US Code

Public Law 119-73 (01/23/2026)

26 U.S.C. § 1446

Withholding of tax on foreign partners’ share of effectively connected income

(a)

General rule

If—
(1)
a partnership has effectively connected taxable income for any taxable year, and
(2)
any portion of such income is allocable under section 704 to a foreign partner,
such partnership shall pay a withholding tax under this section at such time and in such manner as the Secretary shall by regulations prescribe.
(b)

Amount of withholding tax

(1)

In general

The amount of the withholding tax payable by any partnership under subsection (a) shall be equal to the applicable percentage of the effectively connected taxable income of the partnership which is allocable under section 704 to foreign partners.

(2)

Applicable percentage

For purposes of paragraph (1), the term “applicable percentage” means—
(A)
the highest rate of tax specified in section 1 in the case of the portion of the effectively connected taxable income which is allocable under section 704 to foreign partners who are not corporations, and
(B)
the highest rate of tax specified in section 11(b) in the case of the portion of the effectively connected taxable income which is allocable under section 704 to foreign partners which are corporations.
(c)

Effectively connected taxable income

For purposes of this section, the term “effectively connected taxable income” means the taxable income of the partnership which is effectively connected (or treated as effectively connected) with the conduct of a trade or business in the United States computed with the following adjustments:
(1)
Paragraph (1) of section 703(a) shall not apply.
(2)
The partnership shall be allowed a deduction for depletion with respect to oil and gas wells but the amount of such deduction shall be determined without regard to sections 613 and 613A.
(3)
There shall not be taken into account any item of income, gain, loss, or deduction to the extent allocable under section 704 to any partner who is not a foreign partner.
(d)

Treatment of foreign partners

(1)

Allowance of credit

Each foreign partner of a partnership shall be allowed a credit under section 33 for such partner’s share of the withholding tax paid by the partnership under this section. Such credit shall be allowed for the partner’s taxable year in which (or with which) the partnership taxable year (for which such tax was paid) ends.

(2)

Credit treated as distributed to partner

Except as provided in regulations, a foreign partner’s share of any withholding tax paid by the partnership under this section shall be treated as distributed to such partner by such partnership on the earlier of—
(A)
the day on which such tax was paid by the partnership, or
(B)
the last day of the partnership’s taxable year for which such tax was paid.
(e)

Foreign partner

For purposes of this section, the term “foreign partner” means any partner who is not a United States person.

(f)

Special rules for withholding on dispositions of partnership interests

(1)

In general

Except as provided in this subsection, if any portion of the gain (if any) 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, the transferee shall be required to deduct and withhold a tax equal to 10 percent of the amount realized on the disposition.

(2)

Exception if nonforeign affidavit furnished

(A)

In general

No person shall be required to deduct and withhold any amount under paragraph (1) with respect to any disposition if the transferor furnishes to the transferee an affidavit by the transferor stating, under penalty of perjury, the transferor’s United States taxpayer identification number and that the transferor is not a foreign person.

(B)

False affidavit

Subparagraph (A) shall not apply to any disposition if—
(i)
the transferee has actual knowledge that the affidavit is false, or the transferee receives a notice (as described in section 1445(d)) from a transferor’s agent or transferee’s agent that such affidavit or statement is false, or
(ii)
the Secretary by regulations requires the transferee to furnish a copy of such affidavit or statement to the Secretary and the transferee fails to furnish a copy of such affidavit or statement to the Secretary at such time and in such manner as required by such regulations.
(C)

Rules for agents

The rules of section 1445(d) shall apply to a transferor’s agent or transferee’s agent with respect to any affidavit described in subparagraph (A) in the same manner as such rules apply with respect to the disposition of a United States real property interest under such section.

(3)

Authority of Secretary to prescribe reduced amount

At the request of the transferor or transferee, the Secretary may prescribe a reduced amount to be withheld under this section if the Secretary determines that to substitute such reduced amount will not jeopardize the collection of the tax imposed under this title with respect to gain treated under section 864(c)(8) as effectively connected with the conduct of a trade or business with in the United States.

(4)

Partnership to withhold amounts not withheld by the transferee

If a transferee fails to withhold any amount required to be withheld under paragraph (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 this title on such amount).

(5)

Definitions

Any term used in this subsection which is also used under section 1445 shall have the same meaning as when used in such section.

(6)

Regulations

The Secretary shall prescribe such regulations or other guidance as may be necessary to carry out the purposes of this subsection, including regulations providing for exceptions from the provisions of this subsection.

(g)

Regulations

The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this section, including—
(1)
regulations providing for the application of this section in the case of publicly traded partnerships, and
(2)
regulations providing—
(A)
that, for purposes of section 6655, the withholding tax imposed under this section shall be treated as a tax imposed by section 11 and any partnership required to pay such tax shall be treated as a corporation, and
(B)
appropriate adjustments in applying section 6655 with respect to such withholding tax.

Pub. L. 99–514, title XII, § 1246(a)100 Stat. 2582Pub. L. 100–647, title I, § 1012(s)(1)(A)102 Stat. 3526Pub. L. 101–239, title VII, § 7811(i)(6)103 Stat. 2410Pub. L. 115–97, title I131 Stat. 2098Pub. L. 115–141, div. U, title IV, § 401(a)(199)132 Stat. 1193(Added , , ; amended , , ; , , ; , §§ 13001(b)(3)(D), 13501(b), , , 2139; , , .)

Editorial Notes

Amendments

Pub. L. 115–1412018— substituted “Withholding of tax” for “Withholding tax” in section catchline.

Pub. L. 115–97, § 13001(b)(3)(D)2017—Subsec. (b)(2)(B). , substituted “section 11(b)” for “section 11(b)(1)”.

Pub. L. 115–97, § 13501(b)Subsecs. (f), (g). , added subsec. (f) and redesignated former subsec. (f) as (g).

Pub. L. 101–239, § 7811(i)(6)(A)1989—Subsec. (b)(2)(B). , substituted “section 11(b)(1)” for “section 11(b)”.

Pub. L. 101–239, § 7811(i)(6)(B)Subsec. (d)(2). , amended par. (2) generally. Prior to amendment, par. (2) read as follows: “A foreign partner’s share of any withholding tax paid by the partnership under this section shall be treated as distributed to such partner by such partnership on the last day of the partnership’s taxable year (for which such tax was paid).”

Pub. L. 101–239, § 7811(i)(6)(C)Subsec. (f). , amended subsec. (f) generally. Prior to amendment, subsec. (f) read as follows: “The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this section, including regulations providing for the application of this section in the case of publicly traded partnerships.”

Pub. L. 100–6471988— amended section generally, substituting provisions relating to withholding tax on foreign partners’ share of effectively connected income for provisions which related to withholding tax on amounts paid by partnerships to foreign partners.

Statutory Notes and Related Subsidiaries

Effective Date of 2017 Amendment

section 13001(b)(3)(D) of Pub. L. 115–97section 13001(c)(2) of Pub. L. 115–97section 11 of this titleAmendment by applicable to distributions made after , see , set out as a note under .

Pub. L. 115–97, title I, § 13501(c)(2)131 Stat. 2141

“The amendment made by subsection (b) [amending this section] shall apply to sales, exchanges, and dispositions after .”
, , , provided that:

Effective Date of 1989 Amendment

Pub. L. 101–239Pub. L. 100–647section 7817 of Pub. L. 101–239section 1 of this titleAmendment by effective, except as otherwise provided, as if included in the provision of the Technical and Miscellaneous Revenue Act of 1988, , to which such amendment relates, see , set out as a note under .

Effective Date of 1988 Amendment

Pub. L. 100–647, title I, § 1012(s)(1)(D)102 Stat. 3527

“The amendments made by this paragraph [amending sections 1446 and 6401 of this title] shall apply to taxable years beginning after . No amount shall be required to be deducted and withheld under section 1446 of the 1986 Code (as in effect before the amendment made by subparagraph (A)).”
, , , provided that:

Effective Date

Pub. L. 99–514, title XII, § 1246(d)100 Stat. 2583

section 6401 of this title“The amendment made by this section [enacting this section and amending ] shall apply to distributions after (or, if earlier, the effective date (which shall not be earlier than ) of the initial regulations issued under section 1446 of the Internal Revenue Code of 1986 as added by this section).”
, , , provided that: