[Federal Register Volume 74, Number 62 (Thursday, April 2, 2009)]
[Rules and Regulations]
[Pages 14931-14932]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-7392]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 9394]
RIN 1545-BD80


Special Rules To Reduce Section 1446 Withholding; Correction

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Correcting amendments.

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SUMMARY: This document contains corrections to final regulations (TD 
9394) that were published in the Federal Register on Tuesday, April 29, 
2008 (73 FR 23069) regarding when a partnership may consider certain 
deductions and losses of a foreign partner to reduce or eliminate the 
partnership's obligation to pay withholding tax under section 1446 on 
effectively connected taxable income allocable under section 704 to 
such partner. The regulations will affect partnerships engaged in a 
trade or business in the United States that have one or more foreign 
partners.

DATES: This correction is effective on April 2, 2009, and is applicable 
on April 29, 2008.

FOR FURTHER INFORMATION CONTACT: Ronald M. Gootzeit at (202) 622-3860 
(not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

    The final regulations that are the subject of this document are 
under sections 1446, 1464, 6071, 6091, 6151, 6302, and 6414 of the 
Internal Revenue Code.

Need for Correction

    As published, final regulations (TD 9394) contains errors that may 
prove to be misleading and are in need of clarification.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Correction of Publication

0
Accordingly, 26 CFR part 1 is corrected by making the following 
correcting amendments:

PART 1--INCOME TAXES

0
Paragraph 1. The authority citation for part 1 continues to read in 
part as follows:

    Authority:  26 U.S.C. 7805 * * *


0
Par. 2. Section 1.1446-6 is amended as follows:
0
1. Paragraph (c)(2)(i) is revised.
0
2. The last sentence of paragraph (d)(3)(ii) is revised and a new 
sentence is added at the end of the paragraph.
0
3. Paragraphs (e)(1)(vi) second occurrence, (e)(1)(vii), and 
(e)(1)(viii) are redesignated as paragraphs (e)(1)(vii), (e)(1)(viii), 
and (e)(1)(ix), respectively.
0
4. The first sentence of paragraph (e)(2) Example 2.(i) is revised.
0
5. The third and fourth sentences of paragraph (e)(2) Example 2.(ii) 
are revised.
0
6. The fourth sentence of paragraph (e)(2) Example 4. is revised.
0
7. Paragraph (e)(2) Example 6.(ii) is revised.
    The revisions and addition read as follows:


Sec.  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.

* * * * *
    (c) * * *
    (2) * * *
    (i) Form of certification. A partner's certification to a 
partnership under paragraph (c)(1)(i) or (iii) of this section shall be 
made using Form 8804-C, ``Certificate Of Partner-Level Items to Reduce 
Section 1446 Withholding'' in accordance with the instructions of the 
form and the rules of this section.
* * * * *
    (d) * * *
    (3) * * *
    (ii) * * * To permit the partnership to reasonably rely on such 
certificate, the partnership shall be considered to have satisfied the 
requirements of paragraph (d)(3)(i) of this section if the partnership 
demonstrates that such failure was due to reasonable cause and not 
willful neglect and if once the partnership becomes aware of the 
failure, the partnership attaches the certificate and computation, as 
well as a written statement setting forth the reasons for the failure 
to comply with the requirements of paragraph (d)(3)(i) of this section, 
to an amended Form 8813 or amended Forms 8804 and 8805

[[Page 14932]]

for the relevant period. All such submissions should be sent to the 
address provided in the instructions to Form 8804-C.
* * * * *
    (e) * * *
    (2) * * *

    Example 2. * * *
    (i) Assume the same facts as in Example 1. * * *
    (ii) * * * As described in Example 1, NRA's year 4 U.S. income 
tax return is a qualifying U.S. income tax return because it will 
report income or gain effectively connected with a U.S. trade or 
business and is described under paragraph (b)(2)(iii)(C) of this 
section. Although NRA's year 5 U.S. income tax return reports income 
or gain effectively connected with a U.S. trade or business or 
deductions or losses properly allocated and apportioned to such 
activities it is not a qualifying U.S. income tax return under 
paragraph (b)(2)(iii) of this section. * * *
* * * * *
    Example 4. * * * NRA timely-filed (within the meaning of 
paragraph (b)(2) of this section) U.S. income tax returns for years 
1 through 6 reporting its allocable share of ECTI (or loss) from XYZ 
(and timely paid all tax shown on such returns). * * *
* * * * *
    Example 6. * * *
    (ii) If PRS had considered only $900 (or a lesser amount) of 
NRA's certified net operating loss when computing and paying its 
1446 tax during year 4 then, under paragraph (d)(2)(iii) of this 
section, PRS would not be liable for 1446 tax because it did not 
consider a net operating loss greater than the amount actually 
available to NRA.


0
Par. 3. Section 1.1464-1 is amended by revising paragraph (c) to read 
as follows:


Sec.  1.1464-1  Refunds or credits.

* * * * *
    (c) Effective/Applicability date. The last sentence in paragraph 
(a) of this section shall apply to partnership taxable years beginning 
after April 29, 2008.

0
Par. 4. Section 1.6151-1 is amended by revising paragraph (e) to read 
as follows:


Sec.  1.6151-1  Time and place for paying tax shown on returns.

* * * * *
    (e) Effective/Applicability date. Paragraph (d)(2) of this section 
shall apply to publicly traded partnerships described in Sec.  1.1446-4 
for partnership taxable years beginning after April 29, 2008.
* * * * *

LaNita Van Dyke,
Chief, Publications and Regulations Branch, Legal Processing Division, 
Associate Chief Counsel, (Procedure and Administration).
 [FR Doc. E9-7392 Filed 4-1-09; 8:45 am]
BILLING CODE 4830-01-P