PTP Taxation Solution
What is IRC Section 1446(f)?
The Internal Revenue Service (IRS) has published final regulations under Internal Revenue Code (IRC) Section 1446(f) regarding new withholding tax concerning Publicly Traded Partnerships (PTP) that entered into force on Jan. 1, 2023.
According to IRC Section 1446(f) brokers, withholding agents and qualified intermediaries (QIs), acting on behalf of non[1]U.S. Partners, must withhold a tax equal to 10% of the amount realized on the sale or exchange of non-U.S. partnership interests in a PTP.
To identify potential PTPs subject to the withholding requirement of 1446(f), our solution identifies businesses based on a partnership agreement between two or more owners that are:
- Publicly traded on SEC-registered securities markets or OTC trading venues
- Engaged in a U.S. trade or business
- Mainly involved in certain business activities (e.g., energy, natural resources, commodities, logistics, real estate, etc)
Our solution
ICE’s PTP taxation solution enables identification and monitoring of securities that may be in scope of Section 1446(f) - generally represented by shares, units, ETFs, REITs, trusts - through analysis of the issuer’s legal form (mainly limited partnerships and limited liability companies) and the related business. The service offers:
Accurate and in-depth analysis of an extensive number of sources:
- Annual reports, prospectuses, tax reports
- K-1, K-2, K-3 Forms
- Stock exchanges releases, PTP lists from financial intermediaries & clearing houses
Ongoing monitoring of the PTP securities to identify any change in the status of issuers. Events that may lead to a change in the PTP status include:
- Corporate Actions (e.g. M&As, reorganizations)
- New listings and delistings from U.S. securities exchanges
The solution may benefit banks (including custodians) asset managers, wealth managers, brokers and qualified intermediaries who may meet the definition of “broker” as defined by the IRS for the purposes of IRC Section 1446(f).