February 13, 2018

Mr. Chip Harter
Deputy Assistant Secretary (International Tax Affairs)
Department of the Treasury
1400 Pennsylvania Avenue, NW
Washington, DC 20224

Mr. Daniel Winnick
Attorney-Advisor (Office of Tax Policy)
Department of the Treasury
1400 Pennsylvania Avenue, NW
Washington, DC 20224

Mr. Jason Smyczek
Office of Associate (Chief Counsel), International
Senior Technical Reviewer, Branch 4
Internal Revenue Service
1111 Constitution Avenue, NW
Washington, DC 20224

Mr. Ronald Gootzeit
Office of Associate (Chief Counsel), International
Attorney, Branch 4
Internal Revenue Service
1111 Constitution Avenue, NW
Washington, DC 20224

Re: Request for delay in implementation of Section 1446(f) for non-publicly traded partnerships

Gentlemen:

The Securities Industry and Financial Markets Association (“SIFMA”)1 requests that the relief from withholding under new Section 1446(f) of the Internal Revenue Code2 (the “Code”) that was provided to sales of publicly traded partnership interests in Notice 2018-083 be extended to partnership interests that are not publicly traded. Notice 2018-08 requested comments on whether the challenges that apply to transfers of publicly-traded partnerships under Section 1446(f) also apply to non-publicly traded partnerships; the members of SIFMA confirm that such relief is warranted. The new withholding requirement raises many issues of both procedure and substance, making compliance impractical with respect to sales of both publicly traded and non-publicly traded partnerships until the Department of Treasury (“Treasury”) and the Internal Revenue Service (“IRS”) publish guidance for implementing this provision. Further, we would underscore the need for immediate guidance under Section 864(c)(8) for taxpayers to determine their tax liability with respect to a sale of a partnership interest.

By way of background, Public Law 115-97, the “Tax Cuts and Jobs Act”,4 added two new provisions to the Code concerning sales of partnership interests by foreign persons. New Section 864(c)(8) treats a foreign partner’s gain (or loss) from the disposition of an interest in a partnership as effectively connected income subject to US net income tax to the extent that the partner would have had effectively connected gain (or loss) had the partnership sold all of its assets at fair market value on the disposition date. New Section 1446(f) requires that a buyer of a partnership interest from a foreign person withhold 10 percent of the “amount realized” by the outgoing partner “if any portion of the gain (if any) on any disposition of an interest in a partnership would be” subject to tax under Section 864(c)(8). If the transferee fails to withhold the correct amount of tax under Section 1446(f), the obligation to collect is shifted to the partnership itself, which is required to withhold from future distributions to the transferee partner. Section 1446(f) applies to transfers of partnership interests after December 31, 2017.

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1 SIFMA is the voice of the U.S. securities industry. We represent the broker-dealers, banks and asset managers whose nearly 1 million employees provide access to the capital markets, raising over $2.5 trillion for businesses and municipalities in the U.S., serving clients with over $18.5 trillion in assets and managing more than $67 trillion in assets for individual and institutional clients including mutual funds and retirement plans. SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial
Markets Association (GFMA). For more information, visit http://www.sifma.org.

2 Except as otherwise expressly provided herein, all references to “Section” are to sections of the Internal Revenue Code of 1986, as amended (the “Code”), and all references to “Treas. Reg. §” or “Regulations” are to Treasury Regulations issued pursuant to the Code. Furthermore, all references to the “IRS” or the “Service” are to the Internal Revenue Service.

3 Notice 2018-08, 2018-5 IRB.

4 The Tax Cuts and Jobs Act was the short title of H.R. 1 prior to adoption of the last Senate amendment on
December 20, 2017 when the short title was stricken from the bill.