A publicly traded partnership (PTP) that has effectively connected taxable income must pay withholding tax under section 1446(a) on any distributions of that income made to its foreign partners. A PTP must use Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons, and Form 1042-S, Foreign Person's U.S. Source Income Subject to Withholding, (Income Code 27) to report withholding from PTP distributions. The rate of withholding is 37% for noncorporate partners and 21% for corporate partners under section 1446(a). A PTP is any partnership an interest in which is regularly traded on an established securities market or is readily tradable on a secondary market, regardless of the number of its partners. These rules do not apply to a PTP treated as a corporation under section 7704 of the Internal Revenue Code. For more detailed information about the withholding requirements for publicly traded partnerships, refer to Rules applicable to publicly traded partnerships, as well as Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities. References/Related topics Partnership withholding Note: This page contains one or more references to the Internal Revenue Code (IRC), Treasury Regulations, court cases, or other official tax guidance. References to these legal authorities are included for the convenience of those who would like to read the technical reference material. To access the applicable IRC sections, Treasury Regulations, or other official tax guidance, visit the Tax Code, Regulations, and Official Guidance page. To access any Tax Court cases filed on or after May 1, 1986, visit the Opinions Search page of the United States Tax Court.