Regulations Relating to Information Reporting by Foreign Financial Institutions and Withholding on Certain Payments to Foreign Financial Institutions and Other Foreign Entities, 2124-2192 [2016-31601]

Agencies

• Internal Revenue Service
• DEPARTMENT OF THE TREASURY

[Federal Register Volume 82, Number 4 (Friday, January 6, 2017)]
[Rules and Regulations]
[Pages 2124-2192]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-31601]



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Vol. 82

Friday,

No. 4

January 6, 2017

Part VI





Department of the Treasury





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Internal Revenue Service





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26 CFR Parts 1 and 301





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

Federal Register / Vol. 82 , No. 4 / Friday, January 6, 2017 / Rules 
and Regulations

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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 1 and 301

[TD 9809]
RIN 1545-BL72
RIN 1545-BN79


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

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Removal of temporary regulations; final regulations; temporary 
regulations.

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SUMMARY: This document contains final and temporary regulations under 
chapter 4 of Subtitle A (sections 1471 through 1474) of the Internal 
Revenue Code of 1986 (Code) regarding information reporting by foreign 
financial institutions (FFIs) with respect to U.S. accounts and 
withholding on certain payments to FFIs and other foreign entities. 
This document finalizes (with changes) certain proposed regulations 
under chapter 4, and withdraws corresponding temporary regulations. 
This document also includes temporary regulations providing additional 
rules under chapter 4. The text of the temporary regulations also 
serves as the text of proposed regulations set forth in a notice of 
proposed rulemaking published in the Proposed Rules section of this 
issue of the Federal Register. The regulations included in this 
document affect persons making certain U.S.-related payments to FFIs 
and other foreign persons and payments by FFIs to other persons.

DATES: 
    Effective date. These regulations are effective on January 6, 2017.
    Applicability date. For dates of applicability, see Sec. Sec.  
1.1471-1(c), 1.1471-2(c), 1.1471-3(g), 1.1471-4(j), 1.1471-5(l), 
1.1471-6(i), 1.1472-1(h), 1.1473-1(f), 1.1474-1(j), and 1.1474-6(g).

FOR FURTHER INFORMATION CONTACT: Kamela Nelan at (202) 317-6942 (not a 
toll free number).

SUPPLEMENTARY INFORMATION: 

Paperwork Reduction Act

    The collection of information in these final and temporary 
regulations is contained in a number of provisions including Sec. Sec.  
1.1471-3, 1.1471-4, 1.1472-1, 1.1474-1, and 1.1474-6. In addition, 
these final and temporary regulations amend a number of collections of 
information set out in final regulations under chapter 4 issued in TD 
9610 and temporary regulations under chapter 4 issued in TD 9657. The 
IRS intends that the information collection requirements of these final 
and temporary regulations will be satisfied by filing Forms 8957, 8966, 
the W-8 series of forms, W-9, 1042, 1042-S, and the 1099 series of 
forms, as well as certain income tax returns (for example, Forms 1040 
and 1120F). As a result, for purposes of the Paperwork Reduction Act 
(44 U.S.C. 3507), the reporting burden associated with the collection 
of information in these final and temporary regulations will be 
reflected in the information collection burden and OMB control number 
of the appropriate IRS form. An agency may not conduct or sponsor, and 
a person is not required to respond to, a collection of information 
unless the collection of information displays a valid control number.
    Books and records relating to a collection of information must be 
retained as long as their contents may 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

    This document contains amendments to the regulations under chapter 
4 of the Code (sections 1471 through 1474) commonly known as the 
Foreign Account Tax Compliance Act, or FATCA. Chapter 4 generally 
requires U.S. withholding agents to withhold tax on certain payments to 
FFIs that do not agree to report certain information to the IRS 
regarding their U.S. accounts, and on certain payments to certain 
nonfinancial foreign entities (NFFEs) that do not provide information 
on their substantial United States owners (substantial U.S. owners) to 
withholding agents.
    On January 28, 2013, final regulations (TD 9610) under chapter 4 
were published in the Federal Register (78 FR 5874), and on September 
10, 2013, corrections to the final regulations (September 2013 
corrections) were published in the Federal Register (78 FR 55202). TD 
9610 and the September 2013 corrections are referred to collectively in 
this preamble as the 2013 final regulations. On March 6, 2014, the 
Department of the Treasury (Treasury Department) and the IRS published 
temporary regulations (TD 9657) under chapter 4 in the Federal Register 
(79 FR 12812), and corrections to the temporary regulations were 
published in the Federal Register on July 1, 2014 (July 2014 
corrections), and November 18, 2014 (November 2014 corrections) (79 FR 
37175 and 78 FR 68619, respectively). TD 9657, the July 2014 
corrections, and the November 2014 corrections are referred to 
collectively in this preamble as the 2014 temporary regulations. A 
notice of proposed rulemaking cross-referencing the 2014 temporary 
regulations was published in the Federal Register on March 6, 2014 (79 
FR 12868).
    On March 6, 2014, the Treasury Department and the IRS published 
temporary regulations (TD 9658) under chapters 3 and 61 and sections 
3406 and 6402 (79 FR 12726) (temporary coordination regulations). A 
notice of proposed rulemaking cross-referencing the temporary 
coordination regulations was published in the Federal Register on March 
6, 2014 (79 FR 12880). The temporary coordination regulations modify 
certain provisions of the regulations under chapters 3 and 61 and 
sections 3406 and 6402 to coordinate with the 2013 final regulations 
and the 2014 temporary regulations.
    Comments were received in response to the 2014 temporary 
regulations, but no public hearing was requested and none was held. 
After consideration of the comments received, this Treasury decision 
generally adopts as final regulations the 2014 temporary regulations, 
with the modifications described in the Summary of Comments and 
Explanation of Revisions and Provisions of this preamble, and removes 
the corresponding temporary regulations. This Treasury decision also 
includes corrections and makes certain modifications to the 2013 final 
regulations. Additionally, this Treasury decision includes temporary 
regulations, cross-referenced in a notice of proposed rulemaking 
published in the Proposed Rules section of this issue of the Federal 
Register, revising certain sections of the 2013 final regulations. 
Following the publication of the 2014 temporary regulations, the 
Treasury Department and the IRS received comments suggesting changes to 
the 2013 final regulations. These comments are not individually 
discussed in the Summary of Comments and Explanation of Revisions and 
Provisions except where a suggestion is adopted in the temporary 
regulations.
    Part I of the Summary of Comments and Explanation of Revisions and 
Provisions of this preamble summarizes comments received regarding the 
2014 temporary regulations and explains the changes made to the 2013 
final

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regulations and 2014 temporary regulations in response to those 
comments. Several of these revisions were described in Notice 2014-33, 
2014-21 I.R.B. 1033; Notice 2015-66, 2015-41 I.R.B. 541; and Notice 
2016-08, 2016-6 I.R.B. 304. Part I of the Summary of Comments and 
Explanation of Revisions and Provisions of this preamble also describes 
additional technical corrections and revisions to the 2013 final 
regulations and 2014 temporary regulations. Part II of the Summary of 
Comments and Explanation of Revisions and Provisions of this preamble 
summarizes the temporary regulations included in this document.

Summary of Comments and Explanation of Revisions and Provisions

I. Final Regulations

A. Comments and Changes to Sec.  1.1471-1--Scope of Chapter 4 and 
Definitions

1. Branch
    The 2014 temporary regulations define the term branch in Sec.  
1.1471-1T(b)(10) for purposes of chapter 4 by cross-referencing the 
definition of branch for participating FFIs in Sec.  1.1471-
4T(e)(2)(ii). However, Sec.  1.1471-4T(e)(2)(ii) states that the 
definition of branch in that paragraph applies only to participating 
FFIs for purposes of Sec.  1.1471-4, which is inconsistent with the 
cross-reference in Sec.  1.1471-1T(b)(10) to Sec.  1.1471-4T(e)(2)(ii) 
for the general definition of branch for chapter 4, and does not cover 
foreign branches of U.S. financial institutions. Therefore, these final 
regulations provide a definition of branch that applies for purposes of 
chapter 4 with respect to a branch of a financial institution.
2. Nonreporting IGA FFI
    Under the 2014 temporary regulations, the term nonreporting IGA FFI 
means an FFI that is identified as a nonreporting financial institution 
pursuant to a Model 1 IGA or Model 2 IGA that is not a registered 
deemed-compliant FFI, and an FFI that is a resident of, or located or 
established in, a Model 1 or Model 2 IGA jurisdiction, as the context 
requires, and that meets the requirements for certified deemed-
compliant FFI status under Sec.  1.1471-5T(f)(2). This definition of a 
nonreporting IGA FFI, however, excludes a nonreporting financial 
institution that is treated as a registered deemed-compliant FFI under 
Annex II of the Model 2 IGA and a nonreporting financial institution 
that satisfies the requirements of a deemed-compliant FFI under the 
chapter 4 regulations rather than the IGA. The Instructions for Form W-
8BEN-E, ``Certificate of Status of Beneficial Owner for United States 
Tax Withholding and Reporting (Entities),'' state that an FFI that is 
treated as a nonreporting IGA FFI under an applicable IGA, including an 
entity treated as a registered deemed-compliant FFI under an applicable 
IGA, should certify its status as a nonreporting IGA FFI. The 
Instructions for Form W-8BEN-E also provide that a nonreporting IGA FFI 
claiming a deemed-compliant status under the chapter 4 regulations 
should certify its status as a nonreporting IGA FFI.
    To provide an inclusive definition of nonreporting IGA FFI 
consistent with the IGAs and to coordinate with the Instructions for 
Form W-8BEN-E, these final regulations revise the definition of 
nonreporting IGA FFI in the 2014 temporary regulations to mean an FFI 
that is a resident of, or located or established in, a Model 1 or Model 
2 IGA jurisdiction, as the context requires, and that is a nonreporting 
financial institution described in Annex II of the Model 1 or Model 2 
IGA, a registered deemed-compliant FFI described in Sec.  1.1471-
5(f)(1)(i)(A) through (F), a certified deemed-compliant FFI described 
in Sec.  1.1471-5(f)(2)(i) through (v), or an exempt beneficial owner 
described in Sec.  1.1471-6.
    To coordinate with the revised definition of nonreporting IGA FFI, 
these final regulations modify the definition of certified deemed-
compliant FFI to exclude nonreporting IGA FFIs because some 
nonreporting IGA FFIs are required to obtain global intermediary 
identification numbers (GIINs). These final regulations instead include 
all nonreporting IGA FFIs in the definition of deemed-compliant FFI in 
Sec.  1.1471-5(f).
    These final regulations also modify the documentation rules in 
Sec.  1.1471-3(d)(7)(i) to incorporate the registration requirements 
for certain nonreporting IGA FFIs. Under these final regulations, a 
withholding agent must obtain a GIIN from a nonreporting IGA FFI that 
is treated as a registered deemed-compliant FFI under Annex II of the 
Model 2 IGA or that is a registered deemed-compliant FFI described in 
Sec.  1.1471-5(f)(1)(i)(A) through (F).
3. Preexisting Obligation (and Related Documentation Requirements)
    Under the 2014 temporary regulations, the term preexisting 
obligation is defined as: (i) An obligation outstanding on the later of 
the date the FFI is issued a GIIN or June 30, 2014, for a withholding 
agent that is a participating FFI; (ii) an obligation issued prior to 
the later of the date of the FFI's registration or the date the FFI is 
required to implement its account opening procedures, for a withholding 
agent that is a registered-deemed compliant FFI; and (iii) an 
obligation outstanding on June 30, 2014, for any other withholding 
agent not described in (i) and (ii).
    Comments to the 2014 temporary regulations and revised Forms W-8BEN 
and W-8BEN-E (published shortly after the 2014 temporary regulations 
were published) noted difficulties for withholding agents and FFIs to 
document new account holders and payees by the time specified in the 
2014 temporary regulations. In response to comments, Notice 2014-33 was 
issued and announced further transitional relief for withholding agents 
to treat certain new entity accounts as preexisting accounts for 
purposes of documenting such account holders. These final regulations 
implement the transitional relief by modifying the definition of a 
preexisting obligation to provide that a withholding agent or an FFI 
may treat an obligation held by an entity with the withholding agent or 
FFI that is issued, opened, or executed on or after July 1, 2014, and 
before January 1, 2015, as a preexisting obligation. However, the 
timeframe for documenting preexisting entity obligations in Sec.  
1.1471-4(c)(3) is unchanged; that is, the timeframes provided in Sec.  
1.1471-4(c)(3) apply to all preexisting entity obligations, including 
those obligations described in the preceding sentence. Furthermore, as 
provided in Notice 2014-33, these final regulations specify that if a 
participating FFI treats an entity account opened on or after July 1, 
2014, and before January 1, 2015, as a preexisting account, the FFI may 
not apply the exception from identification and documentation for 
certain low-value preexisting entity accounts under Sec.  1.1471-
4(c)(3)(iii)(A) to that account.
    These final regulations also clarify the definition of a 
preexisting obligation in the 2014 temporary regulations to remove the 
references to withholding agents in the second and third sentences of 
Sec.  1.1471-1(b)(104)(i) because the term preexisting obligation may 
apply to a participating FFI or registered deemed-compliant FFI that is 
not a withholding agent because the FFI never has control or custody of 
withholdable payments (as, for example, in the case of a participating 
FFI or registered deemed-compliant FFI that is documenting preexisting 
account holders). Therefore, under these final regulations, a 
preexisting obligation includes an

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obligation maintained by a participating FFI on the later of the date 
the FFI is issued a GIIN or June 30, 2014, and an obligation maintained 
by a registered deemed-compliant FFI prior to the later of the date of 
the FFI's registration or the date the FFI is required to implement its 
account opening procedures, regardless of whether the participating FFI 
or registered deemed-compliant FFI is a withholding agent.
4. U.S. Person
    The 2014 temporary regulations define the term U.S. person to 
include a person described in section 7701(a)(30), but do not specify 
whether a U.S. person includes a dual resident (that is, an individual 
who is considered a resident of the United States and also a resident 
of a country with which the United States has an income tax treaty). 
For purposes of chapter 3, a person that is a resident of a foreign 
country under the residence article of an income tax treaty and Sec.  
301.7701(b)-7(a)(1) (which therefore includes a person that is a dual 
resident) is a nonresident alien individual. See Sec.  1.1441-
1(c)(3)(ii). The Treasury Department and the IRS have determined that 
the treatment of dual residents should be consistent in chapters 3 and 
4 and that dual residents should be treated as non-U.S. persons for 
purposes of chapters 3 and 4. Accordingly, these final regulations 
revise the 2014 temporary regulations to provide that an individual 
will not be treated as a U.S. person for a taxable year or any portion 
of a taxable year that the individual is a dual resident taxpayer 
(within the meaning of Sec.  301.7701(b)-7(a)(1)) who is treated as a 
nonresident alien pursuant to Sec.  301.7701(b)-7 for purposes of 
computing the individual's U.S. tax liability. Final regulations under 
chapter 3 published elsewhere in this issue of the Federal Register 
modify the definition of nonresident alien individual to provide a 
description of a dual resident consistent with the definition included 
in these final regulations (but do not change the substantive rule in 
chapter 3).
    The regulations under chapter 3 also provide that an alien 
individual who has made an election under section 6013(g) or (h) to be 
treated as a resident of the United States is treated as a nonresident 
alien individual for purposes of chapter 3. In order to have a 
consistent rule, these final regulations provide that a U.S. person 
does not include an alien individual who has made an election under 
section 6013(g) or (h) to be treated as a resident of the United 
States.
    These final regulations also revise the definition of U.S. person 
to remove an unnecessary restriction on certain foreign insurance 
companies. The 2014 temporary regulations provide that a U.S. person 
includes a foreign insurance company that has made an election under 
section 953(d) to be treated as a U.S. person if the foreign insurance 
company is not a specified insurance company (as defined in Sec.  
1.1471-5(e)(1)(iv)) and is not licensed to do business in any state. 
The preamble to the 2014 temporary regulations explains that the 
definition of U.S. person in the 2013 final regulations is modified in 
the 2014 temporary regulations to include certain foreign insurance 
companies that have made an election under section 953(d) in light of 
the existing requirements applicable to these types of entities to 
report U.S. owners on the entity's U.S. income tax return. The 
requirement included in the 2014 temporary regulations that a U.S. 
person that is not a specified insurance company not be licensed to do 
business in any state is unnecessary because insurance companies that 
are not specified insurance companies are required under section 953(d) 
to report information regarding their U.S. owners regardless of whether 
they are licensed to do business in a state. These final regulations 
revise the 2014 temporary regulations to provide that a U.S. person 
includes a foreign insurance company that has made an election under 
section 953(d) and that is not a specified insurance company 
(regardless of whether such entity is licensed to do business in a 
state).
5. Withholding
    The 2013 final regulations define the term withholding as the 
deduction and remittance of tax at the applicable rate from a payment. 
However, the definition of withholding for purposes of chapter 3 does 
not include remittance. See Sec.  1.1441-1(c)(1). In order to 
coordinate with chapter 3, these final regulations modify the 
definition of withholding in the 2013 final regulations to mean the 
deduction and withholding of tax at the applicable rate from a payment.

B. Comments and Changes to Sec.  1.1471-2--Requirement To Deduct and 
Withhold Tax on Withholdable Payments to Certain FFIs

1. Requirement To Withhold on Payments to FFIs--Special Withholding 
Rules--Withholding Obligation of a Foreign Branch of a U.S. Financial 
Institution
    The 2014 temporary regulations generally provide that a foreign 
branch of a U.S. financial institution is a withholding agent and is 
not an FFI. The 2014 temporary regulations also provide that a foreign 
branch of a U.S. financial institution that is a reporting Model 1 FFI 
is both a withholding agent and a registered deemed-compliant FFI, and 
must withhold in accordance with Sec.  1.1471-2 and Sec.  1.1472-1(b). 
However, the 2014 temporary regulations do not fully coordinate such 
branch's withholding and documentation obligations as a U.S. 
withholding agent with its obligations as a reporting Model 1 FFI. 
These final regulations clarify in Sec.  1.1471-2(a)(2)(v) that a 
foreign branch of a U.S. financial institution is a U.S. withholding 
agent and a payee that is a U.S. person, and therefore has primary 
withholding responsibility on withholdable payments that it makes and 
is not subject to withholding under chapter 4 on withholdable payments 
that it receives. A foreign branch of a U.S. financial institution that 
is a reporting Model 1 FFI or that has entered into a qualified 
intermediary (QI) agreement may also be an FFI. The treatment of a 
foreign branch as an FFI, however, does not affect its withholding 
responsibilities as a U.S. withholding agent. These final regulations 
allow a foreign branch that is treated as an FFI to apply the 
procedures under Annex I of an applicable Model 1 or Model 2 IGA to 
document the chapter 4 status of a payee of a withholdable payment that 
is a holder of an account maintained by the branch in the Model 1 or 
Model 2 IGA jurisdiction.
2. Grandfathered Obligations
i. Definitions
    Under the 2013 final regulations, a withholdable payment does not 
include a payment made under a grandfathered obligation. A 
grandfathered obligation includes certain obligations outstanding on 
July 1, 2014, as well as any agreement requiring a secured party to 
make a payment with respect to, or to repay, collateral posted to 
secure a grandfathered obligation. If collateral (or a pool of 
collateral) is posted to secure both grandfathered obligations and 
obligations that are not grandfathered,

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the collateral posted to secure the grandfathered obligations must be 
determined by allocating, pro rata by value, the collateral (or each 
item in the pool of collateral) to all outstanding obligations secured 
by the collateral (or pool of collateral). Comments stated that it is 
unduly burdensome for withholding agents that are financial 
institutions to comply with the pro rata rule described in the 
preceding sentence. As announced in Notice 2015-66, these final 
regulations modify the 2013 final regulations to provide that the pro 
rata rule is not mandatory, and that if a withholding agent does not 
apply the pro rata rule, the withholding agent may allocate all 
withholdable payments on collateral (or a pool of collateral) to 
obligations that are not grandfathered and, if applicable, apply 
withholding to such payments.
    The Treasury Department and the IRS also received comments 
requesting that the definition of grandfathered obligation include a 
new obligation that is created as a result of posting a grandfathered 
obligation as collateral. Under the 2013 final regulations, to the 
extent that a secured party is treated as the beneficial owner of a 
grandfathered obligation that is pledged as collateral after July 1, 
2014, payments made by the secured party to the pledgor are treated as 
made under a newly created obligation, resulting in substitute 
payments. Under the 2014 temporary regulations, such substitute 
payments are subject to withholding if paid after January 1, 2017 (when 
the transitional exception from withholding for payments on collateral 
arrangements expires). The comment noted difficulties for certain 
withholding agents that are financial institutions to determine whether 
payments made with respect to collateral are substitute payments or 
payments made with respect to the collateral because collateral is 
frequently rehypothecated from omnibus accounts that include collateral 
from many counterparties. As previewed in Notice 2015-66, these final 
regulations amend the definition of grandfathered obligation to include 
any obligation that gives rise to a payment of substitute interest (as 
defined in Sec.  1.861-2(a)(7)) and that arises from the payee posting 
collateral that is a grandfathered obligation under Sec.  1.1471-
2(b)(2)(i)(A)(1).
ii. Determination by Withholding Agent of Grandfathered Treatment--
Determination of Material Modification
    The 2014 temporary regulations provide that a withholding agent is 
required to treat a modification of an obligation as material only if 
the withholding agent has actual knowledge thereof, such as in the 
event the withholding agent receives a disclosure indicating that there 
has been or will be a material modification to the obligation. A 
comment requested that receipt of disclosure from the issuer be the 
only instance in which a withholding agent has actual knowledge of a 
material modification. The Treasury Department and the IRS considered 
similar comments when drafting the 2014 temporary regulations and 
believe that the 2014 temporary regulations strike the correct balance 
by providing withholding agents with a standard that is narrow in scope 
without limiting the circumstances when there is actual knowledge. 
While the expectation is that a withholding agent that is a broker 
might only have actual knowledge of a material modification upon 
receiving notice from the issuer, the Treasury Department and the IRS 
do not believe that it is appropriate to foreclose the possibility that 
a withholding agent might otherwise have actual knowledge of the 
material modification absent notice from the issuer. Therefore, these 
final regulations do not include any revisions to the determination of 
a material modification.

C. Comments and Changes to Sec.  1.1471-3--Identification of Payee

1. Rules for Reliably Associating a Payment With a Withholding 
Certificate or Other Appropriate Documentation
i. Requirements for Validity of Certificates--Withholding Certificate 
of an Intermediary, Flow-Through Entity, or U.S. Branch (Form W-8IMY)
    The 2014 temporary regulations provide that a withholding agent may 
treat a person receiving a withholdable payment as a QI if the 
withholding agent can reliably associate the payment with a valid Form 
W-8IMY, ``Certificate for Foreign Intermediary, Foreign Flow-Through 
Entity, or Certain U.S. Branches for United States Tax Withholding and 
Reporting,'' as described in Sec.  1.1471-3(c)(3)(iii). Section 1.1471-
3(c)(3)(iii) provides the requirements for a withholding certificate of 
an intermediary, flow-through entity, or U.S. branch. QIs must provide 
a qualified intermediary withholding certificate (that is, a Form W-
8IMY) to a withholding agent, even when the QI is acting as a qualified 
derivatives dealer (QDD) under Sec.  1.1441-1(e)(6)(i). See Sec.  
1.1441-1(e)(3)(ii) and (e)(6)(i)(A). To coordinate with the 
requirements of a QI that is acting as a QDD, these final regulations 
provide that an intermediary, QI, flow-through entity, or U.S. branch 
must provide a valid Form W-8IMY to a withholding agent for chapter 4 
purposes. This revision is intended only to clarify which entities 
provide a Form W-8IMY and does not affect the general meaning of 
intermediary in the chapter 4 regulations as including QIs.
    The 2014 temporary regulations provide that a U.S. branch of a 
participating FFI or registered deemed-compliant FFI (whether or not 
the U.S. branch is treated as a U.S. person) must provide on its 
withholding certificate the GIIN assigned to the participating FFI or a 
registered deemed-compliant FFI. Under Sec.  1.1441-1T(b)(2)(iv)(C) of 
the temporary coordination regulations, a U.S. branch of an FFI that 
agrees to be treated as a U.S. person is subject to the withholding, 
due diligence, and information reporting rules that apply to U.S. 
withholding agents under chapters 3 and 4 and must be either a 
participating FFI or registered deemed-compliant FFI to qualify for 
treatment as a U.S. person. Under the 2014 temporary regulations, a 
U.S. branch of an FFI that does not agree to be treated as a U.S. 
person is required to report for chapter 4 purposes under Sec.  1.1471-
4T(d)(2)(iii)(C). Due to the expiration on January 1, 2017, of the 
transitional rules in Sec.  1.1471-4T(e)(2)(v) and (e)(3)(iv) (relating 
to limited FFI and limited branch statuses), it may become more 
difficult for an FFI to continue to be able to claim participating FFI 
or registered deemed-compliant FFI status, including when it has other 
branches that do not agree to comply with the requirements to be a 
participating FFI or registered deemed-compliant FFI, and therefore 
more difficult for a U.S. branch to avoid being withheld upon under 
chapter 4 (even though the U.S. branch is compliant with FATCA and 
subject to IRS examination and summons procedures in the same manner as 
a U.S. withholding agent).
    In recognition that a U.S. branch of an FFI that agrees to be 
treated as a U.S. person is subject to withholding, due diligence, and 
information reporting requirements similar to any other U.S. 
withholding agent (and U.S. payor for chapter 61 reporting), these 
final regulations no longer require a U.S. branch of an FFI that agrees 
to be treated as a U.S. person to be a participating FFI or registered 
deemed-compliant FFI when acting as an intermediary. Therefore, a U.S. 
branch of an FFI that acts as an intermediary and that agrees to be 
treated as a U.S. person will not need to furnish a GIIN of the FFI of 
which it forms a part. In order to prevent a U.S. branch that is 
treated as a U.S. person from acting on behalf of other branches of the 
FFI that are treated

[[Page 2128]]

as nonparticipating FFIs to avoid withholding under chapter 4 on 
payments made to customers of such other branches, if any, regulations 
under chapter 3 published elsewhere in this issue of the Federal 
Register provide that the U.S. branch must withhold on payments made to 
the other branch to the extent required for chapter 4 purposes as if 
the U.S. branch were an entity separate from such other branch.
    Under these final regulations, a U.S. branch that does not agree to 
be treated as a U.S. person is not required to be part of an FFI that 
is a participating FFI or registered deemed-compliant FFI, provided 
that such branch, when acting as an intermediary for a payment, applies 
the rules described in Sec.  1.1471-4(d)(2)(iii)(C). Section 1.1471-
4(d)(2)(iii)(C) of these final regulations provides that such a U.S. 
branch must report its U.S. accounts and accounts held by owner-
documented FFIs under Sec.  1.1471-4(d)(3), (d)(5), or (d)(6) and apply 
the withholding and due diligence rules in Sec.  1.1471-4(b) and (c)(2) 
to all of its accounts as if the U.S. branch were a participating FFI. 
These final regulations do not impose the verification requirements in 
Sec.  1.1471-4(f) and (g) on such U.S. branches because such branches 
are subject to IRS examination and summons procedures in the same 
manner as a U.S. withholding agent.
    Under these final regulations, a withholding agent making a 
withholdable payment to an intermediary that is a U.S. branch that is 
not treated as a U.S. person must obtain the EIN of the U.S. branch and 
a certification that the U.S. branch is applying the rules described in 
Sec.  1.1471-4(d)(2)(iii)(C). However, for a payment made before June 
30, 2017, that the withholding agent can reliably associate with valid 
documentation from an intermediary that is a U.S. branch not treated as 
a U.S. person, the withholding agent will not be required to obtain the 
certification described in the preceding sentence. Therefore, a 
withholding agent that has previously documented such U.S. branch will 
have additional time to obtain the certification that the U.S. branch 
is applying the rules described in Sec.  1.1471-4(d)(2)(iii)(C).
    Because a U.S. branch of an FFI treated as a U.S. person is not 
required to be part of a participating FFI, and a U.S. branch not 
treated as a U.S. person may avoid being withheld upon under chapter 4 
even if the FFI of which it is a part has one or more branches that are 
treated as nonparticipating FFIs, these final regulations modify the 
definition of the term participating FFI to provide that an FFI that 
registers to agree to the terms of an FFI agreement may only do so if 
it agrees that all branches of the FFI, other than a branch that is a 
reporting Model 1 FFI or a U.S. branch, will comply with the terms of 
the FFI agreement. See Revenue Procedure 2014-38, 2014-29 I.R.B. 131, 
as may be amended, for the FFI agreement.
    The changes in these final regulations only affect a U.S. branch 
when it is acting as an intermediary for a payment. For a U.S. branch 
that receives a payment for an entity that is the beneficial owner of 
the payment, see Sec.  1.1471-3(c)(3)(ii) and the Instructions for Form 
W-8BEN-E (requiring a U.S. branch to provide on its withholding 
certificate a GIIN of the participating FFI or registered deemed-
compliant FFI of which it is a part or any branch of such FFI).
ii. Requirements for Validity of Certificates--Withholding Certificate 
of an Intermediary, Flow-Through Entity, or U.S. Branch (Form W-8IMY)--
Withholding Statement--Special Requirements for an FFI Withholding 
Statement
    The FFI agreement permits a participating FFI to provide a 
withholding statement that allocates a portion of a withholdable 
payment to a group of account holders for whom no reporting is required 
on any of Form 1042-S, ``Foreign Person's U.S. Source Income Subject to 
Withholding,'' the Form 1099 series, and Form 8966, ``FATCA Report'' 
(an exempt payee pool). The preamble to the FFI agreement in Revenue 
Procedure 2014-38 provides that the 2014 temporary regulations will be 
amended to incorporate the allowance for an exempt payee pool on an FFI 
withholding statement. However, the preamble to the FFI agreement 
incorrectly adds that an FFI providing an exempt payee pool is not 
required to provide documentation for the payees in the pool (even 
though such documentation would be required for chapter 3 purposes 
under a similar rule in the regulations under chapter 3).
    To coordinate with the allowance in the FFI agreement, these final 
regulations provide that an FFI may include on its FFI withholding 
statement an allocation of a portion of a withholdable payment to a 
pool of account holders (other than nonqualified intermediaries and 
flow-through entities) for whom no reporting is required on any of 
Forms 1042-S, 1099, and 8966, provided the FFI provides to the 
withholding agent, for each account holder in the pool: (1) Payee-
specific information (including chapter 4 status) and any other 
information required for purposes of chapter 3 or 61 on the withholding 
statement; and (2) documentation. For example, a participating FFI may 
provide on its withholding statement an exempt payee pool for a payment 
of U.S. source interest on a bank deposit not subject to withholding or 
reporting under chapter 4 that is allocable to a pool of foreign 
account holders (that is, a withholdable payment that is not required 
to be reported on any of Forms 1042-S, 1099, and 8966) and provide the 
withholding agent with documentation for each account holder in the 
pool.
    Under the 2014 temporary regulations, an FFI withholding statement, 
a chapter 4 withholding statement, or an exempt beneficial owner 
withholding statement that includes payee-specific information for 
purposes of chapter 4 must indicate both the portion of the payment 
allocated to each payee and each payee's chapter 4 status. The 2014 
temporary regulations also provide that an FFI withholding statement, a 
chapter 4 withholding statement, or an exempt beneficial owner 
withholding statement must include any other information that the 
withholding agent needs in order to fulfill its obligations under 
chapter 4. Since a withholding agent is required to report the chapter 
4 status code for each payee on Form 1042-S, these final regulations 
clarify that the chapter 4 status of a payee shown on a withholding 
statement must be the applicable chapter 4 status code used to report 
the payee on Form 1042-S. This modification is consistent with the 
requirement in the temporary coordination regulations that a 
nonqualified intermediary withholding statement include the chapter 4 
status code for each payee (excluding a payee included in a chapter 4 
withholding rate pool) used for filing Form 1042-S. Additionally, to 
coordinate with the temporary coordination regulations, these final 
regulations clarify that an FFI withholding statement provided by an 
FFI other than an FFI acting as a QI, WP, or WT must identify the GIIN 
of an intermediary or flow-through entity when required under Sec.  
1.1471-3(d) and the chapter 4 status code used for filing Form 1042-S. 
Finally, the description of the recalcitrant account holder pool on an 
FFI withholding statement in Sec.  1.1471-3(c)(3)(iii)(B)(2)(i) is 
revised to cross-reference Sec.  1.1471-1(b)(20) (rather than Sec.  
1.1471-4(d)(6)) to coordinate with the revisions to Sec.  1.1471-
1T(b)(20) in the July 2014 corrections.

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iii. Requirements for Validity of Certificates--Withholding Certificate 
of an Intermediary, Flow-Through Entity, or U.S. Branch (Form W-8IMY)--
Withholding Statement--Special Requirements for Chapter 4 Withholding 
Statement
    Under the 2014 temporary regulations, a chapter 4 withholding 
statement must include an allocation of the payment to each payee 
(other than a payee that is a nonparticipating FFI). The Treasury 
Department and the IRS have determined that allocation information is 
unnecessary for purposes of this withholding statement when there is no 
withholding or reporting requirement with respect to a payment. 
Therefore, these final regulations provide that a chapter 4 withholding 
statement may include an allocation of a portion of the payment to a 
pool of payees (rather than to each payee) for whom no reporting is 
required on any of Forms 1042-S, 1099, and 8966, provided that the 
withholding statement contains payee-specific information (including 
chapter 4 status) and any other information required for purposes of 
chapter 3 or 61, and documentation is provided to the withholding agent 
for each payee in the pool.
    The 2014 temporary regulations permit a chapter 4 withholding 
statement to include pooled allocation information with respect to 
payees that are nonparticipating FFIs. These final regulations clarify 
that when a chapter 4 withholding statement provides pooled allocation 
information with respect to payees that are treated as nonparticipating 
FFIs, the withholding agent does not need to obtain documentation for 
each nonparticipating FFI included in the pool. These final regulations 
also remove an unnecessary cross-reference to chapter 61 in Sec.  
1.1471-3(c)(3)(iii)(B)(3).
iv. Requirements for Documentary Evidence--Foreign Status--Entity 
Government Documentation
    Under the 2013 final regulations, acceptable documentary evidence 
supporting a claim of foreign status includes, with respect to an 
entity, official documentation issued by an authorized government body. 
However, some common types of organizational documentation may not be 
considered ``issued'' by a governmental body (for example, articles of 
incorporation and partnership agreements). Therefore, these final 
regulations revise the 2013 final regulations to provide that 
acceptable documentary evidence supporting a claim of foreign status 
includes any documentation that substantiates that the entity is 
actually organized or created under the laws of a foreign country.
v. Applicable Rules for Withholding Certificates, Written Statements, 
and Documentary Evidence--Period of Validity--Indefinite Validity
    A comment noted that contemporaneous receipt of a beneficial owner 
withholding certificate and documentary evidence is not always 
practical and should not be a condition for indefinite validity of a 
withholding certificate. The Treasury Department and the IRS agree with 
the comment and have determined that these rules should be revised in 
both chapters 3 and 4. With respect to individuals, these final 
regulations cross-reference Sec.  1.1441-1(e)(4)(ii)(B)(1), which is 
modified in regulations published elsewhere in this issue of the 
Federal Register to provide that a beneficial owner withholding 
certificate and documentary evidence supporting the individual's claim 
of foreign status will be treated as provided together if they are 
provided within 30 days of each other, regardless of which the 
withholding agent receives first. With respect to entities, these final 
regulations incorporate the rule in Sec.  1.1441-1(e)(4)(ii)(B)(2), 
which is modified in regulations published elsewhere in this issue of 
the Federal Register to provide that a beneficial owner withholding 
certificate and documentary evidence supporting an entity's claim of 
foreign status will be valid indefinitely when both are received by the 
withholding agent before the validity period of either would otherwise 
expire (that is, both the withholding certificate and the documentary 
evidence are received by the withholding agent and neither has 
expired).
vi. Applicable Rules for Withholding Certificates, Written Statements, 
and Documentary Evidence--Period of Validity--Change in Circumstances
    Under the 2013 final regulations, a withholding agent cannot rely 
on a withholding certificate or documentation if it knows or has reason 
to know that a change in circumstances affects the correctness of the 
certificate or documentation. The 2013 final regulations define a 
change in circumstances as a change that would affect a person's 
chapter 4 status and require the person whose name is on the 
certificate or documentation to notify the withholding agent within 30 
days and provide a new certificate or documentation following a change 
in circumstance.
    A comment requested relief from a withholding agent's requirement 
to obtain new documentation from an FFI following a change in 
circumstances that does not affect whether withholding under chapter 4 
is required on payments to the FFI. In response to the comment, these 
final regulations provide that a withholding agent will not have reason 
to know of a change in circumstances with respect to an FFI's chapter 4 
status that results solely because the jurisdiction in which the FFI is 
resident, organized, or located is one that is later treated as having 
an IGA in effect (including a jurisdiction that had a Model 2 IGA in 
effect and is later treated as having a Model 1 IGA in effect). In lieu 
of providing a new withholding certificate to the withholding agent to 
document the new chapter 4 status, these final regulations allow an FFI 
to provide to the withholding agent oral or written confirmation 
(including by email) of the FFI's change in its chapter 4 status within 
30 days after the change in circumstances described in the preceding 
sentence or a change in circumstances with respect to the FFI's chapter 
4 status that results solely because a jurisdiction is later treated as 
not having an IGA in effect. In such a case, the withholding agent must 
retain a record of the confirmation, which will become part of the 
FFI's withholding certificate or other documentation. See section 
II.C.1.iii of this Summary of Comments and Explanation of Revisions and 
Provisions for an explanation of temporary regulations on a withholding 
agent's reason to know of a change in circumstances if a jurisdiction 
ceases to be treated as having an IGA in effect.
vii. Applicable Rules for Withholding Certificates, Written Statements, 
and Documentary Evidence--Electronic Transmission of Withholding 
Certificate, Written Statement, and Documentary Evidence
    The 2014 temporary regulations provide that a withholding agent may 
accept a withholding certificate, written statement, or other such form 
as the IRS may prescribe, electronically in accordance with the 
requirements of Sec.  1.1441-1(e)(4)(iv). A comment to the temporary 
coordination regulations requested a modification of the effective date 
of Sec.  1.1441-1(e)(4)(iv) so that withholding agents may rely upon 
forms or documentary evidence received electronically after March 6, 
2014, even if the payment was made prior to such date. The Treasury 
Department and the IRS agree with this comment, and have determined 
that the applicability date for reliance on electronically

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transmitted documentation should be the same in chapters 3 and 4. In 
regulations published elsewhere in this issue of the Federal Register, 
the temporary coordination regulations are modified so that Sec.  
1.1441-1(e)(4)(iv)(D) applies to any open tax year. Likewise, these 
final regulations provide that a taxpayer may apply Sec.  1.1471-
3(c)(6)(iv) to all of its open tax years.
viii. Applicable Rules for Withholding Certificates, Written 
Statements, and Documentary Evidence--Reliance on Prior Versions of 
Withholding Certificates
    Under the 2013 final regulations, a withholding agent can accept a 
prior version of a withholding certificate for six months after the 
revision date of an updated version of the certificate, unless the IRS 
has issued guidance that indicates otherwise. The temporary 
coordination regulations include a similar rule for chapter 3 purposes. 
In regulations published elsewhere in this issue of the Federal 
Register, Sec.  1.1441-1(e)(4)(viii)(C) is modified to permit 
withholding agents to accept a prior version of a withholding 
certificate until the later of six full months after the revision date 
of the updated form or the end of the calendar year during which the 
revised version is issued, unless the Treasury Department and the IRS 
designate a shorter transition period. The Treasury Department and the 
IRS have determined that the requirements for reliance on prior 
versions of withholding certificates under chapter 3 should be adopted 
for both chapters 3 and 4. Therefore, these final regulations modify 
the 2013 final regulations by cross-referencing to the rule in Sec.  
1.1441-1(e)(4)(viii)(C) regarding reliance on prior versions of forms.
ix. Curing Documentation Errors--Curing Inconsequential Errors on a 
Withholding Statement
    The 2013 final regulations provide that a withholding agent may 
treat a withholding certificate as valid, notwithstanding that the 
certificate contains an inconsequential error, if the withholding agent 
has sufficient documentation on file to supplement the information 
missing from the withholding certificate due to the error and such 
documentation is conclusive. The 2013 final regulations include an 
example of a withholding agent using government issued identification 
to cure an abbreviation of a country of residence on a withholding 
certificate provided by an individual, implying that any abbreviation 
(whether ambiguous or unambiguous) must be cured. However, since the 
Instructions for Form W-8BEN do not require an individual to provide 
the full name of a country, an unambiguous abbreviation is not an 
error. For consistency with chapter 3 (see Sec.  1.1441-1(b)(7)(iv)), 
these final regulations revise the example to provide that an 
abbreviation of a country of residence is an inconsequential error that 
would need to be cured only if it is an ambiguous abbreviation.
2. Documentation Requirements To Establish a Payee's Chapter 4 Status
i. Identification of U.S. Persons--In General
    The 2014 temporary regulations provide that a withholding agent 
receiving a Form W-9, ``Request for Taxpayer Identification Number and 
Certification,'' indicating that the payee is a U.S. person that is not 
a specified U.S. person must treat the payee as a specified U.S. person 
if the withholding agent knows or has reason to know that the payee's 
claim that it is other than a specified U.S. person is incorrect. A 
comment requested that the final regulations either eliminate reason to 
know in Sec.  1.1471-3T(d)(2)(i) or clarify when a withholding agent 
would have reason to know that a Form W-9 is incorrect with respect to 
an entity payee. The comment also notes that it would be burdensome for 
withholding agents to research publicly available information to 
determine if the entity's claim that it is not a specified U.S. person 
is incorrect. The Treasury Department and the IRS believe that reason 
to know is the appropriate standard for Form W-9 because it is the same 
as the standard of knowledge applied to forms in the W-8 series and the 
application of reason to know to Form W-9 is already clear. Reason to 
know is defined generally in Sec.  1.1471-3(e)(4) and specifically for 
withholding certificates in Sec.  1.1471-3(e)(4)(ii)(A). Under Sec.  
1.1471-3(e)(4)(ii)(A), a withholding agent has reason to know that a 
withholding certificate is unreliable or incorrect if the withholding 
certificate is incomplete with respect to any item on the certificate 
that is relevant to the claims made by the person, the withholding 
certificate contains any information that is inconsistent with the 
person's claim, the withholding agent has other account information 
that is inconsistent with the person's claim, or the withholding 
certificate lacks information necessary to establish entitlement to an 
exemption from withholding for chapter 4 purposes. Therefore, these 
final regulations do not adopt the comment.
ii. Documentation, GIIN Verification, and Registration of Sponsored 
Investment Entities, Sponsored Controlled Foreign Corporations, and 
Sponsored Direct Reporting NFFEs
    These final regulations modify the procedures for withholding 
agents to document the chapter 4 status of a payee that is a sponsored 
investment entity or sponsored controlled foreign corporation described 
Sec.  1.1471-5(f)(1)(i)(F) or a sponsored direct reporting NFFE 
described in Sec.  1.1472-1(c)(5) (each referred to as a sponsored 
entity for purposes of this section I.C.2.ii) to incorporate the 
provisions of Notice 2015-66. Under the 2014 temporary regulations, for 
a transitional period that was to expire on January 1, 2016, a 
withholding agent may obtain the GIIN of a sponsoring entity if the 
sponsored entity has not yet obtained a GIIN. A comment noted that it 
would be difficult for withholding agents to verify the GIINs of 
sponsored entities by the date provided in the 2014 temporary 
regulations. In response to the comment, the Treasury Department and 
the IRS announced in Notice 2015-66 that the 2014 temporary regulations 
would be amended to extend the time for withholding agents to verify 
sponsored entity GIINs. These final regulations, therefore, extend the 
transitional period to apply to withholdable payments made before 
January 1, 2017. These final regulations also provide that a 
withholding agent is not required to verify the GIIN of a sponsored 
entity before January 1, 2017 (even if the sponsored entity obtains a 
GIIN before such date), if the withholding agent verifies the GIIN of 
the sponsoring entity in the manner described in these final 
regulations.
    Notice 2015-66 announced that sponsoring entities must register 
their sponsored entities by January 1, 2017, and, beginning on that 
date, sponsoring entities must use the GIIN of the sponsored entity 
when reporting with respect to the sponsored entity on Form 8966 and 
must provide the GIIN to withholding agents making payments to the 
sponsored entity. The Notice also informed withholding agents that they 
would be required to obtain GIINs of sponsored entities for payments 
made on or after January 1, 2017. After Notice 2015-66 was issued, 
comments requested additional time for withholding agents to obtain the 
GIIN of a sponsored entity. In response to the comments, these final 
regulations provide that for a payment made after December 31, 2016, to 
a payee that the withholding agent has documented prior to January 1, 
2017, as a sponsored

[[Page 2131]]

entity with a valid withholding certificate that includes the GIIN of 
the sponsoring entity, the withholding agent must obtain and verify the 
GIIN of the sponsored entity against the IRS FFI list by March 31, 
2017. Notwithstanding the preceding sentence, a GIIN is not required 
for a payee that provides a valid withholding certificate prior to 
January 1, 2017, that identifies the payee as a sponsored FFI and 
includes the GIIN of the sponsoring entity if the withholding agent 
determines, based on information provided on the withholding 
certificate, that the payee is resident, organized, or located in a 
jurisdiction that is treated as having a Model 1 IGA in effect. A 
withholding certificate provided on or after January 1, 2017, by a 
payee that is a sponsored entity subject to a Model 1 IGA must identify 
the payee as a nonreporting IGA FFI or, if the payee identifies itself 
as a sponsored FFI, must include the payee's GIIN. As previewed in 
Notice 2015-66, the withholding agent may obtain a GIIN for a sponsored 
entity described in this paragraph by oral or written confirmation 
(including by email) rather than obtaining a new withholding 
certificate, provided that the withholding agent retains a record of 
the confirmation, which will become part of the withholding 
certificate.
    As announced in Notice 2015-66, and to coordinate with the 
transitional dates for documentation and GIIN verification discussed in 
the preceding paragraph, these final regulations provide that a 
sponsoring entity must register each sponsored entity for which it acts 
by the later of January 1, 2017, or the date the sponsored entity 
identifies itself to a withholding agent or financial institution as 
having such status.
iii. Identification of Participating FFIs and Registered Deemed-
Compliant FFIs--Reason To Know
    The 2014 temporary regulations provide rules in both Sec.  1.1471-
3T(d)(4)(v) and (e) for when a withholding agent has reason to know 
that a payee's claim of status as a participating FFI or registered 
deemed-compliant FFI is invalid or incorrect. However, Sec.  1.1471-
3T(d)(4)(v) is duplicative of the more detailed rules on reason to know 
in Sec.  1.1471-3T(e). To eliminate this duplication, these final 
regulations modify Sec.  1.1471-3T(d)(4)(v) to cross-reference Sec.  
1.1471-3(e) for the applicable reason to know rules.
iv. Identification of Excepted NFFEs--Identification of Active NFFEs
    Under Sec.  1.1472-1(b), a withholding agent making a withholdable 
payment to a NFFE that does not provide information on its substantial 
U.S. owners (or certify that it has no substantial U.S. owners) must 
withhold on the payment unless the NFFE is an excepted NFFE described 
in Sec.  1.1472-1(c)(1) (for example, an active NFFE described in Sec.  
1.1472-1(c)(1)(iv)). A withholding agent making a withholdable payment 
must apply the documentation rules in Sec.  1.1471-3(d) to determine 
the chapter 4 status of a payee. Specifically, under Sec.  1.1471-
3(d)(11)(ix), a withholding agent may treat a payee as an active NFFE 
described in Sec.  1.1472-1(c)(1)(iv) if the NFFE provides a 
withholding certificate identifying itself as an active NFFE. In 
contrast, a reporting Model 1 FFI or reporting Model 2 FFI documenting 
an account for purposes of satisfying the due diligence requirements of 
a Model 1 or Model 2 IGA applies the procedures in Annex I of the 
applicable IGA to determine whether an account holder is an active or 
passive NFFE. The chapter 4 regulations provide that a NFFE must 
determine its status under chapter 4 for purposes of documenting itself 
to a withholding agent making a withholdable payment to the NFFE. See 
Sec.  1.1471-3(d)(11) and (12). A comment requested that the chapter 4 
regulations be revised to permit a NFFE to determine its status under 
the Model 1 or Model 2 IGA of the jurisdiction where the NFFE is 
organized for purposes of certifying its status to both a withholding 
agent documenting a payee under the chapter 4 regulations and an FFI 
documenting an account holder under an applicable IGA. The Treasury 
Department and the IRS have decided that the chapter 4 regulations 
should not be revised in this regard. The due diligence procedures 
under the Model 1 IGA and Model 2 IGA allow financial institutions 
subject to an applicable IGA to document using such procedures and are 
not broadly intended for NFFEs. An entity resident in, or organized 
under the laws of, an applicable IGA jurisdiction may apply the IGA to 
determine its classification as an FFI or NFFE; however, it may not 
otherwise apply the IGA to determine whether it is an active or passive 
NFFE or whether it should identify controlling U.S. persons instead of 
substantial U.S. owners when it is documenting itself to a withholding 
agent making a withholdable payment to the entity.
v. Excepted Inter-Affiliate FFIs
    The 2014 temporary regulations provide that an excepted inter-
affiliate FFI may hold a depository account with a withholding agent 
that is not a member of the expanded affiliated group if the account is 
held in the country in which the excepted inter-affiliate FFI is 
operating to pay for expenses in that country. The 2014 temporary 
regulations also include identification rules for excepted inter-
affiliate FFIs that provide that a withholding agent that is a 
participating FFI may treat a payee as an excepted inter-affiliate FFI 
if it has obtained a withholding certificate or a written statement (in 
the case of an offshore obligation) identifying the payee as such an 
entity.
    Although the 2014 temporary regulations provide that an excepted 
inter-affiliate FFI is permitted to hold ``a depository account'' in 
the country in which the entity is operating to pay for expenses in 
that country, these final regulations permit an excepted inter-
affiliate FFI to hold more than one depository account in a country in 
which the FFI is operating to pay for expenses in that country.
    In addition, the restriction on withholding agents of an excepted 
inter-affiliate FFI to participating FFIs in Sec.  1.1471-3(d)(11)(xii) 
is inconsistent with the allowance for an excepted inter-affiliate FFI 
to hold a depository account with a withholding agent that is not a 
member of the FFI's expanded affiliated group in Sec.  1.1471-
5(e)(5)(iv)(B). Therefore, these final regulations replace 
``participating FFI'' with ``withholding agent'' in Sec.  1.1471-
3(d)(11)(xii)(A) through (C). Additionally, since an excepted inter-
affiliate FFI can receive any payments from a member of the FFI's 
expanded affiliated group (not only payments of U.S. source bank 
deposit interest), these final regulations revise the reason to know 
rule in Sec.  1.1471-3(d)(11)(xii)(C) so that it is limited to 
withholding agents that are not members of the FFI's expanded 
affiliated group.
3. Standards of Knowledge
i. GIIN Verification--In General
    The 2014 temporary regulations provide that a withholding agent 
that receives a payee's claim of status as a participating FFI or 
registered deemed-compliant FFI must verify: (1) The GIIN assigned to 
the FFI identifying its country of residence or place of organization; 
or (2) with respect to a payment that is made to a branch of, or an 
entity that is disregarded as an entity separate from, a participating 
FFI or registered deemed-compliant FFI located outside of the FFI's 
country of residence or organization, the GIIN assigned to the FFI 
identifying the country in which the branch or disregarded entity 
receiving the payment is located. However, a

[[Page 2132]]

disregarded entity that is a reporting Model 1 FFI may register 
separately from its FFI owner and be issued its own GIIN, and the 
Instructions for Form W-8BEN-E require the form to include the GIIN of 
a disregarded entity in such a case. To account for this situation, 
these final regulations revise Sec.  1.1471-3T(e)(3)(i) to provide that 
a withholding agent making a payment to a branch (including a 
disregarded entity) of a participating FFI or registered deemed-
compliant FFI located outside of the FFI's country of residence or 
organization must confirm the GIIN of the branch (or disregarded 
entity) receiving the payment. In addition, Sec.  1.1471-3(d)(4)(i) is 
revised to provide that a withholding certificate identifying a payee 
as a participating FFI, registered deemed-compliant FFI, or branch 
thereof (including an entity that is disregarded as an entity separate 
from the FFI) must contain a GIIN described in Sec.  1.1471-3(e)(3).
    Under the 2014 temporary regulations, a withholding agent has 
reason to know that a withholdable payment is made to a limited branch 
(including a disregarded entity) of a participating FFI or registered 
deemed-compliant FFI when: (1) The withholding agent is directed to 
make the payment to an address in a jurisdiction other than that of the 
participating FFI or registered deemed-compliant FFI (or branch 
(including a disregarded entity) of such FFI) that is identified by 
such FFI as receiving the payment; and (2) the withholding agent does 
not receive a GIIN assigned to the FFI identifying the country in which 
the branch (or disregarded entity) is located. A comment noted that an 
FFI may direct a payment to an account held by the FFI at another 
financial institution at a location outside the FFI's country of 
residence where the FFI does not have a branch. In response to the 
comment, these final regulations provide that a withholding agent is 
not required to apply the reason to know rule to an FFI that is an 
investment entity. In addition, if an FFI other than an investment 
entity directs a withholding agent to make a payment to an account held 
by the FFI and maintained by another financial institution at a 
location outside the jurisdiction where the FFI is resident or 
incorporated or the jurisdiction where the branch receiving the payment 
is located, the FFI must provide to the withholding agent a statement 
in writing that the FFI is not directing the payment to any branch of 
such FFI that is not a participating FFI or a registered deemed-
compliant FFI. Additionally, these final regulations clarify that if a 
withholding agent is required to apply the reason to know rule 
described in this paragraph, it must treat the branch as other than a 
participating FFI or registered deemed-compliant FFI.
ii. Reason To Know--Reason To Know Regarding an Entity's Chapter 4 
Status
    The 2014 temporary regulations revised the reason to know standard 
for claims of chapter 4 status in the 2013 final regulations to provide 
that, if a withholding agent has classified an entity as engaged in a 
particular type of business based on its records, the withholding agent 
has reason to know that the chapter 4 status claimed by the entity is 
unreliable or incorrect if the entity's claim conflicts with the 
withholding agent's classification of the entity's business type. The 
intent of the 2014 temporary regulations was to limit the reason to 
know rules to only those situations in which the classification 
recorded by the withholding agent is inconsistent with the chapter 4 
status claimed. The preamble of the 2014 temporary regulations 
accurately describes this intent. These final regulations correct the 
2014 temporary regulations and implement the preamble to the 2014 
temporary regulations.
iii. Reason To Know--Specific Standards of Knowledge Applicable to 
Documentation Received From Intermediaries and Flow-Through Entities--
In General
    Under the 2013 final regulations, a withholding agent that receives 
documentation for a payee through an intermediary or flow-through 
entity is required to review the documentation by applying the 
standards of knowledge applicable to chapter 4. The 2014 temporary 
regulations permit a withholding agent to accept a Form W-8 (or a 
substitute Form W-8) electronically through a system established by the 
withholding agent that meets the requirements described in Sec.  
1.1441-1(e)(4)(iv)(B). A comment requested that withholding agents be 
allowed to rely on documentation that the intermediary or flow-through 
entity received through an electronic system established by the 
intermediary or flow-through entity (rather than the withholding agent) 
to collect documentation from a payee. In Notice 2016-08, the Treasury 
Department and the IRS announced an intent to modify the standards of 
knowledge under Sec. Sec.  1.1441-7(b)(10) and 1.1471-3(e)(4)(vi)(A)(2) 
to allow a withholding agent to rely on a withholding certificate 
collected through an electronic system maintained by a nonqualified 
intermediary, nonwithholding foreign partnership, or nonwithholding 
foreign trust. However, the Treasury Department and the IRS have 
determined that the primary concern raised by the comment (validation 
and reliance on a signature on a Form W-8BEN-E) should be addressed in 
temporary regulations that allow withholding agents to accept forms 
signed electronically. See section II.C.1.i of this Summary of Comments 
and Explanation of Revisions and Provisions for a description of the 
temporary regulation on electronic signatures. In light of the new 
allowance for withholding agents to accept forms signed electronically, 
the Treasury Department and the IRS have determined that it is not 
necessary to modify the standards of knowledge as previewed in Notice 
2016-08.
iv. Reason To Know--Specific Standards of Knowledge Applicable to 
Documentation Received From Intermediaries and Flow-Through Entities--
Limits on Reason To Know With Respect to Documentation Received From 
Participating FFIs and Registered Deemed-Compliant FFIs That Are 
Intermediaries or Flow-Through Entities
    These final regulations clarify that a withholding agent that 
receives documentation from an intermediary or flow-through entity that 
is a reporting Model 1 FFI or reporting Model 2 FFI may rely on the 
chapter 4 status for a payee that is determined based on payee 
documentation or information that is publicly available that determines 
the chapter 4 status of the payee if such documentation or information 
is permitted under an applicable IGA, provided that the withholding 
agent has the information necessary to report on Form 1042-S. See Sec.  
1.1441-1(e)(3)(iv)(C)(2)(iv) (requiring that a nonqualified 
intermediary withholding statement for a reportable amount that is a 
withholdable payment include the recipient code for chapter 4 purposes 
used for filing Form 1042-S for an entity payee). However, a 
withholding agent paying an amount subject to chapter 3 withholding is 
still required to obtain documentation that satisfies the requirements 
of chapter 3. This revision is consistent with the Instructions for the 
Requester of Forms W-8BEN, W-8BEN-E, W-8ECI, W-8EXP, and W-8IMY.
v. Reason To Know--Reasonable Explanation Supporting Claim of Foreign 
Status
    The chapter 3 regulations provide that a withholding agent may rely 
on the foreign status of an individual account

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holder irrespective of certain U.S. indicia in certain cases when the 
account holder provides a reasonable explanation supporting the account 
holder's claim of foreign status. The temporary coordination 
regulations provide that a reasonable explanation of foreign status is 
either: (1) A written statement from a payee (in which the payee may 
provide any explanation to support its claim of foreign status); or (2) 
the payee's identification of one of the explanations on a checklist 
provided by the withholding agent to the payee that lists the 
explanations described in Sec.  1.1441-7(b)(12)(i) through (iv). The 
rule in the 2013 final regulations is similar to the rule in the 
temporary coordination regulations, except that the 2013 final 
regulations provide that a reasonable explanation, whether provided in 
the form of a written statement from the payee or the payee's 
identification of one of the explanations on a checklist provided by 
the withholding agent, must be one of the explanations described in 
Sec.  1.1471-3(e)(4)(vii)(A) through (D) (which are identical to the 
explanations listed in Sec.  1.1441-7(b)(12)(i) through (iv)). The 
explanations listed in Sec.  1.1471-3(e)(4)(vii)(A) through (D) are 
common explanations easily reducible to a checklist on a standardized 
form, but are not intended to be an exhaustive list of reasonable 
explanations that a payee may provide to rebut the U.S. indicia on the 
account. Therefore, as previewed in Notice 2014-33, these final 
regulations amend the 2013 final regulations to be consistent with the 
temporary coordination regulations by cross-referencing Sec.  1.1441-
7(b)(12) for the definition of a reasonable explanation of foreign 
status.
vi. Presumptions Regarding Chapter 4 Status of the Person Receiving the 
Payment in the Absence of Documentation--Presumption of Chapter 4 
Status for a Foreign Entity
    The chapter 4 regulations require a withholding agent to apply the 
presumption rules in Sec.  1.1471-3(f) if the withholding agent cannot 
reliably associate a payment with valid documentation. Under Sec.  
1.1471-3(f)(4), a withholding agent must presume that an entity payee 
is a nonparticipating FFI and withhold on withholdable payments to the 
entity if the withholding agent cannot document the entity's chapter 4 
status. A comment suggested that a reporting Model 1 FFI that receives 
a withholdable payment as an intermediary on behalf of, or makes a 
withholdable payment to, an account held by an undocumented entity 
should be permitted to treat such account as a U.S. reportable account 
and not as a nonparticipating FFI subject to withholding pursuant to 
the presumption rules under Sec.  1.1471-3(f)(4). The Treasury 
Department and the IRS do not agree with the comment. Under Annex I of 
the Model 1 and Model 2 IGA, reporting Model 1 FFIs and reporting Model 
2 FFIs must apply the due diligence procedures described in Annex I to 
document the status of their account holders under the IGA as U.S. 
reportable accounts, nonparticipating FFIs, or additionally in the case 
of a reporting Model 2 FFI, non-consenting U.S. accounts, and if such 
procedures are applied, cases in which an entity account is 
undocumented should not arise. If a reporting Model 1 FFI or reporting 
Model 2 FFI does not have information in its possession or that is 
publicly available based on which it can reasonably determine the 
status of an entity account holder the FFI must obtain a self-
certification to establish the status of such entity (or in some cases, 
a self-certification to establish the status of the controlling persons 
of a passive NFFE) consistent with Annex I of the applicable IGA. In 
cases where a reporting Model 1 FFI or reporting Model 2 FFI acts as an 
intermediary for a withholdable payment that is allocated to an entity 
account and is unable to document the account by obtaining such 
information or self-certification consistent with the procedures 
described in Annex I of the applicable IGA, the chapter 4 regulations 
provide presumption rules for withholdable payments made to such 
account (and if an FFI has many such undocumented accounts, the U.S. 
Competent Authority may determine that there is significant non-
compliance with the requirements of the IGA with respect to the FFI). 
In such cases, the reporting Model 1 FFI or reporting Model 2 FFI must 
apply the presumption rules in Sec.  1.1471-3(f) to treat such entity 
account as a nonparticipating FFI and provide sufficient information to 
the upstream withholding agent to withhold on the payment (or, if such 
reporting Model 1 FFI or reporting Model 2 FFI is a WP, WT, or a QI 
that assumes primary withholding responsibility on the payment for 
chapters 3 and 4, the WP, WT, or QI must withhold). Withholding on 
undocumented entity accounts as accounts of nonparticipating FFIs is 
consistent with the IGAs, which contemplates that nonparticipating FFIs 
would remain subject to withholding on withholdable payments received 
through a reporting Model 1 FFI or reporting Model 2 FFI.

D. Comments and Changes to Sec.  1.1471-4--FFI Agreement

1. Withholding Requirements--Foreign Passthru Payments
    Under section 1471(b)(1)(D)(i), a participating FFI must agree to 
withhold on passthru payments (that is, withholdable payments and 
foreign passthru payments) made to recalcitrant account holders of the 
FFI and nonparticipating FFIs. The 2013 final regulations reserve on 
the definition of foreign passthru payment and provide that a 
participating FFI is not required to withhold tax on a foreign passthru 
payment made to a recalcitrant account holder or a nonparticipating FFI 
before the later of January 1, 2017, or the date of publication in the 
Federal Register of final regulations defining foreign passthru 
payment. As announced in Notice 2015-66, this transition period is 
extended in order to facilitate an orderly phase-in of withholding 
under chapter 4. Therefore, these final regulations modify the 2013 
final regulations to provide that a participating FFI is not required 
to withhold tax on a foreign passthru payment made to a recalcitrant 
account holder or a nonparticipating FFI before the later of January 1, 
2019, or the date of publication in the Federal Register of final 
regulations defining the term foreign passthru payment.
2. Due Diligence for the Identification and Documentation of Account 
Holders and Payees--Certifications of Responsible Officer
    The 2013 final regulations require a participating FFI to certify 
to the IRS that the FFI has complied with the applicable due diligence 
requirements with respect to preexisting accounts of the FFI and that 
the FFI did not have any formal or informal practices or procedures in 
place from August 6, 2011, through the date of such certification to 
assist account holders in the avoidance of chapter 4. Under the 2013 
final regulations, this certification must be made no later than 60 
days following the date that is two years after the effective date of 
the participating FFI's FFI agreement. As announced in Notice 2016-08, 
these final regulations modify the time for an FFI to make this 
certification by providing that the certification must be submitted to 
the IRS by the due date of the FFI's first certification of compliance 
required under Sec.  1.1471-4(f)(3). Additionally, in order to mitigate 
any increased burden caused by the modified due date (for example, if 
an FFI has undergone changes in management personnel since August 6, 
2011), these final regulations require a participating FFI to certify 
that

[[Page 2134]]

it did not have any formal or informal practices or procedures in place 
from August 6, 2011, through the date that is two years after the 
effective date of the FFI's FFI agreement (rather than the date when 
the certification is due). These final regulations also reinstate a 
sentence that was unintentionally removed in Sec.  1.1471-4(c)(7) in 
the September 2013 corrections requiring a participating FFI to certify 
that it did not have any practices or procedures to assist account 
holders in avoidance of chapter 4.
3. Account Reporting
i. Reporting Requirements in General--Accounts Subject to Reporting
    Comments requested an exemption from filing Form 8966 for a 
participating FFI that is a partnership filing Form 1065 and Schedule 
K-1 to report its U.S. partners. While the forms collect some 
overlapping information, the Schedule K-1 does not provide all of the 
same information as Form 8966. In particular, Form 8966 collects 
information about both direct and indirect owners of a passive NFFE, 
while Form 1065 and Schedule K-1 only identifies direct partners. 
Therefore, the Treasury Department and the IRS at this time do not 
believe that it would be appropriate to provide an exemption for 
partnerships from having to file Form 8966 on behalf of its U.S. 
partners. The Treasury Department and the IRS will evaluate the 
information received on Forms 8966 filed with the IRS and may assess 
the utility of that information, taking into account any information 
filed on Form 1065 and Schedule K-1 and any other relevant information 
about offshore activities of U.S. persons that are filed with the IRS.
ii. Reporting Requirements in General--Reporting by Participating FFIs 
and Registered Deemed-Compliant FFIs (Including QIs, WPs, WTs, and 
Certain U.S. Branches Not Treated as U.S. Persons) for Accounts of 
Nonparticipating FFIs (Transitional)
    Under Sec.  1.1471-4(d)(2)(ii)(F), a participating FFI that 
maintains an account of a nonparticipating FFI must report to the IRS 
foreign reportable amounts paid to or with respect to the account for 
each of calendar years 2015 and 2016. A foreign reportable amount is 
defined in the 2014 temporary regulations as a foreign source payment 
described in Sec.  1.1471-4(d)(4)(iv) (which includes gross proceeds). 
In lieu of reporting foreign reportable amounts, a participating FFI 
may report all income, gross proceeds, and redemptions (irrespective of 
source) paid to the nonparticipating FFI's account by the participating 
FFI during the year. Under a transitional rule in Sec.  1.1471-
4(d)(7)(ii)(B), a participating FFI is not required to report gross 
proceeds paid to a U.S. account or an account held by an owner-
documented FFI in the 2015 calendar year. As announced in Notice 2016-
08, these final regulations provide that a participating FFI is not 
required to report gross proceeds from the sale or redemption of 
property paid or credited to a custodial account that are paid to or 
with respect to an account held by a nonparticipating FFI for calendar 
year 2015. This exception applies regardless of whether the FFI is 
reporting foreign reportable amounts or all income, gross proceeds, and 
redemptions. These final regulations also remove an incorrect reference 
to a registered deemed-compliant FFI in the first sentence of Sec.  
1.1471-4(d)(2)(ii)(F).
iii. Reporting of Accounts Under Section 1471(c)(1)--Accounts Held by 
U.S. Owned Foreign Entities
    Under the 2013 final regulations, a participating FFI is required 
to report each U.S. account, which is defined as an account held by one 
or more specified U.S. persons or U.S. owned foreign entities. With 
respect to U.S. owned foreign entities, the Treasury Department and the 
IRS intended for participating FFIs to report only substantial U.S. 
owners of NFFEs that are passive NFFEs (defined in Sec.  1.1471-
1(b)(94)). Accordingly, these final regulations revise the reporting 
requirements for participating FFIs to clarify that FFIs are required 
to report on accounts held by passive NFFEs that are U.S. owned foreign 
entities. Conforming changes have also been made throughout these final 
regulations.
iv. Election To Perform Chapter 61 Reporting--In General--Election To 
Report in a Manner Similar to Section 6047(d)
    The 2013 final regulations allow a participating FFI to elect to 
report cash value insurance contracts or annuity contracts that are 
U.S. accounts in a manner similar to section 6047(d), but require that 
such reporting include the account balance or value of the account. In 
contrast, a participating FFI that elects to perform chapter 61 
reporting on a U.S. account other than a cash value insurance contract 
or annuity contract does not need to report the account balance or 
value. These final regulations remove the requirement for an FFI that 
elects to report a U.S. account that is a cash value insurance contract 
or annuity contract under section 6047(d) to report the account balance 
or value in order to achieve parity with the election to report other 
U.S. accounts under chapter 61. This revision reduces burden on FFIs 
electing to report U.S. accounts that are cash value insurance 
contracts or annuity contracts on Form 1099-R, ``Distributions from 
Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, 
Insurance Contracts, etc.,'' in lieu of Form 8966.
4. Expanded Affiliated Group Requirements--Limited Branches and Limited 
FFIs
i. Term of Limited Branch Status and Limited FFI Status (Transitional)
    The 2014 temporary regulations require that each member of an 
expanded affiliated group have a chapter 4 status of participating FFI, 
deemed-compliant FFI, or exempt beneficial owner in order for any 
member of such group to obtain a chapter 4 status of participating FFI 
or registered deemed-compliant FFI. Each member of the group (except a 
certified deemed-compliant FFI or exempt beneficial owner) must also 
agree to the status for which it applies for all of its branches. For a 
transitional period, an expanded affiliated group may include an FFI 
that cannot comply with the requirements of a participating FFI if 
certain conditions specified in the regulations are satisfied (limited 
FFI). Another transitional rule allows an FFI to have a branch that 
cannot satisfy all the requirements of a participating FFI if certain 
requirements specified in the regulations are satisfied (limited 
branch).
    Under the 2013 final regulations, the transitional period for 
limited branch or limited FFI status expires on December 31, 2015. In 
Notice 2015-66, the Treasury Department and the IRS announced that this 
transitional period will be extended in order to provide FFIs and other 
stakeholders additional time to determine whether to continue operating 
in jurisdictions where limited branches or limited FFIs exist. 
Accordingly, these final regulations extend the availability of limited 
branch status and limited FFI status until December 31, 2016.
ii. Conditions for Limited Branch and Limited FFI Status
    One of the conditions in the 2013 final regulations for limited FFI 
or limited branch status is that the FFI or branch agree that it will 
not open accounts that it is required to treat as U.S. accounts or 
accounts held by nonparticipating FFIs, including accounts transferred 
from any member

[[Page 2135]]

of its expanded affiliated group (and, with respect to a limited 
branch, any other branch of the FFI). A comment noted that this 
restriction prevents certain FFIs from agreeing to the conditions of 
limited status. In response to this comment and as previewed in Notice 
2014-33, these final regulations relax this restriction by permitting a 
limited FFI or limited branch to open U.S. accounts for persons 
resident in the same jurisdiction in which the limited FFI is a 
resident or organized, or the limited branch is located or operating, 
and accounts for nonparticipating FFIs that are resident in the same 
jurisdiction, provided that: (1) The limited FFI or limited branch does 
not solicit U.S. accounts or accounts for nonparticipating FFIs from 
persons not resident in the same jurisdiction in which such limited FFI 
is resident or organized or such limited branch is located or 
operating; and (2) the FFI or branch is not used by any FFI in its 
expanded affiliated group to circumvent the obligations of such FFI 
under section 1471.
iii. Conditions for Limited FFI Status--Registration
    A comment stated that certain jurisdictions prohibit FFIs resident 
in, or organized under the laws of, the jurisdiction from registering 
with the IRS for the status of limited FFI. As previewed in Notice 
2015-66, these final regulations provide that a prohibition from 
registration will not prevent an FFI from becoming a limited FFI if 
certain conditions specified in these final regulations are satisfied. 
A member of the FFI's expanded affiliated group that is a U.S. 
financial institution, participating FFI, or reporting Model 1 FFI must 
register on the FATCA registration Web site as a lead FI and identify 
the FFI as a limited FFI. If the limited FFI is prohibited from being 
identified by its legal name on the FATCA registration Web site, the 
lead FI may use the term limited FFI in place of the FFI's name and 
indicate the FFI's jurisdiction of residence or organization. By 
identifying a limited FFI on its FATCA registration as described in the 
preceding sentences, the lead FI is confirming that the limited FFI has 
represented that it will meet the conditions for limited FFI status and 
has agreed to notify the lead FI within 30 days of the date that the 
FFI ceases to meet the requirements of a limited FFI or the date that 
the FFI can comply with the requirements of a participating FFI or 
deemed-compliant FFI (in which case the FFI will separately register 
for that status). If the lead FI receives a notification described in 
the preceding sentence or otherwise knows that the limited FFI has not 
complied with the conditions for limited FFI status or can comply with 
the requirements of a participating FFI or deemed-compliant FFI, these 
final regulations require the lead FI to remove the FFI from its 
registration and maintain a record of the date on which the FFI ceased 
to be a limited FFI and (if applicable) the circumstances of the 
limited FFI's non-compliance, which will be available to the IRS upon 
request.
5. Verification
i. Certification of Compliance--In General
    The 2013 final regulations provide that the responsible officer of 
a participating FFI must submit the certification of compliance 
required in Sec.  1.1471-4(f)(3) to the IRS six months following the 
end of each certification period. As previewed in Notice 2016-08, to 
conform the time for submitting the certification of compliance to the 
time specified in the FFI agreement, these final regulations provide 
that the certification of compliance must be submitted on or before 
July 1 of the calendar year following the end of each certification 
period. The IRS intends to publish instructions for making this 
certification, which will require an FFI to complete and submit the 
certification electronically through the FATCA registration Web site. 
Accordingly, these final regulations specify that a responsible officer 
of a participating FFI must make a certification of effective internal 
controls or qualified certification on the form and in the manner 
prescribed by the IRS.
    In addition, Sec.  1.1471-4(f)(3)(i) states that if the 
participating FFI has failed to remediate any material failures as of 
the date of the certification, the FFI must make the qualified 
certification described in Sec.  1.1471-4(f)(3)(iii). However, Sec.  
1.1471-4(f)(3)(iii) provides that the responsible officer must make the 
qualified certification if it has identified either an event of default 
or a material failure that the participating FFI has not corrected as 
of the date of the certification. These final regulations conform these 
sections by modifying Sec.  1.1471-4(f)(3)(i) so that a qualified 
certification must be made if the FFI has identified an event of 
default (in addition to a material failure) that has not been corrected 
as of the date of the certification.
ii. IRS Review of Compliance--General Inquiries
    The 2014 temporary regulations provide that the IRS, based upon the 
information reporting forms described in Sec.  1.1471-4(d)(3)(v), 
(d)(5)(vii), or (d)(6)(iv) (Form 8966 or Form 1099) filed with the IRS 
for each calendar year, may request additional information with respect 
to the information reported on the forms or may request the account 
statements described in Sec.  1.1471-4(d)(4)(v). The 2014 temporary 
regulations are silent on whether the IRS can request such information 
if the FFI does not file information reporting forms for the calendar 
year.
    As described in the preamble to the 2014 temporary regulations, the 
2014 temporary regulations add a second sentence to Sec.  1.1471-
4T(f)(4)(i) to ``further allow the IRS to request additional 
information to determine an FFI's compliance with the applicable FFI 
agreement.'' The Treasury Department and the IRS did not intend for the 
2014 temporary regulations to be limited such that the IRS cannot 
request information if the FFI fails to file the specified information 
reporting forms. Thus, these final regulations clarify that IRS 
requests for additional information under Sec.  1.1471-4(f)(4)(i) may 
be based on the absence of any information reporting forms filed by the 
FFI with the IRS for the calendar year, and that the IRS may request 
additional information with respect to the information reported or 
required to be reported, including confirmation that the FFI has no 
reporting requirements.

E. Comments and Changes to Sec.  1.1471-5--Definitions Applicable to 
Section 1471

1. Definition of U.S. Account
    Comments requested that the definition of a U.S. account exclude 
accounts held by U.S. individuals resident in the same jurisdiction as 
the FFI with which the account is held. This comment is not adopted. 
The U.S. federal income tax system largely relies on voluntary 
compliance, and third party information reporting of the financial 
accounts of U.S. taxpayers is used to encourage voluntary compliance. 
For this reason, U.S. financial institutions are generally required to 
report under chapter 61 U.S. and foreign source investment income paid 
to account holders that are U.S. individuals. However, before FATCA, 
FFIs (in particular, non-U.S. payors) generally were not required to 
report foreign source payments made to U.S. taxpayers. The information 
reporting required by FATCA is intended to address the use of foreign 
accounts to facilitate tax evasion, and also to strengthen the 
integrity of the voluntary

[[Page 2136]]

compliance system by placing U.S. taxpayers with accounts held with 
FFIs in a comparable position to U.S. taxpayers with accounts held with 
U.S. financial institutions. This is the case even for U.S. taxpayers 
resident abroad, since U.S. citizens and U.S. resident aliens are 
subject to U.S. income tax on their worldwide income regardless of 
where they reside and regardless of whether their accounts are 
maintained by U.S. financial institutions or FFIs. The Treasury 
Department and the IRS have also decided that the risk of U.S. tax 
avoidance by a U.S. taxpayer holding an account with an FFI exists 
regardless of whether the U.S. taxpayer holds an account in his or her 
foreign country of residence or another foreign country.
2. Definition of FFI
    Under the 2013 final regulations, FFI means, with respect to any 
entity that is not resident in a country that has in effect a Model 1 
IGA or Model 2 IGA, any financial institution that is a foreign entity; 
and, with respect to any entity that is resident in a country that has 
in effect a Model 1 IGA or Model 2 IGA, FFI means any entity that is 
treated as a financial institution pursuant to such IGA. Because some 
IGAs use an organizational test, rather than a residence test, to 
determine whether a financial institution is covered by the IGA, these 
final regulations modify the definition of FFI to refer to an entity 
that is (or is not) resident in, or organized under the laws of, as 
applicable, a country that has in effect an IGA. In addition, with 
respect to an entity resident in a country that has in effect a Model 1 
or Model 2 IGA, these final regulations modify the definition of FFI to 
mean an entity that is treated as a FATCA Partner Financial Institution 
under the IGA, not any entity that is treated as a financial 
institution under the IGA, because the term financial institution in 
the IGAs includes a U.S. financial institution. Finally, these final 
regulations cross-reference Sec.  1.1471-2(a)(2)(v) for when a foreign 
branch of a U.S. financial institution is an FFI. See section I.B.1 of 
this Summary of Comments and Explanation of Revisions and Provisions 
for an explanation of the changes to Sec.  1.1471-2(a)(2)(v).
3. Definition of Financial Institution
i. Exclusions--Excepted Nonfinancial Group Entities--In General
    One of the requirements for an excepted nonfinancial group entity 
is that the entity cannot be formed in connection with or availed of by 
certain arrangements or investment vehicles. The 2014 temporary 
regulations provide that an entity will not be considered to have been 
formed in connection with or availed of by an arrangement or investment 
vehicle if the entity existed at least six months prior to its 
acquisition by the arrangement or investment vehicle and, prior to the 
acquisition, regularly conducted activities in the ordinary course of 
business. A comment noted that the phrase ``ordinary course of 
business'' is unclear with respect to a holding company, captive 
finance company, or treasury center. In response to the comment, these 
final regulations clarify the 2014 temporary regulations by cross-
referencing Sec.  1.1471-5(e)(5)(i)(C), (D), or (E) (as applicable) to 
describe the activities of a holding company, captive finance company, 
or treasury center.
ii. Exclusions--Excepted Nonfinancial Group Entities--Nonfinancial 
Group
    A comment noted that the treatment of receivables related to 
financing to customers as passive assets makes it difficult for an 
expanded affiliated group to qualify as a nonfinancial group, even if 
the receivables are originated by a captive finance company in the 
expanded affiliated group. The Treasury Department and the IRS believe 
that certain receivables related to financing to customers should not 
make a group ineligible to qualify as a nonfinancial group because 
customer financing is common in some nonfinancial businesses and is not 
necessarily indicative of a financial business. Further, customer 
financing is a permissible activity for a captive finance company, but 
status as a captive finance company is only relevant for qualifying as 
a nonfinancial group entity. Therefore, these final regulations exclude 
from the passive income and asset tests in Sec.  1.1471-
5(e)(5)(i)(B)(1) receivables that are notes issued by customers to a 
member of the expanded affiliated group that is a captive finance 
company to finance the customer's purchase of inventory or goods 
manufactured by a member of the expanded affiliated group.
    A comment noted that it is difficult for a nonfinancial group 
operating on a non-calendar fiscal year basis to measure its income and 
assets on a calendar year basis in order to determine whether it meets 
the income and asset tests in Sec.  1.1471-5(e)(5)(i)(B)(1). In 
response to the comment, these final regulations provide that the 
income and asset tests should be performed for the three-year period 
(or the period during which the expanded affiliated group has been in 
existence, if shorter) ending December 31 (or the end of the fiscal 
year of one or more members of the group) of the year preceding the 
year in which the determination is made.
    A comment requested elimination of the requirement that each FFI in 
a nonfinancial group be a participating FFI or deemed-compliant FFI. 
The Treasury Department and the IRS believe that a limitation on the 
types of FFIs that can be members of nonfinancial groups is necessary 
to prevent an excepted nonfinancial group entity from acting as a 
``blocker'' for a nonparticipating FFI. The Treasury Department and the 
IRS also note that the rules for a participating FFI group similarly 
prohibit nonparticipating FFI members. However, since the 2014 
temporary regulations permit participating FFI groups to include exempt 
beneficial owners (see Sec.  1.1471-4T(e)(1)), these final regulations 
provide the same allowance for exempt beneficial owners to be members 
of nonfinancial groups.
    A comment described situations in which an acquisition of an entity 
by a member of the expanded affiliated group or a change in chapter 4 
status of a member of an expanded affiliated group may disqualify the 
group as a nonfinancial group. The comment requested a grace period for 
certain unintentional disqualifications from nonfinancial group status. 
The Treasury Department and the IRS agree with the comment and have 
determined that the rules for an acquisition or a change in chapter 4 
status of a member of a nonfinancial group should not be stricter than 
those for a participating FFI group. The FFI agreement allows 90 days 
for a lead FI of an FFI group to inform the IRS of an acquisition or 
sale of a member of the FFI group or a change affecting the chapter 4 
status of a member of the group before the acquisition or change 
becomes an event of default. In response to the comment and for 
consistency with the treatment of FFI groups, these final regulations 
provide that a change affecting the chapter 4 status of a member of a 
nonfinancial group, or an acquisition by a member of the expanded 
affiliated group of an FFI that does not have a permissible chapter 4 
status, disqualifies the group as a nonfinancial group 90 days after 
such change or acquisition.
4. Deemed-Compliant FFIs
i. Preexisting Account Certifications by Registered Deemed-Compliant 
FFIs
    The 2013 final regulations require a registered deemed-compliant 
FFI that is a local FFI or restricted fund to make a

[[Page 2137]]

certification to the IRS regarding its review of preexisting accounts 
that it is required to review as a condition of its status as a 
registered deemed-compliant FFI. The certification by a restricted fund 
regarding its preexisting accounts must be completed by the later of 
December 31, 2014, or six months after the date the FFI registers as a 
deemed-compliant FFI, but no due date for the certification of a local 
FFI regarding its preexisting accounts is specified. In Notice 2016-08, 
the Treasury Department and the IRS announced that the due date for the 
preexisting account certifications of restricted funds and local FFIs 
would be modified to on or before July 1 of the calendar year following 
the end of the certification period to provide FFIs with additional 
time to prepare their certifications and to streamline compliance. 
Accordingly, these final regulations provide that a preexisting account 
certification by a local FFI or restricted fund must be submitted by 
the due date of the FFI's first certification of compliance required 
under Sec.  1.1471-5(f)(1)(ii)(B). See section I.E.4.iii of this 
Summary of Comments and Explanation of Revisions and Provisions for the 
timing of certifications of compliance by registered deemed-compliant 
FFIs.
ii. Registered Deemed-Compliant FFIs--Sponsored Investment Entities and 
Controlled Foreign Corporations
    Under the 2013 final regulations, an FFI may not be a sponsored 
investment entity, sponsored controlled foreign corporation, or 
sponsored, closely held investment vehicle if it is a QI, WP, or WT. In 
Notice 2016-42, 2016-29 I.R.B. 67, the Treasury Department and the IRS 
announced that they are considering including in the WP Agreement an 
allowance for consolidated periodic reviews and certifications for WPs 
that are FFIs, similar to the allowance for QIs (see section 10.02(B) 
of the QI Agreement in Revenue Procedure 2014-39, 2014-29 I.R.B. 150 
(as may be amended)). In order to accommodate an allowance for 
consolidated periodic reviews and certifications for WPs, these final 
regulations provide that a WP may be a sponsored investment entity to 
the extent permitted in the WP Agreement if the WP otherwise meets the 
requirements for status as a sponsored investment entity.
    The 2013 final regulations provide that a sponsoring entity of a 
sponsored investment entity or controlled foreign corporation must be 
authorized to act on behalf of the FFI ``to fulfill the requirements of 
the FFI agreement.'' See Sec.  1.1471-5(f)(1)(i)(F)(3)(i). However, the 
2013 final regulations also provide that the sponsoring entity must 
agree to perform, on behalf of the FFI, ``all due diligence, 
withholding, reporting, and other requirements that the FFI would have 
been required to perform if it were a participating FFI.'' See Sec.  
1.1471-5(f)(1)(i)(F)(3)(iv). Because a sponsored FFI does not enter 
into an FFI agreement with the IRS, these final regulations modify 
Sec.  1.1471-5(f)(1)(i)(F)(3)(i) to conform with Sec.  1.1471-
5(f)(1)(i)(F)(3)(iv).
    The preamble to the 2014 temporary regulations states that the 2014 
temporary regulations revise the 2013 final regulations to clarify that 
a sponsoring entity will not be jointly and severally liable for a 
sponsored FFI's withholding and reporting obligations under chapter 4, 
even if the sponsoring entity performs these responsibilities on behalf 
of such FFI, unless the sponsoring entity is also a withholding agent 
that is separately liable for such obligations. The text of the 2014 
temporary regulations, however, inaccurately provides that a sponsoring 
entity of a sponsored FFI will not be liable for any failure to comply 
with the obligations contained in Sec.  1.1471-5(f)(1)(i)(F)(3) or 
(f)(2)(iii)(D) (as applicable) unless the sponsoring entity is a 
withholding agent that is separately liable for the failure to withhold 
on or report with respect to ``a payment made to the sponsored FFI'' 
(emphasis added). In order to correct this inconsistency between the 
preamble and the text of the 2014 temporary regulations, these final 
regulations revise the 2014 temporary regulations to provide that a 
sponsoring entity that is a withholding agent is separately liable for 
the failure to withhold on or report with respect to a payment made by 
the sponsoring entity on behalf of (rather than to) a sponsored FFI. 
This revision does not affect a sponsoring entity's liability as a 
withholding agent for payments unrelated to the sponsoring entity's 
obligations as a sponsoring entity of a sponsored FFI. This change is 
made in Sec.  1.1471-5(f)(1)(i)(F)(5) for sponsoring entities of 
sponsored investment entities and controlled foreign corporations and 
in Sec.  1.1471-5(f)(2)(iii)(E) for sponsoring entities of sponsored, 
closely held investment vehicles.
iii. Registered Deemed-Compliant FFIs--Procedural Requirements for 
Registered Deemed-Compliant FFIs--Certification Requirement
    Under the 2014 temporary regulations, a responsible officer of a 
registered deemed-compliant FFI must periodically certify to the IRS 
that all of the requirements of the deemed-compliant status claimed by 
the FFI have been satisfied since the later of the date that the 
registered deemed-compliant FFI registers, or June 30, 2014. The 2014 
temporary regulations provide that the certification is made every 
three years, but do not specify the date when the certification is due. 
The 2014 temporary regulations also allow a registered deemed-compliant 
FFI to make a certification on behalf of all registered deemed-
compliant FFIs in the same expanded affiliated group.
    As previewed in Notice 2016-08, these final regulations provide 
that a registered deemed-compliant FFI makes its certification on or 
before July 1 of the calendar year following the end of each 
certification period (consistent with the timing for certifications of 
compliance made by participating FFIs included in these final 
regulations). These final regulations also provide that the first 
certification period begins on the later of the date the FFI registers 
as a deemed-compliant FFI and is issued a GIIN, or June 30, 2014, and 
ends on the close of the third full calendar year following this date. 
Each subsequent certification period is the three calendar year period 
following the previous certification period. Under these final 
regulations, the FFI will certify to its compliance with the 
requirements of the deemed-compliant status during the certification 
period (rather than all periods since the later of the date that the 
FFI registers, or June 30, 2014).
    In addition, these final regulations provide that the certification 
of compliance must be made on the form and in the manner prescribed by 
the IRS (consistent with the requirements for certifications of 
compliance by participating FFIs included in these final regulations). 
These final regulations also clarify that if a responsible officer of a 
registered deemed-compliant FFI makes the certification collectively 
for the FFI's expanded affiliated group, the certification must provide 
that all of the requirements for the deemed-compliant status claimed by 
each member of the expanded affiliated group that is a registered 
deemed-compliant FFI (other than a member that is a reporting Model 1 
FFI or deemed-compliant FFI under an applicable Model 1 IGA) have been 
satisfied during the certification period.
iv. Certified Deemed-Compliant FFIs--Sponsored, Closely Held Investment 
Vehicles
    A comment requested a three-year grace period during which a 
sponsored, closely held investment vehicle that becomes noncompliant 
with the requirements of its deemed-compliant status may retain its 
chapter 4 status.

[[Page 2138]]

The Treasury Department and the IRS believe that a bright line rule is 
necessary for enforcement with respect to certified deemed-compliant 
FFIs because these entities do not register or certify directly to the 
IRS regarding their compliance. Further, the Treasury Department and 
the IRS do not believe that the consequences of a termination of 
deemed-compliant status would be unduly burdensome for these entities 
because an FFI that is unable to meet the requirements of a sponsored, 
closely held investment vehicle may nevertheless become compliant with 
chapter 4 and avoid being withheld on by entering into an FFI agreement 
with the IRS. Therefore, this comment is not adopted.
v. Certified Deemed-Compliant FFIs--Limited Life Debt Investment 
Entities (Transitional)
    In response to comments to the 2013 final regulations, the 2014 
temporary regulations include significant revisions to the requirements 
for limited liability debt investment entities (LLDIEs) in order to 
accommodate industry practices and expand the types of securitization 
vehicles that qualify as LLDIEs. Since the 2014 temporary regulations 
were published, the Treasury Department and the IRS have received 
additional comments requesting modifications to the requirements for 
LLDIEs. One comment noted that it is unclear under the laws of certain 
foreign jurisdictions whether a person has authority to fulfill the 
requirements of a participating FFI. The comment requested that an FFI 
be permitted to base the determination of authority solely on whether 
or not the FFI's trust documents contain an explicit reference to the 
obligations of a participating FFI. The Treasury Department and the IRS 
do not believe that this would be an appropriate test because it is 
unlikely that a trust document would have an explicit reference to the 
obligations of a participating FFI prior to 2013, thereby undermining 
the rule.
    The 2014 temporary regulations provide that substantially all of 
the assets of an LLDIE must consist of debt instruments or interests 
therein. The Treasury Department and the IRS received comments that 
borrowers on a debt instrument held by the LLDIE may encounter 
financial trouble such that the lender may foreclose or restructure the 
debt or the borrower may enter bankruptcy proceedings. Under these 
circumstances, the LLDIE may hold non-debt assets, such as equity or 
real estate, that may represent a significant portion of the LLDIE's 
assets during the wind down period. The comments requested that ``debt 
instruments or interests therein'' include equity or other non-debt 
assets acquired upon a foreclosure or restructuring of the debt. The 
Treasury Department and the IRS agree that an entity should not lose 
its status as an LLDIE because it holds certain non-debt assets as a 
result of foreclosures or restructurings. Therefore, these final 
regulations revise the 2014 temporary regulations to provide that debt 
instruments or interests therein include assets acquired pursuant to a 
restructuring, workout, or similar event with respect to a debt 
instrument.
vi. Certified Deemed-Compliant FFIs--Investment Advisors and Investment 
Managers
    The 2014 temporary regulations added a category of certified 
deemed-compliant FFI for certain investment entities described in Sec.  
1.1471-5(e)(4)(i)(A) that do not maintain financial accounts under the 
heading ``Investment advisors and investment managers.'' A comment 
noted that an investment entity may meet the substantive requirements 
of this category even if it is not an investment advisor or investment 
manager. The Treasury Department and the IRS agree with the comment 
that the rule in the 2014 temporary regulations is not limited to 
investment entities that are investment advisors or investment 
managers. For clarity and in response to this comment, these final 
regulations change the heading of Sec.  1.1471-5(f)(2)(v) to ``Certain 
investment entities that do not maintain financial accounts.''

F. Comments and Changes to Sec.  1.1472-1--Withholding on NFFEs

1. In General
    Under Sec.  1.1471-2(a)(3), participating FFIs that comply with the 
withholding requirements of Sec.  1.1471-4(b), exempt beneficial 
owners, section 501(c) entities described in Sec.  1.1471-5(e)(5)(v), 
and nonprofit organizations described in Sec.  1.1471-5(e)(5)(vi) are 
deemed to satisfy their withholding obligations under section 1471(a) 
and Sec.  1.1471-2. However, under Sec.  1.1472-1(a), only 
participating FFIs are deemed to satisfy their withholding obligations 
under section 1472(a). These final regulations revise Sec.  1.1472-1(a) 
to add exempt beneficial owners, section 501(c) entities described in 
Sec.  1.1471-5(e)(5)(v), and nonprofit organizations to coordinate with 
Sec.  1.1471-2(a)(3). In addition, these final regulations cross-
reference Sec.  1.1471-5(f) for when deemed-compliant FFIs are deemed 
to satisfy their withholding obligations under section 1472(a) with 
respect to withholdable payments to account holders that are NFFEs.

2. Exceptions--Beneficial Owner That Is an Excepted NFFE

    A comment requested an exception from withholding on withholdable 
payments that are property and casualty insurance premiums made to 
``hedge fund reinsurance companies.'' According to the comment, such 
companies generally would not have any substantial U.S. owners because 
they do not allow a U.S. person to hold 10 percent or more of the 
voting stock in order prevent the company from being a controlled 
foreign corporation. The comment assumes that the entity is a NFFE but 
does not analyze the issue of whether the entity is properly 
characterized as an FFI or NFFE. Under Sec.  1.1471-5(e)(4)(i)(C), an 
entity that functions or holds itself out as a hedge fund is an FFI. As 
an FFI, a hedge fund that has agreed to the terms of the FFI agreement 
would be required to report U.S. accounts, which are not limited to 
U.S. persons that hold 10 percent or more of the fund and would 
generally include any specified U.S. person that owns, directly or 
indirectly, more than zero percent of the investment entity. In the 
case of an insurance company that is a passive NFFE, it may elect to be 
a direct reporting NFFE and report any substantial U.S. owners (which 
are defined as specified U.S. persons that hold 10 percent of the stock 
by vote or value) to the IRS if the NFFE does not wish to disclose its 
substantial U.S. owners to a withholding agent. In addition, if a 
passive NFFE has no substantial U.S. owners, it may certify that to a 
withholding agent to avoid withholding on withholdable payments. The 
Treasury Department and the IRS believe that the chapter 4 regulations 
already mitigate any burden imposed by FATCA on passive NFFEs by 
providing an exception for direct reporting NFFEs. Therefore, these 
final regulations do not adopt this comment.
3. Exceptions--Beneficial Owner That Is an Excepted NFFE--Active NFFE
    Under the 2014 temporary regulations, a NFFE satisfies the asset 
test to be an active NFFE if less than 50 percent of the weighted 
average percentage of assets (tested quarterly) held by the NFFE are 
assets that produce or are held for the production of passive income, 
as determined after the application of Sec.  1.1472-1(c)(1)(iv)(B). To 
remove ambiguity, these final regulations clarify that a NFFE satisfies 
the asset test if the

[[Page 2139]]

weighted average of the percentage of assets held by it that produce or 
are held for the production of passive income (weighted by total assets 
and measured quarterly) is less than 50 percent, as determined after 
the application of Sec.  1.1472-1(c)(1)(iv)(B). These final regulations 
also clarify that the asset test is applied to the prior calendar or 
fiscal year. Finally, these final regulations permit a NFFE to 
calculate its passive assets using any accounting period permitted 
under Sec.  1.1472-1(c)(1)(iv)(C), provided the NFFE applies a uniform 
method of measuring assets for the year.
4. Exceptions--Definition of Direct Reporting NFFE
    Under the 2014 temporary regulations, a direct reporting NFFE must 
make a periodic certification to the IRS regarding its compliance with 
the requirements of a direct reporting NFFE within each six month 
period following the end of each certification period. The 2014 
temporary regulations provide that the first certification period 
begins on the date a GIIN is issued to the NFFE. To account for GIINs 
issued before the implementation of FATCA, and for consistency with 
certifications by other entities, these final regulations amend the 
date that the first certification period begins for a direct reporting 
NFFE to the later of the date a GIIN is issued to the NFFE, or June 30, 
2014. These final regulations also require that the NFFE make the 
periodic certification on the form and in the manner prescribed by the 
IRS (consistent with other certifications of compliance included in 
these final regulations). Finally, these final regulations provide that 
the certification will be due on or before July 1 of the calendar year 
following the end of each certification period to conform to the due 
dates for the certifications of compliance by participating FFIs and 
registered deemed-compliant FFIs included in these final regulations.
5. Exceptions--Election To Be Treated as a Direct Reporting NFFE--
Revocation of Election
    Under the 2014 temporary regulations, a NFFE can elect to be 
treated as a direct reporting NFFE by registering with the IRS on Form 
8957, ``Foreign Account Tax Compliance Act (FATCA) Registration,'' or 
the FATCA registration Web site. The 2014 temporary regulations provide 
that this election can only be revoked if the NFFE obtains consent from 
the Commissioner and, upon revocation, the NFFE must notify its 
sponsoring entity (for a NFFE that is a sponsored direct reporting 
NFFE) and all relevant withholding agents of the revocation. The 2014 
temporary regulations also provide that the IRS may revoke the direct 
reporting status of a NFFE upon an event of default.
    The Treasury Department and the IRS have determined that the 
requirement for a direct reporting NFFE to obtain consent to revoke its 
direct reporting NFFE status is unnecessary. Therefore, these final 
regulations remove this requirement and provide that a direct reporting 
NFFE may revoke its election by canceling its registration account on 
the FATCA registration Web site and by notifying the IRS in such manner 
as the IRS may prescribe in the Instructions for Form 8966. Further, 
these final regulations amend the notification requirements in the 2014 
temporary regulations to require a NFFE to send notification within 30 
days of the revocation to each financial institution (in addition to 
each withholding agent) from which it receives payments or with which 
it holds an account for which the NFFE provided a withholding 
certificate or written statement representing its status as a direct 
reporting NFFE. This amendment reflects that a NFFE may have provided 
documentation of its status to a financial institution that is not a 
withholding agent, and that in certain cases a NFFE is permitted to 
provide a written statement (rather than a withholding certificate).

G. Comments and Changes to Sec.  1.1473-1--Section 1473 Definitions

1. Definition of Withholdable Payment--In General
    Under the 2013 final regulations, the term withholdable payment 
means any payment of U.S. source fixed or determinable annual or 
periodical (FDAP) income, and for sales or other dispositions occurring 
after December 31, 2016, any gross proceeds from the sale or other 
disposition of any property of a type that can produce interest or 
dividends that are U.S. source FDAP income. After the publication of 
the 2013 final regulations, a comment stated that additional time is 
needed to implement withholding on gross proceeds. As announced in 
Notice 2015-66, these final regulations modify the definition of 
withholdable payment to include, for sales or other dispositions 
occurring after December 31, 2018, any gross proceeds from the sale or 
other disposition of any property of a type that can produce interest 
or dividends that are U.S. source FDAP income.
2. Definition of Withholdable Payment--Payments Not Treated as 
Withholdable Payments--Offshore Payments of U.S. Source FDAP Income 
Prior to 2017 (Transitional)
    The 2013 final regulations under section 1473 provide an exclusion 
from the definition of withholdable payments for certain non-
intermediated offshore payments of U.S. source FDAP income made prior 
to January 1, 2017. Under the 2014 temporary regulations, this 
transitional rule was expanded to apply to a non-U.S. insurance broker 
that pays insurance and reinsurance premiums to a foreign insurance or 
reinsurance company. Comments requested that the transitional rule for 
offshore payments made by non-U.S. insurance brokers be extended for 
another year to allow non-U.S. brokers additional time to develop 
withholding and information reporting systems. A comment requesting 
further guidance about the sourcing of premiums was also submitted.
    Withholding under chapter 4 is intended to incentivize foreign 
entities to report certain information about U.S. persons that make use 
of offshore accounts or passive NFFEs. The preamble to the 2013 final 
chapter 4 regulations stated that ``[t]his information reporting 
strengthens the integrity of the U.S. voluntary tax compliance system 
by placing U.S. taxpayers that have access to international investment 
opportunities on an equal footing with U.S. taxpayers that do not have 
such access or otherwise choose to invest within the United States.'' 
78 FR 5874. Withholding under chapter 4 is broad and may apply whenever 
a withholding agent, whether U.S. or foreign, makes a withholdable 
payment to ensure that the information reporting objectives of chapter 
4 are met. As a result, chapter 4 withholding under sections 1471 and 
1472 may apply to a withholdable payment made by a non-U.S. payor to a 
foreign payee. Consistent with these information reporting objectives 
of chapter 4, a passive NFFE may avoid being subject to withholding 
under chapter 4 by furnishing the documentation described in Sec.  
1.1471-3(d)(12) to its withholding agent or by electing to be treated 
as a direct reporting NFFE and providing information directly to the 
IRS.
    The Treasury Department and the IRS have not accepted the comment 
to extend further the offshore payment transition rule to exclude from 
the definition of withholdable payments insurance and reinsurance 
premiums that are U.S. source FDAP income and paid by a non-U.S. broker 
to a foreign

[[Page 2140]]

insurance or reinsurance company. A privately-held foreign insurance or 
reinsurance company is treated as a passive NFFE that is required to 
report information about its substantial U.S. owners, or to certify 
that it does not have any such owners, in order to avoid chapter 4 
withholding on withholdable payments. The Treasury Department and the 
IRS have not excluded privately-held insurance or reinsurance companies 
from treatment as passive NFFEs because of concerns that these entities 
may be used to avoid U.S. taxation. Treating U.S. source premiums paid 
with respect to an insurance or reinsurance contract as withholdable 
payments will help to ensure that the IRS receives information about 
the substantial U.S. owners, if any, of these insurance or reinsurance 
companies, which will strengthen IRS enforcement efforts with respect 
to the use of foreign insurance and reinsurance companies for tax 
avoidance. These requirements were promulgated in the 2013 final 
regulations published on January 28, 2013, which provided a generous 
transition period to allow for the development of systems necessary to 
implement the regulations. Furthermore, because the transitional 
offshore payment rule does not apply to U.S. brokers that pay insurance 
and reinsurance premiums to a foreign company, the expiration of the 
transition rule will ensure equivalent treatment of withholdable 
payments made by either a U.S. or non-U.S. broker to a foreign 
insurance or reinsurance company and consistent documentation and 
information reporting requirements under chapter 4 for all withholding 
agents. In addition, the Treasury Department and the IRS believe that 
guidance on sourcing rules for premiums is beyond the scope of chapter 
4. The question of how insurance and reinsurance premiums are sourced 
is not unique to FATCA and the determination may need to be made for 
other purposes under the Code (for example, for purposes of determining 
the limitation on foreign tax credits under section 904).
    From a policy perspective, the question of whether a foreign 
insurance or reinsurance company is a passive foreign investment 
company within the meaning of section 1297 is similar to the question 
of whether the foreign insurance or reinsurance company is a passive 
NFFE. On April 24, 2015, the Treasury Department and the IRS published 
proposed regulations (REG-108214-15) in the Federal Register (80 FR 
22954) regarding when a foreign insurance company's income is excluded 
under section 1297(b)(2)(B) from the definition of passive income for 
purposes of the passive foreign investment company rules. The Treasury 
Department and the IRS continue to study these issues. If the Treasury 
Department and the IRS issue final regulations addressing the issues 
raised by those proposed regulations, it is possible that the scope of 
foreign insurance or reinsurance companies treated as passive NFFEs may 
be modified or potentially conformed to the scope of foreign insurance 
companies treated as passive foreign investment companies under such 
final regulations.

H. Comments and Changes to Sec.  1.1474-1--Liability for Withheld Tax 
and Withholding Agent Reporting

1. Payments and Returns of Tax Withheld--Use of Agents--Authorized 
Agent
    Under the 2013 final regulations, a withholding agent must file 
Form 8655, ``Reporting Agent Authorization,'' with the IRS if it 
appoints an agent to act as its reporting agent for filing Form 1042 or 
making tax deposits and payments with respect to Form 1042. A comment 
suggested that Form 8655 should only be required to be filed when an 
agent files a Form 1042 in its own name (and under its own EIN) on 
behalf of another withholding agent. In response to the comment, these 
final regulations amend the 2013 final regulations to provide that a 
withholding agent must file Form 8655 only when its agent files a Form 
1042 as the filer on behalf of the withholding agent. This revision is 
also included in final regulations under chapter 3 that are published 
elsewhere in this issue of the Federal Register.
2. Information Returns for Payment Reporting--Filing Requirement--In 
General
    The 2014 temporary regulations require withholding agents to file 
Form 1042-S, ``Foreign Person's U.S. Source Income Subject to 
Withholding,'' to report a chapter 4 reportable amount and to furnish a 
copy of the form to the recipient and any intermediary or flow-through 
entity. The chapter 3 regulations include a similar filing requirement 
for amounts subject to reporting under chapter 3. The Treasury 
Department and the IRS have determined that withholding agents should 
be permitted to send Forms 1042-S to recipients electronically for 
purposes of both chapters 3 and 4 if certain requirements are met. 
These final regulations allow electronic recipient copies of Form 1042-
S for chapter 4 purposes by cross-referencing Sec.  1.1461-
1(c)(1)(i)(A) (added in regulations published elsewhere in this issue 
of the Federal Register).
3. Additional Reporting Requirements With Respect to U.S. Owned Foreign 
Entities and Owner-Documented FFIs--Reporting by Certain Withholding 
Agents With Respect to Owner-Documented FFIs
    The 2014 temporary regulations require reporting by a withholding 
agent that makes a withholdable payment to an FFI that it treats as an 
owner-documented FFI, regardless of whether the owner-documented FFI is 
reported by another FFI or withholding agent under Sec.  1.1471-4(d) or 
Sec.  1.1474-1(i)(1). These final regulations relieve a withholding 
agent of this reporting when: (1) The withholding agent obtains from a 
participating FFI or reporting Model 1 FFI receiving a withholdable 
payment allocable to the owner-documented FFI a certification that the 
FFI is reporting for the year of the payment to the IRS all of the 
information described in Sec.  1.1471-4(d) or Sec.  1.1474-1T(i)(1) (as 
appropriate); and (2) the withholding agent does not know or have 
reason to know that the certification is incorrect or unreliable. These 
final regulations also amend the requirements for an FFI withholding 
statement to permit an FFI to include the certification described in 
the preceding sentence on the FFI's withholding statement.
    Finally, the 2014 temporary regulations do not allow a withholding 
agent reporting under Sec.  1.1474-1T(i)(1) on an owner-documented FFI 
to request an extension of time to file Form 8966. However, an FFI that 
otherwise qualifies to be an owner-documented FFI but instead reports 
its accounts as a participating FFI on Form 8966 would be eligible for 
the extensions of time to file Form 8966 provided in Sec.  1.1471-
4(d)(3)(vii). In order to allow a withholding agent the same period of 
time to report the accounts of an owner-documented FFI as the FFI could 
have if it performed its own reporting, these final regulations provide 
that such withholding agent may request an automatic 90-day extension 
of time to file Form 8966 and, under certain hardship conditions, an 
additional 90-day extension.

[[Page 2141]]

4. Additional Reporting Requirements With Respect to U.S. Owned Foreign 
Entities and Owner-Documented FFIs--Reporting by Certain Withholding 
Agents With Respect to U.S. Owned Foreign Entities That Are NFFEs
    The 2014 temporary regulations require reporting on Form 8966 by a 
withholding agent of information about any substantial U.S. owners of a 
passive NFFE to which the withholding agent makes a withholdable 
payment, and require this reporting regardless of whether the passive 
NFFE is reported by a participating FFI as a U.S. account or by a 
reporting Model 1 FFI as a U.S. reportable account under an applicable 
IGA. To eliminate duplicative reporting of U.S. owners, these final 
regulations relieve a withholding agent of reporting with respect to a 
passive NFFE with one or more substantial U.S. owners if: (1) The NFFE 
is an account holder of a participating FFI or a registered deemed-
compliant FFI; (2) the withholding agent obtains the certification 
described in Sec.  1.1471-3(c)(3)(iii)(B)(2)(iv) (added by these final 
regulations) that the FFI receiving the payment is reporting for the 
year of the payment a passive NFFE with one or more substantial U.S. 
owners (or, with respect to a reporting Model 1 FFI or reporting Model 
2 FFI, one or more controlling persons that are specified U.S. persons, 
as defined in the applicable IGA) as a U.S. account (other than a non-
consenting U.S. account or an account held by a recalcitrant account 
holder) or U.S. reportable account (as applicable); and (3) the 
withholding agent does not know or have reason to know that the 
certificate is unreliable or incorrect. These final regulations also 
modify the requirements for an FFI withholding statement to provide 
that the statement may include the FFI's certification described in the 
preceding sentence. These modifications were previewed in the preamble 
to the FFI agreement in Revenue Procedure 2014-38.
    The 2014 temporary regulations do not provide an exception for 
intermediaries and flow-through entities receiving a payment for a 
passive NFFE with one or more substantial U.S. owners that are not 
required to report under Sec.  1.1471-4(d) or an applicable IGA, even 
though reporting by those entities duplicates the reporting required of 
the withholding agent under Sec.  1.1474-1(i)(2). To eliminate this 
duplicative reporting, these final regulations provide that an entity 
not subject to any other coordination rule in Sec.  1.1474-1(i)(2) 
(including as described in the preceding paragraph) that is a flow-
through entity or an entity acting as an intermediary for a 
withholdable payment allocable to a passive NFFE is not required report 
on the substantial U.S. owners of the passive NFFE under Sec.  1.1474-
1(i)(2) if: (1) The entity provides to the withholding agent from which 
it receives the payment documentation with respect to the passive 
NFFE's substantial U.S. owners sufficient for the withholding agent to 
report this information under Sec.  1.1474-1(i)(2); and (2) the 
intermediary or flow-through entity does not know or have reason to 
know that the withholding agent does not report this information.

I. Comments and Changes to Sec.  301.1474-1--Required Use of Magnetic 
Media for Financial Institutions Filing Form 1042-S or Form 8966--
Failure To File

    The 2013 final regulations provide that a failure by a financial 
institution to file Form 1042-S or Form 8966 electronically is a 
failure to comply with the information reporting requirements under 
section 6723. However, section 6723 applies only to a ``specified 
information reporting requirement,'' which does not include Form 1042-S 
or Form 8966. See section 6724(d)(3). The correct citation is section 
6721, which provides penalties applicable to an ``information return,'' 
which is defined in section 6724(d)(1) to include any form, statement, 
or schedule required to be filed under chapter 4. Therefore, these 
final regulations correct the 2013 final regulations to cross-reference 
section 6721 rather than section 6723.

J. Nonsubstantive Clarifications and Corrections

    These final regulations include various nonsubstantive 
clarifications and corrections to the 2013 final regulations and the 
2014 temporary regulations.
    Erroneous cross-references are corrected in Sec. Sec.  1.1471-
2(a)(4)(iii), 1.1471-3(c)(6)(ii)(C)(2)(x), 1.1471-4(c)(2)(v), 1.1471-
4(d)(9) Examples 1 and 2, 1.1471-4(e)(4), 1.1471-5(f)(1)(i)(D)(8), 
1.1471-5(f)(2), 1.1471-5(f)(2)(iii)(E), and 1.1474-1(d)(3)(vii). In the 
first sentence of Sec.  1.1471-3(c)(8)(iii), ``consolidated accounts'' 
is changed to ``consolidated obligations'' to use the correct defined 
term, and in the last sentence of Sec.  1.1471-2(a)(2)(ii), ``QI 
withholding agreement'' is changed to ``QI agreement'' to use the 
defined term. These final regulations also revise the description of 
the U.S. payee pool in Sec.  1.1471-3(c)(3)(iii)(B)(2)(ii) to align 
with the limitations on the use of this pool in regulations under 
chapter 61 (see Sec.  1.6049-4(c)(4)(ii)). Additionally, the heading of 
Sec.  1.1471-3(d)(11)(x) is revised to clarify that the documentation 
rules in that section do not apply to sponsored direct reporting NFFEs.
    These final regulations revise Sec.  1.1471-4(a)(4), which provides 
rules concerning expanded affiliated groups, to conform to the 
revisions to Sec.  1.1471-4T(e)(1) in the 2014 temporary regulations, 
which allow exempt beneficial owners and certified deemed-compliant 
FFIs to be members of an expanded affiliated group that includes a 
participating FFI. These final regulations also modify references to 
territory financial institutions acting as intermediaries in Sec.  
1.1471-4(d)(2)(ii)(B) to refer to both territory financial institutions 
acting as intermediaries and territory financial institutions that are 
flow-through entities, because the rules described in these sections 
apply to both types of territory financial institutions. In Sec.  
1.1471-4(d)(3)(vii) and (d)(6)(vi), references to Form 8809 are revised 
because the IRS created a new form (Form 8809-I, ``Application for 
Extension of Time to File FATCA Form 8966'') for applications for 
extensions of time to file Form 8966.
    The 2013 final regulations are inconsistent when describing the 
specified U.S. persons that a participating FFI is required to report 
with respect to an owner-documented FFI. Under Sec.  1.1471-
4(d)(2)(ii)(D), a participating FFI is required to report the 
information described in Sec.  1.1471-4(d)(3)(iv) or (d)(5)(iii) with 
respect to each specified U.S. person identified in Sec.  1.1471-
3(d)(6)(iv)(A)(1). However, Sec.  1.1471-4(d)(3)(iv)(B) and 
(d)(5)(iii)(B) provide that the participating FFI reports the name, 
address, and TIN of each specified U.S. person identified in Sec.  
1.1471-3(d)(6)(iv)(A)(1) and (2). These final regulations clarify the 
2013 final regulations and correct the inconsistency by adding a cross-
reference to Sec.  1.1471-3(d)(6)(iv)(A)(2) in Sec.  1.1471-4(d)(2)(ii) 
for the specified U.S. persons that the participating FFI must report. 
Finally, these final regulations revise the definition of chapter 4 
reportable amount to coordinate with Sec.  1.1474-
1(d)(1)(ii)(A)(1)(xi), which provides that a recipient for purposes of 
reporting on Form 1042-S includes a person or U.S. branch receiving 
income that is effectively connected with a U.S. trade or business. 
Under these final regulations, a chapter 4 reportable amount includes 
an amount that would be a withholdable payment but for the fact that 
the payment is income effectively connected with a U.S. trade or 
business (as described in Sec.  1.1473-1(a)(4)(ii)).

[[Page 2142]]

II. Temporary Regulations

A. In General

    In response to comments and after further consideration, this 
document includes temporary regulations that revise or clarify certain 
sections of the 2013 final regulations. The following portions of this 
preamble provide a discussion of the additions and modifications made 
by these temporary regulations to the 2013 final regulations.

B. Comments and Changes to Sec.  1.1471-1--Scope of Chapter 4 and 
Definitions--Permanent Residence Address

    The 2013 final regulations provide that an address that is provided 
subject to an instruction to hold all mail to that address is not a 
permanent residence address. The temporary coordination regulations 
apply this rule to chapter 3. A comment noted that some withholding 
agents interpret this provision to mean that a payee that provides an 
address subject to a hold mail instruction cannot generally establish 
non-U.S. status (because, for example, a Form W-8BEN requires a 
permanent residence address). The Treasury Department and the IRS agree 
with this interpretation but did not intend for an account to be 
treated as undocumented if there is a permanent residence address with 
a hold mail instruction. In regulations published elsewhere in this 
issue of the Federal Register, the temporary coordination regulations 
are modified to provide that an address that is subject to a hold mail 
instruction can be relied upon as a permanent residence address if the 
account holder provides documentary evidence establishing residence in 
the country where the account holder is claiming to be a resident. 
These temporary regulations incorporate this rule by revising the 
definition of permanent residence address to provide that an address 
that is subject to a hold mail instruction can be used to the extent 
accompanied by documentary evidence described in Sec.  1.1441-
1(c)(38)(ii) supporting the claim of foreign status.

C. Comments and Changes to Sec.  1.1471-3--Identification of Payee

1. Rules for Reliably Associating a Payment With a Withholding 
Certificate or Other Appropriate Documentation
i. In General
    The 2013 final regulations provide that a withholding agent may 
reliably associate a withholdable payment with valid documentation 
supporting a payee's chapter 4 status if the documentation is obtained 
``either directly or through an agent.'' See Sec.  1.1471-3(c)(1). The 
2013 final regulations further provide that such documentation must be 
``provided by a payee.'' Id. For chapter 3 purposes, a withholding 
agent can reliably associate a payment with a Form W-8BEN that is 
``furnished by'' the beneficial owner. See Sec.  1.1441-
1(e)(1)(ii)(A)(1). A comment noted that it is unclear whether the 
chapter 3 regulations and chapter 4 regulations permit a withholding 
agent to rely on a withholding certificate provided by a payee or 
beneficial owner to a repository that houses these forms for access by 
withholding agents (a third party repository).
    In consideration of this comment, the temporary coordination 
regulations are revised in regulations published elsewhere in this 
issue of the Federal Register to permit a withholding agent to rely on 
withholding certificates housed by a third party repository when 
certain requirements are met. Consistently, these temporary regulations 
clarify that, in general, a withholding agent must obtain documentation 
``either directly from the payee or through its agent.'' These 
temporary regulations also provide that a withholding certificate will 
be considered provided by a payee if a withholding agent obtains the 
certificate from a third party repository (rather than directly from 
the payee or through its agent) and the requirements in Sec.  1.1441-
1(e)(4)(iv)(E) are satisfied. A withholding certificate obtained from a 
third party repository must be reviewed by the withholding agent in the 
same manner as any other documentation to determine whether it may be 
relied upon for chapter 4 purposes.
    The 2014 temporary regulations and the temporary coordination 
regulations do not permit a withholding agent to accept Forms W-8 with 
an electronic signature, other than Forms W-8 electronically 
transmitted through the withholding agent's electronic system. The 
Treasury Department and the IRS have determined that Forms W-8 received 
by facsimile, email, or from a third party repository may include an 
electronic signature, and that this rule should be consistent in 
chapters 3 and 4. Therefore, the temporary coordination regulations are 
revised in regulations published elsewhere in this issue of the Federal 
Register to permit a withholding agent to accept Forms W-8 with 
electronic signatures provided that the requirements in the temporary 
coordination regulations are met. These temporary regulations 
incorporate this rule into chapter 4 by cross-referencing the amended 
chapter 3 rule.
ii. Requirements for Validity of Certificates--Withholding Certificate 
of an Intermediary, Flow-Through Entity, or U.S. Branch (Form W-8IMY)--
Withholding Statement
    Temporary regulations under chapter 3 that are published elsewhere 
in this issue of the Federal Register include an allowance for a 
withholding agent to accept an alternative withholding statement from a 
nonqualified intermediary that meets the requirements in Sec.  1.1441-
1(e)(3)(iv)(C)(3). To coordinate with chapter 3, these temporary 
regulations provide that a withholding agent making a withholdable 
payment to a nonqualified intermediary for which a withholding 
statement is required for purposes of both chapters 3 and 4 may accept 
a withholding statement that meets the requirements described in Sec.  
1.1441-1(e)(3)(iv)(C)(3).
iii. Applicable Rules for Withholding Certificates, Written Statements, 
and Documentary Evidence--Change in Circumstances
    On July 29, 2016, the Treasury Department and the IRS released 
Announcement 2016-27, 2016-33 I.R.B. 238, which provides that on 
January 1, 2017, the Treasury Department will begin updating the list 
of jurisdictions treated as if they have an IGA in effect to provide 
that certain jurisdictions that have not brought their IGA into force 
will no longer be treated as if they have an IGA in effect. The list of 
jurisdictions treated as if they have an IGA in effect (the ``IGA 
List'') is located at https://www.treasury.gov/resource-center/tax-policy/treaties/Pages/FATCA.aspx. Announcement 2016-27 also provides 
that, in order to provide notice to FFIs, a jurisdiction will not cease 
to be treated as having an IGA in effect until at least 60 days after 
the jurisdiction's status on the IGA List is updated. Under the 2014 
temporary regulations, a change in circumstances includes any change 
that affects a person's chapter 4 status. These temporary regulations 
provide that a withholding agent will have reason to know of a change 
in circumstances with respect to an FFI's chapter 4 status on the date 
that the jurisdiction where the FFI is resident, organized, or located 
ceases to be treated as having an IGA in effect. The rule under Sec.  
1.1471-3(c)(6)(ii)(E)(3) will still apply to allow the withholding 
agent 90 days to cure the change in circumstances.

[[Page 2143]]

iv. Curing Documentation Errors--Documentation Received After the Time 
of Payment
    The 2013 final regulations provide rules for when a withholding 
agent may rely on documentation received after the time of payment to 
establish that no withholding was required under chapter 4 on the 
payment. The temporary coordination regulations provide similar rules 
for establishing that no withholding was required under chapter 3. In 
regulations published elsewhere in this issue of the Federal Register, 
the temporary coordination regulations are revised to include 
additional requirements for documentation obtained after the time of 
payment to establish that the payment is income effectively connected 
with the conduct of a trade or business in the United States. These 
temporary regulations cross-reference the chapter 3 rules for 
additional requirements for reliance on documentation received after 
the time of payment to establish that a payment was income effectively 
connected with the conduct of a U.S. trade or business (and therefore 
is not a withholdable payment).
2. Documentation Requirements To Establish Payee's Chapter 4 Status--
Identification of Owner-Documented FFIs
    Under the 2013 final regulations, an FFI cannot qualify as an 
owner-documented FFI if it is a member of an expanded affiliated group 
with any FFI that is a depository institution, custodial institution, 
or specified insurance company. That is, under the 2013 final 
regulations, all FFIs in the expanded affiliated group must be 
investment entities. The 2013 final regulations further provide that a 
withholding agent cannot act as a designated withholding agent for an 
owner-documented FFI if the withholding agent knows or has reason to 
know that the owner-documented FFI is a member of an expanded 
affiliated group with any FFI other than an FFI that is also treated as 
an owner-documented FFI by the withholding agent. These temporary 
regulations modify the reason to know rule for designated withholding 
agents to conform to the requirements of an owner-documented FFI that 
is a member of an expanded affiliated group. Under these temporary 
regulations, a withholding agent cannot act as a designated withholding 
agent for an owner-documented FFI if the withholding agent knows or has 
reason to know that the owner-documented FFI is a member of an expanded 
affiliated group with any FFI that is a depository institution, 
custodial institution, or specified insurance company,

D. Comments and Changes to Sec.  1.1471-4--FFI Agreement

1. Due Diligence for the Identification and Documentation of Account 
Holders and Payees--Standards of Knowledge--Limits on Reason To Know 
With Respect to Certain Accounts Acquired in a Merger or Bulk 
Acquisition
    The 2013 final regulations provide limitations on the standards of 
knowledge that apply in a merger or bulk acquisition if a participating 
FFI (transferee FFI) acquires the accounts of a participating FFI or 
deemed-compliant FFI (including a U.S. branch of either such FFI) that 
applies the due diligence requirements of Sec.  1.1471-4(c) as a 
condition of its status, or of a U.S. financial institution (transferor 
FI), provided certain requirements are met. One such requirement is 
that a transferor FI that is a branch of a participating FFI or of a 
registered deemed-compliant FFI (other than a U.S. branch that is 
treated as a U.S. person) or that is a deemed-compliant FFI that 
applies the due diligence rules of Sec.  1.1471-4(c) as a condition of 
its status provide a written representation to the transferee FFI 
regarding the transferor FI's application of required due diligence 
procedures. Because this written representation is to be provided by 
all transferor FIs that are FFIs, these temporary regulations provide 
that a transferee FFI must obtain the written representation described 
in Sec.  1.1471-4(c)(2)(ii)(B)(2)(iii) from a transferor FI that is a 
participating FFI or registered deemed-compliant FFI (or a U.S. branch 
of either such entity, excluding a U.S. branch that is treated as a 
U.S. person), or a deemed-compliant FFI that applies the due diligence 
rules of Sec.  1.1471-4(c) as a condition of its status.
2. Account Reporting--Reporting Requirements in General
i. Financial Institution Required To Report an Account--Combined 
Reporting on Form 8966 Following a Merger or Bulk Acquisition of 
Accounts
    The 2014 temporary regulations require a participating FFI to 
report information with respect to U.S. accounts and accounts held by 
owner-documented FFIs maintained at any time during the calendar year. 
A participating FFI is also required to report foreign reportable 
amounts paid to accounts held by nonparticipating FFIs. Comments 
requested guidance on reporting accounts acquired in a merger or bulk 
acquisition on Form 8966. In response to the comment, these temporary 
regulations provide that if a participating FFI (successor) acquires 
accounts of another participating FFI (predecessor) in a merger or bulk 
acquisition of accounts, the successor may assume the predecessor's 
obligations to report the acquired accounts under Sec.  1.1471-4(d) 
with respect to the calendar year of the merger or acquisition 
(acquisition year) provided certain requirements are met. First, the 
successor must acquire substantially all of the accounts maintained by 
the predecessor, or substantially all of the accounts maintained at a 
branch of the predecessor, in a merger or bulk acquisition of accounts. 
Second, the successor must agree to report the acquired accounts for 
the acquisition year on Forms 8966 to the extent required in Sec.  
1.1471-4(d)(3) or (d)(5). Third, the successor may not elect to report 
under section 1471(c)(2) and Sec.  1.1471-4(d)(5) with respect any 
acquired account that is a U.S. account for the acquisition year. 
Fourth, the successor must notify the IRS on the form and in the manner 
prescribed by the IRS that Form 8966 is being filed on a combined 
basis. If the requirements described in this paragraph are not 
satisfied, the predecessor is required to report the acquired accounts 
for the portion of the acquisition that it maintains the accounts 
(marking the accounts as closed), and the successor is required to 
report the acquired accounts for the portion of the acquisition year 
that it maintains the accounts. For the rules for reporting on Forms 
1042-S for chapter 4 purposes following a merger or bulk acquisition, 
see section II.E of this Summary of Comments and Explanation of 
Revisions and Provisions.
ii. Descriptions Applicable to Reporting Requirements of Sec.  1.1471-
4(d)(3)--Payments Made With Respect to an Account--Other Accounts
    Under the 2013 final regulations, a participating FFI reporting an 
account that is a debt or equity interest in the FFI must report the 
gross amounts paid or credited to the account holder during the 
calendar year including payments in redemption (in whole or part) of 
the account. A comment requested clarification of the requirements for 
such reporting by a participating FFI that is a partnership for U.S. 
tax purposes. The comment noted disparities between the amount required 
to be reported by the partnership on Form 8966 and the amount of income 
allocated to the partner by the partnership, including that the 
reporting would overstate the partner's share of

[[Page 2144]]

the partnership's income and would include redemption payments already 
included in a partner's income. The comment also noted that tax return 
information may not be available by the due date for filing Form 8966 
for a partnership that invests in other partnerships and files an 
extension of time for filing Schedules K-1 (which is longer than the 
extension of time for filing Form 8966).
    In response to the comment, these temporary regulations modify the 
account reporting requirements for participating FFIs that are 
partnerships. Under these temporary regulations, a participating FFI 
that is a partnership reporting an account under Sec.  1.1471-4(d)(3) 
must report the partner's distributive share of the partnership's 
income or loss for the calendar year, without regard to whether any 
such amount is distributed to the partner during the year, and any 
guaranteed payments for the use of capital. The amount required to be 
reported with respect to a partner may be determined based on the 
partnership's tax returns or, if the tax returns are unavailable by the 
due date for filing Form 8966, the partnership's financial statements 
or any other reasonable method used by the partnership for calculating 
the partner's share of partnership income by such date. These temporary 
regulations provide that the modifications to account reporting by 
partnerships described in this paragraph apply beginning with reporting 
with respect to calendar year 2017. However, taxpayers may apply these 
temporary regulations retroactively to January 28, 2013.
iii. Descriptions Applicable to Reporting Requirements of Sec.  1.1471-
4(d)(3)--Payments Made With Respect to an Account--Transfers and 
Closings of Deposit, Custodial, Insurance, and Annuity Financial 
Accounts
    Under the 2013 final regulations, a participating FFI is required 
to report payments made with respect to an account that the FFI is 
required to treat as a U.S. account or account held by an owner-
documented FFI. The 2013 final regulations provide that in the case of 
an account closed or transferred in its entirety by an account holder, 
the payments made with respect to the account are the payments made to 
the account until the date of transfer or closure and the amount 
withdrawn or transferred. The Treasury Department and the IRS intended 
for FFIs to report a closed or transferred account regardless of who 
initiates the closure or transfer. Therefore, these temporary 
regulations modify the 2013 final regulations to require reporting on a 
closed or transferred account when the account is closed or transferred 
by any person (not just the account holder). This modification is 
necessary to prevent FFIs from abusing the rules by claiming that no 
reporting is required if the FFI initiates the closure or transfer 
rather than the account holder. This modification is also consistent 
with the reporting required on closed accounts under the Model 1 IGA, 
which is not limited to accounts closed by the account holder.

E. Changes to Sec.  1.1474-1--Liability for Withheld Tax and 
Withholding Agent Reporting--Information Returns for Payment 
Reporting--Method of Reporting--Payments by U.S. Withholding Agent to 
Recipients

    Revenue Procedure 99-50, 1999-2 C.B. 757, provides procedures for 
combined reporting on Forms 1042-S following a merger or acquisition 
for purposes of chapter 3. To provide a consistent rule for reporting 
on Forms 1042-S under chapters 3 and 4 in these cases, these temporary 
regulations provide that a withholding agent required to report on 
Forms 1042-S under chapter 4 may rely on the procedures used for 
combined reporting on Form 1042-S that apply for chapter 3 purposes 
(even if the withholding agent is not required to report under chapter 
3) following a merger or acquisition provided that all of the 
requirements for such reporting provided in the Instructions for Form 
1042-S are satisfied.

Special Analyses

    Certain IRS regulations, including these, 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.
    For the applicability of the Regulatory Flexibility Act (5 U.S.C. 
chapter 6), please refer to the cross-referenced notice of proposed 
rulemaking published in the Proposed Rules section in this issue of the 
Federal Register. Pursuant to section 7805(f) of the Code, the 
temporary regulations in this document and the notice of proposed 
rulemaking preceding the final regulations in this document were 
submitted to the Chief Counsel for Advocacy of the Small Business 
Administration for comment on their impact on small business.

Drafting Information

    The principal author of these regulations is Kamela Nelan, Office 
of Associate Chief Counsel (International). However, other personnel 
from the IRS and the Treasury Department participated in their 
development.

List of Subjects

26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

26 CFR Part 301

    Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income 
taxes, Penalties, Reporting and recordkeeping requirements.

Amendments to the Regulations

    Accordingly, 26 CFR parts 1 and 301 are 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 1.1471-0 is amended by:
0
1. Revising the entries for Sec.  1.1471-1(b)(7) through (142).
0
2. Adding entries for Sec.  1.1471-1(b)(143) through (151).
0
3. Revising the entries for Sec.  1.1471-2(a)(2)(i), (a)(4)(ii), and 
(a)(5).
0
4. Revising the entries for Sec.  1.1471-3(a)(3)(v) and (vi), 
(c)(3)(iii)(H), (c)(5)(ii)(B), and (c)(8)(iv).
0
5. Adding an entry for Sec.  1.1471-3(c)(8)(v).
0
6. Revising the entry for Sec.  1.1471-3(d)(4).
0
7. Adding entries for Sec.  1.1471-3(d)(4)(vi) through (vi)(C) and 
(d)(5)(iii) through (iii)(B).
0
8. Revising the entries for Sec.  1.1471-3(d)(6)(iii) and (vii).
0
9. Adding entries for Sec.  1.1471-3(d)(11)(x) through (xii)(C).
0
10. Revising the entry for Sec.  1.1471-3(e)(3).
0
11. Adding entries for Sec.  1.1471-3(e)(3)(iii) through (iv)(B).
0
12. Revising the entries for Sec.  1.1471-3(e)(4)(i), (e)(4)(ii) 
introductory text, (e)(4)(ii)(B).
0
13. Removing the entries for Sec.  1.1471-3(e)(4)(ii)(B)(1) through 
(D).
0
14. Revising the entries for Sec.  1.1471-3(e)(4)(iii), (e)(4)(iv) 
introductory text, (e)(4)(iv)(B).
0
15. Removing the entries for Sec.  1.1471-3(e)(4)(iv)(B)(1) through 
(E).
0
16. Revising the entries for Sec.  1.1471-3(e)(4)(vii)(B), 
(e)(4)(vii)(D), and (f)(2).
0
17. Removing the entries for Sec.  1.1471-3(f)(2)(i) and (ii) and 
(f)(3)(i) through (iii).
0
18. Revising the entry for Sec.  1.1471-3(f)(5).

[[Page 2145]]

0
19. Adding entries for Sec.  1.1471-4(b)(3)(i) through (iii).
0
20. Revising the entries for Sec.  1.1471-4(b)(7), (c)(2)(v), 
(c)(5)(iv)(E), (d)(2)(ii)(D) and (E).
0
21. Adding entries for Sec.  1.1471-4(d)(2)(ii)(F) and (d)(2)(iii)(C).
0
22. Revising the entries for Sec.  1.1471-4(d)(3)(v) through (vii).
0
23. Removing the entry for Sec.  1.1471-4(d)(3)(viii).
0
24. Revising the entries for Sec.  1.1471-4(d)(4)(iv)(D), and 
(d)(6)(vi).
0
25. Adding an entry for Sec.  1.1471-4(d)(6)(vii).
0
26. Revising the entries for Sec.  1.1471-4(d)(7), (d)(7)(ii)(A), and 
(d)(7)(iv)(B).
0
27. Adding entries for Sec.  1.1471-4 (e)(2)(vi), and (e)(3)(v) and 
(vi).
0
28. Revising the entry for Sec.  1.1471-4(i)(2).
0
29. Revising the entries for Sec.  1.1471-5(a)(3)(ii) through (v).
0
30. Removing the entry for Sec.  1.1471-5(a)(3)(vi).
0
31. Revising the entries for Sec.  1.1471-5(b)(1)(iii)(A), (b)(3)(v), 
(b)(3)(vi) and (vii), (b)(4)(iv), (e)(4)(iii)(B), and (f)(1)(i)(E).
0
32. Adding an entry for Sec.  1.1471-5(f)(2)(v).
0
33. Revising the entry for Sec.  1.1471-5(f)(4).
0
34. Removing the entries for Sec.  1.1471-5(i)(2)(i) and (ii).
0
35. Revising the entries for Sec.  1.1471-5(i)(3) through (5).
0
36. Adding entries for Sec.  1.1471-5(i)(6) through (10).
0
37. Revising the entry for Sec.  1.1471-5(j).
0
38. Adding entries for Sec.  1.1471-5(k) and (l).
0
39. Revising the entries for Sec.  1.1471-6(d)(4) and (f)(3).
0
40. Revising the entries for Sec.  1.1472-1(c)(1) and (2), (d)(2), and 
(f).
0
41. Adding entries for Sec.  1.1472-1(c)(1)(vi) and (vii), (c)(3) 
through (c)(5)(iv), (g), and (h).
0
42. Revising the entry for Sec.  1.1473-1(a)(3)(i)(C).
0
43. Adding entries for Sec.  1.1473-1(a)(4)(vii) and (viii).
0
44. Revising the entries for Sec.  1.1474-1(d)(4)(i)(C), (d)(4)(iii) 
introductory text, and (d)(4)(iii)(B) and (C).
0
45. Adding an entry for Sec.  1.1474-1(i)(4).
0
46. Removing the entry for Sec.  1.1474-1(d)(4)(iii)(D).
0
47. Revising the entries for Sec.  1.1474-6(c)(2) and (f).
0
48. Adding an entry for Sec.  1.1474-6(g).
    The revisions and additions read as follows:


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

    This section lists the table of contents for Sec. Sec.  1.1471-1 
through 1.1474-7 and Sec.  301.1474-1 of this chapter.


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

* * * * *
    (b) Definitions.
* * * * *
    (7) Backup withholding.
    (8) Beneficial owner.
    (9) Blocked account.
    (10) Branch.
    (11) Broker.
    (12) Cash value.
    (13) Cash value insurance contract.
    (14) Certified deemed-compliant FFI.
    (15) Change in circumstances.
    (16) Chapter 3.
    (17) Chapter 4.
    (18) Chapter 4 reportable amount.
    (19) Chapter 4 status.
    (20) Chapter 4 withholding rate pool.
    (21) Clearing organization.
    (22) Complex trust.
    (23) Consolidated obligations.
    (24) Custodial account.
    (25) Custodial institution.
    (26) Customer master file.
    (27) Deemed-compliant FFI.
    (28) Deferred annuity contract.
    (29) Depository account.
    (30) Depository institution.
    (31) Direct reporting NFFE.
    (32) Documentary evidence.
    (33) Documentation.
    (34) Dormant account.
    (35) Effective date of the FFI agreement.
    (36) EIN.
    (37) Election to be withheld upon.
    (38) Electronically searchable information.
    (39) Entity.
    (40) Entity account.
    (41) Excepted NFFE.
    (42) Exempt beneficial owner.
    (43) Exempt recipient.
    (44) Expanded affiliated group.
    (45) FATF.
    (46) FATF-compliant jurisdiction.
    (47) FFI.
    (48) FFI agreement.
    (49) Financial account.
    (50) Financial institution.
    (51) Flow-through entity.
    (52) Flow-through withholding certificate.
    (53) Foreign entity.
    (54) Foreign passthru payment.
    (55) Foreign payee.
    (56) Foreign person.
    (57) GIIN.
    (58) Grandfathered obligation.
    (59) Grantor trust.
    (60) Gross proceeds.
    (61) Group annuity contract.
    (62) Group insurance contract.
    (63) Immediate annuity.
    (64) Individual account.
    (65) Insurance company.
    (66) Insurance contract.
    (67) Intergovernmental agreement (IGA).
    (68) Intermediary.
    (69) Intermediary withholding certificate.
    (70) Investment entity.
    (71) Investment-linked annuity contract.
    (72) Investment-linked insurance contract.
    (73) IRS FFI list.
    (74) Life annuity contract.
    (75) Life insurance contract.
    (76) Limited branch.
    (77) Limited FFI.
    (78) Model 1 IGA.
    (79) Model 2 IGA.
    (80) NFFE.
    (81) Non-exempt recipient.
    (82) Nonparticipating FFI.
    (83) Nonreporting IGA FFI.
    (84) Non-U.S. account.
    (85) NQI.
    (86) NWP.
    (87) NWT.
    (88) Offshore obligation.
    (89) Owner.
    (90) Owner-documented FFI.
    (91) Participating FFI.
    (92) Participating FFI group.
    (93) Partnership.
    (94) Passive NFFE.
    (95) Passthru payment.
    (96) Payee.
    (97) Payment with respect to an offshore obligation.
    (98) Payor.
    (99) Permanent residence address.
    (100) Person.
    (101) Preexisting account.
    (102) Preexisting entity account.
    (103) Preexisting individual account.
    (104) Preexisting obligation.
    (105) Pre-FATCA Form W-8.
    (106) Prima facie FFI.
    (107) QI.
    (108) QI agreement.
    (109) QI branch of a U.S. financial institution.
    (110) Recalcitrant account holder.
    (111) Registered deemed-compliant FFI.
    (112) Relationship manager.
    (113) Reportable payment.
    (114) Reporting Model 1 FFI.
    (115) Reporting Model 2 FFI.
    (116) Responsible officer.
    (117) Restricted distributor.
    (118) Simple trust.
    (119) Specified insurance company.
    (120) Specified U.S. person.
    (121) Sponsored FFI.
    (122) Sponsored FFI group.
    (123) Sponsored direct reporting NFFE.

[[Page 2146]]

    (124) Sponsoring entity.
    (125) Standardized industry coding system.
    (126) Standing instructions to pay amounts.
    (127) Subject to withholding.
    (128) Substantial U.S. owner.
    (129) Territory entity.
    (130) Territory financial institution.
    (131) Territory financial institution treated as a U.S. person.
    (132) Territory NFFE.
    (133) TIN.
    (134) U.S. account.
    (135) U.S. branch treated as a U.S. person.
    (136) U.S. financial institution.
    (137) U.S. indicia.
    (138) U.S. owned foreign entity.
    (139) U.S. payee.
    (140) U.S. payor.
    (141) U.S. person.
    (142) U.S. source FDAP income.
    (143) U.S. territory.
    (144) U.S. withholding agent.
    (145) Withholdable payment.
    (146) Withholding.
    (147) Withholding agent.
    (148) Withholding certificate.
    (149) WP.
    (150) Written statement.
    (151) WT.
* * * * *


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, and U.S. branches acting as intermediaries.
* * * * *
    (4) * * *
    (ii) Exception to withholding for certain payments made prior to 
July 1, 2016 (transitional).
* * * * *
    (5) Withholding requirements if source or character of payment is 
unknown.
* * * * *


Sec.  1.1471-3   Identification of payee.

    (a) * * *
    (3) * * *
    (v) Disregarded entity or limited branch.
    (vi) U.S. branch of treated as a U.S. person.
* * * * *
    (c) * * *
    (3) * * *
    (iii) * * *
    (H) Rules applicable to a withholding certificate of a U.S. branch.
* * * * *
    (5) * * *
    (ii) * * *
    (B) Preexisting obligation documentary evidence.
* * * * *
    (8) * * *
    (iv) Document sharing for gross proceeds.
    (v) Preexisting account.
* * * * *
    (d) * * *
    (4) Identification of participating FFIs and registered deemed-
compliant FFIs.
* * * * *
    (vi) Sponsored investment entities and sponsored controlled foreign 
corporations.
    (A) In general.
    (B) Payments made prior to January 1, 2017 (transitional).
    (C) Payments made after December 31, 2016, to payees documented 
prior to January 1, 2017.
    (5) * * *
    (iii) Certain investment entities that do not maintain financial 
accounts.
    (A) In general.
    (B) Offshore obligations.
    (6) * * *
    (iii) Documentation for owners and debt holders of payee.
* * * * *
    (vii) Exception for certain offshore obligations of $1,000,000 or 
less.
* * * * *
    (11) * * *
    (x) Identifying a direct reporting NFFE (other than a sponsored 
direct reporting NFFE).
    (A) In general.
    (B) Exception for offshore obligations.
    (C) Special rule for preexisting offshore obligations.
    (xi) Identifying a sponsored direct reporting NFFE.
    (A) In general.
    (1) Payments made prior to January 1, 2017 (transitional).
    (2) Payments made after December 31, 2016, to payees documented 
prior to January 1, 2017.
    (B) Exception for offshore obligations.
    (xii) Identification of excepted inter-affiliate FFI.
    (A) In general.
    (B) Offshore obligations.
    (C) Reason to know.
* * * * *
    (e) * * *
    (3) GIIN verification.
* * * * *
    (iii) Special rules for direct reporting NFFEs.
    (iv) Special rules for sponsored direct reporting NFFEs and 
sponsoring entities.
    (A) Sponsored direct reporting NFFEs.
    (B) Sponsoring entities (transitional).
    (4) * * *
    (i) Reason to know regarding an entity's chapter 4 status.
    (ii) Reason to know applicable to withholding certificates.
* * * * *
    (B) Withholding certificate provided by an FFI.
    (iii) Reason to know applicable to written statements.
    (iv) Reason to know applicable to documentary evidence.
* * * * *
    (B) Standards of knowledge applicable to certain types of 
documentary evidence.
* * * * *
    (vii) * * *
    (B) Reason to know there are U.S. indicia associated with 
preexisting obligations.
* * * * *
    (D) Limits on reason to know for multiple obligations belonging to 
a single person.
* * * * *
    (f) * * *
    (2) Presumptions of classification as an individual or entity and 
entity as the beneficial owner.
* * * * *
    (5) Presumption of chapter 4 status of payee with respect to a 
payment to an intermediary or flow-through entity.
* * * * *


Sec.  1.1471-4   FFI agreement.

* * * * *
    (b) * * *
    (3) * * *
    (i) In general.
    (ii) Withholding not required.
    (iii) Election to withhold under section 3406.
* * * * *
    (7) Withholding requirements for U.S. branches of FFIs treated as 
U.S. persons.
    (c) * * *
    (2) * * *
    (v) Documentation rules for U.S. branches of FFIs that are treated 
as U.S. persons.
* * * * *
    (5) * * *
    (iv) * * *
    (E) Exception for preexisting individual accounts previously 
documented as held by foreign individuals.
* * * * *
    (d) * * *
    (2) * * *
    (ii) * * *
    (D) Special reporting of accounts held by owner-documented FFIs.
    (E) Requirement to identify the GIIN of a branch that maintains an 
account.

[[Page 2147]]

    (F) Reporting by participating FFIs and registered deemed-compliant 
FFIs (including QIs, WPs, WTs, and certain U.S. branches not treated as 
U.S. persons) for accounts of nonparticipating FFIs (transitional).
    (iii) * * *
    (C) Rules for U.S. branches of FFIs not treated as U.S. persons.
    (3) * * *
    (v) Form for reporting accounts under section 1471(c)(1).
    (vi) Time and manner of filing.
    (vii) Extensions in filing.
    (4) * * *
    (iv) * * *
    (D) Transfers and closings of deposit, custodial, insurance, and 
annuity financial accounts.
* * * * *
    (6) * * *
    (vi) Extensions in filing.
    (vii) Record retention requirements.
    (7) Special reporting rules with respect to the 2014 and 2015 
calendar years.
* * * * *
    (ii) * * *
    (A) Reporting with respect to the 2014 calendar year.
* * * * *
    (iv) * * *
    (B) Special determination date and timing for reporting with 
respect to the 2014 calendar year.
* * * * *
    (e) * * *
    (2) * * *
    (vi) Exception from restriction on opening U.S. accounts and 
nonparticipating FFI accounts.
    (3) * * *
    (v) Exception from registration requirement.
    (A) Conditions for exception.
    (B) Confirmation requirements of lead FI.
    (vi) Exception from restriction on opening U.S. accounts and 
nonparticipating FFI accounts.
* * * * *
    (i) * * *
    (2) Requesting waiver or closure of a U.S. account.
* * * * *


Sec.  1.1471-5   Definitions applicable to section 1471.

    (a) * * *
    (3) * * *
    (ii) Financial accounts held by agents that are not financial 
institutions.
    (iii) Jointly held accounts.
    (iv) Account holder for insurance and annuity contracts.
    (v) Examples.
* * * * *
    (b) * * *
    (1) * * *
    (iii) * * *
    (A) Equity or debt interests in an investment entity.
* * * * *
    (3) * * *
    (v) Value of interest determined, directly or indirectly, primarily 
by reference to assets that give rise (or could give rise) to 
withholdable payments.
* * * * *
    (vi) Return earned on the interest (including upon a sale, 
exchange, or redemption) determined, directly or indirectly, primarily 
by reference to one or more investment entities or passive NFFEs.
* * * * *
    (vii) Cash value insurance contract.
* * * * *
    (4) * * *
    (iv) Currency translation of balance or value.
* * * * *
    (e) * * *
    (4) * * *
    (iii) * * *
    (B) Special rule for start-up entities.
* * * * *
    (f) * * *
    (1) * * *
    (i) * * *
    (E) Qualified credit card issuers and servicers.
* * * * *
    (2) * * *
    (v) Certain investment entities that do not maintain financial 
accounts.
* * * * *
    (4) Definition of a restricted distributor.
* * * * *
    (i) * * *
    (1) Scope of paragraph.
    (2) Expanded affiliated group defined.
    (3) Member of expanded affiliated group.
    (4) Ownership test.
    (i) Corporations.
    (A) Stock not to include certain preferred stock.
    (B) Valuation.
    (ii) Partnerships.
    (iii) Trusts.
    (5) Treatment of warrants, options, and obligations convertible 
into equity for determining ownership.
    (6) Exception for FFIs holding certain capital investments.
    (7) Seed capital.
    (8) Anti-abuse rule.
    (9) Exception for limited life debt investment entities.
    (10) Partnerships, trusts, and other non-corporate entities.
    (j) Sponsoring entity verification.
    (k) Sponsoring entity event of default.
    (l) Effective/applicability date.


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

* * * * *
    (d) * * *
    (4) Income on certain transactions.
* * * * *
    (f) * * *
    (3) Narrow participation retirement funds.
* * * * *


Sec.  1.1472-1   Withholding on NFFEs.

* * * * *
    (c) * * *
    (1) Payments to an excepted NFFE.
* * * * *
    (vi) Direct reporting NFFEs.
    (vii) Sponsored direct reporting NFFEs.
    (2) Payments made to an exempt beneficial owner.
    (3) Definition of direct reporting NFFE.
    (4) Election to be treated as a direct reporting NFFE.
    (i) Manner of making election.
    (ii) Effective date of election.
    (iii) Revocation of election by NFFE.
    (iv) Revocation of election by Commissioner.
    (v) Event of default.
    (vi) Notice of event of default.
    (vii) Remediation of event of default.
    (5) Election by a direct reporting NFFE to be treated as a 
sponsored direct reporting NFFE.
    (i) Definition of sponsored direct reporting NFFE.
    (ii) Requirements for sponsoring entity of a sponsored direct 
reporting NFFE.
    (iii) Revocation of status as sponsoring entity.
    (iv) Liability of sponsoring entity.
    (d) * * *
    (2) Payments made to a NFFE that is a QI, WP, or WT.
* * * * *
    (f) Sponsoring entity verification.
    (g) Sponsoring entity event of default.
    (h) Effective/applicability date.


Sec.  1.1473-1   Section 1473 definitions.

    (a) * * *
    (3) * * *
    (i) * * *
    (C) Special rule for gross proceeds from sales settled by a 
clearing organization.
* * * * *
    (4) * * *
    (vii) Collateral arrangements prior to 2017 (transitional).
    (viii) Certain dividend equivalents.
* * * * *

[[Page 2148]]

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

* * * * *
    (d) * * *
    (4) * * *
    (i) * * *
    (C) Amounts paid to a U.S. branch.
* * * * *
    (iii) Reporting by participating FFIs and deemed-compliant FFIs 
(including QIs, WPs, and WTs) and U.S. branches not treated as U.S. 
persons.
    (A) * * *
    (B) Special reporting requirements of participating FFIs, deemed-
compliant FFIs, FFIs that make an election under section 1471(b)(3), 
and U.S. branches not treated as U.S. persons.
    (C) Reporting by a U.S. branch treated as a U.S. person.
* * * * *
    (i) * * *
    (4) Extensions of time to file.
* * * * *


Sec.  1.1474-6   Coordination of chapter 4 with other withholding 
provisions.

* * * * *
    (c) * * *
    (2) Determining the amount of the distribution from certain 
domestic corporations subject to section 1445 or chapter 4 withholding.
* * * * *
    (f) Coordination with section 3406.
    (g) Effective/applicability date.

0
Par. 3. Section 1.1471-1 is amended by revising paragraphs (b)(6) and 
(7), (b)(10), (b)(20), (b)(23), (b)(31), (b)(35), (b)(41), (b)(43), 
(b)(48), (b)(50), (b)(67), (b)(76) and (77), (b)(81), (b)(83), (b)(88), 
(b)(91), (b)(98) through (100), (b)(104)(i), (b)(104)(ii)(A) through 
(C), (b)(105), (b)(113), (b)(115), (b)(123) through (125), (b)(128), 
(b)(135), (b)(141), (b)(146), and (c) to read as follows:


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

* * * * *
    (b) * * *
    (6) Assumes primary withholding responsibility. The term assumes 
primary withholding responsibility refers to when a QI, territory 
financial institution, or U.S. branch assumes responsibility for 
withholding on a payment for purposes of chapters 3 and 4 as if it were 
a U.S. person. A QI may only assume primary withholding responsibility 
if it does not make an election to be withheld upon with respect to the 
payment.
    (7) Backup withholding. The term backup withholding means the 
withholding required under section 3406.
* * * * *
    (10) Branch. With respect to a financial institution, the term 
branch means a unit, business, or office of a financial institution 
that is treated as a branch under the regulatory regime of a country or 
that is otherwise regulated under the laws of a country as separate 
from other offices, units, or branches of the financial institution and 
also includes an entity that is disregarded as an entity separate from 
the financial institution (including branches maintained by such 
disregarded entity). A branch includes a unit, business, or office of a 
financial institution located in a country in which it is resident, and 
a unit, business, or office of a financial institution located in the 
country in which the financial institution is created or organized. All 
units, businesses, and offices of a participating FFI located in a 
single country, and all entities disregarded as entities separate from 
a participating FFI and located in a single country, shall be treated 
as a single branch and may use the same GIIN. An account will be 
treated as maintained by a branch or disregarded entity if the rights 
and obligations of the account holder and the participating FFI with 
regard to such account (including any assets held in the account) are 
governed by the laws of the country of the branch or disregarded 
entity.
* * * * *
    (20) Chapter 4 withholding rate pool. The term chapter 4 
withholding rate pool means a pool of payees that are nonparticipating 
FFIs provided on a chapter 4 withholding statement (as described in 
Sec.  1.1471-3(c)(3)(iii)(B)(3)) to which a withholdable payment is 
allocated. The term chapter 4 withholding rate pool also means a pool 
provided on an FFI withholding statement (as described in Sec.  1.1471-
3(c)(3)(iii)(B)(2)) to which a withholdable payment is allocated to--
    (i) A pool of payees consisting of each class of recalcitrant 
account holders described in Sec.  1.1471-4(d)(6) (or with respect to 
an FFI that is a QI, a single pool of recalcitrant account holders 
without the need to subdivide into each class of recalcitrant account 
holders described in Sec.  1.1471-4(d)(6)), including a separate pool 
of account holders to which the escrow procedures for dormant accounts 
apply; or
    (ii) A pool of payees that are U.S. persons as described in Sec.  
1.1471-3(c)(3)(iii)(B)(2).
* * * * *
    (23) Consolidated obligations. The term consolidated obligations 
means multiple obligations that a withholding agent (including a 
withholding agent that is an FFI) has chosen to treat as a single 
obligation in order to treat the obligations as preexisting obligations 
pursuant to paragraph (b)(104)(ii) of this section or in order to share 
documentation between the obligations pursuant to Sec.  1.1471-3(c)(8). 
A withholding agent that has opted to treat multiple obligations as 
consolidated obligations pursuant to the previous sentence must also 
treat the obligations as a single obligation for purposes of satisfying 
the standards of knowledge requirements set forth in Sec. Sec.  1.1471-
3(e) and 1.1471-4(c)(2)(ii), and for purposes of determining the 
balance or value of any of the obligations when applying any of the 
account thresholds applicable to due diligence or reporting as set 
forth in Sec. Sec.  1.1471-3(c)(6)(ii), 1.1471-3(d), 1.1471-4(c), 
1.1471-5(a)(4), and 1.1471-5(b)(3)(vii). For example, with respect to 
consolidated obligations, if a withholding agent has reason to know 
that the chapter 4 status assigned to the account holder or payee of 
one of the consolidated obligations is inaccurate, then it has reason 
to know that the chapter 4 status assigned for all other consolidated 
obligations of the account holder or payee is inaccurate. Similarly, to 
the extent that an account balance or value is relevant for purposes of 
applying any account threshold to one or more of the consolidated 
obligations, the withholding agent must aggregate the balance or value 
of all such consolidated obligations.
* * * * *
    (31) Direct reporting NFFE. The term direct reporting NFFE has the 
meaning set forth in Sec.  1.1472-1(c)(3).
* * * * *
    (35) Effective date of the FFI agreement. The term effective date 
of the FFI agreement with respect to an FFI or a branch of an FFI that 
is a participating FFI means the date on which the IRS issues a GIIN to 
the FFI or branch. For participating FFIs that receive a GIIN prior to 
June 30, 2014, the effective date of the FFI agreement is June 30, 
2014.
* * * * *
    (41) Excepted NFFE. The term excepted NFFE means a NFFE that is 
described in Sec.  1.1472-1(c)(1).
* * * * *
    (43) Exempt recipient. The term exempt recipient means a person 
described in Sec.  1.6049-4(c)(1)(ii) (for interest, dividends, and 
royalties), a person described in Sec.  1.6045-2(b)(2)(i) (for broker 
proceeds), and a person described in Sec.  1.6041-3(q) (for rents, 
amounts paid on notional principal contracts, and other fixed or 
determinable income).
* * * * *

[[Page 2149]]

    (48) FFI agreement. The term FFI agreement means an agreement that 
is described in Sec.  1.1471-4(a). An FFI agreement includes a QI 
agreement, a WP agreement, and a WT agreement that is entered into by 
an FFI (other than an FFI that is a registered deemed-compliant FFI, 
including a reporting Model 1 FFI) and that has an effective date or 
renewal date on or after June 30, 2014. The term FFI agreement also 
includes a QI agreement that is entered into by a foreign branch of a 
U.S. financial institution (other than a branch that is a reporting 
Model 1 FFI) and that has an effective date or renewal date on or after 
June 30, 2014.
* * * * *
    (50) Financial institution. The term financial institution has the 
meaning set forth in Sec.  1.1471-5(e) and includes a financial 
institution as defined in an applicable Model 1 or Model 2 IGA.
* * * * *
    (67) Intergovernmental agreement (IGA). The term intergovernmental 
agreement or IGA means any applicable Model 1 or Model 2 IGA.
* * * * *
    (76) Limited branch. The term limited branch has the meaning set 
forth in Sec.  1.1471-4(e)(2)(iii). With respect to a reporting Model 2 
FFI, a limited branch is a branch of the reporting Model 2 FFI that 
operates in a jurisdiction that prevents such branch from fulfilling 
the requirements of a participating FFI or deemed-compliant FFI, or 
that cannot fulfill the requirements of a participating FFI or deemed-
compliant FFI due to the expiration of the transitional rule for 
limited branches under Sec.  1.1471-4(e)(2)(v), and for which the 
reporting Model 2 FFI meets the terms of the applicable Model 2 IGA 
with respect to the branch.
    (77) Limited FFI. The term limited FFI has the meaning set forth in 
Sec.  1.1471-4(e)(3)(ii). With respect to a reporting Model 2 FFI, a 
limited FFI is a related entity that operates in a jurisdiction that 
prevents the entity from fulfilling the requirements of a participating 
FFI or deemed-compliant FFI or that cannot fulfill the requirements of 
a participating FFI or deemed-compliant FFI due to the expiration of 
the transitional rule for limited FFIs under Sec.  1.1471-4(e)(3)(iv), 
and for which the reporting Model 2 FFI meets the requirements of the 
applicable Model 2 IGA with respect to the entity.
* * * * *
    (81) Non-exempt recipient. The term non-exempt recipient means a 
person that is not an exempt recipient.
* * * * *
    (83) Nonreporting IGA FFI. The term nonreporting IGA FFI means an 
FFI that is a resident of, or located or established in, a Model 1 or 
Model 2 IGA jurisdiction, as the context requires, and that meets the 
requirements of one of the following--
    (i) A nonreporting financial institution described in Annex II of 
the Model 1 IGA;
    (ii) A nonreporting financial institution described in Annex II of 
the Model 2 IGA;
    (iii) A registered deemed-compliant FFI described in Sec.  1.1471-
5(f)(1)(i)(A) through (F);
    (iv) A certified deemed-compliant FFI described in Sec.  1.1471-
5(f)(2)(i) through (v); or
    (v) An exempt beneficial owner described in Sec.  1.1471-6.
* * * * *
    (88) Offshore obligation. The term offshore obligation means an 
offshore obligation defined in Sec.  1.6049-5(c)(1) (by substituting 
the terms withholding agent or financial institution for the term 
payor).
* * * * *
    (91) Participating FFI. The term participating FFI means an FFI 
that has agreed to comply with the requirements of an FFI agreement 
with respect to all branches of the FFI, other than a branch that is a 
reporting Model 1 FFI or a U.S. branch. The term participating FFI also 
includes an FFI described in a Model 2 IGA that has agreed to comply 
with the requirements of an FFI agreement with respect to a branch (a 
reporting Model 2 FFI), and a QI branch of a U.S. financial 
institution, unless such branch is a reporting Model 1 FFI.
* * * * *
    (98) Payor. The term payor has the meaning set forth in Sec. Sec.  
31.3406(a)-2 and 1.6049-4(a)(2) and generally includes a withholding 
agent.
    (99) [Reserved]. For further guidance, see Sec.  1.1471-1T(b)(99).
    (100) Person. The term person has the meaning set forth in section 
7701(a)(1) and the regulations thereunder and includes an entity or 
arrangement that is an insurance company. The term person also 
includes, with respect to a withholdable payment, a QI branch of a U.S. 
financial institution.
* * * * *
    (104) * * *
    (i) The term preexisting obligation means any account, instrument, 
contract, debt, or equity interest maintained, executed, or issued by 
the withholding agent that is outstanding on June 30, 2014. With 
respect to a participating FFI, the term preexisting obligation means 
any account, instrument, or contract (including any debt or equity 
interest) maintained, executed, or issued by the FFI that is 
outstanding on the effective date of the FFI agreement. With respect to 
a registered deemed-compliant FFI, a preexisting obligation means any 
account, instrument, or contract (including any debt or equity 
interest) that is maintained, executed, or issued by the FFI prior to 
the later of the date that the FFI registers as a deemed-compliant FFI 
pursuant to Sec.  1.1471-5(f)(1) and receives a GIIN or the date the 
FFI is required to implement its account opening procedures under Sec.  
1.1471-5(f). Notwithstanding the previous provisions of this paragraph 
(b)(104)(i), a preexisting obligation includes an obligation held by an 
entity that is issued, opened, or executed on or after July 1, 2014, 
and before January 1, 2015, by or with a withholding agent or FFI that 
treats the obligation as a preexisting obligation. See Sec. Sec.  
1.1471-2(a)(4)(ii), 1.1472-1(b)(2), and 1.1471-4(c)(3) for the due 
diligence requirements applicable to preexisting obligations for 
withholding agents and participating FFIs.
    (ii) * * *
    (A) The account holder or payee also holds with the withholding 
agent (or a member of the withholding agent's expanded affiliated group 
or sponsored FFI group) an account, instrument, contract, or equity 
interest that is a preexisting obligation under paragraph (b)(104)(i) 
of this section;
    (B) The withholding agent (and, as applicable, the member of the 
withholding agent's expanded affiliated group or sponsored FFI group) 
treats both of the aforementioned obligations, and any other 
obligations of the payee or account holder that are treated as 
preexisting obligations under this paragraph (b)(104)(ii), as 
consolidated obligations; and
    (C) With respect to an obligation that is subject to AML due 
diligence, the withholding agent is permitted to satisfy such AML due 
diligence for the obligation by relying upon the AML due diligence 
performed for the preexisting obligation described in paragraph 
(b)(104)(i) of this section.
    (105) 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, or a Form W-8 that was issued 
prior to 2013 and furnished by an individual to

[[Page 2150]]

establish such individual's foreign status but otherwise meets the 
requirements of Sec.  1.1441-1(e)(1)(ii) applicable to such certificate 
and has not expired.
* * * * *
    (113) Reportable payment. The term reportable payment means a 
payment of interest or dividends (as defined in section 3406(b)(2)) and 
other reportable payments (as defined in section 3406(b)(3)).
* * * * *
    (115) Reporting Model 2 FFI. The term reporting Model 2 FFI means a 
participating FFI that is described in Sec.  1.1471-1(b)(91).
* * * * *
    (123) Sponsored direct reporting NFFE. The term sponsored direct 
reporting NFFE has the meaning set forth in Sec.  1.1472-1(c)(5).
    (124) Sponsoring entity. The term sponsoring entity means (i) an 
entity that registers with the IRS and agrees to perform the due 
diligence, withholding, and reporting obligations of one or more FFIs 
pursuant to Sec.  1.1471-5(f)(1)(i)(F) or (f)(2)(iii); or (ii) an 
entity that registers with the IRS and agrees to perform the due 
diligence and reporting obligations of one or more direct reporting 
NFFEs pursuant to Sec.  1.1472-1(c)(5).
    (125) Standardized industry coding system. The term standardized 
industry coding system means a coding system used by the withholding 
agent or FFI to classify account holders by business type for purposes 
other than U.S. tax purposes and that was implemented by the 
withholding agent by the later of January 1, 2012, or six months after 
the date the withholding agent was formed or organized.
* * * * *
    (128) Substantial U.S. owner. The term substantial U.S. owner or 
substantial United States owner has the meaning set forth in Sec.  
1.1473-1(b). In the case of a reporting Model 2 FFI, in applying this 
section with respect to a passive NFFE the term substantial U.S. owner 
means a controlling person as defined in the applicable Model 2 IGA.
* * * * *
    (135) U.S. branch treated as a U.S. person. The term U.S. branch 
treated as a U.S. person means a U.S. branch that agrees to be treated 
as a U.S. person as described in Sec.  1.1441-1(b)(2)(iv)(A). For the 
due diligence, withholding, and reporting requirements of a U.S. branch 
of an FFI treated as a U.S. person for purposes of chapter 4, see Sec.  
1.1471-4(b)(7), (c)(2)(v), (d)(2)(iii)(B), Sec.  1.1472-1(a), and Sec.  
1.1474-1(i)(1) and (2).
* * * * *
    (141) U.S. person--(i) Except as otherwise provided in paragraph 
(b)(141)(ii) of this section, the term U.S. person or United States 
person means a person described in section 7701(a)(30), the United 
States government (including an agency or instrumentality thereof), a 
State (including an agency or instrumentality thereof), or the District 
of Columbia (including an agency or instrumentality thereof). The term 
U.S. person or United States person also means a foreign insurance 
company that has made an election under section 953(d), provided that 
either the foreign insurance company is not a specified insurance 
company (as described in Sec.  1.1471-5(e)(1)(iv)), or the foreign 
insurance company is a specified insurance company and is licensed to 
do business in any State.
    (ii) The term U.S. person or United States person does not include 
a foreign insurance company that has made an election under section 
953(d) if it is a specified insurance company and is not licensed to do 
business in any State. An individual will not be treated as a U.S. 
person for a taxable year or any portion of a taxable year that the 
individual is a dual resident taxpayer (within the meaning of Sec.  
301.7701(b)-7(a)(1) of this chapter) who is treated as a nonresident 
alien pursuant to Sec.  301.7701(b)-7 of this chapter for purposes of 
computing the individual's U.S. tax liability. A U.S. person does not 
include an alien individual who has made an election under section 
6013(g) or (h) to be treated as a resident of the United States.
* * * * *
    (146) Withholding. The term withholding means the deduction and 
withholding of tax at the applicable rate from a payment.
* * * * *
    (c) Effective/applicability date. This section applies on January 
6, 2017. However, taxpayers may apply these provisions as of January 
28, 2013. (For the rules that apply beginning on January 28, 2013, and 
before January 6, 2017, see this section as in effect and contained in 
26 CFR part 1 revised April 1, 2016.)

0
Par. 4. Section 1.1471-1T is revised to read as follows:


Sec.  1.1471-1T   Scope of chapter 4 and definitions (temporary).

    (a) [Reserved]. For further guidance, see Sec.  1.1471-1(a).
    (b) [Reserved]. For further guidance, see Sec.  1.1471-1(b).
    (1) through (98) [Reserved]. For further guidance, see Sec.  
1.1471-1(b)(1) through (98).
    (99) Permanent residence address. The term permanent residence 
address is the address in the country of which the person claims to be 
a resident for purposes of that country's income tax. The address of a 
financial institution with which the person maintains an account, a 
post office box, or an address used solely for mailing purposes is not 
a permanent residence address unless such address is the only permanent 
address used by the person and appears as the person's registered 
address in the person's organizational documents. An address that is 
provided subject to instructions to hold all mail to that address must 
be accompanied by certain documentary evidence described in Sec.  
1.1441-1(c)(38)(ii) supporting the claim of foreign status. If the 
person is an individual who does not have a tax residence in any 
country, the permanent address is the place at which the person 
normally resides. If the person is an entity and does not have a tax 
residence in any country, then the permanent residence address is the 
place at which the person maintains its principal office.
    (100) through (151) [Reserved]. For further guidance, see Sec.  
1.1471-1(b)(100) through (151).
    (c) [Reserved]. For further guidance, see Sec.  1.1471-1(c).
    (d) Expiration date. The applicability of this section expires on 
December 30, 2019.

0
Par. 5. Section 1.1471-2 is amended by revising paragraphs (a)(1), 
(a)(2)(i), (a)(2)(ii), (a)(2)(iii)(A) introductory text, (a)(2)(v), 
(a)(4)(ii)(A) and (B) introductory text, (a)(4)(iii), (b)(2)(i)(A), 
(b)(2)(ii)(A)(4), (b)(2)(ii)(B)(2), (b)(2)(iv), (b)(4)(ii), and (c) to 
read as follows:


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

    (a) * * *
    (1) General rule of withholding. Under section 1471(a), 
notwithstanding any exemption from withholding under any other 
provision of the Code or regulations, a withholding agent must withhold 
30 percent of any withholdable payment made after June 30, 2014, to a 
payee that is an FFI unless either the withholding agent can reliably 
associate the payment with documentation upon which it is permitted to 
rely to treat the payment as exempt from withholding under paragraph 
(a)(4) of this section or the payment is made under a grandfathered 
obligation that is described in paragraph (b) of this section or 
constitutes gross proceeds from the disposition of such an obligation. 
A withholding agent that is making a payment must determine who the 
payee is under Sec.  1.1471-3(a) with respect to that payment and the 
chapter 4 status of such payee. See

[[Page 2151]]

Sec.  1.1471-3 for requirements for determining the chapter 4 status of 
a payee, including additional documentation requirements that apply 
when a payment is made to an intermediary or flow-through entity that 
is not the payee. Withholding under this section applies without regard 
to whether the payee receives a withholdable payment as a beneficial 
owner or as an intermediary. See paragraph (a)(2)(iv) of this section 
for a description of the withholding requirements imposed on territory 
financial institutions as withholding agents under chapter 4. In the 
case of a withholdable payment to a NFFE, a withholding agent is 
required to determine whether withholding applies under section 1472 
and Sec.  1.1472-1. Except as otherwise provided in the regulations 
under chapter 4, a withholding obligation arises on the date a payment 
is made, as determined under Sec.  1.1473-1(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, and U.S. branches acting as intermediaries. A withholding agent 
that, after June 30, 2014, 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. Further, a withholding agent is not required 
to withhold on a payment that it can reliably associate with 
documentation indicating that the payee is a U.S. branch treated as a 
U.S. person (as defined in Sec.  1.1471-1(b)(135)) or is a U.S. branch 
that is not treated as a U.S. person but that applies the rules 
described in Sec.  1.1471-4(d)(2)(iii)(C). See also Sec.  1.1471-
3(c)(3)(iii)(H) for the rules for valid documentation of a U.S. branch.
    (ii) Residual withholding responsibility of intermediaries and 
flow-through entities. An intermediary or flow-through entity that 
receives a withholdable payment after June 30, 2014, is required to 
withhold on such payment to the extent required under chapter 4. 
Notwithstanding the previous sentence, an intermediary or flow-through 
entity is not required to withhold if another withholding agent has 
withheld the full amount required. Further, an NQI, NWP, or NWT is not 
required to withhold with respect to a withholdable payment under 
chapter 4 if it has provided a valid intermediary withholding 
certificate or flow-through withholding certificate and all of the 
information required by Sec.  1.1471-3(c)(3)(iii), and it does not 
know, and has no reason to know, that another withholding agent failed 
to withhold the correct amount. A QI's, WP's, or WT's obligation to 
withhold and report is determined in accordance with its QI agreement, 
WP agreement, or WT agreement.
    (iii) * * *
    (A) Election to be withheld upon for U.S. source FDAP income. 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 June 30, 2014, 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. In such case, the 
withholding agent must withhold 30 percent of the portion of the 
payment that is allocable, pursuant to a withholding statement 
described in Sec.  1.1471-3(c)(3)(iii)(B) provided by the QI, to 
recalcitrant account holders and nonparticipating FFIs. If no such 
allocation information is provided, the withholding agent must apply 
the presumption rules of Sec.  1.1471-3(f) to determine the chapter 4 
status of the payee. A QI that is an FFI and that makes the election to 
be withheld upon with respect to a payment of U.S. source FDAP income 
may not assume primary withholding responsibility under chapter 3 for 
that payment. Conversely, a QI that is an FFI and that does not make 
the election to be withheld upon with respect to a payment of U.S. 
source FDAP income is required to assume primary withholding 
responsibility under chapter 3 for that payment. The election to be 
withheld upon is only available with respect to a payment of U.S. 
source FDAP income if--
* * * * *
    (v) Withholding obligation of a foreign branch of a U.S. financial 
institution. A foreign branch of a U.S. financial institution is a U.S. 
withholding agent and a payee that is a U.S. person, and is generally 
not an FFI. However, a foreign branch of a U.S. financial institution 
that is also a reporting Model 1 FFI is both a withholding agent and a 
registered deemed-compliant FFI. Additionally, a QI branch of a U.S. 
financial institution is both a withholding agent and either a 
participating FFI or a registered deemed-compliant FFI. Therefore, a 
foreign branch of a U.S. financial institution is not subject to 
withholding under chapter 4 but has an obligation to withhold under 
this section and Sec.  1.1472-1 and may be liable for the tax if it 
fails to do so. See Sec.  1.1471-2(a) (requirement to withhold on 
payments to FFIs) and Sec.  1.1471-3(a)(3)(iii) (U.S. intermediary or 
agent of a foreign person). A foreign branch that is a reporting Model 
1 FFI or a reporting Model 2 FFI may apply the procedures under Annex I 
of an applicable IGA to document the chapter 4 status of a payee of a 
withholdable payment that is a holder of an account maintained by the 
branch in the Model 1 or Model 2 IGA jurisdiction. A QI branch of a 
U.S. financial institution must withhold in accordance with this 
chapter as provided in the QI agreement in addition to meeting its 
obligations under either Sec.  1.1471-4(b) and its FFI agreement or 
Sec.  1.1471-5(f).
* * * * *
    (4) * * *
    (ii) Exception to withholding for certain payments made prior to 
July 1, 2016 (transitional)--(A) In general. For any withholdable 
payment made prior to July 1, 2016, with respect to a preexisting 
obligation for which a withholding agent does not have documentation 
indicating the payee's status as a nonparticipating FFI, the 
withholding agent is not required to withhold under this section and 
section 1471(a) unless the payee is a prima facie FFI.
    (B) Prima facie FFIs. If the payee is a prima facie FFI, the 
withholding agent must treat the payee as a nonparticipating FFI 
beginning on January 1, 2015, until the date the withholding agent 
obtains documentation sufficient to establish a different chapter 4 
status of the payee. A prima facie FFI means any payee if--
* * * * *
    (iii) Payments to a participating FFI. Except to the extent 
provided in paragraph (a)(2)(i) of this section, a withholding agent is 
not required to withhold under section 1471(a) and this section on a 
withholdable payment made to a payee that the withholding

[[Page 2152]]

agent can treat as a participating FFI in accordance with Sec.  1.1471-
3(d)(4). For this purpose, a limited branch of a participating FFI is 
treated as a nonparticipating FFI.
* * * * *
    (b) * * *
    (2) * * *
    (i) * * *
    (A) * * *
    (1) Any obligation outstanding on July 1, 2014;
    (2) Any obligation that gives rise to a withholdable payment solely 
because the obligation is treated as giving rise to a dividend 
equivalent pursuant to section 871(m) and the regulations thereunder, 
provided that the obligation is executed on or before the date that is 
six months after the date on which obligations of its type are first 
treated as giving rise to dividend equivalents;
    (3) Any agreement requiring a secured party to make a payment with 
respect to, or to repay, collateral posted to secure a grandfathered 
obligation. If collateral (or a pool of collateral) secures both 
grandfathered obligations and obligations that are not grandfathered, 
the collateral posted to secure the grandfathered obligations may be 
determined by allocating (pro rata by value) the collateral (or each 
item comprising the pool of collateral) to all outstanding obligations 
secured by the collateral (or pool of collateral) or, if the collateral 
cannot be allocated pro rata to all obligations, by allocating all 
collateral to obligations that are not grandfathered and withholding to 
the extent required under chapter 4; and
    (4) Any obligation that gives rise to substitute interest (as 
defined in Sec.  1.861-2(a)(7)) that arises from the payee posting a 
grandfathered obligation described in paragraph (b)(2)(i)(A)(1) of this 
section as collateral.
* * * * *
    (ii) * * *
    (A) * * *
    (4) A life insurance contract under which the entire contract value 
is payable no later than upon the death of the individual(s) insured 
under the contract but, in the case of a life insurance contract that 
contains a provision that permits the substitution of a new individual 
as the insured under the contract, only until a substitution occurs; 
and
* * * * *
    (B) * * *
    (2) Lacks a stated expiration or term (for example, a savings 
deposit or demand deposit, a deferred annuity contract, or an annuity 
contract that permits a substitution of a new individual as the 
annuitant under the contract);
* * * * *
    (iv) Material modification. In the case of an obligation that 
constitutes indebtedness for U.S. tax purposes, a material modification 
is any significant modification of the debt instrument as defined in 
Sec.  1.1001-3(e). For life insurance contracts, a material 
modification includes any substitution of the insured under the 
contract. In all other cases, whether a modification of an obligation 
is material is determined based on the facts and circumstances.
* * * * *
    (4) * * *
    (ii) Determination of material modification. For purposes of 
paragraph (b)(2)(iv) of this section (defining material modification), 
a withholding agent, other than the issuer of the obligation (or an 
agent of the issuer), is required to treat a modification of the 
obligation as material only if the withholding agent has actual 
knowledge thereof, such as in the event the withholding agent receives 
a disclosure indicating that there has been or will be a material 
modification to such obligation. The issuer of the obligation (or an 
agent of the issuer) that is a withholding agent is required to treat a 
modification of the obligation as material if the withholding agent 
knows or has reason to know that a material modification has occurred 
with respect to the obligation.
* * * * *
    (c) Effective/applicability date. This section applies on January 
6, 2017. However, taxpayers may apply these provisions as of January 
28, 2013. (For the rules that apply beginning on January 28, 2013, and 
before January 6, 2017, see this section as in effect and contained in 
26 CFR part 1 revised April 1, 2016.)


Sec.  1.1471-2T   [Removed]

0
Par. 6. Section 1.1471-2T is removed.

0
Par. 7. Section 1.1471-3 is amended by:
0
1. Revising paragraphs (a)(3)(iii), (a)(3)(v) and (vi), (c)(1), 
(c)(3)(ii)(C) and (D), (c)(3)(iii) introductory text, (c)(3)(iii)(A) 
introductory text, (c)(3)(iii)(A)(5), and (c)(3)(iii)(B)(1) through 
(4),
0
2. Adding paragraph (c)(3)(iii)(B)(5).
0
3. Revising paragraphs (c)(3)(iii)(H), (c)(5)(i)(D), (c)(5)(ii)(B), 
(c)(6)(ii)(A), (c)(6)(ii)(B)(2) and (3), (c)(6)(ii)(B)(5) through (7), 
(c)(6)(ii)(C)(2)(iii), (c)(6)(ii)(C)(2)(x), (c)(6)(ii)(C)(3) through 
(5), and (c)(6)(ii)(E)(2) and (3),
0
4. Adding paragraph (c)(6)(ii)(E)(4).
0
5. Revising paragraphs (c)(6)(iv), (c)(6)(v)(A) and (B), (c)(6)(vii), 
(c)(7)(i) and (ii), (c)(8)(iii), (c)(8)(v), (c)(9)(ii)(B), (c)(9)(v), 
(d)(1), (d)(2)(i), (d)(2)(iii), (d)(4)(i) and (ii), (d)(4)(iii) 
introductory text, (d)(4)(iii)(A)(1), (d)(4)(iv)(A), (d)(4)(iv)(C) and 
(D), (d)(4)(v),
0
6. Adding paragraph (d)(4)(vi).
0
7. Revising paragraphs (d)(5)(i) through (iii), (d)(6)(i)(F), 
(d)(6)(vii)(A)(1), (d)(7)(i), (d)(11)(viii)(A), (d)(11)(viii)(C), 
(d)(11)(x) through (xii), (d)(12)(iii)(A) and (B), (e)(2) and (3), 
(e)(4) introductory text, (e)(4)(i) through (iv), (e)(4)(v), 
(e)(4)(v)(B)(1) and (2), (e)(4)(vi)(B), (e)(4)(vii)(B), (e)(4)(viii), 
(f)(1) through (9), and (g).
    The revisions and additions read as follows:


Sec.  1.1471-3   Identification of payee.

    (a) * * *
    (3) * * *
    (iii) U.S. intermediary or agent of a foreign person. A withholding 
agent that makes a withholdable payment to a U.S. person and has actual 
knowledge that the person receiving the payment is acting as an 
intermediary or agent of a foreign person with respect to the payment 
must treat such foreign person, and not the intermediary or agent, as 
the payee of such payment. Notwithstanding the previous sentence, a 
withholding agent that makes a withholdable payment to a U.S. financial 
institution or a U.S. insurance broker (to the extent such withholdable 
payment is a payment of premiums) that is acting as an intermediary or 
agent with respect to the payment on behalf of one or more foreign 
persons may treat the U.S. financial institution or U.S. insurance 
broker as the payee if the withholding agent does not have reason to 
know that the U.S. financial institution or U.S. insurance broker will 
not comply with its obligations to withhold under sections 1471 and 
1472.
* * * * *
    (v) Disregarded entity or limited branch. Except as otherwise 
provided in paragraph (a)(3)(v) through (vii) of this section, a 
withholding agent that makes a withholdable payment to an entity that 
is disregarded for U.S. federal tax purposes under Sec.  301.7701-
2(c)(2)(i) of this chapter as an entity separate from its single owner 
must treat the single owner as the payee. The rules under Sec.  1.1471-
3(d)(4) and (e)(3) apply to determine the circumstances under which a 
withholding agent may treat a payment made to a disregarded entity 
owned by an FFI as made to a payee that is a participating FFI or 
registered deemed-compliant FFI, and not as a payment made to a payee 
that is a nonparticipating FFI. A withholding

[[Page 2153]]

agent that makes a payment to a limited branch (including an entity 
disregarded as a separate entity from its owner if such owner is an FFI 
and the disregarded entity is unable to comply with the terms of an FFI 
agreement with respect to accounts that it maintains) will be required 
to treat the payment as being made to a nonparticipating FFI.
    (vi) U.S. branch treated as a U.S. person. A withholdable payment 
to a U.S. branch is a payment to a U.S. person if the U.S. branch is 
treated as a U.S. person (as defined in Sec.  1.1471-1(b)(135)). In 
such case, the U.S. branch is treated as the payee. A U.S. branch 
treated as a U.S. person, however, is not treated as a U.S. person for 
purposes of the withholding certificate it may provide to a withholding 
agent for purposes of chapter 4. Accordingly, a U.S. branch treated as 
a U.S. person must furnish a withholding certificate on a Form W-8 to 
certify its chapter 4 status (and not a Form W-9, ``Request for 
Taxpayer Identification Number and Certification''). See also paragraph 
(f)(6) of this section for the rules under which a withholding agent 
can presume a payment to a U.S. branch constitutes income that is 
effectively connected with a U.S. trade or business. A U.S. branch 
treated as a U.S. person may not make an election to be withheld upon, 
as described in section 1471(b)(3) and Sec.  1.1471-2(a)(2)(iii), for 
purposes of chapter 4. See Sec.  1.1471-4(c)(2)(v) for the rule 
requiring a U.S. branch treated as a U.S. person to apply the due 
diligence rules applicable to a U.S. withholding agent. See also Sec.  
1.1474-1(i)(1) and (2) for the requirement of a U.S. branch to report 
information regarding certain U.S. owners of owner documented FFIs and 
passive NFFEs. See Sec.  1.1471-4(d) for rules for when a U.S. branch 
reports as a U.S. person.
* * * * *
    (c) * * *
    (1) [Reserved]. For further guidance, see Sec.  1.1471-3T(c)(1).
* * * * *
    (3) * * *
    (ii) * * *
    (C) The person's entity classification for U.S. tax purposes;
    (D) The person's chapter 4 status; and
* * * * *
    (iii) Withholding certificate of an intermediary, qualified 
intermediary, flow-through entity, or U.S. branch (Form W-8IMY)--(A) In 
general. A withholding certificate of an intermediary, qualified 
intermediary, flow-through entity, or U.S. branch of such entity 
(whether or not such branch is treated as a U.S. person) is valid for 
purposes of chapter 4 only if it is furnished on a Form W-8IMY, an 
acceptable substitute form, or such other form as the IRS may 
prescribe, it is signed under penalties of perjury by a person with 
authority to sign for the person named on the form, its validity period 
has not expired, and it contains the following information, statements, 
and certifications--
* * * * *
    (5) A GIIN, in the case of a participating FFI or a registered 
deemed-compliant FFI (including a QI, WP, or WT that is a participating 
FFI or registered deemed-compliant FFI), and an EIN in the case of a 
QI, WP, or WT. Additionally, if a branch (other than a U.S. branch) of 
a participating FFI or registered deemed-compliant FFI outside of its 
country of residence acts as an intermediary, a GIIN of such branch 
must be provided on the withholding certificate. In the case of a U.S. 
branch, see the rules in paragraph (c)(3)(iii)(H) of this section.
* * * * *
    (B) * * *
    (1) In general. A withholding statement forms an integral part of 
the withholding certificate and the penalties of perjury statement 
provided on the withholding certificate applies to the withholding 
statement as well. The withholding statement may be provided in any 
manner, and in any form, to which the person submitting the form and 
the withholding agent mutually agree, including electronically. A 
withholding statement may be provided electronically only if it meets 
the requirements of Sec.  1.1441-1(e)(3)(iv)(B). The withholding 
statement must be updated as often as necessary for the withholding 
agent to meet its reporting and withholding obligations under chapter 
4. A withholding agent will be liable for tax, interest, and penalties 
under Sec.  1.1474-1(a) to the extent it does not follow the 
presumption rules of paragraph (f) of this section for any payment, or 
portion thereof, for which a withholding statement is required and the 
withholding agent does not have a valid withholding statement prior to 
making a payment. A withholding agent that is making a withholdable 
payment for which a withholding statement is also required for purposes 
of chapter 3 may only rely upon the withholding statement if, in 
addition to providing the information required by paragraph 
(c)(3)(iii)(B) of this section, the withholding statement also includes 
all of the information required for purposes of chapter 3 and specifies 
the chapter 4 status of each payee or pool of payees identified on the 
withholding statement for purposes of chapter 3.
    (2) Special requirements for an FFI withholding statement--(i) An 
FFI withholding statement may include either payee-specific information 
or pooled information that indicates the portion of the payment 
allocable to a chapter 4 withholding rate pool of U.S. payees, each 
class of recalcitrant account holders described in Sec.  1.1471-
1(b)(20)(i), or a class of nonparticipating FFIs. In addition, an FFI 
withholding statement may include an allocation of a portion of the 
payment to a pool of account holders (other than nonqualified 
intermediaries and flow-through entities) for whom no reporting is 
required on any of Forms 1042-S, 1099, and 8966, provided that the FFI 
provides to the withholding agent for each account holder payee-
specific information (including the payee's chapter 4 status (using the 
applicable status code used for filing Form 1042-S)) and any other 
information required for purposes of chapter 3 or 61 on the withholding 
statement, and the FFI provides documentation for each account holder 
in the pool (an exempt payee pool). For example, a participating FFI 
may provide on its withholding statement an exempt payee pool for a 
payment of U.S. source interest on a bank deposit not subject to 
withholding or reporting under chapter 4 that is allocable to a pool of 
foreign account holders (that is, a withholdable payment that is not 
reported on any of Forms 1042-S, 1099, and 8966) and provide to the 
withholding agent documentation for each account holder included in the 
pool. If payee-specific information is provided for purposes of chapter 
4 it must indicate both the portion of the payment allocated to each 
payee and each payee's chapter 4 status (using the applicable status 
code used for filing Form 1042-S). A participating FFI that applies the 
escrow procedures described in Sec.  1.1471-4(b)(6) for dormant 
accounts must also indicate the portion of the payment allocated to a 
chapter 4 withholding rate pool of recalcitrant account holders that 
hold dormant accounts for which the participating FFI (and not the 
withholding agent) will withhold in escrow. The withholding statement 
provided by a participating FFI that applies the election to backup 
withhold under Sec.  1.1471-4(b)(3)(iii) must also indicate the portion 
of the reportable payment that is a withholdable payment allocated to 
each recalcitrant account holder subject to backup withholding under 
section 3406. See section 3406 for when backup withholding is required, 
including the exception to backup withholding under Sec.  31.3406(g)-
1(e).

[[Page 2154]]

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 WP, WT, or 
QI with respect to the account must also identify each intermediary or 
flow-through entity that receives the payment and such entity's chapter 
4 status (using the applicable status code used for filing Form 1042-S) 
and GIIN (when required under paragraph (d) of this section), when 
applicable. An FFI withholding statement must also include any other 
information that the withholding agent or payor reasonably requests in 
order to fulfill its obligations under chapter 4, and chapters 3 and 
61, if applicable.
    (ii) An FFI withholding statement provided by a reporting Model 2 
FFI or a reporting Model 1 FFI may indicate, with respect to a 
withholdable payment, that the payment is allocable to a chapter 4 
withholding rate pool of U.S. payees, which is comprised of account 
holders receiving a payment that is not subject to withholding under 
chapter 3 or 4 or to backup withholding under section 3406 and that 
are, with respect to a reporting Model 2 FFI, the holders of non-
consenting U.S. accounts as described in an applicable IGA when the FFI 
reports the accounts in one of the pools described in Sec.  1.1471-
4(d)(6) for the year in which the payment is made; or with respect to a 
reporting Model 1 FFI, the holders of accounts that have U.S. indicia 
for which appropriate documentation sufficient to treat the accounts as 
held by other than specified U.S. persons has not been provided 
pursuant to an applicable Model 1 IGA and the reporting Model 1 FFI 
reports the accounts as U.S. reportable accounts pursuant to the 
applicable Model 1 IGA for the year in which the payment is made.
    (iii) An FFI withholding statement provided by a participating FFI 
or registered deemed-compliant FFI that is a non-U.S. payor (a payor 
other than a U.S. payor as defined in Sec.  1.6049-5(c)(5)) may 
indicate, with respect to a withholdable payment, that the payment is 
allocable to a chapter 4 withholding rate pool of U.S. payees (in 
addition to the U.S. payees described in paragraph 
(c)(3)(iii)(B)(2)(ii) of this section), which is comprised of account 
holders that are not subject to withholding under chapter 3 or 4 or to 
backup withholding under section 3406 and that are, with respect to a 
participating FFI (including a reporting Model 2 FFI), account holders 
that hold U.S. accounts (as defined in Sec.  1.1471-1(b)(134) and an 
applicable Model 2 IGA) that the FFI reports as U.S. accounts pursuant 
to Sec.  1.1471-4(d)(3) or (5) for the year in which the payment is 
made; with respect to a registered deemed-compliant FFI (other than a 
reporting Model 1 FFI), account holders of U.S. accounts that the FFI 
reports pursuant to the conditions of its applicable deemed-compliant 
status under Sec.  1.1471-5(f)(1) for the year in which the payment is 
made; or with respect to a reporting Model 1 FFI, account holders of 
U.S. accounts that the reporting Model 1 FFI reports as reportable U.S. 
accounts pursuant to an applicable Model 1 IGA, and which includes the 
U.S. TINs of such account holders, for the year in which the payment is 
made.
    (iv) An FFI withholding statement provided by a participating FFI 
or a registered deemed-compliant FFI may include a certification that 
the FFI is reporting, for the year in which the payment is made, an 
account held by a passive NFFE with one or more substantial U.S. owners 
(or, with respect to a reporting Model 1 FFI or reporting Model 2 FFI, 
one or more controlling persons that are specified U.S. persons, as 
defined in an applicable IGA) as a U.S. account (excluding a non-
consenting U.S. account or an account held by a recalcitrant account 
holder) or, with respect to a reporting Model 1 FFI, a U.S. reportable 
account, in accordance with the terms of the FFI agreement or an 
applicable IGA.
    (v) An FFI withholding statement provided by a participating FFI or 
a reporting Model 1 FFI may include a certification that the FFI is 
reporting to the IRS for the year of the payment all of the information 
described in Sec.  1.1471-4(d) or Sec.  1.1474-1(i)(1) (as applicable) 
with respect to all specified U.S. persons described in Sec.  1.1471-
3(d)(6)(iv)(A)(1) and (2) with respect to an account holder or payee 
that the FFI has agreed to treat as an owner-documented FFI.
    (3) Special requirements for a chapter 4 withholding statement. A 
chapter 4 withholding statement must contain the name, address, TIN (if 
any), entity type, and chapter 4 status (using the applicable status 
code used for filing Form 1042-S) of each payee, the amount allocated 
to each payee, a valid withholding certificate or other appropriate 
documentation sufficient to establish the chapter 4 status of each 
payee, and each intermediary or flow-through entity that receives the 
payment on behalf of the payee, in accordance with paragraph (d) of 
this section, and any other information the withholding agent 
reasonably requests in order to fulfill its obligations under chapter 
4. Notwithstanding the prior sentence, a chapter 4 withholding 
statement is permitted to provide pooled allocation information with 
respect to payees that are treated as nonparticipating FFIs (in lieu of 
providing the withholding agent with documentation for each payee). A 
chapter 4 withholding statement may include an allocation of a portion 
of the payment to a pool of payees (rather than to each payee) for whom 
no reporting is required on any of Forms 1042-S, 1099, and 8966, 
provided each payee is identified on the withholding statement and 
documentation is provided to the withholding agent for each payee 
included in the pool. If the withholdable payment is a reportable 
amount under chapter 3, see the provisions of Sec.  1.1441-
1(e)(3)(iv)(C) for any additional information that may be required on 
the withholding statement (including pooled information under the 
alternative procedures described in Sec.  1.1441-1(e)(3)(iv)(D), if 
applicable).
    (4) Special requirements for an exempt beneficial owner withholding 
statement. An exempt beneficial owner withholding statement must 
include the name, address, TIN (if any), entity type, and chapter 4 
status (using the applicable status code used for filing Form 1042-S) 
of each exempt beneficial owner on behalf of which the nonparticipating 
FFI is receiving the payment, the amount of the payment allocable to 
each exempt beneficial owner, a valid withholding certificate or other 
documentation sufficient to establish the chapter 4 status of each 
exempt beneficial owner in accordance with paragraph (d) of this 
section, and any other information the withholding agent reasonably 
requests in order to fulfill its obligations under chapter 4. The 
withholding statement must allocate the remainder of the payment that 
is not allocated to an exempt beneficial owner to the nonparticipating 
FFI receiving the payment. With respect to the amount of the payment 
allocable to each exempt beneficial owner and subject to withholding 
under chapter 3, see Sec.  1.1441-1(e)(3)(iv).
    (5) [Reserved]. For further guidance, see Sec.  1.1471-
3T(c)(3)(iii)(B)(5).
* * * * *
    (H) Rules applicable to a withholding certificate of a U.S. branch. 
A withholding agent may reliably associate a payment with a withholding 
certificate of a U.S. branch of an FFI that is treated as a U.S. person 
for purposes of Sec.  1.1441-1(b)(2)(iv) if, in addition to the other 
information required by paragraph (c)(2)(iii)(A) of this section, the 
certificate contains the EIN of the U.S. branch and a certification 
that the U.S. branch is described in paragraph

[[Page 2155]]

Sec.  1.1441-1(b)(2)(iv) and, accordingly, is required to accept 
primary withholding responsibility with respect to the payment for 
purposes of both chapters 3 and 4. A withholding agent may reliably 
associate a payment with a withholding certificate of a U.S. branch of 
an FFI that is not treated as a U.S. person and that applies the rules 
described in Sec.  1.1471-4(d)(2)(iii)(C) if, in addition to the other 
information required by paragraph (c)(2)(iii)(A) of this section, the 
certificate contains the EIN of the U.S. branch and a certification 
that the U.S. branch applies the rules described in Sec.  1.1471-
4(d)(2)(iii)(C). However, the requirement to obtain the certification 
that a U.S. branch applies the rules described in Sec.  1.1471-
4(d)(2)(iii)(C) shall not apply to payments made on or before June 30, 
2017.
* * * * *
    (5) * * *
    (i) * * *
    (D) Entity government documentation. With respect to an entity, any 
documentation that substantiates that the entity is actually organized 
or created under the laws of a foreign country; and
* * * * *
    (ii) * * *
    (B) Preexisting obligation documentary evidence. With respect to a 
preexisting obligation of an entity, any classification in the 
withholding agent's records with respect to the payee that was 
determined based on documentation supplied by the payee (or other 
person receiving the payment) or a standardized industry coding system 
and that was recorded by the withholding agent consistent with its 
normal business practices for AML or another regulatory purpose (other 
than for tax purposes), to the extent permitted by paragraph (d) of 
this section and provided there is no U.S. indicia associated with the 
payee for which appropriate curing documentation has not been obtained 
as set forth in paragraph (e) of this section; and
* * * * *
    (6) * * *
    (ii) * * *
    (A) General rule. Except as provided otherwise in paragraphs 
(c)(6)(ii)(B) and (C) of this section, a withholding certificate or 
written statement will remain valid until the last day of the third 
calendar year following the year in which the withholding certificate 
or written statement is signed. Documentary evidence is generally valid 
until the last day of the third calendar year following the year in 
which the documentary evidence is provided to the withholding agent. 
Nevertheless, documentary evidence that contains an expiration date may 
be treated as valid until that expiration date if doing so would 
provide a longer period of validity than the three-year period. 
Notwithstanding the validity periods permitted by paragraphs 
(c)(6)(ii)(A) through (D) of this section, a withholding certificate, 
written statement, and documentary evidence will cease to be valid if 
the withholding agent has knowledge of a change in circumstances that 
makes the information on the documentation incorrect. Therefore, a 
withholding agent is required to institute procedures to ensure that 
any change to the customer master files that constitutes a change in 
circumstances described in paragraph (c)(6)(ii)(E) of this section is 
identified by the withholding agent. In addition, a withholding agent 
is required to notify any person providing documentation of the 
person's obligation to notify the withholding agent of a change in 
circumstances.
    (B) * * *
    (2) A beneficial owner withholding certificate and documentary 
evidence supporting the individual's claim of foreign status when both 
are provided together (as defined in Sec.  1.1441-1(e)(4)(ii)(B)(1)) 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 
(other than an entity described in paragraph (c)(6)(ii)(C)(2)(iii) of 
this section) and documentary evidence establishing the entity's 
foreign status when both are received by the withholding agent before 
the validity period of either would otherwise expire under paragraph 
(c)(6)(ii)(A) of this section;
* * * * *
    (5) A withholding certificate, written statement, or documentary 
evidence furnished by a foreign government, government of a U.S. 
territory, foreign central bank (including the Bank for International 
Settlements), international organization, or entity that is wholly 
owned by any such entities;
    (6) Documentary evidence that is not generally renewed or amended 
(such as a certificate of incorporation); and
    (7) For the validity period of a beneficial owner withholding 
certificate provided by an entity described in paragraph 
(c)(6)(ii)(C)(2)(iii) of this section, see Sec.  1.1441-1(e)(4)(ii).
    (C) * * *
    (2) * * *
    (iii) A section 501(c) entity described in Sec.  1.1471-5(e)(5)(v);
* * * * *
    (x) A sponsored FFI described in Sec.  1.1471-5(f)(1)(i)(F);
* * * * *
    (3) A withholding certificate or written statement of an owner-
documented FFI, but not including the withholding statements, 
documentary evidence, and withholding certificates of its owners 
(unless such documentation is permitted indefinite validity under 
another provision);
    (4) An owner reporting statement associated with a withholding 
certificate of an owner-documented FFI, provided the account balance of 
all accounts held by such owner-documented FFI with the withholding 
agent does not exceed $1,000,000 on the later of June 30, 2014, or the 
last day of the calendar year in which the account was opened, and the 
last day of each subsequent calendar year preceding the payment, 
applying the aggregation principles of Sec.  1.1471-5(b)(4)(iii), and 
the owner-documented FFI does not have any contingent beneficiaries or 
designated classes with unidentified beneficiaries; and
    (5) A withholding certificate of a passive NFFE or excepted 
territory NFFE, provided the account balance of all accounts held by 
such entity with the withholding agent does not exceed $1,000,000 on 
the later of June 30, 2014, or the last day of the calendar year in 
which the account was opened, and the last day of each subsequent 
calendar year preceding the payment, applying the aggregation 
principles of Sec.  1.1471-5(b)(4)(iii), and the withholding agent does 
not know or have reason to know that the entity has any contingent 
beneficiaries or designated classes with unidentified beneficiaries.
* * * * *
    (E) * * *
    (2) Obligation to notify withholding agent of a change in 
circumstances. If a change in circumstances makes any information on a 
certificate or other documentation incorrect, then the person whose 
name is on the certificate or other documentation must inform the 
withholding agent within 30 days of the change and furnish a new 
certificate, a new written statement, or new documentary evidence. 
Notwithstanding the previous sentence, if an FFI's chapter 4 status 
changes solely because the jurisdiction in which the FFI is resident, 
organized, or located

[[Page 2156]]

is later treated as having an IGA in effect (including a jurisdiction 
that had a Model 2 IGA in effect and is later treated as having a Model 
1 IGA in effect) or ceases to be treated as having an IGA in effect, in 
lieu of providing a new withholding certificate, the FFI may, within 30 
days of such change in circumstances, provide to the withholding agent 
oral or written confirmation (including by email) of the change in the 
FFI's chapter 4 status. If an intermediary or a flow-through entity 
becomes aware that a certificate or other appropriate documentation it 
has furnished to the person from whom it collects a payment is no 
longer valid because of a change in the circumstances of the person who 
issued the certificate or furnished the other appropriate 
documentation, then the intermediary or flow-through entity must notify 
the person from whom it collects the payment of the change in 
circumstances within 30 days of the date that it knows or has reason to 
know of the change in circumstances. It must also obtain a new 
withholding certificate or new appropriate documentation to replace the 
existing certificate or documentation the validity of which has expired 
due to the change in circumstances.
    (3) Withholding agent's obligation with respect to a change in 
circumstances. A certificate or other documentation becomes invalid on 
the date that the withholding agent holding the certificate or 
documentation knows or has reason to know that circumstances affecting 
the correctness of the certificate or documentation have changed. A 
withholding agent will not have reason to know of a change in 
circumstances with respect to an FFI's chapter 4 status that results 
solely because a jurisdiction is later treated as having an IGA in 
effect (including a jurisdiction that had a Model 2 IGA in effect and 
is later treated as having a Model 1 IGA in effect) until the 
withholding agent obtains the confirmation of a change in the FFI's 
chapter 4 status described in paragraph (c)(6)(ii)(E)(2) of this 
section (which will become part of the FFI's withholding certificate or 
other documentation retained by the withholding agent). See paragraph 
(c)(6)(ii)(E)(4) of this section for when a withholding agent has 
reason to know of a change in circumstances that results solely because 
a jurisdiction ceases to be treated as having an IGA in effect. A 
withholding agent may choose to treat a person as having the same 
chapter 4 status that it had prior to the change in circumstances until 
the earlier of 90 days from the date that the certificate or 
documentation became invalid due to the change in circumstances or the 
date that a new certificate or new documentation is obtained. See, 
however, Sec.  1.1441-1(e)(4)(ii)(D) for requirements, including the 
requirement to withhold under chapter 3 or section 3406, applicable 
when a change in circumstances occurs for purposes of chapter 3 and the 
related grace period allowed under Sec.  1.1441-1(b)(3)(iv). A 
withholding agent may rely on a certificate without having to inquire 
into possible changes of circumstances that may affect the validity of 
the statement, unless it knows or has reason to know that circumstances 
have changed. A withholding agent may require a new certificate or 
additional documentation at any time prior to a payment, regardless of 
whether the withholding agent knows or has reason to know that any 
information stated on the certificate or documentation has changed.
    (4) [Reserved]. For further guidance, see Sec.  1.1471-
3T(c)(6)(ii)(E)(4).
* * * * *
    (iv) Electronic transmission of withholding certificate, written 
statement, and documentary evidence. A withholding agent may accept a 
withholding certificate (including an acceptable substitute form), a 
written statement, or other such form as the IRS may prescribe, 
electronically in accordance with the requirements set forth in Sec.  
1.1441-1(e)(4)(iv).
    (v) * * *
    (A) In general. A withholding agent may substitute its own form for 
an official Form W-8 (or such other official form as the IRS may 
prescribe). A substitute form will be acceptable if it contains 
provisions that are substantially similar to those of the official 
form, it contains the same certifications relevant to the transactions 
as are contained on the official form and these certifications are 
clearly set forth, and the substitute form includes a signature-under-
penalties-of-perjury statement identical to the one on the official 
form. The substitute form is acceptable even if it does not contain all 
of the provisions contained on the official form, so long as it 
contains those provisions that are relevant to the transaction for 
which it is furnished. A withholding agent may choose to provide a 
substitute form that does not include all of the chapter 4 statuses 
provided on the official version but the substitute form must include 
any chapter 4 status for which withholding may apply, such as the 
categories for a nonparticipating FFI or passive NFFE. A withholding 
agent that uses a substitute form must furnish instructions relevant to 
the substitute form only to the extent and in the manner specified in 
the instructions to the official form. A withholding agent may use a 
substitute form that is written in a language other than English and 
may accept a form that is filled out in a language other than English, 
but the withholding agent must make available an English translation of 
the form and its contents to the IRS upon request. A withholding agent 
may refuse to accept a certificate (including the official Form W-8) 
from a person if the certificate provided is not an acceptable 
substitute form provided by the withholding agent, but only if the 
withholding agent furnishes the person with an acceptable substitute 
form within five business days of receipt of an unacceptable form from 
the person. In that case, the substitute form is acceptable only if it 
contains a notice that the withholding agent has refused to accept the 
form submitted by the person and that the person must submit the 
acceptable form provided by the withholding agent in order for the 
person to be treated as having furnished the required withholding 
certificate.
    (B) Non-IRS form for individuals. A withholding agent may also 
substitute its own form for an official Form W-8BEN (for individuals), 
regardless of whether the substitute form is titled a Form W-8. 
However, in addition to the name and address of the individual that is 
the payee or beneficial owner, the substitute form must provide all 
countries in which the individual is resident for tax purposes, country 
of birth, a tax identification number (if any) for each country of 
residence, the individual's date of birth, 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. Notwithstanding the previous sentence, the 
signed certification provided on a form need not be signed under 
penalties of perjury if the form is accompanied by documentary evidence 
that supports the individual's claim of foreign status. Such 
documentary evidence may be the same documentary evidence that is used 
to support foreign status in the case of a payee whose account has U.S. 
indicia as described in paragraph (e) of this section or Sec.  1.1471-
4(c)(4)(i)(A). The form may also request other information required for 
purposes of tax or AML due diligence in the United States or in other 
countries.
* * * * *

[[Page 2157]]

    (vii) Reliance on a prior version of a withholding certificate. 
Upon the issuance by the IRS of an updated version of a withholding 
certificate, a withholding agent may continue to accept the prior 
version of the withholding certificate in accordance with the 
requirements of Sec.  1.1441-1(e)(4)(viii)(C) and without regard to 
whether a withholdable payment associated with the certificate is 
subject to withholding under Sec.  1.1441-2(a).
    (7) * * *
    (i) Curing inconsequential errors on a withholding certificate. A 
withholding agent may treat a withholding certificate as valid, 
notwithstanding that the withholding certificate contains an 
inconsequential error, if the withholding agent has sufficient 
documentation on file to supplement the information missing from the 
withholding certificate due to the error. In such case, the 
documentation relied upon to cure the inconsequential error must be 
conclusive. For example, a withholding certificate in which the 
individual submitting the form abbreviated the country of residence in 
an ambiguous way may be treated as valid, notwithstanding the 
abbreviation, if the withholding agent has government issued 
identification for the person from a country that reasonably matches 
the abbreviation. On the other hand, an ambiguous abbreviation for the 
country of residence that does not reasonably match the country of 
residence shown on the person's passport is not an inconsequential 
error. A failure to select an entity type on a withholding certificate 
is not an inconsequential error, even if the withholding agent has an 
organization document for the entity that provides sufficient 
information to determine the person's entity type, if the person was 
eligible to make an election under Sec.  301.7701-3(c)(1)(i) of this 
chapter (that is, a check-the-box election). A failure to check a box 
to make a required certification on the withholding certificate or to 
provide a country of residence or a country under which treaty benefits 
are sought is not an inconsequential error. In addition, information on 
a withholding certificate that contradicts other information contained 
on the withholding certificate or in the customer master file is not an 
inconsequential error.
    (ii) [Reserved]. For further guidance, see Sec.  1.1471-
3T(c)(7)(ii).
    (8) * * *
    (iii) Shared account systems. A withholding agent may rely on 
documentation furnished by a customer for an account held at another 
branch location of the same withholding agent or at a branch location 
of a member of the expanded affiliated group of the withholding agent 
if the withholding agent treats all accounts that share documentation 
as a consolidated obligation and the withholding agent and the other 
branch location or expanded affiliated group member share an 
information system, electronic or otherwise, that is described in this 
paragraph (c)(8)(iii). The system must allow the withholding agent to 
easily access data regarding the nature of the documentation, the 
information contained in the documentation (including a copy of the 
documentation itself), and the validity status of the documentation. 
The information system must also allow the withholding agent to easily 
transmit data into the system regarding any facts of which it becomes 
aware that may affect the reliability of the documentation. The 
withholding agent must be able to establish, to the extent applicable, 
how and when it has transmitted data regarding any facts of which it 
became aware that may affect the reliability of the documentation and 
must be able to establish that any data it has transmitted to the 
information system has been processed and appropriate due diligence has 
been exercised regarding the validity of the documentation. A 
withholding agent that opts to rely upon the chapter 4 status 
designated for the payee in the shared account system without obtaining 
and reviewing copies of the documentation supporting the status must be 
able to produce all documentation (or a notation of the documentary 
evidence reviewed if the withholding agent is not required to retain 
copies of the documentary evidence) relevant to the chapter 4 status 
claimed upon request by the IRS and will be liable for any 
underwithholding that results from any failure to assign the correct 
status based upon the available information.
* * * * *
    (v) Preexisting account. A withholding agent may rely on 
documentation furnished by a payee for a preexisting account held at 
another branch location of the same withholding agent or at a branch 
location of a member of the expanded affiliated group of the 
withholding agent if the withholding agent obtains and reviews copies 
of such documentation supporting the chapter 4 status designated for 
the payee and the withholding agent has no reason to know that, at the 
time the documentation is obtained by the withholding agent, the 
documentation is unreliable or incorrect. For example, the withholding 
agent may not rely on documentation furnished by a payee for a 
preexisting account held at another branch location of the same 
withholding agent or at a branch location of a member of the expanded 
affiliated group of the withholding agent if, based on information in 
the withholding agent's account records, the withholding agent has 
reason to know that such documentation is unreliable or incorrect.
    (9) * * *
    (ii) * * *
    (B) The third-party data provider must be in the business of 
providing credit reports or business reports to customers unrelated to 
it and must have reviewed all information it has for the entity and 
verified that such additional information does not conflict with the 
chapter 4 status claimed by the entity. For purposes of this paragraph 
(c)(9)(ii)(B), a customer is related to a third-party data provider if 
they have a relationship with each other that is described in section 
267(b).
* * * * *
    (v) Reliance upon documentation for accounts acquired in merger or 
bulk acquisition for value. A withholding agent that acquires an 
account from a predecessor or transferor in a merger or bulk 
acquisition of accounts for value is permitted to rely upon valid 
documentation (or copies of valid documentation) collected by the 
predecessor or transferor. In addition, a withholding agent that 
acquires an account in a merger or bulk acquisition of accounts for 
value, other than a related party transaction, from a U.S. withholding 
agent, a participating FFI that has completed all due diligence 
required under its agreement with respect to the accounts transferred, 
or a reporting Model 1 FFI that has completed all due diligence 
required pursuant to the applicable Model 1 IGA, may also rely upon the 
predecessor's or transferor's determination of the chapter 4 status of 
an account holder for a transition period of the lesser of six months 
from the date of the merger or until the acquirer knows that the claim 
of status is inaccurate or a change in circumstances occurs. At the end 
of the transition period, the acquirer will be permitted to rely upon 
the predecessor's determination as to the chapter 4 status of the 
account holder only if the documentation that the acquirer has for the 
account holder, including documentation obtained from the predecessor 
or transferor, supports the chapter 4 status claimed. An acquirer that 
discovers at the end of the transition period that the chapter 4 status 
assigned by the predecessor or

[[Page 2158]]

transferor to the account holder was incorrect and, as a result, has 
not withheld as it would have been required to but for its reliance 
upon the predecessor's determination, will be required to withhold on 
payments made after the transition period, if any, to the account 
holder equal to the amount of tax that should have been withheld during 
the transition period but for the erroneous classification as to the 
account holder's status. For purposes of this paragraph (c)(9)(v), a 
related party transaction is a merger or sale of accounts in which 
either the acquirer is in the same expanded affiliated group as the 
predecessor or transferor prior to or after the merger or acquisition 
or the predecessor or transferor (or shareholders of the predecessor or 
transferor) obtains a controlling interest in the acquirer or in a 
newly formed entity created for purposes of the merger or acquisition. 
See Sec.  1.1471-4(c)(2)(ii)(B) for an additional allowance for a 
participating FFI to rely upon the determination made by another 
participating FFI as to the chapter 4 status of an account obtained as 
part of a merger or bulk acquisition for value.
    (d) * * *
    (1) Reliance on pre-FATCA Form W-8. 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. This reliance is only available in the 
case of a payee that is an international organization if such payee is 
described under section 7701(a)(18). To establish the chapter 4 status 
of a payee that is not a foreign individual, a foreign government, or 
an international organization, a withholding agent may, for payments 
made prior to January 1, 2017, rely upon a pre-FATCA Form W-8 in lieu 
of obtaining an updated version of the withholding certificate if the 
withholding agent has one or more forms of documentary evidence 
described in paragraphs (c)(5)(ii), as necessary, to establish the 
chapter 4 status of the payee and the withholding agent has obtained 
any additional documentation or information required for the particular 
chapter 4 status (such as withholding statements, certifications as to 
owners, or required documentation for underlying owners), as set forth 
under the specific payee rules in paragraphs (d)(2) through (12) of 
this section. See paragraph (d)(4)(ii) and (iv) of this section for 
specific requirements applicable when relying upon a pre-FATCA Form W-8 
for a participating FFI or registered deemed-compliant FFI. This 
paragraph (d)(1) does not apply to nonregistering local banks, FFIs 
with only low-value accounts, sponsored FFIs, owner-documented FFIs, 
territory financial institutions that are not the beneficial owners of 
the payment, foreign central banks (other than a foreign central bank 
specifically identified as an exempt beneficial owner under a Model 1 
IGA or Model 2 IGA), or international organizations not described under 
section 7701(a)(18).
    (2) * * *
    (i) In general. A withholding agent must treat a payee as a U.S. 
person, including a payee that is a foreign branch of a U.S. person 
(other than a branch that is treated as a QI) or is an FFI that has 
elected to be treated as a U.S. person for tax purposes under section 
953(d), if it has a valid Form W-9 associated with the payee or if it 
must presume the payee is a U.S. person under the presumption rules set 
forth in paragraph (f) of this section. 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 contains a certification that the payee is 
other than a specified U.S. person. Notwithstanding the foregoing, a 
withholding agent receiving a Form W-9 indicating that the payee is 
other than a specified U.S. person must treat the payee as a specified 
U.S. person if the withholding agent knows or has reason to know that 
the payee's claim that it is other than a specified U.S. person is 
incorrect. For example, a withholding agent that receives a Form W-9 
from a payee that is an individual would be required to treat the payee 
as a specified U.S. person regardless of whether the Form W-9 indicates 
that the payee is not a specified U.S. person, because an individual 
that is a U.S. person is not excepted from the definition of a 
specified U.S. person.
* * * * *
    (iii) Preexisting obligations. As an alternative to applying the 
rules in paragraphs (d)(2)(i) and (ii) of this section, a withholding 
agent that makes a payment with respect to a preexisting obligation may 
treat a payee as a U.S. person if it has a notation in its files that 
it has previously reviewed a Form W-9 that established that the payee 
is a U.S. person and has retained the payee's TIN. A withholding agent, 
other than a participating FFI or registered deemed-compliant FFI, may 
also treat a payee of a payment with respect to a preexisting 
obligation as a U.S. person if it has previously classified the payee 
as a U.S. person for purposes of chapter 3 or 61 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) In general. Except as otherwise provided in paragraphs 
(d)(4)(ii) through (iv) or paragraphs (e)(3)(i) and (ii) of this 
section, a withholding agent may treat a payee as a participating FFI 
or registered deemed-compliant FFI only if the withholding agent has a 
withholding certificate identifying the payee as a participating FFI, 
registered deemed-compliant FFI, or branch thereof (including an entity 
that is disregarded as an entity separate from the FFI), and the 
withholding certificate contains a GIIN described in paragraph (e)(3) 
of this section that is verified against the published IRS FFI list in 
the manner described in paragraph (e)(3) of this section (indicating 
when a withholding agent may rely upon a GIIN). For when a withholding 
agent may treat a payee as a registered deemed-compliant FFI that is a 
sponsored investment entity or sponsored controlled foreign 
corporation, see paragraph (d)(4)(vi) of this section. See paragraph 
(c)(3)(iii) of this section for additional requirements that apply to a 
valid withholding certificate provided by a participating FFI or 
registered deemed-compliant FFI that is a flow-through entity or is 
acting as an intermediary with respect to the payment.
    (ii) Exception for payments made prior to January 1, 2017, with 
respect to preexisting obligations (transitional). For payments made 
prior to January 1, 2017, with respect to a preexisting obligation, a 
withholding agent may treat a payee as a participating FFI or 
registered deemed-compliant FFI, or branch thereof (including an entity 
that is disregarded as an entity separate from the FFI), if the payee 
has provided the withholding agent with a pre-FATCA Form W-8 and 
(either orally or in writing) its GIIN and has indicated whether it is 
a participating FFI or a registered deemed-compliant FFI (or whether 
such branch or disregarded entity is treated as a participating FFI or 
a registered deemed-compliant FFI), and the withholding agent has 
verified the GIIN of the FFI, branch, or disregarded entity, as the 
context requires, in the manner described in paragraph (e)(3) of this 
section.
    (iii) Exception for offshore obligations. A withholding agent that 
makes a payment, other than a payment

[[Page 2159]]

of U.S. source FDAP income, with respect to an offshore obligation may 
treat a payee as a participating FFI or registered deemed-compliant 
FFI, or branch thereof (including an entity that is disregarded as an 
entity separate from the FFI), if the payee provides the withholding 
agent with its GIIN and states whether the payee is a participating FFI 
or a registered deemed-compliant FFI, and the withholding agent 
verifies the GIIN in the manner described in paragraph (e)(3) of this 
section. A withholding agent that makes a payment of U.S. source FDAP 
income with respect to an offshore obligation may treat the payee as a 
participating FFI or registered deemed-compliant FFI, or branch thereof 
(including an entity that is disregarded as an entity separate from the 
FFI) if--
    (A) * * *
    (1) A written statement that contains the payee's GIIN, states that 
the payee is the beneficial owner of the payment, and indicates whether 
the payee is treated as a participating FFI or a registered deemed-
compliant FFI, as appropriate; and
* * * * *
    (iv) * * *
    (A) For payments made prior to January 1, 2015, a withholding agent 
may treat a payee that is an FFI or branch of an FFI (including an 
entity that is disregarded as an entity separate from the FFI) as a 
reporting Model 1 FFI if it receives a withholding certificate from the 
payee indicating that the payee is a reporting Model 1 FFI and the 
country in which the payee is a reporting Model 1 FFI, regardless of 
whether the certificate contains a GIIN for the payee.
* * * * *
    (C) For payments made prior to January 1, 2015, with respect to an 
offshore obligation, a withholding agent may treat a payee as a 
reporting Model 1 FFI if the payee informs the withholding agent that 
the payee is a reporting Model 1 FFI and provides the country in which 
the payee is a reporting Model 1 FFI. In the case of a payment of U.S. 
source FDAP income, such payee must also provide a written statement 
that it is the beneficial owner and documentary evidence supporting the 
payee's claim of foreign status (as described in paragraph (c)(5)(i) of 
this section).
    (D) For payments made on or after January 1, 2015, that do not 
constitute U.S. source FDAP income, the withholding agent may continue 
to treat a payee as a reporting Model 1 FFI if the payee provides the 
withholding agent with its GIIN, either orally or in writing, and the 
withholding agent verifies the GIIN in the manner described in 
paragraph (e)(3) of this section.
    (v) Reason to know. See paragraph (e) of this section for when a 
withholding agent will have reason to know that a withholding 
certificate or written statement provided by a payee claiming status as 
a participating FFI or registered deemed-compliant FFI is incorrect or 
invalid.
    (vi) Sponsored investment entities and sponsored controlled foreign 
corporations--(A) In general. A withholding agent may treat a payee as 
a sponsored investment entity or sponsored controlled foreign 
corporation if the withholding agent has a withholding certificate 
identifying the payee as a sponsored investment entity or sponsored 
controlled foreign corporation (as applicable) and the withholding 
certificate includes the GIIN of the sponsored investment entity or 
sponsored controlled foreign corporation entity (as applicable), which 
the withholding agent has verified against the published IRS FFI list 
in the manner described in paragraph (e)(3)(i) of this section.
    (B) Payments made prior to January 1, 2017 (transitional). For 
payments made prior to January 1, 2017, a sponsored investment entity 
or sponsored controlled foreign corporation may provide the GIIN of its 
sponsoring entity on the withholding certificate, which the withholding 
agent must verify against the published IRS FFI list in the manner 
described in paragraph (e)(3)(i) of this section.
    (C) Payments made after December 31, 2016, to payees documented 
prior to January 1, 2017. For a payment made after December 31, 2016, 
to a payee that the withholding agent has documented prior to January 
1, 2017, as a sponsored investment entity or sponsored controlled 
foreign corporation with a valid withholding certificate that includes 
the GIIN of the sponsoring entity, the withholding agent must obtain 
and verify the GIIN of the sponsored investment entity or sponsored 
controlled foreign corporation against the published IRS FFI list in 
the manner described in paragraph (e)(3)(i) of this section by March 
31, 2017. Notwithstanding the preceding sentence, a GIIN is not 
required for a payee that provides a valid withholding certificate 
prior to January 1, 2017, that identifies the payee as a sponsored FFI 
and includes the GIIN of the sponsoring entity if the withholding agent 
determines, based on information provided on the withholding 
certificate, that the sponsored entity is resident, organized, or 
located in a jurisdiction that is treated as having a Model 1 IGA in 
effect. A withholding agent required to obtain a GIIN of the sponsored 
investment entity or sponsored controlled foreign corporation under 
this paragraph (d)(4)(vi)(C) may obtain such GIIN by oral or written 
confirmation (including by email) rather than obtaining a new 
withholding certificate, provided that the withholding agent retains a 
record of the confirmation, which will become part of the withholding 
certificate.
    (5) * * *
    (i) In general. Except as otherwise provided in this paragraph 
(d)(5), a withholding agent may treat a payee as a certified deemed-
compliant FFI, other than a sponsored, closely held investment vehicle, 
if the withholding agent has a withholding certificate that identifies 
the payee as a certified deemed-compliant FFI, and the withholding 
certificate contains a certification by the payee that it meets the 
requirements to qualify as the type of certified deemed-compliant FFI 
identified on the withholding certificate. See paragraph (c)(3)(iii) of 
this section for additional requirements that apply to a valid 
withholding certificate provided by a certified deemed-compliant FFI 
that is a flow-through entity or is acting as an intermediary with 
respect to the payment, or by a U.S. branch of a certified deemed-
compliant FFI.
    (ii) Sponsored, closely held investment vehicles--(A) In general. A 
withholding agent may treat a payee as a sponsored, closely held 
investment vehicle described in Sec.  1.1471-5(f)(2)(iii) if the 
withholding agent can reliably associate the payment with a withholding 
certificate that identifies the payee as a sponsored, closely held 
investment vehicle and includes the sponsoring entity's GIIN, which the 
withholding agent has verified against the published IRS FFI list in 
the manner described in paragraph (e)(3) of this section. In addition 
to the standards of knowledge rules indicated in paragraph (e) of this 
section, a withholding agent will have reason to know that the payee is 
not a sponsored, closely held investment vehicle described in Sec.  
1.1471-5(f)(2)(iii) if its AML due diligence indicates that the payee 
has in excess of 20 individual investors that own direct and/or 
indirect interests in the payee. See paragraph (c)(3)(iii) of this 
section for additional requirements that apply to a valid withholding 
certificate provided by a sponsored, closely held investment vehicle 
that is a flow-through entity or is acting as an

[[Page 2160]]

intermediary with respect to the payment, or by a U.S. branch of such 
vehicle.
    (B) Offshore obligations. A withholding agent that makes a payment 
with respect to an offshore obligation may treat a payee as a 
sponsored, closely held investment vehicle if it obtains a written 
statement that indicates that the payee is a sponsored, closely held 
investment vehicle, and provides the sponsoring entity's GIIN, which 
the withholding agent has verified in the manner described in paragraph 
(e)(3) of this section. In the case of a payment of U.S. source FDAP 
income, the written statement must also indicate that the payee is the 
beneficial owner and must be supplemented with documentary evidence 
supporting the payee's claim of foreign status (as described in 
paragraph (c)(5)(i) of this section).
    (iii) Certain investment entities that do not maintain financial 
accounts--(A) In general. A withholding agent may treat a payee as an 
investment entity that does not maintain financial accounts described 
in Sec.  1.1471-5(f)(2)(v) if the withholding agent can reliably 
associate the payment with a withholding certificate that identifies 
the payee as an investment entity that does not maintain financial 
accounts. In addition to the standards of knowledge rules indicated in 
paragraph (e) of this section, a withholding agent will have reason to 
know that the payee is not an investment entity that does not maintain 
financial accounts described in Sec.  1.1471-5(f)(2)(v) if its AML due 
diligence documentation indicates that the payee has financial 
accounts.
    (B) Offshore obligations. A withholding agent that makes a payment 
with respect to an offshore obligation may treat a payee as an 
investment advisor and investment manager described in Sec.  1.1471-
5(f)(2)(v) if it obtains a written statement that indicates that the 
payee is an investment advisor and investment manager. In the case of a 
payment of U.S. source FDAP income, the written statement must also 
indicate that the payee is the beneficial owner and must be 
supplemented with documentary evidence supporting the payee's claim of 
foreign status (as described in paragraph (c)(5)(i) of this section).
    (6) * * *
    (i) * * *
    (F) [Reserved]. For further guidance, see Sec.  1.1471-
3T(d)(6)(i)(F).
* * * * *
    (vii) * * *
    (A) * * *
    (1) The payment is made with respect to an offshore obligation that 
has a balance or value not exceeding $1,000,000 on the later of June 
30, 2014, or the last day of the calendar year in which the account was 
opened, and the last day of each subsequent year preceding the payment, 
applying the aggregation principles of Sec.  1.1471-5(b)(4);
* * * * *
    (7) Nonreporting IGA FFIs--(i) In general. A withholding agent may 
treat a payee as a nonreporting IGA FFI described in Sec.  1.1471-
1(b)(83)(ii) (unless such FFI is treated as a registered deemed-
compliant FFI under Annex II of the Model 2 IGA) or as a nonreporting 
IGA FFI described in Sec.  1.1471-1(b)(83)(i), (iv), or (v) if the 
withholding agent has a withholding certificate identifying the payee, 
or the relevant branch of the payee, as a nonreporting IGA FFI. A 
withholding agent may treat a payee as a nonreporting IGA FFI described 
in Sec.  1.1471-1(b)(83)(ii) that is treated as a registered deemed-
compliant FFI under Annex II of the Model 2 IGA or as a nonreporting 
IGA FFI described in Sec.  1.1471-1(b)(83)(iii) if the withholding 
agent has a withholding certificate identifying the payee, or the 
relevant branch of the payee, as a nonreporting IGA FFI, and the 
withholding certificate contains a GIIN for the payee that is verified 
against the published IRS FFI list in the manner described in paragraph 
(e)(3) of this section.
* * * * *
    (11) * * *
    (viii) * * *
    (A) Exception for payments made prior to January 1, 2017, with 
respect to preexisting obligations of $1,000,000 or less 
(transitional). A withholding agent that makes a payment prior to 
January 1, 2017, with respect to a preexisting obligation with a 
balance or value not exceeding $1,000,000 on June 30, 2014, and 
December 31, 2015, applying the aggregation principles of Sec.  1.1471-
5(b)(4)(iii), may treat a payee as an excepted territory NFFE described 
in Sec.  1.1472-1(c)(1)(iii) if the withholding agent--
* * * * *
    (C) Exception for preexisting offshore obligations of $1,000,000 or 
less. A withholding agent that makes a payment with respect to an 
offshore obligation that is also a preexisting obligation with a 
balance or value not exceeding $1,000,000 on June 30, 2014 (or the 
effective date of the FFI agreement for a withholding agent that is a 
participating FFI) and the last day of each subsequent calendar year 
preceding the payment, applying the aggregation principles of Sec.  
1.1471-5(b)(4)(iii), may rely upon its review conducted for AML due 
diligence purposes to determine whether the owners of the payee are 
bona fide residents of the U.S. territory in which the payee is 
organized, in lieu of obtaining a written statement or documentary 
evidence described in paragraph (d)(11)(viii)(B) of this section. The 
preceding sentence applies only if the withholding agent is subject, 
with respect to such account, to the laws of a FATF-compliant 
jurisdiction and has identified the residence of the owners. The 
withholding agent relying upon this paragraph (d)(11)(viii)(C) must 
still obtain a written statement, documentary evidence (as provided in 
paragraph (d)(11)(viii)(B) of this section), or preexisting account 
documentary evidence (as described in paragraph (c)(5)(ii)(B) of this 
section) establishing that the payee is an entity other than a 
depository institution, custodial institution, or specified insurance 
company organized in a U.S. territory.
* * * * *
    (x) Identifying a direct reporting NFFE (other than a sponsored 
direct reporting NFFE)--(A) In general. A withholding agent may treat a 
payment as having been made to a direct reporting NFFE (other than a 
sponsored direct reporting NFFE) if it has a withholding certificate 
that identifies the payee as a direct reporting NFFE and the 
withholding certificate contains a GIIN for the payee that is verified 
against the published IRS FFI list in the manner described in paragraph 
(e)(3)(iii) of this section (indicating when a withholding agent may 
rely upon a GIIN).
    (B) Exception for offshore obligations. A withholding agent that 
makes a payment with respect to an offshore obligation may treat the 
payment as made to a direct reporting NFFE if the withholding agent 
has--
    (1)(i) General documentary evidence (as described in paragraph 
(c)(5)(ii)(A) of this section) for the payee providing sufficient 
information to determine that the payee is a foreign entity that is not 
a financial institution; or
    (ii) A written statement that the payee is a foreign entity that is 
not a financial institution and, for a payment of U.S. source FDAP 
income, documentary evidence supporting the payee's claim of foreign 
status (as described in paragraph (c)(5)(i) of this section), and
    (2) Received (either orally or in writing) a GIIN from the direct 
reporting NFFE and has verified the GIIN in the manner described in 
paragraph (e)(3)(iii) of this section.
    (C) Special rule for preexisting offshore obligations. A 
withholding

[[Page 2161]]

agent that makes a payment with respect to an offshore obligation that 
is also a preexisting obligation may treat the payee as a direct 
reporting NFFE if the withholding agent has preexisting account 
documentary evidence (as described in paragraph (c)(5)(ii)(B) of this 
section) providing sufficient information to determine that the payee 
is a foreign entity that is not a financial institution and it has 
received (either orally or in writing) a GIIN from the direct reporting 
NFFE and has verified the GIIN in the manner described in paragraph 
(e)(3)(iii) of this section.
    (xi) Identifying a sponsored direct reporting NFFE--(A) In general. 
A withholding agent may treat a payment as having been made to a 
sponsored direct reporting NFFE if it has a withholding certificate 
that identifies the payee as a sponsored direct reporting NFFE and the 
withholding certificate includes the sponsored direct reporting NFFE's 
GIIN, which the withholding agent has verified against the published 
IRS FFI list in the manner described in paragraph (e)(3)(iv) of this 
section (indicating when a withholding agent may rely upon a GIIN).
    (1) Payments made prior to January 1, 2017 (transitional). For 
payments prior to January 1, 2017, a sponsored direct reporting NFFE 
may provide the GIIN of its sponsoring entity on the withholding 
certificate, which the withholding agent must verify against the 
published IRS FFI list in the manner described in paragraph (e)(3)(iv) 
of this section.
    (2) Payments made after December 31, 2016, to payees documented 
prior to January 1, 2017. For a payment made after December 31, 2016, 
to a payee that the withholding agent has documented prior to January 
1, 2017, as a sponsored direct reporting NFFE with a valid withholding 
certificate that includes the GIIN of the sponsoring entity, the 
withholding agent must obtain and verify the GIIN of the sponsored 
direct reporting NFFE against the published IRS FFI list in the manner 
described in paragraph (e)(3)(i) of this section by March 31, 2017. A 
withholding agent required to obtain a GIIN of the sponsored direct 
reporting NFFE in the preceding sentence may obtain such GIIN by oral 
or written confirmation (including by email) rather than obtaining a 
new withholding certificate, provided that the withholding agent 
retains a record of the confirmation, which will become part of the 
withholding certificate.
    (B) Exception for offshore obligations. A withholding agent that 
makes a payment with respect to an offshore obligation may treat the 
payment as made to a sponsored direct reporting NFFE if the withholding 
agent has--
    (1) A written statement that the payee is a foreign entity that is 
a sponsored direct reporting NFFE and, for a payment of U.S. source 
FDAP income, documentary evidence supporting the payee's claim of 
foreign status (as described in paragraph (c)(5)(i) of this section), 
and
    (2) Received (either orally or in writing) the GIIN of the 
sponsored direct reporting NFFE and has verified the GIIN in the manner 
described in paragraph (e)(3)(iv) of this section. For payments prior 
to January 1, 2017, such requirement may be fulfilled by receiving 
(either orally or in writing) the GIIN of the sponsoring entity to the 
extent that the sponsored direct reporting NFFE has not obtained a 
GIIN.
    (xii) Identification of excepted inter-affiliate FFI--(A) In 
general. A withholding agent may treat a payee as an excepted inter-
affiliate FFI described in Sec.  1.1471-5(e)(5)(iv) if it has obtained 
a withholding certificate identifying the payee as such an entity.
    (B) Offshore obligations. A withholding agent that makes a payment 
with respect to an offshore obligation may treat the payment as made to 
an excepted inter-affiliate FFI described in Sec.  1.1471-5(e)(5)(iv) 
if the withholding agent obtains a written statement in which the payee 
certifies that it is a foreign entity operating as an excepted inter-
affiliate FFI and that it is a member of an expanded affiliated group 
of participating FFIs or registered deemed-compliant FFIs. In the case 
of a payment of U.S. source FDAP income, the written statement must 
also indicate that the payee is the beneficial owner and must be 
supplemented with documentary evidence supporting the payee's claim of 
foreign status (as described in paragraph (c)(5)(i) of this section).
    (C) Reason to know. A withholding agent that is not a member of the 
payee's expanded affiliated group has reason to know that an entity is 
not an excepted inter-affiliate FFI if it makes any payments (other 
than a payment of bank deposit interest) to such entity.
    (12) * * *
    (iii) * * *
    (A) In general. A passive NFFE will be required to provide to the 
withholding agent either a written certification (contained on a 
withholding certificate or in a written statement) that it does not 
have any substantial U.S. owners or the name, address, and TIN of each 
substantial U.S. owner of the NFFE, to avoid being withheld upon under 
Sec.  1.1472-1(b).
    (B) Exception for preexisting obligations of $1,000,000 or less 
(transitional). A withholding agent that makes a payment prior to 
January 1, 2017, with respect to a preexisting obligation with a 
balance or value not exceeding $1,000,000 on June 30, 2014, and 
December 31, 2015, applying the aggregation principles of Sec.  1.1471-
5(b)(4)(iii), may rely upon its review conducted for AML due diligence 
purposes to identify any substantial U.S. owners of the payee in lieu 
of obtaining the certification or information required in paragraph 
(d)(12)(iii)(A) of this section if the withholding agent is subject, 
with respect to such obligation, to the laws of a FATF-compliant 
jurisdiction and has identified the residence of any controlling 
persons (within the meaning of the withholding agent's AML due 
diligence rules). A withholding agent that makes a payment with respect 
to an offshore obligation that is also a preexisting obligation with a 
balance or value not exceeding $1,000,000 on June 30, 2014, (or the 
effective date of the FFI agreement for a withholding agent that is a 
participating FFI) and the last day of each subsequent calendar year 
preceding the payment, applying the aggregation principles of Sec.  
1.1471-5(b)(4)(iii), may rely upon its review conducted for AML due 
diligence purposes to identify any substantial U.S. owners of the payee 
in lieu of obtaining the certification or information required in 
paragraph (d)(12)(iii)(A) of this section if the withholding agent is 
subject, with respect to such obligation, to the laws of a FATF-
compliant jurisdiction and has identified the residence of any 
controlling persons (within the meaning of the withholding agent's AML 
due diligence rules).
    (e) * * *
    (2) Notification by the IRS. A withholding agent that has received 
notification by the IRS that a claim of status as a U.S. person, a 
participating FFI, a deemed-compliant FFI, or other entity entitled to 
a reduced rate of withholding under section 1471 or 1472 is incorrect 
knows that such a claim is incorrect beginning on the date that is 30 
days after the date the notice is received.
    (3) GIIN verification--(i) In general. A withholding agent that has 
received a payee's claim of status as a participating FFI or registered 
deemed-compliant FFI, and that is required under paragraph (d)(4) of 
this section to confirm that the FFI or branch thereof (including an 
entity that is disregarded as an entity separate from the FFI) claiming 
status as a participating FFI or registered deemed-compliant FFI has a 
GIIN that appears on the published IRS FFI list, has reason to know 
that such payee is

[[Page 2162]]

not such a financial institution if the payee's name (including a name 
reasonably similar to the name the withholding agent has on file for 
the payee) and GIIN do not appear on the most recently published IRS 
FFI list within 90 days of the date that the claim is made. For 
purposes of this paragraph (e)(3)(i), the GIIN that the withholding 
agent must confirm is, with respect to a payee that is a participating 
FFI or registered deemed-compliant FFI, the GIIN assigned to the FFI 
identifying its country of residence for tax purposes (or place of 
organization if the FFI has no country of residence) or, with respect 
to a payment that is made to a branch (including a disregarded entity) 
of a participating FFI or registered deemed-compliant FFI located 
outside of the FFI's country of residence or organization, the GIIN of 
the branch (or disregarded entity) receiving the payment. The 
withholding agent will have reason to know that a withholdable payment 
is made to a branch (including a disregarded entity) of a participating 
or registered deemed-compliant FFI that is not itself a participating 
FFI or registered deemed-compliant FFI when the withholding agent is 
directed to make the payment to an address in a jurisdiction other than 
that of the participating FFI or registered deemed-compliant FFI (or 
branch (including a disregarded entity) of such FFI) that is identified 
as the FFI (or branch (including a disregarded entity) of such FFI) 
that is supposed to receive the payment and for which the FFI's GIIN is 
not confirmed as described in the preceding sentence. The preceding 
sentence does not apply to an FFI that is an investment entity. If an 
FFI (other than an investment entity) directs the withholding agent to 
make the payment to an account held by the FFI and maintained by 
another financial institution, the FFI must provide to the withholding 
agent a statement in writing that the FFI is not directing the payment 
to any branch of such FFI that is not a participating FFI or a 
registered deemed-compliant FFI. An FFI whose registration with the IRS 
as a participating FFI or a registered deemed-compliant FFI is in 
process but has not yet received a GIIN may provide a withholding agent 
with a Form W-8 claiming the chapter 4 status it applied for and 
writing ``applied for'' in the box for the GIIN. In such case, the 
withholding agent will have 90 days from the date it receives the Form 
W-8 to obtain a GIIN and to verify the accuracy of the GIIN against the 
published IRS FFI list before it has reason to know that the payee is 
not a participating FFI or registered deemed-compliant FFI. If an FFI 
is removed from the published IRS FFI list, the withholding agent knows 
that such FFI is not a participating FFI or registered deemed-compliant 
FFI on the earlier of the date that the withholding agent discovers 
that the FFI has been removed from the list or the date that is one 
year from the date the FFI's GIIN was actually removed from the list.
    (ii) Special rules for reporting Model 1 FFIs. Prior to January 1, 
2015, a withholding agent that receives an FFI's claim of status as a 
reporting Model 1 FFI will not be required to confirm that the FFI has 
a GIIN that appears on the published IRS FFI list. A withholding agent 
has reason to know that the FFI is not a reporting Model 1 FFI if the 
withholding agent does not have a permanent residence address for the 
FFI, or an address of the relevant branch of the FFI, located in the 
country in which the FFI claims to be a reporting Model 1 FFI, or the 
withholding agent is making a payment to a branch of the FFI at an 
address in a country that does not have in effect a Model 1 IGA.
    (iii) Special rules for direct reporting NFFEs. A withholding agent 
that has received a payee's claim of status as a direct reporting NFFE 
and that is required under paragraph (d)(11)(x) of this section to 
confirm that the entity claiming status as a direct reporting NFFE has 
a GIIN that appears on the published IRS FFI list, has reason to know 
that such payee is not such a NFFE if the payee's name (including a 
name reasonably similar to the name the withholding agent has on file 
for the payee) and GIIN do not appear on the most recently published 
IRS FFI list within 90 days of the date that the claim is made. A payee 
whose registration with the IRS as a direct reporting NFFE is in 
process but has not yet received a GIIN may provide a withholding agent 
with a Form W-8 claiming the chapter 4 status it applied for and 
writing ``applied for'' in the box for the GIIN. In such case, the 
withholding agent will have 90 days from the date it receives the Form 
W-8 to verify the accuracy of the GIIN against the published IRS FFI 
list before it has reason to know that the payee is not a direct 
reporting NFFE. If a direct reporting NFFE is removed from the 
published IRS FFI list, the withholding agent knows that such NFFE is 
not a direct reporting NFFE on the earlier of the date that the 
withholding agent discovers that the NFFE has been removed from the 
list or the date that is one year from the date the NFFE's GIIN was 
actually removed from the list.
    (iv) Special rules for sponsored direct reporting NFFEs and 
sponsoring entities--(A) Sponsored direct reporting NFFEs. A 
withholding agent that has received a payee's claim of status as a 
sponsored direct reporting NFFE and that is required under paragraph 
(d)(11)(xi) of this section to confirm that the entity claiming status 
as a sponsored direct reporting NFFE has a GIIN that appears on the 
published IRS FFI list, has reason to know that such payee is not such 
a NFFE if its name (including a name reasonably similar to the name the 
withholding agent has on file for the payee) and GIIN do not appear on 
the most recently published IRS FFI list within 90 days of the date 
that the claim is made. A sponsored direct reporting NFFE whose 
registration with the IRS as a sponsored direct reporting NFFE is in 
process but has not yet received a GIIN may provide a withholding agent 
with a Form W-8 claiming the chapter 4 status it applied for and 
writing ``applied for'' in the box for the GIIN. In such case, the 
withholding agent will have 90 days from the date it receives the Form 
W-8 to verify the accuracy of the GIIN against the published IRS FFI 
list before it has reason to know that the payee is not a sponsored 
direct reporting NFFE. If a sponsored direct reporting NFFE is removed 
from the published IRS FFI list, the withholding agent knows that such 
NFFE is not a sponsored direct reporting NFFE on the earlier of the 
date that the withholding agent discovers that the sponsored entity has 
been removed from the list or the date that is one year from the date 
the sponsored entity's GIIN was actually removed from the list.
    (B) Sponsoring entities (transitional). For payments made prior to 
January 1, 2017, a withholding agent that has received a payee's claim 
of status as a sponsored direct reporting NFFE has reason to know that 
such payee is not such a NFFE if the name of its sponsoring entity 
(including a name reasonably similar to the name the withholding agent 
has on file for the sponsoring entity) and the GIIN of its sponsoring 
entity do not appear on the most recently published IRS FFI list within 
90 days of the date that the claim is made. A sponsoring entity whose 
registration with the IRS is in process but has not yet received a GIIN 
may provide a withholding agent with a Form W-8 claiming the chapter 4 
status it applied for and writing ``applied for'' in the box for the 
GIIN. In such case, the withholding agent will have 90 days from the 
date it receives the Form W-8 to verify the accuracy of the GIIN 
against the published IRS FFI list before

[[Page 2163]]

it has reason to know that the payee is not a sponsored direct 
reporting NFFE. If the sponsoring entity of the NFFE is removed from 
the published IRS FFI list, the withholding agent knows that such NFFE 
is not a sponsored direct reporting NFFE on the earlier of the date 
that the withholding agent discovers that the sponsoring entity has 
been removed from the list or the date that is one year from the date 
the sponsoring entity's GIIN was actually removed from the list.
    (4) Reason to know. A withholding agent has reason to know that a 
claim of chapter 4 status is unreliable or incorrect if its knowledge 
of relevant facts or statements contained in the withholding 
certificate or other documentation is such that a reasonably prudent 
person in the position of the withholding agent would question the 
claim being made. For an obligation other than a preexisting 
obligation, a withholding agent has reason to know that a person's 
claim of chapter 4 status is unreliable or incorrect if any information 
contained in its account opening files or other customer account files, 
including documentation collected for AML due diligence purposes, 
conflicts with the chapter 4 status being claimed. A withholding agent 
will not, however, have reason to know that a person's claim of chapter 
4 status is unreliable or incorrect based on documentation collected 
for AML due diligence purposes until the date that is 30 days after the 
obligation is created. In addition to the specific standards of 
knowledge set forth in this paragraph (e) regarding a person's claim of 
chapter 4 status, a withholding agent is also required to apply any 
specific standards of knowledge applicable to the chapter 4 status 
claimed as set forth in paragraph (d) of this section. A withholding 
agent that has obtained documentation to reliably associate a payment 
to a foreign person under paragraph (c) of this section has reason to 
know that the person's claim of foreign status is unreliable or 
incorrect only to the extent provided in this paragraph (e)(4). See 
also Sec.  1.1441-1(e)(4)(ii)(D) for requirements that apply when a 
change in circumstances occurs for purposes of chapter 3 and the 
related grace period allowed under Sec.  1.1441-1(b)(3)(iv). The limits 
on reason to know for multiple obligations held by the same person set 
forth in Sec.  1.1441-7(b)(11) shall apply by substituting the term 
chapter 4 status for the term foreign status. See Sec.  1.1471-
3(e)(4)(vii) for the limits on reason to know with respect to a 
preexisting obligation.
    (i) Reason to know regarding an entity's chapter 4 status. A 
withholding agent has reason to know that a withholding certificate, 
written statement, or documentary evidence provided by or on behalf of 
an entity is unreliable or incorrect if there is information on the 
face of the documentation or in the withholding agent's account files 
that conflicts with the entity's claim regarding its chapter 4 status. 
For example, a withholding agent has reason to know that an entity's 
claim that it is an excepted NFFE is unreliable or incorrect if the 
withholding agent has obtained a financial statement or credit report 
for AML purposes that indicates that the entity is engaged in business 
as a financial institution. See also paragraph (e)(4) of this section 
for the 30-day period before a withholding agent has reason to know a 
claim is unreliable or incorrect based on AML information. Further, a 
withholding agent that has classified an entity as engaged in a 
particular type of business based on its records, such as through the 
use of a standardized industry coding system, AML or other regulatory 
purpose that requires the withholding agent to periodically monitor and 
periodically update the business classification based on the 
withholding agent's records, the withholding agent has reason to know 
that the chapter 4 status claimed by the entity is unreliable or 
incorrect only if the entity's claim conflicts with the withholding 
agent's classification of the entity's business type.
    (ii) Reason to know applicable to withholding certificates--(A) In 
general. A withholding agent has reason to know that a withholding 
certificate provided by a person is unreliable or incorrect if the 
withholding certificate is incomplete with respect to any item on the 
certificate that is relevant to the claims made by the person, the 
withholding certificate contains any information that is inconsistent 
with the person's claim, the withholding agent has other account 
information that is inconsistent with the person's claim, or the 
withholding certificate lacks information necessary to establish 
entitlement to an exemption from withholding for chapter 4 purposes. 
Except as otherwise provided in this paragraph (e)(4)(ii)(A), a 
withholding agent that is a financial institution or other entity 
described in Sec.  1.1441-7(b)(3) and that has obtained a withholding 
certificate to reliably associate a payment to a foreign person under 
paragraph (c) of this section has reason to know that the person's 
claim of foreign status is unreliable or incorrect only if there are 
U.S. indicia, as described in Sec.  1.1441-7(b)(5), associated with the 
person and for which appropriate documentation sufficient to cure the 
U.S. indicia has not been obtained in accordance with Sec.  1.1441-7(b) 
within 90 days of when the U.S. indicia was first identified by the 
withholding agent. See also Sec.  1.1441-1(e)(4)(ii)(D) for 
requirements that apply when a change in circumstances occurs for 
purposes of chapter 3 and the related grace period allowed under Sec.  
1.1441-1(b)(3)(iv). A withholding agent that relies on an agent to 
review and maintain a withholding certificate is considered to know or 
have reason to know the facts within the knowledge of the agent.
    (B) Withholding certificate provided by an FFI. A withholding agent 
that obtains a withholding certificate to reliably associate a payment 
to a participating FFI, a registered deemed-compliant FFI, a sponsoring 
entity, or a sponsored FFI does not need to apply the standards of 
knowledge described in Sec.  1.1441-7(b)(5) if it has confirmed the 
FFI's GIIN on the current published IRS FFI list, in the manner 
described under paragraph (e)(3) of this section, within 90 days of 
receipt of the withholding certificate.
    (iii) Reason to know applicable to written statements. A 
withholding agent must apply the standards of knowledge applicable to 
withholding certificates, as set forth in paragraph (e)(4)(ii) of this 
section, to determine whether it has reason to know that a written 
statement is unreliable or incorrect in terms of establishing a 
person's claim of foreign status. The rules under paragraph (e)(4)(ii) 
shall be applied by substituting the term written statement for the 
term withholding certificate.
    (iv) Reason to know applicable to documentary evidence--(A) In 
general. A withholding agent may not treat documentary evidence 
provided by a person as valid if the documentary evidence does not 
reasonably establish the identity of the person presenting the 
documentary evidence. For example, documentary evidence is not valid if 
it is provided in person by an individual and the photograph or 
signature on the documentary evidence does not match the appearance or 
signature of the person presenting the document. A withholding agent 
may not treat documentary evidence as valid if the documentary evidence 
contains information that is inconsistent with the person's claim as to 
its chapter 4 status, the withholding agent has other account 
information that is inconsistent with the person's chapter 4 status, or 
the documentary evidence lacks information necessary to establish the 
person's chapter 4 status. Additionally,

[[Page 2164]]

a withholding agent that is a financial institution under Sec.  1.1471-
5(e), or other entity as described in Sec.  1.1441-7(b)(3) that has 
obtained documentary evidence to reliably associate a payment to a 
foreign person under paragraph (c) of this section has reason to know 
that the person's claim of foreign status is unreliable or incorrect 
only if there are U.S. indicia, as described in Sec.  1.1441-7(b)(8), 
associated with the person and appropriate documentation sufficient to 
cure the U.S. indicia has not been obtained in accordance with Sec.  
1.1441-7(b) within 90 days of when the U.S. indicia was first 
identified by the withholding agent. See also Sec.  1.1441-
1(e)(4)(ii)(D) for requirements when a change in circumstances occurs 
for purposes of chapter 3 and the related grace period allowed under 
Sec.  1.1441-1(b)(3)(iv).
    (B) Standards of knowledge applicable to certain types of 
documentary evidence--(1) Financial statement. A withholding agent that 
obtains a financial statement for purposes of establishing that a 
foreign payee meets a certain asset threshold has reason to know that 
the chapter 4 status claimed is unreliable or incorrect only if the 
total assets shown on the financial statement for the payee, and if 
relevant the payee's expanded affiliated group, are not within the 
permissible thresholds, or the footnotes to the financial statement 
indicate that the payee is not a foreign entity or is not a type of FFI 
eligible for the chapter 4 status claimed. A withholding agent that 
obtains a financial statement for purposes of establishing that the 
payee is an active NFFE will be required to review the balance sheet 
and income statement to determine whether the payee meets the income 
and asset thresholds set forth in Sec.  1.1472-1(c)(1)(iv) and the 
footnotes of the financial statement for an indication that the payee 
is not a foreign entity or is a financial institution. A withholding 
agent that obtains a financial statement for purposes of establishing a 
chapter 4 status for a payee that does not require the payee to meet an 
asset or income threshold will be required to review only the footnotes 
to the financial statement to determine whether the financial statement 
supports the claim of chapter 4 status. A withholding agent that is not 
relying upon a financial statement to establish the chapter 4 status of 
the payee (for example because it has other documentation that 
establishes the payee's chapter 4 status) is not required to 
independently evaluate the financial statement solely because the 
withholding agent also has collected the financial statement in the 
course of its account opening or other procedures.
    (2) Organizational documents. A withholding agent that obtains 
organizational documents for a payee solely for the purpose of 
supporting the chapter 4 status claimed by the entity will only be 
required to review the document sufficiently to establish that the 
entity is a foreign person and that the purposes for which the entity 
was formed and its basic activities appear to be of a type consistent 
with the chapter 4 status claimed, unless otherwise specified in 
paragraph (d) of this section. A withholding agent that obtains 
organizational documents for the purpose of establishing that an entity 
has a particular chapter 4 status will only be required to review the 
document to the extent needed to establish that the entity is a foreign 
person, that the requirements applicable to the particular chapter 4 
status are met, and that the document was executed, but will not be 
required to review the remainder of the document.
    (v) Specific standards of knowledge applicable when only 
documentary evidence is a code or classification described in paragraph 
(c)(5)(ii)(B) of this section. A withholding agent may not rely upon a 
classification described in paragraph (c)(5)(ii)(B) of this section or 
a standardized industry coding system to treat an entity as having a 
foreign status if there are U.S. indicia described in paragraph 
(e)(4)(v)(A) of this section associated with the entity, unless such 
U.S. indicia are cured in the manner set forth in paragraph 
(e)(4)(v)(B) of this section.
* * * * *
    (B) * * *
    (1) If there are U.S. indicia described in paragraphs 
(e)(4)(v)(A)(1) through (4) of this section associated with the entity, 
the withholding agent may treat the entity as a foreign person only if 
the withholding agent obtains a withholding certificate for the entity 
and one form of documentary evidence, described in paragraph (c)(5) of 
this section, that establishes the entity's status as a foreign person 
(such as a certificate of incorporation).
    (2) If there are U.S. indicia described in paragraphs 
(e)(4)(v)(A)(1) through (4) of this section associated with the entity 
and the withholding agent is making a payment with respect to an 
offshore obligation, the withholding agent may also treat the entity as 
a foreign person if the withholding agent obtains a withholding 
certificate for the entity and the withholding agent treats the entity 
as foreign for purposes of foreign tax reporting. A withholding agent 
will treat an entity as foreign for purposes of foreign tax reporting 
only if the withholding agent classifies the entity as a resident of 
the country in which the obligation is maintained, the withholding 
agent is required to report a payment made to the entity annually on a 
tax information statement that is filed with the tax authority of the 
country in which the account is maintained as part of that country's 
resident reporting requirements, and that country has a tax information 
exchange agreement or income tax treaty in effect with the United 
States.
* * * * *
    (vi) * * *
    (B) Limits on reason to know with respect to documentation received 
from participating FFIs and registered deemed-compliant FFIs that are 
intermediaries or flow-through entities. A withholding agent that 
receives documentation from a participating FFI or registered deemed-
compliant FFI that is not the payee must apply the requirements of 
paragraph (e)(4)(vi)(A) of this section, except that the withholding 
agent may rely upon the chapter 4 status provided by the participating 
FFI or registered deemed-compliant FFI in the withholding statement, 
including a chapter 4 status determined under the requirements of (and 
documentation or information that is publicly available that determines 
the chapter 4 status of the payee permitted under) an applicable IGA 
for an account holder, provided that the withholding agent has the 
information necessary to report on Form 1042-S, unless the withholding 
agent has information that conflicts with the chapter 4 status 
provided. See Sec.  1.1441-1(e)(3)(iv)(C)(2)(iv) (requiring that a 
nonqualified intermediary withholding statement for a reportable amount 
that is a withholdable payment include the recipient code for chapter 4 
purposes used for filing Form 1042-S for an entity payee). If 
underlying documentation is provided for the payee and information in 
the documentation or in the withholding agent's records conflicts with 
the chapter 4 status claimed by the payee, the withholding agent has 
reason to know that the chapter 4 status claimed is unreliable or 
incorrect. A withholding agent is not, however, required to verify 
information contained in documentation provided by an intermediary or 
flow-through entity that is a participating FFI or registered deemed-
compliant FFI that is not facially incorrect and is not required to 
obtain supporting documentation for the payee in addition to a 
withholding

[[Page 2165]]

certificate unless the withholding agent obtains such documentation for 
purposes of chapter 3 or 61 or unless the withholding agent knows that 
the review conducted by the participating FFI or registered deemed-
compliant FFI for purposes of chapter 4 was not adequate. For example, 
a withholding agent that receives a withholding statement from a 
participating FFI that is an intermediary stating that the payee is a 
registered deemed-compliant FFI is only required to determine that any 
withholding certificate provided for the payee contains a GIIN and that 
the GIIN does not appear to be facially invalid (for example, because 
it does not contain the correct amount of digits), but is not subject 
to the requirements set forth in paragraph (e)(3) of this section. 
Similarly, a withholding agent that receives from a participating FFI 
that is a partnership a withholding statement claiming that the payee 
is an active NFFE has reason to know that the claim is unreliable or 
incorrect if it receives a withholding statement that contains a U.S. 
address for the payee unless the partnership also provides a copy of 
documentation sufficient to cure the U.S. indicia in the manner set 
forth in this paragraph (e) or the withholding statement indicates that 
appropriate documentation sufficient to cure the U.S. indicia in the 
manner set forth in this paragraph (e) has been obtained and provides 
details of such documentation, such as the type of documentation and an 
identification number of the person contained in the document.
    (vii) * * *
    (B) Reason to know there are U.S. indicia associated with 
preexisting obligations. With respect to a preexisting obligation, a 
withholding agent may apply the limits on reason to know described in 
Sec.  1.1441-7(b)(3)(ii) for a person that the withholding agent has 
previously documented for purposes of chapter 3 or 61. A withholding 
agent that applies the limits on reason to know described in Sec.  
1.1441-7(b)(3)(ii) must, however, review for U.S. indicia any 
additional documentation upon which the withholding agent is relying to 
determine the chapter 4 status of the person, if any.
* * * * *
    (viii) Reasonable explanation supporting claim of foreign status. A 
reasonable explanation supporting a claim of foreign status for an 
individual has the meaning described in Sec.  1.1441-7(b)(12).
* * * * *
    (f) * * *
    (1) In general. A withholding agent that cannot, prior to the 
payment, reliably associate (within the meaning of paragraph (c) of 
this section) the payment with valid documentation may rely on the 
presumptions of this paragraph (f) to determine the status of the payee 
(or other person receiving the payment) as a U.S. or foreign person and 
such person's other relevant characteristics (for example, as a 
nonparticipating FFI). Paragraph (f)(2) of this section provides the 
presumption rules with respect to classification as an individual or 
entity. Paragraph (f)(3) of this section provides the presumption rules 
to determine a payee's U.S. or foreign status. Paragraph (f)(4) of this 
section provides the presumption rules with respect to an entity's 
chapter 4 status. Paragraph (f)(5) of this section provides the 
presumption rules with respect to an intermediary or flow-through 
entity. Paragraph (f)(6) of this section provides the presumption rules 
with respect to effectively connected income paid to a U.S. branch of a 
payee. Paragraph (f)(7) of this section provides the presumption rules 
that apply to a payment made to joint payees. Paragraph (f)(8) of this 
section provides rules for how a payee may rebut the presumptions 
described in this paragraph (f). Paragraph (f)(9) of this section 
provides the consequences to a withholding agent that fails to withhold 
in accordance with the presumptions set forth in this paragraph (f) or 
that has actual knowledge or reason to know facts that are contrary to 
the presumptions set forth in this paragraph (f).
    (2) Presumptions of classification as an individual or entity and 
entity as the beneficial owner. A withholding agent that cannot 
reliably associate a payment with a valid withholding certificate, or 
that has received valid documentary evidence (as described in paragraph 
(c)(5) of this section), but cannot determine a payee's status as an 
individual or an entity from the documentary evidence, must apply the 
presumption rules of Sec.  1.1441-1(b)(3)(ii) to determine the payee's 
classification as an individual, trust, partnership, corporation, 
intermediary, or flow-through entity. Additionally, a withholding agent 
that receives valid documentary evidence with respect to an entity must 
apply the rules under Sec.  1.1441-1(b)(3)(ii) to determine when it may 
treat such entity as a beneficial owner.
    (3) Presumptions of U.S. or foreign status. If a withholding agent 
cannot reliably associate a payment with a valid withholding 
certificate or valid documentary evidence from which it is possible to 
determine the payee's U.S. or foreign status, it must apply the 
presumption rules of Sec.  1.1441-1(b)(3)(iii) to determine the U.S. or 
foreign status of the payee (substituting the term withholdable payment 
for the term payment). In the case of a payment that a withholding 
agent can reliably associate with valid documentation that indicates 
the payment is made to a U.S. person but does not indicate whether the 
person is a specified U.S. person, the payment will be presumed made to 
a specified U.S. person unless the withholding agent can apply the 
presumption rules of Sec.  1.6049-4(c)(1)(ii)(B), (C), (D), (E), (I), 
(J), (K), (L), or (N), to presume that the person is other than a 
specified U.S. person, or the person's name reasonably indicates that 
the person is a bank (for example because it contains the word Bank or 
a foreign equivalent).
    (4) Presumption of chapter 4 status for a foreign entity. If a 
withholding agent cannot reliably associate a valid withholding 
certificate or valid documentary evidence sufficient to determine the 
chapter 4 status of the entity receiving payment under paragraph (d) of 
this section (for example, as a participating FFI, nonparticipating 
FFI, or NFFE), it must presume that the entity is a nonparticipating 
FFI.
    (5) Presumption of chapter 4 status of payee with respect to a 
payment to an intermediary or flow-through entity. If a withholding 
agent makes a payment to a foreign flow-through entity or intermediary, 
including a payment that it is required to treat as made to such an 
entity under paragraphs (f)(2) and (3) of this section, and cannot 
reliably associate such payment with valid documentation under 
paragraph (c) of this section, the withholding agent must presume that 
the payment is made to a nonparticipating FFI.
    (6) Presumption of effectively connected income for payments to 
certain U.S. branches. A withholding agent that makes a payment to a 
U.S. branch described in this paragraph (f)(6) may presume, in the 
absence of documentation indicating otherwise, that the U.S. branch is 
the payee of a payment that is effectively connected with the conduct 
of a trade or business in the United States if the withholding agent 
has obtained an EIN from the U.S. branch (either orally or in writing). 
A U.S. branch is described in this paragraph (f)(6) if it is a U.S. 
branch of a foreign bank subject to regulatory supervision by the 
Federal Reserve Board or a U.S. branch of a foreign insurance company 
required to file an annual statement on a form approved by

[[Page 2166]]

the National Association of Insurance Commissioners with the Insurance 
Department of a State, a Territory, or the District of Columbia. A 
payment is treated as made to a U.S. branch of a foreign bank or 
foreign insurance company if the payment is credited to an account 
maintained in the United States in the name of a U.S. branch of the 
foreign person, or the payment is made to an address in the United 
States where the U.S. branch is located and the name of the U.S. branch 
appears on documents (in written or electronic form) associated with 
the payment (for example, the check mailed or letter addressed to the 
branch).
    (7) Joint payees--(i) In general. If a withholding agent makes a 
payment to joint payees and cannot reliably associate the payment with 
valid documentation from each payee but all of the joint payees appear 
to be individuals, then the payment is presumed made to an unidentified 
U.S. person. If any joint payee does not appear, by its name and other 
information contained in the account file, to be an individual, then 
the entire payment will be treated as made to a nonparticipating FFI. 
However, if one of the joint payees provides a Form W-9 in accordance 
with the procedures described in Sec. Sec.  31.3406(d)-1 through 
31.3406(d)-5 of this chapter, the payment shall be treated as made to 
that payee.
    (ii) Exception for offshore obligations. If a withholding agent 
makes a payment outside the United States with respect to an offshore 
obligation held by joint payees and cannot reliably associate a payment 
with valid documentation from each payee but all of the joint payees 
appear to be individuals, then the payment is presumed made to an 
unknown foreign individual if the payment with respect to the offshore 
obligation is made outside the United States (as described in Sec.  
1.6049-5(e)).
    (8) Rebuttal of presumptions. A payee may rebut the presumptions 
described in paragraphs (f)(2) through (7) of this section by providing 
reliable documentation to the withholding agent or, if applicable, to 
the IRS.
    (9) Effect of reliance on presumptions and of actual knowledge or 
reason to know otherwise--(i) In general. Except as otherwise provided 
in this paragraph (f)(9), a withholding agent that withholds on a 
payment under section 1471 or 1472 in accordance with the presumptions 
set forth in this paragraph (f) shall not be liable for withholding 
under this section even if it is later established that the payee has a 
chapter 4 status other than the status presumed. A withholding agent 
that fails to report and withhold in accordance with the presumptions 
described in paragraphs (f)(2) through (7) of this section with respect 
to a payment that it cannot reliably associate with valid documentation 
shall be liable for tax, interest, and penalties. See Sec.  1.1474-1(a) 
for the extent of a withholding agent's liability for failing to 
withhold in accordance with the presumptions described in this 
paragraph (f).
    (ii) Actual knowledge or reason to know that amount of withholding 
is greater than is required under the presumptions or that reporting of 
the payment is required. Notwithstanding the provisions of paragraph 
(f)(9)(i) of this section, a withholding agent that knows or has reason 
to know that the status or characteristics of the person are other than 
what is presumed under this paragraph (f) may not rely on the 
presumptions described in this paragraph (f) to the extent that, if it 
determined the status of the person based on such knowledge or reason 
to know, it would be required to withhold (under this section or 
another withholding provision of the Code) an amount greater than would 
be the case if it relied on the presumptions described in this 
paragraph (f). In such a case, the withholding agent must rely on its 
knowledge or reason to know rather than on the presumptions set forth 
in this paragraph (f). Failure to do so shall result in liability for 
tax, interest, and penalties to the extent described in Sec.  1.1474-
1(a).
    (g) Effective/applicability date. This section applies on January 
6, 2017. However, taxpayers may apply these provisions as of January 
28, 2013. A taxpayer may apply paragraph (c)(6)(iv) of this section to 
all of its open tax years. (For the rules that apply beginning on 
January 28, 2013, and before January 6, 2017, see this section as in 
effect and contained in 26 CFR part 1 revised April 1, 2016.)

0
Par. 8. Section 1.1471-3T is revised to read as follows:


Sec.  1.1471-3T   Identification of payee (temporary).

    (a) through (a)(3)(vii) [Reserved]. For further guidance, see Sec.  
1.1471-3(a) through (a)(3)(vii).
    (b) through (b)(4) [Reserved]. For further guidance, see Sec.  
1.1471-3(b) through (b)(4).
    (c) [Reserved]. For further guidance, see Sec.  1.1471-3(c).
    (1) In general. A withholding agent can reliably associate a 
withholdable payment with valid documentation if, prior to the payment, 
it has obtained (either directly from the payee or through its agent) 
valid documentation appropriate to the payee's chapter 4 status as 
described in paragraph (d) of this section, it can reliably determine 
how much of the payment relates to the valid documentation, and it does 
not know or have reason to know that any of the information, 
certifications, or statements in, or associated with, the documentation 
are unreliable or incorrect. Thus, a withholding agent cannot reliably 
associate a withholdable payment with valid documentation provided by a 
payee to the extent such documentation appears unreliable or incorrect 
with respect to the claims made, or to the extent that information 
required to allocate all or a portion of the payment to each payee is 
unreliable or incorrect. A withholding agent may rely on information 
and certifications contained in withholding certificates or other 
documentation without having to inquire into the truthfulness of the 
information or certifications, unless it knows or has reason to know 
that the information or certifications are untrue. A withholding agent 
may rely upon the same documentation for purposes of both chapters 3 
and 4 provided the documentation is sufficient to meet the requirements 
of each chapter. Alternatively, a withholding agent may elect to rely 
upon the presumption rules of paragraph (f) of this section in lieu of 
obtaining documentation from the payee. A withholding certificate will 
be considered provided by a payee if a withholding agent obtains the 
certificate from a third party repository (rather than directly from 
the payee or through its agent) and the requirements in Sec.  1.1441-
1(e)(4)(iv)(E) are satisfied. A withholding certificate obtained from a 
third party repository must still be reviewed by the withholding agent 
in the same manner as any other documentation to determine whether it 
may be relied upon for chapter 4 purposes. A withholding agent may rely 
on an electronic signature on a withholding certificate if the 
requirements in Sec.  1.1441-1(e)(4)(i)(B) are satisfied.
    (2) [Reserved]. For further guidance, see Sec.  1.1471-3(c)(2).
    (3) [Reserved]. For further guidance, see Sec.  1.1471-3(c)(3).
    (i) through (ii) [Reserved]. For further guidance, see Sec.  
1.1471-3(c)(3)(i) through (ii).
    (iii) [Reserved]. For further guidance, see Sec.  1.1471-
3(c)(3)(iii).
    (A) [Reserved]. For further guidance, see Sec.  1.1471-
3(c)(3)(iii)(A).
    (B) [Reserved]. For further guidance, see Sec.  1.1471-
3(c)(3)(iii)(B).
    (1) through (4) [Reserved]. For further guidance, see Sec.  1.1471-
3(c)(3)(iii)(B)(1) through (4).

[[Page 2167]]

    (5) Alternative withholding statement. A withholding agent that is 
making a withholdable payment to a nonqualified intermediary for which 
a withholding statement is required under chapters 3 and 4 may accept a 
withholding statement that meets the requirements for an alternative 
withholding statement described in Sec.  1.1441-1(e)(3)(iv)(C)(3).
    (C) through (H) [Reserved]. For further guidance, see Sec.  1.1471-
3(c)(3)(iii)(C) through (H).
    (iv) through (v) [Reserved]. For further guidance, see Sec.  
1.1471-3(c)(3)(iv) through (v).
    (4) through (5) [Reserved]. For further guidance, see Sec.  1.1471-
3(c)(4) through (5).
    (6) [Reserved]. For further guidance, see Sec.  1.1471-3(c)(6).
    (i) [Reserved]. For further guidance, see Sec.  1.1471-3(c)(6)(i).
    (ii) [Reserved]. For further guidance, see Sec.  1.1471-
3(c)(6)(ii).
    (A) through (D) [Reserved]. For further guidance, see Sec.  1.1471-
3(c)(6)(ii)(A) through (D).
    (E) [Reserved]. For further guidance, see Sec.  1.1471-
3(c)(6)(ii)(E).
    (1) through (3) [Reserved]. For further guidance, see Sec.  1.1471-
3(c)(6)(ii)(E)(1) through (3).
    (4) Withholding agent's reason to know of a change in circumstances 
due to a jurisdiction ceasing to be treated as having an IGA in effect. 
A withholding agent will have reason to know of a change in 
circumstances with respect to an FFI's chapter 4 status that results 
solely because the jurisdiction in which the FFI is resident, 
organized, or located ceases to be treated as having an IGA in effect 
on the date that the jurisdiction ceases to be treated as having an IGA 
in effect.
    (iii) through (vii) [Reserved]. For further guidance, see Sec.  
1.1471-3(c)(6)(iii) through (vii).
    (7) [Reserved]. For further guidance, see Sec.  1.1471-3(c)(7).
    (i) [Reserved]. For further guidance, see Sec.  1.1471-3(c)(7)(i).
    (ii) Documentation received after the time of payment. Proof that 
withholding was not required under the provisions of chapter 4 and the 
regulations thereunder also may be established after the date of 
payment by the withholding agent on the basis of a valid withholding 
certificate and/or other appropriate documentation that was furnished 
after the date of payment but that was effective as of the date of 
payment. A withholding certificate furnished after the date of payment 
will be considered effective as of the date of the payment if the 
certificate contains a signed affidavit (either at the bottom of the 
form or on an attached page) that states that the information and 
representations contained on the certificate were accurate as of the 
time of the payment. A certificate obtained within 30 days after the 
date of the payment will not be considered to be unreliable solely 
because it does not contain an affidavit. However, in the case of a 
withholding certificate of an individual received more than a year 
after the date of payment, the withholding agent will be required to 
obtain, in addition to the withholding certificate and affidavit, 
documentary evidence described in paragraph (c)(5)(i) of this section 
that supports the individual's claim of foreign status. In the case of 
a withholding certificate of an entity received more than a year after 
the date of payment, the withholding agent will be required to obtain, 
in addition to the withholding certificate and affidavit, documentary 
evidence specified in paragraph (c)(5)(ii) of this section that 
supports the chapter 4 status claimed. If documentation other than a 
withholding certificate is submitted from a payee more than a year 
after the date of payment, the withholding agent will be required to 
also obtain from the payee a withholding certificate and affidavit 
supporting the chapter 4 status claimed as of the date of the payment. 
See, however, Sec.  1.1441-1(b)(7)(ii) for special rules that apply 
when a withholding certificate is received after the date of the 
payment to claim that income is effectively connected with the conduct 
of a U.S. trade or business (as applied for purposes of this paragraph 
(c)(7)(ii) to a claim to establish that the payment is not a 
withholdable payment under Sec.  1.1473-1(a)(4)(ii) rather than to 
claim an exemption described in Sec.  1.1441-4(a)(1)).
    (8) through (9) [Reserved]. For further guidance, see Sec.  1.1471-
3(c)(8) through (c)(9)(v).
    (d) [Reserved]. For further guidance, see Sec.  1.1471-3(d).
    (1) through (5) [Reserved]. For further guidance, see Sec.  1.1471-
3(d)(1) through (5).
    (6) [Reserved]. For further guidance, see Sec.  1.1471-3(d)(6).
    (i) [Reserved]. For further guidance, see Sec.  1.1471-3(d)(6)(i).
    (A) through (E) [Reserved]. For further guidance, see Sec.  1.1471-
3(d)(6)(i)(A) through (E).
    (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 FFI that 
is a depository institution, custodial institution, or specified 
insurance company, 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) through (vii) [Reserved]. For further guidance, see Sec.  
1.1471-3(d)(6)(ii) through (d)(6)(vii)(B).
    (7) through (12) [Reserved]. For further guidance, see Sec.  
1.1471-3(d)(7) through (12)(iii)(B).
    (e) through (g) [Reserved]. For further guidance, see Sec.  1.1471-
3(e) through (g).
    (h) Expiration date. The applicability of this section expires on 
December 30, 2019.

0
Par. 9. Section 1.1471-4 is amended by:
0
1. Revising paragraphs (a)(3) and (4), (b)(1) through (4), (b)(6) and 
(7), (c)(1), (c)(2)(ii)(B)(2)(iii), (c)(2)(v), (c)(3)(ii), 
(c)(3)(iii)(A), (c)(5)(iv)(B)(2)(vi), (c)(5)(iv)(E), (c)(7), (d)(1), 
(d)(2)(i), (d)(2)(ii)(A), (d)(2)(ii)(B) introductory text, 
(d)(2)(ii)(B)(2), and (d)(2)(ii)(D) through (F).
0
2. Adding paragraph (d)(2)(ii)(G).
0
3. Revising paragraphs (d)(2)(iii)(A), (d)(2)(iii)(B) introductory 
text, (d)(2)(iii)(C) and (E), (d)(3)(iii) introductory text, 
(d)(3)(iii)(F), (d)(3)(vii), (d)(4)(i), (d)(4)(iv)(C), (d)(4)(iv)(D) 
introductory text, (d)(5)(i)(A) and (B), (d)(5)(ii)(B) introductory 
text, (d)(5)(v) through (vii), (d)(6)(vi), (d)(7)(i), (d)(7)(ii)(A) 
introductory text, (d)(7)(ii)(A)(1), (d)(7)(iii), (d)(7)(iv)(A) and 
(B), (d)(8), (d)(9) Example 1 through Example 3, (d)(9) Example 5, 
(d)(9) Example 7, (e)(1), (e)(2)(ii), (e)(2)(iv)(D), and (e)(2)(v),
0
4. Adding paragraph (e)(2)(vi).
0
5. Revising paragraphs (e)(3)(iii)(A) and (C), (e)(3)(iv),
0
6. Adding paragraphs (e)(3)(v) and (vi).
0
7. Revising paragraphs (e)(4), (f)(1), (f)(3)(i), (f)(4)(i) and (ii), 
(g)(1) introductory text, (g)(1)(ii), (g)(2), and (j).
    The revisions and additions read as follows:


Sec.  1.1471-4  FFI agreement.

    (a) * * *
    (3) Reporting. A participating FFI is required to report the 
information described in paragraph (d) of this section annually with 
respect to U.S. accounts under section 1471(c) and accounts held by 
recalcitrant account holders. A participating FFI must also comply with 
the filing requirements described in Sec.  1.1474-1(c) and (d) to 
report payments that are chapter 4 reportable amounts paid to 
recalcitrant

[[Page 2168]]

account holders and nonparticipating FFIs (including the transitional 
reporting of foreign reportable amounts paid to nonparticipating FFIs 
for calendar years 2015 and 2016 described in Sec.  1.1471-
4(d)(2)(ii)(F)). A participating FFI that is unable to obtain a waiver, 
if required by foreign law, to report an account as required under 
paragraph (d) of this section must close or transfer such account 
within a reasonable period of time as described in paragraph (i) of 
this section.
    (4) Expanded affiliated group. Except as otherwise provided in 
Model 1 IGA or Model 2 IGA, in order for any FFI that is a member of an 
expanded affiliated group to be a participating FFI, each FFI that is a 
member of the expanded affiliated group must be a participating FFI, 
deemed-compliant FFI, or exempt beneficial owner as described in 
paragraph (e) of this section. For a limited period described in 
paragraph (e)(2) or (3) of this section, however, a branch of an FFI or 
an FFI that is a member of an expanded affiliated group and is unable 
under foreign law to satisfy the requirements of this section may 
instead obtain status as a limited branch of a participating FFI or 
limited FFI if the branch or FFI meets the requirements set forth in 
paragraph (e)(2) or (3) of this section (as applicable).
* * * * *
    (b) * * *
    (1) In general. Except as otherwise provided in a Model 2 IGA, a 
participating FFI is required to deduct and withhold a tax equal to 30 
percent of any withholdable payment made by such participating FFI to 
an account held by a recalcitrant account holder or to a 
nonparticipating FFI after June 30, 2014, to the extent required under 
paragraph (b)(3) of this section. See paragraph (b)(2) of this section 
for rules for a participating FFI to identify the payee of a payment in 
order to determine whether withholding is required under this paragraph 
(b). See paragraph (b)(4) of this section for the extent of a 
participating FFI's requirement to deduct and withhold tax on a foreign 
passthru payment made by such participating FFI to an account held by a 
recalcitrant account holder or to a nonparticipating FFI. See paragraph 
(b)(5) of this section for the rules for withholding on payments to 
limited branches and limited FFIs. See paragraph (b)(6) for the special 
allowance to set aside in escrow amounts withheld with respect to 
dormant accounts. See paragraph (b)(7) of this section for the 
withholding requirements of certain U.S. branches of FFIs. See Sec.  
1.1471-2 for the exceptions to and special rules for withholding and 
the exclusion from the definitions of the terms 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. See Sec.  1.1474-1(d)(4)(iii) for the requirement 
of participating FFIs to report payments that are chapter 4 reportable 
amounts. See Sec.  1.1474-6 for the coordination of withholding on 
payments under this paragraph (b) with the other withholding provisions 
under the Code.
    (2) Withholding determination. Except as otherwise provided under 
Sec.  1.1471-2 and, with respect to certain preexisting accounts, 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, if the account is held by one or more 
individuals, the payee is each individual account holder. 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. If the 
participating FFI makes a withholdable payment to a payee that is an 
entity and the payment is made with respect to an obligation that is 
not an account, except as otherwise provided in Sec.  1.1471-3(a)(3), 
the payee is the person to whom the payment is made. See Sec.  1.1473-
1(a) to determine when a payment is made in the case of a withholdable 
payment. If a participating FFI cannot reliably associate a payment (or 
any portion of a payment) with valid documentation, the rules described 
in paragraph (c) of this section shall apply to determine the chapter 4 
status of the account holder (and payee if other than the account 
holder). Notwithstanding the foregoing, a participating FFI may 
establish after the date of payment that withholding was not required 
to the extent permitted under Sec.  1.1471-3(c)(7) or may apply the 
procedures provided in Sec.  1.1474-2 when overwithholding occurs.
    (3) Satisfaction of withholding requirements--(i) In general. A 
participating FFI that complies with the withholding obligations of 
this paragraph (b) with respect to accounts held by recalcitrant 
account holders and payees that are nonparticipating FFIs shall be 
deemed to satisfy its withholding obligations under sections 1471(a) 
and 1472 with respect to such account holders and payees.
    (ii) Withholding not required. A participating FFI that is an NQI, 
NWP, NWT, or that is a QI that elects under section 1471(b)(3) not to 
assume withholding responsibility for a payment and that provides its 
withholding agent with the information necessary to allocate all or a 
portion of the payment to each payee as part of a withholding 
certificate described in Sec.  1.1471-3(c)(3)(iii) will generally not 
be required to withhold under paragraph (b)(1) of this section. See 
Sec.  1.1471-2(a)(2)(ii), however, for the circumstances under which a 
participating FFI that is an NQI, NWP, or NWT has a residual 
withholding responsibility. See also Sec.  1.1471-3(c)(9)(iii)(B) for 
the circumstances under which a participating FFI that is a broker has 
a residual withholding responsibility as an intermediary of the payment 
and may also be liable for any underwithholding that occurs. See 
Sec. Sec.  1.1471-2(a) and 1.1472-1(a)(2)(i) and the QI, WP, or WT 
agreement for the withholding requirements of a participating FFI that 
is a QI, WP, or WT for purposes of chapter 4.
    (iii) Election to withhold under section 3406. A participating FFI 
may elect to satisfy its withholding obligation under paragraph (b)(1) 
of this section with respect to recalcitrant account holders that are 
also U.S. non-exempt recipients subject to backup withholding under 
section 3406 receiving withholdable payments, to the extent that the 
payments also constitute reportable payments, by applying withholding 
under section 3406 at the backup withholding rate to such withholdable 
payments. A participating FFI may make the election described in this 
paragraph only if it complies with the information reporting rules 
under chapter 61 with respect to payments to which backup withholding 
applies. Nothing in this paragraph relieves a participating FFI of its 
requirement to backup withhold under section 3406 with respect to 
reportable payments that are not also withholdable payments. See Sec.  
1.1474-6(f) for the general rule that satisfying withholding 
requirements under chapter 4 will satisfy backup withholding 
requirements under section 3406 for a payment that is both a 
withholdable payment and a reportable payment.
    (4) Foreign passthru payments. A participating FFI is not required 
to deduct and withhold tax on a foreign passthru payment made by such 
participating FFI to an account held by a recalcitrant account holder 
or to a nonparticipating FFI before the later of January 1, 2019, or 
the date of publication in the Federal Register of

[[Page 2169]]

final regulations defining the term foreign passthru payment.
* * * * *
    (6) Special rule for dormant accounts. A participating FFI that 
makes a withholdable payment not otherwise subject to withholding under 
chapter 3 or backup withholding under section 3406 to a recalcitrant 
account holder of a dormant account that it maintains must withhold on 
the account for purposes of chapter 4. However, the participating FFI 
may, in lieu of depositing the tax withheld, set aside the amount 
withheld in escrow until the date that the account ceases to be a 
dormant account. In such case, the tax withheld becomes due 90 days 
following the date that the account ceases to be a dormant account if 
the account holder does not provide the documentation required under 
paragraph (c) of this section or becomes refundable to the account 
holder if the account holder provides the documentation required under 
paragraph (c) of this section establishing that withholding does not 
apply. A participating FFI that maintains a dormant account of a 
recalcitrant account holder and that elects to escrow withheld tax 
pursuant to this paragraph (b)(6) may not delegate the responsibility 
to escrow withheld tax to the withholding agent from which it is 
receiving payment. Once a dormant account escheats irrevocably to a 
foreign government under the relevant laws in the jurisdiction in which 
the participating FFI (or branch thereof) operates, the participating 
FFI is no longer required to deposit with the IRS the amount held in 
escrow with respect to the account. See paragraph (d)(6)(ii) of this 
section for the definition of dormant account.
    (7) Withholding requirements for U.S. branches of FFIs treated as 
U.S. persons. A U.S. branch of an FFI treated as a U.S. person must 
satisfy 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. See 
Sec. Sec.  1.1441-1(b)(2)(iv)(C), 1.1471-2(a), and 1.1472-1(a) for 
additional withholding obligations for a U.S. branch of an FFI treated 
as a U.S. person. See paragraph (d)(2)(iii)(B) of this section for the 
reporting requirements applicable to U.S. branches of FFIs that are 
treated as U.S. persons.
* * * * *
    (c) * * *
    (1) Scope of paragraph. Except to the extent that a participating 
FFI relies on the due diligence procedures set forth in an applicable 
Model 2 IGA, a participating FFI must follow this paragraph (c) to 
identify and document the chapter 4 status of each holder of an account 
maintained by the participating FFI to determine if the account is a 
U.S. account, non-U.S. account, or an account held by a recalcitrant 
account holder or nonparticipating FFI. Paragraph (c)(2) of this 
section provides the general rules for identification and documentation 
of account holders and payees, and paragraph (c)(2)(v) provides 
documentation requirements for certain U.S. branches of FFIs. Paragraph 
(c)(3) of this section provides the rules for documenting entity 
accounts and payees. Paragraph (c)(4) of this section provides the 
general rules for documenting individual accounts other than 
preexisting accounts. Paragraph (c)(5) of this section provides the 
identification and documentation procedure for preexisting individual 
accounts. Paragraph (c)(6) of this section provides examples 
illustrating the application of the documentation exceptions for entity 
accounts and individual accounts. Paragraph (c)(7) of this section 
outlines the certification requirement relating to the due diligence 
procedures of this paragraph (c) with respect to preexisting accounts 
within the specified periods of time.
    (2) * * *
    (ii) * * *
    (B) * * *
    (2) * * *
    (iii) [Reserved]. For further guidance, see Sec.  1.1471-
4T(c)(2)(ii)(B)(2)(iii).
* * * * *
    (v) Documentation rules for U.S. branches of FFIs that are treated 
as U.S. persons. A U.S. branch of an FFI that is treated as a U.S. 
person shall apply 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. See 
paragraph (b)(7) of this section for withholding rules and paragraph 
(d)(2)(iii)(B) of this section for reporting rules applicable to such 
U.S. branches.
* * * * *
    (3) * * *
    (ii) Timeframe for applying identification and documentation 
procedure for entity accounts and payees. For preexisting entity 
accounts (including entity accounts that are opened on or after July 1, 
2014, and before January 1, 2015, that the FFI treats as preexisting 
obligations under Sec.  1.1471-1(b)(104)(i)), a participating FFI must 
perform the requisite identification and documentation procedures 
within six months of the effective date of the FFI agreement for any 
account holder that is a prima facie FFI, as defined in Sec.  1.1471-
2(a)(4)(ii)(B), and within two years of the effective date of the FFI 
agreement for all other entity accounts, except as otherwise provided 
in paragraph (c)(3)(iii) of this section. For accounts that are not 
preexisting accounts, the participating FFI must perform the requisite 
identification and documentation procedures by the earlier of the date 
a withholdable payment or a foreign passthru payment is made with 
respect to the account or within 90 days of the date the participating 
FFI opens the account. Notwithstanding the foregoing sentences of this 
paragraph (c)(3)(ii), with respect to a preexisting obligation issued 
in nonregistered (bearer) form by an investment entity, the investment 
entity is required to perform the requisite identification and 
documentation procedures at the time a payment is collected by the 
beneficial owner of the payment (including a beneficial owner that 
collects the payment through an intermediary or agent). If the 
participating FFI cannot obtain all the documentation described in 
Sec.  1.1471-3(d) or if the participating FFI knows or has reason to 
know that the documentation provided for an entity account is 
unreliable or incorrect (by applying the standards of knowledge 
applicable to entities in Sec.  1.1471-3(e) as modified by paragraph 
(c)(2)(ii)), the participating FFI shall apply the presumption rules of 
Sec.  1.1471-3(f) (as applicable to entities) to determine the chapter 
4 status of the account holder. In the case of an account held by a 
passive NFFE that provides the documentation described in Sec.  1.1471-
3(d)(12) to establish its status as a passive NFFE but fails to provide 
the information regarding its owners, see Sec.  1.1471-5(g)(2)(iv) for 
the requirement to treat the account as held by a recalcitrant account 
holder.
    (iii) * * *
    (A) Accounts to which this exception applies. Unless the 
participating FFI elects otherwise pursuant to paragraph (c)(3)(iii)(C) 
of this section, a participating FFI is not required to perform the 
identification and documentation procedure contained in this paragraph 
(c)(3) with respect to a preexisting entity account the aggregate 
balance or value of which is $250,000 or less if no holder of such 
account that has previously been documented by the FFI as a U.S. person 
for purposes of chapter 3 or 61 is a specified U.S. person. For 
purposes of applying this

[[Page 2170]]

exception, the account balance must be determined as of the effective 
date of the FFI agreement and the aggregation rules of paragraph 
(c)(3)(iii)(B) of this section shall apply. An account that meets this 
exception will cease to meet this exception as of the end of any 
subsequent calendar year in which the account balance or value exceeds 
$1,000,000, applying the aggregation rules of paragraph (c)(3)(iii)(B) 
of this section, or as of the date on which there is another change in 
circumstances with respect to the account or any account aggregated 
with the account. The exception to the identification and documentation 
procedure described in this paragraph (c)(3)(iii)(A) does not apply to 
an entity account opened on or after July 1, 2014, and before January 
1, 2015, that the FFI treats as a preexisting account under Sec.  
1.1471-1(b)(104)(i).
* * * * *
    (5) * * *
    (iv) * * *
    (B) * * *
    (2) * * *
    (vi) Standing instructions to pay amounts. If information required 
to be reviewed with respect to the account contains standing 
instructions to pay amounts from the account to an account maintained 
in the United States for an account holder, the participating FFI must 
retain a record of a withholding certificate and either a form of 
documentary evidence described in Sec.  1.1471-3(c)(5)(i)(A) through 
(C) or a written reasonable explanation (as defined in Sec.  1.1441-
7(b)(12)) establishing the account holder's status as a foreign person.
* * * * *
    (E) Exception for preexisting individual accounts previously 
documented as held by foreign individuals. A participating FFI that has 
previously obtained documentation from an account holder to establish 
the account holder's status as a foreign individual in order to meet 
its obligations under its QI, WP, or WT agreement with the IRS, or to 
fulfill its reporting obligations as a U.S. payor under chapter 61, is 
not required to perform the electronic search described in paragraph 
(c)(5)(iv)(C) of this section or the enhanced review described in 
paragraph (c)(5)(iv)(D)(3) of this section for such account. 
Additionally, a participating FFI with a U.S. payor as its paying agent 
is not required to perform the electronic search described in paragraph 
(c)(5)(iv)(C) of this section or the enhanced review described in 
paragraph (c)(5)(iv)(D)(3) of this section for an account for which its 
paying agent that is a U.S. payor has previously obtained documentation 
to establish the account holder's status as a foreign individual under 
chapter 61. The participating FFI is required, however, to perform the 
relationship manager inquiry described in paragraph (c)(5)(iv)(D)(2) of 
this section if the account is a high-value account described in 
paragraph (c)(5)(iv)(D)(1) of this section. For purposes of this 
paragraph (c)(5)(iv)(E), a participating FFI has documented an account 
holder's foreign status under chapter 61 if the participating FFI (or 
its paying agent that is a U.S. payor) has retained a record of the 
documentation required under chapter 61 to establish the foreign status 
of an individual and the account received a reportable payment as 
defined under section 3406(b) in any prior year that was properly 
reported in that year. In the case of a participating FFI that is a QI, 
WP, or WT, the participating FFI has documented an account holder's 
foreign status under its QI, WP, or WT agreement (as applicable) if the 
participating FFI has met the relevant documentation and reporting 
requirements of its agreement with respect to an account holder that 
received a reportable amount in any year in which its agreement was in 
effect.
* * * * *
    (7) Certifications of responsible officer. In order for a 
participating FFI to comply with the requirements of an FFI agreement 
with respect to its identification procedures for preexisting accounts, 
a responsible officer of the participating FFI must certify to the IRS 
regarding the participating FFI's compliance with the diligence 
requirements of this paragraph (c). The responsible officer must 
certify that the participating FFI has completed the review of all 
high-value accounts as required under paragraphs (c)(5)(iv)(D) and (E) 
of this section and treats any account holder of an account for which 
the participating FFI has not retained a record of any required 
documentation as a recalcitrant account holder as required under this 
section and Sec.  1.1471-5(g). 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). The responsible officer must also certify to the 
best of the responsible officer's knowledge after conducting a 
reasonable inquiry, that the participating FFI did not have any formal 
or informal practices or procedures in place from August 6, 2011, 
through the date that is two years after the effective date of the 
FFI's FFI agreement to assist account holders in the avoidance of 
chapter 4. A reasonable inquiry for purposes of this paragraph (c)(7) 
is a review of the participating FFI's procedures and a written 
inquiry, such as email requests to relevant lines of business, that 
requires responses from relevant customer on-boarding and management 
personnel as to whether they engaged in any such practices during that 
period. Practices or procedures that assist account holders in the 
avoidance of chapter 4 include, for example, suggesting that account 
holders split up accounts to avoid classification as a high-value 
account; suggesting that account holders of U.S. accounts close, 
transfer, or withdraw from their account to avoid reporting; 
intentional failures to disclose a known U.S. account; suggesting that 
an account holder remove U.S. indicia from its account information; or 
facilitating the manipulation of account balances or values to avoid 
thresholds. If the responsible officer is unable to make any of the 
certifications described in this paragraph (c)(7), the responsible 
officer must make a qualified certification to the IRS stating that 
such certification cannot be made and that corrective actions will be 
taken by the responsible officer. The certifications described in this 
paragraph (c)(7) must be submitted to the IRS by the due date of the 
FFI's first certification of compliance required under paragraph (f)(3) 
of this section.
    (d) * * *
    (1) Scope of paragraph. This paragraph (d) provides rules 
addressing the information reporting requirements applicable to 
participating FFIs with respect to U.S. accounts, accounts held by 
owner-documented FFIs, and recalcitrant account holders. Paragraph 
(d)(2) of this section describes the accounts subject to reporting 
under this paragraph (d), and specifies the participating FFI that is 
responsible for reporting an account or account holder. Paragraph 
(d)(3) of this section describes the information required to be 
reported and the manner of reporting by a participating FFI under 
section 1471(c)(1) with respect to a U.S. account or an account held by 
an owner-documented FFI. Paragraph (d)(4) of this section provides 
definitions of terms applicable to paragraph (d)(3). Paragraph (d)(5) 
of this section describes the conditions for a participating FFI to

[[Page 2171]]

elect to report its U.S. accounts and accounts held by owner-documented 
FFIs under section 1471(c)(2) and the information required to be 
reported under such election. Paragraph (d)(6) of this section provides 
rules for a participating FFI to report its recalcitrant account 
holders. Paragraph (d)(7) of this section provides special transitional 
reporting rules applicable to reports due in 2015 and 2016. Paragraph 
(d)(8) of this section provides the reporting requirements of a 
participating FFI that is a QI, WP, or WT with respect to U.S. 
accounts. See chapter 61 for reporting requirements that may apply to a 
payor that is a participating FFI or registered deemed-compliant FFI 
with respect to payees. See Sec.  301.1474-1(a) of this chapter for the 
requirement for a financial institution to file the information 
required under this paragraph (d) on magnetic media.
    (2) * * *
    (i) Accounts subject to reporting. Subject to the rules of 
paragraph (d)(7) of this section, a participating FFI shall report by 
the time and in the manner prescribed in paragraph (d)(3)(vi) of this 
section, the information described in paragraph (d)(3) of this section 
with respect to accounts maintained at any time during each calendar 
year for which the participating FFI is responsible for reporting under 
paragraph (d)(2)(ii) of this section and that it is required to treat 
as U.S. accounts or accounts held by owner-documented FFIs, including 
accounts that are identified as U.S. accounts by the end of such 
calendar year pursuant to a change in circumstances during such year as 
described in paragraph (c)(2)(iii) of this section. Alternatively, a 
participating FFI may elect to report under paragraph (d)(5) of this 
section with respect to such accounts for each calendar year. With 
respect to accounts held by recalcitrant account holders, a 
participating FFI is required to report with respect to each calendar 
year under paragraph (d)(6) of this section and not under paragraph 
(d)(3) or (5) of this section. For separate reporting requirements of 
participating FFIs with respect to foreign reportable amounts and for 
transitional rules for participating FFIs to report certain foreign 
reportable amounts paid to accounts held by nonparticipating FFIs, see 
Sec.  1.1471-4(d)(2)(ii)(F).
    (ii) * * *
    (A) In general. Except as otherwise provided in paragraphs 
(d)(2)(ii)(B) through (G) of this section, the participating FFI that 
maintains the account is responsible for reporting the account in 
accordance with the requirements of paragraph (d)(2)(iii), (d)(3), or 
(d)(5) of this section (as applicable) for each calendar year. Except 
as otherwise provided in paragraph (d)(2)(ii)(C) of this section, a 
participating FFI is responsible for reporting accounts held by 
recalcitrant account holders that it maintains in accordance with the 
requirements of paragraph (d)(6) of this section. A participating FFI 
is not required to report the information required under paragraph 
(d)(6) of this section with respect to an account held by a 
recalcitrant account holder of another participating FFI even if that 
other participating FFI holds the account as an intermediary on behalf 
of such account holder and regardless of whether the participating FFI 
is required to report payments made to the recalcitrant account holder 
of such other FFI under Sec.  1.1474-1(d)(4)(iii).
    (B) Special reporting of account holders of territory financial 
institutions. In the case of an account held by a territory financial 
institution that is a flow-through entity or acting as an intermediary 
with respect to a withholdable payment--
* * * * *
    (2) If the territory financial institution does not agree to be 
treated as a U.S. person with respect to a withholdable payment, the 
participating FFI must report with respect to each specified U.S. 
person or substantial U.S. owner of an entity that is treated as a 
passive NFFE with respect to which the territory financial institution 
acts as an intermediary or is a flow-through entity and provides the 
participating FFI with the information and documentation required under 
Sec.  1.1471-3(c)(3)(iii)(G). The participating FFI shall be treated as 
having satisfied these reporting requirements if it reports with 
respect to each such specified U.S. person or substantial U.S. owner of 
a passive NFFE either--
    (i) The information required by chapter 61 and described in 
paragraph (d)(5)(ii) or (d)(5)(iii) of this section (except account 
number); or
    (ii) The information described in paragraph (d)(3)(ii), 
(d)(3)(iii), or (d)(3)(iv) of this section (except account number and 
account balance or value).
* * * * *
    (D) Special reporting of accounts held by owner-documented FFIs. A 
participating FFI that maintains an account held by an FFI that it has 
agreed to treat as an owner-documented FFI under Sec.  1.1471-3(d)(6) 
shall report the information described in paragraph (d)(3)(iv) or 
(d)(5)(iii) of this section with respect to each specified U.S. person 
identified in Sec.  1.1471-3(d)(6)(iv)(A)(1) and (2). See Sec.  1.1474-
1(i) for the reporting obligations of a participating FFI with respect 
to a payee of an obligation other than an account that it has agreed to 
treat as an owner-documented FFI.
    (E) Requirement to identify the GIIN of a branch that maintains an 
account. A participating FFI may report under paragraph (d)(3) or 
(d)(5) of this section either with respect to all of its U.S. accounts 
and recalcitrant accounts, or separately with respect to any clearly 
identified group of accounts (such as by line of business or the 
location of where the account is maintained). A participating FFI shall 
include the GIIN assigned to the participating FFI or its branches to 
identify the jurisdiction of the FFI or branch that maintains the 
accounts subject to reporting under paragraph (d)(3) or (d)(5) of this 
section. Additionally, a participating FFI shall file with the IRS the 
information required to be reported on accounts that it maintains in 
accordance with the forms and their accompanying instructions provided 
by the IRS. For the definition of a branch that applies for purposes of 
this paragraph (d), see paragraph (e)(2)(ii) of this section.
    (F) Reporting by participating FFIs (including QIs, WPs, WTs, and 
certain U.S. branches not treated as U.S. persons) for accounts of 
nonparticipating FFIs (transitional). Except as otherwise provided in 
the instructions to Form 8966, ``FATCA Report'' or in this paragraph 
(d)(2)(ii)(F), if a participating FFI (including a QI, WP, WT, or U.S. 
branch of a participating FFI that is not treated as a U.S. person) 
maintains an account for a nonparticipating FFI (including a limited 
branch and limited FFI treated as a nonparticipating FFI), the 
participating FFI must report on Form 8966 the name and address of the 
nonparticipating FFI, and the aggregate amount of foreign source 
payments, as described in paragraph (d)(4)(iv) of this section, paid to 
or with respect to each such account (foreign reportable amount) for 
each of the calendar years 2015 and 2016. If, however, the 
participating FFI is prohibited under domestic law from reporting on a 
specific payee basis without consent from the nonparticipating FFI 
account holder and the participating FFI has not been able to obtain 
such consent, the participating FFI may instead report the aggregate 
number of accounts held by such non-consenting nonparticipating FFIs 
and the aggregate amount of foreign reportable amounts paid with 
respect to such accounts, as described in paragraph (d)(4)(iv) of this 
section, during the calendar year. A

[[Page 2172]]

participating FFI may, in lieu of reporting only foreign reportable 
amounts, report all income, gross proceeds, and redemptions 
(irrespective of the source) paid to the nonparticipating FFI's account 
by the participating FFI during the calendar year. With respect to 
calendar year 2015, however, a participating FFI is not required to 
report gross proceeds described in paragraph (d)(4)(iv)(B)(3) of this 
section paid to an account held by a nonparticipating FFI. In addition, 
the participating FFI must retain the account statements related to 
such nonparticipating FFI accounts. See paragraphs (d)(6)(iv), through 
(vii) of this section for rules relating to reporting on recalcitrant 
account holders. Form 8966 shall be filed electronically with the IRS 
on or before March 31 of the year following the end of the calendar 
year to which the form relates.
    (G) [Reserved]. For further guidance, see Sec.  1.1471-
4T(d)(2)(ii)(G).
    (iii) * * *
    (A) Special reporting rule for U.S. payors other than U.S. 
branches. Participating FFIs that are U.S. payors (other than U.S. 
branches) shall be treated as having satisfied the chapter 4 reporting 
requirements described in paragraph (d)(2)(i) of this section with 
respect to accounts that the participating FFI is required to treat as 
U.S. accounts, or accounts held by owner-documented FFIs, if the 
participating FFI reports with respect to each such account either--
    (1) The information required by chapter 61 and described in 
paragraph (d)(5)(ii) or (d)(5)(iii) of this section; or
    (2) The information described in paragraph (d)(3)(ii), (d)(3)(iii), 
or (d)(3)(iv) of this section. However, such participating FFI that is 
required to report on such accounts under chapter 61 is not relieved of 
that obligation.
    (B) Special reporting rules for U.S. branches treated as U.S. 
persons. A U.S. branch treated as a U.S. person (as defined in Sec.  
1.1471-1(b)(135)) shall be treated as having satisfied the reporting 
requirements described in paragraph (d)(2)(i) of this section if it 
reports under--
* * * * *
    (C) Rules for U.S. branches of FFIs not treated as U.S. persons. A 
U.S. branch of an FFI that is not treated as a U.S. person shall apply 
the due diligence rules in paragraph (c)(2) of this section to document 
its accounts and payees, and shall report its U.S. accounts and 
accounts held by owner-documented FFIs under paragraph (d)(3), (d)(5), 
or (d)(6) of this section, as if the U.S. branch were a participating 
FFI. In addition, the U.S. branch shall apply the withholding 
requirements in paragraph (b) of this section as if the U.S. branch 
were a participating FFI.
    (3) * * *
    (ii) * * *
    (E) Such other information as is otherwise required to be reported 
under this paragraph (d)(3) or in the form described in paragraph 
(d)(3)(v) of this section and its accompanying instructions.
    (iii) Accounts held by U.S. owned foreign entities. With respect to 
each U.S. account described in paragraph (d)(3)(i) of this section that 
is held by a passive NFFE that is a U.S. owned foreign entity, a 
participating FFI is required to report under this paragraph 
(d)(3)(iii)--
* * * * *
    (F) Such other information as is otherwise required to be reported 
under this paragraph (d)(3) or in the form described in paragraph 
(d)(3)(v) of this section and its accompanying instructions.
* * * * *
    (vii) Extensions in filing. The IRS shall grant an automatic 90-day 
extension of time in which to file Form 8966. Form 8809-I, 
``Application for Extension of Time to File FATCA Form 8966,'' (or such 
other form as the IRS may prescribe) must be used to request such 
extension of time and must be filed no later than the due date of Form 
8966. Under certain hardship conditions, the IRS may grant an 
additional 90-day extension. A request for extension due to hardship 
must contain a statement of the reasons for requesting the extension 
and such other information as the forms or instructions may require.
    (4) * * *
    (i) Address. The address to be reported with respect to an account 
held by a specified U.S. person is the residence address recorded by 
the participating FFI for the account holder or, if no residence 
address is associated with the account holder, the address for the 
account used for mailing or for other purposes by the participating 
FFI. In the case of an account held by a passive NFFE that is a U.S. 
owned foreign entity, the address to be reported is the address of each 
substantial U.S. owner of such entity. 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).
* * * * *
    (iv) * * *
    (C) [Reserved]. For further guidance, see Sec.  1.1471-
4T(d)(4)(iv)(C).
    (D) [Reserved]. For further guidance, see Sec.  1.1471-
4T(d)(4)(iv)(D).
* * * * *
    (5) * * *
    (i) * * *
    (A) Election under section 1471(c)(2). Except as otherwise provided 
in this paragraph (d)(5), a participating FFI may elect under section 
1471(c)(2) and this paragraph (d)(5) to report under sections 6041, 
6042, 6045, and 6049, as appropriate, with respect to any account 
required to be reported under this paragraph (d). Such reporting must 
be done as if such participating FFI were a U.S. payor and each holder 
of an account that is a specified U.S. person, passive NFFE that is a 
U.S. owned foreign entity, or owner-documented FFI were a payee who is 
an individual and citizen of the United States. If a participating FFI 
makes such an election, the FFI is required to report the information 
required under this paragraph (d)(5) with respect to each such U.S. 
account or account held by an owner-documented FFI, regardless of 
whether the account holder of such account qualifies as a recipient 
exempt from reporting by a payor or middleman under sections 6041, 
6042, 6045, or 6049, including the reporting of payments made to such 
account of amounts that are subject to reporting under any of these 
sections. A participating FFI that elects to report an account under 
the election described in this paragraph (d)(5) is required to report 
the information described in paragraph (d)(5)(ii) or (iii) of this 
section for a calendar year regardless of whether a reportable payment 
was made to the U.S. account during the calendar year. A participating 
FFI that reports an account under the election described in this 
paragraph (d)(5) is not required to report the information described in 
paragraph (d)(3) of this section with respect to the account. The 
election under section 1471(c)(2) described in this paragraph 
(d)(5)(i)(A) does not apply to cash value insurance contracts or 
annuity contracts that are financial accounts described in Sec.  
1.1471-5(b)(1)(iv). See paragraph (d)(5)(i)(B) of this section for an 
election to report cash value insurance contracts or annuity contracts 
that are U.S. accounts held by specified U.S. persons in a manner 
similar to section 6047(d).
    (B) Election to report in a manner similar to section 6047(d). 
Except as otherwise provided in this paragraph (d)(5), a participating 
FFI may elect to report with respect to any of its cash value insurance 
contracts or annuity contracts that are U.S. accounts held by specified 
U.S. persons under section

[[Page 2173]]

6047(d), modified as follows. The amount to be reported is any amount 
paid under the contract during such reporting period as if such 
participating FFI were a U.S. payor. Each holder of a U.S. account that 
is a specified U.S. person is treated for purposes of reporting under 
this paragraph (d)(5)(i)(B) as a contract holder or payee who is an 
individual and citizen of the United States.
    (ii) * * *
    (B) In the case of an account holder that is a U.S. owned foreign 
entity that is a passive NFFE--
* * * * *
    (v) Time and manner of making the election. A participating FFI (or 
one or more branches of the participating FFI) may make the election 
described in this paragraph (d)(5) by reporting the information 
described in this paragraph (d)(5) on the form described in paragraph 
(d)(5)(vii) of this section on the next reporting date following the 
end of the calendar year for which the election is made. A 
participating FFI may make an election under this paragraph (d)(5) 
either with respect to all of its U.S. accounts and recalcitrant 
accounts or, separately, with respect to any clearly identified group 
of accounts (such as by line of business or the location where the 
account is maintained).
    (vi) Revocation of election. A participating FFI may revoke the 
election described in paragraph (d)(5)(i) of this section (as a whole 
or with regard to any clearly identified group of accounts) by 
reporting the information described in paragraph (d)(3) of this section 
beginning on the first reporting date with respect to the calendar year 
that follows the calendar year for which it last reports an account 
under this paragraph (d)(5).
    (vii) Filing of information under election. In the case of an 
account holder that is a specified U.S. person, the information 
required to be reported under the election described in this paragraph 
(d)(5) shall be filed with the IRS and issued to the account holder in 
the time and manner prescribed in sections 6041, 6042, 6045, 6047(d), 
and 6049 and in accordance with the forms referenced therein and their 
accompanying instructions provided by the IRS for reporting under each 
of these sections. If the account holder is a passive NFFE that is a 
U.S. owned foreign entity or owner-documented FFI, however, the 
information required to be reported under the election described in 
this paragraph (d)(5) shall be filed on Form 8966 in accordance with 
its requirements and its accompanying instructions.
    (6) * * *
    (vi) Extensions in filing. The IRS shall grant an automatic 90-day 
extension of time in which to file Form 8966. Form 8809-I, 
``Application for Extension of Time to File FATCA Form 8966,'' (or such 
other form as the IRS may prescribe) must be used to request such 
extension of time and must be filed no later than the due date of Form 
8966. Under certain hardship conditions, the IRS may grant an 
additional 90-day extension. A request for extension due to hardship 
must contain a statement of the reasons for requesting the extension 
and such other information as the forms or instructions may require.
* * * * *
    (7) Special reporting rules with respect to the 2014 and 2015 
calendar years--(i) In general. If the effective date of the FFI 
agreement of a participating FFI is on or before December 31, 2015, the 
participating FFI is required to report U.S. accounts and accounts held 
by owner-documented FFIs that it maintained (or that it is otherwise 
required to report under paragraph (d)(2)(ii) of this section) during 
the 2014 and 2015 calendar years in accordance with paragraph 
(d)(7)(ii) or (iii) of this section.
    (ii) * * *
    (A) Reporting with respect to the 2014 calendar year. With respect 
to accounts maintained during the 2014 calendar year--
    (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 a 
passive 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);
* * * * *
    (iii) Participating FFIs that report under Sec.  1.1471-4(d)(5). A 
participating FFI that elects to report under paragraph (d)(5) of this 
section may report only the information described in paragraphs 
(d)(7)(ii)(A)(1) and (3) of this section for its 2014 calendar year. 
With respect to its 2015 calendar year, a participating FFI is required 
to report all of the information required to be reported under 
paragraphs (d)(5)(i) through (iii) of this section but may exclude from 
such reporting amounts reportable under section 6045.
    (iv) * * *
    (A) In general. Except as provided in paragraph (d)(7)(iv)(B) of 
this section, reporting under paragraph (d)(7)(ii) of this section 
shall be made on Form 8966 (or such other form as the IRS may 
prescribe), in the manner described in paragraph (d)(3)(vi) of this 
section. Reporting under paragraph (d)(7)(iii) of this section shall be 
made in accordance with paragraph (d)(5)(vii) of this section.
    (B) Special determination date and timing for reporting with 
respect to the 2014 calendar year. With respect to the 2014 calendar 
year, a participating FFI must report under paragraph (d)(3) or (5) of 
this section on all accounts that are identified and documented under 
paragraph (c) of this section as U.S. accounts or accounts held by 
owner-documented FFIs as of December 31, 2014, (or as of the date an 
account is closed if the account is closed prior to December 31, 2014) 
if such account was outstanding on or after the effective date of the 
participating FFI's FFI agreement. Reporting for the 2014 calendar year 
shall be filed with the IRS on or before March 31, 2015. However, a 
U.S. payor (including a U.S. branch treated as a U.S. person (as 
defined in Sec.  1.1471-1(b)(135))) that reports in accordance with 
paragraph (d)(2)(iii) of this section may report all or a portion of 
its U.S. accounts and accounts held by owner-documented FFIs in 
accordance with the dates otherwise applicable to reporting under 
chapter 61 with respect to the 2014 calendar year.
    (8) Reporting requirements of QIs, WPs, and WTs. In general, the 
reporting requirements with respect to the U.S. accounts maintained by 
a participating FFI that is a QI, WP, or WT will be consistent with the 
reporting requirements with respect to such accounts of a participating 
FFI that is not a QI, WP, or WT. See the QI, WP, or WT agreement for 
the coordination of the chapter 4 reporting obligations of a 
participating FFI that also is a QI, WP, or WT.
    (9) * * *

    Example 1.  Financial institution required to report U.S. 
account. PFFI1, a participating FFI, issues shares of stock that are 
financial accounts under Sec.  1.1471-5(b). Such shares are held in 
custody by PFFI2, another participating FFI, on behalf of U, a 
specified U.S. person that holds an account with PFFI2. The shares 
of PFFI1 held by PFFI2 will not be subject to reporting by PFFI1 if 
PFFI1 may treat PFFI2 as a participating FFI under Sec.  1.1471-
3(d)(4). See paragraph (d)(2)(ii)(A) of this section.
    Example 2.  Financial institution required to report U.S. 
account. U, a specified U.S. person, holds shares in PFFI1, a 
participating FFI that invests in other financial institutions (a 
fund of funds). The shares of PFFI1 are financial accounts under 
Sec.  1.1471-5(b)(3)(iii). PFFI1 holds shares that are also 
financial accounts under Sec.  1.1471-5(b)(3)(iii) in PFFI2, another 
participating FFI. The shares of

[[Page 2174]]

PFFI2 held by PFFI1 are not subject to reporting by PFFI2, if PFFI2 
may treat PFFI1 as a participating FFI under Sec.  1.1471-3(d)(4). 
See paragraph (d)(2)(ii)(A) of this section.
    Example 3.  U.S. owned foreign entity. FC, a passive NFFE, holds 
a custodial account with PFFI1, a participating FFI. U, a specified 
U.S. person, owns 3% of the only class of stock of FC. Q, another 
specified U.S. person, owns 12% of the only class of stock of FC. U 
is not a substantial U.S. owner of FC. See Sec.  1.1473-1(b). Q is a 
substantial U.S. owner of FC and FC identifies her as such to PFFI1. 
PFFI1 does not elect to report under paragraph (d)(5) of this 
section. PFFI1 must complete and file the reporting form described 
in paragraph (d)(3)(v) of this section and report the information 
described in paragraph (d)(3)(iii) with respect to both FC and Q. 
See paragraph (d)(3)(ii) of this section.
* * * * *
    Example 5.  Owner-documented FFI. DC, an owner-documented FFI 
under Sec.  1.1471-3(d)(6), holds a custodial account with PFFI1, a 
participating FFI. U, a specified U.S. person, owns 3% of the only 
class of stock of DC. Q, another specified U.S. person, owns 12% of 
the only class of stock of DC. Both U and Q are persons identified 
in Sec.  1.1471-3(d)(6)(iv)(A)(1) and DC identifies U and Q to PFFI1 
and otherwise provides to PFFI1 all of the information required to 
be reported with respect to DC. PFFI1 must complete and file a form 
described in paragraph (d)(3)(v) of this section with regard to U 
and Q. See paragraph (d)(3)(iii) of this section.
* * * * *
    Example 7.  Sponsored FFI. DC2 is an FFI that has agreed to have 
a sponsoring entity, PFFI1, fulfill DC2's chapter 4 responsibilities 
under Sec.  1.1471-5(f)(2)(iii). U, a specified U.S. person, holds 
an equity interest in DC2 that is a financial account under Sec.  
1.1471-5(b)(3)(iii). PFFI1 must complete and file a form described 
in paragraph (d)(3)(v) of this section with regard to U's account on 
behalf of DC2. See paragraph (d)(2)(ii)(C) of this section.

    (e) * * *
    (1) In general. Except as otherwise provided in this paragraph 
(e)(1) or paragraphs (e)(2) and (e)(3) of this section, each FFI that 
is a member of an expanded affiliated group must have the chapter 4 
status of a participating FFI, deemed-compliant FFI, or exempt 
beneficial owner as a condition for any member of such group to obtain 
the status of a participating FFI or registered deemed-compliant FFI. 
Accordingly, except as otherwise provided in paragraph (e)(3)(v) of 
this section, each FFI other than a certified deemed-compliant FFI or 
exempt beneficial owner in an expanded affiliated group must submit a 
registration form to the IRS in such manner as the IRS may prescribe 
requesting an FFI agreement, registered deemed-compliant status, or 
limited FFI status as a condition for any member to become a 
participating FFI or registered deemed-compliant FFI. Except as 
provided in paragraph (e)(2) of this section, each FFI other than a 
certified deemed-compliant FFI or exempt beneficial owner that is a 
member of such group must also agree to all of the requirements for the 
status for which it applies with respect to all accounts maintained at 
all of its branches, offices, and divisions. For the withholding 
requirements of a participating FFI with respect to its limited 
branches and its affiliates that are limited FFIs, see paragraph (b)(5) 
of this section. Notwithstanding the foregoing, an FFI (or branch 
thereof) that is treated as a participating FFI or a deemed-compliant 
FFI pursuant to a Model 1 IGA or Model 2 IGA will maintain such status 
provided that it meets the terms for such status pursuant to such 
agreement.
    (2) * * *
    (ii) Branch defined. The term branch has the meaning set forth in 
Sec.  1.1471-1(b)(10).
* * * * *
    (iv) * * *
    (D) Except as otherwise provided in paragraph (e)(2)(vi) of this 
section, agree that each such branch will not open accounts that it is 
required to treat as U.S. accounts or accounts held by nonparticipating 
FFIs, including accounts transferred from any branch of the FFI or from 
any member of its expanded affiliated group; and
* * * * *
    (v) Term of limited branch status (transitional). An FFI that 
becomes a participating FFI with one or more limited branches will 
cease to be a participating FFI after December 31, 2016, unless 
otherwise provided pursuant to Model 1 IGA or Model 2 IGA. A branch 
will cease to be a limited branch as of the beginning of the third 
calendar quarter following the date on which the branch is no longer 
prohibited from complying with the requirements of a participating FFI 
as described in this section. In such case, a participating FFI will 
retain its status as a participating FFI if it notifies the IRS by the 
date such branch ceases to be a limited branch that it will comply with 
the requirements of an FFI agreement with respect to such branch, or if 
otherwise provided pursuant to a Model 1 IGA or Model 2 IGA.
    (vi) Exception from restriction on opening U.S. accounts and 
accounts held by nonparticipating FFIs. Notwithstanding the 
requirements of paragraph (e)(2)(iv)(D) of this section, a branch may 
open U.S. accounts for persons resident in the same jurisdiction in 
which such branch is located or operating and accounts for 
nonparticipating FFIs that are resident in the same jurisdiction 
provided that--
    (A) The branch does not solicit U.S. accounts or accounts for 
nonparticipating FFIs from persons not resident in the same 
jurisdiction in which such branch is located or operating; and
    (B) The branch is not used by the FFI or any FFI in its expanded 
affiliated group to circumvent the obligations of such FFI under 
section 1471.
    (3) * * *
    (iii) * * *
    (A) Except as otherwise provided in paragraph (e)(3)(v) of this 
section, register as part of its expanded affiliated group's FFI 
agreement process for limited FFI status;
* * * * *
    (C) Except as otherwise provided in paragraph (e)(3)(vi) of this 
section, agree as part of such registration that it will not open 
accounts that it is required to treat as U.S. accounts or accounts held 
by nonparticipating FFIs, including accounts transferred from any 
member of its expanded affiliated group; and
* * * * *
    (iv) Period for limited FFI status (transitional). A limited FFI 
will cease to be a limited FFI after December 31, 2016. An FFI will 
also cease to be a limited FFI when it becomes a participating FFI or 
deemed-compliant FFI, or as of the beginning of the third calendar 
quarter following the date on which the FFI is no longer prohibited 
from complying with the requirements of a participating FFI as 
described in this section. In such case, participating FFIs and deemed-
compliant FFIs that are members of the same expanded affiliated group 
will retain their status if, by the date that an FFI ceases to be a 
limited FFI, such FFI enters into an FFI agreement or becomes a 
registered deemed-compliant FFI, unless otherwise provided pursuant to 
an applicable Model 1 IGA or Model 2 IGA.
    (v) Exception from registration requirement--(A) Conditions for 
exception. An FFI that seeks to become a limited FFI is excepted from 
the registration requirement of paragraph (e)(3)(iii)(A) of this 
section provided that--
    (1) The FFI is prohibited under local law from registering as a 
limited FFI;
    (2) A member of the FFI's expanded affiliated group that is a U.S. 
financial institution or an FFI seeking status as (or that is) a 
participating FFI or reporting Model 1 FFI registers as a lead FI 
(defined in the Instructions for Form 8957, ``Foreign Account Tax 
Compliance Act (FATCA) Registration'') with respect to the limited FFI; 
and

[[Page 2175]]

    (3) The lead FI identifies the limited FFI on the lead FI's FATCA 
registration. However, if the limited FFI is prohibited under 
applicable law from being identified by its legal name on the FATCA 
registration Web site, the lead FI may use the term Limited FFI in 
place of the limited FFI's name and indicate the limited FFI's 
jurisdiction of residence or organization.
    (B) Confirmation requirements of lead FI. By identifying a limited 
FFI on the FATCA registration Web site pursuant to paragraph 
(e)(3)(v)(A)(2) of this section, the lead FI is confirming that--
    (1) The limited FFI has represented to the lead FI that it will 
meet the conditions for limited FFI status described in paragraph 
(e)(3)(iii) of this section;
    (2) The limited FFI has agreed to notify the lead FI within 30 days 
of the date that such FFI ceases to meet the requirements of a limited 
FFI or the date that such FFI can comply with the requirements of a 
participating FFI or deemed-compliant FFI (and will separately register 
for that status); and
    (3) The lead FI, if it receives a notification described in 
paragraph (e)(3)(v)(B)(2) of this section or otherwise knows that the 
limited FFI has not complied with the conditions for limited FFI status 
or can comply with the requirements of a participating FFI or deemed-
compliant FFI, will, within 90 days of such notification or acquiring 
such knowledge, remove the FFI from the lead FI's registration on the 
FATCA registration Web site and maintain a record of the date on which 
the FFI ceased to be a limited FFI and (if applicable) the 
circumstances of the limited FFI's non-compliance, which will be 
available to the IRS upon request.
    (vi) Exception from restriction on opening U.S. accounts and 
accounts held by nonparticipating FFIs. Notwithstanding paragraph 
(e)(3)(iii)(C) of this section, a limited FFI may open U.S. accounts 
for persons resident in the same jurisdiction in which such FFI is 
resident or organized and accounts for nonparticipating FFIs that are 
resident in the same jurisdiction provided that--
    (A) Such FFI does not solicit U.S. accounts or accounts for 
nonparticipating FFIs from persons not resident in the same 
jurisdiction in which the FFI is resident or organized; and
    (B) The FFI is not used by another FFI in the FFI's expanded 
affiliated group to circumvent the obligations of such other FFI under 
section 1471.
    (4) Special rule for QIs. An FFI that has in effect a QI agreement 
with the IRS will be allowed to become a limited FFI notwithstanding 
that none of the FFIs in the expanded affiliated group of which the FFI 
is a member can comply with the requirements of a participating FFI as 
described in this section if the FFI that is a QI meets the conditions 
of a limited FFI under paragraph (e)(3)(iii) of this section.
    (f) * * *
    (1) In general. This paragraph (f) describes the requirement for a 
participating FFI to establish and implement a compliance program for 
satisfying its requirements under this section. Paragraph (f)(2) of 
this section provides the requirement for a participating FFI to 
establish a compliance program and the option for a group of FFIs to 
adopt a consolidated compliance program. Paragraph (f)(3) of this 
section describes the periodic certification that the participating FFI 
must make to the IRS regarding the participating FFI's compliance with 
the requirements of an FFI agreement. Paragraph (f)(4) describes IRS 
information requests related to compliance with an FFI agreement.
* * * * *
    (3) * * *
    (i) In general. In addition to the certifications required under 
paragraph (c)(7) of this section, on or before July 1 of the calendar 
year following the end of each certification period, the responsible 
officer must make the certification described in either paragraph 
(f)(3)(ii) or (iii) of this section on the form and in the manner 
prescribed by the IRS. The first certification period begins on the 
effective date of the FFI agreement and ends at the close of the third 
full calendar year following the effective date of the FFI agreement. 
Each subsequent certification period is the three calendar year period 
following the previous certification period, unless the FFI agreement 
provides for a different period. The responsible officer must either 
certify that the participating FFI maintains effective internal 
controls or, if the participating FFI has identified an event of 
default (defined in paragraph (g) of this section) or a material 
failure (defined in paragraph (f)(3)(iv) of this section) that it has 
not corrected as of the date of the certification, must make the 
qualified certification described in paragraph (f)(3)(iii) of this 
section.
* * * * *
    (4) * * *
    (i) General inquiries. The IRS, based upon the information 
reporting forms described in paragraphs (d)(3)(v), (d)(5)(vii), or 
(d)(6)(iv) of this section filed with the IRS (or the absence of such 
reporting) for each calendar year, may request additional information 
with respect to the information reported (or required to be reported) 
on the forms or may request the account statements described in 
paragraph (d)(4)(v) of this section, or confirmation that the FFI has 
no accounts that it was required to report. The IRS may also request 
any additional information to determine an FFI's compliance with its 
FFI agreement and to assist the IRS with its review of account holder 
compliance with tax reporting requirements.
    (ii) Inquiries regarding substantial non-compliance. If, based on 
the information reporting forms described in paragraphs (d)(3)(v), 
(d)(5)(vii), or (d)(6)(iv) of this section filed with the IRS for each 
calendar year, the certifications made by the responsible officer 
described in paragraph (f)(3) of this section, or any other information 
related to the participating FFI's compliance with its FFI agreement, 
the IRS determines in its discretion that the participating FFI may not 
have substantially complied with the requirements of its FFI agreement, 
the IRS may request from the responsible officer (or designee) 
information necessary to verify the participating FFI's compliance with 
the FFI agreement. The IRS may request, for example, a description or 
copy of the participating FFI's policies and procedures for fulfilling 
the requirements of the FFI agreement, a description of the 
participating FFI's procedures for conducting its periodic review, or a 
copy of any written reports documenting the findings of such review in 
order to evaluate the sufficiency of the participating FFI's compliance 
program and review of such program. The IRS may also request the 
performance of specified review procedures by a person (including an 
external auditor or third-party consultant) that the IRS identifies as 
competent to perform such procedures given the facts and circumstances 
surrounding the FFI's potential failure to comply with the FFI 
agreement. The IRS may make these requests to a sponsoring entity with 
respect to any sponsored FFI.
    (g) * * *
    (1) Defined. An event of default occurs if a participating FFI 
fails to perform material obligations required with respect to the due 
diligence, verification, withholding, or reporting requirements of the 
FFI agreement or if the IRS determines that the participating FFI has 
failed to substantially comply with the requirements of the FFI 
agreement. An event of default also

[[Page 2176]]

includes the occurrence of the following--
* * * * *
    (ii) Failure to significantly reduce, over a period of time, the 
number of account holders or payees that the participating FFI is 
required to treat as recalcitrant account holders or nonparticipating 
FFIs, as a result of the participating FFI failing to comply with the 
due diligence procedures for the identification and documentation of 
account holders and payees, as set forth in paragraph (c) of this 
section;
* * * * *
    (2) Notice of event of default. Following an event of default known 
by or disclosed to the IRS, the IRS will deliver to the participating 
FFI a notice of default specifying the event of default. The IRS will 
request that the participating FFI remediate the event of default 
within a specified time period. The participating FFI must respond to 
the notice of default and provide information responsive to an IRS 
request for information or state the reasons why the participating FFI 
does not agree that an event of default has occurred. Taking into 
account the terms of any applicable Model 2 IGA, if the participating 
FFI does not provide a response within the specified time period, the 
IRS may, at its sole discretion, deliver a notice of termination that 
terminates the FFI's participating FFI status. A participating FFI may 
request, within a reasonable period of time, reconsideration of a 
notice of default or notice of termination by written request to the 
IRS.
* * * * *
    (j) Effective/applicability date--(1) In general. This section 
applies on January 6, 2017. However, taxpayers may apply these 
provisions as of January 28, 2013. (For the rules that apply beginning 
on January 28, 2013, and before January 6, 2017, see this section as in 
effect and contained in 26 CFR part 1 revised April 1, 2016.)
    (2) [Reserved]. For further guidance, see Sec.  1.1471-4T(j)(2).


0
Par. 10. Section 1.1471-4T is revised to read as follows:


Sec.  1.1471-4T  FFI agreement (temporary).

    (a) through (b) [Reserved]. For further guidance, see Sec.  1.1471-
4(a) through (b)(7).
    (c) [Reserved]. For further guidance, see Sec.  1.1471-4(c).
    (1) through (2) [Reserved]. For further guidance, see Sec.  1.1471-
4(c)(1) through (2).
    (i) [Reserved]. For further guidance, see Sec.  1.1471-4(c)(2)(i).
    (ii) [Reserved]. For further guidance, see Sec.  1.1471-
4(c)(2)(ii).
    (A) [Reserved]. For further guidance, see Sec.  1.1471-
4(c)(2)(ii)(A).
    (B) [Reserved]. For further guidance, see Sec.  1.1471-
4(c)(2)(ii)(B).
    (1) [Reserved]. For further guidance, see Sec.  1.1471-
4(c)(2)(ii)(B)(1).
    (2) [Reserved]. For further guidance, see Sec.  1.1471-
4(c)(2)(ii)(B)(2).
    (i) through (ii) [Reserved]. For further guidance, see Sec.  
1.1471-4(c)(2)(ii)(B)(2)(i) through (ii).
    (iii) In the case of a transferor FI that is a participating FFI or 
a registered deemed-compliant FFI (or a U.S. branch of either such 
entity that is not treated as a U.S. person) or that is a deemed-
compliant FFI that applies the requisite due diligence rules of this 
paragraph (c) as a condition of its status, the transferor FI provides 
a written representation to the transferee FFI acquiring the accounts 
that the transferor FI has applied the due diligence procedures of this 
paragraph (c) with respect to the transferred accounts and, in the case 
of a transferor FI that is a participating FFI, has complied with the 
requirements of paragraph (f)(2) of this section; and
    (iv) [Reserved]. For further guidance, see Sec.  1.1471-
4(c)(2)(ii)(B)(2)(iv).
    (iii) through (v) [Reserved]. For further guidance, see Sec.  
1.1471-4(c)(2)(iii) through (v).
    (3) through (7) [Reserved]. For further guidance, see Sec.  1.1471-
4(c)(3) through (7).
    (d) [Reserved]. For further guidance, see Sec.  1.1471-4(d).
    (1) [Reserved]. For further guidance, see Sec.  1.1471-4(d)(1).
    (2) [Reserved]. For further guidance, see Sec.  1.1471-4(d)(2).
    (i) [Reserved]. For further guidance, see Sec.  1.1471-4(d)(2)(i).
    (ii) [Reserved]. For further guidance, see Sec.  1.1471-
4(d)(2)(ii).
    (A) through (F) [Reserved]. For further guidance, see Sec.  1.1471-
4(d)(2)(ii)(A) through (F).
    (G) Combined reporting on Form 8966 following merger or bulk 
acquisition. If a participating FFI (successor) acquires accounts of 
another participating FFI (predecessor) in a merger or bulk acquisition 
of accounts, the successor may assume the predecessor's obligations to 
report the acquired accounts under paragraph (d) of this section with 
respect the calendar year in which the merger or acquisition occurs 
(acquisition year), provided that the requirements in paragraphs 
(d)(2)(ii)(G)(1) through (6) of this section are satisfied. If the 
requirements of paragraphs (d)(2)(ii)(G)(1) through (6) of this section 
are not satisfied, both the predecessor and the successor are required 
to report the acquired accounts for the portion of the acquisition year 
that it maintains the account.
    (1) The successor must acquire substantially all of the accounts 
maintained by the predecessor, or substantially all of the accounts 
maintained at a branch of the predecessor, in a merger or bulk 
acquisition of accounts for value.
    (2) The successor must agree to report the acquired accounts for 
the acquisition year on Form 8966 to the extent required in Sec.  
1.1471-4(d)(3) or (d)(5).
    (3) The successor may not elect to report under section 1471(c)(2) 
and Sec.  1.1471-4(d)(5) with respect to any acquired account that is a 
U.S. account for the acquisition year.
    (4) The successor must notify the IRS on the form and in the manner 
prescribed by the IRS that Form 8966 is being filed on a combined 
basis.
    (iii) [Reserved]. For further guidance, see Sec.  1.1471-
4(d)(2)(iii) through (d)(2)(iii)(C).
    (3) [Reserved]. For further guidance, see Sec.  1.1471-4(d)(3) 
through (d)(3)(vii).
    (4) [Reserved]. For further guidance, see Sec.  1.1471-4(d)(4).
    (i) through (iii) [Reserved]. For further guidance, see Sec.  
1.1471-4(d)(4)(i) through (iii).
    (iv) [Reserved]. For further guidance, see Sec.  1.1471-
4(d)(4)(iv).
    (A) through (B) [Reserved]. For further guidance, see Sec.  1.1471-
4(d)(4)(iv)(A) through (B).
    (C) Other accounts. In the case of an account described in Sec.  
1.1471-5(b)(1)(iii) (relating to a debt or equity interest other than 
an interest as a partner in a partnership) or Sec.  1.1471-5(b)(1)(iv) 
(relating to cash value insurance contracts and annuity contracts), the 
payments made during the calendar year with respect to such account are 
the gross amounts paid or credited to the account holder during the 
calendar year including payments in redemption (in whole or part) of 
the account. In the case of an account that is a partner's interest in 
a partnership, the payments made during the calendar year with respect 
to such account are the amount of the partner's distributive share of 
the partnership's income or loss for the calendar year, without regard 
to whether any such amount is distributed to the partner during the 
year, and any guaranteed payments for the use of capital. The payments 
required to be reported under this paragraph (d)(4)(iv)(C) with respect 
to a partner may be determined based on the partnership's tax returns 
or, if the tax returns are unavailable by the due date for filing Form 
8966, the partnership's

[[Page 2177]]

financial statements or any other reasonable method used by the 
partnership for calculating the partner's share of partnership income 
by such date.
    (D) Transfers and closings of deposit, custodial, insurance, and 
annuity financial accounts. In the case of an account closed or 
transferred in its entirety during a calendar year that is a depository 
account, custodial account, or a cash value insurance contract or 
annuity contract, the payments made with respect to the account shall 
be--
    (1) through (2) [Reserved]. For further guidance, see Sec.  1.1471-
4(d)(4)(iv)(D)(1) through (2).
    (E) through (F) [Reserved]. For further guidance, see Sec.  1.1471-
4(d)(4)(iv)(E) through (F).
    (v) [Reserved]. For further guidance, see Sec.  1.1471-4(d)(4)(v).
    (5) through (9) [Reserved]. For further guidance, see Sec.  1.1471-
4(d)(5) through (d)(9), Example 7.
    (e) through (i) [Reserved]. For further guidance, see Sec.  1.1471-
4(e) through (i).
    (j) [Reserved]. For further guidance, see Sec.  1.1471-4(j).
    (1) [Reserved]. For further guidance, see Sec.  1.1471-4(j)(1).
    (2) Special applicability date. Paragraph (d)(4)(iv)(C) of this 
section applies beginning with reporting with respect to calendar year 
2017.
    (k) Expiration date. The applicability of this section expires on 
December 30, 2019.

0
Par. 11. Section 1.1471-5 is amended by revising paragraphs (a)(3)(i), 
(a)(4)(i), (b)(1)(iii)(B)(2), (b)(3)(iv), (b)(3)(v)(A), (b)(3)(v)(B)(1) 
and (2), (b)(3)(vi), (c), (d), (e)(1)(v)(A), (e)(3)(ii), (e)(4)(v) 
Example 7 and Example 8, (e)(5)(i)(A)(3), (e)(5)(i)(B) through (C), 
(e)(5)(i)(D)(1)(iv) and (v), (e)(5)(iv)(B), (f), (f)(1)(i)(A)(6) and 
(7), (f)(1)(i)(B)(1), (f)(1)(i)(B)(3), (f)(1)(i)(C)(2), (f)(1)(i)(D)(4) 
through (6), (f)(1)(i)(D)(7) introductory text, (f)(1)(i)(D)(8), 
(f)(1)(i)(E), (f)(1)(i)(F)(1)(i) and (ii), (f)(1)(i)(F)(3)(i), 
(f)(1)(i)(F)(3)(iii), (f)(1)(i)(F)(3)(v) through (viii), 
(f)(1)(i)(F)(5), (f)(1)(ii)(B), (f)(2) introductory text, (f)(2)(i)(B), 
(f)(2)(iii) through (v), (f)(4)(i), (g)(1), (g)(3)(i)(D), and (i) 
through (l) to read as follows:


Sec.  1.1471-5  Definitions applicable to section 1471.

    (a) * * *
    (3) * * *
    (i) In general. Except as otherwise provided in this paragraph 
(a)(3), the account holder is the person listed or identified as the 
holder or owner of the account with the FFI that maintains the account, 
regardless of whether such person is a flow-through entity. Thus, for 
example, except as otherwise provided in paragraph (a)(3)(ii) of this 
section, if a trust (including a simple or grantor trust) or an estate 
is listed as the holder or owner of a financial account, the trust or 
estate is the account holder, rather than its owners or beneficiaries. 
Similarly, except as otherwise provided in this paragraph (a)(3), if a 
partnership is listed as the holder or owner of a financial account, 
the partnership is the account holder, rather than the partners in the 
partnership. In the case of an account held by an entity that is 
disregarded for U.S. federal tax purposes under Sec.  301.7701-
2(c)(2)(i) of this chapter, the account shall be treated as held by the 
person owning such entity. With respect to an account held by an exempt 
beneficial owner, such account is treated as held by an exempt 
beneficial owner only when all payments made to such account would be 
treated as made to an exempt beneficial owner. See Sec.  1.1471-6(h) 
for when a payment derived from certain commercial activities is not 
treated as made to an exempt beneficial owner.
* * * * *
    (4) * * *
    (i) Exception for certain individual accounts of participating 
FFIs. Unless a participating FFI elects under paragraph (a)(4)(ii) of 
this section not to apply this paragraph (a)(4)(i), the term U.S. 
account shall not include any depository account maintained by such 
financial institution during a calendar year if the account is held 
solely by one or more individuals and, with respect to each holder of 
such account, the aggregate balance or value of all depository accounts 
held by each such individual does not exceed $50,000 as of the end of 
the calendar year or on the date the account is closed. For rules for 
determining the account balance or value, see paragraphs (a)(3)(iii) 
and (b)(4) of this section.
* * * * *
    (b) * * *
    (1) * * *
    (iii) * * *
    (B) * * *
    (2) The return earned on the interest is determined, directly or 
indirectly, primarily by reference to one or more investment entities 
described in paragraph (e)(4)(i)(B) or (C) of this section or one or 
more passive NFFEs that are members of the entity's expanded affiliated 
group (as determined under paragraph (b)(3)(vi) of this section);
* * * * *
    (3) * * *
    (iv) Regularly traded on an established securities market. 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. For purposes of paragraph (b)(1)(iii) 
of this section, an interest is not regularly traded on an established 
securities market if the holder of the interest (excluding a financial 
institution acting as an intermediary) is registered on the books of 
the investment entity. The preceding sentence shall not apply to the 
extent a holder's interest is registered prior to July 1, 2014, on the 
books of the investment entity.
    (v) * * *
    (A) Equity interest. The value of an equity interest is determined, 
directly or indirectly, primarily by reference to assets that give rise 
(or could give rise) to withholdable payments if the return earned on 
such interest (including upon a sale, exchange, or redemption) is 
determined primarily by reference to profits or assets of a U.S. person 
or equity interests in a U.S. person.
    (B) * * *
    (1) Debt is convertible into equity interests in a U.S. person; or
    (2) The return earned on such interest (including upon a sale, 
exchange, or redemption) is determined primarily by reference to 
profits or assets of a U.S. person or equity interests in a U.S. 
person.
    (vi) Return earned on the interest (including upon a sale, 
exchange, or redemption) determined, directly or indirectly, primarily 
by reference to one or more investment entities or passive NFFEs--(A) 
Equity interest. The return earned on an equity interest is determined, 
directly or indirectly, primarily by reference to one or more 
investment entities described in paragraph (e)(4)(i)(B) or (C) of this 
section or passive NFFEs that are members of the entity's expanded 
affiliated group if the return on such interest (including upon a sale, 
exchange, or redemption) is determined primarily by reference to 
profits or assets of, or equity interests in, one or more investment 
entities described in paragraph (e)(4)(i)(B) or (C) of this section or 
passive NFFEs that are members of the entity's expanded affiliated 
group.
    (B) Debt interest. The return earned on a debt interest is 
determined, directly or indirectly, primarily by reference to one or 
more investment entities described in paragraph (e)(4)(i)(B) or (C) of 
this

[[Page 2178]]

section or passive NFFEs that are members of the entity's expanded 
affiliated group if--
    (1) Debt is convertible into equity interests in one or more 
investment entities described in paragraph (e)(4)(i)(B) or (C) of this 
section or passive NFFEs that are members of the entity's expanded 
affiliated group; or
    (2) The return on such interest (including upon a sale, exchange, 
or redemption) is determined primarily by reference to profits or 
assets of, or equity interests in, one or more investment entities 
described in paragraph (e)(4)(i)(B) or (C) of this section or passive 
NFFEs that are members of the entity's expanded affiliated group.
* * * * *
    (c) U.S. owned foreign entity. The term U.S. owned foreign entity 
means any foreign entity that has one or more substantial U.S. owners 
(as defined in Sec.  1.1473-1(b)). See Sec.  1.1473-1(e) for the 
definition of foreign entity for purposes of chapter 4. For the 
requirements applicable to determining direct and indirect ownership in 
an entity, see Sec.  1.1473-1(b)(2).
    (d) Definition of FFI. The term FFI means, with respect to any 
entity that is not resident in, or organized under the laws of, as 
applicable, a country that has in effect a Model 1 IGA or Model 2 IGA, 
any financial institution (as defined in paragraph (e) of this section) 
that is a foreign entity. The term FFI also means, with respect to any 
entity that is resident in, or organized under the laws of, as 
applicable, a country that has in effect a Model 1 IGA or Model 2 IGA, 
any entity that is treated as a FATCA Partner Financial Institution 
pursuant to such Model 1 IGA or Model 2 IGA. See, however, Sec.  
1.1471-2(a)(2)(v) for when certain branches of U.S. financial 
institutions may be treated as FFIs. A territory financial institution 
is not an FFI under this paragraph (d).
    (e) * * *
    (1) * * *
    (v) * * *
    (A) Is part of an expanded affiliated group that includes a 
depository institution, custodial institution, specified insurance 
company, or investment entity described in paragraphs (e)(4)(i)(B) or 
(C) of this section; or
* * * * *
    (3) * * *
    (ii) Income attributable to holding financial assets and related 
financial services. For purposes of this paragraph (e)(3), the term 
income attributable to holding financial assets and related financial 
services means custody, account maintenance, and transfer fees; 
commissions and fees earned from executing and pricing securities 
transactions; income earned from extending credit to customers with 
respect to financial assets held in custody by the entity (or acquired 
through such extension of credit); income earned on the bid-ask spread 
of financial assets; fees for providing financial advice with respect 
to financial assets held in (or potentially to be held in) custody by 
the entity; and fees for clearance and settlement services.
* * * * *
    (4) * * *
    (v) * * *

    Example 7. Individual introducing broker. IB, an individual 
introducing broker, primarily conducts a business of providing 
advice to clients, has discretionary authority to manage clients' 
assets, and uses the services of a foreign entity to conduct and 
execute trades on behalf of clients. IB provides services as an 
investment advisor and manager to Entity, a foreign corporation. 
Entity has earned 50% or more of its gross income for the past three 
years from investing, reinvesting, or trading in financial assets. 
Because IB is an individual, notwithstanding that IB primarily 
conducts certain investment-related activities, IB is not an 
investment entity under paragraph (e)(4)(i)(A) of this section. 
Further, Entity is not an investment entity under paragraph 
(e)(4)(i)(B) of this section because Entity is managed by IB, an 
individual.
    Example 8. Entity introducing broker. IB, a foreign entity 
introducing broker, primarily conducts a business of providing 
advice to clients, has discretionary authority to manage clients' 
assets, and uses the services of a foreign entity to conduct and 
execute trades on behalf of clients. IB provides its services as an 
investment advisor and manager to Entity, a foreign corporation. 
Entity has earned 50% or more of its gross income for the past three 
years from investing, reinvesting, or trading in financial assets. 
Because IB is an entity that primarily conducts certain investment-
related activities, IB is an investment entity under paragraph 
(e)(4)(i)(A) of this section. Further, Entity is an investment 
entity under paragraph (e)(4)(i)(B) of this section because it is 
managed by IB, an investment entity that performs certain of the 
activities described in paragraph (e)(4)(i)(A) of this section on 
behalf of Entity.

    (5) * * *
    (i) * * *
    (A) * * *
    (3) The entity does not hold itself out as, and was not formed in 
connection with or availed of by, an arrangement or investment vehicle 
that is a private equity fund, venture capital fund, leveraged buyout 
fund, or any similar investment vehicle established with an investment 
strategy to acquire or fund companies and to treat the interests in 
those companies as capital assets held for investment purposes. For 
purposes of determining whether an entity was formed in connection with 
or availed of by such an arrangement or investment vehicle, any entity 
that existed at least six months prior to its acquisition by such 
arrangement or investment vehicle and that, prior to the acquisition, 
regularly conducted activities described in paragraph (e)(5)(i)(C), 
(D), or (E) of this section will not be considered to have been formed 
in connection with or availed of by the arrangement or investment 
vehicle, in the absence of other facts suggesting the existence of an 
investment strategy described in the prior sentence.
    (B) Nonfinancial group. An expanded affiliated group defined in 
paragraph (i)(2) of this section is a nonfinancial group if, taking 
into account the application of this section--
    (1) For the three-year period (or the period during which the 
expanded affiliated group has been in existence, if shorter) ending on 
December 31 (or the end of the fiscal year of one or more members of 
the group) of the year preceding the year in which the determination is 
made, no more than 25 percent of the gross income of the expanded 
affiliated group (excluding income derived by any member that is an 
entity described in paragraph (e)(5)(ii) or (iii) of this section, 
income derived from transactions between members of the expanded 
affiliated group, and interest income on notes issued by customers to a 
member of the expanded affiliated group that is a captive finance 
company to finance the customer's purchase of inventory or goods that 
are manufactured by a member of the expanded affiliated group) consists 
of passive income (as defined in Sec.  1.1472-1(c)(1)(iv)); no more 
than five percent of the gross income of the expanded affiliated group 
is derived by members of the expanded affiliated group that are FFIs 
(excluding income derived from transactions between members of the 
expanded affiliated group or by any member of the expanded affiliated 
group that is a certified deemed-compliant FFI); and no more than 25 
percent of the value of assets held by the expanded affiliated group 
(excluding assets held by a member that is an entity described in 
paragraph (e)(5)(ii) or (iii) of this section, assets resulting from 
transactions between related members of the expanded affiliated group, 
and receivables that are notes issued by customers to a member of the 
expanded affiliated group that is a captive finance company to finance 
the customer's purchase of inventory or goods that are manufactured by 
a member of the

[[Page 2179]]

expanded affiliated group) are assets that produce or are held for the 
production of passive income; and
    (2) Any member of the expanded affiliated group that is an FFI is a 
participating FFI, deemed-compliant FFI, or an exempt beneficial owner. 
However, an acquisition by a member of the expanded affiliated group of 
an FFI that is not a participating FFI, deemed-compliant FFI, or an 
exempt beneficial owner, or a change in the chapter 4 status of a 
member of the expanded affiliated group, will not cause a nonfinancial 
group to cease to be a nonfinancial group until 90 days after the 
acquisition or change in chapter 4 status.
    (C) Holding company. For purposes of this paragraph (e)(5)(i), an 
entity is a holding company if its primary activity consists of holding 
(directly or indirectly) all or part of the outstanding stock of one or 
more members of its expanded affiliated group. A partnership or any 
other non-corporate entity shall be treated as a holding company if 
substantially all the activities of such partnership (or other entity) 
consist of holding more than 50 percent of the voting power and value 
of the stock of one or more common parent corporation(s) of one or more 
expanded affiliated group(s). If a partnership or other non-corporate 
entity owns more than 50 percent of the voting power and value of the 
stock of more than one common parent corporation of an expanded 
affiliated group, each common parent corporation's expanded affiliated 
group will be treated as a separate expanded affiliated group for 
purposes of applying the rules of this section unless a non-corporate 
entity is treated as the common parent entity of the expanded 
affiliated group in accordance with Sec.  1.1471-5(i)(10).
    (D) * * *
    (1) * * *
    (iv) Managing the working capital of the expanded affiliated group 
(or any member thereof) such as by pooling the cash balances of 
affiliates (including both positive and deficit cash balances) or by 
investing or trading in financial assets solely for the account and 
risk of such entity or any member of its expanded affiliated group; or
    (v) Acting as a financing vehicle for the expanded affiliated group 
(or any member thereof).
* * * * *
    (iv) * * *
    (B) The entity does not hold an account (other than depository 
accounts in the country in which the entity is operating to pay for 
expenses in that country) with or receive payments from any withholding 
agent other than a member of its expanded affiliated group;
* * * * *
    (f) Deemed-compliant FFIs. The term deemed-compliant FFI includes a 
registered deemed-compliant FFI (as defined in paragraph (f)(1) of this 
section), a certified deemed-compliant FFI (as defined in paragraph 
(f)(2) of this section), a nonreporting IGA FFI (as defined in Sec.  
1.1471-1(b)(83)), and, to the extent provided in paragraph (f)(3) of 
this section, an owner-documented FFI. A deemed-compliant FFI will be 
treated pursuant to section 1471(b)(2) as having met the requirements 
of section 1471(b). A deemed-compliant FFI that complies with the due 
diligence and withholding requirements applicable to such entity as 
provided in this paragraph (f) will also be deemed to have met its 
withholding obligations under sections 1471(a) and 1472(a). For this 
purpose, an intermediary or flow-through entity that has a residual 
withholding obligation under Sec.  1.1471-2(a)(2)(ii) must fulfill such 
obligation to be considered a deemed-compliant FFI.
    (1) * * *
    (i) * * *
    (A) * * *
    (6) By the later of June 30, 2014, or the date it registers as a 
deemed-compliant FFI, the FFI implements policies and procedures, 
consistent with those set forth for a participating FFI under Sec.  
1.1471-4(c), to monitor whether the FFI opens or maintains an account 
for a specified U.S. person who is not a resident of the country in 
which the FFI is incorporated or organized (including a U.S. person 
that was a resident when the account was opened but subsequently ceases 
to be a resident), an entity controlled or beneficially owned (as 
determined under the FFI's AML due diligence) by one or more specified 
U.S. persons that are not residents of the country in which the FFI is 
incorporated or organized, or a nonparticipating FFI. Such policies and 
procedures must provide that if any such account is discovered, the FFI 
will close such account, transfer such account to a participating FFI, 
reporting Model 1 FFI, or U.S. financial institution, or withhold and 
report on such account as would be required under Sec.  1.1471-4(b) and 
(d) if the FFI were a participating FFI.
    (7) With respect to each preexisting account held by a nonresident 
of the country in which the FFI is organized or held by an entity, the 
FFI reviews those accounts in accordance with the procedures described 
in Sec.  1.1471-4(c) applicable to preexisting accounts to identify any 
U.S. account or account held by a nonparticipating FFI, and certifies 
to the IRS that it did not identify any such account as a result of its 
review, that it has closed any such accounts that were identified or 
transferred them to a participating FFI, reporting Model 1 FFI, or U.S. 
financial institution, or that it agrees to withhold and report on such 
accounts as would be required under Sec.  1.1471-4(b) and (d) if it 
were a participating FFI. Such certification must be submitted by the 
due date of the FFI's first certification of compliance required under 
paragraph (f)(1)(ii)(B) of this section.
* * * * *
    (B) * * *
    (1) By the later of June 30, 2014, or the date it registers with 
the IRS pursuant to paragraph (f)(1)(ii) of this section, the FFI 
implements policies and procedures to ensure that within six months of 
opening a U.S. account or an account held by a recalcitrant account 
holder or a nonparticipating FFI, the FFI either transfers such account 
to an affiliate that is a participating FFI, reporting Model 1 FFI, or 
U.S. financial institution, closes the account, or becomes a 
participating FFI.
* * * * *
    (3) By the later of June 30, 2014, or the date it registers with 
the IRS pursuant to paragraph (f)(1)(ii) of this section, the FFI 
implements policies and procedures to ensure that it identifies any 
account that becomes a U.S. account or an account held by a 
recalcitrant account holder or a nonparticipating FFI due to a change 
in circumstances. Within six months of the date on which the FFI first 
has knowledge or reason to know of the change in the account holder's 
chapter 4 status, the FFI transfers any such account to an affiliate 
that is a participating FFI, reporting Model 1 FFI, or U.S. financial 
institution, closes the account, or becomes a participating FFI.
    (C) * * *
    (2) Each holder of record of direct debt interests in the FFI in 
excess of $50,000, of any direct equity interests in the FFI (for 
example the holders of its units or global certificates), and of any 
other account holder of the FFI is a participating FFI, a registered 
deemed-compliant FFI, a retirement plan described in Sec.  1.1471-6(f), 
a non-profit organization described in paragraph (e)(5)(vi) of this 
section, a U.S. person that is not a specified U.S. person, a 
nonreporting IGA FFI, or an exempt beneficial owner. Notwithstanding 
the prior sentence, an FFI will not be prohibited from qualifying as a 
qualified collective investment vehicle solely because it has issued 
interests in bearer

[[Page 2180]]

form provided that the FFI ceased issuing interests in such form after 
December 31, 2012, retires all such interests upon surrender, and 
establishes policies and procedures to redeem or immobilize all such 
interests prior to January 1, 2017, and that prior to payment the FFI 
documents the account holder in accordance with the procedures set 
forth in Sec.  1.1471-4(c) applicable to accounts other than 
preexisting accounts and agrees to withhold and report on such accounts 
as would be required under Sec.  1.1471-4(b) and (d) if it were a 
participating FFI. For purposes of this paragraph (f)(1)(i)(C), an FFI 
may disregard equity interests owned by specified U.S. persons acquired 
with seed capital within the meaning of paragraph (i)(4) of this 
section if the specified U.S. person is described in paragraph 
(i)(3)(i) and (ii) of this section (substituting the term U.S. person 
for the terms FFI and member), and the specified U.S. person neither 
has held, nor intends to hold, such interest for more than three years.
* * * * *
    (D) * * *
    (4) The FFI ensures that by the later of December 31, 2014, or six 
months after the date the FFI registers as a deemed-compliant FFI, each 
agreement that governs the distribution of its debt or equity interests 
prohibits sales and other transfers of debt or equity interests in the 
FFI (other than interests that are both distributed by and held through 
a participating FFI) to specified U.S. persons, nonparticipating FFIs, 
or passive NFFEs with one or more substantial U.S. owners. In addition, 
by that date, the FFI's prospectus and all marketing materials must 
indicate that sales and other transfers of interests in the FFI to 
specified U.S. persons, nonparticipating FFIs, or passive NFFEs with 
one or more substantial U.S. owners are prohibited unless such 
interests are both distributed by and held through a participating FFI.
    (5) The FFI ensures that by the later of December 31, 2014, or six 
months after the date the FFI registers as a deemed-compliant FFI, each 
agreement entered into by the FFI that governs the distribution of its 
debt or equity interests requires the distributor to notify the FFI of 
a change in the distributor's chapter 4 status within 90 days of the 
change. The FFI must, with respect to any distributor that ceases to 
qualify as a distributor identified in paragraph (f)(1)(i)(D)(3) of 
this section, terminate its distribution agreement with the 
distributor, or cause the distribution agreement to be terminated, 
within 90 days of the notification of the distributor's change in 
status and, with respect to all debt and equity interests of the FFI 
issued through that distributor, redeem those interests, convert those 
interests to direct holdings in the fund, or cause those interests to 
be transferred to another distributor identified in paragraph 
(f)(1)(i)(D)(3) of this section within six months of the distributor's 
change in status.
    (6) With respect to any of the FFI's preexisting direct accounts 
that are held by the beneficial owner of the interest in the FFI, the 
FFI reviews those accounts in accordance with the procedures (and time 
frames) described in Sec.  1.1471-4(c) applicable to preexisting 
accounts to identify any U.S. account or account held by a 
nonparticipating FFI. Notwithstanding the previous sentence, the FFI 
will not be required to review the account of any individual investor 
that purchased its interest at a time when all of the FFI's 
distribution agreements and its prospectus contained an explicit 
prohibition of the issuance and/or sale of shares to U.S. entities and 
U.S. resident individuals. An FFI will not be required to review the 
account of any investor that purchased its interest in bearer form 
until the time of payment, but at such time will be required to 
document the account in accordance with procedures set forth in Sec.  
1.1471-4(c) applicable to accounts other than preexisting accounts. The 
FFI is required to certify to the IRS either that it did not identify 
any U.S. account or account held by a nonparticipating FFI as a result 
of its review or, if any such accounts were identified, that the FFI 
will either redeem such accounts, transfer such accounts to an 
affiliate or other FFI that is a participating FFI, reporting Model 1 
FFI, or U.S. financial institution, or withhold and report on such 
accounts as would be required under Sec.  1.1471-4(b) and (d) if it 
were a participating FFI. Such certification must be submitted to the 
IRS by the due date of the FFI's first certification of compliance 
required under paragraph (f)(1)(ii)(B) of this section.
    (7) By the later of June 30, 2014, or the date that it registers as 
a deemed-compliant FFI, the FFI implements the policies and procedures 
described in Sec.  1.1471-4(c) to ensure that it either--
* * * * *
    (8) For an FFI that is part of an expanded affiliated group, all 
other FFIs in the expanded affiliated group are participating FFIs, 
registered deemed-compliant FFIs, sponsored FFIs described in paragraph 
(f)(1)(i)(F)(1) or (2) of this section, nonreporting IGA FFIs, or 
exempt beneficial owners.
    (E) Qualified credit card issuers and servicers. An FFI is 
described in this paragraph (f)(1)(i)(E) if the FFI meets the following 
requirements.
    (1) The FFI is an FFI solely because it is an issuer or servicer of 
credit cards that accepts deposits, on its own behalf or, in the case 
of a servicer, on behalf of a credit card issuer, only when a customer 
makes a payment in excess of a balance due with respect to the credit 
card account and the overpayment is not immediately returned to the 
customer.
    (2) By the later of June 30, 2014, or the date it registers as a 
deemed-compliant FFI, the FFI implements policies and procedures to 
either prevent a customer deposit in excess of $50,000 or to ensure 
that any customer deposit in excess of $50,000 is refunded to the 
customer within 60 days. For this purpose, a customer deposit does not 
refer to credit balances to the extent of disputed charges but does 
include credit balances resulting from merchandise returns.
    (F) * * *
    (1) * * *
    (i) It is an investment entity that is not a QI, WP (except to the 
extent permitted in the WP agreement), or WT; and
    (ii) An entity, other than a nonparticipating FFI, has agreed with 
the FFI to act as a sponsoring entity for the FFI.
* * * * *
    (3) * * *
    (i) Is authorized to act on behalf of the FFI (such as a fund 
manager, trustee, corporate director, or managing partner) to fulfill 
all due diligence, withholding, and reporting responsibilities that the 
FFI would have assumed if it were a participating FFI;
* * * * *
    (iii) Has registered the FFI with the IRS by the later of January 
1, 2017, or the date that the FFI identifies itself as qualifying under 
this paragraph (f)(1)(i)(F);
* * * * *
    (v) Identifies the FFI in all reporting completed on the FFI's 
behalf to the extent required under Sec. Sec.  1.1471-4(d)(2)(ii)(C) 
and 1.1474-1;
    (vi) Performs the verification procedures required under Sec.  
1.1471-4(f) on behalf of the FFI, including the certification required 
under Sec.  1.1471-4(f)(3);
    (vii) Performs the verification procedures required under 
paragraphs (j) and (k) of this section; and
    (viii) Has not had its status as a sponsoring entity revoked.
* * * * *

[[Page 2181]]

    (5) A sponsoring entity is not liable for any failure to comply 
with the obligations contained in paragraph (f)(1)(i)(F)(3) of this 
section unless the sponsoring entity is a withholding agent that is 
separately liable for the failure to withhold on or report with respect 
to a payment made by the sponsoring entity on behalf of the sponsored 
FFI. A sponsored FFI will remain liable for any failure of its 
sponsoring entity to comply with the obligations contained in paragraph 
(f)(1)(i)(F)(3) of this section that the sponsoring entity has agreed 
to undertake on behalf of the FFI, even if the sponsoring entity is 
also a withholding agent and is itself separately liable for the 
failure to withhold on or report with respect to a payment made by the 
sponsoring entity on behalf of the sponsored FFI. The same tax, 
interest, or penalties, however, shall not be collected more than once.
    (ii) * * *
    (B) Have its responsible officer certify, on or before July 1 of 
the calendar year following the end of each certification period, that 
all of the requirements for the deemed-compliant status claimed by the 
FFI have been satisfied during the certification period. The 
responsible officer may certify collectively for the FFI's expanded 
affiliated group that all of the requirements for the deemed-compliant 
status claimed by each member of the expanded affiliated group that is 
a registered deemed-compliant FFI (other than a member that is a 
reporting Model 1 FFI or deemed-compliant FFI under an applicable Model 
1 IGA) have been satisfied. The certification must be made on the form 
and in the manner prescribed by the IRS. The first certification period 
begins on the later of the date the FFI registers as a deemed-compliant 
FFI and is issued a GIIN, or June 30, 2014, and ends at the close of 
the third full calendar year following that date. Each subsequent 
certification period is the three calendar year period following the 
previous certification period.
* * * * *
    (2) Certified deemed-compliant FFIs. A certified deemed-compliant 
FFI means an FFI described in any of paragraphs (f)(2)(i) through (v) 
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. A certified deemed-compliant FFI is not required to 
register with the IRS.
    (i) * * *
    (B) The FFI's business consists primarily of receiving deposits 
from and making loans to, with respect to a bank, retail customers that 
are unrelated to such bank and, with respect to a credit union or 
similar cooperative credit organization, members, provided that no such 
member has a greater than 5 percent interest in such credit union or 
cooperative credit organization. For purposes of this paragraph 
(f)(2)(i)(B), a customer is related to a bank if the customer and the 
bank have a relationship described in section 267(b). For purposes of 
determining whether a member has a greater than 5 percent interest in a 
credit union or cooperative credit organization, the member must 
aggregate the ownership or beneficial interests in the credit union or 
cooperative credit organization that are owned or held by a related 
member. A member of a credit union or cooperative credit organization 
is related to another member if the relationship of such members is 
described in section 267(b).
* * * * *
    (iii) Sponsored, closely held investment vehicles. Subject to the 
provisions of paragraph (f)(2)(iii)(E) of this section, an FFI is 
described in this paragraph (f)(2)(iii) if it meets the requirements 
described in paragraphs (f)(2)(iii)(A) through (D) of this section.
    (A) The FFI is an FFI solely because it is an investment entity and 
is not a QI, WP, or WT.
    (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.
    (C) Twenty or fewer individuals own all of the debt and equity 
interests in the FFI (disregarding debt interests owned by U.S. 
financial institutions, participating FFIs, registered deemed-compliant 
FFIs, and certified deemed-compliant FFIs and equity interests owned by 
an entity if that entity owns 100 percent of the equity interests in 
the FFI and is itself a sponsored FFI under this paragraph (f)(2)(iii).
    (D) The sponsoring entity complies with the following 
requirements--
    (1) The sponsoring entity has registered with the IRS as a 
sponsoring entity;
    (2) The sponsoring entity agrees to perform, on behalf of the FFI, 
all due diligence, withholding, reporting, and other requirements that 
the FFI would have been required to perform if it were a participating 
FFI and retains documentation collected with respect to the FFI for a 
period of six years;
    (3) The sponsoring entity identifies the FFI in all reporting 
completed on the FFI's behalf to the extent required under Sec. Sec.  
1.1471-4(d)(2)(ii)(C) and 1.1474-1;
    (4) The sponsoring entity performs the verification procedures 
required under Sec.  1.1471-4(f) on behalf of the FFI, including the 
certification required under Sec.  1.1471-4(f)(3);
    (5) The sponsoring entity performs the verification procedures 
required under paragraphs (j) and (k) of this section; and
    (6) The sponsoring entity has not had its status as a sponsor 
revoked.
    (E) The IRS may revoke a sponsoring entity's status as a sponsoring 
entity with respect to all sponsored FFIs if there is a material 
failure by the sponsoring entity to comply with its obligations under 
paragraph (f)(2)(iii)(D) of this section with respect to any sponsored 
FFI. A sponsoring entity is not liable for any failure to comply with 
the obligations contained in paragraph (f)(2)(iii)(D) of this section 
unless the sponsoring entity is a withholding agent that is separately 
liable for the failure to withhold on or report with respect to a 
payment made by the sponsoring entity on behalf of the sponsored FFI. A 
sponsored FFI will remain liable for any failure of its sponsoring 
entity to comply with the obligations contained in paragraph 
(f)(2)(iii)(D) of this section that the sponsoring entity has agreed to 
undertake on behalf of the FFI, even if the sponsoring entity is also a 
withholding agent and is itself separately liable for the failure to 
withhold on or report with respect to a payment made by the sponsoring 
entity on behalf of the sponsored FFI. The same tax, interest, or 
penalties, however, shall not be collected more than once.
    (iv) Limited life debt investment entities (transitional). An FFI 
is described in this paragraph (f)(2)(iv) if the FFI is the beneficial 
owner of the payment (or of payments made with respect to the account) 
and the FFI meets the following requirements.
    (A) The FFI is an investment entity that issued one or more classes 
of debt or equity interests to investors pursuant to a trust indenture 
or similar agreement and all of such interests were issued on or before 
January 17, 2013.
    (B) The FFI was in existence as of January 17, 2013, and has 
entered into a trust indenture or similar agreement that requires the 
FFI to pay to investors holding substantially all of the interests in 
the FFI, no later than a set date or period following the maturity of 
the last asset held by the FFI, all amounts that such investors are 
entitled to receive from the FFI.
    (C) The FFI was formed and operated for the purpose of purchasing 
or

[[Page 2182]]

acquiring specific types of debt instruments or interests therein and 
holding those assets subject to reinvestment only under prescribed 
circumstances to maturity.
    (D) Substantially all of the assets of the FFI consist of debt 
instruments or interests therein (including assets acquired pursuant to 
a foreclosure, restructuring, workout, or similar event with respect to 
a debt instrument).
    (E) All payments made to the investors of the FFI (other than 
holders of a de minimis interest) are either cleared through a clearing 
organization or custodial institution that is a participating FFI, 
reporting Model 1 FFI, or U.S. financial institution or made through a 
transfer agent that is a participating FFI, reporting Model 1 FFI, or 
U.S. financial institution.
    (F) The FFI's trustee or fiduciary is not authorized through a 
fiduciary duty or otherwise to fulfill the obligations of a 
participating FFI under Sec.  1.1471-4 and no other person has the 
authority to fulfill the obligations of a participating FFI under Sec.  
1.1471-4 on behalf of the FFI.
    (v) Certain investment entities that do not maintain financial 
accounts. An FFI is described in this paragraph (f)(2)(v) if the FFI 
meets the following requirements.
    (A) The FFI is a financial institution solely because it is 
described in paragraph (e)(4)(i)(A) of this section.
    (B) The FFI does not maintain financial accounts.
* * * * *
    (4) * * *
    (i) The distributor provides investment services to at least 30 
customers unrelated to each other and fewer than half of the 
distributor's customers are related to each other. For purposes of this 
paragraph (f)(4)(i), customers are related to each other if they have a 
relationship with each other described in section 267(b).
* * * * *
    (g) * * *
    (1) Scope. This paragraph (g) provides rules for determining when 
an account holder of a participating FFI or registered deemed-compliant 
FFI is a recalcitrant account holder. Paragraph (g)(2) of this section 
defines the term recalcitrant account holder. Paragraphs (g)(3) and (4) 
of this section provide timing rules for when an account holder will 
begin to be treated as a recalcitrant account holder by a participating 
FFI and when an account holder will cease to be treated as a 
recalcitrant account holder by such institution. For rules for 
determining the holder of an account, see paragraph (a)(3) of this 
section. For the withholding requirements of an FFI with respect to its 
recalcitrant account holders, see paragraph (f) of this section and 
Sec.  1.1471-4(b). For the reporting requirements of an FFI with 
respect to its recalcitrant account holders, see Sec.  1.1471-4(d)(6), 
and, for the reporting required with respect to payments made to such 
account holders, see Sec.  1.1474-1(d)(4)(iii). A U.S. branch treated 
as a U.S. person shall apply the presumption rules of Sec.  1.1471-3(f) 
(for foreign entity account holders) and chapter 3 or 61 (for 
individual payees) to determine the status of a payee if it cannot 
reliably associate a payment made to the payee with valid documentation 
and does not apply this paragraph (g).
    (3) * * *
    (i) * * *
    (D) Preexisting accounts that become high-value accounts. With 
respect to a calendar year beginning after December 31, 2015, an 
account holder that is described in paragraph (g)(2) of this section 
and that holds a preexisting account that a participating FFI 
identifies as a high-value account pursuant to Sec.  1.1471-
4(c)(5)(iv)(D) will be treated as a recalcitrant account holder 
beginning on the earlier of the date a withholdable payment is made to 
the account following end of the calendar year in which the account is 
identified as a high-value account or the date that is six months after 
the calendar year end.
* * * * *
    (i) Expanded affiliated group--(1) Scope of paragraph. This 
paragraph (i) defines the term expanded affiliated group for purposes 
of chapter 4. For the requirements of a participating FFI with respect 
to members of its expanded affiliated group that are FFIs, see Sec.  
1.1471-4(e).
    (2) Expanded affiliated group defined. Except as otherwise provided 
in this paragraph (i), an expanded affiliated group is defined in 
accordance with the principles of section 1504(a) to mean one or more 
chains of members connected through ownership by a common parent entity 
if the common parent entity directly owns stock or other equity 
interests meeting the requirements of paragraph (i)(4) of this section 
in at least one of the other members (for purposes of this paragraph 
(i), the constructive ownership rules of section 318 do not apply). 
Generally, only a corporation shall be treated as the common parent 
entity of an expanded affiliated group, unless the taxpayer elects to 
follow the approach described in paragraph (i)(10) of this section.
    (3) Member of an expanded affiliated group. The term member of an 
expanded affiliated group means a corporation or any entity other than 
a corporation (such as a partnership or trust) with respect to which 
the ownership requirements of paragraph (i)(4) of this section are met, 
regardless of whether such entity is a U.S. person or a foreign person, 
but excluding corporations described in paragraphs (1), (4), (6), (7), 
or (8) of section 1504(b).
    (4) Ownership test. The ownership requirements of this paragraph 
(i)(4) are met if--
    (i) Corporations. For purposes of paragraph (i)(2) of this section, 
a corporation (except the common parent entity) will be considered 
owned by another member entity or by the common parent entity if more 
than 50 percent of the total voting power of the stock of such 
corporation and more than 50 percent of the total value of the stock of 
such corporation is owned directly by one or more other members of the 
group (including the common parent entity).
    (A) Stock not to include certain preferred stock. For purposes of 
this paragraph (i)(4), the term stock does not include any stock which 
is described in section 1504(a)(4).
    (B) Valuation. For purposes of section 1471(e) and this section, 
all shares of stock within a single class are considered to have the 
same value in determining the ownership percentage. Thus, control 
premiums and minority blockage discounts within a single class are not 
taken into account.
    (ii) Partnerships. For purposes of paragraph (i)(2) of this 
section, a partnership will be considered owned by another member 
entity (including the common parent entity) if more than 50 percent (by 
value) of the capital or profits interest in the partnership is owned 
directly by one or more other members of the group (including the 
common parent entity).
    (iii) Trusts. For purposes of paragraph (i)(2) of this section, a 
trust will be considered owned by another member entity or by the 
common parent entity if more than 50 percent (by value) of the 
beneficial interest in such trust is owned directly by one or more 
other members of the group (including the common parent entity). A 
beneficial interest in a trust includes an interest held by an entity 
treated as a grantor or other owner of the trust under sections 671 
through 679 and a beneficial trust interest.
    (5) Treatment of warrants, options, and obligations convertible 
into equity for determining ownership. For purposes of paragraph (i)(4) 
of this section, ownership of warrants, options, obligations 
convertible into the equity of a corporation or entity other than a

[[Page 2183]]

corporation, and other similar interests is not considered for purposes 
of determining whether an entity is a member of an expanded affiliated 
group, except as follows:
    (i) Ownership of a warrant, option, obligation convertible into 
stock, or other similar instrument creating an interest in a 
corporation will be considered for purposes of paragraph (i)(4) of this 
section to the extent that the common parent or member of the expanded 
affiliated group that holds such instrument also maintains voting 
rights with respect to such corporation. However, interests described 
in Sec.  1.1504-4(d)(2) will not be treated as options.
    (ii) Ownership of a warrant, option, obligation convertible into an 
equity interest, or other similar instrument creating an interest in a 
corporation or entity other than a corporation will be considered for 
purposes of paragraph (i)(4) of this section to the extent that such 
instrument is reasonably certain to be exercised, based on all of the 
facts and circumstances and in accordance with the principles set forth 
in Sec.  1.1504-4(g).
    (6) Exception for FFIs holding certain capital investments. 
Notwithstanding paragraphs (i)(2) and (i)(4) of this section, an 
investment entity will not be considered a member of an expanded 
affiliated group as a result of a contribution of seed capital by a 
member of such expanded affiliated group if--
    (i) The member that owns the investment entity is an FFI that is in 
the business of providing seed capital to form investment entities, the 
interests in which it intends to sell to investors that do not have a 
relationship with each other described in section 267(b);
    (ii) The investment entity is created in the ordinary course of 
such other FFI's business described in paragraph (i)(6)(i) of this 
section;
    (iii) As of the date the FFI acquired the equity interest, any 
equity interest in the investment entity in excess of 50 percent of the 
total value of the stock of the investment entity is intended to be 
held by such other FFI (including ownership by other members of such 
other FFI's expanded affiliated group) for no more than three years 
from the date on which such other FFI first acquired an equity interest 
in the investment entity; and
    (iv) In the case of an equity interest that has been held by such 
other FFI for over three years from the date referenced in paragraph 
(i)(6)(iii) of this section, the aggregate value of the equity interest 
held by such other FFI and the equity interests held by other members 
of its expanded affiliated group is 50 percent or less of the total 
value of the stock of the investment entity.
    (7) Seed capital. For purposes of this paragraph (i), the term seed 
capital means an initial capital contribution made to an investment 
entity that is intended as a temporary investment and is deemed by the 
manager of the entity to be necessary or appropriate for the 
establishment of the entity, such as for the purpose of establishing a 
track record of investment performance for such entity, achieving 
economies of scale for diversified investment, avoiding an artificially 
high expense to return ratio, or similar purposes.
    (8) Anti-abuse rule. A change in ownership, voting rights, or the 
form of an entity that results in an entity meeting or not meeting the 
ownership requirements described in paragraph (i)(4) of this section 
will be disregarded for purposes of determining whether an entity is a 
member of an expanded affiliated group if the change is pursuant to a 
plan a principal purpose of which is to avoid reporting or withholding 
that would otherwise be required under any chapter 4 provision. For 
purposes of this paragraph (i)(8), a change in voting rights includes a 
separation of voting rights and value.
    (9) Exception for limited life debt investment entities. 
Notwithstanding paragraphs (i)(2) and (4) of this section, an entity 
that meets the requirements of paragraph (f)(2)(iv) of this section, 
including the requirements to have been in existence as of January 17, 
2013, and to have issued interests in the entity on or before January 
17, 2013, will not be considered a member of an expanded affiliated 
group as a result of any member of such expanded affiliated group 
owning interests in such entity.
    (10) Partnerships, trusts, and other non-corporate entities. For 
purposes of determining the composition of an expanded affiliated 
group, an entity other than a corporation may elect to be treated as 
the common parent entity. Taxpayers following this approach may not, in 
a later year, follow the rule described in paragraph (i)(2) of this 
section without the approval of the Commissioner. See also paragraph 
(e)(5)(i)(C) of this section.
    (j) Sponsoring entity verification. [Reserved]
    (k) Sponsoring entity event of default. [Reserved]
    (l) Effective/applicability date. This section applies on January 
6, 2017. However, taxpayers may apply these provisions as of January 
28, 2013. (For the rules that apply beginning on January 28, 2013, and 
before January 6, 2017, see this section as in effect and contained in 
26 CFR part 1 revised April 1, 2016.)


Sec.  1.1471-5T   [Removed]

0
Par. 12. Section 1.1471-5T is removed.

0
Par. 13. Section 1.1471-6 is amended by revising paragraphs (d)(1) and 
(4), (f)(2)(iii)(B) and (C), (f)(3)(ii) and (iii), (f)(5) and (6), (g), 
(h)(2), and (i) to read as follows:


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

* * * * *
    (d) * * *
    (1) In general. Solely for purposes of this section and except as 
provided in paragraph (h) of this section, the term foreign central 
bank of issue means an institution that is by law or government 
sanction the principal authority, other than the government itself, 
issuing instruments intended to circulate as currency. Such an 
institution is generally the custodian of the banking reserves of the 
country under whose law it is organized.
* * * * *
    (4) Income on certain transactions. Solely for purposes of 
determining whether an entity is an exempt beneficial owner of a 
payment under this paragraph (d), a foreign central bank of issue is a 
beneficial owner with respect to income earned on cash and securities, 
including cash and securities held as collateral or securities held in 
connection with a securities lending transaction, held by the foreign 
central bank of issue in the ordinary course of its operations as a 
central bank of issue.
* * * * *
    (f) * * *
    (2) * * *
    (iii) * * *
    (B) The fund receives at least 50 percent of its total 
contributions (other than transfers of assets from accounts described 
in Sec.  1.1471-5(b)(2)(i)(A) (referring to retirement and pension 
accounts), from retirement and pension accounts described in an 
applicable Model 1 or Model 2 IGA, or from other retirement funds 
described in this paragraph (f) or in an applicable Model 1 or Model 2 
IGA) from the sponsoring employers;
    (C) Distributions or withdrawals from the fund are allowed only 
upon the occurrence of specified events related to retirement, 
disability, or death (except rollover distributions to accounts 
described in Sec.  1.1471-5(b)(2)(i)(A) (referring to retirement and 
pension accounts), to retirement and pension accounts described in an 
applicable Model 1 or Model 2 IGA, or to other

[[Page 2184]]

retirement funds described in this paragraph (f) or in an applicable 
Model 1 or Model 2 IGA), or penalties apply to distributions or 
withdrawals made before such specified events; or
* * * * *
    (3) * * *
    (ii) The fund is sponsored by one or more employers and each of 
these employers are not investment entities or passive NFFEs;
    (iii) Employee and employer contributions to the fund (other than 
transfers of assets from other retirement plans described in paragraph 
(f)(1) of this section, from accounts described in Sec.  1.1471-
5(b)(2)(i)(A) (referring to retirement and pension accounts), or 
retirement and pension accounts described in an applicable Model 1 or 
Model 2 IGA) are limited by reference to earned income and compensation 
of the employee, respectively;
* * * * *
    (5) Investment vehicles exclusively for retirement funds. A fund 
established exclusively to earn income for the benefit of one or more 
retirement funds described in paragraphs (f)(1) through (5) of this 
section or in an applicable Model 1 or Model 2 IGA, accounts described 
in Sec.  1.1471-5(b)(2)(i)(A) (referring to retirement and pension 
accounts), or retirement and pension accounts described in an 
applicable Model 1 or Model 2 IGA.
    (6) Pension fund of an exempt beneficial owner. A fund established 
and sponsored by an exempt beneficial owner described in paragraph (b), 
(c), (d), or (e) of this section or an exempt beneficial owner (other 
than a fund that qualifies as an exempt beneficial owner) described in 
an applicable Model 1 or Model 2 IGA to provide retirement, disability, 
or death benefits to beneficiaries or participants that are current or 
former employees of the exempt beneficial owner (or persons designated 
by such employees), or that are not current or former employees, but 
the benefits provided to such beneficiaries or participants are in 
consideration of personal services performed for the exempt beneficial 
owner.
* * * * *
    (g) Entities wholly owned by exempt beneficial owners. A person is 
described in this paragraph (g) if it is an FFI solely because it is an 
investment entity, each direct holder of an equity interest in the 
investment entity is an exempt beneficial owner described in paragraph 
(b), (c), (d), (e), (f), or (g) of this section or an exempt beneficial 
owner described in an applicable Model 1 or Model 2 IGA, and each 
direct holder of a debt interest in the investment entity is either a 
depository institution (with respect to a loan made to such entity), an 
exempt beneficial owner described in paragraph (b), (c), (d), (e), (f), 
or (g) of this section, or an exempt beneficial owner described in an 
applicable Model 1 or Model 2 IGA.
    (h) * * *
    (2) Limitation. Paragraph (h)(1) of this section will not apply to 
treat an exempt beneficial owner as engaged in a commercial financial 
activity if--
    (i) The entity undertakes commercial financial activity described 
in paragraph (h)(1) of this section solely for or at the direction of 
other exempt beneficial owners and such commercial financial activity 
is consistent with the purposes of the entity;
    (ii) The entity has no outstanding debt that would be a financial 
account under Sec.  1.1471-5(b)(1)(iii); and
    (iii) The entity otherwise maintains financial accounts only for 
exempt beneficial owners, or, in the case of a foreign central bank of 
issue as described in paragraph (d), the entity only maintains 
financial accounts that are depository accounts for current or former 
employees of the entity (and the spouses and children of such 
employees) or financial accounts for exempt beneficial owners.
    (i) Effective/applicability date. This section applies on January 
6, 2017. However, taxpayers may apply these provisions as of January 
28, 2013. (For the rules that apply beginning on January 28, 2013, and 
before January 6, 2017, see this section as in effect and contained in 
26 CFR part 1 revised April 1, 2016.)


Sec.  1.1471-6T   [Removed]

0
Par. 14. Section 1.1471-6T is removed.


0
Par. 15. Section 1.1472-1 is amended by revising paragraphs (a), (b)(1) 
introductory text, (b)(2), (c)(1) introductory text, (c)(1)(i) 
introductory text, (c)(1)(ii) and (iii), (c)(1)(iv) introductory text, 
(c)(1)(iv)(C), (c)(1)(v) through (vii), (c)(2) through (5), (d)(1) and 
(2), and (f) through (h) to read as follows:


Sec.  1.1472-1  Withholding on NFFEs.

    (a) In general. This section provides rules that a withholding 
agent must apply to determine its obligations to withhold under section 
1472 on withholdable payments made to a payee that is a NFFE. A 
participating FFI that complies with its withholding obligations under 
Sec.  1.1471-4(b) will be deemed to satisfy its obligations under 
section 1472 with respect to withholdable payments made to NFFEs that 
are account holders. The rules of this section will apply, however, in 
the case of a participating FFI acting as a withholding agent with 
respect to a payment made to a NFFE that is not an account holder (for 
example, a payment with respect to a contract that does not constitute 
a financial account). 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. The following entities are deemed to satisfy 
their withholding obligations under section 1472: Exempt beneficial 
owners; section 501(c) entities described in Sec.  1.1471-5(e)(5)(v); 
and nonprofit organizations described in Sec.  1.1471-5(e)(5)(vi). See 
Sec.  1.1471-5(f) for when a deemed-compliant FFI is deemed to satisfy 
its withholding obligations with respect to payments made to NFFEs that 
are account holders under section 1472.
    (b) * * *
    (1) In general. Except as otherwise provided in paragraph (b)(2) of 
this section (providing transitional relief) or paragraph (c)(1) or (2) 
of this section (providing exceptions for payments to an excepted NFFE 
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 June 30, 2014, to a payee that is a NFFE unless--
* * * * *
    (2) Transitional relief. For any withholdable payment made prior to 
July 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-

[[Page 2185]]

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) * * *
    (1) Payments to an excepted NFFE. A withholding agent is not 
required to withhold under section 1472(a) and paragraph (b) of this 
section on a withholdable payment (or portion thereof) if the 
withholding agent can treat the payment as made to a payee that is an 
excepted NFFE. For purposes of this paragraph, the term excepted NFFE 
means a payee that the withholding agent may treat as a NFFE that is a 
QI, WP, or WT. Additionally, the term excepted NFFE means, with respect 
to the payment, a NFFE described in paragraphs (c)(1)(i) through (vii) 
of this section to the extent the withholding agent may treat the NFFE 
as the beneficial owner of the payment.
    (i) Publicly traded corporation. A NFFE is described in this 
paragraph (c)(1)(i) if it is a corporation the stock of which is 
regularly traded on one or more established securities markets for the 
calendar year.
* * * * *
    (ii) Certain affiliated entities related to a publicly traded 
corporation. A NFFE is described in this paragraph (c)(1)(ii) if it is 
a corporation that is a member of the same expanded affiliated group 
(as defined in Sec.  1.1471-5(i)) as a corporation described in 
paragraph (c)(1)(i) of this section (without regard to whether such 
corporation is a NFFE).
    (iii) Certain territory entities. A NFFE is described in this 
paragraph (c)(1)(iii) if it is a territory entity that is directly or 
indirectly wholly owned by one or more bona fide residents of the U.S. 
territory under the laws of which the entity is organized. The term 
bona fide resident of a U.S. territory means an individual who 
qualifies as a bona fide resident under section 937(a) and Sec.  1.937-
1.
    (iv) Active NFFEs. A NFFE is described in this paragraph (c)(1)(iv) 
(and thus constitutes an active NFFE) if it is an entity and for the 
preceding calendar or fiscal year less than 50 percent of its gross 
income is passive income and the weighted average of the percentage of 
assets held by it that produce or are held for the production of 
passive income (weighted by total assets and measured quarterly) is 
less than 50 percent, as determined after the application of paragraph 
(c)(1)(iv)(B) of this section (passive assets). For purposes of the 
calculations described in the preceding sentence, a NFFE may use any 
accounting method permitted under paragraph (c)(1)(iv)(C) of this 
section but must apply a uniform method for measuring assets for the 
calendar or fiscal year.
* * * * *
    (C) Methods of measuring assets. For purposes of this paragraph 
(c)(1)(iv), the value of a NFFE's assets is determined based on the 
fair market value or book value of the assets that is reflected on the 
NFFE's balance sheet (as determined under either a U.S. or an 
international financial accounting standard).
    (v) Excepted nonfinancial entities. A NFFE is described in this 
paragraph (c)(1)(v) if it is an entity described in Sec.  1.1471-
5(e)(5) (referring to holding companies, treasury centers, and captive 
finance companies that are members of a nonfinancial group; start-up 
companies; entities that are liquidating or emerging from bankruptcy; 
and non-profit organizations).
    (vi) Direct reporting NFFEs. A NFFE is described in this paragraph 
(c)(1)(vi) if it meets the requirements described in Sec.  1.1472-
1(c)(3) to be treated as a direct reporting NFFE.
    (vii) Sponsored direct reporting NFFEs. A NFFE is described in this 
paragraph (c)(1)(vii) if it meets the requirements described in Sec.  
1.1472-1(c)(5) to be treated as a sponsored direct reporting NFFE.
    (2) Payments made to an exempt beneficial owner. A withholding 
agent is not required to withhold on a withholdable payment (or portion 
thereof) under section 1472(a) and paragraph (b) of this section if the 
withholding agent may treat the payment as made to an exempt beneficial 
owner.
    (3) Definition of direct reporting NFFE. A direct reporting NFFE 
means a NFFE that elects to report information about its direct or 
indirect substantial U.S. owners to the IRS and meets the following 
requirements--
    (i) The NFFE must register on Form 8957, ``FATCA Registration,'' 
(or such other form as the IRS may prescribe) with the IRS to obtain a 
GIIN pursuant to the procedures prescribed by the IRS;
    (ii) The NFFE must report directly to the IRS on Form 8966, ``FATCA 
Report,'' (or such other form as the IRS may prescribe) the following 
information for each calendar year (or, may be required by the IRS to 
certify on Form 8966, or in such other manner as the IRS may prescribe, 
that the NFFE has no substantial U.S. owners):
    (A) The name, address, and TIN of each substantial U.S. owner (as 
defined in Sec.  1.1473-1(b)) of such NFFE;
    (B) The total of all payments made to each substantial U.S. owner 
(including the gross amounts paid or credited to the substantial U.S. 
owner with respect to such owner's equity interest in the NFFE during 
the calendar year, which include payments in redemption or liquidation 
(in whole or part) of the substantial U.S. owner's equity interest in 
the NFFE);
    (C) The value of each substantial U.S. owner's equity interest in 
the NFFE determined by applying the rules described in Sec.  1.1471-
5(b)(4) (substituting the term equity for the terms account and 
financial account);
    (D) The name, address, and GIIN of the NFFE; and
    (E) Any other information as required by Form 8966 (or such other 
form as the IRS may prescribe) and its accompanying instructions;
    (iii) The NFFE must obtain a written certification (contained on a 
withholding certificate or in a written statement) from each person 
that would be treated as a substantial U.S. owner of the NFFE if such 
person were a specified U.S. person. Such written certification must 
indicate whether the person is a substantial U.S. owner of the NFFE, 
and if so, the name, address and TIN of the person. If the NFFE has 
reason to know that such written certification is unreliable or 
incorrect, it must contact the person and request a revised written 
certification. If no revised written certification is received, the 
NFFE must treat the person as a substantial U.S. owner and report on 
Form 8966 the information required under paragraph (c)(3)(ii) of this 
section. The NFFE has reason to know that such a written certification 
is unreliable or incorrect if the certification is inconsistent with 
information in the NFFE's possession, including information that the 
NFFE provides to a financial institution in order for the financial 
institution to meet its AML or other account identification due 
diligence procedures with respect to the NFFE's account, information 
that is publicly available, or U.S. indicia as described in Sec.  
1.1441-7(b) for which appropriate documentation sufficient to cure the 
U.S. indicia in the manner set forth in Sec.  1.1441-7(b)(8) has not 
been obtained;
    (iv) The NFFE must keep records that it produces in the ordinary 
course of its business that summarize the activity (including the gross 
amounts described in paragraph (c)(3)(ii)(B) of this section that are 
paid or credited to each of its substantial U.S. owners) relating to 
its transactions with respect to the equity of the NFFE held by each of 
its substantial U.S. owners for any calendar year in which the owner 
was required to be reported under paragraph (c)(3)(ii)

[[Page 2186]]

of this section. The records must be retained for the longer of six 
years or the retention period under the NFFE's normal business 
procedures. A NFFE may be required to extend the six year retention 
period if the IRS requests such an extension prior to the expiration of 
the six year period;
    (v) The NFFE must respond to requests made by the IRS for 
additional information with respect to any substantial U.S. owner that 
is subject to reporting by the NFFE or with respect to the records 
described in paragraph (c)(3)(iii) or (iv) of this section;
    (vi) The NFFE must make a periodic certification to the IRS on or 
before July 1 of the calendar year following the end of each 
certification period relating to its compliance with respect to the 
election described in paragraphs (c)(3) and (4) of this section on the 
form and in the manner prescribed by the IRS. The first certification 
period begins on the later of the date a GIIN is issued or June 30, 
2014, and ends at the close of the third full calendar year following 
that date. Each subsequent certification period is the three calendar 
year period following the close of the previous certification period. 
The certification will require an officer of the NFFE to certify to the 
following statements--
    (A)(1) The NFFE has not had any events of default described in 
paragraph (c)(4)(v) of this section; or
    (2) If there are any events of default, appropriate measures were 
taken to remediate such failures and to prevent such failures from 
recurring; and
    (B) With respect to any failure to report to the extent required 
under paragraph (c)(3)(ii), the NFFE has corrected such failure by 
filing the appropriate information returns; and
    (vii) The NFFE has not had its status as a direct reporting NFFE 
revoked by the IRS.
    (4) Election to be treated as a direct reporting NFFE--(i) Manner 
of making election. A NFFE may elect to be treated as a direct 
reporting NFFE by registering on Form 8957 (or such other form as the 
IRS may prescribe) with the IRS to obtain a GIIN pursuant to the 
procedures prescribed by the IRS.
    (ii) Effective date of election. The election is effective upon the 
issuance of a GIIN to the NFFE.
    (iii) Revocation of election by NFFE. The election may be revoked 
by the NFFE by canceling its registration account on the FATCA 
registration Web site and notifying the IRS of its revocation in such 
manner as the IRS may prescribe in the Instructions for Form 8966, 
``FATCA Report.'' The NFFE must also notify within 30 days its 
sponsoring entity (if applicable) and each withholding agent and 
financial institution from which it receives payments or with which it 
holds an account for which a withholding certificate or written 
statement prescribed in Sec.  1.1471-3(d)(11)(x)(B) (as applicable) was 
provided on which the NFFE certified its status as a direct reporting 
NFFE if it revokes its election.
    (iv) Revocation of election by Commissioner. The election may be 
revoked by the Commissioner upon an event of default described in 
paragraph (c)(4)(v) of this section and following the notice and 
remediation procedures described in paragraphs (vi) and (vii) of this 
section. If the Commissioner revokes the NFFE's status as a direct 
reporting NFFE, the NFFE must provide notification within 30 days of 
the revocation to each withholding agent and financial institution from 
which the NFFE receives payments or with which it holds an account for 
which a withholding certificate or written statement (as permitted for 
chapter 4 purposes) was provided by the NFFE to represent its status as 
a direct reporting NFFE.
    (v) Event of default. An event of default occurs if a direct 
reporting NFFE fails to perform any of the obligations described in 
(c)(3)(i) through (vi) of this section. An event of default also 
includes any misrepresentation of a material fact to the IRS.
    (vi) Notice of event of default. Following an event of default 
known by or disclosed to the IRS, the IRS will deliver to the NFFE a 
notice of default specifying the event of default. The IRS will request 
that the NFFE remediate the event of default within a specified time 
period. The NFFE must respond to the notice of default and provide 
information responsive to an IRS request for information or state the 
reasons why the NFFE does not agree that an event of default has 
occurred. If the NFFE does not provide a response within the specified 
time period, the IRS may, at its sole discretion, deliver a notice to 
the NFFE that its election to be treated as a direct reporting NFFE has 
been revoked. A NFFE may request, within 90 days of receipt, 
reconsideration of a notice of default or notice of revocation by 
written request to the IRS.
    (vii) Remediation of event of default. A NFFE will be permitted to 
remediate an event of default to the extent it agrees with the IRS on a 
remediation plan. The IRS may, as part of a remediation plan, require 
additional information from the NFFE.
    (5) Election by a direct reporting NFFE to be treated as a 
sponsored direct reporting NFFE--(i) Definition of sponsored direct 
reporting NFFE. A NFFE is a sponsored direct reporting NFFE if the NFFE 
is a direct reporting NFFE and if another entity, other than a 
nonparticipating FFI, has agreed with the NFFE to act as its sponsoring 
entity, as described in paragraph (c)(5)(ii) of this section.
    (ii) Requirements for sponsoring entity of a sponsored direct 
reporting NFFE. A sponsoring entity meets the requirements of this 
paragraph (c)(5)(ii) if the sponsoring entity--
    (A) Is authorized to act on behalf of the NFFE;
    (B) Has registered with the IRS as a sponsoring entity;
    (C) Has registered the NFFE with the IRS as a sponsored direct 
reporting NFFE by the later of January 1, 2017, or the date that the 
NFFE identifies itself to a withholding agent or financial institution 
as qualifying as a sponsored direct reporting NFFE under paragraph 
(c)(5) of this section;
    (D) Agrees to perform, on behalf of the NFFE, all due diligence, 
reporting, and other requirements that the NFFE would have been 
required to perform as a direct reporting NFFE;
    (E) Identifies the NFFE in all reporting completed on the NFFE's 
behalf;
    (F) Complies with the certification and other requirements in 
paragraphs (f) and (g) of this section;
    (G) Has not had its status as a sponsoring entity revoked; and
    (H) Agrees to notify all relevant withholding agents and the IRS if 
its status as a sponsoring entity is revoked, if it otherwise ceases to 
be the sponsoring entity of any of its sponsored direct reporting NFFEs 
(for example, if the sponsored direct reporting NFFE changes sponsors), 
or if the status of any of its sponsored direct reporting NFFEs has 
been revoked.
    (iii) Revocation of status as sponsoring entity. The IRS may revoke 
a sponsoring entity's status as a sponsoring entity with respect to all 
sponsored direct reporting NFFEs if there is a material failure by the 
sponsoring entity to comply with its obligations under paragraph 
(c)(5)(ii) of this section with respect to any sponsored direct 
reporting NFFE.
    (iv) Liability of sponsoring entity. A sponsoring entity is not 
liable for any failure to comply with the obligations contained in 
paragraph (c)(5)(ii) of this section. A sponsored direct reporting NFFE 
will remain liable for all of its chapter 4 obligations without regard 
to any failure of its sponsoring entity to comply with the obligations 
contained in paragraph (c)(5)(ii) of this section that the sponsoring 
entity has agreed to undertake on behalf of the NFFE.

[[Page 2187]]

    (d) * * *
    (1) In general. For purposes of this section, except in the case of 
a payee that is a QI, WP, or WT, a withholding agent may treat a 
withholdable payment as beneficially owned by the payee as determined 
under Sec.  1.1471-3. Thus, a withholding agent may treat a 
withholdable payment as beneficially owned by an excepted NFFE (other 
than a QI, WP, or WT) if the withholding agent can reliably associate 
the payment with valid documentation to determine the payee's status as 
an excepted NFFE under the rules of Sec.  1.1471-3(d).
    (2) Payments made to a NFFE that is a QI, WP, or WT. A withholding 
agent may treat the payee of a withholdable payment as a NFFE that is a 
QI, WP, or WT if the withholding agent can reliably associate the 
payment with valid documentation to determine the payee's status as 
such under the rules of Sec.  1.1471-3(b)(3) and (d).
* * * * *
    (f) Sponsoring entity verification. [Reserved]
    (g) Sponsoring entity event of default. [Reserved]
    (h) Effective/applicability date. This section applies on January 
6, 2017. However, taxpayers may apply these provisions as of January 
28, 2013. (For the rules that apply beginning on January 28, 2013, and 
before January 6, 2017, see this section as in effect and contained in 
26 CFR part 1 revised April 1, 2016.)


Sec.  1.1472-1T   [Removed]

0
Par. 16. Section 1.1472-1T is removed.

0
Par. 17. Section 1.1473-1 is amended by revising paragraphs (a)(1)(ii), 
(a)(2)(vi), (a)(3)(iii)(B)(4), (a)(4)(vi) and (vii), (a)(5)(i) through 
(vi), (b)(2)(v), and (f) to read as follows:


Sec.  1.1473-1  Section 1473 definitions.

    (a) * * *
    (1) * * *
    (ii) For any sales or other dispositions occurring after December 
31, 2018, any gross proceeds from the sale or other disposition (as 
defined in paragraph (a)(3)(i) of this section) of any property of a 
type that can produce interest or dividends that are U.S. source FDAP 
income.
    (2) * * *
    (vi) Special rule for sales of interest bearing debt obligations. 
Income that is otherwise described as U.S. source FDAP income in 
paragraphs (a)(2)(i) through (v) of this section does not include an 
amount of interest accrued on the date of a sale or exchange of an 
interest bearing debt obligation if the sale occurs between two 
interest payment dates and is not part of a plan described in Sec.  
1.1441-3(b)(2)(ii).
* * * * *
    (3) * * *
    (iii) * * *
    (B) * * *
    (4) In the case of a sale of an obligation described in paragraph 
(a)(2)(vi), gross proceeds includes any interest accrued between 
interest payment dates other than an amount described in paragraph 
(a)(2)(vi) of this section that is treated as U.S. source FDAP income; 
and
* * * * *
    (4) * * *
    (vi) Offshore payments of U.S. source FDAP income prior to 2017 
(transitional). A payment with respect to an offshore obligation (as 
defined in Sec.  1.1471-1(b)(88)) made prior to January 1, 2017, if 
such payment is U.S. source FDAP income and made by a person that is 
not acting as an intermediary or as a WP or WT with respect to the 
payment. Additionally, a payment with respect to an account, 
obligation, contract, or other instrument that is issued or maintained 
by an entity other than a financial institution and that would be 
treated as an offshore obligation under Sec.  1.6049-5(c)(1) (applied 
by substituting the term entity for the term financial institution (as 
defined in Sec.  1.1471-5(e)) in each place that it appears), made 
prior to January 1, 2017, if such payment is U.S. source FDAP and made 
by a person that is not acting as an intermediary or as a WP or WT with 
respect to the payment is not a withholdable payment under paragraph 
(a)(1) of this section. The exception for offshore payments of U.S. 
source FDAP income provided in the preceding sentences shall not apply, 
however, in the case of a flow-through entity that has a residual 
withholding requirement with respect to its partners, owners, or 
beneficiaries under Sec.  1.1471-2(a)(2)(ii), or in the case of 
payments made with respect to debt or equity issued by a U.S. person 
(excluding interest payments made by a foreign branch of a U.S. 
financial institution with respect to depository accounts it 
maintains). For purposes of this paragraph (a)(4)(vi), an intermediary 
includes a person that acts as a qualified securities lender as defined 
for purposes of chapter 3 and does not include a person acting as an 
insurance broker with respect to premiums.
    (vii) Collateral arrangements prior to 2017 (transitional). A 
payment made prior to January 1, 2017, by a secured party, or to a 
secured party other than a nonparticipating FFI, with respect to 
collateral securing one or more transactions under a collateral 
arrangement, provided that only a commercially reasonable amount of 
collateral is held by the secured party (or by a third party for the 
benefit of the secured party) as part of the collateral arrangement. 
For purposes of this paragraph (a)(4)(vii), the term transaction 
generally includes a debt instrument, a derivative financial instrument 
(including a notional principal contract, future, forward, and option), 
and any securities lending transaction, sale-repurchase transaction, 
margin loan, or substantially similar transaction that is subject to a 
collateral arrangement. Solely for purposes of this paragraph 
(a)(4)(vii), a secured party may provide documentation to the 
withholding agent indicating that it is the beneficial owner of a 
payment described in this paragraph (a)(4)(vii), and a withholding 
agent may rely on such certification for purposes of its requirements 
under Sec.  1.1471-3(d) for determining whether withholding under 
chapter 4 applies.
* * * * *
    (5) * * *
    (i) In general. This paragraph (a)(5) provides special rules for a 
flow-through entity, complex trust, or estate to determine when such 
entity must treat a payment of U.S. source FDAP income that is also a 
withholdable payment as having been paid by such entity to its 
partners, owners, or beneficiaries (as applicable depending on the type 
of entity).
    (ii) Partnerships. An amount of U.S. source FDAP income that is 
also a withholdable payment is treated as being paid to a partner under 
rules similar to the rules prescribing when withholding is required for 
chapter 3 purposes as described in Sec.  1.1441-5(b)(2)(i)(A).
    (iii) Simple trusts. An amount of U.S. source FDAP income that is 
also a withholdable payment is treated as being paid to a beneficiary 
of a simple trust under rules similar to the rules prescribing when 
withholding is required for chapter 3 purposes as described in Sec.  
1.1441-5(b)(2)(ii).
    (iv) Complex trusts and estates. An amount of U.S. source FDAP 
income that is also a withholdable payment is treated as being paid to 
a beneficiary of a complex trust or estate under rules similar to the 
rules prescribing when withholding is required for chapter 3 purposes 
as described in Sec.  1.1441-5(b)(2)(iii).
    (v) Grantor trusts. If an amount of U.S. source FDAP income that is 
also a withholdable payment is paid to a

[[Page 2188]]

grantor trust, a person treated as an owner of all or a portion of such 
trust is treated as having been paid such income by the trust at the 
time it is received by or credited to the trust or portion thereof.
    (vi) Special rule for an NWP or NWT. In the case of a partnership, 
simple trust, or complex trust that is an NWP or NWT, the rules 
described in paragraphs (a)(5)(ii) and (iii) of this section shall not 
apply, and U.S. source FDAP income that is also a withholdable payment 
is treated as being paid to the partner or beneficiary at the time the 
income is paid to the partnership or trust, respectively.
* * * * *
    (b) * * *
    (2) * * *
    (v) Interests owned or held by a related person. For purposes of 
determining whether a specified U.S. person is a substantial U.S. owner 
in a foreign entity described in paragraphs (b)(2)(i) through (iv) of 
this section, if a specified U.S. person owns or holds, directly or 
indirectly, any interest in the foreign entity, that interest must be 
aggregated with any such interest in the foreign entity owned or held, 
directly or indirectly, by a related person. For purposes of the 
preceding sentence, a related person is a person or spouse of a person 
described in Sec.  1.267(c)-1(a)(4), determined by reference to such 
specified U.S. person.
* * * * *
    (f) Effective/applicability date. This section generally applies on 
January 6, 2017. However, taxpayers may apply these provisions as of 
January 28, 2013. Paragraph (a)(4)(viii) of this section applies to 
payments made on or after September 18, 2015. (For the rules that apply 
beginning on January 28, 2013, and before January 6, 2017, see this 
section as in effect and contained in 26 CFR part 1 revised April 1, 
2016.)


Sec.  1.1473-1T  [Removed]

0
Par. 18. Section 1.1473-1T is removed.

0
Par. 19. Section 1.1474-1 is amended by:
0
1. Revising paragraphs (a)(3)(ii)(B), (d)(1)(i), (d)(1)(ii)(A)(1)(iii), 
(d)(1)(ii)(A)(1)(vi), (d)(1)(ii)(A)(1)(viii), (d)(1)(ii)(A)(1)(ix), 
(d)(1)(ii)(A)(1)(xi), (d)(1)(ii)(B)(1)(i), (d)(1)(ii)(B)(1)(iii) and 
(iv), (d)(1)(ii)(B)(1)(vi) and (vii), (d)(1)(ii)(B)(1)(ix), (d)(2)(i), 
(d)(3)(vii), (d)(4)(i)(B), (d)(4)(i)(C) introductory text, 
(d)(4)(i)(C)(2) and (3), (d)(4)(i)(E), (d)(4)(ii)(B) and (C), and 
(d)(4)(iii).
0
2. Adding paragraph (d)(4)(vii).
0
3. Revising paragraphs (i)(1), (i)(2), and (i)(2)(iii).
0
2. Adding paragraphs (d)(4)(vii) and (i)(4).
0
5. Revising paragraph (j).
    The revisions and additions read as follows:


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

    (a) * * *
    (3) * * *
    (ii) * * *
    (B) A Form 8655, ``Reporting Agent Authorization,'' is filed with 
the IRS by a withholding agent if its agent (including any sub-agent) 
acts as a reporting agent for filing Form 1042 on behalf of the 
withholding agent and the agent (or sub-agent) identifies itself as the 
filer on the Form 1042;
* * * * *
    (d) * * *
    (1) * * *
    (i) In general. Except as otherwise provided in paragraph (d)(4) of 
this section or in the instructions to Form 1042-S, every withholding 
agent must file an information return on Form 1042-S, ``Foreign 
Person's U.S. Source Income Subject to Withholding,'' (or such other 
form as the IRS may prescribe) to report to the IRS chapter 4 
reportable amounts as described in paragraph (d)(2)(i) of this section 
that were paid to a recipient during the preceding calendar year. 
Except as otherwise provided in paragraphs (d)(4)(ii)(B) (certain 
unknown recipients) and (d)(4)(i)(B) and (d)(4)(iii)(A) of this section 
(describing payees includable in reporting pools of a participating FFI 
or registered deemed-compliant FFI), a separate Form 1042-S must be 
filed with the IRS for each recipient of an amount subject to reporting 
under paragraph (d)(2)(i) of this section and for each separate type of 
payment made to a single recipient in accordance with paragraph 
(d)(4)(i) of this section. The Form 1042-S shall be prepared in such 
manner as the form and its accompanying instructions prescribe. One 
copy of the Form 1042-S shall be filed with the IRS on or before March 
15 of the calendar year following the year in which the amount subject 
to reporting was paid, with a transmittal form as provided in the 
instructions to the form. Withholding certificates, certifications, 
documentary evidence, or other statements or documentation provided to 
a withholding agent are not required to be attached to the form. A copy 
of the Form 1042-S must be furnished to the recipient for whom the form 
is prepared (or any other person, as required under this paragraph or 
the instructions to the form) and to any intermediary or flow-through 
entity described in paragraph (d)(3)(vii) of this section on or before 
March 15 of the calendar year following the year in which the amount 
subject to reporting was paid. A person required by this paragraph 
(d)(1)(i) to furnish a copy of Form 1042-S to the recipient for whom it 
is prepared may furnish the copy of Form 1042-S in an electronic format 
in lieu of a paper format provided it meets the requirements of Sec.  
1.1461-1(c)(1)(i)(A). The withholding agent must retain a copy of each 
Form 1042-S for the period of limitations on assessment and collection 
applicable to the tax reportable on the Form 1042 to which the Form 
1042-S relates (determined as set forth in paragraph (c)(1) of this 
section). See paragraph (d)(4)(iii) of this section for the additional 
reporting requirements of participating FFIs and deemed-compliant FFIs.
    (ii) * * *
    (A) * * *
    (1) * * *
    (iii) A participating FFI or a registered deemed-compliant FFI that 
is an NQI, NWP, NWT, and a U.S. branch of an FFI that is not treated as 
a U.S. person that applies the rules described in Sec.  1.1471-
4(d)(2)(iii)(C) and that provides its withholding agent with sufficient 
information to determine the portion of the payment allocable to its 
reporting pools of recalcitrant account holders, payees that are 
nonparticipating FFIs, and payees that are U.S. persons described in 
paragraph (d)(4)(i)(B) of this section;
* * * * *
    (vi) A U.S. branch of an FFI treated as a U.S. person;
* * * * *
    (viii) An excepted NFFE and passive NFFE that also is not a flow-
through entity and that is not acting as an agent or intermediary with 
respect to the payment;
    (ix) A foreign person that is a partner or beneficiary in a flow-
through entity that is a NFFE (looking through a partner or beneficiary 
that is a foreign intermediary or flow-through entity);
* * * * *
    (xi) Any person (including a flow-through entity or U.S. branch) 
receiving such income that is (or is deemed to be) effectively 
connected with the conduct of its trade or business in the United 
States;
* * * * *
    (B) * * *
    (1) * * *
    (i) A certified deemed-compliant FFI that is an NQI, NWP, or NWT 
and that fails to provide its withholding agent with sufficient 
information to allocate

[[Page 2189]]

the payment to its account holders and payees;
* * * * *
    (iii) A participating FFI or a registered deemed-compliant FFI that 
is an NQI, NWP, or NWT, and a U.S. branch of an FFI that is not treated 
as a U.S. person that applies the rules described in Sec.  1.1471-
4(d)(2)(iii)(C) to the extent it provides its withholding agent with 
sufficient information to allocate the payment to its account holders 
and payees that are exempt from withholding under chapter 4;
    (iv) An account holder or payee of a participating FFI or 
registered deemed-compliant FFI, and an account holder or payee of a 
U.S. branch of an FFI that is not treated as a U.S. person that applies 
the rules described in Sec.  1.1471-4(d)(2)(iii)(C) that is included in 
the FFI's reporting pools described in paragraph (d)(4)(i)(B) of this 
section;
* * * * *
    (vi) An account holder or payee of a nonparticipating FFI except to 
the extent described in paragraph (d)(1)(ii)(A)(1)(x) of this section 
for an exempt beneficial owner;
    (vii) Except as provided in paragraph (d)(1)(ii)(A)(1) of this 
section, an entity that is disregarded under Sec.  301.7701-2(c)(2) of 
this chapter as an entity separate from its owner;
* * * * *
    (ix) A passive NFFE or an excepted NFFE that is a flow-through 
entity or acts as an intermediary;
* * * * *
    (2) * * *
    (i) In general. Subject to paragraph (d)(2)(iii) of this section, 
the term chapter 4 reportable amount means each of the following 
amounts reportable on a Form 1042-S for purposes of chapter 4--
    (A) An amount of a withholdable payment that is subject to 
withholding under chapter 4 paid after June 30, 2014;
    (B) An amount of a withholdable payment of U.S. source FDAP income 
(including an amount that would be a withholdable payment but for the 
fact that it is an amount effectively connected with a U.S. trade or 
business, as described in Sec.  1.1471-3(a)(4)(ii)) that is also 
reportable on Form 1042-S under Sec.  1.1461-1(c)(2)(i); or
    (C) A foreign passthru payment subject to withholding under chapter 
4.
* * * * *
    (3) * * *
    (vii) The EIN or GIIN (as applicable), status for chapter 3 and 
chapter 4 purposes (as required on the instructions to the form) of an 
entity reported under paragraph (d)(3)(vi) of this section;
* * * * *
    (4) * * *
    (i) * * *
    (B) Payments to participating FFIs, deemed-compliant FFIs, and 
certain QIs. Except as otherwise provided in this paragraph 
(d)(4)(i)(B), a U.S. withholding agent that makes a payment of a 
chapter 4 reportable amount to a participating FFI or deemed-compliant 
FFI that is an NQI, NWP, or NWT must complete a Form 1042-S treating 
such FFI as the recipient. 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 
an FFI withholding statement allocating the payment (or portion of the 
payment) to a chapter 4 withholding rate pool, 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 such pool identified on an FFI withholding 
statement, described in Sec.  1.1471-3(c)(3)(iii)(B)(2). If, however, a 
participating FFI, deemed-compliant FFI, or QI (as applicable) has made 
an election under Sec.  1.1471-4(b)(3)(iii), for the portion of the 
payment that the FFI allocates to each recalcitrant account holder that 
is subject to backup withholding under section 3406, the withholding 
agent must report on Form 1099 the amount of the payment and tax 
withheld in accordance with the form's requirements and accompanying 
instructions. See Sec.  1.1471-2(a)(2)(i) for the requirement of a 
withholding agent to withhold on payments of U.S. source FDAP income 
made to a participating FFI or registered deemed-compliant FFI that is 
an NQI, NWP, or NWT. See also Sec.  1.1471-2(a)(2)(iii) in the case of 
payments made to a QI. See Sec.  1.1461-1(c)(4)(A) for the extent to 
which reporting is required under that section for U.S. source FDAP 
income that is reportable on Form 1042-S under chapter 3 and not 
subject to withholding under chapter 4, in which case the U.S. 
withholding agent must report in the manner described under Sec.  
1.1461-1(c)(4)(ii) and paragraph (d)(4)(ii)(A) of this section. 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. See paragraph (d)(4)(iii) of this section 
for the residual reporting responsibilities of an NQI, NWP, or NWT that 
is an FFI.
    (C) Amounts paid to a U.S. branch. A U.S. withholding agent making 
a payment of U.S. source FDAP income to a U.S. branch shall complete 
Form 1042-S as follows--
* * * * *
    (2) If the U.S. branch is not treated as a U.S. person and applies 
the rules described in Sec.  1.1471-4(d)(2)(iii)(C) and provides the 
withholding agent with a withholding certificate that transmits 
information regarding its reporting pools referenced in paragraph 
(d)(4)(i)(B) of this section or information regarding each recipient 
that is an account holder or payee of the U.S. branch, the withholding 
agent must complete a separate Form 1042-S issued to the U.S. branch 
for each such pool to the extent required on the form and its 
accompanying instructions or must complete a separate Form 1042-S 
issued to each recipient whose documentation is associated with the 
U.S. branch's withholding certificate as described in paragraph 
(d)(4)(ii)(A) of this section and report the U.S. branch as an entity 
not treated as a recipient; or
    (3) If the U.S. branch is not treated as a U.S. person and applies 
the rules described in Sec.  1.1471-4(d)(2)(iii)(C) to the extent it 
fails to provide sufficient information regarding its account holders 
or payees, the withholding agent shall report the recipient of the 
payment as an unknown recipient to the extent recipient information is 
not provided and report the U.S. branch as provided in paragraph 
(d)(4)(ii)(A) of this section for an entity not treated as a recipient.
* * * * *
    (E) Amounts paid to NFFEs. A U.S. withholding agent that makes 
payments of chapter 4 reportable amounts to an excepted or passive NFFE 
shall complete Forms 1042-S treating the NFFE as the recipient, except 
when the NFFE is a flow-through entity or acting as an intermediary and 
the partner or beneficiary is treated as the payee. In cases in which 
the chapter 4 reportable amount is also an amount of U.S. source FDAP 
income reportable on Form 1042-S (described in Sec.  1.1441-2(a)), see 
also Sec.  1.1461-1(c)(4)(ii)(A) for the extent to which reporting is 
required with respect to the partners, beneficiaries, or owners of such 
entities.
    (ii) * * *
    (B) Nonparticipating FFI that is a flow-through entity or 
intermediary. If a withholding agent makes a payment of a chapter 4 
reportable amount to a nonparticipating FFI that it is required to 
treat as an intermediary with regard

[[Page 2190]]

to a payment or as a flow-through entity under rules described in Sec.  
1.1471-3(c)(3)(iii), and except as otherwise provided in paragraph 
(d)(1)(ii)(A)(1)(x) of this section (relating to an exempt beneficial 
owner), the withholding agent must report the recipient of the payment 
as an unknown recipient and report the nonparticipating FFI as provided 
in paragraph (d)(4)(ii)(A) of this section for an entity not treated as 
a recipient.
    (C) Disregarded entities. 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 in 
accordance with the instructions to the Form 1042-S.
    (iii) Reporting by participating FFIs and deemed-compliant FFIs 
(including QIs, WPs, and WTs) and U.S. branches not treated as U.S. 
persons--(A) In general. Except as otherwise provided in paragraph 
(d)(4)(iii)(B) (relating to NQIs, NWPs, NWTs, and FFIs electing under 
section 1471(b)(3)) and Sec.  1.1471-4(d)(2)(ii)(F) (relating to 
transitional payee-specific reporting for payments to nonparticipating 
FFIs), a participating FFI or deemed-compliant FFI (including a QI, WP, 
or WT), and a U.S. branch that is not treated as a U.S. person that 
applies the rules described in Sec.  1.1471-4(d)(2)(iii)(C) 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, or WT), and a U.S. branch that is 
not treated as a U.S. person that applies the rules described in Sec.  
1.1471-4(d)(2)(iii)(C) may report in pools consisting of its 
recalcitrant account holders and payees that are nonparticipating FFIs. 
With respect to recalcitrant account holders, the FFI may report in 
pools consisting of recalcitrant account holders within a particular 
status described in Sec.  1.1471-4(d)(6) and within a particular income 
code. Except as otherwise provided in Sec.  1.1471-4(d)(2)(ii)(F), with 
respect to payees that are nonparticipating FFIs, the FFI may report in 
pools consisting of one or more nonparticipating FFIs that fall within 
a particular income code and within a particular status code described 
in the instructions to Form 1042-S. Alternatively, a participating FFI 
or registered deemed-compliant FFI (including a QI, WP, or WT) and a 
U.S. branch that is not treated as a U.S. person that applies the rules 
described in Sec.  1.1471-4(d)(2)(iii)(C) may (and a certified deemed-
compliant FFI is required to) perform payee-specific reporting to 
report a chapter 4 reportable amount paid to a recalcitrant account 
holder or a nonparticipating FFI when withholding was applied (or 
should have applied) to the payment.
    (B) Special reporting requirements of participating FFIs, deemed-
compliant FFIs, FFIs that make an election under section 1471(b)(3), 
and U.S. branches not treated as U.S. persons. Except as otherwise 
provided in Sec.  1.1471-4(d)(2)(ii)(F), a participating FFI or deemed-
compliant FFI that is an NQI, NWP, or NWT, and a U.S. branch that is 
not treated as a U.S. person that applies the rules described in Sec.  
1.1471-4(d)(2)(iii)(C) 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 1042-S as described in paragraph 
(d)(4)(iii)(A) of this section if the payment is made to a 
nonparticipating FFI or recalcitrant account holder and its withholding 
agent has withheld the correct amount of tax on such payment and 
correctly reported the payment on a Form 1042-S. Such FFI or branch is 
required to report a payment, however, when the FFI knows, or has 
reason to know, that less than the required amount has been withheld by 
the withholding agent on the payment or the withholding agent has not 
correctly reported the payment on Form 1042-S. In such case, the FFI or 
branch must report on Form 1042-S to the extent required under 
paragraph (d)(4)(iii)(A) of this section. See, however, Sec.  1.1471-
4(d)(6) for the requirement to report certain aggregate information 
regarding accounts held by recalcitrant account holders on Form 8966, 
``FATCA Report,'' regardless of whether withholdable payments are made 
to such accounts.
    (C) Reporting by a U.S. branch treated as a U.S. person. A U.S. 
branch treated as a U.S. person (as defined in Sec.  1.1471-1(b)(135)) 
must report amounts paid to recipients on Forms 1042-S in the same 
manner as a U.S. withholding agent under paragraph (d)(4)(i) of this 
section.
* * * * *
    (vii) [Reserved]. For further guidance, see Sec.  1.1474-
1T(d)(4)(vii).
* * * * *
    (i) * * *
    (1) Reporting by certain withholding agents with respect to owner-
documented FFIs--(i) Beginning on July 1, 2014, if a withholding agent 
(other than an FFI reporting accounts held by owner-documented FFIs 
under Sec.  1.1471-4(d)) makes 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 July 1 through 
December 31, 2014, with respect to each specified U.S. person 
identified in Sec.  1.1471-3(d)(6)(iv)(A)(1) and (2) the information 
described in paragraph (i)(1)(iii) of this section.
    (ii) Beginning in calendar year 2015, 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 
identified in Sec.  1.1471-3(d)(6)(iv)(A)(1) and (2) the information 
described in paragraph (i)(1)(iii) of this section.
    (iii) The information that a withholding agent (other than an FFI 
reporting accounts held by owner-documented FFIs under Sec.  1.1471-
4(d)) is required to report under paragraphs (i)(1)(i) and (ii) of this 
section must be made on Form 8966 (or such other form as the IRS may 
prescribe) and filed on or before March 31 of the calendar year 
following the year in which the withholdable payment was made. A 
withholding agent is not required to report under paragraph (i)(1)(i) 
or (ii) of this section on a withholdable payment made to a 
participating FFI or reporting Model 1 FFI that is allocated to a payee 
that is an owner-documented FFI on an FFI withholding statement when 
the participating FFI or reporting Model 1 FFI includes on the 
statement the certification described in Sec.  1.1471-
3(c)(3)(iii)(B)(2)(v), provided that the withholding agent does not 
know or have reason to know that the certification is incorrect or 
unreliable. The report must contain the following information--
    (A) The name of the owner-documented FFI;
    (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);
    (C) For the period from July 1 through December 31, 2014, the total 
of all withholdable payments made to the owner-documented FFI, and with 
respect to payments made after the 2014 calendar year, the total of all 
withholdable payments made to the owner-documented FFI during the 
calendar year;

[[Page 2191]]

    (D) The account balance or value of the account held by the owner-
documented FFI; and
    (E) Any other information required on Form 8966 and its 
accompanying instructions provided for purposes of such reporting.
    (2) Reporting by certain withholding agents with respect to U.S. 
owned foreign entities that are passive NFFEs. Beginning on July 1, 
2014, in addition to the reporting on Form 1042-S required under 
paragraph (d)(4)(i)(E) of this section, a withholding agent (other than 
an FFI reporting accounts held by NFFEs under Sec.  1.1471-4(d)) that 
makes a withholdable payment to, and receives information about any 
substantial U.S. owners of, a passive NFFE that is not an excepted NFFE 
as defined in Sec.  1.1472-1(c) shall file a report with the IRS for 
the period from July 1 through December 31, 2014, and in each 
subsequent calendar year in which a withholdable payment is made with 
respect to any substantial U.S. owners of such NFFE. Such report must 
be made on Form 8966 (or such other form as the IRS may prescribe) and 
filed on or before March 31 of the calendar year following the year in 
which the withholdable payment was made. A withholding agent is not 
required to report under this paragraph (i)(2) on a withholdable 
payment made to a participating FFI or a registered deemed-compliant 
FFI that is allocated to a payee that is a passive NFFE with one or 
more substantial U.S. owners on an FFI withholding statement when the 
participating FFI or registered deemed-compliant FFI includes on the 
statement the certification described in Sec.  1.1471-
3(c)(3)(iii)(B)(2)(iv), provided that the withholding agent does not 
know or have reason to know that the certification is incorrect or 
unreliable. In the case of an entity to which the preceding sentence 
does not apply that is a flow-through entity or is acting as an 
intermediary receiving a withholdable payment allocable to a passive 
NFFE with one or more substantial U.S. owners, the entity is not 
required to report with respect to the passive NFFE under this 
paragraph (i)(2) if it provides to the withholding agent from which it 
receives the payment documentation sufficient for the withholding agent 
to report information with respect to the passive NFFE under this 
paragraph (i)(2), provided that the intermediary or flow-through entity 
does not know or have reason to know that the withholding agent does 
not report with respect to the passive NFFE under this paragraph 
(i)(2). The report must contain the following information--
* * * * *
    (iii) For the period from July 1, 2014 through December 31, 2014, 
the total of all withholdable payments made to the NFFE and, with 
respect to payments made after the 2014 calendar year, the total of all 
withholdable payments made to the NFFE during the calendar year; and
* * * * *
    (4) Extensions of time to file. The IRS shall grant an automatic 
90-day extension of time in which to file Form 8966 as required under 
paragraph (i)(1) or (i)(2) of this section. Form 8809-I, ``Application 
of Extension of Time to File FATCA Form 8966,'' (or such other form as 
the IRS may prescribe) must be used to request such extension of time 
and must be filed no later than the due date of Form 8966. Under 
certain hardship conditions, the IRS may grant an additional 90-day 
extension. A request for extension due to hardship must contain a 
statement of the reasons for requesting the extension and such other 
information as the form or instructions may require.
    (j) Effective/applicability date. This section applies on January 
6, 2017. However, taxpayers may apply these provisions as of January 
28, 2013. (For the rules that apply beginning on January 28, 2013, and 
before January 6, 2017, see this section as in effect and contained in 
26 CFR part 1 revised April 1, 2016.)

0
Par. 20. Section 1.1474-1T is revised as follows:


Sec.  1.1474-1T   Liability for withheld tax and withholding agent 
reporting (temporary).

    (a) through (c) [Reserved]. For further guidance, see Sec.  1.1474-
1(a) through (c)(3).
    (d) [Reserved]. For further guidance, see Sec.  1.1474-1(d).
    (1) through (3)(ix) [Reserved]. For further guidance, see Sec.  
1.1474-1(d)(1) through (3)(ix).
    (4) [Reserved]. For further guidance, see Sec.  1.1474-1(d)(4).
    (i) through (vi) [Reserved]. For further guidance, see Sec.  
1.1474-1(d)(4)(i) through (vi).
    (vii) Combined Form 1042-S reporting. A withholding agent required 
to report on Form 1042-S under paragraph (d)(4) of this section (other 
than a nonparticipating FFI reporting under paragraph (d)(4)(v) of this 
section) may rely on the procedures used for chapter 3 purposes 
(provided in published guidance) for reporting on Form 1042-S (even if 
the withholding agent is not required to report under chapter 3) for 
combined reporting following a merger or acquisition, provided that all 
of the requirements for such reporting provided in the Instructions for 
Form 1042-S are satisfied.
    (e) through (j) [Reserved]. For further guidance, see Sec.  1.1474-
1(e) through (j).
    (k) Expiration date. The applicability of this section expires on 
December 30, 2019.

0
Par. 21. Section 1.1474-6 is amended by revising paragraphs (b)(1), 
(f), and (g) to read as follows:


Sec.  1.1474-6  Coordination of chapter 4 with other withholding 
provisions.

* * * * *
    (b) * * *
    (1) In general. In the case of a withholdable payment that is both 
subject to withholding under chapter 4 and is an amount subject to 
withholding under Sec.  1.1441-2(a), a withholding agent may credit the 
withholding applied under chapter 4 against its liability for any tax 
due under sections 1441, 1442, or 1443. See Sec.  1.1474-1(c) and (d) 
for the income tax return and information return reporting requirements 
that apply in the case of a payment that is a withholdable payment 
subject to withholding under chapter 4 that is also an amount subject 
to withholding under Sec.  1.1441-2(a).
* * * * *
    (f) Coordination with section 3406. A participating FFI that makes 
a withholdable payment that is also a reportable payment (as defined in 
the relevant sections of chapter 61) to a recalcitrant account holder 
that is a U.S. non-exempt recipient is not required to withhold under 
section 3406 if it withholds on the payment at a 30-percent rate in 
accordance with its withholding obligations under chapter 4. See, 
however, Sec.  1.1471-4(b)(3)(iii) for the election to withhold on 
recalcitrant account holders that are non-exempt U.S. recipients under 
section 3406 instead of withholding under chapter 4.
    (g) Effective/applicability date. This section applies on January 
6, 2017. However, taxpayers may apply these provisions as of January 
28, 2013. (For the rules that apply beginning on January 28, 2013, and 
before January 6, 2017, see this section as in effect and contained in 
26 CFR part 1 revised April 1, 2016.)


Sec.  1.1474-6T   [Removed]

0
Par. 22. Section 1.1474-6T is removed.

[[Page 2192]]

PART 301--PROCEDURE AND ADMINISTRATION

0
Par. 23. Need Authority

0
Par. 24. Section 301.1474-1 is amended by revising paragraph (c) to 
read as follows:


Sec.  301.1474-1   Required use of magnetic media for financial 
institutions filing Form 1042-S or Form 8966.

* * * * *
    (c) Failure to file. If a financial institution fails to file a 
Form 1042-S or a Form 8966 on magnetic media when required to do so by 
this section, the financial institution is deemed to have failed to 
comply with the information reporting requirements under section 6721 
of the Code. See section 6724(c) for failure to meet magnetic media 
requirements. In determining whether there is reasonable cause for 
failure to file the return, Sec.  301.6651-1(c) and rules similar to 
the rules in Sec.  301.6724-1(c)(3) (undue economic hardship related to 
filing information returns on magnetic media) will apply.
* * * * *

John Dalrymple,
Deputy Commissioner for Services and Enforcement.
    Approved: December 22, 2016.
Mark J. Mazur,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2016-31601 Filed 12-30-16; 4:15 pm]
 BILLING CODE 4830-01-P