Investment from abroad into U.S. commercial real estate reached $16.1 billion in the first half of 2026, up 23 percent from a year earlier, according to Savills data reported by Commercial Observer on November 9. For a sponsor whose deals hold foreign partners directly, that capital carries a quieter obligation that falls due every quarter. Form 8804-C is the document that can change how much of it the partnership pays. The form lets a foreign partner certify deductions and losses it already holds, so the partnership can take them into account when it figures Section 1446 withholding. It sits beside the annual returns and statements explained in our guide to Forms 8804, 8805 and 1042-S.
Section 1446 is blunt by design. The partnership withholds on each foreign partner's share of effectively connected taxable income at the highest rate. It does so even when that partner carries losses that would cancel the tax. Form 8804-C is the narrow route the regulations open for those losses, and the partnership is free to use it or ignore it. A sponsor with direct foreign partners should decide before the December 15 installment whether it will accept certificates. Accepting brings duties of its own, from checking each certificate to filing copies with the IRS.
How Section 1446 Withholding Works on a Syndication
The IRS states that a partnership, foreign or domestic, must pay a withholding tax on the effectively connected taxable income allocable to its foreign partners. Effectively connected income is income tied to a U.S. trade or business. Under FIRPTA, gain on a sale of U.S. real property is treated the same way, so one property sale can produce a large share in a single year. The IRS gives the current rates as 37 percent for foreign partners that are not corporations and 21 percent for corporate foreign partners.
The money moves in installments. According to the IRS instructions for Forms 8804, 8805 and 8813, each payment goes in with Form 8813 on the 15th day of the 4th, 6th, 9th and 12th months of the partnership's tax year. For a partnership on the calendar year, that means April 15, June 15, September 15 and December 15. Forms 8804 and 8805 follow by March 15 for the same partnership.
The withholding is a payment toward the partner's tax, not the tax itself. A foreign partner reports its share on its own U.S. return, Form 1040-NR or Form 1120-F, and claims the amount on its Form 8805 as a credit. The difficulty is timing. A partner with a large net operating loss carryover may owe little for the year. Yet the partnership has paid at the top rate four times, and that cash stays with the Treasury until the partner files and is refunded.
What Form 8804-C Lets a Foreign Partner Certify
The IRS describes Form 8804-C as the form a foreign partner uses when it chooses to give a partnership a certification under Treasury Regulation 1.1446-6, to reduce or eliminate the tax on its share of income. The items it covers already exist at the partner's own level, such as a net operating loss carryover, capital losses, and losses suspended under the basis, passive activity or at risk limits. Current year deductions and losses cannot be certified, and neither can charitable contributions.
There are conditions on who may certify. Under the regulation, a partner giving its first certificate must have filed qualifying U.S. returns for its three taxable years ending before the end of the partnership's taxable year. Foreign estates, partners in publicly traded partnerships and most trusts fall outside the rule. A separate certificate is needed for each partnership and each tax year.
The rules also offer a smaller route for individuals. A foreign partner may certify that its investment in the partnership is its only activity producing effectively connected income. If the partnership then estimates that partner's annualized withholding at less than $1,000, before counting any certified losses, the partnership may choose not to withhold for that partner at all.
Why Accepting Form 8804-C Is the Sponsor's Decision
The IRS says plainly that a partnership receiving Form 8804-C is not obligated to consider it. That leaves the decision with the sponsor as general partner and with the partnership's tax advisors. Accepting keeps a foreign partner's cash in the deal rather than in an overpayment. Declining is simpler, because the partnership withholds at the full rate and the partner recovers any excess on its own return.
A sponsor that accepts also takes on a standard of care. The regulation lets the partnership reasonably rely on a certificate until it has actual knowledge or reason to know the certificate is defective, and written notice from the IRS counts as knowledge. After such a notice, the partnership may not use any certificate from that partner for that year or later years until the IRS withdraws it. Withholding too little leaves the partnership exposed, since the IRS says a partnership that fails to pay may be liable for the tax, penalties and interest.
The Filings That Follow an Accepted Certificate
The form is dated March 2009 and its instructions November 2012, but the IRS has posted an early release of revised Form 8804-C instructions marked December 2026, which it says may change before final approval. They state that a partnership relying on a certificate attaches a copy to Form 8813 for the first installment where it is used. For later installments it may attach a statement instead, listing the partner's name, taxpayer identification number and certified amounts.
When the year closes, the most recent certificate goes to the IRS attached to that partner's Form 8805, which is filed with Form 8804. The revised instructions give a foreign partner 10 days to send an updated certificate after certain changes to the facts it certified. A sponsor or its administrator should confirm which version applies before figuring the December payment.
Not every investor abroad brings this work with it. Section 1446 reaches only partners that are not U.S. persons. Foreign investors who come in through a U.S. C corporation blocker are represented in the partnership by a domestic corporation, which carries their tax position instead. The choice between direct holdings and a blocker is set out in our guide to international investors in a syndication, and the mechanics of the structure in how a blocker corporation works for foreign investors.
What Sponsors Can Do Before the December Installment
Start with the investor register. Identify every partner that gave a Form W-8 rather than a Form W-9, because their shares of income drive the installment. Ask the partnership's CPA to estimate each share for tax year 2026. Then settle a written position for the year, either declining certificates or accepting them once the CPA has checked each one, and tell foreign partners before any of them prepares one.
If the partnership will accept certificates, build the record now. Keep each certificate with evidence that the partner's prior U.S. returns were filed, and calendar the Form 8813 attachments and the March filings. Ask securities counsel and the CPA how the operating agreement treats any tax the partnership pays on a partner's behalf, so the capital accounts match the filings. These are the kinds of tasks a sponsor can hand to a real estate fund administrator, while the sponsor and its advisors still make the tax calls.
Raveum offers sponsors an investment management platform, fund administration, a global raise track under Regulation S, and an operating partnership for selected sponsors. Offshore investors on that track invest through a U.S. C corporation blocker that holds the partnership interest, Raveum reports their dividends on Form 1042-S and files Form 1042, and sponsors keep their investor relationships, their property and their business plan. See how the Raveum Sponsor Program works.
A Choice Best Made Before the Payment Is Due
The capital arriving from abroad comes with obligations that do not wait for a property to sell. Section 1446 withholding is collected quarterly at the top rate, and Form 8804-C is the one formal way to bring a foreign partner's own losses into that calculation. Whether to use it belongs to the sponsor and its advisors, and the decision is easier to make in November than in the week of the December 15 installment. The forms it attaches to are set out in our guide to Forms 8804, 8805 and 1042-S, a sensible starting point for that conversation with the partnership's CPA.
Frequently Asked Questions
What Is Form 8804-C Used For?
Form 8804-C is a certificate a foreign partner gives a partnership to report deductions and losses it already holds, such as a net operating loss carryover. The partnership can then reduce or eliminate the Section 1446 withholding on that partner's share of effectively connected taxable income. Giving the certificate is optional for the partner, and relying on it is optional for the partnership.
Does a Partnership Have to Accept a Form 8804-C?
No. The IRS says a partnership that receives Form 8804-C is not obligated to consider it when figuring Section 1446 tax. A partnership that declines withholds at the full rate, and the foreign partner claims any excess as a credit on its own U.S. return. A partnership that accepts must file copies and may rely on the certificate only while it has no reason to doubt it.
When Should a Foreign Partner Submit Form 8804-C?
A foreign partner may submit the certificate at any time during the partnership's tax year, before the partnership files Form 8804. In practice it affects only installments the partnership figures after receiving it, so timing matters. For a partnership on the calendar year, the final installment is due December 15, which makes November the practical window for this year.
Can Current Year Losses Be Certified on Form 8804-C?
No. The IRS instructions say current year deductions and losses cannot be certified, and charitable contributions cannot be certified either. The form covers items that already exist, including net operating loss carryovers, capital losses and losses suspended under the basis, passive activity and at risk limits. The partner's CPA should confirm which items qualify before the certificate is sent.
Who Sends Form 8804-C to the IRS?
The partnership does, not the partner. The IRS instructions tell foreign partners not to file Form 8804-C with the IRS. A partnership that relies on a certificate attaches a copy to Form 8813 for the first installment where it is used, and attaches the most recent certificate to that partner's Form 8805 when it files Form 8804 after the year closes.
What Risks Does a Partnership Take When It Relies on Form 8804-C?
The main risk is withholding too little. A partnership may rely on a certificate only until it knows or has reason to know it is defective, and written notice from the IRS counts as knowledge. A partnership that fails to pay required tax may be liable for it, plus penalties and interest, so bring in the partnership's CPA and tax counsel before accepting any certificate.
This article is for general education only and is not legal, tax or investment advice. Securities and tax rules change and depend on each sponsor's facts, so work with qualified securities counsel and tax advisors before launching an offering. Real estate investments involve risk, including loss of capital, illiquidity and changes in property values. Offerings on Raveum are available to eligible investors only and are not open to the general public.
