1446(f) broker logic checklist — PTP transfers, exceptions & evidence
For transfers of interests in publicly traded partnerships (PTPs), brokers must determine whether IRC 1446(f) withholding applies, identify valid exceptions, collect the right certifications, and calculate/track withholding and reporting. Use this checklist to make your logic reviewer-ready and to build a clean evidence pack.
Scope: This guide is focused on broker/QI operational logic for PTP interest transfers (secondary market).
It does not cover 1446(a) operating distributions. Always align with your legal interpretations and current IRS guidance.
1) Decision flow (at a glance)
- Is the security a PTP interest? (Maintain a master list/ticker map with flags.)
- Is the transaction a transfer (sale, exchange, redemption) in scope of 1446(f)?
- Does a valid exception apply? e.g., U.S. transferor, certified effectively connected gain = 0, qualified notice exception, de minimis rules per notice, or other published exceptions your policy recognizes.
- Has the transferor provided appropriate certification? (e.g., W-9; W-8 with specific 1446(f) representations; intermediary statements.)
- If no exception: determine amount realized basis for withholding, apply required rate, collect/track tax, and generate reporting.
- Document the path: inputs → decision → calculation → reporting reference.
2) Exceptions & certifications to capture
| Exception (examples) | Typical certification/evidence | Operational note |
|---|---|---|
| Transferor is a U.S. person | Form W-9 (valid TIN; no indications of foreign status) | Run TIN match & backup-WH checks per your 1099 process |
| PTP published a qualified notice indicating no 1446(f) withholding needed (for period/transaction) | Copy of qualified notice; ticker mapping; effective dates | Keep a repository; time-box the validity window |
| Transferor certifies effectively connected gain is 0 (per rules) | W-8 form with 1446(f) rep or separate rider; date-stamped | Define when/how often such reps must be refreshed |
| Intermediary/QI pooling logic supplies look-through support | QI/Non-QI statements; allocation sheets; withholding statements | Validate statement completeness and timeliness |
Your policy should define which exceptions you accept and the exact wording/placement of 1446(f) reps on W-8IMY/W-8BEN-E/W-8ECI riders.
3) Calculation & controls
- Amount realized basis: define inputs (gross proceeds incl. liabilities per policy), FX handling, and timestamp source.
- Rate application: ensure system rate tables reflect current 1446(f) requirements and any specific exceptions in force.
- Edge cases: same-day cancellations, partial fills, corporate actions treated as transfers, internal transfers across accounts.
- Maker-checker: a second-line review for manual overrides and exception acceptance.
- Daily reconciliation: tax collected vs postings vs reporting queue (tie to GL control account).
4) Evidence to retain (reviewer-ready)
- PTP master list with flags; change log; source for flags (vendor, notices).
- Exception repository: qualified notices (PDF), policy references, expiry windows.
- Sampled transfer packets: order/execution, certification images (W-8/W-9/riders), decision log, calc sheet, GL posting.
- Daily/periodic reconciliations from tax subledger to GL; correction logs.
- Reporting outputs and tie-outs to returns where applicable.
5) Common pitfalls (and quick fixes)
| Pitfall | Why it happens | Fix |
|---|---|---|
| Expired/insufficient 1446(f) reps on W-8 | No refresh cadence; reps stored outside KYC/Doc workflow | Add expiry tracking; integrate rep fields into renewal queue |
| Uncontrolled use of qualified notices | No central repository; date ranges misapplied | Maintain repository + effective windows; require maker-checker |
| Incorrect amount realized basis | Ambiguity in gross proceeds/liability treatment | Policy one-pager; system config locked; exception notes required |
| GL doesn’t tie to tax collected | Timing and manual postings in clearing accounts | Daily roll-forward; restrict manual postings; reconcile cut-off |
6) Minimal dossier index (what to hand to reviewers)
- Policy & logic: 1446(f) policy note; decision flow; rate table; amount realized basis.
- PTP master/flags: list with data source and updates; qualified notice repository.
- Certifications: samples of W-8/W-9 with 1446(f) reps; intermediary statements.
- Calculations: exported calc sheets for sampled transfers; overrides with approvals.
- Reconciliations: subledger ↔ GL tie-out; corrections log; reporting extracts.
1446(f) Logic Pack (templates)
Exception tracker, qualified notice log, sample calc sheet, and decision log.
Exception tracker, qualified notice log, sample calc sheet, and decision log.
Want your 1446(f) logic validated?
We’ll review your exceptions, reps, and reconciliations — and prepare a reviewer-ready dossier.
We’ll review your exceptions, reps, and reconciliations — and prepare a reviewer-ready dossier.