A WW or WT can only act in this capacity for payments of amounts submitted to non-residents (NRAs) that are distributed to its partners, beneficiaries or direct owners or that are included in the distribution share of its direct partners, beneficiaries or owners. A WP or WT acting in this capacity must assume the NRA and hold responsibility for these amounts. You can treat a WP or WT as a beneficiary if it has provided you with documentation (discussed later) that indicates that it acts as WP or WT for such amounts. Organizations considering these agreements or have agreements should consult with their tax advisors to understand the requirements and assess potential gaps in existing processes. Since 2003, the IRS has allowed certain foreign partnerships, trusts and foreign trusts to become wPs/WTs and to resume Chapters 3 and 61, which report/retained on certain partners/beneficiaries. (To the extent that a WP or WT must be retained under Chapter 3 or Chapter 61, it must make the deduction itself and cannot apply to an upstream payer to make the deduction. In other words, a WP/WT must take on „primary” restraint tasks.) To the extent that a WP/WT does, it is not obligated to provide partner/recipient documentation to upstream payers. In some cases, a WP/WT may report information about non-U.S. companies. Partners/recipients on Form 1042-S on a pooled basis at the IRS, instead of ensuring that each of them is set up on Forms 1042-S. On January 19, 2017, the IRS released Rev. Proc. 2017-21, the Foreign Partnership Reserve Contract (WP) and the retention of foreign trusts (WT) which were due to expire on 31 December 2016, but temporarily until the rev act is granted.
Proc. 2017-21, updated and extended. The agreement has been updated to comply with the recently released New Qualified Intermediate Agreement (IQ) and to reflect recently published final and temporary rules guidelines. (See TD 9808 and TD 9809 and our previously issued warning for both). Two exceptions allowed a WP/WT to assume the responsibilities of Chapter 3/Chapter 61 with respect to indirect/benefit partners of a debit company. The first was when WP/WT and Flowthrough agreed to treat FlowThrough`s account as a joint account for reporting and retention purposes (common account option). The second was when the flow unit agreed to act as a WP/WT agent for specific purposes (agency option). Observation: The IQ portal is the system that retains foreign partnerships (WPs) and retains foreign trusts (WTs) to apply for WP and WT status.
The WP and WT agreements technically expired on December 31, 2016. The IRS indicated that the WP and WT agreements, which were in effect prior to December 31, 2016, will continue until the agreements are updated in January 2017.