PATH Act Changes to Section 1445, 8398-8402 [2016-03421]

Download as PDF asabaliauskas on DSK5VPTVN1PROD with RULES 8398 Federal Register / Vol. 81, No. 33 / Friday, February 19, 2016 / Rules and Regulations Tompkinsville, KY, Tompkinsville-Monroe County, RNAV (GPS) RWY 22, Amdt 1B Orange, MA, Orange Muni, NDB RWY 1, Amdt 1A, CANCELED Orange, MA, Orange Muni, NDB RWY 32, Amdt 1A, CANCELED Vineyard Haven, MA, Martha’s Vineyard, VOR RWY 24, Amdt 2A, CANCELED Baltimore, MD, Baltimore/Washington Intl Thurgood Marshall, VOR RWY 10, Amdt 17B, CANCELED Baltimore, MD, Baltimore/Washington Intl Thurgood Marshall, VOR/DME RWY 33L, Amdt 3A, CANCELED Eliot, ME, Littlebrook Air Park, NDB–B, Amdt 1, CANCELED Sanford, ME, Sanford Seacoast Rgnl, VOR RWY 7, Amdt 4C, CANCELED Alpena, MI, Alpena County Rgnl, VOR RWY 1, Amdt 14D, CANCELED Hancock, MI, Houghton County Memorial, VOR RWY 13, Amdt 16, CANCELED Fairmont, MN, Fairmont Muni, VOR RWY 13, Amdt 5, CANCELED Fairmont, MN, Fairmont Muni, VOR RWY 31, Amdt 8, CANCELED Hibbing, MN, Range Rgnl, VOR RWY 13, Amdt 13A, CANCELED Hibbing, MN, Range Rgnl, VOR RWY 31, Amdt 17, CANCELED Willmar, MN, Willmar Muni-John L Rice Field, VOR RWY 13, Orig, CANCELED Glasgow, MT, Wokal Field/Glasgow Intl, NDB RWY 30, Amdt 2A, CANCELED Beaufort, NC, Michael J Smith Field, NDB RWY 21, Amdt 2, CANCELED Tarboro, NC, Tarboro-Edgecombe, NDB RWY 27, Orig, CANCELED Berlin, NH, Berlin Rgnl, VOR–B, AMDT 3A, CANCELED Manchester, NH, Manchester, VOR RWY 35, Amdt 15E, CANCELED Portsmouth, NH, Portsmouth Intl at Pease, VOR RWY 16, Amdt 5B, CANCELED Portsmouth, NH, Portsmouth Intl at Pease, VOR RWY 34, Orig–D, CANCELED Newark, NJ, Newark Liberty Intl, VOR/DME RWY 22L, Orig–D, CANCELED Newark, NJ, Newark Liberty Intl, VOR/DME RWY 22R, Amdt 4D, CANCELED Hudson, NY, Columbia County, Takeoff Minimums and Obstacle DP, Amdt 1 White Plains, NY, Westchester County, VOR/ DME–A, Amdt 4B, CANCELED Knoxville, TN, Mc Ghee Tyson, Takeoff Minimums and Obstacle DP, Amdt 8 RESCINDED: On December 7, 2015 (80 FR 75923), the FAA published an Amendment in Docket No. 31049, Amdt No. 3671, to Part 97 of the Federal Aviation Regulations, under section 97.20. The following entry for Port Angeles, WA, effective February 4, 2016, is hereby rescinded in its entirety: Port Angeles, WA, William R Fairchild Intl, WATTR SIX, Graphic DP RESCINDED: On January 26, 2016 (81 FR 4174), the FAA published an Amendment in Docket No. 31051, Amdt No. 3673, to Part 97 of the Federal Aviation Regulations, under sections 97.29 and 97.33. The following entries for Port Angeles, WA, effective February 4, 2016, are hereby rescinded in their entirety: Port Angeles, WA, William R Fairchild Intl, ILS OR LOC RWY 8, Amdt 3 VerDate Sep<11>2014 16:19 Feb 18, 2016 Jkt 238001 Port Angeles, WA, William R Fairchild Intl, RNAV (GPS) RWY 8, Amdt 1 Port Angeles, WA, William R Fairchild Intl, RNAV (GPS) RWY 26, Amdt 1 [FR Doc. 2016–03368 Filed 2–18–16; 8:45 am] BILLING CODE 4910–13–P DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 1 [TD 9751] RIN 1545–BN22 PATH Act Changes to Section 1445 Internal Revenue Service (IRS), Treasury. ACTION: Final and temporary regulations. AGENCY: This document contains final and temporary regulations relating to the taxation of, and withholding on, foreign persons upon certain dispositions of, and distributions with respect to, United States real property interests (USRPIs). The regulations reflect changes made by the Protecting Americans from Tax Hikes Act of 2015 (the PATH Act). In addition, the regulations update certain mailing addresses listed in regulations under sections 897 and 1445. These regulations affect certain holders of USRPIs and withholding agents that are required to withhold tax on certain dispositions of, and distributions with respect to, USRPIs. This document also requests comments on certain other aspects of the PATH Act that apply to dispositions of, and distributions with respect to, USRPIs. DATES: Effective date: These regulations are effective on February 19, 2016. Applicability date: For dates of applicability, see §§ 1.1445–1(h), 1.1445–2(e), and 1.1445–5(h). ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG–101329–16), Room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be hand-delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG–101329– 16), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue NW., Washington, DC 20224, or sent electronically via the Federal eRulemaking Portal at http:// www.regulations.gov (IRS REG–101329– 16). FOR FURTHER INFORMATION CONTACT: Milton M. Cahn or David A. Levine, SUMMARY: PO 00000 Frm 00010 Fmt 4700 Sfmt 4700 (202) 317–6937; concerning submissions of comments, Regina Johnson, (202) 317–6901 (not toll-free numbers). SUPPLEMENTARY INFORMATION: Paperwork Reduction Act The collections of information contained in these final regulations were previously reviewed and approved by the Office of Management and Budget in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507) under control numbers 1545–0123, 1545–0902, and 1545–1797 in conjunction with Treasury decisions 7999 (49 FR 50689, Dec. 31, 1984), 8113 (51 FR 46620, Dec. 24, 1986), and 9082 (68 FR 46081, Aug. 5, 2003), respectively. There are no proposals for substantive changes to these collections of information. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a valid control number assigned by the Office of Management and Budget. Books or records relating to a collection of information must be retained as long as their contents might become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103. Background Section 897(a)(1) provides, in general, that gain or loss of a nonresident alien individual or foreign corporation from the disposition of a United States real property interest (USRPI) shall be taken into account under section 871(b)(1) or 882(a)(1), as applicable, as if the nonresident alien individual or foreign corporation were engaged in a trade or business within the United States during the taxable year and such gain or loss were effectively connected with that trade or business. Section 897(c)(1)(A) defines a USRPI to include any interest (other than solely as a creditor) in any domestic corporation unless the taxpayer establishes that such corporation was at no time a United States real property holding corporation (USRPHC) during the applicable testing period (generally, the five-year period ending on the date of the disposition of the USRPHC). Under section 897(c)(2), a USRPHC means any corporation if the fair market value of its USRPIs equals or exceeds 50 percent of the total fair market value of its USRPIs, its interests in real property located outside the United States, and any other assets that are used or held for use in a trade or business. However, section 897(c)(1)(B) generally provides E:\FR\FM\19FER1.SGM 19FER1 asabaliauskas on DSK5VPTVN1PROD with RULES Federal Register / Vol. 81, No. 33 / Friday, February 19, 2016 / Rules and Regulations that an interest in a corporation is not a USRPI if the corporation does not hold USRPIs as of the date its stock is sold and the corporation disposed of all of the USRPIs that it held during the applicable testing period in transactions in which the full amount of gain, if any, was recognized (the cleansing exception). Section 1445(a) generally imposes a withholding tax obligation on the transferee when a foreign person disposes of a USRPI. Section 1445(f)(3) provides that a foreign person is any person other than a United States person. Section 1445(e)(3) generally imposes a withholding obligation on a domestic corporation that is a USRPHC on distributions to foreign persons to which section 302 or sections 331 through 346 apply. Section 1445(e)(3) also provides that similar rules are applicable to distributions to foreign persons under section 301 that are not made out of the earnings and profits of the domestic corporation. Section 1445(e)(4) generally requires a domestic or foreign partnership, the trustee of a domestic or foreign trust, or the executor of a domestic or foreign estate to withhold on the distribution of any USRPI to a partner or beneficiary who is a foreign person. Under section 1445(e)(5), the transferee of a partnership interest or of a beneficial interest in a trust or estate is required to deduct and withhold tax to the extent provided in regulations. Any amounts withheld under section 1445 are credited against the foreign transferor’s U.S. tax liability. § 1.1445–1(f)(1). Before the enactment of the Protecting Americans from Tax Hikes Act of 2015, Public Law 114–113 (the PATH Act), the withholding rate under sections 1445(a), 1445(e)(3), 1445(e)(4), and 1445(e)(5) was 10 percent of either the amount realized or the fair market value of the interest, as applicable. Section 324(a) of the PATH Act increased the withholding rate under these sections from 10 percent to 15 percent. This new rate applies to dispositions after February 16, 2016. Section 324(b) of the PATH Act, however, retained the 10percent withholding rate in the case of a disposition of property that is acquired by the transferee for his or her use as a residence with respect to which the amount realized is greater than $300,000 but does not exceed $1 million. Section 325 of the PATH Act provides that the cleansing exception will not apply to dispositions on or after December 18, 2015, if the corporation or its predecessor was a real estate investment trust or a regulated investment company at any time during VerDate Sep<11>2014 16:19 Feb 18, 2016 Jkt 238001 the shorter of the period that the shareholder held the interest or the fiveyear period ending on the date of the disposition of the shareholder’s interest in the corporation. Section 323(a) of the PATH Act added section 897(l), which provides that section 897 does not apply (i) to USRPIs held directly (or indirectly through one or more partnerships) by, or (ii) to distributions received from a real estate investment trust by, a qualified foreign pension fund or an entity wholly owned by a qualified foreign pension fund. Section 897(l)(2) defines a qualified foreign pension fund for purposes of section 897(l), and section 897(l)(3) provides that the Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of section 897(l). In addition, section 323(b) of the PATH Act amended the definition of foreign person in section 1445(f)(3) to provide that entities described in section 897(l) are not treated as foreign persons for purposes of section 1445, except as otherwise provided by the Secretary. The amendments in section 323 of the PATH Act are applicable to dispositions and distributions after December 18, 2015. Explanation of Provisions These regulations update § 1.897–2 and §§ 1.1445–1 through 1.1445–5, and append an informational footnote to § 1.1445–11T(d)(2)(iii), to reflect changes made by the PATH Act. Additionally, for certain filings that are described in regulations under sections 897 and 1445, these regulations provide that the mailing address is the address specified in the Instructions for Form 8288 under the heading ‘‘Where To File.’’ Applicability Dates Consistent with the PATH Act, the revisions to § 1.1445–2 to incorporate the exemption under section 1445(f)(3) for entities described in section 897(l) apply to dispositions and distributions after December 18, 2015, and the revisions to § 1.897–2 regarding the cleansing exception apply to dispositions on or after December 18, 2015. The new withholding rates described in these regulations apply to dispositions of, and distributions with respect to, USRPIs that occur after February 16, 2016. Beginning after February 19, 2016, taxpayers are required to use the revised mailing address provided in these regulations. However, the IRS will not assert penalties against taxpayers that use the mailing address previously specified in the regulations on or before PO 00000 Frm 00011 Fmt 4700 Sfmt 4700 8399 June 20, 2016. Any prior timely filings made pursuant to the regulations under sections 897 and 1445 that were mailed to the address specified in the Instructions for Form 8288 under the heading ‘‘Where To File,’’ instead of the address previously specified in the regulations, have been accepted by the IRS. Request for Comments The Treasury Department and the IRS request comments regarding what regulations, if any, should be issued pursuant to section 897(l)(3). All comments that are submitted as prescribed in this preamble under the ADDRESSES heading will be available at www.regulations.gov or upon request. Special Analyses Certain IRS regulations, including this one, are exempt from the requirements of Executive Order 12866, as supplemented and reaffirmed by Executive Order 13563. Therefore, a regulatory impact assessment is not required. Because no notice of proposed rulemaking is required, a Regulatory Flexibility Analysis under the Regulatory Flexibility Act (5 U.S.C. chapter 6) is not required. The Treasury Department and the IRS have determined that section 553(b) of the Administrative Procedure Act (APA) (5 U.S.C. chapter 5) does not apply to these regulations, including because good cause exists under section 553(b)(B) of the APA. Section 553(b)(B) of the APA provides that an agency is not required to publish a notice of proposed rulemaking in the Federal Register when the agency, for good cause, finds that notice and public comment thereon are impracticable, unnecessary, or contrary to the public interest. These regulations are necessary to ensure that existing regulations for transferees and other parties properly reflect the changes implemented by the PATH Act. Because these regulations merely conform the regulations to certain changes made by the PATH Act, and update certain mailing addresses, prior notice and public comment is unnecessary. Accordingly, good cause exists for dispensing with notice and public comment pursuant to section 553(b) of the APA. For the same reasons that section 553(b) of the APA does not apply, including because good cause exists under section 553(d)(3) of the APA, the requirements in section 553(d) of the APA for a delayed effective date are inapplicable. Drafting Information The principal authors of these regulations are Milton M. Cahn and E:\FR\FM\19FER1.SGM 19FER1 8400 Federal Register / Vol. 81, No. 33 / Friday, February 19, 2016 / Rules and Regulations David A. Levine of the Office of Associate Chief Counsel (International). However, other personnel from the IRS and the Treasury Department participated in their development. List of Subjects in 26 CFR Part 1 Income taxes, Reporting and recordkeeping requirements. Paragraph 1. The authority citation for part 1 continues to read in part as follows: ■ Authority: 26 U.S.C. 7805 * * * Par. 2. Section 1.897–2 is amended as follows: ■ 1. By removing ‘‘, and’’ at the end of paragraph (f)(2)(i) and adding a semicolon in its place. ■ Adoption of Amendments to the Regulations Accordingly, 26 CFR part 1 is amended as follows: Paragraph 2. By removing the period at the end of paragraph (f)(2)(ii) and adding ‘‘; and’’ in its place. ■ 1. By adding paragraph (f)(2)(iii) before the existing undesignated paragraph. ■ 2. In each of the paragraphs listed in the first column by removing the language in the ‘‘Remove’’ column and adding in its place the language in the ‘‘Add’’ column. ■ PART 1—INCOME TAXES Remove (h)(2)(v), third sentence ...................................... (h)(4)(ii), first sentence ....................................... The revision and addition reads as follows: § 1.897–2 United States real property holding corporations. * * * * * (f) * * * (2) * * * (iii) If the disposition occurs on or after December 18, 2015, neither Add the Director, Philadelphia Service P.O. Box 21086, Drop Point 8731, Unit, Philadelphia, PA 19114–0586. the Director, Philadelphia Service P.O. Box 21086, Drop Point 8731, Unit, Philadelphia, PA 19114–0586. Center, FIRPTA Center, FIRPTA the corporation nor any predecessor of the corporation was a regulated investment company or a real estate investment trust at any time during the shorter of the periods described in section 897(c)(1)(A)(ii). * * * * * Paragraph the address specified in the Instructions Form 8288 under the heading ‘‘Where File’’. the address specified in the Instructions Form 8288 under the heading ‘‘Where File’’. § 1.897–3 for To for To [Amended] Par. 3. Section 1.897–3 is amended in each of the paragraphs listed in the first column by removing the language in the ‘‘Remove’’ column and adding in its place the language in the ‘‘Add’’ column. ■ Remove (c) introductory text, first sentence (d)(1), fourth sentence .................... (f)(1), second sentence ................... (f)(1), fifth sentence ......................... Add with the Director, Philadelphia Service Center, P.O. Box 21086, Drop Point 8731, FIRPTA Unit, Philadelphia, PA 19114–0586. the Philadelphia Service Center ................................ at the address specified in the Instructions for Form 8288 under the heading ‘‘Where To File’’. addressed to the Director, Philadelphia Service Center, P.O. Box 21086, Drop Point 8731, FIRPTA Unit, Philadelphia, PA 19114–0586. the Director, Philadelphia Service Center ................. Par. 4. Section 1.1445–1 is amended as follows: ■ 1. By revising the first sentence and removing the last sentence of paragraph (b)(1). ■ the address specified in the Instructions for Form 8288 under the heading ‘‘Where To File’’. delivered to the address specified in the Instructions for Form 8288 under the heading ‘‘Where To File’’. the address specified in the Instructions for Form 8288 under the heading ‘‘Where To File’’. 2. By redesignating paragraphs (b)(2) through (4) as paragraphs (b)(3) through (5) respectively. ■ 3. By adding a new paragraph (b)(2). ■ 4. By revising paragraph (g)(10). ■ 5. By revising the heading and adding two sentences after the first sentence in paragraph (h). ■ 6. In each of the paragraphs listed in the first column by removing the language in the ‘‘Remove’’ column and adding in its place the language in the ‘‘Add’’ column. ■ Remove Add (a), second sentence .......................................... asabaliauskas on DSK5VPTVN1PROD with RULES Paragraph 10 percent ........................................................ newly designated (b)(4)(iii), first sentence ......... newly designated (b)(4)(iii), second sentence ... (c)(2)(i)(A), first sentence ................................... 10 percent ........................................................ § 1.1445–1(b)(3)(iii) .......................................... 10 percent ........................................................ (c)(2)(i)(B), third sentence .................................. 10 percent ........................................................ 15 percent (10 percent in the case of dispositions described in paragraph (b)(2) of this section). 15 percent. paragraph (b)(4)(iii). 15 percent (10 percent in the case of dispositions described in paragraph (b)(2) of this section). 15 percent (10 percent in the case of dispositions described in paragraph (b)(2) of this section). VerDate Sep<11>2014 16:19 Feb 18, 2016 Jkt 238001 PO 00000 Frm 00012 Fmt 4700 Sfmt 4700 E:\FR\FM\19FER1.SGM 19FER1 Federal Register / Vol. 81, No. 33 / Friday, February 19, 2016 / Rules and Regulations The additions and revisions read as follows: § 1.1445–1 Withholding on dispositions of U.S. real property interests by foreign persons: In general. * * * * * (b) Duty to withhold—(1) In general. Except as provided in paragraph (b)(2) and §§ 1.1445–2 and 1.1445–3, transferees of U.S. real property interests are required to deduct and withhold a tax equal to 15 percent of the amount realized by the transferor if the transferor is a foreign person.* * * (2) Reduced rate for certain residences. Transferees of U.S. real property interests are required to deduct and withhold a tax equal to 10 percent of the amount realized by the transferor if the transferor is a foreign person and the following requirements are satisfied: (i) The property is acquired by the transferee for use by the transferee as a residence; (ii) the amount realized for the property does not exceed $1,000,000; and (iii) section 1445(b)(5) does not apply to the disposition. See § 1.1445–2(d)(1). * * * * * (g) * * * (10) Address for correspondence. Any written communication to the Internal Revenue Service described in this section is to be mailed to the address specified in the Instructions for Form 8288 under the heading ‘‘Where To File.’’ (h) Applicability dates. * * * The withholding rates set forth in paragraphs (a), (b)(1), (b)(2), (b)(4)(iii), (c)(2)(i)(A), and (c)(2)(i)(B) of this section apply to dispositions after 8401 February 16, 2016. For dispositions on or before February 16, 2016, see paragraphs (a), (b)(1), (b)(3)(iii), (c)(2)(i)(A), and (c)(2)(i)(B) of this section as contained in 26 CFR part 1 revised as of April 1, 2015. ■ Par. 5. Section 1.1445–2 is amended as follows: ■ 1. By revising the first sentence in the undesignated paragraph following paragraph (b)(2)(i)(C). ■ 2. In paragraph (b)(4)(iv), by adding a sentence after the last sentence. ■ 3. In paragraph (e), by revising the heading and adding two sentences after the first sentence. ■ 4. In each of the paragraphs listed in the first colum by removing the language in the ‘‘Remove’’ column and adding in its place the language in the ‘‘Add’’ column. Paragraph Remove Add (b)(4)(iv), second sentence ................................ (b)(4)(iv), third sentence ..................................... (b)(4)(iv), fourth sentence ................................... (c)(3)(iii), second sentence ................................. (c)(3)(iii), third sentence ..................................... (c)(3)(iii), fourth sentence ................................... (d)(2)(i)(B), first sentence ................................... (d)(3)(i)(A) introductory text, first sentence ........ 10 percent ........................................................ 10 percent ........................................................ 10 percent ........................................................ 10 percent ........................................................ 10 percent ........................................................ 10 percent ........................................................ provides a copy of the transferor’s notice to the Director, Philadelphia Service Center. 10 percent ........................................................ (d)(3)(i)(B) introductory text, first sentence ........ 10 percent ........................................................ 15 percent. 15 percent. 15 percent. 15 percent. 15 percent. 15 percent. mails a copy of the transferor’s notice to the Internal Revenue Service. 15 percent (10 percent in the case of dispositions described in § 1.1445–1(b)(2)). 15 percent (10 percent in the case of dispositions described in § 1.1445–1(b)(2)). The additions and revision read as follows: § 1.1445–2 Situations in which withholding is not required under section 1445(a). * * * * * (b) * * * (2) * * * (i) * * * (C) * * * In general, a foreign person is a nonresident alien individual, foreign corporation, foreign partnership, foreign trust, or foreign estate, but not a qualified foreign pension fund (as defined in section 897(l)) or an entity all of the interests of which are held by a qualified foreign pension fund. * * * (4) * * * (iv) * * * For dispositions described in § 1.1445–1(b)(2), this paragraph shall be applied by replacing ‘‘15 percent’’ with ‘‘10 percent’’ each time it appears. * * * * * (e) Applicability dates. * * * The exclusion of entities described in section 897(l) from the definition of foreign person in paragraph (b)(2)(i) of this section applies to dispositions and distributions after December 18, 2015, and the withholding rates set forth in paragraphs (b)(4)(iv), (c)(3)(iii), and Paragraph to the Director, Philadelphia Service Center, at. to the Director, Philadelphia Service Center, at. by the Director, Philadelphia Service Center, by the Director, Philadelphia Service Center or his delegate. addressed to the Director, Philadelphia Service Center, at. (f)(1), first sentence ............................................ asabaliauskas on DSK5VPTVN1PROD with RULES § 1.1445–3 [Amended] Par. 6. Section 1.1445–3 is amended in each of the paragraphs listed in the first column by removing the language in the ‘‘Remove’’ column and adding in its place the language in the ‘‘Add’’ column. ■ Remove (b)(1), first sentence ........................................... (d)(3)(i) of this section apply to dispositions after February 16, 2016. For dispositions on or before February 16, 2016, see paragraphs (b)(4)(iv), (c)(3)(iii), and (d)(3)(i) of this section as contained in 26 CFR part 1 revised as of April 1, 2015. (f)(2)(iii), heading ................................................ (f)(2)(iii), first sentence ....................................... (g) introductory text, third sentence ................... VerDate Sep<11>2014 16:19 Feb 18, 2016 Jkt 238001 PO 00000 Frm 00013 Fmt 4700 Sfmt 4700 Add to. to. on behalf of the Service. on behalf of the Service. delivered to. E:\FR\FM\19FER1.SGM 19FER1 8402 Federal Register / Vol. 81, No. 33 / Friday, February 19, 2016 / Rules and Regulations § 1.1445–4 [Amended] first column by removing the language in the ‘‘Remove’’ column and adding in Par. 7. Section 1.1445–4 is amended in each of the paragraphs listed in the ■ its place the language in the ‘‘Add’’ column. Paragraph Remove Add (c)(1), tenth sentence ......................................... from a foreign person must withhold a tax equal to 10 percent. (c)(1), thirteenth sentence .................................. 10 percent tax .................................................. (c)(2), second sentence ..................................... to the Director, Philadelphia Service Center, at. from a foreign person after February 16, 2016, must withhold a tax equal to 15 percent (10 percent in the case of dispositions described in § 1.1445–1(b)(2)). 15 percent tax (10 percent tax in the case of dispositions described in § 1.1445–1(b)(2)). to. Par. 8. Section 1.1445–5 is amended as follows: 1. In each of the paragraphs listed in the first column, by removing the language in the ‘‘Remove’’ column and ■ ■ Paragraph Remove (b)(2)(ii) introductory text, first sentence ............ to the Director, Philadelphia Service Center, at. 10 percent ........................................................ with the Director, Philadelphia Service Center, at. with the Director, Philadelphia Service Center, at. 10 percent ........................................................ (c)(3)(iv) introductory text, second sentence ...... (c)(3)(v), first sentence ....................................... (c)(3)(v), fifth sentence ....................................... (e)(1) introductory text, first sentence ................ 2. In paragraph (h), by revising the heading and adding two sentences after the first sentence. The revision and additions read as follows: ■ § 1.1445–5 Special rules concerning distributions and other transactions by corporations, partnerships, trusts, and estates. * * * * Add (h) Applicability dates. * * * The withholding rates set forth in paragraphs (c)(3)(iv) and (e)(1) of this section apply to distributions after February 16, 2016. For distributions on or before February 16, 2016, see paragraphs (c)(3)(iv) and (e)(1) of this section as contained in 26 CFR part 1 revised as of April 1, 2015. to. 15 percent. at. at. 15 percent. § 1.1445–6 [Amended] Par. 9. Section 1.1445–6 is amended in each of the paragraphs listed in the first column by removing the language in the ‘‘Remove’’ column and adding in its place the language in the ‘‘Add’’ column. ■ * Paragraph Remove (f)(1), first sentence ............................................ to the Director, Philadelphia Service Center, at. by the Director, Philadelphia Service Center .. by the Director, Philadelphia Service Center, or his delegate. addressed to the Director, Philadelphia Service Center, at. (f)(2)(iii), heading ................................................ (f)(2)(iii), first sentence ....................................... (g) introductory text, second sentence ............... § 1.1445–11T § 1.1445–11T Special rules requiring withholding under § 1.1445–5 (temporary). * * * (d) * * * (2) * * * (iii) * * * * * John Dalrymple, Deputy Commissioner for Services and Enforcement. Approved: February 12, 2016. Mark J. Mazur, Assistant Secretary of the Treasury (Tax Policy). [FR Doc. 2016–03421 Filed 2–17–16; 4:15 pm] BILLING CODE 4830–01–P 1 Section 324(a) of the Protecting Americans from Tax Hikes Act of 2015 (Pub. L. 114–113) increased the withholding rate under section 1445(e)(5) to 15 percent, VerDate Sep<11>2014 Add applicable to dispositions after February 16, 2016. [Amended] Par. 10. Section 1.1445–11T is amended in paragraph (d)(2)(iii) by adding footnote ‘‘1’’ after the last sentence to read as follows: ■ asabaliauskas on DSK5VPTVN1PROD with RULES adding in its place the language in the ‘‘Add’’ column. 16:19 Feb 18, 2016 Jkt 238001 PO 00000 Frm 00014 Fmt 4700 Sfmt 4700 to. on behalf of the Service. on behalf of the Service. delivered to. DEPARTMENT OF THE TREASURY 31 CFR Part 0 Department of the Treasury Employee Rules of Conduct AGENCY: ACTION: Department of the Treasury. Interim final rule. The Department of the Treasury (the ‘‘Department’’ or ‘‘Treasury’’) is updating its Employee Rules of Conduct, which prescribe uniform rules of conduct and procedure SUMMARY: E:\FR\FM\19FER1.SGM 19FER1

Agencies

[Federal Register Volume 81, Number 33 (Friday, February 19, 2016)]
[Rules and Regulations]
[Pages 8398-8402]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-03421]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 9751]
RIN 1545-BN22


PATH Act Changes to Section 1445

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final and temporary regulations.

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SUMMARY: This document contains final and temporary regulations 
relating to the taxation of, and withholding on, foreign persons upon 
certain dispositions of, and distributions with respect to, United 
States real property interests (USRPIs). The regulations reflect 
changes made by the Protecting Americans from Tax Hikes Act of 2015 
(the PATH Act). In addition, the regulations update certain mailing 
addresses listed in regulations under sections 897 and 1445. These 
regulations affect certain holders of USRPIs and withholding agents 
that are required to withhold tax on certain dispositions of, and 
distributions with respect to, USRPIs. This document also requests 
comments on certain other aspects of the PATH Act that apply to 
dispositions of, and distributions with respect to, USRPIs.

DATES: 
    Effective date: These regulations are effective on February 19, 
2016.
    Applicability date: For dates of applicability, see Sec. Sec.  
1.1445-1(h), 1.1445-2(e), and 1.1445-5(h).

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-101329-16), Room 
5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, 
Washington, DC 20044. Submissions may be hand-delivered Monday through 
Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-
101329-16), Courier's Desk, Internal Revenue Service, 1111 Constitution 
Avenue NW., Washington, DC 20224, or sent electronically via the 
Federal eRulemaking Portal at http://www.regulations.gov (IRS REG-
101329-16).

FOR FURTHER INFORMATION CONTACT: Milton M. Cahn or David A. Levine, 
(202) 317-6937; concerning submissions of comments, Regina Johnson, 
(202) 317-6901 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

    The collections of information contained in these final regulations 
were previously reviewed and approved by the Office of Management and 
Budget in accordance with the Paperwork Reduction Act of 1995 (44 
U.S.C. 3507) under control numbers 1545-0123, 1545-0902, and 1545-1797 
in conjunction with Treasury decisions 7999 (49 FR 50689, Dec. 31, 
1984), 8113 (51 FR 46620, Dec. 24, 1986), and 9082 (68 FR 46081, Aug. 
5, 2003), respectively. There are no proposals for substantive changes 
to these collections of information.
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless it displays a valid 
control number assigned by the Office of Management and Budget.
    Books or records relating to a collection of information must be 
retained as long as their contents might become material in the 
administration of any internal revenue law. Generally, tax returns and 
tax return information are confidential, as required by 26 U.S.C. 6103.

Background

    Section 897(a)(1) provides, in general, that gain or loss of a 
nonresident alien individual or foreign corporation from the 
disposition of a United States real property interest (USRPI) shall be 
taken into account under section 871(b)(1) or 882(a)(1), as applicable, 
as if the nonresident alien individual or foreign corporation were 
engaged in a trade or business within the United States during the 
taxable year and such gain or loss were effectively connected with that 
trade or business.
    Section 897(c)(1)(A) defines a USRPI to include any interest (other 
than solely as a creditor) in any domestic corporation unless the 
taxpayer establishes that such corporation was at no time a United 
States real property holding corporation (USRPHC) during the applicable 
testing period (generally, the five-year period ending on the date of 
the disposition of the USRPHC). Under section 897(c)(2), a USRPHC means 
any corporation if the fair market value of its USRPIs equals or 
exceeds 50 percent of the total fair market value of its USRPIs, its 
interests in real property located outside the United States, and any 
other assets that are used or held for use in a trade or business. 
However, section 897(c)(1)(B) generally provides

[[Page 8399]]

that an interest in a corporation is not a USRPI if the corporation 
does not hold USRPIs as of the date its stock is sold and the 
corporation disposed of all of the USRPIs that it held during the 
applicable testing period in transactions in which the full amount of 
gain, if any, was recognized (the cleansing exception).
    Section 1445(a) generally imposes a withholding tax obligation on 
the transferee when a foreign person disposes of a USRPI. Section 
1445(f)(3) provides that a foreign person is any person other than a 
United States person. Section 1445(e)(3) generally imposes a 
withholding obligation on a domestic corporation that is a USRPHC on 
distributions to foreign persons to which section 302 or sections 331 
through 346 apply. Section 1445(e)(3) also provides that similar rules 
are applicable to distributions to foreign persons under section 301 
that are not made out of the earnings and profits of the domestic 
corporation. Section 1445(e)(4) generally requires a domestic or 
foreign partnership, the trustee of a domestic or foreign trust, or the 
executor of a domestic or foreign estate to withhold on the 
distribution of any USRPI to a partner or beneficiary who is a foreign 
person. Under section 1445(e)(5), the transferee of a partnership 
interest or of a beneficial interest in a trust or estate is required 
to deduct and withhold tax to the extent provided in regulations. Any 
amounts withheld under section 1445 are credited against the foreign 
transferor's U.S. tax liability. Sec.  1.1445-1(f)(1).
    Before the enactment of the Protecting Americans from Tax Hikes Act 
of 2015, Public Law 114-113 (the PATH Act), the withholding rate under 
sections 1445(a), 1445(e)(3), 1445(e)(4), and 1445(e)(5) was 10 percent 
of either the amount realized or the fair market value of the interest, 
as applicable. Section 324(a) of the PATH Act increased the withholding 
rate under these sections from 10 percent to 15 percent. This new rate 
applies to dispositions after February 16, 2016. Section 324(b) of the 
PATH Act, however, retained the 10-percent withholding rate in the case 
of a disposition of property that is acquired by the transferee for his 
or her use as a residence with respect to which the amount realized is 
greater than $300,000 but does not exceed $1 million.
    Section 325 of the PATH Act provides that the cleansing exception 
will not apply to dispositions on or after December 18, 2015, if the 
corporation or its predecessor was a real estate investment trust or a 
regulated investment company at any time during the shorter of the 
period that the shareholder held the interest or the five-year period 
ending on the date of the disposition of the shareholder's interest in 
the corporation.
    Section 323(a) of the PATH Act added section 897(l), which provides 
that section 897 does not apply (i) to USRPIs held directly (or 
indirectly through one or more partnerships) by, or (ii) to 
distributions received from a real estate investment trust by, a 
qualified foreign pension fund or an entity wholly owned by a qualified 
foreign pension fund. Section 897(l)(2) defines a qualified foreign 
pension fund for purposes of section 897(l), and section 897(l)(3) 
provides that the Secretary shall prescribe such regulations as may be 
necessary or appropriate to carry out the purposes of section 897(l). 
In addition, section 323(b) of the PATH Act amended the definition of 
foreign person in section 1445(f)(3) to provide that entities described 
in section 897(l) are not treated as foreign persons for purposes of 
section 1445, except as otherwise provided by the Secretary. The 
amendments in section 323 of the PATH Act are applicable to 
dispositions and distributions after December 18, 2015.

Explanation of Provisions

    These regulations update Sec.  1.897-2 and Sec. Sec.  1.1445-1 
through 1.1445-5, and append an informational footnote to Sec.  1.1445-
11T(d)(2)(iii), to reflect changes made by the PATH Act.
    Additionally, for certain filings that are described in regulations 
under sections 897 and 1445, these regulations provide that the mailing 
address is the address specified in the Instructions for Form 8288 
under the heading ``Where To File.''

Applicability Dates

    Consistent with the PATH Act, the revisions to Sec.  1.1445-2 to 
incorporate the exemption under section 1445(f)(3) for entities 
described in section 897(l) apply to dispositions and distributions 
after December 18, 2015, and the revisions to Sec.  1.897-2 regarding 
the cleansing exception apply to dispositions on or after December 18, 
2015. The new withholding rates described in these regulations apply to 
dispositions of, and distributions with respect to, USRPIs that occur 
after February 16, 2016.
    Beginning after February 19, 2016, taxpayers are required to use 
the revised mailing address provided in these regulations. However, the 
IRS will not assert penalties against taxpayers that use the mailing 
address previously specified in the regulations on or before June 20, 
2016. Any prior timely filings made pursuant to the regulations under 
sections 897 and 1445 that were mailed to the address specified in the 
Instructions for Form 8288 under the heading ``Where To File,'' instead 
of the address previously specified in the regulations, have been 
accepted by the IRS.

Request for Comments

    The Treasury Department and the IRS request comments regarding what 
regulations, if any, should be issued pursuant to section 897(l)(3). 
All comments that are submitted as prescribed in this preamble under 
the ADDRESSES heading will be available at www.regulations.gov or upon 
request.

Special Analyses

    Certain IRS regulations, including this one, are exempt from the 
requirements of Executive Order 12866, as supplemented and reaffirmed 
by Executive Order 13563. Therefore, a regulatory impact assessment is 
not required. Because no notice of proposed rulemaking is required, a 
Regulatory Flexibility Analysis under the Regulatory Flexibility Act (5 
U.S.C. chapter 6) is not required.
    The Treasury Department and the IRS have determined that section 
553(b) of the Administrative Procedure Act (APA) (5 U.S.C. chapter 5) 
does not apply to these regulations, including because good cause 
exists under section 553(b)(B) of the APA. Section 553(b)(B) of the APA 
provides that an agency is not required to publish a notice of proposed 
rulemaking in the Federal Register when the agency, for good cause, 
finds that notice and public comment thereon are impracticable, 
unnecessary, or contrary to the public interest. These regulations are 
necessary to ensure that existing regulations for transferees and other 
parties properly reflect the changes implemented by the PATH Act. 
Because these regulations merely conform the regulations to certain 
changes made by the PATH Act, and update certain mailing addresses, 
prior notice and public comment is unnecessary. Accordingly, good cause 
exists for dispensing with notice and public comment pursuant to 
section 553(b) of the APA. For the same reasons that section 553(b) of 
the APA does not apply, including because good cause exists under 
section 553(d)(3) of the APA, the requirements in section 553(d) of the 
APA for a delayed effective date are inapplicable.

Drafting Information

    The principal authors of these regulations are Milton M. Cahn and

[[Page 8400]]

David A. Levine of the Office of Associate Chief Counsel 
(International). However, other personnel from the IRS and the Treasury 
Department participated in their development.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Adoption of Amendments to the Regulations

    Accordingly, 26 CFR part 1 is amended as follows:

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 1.897-2 is amended as follows:
0
1. By removing ``, and'' at the end of paragraph (f)(2)(i) and adding a 
semicolon in its place.
0
2. By removing the period at the end of paragraph (f)(2)(ii) and adding 
``; and'' in its place.
0
1. By adding paragraph (f)(2)(iii) before the existing undesignated 
paragraph.
0
2. In each of the paragraphs listed in the first column by removing the 
language in the ``Remove'' column and adding in its place the language 
in the ``Add'' column.

------------------------------------------------------------------------
          Paragraph                  Remove                  Add
------------------------------------------------------------------------
(h)(2)(v), third sentence...  the Director,         the address
                               Philadelphia          specified in the
                               Service Center,       Instructions for
                               P.O. Box 21086,       Form 8288 under the
                               Drop Point 8731,      heading ``Where To
                               FIRPTA Unit,          File''.
                               Philadelphia, PA
                               19114-0586.
(h)(4)(ii), first sentence..  the Director,         the address
                               Philadelphia          specified in the
                               Service Center,       Instructions for
                               P.O. Box 21086,       Form 8288 under the
                               Drop Point 8731,      heading ``Where To
                               FIRPTA Unit,          File''.
                               Philadelphia, PA
                               19114-0586.
------------------------------------------------------------------------

    The revision and addition reads as follows:


Sec.  1.897-2  United States real property holding corporations.

* * * * *
    (f) * * *
    (2) * * * (iii) If the disposition occurs on or after December 18, 
2015, neither the corporation nor any predecessor of the corporation 
was a regulated investment company or a real estate investment trust at 
any time during the shorter of the periods described in section 
897(c)(1)(A)(ii).
* * * * *


Sec.  1.897-3  [Amended]

0
Par. 3. Section 1.897-3 is amended in each of the paragraphs listed in 
the first column by removing the language in the ``Remove'' column and 
adding in its place the language in the ``Add'' column.

------------------------------------------------------------------------
            Paragraph                   Remove                Add
------------------------------------------------------------------------
(c) introductory text, first      with the Director,  at the address
 sentence.                         Philadelphia        specified in the
                                   Service Center,     Instructions for
                                   P.O. Box 21086,     Form 8288 under
                                   Drop Point 8731,    the heading
                                   FIRPTA Unit,        ``Where To
                                   Philadelphia, PA    File''.
                                   19114-0586.
(d)(1), fourth sentence.........  the Philadelphia    the address
                                   Service Center.     specified in the
                                                       Instructions for
                                                       Form 8288 under
                                                       the heading
                                                       ``Where To
                                                       File''.
(f)(1), second sentence.........  addressed to the    delivered to the
                                   Director,           address specified
                                   Philadelphia        in the
                                   Service Center,     Instructions for
                                   P.O. Box 21086,     Form 8288 under
                                   Drop Point 8731,    the heading
                                   FIRPTA Unit,        ``Where To
                                   Philadelphia, PA    File''.
                                   19114-0586.
(f)(1), fifth sentence..........  the Director,       the address
                                   Philadelphia        specified in the
                                   Service Center.     Instructions for
                                                       Form 8288 under
                                                       the heading
                                                       ``Where To
                                                       File''.
------------------------------------------------------------------------


0
Par. 4. Section 1.1445-1 is amended as follows:
0
1. By revising the first sentence and removing the last sentence of 
paragraph (b)(1).
0
2. By redesignating paragraphs (b)(2) through (4) as paragraphs (b)(3) 
through (5) respectively.
0
3. By adding a new paragraph (b)(2).
0
4. By revising paragraph (g)(10).
0
5. By revising the heading and adding two sentences after the first 
sentence in paragraph (h).
0
6. In each of the paragraphs listed in the first column by removing the 
language in the ``Remove'' column and adding in its place the language 
in the ``Add'' column.

------------------------------------------------------------------------
          Paragraph                  Remove                  Add
------------------------------------------------------------------------
(a), second sentence........  10 percent..........  15 percent (10
                                                     percent in the case
                                                     of dispositions
                                                     described in
                                                     paragraph (b)(2) of
                                                     this section).
newly designated              10 percent..........  15 percent.
 (b)(4)(iii), first sentence.
newly designated              Sec.   1.1445-        paragraph
 (b)(4)(iii), second           1(b)(3)(iii).         (b)(4)(iii).
 sentence.
(c)(2)(i)(A), first sentence  10 percent..........  15 percent (10
                                                     percent in the case
                                                     of dispositions
                                                     described in
                                                     paragraph (b)(2) of
                                                     this section).
(c)(2)(i)(B), third sentence  10 percent..........  15 percent (10
                                                     percent in the case
                                                     of dispositions
                                                     described in
                                                     paragraph (b)(2) of
                                                     this section).
------------------------------------------------------------------------


[[Page 8401]]

    The additions and revisions read as follows:


Sec.  1.1445-1  Withholding on dispositions of U.S. real property 
interests by foreign persons: In general.

* * * * *
    (b) Duty to withhold--(1) In general. Except as provided in 
paragraph (b)(2) and Sec. Sec.  1.1445-2 and 1.1445-3, transferees of 
U.S. real property interests are required to deduct and withhold a tax 
equal to 15 percent of the amount realized by the transferor if the 
transferor is a foreign person.* * *
    (2) Reduced rate for certain residences. Transferees of U.S. real 
property interests are required to deduct and withhold a tax equal to 
10 percent of the amount realized by the transferor if the transferor 
is a foreign person and the following requirements are satisfied:
    (i) The property is acquired by the transferee for use by the 
transferee as a residence;
    (ii) the amount realized for the property does not exceed 
$1,000,000; and
    (iii) section 1445(b)(5) does not apply to the disposition. See 
Sec.  1.1445-2(d)(1).
* * * * *
    (g) * * *
    (10) Address for correspondence. Any written communication to the 
Internal Revenue Service described in this section is to be mailed to 
the address specified in the Instructions for Form 8288 under the 
heading ``Where To File.''
    (h) Applicability dates. * * * The withholding rates set forth in 
paragraphs (a), (b)(1), (b)(2), (b)(4)(iii), (c)(2)(i)(A), and 
(c)(2)(i)(B) of this section apply to dispositions after February 16, 
2016. For dispositions on or before February 16, 2016, see paragraphs 
(a), (b)(1), (b)(3)(iii), (c)(2)(i)(A), and (c)(2)(i)(B) of this 
section as contained in 26 CFR part 1 revised as of April 1, 2015.

0
Par. 5. Section 1.1445-2 is amended as follows:
0
1. By revising the first sentence in the undesignated paragraph 
following paragraph (b)(2)(i)(C).
0
2. In paragraph (b)(4)(iv), by adding a sentence after the last 
sentence.
0
3. In paragraph (e), by revising the heading and adding two sentences 
after the first sentence.
0
4. In each of the paragraphs listed in the first colum by removing the 
language in the ``Remove'' column and adding in its place the language 
in the ``Add'' column.

------------------------------------------------------------------------
          Paragraph                  Remove                  Add
------------------------------------------------------------------------
(b)(4)(iv), second sentence.  10 percent..........  15 percent.
(b)(4)(iv), third sentence..  10 percent..........  15 percent.
(b)(4)(iv), fourth sentence.  10 percent..........  15 percent.
(c)(3)(iii), second sentence  10 percent..........  15 percent.
(c)(3)(iii), third sentence.  10 percent..........  15 percent.
(c)(3)(iii), fourth sentence  10 percent..........  15 percent.
(d)(2)(i)(B), first sentence  provides a copy of    mails a copy of the
                               the transferor's      transferor's notice
                               notice to the         to the Internal
                               Director,             Revenue Service.
                               Philadelphia
                               Service Center.
(d)(3)(i)(A) introductory     10 percent..........  15 percent (10
 text, first sentence.                               percent in the case
                                                     of dispositions
                                                     described in Sec.
                                                     1.1445-1(b)(2)).
(d)(3)(i)(B) introductory     10 percent..........  15 percent (10
 text, first sentence.                               percent in the case
                                                     of dispositions
                                                     described in Sec.
                                                     1.1445-1(b)(2)).
------------------------------------------------------------------------

    The additions and revision read as follows:


Sec.  1.1445-2  Situations in which withholding is not required under 
section 1445(a).

* * * * *
    (b) * * *
    (2) * * *
    (i) * * *
    (C) * * *
    In general, a foreign person is a nonresident alien individual, 
foreign corporation, foreign partnership, foreign trust, or foreign 
estate, but not a qualified foreign pension fund (as defined in section 
897(l)) or an entity all of the interests of which are held by a 
qualified foreign pension fund. * * *
    (4) * * *
    (iv) * * * For dispositions described in Sec.  1.1445-1(b)(2), this 
paragraph shall be applied by replacing ``15 percent'' with ``10 
percent'' each time it appears.
* * * * *
    (e) Applicability dates. * * * The exclusion of entities described 
in section 897(l) from the definition of foreign person in paragraph 
(b)(2)(i) of this section applies to dispositions and distributions 
after December 18, 2015, and the withholding rates set forth in 
paragraphs (b)(4)(iv), (c)(3)(iii), and (d)(3)(i) of this section apply 
to dispositions after February 16, 2016. For dispositions on or before 
February 16, 2016, see paragraphs (b)(4)(iv), (c)(3)(iii), and 
(d)(3)(i) of this section as contained in 26 CFR part 1 revised as of 
April 1, 2015.


Sec.  1.1445-3  [Amended]

0
Par. 6. Section 1.1445-3 is amended in each of the paragraphs listed in 
the first column by removing the language in the ``Remove'' column and 
adding in its place the language in the ``Add'' column.

------------------------------------------------------------------------
          Paragraph                  Remove                  Add
------------------------------------------------------------------------
(b)(1), first sentence......  to the Director,      to.
                               Philadelphia
                               Service Center, at.
(f)(1), first sentence......  to the Director,      to.
                               Philadelphia
                               Service Center, at.
(f)(2)(iii), heading........  by the Director,      on behalf of the
                               Philadelphia          Service.
                               Service Center,.
(f)(2)(iii), first sentence.  by the Director,      on behalf of the
                               Philadelphia          Service.
                               Service Center or
                               his delegate.
(g) introductory text, third  addressed to the      delivered to.
 sentence.                     Director,
                               Philadelphia
                               Service Center, at.
------------------------------------------------------------------------


[[Page 8402]]

Sec.  1.1445-4  [Amended]

0
Par. 7. Section 1.1445-4 is amended in each of the paragraphs listed in 
the first column by removing the language in the ``Remove'' column and 
adding in its place the language in the ``Add'' column.

------------------------------------------------------------------------
          Paragraph                  Remove                  Add
------------------------------------------------------------------------
(c)(1), tenth sentence......  from a foreign        from a foreign
                               person must           person after
                               withhold a tax        February 16, 2016,
                               equal to 10 percent.  must withhold a tax
                                                     equal to 15 percent
                                                     (10 percent in the
                                                     case of
                                                     dispositions
                                                     described in Sec.
                                                     1.1445-1(b)(2)).
(c)(1), thirteenth sentence.  10 percent tax......  15 percent tax (10
                                                     percent tax in the
                                                     case of
                                                     dispositions
                                                     described in Sec.
                                                     1.1445-1(b)(2)).
(c)(2), second sentence.....  to the Director,      to.
                               Philadelphia
                               Service Center, at.
------------------------------------------------------------------------

0
Par. 8. Section 1.1445-5 is amended as follows:

0
1. In each of the paragraphs listed in the first column, by removing 
the language in the ``Remove'' column and adding in its place the 
language in the ``Add'' column.

------------------------------------------------------------------------
          Paragraph                  Remove                  Add
------------------------------------------------------------------------
(b)(2)(ii) introductory       to the Director,      to.
 text, first sentence.         Philadelphia
                               Service Center, at.
(c)(3)(iv) introductory       10 percent..........  15 percent.
 text, second sentence.
(c)(3)(v), first sentence...  with the Director,    at.
                               Philadelphia
                               Service Center, at.
(c)(3)(v), fifth sentence...  with the Director,    at.
                               Philadelphia
                               Service Center, at.
(e)(1) introductory text,     10 percent..........  15 percent.
 first sentence.
------------------------------------------------------------------------

0
2. In paragraph (h), by revising the heading and adding two sentences 
after the first sentence.
    The revision and additions read as follows:


Sec.  1.1445-5  Special rules concerning distributions and other 
transactions by corporations, partnerships, trusts, and estates.

* * * * *
    (h) Applicability dates. * * * The withholding rates set forth in 
paragraphs (c)(3)(iv) and (e)(1) of this section apply to distributions 
after February 16, 2016. For distributions on or before February 16, 
2016, see paragraphs (c)(3)(iv) and (e)(1) of this section as contained 
in 26 CFR part 1 revised as of April 1, 2015.


Sec.  1.1445-6  [Amended]

0
Par. 9. Section 1.1445-6 is amended in each of the paragraphs listed in 
the first column by removing the language in the ``Remove'' column and 
adding in its place the language in the ``Add'' column.

------------------------------------------------------------------------
          Paragraph                  Remove                  Add
------------------------------------------------------------------------
(f)(1), first sentence......  to the Director,      to.
                               Philadelphia
                               Service Center, at.
(f)(2)(iii), heading........  by the Director,      on behalf of the
                               Philadelphia          Service.
                               Service Center.
(f)(2)(iii), first sentence.  by the Director,      on behalf of the
                               Philadelphia          Service.
                               Service Center, or
                               his delegate.
(g) introductory text,        addressed to the      delivered to.
 second sentence.              Director,
                               Philadelphia
                               Service Center, at.
------------------------------------------------------------------------

Sec.  1.1445-11T  [Amended]

0
Par. 10. Section 1.1445-11T is amended in paragraph (d)(2)(iii) by 
adding footnote ``1'' after the last sentence to read as follows:


Sec.  1.1445-11T  Special rules requiring withholding under Sec.  
1.1445-5 (temporary).

* * * * *
    (d) * * *
    (2) * * *
    (iii) * * *

    \1\ Section 324(a) of the Protecting Americans from Tax Hikes 
Act of 2015 (Pub. L. 114-113) increased the withholding rate under 
section 1445(e)(5) to 15 percent, applicable to dispositions after 
February 16, 2016.

John Dalrymple,
Deputy Commissioner for Services and Enforcement.
    Approved: February 12, 2016.
 Mark J. Mazur,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2016-03421 Filed 2-17-16; 4:15 pm]
 BILLING CODE 4830-01-P