Form 8804-C: Certify Partner-Level Deductions and De Minimis Rules

Form 8804-C is the certificate a foreign partner gives a U.S. partnership to lower the Section 1446 withholding on their share of effectively connected income. Without it, the partnership withholds at the top statutory rate on the full allocable share: 37% for a non-corporate foreign partner and 21% for a foreign corporate partner.¹² With a valid certificate, the partnership subtracts the partner’s certified deductions and losses before applying that rate, so more cash stays with the partner during the year instead of being reclaimed on a return.

The rule sits in Internal Revenue Code Section 1446, which requires any partnership with income effectively connected to a U.S. trade or business to withhold on the share allocable to each foreign partner. “Foreign partner” covers nonresident alien individuals, foreign corporations, foreign partnerships, foreign trusts, and foreign estates.³⁴

Who Can File Form 8804-C

Not every foreign partner qualifies. Treasury Regulation Section 1.1446-6 sets three gates.⁴

First, the partner must hold a valid U.S. taxpayer identification number, either an ITIN or an EIN. Second, the partner needs a clean filing history. In the first year the partner sends a certificate to any partnership, the partner must have filed a U.S. income tax return for each of the three taxable years ending before the close of the partnership’s current tax year, assuming a return was required for those years, and must continue timely filing in later years. Third, the IRS must not have previously notified the partnership that a certificate from this partner is defective or unreliable; if it has, no certificate from that partner can be accepted for the current or any later tax year until the IRS revokes the notice.⁵

What You Certify on the Form

Part I is identification: the partner’s legal name, U.S. TIN, and address on file with the IRS. These need to match IRS records exactly. A mismatch is one of the most common reasons a certificate is treated as defective.⁶

Part II is the substance. The partner lists specific dollar amounts of deductions and losses expected to offset their allocable share of effectively connected income. The items typically certified include:

Net operating loss carryforwards from prior years available to apply against current-year income.⁶
Capital losses realized or expected to be realized during the tax year.
Suspended passive activity losses under Section 469 that the partner expects to free up in the current year.
Losses previously suspended under Section 704(d) for lack of basis that are now usable.

Every deduction and loss must be directly connected to U.S. business activity and allowable under regular tax rules. The certificate has to identify the character of each item, ordinary or capital. If the IRS later finds the character was wrong, the certificate can be declared defective and the partnership becomes liable for the shortfall in withholding.⁷

Passive losses get extra scrutiny. Any loss subject to the Section 469 limitations must be flagged, and the partner must reasonably expect those losses to actually be available against the year’s effectively connected income. Certifying passive losses that turn out to be still suspended makes the certificate defective for the overstated amount.⁷

The signature is under penalties of perjury. Books and records supporting the certified amounts have to be kept as long as they may be material to any tax law, which in practice runs well beyond the standard three-year audit window.⁶

One item does not belong on the form. State and local income taxes withheld and remitted on behalf of a foreign partner are already accounted for by the partnership at 90% when it calculates Section 1446 tax, regardless of whether the partner files a Form 8804-C.⁴

The De Minimis Certificate

A separate use of Form 8804-C can eliminate withholding entirely. A nonresident alien individual whose only activity generating effectively connected income is the partnership investment itself can file a de minimis certificate. If the partnership estimates that the annualized Section 1446 tax for that partner would be less than $1,000, before counting any certified deductions, losses, or state and local taxes paid on the partner’s behalf, no withholding is required.⁶

This option is limited to nonresident alien individuals. Foreign corporations, trusts, and estates cannot use it. And the partner must have no other U.S. business activity producing effectively connected income. If that changes, the partner must revoke the de minimis certificate within 10 days and notify the partnership in writing.⁸

When to Submit It

Form 8804-C goes to the partnership, not to the IRS. A partner can submit it at any time during the partnership’s tax year and before the partnership files its Form 8804.⁶ Timing still matters, because the partnership can only rely on the certificate for installment payments due on or after the date it arrives.⁴

For a calendar-year partnership, the Section 1446 installments fall on April 15, June 15, September 15, and December 15.⁹ To reduce the first installment, get the form to the partnership well before April 15. A certificate that arrives the day after an installment payment cannot pull back withholding on that payment.

Once the partnership has a valid certificate, it may reasonably rely on it unless it has actual knowledge or reason to believe the certificate is wrong. Partnerships do not have discretion to reject a valid certificate just because they would prefer to withhold at the full rate.⁴

Updating or Revoking the Certification

If certified deductions decrease during the year, or if the character of a certified loss turns out to be wrong, the partner must submit an updated Form 8804-C within 10 days of the event that triggered the change.⁶ This is not optional. Sitting on the information while the partnership continues to underwithhold creates exposure for both sides.

The partnership swaps in the updated certificate and recalculates withholding for the remaining installments. If the partner never updates and the original amounts were overstated, the partnership is on the hook for the underpaid Section 1446 tax under Section 1461.⁵

If the IRS Declares the Certificate Defective

The IRS can declare a partner’s certificate defective at any time and notifies the partnership in writing. From that point, the partnership cannot rely on any certificate from that partner for the current or any later tax year until the IRS revokes or modifies the notice.⁵

If the defect involves overstated deductions or mischaracterized losses, the partnership owes the additional Section 1446 tax it should have withheld, under Section 1461. The partner remains fully liable for income tax on their share of effectively connected income regardless of what the certificate claimed. Filing Form 8804-C is not an IRS acceptance of the amounts on it.⁵ The perjury signature carries real weight because of exactly that: the partner takes responsibility for the numbers, and the partnership relies on that representation in good faith.

Tiered Partnerships: One Certificate, One Use

When partnerships own interests in other partnerships, look-through rules under Section 1.1446-5 let a foreign partner’s certificate reduce withholding at the lower-tier level. The partner gives the certificate to the upper-tier partnership, which passes it down to the lower-tier partnership with supporting documentation.⁴

A certificate cannot be reused. If the upper-tier partnership relies on it for its own withholding calculation on income that does not flow from a lower-tier partnership, that same certificate cannot then be sent down. And a certificate passed to one lower-tier partnership cannot be forwarded to another. The lower-tier partnership must include enough identifying information on its Forms 8813 and 8805 to let the IRS trace the certified deductions back through each tier to the individual partner.⁴

1
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
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Office of the Law Revision Counsel. 26 USC 11 – Tax Imposed
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Office of the Law Revision Counsel. 26 USC 1446: Withholding of Tax on Foreign Partners’ Share of Effectively Connected Income
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eCFR. 26 CFR 1.1446-6 – Special Rules to Reduce a Partnership’s 1446 Tax
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eCFR. 26 CFR 1.1446-6 – Special Rules to Reduce a Partnership’s 1446 Tax
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Internal Revenue Service. Instructions for Form 8804-C – Certificate of Partner-Level Items to Reduce Section 1446 Withholding
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GovInfo. 26 CFR 1.1446-6T – Special Rules to Reduce a Partnership’s 1446 Tax (Temporary)
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eCFR. 26 CFR 1.1446-6 – Special Rules to Reduce a Partnership’s 1446 Tax
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Internal Revenue Service. Instructions for Forms 8804, 8805, and 8813