Under the Tax Reform Act of 1986, U.S. partnerships are required to withhold income tax on "effectively connected taxable income" deemed allocable to foreign partners.

The U.S. partnership must file a Form 8805, Foreign Partner's Information Statement of Section 1446 Withholding Tax, to show the amount of effectively connected taxable income and the total tax credit allocable to the foreign partner for the partnership's tax year.

Foreign partners must attach this form to their U.S. income tax returns to claim a withholding credit for their shares of the Section 1446 tax withheld by the partnership.

 

 Source:

IRS Issue Number:    2013 - 9