IRS Form 8804-C - Certificate of Partner-Level Items to Reduce Section 1446 Withholding

IRS Form 8804-C – In the complex world of U.S. taxation for international investors, IRS Form 8804-C plays a crucial role for foreign partners in partnerships. This certificate allows eligible foreign partners to potentially reduce or eliminate the withholding tax on their share of effectively connected taxable income (ECTI). If you’re a foreign partner navigating U.S. tax obligations, understanding Form 8804-C can help optimize your tax strategy while ensuring compliance. In this article, we’ll break down what the form is, who needs it, how it works, and key considerations based on official IRS guidelines as of 2026.

What Is Section 1446 Withholding?

Before diving into Form 8804-C, it’s essential to grasp Section 1446 of the Internal Revenue Code. This section requires U.S. partnerships with foreign partners to withhold tax on the foreign partners’ allocable share of ECTI—income effectively connected with a U.S. trade or business. The withholding rate is typically the highest applicable tax rate (e.g., 37% for individuals or 21% for corporations), and it’s paid quarterly using Form 8813. The partnership reports this annually on Form 8804 and provides each foreign partner with Form 8805 detailing their share.

This withholding acts as a prepayment of the foreign partner’s U.S. income tax liability. However, it can sometimes exceed the actual tax owed, especially if the partner has deductions or losses that offset the income. That’s where Form 8804-C comes in.

Purpose of IRS Form 8804-C

IRS Form 8804-C, officially titled “Certificate of Partner-Level Items to Reduce Section 1446 Withholding,” enables a foreign partner to certify certain deductions, losses, or other items to the partnership. By submitting this form, the partner provides evidence that these items can reduce their U.S. tax liability on ECTI, potentially lowering the partnership’s withholding obligation under Section 1446.

Key purposes include:

Certifying partner-level deductions and losses (e.g., net operating losses, capital losses, or suspended losses) that are reasonably expected to offset ECTI.
Representing that the partnership investment is the partner’s only activity generating effectively connected items, which may qualify for a de minimis exemption if the estimated withholding is under $1,000.
Allowing updates to prior certifications if facts change, such as filing a previously unfiled tax return or adjusting loss amounts.

The partnership isn’t required to accept or rely on the certificate, but if it does, it must attach copies to its withholding payments and returns. As of January 2026, there are no recent developments or changes to the form, making the March 2009 revision still applicable.

Who Needs to File Form 8804-C?

Form 8804-C is primarily for foreign partners (individuals, corporations, trusts, or estates) in U.S. partnerships that generate ECTI. It’s not suitable for:

Partners in publicly traded partnerships.
Domestic partners or those without foreign status.
Situations where the partner hasn’t provided valid documentation of foreign status under Regulations section 1.1446-1.

Tiered partnerships (e.g., an upper-tier foreign partnership in a lower-tier U.S. partnership) have special rules: The upper-tier can submit the form only if look-through provisions apply, and deductions can’t be double-certified across multiple partnerships.

If you’re a foreign partner expecting deductions or losses to offset your ECTI share, or if the partnership is your sole U.S. business activity, submitting this form could reduce unnecessary withholding.

Eligibility Requirements for Using Form 8804-C

To qualify, foreign partners must meet strict criteria outlined in Regulations section 1.1446-6:

Timely Filing and Payment of Prior U.S. Tax Returns: For the first certificate submitted (to any partnership), returns for the two prior tax years must be filed and paid by specific deadlines (e.g., within one year of the original due date or before submitting the certificate). Subsequent certificates require ongoing compliance.
Unfiled Returns Disclosure: List any unfiled prior-year returns on the form; updates must be provided within 10 days of filing.
Deductions and Losses: Must be from prior tax years, effectively connected, and not disallowed by the IRS. They can’t be used to offset estimated taxes on other income.
Representations: The partner must certify accuracy, consent to IRS disclosures, and acknowledge that the certificate doesn’t relieve filing or payment obligations.

Failure to meet these can result in the IRS deeming the certificate defective, preventing the partnership from relying on it.

How to Complete IRS Form 8804-C?

Completing Form 8804-C involves four main sections. Always use the latest version—download the PDF from the IRS website: https://www.irs.gov/pub/irs-pdf/f8804c.pdf.

Section A: Partner Information (Part I)

Enter your name, taxpayer ID (SSN, ITIN, or EIN), address, and certification date.
Specify the partnership’s tax year.
Check boxes for first-time, prior-year, or updated certificates.

Section B: Partnership Information

Provide the partnership’s name, EIN, and address.

Section C: Partner Representations

Affirm compliance with filing rules, documentation, and other requirements (lines 1–4).

Part II: Certifications of Deductions and Losses (If Applicable)

List expected deductions/losses by type (e.g., NOL carryover, capital losses) in columns for original, changes, and updated amounts.
Attach statements for specifics like loss character or limitations (e.g., under sections 704(d), 469, or 465).

Part III: Sole Activity Certification (Optional)

Check if the partnership is your only source of effectively connected items.

Sign under penalties of perjury; attach power of attorney if needed.

For detailed step-by-step instructions, refer to the official IRS Instructions for Form 8804-C (PDF: https://www.irs.gov/pub/irs-pdf/i8804c.pdf).

Submitting Form 8804-C

Submit the completed form directly to the partnership, not the IRS—at any time during the tax year but ideally before the partnership’s final withholding installment. Updated certificates are required within 10 days of changes (e.g., filing a return or loss adjustments). The partnership, if relying on it, attaches copies to Forms 8813, 8804, and 8805.

Benefits and Considerations for Foreign Partners

Using Form 8804-C can prevent over-withholding, improving cash flow. However, consider:

Limitations: NOLs are capped at 90% of ECTI after other deductions; passive losses must relate to the partnership’s activity.
Penalties: Inaccurate certifications may lead to underpayment penalties or IRS rejection.
Recordkeeping: Retain supporting documents; estimated preparation time is about 10 hours.
Consult Professionals: Tax rules are intricate—work with a U.S. tax advisor to ensure eligibility.

Form 8804: Annual return for partnership withholding.
Form 8805: Foreign partner’s withholding statement.
Form 8813: Quarterly payment voucher.
Publication 515: Withholding on nonresident aliens and foreign entities.
IRS Resources: Visit irs.gov/forms-pubs/about-form-8804-c for updates.

Final Thoughts on IRS Form 8804-C

IRS Form 8804-C offers foreign partners a valuable tool to align withholding with actual tax liability, promoting fair taxation in U.S. partnerships. By certifying eligible items, you can potentially minimize overpayments and streamline compliance. Always verify the latest IRS guidance, as tax laws evolve. For the most current form, download it here: https://www.irs.gov/pub/irs-pdf/f8804c.pdf. If you’re dealing with Section 1446 withholding, proactive use of this certificate can make a significant difference in your tax planning.