Who must file Form 8804 or 8805, and what triggers partnership withholding?

There are two ways US-source income reaches a foreign person, and each has its own withholding form. Passive payments — dividends, interest, rents, royalties — run through Form 1042 under the §1441/§1442 rules. The other channel is a foreign person who shares in the profits of an actual US business through a partnership: there, the partnership itself must withhold US tax on that partner's share of the business income, and report it on Form 8804 and Form 8805. This is the effectively connected side of foreign-payee withholding, governed by §1446.

Like the other international information returns, these forms compute no tax of their own — but, as with Form 1042, real money rides on them: the partnership is personally liable under §1461 for the §1446 tax it should have withheld. This guide works the threshold question: does a partnership have to withhold for a foreign partner, and file Forms 8804 and 8805? There is no filer-category system. The structure is a three-part trigger — a partnership, income effectively connected with a US trade or business, and a foreign partner who shares in it — plus the rate and the liability. We work the trigger, then the rate, then the one distinction that trips everyone up: §1446(a) versus §1446(f).

In plain terms if a partnership runs a US business and any of its partners are foreign, the partnership generally has to withhold US tax on each foreign partner's share of the business profits and report it — Form 8804 is the partnership's annual return, Form 8805 is the slip for each foreign partner, and Form 8813 is the quarterly payment. The foreign partner doesn't file these; the partnership does, and it is on the hook for the tax. PILOT determines whether that obligation exists; it never computes the rate or the tax.

Two forms and a voucher

The §1446 regime is one annual return, a per-partner statement, and a quarterly payment voucher — all filed by the partnership.

Form 8804 — the partnership's annual return

Form 8804 is the partnership's once-a-year reconciliation of the §1446 tax — the analog of the Form 1042 annual return, but for effectively connected income rather than FDAP. It is filed separately from Form 1065; it is not a schedule attached to the partnership return. Crucially, the foreign partner is not the filer here — the partnership is the withholding agent and the filer.

Form 8805 — the per-foreign-partner statement

Form 8805 is the partner-level statement: one for each foreign partner, showing that partner's share of effectively connected taxable income and the §1446 tax paid on its behalf. The foreign partner uses its Form 8805 to claim that withheld tax as a credit (under §33) on its own US return. The partnership furnishes Form 8805 to the IRS and to each partner — and, because of a documentation rule below, sometimes must furnish a Form 8805 showing zero tax.

The three-part trigger

A partnership must withhold under §1446, and file Forms 8804 and 8805, when three things are all true. The statute states the core 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 …

— IRC §1446(a)

So the three elements are: (1) the entity is a partnership (including an LLC taxed as a partnership), (2) it has income effectively connected with a US trade or business, and (3) some of that income is allocable to a foreign partner. Miss any one and §1446 does not apply.

But there is a precision point that catches careful preparers, and it is the most important thing in this guide: the filing obligation is broader than the tax. The withholding tax is computed on effectively connected taxable income (ECTI) — gross income net of the connected deductions — allocable to the foreign partner. The filing obligation, by regulation, attaches whenever the partnership has effectively connected gross income allocable to a foreign partner:

Every partnership (except a publicly traded partnership subject to § 1.1446-4) that has effectively connected gross income for the partnership's taxable year allocable under section 704 to one or more of its foreign partners … must file Form 8804 …

— Treas. Reg. §1.1446-3(d)(1)(iii)

The consequence: a partnership can owe the forms even when it owes no tax. If connected deductions wipe out the ECTI so that the net allocable to the foreign partner is zero, the §1446 tax is zero — but the partnership still files Form 8804 (and a Form 8805 for the partner). Absence of ECTI, or of any tax due, is not a filing exception. Likewise, §1446 withholding is owed on the partner's allocable share whether or not the partnership actually distributes anything — there is no "only if distributed" escape.

Example 1 — the core case. USP A LLC, taxed as a partnership, runs an operating business in the US and has a 25% partner, FC B, a foreign corporation. FC B's share of the US business income is effectively connected income allocable to a foreign partner — so USP A withholds §1446 tax on FC B's share, pays it in quarterly installments on Form 8813, and files Form 8804 plus a Form 8805 for FC B after year-end. FC B then claims the tax shown on its Form 8805 as a credit on its own US return.

In plain terms two traps live here. First, the partnership files even in a year it owes no §1446 tax — if there's US business income allocated to a foreign partner, the forms are due even when deductions zero out the taxable amount. Second, it doesn't matter whether the foreign partner was paid a dime — withholding is on the partner's share of the profits, not on cash distributions. PILOT asks the plain trigger — US business income allocated to a foreign partner — not the tax math.

Why a foreign partner has effectively connected income

It is worth pausing on why a foreign investor who merely holds a partnership interest gets pulled into a US filing. The answer is a one-line conduit rule:

… a nonresident alien individual or foreign corporation shall be considered as being engaged in a trade or business within the United States if the partnership of which such individual or corporation is a member is so engaged …

— IRC §875(1)

Because of §875(1), a foreign partner in a partnership that conducts a US trade or business is itself treated as engaged in that business — so its distributive share of the partnership's income is effectively connected income (the meaning of "effectively connected" comes from §864(c)). Without §875(1), a passive foreign limited partner would not be "engaged in a US business" just by holding the interest. With it, the partnership's activity flows up to the partner — and §1446 makes the partnership withhold on the way. The chain is §875(1) (the foreign partner is engaged in the US business) → §864(c) (its share is effectively connected) → §1446 (the partnership withholds).

Who is a foreign partner

The third element is mechanical. A foreign partner is simply any partner who is not a US person:

… the term "foreign partner" means any partner who is not a United States person.

— IRC §1446(e)

That is the §7701(a)(30) definition — a nonresident alien individual, a foreign corporation, a foreign partnership, or a foreign estate or trust. The partnership establishes a partner's status with the W-8 series (W-8BEN / W-8BEN-E for foreign partners) versus Form W-9 for US partners; an undocumented partner is presumed foreign. A partnership with only US partners has no §1446 obligation.

The rate, and the partnership's liability

The §1446 rate is not a single number — it is a moving reference to the top individual and corporate rates, applied to the foreign partner's share of ECTI:

… (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 … allocable … to foreign partners which are corporations.

— IRC §1446(b)(2)

Under current law that is 37% for a non-corporate foreign partner (the top §1 rate) and 21% for a corporate foreign partner (the §11(b) rate). The rate turns on the partner's character, not the partnership's.

And the liability lands on the partnership. The regulation is explicit:

Every partnership required to pay 1446 tax is made liable for that tax by section 1461.

— Treas. Reg. §1.1446-3(e)(1)

So a partnership that fails to withhold is itself liable for the §1446 tax, plus interest and a §6655 underpayment addition — and a person responsible for collecting and paying it over who willfully fails to do so can face the §6672 penalty (equal to the amount that should have been paid over). The partnership can be relieved of the tax if it proves the foreign partner later paid its own US tax (and §1463 says the same) — but never of the interest and penalties. As with Form 1042, the defining exposure here is the tax itself, not a flat information-return fee.

Example 2 — the rate turns on the partner. Change Example 1's partner from a foreign corporation to NRA C, a foreign individual. Now the §1446 rate on C's allocable ECTI is 37% (the top §1 rate), not the 21% that applied to corporate FC B. Same partnership, same business income — a different applicable percentage, driven entirely by whether the foreign partner is an individual or a corporation.

In plain terms the partnership — not the foreign investor — is the one the IRS pursues for §1446 tax that wasn't withheld, plus interest and penalties, and even a partnership employee who handled the money can be personally penalized. Collecting a valid W-8 from every partner and depositing the quarterly tax is what protects the partnership.

§1446(a) versus §1446(f) — keep them distinct

This is the single most-confused point in the area, because both rules live in §1446. They are different events, different withholders, and different forms.

• §1446(a) — the operating rule above: the partnership withholds on its effectively connected income allocable to foreign partners, and reports on Forms 8804 / 8805 / 8813.
• §1446(f) — a transfer rule: when a foreign partner sells its partnership interest, the buyer withholds, and reports on a different form entirely:

… 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.

— IRC §1446(f)(1)

So §1446(f) is withholding by the transferee (the buyer) of 10% of the amount realized on the sale of a partnership interest — reported on Form 8288 and 8288-A (with Form 8288-C for the partnership's back-stop withholding), the same vehicle as FIRPTA. It is not a Form 8804/8805 matter. The two regimes touch at exactly one point: a §1446(f) amount withheld on a transfer can be credited against the partnership's §1446(a) liability to the extent allocable to foreign partners (Reg §1.1446-3(c)(4)). Otherwise, keep them apart.

Example 3 — operating income versus a sale. USP A's ongoing US business income allocable to FC B is a §1446(a) matter — USP A withholds and files Forms 8804/8805. Now FC B sells its 25% interest to a buyer. That sale is a §1446(f) matter — the buyer withholds 10% of the amount realized and reports on Form 8288, because FC B's gain would be effectively connected under §864(c)(8). Different trigger (a disposition, not operating income), different withholder (the buyer, not the partnership), different form (8288, not 8804). PILOT determines the Form 8804/8805 obligation; the §1446(f) transfer withholding on Form 8288 is a separate analysis.

Publicly traded partnerships file differently

One large category of partnership does not use Forms 8804/8805 at all. A publicly traded partnership (PTP) under §7704 pays its §1446 tax by withholding on the actual distributions it makes to foreign partners — and reports that withholding on Form 1042 and 1042-S, not Forms 8804/8805 (Reg §1.1446-4).

Example 4 — the PTP exception. A publicly traded partnership has foreign unitholders and effectively connected income. It does not file Form 8804/8805 for them. Instead it withholds §1446 tax as it distributes to its foreign partners and reports on Form 1042/1042-S (income code 27). The §1446 tax is the same idea; the reporting form is different because the partner is a public investor receiving distributions rather than an allocated share.

Due dates and how it is filed

• Forms 8804 and 8805 are due on the 15th day of the 3rd month after the close of the partnership's tax year — March 15 for a calendar-year partnership — and are filed separately from Form 1065. A partnership that keeps its books and records outside the US and Puerto Rico gets the 15th day of the 6th month (June 15). An extension is requested on Form 7004, but it extends only the time to file, not the time to pay.
• Form 8813 installments are due during the year, on the 15th day of the 4th, 6th, 9th, and 12th months (April 15, June 15, September 15, December 15 for a calendar-year partnership). For underpayment purposes the partnership is treated as a corporation under §6655 (§1446(g)(2)) — so the §1446 tax must be funded during the year, well before Form 1065 and the Schedules K-1 are issued.

Penalties

The §1446 regime carries both the information-return penalties and — the larger exposure — the withholding liability:

• §1461 liability for the tax. The partnership is liable for the §1446 tax it failed to withhold, plus interest and the §6655 underpayment addition; the §1463 / Reg §1.1446-3(e) relief (if the foreign partner pays its own tax) reaches only the tax, never the interest and penalties.
• §6672 — a person required to collect and pay over the tax who willfully fails to do so can owe a penalty equal to the amount that should have been paid over.
• §6651(a)(1) — late filing of Form 8804 (the return): 5% of the unpaid tax per month, up to 25%.
• §6721 / §6722 — failure to file or furnish a correct Form 8805: a per-statement penalty, indexed annually, with a much larger uncapped amount for intentional disregard, and reasonable-cause relief.

As with Form 1042, this is not a §6038-family flat-penalty return — do not carry across the $10,000 (Forms 5471 / 8858 / 8865), $25,000 (Form 5472), or value-based (Form 926) figures. The defining number is the tax the partnership should have withheld.

Currency notes

The currency story here is the §1446(f) build-out and the rate references, not OBBBA:

• §1446(f) is the recent structural change. It was added by the TCJA (effective for transfers after December 31, 2017), and the withholding rules for publicly traded partnership interests took effect January 1, 2023. Pre-2018 transfer analysis is unreliable; this is the live development in the area.
• The 37% / 21% rates are a moving reference. §1446(b)(2) ties the rate to the highest §1 and §11(b) rates; the 37% / 21% figures are the TCJA-era rates that the current (Rev. 01/2026) Instructions for Form 8804 still state. A future change to §1 or §11(b) would move the rate (a workpaper number), not the filing trigger.
• OBBBA did not change the Form 8804 trigger. The 2025 reconciliation act (OBBBA, Pub. L. 119-21) §70353 restored §958(b)(4), which governs the downward attribution behind controlled-foreign-corporation and PFIC status (the subject of the Form 5471 and Form 8621 guides). OBBBA did not amend §1446. It did make one §864 change — but to §864(g) (an expense-allocation cross-reference for research expenditures), not to §864(c), the effectively-connected-income definition that drives §1446. So who must withhold and file Forms 8804/8805 is unchanged, and this guide carries the "No OBBBA Change" tag.

Relationships to other regimes and forms

Form 8804 is one half of foreign-payee withholding; the boundaries with its neighbors are where the analysis goes wrong.

• Form 1042 / 1042-S — the FDAP sibling. This is the defining distinction: passive US-source income (dividends, interest, rents, royalties) paid to a foreign person is withheld under §1441/§1442 and reported on Form 1042 / 1042-S; income effectively connected with a US business and allocable to a foreign partner is withheld by the partnership under §1446 and reported on Forms 8804 / 8805. One regime for passive income, the other for business income earned through a partnership. (And, as above, a PTP flips its §1446 reporting back onto Form 1042/1042-S.)
• Form 8865 — the foreign-partnership overlap. A foreign partnership can be in the §1446 regime too (it need not be domestic), and a US person with an interest in that foreign partnership may independently owe Form 8865. Section 1446 is about the partnership's withholding for foreign partners; Form 8865 is about a US person's information reporting of the foreign partnership — different questions that can both apply.
• §1446(f) / Form 8288, and FIRPTA. A foreign partner's sale of its interest is §1446(f) withholding on Form 8288 (above). Relatedly, when a domestic partnership disposes of a US real property interest, the gain is effectively connected and handled under §1446, not the §1445(e)(1) FIRPTA-for-partnerships rule (Reg §1.1446-3(c)(2)) — though §1445 amounts withheld can be credited.
• Schedule K-1 / Form 1065. The §1446 tax the partnership pays is reported to each foreign partner on Form 8805 (separate from the K-1) and claimed by the partner as a §33 credit on its own US return — the partner still files (Form 1040-NR or 1120-F); §1446 withholding does not replace the partner's return.

In plain terms the key fork is the same one Form 1042 sits on: passive payment or business profit. A dividend or royalty to a foreign person is a Form 1042 question; a foreign partner's share of a US business's income is a Form 8804 question; and a foreign partner selling out is a Form 8288 question. Sort the event first, and the form follows. PILOT runs that determination across a structure — which of these each partnership and payer must file, and why.

What Form 8804 is not

Forms 8804 and 8805 report and collect — they do not compute the partnership's or the partner's net US tax, and PILOT does not compute the §1446 tax. The ECTI calculation, the applicable rate, the quarterly installment amounts, the §6655 underpayment addition, any §1446(f) credit, and the foreign partner's ultimate US liability are separate, downstream work that builds on the facts these forms capture. The first question — and the one this guide answers — is simply whether a Form 8804/8805 obligation exists: for which partnership, on account of which foreign partner, and how the §1446(a)/§1446(f) and PTP boundaries cut.