82 FR 29719 - 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

DEPARTMENT OF THE TREASURY
Internal Revenue Service

Federal Register Volume 82, Issue 125 (June 30, 2017)

Page Range		29719-29728
FR Document		2017-13634
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.
Federal Register, Volume 82 Issue 125 (Friday, June 30, 2017)
[Federal Register Volume 82, Number 125 (Friday, June 30, 2017)]
[Rules and Regulations]
[Pages 29719-29728]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-13634]


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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
29720 Federal Register / Vol. 82, No. 125 / Friday, June 30, 2017 / Rules and Regulations

to § 1.1441–4(h); and to return § 1.6045– ■ 7. Adding new paragraph (e)(5)(ii)(D) as applicable). A withholding agent will
1(m)(2)(ii) and (n)(12)(ii) to the way and removing paragraph (e)(5)(ii)(E); be liable for tax, interest, and penalties
those provisions read prior to ■ 8. Revising paragraphs (e)(5)(iii) in accordance with paragraph (b)(7) of
unnecessary revisions in TD 9808. through (e)(5)(v)(B)(3); this section to the extent it does not
■ 9. Adding paragraph (e)(5)(v)(B)(5) follow the presumption rules of
List of Subjects in 26 CFR Part 1 through (e)(5)(v)(D); and paragraph (b)(3) of this section or
Income taxes, Reporting and ■ 10. Revising the heading of paragraph §§ 1.1441–5(d) and (e)(6), and 1.6049–
recordkeeping requirements. (f), and paragraphs (f)(1) through (4). 5(d) for any payment of a reportable
The addition and revisions read as amount, or portion thereof, for which it
Correction of Publication follows: does not have a valid withholding
Accordingly, 26 CFR part 1 is statement prior to making a payment. A
corrected by making the following § 1.1441–1 Requirement for the deduction
and withholding of tax on payments to
withholding agent may not treat as valid
correcting amendments: foreign persons. an allocation of a payment to a chapter
4 withholding rate pool of U.S. payees
PART 1—INCOME TAXES * * * * *
described in paragraph (e)(3)(iv)(A) of
(b) * * *
this section or an allocation of a
■ Paragraph 1. The authority citation (7) * * *
(ii) * * * payment to a chapter 4 withholding rate
for part 1 continues to read in part as
(B) [Reserved]. For further guidance, pool of recalcitrant account holders
follows: described in paragraph (e)(3)(iv)(C)(2) of
see § 1.1441–1T(b)(7)(ii)(B).
Authority: 26 U.S.C. 7805 * * * this section unless the withholding
* * * * * agent identifies the nonqualified
■ Par. 2. Section 1.1441–0 is amended (e) * * *
by adding an entry for § 1.1441– intermediary maintaining the account
(3) * * *
1(e)(4)(viii)(C); revising the entries for (as described in § 1.1471–5(b)(5)) as a
(iv) * * *
§ 1.1441–1(e)(4)(ix), (e)(5)(v)(A), (f), and (B) General requirements. A participating FFI (including a reporting
(f)(2); and removing the entries for withholding statement must be Model 2 FFI) or registered deemed-
§ 1.1441–1(f)(2)(i) and (ii). compliant FFI (including a reporting
provided prior to the payment of a
The addition and revisions read as Model 1 FFI) by applying the rules of
reportable amount and must contain the
follows: § 1.1471–3(d)(4). Additionally, in the
information specified in paragraph
case of a withholdable payment that is
(e)(3)(iv)(C) of this section. The
§ 1.1441–0 Outline of regulation provisions an amount subject to withholding made
for section 1441. statement must be updated as often as
on or after April 1, 2017, a withholding
required to keep the information in the
* * * * * agent may not treat as valid an
withholding statement correct prior to
allocation of the payment to a chapter
§ 1.1441–1 Requirement for the deduction each subsequent payment. The
4 withholding rate pool of U.S. payees
and withholding of tax on payments to withholding statement forms an integral
unless the nonqualified intermediary
foreign persons. part of the withholding certificate identifies the pool of U.S. payees as one
* * * * * provided under paragraph (e)(3)(iii) of described in § 1.1471–
(e) * * * this section, and the penalties of perjury 3(c)(3)(iii)(B)(2)(iii) (or by describing
(4) * * * statement provided on the withholding such payees consistent with the
(viii) * * * certificate shall apply to the description provided in § 1.1471–
(C) Reliance on a prior version of a withholding statement. The withholding 3(c)(3)(ii)(B)(2)(iii)).
withholding certificate. statement may be provided in any (C) Content of withholding statement.
(ix) Certificates to be furnished to manner the nonqualified intermediary The withholding statement provided by
withholding agent for each obligation and the withholding agent mutually a nonqualified intermediary must
unless exception applies. agree, including electronically. If the contain the information required by this
* * * * * withholding statement is provided paragraph (e)(3)(iv)(C).
(5) * * * electronically as part of a system (1) In general. Except as otherwise
(v) * * * established by the withholding agent or provided by paragraph (e)(3)(iv)(C)(2)
(A) In general. nonqualified intermediary to provide and (3) of this section), the withholding
the statement, however, there must be statement provided by a nonqualified
* * * * *
sufficient safeguards to ensure that the intermediary must contain the
(f) Effective/applicability date.
information received by the withholding information required by this paragraph
* * * * * agent is the information sent by the (e)(3)(iv)(C)(1).
(2) Lack of documentation for past nonqualified intermediary and all (i) Except as otherwise provided in
years. occasions of user access that result in (e)(3)(iv)(A) of this section (which
* * * * * the submission or modification of the excludes reporting of information with
■ Par. 3. Section 1.1441–1 is amended withholding statement information must respect to certain U.S. persons on the
by: be recorded. In addition, the electronic withholding statement), the withholding
■ 1. Adding paragraph (b)(7)(ii)(B); system must be capable of providing a statement must contain the name,
■ 2. Adding paragraphs (e)(3)(iv)(B) and hard copy of all withholding statements address, TIN (if any), and the type of
(C); provided by the nonqualified documentation (documentary evidence,
■ 3. Revising paragraph (e)(4)(ii)(B)(11); intermediary. A withholding statement Form W–9, or type of Form W–8) for
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■ 4. Revising the last sentence of may otherwise be transmitted by a every person from whom
paragraph (e)(4)(ix)(D); nonqualified intermediary via email or documentation has been received by the
■ 5. Revising paragraphs (e)(5)(ii) facsimile to a withholding agent under nonqualified intermediary and provided
introductory text through (e)(5)(ii)(B); the requirements specified in paragraph to the withholding agent and whether
■ 6. Removing paragraph (e)(5)(ii)(C) (e)(4)(iv)(D) of this section (substituting that person is a U.S. exempt recipient,
and redesignating paragraph (e)(5)(ii)(D) the term withholding statement for the a U.S. non-exempt recipient, or a foreign
as new paragraph (e)(5)(ii)(C); term Form W–8 or the term document, person. See paragraphs (c)(2), (20), and

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Federal Register / Vol. 82, No. 125 / Friday, June 30, 2017 / Rules and Regulations 29721

(21) of this section for the definitions of (iii) If a payee is identified as a foreign respect to the portions of the payment
foreign person, U.S. exempt recipient, person, the nonqualified intermediary allocated to nonparticipating FFIs and
and U.S. non-exempt recipient. In the must specify the rate of withholding to recalcitrant account holders (to the
case of a foreign person, the statement which the payee is subject, the payee’s extent permitted on an FFI withholding
must indicate whether the foreign country of residence and, if a reduced statement described in that paragraph)
person is a beneficial owner or an rate of withholding is claimed, the basis in lieu of providing specific payee
intermediary, flow-through entity, U.S. for that reduced rate (e.g., treaty benefit, information with respect to such
branch, or territory financial institution portfolio interest, exempt under section persons on the statement (including
described in paragraph (b)(2)(iv) of this 501(c)(3), 892, or 895). The allocation persons subject to chapter 4
section and include the type of statement must also include the TINs of withholding) as described in paragraph
recipient, based on recipient codes those foreign persons for whom such a (e)(3)(iv)(C)(1) of this section;
applicable for chapter 3 purposes used number is required under paragraph (iii) If the nonqualified intermediary
for filing Forms 1042–S, if the foreign (e)(4)(vii) of this section or § 1.1441– provides a withholding statement
person is a recipient as defined in 6(b)(1) (regarding claims for treaty described in § 1.1471–3(c)(3)(iii)(B)(3)
§ 1.1461–1(c)(1)(ii). benefits for which a TIN is provided (describing a chapter 4 withholding
(ii) The withholding statement must unless a foreign tax identifying number statement), the withholding statement
allocate each payment, by income type, described in § 1.1441–6(b)(1) is may include chapter 4 withholding rate
to every payee required to be reported provided). In the case of a claim of pools with respect to the portions of the
on the withholding statement for whom treaty benefits, the nonqualified payment allocated to nonparticipating
documentation has been provided intermediary’s withholding statement FFIs; and
(including U.S. exempt recipients must also state whether the limitation (iv) For a payment allocated to a
except as provided in paragraph on benefits and section 894 statements payee that is a foreign person (other
(e)(3)(iv)(A) of this section). Any required by § 1.1441–6(c)(5) have been than a person included in a chapter 4
payment that cannot be reliably provided, if required, in the beneficial withholding rate pool described in
associated with valid documentation owner’s Form W–8 or associated with paragraphs (e)(3)(iv)(C)(2)(ii) and (iii) of
such owner’s documentary evidence. this section) that is reported on a
from a payee shall be treated as made
(iv) The withholding statement must withholding statement described in
to an unknown payee in accordance
also contain any other information the § 1.1471–3(c)(3)(iii)(B)(2) or (3), the
with the presumption rules of paragraph withholding agent reasonably requests
(b) of this section and §§ 1.1441–5(d) withholding statement must include the
in order to fulfill its obligations under chapter 4 status of the payee (unless an
and (e)(6) and 1.6049–5(d). For this chapter 3 and chapter 61 of the Code,
purpose, a type of income is determined exception applies for purposes of
and section 3406. providing such status under chapter 4)
by the types of income required to be (2) Nonqualified intermediary
reported on Forms 1042–S or 1099, as and, for a payee other than an
withholding statement for withholdable individual, the recipient code for
appropriate. Notwithstanding the payments. This paragraph
preceding sentence, deposit interest chapter 4 purposes used for filing Form
(e)(3)(iv)(C)(2) modifies the 1042–S; and
(including original issue discount) requirements of a withholding statement
described in section 871(i)(2)(A) or (v) To the extent that a withholdable
described in paragraph (e)(3)(iv)(C)(1) of payment is not reportable on a Form
881(d) and interest or original issue this section that is provided by a
discount on short-term obligations as 1042–S, Form 1099 under the rules of
nonqualified intermediary with respect chapter 61, or Form 8966 ‘‘FATCA
described in section 871(g)(1)(B) or to a reportable amount that is a
881(e) is only required to be allocated to Report,’’ no allocation of the payment is
withholdable payment. For such a required on the withholding statement.
the extent it is required to be reported payment, the requirements applicable to (3) [Reserved]. For further guidance,
on Form 1099 or Form 1042–S. See a withholding statement described in see § 1.1441–1T(e)(3)(iv)(C)(3).
§ 1.6049–8 (regarding reporting of bank paragraph (e)(3)(iv)(A) through
deposit interest to certain foreign (4) Example. This example illustrates the
(e)(3)(iv)(C)(1) of this section shall
persons). If a payee receives income principles of paragraph (e)(3)(iv)(C) of this
apply, except that— section. WA makes a withholdable payment
through another nonqualified (i) The withholding statement must of U.S. source dividends to NQI, a
intermediary, flow-through entity, or include the chapter 4 status (using the nonqualified intermediary. NQI provides WA
U.S. branch or territory financial applicable status code used for filing with a valid intermediary withholding
institution described in paragraph Form 1042–S) and GIIN (when required certificate under paragraph (e)(3)(iii) of this
(e)(2)(iv) of this section (other than a for chapter 4 purposes under § 1.1471– section that includes NQI’s certification of its
U.S. branch or territory financial 3(d)) of each other intermediary or flow- status for chapter 4 purposes as a
institution treated as a U.S. person), the through entity that is a foreign person participating FFI. NQI provides a
withholding statement must also state, withholding statement on which NQI
and that receives the payment,
allocates 20% of the payment to a chapter 4
with respect to the payee, the name, excluding an intermediary or flow- withholding rate pool of recalcitrant account
address, and TIN, if known, of the other through entity that is an account holder holders of NQI for purposes of chapter 4 and
nonqualified intermediary or U.S. of or interest holder in a withholding allocates 80% of the payment equally to A
branch from which the payee directly foreign partnership, withholding foreign and B, individuals that are account holders
receives the payment or the flow- trust, or intermediary acting as a of NQI. NQI also provides WA with valid
through entity in which the payee has qualified intermediary for the payment; beneficial owner withholding certificates
a direct ownership interest. If another (ii) If the nonqualified intermediary from A and B establishing their status as
foreign persons entitled to a 15% rate of
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nonqualified intermediary, flow-through that is a participating FFI or registered
deemed-compliant FFI provides a withholding under an applicable income tax
entity, or U.S. branch fails to allocate a
treaty. Because NQI has certified its status as
payment, the name of the nonqualified withholding statement described in a participating FFI, withholding under
intermediary, flow-through entity, or § 1.1471–3(c)(3)(iii)(B)(2) (describing an chapter 4 is not required with respect to NQI.
U.S. branch that failed to allocate the FFI withholding statement), the See § 1.1471–2(a)(4). Based on the
payment shall be provided with respect withholding statement may include documentation NQI provided to WA with
to such payment. chapter 4 withholding rate pools with respect to A and B, WA can reliably associate

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29722 Federal Register / Vol. 82, No. 125 / Friday, June 30, 2017 / Rules and Regulations

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

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

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may include a chapter 4 withholding (ii) If the qualified intermediary appropriate Form 1099 and the
rate pool of U.S. payees on a provides a withholding statement instructions accompanying the form.
withholding statement by applying the described in § 1.1471–3(c)(3)(iii)(B)(3) (D) Example. The following example
rules under paragraph (e)(3)(iv)(A) of (describing a chapter 4 withholding illustrates the application of paragraph
this section (by substituting ‘‘qualified statement), the withholding statement (e)(5)(v)(C) of this section for a qualified
intermediary’’ for ‘‘nonqualified may include a chapter 4 withholding intermediary providing chapter 4
intermediary’’) with respect to an rate pool with respect to the portion of withholding rate pools on an FFI
account that it maintains (as described the payment allocated to withholding statement provided to a
in § 1.1471–5(b)(5)) for the payee of the nonparticipating FFIs. withholding agent. WA makes a payment of
U.S. source interest that is a withholdable
payment. A qualified intermediary shall (3) Alternative procedure for U.S. payment to QI, a qualified intermediary that
determine withholding rate pools based non-exempt recipients. If permitted is an FFI and a non-U.S. payor (as defined
on valid documentation that it obtains under its withholding agreement with in § 1.6049–5(c)(5)), and A and B are account
under its withholding agreement with the IRS, a qualified intermediary may, holders of QI (as defined under § 1.1471–5(a))
the IRS, or if a payment cannot be by mutual agreement with a and are both U.S. non-exempt recipients (as
reliably associated with valid withholding agent, establish a single defined in paragraph (c)(21) of this section).
documentation, under the applicable zero withholding rate pool that includes Ten percent of the payment is attributable to
presumption rules. If a qualified both A and B. A has provided WA with a
U.S. non-exempt recipient account
intermediary has an account holder that Form W–9, but B has not provided WA with
holders for whom the qualified a Form W–9. QI assumes primary
is another intermediary (whether a intermediary has provided Forms W–9 withholding responsibility under chapters 3
qualified intermediary or a nonqualified prior to the withholding agent paying and 4 with respect to the payment, 80
intermediary) or a flow- through entity, any reportable payments, as defined in percent of which is allocable to foreign
the qualified intermediary may combine the qualified intermediary withholding payees who are account holders other than A
the account holder information agreement, and foreign persons for and B. As a participating FFI, QI is required
provided by the other intermediary or which no withholding is required under to report with respect to its U.S. accounts
flow-through entity with the qualified chapters 3 and 4, and may include under § 1.1471–4(d) (as incorporated into its
intermediary’s direct account holder qualified intermediary agreement). Provided
payments allocated to a chapter 4
information to determine the qualified that QI reports A’s account as a U.S. account
withholding rate pool of U.S. payees. In under the requirements referenced in the
intermediary’s chapter 3 withholding such a case, the qualified intermediary preceding sentence, QI is not required to
rate pools and each of the qualified may also establish a separate provide WA with a Form W–9 from A and
intermediary’s chapter 4 withholding withholding rate pool (subject to 28- may instead include A in a chapter 4
rate pools to the extent provided in its percent withholding, or other applicable withholding rate pool of U.S. payees,
withholding agreement with the IRS. statutory back-up withholding tax rate) allocating 10% of the payment to this pool.
(2) Withholding rate pool that includes only U.S. non-exempt See § 1.6049–4(c)(4)(iii) concerning when
requirements for a withholdable recipient account holders for whom a reporting under section 6049 for a payment
payment. This paragraph (e)(5)(v)(C)(2) of interest is not required when an FFI that
qualified intermediary has not provided
is a non-U.S. payor reports an account holder
modifies the requirements of a Forms W–9 prior to the withholding receiving the payment under its chapter 4
withholding statement described in agent paying any reportable payments. If requirements. With respect to B, the interest
paragraph (e)(5)(v)(C)(1) of this section a qualified intermediary chooses the payment is subject to backup withholding
provided by a qualified intermediary alternative procedure of this paragraph under section 3406. Because B is a
with respect to a withholdable payment (e)(5)(v)(C)(3), the qualified recalcitrant account holder of QI for
(including a reportable amount that is a intermediary must provide the withholdable payments and because QI
withholdable payment). For such a information required by its withholding assumes primary chapter 4 withholding
payment, the regulations applicable to a agreement to the withholding agent no responsibility, however, QI may include the
withholding statement described in portion of the payment allocated to B with
later than January 15 of the year
the remaining 80% of the payment for which
paragraph (e)(5)(v)(C)(1) of this section following the year in which the QI assumes primary withholding
shall apply, except that— payments are paid. Failure to provide responsibility. WA can reliably associate the
(i) If the qualified intermediary such information will result in the full amount of the payment based on the
provides a withholding statement application of penalties to the qualified withholding statement and does so regardless
described in § 1.1471–3(c)(3)(iii)(B)(2) intermediary under sections 6721 and of whether WA knows B is a U.S. non-
(describing an FFI withholding 6722, as well as any other applicable exempt recipient that is receiving a portion
statement), the withholding statement penalties, and may result in the of the payment. See § 31.3406(g)–1(e)
may include a chapter 4 withholding termination of the qualified (providing exemption to backup withholding
when withholding was applied under
rate pool with respect to the portion of intermediary’s withholding agreement
chapter 4).
the payment allocated to a single pool with the IRS. A withholding agent shall
of recalcitrant account holders (without not be liable for tax, interest, or * * * * *
the need to subdivide into the pools penalties for failure to backup withhold (f) Effective/applicability date—(1) In
described in § 1.1471–4(d)(6)), including or report information under chapter 61 general. Except as otherwise provided
both account holders of the qualified of the Code due solely to the errors or in paragraphs (e)(4)(ix)(D), (f)(2), and
intermediary and of any participating omissions of the qualified intermediary. (f)(3) of this section, this section applies
FFI, registered deemed-compliant FFI, If a qualified intermediary fails to to payments made on or after January 6,
or other qualified intermediary for provide the allocation information 2017. (For payments made after June 30,
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whom the first-mentioned qualified required by this paragraph 2014 (except for payments to which
intermediary receives the payment, and (e)(5)(v)(C)(3), with respect to U.S. non- paragraph (e)(4)(ix)(D) applies, in which
nonparticipating FFIs (to the extent exempt recipients, the withholding case, substitute March 5, 2014, for June
permitted) in lieu of reporting chapter 3 agent shall report the unallocated 30, 2014), and before January 6, 2017,
withholding rate pools with respect to amount paid from the withholding rate see this section as in effect and
such persons as described in paragraph pool to an unknown recipient, or contained in 26 CFR part 1, as revised
(e)(5)(v)(C)(1) of this section); or otherwise in accordance with the April 1, 2016. For payments made after

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December 31, 2000, and before July 1, (b)(7)(iii) through (c)(2)(i) [Reserved]. maintained at a U.S. branch or office of
2014, see this section as in effect and For further guidance, see § 1.1441– a financial institution is required to
contained in 26 CFR part 1, as revised 1(b)(7)(iii) through (c)(2)(i). contain the account holder’s foreign TIN
April 1, 2013.) (ii) Dual residents. Individuals will and, in the case of an individual
(2) Lack of documentation for past not be treated as U.S. persons for account holder, the account holder’s
years. A taxpayer may elect to apply the purposes of this section for a taxable date of birth in order for the
provisions of paragraphs (b)(7)(i)(B), (ii), year or any portion of a taxable year for withholding agent to treat such
and (iii) of this section, dealing with which they are a dual resident taxpayer withholding certificate as valid under
liability for failure to obtain (within the meaning of § 301.7701(b)– paragraph (e)(2) of this section. For
documentation timely, to all of its open 7(a)(1) of this chapter) who is treated as withholding certificates associated with
tax years, including tax years that are a nonresident alien pursuant to payments made on or after January 1,
currently under examination by the IRS. § 301.7701(b)–7(a)(1) of this chapter for 2018, if an account holder does not have
The election is made by simply taking purposes of computing their U.S. tax a foreign TIN, the account holder is
action under those provisions in the liability. required to provide a reasonable
(c)(3) through (c)(3)(i) [Reserved]. For explanation for its absence (e.g., the
same manner as the taxpayer would take
further guidance, see § 1.1441–1(c)(3) country of residence does not provide
action for payments made after
through (c)(3)(i). TINs) in order for the withholding
December 31, 2000. (ii) Nonresident alien individual. The certificate not to be considered invalid
(3) Section 871(m) transactions. term nonresident alien individual as a result of the application of this
Paragraphs (b)(4)(xxi), (b)(4)(xxiii), means persons described in section paragraph (e)(2)(ii)(B). A withholding
(e)(3)(ii)(E), and (e)(6) of this section 7701(b)(1)(B), alien individuals who are certificate that does not contain the
apply to payments made on or after treated as nonresident aliens pursuant account holder’s date of birth will not
September 18, 2015. to § 301.7701(b)–7 of this chapter for be considered invalid as a result of the
(4) [Reserved]. For further guidance, purposes of computing their U.S. tax application of this paragraph (e)(2)(ii)(B)
see § 1.1441–1T(f)(4). liability, or an alien individual who is if the withholding agent has the account
* * * * * a resident of Puerto Rico, Guam, the holder’s date of birth information in its
Commonwealth of Northern Mariana files.
■ Par. 4. Section 1.1441–1T is revised to Islands, the U.S. Virgin Islands, or (e)(3) through (e)(3)(iv)(C)(2)
read as follows: American Samoa as determined under [Reserved]. For further guidance, see
§ 1.1441–1T Requirement for the § 301.7701(b)–1(d) of this chapter. An § 1.1441–1(e)(3) through (e)(3)(iv)(C)(2).
deduction and withholding of tax on alien individual who has made an (3) Alternative withholding statement.
payments to foreign persons (temporary). election under section 6013(g) or (h) to In lieu of a withholding statement
be treated as a resident of the United containing all of the information
(a) through (b)(7)(ii)(A) [Reserved].
States is nevertheless treated as a described in paragraph (e)(3)(iv)(C)(1) of
For further guidance, see § 1.1441–1(a)
nonresident alien individual for this section, a withholding agent may
through (b)(7)(ii)(A).
purposes of withholding under chapter accept from a nonqualified intermediary
(B) Special rules for establishing that 3 of the Code and the regulations a withholding statement that meets all
income is effectively connected with the thereunder. of the requirements of this paragraph
conduct of a U.S. trade or business. A (c)(4) through (c)(38)(i) [Reserved]. (e)(3)(iv)(C)(3) with respect to a
withholding certificate received after For further guidance, see § 1.1441– payment. This alternative withholding
the date of payment to claim under 1(c)(4) through (c)(38)(i). statement may only be provided by a
§ 1.1441–4(a)(1) that income is (ii) Hold mail instruction. nonqualified intermediary that provides
effectively connected with the conduct Notwithstanding the provisions of the withholding agent with the
of a U.S. trade or business will be paragraph (i) of this section, an address withholding certificates from the
considered effective as of the date of the that is subject to a hold mail instruction beneficial owners (i.e., not documentary
payment if the certificate contains a can be used as a permanent residence evidence) before the payment is made.
signed affidavit (either at the bottom of address if the person has also provided (i) The withholding statement is not
the form or on an attached page) that the withholding agent with required to contain information that is
states that the information and documentary evidence establishing also included on a withholding
representations contained on the residence in the country in which the certificate (e.g., name, address, TIN (if
certificate were accurate as of the time person claims to be a resident for tax any), chapter 4 status, GIIN (if any)).
of the payment. The signed affidavit purposes. If, after a withholding The withholding statement is also not
must also state that the beneficial owner certificate is provided, a person’s required to specify the rate of
has included the income on its U.S. permanent residence address is withholding to which each foreign
income tax return for the taxable year in subsequently subject to a hold mail payee is subject, provided that all of the
which it is required to report the income instruction, this is a change in information necessary to make such
or, alternatively, that the beneficial circumstances requiring the person to determination is provided on the
owner intends to include the income on provide the documentary evidence withholding certificate. A withholding
a U.S. income tax return for the taxable described in this paragraph (c)(38)(ii) in agent that uses an alternative
year in which it is required to report the order to use the address as a permanent withholding statement may not apply a
income and the due date for filing such residence address. different rate from that which the
return (including any applicable (c)(39) through (e)(2)(ii)(A) [Reserved]. withholding agent may reasonably
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extensions) is after the date on which For further guidance, see § 1.1441– conclude from the information on the
the affidavit is signed. A certificate 1(c)(39) through (e)(2)(ii)(A). withholding certificate.
received within 30 days after the date of (B) Requirement to collect foreign TIN (ii) The withholding statement must
the payment will not be considered to and date of birth beginning January 1, allocate the payment to every payee
be unreliable solely because it does not 2017. Beginning January 1, 2017, a required to be reported as described in
contain the affidavit described in the beneficial owner withholding certificate paragraph (e)(3)(iv)(C)(1)(ii) of this
preceding sentences. provided to document an account that is section.

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(4) Effective/applicability date. This § 1.6049–5 Interest and original issue withholding under chapter 3 of the
section applies to payments made on or discount subject to reporting after Code or that is a chapter 4 reportable
after January 6, 2017. December 31, 1982. amount under § 1.1474–1(d)(2) must
(g) Expiration date. The applicability * * * * * contain all of the information that is
(c) * * * necessary to complete a Form 1042–S
of this section expires on December 30,
(1) Documentary evidence for offshore for that payment. See §§ 1.1471–3(c) and
2019.
obligations and certain other 1.1471–4(c) for additional
§ 1.1441–3 [Amended] obligations—(i) A payor may rely on documentation requirements to identify
documentary evidence described in a payee or account holder for chapter 4
■ Par. 5. Section 1.1441–3 is amended § 1.1471–3(c)(5)(i) instead of a beneficial purposes that may apply in addition to
by removing the second instance of the owner withholding certificate described the requirements under paragraph (c) of
word ‘‘is’’ in the last sentence of in § 1.1441–1(e)(2)(i) in the case of an this section.
paragraph (d)(1). amount paid outside the United States (iii) Even if an account or obligation
§ 1.1441–4 [Amended]
(as described in paragraph (e) of this (as defined in § 1.6049–4(f)(3)) is not
section) with respect to an offshore maintained outside the United States
■ Par. 6. Section 1.1441–4 is amended obligation, or, in the case of broker (maintained in the United States), a
by removing and reserving paragraph proceeds described in § 1.6045–1(c)(2), payor may rely on documentary
(h). to the extent provided in § 1.6045– evidence associated with a withholding
1(g)(1)(i). For purposes of this section, certificate described in § 1.1441–
■ Par. 7. Section 1.6045–1 is amended the term offshore obligation means—
by revising paragraphs (m)(2)(ii) and 1(e)(3)(iii) with respect to the persons
(A) An account maintained at an for whom an entity acting as an
(n)(12)(ii) to read as follows: office or branch of a bank or other intermediary collects the payment. A
§ 1.6045–1 Returns of information of financial institution located outside the payor may also rely on documentary
brokers and barter exchanges. United States; or evidence associated with a flow-through
(B) An obligation as defined in withholding certificate for payments
* * * * *
§ 1.6049–4(f)(3) (other than an account treated as made to foreign partners of a
(m) * * * described in paragraph (c)(1)(i)(A) of nonwithholding foreign partnership, as
(2) * * * this section), contract, or other defined in § 1.1441–1(c)(28), the foreign
(ii) Delayed effective date for certain instrument with respect to which the beneficiaries of a foreign simple trust, as
options—(A) Notwithstanding payor is either engaged in business as a defined in § 1.1441–1(c)(24), or foreign
paragraph (m)(2)(i) of this section, if an broker or dealer in securities or a owners of a foreign grantor trust, as
option, stock right, or warrant is issued financial institution (as defined in defined in § 1.1441–1(c)(26), even
as part of an investment unit described § 1.1471–5(e)) that engages in significant though the partnership or trust account
in § 1.1273–2(h), paragraph (m) of this activities at an office or branch located is an obligation maintained in the
section applies to the option, stock outside the United States. For purposes United States.
right, or warrant if it is acquired on or of the preceding sentence, an office or (iv) For accounts opened on or after
after January 1, 2016. branch of such payor shall be July 1, 2014, and before January 1, 2015,
(B) Notwithstanding paragraph considered to engage in significant and for obligations entered into on or
(m)(2)(i) of this section, if the property activities with respect to an obligation after July 1, 2014, and before January 1,
referenced by an option (that is, the when it participates materially and 2015, a payor may continue to apply the
property underlying the option) is a actively in negotiating the obligation rules of § 1.6049–5(c)(1) and (c)(4) as in
debt instrument that is issued by a non- under the principles described in effect and contained in 26 CFR part 1
U.S. person or that provides for one or § 1.864–4(c)(5)(iii) (substituting the term revised April 1, 2013, rather than this
more payments denominated in, or ‘‘obligation’’ for the term ‘‘stock or paragraph (c)(1) and paragraph (c)(4) of
determined by reference to, a currency security’’). this section. A payor that applies the
(ii) A payor may rely on documentary rules of § 1.6049–5(c)(1) and (c)(4) as in
other than the U.S. dollar, paragraph (m)
evidence if the payor has established effect and contained in 26 CFR part 1
of this section applies to the option if it
procedures to obtain, review, and revised April 1, 2013, to an account or
is granted or acquired on or after
maintain documentary evidence obligation must also apply § 1.1441–
January 1, 2016.
sufficient to establish the identity of the 6(c)(2) (to the extent applicable) and
* * * * * payee and the status of that person as a § 1.6049–5(e) both as in effect and
(n) * * * foreign person; and the payor obtains, contained in 26 CFR part 1 revised
(12) * * * reviews, and maintains such April, 2013, with respect to the account
(ii) Effective/applicability date. documentary evidence in accordance or obligation.
Paragraph (n)(12)(i) of this section with those procedures. A payor (2) Other applicable rules. The
applies to a debt instrument described maintains the documents reviewed for provisions of § 1.1441–1(e)(4)(i) through
in paragraph (n)(12)(i)(A) or (B) of this purposes of this paragraph (c)(1) by (xii) (regarding who may sign a
section that is acquired on or after retaining an original, certified copy, or certificate, validity period of certificates
February 18, 2016. However, a broker photocopy (including a microfiche, and documentary evidence, retention of
may rely on paragraph (n)(12)(i) of this electronic scan, or similar means of certificates, reliance rules, etc.) shall
section for a debt instrument described electronic storage) of the documents apply (by substituting the term ‘‘payor’’
in paragraph (n)(12)(i)(A) or (B) of this reviewed for as long as it may be for the term ‘‘withholding agent’’ and
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section acquired before February 18, relevant to the determination of the disregarding the fact that the provisions
2016. payor’s obligation to report under under § 1.1441–1(e)(4) only apply to
§ 1.6049–4 and this section and noting amounts subject to withholding under
* * * * * in its records the date on which the chapter 3 of the Code) to withholding
■ Par. 8. Section 1.6049–5 is amended document was received and reviewed. certificates and documentary evidence
by revising paragraphs (c)(1) through Documentary evidence furnished for a furnished for purposes of this section.
(c)(4) to read as follows: payment of an amount subject to See § 1.1441–1(b)(2)(vii) for provisions

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dealing with reliable association of a § 1.1471–3(c)(6)(ii)(C)(1). Further, a regardless of whether such
payment with documentation. payor may maintain such documentation or certification is
(3) Standards of knowledge. A payor documentation or documentary described in paragraph (c)(1) of this
may not rely on a withholding evidence as required in paragraph section or § 1.1441–1(e)(2).
certificate or documentary evidence (c)(4)(iv) of this section. (iii) Maintenance of documentation
described in paragraph (c)(1) or (4) of (i) Statement in lieu of documentary and written statement. A payor
this section if it has actual knowledge or evidence with respect to accounts. If maintains documentation if it either
reason to know that any information or under the local laws, regulations, or maintains the documentary evidence as
certification stated in the certificate or practices of a country in which an described in paragraph (c)(1) of this
documentary evidence is unreliable. A account is maintained, it is not section or retains a record of the
payor has reason to know that customary to obtain documentary documentary evidence reviewed if the
information or certifications are evidence described in paragraph (c)(1) payor is not required to retain copies of
unreliable only if the payor would have of this section with respect to the type the documentation pursuant to the
reason to know under the provisions of of account, the payor may, instead of payor’s AML due diligence (as defined
§ 1.1441–7(b)(2) and (3) that the obtaining a beneficial owner in § 1.1471–1(b)(4)). A payor retains a
information and certifications provided withholding certificate described in record of documentary evidence
on the certificate or in the documentary § 1.1441–1(e)(2)(i) or documentary reviewed by noting in its records the
evidence are unreliable or, in the case evidence described in paragraph (c)(1) type of documentation reviewed, the
of a Form W–9 (or an acceptable of this section, establish a payee’s date the document was reviewed, the
substitute), it cannot reasonably rely on foreign status based on the statement document’s identification number (if
the documentation as set forth in described in this paragraph (c)(4)(i) (or any), and whether such documentation
§ 31.3406(h)–3(e) of this chapter (see the such substitute statement as the Internal contained any U.S. indicia described in
information and certification described Revenue Service may prescribe) made § 1.1441–7(b)(8). Any statement
in § 31.3406(h)–3(e)(2)(i) through (iv) of on an account opening form. However, described in paragraph (c)(4)(i) of this
this chapter that are required in order see, also § 1.1471–4(c) or an applicable section, must be retained in accordance
for a payor reasonably to rely on a Form IGA for additional documentation with § 1.1471–3(c)(6)(iii).
W–9). The provisions of § 1.1441–7(b)(2) requirements that may apply to a
* * * * *
and (3) shall apply for purposes of this participating FFI (including a reporting
paragraph (c)(3) irrespective of the type Model 2 FFI) for determining the status Martin V. Franks,
of income to which § 1.1441–7(b)(2) is of its account holders for chapter 4 Chief, Publications and Regulations Branch,
otherwise limited. The exemptions from purposes. The statement referred to in Legal Processing Division, Associate Chief
reporting described in paragraphs this paragraph (c)(4)(i) must appear near Counsel (Procedure and Administration).
(b)(10) and (11) of this section shall not the signature line and must state, ‘‘By [FR Doc. 2017–13634 Filed 6–29–17; 8:45 am]
apply if the payor has actual knowledge opening this account and signing below, BILLING CODE 4830–01–P
that the payee is a U.S. person who is the account owner represents and
not an exempt recipient. warrants that he/she/it is not a U.S.
(4) Special documentation rules for person for purposes of U.S. Federal DEPARTMENT OF THE TREASURY
certain payments. This paragraph (c)(4) income tax and that he/she/it is not
modifies the provisions of paragraph acting for, or on behalf of, a U.S. person. Internal Revenue Service
(c)(1) of this section for payments of A false statement or misrepresentation
amounts that are not subject to of tax status by a U.S. person could lead 26 CFR Part 1
withholding under chapter 3 of the to penalties under U.S. law. If your tax
Code, other than amounts described in [TD 9809]
status changes and you become a U.S.
paragraph (d)(3)(iii) of this section citizen or a resident, you must notify us RIN 1545–BL72
(dealing with U.S. short-term OID and within 30 days.’’ Additionally, a payor RIN 1545–BN79
U.S. source deposit interest described in may, instead of obtaining a beneficial
section 871(i)(2)(A) or 881(d)(3)). owner withholding certificate described Regulations Relating to Information
Amounts are not subject to withholding in § 1.1441–1(e)(2)(i) or § 1.1471– Reporting by Foreign Financial
under chapter 3 of the Code if they are 3(c)(3)(ii) or documentary evidence Institutions and Withholding on
not included in the definition of described in paragraph (c)(1) of this Certain Payments to Foreign Financial
amounts subject to withholding under section, establish a payee’s foreign Institutions and Other Foreign Entities;
§ 1.1441–2(a) (e.g., deposit interest with status based on a written statement Correction
foreign branches of U.S. banks, foreign described in paragraph § 1.1471–
source income, or broker proceeds). A 1(b)(150) to the extent a payor uses such AGENCY: Internal Revenue Service (IRS),
payor may rely upon documentation in written statement to establish a payee’s Treasury.
lieu of documentary evidence (as chapter 4 status and is permitted to use ACTION: Correcting amendments.
described in paragraph (c)(1) of this the written statement under § 1.1471–
section) or a written statement (as 3(d) (by substituting the term ‘‘payor’’ SUMMARY: This document contains
defined in § 1.1471–1(b)(150)) or for the term ‘‘withholding agent’’) corrections to final and temporary
another statement to the extent without any other documentary regulations (TD 9809) that were
permitted in paragraphs (c)(4)(i) through evidence. published in the Federal Register on
(iii) of this section, until the payor (ii) Documentation under IGA. A Friday, January 6, 2017 (82 FR 2124).
mstockstill on DSK30JT082PROD with RULES

knows or has reason to know of a payor that is a reporting Model 1 FFI or The final and temporary regulations
change in circumstance that makes the reporting Model 2 FFI may rely upon under chapter 4 of the Subtitle A
documentation unreliable or incorrect documentation or information (sections 1471 through 1474) of the
(as defined in § 1.1441–1(e)) when the establishing a payee’s status that is Internal Revenue Code of 1986 (Code)
payor does not have customer permitted under an applicable IGA for relate to information reporting by
information for the payee that includes determining whether the account of the foreign financial institutions (FFIs) with
any of the U.S. indicia described in payee is other than a U.S. account and respect to U.S. accounts and

VerDate Sep<11>2014 17:26 Jun 29, 2017 Jkt 241001 PO 00000 Frm 00030 Fmt 4700 Sfmt 4700 E:\FR\FM\30JNR1.SGM 30JNR1
Document Created: 2017-06-30 06:01:40
Document Modified: 2017-06-30 06:01:40
Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Rules and Regulations
Action		Correcting amendment.
Dates		Effective Date: These corrections are effective June 30, 2017.
Contact		Nancy Lee, (202) 317-6942 (not a toll- free number).
FR Citation		82 FR 29719
RIN Number		1545-BL17
CFR Associated		Income Taxes and Reporting and Recordkeeping Requirements
82 FR 29719 - 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

DEPARTMENT OF THE TREASURYInternal Revenue Service

Federal Register Volume 82, Issue 125 (June 30, 2017)

DEPARTMENT OF THE TREASURY
Internal Revenue Service
