Non-U.S. unitholders are subject to U.S. taxes and withholding with respect to their income and gain from owning NRP units. Although our distributions to non-U.S. unitholders have always been subject to withholding at the highest applicable effective tax rate, the U.S. Tax Cuts and Jobs Act of 2017 included additional withholding rules that became effective January 1, 2023.
In addition to implementing new withholding obligations on sales transactions, new regulations have increased the amount of withholding on distributions to you and sales of your common units by you.
Starting January 1, 2023, for publicly traded partnerships that have income that is effectively connected with a U.S. trade or business (such as NRP), sales of units by non-U.S. investors are subject to a new withholding equal to 10% of the sales proceeds and distributions are subject to an additional 10% withholding to the extent the distribution is in excess of the partnerships’ cumulative net income and sales on gains at 10%. We expect this additional 10% withholding to apply to each of our future distributions and on proceeds from the sales of our units.
After January 1, 2023, we will post Qualified Notices to this website in the Foreign Withholding column under Distribution History here, communicating to the brokers who hold units on behalf of non-U.S. unitholders that they should withhold on all of our distributions as if 100% of the distribution is attributable to income that is effectively connected with a U.S. trade or business and that 100% of the distribution is in excess of our cumulative net income.