Do the instructions and the January 18, 2022 updates provide any exceptions to filing if a domestic partnership or S corporation has no foreign activities and no foreign partners

Yes, the instructions and the January 18, 2022 updates provide exceptions to filing Schedules K-2 and K-3 for domestic partnerships and S corporations with no foreign activities and no foreign partners under certain conditions.

For domestic partnerships, the "Domestic Filing Exception" applies if all the following criteria are met:

1. No or Limited Foreign Activity: The partnership has no foreign activity, or if it does, such activity is limited to passive category foreign income with not more than $300 of foreign income taxes allowable as a credit under section 901, and such income and taxes are shown on a payee statement furnished to the partnership.
2. U.S. Citizen/Resident Alien Partners: All direct partners are U.S. citizens, resident aliens, domestic decedents’ estates, domestic grantor trusts with solely U.S. citizen and/or resident alien individual grantors and beneficiaries, domestic non-grantor trusts with solely U.S. citizen and/or resident alien individual beneficiaries, S corporations with a sole shareholder, or single-member LLCs disregarded as entities separate from their owners.
3. Partner Notification: Partners receive a notification from the partnership, at the latest when the partnership furnishes the Schedule K-1, stating that they will not receive Schedule K-3 unless they request it.
4. No Schedule K-3 Requests by the 1-Month Date: The partnership does not receive 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 S corporations, the "Domestic Filing Exception" applies if all the following criteria are met:

1. No or Limited Foreign Activity: The S corporation has no foreign activity, or if it does, such activity is limited to passive category foreign income with not more than $300 of foreign income taxes allowable as a credit under section 901, and such income and taxes are shown on a payee statement furnished to the S corporation.
2. Shareholder Notification: Shareholders receive a notification from the S corporation, at the latest when the S corporation furnishes the Schedule K-1, stating that they will not receive Schedule K-3 unless they request it.
3. No Schedule K-3 Requests by the 1-Month Date: The S corporation does not receive a request from any shareholder for Schedule K-3 information on or before the 1-month date (1 month before the date the S corporation files Form 1120-S).

If these conditions are met, the domestic partnership or S corporation is not required to file Schedules K-2 and K-3 with the IRS or furnish Schedule K-3 to the partners or shareholders, except to those who request it after the 1-month date.

Sources:
Instructions for Form 1065 (2023)
Instructions for Form 1120-S (2023)
Notice 2021-39
S Corporation Instructions for Schedules K-2 and K-3 (Form 1120-S) (2023)
Partnership Instructions for Schedules K-2 and K-3 (Form 1065) (2023)
Partner’s Instructions for Schedule K-3 (Form 1065) (2023)
Instructions for Form 1120-F (2023)