Regulations Regarding Withholding of Tax on Certain U.S. Source Income Paid to Foreign Persons, Information Reporting and Backup Withholding on Payments Made to Certain U.S. Persons, and Portfolio Interest Treatment; Correction, 29719-29728 [2017-13634]

Download as PDF mstockstill on DSK30JT082PROD with RULES Federal Register / Vol. 82, No. 125 / Friday, June 30, 2017 / Rules and Regulations having an individual broker’s license (see § 111.11(b) and (c)(2)) and its license would be revoked by operation of law under the provisions of 19 U.S.C. 1641(b)(5) and § 111.45(a) before the next scheduled examination, CBP may authorize a special examination for a prospective applicant for an individual license who would serve as the required licensed member or officer. CBP may also authorize a special examination for an individual for purposes of continuing the business of a sole proprietorship broker. A special examination for an individual may also be authorized by CBP if a brokerage firm loses the individual broker who was exercising responsible supervision and control over an office in another district (see § 111.19(d)) and the permit for that additional district would be revoked by operation of law under the provisions of 19 U.S.C. 1641(c)(3) and § 111.45(b) before the next scheduled examination. A request for a special examination must be submitted to the Executive Assistant Commissioner, Office of Trade, in writing and must describe the circumstances giving rise to the need for the examination. If the request is granted, the Executive Assistant Commissioner, Office of Trade or his/ her designee, will notify the prospective examinee of the exact time and place for the examination. If the individual attains a passing grade on the special examination, the application for the license may be submitted in accordance with § 111.12. The examinee will be responsible for all additional costs incurred by CBP in preparing and administering the special examination that exceed the $390 examination fee prescribed in § 111.96(a), and those additional costs must be reimbursed to CBP before the examination is given. (d) Failure to appear for examination. If a prospective examinee advises the Office of Trade at the Headquarters of U.S. Customs and Border Protection, Attn: Broker Management Branch, electronically in a manner specified by CBP at least 2 working days prior to the date of a regularly scheduled examination that he will not appear for the examination, CBP will refund the $390 examination fee referred to in paragraph (b) of this section. No refund of the examination fee or additional reimbursed costs will be made in the case of a special written examination provided for under paragraph (c) of this section. * * * * * (f) Appeal of failing grade on examination. If an examinee fails to attain a passing grade on the examination taken under this section, VerDate Sep<11>2014 17:26 Jun 29, 2017 Jkt 241001 the examinee may challenge that result by filing a written appeal with the Office of Trade at the Headquarters of U.S. Customs and Border Protection, Attn: Broker Management Branch, within 60 calendar days after the date of the written notice provided for in paragraph (e) of this section. CBP will provide to the examinee written notice of the decision on the appeal. If the CBP decision on the appeal affirms the result of the examination, the examinee may request review of the decision on the appeal by writing to the Executive Assistant Commissioner, Office of Trade, U.S. Customs and Border Protection, within 60 calendar days after the date of the notice on that decision. § 111.96 [Amended] 5. In § 111.96: a. Paragraph (a) is amended by removing the word ‘‘written’’ from the second sentence and removing the phrase ‘‘$200 examination fee’’ in the second sentence and adding in its place the phrase ‘‘$390 examination fee’’; and ■ b. Paragraph (e) is amended by removing the words ‘‘United States Customs Service’’ and adding in their place the words ‘‘U.S. Customs and Border Protection, or paid by other CBPapproved payment method’’. ■ ■ Dated: June 27, 2017. Elaine C. Duke, Deputy Secretary. [FR Doc. 2017–13829 Filed 6–29–17; 8:45 am] BILLING CODE 9111–14–P DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 1 [TD 9808] RIN 1545–BL17 RIN 1545–BN74 Regulations Regarding Withholding of Tax on Certain U.S. Source Income Paid to Foreign Persons, Information Reporting and Backup Withholding on Payments Made to Certain U.S. Persons, and Portfolio Interest Treatment; Correction Internal Revenue Service (IRS), Treasury. ACTION: Correcting amendment. AGENCY: This document contains corrections to final and temporary regulations (TD 9808), which were published in the Federal Register on Friday, January 6, 2017 (82 FR 2046). These regulations are related to SUMMARY: PO 00000 Frm 00021 Fmt 4700 Sfmt 4700 29719 withholding of tax on certain U.S. source income paid to foreign persons, information reporting and backup withholding with respect to payments made to certain U.S. persons, and portfolio interest paid to nonresident alien individuals and foreign corporations. DATES: Effective Date: These corrections are effective June 30, 2017. Applicability Date: The corrections to §§ 1.1441–0; 1.1441–1(b)(7)(ii)(B), (e)(3)(iv)(B) and (C), (e)(4)(ii)(B)(11), (e)(4)(ix)(D), (e)(5)(ii) through (e)(5)(ii)(B), (e)(5)(ii)(D) through (e)(5)(v)(B)(3), (e)(5)(v)(B)(5) through (e)(5)(v)(D), and (f) through (f)(4); 1.1441–1T; 1.1441–3(d)(1); 1.1441–4; 1.6045–1(m)(2)(ii) and (n)(12)(ii); and 1.6049–5(c)(1) through (c)(4) are applicable on January 6, 2017. FOR FURTHER INFORMATION CONTACT: Nancy Lee, (202) 317–6942 (not a tollfree number). SUPPLEMENTARY INFORMATION: Background The final and temporary regulations that are the subject of these corrections are §§ 1.1441–0, 1.1441–1, 1.1441–1T, 1.1441–3, 1.1441–4, 1.6045–1, and 1.6049–5, promulgated under sections 1441, 6045, 6049, and 7805 of the Internal Revenue Code. These regulations affect persons making payments of U.S. source income to foreign persons and persons making payments to certain U.S. persons subject to reporting and backup withholding. Need for Correction As published, the final regulations contain a number of items that need to be corrected or clarified. Several portions of TD 9808 could not be incorporated due to inaccurate amendatory instructions. Most of the correcting amendments to TD 9808 are needed to clarify or correct the results of these inaccurate amendatory instructions. The correcting amendments also include the addition, deletion, or modification of regulatory language to clarify the relevant provisions to meet their intended purposes, specifically to make a conforming change to the entry in the table of contents (§ 1.1441–0) for § 1.1441–1(e)(4)(ix); to correct typographical errors in §§ 1.1441– 1(e)(4)(ix)(D), 1.1441–1T(c)(3)(ii), and 1.1441–3(d)(1); to clarify that allowances for electronic signatures in § 1.1441–1T(e)(4)(i)(B) and use of third party repository in § 1.1441– 1T(e)(4)(iv)(E) are limited to Forms W– 8; to remove an obsolete cross-reference E:\FR\FM\30JNR1.SGM 30JNR1 29720 Federal Register / Vol. 82, No. 125 / Friday, June 30, 2017 / Rules and Regulations to § 1.1441–4(h); and to return § 1.6045– 1(m)(2)(ii) and (n)(12)(ii) to the way those provisions read prior to unnecessary revisions in TD 9808. List of Subjects in 26 CFR Part 1 Income taxes, Reporting and recordkeeping requirements. Correction of Publication 7. Adding new paragraph (e)(5)(ii)(D) and removing paragraph (e)(5)(ii)(E); ■ 8. Revising paragraphs (e)(5)(iii) through (e)(5)(v)(B)(3); ■ 9. Adding paragraph (e)(5)(v)(B)(5) through (e)(5)(v)(D); and ■ 10. Revising the heading of paragraph (f), and paragraphs (f)(1) through (4). The addition and revisions read as follows: ■ Accordingly, 26 CFR part 1 is corrected by making the following correcting amendments: § 1.1441–1 Requirement for the deduction and withholding of tax on payments to foreign persons. PART 1—INCOME TAXES * Paragraph 1. The authority citation for part 1 continues to read in part as follows: ■ Authority: 26 U.S.C. 7805 * * * Par. 2. Section 1.1441–0 is amended by adding an entry for § 1.1441– 1(e)(4)(viii)(C); revising the entries for § 1.1441–1(e)(4)(ix), (e)(5)(v)(A), (f), and (f)(2); and removing the entries for § 1.1441–1(f)(2)(i) and (ii). The addition and revisions read as follows: ■ § 1.1441–0 Outline of regulation provisions for section 1441. * * * * * § 1.1441–1 Requirement for the deduction and withholding of tax on payments to foreign persons. mstockstill on DSK30JT082PROD with RULES * * * * * (e) * * * (4) * * * (viii) * * * (C) Reliance on a prior version of a withholding certificate. (ix) Certificates to be furnished to withholding agent for each obligation unless exception applies. * * * * * (5) * * * (v) * * * (A) In general. * * * * * (f) Effective/applicability date. * * * * * (2) Lack of documentation for past years. * * * * * ■ Par. 3. Section 1.1441–1 is amended by: ■ 1. Adding paragraph (b)(7)(ii)(B); ■ 2. Adding paragraphs (e)(3)(iv)(B) and (C); ■ 3. Revising paragraph (e)(4)(ii)(B)(11); ■ 4. Revising the last sentence of paragraph (e)(4)(ix)(D); ■ 5. Revising paragraphs (e)(5)(ii) introductory text through (e)(5)(ii)(B); ■ 6. Removing paragraph (e)(5)(ii)(C) and redesignating paragraph (e)(5)(ii)(D) as new paragraph (e)(5)(ii)(C); VerDate Sep<11>2014 17:26 Jun 29, 2017 Jkt 241001 * * * * (b) * * * (7) * * * (ii) * * * (B) [Reserved]. For further guidance, see § 1.1441–1T(b)(7)(ii)(B). * * * * * (e) * * * (3) * * * (iv) * * * (B) General requirements. A withholding statement must be provided prior to the payment of a reportable amount and must contain the information specified in paragraph (e)(3)(iv)(C) of this section. The statement must be updated as often as required to keep the information in the withholding statement correct prior to each subsequent payment. The withholding statement forms an integral part of the withholding certificate provided under paragraph (e)(3)(iii) of this section, and the penalties of perjury statement provided on the withholding certificate shall apply to the withholding statement. The withholding statement may be provided in any manner the nonqualified intermediary and the withholding agent mutually agree, including electronically. If the withholding statement is provided electronically as part of a system established by the withholding agent or nonqualified intermediary to provide the statement, however, there must be sufficient safeguards to ensure that the information received by the withholding agent is the information sent by the nonqualified intermediary and all occasions of user access that result in the submission or modification of the withholding statement information must be recorded. In addition, the electronic system must be capable of providing a hard copy of all withholding statements provided by the nonqualified intermediary. A withholding statement may otherwise be transmitted by a nonqualified intermediary via email or facsimile to a withholding agent under the requirements specified in paragraph (e)(4)(iv)(D) of this section (substituting the term withholding statement for the term Form W–8 or the term document, PO 00000 Frm 00022 Fmt 4700 Sfmt 4700 as applicable). A withholding agent will be liable for tax, interest, and penalties in accordance with paragraph (b)(7) of this section to the extent it does not follow the presumption rules of paragraph (b)(3) of this section or §§ 1.1441–5(d) and (e)(6), and 1.6049– 5(d) for any payment of a reportable amount, or portion thereof, for which it does not have a valid withholding statement prior to making a payment. A withholding agent may not treat as valid an allocation of a payment to a chapter 4 withholding rate pool of U.S. payees described in paragraph (e)(3)(iv)(A) of this section or an allocation of a payment to a chapter 4 withholding rate pool of recalcitrant account holders described in paragraph (e)(3)(iv)(C)(2) of this section unless the withholding agent identifies the nonqualified intermediary maintaining the account (as described in § 1.1471–5(b)(5)) as a participating FFI (including a reporting Model 2 FFI) or registered deemedcompliant FFI (including a reporting Model 1 FFI) by applying the rules of § 1.1471–3(d)(4). Additionally, in the case of a withholdable payment that is an amount subject to withholding made on or after April 1, 2017, a withholding agent may not treat as valid an allocation of the payment to a chapter 4 withholding rate pool of U.S. payees unless the nonqualified intermediary identifies the pool of U.S. payees as one described in § 1.1471– 3(c)(3)(iii)(B)(2)(iii) (or by describing such payees consistent with the description provided in § 1.1471– 3(c)(3)(ii)(B)(2)(iii)). (C) Content of withholding statement. The withholding statement provided by a nonqualified intermediary must contain the information required by this paragraph (e)(3)(iv)(C). (1) In general. Except as otherwise provided by paragraph (e)(3)(iv)(C)(2) and (3) of this section), the withholding statement provided by a nonqualified intermediary must contain the information required by this paragraph (e)(3)(iv)(C)(1). (i) Except as otherwise provided in (e)(3)(iv)(A) of this section (which excludes reporting of information with respect to certain U.S. persons on the withholding statement), the withholding statement must contain the name, address, TIN (if any), and the type of documentation (documentary evidence, Form W–9, or type of Form W–8) for every person from whom documentation has been received by the nonqualified intermediary and provided to the withholding agent and whether that person is a U.S. exempt recipient, a U.S. non-exempt recipient, or a foreign person. See paragraphs (c)(2), (20), and E:\FR\FM\30JNR1.SGM 30JNR1 mstockstill on DSK30JT082PROD with RULES Federal Register / Vol. 82, No. 125 / Friday, June 30, 2017 / Rules and Regulations (21) of this section for the definitions of foreign person, U.S. exempt recipient, and U.S. non-exempt recipient. In the case of a foreign person, the statement must indicate whether the foreign person is a beneficial owner or an intermediary, flow-through entity, U.S. branch, or territory financial institution described in paragraph (b)(2)(iv) of this section and include the type of recipient, based on recipient codes applicable for chapter 3 purposes used for filing Forms 1042–S, if the foreign person is a recipient as defined in § 1.1461–1(c)(1)(ii). (ii) The withholding statement must allocate each payment, by income type, to every payee required to be reported on the withholding statement for whom documentation has been provided (including U.S. exempt recipients except as provided in paragraph (e)(3)(iv)(A) of this section). Any payment that cannot be reliably associated with valid documentation from a payee shall be treated as made to an unknown payee in accordance with the presumption rules of paragraph (b) of this section and §§ 1.1441–5(d) and (e)(6) and 1.6049–5(d). For this purpose, a type of income is determined by the types of income required to be reported on Forms 1042–S or 1099, as appropriate. Notwithstanding the preceding sentence, deposit interest (including original issue discount) described in section 871(i)(2)(A) or 881(d) and interest or original issue discount on short-term obligations as described in section 871(g)(1)(B) or 881(e) is only required to be allocated to the extent it is required to be reported on Form 1099 or Form 1042–S. See § 1.6049–8 (regarding reporting of bank deposit interest to certain foreign persons). If a payee receives income through another nonqualified intermediary, flow-through entity, or U.S. branch or territory financial institution described in paragraph (e)(2)(iv) of this section (other than a U.S. branch or territory financial institution treated as a U.S. person), the withholding statement must also state, with respect to the payee, the name, address, and TIN, if known, of the other nonqualified intermediary or U.S. branch from which the payee directly receives the payment or the flowthrough entity in which the payee has a direct ownership interest. If another nonqualified intermediary, flow-through entity, or U.S. branch fails to allocate a payment, the name of the nonqualified intermediary, flow-through entity, or U.S. branch that failed to allocate the payment shall be provided with respect to such payment. VerDate Sep<11>2014 17:26 Jun 29, 2017 Jkt 241001 (iii) If a payee is identified as a foreign person, the nonqualified intermediary must specify the rate of withholding to which the payee is subject, the payee’s country of residence and, if a reduced rate of withholding is claimed, the basis for that reduced rate (e.g., treaty benefit, portfolio interest, exempt under section 501(c)(3), 892, or 895). The allocation statement must also include the TINs of those foreign persons for whom such a number is required under paragraph (e)(4)(vii) of this section or § 1.1441– 6(b)(1) (regarding claims for treaty benefits for which a TIN is provided unless a foreign tax identifying number described in § 1.1441–6(b)(1) is provided). In the case of a claim of treaty benefits, the nonqualified intermediary’s withholding statement must also state whether the limitation on benefits and section 894 statements required by § 1.1441–6(c)(5) have been provided, if required, in the beneficial owner’s Form W–8 or associated with such owner’s documentary evidence. (iv) The withholding statement must also contain any other information the withholding agent reasonably requests in order to fulfill its obligations under chapter 3 and chapter 61 of the Code, and section 3406. (2) Nonqualified intermediary withholding statement for withholdable payments. This paragraph (e)(3)(iv)(C)(2) modifies the requirements of a withholding statement described in paragraph (e)(3)(iv)(C)(1) of this section that is provided by a nonqualified intermediary with respect to a reportable amount that is a withholdable payment. For such a payment, the requirements applicable to a withholding statement described in paragraph (e)(3)(iv)(A) through (e)(3)(iv)(C)(1) of this section shall apply, except that— (i) The withholding statement must include the chapter 4 status (using the applicable status code used for filing Form 1042–S) and GIIN (when required for chapter 4 purposes under § 1.1471– 3(d)) of each other intermediary or flowthrough entity that is a foreign person and that receives the payment, excluding an intermediary or flowthrough entity that is an account holder of or interest holder in a withholding foreign partnership, withholding foreign trust, or intermediary acting as a qualified intermediary for the payment; (ii) If the nonqualified intermediary that is a participating FFI or registered deemed-compliant FFI provides a withholding statement described in § 1.1471–3(c)(3)(iii)(B)(2) (describing an FFI withholding statement), the withholding statement may include chapter 4 withholding rate pools with PO 00000 Frm 00023 Fmt 4700 Sfmt 4700 29721 respect to the portions of the payment allocated to nonparticipating FFIs and recalcitrant account holders (to the extent permitted on an FFI withholding statement described in that paragraph) in lieu of providing specific payee information with respect to such persons on the statement (including persons subject to chapter 4 withholding) as described in paragraph (e)(3)(iv)(C)(1) of this section; (iii) If the nonqualified intermediary provides a withholding statement described in § 1.1471–3(c)(3)(iii)(B)(3) (describing a chapter 4 withholding statement), the withholding statement may include chapter 4 withholding rate pools with respect to the portions of the payment allocated to nonparticipating FFIs; and (iv) For a payment allocated to a payee that is a foreign person (other than a person included in a chapter 4 withholding rate pool described in paragraphs (e)(3)(iv)(C)(2)(ii) and (iii) of this section) that is reported on a withholding statement described in § 1.1471–3(c)(3)(iii)(B)(2) or (3), the withholding statement must include the chapter 4 status of the payee (unless an exception applies for purposes of providing such status under chapter 4) and, for a payee other than an individual, the recipient code for chapter 4 purposes used for filing Form 1042–S; and (v) To the extent that a withholdable payment is not reportable on a Form 1042–S, Form 1099 under the rules of chapter 61, or Form 8966 ‘‘FATCA Report,’’ no allocation of the payment is required on the withholding statement. (3) [Reserved]. For further guidance, see § 1.1441–1T(e)(3)(iv)(C)(3). (4) Example. This example illustrates the principles of paragraph (e)(3)(iv)(C) of this section. WA makes a withholdable payment of U.S. source dividends to NQI, a nonqualified intermediary. NQI provides WA with a valid intermediary withholding certificate under paragraph (e)(3)(iii) of this section that includes NQI’s certification of its status for chapter 4 purposes as a participating FFI. NQI provides a withholding statement on which NQI allocates 20% of the payment to a chapter 4 withholding rate pool of recalcitrant account holders of NQI for purposes of chapter 4 and allocates 80% of the payment equally to A and B, individuals that are account holders of NQI. NQI also provides WA with valid beneficial owner withholding certificates from A and B establishing their status as foreign persons entitled to a 15% rate of withholding under an applicable income tax treaty. Because NQI has certified its status as a participating FFI, withholding under chapter 4 is not required with respect to NQI. See § 1.1471–2(a)(4). Based on the documentation NQI provided to WA with respect to A and B, WA can reliably associate E:\FR\FM\30JNR1.SGM 30JNR1 29722 Federal Register / Vol. 82, No. 125 / Friday, June 30, 2017 / Rules and Regulations the payment with valid documentation on the portion of the payment allocated to them and, because the payment is a withholdable payment, may rely on the allocation of the payment for NQI’s recalcitrant account holders in a chapter 4 withholding rate pool in lieu of payee information with respect to such account holders. See paragraph (e)(3)(iv)(C)(2) of this section for the special rules for a withholding statement provided by a nonqualified intermediary for a withholdable payment. Also see § 1.1471– 2(a) for WA’s withholding requirements under chapter 4 with respect to the portion of the payment allocated to NQI’s recalcitrant account holders and § 1.1441–3(a)(2) for coordinating withholding under chapter 3 for payments to which withholding is applied under chapter 4. mstockstill on DSK30JT082PROD with RULES * * * * * (4) * * * (ii) * * * (B) * * * (11) Documentary evidence that is not generally renewed or amended (such as a certificate of incorporation). * * * * * (ix) * * * (D) * * * See § 1.1471–3(c)(9)(v) for a similar reliance rule that applies for purposes of chapter 4. (5) * * * (ii) Definition of qualified intermediary. With respect to a payment to a foreign person, the term qualified intermediary means a person that is a party to a withholding agreement with the IRS where such person is— (A) A foreign financial institution that is a participating FFI (including a reporting Model 2 FFI), a registered deemed-compliant FFI (including a reporting Model 1 FFI), an FFI treated as a deemed-compliant FFI under an applicable IGA that is subject to due diligence and reporting requirements with respect to its U.S. accounts similar to those applicable to a registered deemed-compliant FFI under § 1.1471– 5(f)(1), excluding a U.S. branch of any of the foregoing entities, or any other category of FFI identified in a qualified intermediary withholding agreement as eligible to act as a qualified intermediary; (B) A foreign branch or office of a U.S. financial institution or a foreign branch or office of a U.S. clearing organization that is either a reporting Model 1 FFI or agrees to the reporting requirements applicable to a participating FFI with respect to its U.S. accounts; * * * * * (D) Any other person acceptable to the IRS. (iii) Withholding agreement—(A) In general. The IRS may, upon request, enter into a withholding agreement with a foreign person described in paragraph (e)(5)(ii) of this section pursuant to such VerDate Sep<11>2014 17:26 Jun 29, 2017 Jkt 241001 procedures as the IRS may prescribe in published guidance (see § 601.601(d)(2) of this chapter). Under the withholding agreement, a qualified intermediary shall generally be subject to the applicable withholding and reporting provisions applicable to withholding agents and payors under chapters 3, 4, and 61 of the Code, section 3406, the regulations under those provisions, and other withholding provisions of the Code, except to the extent provided under the agreement. (B) Terms of the withholding agreement. The withholding agreement shall specify the obligations of the qualified intermediary under chapters 3 and 4 including, for a qualified intermediary that is an FFI, the documentation, withholding, and reporting obligations required of a participating FFI or registered deemedcompliant FFI (including a reporting Model 1 FFI as defined in § 1.1471– 1(b)(114)) with respect to each branch of the qualified intermediary other than a U.S. branch that is treated as a U.S. person under paragraph (b)(2)(iv)(A) of this section. The withholding agreement will specify the type of certifications and documentation upon which the qualified intermediary may rely to ascertain the classification (e.g., corporation or partnership), status (i.e., U.S. or foreign and chapter 4 status) of beneficial owners and payees who receive reportable amounts, reportable payments, and withholdable payments collected by the qualified intermediary for purposes of chapters 3, 4, and 61, section 3406, and, if necessary, entitlement to the benefits of a reduced rate under an income tax treaty. The withholding agreement shall specify if, and to what extent, the qualified intermediary may assume primary withholding responsibility in accordance with paragraph (e)(5)(iv) of this section. It shall also specify the extent to which applicable return filing and information reporting requirements are modified so that, in appropriate cases, the qualified intermediary may report payments to the IRS on an aggregated basis, without having to disclose the identity of beneficial owners and payees. However, the qualified intermediary may be required to provide to the IRS the name and address of those foreign customers who benefit from a reduced rate under an income tax treaty pursuant to the withholding agreement for purposes of verifying entitlement to such benefits, particularly under an applicable limitation on benefits provision. Under the withholding agreement, a qualified intermediary may agree to act as an PO 00000 Frm 00024 Fmt 4700 Sfmt 4700 acceptance agent to perform the duties described in § 301.6109–1(d)(3)(iv)(A) of this chapter. The withholding agreement may specify the manner in which applicable procedures for adjustments for underwithholding and overwithholding, including refund procedures, apply to qualified intermediaries and the extent to which applicable procedures may be modified. In particular, a withholding agreement may allow a qualified intermediary to claim refunds of overwithheld amounts. In addition, the withholding agreement shall specify the manner in which the IRS will verify compliance with the agreement, including the time and manner for which a qualified intermediary will be required to certify to the IRS regarding its compliance with the withholding agreement (including its performance of a periodic review) and the types of information required to be disclosed as part of the certification. In appropriate cases, the IRS may require review procedures be performed by an approved reviewer (in addition to those performed as part of the periodic review) and may conduct a review of the reviewer’s findings. The withholding agreement may include provisions for the assessment and collection of tax in the event that failure to comply with the terms of the withholding agreement results in the failure by the withholding agent or the qualified intermediary to withhold and deposit the required amount of tax. Further, the withholding agreement may specify the procedures by which amounts withheld are to be deposited, if different from the deposit procedures under the Code and applicable regulations. To determine whether to enter a withholding agreement and the terms of any particular withholding agreement, the IRS will consider the type of local know-your-customer laws and practices to which the entity is subject (if the entity is an FFI), as well as the extent and nature of supervisory and regulatory control exercised under the laws of the foreign country over the foreign entity. (iv) Assignment of primary withholding responsibility. Any person (whether a U.S. person or a foreign person) who meets the definition of a withholding agent under § 1.1441–7(a) (for payments subject to chapter 3 withholding) and § 1.1473–1(d) (for withholdable payments) is required to withhold and deposit any amount withheld under §§ 1.1461–1(a) and 1.1474–1(b) and to make the returns prescribed by §§ 1.1461–1(b) and (c), and by 1.1474–1(c), and (d). Under its qualified intermediary withholding E:\FR\FM\30JNR1.SGM 30JNR1 mstockstill on DSK30JT082PROD with RULES Federal Register / Vol. 82, No. 125 / Friday, June 30, 2017 / Rules and Regulations agreement, a qualified intermediary may, however, inform a withholding agent from which it receives a payment that it will assume the primary obligation to withhold, deposit, and report amounts under chapters 3 and 4 of the Code and/or under chapter 61 and section 3406 of the Code. For assuming withholding obligations as described in the previous sentence, a qualified intermediary that assumes primary withholding responsibility for payments made to an account under chapter 3 is also required to assume primary withholding responsibility under chapter 4 for payments made to the account that are withholdable payments. Additionally, a qualified intermediary may represent that it assumes chapter 61 reporting and section 3406 obligations for a payment when the qualified intermediary meets the requirements of § 1.6049–4(c)(4)(i) or (ii) for the payment. If a withholding agent makes a payment of an amount subject to withholding under chapter 3, a reportable payment (as defined in section 3406(b)), or a withholdable payment to a qualified intermediary that represents to the withholding agent that it has assumed primary withholding responsibility for the payment, the withholding agent is not required to withhold on the payment. The withholding agent is not required to determine that the qualified intermediary actually performs its primary withholding responsibilities. A qualified intermediary that assumes primary withholding responsibility under chapters 3 and 4 or primary reporting and backup withholding responsibility under chapter 61 and section 3406 is not required to assume primary withholding responsibility for all accounts it has with a withholding agent but must assume primary withholding responsibility for all payments made to any one account that it has with the withholding agent. (v) Withholding statement—(A) In general. A qualified intermediary must provide each withholding agent from which it receives reportable amounts as a qualified intermediary with a written statement (the withholding statement) containing the information specified in paragraph (e)(5)(v)(B) of this section. A withholding statement is not required, however, if all of the information a withholding agent needs to fulfill its withholding and reporting requirements is contained in the withholding certificate. The qualified intermediary withholding agreement will require the qualified intermediary to include information in its withholding statement relating to withholdable VerDate Sep<11>2014 17:26 Jun 29, 2017 Jkt 241001 payments for purposes of withholding under chapter 4 as described in paragraph (e)(5)(v)(C)(2) of this section. The withholding statement forms an integral part of the qualified intermediary’s qualified intermediary withholding certificate, and the penalties of perjury statement provided on the withholding certificate shall apply to the withholding statement as well. The withholding statement may be provided in any manner, and in any form, to which qualified intermediary and the withholding agent mutually agree, including electronically. If the withholding statement is provided electronically, the statement must satisfy the requirements described in paragraph (e)(3)(iv) of this section (applicable to a withholding statement provided by a nonqualified intermediary). The withholding statement shall be updated as often as necessary for the withholding agent to meet its reporting and withholding obligations under chapters 3, 4, and 61 and section 3406. For purposes of this section, a withholding agent will be liable for tax, interest, and penalties in accordance with paragraph (b)(7) of this section to the extent it does not follow the presumption rules of paragraph (b)(3) of this section, §§ 1.1441–5(d) and (e)(6), and 1.6049–5(d) for a payment, or portion thereof, for which it does not have a valid withholding statement prior to making a payment. (B) Content of withholding statement. The withholding statement must contain sufficient information for a withholding agent to apply the correct rate of withholding on payments from the accounts identified on the statement and to properly report such payments on Forms 1042–S and Forms 1099, as applicable. The withholding statement must— (1) Designate those accounts for which the qualified intermediary acts as a qualified intermediary; (2) Designate those accounts for which qualified intermediary assumes primary withholding responsibility under chapter 3 and chapter 4 of the Code and/or primary reporting and backup withholding responsibility under chapter 61 and section 3406; (3) If applicable, designate those accounts for which the qualified intermediary is acting as a qualified securities lender with respect to a substitute dividend paid in a securities lending or similar transaction; * * * * * (5) Provide information regarding withholding rate pools, as described in paragraph (e)(5)(v)(C) of this section. (C) Withholding rate pools—(1) In general. Except to the extent it has PO 00000 Frm 00025 Fmt 4700 Sfmt 4700 29723 assumed both primary withholding responsibility under chapters 3 and 4 of the Code and primary Form 1099 reporting and backup withholding responsibility under chapter 61 and section 3406 with respect to a payment, a qualified intermediary shall provide as part of its withholding statement the chapter 3 withholding rate pool information that is required for the withholding agent to meet its withholding and reporting obligations under chapters 3 and 61 of the Code and section 3406. See, however, paragraph (e)(5)(v)(C)(2) of this section for when a qualified intermediary may provide a chapter 4 withholding rate pool (as described in paragraph (c)(48) of this section) with respect to a payment that is a withholdable payment. A chapter 3 withholding rate pool is a payment of a single type of income, determined in accordance with the categories of income reported on Form 1042–S, that is subject to a single rate of withholding paid to a payee that is a foreign person and for which withholding under chapter 4 does not apply. A chapter 3 withholding rate pool may be established by any reasonable method on which the qualified intermediary and a withholding agent agree (e.g., by establishing a separate account for a single chapter 3 withholding rate pool, or by dividing a payment made to a single account into portions allocable to each chapter 3 withholding rate pool). A qualified intermediary may include a separate pool for account holders that are U.S. exempt recipients or may include such accounts in a chapter 3 withholding rate pool to which withholding does not apply. The withholding statement must identify the chapter 4 exemption code (as provided in the instructions to Form 1042–S) applicable to the chapter 3 withholding rate pools contained on the withholding statement. To the extent a qualified intermediary does not assume primary Form 1099 reporting and backup withholding responsibility under chapter 61 and section 3406, a qualified intermediary’s withholding statement must establish a separate withholding rate pool for each U.S. non-exempt recipient account holder that the qualified intermediary has disclosed to the withholding agent unless the qualified intermediary uses the alternative procedures in paragraph (e)(5)(v)(C)(3) of this section or the account holder is a payee that the qualified intermediary is permitted to include in a chapter 4 withholding rate pool of U.S. payees. A qualified intermediary that is a participating FFI or registered deemed- compliant FFI E:\FR\FM\30JNR1.SGM 30JNR1 mstockstill on DSK30JT082PROD with RULES 29724 Federal Register / Vol. 82, No. 125 / Friday, June 30, 2017 / Rules and Regulations may include a chapter 4 withholding rate pool of U.S. payees on a withholding statement by applying the rules under paragraph (e)(3)(iv)(A) of this section (by substituting ‘‘qualified intermediary’’ for ‘‘nonqualified intermediary’’) with respect to an account that it maintains (as described in § 1.1471–5(b)(5)) for the payee of the payment. A qualified intermediary shall determine withholding rate pools based on valid documentation that it obtains under its withholding agreement with the IRS, or if a payment cannot be reliably associated with valid documentation, under the applicable presumption rules. If a qualified intermediary has an account holder that is another intermediary (whether a qualified intermediary or a nonqualified intermediary) or a flow- through entity, the qualified intermediary may combine the account holder information provided by the other intermediary or flow-through entity with the qualified intermediary’s direct account holder information to determine the qualified intermediary’s chapter 3 withholding rate pools and each of the qualified intermediary’s chapter 4 withholding rate pools to the extent provided in its withholding agreement with the IRS. (2) Withholding rate pool requirements for a withholdable payment. This paragraph (e)(5)(v)(C)(2) modifies the requirements of a withholding statement described in paragraph (e)(5)(v)(C)(1) of this section provided by a qualified intermediary with respect to a withholdable payment (including a reportable amount that is a withholdable payment). For such a payment, the regulations applicable to a withholding statement described in paragraph (e)(5)(v)(C)(1) of this section shall apply, except that— (i) If the qualified intermediary provides a withholding statement described in § 1.1471–3(c)(3)(iii)(B)(2) (describing an FFI withholding statement), the withholding statement may include a chapter 4 withholding rate pool with respect to the portion of the payment allocated to a single pool of recalcitrant account holders (without the need to subdivide into the pools described in § 1.1471–4(d)(6)), including both account holders of the qualified intermediary and of any participating FFI, registered deemed-compliant FFI, or other qualified intermediary for whom the first-mentioned qualified intermediary receives the payment, and nonparticipating FFIs (to the extent permitted) in lieu of reporting chapter 3 withholding rate pools with respect to such persons as described in paragraph (e)(5)(v)(C)(1) of this section); or VerDate Sep<11>2014 17:26 Jun 29, 2017 Jkt 241001 (ii) If the qualified intermediary provides a withholding statement described in § 1.1471–3(c)(3)(iii)(B)(3) (describing a chapter 4 withholding statement), the withholding statement may include a chapter 4 withholding rate pool with respect to the portion of the payment allocated to nonparticipating FFIs. (3) Alternative procedure for U.S. non-exempt recipients. If permitted under its withholding agreement with the IRS, a qualified intermediary may, by mutual agreement with a withholding agent, establish a single zero withholding rate pool that includes U.S. non-exempt recipient account holders for whom the qualified intermediary has provided Forms W–9 prior to the withholding agent paying any reportable payments, as defined in the qualified intermediary withholding agreement, and foreign persons for which no withholding is required under chapters 3 and 4, and may include payments allocated to a chapter 4 withholding rate pool of U.S. payees. In such a case, the qualified intermediary may also establish a separate withholding rate pool (subject to 28percent withholding, or other applicable statutory back-up withholding tax rate) that includes only U.S. non-exempt recipient account holders for whom a qualified intermediary has not provided Forms W–9 prior to the withholding agent paying any reportable payments. If a qualified intermediary chooses the alternative procedure of this paragraph (e)(5)(v)(C)(3), the qualified intermediary must provide the information required by its withholding agreement to the withholding agent no later than January 15 of the year following the year in which the payments are paid. Failure to provide such information will result in the application of penalties to the qualified intermediary under sections 6721 and 6722, as well as any other applicable penalties, and may result in the termination of the qualified intermediary’s withholding agreement with the IRS. A withholding agent shall not be liable for tax, interest, or penalties for failure to backup withhold or report information under chapter 61 of the Code due solely to the errors or omissions of the qualified intermediary. If a qualified intermediary fails to provide the allocation information required by this paragraph (e)(5)(v)(C)(3), with respect to U.S. nonexempt recipients, the withholding agent shall report the unallocated amount paid from the withholding rate pool to an unknown recipient, or otherwise in accordance with the PO 00000 Frm 00026 Fmt 4700 Sfmt 4700 appropriate Form 1099 and the instructions accompanying the form. (D) Example. The following example illustrates the application of paragraph (e)(5)(v)(C) of this section for a qualified intermediary providing chapter 4 withholding rate pools on an FFI withholding statement provided to a withholding agent. WA makes a payment of U.S. source interest that is a withholdable payment to QI, a qualified intermediary that is an FFI and a non-U.S. payor (as defined in § 1.6049–5(c)(5)), and A and B are account holders of QI (as defined under § 1.1471–5(a)) and are both U.S. non-exempt recipients (as defined in paragraph (c)(21) of this section). Ten percent of the payment is attributable to both A and B. A has provided WA with a Form W–9, but B has not provided WA with a Form W–9. QI assumes primary withholding responsibility under chapters 3 and 4 with respect to the payment, 80 percent of which is allocable to foreign payees who are account holders other than A and B. As a participating FFI, QI is required to report with respect to its U.S. accounts under § 1.1471–4(d) (as incorporated into its qualified intermediary agreement). Provided that QI reports A’s account as a U.S. account under the requirements referenced in the preceding sentence, QI is not required to provide WA with a Form W–9 from A and may instead include A in a chapter 4 withholding rate pool of U.S. payees, allocating 10% of the payment to this pool. See § 1.6049–4(c)(4)(iii) concerning when reporting under section 6049 for a payment of interest is not required when an FFI that is a non-U.S. payor reports an account holder receiving the payment under its chapter 4 requirements. With respect to B, the interest payment is subject to backup withholding under section 3406. Because B is a recalcitrant account holder of QI for withholdable payments and because QI assumes primary chapter 4 withholding responsibility, however, QI may include the portion of the payment allocated to B with the remaining 80% of the payment for which QI assumes primary withholding responsibility. WA can reliably associate the full amount of the payment based on the withholding statement and does so regardless of whether WA knows B is a U.S. nonexempt recipient that is receiving a portion of the payment. See § 31.3406(g)–1(e) (providing exemption to backup withholding when withholding was applied under chapter 4). * * * * * (f) Effective/applicability date—(1) In general. Except as otherwise provided in paragraphs (e)(4)(ix)(D), (f)(2), and (f)(3) of this section, this section applies to payments made on or after January 6, 2017. (For payments made after June 30, 2014 (except for payments to which paragraph (e)(4)(ix)(D) applies, in which case, substitute March 5, 2014, for June 30, 2014), and before January 6, 2017, see this section as in effect and contained in 26 CFR part 1, as revised April 1, 2016. For payments made after E:\FR\FM\30JNR1.SGM 30JNR1 Federal Register / Vol. 82, No. 125 / Friday, June 30, 2017 / Rules and Regulations December 31, 2000, and before July 1, 2014, see this section as in effect and contained in 26 CFR part 1, as revised April 1, 2013.) (2) Lack of documentation for past years. A taxpayer may elect to apply the provisions of paragraphs (b)(7)(i)(B), (ii), and (iii) of this section, dealing with liability for failure to obtain documentation timely, to all of its open tax years, including tax years that are currently under examination by the IRS. The election is made by simply taking action under those provisions in the same manner as the taxpayer would take action for payments made after December 31, 2000. (3) Section 871(m) transactions. Paragraphs (b)(4)(xxi), (b)(4)(xxiii), (e)(3)(ii)(E), and (e)(6) of this section apply to payments made on or after September 18, 2015. (4) [Reserved]. For further guidance, see § 1.1441–1T(f)(4). * * * * * Par. 4. Section 1.1441–1T is revised to read as follows: ■ mstockstill on DSK30JT082PROD with RULES § 1.1441–1T Requirement for the deduction and withholding of tax on payments to foreign persons (temporary). (a) through (b)(7)(ii)(A) [Reserved]. For further guidance, see § 1.1441–1(a) through (b)(7)(ii)(A). (B) Special rules for establishing that income is effectively connected with the conduct of a U.S. trade or business. A withholding certificate received after the date of payment to claim under § 1.1441–4(a)(1) that income is effectively connected with the conduct of a U.S. trade or business 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. The signed affidavit must also state that the beneficial owner has included the income on its U.S. income tax return for the taxable year in which it is required to report the income or, alternatively, that the beneficial owner intends to include the income on a U.S. income tax return for the taxable year in which it is required to report the income and the due date for filing such return (including any applicable extensions) is after the date on which the affidavit is signed. A certificate received within 30 days after the date of the payment will not be considered to be unreliable solely because it does not contain the affidavit described in the preceding sentences. VerDate Sep<11>2014 17:26 Jun 29, 2017 Jkt 241001 (b)(7)(iii) through (c)(2)(i) [Reserved]. For further guidance, see § 1.1441– 1(b)(7)(iii) through (c)(2)(i). (ii) Dual residents. Individuals will not be treated as U.S. persons for purposes of this section for a taxable year or any portion of a taxable year for which they are a dual resident taxpayer (within the meaning of § 301.7701(b)– 7(a)(1) of this chapter) who is treated as a nonresident alien pursuant to § 301.7701(b)–7(a)(1) of this chapter for purposes of computing their U.S. tax liability. (c)(3) through (c)(3)(i) [Reserved]. For further guidance, see § 1.1441–1(c)(3) through (c)(3)(i). (ii) Nonresident alien individual. The term nonresident alien individual means persons described in section 7701(b)(1)(B), alien individuals who are treated as nonresident aliens pursuant to § 301.7701(b)–7 of this chapter for purposes of computing their U.S. tax liability, or an alien individual who is a resident of Puerto Rico, Guam, the Commonwealth of Northern Mariana Islands, the U.S. Virgin Islands, or American Samoa as determined under § 301.7701(b)–1(d) of this chapter. 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 nevertheless treated as a nonresident alien individual for purposes of withholding under chapter 3 of the Code and the regulations thereunder. (c)(4) through (c)(38)(i) [Reserved]. For further guidance, see § 1.1441– 1(c)(4) through (c)(38)(i). (ii) Hold mail instruction. Notwithstanding the provisions of paragraph (i) of this section, an address that is subject to a hold mail instruction can be used as a permanent residence address if the person has also provided the withholding agent with documentary evidence establishing residence in the country in which the person claims to be a resident for tax purposes. If, after a withholding certificate is provided, a person’s permanent residence address is subsequently subject to a hold mail instruction, this is a change in circumstances requiring the person to provide the documentary evidence described in this paragraph (c)(38)(ii) in order to use the address as a permanent residence address. (c)(39) through (e)(2)(ii)(A) [Reserved]. For further guidance, see § 1.1441– 1(c)(39) through (e)(2)(ii)(A). (B) Requirement to collect foreign TIN and date of birth beginning January 1, 2017. Beginning January 1, 2017, a beneficial owner withholding certificate provided to document an account that is PO 00000 Frm 00027 Fmt 4700 Sfmt 4700 29725 maintained at a U.S. branch or office of a financial institution is required to contain the account holder’s foreign TIN and, in the case of an individual account holder, the account holder’s date of birth in order for the withholding agent to treat such withholding certificate as valid under paragraph (e)(2) of this section. For withholding certificates associated with payments made on or after January 1, 2018, if an account holder does not have a foreign TIN, the account holder is required to provide a reasonable explanation for its absence (e.g., the country of residence does not provide TINs) in order for the withholding certificate not to be considered invalid as a result of the application of this paragraph (e)(2)(ii)(B). A withholding certificate that does not contain the account holder’s date of birth will not be considered invalid as a result of the application of this paragraph (e)(2)(ii)(B) if the withholding agent has the account holder’s date of birth information in its files. (e)(3) through (e)(3)(iv)(C)(2) [Reserved]. For further guidance, see § 1.1441–1(e)(3) through (e)(3)(iv)(C)(2). (3) Alternative withholding statement. In lieu of a withholding statement containing all of the information described in paragraph (e)(3)(iv)(C)(1) of this section, a withholding agent may accept from a nonqualified intermediary a withholding statement that meets all of the requirements of this paragraph (e)(3)(iv)(C)(3) with respect to a payment. This alternative withholding statement may only be provided by a nonqualified intermediary that provides the withholding agent with the withholding certificates from the beneficial owners (i.e., not documentary evidence) before the payment is made. (i) The withholding statement is not required to contain information that is also included on a withholding certificate (e.g., name, address, TIN (if any), chapter 4 status, GIIN (if any)). The withholding statement is also not required to specify the rate of withholding to which each foreign payee is subject, provided that all of the information necessary to make such determination is provided on the withholding certificate. A withholding agent that uses an alternative withholding statement may not apply a different rate from that which the withholding agent may reasonably conclude from the information on the withholding certificate. (ii) The withholding statement must allocate the payment to every payee required to be reported as described in paragraph (e)(3)(iv)(C)(1)(ii) of this section. E:\FR\FM\30JNR1.SGM 30JNR1 mstockstill on DSK30JT082PROD with RULES 29726 Federal Register / Vol. 82, No. 125 / Friday, June 30, 2017 / Rules and Regulations (iii) The withholding statement must also contain any other information the withholding agent reasonably requests in order to fulfill its obligations under chapters 3, 4, and 61 of the Code, and section 3406. (iv) The withholding statement must contain a representation from the nonqualified intermediary that the information on the withholding certificates is not inconsistent with any other account information the nonqualified intermediary has for the beneficial owners for determining the rate of withholding with respect to each payee. (e)(3)(iv)(C)(4) through (e)(4)(i)(A) [Reserved]. For further guidance, see § 1.1441–1(e)(3)(iv)(C)(4) through (e)(4)(i)(A). (B) Electronic signatures. A withholding agent, regardless of whether the withholding agent has established an electronic system pursuant to paragraph (e)(4)(iv)(A) or (e)(4)(iv)(C) of this section, may accept a withholding certificate (other than a Form W–9) with an electronic signature, provided the electronic signature meets the requirements of paragraph (e)(4)(iv)(B)(3)(ii) of this section. In addition, the withholding certificate must reasonably demonstrate to the withholding agent that the form has been electronically signed by the recipient identified on the form (or a person authorized to sign for the person identified on the form). For example, a withholding agent may treat as validly signed a withholding certificate that has, in the signature block, the name of the person authorized to sign, a time and date stamp, and a statement that the certificate has been electronically signed. However, a withholding agent may not treat a withholding certificate with a typed name in the signature line and no other information as validly signed. (e)(4)(ii) through (e)(4)(ii)(A)(1) [Reserved]. For further guidance, see § 1.1441–1(e)(4)(ii) through (e)(4)(ii)(A)(1). (2) Documentary evidence for treaty claims and treaty statements. Documentary evidence described in § 1.1441–6(c)(3) or (4) and a statement regarding entitlement to treaty benefits described in § 1.1441–6(c)(5)(i) (treaty statement) shall remain valid until the last day of the third calendar year following the year in which the documentary evidence is provided to the withholding agent except as provided in paragraph (e)(4)(ii)(B) of this section. Notwithstanding the validity period prescribed in this paragraph (e)(4)(ii)(A)(2), a treaty statement will cease to be valid if a VerDate Sep<11>2014 17:26 Jun 29, 2017 Jkt 241001 change in circumstances makes the information on the statement unreliable or incorrect. For accounts opened and treaty statements obtained prior to January 6, 2017, the treaty statement will expire January 1, 2019. (e)(4)(ii)(B) through (e)(4)(iv)(B)(4) [Reserved]. For further guidance, see § 1.1441–1(e)(4)(ii)(B) through (e)(4)(iv)(B)(4). (C) Form 8233. A withholding agent may establish a system for a beneficial owner or payee to provide Form 8233 electronically, provided the system meets the requirements of paragraph (e)(4)(iv)(B)(1) through (4) of this section (replacing ‘‘Form W–8’’ with ‘‘Form 8233’’ each place it appears). (D) [Reserved]. For further guidance, see § 1.1441–1(e)(4)(iv)(D). (E) Third party repositories. A withholding certificate (other than a Form W–9) will be considered furnished for purposes of this section (including paragraph (e)(1)(ii)(A)(1) of this section) by the person providing the certificate, and a withholding agent may rely on an otherwise valid withholding certificate received electronically from a third party repository, if the withholding certificate was uploaded or provided to a third party repository and there are processes in place to ensure that the withholding certificate can be reliably associated with a specific request from the withholding agent and a specific authorization from the person providing the certificate (or an agent of the person providing the certificate) for the withholding agent making the request to receive the withholding certificate. Each request and authorization must be associated with a specific payment, and, as applicable, a specific obligation maintained by a withholding agent. A third party repository may also be used for withholding statements, and a withholding agent may also rely on an otherwise valid withholding statement, if the intermediary providing the withholding certificates and withholding statement through the repository provides an updated withholding statement in the event of any change in the information previously provided (e.g., a change in the composition of a partnership or a change in the allocation of payments to the partners) and ensures there are processes in place to update withholding agents when there is a new withholding statement (and withholding certificates, as necessary) in the event of any change that would affect the validity of the prior withholding certificates or withholding statement. A third party repository, for purposes of this paragraph, is an entity that maintains withholding certificates PO 00000 Frm 00028 Fmt 4700 Sfmt 4700 (including certificates accompanied by withholding statements) but is not an agent of the applicable withholding agent or the person providing the certificate. The following examples illustrate the provisions of this paragraph (e)(4)(iv)(E): Example 1. A, a foreign corporation, completes a Form W–8BEN–E and a Form W–8ECI and uploads the forms to X, a third party repository (X is an entity that maintains withholding certificates on an electronic data aggregation site). WA, a withholding agent, enters into a contract with A under which it will make payments to A of U.S. source FDAP that are not effectively connected with A’s conduct of a trade or business in the United States. X is not an agent of WA or A. Prior to receiving a payment, A sends WA an email with a link that authorizes WA to access A’s Form W–8BEN–E on X’s system. The link does not authorize WA to access A’s Form W–8ECI. X’s system meets the requirements of a third party repository, and WA can treat the Form W–8BEN–E as furnished by A. Example 2. The facts are the same as Example 1 of this paragraph (e)(4)(iv)(E), and WA and A enter into a second contract under which WA will make payments to A that are effectively connected with A’s conduct of a trade or business in the United States. A sends WA an email with a link that gives WA access to A’s Form W–8ECI on X’s system. The link in this second email does not give WA access to A’s Form W–8BEN–E. A’s email also clearly indicates that the link is associated with payments received under the second contract. X’s system meets the requirements of a third party repository, and WA can treat the Form W–8ECI as furnished by A. Example 3. FP is a foreign partnership that is acting on behalf of its partners, A and B, who are both foreign individuals. FP completes a Form W–8IMY and uploads it to X, a third party repository. FP also uploads Forms W–8BEN from both A and B and a valid withholding statement allocating 50% of the payment to A and 50% to B. WA is a withholding agent that makes payments to FP as an intermediary for A and B. FP sends WA an email with a link to its Form W–8IMY on X’s system. The link also provides WA access to FP’s withholding statement and A’s and B’s Forms W–8BEN. FP also has processes in place that ensure it will provide a new withholding statement or withholding certificate to X’s repository in the event of a change in the information previously provided that affects the validity of the withholding statement and that ensure it will update WA if there is a new withholding statement. X’s system meets the requirements of a third party repository, and WA can treat the Form W–8IMY (and withholding statement) as furnished by FP. In addition, because FP is acting as an agent of A and B, the beneficial owners, WA can treat the Forms W–8BEN for A and B as furnished by A and B. (e)(4)(v) through (f)(3) [Reserved]. For further guidance, see § 1.1441–1(e)(4)(v) through (f)(3). E:\FR\FM\30JNR1.SGM 30JNR1 Federal Register / Vol. 82, No. 125 / Friday, June 30, 2017 / Rules and Regulations (4) Effective/applicability date. This section applies to payments made on or after January 6, 2017. (g) Expiration date. The applicability of this section expires on December 30, 2019. § 1.1441–3 [Amended] Par. 5. Section 1.1441–3 is amended by removing the second instance of the word ‘‘is’’ in the last sentence of paragraph (d)(1). ■ § 1.1441–4 [Amended] Par. 6. Section 1.1441–4 is amended by removing and reserving paragraph (h). ■ Par. 7. Section 1.6045–1 is amended by revising paragraphs (m)(2)(ii) and (n)(12)(ii) to read as follows: ■ § 1.6045–1 Returns of information of brokers and barter exchanges. mstockstill on DSK30JT082PROD with RULES * * * * * (m) * * * (2) * * * (ii) Delayed effective date for certain options—(A) Notwithstanding paragraph (m)(2)(i) of this section, if an option, stock right, or warrant is issued as part of an investment unit described in § 1.1273–2(h), paragraph (m) of this section applies to the option, stock right, or warrant if it is acquired on or after January 1, 2016. (B) Notwithstanding paragraph (m)(2)(i) of this section, if the property referenced by an option (that is, the property underlying the option) is a debt instrument that is issued by a nonU.S. person or that provides for one or more payments denominated in, or determined by reference to, a currency other than the U.S. dollar, paragraph (m) of this section applies to the option if it is granted or acquired on or after January 1, 2016. * * * * * (n) * * * (12) * * * (ii) Effective/applicability date. Paragraph (n)(12)(i) of this section applies to a debt instrument described in paragraph (n)(12)(i)(A) or (B) of this section that is acquired on or after February 18, 2016. However, a broker may rely on paragraph (n)(12)(i) of this section for a debt instrument described in paragraph (n)(12)(i)(A) or (B) of this section acquired before February 18, 2016. * * * * * Par. 8. Section 1.6049–5 is amended by revising paragraphs (c)(1) through (c)(4) to read as follows: ■ VerDate Sep<11>2014 17:26 Jun 29, 2017 Jkt 241001 § 1.6049–5 Interest and original issue discount subject to reporting after December 31, 1982. * * * * * (c) * * * (1) Documentary evidence for offshore obligations and certain other obligations—(i) A payor may rely on documentary evidence described in § 1.1471–3(c)(5)(i) instead of a beneficial owner withholding certificate described in § 1.1441–1(e)(2)(i) in the case of an amount paid outside the United States (as described in paragraph (e) of this section) with respect to an offshore obligation, or, in the case of broker proceeds described in § 1.6045–1(c)(2), to the extent provided in § 1.6045– 1(g)(1)(i). For purposes of this section, the term offshore obligation means— (A) An account maintained at an office or branch of a bank or other financial institution located outside the United States; or (B) An obligation as defined in § 1.6049–4(f)(3) (other than an account described in paragraph (c)(1)(i)(A) of this section), contract, or other instrument with respect to which the payor is either engaged in business as a broker or dealer in securities or a financial institution (as defined in § 1.1471–5(e)) that engages in significant activities at an office or branch located outside the United States. For purposes of the preceding sentence, an office or branch of such payor shall be considered to engage in significant activities with respect to an obligation when it participates materially and actively in negotiating the obligation under the principles described in § 1.864–4(c)(5)(iii) (substituting the term ‘‘obligation’’ for the term ‘‘stock or security’’). (ii) A payor may rely on documentary evidence if the payor has established procedures to obtain, review, and maintain documentary evidence sufficient to establish the identity of the payee and the status of that person as a foreign person; and the payor obtains, reviews, and maintains such documentary evidence in accordance with those procedures. A payor maintains the documents reviewed for purposes of this paragraph (c)(1) by retaining an original, certified copy, or photocopy (including a microfiche, electronic scan, or similar means of electronic storage) of the documents reviewed for as long as it may be relevant to the determination of the payor’s obligation to report under § 1.6049–4 and this section and noting in its records the date on which the document was received and reviewed. Documentary evidence furnished for a payment of an amount subject to PO 00000 Frm 00029 Fmt 4700 Sfmt 4700 29727 withholding under chapter 3 of the Code or that is a chapter 4 reportable amount under § 1.1474–1(d)(2) must contain all of the information that is necessary to complete a Form 1042–S for that payment. See §§ 1.1471–3(c) and 1.1471–4(c) for additional documentation requirements to identify a payee or account holder for chapter 4 purposes that may apply in addition to the requirements under paragraph (c) of this section. (iii) Even if an account or obligation (as defined in § 1.6049–4(f)(3)) is not maintained outside the United States (maintained in the United States), a payor may rely on documentary evidence associated with a withholding certificate described in § 1.1441– 1(e)(3)(iii) with respect to the persons for whom an entity acting as an intermediary collects the payment. A payor may also rely on documentary evidence associated with a flow-through withholding certificate for payments treated as made to foreign partners of a nonwithholding foreign partnership, as defined in § 1.1441–1(c)(28), the foreign beneficiaries of a foreign simple trust, as defined in § 1.1441–1(c)(24), or foreign owners of a foreign grantor trust, as defined in § 1.1441–1(c)(26), even though the partnership or trust account is an obligation maintained in the United States. (iv) For accounts opened on or after July 1, 2014, and before January 1, 2015, and for obligations entered into on or after July 1, 2014, and before January 1, 2015, a payor may continue to apply the rules of § 1.6049–5(c)(1) and (c)(4) as in effect and contained in 26 CFR part 1 revised April 1, 2013, rather than this paragraph (c)(1) and paragraph (c)(4) of this section. A payor that applies the rules of § 1.6049–5(c)(1) and (c)(4) as in effect and contained in 26 CFR part 1 revised April 1, 2013, to an account or obligation must also apply § 1.1441– 6(c)(2) (to the extent applicable) and § 1.6049–5(e) both as in effect and contained in 26 CFR part 1 revised April, 2013, with respect to the account or obligation. (2) Other applicable rules. The provisions of § 1.1441–1(e)(4)(i) through (xii) (regarding who may sign a certificate, validity period of certificates and documentary evidence, retention of certificates, reliance rules, etc.) shall apply (by substituting the term ‘‘payor’’ for the term ‘‘withholding agent’’ and disregarding the fact that the provisions under § 1.1441–1(e)(4) only apply to amounts subject to withholding under chapter 3 of the Code) to withholding certificates and documentary evidence furnished for purposes of this section. See § 1.1441–1(b)(2)(vii) for provisions E:\FR\FM\30JNR1.SGM 30JNR1 mstockstill on DSK30JT082PROD with RULES 29728 Federal Register / Vol. 82, No. 125 / Friday, June 30, 2017 / Rules and Regulations dealing with reliable association of a payment with documentation. (3) Standards of knowledge. A payor may not rely on a withholding certificate or documentary evidence described in paragraph (c)(1) or (4) of this section if it has actual knowledge or reason to know that any information or certification stated in the certificate or documentary evidence is unreliable. A payor has reason to know that information or certifications are unreliable only if the payor would have reason to know under the provisions of § 1.1441–7(b)(2) and (3) that the information and certifications provided on the certificate or in the documentary evidence are unreliable or, in the case of a Form W–9 (or an acceptable substitute), it cannot reasonably rely on the documentation as set forth in § 31.3406(h)–3(e) of this chapter (see the information and certification described in § 31.3406(h)–3(e)(2)(i) through (iv) of this chapter that are required in order for a payor reasonably to rely on a Form W–9). The provisions of § 1.1441–7(b)(2) and (3) shall apply for purposes of this paragraph (c)(3) irrespective of the type of income to which § 1.1441–7(b)(2) is otherwise limited. The exemptions from reporting described in paragraphs (b)(10) and (11) of this section shall not apply if the payor has actual knowledge that the payee is a U.S. person who is not an exempt recipient. (4) Special documentation rules for certain payments. This paragraph (c)(4) modifies the provisions of paragraph (c)(1) of this section for payments of amounts that are not subject to withholding under chapter 3 of the Code, other than amounts described in paragraph (d)(3)(iii) of this section (dealing with U.S. short-term OID and U.S. source deposit interest described in section 871(i)(2)(A) or 881(d)(3)). Amounts are not subject to withholding under chapter 3 of the Code if they are not included in the definition of amounts subject to withholding under § 1.1441–2(a) (e.g., deposit interest with foreign branches of U.S. banks, foreign source income, or broker proceeds). A payor may rely upon documentation in lieu of documentary evidence (as described in paragraph (c)(1) of this section) or a written statement (as defined in § 1.1471–1(b)(150)) or another statement to the extent permitted in paragraphs (c)(4)(i) through (iii) of this section, until the payor knows or has reason to know of a change in circumstance that makes the documentation unreliable or incorrect (as defined in § 1.1441–1(e)) when the payor does not have customer information for the payee that includes any of the U.S. indicia described in VerDate Sep<11>2014 17:26 Jun 29, 2017 Jkt 241001 § 1.1471–3(c)(6)(ii)(C)(1). Further, a payor may maintain such documentation or documentary evidence as required in paragraph (c)(4)(iv) of this section. (i) Statement in lieu of documentary evidence with respect to accounts. If under the local laws, regulations, or practices of a country in which an account is maintained, it is not customary to obtain documentary evidence described in paragraph (c)(1) of this section with respect to the type of account, the payor may, instead of obtaining a beneficial owner withholding certificate described in § 1.1441–1(e)(2)(i) or documentary evidence described in paragraph (c)(1) of this section, establish a payee’s foreign status based on the statement described in this paragraph (c)(4)(i) (or such substitute statement as the Internal Revenue Service may prescribe) made on an account opening form. However, see, also § 1.1471–4(c) or an applicable IGA for additional documentation requirements that may apply to a participating FFI (including a reporting Model 2 FFI) for determining the status of its account holders for chapter 4 purposes. The statement referred to in this paragraph (c)(4)(i) must appear near the signature line and must state, ‘‘By opening this account and signing below, the account owner represents and warrants that he/she/it is not a U.S. person for purposes of U.S. Federal income tax and that he/she/it is not acting for, or on behalf of, a U.S. person. A false statement or misrepresentation of tax status by a U.S. person could lead to penalties under U.S. law. If your tax status changes and you become a U.S. citizen or a resident, you must notify us within 30 days.’’ Additionally, a payor may, instead of obtaining a beneficial owner withholding certificate described in § 1.1441–1(e)(2)(i) or § 1.1471– 3(c)(3)(ii) or documentary evidence described in paragraph (c)(1) of this section, establish a payee’s foreign status based on a written statement described in paragraph § 1.1471– 1(b)(150) to the extent a payor uses such written statement to establish a payee’s chapter 4 status and is permitted to use the written statement under § 1.1471– 3(d) (by substituting the term ‘‘payor’’ for the term ‘‘withholding agent’’) without any other documentary evidence. (ii) Documentation under IGA. A payor that is a reporting Model 1 FFI or reporting Model 2 FFI may rely upon documentation or information establishing a payee’s status that is permitted under an applicable IGA for determining whether the account of the payee is other than a U.S. account and PO 00000 Frm 00030 Fmt 4700 Sfmt 4700 regardless of whether such documentation or certification is described in paragraph (c)(1) of this section or § 1.1441–1(e)(2). (iii) Maintenance of documentation and written statement. A payor maintains documentation if it either maintains the documentary evidence as described in paragraph (c)(1) of this section or retains a record of the documentary evidence reviewed if the payor is not required to retain copies of the documentation pursuant to the payor’s AML due diligence (as defined in § 1.1471–1(b)(4)). A payor retains a record of documentary evidence reviewed by noting in its records the type of documentation reviewed, the date the document was reviewed, the document’s identification number (if any), and whether such documentation contained any U.S. indicia described in § 1.1441–7(b)(8). Any statement described in paragraph (c)(4)(i) of this section, must be retained in accordance with § 1.1471–3(c)(6)(iii). * * * * * Martin V. Franks, Chief, Publications and Regulations Branch, Legal Processing Division, Associate Chief Counsel (Procedure and Administration). [FR Doc. 2017–13634 Filed 6–29–17; 8:45 am] BILLING CODE 4830–01–P DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 1 [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; Correction Internal Revenue Service (IRS), Treasury. ACTION: Correcting amendments. AGENCY: This document contains corrections to final and temporary regulations (TD 9809) that were published in the Federal Register on Friday, January 6, 2017 (82 FR 2124). The final and temporary regulations under chapter 4 of the Subtitle A (sections 1471 through 1474) of the Internal Revenue Code of 1986 (Code) relate to information reporting by foreign financial institutions (FFIs) with respect to U.S. accounts and SUMMARY: E:\FR\FM\30JNR1.SGM 30JNR1

Agencies

[Federal Register Volume 82, Number 125 (Friday, June 30, 2017)]
[Rules and Regulations]
[Pages 29719-29728]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-13634]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 9808]
RIN 1545-BL17
 RIN 1545-BN74


Regulations Regarding Withholding of Tax on Certain U.S. Source 
Income Paid to Foreign Persons, Information Reporting and Backup 
Withholding on Payments Made to Certain U.S. Persons, and Portfolio 
Interest Treatment; Correction

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Correcting amendment.

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

SUMMARY: This document contains corrections to final and temporary 
regulations (TD 9808), which were published in the Federal Register on 
Friday, January 6, 2017 (82 FR 2046). These regulations are related to 
withholding of tax on certain U.S. source income paid to foreign 
persons, information reporting and backup withholding with respect to 
payments made to certain U.S. persons, and portfolio interest paid to 
nonresident alien individuals and foreign corporations.

DATES: 
    Effective Date: These corrections are effective June 30, 2017.
    Applicability Date: The corrections to Sec. Sec.  1.1441-0; 1.1441-
1(b)(7)(ii)(B), (e)(3)(iv)(B) and (C), (e)(4)(ii)(B)(11), 
(e)(4)(ix)(D), (e)(5)(ii) through (e)(5)(ii)(B), (e)(5)(ii)(D) through 
(e)(5)(v)(B)(3), (e)(5)(v)(B)(5) through (e)(5)(v)(D), and (f) through 
(f)(4); 1.1441-1T; 1.1441-3(d)(1); 1.1441-4; 1.6045-1(m)(2)(ii) and 
(n)(12)(ii); and 1.6049-5(c)(1) through (c)(4) are applicable on 
January 6, 2017.

FOR FURTHER INFORMATION CONTACT: Nancy Lee, (202) 317-6942 (not a toll-
free number).

SUPPLEMENTARY INFORMATION: 

Background

    The final and temporary regulations that are the subject of these 
corrections are Sec. Sec.  1.1441-0, 1.1441-1, 1.1441-1T, 1.1441-3, 
1.1441-4, 1.6045-1, and 1.6049-5, promulgated under sections 1441, 
6045, 6049, and 7805 of the Internal Revenue Code. These regulations 
affect persons making payments of U.S. source income to foreign persons 
and persons making payments to certain U.S. persons subject to 
reporting and backup withholding.

Need for Correction

    As published, the final regulations contain a number of items that 
need to be corrected or clarified. Several portions of TD 9808 could 
not be incorporated due to inaccurate amendatory instructions. Most of 
the correcting amendments to TD 9808 are needed to clarify or correct 
the results of these inaccurate amendatory instructions. The correcting 
amendments also include the addition, deletion, or modification of 
regulatory language to clarify the relevant provisions to meet their 
intended purposes, specifically to make a conforming change to the 
entry in the table of contents (Sec.  1.1441-0) for Sec.  1.1441-
1(e)(4)(ix); to correct typographical errors in Sec. Sec.  1.1441-
1(e)(4)(ix)(D), 1.1441-1T(c)(3)(ii), and 1.1441-3(d)(1); to clarify 
that allowances for electronic signatures in Sec.  1.1441-
1T(e)(4)(i)(B) and use of third party repository in Sec.  1.1441-
1T(e)(4)(iv)(E) are limited to Forms W-8; to remove an obsolete cross-
reference

[[Page 29720]]

to Sec.  1.1441-4(h); and to return Sec.  1.6045-1(m)(2)(ii) and 
(n)(12)(ii) to the way those provisions read prior to unnecessary 
revisions in TD 9808.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Correction of Publication

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

PART 1--INCOME TAXES

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

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


0
Par. 2. Section 1.1441-0 is amended by adding an entry for Sec.  
1.1441-1(e)(4)(viii)(C); revising the entries for Sec.  1.1441-
1(e)(4)(ix), (e)(5)(v)(A), (f), and (f)(2); and removing the entries 
for Sec.  1.1441-1(f)(2)(i) and (ii).
    The addition and revisions read as follows:


Sec.  1.1441-0   Outline of regulation provisions for section 1441.

* * * * *


Sec.  1.1441-1   Requirement for the deduction and withholding of tax 
on payments to foreign persons.

* * * * *
    (e) * * *
    (4) * * *
    (viii) * * *
    (C) Reliance on a prior version of a withholding certificate.
    (ix) Certificates to be furnished to withholding agent for each 
obligation unless exception applies.
* * * * *
    (5) * * *
    (v) * * *
    (A) In general.
* * * * *
    (f) Effective/applicability date.
* * * * *
    (2) Lack of documentation for past years.
* * * * *

0
Par. 3. Section 1.1441-1 is amended by:
0
1. Adding paragraph (b)(7)(ii)(B);
0
2. Adding paragraphs (e)(3)(iv)(B) and (C);
0
3. Revising paragraph (e)(4)(ii)(B)(11);
0
4. Revising the last sentence of paragraph (e)(4)(ix)(D);
0
5. Revising paragraphs (e)(5)(ii) introductory text through 
(e)(5)(ii)(B);
0
6. Removing paragraph (e)(5)(ii)(C) and redesignating paragraph 
(e)(5)(ii)(D) as new paragraph (e)(5)(ii)(C);
0
7. Adding new paragraph (e)(5)(ii)(D) and removing paragraph 
(e)(5)(ii)(E);
0
8. Revising paragraphs (e)(5)(iii) through (e)(5)(v)(B)(3);
0
9. Adding paragraph (e)(5)(v)(B)(5) through (e)(5)(v)(D); and
0
10. Revising the heading of paragraph (f), and paragraphs (f)(1) 
through (4).
    The addition and revisions read as follows:


Sec.  1.1441-1   Requirement for the deduction and withholding of tax 
on payments to foreign persons.

* * * * *
    (b) * * *
    (7) * * *
    (ii) * * *
    (B) [Reserved]. For further guidance, see Sec.  1.1441-
1T(b)(7)(ii)(B).
* * * * *
    (e) * * *
    (3) * * *
    (iv) * * *
    (B) General requirements. A withholding statement must be provided 
prior to the payment of a reportable amount and must contain the 
information specified in paragraph (e)(3)(iv)(C) of this section. The 
statement must be updated as often as required to keep the information 
in the withholding statement correct prior to each subsequent payment. 
The withholding statement forms an integral part of the withholding 
certificate provided under paragraph (e)(3)(iii) of this section, and 
the penalties of perjury statement provided on the withholding 
certificate shall apply to the withholding statement. The withholding 
statement may be provided in any manner the nonqualified intermediary 
and the withholding agent mutually agree, including electronically. If 
the withholding statement is provided electronically as part of a 
system established by the withholding agent or nonqualified 
intermediary to provide the statement, however, there must be 
sufficient safeguards to ensure that the information received by the 
withholding agent is the information sent by the nonqualified 
intermediary and all occasions of user access that result in the 
submission or modification of the withholding statement information 
must be recorded. In addition, the electronic system must be capable of 
providing a hard copy of all withholding statements provided by the 
nonqualified intermediary. A withholding statement may otherwise be 
transmitted by a nonqualified intermediary via email or facsimile to a 
withholding agent under the requirements specified in paragraph 
(e)(4)(iv)(D) of this section (substituting the term withholding 
statement for the term Form W-8 or the term document, as applicable). A 
withholding agent will be liable for tax, interest, and penalties in 
accordance with paragraph (b)(7) of this section to the extent it does 
not follow the presumption rules of paragraph (b)(3) of this section or 
Sec. Sec.  1.1441-5(d) and (e)(6), and 1.6049-5(d) for any payment of a 
reportable amount, or portion thereof, for which it does not have a 
valid withholding statement prior to making a payment. A withholding 
agent may not treat as valid an allocation of a payment to a chapter 4 
withholding rate pool of U.S. payees described in paragraph 
(e)(3)(iv)(A) of this section or an allocation of a payment to a 
chapter 4 withholding rate pool of recalcitrant account holders 
described in paragraph (e)(3)(iv)(C)(2) of this section unless the 
withholding agent identifies the nonqualified intermediary maintaining 
the account (as described in Sec.  1.1471-5(b)(5)) as a participating 
FFI (including a reporting Model 2 FFI) or registered deemed-compliant 
FFI (including a reporting Model 1 FFI) by applying the rules of Sec.  
1.1471-3(d)(4). Additionally, in the case of a withholdable payment 
that is an amount subject to withholding made on or after April 1, 
2017, a withholding agent may not treat as valid an allocation of the 
payment to a chapter 4 withholding rate pool of U.S. payees unless the 
nonqualified intermediary identifies the pool of U.S. payees as one 
described in Sec.  1.1471-3(c)(3)(iii)(B)(2)(iii) (or by describing 
such payees consistent with the description provided in Sec.  1.1471-
3(c)(3)(ii)(B)(2)(iii)).
    (C) Content of withholding statement. The withholding statement 
provided by a nonqualified intermediary must contain the information 
required by this paragraph (e)(3)(iv)(C).
    (1) In general. Except as otherwise provided by paragraph 
(e)(3)(iv)(C)(2) and (3) of this section), the withholding statement 
provided by a nonqualified intermediary must contain the information 
required by this paragraph (e)(3)(iv)(C)(1).
    (i) Except as otherwise provided in (e)(3)(iv)(A) of this section 
(which excludes reporting of information with respect to certain U.S. 
persons on the withholding statement), the withholding statement must 
contain the name, address, TIN (if any), and the type of documentation 
(documentary evidence, Form W-9, or type of Form W-8) for every person 
from whom documentation has been received by the nonqualified 
intermediary and provided to the withholding agent and whether that 
person is a U.S. exempt recipient, a U.S. non-exempt recipient, or a 
foreign person. See paragraphs (c)(2), (20), and

[[Page 29721]]

(21) of this section for the definitions of foreign person, U.S. exempt 
recipient, and U.S. non-exempt recipient. In the case of a foreign 
person, the statement must indicate whether the foreign person is a 
beneficial owner or an intermediary, flow-through entity, U.S. branch, 
or territory financial institution described in paragraph (b)(2)(iv) of 
this section and include the type of recipient, based on recipient 
codes applicable for chapter 3 purposes used for filing Forms 1042-S, 
if the foreign person is a recipient as defined in Sec.  1.1461-
1(c)(1)(ii).
    (ii) The withholding statement must allocate each payment, by 
income type, to every payee required to be reported on the withholding 
statement for whom documentation has been provided (including U.S. 
exempt recipients except as provided in paragraph (e)(3)(iv)(A) of this 
section). Any payment that cannot be reliably associated with valid 
documentation from a payee shall be treated as made to an unknown payee 
in accordance with the presumption rules of paragraph (b) of this 
section and Sec. Sec.  1.1441-5(d) and (e)(6) and 1.6049-5(d). For this 
purpose, a type of income is determined by the types of income required 
to be reported on Forms 1042-S or 1099, as appropriate. Notwithstanding 
the preceding sentence, deposit interest (including original issue 
discount) described in section 871(i)(2)(A) or 881(d) and interest or 
original issue discount on short-term obligations as described in 
section 871(g)(1)(B) or 881(e) is only required to be allocated to the 
extent it is required to be reported on Form 1099 or Form 1042-S. See 
Sec.  1.6049-8 (regarding reporting of bank deposit interest to certain 
foreign persons). If a payee receives income through another 
nonqualified intermediary, flow-through entity, or U.S. branch or 
territory financial institution described in paragraph (e)(2)(iv) of 
this section (other than a U.S. branch or territory financial 
institution treated as a U.S. person), the withholding statement must 
also state, with respect to the payee, the name, address, and TIN, if 
known, of the other nonqualified intermediary or U.S. branch from which 
the payee directly receives the payment or the flow-through entity in 
which the payee has a direct ownership interest. If another 
nonqualified intermediary, flow-through entity, or U.S. branch fails to 
allocate a payment, the name of the nonqualified intermediary, flow-
through entity, or U.S. branch that failed to allocate the payment 
shall be provided with respect to such payment.
    (iii) If a payee is identified as a foreign person, the 
nonqualified intermediary must specify the rate of withholding to which 
the payee is subject, the payee's country of residence and, if a 
reduced rate of withholding is claimed, the basis for that reduced rate 
(e.g., treaty benefit, portfolio interest, exempt under section 
501(c)(3), 892, or 895). The allocation statement must also include the 
TINs of those foreign persons for whom such a number is required under 
paragraph (e)(4)(vii) of this section or Sec.  1.1441-6(b)(1) 
(regarding claims for treaty benefits for which a TIN is provided 
unless a foreign tax identifying number described in Sec.  1.1441-
6(b)(1) is provided). In the case of a claim of treaty benefits, the 
nonqualified intermediary's withholding statement must also state 
whether the limitation on benefits and section 894 statements required 
by Sec.  1.1441-6(c)(5) have been provided, if required, in the 
beneficial owner's Form W-8 or associated with such owner's documentary 
evidence.
    (iv) The withholding statement must also contain any other 
information the withholding agent reasonably requests in order to 
fulfill its obligations under chapter 3 and chapter 61 of the Code, and 
section 3406.
    (2) Nonqualified intermediary withholding statement for 
withholdable payments. This paragraph (e)(3)(iv)(C)(2) modifies the 
requirements of a withholding statement described in paragraph 
(e)(3)(iv)(C)(1) of this section that is provided by a nonqualified 
intermediary with respect to a reportable amount that is a withholdable 
payment. For such a payment, the requirements applicable to a 
withholding statement described in paragraph (e)(3)(iv)(A) through 
(e)(3)(iv)(C)(1) of this section shall apply, except that--
    (i) The withholding statement must include the chapter 4 status 
(using the applicable status code used for filing Form 1042-S) and GIIN 
(when required for chapter 4 purposes under Sec.  1.1471-3(d)) of each 
other intermediary or flow-through entity that is a foreign person and 
that receives the payment, excluding an intermediary or flow- through 
entity that is an account holder of or interest holder in a withholding 
foreign partnership, withholding foreign trust, or intermediary acting 
as a qualified intermediary for the payment;
    (ii) If the nonqualified intermediary that is a participating FFI 
or registered deemed-compliant FFI provides a withholding statement 
described in Sec.  1.1471-3(c)(3)(iii)(B)(2) (describing an FFI 
withholding statement), the withholding statement may include chapter 4 
withholding rate pools with respect to the portions of the payment 
allocated to nonparticipating FFIs and recalcitrant account holders (to 
the extent permitted on an FFI withholding statement described in that 
paragraph) in lieu of providing specific payee information with respect 
to such persons on the statement (including persons subject to chapter 
4 withholding) as described in paragraph (e)(3)(iv)(C)(1) of this 
section;
    (iii) If the nonqualified intermediary provides a withholding 
statement described in Sec.  1.1471-3(c)(3)(iii)(B)(3) (describing a 
chapter 4 withholding statement), the withholding statement may include 
chapter 4 withholding rate pools with respect to the portions of the 
payment allocated to nonparticipating FFIs; and
    (iv) For a payment allocated to a payee that is a foreign person 
(other than a person included in a chapter 4 withholding rate pool 
described in paragraphs (e)(3)(iv)(C)(2)(ii) and (iii) of this section) 
that is reported on a withholding statement described in Sec.  1.1471-
3(c)(3)(iii)(B)(2) or (3), the withholding statement must include the 
chapter 4 status of the payee (unless an exception applies for purposes 
of providing such status under chapter 4) and, for a payee other than 
an individual, the recipient code for chapter 4 purposes used for 
filing Form 1042-S; and
    (v) To the extent that a withholdable payment is not reportable on 
a Form 1042-S, Form 1099 under the rules of chapter 61, or Form 8966 
``FATCA Report,'' no allocation of the payment is required on the 
withholding statement.
    (3) [Reserved]. For further guidance, see Sec.  1.1441-
1T(e)(3)(iv)(C)(3).

    (4) Example.  This example illustrates the principles of 
paragraph (e)(3)(iv)(C) of this section. WA makes a withholdable 
payment of U.S. source dividends to NQI, a nonqualified 
intermediary. NQI provides WA with a valid intermediary withholding 
certificate under paragraph (e)(3)(iii) of this section that 
includes NQI's certification of its status for chapter 4 purposes as 
a participating FFI. NQI provides a withholding statement on which 
NQI allocates 20% of the payment to a chapter 4 withholding rate 
pool of recalcitrant account holders of NQI for purposes of chapter 
4 and allocates 80% of the payment equally to A and B, individuals 
that are account holders of NQI. NQI also provides WA with valid 
beneficial owner withholding certificates from A and B establishing 
their status as foreign persons entitled to a 15% rate of 
withholding under an applicable income tax treaty. Because NQI has 
certified its status as a participating FFI, withholding under 
chapter 4 is not required with respect to NQI. See Sec.  1.1471-
2(a)(4). Based on the documentation NQI provided to WA with respect 
to A and B, WA can reliably associate

[[Page 29722]]

the payment with valid documentation on the portion of the payment 
allocated to them and, because the payment is a withholdable 
payment, may rely on the allocation of the payment for NQI's 
recalcitrant account holders in a chapter 4 withholding rate pool in 
lieu of payee information with respect to such account holders. See 
paragraph (e)(3)(iv)(C)(2) of this section for the special rules for 
a withholding statement provided by a nonqualified intermediary for 
a withholdable payment. Also see Sec.  1.1471-2(a) for WA's 
withholding requirements under chapter 4 with respect to the portion 
of the payment allocated to NQI's recalcitrant account holders and 
Sec.  1.1441-3(a)(2) for coordinating withholding under chapter 3 
for payments to which withholding is applied under chapter 4.

* * * * *
    (4) * * *
    (ii) * * *
    (B) * * *
    (11) Documentary evidence that is not generally renewed or amended 
(such as a certificate of incorporation).
* * * * *
    (ix) * * *
    (D) * * * See Sec.  1.1471-3(c)(9)(v) for a similar reliance rule 
that applies for purposes of chapter 4.
    (5) * * *
    (ii) Definition of qualified intermediary. With respect to a 
payment to a foreign person, the term qualified intermediary means a 
person that is a party to a withholding agreement with the IRS where 
such person is--
    (A) A foreign financial institution that is a participating FFI 
(including a reporting Model 2 FFI), a registered deemed-compliant FFI 
(including a reporting Model 1 FFI), an FFI treated as a deemed-
compliant FFI under an applicable IGA that is subject to due diligence 
and reporting requirements with respect to its U.S. accounts similar to 
those applicable to a registered deemed-compliant FFI under Sec.  
1.1471-5(f)(1), excluding a U.S. branch of any of the foregoing 
entities, or any other category of FFI identified in a qualified 
intermediary withholding agreement as eligible to act as a qualified 
intermediary;
    (B) A foreign branch or office of a U.S. financial institution or a 
foreign branch or office of a U.S. clearing organization that is either 
a reporting Model 1 FFI or agrees to the reporting requirements 
applicable to a participating FFI with respect to its U.S. accounts;
* * * * *
    (D) Any other person acceptable to the IRS.
    (iii) Withholding agreement--(A) In general. The IRS may, upon 
request, enter into a withholding agreement with a foreign person 
described in paragraph (e)(5)(ii) of this section pursuant to such 
procedures as the IRS may prescribe in published guidance (see Sec.  
601.601(d)(2) of this chapter). Under the withholding agreement, a 
qualified intermediary shall generally be subject to the applicable 
withholding and reporting provisions applicable to withholding agents 
and payors under chapters 3, 4, and 61 of the Code, section 3406, the 
regulations under those provisions, and other withholding provisions of 
the Code, except to the extent provided under the agreement.
    (B) Terms of the withholding agreement. The withholding agreement 
shall specify the obligations of the qualified intermediary under 
chapters 3 and 4 including, for a qualified intermediary that is an 
FFI, the documentation, withholding, and reporting obligations required 
of a participating FFI or registered deemed-compliant FFI (including a 
reporting Model 1 FFI as defined in Sec.  1.1471-1(b)(114)) with 
respect to each branch of the qualified intermediary other than a U.S. 
branch that is treated as a U.S. person under paragraph (b)(2)(iv)(A) 
of this section. The withholding agreement will specify the type of 
certifications and documentation upon which the qualified intermediary 
may rely to ascertain the classification (e.g., corporation or 
partnership), status (i.e., U.S. or foreign and chapter 4 status) of 
beneficial owners and payees who receive reportable amounts, reportable 
payments, and withholdable payments collected by the qualified 
intermediary for purposes of chapters 3, 4, and 61, section 3406, and, 
if necessary, entitlement to the benefits of a reduced rate under an 
income tax treaty. The withholding agreement shall specify if, and to 
what extent, the qualified intermediary may assume primary withholding 
responsibility in accordance with paragraph (e)(5)(iv) of this section. 
It shall also specify the extent to which applicable return filing and 
information reporting requirements are modified so that, in appropriate 
cases, the qualified intermediary may report payments to the IRS on an 
aggregated basis, without having to disclose the identity of beneficial 
owners and payees. However, the qualified intermediary may be required 
to provide to the IRS the name and address of those foreign customers 
who benefit from a reduced rate under an income tax treaty pursuant to 
the withholding agreement for purposes of verifying entitlement to such 
benefits, particularly under an applicable limitation on benefits 
provision. Under the withholding agreement, a qualified intermediary 
may agree to act as an acceptance agent to perform the duties described 
in Sec.  301.6109-1(d)(3)(iv)(A) of this chapter. The withholding 
agreement may specify the manner in which applicable procedures for 
adjustments for underwithholding and overwithholding, including refund 
procedures, apply to qualified intermediaries and the extent to which 
applicable procedures may be modified. In particular, a withholding 
agreement may allow a qualified intermediary to claim refunds of 
overwithheld amounts. In addition, the withholding agreement shall 
specify the manner in which the IRS will verify compliance with the 
agreement, including the time and manner for which a qualified 
intermediary will be required to certify to the IRS regarding its 
compliance with the withholding agreement (including its performance of 
a periodic review) and the types of information required to be 
disclosed as part of the certification. In appropriate cases, the IRS 
may require review procedures be performed by an approved reviewer (in 
addition to those performed as part of the periodic review) and may 
conduct a review of the reviewer's findings. The withholding agreement 
may include provisions for the assessment and collection of tax in the 
event that failure to comply with the terms of the withholding 
agreement results in the failure by the withholding agent or the 
qualified intermediary to withhold and deposit the required amount of 
tax. Further, the withholding agreement may specify the procedures by 
which amounts withheld are to be deposited, if different from the 
deposit procedures under the Code and applicable regulations. To 
determine whether to enter a withholding agreement and the terms of any 
particular withholding agreement, the IRS will consider the type of 
local know-your-customer laws and practices to which the entity is 
subject (if the entity is an FFI), as well as the extent and nature of 
supervisory and regulatory control exercised under the laws of the 
foreign country over the foreign entity.
    (iv) Assignment of primary withholding responsibility. Any person 
(whether a U.S. person or a foreign person) who meets the definition of 
a withholding agent under Sec.  1.1441-7(a) (for payments subject to 
chapter 3 withholding) and Sec.  1.1473-1(d) (for withholdable 
payments) is required to withhold and deposit any amount withheld under 
Sec. Sec.  1.1461-1(a) and 1.1474-1(b) and to make the returns 
prescribed by Sec. Sec.  1.1461-1(b) and (c), and by 1.1474-1(c), and 
(d). Under its qualified intermediary withholding

[[Page 29723]]

agreement, a qualified intermediary may, however, inform a withholding 
agent from which it receives a payment that it will assume the primary 
obligation to withhold, deposit, and report amounts under chapters 3 
and 4 of the Code and/or under chapter 61 and section 3406 of the Code. 
For assuming withholding obligations as described in the previous 
sentence, a qualified intermediary that assumes primary withholding 
responsibility for payments made to an account under chapter 3 is also 
required to assume primary withholding responsibility under chapter 4 
for payments made to the account that are withholdable payments. 
Additionally, a qualified intermediary may represent that it assumes 
chapter 61 reporting and section 3406 obligations for a payment when 
the qualified intermediary meets the requirements of Sec.  1.6049-
4(c)(4)(i) or (ii) for the payment. If a withholding agent makes a 
payment of an amount subject to withholding under chapter 3, a 
reportable payment (as defined in section 3406(b)), or a withholdable 
payment to a qualified intermediary that represents to the withholding 
agent that it has assumed primary withholding responsibility for the 
payment, the withholding agent is not required to withhold on the 
payment. The withholding agent is not required to determine that the 
qualified intermediary actually performs its primary withholding 
responsibilities. A qualified intermediary that assumes primary 
withholding responsibility under chapters 3 and 4 or primary reporting 
and backup withholding responsibility under chapter 61 and section 3406 
is not required to assume primary withholding responsibility for all 
accounts it has with a withholding agent but must assume primary 
withholding responsibility for all payments made to any one account 
that it has with the withholding agent.
    (v) Withholding statement--(A) In general. A qualified intermediary 
must provide each withholding agent from which it receives reportable 
amounts as a qualified intermediary with a written statement (the 
withholding statement) containing the information specified in 
paragraph (e)(5)(v)(B) of this section. A withholding statement is not 
required, however, if all of the information a withholding agent needs 
to fulfill its withholding and reporting requirements is contained in 
the withholding certificate. The qualified intermediary withholding 
agreement will require the qualified intermediary to include 
information in its withholding statement relating to withholdable 
payments for purposes of withholding under chapter 4 as described in 
paragraph (e)(5)(v)(C)(2) of this section. The withholding statement 
forms an integral part of the qualified intermediary's qualified 
intermediary withholding certificate, and the penalties of perjury 
statement provided on the withholding certificate shall apply to the 
withholding statement as well. The withholding statement may be 
provided in any manner, and in any form, to which qualified 
intermediary and the withholding agent mutually agree, including 
electronically. If the withholding statement is provided 
electronically, the statement must satisfy the requirements described 
in paragraph (e)(3)(iv) of this section (applicable to a withholding 
statement provided by a nonqualified intermediary). The withholding 
statement shall be updated as often as necessary for the withholding 
agent to meet its reporting and withholding obligations under chapters 
3, 4, and 61 and section 3406. For purposes of this section, a 
withholding agent will be liable for tax, interest, and penalties in 
accordance with paragraph (b)(7) of this section to the extent it does 
not follow the presumption rules of paragraph (b)(3) of this section, 
Sec. Sec.  1.1441-5(d) and (e)(6), and 1.6049-5(d) for a payment, or 
portion thereof, for which it does not have a valid withholding 
statement prior to making a payment.
    (B) Content of withholding statement. The withholding statement 
must contain sufficient information for a withholding agent to apply 
the correct rate of withholding on payments from the accounts 
identified on the statement and to properly report such payments on 
Forms 1042-S and Forms 1099, as applicable. The withholding statement 
must--
    (1) Designate those accounts for which the qualified intermediary 
acts as a qualified intermediary;
    (2) Designate those accounts for which qualified intermediary 
assumes primary withholding responsibility under chapter 3 and chapter 
4 of the Code and/or primary reporting and backup withholding 
responsibility under chapter 61 and section 3406;
    (3) If applicable, designate those accounts for which the qualified 
intermediary is acting as a qualified securities lender with respect to 
a substitute dividend paid in a securities lending or similar 
transaction;
* * * * *
    (5) Provide information regarding withholding rate pools, as 
described in paragraph (e)(5)(v)(C) of this section.
    (C) Withholding rate pools--(1) In general. Except to the extent it 
has assumed both primary withholding responsibility under chapters 3 
and 4 of the Code and primary Form 1099 reporting and backup 
withholding responsibility under chapter 61 and section 3406 with 
respect to a payment, a qualified intermediary shall provide as part of 
its withholding statement the chapter 3 withholding rate pool 
information that is required for the withholding agent to meet its 
withholding and reporting obligations under chapters 3 and 61 of the 
Code and section 3406. See, however, paragraph (e)(5)(v)(C)(2) of this 
section for when a qualified intermediary may provide a chapter 4 
withholding rate pool (as described in paragraph (c)(48) of this 
section) with respect to a payment that is a withholdable payment. A 
chapter 3 withholding rate pool is a payment of a single type of 
income, determined in accordance with the categories of income reported 
on Form 1042-S, that is subject to a single rate of withholding paid to 
a payee that is a foreign person and for which withholding under 
chapter 4 does not apply. A chapter 3 withholding rate pool may be 
established by any reasonable method on which the qualified 
intermediary and a withholding agent agree (e.g., by establishing a 
separate account for a single chapter 3 withholding rate pool, or by 
dividing a payment made to a single account into portions allocable to 
each chapter 3 withholding rate pool). A qualified intermediary may 
include a separate pool for account holders that are U.S. exempt 
recipients or may include such accounts in a chapter 3 withholding rate 
pool to which withholding does not apply. The withholding statement 
must identify the chapter 4 exemption code (as provided in the 
instructions to Form 1042-S) applicable to the chapter 3 withholding 
rate pools contained on the withholding statement. To the extent a 
qualified intermediary does not assume primary Form 1099 reporting and 
backup withholding responsibility under chapter 61 and section 3406, a 
qualified intermediary's withholding statement must establish a 
separate withholding rate pool for each U.S. non-exempt recipient 
account holder that the qualified intermediary has disclosed to the 
withholding agent unless the qualified intermediary uses the 
alternative procedures in paragraph (e)(5)(v)(C)(3) of this section or 
the account holder is a payee that the qualified intermediary is 
permitted to include in a chapter 4 withholding rate pool of U.S. 
payees. A qualified intermediary that is a participating FFI or 
registered deemed- compliant FFI

[[Page 29724]]

may include a chapter 4 withholding rate pool of U.S. payees on a 
withholding statement by applying the rules under paragraph 
(e)(3)(iv)(A) of this section (by substituting ``qualified 
intermediary'' for ``nonqualified intermediary'') with respect to an 
account that it maintains (as described in Sec.  1.1471-5(b)(5)) for 
the payee of the payment. A qualified intermediary shall determine 
withholding rate pools based on valid documentation that it obtains 
under its withholding agreement with the IRS, or if a payment cannot be 
reliably associated with valid documentation, under the applicable 
presumption rules. If a qualified intermediary has an account holder 
that is another intermediary (whether a qualified intermediary or a 
nonqualified intermediary) or a flow- through entity, the qualified 
intermediary may combine the account holder information provided by the 
other intermediary or flow-through entity with the qualified 
intermediary's direct account holder information to determine the 
qualified intermediary's chapter 3 withholding rate pools and each of 
the qualified intermediary's chapter 4 withholding rate pools to the 
extent provided in its withholding agreement with the IRS.
    (2) Withholding rate pool requirements for a withholdable payment. 
This paragraph (e)(5)(v)(C)(2) modifies the requirements of a 
withholding statement described in paragraph (e)(5)(v)(C)(1) of this 
section provided by a qualified intermediary with respect to a 
withholdable payment (including a reportable amount that is a 
withholdable payment). For such a payment, the regulations applicable 
to a withholding statement described in paragraph (e)(5)(v)(C)(1) of 
this section shall apply, except that--
    (i) If the qualified intermediary provides a withholding statement 
described in Sec.  1.1471-3(c)(3)(iii)(B)(2) (describing an FFI 
withholding statement), the withholding statement may include a chapter 
4 withholding rate pool with respect to the portion of the payment 
allocated to a single pool of recalcitrant account holders (without the 
need to subdivide into the pools described in Sec.  1.1471-4(d)(6)), 
including both account holders of the qualified intermediary and of any 
participating FFI, registered deemed-compliant FFI, or other qualified 
intermediary for whom the first-mentioned qualified intermediary 
receives the payment, and nonparticipating FFIs (to the extent 
permitted) in lieu of reporting chapter 3 withholding rate pools with 
respect to such persons as described in paragraph (e)(5)(v)(C)(1) of 
this section); or
    (ii) If the qualified intermediary provides a withholding statement 
described in Sec.  1.1471-3(c)(3)(iii)(B)(3) (describing a chapter 4 
withholding statement), the withholding statement may include a chapter 
4 withholding rate pool with respect to the portion of the payment 
allocated to nonparticipating FFIs.
    (3) Alternative procedure for U.S. non-exempt recipients. If 
permitted under its withholding agreement with the IRS, a qualified 
intermediary may, by mutual agreement with a withholding agent, 
establish a single zero withholding rate pool that includes U.S. non-
exempt recipient account holders for whom the qualified intermediary 
has provided Forms W-9 prior to the withholding agent paying any 
reportable payments, as defined in the qualified intermediary 
withholding agreement, and foreign persons for which no withholding is 
required under chapters 3 and 4, and may include payments allocated to 
a chapter 4 withholding rate pool of U.S. payees. In such a case, the 
qualified intermediary may also establish a separate withholding rate 
pool (subject to 28-percent withholding, or other applicable statutory 
back-up withholding tax rate) that includes only U.S. non-exempt 
recipient account holders for whom a qualified intermediary has not 
provided Forms W-9 prior to the withholding agent paying any reportable 
payments. If a qualified intermediary chooses the alternative procedure 
of this paragraph (e)(5)(v)(C)(3), the qualified intermediary must 
provide the information required by its withholding agreement to the 
withholding agent no later than January 15 of the year following the 
year in which the payments are paid. Failure to provide such 
information will result in the application of penalties to the 
qualified intermediary under sections 6721 and 6722, as well as any 
other applicable penalties, and may result in the termination of the 
qualified intermediary's withholding agreement with the IRS. A 
withholding agent shall not be liable for tax, interest, or penalties 
for failure to backup withhold or report information under chapter 61 
of the Code due solely to the errors or omissions of the qualified 
intermediary. If a qualified intermediary fails to provide the 
allocation information required by this paragraph (e)(5)(v)(C)(3), with 
respect to U.S. non-exempt recipients, the withholding agent shall 
report the unallocated amount paid from the withholding rate pool to an 
unknown recipient, or otherwise in accordance with the appropriate Form 
1099 and the instructions accompanying the form.

    (D) Example. The following example illustrates the application 
of paragraph (e)(5)(v)(C) of this section for a qualified 
intermediary providing chapter 4 withholding rate pools on an FFI 
withholding statement provided to a withholding agent. WA makes a 
payment of U.S. source interest that is a withholdable payment to 
QI, a qualified intermediary that is an FFI and a non-U.S. payor (as 
defined in Sec.  1.6049-5(c)(5)), and A and B are account holders of 
QI (as defined under Sec.  1.1471-5(a)) and are both U.S. non-exempt 
recipients (as defined in paragraph (c)(21) of this section). Ten 
percent of the payment is attributable to both A and B. A has 
provided WA with a Form W-9, but B has not provided WA with a Form 
W-9. QI assumes primary withholding responsibility under chapters 3 
and 4 with respect to the payment, 80 percent of which is allocable 
to foreign payees who are account holders other than A and B. As a 
participating FFI, QI is required to report with respect to its U.S. 
accounts under Sec.  1.1471-4(d) (as incorporated into its qualified 
intermediary agreement). Provided that QI reports A's account as a 
U.S. account under the requirements referenced in the preceding 
sentence, QI is not required to provide WA with a Form W-9 from A 
and may instead include A in a chapter 4 withholding rate pool of 
U.S. payees, allocating 10% of the payment to this pool. See Sec.  
1.6049-4(c)(4)(iii) concerning when reporting under section 6049 for 
a payment of interest is not required when an FFI that is a non-U.S. 
payor reports an account holder receiving the payment under its 
chapter 4 requirements. With respect to B, the interest payment is 
subject to backup withholding under section 3406. Because B is a 
recalcitrant account holder of QI for withholdable payments and 
because QI assumes primary chapter 4 withholding responsibility, 
however, QI may include the portion of the payment allocated to B 
with the remaining 80% of the payment for which QI assumes primary 
withholding responsibility. WA can reliably associate the full 
amount of the payment based on the withholding statement and does so 
regardless of whether WA knows B is a U.S. non-exempt recipient that 
is receiving a portion of the payment. See Sec.  31.3406(g)-1(e) 
(providing exemption to backup withholding when withholding was 
applied under chapter 4).

* * * * *
    (f) Effective/applicability date--(1) In general. Except as 
otherwise provided in paragraphs (e)(4)(ix)(D), (f)(2), and (f)(3) of 
this section, this section applies to payments made on or after January 
6, 2017. (For payments made after June 30, 2014 (except for payments to 
which paragraph (e)(4)(ix)(D) applies, in which case, substitute March 
5, 2014, for June 30, 2014), and before January 6, 2017, see this 
section as in effect and contained in 26 CFR part 1, as revised April 
1, 2016. For payments made after

[[Page 29725]]

December 31, 2000, and before July 1, 2014, see this section as in 
effect and contained in 26 CFR part 1, as revised April 1, 2013.)
    (2) Lack of documentation for past years. A taxpayer may elect to 
apply the provisions of paragraphs (b)(7)(i)(B), (ii), and (iii) of 
this section, dealing with liability for failure to obtain 
documentation timely, to all of its open tax years, including tax years 
that are currently under examination by the IRS. The election is made 
by simply taking action under those provisions in the same manner as 
the taxpayer would take action for payments made after December 31, 
2000.
    (3) Section 871(m) transactions. Paragraphs (b)(4)(xxi), 
(b)(4)(xxiii), (e)(3)(ii)(E), and (e)(6) of this section apply to 
payments made on or after September 18, 2015.
    (4) [Reserved]. For further guidance, see Sec.  1.1441-1T(f)(4).
* * * * *

0
Par. 4. Section 1.1441-1T is revised to read as follows:


Sec.  1.1441-1T  Requirement for the deduction and withholding of tax 
on payments to foreign persons (temporary).

    (a) through (b)(7)(ii)(A) [Reserved]. For further guidance, see 
Sec.  1.1441-1(a) through (b)(7)(ii)(A).
    (B) Special rules for establishing that income is effectively 
connected with the conduct of a U.S. trade or business. A withholding 
certificate received after the date of payment to claim under Sec.  
1.1441-4(a)(1) that income is effectively connected with the conduct of 
a U.S. trade or business 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. The signed affidavit must also 
state that the beneficial owner has included the income on its U.S. 
income tax return for the taxable year in which it is required to 
report the income or, alternatively, that the beneficial owner intends 
to include the income on a U.S. income tax return for the taxable year 
in which it is required to report the income and the due date for 
filing such return (including any applicable extensions) is after the 
date on which the affidavit is signed. A certificate received within 30 
days after the date of the payment will not be considered to be 
unreliable solely because it does not contain the affidavit described 
in the preceding sentences.
    (b)(7)(iii) through (c)(2)(i) [Reserved]. For further guidance, see 
Sec.  1.1441-1(b)(7)(iii) through (c)(2)(i).
    (ii) Dual residents. Individuals will not be treated as U.S. 
persons for purposes of this section for a taxable year or any portion 
of a taxable year for which they are 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(a)(1) of 
this chapter for purposes of computing their U.S. tax liability.
    (c)(3) through (c)(3)(i) [Reserved]. For further guidance, see 
Sec.  1.1441-1(c)(3) through (c)(3)(i).
    (ii) Nonresident alien individual. The term nonresident alien 
individual means persons described in section 7701(b)(1)(B), alien 
individuals who are treated as nonresident aliens pursuant to Sec.  
301.7701(b)-7 of this chapter for purposes of computing their U.S. tax 
liability, or an alien individual who is a resident of Puerto Rico, 
Guam, the Commonwealth of Northern Mariana Islands, the U.S. Virgin 
Islands, or American Samoa as determined under Sec.  301.7701(b)-1(d) 
of this chapter. 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 nevertheless treated as a nonresident alien individual for purposes 
of withholding under chapter 3 of the Code and the regulations 
thereunder.
    (c)(4) through (c)(38)(i) [Reserved]. For further guidance, see 
Sec.  1.1441-1(c)(4) through (c)(38)(i).
    (ii) Hold mail instruction. Notwithstanding the provisions of 
paragraph (i) of this section, an address that is subject to a hold 
mail instruction can be used as a permanent residence address if the 
person has also provided the withholding agent with documentary 
evidence establishing residence in the country in which the person 
claims to be a resident for tax purposes. If, after a withholding 
certificate is provided, a person's permanent residence address is 
subsequently subject to a hold mail instruction, this is a change in 
circumstances requiring the person to provide the documentary evidence 
described in this paragraph (c)(38)(ii) in order to use the address as 
a permanent residence address.
    (c)(39) through (e)(2)(ii)(A) [Reserved]. For further guidance, see 
Sec.  1.1441-1(c)(39) through (e)(2)(ii)(A).
    (B) Requirement to collect foreign TIN and date of birth beginning 
January 1, 2017. Beginning January 1, 2017, a beneficial owner 
withholding certificate provided to document an account that is 
maintained at a U.S. branch or office of a financial institution is 
required to contain the account holder's foreign TIN and, in the case 
of an individual account holder, the account holder's date of birth in 
order for the withholding agent to treat such withholding certificate 
as valid under paragraph (e)(2) of this section. For withholding 
certificates associated with payments made on or after January 1, 2018, 
if an account holder does not have a foreign TIN, the account holder is 
required to provide a reasonable explanation for its absence (e.g., the 
country of residence does not provide TINs) in order for the 
withholding certificate not to be considered invalid as a result of the 
application of this paragraph (e)(2)(ii)(B). A withholding certificate 
that does not contain the account holder's date of birth will not be 
considered invalid as a result of the application of this paragraph 
(e)(2)(ii)(B) if the withholding agent has the account holder's date of 
birth information in its files.
    (e)(3) through (e)(3)(iv)(C)(2) [Reserved]. For further guidance, 
see Sec.  1.1441-1(e)(3) through (e)(3)(iv)(C)(2).
    (3) Alternative withholding statement. In lieu of a withholding 
statement containing all of the information described in paragraph 
(e)(3)(iv)(C)(1) of this section, a withholding agent may accept from a 
nonqualified intermediary a withholding statement that meets all of the 
requirements of this paragraph (e)(3)(iv)(C)(3) with respect to a 
payment. This alternative withholding statement may only be provided by 
a nonqualified intermediary that provides the withholding agent with 
the withholding certificates from the beneficial owners (i.e., not 
documentary evidence) before the payment is made.
    (i) The withholding statement is not required to contain 
information that is also included on a withholding certificate (e.g., 
name, address, TIN (if any), chapter 4 status, GIIN (if any)). The 
withholding statement is also not required to specify the rate of 
withholding to which each foreign payee is subject, provided that all 
of the information necessary to make such determination is provided on 
the withholding certificate. A withholding agent that uses an 
alternative withholding statement may not apply a different rate from 
that which the withholding agent may reasonably conclude from the 
information on the withholding certificate.
    (ii) The withholding statement must allocate the payment to every 
payee required to be reported as described in paragraph 
(e)(3)(iv)(C)(1)(ii) of this section.

[[Page 29726]]

    (iii) The withholding statement must also contain any other 
information the withholding agent reasonably requests in order to 
fulfill its obligations under chapters 3, 4, and 61 of the Code, and 
section 3406.
    (iv) The withholding statement must contain a representation from 
the nonqualified intermediary that the information on the withholding 
certificates is not inconsistent with any other account information the 
nonqualified intermediary has for the beneficial owners for determining 
the rate of withholding with respect to each payee.
    (e)(3)(iv)(C)(4) through (e)(4)(i)(A) [Reserved]. For further 
guidance, see Sec.  1.1441-1(e)(3)(iv)(C)(4) through (e)(4)(i)(A).
    (B) Electronic signatures. A withholding agent, regardless of 
whether the withholding agent has established an electronic system 
pursuant to paragraph (e)(4)(iv)(A) or (e)(4)(iv)(C) of this section, 
may accept a withholding certificate (other than a Form W-9) with an 
electronic signature, provided the electronic signature meets the 
requirements of paragraph (e)(4)(iv)(B)(3)(ii) of this section. In 
addition, the withholding certificate must reasonably demonstrate to 
the withholding agent that the form has been electronically signed by 
the recipient identified on the form (or a person authorized to sign 
for the person identified on the form). For example, a withholding 
agent may treat as validly signed a withholding certificate that has, 
in the signature block, the name of the person authorized to sign, a 
time and date stamp, and a statement that the certificate has been 
electronically signed. However, a withholding agent may not treat a 
withholding certificate with a typed name in the signature line and no 
other information as validly signed.
    (e)(4)(ii) through (e)(4)(ii)(A)(1) [Reserved]. For further 
guidance, see Sec.  1.1441-1(e)(4)(ii) through (e)(4)(ii)(A)(1).
    (2) Documentary evidence for treaty claims and treaty statements. 
Documentary evidence described in Sec.  1.1441-6(c)(3) or (4) and a 
statement regarding entitlement to treaty benefits described in Sec.  
1.1441-6(c)(5)(i) (treaty statement) shall remain valid until the last 
day of the third calendar year following the year in which the 
documentary evidence is provided to the withholding agent except as 
provided in paragraph (e)(4)(ii)(B) of this section. Notwithstanding 
the validity period prescribed in this paragraph (e)(4)(ii)(A)(2), a 
treaty statement will cease to be valid if a change in circumstances 
makes the information on the statement unreliable or incorrect. For 
accounts opened and treaty statements obtained prior to January 6, 
2017, the treaty statement will expire January 1, 2019.
    (e)(4)(ii)(B) through (e)(4)(iv)(B)(4) [Reserved]. For further 
guidance, see Sec.  1.1441-1(e)(4)(ii)(B) through (e)(4)(iv)(B)(4).
    (C) Form 8233. A withholding agent may establish a system for a 
beneficial owner or payee to provide Form 8233 electronically, provided 
the system meets the requirements of paragraph (e)(4)(iv)(B)(1) through 
(4) of this section (replacing ``Form W-8'' with ``Form 8233'' each 
place it appears).
    (D) [Reserved]. For further guidance, see Sec.  1.1441-
1(e)(4)(iv)(D).
    (E) Third party repositories. A withholding certificate (other than 
a Form W-9) will be considered furnished for purposes of this section 
(including paragraph (e)(1)(ii)(A)(1) of this section) by the person 
providing the certificate, and a withholding agent may rely on an 
otherwise valid withholding certificate received electronically from a 
third party repository, if the withholding certificate was uploaded or 
provided to a third party repository and there are processes in place 
to ensure that the withholding certificate can be reliably associated 
with a specific request from the withholding agent and a specific 
authorization from the person providing the certificate (or an agent of 
the person providing the certificate) for the withholding agent making 
the request to receive the withholding certificate. Each request and 
authorization must be associated with a specific payment, and, as 
applicable, a specific obligation maintained by a withholding agent. A 
third party repository may also be used for withholding statements, and 
a withholding agent may also rely on an otherwise valid withholding 
statement, if the intermediary providing the withholding certificates 
and withholding statement through the repository provides an updated 
withholding statement in the event of any change in the information 
previously provided (e.g., a change in the composition of a partnership 
or a change in the allocation of payments to the partners) and ensures 
there are processes in place to update withholding agents when there is 
a new withholding statement (and withholding certificates, as 
necessary) in the event of any change that would affect the validity of 
the prior withholding certificates or withholding statement. A third 
party repository, for purposes of this paragraph, is an entity that 
maintains withholding certificates (including certificates accompanied 
by withholding statements) but is not an agent of the applicable 
withholding agent or the person providing the certificate. The 
following examples illustrate the provisions of this paragraph 
(e)(4)(iv)(E):

    Example 1. A, a foreign corporation, completes a Form W-8BEN-E 
and a Form W-8ECI and uploads the forms to X, a third party 
repository (X is an entity that maintains withholding certificates 
on an electronic data aggregation site). WA, a withholding agent, 
enters into a contract with A under which it will make payments to A 
of U.S. source FDAP that are not effectively connected with A's 
conduct of a trade or business in the United States. X is not an 
agent of WA or A. Prior to receiving a payment, A sends WA an email 
with a link that authorizes WA to access A's Form W-8BEN-E on X's 
system. The link does not authorize WA to access A's Form W-8ECI. 
X's system meets the requirements of a third party repository, and 
WA can treat the Form W-8BEN-E as furnished by A.
    Example 2.  The facts are the same as Example 1 of this 
paragraph (e)(4)(iv)(E), and WA and A enter into a second contract 
under which WA will make payments to A that are effectively 
connected with A's conduct of a trade or business in the United 
States. A sends WA an email with a link that gives WA access to A's 
Form W-8ECI on X's system. The link in this second email does not 
give WA access to A's Form W-8BEN-E. A's email also clearly 
indicates that the link is associated with payments received under 
the second contract. X's system meets the requirements of a third 
party repository, and WA can treat the Form W-8ECI as furnished by 
A.
    Example 3.  FP is a foreign partnership that is acting on behalf 
of its partners, A and B, who are both foreign individuals. FP 
completes a Form W-8IMY and uploads it to X, a third party 
repository. FP also uploads Forms W-8BEN from both A and B and a 
valid withholding statement allocating 50% of the payment to A and 
50% to B. WA is a withholding agent that makes payments to FP as an 
intermediary for A and B. FP sends WA an email with a link to its 
Form W-8IMY on X's system. The link also provides WA access to FP's 
withholding statement and A's and B's Forms W-8BEN. FP also has 
processes in place that ensure it will provide a new withholding 
statement or withholding certificate to X's repository in the event 
of a change in the information previously provided that affects the 
validity of the withholding statement and that ensure it will update 
WA if there is a new withholding statement. X's system meets the 
requirements of a third party repository, and WA can treat the Form 
W-8IMY (and withholding statement) as furnished by FP. In addition, 
because FP is acting as an agent of A and B, the beneficial owners, 
WA can treat the Forms W-8BEN for A and B as furnished by A and B.

    (e)(4)(v) through (f)(3) [Reserved]. For further guidance, see 
Sec.  1.1441-1(e)(4)(v) through (f)(3).

[[Page 29727]]

    (4) Effective/applicability date. This section applies to payments 
made on or after January 6, 2017.
    (g) Expiration date. The applicability of this section expires on 
December 30, 2019.


Sec.  1.1441-3   [Amended]

0
Par. 5. Section 1.1441-3 is amended by removing the second instance of 
the word ``is'' in the last sentence of paragraph (d)(1).


Sec.  1.1441-4   [Amended]

0
Par. 6. Section 1.1441-4 is amended by removing and reserving paragraph 
(h).

0
Par. 7. Section 1.6045-1 is amended by revising paragraphs (m)(2)(ii) 
and (n)(12)(ii) to read as follows:


Sec.  1.6045-1   Returns of information of brokers and barter 
exchanges.

* * * * *
    (m) * * *
    (2) * * *
    (ii) Delayed effective date for certain options--(A) 
Notwithstanding paragraph (m)(2)(i) of this section, if an option, 
stock right, or warrant is issued as part of an investment unit 
described in Sec.  1.1273-2(h), paragraph (m) of this section applies 
to the option, stock right, or warrant if it is acquired on or after 
January 1, 2016.
    (B) Notwithstanding paragraph (m)(2)(i) of this section, if the 
property referenced by an option (that is, the property underlying the 
option) is a debt instrument that is issued by a non-U.S. person or 
that provides for one or more payments denominated in, or determined by 
reference to, a currency other than the U.S. dollar, paragraph (m) of 
this section applies to the option if it is granted or acquired on or 
after January 1, 2016.
* * * * *
    (n) * * *
    (12) * * *
    (ii) Effective/applicability date. Paragraph (n)(12)(i) of this 
section applies to a debt instrument described in paragraph 
(n)(12)(i)(A) or (B) of this section that is acquired on or after 
February 18, 2016. However, a broker may rely on paragraph (n)(12)(i) 
of this section for a debt instrument described in paragraph 
(n)(12)(i)(A) or (B) of this section acquired before February 18, 2016.
* * * * *

0
Par. 8. Section 1.6049-5 is amended by revising paragraphs (c)(1) 
through (c)(4) to read as follows:


Sec.  1.6049-5  Interest and original issue discount subject to 
reporting after December 31, 1982.

* * * * *
    (c) * * *
    (1) Documentary evidence for offshore obligations and certain other 
obligations--(i) A payor may rely on documentary evidence described in 
Sec.  1.1471-3(c)(5)(i) instead of a beneficial owner withholding 
certificate described in Sec.  1.1441-1(e)(2)(i) in the case of an 
amount paid outside the United States (as described in paragraph (e) of 
this section) with respect to an offshore obligation, or, in the case 
of broker proceeds described in Sec.  1.6045-1(c)(2), to the extent 
provided in Sec.  1.6045-1(g)(1)(i). For purposes of this section, the 
term offshore obligation means--
    (A) An account maintained at an office or branch of a bank or other 
financial institution located outside the United States; or
    (B) An obligation as defined in Sec.  1.6049-4(f)(3) (other than an 
account described in paragraph (c)(1)(i)(A) of this section), contract, 
or other instrument with respect to which the payor is either engaged 
in business as a broker or dealer in securities or a financial 
institution (as defined in Sec.  1.1471-5(e)) that engages in 
significant activities at an office or branch located outside the 
United States. For purposes of the preceding sentence, an office or 
branch of such payor shall be considered to engage in significant 
activities with respect to an obligation when it participates 
materially and actively in negotiating the obligation under the 
principles described in Sec.  1.864-4(c)(5)(iii) (substituting the term 
``obligation'' for the term ``stock or security'').
    (ii) A payor may rely on documentary evidence if the payor has 
established procedures to obtain, review, and maintain documentary 
evidence sufficient to establish the identity of the payee and the 
status of that person as a foreign person; and the payor obtains, 
reviews, and maintains such documentary evidence in accordance with 
those procedures. A payor maintains the documents reviewed for purposes 
of this paragraph (c)(1) by retaining an original, certified copy, or 
photocopy (including a microfiche, electronic scan, or similar means of 
electronic storage) of the documents reviewed for as long as it may be 
relevant to the determination of the payor's obligation to report under 
Sec.  1.6049-4 and this section and noting in its records the date on 
which the document was received and reviewed. Documentary evidence 
furnished for a payment of an amount subject to withholding under 
chapter 3 of the Code or that is a chapter 4 reportable amount under 
Sec.  1.1474-1(d)(2) must contain all of the information that is 
necessary to complete a Form 1042-S for that payment. See Sec. Sec.  
1.1471-3(c) and 1.1471-4(c) for additional documentation requirements 
to identify a payee or account holder for chapter 4 purposes that may 
apply in addition to the requirements under paragraph (c) of this 
section.
    (iii) Even if an account or obligation (as defined in Sec.  1.6049-
4(f)(3)) is not maintained outside the United States (maintained in the 
United States), a payor may rely on documentary evidence associated 
with a withholding certificate described in Sec.  1.1441-1(e)(3)(iii) 
with respect to the persons for whom an entity acting as an 
intermediary collects the payment. A payor may also rely on documentary 
evidence associated with a flow-through withholding certificate for 
payments treated as made to foreign partners of a nonwithholding 
foreign partnership, as defined in Sec.  1.1441-1(c)(28), the foreign 
beneficiaries of a foreign simple trust, as defined in Sec.  1.1441-
1(c)(24), or foreign owners of a foreign grantor trust, as defined in 
Sec.  1.1441-1(c)(26), even though the partnership or trust account is 
an obligation maintained in the United States.
    (iv) For accounts opened on or after July 1, 2014, and before 
January 1, 2015, and for obligations entered into on or after July 1, 
2014, and before January 1, 2015, a payor may continue to apply the 
rules of Sec.  1.6049-5(c)(1) and (c)(4) as in effect and contained in 
26 CFR part 1 revised April 1, 2013, rather than this paragraph (c)(1) 
and paragraph (c)(4) of this section. A payor that applies the rules of 
Sec.  1.6049-5(c)(1) and (c)(4) as in effect and contained in 26 CFR 
part 1 revised April 1, 2013, to an account or obligation must also 
apply Sec.  1.1441-6(c)(2) (to the extent applicable) and Sec.  1.6049-
5(e) both as in effect and contained in 26 CFR part 1 revised April, 
2013, with respect to the account or obligation.
    (2) Other applicable rules. The provisions of Sec.  1.1441-
1(e)(4)(i) through (xii) (regarding who may sign a certificate, 
validity period of certificates and documentary evidence, retention of 
certificates, reliance rules, etc.) shall apply (by substituting the 
term ``payor'' for the term ``withholding agent'' and disregarding the 
fact that the provisions under Sec.  1.1441-1(e)(4) only apply to 
amounts subject to withholding under chapter 3 of the Code) to 
withholding certificates and documentary evidence furnished for 
purposes of this section. See Sec.  1.1441-1(b)(2)(vii) for provisions

[[Page 29728]]

dealing with reliable association of a payment with documentation.
    (3) Standards of knowledge. A payor may not rely on a withholding 
certificate or documentary evidence described in paragraph (c)(1) or 
(4) of this section if it has actual knowledge or reason to know that 
any information or certification stated in the certificate or 
documentary evidence is unreliable. A payor has reason to know that 
information or certifications are unreliable only if the payor would 
have reason to know under the provisions of Sec.  1.1441-7(b)(2) and 
(3) that the information and certifications provided on the certificate 
or in the documentary evidence are unreliable or, in the case of a Form 
W-9 (or an acceptable substitute), it cannot reasonably rely on the 
documentation as set forth in Sec.  31.3406(h)-3(e) of this chapter 
(see the information and certification described in Sec.  31.3406(h)-
3(e)(2)(i) through (iv) of this chapter that are required in order for 
a payor reasonably to rely on a Form W-9). The provisions of Sec.  
1.1441-7(b)(2) and (3) shall apply for purposes of this paragraph 
(c)(3) irrespective of the type of income to which Sec.  1.1441-7(b)(2) 
is otherwise limited. The exemptions from reporting described in 
paragraphs (b)(10) and (11) of this section shall not apply if the 
payor has actual knowledge that the payee is a U.S. person who is not 
an exempt recipient.
    (4) Special documentation rules for certain payments. This 
paragraph (c)(4) modifies the provisions of paragraph (c)(1) of this 
section for payments of amounts that are not subject to withholding 
under chapter 3 of the Code, other than amounts described in paragraph 
(d)(3)(iii) of this section (dealing with U.S. short-term OID and U.S. 
source deposit interest described in section 871(i)(2)(A) or 
881(d)(3)). Amounts are not subject to withholding under chapter 3 of 
the Code if they are not included in the definition of amounts subject 
to withholding under Sec.  1.1441-2(a) (e.g., deposit interest with 
foreign branches of U.S. banks, foreign source income, or broker 
proceeds). A payor may rely upon documentation in lieu of documentary 
evidence (as described in paragraph (c)(1) of this section) or a 
written statement (as defined in Sec.  1.1471-1(b)(150)) or another 
statement to the extent permitted in paragraphs (c)(4)(i) through (iii) 
of this section, until the payor knows or has reason to know of a 
change in circumstance that makes the documentation unreliable or 
incorrect (as defined in Sec.  1.1441-1(e)) when the payor does not 
have customer information for the payee that includes any of the U.S. 
indicia described in Sec.  1.1471-3(c)(6)(ii)(C)(1). Further, a payor 
may maintain such documentation or documentary evidence as required in 
paragraph (c)(4)(iv) of this section.
    (i) Statement in lieu of documentary evidence with respect to 
accounts. If under the local laws, regulations, or practices of a 
country in which an account is maintained, it is not customary to 
obtain documentary evidence described in paragraph (c)(1) of this 
section with respect to the type of account, the payor may, instead of 
obtaining a beneficial owner withholding certificate described in Sec.  
1.1441-1(e)(2)(i) or documentary evidence described in paragraph (c)(1) 
of this section, establish a payee's foreign status based on the 
statement described in this paragraph (c)(4)(i) (or such substitute 
statement as the Internal Revenue Service may prescribe) made on an 
account opening form. However, see, also Sec.  1.1471-4(c) or an 
applicable IGA for additional documentation requirements that may apply 
to a participating FFI (including a reporting Model 2 FFI) for 
determining the status of its account holders for chapter 4 purposes. 
The statement referred to in this paragraph (c)(4)(i) must appear near 
the signature line and must state, ``By opening this account and 
signing below, the account owner represents and warrants that he/she/it 
is not a U.S. person for purposes of U.S. Federal income tax and that 
he/she/it is not acting for, or on behalf of, a U.S. person. A false 
statement or misrepresentation of tax status by a U.S. person could 
lead to penalties under U.S. law. If your tax status changes and you 
become a U.S. citizen or a resident, you must notify us within 30 
days.'' Additionally, a payor may, instead of obtaining a beneficial 
owner withholding certificate described in Sec.  1.1441-1(e)(2)(i) or 
Sec.  1.1471-3(c)(3)(ii) or documentary evidence described in paragraph 
(c)(1) of this section, establish a payee's foreign status based on a 
written statement described in paragraph Sec.  1.1471-1(b)(150) to the 
extent a payor uses such written statement to establish a payee's 
chapter 4 status and is permitted to use the written statement under 
Sec.  1.1471-3(d) (by substituting the term ``payor'' for the term 
``withholding agent'') without any other documentary evidence.
    (ii) Documentation under IGA. A payor that is a reporting Model 1 
FFI or reporting Model 2 FFI may rely upon documentation or information 
establishing a payee's status that is permitted under an applicable IGA 
for determining whether the account of the payee is other than a U.S. 
account and regardless of whether such documentation or certification 
is described in paragraph (c)(1) of this section or Sec.  1.1441-
1(e)(2).
    (iii) Maintenance of documentation and written statement. A payor 
maintains documentation if it either maintains the documentary evidence 
as described in paragraph (c)(1) of this section or retains a record of 
the documentary evidence reviewed if the payor is not required to 
retain copies of the documentation pursuant to the payor's AML due 
diligence (as defined in Sec.  1.1471-1(b)(4)). A payor retains a 
record of documentary evidence reviewed by noting in its records the 
type of documentation reviewed, the date the document was reviewed, the 
document's identification number (if any), and whether such 
documentation contained any U.S. indicia described in Sec.  1.1441-
7(b)(8). Any statement described in paragraph (c)(4)(i) of this 
section, must be retained in accordance with Sec.  1.1471-3(c)(6)(iii).
* * * * *

Martin V. Franks,
Chief, Publications and Regulations Branch, Legal Processing Division, 
Associate Chief Counsel (Procedure and Administration).
[FR Doc. 2017-13634 Filed 6-29-17; 8:45 am]
BILLING CODE 4830-01-P