Sec. 13501. Treatment of gain or loss of foreign persons from sale or exchange of interests in partnerships engaged in trade or business within the united states
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Section 864(c) is amended by adding at the end the following: Notwithstanding any other provision of this subtitle, if a nonresident alien individual or foreign corporation owns, directly or indirectly, an interest in a partnership which is engaged in any trade or business within the United States, gain or loss on the sale or exchange of all (or any portion of) such interest shall be treated as effectively connected with the conduct of such trade or business to the extent such gain or loss does not exceed the amount determined under subparagraph (B).
The amount determined under this subparagraph with respect to any partnership interest sold or exchanged— in the case of any gain on the sale or exchange of the partnership interest, is— the portion of the partner's distributive share of the amount of gain which 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 sale or exchange of such interest, or zero if no gain on such deemed sale would have been so effectively connected, and in the case of any loss on the sale or exchange of the partnership interest, is— the portion of the partner's distributive share of the amount of loss on the deemed sale described in clause (i)(I) which would have been so effectively connected, or zero if no loss on such deemed sale would be have been so effectively connected.
For purposes of this subparagraph, a partner's distributive share of gain or loss on the deemed sale shall be determined in the same manner as such partner’s distributive share of the non-separately stated taxable income or loss of such partnership. If a partnership described in subparagraph
(A)holds any United States real property interest (as defined in section 897(c)) at the time of the sale or exchange of the partnership interest, then the gain or loss treated as effectively connected income under subparagraph
(A)shall be reduced by the amount so treated with respect to such United States real property interest under section 897. For purposes of this paragraph, the term sale or exchange means any sale, exchange, or other disposition. The Secretary shall prescribe such regulations or other guidance as the Secretary determines appropriate for the application of this paragraph, including with respect to exchanges described in section 332, 351, 354, 355, 356, or 361. . Section 864(c)(1) is amended— by striking and
(7)in subparagraph (A), and inserting (7), and
(8), and by striking or
(7)in subparagraph (B), and inserting (7), or
(8). Section 1446 is amended by redesignating subsection
(f)as subsection
(g)and by inserting after subsection
(e)the following: 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. 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. Subparagraph
(A)shall not apply to any disposition if— 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 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. 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. 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. 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). Any term used in this subsection which is also used under section 1445 shall have the same meaning as when used in such section. 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. .
(a)The amendments made by subsection
(a)shall apply to sales, exchanges, and dispositions on or after November 27, 2017.
(b)The amendment made by subsection
(b)shall apply to sales, exchanges, and dispositions after December 31, 2017.