Enter the total section 1446 tax that would have been due for 2012 on ECTI allocable to foreign partners for 2012, without any reductions for state and local taxes under Regulations section 1.1446-6(c)(1)(iii) or certified partner-level items. For the partnership's first installment payment, if the 2012 Form 8804 has not yet been filed, an estimate is acceptable. However, if the partnership later determines that this estimate is incorrect, see Refiguring Estimated Section 1446 Tax, earlier.

Complete line 8 only if all of the following apply:

If any of the above does not apply, skip line 8 and enter the amount from line 7 on line 9.

If the partnership qualifies to use the prior year safe harbor and chooses that method, it must use that method to pay each of its installments during the tax year. Furthermore, for each installment payment, the average of that installment and prior installments during the tax year must be at least 25% of the amount that satisfies the partnership's section 1446 tax liability under the prior year safe harbor. If the partnership does not satisfy both of these requirements, it will not qualify for the prior year safe harbor when determining any penalty due on Schedule A (Form 8804).

If the partnership begins using the prior year safe harbor method and it determines later in the tax year (based upon the standard option annualization method described later in these instructions) that it will not meet the 50% of ECTI requirement described in the last bulleted item above, it may make all subsequent installment payments using the standard option annualization method and it will not be subject to the penalty determined on Schedule A (Form 8804). This change in method must be disclosed in a statement attached to the Form 8804 the partnership files for the current tax year and the statement must include enough information to allow the IRS to determine whether the change was appropriate.

If the partnership begins using the prior year safe harbor method and switches to the current year safe harbor (because the partnership does not qualify for the relief described in the previous paragraph (i.e., using the standard option annualization method) or the partnership chooses not to continue using it), in order to avoid an underpayment penalty on the current installment payment, the partnership must pay the sum of (a) the current installment payment based on the current year safe harbor, plus (b) the sum of the amount by which the current year safe harbor exceeds the prior year safe harbor amount paid in for each prior installment period during which it qualified for the prior year safe harbor.

Enter the smaller of line 7 or line 8. However, if, for any installment payment, line 7 is smaller than line 8 and you enter that smaller line 7 amount on line 9, you will not qualify for the prior year safe harbor when determining any penalty due on Schedule A (Form 8804) (see the line 8 instructions, earlier). Therefore, in that case, for any subsequent installment payment during the tax year, do not use the line 8 amount.

Enter 25% of line 9 in columns (a) through (d). If the partnership uses the annualized income installment method or the adjusted seasonal installment method, then enter the amount from line 43.

Annualized income installment method and/or adjusted seasonal installment method.   If the partnership's ECTI is expected to vary during the year because, for example, it operates its business on a seasonal basis, it may be able to lower the amount of one or more required installments by using the annualized income installment method and/or the adjusted seasonal installment method. For example, a ski shop, which receives most of its income during the winter months, may be able to benefit from using one or both of these methods in figuring one or more of its required installments.

  To use one or both of these methods, complete Part II and/or Part III of the form. If those Parts are used for any payment date, those Parts must be used for all subsequent payment due dates. To arrive at the amount of each required installment, Part IV automatically selects the smallest of (a) the annualized income installment (if applicable), (b) the adjusted seasonal installment (if applicable), or (c) the current year safe harbor (increased by any recapture of a reduction in a required installment under section 6655(e)(1)(B)).

Include on line 12 any 2012 overpayment that the partnership chose to credit against its 2013 tax. The overpayment is credited against unpaid required installments in the order in which the installments are required to be paid.

Also include on line 12 any:

Extraordinary items.   Generally, under the annualized income installment method, extraordinary items must be taken into account after annualizing the ECTI for the annualization period. Similar rules apply in determining ECTI under the adjusted seasonal installment method. An extraordinary item includes:

  

  These extraordinary items must be accounted for in the appropriate annualization period. However, a section 481(a) adjustment (unless the partnership makes the alternative choice under Regulations section 1.6655-2(f)(3)(ii)(C)) is treated as an extraordinary item occurring on the first day of the tax year in which the item is taken into account in determining ECTI.

  For more information regarding extraordinary items, see Regulations section 1.6655-2(f)(3)(ii) and the examples in Regulations section 1.6655-2(f)(3)(vii). Also see Regulations section 1.6655-3(d)(3).

De minimis rule.   Extraordinary items identified above resulting from a particular transaction that total less than $1 million (other than a section 481(a) adjustment) may be annualized using the general rules of Regulations section 1.6655-2(f), or, if the partnership chooses, may be taken into account after annualizing the ECTI for the annualization period.

An amusement park with a calendar year as its tax year receives the largest part of its ECTI during a 6-month period, May through October. To compute its base period percentage for this 6-month period, the amusement park figures its ECTI for each May–October period in 2010, 2011, and 2012. It then divides the ECTI for each May–October period by the total ECTI for that particular tax year. The resulting percentages are 69% (.69) for May–October 2010, 74% (.74) for May–October 2011, and 67% (.67) for May–October 2012. Because the average of 69%, 74%, and 67% is 70%, the base period percentage for May through October 2013 is 70%. Therefore, the amusement park qualifies for the adjusted seasonal installment method.

If the partnership has certain extraordinary items, special rules apply. Do not include on line 15 the de minimis extraordinary items that the partnership chooses to include on line 22b. See Extraordinary items, earlier.

If the partnership has certain extraordinary items of $1 million or more from a transaction, or a section 481(a) adjustment, special rules apply. Include these amounts on line 22b for the appropriate period. Also, include on line 22b the de minimis extraordinary items that the partnership chooses to exclude from line 15. See Extraordinary items, earlier.

Enter the reduction to the line 22c amount for state and local taxes under Regulations section 1.1446-6(c)(1)(iii) and for certified foreign partner-level items submitted under Regulations section 1.1446-6. See Certification of Deductions and Losses in the Instructions for Forms 8804, 8805, and 8813 for additional information.

Enter in the space on line 30, columns (a) through (d), respectively, the annualization periods that the partnership is using, based on the options listed below. For example, if the partnership elects Option 1, enter on line 30 the annualization periods 2, 4, 7, and 10, in columns (a) through (d), respectively.

Enter on lines 31a through 31e the foreign partner's allocable share of ECTI for the months entered for each annualization period in columns (a) through (d) on line 30. To determine the foreign partner's allocable share of ECTI, see Effectively Connected Taxable Income in the Instructions for Forms 8804, 8805, and 8813.

If the partnership has certain extraordinary items, special rules apply. Do not include on line 31a, 31b, 31c, 31d, or 31e the de minimis extraordinary items that the partnership chooses to include on line 33a, 33e, 33i, 33m, or 33q, respectively. See Extraordinary items, earlier.

Enter the annualization amounts for the option used on line 30. For example, if the partnership elects Option 1, enter on line 32 the annualization amounts 6, 3, 1.71429, and 1.2, in columns (a) through (d), respectively.

If the partnership has certain extraordinary items that total $1 million or more from a particular transaction, or a section 481(a) adjustment, special rules apply. Include these amounts on line 33a, 33e, 33i, 33m, or 33q, depending upon the type of income against which the item applies, for the appropriate period. Also include on line 33a, 33e, 33i, 33m, or 33q the de minimis extraordinary items that the partnership chooses to exclude from line 31a, 31b, 31c, 31d, or 31e, respectively. See Extraordinary items, earlier.

Enter on lines 33i, 33m, and 33q the specified types of ECTI if such partner would be entitled to use a preferential rate on the income or gain (see Regulations section 1.1446-3(a)(2)).

Enter the reduction amounts for state and local taxes under Regulations section 1.1446-6(c)(1)(iii). See Reductions for State and Local Taxes in the Instructions for Forms 8804, 8805, and 8813 for additional information. The netting rules under section 1(h) and Notice 97-59 must be considered in determining the category of income the reduction amounts offset.

Enter the reduction amounts resulting from certified partner-level items received from foreign partners using Form 8804-C. See Certification of Deductions and Losses in the Instructions for Forms 8804, 8805, and 8813 for additional information. The netting rules under section 1(h) and Notice 97-59 must be considered in determining the category of income the reduction amounts offset.

Before completing line 38 in columns (b) through (d), complete lines 39 through 43 in each of the preceding columns. For example, complete lines 39 through 43 in column (a) before completing line 38 in column (b).

For each installment, enter the smaller of line 39 or line 42 on line 43. Also enter the result on line 11.