Per the IRS instructions, a 2023 domestic partnership does not need to complete and file with the IRS Schedules K-2 and K-3 or furnish to the partner(s) their Schedule K-3 if each of the following 4 criteria are met:

1. No or limited foreign activity
• Foreign activity is defined as
1. Foreign income taxes paid or accrued,
2. Foreign source income or loss,
3. Ownership interest in a foreign partnership,
4. Ownership interest in a foreign corporation
5. Ownership of a foreign branch, or
6. Ownership interest in a foreign entity that is treated as disregarded as an entity separate from its owner.


• If there is foreign activity, it must be limited to passive category foreign income, which is not more than $300 of foreign income taxes allowable as a credit under Section 901 are treated as paid or accrued by the partnership, and such income and taxes are shown on a payee statement that is furnished to the partnership.


2. Direct partners are US citizens or resident aliens
1. During tax year 2023, the direct partners in the domestic partnership must be:
1. Individuals that are US citizens,
2. Individuals that are US aliens,
3. Domestic decedent’s estates, with solely US citizen and/or resident alien individual beneficiaries,
4. Domestic grantor trusts that are not foreign trusts and that have solely US citizen and/or resident alien individual grantors and solely US citizen and/or resident alien individual beneficiaries,
5. Domestic non-grantor trusts with solely US citizen and/or resident alien individual beneficiaries,
6. S corporations with a sole shareholder, or
7. Single-member LLCs, where the LLC’s sole member is one of the persons listed in items a through f above and the LLC is disregarded as an entity separate from its owner


3. Partners must receive notification from the partnership
1. If the partnership satisfies criteria 1 and 2, the partners must receive notification from the partnership that the partners will not receive Schedule K-3 from the partnership unless the partners request the schedule. At the latest, the notification must be furnished when the partnership furnishes the Schedule K-1 to the partner. The notice can be provided as an attachment to the Schedule K-1. See this FAQ: Schedule K-2 Domestic Filing Exception - Entering in Program for how to attach notification to the Schedule K-1.


4. There were no 2022 Schedule K-3 requests by the 1-month date
1. To qualify, the partnership has not received a request from any partner for Schedule K-3 information on or before the 1- month date (1 month before the date the partnership files Form 1065). For calendar year filers, the latest 1-month date for tax year 2023 is August 15, 2024, if the partnership files an extension.