 will not apply after
guidance is issued providing for withholding certificates or otherwise providing for
withholding determined by reference to
gain recognized under section 1446(f)(3).
The comments also raised an issue relating to the determination of a transferor’s basis in its partnership interest. Section 731(a) provides that in the case of a
distribution by a partnership to a partner,
gain shall not be recognized to such partner, except to the extent that any money
distributed exceeds the adjusted basis of
such partner’s interest in the partnership
immediately before the distribution. Any
gain recognized under section 731(a) is
considered gain from the sale or exchange
of the partnership interest of the distributee partner. Thus, section 1446(f) applies
in certain cases when a distribution of
money (including marketable securities)
results in gain under section 731. According to a comment, when a partnership
distributes money, it may not know the

Bulletin No. 2018 –16

distributee partner’s basis in its interest
and, thus, may not know whether the distribution will cause the distributee partner
to recognize gain. In response to this comment, section 9 of this notice provides that
the partnership may generally rely on its
books and records, or on a certification
received from the distributee partner, to
determine whether the distribution exceeds the partner’s basis.
Section 10 of this notice responds to
requests for guidance on the interaction of
section 1445 with section 1446(f).
The Treasury Department and the IRS
are considering rules that would relieve a
partnership of its obligation under section
1446(f)(4) if it provides the information
required by a transferor and transferee to
comply with the requirements under sections 864(c)(8) and 1446(f), including the
certification described in section 6.04 of
this notice, information on the calculation
of the tax liability under section 864(c)(8)
to the transferor, and information necessary to calculate the amount realized (including calculations relating to section 752)
by the transferor. Section 11 of this notice
provides that the withholding requirements
described in section 1446(f)(4) will not apply until regulations or other guidance have
been issued under that section.
SECTION 3. DEFINITIONS
.01 Effectively connected gain. The term
“effectively connected gain” means the
amount of net gain (if any) that would
have been effectively connected with the
conduct of a trade or business within the
United States if the partnership had sold
all of its assets at their fair market value as
of the date of the transfer described in
section 864(c)(8)(A).
.02 Transfer. The term “transfer” means
any sale, exchange or other disposition.
.03 Transferor. The term “transferor”
means any person that transfers a partnership interest, and includes a person that
receives a distribution from a partnership.
.04 Transferee. The term “transferee”
means any person that acquires a partnership interest by transfer, and includes a
partnership that makes a distribution.
.05 Related person. The term “related person” is a person that is related within the
meaning of section 267(b) or section
707(b)(1).

Bulletin No. 2018 –16

SECTION 4. RULES OF GENERAL
APPLICABILITY
.01 U.S. taxpayer identification numbers
(“U.S. TINs”). A certificate described in
sections 6.02, 6.03, and 7.02 of this notice
must include the transferor’s U.S. TIN to
the extent that the transferor is required to
have, or does have, a U.S. TIN. A transferee may rely on an otherwise valid certificate that does not include a U.S. TIN
for the transferor unless the transferee
knows that the transferor is required to
have a U.S. TIN or that the transferor does
in fact have a U.S. TIN. An affidavit of
non-foreign status or Form W–9, Request
for Taxpayer Identification Number and
Certification, provided for purposes of
section 6.01 of this notice must include a
U.S. TIN in all cases.
.02 Penalties of perjury. For purposes of
this notice, 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.” Such a certification
by an entity must further provide the following: “I further declare that I have authority to sign this document on behalf of
[name of entity].”
.03 Authority to sign certifications. For
purposes of this notice, a certification described in section 6, 7, or 9 of this notice
from an entity must be signed by an individual who is an officer, director, general
partner, or managing member of the entity, or, if the general partner or managing
member of the entity is itself an entity, an
individual who is an officer, director, general partner, or managing member of the
entity that is the general partner or managing member.
.04 Retention period. A transferee that
obtains and relies upon an affidavit or
certification provided for in this notice
must retain that document with its books
and records for a period of five calendar
years following the close of the last calendar year in which the entity relied upon
the certification or as long as it may be
relevant to the determination of the transferee’s withholding obligation under section 1446(f), whichever period is longer.
.05 Publicly traded partnerships. The
rules in this notice do not apply to the

497

transfer of a publicly traded interest in a
publicly traded partnership (within the
meaning of section 7704(b)).
.06 Applicability of Section 864(c)(8). The
rules in this notice that modify or suspend
withholding under section 1446(f) do not
affect the transferor’s tax liability under section 864(c)(8).
SECTION 5. USE OF SECTION 1445
PRINCIPLES FOR REPORTING
AND PAYING OVER SECTION
1446(f) WITHHOLDING FOR
DISPOSITIONS OF NON-PUBLICLY
TRADED PARTNERSHIP
INTERESTS
The Treasury Department and the IRS
have determined that, until regulations,
other guidance, or forms and instructions
have been issued under section 1446(f),
transferees required to withhold under
section 1446(f)(1) must use the rules in
section 1445 and the regulations thereunder for purposes of reporting and paying
over the tax, except as otherwise provided
in this notice. See, e.g., § 1.1445–1(c).
The forms specified in those rules include
Form 8288, U.S. Withholding Tax Return
for Dispositions by Foreign Persons of
U.S. Real Property Interests, and Form
8288 –A, Statement of Withholding on
Dispositions by Foreign Persons of U.S.
Real Property Interests. The transferee
must include the statement “Section
1446(f)(1) withholding” at the top of both
the relevant Form 8288 and the relevant
Form 8288 –A. Except as provided in section 8 of this notice, the transferee must
also enter the amount subject to withholding under section 1446(f)(1) on line 5b of
Part I of the Form 8288 and on line 3 of
Form 8288 –A and enter the amount withheld on line 6 of Part I of Form 8288 and
on line 2 of Form 8288 –A. At this time,
the IRS will not issue withholding certificates under section 1446(f)(3), such as
those provided on Form 8288 –B, Application for Withholding Certificate for Dispositions by Foreign Persons of U.S. Real
Property Interests.
The rules for reporting and paying over
amounts withheld and the rules regarding
the contents of Form 8288 and Form
8288 –A contained in § 1.1445–1(c) and
(d) (such as the requirement to report and
pay over withholding within 20 days of a
transfer) apply to the submission of sec-

April 16, 2018

tion 1446(f)(1) withholding. A transferee
that is required to pay over a withholding
tax under section 1446(f) is made liable
for that tax under section 1461 (including
any applicable penalties and interest). A
person that is required, but fails, to pay
over the withholding tax required by section 1446(f) may also be subject to civil
and criminal penalties. Officers or other
responsible persons of either an entity that
is required to pay over the withholding tax
or any other withholding agent may be
subject to a civil penalty under section
6672. The Treasury Department and the
IRS intend to issue regulations providing
that with respect to any forms that were
required to be filed, or amounts that were
due, under section 1446(f) on or before
May 31, 2018, no penalties or interest will
be asserted if these forms are filed with,
and such amounts are paid over to, the
IRS on or before May 31, 2018.

scribed in § 1.1445–2(b), as modified to
take into account section 1446(f) to satisfy
the requirements of section 1446(f)(2).
Further, a transferor may submit a Form
W–9 for this purpose if: (i) it includes the
name and U.S. TIN of the transferor; (ii) it
is signed and dated by the transferor; and
(iii) the jurat has not been deleted. A
transferee may generally rely on a Form
W–9 that it has previously received from
the transferor if it meets these requirements. Until further notice, the certification of non-foreign status or Form W–9
the transferor provides to the transferee
should not be furnished to the IRS. See
section 1446(f)(2)(B)(ii). If the transferee
has actual knowledge that the certification
or Form W–9 is false, or the transferee receives a notice (as described in section
1445(d)) from a transferor’s agent or transferee’s agent that it is false, it may not be
relied upon. See section 1446(f)(2)(B)(i).

SECTION 6. EXCEPTIONS TO
SECTION 1446(f) WITHHOLDING
ON DISPOSITIONS OF NONPUBLICLY TRADED
PARTNERSHIP INTERESTS

.02 Transferee Receives a Certification
of No Realized Gain

.01 Certifying Non-Foreign Status
Section 1446(f)(2) provides that no
person shall be required to deduct and
withhold any amount under section
1446(f)(1) with respect to any disposition of an interest in a partnership if the
transferor furnishes to the transferee an
affidavit by the transferor stating, under
penalty of perjury, the transferor’s U.S. TIN
and that the transferor is not a foreign person. Thus, unless the transferee receives the
required affidavit, it must presume that the
transferor is foreign for purposes of withholding under section 1446(f)(1).
The Treasury Department and the IRS
intend to issue regulations applying rules
substantially similar to § 1.1445–2(b), except § 1.1445–2(b)(2)(ii), for making a
certification of non-foreign status for purposes of applying section 1446(f)(2). Section 1.1445–2(b) provides rules pursuant
to which a transferor of a U.S. real property interest can provide a certification of
non-foreign status to inform the transferee
that withholding is not required. Until regulations on certifications of non-foreign
status under section 1446(f) are issued, a
transferor may furnish the certification de-

April 16, 2018

The Treasury Department and the IRS
intend to issue regulations providing that,
if the transferee receives a certification,
issued by the transferor (signed under
penalties of perjury and including a U.S.
TIN, to the extent required under section
4.01 of this notice), stating that the transfer of its partnership interest will not result in realized gain, a transferee may generally rely on the certification and be
relieved from liability for withholding under section 1446(f). The transferee may
not rely on the certification and is not
relieved from withholding if it has knowledge that the certification is false under
the principles of § 1.1445–2(b)(4). Pending the issuance of other guidance, the
transferor should not submit to the IRS
Form 8288 –B for this purpose. If gain is
realized in a transfer but not recognized as
a result of a nonrecognition provision, the
transferee cannot apply this section 6.02.
In this circumstance, see section 6.05 of
this notice.

no withholding is required under section
1446(f)(1) upon the transfer of a partnership interest if no earlier than 30 days
before the transfer the transferee receives
from the transferor a certification (signed
under penalties of perjury and including a
U.S. TIN, to the extent required under
section 4.01 of this notice) that for the
transferor’s immediately prior taxable
year and the two taxable years that precede it the transferor was a partner in the
partnership for the entirety of each of
those years, and that the transferor’s allocable share of effectively connected taxable income (ECTI) (as determined under
§ 1.1446 –2) for each of those taxable
years was less than 25 percent of the
transferor’s total distributive share of income for that year. For this purpose, the
transferor’s immediately prior taxable
year is the most recent taxable year of the
transferor that includes the partnership
taxable year that ends with or within the
transferor’s taxable year and for which
both a Form 8805, Foreign Partner’s Information Statement of Section 1446
Withholding Tax, and a Schedule K-1
(Form 1065) were due (including extensions) or filed (if earlier) by the time of the
transfer. In no event may a transferee rely
on a certification provided prior to the
transferor’s receipt of the relevant Forms
8805 and Schedules K-1 (Form 1065). For
purposes of this rule, a transferor that had
a distributive share of deductions and expenses attributable to the partnership’s
U.S. trade or business but no ECTI allocated to it in a year must treat its allocable
share of ECTI for that year as zero. A
transferor that did not have a distributive
share of income in any of its three immediately prior taxable years during which
the partnership had effectively connected
income cannot provide this certification.
A transferee may not rely on the certification and is not relieved from withholding if it has actual knowledge that the
certification is false. When a partnership is
a transferee by reason of making a distribution, this section 6.03 does not apply.

.03 Transferee Receives a Certification
that Transferor Had Less than 25
Percent Effectively Connected Taxable
Income in Three Prior Taxable Years

.04 Transferee Receives a Certification
from Partnership of Less than 25
Percent Effectively Connected Gain
Under Section 864(c)(8)

The Treasury Department and the IRS
intend to issue regulations providing that

The Treasury Department and the IRS
intend to issue regulations providing that

498

Bulletin No. 2018 –16

no withholding is required under section
1446(f)(1) upon the transfer of a partnership interest if the transferee is provided a
certification, issued by the partnership and
signed under penalties of perjury no earlier than 30 days before the transfer, certifying that if the partnership had sold all
of its assets at their fair market value, the
amount of gain that would have been effectively connected with the conduct of a
trade or business within the United States
would be less than 25 percent of the total
gain. For purposes of this section 6.04,
effectively connected gain includes gain
treated as effectively connected with a
trade or business in the United States under section 897. Principles similar to the
rules of § 1.1445–11T(d)(2)(ii) and (iii)
apply to certifications furnished pursuant
to this section 6.04. When a partnership is
a transferee by reason of making a distribution, the transferee partnership must retain a record of the documentation relied
upon to determine the amount of gain (if
any), and the portion of the gain that
would have been effectively connected
with the conduct of a trade or business in
the United States (if any). This documentation must be retained for the period described in section 4.04 of this notice.
.05 Nonrecognition Transactions
The Treasury Department and the IRS
intend to issue regulations providing that
no withholding is required under section
1446(f)(1) upon the transfer of a partnership interest if the transferee receives
from the transferor a notice that satisfies
the requirements of § 1.1445–2(d)(2),
treating references to section 1445(a) as
references to section 1446(f), and references to “U.S. real property interest” as
“partnership interest”, except as provided
in this section 6.05. A transferee should
not mail a copy of the transferor’s notice
to the IRS as described in § 1.1445–
2(d)(2)(i)(B). The Treasury Department
and the IRS are studying the appropriate
treatment of nonrecognition transactions
under section 864(c)(8). Until guidance
providing for the treatment of nonrecognition transactions under section 864(c)(8) is
issued, a transfer in which the transferor is
not required to recognize any gain or loss by
reason of a nonrecognition provision of the
Code (without regard to section 864(c)(8))
will be eligible for the exception from with-

Bulletin No. 2018 –16

holding provided in this section 6.05. When
a partnership is a transferee by reason of
making a distribution in which no gain is
recognized, the transferee partnership is not
required to withhold and the transferor is not
required to provide a notice to the transferee
partnership.
.06 Rules for Agents
Section 1446(f)(2)(C) provides that the
rules of section 1445(d) shall apply to a
transferor’s agent or transferee’s agent
with respect to any affidavit of nonforeign
status in the same manner as such rules
apply with respect to the disposition of a
United States real property interest under
such section. The Treasury Department and
the IRS intend to issue regulations providing
that the principles of § 1.1445– 4 apply for
agents to fulfill their responsibilities with
respect to any certification provided for purposes of section 1446(f).
SECTION 7. DETERMINING THE
AMOUNT OF PARTNERSHIP
LIABILITIES INCLUDED IN
AMOUNT REALIZED
.01 In General
The Treasury Department and the IRS
intend to issue regulations providing that a
transferee may rely upon a certification
described in section 7.02 or section 7.03
of this notice to determine the amount of
liabilities of the partnership that are included in the amount realized on a transfer
for purposes of section 1446(f), unless the
transferee has actual knowledge that the
certification is incorrect or unreliable.

that would cause the amount of the transferor’s share of partnership liabilities at
the time of the transfer to be significantly
different than the amount shown on the
Schedule K-1 (Form 1065). A difference
in the amount of the transferor’s share of
partnership liabilities of 25 percent or less
is not a significant difference. A transferor
is a controlling partner for purposes of this
section 7.02 if the transferor (and related
persons) owned a 50 percent or greater interest in capital, profits, deductions or losses
in the 12 months before the transfer.
.03 Partnership Certification
The partnership may issue a certification, signed under penalties of perjury, no
earlier than 30 days before the transfer,
that provides (i) the amount of the transferor’s share of partnership liabilities,
which may be the amount reported on the
most recently prepared Schedule K-1
(Form 1065), and (ii) that the partnership
does not have actual knowledge of events
occurring after its determination of the
amount of the transferor’s share of partnership liabilities that would cause the
amount of the transferor’s share of partnership liabilities at the time of the transfer to be significantly different than the
amount shown on the certification provided to the transferee. A difference in the
amount of the transferor’s share of partnership liabilities of 25 percent or less is
not a significant difference.

.02 Transferor Certification

SECTION 8. WITHHOLDING
LIMITATION IN CERTAIN CASES
RELATING TO THE
TRANFEROR’S SHARE OF
PARTNERSHIP LIABILITIES

A transferor that is not a controlling
partner (as defined below) may provide to
the transferee a certification (signed under
penalties of perjury and including a U.S.
TIN, to the extent required under section
4.01 of this notice) that provides (i) the
amount of the transferor’s share of partnership liabilities reported on the most
recently received Schedule K-1 (Form
1065) from the partnership, for a partnership taxable year that closed no more than
10 months before the date of transfer, and
(ii) that the transferor does not have actual
knowledge of events occurring after the
Schedule K-1 (Form 1065) was issued

The Treasury Department and the IRS
intend to issue regulations providing that
if the amount otherwise required to be
withheld under section 1446(f) exceeds
the amount realized less the decrease in
the transferor partner’s share of partnership liabilities, then the amount of withholding required by section 1446(f)(1) is
the amount realized less the decrease in
the transferor partner’s share of partnership liabilities. In addition, if a transferee
is unable to determine the amount realized
because it does not have knowledge of the
transferor partner’s share of partnership
liabilities (and does not receive a certifi-

499

April 16, 2018

cation described in section 7.02 or section
7.03 of this notice on which it can rely),
then the amount of withholding required
is the entire amount realized, determined
without regard to the decrease in the transferor partner’s share of partnership liabilities. In both cases, the amount of withholding under section 1446(f) is generally
the amount that the transferor would, but
for the transferee remitting it as withholding under section 1446(f), receive from
the transferee. A transferee may rely on
this rule only if the transferee (1) is not the
partnership in which the transferor is a
partner, and (2) is not a related person to
the transferor. A transferee applying this
section 8 must check the box on line 5c of
Part I of Form 8288 and include the
amount withheld in the total reported on
line 6, Part I of Form 8288 and line 2 of
Form 8288 –A.
SECTION 9. DETERMINATION OF
APPLICABILITY OF SECTION
1446(f)(1) TO DISTRIBUTIONS BY
PARTNERSHIPS
The Treasury Department and the IRS
intend to issue regulations providing that
for purposes of section 1446(f)(1), if a
partnership makes a distribution to a partner, the partnership may rely on its books
and records, or on a certification received
from the distributee partner, to determine
whether the distribution exceeds the partner’s basis in its partnership interest, provided that the partnership does not know
or have reason to know that its books and
records, or the distributee partner’s certification, is incorrect and the partnership
retains a record of the documentation relied upon to establish the partner’s basis
for the period described in section 4.04 of
this notice.
SECTION 10. COORDINATION
WITH SECTION 1445
WITHHOLDING
The Treasury Department and the IRS
intend to issue regulations providing that 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),

April 16, 2018

with respect to such amount. However,
this rule applies only if the transferor has
not obtained a withholding certificate that
is provided for in the last sentence of
§ 1.1445–11T(d)(1). If the transferor has
obtained such a withholding certificate,
the transferee must withhold the greater of
the amounts required under section
1445(e)(5) or section 1446(f)(1). Under
these circumstances, a transferee that has
complied with the withholding requirements under either section 1445(e)(5) or
section 1446(f)(1), as applicable, will be
deemed to satisfy the other withholding
requirement.
SECTION 11. TIMING OF THE
WITHHOLDING REQUIREMENT
OF SECTION 1446(f)(4)
The Treasury Department and the IRS
intend to issue regulations providing that
the withholding requirements in section
1446(f)(4) will not apply until regulations
or other guidance have been issued under
that section.
SECTION 12. TIERED
PARTNERSHIPS
The Treasury Department and the IRS
intend to issue regulations clarifying that
if a transferor transfers an interest in a
partnership (upper-tier partnership) that
owns an interest (directly or indirectly)
in another partnership (lower-tier partnership), and the lower-tier partnership
would have effectively connected gain
upon the deemed transaction described
in section 864(c)(8)(B)(i)(I) that would
be taken into account by the transferor
at the time of the transfer of the interest
in the upper-tier partnership, a portion
of the gain recognized by the transferor
is characterized as effectively connected
gain. These regulations will require
lower-tier partnerships to furnish information to their partners in order for their
indirect partners to be able to comply
with sections 864(c)(8) and 1446(f). See
section 6031(b); § 1.6031(b)–1T.
SECTION 13. REQUEST FOR
COMMENTS AND CONTACT
INFORMATION
The Treasury Department and the IRS
request comments on the rules to be issued under section 1446(f). In addition to

500

requests for comments identified in the
PTP Notice (which may also be applicable
to non-PTP interests) and in section 2 of
this notice, comments are requested concerning the following:
(i) rules for determining the amount
realized, including when the amount of
required withholding may exceed the proceeds of a sale of a partnership interest;
(ii) procedures for reducing the amount
required to be withheld, such as (a) limiting the withholding to the tax on the gain
recognized (if determinable) and (b) relieving identifiable historically compliant
taxpayers from withholding;
(iii) credit and refund forms and processes, such as (a) forms of standardized
documentation that could be used by
transferors when claiming refunds or
credits for the withholding to facilitate
IRS’s evaluation of such claims, or (b)
providing for an expedited refund procedure if a taxpayer can demonstrate substantial overwithholding;
(iv) rules implementing the requirement for a partnership to withhold under
section 1446(f)(4) on distributions to a
transferee that fails to withhold under section 1446(f)(1);
(v) rules that should apply under sections 864(c)(8), 897, 1445, and 1446(f)
when a partner disposes of an interest in a
partnership that holds both U.S. real property interests and other property used in
the conduct of a trade or business in the
United States; and
(vi) the calculation of the amount of
gain or loss from the sale, exchange, or
other disposition of a partnership interest
that is effectively connected with the conduct of a trade or business in the United
States by operation of section 864(c)(8).
Comments must be submitted by June
2, 2018. All comments received will be
available for public inspection and copying.
Written comments responding to this
notice should be mailed to:
Internal Revenue Service
CC:PA:LPD:PR (Notice 2018 –29)
Room 5203
P.O. Box 7604
Ben Franklin Station
Washington, DC 20044
Please include “Notice 2018 –29” on the
cover page.

Bulletin No. 2018 –16

Submissions may be hand delivered
Monday through Friday between the
hours of 8 a.m. and 4 p.m. to:
Internal Revenue Service
Courier’s Desk
1111 Constitution Ave., N.W.
Washington, DC 20224
Attn: CC:PA:LPD:PR
(Notice 2018 –29)
Alternatively, taxpayers may submit
comments electronically to the following email address: Notice.comments@
irscounsel.treas.gov. Please include
“Notice 2018 –29” in the subject line of
any electronic submission.
The principal authors of this notice are
Ronald M. Gootzeit of the Office of Associate Chief Counsel (International) and
Kevin I. Babitz of the Office of Associate
Chief Counsel (Passthroughs and Special
Industries). However, other personnel
from the Treasury Department and the
IRS also participated in its development.
For further information regarding this notice contact Mr. Gootzeit at 202.317.4953
(not a toll-free number).

National Security
Considerations with
Respect to Country-byCountry Reporting
Notice 2018 –31

SECTION 2. BACKGROUND
On December 23, 2015, a notice of
proposed rulemaking (REG–109822–15)
relating to the furnishing of CbC reports
by certain United States persons under
section 6038 was published in the Federal
Register (80 FR 79795). The preamble
to the proposed regulations requested
comments concerning the need for a national security exception to the CbC information reporting requirement. On
June 30, 2016, the Treasury Department
and the IRS published final regulations
(TD 9773) requiring annual CbC reporting on Form 8975, Country-by-Country
Report (CbC report), by certain United
States persons that are ultimate parent
entities of U.S. MNE groups that have
annual revenue for the preceding reporting period of $850,000,000 or more. The
final regulations do not provide a general exception for information that may
relate to national security, but the preamble to the final regulations stated that
the Department of Defense would continue to consider the national security
implications of CbC reports in particular
fact patterns. Based on subsequent consultations with the Department of Defense, the Treasury Department and the
IRS have determined that national security interests require modifications to the
reporting requirements for U.S. MNE
groups that are specified national security contractors as defined in section
3.01 of this notice and that have a reporting requirement under § 1.6038 – 4.

SECTION 1. OVERVIEW
This notice provides additional guidance
concerning country-by-country (CbC) reporting requirements under section 6038
and § 1.6038 – 4. In consideration of the
national security interests of the United
States, this notice addresses modifications to
the reporting requirement under § 1.6038 – 4
with respect to certain U.S. multinational
enterprise (MNE) groups. The Department
of the Treasury (Treasury Department) and
the Internal Revenue Service (IRS) intend to
amend § 1.6038 – 4 to incorporate the guidance described in this notice. Prior to the
issuance of these amendments, U.S. MNE
groups may rely on the provisions of section
3 of this notice.

Bulletin No. 2018 –16

SECTION 3. MODIFICATIONS TO
CBC REPORTING FOR SPECIFIED
NATIONAL SECURITY
CONTRACTORS
.01 Specified National Security
Contractor
For purposes of this notice, a U.S.
MNE group is a “specified national security contractor” if more than 50 percent of
the U.S. MNE group’s annual revenue, as
determined in accordance with U.S. generally accepted accounting principles, in
the preceding reporting period is attributable to contracts with the Department of
Defense or other U.S. government intelligence or security agencies.

501

.02 Modifications to Manner of
Reporting on Form 8975
The Treasury Department and the IRS
intend to amend § 1.6038 – 4 to provide
the definition of specified national security contractor and modifications to the
manner of reporting on Form 8975 for
such U.S. MNE groups. The amended regulations will provide that U.S. MNE
groups that have a Form 8975 filing obligation under § 1.6038 – 4 and are specified
national security contractors may provide
Form 8975 and Schedules A (Form 8975)
in the following manner:
• Complete Form 8975 with a statement
at the beginning of Part II, Additional
Information, that the U.S. MNE group
is a specified national security contractor as defined in this notice;
• Complete one Schedule A (Form
8975) for the Tax Jurisdiction of the
United States with aggregated financial
and employee information for the entire
U.S. MNE group in Part I, Tax Jurisdiction Information, and only the ultimate
parent entity’s information in Part II,
Constituent Entity Information; and
• Complete one Schedule A (Form
8975) for the Tax Jurisdiction “Stateless” with zeroes in Part I, Tax Jurisdiction Information, and only the ultimate parent entity’s information in
Part II, Constituent Entity Information.
No other Schedule A (Form 8975) or additional information is required.
.03 Amended Form 8975 and Schedules
A (Form 8975)
A specified national security contractor
that has already filed Form 8975 and
Schedules A (Form 8975) for prior reporting periods may file an amended Federal
income tax return (following the instructions for filing of amended Federal income tax returns) and attach an amended
Form 8975 and Schedules A (Form 8975)
in the manner provided in section 3.02
with the amended report checkbox on
Form 8975 marked. Specified national security contractors that do not electronically file their amended Federal income
tax returns should, in addition to filing an
amended Federal income tax return with
an amended Form 8975 and Schedules A
(Form 8975), mail a copy of page 1 of

April 16, 2018