New 1446(f) regulations
What is the Section 1446(f) regulations?
Section 1446(f) of the U.S. Internal Revenue Code imposes new withholding and reporting requirements on sales of partnership interest. Generally, the securities affected are classified as partnerships for U.S. tax withholding purposes. Such securities include Master Limited Partnerships (MLP), Publicly Traded Partnerships (PTP), and Exchange Traded Funds (ETF).
Current section 1446 regulations already extend to include withholding on partnership distributions. Starting 01/01/2023, additional requirements include a new 10% withholding tax on distributions and 10% withholding tax on proceeds from partnership securities.
Who is affected by the 1446(f) regulations?
Any foreign accounts holding securities that are in scope for section 1446(f) will be subject to additional withholding requirements on and after 01/01/2023.
What are the 1446(f) securities?
| CUSIP | Security Name | Symbol |
|---|---|---|
| 026695106 | ***AMERICAN HOTEL INCOME PROP REIT LP UNITS | AHOTF |
| 131476103 | CALUMET SPECIALTY PRODS PARTNERS L P COMMON UNITS REPSTG LTD PARTNER INT | CLMT |
| 150185106 | CEDAR FAIR LP-DEP RCPTS REPSTG UNITS LTD PARTNERSHIP INT | FUN |
| 165185109 | CHESAPEAKE GRANITE WASH TRUST COMMON SHARES | CHKR |
| 212849103 | CONWEST PARTNERSHIP PART UNITS | CWPS |
| 226344208 | CRESTWOOD EQUITY PARTNERS LP COMMON UNITS REPRESENTING LIMITED PARTNER INTERESTS | CEQP |
| 226344307 | CRESTWOOD EQUITY PARTNERS LP PREFERRED UNITS REPRESENTING LIMITED PARTNER INTERE | CEQPPR |
| 292102100 | EMPIRE STATE REALTY OP L P SER ES OPERATING PARTNERSHIP UNITS REP LTD PARTNERSHI | ESBA |
| 292102209 | EMPIRE STATE REALTY OP L P SER 60 OPERATING PARTNERSHIP UNITS REP LTD PARTNERSHI | OGCP |
| 292102308 | EMPIRE STATE REALTY OP L P SER 250 OPERATING PARTNERSHIP UNITS REP LTD PARTNERSH | FISK |
| 293792107 | ENTERPRISE PRODUCTS PARTNERS LP | EPD |
| 315293100 | Ferrellgas Partners, L.P. | FGPR |
| 315293308 | UTS FERRELLGAS PARTNERS L P UNIT LTD PARTNERSHIP INT CL B | FGPRB |
| 371927104 | GENESIS ENERGY LP UNITS LTD PARTNERSHIP INT | GEL |
| 393221106 | GREEN PLAINS PARTNERS LP COM UNIT REPSTG LTD PARTNER INT | GPP |
| 403829104 | GYRODYNE LLC COM | GYRO |
| 435763107 | HOLLY ENERGY PARTNERS L P UNIT REPSTG LIMITED INTEREST | HEP |
| 451100101 | ICAHN ENTERPRISES L P | IEP |
| 559080106 | MAGELLAN MIDSTREAM PARTNERS LP UNIT REPSTG LTD PARTNER | MMP |
| 573331105 | MARTIN MIDSTREAM PARTNERS L P | MMLP |
| 644206104 | NEW ENGLAND REALTY ASSOCIATES LP-DEPOSITARY RCPT | NEN |
| 726503105 | PLAINS ALL AMERICAN PIPELINE L P COMMON UNITS REPRESENTING LIMITED PARTNER INTER | PAA |
| 864482104 | SUBURBAN PROPANE PARTNERS LP UNITS LTD PARTNERSHIP INT | SPH |
| 866142409 | SUMMIT MIDSTREAM PARTNERS LP COMMON UNITS REPRESENTING LIMITED PARTNER INTERESTS | SMLP |
| 903318103 | USD PARTNERS LP COM UNIT REPSTG LTD PARTNER INTS | USDP |
| 958669103 | WESTERN MIDSTREAM PARTNERS LP COMMON UNITS REPRESENTING LIMITED PARTNER INTEREST | WES |
| 960417103 | WESTLAKE CHEMICAL PARTNERS LP COM UNIT REPSTG LTD PARTNER INT | WLKP |
| 01877R108 | ALLIANCE RESOURCE PARTNERS L P UNIT LTD PARTNER INT | ARLP |
| 01881G106 | ALLIANCEBERNSTEIN HOLDING LP UNIT LTD PARTNERSHIP INT | AB |
| 09225M101 | BLACK STONE MINERALS L P COMMON UNITS REPRESENTING LIMITED PARTNER INTERESTS | BSM |
| 12637A103 | CSI COMPRESSCO LP COMMON UNITS | CCLP |
| 16411Q101 | CHENIERE ENERGY PARTNERS L P COMMON UNITS | CQP |
| 22758A105 | CROSSAMERICA PARTNERS LP COMMON UNITS REPSNTNG LIMITED PARTNER INTERESTS | CAPL |
| 23311P100 | DCP MIDSTREAM LP COMMON UNITS REPRESENTING LIMITED PARTNERSHIP INTERESTS | DCP |
| 23311P209 | DCP MIDSTREAM LP 7.875% RED PERP CUM PFD UNIT SER B FIXED/FLTG SHS | DCPPRB |
| 23311P308 | DCP MIDSTREAM LP 7.95% SERS C FXD TO FLTNG RATE CUM REDMBLE PRPTUAL PREF UNITS | DCPPRC |
| 24664T103 | DELEK LOGISTICS PARTNERS LP COM UNIT REPSTG LTD PARTNERSHP INT | DKL |
| 25820R105 | DORCHESTER MINERALS L P | DMLP |
| 26827L109 | ECA MARCELLUS TR I UNIT | ECTM |
| 29273V100 | ENERGY TRANSFER LP COMMON UNITS REPRESENTING LIMITED PARTNER INTERESTS | ET |
| 29273V407 | ENERGY TRANSFER LP 7.375% SRS C FXD TO FLTNG RATE CMLTV RDMBL PERPETUAL PREF UNT | ETPRC |
| 29273V506 | ENERGY TRANSFER LP 7.625% SRS D FXD TO FLTNG RT CMLTV RDMBL PERPETUAL PREF UNT | ETPRD |
| 29273V605 | ENERGY TRANSFER LP 7.600% SRS E FXD TO FLTNG RT CMLTV RDMBL PERPETUAL PREF UNT | ETPRE |
| 37946R109 | GLOBAL PARTNERS LP UNIT REPSTG LTD PARTNER INT | GLP |
| 37946R208 | GLOBAL PARTNERS LP 9.75% SRS A FXD TO FLTNG RT CMLTV RDMBL PRPTL PRFRD UNTS | GLPPRA |
| 37946R307 | GLOBAL PARTNERS LP 9.50% SRS B FXD RT CMLTV RDMBL PERPETUAL PREFERRED UNITS | GLPPRB |
| 55336V100 | MPLX LP COM UNIT REPSTG LTD PARTNER INT | MPLX |
| 62913M107 | NGL ENERGY PARTNERS LP COM UNIT REPSTG LTD PARTNER INT | NGL |
| 62913M206 | NGL ENERGY PARTNERS LP 9.00% CL B FXD TO FLTNG CMLTV RDMBL PRPTL PFRD UNTS | NGLPRB |
| 62913M305 | NGL ENERGY PARTNERS LP 9.625% CL C FXD TO FLTNG CMLTV RDMBL PRPTL PFRD UNTS | NGLPRC |
| 63900P608 | NATURAL RESOURCE PARTNERS L P COM UNIT LTD PARTNERSHIP INT NEW | NRP |
| 67058H102 | NUSTAR ENERGY L P COM UNITS REPSTG LTD PRTNR INT | NS |
| 67058H201 | NUSTAR ENERGY LP 8.50% SERIES A FIXED TO FLOATING RATE CUM RED PFD UNIT | NSPRA |
| 67058H300 | NUSTAR ENERGY LP 7.625% SRS B FXD TO FLTG RATE CUM RDMBL PRPTL PRFRRD UNITS | NSPRB |
| 67058H409 | NUSTAR ENERGY LP 9.00% SRS C FXD TO FLTG RATE CUM RDMBL PRPTL PRFRRD UNITS | NSPRC |
| 67081B106 | Sisecam Resources LP | SIRE |
| 76090H103 | ***RESTAURANT BRANDS INTERNATIONAL INC UNIT LTD PARTNERSHIP INT | RSTRF |
| 79971C201 | Sanchez Midstream Partners LP | SNMP |
| 80007T101 | SANDRIDGE MISSISSIPPIAN TR I UNIT | SDTTU |
| 85814R107 | STEEL PARTNERS HOLDINGS LTD PARTNERSHIP UNIT | SPLP |
| 85814R206 | STEEL PARTNERS HOLDINGS LP 6.0% SERIES A PREFERRED UNITS | SPLPPRA |
| 86765K109 | SUNOCO LP COMMON UNITS REPRESENTING LIMITED PARTNER INTERESTS | SUN |
| 90290N109 | USA COMPRESSION PARTNERS LP COM UNIT LTD PARTNER INTSLTD | USAC |
Please note that the list is NOT an exhaustive list of every publicly traded security that is in scope for section 1446(f). There are market circumstances, such as entity conversions and other corporate actions, that can change an entity’s tax classification.
What happens if a foreign customer holds 1446(f) in scope securities after January 1, 2023?
If the 1446(f) partnership security declares a distribution, that distribution may potentially be subject to the new 10% withholding tax on ECNI. ECNI is defined as excess cumulative net income earned by a publicly traded partnership since its formation that has not been previously.
Foreign customer may be subject to 10% withholding tax on their proceeds when selling their units.
How can customers reclaim funds as a result of 1446(f) withholding?
Legitimate withheld funds will be remitted to the IRS and, by the tax reporting season, foreign customers will get a 1042-S slip. You may consult with your tax advisors and file a U.S. tax return to reclaim any potential over withholding.
Does the 1446(f) withholding apply to option exercise and assignments?
Option exercise or assignments are not subject to the 1446(f) withholding. However, if you receive shares from exercising or being assigned those options and subsequently sell the shares in the future then the 10% withholding will be applied on those sales.
The 10% withholding would still apply to proceeds from closing option contracts.
When would I see the withholding after a sale?
1446(f) withholding usually happens the day following the settlement day of the sale.