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PTP Securities
Starting January 1, 2023, changes to how partnerships (“PTPs”) report and pay tax on certain income from foreign sources will take effect under the U.S. Internal Revenue Section 1446(f). These changes, which were enacted as part of the Tax Cuts and Jobs Act of 2017, are designed to reduce the potential for tax avoidance and ensure that PTPs are correctly paying their fair share of taxes.
One significant change under Section 1446(f) is the implementation of withholding requirements for PTPs. Under the new rules, PTPs will be required to withhold and pay tax on certain income that is distributed to foreign partners. This includes not only income that is effectively connected to a trade or business in the United States but also all foreign-source income, regardless of whether it is effectively connected.
How does this impact me?
Withholding applies to PTPs held by non-U.S. tax residents (individuals and entities). If you are a non-U.S. tax resident, and if you have holdings in any of the PTPs listed below, starting January 1, 2023, gross proceeds from the sale of these PTPs will be subject to 10% withholding. This withholding will be reported on the year-end Form 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding.
The list of PTP securities that are available on Vested and will be subject to withholding under IRC Sec. 1446(f). is being maintained here. Please note that this list of PTPs will be updated on a best-efforts basis and is subject to change without notice.
