n-14-59.pdf

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Part III
Administrative, Procedural, and Miscellaneous

Modified Applicability Dates of Certain Provisions Under Chapters 3 and 61
Notice 2014-59

I. PURPOSE
This notice announces the intention of the Department of the Treasury (Treasury)
and the IRS to amend certain provisions of the temporary regulations published under
sections 1441, 1442, and 6049 of the Internal Revenue Code (Code) on March 6, 2014,
to provide modified applicability dates with respect to: (i) the standards of knowledge
applicable to a withholding certificate or documentary evidence to document a payee
that is an entity under §1.1441-7(b); and (ii) the rules under §1.6049-5(c) providing the
circumstances under which a withholding agent or payor may rely on documentary
evidence provided by a payee instead of a withholding certificate to document the
foreign status of the payee for purposes of chapters 3 and 61. Prior to the issuance of
these amendments, taxpayers may rely on this notice regarding the modified
applicability dates.
II. BACKGROUND
On March 18, 2010, the Hiring Incentives to Restore Employment Act of 2010,
Pub. L. 111-147 (H.R. 2847), added chapter 4 to Subtitle A of the Code (sections 1471–
1474 (commonly known as “FATCA”)). Chapter 4 generally requires withholding agents
to withhold at a 30 percent rate on certain payments to a foreign financial institution

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(FFI) unless the FFI has entered into an agreement (FFI agreement) to obtain status as
a participating FFI and, among other things, to report certain information with respect to
U.S. accounts. Chapter 4 also imposes on withholding agents withholding,
documentation, and reporting requirements with respect to certain payments made to
non-financial foreign entities (NFFEs). On January 17, 2013, Treasury and the IRS
published final regulations under chapter 4 (TD 9610, 78 Fed. Reg. 5873) (final chapter
4 regulations).
On March 6, 2014, Treasury and the IRS published temporary regulations under
chapter 4 (T.D. 9657, 79 Fed. Reg. 12812) (temporary chapter 4 regulations) and under
chapter 3, chapter 61, and section 3406 (T.D. 9658, 79 Fed. Reg. 12726) (temporary
coordination regulations). The temporary coordination regulations modify certain
provisions of the regulations under chapters 3 and 61 and section 3406 to coordinate
with the chapter 4 regulations, including (i) the standards of knowledge for withholding
agents under §1.1441-7(b); and (ii) the conditions under which a withholding agent or a
payor (as defined for chapter 61 purposes in §1.6049-5(c)(5)) may rely on documentary
evidence to document a payee’s foreign status. The temporary coordination regulations
are generally effective for payments made by withholding agents and payors beginning
on or after July 1, 2014.
The temporary coordination regulations in §1.1441-7(b) amend the standards of
knowledge regarding the circumstances under which a withholding agent has reason to
know that a payee’s claim of foreign status is unreliable or incorrect. These
amendments were made to coordinate with the chapter 4 regulations and are consistent
with the standards of knowledge that apply for purposes of chapter 4. The temporary

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coordination regulations in §1.1441-7(b)(5) and (b)(8) modify the circumstances under
which a withholding agent that is described in §1.1441-7(b)(3)(i) (including a financial
institution) and that has obtained a withholding certificate or documentary evidence has
reason to know that a claim of foreign status made by a direct account holder is
unreliable or incorrect for purposes of chapters 3 and 61. In particular, the temporary
coordination regulations provide additional U.S. indicia that will cause a withholding
agent to have reason to know that a claim of foreign status by a direct account holder is
unreliable or incorrect for purposes of chapters 3 and 61. The additional U.S. indicia
are as follows: (1) the withholding agent’s classification of the account holder as a U.S.
person in its account information; (2) a current U.S. telephone number for the account
holder if the withholding agent has no telephone number for the account holder outside
the United States; and (3) an unambiguous indication of a U.S. place of birth for an
individual direct account holder on accompanying documentation or in the withholding
agent’s account information. See §1.1441-7(b)(5)(i), (b)(5)(ii), (b)(8)(ii), and (b)(8)(iii).
The temporary coordination regulations under §1.1441-7(b)(3)(ii) do not require a
withholding agent to take into account these additional U.S. indicia for a preexisting
obligation if the foreign status of the direct account holder was documented by the
withholding agent for purposes of chapter 3 or chapter 61 before July 1, 2014, unless
the withholding agent is notified of a change in circumstances with respect to the
obligation or, in the case of an individual account holder, reviews documentation that
contains a U.S. place of birth.
The regulations under §1.6049-5(c)(1) provide guidance on a payor’s use of
documentary evidence with respect to an offshore obligation to establish a payee’s

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foreign status for certain amounts paid outside the United States under §1.6049-5(e).
Prior to amendment, an amount was considered paid outside the United States under
§1.6049-5(e) if the payor completed the acts necessary to effect the payment outside
the United States, provided that the payment was not further described in §1.6049-5(e).
Section 1.6049-5(e) describes certain “U.S. tiebacks,” which cause a payment not to be
treated as an amount paid outside the United States, such as when a payment is
transferred to an account maintained by the payee in the United States or mailed to a
United States address when certain other conditions apply. Additionally, prior to
amendment, the regulations under §1.6049-5(c)(4) modified the regulations under
§1.6049-5(c)(1) regarding the use of documentary evidence for payments of amounts
that are not subject to withholding under §1.1441-2(a), other than amounts described in
§1.6049-5(d)(3)(iii) (dealing with U.S. short-term original issue discount and U.S. bank
deposit interest). The temporary coordination regulations amend §1.6049-5(e) and
§1.6049-5(c)(4) to provide further guidance with respect to when an amount is
considered paid outside the United States and the types of documentary evidence
permitted for establishing a payee’s foreign status with respect to certain payments,
including the requirements for maintaining such documentation.
On May 19, 2014, Treasury and the IRS issued Notice 2014-33 (2014-21 I.R.B.
1033), which, among other things, states the intention of Treasury and the IRS to
amend the chapter 4 regulations to allow a withholding agent or FFI to treat an
obligation held by an entity that is issued, opened, or executed on or after July 1, 2014,
and before January 1, 2015, as a preexisting obligation described in §§1.1471-
2(a)(4)(ii), 1.1472-1(b)(2), and 1.1471-4(c)(3), except that an FFI may not apply the

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documentation exception under §1.1471-4(c)(3)(iii).
III. SCOPE
This notice applies to withholding agents, FFIs, and payors that have withholding
or information reporting requirements under chapter 3, chapter 4, chapter 61, or section
3406 with respect to accounts and obligations they open or enter into before January 1,
2015, and provides relief generally consistent with Notice 2014-33. As under Notice
2014-33, the relief provided by this notice may be used with respect to all accounts and
obligations to which the relief applies, or separately with respect to any such account or
clearly identified group of such accounts (for example, by line of business).
IV. MODIFIED APPLICABILITY DATE WITH RESPECT TO THE STANDARDS OF
KNOWLEDGE FOR ENTITIES
Following the publication of Notice 2014-33, some commentators noted that,
while the modifications to §1.1441-7(b) in the temporary coordination regulations
address the application of the revised reason to know standards for obligations that
were documented before July 1, 2014, the Notice does not address how §1.1441-7(b)
applies to entity accounts opened on or after July 1, 2014, and before January 1, 2015,
that are treated as preexisting obligations by withholding agents and participating FFIs
for purposes of chapter 4 under section IV of the Notice. These commentators
requested that a similar modified applicability date be added to §1.1441-7(b) for
purposes of chapters 3 and 61 (and for chapter 4 purposes by cross-reference to
§1.1441-7(b) in §1.1471-3(e)(4)) to effectively implement the Notice’s transition relief
with respect to the allowance to treat a new entity account as a preexisting entity
account . Absent such a modification, a withholding agent that makes a payment that is

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subject to withholding under sections 1441 and 1442 to a new account held by an entity
that it treats as a preexisting account under the Notice would be required to apply the
revised standards of knowledge under §1.1441-7(b) when validating a withholding
certificate or documentary evidence furnished by the entity to determine whether
withholding under chapter 3 applies, even though the withholding agent may have a
longer period of time to apply the documentation requirements (including the revised
standards of knowledge) under chapter 4 with respect to the same entity. In response
to these comments, Treasury and the IRS intend to modify the revised standards of
knowledge in the temporary coordination regulations to allow a withholding agent to
apply the rules under §1.1441-7(b)(5) and (b)(8) as in effect and contained in 26 CFR
part 1 revised April 1, 2013, to accounts opened, and obligations entered into, by an
entity, on or after July 1, 2014, and before January 1, 2015. Therefore, this notice
provides additional time for withholding agents to apply the new entity account
procedures to document a new obligation held by an entity and further facilitates the
relief provided by Notice 2014-33.
In addition, certain commentators stated that the allowance for preexisting
obligations provided in section V of Notice 2014-33 and §1.1441-7(b)(3)(ii) would still
require a withholding agent to immediately identify a change in circumstances for an
entity payee that occurs on any date on or after July 1, 2014, based on the additional
U.S. indicia specified in §1.1441-7(b) (and described above). Commentators suggested
that, because withholding agents lack existing systems that can identify the new U.S.
indicia, additional time should be provided for withholding agents to modify their
systems to identify the new U.S. indicia for an existing entity account holder. In

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furtherance of the relief provided by Notice 2014-33 with respect to new obligations held
by an entity, and to coordinate with the revised applicability date described in the
preceding paragraph, Treasury and the IRS also intend to amend the temporary
coordination regulations to provide that, with respect to an obligation held by an entity, a
withholding agent will not be required to treat the additional U.S. indicia specified in
§1.1441-7(b) as a change in circumstances under §1.1441-1(e)(4)(ii)(D) before January
1, 2015.
The amendments described in this section IV apply to withholding agents and
FFIs for purposes of determining a payee’s or account holder’s foreign status for
chapter 4 purposes by cross-reference to §1.1441-7(b) in §1.1471-3(e)(4) and are
available only with respect to obligations held by entities.
V. ALLOWANCE TO APPLY PRIOR RULES REGARDING DOCUMENTARY
EVIDENCE FOR CERTAIN OFFSHORE PAYMENTS
The temporary coordination regulations revise §1.6049-5(c)(1) to make the use
of documentary evidence available with respect to offshore obligations (rather than just
offshore accounts) and revise §1.6049-5(e) to remove the U.S. tiebacks (described
above), thus allowing for a payor’s use of documentary evidence without regard to the
presence of U.S. tiebacks with respect to a payment. In addition, the temporary
coordination regulations in §1.6049-5(c)(1) specify the types of documentary evidence
on which a payor can rely, replacing the generalized standard for documentary
evidence previously provided in §1.6049-5(c)(1). The types of documentary evidence
allowed are consistent with the final chapter 4 regulations under §1.1471-3(c)(5)(i).
Finally, the temporary coordination regulations in §1.6049-5(c)(1) specify the types of

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withholding agents and payors that may use documentary evidence to document a
payee (that is, a financial institution or a broker or dealer in securities). The temporary
coordination regulations under §1.6049-5(c)(1) apply to payments made on or after July
1, 2014, except to payments made with respect to preexisting obligations as described
in §1.1441-7(b)(3)(ii). An allowance is contained in the temporary coordination
regulations under §1.1441-6(c)(4) for when a withholding agent may rely on
documentary evidence to provide a reduced rate of withholding under an income tax
treaty.
To allow payors additional time to modify their systems to implement the revised
requirements of §1.6049-5(c)(1), Treasury and the IRS intend to modify the temporary
coordination regulations to allow a payor to continue to use, for accounts opened on or
after July 1, 2014, and before January 1, 2015, the rules regarding the use of
documentary evidence under §1.6049-5(c)(1) and (c)(4) as in effect and contained in 26
CFR part 1 revised April 1, 2013 (“prior §1.6049-5(c)”), instead of the new rules
regarding documentary evidence for offshore obligations under §1.6049-5(c)(1) and
(c)(4) of the temporary coordination regulations. For consistency, a payor that applies
prior §1.6049-5(c) to an account or obligation will also be required to apply §1.1441-
6(c)(2) (to the extent applicable) and §1.6049-5(e) as in effect and contained in 26 CFR
part 1 revised April 1, 2013, with respect to the account or obligation.
VI. DRAFTING INFORMATION
The principal author of this notice is Nancy J. Lee of the Office of Associate Chief
Counsel (International). For further information regarding this notice, contact Ms. Lee at
(202) 317-6942 (not a toll-free call).