On July 12, MFA submitted comments to Treasury and the IRS on the proposed rules to implement section 1446(f) of the Internal Revenue Code, Withholding of Tax and Information Reporting with Respect to Interests in Partnerships Engaged in the Conduct of a U.S. Trade or Business. In our letter, we expressed that the proposed rules provide an improved framework for implementing section 1446(f). We also encouraged Treasury and the IRS to modify the proposed rules to permit partnerships to minimize the risk of double withholding taxes by providing: (1) a look-through exception for indirect foreign partners who otherwise could qualify for one of the exceptions in the proposed rules; (2) an exception for a foreign partnership that has provided a Form W-8IMY in which it has checked the box as a “withholding foreign partnership;” and (3) a mechanism for refunding any back-up withholding by a partnership once a transferor pay its tax liability under section 864(c)(8). Second, we encouraged Treasury and the IRS to modify the exceptions in §1.1446(f)-2(b)(3)-(5) to avoid imposing withholding taxes when partnerships have little, if any, U.S. effectively connected income or when a transferor has an overall loss in connection with the transfer of its partnership interest. Third, we suggested modifying the methodology for determining a transferor’s “amount realized” under the proposed rules to avoid potential over-withholding on transfers of partnership interests when the partnership has liabilities. Finally, we encouraged Treasury and the IRS to provide guidance on how to apply the proposed rules in the context of earnouts, particularly with respect to application of the timing provisions in the relevant exceptions from withholding.