Regulations Relating to Information Reporting by Foreign Financial Institutions and Withholding on Certain Payments to Foreign Financial Institutions and Other Foreign Entities; Correction, 55202-55210 [2013-22004]

Agencies

• Internal Revenue Service
• DEPARTMENT OF THE TREASURY

[Federal Register Volume 78, Number 175 (Tuesday, September 10, 2013)]
[Rules and Regulations]
[Pages 55202-55210]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-22004]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 9610]
RIN 1545-BK68


Regulations Relating to Information Reporting by Foreign 
Financial Institutions and Withholding on Certain Payments to Foreign 
Financial Institutions and Other Foreign Entities; Correction

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Correcting amendments.

-----------------------------------------------------------------------

SUMMARY: This document contains corrections to final regulations (TD 
9610), which were published in the Federal Register on Monday, January 
28, 2013 (78 FR 5874). The regulations related to information reporting 
by foreign financial institutions (FFIs) with respect to U.S. accounts 
and withholding on certain payments to FFIs and other foreign entities.

DATES: Effective Date: These corrections are effective September 10, 
2013.
    Applicability Date: These corrections are applicable on January 28, 
2013.

FOR FURTHER INFORMATION CONTACT: John Sweeney, (202) 622-3840 (not a 
toll-free call).

SUPPLEMENTARY INFORMATION: 

Background

    The final regulations that are the subject of these corrections are 
Sec. Sec.  1.1471-1 through 1.1474-7, promulgated under sections 1471 
through 1474 of the Internal Revenue Code. These regulations affect 
persons making certain U.S.-related payments to FFIs and other foreign 
entities, and affect payments by FFIs to other persons. Sections 1471 
through 1474 were added to the Internal Revenue Code, as Chapter 4 of 
Subtitle A, by the Hiring Incentives to Restore Employment Act of 2010 
(Pub. L. 111-147, 124 Stat. 71).

Need for Correction

    As published, the final regulations contain a number of items that 
need to be corrected or clarified. Several citations and cross 
references are corrected. The correcting amendments also include the 
addition, deletion, or modification of regulatory language to clarify 
the relevant provisions to meet their intended purposes. Additions, 
deletions, and modifications are also made to ensure that the rules in 
the final regulations are coordinated with other

[[Page 55203]]

rules contained in other relevant regulations (e.g., under chapters 3 
and 61). For example in Sec.  1.1471-3(c)(3)(iii)(B)(2), the definition 
of an FFI withholding statement was modified to add an applicable cross 
reference to the reporting on the statement that is required under 
chapter 61 (in addition to the reporting required under chapters 3 and 
4); to delete an incorrect reference to a pool of payees exempt from 
chapter 4 withholding; and to add the modified requirements of an FFI 
withholding statement provided by a Qualified Intermediary that should 
have been referenced in this paragraph.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Correction of Publication

    Accordingly, 26 CFR part 1 is corrected by making the following 
correcting amendments:

PART 1--INCOME TAXES

0
Paragraph 1. The authority citation for part 1 continues to read in 
part as follows:

    Authority:  26 U.S.C. 7805 * * *


0
Par. 2. Section 1.1471-0 is amended by:
0
1. Revising paragraph (a)(2)(i) under Sec.  1.1471-2.
0
2. Revising paragraphs (b)(7) and (c)(2)(v) under Sec.  1.1471-4.
0
3. Revising paragraph (b)(2)(i)(E) under Sec.  1.1471-5.
0
4. Revising paragraph (a)(5)(vii) and removing paragraph (b)(3)(iii) 
under Sec.  1.1473-1.
    The revisions read as follows:


Sec.  1.1471-0  Outline of regulation provisions for sections 1471 
through 1474.

* * * * *


Sec.  1.1471-2  Requirement to deduct and withhold tax on withholdable 
payments to certain FFIs.

    (a) * * *
    (2) * * *
    (i) Requirement to withhold on payments of U.S. source FDAP income 
to participating FFIs and deemed-compliant FFIs that are NQIs, NWPs, or 
NWTs.
* * * * *


Sec.  1.1471-4  FFI agreement.

* * * * *
    (b) * * *
    (7) Withholding requirements for U.S. branches of participating 
FFIs (and reporting Model 1 FFIs) that are treated as U.S. persons.
    (c) * * *
    (2) * * *
    (v) Special rule for U.S. branches of participating FFIs (and 
reporting Model 1 FFIs) that are treated as U.S. persons.
* * * * *


Sec.  1.1471-5  Definitions applicable to section 1471.

* * * * *
    (b) * * *
    (2) * * *
    (i) * * *
    (E) Account that is tax-favored.
* * * * *


Sec.  1.1473-1  Section 1473 definitions.

    (a) * * *
    (5) * * *
    (vii) Special rules for determining when gross proceeds are treated 
as paid to a partner, owner, or beneficiary of a flow-through entity.
* * * * *

0
Par. 3. Section 1.1471-1 is amended by revising paragraph (b)(23), the 
first sentence of paragraph (b)(34), and paragraph (b)(99) to read as 
follows:


Sec.  1.1471-1  Scope of chapter 4 and definitions.

* * * * *
    (b) * * *
    (23) Customer master file. A customer master file includes the 
primary files of a withholding agent, participating FFI, or deemed-
compliant FFI for maintaining account holder information, such as 
information used for contacting account holders and for satisfying AML 
due diligence.
* * * * *
    (34) * * * The term electronically searchable information means 
information that a withholding agent or FFI maintains in its tax 
reporting files, customer master files, or similar files, and that is 
stored in the form of an electronic database against which standard 
queries in programming languages, such as Structured Query Language, 
may be used. * * *
* * * * *
    (99) Pre-FATCA Form W-8. The term pre-FATCA Form W-8 means a 
version of a Form W-8 that was issued by the IRS prior to 2013 
(including an acceptable substitute form based on such version) and 
that does not contain chapter 4 statuses but otherwise meets the 
requirements of Sec.  1.1441-1(e)(1)(ii) applicable to such certificate 
(or substitute form) and has not expired.
* * * * *

0
Par. 4. Section 1.1471-2 is amended by:
0
1. Revising the heading and first two sentences of paragraph (a)(2)(i),
0
2. Revising the first sentence of paragraph (a)(2)(iii)(A),
0
3. Revising paragraphs (a)(2)(iii)(A)(2) and (a)(2)(iv),
0
4. Revising the second and fourth sentences of paragraph (a)(2)(v),
0
5. Revising the first sentence of paragraph (a)(4)(i)(A), and
0
6. Revising paragraph (a)(4)(viii).
    The revisions read as follows:


Sec.  1.1471-2  Requirement to deduct and withhold tax on withholdable 
payments to certain FFIs.

    (a) * * *
    (2) * * *
    (i) Requirement to withhold on payments of U.S. source FDAP income 
to participating FFIs and deemed-compliant FFIs that are NQIs, NWPs, or 
NWTs. A withholding agent that, after December 31, 2013, makes a 
payment of U.S. source FDAP income to a participating FFI or deemed-
compliant FFI that is an NQI receiving the payment as an intermediary, 
or a NWP or NWT, must withhold 30 percent of the payment unless the 
withholding is reduced under this paragraph (a)(2)(i). A withholding 
agent is not required to withhold on a payment, or portion of a 
payment, that it can reliably associate, in the manner described in 
Sec.  1.1471-3(c)(2), with a valid intermediary or flow-through 
withholding certificate that meets the requirements of Sec.  1.1471-
3(d)(4) and a withholding statement that meets the requirements of 
Sec.  1.1471-3(c)(3)(iii)(B) and that allocates the payment or portion 
of the payment to payees for which no withholding is required under 
chapter 4. * * *
* * * * *
    (iii) * * *
    (A) * * * A withholding agent is required to withhold with respect 
to a payment, or portion of a payment, that is U.S. source FDAP income 
subject to withholding that is made after December 31, 2013, to a QI 
that has elected in accordance with this paragraph to be withheld upon, 
unless such withholding agent also makes an election to be withheld 
upon under this paragraph (a)(2)(iii)(A) or is an FFI that may not 
accept primary withholding responsibility for the payment. * * *
* * * * *
    (2) The person who receives the payment is a participating FFI or 
registered deemed-compliant FFI that acts as a QI with respect to the 
payment;
* * * * *
    (iv) Withholding obligation of a territory financial institution. A 
territory financial institution that is a flow-through entity or that 
acts as an intermediary with respect to a withholdable payment has an 
obligation to withhold (to the extent required

[[Page 55204]]

under this section and Sec.  1.1472-1(b)) if it agrees to be treated as 
a U.S. person with respect to the payment for purposes of both chapter 
4 and Sec.  1.1441-1(b)(2)(iv)(A). A territory financial institution 
that is a flow-through entity or that acts as an intermediary with 
respect to a withholdable payment is not required to withhold under 
paragraph (a)(1) of this section or Sec.  1.1472-1(b), however, if it 
has provided the withholding agent that is a U.S. withholding agent, 
participating FFI, reporting Model 1 FFI, or QI with all of the 
documentation described in Sec.  1.1471-3(c)(3)(iii) (in which it has 
not agreed to be treated as a U.S. person with respect to the payment), 
and it does not know, or have reason to know, that another withholding 
agent failed to withhold the correct amount or failed to report the 
payment correctly under Sec.  1.1474-1(d).
    (v) * * * Accordingly, a QI branch of a U.S. financial institution 
must withhold in accordance with this section and Sec.  1.1472-1(b) in 
addition to meeting its obligations under either Sec.  1.1471-4(b) and 
its FFI agreement or Sec.  1.1471-5(f). * * * Accordingly, a foreign 
branch of a U.S. financial institution that is a reporting Model 1 FFI 
must withhold in accordance with this section and Sec.  1.1472-1(b). * 
* *
* * * * *
    (4) * * *
    (i) * * *
    (A) * * * A withholding agent that is not related to the payee or 
beneficial owner has an obligation to withhold under chapter 4 only to 
the extent that, at any time between the date that the obligation to 
withhold would arise (but for the provisions of this paragraph 
(a)(4)(i)) and the due date for filing the return on Form 1042 
(including extensions) for the year in which the payment occurs, it has 
control over or custody of money or property owned by the payee or 
beneficial owner from which to withhold an amount and has knowledge of 
the facts that give rise to the payment. * * *
* * * * *
    (viii) Payments to certain excepted accounts. A withholding agent 
is not required to withhold under chapter 4 on a withholdable payment 
made to an account described in Sec.  1.1471-5(b)(2).
* * * * *

0
Par. 5. Section 1.1471-3 is amended by:
0
1. Revising the fourth sentence of paragraph (b)(2),
0
2. Adding a sentence to the end of paragraph (c)(2)(i),
0
3. Revising paragraph (c)(3)(iii)(A)(5),
0
4. Revising the first two sentences of paragraph (c)(3)(iii)(B)(2),
0
5. Revising the first sentence of paragraph (c)(6),
0
6. Revising paragraphs (c)(6)(ii)(B)(2), (c)(6)(ii)(B)(3), and 
(c)(6)(ii)(C)(2)(vi),
0
7. Revising the second sentence of paragraph (c)(6)(v)(B),
0
8. Revising the second sentence of paragraph (c)(9)(iv)(A),
0
9. Revising the first sentence of paragraph (d)(1),
0
10. Revising the second sentence of paragraph (d)(2)(i),
0
11. Revising paragraph (d)(2)(ii),
0
12. Revising the second sentence of paragraph (d)(2)(iii),
0
13. Revising the second sentence of paragraph (d)(4)(i),
0
14. Revising paragraph (d)(6)(i)(F),
0
15. Revising the third sentence of paragraph (d)(6)(ii),
0
16. Revising the first sentence of paragraph (d)(6)(iii), and
0
17. Revising the first sentence of paragraph (d)(9)(i)(A).
    The revisions and addition read as follows:


Sec.  1.1471-3  Identification of payee.

* * * * *
    (b) * * *
    (2) * * * A withholding agent that makes a payment with respect to 
an offshore obligation may also rely upon a written notification 
provided by the person who receives the payment, regardless of whether 
such notification is signed, that indicates the person's entity 
classification (other than as a QI, WP, or WT) unless the withholding 
agent knows or has reason to know that the entity classification 
indicated by the person who receives the payment is incorrect. * * *
* * * * *
    (c) * * *
    (2) * * *
    (i) * * * With respect to the documentation provided for the owners 
of a foreign flow-through entity, the foreign flow-through entity is 
permitted to provide the documentary evidence described in paragraph 
(d) of this section applicable to each payee in lieu of a withholding 
certificate, regardless of whether the payment is made with respect to 
an offshore obligation.
* * * * *
    (3) * * *
    (iii) * * *
    (A) * * *
    (5) A GIIN, in the case of a participating FFI or a registered 
deemed-compliant FFI (including a U.S. branch of such an entity), and 
an EIN in the case of a QI, WP, or WT.
* * * * *
    (B) * * *
    (2) * * * An FFI withholding statement must include either pooled 
information that indicates the portion of the payment attributable to a 
class of U.S. persons, each class of recalcitrant account holders 
identified in Sec.  1.1471-5(g)(2), or a class of nonparticipating 
FFIs; or payee-specific information, if payee-specific information is 
provided for purposes of chapter 3 or 61, which indicates both the 
portion of the payment attributable to each payee and each payee's 
chapter 4 status. Regardless of whether the FFI withholding statement 
provides information on a pooled or payee-specific basis, a withholding 
statement provided by an FFI other than an FFI acting as a QI with 
respect to the account must identify each intermediary or flow-through 
entity that receives the payment on behalf of a payee with such 
entity's chapter 4 status and GIIN, when applicable. * * *
* * * * *
    (6) * * * The provisions in this paragraph (c)(6) describe 
standards generally applicable to withholding certificates on Forms W-8 
(or substitute forms), written statements, and documentary evidence 
furnished to establish the payee's chapter 4 status. * * *
* * * * *
    (ii) * * *
    (B) * * *
    (2) A beneficial owner withholding certificate and documentary 
evidence supporting the individual's claim of foreign status when both 
are provided together by an individual claiming foreign status, if the 
withholding agent does not have a current U.S. residence or U.S. 
mailing address for the payee and does not have one or more current 
U.S. telephone numbers that are the only telephone numbers the 
withholding agent has for the payee;
    (3) A beneficial owner withholding certificate that is provided by 
an entity described in paragraph (c)(6)(ii)(C)(2) of this section and 
documentary evidence establishing the entity's foreign status when both 
are provided together;
* * * * *
    (C) * * *
    (2) * * *
    (vi) A territory financial institution;
* * * * *
    (v) * * *
    (B) * * * However, in addition to the name and address of the 
individual that is the payee or beneficial owner, the form must provide 
all countries for which the individual is a resident for tax purposes, 
the individual's city and country of birth, a tax identification

[[Page 55205]]

number, if any, for each country of residence (or the individual's date 
of birth if the individual does not have a foreign tax identification 
number for the country of residence claimed), and must contain a signed 
and dated certification made under penalties of perjury that the 
information provided on the form is accurate and will be updated by the 
individual within 30 days of a change in circumstances that causes the 
form to become incorrect. * * *
* * * * *
    (9) * * *
    (iv) * * *
    (A) * * * However, an agent that makes a payment pursuant to an 
agency arrangement (paying agent) is also a withholding agent with 
respect to the payment unless an exception under Sec.  1.1473-1(d) 
applies. * * *
* * * * *
    (d) * * *
    (1) * * * To establish a payee's status as a foreign individual, 
foreign government, government of a U.S. territory, or international 
organization, a withholding agent may rely upon a pre-FATCA Form W-8 in 
lieu of obtaining an updated version of the withholding certificate. * 
* *
    (2) * * *
    (i) * * * Consistent with the presumption rules in paragraph (f)(3) 
of this section, a withholding agent must treat a payee that has 
provided a valid Form W-9 as a specified U.S. person unless the Form W-
9 certifies that the payee is other than a specified U.S. person. * * *
    (ii) Reliance on documentary evidence. A withholding agent may also 
treat the payee as a U.S. person that is other than a specified U.S. 
person if the withholding agent has documentary evidence described in 
paragraphs (c)(5)(i)(C) and (D) of this section or general documentary 
evidence (as described in paragraph (c)(5)(ii)(A) of this section) that 
both establishes that the payee is a U.S. person and establishes 
(either through the documentation or the application of the rules in 
Sec.  1.6049-4(c)(1)(ii) or paragraph (f)(3) of this section) that the 
payee is an exempt recipient. For purposes of the previous sentence, an 
exempt recipient means with respect to a withholding agent other than a 
participating FFI or registered deemed-compliant FFI, an exempt 
recipient under Sec.  1.6049-4(c)(1)(ii) or, with respect to a 
withholding agent that is a participating FFI or registered deemed-
compliant FFI, a U.S. person other than a specified U.S. person as 
described under Sec.  1.1473-1(c).
    (iii) * * * A withholding agent, other than a participating FFI or 
registered deemed-compliant FFI, may also treat a payee as a U.S. 
person if it has previously reviewed a Form W-9 or documentary evidence 
that established that the payee is a U.S. person and established 
(through the documentation or the application of the rules in Sec.  
1.6049-4(c)(1)(ii)) that the payee is an exempt recipient for purposes 
of chapter 61.
* * * * *
    (4) * * *
    (i) * * * For payments made prior to January 1, 2016, a registered 
deemed-compliant FFI that is a sponsored FFI must provide the GIIN of 
its sponsoring entity on the withholding certificate if the sponsored 
FFI has not obtained a GIIN.
* * * * *
    (6) * * *
    (i) * * *
    (F) The withholding agent does not know or have reason to know that 
the payee is a member of an expanded affiliated group with any other 
FFI other than an FFI that is also treated as an owner-documented FFI 
by the withholding agent or that the FFI has any specified U.S. persons 
that own an equity interest in the FFI or a debt interest (other than a 
debt interest that is not a financial account or that has a balance or 
value not exceeding $50,000) in the FFI other than those identified on 
the FFI owner reporting statement described in paragraph (d)(6)(iv) of 
this section.
    (ii) * * * A withholding agent may rely upon the letter described 
in this paragraph (d)(6)(ii) if it does not know or have reason to know 
that any of the information contained in the letter is unreliable or 
incorrect.
    (iii) * * * Acceptable documentation for an individual owning an 
equity interest in the payee or a debt holder described in paragraph 
(d)(6)(iv) of this section means a valid withholding certificate, valid 
Form W-9 (including any necessary waiver), or documentary evidence 
establishing the foreign status of the individual as set forth in 
paragraph (d)(3)(ii) of this section (regardless of whether the payment 
is made with respect to an offshore obligation). * * *
* * * * *
    (9) * * *
    (i) * * *
    (A) * * * A withholding agent may treat a payee as a foreign 
government, government of a U.S. territory, international organization, 
or foreign central bank of issue if it has a withholding certificate 
that identifies the payee as such an entity, indicates that the payee 
is the beneficial owner of the payment, and indicates that the payee is 
not engaged in commercial financial activities with respect to the 
payments or accounts identified on the form. * * *
* * * * *

0
Par. 6. Section 1471-4 is amended by:
0
1. Revising the seventh sentence of paragraph (b)(1),
0
2. Revising the first and third sentences of paragraph (b)(2),
0
3. Revising the fifth sentence of paragraph (b)(3),
0
4. Revising paragraph (b)(7),
0
5. Revising the first and third sentences of paragraph (c)(2)(iii)(B),
0
6. Revising the second sentence of paragraph (c)(2)(iii)(C),
0
7. Revising the heading and first sentence of paragraph (c)(2)(v),
0
8. Removing the language ``this paragraph (c)(5)(iv)(D)'' from 
paragraph (c)(5)(iv)(D)(4) and adding ``paragraph (c)(5)(iv)(D)(3) of 
this section'' in its place,
0
9. Revising the second, fourth, and eighth sentences of paragraph 
(c)(6) Example 2,
0
10. Revising the fourth sentence of paragraph (c)(7),
0
11. Revising paragraphs (d)(2)(iii)(B) introductory text, 
(d)(2)(iii)(B)(4), (d)(3)(iv)(B), and (d)(3)(iv)(D),
0
12. Revising the third sentence of paragraph (d)(4)(i),
0
13. Revising paragraph (d)(5)(iii)(B),
0
14. Revising the first sentence of paragraph (d)(6)(i),
0
15. Revising paragraph (d)(7)(ii)(A)(1),
0
16. Revising the first sentence of paragraph (e)(2)(ii),
0
17. Removing the language ``as of February 15, 2012, and'' from 
paragraph (e)(2)(iii),
0
18. Revising paragraph (e)(2)(iv)(B),
0
19. Revising the second sentence of paragraph (e)(3)(ii)(B),
0
20. Revising paragraph (e)(3)(iii)(B), and
0
21. Revising the first sentence of paragraph (i)(1).
    The revisions read as follows:


Sec.  1.1471-4  FFI agreement.

* * * * *
    (b) * * *
    (1) * * * See Sec.  1.1471-2 for the exceptions to and special 
rules for withholding and the exclusion from the definition of 
withholdable payment and foreign passthru payment that applies to any 
payment made under a grandfathered obligation or the gross proceeds 
from the disposition of such an obligation. * * *
    (2) * * * Except as otherwise provided under Sec.  1.1471-2 and, 
with respect to certain preexisting accounts

[[Page 55206]]

under paragraph (c) of this section, a participating FFI is required to 
determine whether withholding applies at the time a payment is made by 
reliably associating the payment with valid documentation described in 
paragraph (c) of this section for the payee of the payment. * * * For a 
payment made to an account held by an entity, except as otherwise 
provided in Sec.  1.1471-3(a)(3), the payee is the account holder. * * 
*
    (3) * * * See the QI, WP, or WT agreement for the withholding 
requirements of an FFI that is a QI, WP, or WT for purposes of chapter 
4.
* * * * *
    (7) Withholding requirements for U.S. branches of participating 
FFIs (and reporting Model 1 FFIs) that are treated as U.S. persons. A 
U.S. branch of a participating FFI (and reporting Model 1 FFI) that is 
treated as a U.S. person and that satisfies its backup withholding 
obligations under section 3406(a) with respect to accounts held at the 
U.S. branch by account holders that are payees treated as other than 
exempt recipients under chapter 61 will be treated as satisfying its 
withholding obligation with respect to such accounts under section 
1471(b)(1) and this paragraph (b). See paragraph (d)(2)(iii)(B) of this 
section for the special reporting requirements applicable to U.S. 
branches of participating FFIs (and reporting Model 1 FFIs) that are 
treated as U.S. persons. See paragraphs (c)(2) and (d)(4) of this 
section for the reporting requirements of U.S. branches of 
participating FFIs (and reporting Model 1 FFIs) with respect to 
payments that are chapter 4 reportable amounts.
    (c) * * *
    (2) * * *
    (iii) * * *
    (B) * * * For purposes of this section, a change in circumstances 
(as defined in Sec.  1.1471-3(c)(6)(ii)(E)) includes any change or 
addition of information to the account holder's account (including the 
addition, substitution, or other change of an account holder) or any 
change or addition of information to any account associated with such 
account (applying the account aggregation rules described in Sec.  
1.1471-5(b)(4)(iii) or by treating the accounts as consolidated 
obligations) if such change or addition of information affects the 
chapter 4 status of the account holder. * * * With respect to a 
preexisting account that meets a documentation exception described in 
paragraphs (c)(3)(iii) and (c)(5)(iii) of this section, a change in 
circumstances also includes a change in account balance or value as of 
the end of the first subsequent year that causes the account no longer 
to meet the documentation exception.
    (C) * * * With respect to an account held by an entity other than a 
passive NFFE described in the preceding sentence, following a change in 
circumstances, the participating FFI must retain a record of the 
appropriate documentation described in paragraph (c)(3) of this section 
by the date that is 90 days after the change in circumstances or, if 
unable to do so, must treat such account as held by a nonparticipating 
FFI.
* * * * *
    (v) Special rule for U.S. branches of participating FFIs (and 
reporting Model 1 FFIs) that are treated as U.S. persons. A U.S. branch 
of a participating FFI (and reporting Model 1 FFI) that is treated as a 
U.S. person shall apply, in lieu of the due diligence requirements of 
this paragraph (c), the due diligence requirements of Sec.  1.1471-3 to 
determine the chapter 4 status of account holders and payees that are 
entities and shall apply the documentation requirements of chapter 3 or 
61 (as applicable) with respect to individual account holders. * * *
* * * * *
    (6) * * *
    Example 2. * * * The balance in U's depository account on the 
effective date of CB's FFI agreement is $20,000. * * * The balance in 
Entity X's account on the effective date of CB's FFI agreement is 
$130,000, and the balance in Entity Y's account on the effective date 
of CB's FFI agreement is $110,000. * * * U's depository account 
qualifies for the Sec.  1.1471-5(a)(4)(i) exception to U.S. account 
status because it does not exceed the $50,000 threshold, taking into 
account the aggregation rule described in Sec.  1.1471-5(a)(4)(iii)(A). 
* * *
    (7) * * * The responsible officer must also certify that the 
participating FFI has completed the account identification procedures 
and documentation requirements of this paragraph (c) for all other 
preexisting accounts or, if it has not retained a record of the 
documentation required under this paragraph (c) with respect to an 
account, treats such account in accordance with the requirements of 
this section and Sec.  1.1471-5(g) or Sec.  1.1471-3(f) (as 
applicable). * * *
    (d) * * *
    (2) * * *
    (iii) * * *
    (B) Special reporting rules for U.S. branches treated as U.S. 
persons. A U.S. branch of a participating FFI (and reporting Model 1 
FFI) that is treated as a U.S. person shall be treated as having 
satisfied the reporting requirements described in paragraphs (d)(2)(i) 
and (d)(2)(ii)(C) of this section if it reports under--
* * * * *
    (4) Section 1.1474-1(i) with respect to specified U.S. persons 
identified in Sec.  1.1471-3(d)(6)(iv)(A)(1) and (2) of owner-
documented FFIs.
    (3) * * *
    (iv) * * *
    (B) The name, address, and TIN of each specified U.S. person 
identified in Sec.  1.1471-3(d)(6)(iv)(A)(1) and (2);
* * * * *
    (D) The account balance or value of the account held by the owner-
documented FFI;
* * * * *
    (4) * * *
    (i) * * * In the case of an account held by an owner-documented 
FFI, the address to be reported is the address of each specified U.S. 
person identified in Sec.  1.1471-3(d)(6)(iv)(A)(1) and (2).
* * * * *
    (5) * * *
    (iii) * * *
    (B) The name, address, and TIN of each specified U.S. person 
identified in Sec.  1.1471-3(d)(6)(iv)(A)(1) and (2); and
* * * * *
    (6) * * *
    (i) * * * Except as otherwise provided in a Model 2 IGA, a 
participating FFI, as part of its reporting responsibilities under this 
paragraph (d), shall report to the IRS for each calendar year the 
information described for each of the classes of account holders 
described in paragraphs (d)(6)(i)(A) through (E) of this section. * * *
* * * * *
    (7) * * *
    (ii) * * *
    (A) * * *
    (1) The name, address, and TIN of each specified U.S. person who is 
an account holder and, in the case of any account holder that is an 
NFFE that is a U.S. owned foreign entity or that is an owner-documented 
FFI, the name of such entity and the name, address, and TIN of each 
substantial U.S. owner of such NFFE or, in the case of an owner-
documented FFI, of each specified U.S. person identified in Sec.  
1.1471-3(d)(6)(iv)(A)(1) and (2);
* * * * *
    (e) * * *
    (2) * * *
* * * * *
    (ii) * * * For purposes of this section, a branch is a unit, 
business, or office of an FFI that is treated as a branch under

[[Page 55207]]

the regulatory regime of a country or is otherwise regulated under the 
laws of such country as separate from other offices, units, or branches 
of the FFI. * * *
* * * * *
    (iv) * * *
    (B) Agree that each such branch will identify its account holders 
under the due diligence requirements applicable to participating FFIs 
under paragraph (c) of this section, retain a record of account holder 
and payee documentation pertaining to those identification requirements 
for the longer of six years from the effective date of the FFI 
agreement or for as long as the branch maintains the account or 
obligation, and report to the IRS with respect to accounts that it is 
required to treat as U.S. accounts to the extent permitted under the 
relevant laws pertaining to the branch;
* * * * *
    (3) * * *
    (ii) * * *
    (B) * * * See paragraph (e)(2)(iii)(B) of this section for when an 
account is considered blocked.
    (iii) * * *
    (B) Agree as part of such registration to identify its account 
holders under the due diligence requirements applicable to 
participating FFIs under paragraph (c) of this section, retain a record 
of account holder and payee documentation pertaining to those 
identification requirements for the longer of six years from the 
effective date of its registration as a limited FFI or for as long as 
the FFI maintains the account or obligation, and report with respect to 
accounts that it is required to treat as U.S. accounts to the extent 
permitted under the relevant laws pertaining to the FFI;
* * * * *
    (i) * * *
    (1) * * * Except to the extent otherwise provided in a Model 2 IGA, 
a participating FFI (or branch thereof) that is prohibited by foreign 
law from reporting the information required under paragraph (d) of this 
section with respect to a U.S. account must follow the procedures of 
paragraph (i)(2) of this section to obtain a valid and effective waiver 
of such law and, if such waiver is not obtained within a reasonable 
period of time, to close or transfer such account. * * *
* * * * *

0
Par. 7. Section 1.1471-5 is amended by:
0
1. Removing the language ``(e)(3)(iv)'' from paragraphs (b)(1)(iii)(A), 
(b)(1)(iii)(B), and (b)(1)(iii)(C) and adding ``(b)(3)(iv)'' in its 
place,
0
2. Revising paragraphs (b)(2)(i)(C) and (b)(2)(v),
0
3. Revising the first sentence of and adding a new second sentence in 
paragraph (b)(3)(iv),
0
4. Revising the third sentence of paragraph (b)(4)(iv),
0
5. Revising the third, fourth, and fifth sentences of paragraph 
(e)(4)(v) Example 1,
0
6. Revising the second sentence of paragraph (e)(5),
0
7. Adding the language ``and income derived from transactions between 
members of the expanded affiliated group'' to the end of the first 
parenthetical in paragraph (e)(5)(i)(B)(1),
0
8. Revising paragraphs (e)(5)(iv)(D), (f)(1)(i)(F)(3)(i), and 
(f)(1)(i)(F)(3)(iii),
0
9. Revising the first sentence of paragraph (f)(2),
0
10. Revising paragraph (f)(2)(iii)(B),
0
11. Revising the first sentence of paragraph (f)(3)(ii)(E),
0
12. Removing the language ``Sec.  1.1471-4(c)(8)'' in paragraph 
(g)(3)(i)(B) and adding ``Sec.  1.1471-4(c)(5)(iv)(D)'' in its place,
0
13. Revising the first sentence of paragraph (g)(3)(ii), and
0
14. Revising the first sentence of paragraph (g)(3)(iii).
    The revisions read as follows:


Sec.  1.1471-5  Definitions applicable to section 1471.

* * * * *
    (b) * * *
    (2) * * *
    (i) * * *
    (C) Rollovers. An account that otherwise satisfies the requirements 
of paragraph (b)(2)(i)(A) or (B) of this section will not fail to 
satisfy such requirements solely because such account may receive 
assets or funds transferred from one or more accounts that meet the 
requirements of paragraph (b)(2)(i)(A) or (B) of this section, one or 
more retirement or pension funds that meet the requirements of Sec.  
1.1471-6(f), one or more accounts described in paragraph (b)(2)(vi) of 
this section, or one or more entities identified as nonreporting 
financial institutions under the terms of an applicable Model 1 or 
Model 2 IGA because they are retirement or pension funds.
* * * * *
    (v) Certain annuity contracts. A non-investment linked, non-
transferable, immediate life annuity contract (including a disability 
annuity) that monetizes a retirement or pension account described in 
paragraph (b)(2)(i)(A) or (b)(2)(vi) of this section.
* * * * *
    (3) * * *
    (iv) * * * To determine if debt or equity interests described in 
paragraph (b)(1)(iii) of this section are regularly traded, the 
principles of Sec.  1.1472-1(c)(1)(i)(A)(2)(i) and (ii) shall apply 
with respect to the interests, and the principles of Sec.  1.1472-
1(c)(1)(i)(B)(1) shall apply for this purpose in the case of an initial 
public offering of such interests. See Sec.  1.1472-1(c)(1)(i)(C) for 
the definition of an established securities market. * * *
* * * * *
    (4) * * *
* * * * *
    (iv) * * * In the case of an FFI determining whether an account 
meets (or continues to meet) a preexisting account documentation 
exception described in Sec.  1.1471-4(c)(3)(iii) or (c)(5)(iii), or 
whether the account is an account described in paragraph (a)(4)(i) of 
this section, the spot rate must be determined on the date for which 
the FFI is determining the threshold amount as prescribed in those 
provisions.
* * * * *
    (e) * * *
    (4) * * *
    (v) * * *

    Example 1. * * * Fund Manager hires Investment Advisor, a 
foreign entity, to provide advice and discretionary management of a 
portion of the financial assets held by Fund A. Investment Advisor 
earned more than 50% of its gross income for the last three years 
from providing similar services. Because Investment Advisor 
primarily conducts a business of managing financial assets on behalf 
of clients, Investment Advisor is an investment entity under 
paragraph (e)(4)(i)(A) of this section and an FFI under paragraph 
(e)(1)(iii) of this section.
* * * * *
    (5) * * * For the treatment of foreign entities described in this 
paragraph under section 1472, see Sec.  1.1472-1(c)(1)(v).
* * * * *
    (iv) * * *
    (D) The entity has not agreed to report under Sec.  1.1471-
4(d)(2)(ii)(C) or otherwise act as an agent for chapter 4 purposes on 
behalf of any financial institution, including a member of its expanded 
affiliated group.
* * * * *
    (f) * * *
    (1) * * *
    (i) * * *
    (F) * * *
    (3) * * *
    (i) Is authorized to act on behalf of the FFI (such as a fund 
manager, trustee, corporate director, or managing partner) to fulfill 
the requirements of the FFI agreement;
* * * * *
    (iii) Has registered the FFI with the IRS by the later of January 
1, 2016, or

[[Page 55208]]

the date that the FFI identifies itself as qualifying under this 
paragraph (f)(1)(i)(F);
* * * * *
    (2) * * * A certified deemed-compliant FFI means an FFI described 
in any of paragraphs (f)(2)(i) through (iv) of this section that has 
certified as to its status as a deemed-compliant FFI by providing a 
withholding agent with the documentation described in Sec.  1.1471-
3(d)(5) applicable to the relevant deemed-compliant category. * * *
* * * * *
    (iii) * * *
    (B) A participating FFI, reporting Model 1 FFI, or U.S. financial 
institution agrees to fulfill all due diligence, withholding, and 
reporting responsibilities that the FFI would have assumed if it were a 
participating FFI.
* * * * *
    (3) * * *
    (ii) * * *
    (E) The designated withholding agent agrees to report to the IRS 
(or, in the case of a reporting Model 1 FFI, to the relevant foreign 
government or agency thereof) all of the information described in Sec.  
1.1471-4(d) or Sec.  1.1474-1(i) (as appropriate) with respect to any 
specified U.S. persons that are identified in Sec.  1.1471-
3(d)(6)(iv)(A)(1) and (2). * * *
* * * * *
    (g) * * *
    (3) * * *
    (ii) * * * An account holder of an account other than a preexisting 
account and that is described in paragraph (g)(2) of this section will 
be treated as a recalcitrant account holder beginning on the date that 
is the earlier of 90 days after the account is opened by the 
participating FFI or the date that a withholdable payment that is 
subject to withholding under Sec.  1.1441-2(a) is made to the account. 
* * *
    (iii) * * * An account holder holding an account that is described 
in paragraph (g)(2) of this section following a change in circumstances 
(other than a change in account balance or value in a subsequent year 
that causes an individual account to be identified as a high-value 
account) will be treated as a recalcitrant account holder beginning on 
the date that is 90 days after the change in circumstances. * * *
* * * * *

0
Par. 8. Section 1471-6 is amended by revising paragraph (h)(2)(ii) to 
read as follows:


Sec.  1.1471-6  Payments beneficially owned by exempt beneficial 
owners.

* * * * *
    (h) * * *
    (2) * * *
    (ii) The entity has no outstanding debt that would be a financial 
account under Sec.  1.1471-5(b)(1)(iii)(C); and
* * * * *

0
Par. 9. Section 1.1472-1 is amended by revising the fourth sentence of 
and adding a new fifth sentence to paragraph (a), and revising 
paragraphs (b)(1) introductory text, (b)(2), and (c)(2)(i) to read as 
follows:


Sec.  1.1472-1  Withholding on NFFEs.

    (a) * * * See Sec.  1.1473-1(a)(4)(vi), however, for rules 
excepting from the definition of withholdable payment certain payments 
of U.S. source FDAP income made prior to January 1, 2017, with respect 
to an offshore obligation and Sec.  1.1471-2(b) for rules excepting 
from the definition of withholdable payment a grandfathered obligation. 
See also Sec.  1.1471-2(a)(2)(ii), (iv), (v), and (vi) for special 
rules of withholding that apply for purposes of this section and Sec.  
1.1471-2(a)(5) for withholding requirements if the source or character 
of a payment is unknown.
    (b) * * *
    (1) In general. Except as otherwise provided in paragraph (b)(2) of 
this section (providing transitional relief), paragraph (c) of this 
section (providing exceptions for payments to an excepted NFFE, a WP or 
WT, or an exempt beneficial owner), Sec.  1.1471-2(a)(4)(i) (providing 
an exception to withholding if the withholding agent lacks control, 
custody, or knowledge), Sec.  1.1471-2(a)(4)(vii) (providing an 
exception to withholding for payments made to an account held with or 
equity interests traded through a clearing organization with FATCA-
compliant membership), or Sec.  1.1471-2(a)(4)(viii) (providing an 
exception to withholding for payments to certain excepted accounts), a 
withholding agent must withhold 30 percent of any withholdable payment 
made after December 31, 2013, to a payee that is an NFFE unless--
* * * * *
    (2) Transitional relief. For any withholdable payment made prior to 
January 1, 2016, with respect to a preexisting obligation to a payee 
that is not a prima facie FFI and for which a withholding agent does 
not have documentation indicating the payee's status as a passive NFFE 
when the NFFE has failed to provide the owner certification as required 
under Sec.  1.1471-3(d)(12)(iii), the withholding agent is not required 
to withhold under this section or report under Sec.  1.1474-1(i)(2) 
(describing the reporting obligations of withholding agents with 
respect to NFFEs).
    (c) * * *
    (2) * * *
    (i) Treat the payee as an NFFE that is a WP or WT in accordance 
with Sec.  1.1441-5(c)(2) (for a WP) or Sec.  1.1441-5(e)(5)(v) (for a 
WT); or
* * * * *

0
Par. 10. Section 1.1473-1 is amended by:
0
1. Removing the second sentence of paragraph (a)(3)(iii)(A),
0
2. Revising the second sentence of paragraph (a)(4)(iii),
0
3. Revising the first sentence of paragraph (a)(4)(vi),
0
4. Revising the heading of paragraph (a)(5)(vii),
0
5. Removing the language ``beneficiary'' from paragraph (b)(3)(ii)(A) 
and adding ``person'' in its place, and
0
6. Removing the language ``trust; or'' from paragraph (b)(3)(ii)(B) and 
adding ``trust as of the end of the prior calendar year; or'' in its 
place.
    The revisions read as follows:


Sec.  1.1473-1  Section 1473 definitions.

    (a) * * *
    (4) * * *
    (iii) * * * Notwithstanding the preceding sentence, excluded 
nonfinancial payments do not include: payments in connection with a 
lending transaction (including loans of securities), a forward, 
futures, option, or notional principal contract, or a similar financial 
instrument; premiums for insurance contracts or annuity contracts; 
amounts paid under cash value insurance or annuity contracts; 
dividends; interest (including substitute interest described in Sec.  
1.861-2(a)(7)) other than interest described in the preceding sentence; 
gross proceeds other than gross proceeds described in paragraph 
(a)(4)(iv) of this section; investment advisory fees; custodial fees; 
and bank or brokerage fees.
* * * * *
    (vi) * * * A payment of U.S. source FDAP income made prior to 
January 1, 2017, with respect to an offshore obligation if such payment 
is made by a person that is not acting as an intermediary or as a WP or 
WT with respect to the payment. * * *
    (5) * * *
    (vii) Special rules for determining when gross proceeds are treated 
as paid to a partner, owner, or beneficiary of a flow-through entity. * 
* *
* * * * *

0
Par. 11. Section 1.1474-1 is amended by:
0
1. Revising paragraph (a)(2),
0
2. Revising the first sentence of paragraph (b)(1),

[[Page 55209]]

0
3. Removing the language ``Except as otherwise provided under an FFI 
agreement, a'' in the first sentence of paragraph (c)(2) and adding 
``A'' in its place,
0
4. Removing the language ``(including its U.S. branch that is not 
treated as a U.S. person)'' from paragraphs (d)(1)(ii)(A)(1)(iii), 
(d)(1)(ii)(B)(1)(i), and (d)(1)(ii)(B)(1)(iii) and adding ``(including 
a U.S. branch of a participating FFI that is not treated as a U.S. 
person)'' in its place,
0
5. Revising the second and sixth sentences of paragraph (d)(4)(i)(B),
0
6. Revising paragraph (d)(4)(i)(C)(1),
0
7. Removing the language ``If the U.S. branch is not treated'' from 
paragraphs (d)(4)(i)(C)(2) and (d)(4)(i)(C)(3) and adding ``If the U.S. 
branch of a participating FFI is not treated'' in its place,
0
8. Removing the language ``its reporting pools as described in 
paragraph (d)(4)(i)(B)'' from paragraph (d)(4)(i)(C)(2) and adding 
``its reporting pools referenced in paragraph (d)(4)(i)(B)'' in its 
place,
0
9. Revising the first sentence of paragraph (d)(4)(ii)(C),
0
10. Revising the first, second, and fifth sentences of paragraph 
(d)(4)(iii)(A),
0
11. Revising the first sentence of paragraph (d)(4)(iii)(B),
0
12. Revising paragraph (d)(4)(iii)(C),
0
13. Revising the first sentence of paragraph (i)(1), and
0
14. Revising paragraphs (i)(1)(ii), (i)(1)(iii), and (i)(2)(iii).
    The revisions read as follows:


Sec.  1.1474-1  Liability for withheld tax and withholding agent 
reporting.

    (a) * * *
    (2) Withholding agent liability. A withholding agent that is 
required to withhold with respect to a payment under Sec.  1.1471-2(a), 
1.1471-4(b) (in the case of a participating FFI), or 1.1472-1(b) but 
fails either to withhold or to deposit any tax withheld as required 
under paragraph (b) of this section is liable for the amount of tax not 
withheld and deposited.
* * * * *
    (b) * * *
    (1) * * * Except as otherwise provided in this paragraph (b), every 
withholding agent who withholds tax pursuant to chapter 4 shall deposit 
such tax within the time provided in Sec.  1.6302-2(a) by electronic 
funds transfer as provided under Sec.  31.6302-1(h) of this chapter. * 
* *
* * * * *
    (d) * * *
    (4) * * *
    (i) * * *
    (B) * * * With respect to a payment of U.S. source FDAP income made 
to a participating FFI or registered deemed-compliant FFI that is an 
NQI, NWP, or NWT or QI that elects to be withheld upon under section 
1471(b)(3) and from whom the withholding agent receives pooled 
information regarding such FFI's account holders and payees, a U.S. 
withholding agent must complete a separate Form 1042-S issued to the 
participating FFI, registered deemed-compliant FFI, or QI (as 
applicable) as the recipient with respect to each pool provided in an 
FFI withholding statement described in Sec.  1.1471-3(c)(3)(iii)(B)(2). 
* * * See paragraph (d)(4)(ii)(A) of this section for reporting rules 
applicable if participating FFIs or deemed-compliant FFIs provide 
specific payee information for reporting to the recipient of the 
payment for Form 1042-S reporting purposes. * * *
    (C) * * *
    (1) If the U.S. branch is treated as a U.S. person, if the 
withholding agent treats amounts paid as effectively connected with the 
conduct of the branch's trade or business in the United States, or if 
the U.S. branch is the beneficial owner of the payment, the withholding 
agent must file Form 1042-S reporting the U.S. branch as the recipient;
* * * * *
    (ii) * * *
    (C) * * * If a U.S. withholding agent makes a payment to a 
disregarded entity and receives a valid withholding certificate or 
other documentary evidence from the person that is the single owner of 
such disregarded entity, the withholding agent must file a Form 1042-S 
treating the single owner as the recipient. * * *
    (iii) * * *
    (A) * * * Except as otherwise provided in paragraphs (d)(4)(iii)(B) 
(relating to NQIs, NWPs, NWTs, and FFIs electing under section 
1471(b)(3)) and (d)(4)(iii)(C) of this section (relating to 
transitional payee-specific reporting for payments to nonparticipating 
FFIs), a participating FFI or deemed-compliant FFI (including a QI, WP, 
WT, or U.S. branch of a participating FFI that is not treated as a U.S. 
person) that makes a payment that is a chapter 4 reportable amount to a 
recalcitrant account holder or nonparticipating FFI, must complete a 
Form 1042-S to report such payments. A participating FFI or registered 
deemed-compliant FFI (including a QI, WP, WT, or U.S. branch of a 
participating FFI that is not treated as a U.S. person) may report in 
pools consisting of its recalcitrant account holders and payees that 
are nonparticipating FFIs. * * * Alternatively, a participating FFI or 
registered deemed-compliant FFI (including a QI, WP, WT, or U.S. branch 
of a participating FFI that is not treated as a U.S. person) may (and a 
certified deemed-compliant FFI is required to) perform payee-specific 
reporting to report a chapter 4 reportable amount made to a 
recalcitrant account holder or a nonparticipating FFI when withholding 
was applied (or should have applied) to the payment.
    (B) * * * Except as otherwise provided in paragraph (d)(4)(iii)(C) 
of this section, a participating FFI or deemed-compliant FFI that is an 
NQI, NWP, NWT (including a U.S. branch of a participating FFI that is 
not treated as a U.S. person), or an FFI that has made an election 
under section 1471(b)(3) and has provided sufficient information to its 
withholding agent to withhold and report the payment is not required to 
report the payment on Form 10420S as described in paragraph 
(d)(4)(iii)(A) of this section if the payment is made to a 
nonparticipating FFI or recalcitrant account holding and its 
withholding agent has withheld the correct amount of tax on such 
payment and correctly reported the payment on a Form 1042-S. * * *
    (C) Reporting by participating FFIs and registered deemed-compliant 
FFIs (including QIs, WPs, and WTs) for certain payments made to 
nonparticipating FFIs (transitional). Except as otherwise provided in 
the instructions to Form 1042-S or under a Model 2 IGA, if a 
participating FFI or registered deemed-compliant FFI (including a QI, 
WP, WT, or U.S. branch of a participating FFI that is not treated as a 
U.S. person) makes a payment to a nonparticipating FFI of a foreign 
reportable amount as defined in paragraph (d)(2)(i)(D) of this section, 
the FFI must report on Form 1042-S on a payee-specific basis the 
aggregate amount of all foreign reportable amounts paid by the FFI to 
the nonparticipating FFI for each of the calendar years 2015 and 2016.
* * * * *
    (i) * * *
    (1) * * * Beginning in calendar year 2014, if a withholding agent 
(other than an FFI reporting accounts held by owner-documented FFIs 
under Sec.  1.1471-4(d)) makes during a calendar year a withholdable 
payment to an entity account holder or payee of an obligation and the 
withholding agent treats the entity as an owner-documented FFI under 
Sec.  1.1471-3(d)(6), the withholding agent is required to report for 
such calendar year with respect to each specified U.S. person

[[Page 55210]]

identified under Sec.  1.1471-3(d)(6)(iv)(A)(1) or (2). * * *
* * * * *
    (ii) The name, address, and TIN of each specified U.S. person 
identified in Sec.  1.1471-3(d)(6)(iv)(A)(1) and (2);
    (iii) The total of all withholdable payments made to the owner-
documented FFI;
* * * * *
    (2) * * *
    (iii) The total of all withholdable payments made to the NFFE; and
* * * * *

Martin V. Franks,
Chief, Publications and Regulations Branch, Legal Processing Division, 
Associate Chief Counsel, (Procedure and Administration).
[FR Doc. 2013-22004 Filed 9-9-13; 8:45 am]
BILLING CODE 4830-01-P