Internal Revenue Bulletin 2017-5 (PDF rendition): IRS Notices

Preserve advance releases and the authoritative Internal Revenue Bulletin rendition; directory timestamps are file-publication metadata, not legal effective dates. HTML bulletins begin June 2003; earlier available issues require full PDF parsing. Whole bulletin rendition: numbered items are identified below; other legal material and publisher context remain included. This is not a new standalone advance release.

# INTERNAL REVENUE BULLETIN

4
IRS

Bulletin No. 2017-5
January 30, 2017

## HIGHLIGHTS OF THIS ISSUE

These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.

## INCOME TAX

REG-103477-14, page 746.

This document contains proposed regulations under chapter 4
of Subtitle A (sections 1471 through 1474) of the Internal
Revenue Code of 1986 describing the verification require-
ments (including certifications of compliance) and events of
default for entities that agree to perform the chapter 4 due
diligence, withholding, and reporting requirements on behalf of
certain foreign financial institutions or the chapter 4 due dili-
gence and reporting obligations on behalf of certain non-
financial foreign entities. Regulations in T.D. 9809 finalize (with
changes) certain proposed regulations under chapter 4, with-
draw corresponding temporary regulations, and add new tem-
porary regulations. The text of the temporary regulations in
T.D. 9809 also serves as the text of the proposed regulations
in this document that are proposed by cross-reference to the
temporary chapter 4 regulations. This document was pub-
lished in the Federal Register on January 6, 2017.

### REG-123841-16, page 766.

This document contains proposed regulations under section
3402(q) with respect to withholding on certain payments of
gambling winnings from horse races, dog races, and jai alai
and on certain other payments of gambling winnings. The
proposed regulations affect both payers and payees of the
gambling winnings subject to withholding under section
3402(q).

### REG-134247-16, page 744.

This document contains proposed regulations under chapter 3
of Subtitle A of the Internal Revenue Code of 1986 (Code).
Chapter 3 provides rules regarding withholding of tax on cer-
tain U.S. source income paid to foreign persons. Regulations in
T.D. 9808 finalize certain proposed regulations under chapters
3 and 61 and sections 871, 3406, and 6402 of the Code,
withdraw corresponding temporary regulations, and add new
temporary regulations. The text of the temporary regulations in

T.D. 9808 serves as the text of the proposed regulations in this
document that are proposed by cross-reference to the tempo-
rary chapter 3 regulations. This document was published in the
Federal Register on January 6, 2017.

### T.D. 9807, page 573.

This document contains final regulations in Title 26 of the Code
of Federal Regulations under section 6041 of the Internal
Revenue Code. The final regulations replace the existing infor-
mation reporting requirements under § 7.6041-1 of the Tem-
porary Income Tax Regulations under the Tax Reform Act of
1976 for persons who make reportable payments of bingo,
keno, or slot machine winnings.

### T.D. 9808, page 580.

This document contains final and temporary regulations re-
garding withholding of tax on certain U.S. source income paid
to foreign persons, information reporting and backup withhold-
ing with respect to payments made to certain U.S. persons,
and portfolio interest paid to nonresident alien individuals and
foreign corporations. This document finalizes (with certain
changes) certain proposed regulations under chapters 3 and
61 and sections 871, 3406, and 6402 of the Internal Revenue
Code of 1986 (Code), and withdraws corresponding temporary
regulations. This document also includes temporary regula-
tions providing additional rules under chapter 3 of the Code.
The temporary regulations affect persons making payments of
U.S. source income to foreign persons. This document was
published in the Federal Register on January 6, 2017.

(Continued on the next page)

Finding Lists begin on page ii.

<!-- PageBreak -->

### T.D. 9809, page 664.

This document contains final and temporary regulations under
chapter 4 of Subtitle A (sections 1471 through 1474) of the
Internal Revenue Code of 1986 (Code) regarding information
reporting by foreign financial institutions (FFIs) with respect to
U.S. accounts and withholding on certain payments to FFIs and
other foreign entities. This document finalizes (with certain
changes) certain proposed regulations under chapter 4, and
withdraws corresponding temporary regulations. This docu-
ment also includes temporary regulations providing additional
rules under chapter 4. The regulations included in this docu-
ment affect persons making certain U.S .- related payments to
FFIs and other foreign persons and payments by FFIs to other
persons. This document was published in the Federal Register
on January 6, 2017.

## EMPLOYEE PLANS

### Rev. Proc. 2017-18, page 743.

This revenue procedure provides that the last day of the reme-
dial amendment period for § 403(b) plans, for purposes of
section 21 of Rev. Proc. 2013-22, 2013-18 I.R.B. 985, is
March 31, 2020.

## ESTATE TAX

### Notice 2017-12, page 742.

This notice provides guidance on the methods available to
confirm the closing of an examination of the estate tax return.
In addition, the notice announces that an account transcript
with a transaction code of "421" and explanation "Closed
examination of tax return" can serve as the functional equiva-
lent of an estate tax closing letter in confirming the closing of
an examination.

## EMPLOYMENT TAX

### REG-123841-16, page 766.

This document contains proposed regulations under section
3402(q) with respect to withholding on certain payments of
gambling winnings from horse races, dog races, and jai alai
and on certain other payments of gambling winnings. The
proposed regulations affect both payers and payees of the
gambling winnings subject to withholding under section
3402(q).

### T.D. 9807, page 573.

This document contains final regulations in Title 26 of the Code
of Federal Regulations under section 6041 of the Internal
Revenue Code. The final regulations replace the existing infor-
mation reporting requirements under § 7.6041-1 of the Tem-
porary Income Tax Regulations under the Tax Reform Act of
1976 for persons who make reportable payments of bingo,
keno, or slot machine winnings.

## ADMINISTRATIVE

REG-123829-16, page 764.

This document proposes to amend the Health Insurance Pro-
viders Fee regulations to require certain covered entities en-
gaged in the business of providing health insurance for United
States health risks to electronically file Form 8963, "Report of
Health Insurance Provider Information." These proposed regu-
lations affect those entities.

### REG-123841-16, page 766.

This document contains proposed regulations under section
3402(q) with respect to withholding on certain payments of
gambling winnings from horse races, dog races, and jai alai
and on certain other payments of gambling winnings. The
proposed regulations affect both payers and payees of the
gambling winnings subject to withholding under section
3402(q).

### T.D. 9807, page 573

This document contains final regulations in Title 26 of the Code
of Federal Regulations under section 6041 of the Internal
Revenue Code. The final regulations replace the existing infor-
mation reporting requirements under § 7.6041-1 of the Tem-
porary Income Tax Regulations under the Tax Reform Act of
1976 for persons who make reportable payments of bingo,
keno, or slot machine winnings.

<!-- PageBreak -->

## The IRS Mission

Provide America's taxpayers top-quality service by helping
them understand and meet their tax responsibilities and en-
force the law with integrity and fairness to all.

## Introduction

The Internal Revenue Bulletin is the authoritative instrument of
the Commissioner of Internal Revenue for announcing official
rulings and procedures of the Internal Revenue Service and for
publishing Treasury Decisions, Executive Orders, Tax Conven-
tions, legislation, court decisions, and other items of general
interest. It is published weekly.

It is the policy of the Service to publish in the Bulletin all
substantive rulings necessary to promote a uniform application
of the tax laws, including all rulings that supersede, revoke,
modify, or amend any of those previously published in the
Bulletin. All published rulings apply retroactively unless other-
wise indicated. Procedures relating solely to matters of internal
management are not published; however, statements of inter-
nal practices and procedures that affect the rights and duties
of taxpayers are published.

Revenue rulings represent the conclusions of the Service on
the application of the law to the pivotal facts stated in the
revenue ruling. In those based on positions taken in rulings to
taxpayers or technical advice to Service field offices, identify-
ing details and information of a confidential nature are deleted
to prevent unwarranted invasions of privacy and to comply with
statutory requirements.

Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned

against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.

The Bulletin is divided into four parts as follows:

### Part I .- 1986 Code.

This part includes rulings and decisions based on provisions of
the Internal Revenue Code of 1986.

### Part II .- Treaties and Tax Legislation.

This part is divided into two subparts as follows: Subpart A, Tax
Conventions and Other Related Items, and Subpart B, Legisla-
tion and Related Committee Reports.

Part III .- Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative Rul-
ings. Bank Secrecy Act Administrative Rulings are issued by
the Department of the Treasury's Office of the Assistant Sec-
retary (Enforcement).

### Part IV .- Items of General Interest.

This part includes notices of proposed rulemakings, disbar-
ment and suspension lists, and announcements.

The last Bulletin for each month includes a cumulative index for
the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.

The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.

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## Part I. Rulings and Decisions Under the Internal Revenue Code of 1986

26 CFR 1.6041-10: Information returns; Winnings
From Bingo, Keno, and Slot Machines

### T.D. 9807

DEPARTMENT OF TREASURY
Internal Revenue Service
26 CFR Parts 1, 7, and 31

### Information Returns; Winnings from Bingo, Keno, and Slot Machines

AGENCY: Internal Revenue Service
(IRS), Treasury.

ACTION: Final regulations.

SUMMARY: This document contains fi-
nal regulations under section 6041 regard-
ing the filing of information returns to
report winnings from bingo, keno, and
slot machine play. The rules update the
existing requirements regarding the filing,
form, and content of such information re-
turns; allow for an additional form of
payee identification; and provide an op-
tional aggregate reporting method. The fi-
nal regulations affect persons who pay
winnings of $1,200 or more from bingo
and slot machine play, $1,500 or more
from keno, and recipients of such
payments.

DATES: These regulations are effective
on December 30, 2016.

FOR FURTHER INFORMATION CON-
TACT: David Bergman, (202) 317-6845
(not a toll-free number).

SUPPLEMENTARY INFORMATION:

#### Background

This document contains final regula-
tions in Title 26 of the Code of Federal
Regulations under section 6041 of the In-
ternal Revenue Code. The final regula-
tions replace the existing information re-
porting requirements under § 7.6041-1 of
the Temporary Income Tax Regulations
under the Tax Reform Act of 1976 for
persons who make reportable payments of
bingo, keno, or slot machine winnings.
The new requirements are set forth in a

new § 1.6041-10 of the regulations. Be-
cause the new requirements replace the
existing requirements, the regulations un-
der § 7.6041-1 are being removed.

On March 4, 2015, the Treasury De-
partment and the IRS published a notice
of proposed rulemaking (REG-132253-
11) in the Federal Register, 80 FR
11600, containing proposed regulations
that would update the existing rules and
add rules for electronically tracked slot
machine play, payee identification, and an
optional aggregate reporting method.

A public hearing was held on June 17,
2015, and five speakers provided testi-
mony. In addition, over 14,000 written
public comments were received. After
careful consideration of the written com-
ments and statements made during the
hearing, the proposed regulations are ad-
opted as modified by this Treasury Deci-
sion.

### Explanation and Summary of Comments

All of the 14,000 written comments on
the notice of proposed rulemaking were
considered and are available at regula-
tions.gov or upon request. Many of these
comments addressed similar issues and
expressed similar points of view. These
comments are summarized in this pream-
ble. Comments pertaining to parimutuel
gambling in the case of horse races, dog
races, and jai alai are being considered in
a separate regulations project under sec-
tion 3402(q).

#### Filing Requirement, Form and Content of the Information Return

Commentators supported the proposed
rules regarding filing requirements and the
form and content of the information re-
turns required to be filed. Accordingly, the
Treasury Department and the IRS con-
clude that the final regulations should
adopt the filing requirements without
modification.

Electronically Tracked Slot Machine
Play

The proposed regulations created rules
for electronically tracked slot machine
play, which was defined in proposed
§1.6041-10(b)(1) as slot machine play
where an electronic player system con-
trolled by the gaming establishment (such
as through the use of a player's card or
similar system) records the amount a spe-
cific individual wins and wagers on slot
machine play. Section 1.6041-10(b)(2)
(i)(D) of the proposed regulations pro-
vided that gambling winnings for elec-
tronically tracked slot machine play are
required to be reported if (1) the total
amount of winnings netted against the to-
tal amount of wagers during the same
session of play was $1,200 or more, and
(2) at least one single win during the ses-
sion was $1,200 or more without regard to
the wager. A "session" of play was deter-
mined with reference to a calendar day.
The changes were intended to facilitate
reporting by payees on their individual
income tax returns under the proposed
safe harbor in Notice 2015-21, 2015-12
I.R.B. 765.

Some commentators expressed con-
cern regarding the feasibility of the pro-
posed rules given existing technology and
recommended that the proposed rules not
be adopted. Commentators stated that one
of the purposes of electronic player sys-
tems was for marketing and customer loy-
alty and that current systems should not be
used as a mandatory method for tracking
winnings and wagers for purposes of tax
reporting. Moreover, commentators stated
that the use of electronic player systems
for tax reporting may chill customer use
and have a negative effect on customer
relations. In addition, some commentators
stated that their electronic player systems
lack the necessary controls to be used for
tax reporting, and that implementing such
controls may be costly and labor-
intensive. Based on these comments, the
final regulations do not adopt the pro-
posed rules for electronically tracked slot
machine play.

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Payee Identification Requirements

The proposed regulations retain the
rule in §7.6041-1(c)(3) of the Temporary
Income Tax Regulations that the payor
must obtain two forms of identification
from the payee to verify the payee's iden-
tity. However, §1.6041-10(f) of the pro-
posed regulations modifies the rules for
acceptable identification by requiring that
one of the forms of identification include
the payee's photograph and by providing
that the payor may accept a properly com-
pleted Form W-9 in lieu of identification
that includes the payee's social security
number. The proposed regulations pro-
vide that payors may rely on this provi-
sion prior to publication of final regula-
tions in the Federal Register.

Most commentators supported the
proposed rules regarding the types of
identification that can be relied on to
verify a payee's identity. In particular,
commentators supported the provision
that allows a Form W-9 to be used as an
acceptable means of verifying a payee's
identity in lieu of identification that in-
cludes the payee's social security num-
ber. This rule is consistent with proce-
dures currently used by many payors to
address the fact that, today, most forms
of identification that payees carry with
them do not contain a social security
number.

Other commentators suggested that
the list of examples of acceptable forms
of government-issued identification be
expanded to include tribal member iden-
tification cards issued by a federally rec-
ognized Indian tribe. Some commenta-
tors also suggested that an exception
from the photo identification require-
ment be provided for tribal identifica-
tion cards presented at tribal govern-
ment gaming facilities because many
tribal identification cards do not contain
photographs.

In response to the comments re-
ceived, the list of examples of accept-
able government-issued identification
has been expanded in §1.6041-10(e)
(1) of the final regulations to include
tribal member identification cards issued
by a federally recognized Indian tribe.
In addition, in response to comments,
§1.6041-10(d)(2) of the final regula-
tions provides an exception to the photo

identification requirement if one of the
forms of identification is a tribal identi-
fication card presented at a gaming es-
tablishment owned or licensed by the
tribal government that issued the tribal
member identification card.

##### Optional Aggregate Reporting Method and Session

Section 1.6041-10(h) of the proposed
regulations provides a new rule for an
optional aggregate reporting method. Un-
der §7.6041-1(a), reporting of gambling
winnings from bingo, keno, and slot ma-
chine play is required each time a payor
makes a payment of reportable gambling
winnings (i.e., a payment that meets the
reporting threshold). The aggregate re-
porting method allows a payor who makes
more than one payment of reportable
gambling winnings to the same payee
from the same type of game during a
"session" to report the aggregate amount
of such reportable gambling winnings on
one Form W-2G, provided the payor sat-
isfies certain recordkeeping requirements
set forth in the regulations. Under
§1.6041-10(b)(3) of the proposed regu-
lations, a "session" is generally defined
as a period of play that begins when a
patron places the first wager on a par-
ticular type of game at a gaming estab-
lishment and ends when the patron
places his or her last wager on the same
type of game before the end of the same
calendar day at the same gaming estab-
lishment. This aggregate reporting
method may be used at the payor's op-
tion. The proposed regulations provide
that payors may rely on this provision
prior to publication of final regulations
in the Federal Register.

Commentators were generally support-
ive of the proposed optional aggregate
reporting method but did suggest some
changes. Accordingly, the final regula-
tions adopt the proposed optional aggre-
gate reporting method with some modifi-
cations.

First, the period for purposes of the
aggregate reporting method in the final
regulations is not referred to as a "ses-
sion." Rather, in §1.6041-10(g) of the fi-
nal regulations, the period used for pur-
poses of the aggregate reporting method is
now referred to as an "information report-

ing period." The proposed regulations'
definition of a "session" was intended to
mirror the concept of "session" set forth in
the safe harbor for the determination of
wagering gains and losses from electron-
ically tracked slot machine play that was
published in a Notice and draft Revenue
Procedure on the same date as the pro-
posed regulations. Notice 2015-21. The
Treasury Department and the IRS are still
considering the income tax reporting rules
in this area, and the draft Revenue Proce-
dure has not been finalized. Therefore, to
avoid confusion, the aggregate reporting
method rules in §1.6041-10(g) of the final
regulations have been modified so that the
period during which reporting may be ag-
gregated is referred to as the "information
reporting period" rather than as a "ses-
sion."

Second, commentators suggested that
rather than a calendar day, payors should
have the option of using the 24-hour pe-
riod known commonly in the industry as
the "gaming day" for purposes of the ag-
gregate reporting method. The comments
explained that the period of a "gaming
day" is used by gaming establishments for
financial accounting, gaming control
board, and other regulatory purposes, and
allows each establishment the flexibility
to define a day for these purposes by tak-
ing into account peak gaming times. The
"gaming day" period is also utilized in
complying with anti-money laundering re-
porting obligations. According to the
comments, a gaming day is a 24-hour
period that ends at a time during which the
gaming establishment is closed or when
business is slowest, typically between 3
a.m. and 6 a.m. The comments indicate
that allowing payors to use the same pe-
riod for purposes of information reporting
as for other regulatory purposes will en-
hance the benefits of aggregate reporting
for payors by not having a different re-
porting period for tax reporting, and by
allowing aggregate reports to be generated
during non-peak gaming times.

To give payors more flexibility, the
final regulations adopt these suggestions
and provide a flexible "information re-
porting period" as the period to be used
for aggregate reporting. Under §1.6041-
10(b)(2) of the final regulations, an "in-
formation reporting period" is either a
"calendar day" or a "gaming day," so long

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as that period is applied uniformly by the
payor to all payees during the calendar
year. A payor may adopt a different "in-
formation reporting period" from one cal-
endar year to the next, but may not change
the "information reporting period" in the
middle of a calendar year. Changes to a
payor's "information reporting period"
from one calendar year to the next must be
implemented on January 1. In addition,
the final regulations provide that on De-
cember 31st, all open information report-
ing periods must end at 11:59 p.m. in
order to end by the end of the calendar
year. This rule is necessary to maintain
calendar year federal income tax reporting
that is the bedrock of the information re-
porting regime and that is required by
section 6041. Section 1.6041-10(b)(2)(iii)
of the final regulations provides that if a
"gaming day" is adopted for a calendar
year, the information reporting period for
December 31st ends at 11:59 p.m. on De-
cember 31, and the information reporting
period for January 1st begins at 12 a.m. on
January 1, regardless of the number of
hours of the December 31st and January
1st information reporting periods.

Third, commentators noted that the
proposed regulations did not specifically
define "gaming establishment," and how
to deal with common ownership be-
tween various casinos. Section 1.6041-
10(b)(2)(iv) of the final regulations de-
fines the term "gaming establishment"
as a business entity of a payor of report-
able gambling winnings with respect to
bingo, keno, or slot machine play, and
includes all gaming establishments
owned by the payor using the same em-
ployer identification number (EIN) is-
sued to such payor in accordance with
section 6109.

Finally, commentators requested that
the proposed recordkeeping require-
ments with respect to aggregate report-
ing be updated to reflect the actual
credentials held by various casino rep-
resentatives. These recordkeeping re-
quirements require that payors maintain
a record of every payment that will be
reported using the aggregate reporting
method and that each entry in the record
be verified by a designated casino
representative. Section §1.6041-10(g)
(3)(vii) of the proposed regulations re-
quires that the designated individual

provide a gaming license number. The
final regulations do not require that a
gaming license number be provided. In-
stead, §1.6041-10(g)(3)(vii) of the final
regulations requires that the person au-
thorized by the applicable gaming regu-
latory control authority to ensure accu-
racy in reporting provide his or her
unique identification number.

###### Reporting Thresholds

The proposed rules maintained the re-
porting thresholds of $1,200 for bingo and
slot machine play and $1,500 for keno in
§7.6041-1(a), but invited comments on
the feasibility of reducing these thresh-
olds. Commentators overwhelmingly op-
posed the idea of reducing these reporting
thresholds. Payors opposed lowering the
thresholds because it would result in more
reporting, which would increase compli-
ance burdens for the industry. In fact,
many commentators suggested that rather
than reducing the current thresholds, they
should be increased to account for infla-
tion. These final regulations do not change
the existing reporting thresholds for
bingo, keno, and slot machine play.

### Netting Wagers

The proposed regulations retain the
rules in §7.6041-1(b) that, in determining
whether the reporting threshold is satis-
fied, the amount of winnings from bingo
and slot machine play is not reduced by
the amount of the wager, but the amount
of winnings from one keno game is re-
duced by the amount of the wager in that
one game. Commentators were divided as
to whether uniform application of netting
the wager against the winnings was feasi-
ble, citing compliance cost and labor con-
cerns. In light of these concerns, the Trea-
sury Department and the IRS conclude
that the existing approach, as described
in the proposed regulations, should be
retained. Accordingly, §1.6041-10(b)
(1)(i) of the final regulations provides
that reportable gambling winnings in the
case of bingo and slot machine play are
not determined by netting the wager
against the winnings, but reportable
gambling winnings in the case of keno
are determined by netting the wager in

that one game against the winnings from
that game.

### Definition of Slot Machine and Reportable Gambling Winnings

For purposes of information reporting,
proposed §1.6041-10(b)(4) defines a slot
machine as a device that, by application of
the element of chance, may deliver or
entitle the person playing or operating the
device to receive cash, premiums, mer-
chandise, or tokens, whether or not the
device is operated by inserting a coin,
token, or similar object. One commentator
suggested that the definition of slot ma-
chines be changed to adopt either of the
definitions that has been adopted by the
states of New Jersey or Nevada, both of
which define slot machines more broadly.
Other commentators suggested that the
definition of slot machine in the proposed
regulations is too broad because it could
include technologic aids to Class II gam-
ing as defined under the Indian Gaming
Regulatory Act, 25 U.S.C. 2701-2721,
such as electronic bingo or electronic pull-
tabs.

As discussed in the preamble of the
proposed regulations, the definition of slot
machine in proposed §1.6041-10(b)(4) is
intended to be consistent with the defini-
tion of slot machine in §44.4402-
1(b)(1) of the Wagering Tax Regulations.
Having consistent definitions benefits tax
administration and may prevent unin-
tended confusion that could arise from
having different definitions for federal tax
purposes. Because the Treasury Depart-
ment and the IRS conclude that, on bal-
ance, the proposed definition of slot ma-
chine is the most appropriate definition,
the final regulations adopt the proposed
definition of the term "slot machine" with-
out modification.

Section 1.6041-10(b)(2)(i) of the pro-
posed regulations provides that all win-
nings from all cards played during one
bingo game are combined and that all
winnings from all "ways" on a multi-way
keno ticket are combined. In addition,
§1.6041-10(b)(2)(ii) of the proposed reg-
ulations provides that winnings from dif-
ferent types of games are not combined to
determine whether the reporting thresh-
olds are satisfied, and that bingo, keno,
and slot machine play are all different

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types of games. Commentators did not
oppose inclusion of these rules in the def-
inition of reportable gambling winnings in
the proposed regulations. Accordingly,
the final regulations adopt these aspects of
the definition of reportable gambling win-
nings without modification.

### Special Analyses

Certain IRS regulations, including this
one, are exempt from the requirements of
Executive Order 12866, as supplemented
by Executive Order 13563. Therefore, a
regulatory assessment is not required.

It is hereby certified that this rule will
not have a significant economic impact on
a substantial number of small entities.
This certification is based on the fact that
this rule merely provides guidance as to
the filing of information reporting returns
for payors who make reportable payments
of bingo, keno, or slot machine winnings
and who are required by section 6041 to
make returns reporting those payments.
The requirement for payors to make infor-
mation returns is imposed by statute and
not these regulations. In addition, this rule
reduces the existing burden on payors to
comply with the statutory requirement by
simplifying the process for payors to ver-
ify payees' identities with a broader range
of documents that are more readily avail-
able, and also by allowing payors to re-
duce the number of information returns
they issue if they adopt the new aggregate
reporting methodology. Therefore, a reg-
ulatory flexibility analysis under the Reg-
ulatory Flexibility Act (5 U.S.C. Chapter
6) is not required.

Pursuant to section 7805(f) of the In-
ternal Revenue Code, the notice of pro-
posed rulemaking preceding these regula-
tions was submitted to the Chief Counsel
for Advocacy of the Small Business Ad-
ministration for comment on the regula-
tions' impact on small businesses, and no
comments were received.

### Drafting Information

The principal author of these regula-
tions is David Bergman of the Office of
Associate Chief Counsel (Procedure &
Administration).

### List of Subjects

* * * * *

### Adoption of Amendments to the Regulations

Accordingly, 26 CFR parts 1, 7, and 31
are amended as follows:

#### PART 1 - INCOME TAXES

Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805* * *

Par. 2. Section 1.6041-10 is added to
read as follows:

§1.6041-10 Return of information as to
payments of winnings from bingo, keno,
and slot machine play.

(a) In general. Every person engaged
in a trade or business (as defined in
§1.6041-1(b)) and who, in the course of
such trade or business, makes a payment
of reportable gambling winnings (defined
in paragraph (b)(1) of this section) must
make an information return with respect
to such payment. Unless the provisions of
paragraph (g) of this section (regarding
aggregate reporting) apply, a separate in-
formation return is required with respect
to each payment of reportable gambling
winnings.

(b) Definitions-(1) Reportable gam-
bling winnings. (i) For purposes of this
section, the term reportable gambling win-
nings is defined as follows:

(A) For bingo, the term "reportable
gambling winnings" means winnings of
$1,200 or more from one bingo game,
without reduction for the amount wa-
gered. All winnings received from all wa-
gers made during one bingo game are
combined (for example, all winnings from
all cards played during one bingo game
are combined).

(B) For keno, the term "reportable
gambling winnings" means winnings of
$1,500 or more from one keno game re-
duced by the amount wagered on the same
keno game. All winnings received from
all wagers made during one keno game
are combined (for example, all winnings
from all "ways" on a multi-way keno
ticket are combined).

(C) For slot machine play, the term
"reportable gambling winnings" means
winnings of $1,200 or more from one slot
machine play, without reduction for the
amount wagered.

(ii) Winnings and wagers from differ-
ent types of games are not combined to
determine if the reporting threshold is sat-
isfied. Bingo, keno, and slot machine play
are different types of games.

(iii) Winnings include the fair market
value of a payment in any medium other
than cash.

(iv) The amount wagered in the case of
a free play is zero.

(2) Information reporting period. (i) In
general. For purposes of paragraph (g) of
this section, the "information reporting
period" begins when a patron places the
first wager on a particular type of game at
a gaming establishment, as defined in
paragraph (b)(2)(iv) of this section, and
ends when the patron places his or her last
wager on the same type of game at the
same gaming establishment before the end
of the "information reporting period." An
information reporting period is a 24-hour
period. A payor may select a calendar
day (as defined in paragraph (b)(2)(ii) of
this section) or a gaming day (as defined
in paragraph (b)(2)(iii) of this section)
as the information reporting period for
purposes of the aggregate reporting
method in paragraph (g) of this section.
For purposes of this paragraph (b)(2),
time is determined by the time zone of
the location where the patron places the
wager. A payor must use the same in-
formation reporting period (a calendar
day or gaming day) to report all "report-
able gambling winnings" paid during
the calendar year. Once selected, a
payor may not change its information
reporting period during a calendar year.
Any changes to a payor's information
reporting period from one calendar year
to another must be implemented on Jan-
uary 1.

(ii) Calendar day. A calendar day is
determined with reference to a period be-
ginning at 12 a.m. and ending no later
than 11:59 p.m. of the same calendar day.

(iii) Gaming day-(A) In general. A
gaming day is a 24-hour period other
than a calendar day (as defined in para-
graph (b)(2)(ii) of this section) selected by
the payor, subject to the special rules for
December 31 and January 1 in paragraphs
(b)(2)(iii)(B) and (C) of this section.

(B) Special rule for December 31. For
purposes of paragraph (b)(2)(iii) of this
section, the gaming day that begins on

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December 31 of any calendar year ends at
11:59 p.m. on December 31, regardless of
the time on December 31 on which that
gaming day began.

(C) Special rule for January 1. For
purposes of paragraph (b)(2)(iii) of this
section, the gaming day of January 1 be-
gins at 12:00 a.m. on January 1, regardless
of the time and calendar day on which that
gaming day ends, and may extend beyond
24 hours.

(iv) Gaming establishment. For pur-
poses of this section, a gaming establish-
ment is a business entity of a payor of
reportable gambling winnings with re-
spect to bingo, keno, or slot machine play,
and includes all gaming establishments
owned by such payor using the same em-
ployer identification number (EIN) issued
to such payor in accordance with section
6109.

(v) Examples. The following examples
illustrate the provisions of paragraph
(b)(2) of this section.

Example 1. Casino R uses the aggregate report-
ing method under paragraph (g) of this section to
report certain reportable gambling winnings. For
other regulatory purposes, Casino R uses a gaming
day that begins at 3 a.m. and ends at 2:59 a.m. the
following calendar day. Casino R chooses to use its
gaming day as its information reporting period for
purposes of paragraph (b)(2) of this section during
Year 1. Accordingly, the information reporting pe-
riod for purposes of paragraph (g) of this section for
each day during Year 1 begins at 3 a.m. and ends at
2:59 a.m. the following day. The information report-
ing period for December 31 of Year 1 begins at 3
a.m. on December 31 of Year 1 and ends at 11:59
p.m. on December 31 of Year 1. The information
reporting period for January 1 of Year 2 begins at 12
a.m. on January 1 of Year 2 and ends at 2:59 a.m. on
January 2 of Year 2.

Example 2. The facts are the same as Example 1,
except Casino R uses a calendar day as its informa-
tion reporting period for purposes of paragraph
(b)(2) of this section during Year 1. Accordingly, the
information reporting period for purpose of para-
graph (g) of this section for each day during Year 1
begins at 12 a.m. and ends at 11:59 p.m. on the same
day.

Example 3. Casino R uses the aggregate report-
ing method under paragraph (g) of this section to
report certain reportable gambling winnings. For
other regulatory purposes, Casino R uses a gaming
day that begins at 9:00 p.m. and ends at 8:59 p.m. the
following calendar day. Casino R chooses to use its
gaming day as its information reporting period for
purposes of paragraph (b)(2) of this section during
Year 1. Accordingly, the information reporting pe-
riod for purposes of paragraph (g) of this section for
each day during Year 1 begins at 9:00 p.m. and ends
at 8:59 p.m. the following day. The information
reporting period for December 31 of Year 1 begins at
9:00 p.m. on December 30 and ends at 8:59 p.m. on

December 31. A second information reporting period
for December 31 then begins at 9:00 p.m. on De-
cember 31 and ends at 11:59 p.m. on December 31.
The information reporting period for January 1 of
Year 2 begins at 12:00 a.m. on January 1 and ends at
8:59 p.m. on January 1 of Year 2.

Example 4. Casino R uses the aggregate report-
ing method under paragraph (g) of this section to
report certain reportable gambling winnings. In Year
1, Casino R chooses to use a "gaming day" that
begins at 3 a.m. and ends at 2:59 a.m. the following
day as its information reporting period. During the
course of Year 1, Casino R decides that it would like
to change its information reporting period to instead
begin at 5 a.m. and end at 4:59 a.m. the following
day. Casino R must wait until January 1 of Year 2 to
implement such a change. On January 1 of Year 2,
Casino R's information reporting period will begin
at 12 a.m. and end at 4:59 a.m. on January 2. On
December 31 of Year 2, Casino R's information
reporting period will begin at 5 a.m. and end at 11:59
p.m.

(3) Slot machine. The term "slot ma-
chine" means a device that, by application
of the element of chance, may deliver, or
entitle the person playing or operating the
device to receive cash, premiums, mer-
chandise, or tokens whether or not the
device is operated by insertion of a coin,
token, or similar object.

(c) Prescribed form; time and place for
filing the return. The return described in
paragraph (a) of this section is a Form
W-2G, "Certain Gambling Winnings."
The Form W-2G must be filed with the
appropriate Internal Revenue Service lo-
cation designated in the instructions to the
form on or before February 28 (March 31,
if filed electronically) of the year follow-
ing the calendar year in which the report-
able gambling winnings were paid. See
section 6011 and § 1.6011-2 for require-
ments to file electronically.

(d) Information included on the re-
turn-(1) In general. Each return required
by paragraph (a) of this section must con-
tain:

(i) The name, address, and taxpayer
identification number of the payor;

(ii) The name, address, and taxpayer
identification number of the payee;

(iii) A general description of the two
types of identification (as described in
paragraph (e) of this section), one of
which must have the payee's photograph
on it (except in the case of tribal member
identification cards in certain circum-
stances as described in paragraph (d)(2) of
this section) that the payor relied on to
verify the payee's name, address, and tax-
payer identification number;

(iv) The date and amount of payment;

(v) The type of wagering transaction
(bingo, keno, or slot machine play);

(vi) In the case of a bingo or keno
game, any number, color, or other desig-
nation assigned to the game for which the
payment is made;

(vii) In the case of slot machine play,
the identification number of the slot ma-
chine(s) (for example, location and asset
number);

(viii) Any other information required
by the forms, instructions, revenue proce-
dures, or other applicable guidance pub-
lished in the Internal Revenue Bulletin.

(2) Special rule for tribal member
identification cards. A tribal member
identification card need not contain the
payee's photograph to meet the identifica-
tion requirement described in paragraph
(d)(1)(iii) of this section if:

(i) The payee is a member of a feder-
ally recognized Indian tribe;

(ii) The payee presents the payor with a
tribal member identification card issued
by a federally recognized Indian tribe stat-
ing that the payee is a member of such
tribe; and

(iii) The payor is a gaming establish-
ment (as described in paragraph (b)(2)(iv)
of this section) owned or licensed (in ac-
cordance with 25 U.S.C. 2710) by the
tribal government that issued the tribal
member identification card referred to in
(d)(2)(ii).

(3) Special rule for optional aggregate
reporting method. In the case of aggregate
reporting under paragraph (g) of this sec-
tion, the amount of the payment in para-
graph (d)(1)(iv) of this section is the ag-
gregate amount of payments of reportable
gambling winnings from the same type of
game (bingo, keno, or slot machine play)
made to the same payee during the same
information reporting period (as defined
in paragraph (b)(2) of this section). Unless
otherwise provided in forms, instructions,
or other guidance, in the case of aggregate
reporting under paragraph (g) of this sec-
tion, the information required by para-
graphs (d)(1)(v) through (viii) of this sec-
tion must be maintained by the payor as
described in paragraph (g)(3) of this sec-
tion.

(e) Identification. The following items
are treated as identification for purposes
of paragraph (d)(1)(iii) of this section-

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(1) Government-issued identification
(for example, a driver's license, passport,
social security card, military identification
card, tribal member identification card is-
sued by a federally recognized Indian
tribe, or voter registration card) in the
name of the payee; and

(2) A Form W-9, "Request for Tax-
payer Identification Number and Certifi-
cation," signed by the payee, that includes
the payee's name, address, taxpayer iden-
tification number, and other information
required by the form. A Form W-9 is not
acceptable for this purpose if the payee
has modified the form (other than pursu-
ant to instructions to the form) or if the
payee has deleted the jurat or other similar
provisions by which the payee certifies or
affirms the correctness of the statements
contained on the form.

(f) Furnishing a statement to the payee.
Every payor required to make a return
under paragraph (a) of this section must
also make and furnish to each payee, with
respect to each payment of reportable
gambling winnings, a written statement
that contains the information that is re-
quired to be included on the return under
paragraph (d) of this section. The payor
must furnish the statement to the payee on
or before January 31st of the year follow-
ing the calendar year in which payment of
the reportable gambling winnings is made.
The statement will be considered fur-
nished to the payee if it is provided to the
payee at the time of payment or if it is
mailed to the payee on or before January
31st of the year following the calendar
year in which payment was made.

(g) Aggregate reporting of bingo, keno,
and slot machine winnings-(1) In gen-
eral. In lieu of filing a separate informa-
tion return for each payment of reportable
gambling winnings as required by para-
graph (a) of this section, a payor may use
the aggregate reporting method (defined
in paragraph (g)(2) of this section) to re-
port reportable gambling winnings from
bingo, keno, or slot machine play. A payor
using the aggregate reporting method to
file information returns under paragraph
(a) of this section must also furnish state-
ments to the payee under paragraph (f) of
this section using the aggregate reporting
method.

(2) Aggregate reporting method de-
fined. (i) The aggregate reporting method

is a method of reporting more than one
payment of reportable gambling winnings
from the same type of game (bingo, keno,
or slot machine play) made to the same
payee during the same information report-
ing period (as defined in this paragraph
(b)(2) of this section) on one information
return or statement.

(ii) A payor may use the aggregate
reporting method for payments to some
payees and not others, at its own discre-
tion. In addition, with respect to a single
payee, the payor may use the aggregate
reporting method to report winnings from
one type of game, but not for winnings
from another type of game.

(iii) Failure to report some reportable
gambling winnings from a particular
type of game during one information
reporting period to a particular payee
under the aggregate reporting method
(for whatever reason, including because
the winnings are not permitted to be
reported using the aggregate reporting
method under paragraph (g)(4) of this
section) will not disqualify the payor
from using the aggregate reporting
method to report other reportable gam-
bling winnings from that type of game
during that information reporting period
to that payee. The payor may stop using
the aggregate reporting method for a
particular payee or for all payees before
the end of the payor's information re-
porting period for any reason.

(3) Recordkeeping under the aggregate
reporting method. A payor using the ag-
gregate reporting method must maintain a
record of every payment of reportable
gambling winnings from the same type of
game made to the same payee during the
information reporting period that will be
reported using the aggregate reporting
method. Every individual that the payor
has determined is responsible for an entry
in the record must confirm the information
in the entry by signing the record in a
manner that will enable the signature to be
associated with the relevant entry. Each
payment of a reportable gambling win-
ning made to the same payee and reported
under the aggregate reporting method
must have its own entry in the record,
however, the information required by
paragraphs (d)(1)(i) through (iii) of this
section is not required to be recorded
more than one time per information re-

porting period. A payor that uses the ag-
gregate reporting method must retain a
copy of the record in its files. The record
(which may be electronic provided the
requirements set forth in forms, instruc-
tions, or guidance published in the Inter-
nal Revenue Bulletin are met) must in-
clude the following information about
each payment:

(i) The payee's signature confirming the
information in the record;

(ii) The information required under
paragraph (d) of this section;

(iii) The time of the win resulting in the
reportable gambling winnings;

(iv) The total amount of reportable gam-
bling winnings with respect to all pay-
ments to the payee during the information
reporting period;

(v) The amount of reportable gambling
winnings with respect to each particular
payment;

(vi) The method of payment to the
payee (for example, cash, check, voucher,
credit, token, or chips); and

(vii) The name and unique identification
number of the individual who the payor
has determined is responsible for ensuring
that the entry with respect to the report-
able gambling winnings (including the
general description of two types of iden-
tification used to verify the payee's name,
address, and taxpayer identification num-
ber) is complete and accurate and who is
authorized to perform that function by the
applicable gaming regulatory control au-
thority. Such individual may or may not
be the same individual who prepared the
entry.

(4) When the aggregate reporting
method may not be used. A payor cannot
use the aggregate reporting method if-

(i) The payment is to a foreign person,
as described in section 1.6041-10(h);

(ii) The payor knows or has reason to
know that the person making the wager is
not the person entitled to the winnings or
is not the only person entitled to the win-
nings (regardless of whether the person
making the wager furnishes a Form 5754,
"Statement by Person(s) Receiving Gam-
bling Winnings"); or

(iii) Backup withholding under section
3406(a) applies to the payment.

(5) Examples. The following examples
illustrate the provisions of this section.
For each example, assume that for pur-

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poses of the aggregate reporting method
in paragraph (g) of this section, Casino
R's "information reporting period" for all
calendar years is a gaming day that begins
at 3 a.m. and ends at 2:59 a.m. the follow-
ing day (except for January 1 and Decem-
ber 31) and that individuals C, D, and E
are U.S. persons.

Example 1. On Day 1, between 7 a.m. and 4 p.m.,
C places five wagers at casino R on five different slot
machines. The first two wagers result in no win. The
third wager results in a $1,500 win. The fourth wager
results in a $2,500 win. The fifth wager results in an
$800 win:

(i) Under paragraph (b)(1)(i)(C) of this section,
there are reportable gambling winnings from the slot
machine play of $4,000 ($1,500 + $2,500). The
$800 win is not a reportable gambling winning from
slot machine play because it does not equal or ex-
ceed the $1,200 threshold.

(ii) Because all of the amounts were won on the
same type of game (even though each of the win-
nings occurred on different machines) during the
same information reporting period, R is permitted to
use the aggregate reporting method under this para-
graph (g). If R decides not to use the aggregate
reporting method, a separate Form W-2G would
have to be filed and furnished for the payment of
reportable gambling winnings of $1,500 and for the
payment of reportable gambling winnings of $2,500.
However, if R decides to use the aggregate reporting
method, R may report total reportable gambling win-
nings from slot machine play of $4,000 ($1,500 +
$2,500) on one Form W-2G.

Example 2. Assume the same facts as Example
1, except that in addition to the winnings de-
scribed in Example 1, at 5 a.m. on Day 2, C wins
$3,250 from one slot machine play at casino R.
Even though C played the same type of game (slot
machine play) on Day 1 and Day 2, under para-
graph (b)(2) of this section, the win at 5 a.m. on
Day 2 is a win during a separate information
reporting period. Under paragraph (g)(2)(i) of this
section, the $3,250 of reportable gambling win-
nings on Day 2 cannot be aggregated with the
reportable gambling winnings of $4,000 from Day
1 on a single Form W-2G. Accordingly, if R uses
the aggregate reporting method, R must file two
Forms W-2G with respect to C's reportable gam-
bling winnings on Day 1 and Day 2. R must report
$4,000 of reportable gambling winnings from slot
machine play paid to C on Day 1 on the first Form
W-2G, and $3,250 of reportable gambling win-
nings from slot machine play paid to C on Day 2
on the second Form W-2G.

Example 3. On December 31 of Year 1 at 4:00
p.m., C wins $10,000 from one slot machine play at
casino R. At 12:30 a.m. on January 1 of Year 2, C
wins $4,000 from one slot machine play at casino R.
Under paragraphs (b)(2)(iii)(B) and (C) of this sec-
tion, the win at 4 p.m. on December 31 of Year 1 and
the win at 12:30 a.m. on January 1 of Year 2 are wins
during different information reporting periods. Un-
der paragraph (g)(2)(i) of this section, the $4,000 of
reportable gambling winnings on January 1 cannot
be aggregated with the reportable gambling win-
nings of $10,000 from December 31 on a single

Form W-2G. Accordingly, if R uses the aggregate
reporting method, R must file two Forms W-2G with
respect to C's reportable gambling winnings on Day
1 and Day 2. R must report $10,000 of reportable
gambling winnings from slot machine play paid to C
on December 31 on the first Form W-2G and $4,000
of reportable gambling winnings from slot machine
play paid to C on January 1 on the second Form
W-2G.

Example 4. Assume the same facts as example 3,
except that C also wins $5,000 from one slot ma-
chine play at 3:30 p.m. on January 1 and $7,000 from
one slot machine play at 1:30 a.m. on January 2.
Under the special rule of paragraph (b)(2)(iii) of this
section, the "information reporting period" begins at
12:00 a.m. on January 1 and extends until the start of
the next information reporting period, in this case
2:59 a.m. on January 2. Under paragraph (b)(1)(C) of
this section, Casino R will pay C a total of $26,000
($10,000 + $4,000 + $5,000 + $7,000) in report-
able gambling winnings; however, $10,000 must be
reported in Year 1, and $16,000 must be reported in
Year 2. Because all of the amounts won in Year 2
were won on the same type of game and during the
same information reporting period, R is permitted to
use the aggregate reporting method under this para-
graph (g). If R decides to use the aggregate reporting
method, R may report $10,000 of reportable gam-
bling winnings from slot machine play paid to C on
December 31 on the first Form W-2G and $16,000 of
total reportable gambling winnings from slot ma-
chine play paid to C on January 1 on the second
Form W-2G.

Example 5. At 2 p.m. on Day 1, D won $2,000
(after reducing the amount of the win by the amount
wagered) playing one keno game at casino R. D
provides R with his driver's license. The driver's
license has D's photograph on it, as well as D's name
and address. The driver's license does not include
D's social security number. D cannot remember his
social security number and has no other identifica-
tion at the time with his social security number on it.
D does not provide R with his social security number
before R pays the winnings to D. Because D cannot
remember his social security number, D cannot com-
plete and sign a Form W-9. R deducts and withholds
$560 (28 percent of $2,000) under the backup with-
holding provisions of section 3406(a) and pays the
remaining $1,440 in winnings to D. D returns to
casino R and at 6 p.m. on Day 1 wins $1,500 (after
reducing the amount of the win by the amount wa-
gered) in one keno game. D provides R with his
driver's license as well as D's social security card. R
generally uses the aggregate reporting method and in
all cases where it is used, R complies with the
requirements of this paragraph (g). At 8 p.m. and 10
p.m. on Day 1, D wins an additional $1,800 and
$1,700 (after reducing the amount of the win by the
amount wagered), respectively, from two different
keno games. For each of these two wins, an em-
ployee of R obtains the information from D required
by this paragraph (g):

(i) Under paragraph (b)(1)(i)(B) of this section,
each of D's wins from the four games of keno on
Day 1 ($2,000, $1,500, $1,800, and $1,700) are
reportable gambling winnings. Because D's first
win on Day 1 was at 2 p.m. and D's last win on
Day 1 was at 10 p.m., all of D's reportable gam-

bling winnings from keno are won during the same
information reporting period. Because R satisfies
the requirements of paragraph (g)(2)(i), R may use
the aggregate reporting method to report D's re-
portable gambling winnings from keno. However,
pursuant to paragraph (g)(4)(iii) of this section,
the $2,000 payment made to D at 2 p.m. cannot be
reported under the aggregate reporting method
because that payment was subject to backup with-
holding. Accordingly, if R uses the aggregate re-
porting method under this paragraph (g), R will
have to file two Forms W-2G with respect to D's
reportable gambling winnings from keno on Day
1\. On the first Form W-2G, R will report $2,000 of
reportable gambling winnings and $560 of backup
withholding with respect to the 2 p.m. win from
keno, and, on the second Form W-2G, R will
report $5,000 of reportable gambling winnings
from keno (representing the three payments of
$1,500, $1,800, and $1,700 that D won between 6
p.m. and 10 p.m. on Day 1).

Example 6. In one information reporting period
on Day 1, E won five reportable gambling win-
nings from five different bingo games at a casino
R. R generally uses the aggregate reporting
method and in all cases where it is used, R com-
plies with the requirements of this paragraph (g).
Although E signed the entry in the record R main-
tains for payment of the first four reportable gam-
bling winnings, E refuses to sign the entry in the
record for the fifth payment of reportable gam-
bling winnings. R may use the aggregate reporting
method for the first four payments of reportable
gambling winnings to E. However, because the
entry in the record for the fifth payment of report-
able gambling winnings does not include E's sig-
nature, as required by paragraph (g)(3)(i) of this
section, that payment may not be reported under
the aggregate reporting method. Accordingly, if R
uses the aggregate reporting method under para-
graph (g) of this section, R must prepare two
Forms W-2G as follows: On the first Form W-2G,
R must report the first four payments of reportable
gambling winnings from bingo made to E on Day
1\. On the second Form W-2G, R must report the
fifth payment of reportable gambling winnings
from bingo made to E on Day 1.

§ 1.6041-4 regarding payments to foreign
persons. See § 1.6049-5(d) for deter-
mining whether the payee is a foreign
person.

(i) Effective/applicability date. Sec-
tion 1.6041-10(b)(2), concerning payor-
selected "information reporting peri-
ods," applies to payments of reportable
gambling winnings from bingo, keno, or
slot machine play made on or after Jan-
uary 1 of the year following the date
these regulations are published in the
Federal Register. All other sections
contained herein apply to payments of
reportable gambling winnings from
bingo, keno, or slot machine play made
on or after December 30, 2016.

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(j) Cross-references for certain gam-
bling winnings. For provisions relating to
backup withholding for winnings from
bingo, keno, and slot machine play and
other reportable gambling winnings, see
§31.3406(g)-2(d). For provisions relating
to withholding and reporting for gambling
winnings from lotteries, sweepstakes, wa-
gering pools, and other wagering transac-
tions, including a wagering transaction in
a parimutuel pool with respect to horse
races, dog races, or jai alai, see
§31.3402(q)-1.

#### PART 7 - TEMPORARY INCOME TAX REGULATIONS UNDER THE TAX REFORM ACT OF 1976

Par. 3. The authority citation for part 7
continues to read in part as follows:

26 U.S.C. 7805* * *

§7.6041-1 [Removed]

Par. 4. Section 7.6041-1 is removed.

PART 31-EMPLOYMENT TAXES
AND COLLECTION OF INCOME
TAX AT SOURCE

Par. 5. The authority citation for part
31 continues to read in part as follows:
26 U.S.C. 7805* * *

§31.3406(g)-2 [Amended]

Par. 6. In §31.3406(g)-2, paragraph
(d)(3) is amended by removing the cita-
tion "§7.6041-1" and adding the citation
"§1.6041-10" in its place.

* * * * *

John Dalrymple
Deputy Commissioner for Services and
Enforcement.
Approved: December 13, 2016.

Mark J. Mazur
Assistant Secretary of the
Treasury (Tax Policy).

(Filed by the Office of the federal Register on December 8,
2016, 8:45 a.m., and published in the issue of the federal
Register on December 9, 2016, 81 F.R. 89004)

26 CFR 1.871-14; 26 CFR 1.1441-0; 26 CFR
1.1441-1; 26 CFR 1.1441-2; 26 CFR 1.1441-3; 26
CFR 1.1441-4; 26 CFR 1.1441-5; 26 CFR
1.1441-6; etc.

### T.D. 9808

DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Parts 1, 31, and 301

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

AGENCY: Internal Revenue Service
(IRS), Treasury.

ACTION: Removal of temporary regula-
tions; final regulations; and temporary
regulations.

SUMMARY: This document contains fi-
nal and temporary regulations regarding
withholding of tax on certain U.S. source
income paid to foreign persons, informa-
tion 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. This document finalizes
(with minor changes) certain proposed
regulations under chapters 3 and 61 and
sections 871, 3406, and 6402 of the Inter-
nal Revenue Code of 1986 (Code), and
withdraws corresponding temporary regu-
lations. This document also includes tem-
porary regulations providing additional
rules under chapter 3 of the Code. The text
of the temporary regulations also serves as
the text of the proposed regulations set
forth in a notice of proposed rulemaking
published in the Proposed Rules section of
this issue of the Bulletin. The temporary
regulations affect persons making pay-
ments of U.S. source income to foreign
persons.

DATES: Effective date. These regulations
are effective on January 6, 2017.

Applicability dates. For dates of appli-
cability, see §§ 1.871-14(j), 1.1441-1(f),
1.1441-3(i), 1.1441-4(g), 1.1441-5(g),
1.1441-6(i), 1.1441-7(g), 1.1461-1(i),
1.1461-2(d), 1.6041-1(j), 1.6041-4(d),
1.6042-2(f), 1.6042-3(d), 1.6045-1(q),
1.6049-4(h), 1.6049-5(g), 31.3406(g)-
1(g), 31.3406(h)-2(i), and 301.6402-3(f).

FOR FURTHER INFORMATION CON-
TACT: Leni Perkins at (202) 317-6942
(not a toll free number).

## SUPPLEMENTARY INFORMATION: Paperwork Reduction Act

The collection of information in these
temporary regulations is contained in
a number of provisions including
§§ 1.1441-1, 1.1441-3, 1.1441-4, and
1.1441-5. The IRS intends that the in-
formation collection requirements of
these regulations will be implemented
through use of the W-8 series of forms,
Form W-9, Form 1042, Form 1042-S,
the 1099 series of forms, and Form
8966, as well as certain income tax re-
turns (for example, Forms 1040, 1040-
NR, and 1120F). As a result, for pur-
poses of the Paperwork Reduction Act
(44 U.S.C. 3507), the reporting burden
associated with the collection of infor-
mation in these regulations will be re-
flected in the information collection bur-
den and OMB control number of the
appropriate IRS form.

An agency may not conduct or spon-
sor, and a person is not required to re-
spond to, a collection of information un-
less the collection of information displays
a valid OMB control number.

Books and records relating to a collec-
tion of information must be retained as
long as their contents may become mate-
rial in the administration of any internal
revenue law. Generally, tax returns and
tax return information are confidential, as
required by 26 U.S.C. 6103.

### Background

This document contains amendments
to the Income Tax Regulations (26 CFR
part 1) under sections 871, 1441, 1461,
6041, 6042, 6045, 6049, and 6050 of the
Code, the Employment Tax Regulations
(26 CFR part 31) under section 3406 of
the Code, and the Procedure and Admin-

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istration Regulations (26 CFR part 301)
under section 6402 of the Code. On Jan-
uary 28, 2013, final regulations (TD 9610)
under chapter 4 of the Code (sections
1471 through 1474) were published in the
Federal Register (78 FR 5874), and on
September 10, 2013, corrections to
the final regulations were published in the
Federal Register (78 FR 55202). The
regulations in TD 9610 and the correc-
tions thereto are collectively referred to in
this preamble as the 2013 final chapter 4
regulations. To coordinate with certain
provisions of the 2013 final chapter 4 reg-
ulations, as well as temporary regulations
(TD 9657) under chapter 4 published in
the Federal Register (79 FR 12812) on
March 6, 2014, temporary regulations
(TD 9658) revising certain provisions of
the final chapters 3 and 61 regulations
were published in the Federal Register
(79 FR 12726) on March 6, 2014, and
corrections to those temporary regulations
were published in the Federal Register
(79 FR 37181) on July 1, 2014. Collec-
tively, the regulations in TD 9657 and the
corrections thereto are referred to in this
preamble as the 2014 temporary coordi-
nation regulations. A notice of proposed
rulemaking cross-referencing the 2014
temporary coordination regulations was
published in the Federal Register on
March 6, 2014 (79 FR 12880).

Comments were received in response
to the 2014 temporary coordination regu-
lations, but no public hearing was re-
quested, and none was held. In response to
comments, and after further consideration,
this document includes final and tempo-
rary regulations that revise and clarify cer-
tain sections of the 2014 temporary coor-
dination regulations. In some cases, the
changes to the 2014 temporary coordina-
tion regulations contained in these final
and temporary chapter 3 regulations are
made to coordinate with final and tempo-
rary regulations issued under chapter 4
that are being published in the Federal
Register concurrently with this docu-
ment. Certain provisions of these final and
temporary chapter 3 regulations were pre-
viewed in notices published after the pub-
lication of the 2014 temporary coordina-
tion regulations. See Notice 2014-33,
2014-21 I.R.B. 1033; Notice 2014-59,
2014-44 I.R.B. 747; and Notice 2016-
42, 2016-19 I.R.B. 67. In addition, some

changes in these final regulations are
corrections of minor errors in the 2014
temporary coordination regulations. Ad-
ditional unsolicited comments were re-
ceived regarding the final chapters 3 and
61 regulations. These comments are not
discussed herein, except where changes
have been made in response thereto.

## Summary of Comments and Explanation of Revisions and Provisions

A. Comments and Changes to § 1.1441-
1 - Requirement for the Deduction and
Withholding of Tax on Payments to
Foreign Persons

### 1. U.S. branch treated as a U.S. person

Section 1.1441-1T(b)(2)(iv)(A) of the
2014 temporary coordination regulations
provides that a U.S. branch of a foreign
person that is a participating FFI, regis-
tered deemed-compliant FFI, or NFFE
may agree to be treated as a U.S. person.
In connection with changes in the chapter
4 regulations published concurrently with
these regulations, the final regulations re-
move the requirement that the foreign per-
son of which the U.S. branch is a part
have a specified chapter 4 status. Addi-
tionally, the requirements for a withhold-
ing certificate from a U.S. branch that
agrees to be treated as a U.S. person in
§ 1.1441-1(e)(3)(v)(A) have been modi-
fied to remove the requirement that the
U.S. branch certify to the chapter 4 status
of the foreign person of which the U.S.
branch is a part.

### 2. Presumption of foreign status of an entity based on documentary evidence or GIIN

Section 1.1441-1T(b)(3)(iii)(A) of the
2014 temporary coordination regulations
provides presumption rules for payments
made to exempt recipients. Comments re-
quested that if a withholding agent or
payor makes a payment (other than a
withholdable payment) to an entity payee
that is an exempt recipient and has not
received a valid withholding certificate
but instead has documentary evidence
such as a certificate of incorporation indi-
cating that the payee is a foreign person,
the withholding agent or payor should be

able to presume, based on the documen-
tary evidence, that the payee is a foreign
person. The Treasury Department and the
IRS decline to adopt this recommendation
because the application of such a pre-
sumption rule would be limited in scope
(given that withholding agents can choose
to apply the rules of § 1.1441-1(b)(3)
(iii)(A)(2), which are generally applicable
to withholdable payments, to all payments
with respect to an obligation) and because
of concerns about the application of the
suggested presumption rule in the case of
foreign partnerships in which non-exempt
recipients are partners, and to which the
presumption rules of § 1.1441-5(c)(1)(iii)
apply.

Comments also requested that a with-
holding agent or payor should be able to
presume that an undocumented entity
payee is foreign if there is a Global Inter-
mediary Identification Number (GIIN) on
file for the payee and the payee's name
appears on the IRS FFI List. The Treasury
Department and the IRS have declined to
adopt this suggestion. U.S. entities can
obtain GIINs, and if they do, their names
appear on the IRS FFI list, such as when
they are acting as sponsoring entities for
chapter 4 purposes. Thus, it would not be
appropriate for a GIIN to support a pre-
sumption of foreign status without more
evidence of such status.

### 3. Presumption of foreign status for certain entities on the per se list of foreign corporations

Under § 1.1441-1T(b)(3)(iii)(A)(1)(iii)
of the 2014 temporary coordination regu-
lations, a withholding agent must presume
that an undocumented entity payee that is
an exempt recipient is a foreign person if
the name of the payee indicates that the
entity is a type of entity that is on the
per se list of foreign corporations in
§ 301.7701-2(b)(8)(i), unless the name
contains the designation "corporation" or
"company" (which, in itself, would not be
indicative of foreign status). Comments
have requested that, rather than excluding
all exempt entity payees whose names in-
clude "company" or "corporation" for
purposes of this presumption rule, the rule
instead be modified to provide that for
payees whose names contain these desig-
nations, foreign status should be presumed

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if the withholding agent has a document
that reasonably demonstrates that the en-
tity is incorporated in the relevant foreign
jurisdiction on the per se list. The Trea-
sury Department and the IRS agree that
this modification is appropriate and have
included it in these final regulations.

4\. Reliance on electronic transmission of
certificates, forms, and documentation

Generally, a withholding agent must
withhold at a 30% rate on any payment of
an amount subject to withholding unless it
can reliably associate the payment with
documentation upon which it can rely to
treat the payment as made to a U.S. person
or as made to a beneficial owner that is a
foreign person entitled to a reduced rate of
withholding. § 1.1441-1(b)(1). The 2014
temporary coordination regulations allow
a withholding agent to rely on a valid
Form W-8 or documentary evidence re-
ceived by facsimile or scanned and fur-
nished by e-mail unless the withholding
agent knows that the person transmitting
the withholding certificate or documen-
tary evidence is not authorized to do so,
effective for payments made after March
6, 2014. This effective date prevents with-
holding agents from relying upon scanned
or faxed withholding certificates or docu-
mentary evidence pursuant to § 1.1441-
1T(e)(4)(iv)(C) of the 2014 temporary co-
ordination regulations for payments made
on or before March 6, 2014. As a result,
withholding agents must instead obtain
"hard copies" of the original form or doc-
ument in order to cure documentation
failures for such payments, to the extent
allowed under § 1.1441-1(b)(7)(ii). Com-
ments have suggested that the effective
date with respect to this provision be mod-
ified to allow withholding agents to rely
upon forms or documentary evidence re-
ceived by facsimile or scanned and sent
by e-mail after March 6, 2014, regardless
of when the payment was made. The Trea-
sury Department and the IRS agree that
requiring hard copies of original docu-
mentation to cure documentation failures
for payments made on or before March 6,
2014, but not for payments after that date,
provides minimal benefits compared to
the additional effort required for a with-
holding agent to obtain a hard copy of the
documentation. Accordingly, these final

regulations modify the effective date as it
relates to this provision so that it applies
to any open tax year. In addition, to cor-
respond to other changes, § 1.1441-
1T(e)(4)(iv)(C) of the 2014 temporary co-
ordination regulations is redesignated as
§ 1.1441-1(e)(4)(iv)(D) in these final reg-
ulations.

5\. Curing late documentation for claims
that income is effectively connected with
the conduct of a trade or business in the
United States

When a withholding agent fails to ob-
tain documentation and fails to withhold
at the time of payment, the withholding
agent is allowed, under certain circum-
stances, to obtain a valid withholding cer-
tificate (and other certifications, as re-
quired) to support a reduced rate of
withholding. A withholding agent may
obtain valid documentation after the date
of payment to establish that a reduced rate
of withholding was appropriate when it
meets the additional requirements under
§ 1.1441-1(b)(7)(ii) (as amended by the
2014 temporary coordination regulations).

The rules in § 1.1441-1T(b)(7)(ii) of
the 2014 temporary coordination regula-
tions establish when additional docu-
mentation is required and what the ad-
ditional documentation is required to
contain. These temporary regulations
add § 1.1441-1T(b)(7)(ii)(B) with re-
spect to late documentation for income
that is effectively connected with the
conduct of a trade or business in the
United States (effectively connected in-
come). Under this rule, the withholding
certificate (in this case, Form W-8ECI)
must be associated with a signed affida-
vit that states that the information and
representations contained on the certifi-
cate were accurate as of the time of the
payment and either (i) the beneficial
owner has included the income on its
U.S. income tax return for the taxable
year in which the income must be re-
ported, or (ii) the beneficial owner will
include the income on its U.S. income
tax return for the taxable year in which
the income must be reported and the due
date for filing the return (including any
applicable extensions) is after the date
on which the affidavit is signed.

This rule is added to ensure compli-
ance with the requirement that the bene-
ficial owner actually include the income
on its income tax return for the taxable
year in which the income is required to
be reported for U.S. tax purposes. Because
the exemption for withholding on effec-
tively connected income under section
1441(c)(1) applies only when the income
is included in the gross income of the
recipient, the Treasury Department and
the IRS have decided it is appropriate for
a withholding agent that receives a late
Form W-8ECI to obtain the aforemen-
tioned affidavit. A corresponding change
has been made to the temporary regula-
tions under chapter 4 that are being pub-
lished concurrently with these regulations
to address circumstances when a with-
holding agent may rely on a Form
W-8ECI provided after the date of a pay-
ment to claim that the payment is effec-
tively connected income (and thus is not a
withholdable payment under § 1.1473-
1(a)(5)(ii)).

### 6. Nonresident alien individuals and dual residents

A U.S. person is defined by reference
to section 7701(b). The definition of non-
resident alien individual in the chapter 3
regulations does not specify the exact cir-
cumstances under which a dual resident of
the United States and another jurisdiction
will be treated as a nonresident alien in-
dividual under an applicable income tax
treaty and § 301.7701(b)-7. These tempo-
rary regulations therefore clarify that an
individual will not be treated as a U.S.
person for a taxable year (or any portion
thereof) for which he or she is a dual
resident taxpayer who is treated as a non-
resident alien pursuant to § 301.7701(b)-7
for purposes of computing his or her U.S.
tax liability. A corresponding change has
also been made to the definition of a U.S.
person in the chapter 4 regulations that are
being published concurrently with these
regulations.

### 7. Hold mail instruction

The 2014 temporary coordination reg-
ulations provide that an address that is
provided subject to instructions to hold all
mail to that address is not considered a

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permanent residence address; the same
rule is provided in the 2013 final chapter 4
regulations. Comments have requested
that the definition of permanent residence
address be modified to treat an address
subject to a hold mail instruction as a
permanent residence address if additional
documentation is provided. The Treasury
Department and the IRS agree that a hold
mail instruction should not prevent per-
sons from being able to verify that they
have a permanent residence address by
providing appropriate additional docu-
mentary evidence that supports their resi-
dency in the foreign jurisdiction where
they are claiming to be resident. These
temporary regulations thus revise the def-
inition of "permanent residence address"
in § 1.1441-1T(c)(38) to add that an ad-
dress that is subject to a hold mail instruc-
tion can be relied upon as a permanent
residence address if the person provides
documentary evidence (as described in
§ 1.1441-1(c)(17)) establishing the per-
son's residence in the country where the
person is claiming to be resident. These
revisions also provide that if a hold mail
instruction is provided to a withholding
agent after the withholding certificate was
provided, this will be considered a change in
circumstances requiring that additional doc-
umentary evidence be obtained in order to
use the address on the withholding certifi-
cate as a permanent residence address.

## 8. Revisions to nonqualified intermediary withholding statement for U.S. payee pool

Under § 1.1441-1(e)(3)(iv), a withhold-
ing statement provided by a nonqualified
intermediary may include an allocation of a
payment to a chapter 4 withholding rate
pool of U.S. payees when the requirements
of that paragraph are satisfied, and a similar
allowance is provided for an FFI withhold-
ing statement provided by a nonqualified
intermediary in the case of a withholdable
payment for chapter 4 purposes. A chapter 4
withholding rate pool of U.S. payees is de-
fined as a pool of payees described in either
§ 1.1471-3(c)(3)(iii)(B)(2)(ii) or (iii) (with
§ 1.1471-3(c)(3)(iii)(B)(2)(ii), as revised in
the final chapter 4 regulations, being pub-
lished concurrently with these regulations).
See the preamble to the final chapter 4 reg-
ulations for background on this revision.
Payees described in § 1.1471-3(c)(3)(iii)

(B)(2)(ii) consist of account holders receiv-
ing payments not subject to withholding un-
der chapter 3 or 4 or under section 3406 that
are either (1) holders of non-consenting U.S.
accounts maintained by a reporting Model 2
FFI, or (2) holders of accounts with U.S.
indicia maintained by a reporting Model 1
FFI for which appropriate documentation
sufficient to treat the account holders as
other than U.S. persons has not been pro-
vided to the FFI. Payees described in
§ 1.1471-3(c)(3)(iii)(B)(2)(iii) consist of ac-
count holders of an FFI that is a non-U.S.
payor for chapter 61 purposes that are ac-
count holders not subject to withholding un-
der chapter 3 or chapter 4 or under section
3406 and that are also: (1) holders of U.S.
accounts that the FFI reports as U.S. ac-
counts pursuant to § 1.1471-4(d)(3) or (5)
for the year in which the payment is made,
(2) holders of U.S. accounts that the FFI
reports pursuant to the conditions of its ap-
plicable deemed-compliant status under
§ 1.1471-5(f)(1) for the year in which the
payment is made, or (3) holders of U.S.
accounts that a reporting Model 1 FFI re-
ports as reportable U.S. accounts pursuant to
an applicable Model 1 IGA, and which in-
cludes the U.S. taxpayer identification num-
bers (TINs) of such account holders, for the
year in which the payment is made. Al-
though an allocation of a payment to a
payee described in § 1.1471-3(c)(3)(iii)
(B)(2)(ii) (as revised in the final chapter 4
regulations being published concurrently
with these regulations) is not permitted for a
payment subject to chapter 3 withholding,
no such limitation applies under § 1.1471-
3(c)(3)(iii)(B)(2)(iii) for a payment that is
allocable to U.S. accounts (or reportable
U.S accounts) that are maintained by a non-
U.S. payor and subject to comprehensive
reporting (which includes the U.S. TINs of
such account holders) under FATCA or an
applicable IGA. As a result, these final
regulations add a requirement that a
withholding agent may not treat as valid
an allocation of a payment subject to
chapter 3 withholding to a withholding
rate pool of U.S. payees that a nonquali-
fied intermediary does not identify as
described in § 1.1471-3(c)(3)(iii)(B)
(2)(iii) (by citing to § 1.1471-3(c)(3)
(iii)(B)(2)(iii) or describing the payees
consistent with that paragraph). To al-
low withholding agents time to amend
their procedures for validating with-

holding statements provided by non-
qualified intermediaries, this require-
ment applies only to payments made on
or after April 1, 2018.

### 9. Alternative withholding statement of a nonqualified intermediary

Section 1.1441-1T(e)(3)(iv)(C) of the
2014 temporary coordination regulations
prescribes the information required to be
included on a withholding statement pro-
vided by a nonqualified intermediary
(NQI), such as the name, address, TIN (if
any), and type of documentation received
by the NQI for each payee. Comments
have requested that NQIs be permitted to
provide, and withholding agents be per-
mitted to rely on, simplified withholding
statements that do not include all of the
information specified in § 1.1441-1T(e)
(3)(iv)(C) of the 2014 temporary coordi-
nation regulations. These comments noted
that withholding agents are required to
independently verify the information pro-
vided on the NQI withholding statement
by reviewing and validating the beneficial
owner withholding certificates that ac-
company the NQI's Form W-8IMY. Ac-
cordingly, the comments requested that
withholding agents not be required to in-
validate a withholding statement that does
not provide all of the information speci-
fied in § 1.1441-1T(e)(3)(iv)(C) of the
2014 temporary coordination regulations
when that information can be found on the
beneficial owner withholding certificate.
The Treasury Department and the IRS
agree with this recommendation, and
these temporary regulations add § 1.1441-
1T(e)(3)(iv)(C)(3) to provide a new rule
allowing a withholding agent to rely on an
alternative withholding statement re-
ceived from an NQI to the extent that the
NQI provides the withholding agent with
beneficial owner withholding certificates
(and not only with documentary evi-
dence). The alternative withholding state-
ment is not required to include informa-
tion that is also included on the
withholding certificates and is not re-
quired to specify the rate of withholding
applicable to each payee, as long as the
withholding agent can determine the ap-
propriate rate from the information on the
withholding certificates. Additional re-
quirements include that the alternative

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withholding statement contain any other
information the withholding agent reason-
ably requests in order to fulfill its obliga-
tions under chapters 3, 4, and 61, and
section 3406, and that the NQI certify that
none of the information on the beneficial
owner withholding certificates is inconsis-
tent with information in the NQI's files.
For example, under this alternative with-
holding statement rule, if a withholding
agent is making a payment to a foreign
partnership (that is not a withholding for-
eign partnership) and has partners who are
all foreign individuals, the withholding
agent can choose to accept a Form
W-8IMY from the foreign partnership
that is associated with Forms W-8BEN
from all of its partners. The foreign part-
nership would provide the withholding
agent with, in addition to its Form
W-8IMY and the Forms W-8BEN, a
withholding statement indicating the ap-
propriate allocation among the partners
and a representation that none of the in-
formation on the Forms W-8BEN is in-
consistent with what the foreign partner-
ship has in its files. However, if, for
example, the foreign partnership has in-
formation in its files for one of the foreign
partners such that it would be unable to
rely on the withholding certificate under
the rules of § 1.1441-7, the foreign part-
nership would not be able to provide the
representation, and the withholding agent
would not be allowed to rely on an alter-
native withholding statement.

### 10. Indefinite validity of documentation

Section 1.1441-1T(e)(4)(ii)(B)(1) of
the 2014 temporary coordination regula-
tions requires that documentary evidence
be provided at the same time as a with-
holding certificate provided by an individ-
ual to support a claim of foreign status in
order for the withholding certificate to re-
main valid indefinitely. Commenters have
noted that documentary evidence and
withholding certificates are often not pro-
vided at the same time, and therefore the
rule should be more flexible regarding the
timing of when these documents must be
obtained. The Treasury Department and
the IRS agree that the meaning of "pro-
vided together" should be clarified. These
final regulations specify that "provided to-
gether" means that a withholding certifi-

cate and the documentary evidence must
be received within 30 days of one another,
regardless of which is received first. The
Treasury Department and the IRS do not
believe it is appropriate to allow the doc-
umentary evidence to be provided at any
point before the expiration of the with-
holding certificate because of the risk of
changes in an individual's status or resi-
dency over a three-year period. In addi-
tion, account opening procedures are gen-
erally performed within a 30-day period.
See § 1.1441-7(b)(2). Corresponding
changes have also been made to the chap-
ter 4 regulations that are being published
concurrently with these regulations.

In addition, § 1.1441-1T(e)(4)(ii)(B)
(2) of the 2014 temporary coordination
regulations provides that a withholding
certificate (other than the portion relating
to a claim for treaty benefits) described in
§ 1.1471-3(c)(6)(ii)(C)(2) and documen-
tary evidence provided by an entity sup-
porting the entity's claim of foreign status
are valid indefinitely if they are provided
together. Similar to comments on with-
holding certificates provided by individu-
als, comments on withholding certificates
provided by entities noted challenges with
respect to the "provided together" require-
ment. In response to these comments, the
final regulations remove the phrase "pro-
vided together" and instead provide that a
withholding certificate provided by an en-
tity (that is, a Form W-8BEN-E) (other
than the portion relating to a claim
for treaty benefits) accompanied by docu-
mentary evidence will be valid indefi-
nitely if the withholding agent receives
both before either the withholding certif-
icate or the documentary evidence would
otherwise expire (even if the withholding
certificate and documentary evidence are
not provided simultaneously). The Trea-
sury Department and the IRS believe it is
appropriate to have different standards for
documentation received from individuals
and entities in this respect because it is
less common for entities to change their
statuses within a three-year period. In ad-
dition, comments noted that the applica-
bility of this rule in the 2014 temporary
coordination regulations, limited to the
withholding certificates described in
§ 1.1471-3(c)(6)(ii)(C)(2), is too narrow.
The Treasury Department and the IRS
agree; accordingly, these final regulations

remove the cross-reference to § 1.1471-
3(c)(6)(ii)(B). However, these final regu-
lations cross-reference the indefinite va-
lidity rules in § 1.1471-3(c)(6)(ii) that
apply for chapter 4 purposes.

#### 11. Treaty statements provided with documentary evidence

Under the chapter 3 regulations, a
withholding agent may apply a reduced
rate of withholding under section 1441,
1442, or 1443 on a payment to a foreign
entity in certain cases under the terms of
an income tax treaty if the person repre-
sents that the payment is treated as de-
rived by a resident of the applicable treaty
jurisdiction and all of the other require-
ments for benefits under the applicable
treaty are satisfied. A withholding certifi-
cate provided by an entity that is claiming
reduced withholding under an income tax
treaty must contain a statement that the
treaty claimant meets the limitation on
benefits requirement, if any, under the
treaty. Because entitlement to a reduced
rate of withholding under a treaty is con-
ditioned on the beneficial owner satisfying
limitation on benefits provisions, the re-
quirement for a beneficial owner to pro-
vide a treaty statement helps ensure that
beneficial owners understand the relevant
treaty provisions and qualify for the
claims they are making. Under the chapter
3 regulations, a treaty statement provided
on a Form W-8BEN-E expires on the last
day of the third calendar year following
the date the form was signed, but a treaty
statement provided with documentary ev-
idence remains valid indefinitely (unlike
the documentary evidence itself in most
cases). In order to enhance the reliability
and increase the accuracy of the claims, to
help assure that information is updated
when ownership thresholds or activity re-
quirements in a particular treaty have
changed, and to have a consistent validity
period regardless of how a treaty state-
ment is provided, these temporary regula-
tions provide that a treaty statement re-
garding limitation on benefits that is
associated with documentary evidence
will remain valid until the last day of the
third calendar year following the year in
which the statement is provided to the
withholding agent. For existing accounts
that were documented with documentary

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evidence before the date of publication of
these temporary regulations, the treaty
statements will expire on January 1, 2019.

### 12. Electronic system for Form 8233

Section 1.1441-1T(e)(4)(iv)(A) of the
2014 temporary coordination regulations
allows a withholding agent to establish an
electronic system to collect Forms W-8
(or any other form as the IRS may pre-
scribe) from a beneficial owner or payee.
Comments requested that withholding
agents be allowed to establish such an
electronic system for collecting Forms
8233, "Exemption from Withholding on
Compensation for Independent (and Cer-
tain Dependent) Personal Services of a
Nonresident Alien Individual." The Trea-
sury Department and the IRS accept this
request and have added § 1.1441-1T(e)
(4)(iv)(C) to provide the requirements for
the system.

### 13. Electronic signatures

Comments requested that the regula-
tions be amended to allow a withholding
agent to accept a Form W-8 with an elec-
tronic signature when the withholding
agent has not developed and maintained
an electronic collection system described
in § 1.1441-1(e)(4)(iv)(B). The Treasury
Department and the IRS have determined
that valid electronically signed withhold-
ing certificates may be accepted by a with-
holding agent if the withholding certifi-
cates reasonably demonstrate to the
withholding agent that they have been
electronically signed by the recipient
identified on the form or a person autho-
rized by the recipient to sign the form (by,
for example, a signature block that in-
cludes a time and date stamp and a state-
ment that the certificate has been electron-
ically signed and the name of the person
authorized to sign the form). If the with-
holding certificate contains only a typed
name in the signature line and no other
information regarding the method of signa-
ture, a withholding agent cannot treat the
withholding certificate as validly signed.
These temporary regulations reflect this
change. A coordinating change is also being
made to the chapter 4 regulations.

14\. Authentication of forms and
documentary evidence received by
facsimile or e-mail

Comments requested more detailed
guidance on how a withholding agent
could authenticate and verify a form or
documentary evidence received by fac-
simile or e-mail, for example by obtaining
an authorization letter from the person
who signed the form. The Treasury De-
partment and the IRS have not provided
prescriptive guidance on the procedures
that must be used for this purpose, in part
because the standard under § 1.1441-
1(e)(4)(iv)(D) (§ 1.1441-1T(e)(4)(iv)(C)
of the 2014 temporary coordination regu-
lations) for a withholding agent with re-
spect to whether a form was provided by
someone authorized to provide the form is
an actual knowledge standard (that is, the
withholding agent must not have actual
knowledge that the form was transmitted
by a person not authorized to do so by the
person required to execute the form). The
Treasury Department and the IRS believe
that the current regulations offer sufficient
flexibility for withholding agents to de-
velop the necessary procedures for au-
thenticating and verifying that the form
was transmitted to the withholding agent
by a person who was authorized to do so
without the need for further guidance.

15\. Withholding certificates and
documentary evidence furnished through
a third party repository

Comments have requested clarification
of guidance provided in the Frequently
Asked Questions (FAQ) on the IRS web-
site (see https://www.irs.gov/businesses/
corporations/frequently-asked-questions-
faqs-fatca-compliance-legal) regarding
when withholding agents may rely on
withholding certificates obtained from
third-party repositories; specifically,
clarification was requested that the prin-
ciples for the appropriate use of a third-
party repository outlined in the FAQ
would extend to all Forms W-8. The
Treasury Department and the IRS have
included in these temporary regulations
guidance regarding the circumstances
under which a Form W-8 (and, in cer-
tain circumstances where applicable, a
withholding statement) maintained by a
third-party repository will be considered

furnished to the withholding agent by
the person whose name is on the certif-
icate. See § 1.1441-1T(e)(4)(iv)(E).

### 16. Reliance on prior versions of withholding certificates

The 2014 temporary coordination reg-
ulations allow a withholding agent to con-
tinue to accept the prior version of a with-
holding certificate that has been revised
for a period of six months after the date of
release of the revised withholding certifi-
cate. Comments noted that this period
may be difficult for withholding agents to
comply with, depending on when the re-
vised version of the form is released and
how extensive the revisions are. Com-
ments also noted challenges in coordinat-
ing this requirement with the renewal re-
quirements for withholding certificates,
which expire as of the end of a calendar
year. The Treasury Department and the
IRS agree that it is appropriate to extend
the period during which prior versions of
withholding certificates may be used be-
yond six months. These final regulations
provide that withholding agents generally
may use prior versions of withholding cer-
tificates until the later of six months after
the date of issuance of the most recent
revision to the withholding certificate, or
the end of the calendar year during which
the revised version was issued. However,
in certain circumstances, such as when a
new status must be established on the
withholding certificate because of a new
requirement in the regulations, the Trea-
sury Department and the IRS may desig-
nate a shorter transition period.

### 17. Revisions related to qualified intermediaries

On July 1, 2016, in Notice 2016-42,
2016-29 I.R.B. 67, the Treasury Depart-
ment and the IRS released the proposed
Qualified Intermediary (QI) agreement
(the Proposed QI Agreement), which,
once finalized, would be effective on or
after January 1, 2017. In response to com-
ments received following the publication
of the QI agreement (the 2014 QI Agree-
ment) in 2014 in Rev. Proc. 2014-39,
2014-29 I.R.B. 150, the Proposed QI
Agreement provided more detailed com-
pliance and review procedures for QIs,

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requirements applicable to qualified deriv-
atives dealers, and other revisions and cor-
rections. These temporary and final regu-
lations include several revisions that align
with the Proposed QI Agreement. These
final regulations clarify the rule already
provided in the 2014 temporary coordina-
tion regulations that when a QI is a par-
ticipating FFI or a registered deemed-
compliant FFI for purposes of chapter 4, it
may represent that it assumes chapter 61
reporting responsibilities (and reports ac-
cordingly) when it reports its U.S. ac-
counts in accordance with the coordina-
tion rules of § 1.6049-4(c)(4). These
regulations also clarify that, in certain
cases, for purposes of the alternative pro-
cedures for allocating payments to U.S.
non-exempt recipients on withholding
statements described in the QI agreement,
QIs may, as provided in the QI agreement,
include a chapter 4 withholding rate pool
of U.S. payees in the same zero-rate pool
as foreign persons that are exempt from
chapter 3 withholding.

Section 1.1441-1T(e)(5)(ii) of the
2014 temporary coordination regulations
lists the types of entities that are eligible
to enter into QI agreements, including
foreign corporations that are presenting
claims of treaty benefits on behalf of their
shareholders. In Notice 2016-42, the
Treasury Department and the IRS re-
quested comments on the situations where
a foreign corporation (other than a reverse
hybrid entity) would be seeking to act as a
QI on behalf of its shareholders, and ques-
tioned why the withholding foreign partner-
ship agreement does not accommodate such
situations. No comments were received in
response to this request. As a result, and
because § 1.1441-1(e)(5)(ii)(D) provides
that "any person acceptable to the IRS" may
be eligible to be a QI, these final regulations
remove from the list of prospective QIs the
specific category of foreign corporations
presenting treaty benefit claims on behalf of
their shareholders.

18\. Requirement for a withholding agent
to collect foreign taxpayer identification
number (foreign TIN)

Form W-8BEN and the instructions to
the form describe circumstances under
which a foreign person is required to pro-
vide a foreign TIN or date of birth on the

form. Similarly, Form 1042-S and the in-
structions to the form outline circum-
stances under which a withholding agent
is required to report such information.
These temporary regulations provide that,
starting January 1, 2017, for an account
maintained at a U.S. office or branch of a
withholding agent that is a financial insti-
tution, the withholding agent will be re-
quired to collect the account holder's for-
eign TIN, and, in the case of an individual
account holder, the account holder's date
of birth, on a withholding certificate. A
withholding certificate that does not con-
tain a date of birth but is otherwise valid
will not be invalid if the withholding
agent has such information in its files. For
withholding certificates associated with
payments made on or after January 1,
2018, a foreign person that does not have
a foreign TIN must provide a reasonable
explanation as to the lack of a foreign TIN
(for example, that the country of residence
does not provide TINs).

B. Changes to § 1.1441-2 - Amounts
Subject to Withholding - Withholding on
United States Source Gross
Transportation Income

Under section 887(a), gross income de-
rived by a nonresident individual or for-
eign corporation that constitutes United
States source gross transportation income
(USSGTI) is subject to a four-percent tax,
and is not subject to tax under section 871,
881, or 882. For these purposes, USSGTI
consists of income derived from, or in
connection with, (1) the use (or hiring or
leasing for use) of a vessel or aircraft or
(2) the performance of services directly
related to the use of a vessel or aircraft,
to the extent the income is treated as
derived from U.S. sources under section
863(c)(2). USSGTI does not include
such income, however, if it is effec-
tively connected with the trade or busi-
ness in the United States of a nonresi-
dent alien or foreign corporation, within
the meaning of section 887(b)(4), nor
does it include income taxable in a pos-
session of the United States under the
provisions of the Code as made applica-
ble in such possession. Items of income
that are not USSGTI, as defined in sec-
tion 887(b), are not affected by the
change to the regulations described in

this section, and the normal income tax
rules apply.

Under sections 1441 and 1442, items
of gross income from U.S. sources paid to
nonresident individuals and foreign cor-
porations may be subject to withholding at
a 30-percent rate if such items are
"amounts subject to withholding" within
the meaning of § 1.1441-2. In general,
under § 1.1441-2(a), the term "amounts
subject to withholding" is broadly defined
to include amounts from sources within
the United States that constitute fixed or
determinable annual or periodical income,
which in turn is defined to include all
income included in gross income under
section 61 subject to certain exceptions.
Given the broad definition of "amounts
subject to withholding" and the lack of a
specific exception for USSGTI, taxpayers
have questioned whether amounts paid
that constitute USSGTI are subject to
withholding under section 1441 or 1442 at
a 30-percent rate, notwithstanding that,
under section 887(a), a four-percent tax is
imposed on a nonresident alien individual
or foreign corporation's USSGTI for the
taxable year.

Because USSGTI is not subject to sec-
tion 871 or 881 gross basis tax if section
887(a) applies, it is not an amount subject
to withholding under section 1441 or
1442. The temporary regulations clarify
this result under § 1.1441-2T(a)(8) by
providing that amounts subject to with-
holding under section 1441 or 1442 do not
include gross income of a nonresident
alien or foreign corporation that is taxable
under section 887(a) at four percent. Com-
ments are requested regarding documen-
tation requirements for applying this ex-
ception.

C. Comments and Changes to § 1.1441-
3 - Determination of Amounts to be
Withheld- Coordination with
Withholding under Section 1445 as
Amended by the PATH Act

The regulations in § 1.1441-3 in-
clude rules for coordinating with section
1445 in the case of distributions from
qualified investment entities and United
States real property holding companies.
Section 1445(a) generally imposes a
withholding tax obligation on the trans-
feree when a foreign person disposes of

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a United States real property interest.
Before the enactment of the Protecting
Americans from Tax Hikes Act of 2015
(PATH Act), enacted as Division Q of
the Consolidated Appropriations Act,
2016, Public Law 114-113, 129 Stat.
2422, the withholding rate under the rel-
evant provisions of section 1445 was 10
percent of either the amount realized or
the fair market value of the interest, as
applicable. The PATH Act generally in-
creased the withholding rate under sec-
tion 1445 from 10 percent to 15 percent
for dispositions occurring after February
16, 2016 (with certain exceptions for
acquisitions of residences). These final
regulations incorporate the PATH Act's
rate change for these dispositions when
referenced in § 1.1441-3.

D. Comments and Changes to § 1.1441-
4 - Exemptions from Withholding for
Certain Effectively Connected Income
and Other Amounts - Form 8233 TIN
requirement

Compensation for personal services
paid to a nonresident alien individual is
not subject to withholding under section
1441 if the compensation is effectively
connected with the conduct of a trade or
business in the United States and is ex-
empt from U.S. federal income tax under
an income tax treaty. In order for a non-
resident alien individual to claim treaty
benefits for reduced withholding, the
chapter 3 regulations require that he or she
provide a Form 8233 that includes a TIN
or proof that an application for a TIN has
been filed. Comments requested that indi-
viduals in these circumstances be exempt
from the requirement to include a TIN on
the Form 8233. The Treasury Department
and the IRS decline to accept this request
because these individuals also generally
have an obligation to file a Form 1040NR
to claim the exemption from tax provided
by the income tax treaty and must have a
TIN to file the Form 1040NR. The re-
quirement that the TIN (or proof of appli-
cation for a TIN) also be provided on the
Form 8233 therefore does not place an
additional burden on these individuals and
helps ensure appropriate treaty benefits
are provided.

E. Comments and Changes to § 1.1441-
6 - Claim of Reduced Withholding
under an Income Tax Treaty

### 1. Form W-8BEN-E and limitation on benefits requirements

In April 2016, the IRS released a re-
vised Form W-8BEN-E, "Certification of
Status of Beneficial Owner for United
States Tax Withholding and Reporting
(Entities)," and revised instructions,
which require an entity claiming treaty
benefits to identify the specific type of
limitation on benefits provision that the
entity meets to be eligible to claim bene-
fits under the treaty (for example, the pub-
licly traded test or the stock ownership
and base erosion test, the active trade or
business test, etc.). These temporary
regulations modify the chapter 3 regula-
tions, consistent with the revised Form
W-8BEN-E and instructions, to require
that a limitation on benefits statement on
Form W-8BEN-E identify the specific
limitation on benefits provision on which
the taxpayer is relying to claim treaty ben-
efits. This revision to the form and the
chapter 3 regulations will further improve
the compliance of treaty claimants with
the specific requirements of the applicable
limitation on benefits provisions in the
treaty pursuant to which they seek at-
source relief from chapter 3 withholding.

Comments requested that more guid-
ance be provided on when a payee's
limitation on benefits claim is unreliable
or incorrect. Accordingly, these tempo-
rary regulations provide that a withhold-
ing agent may rely on a valid Form
W-8BEN-E that includes limitation on
benefits information unless it has actual
knowledge that the information pro-
vided with respect to the limitation on
benefits is unreliable or incorrect. With-
holding agents are generally expected to
report this information beginning in
2018.

Under the chapter 3 regulations, a
withholding agent may, in certain circum-
stances, use documentary evidence to doc-
ument a payee and reduce the rate of
withholding if the withholding agent ob-
tains a treaty statement that the payee
meets the limitation on benefits provision
contained in the applicable income tax
treaty. These temporary regulations pro-

vide, consistent with the requirements for
withholding certificates, that the treaty
statement associated with documentary
evidence to support a treaty claim must
also identify the specific limitation on
benefits provision on which the entity re-
lies to claim benefits under the applicable
income tax treaty.

### 2. Reason to know that a treaty is in force

More generally, these temporary reg-
ulations also clarify a withholding
agent's responsibility with respect to
claims of benefits under an income tax
treaty, whether they are made by an
individual or an entity. By way of ex-
ample, these temporary regulations pro-
vide that if the income tax treaty that the
treaty claimant references on the form
does not exist or is not in force (which a
withholding agent can determine by
consulting the list of jurisdictions with
which the United States has an income
tax treaty in force maintained on the IRS
website, or the State Department's Trea-
ties in Force publication), a withholding
agent will have reason to know that the
information provided on the Form
W-8BEN-E is incorrect and the form is
therefore not valid for purposes of
claiming treaty benefits.

F. Comments and Changes to § 1.1441-
7 - General Provisions Relating to
Withholding Agents

#### 1. Curing of U.S. indicia

Under § 1.1441-7(b), a withholding
agent must withhold at the full 30-percent
rate if it has actual knowledge or reason to
know that a payee's claim of U.S. status
or of entitlement to a reduced rate of with-
holding is unreliable or incorrect. Com-
ments requested that a withholding agent
should be able to presume that an undoc-
umented entity payee is a foreign person if
the withholding agent has on file for the
payee a GIIN and confirms that the pay-
ee's name and GIIN appear on the IRS
FFI list. These comments noted that under
§ 1.1471-3(e)(4)(ii)(B), for chapter 4 pur-
poses, a withholding agent can reliably
associate a withholding certificate with
a payment to a participating FFI, a reg-
istered deemed-compliant FFI, a spon-

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soring entity, or a sponsored FFI with-
out applying the rules of § 1.1441-
7(b)(5) (relating to when a withholding
agent has reason to know that a with-
holding certificate is unreliable or incor-
rect due to the presence of U.S. indicia)
if the withholding agent has confirmed
the entity's GIIN on the current pub-
lished FFI list. The Treasury Depart-
ment and the IRS have declined to adopt
this suggestion. Because U.S. entities
can obtain GIINs, and if they do so,
their names would appear on the IRS
FFI list (as is the case for U.S. entities
that are sponsoring entities, for exam-
ple), it is not appropriate to allow a
GIIN to cure U.S. indicia for purposes
of chapter 3.

### 2. Modification of applicability date for revised standards of knowledge as previewed in Notice 2014-33

The 2014 temporary coordination reg-
ulations revised the standards of knowl-
edge regarding additional U.S. indicia that
will cause a withholding agent to have
reason to know that a payee's claim of
foreign status is unreliable or incorrect for
purposes of chapter 3 or 61 to coordinate
with the standards of knowledge that ap-
ply for purposes of chapter 4. These re-
vised standards of knowledge generally
do not require a withholding agent to take
the additional U.S. indicia into account for
a preexisting obligation of a direct ac-
count holder if the foreign status of the
account holder was documented by the
withholding agent for purposes of chapter
3 or chapter 61 before July 1, 2014. On
May 19, 2014, Treasury and the IRS pub-
lished Notice 2014-33, 2014-21 I.R.B.
1033, which, among other things, gener-
ally allowed a withholding agent or FFI to
treat an obligation held by an entity that
was issued, opened, or executed on or
after July 1, 2014, and before January 1,
2015, as a preexisting obligation de-
scribed in §§ 1.1471-2(a)(4)(ii), 1.1472-
1(b)(2), and 1.1471-4(c)(3). Following
the publication of Notice 2014-33, com-
ments noted that, while the modifications
made to § 1.1441-7(b) addressed the ap-
plication of the revised reason to know
standards for obligations that were docu-
mented by a withholding agent before
July 1, 2014, Notice 2014-33 did not

address how the standards would apply to
entity accounts opened on or after July 1,
2014, and before January 1, 2015, that are
treated as preexisting obligations by with-
holding agents and participating FFIs for
purposes of chapter 4, pursuant to Notice
2014-33. These comments requested that
a similar modified applicability date be
added to § 1.1441-7(b) to allow withhold-
ing agents to treat an entity account
opened during the transition period be-
tween July 1, 2014, and January 1, 2015
as a preexisting entity account for pur-
poses of the standards of knowledge ap-
plicable to accounts under chapters 3 and
61. Accordingly, these final regulations
allow withholding agents 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 Jan-
uary 1, 2015. In addition, these final reg-
ulations provide that, with respect to an
obligation held by an entity, a withhold-
ing agent will not be required to treat the
existence of the additional U.S. indicia
specified in § 1.1441-7(b) as giving rise
to a change in circumstances under
§ 1.1441-1(e)(4)(ii)(D) before January
1, 2015. These changes to the chapter 3
regulations were previewed in Notice
2014-59, 2014-44 I.R.B. 747.

### 3. Indicia of U.S. status on Form W- 8ECI

The 2014 temporary coordination reg-
ulations describe the U.S. indicia that will
cause a withholding agent to have reason
to know that a withholding certificate is
unreliable or incorrect for purposes of es-
tablishing the account holder's status as a
foreign person. Comments have noted that
foreign persons that have a trade or busi-
ness in the United States are likely to have
U.S. indicia; therefore, the existence of
U.S. indicia on a Form W-8ECI should
not cause the withholding agent to have
reason to know that the Form W-8ECI is
unreliable or incorrect. The Treasury De-
partment and the IRS agree. These final
regulations reflect this change by provid-
ing that the existence of U.S. indicia on a
Form W-8ECI will not cause a withhold-
ing agent to have reason to know that the
form is unreliable or incorrect for pur-

poses of establishing the account holder's
status as a foreign person.

4\. Reason to know-specific standards of
knowledge applicable to documentation
received from intermediaries and flow-
through entities

The chapter 3 regulations permit a
withholding agent to accept a Form W-8
(or a substitute Form W-8) electronically
through a system established by the with-
holding agent that meets the requirements
described in § 1.1441-1(e)(3)(iv)(B). An-
nouncement 98-27, 1998-1 C.B. 865,
and Announcement 2001-91, 2001-2
C.B. 221, provide similar requirements for
an electronic system established by a
withholding agent to receive a Form W-9.
Comments requested that specific guid-
ance be given to clarify that a withholding
agent is allowed to rely on documentation
provided to it by an intermediary or flow-
through entity that has established an elec-
tronic system to collect documentation
from a payee. The primary concern raised
in these comments was how a withholding
agent was supposed to validate, and
whether a withholding agent could rely
on, a signature on a beneficial owner with-
holding certificate received through an
electronic system. In Notice 2016-08,
2016-6 I.R.B 304, the Treasury Depart-
ment and the IRS announced an intent to
modify the standards of knowledge under
§§ 1.1441-7(b)(10) and 1.1471-3(e)(4)
(vi)(A)(2) to allow a withholding agent to
rely on a withholding certificate collected
through an electronic system maintained
by a nonqualified intermediary, nonwith-
holding foreign partnership, or nonwith-
holding foreign trust. However, in light of
the new provisions in § 1.1441-1T(e)
(4)(i)(B) describing when withholding
agents may accept withholding certificates
signed electronically, the Treasury De-
partment and the IRS have determined
that it is not necessary to modify the stan-
dards of knowledge for payments to inter-
mediary and flow-through entities as pre-
viewed in Notice 2016-08.

### 5. Authorized agents and Form 8655

Under the 2014 temporary coordina-
tion regulations, a withholding agent must
file Form 8655, "Reporting Agent Autho-

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rization," with the IRS if it appoints an
agent to act as its reporting agent for filing
Form 1042, "Annual Withholding Tax
Return for U.S. Source Income of Foreign
Persons," or making tax deposits and pay-
ments with respect to Form 1042. A com-
ment suggested that a Form 8655 should
be required to be filed only when an agent
files a Form 1042 in its own name (and
under its own EIN) on behalf of one or
more other withholding agents. In re-
sponse to the comment, these final regu-
lations amend the 2014 temporary coordi-
nation regulations to provide that a
withholding agent must file a Form 8655
only when its agent files a Form 1042 as
the filer on behalf of one or more other
withholding agents. This revision is also
included in temporary regulations under
chapter 4 that are being published concur-
rently with these temporary and final reg-
ulations.

### G. Comments and Changes to § 1.1461- 1 - Payment and Returns of Tax Withheld

#### 1. Electronic furnishing of Form 1042-S

The chapter 3 regulations generally
require withholding agents to file an in-
formation return on Form 1042-S to re-
port the amounts subject to reporting
that were paid during the preceding cal-
endar year and to provide a copy of the
form to the recipient of the payment, on
or before March 15 of the calendar year
following the payment. The withholding
agent must retain a copy of each Form
1042-S for the period corresponding to
the statute of limitations on assessment
and collection applicable to the Form
1042 to which the Form 1042-S relates.
The Treasury Department and the IRS
have determined that it is appropriate to
allow withholding agents to furnish the
recipient copy of the Form 1042-S elec-
tronically under the same conditions ap-
plicable to furnishers of recipient copies
of other forms (for example, Form W-2,
Form 1099-K), and for this reason,
these final regulations include a cross-
reference to the requirements under
§ 1.6050W-2 for certain information
statements that are furnished electroni-
cally. Statements can be furnished elec-
tronically beginning in calendar year

2017 for payments made in calendar
year 2016 that are reportable on Form
1042-S.

2\. Provision of foreign TINs on recipient
copies of Form 1042-S

The Form 1042-S requires, among
other information, the foreign TIN of a
recipient if (A) the recipient is claiming a
reduced rate of, or exemption from, tax
under a tax treaty, the person did not pro-
vide a U.S. TIN, and the income is not the
type of income for which an exemption
from the U.S. TIN requirement applies;
(B) the recipient receives a payment made
with respect to an obligation maintained at
a U.S. office or branch of the withholding
agent, the withholding agent is a financial
institution, and the foreign TIN is avail-
able in the withholding agent's electroni-
cally searchable information; or (C) the
withholding agent is required to collect
the foreign TIN on the Form W-8. Com-
ments have requested that the form in-
structions or the chapter 3 regulations be
modified to allow a foreign TIN to be
truncated on the recipient copy of the
Form 1042-S consistent with the trunca-
tion of U.S. TINs on the Form 1042-S.
The Treasury Department and the IRS
agree with these comments and will mod-
ify the Form 1042-S instructions accord-
ingly.

H. Comments and Changes to § 1.6041-
4 - Foreign-Related Items and Other
Exceptions - Definition of "Paid and
Received Outside the United States"

Under § 1.6041-4, returns of informa-
tion are not required for payments of cer-
tain amounts from sources outside the
United States that are paid by a non-U.S.
payor or a non-U.S. middleman and that
are paid and received outside the United
States. Section 1.6049-4(f)(16) describes
the circumstances under which a payment
is considered "paid and received outside
the United States" (and is therefore not a
reportable payment). Comments have
suggested that the definition of "paid and
received outside the United States" be
limited to allow a broader range of pay-
ments to be treated as reportable pay-
ments, such as payments for services per-
formed outside the United States. The
Treasury Department and the IRS con-

tinue to consider this issue but have not
incorporated this suggestion into these
temporary and final regulations.

I. Comments and Changes to § 1.6042-2
and § 1.6045-1 - Returns of
Information as to Dividends Paid and
Brokers and Barter Exchanges -
Extended Period of Validity for PFIC
Statements

Under § 1.6042-2, every person who
makes a payment of dividends to any
other person during a calendar year must
file an information return (that is, Form
1099) that contains the aggregate amount
of the dividends, identifying information
about the payee, the amount of tax de-
ducted and withheld under section 3406,
and such other information as the form
requires. The 2014 temporary coordina-
tion regulations provide an exception to
this filing requirement for payments made
by a paying agent on behalf of a passive
foreign investment company (PFIC), as
defined in section 1297(a), with respect to
a shareholder in the PFIC if, among other
things, the paying agent obtains from the
corporation a written certification signed
by an officer of the corporation that states
that the corporation is described in section
1297(a) for each calendar year during
which the exception is to be applied, and
the paying agent has no reason to know
that the written certification is unreliable
or incorrect. The paying agent must also
identify, before payment, that the PFIC is
a participating FFI or a reporting Model 1
FFI, and must obtain annually a written
certification from the PFIC representing
that it will report payments made by the
paying agent pursuant to its reporting ob-
ligations under chapter 4 or under an
applicable intergovernmental agreement
(IGA).

Comments have requested that, rather
than obtaining an annual certification that
is signed by an officer of the corporation,
the paying agent should be able to rely on
a single written certification of PFIC sta-
tus until there is a change in circum-
stances or the paying agent knows or has
reason to know that the certification is
unreliable or incorrect, and that such cer-
tification can be signed by any person that
has the authority to sign the certification
on behalf of the corporation. The Treasury
Department and the IRS decline to accept

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the request for a single written certifica-
tion of PFIC status at this time because the
annual certification requirement does not
appear to present a significant compliance
burden and helps assure that the paying
agent is meeting its due diligence stan-
dards. However, the request that the cer-
tification be signed by any person that has
the authority to sign the certification on
behalf of the corporation has been ac-
cepted. A similar change has been made in
§ 1.6045-1(c)(3)(xiv)(A).

J. Comments and Changes to § 1.6049-
5 - Interest and Original Discount
Subject to Reporting After December 31,
1982

#### 1. Modification of applicability date for use of documentary evidence with respect to an offshore obligation

The regulations under § 1.6049-
5(c)(1) provide guidance on a payor's
use of documentary evidence to estab-
lish a payee's foreign status for certain
amounts paid outside the United States
(as determined under § 1.6049-5(e))
with respect to an offshore obligation.
The 2014 temporary coordination regu-
lations included a series of modifica-
tions, made in coordination with modi-
fications to regulations under chapter 4,
to the conditions under which a with-
holding 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, and also
provided guidance on when an amount is
considered paid outside the United States.
The 2014 temporary coordination regula-
tions under § 1.6049-5T(c)(1) apply to pay-
ments made on or after July 1, 2014, except
for certain payments made with respect to
preexisting obligations, as described in
§ 1.1441-7(b)(3)(ii).

In response to requests to allow payors
additional time to modify their systems to
implement the revised requirements of
§ 1.6049-5(c)(1), these final regulations
allow a payor to continue to use, for ac-
counts opened on or after July 1, 2014,
and before January 1, 2015, the rules re-
garding 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 obli-
gations under § 1.6049-5T(c)(1) and
(c)(4) of the 2014 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) (for documentary evi-
dence used to support a treaty claim) 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.
These modifications to the 2014 tempo-
rary coordination regulations were pre-
viewed in Notice 2014-59.

### 2. Presumption rules for bank deposit interest

These regulations also include a
change to the presumption rule for U.S.
source bank deposit interest in § 1.6049-
5(d)(3)(iii)(A). This presumption rule was
inadvertently removed in the 2014 tempo-
rary coordination regulations and the 2014
QI Agreement, and it was corrected in the
Proposed QI Agreement. It is expected to
apply only in cases in which chapter 4
withholding does not apply.

### K. Minor and Non-substantive Clarifications and Corrections

These final regulations also include
various non-substantive clarifications and
corrections to the 2014 temporary coordi-
nation regulations, including corrections
of erroneous cross-references. For exam-
ple, these final regulations clarify in
§ 1.1441-5(c)(2)(iii) that a withholding
foreign partnership is required to assume
primary withholding responsibility under
chapters 3 and 4 to the extent required by
the withholding foreign partnership agree-
ment.

#### Special Analyses

Certain IRS regulations, including
these, are exempt from the requirements
of Executive Order 12866, as supple-
mented and reaffirmed by Executive Or-
der 13653. Therefore, a regulatory assess-
ment is not required.

For the applicability of the Regulatory
Flexibility Act (5 U.S.C. chapter 6), refer
to the cross-referenced notice of proposed
rulemaking published in the Proposed
Rules section of this issue of the Bulletin.

Pursuant to section 7805(f) of the Code,
the notice of proposed rulemaking preced-
ing the final regulations in this document
were submitted to the Chief Counsel for
Advocacy of the Small Business Admin-
istration for comment on their impact on
small business.

#### Drafting Information

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

* * * * *

#### Adoption of Amendments to the Regulations

Accordingly, 26 CFR parts 1, 31, and
301 are amended as follows:

PART 1-INCOME TAXES

Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *

Par. 2. Section 1.871-14 is amended by
revising paragraphs (b), (c)(2) introduc-
tory text, (c)(2)(i) through (iv), (c)(3)(i),
(c)(4), and (e)(1), removing paragraph
(e)(4)(iv), and revising paragraph (j).

The revisions read as follows:

§ 1.871-14 Rules relating to repeal of
tax on interest of nonresident alien
individuals and foreign corporations
received from certain portfolio debt
investments.

* * * * *

(b) Rules concerning obligations in
bearer form before March 19, 2012-(1)
In general. Interest (including original is-
sue discount) with respect to an obligation
in bearer form is portfolio interest within
the meaning of section 871(h)(2)(A) or
881(c)(2)(A) only if it is paid with respect
to an obligation issued after July 18, 1984,
and issued before March 19, 2012, that is
described in section 163(f)(2)(B), as in
effect before the amendment by section
502 of the Hiring Incentives to Restore
Employment Act of 2010 (HIRE Act),
Public Law 111-147, and the regulations
under that section and an exception under
section 871(h) or 881(c) does not apply.

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Any obligation that is not in registered
form as defined in paragraph (c)(1)(i) of
this section is an obligation in bearer
form.

(2) Coordination with withholding and
reporting rules. For an exemption from
withholding under section 1441 with re-
spect to obligations described in this para-
graph (b), see § 1.1441-1(b)(4)(i). See
§ 1.1471-2 for rules relating to withhold-
ing under chapter 4 of the Code that may
apply to withholdable payments (as de-
fined in § 1.1471-4(b)(145)) made on or
after July 1, 2014, with respect to an
agreement or instrument that is not treated
as an obligation outstanding before March
19, 2012. For purposes of the preceding
sentence, the terms obligation and out-
standing are described in § 1.1471-2(b)).
See also § 1.1471-4(d)(6) for the report-
ing requirements of participating for-
eign financial institutions (as defined in
§ 1.1471-1(b)(91)) with respect to ac-
counts held by recalcitrant account
holders (as defined in § 1.1471-5(g)).
For rules relating to an exemption from
Form 1099 reporting and backup with-
holding under section 3406, see section
6049 and § 1.6049-5(b)(8) for the pay-
ment of interest and § 1.6045-1(g)(1)(ii)
for the redemption, retirement, or sale of
an obligation in bearer form.

(c) * * *

(2) Required statement. For purposes
of paragraph (c)(1)(ii)(C) of this sec-
tion, a U.S. person will be considered to
have received a statement that meets the
requirements of section 871(h)(5) if ei-
ther it complies with one of the proce-
dures described in this paragraph (c)(2)
and does not have actual knowledge or
reason to know that the beneficial owner
is a U.S. person or it complies with the
procedures described in paragraph (d) or
(e) of this section (to the extent appli-
cable).

(i) The U.S. person (or its authorized
agent described in § 1.1441-7(c)(2)) can
reliably associate the payment with docu-
mentation upon which it can rely to treat
the payment as made to a foreign benefi-
cial owner in accordance with § 1.1441-
1(e)(1)(ii). See § 1.1441-1(b)(2)(vii) for
rules regarding reliable association with
documentation.

(ii) The U.S. person (or its authorized
agent described in § 1.1441-7(c)(2)) can

reliably associate the payment with
a withholding certificate described in
§ 1.1441-5(c)(2)(iv) from a person claim-
ing to be a withholding foreign partner-
ship or § 1.1441-5(e)(v) for a person
claiming to be a withholding foreign
trust.

(iii) The U.S. person (or its authorized
agent described in § 1.1441-7(c)(2)) can
reliably associate the payment with
a withholding certificate described in
§ 1.1441-1(e)(3)(ii) from a person repre-
senting to be a qualified intermediary that
has assumed primary withholding respon-
sibility for the payment in accordance
with § 1.1441-1(e)(5)(iv) or a qualified
intermediary that has provided a with-
holding statement that meets the require-
ments of § 1.1441-1(e)(5)(v)(C) or that
includes the payment in a withholding rate
pool for payments excepted from with-
holding.

(iv) The U.S. person (or its authorized
agent described in § 1.1441-7(c)(2)) can
reliably associate the payment with
a withholding certificate described in
§ 1.1441-1(e)(3)(v) from a person claim-
ing to be a U.S. branch of a foreign bank
or of a foreign insurance company that is
described in § 1.1441-1(b)(2)(iv)(A) or a
U.S. branch designated in accordance
with § 1.1441-1(b)(2)(iv)(E).

* * * * *

(3) Time for providing certificate or
documentary evidence-(i) General rule.
Interest on a registered obligation shall
qualify as portfolio interest if the with-
holding certificate or documentary evi-
dence that must be provided is furnished
before expiration of the beneficial owner's
period of limitation for claiming a refund
of tax with respect to such interest. See,
however, § 1.1441-1(b)(7) for conse-
quences to a withholding agent that makes
a payment without withholding even
though it cannot reliably associate the
payment with the documentation prior to
the payment. If a withholding agent with-
holds an amount under chapter 3 of the
Code because it cannot reliably associate
the payment with the documentation for
the beneficial owner on the date of pay-
ment, the beneficial owner may neverthe-
less claim the benefit of an exemption
from tax under this section by claiming a
refund or credit for the amount withheld
based upon the procedures described in

§§ 1.1464-1 and 301.6402-3(e) of this
chapter. See §§ 1.1474-5 and 301.6402-
3(e) of this chapter for the allowance and
requirements for a refund with respect to
an amount (including a payment of inter-
est) that was withheld upon under chapter
4 of the Code. In the alternative, adjust-
ments to any amount of overwithheld tax
may be made under the procedures de-
scribed in § 1.1461-2(a) for a payment
withheld upon under chapter 3 of the
Code or in § 1.1474-2 for a payment
withheld upon under chapter 4 of the
Code.

* * * * *

(4) Coordination with withholding and
reporting rules. For an exemption from
withholding under section 1441 with re-
spect to obligations described in this para-
graph (c)(4), see § 1.1441-1(b)(4)(i). For
rules applicable to withholding certifi-
cates, see § 1.1441-1(e)(4). For rules
regarding documentary evidence, see
§ 1.6049-5(c)(1). For application of pre-
sumptions when the U.S. person cannot
reliably associate the payment with docu-
mentation, see § 1.1441-1(b)(3). For stan-
dards of knowledge applicable to with-
holding agents, see § 1.1441-7(b). For
rules relating to reporting on Forms 1042
and 1042-S, see § 1.1461-1(b) and (c).
For rules relating to an exemption from
Form 1099 reporting and backup with-
holding under section 3406, see section
6049 and § 1.6049-5(b)(8) for the pay-
ment of interest and § 1.6045-1(g)(1)(i)
for the redemption, retirement, or sale of an
obligation in registered form. For rules re-
lating to withholding under sections 1471
and 1472 that may apply notwithstanding
the exemption for payments of portfolio in-
terest under section 1441, see §§ 1.1471-
2(a), 1.1471-4(b), and 1.1472-1(b).
* * * * *

(e) Foreign-targeted registered obliga-
tions-(1) General rule. The statement
described in paragraph (c)(1)(ii) of this
section is not required with respect to in-
terest paid on an obligation issued before
January 1, 2016, that is a registered obli-
gation targeting foreign markets in accor-
dance with the provisions of paragraph
(e)(2) of this section if the interest is paid
by a U.S. person, a withholding foreign
partnership, or a U.S. branch described in
§ 1.1441-1(b)(2)(iv)(A) or (E) to a regis-
tered owner at an address outside the

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United States, provided that the registered
owner is a financial institution described
in section 871(h)(5)(B). In that case, the
U.S. person otherwise required to deduct
and withhold tax may treat the interest as
portfolio interest if it does not have actual
knowledge that the beneficial owner is a
United States person and if it receives the
certificate described in paragraph (e)(3)(i)
of this section from a financial institution
or member of a clearing organization,
which member is the beneficial owner of
the obligation, or the documentary evi-
dence or statement described in paragraph
(e)(3)(ii) of this section from the benefi-
cial owner, in accordance with the proce-
dures described in paragraph (e)(4) of this
section.

* * * * *

(j) Effective/applicability date-(1) In
general. Except as otherwise provided in
paragraph (j)(2) and (3) of this section,
this section applies to payments of interest
made on or after January 6, 2017. (For the
rules that apply after 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 of
interest made after 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) Portfolio interest not to include in-
terest received by 10-percent sharehold-
ers. Paragraph (g) applies to interest paid
after April 12, 2007. Taxpayers may
choose to apply the rules of paragraph (g)
to interest paid in any taxable year not
closed by the period of limitations as of
April 12, 2007, provided they do so con-
sistently for all relevant partnerships dur-
ing such years.

(3) Portfolio interest not to include
certain contingent interest. The rules of
paragraph (h) of this section apply begin-
ning September 18, 2015.

##### § 1.871-14T [Removed]

Par. 3. Section 1.871-14T is removed.

Par. 4. Section 1.1441-0 is amended
by:

1\. Revising entries for § 1.1441-
1(b)(2)(vii)(D) through (F) and (b)(3)
(ii)(C).

2\. Adding entries for § 1.1441-1
(b)(3)(iii)(A)(1) and (2).

3\. Revising entry for § 1.1441-
1(b)(3)(iii)(D).

4\. Adding entry for § 1.1441-1(b)
(3)(iii)(E).

5\. Removing entries for § 1.1441-1(b)
(3)(v)(C) and (D).

6\. Revising entries for § 1.1441-
1(b)(3)(vi) through (b)(3)(vii)(B).

7\. Revising entries for § 1.1441-
1(b)(6)(ii) through (b)(7)(v).

8\. Adding entries for § 1.1441-
1(c)(2)(i) and (ii).

9\. Revising entries for § 1.1441-
1(c)(5), (c)(10), and (c)(28) and (29).

10\. Adding entries for § 1.1441-
1(c)(30) through (56).

11\. Adding entries for § 1.1441-
1(e)(2)(ii)(A) and (B).

12\. Revising the entry for § 1.1441-
1(e)(3)(iv).

13\. Adding entries for § 1.1441-
1(e)(3)(iv)(C)(1) through (4) and
§ 1.1441-1(e)(3)(iv)(D)(1) through (8).

14\. Revising the entry for § 1.1441-
1(e)(3)(v).

15\. Adding entries for § 1.1441-
1(e)(4)(i)(A) and (B).

16\. Revising the entry for § 1.1441-
1(e)(4)(ii)(A) and adding entries for
§ 1.1441-1(e)(4)(ii)(A)(1) and (2).

17\. Adding entries for § 1.1441-
1(e)(4)(ii)(D)(1) through (3)

18\. Revising the entries for § 1.1441-
1(e)(4)(iii).

19\. Adding entries from § 1.1441-
1(e)(4)(iv)(B)(1) through (4).

20\. Revising the entry from § 1.1441-
1(e)(4)(iv)(C) and adding entries for
§ 1.1441-1(e)(4)(iv)(D) and (E).

21\. Revising the entries for § 1.1441-
1(e)(4)(v), § 1.1441-1(e)(4)(viii)(C),
§ 1.1441-1(e)(4)(ix) introductory text and
§ 1.1441-1(e)(4)(ix)(A) and (B).

22\. Adding entries for § 1.1441-
1(e)(4)(ix)(B)(1) and (2) ..

23\. Revising entry for § 1.1441-
1(e)(4)(ix)(C) and adding entries for
§ 1.1441(e)(4)(ix)(C)(1) and (2) and
§ 1.1441-1(e)(4)(ix)(D).

24\. Revising entries for § 1.1441-
1(e)(5)(i) and

25\. Adding entries for § 1.1441-
1(e)(5)(v)(C)(1) through (f)(3).

26\. Adding entries for § 1.1441-
2(b)(3)(iii), (b)(6), and (e)(7).

27\. Revising the entry for § 1.1441-
3(a) and adding entries for § 1.1441-
3(a)(1) and (2).

28\. Revising the entry for § 1.1441-
3(c)(4)(i)(C).

29\. Adding entries for § 1.1441-
3(g)(1) and (2).

30\. Revising entry for § 1.1441-3(h)
and adding entries for § 1.1441-3(h)(1)
and (2) and § 1.1441-3(i).

31\. Adding an entry for § 1.1441-
4(a)(3)(iii); and revising entries for
§ 1.1441-4(b)(4) and (g).

32\. Removing entries for § 1.1441-
4(g)(1) through (2).

33\. Adding an entry for § 1.1441-
5(b)(2)(vi).

34\. Revising and adding entries for
§ 1.1441-5(c)(1)(iv) and (v).

35\. Revising entries for § 1.1441-
5(c)(3)(iv) through (d)(2).

36\. Revising the entry for § 1.1441-
5(e)(2).

37\. Adding an entry for § 1.1441-
5(e)(3)(iii).

38\. Revising entries for § 1.1441-
5(e)(5)(iv) and (g).

39\. Removing entries for § 1.1441-
5(g)(1) and (2).

40\. Adding entries for § 1.1441-
6(b)(1)(i) and (ii).

41\. Revising the entry for § 1.1441-
6(c)(1).

42\. Revising the entry for § 1.1441-
6(h).

43\. Adding an entry for § 1.1441-6(i).

44\. Revising the entry for § 1.1441-
7(a)(2), and adding entries for § 1.1441-
7(a)(3) and (4).

45\. Adding entries for § 1.1441-
7(b)(3)(i) and (ii).

46\. Adding entries for § 1.1441-

7(b)(5)(i) through (c)(3), § 1.1441-

7(b)(6)(i) through (iii), § 1.1441-
7(b)(8)(i) through (iv), and § 1.1441-
7(b)(9)(i) and (ii).

47\. Revising entries for § 1.1441-
7(b)(10) and (11) and adding entries for
§ 1.1441-7(b)(12) and (13).

48\. Revising the entry for § .1441-7(c).

49\. Adding entries for § 1.1441-7(f)(1)
through (f)(2)(ii).

50\. Revising entry for § 1.1441-7(g).

51\. Adding an entry for § 1.1441-10.
The revisions and additions read as fol-
lows:

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1.1441-0 Outline for regulations

(6) * * *

(44) Chapter 3 withholding rate pool.

provisions for section 1441.

(ii) Examples.

(45) Chapter 3 status.

(7) Liability for failure to obtain docu-

(46) Chapter 4 of the Code (or chapter

This section lists captions contained in

mentation timely or to act in accordance

4).

§§ 1.1441-1 through 1.1441-10.

with applicable presumptions.

(47) Chapter 4 status.

(i) General rule.

(48) Chapter 4 withholding rate pool.

§ 1.1441-1 Requirement for the

(ii) Proof that tax liability has been

(49) Deemed-compliant FFI.

deduction and withholding of tax on

satisfied.

(50) GIIN (or Global Intermediary

payments to foreign persons.

(A) In general.

Identification Number).

(B) Special rule for establishing that

(51) NFFE.

* * * * *

income is effectively connected with the

(52) Nonparticipating FFI.

(b) * * *

conduct of a U.S. trade or business.

(53) Participating FFI.

(2)

(iii) Liability for interest and penalties.

(54) Preexisting obligation.

(vii) * * *

(iv) Special rule for determining valid-

(55) Registered deemed-compliant

(D) Special rules applicable to a with-

ity of withholding certificate containing FFI.

holding certificate provided by a qualified

inconsequential errors.

(56) Withholdable payment.

intermediary that assumes primary with-

(v) Special effective date.

* * * * *

holding responsibility under chapter 3 and

* * * * *

(e) * * *

chapter 4 of the Internal Revenue Code.

(c) * * *

(2) * * *

(E) Special rules applicable to a with-

(2) * * *

(ii) * * *

holding certificate provided by a qualified

(i) In general.

(A) In general.

intermediary that assumes primary Form

(ii) Dual residents.

(B) Requirement to collect foreign TIN

1099 reporting and backup withholding

* * * * *

and date of birth beginning January 1,

responsibility but not primary withholding

(5) Financial institution and foreign fi-

2017.

under chapter 3 and chapter 4.

nancial institution (or FFI).

(3) * * *

(F) Special rules applicable to a with-

* * * * *

(iv) Withholding statement provided

holding certificate provided by a qualified

(10) Chapter 3 of the Code (or chapter

by nonqualified intermediary.

intermediary that assumes primary with-

3).

* * * * *

holding responsibility under chapter 3 and

* * * * *

(C) * * *

chapter 4 and primary Form 1099 report-

(28) Nonwithholding foreign partner-

(1) In general.

ing and backup withholding responsibility

ship (or NWP).

(2) Nonqualified intermediary with-

and a withholding certificate provided by

(29) Withholding foreign partnership

holding statement for withholdable pay-

a withholding foreign partnership or a

(or WP).

ments.

withholding foreign trust.

(30) Possession of the United States or

(3) Alternative withholding statement.

(3) * * *

U.S. territory.

(4) Example.

(ii) * * *

(31) Amount subject to chapter 3 with-

(D) Alternative procedures.

(C) Documentary evidence furnished

holding.

(1) In general.

for offshore obligation.

(32) EIN.

(2) Withholding rate pools.

(iii) Presumption of U.S. or foreign

(33) Flow-through withholding certifi-

(i) In general.

status.

cate.

(ii) Withholding rate pools for chapter

(A) Payments to exempt recipients.

(34) Foreign payee.

4 purposes.

(1) In general.

(35) Intermediary withholding certifi-

(3) Allocation information.

(2) Special rule for withholdable pay-

cate.

(4) Failure to provide allocation infor-

ments made to exempt recipients.

(36) Nonwithholding foreign trust (or

mation.

* * * * *

NWT).

(5) Cure provision.

(D) Payments with respect to offshore

(37) Payment with respect to an off-

(6) Form 1042-S reporting in case of

obligations.

shore obligation.

allocation failure.

(E) Certain payments for services.

(38) Permanent residence address.

(7) Liability for tax, interest, and pen-

* * * * *

(i) In general.

alties.

(vi) U.S. branches and territory finan-

(ii) Hold mail instruction.

(8) Applicability to flow-through enti-

cial institutions not treated as U.S. per-

(39) Standing instructions to pay

ties and certain U.S. branches.

sons.

amounts.

(E) Notice procedures.

(vii) Joint payees.

(40) Territory financial institution.

(v) Withholding certificate from cer-

(A) In general.

(41) TIN.

tain U.S. branches (including territory fi-

(B) Special rule for offshore obliga-

(42) Withholding foreign trust (or

nancial institutions).

tions.

WT).

(vi) Reportable amounts.

* * * * *

(43) Certified deemed-compliant FFI.

(4) Applicable rules.

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(i) Who may sign the certificate. (A) In general.

(5) Qualified intermediaries. (i) In general.

(2) Reliance by withholding agent on reasonable determinations.

(B) Electronic signatures.

* * * * *

(3) Effective/applicability date.

(ii) Period of validity.

(v) * * *

(i) Effective/applicability date.

(A) General rule.

(A) In general.

(1) Withholding certificates and docu-

(B) Content of withholding statement.

§ 1.1441-4 Exemptions from

mentary evidence.

(C) Withholding rate pools

withholding for certain effectively

(2) Documentary evidence for treaty

(1) In general.

connected income and other amounts.

claims and treaty statements.

(2) Withholding rate pool requirements

* * * * *

for a withholdable payment.

(a) * * *

(D) * * *

(3) Alternative procedure for U.S. non-

(3) * * *

(1) Defined.

exempt recipients.

(iii) Exception for specified notional

(2) Obligation to notify a withholding

(D) Example.

principal contracts.

agent of a change in circumstances.

(6) Qualified derivatives dealers.

(b) * * *

(3) Withholding agent's obligation

(f) Effective/applicability date.

(4) Final payment exemption.

with respect to a change in circumstances.

(1) In general.

* * * * *

(iii) Retention of documentation.

(2) Lack of documentation for past

(g) Effective/applicability date.

(iv) Electronic transmission of infor-

years.

mation

(3) Section 871(m) transactions.

§ 1.1441-5 Withholding on payments to

(A) In general.

(B) Requirements.

partnerships, trusts, and estates.

(1) In general.

§ 1.1441-2 Amounts subject to

** * * *

(2) Same information as paper Form

withholding.

(b) * * *

W-8.

* * * * *

(2) * * *

(3) Perjury statement and signature re-

(b) * * *

(vi) Coordination with chapter 4 re-

quirements.

(3) * * *

quirements for U.S. partnerships, trusts,

(i) Perjury statement.

and estates.

(ii) Electronic signature.

(iii) Exceptions to withholding. * * * * *

(c) * * *

(4) Requests for electronic Form W-8

(1) * * *

data.

(6) Dividend equivalents.

(iv) Coordination with chapter 4 for

(C) Form 8233.

** * * *

(D) Forms and documentary evidence

(e) * * *

payments made to foreign partnerships.

received by facsimile or email.

(7) Payments of dividend equivalents.

(v) Examples. ** * * *

(E) Third party repositories.

(i) In general.

(3) * * *

(v) Additional procedures for certifi-

(ii) Payment.

cates provided electronically.

(iii) Premiums and other upfront pay-

(iv) Withholding statement provided

* * * * *

ments.

by nonwithholding foreign partnership

(viii) * * *

* * * * *

and coordination with chapter 4. (v) Withholding and reporting by a for-

(C) Reliance on a prior version of a

eign partnership.

withholding certificate.

§ 1.1441-3 Determination of amounts to

(d) Presumption rules.

(ix) Certificates to be furnished to with-

be withheld.

(1) In general.

holding agent for each obligation unless ex-

(2) Determination of partnership status

ception applies.

(a) General rule.

as U.S. or foreign in the absence of doc-

(A) Exception for certain branch or ac-

(1) Withholding on gross amount.

umentation.

count systems or system maintained by agent.

(2) Coordination with chapter 4.

* * * * *

(B) Reliance on certification provided

* * * * *

(e) * * *

by introducing brokers.

(c) * * *

(2) Payments to foreign complex trusts

(1) In general.

(4) * * *

and foreign estates.

(2) Example.

(i) * * *

(3) * * *

(C) Reliance on documentation and

(C) Coordination with REIT/QIE with-

(iii) Coordination with chapter 4 for

certifications provided between principals

holding.

payments made to foreign simple trusts

and agents.

** * * *

and foreign grantor trusts.

(1) Withholding agent as agent.

(g) * * *

* * * * *

(2) Withholding agent as principal.

(1) Duty to withhold.

(5) * * *

(D) Reliance upon documentation for

(2) Effective date.

(iv) Withholding statement provided by

accounts acquired in merger or bulk ac-

(h) Dividend equivalents.

a foreign simple trust or foreign grantor trust

quisition for value.

(1) Withholding on gross amount.

and coordination with chapter 4.

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* * * * *

(g) Effective/applicability date.

###### § 1.1441-6 Claim of reduced withholding under an income tax treaty.

* * * * *

(b) * * *

(1) * * *

(i) Identification of limitation on bene-
fits provisions.

(ii) Reason to know based on existence
of treaty.

* * * * *

(c) * * *

(1) General rule.

* * * * *

(h) Dividend equivalents.

(i) Effective/applicability dates.

(1) General rule.

(2) Dividend equivalents.

§ 1.1441-7 General provisions relating
to withholding agents.

(a) * * *

(2) Withholding agent with respect to
dividend equivalents.

(3) Examples.

(4) Effective/applicability date.

(b) * * *

(3) * * *

(i) In general.

(ii) Limits on reason to know for pre-
existing obligations.

* * * * *

(5) * * *

(i) Classification of U.S. status, U.S.
address, or U.S. telephone number.

(ii) U.S. place of birth.

(iii) Standing instructions with respect
to offshore obligations.

(6) Withholding certificate-claim of
reduced rate of withholding under .

(i) Permanent residence address.

(ii) Mailing address.

(iii) Standing instructions.

(7) Documentary evidence.

(8) Documentary evidence-establish-
ment of foreign status.

(i) Documentary evidence received
prior to January 1, 2001.

(ii) Documentary evidence received af-
ter December 31, 2000.

(A) Treatment of individual's foreign
status.

(B) Presumption of entity's foreign sta-
tus.

(iii) U.S. place of birth.

(iv) Standing instructions with respect
to offshore obligations.

(9) Documentary evidence-claim of
reduced rate of withholding under treaty.

(i) Permanent residence address and
mailing address.

(ii) Standing instructions.

(10) Indirect account holders.

(11) Limits on reason to know for mul-
tiple obligations belonging to a single per-
son.

(12) Reasonable explanation support-
ing claim of foreign status.

(13) Additional guidance.

(c) Agent.

(1) In general.

(2) Authorized agent.

(3) Liability of withholding agent act-
ing through an agent.

* * * * *

(f) * * *

(1) Liability of withholding agent.

(2) Exception for withholding agents
that do not know of conduit financing
arrangement.

(i) In general.

(ii) Examples.

(g) Effective/applicability date.

* * * * *

§ 1.1441-10 Withholding agents with
respect to fast-pay arrangements.

(a) In general.

(b) Exception.

(c) Liability.

(d) Examples.

(e) Effective date.

Par. 5. Section 1.1441-1 is amended
by:

1\. Revising paragraphs (a), (b)(1),
(b)(2)(i), (b)(2)(iii)(A), (b)(2)(iv)(A),
(b)(2)(iv)(B)(2) though (4),(b)(2)(iv)(C),
(b)(2)(iv)(E), (b)(2)(vi), (b)(2)(vii)(B)
through (b)(2)(vii)(F),(b)(3)(i),(b)(3)(ii),
(b)(3)(iii) introductory text, (b)(3)(iii)
(A)(1), and (b)(3)(iii)(A)(1)(i) through
(b)(3)(iii)(A)(1)(v),(b)(3)(iii)(A)(2), (b)
(3)(iii)(D), (b)(3)(iv) introductory text,
(b)(3)(iv)(A), (b)(3)(v)(B), (b)(3)(vi),
(b)(3)(vii), (b)(3)(ix)(A),(b)(3)(x),(b)(4)
introductory text, (b)(4)(i), (b)(5)(ix),
(b)(6), (b)(7)(i) introductory text, and
(b)(7)(i)(A) through (b)(7)(i)(C).

2\. Redesignating paragraph (b)(7)(ii)
as (b)(7)(ii)(A) and revising it.

3\. Adding reserved paragraph (b)(7)
(ii)(C).

4\. Revising paragraphs (b)(7)(iv) and
(v) and (c) introductory text.

5\. Redesignating paragraph (c)(2) as
(c)(2)(i) and revising it.

6\. Adding reserved paragraph (c)
(2)(ii).

7\. Revising paragraphs (c)(3)(ii),
(c)(5), (c)(10), (c)(12), (c)(16) and (17),
(c)(23), (c)(25), and (c)(28) through (37).

8\. Redesignating paragraph (c)(38) as
(c)(38)(i) and revising it.

9\. Adding reserved paragraph (c)
(38)(ii).

10\. Revising paragraphs (c)(39)
through (56), (d)(4), and (e)(1)(ii)(A)(2)
and (3).

11\. Redesignating paragraph (e)(2)(ii)
as (e)(2)(ii)(A) and revising new para-
graph (e)(2)(ii)(A).

12\. Adding reserved paragraph (e)(2)
(ii)(B).

13\. Revising paragraphs (e)(3)(ii) in-
troductory text, (e)(3)(ii)(A),(e)(3)(ii)(C),
(e)(3)(ii)(D),(e)(3)(ii)(F), (e)(3)(iii) intro-
ductory text, (e)(3)(iii)(A), (e)(3)(iii)(C)
through (E), and (e)(3)(iv)(A) through
(e)(3)(iv)(C)(2)(v).

14\. Adding paragraph (e)(3)(iv)
(C)(2)(v).

15\. Redesignating paragraph (e)(3)(iv)

(C)(3) as (e)(3)(iv)(C)(4) and revising it.

16\. Adding reserved new paragraph
(e)(3)(iv)(C)(3)

17\. Revising paragraphs (e)(3)(iv)
(D)(1) through (6), (e)(3)(iv)(E),(e)(3)(v),
and (e)(4) introductory text.

18\. Redesignating paragraph (e)(4)(i)
as (e)(4)(i)(A) and revising it.

19\. Adding reserved paragraph (e)(4)
(i)(B).

20\. Revising paragraph (e)(4)(ii)(A).

22\. Revising paragraphs (e)(4)(ii)(B)
introductory text, (e)(4)(ii)(B)(1) through
(6), and (e)(4)(ii)(B)(8) through (10).

23\. Removing paragraph (e)(4)(ii)
(B)(11) and redesignating paragraph
(e)(4)(ii)(B)(12) as paragraph (e)(4)(ii)
(B)(11).

24\. Revising paragraphs (e)(4)(ii)(C)
and (D), (e)(4)(iii), and (e)(4)(iv)(A).

25\. Redesignating paragraph (e)(4)(iv)

(C) as (e)(4)(iv)(D) and revising it.

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26\. Adding reserved paragraph (e)(4)
(iv)(C).

27\. Adding reserved paragraph (e)(4)
(iv)(E).

28\. Revising paragraphs (e)(4)(v),
(e)(4)(vi), (e)(4)(vii) introductory text,
(e)(4)(vii)(A), (e)(4)(vii)(F), (e)(4)(vii)
(H), (e)(4)(vii)(l), (e)(4)(viii) introductory
text, (e)(4)(viii)(B) and (C), (e)(4)(ix),
(e)(5)(ii) introductory text, and (e)(5)
(ii)(A) through (D).

29\. Revising paragraphs (e)(5)(iii) and
(iv), (e)(5)(v)(A), (e)(5)(v)(B) introduc-
tory text, and (e)(5)(v)(B)(1) through (3).

30\. Redesignating paragraph (e)(5)
(v)(B)(4) as (e)(5)(v)(B)(5) and revising
it.

31\. Revising paragraphs (e)(5)(v)(C)
and (D) and (f)(1)(4).

The additions and revisions read as fol-
lows:

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

(a) Purpose and scope. This section,
§§ 1.1441-2 through 1.1441-9, and
1.1443-1 provide rules for withholding
under sections 1441, 1442, and 1443
when a payment is made to a foreign
person. This section provides definitions
of terms used in chapter 3 of the Internal
Revenue Code (Code) and regulations
thereunder. It prescribes procedures to de-
termine whether an amount must be with-
held under chapter 3 of the Code and
documentation that a withholding agent
may rely upon to determine the status of a
payee or a beneficial owner as a U.S.
person or as a foreign person and other
relevant characteristics of the payee that
may affect a withholding agent's obliga-
tion to withhold under chapter 3 of the
Code and the regulations thereunder. Spe-
cial procedures regarding payments to for-
eign persons that act as intermediaries are
also provided. Section 1.1441-2 defines
the income subject to withholding under
sections 1441, 1442, and 1443 and the
regulations under these sections. Section
1.1441-3 provides rules regarding the
amount subject to withholding and rules
for coordinating withholding under this
section with withholding under section
1445 and under chapter 4 of the Code.
Section 1.1441-4 provides exemptions

from withholding for, among other things,
certain income effectively connected with
the conduct of a trade or business in the
United States, including certain compen-
sation for the personal services of an in-
dividual. Section 1.1441-5 provides rules
for withholding on payments made to
flow-through entities and other similar ar-
rangements. Section 1.1441-6 provides
rules for claiming a reduced rate of with-
holding under an income tax treaty. Sec-
tion 1.1441-7 defines the term withhold-
ing agent and provides due diligence rules
governing a withholding agent's obliga-
tion to withhold. Section 1.1441-8 pro-
vides rules for relying on claims of ex-
emption from withholding for payments
to a foreign government, an international
organization, a foreign central bank of
issue, or the Bank for International Settle-
ments. Sections 1.1441-9 and 1.1443-1
provide rules for relying on claims of ex-
emption from withholding for payments
to foreign tax exempt organizations and
foreign private foundations.

(b) General rules of withholding-(1)
Requirement to withhold on payments to
foreign persons. A withholding agent
must withhold 30 percent of any payment
of an amount subject to withholding made
to a payee that is a foreign person unless it
can reliably associate the payment with
documentation upon which it can rely to
treat the payment as made to a payee that
is a U.S. person or as made to a beneficial
owner that is a foreign person entitled to
a reduced rate of withholding. However, a
withholding agent making a payment to a
foreign person need not withhold where
the foreign person assumes responsibility
for withholding on the payment under
chapter 3 of the Code and the regulations
thereunder as a qualified intermediary (see
paragraphs (e)(5) and (e)(6) of this sec-
tion), as a U.S. branch of a foreign person
(see paragraph (b)(2)(iv) of this section),
as a withholding foreign partnership (see
§ 1.1441-5(c)(2)(i)), or as a withholding
foreign trust (see § 1.1441-5(e)(5)(v)).
When withholding under chapter 4 was
applied to a payment, the withholding ob-
ligation under this section is satisfied. See
§ 1.1441-3(a)(2). This section (dealing
with general rules of withholding and
claims of foreign or U.S. status by a payee
or a beneficial owner) and §§ 1.1441-4,
1.1441-5, 1.1441-6, 1.1441-8, 1.1441-9,

and 1.1443-1 provide rules for determin-
ing whether documentation is required as
a condition for reducing the rate of with-
holding on a payment to a foreign bene-
ficial owner or to a U.S. payee and if so,
the nature of the documentation upon
which a withholding agent may rely in
order to reduce such rate. Paragraph (b)(2)
of this section prescribes the rules for the
determination of who the payee is, the
extent to which a payment is treated as
made to a foreign payee, and reliable as-
sociation of a payment with documenta-
tion. Paragraph (b)(3) of this section de-
scribes the applicable presumptions for
determining the payee's status as U.S. or
foreign and the payee's other characteris-
tics (e.g., as an owner or intermediary, as
an individual, partnership, corporation,
etc.). Paragraph (b)(4) of this section lists
the types of payments for which the 30-
percent withholding rate may be reduced.
Because the treatment of a payee as a U.S.
or a foreign person also has consequences
for purposes of making an information
return under the provisions of chapter 61
of the Code and for withholding under
other provisions of the Code, such as sec-
tions 3402, 3405, or 3406, paragraph
(b)(5) of this section lists applicable pro-
visions outside chapter 3 of the Code that
require certain payees to establish their
foreign status (e.g., in order to be exempt
from information reporting). Paragraph
(b)(6) of this section describes the with-
holding obligations of a foreign person
making a payment that it has received in
its capacity as an intermediary. Paragraph
(b)(7) of this section describes the liability
of a withholding agent that fails to with-
hold at the required 30-percent rate in the
absence of documentation. Paragraph
(b)(8) of this section deals with adjust-
ments and refunds in the case of overwith-
holding. Paragraph (b)(9) of this section
deals with determining the status of the
payee when the payment is jointly owned.
See paragraph (c)(6) of this section for a
definition of beneficial owner. See
§ 1.1441-7(a) for a definition of withhold-
ing agent. See § 1.1441-2(a) for the de-
termination of an amount subject to with-
holding. See § 1.1441-2(e) for the
definition of a payment and when it is
considered made. Except as otherwise
provided, the provisions of this section
apply only for purposes of determining a

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withholding agent's obligation to with-
hold under chapter 3 of the Code and the
regulations thereunder.

(2) Determination of payee and pay-
ee's status-(i) In general. Except as oth-
erwise provided in this paragraph (b)(2)
and § 1.1441-5(c)(1) and (e)(3), a payee
is the person to whom a payment is made,
regardless of whether such person is the
beneficial owner of the amount (as defined
in paragraph (c)(6) of this section). A for-
eign payee is a payee who is a foreign
person. A U.S. payee is a payee who is a
U.S. person. Generally, the determination
by a withholding agent of the U.S. or
foreign status of a payee and of its other
relevant characteristics (e.g., as a benefi-
cial owner or intermediary, or as an indi-
vidual, corporation, or flow-through en-
tity) is made on the basis of a withholding
certificate that is a Form W-8 or a Form
8233 (indicating foreign status of the payee
or beneficial owner) or a Form W-9 (indi-
cating U.S. status of the payee). The provi-
sions of this paragraph (b)(2), paragraph
(b)(3) of this section, and § 1.1441-5(c), (d),
and (e) dealing with determinations of payee
and applicable presumptions in the absence
of documentation apply only to payments of
amounts subject to withholding under chap-
ter 3 of the Code (within the meaning of
§ 1.1441-2(a). However, for a payment
that is both an amount subject to withhold-
ing under chapter 3 and a withholdable pay-
ment under chapter 4, first apply the rules of
§ 1.1471-3 for determining the payee of a
withholdable payment under chapter 4 and
the applicable presumptions in the absence
of documentation applicable to such pay-
ments. See also § 1.6049-5(d) for payments
of amounts that are not subject to withhold-
ing under chapter 3 of the Code (or the
regulations thereunder) but that may be re-
portable under provisions of chapter 61 of
the Code (and the regulations thereunder).
See paragraph (d) of this section for docu-
mentation upon which the withholding
agent may rely in order to treat the payee or
beneficial owner as a U.S. person. See para-
graph (e) of this section for documentation
upon which the withholding agent may rely
in order to treat the payee or beneficial
owner as a foreign person. For applicable
presumptions of status in the absence of
documentation, see paragraph (b)(3) of this
section and § 1.1441-5(d). For definitions of

a foreign person and U.S. person, see para-
graph (c)(2) of this section.
* * * * *

(iii) Payments to wholly-owned enti-
ties-(A) Foreign-owned domestic entity.
A payment to a wholly-owned domestic
entity that is disregarded for federal tax
purposes under § 301.7701-2(c)(2) of this
chapter as an entity separate from its
owner and whose single owner is a for-
eign person shall be treated as a payment
to the owner of the entity, subject to the
provisions of paragraph (b)(2)(iv) of this
section. For purposes of this paragraph
(b)(2)(iii)(A), a domestic entity means a
person that would be treated as a U.S.
person if it had an election in effect under
§ 301.7701-3(c)(1)(i) of this chapter to be
treated as a corporation. For example, a
limited liability company, A, organized
under the laws of the State of Delaware,
opens an account at a U.S. bank. Upon
opening of the account, the bank requests
A to furnish a Form W-9 as required
under section 6049(a) and the regulations
under that section. A does not have an
election in effect under § 301.7701-
3(c)(1)(i) of this chapter and, therefore, is
not treated as an organization taxable as a
corporation, including for purposes of the
exempt recipient provisions in § 1.6049-
4(c)(1). If A has a single owner and the
owner is a foreign person (as defined in
paragraph (c)(2) of this section), then A
may not furnish a Form W-9 because it
may not represent that it is a U.S. person
for purposes of the provisions of chapters
3, 4, and 61 of the Code, and section 3406.
Therefore, A must furnish a Form W-8
with the name, address, and taxpayer
identifying number (TIN) (if required) of
the foreign person who is the single owner
in the same manner as if the account were
opened directly by the foreign single
owner. See §§ 1.894-1(d) and 1.1441-
6(b)(2) for special rules where the entity's
owner is claiming a reduced rate of with-
holding under an income tax treaty.

* * * * *

(iv) Payments to a U.S. branch of cer-
tain foreign banks or foreign insurance
companies-(A) U.S. branch treated as a
U.S. person in certain cases. A payment
to a U.S. branch of a foreign person is a
payment to a foreign person. However, a
U.S. branch of a foreign person that is
described in this paragraph (b)(2)(iv)(A)

may agree to be treated as a U.S. person
for purposes of withholding on specified
payments to the U.S. branch. If a U.S.
branch agrees to be treated as a U.S. per-
son with a withholding agent, it is re-
quired to act as a U.S. person with respect
to all other withholding agents, including
when acting as an intermediary with re-
spect to withholdable payments for pur-
poses of chapter 4. See § 1.1471-
3(a)(3)(vi). In such cases, the U.S. branch
is treated as a payee that is a U.S. person.
See paragraph (C) of this section for ad-
ditional requirements for the U.S. branch
when treated as a payor that is a U.S.
person. Notwithstanding the preceding
sentence, a withholding agent making a
payment to a U.S. branch treated as a U.S.
person under this paragraph (b)(2)(iv)(A)
shall not treat the branch as a U.S. person
for purposes of reporting the payment
made to the branch. Therefore, a payment
to such U.S. branch shall be reported on
Form 1042-S under § 1.1461-1(c) and
§ 1.1474-1(d)(1)(i) for a payment of U.S.
source FDAP income that is a chapter 4
reportable amount as defined in § 1.1471-
1(b)(18). Further, a U.S. branch that is
treated as a U.S. person under this para-
graph (b)(2)(iv)(A) shall not be treated as
a U.S. person for purposes of the with-
holding certificate it provides to a with-
holding agent. Therefore, the U.S. branch
must furnish a U.S. branch withholding
certificate on a Form W-8IMY as pro-
vided in paragraph (e)(3)(v) of this section
and not a Form W-9. An agreement to
treat a U.S. branch as a U.S. person must
be evidenced by a U.S. branch withhold-
ing certificate described in paragraph
(e)(3)(v) of this section furnished by the
U.S. branch to the withholding agent. A
U.S. branch described in this paragraph
(b)(2)(iv)(A) and eligible to be treated as a
U.S. person is any U.S. branch of a for-
eign bank subject to regulatory supervi-
sion by the Federal Reserve Board or a
U.S. branch of a foreign insurance com-
pany required to file an annual statement
on a form approved by the National As-
sociation of Insurance Commissioners
with the Insurance Department of a State,
a Territory, or the District of Columbia. In
addition, a territory financial institution
(including a territory financial institution
that is a flow-through entity) will be
treated as a U.S. branch for purposes of

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this paragraph (b)(2)(iv)(A) and therefore
is eligible to be treated as a U.S. person.
The Internal Revenue Service (IRS) may
approve a list of U.S. branches that may
be eligible for treatment as U.S. persons
under this paragraph (b)(2)(iv)(A) (see
§ 601.601(d)(2) of this chapter). See
§ 1.6049-5(c)(5)(vi) for the treatment of
U.S. branches as U.S. payors if they make
a payment that is subject to reporting un-
der chapter 61 of the Code. Also see
§ 1.6049-5(d)(1)(ii) for the treatment of
U.S. branches as foreign payees under
chapter 61 of the Code.

(B) * * *

(2) As a payment directly to the per-
sons whose names are on withholding cer-
tificates or other appropriate documenta-
tion forwarded by the U.S. branch to the
withholding agent when no agreement is
in effect to treat the U.S. branch as a U.S.
person for such payment, to the extent the
withholding agent can reliably associate
the payment with such certificates or doc-
umentation;

(3) As a payment to a foreign person of
income that is effectively connected with
the conduct of a trade or business in the
United States if the withholding agent has
obtained an EIN for the branch and cannot
reliably associate the payment with a
withholding certificate from a U.S. branch
(or any other certificate or other appropri-
ate documentation from another person).
See § 1.1441-4(a)(2)(ii); or

(4) As a payment to a foreign person of
income that is not effectively connected
with the conduct of a trade or business in
the United States if the withholding agent
has not obtained an EIN for the branch
and cannot reliably associate the payment
with a withholding certificate from the
U.S. branch.

(C) Consequences to the U.S. branch.
A U.S. branch that is treated as a U.S.
person under paragraph (b)(2)(iv)(A) of
this section shall be treated as a separate
person for purposes of section 1441(a)
and all other provisions of chapters 3 and
4 of the Code and the regulations there-
under (other than for purposes of report-
ing the payment to the U.S. branch under
§ 1.1461-1(c) and § 1.1474-1(d)(1)(i) for
a chapter 4 reportable amount by a with-
holding agent) or for purposes of the doc-
umentation such a branch must furnish
under paragraph (e)(3)(v) of this section)

for any payment that it receives as such.
Thus, the U.S. branch shall be responsible
for withholding on a payment as a U.S.
person in accordance with the provisions
under chapters 3 and 4 of the Code and the
regulations thereunder and other applica-
ble withholding provisions of the Code.
For this purpose, it shall obtain and retain
documentation from payees or beneficial
owners of the payments that it receives as
an intermediary as a U.S. person in the
same manner as if it were a separate en-
tity. For example, if a U.S. branch re-
ceives a payment as an intermediary on
behalf of customers of its home office and
the home office is a qualified intermedi-
ary, the U.S. branch must obtain a quali-
fied intermediary withholding certificate
described in paragraph (e)(3)(ii) of this
section from its home office. Similarly, if
a U.S. branch of an FFI treated as a U.S.
person receives a payment on behalf of
another branch of the FFI that is treated as
a nonparticipating FFI, the U.S. branch
must withhold on the payment made to the
other branch as if it were a separate person
to the extent required under chapter 4. In
addition, a U.S. branch that has not pro-
vided documentation to the withholding
agent for a payment that is, in fact, not
effectively connected income is a with-
holding agent with respect to that pay-
ment. See paragraph (b)(6) of this section
and § 1.1441-4(a)(2)(ii).

* * * * *

(E) Payments to other U.S. branches.
Similar withholding procedures may ap-
ply to payments to U.S. branches that are
not described in paragraph (b)(2)(iv)(A)
of this section to the extent permitted by
the IRS. Any such branch must establish
that its situation is analogous to that of a
U.S. branch described in paragraph (b)(2)
(iv)(A) of this section. In the alternative,
the branch must establish that the with-
holding and reporting requirements under
chapter 3 of the Code and the regulations
thereunder impose an undue administra-
tive burden and that the collection of the
tax imposed by section 871(a) or 881(a)
on the foreign person (or its members in
the case of a foreign partnership) will not
be jeopardized by the exemption from
withholding. Generally, an undue admin-
istrative burden will be found to exist in a
case where the person entitled to the in-
come, such as a foreign insurance com-

pany, receives from the withholding agent
income on securities issued by a single
corporation, some of which is, and some
of which is not, effectively connected with
conduct of a trade or business within the
United States and the criteria for deter-
mining the effective connection are un-
duly difficult to apply because of the cir-
cumstances under which such securities
are held. No exemption from withhold-
ing shall be granted under this para-
graph (b)(2)(iv)(E) unless the person en-
titled to the income complies with such
other requirements as may be imposed
by the IRS and unless the IRS is satis-
fied that the collection of the tax on the
income involved will not be jeopardized
by the exemption from withholding. The
IRS may prescribe such procedures as
are necessary to make these determina-
tions (see § 601.601(d)(2) of this chap-
ter).

** * * *

(vi) Other payees. A payment to a per-
son described in § 1.6049-4(c)(1)(ii) that
the withholding agent would treat as a
payment to a foreign person without ob-
taining documentation for purposes of in-
formation reporting under section 6049 (if
the payment were interest) is treated as a
payment to a foreign payee for purposes
of chapter 3 of the Code and the regula-
tions thereunder (or to a foreign beneficial
owner to the extent provided in paragraph
(e)(1)(ii)(A)(6) or (7) of this section). Fur-
ther, a payment that the withholding agent
can reliably associate with documentary
evidence described in § 1.6049-5(c)(1)
relating to the payee is treated as a pay-
ment to a foreign payee. See § 1.1441-
5(b)(1) and (c)(1) for payee determina-
tions for payments to partnerships. See
§ 1.1441-5(e) for payee determinations
for payments to foreign trusts or foreign
estates.

(vii) * * *

(B) Special rules applicable to a with-
holding certificate from a nonqualified in-
termediary or flow-through entity. (1) In
the case of a payment made to a nonquali-
fied intermediary, a flow-through entity
(as defined in paragraph (c)(23) of this
section), or a U.S. branch described in
paragraph (b)(2)(iv) of this section (other
than a U.S. branch that is treated as a U.S.
person), a withholding agent can reliably
associate the payment with valid docu-

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mentation only to the extent that, prior to
the payment, the withholding agent can
allocate the payment to a valid nonquali-
fied intermediary, flow-through entity, or
U.S. branch withholding certificate (and a
withholding certificate provided by a non-
participating FFI with respect to a portion
of a payment that is a withholdable pay-
ment allocated to an exempt beneficial
owner as described in § 1.1471-3(c)(3)
(iii)(B)(4)); the withholding agent can re-
liably determine how much of the pay-
ment relates to valid documentation pro-
vided by a payee as determined under
paragraph (c)(12) of this section (i.e., a
person that is not itself an intermediary,
flow-through entity, or U.S. branch); and
the withholding agent has sufficient infor-
mation to report the payment on Form
1042-S or Form 1099, if reporting is re-
quired. See, however, paragraph (e)(3)(iv)
of this section for when a nonqualified
intermediary may report payees to the
withholding agent in a chapter 4 withhold-
ing rate pool, in which case a withholding
agent need not associate the portion of the
payment attributable to such payees with
documentation from each such payee. See
also paragraph (e)(3)(iii) of this section
for the requirements of a nonqualified in-
termediary withholding certificate, para-
graph (e)(3)(v) of this section for the re-
quirements of a U.S. branch withholding
certificate, and §§ 1.1441-5(c)(3)(iii) and
(e)(5)(iii) for the requirements of a flow-
through withholding certificate (including
the requirements for a withholding certif-
icate associated with a withholdable pay-
ment). Thus, a payment cannot be reliably
associated with valid documentation pro-
vided by a payee to the extent such doc-
umentation is lacking or unreliable, or to
the extent that information required to al-
locate and report all or a portion of the
payment to each payee is lacking or unre-
liable. If a withholding certificate attached
to an intermediary, U.S. branch, or flow-
through withholding certificate is another
intermediary, U.S. branch, or flow-
through withholding certificate, the rules
of this paragraph (b)(2)(vii)(B) apply by
treating the share of the payment allocable
to the other intermediary, U.S. branch, or
flow-through entity as if the payment were
made directly to such other entity. See
paragraph (e)(3)(iv)(D) of this section for
rules permitting information allocating a

payment to documentation to be received
after the payment is made.

(2) The rules of paragraph (b)(2)
(vii)(B)(1) of this section are illustrated by
the following examples. Each example il-
lustrates a payment that is not a withhold-
able payment and, as a result of which,
neither the chapter 4 status of the NQI nor
payee specific documentation with respect
to the chapter 4 status is required to be
provided to the withholding agent (and no
withholding applies under chapter 4 on each
payment). See paragraph (e)(3)(iv)(C) of
this section for the requirements of a with-
holding statement provided by a nonquali-
fied intermediary that receives a withhold-
able payment and for an example illustrating
the requirements of an NQI providing a
withholding statement to a withholding
agent for a withholdable payment.

Example 1. WA, a withholding agent, makes a
payment of U.S. source interest with respect to a
grandfathered obligation as described in § 1.1471-
2(b) (and thus the payment is not a withholdable
payment) to NQI, an intermediary that is a nonquali-
fied intermediary. NQI provides a valid intermediary
withholding certificate under paragraph (e)(3)(iii) of
this section. NQI does not, however, provide valid
documentation from the persons on whose behalf it
receives the interest payment, and, therefore, the
interest payment cannot be reliably associated with
valid documentation provided by a payee. WA must
apply the presumption rules of paragraph (b)(3)(v) of
this section to the payment.

Example 2. The facts are the same as in Example
1, except that NQI does attach valid beneficial owner
withholding certificates (as defined in paragraph
(e)(2)(i) of this section) from A, B, C, and D estab-
lishing their statuses as foreign persons. NQI does
not, however, provide WA with any information
allocating the payment among A, B, C, and D and,
therefore, WA cannot determine the portion of the
payment that relates to each beneficial owner with-
holding certificate. The interest payment cannot be
reliably associated with valid documentation from a
payee, and WA must apply the presumption rules of
paragraph (b)(3)(v) of this section to the payment.
See, however, paragraph (e)(3)(iv)(D) of this section
providing for alternative procedures that allow a
nonqualified intermediary to provide allocation in-
formation after a payment is made.

Example 3. The facts are the same as in Example
2, except that NQI provides allocation information
associated with its intermediary withholding certifi-
cate indicating that 25% of the interest payment is
allocable to A and 25% to B. NQI does not provide
any allocation information regarding the remaining
50% of the payment. WA may treat 25% of the
payment as made to A and 25% as made to B. The
remaining 50% of the payment cannot be reliably
associated with valid documentation from a payee,
however, since NQI did not provide information
allocating the payment. Thus, the remaining 50% of

the payment is subject to the presumption rules of
paragraph (b)(3)(v) of this section.

Example 4. WA makes a payment of U.S. source
interest to NQI1, an intermediary that is not a qual-
ified intermediary. NQI1 provides WA with a valid
nonqualified intermediary withholding certificate as
well valid beneficial owner withholding certificates
from A and B and a valid nonqualified intermediary
withholding certificate from NQI2. NQI2 has pro-
vided valid beneficial owner documentation from C
sufficient to establish C's status as a foreign person.
Based on information provided by NQI1, WA can
allocate 20% of the interest payment to A, and 20%
to B. Based on information that NQI2 provided
NQI1 and that NQI1 provides to WA, WA can
allocate 60% of the payment to NQI2, but can only
allocate one half of that payment (30%) to C. There-
fore, WA cannot reliably associate the remainder of
the payment made to NQI2 (30% of the total pay-
ment) with valid documentation and must apply the
presumption rules of paragraph (b)(3)(v) of this sec-
tion to that portion of the payment.

(C) Special rules applicable to a with-
holding certificate provided by a qualified
intermediary that does not assume pri-
mary withholding responsibility-(1) If a
payment is made to a qualified intermedi-
ary that does not assume primary with-
holding responsibility under chapters 3
and 4 of the Code or primary Form 1099
reporting and backup withholding respon-
sibility under chapter 61 and section 3406
of the Code for the payment, a withhold-
ing agent can reliably associate the pay-
ment with valid documentation only to the
extent that, prior to the payment, the with-
holding agent has received a valid quali-
fied intermediary withholding certificate
described in paragraph (e)(3)(ii) of this
section and the withholding agent can re-
liably determine the portion of the pay-
ment that relates to a chapter 3 withhold-
ing rate pool, as defined in paragraph
(c)(44) of this section; a chapter 4 with-
holding rate pool (including for a with-
holdable payment as described in para-
graph (e)(5)(v)(C)(2) of this section), as
defined in paragraph (c)(48) of this sec-
tion; or a pool attributable to U.S. exempt
recipients. In the case of a withholding
rate pool attributable to a U.S. non-
exempt recipient, a payment cannot be
reliably associated with valid documenta-
tion unless, prior to the payment, the qual-
ified intermediary has provided the U.S.
person's Form W-9 (or, in the absence of
the form, the name, address, and TIN, if
available, of the U.S. person) and suffi-
cient information for the withholding
agent to report the payment on Form
1099. See, however, paragraph (e)(5)

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(v)(C)(3) of this section for alternative
procedures for allocating payments
among U.S. non-exempt recipients and
paragraphs (e)(5)(v)(C)(1) and (2) of
this section for when a chapter 4 with-
holding rate pool of U.S. payees may be
provided by a qualified intermediary in-
stead of documentation with respect to
each U.S. non-exempt recipient.

(2) The rules of this paragraph
(b)(2)(vii)(C) are illustrated by the follow-
ing examples:

Example 1. WA, a withholding agent, makes a
payment of U.S. source dividends that is a withhold-
able payment to QI. QI provides WA with a valid
qualified intermediary withholding certificate on
which it indicates that it does not assume primary
withholding responsibility under chapters 3 and 4 or
primary Form 1099 reporting and backup withhold-
ing responsibility under chapter 61 and section 3406.
QI does not provide any information allocating the
dividend to withholding rate pools. WA cannot reli-
ably associate the payment with valid payee docu-
mentation and therefore must apply the presumption
rules applicable to a withholdable payment under
§ 1.1471-3(f)(5) to determine the status of the payee
for purposes of chapter 4. See Example 2 for an
application of the presumption rules under § 1.1471-
3(f).

Example 2. WA makes a payment of U.S. source
dividends that is a withholdable payment to QI,
which is an NFFE. QI has 5 customers: A, B, C, D,
and E, all of whom are individuals except for C. QI
has obtained valid documentation from A and B
establishing their entitlement to a 15% rate of tax on
U.S. source dividends under an income tax treaty. C
is a U.S. person that is an exempt recipient as defined
in paragraph (c)(20) of this section. D and E are U.S.
non-exempt recipients who have provided Forms
W-9 to QI. A, B, C, D, and E are each entitled to
20% of the dividend payment. QI provides WA with
a valid qualified intermediary withholding certificate
as described in paragraph (e)(3)(ii) of this section
with which it associates the Forms W-9 from D and
E. QI associates the following allocation information
with its qualified intermediary withholding certifi-
cate: 40% of the payment is allocable to the 15%
chapter 3 withholding rate pool, and 20% is allocable
to each of D and E. QI does not provide any alloca-
tion information regarding the remaining 20% of the
payment. WA cannot reliably associate 20% of the
payment with valid documentation and, therefore,
must apply the presumption rules applicable to a
withholdable payment. Because QI is receiving a
withholdable payment as an intermediary, under
paragraph (b)(3)(iii) of this section WA must apply
the presumption rule of § 1.1471-3(f)(5) to treat the
portion of the payment that cannot reliably be asso-
ciated with valid documentation as made to a non-
participating FFI account holder of QI. As a result,
WA is required to withhold at a 30% rate of tax
under chapter 4. See § 1.1441-3(a)(2) permitting
WA to credit the amount withheld under chapter 4
against the liability for tax due on the payment under
section 1441 or 1442. The 40% of the payment
allocable to the 15% withholding rate pool and the

portion of the payments allocable to D and E are
payments that can be reliably associated with docu-
mentation.

(D) Special rules applicable to a with-
holding certificate provided by a qualified
intermediary that assumes primary with-
holding responsibility under chapter 3
and chapter 4 of the Internal Revenue
Code. (1) In the case of a payment made
to a qualified intermediary that assumes
primary withholding responsibility under
chapters 3 and 4 of the Code with respect
to that payment (but does not assume pri-
mary Form 1099 reporting and backup
withholding responsibility under chapter
61 of the Code and section 3406), a with-
holding agent can reliably associate the
payment with valid documentation only to
the extent that, prior to the payment, the
withholding agent has received a valid
qualified intermediary withholding certif-
icate and the withholding agent can reli-
ably determine the portion of the payment
that relates to the withholding rate pool
for which the qualified intermediary as-
sumes primary withholding responsibility
and the portion of the payment attribut-
able to withholding rate pools for each
U.S. non-exempt recipient for whom the
qualified intermediary has provided a
Form W-9 (or, in absence of the form, the
name, address, and TIN, if available, of
the U.S. non-exempt recipient). See para-
graph (e)(5)(iv) of this section (requiring a
qualified intermediary assuming primary
withholding responsibility under chapter 3
to assume primary withholding responsi-
bility under chapter 4). See also paragraph
(e)(5)(v)(C)(3) of this section for alterna-
tive allocation procedures for payments
made to U.S. persons that are not exempt
recipients and paragraphs (e)(5)(v)(C)(1)
and (2) of this section for when a qualified
intermediary may provide a chapter 4
withholding rate pool of U.S. payees to a
withholding agent instead of documenta-
tion with respect to each U.S. non-exempt
recipient.

(2) Examples. The following examples
illustrate the rules of paragraph (b)(2)
(vii)(D)(1) of this section. See also the
example in paragraph (e)(5)(v)(D) for
rules for reporting of U.S. non-exempt
recipients when a qualified intermediary
that is an FFI reports a U.S. account under
chapter 4.

Example 1. WA makes a payment of U.S. source
interest that is a withholdable payment to QI, a

qualified intermediary that is an NFFE. QI provides
WA with a withholding certificate that indicates that
QI will assume primary withholding responsibility
under chapters 3 and 4 of the Code with respect to
the payment. In addition, QI attaches a Form W-9
from A, a U.S. non-exempt recipient, as defined in
paragraph (c)(21) of this section, and provides the
name, address, and TIN of B, a U.S. person that is
also a non-exempt recipient but who has not pro-
vided a Form W-9. QI associates a withholding
statement with its qualified intermediary withholding
certificate indicating that 10% of the payment is
attributable to A and 10% to B, and that QI will
assume primary withholding responsibility under
chapters 3 and 4 with respect to the remaining 80%
of the payment. WA can reliably associate the entire
payment with valid documentation. Although under
the presumption rule of paragraph (b)(3)(v) of this
section, an undocumented person receiving U.S.
source interest is generally presumed to be a foreign
person, WA has actual knowledge that B is a U.S.
non-exempt recipient and therefore must report the
payment on Form 1099 and backup withhold on the
interest payment under section 3406.

Example 2. The facts are the same as in Example
1, except that no information has been provided for
the 20% of the payment that is allocable to A and B.
Thus, QI has accepted withholding responsibility for
80% of the payment but has provided no information
for the remaining 20%. In this case, 20% of the
payment cannot be reliably associated with valid
documentation, and, under paragraph (b)(3)(iii) of
this section, WA must apply the presumption rule of
§ 1.1471-3(f)(5) to treat the payment as made to a
nonparticipating FFI and withhold 30% of the gross
amount of the payment (because the payment is a
withholdable payment and is treated as made to a
foreign payee under paragraph (b)(3)(v) of this sec-
tion). See Example 2 in paragraph (b)(2)(vii)(C)(2)
and § 1.1471-3(f)(1).

(E) Special rules applicable to a with-
holding certificate provided by a qualified
intermediary that assumes primary Form
1099 reporting and backup withholding
responsibility but not primary withholding
under chapter 3 and chapter 4. (1) If a
payment is made to a qualified intermedi-
ary that assumes primary Form 1099 re-
porting and backup withholding responsi-
bility for the payment (but does not
assume primary withholding responsibil-
ity under chapters 3 and 4 of the Code), a
withholding agent can reliably associate
the payment with valid documentation
only to the extent that, prior to the pay-
ment, the withholding agent has received
a valid qualified intermediary withholding
certificate and the withholding agent can
reliably determine the portion of the pay-
ment that relates to a withholding rate
pool or pools provided as part of the qual-
ified intermediary's withholding state-
ment and the portion of the payment for
which the qualified intermediary assumes

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primary Form 1099 reporting and backup
withholding responsibility. See paragraph
(e)(5)(v)(C)(2) of this section for when a
qualified intermediary may include a
chapter 4 withholding rate pool on a with-
holding statement provided to a withhold-
ing agent with respect to a withholdable
payment.

(2) The following example illustrates
the rules of paragraph (b)(2)(vii)(D)(1) of
this section:

Example. WA, a withholding agent, makes a
payment of U.S. source dividends that is a withhold-
able payment to QI, a qualified intermediary that is a
participating FFI. QI has provided WA with a valid
qualified intermediary withholding certificate. QI
states on its withholding statement accompanying
the certificate that it assumes primary Form 1099
reporting and backup withholding responsibility but
does not assume primary withholding responsibility
under chapters 3 and 4 of the Code. QI represents
that 15% of the dividend is subject to a 30% rate of
withholding, 75% of the dividend is subject to a 15%
rate of withholding. QI represents that it assumes
primary Form 1099 reporting and backup withhold-
ing for the remaining 10% of the payment and will
not need to provide a chapter 4 withholding rate pool
with respect to this portion of the payment or docu-
mentation with respect to U.S. non-exempt recipi-
ents. WA can reliably associate the entire payment
with valid documentation.

(F) Special rules applicable to a with-
holding certificate provided by a qualified
intermediary that assumes primary with-
holding responsibility under chapter 3
and chapter 4 and primary Form 1099
reporting and backup withholding respon-
sibility and a withholding certificate pro-
vided by a withholding foreign partner-
ship or a withholding foreign trust. If a
payment is made to a qualified intermedi-
ary that assumes both primary withhold-
ing responsibility under chapters 3 and 4
of the Code and primary Form 1099 re-
porting and backup withholding responsi-
bility under chapter 61 and section 3406
of the Code for the payment, a withhold-
ing agent can reliably associate a payment
with valid documentation provided that it
receives a valid qualified intermediary
withholding certificate as described in
paragraph (e)(3)(ii) of this section. In the
case of a payment made to a withholding
foreign partnership or a withholding for-
eign trust, the withholding agent can reli-
ably associate the payment with valid doc-
umentation to the extent it can associate
the payment with a valid withholding cer-
tificate described in § 1.1441-5(c)(2)(iv)
or in § 1.1441-5(e)(5)(v) (respectively).

See paragraph (e)(5)(iv) of this section,
providing that a qualified intermediary as-
suming primary withholding responsibil-
ity under chapter 3 must also assume pri-
mary withholding responsibility under
chapter 4 with respect to a withholdable
payment.

(3) Presumptions regarding payee's
status in the absence of documentation-
(i) General rules. A withholding agent
that cannot, prior to the payment, reliably
associate (within the meaning of para-
graph (b)(2)(vii) of this section) a pay-
ment of an amount subject to withholding
(as described in § 1.1441-2(a)) with valid
documentation may rely on the presump-
tions of this paragraph (b)(3) to determine
the status of the person receiving the pay-
ment as a U.S. or a foreign person and the
person's other relevant characteristics
(e.g., as an owner or intermediary, as an
individual, trust, partnership, or corpora-
tion). The determination of withholding
and reporting requirements applicable to
payments to a person presumed to be a
foreign person is governed only by the
provisions of chapters 3 and 4 of the Code
and the regulations thereunder. For the
determination of withholding and report-
ing requirements applicable to payments
to a person presumed to be a U.S. person,
see chapter 61 of the Code, section 3402,
3405, or 3406, and, with respect to the
reporting requirements of a participating
FFI or registered deemed-compliant FFI,
see chapter 4 of the Code and the related
regulations. A presumption that a payee is
a foreign payee is not a presumption that
the payee is a foreign beneficial owner.
Therefore, the provisions of this para-
graph (b)(3) have no effect for purposes of
reducing the withholding rate if associat-
ing the payment with documentation of
foreign beneficial ownership is required as
a condition for such rate reduction. See
paragraph (b)(3)(ix) of this section for
consequences to a withholding agent that
fails to withhold in accordance with the
presumptions set forth in this paragraph
(b)(3) or if the withholding agent has ac-
tual knowledge or reason to know of facts
that are contrary to the presumptions set
forth in this paragraph (b)(3). See para-
graph (b)(2)(vii) of this section for rules
regarding the extent to which a withhold-
ing agent can reliably associate a payment
with documentation.

(ii) Presumptions of classification
as individual, corporation, partnership,
etc .- (A) In general. A withholding agent
that cannot reliably associate a payment
with a valid withholding certificate or that
has received valid documentary evidence
under §§ 1.1441-1(e)(1)(ii)(A)(2) and
1.6049-5(c)(1) or (4) but cannot deter-
mine a payee's classification from the
documentary evidence must apply the
rules of this paragraph (b)(3)(ii) to deter-
mine the payee's classification as an indi-
vidual, trust, estate, corporation, or part-
nership. The fact that a payee is presumed
to have a certain status under the provi-
sions of this paragraph (b)(3)(ii) does not
mean that it is excused from furnishing
documentation if documentation is other-
wise required to obtain a reduced rate of
withholding under this section. For exam-
ple, if, for purposes of this paragraph
(b)(3)(ii), a payee is presumed to be
a tax-exempt organization based on
§ 1.6049-4(c)(1)(ii)(B), the withholding
agent cannot rely on this presumption to
reduce the rate of withholding on pay-
ments to such person (if such person is
also presumed to be a foreign person un-
der paragraph (b)(3)(iii)(A) of this sec-
tion) because a reduction in the rate of
withholding for payments to a foreign tax-
exempt organization generally requires
that a valid Form W-8 described in
§ 1.1441-9(b)(2) be furnished to the with-
holding agent.

(B) No documentation provided. If the
withholding agent cannot reliably associ-
ate a payment with a valid withholding
certificate or valid documentary evidence,
it must presume that the payee is an indi-
vidual, a trust, or an estate, if the payee
appears to be such person (e.g., based on
the payee's name or information in the
customer file). In the absence of reliable
indications that the payee is an individual,
a trust, or an estate, the withholding agent
must presume that the payee is a corpora-
tion or one of the persons enumerated
under § 1.6049-4(c)(1)(ii)(B) through
(Q) if it can be so treated under § 1.6049-
4(c)(1)(ii)(A)(1) or any one of the para-
graphs under § 1.6049-4(c)(1)(ii)(B)
through (Q) without the need to furnish
documentation. If the withholding agent
cannot treat a payee as a person described
in § 1.6049-4(c)(1)(ii)(A)(1) through
(Q), then the payee shall be presumed to

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be a partnership. If such a partnership is
presumed to be foreign, it is not the ben-
eficial owner of the income paid to it. See
paragraph (c)(6) of this section. If such a
partnership is presumed to be domestic, it
is a U.S. non-exempt recipient for pur-
poses of chapter 61 of the Code.

(C) Documentary evidence furnished
for offshore obligation. If the withholding
agent receives valid documentary evi-
dence, as described in § 1.6049-5(c)(1) or
(c)(4), with respect to an offshore obliga-
tion from an entity but the documentary
evidence does not establish the entity's
classification as a corporation, trust, es-
tate, or partnership, the withholding agent
may presume (in the absence of actual
knowledge otherwise) that the entity is
the type of person enumerated under
§ 1.6049-4 (c)(1)(ii)(B) through (Q) if it
can be so treated under any one of those
paragraphs without the need to furnish
documentation. If the withholding agent
cannot treat a payee as a person described
in § 1.6049-4(c)(1)(ii)(B) through (Q),
then the payee shall be presumed to be a
corporation unless the withholding agent
knows, or has reason to know, that the
entity is not classified as a corporation for
U.S. tax purposes. If a payee is, or is
presumed to be, a corporation under this
paragraph (b)(3)(ii)(C) and a foreign per-
son under paragraph (b)(3)(iii) of this sec-
tion, a withholding agent shall not treat
the payee as the beneficial owner of in-
come if the withholding agent knows, or
has reason to know, that the payee is not
the beneficial owner of the income. For
this purpose, a withholding agent will
have reason to know that the payee is not
a beneficial owner if the documentary ev-
idence indicates that the payee is a bank,
broker, intermediary, custodian, or other
agent, or is treated under § 1.6049-
4(c)(1)(ii)(B) through (Q) as such a per-
son. A withholding agent may, however,
treat such a person as a beneficial owner if
the foreign person provides a statement, in
writing and signed by a person with au-
thority to sign the statement, that is at-
tached to the documentary evidence and
that states that the foreign person is the
beneficial owner of the income.

(iii) Presumption of U.S. or foreign
status. A payment that the withholding
agent cannot reliably associate with doc-
umentation is presumed to be made to a

U.S. person, except as otherwise provided
in this paragraph (b)(3)(iii), in paragraphs
(b)(3)(iv) and (v) of this section, or in
§ 1.1441-5(d) or (e). A withholding agent
must treat a payee that is presumed or
known to be a trust but for which the
withholding agent cannot determine the
type of trust in accordance with the pre-
sumptions specified in § 1.1441-5(e)(6)
(ii). In the case of a payment that is a
withholdable payment, a withholding
agent must apply the presumption rule
under § 1.1471-3(f) for purposes of chap-
ter 4.

(A) Payments to exempt recipients-
(1) In general. If a withholding agent can-
not reliably associate a payment with doc-
umentation from the payee and the payee
is an exempt recipient (as determined un-
der the provisions of § 1.6049-4(c)(1)(ii)
in the case of interest, or under similar
provisions under chapter 61 of the Code
applicable to the type of payment in-
volved, but not including a payee that the
withholding agent may treat as a foreign
intermediary in accordance with para-
graph (b)(3)(v) of this section), the payee
is presumed to be a foreign person and not
a U.S. person-

(i) If the withholding agent has actual
knowledge of the payee's employer iden-
tification number and that number begins
with the two digits "98";

(ii) If the withholding agent's commu-
nications with the payee are mailed to an
address in a foreign country;

(iii) If the name of the payee indicates
that the entity is the type of entity that is
on the per se list of foreign corporations
contained in § 301.7701-2(b)(8)(i) of this
chapter (and, in the case of a name which
contains the designation "corporation" or
"company," the withholding agent has a
document that reasonably demonstrates
the payee was incorporated in the relevant
jurisdiction);

(iv) If the payment is made with respect
to an offshore obligation (as defined in
paragraph (c)(37) of this section); or

(v) With respect to an account opened
after July 1, 2014, if the withholding agent
has a telephone number for the person
outside of the United States.

(2) Special rule for withholdable pay-
ments made to exempt recipients. Not-
withstanding the provisions of paragraph
(b)(3)(iii)(A)(1) of this section, a payment

that is also a withholdable payment made
to an entity determined to be an exempt
recipient under § 1.6049-4(c)(1)(ii)(A)
(1), (F), (G), (H), (M), (O), (P), or (Q) in
the case of interest (or under similar pro-
visions in chapter 61 applicable to the
type of income) shall be presumed made
to a foreign payee in the absence of doc-
umentation (including documentary evi-
dence) establishing the entity as a U.S.
person. Additionally, a withholding agent
may apply the rule provided in this para-
graph (b)(3)(iii)(A)(2) instead of the rule
in provided in paragraph (b)(3)(iii)(A)(1)
of this section for all payments with re-
spect to an obligation. The provisions of
this paragraph (b)(3)(iii)(A)(2) will not
apply, however, to a withholdable pay-
ment made with respect to a preexisting
obligation to a payee that the withholding
agent determined prior to July 1, 2014, to
be a U.S. exempt recipient.

** * * *

(D) Payments with respect to offshore
obligations. A payment is presumed made
to a foreign payee if the payment is made
outside the United States (as defined in
§ 1.6049-5(e)) with respect to an offshore
obligation (as defined in paragraph (c)(37)
of this section) and the withholding agent
does not have actual knowledge that the
payee is a U.S. person. See § 1.6049-
5(d)(2) and (3) for exceptions to this rule.
* * * * *

(iv) Grace period. A withholding agent
may choose to apply the provisions of
§ 1.6049-5(d)(2)(ii) regarding a 90-day
grace period for purposes of this para-
graph (b)(3) (by applying the term with-
holding agent instead of the term payor) to
amounts described in § 1.1441-6(c)(2)
and to amounts covered by a Form 8233
described in § 1.1441-4(b)(2)(ii). Thus,
for these amounts, a withholding agent
may choose to treat the payee as a foreign
person and withhold under chapter 3 of
the Code (and the regulations thereunder)
while awaiting documentation. For pur-
poses of determining the rate of withhold-
ing under this section, the withholding
agent must withhold at the unreduced 30-
percent rate at the time that the amounts
are credited to an account. For reporting
of amounts credited both before and after
the grace period, see § 1.1461-1(c)(4)
(i)(A). The following adjustments shall be
made at the expiration of the grace period:

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(A) If, at the end of the grace period,
the documentation is not furnished in the
manner required under this section and the
account holder is presumed to be a U.S.
non-exempt recipient, then backup with-
holding only applies to amounts credited
to the account after the expiration of the
grace period. Amounts credited to the ac-
count during the grace period shall be
treated as owned by a foreign payee and
adjustments must be made to correct any
underwithholding on such amounts in the
manner described in § 1.1461-2.

* * * * *

(v) * * *

(B) Beneficial owner documentation or
allocation information is lacking or unre-
liable. Except as otherwise provided in
this paragraph (b)(3)(v)(B), any portion of
a payment that the withholding agent may
treat as made to a foreign intermediary
(whether a nonqualified or a qualified in-
termediary) but that the withholding agent
cannot treat as reliably associated with
valid documentation under the rules of
paragraph (b)(2)(vii) of this section is pre-
sumed made to an unknown, undocu-
mented foreign payee. As a result, a with-
holding agent must deduct and withhold
30 percent from any payment of an
amount subject to withholding. If a with-
holding certificate attached to an interme-
diary certificate is another intermediary
withholding certificate or a flow-through
withholding certificate, the rules of this
paragraph (b)(3)(v)(B) (or § 1.1441-
5(d)(3) or (e)(6)(iii)) apply by treating the
portion of the payment allocable to the
other intermediary or flow-through entity
as if it were made directly to the other
intermediary or flow-through entity. Any
payment of an amount subject to with-
holding that is presumed made to an un-
documented foreign person must be re-
ported on Form 1042-S. See § 1.1461-
1(c). See § 1.6049-5(d) for payments that
are not subject to withholding under chap-
ter 3. However, in the case of a payment
that is a withholdable payment made to a
foreign intermediary, the presumption
rules under § 1.1471-3(f)(5) shall apply.

(vi) U.S. branches and territory finan-
cial institutions not treated as U.S. per-
sons. The rules of paragraph (b)(3)(v)(B)
of this section shall apply to payments to
a U.S. branch or a territory financial insti-
tution described in paragraph (b)(2)(iv)

(A) of this section that has provided a
withholding certificate as described in
paragraph (e)(3)(v) of this section on
which it has not agreed to be treated as a
U.S. person.

(vii) Joint payees-(A) In general. Ex-
cept as provided in paragraph (b)(3)(vii)
(B) of this section and this paragraph
(b)(3)(vii)(A), if a withholding agent
makes a payment to joint payees and can-
not reliably associate the payment with
valid documentation from all payees, the
payment is presumed made to an uniden-
tified U.S. person. If, however, a with-
holding agent makes a payment that is a
withholdable payment and any joint payee
does not appear, by its name and other
information contained in the account file,
to be an individual, then the entire amount
of the payment will be treated as made to
an undocumented foreign person. See
paragraph (b)(3)(iii) of this section for
presumption rules that apply in the case of
a payment that is a withholdable payment.
However, if one of the joint payees pro-
vides a Form W-9 furnished in accor-
dance with the procedures described in
§§ 31.3406(d)-1 through 31.3406(d)-5 of
this chapter, the payment shall be treated
as made to that payee. See § 31.3406(h)-2
of this chapter for rules to determine the
relevant payee if more than one Form
W-9 is provided. For purposes of apply-
ing this paragraph (b)(3), the grace period
rules in paragraph (b)(3)(iv) of this sec-
tion shall apply only if each payee meets
the conditions described in paragraph
(b)(3)(iv) of this section.

(B) Special rule for offshore obliga-
tions. If a withholding agent makes a pay-
ment to joint payees and cannot reliably
associate a payment with valid documen-
tation from all payees, the payment is
presumed made to an unknown foreign
payee if the payment is made outside the
United States (as defined in § 1.6049-
5(e)) with respect to an offshore obliga-
tion (as defined in § 1.6049-5(c)(1)).
* * * * *

(ix) Effect of reliance on presumptions
and of actual knowledge or reason to
know otherwise-(A) General rule. Ex-
cept as otherwise provided in paragraph
(b)(3)(ix)(B) of this section, a withholding
agent that withholds on a payment under
section 3402, 3405, or 3406 in accordance
with the presumptions set forth in this

paragraph (b)(3) shall not be liable for
withholding under this section even if it is
later established that the beneficial owner
of the payment is, in fact, a foreign per-
son. Similarly, a withholding agent that
withholds on a payment under this section
in accordance with the presumptions set
forth in this paragraph (b)(3) shall not be
liable for withholding under section 3402
or 3405 or for backup withholding under
section 3406 even if it is later established
that the payee or beneficial owner is, in
fact, a U.S. person. A withholding agent
that, instead of relying on the presump-
tions described in this paragraph (b)(3),
relies on its own actual knowledge to
withhold a lesser amount, not withhold, or
not report a payment, even though report-
ing of the payment or withholding a
greater amount would be required if the
withholding agent relied on the presump-
tions described in this paragraph (b)(3),
shall be liable for tax, interest, and penal-
ties to the extent provided under section
1461 and the regulations under that sec-
tion. See paragraph (b)(7) of this section
for provisions regarding such liability if
the withholding agent fails to withhold in
accordance with the presumptions de-
scribed in this paragraph (b)(3).
* * * * *

(x) Examples. The provisions of this
paragraph (b)(3) are illustrated by the fol-
lowing examples:

Example 1. A withholding agent, W, makes a
payment of U.S. source interest with respect to a
grandfathered obligation as described in § 1.1471-
2(b) (and thus the payment is not a withholdable
payment) to X, Inc. with respect to an account W
maintains for X, Inc. outside the United States. W
cannot reliably associate the payment to X, Inc. with
documentation. Under § 1.6049-4(c)(1)(ii)(A)(1),
W may treat X, Inc. as a corporation that is an
exempt recipient under chapter 61. Thus, under the
presumptions described in paragraph (b)(3)(iii) of
this section as applicable to a payment to an exempt
recipient that is not a withholdable payment, W must
presume that X, Inc. is a foreign person (because the
payment is made with respect to an offshore obliga-
tion). However, W knows that X, Inc. is a U.S.
person who is an exempt recipient. W may not rely
on its actual knowledge to not withhold under this
section. If W's knowledge is, in fact, incorrect, W
would be liable for tax, interest, and, if applicable,
penalties, under section 1461. W would be permitted
to reduce or eliminate its liability for the tax by
establishing, in accordance with paragraph (b)(7) of
this section, that the tax is not due or has been
satisfied. If W's actual knowledge is, in fact, correct,
W may nevertheless be liable for tax, interest, or
penalties under section 1461 for the amount that W
should have withheld based upon the presumptions.

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W would be permitted to reduce or eliminate its
liability for the tax by establishing, in accordance
with paragraph (b)(7) of this section, that its actual
knowledge was, in fact, correct and that no tax or a
lesser amount of tax was due.

Example 2. A withholding agent, W, makes a
payment of U.S. source interest with respect to a
grandfathered obligation as described in § 1.1471-
2(b) (and thus the payment is not a withholdable
payment) to Y who does not qualify as an exempt
recipient under § 1.6049-4(c)(1)(ii). W cannot reli-
ably associate the payment to Y with documentation.
Under the presumptions described in paragraph
(b)(3)(iii) of this section, W must presume that Y is
a U.S. person who is not an exempt recipient for
purposes of section 6049. However, W knows that Y
is a foreign person. W may not rely on its actual
knowledge to withhold under this section rather than
backup withhold under section 3406. If W's knowl-
edge is, in fact, incorrect, W would be liable for tax,
interest, and, if applicable, penalties, under section
3403. If W's actual knowledge is, in fact, correct, W
may nevertheless be liable for tax, interest, or pen-
alties under section 3403 for the amount that W
should have withheld based upon the presumptions.
Paragraph (b)(7) of this section does not apply to
provide relief from liability under section 3403.

Example 3. A withholding agent, W, makes a
payment of U.S. source dividends to X, Inc. with
respect to an account that X, Inc. opened with W
after June 30, 2014. W cannot reliably associate the
payment to X, Inc. with documentation but may treat
X, Inc. as an exempt recipient for purposes of this
section applying the rules of § 1.6042-3(b)(1)(vii).
However, because the dividend payment is a with-
holdable payment and W did not determine the chap-
ter 3 status of X, Inc. before July 1, 2014, W may
treat X, Inc. as a U.S. person that is an exempt
recipient only if W obtains documentary evidence
supporting X, Inc.'s status as a U.S. person. See
paragraph (b)(3)(iii)(A)(2) of this section.

Example 4. A withholding agent, W, is a plan
administrator who makes pension payments to per-
son X with a mailing address in a foreign country
with which the United States has an income tax
treaty in effect. Under that treaty, the type of pension
income paid to X is taxable solely in the country of
residence. The plan administrator has a record of X's
U.S. social security number. W has no actual knowl-
edge or reason to know that X is a foreign person. W
may rely on the presumption of paragraph
(b)(3)(iii)(C) of this section in order to treat X as a
U.S. person. Therefore, any withholding and report-
ing requirements for the payment are governed by
the provisions of section 3405 and the regulations
under that section.

(4) List of exemptions from, or reduced
rates of, withholding under chapter 3 of
the Code. A withholding agent that has
determined that the payee is a foreign
person for purposes of paragraph (b)(1) of
this section must determine whether the
payee is entitled to a reduced rate of with-
holding under section 1441, 1442, or
1443. This paragraph (b)(4) identifies
items for which a reduction in the rate of

withholding may apply and whether the
rate reduction is conditioned upon docu-
mentation being furnished to the with-
holding agent. Documentation required
under this paragraph (b)(4) is documenta-
tion that a withholding agent must be able
to associate with a payment upon which it
can rely to treat the payment as made to a
foreign person that is the beneficial owner
of the payment in accordance with para-
graph (e)(1)(ii) of this section. This para-
graph (b)(4) also cross-references other
sections of the Code and applicable regu-
lations in which some of these exceptions,
exemptions, or reductions are further ex-
plained. See, for example, paragraph
(b)(4)(viii) of this section, dealing with
effectively connected income, that cross-
references § 1.1441-4(a); see paragraph
(b)(4)(xv) of this section, dealing with
exemptions from, or reductions of, with-
holding under an income tax treaty, that
cross-references § 1.1441-6. This para-
graph (b)(4) is not an exclusive list of
items to which a reduction of the rate of
withholding may apply and, thus, does not
preclude an exemption from, or reduction
in, the rate of withholding that may oth-
erwise be allowed under the regulations
under the provisions of chapter 3 of the
Code for a particular item of income iden-
tified in this paragraph (b)(4). The exclu-
sions and limitations specified in this
paragraph (b)(4) apply for purposes of
chapter 3. Additional withholding and
documentation requirements may apply to
withholding agents under chapter 4 with
respect to payments that are withholdable
payments. See, for example, § 1.1471-
2(a) requiring withholding on withhold-
able payments made to certain FFIs and
§ 1.1471-2(a)(4) for payments exempted
from withholding under section 1471(a).

(i) Portfolio interest described in sec-
tion 871(h) or 881(c) and substitute inter-
est payments described in § 1.871-7(b)(2)
or § 1.881-2(b)(2) are exempt from
withholding under section 1441(a). See
§ 1.871-14 for regulations regarding port-
folio interest and section 1441(c)(9) for
the exemption from withholding for port-
folio interest. Documentation establishing
foreign status is required for interest on an
obligation in registered form to qualify as
portfolio interest. See section 871(h)(2)
(B)(ii) and § 1.871-14(c)(1)(ii)(C). For
special documentation rules regarding

foreign-targeted registered obligations de-
scribed in § 1.871-14(e)(2) (and issued
before January 1, 2016), see § 1.871-
14(e)(3) and (4) and, in particular,
§ 1.871-14(e)(4)(i)(A) and (ii)(A) regard-
ing when the withholding agent must re-
ceive the documentation. The documenta-
tion furnished for purposes of qualifying
interest as portfolio interest serves as the
basis for the withholding exemption for
purposes of this section and establishing
foreign status for purposes of section
6049. See § 1.6049-5(b)(8). Documenta-
tion establishing foreign status is not
required for qualifying interest on an
obligation in bearer form described in
§ 1.871-14(b)(1) (and issued before
March 19, 2012) as portfolio interest.
However, in certain cases, documenta-
tion for portfolio interest on a bearer
obligation may have to be furnished in
order to establish foreign status for pur-
poses of the information reporting pro-
visions of section 6049 and backup
withholding under section 3406. See
§ 1.6049-5(b)(7).

* * * * *

(5) * * *

(ix) Payments to a foreign person that
are governed by section 6050W (dealing
with payment card and third party net-
work transactions) are exempt from infor-
mation reporting under § 1.6050W-
1(a)(5)(ii).

(6) Rules of withholding for payments
by a foreign intermediary or certain U.S.
branches-(i) In general. A foreign inter-
mediary described in paragraph (e)(3)(i)
of this section or a U.S. branch or territory
financial institution described in para-
graph (b)(2)(iv) of this section that re-
ceives an amount subject to withholding
(as defined in § 1.1441-2(a)) shall be re-
quired to withhold (if another withholding
agent has not withheld the full amount
required) and report such payment under
chapter 3 of the Code and the regulations
thereunder except as otherwise provided
in this paragraph (b)(6). A nonqualified
intermediary, U.S. branch, or territory fi-
nancial institution described in paragraph
(b)(2)(iv) of this section (other than a U.S.
branch or territory financial institution
that is treated as a U.S. person) shall not
be required to withhold or report if it has
provided a valid nonqualified intermedi-
ary withholding certificate or a U.S.

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branch withholding certificate, it has pro-
vided all of the information required by
paragraph (e)(3)(iv) of this section (with-
holding statement), and it does not know,
and has no reason to know, that another
withholding agent failed to withhold the
correct amount or failed to report the pay-
ment correctly under § 1.1461-1(c). The
withholding requirement of a nonqualified
intermediary under the previous sentence
also excludes a case in which withholding
under chapter 4 was applied by a with-
holding agent on the payment. See
§ 1.1441-3(a)(2) (coordinating withhold-
ing under chapter 3 with withholding ap-
plied under chapter 4 of the Code). A
qualified intermediary's obligations to
withhold and report shall be determined in
accordance with its qualified intermediary
withholding agreement.

(ii) Examples. The following examples
illustrate the rules of paragraph (b)(6)(i)
of this section and coordinate rules for
withholding that apply under chapter 4
with those that apply under chapter 3. See
also paragraph (e)(3)(iv)(C) of this section
for the requirements of withholding state-
ments provided by nonqualified interme-
diaries.

Example 1. FB, a foreign bank, acts as interme-
diary for five different individuals, A, B, C, D, and
E, each of whom owns U.S. securities that generate
U.S. source dividends (that are withholdable pay-
ments). The dividends are paid by USWA, a U.S.
withholding agent. FB furnished USWA with a non-
qualified intermediary withholding certificate, de-
scribed in paragraph (e)(3)(iii) of this section, on
which FB certifies its status as a participating FFI
(such that withholding under chapter 4 does not
apply), to which it attached valid withholding certif-
icates for A, B, C, D, and E. The withholding cer-
tificates from A and B claim a 15% reduced rate of
withholding under an income tax treaty. C, D, and E
claim no reduced rate of withholding. FB provides a
withholding statement that meets all of the require-
ments of paragraph (e)(3)(iv) of this section, includ-
ing information allocating 20% of each dividend
payment to each of A, B, C, D, and E. FB does not
have actual knowledge or reason to know that
USWA did not withhold the correct amounts or
report the dividends on Forms 1042-S to each of A,
B, C, D, and E. FB is not required to withhold or to
report the dividends to A, B, C, D, and E.

Example 2. The facts are the same as in Example
1, except that FB did not provide any information for
USWA to determine how much of the dividend
payments were made to A, B, C, D, and E. Because
USWA could not reliably associate the dividend
payments with documentation under paragraph
(b)(2)(vii) of this section with respect to a payment
that is a withholdable payment, USWA applied the
presumption rule of § 1.1471-3(f)(5) and withheld
30% from all dividend payments under chapter 4 and

filed a Form 1042-S reporting the payment to an
account holder of FB that is a non-participating FFI.
FB is deemed to know that USWA did not report the
payment to A, B, C, D, and E because it did not
provide all of the information required on a with-
holding statement under paragraph (e)(3)(iv) of this
section (i.e., allocation information). Although FB is
not required to withhold on the payment under this
section because the full 30% withholding was im-
posed by USWA, it is required to report the pay-
ments on Forms 1042-S to A, B, C, D, and E. FB's
intentional failure to do so will subject it to inten-
tional disregard penalties under sections 6721 and
6722.

(7) Liability for failure to obtain doc-
umentation timely or to act in accordance
with applicable presumptions-(i) Gen-
eral rule. A withholding agent that cannot
reliably associate a payment with valid
documentation on the date of payment and
that does not withhold under this section,
or withholds at less than the 30-percent
rate prescribed under section 1441(a) and
paragraph (b)(1) of this section, is liable
under section 1461 for the tax required to
be withheld under chapter 3 of the Code
and the regulations thereunder, without
the benefit of a reduced rate unless-

(A) The withholding agent has appro-
priately relied on the presumptions de-
scribed in paragraph (b)(3) of this section
(including the grace period described in
paragraph (b)(3)(iv) of this section) in or-
der to treat the payee as a U.S. person or,
if applicable, on the presumptions de-
scribed in § 1.1441-4(a)(2)(ii) or (a)(3)(i)
to treat the payment as effectively con-
nected income;

(B) The withholding agent can demon-
strate to the satisfaction of the district
director or the Assistant Commissioner
(International) that the proper amount of
tax, if any, was in fact paid to the IRS;

(C) No documentation is required un-
der section 1441 or this section in order
for a reduced rate of withholding to apply;
or

* * * * *

(ii) Proof that tax liability has been
satisfied-(A) In general. Proof of pay-
ment of tax may be established for pur-
poses of paragraph (b)(7)(i)(B) of this sec-
tion on the basis of a Form 4669 (or such
other form as the IRS may prescribe in
published guidance (see § 601.601(d)(2)
of this chapter)) establishing the amount
of tax, if any, actually paid by or for the
beneficial owner on the income. Proof that
a reduced rate of withholding was, in fact,

appropriate under the provisions of chap-
ter 3 of the Code and the regulations
thereunder may also be established after
the date of payment by the withholding
agent on the basis of a valid withholding
certificate or other appropriate documen-
tation received after that date that was
effective as of the date of payment. A
withholding certificate furnished after the
date of payment will be considered effec-
tive as of the date of the payment if the
certificate contains a signed affidavit (ei-
ther at the bottom of the form or on an
attached page) that states that the informa-
tion and representations contained on the
certificate were accurate as of the time of
the payment. A withholding certificate re-
ceived within 30 days after the date of the
payment will not be considered to be un-
reliable solely because it does not contain
the affidavit described in the preceding
sentence. However, in the case of a with-
holding certificate of an individual re-
ceived more than a year after the date of
payment, the withholding agent will be
required to obtain, in addition to the with-
holding certificate and affidavit, docu-
mentary evidence, as described in
§ 1.1471-3(c)(5)(i), that supports the in-
dividual's claim of foreign status or doc-
umentary evidence described in § 1.1441-
6(c)(4)(i) to support any treaty claim
made on the certificate. In the case of a
withholding certificate of an entity re-
ceived more than a year after the date of
payment, the withholding agent will be
required to obtain, in addition to the with-
holding certificate and affidavit, docu-
mentary evidence described in § 1.1471-
3(c)(5)(i) that supports the entity's claim
of foreign status or documentary evidence
described in § 1.1441-6(c)(4)(ii) to sup-
port any treaty claim made on the certifi-
cate. If documentation other than a with-
holding certificate is submitted from a
payee more than a year after the date of
payment, the withholding agent will be
required to obtain from the payee a with-
holding certificate and affidavit support-
ing the claim of chapter 3 status as of the
time of the payment. See, however, para-
graph (b)(7)(ii)(B) of this section for spe-
cial rules that apply when a withholding
certificate is received after the date of the
payment to claim that income is effec-
tively connected with the conduct of a
U.S. trade or business. See § 1.1471-

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3(c)(7)(ii) for additional requirements that
may apply under chapter 4 for documen-
tation obtained after the date of payment
of a withholdable payment.

(B) [Reserved]. For further guidance,
see § 1.1441-1T(b)(7)(ii)(B).

* * * * *

(iv) Special rule for determining valid-
ity of withholding certificate containing
inconsequential errors. A withholding
agent may treat a withholding certificate
as valid when the certificate includes an
error described as an inconsequential error
in § 1.1471-3(c)(7)(i) for which the with-
holding agent obtains documentation suf-
ficient for supporting a payee's claim of
status as a foreign person or, for a payee
that is an entity, its classification to the
extent permitted under § 1.1471-3(c)(7)
(i). For example, if the country of resi-
dence is abbreviated in an ambiguous way
on a beneficial owner withholding certif-
icate provided to establish the beneficial
owner's foreign status, a withholding
agent may treat the withholding certificate
as valid if it has obtained documentary
evidence supporting that the beneficial
owner's residence is in a country other
than the United States.

(v) Special effective date. See para-
graph (f)(2)(ii) of this section for the spe-
cial effective date applicable to this para-
graph (b)(7).

* * * * *

(c) Definitions. The following defini-
tions apply for purposes of sections 1441
through 1443, 1461, and regulations under
those sections. For definitions of terms
used in these regulations that are defined
under sections 1471 through 1474, see
subparagraphs (43) through (56) of this
paragraph.

* * * * *

(2) Foreign and U.S. person-(i) In
general. The term foreign person means
any person that is not a U.S. person, in-
cluding a QI branch of a U.S. financial
institution (as defined in § 1.1471-
1(b)(109). Such a branch continues to be a
U.S. payor for purposes of chapter 61 of
the Code. See § 1.6049-5(c)(4). A U.S.
person is a person described in section
7701(a)(30), the U.S. government (includ-
ing an agency or instrumentality thereof),
a State (including an agency or instrumen-
tality thereof), or the District of Columbia

(including an agency or instrumentality
thereof).

(ii) [Reserved]. For further guidance,
see § 1.1441-1T(c)(2)(ii).

(3) * * *

(ii) [Reserved]. For further guidance,
see § 1.1441-1T(c)(3)(ii).

* * * * *

(5) Financial institution and foreign
financial institution (or FFI). The term
financial institution means a person de-
scribed in § 1.1471-1(b)(50). The term
foreign financial institution or FFI has the
meaning set forth in § 1.1471-1(b)(47).
* * * * *

(10) Chapter 3 of the Code (or chapter
3). For purposes of the regulations under
sections 1441, 1442, and 1443, any refer-
ence to chapter 3 of the Code (or chapter
3) shall not include references to sections
1445 and 1446, unless the context indi-
cates otherwise.

* * * * *

(12) Payee. For purposes of chapter 3
of the Code, the term payee of a payment
is determined under paragraph (b)(2) of
this section, § 1.1441-5(c)(1) (relating to
partnerships), and § 1.1441-5(e)(2) and
(3) (relating to trusts and estates) and in-
cludes foreign persons, U.S. exempt recip-
ients, and U.S. non-exempt recipients. A
nonqualified intermediary and a qualified
intermediary (to the extent it does not
assume primary withholding responsibil-
ity) are not payees if they are acting as
intermediaries and not the beneficial
owner of income. In addition, a flow-
through entity (other than a withholding
foreign partnership, withholding foreign
trust, or qualified intermediary that as-
sumes primary withholding responsibil-
ity) is not a payee unless the income is (or
is deemed to be) effectively connected
with the conduct of a trade or business in
the United States. See § 1.6049-5(d)(1)
for rules to determine the payee for pur-
poses of chapter 61 of the Code. See
§§ 1.1441-1(b)(3), 1.1441-5(d), and
(e)(6) and § 1.6049-5(d)(3) for presump-
tion rules that apply if a payee's identity
cannot be determined on the basis of valid
documentation. For purposes of chapter 4,
the term payee has the meaning set forth
in § 1.1471-3(a) with respect to a with-
holdable payment.

* * * * *

(16) Withholding certificate. The term
withholding certificate means a Form
W-8 described in paragraph (e)(2)(i) of
this section (relating to foreign beneficial
owners), paragraphs (e)(3)(i) or (e)(5)(i)
of this section (relating to foreign inter-
mediaries or qualified intermediaries),
§ 1.1441-5(c)(2)(iv), (c)(3)(iii), and
(e)(5)(iii) (relating to flow-through enti-
ties), a Form 8233 described in § 1.1441-
4(b)(2), a Form W-9 as described in para-
graph (d) of this section, a statement
described in § 1.871-14(c)(2)(v) (relating
to portfolio interest), or any other certifi-
cates that under the Code or regulations
certifies or establishes the status of a
payee or beneficial owner as a U.S. or a
foreign person.

(17) Documentary evidence; other ap-
propriate documentation. The terms doc-
umentary evidence or other appropriate
documentation refer to documentary evi-
dence that may be provided for payments
made outside the United States with re-
spect to offshore obligations in accor-
dance with § 1.6049-5(c)(1) or any other
evidence that under the Code or regula-
tions certifies or establishes the status of a
payee or beneficial owner as a U.S. or
foreign person. See §§ 1.1441-6(b)(2),
(c)(3) and (4) (relating to treaty benefits),
and 1.6049-5(c)(1) and (4) (relating to
chapter 61 reporting). Also see § 1.1441-
4(a)(3)(ii) regarding documentary evi-
dence for notional principal contracts.
* * * * *

(23) Flow-through entity. A flow-
through entity means any entity that is
described in this paragraph (c)(23) and
that may provide documentation on behalf
of its partners, beneficiaries, or owners to
a withholding agent. The entities de-
scribed in this paragraph are a foreign
partnership (other than a withholding for-
eign partnership), a foreign simple trust
(other than a withholding foreign trust)
that is described in paragraph (c)(24) of
this section, a foreign grantor trust (other
than a withholding foreign trust) that is
described in paragraph (c)(26) of this sec-
tion, or, for any payments for which a
reduced rate of withholding under an in-
come tax treaty is claimed, any entity to
the extent the entity is considered to be
fiscally transparent under section 894 with
respect to the payment by an interest hold-
er's jurisdiction.

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(25) Foreign complex trust. A foreign
complex trust is a foreign trust other than
a foreign simple trust or foreign grantor
trust.

(28) Nonwithholding foreign partner-
ship (or NWP). A nonwithholding foreign
partnership is a foreign partnership that is
not a withholding foreign partnership, as
defined in § 1.1441-5(c)(2)(i).

(29) Withholding foreign partnership
(or WP). A withholding foreign partner-
ship is defined in § 1.1441-5(c)(2)(i).

(30) Possessions of the United States
or U.S. territory. For purposes of the reg-
ulations under chapters 3 and 61 of the
Code, the term possessions of the United
States or U.S. territory means Guam,
American Samoa, the Northern Mariana
Islands, Puerto Rico, or the Virgin Islands.

(31) Amount subject to chapter 3 with-
holding. An amount subject to withhold-
ing under chapter 3 is an amount de-
scribed in § 1.1441-2(a).

(32) EIN. The term EIN means an em-
ployer identification number (also known
as a federal tax identification number) de-
scribed in § 301.6109-1(a)(1)(i).

(33) Flow-through withholding certifi-
cate. The term flow-through withholding
certificate means a Form W-8IMY sub-
mitted by a foreign partnership, foreign
simple trust, or foreign grantor trust.

(34) Foreign payee. The term foreign
payee means any payee other than a U.S.
payee.

(35) Intermediary withholding certifi-
cate. The term intermediary withholding
certificate means a Form W-8IMY sub-
mitted by an intermediary or qualified in-
termediary.

(36) Nonwithholding foreign trust (or
NWT). The term nonwithholding foreign
trust or NWT means a foreign trust as
defined in section 7701(a)(31)(B) that is a
simple trust or grantor trust and is not a
withholding foreign trust.

(37) Payment with respect to an off-
shore obligation. The term payment with
respect to an offshore obligation means a
payment made outside of the United
States, within the meaning of § 1.6049-
5(e), with respect to an offshore obligation
(as defined in § 1.6049-5(c)(1), § 1.6041-
1(d), or § 1.6042-3(b) (depending on the
type of payment)).

(38) Permanent residence address-(i)
In general. The term permanent residence
address is the address in the country of
which the person claims to be a resident
for purposes of that country's income tax.
In the case of a withholding certificate
furnished in order to claim a reduced rate
of withholding under an income tax treaty,
whether a person is a resident of a treaty
country must be determined in the manner
prescribed under the applicable treaty. See
§ 1.1441-6(b). The address of a financial
institution with which the person main-
tains an account, a post office box, or an
address used solely for mailing purposes
is not a permanent residence address un-
less such address is the only permanent
address used by the person and appears as
the person's registered address in the per-
son's organizational documents. Further,
an address that is provided subject to in-
structions to hold all mail to that address
is not a permanent residence address. If
the person is an individual who does not
have a tax residence in any country, the
permanent residence address is the place
at which the person normally resides. If
the person is an entity and does not have a
tax residence in any country, then the per-
manent residence address of the entity is
the place at which the person maintains its
principal office.

(ii) [Reserved]. For further guidance,
see § 1.1441-1T(c)(38)(ii).

(39) Standing instructions to pay
amounts. The term standing instructions
to pay amounts has the meaning set forth
in § 1.1471-1(b)(126).

(40) Territory financial institution. The
term territory financial institution has the
meaning set forth in § 1.1471-1(b)(130).

(41) TIN. The term TIN means the tax
identifying number assigned to a person
under section 6109.

(42) Withholding foreign trust (or WT).
The term withholding foreign trust (or
WT) means a foreign grantor trust or
foreign simple trust that has executed the
agreement described in § 1.1441-5(e)
(5)(v).

(43) Certified deemed-compliant FFI.
The term certified deemed-compliant FFI
means an FFI described in § 1.1471-
5(f)(2).

(44) Chapter 3 withholding rate pool.
The term chapter 3 withholding rate pool

has the meaning described in paragraph
(e)(5)(v)(C)(1) of this section.

(45) Chapter 3 status. The term chapter
3 status refers to the attributes of a payee
relevant for determining the rate of with-
holding with respect to a payment made to
the payee for purposes of chapter 3.

(46) Chapter 4 of the Code (or chapter
4). The term chapter 4 of the Code (or
chapter 4) means sections 1471 through
1474 and the regulations thereunder.

(47) Chapter 4 status. The term chapter
4 status means a person's status as a U.S.
person, a specified U.S. person, an indi-
vidual that is a foreign person, a partici-
pating FFI, a deemed-compliant FFI, a
restricted distributor, an exempt beneficial
owner, a nonparticipating FFI, a territory
financial institution, an excepted NFFE, or
a passive NFFE.

(48) Chapter 4 withholding rate pool.
The term chapter 4 withholding rate pool
has the meaning set forth § 1.1471-
1(b)(20). For when a withholding state-
ment may include a chapter 4 withholding
rate pool of U.S. payees for purposes of
this section and § 1.1441-5, however, see
paragraph (e)(3)(iv)(A) of this section (for
a withholding statement provided by a
nonqualified intermediary) or paragraph
(e)(5)(v)(C)(2) of this section (for a with-
holding statement provided by a qualified
intermediary).

(49) Deemed-compliant FFI. The term
deemed-compliant FFI means an FFI that
is treated, pursuant to section 1471(b)(2)
and § 1.1471-5(f), as meeting the require-
ments of section 1471(b). The term
deemed-compliant FFI also includes a QI
branch of a U.S. financial institution that
is a reporting Model 1 FFI.

(50) GIIN (or Global Intermediary
Identification Number). The term GIIN or
Global Intermediary Identification Num-
ber means the identification number that is
assigned to a participating FFI or regis-
tered deemed-compliant FFI. The term
GIIN or Global Intermediary Identifica-
tion Number also includes the identifica-
tion number assigned to a reporting Model
1 FFI (as defined in § 1.1471-1(b)(114))
for purposes of identifying such entity to
withholding agents. All GIINs will appear
on the IRS FFI list.

(51) NFFE. The term NFFE or non-
financial foreign entity has the meaning
set forth in § 1.1471-1(b)(80).

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(52) Nonparticipating FFI. The term
nonparticipating FFI means an FFI other
than a participating FFI, a deemed-
compliant FFI, or an exempt beneficial
owner.

(53) Participating FFI. The term par-
ticipating FFI has the meaning set forth in
§ 1.1471-1(b)(91).

(54) Preexisting obligation. The term
preexisting obligation has the meaning set
forth in § 1.1471-1(b)(104).

(55) Registered deemed-compliant
FFI. The term registered deemed- compli-
ant FFI has the meaning set forth in
§ 1.1471-5(f)(1).

(56) Withholdable payment. The term
withholdable payment has the meaning set
forth in § 1.1473-1(a).

(d) * * *

(4) When a payment to an intermediary
or flow-through entity may be treated as
made to a U.S. payee. A withholding
agent that makes a payment to an inter-
mediary (whether a qualified intermediary
or nonqualified intermediary), a flow-
through entity, or a U.S. branch or terri-
tory financial institution described in para-
graph (b)(2)(iv) of this section may treat
the payment as made to a U.S. payee to
the extent that, prior to the payment, the
withholding agent can reliably associate
the payment with a Form W-9 described
in paragraph (d)(2) or (3) of this section
attached to a valid intermediary, flow-
through, or U.S. branch withholding cer-
tificate described in paragraph (e)(3)(i) of
this section or to the extent the withhold-
ing agent can reliably associate the pay-
ment with a Form W-8 described in
paragraph (e)(3)(v) of this section that ev-
idences an agreement to treat a U.S.
branch or territory financial institution de-
scribed in paragraph (b)(2)(iv) of this sec-
tion as a U.S. person. In addition, a with-
holding agent may treat the payment as
made to a U.S. payee only if it complies
with the electronic confirmation proce-
dures described in paragraph (e)(4)(v) of
this section, if required, and it has not
been notified by the IRS that any of the
information on the withholding certificate
or other documentation is incorrect or un-
reliable. In the case of a Form W-9 that is
required to be furnished for a reportable
payment that may be subject to backup
withholding, the withholding agent may
be notified in accordance with section

3406(a)(1)(B) and the regulations under
that section. See applicable procedures
under section 3406(a)(1)(B) and the reg-
ulations under that section for payors who
have been notified with regard to such a
Form W-9. Withholding agents who have
been notified in relation to other Forms
W-9, including under section 6724(b)
pursuant to section 6721, may rely on the
withholding certificate or other documen-
tation only to the extent provided under
procedures as prescribed by the IRS (see
§ 601.601(d)(2) of this chapter).

(e) * * *

(1) * * *

(ii) * * *

(A) * * *

(2) That the payment is made outside
the United States (within the meaning of
§ 1.6049-5(e)) with respect to an offshore
obligation (within the meaning of para-
graph (c)(37) of this section) and the with-
holding agent can reliably associate the
payment with documentary evidence de-
scribed in §§ 1.1441-6(c)(3) or (4), or
1.6049-5(c)(1) relating to the beneficial
owner;

(3) That the withholding agent can re-
liably associate the payment with a valid
qualified intermediary withholding certif-
icate, as described in paragraph (e)(3)(ii)
of this section, and the qualified interme-
diary has provided sufficient information
for the withholding agent to allocate the
payment to a chapter 3 withholding rate
pool;

* * * * *

(2) * * *

(ii) Requirements for validity of certif-
icate-(A) In general. A beneficial owner
withholding certificate is valid for pur-
poses of a payment of an amount subject
to chapter 3 withholding only if it is pro-
vided on a Form W-8 or a Form 8233 in
the case of personal services income de-
scribed in § 1.1441-4(b) or certain schol-
arship or grant amounts described in
§ 1.1441-4(c) (or a substitute form de-
scribed in paragraph (e)(4)(vi) of this sec-
tion or such other form as the IRS may
prescribe). A Form W-8 is valid only if
its validity period has not expired, it is
signed under penalties of perjury by the
beneficial owner, and it contains all of the
information required on the form. The re-
quired information is the beneficial own-
er's name, permanent residence address

(as defined in § 1.1441-1(c)(38)), TIN (if
required), a certification that the person is
not a U.S. citizen (if the person is an
individual) or a certification of the country
under the laws of which the beneficial
owner is created, incorporated, or gov-
erned (if a person other than an individ-
ual), the classification of the entity, and
such other information as may be required
by the regulations under section 1441 or
by the form or accompanying instructions
in addition to, or in lieu of, the informa-
tion described in this paragraph (e)(2)(ii)
(including when a foreign TIN and an
individual's date of birth are required). A
beneficial owner withholding certificate
must also include the chapter 4 status of a
beneficial owner when required for chap-
ter 4 purposes in order to be valid. See
paragraph (e)(4)(vii) of this section for
circumstances in which a TIN is required
on a beneficial owner withholding certif-
icate.

(B) [Reserved]. For further guidance,
see § 1.1441-1T(e)(2)(ii)(B).

(3) * * *

(ii) Intermediary withholding certifi-
cate from a qualified intermediary. A
qualified intermediary shall provide a
qualified intermediary withholding certif-
icate for withholdable payments or report-
able amounts received by the qualified
intermediary. See paragraph (e)(3)(vi) of
this section for the definition of reportable
amount. A qualified intermediary with-
holding certificate is valid only if it is
furnished on a Form W-8, an acceptable
substitute form, or such other form as the
IRS may prescribe, it is signed under pen-
alties of perjury by a person with authority
to sign for the qualified intermediary, its
validity has not expired, and it contains
the following information, statement, and
certifications-

(A) The name, permanent residence
address, qualified intermediary employer
identification number (QI-EIN), and the
country under the laws of which the qual-
ified intermediary is created, incorporated,
or governed. If required for purposes of
chapter 4 or if the qualified intermediary
is a participating FFI or registered
deemed-compliant FFI and certifies that it
is providing (or will provide) a chapter 4
withholding rate pool of U.S. payees un-
der § 1.6049-4(c)(4) with respect to ac-
counts that the qualified intermediary

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maintains, the withholding certificate
must also include the chapter 4 status of
the qualified intermediary and its GIIN (if
applicable). See paragraph (e)(5)(ii) for
the chapter 4 status required of a qualified
intermediary, including when a qualified
intermediary withholding certificate may
include a chapter 4 status of limited FFI
(as defined in § 1.1471-1(b)(77)). A qual-
ified intermediary that does not act in its
capacity as a qualified intermediary must
not use its QI-EIN. Rather, it should pro-
vide a nonqualified intermediary with-
holding certificate, if it is acting as an
intermediary, and should use the taxpayer
identification number (if any) that it uses
for all other purposes and GIIN (if appli-
cable);

* * * * *

(C) A certification that the qualified
intermediary has provided, or will pro-
vide, a withholding statement as required
by paragraph (e)(5)(v) of this section;

(D) A certification that the qualified
intermediary meets the requirements of
§ 1.6049-4(c)(4) when the qualified in-
termediary provides (or will provide) a
withholding statement associated with its
Form W-8 that allocates a payment to a
chapter 4 withholding rate pool of U.S.
payees that hold accounts with the quali-
fied intermediary. Additionally, when the
qualified intermediary provides a chapter
4 withholding rate pool of U.S. payees
that do not hold accounts maintained by
the qualified intermediary, the qualified
intermediary provides a certification on
the Form W-8 that the qualified interme-
diary has obtained (or will obtain)
documentation from the intermediary or
flow through entity allocating the pay-
ment to the pool to establish that the
entity's status is as a participating FFI,
registered deemed-compliant FFI, or
qualified intermediary under § 1.1471-
3(d)(4) (or, as applicable, § 1.1471-
3(e)(4)(vi)(B) or § 1.1441-1(b)(2)(vii));
and

(E) Reserved.

(F) Any other information, certifica-
tions, or statements as may be required by
the form or accompanying instructions in
addition to, or in lieu of, the information
and certifications described in this para-
graph (e)(3)(ii) or paragraph (e)(3)(v) of
this section. See paragraph (e)(5)(v) of
this section for the requirements of a with-

holding statement associated with the
qualified intermediary withholding certif-
icate.

(iii) Intermediary withholding certifi-
cate from a nonqualified intermediary. A
nonqualified intermediary shall provide
a nonqualified intermediary withholding
certificate for reportable amounts received
by the nonqualified intermediary. See
paragraph (e)(3)(vi) of this section for the
definition of reportable amount. A non-
qualified intermediary withholding certif-
icate is valid only to the extent it is fur-
nished on a Form W-8, an acceptable
substitute form, or such other form as the
IRS may prescribe, it is signed under pen-
alties of perjury by a person authorized to
sign for the nonqualified intermediary, it
contains the information, statements, and
certifications described in this paragraphs
(e)(3)(iii) and (iv) of this section, its va-
lidity has not expired, and the withholding
certificates and other appropriate docu-
mentation for all persons to whom the
certificate relates are associated with the
certificate. Withholding certificates and
other appropriate documentation consist
of beneficial owner withholding certifi-
cates described in paragraph (e)(2)(i)
of this section, intermediary and flow-
through withholding certificates described
in paragraph (e)(3)(i) of this section, with-
holding foreign partnership and withhold-
ing foreign trust certificates described in
§ 1.1441-5(c)(2)(iv) and (e)(5)(iii), docu-
mentary evidence described in §§ 1.1441-
6(c)(3) or (4) and 1.6049-5(c)(1), and any
other documentation or certificates appli-
cable under other provisions of the Code
or regulations that certify or establish the
status of the payee or beneficial owner as
a U.S. or a foreign person. If a nonquali-
fied intermediary is acting on behalf of
another nonqualified intermediary or a
flow-through entity, then the nonqualified
intermediary must associate with its own
withholding certificate the other nonquali-
fied intermediary withholding certificate
or the flow-through withholding certifi-
cate and separately identify all of the
withholding certificates and other appro-
priate documentation that are associated
with the withholding certificate of the
other nonqualified intermediary or flow-
through entity. Nothing in this paragraph
(e)(3)(iii) shall require an intermediary to
furnish original documentation. Copies of

certificates or documentary evidence may
be transmitted to the U.S. withholding
agent, in which case the nonqualified in-
termediary must retain the original
documentation for the same time period
that the copy is required to be retained by
the withholding agent under paragraph
(e)(4)(iii) of this section and must provide
it to the withholding agent upon request.
For purposes of this paragraph (e)(3)(iii),
a valid intermediary withholding certifi-
cate also includes a statement described in
§ 1.871-14(c)(2)(v) furnished for interest
to qualify as portfolio interest for pur-
poses of sections 871(h) and 881(c). The
information and certifications required on
a Form W-8 described in this paragraph
(e)(3)(iii) are as follows-

(A) The name and permanent resident
address of the nonqualified intermediary,
chapter 4 status (if required for chapter 4
purposes or if the nonqualified intermedi-
ary provides the certification described in
paragraph (e)(3)(iii)(D) of this section),
GIIN (if applicable), and the country un-
der the laws of which the nonqualified
intermediary is created, incorporated, or
governed;

* * * * *

(C) If the nonqualified intermediary
withholding certificate is used to transmit
withholding certificates or other appropri-
ate documentation for more than one per-
son on whose behalf the nonqualified
intermediary is acting, a withholding
statement associated with the Form W-8
that provides all the information required
by paragraph (e)(3)(iv) of this section;

(D) If the nonqualified intermediary
provides a withholding statement associ-
ated with the Form W-8 allocating a pay-
ment to a chapter 4 withholding rate pool
of U.S. payees, a certification that the
nonqualified intermediary meets the re-
quirements of § 1.6049-4(c)(4) with re-
spect to any payees included in such pool
that hold accounts maintained (as defined
in § 1.1471-5(b)(5)) by the nonqualified
intermediary; and

(E) Any other information, certifica-
tions, or statements as may be required by
the form or accompanying instructions in
addition to, or in lieu of, the information,
certifications, and statements described in
this paragraph (e)(3)(iii) or paragraph
(e)(5)(iv) of this section.

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(iv) Withholding statement provided by
nonqualified intermediary-(A) In gen-
eral. A nonqualified intermediary shall
provide a withholding statement required
by this paragraph (e)(3)(iv) to the extent
the nonqualified intermediary is required
to furnish, or does furnish, documentation
for payees on whose behalf it receives
reportable amounts (as defined in para-
graph (e)(3)(vi) of this section) or to the
extent it otherwise provides the documen-
tation of such payees to a withholding
agent. A nonqualified intermediary, how-
ever, that is subject to withholding under
chapter 4 due to its chapter 4 status as a
nonparticipating FFI need not provide a
withholding statement unless it is provid-
ing documentation to allocate a portion of
the payment as made to an exempt bene-
ficial owner as described in § 1.1471-
3(c)(3)(iii)(B)(4). A nonqualified interme-
diary that is subject to withholding under
chapter 4 due to its chapter 4 status is not
required to disclose to the withholding
agent information regarding persons for
whom it collects reportable amounts un-
less it has actual knowledge that any such
person is a U.S. non-exempt recipient as
defined in paragraph (c)(21) of this sec-
tion. Information regarding U.S. non-
exempt recipients required under this
paragraph (e)(3)(iv) must be provided ir-
respective of any requirement under for-
eign law that prohibits the disclosure of
the identity of an account holder of a
nonqualified intermediary or financial in-
formation relating to such account holder.
A nonqualified intermediary is not re-
quired to provide information on a with-
holding statement regarding U.S. non-
exempt recipients, provided that the
nonqualified intermediary is a participat-
ing FFI (including a reporting Model 2
FFI) or registered deemed-compliant FFI
(including a reporting Model 1 FFI) that
identifies on the withholding statement the
portion of a payment allocable to a chap-
ter 4 withholding rate pool of U.S. payees
to the extent that the nonqualified inter-
mediary is permitted to include such U.S.
payees in a pool under § 1.6049-
4(c)(4)(iii). See § 1.1471-3(d)(4) for the
requirements of an entity to identify itself
as a participating FFI or registered
deemed-compliant FFI to a withholding
agent for purposes of chapter 4. Although
a nonqualified intermediary is not re-

quired to provide documentation and
other information required by this para-
graph (e)(3)(iv) for persons other than
U.S. non-exempt recipients not included
in a chapter 4 withholding rate pool of
U.S. payees, a withholding agent that does
not receive documentation and such infor-
mation must apply the presumption rules
of paragraph (b) of this section,
§§ 1.1441-5(d) and (e)(6), 1.6049-5(d),
and 1.1471-3(f)(5) (for a withholdable
payment) or the withholding agent shall
be liable for tax, interest, and penalties. A
withholding agent must apply the pre-
sumption rules even if it is not required
under chapter 61 of the Code to obtain
documentation to treat a payee as an ex-
empt recipient and even though it has ac-
tual knowledge that the payee is a U.S.
person. For example, if a nonqualified in-
termediary receives a payment that is not
a withholdable payment and fails to pro-
vide a withholding agent with a Form
W-9 for an account holder that is a U.S.
exempt recipient that is not included in a
chapter 4 withholding rate pool of U.S.
payees to the extent permitted in this para-
graph (e)(3)(iv)(A), the withholding agent
must presume (even if it has actual knowl-
edge that the account holder is a U.S.
exempt recipient) that the account holder
is an undocumented foreign person with
respect to amounts subject to chapter 3
withholding. See paragraph (b)(3)(v) of
this section for applicable presumptions.
Therefore, the withholding agent must
withhold 30 percent from the payment
even though if a Form W-9 had been
provided, no withholding or reporting on
the payment attributable to a U.S. exempt
recipient would apply. Further, a non-
qualified intermediary that fails to provide
the documentation and the information
under this paragraph (e)(3)(iv) for another
withholding agent to report the payments
on Forms 1042-S (including under the
requirements of § 1.1474-1(d)(2) for a
payment of a chapter 4 reportable amount)
and Forms 1099 is not relieved of its
responsibility to file information returns.
See paragraph (b)(6) of this section.
Therefore, unless the nonqualified inter-
mediary itself files such returns and pro-
vides copies to the payees, it shall be
liable for penalties under sections 6721
(failure to file information returns), and
6722 (failure to furnish payee statements),

including the penalties under those sec-
tions for intentional failure to file infor-
mation returns. In addition, failure to pro-
vide either the documentation or the
information required by this paragraph
(e)(3)(iv) results in a payment not being
reliably associated with valid documenta-
tion. Therefore, the beneficial owners of
the payment are not entitled to reduced
rates of withholding and if the full amount
required to be held under the presumption
rules is not withheld by the withholding
agent, the nonqualified intermediary must
withhold the difference between the
amount withheld by the withholding agent
and the amount required to be withheld.
Failure to withhold shall result in the non-
qualified intermediary being liable for tax
under section 1461, interest, and penalties,
including penalties under section 6656
(failure to deposit) and section 6672 (fail-
ure to collect and pay over tax).

(B) General requirements. A withhold-
ing 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 withhold-
ing statement forms an integral part of the
withholding certificate provided under
paragraph (e)(3)(iii) of this section, and
the penalties of perjury statement pro-
vided 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 withhold-
ing statement is provided electronically as
part of a system established by the with-
holding agent or nonqualified intermedi-
ary to provide the statement, however,
there must be sufficient safeguards to en-
sure 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 with-
holding statement information must be re-
corded. In addition, the electronic system
must be capable of providing a hard copy
of all withholding statements provided by
the nonqualified intermediary. A with-
holding statement may otherwise be trans-

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mitted by a nonqualified intermediary via
email or facsimile to a withholding agent
under the requirements specified in para-
graph (e)(4)(iv)(D) of this section (substi-
tuting the term withholding statement for
the term Form W-8 or the term docu-
ment, as applicable). A withholding agent
will be liable for tax, interest, and penal-
ties in accordance with paragraph (b)(7)
of this section to the extent it does not
follow the presumption rules of paragraph
(b)(3) of this section or §§ 1.1441-5(d)
and (e)(6), and 1.6049-5(d) for any pay-
ment 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 de-
scribed in paragraph (e)(3)(iv)(C)(2) of
this section unless the withholding agent
identifies the nonqualified intermediary
maintaining the account (as described in
§ 1.1471-5(b)(5)) as a participating FFI
(including a reporting Model 2 FFI) or
registered deemed-compliant FFI (includ-
ing a reporting Model 1 FFI) by applying
the rules of § 1.1471-3(d)(4). Addition-
ally, in the case of a withholdable pay-
ment that is an amount subject to with-
holding 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 un-
less the nonqualified intermediary identi-
fies the pool of U.S. payees as one de-
scribed in § 1.1471-3(c)(3)(iii)(B)(2)(iii)
(or by describing such payees consistent
with the description provided in § 1.1471-
3(c)(3)(ii)(B)(2)(iii)).

(C) Content of withholding statement.
The withholding statement provided by a
nonqualified intermediary must contain
the information required by this paragraph
(e)(3)(iv)(C).

(1) In general. Except as otherwise
provided by paragraph (e)(3)(iv)(C)(2)
and (3) of this section), the withholding
statement provided by a nonqualified in-
termediary 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 ex-
cludes reporting of information with re-
spect to certain U.S. persons on the
withholding statement), the withholding
statement must contain the name, address,
TIN (if any), and the type of documenta-
tion (documentary evidence, Form W-9,
or type of Form W-8) for every person
from whom documentation has been re-
ceived by the nonqualified intermediary
and provided to the withholding agent and
whether that person is a U.S. exempt re-
cipient, a U.S. non-exempt recipient, or a
foreign person. See paragraphs (c)(2),
(20), and (21) of this section for the def-
initions of foreign person, U.S. exempt
recipient, and U.S. non-exempt recipient.
In the case of a foreign person, the state-
ment must indicate whether the foreign
person is a beneficial owner or an
intermediary, flow-through entity, U.S.
branch, or territory financial institution
described in paragraph (b)(2)(iv) of this
section and include the type of recipient,
based on recipient codes applicable for
chapter 3 purposes used for filing Forms
1042-S, if the foreign person is a recipient
as defined in § 1.1461-1(c)(1)(ii).

(ii) The withholding statement must al-
locate each payment, by income type, to
every payee required to be reported on the
withholding statement for whom docu-
mentation 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 as-
sociated with valid documentation from a
payee shall be treated as made to an un-
known payee in accordance with the pre-
sumption rules of paragraph (b) of this
section and §§ 1.1441-5(d) and (e)(6) and
1.6049-5(d). For this purpose, a type of
income is determined by the types of in-
come required to be reported on Forms
1042-S or 1099, as appropriate. Notwith-
standing the preceding sentence, deposit
interest (including original issue discount)
described in section 871(i)(2)(A) or
881(d) and interest or original issue dis-
count on short-term obligations as de-
scribed in section 871(g)(1)(B) or 881(e)
is only required to be allocated to the
extent it is required to be reported on
Form 1099 or Form 1042-S. See
§ 1.6049-8 (regarding reporting of bank
deposit interest to certain foreign per-

sons). If a payee receives income through
another nonqualified intermediary, flow-
through entity, or U.S. branch or territory
financial institution described in para-
graph (e)(2)(iv) of this section (other than
a U.S. branch or territory financial insti-
tution treated as a U.S. person), the with-
holding statement must also state, with
respect to the payee, the name, address,
and TIN, if known, of the other nonquali-
fied intermediary or U.S. branch from
which the payee directly receives the pay-
ment 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 non-
qualified intermediary, flow-through en-
tity, or U.S. branch that failed to allocate
the payment shall be provided with re-
spect 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, port-
folio interest, exempt under section
501(c)(3), 892, or 895). The allocation
statement must also include the TINs of
those foreign persons for whom such a
number is required under paragraph
(e)(4)(vii) of this section or § 1.1441-
6(b)(1) (regarding claims for treaty bene-
fits for which a TIN is provided unless a
foreign tax identifying number described
in § 1.1441-6(b)(1) is provided). In the
case of a claim of treaty benefits, the
nonqualified intermediary's withholding
statement must also state whether the lim-
itation on benefits and section 894 state-
ments required by § 1.1441-6(c)(5) have
been provided, if required, in the benefi-
cial 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 chap-
ter 3 and chapter 61 of the Code, and
section 3406.

(2) Nonqualified intermediary with-
holding statement for withholdable pay-
ments. This paragraph (e)(3)(iv)(C)(2)
modifies the requirements of a withhold-
ing statement described in paragraph

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(e)(3)(iv)(C)(1) of this section that is pro-
vided by a nonqualified intermediary with
respect to a reportable amount that is a
withholdable payment. For such a pay-
ment, the requirements applicable to a
withholding statement described in para-
graph (e)(3)(iv)(A) through (e)(3)(iv)
(C)(1) of this section shall apply, except
that-

(i) The withholding statement must in-
clude the chapter 4 status (using the ap-
plicable status code used for filing Form
1042-S) and GIIN (when required for
chapter 4 purposes under § 1.1471-3(d))
of each other intermediary or 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, with-
holding foreign trust, or intermediary act-
ing as a qualified intermediary for the
payment;

(ii) If the nonqualified intermediary
that is a participating FFI or registered
deemed-compliant FFI provides a with-
holding statement described in § 1.1471-
3(c)(3)(iii)(B)(2) (describing an FFI
withholding statement), the withholding
statement may include chapter 4 with-
holding rate pools with respect to the por-
tions of the payment allocated to nonpar-
ticipating 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 per-
sons 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 de-
scribed in § 1.1471-3(c)(3)(iii)(B)(3) (de-
scribing a chapter 4 withholding state-
ment), the withholding statement may
include chapter 4 withholding rate pools
with respect to the portions of the pay-
ment allocated to nonparticipating FFIs;

(iv) For a payment allocated to a payee
that is a foreign person (other than a per-
son included in a chapter 4 withholding
rate pool described in paragraphs (e)(3)
(iv)(C)(2)(ii) and (iii) of this section) that
is reported on a withholding statement
described in § 1.1471-3(c)(3)(iii)(B)(2) or
(3), the withholding statement must in-

clude 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 Re-
port," no allocation of the payment is re-
quired on the withholding statement.

(3) [Reserved]. For further guidance,
see § 1.1441-1T(e)(3)(iv)(C)(3).

(4) Example. This example illustrates the princi-
ples of paragraph (e)(3)(iv)(C) of this section.

Example. WA makes a withholdable payment of
U.S. source dividends to NQI, a nonqualified inter-
mediary. NQI provides WA with a valid interme-
diary withholding certificate under paragraph
(e)(3)(iii) of this section that includes NQI's certifi-
cation of its status for chapter 4 purposes as a par-
ticipating FFI. NQI provides a withholding statement
on which NQI allocates 20% of the payment to a
chapter 4 withholding rate pool of recalcitrant ac-
count 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 with-
holding certificates from A and B establishing their
status as foreign persons entitled to a 15% rate of
withholding under an applicable income tax treaty.
Because NQI has certified its status as a participating
FFI, withholding under chapter 4 is not required with
respect to NQI. See § 1.1471-2(a)(4). Based on the
documentation NQI provided to WA with respect to
A and B, WA can reliably associate the payment
with valid documentation on the portion of the pay-
ment allocated to them and, because the payment is
a withholdable payment, may rely on the allocation
of the payment for NQI's recalcitrant account hold-
ers in a chapter 4 withholding rate pool in lieu of
payee information with respect to such account hold-
ers. See paragraph (e)(3)(iv)(C)(2) of this section for
the special rules for a withholding statement pro-
vided by a nonqualified intermediary for a withhold-
able payment. Also see § 1.1471-2(a) for WA's
withholding requirements under chapter 4 with re-
spect to the portion of the payment allocated to
NQI's recalcitrant account holders and § 1.1441-
3(a)(2) for coordinating withholding under chapter 3
for payments to which withholding is applied under
chapter 4.

(D) Alternative procedures-(1) In
general. Under the alternative procedures
of this paragraph (e)(3)(iv)(D), a non-
qualified intermediary may provide infor-
mation allocating a payment of a report-
able amount to each payee (including U.S.
exempt recipients) otherwise required un-
der paragraph (e)(3)(iv)(B)(2) of this sec-
tion after a payment is made. To use the
alternative procedure of this paragraph
(e)(3)(iv)(D), the nonqualified intermedi-

ary must inform the withholding agent on
a statement associated with its nonquali-
fied intermediary withholding certificate
that it is using the procedure under this
paragraph (e)(3)(iv)(D) and the withhold-
ing agent must agree to the procedure. If
the requirements of the alternative proce-
dure are met, a withholding agent, includ-
ing the nonqualified intermediary using
the procedures, can treat the payment as
reliably associated with documentation
and, therefore, the presumption rules of
paragraph (b)(3) of this section and
§§ 1.1441-5(d) and (e)(6) and 1.6049-
5(d) do not apply even though information
allocating the payment to each payee has
not been received prior to the payment.
See paragraph (e)(3)(iv)(D)(7) of this sec-
tion, however, for a nonqualified interme-
diary's liability for tax and penalties if the
requirements of this paragraph (e)(3)
(iv)(D) are not met. These alternative pro-
cedures shall not be used for payments
that are allocable to U.S. non-exempt re-
cipients except as provided in paragraph
(e)(3)(iv)(D)(2)(ii) of this section. There-
fore, a nonqualified intermediary is re-
quired to provide a withholding agent
with information allocating payments of
reportable amounts to U.S. non-exempt
recipients prior to the payment being
made by the withholding agent.

(2) Withholding rate pools-(i) In gen-
eral. In place of the information required
in paragraph (e)(3)(iv)(C)(2) of this sec-
tion allocating payments to each payee,
the nonqualified intermediary must pro-
vide a withholding agent with withholding
rate pool information prior to the payment
of a reportable amount. The withholding
statement must contain all other informa-
tion required by paragraph (e)(3)(iv)(C) of
this section. Further, each payee listed in
the withholding statement must be as-
signed to an identified withholding rate
pool. To the extent a nonqualified inter-
mediary is required to provide, or does
provide, documentation, the alternative
procedures do not relieve the nonqualified
intermediary from the requirement to pro-
vide documentation prior to the payment
being made. Therefore, withholding cer-
tificates or other appropriate documenta-
tion and all information required by para-
graph (e)(3)(iv)(C) of this section (other
than allocation information) must be pro-
vided to a withholding agent before any

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new payee receives a reportable amount.
In addition, the withholding statement
must be updated by assigning a new payee
to a withholding rate pool prior to the
payment of a reportable amount. A with-
holding rate pool is a payment of a single
type of income, determined in accordance
with the categories of income used to
file Form 1042-S, that is subject to a
single rate of withholding. A withholding
rate pool may be established by any rea-
sonable method to which the nonqualified
intermediary and a withholding agent
agree (e.g., by establishing a separate ac-
count for a single withholding rate pool,
or by dividing a payment made to a single
account into portions allocable to each
withholding rate pool). The nonqualified
intermediary shall determine withholding
rate pools based on valid documentation
or, to the extent a payment cannot be
reliably associated with valid documenta-
tion, the presumption rules of paragraph
(b)(3) of this section and §§ 1.1441-5(d)
and (e)(6) and 1.6049-5(d).

(ii) Withholding rate pools for chapter
4 purposes. This paragraph (e)(3)(iv)
(D)(2)(ii) modifies the provisions of para-
graph (e)(3)(iv)(D)(2)(i) of this section
with respect to the withholding rate pools
permitted for the alternative procedures
described in paragraph (e)(3)(iv)(D)(1) of
this section in the case of a payment that is
allocable on a withholding statement to a
chapter 4 withholding rate pool as de-
scribed in this paragraph. In the case of a
withholdable payment, a nonqualified
intermediary may include reportable
amounts allocable to a chapter 4 withhold-
ing rate pool (other than a chapter 4 with-
holding rate pool of U.S. payees) in a
30-percent rate pool together with a with-
holding rate pool for amounts subject to
chapter 3 withholding at the 30-percent
rate. For a payment of a reportable amount
that is allocable to a chapter 4 withholding
rate pool of U.S. payees on a withholding
statement, a nonqualified intermediary
may include such amount in a single with-
holding rate pool with the amount of the
payment that is exempt from withholding
under chapter 3 instead of providing doc-
umentation regarding U.S. non-exempt re-
cipients included in the pool or separately
allocating the amount to the chapter 4
withholding rate pool. To the extent that a
nonqualified intermediary allocates an

amount to any chapter 4 withholding rate
pool, the nonqualified intermediary is re-
quired to notify the withholding agent of
the allocation before receiving the pay-
ment and is not required to provide doc-
umentation with respect to the payees in-
cluded in such pool. The nonqualified
intermediary shall determine the chapter 4
withholding rate pools permitted to be
used under this paragraph (e)(3)(iv)
(D)(2)(ii) in accordance with the non-
qualified intermediary's applicable chap-
ter 4 status and under § 1.1471-3(c)
(3)(iii)(B)(2) (for an FFI withholding
statement) or (c)(3)(iii)(B)(3) (for a chap-
ter 4 withholding statement) or under
§ 1.6049-4(c)(4) for a chapter 4 with-
holding rate pool of U.S. payees (or sim-
ilar applicable coordination rule in chapter
61 for payments other than interest). Ad-
ditionally, the nonqualified intermediary
shall identify those payees to which with-
holding under chapter 4 applies that are
not included in a chapter 4 reporting pool
(including payees that could be included
in a chapter 4 withholding rate pool for
whom the nonqualified intermediary
chooses to provide payee specific infor-
mation).

(3) Allocation information. The non-
qualified intermediary must provide the
withholding agent with sufficient informa-
tion to allocate the income in each with-
holding rate pool to each payee (including
U.S. exempt recipients or any chapter 4
withholding rate pool identified by the
withholding agent under paragraph (e)(3)
(iv)(D)(2)(ii) of this section) within the
pool no later than January 31 of the year
following the year of payment. Any pay-
ments that are not allocated to payees for
whom documentation has been provided
or a chapter 4 withholding rate pool re-
ferred to in the previous sentence shall be
allocated to an undocumented payee in
accordance with the presumption rules of
paragraph (b)(3) of this section and
§§ 1.1441-5(d) and (e)(6), 1.6049-5(d),
and 1.1471-3(f)(5) (for a withholdable
payment for chapter 4 purposes). Notwith-
standing the preceding sentence, deposit
interest (including original issue discount)
described in section 871(i)(2)(A) or
881(d) and interest or original issue dis-
count on short-term obligations as de-
scribed in section 871(g)(1)(B) or 881(e)
is not required to be allocated to a U.S.

exempt recipient or a foreign payee, ex-
cept as required under § 1.6049-8 (re-
garding reporting of deposit interest paid
to certain foreign persons).

(4) Failure to provide allocation infor-
mation. Except as provided in paragraph
(e)(3)(iv)(D)(5) of this section, if a non-
qualified intermediary fails to provide al-
location information, if required, by Jan-
uary 31 for any withholding rate pool to
the extent required in paragraph (e)(3)
(iv)(D)(3) of this section, a withholding
agent shall not apply the alternative pro-
cedures of this paragraph (e)(3)(iv)(D) to
any payments of reportable amounts paid
after January 31 in the taxable year fol-
lowing the calendar year for which allo-
cation information was not given and any
subsequent taxable year. Further, the al-
ternative procedures shall be unavailable
for any other withholding rate pool (other
than a chapter 4 withholding rate pool as
otherwise permitted) even though alloca-
tion information was given for that other
pool. Therefore, the withholding agent
must withhold on a payment of a report-
able amount in accordance with the pre-
sumption rules of paragraph (b)(3) of this
section, and §§ 1.1441-5(d) and (e)(6),
1.6049-5(d), and 1.1471-3(f)(5) (for a
withholdable payment for chapter 4 pur-
poses), unless the nonqualified intermedi-
ary provides all of the information, includ-
ing information sufficient to allocate the
payment to each specific payee or chapter
4 withholding rate pool (as permitted), re-
quired by paragraph (e)(3)(iv)(A) through
(C) of this section prior to the payment. A
nonqualified intermediary must allocate at
least 90 percent of the income required to be
allocated for each withholding rate pool as
required under this paragraph (e)(3)(iv)
(D)(4) or the nonqualified intermediary will
be treated as having failed to provide allo-
cation information for purposes of this para-
graph (e)(3)(iv)(D). For purposes of the al-
location, a nonqualified intermediary is
required to identify by January 31 the por-
tion of the payment that is allocated to each
chapter 4 withholding rate pool (rather than
the payees included in each such pool). See
paragraph (e)(3)(iv)(D)(7) of this section for
liability for tax and penalties if a nonquali-
fied intermediary fails to provide allocation
information in whole or in part.

(5) Cure provision. A nonqualified in-
termediary may cure any failure to pro-

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vide allocation information by providing
the required allocation information to the
withholding agent no later than February
14 following the calendar year of pay-
ment. If the withholding agent receives
the allocation information by that date, it
may apply the adjustment procedures of
§ 1.1461-2 (or of § 1.1474-2 for an
amount withheld under chapter 4) to any
excess withholding for payments made on
or after February 1 and on or before Feb-
ruary 14. Any nonqualified intermediary
that fails to cure by February 14 may
request the ability to use the alternative
procedures of this paragraph (e)(3)(iv)(D)
by submitting a request, in writing, to the
IRS. The request must state the reason that
the nonqualified intermediary did not
comply with the alternative procedures of
this paragraph (e)(3)(iv)(D) and steps that
the nonqualified intermediary has taken,
or will take, to ensure that no failures
occur in the future. If the IRS determines
that the alternative procedures of this
paragraph (e)(3)(iv)(D) may apply, a de-
termination to that effect will be issued by
the IRS to the nonqualified intermediary.

(6) Form 1042-S reporting in case of
allocation failure. If a nonqualified inter-
mediary fails to provide allocation infor-
mation by February 14 following the year
of payment for a withholding rate pool,
the withholding agent must file Forms
1042-S for payments made to each payee
in that pool (other than U.S. exempt re-
cipients) in the prior calendar year by pro
rating the payment to each payee (includ-
ing U.S. exempt recipients) listed in the
withholding statement for that withhold-
ing rate pool, treating as a payee for this
purpose each chapter 4 withholding rate
pool identified by the nonqualified inter-
mediary under paragraph (e)(3)(iv)(D)
(2)(ii) of this section. If the nonqualified
intermediary fails to allocate 10 percent or
less of an amount required to be allocated
for a withholding rate pool, a withholding
agent shall report the unallocated amount
as paid to a single unknown payee in
accordance with the presumption rules
of paragraph (b) of this section and
§§ 1.1441-5(d) and (e)(6), 1.6049-5(d),
and § 1.1471-3(f)(5) (for a withholdable
payment for chapter 4 purposes). The por-
tion of the payment that can be allocated
to specific recipients, as defined in
§ 1.1461-1(c)(1)(ii), shall be reported to

each recipient in accordance with the rules
of § 1.1461-1(c) and § 1.1474-1(d)(2)
(for a withholdable payment).
* * * * *

(E) Notice procedures. The IRS may
notify a withholding agent that the alter-
native procedures of paragraph (e)(3)
(iv)(D) of this section are not applicable to
a specified nonqualified intermediary,
a U.S. branch described in paragraph
(b)(2)(iv) of this section, or a flow-
through entity. If a withholding agent re-
ceives such a notice, it must commence
withholding under this section or chapter
4 (if applicable) in accordance with the
presumption rules of paragraph (b)(3) of
this section and §§ 1.1441-5(d) and
(e)(6), 1.6049-5(d), and1.1471-3(f)(5)
(for a withholdable payment for chapter 4
purposes) unless the nonqualified interme-
diary, U.S. branch, or flow-through entity
complies with the procedures in para-
graphs (e)(3)(iv)(A) through (C) of this
section. In addition, the IRS may notify a
withholding agent, in appropriate circum-
stances, that it must apply the presumption
rules of paragraph (b)(3) of this section
and §§ 1.1441-5(d) and (e)(6), 1.6049-
5(d), and § 1.1471-3(f)(5) (for a with-
holdable payment for chapter 4 purposes)
to payments made to a nonqualified inter-
mediary, a U.S. branch, or a flow-through
entity even if the nonqualified intermedi-
ary, U.S. branch, or flow-through entity
provides allocation information prior to
the payment. A withholding agent that
receives a notice under this paragraph
(e)(3)(iv)(E) must commence withholding
in accordance with the presumption rules
within 30 days of the date of the notice.
The IRS may withdraw its prohibition
against using the alternative procedures of
paragraph (e)(3)(iv)(D) of this section, or
its requirement to follow the presumption
rules, if the nonqualified intermediary,
U.S. branch, or flow-through entity can
demonstrate to the satisfaction of the IRS
that it is capable of complying with the
rules under chapter 3 of the Code and any
other conditions required by the IRS.

(v) Withholding certificate from cer-
tain U.S. branches (including territory fi-
nancial institutions). A U.S. branch
certificate is a withholding certificate pro-
vided by a U.S. branch (including a terri-
tory financial institution) described in
paragraph (b)(2)(iv) of this section that is

not the beneficial owner of the income.
The withholding certificate is provided
with respect to reportable amounts and
must state that such amounts are not ef-
fectively connected with the conduct of a
trade or business in the United States. The
withholding certificate must either trans-
mit the appropriate documentation for the
persons for whom the branch receives the
payment (i.e., as an intermediary) or be
provided as evidence of its agreement
with the withholding agent to be treated as
a U.S. person with respect to any payment
associated with the certificate. A U.S.
branch withholding certificate is valid
only if it is furnished on a Form W-8, an
acceptable substitute form, or such other
form as the IRS may prescribe, it is signed
under penalties of perjury by a person
authorized to sign for the branch, its va-
lidity has not expired, and it contains the
information, statements, and certifications
described in this paragraph (e)(3)(v). If
the certificate is furnished to transmit
withholding certificates and other docu-
mentation, it must contain the informa-
tion, certifications, and statements de-
scribed in paragraphs (e)(3)(v)(A) through
(C) of this section and in paragraphs
(e)(3)(iii) and (iv) (alternative procedures)
of this section, applying the term U.S.
branch instead of the term nonqualified
intermediary. If the certificate is furnished
pursuant to an agreement to treat the U.S.
branch or territory financial institution as
a U.S. person (which agreement must be
for purposes of chapter 4 in addition to
this section in the case of a payment that is
a withholdable payment), the information
and certifications required on the with-
holding certificate are limited to the fol-
lowing-

(A) The name of the territory financial
institution or person of which the U.S.
branch is a part, the address of the terri-
tory financial institution or U.S. branch;

(B) A certification that the payments
associated with the certificate are not ef-
fectively connected with the conduct of its
trade or business in the United States;

(C) The EIN of the U.S. branch or
territory financial institution;

(D) When required for chapter 4 pur-
poses, the chapter 4 status and GIIN (if
applicable) of the entity of which the U.S.
branch is a part; and

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(E) Any other information, certifica-
tions, or statements as may be required by
the form or accompanying instructions in
addition to, or in lieu of, the information
and certification described in this para-
graph (e)(3)(v).

* * * * *

(4) Applicable rules. The provisions in
this paragraph (e)(4) describe procedures
applicable to withholding certificates on
Form W-8 or Form 8233 (or a substitute
form) or documentary evidence furnished
to establish foreign status. These provi-
sions do not apply to Forms W-9 (or their
substitutes). For corresponding provisions
regarding Form W-9 (or a substitute
form), see section 3406 and the regula-
tions under that section.

(i) Who may sign the certificate-(A)
In general. A withholding certificate (in-
cluding an acceptable substitute) may be
signed by any person authorized to sign a
declaration under penalties of perjury on
behalf of the person whose name is on the
certificate as provided in section 6061 and
the regulations under that section (relating
to who may sign generally for an individ-
ual, estate, or trust, which includes certain
agents who may sign returns and other
documents), section 6062 and the regula-
tions under that section (relating to who
may sign corporate returns), and section
6063 and the regulations under that sec-
tion (relating to who may sign partnership
returns). A person authorized to sign a
withholding certificate includes an officer
or director of a corporation, a partner of a
partnership, a trustee of a trust, an execu-
tor of an estate, any foreign equivalent of
the former titles, and any other person that
has been provided written authorization
by the individual or entity named on the
certificate to sign documentation on such
person's behalf.

(B) [Reserved]. For further guidance,
see § 1.1441-1T(e)(4)(i)(B).

(ii) Period of validity-(A) General
rule-(1) Withholding certificates and
documentary evidence. Except as pro-
vided otherwise in paragraphs (e)(4)
(ii)(B) and (C) of this section and this
paragraph (e)(4)(ii)(A), a withholding cer-
tificate described in paragraph (e)(2)(i) of
this section, or a certificate described in
§ 1.871-14(c)(2)(v) (furnished to qualify
interest as portfolio interest for purposes
of sections 871(h) and 881(c)), will re-

main valid until the earlier of the last day
of the third calendar year following the
year in which the withholding certificate
is signed or the day that a change in cir-
cumstances occurs that makes any infor-
mation on the certificate incorrect. For
example, a withholding certificate signed
on September 30, 2015, remains valid
through December 31, 2018, unless cir-
cumstances change that make the infor-
mation on the form no longer correct.
Documentary evidence described in
§ 1.6049-5(c)(1) provided to establish a
payee's foreign status shall remain valid
until the last day of the third calendar year
following the year in which the documen-
tary evidence is provided to the withhold-
ing agent except as provided in paragraph
(e)(4)(ii)(B) of this section; however, if
such documentary evidence contains an
expiration date, it may be treated as valid
until that expiration date if doing so would
provide a longer period of validity than
the three-year period. Additionally, a
withholding certificate or documentary
evidence with a period of validity that is
valid on December 31, 2013, will not be
treated as invalid based solely on the pe-
riod described in this paragraph (e)(4)(ii)
before January 1, 2015. Notwithstanding
the validity periods prescribed by this
paragraph (e)(4)(ii)(A) and paragraphs
(e)(4)(ii)(B) and (C) of this section, a
withholding certificate and documentary
evidence will cease to be valid if a change
in circumstances makes the information
on the documentation incorrect.

(2) [Reserved]. For further guidance,
see § 1.1441-1T(e)(4)(ii)(A)(2).

(B) Indefinite validity period. Notwith-
standing paragraph (e)(4)(ii)(A) of this
section, the certificates (or parts of certif-
icates) and documentary evidence de-
scribed in paragraphs (e)(4)(ii)(B)(1)
through (11) of this section shall remain
valid until a change in circumstances
makes the information on the documenta-
tion incorrect under paragraph (e)(4)(ii)
(D)(3). See, however, § 1.1471-3(c)(6)(ii)
for when a withholding certificate or doc-
umentary evidence remains valid (or is
subject to renewal) when also provided
with respect to a withholdable payment
made to an entity (including an interme-
diary) for purposes of whether a withhold-
ing agent may continue to rely on the
entity's claim of chapter 4 status. Addi-

tionally, the provisions of paragraphs
(e)(4)(ii)(B)(1), (2), and (11) of this sec-
tion do not apply to documentary evi-
dence or a withholding certificate fur-
nished prior to July 1, 2014. (For
documentary evidence or a withholding
certificate furnished after 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.)

(1) A beneficial owner withholding
certificate (other than the portion of the
certificate making a claim for treaty ben-
efits) and documentary evidence support-
ing a claim of foreign status when both are
provided together by an individual claim-
ing foreign status, if the withholding agent
does not have a current U.S. residence
address or U.S. mailing address for the
payee, does not have one or more current
U.S. telephone numbers that are the only
telephone numbers the withholding agent
has for the payee, and, for a payment
described in § 1.6049-5(c)(1), the with-
holding agent has not been provided
standing instructions to make a payment
to an account in the United States for the
obligation. For purposes of the preceding
sentence, a beneficial owner withholding
certificate and documentary evidence sup-
porting the individual's claim of foreign
status will be treated as provided together
if they are provided within 30 days of
each other, regardless of which the with-
holding agent receives first.

(2) A beneficial owner withholding
certificate (other than the portion of the
certificate making a claim for treaty ben-
efits) and documentary evidence provided
by an entity supporting the entity's claim
of foreign status, if both are received by
the withholding agent before the validity
period of either the withholding certificate
or the documentary evidence would oth-
erwise expire under paragraph (e)(4)
(ii)(A) of this section. See, however,
§ 1.1471-3(c)(6)(ii) for rules regarding
indefinite validity for chapter 4 purposes.

(3) A beneficial owner withholding
certificate provided by an entity claiming
status as a tax-exempt entity under section
501(c) that is not a foreign private foun-
dation under section 509, provided that
the withholding agent reports at least one
payment annually to the entity under
§ 1.1461-1(c).

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(4) A certificate described in paragraph
(e)(3)(ii) of this section (a qualified inter-
mediary withholding certificate) but not
including the withholding certificates,
documentary evidence, statements, or
other information associated with the cer-
tificate.

(5) A certificate described in paragraph
(e)(3)(iii) of this section (a nonqualified
intermediary certificate), but not including
the withholding certificates, documentary
evidence, statements, or other information
associated with the certificate.

(6) A certificate described in paragraph
(e)(3)(v) of this section (a U.S. branch
(including a territory financial institution)
withholding certificate that is not provided
by the beneficial owner), but not including
the withholding certificates, documentary
evidence, statements, or other information
associated with the certificate.

* * * * *

(8) A withholding certificate provided
by a withholding foreign trust described in
§ 1.1441-5(e)(5)(v).

(9) A certificate described in § 1.1441-
5(c)(2)(iv) (dealing with a certificate from
a person representing to be a withholding
foreign partnership).

(10) A certificate described in § 1.1441-
5(c)(3)(iii) (a withholding certificate from a
nonwithholding foreign partnership) or in
§ 1.1441-5(e)(5)(iii) (a withholding certifi-
cate of a foreign simple or foreign grantor
trust) but not including the withholding cer-
tificates, documentary evidence, statements,
or other information required to be associ-
ated with the certificate; and

(11) Documentary evidence that is not
generally renewed or amended (such as a
certificate of incorporation).

(C) Withholding certificate for effec-
tively connected income. Notwithstanding
paragraph (e)(4)(ii)(B) of this section, the
period of validity of a withholding certif-
icate furnished to a withholding agent to
claim a reduced rate of withholding for
income that is effectively connected with
the conduct of a trade or business within
the United States shall be limited to the
three-year period described in paragraph
(e)(4)(ii)(A) of this section.

(D) Change in circumstances-(1) De-
fined. A certificate or documentation be-
comes invalid from the date of a change in
circumstances affecting the correctness of
the certificate or documentation to the ex-

tent provided in this paragraph (e)(4)
(ii)(D). For purposes of this section, a
person is considered to have a change in
circumstances only if such change affects
the person's claim of chapter 3 status.
Thus, for example, a change of address is
not a change in circumstances with re-
spect to a claim of only foreign status
under this paragraph (e)(4)(ii)(D) if the
change is to another address outside the
United States, but is a change in circum-
stances if the change is to an address in
the United States.

(2) Obligation to notify a withholding
agent of a change in circumstances. If a
change in circumstances makes any infor-
mation on a certificate or other documen-
tary evidence incorrect, then the person
whose name is on the certificate or other
documentation must inform the withhold-
ing agent within 30 days of the change
and furnish a new certificate or new doc-
umentary evidence. If an intermediary (in-
cluding a U.S. branch or territory financial
institution described in paragraph (b)(2)
(iv)(A) of this section) or a flow-through
entity becomes aware that a certificate or
other appropriate documentation it has
furnished to the person from whom it col-
lects a payment is no longer valid because
of a change in the circumstances of the
person who issued the certificate or fur-
nished the other appropriate documenta-
tion, then the intermediary or flow-
through entity must notify the person from
whom it collects the payment of the
change of circumstances within 30 days of
the date that it knows or has reason to
know of the change in circumstances. It
must also obtain a new withholding cer-
tificate or new appropriate documentation
to replace the existing certificate or docu-
mentation the validity of which has ex-
pired due to the change in circumstances
to continue to treat the person who pro-
vided the certificate or documentary evi-
dence under its claimed chapter 3 status.

(3) Withholding agent's obligation
with respect to a change in circumstances.
A withholding agent may rely on a certif-
icate without having to inquire into possi-
ble changes of circumstances that may
affect the validity of the statement, unless
it knows or has reason to know that cir-
cumstances have changed, as permitted
under paragraph (e)(4)(viii) of this sec-
tion. A withholding agent is required to

notify any person providing documentary
evidence (in lieu of a withholding certifi-
cate) of the person's obligation to notify
the withholding agent of a change in
circumstances. However, a withholding
agent may choose to apply the provisions
of paragraph (b)(3)(iv) of this section re-
garding the 90-day grace period as of that
date while awaiting a new certificate or
documentation or while seeking informa-
tion regarding changes, or suspected
changes, in the person's circumstances. A
withholding agent may also require a new
certificate at any time prior to a payment,
even though the withholding agent has no
actual knowledge or reason to know that
any information stated on the certificate
has changed.

(iii) Retention of documentation. A
withholding agent must retain each with-
holding certificate and other documenta-
tion for purposes of this section for as
long as it may be relevant to the determi-
nation of the withholding agent's tax lia-
bility under section 1461 and § 1.1461-1.
A withholding agent may retain a with-
holding certificate or documentary evi-
dence that is an original, certified copy, or
a scanned document (as described in para-
graph (e)(4)(iv)(D) of this section). A
withholding agent may also retain a with-
holding certificate by other means (such
as microfiche) that allows a reproduction
of the document provided that the with-
holding agent has recorded its receipt of a
form described in the preceding sentence
and is able to produce a hard copy of the
form. See § 1.6049-5(c)(1) for the re-
quirements for maintaining documentary
evidence that also apply for purposes of
determining a payee's U.S. or foreign sta-
tus for purposes of chapter 3.

(iv) Electronic transmission of infor-
mation-(A) In general. A withholding
agent may establish a system for a bene-
ficial owner or payee to electronically fur-
nish a Form W-8, an acceptable substi-
tute Form W-8, or such other form as the
IRS may prescribe. The system must meet
the requirements described in paragraph
(e)(4)(iv)(B) of this section. See para-
graph (e)(4)(iv)(D) of this section for
other cases in which a Form W-8 (or
other documentation) may be furnished
electronically.

* * * * *

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(C) [Reserved]. For further guidance,
see § 1.1441-1T(e)(4)(iv)(C).

(D) Forms and documentary evidence
received by facsimile or email. A with-
holding agent may rely upon an otherwise
valid Form W-8 (or documentary evi-
dence) received by facsimile or a form or
document scanned and received electron-
ically, such as, for example, an image
embedded in an email or as a Portable
Document Format (.pdf) attached to an
email. A withholding agent may not rely
on a form or document received by such
means, however, if the withholding agent
knows that the form or document was
transmitted to the withholding agent by a
person not authorized to do so by the
person required to execute the form. A
withholding agent may establish other
procedures to authenticate and verify a
form or document sent by such means and
may reject any form or document that fails
to satisfy the requirements of such proce-
dures. A taxpayer may apply this para-
graph (e)(4)(iv)(D) to all of its open tax
years, including tax years that are cur-
rently under examination by the IRS.

(E) [Reserved]. For further guidance,
see § 1.1441-1T(e)(4)(iv)(E).

(v) Additional procedures for certifi-
cates provided electronically. The IRS
may prescribe procedures in a revenue
procedure (see § 601.601(d)(2) of this
chapter) or may issue other appropriate
guidance (including a written directive for
revenue agents) to further prescribe the
conditions by which the IRS will deter-
mine that a system developed by a with-
holding agent to permit beneficial owners
and payees to provide Forms W-8 elec-
tronically satisfies the requirements of
paragraph (e)(4)(iv)(B) of this section.

(vi) Acceptable substitute form. A
withholding agent may substitute its own
form instead of an official Form W-8 or
8233 (or such other official form as the
IRS may prescribe). Such a substitute for
an official form will be acceptable if it
contains provisions that are substantially
similar to those of the official form, it
contains the same certifications relevant to
the transactions as are contained on the
official form and these certifications are
clearly set forth, and the substitute form
includes a signature-under-penalties-of-
perjury statement identical to the one
stated on the official form. The substitute

form is acceptable even if it does not
contain all of the provisions contained on
the official form, so long as it contains
those provisions that are relevant to the
transaction for which it is furnished (in-
cluding those required for purposes of
chapter 4). For example, a withholding
agent that pays no income for which treaty
benefits are claimed may develop a sub-
stitute form that is identical to the official
form, except that it does not include in-
formation regarding claims of benefits un-
der an income tax treaty. Similarly, a
withholding agent that is not required to
determine the chapter 4 status of a payee
providing a form may develop a substitute
form that does not contain chapter 4 sta-
tuses. A withholding agent who uses a
substitute form must furnish instructions
relevant to the substitute form only to the
extent and in the manner specified in the
instructions to the official form. A with-
holding agent may use a substitute form
that is written in a language other than
English and may accept a form that is
filled out in a language other than English,
but the withholding agent must make
available an English translation of the
form and its contents to the IRS upon
request. A withholding agent may refuse
to accept a certificate from a payee or
beneficial owner (including the official
Form W-8 or 8233) if the certificate pro-
vided is not an acceptable substitute form
provided by the withholding agent, but
only if the withholding agent furnishes the
payee or beneficial owner with an accept-
able substitute form within 5 business
days of receipt of an unacceptable form
from the payee or beneficial owner. In that
case, the substitute form is acceptable
only if it contains a notice that the with-
holding agent has refused to accept the
form submitted by the payee or beneficial
owner and that the payee or beneficial
owner must submit the acceptable form
provided by the withholding agent in or-
der for the payee or beneficial owner to be
treated as having furnished the required
withholding certificate.

(vii) Requirement of taxpayer identify-
ing number. A TIN must be stated on a
withholding certificate when required by
this paragraph (e)(4)(vii) for the withhold-
ing certificate to be valid for purposes of
this section. A TIN is required to be stated
on-

(A) A withholding certificate on which
a beneficial owner is claiming the benefit
of a reduced rate under an income tax
treaty (other than for amounts described in
§ 1.1441-6(c)(2) or amounts for which a
foreign tax identifying number has been
provided, as described in § 1.1441-
6(c)(2));

* * * * *

(F) A withholding certificate from a
person representing to be a withholding
foreign partnership or a withholding for-
eign trust;

* * * * *

(H) A withholding certificate from a
person representing to be a U.S. branch or
territory financial institution described in
paragraph (b)(2)(iv) of this section; and

(I) A withholding certificate provided
by an entity acting as a qualified securities
lender, as defined for purposes of chapter
3, with respect to a substitute dividend
paid in a securities lending or similar
transaction.

(viii) Reliance rules. A withholding
agent may rely on the information and
certifications stated on withholding certif-
icates or other documentation without
having to inquire into the veracity of this
information or certification, unless it has
actual knowledge or reason to know that
the information or certification is incor-
rect. In the case of amounts described in
§ 1.1441-6(c)(2), a withholding agent de-
scribed in § 1.1441-7(b)(3) has reason to
know that the information or certifications
on a certificate are incorrect only to
the extent provided in § 1.1441-7(b)(4)
through (6). See § 1.1441-6(b)(1) for re-
liance on representations regarding eligi-
bility for a reduced rate under an income
tax treaty. Paragraphs (e)(4)(viii)(A) and
(B) of this section provide examples of
such reliance.

* * * * *

(B) Status of payee as an intermediary
or as a person acting for its own account.
A withholding agent may rely on the type
of certificate furnished as indicative of the
payee's status as an intermediary or as an
owner, unless the withholding agent has
actual knowledge or reason to know oth-
erwise. For example, a withholding agent
that receives a beneficial owner withhold-
ing certificate from a foreign financial in-
stitution may treat the institution as the
beneficial owner, unless it has information

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in its records that would indicate other-
wise or the certificate contains informa-
tion that is not consistent with beneficial
owner status (e.g., sub-account numbers
that do not correspond to accounts main-
tained by the withholding agent for such
person or names of one or more persons
other than the person submitting the with-
holding certificate). If the financial insti-
tution also acts as an intermediary, the
withholding agent may request that the
institution furnish two certificates, i.e., a
beneficial owner certificate described in
paragraph (e)(2)(i) of this section for the
amounts that it receives as a beneficial
owner, and an intermediary withholding
certificate described in paragraph (e)(3)(i)
of this section for the amounts that it
receives as an intermediary. In the ab-
sence of reliable representation or infor-
mation regarding the status of the payee as
an owner or as an intermediary, see para-
graph (b)(3)(v)(A) for applicable pre-
sumptions.

(C) Reliance on a prior version of a
withholding certificate. Upon the issuance
by the IRS of an updated version of a
withholding certificate, a withholding
agent may continue to accept the prior
version of the withholding certificate until
the later of six full months after the revi-
sion date shown on the updated withhold-
ing certificate or the end of the calendar
year the updated withholding certificate is
issued, unless the IRS has issued guidance
that indicates that the period for accepting
a prior version is shortened or extended
(including in the instructions to the form),
such as when there is a new payee status
required to be established using the form.
A withholding agent may continue to rely
upon a previously signed prior version of
the withholding certificate until its period
of validity expires.

(ix) Certificates to be furnished to
withholding agent for each obligation un-
less exception applies. Unless otherwise
provided in paragraphs (e)(4)(ix)(A)
through (D) of this section, a withholding
agent that is a financial institution with
which a customer may open an account
shall obtain a withholding certificate or
documentary evidence on an obligation-
by-obligation basis and may not rely upon
such documentation collected by another
person or another branch of the withhold-
ing agent.

(A) Exception for certain branch or
account systems or system maintained by
agent. A withholding agent may rely on a
withholding certificate or documentary
evidence furnished by a customer as part
of a single branch system, universal ac-
count system, or shared account system
described in § 1.1471-3(c)(8) (substitut-
ing the term chapter 3 status for chapter 4
status each place it appears in that para-
graph). Furthermore, a withholding agent
may rely on a shared documentation sys-
tem maintained by an agent as described
in § 1.1471-3(c)(9)(i) (also substituting
the term chapter 3 status for chapter 4
status each place it appears in that para-
graph).

(B) Reliance on certification provided
by introducing brokers-(1) In general. A
withholding agent may rely on the certi-
fication of a broker indicating the broker's
determination of a payee's chapter 3 sta-
tus and that the broker holds a valid ben-
eficial owner withholding certificate de-
scribed in paragraph (e)(2)(i) of this
section or other appropriate documenta-
tion for that beneficial owner with respect
to any readily tradable instrument, as de-
fined in § 31.3406(h)-1(d) of this chapter,
if the broker is a United States person
(including a U.S. branch treated as a U.S.
person under paragraph (b)(2)(iv) of this
section) that is acting as the agent of a
beneficial owner. A withholding agent
may also rely on a certification described
in the preceding sentence that is provided
by a qualified intermediary that makes
payments to beneficial owners that it re-
ceives from the withholding agent. The
certification must be in writing or in elec-
tronic form and contain all of the infor-
mation required of a nonqualified interme-
diary under paragraphs (e)(3)(iv)(B) and
(C) of this section. If a broker chooses to
use this paragraph (e)(4)(ix)(B), that bro-
ker will be solely responsible for applying
the rules of § 1.1441-7(b) to the withhold-
ing certificates or other appropriate docu-
mentation and shall be liable for any un-
derwithholding as a result of the broker's
failure to apply such rules. See § 1.1471-
3(c)(9)(iii) for a similar allowance that
applies to a broker's determination of a
payee's chapter 4 status for purposes of
chapter 4. For purposes of this paragraph
(e)(4)(ix)(B), the term broker means a

person treated as a broker under § 1.6045-
1(a).

(2) Example. The following example
illustrates the rules of this paragraph
(e)(4)(ix)(B) with respect to a U.S. broker:

Example. SCO is a U.S. securities clearing orga-
nization that provides clearing services for corre-
spondent broker, CB, a U.S. corporation. Pursuant to
a fully disclosed clearing agreement, CB fully dis-
closes the identity of each of its customers to SCO.
Part of SCO's clearing duties include the crediting of
income and gross proceeds of readily tradable instru-
ments (as defined in § 31.3406(h)-1(d)) to each
customer's account. For each disclosed customer
that is a foreign beneficial owner, CB provides SCO
with information required under paragraphs
(e)(3)(iv)(B) and (C) of this section that is necessary
to apply the correct rate of withholding and to file
Forms 1042-S. SCO may use the representations and
beneficial owner information provided by CB to
determine the proper amount of withholding and to
file Forms 1042-S. CB is responsible for determin-
ing the validity of the withholding certificates or
other appropriate documentation under § 1.1441-
1(b).

(C) Reliance on documentation and
certifications provided between principals
and agents-(1) Withholding agent as
agent. A withholding agent that acts on
behalf of a principal may rely upon doc-
umentation (or copies of documentation)
obtained from the principal, and, with re-
spect to a principal that is a U.S. withhold-
ing agent, a qualified intermediary (when
acting as such for determining a payee's
status), or a withholding foreign partner-
ship or withholding foreign trust with re-
spect to a partner, owner, or beneficiary in
the partnership or trust, the withholding
agent may rely upon certification provided
by the principal for purposes of determin-
ing a payee's chapter 3 status. Thus an
agent (such as a paying agent or transfer
agent) may not rely upon a certification
provided by a principal that is a partici-
pating FFI but is not also a qualified in-
termediary, withholding foreign partner-
ship, or withholding foreign trust for
purposes of this section, even though it
may rely on the certification when pro-
vided solely for purposes of chapter 4
under § 1.1471-3(c)(9)(iv).

(2) Withholding agent as principal. A
withholding agent may also rely on doc-
umentation collected by an agent of the
withholding agent in order to fulfill its
chapter 3 obligations because such agent's
actions are imputed to the principal (the
withholding agent). For example, a with-
holding agent may contract an agent to

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collect Forms W-8 from account holders
on its behalf, but the withholding agent
remains liable for any tax liability result-
ing from a failure of the agent to comply
with the requirements of chapter 3.

(D) Reliance upon documentation for
accounts acquired in merger or bulk ac-
quisition for value. A withholding agent
that acquires an account from a predeces-
sor or transferor in a merger or bulk ac-
quisition of accounts for value is permit-
ted to rely upon valid documentation (or
copies of valid documentation) collected
by the predecessor or transferor for deter-
mining the chapter 3 status of an account
holder of such an account. In addition, a
withholding agent that acquires an ac-
count in a merger or bulk acquisition of
accounts for value, other than a related
party transaction, from a U.S. withholding
agent (or a qualified intermediary when
the withholding agent is also a qualified
intermediary) may also rely upon the pre-
decessor's or transferor's determination of
the account holder's chapter 3 status for a
transition period of the lesser of six
months from the date of the merger or
until the acquirer knows that the claim of
entity classification and status is inaccu-
rate or a change in circumstances occurs
with respect to the account. At the end of
the transition period, the acquirer will be
permitted to rely upon the predecessor's
determination as to the chapter 3 status of
the account holder only if the documenta-
tion that the acquirer has for the account
holder, including documentation obtained
from the predecessor or transferor, sup-
ports the status claimed. An acquirer that
discovers at the end of the transition pe-
riod that the chapter 3 status assigned by
the predecessor or transferor to the ac-
count holder was incorrect and has not
withheld as it would have been required to
but for its reliance upon the predecessor's
determination, will be required to with-
hold on future payments, if any, made to
the account holder the amount of tax that
should have been withheld during the
transition period but for the erroneous
classification as to the account holder's
status. For purposes of this paragraph
(e)(4)(ix)(D), a related party transaction is
a merger or sale of accounts in which the
acquirer is in the same expanded affiliated
group, within the meaning of § 1.1471-
5(i)(2), as the predecessor or transferor

either prior to or after the merger or ac-
quisition or the predecessor or transferor
(or shareholders of the predecessor or
transferor) obtain a controlling interest in
the acquirer or in a newly formed entity
created for purposes of the merger or ac-
quisition. See § 1.1471-3(c)(v) for a sim-
ilar reliance rule that applies for purposes
of chapter 4.

(5) * * *

(ii) Definition of qualified intermedi-
ary. With respect to a payment to a for-
eign person, the term qualified intermedi-
ary 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 report-
ing 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 report-
ing requirements with respect to its U.S.
accounts similar to those applicable to a
registered deemed-compliant FFI under
§ 1.1471-5(f)(1), excluding a U.S. branch
of any of the foregoing entities, or any
other category of FFI identified in a qual-
ified intermediary withholding agreement
as eligible to act as a qualified intermedi-
ary;

(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;

(C) [Reserved].

(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 for-
eign person described in paragraph
(e)(5)(ii) of this section pursuant to such
procedures as the IRS may prescribe in
published guidance (see § 601.601(d)(2)
of this chapter). Under the withholding
agreement, a qualified intermediary shall
generally be subject to the applicable
withholding and reporting provisions ap-
plicable to withholding agents and payors
under chapters 3, 4, and 61 of the Code,
section 3406, the regulations under those
provisions, and other withholding provi-

sions of the Code, except to the extent
provided under the agreement.

(B) Terms of the withholding agree-
ment. The withholding agreement shall
specify the obligations of the qualified
intermediary under chapters 3 and 4 in-
cluding, for a qualified intermediary that
is an FFI, the documentation, withhold-
ing, and reporting obligations required of
a participating FFI or registered deemed-
compliant FFI (including a reporting
Model 1 FFI as defined in § 1.1471-
1(b)(114)) with respect to each branch of
the qualified intermediary other than a
U.S. branch that is treated as a U.S. person
under paragraph (b)(2)(iv)(A) of this sec-
tion. The withholding agreement will
specify the type of certifications and doc-
umentation upon which the qualified in-
termediary may rely to ascertain the
classification (e.g., corporation or partner-
ship), 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 inter-
mediary for purposes of chapters 3, 4, and
61, section 3406, and, if necessary, enti-
tlement to the benefits of a reduced rate
under an income tax treaty. The withhold-
ing agreement shall specify if, and to what
extent, the qualified intermediary may as-
sume 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 in-
formation reporting requirements are
modified so that, in appropriate cases, the
qualified intermediary may report pay-
ments to the IRS on an aggregated basis,
without having to disclose the identity of
beneficial owners and payees. However,
the qualified intermediary may be re-
quired to provide to the IRS the name and
address of those foreign customers who
benefit from a reduced rate under an in-
come tax treaty pursuant to the withhold-
ing agreement for purposes of verifying
entitlement to such benefits, particularly
under an applicable limitation on benefits
provision. Under the withholding agree-
ment, a qualified intermediary may
agree to act as an acceptance agent to
perform the duties described in
§ 301.6109-1(d)(3)(iv)(A) of this chap-
ter. The withholding agreement may
specify the manner in which applicable

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procedures for adjustments for under-
withholding and overwithholding, in-
cluding 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 inter-
mediary to claim refunds of overwith-
held amounts. In addition, the withhold-
ing agreement shall specify the manner
in which the IRS will verify compliance
with the agreement, including the time
and manner for which a qualified inter-
mediary 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 re-
view) 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 re-
sults 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 applica-
ble 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 sub-
ject (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 withhold-
ing responsibility. Any person (whether a
U.S. person or a foreign person) who
meets the definition of a withholding
agent under § 1.1441-7(a) (for payments
subject to chapter 3 withholding) and
§ 1.1473-1(d) (for withholdable pay-
ments) is required to withhold and deposit
any amount withheld under §§ 1.1461-

1(a) and 1.1474-1(b) and to make the
returns prescribed by §§ 1.1461-1(b) and
(c), and by 1.1474-1(c), and (d). Under its
qualified intermediary withholding agree-
ment, a qualified intermediary may, how-
ever, inform a withholding agent from
which it receives a payment that it will
assume the primary obligation to with-
hold, 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 qual-
ified 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 pay-
ments made to the account that are with-
holdable payments. Additionally, a quali-
fied intermediary may represent that it
assumes chapter 61 reporting and section
3406 obligations for a payment when the
qualified intermediary meets the require-
ments of § 1.6049-4(c)(4)(i) or (ii) for
the payment. If a withholding agent makes
a payment of an amount subject to with-
holding under chapter 3, a reportable pay-
ment (as defined in section 3406(b)), or a
withholdable payment to a qualified inter-
mediary that represents to the withholding
agent that it has assumed primary with-
holding responsibility for the payment,
the withholding agent is not required to
withhold on the payment. The withhold-
ing agent is not required to determine that
the qualified intermediary actually per-
forms its primary withholding responsibil-
ities. A qualified intermediary that as-
sumes primary withholding responsibility
under chapters 3 and 4 or primary report-
ing 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 pri-
mary 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 with-
holding agent needs to fulfill its withhold-
ing and reporting requirements is con-
tained in the withholding certificate. The
qualified intermediary withholding agree-
ment will require the qualified intermedi-
ary to include information in its withhold-
ing statement relating to withholdable
payments for purposes of withholding un-
der chapter 4 as described in paragraph
(e)(5)(v)(C)(2) of this section. The with-
holding statement forms an integral part
of the qualified intermediary's qualified
intermediary withholding certificate, and
the penalties of perjury statement pro-
vided 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, includ-
ing 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 state-
ment provided by a nonqualified interme-
diary). The withholding statement shall be
updated as often as necessary for the with-
holding agent to meet its reporting and
withholding obligations under chapters 3,
4, and 61 and section 3406. For purposes
of this section, a withholding agent will be
liable for tax, interest, and penalties in
accordance with paragraph (b)(7) of this
section to the extent it does not follow the
presumption rules of paragraph (b)(3) of
this section, §§ 1.1441-5(d) and (e)(6),
and 1.6049-5(d) for a payment, or portion
thereof, for which it does not have a valid
withholding statement prior to making a
payment.

(B) Content of withholding statement.
The withholding statement must contain
sufficient information for a withholding
agent to apply the correct rate of with-
holding 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 with-
holding statement must-

(1) Designate those accounts for which
the qualified intermediary acts as a quali-
fied intermediary;

(2) Designate those accounts for which
qualified intermediary assumes primary

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withholding responsibility under chapter 3
and chapter 4 of the Code and/or primary
reporting and backup withholding respon-
sibility under chapter 61 and section 3406;

(3) If applicable, designate those ac-
counts for which the qualified intermedi-
ary is acting as a qualified securities
lender with respect to a substitute divi-
dend paid in a securities lending or similar
transaction;

(4) [Reserved].

(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 as-
sumed both primary withholding respon-
sibility 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 ac-
cordance 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 reason-
able method on which the qualified inter-
mediary 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 sep-
arate 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 with-
holding rate pools contained on the with-
holding statement. To the extent a quali-
fied intermediary does not assume
primary Form 1099 reporting and backup
withholding responsibility under chapter
61 and section 3406, a qualified interme-
diary's withholding statement must estab-
lish 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 alter-
native 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 with-
holding rate pool of U.S. payees. A qual-
ified intermediary that is a participating
FFI or registered deemed-compliant FFI
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 de-
scribed in § 1.1471-5(b)(5)) for the payee
of the payment. A qualified intermediary
shall determine withholding rate pools
based on valid documentation that it ob-
tains under its withholding agreement
with the IRS, or if a payment cannot be
reliably associated with valid documenta-
tion, under the applicable presumption
rules. If a qualified intermediary has an
account holder that is another intermedi-
ary (whether a qualified intermediary or a
nonqualified intermediary) or a flow-
through entity, the qualified intermediary
may combine the account holder informa-
tion provided by the other intermediary or
flow-through entity with the qualified in-
termediary's direct account holder infor-
mation to determine the qualified interme-
diary'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 agree-
ment with the IRS.

(2) Withholding rate pool requirements
for a withholdable payment. This para-
graph (e)(5)(v)(C)(2) modifies the re-
quirements of a withholding statement
described in paragraph (e)(5)(v)(C)(1)
provided by a qualified intermediary with

respect to a withholdable payment (in-
cluding a reportable amount that is a with-
holdable payment). For such a payment,
the regulations applicable to a withhold-
ing statement described in paragraph
(e)(5)(v)(C)(1) of this section shall apply,
except that-

(i) If the qualified intermediary pro-
vides a withholding statement described
in § 1.1471-3(c)(3)(iii)(B)(2) (describing
an FFI withholding statement), the with-
holding statement may include a chapter 4
withholding rate pool with respect to the
portion of the payment allocated to a sin-
gle pool of recalcitrant account holders
(without the need to subdivide into the
pools described in § 1.1471-4(d)(6)), in-
cluding both account holders of the qual-
ified intermediary and of any participating
FFI, registered deemed-compliant FFI, or
other qualified intermediary for whom the
first-mentioned qualified intermediary re-
ceives 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 sec-
tion); or

(ii) If the qualified intermediary pro-
vides a withholding statement described
in § 1.1471-3(c)(3)(iii)(B)(3) (describing
a chapter 4 withholding statement), the
withholding statement may include a
chapter 4 withholding rate pool with re-
spect to the portion of the payment allo-
cated 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, es-
tablish 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 agree-
ment, and foreign persons for which no
withholding is required under chapters 3
and 4, and may include payments allo-
cated to a chapter 4 withholding rate pool
of U.S. payees. In such a case, the quali-
fied intermediary may also establish a sep-
arate withholding rate pool (subject to 28-
percent withholding, or other applicable
statutory back-up withholding tax rate)

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that includes only U.S. non-exempt recip-
ient 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 inter-
mediary chooses the alternative procedure
of this paragraph (e)(5)(v)(C)(3), the qual-
ified intermediary must provide the infor-
mation required by its withholding agree-
ment 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 sec-
tions 6721 and 6722, as well as any
other applicable penalties, and may re-
sult in the termination of the qualified
intermediary's withholding agreement
with the IRS. A withholding agent shall
not be liable for tax, interest, or penal-
ties 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 pro-
vide 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 with-
holding rate pool to an unknown recip-
ient, or otherwise in accordance with the
appropriate Form 1099 and the instruc-
tions accompanying the form.

(D) Example. The following example illustrates
the application of paragraph (e)(5)(v)(C) of this sec-
tion for a qualified intermediary providing chapter 4
withholding rate pools on an FFI withholding state-
ment provided to a withholding agent.

Example. WA makes a payment of U.S. source
interest that is a withholdable payment to QI, a
qualified intermediary that is an FFI and a non-U.S.
payor (as defined in § 1.6049-5(c)(5)), and A and B
are account holders of QI (as defined under
§ 1.1471-5(a)) and are both U.S. non-exempt recip-
ients (as defined paragraph (c)(21) of this section).
Ten percent of the payment is attributable to both A
and B. A has provided WA with a Form W-9, but B
has not provided WA with a Form W-9. QI assumes
primary withholding responsibility under chapters 3
and 4 with respect to the payment, 80 percent of
which is allocable to foreign payees who are account
holders other than A and B. As a participating FFI,
QI is required to report with respect to its U.S.
accounts under § 1.1471-4(d) (as incorporated into
its qualified intermediary agreement). Provided that
QI reports A's account as a U.S. account under the
requirements referenced in the preceding sentence,
QI is not required to provide WA with a Form W-9
from A and may instead include A in a chapter 4

withholding rate pool of U.S. payees, allocating 10%
of the payment to this pool. See § 1.6049-
4(c)(4)(iii) concerning when reporting under section
6049 for a payment of interest is not required when
an FFI that is a non-U.S. payor reports an account
holder receiving the payment under its chapter 4
requirements. With respect to B, the interest pay-
ment is subject to backup withholding under section
3406. Because B is a recalcitrant account holder of
QI for withholdable payments and because QI as-
sumes primary chapter 4 withholding responsibility,
however, QI may include the portion of the payment
allocated to B with the remaining 80% of the pay-
ment 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
§ 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 pay-
ments 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, sub-
stitute March 5, 2014, for June 30, 2014),
and before January 6, 2017 , see this sec-
tion as in effect and contained in 26 CFR
part 1, as revised April 1, 2016. For pay-
ments made after 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 lia-
bility for failure to obtain documentation
timely, to all of its open tax years, includ-
ing tax years that are currently under ex-
amination by the IRS. The election is
made by simply taking action under those
provisions in the same manner as the tax-
payer would take action for payments
made after December 31, 2000.

(3) Section 871(m) transactions. Para-
graphs (b)(4)(xxi) through (b)(4)(xxiii),
(e)(3)(ii)(E), and (e)(6) of this section ap-
ply to payments made on or after Septem-
ber 18, 2015.

(4) [Reserved]. For further guidance,
see § 1.1441-1T(f)(4).

Par. 6. Section 1.1441-1T is added as
follows:

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

(a) through (b)(7)(ii)(A) [Reserved].
For further guidance, see § 1.1441-1(a)
through (b)(7)(ii)(A).

(B) Special rules for establishing that
income is effectively connected with the
conduct of a U.S. trade or business. A
withholding certificate received after the
date of payment to claim under § 1.1441-
4(a)(1) that income is effectively con-
nected 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 certifi-
cate were accurate as of the time of the
payment. The signed affidavit must also
state that the beneficial owner has in-
cluded the income on its U.S. income tax
return for the taxable year in which it is
required to report the income or, alterna-
tively, 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 con-
tain the affidavit described in the preced-
ing sentences.

(b)(7)(iii) through (c)(2)(i) [Reserved].
For further guidance, see § 1.1441-
1(b)(7)(iii) through (c)(2)(i).

(ii) Dual Residents. Individuals will
not be treated as U.S. persons for purposes
of this section for a taxable year or any
portion of a taxable year for which they
are a dual resident taxpayer (within the
meaning of § 301.7701(b)-7(a)(1) of this
chapter) who is treated as a nonresident
alien pursuant to § 301.7701(b)-7(a)(1) of
this chapter for purposes of computing
their U.S. tax liability.

(c)(3) through (c)(3)(i) [Reserved]. For
further guidance, see § 1.1441-1(c)(3)
through (c)(3)(i).

(ii) Nonresident alien individual. The
term nonresident alien individual means

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persons described in section 7701(b)
(1)(B), alien individuals who are treated
as nonresident aliens pursuant to
§ 301.7701(b)(7) of this chapter for pur-
poses of computing their U.S. tax liabil-
ity, or an alien individual who is a
resident of Puerto Rico, Guam, the
Commonwealth of Northern Mariana Is-
lands, the U.S. Virgin Islands, or Amer-
ican Samoa as determined under
§ 301.7701(b)-1(d) of this chapter. An
alien individual who has made an elec-
tion 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 with-
holding under chapter 3 of the Code and
the regulations thereunder.

(c)(4) through (c)(38)(i) [Reserved].
For further guidance, see § 1.1441-1(c)(4)
through (c)(38)(i).

(ii) Hold mail instruction. Notwith-
standing 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 per-
son claims to be a resident for tax pur-
poses. 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 cir-
cumstances requiring the person to pro-
vide the documentary evidence described
in this paragraph (c)(38)(ii) in order to use
the address as a permanent residence ad-
dress.

(c)(39) through (e)(2)(ii)(A) [Reserved].
For further guidance, see § 1.1441-1(c)(39)
through (e)(2)(ii)(A).

(B) Requirement to collect foreign TIN
and date of birth beginning January 1,
2017. Beginning January 1, 2017, a ben-
eficial owner withholding certificate pro-
vided 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 with-
holding certificates associated with pay-
ments 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 consid-
ered invalid as a result of the application
of this paragraph (e)(2)(ii)(B). A with-
holding 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) [Re-
served]. For further guidance, see
§ 1.1441-1(e)(3) through (e)(3)(iv)(C)(2).

(3) Alternative withholding statement.
In lieu of a withholding statement contain-
ing 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 require-
ments of this paragraph (e)(3)(iv)(C)(3)
with respect to a payment. This alternative
withholding statement may only be pro-
vided by a nonqualified intermediary that
provides the withholding agent with the
withholding certificates from the benefi-
cial owners (i.e., not documentary evi-
dence) 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 for-
eign payee is subject, provided that all of
the information necessary to make such
determination is provided on the with-
holding certificate. A withholding agent
that uses an alternative withholding state-
ment may not apply a different rate from
that which the withholding agent may rea-
sonably conclude from the information on
the withholding certificate.

(ii) The withholding statement must al-
locate the payment to every payee re-
quired to be reported as described in para-
graph (e)(3)(iv)(C)(1)(ii) of this section.

(iii) The withholding statement must
also contain any other information the
withholding agent reasonably requests in
order to fulfill its obligations under chap-

ters 3, 4, and 61 of the Code, and section
3406.

(iv) The withholding statement must
contain a representation from the non-
qualified intermediary that the informa-
tion on the withholding certificates is not
inconsistent with any other account infor-
mation the nonqualified intermediary has
for the beneficial owners for determining
the rate of withholding with respect to
each payee.

(e)(3)(iv)(C)(4) through (e)(4)(i)(A)
[Reserved]. For further guidance, see
§ 1.1441-1(e)(3)(iv)(C)(4) through
(e)(4)(i)(A).

(B) Electronic Signatures. A withhold-
ing agent, regardless of whether the with-
holding agent has established an elec-
tronic system pursuant to paragraph (e)(4)
(iv)(A) or (e)(4)(iv)(C) of this section,
may accept a withholding certificate with
an electronic signature, provided the elec-
tronic signature meets the requirements of
paragraph (e)(4)(iv)(B)(3)(ii). In addition,
the withholding certificate must reason-
ably demonstrate to the withholding agent
that the form has been electronically
signed by the recipient identified on the
form (or a person authorized to sign for
the person identified on the form). For
example, a withholding agent may treat as
validly signed a withholding certificate
that has, in the signature block, the name
of the person authorized to sign, a time
and date stamp, and a statement that the
certificate has been electronically signed.
However, a withholding agent may not
treat a withholding certificate with a typed
name in the signature line and no other
information as validly signed.

(e)(4)(ii) through (e)(4)(ii)(A)(1)
[Reserved]. For further guidance, see
§ 1.1441-1(e)(4)(ii) through (e)(4)
(ii)(A)(1).

(2) Documentary evidence for treaty
claims and treaty statements. Documen-
tary evidence described in § 1.1441-
6(c)(3) or (4) and a statement regarding
entitlement to treaty benefits described in
§ 1.1441-6(c)(5)(i) (treaty statement)
shall remain valid until the last day of the
third calendar year following the year in
which the documentary evidence is pro-
vided to the withholding agent except as
provided in paragraph (e)(4)(ii)(B) of this
section. Notwithstanding the validity pe-
riod prescribed in this paragraph (e)(4)

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(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 state-
ment will expire January 1, 2019.

(e)(4)(ii)(B) through (e)(4)(iv)(B)(4)
[Reserved]. For further guidance, see
§ 1.1441-1(e)(4)(ii)(B) through (e)(4)
(iv)(B)(4).

(C) Form 8233. A withholding agent
may establish a system for a beneficial
owner or payee to provide Form 8233
electronically, provided the system meets
the requirements of paragraph (e)(4)(iv)
(B)(1) through (4) of this section (replac-
ing "Form W-8" with "Form 8233" each
place it appears).

(e)(4)(iv)(D) [Reserved]. For further
guidance, see § 1.1441-1(e)(4)(iv)(D).

(E) Third party repositories. A with-
holding certificate will be considered fur-
nished for purposes of this section (in-
cluding paragraph (e)(1)(ii)(A)(1) of this
section) by the person providing the cer-
tificate, and a withholding agent may rely
on an otherwise valid withholding certif-
icate received electronically from a third
party repository, if the withholding certif-
icate was uploaded or provided to a third
party repository and there are processes in
place to ensure that the withholding cer-
tificate 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 certifi-
cate) for the withholding agent making the
request to receive the withholding certifi-
cate. 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 withhold-
ing agent may also rely on an otherwise
valid withholding statement, if the inter-
mediary providing the withholding certif-
icates and withholding statement through
the repository provides an updated with-
holding statement in the event of any
change in the information previously pro-
vided (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 re-
pository, for purposes of this paragraph, is
an entity that maintains withholding cer-
tificates (including certificates accompa-
nied by withholding statements) but is not
an agent of the applicable withholding
agent or the person providing the certifi-
cate. 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 up-
loads 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 e-mail 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 e-mail 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 e-mail also
clearly indicates that the link is associated with pay-
ments received under the second contract. X's sys-
tem meets the requirements of a third party reposi-
tory, 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 reposi-
tory. 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 va-
lidity of the withholding statement and that ensure it
will update WA if there is a new withholding state-
ment. X's system meets the requirements of a third
party repository, and WA can treat the Form
W-8IMY (and withholding statement) as furnished by
FP. In addition, because FP is acting as an agent of A

and B, the beneficial owners, WA can treat the Forms
W-8BEN for A and B as furnished by A and B.

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

(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.

Par. 7. Section 1.1441-2 is amended by
removing paragraph (e)(7), redesignating
paragraph (e)(8) as paragraph (e)(7), add-
ing new paragraph (a)(8), and revising
paragraph (f).

The revisions and additions read as fol-
lows:

§ 1.1441-2 Amounts subject to
withholding.

(a) * * *

(8) [Reserved]. For further guidance,
see § 1.1441-2T(a)(8).

* * * * *

(f) Effective/applicability date-(1)
This section applies to payments made
after December 31, 2000. Paragraphs
(b)(5) and (d)(4) of this section apply to
payments made after August 1, 2006.
Paragraph (b)(6) of this section applies to
payments made on or after January 23,
2012. Paragraph (e)(8) of this section ap-
plies to payments made on or after Sep-
tember 18, 2015.

(2) [Reserved]. For further guidance,
see § 1.1441-2T(f)(2).

Par. 8. Section 1.1441-2T is added to
read as follows:

§ 1.1441-2T Amounts subject to
withholding (temporary).

(a) through (a)(7) [Reserved]. For fur-
ther guidance, see § 1.1441-2(a) through
(a)(7).

(8) Amounts of United States source
gross transportation income, as defined in
section 887(b)(1), that is taxable under
section 887(a).

(b) through (f)(1) [Reserved]. For fur-
ther guidance, see § 1.1441-2(b) through
(f)(1).

(2) Effective/applicability date. This
section applies on January 6, 2017.

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(g) Expiration date. The applicability
of this section expires on December 30,
2019.

Par. 9. Section 1.1441-3 is amended
by:

1\. Revising paragraphs (a), (c)(4)(i),
(d), and (i).

2\. Removing paragraph (j).
The revisions read as follows:

§ 1.1441-3 Determination of amounts to
be withheld.

(a) General rule-(1) Withholding on
gross amount. Except as otherwise pro-
vided in regulations under section 1441,
the amount subject to withholding under
§ 1.1441-1 is the gross amount of income
subject to withholding that is paid to a
foreign person. The gross amount of in-
come subject to withholding may not be
reduced by any deductions, except to the
extent that one or more personal exemp-
tions are allowed as provided under
§ 1.1441-4(b)(6).

(2) Coordination with chapter 4. A
withholding agent making a payment that
is both a withholdable payment and an
amount subject to withholding under
§ 1.1441-2(a) and that has withheld tax as
required under chapter 4 from such pay-
ment is not required to withhold under this
section notwithstanding paragraph (a)(1)
of this section. See § 1.1474-6(b)(1) for
the allowance for a withholding agent to
credit withholding applied under chapter 4
against its liability for tax due under
sections 1441, 1442, or 1443, and see
§ 1.1474-6(b)(1) for the rule allowing a
withholding agent to credit withholding
applied under chapter 4 against its liability
for tax due under sections 1441, 1442, or
1443, and § 1.1474-6(b)(2) for when
such withholding is considered applied by
a withholding agent. If the withholdable
payment is not required to be withheld
upon under chapter 4, then the withhold-
ing agent must apply the provisions of
§ 1.1441-1 to determine whether with-
holding is required under sections 1441,
1442, or 1443.

* * * * *

(c) * * *

(4) Coordination with withholding un-
der section 1445-(i) In general. A dis-
tribution from a U.S. Real Property Hold-
ing Corporation (USRPHC) (or from a

corporation that was a USRPHC at any
time during the five-year period ending on
the date of distribution) with respect to
stock that is a U.S. real property interest
under section 897(c) or from a Real Estate
Investment Trust (REIT) or other entity
that is a qualified investment entity (QIE)
under section 897(h)(4) with respect to its
stock is subject to the withholding provi-
sions under section 1441 (or section 1442
or 1443) and section 1445. A USRPHC
making a distribution shall be treated as
satisfying its withholding obligations un-
der both sections if it withholds in accor-
dance with one of the procedures de-
scribed in either paragraph (c)(4)(i)(A) or
(B) of this section. A USRPHC must ap-
ply the same withholding procedure to all
the distributions made during the taxable
year. However, the USRPHC may change
the applicable withholding procedure
from year to year. For rules regarding
distributions by REITs and other entities
that are QIEs, see paragraph (c)(4)(i)(C)
of this section. To the extent withholding
under sections 1441, 1442, or 1443 ap-
plies under this paragraph (c)(4)(i) to any
portion of a distribution that is a withhold-
able payment, see paragraph (a)(2) for
rules coordinating withholding under
chapter 4.

(A) Withholding under section 1441.
The USRPHC may choose to withhold on
a distribution only under section 1441 (or
1442 or 1443) and not under section 1445.
In such a case, the USRPHC must with-
hold under section 1441 (or 1442 or 1443)
on the full amount of the distribution,
whether or not any portion of the distri-
bution represents a return of basis or cap-
ital gain. If a reduced tax rate under an
income tax treaty applies to the distribu-
tion by the USRPHC, then the applicable
rate of withholding on the distribution
shall be no less than 15 percent for distri-
butions after February 16, 2016, and no
less than 10 percent for distributions on or
before February 16, 2016, unless the ap-
plicable treaty specifies an applicable
lower rate for distributions from a USR-
PHC, in which case the lower rate may
apply.

(B) Withholding under both sections
1441 and 1445. As an alternative to the
procedure described in paragraph (c)(4)
(i)(A) of this section, a USRPHC may
choose to withhold under both sections

1441 (or 1442 or 1443) and 1445 under
the procedures set forth in this paragraph
(c)(4)(i)(B). The USRPHC must make a
reasonable estimate of the portion of the
distribution that is a dividend under para-
graph (c)(2)(ii)(A) of this section, and
must-

(1) Withhold under section 1441 (or
1442 or 1443) on the portion of the dis-
tribution that is estimated to be a dividend
under paragraph (c)(2)(ii)(A) of this sec-
tion; and

(2) Withhold under section 1445(e)(3)
and § 1.1445-5(e) on the remainder of the
distribution or on such smaller portion
based on a withholding certificate ob-
tained in accordance with § 1.1445-
5(e)(3)(iv).

(C) Coordination with REIT/QIE with-
holding. Withholding is required under
section 1441 (or 1442 or 1443) on the
portion of a distribution from a REIT or
other entity that is a QIE that is not des-
ignated (for REITs) or reported (for reg-
ulated investment companies that are
QIEs) as a capital gain dividend, a return
of basis, or a distribution in excess of a
shareholder's adjusted basis in the stock
of the REIT or QIE that is treated as a
capital gain under section 301(c)(3). A
distribution in excess of a shareholder's
adjusted basis in the stock of the REIT or
QIE is, however, subject to withholding
under section 1445, unless the interest in
the REIT or QIE is not a U.S. real prop-
erty interest (e.g., an interest in a domes-
tically controlled REIT or QIE under sec-
tion 897(h)(2)). In addition, withholding
is required under section 1445 on the por-
tion of the distribution designated (for
REITs) or reported (for regulated invest-
ment companies that are QIEs) as a capital
gain dividend to the extent that it is attrib-
utable to the sale or exchange of a U.S.
real property interest. See § 1.1445-8.
* * * * *

(d) Withholding on payments that in-
clude an undetermined amount of in-
come-(1) In general. Where the with-
holding agent makes a payment and does
not know at the time of payment the
amount that is subject to withholding be-
cause the determination of the source of
the income or the calculation of the
amount of income subject to tax depends
upon facts that are not known at the
time of payment, then the withholding

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agent must withhold an amount under
§ 1.1441-1 based on the entire amount
paid that is necessary to ensure that the
tax withheld is not less than 30 percent
(or other applicable percentage) of the
amount that could be from sources
within the United States or income sub-
ject to tax. See § 1.1471-2(a)(5) for
similar rules under chapter 4 that apply
to payments made to payees that are
entities. The amount so withheld shall
not exceed 30 percent of the amount
paid. With respect to a payment de-
scribed in paragraph (d)(1) or (2) of this
section, the withholding agent may elect
to retain 30 percent of the payment to
hold in escrow until the earlier of the
date that the amount of income from
sources within the United States or the
taxable amount can be determined or
one year from the date the amount is
placed is in escrow, at which time
the withholding becomes due under
§ 1.1441-1, or, to the extent that with-
holding is not required, the escrowed
amount must be paid to the payee.

(2) Withholding on certain gains. Ab-
sent actual knowledge or reason to know
otherwise, a withholding agent may rely
on a claim regarding the amount of gain
described in § 1.1441-2(c) if the benefi-
cial owner withholding certificate, or
other appropriate withholding certificate,
states the beneficial owner's basis in the
property giving rise to the gain. In the
absence of a reliable representation on a
withholding certificate, the withholding
agent must withhold an amount under
§ 1.1441-1 that is necessary to assure that
the tax withheld is not less than 30 percent
(or other applicable percentage) of the
recognized gain. For this purpose, the rec-
ognized gain is determined without regard
to any deduction allowed by the Code
from the gains. The amount so withheld
shall not exceed 30 percent of the amount
payable by reason of the transaction giv-
ing rise to the recognized gain. See
§ 1.1441-1(b)(8) regarding adjustments in
the case of overwithholding.

* * * * *

(i) Effective/applicability date. Except
as otherwise provided in paragraphs (g)(2)
and (h)(3) of this section, this section ap-
plies to payments made on or after Janu-
ary 6, 2017. (For payments made after
June 30, 2014, and before January 6,

2017, see this section as in effect and
contained in 26 CFR part 1, revised April
1, 2016. For payments made after Decem-
ber 31, 2000, see this section as in effect
and contained in 26 CFR part 1 as revised
April 1, 2013.)

##### § 1.1441-3T [Removed]

Par. 10. Section 1.1441-3T is re-
moved.

Par. 11. Section 1.1441-4 is amended
by revising paragraphs (a)(2)(ii), (b)(2)(i),
(b)(2)(iii),(b)(2)(v), (b)(3), and (g) to read
as follows:

§ 1.1441-4 Exemptions from
withholding for certain effectively
connected income and other amounts.

(a) * * *

(2) * * *

(ii) Special rules for U.S. branches of
foreign persons-(A) U.S. branches of
certain foreign banks or foreign insurance
companies. A payment to a U.S. branch
described in § 1.1441-1(b)(2)(iv)(B)(3) is
presumed to be effectively connected with
the conduct of a trade or business in the
United States without the need to furnish a
certificate if the withholding agent obtains
an EIN for the entity, unless the U.S.
branch provides a U.S. branch withhold-
ing certificate described in § 1.1441-
1(e)(3)(v) that represents otherwise. If no
certificate is furnished but the income is
not, in fact, effectively connected income,
then the branch must withhold whether
the payment is collected on behalf of other
persons or on behalf of another branch of
the same entity. See § 1.1441-1(b)(2)(iv)
and (b)(6) for general rules applicable to
payments to U.S. branches of foreign per-
sons.

(B) Other U.S. branches. See
§ 1.1441-1(b)(2)(iv)(E) for similar proce-
dures for other U.S. branches to the extent
provided in a determination letter from the
IRS.

** * * *

(b) * * *

(2) Manner of obtaining withholding
exemption under tax treaty-(i) In gen-
eral. In order to obtain the exemption
from withholding by reason of a tax treaty
provided by paragraph (b)(1)(iv) of this
section, a nonresident alien individual

must submit a withholding certificate (de-
scribed in paragraph (b)(2)(ii) of this sec-
tion) to each withholding agent from
whom amounts are to be received. A sep-
arate withholding certificate must be filed
for each taxable year of the alien individ-
ual. If the withholding agent is satisfied
that an exemption from withholding is
warranted (see paragraph (b)(2)(iii) of this
section), the withholding certificate shall
be accepted in the manner set forth in
paragraph (b)(2)(iv) of this section. The
exemption from withholding becomes ef-
fective for payments made at least ten
days after a copy of the accepted with-
holding certificate is forwarded to the IRS.
The withholding agent may rely on an
accepted withholding certificate only if
the IRS has not objected to the certificate.
For purposes of this paragraph (b)(2)(i),
the IRS will be considered to have not
objected to the certificate if it has not
notified the withholding agent within a
10-day period beginning from the date
that the withholding certificate is for-
warded to the IRS pursuant to paragraph
(b)(2)(v) of this section. After expiration
of the 10-day period, the withholding
agent may rely on the withholding certif-
icate retroactive to the date of the first
payment covered by the certificate. The
fact that the IRS does not object to the
withholding certificate within the 10-day
period provided in this paragraph (b)(2)(i)
shall not preclude the IRS from examining
the withholding agent at a later date with
respect to facts that the withholding agent
knew or had reason to know regarding the
payment and eligibility for a reduced rate
and that were not disclosed to the IRS as
part of the 10-day review process.
* * * * *

(iii) Review by withholding agent. The
exemption from withholding provided by
paragraph (b)(1)(iv) of this section shall
not apply unless the withholding agent
accepts (in the manner provided in para-
graph (b)(2)(iv) of this section) the state-
ment on Form 8233, "Exemption From
Withholding on Compensation for Inde-
pendent (and Certain Dependent) Personal
Services of a Nonresident Alien Individ-
ual," (or successor form) supplied by the
nonresident alien individual. Before ac-
cepting the statement, the withholding
agent must examine the statement. If the
withholding agent knows or has reason to

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know that any of the facts or assertions on
Form 8233 may be false or that the eligi-
bility of the individual's compensation for
the exemption cannot be readily deter-
mined, the withholding agent may not ac-
cept the statement on Form 8233 and is
required to withhold under this section. If
the withholding agent accepts the state-
ment and subsequently finds that any of
the facts or assertions contained on Form
8233 may be false or that the eligibility of
the individual's compensation for the ex-
emption can no longer be readily deter-
mined, then the withholding agent shall
promptly so notify the IRS by letter, and
the withholding agent is not relieved of
liability to withhold on any amounts still
to be paid. If the withholding agent is
notified by the IRS that the eligibility of
the individual's compensation for the ex-
emption is in doubt or that such compen-
sation is not eligible for the exemption,
the withholding agent is required to with-
hold under this section. The rules of this
paragraph (b)(2) are illustrated by the fol-
lowing examples.

Example 1. C, a nonresident alien individual,
submits Form 8233 to W, a withholding agent. The
statement on Form 8233 does not include all the
information required by paragraph (b)(2)(ii) of this
section. Therefore, W has reason to know that he or
she cannot readily determine whether C's compen-
sation for personal services is eligible for an exemp-
tion from withholding and, therefore, W must with-
hold.

Example 2. D, a nonresident alien individual, is
performing services for W, a withholding agent. W
has accepted a statement on Form 8233 submitted by
D, according to the provisions of this section. W
receives notice from the IRS that the eligibility of
D's compensation for a withholding exemption is in
doubt. Therefore, W has reason to know that the
eligibility of the compensation for a withholding
exemption cannot be readily determined, as of the
date W receives the notification, and W must with-
hold tax under section 1441 on amounts paid after
receipt of the notification.

Example 3. E, a nonresident alien individual,
submits Form 8233 to W, a withholding agent for
whom E is to perform personal services. The state-
ment contains all the information requested on Form
8233. E claims an exemption from withholding
based on a personal exemption amount computed on
the number of days E will perform personal services
for W in the United States. If W does not know or
have reason to know that any statement on the Form
8233 is false or that the eligibility of E's compensa-
tion for the withholding exemption cannot be readily
determined, W can accept the statement on Form
8233 and exempt from withholding the appropriate
amount of E's income.

* * * * *

(v) Copies of Form 8233. The with-
holding agent shall forward one copy of
each Form 8233 that is accepted under
paragraph (b)(2)(iv) of this section to the
IRS within five days of such acceptance.
The withholding agent shall retain a copy
of Form 8233.

(3) Withholding agreements. Compen-
sation for personal services of a nonresi-
dent alien individual who is engaged dur-
ing the taxable year in the conduct of a
trade or business within the United States
may be wholly or partially exempted from
the withholding required by § 1.1441-1 if
an agreement is reached between the IRS
and the alien individual with respect to the
amount of withholding required. Such
agreement shall be available in the cir-
cumstances and in the manner set forth by
the Internal Revenue Service, and shall be
effective for payments covered by the
agreement that are made after the agree-
ment is executed by all parties. The alien
individual must agree to timely file an
income tax return for the current taxable
year.

* * * * *

(g) Effective/applicability date. This
section applies to payments made on or
after January 6, 2017. (For payments
made after June 30, 2014, and before Jan-
uary 6, 2017, see this section as in effect
and contained in 26 CFR part 1, revised
April 1, 2016. For payments made after
December 31, 2000, see this section as in
effect and contained in 26 CFR part 1
revised April 1, 2013.)

##### § 1.1441-4T [Removed]

Par. 12. Section 1.1441-4T is re-
moved.

Par. 13. Section 1.1441-5 is amended
by:

1\. Revising paragraphs (b)(2)(iii),
(b)(2)(vi), (c)(1)(i) introductory text,
(c)(1)(i)(C), (c)(1)(iv) and (v), (c)(2)(i)
through (iii), (c)(2)(iv)(A) and (B),
(c)(3)(i) and (ii), (c)(3)(iii)(A), (c)(3)(iv)
and (v), (d)(2) through (4), (e)(3)(iii),
(e)(5)(i) and (ii), (e)(5)(iii)(A), (e)(5)(iv)
and (v), (e)(6)(ii), (f), and (g) to read as
follows:

§ 1.1441-5 Withholding on payments to
partnerships, trusts, and estates.

* * * * *

(b) * * *

(2) * * *

(iii) U.S. complex trusts and U.S. es-
tates. A U.S. trust that is not a trust de-
scribed in section 651(a) (see paragraph
(b)(2)(ii) of this section) or sections 671
through 679 (see paragraph (b)(2)(iv) of
this section) (a U.S. complex trust) is re-
quired to withhold under chapter 3 of the
Internal Revenue Code (Code) as a with-
holding agent on the distributable net in-
come includible in the gross income of a
foreign beneficiary to the extent the dis-
tributable net income consists of an
amount subject to withholding (as defined
in § 1.1441-2(a)) that is, or is required to
be, distributed currently. The U.S. com-
plex trust shall withhold when a distribu-
tion is made to a foreign beneficiary. The
trust may use the same procedures regard-
ing an estimate of the amount subject to
withholding as a U.S. simple trust under
paragraph (b)(2)(ii) of this section. To the
extent an amount subject to withholding is
required to be, but is not actually, distrib-
uted, the U.S. complex trust must with-
hold on the foreign beneficiary's allocable
share at the time the income is required to
be reported on Form 1042-S under
§ 1.1461-1(c), without extension. A U.S.
estate is required to withhold under chap-
ter 3 of the Code on the distributable net
income includible in the gross income of a
foreign beneficiary to the extent the dis-
tributable net income consists of an
amount subject to withholding (as defined
in § 1.1441-2(a)) that is actually distrib-
uted. A U.S. estate may also use the rea-
sonable estimate procedures of paragraph
(b)(2)(ii) of this section. However, those
procedures apply to an estate that has a
taxable year other than a calendar year
only if the estate files an amended return
on Form 1042 for the calendar year in
which the distribution was made and pays
the underwithheld tax and interest within
60 days after the close of the taxable year
in which the distribution was made.
* * * * *

(vi) Coordination with chapter 4 re-
quirements for U.S. partnerships, trusts,
and estates. To the extent that a U.S.
partnership is required to withhold on an

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amount under chapter 4 with respect to a
partner, beneficiary, or owner, the partner-
ship, trust, or estate must apply the rules
described in § 1.1473-1(a)(5) to deter-
mine when it must withhold on the
amount under chapter 4. In a case in
which withholding applies under chapter
4 to such an amount, see § 1.1441-3(a)(2)
to coordinate with withholding that other-
wise applies to such an amount under this
paragraph (b).

(c) Foreign partnerships-(1) Deter-
mination of payee-(i) Payments treated
as made to partners. Except as otherwise
provided in paragraph (c)(1)(ii) or (iv) of
this section, the payees of a payment to a
person that the withholding agent may
treat as a nonwithholding foreign partner-
ship under paragraph (c)(3)(i) or (d)(2) of
this section are the partners (looking
through partners that are foreign interme-
diaries or flow-through entities) as fol-
lows-

* * * * *

(C) If the withholding agent can reli-
ably associate a partner's distributive
share of the payment with a qualified in-
termediary withholding certificate under
§ 1.1441-1(e)(3)(ii), a nonqualified inter-
mediary withholding certificate under
§ 1.1441-1(e)(3)(iii), or a U.S. branch
certificate under § 1.1441-1(e)(3)(v) (in-
cluding one provided by a territory finan-
cial institution), then the rules of
§ 1.1441-1(b)(2)(v) shall apply to deter-
mine who the payee is in the same manner
as if the partner's distributive share of the
payment had been paid directly to such
intermediary or U.S. branch or territory
financial institution;

* * * * *

(iv) Coordination with chapter 4 for
payments made to foreign partnerships. A
withholding agent that makes a payment
of U.S. source FDAP income to a foreign
partnership that is a withholdable payment
to which withholding under chapter 4 ap-
plies must apply the rules described in
§ 1.1473-1(a)(5)(vi) to determine when
the payment is treated as made to a partner
in the partnership for purposes of chapter
4. In a case in which withholding applies
under chapter 4 to a withholdable pay-
ment made to a foreign partnership, see
§ 1.1441-3(a)(2) to coordinate with with-
holding otherwise required under this
paragraph (c) with respect to the amount

of the payment included in the gross in-
come of a partner. For when a withholding
agent may reliably associate a withhold-
able payment with a chapter 4 withhold-
ing rate pool in lieu of obtaining docu-
mentation for each payee include in the
pool, see § 1.1441-1(e)(3)(iv)(C)(2) (sub-
stituting the term nonwithholding foreign
partnership for the term nonqualified in-
termediary).

(v) Examples. The rules of paragraphs
(c)(1)(i) and (ii) of this section are illus-
trated by the following examples. Each
example assumes that all payments are not
withholdable payments and thus no with-
holding applies under chapter 4.

Example 1. FP is a nonwithholding foreign part-
nership organized in Country X. FP has two partners,
FC, a foreign corporation, and USP, a U.S. partner-
ship. USWH, a U.S. withholding agent, makes a
payment of U.S. source interest to FP that is not a
withholdable payment. FP has provided USWH with
a valid nonwithholding foreign partnership certifi-
cate, as described in paragraph (c)(3)(iii) of this
section, with which it associates a beneficial owner
withholding certificate from FC and a Form W-9,
"Request for Taxpayer Identification Number and
Certification," from USP together with the withhold-
ing statement required by paragraph (c)(3)(iv) of this
section. USWH can reliably associate the payment of
interest with the withholding certificates from FC
and USP. Under paragraph (c)(1)(i) of this section,
the payees of the interest payment are FC and USP.

Example 2. The facts are the same as in Example
1, except that FP1, a nonwithholding foreign part-
nership, is a partner in FP rather than USP. FP1 has
two partners, A and B, both foreign persons. FP
provides USWH with a valid nonwithholding for-
eign partnership certificate, as described in para-
graph (c)(3)(iii) of this section, with which it asso-
ciates a beneficial owner withholding certificate
from FC and a nonwithholding foreign partnership
certificate from FP1. In addition, foreign beneficial
owner withholding certificates from A and B are
associated with the nonwithholding foreign partner-
ship withholding certificate from FP1. FP also pro-
vides the withholding statement required by para-
graph (c)(3)(iv) of this section. USWH can reliably
associate the interest payment with the withholding
certificates provided by FC, A, and B. Therefore,
under paragraph (c)(1)(i) of this section, the payees
of the interest payment are FC, A, and B.

Example 3. USWH makes a payment of U.S.
source dividends to WFP, a withholding foreign
partnership, that is not a withholdable payment.
WFP has two partners, FC1 and FC2, both foreign
corporations. USWH can reliably associate the pay-
ment with a valid withholding foreign partnership
withholding certificate from WFP. Therefore, under
paragraph (c)(1)(ii)(A) of this section, WFP is the
payee of the interest.

Example 4. USWH makes a payment of U.S.
source royalties that is not a withholdable payment
to FP, a foreign partnership. USWH can reliably
associate the royalties with a valid withholding cer-

tificate from FP on which FP certifies that the in-
come is effectively connected with the conduct of a
trade or business in the United States. Therefore,
under paragraph (c)(1)(ii)(B) of this section, FP is
the payee of the royalties.

(2) Withholding foreign partner-
ships-(i) Reliance on claim of withhold-
ing foreign partnership status. A with-
holding foreign partnership is a foreign
partnership that has entered into an agree-
ment with the IRS, as described in para-
graph (c)(2)(ii) of this section, with re-
spect to distributions and guaranteed
payments it makes to its partners. A with-
holding agent that can reliably associate a
payment with a certificate described in
paragraph (c)(2)(iv) of this section may
treat the person to whom it makes the
payment as a withholding foreign partner-
ship for purposes of withholding under
chapters 3 and 4 of the Code, information
reporting under chapter 61 of the Code,
backup withholding under section 3406,
and withholding under other provisions of
the Code. Furnishing such a certificate is
in lieu of transmitting to a withholding
agent withholding certificates or other ap-
propriate documentation for its partners.
Although the withholding foreign partner-
ship generally will be required to obtain
withholding certificates or other appropri-
ate documentation from its partners pur-
suant to its agreement with the IRS, it
generally will not be required to attach
such documentation to its withholding
foreign partnership withholding certificate
to the extent it is permitted to act as a
withholding foreign partnership with re-
spect to the payment under its agreement.
In addition, the IRS may permit a foreign
partnership to act as a qualified interme-
diary under § 1.1441-1(e)(5)(ii)(D) with
respect to its partners in appropriate cir-
cumstances.

(ii) Withholding agreement. The IRS
may, upon request, enter into a withhold-
ing agreement with a foreign partnership
pursuant to such procedures as the IRS
may prescribe in published guidance (see
§ 601.601(d)(2) of this chapter). Under
the withholding agreement, a foreign part-
nership shall generally be subject to the
applicable withholding and reporting pro-
visions applicable to withholding agents
and payors as defined in § 1.6049-4(a)
under chapters 3, 4, and 61 of the Code,
section 3406, the regulations under those
provisions, and other withholding provi-

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sions of the Code, except to the extent
provided under the withholding agree-
ment. Under the withholding agreement, a
foreign partnership may agree to act as an
acceptance agent to perform the duties
described in § 301.6109-1(d)(3)(iv)(A) of
this chapter. For a foreign partnership that
is an FFI, the withholding agreement will
require the partnership to assume the re-
quirements of a participating FFI, a regis-
tered deemed-compliant FFI, or an FFI
treated as a deemed-compliant FFI under
an applicable IGA that is subject to due
diligence and reporting requirements with
respect to its U.S. accounts similar to
those applicable to a registered deemed-
compliant FFI under § 1.1471-5(f)(1).
The withholding agreement may specify
the manner in which applicable proce-
dures for adjustments for underwithhold-
ing and overwithholding, including refund
procedures, apply to the withholding for-
eign partnership and its partners and the
extent to which applicable procedures
may be modified. In particular, the with-
holding agreement may allow a withhold-
ing foreign partnership to claim refunds of
overwithheld amounts on behalf of its
customers. In addition, the withholding
agreement must specify the manner in
which the IRS will verify the partner-
ship's compliance with its agreement, in-
cluding the requirements for a periodic
review of the partnership's compliance
with the withholding agreement and the
procedures for the partnership to certify to
its compliance with the withholding
agreement. A withholding foreign part-
nership must file a return on Form 1042,
"Annual Withholding Tax Return for U.S.
Source Income of Foreign Persons," and
information returns on Form 1042-S,
"Foreign Person's U.S. Source Income
Subject to Withholding." The withholding
agreement may also require a withholding
foreign partnership to file a partnership
return under section 6031(a) and partner
statements under 6031(b), including for
each U.S. partner to the extent required in
the agreement. Additionally, a partnership
that is an FFI will be required to file Form
8966, "FATCA Report" to the extent pro-
vided in the withholding agreement.

(iii) Withholding responsibility. A
withholding foreign partnership must as-
sume primary withholding responsibility
under both chapters 3 and 4 of the Code to

the extent required in the withholding
agreement. It is not required to provide
information to the withholding agent re-
garding each partner's distributive share
of the payment (including a withholdable
payment). The withholding foreign part-
nership will be responsible for reporting
the payments under §§ 1.1461-1(c),
1.1474-1(d), and chapter 61 of the Code
and filing Form 1042 (to the extent re-
quired in the withholding agreement). A
withholding agent making a payment to a
withholding foreign partnership is not re-
quired to withhold any amount under
chapters 3 and 4 of the Code on the pay-
ment unless it has actual knowledge or
reason to know that the foreign partner-
ship is not acting as a withholding foreign
partnership with respect to the payment or
has not withheld to the extent required.
The withholding foreign partnership shall
withhold the payments under the same
procedures and at the same time as pre-
scribed for withholding by a U.S. partner-
ship under paragraph (b)(2) of this
section, except that, for purposes of deter-
mining the partner's status, the provisions
of paragraph (d)(4) of this section shall
apply.

* * * * *

(A) The name, permanent residence
address (as described in § 1.1441-
1(e)(2)(ii)), the employer identification
number of the partnership, the country
under the laws of which the partnership
is created or governed, the chapter 4 status
of the partnership if required for purposes
of chapter 4 or if the partnership provides
(or will provide) a withholding statement
associated with the Form W-8 allocating
a payment to a chapter 4 withholding rate
pool of U.S. payees under § 1.6049-
4(c)(4) with respect to its partners, and the
GIIN of the partnership (if applicable). If
the partnership provides (or will provide)
a chapter 4 withholding rate pool of U.S.
payees as described in the preceding sen-
tence, the partnership must certify to its
chapter 4 status as a participating FFI (in-
cluding a reporting Model 2 FFI) or reg-
istered deemed-compliant FFI (including
a reporting Model 1 FFI);

(B) A certification that the partnership
is a withholding foreign partnership
within the meaning of paragraph (c)(2)(i)
of this section, and, for a partnership that
is an FFI receiving a withholdable pay-

ment, a certification that the partnership is
acting as a participating FFI, a registered
deemed-compliant FFI, or a nonreporting
IGA FFI (as defined in § 1.1471-
1(b)(83)); and

* * * * *

(3) Nonwithholding foreign partner-
ships-(i) Reliance on claim of foreign
partnership status. A withholding agent
may treat a person as a nonwithholding
foreign partnership if it receives from that
person a nonwithholding foreign partner-
ship withholding certificate as described
in paragraph (c)(3)(iii) of this section. A
withholding agent that does not receive a
nonwithholding foreign partnership with-
holding certificate or does not receive a
valid withholding certificate from an en-
tity it knows, or has reason to know, is a
foreign partnership must apply the pre-
sumption rules of §§ 1.1441-1(b)(3) and
1.6049-5(d) and paragraphs (d) and (e)(6)
of this section. In addition, to the extent a
withholding agent cannot, prior to a pay-
ment, reliably associate the payment with
valid documentation from a payee that is
associated with the nonwithholding for-
eign partnership withholding certificate or
has insufficient information to report the
payment on Form 1042-S or Form 1099,
to the extent reporting is required, the
withholding agent must apply the pre-
sumption rules. See § 1.1441-1(b)(2)
(vii)(A) and (B) for rules regarding reli-
able association. See, however, § 1.1441-
1(e)(3)(iv)(C)(2) for when a withholding
agent may reliably associate a withhold-
able payment with a chapter 4 withhold-
ing rate pool in lieu of obtaining docu-
mentation for each payee included in the
pool (substituting the term nonwithhold-
ing foreign partnership for the term
nonqualified intermediary). See also
§ 1.1441-1(e)(3)(iv)(A) for when a with-
holding agent may reliably associate a
payment with a chapter 4 withholding rate
pool of U.S. payees. See paragraph
(c)(3)(iv) of this section and § 1.1441-
1(e)(3)(iv) for alternative procedures per-
mitting allocation information to be re-
ceived after a payment is made.

(ii) Reliance on claim of reduced with-
holding by a partnership for its partners.
This paragraph (c)(3)(ii) describes the
manner in which a withholding agent may
rely on a claim of reduced withholding
when making a payment to a nonwith-

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holding foreign partnership. To the extent
that a withholding agent treats a payment
to a nonwithholding foreign partnership as
a payment to the nonwithholding foreign
partnership's partners (whether direct or
indirect) in accordance with paragraph
(c)(1)(i) of this section, it may rely on a
claim for reduced withholding by the part-
ner if, prior to the payment, the withhold-
ing agent can reliably associate the pay-
ment (within the meaning of § 1.1441-
1(b)(2)(vii)) with a valid withholding
certificate or other appropriate documen-
tation from the partner that establishes
entitlement to a reduced rate of withhold-
ing. A withholding certificate or other ap-
propriate documentation that establishes
entitlement to a reduced rate of withhold-
ing is a beneficial owner withholding cer-
tificate described in § 1.1441-1(e)(2)(i),
documentary evidence described in
§ 1.1441-6(c)(3) or (4) or § 1.6049-
5(c)(1) (for a partner claiming to be a
foreign person and a beneficial owner,
determined under the provisions of
§ 1.1441-1(c)(6)), a Form W-9 described
in § 1.1441-1(d) (for a partner claiming to
be a U.S. payee), a withholding foreign
partnership withholding certificate de-
scribed in paragraph (c)(2)(iv) of this sec-
tion, or a withholding statement allocating
the payment to a chapter 4 withholding
rate pool of U.S. payees. For when the
withholding agent can reliably associate
the payment with a chapter 4 withholding
rate pool, see paragraph (c)(3)(i) of this
section. See also § 1.1441-3(a)(2) (coor-
dinating withholding under chapter 3
when withholding under chapter 4 is ap-
plied to a payment). Unless a nonwith-
holding foreign partnership withholding
certificate is provided for income claimed
to be effectively connected with the con-
duct of a trade or business in the United
States, a claim must be presented for each
portion of the payment that represents an
item of income includible in the distribu-
tive share of a partner as required under
paragraph (c)(3)(iii)(C) of this section.
When making a claim for several partners,
the partnership may present a single non-
withholding foreign partnership withhold-
ing certificate to which the partners'
certificates or other appropriate documen-
tation are associated. Where the nonwith-
holding foreign partnership withholding
certificate is provided for income claimed

to be effectively connected with the con-
duct of a trade or business in the United
States under paragraph (c)(3)(iii)(D) of
this section, the claim may be presented
without having to identify any partner's
distributive share of the payment.
* * * * *

(A) The name, permanent residence
address (as described in § 1.1441-
1(e)(2)(ii)), the employer identification
number of the partnership, if any, the
country under the laws of which the part-
nership is created or governed, and the
chapter 4 status of the partnership (for a
nonwithholding foreign partnership re-
ceiving a withholdable payment or pro-
viding a withholding statement associated
with the Form W-8 allocating a payment
to a chapter 4 withholding rate pool of
U.S. payees), and the GIIN of the partner-
ship (if applicable);

** * * *

(iv) Withholding statement provided by
nonwithholding foreign partnership and
coordination with chapter 4. The provi-
sions of § 1.1441-1(e)(3)(iv) (regarding a
withholding statement) shall apply to a
nonwithholding foreign partnership by
substituting the term nonwithholding for-
eign partnership for the term nonqualified
intermediary, including when a nonwith-
holding foreign partnership may provide
to a withholding agent a withholding
statement that includes a chapter 4 with-
holding rate pool in lieu of information
with respect to each partner that is a payee
of a payment.

(v) Withholding and reporting by a for-
eign partnership. A nonwithholding for-
eign partnership described in this para-
graph (c)(3) that receives an amount
subject to withholding (as defined in
§ 1.1441-2(a)) shall be required to with-
hold and report such payment under chap-
ter 3 of the Code and the regulations
thereunder except as otherwise provided
in this paragraph (c)(3)(v). A nonwith-
holding foreign partnership shall not be
required to withhold and report if it has
provided a valid nonwithholding foreign
partnership withholding certificate, it has
provided all of the information required
by paragraph (c)(3)(iv) of this section
(withholding statement), and it does not
know, and has no reason to know, that
another withholding agent failed to with-
hold the correct amount or failed to report

the payment correctly under § 1.1461-
1(c). A nonwithholding foreign partner-
ship is also not required to withhold and
report under this paragraph (c)(3) to the
extent that withholding under chapter 4
was applied to a payment that is includible
in the gross income of a partner in the
partnership. See also § 1.1441-3(a)(2) for
coordination rules when withholding un-
der chapter 4 has been applied to a with-
holdable payment. A withholding foreign
partnership's obligations to withhold and
report shall be determined in accordance
with its withholding foreign partnership
agreement.

(d) * * *

(2) Determination of partnership status
as U.S. or foreign in the absence of doc-
umentation. In the absence of a valid rep-
resentation of U.S. partnership status in
accordance with paragraph (b)(1) of this
section or of foreign partnership status in
accordance with paragraph (c)(2)(i) or
(c)(3)(i) of this section, the withholding
agent shall determine the classification of
the payee under the presumptions set forth
in § 1.1441-1(b)(3)(ii). If the withholding
agent treats the payee as a partnership
under § 1.1441-1(b)(3)(ii), the withhold-
ing agent shall apply the presumptions set
forth in § 1.1441-1(b)(3)(iii)(A)(1) (ap-
plied by substituting the term partnership
for the term exempt recipient) to deter-
mine whether to treat the partnership as a
U.S. person or foreign person. For rules
regarding reliable association with a
withholding certificate from a domestic
or a foreign partnership, see § 1.1441-
1(b)(2)(vii).

(3) Determination of partners' status
in the absence of certain documentation.
If a nonwithholding foreign partnership
has provided a nonwithholding foreign
partnership withholding certificate under
paragraph (c)(3)(iii) of this section that
would be valid except that the withhold-
ing agent cannot reliably associate all or a
portion of the payment with valid docu-
mentation from a partner of the partner-
ship, then the withholding agent may ap-
ply the presumption rule of this paragraph
(d)(3) with respect to all or a portion of
the payment for which documentation has
not been received. See § 1.1441-1(b)(2)
(vii)(A) and (B) for rules regarding reli-
able association. The presumption rule of
this paragraph (d)(3) also applies to a per-

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son that is presumed to be a foreign part-
nership under the rule of paragraph (d)(2)
of this section. Any portion of a payment
that the withholding agent cannot treat as
reliably associated with valid documenta-
tion from a partner may be presumed
made to a foreign payee. As a result, any
payment of an amount subject to with-
holding is subject to withholding at a rate
of 30 percent. Any payment that is pre-
sumed to be made to an undocumented
foreign payee must be reported on Form
1042-S. See § 1.1461-1(c). For a pay-
ment described in this paragraph (d)(3)
that is a withholdable payment, see
§ 1.1471-3(f)(5) for the presumption rule
for determining the payee's chapter 4 sta-
tus to determine whether withholding un-
der chapter 4 applies to the payment.

(4) Determination by a withholding
foreign partnership of the status of its
partners. Except as otherwise provided in
the agreement described in paragraph
(c)(2) of this section, a withholding for-
eign partnership shall determine whether
the partners or some other persons are the
payees of the partners' distributive shares
of any payment made by a withholding
foreign partnership by applying the rules
of § 1.1441-1(b)(2), paragraph (c)(1) of
this section (in the case of a partner that is
a foreign partnership), and paragraph
(e)(3) of this section (in the case of a
partner that is a foreign estate or a foreign
trust). Further, the provisions of paragraph
(d)(3) of this section shall apply to deter-
mine the status of partners and the appli-
cable withholding rates to the extent that,
at the time the foreign partnership is re-
quired to withhold on a payment, it cannot
reliably associate the amount with docu-
mentation for any one or more of its part-
ners.

(e) * * *

(3) * * *

(iii) Coordination with chapter 4 for
payments made to foreign simple trusts
and foreign grantor trusts. A withholding
agent that makes a payment of U.S. source
FDAP income to a foreign simple trust or
foreign grantor trust that is a withholdable
payment to which withholding under
chapter 4 applies must apply the rules
described in § 1.1473-1(a)(5)(vi) to deter-
mine when the payment is treated as made
to a beneficiary or owner of the trust for
purposes of chapter 4. In a case in which

withholding applies under chapter 4 to a
withholdable payment made to a foreign
simple trust or foreign grantor trust, see
§ 1.1441-3(a)(2) to coordinate withhold-
ing otherwise required under this para-
graph (e) with respect to the amount of the
payment included in the gross income of
the payee of the payment. For when a
withholding agent may reliably associate
a withholdable payment with a chapter 4
withholding rate pool in lieu of obtaining
documentation for each payee included in
the pool, see § 1.1441-1(e)(3)(iv)(C)(2)
(substituting the term nonwithholding for-
eign trust for the term nonqualified inter-
mediary).

* * * * *

(5) Foreign simple trust and foreign
grantor trust-(i) Reliance on claim of
foreign simple trust or foreign grantor
trust status. A withholding agent may
treat a person as a foreign simple trust or
foreign grantor trust if it receives from
that person a foreign simple trust or for-
eign grantor trust withholding certificate
as described in paragraph (e)(5)(iii) of this
section. A withholding agent must apply
the presumption rules of §§ 1.1441-
1(b)(3) and 1.6049-5(d) and paragraphs
(d) and (e)(6) of this section to the extent
it cannot, prior to the payment, reliably
associate a payment (within the meaning
of § 1.1441-1(b)(2)(vii)) with a valid for-
eign simple trust or foreign grantor trust
withholding certificate, it cannot reliably
determine how much of the payment re-
lates to valid documentation provided by a
payee (e.g., a person that is not itself a
nonqualified intermediary, flow-through
entity, or U.S. branch) associated with the
foreign simple trust or foreign grantor
trust withholding certificate, or it does not
have sufficient information to report the
payment on Form 1042-S or Form 1099,
if reporting is required. See § 1.1441-
1(b)(2)(vii)(A) and (B). See, however,
§ 1.1441-1(e)(3)(iv)(C)(2) for when a
withholding agent may reliably associate
a withholdable payment with a chapter 4
withholding rate pool in lieu of obtaining
documentation for each payee included in
a pool (substituting the term nonwithhold-
ing foreign trust for the term nonqualified
intermediary). See also § 1.1441-1(e)(3)
(iv)(A) for when a withholding agent may
reliably associate a payment with a chap-
ter 4 withholding rate pool of U.S. payees.

(ii) Reliance on claim of reduced with-
holding by a foreign simple trust or for-
eign grantor trust for its beneficiaries or
owners. This paragraph (e)(5)(ii) de-
scribes the manner in which a withholding
agent may rely on a claim of reduced
withholding when making a payment to a
foreign simple trust or foreign grantor
trust. To the extent that a withholding
agent treats a payment to a foreign simple
trust or foreign grantor trust as a payment
to payees other than the trust in accor-
dance with paragraph (e)(3)(i) of this sec-
tion, it may rely on a claim for reduced
withholding by a beneficiary or owner if,
prior to the payment, the withholding
agent can reliably associate the payment
(within the meaning of § 1.1441-1(b)
(2)(vii)) with a valid withholding certifi-
cate or other appropriate documentation
from a payee or beneficial owner that es-
tablishes entitlement to a reduced rate of
withholding. A withholding certificate or
other appropriate documentation that es-
tablishes entitlement to a reduced rate of
withholding is a beneficial owner with-
holding certificate described in § 1.1441-
1(e)(2)(i) or documentary evidence de-
scribed in § 1.1441-6(c)(3) or (4) or in
§ 1.6049-5(c)(1) (for a beneficiary or
owner claiming to be a foreign person and
a beneficial owner, determined under the
provisions of § 1.1441-1(c)(6)), a Form
W-9 described in § 1.1441-1(d) (for a
beneficiary or owner claiming to be a U.S.
payee), a withholding foreign partnership
withholding certificate described in para-
graph (c)(2)(iv) of this section, or a with-
holding statement allocating the payment
to a chapter 4 withholding rate pool of
U.S. payees. For when the withholding
agent can reliably associate the payment
with a chapter 4 withholding rate pool, see
paragraph (c)(3)(i) of this section. See
also § 1.1441-3(a)(2) (coordinating with-
holding under chapter 3 when withholding
under chapter 4 is applied to a withhold-
able payment). Unless a foreign simple
trust or foreign grantor trust withholding
certificate is provided for income treated
as income effectively connected with the
conduct of a trade or business in the
United States, a claim must be presented
for each payee's portion of the payment.
When making a claim for several payees,
the trust may present a single foreign sim-
ple trust or foreign grantor trust withhold-

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ing certificate with which the payees'
certificates or other appropriate documen-
tation are associated. Where the foreign
simple trust or foreign grantor trust with-
holding certificate is provided for income
that is treated as effectively connected
with the conduct of a trade or business in
the United States under paragraph (e)(5)
(iii)(D) of this section, the claim may be
presented without having to identify any
beneficiary's or grantor's distributive
share of the payment.

(iii) * * *

(A) The name, permanent residence
address (as described in § 1.1441-1(e)
(2)(ii)), the employer identification num-
ber, if required, of the trust, the country
under the laws of which the trust is cre-
ated, the chapter 4 status of the trust if
required for purposes of chapter 4 or if the
trust provides (or will provide) a with-
holding statement associated with the
Form W-8 allocating a payment to a
chapter 4 withholding rate pool of U.S.
payees under § 1.6049-4(c)(4) with re-
spect to the nonwithholding foreign trust's
owners and beneficiaries, and the GIIN of
the trust (if applicable). If a nonwithhold-
ing foreign trust provides (or will provide)
a chapter 4 withholding rate pool of U.S.
payees as described in the preceding sen-
tence, the trust must certify to its chapter
4 status as a participating FFI (including a
reporting Model 2 FFI) or registered
deemed-compliant FFI (including a re-
porting Model 1 FFI);

* * * * *

(iv) Withholding statement provided by
a foreign simple trust or foreign grantor
trust and coordination with chapter 4. The
provisions of § 1.1441-1(e)(3)(iv) (re-
garding a withholding statement) shall ap-
ply to a foreign simple trust or foreign
grantor trust by substituting the term for-
eign simple trust or foreign grantor trust
for the term nonqualified intermediary, in-
cluding when a withholding statement
provided by a foreign simple trust or for-
eign grantor trust may include a chapter 4
withholding rate pool in lieu of informa-
tion with respect to each owner or bene-
ficiary that is a payee of a payment.

(v) Withholding foreign trusts. The IRS
may enter into a withholding agreement
with a foreign trust to treat the trust or
estate as a withholding foreign trust. Such
a withholding agreement shall generally

follow the same principles as a withhold-
ing agreement with a withholding foreign
partnership under paragraph (c)(2)(ii) of
this section. A withholding agent may
treat a payment to a withholding foreign
trust in the same manner the withholding
agent would treat a payment (including a
withholdable payment) to a withholding
foreign partnership. See § 1.1441-1(e)
(5)(ii)(D). For a withholding foreign trust
that is an FFI, the withholding agreement
will require the withholding foreign trust
to assume the requirements of either a
participating FFI, registered deemed-
compliant FFI, or an FFI treated as a
deemed-compliant FFI under an applica-
ble IGA that is subject to due diligence
and reporting requirements with respect to
its U.S. accounts similar to those applica-
ble to a registered deemed-compliant FFI
under § 1.1471-5(f)(1).

(6) * * *

(ii) Determination of status as U.S. or
foreign trust or estate in the absence of
documentation. In the absence of valid
documentation that establishes the U.S.
status of a trust or estate under paragraph
(b)(1) of this section and of documenta-
tion that establishes the foreign status of a
trust or estate under paragraph (e)(4) or
(e)(5)(iii) of this section, the withholding
agent shall determine the classification of
the payee based upon the presumptions set
forth in § 1.1441-1(b)(3)(ii). If, based
upon those presumptions, the withholding
agent classifies the payee as a trust or
estate, the withholding agent shall apply
the presumptions set forth in § 1.1441-
1(b)(3)(iii)(A)(1) (applied by substituting
the term trust for the term exempt recipi-
ent) to determine whether the trust or es-
tate is a U.S. person or foreign person. An
undocumented payee presumed to be a
foreign trust shall be presumed to be a
foreign complex trust. If a withholding
agent has documentary evidence that es-
tablishes that an entity is a foreign trust,
but the withholding agent cannot deter-
mine whether the foreign trust is a com-
plex trust, a simple trust, or foreign
grantor trust, the withholding agent shall
presume that the trust is a foreign complex
trust. Notwithstanding the preceding sen-
tence, in the case of a foreign trust with a
settlor that is a U.S. person for which a
withholding agent has both a U.S. address
and TIN, the withholding agent shall pre-

sume that the trust is a grantor trust when
it cannot determine the status of the trust
as a simple trust, complex trust, or grantor
trust. See § 1.1471-3(f)(4) and (5) to de-
termine the status of the payee for pur-
poses of chapter 4.

* * * * *

(f) Failure to receive withholding cer-
tificate timely or to act in accordance with
applicable presumptions. See applicable
procedures described in § 1.1441-1(b)(7)
in the event the withholding agent does
not hold an appropriate withholding cer-
tificate or other appropriate documenta-
tion at the time of payment or fails to rely
on the presumptions set forth in § 1.1441-
1(b)(3) or in paragraph (d) or (e) of this
section. For a payment that is a withhold-
able payment, see § 1.1471-3(f) for the
presumption rule for determining the pay-
ee's chapter 4 status.

(g) Effective/applicability date. This
section applies to payments made on or
after January 6, 2017. (For payments
made after June 30, 2014, and before Jan-
uary 6, 2017, see this section as in effect
and contained in 26 CFR Part 1, as revised
April 1, 2016. For payments made after
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.)

##### § 1.1441-5T [Removed]

Par. 14. Section 1.1441-5T is removed.

Par. 15. Section 1.1441-6 is amended by
revising paragraphs (a), (b)(1), (b)(2)(i) and
(iv), (c)(1), (c)(5)(i), and (i) to read as fol-
lows:

###### § 1.1441-6 Claim of reduced withholding under an income tax treaty.

(a) In general. The rate of withholding
on a payment of income subject to with-
holding may be reduced to the extent pro-
vided under an income tax treaty in effect
between the United States and a foreign
country. Most benefits under income tax
treaties are to foreign persons who reside
in the treaty country. In some cases, ben-
efits are available under an income tax
treaty to U.S. citizens or U.S. residents or
to residents of a third country. See para-
graph (b)(5) of this section for claims of
benefits by U.S. persons. If the require-

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ments of this section are met, the amount
withheld from the payment may be re-
duced at source to account for the treaty
benefit. See, however, § 1.1471-2(a) and
§ 1.1472-1(b) for when withholding at
source on a withholdable payment may
not be reduced to account for a treaty
benefit such that the beneficial owner of
the payment may need to file a claim for
refund to obtain a refund for the overwith-
held amount of tax. See also § 1.1441-
4(b)(2) for rules regarding claims of a
reduced rate of withholding under an in-
come tax treaty in the case of compensa-
tion from personal services and § 1.1441-
4(c)(1) for rules regarding claims of a
reduced rate of withholding under an in-
come tax treaty in the case of scholarship
and fellowship income.

(b) Reliance on claim of reduced with-
holding under an income tax treaty-(1)
In general. The withholding imposed un-
der section 1441, 1442, or 1443 on any
payment to a foreign person is eligible for
reduction under the terms of an income
tax treaty only to the extent that such
payment is treated as derived by a resident
of an applicable treaty jurisdiction, such
resident is a beneficial owner, and all
other requirements for benefits under the
treaty are satisfied. See section 894 and
the regulations under section 894 to deter-
mine whether a resident of a treaty coun-
try derives the income. Absent actual
knowledge or reason to know otherwise, a
withholding agent may rely on a claim
that a beneficial owner is entitled to a
reduced rate of withholding based upon an
income tax treaty if, prior to the payment,
the withholding agent can reliably associ-
ate the payment with a beneficial owner
withholding certificate, as described in
§ 1.1441-1(e)(2), that contains the infor-
mation necessary to support the claim, or,
in the case of a payment of income de-
scribed in paragraph (c)(2) of this section
made outside the United States with re-
spect to an offshore obligation, documen-
tary evidence described in paragraphs
(c)(3), (c)(4), and (c)(5) of this section.
See § 1.6049-5(e) for the definition of
payments made outside the United States
and § 1.6049-5(c)(1) for the definition of
an offshore obligation. For purposes of
this paragraph (b)(1), a beneficial owner
withholding certificate described in
§ 1.1441-1(e)(2)(i) contains informa-

tion necessary to support the claim for a
treaty benefit only if it includes the
beneficial owner's taxpayer identifying
number (except as otherwise provided in
paragraph (c)(1) and (g) of this section,
or the beneficial owner provides its for-
eign tax identifying number issued by
its country of residence and such coun-
try has with the United States an income
tax treaty or information exchange
agreement in effect), includes the repre-
sentations that the beneficial owner de-
rives the income under section 894 and
the regulations under section 894, if re-
quired, and with regard to a beneficial
owner that is an entity, includes a state-
ment that the entity meets the limitation
on benefits provisions of the treaty, if
any. For claims for treaty benefits for
scholarship and fellowship income, the
beneficial owner withholding certificate
must contain the beneficial owner's U.S.
taxpayer identifying number (not a for-
eign taxpayer identifying number). The
withholding certificate must also con-
tain any other representations required
by this section and any other informa-
tion, certifications, or statements as may
be required by the form or accompany-
ing instructions in addition to, or in
place of, the information and certifica-
tions described in this section. Absent
actual knowledge or reason to know that
the claims are unreliable or incorrect
(applying the standards of knowledge in
§ 1.1441-7(b)), a withholding agent
may rely on the claims made on a with-
holding certificate or on documentary
evidence. A withholding agent may also
rely on the information contained in a
withholding statement provided under
§§ 1.1441-1(e)(3)(iv) and 1.1441-5(c)
(3)(iv) and (e)(5)(iv) to determine
whether the appropriate statements re-
garding section 894 and limitation on
benefits have been provided in connec-
tion with documentary evidence. The
Internal Revenue Service (IRS) may ap-
ply the provisions of § 1.1441-1(e)
(1)(ii)(B) to notify the withholding
agent that the certificate cannot be relied
upon to grant benefits under an income
tax treaty. See § 1.1441-1(e)(4)(viii) re-
garding reliance on a withholding cer-
tificate by a withholding agent. The pro-
visions of § 1.1441-1(b)(3)(iv) dealing

with a 90-day grace period shall apply
for purposes of this section.

(i) [Reserved]. For further guidance,
§ 1.1441-6T(b)(1)(i).

(ii) [Reserved]. For further guidance,
§ 1.1441-6T(b)(1)(ii).

(2) Payment to fiscally transparent en-
tity-(i) In general. If the person claiming
a reduced rate of withholding under an
income tax treaty is an interest holder of
an entity that is considered to be fiscally
transparent (as defined in the regulations
under section 894) by the interest holder's
jurisdiction with respect to an item of in-
come, then, with respect to such income
derived by that person through the entity,
the entity shall be treated as a flow-
through entity and may provide a flow-
through withholding certificate with
which the withholding certificate or other
documentary evidence of the interest
holder that supports the claim for treaty
benefits is associated. In the case of a
payment that is a withholdable payment,
see, however, § 1.1471-3(c) for determin-
ing the payee of the payment and
§§ 1.1471-2(a) and 1472-1(b) for when
withholding at source may apply to the
payment based on the status of the payee
notwithstanding a claim for treaty benefits
made under this paragraph (b)(2) by an
interest holder in the payee. In such a
case, the interest holder may file a claim
for refund of the overwithheld amount of
tax. For purposes of this paragraph
(b)(2)(i), interest holders do not include
any direct or indirect interest holders that
are themselves treated as fiscally transpar-
ent entities with respect to that income by
the interest holder's jurisdiction. See
§ 1.1441-1(c)(23) and (e)(3)(i) for the
definition of flow-through entity and flow-
through withholding certificate. The entity
may provide a beneficial owner withhold-
ing certificate, or beneficial owner docu-
mentation, with respect to any remaining
portion of the income to the extent the
entity is receiving income and is not
treated as fiscally transparent by its own
jurisdiction. Further, the entity may claim
a reduced rate of withholding with respect
to the portion of a payment for which it is
not treated as fiscally transparent if it
meets all the requirements to make such a
claim and, in the case of treaty benefits, it
provides the documentation required by
paragraph (b)(1) of this section. If dual

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claims, as described in paragraph
(b)(2)(iii) of this section, are made, mul-
tiple withholding certificates may have to
be furnished. Multiple withholding certif-
icates may also have to be furnished if the
entity receives income for which a reduc-
tion of withholding is claimed under a
provision of the Internal Revenue Code
(e.g., portfolio interest) and income for
which a reduction of withholding is
claimed under an income tax treaty.
* * * * *

(iv) Examples. The following examples
illustrate the rules of paragraph (b)(2) of
this section. Each of the following exam-
ples describes a payment of U.S. source
royalties, which are not withholdable pay-
ments under chapter 4. See § 1.1473-
1(a)(4)(iii) (describing nonfinancial pay-
ments that are not treated as withholdable
payments). Thus, withholding under chap-
ter 4 shall not apply with respect to the
U.S. source royalties in any of the follow-
ing examples:

Example 1. (i) Facts. Entity E is a business
organization formed under the laws of country Y.
Country Y has an income tax treaty with the United
States. The treaty contains a limitation on benefits
provision. E receives U.S. source royalties from
withholding agent W and claims a reduced rate of
withholding under the U.S .- Y tax treaty on its own
behalf (rather than on behalf of its interest holders).
E furnishes a beneficial owner withholding certifi-
cate described in paragraph (b)(1) of this section that
represents that E is a resident of country Y (within
the meaning of the U.S .- Y tax treaty), is the benefi-
cial owner of the income, derives the income under
section 894 and the regulations under section 894,
and is not precluded from claiming benefits by the
treaty's limitation on benefits provision.

(ii) Analysis. Absent actual knowledge or reason
to know otherwise, as described in paragraph (b)(1)
of this section, W may rely on the representations
made by E to apply a reduced rate of withholding.

Example 2. (i) Facts. The facts are the same as
under Example 1, except that one of E's interest
holders, H, is an entity organized in country Z. The
U.S .- Z tax treaty reduces the rate on royalties to zero
whereas the rate on royalties under the U.S .- Y tax
treaty applicable to E is 5%. H is not fiscally trans-
parent under country Z's tax law with respect to such
income. H furnishes a beneficial owner withholding
certificate to E that represents that H derives, within
the meaning of section 894 and the regulations under
section 894, its share of the royalty income paid to E
as a resident of country Z, is the beneficial owner of
the royalty income, and is not precluded from claim-
ing treaty benefits by virtue of the limitation on
benefits provision in the U.S .- Z treaty. E furnishes to
W a flow-through withholding certificate described
in § 1.1441-1(e)(3)(i) to which it attaches H's ben-
eficial owner withholding certificate and a withhold-
ing statement for the portion of the payment that H
claims as its distributive share of the royalty income.

E also furnishes to W a beneficial owner withholding
certificate for itself for the portion of the payment
that H does not claim as its distributive share.

(ii) Analysis. Absent actual knowledge or reason
to know otherwise, as described in paragraph (b)(1)
of this section, W may rely on the documentation
furnished by E to treat the royalty payment to a
single foreign entity (E) as derived by different res-
idents of tax treaty countries as a result of the claims
presented under different treaties. W may, at its
option, grant dual treatment, that is, a reduced rate of
zero percent under the U.S .- Z treaty on the portion of
the royalty payment that H claims to derive as a
resident of country Z and a reduced rate of 5% under
the U.S .- Y treaty for the balance. However, under
paragraph (b)(2)(iii) of this section, W may, at its
option, treat E as the only relevant person deriving
the royalty and grant benefits under the U.S .- Y treaty
only.

Example 3. (i) Facts. E is a business organization
formed under the laws of country X. Country X has
an income tax treaty with the United States. E has
two interest holders, H1, organized in country Y, and
H2, organized in country Z. E receives from W, a
U.S. withholding agent, a payment of U.S. source
royalties and interest, with respect to an obligation
issued before July 1, 2014, that is eligible for the
portfolio interest exception under sections 871(h)
and 881(c), provided W receives the appropriate
beneficial owner statement required under section
871(h)(5). E is classified as a corporation under U.S.
tax law principles. Country X, E's country of orga-
nization, treats E as an entity that is not fiscally
transparent with respect to items of income under the
regulations under section 894. Under the U.S .- X
income tax treaty, royalties are subject to a 5% rate
of withholding. Country Y, Hl's country of organi-
zation, treats E as fiscally transparent with respect to
items of income under section 894 and H1 as not
fiscally transparent with respect to items of income.
Under the country Y-U.S. income tax treaty, royal-
ties are exempt from U.S. tax. Country Z, H2's
country of organization, treats E as not fiscally trans-
parent under section 894 with respect to items of
income. E provides W with a flow-through beneficial
owner withholding certificate with which it associ-
ates a beneficial owner withholding certificate from
H1. Hl's withholding certificate states that H1 is a
resident of country Y, derives the royalty income
under section 894, meets the applicable limitation on
benefits provisions of the U.S .- Y treaty, and is the
beneficial owner of the income. The withholding
statement attached to E's flow-through withholding
certificate allocates one-half of the royalty payment
to H1. E also provides W with a beneficial owner
withholding certificate for the interest income and
the remaining one-half of the royalty income. The
withholding certificate states that E is a resident of
country X, derives the royalty income under section
894, meets the limitation on benefits provisions of
the U.S .- X treaty, and is the beneficial owner of the
income.

(ii) Analysis. Absent actual knowledge or reason
to know that the claims are incorrect, as described in
paragraph (b)(1), W may treat one-half of the royalty
derived by E as subject to a 5% withholding rate and
one-half of the royalty as derived by H1 and subject
to no withholding. Further, it may treat all of the

interest as being paid to E and as qualifying for the
portfolio interest exception. W can, at its option,
treat the entire royalty as paid to E and subject it to
withholding at a 5% rate of withholding. In that case,
H1 would be entitled to claim a refund with respect
to its one-half of the royalty.

Example 4. [Reserved]. For further
guidance, see § 1.1441-6T(b)(2)(iv) Ex-
ample 4.

(c) Exemption from requirement to fur-
nish a taxpayer identifying number and
special documentary evidence rules for
certain income-(1) General rule. In the
case of income described in paragraph
(c)(2) of this section, a withholding agent
may rely on a beneficial owner withhold-
ing certificate described in paragraph
(b)(1) of this section without regard to the
requirement that the withholding certifi-
cate include the beneficial owner's tax-
payer identifying number. In the case of a
payment of income not described in para-
graph (c)(2) of this section, a withholding
agent may rely on a withholding certifi-
cate that includes the beneficial owner's
foreign taxpayer identifying number de-
scribed in paragraph (b)(1) of this section
instead of the beneficial owner's taxpayer
identifying number. In the case of pay-
ments of income described in paragraph
(c)(2) of this section made outside the
United States (as defined in § 1.6049-
5(e)) with respect to an offshore obliga-
tion (as defined in § 1.6049-5(c)(1)), a
withholding agent may, as an alternative
to a withholding certificate described in
paragraph (b)(1) of this section, rely on a
certificate of residence described in para-
graph (c)(3) of this section or documen-
tary evidence described in paragraph
(c)(4) of this section, relating to the ben-
eficial owner, that the withholding agent
has reviewed and maintains in its records
in accordance with § 1.1441-1(e)(4)(iii).
In the case of a payment to a person other
than an individual, the certificate of resi-
dence or documentary evidence must be
accompanied by the statements described
in paragraphs (c)(5)(i) and (ii) of this sec-
tion regarding limitation on benefits and
whether the amount paid is derived by
such person or by one of its interest hold-
ers. The withholding agent maintains the
reviewed documents by retaining the orig-
inal, certified copy, or photocopy (micro-
fiche, electronic scan, or similar means of
electronic storage) of such documents.
With respect to documentary evidence,

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the withholding agent must also note in its
records the date on which the documents
were received and reviewed. This para-
graph (c)(1) shall not apply to amounts
that are exempt from withholding based
on a claim that the income is effectively
connected with the conduct of a trade or
business in the United States.

* * * * *

(5) * * *

(i) [Reserved]. For further guidance,
see § 1.1441-6T(c)(5)(i).

* * * * *

(i) Effective/applicability dates-(1)
General rule. Except as otherwise pro-
vided in paragraph (i)(2) of this section,
this section applies to payments made on
or after January 6, 2017. (For payments
made after June 30, 2014 (except for pay-
ments to which paragraph (c)(1) 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, revised April
1, 2016. For payments made after Decem-
ber 31, 2001, and before July 1, 2014, see
this section as in effect and contained in
26 CFR part 1 revised April 1, 2013.)

(2) Dividend equivalents. Paragraph
(h) of this section applies to payments
made on or after December 5, 2013.

(3) [Reserved]. For further guidance,
see § 1.1441-6T(i)(3).

Par. 16. Section 1.1441-6T is revised
to read as follows:

§ 1.1441-6T Claim of reduced
withholding under an income tax treaty
(temporary).

(a) through (b)(1) introductory text
[Reserved]. For further guidance, see
§ 1.1441-6(a) through (b)(1) introductory
text.

(i) Identification of limitation on bene-
fits provisions. In conjunction with the
representation that the beneficial owner
meets the limitation on benefits provision
of the applicable treaty, if any, required by
paragraph (b)(1) of this section, a benefi-
cial owner withholding certificate must
also identify the specific limitation on
benefits provision of the article (if any, or
a similar provision) of the treaty upon
which the beneficial owner relies to claim
the treaty benefit. A withholding agent
may rely on the beneficial owner's claim

regarding its reliance on a specific limita-
tion on benefits provision absent actual
knowledge that such claim is unreliable or
incorrect.

(ii) Reason to know based on existence
of treaty. For purposes of this paragraph
(b)(1), a withholding agent's reason to
know that a beneficial owner's claim to a
reduced rate of withholding under an in-
come tax treaty is unreliable or incorrect
includes a circumstance where the bene-
ficial owner is claiming benefits under an
income tax treaty that does not exist or is
not in force. A withholding agent may
determine whether a tax treaty is in exis-
tence and is in force by checking the list
maintained on the IRS website at https://
www.irs.gov/businesses/international-
businesses/united-states-income-tax-
treaties-a-to-z (or any replacement page
on the IRS website) or in the State De-
partment's annual Treaties in Force pub-
lication.

(b)(2)(i) through (iv) Example 3 [Re-
served]. For further guidance, see
§ 1.1441-6(b)(2)(i) through (b)(2)(iv)
Example 3.

Example 4. (i) Facts. Entity E is a business
organization formed under the laws of country Y.
Country Y has an income tax treaty with the United
States that contains a limitation on benefits provi-
sion. E receives U.S. source royalties from withhold-
ing agent W. E furnishes a beneficial owner with-
holding certificate to W claiming a reduced rate of
withholding under the U.S .- Y tax treaty. However,
E's beneficial owner withholding certificate does not
specifically identify the limitation on benefits provi-
sion that E satisfies.

(ii) Analysis. Because E's withholding certificate
does not specifically identify the limitation on ben-
efits provision under the U.S .- Y tax treaty that E
satisfies as required by paragraph (b)(1)(i) of this
section, W cannot rely on E's withholding certificate
to apply the reduced rate of withholding claimed
by E.

(c) introductory text through (c)(4)
[Reserved]. For further guidance, see
§ 1.1441-6(c) through (c)(4).

(5) Statements regarding entitlement to
treaty benefits-(i) Statement regarding
conditions under a limitation on benefits
provision. In addition to the documentary
evidence described in paragraph (c)(4)(ii)
of this section, a taxpayer that is not an
individual must provide a statement that it
meets one or more of the conditions set
forth in the limitation on benefits article
(if any, or in a similar provision) con-
tained in the applicable tax treaty and
must identify the specific limitation on

benefits provision of the article (if any, or
a similar provision) of the treaty upon
which the taxpayer relies to claim the
treaty benefit.

(c)(5)(ii) through (i)(2) [Reserved]. For
further guidance, see § 1.1441-6(c)(5)(ii)
through (i)(2).

(3) Effective/applicability date. This
section applies on January 6, 2017.

(j) Expiration date. The applicability of
this section expires on December 30, 2019

Par. 17. Section 1.1441-7 is amended
by:

1\. Revising paragraph (b), (c) and
(f)(2)(ii).

2\. Removing paragraph (f)(3).

3\. Revising paragraph (g).

4\. Removing paragraph (h).
The revisions read as follows:

§ 1.1441-7 General provisions relating
to withholding agents.

* * * * *

(b) Standards of knowledge-(1) In
general. A withholding agent must with-
hold at the full 30-percent rate under sec-
tion 1441, 1442, or 1443(a) or at the full
4-percent rate under section 1443(b) if it
has actual knowledge or reason to know
that a claim of U.S. status or of a reduced
rate of withholding under section 1441,
1442, or 1443 is unreliable or incorrect. A
withholding agent shall be liable for tax,
interest, and penalties to the extent pro-
vided under sections 1461 and 1463 and
the regulations under those sections if it
fails to withhold the correct amount de-
spite its actual knowledge or reason to
know the amount required to be withheld.
For purposes of the regulations under sec-
tions 1441, 1442, and 1443, a withholding
agent may rely on information or certifi-
cations contained in, or associated with, a
withholding certificate or other documen-
tation furnished by or for a beneficial
owner or payee unless the withholding
agent has actual knowledge or reason to
know that the information or certifications
are incorrect or unreliable and, if based on
such knowledge or reason to know, it
should withhold (under chapter 3 of the
Code or another withholding provision of
the Code) an amount greater than would
be the case if it relied on the information
or certifications, or it should report (under
chapter 3 of the Code or under another

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provision of the Code) an amount that
would not otherwise be reportable if it
relied on the information or certifications.
See § 1.1441-1(e)(4)(viii) for applicable
reliance rules. A withholding agent that
has received notification by the Internal
Revenue Service (IRS) that a claim of
U.S. status or of a reduced rate is incorrect
has actual knowledge beginning on the
date that is 30 calendar days after the date
the notice is received. A withholding
agent that fails to act in accordance with
the presumptions set forth in §§ 1.1441-
1(b)(3), 1.1441-4(a), 1.1441-5 (d) and
(e), or 1.1441-9(b)(3) may also be liable
for tax, interest, and penalties. See
§ 1.1441-1(b)(3)(ix) and (7). In the case
of a withholding agent making a with-
holdable payment to a payee that the with-
holding agent is required to treat as a
foreign entity, see § 1.1471-3(e) for stan-
dards of knowledge and §§ 1.1471-2 and
1.1472-1(b) for withholding that may ap-
ply under chapter 4. A withholding agent
is allowed to apply the rules under para-
graphs (b)(5) and (b)(8) of this section 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 Jan-
uary 1, 2015.

(2) Reason to know. A withholding
agent shall be considered to have reason
to know if its knowledge of relevant facts
or of statements contained in the with-
holding certificates or other documenta-
tion is such that a reasonably prudent per-
son in the position of the withholding
agent would question the chapter 3 claims
made. For an obligation other than a pre-
existing obligation, a withholding agent
will have reason to know that a chapter 3
claim made by the holder of the obligation
(account holder) is unreliable or incorrect
if any information contained in its account
opening files or other files pertaining to
the obligation (account information), in-
cluding documentation collected for pur-
poses of AML due diligence (as defined
under § 1.1471-1(b)(4)), conflicts with
the account holder's claim. A withholding
agent will not, however, be considered to
have reason to know that a person's chap-
ter 3 claim is unreliable or incorrect based
on documentation collected for AML due
diligence until the date that is 30 days
after the obligation is executed (or the

account is opened for an obligation that is
an account with a financial institution).

(3) Financial institutions-limits on
reason to know-(i) In general. For pur-
poses of this paragraph (b)(3) and para-
graphs (b)(4) through (10) of this section,
the terms withholding certificate, docu-
mentary evidence, and documentation are
defined in § 1.1441-1(c)(16), (17), and
(18). Except as otherwise provided in
paragraphs (b)(4) through (9) of this sec-
tion, a withholding agent that is a financial
institution under § 1.1471-5(e), an insur-
ance company (without regard to whether
such company is a specified insurance
company), or a broker or dealer in secu-
rities that maintains or opens an account
for a beneficial owner (a direct account
holder) has reason to know that documen-
tation provided by the direct account
holder is unreliable or incorrect only if
one or more of the circumstances de-
scribed in paragraphs (b)(4) through (9) of
this section exist. If a direct account
holder has provided documentation that is
unreliable or incorrect under the rules of
paragraph (b)(4) through (9) of this sec-
tion, the withholding agent may require
new documentation. Alternatively, the
withholding agent may rely on the docu-
mentation originally provided if the rules
of paragraphs (b)(4) through (9) of this
section permit such reliance based on ad-
ditional statements and documentation ob-
tained by the withholding agent from the
beneficial owner. Paragraph (b)(10) of this
section provides rules regarding reason to
know for withholding agents that receive
beneficial owner documentation from per-
sons (indirect account holders) that have
an account relationship with, or an own-
ership interest in, a direct account holder
of the withholding agent. Paragraph
(b)(11) of this section provides limitations
on a withholding agent's reason to know
for multiple obligations held by the same
person. Paragraph (b)(12) of this section
defines a reasonable explanation provided
by an individual with respect to the indi-
vidual's claim of foreign status. For rules
regarding reliance on Form W-9, see
§ 31.3406(h)-3(e)(2) of this chapter. For
payments that are withholdable payments,
see § 1.1471-3(e)(3) and (4) for additional
rules regarding a withholding agent's rea-
son to know with respect to a payee's
claim of chapter 4 status and § 1.1471-

3(f) for presumption rules that apply when
the claim of chapter 4 status is unreliable
or incorrect.

(ii) Limits on reason to know for pre-
existing obligations. With respect to a pre-
existing obligation, a withholding agent
that has documented the foreign status of
the direct account holder for purposes of
chapter 3 or chapter 61 before July 1,
2014, may continue to rely on such doc-
umentation without regard to a U.S. phone
number or U.S. place of birth. If, however,
the withholding agent reviews documen-
tation for an individual account holder
claiming foreign status that contains a
U.S. place of birth (as described in para-
graph (b)(5)(ii) of this section) or if the
withholding agent is notified of a change
in circumstances under the criteria of
paragraphs (b)(5) and (8) of this section
(as effective on July 1, 2014), the obli-
gation will be treated as having experi-
enced a change in circumstances under
§ 1.1441-1(e)(4)(ii)(D) as of the date
that the withholding agent reviews the
documentation or receives the notifica-
tion, and the withholding agent will then
have reason to know that the documen-
tation is unreliable or incorrect. With
respect to an obligation held by an en-
tity, a withholding agent is not required
to treat the additional U.S. indicia de-
scribed in this paragraph (b) as a change
in circumstances under § 1.1441-1(e)
(4)(ii)(D) before January 1, 2015. See
§ 1.1441-1(b)(3)(iv) for the grace pe-
riod following a change in circum-
stances. For purposes of this rule, a di-
rect account holder will be considered
documented prior to July 1, 2014, with-
out regard to whether the withholding
agent obtains renewal documentation
for the account holder on or after July 1,
2014, pursuant to the requirements of
§ 1.1441-1(e)(4)(ii)(A).

(4) Rules applicable to withholding
certificates-(i) In general. A withhold-
ing agent has reason to know that a ben-
eficial owner withholding certificate pro-
vided by a direct account holder is
unreliable or incorrect if the withholding
certificate is incomplete with respect to
any item on the certificate that is relevant
to the claims made by the direct account
holder, the withholding certificate con-
tains any information that is inconsistent
with the direct account holder's claim, the

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withholding agent has account informa-
tion that is inconsistent with the direct
account holder's claim, or the withholding
certificate lacks information necessary to
establish entitlement to a reduced rate of
withholding. For purposes of establishing
a direct account holder's status as a for-
eign person or resident of a treaty country
a withholding certificate shall be consid-
ered unreliable or inconsistent with an ac-
count holder's claims only if it is not
reliable under the rules of paragraphs
(b)(5) and (6) of this section. A withhold-
ing agent that relies on an agent to review
and maintain a withholding certificate is
considered to know or have reason to
know the facts within the knowledge of
the agent.

(ii) Examples. The rules of paragraph
(b)(4) of this section are illustrated by the
following examples:

Example 1. F, a foreign person that has a direct
account relationship with USB, a bank that is a U.S.
person, provides USB with a beneficial owner with-
holding certificate for the purpose of claiming a
reduced rate of withholding on U.S. source divi-
dends (which is a withholdable payment). F resides
in a treaty country that has a limitation on benefits
provision in its income tax treaty with the United
States. The withholding certificate includes a certi-
fication of F's status for chapter 4 purposes to except
the payment from withholding under chapter 4, but
does not contain a statement regarding limitation on
benefits or deriving the income under section 894 as
required by § 1.1441-6(b)(1). USB cannot rely on
the withholding certificate to grant a reduced rate of
withholding for chapter 3 purposes because it is
incomplete with respect to the claim made by F.

Example 2. F, a foreign person and entity that has
a direct account relationship with USB, a broker that
is a U.S. person, provides USB with a withholding
certificate for the purpose of claiming the portfolio
interest exception under section 881(c) with respect
to interest paid on an obligation issued before July 1,
2014. The payment of interest is not a withholdable
payment under § 1.1471-2(b) (referring to payments
made with respect to grandfathered obligations),
and, therefore, withholding does not apply to the
payment under chapter 4. See § 1.1441-3(c)(4)(i) for
rules coordinating withholding under chapters 3 and
4. F indicates on its withholding certificate, however,
that it is a partnership. USB may not treat F as a
beneficial owner of the interest for purposes of the
portfolio interest exception because F has indicated
on its withholding certificate that it is a foreign
partnership, and such entity classification is incon-
sistent with its claim as a beneficial owner.

(5) Withholding certificate-establish-
ment of foreign status. A withholding
agent has reason to know that a beneficial
owner withholding certificate (as defined
in § 1.1441-1(e)(2), but excluding a Form
W-8ECI) provided by a direct account

holder is unreliable or incorrect for pur-
poses of establishing the account holder's
status as a foreign person as set forth in
paragraphs (b)(5)(i) through (iii) of this
section.

(i) Classification of U.S. status, U.S.
address, or U.S. telephone number. A
withholding certificate is unreliable or in-
correct if the withholding agent has clas-
sified the person as a U.S. person in its
account information, the withholding cer-
tificate has a current permanent residence
address (as defined in § 1.1441-1(e)
(2)(ii)) in the United States, the withhold-
ing certificate has a current mailing ad-
dress in the United States, the withholding
agent has a current residence or mailing
address as part of its account information
that is an address in the United States, or
the direct account holder notifies the with-
holding agent of a new residence or mail-
ing address in the United States (whether
or not provided on a withholding certifi-
cate). A withholding agent also has reason
to know that a withholding certificate pro-
vided by a person is unreliable or incor-
rect if the withholding agent has a current
telephone number for the account holder
in the United States and has no telephone
number for the account holder outside of
the United States. When any of the fore-
going U.S. indicia are present, a withhold-
ing agent may nevertheless rely on the
beneficial owner withholding certificate to
establish the account holder's foreign sta-
tus if it may do so under the provisions of
paragraph (b)(5)(i)(A) or (B) of this sec-
tion.

(A) A withholding agent may treat a
direct account holder as a foreign person
if the beneficial owner withholding certif-
icate has been provided by an individual
and-

(1) The withholding agent has in its
possession or obtains documentary evi-
dence establishing foreign status (as de-
scribed in § 1.1471-3(c)(5)(i)) that does
not contain a U.S. address and the indi-
vidual provides the withholding agent
with a reasonable explanation, in writing,
supporting the claim of foreign status (as
defined in paragraph (b)(12) of this sec-
tion);

(2) For a payment made outside the
U.S. with respect to an offshore obligation
(as described in § 1.6049-5(c)(1)), the
withholding agent has in its possession or

obtains documentary evidence establish-
ing foreign status (as described in
§ 1.1471-3(c)(5)(i)), that does not contain
a U.S. address;

(3) For a payment made with respect to
an offshore obligation (with offshore ob-
ligation defined as in § 1.6049-5(c)(1)),
the withholding agent classifies the indi-
vidual as a resident of the country in
which the obligation is maintained, the
withholding agent is required to report a
payment made to the individual annually
on a tax information statement that is filed
with the tax authority of the country in
which the office is located as part of that
country's resident reporting requirements,
and that country has a tax information
exchange agreement or income tax treaty
in effect with the United States; or

(4) For a case in which the withholding
agent classified the account holder as a
U.S. person in its account information, the
withholding agent has in its possession or
obtains documentary evidence described
in § 1.1471-3(c)(5)(i)(B) evidencing citi-
zenship in a country other than the United
States.

(B) A withholding agent may treat a
direct account holder as a foreign person
if the beneficial owner withholding certif-
icate has been provided by an entity that
the withholding agent does not know, or
does not have reason to know, is a flow-
through entity and-

(1) The withholding agent has in its
possession or obtains documentation es-
tablishing foreign status that substantiates
that the entity is actually organized or
created under the laws of a foreign coun-
try; or

(2) For a payment made with respect to
an offshore obligation (with offshore ob-
ligation defined as in § 1.6049-5(c)(1)),
the withholding agent classifies the entity
as a resident of the country in which the
account is maintained, the withholding
agent is required to report a payment
made to the entity annually on a tax in-
formation statement that is filed with the
tax authority of the country in which the
office is located as part of that country's
resident reporting requirements, and that
country has a tax information exchange
agreement or income tax treaty in effect
with the United States.

(ii) U.S. place of birth. A withholding
agent has reason to know that a withhold-

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ing certificate claiming foreign status pro-
vided by a direct account holder that is an
individual is unreliable or incorrect if the
withholding agent has, either on accom-
panying documentation or as part of its
account information, an unambiguous in-
dication of a place of birth for the indi-
vidual in the United States. A withholding
agent may treat the individual as a foreign
person, notwithstanding the U.S. place of
birth, if the withholding agent has in its
possession or obtains documentary evi-
dence described in § 1.1471-3(c)(5)(i)(B)
evidencing citizenship in a country other
than the United States and either a copy of
the individual's Certificate of Loss of Na-
tionality of the United States or a reason-
able written explanation of the account
holder's renunciation of U.S. citizenship
or the reason the account holder did not
obtain U.S. citizenship at birth.

(iii) Standing instructions with respect
to offshore obligations. A beneficial
owner withholding certificate is unreliable
or incorrect if it is provided with respect
to an offshore obligation (as defined in
§ 1.6049-5(c)(1)) of a direct account
holder that has provided standing instruc-
tions to pay amounts to an address or an
account maintained in the United States.
The withholding agent may treat the ac-
count holder as a foreign person, however,
if the account holder provides either a
reasonable explanation in writing that
supports its foreign status or documentary
evidence establishing foreign status de-
scribed in § 1.1471-3(c)(5)(i).

(6) Withholding certificate-claim of
reduced rate of withholding under treaty.
A withholding agent has reason to know
that a withholding certificate (other than
Form W-9) provided by a direct account
holder is unreliable or incorrect for pur-
poses of establishing that the account
holder is a resident of a country with
which the United States has an income tax
treaty if it is described in paragraphs
(b)(6)(i) through (iii) of this section.

(i) Permanent residence address. A
beneficial owner withholding certificate is
unreliable or incorrect if the permanent
residence address on the beneficial owner
withholding certificate is not in the coun-
try whose treaty is invoked, or the direct
account holder notifies the withholding
agent of a new permanent residence ad-
dress that is not in the treaty country. A

withholding agent may, however, treat a
direct account holder as entitled to a re-
duced rate of withholding under an in-
come tax treaty if the account holder pro-
vides a reasonable explanation for the
permanent residence address outside the
treaty country (e.g., the address is the ad-
dress of a branch of the beneficial owner
located outside the treaty country in which
the entity is a resident) or the withholding
agent has in its possession or obtains doc-
umentary evidence described in § 1.1471-
3(c)(5)(i) that establishes residency in a
treaty country.

(ii) Mailing address. A beneficial
owner withholding certificate is unreliable
or incorrect if the permanent residence
address on the withholding certificate is in
the applicable treaty country but the with-
holding certificate contains a mailing ad-
dress outside the treaty country or the
withholding agent has a current mailing
address as part of its account information
for the direct account holder that is out-
side the treaty country. A mailing address
that is a P.O. Box, in-care-of address, or
address at a financial institution (if the
financial institution is not a beneficial
owner) shall not preclude a withholding
agent from treating the account holder as a
resident of a treaty country if such address
is in the treaty country. If a withholding
agent has a mailing address (whether or
not contained on the withholding certifi-
cate) outside the applicable treaty country,
the withholding agent may nevertheless
treat a direct account holder as a resident
of an applicable treaty country if-

(A) The withholding agent has in its
possession or obtains documentary evi-
dence described in § 1.1471-3(c)(5)(i)
supporting the account holder's claim of
residence in the applicable treaty country
(and the additional documentation does
not contain an address outside the treaty
country);

(B) The withholding agent has in its
possession, or obtains, documentation that
establishes that the direct account holder
is an entity organized in a treaty country
(or an entity managed and controlled in a
treaty country, if the applicable treaty so
requires);

(C) The withholding agent knows that
the address outside the applicable treaty
country (other than a P.O. box, or in-
care-of address) is a branch of the account

holder that is an entity that is a resident of
the applicable treaty country; or

(D) The withholding agent obtains a
written statement from the direct account
holder that reasonably establishes entitle-
ment to treaty benefits.

(iii) Standing instructions. A beneficial
owner withholding certificate is unreliable
or incorrect to establish entitlement to a
reduced rate of withholding under an in-
come tax treaty if the direct account
holder has standing instructions to pay
amounts directing the withholding agent
to pay amounts from its account to an
address or an account outside the treaty
country unless the account holder pro-
vides a reasonable explanation, in writing,
or the withholding agent has in its posses-
sion or obtains documentary evidence de-
scribed in § 1.1471-3(c)(5)(i) establishing
the account holder's residence in the ap-
plicable treaty country.

(7) Documentary evidence. A with-
holding agent shall not treat documentary
evidence provided by a direct account
holder as valid if the documentary evi-
dence does not reasonably establish the
identity of the person presenting the doc-
umentary evidence. For example, docu-
mentary evidence is not valid if it is pro-
vided in person by a direct account holder
that is a natural person and the photograph
or signature on the documentary evidence,
if any, does not match the appearance or
signature of the person presenting the doc-
ument. A withholding agent shall not
rely on documentary evidence to reduce
the rate of withholding that would oth-
erwise apply under the presumption
rules of §§ 1.1441-1(b)(3), 1.1441-5(d)
and (e)(6), and 1.6049-5(d) if the doc-
umentary evidence contains information
that is inconsistent with the direct ac-
count holder's claim of a reduced rate of
withholding, the withholding agent has
other account information that is incon-
sistent with the direct account holder's
claim, or the documentary evidence
lacks information necessary to establish
entitlement to a reduced rate of with-
holding. For example, if a direct account
holder provides documentary evidence
to claim treaty benefits and the docu-
mentary evidence establishes the direct
account holder's status as a foreign per-
son and a resident of a treaty country,
but the account holder fails to provide

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the treaty statements required by
§ 1.1441-6(c)(5), the documentary evi-
dence does not establish the direct ac-
count holder's entitlement to a reduced
rate of withholding. For purposes of es-
tablishing a direct account holder's sta-
tus as a foreign person or resident of a
country with which the United States
has an income tax treaty, documentary
evidence shall be considered unreliable
or incorrect only if it is not reliable
under the rules of paragraph (b)(8) or
(9) of this section.

(8) Documentary evidence-establish-
ment of foreign status. A withholding
agent has reason to know that documen-
tary evidence is unreliable or incorrect for
purposes of establishing the direct account
holder's status as a foreign person if the
documentary evidence is described in
paragraphs (b)(8)(i), (ii), (iii), or (iv) of
this section.

(i) Documentary evidence received
prior to January 1, 2001. A withholding
agent shall not treat documentary evi-
dence provided by a direct account holder
before January 1, 2001, as valid for pur-
poses of establishing the account holder's
status as a foreign person if it has actual
knowledge that the account holder is a
U.S. person or if it has a mailing or resi-
dence address for the account holder in
the United States. If a withholding agent
has an address for the direct account
holder in the United States, the withhold-
ing agent may nevertheless treat the ac-
count holder as a foreign person if it can
so treat the account holder under the rules
of paragraph (b)(8)(ii) of this section. See,
however, paragraph (b)(3)(ii) of this sec-
tion regarding changes in circumstances
with respect to preexisting obligations.

(ii) Documentary evidence received af-
ter December 31, 2000. A withholding
agent shall not treat documentary evi-
dence provided by an account holder after
December 31, 2000, as valid for purposes
of establishing the direct account holder's
foreign status if the withholding agent
does not have a permanent residence ad-
dress for the account holder. Documentary
evidence is also unreliable or incorrect to
establish a direct account holder's status
as a foreign person if the withholding
agent has classified the account holder as
a U.S. person in its account information, if
the withholding agent has a current mail-

ing or permanent residence address
(whether or not on the documentation) for
the direct account holder in the United
States, the direct account holder notifies
the withholding agent of a new residence
or mailing address in the United States, or
if the withholding agent has a current tele-
phone number for the account holder in
the United States and has no telephone
number for the account holder outside of
the United States. Notwithstanding the
foregoing, a withholding agent may rely
on documentary evidence as establishing
the direct account holder's foreign status
if it may do so under the provisions of
paragraph (b)(8)(ii)(A) or (B) of this sec-
tion.

(A) Treatment of individual's foreign
status. A withholding agent may treat a
direct account holder that is an individual
as a foreign person even if it has any of
the U.S. indicia described in this para-
graph for the account holder if-

(1) The withholding agent has in its
possession or obtains additional documen-
tary evidence supporting the claim of for-
eign status (described in § 1.1471-
3(c)(5)(i)) that does not contain a U.S.
address and a reasonable explanation in
writing supporting the account holder's
foreign status;

(2) The withholding agent obtains a
valid beneficial owner withholding certif-
icate on Form W-8 and the Form W-8
contains a permanent residence address
outside the United States and a mailing
address outside the United States (or if a
mailing address is inside the United States
the account holder provides a reasonable
explanation in writing supporting the ac-
count holder's foreign status); or

(3) For a payment made with respect to
an offshore obligation (with offshore ob-
ligation defined as in § 1.6049-5(c)(1)),
the withholding agent classifies the indi-
vidual as a resident of the country in
which the obligation is maintained, the
withholding agent is required to report a
payment made to the individual annually
on a tax information statement that is filed
with the tax authority of the country in
which the office is located as part of that
country's resident reporting requirements,
and that country has a tax information
exchange agreement or income tax treaty
in effect with the United States.

(B) Presumption of entity's foreign sta-
tus. A withholding agent may treat a direct
account holder that is an entity (other than
a flow-through entity) as a foreign person
even if it has any of the U.S. indicia
described in this paragraph for the account
holder in the United States if-

(1) The withholding agent has in its
possession or obtains documentary evi-
dence establishing foreign status that sub-
stantiates that the entity is actually orga-
nized or created under the laws of a
foreign country;

(2) The withholding agent obtains a
valid beneficial owner withholding certif-
icate on Form W-8 and the Form W-8
contains a permanent residence address
outside the United States and a mailing
address outside the United States (or if a
mailing address is inside the United States
the account holder provides additional
documentary evidence sufficient to estab-
lish the account holder's foreign status);
or

(3) For a payment made with respect to
an offshore obligation (with offshore ob-
ligation defined as in § 1.6049-5(c)(1)),
the withholding agent classifies the entity
as a resident of the country in which the
account is maintained, the withholding
agent is required to report a payment
made to the entity annually on a tax in-
formation statement that is filed with the
tax authority of the country in which the
office is located as part of that country's
resident reporting requirements, and that
country has a tax information exchange
agreement or income tax treaty in effect
with the United States.

(iii) U.S. place of birth. A withholding
agent has reason to know that documen-
tary evidence provided by a direct account
holder to support an individual's foreign
status is unreliable or incorrect if the with-
holding agent has, either on the documen-
tary evidence or as part of its account
information, an unambiguous indication
of a place of birth for the individual in the
United States. A withholding agent may
treat the individual as a foreign person,
notwithstanding the U.S. birth place, if the
withholding agent has in its possession or
obtains documentary evidence described
in § 1.1471-3(c)(5)(i)(B) evidencing citi-
zenship in a country other than the United
States and a copy of the individual's Cer-
tificate of Loss of Nationality of the

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United States. Alternatively, a withhold-
ing agent may treat the individual as a
foreign person if the withholding agent
obtains a valid beneficial owner withhold-
ing certificate on Form W-8 from the
individual that establishes the account
holder's foreign status, documentary evi-
dence described in § 1.1471-3(c)(5)(i)(B)
evidencing citizenship in a country other
than the United States, and a reasonable
written explanation of the individual's re-
nunciation of U.S. citizenship or the rea-
son the individual did not obtain U.S. cit-
izenship at birth.

(iv) Standing instructions with respect
to offshore obligations. Documentary ev-
idence is unreliable or incorrect if it is
provided with respect to an offshore obli-
gation (as defined in § 1.6049-5(c)(1)) of
a direct account holder that has provided
the withholding agent with standing in-
structions to pay amounts to an address or
an account maintained in the United
States. The withholding agent may treat
the direct account holder as a foreign per-
son, however, if the account holder pro-
vides either a reasonable explanation in
writing that supports its foreign status or a
valid beneficial owner withholding certif-
icate claiming foreign status.

(9) Documentary evidence-claim of
reduced rate of withholding under treaty.
A withholding agent has reason to know
that documentary evidence is unreliable or
incorrect for purposes of establishing that
a direct account holder is a resident of a
country with which the United States has
an income tax treaty if it is described in
paragraph (b)(9)(i) or (ii) of this section.

(i) Permanent residence address and
mailing address. Documentary evidence
is unreliable or incorrect if the withhold-
ing agent has a current mailing or current
permanent residence address for the direct
account holder (whether or not on the
documentary evidence) that is outside the
applicable treaty country, or the withhold-
ing agent has no permanent residence ad-
dress for the account holder. If a withhold-
ing agent has a current mailing or current
permanent residence address for the direct
account holder outside the applicable
treaty country, the withholding agent may
nevertheless treat a direct account holder
as a resident of an applicable treaty coun-
try if the withholding agent-

(A) Has in its possession or obtains
additional documentary evidence de-
scribed in § 1.1471-3(c)(5)(i) supporting
the direct account holder's claim of resi-
dence in the applicable treaty country (and
the documentary evidence does not con-
tain an address outside the applicable
treaty country, a P.O. box, an in-care-of
address, or the address of a financial in-
stitution);

(B) Has in its possession or obtains
documentary evidence described in
§ 1.1471-3(c)(5)(i) that establishes the di-
rect account holder is an entity organized
in a treaty country (or an entity managed
and controlled in a treaty country, if the
applicable treaty so requires); or

(C) Obtains a valid beneficial owner
withholding certificate on Form W-8 that
contains a permanent residence address
and a mailing address in the applicable
treaty country.

(ii) Standing instructions. Documen-
tary evidence is unreliable or incorrect if
the direct account holder has provided the
withholding agent with standing instruc-
tions to pay amounts to an address or an
account maintained outside the treaty
country unless the direct account holder
provides a reasonable explanation, in writ-
ing, establishing the direct account hold-
er's residence in the applicable treaty
country, or a valid beneficial owner with-
holding certificate that contains a perma-
nent residence address and a mailing ad-
dress in the applicable treaty country.

(10) Indirect account holders. A with-
holding agent that receives documentation
from a payee through a nonqualified in-
termediary, a flow-through entity, or a
U.S. branch (including a territory financial
institution) described in § 1.1441-
1(b)(2)(iv) (other than a U.S. branch or
territory financial institution that is treated
as a U.S. person) has reason to know that
the documentation is unreliable or incor-
rect if a reasonably prudent person in the
position of a withholding agent would
question the claims made. This standard
requires, but is not limited to, a withhold-
ing agent's compliance with the rules of
paragraphs (b)(10)(i) through (iv).

(i) The withholding agent must review
the withholding statement described in
§ 1.1441-1(e)(3)(iv) and may not rely on
information in the statement to the extent
the information does not support the

claims made for any payee. For this pur-
pose, a withholding agent may not treat a
payee as a foreign person if an address in
the United States is provided for such
payee and may not treat a person as a
resident of a country with which the
United States has an income tax treaty if
the address for that person is outside the
applicable treaty country. Notwithstand-
ing a U.S. address or an address outside a
treaty country, the withholding agent may
treat a payee as a foreign person or a
foreign person as a resident of a treaty
country if the withholding statement is
accompanied by a valid withholding cer-
tificate and documentary evidence (as de-
scribed in § 1.1471-3(c)(5)(i)) or a rea-
sonable explanation is provided, in
writing, by the nonqualified intermediary,
flow-through entity, or U.S. branch sup-
porting the payee's foreign status or the
foreign person's residency in a treaty
country.

(ii) The withholding agent must review
each withholding certificate in accordance
with the requirements of paragraphs (b)(5)
and (6) of this section and verify that the
information on the withholding certificate
is consistent with the information on the
withholding statement required under
§ 1.1441-1(e)(3)(iv). If there is a discrep-
ancy between the withholding certificate
and the withholding statement, the with-
holding agent may choose to rely on the
withholding certificate, if valid, and in-
struct the nonqualified intermediary, flow-
through entity, or U.S. branch to correct
the withholding statement or apply the
presumption rules of §§ 1.1441-1(b),
1.1441-5(d) and (e)(6), 1.6049-5(d), and
1.1471-3(f) (for a withholdable payment
for chapter 4 purposes) to the payment
allocable to the payee who provided the
withholding certificate. If the withholding
agent chooses to rely upon the withhold-
ing certificate, the withholding agent is
required to instruct the intermediary or
flow-through entity to correct the with-
holding statement and confirm that the
intermediary or flow-through entity does
not know or have reason to know that the
withholding certificate is unreliable or in-
accurate.

(iii) The withholding agent must re-
view the documentary evidence provided
by the nonqualified intermediary, flow-
through entity, or U.S. branch to deter-

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mine that there is no obvious indication
that the payee is a U.S. non-exempt recip-
ient or that the documentary evidence
does not establish the identity of the per-
son who provided the documentation
(e.g., the documentary evidence does not
appear to be an identification document).

(iv) [Reserved]. For further guidance,
see § 1.1441-7T(b)(10)(iv).

(11) Limits on reason to know for mul-
tiple obligations belonging to a single
person. A withholding agent that main-
tains multiple obligations for a single per-
son will have reason to know that a claim
of foreign status for the person is inaccu-
rate based on account information for an-
other obligation held by the person only to
the extent that-

(i) The withholding agent's computer-
ized systems link the obligations by refer-
ence to a data element such as client num-
ber, EIN, or foreign tax identifying
number and consolidates the account in-
formation and payment information for
the obligations; or

(ii) The withholding agent has treated
the obligations as consolidated obligations
for purposes of sharing documentation
pursuant to § 1.1441-1(e)(4)(ix).

(12) Reasonable explanation support-
ing claim of foreign status. A reasonable
explanation supporting an individual's
claim of foreign status for purposes of
paragraphs (b)(5) and (8) of this section
means a written statement prepared by the
individual or the individual's completion
of a checklist provided by the withholding
agent, stating that the individual meets
the requirements of one of paragraphs
(b)(12)(i) through (iv) of this section.

(i) The individual certifies that he or
she-

(A) Is a student at a U.S. educational
institution and holds the appropriate visa;

(B) Is a teacher, trainee, or intern at a
U.S. educational institution or a partici-
pant in an educational or cultural ex-
change visitor program, and holds the ap-
propriate visa;

(C) Is a foreign individual assigned to a
diplomatic post or a position in a consul-
ate, embassy, or international organization
in the United States; or

(D) Is a spouse or unmarried child un-
der the age of 21 years of one of the
persons described in paragraphs (b)(12)
(i)(A) through (C) of this section;

(ii) The individual provides informa-
tion demonstrating that he or she has not
met the substantial presence test set forth
in § 301.7701(b)-1(c) of this chapter (e.g.,
a written statement indicating the number
of days present in the United States during
the three-year period that includes the cur-
rent year);

(iii) The individual certifies that he or
she meets the closer connection exception
described in § 301.7701(b)-2, states the
country to which the individual has a
closer connection, and demonstrates how
that closer connection has been estab-
lished; or

(iv) With respect a payment entitled to
a reduced rate of tax under a U.S. income
tax treaty, the individual certifies that he
or she is treated as a resident of a country
other than the United States and is not
treated as a U.S. resident or U.S. citizen
for purposes of that income tax treaty.

(13) Additional guidance. The IRS
may prescribe other circumstances for
which a withholding certificate or docu-
mentary evidence is unreliable or incor-
rect in addition to the circumstances de-
scribed in paragraph (b) of this section to
establish an account holder's status as a
foreign person or a beneficial owner enti-
tled to a reduced rate of withholding in
published guidance (see § 601.601(d)(2)
of this chapter).

(c) Agent-(1) In general. A withhold-
ing agent may authorize an agent to fulfill
its obligations under chapter 3 if the re-
quirements of paragraph (c)(2) of this sec-
tion are satisfied. The acts of an agent of a
withholding agent (including the receipt
of withholding certificates, the payment of
amounts of income subject to withhold-
ing, and the deposit of tax withheld) are
imputed to the withholding agent on
whose behalf it is acting.

(2) Authorized agent. An agent is an
authorized agent only if-

(i) There is a written agreement be-
tween the withholding agent and the per-
son acting as agent that clearly provides
which obligations under chapter 3 that the
agent is authorized to fulfill;

(ii) A Form 8655, "Reporting Agent
Authorization," is filed with the IRS by a
withholding agent if its agent (including
any sub-agent) acts as a reporting agent
for filing Form 1042 on behalf of the
withholding agent and the agent (or sub-

agent) identifies itself (instead of the with-
holding agent) as the filer on the Form
1042;

(iii) Books and records and relevant
personnel of the agent (including any sub-
agent) are available to the withholding
agent (on a continuous basis, including
after termination of the relationship) in
order to evaluate the withholding agent's
compliance with the provisions of chap-
ters 3, 4, and 61 of the Code, section 3406,
and the regulations under those provi-
sions; and

(iv) The U.S. withholding agent re-
mains fully liable for the acts of its agent
(or for any sub-agent) and does not assert
any of the defenses that may otherwise be
available, including under common law
principles of agency in order to avoid tax
liability under the Code.

(3) Liability of withholding agent act-
ing through an agent. An authorized agent
is subject to the same withholding and
reporting obligations that apply to any
withholding agent under the provisions of
chapter 3 of the Code and the regulations
thereunder. See the instructions to Form
1042-S for the manner for filing the form
when an authorized agent acts on behalf
of a withholding agent. Except as other-
wise provided in the QI, WP, and WT
agreements, an authorized agent does not
benefit from the special procedures or ex-
ceptions that may apply to a QI, WP, or
WT. A withholding agent acting through
an authorized agent is liable for any fail-
ure of the agent, such as failure to with-
hold an amount or make payment of tax,
in the same manner and to the same extent
as if the agent's failure had been the fail-
ure of the withholding agent. For this pur-
pose, the agent's actual knowledge or rea-
son to know shall be imputed to the
withholding agent. The withholding
agent's liability shall exist irrespective of
the fact that the authorized agent is also a
withholding agent and is itself separately
liable for failure to comply with the pro-
visions of the regulations under section
1441, 1442, or 1443. However, the same
tax, interest, or penalties shall not be col-
lected more than once.

* * * * *

(f) ** *

(2) * * *

(ii) Examples. The following examples
illustrate the operation of paragraph (d)(2)

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of this section. Each example assumes that
withholding under chapter 4 does not ap-
ply.

Example 1. (i) DS is a U.S. subsidiary of FP, a
corporation organized in Country N, a country that
does not have an income tax treaty with the United
States. FS is a special purpose subsidiary of FP that
is incorporated in Country T, a country that has an
income tax treaty with the United States that prohib-
its the imposition of withholding tax on payments of
interest. FS is capitalized with $10,000,000 in debt
from BK, a Country N bank, and $1,000,000 in
capital from FS.

(ii) On May 1, 1995, C, a U.S. person, purchases
an automobile from DS in return for an installment
note. On July 1, 1995, DS sells a number of install-
ment notes, including C's, to FS in exchange for
$10,000,000. DS continues to service the installment
notes for FS, and C is not notified of the sale of its
obligation and continues to make payments to DS.
But for the withholding tax on payments of interest
by DS to BK, DS would have borrowed directly
from BK, pledging the installment notes as collat-
eral.

(iii) The C installment note is a financing trans-
action, whether held by DS or by FS, and the FS note
held by BK also is a financing transaction. After FS
purchases the installment note, and during the time
the installment note is held by FS, the transactions
constitute a financing arrangement, within the mean-
ing of § 1.881-3(a)(2)(i). BK is the financing entity,
FS is the intermediate entity, and C is the financed
entity. Because the participation of FS in the financ-
ing arrangement reduces the tax imposed by section
881 and because there was a tax avoidance plan, FS
is a conduit entity.

(iv) Because C does not know or have reason to
know of the tax avoidance plan (and by extension
that the financing arrangement is a conduit financing
arrangement), C is not required to withhold tax under
section 1441. However, DS, who knows that FS's
participation in the financing arrangement is pursu-
ant to a tax avoidance plan and is a withholding
agent for purposes of section 1441, is not relieved of
its withholding responsibilities.

Example 2. Assume the same facts as in Example
1 except that C receives a new payment booklet on
which DS is described as "agent." Although C may
deduce that its installment note has been sold, with-
out more C has no reason to know of the existence of
a financing arrangement. Accordingly, C is not liable
for failure to withhold, although DS still is not re-
lieved of its withholding responsibilities.

Example 3. (i) DC is a U.S. corporation that is in
the process of negotiating a loan of $10,000,000
from BK1, a bank located in Country N, a country
that does not have an income tax treaty with the
United States. Before the loan agreement is signed,
DC's tax lawyers point out that interest on the loan
would not be subject to withholding tax if the loan
were made by BK2, a subsidiary of BK1 that is
incorporated in Country T, a country that has an
income tax treaty with the United States that prohib-
its the imposition of withholding tax on payments of
interest. BK1 makes a loan to BK2 to enable BK2 to
make the loan to DC. Without the loan from BK1 to
BK2, BK2 would not have been able to make the
loan to DC.

(ii) The loan from BK1 to BK2 and the loan from
BK2 to DC are both financing transactions and to-
gether constitute a financing arrangement within the
meaning of § 1.881-3(a)(2)(i). BK1 is the financing
entity, BK2 is the intermediate entity, and DC is the
financed entity. Because the participation of BK2 in
the financing arrangement reduces the tax imposed
by section 881 and because there is a tax avoidance
plan, BK2 is a conduit entity.

(iii) Because DC is a party to the tax avoidance
plan (and accordingly knows of its existence), DC
must withhold tax under section 1441. If DC does
not withhold tax on its payment of interest, BK2, a
party to the plan and a withholding agent for pur-
poses of section 1441, must withhold tax as required
by section 1441.

Example 4. (i) DC is a U.S. corporation that has
a long-standing banking relationship with BK2, a
U.S. subsidiary of BK1, a bank incorporated in
Country N, a country that does not have an income
tax treaty with the United States. DC has borrowed
amounts of as much as $75,000,000 from BK2 in the
past. On January 1, 1995, DC asks to borrow
$50,000,000 from BK2. BK2 does not have the
funds available to make a loan of that size. BK2
considers asking BK1 to enter into a loan with DC
but rejects this possibility because of the additional
withholding tax that would be incurred. Accord-
ingly, BK2 borrows the necessary amount from BK1
with the intention of on-lending to DC. BK1 does not
make the loan directly to DC because of the with-
holding tax that would apply to payments of interest
from DC to BK1. DC does not negotiate with BK1
and has no reason to know that BK1 was the source
of the loan.

(ii) The loan from BK2 to DC and the loan from
BK1 to BK2 are both financing transactions and
together constitute a financing arrangement within
the meaning of § 1.881-3(a)(2)(i). BK1 is the financ-
ing entity, BK2 is the intermediate entity, and DC is
the financed entity. The participation of BK2 in the
financing arrangement reduces the tax imposed by
section 881. Because the participation of BK2 in the
financing arrangement reduces the tax imposed by
section 881 and because there was a tax avoidance
plan, BK2 is a conduit entity.

(iii) Because DC does not know or have reason
to know of the tax avoidance plan (and by extension
that the financing arrangement is a conduit financing
arrangement), DC is not required to withhold tax
under section 1441. However, BK2, who is also a
withholding agent under section 1441 and who
knows that the financing arrangement is a conduit
financing arrangement, is not relieved of its with-
holding responsibilities.

(g) Effective/applicability date-(1)
Except as otherwise provided in para-
graph (a)(4) of this section, this section
applies to payments made on or after Jan-
uary 6, 2017. (For payments made after
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
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) [Reserved]. For further guidance,
see § 1.1441-7T(g)(2).

Par. 18. Section 1.1441-7T is revised
to read as follows:

§ 1.1441-7T General provisions relating
to withholding agents (temporary).

(a) through (b)(10)(iii) [Reserved]. For
further guidance, see § 1.1441-7(a)
through (b)(10)(iii).

(iv) If the beneficial owner is claiming
a reduced rate of withholding under an
income tax treaty, the rules of § 1.1441-
6(b)(1)(ii) also apply to determine
whether the withholding agent has reason
to know that a claim for treaty benefits is
unreliable or incorrect.

(b)(11) through (g)(1) [Reserved]. For
further guidance, see § 1.1441-7(b)(11)
through (g)(1).

(2) Effective/applicability date. This
section applies on January 6, 2017.

(h) Expiration date. The applicability
of this section expires on December 30,
2019.

Par. 19. Section 1.1461-1 is amended
by:

1\. Revising paragraphs (b)(1), (c)(1)(i)
and (ii), (c)(2)(ii)(E), (c)(2)(ii)(H) and (I),
(c)(3)(i) and (iii), (c)(4)(i), (c)(4)(ii)(A),
(c)(4)(iv) and (v), (c)(5), and (i) to read as
follows:

§ 1.1461-1 Payment and returns of tax
withheld.

* * * * *

(b) Income tax return-(1) General
rule. A withholding agent shall make an
income tax return on Form 1042 (or such
other form as the IRS may prescribe) for
income paid during the preceding calen-
dar year that the withholding agent is re-
quired to report on an information return
on Form 1042-S (or such other form as
the IRS may prescribe) under paragraph
(c)(1) of this section. See section 6011 and
§ 1.6011-1(c). The withholding agent
must file the return on or before March 15
of the calendar year following the year in
which the income was paid. The return
must show the aggregate amount of in-
come paid and tax withheld required to be
reported on all the Forms 1042-S for the

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preceding calendar year by the withhold-
ing agent, in addition to such information
as is required by the form and accompa-
nying instructions. See § 1.1474-1(c) for
the requirement to show the aggregate
chapter 4 reportable amounts and tax
withheld on Form 1042. A single Form
1042 may be filed by a withholding agent
to report amounts under chapters 3 and 4,
including tax withheld. Withholding cer-
tificates or other statements or information
provided to a withholding agent are not
required to be attached to the return. A
return must be filed under this paragraph
(b)(1) even though no tax was required to
be withheld during the preceding calendar
year. The withholding agent must retain a
copy of Form 1042 for the applicable stat-
ute of limitations on assessments and col-
lection with respect to the amounts re-
quired to be reported on the Form 1042.
See section 6501 and the regulations
thereunder for the applicable statute of
limitations. Adjustments to the total
amount of tax withheld, as described in
§ 1.1461-2, shall be stated on the return as
prescribed by the form and accompanying
instructions.

* * * * *

(c) Information returns-(1) Filing re-
quirement-(i) In general. A withholding
agent (other than an individual who is not
acting in the course of a trade or business
with respect to a payment) must make an
information return on Form 1042-S, "For-
eign Person's U.S. Source Income Subject
to Withholding," (or such other form as
the IRS may prescribe) to report the
amounts subject to reporting, as defined in
paragraph (c)(2) of this section, that were
paid during the preceding calendar year.
Notwithstanding the preceding sentence,
any person that withholds or is required to
withhold an amount under sections 1441,
1442, 1443, or § 1.1446-4(a) (applicable
to publicly traded partnerships required to
pay tax under section 1446 on distribu-
tions) must file a Form 1042-S for the
payment withheld upon whether or not
that person is engaged in a trade or busi-
ness and whether or not the payment is an
amount subject to reporting. The reference
in the previous sentence to withholding
under § 1.1446-4 shall apply to partner-
ship taxable years beginning after May 18,
2005, or such earlier time as the regula-
tions under §§ 1.1446-1 through

1.1446-5 apply by reason of an election
under § 1.1446-7. A Form 1042-S shall
be prepared for each recipient of an
amount subject to reporting and for each
single type of income payment. The Form
1042-S shall be prepared in such manner
as the form and accompanying instruc-
tions prescribe. One copy of the Form
1042-S shall be filed with the IRS on or
before March 15th of the calendar year
following the year in which the amount
subject to reporting was paid. It shall be
filed with a transmittal form as provided
in the instructions to the Form 1042-S and
to the transmittal form. Withholding cer-
tificates, documentary evidence, or other
statements or documentation provided to a
withholding agent are not required to be
attached to the form. Another copy of the
Form 1042-S must be furnished to the
recipient for whom the form is prepared
(or any other person, as required under
this paragraph (c) or the instructions to the
form) on or before March 15 of the cal-
endar year following the year in which the
amount subject to reporting was paid. The
withholding agent must retain a copy of
each Form 1042-S for the statute of lim-
itations on assessment and collection ap-
plicable to the Form 1042 to which the
Form 1042-S relates. A withholding
agent required by this section to furnish a
recipient copy of Form 1042-S may fur-
nish such copy electronically by comply-
ing with the requirements provided in
§ 1.6050W-2(a)(2) through (5) applicable
to statements required under section
6050W (substituting the phrase "Form
1042-S" for the phrases "statement re-
quired under section 6050W" or "state-
ments required by section 6050W(f)" each
place they appear). A withholding agent
that meets the requirements of that section
for providing electronic copies to recipi-
ents may apply these rules to payments
made in calendar year 2016.

(ii) Recipient-(A) Defined. For pur-
poses of this section, the term recipient
means-

(1) A beneficial owner as defined in
§ 1.1441-1(c)(6), including a foreign es-
tate or a foreign complex trust, as defined
in § 1.1441-1(c)(25);

(2) A qualified intermediary as defined
in § 1.1441-1(e)(5)(ii);

(3) A withholding foreign partnership
as defined in § 1.1441-5(c)(2) or a with-

holding foreign trust under § 1.1441-
5(e)(5)(v);

(4) A territory financial institution
treated as a U.S. person under § 1.1441-
1(b)(2)(iv)(A);

(5) A U.S. branch that is treated as a
U.S. person under § 1.1441-1(b)(2)
(iv)(A);

(6) A nonwithholding foreign partner-
ship or a foreign simple trust as defined in
§ 1.1441-1(c)(24), but only to the extent
the income is (or is treated as) effectively
connected with the conduct of a trade or
business in the United States by such en-
tity, or if the nonwithholding foreign part-
nership or foreign simple trust is also de-
scribed in paragraph (c)(1)(ii)(A)(9) or
(c)(1)(ii)(A)(10) of this section;

(7) A payee, as defined in § 1.1441-
1(b)(2) that is presumed to be a foreign
person under the presumption rules of
§ 1.1441-1(b)(3); 1.1441-5(d) or (e)(6),
or 1.6049-5(d);

(8) A partner receiving a distribution
from a publicly traded partnership subject
to withholding under section 1446 and
§ 1.1446-4 on distributions of effectively
connected income. This paragraph (c)(1)
(ii)(A)(8) shall apply to partnership tax-
able years beginning after May 18,
2005, or such earlier time as the regula-
tions under §§ 1.1446-1 through
1.1446-5 apply by reason of an election
under § 1.1446-7.

(9) A foreign intermediary, nonwith-
holding foreign partnership, or nonwith-
holding foreign trust that is a participating
FFI or registered deemed-compliant FFI
with respect to a chapter 4 reporting pool
of U.S. payees;

(10) A participating FFI or a registered
deemed-compliant FFI that is a recipient
of a withholdable payment described in
§ 1.1474-1(d)(1)(ii)(A)(1)(iii); and

(11) Any other person as required on
Form 1042-S or the instructions to the
form.

(B) Persons that are not recipients. A
recipient does not include-

(1) A nonqualified intermediary, ex-
cept with respect to a payment (or portion
of a payment) for which a nonqualified
intermediary that is an FFI is a recipient
reporting as described in § 1.1474-
1(d)(1)(ii)(A)(1)(iii), or if the nonqualified
intermediary is also described in para-

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graph (c)(1)(ii)(A)(9) or (c)(1)(ii)(A)(10)
of this section;

(2) A payee included in a chapter 3 or
chapter 4 withholding rate pool;

(3) A flow-through entity, as defined in
§ 1.1441-1(c)(23) (to the extent it is re-
ceiving amounts subject to reporting other
than income effectively connected with
the conduct of a trade or business in the
United States), that is not a recipient de-
scribed in paragraphs (c)(1)(ii)(A)(9) or
(c)(1)(ii)(A)(10) of this section; and

(4) A U.S. branch (including a terri-
tory financial institution) described in
§ 1.1441-1(b)(2)(iv)(A) that is not
treated as a U.S. person under that sec-
tion and is not a recipient described in
paragraphs (c)(1)(ii)(A)(9) or (10) of
this section.

(C) Coordination with chapter 4 re-
porting. See § 1.1474-1(d)(1)(ii)(A) for
persons that are defined as recipients of a
withholdable payment of U.S. source
FDAP income for purposes of chapter 4 in
addition to the persons that are recipients
under this paragraph (c)(1)(ii).

(2) * * *

(ii) * * *

(E) Any item required to be reported on
Form 1099, and such other forms as are
prescribed pursuant to the information re-
porting provisions of sections 6041
through 6050W and the regulations under
those sections;

* * * * *

(H) Interest (including original issue
discount) paid with respect to foreign-
targeted registered obligations issued be-
fore January 1, 2016, that are described in
§ 1.871-14(e)(2) to the extent the docu-
mentation requirements described in
§ 1.871-14(e)(3) and (e)(4) are required to
be satisfied (taking into account the pro-
visions of § 1.871-14(e)(4)(ii), if applica-
ble;

(I) Interest on a foreign-targeted bearer
obligation (see §§ 1.1441-1(b)(4)(i) and
1.1441-2(a)) issued before March 19,
2012;

* * * * *

(3) * * *

(i) The name, address, taxpayer identi-
fying number of the withholding agent,
and the withholding agent's status for
chapter 3 purposes (based on the status
codes applicable for chapter 3 purposes
provided on the form);

* * * * *

(iii) For a payment not subject to with-
holding under chapter 4, the rate of with-
holding applied or the basis for exempting
the payment from withholding under
chapter 3, and the exemption applicable to
the payment for chapter 4 purposes (based
on the exemption codes provided on the
form);

* * * * *

(4) Method of reporting-(i) Payments
by U.S. withholding agents to recipients.
A withholding agent that is a U.S. person
(other than a foreign branch of a U.S.
person that is a qualified intermediary as
defined in § 1.1441-1(e)(5)(ii) that makes
payments of amounts subject to reporting
on Form 1042-S must file a separate Form
1042-S for each recipient who receives
such amount. For purposes of this para-
graph (c)(4), a U.S. person includes a U.S.
branch (including a territory financial in-
stitution) described in § 1.1441-1(b)(2)
(iv)(A) that is treated as a U.S. person.
Except as may otherwise be required on
Form 1042-S or the instructions to the
form, only payments for which the income
code, exemption code, withholding rate,
and recipient code are the same may be
reported on a single Form 1042-S. See
paragraph (c)(4)(ii) of this section for re-
porting of payments made to a person that
is not a recipient. See § 1.1474-1(d)(4)
for additional requirements that may ap-
ply for reporting on Form 1042-S with
respect to a withholdable payment that is a
chapter 4 reportable amount.

(A) Payments to beneficial owners. If a
U.S. withholding agent makes a payment
directly to a beneficial owner it must com-
plete Form 1042-S treating the beneficial
owner as the recipient. Under the grace
period rule of § 1.1441-1(b)(3)(iv), a U.S.
withholding agent may, under certain cir-
cumstances, treat a payee as a foreign
person while the withholding agent awaits
a valid withholding certificate. A U.S.
withholding agent who relies on the grace
period rule to treat a payee as a foreign
person must file a Form 1042-S to report
all payments on Form 1042-S during the
period that person was presumed to be
foreign even if that person is later deter-
mined to be a U.S. person based on ap-
propriate documentation or is presumed to
be a U.S. person after the grace period
ends. In the case of joint owners, a with-

holding agent may provide a single Form
1042-S made out to the owner whose
status the U.S. withholding agent relied
upon to determine the applicable rate of
withholding. If, however, any one of the
owners requests its own Form 1042-S, the
withholding agent must furnish a Form
1042-S to the person who requests it. If
more than one Form 1042-S is issued for
a single payment, the aggregate amount
paid and tax withheld that is reported on
all Forms 1042-S cannot exceed the total
amounts paid to joint owners and the tax
withheld thereon.

(B) Payments to a qualified intermedi-
ary, a withholding foreign partnership, or
a withholding foreign trust. A U.S. with-
holding agent that makes payments to a
qualified intermediary (whether or not the
qualified intermediary assumes primary
withholding responsibility for purposes of
chapter 3 and chapter 4 of the Code), a
withholding foreign partnership, or a
withholding foreign trust shall complete
Forms 1042-S treating the qualified inter-
mediary, withholding foreign partnership,
or withholding foreign trust as the recipi-
ent. The U.S. withholding agent must
complete a separate Form 1042-S for
each chapter 3 and chapter 4 withholding
rate pool with respect to each qualified
intermediary. A qualified intermediary
that does not assume primary withholding
responsibility on all payments it receives
provides information regarding the pro-
portions of income subject to a particular
withholding rate (i.e., a chapter 3 with-
holding rate pool) to the withholding
agent on a withholding statement associ-
ated with a qualified intermediary with-
holding certificate. In such a case, the U.S.
withholding agent must complete a sepa-
rate Form 1042-S for each chapter 3 and
chapter 4 withholding rate pool with re-
spect to the qualified intermediary. To the
extent a qualified intermediary is required
to report a payment under chapter 61, it
may provide a U.S. withholding agent
with information regarding withholding
rate pools for U.S. non-exempt recipients
(as defined under § 1.1441-1(c)(21)).
Amounts paid with respect to such with-
holding rate pools must be reported on a
Form 1099 completed for each U.S. non-
exempt recipient to the extent such U.S.
non-exempt recipient is subject to Form
1099 reporting and is not reported on

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Form 1042-S. See, however, § 1.1441-
1(e)(5)(v)(C) for when a qualified inter-
mediary may provide a chapter 4 with-
holding rate pool of U.S payees (in lieu of
reporting such payees on a withholding
statement) and for the withholding rate
pools (including chapter 4 withholding
rate pools) otherwise reportable on a with-
holding statement provided by a qualified
intermediary.

(C) Amounts paid to U.S. branches
treated as U.S. persons. A U.S. withhold-
ing agent making a payment to a U.S.
branch of a foreign person (including a
territory financial institution) described in
§ 1.1441-1(b)(2)(iv)(A) shall complete
Form 1042-S as follows-

(1) If the branch has provided the U.S.
withholding agent with a withholding cer-
tificate that evidences its agreement with
the withholding agent to be treated as a
U.S. person, the U.S. withholding agent
files Forms 1042-S treating the U.S.
branch or territory financial institution as
the recipient;

(2) If the branch has provided the U.S.
withholding agent with a withholding cer-
tificate that transmits information regard-
ing beneficial owners, qualified interme-
diaries, withholding foreign partnerships,
or other recipients, the U.S. withholding
agent must complete a separate Form
1042-S for each recipient whose docu-
mentation is associated with the U.S.
branch's or territory financial institution's
withholding certificate; or

(3) If the U.S. withholding agent can-
not reliably associate a payment with a
valid withholding certificate from the U.S.
branch, it shall treat the U.S. branch as the
recipient and report the income as effec-
tively connected with the conduct of a
trade or business in the United States ex-
cept as otherwise provided in § 1.1441-
1(b)(2)(iv)(B)(4).

(D) Dual Claims. A U.S. withholding
agent may make a payment to a foreign
entity that is simultaneously claiming a
reduced rate of tax on its own behalf for
a portion of the payment and a reduced
rate on behalf of persons in their capac-
ity as interest holders in that entity on
the remaining portion. See § 1.1441-
6(b)(2)(iii). If the claims are consistent
and the withholding agent accepts the
multiple claims, the withholding agent
must file a separate Form 1042-S for

those payments for which the entity is
treated as the beneficial owner and
Forms 1042-S for each of the interest
holders in the entity for which the inter-
est holder is treated as the recipient. For
those payments for which the interest
holder in an entity is treated as the re-
cipient, the U.S. withholding agent shall
prepare the Form 1042-S in the same
manner as a payment made to a non-
qualified intermediary or flow-through
entity as set forth in paragraph (c)(4)(ii)
of this section. If the claims are consis-
tent but the withholding agent has not
chosen to accept the multiple claims, or
if the claims are inconsistent, the with-
holding agent must file a separate Form
1042-S for the person or persons it has
chosen to treat as the recipients.

(ii) Payments made by U.S. withhold-
ing agents to persons that are not recipi-
ents-(A) Amounts paid to a nonqualified
intermediary, a flow-through entity, and
certain U.S. branches. If a U.S. with-
holding agent makes a payment to a
nonqualified intermediary, a flow-
through entity, or a U.S. branch (includ-
ing a territory financial institution) de-
scribed in § 1.1441-1(b)(2)(iv) (other
than a U.S. branch or territory financial
institution that is treated as a U.S. per-
son), it must complete a separate Form
1042-S for each recipient to the extent
the withholding agent can reliably asso-
ciate a payment with valid documenta-
tion (within the meaning of § 1.1441-
1(b)(2)(vii)) from the recipient which is
associated with the withholding certifi-
cate provided by the nonqualified inter-
mediary, flow-through entity, or U.S.
branch or territory financial institution.
See § 1.1474-1(d)(4)(i) for when a
withholding agent may report a chapter
4 reportable amount made to such an
entity in a chapter 4 withholding rate
pool. See also § 1.1441-1(e)(3)(iv)(A)
for when a withholding statement pro-
vided by a nonqualified intermediary
may include a chapter 4 withholding
rate pool of U.S. payees. If a payment is
reported by the withholding agent in a
chapter 4 withholding rate pool, the
withholding agent must report on Form
1042-S the nonqualified intermediary or
flow-through entity as a recipient asso-
ciated with the applicable chapter 4
withholding rate pool. If a payment is

made through tiers of nonqualified inter-
mediaries or flow-through entities, the
withholding agent must nevertheless
complete Form 1042-S for the recipient
to the extent it can reliably associate the
payment with documentation from the
recipient. A withholding agent that is
completing a Form 1042-S for a recip-
ient that receives a payment through a
nonqualified intermediary, a flow-
through entity, or a U.S. branch or ter-
ritory financial institution must include
on the Form 1042-S the name of the
nonqualified intermediary, flow-through
entity, U.S. branch or territory financial
institution from which the recipient di-
rectly receives the payment. If a U.S.
withholding agent cannot reliably asso-
ciate the payment, or any portion of the
payment, with valid documentation
from a recipient either because no such
documentation has been provided or be-
cause the nonqualified intermediary,
flow-through entity, or U.S. branch or
territory financial institution has failed
to provide sufficient allocation informa-
tion so that the withholding agent can
associate the payment, or any portion
thereof, with valid documentation, then
the withholding agent must report the
payments as made to an unknown recip-
ient in accordance with the appropriate
presumption rules for that payment.
Thus, if the payment is not a withhold-
able payment and under the presumption
rules the payment is presumed to be
made to a foreign person, the withhold-
ing agent must generally withhold 30
percent of the payment and report the
payment on Form 1042-S made out to
an unknown recipient and shall also in-
clude the name of the nonqualified in-
termediary, flow-through entity, U.S.
branch or territory financial institution
that received the payment on behalf of
the unknown recipient. If, however, the
recipient is presumed to be a U.S.
non-exempt recipient (as defined in
§ 1.1441-1(c)(21)), the withholding
agent must withhold on the payment as
required under section 3406 and report
the payment as required under chapter
61 of the Code. See § 1.1474-1(d)(4)
for reporting requirements that apply to
payments of chapter 4 reportable
amounts paid to nonqualified intermedi-
aries and flow-through entities. If, how-

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ever, the payment is a withholdable pay-
ment, the withholding agent must report
the payment as made to a chapter 4
withholding rate pool of nonparticipat-
ing FFIs in accordance with the pre-
sumption rule under § 1.1471-3(f)(5).
* * * * *

(iv) Reporting by a nonqualified inter-
mediary, flow-through entity, and certain
U.S. branches. A nonqualified intermedi-
ary, flow-through entity, or U.S. branch
(including a territory financial institution)
described in § 1.1441-1(e)(2)(iv) (other
than a U.S. branch or territory financial
institution that is treated as a U.S. person)
is a withholding agent and must file Forms
1042-S for amounts paid to recipients in
the same manner as a U.S. withholding
agent. A Form 1042-S will not be re-
quired, however, if another withholding
agent has reported the same amount for
which the nonqualified intermediary,
flow-through entity, or U.S. branch would
be required to file a return and the entire
amount that should be withheld from such
payment has been withheld (including
withholding and reporting in accordance
with the applicable presumption rule for
the payment). A nonqualified intermedi-
ary, flow-through entity, or U.S. branch
must report payments made to recipients
to the extent it has failed to provide the
appropriate documentation to another
withholding agent together with the infor-
mation required for that withholding agent
to reliably associate the payment with the
recipient documentation or to the extent it
knows, or has reason to know, that less
than the required amount has been with-
held. A nonqualified intermediary or flow-
through entity that is required to report a
payment on Form 1042-S must follow the
same rules as apply to a U.S. withholding
agent under paragraphs (c)(4)(i) and (ii) of
this section.

(v) Pro rata reporting for allocation
failures. If a nonqualified intermediary,
flow-through entity, or U.S. branch (in-
cluding a territory financial institution)
described in § 1.1441-1(b)(2)(iv) (other
than a U.S. branch or territory financial
institution treated as a U.S. person) uses
the alternative procedures of § 1.1441-
1(e)(3)(iv)(D) and fails to provide infor-
mation sufficient to allocate the amount
subject to reporting paid to a withholding
rate pool to the payees identified for that

pool, then the withholding agent shall
report the payment in accordance with
the rule provided in § 1.1441-
1(e)(3)(iv)(D)(6).

* * * * *

(5) Magnetic media reporting. A with-
holding agent that makes 250 or more
Form 1042-S information returns for a
taxable year must file Form 1042-S re-
turns on magnetic media. See, however,
§ 301.1474-1(a) of this chapter for the
requirements for a withholding agent that
is a financial institution to file Forms
1042-S on magnetic media. See, also,
§ 301.6011-2 of this chapter for require-
ments applicable to a withholding agent
that files Forms 1042-S with the IRS on
magnetic media and publications of the
IRS relating to magnetic media filing.
* * * * *

(i) Effective/applicability date. Except
as otherwise provided in paragraph
(c)(2)(iii) of this section, this section shall
apply to returns required for payments
made on or after January 6, 2017. (For
payments made after 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 December 31, 2000, and be-
fore July 1, 2014, see this section as in
effect and contained in 26 CFR part 1, as
revised April 1, 2013.)

##### § 1.1461-1T [Removed]

Par. 20. Section 1.1461-1T is removed.
Par. 21. Section 1.1461-2 is amended
by revising paragraphs (a)(2)(i), (a)(4),
and (d) to read as follows:

§ 1.1461-2 Adjustments for
overwithholding or underwithholding of
tax.

(a) * * *

(2) Reimbursement of tax-(i) General
rule. Under the reimbursement procedure,
the withholding agent repays the benefi-
cial owner or payee for the amount of tax
overwithheld. In such a case, the with-
holding agent may reimburse itself by re-
ducing, by the amount of tax actually re-
paid to the beneficial owner or payee, the
amount of any deposit of tax made by the
withholding agent under § 1.6302-
2(a)(1)(iii) for any subsequent payment

period occurring before the end of the
calendar year following the calendar year
of overwithholding. Any such reduction
that occurs for a payment period in the
calendar year following the calendar year
of overwithholding shall be allowed only
if-

(A) The repayment to the beneficial
owner or payee occurs before the earlier
of the due date (not including extensions)
for filing Form 1042-S for the calendar
year of overwithholding or the date the
Form 1042-S is actually filed with the
IRS; and

(B) The withholding agent states on a
timely filed (not including extensions)
Form 1042 for the calendar year of over-
withholding, that the filing of the Form
1042 constitutes a claim for credit in ac-
cordance with § 1.6414-1.

* * * * *

(4) Examples. The principles of this
paragraph (a) are illustrated by the follow-
ing examples:

Example 1. (i) N is a nonresident alien individual
who is a resident of the United Kingdom. In Decem-
ber 2001, a domestic corporation C pays a dividend
of $100 to N, at which time C withholds $30 and
remits the balance of $70 to N. On February 10,
2002, prior to the time that C files its Form 1042 and
Form 1042-S with respect to the payment, N fur-
nishes a valid Form W-8 described in § 1.1441-
1(e)(2)(i) upon which C may rely to reduce the rate
of withholding to 15% under the provisions of the
U.S .- U.K. tax treaty. Consequently, N advises C that
its tax liability is only $15 and not $30 and requests
reimbursement of $15. Although C has already de-
posited the $30 that was withheld, as required by
§ 1.6302-2(a)(1)(iv), C repays N in the amount of
$15.

(ii) During 2001, C makes no other payments
upon which tax is required to be withheld under
chapter 3 of the Code; accordingly, its return on
Form 1042 for such year, which is filed on March 15,
2002, shows total tax withheld of $30, an adjusted
total tax withheld of $15, and $30 previously paid for
such year. Pursuant to § 1.6414-1(b), C claims a
credit for the overpayment of $15 shown on the
Form 1042 for 2001. Accordingly, it is permitted to
reduce by $15 any deposit required by § 1.6302-2 to
be made of tax withheld during the calendar year
2002. The Form 1042-S required to be filed by C
with respect to the dividend of $100 paid to N in
2001 is required to show tax withheld under chapter
3 of $30 and tax repaid to N of $15.

Example 2. The facts are the same as in Example
1\. In addition, during 2002, C makes payments to N
upon which it is required to withhold $200 under
chapter 3 of the Code, all of which is withheld in
June 2002. Pursuant to § 1.6302-2(a)(1)(iii), C de-
posits the amount of $185 on July 15, 2002 ($200
less the $15 for which credit is claimed on the Form
1042 for 2001). On March 15, 2003, C Corporation
files its return on Form 1042 for calendar year 2002,

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which shows total tax withheld of $200, $185 pre-
viously deposited by C, and $15 allowable credit.
Example 3. The facts are the same as in Example
1\. Under § 1.6302-2(a)(1)(ii), C is required to de-
posit on a quarter-monthly basis the tax withheld
under chapter 3 of the Code. C withholds tax of $100
between February 8 and February 15, 2002, and
deposits $75 [($100 × 90%) less $15] of the with-
held tax within 3 banking days after February 15,
2002, and by depositing $10 [($100-$15) less $75]
within 3 banking days after March 15, 2002.
* * * * *

(d) Effective/applicability date. This
section applies to payments made on or
after January 6, 2017. (For payments
made after June 30, 2014, and before Jan-
uary 6, 2017, see this section as in effect
and contained in 26 CFR part 1, as revised
April 1, 2016. For payments made after
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.)

##### § 1.1461-2T [Removed]

Par. 22. Section 1.1461-2T is removed.

Par. 23. Section 1.6041-1 is amended
by revising paragraphs (d)(5)(i) and (ii)
and (j) to read as follows:

§ 1.6041-1 Return of information as to
payments of $600 or more.

* * * * *

(d) * * *

(5) * * *

(i) An amount paid with respect to a
notional principal contract is not required
to be reported if the amount is paid by a
non-U.S. payor or a non-U.S. middleman
and is paid and received outside the
United States (as defined in § 1.6049-
4(f)(16)).

(ii) An amount paid with respect to a
notional principal contract is not required
to be reported if the amount is paid by a
payor that has no actual knowledge that
the payee is a U.S. person and is paid and
received outside the United States (as de-
fined in § 1.6049-4(f)(16)), and the payor
is-

* * * * *

(j) Effective/applicability date. This
section applies to payments made on or
after January 6, 2017. (For payments
made after June 30, 2014, and before Jan-
uary 6, 2017, see this section as in effect
and contained in 26 CFR part 1, as revised

April 1, 2016. For payments made after
December 31, 2010, and before July 1,
2014, see this section as in effect and
contained in 26 CFR part 1, as revised
April 1, 2013.)

###### § 1.6041-1T [Removed]

Par. 24. Section 1.6041-1T is removed.

Par. 25. Section 1.6041-4 is amended
by revising paragraphs (a)(1) through (3),
(a)(7), (b), and (d) to read as follows:

§ 1.6041-4 Foreign-related items and
other exceptions.

(a) * * *

(1) Returns of information are not re-
quired for payments that a payor can, prior
to payment, reliably associate with docu-
mentation upon which it may rely to treat
as made to a foreign beneficial owner in
accordance with § 1.1441-1(e)(1)(ii) or as
made to a foreign payee in accordance
with § 1.6049-5(d)(1) or presumed to be
made to a foreign payee under § 1.6049-
5(d)(2), (3), (4), or (5). Returns of infor-
mation are also not required for a payment
that a payor or middleman can, prior to
payment, reliably associate with docu-
mentation upon which it may rely to treat
as made to a foreign intermediary or
flow-through entity in accordance with
§ 1.1441-1(b) if it obtains from the inter-
mediary or flow-through entity a with-
holding statement described in § 1.6049-
5(b)(14) that allocates the payment to a
chapter 4 withholding rate pool (as de-
fined in § 1.6049-4(f)(5)) or specific pay-
ees to which withholding applies under
chapter 4. Payments excepted from report-
ing under this paragraph (a)(1) may be
reportable, for purposes of chapter 3 of the
Internal Revenue Code (Code), under
§ 1.1461-1(b) and (c) and, for purposes of
chapter 4 of the Code, under § 1.1474-
1(d)(2). The provisions in § 1.6049-5(c)
regarding documentation of foreign status
shall apply for purposes of this paragraph
(a)(1). The provisions in § 1.6049-5(c)(5)
regarding the definitions of U.S. payor
and non-U.S. payor shall also apply for
purposes of this paragraph (a)(1). See
§ 1.1441-1(b)(3)(iii)(B) and (C) for spe-
cial payee rules regarding scholarships,
grants, pensions, annuities, etc. The pro-
visions of § 1.1441-1 shall apply by sub-

stituting the term "payor" for the term
"withholding agent" and without regard to
the fact that the provisions apply only to
amounts subject to withholding under
chapter 3 of the Code and the regulations
under that chapter.

(2) Returns of information are not re-
quired for payments of amounts from
sources outside the United States (deter-
mined under the provisions of part I, sub-
chapter N, chapter 1 of the Code and the
regulations under those provisions) paid
by a non-U.S. payor or non-U.S. middle-
man and that are paid and received outside
the United States. For a definition of non-
U.S. payor and non-U.S. middleman, see
§ 1.6049-5(c)(5). For circumstances in
which an amount is considered to be paid
and received outside the United States, see
§ 1.6049-4(f)(16).

(3) If a foreign intermediary, as de-
scribed in § 1.1441-1(c)(13), or a U.S.
branch that is not treated as a U.S. person
receives a payment from a payor, which
payment the payor can reliably associate
with a valid withholding certificate de-
scribed in § 1.1441-1(e)(3)(ii) or (iii), or
§ 1.1441-1(e)(3)(v), respectively, fur-
nished by such intermediary or branch,
then the intermediary or branch is not
required to report such payment when it,
in turn, pays the amount, unless, and to the
extent, the intermediary or branch knows
that the payment is required to be reported
under this section and was not so reported.
For example, if a U.S. branch described
in § 1.1441-1(b)(2)(iv) fails to provide
information regarding U.S. persons that
are not exempt from reporting under
§ 1.6041-3(q) to the person from whom
the U.S. branch receives the payment,
the U.S. branch must report the payment
on an information return. See, however,
paragraph (a)(7) of this section for when
reporting under section 6041is coordi-
nated with reporting under chapter 4 of
the Code or an applicable IGA (as de-
fined in § 1.6049-4(f)(7)). The excep-
tion described in this paragraph (a)(3)
for amounts paid by a foreign interme-
diary shall not apply to a qualified in-
termediary that assumes reporting re-
sponsibility under chapter 61 of the
Code with respect to amounts reportable
under the agreement described in
§ 1.1441-1(e)(5)(iii).

* * * * *

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(7) Returns of information are not re-
quired for payments with respect to which
a return is not required by applying the
rules of § 1.6049-4(c)(4) (by substituting
the term "a payment subject to reporting
under section 6041" for the term "an in-
terest payment").

(b) Joint owners. Amounts paid to joint
owners for which a certificate or docu-
mentation is required as a condition for
being exempt from reporting under para-
graph (a) of this section are presumed
made to U.S. payees who are not exempt
recipients if, prior to payment, the payor
or middleman cannot reliably associate
the payment either with a Form W-9 fur-
nished by one of the joint owners in the
manner required in §§ 31.3406(d)-1
through 31.3406(d)-5, or with documen-
tation described in paragraph (a)(1) of this
section furnished by each joint owner
upon which the payor or middleman can
rely to treat each joint owner as a foreign
payee or foreign beneficial owner. How-
ever, in the case of a withholdable pay-
ment (as defined in § 1.6049-4(f)(15))
made to joint payees, if any joint payee
does not appear to be an individual, the
payment is presumed made to a foreign
payee that is a nonparticipating FFI (as
defined in § 1.1471-1(b)(82)). See
§ 1.1471-3(f)(7).

* * * * *

(d) Effective/applicability date. This
section applies to payments made on or
after January 6, 2017. (For payments
made after June 30, 2014, and before Jan-
uary 6, 2017, see this section as in effect
and contained in 26 CFR part 1, as revised
April 1, 2016. For payments made after
December 31, 2002, and before July 1,
2014, see this section as in effect and
contained in 26 CFR part 1, as revised
April 1, 2013.)

###### § 1.6041-4T [Removed]

Par. 26. Section 1.6041-4T is removed.
Par. 27. Section 1.6042-2 is amended
by revising paragraphs (a)(1)(i) and (f) to
read as follows:

§ 1.6042-2 Returns of information as to
dividends paid.

(a) * * *

(1) * * *

(i) Every person who makes a payment
of dividends (as defined in § 1.6042-3) to
any other person during a calendar year.
The information return shall show the ag-
gregate amount of the dividends, the
name, address, and taxpayer identifying
number of the person to whom paid, the
amount of tax deducted and withheld un-
der section 3406 from the dividends, if
any, and such other information as re-
quired by the forms. An information re-
turn is generally not required if the
amount of dividends paid to the other per-
son during the calendar year aggregates
less than $10 or if the payment is made to
a person who is an exempt recipient de-
scribed in § 1.6049-4(c)(1)(ii) unless the
payor backup withholds under section
3406 on such payment (because, for ex-
ample, the payee has failed to furnish a
Form W-9), in which case the payor must
make a return under this section, unless
the payor refunds the amount withheld
pursuant to § 31.6413(a)-3 of this chapter.
Further, a return of information is not
required under this section for-

(A) Payments with respect to which a
return is not required by applying the rules
of § 1.6049-4(c)(4) (by substituting the
term "dividend" for the term "interest");
or

(B) Payments made by a paying agent
on behalf of a corporation described in
section 1297(a) with respect to a share-
holder of the corporation if-

(1) The paying agent obtains from the
corporation a written certification signed
by a person authorized to sign on behalf of
the corporation, that states that the corpo-
ration is described in section 1297(a) for
each calendar year during which the pay-
ing agent relies on the provisions of para-
graph (a)(1)(i)(B) of this section, and the
paying agent has no reason to know the
written certification is unreliable or incor-
rect;

(2) The paying agent identifies, prior to
payment, the corporation as a participat-
ing FFI (including a reporting Model 2
FFI) (as defined in § 1.6049-4(f)(10) or
(14), respectively), or reporting Model 1
FFI (as defined in § 1.6049-4(f)(13)), in
accordance with the requirements of
§ 1.1471-3(d)(4) (substituting the terms
"paying agent" and "corporation" for the
terms "withholding agent" and "payee,"

respectively) and validates that status an-
nually;

(3) The paying agent obtains a written
certification representing that the corpora-
tion shall report the payment as part of its
reporting obligations under chapter 4 of
the Code or an applicable IGA (as defined
in § 1.6049-4(f)(7)) with respect to its
U.S. accounts and provided the paying
agent does not know that the corporation
is not reporting the payment as required.
The paying agent may rely on the written
certification until there is a change in cir-
cumstances or the paying agent knows or
has reason to know that the statement is
unreliable or incorrect. A paying agent
that knows that the corporation is not re-
porting the payment as required under
chapter 4 of the Code or an applicable
IGA (as defined in § 1.6049-4(f)(7))
must report all payments reportable under
this section that it makes during the year
in which it obtains such knowledge; and

(4) The paying agent is not also acting
in its capacity as a custodian, nominee, or
other agent of the payee with respect to
the payments.

* * * * *

(f) Effective/applicability date. This
section applies to payments made on or
after January 6, 2017. (For payments
made after June 30, 2014, and before Jan-
uary 6, 2017, see this section as in effect
and contained in 26 CFR part 1, as revised
April 1, 2016. For payments made after
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.)

####### § 1.6042-2T [Removed]

Par. 28. Section 1.6042-2T is removed.

Par. 29. Section 1.6042-3 is amended
by:

1\. Revising paragraphs (b)(1)(iii) and
(iv), (b)(1)(vi), and (b)(3).

2\. Removing paragraph (b)(5).

3\. Adding paragraph (d).

The revisions and addition read as fol-
lows:

§ 1.6042-3 Dividends subject to
reporting.

* * * * *

(b) * * *

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(1) * * *

(iii) Distributions or payments that a
payor can, prior to payment, reliably as-
sociate with documentation upon which it
may rely to treat as made to a foreign
beneficial owner in accordance with
§ 1.1441-1(e)(1)(ii) or as made to a for-
eign payee in accordance with § 1.6049-
5(d)(1) or presumed to be made to a for-
eign payee under § 1.6049-5(d)(2), (3),
(4), or (5). Returns of information are also
not required for payments that a payor or
middleman can, prior to payment, reli-
ably associate with documentation upon
which it may rely to treat as made to a
foreign intermediary in accordance with
§ 1.1441-1(b) if it obtains from the in-
termediary entity a withholding state-
ment (described in § 1.6049-5(b)(14))
that allocates the payment to a chapter 4
withholding rate pool (as defined in
§ 1.6049-4(f)(5)) or to specific payees
to which withholding under chapter 4
applies. Payments excepted from report-
ing under this paragraph (b)(1)(iii) may
be reportable, for purposes of chapter 3
of the Internal Revenue Code (Code),
under § 1.1461-1(b) and (c) or, for
chapter 4 purposes, under § 1.1474-
1(d)(2). The provisions in § 1.6049-5(c)
regarding documentation of foreign sta-
tus shall apply for purposes of this para-
graph (b)(1)(iii). The provisions in
§ 1.6049-5(c) regarding the definitions
of U.S. payor and non-U.S. payor shall
also apply for purposes of this paragraph
(b)(1)(iii). The provisions of § 1.1441-1
shall apply by substituting the term
payor for the term withholding agent
and without regard to the fact that the
provisions apply only to amounts sub-
ject to withholding under chapter 3 of
the Code.

(iv) Distributions or payments from
sources outside the United States (as de-
termined under the provisions of part I,
subchapter N, chapter 1 of the Code and
the regulations under those provisions)
that are paid by a non-U.S. payor or non-
U.S. middleman and that are paid and
received outside the United States. For a
definition of non-U.S. payor and non-U.S.
middleman, see § 1.6049-5(c)(5). For cir-
cumstances in which an amount is consid-
ered to be paid and received outside the
United States, see § 1.6049-4(f)(16).

* * * * *

(vi) If a foreign intermediary, as de-
scribed in § 1.1441-1(c)(13), or a U.S.
branch that is not treated as a U.S. person
receives a payment from a payor, which
payment the payor can reliably associate
with a valid withholding certificate de-
scribed in § 1.1441-1(e)(3)(ii) or (iii), or
§ 1.1441-1(e)(3)(v), respectively, fur-
nished by such intermediary or branch,
then the intermediary or branch is not
required to report such payment when it,
in turn, pays the amount, unless, and to the
extent, the intermediary or branch knows
that the payment is required to be reported
under this section and was not so reported.
For example, if a U.S. branch described
in § 1.1441-1(b)(2)(iv) fails to provide
information regarding U.S. persons that
are not exempt from reporting under
§ 1.6049-4(c)(1)(ii) to the person from
whom the U.S. branch receives the pay-
ment, the amount paid by the U.S.
branch to such person is a dividend. See,
however, § 1.6042-2(a)(1)(i)(A) for
when reporting under section 6042 is
coordinated with reporting under chap-
ter 4 of the Code or an applicable IGA
(as defined in § 1.6049-4(f)(7)). The
exception of this paragraph (b)(1)(vi)
for amounts paid by a foreign interme-
diary shall not apply to a qualified in-
termediary that assumes reporting re-
sponsibility under chapter 61 of the
Code with respect to amounts reportable
under the agreement described in
§ 1.1441-1(e)(5)(iii).

* * * * *

(3) Joint owners. Amounts paid to joint
owners for which a certificate or docu-
mentation is required as a condition for
being exempt from reporting under this
paragraph (b) are presumed made to U.S.
payees who are not exempt recipients if,
prior to payment, the payor or middleman
cannot reliably associate the payment ei-
ther with a Form W-9 furnished by one of
the joint owners in the manner required in
§§ 31.3406(d)-1 through 31.3406(d)-5 of
this chapter, or with documentation de-
scribed in paragraph (b)(1)(iii) of this sec-
tion furnished by each joint owner upon
which it can rely to treat each joint owner
as a foreign payee or foreign beneficial
owner. However in the case of a withhold-
able payment (as defined in § 1.6049-
4(f)(15)) made to joint payees, if any such
joint payee does not appear to be an indi-

vidual, the payment is presumed made to
a foreign payee that is a nonparticipating
FFI (as defined in § 1.1471-1(b)(82)). See
§ 1.1471-3(f)(7). For purposes of apply-
ing this paragraph (b)(3), the grace period
described in § 1.6049-5(d)(2)(ii) shall ap-
ply only if each payee qualifies for such
grace period.

* * * * *

(d) Effective/applicability date. This
section applies on or after January 6,
2017. (For payments made after 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 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).

####### § 1.6042-3T [Removed]

Par. 30. Section 1.6042-3T is removed.
Par. 31. Section 1.6045-1 is amended
by:

1\. Revising paragraphs (c)(3)(ii) and
(xiv).

2\. Removing paragraph (c)(3)(xv) and
(c)(7)(v).

3\. Revising paragraphs (g)(1)(i),
(g)(3)(iv), and (g)(4),

4\. Removing paragraph (g)(5).

5\. Adding paragraph (q).
The revisions and addition read as fol-
lows:

######## § 1.6045-1 Returns of information of brokers and barter exchanges.

* * * * *

(c) * * *

(3) * * *

(ii) Excepted sales. No return of in-
formation is required with respect to a
sale effected by a broker for a customer
if the sale is an excepted sale. For this
purpose, a sale is an excepted sale if it
is-

(A) So designated by the Internal Rev-
enue Service in a revenue ruling or reve-
nue procedure (see § 601.601(d)(2) of this
chapter); or

(B) A sale with respect to which a
return is not required by applying the rules
of § 1.6049-4(c)(4) (by substituting the
term "a sale subject to reporting under

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section 6045" for the term "an interest
payment").

* * * * *

(xiv) Certain redemptions. No return
of information is required under this sec-
tion for payments made by a stock transfer
agent (as described in § 1.6045-1(b)(iv))
with respect to a redemption of stock of a
corporation described in section 1297(a)
with respect to a shareholder in the cor-
poration if-

(A) The stock transfer agent obtains
from the corporation a written certifica-
tion signed by a person authorized to sign
on behalf of the corporation, that states
that the corporation is described in section
1297(a) for each calendar year during
which the stock transfer agent relies on
the provisions of paragraph (c)(3)(xiv) of
this section, and the stock transfer agent
has no reason to know that the written
certification is unreliable or incorrect;

(B) The stock transfer agent identifies,
prior to payment, the corporation as a
participating FFI (including a reporting
Model 2 FFI) (as defined in § 1.6049-
4(f)(10) or (f)(14), respectively), or re-
porting Model 1 FFI (as defined in
§ 1.6049-4(f)(13)), in accordance with
the requirements of § 1.1471-3(d)(4)
(substituting the terms “stock transfer
agent" and "corporation" for the terms
"withholding agent" and "payee," respec-
tively) and validates that status annually;

(C) The stock transfer agent obtains a
written certification representing that the
corporation shall report the payment as
part of its account holder reporting obli-
gations under chapter 4 of the Code or an
applicable IGA (as defined in § 1.6049-
4(f)(7)) and provided the stock transfer
agent does not know that the corporation
is not reporting the payment as required.
The paying agent may rely on the written
certification until there is a change in cir-
cumstances or the paying agent knows or
has reason to know that the statement is
unreliable or incorrect. A stock transfer
agent that knows that the corporation is
not reporting the payment as required un-
der chapter 4 of the Code or an applicable
IGA must report all payments reportable
under this section that it makes during the
year in which it obtains such knowledge;
and

(D) The stock transfer agent is not also
acting in its capacity as a custodian, nom-

inee, or other agent of the payee with
respect to the payment.
* * * * *

(g) * * *

(1) * * *

(i) With respect to a sale effected at an
office of a broker either inside or outside
the United States, the broker may treat the
customer as an exempt foreign person if
the broker can, prior to the payment, reli-
ably associate the payment with documen-
tation upon which it can rely in order to
treat the customer as a foreign beneficial
owner in accordance with § 1.1441-
1(e)(1)(ii), as made to a foreign payee in
accordance with § 1.6049-5(d)(1), or pre-
sumed to be made to a foreign payee
under § 1.6049-5(d)(2) or (3). For pur-
poses of this paragraph (g)(1)(i), the pro-
visions in § 1.6049-5(c) regarding rules
applicable to documentation of foreign
status shall apply with respect to a sale
when the broker completes the acts nec-
essary to effect the sale at an office out-
side the United States, as described in
paragraph (g)(3)(iii)(A) of this section,
and no office of the same broker within
the United States negotiated the sale with
the customer or received instructions with
respect to the sale from the customer. The
provisions in § 1.6049-5(c) regarding the
definitions of U.S. payor, U.S. middle-
man, non-U.S. payor, and non-U.S. mid-
dleman shall also apply for purposes of
this paragraph (g)(1)(i). The provisions of
§ 1.1441-1 shall apply by substituting the
terms "broker" and "customer" for the
terms "withholding agent" and "payee,"
respectively, and without regard for the
fact that the provisions apply to amounts
subject to withholding under chapter 3 of
the Code. The provisions of § 1.6049-
5(d) shall apply by substituting the terms
"broker" and "customer" for the terms
"payor" and "payee," respectively. For
purposes of this paragraph (g)(1)(i), a bro-
ker that is required to obtain, or chooses to
obtain, a beneficial owner withholding
certificate described in § 1.1441-1(e)(2)(i)
from an individual may rely on the with-
holding certificate only to the extent the
certificate includes a certification that
the beneficial owner has not been, and at
the time the certificate is furnished, rea-
sonably expects not to be present in the
United States for a period aggregating 183
days or more during each calendar year to

which the certificate pertains. The certifi-
cation is not required if a broker receives
documentary evidence under § 1.6049-
5(c)(1) or (4).

* * * * *

(3) * * *

(iv) Special rules where the customer
is a foreign intermediary or certain U.S.
branches. A foreign intermediary, as de-
fined in § 1.1441-1(c)(13), is an exempt
foreign person, except when the broker
has actual knowledge (within the meaning
of § 1.6049-5(c)(3)) that the person for
whom the intermediary acts is a U.S. per-
son that is not exempt from reporting un-
der paragraph (c)(3) of this section or the
broker is required to presume under
§ 1.6049-5(d)(3) that the payee is a U.S.
person that is not an exempt recipient. If a
foreign intermediary, as described in
§ 1.1441-1(c)(13), or a U.S. branch that is
not treated as a U.S. person receives a
payment from a payor or middleman,
which payment the payor or middleman
can reliably associate with a valid with-
holding certificate described in § 1.1441-
1(e)(3)(ii) or (iii) or § 1.1441-1(e)(3)(v),
respectively, furnished by such intermedi-
ary or branch, then the intermediary or
branch is not required to report such pay-
ment when it, in turn, pays the amount,
unless, and to the extent, the intermediary
or branch knows that the payment is re-
quired to be reported under this section
and was not so reported. For example, if a
U.S. branch described in § 1.1441-
1(b)(2)(iv) fails to provide information re-
garding U.S. persons that are not exempt
from reporting under paragraph (c)(3) of
this section to the person from whom the
U.S. branch receives the payment, the
U.S. branch must report the payment on
an information return. See, however, para-
graph (c)(3)(ii) of this section for when
reporting under section 6045 is coordi-
nated with reporting under chapter 4 of
the Code or an applicable IGA (as defined
in § 1.6049-4(f)(7)). The exception of
this paragraph (g)(3)(iv) for amounts paid
by a foreign intermediary shall not apply
to a qualified intermediary that assumes
reporting responsibility under chapter
61 of the Code except as provided under
the agreement described in § 1.1441-
1(e)(5)(iii).

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(4) Examples. The application of the
provisions of this paragraph (g) may be
illustrated by the following examples:

Example 1. FC is a foreign corporation that is not
a U.S. payor or U.S. middleman described in
§ 1.6049-5(c)(5) that regularly issues and retires its
own debt obligations. A is an individual whose res-
idence address is inside the United States, who holds
a bond issued by FC that is in registered form (within
the meaning of section 163(f) and the regulations
under that section). The bond is retired by FP, a
foreign corporation that is a broker within the mean-
ing of paragraph (a)(1) of this section and the des-
ignated paying agent of FC. FP mails the proceeds to
A at A's U.S. address. The sale would be considered
to be effected at an office outside the United States
under paragraph (g)(3)(iii)(A) of this section except
that the proceeds of the sale are mailed to a U.S.
address. For that reason, the sale is considered to be
effected at an office of the broker inside the United
States under paragraph (g)(3)(iii)(B) of this section.
Therefore, FC is a broker under paragraph (a)(1) of
this section with respect to this transaction because,
although it is not a U.S. payor or U.S. middleman, as
described in § 1.6049-5(c)(5), it is deemed to effect
the sale in the United States. FP is a broker for the
same reasons. However, under the multiple broker
exception under paragraph (c)(3)(iii) of this section,
FP, rather than FC, is required to report the payment
because FP is responsible for paying the holder the
proceeds from the retired obligations. Under para-
graph (g)(1)(i) of this section, FP may not treat A as
an exempt foreign person and must make an infor-
mation return under section 6045 with respect to the
retirement of the FC bond, unless FP obtains the
certificate or documentation described in paragraph
(g)(1)(i) of this section.

Example 2. The facts are the same as in Example
1 except that FP mails the proceeds to A at an
address outside the United States. Under paragraph
(g)(3)(iii)(A) of this section, the sale is considered to
be effected at an office of the broker outside the
United States. Therefore, under paragraph (a)(1) of
this section, neither FC nor FP is a broker with
respect to the retirement of the FC bond. Accord-
ingly, neither is required to make an information
return under section 6045.

Example 3. The facts are the same as in Example
2 except that FP is also the agent of A. The result is
the same as in Example 2. Neither FP nor FC are
brokers under paragraph (a)(1) of this section with
respect to the sale since the sale is effected outside
the United States and neither of them are U.S. payors
(within the meaning of § 1.6049-5(c)(5)).

Example 4. The facts are the same as in Example
1 except that the registered bond held by A was
issued by DC, a domestic corporation that regularly
issues and retires its own debt obligations. Also, FP
mails the proceeds to A at an address outside the
United States. Interest on the bond is not described in
paragraph (g)(1)(ii) of this section. The sale is con-
sidered to be effected at an office outside the United
States under paragraph (g)(3)(iii)(A) of this section.
DC is a broker under paragraph (a)(1)(i)(B) of this
section. DC is not required to report the payment
under the multiple broker exception under paragraph
(c)(3)(iii) of this section. FP is not required to make
an information return under section 6045 because FP

is not a U.S. payor described in § 1.6049-5(c)(5) and
the sale is effected outside the United States. Ac-
cordingly, FP is not a broker under paragraph (a)(1)
of this section.

Example 5. The facts are the same as in Example
4 except that FP is also the agent of A. DC is a
broker under paragraph (a)(1) of this section. DC is
not required to report under the multiple broker
exception under paragraph (c)(3)(iii) of this section.
FP is not required to make an information return
under section 6045 because FP is not a U.S. payor
described in § 1.6049-5(c)(5) and the sale is effected
outside the United States and therefore FP is not a
broker under paragraph (a)(1) of this section.

Example 6. The facts are the same as in Example
4 except that the bond is retired by DP, a broker
within the meaning of paragraph (a)(1) of this sec-
tion and the designated paying agent of DC. DP is a
U.S. payor under § 1.6049-5(c)(5). DC is not re-
quired to report under the multiple broker exception
under paragraph (c)(3)(iii) of this section. DP is
required to make an information return under section
6045 because it is the person responsible for paying
the proceeds from the retired obligations unless DP
obtains the certificate or documentary evidence de-
scribed in paragraph (g)(1)(i) of this section.

Example 7. Customer A owns U.S. corporate
bonds issued in registered form after July 18, 1984,
and carrying a stated rate of interest. The bonds are
held through an account with foreign bank, X, and
are held in street name. X is a wholly-owned sub-
sidiary of a U.S. company and is not a qualified
intermediary within the meaning of § 1.1441-
1(e)(5)(ii). X has no documentation regarding A. A
instructs X to sell the bonds. In order to effect the
sale, X acts through its agent in the United States, Y.
Y sells the bonds and remits the sales proceeds to X.
X credits A's account in the foreign country. X does
not provide documentation to Y and has no actual
knowledge that A is a foreign person but it does
appear that A is an entity (rather than an individual).

(i) Y's obligations to withhold and report. Y
treats X as the customer, and not A, because Y
cannot treat X as an intermediary because it has
received no documentation from X. Y is not required
to report the sales proceeds under the multiple broker
exception under paragraph (c)(3)(iii) of this section,
because X is an exempt recipient. Further, Y is not
required to report the amount of accrued interest paid
to X on Form 1042-S under § 1.1461-1(c)(2)(ii)
because accrued interest is not an amount subject to
reporting under chapter 3 unless the withholding
agent knows that the obligation is being sold with a
primary purpose of avoiding tax.

(ii) X's obligations to withhold and report. Al-
though X has effected, within the meaning of para-
graph (a)(1) of this section, the sale of a security at
an office outside the United States under paragraph
(g)(3)(iii) of this section, X is treated as a broker,
under paragraph (a)(1) of this section, because as a
wholly-owned subsidiary of a U.S. corporation, X is
a controlled foreign corporation and therefore is a
U.S. payor. See § 1.6049-5(c)(5). Under the pre-
sumptions described in § 1.6049-5(d)(2) (as applied
to amounts not subject to withholding under chapter
3), X must apply the presumption rules of § 1.1441-
1(b)(3)(i) through (iii), with respect to the sales
proceeds, to treat A as a partnership that is a U.S.

non-exempt recipient because the presumption of
foreign status for offshore obligations under
§ 1.1441-1(b)(3)(iii)(D) does not apply. See para-
graph (g)(1)(i) of this section. Therefore, unless X is
an FFI (as defined in § 1.1471-1(b)(47)) that is
excepted from reporting the sales proceeds under
paragraph (c)(3)(ii) of this section, the payment of
proceeds to A by X is reportable on a Form 1099
under paragraph (c)(2) of this section. X has no
obligation to backup withhold on the payment based
on the exemption under § 31.3406(g)-1(e) of this
chapter, unless X has actual knowledge that A is a
U.S. person that is not an exempt recipient. X is also
required to separately report the accrued interest (see
paragraph (d)(3) of this section) on Form 1099 under
section 6049 because A is also presumed to be a U.S.
person who is not an exempt recipient with respect to
the payment because accrued interest is not an
amount subject to withholding under chapter 3 and,
therefore, the presumption of foreign status for off-
shore obligations under § 1.1441-1(b)(3)(iii)(D)
does not apply. See § 1.6049-5(d)(2)(i).

Example 8. The facts are the same as in Example
7, except that X is a foreign corporation that is not a
U.S. payor under § 1.6049-5(c).

(i) Y's obligations to withhold and report. Y is
not required to report the sales proceeds under the
multiple broker exception under paragraph (c)(3)(iii)
of this section, because X is the person responsible
for paying the proceeds from the sale to A.

(ii) X's obligations to withhold and report. Al-
though A is presumed to be a U.S. payee under the
presumptions of § 1.6049-5(d)(2), X is not consid-
ered to be a broker under paragraph (a)(1) of this
section because it is a not a U.S. payor under
§ 1.6049-5(c)(5). Therefore X is not required to
report the sale under paragraph (c)(2) of this section.
* * * * *

(q) Effective/applicability date. Except
as otherwise provided in this section, this
section applies on or after January 6,
2017. (For rules that apply after 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.)

## § 1.6045-1T [Removed]

Par. 32. Section 1.6045-1T is removed.
Par. 33. Section 1.6049-4 is amended
by revising paragraphs (b)(1), (c)(4),
(f)(3), (f)(4)(ii), (f)(5) through (16), and
(h) to read as follows:

§ 1.6049-4 Return of information as to
interest paid and original issue discount
includible in gross income after
December 31, 1982.

* * * * *

(b) Information to be reported-(1) In-
terest payments. Except as provided in
paragraphs (b)(3) and (5) of this section,
in the case of interest other than original

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issue discount treated as interest under
§ 1.6049-5(f), an information return on
Form 1099 shall be made for the calendar
year showing the aggregate amount of the
payments, the name, address, and tax-
payer identification number of the person
to whom paid, the amount of tax deducted
and withheld under section 3406 from the
payments, if any, and such other informa-
tion as required by the forms. An infor-
mation return is generally not required if
the amount of interest paid to a person
aggregates less than $10 or if the payment
is made to a person who is an exempt
recipient described in paragraph (c)(1)(ii)
of this section, unless the payor backup
withholds under section 3406 on such
payment (because, for example, the payee
(i.e., exempt recipient) has failed to furnish
a Form W-9 on request), in which case the
payor must make a return under this section,
unless the payor refunds the amount with-
held pursuant to § 31.6413(a)-3 (Employ-
ment Tax Regulations). For reporting inter-
est paid to certain nonresident alien
individuals, see § 1.6049-8.

* * * * *

(c) * * *

(4) Coordination of reporting with
chapter 4 reporting or an applicable
IGA-(i) U.S. accounts reported by FFIs
that are non-U.S. payors. An information
return shall not be required with respect to
an interest payment made by a participat-
ing FFI (including a reporting Model 2
FFI), or registered deemed-compliant FFI
(including a reporting Model 1 FFI), that
is a non-U.S. payor (as defined in
§ 1.6049-5(c)(5)) to an account holder of
an account maintained by the FFI, when
the payment is not subject to withholding
under chapter 4 or to backup withholding
under section 3406, and the conditions of
paragraphs (c)(4)(i)(A), (B), or (C) of this
section, as applicable, are met. See para-
graph (c)(4)(iii) of this section for circum-
stances in which an FFI may allocate a
payment described in this paragraph
(c)(4)(i) to a chapter 4 withholding rate
pool of U.S. payees.

(A) The FFI is a participating FFI (in-
cluding a reporting Model 2 FFI) report-
ing the account holder of the U.S. account
(as defined in § 1.1471-1(b)(133)) pursu-
ant to either § 1.1471-4(d)(3) or (5) for
the year in which the payment is made

(including reporting of the account hold-
er's TIN).

(B) The FFI is a registered deemed-
compliant FFI (other than a reporting
Model 1 FFI) reporting the account holder
of the U.S. account pursuant to the condi-
tions of its applicable deemed-compliant
status under § 1.1471-5(f)(1) for the year
in which the payment is made (including
reporting of the account holder's TIN).

(C) The FFI is a reporting Model 1 FFI
reporting the account holder of the report-
able U.S. account pursuant to an applica-
ble Model 1 IGA for the year in which the
payment is made (including reporting of
the account holder's TIN).

(ii) Other accounts reported by FFIs
under chapter 4. An information return
shall not be required under this section
with respect to a payment that is not sub-
ject to withholding under chapter 3 (as
defined in § 1.1441-2(a)) or backup with-
holding under § 31.3406(g)-1(e) and that
is made to a recalcitrant account holder of
a participating FFI or registered deemed-
compliant FFI (or non-consenting U.S. ac-
count of a reporting Model 2 FFI), pro-
vided that the FFI reports such account
holder in accordance with the classes of
account holders described in § 1.1471-
4(d)(6) for the year in which the payment
is made. See paragraph (c)(4)(iii) of this
section for circumstances in which an FFI
may allocate a payment described in this
paragraph (c)(4)(ii) to a chapter 4 with-
holding rate pool of U.S. payees. In the
case of a payment made by an FFI that is
a reporting Model 1 FFI, an information
return shall not be required with respect to
a payment that is not subject to withhold-
ing under chapter 3 or backup withholding
under § 31.3406(g)-1(e) and that is made
to an account holder of the FFI if the
account-

(A) Has U.S. indicia for which appro-
priate documentation sufficient to treat the
account as held by other than a specified
U.S. person has not been provided pursu-
ant to the due diligence requirements de-
scribed in an applicable Model 1 IGA, and

(B) Is therefore treated as a U.S. report-
able account that the FFI is required to
report pursuant to the applicable Model 1
IGA.

(iii) Coordination of reporting excep-
tions with reporting of chapter 4 with-
holding rate pools. For purposes of para-

graphs (c)(4)(i) and (ii) of this section, a
participating FFI (including a reporting
Model 2 FFI) or registered deemed-
compliant FFI (including a reporting
Model 1 FFI) receiving a payment from
another payor may provide a withholding
statement to the payor allocating the pay-
ment to a chapter 4 withholding rate of
pool of U.S. payees only if the payment is
excepted from reporting under paragraph
(c)(4)(i) of this section or if the payment is
both excepted from reporting under para-
graph (c)(4)(ii) of this section and not
subject to withholding under chapter 4.
See § 1.6049-5(b)(14) (providing an ex-
ception from reporting under section 6049
to a payor that has been furnished a with-
holding statement from an participating
FFI (including a reporting Model 2 FFI)
or registered deemed-compliant FFI (in-
cluding a reporting Model 1 FFI) and that
allocates the payment to a chapter 4 with-
holding rate pool). Thus, for example, a
U.S. payor that is a participating FFI may
not allocate a payment to a chapter 4 with-
holding rate pool of U.S. payees on a with-
holding statement described in § 1.6049-
5(b)(14) when the payment is made to a
U.S. account maintained by the FFI, regard-
less of whether the FFI reports the account
in accordance with § 1.1471-4(d)(3) be-
cause the U.S. payor is not excepted from
reporting under this section pursuant to
paragraph (c)(4)(i) of this section.

(iv) Example. The application of the
provisions of paragraphs (c)(4)(ii) and
(iii) of this section may be illustrated by
the following example:

Example. USP is a payor that makes an interest
payment that is not a withholdable payment (as de-
fined in paragraph (f)(15) of this section) to RM2, a
U.S. payor and reporting Model 2 FFI. The payment
is paid and received outside of the United States and
is not an amount subject to withholding under chap-
ter 3. RM2 receives the payment as an intermediary
with respect to a preexisting account held by A. RM2
has account information with respect to A which
includes U.S. indicia as described in § 1.1441-
7(b)(5) or (8). A does not provide consent for RM2
to report A's account. Under the presumption rules
described in § 1.6049-5(d)(2)(i), RM2 is required to
treat A as a U.S. non-exempt recipient. Despite this
presumption rule, and because backup withholding
does not apply under § 31.3406(g)-1(e), no informa-
tion return shall be required with respect to the
payment under paragraph (c)(4)(ii) of this section if
A is reported by RM2 consistent with § 1.1471-
4(d)(6) as a non-consenting account holder. Addi-
tionally, RM2 may include A in the chapter 4 with-
holding rate pool of U.S. payees on the withholding

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statement provided to USP consistent with the re-
quirements of paragraph (c)(4)(iii) of this section.
* * * * *

(f) * * *

(3) Obligation. The term obligation in-
cludes bonds, debentures, notes, certifi-
cates, and other evidences of indebtedness
regardless of how denominated. For the
definition of the term offshore obligation,
see paragraph (f)(9) of this section.

(4)
* * *

(ii) Example. The application of the
provisions of paragraph (f)(4) of this sec-
tion may be illustrated by the following
example:

Example. In January 1984, Broker B, a U.S.
payor, purchases on behalf of its customer, Individ-
ual A, an obligation issued by partnership in a public
offering on that date. Broker B holds the obligation
for A throughout 1984. Broker B is required to make
an information return showing the amount of origi-
nal issue discount treated as paid to A under
§ 1.6049-5(f).

(5) Chapter 4 withholding rate pool. The
term chapter 4 withholding rate pool has the
meaning set forth in § 1.1471-1(b)(20).
However, for determining the U.S. payees
included in a chapter 4 withholding rate
pool for purposes of section 6049, see para-
graph (c)(4)(iii) of this section.

(6) Foreign financial institution (or
FFI). The term foreign financial institu-
tion or FFI means an entity described in
§ 1.1471-1(b)(47),

(7) Intergovernmental agreement (or
IGA). The term intergovernmental agree-
ment or IGA has the meaning set forth in
§ 1.1471-1(b)(67) (i.e., either a Model 1
IGA described in § 1.1471-1(b)(78) or a
Model 2 IGA described in § 1.1471-
1(b)(79)).

(8) Non-consenting U.S. accounts. The
term non-consenting U.S. accounts has
the meaning set forth in an applicable
Model 2 IGA.

(9) Offshore obligation. The term off-
shore obligation means an offshore obli-
gation defined in § 1.6049-5(c)(1). For
the definition of the term obligation, see
paragraph (f)(3) of this section.

(10) Participating FFI. The term par-
ticipating FFI means an FFI that is de-
scribed in § 1.1471-1(b)(91).

(11) Recalcitrant account holder. The
term recalcitrant account holder has the
same meaning set forth in § 1.1471-
1(b)(110).

(12) Registered deemed-compliant
FFI. The term registered deemed-

compliant FFI means an FFI that is de-
scribed in § 1.1471-1(b)(111).

(13) Reporting Model 1 FFI. The term
reporting Model 1 FFI means an FFI that
is described in § 1.1471-1(b)(114).

(14) Reporting Model 2 FFI. The term
reporting Model 2 FFI means a participat-
ing FFI that is described in § 1.1471-
1(b)(91).

(15) Withholdable payment. The term
withholdable payment means a payment
described in § 1.1471-1(b)(145).

(16) Paid and received outside the
United States-(i) In general. Except as
otherwise provided in paragraphs (f)(16)
(ii) and (iii) of this section, the term paid
and received outside the United States
means an amount that is paid by a payor
or middleman outside the United States as
described in § 1.6049-5(e).

(ii) Transfers to the United States. With-
out regard to the location of the account
from which the amount is drawn, an amount
that is described in paragraph (f)(16)(ii)(A)
or (B) of this section and paid by transfer to
an account maintained by the payee in the
United States or by mail to a United States
address (including an amount paid with re-
spect to a bond or a discount obligation
described in § 1.6049-5(e)(4)) is not con-
sidered to be paid and received outside the
United States.

(A) An amount is described in this
paragraph (f)(16)(ii)(A) if it is paid by an
issuer or the paying agent of the issuer
with respect to an obligation that is-

(1) Issued by a U.S. payor, as defined in
§ 1.6049-5(c)(5);

(2) Registered under the Securities Act
of 1933 (15 U.S.C. 77a); or

(3) Listed on an exchange that is regis-
tered as a national securities exchange in the
United States or included in an interdealer
quotation system in the United States.

(B) An amount is described in this
paragraph (f)(16)(ii)(B) if it is paid by a
U.S. middleman (as defined in § 1.6049-
5(c)(5)) that, as a custodian, nominee, or
other agent of a payee, collects the amount
for or on behalf of the payee.

(iii) Deposits or accounts with banks
and other financial institutions. In the case
of an amount paid by a bank or other
financial institution with respect to a de-
posit or an account that is considered paid
at a branch or office outside the United
States as described in § 1.6049-5(e)(2),

the amount is not considered paid and
received outside the United States if the
institution has knowledge that the cus-
tomer has transmitted instructions to an
agent, branch, or office of the institution
from inside the United States by mail,
telephone, electronic transmission, or oth-
erwise concerning the deposit or account
(unless the transmission from the United
States has taken place in isolated and in-
frequent circumstances).

(iv) Examples. The application of the
provisions of paragraph (f)(16) of this sec-
tion may be illustrated by the following
examples:

Example 1. FC is a foreign corporation that is not
a U.S. payor or U.S. middleman, as defined in
§ 1.6049-5(c)(5). A holds FC coupon bonds that are
not in registered form under section 163(f) and the
regulations . FB, a foreign branch of DC, a domestic
corporation, is the designated paying agent with re-
spect to the bonds issued by FC. A does not have an
account with FB. A presents a coupon to FB at its
office outside the United States with instructions to
transfer funds to a bank account maintained by A in
the United States. FB transfers the funds in accor-
dance with A's instructions. Even though the amount
is credited to an account in the United States, the
interest on the FC bonds is paid and received outside
the United States under paragraph (f)(16)(ii) of this
section and § 1.6049-5(e)(3) because the coupon is
presented for payment outside the United States;
because FC is a foreign person that is not a U.S.
payor or U.S. middleman, as defined in § 1.6049-
5(d)(1); because FB is not acting as A's agent; and
because the obligation is not registered under the
Securities Act of 1933 (15 U.S.C. 77a), listed on a
securities exchange that is registered as a national
securities exchange in the United States, or included
in an interdealer quotation system.

Example 2. FC is a foreign corporation that is not
a U.S. payor or U.S. middleman, as defined in
§ 1.6049-5(d)(1). B, a United States citizen, holds a
bond issued by FC in registered form under section
163(f) and the regulations thereunder and registered
under the Securities Act of 1933 (15 U.S.C. 77a).
The bond is not a foreign-targeted registered obliga-
tion as defined in § 1.871-14(e)(2). DB, a United
States branch of a foreign corporation engaged in the
commercial banking business, is the registrar of the
bonds issued by FC. DB supplies FC with a list of
the holders of the FC bonds. Interest on the FC bonds
is paid to B and other bondholders by checks pre-
pared by FC at its principal office outside the United
States, and B's check is mailed from there to his
designated address in the United States. The bond is
described in paragraph (f)(16)(ii)(A)(2) of this sec-
tion. The interest on the FC bonds paid to B by FC
is not paid and received outside the United States
under paragraph (f)(16) of this section.

Example 3. The facts are the same as in Example
2 except that the checks are prepared and mailed in
the United States by DC, a U.S. corporation engaged
in the commercial banking business that is the des-
ignated paying agent with respect to the bonds issued

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by FC, and B's check is mailed to his designated
address outside the United States. For purposes of
section 6049, the interest on the FC bonds paid by
DC is not paid and received outside the United States
under paragraph (f)(16)(i) of this section.
** * * *

(h) Effective/applicability dates. Ex-
cept as otherwise provided in paragraphs
(b)(5)(ii) and (d)(3)(ii)(B) of this section,
this section applies to payments made on
or after January 6, 2017. (For payments
made after June 30, 2014, and before Jan-
uary 6, 2017, see this section as in effect
and contained in 26 CFR part 1, as revised
April 1, 2016.)

### § 1.6049-4T [Removed]

Par. 34. Section 1.6049-4T is removed.
Par. 35. Section 1.6049-5 is amended
by:

1\. Revising paragraphs (b)(6) through
(8), (b)(10) through (b)(11)(ii)(A),
(b)(12), (b)(14) and (15), and (c)(1)(i)
through (iii).

2\. Adding paragraph (c)(1)(iv).

3\. Revising paragraphs (c)(2) and (3)
and (c)(4) introductory text and (c)(4)(i).

4\. Removing paragraph (c)(4)(ii).

5\. Redesignating paragraphs (c)(4)(iii)
and (iv) as paragraphs (c)(4)(ii) and (iii).

6\. Revising paragraphs (c)(5)(i)(F),
(c)(6), (d)(1) and (2), (d)(3)(i) through
(d)(3)(iii)(A), (d)(4), (e), and (g).

The addition and revisions read as fol-
lows:

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

* * * * *

(b) * * *

(6) Amounts from sources outside the
United States (determined under the pro-
visions of part I, subchapter N, chapter 1
of the Internal Revenue Code (Code) and
the regulations under those provisions)
paid by a non-U.S. payor or a non-U.S.
middleman (as defined in paragraph (c)(5)
of this section) and paid and received out-
side the United States. See § 1.6049-
4(f)(16) for circumstances in which a pay-
ment is considered to be paid and received
outside the United States.

(7) Portfolio interest, as defined in
§ 1.871-14(b)(1), paid with respect to ob-
ligations in bearer form described in sec-

tion 871(h)(2)(A), as in effect prior to the
amendment by section 502 of the Hiring
Incentives to Restore Employment Act of
2010 (HIRE Act), Public Law 111-147,
or section 881(c)(2)(A), as in effect prior
to the amendment by section 502 of the
HIRE Act, that were issued prior to March
19, 2012, or with respect to a foreign-
targeted registered obligation described in
§ 1.871-14(e)(2) that was issued prior to
January 1, 2016, and for which the docu-
mentation requirements described in
§ 1.871-14(e)(3) and (4) have been satis-
fied (other than by a U.S. middleman (as
defined in paragraph (c)(5) of this section)
that, as a custodian or nominee of the
payee, collects the amount for, or on be-
half of, the payee, regardless of whether
the middleman is also acting as agent of
the payor).

(8) Portfolio interest described in
§ 1.871-14(c)(1)(ii), paid with respect to
obligations in registered form described in
section 871(h)(2) or 881(c)(2) that is not
described in paragraph (b)(7) of this section.
* * * * *

(10)(i) Amounts paid and received out-
side the United States under § 1.6049-
4(f)(16) (other than by a U.S. middleman
(as defined in paragraph (c)(5) of this sec-
tion) that are paid by a custodian or nom-
inee or other agent of the payee, of
amounts that that it receives for, or on
behalf of, the payee, regardless of whether
the middleman is also acting as agent of
the payor) with respect to an obligation
that: Has a face amount or principal
amount of not less than $500,000 (as de-
termined based on the spot rate on the date
of issuance if in foreign currency); has a
maturity (at issue) of 183 days or less;
satisfies the requirements of sections
163(f)(2)(B)(i) and (ii)(I), as in effect
prior to the amendment by section 502 of
the HIRE Act, and the regulations there-
under (as if the obligation would other-
wise be a registration-required obligation
within the meaning of section 163(f)
(2)(A)) (however, an original issue dis-
count obligation with a maturity of 183
days or less from the date of issuance is
not required to satisfy the certification re-
quirement of § 1.163-5(c)(2)(i)(D)(3))
and is issued in accordance with the pro-
cedures of § 1.163-5(c)(2)(i)(D); and has
on its face the following statement (or a
similar statement having the same effect):

By accepting this obligation, the holder
represents and warrants that it is not a
United States person (other than an ex-
empt recipient described in section
6049(b)(4) of the Internal Revenue Code
and regulations thereunder) and that it is
not acting for or on behalf of a United
States person (other than an exempt recip-
ient described in section 6049(b)(4) of the
Internal Revenue Code and the regulations
thereunder).

(ii) If the obligation is in registered
form, it must be registered in the name
of an exempt recipient described in
§ 1.6049-4(c)(1)(ii). For purposes of
this paragraph (b)(10), a middleman
may treat an obligation as described in
section 163(f)(2)(B)(i) and (f)(2)(B)
(ii)(I), as in effect prior to the amend-
ment by section 502 of the HIRE Act,
and the regulations under that section if
the obligation, or coupons detached
therefrom, whichever is presented for
payment, contains the statement de-
scribed in this paragraph (b)(10). The
exemption from reporting described in
this paragraph (b)(10) shall not apply if
the payor has actual knowledge that the
payee is a U.S. person who is not an
exempt recipient.

(11) Amounts paid with respect to an
account or deposit with a U.S. or foreign
branch of a domestic or foreign corpora-
tion or partnership that is paid with re-
spect to an obligation described in either
paragraph (b)(11)(i) or (ii) of this section,
if the branch is engaged in the commercial
banking business; and the interest or OID
is paid and received outside the United
States as defined in § 1.6049-4(f)(16)
(other than by a U.S. middleman (as de-
fined in paragraph (c)(5) of this section)
that acts as a custodian, nominee, or other
agent of the payee, and collects the
amount for, or on behalf of, the payee,
regardless of whether the middleman is
also acting as agent of the payor). The
exemption from reporting described in
this paragraph (b)(11) shall not apply if
the payor has actual knowledge that the
payee is a U.S. person who is not an
exempt recipient.

(i) An obligation is described in this
paragraph (b)(11)(i) if it is not in regis-
tered form (within the meaning of section
163(f) and the regulations under that sec-
tion), is described in section 163(f)(2)(B),
as in effect prior to the amendment by
section 502 of the HIRE Act, and issued in

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accordance with the procedures of
§ 1.163-5(c)(2)(i)(C) or (D), and, in the
case of a U.S. branch, is part of a larger
single public offering of securities. For
purposes of this paragraph (b)(11)(i), a
middleman may treat an obligation as de-
scribed in section 163(f)(2)(B), as in ef-
fect prior to the amendment by section
502 of the HIRE Act, if the obligation, and
any detachable coupons, contains the state-
ment described in section 163(f)(2)(B)
(ii)(II), as in effect prior to the amendment
by section 502 of the HIRE Act, and the
regulations under that section.

(ii) (A) An obligation is described in
this paragraph (b)(11)(ii) if it produces
income described in section 871(i)(2)(A);
has a face amount or principal amount of
not less than $500,000 (as determined
based on the spot rate on the date of
issuance if in foreign currency); satisfies
the requirements of sections 163(f)(2)
(B)(i) and (ii)(I), as in effect prior to the
amendment by section 502 of the HIRE
Act, and the regulations thereunder (as if
the obligation would otherwise be a
registration-required obligation within the
meaning of section 163(f)(2)(A)) and is
issued in accordance with the procedures
of § 1.163-5(c)(2)(i)(C) or (D) (however,
an original issue discount obligation with
a maturity of 183 days or less from the
date of issuance is not required to satisfy
the certification requirement of § 1.163-
5(c)(2)(i)(D)(3)). For purposes of this
paragraph (b)(11)(ii), a middleman may
treat an obligation as described in sections
163(f)(2)(B)(i) and (ii), as in effect prior
to the amendment by section 502 of the
HIRE Act, and the regulations under that
section if the obligation, or any detachable
coupon, contains the statement described
in paragraph (b)(11)(ii)(B) of this section.
* * * * *

(12) Payments that a payor can, prior to
payment, reliably associate with docu-
mentation upon which it may rely to treat
the payment as made to a foreign benefi-
cial owner in accordance with § 1.1441-
1(e)(1)(ii) or as made to a foreign payee in
accordance with paragraph (d)(1) of this
section or presumed to be made to a for-
eign payee under paragraph (d)(2) or (3)
of this section. However, such payments
may be reportable under § 1.1461-1(b)
and (c) or under § 1.1474-1(d)(2) (for a
chapter 4 reportable amount (as described

in § 1.1471-1(b)(18)). The provisions of
§ 1.1441-1 shall apply by substituting the
term "payor" for the term "withholding
agent" and without regard to the fact that
the provisions apply only to amounts sub-
ject to withholding under chapter 3 of the
Code. In the event of a conflict between
the provisions of § 1.1441-1 and para-
graph (d) of this section in determining
the foreign status of the payee, the provi-
sions of § 1.1441-1 shall govern for pay-
ments of amounts subject to withholding
under chapter 3 of the Code and the pro-
visions of paragraph (d) of this section
shall govern in other cases. This para-
graph (b)(12) does not apply to interest
paid on or after January 1, 2013, to a
nonresident alien individual to the extent
provided in § 1.6049-8.

* * * * *

(14) Payments that a payor or middle-
man can, prior to payment, reliably asso-
ciate with documentation upon which it
may rely to treat as made to a foreign
intermediary or flow-through entity in ac-
cordance with § 1.1441-1(b) if it obtains
from the foreign intermediary or flow-
through entity a withholding statement
under § 1.1471-3(c)(3)(iii)(B)(2) (de-
scribing an FFI withholding statement),
§ 1.1471-3(c)(3)(iii)(B)(3) (describing
a chapter 4 withholding statement),
§ 1.1441-1(e)(3)(iv) (describing a with-
holding statement provided by a non-
qualified intermediary), § 1.1441-1(e)
(5)(v) (describing a withholding state-
ment provided by a qualified intermedi-
ary), or under § 1.1441-5 (describing a
withholding statement provided by a
foreign partnership, foreign simple trust,
or foreign grantor trust), that allocates
the payment (or portion of a payment) to
a chapter 4 withholding rate pool or
specific payees to which withholding
applies under chapter 4. The provisions
of each of the foregoing sections shall
apply by substituting the term "payor"
for the term "withholding agent." A
payor or middleman may rely on a with-
holding statement provided by a foreign
intermediary or flow-through entity that
identifies a chapter 4 withholding rate
pool of U.S. payees (as described in
§ 1.6049-4(c)(4)) or, with respect to a
withholdable payment, a chapter 4 with-
holding rate pool of recalcitrant account
holders (as described in § 1.1471-

4(d)(6)) provided that the payor or mid-
dleman identifies the foreign intermedi-
ary or flow-through entity that maintains
the accounts (as described in § 1.1471-
5(b)(5)) included in the chapter 4 with-
holding rate pool as a participating FFI
(including a reporting Model 2 FFI) or
registered deemed-compliant FFI (in-
cluding a reporting Model 1 FFI) by
applying the rules in § 1.1471-3(d)(4)
or in § 1.1471-3(e)(4)(vi)(B), as appli-
cable, for identifying the payee of a
payment (by substituting the term
"payor" for the term "withholding
agent"). See, however, § 1.1441-1(e)
(5)(v)(C)(2)(i) for when a qualified in-
termediary may provide a single pool of
recalcitrant account holders (without the
need to subdivide into the pools de-
scribed in § 1.1471-4(d)(6)). Addition-
ally, when a foreign intermediary or
flow-through entity provides to a payor
or middleman a withholding statement
that allocates the payment (or portion of
a payment) to a chapter 4 withholding
rate pool of U.S. payees, the payor or
middleman may also rely on the with-
holding statement if the payor or mid-
dleman identifies the intermediary or
flow-through entity as a qualified inter-
mediary (as defined in § 1.1441-
1(c)(15) by applying the rules described
in § 1.1441-1(b)(2)(vii)) that provides
the certification described in § 1.1441-
1(e)(3)(ii)(D) with respect to U.S. pay-
ees that hold accounts with a foreign
intermediary or flow-through entity
other than the qualified intermediary
providing the certification.

(15) If a foreign intermediary, as de-
scribed in § 1.1441-1(c)(13), or a U.S.
branch that is not treated as a U.S. person
receives a payment from a payor, which
payment the payor can reliably associate
with a valid withholding certificate de-
scribed in § 1.1441-1(e)(3)(ii) or (iii), or
§ 1.1441-1(e)(3)(v), respectively, fur-
nished by such intermediary or branch,
then the intermediary or branch is not
required to report such payment when it,
in turn, pays the amount, unless, and to the
extent, the intermediary or branch knows
that the payment is required to be reported
under this section and was not so reported.
For example, if a U.S. branch described in
§ 1.1441-1(b)(2)(iv) fails to provide in-
formation regarding U.S. persons that

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are not exempt from reporting under
§ 1.6049-4(c)(1)(ii) to the person from
whom the U.S. branch receives the pay-
ment, the amount paid by the U.S. branch
to such person is interest or original issue
discount. See, however, § 1.6049-4(c)(4)
for when reporting under section 6049 is
coordinated with reporting under chapter
4 or an applicable IGA (as defined in
§ 1.6049-4(f)(7)). The exception for pay-
ments described in this paragraph (b)(15)
shall not apply to a qualified intermediary
that assumes reporting responsibility un-
der chapter 61 of the Code for the pay-
ment under the agreement described in
§ 1.1441-1(e)(5)(iii).

* * * * *

(c) Applicable rules-(1) Documen-
tary evidence for offshore obligations and
certain other obligations-(i) A payor
may rely on documentary evidence de-
scribed in § 1.1471-3(c)(5)(i) instead of a
beneficial owner withholding certificate
described in § 1.1441-1(e)(2)(i) in the
case of an amount paid outside the United
States (as described in paragraph (e) of
this section) with respect to an offshore
obligation, or, in the case of broker pro-
ceeds described in § 1.6045-1(c)(2), to
the extent provided in § 1.6045-1(g)(1)(i).
For purposes of this section, the term off-
shore obligation means-

(A) An account maintained at an office
or branch of a bank or other financial
institution located outside the United
States; or

(B) An obligation as defined in
§ 1.6049-4(f)(3) (other than an account
described in paragraph (c)(1)(i)(A) of this
section), contract, or other instrument
with respect to which the payor is either
engaged in business as a broker or dealer
in securities or a financial institution (as
defined in § 1.1471-5(e)) that engages in
significant activities at an office or branch
located outside the United States. For pur-
poses of the preceding sentence, an office
or branch of such payor shall be consid-
ered to engage in significant activities
with respect to an obligation when it par-
ticipates materially and actively in nego-
tiating the obligation under the principles
described in § 1.864-4(c)(5)(iii) (substi-
tuting the term "obligation" for the term
"stock or security").

(ii) A payor may rely on documentary
evidence if the payor has established pro-

cedures to obtain, review, and maintain
documentary evidence sufficient to estab-
lish 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 orig-
inal, certified copy, or photocopy (includ-
ing a microfiche, electronic scan, or sim-
ilar means of electronic storage) of the
documents reviewed for as long as it
may be relevant to the determination of
the payor's obligation to report under
§ 1.6049-4 and this section and noting in
its records the date on which the docu-
ment was received and reviewed. Docu-
mentary 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 § 1.1474-1(d)(2)
must contain all of the information that is
necessary to complete a Form 1042-S for
that payment. See §§ 1.1471-3(c) and
1.1471-4(c) for additional documentation
requirements to identify a payee or account
holder for chapter 4 purposes that may ap-
ply in addition to the requirements under
paragraph (c) of this section.

(iii) Even if an account or obligation
(as defined in § 1.6049-4(f)(3)) is not
maintained outside the United States
(maintained in the United States), a payor
may rely on documentary evidence asso-
ciated with a withholding certificate de-
scribed in § 1.1441-1(e)(3)(iii) with re-
spect to the persons for whom an entity
acting as an intermediary collects the
payment. A payor may also rely on doc-
umentary evidence associated with a flow-
through withholding certificate for pay-
ments treated as made to foreign partners of
a nonwithholding foreign partnership, as de-
fined in § 1.1441-1(c)(28), the foreign ben-
eficiaries of a foreign simple trust, as de-
fined in § 1.1441-1(c)(24), or foreign
owners of a foreign grantor trust, as defined
in § 1.1441-1(c)(26), even though the part-
nership or trust account is an obligation
maintained in the United States.

(iv) For accounts opened on or after
July 1, 2014, and before January 1, 2015,
and for obligations entered into on or after
July 1, 2014, and before January 1, 2015,
a payor may continue to apply the rules of
§§ 1.6049-5(c)(1) and (c)(4) as in effect

and contained in 26 CFR part 1 revised
April 1, 2013, rather than this paragraph
(c)(1) and paragraph (c)(4) of this section.
A payor that applies the rules of
§§ 1.6049-5(c)(1) and (c)(4) as in effect
and contained in 26 CFR part 1 revised
April 1, 2013, to an account or obligation
must also apply § 1.1441-6(c)(2) (to the
extent applicable) and § 1.6049-5(e) both
as in effect and contained in 26 CFR part
1 revised April, 2013, with respect to the
account or obligation.

(2) Other applicable rules. The provi-
sions of § 1.1441-1(e)(4)(i) through (xii)
(regarding who may sign a certificate, va-
lidity period of certificates and documen-
tary evidence, retention of certificates, re-
liance rules, etc.) shall apply (by
substituting the term "payor" for the term
"withholding agent" and disregarding the
fact that the provisions under § 1.1441-
1(e)(4) only apply to amounts subject to
withholding under chapter 3 of the Code)
to withholding certificates and documen-
tary evidence furnished for purposes of
this section. See § 1.1441-1(b)(2)(vii) for
provisions dealing with reliable associa-
tion 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 unre-
liable only if the payor would have reason
to know under the provisions of § 1.1441-
7(b)(2) and (3) that the information and
certifications provided on the certificate or
in the documentary evidence are unreli-
able or, in the case of a Form W-9 (or an
acceptable substitute), it cannot reason-
ably rely on the documentation as set forth
in § 31.3406(h)-3(e) of this chapter (see
the information and certification described
in § 31.3406(h)-3(e)(2)(i) through (iv) of
this chapter that are required in order for a
payor reasonably to rely on a Form W-9).
The provisions of § 1.1441-7(b)(2) and
(3) shall apply for purposes of this para-
graph (c)(3) irrespective of the type of
income to which § 1.1441-7(b)(2) is oth-
erwise limited. The exemptions from re-
porting described in paragraphs (b)(10)
and (11) of this section shall not apply if

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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 withhold-
ing 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 de-
posit 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 withhold-
ing under § 1.1441-2(a) (e.g., deposit in-
terest with foreign branches of U.S. banks,
foreign source income, or broker pro-
ceeds). A payor may rely upon documen-
tation in lieu of documentary evidence (as
described in paragraph (c)(1) of this sec-
tion) or a written statement (as defined in
§ 1.1471-1(b)(150)) or another statement
to the extent permitted in paragraphs
(c)(4)(i) through (iii) of this section, until
the payor knows or has reason to know of
a change in circumstance that makes the
documentation unreliable or incorrect (as
defined in § 1.1441-1(e)) when the payor
does not have customer information for
the payee that includes any of the U.S.
indicia described in § 1.1471-3(c)(6)
(ii)(C)(1). Further, a payor may maintain
such documentation or documentary evi-
dence as required in paragraph (c)(4)(iv)
of this section.

(i) Statement in lieu of documentary
evidence with respect to accounts. If un-
der the local laws, regulations, or prac-
tices of a country in which an account is
maintained, it is not customary to obtain
documentary evidence described in para-
graph (c)(1) of this section with respect
to the type of account, the payor may,
instead of obtaining a beneficial owner
withholding certificate described in
§ 1.1441-1(e)(2)(i) or documentary ev-
idence 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 sub-
stitute statement as the Internal Revenue
Service may prescribe) made on an ac-
count opening form. However, see, also
§ 1.1471-4(c) or an applicable IGA for

additional documentation requirements
that may apply to a participating FFI
(including a reporting Model 2 FFI) for
determining the status of its account
holders for chapter 4 purposes. The
statement referred to in this paragraph
(c)(4)(i) must appear near the signature
line and must state, "By opening this
account and signing below, the account
owner represents and warrants that he/
she/it is not a U.S. person for purposes
of U.S. Federal income tax and that he/
she/it is not acting for, or on behalf of, a
U.S. person. A false statement or mis-
representation 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 withhold-
ing certificate described in § 1.1441-
1(e)(2)(i) or § 1.1471-3(c)(3)(ii) or
documentary evidence described in
paragraph (c)(1) of this section, estab-
lish a payee's foreign status based on a
written statement described in paragraph
§ 1.1471-1(b)(150) to the extent a payor
uses such written statement to establish
a payee's chapter 4 status and is permit-
ted to use the written statement under
§ 1.1471-3(d) (by substituting the term
"payor" for the term "withholding
agent") without any other documentary
evidence.

(ii) Documentation under IGA. A
payor that is a reporting Model 1 FFI or
reporting Model 2 FFI may rely upon doc-
umentation 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 de-
scribed in paragraph (c)(1) of this section
or § 1.1441-1(e)(2).

(iii) Maintenance of documentation
and written statement. A payor maintains
documentation if it either maintains the
documentary evidence as described in
paragraph (c)(1) of this section or retains a
record of the documentary evidence re-
viewed if the payor is not required to
retain copies of the documentation pursu-
ant to the payor's AML due diligence (as
defined in § 1.1471-1(b)(4)). A payor re-
tains a record of documentary evidence

reviewed by noting in its records the type
of documentation reviewed, the date the
document was reviewed, the document's
identification number (if any), and
whether such documentation contained
any U.S. indicia described in § 1.1441-
7(b)(8). Any statement described in para-
graph (c)(4)(i) of this section, must be
retained in accordance with § 1.1471-
3(c)(6)(iii).

(5) * * *

(i) * * *

(F) A U.S. branch or territory financial
institution described in § 1.1441-
1(b)(2)(iv) that is treated as a U.S. person.
* * * * *

(6) Examples. The following examples
illustrate the provisions of paragraphs (b)
and (c) of this section:

Example 1. FC is a foreign corporation that is not
engaged in a trade or business in the United States
during the current calendar year. D, an individual
who is a resident and citizen of the United States,
holds a registered obligation issued by FC in a public
offering. Interest is paid on the obligation within the
United States by DC, a U.S. corporation that is the
designated paying agent of FC. D does not have an
account with DC. Although interest paid on the
obligation issued by FC is foreign source, the interest
paid by DC to D is considered to be interest under
paragraph (b)(6) of this section for purposes of in-
formation reporting under section 6049 because it is
not paid and received outside the United States
within the meaning of § 1.6049-4(f)(16).

Example 2. The facts are the same as in Example
1 except that D is a nonresident alien individual who
has furnished DC with a Form W-8 in accordance
with the provisions of § 1.1441-1(e)(1)(ii). By rea-
son of paragraph (b)(12) of this section, the payment
of interest by DC to D is not considered to be a
payment of interest for purposes of information report-
ing under section 6049. Therefore, DC is not required
to make an information return under section 6049.

Example 3. The facts are the same as in Example
2 except that the obligation of FC is held in a
custodial account for D by FB, a foreign branch of a
U.S. financial institution. By reason of paragraph
(c)(5) of this section, FB is considered to be a U.S.
middleman. Therefore, FB is required to make an
information return unless FB may treat D as a ben-
eficial owner that is a foreign person in accordance
with the provisions of § 1.1441-1(e)(1)(ii).

Example 4. The facts are the same as in Example
3 except that the FC obligation is held for D by NC,
in a custodial account at NC's foreign branch. NC is
a foreign corporation that is a non-U.S. middleman
described in paragraph (c)(5) of this section. The
payment by NC to D is paid and received outside of
the United States under § 1.6049-4(f)(16) and there-
fore is not considered to be a payment of interest for
purposes of section 6049 pursuant to paragraph
(b)(6) of this section. Therefore, NC is not required
to make an information return under section 6049
with respect to the payment.

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(d) Determination of status as U.S. or
foreign payee and applicable presump-
tions in the absence of documentation-
(1) Identifying the payee. The provisions
of §§ 1.1441-1(b)(2), 1.1441-5(c)(1) and
(e)(2) and (3) shall apply (by substituting
the term "payor" for the term "withhold-
ing agent") to identify the payee (other
than a payee included in a chapter 4 with-
holding rate pool described in paragraph
(b)(14) of this section) for purposes of this
section (and other sections of the regula-
tions under this chapter to which this para-
graph (d)(1) applies), except to the extent
provided in this paragraph (d)(1) in the
case of a payment of an amount that is not
subject to withholding under chapter 3 of
the Code and that is not a withholdable
payment (as defined in § 1.6049-
4(f)(15)). Amounts are not subject to
withholding under chapter 3 of the Code if
they are not included in the definition of
amounts subject to withholding under
§ 1.1441-2(a) (e.g., deposit interest with
foreign branches of U.S. banks, foreign
source income, or broker proceeds). The
exceptions to the application of § 1.1441-
1(b)(2) to amounts that are not subject to
withholding under chapter 3 of the Code
and that are not withholdable payments
are as follows:

(i) The provisions of § 1.1441-
1(b)(2)(ii), dealing with payments to a U.S.
agent or intermediary of a foreign person,
shall not apply. Thus, a payment to a U.S.
agent or intermediary of a foreign person is
treated as a payment to a U.S. payee.

(ii) Payments to U.S. branches or ter-
ritory financial institution described in
§ 1.1441-1(b)(2)(iv) shall be treated as
payments to a foreign payee, irrespective of
the fact that the U.S. branch or territory
financial institution is otherwise treated as a
U.S. person for payments of amounts sub-
ject to withholding under chapter 3 and
withholdable payments, and irrespective of
the fact that the branch or territory financial
institution is treated as a U.S. payor for
purposes of paragraph (c)(5) of this section.

(2) Presumptions of U.S. or foreign
status in the absence of documentation-
(i) In general. Except as otherwise pro-
vided in this paragraph (d)(2)(i), for pur-
poses of this section (and other sections of
regulations under this chapter 61 to which
this paragraph (d)(2) applies), the provi-
sions of § 1.1441-1(b)(3)(i) through (ix)

and § 1.1441-5(d) and (e)(6) shall apply
(by substituting the term "payor" for the
term "withholding agent") to determine
the classification (e.g., individual, corpo-
ration, partnership, trust), status (i.e., a
U.S. or a foreign person), and other rele-
vant characteristics (e.g., beneficial owner
or intermediary) of a payee if a payment
cannot be reliably associated with valid
documentation under § 1.1441-1(b)(2)
(vii) irrespective of whether the payments
are subject to withholding under chapter 3
of the Code or are withholdable payments.
The provisions of § 1.1441-1(b)(3)
(iii)(D) and (vii)(B) (referencing pre-
sumption rules for payments with respect
to offshore obligations) shall not apply to
a payment of an amount not subject to
withholding under chapter 3, unless it is
an amount that is a withholdable payment
made to a payee that is an entity. Thus, in
the case of a withholdable payment made
to an entity, the presumption rules of
§ 1.1441-1(b)(3)(iii)(D) and (vii)(B) shall
apply regardless of whether the payment
is an amount subject to withholding under
chapter 3. Additionally, in the case of an
amount paid outside the United States
with respect to an offshore obligation de-
scribed in § 1.1441-1(b)(3)(iii)(D) or
(vii)(B) of an amount not subject to with-
holding under chapter 3 and that is treated
as made to a payee that is an individual,
the presumption rules of § 1.1441-
1(b)(3)(iii) shall not apply, and the payee
shall be presumed a U.S. person only
when the payee has any of the indicia of
U.S. status that are described in § 1.1441-
7(b)(5) or (8). In a case in which a with-
holding agent makes a withholdable pay-
ment that cannot reliably be associated
with documentation, see § 1.1471-3(f)(4)
and (5) for determining the status of the
payee for chapter 4 purposes when the
payment is treated as made to a foreign
entity (by substituting the term "payor" for
the term "withholding agent"). The rules of
§ 1.1441-1(b)(2)(vii) shall apply for pur-
poses of determining when a payment can
reliably be associated with documentation,
by substituting the term "payor" for the term
"withholding agent." For this purpose, the
information, documentary evidence, state-
ment, or other documentation described in
paragraph (c)(4) of this section can be
treated as documentation with which a pay-
ment can be associated.

(ii) Grace period in the case of indicia
of a foreign payee. When the conditions of
this paragraph (d)(2)(ii) are satisfied, the
30-day grace period provisions under sec-
tion 3406(e) shall not apply and the pro-
visions of this paragraph (d)(2)(ii) shall
apply instead. A payor that, at any time
during the grace period described in this
paragraph (d)(2)(ii), credits an account
with payments described in § 1.1441-
6(c)(2) (or credits an account with broker
proceeds from securities described in
§ 1.1441-6(c)(2)), that are reportable un-
der section 6042, 6045, 6049, or 6050N
may, instead of treating the account as
owned by a U.S. person and applying
backup withholding under section 3406, if
applicable, choose to treat the account as
owned by a foreign person (and apply the
grace period described in § 1.1441-
1(b)(3)(iv)) if, at the beginning of the
grace period, the address that the payor
has in its records for the account holder is
in a foreign country, the payor has been
furnished the information contained in
a withholding certificate described in
§ 1.1441-1(e)(2), or the payor holds a
withholding certificate that is no longer
reliable other than because the validity
period as described in § 1.1441-1(e)
(4)(ii)(A) has expired. In the case of a
newly opened account, the grace period
begins on the date that the payor first
credits the account. In the case of an ex-
isting account for which the payor holds a
Form W-8 or documentary evidence of
foreign status, the payor may apply the
provisions of the grace period described in
§ 1.1441-1(b)(3)(iv), beginning on the
date that the payor first credits the account
after the existing documentation held with
regard to the account can no longer be
relied upon (other than because the valid-
ity period described in § 1.1441-1(e)(4)
(ii)(A) has expired). A new account shall
be treated as an existing account for pur-
poses of this paragraph (d)(2)(ii) if the
account holder already holds an account at
the branch location at which the new ac-
count is opened, or if the account is
treated as a consolidated obligation as de-
fined in § 1.1471-(1)(b)(23) for purpose
of chapter 4 to the extent the account does
not receive any amounts subject to with-
holding under chapter 3. A new account
shall also be treated as an existing account
for purposes of this paragraph (d)(2)(ii) if

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an account is held at another branch
location if the institution maintains an ac-
count information system described in
§ 1.1441-1(e)(4)(ix). The grace period
terminates on the earlier of the close of the
90th day from the date on which the grace
period begins or the date that valid docu-
mentation is provided. The grace period
also terminates when the remaining bal-
ance in the account (due to withdrawals or
otherwise) is equal to or less than 28 per-
cent (or other statutory tax rate that is
applicable to backup withholding) of the
total amounts credited since the beginning
of the grace period that would be subject
to backup withholding if the provisions of
this paragraph (d)(2)(ii) did not apply.
At the end of the grace period, the payor
shall treat the amounts credited to the ac-
count, or paid with respect to an account,
during the grace period as paid to a U.S.
or foreign payee depending upon whether
documentation has been furnished and the
nature of any such documentation fur-
nished upon which the payor may rely to
treat the account as owned by a U.S. or
foreign payee. If the documentation has
not been received on or before the date of
expiration of the grace period, the payor
may also apply the presumptions de-
scribed in this paragraph (d) to amounts
credited to the account after the date on
which the grace period expires (until such
time as the payor can reliably associate
the documentation with amounts cred-
ited). See § 31.6413(a)-3(a)(1)(iv) of this
chapter for treating backup withheld
amounts under section 3406 as errone-
ously withheld when the documentation
establishing foreign status is furnished
prior to the end of the calendar year in
which backup withholding occurs. If the
provisions of this paragraph (d)(2)(ii) ap-
ply, the provisions of § 31.3406(d)-3 of
this chapter shall not apply. For purposes
of this paragraph (d)(2)(ii), an account
holder's reinvestment of gross proceeds of
a sale into other instruments constitutes a
withdrawal and a non-qualified electronic
transmission of information on a with-
holding certificate is a transmission that is
not in accordance with the provisions of
§ 1.1441-1(e)(4)(iv). See § 1.1092(d)-1
for a definition of the term actively traded
for purposes of this paragraph (d)(2)(ii).

(iii) Joint owners. Amounts paid to ac-
counts held jointly for which a certificate

or documentation is required as a condi-
tion for being exempt from reporting un-
der paragraph (b) of this section are pre-
sumed made to U.S. payees who are not
exempt recipients if, prior to payment, the
payor cannot reliably associate the pay-
ment either with a Form W-9 furnished
by one of the joint owners in the manner
required in §§ 31.3406(d)-1 through
31.3406(d)-5 of this chapter, or with doc-
umentation described in paragraph (b)(12)
of this section furnished by each joint
owner upon which it can rely to treat each
joint owner as a foreign payee or foreign
beneficial owner. In the case of an amount
that is a withholdable payment made to a
joint account, however, see § 1.1471-
3(f)(7) for when the payment is treated as
made to a foreign payee that is a nonpar-
ticipating FFI (as defined in § 1.1471-
1(b)(82)). For purposes of applying this
paragraph (d)(2)(iii), the grace period de-
scribed in paragraph (d)(2)(ii) of this sec-
tion shall apply only if each payee quali-
fies for such grace period.

(3) Payments to foreign intermediaries
or flow-through entities-(i) Payments of
amounts subject to withholding under
chapter 3 of the Code or withholdable
payments. In the case of payments of
amounts that the payor may treat as made
to a foreign intermediary or flow-through
entity in accordance with §§ 1.1441-
1(b)(3)(ii)(C) and (b)(3)(v)(A) and
1.1441-5(c) or (e) and that are subject to
withholding under § 1.1441-2(a), the pro-
visions of §§ 1.1441-1(b)(2)(v) and
1.1441-5(c)(1), (e)(2), and (3) shall apply
(by substituting the term "payor" for the
term "withholding agent") to identify the
payee. If a payment of an amount subject
to withholding cannot be reliably associ-
ated with valid documentation from a
payee in accordance with § 1.1441-
1(b)(2)(vii), the presumption rules of
§§ 1.1441-1(b)(3)(v) and 1.1441-5(d)
and (e)(6) shall apply to determine the
payee's status for purposes of this section
(and other sections of regulations under
this chapter to which this paragraph (d)(3)
applies). In the case of an amount that is a
withholdable payment, see § 1.1471-
3(c)(3) for rules to identify the payee and
see § 1.1471-3(f)(5) for the presumption
rule that shall apply to amounts treated as
made to a foreign intermediary or flow-
through entity (by substituting the term

"payor" for the term "withholding
agent"). For example, where a withhold-
able payment is made to an intermediary
under § 1.1471-3 that is treated as a non-
participating FFI under § 1.1471-3(f)(5),
the nonparticipating FFI shall be treated
as the payee under § 1.1471-3(c)(3) and
for purposes of this paragraph (d)(3)(i),
therefore, no information return shall be
required under this section.

(ii) Payments of amounts not subject to
withholding under chapter 3 of the Code
and that are not withholdable payments.
Except as provided in paragraph (d)(3)(iii)
of this section, amounts that are not sub-
ject to withholding under chapter 3 of the
Code and that are not withholdable pay-
ments that the payor may treat as paid to a
foreign intermediary or flow-through en-
tity shall be treated as made to an exempt
recipient described in § 1.6049-4(c) ex-
cept to the extent that the payor has actual
knowledge that any person for whom the
intermediary or flow-through entity is col-
lecting the payment is a U.S. person who
is not an exempt recipient. In the case of
such actual knowledge, the payor shall
treat the payment that it knows is alloca-
ble to such U.S. person as a payment to a
U.S. payee who is not an exempt recipient
and has actual knowledge of the amount
allocable to such a person.

(iii) Special rule for payments of cer-
tain short-term original issue discount-
(A) General rule. A payment of U.S.
source bank deposit interest not subject to
chapter 4 withholding or U.S. source in-
terest or original issue discount on the
redemption of an obligation with a matu-
rity from the date of issue of 183 days or
less (short-term OID) described in section
871(g)(1)(B) or 881(e) that the payor may
treat as paid to a foreign intermediary or
flow-through entity in accordance with the
provisions of § 1.1441-1(b)(3)(ii)(C),
(b)(3)(v)(A), § 1.1441-5(d) or (e) (by sub-
stituting the term "payor" for the term
"withholding agent"), shall be treated as
paid to an undocumented U.S. payee that
is not an exempt recipient under para-
graph § 1.6049-4(c) unless the payor has
documentation from the payees of the
payment and the payment is allocated to
foreign payees, as a group, and to each
U.S. non-exempt recipient payee. See
§ 1.1441-1(e)(3)(iv)(C)(2). However, a
payor may rely on a withholding state-

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ment provided by an intermediary de-
scribed in § 1.1441-1(e)(3)(iv) (or similar
withholding statement for a flow-through
entity) that identifies a chapter 4 withhold-
ing rate pool of U.S. payees (as described
in § 1.6049-4(c)(4)(iii)) only if it identi-
fies the foreign intermediary or flow-
through entity as a participating FFI (in-
cluding a reporting Model 2 FFI) or
registered deemed-compliant FFI (includ-
ing a reporting Model 1 FFI) under
§ 1.1471-3(d)(4) (by substituting the term
"payor" for the term "withholding
agent"). See also § 1.6049-4(c)(4)(iii) for
when an FFI may provide a chapter 4
withholding rate pool of U.S. payees on a
withholding statement.
* * * * *

(4) Examples. The rules of paragraphs
(d)(1) through (3) of this section are illus-
trated by the examples in this paragraph
(d)(4). Unless otherwise specified in an
example, the following facts apply: all
FFIs, such as a nonqualified intermediary
that is an FFI, are treated as participating
FFIs; all payees have been identified with
chapter 4 statuses that do not require with-
holding under chapter 4; and none of the
payments are withholdable payments.

Example 1. (i) Facts. USP is a U.S. payor as
defined in paragraph (c)(5) of this section. USP pays
interest from sources within the United States that is
a withholdable payment to an account maintained in
the United States by X. The interest is not deposit
interest described in sections 871(i)(2)(A) or 881(d).
USP does not have a Form W-9, or withholding
certificate from X as defined in § 1.1441-1(c)(16).
Moreover, USP cannot treat X as an exempt recipi-
ent, as defined in § 1.6049-4(c)(1)(ii), without doc-
umentation and there is no indication that X is an
individual, trust, or estate.

(ii) Analysis. The U.S. source interest is an
amount subject to withholding as defined in
§ 1.1441-2(a). Under paragraph (d)(1) of this sec-
tion, USP must apply the provisions of §§ 1.1441-
1(b)(2) and 1.1441-5(c) and (e) to determine the
payee of the interest. Under § 1.1441-1(b)(2)(i), X,
the person to whom the payment is made, is consid-
ered to be the payee, unless X is determined to be a
flow-through entity, in which case the rules of
§ 1.1441-5 apply to determine the payee. Under
paragraph (d)(2)(i) of this section, the rules of
§ 1.1441-1(b)(3)(ii) apply to determine the classifi-
cation of a payee as an individual, trust, estate,
corporation, or partnership. Under § 1.1441-
1(b)(3)(ii)(B), X is presumed to be a partnership,
since X does not appear to be an individual, trust or
estate, and X cannot be presumed to be an exempt
recipient in the absence of documentation. Paragraph
(d)(2)(i) of this section requires USP to apply the
provisions of §§ 1.1441-1(b)(3)(iii) and 1.1441-5(d)
to determine whether X is presumed to be a U.S. or
foreign partnership. Under §§ 1.1441-1(b)(3)(iii) and

1.1441-5(d)(2), X is presumed to be a U.S. partnership
in absence of any indicia of foreign partnership status.
The presumption of U.S. status applies even though the
payment is a withholdable payment (see paragraph
(d)(2) of this section and § 1.1471-3(f)(2) cross refer-
encing the presumption rules of § 1.1441-1(b)(3). The
U.S. source interest paid to X is reportable under sec-
tion 6049 on Form 1099 and the interest is subject to
backup withholding under section 3406 because X has
not provided its TIN on a valid Form W-9. No with-
holding or reporting applies to the payment under chap-
ter 3 or 4 of the Code.

Example 2. (i) Facts. The facts are the same as in
Example 1, except that the interest paid by USP is
from sources outside the United States.

(ii) Analysis. Interest from sources outside the
United States is not an amount subject to withhold-
ing, as defined in § 1.1441-2(a) or a withholdable
payment. Under paragraph (d)(1) of this section,
USP must apply the provisions of §§ 1.1441-1(b)(2)
and 1.1441-5(c) and (e) to determine the payee.
Under § 1.1441-1(b)(2)(i), X, the person to whom
the payment is made, is considered to be the payee,
unless X is determined to be a flow-through entity, in
which case the rules of § 1.1441-5(c) or (e) apply to
determine the payee. Under paragraph (d)(2)(i) of
this section, the rules of § 1.1441-1(b)(3)(ii) apply to
determine the classification of a payee as an individ-
ual, trust, estate, corporation, or partnership. These
rules apply irrespective of whether the payment is an
amount subject to withholding. Under § 1.1441-
1(b)(3)(ii)(B), X is presumed to be a partnership,
since X does not appear to be an individual, trust or
estate, and X cannot be presumed to be an exempt
recipient in the absence of documentation. Paragraph
(d)(2)(i) of this section requires USP to apply the
provisions of §§ 1.1441-1(b)(3)(iii) and 1.1441-5(d)
to determine whether, X is presumed to be a U.S. or
foreign partnership. Under §§ 1.1441-1(b)(3)(iii)
and 1.1441-5(d)(2), X is presumed to be a U.S.
partnership in absence of any indicia of foreign part-
nership status. The foreign source interest is a pay-
ment subject to reporting on Form 1099 under
§ 1.6049-5(a). Further, because X is a non-exempt
recipient that has failed to provide its TIN on a valid
Form W-9, the foreign source interest is subject to
backup withholding under section 3406.

Example 3. (i) Facts. USP is a U.S. payor as
defined in paragraph (c)(5) of this section. USP
makes a payment of U.S. source interest outside the
United States to an offshore account of X. See para-
graphs (c)(1) for a definition of offshore account and
(e) for a payment outside the United States. USP
does not have a withholding certificate from X as
defined in § 1.1441-1(c)(16) nor does it have docu-
mentary evidence as described in § 1.1441-
1(e)(1)(ii)(A)(2) and §1.6049-5(c)(1).

(ii) Analysis. The interest is an amount subject to
withholding as defined in § 1.1441-2(a). Under para-
graph (d)(1) of this section, USP must apply the
provisions of § 1.1441-1(b)(2) and § 1.1441-5(c)
and (e) to determine the payee. Under § 1.1441-
1(b)(2)(i), X, the person to whom the payment is
made, is considered to be the payee, unless X is
determined to be a flow-through entity, in which
case the rules of § 1.1441-5(c) or (e) apply to de-
termine the payee. Under paragraph (d)(2)(i) of this
section, the rules of § 1.1441-1(b)(3)(ii) apply to

determine the classification of a payee as an individ-
ual, trust, estate, corporation, or partnership. Under
§ 1.1441-1(b)(3)(ii)(B), X is presumed to be a part-
nership, since X does not appear to be an individual,
trust or estate, and X cannot be presumed to be an
exempt recipient in the absence of documentation.
Paragraph (d)(2)(i) of this section requires USP to
apply the provisions of §§ 1.1441-1(b)(3)(iii) and
1.1441-5(d) to determine whether, X is presumed to
be a U.S. or foreign partnership. Under §§ 1.1441-
1(b)(3)(iii)(D) and 1.1441-5(d)(2), X is presumed to
be a foreign partnership. Therefore, under paragraph
(d)(1) of this section and § 1.1441-5(c)(1)(i)(E), the
payees of the interest are presumed to be the partners
of X. Under § 1.1441-5(d)(3), the partners are pre-
sumed to be undocumented foreign persons. There-
fore, USP must withhold 30% of the interest pay-
ment under § 1.1441-1(b)(1) and report the payment
on Form 1042-S in accordance with § 1.1461-1(c).

Example 4. (i) Facts. The facts are the same as in
Example 3, except that the interest is paid by F, a
non-U.S. payor.

(ii) Analysis. The analysis and result are the same
as in Example 3. F is a withholding agent under
§ 1.1441-7 and its status as a non-U.S. payor under
paragraph (c)(5) of this section is irrelevant.

Example 5. (i) Facts. USP is a U.S. payor as
defined in paragraph (c)(5) of this section that is not
an FFI. USP makes a payment outside the United
States of interest from sources outside the United
States with respect to an offshore obligation held by
X. USP does not have a withholding certificate from
X as defined in § 1.1441-1(c)(16) nor does it have
documentary evidence as described in §§ 1.1471-
3(c)(5)(i) and 1.6049-5(c)(1). USP does not have
actual knowledge of an employer identification num-
ber for X. X does not appear to be an individual,
trust, or estate and cannot be treated as an exempt
recipient, as defined in § 1.6049-4(c)(1)(ii) in the
absence of documentation.

(ii) Analysis. The interest is not an amount sub-
ject to withholding as defined in § 1.1441-2(a) and is
not a withholdable payment. Under paragraph (d)(1)
of this section, USP must apply the rules of
§§ 1.1441-1(b)(2) and 1.1441-5(c) and (e) to deter-
mine the payee of the interest. Under § 1.1441-
1(b)(2)(i), X, the person to whom the payment is
made, is considered to be the payee, unless X is
determined to be a flow-through entity, in which case
the rules of § 1.1441-5(c) or (e) apply to determine
the payee. Under paragraph (d)(2)(i) of this section,
§ 1.1441-1(b)(3)(ii) applies to determine X's classi-
fication as an individual, trust, estate, corporation or
partnership. Under § 1.1441-1(b)(3)(ii)(B), X is
treated as a partnership, since it does not appear to be
an individual, trust, or estate and cannot be treated as
an exempt recipient without documentation. Para-
graph (d)(2)(i) of this section requires USP to apply
the provisions of §§ 1.1441-1(b)(3)(iii) and 1.1441-
5(d) to determine whether, X is presumed to be a
U.S. or foreign partnership. Paragraph (d)(2)(i) of
this section also states that the presumptions of for-
eign status for payments made with respect to
offshore obligations contained in §§ 1.1441-
1(b)(3)(iii)(D) and 1.1441-5(d)(2) do not apply to
amounts that are not subject to withholding and that
are not withholdable payments described in para-
graph (d)(2)(i). Therefore, under §§ 1.1441-

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1(b)(3)(iii) and 1.1441-5(d)(2), X is presumed to be a
U.S. partnership because it does not have actual knowl-
edge that X's employer identification number begins
with the digits "98." Therefore, USP must treat X as a
U.S. person that is not an exempt recipient and report
the payment on Form 1099 under section 6049. Under
§ 31.3406(g)-1(e) of this chapter, however, USP is not
required to backup withhold on the payment unless it
has actual knowledge that X is a U.S. person that is not
an exempt recipient.

Example 6. (i) Facts. The facts are the same as in
Example 5, except that the interest is paid by F, a
non-U.S. payor, as defined under paragraph (c)(5) of
this section.

(ii) Analysis. The analysis is the same as under
Example 5. However, F is a non-U.S. payor paying
foreign source interest outside the United States, and
there is no indication that the amount is received in
the United States under § 1.6049-4(f)(16). Thus,
paragraph (b)(6) of this section exempts the payment
from reporting under section 6049.

Example 7. (i) Facts. USP, a U.S. payor as de-
fined in paragraph (c)(5) of this section that is not an
FFI, makes a payment of U.S. source interest that is
a withholdable payment to NQI, a nonqualified in-
termediary as defined in § 1.1441-1(c)(14), that is a
certified deemed-compliant FFI under § 1.1471-
5(f)(2). The interest is paid inside the United States
to an account of a bank or other financial institution
maintained in the United States. NQI has provided
USP with a nonqualified intermediary withholding
certificate, as described in § 1.1441-1(e)(3)(iii) that
includes its chapter 4 status, but has not attached any
documentation from the persons on whose behalf it
acts or a withholding statement as described in
§ 1.1441-1(e)(3)(iv).

(ii) Analysis. U.S. source interest is an amount
subject to withholding under § 1.1441-2(a). USP
may treat the payment as made to a foreign interme-
diary under § 1.1441-1(b)(3)(v)(A) because USP has
received a nonqualified intermediary withholding
certificate from NQI and may except NQI from with-
holding under chapter 4 of the Code given NQI's
status for chapter 4 purposes as a deemed-compliant
FFI. Under paragraph (d)(3)(i) of this section, USP
must then apply § 1.1471-3(c)(3) to treat the persons
on whose behalf NQI is acting as the payees. Para-
graph (d)(3)(i) of this section also requires USP to
apply the presumption rules of § 1.1441-1(b)(3)(v) if
it cannot reliably associate the payment with valid
documentation from a payee. See § 1.1441-
1(b)(2)(vii). As the payment is a withholdable pay-
ment, the interest is treated as paid to a nonpartici-
pating FFI under § 1.1471-3(f)(4). Therefore, the
payment is not subject to reporting on Form 1099
under paragraph (b)(12) of this section . See
§ 1.1471-2(a) for the withholding requirement with
respect to the payment and § 1.1474-1(d)(2) for the
requirement to report the payment on Form 1042-S.

Example 8. (i) Facts. The facts are the same as in
Example 7, except that the interest is paid outside the
United States, as defined in paragraph (e) of this section
to an offshore account, as defined in paragraph (c)(1) of
this section and is not a withholdable payment.

(ii) Analysis. Under § 1.1441-1(b)(3)(v)(B), the
interest is treated as paid to an unknown foreign payee
because it cannot be reliably associated with documen-
tation under § 1.1441-1(b)(2)(vii). Therefore, the pay-

ment is not subject to reporting on Form 1099 under
paragraph (b)(12) of this section because the payment
is presumed made to a foreign person. The payment is
subject to withholding, however, under § 1.1441-1(b)
at a rate of 30% and is subject to reporting on Form
1042-S under § 1.1461-1(c).

Example 9. (i) Facts. The facts are the same as in
Example 8, except that the interest is paid by F, a
non-U.S. payor, as defined in paragraph (c)(5) of this
section.

(ii) Analysis. The analysis and results are the
same as in Example 8.

Example 10. (i) Facts. USP, a U.S. payor as defined
in paragraph (c)(5) of this section, makes a payment of
foreign source interest (other than deposit interest) to
NQI, a foreign corporation and a nonqualified interme-
diary as defined in § 1.1441-1(c)(14). NQI has pro-
vided USP with a nonqualified intermediary withhold-
ing certificate, as described in § 1.1441-1(e)(3)(iii), but
has not attached any documentation from the persons
on whose behalf it acts or a withholding statement as
described in § 1.1441-1(e)(3)(iv).

(ii) Analysis. Foreign source interest is not an
amount subject to withholding under chapter 3 of the
Code and is not a withholdable payment. See
§§ 1.1441-2(a) and 1.1473-1(a). Under paragraph
(d)(3)(ii) of this section, amounts that are not subject
to withholding under chapter 3 of the Code and that
are not withholdable payments described in para-
graph (d)(2)(i) of this section that a payor may treat
as paid to a foreign intermediary are treated as made
to an exempt recipient described in § 1.6049-4(c)
absent actual knowledge that the payee is a U.S.
person who is not an exempt recipient. Therefore,
the foreign source interest is not subject to reporting
on Form 1099.

Example 11. (i) Facts. USP is a U.S. payor as
defined in paragraph (c)(5) of this section that is a
bank. USP pays U.S. source original issue discount
from the redemption of an obligation described in
section 871(g)(1)(B) to NQI, a foreign corporation
that is a nonqualified intermediary as defined in
§ 1.1441-1(c)(14). The redemption proceeds are not
paid outside of the United States as they are paid
with respect to an account NQI has with a branch of
a bank in the United States. See § 1.6049-5(e)(2).
NQI provides a nonqualified intermediary withhold-
ing certificate as described in § 1.1441-1(e)(3)(iii)
that includes a certification of its status as a regis-
tered deemed-compliant FFI but does not attach any
payee documentation or a withholding statement de-
scribed in § 1.1441-1(e)(3)(iv).

(ii) Analysis. Under paragraph (d)(3)(ii)(A) of
this section, USP must treat the payment as made to
an undocumented U.S. payee that is not an exempt
recipient and report the payment on Form 1099.
Further, because the payment is made inside the
United States, the exception to backup withholding
with respect to offshore obligations contained in
§ 31.3406(g)-1(e) of this chapter does not apply, and
the payment is subject to backup withholding.

Example 12. (i) Facts. P, a payor, makes a pay-
ment to NQI of U.S. source interest on debt obliga-
tions issued prior to July 18, 1984, that mature 30
years from their issuance dates. Therefore, the inter-
est does not qualify as portfolio interest under sec-
tion 871(h) or 881(d). Additionally, the interest is
not a withholdable payment under § 1.1471-2(b) as

the interest is a payment with respect to a grandfa-
thered obligation for purposes of chapter 4 of the
Code. NQI, a U.S. payor, is a nonqualified foreign
intermediary, as defined in § 1.1441-1(c)(14), and
has furnished P a valid nonqualified intermediary
withholding certificate described in § 1.1441-
1(e)(3)(iii) to which it has attached a valid Form
W-9 for A, and two valid beneficial owner Forms
W-8, one for B and one for C. A is not an exempt
recipient under § 1.6049-4(c). NQI furnishes a
withholding statement, described in § 1.1441-
1(e)(3)(iv), in which it allocates 20% of the U.S.
source interest to A, but does not allocate the re-
maining 80% of the interest between B and C. B's
withholding certificate indicates that B is a foreign
pension fund, exempt from U.S. tax under the U.S.
income tax treaty with Country T. C's withholding
certificate indicates that C is a foreign corporation
not entitled to a reduced rate of withholding.

(ii) Analysis. As the interest is not a withholdable
payment under paragraph (d)(3)(i) of this section, P
applies the rules of § 1.1441-1(b)(2)(v) to determine
the payees of the interest even though NQI has not
certified its status for purposes of chapter 4 of the
Code. Under that section, the payees are the persons
on whose behalf NQI acts-A, B and C. Because P
can reliably associate 20% of the payment with valid
documentation provided by A, P must treat 20% of
the interest as paid to A, a U.S. person not exempt
from reporting, and report the payment on Form
1099. P cannot reliably associate the remaining 80%
of the payment with valid documentation under
§ 1.1441-1(b)(2)(vii) and, therefore, under para-
graph (d)(3)(i) of this section must apply the pre-
sumption rules of § 1.1441-1(b)(3)(v). Under that
section, the interest is presumed paid to an unknown
foreign payee. Under paragraph (b)(12) of this sec-
tion, P is not required to report the interest presumed
paid to a foreign person on Form 1099. Under
§ 1.1441-1(b), 80% of the interest is subject to 30%
withholding, however, and the interest is reportable
on Form 1042-S under § 1.1461-1(c).

Example 13. (i) Facts. The facts are the same as
in Example 12, except that P can reliably associate
30% of the payment of interest to B, but cannot reliably
associate the remaining 70 percent with A or C.

(ii) Analysis. Under paragraph (d)(3)(i) of this
section, P applies the rules of § 1.1441-1(b)(2)(v) to
determine the payees of the interest. Under that
section, the payees are the persons on whose behalf
NQI acts-A, B and C. Because P can reliably
associate 30% of the payment with B, a foreign
pensions fund exempt from withholding under an
income tax treaty, P may treat that payment as paid
to B and not subject to reporting on Form 1099 under
paragraph (b)(12) of this section. P cannot reliably
associate the remaining 70% of the payment with
valid documentation under § 1.1441-1(b)(2)(vii)
and, therefore, under paragraph (d)(3)(i) of this sec-
tion must apply the presumption rules of § 1.1441-
1(b)(3)(v). Under that section, the interest is pre-
sumed paid to an unknown foreign payee. Under
paragraph (b)(12) of this section, P is not required to
report the interest presumed paid to a foreign person
on Form 1099. Under § 1.1441-1(b), 80% of the
interest is subject to 30% withholding, however, and
the interest is reportable on Form 1042-S under
§ 1.1461-1(c).

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Example 14. (i) Facts. The facts are the same as
in Example 12, except that P also makes a payment
of foreign source interest to NQI.

(ii) Analysis. Under paragraph (d)(3)(ii), P may
treat the foreign source interest as paid to an exempt
recipient as defined in § 1.6049-4(c) and not subject to
reporting on Form 1099 even though some or all of the
foreign source interest may in fact be owned by A, the
U.S. person that is not exempt from reporting.

Example 15. (i) Facts. The facts are the same as
in Example 12, except that NQI is a non-U.S. payor.

(ii) Analysis. The analysis is the same as under
Example 12 with respect to B and C. However,
because NQI is a non-U.S. payor, it may under
§ 1.6049-4(c)(4)(iii) allocate the portion of the pay-
ment to A to a chapter 4 withholding rate pool of
U.S. payees on a withholding statement provided to
P in lieu of furnishing the Form W-9 to P when NQI
reports the payments in accordance with § 1.6049-
4(c)(4)(i). In such a case, provided that P obtains a
certification form confirming NQI's status as a par-
ticipating FFI, P is excepted from reporting the pay-
ment under paragraph (b)(14) of this section because
P can reliably associate the payment with the docu-
mentation provided by NQI.

(e) Determination of whether amounts
are considered paid outside the United
States-(1) In general. For purposes of
section 6049 and this section, an amount is
considered to be paid by a payor or middle-
man outside the United States if the payor or
middleman completes the acts necessary to
effect payment outside the United States.
See paragraphs (e)(2) through (5) of this
section for further clarification of where
amounts are considered paid. A payment
shall not be considered to be made within
the United States for purposes of section
6049 merely by reason of the fact that it is
made on a draft drawn on a United States
bank account or by a wire or other electronic
transfer from a United States account.

(2) Amounts paid with respect to de-
posits or accounts with banks and other
financial institutions. Notwithstanding
paragraph (e)(1) of this section, an amount
paid by a bank or other financial institu-
tion with respect to a deposit or with re-
spect to an account with the institution is
considered paid at the branch or office at
which the amount is credited unless the
amount is collected by the financial insti-
tution as the agent of the payee. However,
an amount will not be considered to be
paid at the branch or office where the
amount is considered to be credited unless
the branch or office is a permanent place
of business that is regularly maintained,
occupied, and used to carry on a banking
or similar financial business; the business
is conducted by at least one employee of

the branch or office who is regularly in
attendance at such place of business dur-
ing normal business hours; and the branch
or office receives deposits and engages in
one or more of the other activities de-
scribed in § 1.864-4(c)(5)(i).

(3) Coupon bonds and discount obliga-
tions in bearer form. Notwithstanding
paragraph (e)(1) of this section, an amount
paid with respect to a bond with coupons
attached (including a certificate of deposit
with detachable interest coupons) or a dis-
count obligation that is not in registered
form (within the meaning of section
163(f) and the regulations thereunder) is
considered to be paid where the coupon or
the discount obligation is presented to the
payor or its paying agent for payment.

(4) Foreign-targeted registered obliga-
tions. Notwithstanding paragraph (e)(1) of
this section, where the payor is the issuer
or the issuer's agent, an amount is consid-
ered paid outside the United States with
respect to a foreign-targeted registered ob-
ligation issued before January 1, 2016, as
described in § 1.871-14(e)(2), if either the
amount is paid by transfer to an account
maintained by the registered owner out-
side the United States, or by mail to an
address of the registered owner outside
the United States, or by credit to an inter-
national account. For purposes of this
paragraph (e)(4), the term international
account means the book-entry account of
a financial institution (within the meaning
of section 871(h)(4)(B)) or of an interna-
tional financial organization with the Fed-
eral Reserve Bank of New York for which
the Federal Reserve Bank of New York
maintains records that specifically identify
an international financial organization or a
financial institution (within the meaning
of section 871(h)(4)(B)) as either a non-
United States person or a foreign branch
of a United States person as registered
owner. An international financial organi-
zation is a central bank or monetary au-
thority of a foreign government or a pub-
lic international organization of which the
United States is a member to the extent
that such central bank, authority, or orga-
nization holds obligations solely for its
own account and is exempt from tax under
section 892 or 895.

(5) Examples. The application of the
provisions of this paragraph (e) is illus-
trated by the following examples:

Example 1. FC is a foreign corporation that is not a
U.S. payor or U.S. middleman, as defined in paragraph
(c)(5) of this section. A holds FC coupon bonds that are
not in registered form under section 163(f) and the
regulations thereunder. FB, a foreign branch of DC, is
the designated paying agent with respect to the bonds
issued by FC. A does not have an account with FB. A
presents a coupon from a FC bond for payment to FB
at its office outside the United States. FB pays A with
a check drawn against a bank account maintained in the
United States. For purposes of section 6049, the place
of payment of interest on the FC bond by FB to A is
considered to be outside the United States under para-
graph (e)(3) of this section.

Example 2. Individual C deposits funds in an
account with FB, a foreign country X branch of DB,
a U.S. corporation engaged in the commercial bank-
ing business. FB maintains an office and employees
in foreign country X, accepts deposits, and conducts
one or more of the other activities listed in § 1.864-
4(c)(5)(i). The terms of C's deposit provide that it
will be payable with accrued interest. Under para-
graph (e)(2) of this section, FB is considered to pay
the interest on C's deposit outside the United States.

Example 3. DC, a U.S. corporation engaged in
the commercial banking business, maintains FB, a
branch in foreign country X. FB has an office and
employees in foreign country X, accepts deposits,
and engages in one or more of the other activities
listed in § 1.864-4(c)(5)(i). D, a United States citi-
zen, purchases a certificate of deposit issued in 1980
by FB. The certificate of deposit has a maturity of 20
years and has detachable interest coupons payable at
six-month intervals. D presents some of the coupons
at the U.S. office of DC and receives payment in
cash. Because the coupon is presented to DC for
payment within the United States, DC is considered
to have made the payment within the United States
under paragraph (e)(3) of this section.

Example 4. FB is recognized by both foreign coun-
try X and by the Federal Reserve Bank as a foreign
country X branch of DC, a U.S. corporation engaged in
the commercial banking business. A local foreign
country X bank serves as FB's resident agent in Coun-
try X. FB maintains no physical office or employees in
foreign country X. All the records, accounts, and trans-
actions of FB are handled at the United States office of
DC. E deposits funds in an amount maintained with
FB. Interest earned on the deposit is periodically cred-
ited to E's account with FB by employees of DC. For
purposes of section 6049, the place of payment of the
interest on E's deposit with FB is considered to be
within the United States by reason of paragraphs (e)(1)
and (e)(2) of this section.

Example 5. DC is a U.S. corporation. A holds
bonds that were issued by DC in registered form
under section 163(f), as in effect prior to the amend-
ment by section 502 of the HIRE Act of 2010, and
the regulations thereunder and that are foreign-
targeted registered obligations as defined in § 1.871-
14(e)(2). DB, a commercial banking business, is the
registrar of bonds issued by DC. Interest on the DC
bonds is paid to A and other bondholders by check
prepared by DB at its principal office inside the
United States and mailed from there to A's address
outside the United States. The check is drawn on a
United States account maintained by DC with DB
within the United States. The place of payment to A

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by DB of the interest on the DC bonds is considered
to be outside the United States under paragraph
(e)(4) of this section.

* * * * *

(g) Effective/applicability date. This sec-
tion applies to payments made on or after
January 6, 2017. (For payments made after
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 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.)

### § 1.6049-5T [Removed]

Par. 36. Section 1.6049-5T is removed.
Par. 37. Section 1.6050N-1 is amended

by revising (c)(1)(ii) to read as follows:

§ 1.6050N-1 Statements to recipients of
royalties paid after December 31, 1986.

* * * * *

(c) * * *

(1) * * *

(ii) Returns of information are not re-
quired for payments of royalties from
sources outside the United States paid by
a non-U.S. payor or non-U.S. middleman
and that are paid and received outside
the United States. For a definition of
non-U.S. payor or non-U.S. middleman,
see § 1.6049-5(c)(5). For circumstances
in which a payment is considered to be
paid and received outside the United
States, see § 1.6049-4(f)(16).

* * * * *

## PART 31-EMPLOYMENT TAXES AND COLLECTION OF INCOME TAX AT SOURCE

Par. 38. The authority citation for part
31 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *

Par. 39. Section 31.3406(g)-1 is
amended by revising paragraph (e) and
adding paragraph (f) to read as follows:

§ 31.3406(g)-1 Exception for payments
to certain payees and certain other
payments.

* * * * *

(e) Certain reportable payments made
outside the United States by foreign per-
sons, foreign offices of United States

banks and brokers, and others. For report-
able payments made after June 30, 2014, a
payor is not required to backup withhold
under section 3406 on a reportable pay-
ment that is paid and received outside the
United States (as defined in § 1.6049-
4(f)(16)) with respect to an offshore obli-
gation (as defined in § 1.6049-5(c)(1)) or
on gross proceeds from a sale effected
outside the United States (as defined in
§ 1.6045-1(g)(3)(iii)), unless the payor
has actual knowledge that the payee is a
United States person. Further, no backup
withholding is required on a reportable
payment of an amount already withheld
upon by a participating FFI (as defined in
§ 1.1471-1(b)(91)) or another payor in
accordance with the withholding provi-
sions under chapter 3 or 4 of the Code and
the regulations under those chapters even
if the payee is a known U.S. person. For
example, a participating FFI is not re-
quired to backup withhold on a reportable
payment allocable to its chapter 4 with-
holding rate pool (as defined in § 1.6049-
4(f)(5)) of recalcitrant account holders (as
described in § 1.6049-4(f)(11)), if with-
holding was applied to the payment (ei-
ther by the participating FFI or another
payor) pursuant to § 1.1471-4(b) or
§ 1.1471-2(a). For rules applicable to no-
tional principal contracts, see § 1.6041-
1(d)(5) of this chapter. For rules applica-
ble to reportable payments made before
July 1, 2014, see this paragraph (e) as in
effect and contained in 26 CFR part 1
revised April 1, 2013.)

(f) Effective/applicability date. This
section applies on or after January 6,
2017. (For payments made after June 30,
2014, and before January 6, 2017, see this
section as in effect and contained in 26
CFR part 1, revised April 1, 2016).

### § 31.3406(g)-1T [Removed]

Par. 40. Section 31.3406(g)-1T is re-
moved.

Par. 41. Section 31.3406(h)-2 is
amended by revising paragraph (a)(3)(i) and
adding paragraph (i) to read as follows:

§ 31.3406(h)-2 Special rules.

(a) * * *

(3) * * *

(i) In general. If the relevant payee
listed on a jointly owned account or in-
strument provides a Form W-8 or docu-
mentary evidence described in § 1.1441-
1(e)(1)(ii) regarding its foreign status,
withholding under section 3406 applies
unless every joint payee provides the
statement regarding foreign status (under
the provisions of chapters 3 or 61 of the
Internal Revenue Code and the regula-
tions under those provisions); any one of
the joint owners who has not established
foreign status provides a taxpayer identi-
fication number to the payor in the man-
ner required in §§ 31.3406(d)-1 through
31.3406(d)-5; or, in the case of a with-
holdable payment (as defined in
§ 1.6049-4(f)(15)), any joint payee
does not appear to be an individual as
described in § 1.1471-3(f)(7). See
§ 1.6049-5(d)(2)(iii) of this chapter for
corresponding joint payees provisions.

* * * * *

(i) Effective/applicability date. This
section applies to payments made on or
after January 6, 2017. (For payments
made after June 30, 2014, and before Jan-
uary 6, 2017, see this section as in effect
and contained in 26 CFR part 1, revised
April 1, 2016.)

### § 31.3406(h)-2T [Removed]

Par. 42. Section 31.3406(h)-2T is re-
moved.

PART 301-PROCEDURE AND
ADMINISTRATION

Par. 43. The authority citation for part
301 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *

Par. 44. Section 301.6402-3 is
amended by revising paragraphs (e) and
(f) to read as follows:

§ 301.6402-3 Special rules applicable to
income tax.

* * * * *

(e) In the case of a nonresident alien
individual or foreign corporation, the ap-
propriate income tax return on which the
claim for refund or credit is made must
contain the tax identification number of
the taxpayer required pursuant to section
6109 and the entire amount of income of
the taxpayer subject to tax, even if the tax

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liability for that income was fully satisfied
at source through withholding under chap-
ters 3 or 4 of the Internal Revenue Code
(Code). Also, if the overpayment of tax
resulted from the withholding of tax at
source under chapter 3 or 4 of the Code, a
copy of the Form 1042-S, "Foreign Per-
son's U.S. Source Income subject to
Withholding," Form 8805, "Foreign Part-
ner's Information Statement of Section
1446 Withholding Tax," or other state-
ment (required under § 1.1446-3(d)(2) of
this chapter) required to be provided to the
beneficial owner or partner pursuant to
§ 1.1461-1(c)(1)(i), § 1.1474-1(d)(1)(i),
or § 1.1446-3(d) of this chapter must be
attached to the return. For purposes of
claiming a refund, the Form 8805 or other
statement must include the taxpayer iden-
tification number of the beneficial owner
or partner even if not otherwise required.
No claim for refund or credit under chap-
ter 65 of the Code may be made by the
taxpayer for any amount that the payor
has repaid to the taxpayer pursuant to
reimbursement or set-off procedures
(described in § 1.1461-2(a)(2),(3) or
§ 1.1474-2(a)(3), (4) of this chapter). In
addition, no claim for refund or credit may
be made by a taxpayer for any amount that
has been repaid to a qualified intermediary
(as described in § 1.1441-1(e)(5)(ii)) or
a participating FFI (as described in
§ 1.1471-1(b)(91)) pursuant to a collec-
tive refund filed by such entity on behalf
of the taxpayer. See § 1.1441-1(e)(5)(iii)
(describing a qualified intermediary
agreement) and § 1.1471-4(h) (describing
a collective refund). Upon request, a tax-
payer must also submit such documenta-
tion as the IRS, may require establishing
that the taxpayer is the beneficial owner of
the income for which a claim for refund or
credit is being made and verifying the
grounds and facts set forth in taxpayer's
claim as required by § 301.6402-2(b)(1).
See § 1.1474-5 for additional require-
ments that may apply in the case of a
refund of tax withheld under chapter 4.

(f) Effective/applicability date-(1) Ex-
cept as provided in paragraph (f)(2) of this
section, this section applies on or after Jan-
uary 6, 2017. (For payments made after
June 30, 2014, and before January 6, 2017,
see this section as in effect and contained in
26 CFR part 1, revised April 1, 2016.)

(2) References in paragraph (e) of this
section to Form 8805 or other statements
required under § 1.1446-3(d)(2) shall apply
to partnership taxable years beginning after
April 29, 2008. References in paragraph (e)
of this section to amounts withheld under
chapter 4 of the Code and claims made with
respect to amounts withheld under chapter 4
of the Code shall apply to withholdable pay-
ments made after June 30, 2014.

§ 301.6402-3T [Removed]

Par. 46. Section 301.6402-3T is re-
moved.

John Dalrymple,
Deputy Commissioner for Services and
Enforcement.

Approved: December 22, 2016.

Mark J. Mazur,
Assistant Secretary of the Treasury (Tax
Policy).

(Filed by the Office of the Federal Register on December 30,
2016, 4:15 p.m., and published in the issue of the Federal
Register for January 6, 2017, 82 F.R. 2046)

26 CFR 1.1471-1; 26 CFR 1.1471-2; 26 CFR
1.1471-3; 26 CFR 1.1471-4; 26 CFR 1.1471-5; 26
CFR 1.1471-6; 26 CFR 1.1472-1; 26 CFR
1.1473-1; etc

## T.D. 9809

DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Parts 1 and 301

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

AGENCY: Internal Revenue Service (IRS),
Treasury.

ACTION: Removal of temporary regu-
lations; final regulations; temporary
regulations.

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

DATES: Effective date. These regulations
are effective on January 6, 2017.

Applicability date. For dates of applica-
bility, see §§ 1.1471-1(c), 1.1471-2(c),
1.1471-3(g), 1.1471-4(j), 1.1471-5(1),
1.1471-6(i), 1.1472-1(h), 1.1473-1(f),
1.1474-1(j), and 1.1474-6(g).

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

SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act

The collection of information in these
final and temporary regulations is con-
tained in a number of provisions includ-
ing §§ 1.1471-3, 1.1471-4, 1.1472-1,
1.1474-1, and 1.1474-6. In addition,
these final and temporary regulations
amend a number of collections of infor-
mation set out in final regulations under
chapter 4 issued in TD 9610 and tempo-
rary regulations under chapter 4 issued
in TD 9657. The IRS intends that the
information collection requirements of
these final and temporary regulations
will be satisfied by filing Forms 8957,
8966, the W-8 series of forms, W-9,
1042, 1042-S, and the 1099 series of
forms, as well as certain income tax
returns (for example, Forms 1040 and

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1120F). As a result, for purposes of the
Paperwork Reduction Act (44 U.S.C.
3507), the reporting burden associated
with the collection of information in
these final and temporary regulations
will be reflected in the information col-
lection burden and OMB control number
of the appropriate IRS form. An agency
may not conduct or sponsor, and a per-
son is not required to respond to, a col-
lection of information unless the collec-
tion of information displays a valid
control number.

Books and records relating to a collec-
tion of information must be retained as
long as their contents may become mate-
rial in the administration of any internal
revenue law. Generally, tax returns and
tax return information are confidential, as
required by 26 U.S.C. 6103.

### Background

This document contains amendments
to the regulations under chapter 4 of the
Code (sections 1471 through 1474) com-
monly known as the Foreign Account Tax
Compliance Act, or FATCA. Chapter 4
generally requires U.S. withholding
agents to withhold tax on certain pay-
ments to FFIs that do not agree to report
certain information to the IRS regarding
their U.S. accounts, and on certain pay-
ments to certain nonfinancial foreign en-
tities (NFFEs) that do not provide infor-
mation on their substantial United States
owners (substantial U.S. owners) to with-
holding agents.

On January 28, 2013, final regulations
(TD 9610) under chapter 4 were published
in the Federal Register (78 FR 5874),
and on September 10, 2013, corrections to
the final regulations (September 2013 cor-
rections) were published in the Federal
Register (78 FR 55202). TD 9610 and the
September 2013 corrections are referred
to collectively in this preamble as the
2013 final regulations. On March 6, 2014,
the Department of the Treasury (Treasury
Department) and the IRS published tem-
porary regulations (TD 9657) under chap-
ter 4 in the Federal Register (79 FR
12812), and corrections to the temporary
regulations were published in the Federal
Register on July 1, 2014 (July 2014 cor-
rections), and November 18, 2014 (No-
vember 2014 corrections) (79 FR 37175
and 78 FR 68619, respectively). TD 9657,

the July 2014 corrections, and the Novem-
ber 2014 corrections are referred to col-
lectively in this preamble as the 2014 tem-
porary regulations. A notice of proposed
rulemaking cross-referencing the 2014
temporary regulations was published in
the Federal Register on March 6, 2014
(79 FR 12868).

On March 6, 2014, the Treasury De-
partment and the IRS published temporary
regulations (TD 9658) under chapters 3
and 61 and sections 3406 and 6402 (79 FR
12726) (temporary coordination regula-
tions). A notice of proposed rulemaking
cross-referencing the temporary coordina-
tion regulations was published in the Fed-
eral Register on March 6, 2014 (79 FR
12880). The temporary coordination reg-
ulations modify certain provisions of the
regulations under chapters 3 and 61 and
sections 3406 and 6402 to coordinate with
the 2013 final regulations and the 2014
temporary regulations.

Comments were received in response
to the 2014 temporary regulations, but no
public hearing was requested and none
was held. After consideration of the
comments received, this Treasury deci-
sion generally adopts as final regula-
tions the 2014 temporary regulations,
with the modifications described in the
Summary of Comments and Explanation
of Revisions and Provisions of this pre-
amble, and removes the corresponding
temporary regulations. This Treasury
decision also includes corrections and
makes certain modifications to the
2013 final regulations. Additionally, this
Treasury decision includes temporary
regulations, cross-referenced in a notice
of proposed rulemaking published in the
Proposed Rules section of this issue of
the Bulletin, revising certain sections of
the 2013 final regulations. Following the
publication of the 2014 temporary reg-
ulations, the Treasury Department and
the IRS received comments suggesting
changes to the 2013 final regulations.
These comments are not individually
discussed in the Summary of Comments
and Explanation of Revisions and Pro-
visions except where a suggestion is ad-
opted in the temporary regulations.

Part I of the Summary of Comments
and Explanation of Revisions and Provi-
sions of this preamble summarizes com-
ments received regarding the 2014 tempo-

rary regulations and explains the changes
made to the 2013 final regulations and
2014 temporary regulations in response to
those comments. Several of these revi-
sions were described in Notice 2014-33,
2014-21 I.R.B. 1033; Notice 2015-66,
2015-41 I.R.B. 541; and Notice 2016-
08, 2016-6 I.R.B. 304. Part I of the Sum-
mary of Comments and Explanation of
Revisions and Provisions of this preamble
also describes additional technical correc-
tions and revisions to the 2013 final reg-
ulations and 2014 temporary regulations.
Part II of the Summary of Comments and
Explanation of Revisions and Provisions
of this preamble summarizes the tempo-
rary regulations included in this docu-
ment.

## Summary of Comments and Explanation of Revisions and Provisions

I. Final Regulations

A. Comments and changes to § 1.1471-
1-Scope of chapter 4 and definitions

### 1. Branch

The 2014 temporary regulations define
the term branch in § 1.1471-1T(b)(10) for
purposes of chapter 4 by cross-referencing
the definition of branch for participating
FFIs in § 1.1471-4T(e)(2)(ii). However,
§ 1.1471-4T(e)(2)(ii) states that the defi-
nition of branch in that paragraph applies
only to participating FFIs for purposes of
§ 1.1471-4, which is inconsistent with the
cross-reference in § 1.1471-1T(b)(10) to
§ 1.1471-4T(e)(2)(ii) for the general def-
inition of branch for chapter 4, and does
not cover foreign branches of U.S. finan-
cial institutions. Therefore, these final reg-
ulations provide a definition of branch that
applies for purposes of chapter 4 with
respect to a branch of a financial institu-
tion.

### 2. Nonreporting IGA FFI

Under the 2014 temporary regulations,
the term nonreporting IGA FFI means an
FFI that is identified as a nonreporting
financial institution pursuant to a Model 1
IGA or Model 2 IGA that is not a registered
deemed-compliant FFI, and an FFI that is a
resident of, or located or established in, a

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Model 1 or Model 2 IGA jurisdiction, as the
context requires, and that meets the require-
ments for certified deemed-compliant FFI
status under § 1.1471-5T(f)(2). This defini-
tion of a nonreporting IGA FFI, however,
excludes a nonreporting financial institution
that is treated as a registered deemed-
compliant FFI under Annex II of the Model
2 IGA and a nonreporting financial institu-
tion that satisfies the requirements of a
deemed-compliant FFI under the chapter 4
regulations rather than the IGA. The In-
structions for Form W-8BEN-E, "Certifi-
cate of Status of Beneficial Owner for
United States Tax Withholding and Report-
ing (Entities)," state that an FFI that is
treated as a nonreporting IGA FFI under an
applicable IGA, including an entity treated
as a registered deemed-compliant FFI under
an applicable IGA, should certify its status
as a nonreporting IGA FFI. The Instructions
for Form W-8BEN-E also provide that a
nonreporting IGA FFI claiming a deemed-
compliant status under the chapter 4 regula-
tions should certify its status as a nonreport-
ing IGA FFI.

To provide an inclusive definition of
nonreporting IGA FFI consistent with the
IGAs and to coordinate with the Instruc-
tions for Form W-8BEN-E, these final
regulations revise the definition of nonre-
porting IGA FFI in the 2014 temporary
regulations to mean an FFI that is a resi-
dent of, or located or established in, a
Model 1 or Model 2 IGA jurisdiction, as
the context requires, and that is a nonre-
porting financial institution described in
Annex II of the Model 1 or Model 2 IGA,
a registered deemed-compliant FFI de-
scribed in § 1.1471-5(f)(1)(i)(A) through
(F), a certified deemed-compliant FFI de-
scribed in § 1.1471-5(f)(2)(i) through (v),
or an exempt beneficial owner described
in § 1.1471-6.

To coordinate with the revised defini-
tion of nonreporting IGA FFI, these final
regulations modify the definition of certi-
fied deemed-compliant FFI to exclude
nonreporting IGA FFIs because some
nonreporting IGA FFIs are required to
obtain global intermediary identification
numbers (GIINs). These final regulations
instead include all nonreporting IGA FFIs
in the definition of deemed-compliant FFI
in § 1.1471-5(f).

These final regulations also modify
the documentation rules in § 1.1471-3(d)

(7)(i) to incorporate the registration re-
quirements for certain nonreporting IGA
FFIs. Under these final regulations, a with-
holding agent must obtain a GIIN from a
nonreporting IGA FFI that is treated as a
registered deemed-compliant FFI under An-
nex II of the Model 2 IGA or that is a
registered deemed-compliant FFI described
in § 1.1471-5(f)(1)(i)(A) through (F).

#### 3. Preexisting Obligation (and Related Documentation Requirements)

Under the 2014 temporary regulations,
the term preexisting obligation is defined
as: (i) an obligation outstanding on the
later of the date the FFI is issued a GIIN
or June 30, 2014, for a withholding agent
that is a participating FFI; (ii) an obliga-
tion issued prior to the later of the date of
the FFI's registration or the date the FFI is
required to implement its account opening
procedures, for a withholding agent that is
a registered-deemed compliant FFI; and
(iii) an obligation outstanding on June 30,
2014, for any other withholding agent not
described in (i) and (ii).

Comments to the 2014 temporary reg-
ulations and revised Forms W-8BEN and
W-8BEN-E (published shortly after the
2014 temporary regulations were pub-
lished) noted difficulties for withholding
agents and FFIs to document new account
holders and payees by the time specified
in the 2014 temporary regulations. In re-
sponse to comments, Notice 2014-33 was
issued and announced further transitional
relief for withholding agents to treat cer-
tain new entity accounts as preexisting
accounts for purposes of documenting
such account holders. These final regula-
tions implement the transitional relief by
modifying the definition of a preexisting
obligation to provide that a withholding
agent or an FFI may treat an obligation
held by an entity with the withholding
agent or FFI that is issued, opened, or
executed on or after July 1, 2014, and
before January 1, 2015, as a preexisting
obligation. However, the timeframe for
documenting preexisting entity obliga-
tions in § 1.1471-4(c)(3) is unchanged;
that is, the timeframes provided in
§ 1.1471-4(c)(3) apply to all preexisting
entity obligations, including those obliga-
tions described in the preceding sentence.
Furthermore, as provided in Notice 2014-

33, these final regulations specify that if a
participating FFI treats an entity account
opened on or after July 1, 2014, and be-
fore January 1, 2015, as a preexisting
account, the FFI may not apply the excep-
tion from identification and documenta-
tion for certain low-value preexisting
entity accounts under § 1.1471-4(c)(3)
(iii)(A) to that account.

These final regulations also clarify the
definition of a preexisting obligation in
the 2014 temporary regulations to remove
the references to withholding agents in the
second and third sentences of § 1.1471-
1(b)(104)(i) because the term preexisting
obligation may apply to a participating
FFI or registered deemed-compliant FFI
that is not a withholding agent because the
FFI never has control or custody of with-
holdable payments (as, for example, in the
case of a participating FFI or registered
deemed-compliant FFI that is document-
ing preexisting account holders). There-
fore, under these final regulations, a pre-
existing obligation includes an
obligation maintained by a participating
FFI on the later of the date the FFI is
issued a GIIN or June 30, 2014, and an
obligation maintained by a registered
deemed-compliant FFI prior to the later
of the date of the FFI's registration or
the date the FFI is required to implement
its account opening procedures, regard-
less of whether the participating FFI or
registered deemed-compliant FFI is a
withholding agent.

### 4. U.S. Person

The 2014 temporary regulations define
the term U.S. person to include a person
described in section 7701(a)(30), but do
not specify whether a U.S. person in-
cludes a dual resident (that is, an individ-
ual who is considered a resident of the
United States and also a resident of a
country with which the United States has
an income tax treaty). For purposes of
chapter 3, a person that is a resident of a
foreign country under the residence ar-
ticle of an income tax treaty and
§ 301.7701(b)-7(a)(1) (which therefore
includes a person that is a dual resident)
is a nonresident alien individual. See
§ 1.1441-1(c)(3)(ii). The Treasury De-
partment and the IRS have determined
that the treatment of dual residents

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should be consistent in chapters 3 and 4
and that dual residents should be treated
as non-U.S. persons for purposes of
chapters 3 and 4. Accordingly, these
final regulations revise the 2014 tempo-
rary regulations to provide that an indi-
vidual will not be treated as a U.S. per-
son for a taxable year or any portion of
a taxable year that the individual is a
dual resident taxpayer (within the mean-
ing of § 301.7701(b)-7(a)(1)) who is
treated as a nonresident alien pursuant
to § 301.7701(b)-7 for purposes of com-
puting the individual's U.S. tax liability.
Final regulations under chapter 3 pub-
lished elsewhere in this issue of the Bul-
letin modify the definition of nonresi-
dent alien individual to provide a
description of a dual resident consistent
with the definition included in these fi-
nal regulations (but do not change the
substantive rule in chapter 3).

The regulations under chapter 3 also
provide that an alien individual who has
made an election under section 6013(g) or
(h) to be treated as a resident of the United
States is treated as a nonresident alien
individual for purposes of chapter 3. In
order to have a consistent rule, these final
regulations provide that a U.S. person
does not include an alien individual who
has made an election under section
6013(g) or (h) to be treated as a resident of
the United States.

These final regulations also revise the
definition of U.S. person to remove an
unnecessary restriction on certain for-
eign insurance companies. The 2014
temporary regulations provide that a
U.S. person includes a foreign insurance
company that has made an election un-
der section 953(d) to be treated as a U.S.
person if the foreign insurance company
is not a specified insurance company (as
defined in § 1.1471-5(e)(1)(iv)) and is
not licensed to do business in any state.
The preamble to the 2014 temporary
regulations explains that the definition
of U.S. person in the 2013 final regula-
tions is modified in the 2014 temporary
regulations to include certain foreign in-
surance companies that have made an
election under section 953(d) in light of
the existing requirements applicable to
these types of entities to report U.S.
owners on the entity's U.S. income tax
return. The requirement included in the

2014 temporary regulations that a U.S.
person that is not a specified insurance
company not be licensed to do business
in any state is unnecessary because in-
surance companies that are not specified
insurance companies are required under
section 953(d) to report information re-
garding their U.S. owners regardless of
whether they are licensed to do business
in a state. These final regulations revise
the 2014 temporary regulations to
provide that a U.S. person includes a
foreign insurance company that has
made an election under section 953(d)
and that is not a specified insurance
company (regardless of whether such
entity is licensed to do business in a
state).

### 5. Withholding

The 2013 final regulations define the
term withholding as the deduction and
remittance of tax at the applicable rate
from a payment. However, the definition
of withholding for purposes of chapter 3
does not include remittance. See
§ 1.1441-1(c)(1). In order to coordinate
with chapter 3, these final regulations
modify the definition of withholding in
the 2013 final regulations to mean the
deduction and withholding of tax at the
applicable rate from a payment.

B. Comments and changes to § 1.1471-
2-Requirement to deduct and withhold
tax on withholdable payments to certain
FFIs

1\. Requirement to Withhold on
Payments to FFIs-Special Withholding
Rules-Withholding Obligation of a
Foreign Branch of a U.S. Financial
Institution

The 2014 temporary regulations gener-
ally provide that a foreign branch of a
U.S. financial institution is a withholding
agent and is not an FFI. The 2014 tempo-
rary regulations also provide that a foreign
branch of a U.S. financial institution that
is a reporting Model 1 FFI is both a with-
holding agent and a registered deemed-
compliant FFI, and must withhold in ac-
cordance with § 1.1471-2 and § 1.1472-
1(b). However, the 2014 temporary
regulations do not fully coordinate such
branch's withholding and documentation

obligations as a U.S. withholding agent
with its obligations as a reporting Model 1
FFI. These final regulations clarify in
§ 1.1471-2(a)(2)(v) that a foreign branch
of a U.S. financial institution is a U.S.
withholding agent and a payee that is a
U.S. person, and therefore has primary
withholding responsibility on withhold-
able payments that it makes and is not
subject to withholding under chapter 4 on
withholdable payments that it receives. A
foreign branch of a U.S. financial institu-
tion that is a reporting Model 1 FFI or that
has entered into a qualified intermediary
(QI) agreement may also be an FFI. The
treatment of a foreign branch as an FFI,
however, does not affect its withholding
responsibilities as a U.S. withholding
agent. These final regulations allow a for-
eign branch that is treated as an FFI to
apply the procedures under Annex I of an
applicable Model 1 or Model 2 IGA to
document the chapter 4 status of a payee
of a withholdable payment that is a holder
of an account maintained by the branch in
the Model 1 or Model 2 IGA jurisdiction.

#### 2. Grandfathered Obligations

##### i. Definitions

Under the 2013 final regulations, a
withholdable payment does not include a
payment made under a grandfathered ob-
ligation. A grandfathered obligation in-
cludes certain obligations outstanding on
July 1, 2014, as well as any agreement
requiring a secured party to make a pay-
ment with respect to, or to repay, collat-
eral posted to secure a grandfathered ob-
ligation. If collateral (or a pool of
collateral) is posted to secure both grand-
fathered obligations and obligations that
are not grandfathered, the collateral
posted to secure the grandfathered obliga-
tions must be determined by allocating,
pro rata by value, the collateral (or each
item in the pool of collateral) to all out-
standing obligations secured by the collat-
eral (or pool of collateral). Comments
stated that it is unduly burdensome for
withholding agents that are financial insti-
tutions to comply with the pro rata rule
described in the preceding sentence. As
announced in Notice 2015-66, these final
regulations modify the 2013 final regula-
tions to provide that the pro rata rule is not

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mandatory, and that if a withholding agent
does not apply the pro rata rule, the with-
holding agent may allocate all withhold-
able payments on collateral (or a pool of
collateral) to obligations that are not
grandfathered and, if applicable, apply
withholding to such payments.

The Treasury Department and the IRS
also received comments requesting that
the definition of grandfathered obligation
include a new obligation that is created as
a result of posting a grandfathered obliga-
tion as collateral. Under the 2013 final
regulations, to the extent that a secured
party is treated as the beneficial owner of
a grandfathered obligation that is pledged
as collateral after July 1, 2014, payments
made by the secured party to the pledgor
are treated as made under a newly created
obligation, resulting in substitute pay-
ments. Under the 2014 temporary regula-
tions, such substitute payments are subject
to withholding if paid after January 1,
2017 (when the transitional exception
from withholding for payments on collat-
eral arrangements expires). The comment
noted difficulties for certain withholding
agents that are financial institutions to de-
termine whether payments made with re-
spect to collateral are substitute payments
or payments made with respect to the col-
lateral because collateral is frequently re-
hypothecated from omnibus accounts that
include collateral from many counterpar-
ties. As previewed in Notice 2015-66,
these final regulations amend the defini-
tion of grandfathered obligation to include
any obligation that gives rise to a payment
of substitute interest (as defined in
§ 1.861-2(a)(7)) and that arises from the
payee posting collateral that is a grandfa-
thered obligation under § 1.1471-2(b)(2)
(i)(A)(1).

### ii. Determination by withholding agent of grandfathered treatment- Determination of material modification

The 2014 temporary regulations pro-
vide that a withholding agent is required
to treat a modification of an obligation as
material only if the withholding agent has
actual knowledge thereof, such as in the
event the withholding agent receives a
disclosure indicating that there has been
or will be a material modification to the
obligation. A comment requested that re-

ceipt of disclosure from the issuer be the
only instance in which a withholding
agent has actual knowledge of a material
modification. The Treasury Department
and the IRS considered similar comments
when drafting the 2014 temporary regula-
tions and believe that the 2014 temporary
regulations strike the correct balance by
providing withholding agents with a stan-
dard that is narrow in scope without lim-
iting the circumstances when there is ac-
tual knowledge. While the expectation is
that a withholding agent that is a broker
might only have actual knowledge of a
material modification upon receiving no-
tice from the issuer, the Treasury Depart-
ment and the IRS do not believe that it is
appropriate to foreclose the possibility
that a withholding agent might otherwise
have actual knowledge of the material
modification absent notice from the issuer.
Therefore, these final regulations do not
include any revisions to the determination
of a material modification.

C. Comments and changes to § 1.1471-
3-Identification of payee

### 1. Rules for Reliably Associating a Payment with a Withholding Certificate or Other Appropriate Documentation

i. Requirements for validity of
certificates-Withholding certificate of
an intermediary, flow-through entity, or
U.S. branch (Form W-8IMY)

The 2014 temporary regulations pro-
vide that a withholding agent may treat a
person receiving a withholdable payment
as a QI if the withholding agent can reli-
ably associate the payment with a valid
Form W-8IMY, "Certificate for Foreign
Intermediary, Foreign Flow-Through En-
tity, or Certain U.S. Branches for United
States Tax Withholding and Reporting,"
as described in § 1.1471-3(c)(3)(iii). Sec-
tion 1.1471-3(c)(3)(iii) provides the re-
quirements for a withholding certificate of
an intermediary, flow-through entity, or
U.S. branch. QIs must provide a qualified
intermediary withholding certificate (that
is, a Form W-8IMY) to a withholding
agent, even when the QI is acting as a
qualified derivatives dealer (QDD) under
§ 1.1441-1(e)(6)(i). See § 1.1441-1(e)
(3)(ii) and (e)(6)(i)(A). To coordinate with
the requirements of a QI that is acting as a

QDD, these final regulations provide that
an intermediary, QI, flow-through entity,
or U.S. branch must provide a valid Form
W-8IMY to a withholding agent for
chapter 4 purposes. This revision is in-
tended only to clarify which entities pro-
vide a Form W-8IMY and does not affect
the general meaning of intermediary in the
chapter 4 regulations as including QIs.

The 2014 temporary regulations pro-
vide that a U.S. branch of a participating
FFI or registered deemed-compliant FFI
(whether or not the U.S. branch is treated
as a U.S. person) must provide on its
withholding certificate the GIIN assigned
to the participating FFI or a registered
deemed-compliant FFI. Under § 1.1441-
1T(b)(2)(iv)(C) of the temporary coordi-
nation regulations, a U.S. branch of an FFI
that agrees to be treated as a U.S. person is
subject to the withholding, due diligence,
and information reporting rules that apply
to U.S. withholding agents under chapters
3 and 4 and must be either a participating
FFI or registered deemed-compliant FFI
to qualify for treatment as a U.S. person.
Under the 2014 temporary regulations, a
U.S. branch of an FFI that does not agree
to be treated as a U.S. person is required
to report for chapter 4 purposes under
§ 1.1471-4T(d)(2)(iii)(C). Due to the ex-
piration on January 1, 2017, of the transi-
tional rules in § 1.1471-4T(e)(2)(v) and
(e)(3)(iv) (relating to limited FFI and lim-
ited branch statuses), it may become more
difficult for an FFI to continue to be able
to claim participating FFI or registered
deemed-compliant FFI status, including
when it has other branches that do not
agree to comply with the requirements
to be a participating FFI or registered
deemed-compliant FFI, and therefore
more difficult for a U.S. branch to avoid
being withheld upon under chapter 4
(even though the U.S. branch is compli-
ant with FATCA and subject to IRS
examination and summons procedures
in the same manner as a U.S. withhold-
ing agent).

In recognition that a U.S. branch of an
FFI that agrees to be treated as a U.S.
person is subject to withholding, due dil-
igence, and information reporting require-
ments similar to any other U.S. withhold-
ing agent (and U.S. payor for chapter 61
reporting), these final regulations no lon-
ger require a U.S. branch of an FFI that

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agrees to be treated as a U.S. person to be
a participating FFI or registered deemed-
compliant FFI when acting as an interme-
diary. Therefore, a U.S. branch of an FFI
that acts as an intermediary and that
agrees to be treated as a U.S. person will
not need to furnish a GIIN of the FFI of
which it forms a part. In order to prevent
a U.S. branch that is treated as a U.S.
person from acting on behalf of other
branches of the FFI that are treated as
nonparticipating FFIs to avoid withhold-
ing under chapter 4 on payments made to
customers of such other branches, if any,
regulations under chapter 3 published
elsewhere in this issue of the Bulletin
provide that the U.S. branch must with-
hold on payments made to the other
branch to the extent required for chapter 4
purposes as if the U.S. branch were an
entity separate from such other branch.

Under these final regulations, a U.S.
branch that does not agree to be treated as
a U.S. person is not required to be part of
an FFI that is a participating FFI or reg-
istered deemed-compliant FFI, provided
that such branch, when acting as an inter-
mediary for a payment, applies the rules
described in § 1.1471-4(d)(2)(iii)(C).
Section 1.1471-4(d)(2)(iii)(C) of these fi-
nal regulations provides that such a U.S.
branch must report its U.S. accounts and
accounts held by owner-documented FFIs
under § 1.1471-4(d)(3), (d)(5), or (d)(6)
and apply the withholding and due dili-
gence rules in § 1.1471-4(b) and (c)(2) to
all of its accounts as if the U.S. branch
were a participating FFI. These final reg-
ulations do not impose the verification
requirements in § 1.1471-4(f) and (g) on
such U.S. branches because such branches
are subject to IRS examination and sum-
mons procedures in the same manner as a
U.S. withholding agent.

Under these final regulations, a with-
holding agent making a withholdable pay-
ment to an intermediary that is a U.S.
branch of an FFI that is not treated as a
U.S. person must obtain the EIN of
the U.S. branch and a certification that the
U.S. branch is applying the rules de-
scribed in § 1.1471-4(d)(2)(iii)(C). How-
ever, for a payment made before June 30,
2017, that the withholding agent can reli-
ably associate with valid documentation
from an intermediary that is a U.S. branch of
an FFI not treated as a U.S. person, the

withholding agent will not be required to
obtain the certification described in the pre-
ceding sentence. Therefore, a withholding
agent that has previously documented such
U.S. branch will have additional time to
obtain the certification that the U.S. branch
is applying the rules described in § 1.1471-
4(d)(2)(iii)(C).

Because a U.S. branch of an FFI
treated as a U.S. person is not required to
be part of a participating FFI, and a U.S.
branch of an FFI not treated as a U.S.
person may avoid being withheld upon
under chapter 4 even if the FFI of which it
is a part has one or more branches that are
treated as nonparticipating FFIs, these fi-
nal regulations modify the definition of
the term participating FFI to provide that
an FFI that registers to agree to the terms
of an FFI agreement may only do so if it
agrees that all branches of the FFI, other
than a branch that is a reporting Model 1 FFI
or a U.S. branch, will comply with the terms
of the FFI agreement. See Revenue Proce-
dure 2014-38, 2014-29 I.R.B. 131, as may
be amended, for the FFI agreement.

The changes in these final regulations
only affect a U.S. branch when it is acting
as an intermediary for a payment. For a
U.S. branch that receives a payment for an
entity that is the beneficial owner of the
payment, see § 1.1471-3(c)(3)(ii) and the
Instructions for Form W-8BEN-E (re-
quiring a U.S. branch to provide on its
withholding certificate a GIIN of the par-
ticipating FFI or registered deemed-
compliant FFI of which it is a part or any
branch of such FFI).

ii. Requirements for validity of
certificates-Withholding certificate of an
intermediary, flow-through entity, or U.S.
branch (Form W-8IMY)-Withholding
statement-Special requirements for an
FFI withholding statement

The FFI agreement permits a participat-
ing FFI to provide a withholding statement
that allocates a portion of a withholdable
payment to a group of account holders for
whom no reporting is required on any of
Form 1042-S, "Foreign Person's U.S.
Source Income Subject to Withholding," the
Form 1099 series, and Form 8966, "FATCA
Report" (an exempt payee pool). The pre-
amble to the FFI agreement in Revenue
Procedure 2014-38 provides that the 2014
temporary regulations will be amended to

incorporate the allowance for an exempt
payee pool on an FFI withholding state-
ment. However, the preamble to the FFI
agreement incorrectly adds that an FFI pro-
viding an exempt payee pool is not required
to provide documentation for the payees in
the pool (even though such documentation
would be required for chapter 3 purposes
under a similar rule in the regulations under
chapter 3).

To coordinate with the allowance in
the FFI agreement, these final regulations
provide that an FFI may include on its FFI
withholding statement an allocation of a
portion of a withholdable payment to a
pool of account holders (other than non-
qualified intermediaries and flow-through
entities) for whom no reporting is required
on any of Forms 1042-S, 1099, and 8966,
provided the FFI provides to the withhold-
ing agent, for each account holder in the
pool: (1) payee-specific information (in-
cluding chapter 4 status) and any other
information required for purposes of
chapter 3 or 61 on the withholding state-
ment; and (2) documentation. For exam-
ple, a participating FFI may provide on its
withholding statement an exempt payee
pool for a payment of U.S. source interest
on a bank deposit not subject to withhold-
ing or reporting under chapter 4 that is
allocable to a pool of foreign account
holders (that is, a withholdable payment
that is not required to be reported on any
of Forms 1042-S, 1099, and 8966) and
provide the withholding agent with docu-
mentation for each account holder in the
pool.

Under the 2014 temporary regulations,
an FFI withholding statement, a chapter 4
withholding statement, or an exempt ben-
eficial owner withholding statement that
includes payee-specific information for
purposes of chapter 4 must indicate both
the portion of the payment allocated to
each payee and each payee's chapter 4
status. The 2014 temporary regulations
also provide that an FFI withholding state-
ment, a chapter 4 withholding statement,
or an exempt beneficial owner withhold-
ing statement must include any other in-
formation that the withholding agent
needs in order to fulfill its obligations
under chapter 4. Since a withholding
agent is required to report the chapter 4
status code for each payee on Form
1042-S, these final regulations clarify that

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the chapter 4 status of a payee shown on a
withholding statement must be the appli-
cable chapter 4 status code used to report
the payee on Form 1042-S. This modifi-
cation is consistent with the requirement
in the temporary coordination regulations
that a nonqualified intermediary withhold-
ing statement include the chapter 4 status
code for each payee (excluding a payee
included in a chapter 4 withholding rate
pool) used for filing Form 1042-S. Ad-
ditionally, to coordinate with the tempo-
rary coordination regulations, these final
regulations clarify that an FFI withhold-
ing statement provided by an FFI other
than an FFI acting as a QI, WP, or WT
must identify the GIIN of an intermedi-
ary or flow-through entity when re-
quired under § 1.1471-3(d) and the
chapter 4 status code used for filing
Form 1042-S. Finally, the description of
the recalcitrant account holder pool
on an FFI withholding statement in
§ 1.1471-3(c)(3)(iii)(B)(2)(i) is revised
to cross-reference § 1.1471-1(b)(20)
(rather than § 1.1471-4(d)(6)) to coor-
dinate with the revisions to § 1.1471-
1T(b)(20) in the July 2014 corrections.

iii. Requirements for validity of
certificates-Withholding certificate of
an intermediary, flow-through entity, or
U.S. branch (Form W-8IMY)-
Withholding statement-Special
requirements for chapter 4 withholding
statement

Under the 2014 temporary regulations,
a chapter 4 withholding statement must
include an allocation of the payment to
each payee (other than a payee that is a
nonparticipating FFI). The Treasury De-
partment and the IRS have determined
that allocation information is unnecessary
for purposes of this withholding statement
when there is no withholding or reporting
requirement with respect to a payment.
Therefore, these final regulations provide
that a chapter 4 withholding statement
may include an allocation of a portion of
the payment to a pool of payees (rather
than to each payee) for whom no report-
ing is required on any of Forms 1042-S,
1099, and 8966, provided that the with-
holding statement contains payee-
specific information (including chapter
4 status) and any other information re-
quired for purposes of chapter 3 or 61,

and documentation is provided to the
withholding agent for each payee in the
pool.

The 2014 temporary regulations permit a
chapter 4 withholding statement to include
pooled allocation information with respect
to payees that are nonparticipating FFIs.
These final regulations clarify that when a
chapter 4 withholding statement provides
pooled allocation information with respect
to payees that are treated as nonparticipating
FFIs, the withholding agent does not need to
obtain documentation for each nonpartici-
pating FFI included in the pool. These final
regulations also remove an unnecessary
cross-reference to chapter 61 in § 1.1471-
3(c)(3)(iii)(B)(3).

### iv. Requirements for documentary evidence-Foreign status-Entity government documentation

Under the 2013 final regulations, ac-
ceptable documentary evidence support-
ing a claim of foreign status includes, with
respect to an entity, official documenta-
tion issued by an authorized government
body. However, some common types of
organizational documentation may not be
considered "issued" by a governmental
body (for example, articles of incorpora-
tion and partnership agreements). There-
fore, these final regulations revise the
2013 final regulations to provide that ac-
ceptable documentary evidence support-
ing a claim of foreign status includes any
documentation that substantiates that the
entity is actually organized or created un-
der the laws of a foreign country.

v. Applicable rules for withholding
certificates, written statements, and
documentary evidence-Period of
validity-Indefinite validity

A comment noted that contemporane-
ous receipt of a beneficial owner with-
holding certificate and documentary ev-
idence is not always practical and
should not be a condition for indefinite
validity of a withholding certificate. The
Treasury Department and the IRS agree
with the comment and have determined
that these rules should be revised in
both chapters 3 and 4. With respect to
individuals, these final regulations
cross-reference § 1.1441-1(e)(4)(ii)(B)
(1), which is modified in regulations

published elsewhere in this issue of the
Bulletin to provide that a beneficial
owner withholding certificate and docu-
mentary evidence supporting the indi-
vidual's claim of foreign status will be
treated as provided together if they are
provided within 30 days of each other,
regardless of which the withholding
agent receives first. With respect to en-
tities, these final regulations incorporate
the rule in § 1.1441-1(e)(4)(ii)(B)(2),
which is modified in regulations pub-
lished elsewhere in this issue of the Bul-
letin to provide that a beneficial owner
withholding certificate and documentary
evidence supporting an entity's claim of
foreign status will be valid indefinitely
when both are received by the withhold-
ing agent before the validity period of
either would otherwise expire (that is,
both the withholding certificate and the
documentary evidence are received by
the withholding agent and neither has
expired).

vi. Applicable rules for withholding
certificates, written statements, and
documentary evidence-Period of
validity-Change in circumstances

Under the 2013 final regulations, a
withholding agent cannot rely on a with-
holding certificate or documentation if it
knows or has reason to know that a
change in circumstances affects the cor-
rectness of the certificate or documenta-
tion. The 2013 final regulations define a
change in circumstances as a change
that would affect a person's chapter 4
status and require the person whose
name is on the certificate or documen-
tation to notify the withholding agent
within 30 days and provide a new cer-
tificate or documentation following a
change in circumstance.

A comment requested relief from a
withholding agent's requirement to obtain
new documentation from an FFI follow-
ing a change in circumstances that does
not affect whether withholding under
chapter 4 is required on payments to the
FFI. In response to the comment, these
final regulations provide that a withhold-
ing agent will not have reason to know of
a change in circumstances with respect to
an FFI's chapter 4 status that results solely
because the jurisdiction in which the FFI

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is resident, organized, or located is one
that is later treated as having an IGA in
effect (including a jurisdiction that had a
Model 2 IGA in effect and is later treated
as having a Model 1 IGA in effect). In lieu
of providing a new withholding certificate
to the withholding agent to document the
new chapter 4 status, these final regula-
tions allow an FFI to provide to the with-
holding agent oral or written confirmation
(including by e-mail) of the FFI's change
in its chapter 4 status within 30 days after
the change in circumstances described in
the preceding sentence or a change in cir-
cumstances with respect to the FFI's
chapter 4 status that results solely because
a jurisdiction is later treated as not having
an IGA in effect. In such a case, the with-
holding agent must retain a record of the
confirmation, which will become part of
the FFI's withholding certificate or other
documentation. See section II.C.1.iii of
this Summary of Comments and Explana-
tion of Revisions and Provisions for an
explanation of temporary regulations on a
withholding agent's reason to know of a
change in circumstances if a jurisdiction
ceases to be treated as having an IGA in
effect.

vii. Applicable rules for withholding
certificates, written statements, and
documentary evidence-Electronic
transmission of withholding certificate,
written statement, and documentary
evidence

The 2014 temporary regulations pro-
vide that a withholding agent may accept
a withholding certificate, written state-
ment, or other such form as the IRS may
prescribe, electronically in accordance
with the requirements of § 1.1441-
1(e)(4)(iv). A comment to the temporary
coordination regulations requested a mod-
ification of the effective date of § 1.1441-
1(e)(4)(iv) so that withholding agents may
rely upon forms or documentary evidence
received electronically after March 6,
2014, even if the payment was made prior
to such date. The Treasury Department
and the IRS agree with this comment, and
have determined that the applicability date
for reliance on electronically transmitted
documentation should be the same in
chapters 3 and 4. In regulations published
elsewhere in this issue of the Bulletin, the
temporary coordination regulations are

modified so that § 1.1441-1(e)(4)(iv)(D)
applies to any open tax year. Likewise,
these final regulations provide that a tax-
payer may apply § 1.1471-3(c)(6)(iv) to
all of its open tax years.

viii. Applicable rules for withholding
certificates, written statements, and
documentary evidence-Reliance on
prior versions of withholding certificates

Under the 2013 final regulations, a
withholding agent can accept a prior ver-
sion of a withholding certificate for six
months after the revision date of an up-
dated version of the certificate, unless the
IRS has issued guidance that indicates
otherwise. The temporary coordination
regulations include a similar rule for chap-
ter 3 purposes. In regulations published
elsewhere in this issue of the Bulletin,
§ 1.1441-1(e)(4)(viii)(C) is modified to
permit withholding agents to accept a
prior version of a withholding certificate
until the later of six full months after
the revision date of the updated form or
the end of the calendar year during
which the revised version is issued, un-
less the Treasury Department and the
IRS designate a shorter transition pe-
riod. The Treasury Department and the
IRS have determined that the require-
ments for reliance on prior versions of
withholding certificates under chapter 3
should be adopted for both chapters 3
and 4. Therefore, these final regulations
modify the 2013 final regulations
by cross-referencing to the rule in
§ 1.1441-1(e)(4)(viii)(C) regarding reli-
ance on prior versions of forms.

ix. Curing documentation errors-Curing
inconsequential errors on a withholding
statement

The 2013 final regulations provide
that a withholding agent may treat a
withholding certificate as valid, notwith-
standing that the certificate contains an
inconsequential error, if the withholding
agent has sufficient documentation on
file to supplement the information miss-
ing from the withholding certificate due
to the error and such documentation is
conclusive. The 2013 final regulations
include an example of a withholding
agent using government issued identifi-
cation to cure an abbreviation of a coun-

try of residence on a withholding
certificate provided by an individual,
implying that any abbreviation (whether
ambiguous or unambiguous) must be
cured. However, since the Instructions
for Form W-8BEN do not require an
individual to provide the full name of a
country, an unambiguous abbreviation
is not an error. For consistency with
chapter 3 (see § 1.1441-1(b)(7)(iv)),
these final regulations revise the exam-
ple to provide that an abbreviation of a
country of residence is an inconsequen-
tial error that would need to be cured
only if it is an ambiguous abbreviation.

## 2. Documentation Requirements to Establish a Payee's Chapter 4 Status

i. Identification of U.S. persons-In
general

The 2014 temporary regulations pro-
vide that a withholding agent receiving
a Form W-9, "Request for Taxpayer
Identification Number and Certifica-
tion," indicating that the payee is a U.S.
person that is not a specified U.S. person
must treat the payee as a specified U.S.
person if the withholding agent knows
or has reason to know that the payee's
claim that it is other than a specified
U.S. person is incorrect. A comment
requested that the final regulations ei-
ther eliminate reason to know in
§ 1.1471-3T(d)(2)(i) or clarify when a
withholding agent would have reason to
know that a Form W-9 is incorrect with
respect to an entity payee. The comment
also notes that it would be burdensome
for withholding agents to research pub-
licly available information to determine
if the entity's claim that it is not a spec-
ified U.S. person is incorrect. The Trea-
sury Department and the IRS believe
that reason to know is the appropriate
standard for Form W-9 because it is the
same as the standard of knowledge ap-
plied to forms in the W-8 series and the
application of reason to know to Form
W-9 is already clear. Reason to know is
defined generally in § 1.1471-3(e)(4)
and specifically for withholding
certificates in § 1.1471-3(e)(4)
(ii)(A). Under § 1.1471-3(e)(4)(ii)(A), a
withholding agent has reason to know
that a withholding certificate is unreli-

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able or incorrect if the withholding cer-
tificate is incomplete with respect to any
item on the certificate that is relevant to
the claims made by the person, the with-
holding certificate contains any informa-
tion that is inconsistent with the per-
son's claim, the withholding agent has
other account information that is incon-
sistent with the person's claim, or the
withholding certificate lacks informa-
tion necessary to establish entitlement to
an exemption from withholding for
chapter 4 purposes. Therefore, these fi-
nal regulations do not adopt the com-
ment.

ii. Documentation, GIIN verification,
and registration of sponsored investment
entities, sponsored controlled foreign
corporations, and sponsored direct
reporting NFFEs

These final regulations modify the pro-
cedures for withholding agents to docu-
ment the chapter 4 status of a payee that is
a sponsored investment entity or spon-
sored controlled foreign corporation de-
scribed § 1.1471-5(f)(1)(i)(F) or a spon-
sored direct reporting NFFE described in
§ 1.1472-1(c)(5) (each referred to as a
sponsored entity for purposes of this sec-
tion I.C.2.ii) to incorporate the provisions
of Notice 2015-66. Under the 2014 tem-
porary regulations, for a transitional pe-
riod that was to expire on January 1, 2016,
a withholding agent may obtain the GIIN
of a sponsoring entity if the sponsored
entity has not yet obtained a GIIN. A
comment noted that it would be difficult
for withholding agents to verify the GIINs
of sponsored entities by the date provided
in the 2014 temporary regulations. In re-
sponse to the comment, the Treasury De-
partment and the IRS announced in Notice
2015-66 that the 2014 temporary regula-
tions would be amended to extend the
time for withholding agents to verify
sponsored entity GIINs. These final regu-
lations, therefore, extend the transitional
period to apply to withholdable payments
made before January 1, 2017. These final
regulations also provide that a withhold-
ing agent is not required to verify the
GIIN of a sponsored entity before January
1, 2017 (even if the sponsored entity ob-
tains a GIIN before such date), if the with-
holding agent verifies the GIIN of the

sponsoring entity in the manner described
in these final regulations.

Notice 2015-66 announced that spon-
soring entities must register their spon-
sored entities by January 1, 2017, and,
beginning on that date, sponsoring entities
must use the GIIN of the sponsored entity
when reporting with respect to the spon-
sored entity on Form 8966 and must pro-
vide the GIIN to withholding agents mak-
ing payments to the sponsored entity. The
Notice also informed withholding agents
that they would be required to obtain GI-
INs of sponsored entities for payments
made on or after January 1, 2017. After
Notice 2015-66 was issued, comments
requested additional time for withholding
agents to obtain the GIIN of a sponsored
entity. In response to the comments, these
final regulations provide that for a pay-
ment made after December 31, 2016, to a
payee that the withholding agent has doc-
umented prior to January 1, 2017, as a
sponsored entity with a valid withholding
certificate that includes the GIIN of the
sponsoring entity, the withholding agent
must obtain and verify the GIIN of the
sponsored entity against the IRS FFI list
by March 31, 2017. Notwithstanding the
preceding sentence, a GIIN is not required
for a payee that provides a valid withhold-
ing certificate prior to January 1, 2017,
that identifies the payee as a sponsored
FFI and includes the GIIN of the sponsor-
ing entity if the withholding agent deter-
mines, based on information provided on
the withholding certificate, that the payee
is resident, organized, or located in a ju-
risdiction that is treated as having a Model
1 IGA in effect. A withholding certificate
provided on or after January 1, 2017, by a
payee that is a sponsored entity subject to
a Model 1 IGA must identify the payee as
a nonreporting IGA FFI or, if the payee
identifies itself as a sponsored FFI, must
include the payee's GIIN. As previewed
in Notice 2015-66, the withholding agent
may obtain a GIIN for a sponsored entity
described in this paragraph by oral or
written confirmation (including by e-mail)
rather than obtaining a new withholding
certificate, provided that the withholding
agent retains a record of the confirmation,
which will become part of the withholding
certificate.

As announced in Notice 2015-66, and
to coordinate with the transitional dates

for documentation and GIIN verification
discussed in the preceding paragraph,
these final regulations provide that a spon-
soring entity must register each sponsored
entity for which it acts by the later of
January 1, 2017, or the date the sponsored
entity identifies itself to a withholding
agent or financial institution as having
such status.

### iii. Identification of participating FFIs and registered deemed-compliant FFIs- Reason to know

The 2014 temporary regulations pro-
vide rules in both § 1.1471-3T(d)(4)(v)
and (e) for when a withholding agent has
reason to know that a payee's claim of
status as a participating FFI or registered
deemed-compliant FFI is invalid or incor-
rect. However, § 1.1471-3T(d)(4)(v) is
duplicative of the more detailed rules on
reason to know in § 1.1471-3T(e). To
eliminate this duplication, these final reg-
ulations modify § 1.1471-3T(d)(4)(v) to
cross-reference § 1.1471-3(e) for the ap-
plicable reason to know rules.

### iv. Identification of excepted NFFEs- Identification of active NFFEs

Under § 1.1472-1(b), a withholding
agent making a withholdable payment to a
NFFE that does not provide information
on its substantial U.S. owners (or certify
that it has no substantial U.S. owners)
must withhold on the payment unless the
NFFE is an excepted NFFE described in
§ 1.1472-1(c)(1) (for example, an active
NFFE described in § 1.1472-1(c)(1)(iv)).
A withholding agent making a withhold-
able payment must apply the documenta-
tion rules in § 1.1471-3(d) to determine
the chapter 4 status of a payee. Specifi-
cally, under § 1.1471-3(d)(11)(ix), a with-
holding agent may treat a payee as an
active NFFE described in § 1.1472-
1(c)(1)(iv) if the NFFE provides a with-
holding certificate identifying itself as an
active NFFE. In contrast, a reporting
Model 1 FFI or reporting Model 2 FFI
documenting an account for purposes of
satisfying the due diligence requirements
of a Model 1 or Model 2 IGA applies the
procedures in Annex I of the applicable
IGA to determine whether an account
holder is an active or passive NFFE. The

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chapter 4 regulations provide that a NFFE
must determine its status under chapter 4
for purposes of documenting itself to a
withholding agent making a withholdable
payment to the NFFE. See § 1.1471-
3(d)(11) and (12). A comment requested
that the chapter 4 regulations be revised to
permit a NFFE to determine its status un-
der the Model 1 or Model 2 IGA of the
jurisdiction where the NFFE is organized
for purposes of certifying its status to both
a withholding agent documenting a payee
under the chapter 4 regulations and an FFI
documenting an account holder under an
applicable IGA. The Treasury Department
and the IRS have decided that the chapter
4 regulations should not be revised in this
regard. The due diligence procedures un-
der the Model 1 IGA and Model 2 IGA
allow financial institutions subject to an
applicable IGA to document using such
procedures and are not broadly intended
for NFFEs. An entity resident in, or orga-
nized under the laws of, an applicable
IGA jurisdiction may apply the IGA to
determine its classification as an FFI or
NFFE; however, it may not otherwise ap-
ply the IGA to determine whether it is an
active or passive NFFE or whether it
should identify controlling U.S. persons
instead of substantial U.S. owners when it
is documenting itself to a withholding
agent making a withholdable payment to
the entity.

### v. Excepted inter-affiliate FFIs

The 2014 temporary regulations pro-
vide that an excepted inter-affiliate FFI
may hold a depository account with a
withholding agent that is not a member
of the expanded affiliated group if the
account is held in the country in which
the excepted inter-affiliate FFI is oper-
ating to pay for expenses in that country.
The 2014 temporary regulations also in-
clude identification rules for excepted
inter-affiliate FFIs that provide that a
withholding agent that is a participating
FFI may treat a payee as an excepted
inter-affiliate FFI if it has obtained a
withholding certificate or a written
statement (in the case of an offshore
obligation) identifying the payee as such
an entity.

Although the 2014 temporary regula-
tions provide that an excepted inter-

affiliate FFI is permitted to hold "a depos-
itory account" in the country in which the
entity is operating to pay for expenses in
that country, these final regulations permit
an excepted inter-affiliate FFI to hold
more than one depository account in a
country in which the FFI is operating to
pay for expenses in that country.

In addition, the restriction on withhold-
ing agents of an excepted inter-affiliate FFI
to participating FFIs in § 1.1471-3(d)(11)
(xii) is inconsistent with the allowance for
an excepted inter-affiliate FFI to hold a de-
pository account with a withholding agent
that is not a member of the FFI's expanded
affiliated group in § 1.1471-5(e)(5)(iv)(B).
Therefore, these final regulations re-
place "participating FFI" with "withholding
agent" in § 1.1471-3(d)(11)(xii)(A) through
(C). Additionally, since an excepted
inter-affiliate FFI can receive any pay-
ments from a member of the FFI's ex-
panded affiliated group (not only pay-
ments of U.S. source bank deposit
interest), these final regulations revise
the reason to know rule in § 1.1471-
3(d)(11)(xii)(C) so that it is limited to
withholding agents that are not members
of the FFI's expanded affiliated group.

#### 3. Standards of Knowledge

##### i. GIIN verification-In general

The 2014 temporary regulations pro-
vide that a withholding agent that receives
a payee's claim of status as a participating
FFI or registered deemed-compliant FFI
must verify: (1) the GIIN assigned to the
FFI identifying its country of residence or
place of organization; or (2) with respect
to a payment that is made to a branch of,
or an entity that is disregarded as an entity
separate from, a participating FFI or reg-
istered deemed-compliant FFI located
outside of the FFI's country of residence
or organization, the GIIN assigned to the
FFI identifying the country in which
the branch or disregarded entity receiving
the payment is located. However, a disre-
garded entity that is a reporting Model 1
FFI may register separately from its FFI
owner and be issued its own GIIN, and the
Instructions for Form W-8BEN-E re-
quire the form to include the GIIN of a
disregarded entity in such a case. To ac-
count for this situation, these final regula-

tions revise § 1.1471-3T(e)(3)(i) to pro-
vide that a withholding agent making a
payment to a branch (including a disre-
garded entity) of a participating FFI or
registered deemed-compliant FFI located
outside of the FFI's country of residence
or organization must confirm the GIIN of
the branch (or disregarded entity) receiv-
ing the payment. In addition, § 1.1471-
3(d)(4)(i) is revised to provide that a with-

holding certificate identifying a payee as a
participating FFI, registered deemed-
compliant FFI, or branch thereof (includ-
ing an entity that is disregarded as an
entity separate from the FFI) must contain
a GIIN described in § 1.1471-3(e)(3).

Under the 2014 temporary regulations,
a withholding agent has reason to know
that a withholdable payment is made to a
limited branch (including a disregarded
entity) of a participating FFI or registered
deemed-compliant FFI when: (1) the
withholding agent is directed to make the
payment to an address in a jurisdiction
other than that of the participating FFI or
registered deemed-compliant FFI (or
branch (including a disregarded entity) of
such FFI) that is identified by such FFI as
receiving the payment; and (2) the with-
holding agent does not receive a GIIN
assigned to the FFI identifying the country
in which the branch (or disregarded en-
tity) is located. A comment noted that an
FFI may direct a payment to an account
held by the FFI at another financial insti-
tution at a location outside the FFI's coun-
try of residence where the FFI does not
have a branch. In response to the com-
ment, these final regulations provide that a
withholding agent is not required to apply
the reason to know rule to an FFI that is an
investment entity. In addition, if an FFI
other than an investment entity directs a
withholding agent to make a payment to
an account held by the FFI and maintained
by another financial institution at a loca-
tion outside the jurisdiction where the FFI
is resident or incorporated or the jurisdic-
tion where the branch receiving the pay-
ment is located, the FFI must provide to
the withholding agent a statement in writ-
ing that the FFI is not directing the
payment to any branch of such FFI that
is not a participating FFI or a registered
deemed-compliant FFI. Additionally,
these final regulations clarify that if a
withholding agent is required to apply

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the reason to know rule described in this
paragraph, it must treat the branch as
other than a participating FFI or regis-
tered deemed-compliant FFI.

ii. Reason to know-Reason to know
regarding an entity's chapter 4 status

The 2014 temporary regulations re-
vised the reason to know standard for
claims of chapter 4 status in the 2013 final
regulations to provide that, if a withhold-
ing agent has classified an entity as en-
gaged in a particular type of business
based on its records, the withholding
agent has reason to know that the chapter
4 status claimed by the entity is unreliable
or incorrect if the entity's claim conflicts
with the withholding agent's classification
of the entity's business type. The intent of
the 2014 temporary regulations was to
limit the reason to know rules to only
those situations in which the classification
recorded by the withholding agent is in-
consistent with the chapter 4 status
claimed. The preamble of the 2014 tem-
porary regulations accurately describes
this intent. These final regulations correct
the 2014 temporary regulations and im-
plement the preamble to the 2014 tempo-
rary regulations.

iii. Reason to know-Specific standards
of knowledge applicable to
documentation received from
intermediaries and flow-through
entities-In general

Under the 2013 final regulations, a
withholding agent that receives documen-
tation for a payee through an intermediary
or flow-through entity is required to re-
view the documentation by applying the
standards of knowledge applicable to
chapter 4. The 2014 temporary regulations
permit a withholding agent to accept a
Form W-8 (or a substitute Form W-8)
electronically through a system estab-
lished by the withholding agent that meets
the requirements described in § 1.1441-
1(e)(4)(iv)(B). A comment requested that
withholding agents be allowed to rely on
documentation that the intermediary or
flow-through entity received through an
electronic system established by the inter-
mediary or flow-through entity (rather
than the withholding agent) to collect
documentation from a payee. In Notice

2016-08, the Treasury Department and
the IRS announced an intent to modify the
standards of knowledge under §§ 1.1441-
7(b)(10) and 1.1471-3(e)(4)(vi)(A)(2) to
allow a withholding agent to rely on a
withholding certificate collected through
an electronic system maintained by a non-
qualified intermediary, nonwithholding
foreign partnership, or nonwithholding
foreign trust. However, the Treasury De-
partment and the IRS have determined
that the primary concern raised by the
comment (validation and reliance on a
signature on a Form W-8BEN-E) should
be addressed in temporary regulations that
allow withholding agents to accept forms
signed electronically. See section II.C.1.i
of this Summary of Comments and Expla-
nation of Revisions and Provisions for a
description of the temporary regulation on
electronic signatures. In light of the new
allowance for withholding agents to ac-
cept forms signed electronically, the Trea-
sury Department and the IRS have deter-
mined that it is not necessary to modify
the standards of knowledge as previewed
in Notice 2016-08.

iv. Reason to know-Specific standards
of knowledge applicable to
documentation received from
intermediaries and flow-through
entities-Limits on reason to know with
respect to documentation received from
participating FFIs and registered
deemed-compliant FFIs that are
intermediaries or flow-through entities

These final regulations clarify that a
withholding agent that receives documen-
tation from an intermediary or flow-
through entity that is a reporting Model 1
FFI or reporting Model 2 FFI may rely on
the chapter 4 status for a payee that is
determined based on payee documenta-
tion or information that is publicly avail-
able that determines the chapter 4 status of
the payee if such documentation or infor-
mation is permitted under an applicable
IGA, provided that the withholding agent
has the information necessary to report on
Form 1042-S. See § 1.1441-1(e)(3)(iv)
(C)(2)(iv) (requiring that a nonqualified
intermediary withholding statement for a
reportable amount that is a withholdable
payment include the recipient code for
chapter 4 purposes used for filing Form
1042-S for an entity payee). However, a

withholding agent paying an amount sub-
ject to chapter 3 withholding is still re-
quired to obtain documentation that satis-
fies the requirements of chapter 3. This
revision is consistent with the Instructions
for the Requester of Forms W-8BEN,
W-8BEN-E, W-8ECI, W-8EXP, and
W-8IMY.

v. Reason to know-Reasonable
explanation supporting claim of foreign
status

The chapter 3 regulations provide that
a withholding agent may rely on the for-
eign status of an individual account holder
irrespective of certain U.S. indicia in cer-
tain cases when the account holder pro-
vides a reasonable explanation supporting
the account holder's claim of foreign
status. The temporary coordination regu-
lations provide that a reasonable explana-
tion of foreign status is either: (1) a writ-
ten statement from a payee (in which the
payee may provide any explanation to
support its claim of foreign status); or (2)
the payee's identification of one of the
explanations on a checklist provided by
the withholding agent to the payee that
lists the explanations described in
§ 1.1441-7(b)(12)(i) through (iv). The
rule in the 2013 final regulations is similar
to the rule in the temporary coordination
regulations, except that the 2013 final reg-
ulations provide that a reasonable expla-
nation, whether provided in the form of a
written statement from the payee or the
payee's identification of one of the expla-
nations on a checklist provided by the
withholding agent, must be one of the
explanations described in § 1.1471-3(e)
(4)(vii)(A) through (D) (which are identi-
cal to the explanations listed in § 1.1441-
7(b)(12)(i) through (iv)). The explana-
tions listed in § 1.1471-3(e)(4)(vii)(A)
through (D) are common explanations
easily reducible to a checklist on a stan-
dardized form, but are not intended to be
an exhaustive list of reasonable explana-
tions that a payee may provide to rebut the
U.S. indicia on the account. Therefore, as
previewed in Notice 2014-33, these final
regulations amend the 2013 final regu-
lations to be consistent with the tempo-
rary coordination regulations by cross-
referencing § 1.1441-7(b)(12) for the

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definition of a reasonable explanation of
foreign status.

vi. Presumptions regarding chapter 4
status of the person receiving the
payment in the absence of
documentation-Presumption of chapter
4 status for a foreign entity

The chapter 4 regulations require a
withholding agent to apply the presump-
tion rules in § 1.1471-3(f) if the withhold-
ing agent cannot reliably associate a pay-
ment with valid documentation. Under
§ 1.1471-3(f)(4), a withholding agent
must presume that an entity payee is a
nonparticipating FFI and withhold on
withholdable payments to the entity if the
withholding agent cannot document the
entity's chapter 4 status. A comment sug-
gested that a reporting Model 1 FFI that
receives a withholdable payment as an
intermediary on behalf of, or makes a
withholdable payment to, an account held
by an undocumented entity should be per-
mitted to treat such account as a U.S.
reportable account and not as a nonpar-
ticipating FFI subject to withholding
pursuant to the presumption rules under
§ 1.1471-3(f)(4). The Treasury Depart-
ment and the IRS do not agree with the
comment. Under Annex I of the Model 1
and Model 2 IGA, reporting Model 1
FFIs and reporting Model 2 FFIs must
apply the due diligence procedures de-
scribed in Annex I to document the sta-
tus of their account holders under the
IGA as U.S. reportable accounts, non-
participating FFIs, or additionally in the
case of a reporting Model 2 FFI, non-
consenting U.S. accounts, and if such
procedures are applied, cases in which
an entity account is undocumented
should not arise. If a reporting Model 1
FFI or reporting Model 2 FFI does not
have information in its possession or
that is publicly available based on which
it can reasonably determine the status of
an entity account holder the FFI must
obtain a self-certification to establish the
status of such entity (or in some cases, a
self-certification to establish the status
of the controlling persons of a passive
NFFE) consistent with Annex I of the
applicable IGA. In cases where a report-
ing Model 1 FFI or reporting Model 2
FFI acts as an intermediary for a with-

holdable payment that is allocated to an
entity account and is unable to docu-
ment the account by obtaining such in-
formation or self-certification consistent
with the procedures described in Annex
I of the applicable IGA, the chapter 4
regulations provide presumption rules
for withholdable payments made to such
account (and if an FFI has many such
undocumented accounts, the U.S. Com-
petent Authority may determine that
there is significant non-compliance with
the requirements of the IGA with re-
spect to the FFI). In such cases, the
reporting Model 1 FFI or reporting
Model 2 FFI must apply the presump-
tion rules in § 1.1471-3(f) to treat such
entity account as a nonparticipating FFI
and provide sufficient information to the
upstream withholding agent to withhold
on the payment (or, if such reporting
Model 1 FFI or reporting Model 2 FFI is
a WP, WT, or a QI that assumes primary
withholding responsibility on the pay-
ment for chapters 3 and 4, the WP, WT,
or QI must withhold). Withholding on
undocumented entity accounts as ac-
counts of nonparticipating FFIs is con-
sistent with the IGAs, which contem-
plates that nonparticipating FFIs would
remain subject to withholding on with-
holdable payments received through a
reporting Model 1 FFI or reporting
Model 2 FFI.

D. Comments and changes to § 1.1471-
4-FFI agreement

1\. Withholding Requirements-Foreign
Passthru Payments

Under section 1471(b)(1)(D)(i), a par-
ticipating FFI must agree to withhold on
passthru payments (that is, withholdable
payments and foreign passthru payments)
made to recalcitrant account holders of the
FFI and nonparticipating FFIs. The 2013
final regulations reserve on the definition
of foreign passthru payment and provide
that a participating FFI is not required to
withhold tax on a foreign passthru pay-
ment made to a recalcitrant account holder
or a nonparticipating FFI before the later
of January 1, 2017, or the date of publi-
cation in the Federal Register of final
regulations defining foreign passthru pay-
ment. As announced in Notice 2015-66,

this transition period is extended in or-
der to facilitate an orderly phase-in of
withholding under chapter 4. Therefore,
these final regulations modify the 2013
final regulations to provide that a par-
ticipating FFI is not required to with-
hold tax on a foreign passthru payment
made to a recalcitrant account holder or
a nonparticipating FFI before the later
of January 1, 2019, or the date of pub-
lication in the Federal Register of final
regulations defining the term foreign
passthru payment.

2\. Due Diligence for the Identification
and Documentation of Account Holders
and Payees-Certifications of
Responsible Officer

The 2013 final regulations require a
participating FFI to certify to the IRS that
the FFI has complied with the applicable
due diligence requirements with respect to
preexisting accounts of the FFI and that
the FFI did not have any formal or infor-
mal practices or procedures in place from
August 6, 2011, through the date of such
certification to assist account holders in
the avoidance of chapter 4. Under the
2013 final regulations, this certification
must be made no later than 60 days fol-
lowing the date that is two years after the
effective date of the participating FFI's
FFI agreement. As announced in Notice
2016-08, these final regulations modify
the time for an FFI to make this certifica-
tion by providing that the certification
must be submitted to the IRS by the due
date of the FFI's first certification of com-
pliance required under § 1.1471-4(f)(3).
Additionally, in order to mitigate any in-
creased burden caused by the modified
due date (for example, if an FFI has un-
dergone changes in management person-
nel since August 6, 2011), these final reg-
ulations require a participating FFI to
certify that it did not have any formal or
informal practices or procedures in place
from August 6, 2011, through the date that
is two years after the effective date of the
FFI's FFI agreement (rather than the date
when the certification is due). These final
regulations also reinstate a sentence that
was unintentionally removed in § 1.1471-
4(c)(7) in the September 2013 corrections
requiring a participating FFI to certify that
it did not have any practices or procedures

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to assist account holders in avoidance of
chapter 4.

#### 3. Account Reporting

i. Reporting requirements in general-
Accounts subject to reporting

Comments requested an exemption
from filing Form 8966 for a participating
FFI that is a partnership filing Form 1065
and Schedule K-1 to report its U.S. part-
ners. While the forms collect some over-
lapping information, the Schedule K-1
does not provide all of the same informa-
tion as Form 8966. In particular, Form
8966 collects information about both di-
rect and indirect owners of a passive
NFFE, while Form 1065 and Schedule
K-1 only identifies direct partners. There-
fore, the Treasury Department and the IRS
at this time do not believe that it would be
appropriate to provide an exemption for
partnerships from having to file Form
8966 on behalf of its U.S. partners. The
Treasury Department and the IRS will
evaluate the information received on
Forms 8966 filed with the IRS and may
assess the utility of that information, tak-
ing into account any information filed on
Form 1065 and Schedule K-1 and any
other relevant information about offshore
activities of U.S. persons that are filed
with the IRS.

ii. Reporting requirements in general-
Reporting by participating FFIs and
registered deemed-compliant FFIs
(including QIs, WPs, WTs, and certain
U.S. branches not treated as U.S.
persons) for accounts of nonparticipating
FFIs (transitional)

Under § 1.1471-4(d)(2)(ii)(F), a par-
ticipating FFI that maintains an account of
a nonparticipating FFI must report to the
IRS foreign reportable amounts paid to or
with respect to the account for each of
calendar years 2015 and 2016. A foreign
reportable amount is defined in the 2014
temporary regulations as a foreign source
payment described in § 1.1471-4(d)

(4)(iv) (which includes gross proceeds).
In lieu of reporting foreign reportable
amounts, a participating FFI may report
all income, gross proceeds, and redemp-
tions (irrespective of source) paid to the
nonparticipating FFI's account by the par-

ticipating FFI during the year. Under a
transitional rule in § 1.1471-4(d)(7)
(ii)(B), a participating FFI is not required
to report gross proceeds paid to a U.S.
account or an account held by an owner-
documented FFI in the 2015 calendar
year. As announced in Notice 2016-08,
these final regulations provide that a par-
ticipating FFI is not required to report
gross proceeds from the sale or redemp-
tion of property paid or credited to a cus-
todial account that are paid to or with
respect to an account held by a nonpartic-
ipating FFI for calendar year 2015. This
exception applies regardless of whether
the FFI is reporting foreign reportable
amounts or all income, gross proceeds,
and redemptions. These final regulations
also remove an incorrect reference to a
registered deemed-compliant FFI in the
first sentence of § 1.1471-4(d)(2)(ii)(F).

##### iii. Reporting of accounts under section 1471(c)(1)-Accounts held by U.S. owned foreign entities

Under the 2013 final regulations, a par-
ticipating FFI is required to report each
U.S. account, which is defined as an ac-
count held by one or more specified U.S.
persons or U.S. owned foreign entities.
With respect to U.S. owned foreign enti-
ties, the Treasury Department and the IRS
intended for participating FFIs to report
only substantial U.S. owners of NFFEs
that are passive NFFEs (defined in
§ 1.1471-1(b)(94)). Accordingly, these fi-
nal regulations revise the reporting re-
quirements for participating FFIs to clar-
ify that FFIs are required to report on
accounts held by passive NFFEs that are
U.S. owned foreign entities. Conforming
changes have also been made throughout
these final regulations.

iv. Election to perform chapter 61
reporting-In general-Election to
report in a manner similar to section
6047(d)

The 2013 final regulations allow a par-
ticipating FFI to elect to report cash value
insurance contracts or annuity contracts
that are U.S. accounts in a manner similar
to section 6047(d), but require that such
reporting include the account balance or
value of the account. In contrast, a partic-
ipating FFI that elects to perform chapter

61 reporting on a U.S. account other than
a cash value insurance contract or annuity
contract does not need to report the ac-
count balance or value. These final regu-
lations remove the requirement for an FFI
that elects to report a U.S. account that is
a cash value insurance contract or annuity
contract under section 6047(d) to report
the account balance or value in order to
achieve parity with the election to report
other U.S. accounts under chapter 61. This
revision reduces burden on FFIs electing
to report U.S. accounts that are cash value
insurance contracts or annuity contracts
on Form 1099-R, "Distributions from
Pensions, Annuities, Retirement or Profit-
Sharing Plans, IRAs, Insurance Contracts,
etc.," in lieu of Form 8966.

4\. Expanded Affiliated Group
Requirements-Limited Branches and
Limited FFIs

i. Term of limited branch status and
limited FFI status (transitional)

The 2014 temporary regulations re-
quire that each member of an expanded
affiliated group have a chapter 4 status of
participating FFI, deemed-compliant FFI,
or exempt beneficial owner in order for
any member of such group to obtain a
chapter 4 status of participating FFI or
registered deemed-compliant FFI. Each
member of the group (except a certified
deemed-compliant FFI or exempt benefi-
cial owner) must also agree to the status
for which it applies for all of its branches.
For a transitional period, an expanded af-
filiated group may include an FFI that
cannot comply with the requirements of a
participating FFI if certain conditions
specified in the regulations are satisfied
(limited FFI). Another transitional rule al-
lows an FFI to have a branch that cannot
satisfy all the requirements of a participat-
ing FFI if certain requirements specified
in the regulations are satisfied (limited
branch).

Under the 2013 final regulations, the
transitional period for limited branch or
limited FFI status expires on December
31, 2015. In Notice 2015-66, the Trea-
sury Department and the IRS announced
that this transitional period will be ex-
tended in order to provide FFIs and other
stakeholders additional time to determine

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whether to continue operating in jurisdic-
tions where limited branches or limited
FFIs exist. Accordingly, these final regu-
lations extend the availability of limited
branch status and limited FFI status until
December 31, 2016.

##### ii. Conditions for limited branch and limited FFI status

One of the conditions in the 2013 final
regulations for limited FFI or limited
branch status is that the FFI or branch
agree that it will not open accounts that it
is required to treat as U.S. accounts or
accounts held by nonparticipating FFIs,
including accounts transferred from any
member of its expanded affiliated group
(and, with respect to a limited branch, any
other branch of the FFI). A comment
noted that this restriction prevents certain
FFIs from agreeing to the conditions of
limited status. In response to this com-
ment and as previewed in Notice 2014-
33, these final regulations relax this re-
striction by permitting a limited FFI or
limited branch to open U.S. accounts for
persons resident in the same jurisdiction
in which the limited FFI is a resident or
organized, or the limited branch is located
or operating, and accounts for nonpartici-
pating FFIs that are resident in the same
jurisdiction, provided that: (1) the limited
FFI or limited branch does not solicit U.S.
accounts or accounts for nonparticipating
FFIs from persons not resident in the same
jurisdiction in which such limited FFI is
resident or organized or such limited
branch is located or operating; and (2) the
FFI or branch is not used by any FFI in its
expanded affiliated group to circumvent
the obligations of such FFI under section
1471.

##### iii. Conditions for limited FFI status- Registration

A comment stated that certain jurisdic-
tions prohibit FFIs resident in, or orga-
nized under the laws of, the jurisdiction
from registering with the IRS for the sta-
tus of limited FFI. As previewed in Notice
2015-66, these final regulations provide
that a prohibition from registration will
not prevent an FFI from becoming a lim-
ited FFI if certain conditions specified in
these final regulations are satisfied. A

member of the FFI's expanded affiliated
group that is a U.S. financial institution,
participating FFI, or reporting Model 1
FFI must register on the FATCA registra-
tion website as a lead FI and identify the
FFI as a limited FFI. If the limited FFI is
prohibited from being identified by its le-
gal name on the FATCA registration web-
site, the lead FI may use the term limited
FFI in place of the FFI's name and indi-
cate the FFI's jurisdiction of residence or
organization. By identifying a limited FFI
on its FATCA registration as described in
the preceding sentences, the lead FI is
confirming that the limited FFI has repre-
sented that it will meet the conditions for
limited FFI status and has agreed to notify
the lead FI within 30 days of the date that
the FFI ceases to meet the requirements of
a limited FFI or the date that the FFI can
comply with the requirements of a partic-
ipating FFI or deemed-compliant FFI (in
which case the FFI will separately register
for that status). If the lead FI receives a
notification described in the preceding
sentence or otherwise knows that the lim-
ited FFI has not complied with the condi-
tions for limited FFI status or can comply
with the requirements of a participating
FFI or deemed-compliant FFI, these final
regulations require the lead FI to remove
the FFI from its registration and maintain
a record of the date on which the FFI
ceased to be a limited FFI and (if appli-
cable) the circumstances of the limited
FFI's non-compliance, which will be
available to the IRS upon request.

#### 5. Verification

##### i. Certification of compliance-In general

The 2013 final regulations provide that
the responsible officer of a participating
FFI must submit the certification of com-
pliance required in § 1.1471-4(f)(3) to the
IRS six months following the end of each
certification period. As previewed in No-
tice 2016-08, to conform the time for
submitting the certification of compliance
to the time specified in the FFI agreement,
these final regulations provide that the
certification of compliance must be sub-
mitted on or before July 1 of the calendar
year following the end of each certifica-
tion period. The IRS intends to publish

instructions for making this certification,
which will require an FFI to complete and
submit the certification electronically
through the FATCA registration website.
Accordingly, these final regulations spec-
ify that a responsible officer of a partici-
pating FFI must make a certification of
effective internal controls or qualified cer-
tification on the form and in the manner
prescribed by the IRS.

In addition, § 1.1471-4(f)(3)(i) states
that if the participating FFI has failed to
remediate any material failures as of
the date of the certification, the FFI must
make the qualified certification de-
scribed in § 1.1471-4(f)(3)(iii). How-
ever, § 1.1471-4(f)(3)(iii) provides that
the responsible officer must make the
qualified certification if it has identified
either an event of default or a material
failure that the participating FFI has not
corrected as of the date of the certifica-
tion. These final regulations conform
these sections by modifying § 1.1471-
4(f)(3)(i) so that a qualified certification
must be made if the FFI has identified an
event of default (in addition to a mate-
rial failure) that has not been corrected
as of the date of the certification.

##### ii. IRS review of compliance-General inquiries

The 2014 temporary regulations pro-
vide that the IRS, based upon the infor-
mation reporting forms described in
§ 1.1471-4(d)(3)(v), (d)(5)(vii), or (d)(6)
(iv) (Form 8966 or Form 1099) filed
with the IRS for each calendar year, may
request additional information with re-
spect to the information reported on the
forms or may request the account state-
ments described in § 1.1471-4(d)(4)(v).
The 2014 temporary regulations are si-
lent on whether the IRS can request such
information if the FFI does not file in-
formation reporting forms for the calen-
dar year.

As described in the preamble to the
2014 temporary regulations, the 2014
temporary regulations add a second sen-
tence to § 1.1471-4T(f)(4)(i) to "further
allow the IRS to request additional infor-
mation to determine an FFI's compliance
with the applicable FFI agreement." The
Treasury Department and the IRS did not
intend for the 2014 temporary regulations

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to be limited such that the IRS cannot
request information if the FFI fails to file
the specified information reporting forms.
Thus, these final regulations clarify that
IRS requests for additional information
under § 1.1471-4(f)(4)(i) may be based
on the absence of any information report-
ing forms filed by the FFI with the IRS for
the calendar year, and that the IRS may
request additional information with re-
spect to the information reported or re-
quired to be reported, including confirma-
tion that the FFI has no reporting
requirements.

E. Comments and changes to § 1.1471-
5-Definitions applicable to section
1471

##### 1. Definition of U.S. Account

Comments requested that the definition
of a U.S. account exclude accounts held
by U.S. individuals resident in the same
jurisdiction as the FFI with which the ac-
count is held. This comment is not ad-
opted. The U.S. federal income tax system
largely relies on voluntary compliance,
and third party information reporting of
the financial accounts of U.S. taxpayers is
used to encourage voluntary compliance.
For this reason, U.S. financial institutions
are generally required to report under
chapter 61 U.S. and foreign source invest-
ment income paid to account holders that
are U.S. individuals. However, before
FATCA, FFIs (in particular, non-U.S.
payors) generally were not required to re-
port foreign source payments made to
U.S. taxpayers. The information reporting
required by FATCA is intended to address
the use of foreign accounts to facilitate tax
evasion, and also to strengthen the integ-
rity of the voluntary compliance system
by placing U.S. taxpayers with accounts
held with FFIs in a comparable position to
U.S. taxpayers with accounts held with
U.S. financial institutions. This is the case
even for U.S. taxpayers resident abroad,
since U.S. citizens and U.S. resident
aliens are subject to U.S. income tax on
their worldwide income regardless of
where they reside and regardless of
whether their accounts are maintained by
U.S. financial institutions or FFIs. The
Treasury Department and the IRS have
also decided that the risk of U.S. tax

avoidance by a U.S. taxpayer holding an
account with an FFI exists regardless of
whether the U.S. taxpayer holds an ac-
count in his or her foreign country of
residence or another foreign country.

##### 2. Definition of FFI

Under the 2013 final regulations, FFI
means, with respect to any entity that is
not resident in a country that has in effect
a Model 1 IGA or Model 2 IGA, any
financial institution that is a foreign entity;
and, with respect to any entity that is
resident in a country that has in effect a
Model 1 IGA or Model 2 IGA, FFI means
any entity that is treated as a financial
institution pursuant to such IGA. Because
some IGAs use an organizational test,
rather than a residence test, to determine
whether a financial institution is covered
by the IGA, these final regulations modify
the definition of FFI to refer to an entity
that is (or is not) resident in, or organized
under the laws of, as applicable, a country
that has in effect an IGA. In addition, with
respect to an entity resident in a country
that has in effect a Model 1 or Model 2
IGA, these final regulations modify the
definition of FFI to mean an entity that is
treated as a FATCA Partner Financial In-
stitution under the IGA, not any entity that
is treated as a financial institution under
the IGA, because the term financial insti-
tution in the IGAs includes a U.S. finan-
cial institution. Finally, these final regula-
tions cross-reference § 1.1471-2(a)(2)(v)
for when a foreign branch of a U.S. finan-
cial institution is an FFI. See section I.B.1
of this Summary of Comments and Expla-
nation of Revisions and Provisions for an
explanation of the changes to § 1.1471-
2(a)(2)(v).

##### 3. Definition of Financial Institution

i. Exclusions-Excepted nonfinancial
group entities-In general

One of the requirements for an ex-
cepted nonfinancial group entity is that the
entity cannot be formed in connection
with or availed of by certain arrangements
or investment vehicles. The 2014 tempo-
rary regulations provide that an entity will
not be considered to have been formed in
connection with or availed of by an ar-

rangement or investment vehicle if the
entity existed at least six months prior to
its acquisition by the arrangement or in-
vestment vehicle and, prior to the acqui-
sition, regularly conducted activities in the
ordinary course of business. A comment
noted that the phrase "ordinary course of
business" is unclear with respect to a
holding company, captive finance com-
pany, or treasury center. In response to the
comment, these final regulations clarify
the 2014 temporary regulations by cross-
referencing § 1.1471-5(e)(5)(i)(C), (D),
or (E) (as applicable) to describe the ac-
tivities of a holding company, captive fi-
nance company, or treasury center.

##### ii. Exclusions-Excepted nonfinancial group entities-Nonfinancial group

A comment noted that the treatment of
receivables related to financing to custom-
ers as passive assets makes it difficult for
an expanded affiliated group to qualify as
a nonfinancial group, even if the receiv-
ables are originated by a captive finance
company in the expanded affiliated group.
The Treasury Department and the IRS be-
lieve that certain receivables related to
financing to customers should not make a
group ineligible to qualify as a nonfinan-
cial group because customer financing is
common in some nonfinancial businesses
and is not necessarily indicative of a fi-
nancial business. Further, customer fi-
nancing is a permissible activity for a cap-
tive finance company, but status as a
captive finance company is only relevant
for qualifying as a nonfinancial group en-
tity. Therefore, these final regulations ex-
clude from the passive income and asset
tests in § 1.1471-5(e)(5)(i)(B)(1) receiv-
ables that are notes issued by customers to
a member of the expanded affiliated group
that is a captive finance company to fi-
nance the customer's purchase of inven-
tory or goods manufactured by a member
of the expanded affiliated group.

A comment noted that it is difficult for
a nonfinancial group operating on a non-
calendar fiscal year basis to measure its
income and assets on a calendar year basis
in order to determine whether it meets the
income and asset tests in § 1.1471-
5(e)(5)(i)(B)(1). In response to the com-
ment, these final regulations provide that
the income and asset tests should be per-

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formed for the three-year period (or the
period during which the expanded affili-
ated group has been in existence, if
shorter) ending December 31 (or the end
of the fiscal year of one or more members
of the group) of the year preceding the
year in which the determination is made.

A comment requested elimination of
the requirement that each FFI in a nonfi-
nancial group be a participating FFI or
deemed-compliant FFI. The Treasury De-
partment and the IRS believe that a limi-
tation on the types of FFIs that can be
members of nonfinancial groups is neces-
sary to prevent an excepted nonfinancial
group entity from acting as a "blocker" for
a nonparticipating FFI. The Treasury
Department and the IRS also note that
the rules for a participating FFI group
similarly prohibit nonparticipating FFI
members. However, since the 2014 tem-
porary regulations permit participating
FFI groups to include exempt beneficial
owners (see § 1.1471-4T(e)(1)), these fi-
nal regulations provide the same allow-
ance for exempt beneficial owners to be
members of nonfinancial groups.

A comment described situations in
which an acquisition of an entity by a
member of the expanded affiliated group
or a change in chapter 4 status of a mem-
ber of an expanded affiliated group may
disqualify the group as a nonfinancial
group. The comment requested a grace
period for certain unintentional disqualifi-
cations from nonfinancial group status.
The Treasury Department and the IRS
agree with the comment and have deter-
mined that the rules for an acquisition or a
change in chapter 4 status of a member of
a nonfinancial group should not be stricter
than those for a participating FFI group.
The FFI agreement allows 90 days for a
lead FI of an FFI group to inform the IRS
of an acquisition or sale of a member of
the FFI group or a change affecting the
chapter 4 status of a member of the group
before the acquisition or change becomes
an event of default. In response to the
comment and for consistency with the
treatment of FFI groups, these final regu-
lations provide that a change affecting the
chapter 4 status of a member of a nonfi-
nancial group, or an acquisition by a
member of the expanded affiliated group
of an FFI that does not have a permissible
chapter 4 status, disqualifies the group as

a nonfinancial group 90 days after such
change or acquisition.

4\. Deemed-Compliant FFIs

i. Preexisting account certifications by
registered deemed-compliant FFIs

The 2013 final regulations require a
registered deemed-compliant FFI that is
a local FFI or restricted fund to make a
certification to the IRS regarding its re-
view of preexisting accounts that it is re-
quired to review as a condition of its sta-
tus as a registered deemed-compliant FFI.
The certification by a restricted fund re-
garding its preexisting accounts must be
completed by the later of December 31,
2014, or six months after the date the FFI
registers as a deemed-compliant FFI, but
no due date for the certification of a local
FFI regarding its preexisting accounts is
specified. In Notice 2016-08, the Trea-
sury Department and the IRS announced
that the due date for the preexisting ac-
count certifications of restricted funds and
local FFIs would be modified to on or
before July 1 of the calendar year follow-
ing the end of the certification period to
provide FFIs with additional time to pre-
pare their certifications and to streamline
compliance. Accordingly, these final reg-
ulations provide that a preexisting account
certification by a local FFI or restricted
fund must be submitted by the due date of
the FFI's first certification of compliance
required under § 1.1471-5(f)(1)(ii)(B).
See section I.E.4.iii of this Summary of
Comments and Explanation of Revisions
and Provisions for the timing of certifica-
tions of compliance by registered deemed-
compliant FFIs.

##### ii. Registered deemed-compliant FFIs- Sponsored investment entities and controlled foreign corporations

Under the 2013 final regulations, an
FFI may not be a sponsored investment
entity, sponsored controlled foreign cor-
poration, or sponsored, closely held in-
vestment vehicle if it is a QI, WP, or WT.
In Notice 2016-42, 2016-29 I.R.B. 67,
the Treasury Department and the IRS an-
nounced that they are considering includ-
ing in the WP Agreement an allowance
for consolidated periodic reviews and cer-
tifications for WPs that are FFIs, similar to

the allowance for QIs (see section
10.02(B) of the QI Agreement in Revenue
Procedure 2014-39, 2014-29 I.R.B. 150
(as may be amended)). In order to accom-
modate an allowance for consolidated pe-
riodic reviews and certifications for WPs,
these final regulations provide that a WP
may be a sponsored investment entity to
the extent permitted in the WP Agreement
if the WP otherwise meets the require-
ments for status as a sponsored investment
entity.

The 2013 final regulations provide that
a sponsoring entity of a sponsored invest-
ment entity or controlled foreign corpora-
tion must be authorized to act on behalf of
the FFI "to fulfill the requirements of the
FFI agreement." See § 1.1471-5(f)(1)(i)
(F)(3)(i). However, the 2013 final regula-
tions also provide that the sponsoring en-
tity must agree to perform, on behalf of
the FFI, "all due diligence, withholding,
reporting, and other requirements that the
FFI would have been required to perform
if it were a participating FFI." See
§ 1.1471-5(f)(1)(i)(F)(3)(iv). Because a
sponsored FFI does not enter into an FFI
agreement with the IRS, these final
regulations modify § 1.1471-5(f)(1)(i)
(F)(3)(i) to conform with § 1.1471-
5(f)(1)(i)(F)(3)(iv).

The preamble to the 2014 temporary
regulations states that the 2014 temporary
regulations revise the 2013 final regula-
tions to clarify that a sponsoring entity
will not be jointly and severally liable for
a sponsored FFI's withholding and report-
ing obligations under chapter 4, even if
the sponsoring entity performs these re-
sponsibilities on behalf of such FFI, un-
less the sponsoring entity is also a with-
holding agent that is separately liable for
such obligations. The text of the 2014
temporary regulations, however, inaccu-
rately provides that a sponsoring entity of
a sponsored FFI will not be liable for any
failure to comply with the obligations
contained in § 1.1471-5(f)(1)(i)(F)(3) or
(f)(2)(iii)(D) (as applicable) unless the
sponsoring entity is a withholding agent
that is separately liable for the failure to
withhold on or report with respect to "a
payment made to the sponsored FFI" (em-
phasis added). In order to correct this in-
consistency between the preamble and the
text of the 2014 temporary regulations,
these final regulations revise the 2014

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temporary regulations to provide that a
sponsoring entity that is a withholding
agent is separately liable for the failure to
withhold on or report with respect to a
payment made by the sponsoring entity on
behalf of (rather than to) a sponsored FFI.
This revision does not affect a sponsoring
entity's liability as a withholding agent for
payments unrelated to the sponsoring en-
tity's obligations as a sponsoring entity of
a sponsored FFI. This change is made in
§ 1.1471-5(f)(1)(i)(F)(5) for sponsoring
entities of sponsored investment entities
and controlled foreign corporations and in
§ 1.1471-5(f)(2)(iii)(E) for sponsoring
entities of sponsored, closely held invest-
ment vehicles.

iii. Registered deemed-compliant FFIs-
Procedural requirements for registered
deemed-compliant FFIs-Certification
requirement

Under the 2014 temporary regulations,
a responsible officer of a registered
deemed-compliant FFI must periodically
certify to the IRS that all of the require-
ments of the deemed-compliant status
claimed by the FFI have been satisfied
since the later of the date that the regis-
tered deemed-compliant FFI registers, or
June 30, 2014. The 2014 temporary regu-
lations provide that the certification is
made every three years, but do not specify
the date when the certification is due. The
2014 temporary regulations also allow a
registered deemed-compliant FFI to make
a certification on behalf of all registered
deemed-compliant FFIs in the same ex-
panded affiliated group.

As previewed in Notice 2016-08,
these final regulations provide that a reg-
istered deemed-compliant FFI makes its
certification on or before July 1 of the
calendar year following the end of each
certification period (consistent with the
timing for certifications of compliance
made by participating FFIs included in
these final regulations). These final regu-
lations also provide that the first certifica-
tion period begins on the later of the date
the FFI registers as a deemed-compliant
FFI and is issued a GIIN, or June 30,
2014, and ends on the close of the third
full calendar year following this date.
Each subsequent certification period is the
three calendar year period following the

previous certification period. Under these
final regulations, the FFI will certify to its
compliance with the requirements of the
deemed-compliant status during the certi-
fication period (rather than all periods
since the later of the date that the FFI
registers, or June 30, 2014).

In addition, these final regulations pro-
vide that the certification of compliance
must be made on the form and in the
manner prescribed by the IRS (consistent
with the requirements for certifications of
compliance by participating FFIs included
in these final regulations). These final reg-
ulations also clarify that if a responsible
officer of a registered deemed-compliant
FFI makes the certification collectively
for the FFI's expanded affiliated group,
the certification must provide that all
of the requirements for the deemed-
compliant status claimed by each member
of the expanded affiliated group that is a
registered deemed-compliant FFI (other
than a member that is a reporting Model 1
FFI or deemed-compliant FFI under an
applicable Model 1 IGA) have been satis-
fied during the certification period.

iv. Certified deemed-compliant FFIs-
Sponsored, closely held investment
vehicles

A comment requested a three-year
grace period during which a sponsored,
closely held investment vehicle that be-
comes noncompliant with the require-
ments of its deemed-compliant status may
retain its chapter 4 status. The Treasury
Department and the IRS believe that a
bright line rule is necessary for enforce-
ment with respect to certified deemed-
compliant FFIs because these entities do
not register or certify directly to the IRS
regarding their compliance. Further, the
Treasury Department and the IRS do not
believe that the consequences of a termi-
nation of deemed-compliant status would
be unduly burdensome for these entities
because an FFI that is unable to meet the
requirements of a sponsored, closely held
investment vehicle may nevertheless be-
come compliant with chapter 4 and avoid
being withheld on by entering into an FFI
agreement with the IRS. Therefore, this
comment is not adopted.

v. Certified deemed-compliant FFIs-
Limited life debt investment entities
(transitional)

In response to comments to the 2013
final regulations, the 2014 temporary reg-
ulations include significant revisions to
the requirements for limited liability debt
investment entities (LLDIEs) in order to
accommodate industry practices and ex-
pand the types of securitization vehicles
that qualify as LLDIEs. Since the 2014
temporary regulations were published, the
Treasury Department and the IRS have
received additional comments requesting
modifications to the requirements for
LLDIEs. One comment noted that it is
unclear under the laws of certain foreign
jurisdictions whether a person has author-
ity to fulfill the requirements of a partici-
pating FFI. The comment requested that
an FFI be permitted to base the determi-
nation of authority solely on whether or
not the FFI's trust documents contain an
explicit reference to the obligations of a
participating FFI. The Treasury Depart-
ment and the IRS do not believe that this
would be an appropriate test because it is
unlikely that a trust document would have
an explicit reference to the obligations of
a participating FFI prior to 2013, thereby
undermining the rule.

The 2014 temporary regulations pro-
vide that substantially all of the assets of
an LLDIE must consist of debt instru-
ments or interests therein. The Treasury
Department and the IRS received com-
ments that borrowers on a debt instrument
held by the LLDIE may encounter finan-
cial trouble such that the lender may fore-
close or restructure the debt or the bor-
rower may enter bankruptcy proceedings.
Under these circumstances, the LLDIE
may hold non-debt assets, such as equity
or real estate, that may represent a signif-
icant portion of the LLDIE's assets during
the wind down period. The comments re-
quested that "debt instruments or interests
therein" include equity or other non-debt
assets acquired upon a foreclosure or re-
structuring of the debt. The Treasury De-
partment and the IRS agree that an entity
should not lose its status as an LLDIE
because it holds certain non-debt assets as
a result of foreclosures or restructurings.
Therefore, these final regulations revise
the 2014 temporary regulations to provide

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that debt instruments or interests therein
include assets acquired pursuant to a re-
structuring, workout, or similar event with
respect to a debt instrument.

vi. Certified deemed-compliant FFIs-
Investment advisors and investment
managers

The 2014 temporary regulations added
a category of certified deemed-compliant
FFI for certain investment entities de-
scribed in § 1.1471-5(e)(4)(i)(A) that do
not maintain financial accounts under the
heading "Investment advisors and invest-
ment managers." A comment noted that
an investment entity may meet the sub-
stantive requirements of this category
even if it is not an investment advisor or
investment manager. The Treasury De-
partment and the IRS agree with the com-
ment that the rule in the 2014 temporary
regulations is not limited to investment
entities that are investment advisors or
investment managers. For clarity and in
response to this comment, these final reg-
ulations change the heading of § 1.1471-
5(f)(2)(v) to "Certain investment entities
that do not maintain financial accounts."

F. Comments and changes to § 1.1472-
1-Withholding on NFFEs

## 1. In General

Under § 1.1471-2(a)(3), participating
FFIs that comply with the withholding
requirements of § 1.1471-4(b), exempt
beneficial owners, section 501(c) enti-
ties described in § 1.1471-5(e)(5)(v),
and nonprofit organizations described in
§ 1.1471-5(e)(5)(vi) are deemed to sat-
isfy their withholding obligations under
section 1471(a) and § 1.1471-2. How-
ever, under § 1.1472-1(a), only partici-
pating FFIs are deemed to satisfy their
withholding obligations under section
1472(a). These final regulations revise
§ 1.1472-1(a) to add exempt beneficial
owners, section 501(c) entities de-
scribed in § 1.1471-5(e)(5)(v), and non-
profit organizations to coordinate with
§ 1.1471-2(a)(3). In addition, these final
regulations cross-reference § 1.1471-
5(f) for when deemed-compliant FFIs
are deemed to satisfy their withholding
obligations under section 1472(a) with

respect to withholdable payments to ac-
count holders that are NFFEs.

2\. Exceptions-Beneficial Owner that is
an Excepted NFFE

A comment requested an exception
from withholding on withholdable pay-
ments that are property and casualty in-
surance premiums made to "hedge fund
reinsurance companies." According to
the comment, such companies generally
would not have any substantial U.S. own-
ers because they do not allow a U.S. per-
son to hold 10 percent or more of the
voting stock in order prevent the company
from being a controlled foreign corpora-
tion. The comment assumes that the entity
is a NFFE but does not analyze the issue
of whether the entity is properly charac-
terized as an FFI or NFFE. Under
§ 1.1471-5(e)(4)(i)(C), an entity that
functions or holds itself out as a hedge
fund is an FFI. As an FFI, a hedge fund
that has agreed to the terms of the FFI
agreement would be required to report
U.S. accounts, which are not limited to
U.S. persons that hold 10 percent or more
of the fund and would generally include
any specified U.S. person that owns, di-
rectly or indirectly, more than zero per-
cent of the investment entity. In the case
of an insurance company that is a passive
NFFE, it may elect to be a direct reporting
NFFE and report any substantial U.S.
owners (which are defined as specified
U.S. persons that hold 10 percent of the
stock by vote or value) to the IRS if the
NFFE does not wish to disclose its sub-
stantial U.S. owners to a withholding
agent. In addition, if a passive NFFE has
no substantial U.S. owners, it may certify
that to a withholding agent to avoid with-
holding on withholdable payments. The
Treasury Department and the IRS believe
that the chapter 4 regulations already mit-
igate any burden imposed by FATCA on
passive NFFEs by providing an exception
for direct reporting NFFEs. Therefore,
these final regulations do not adopt this
comment.

## 3. Exceptions-Beneficial Owner that is an Excepted NFFE-Active NFFE

Under the 2014 temporary regulations,
a NFFE satisfies the asset test to be an

active NFFE if less than 50 percent of the
weighted average percentage of assets
(tested quarterly) held by the NFFE are
assets that produce or are held for the
production of passive income, as deter-
mined after the application of § 1.1472-
1(c)(1)(iv)(B). To remove ambiguity,
these final regulations clarify that a NFFE
satisfies the asset test if the weighted av-
erage of the percentage of assets held by it
that produce or are held for the production
of passive income (weighted by total as-
sets and measured quarterly) is less than
50 percent, as determined after the appli-
cation of § 1.1472-1(c)(1)(iv)(B). These
final regulations also clarify that the asset
test is applied to the prior calendar or
fiscal year. Finally, these final regulations
permit a NFFE to calculate its passive
assets using any accounting period per-
mitted under § 1.1472-1(c)(1)(iv)(C),
provided the NFFE applies a uniform
method of measuring assets for the year.

## 4. Exceptions-Definition of Direct Reporting NFFE

Under the 2014 temporary regulations,
a direct reporting NFFE must make a pe-
riodic certification to the IRS regarding its
compliance with the requirements of a
direct reporting NFFE within each six
month period following the end of each
certification period. The 2014 temporary
regulations provide that the first certifica-
tion period begins on the date a GIIN is
issued to the NFFE. To account for GIINs
issued before the implementation of
FATCA, and for consistency with certifi-
cations by other entities, these final regu-
lations amend the date that the first certi-
fication period begins for a direct
reporting NFFE to the later of the date a
GIIN is issued to the NFFE, or June 30,
2014. These final regulations also require
that the NFFE make the periodic certifi-
cation on the form and in the manner
prescribed by the IRS (consistent with
other certifications of compliance in-
cluded in these final regulations). Finally,
these final regulations provide that the
certification will be due on or before July
1 of the calendar year following the end of
each certification period to conform to the
due dates for the certifications of compli-
ance by participating FFIs and registered

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deemed-compliant FFIs included in these
final regulations.

5\. Exceptions-Election to be Treated as
a Direct Reporting NFFE-Revocation
of Election

Under the 2014 temporary regula-
tions, a NFFE can elect to be treated as
a direct reporting NFFE by registering
with the IRS on Form 8957, "Foreign
Account Tax Compliance Act (FATCA)
Registration," or the FATCA registra-
tion website. The 2014 temporary regu-
lations provide that this election can
only be revoked if the NFFE obtains
consent from the Commissioner and,
upon revocation, the NFFE must notify
its sponsoring entity (for a NFFE that is
a sponsored direct reporting NFFE) and
all relevant withholding agents of the
revocation. The 2014 temporary regula-
tions also provide that the IRS may re-
voke the direct reporting status of a
NFFE upon an event of default.

The Treasury Department and the
IRS have determined that the require-
ment for a direct reporting NFFE to
obtain consent to revoke its direct re-
porting NFFE status is unnecessary.
Therefore, these final regulations re-
move this requirement and provide that
a direct reporting NFFE may revoke its
election by canceling its registration ac-
count on the FATCA registration web-
site and by notifying the IRS in such
manner as the IRS may prescribe in the
Instructions for Form 8966. Further,
these final regulations amend the notifi-
cation requirements in the 2014 tempo-
rary regulations to require a NFFE to
send notification within 30 days of the
revocation to each financial institution
(in addition to each withholding agent)
from which it receives payments or with
which it holds an account for which the
NFFE provided a withholding certificate
or written statement representing its sta-
tus as a direct reporting NFFE. This
amendment reflects that a NFFE may
have provided documentation of its sta-
tus to a financial institution that is not a
withholding agent, and that in certain
cases a NFFE is permitted to provide a
written statement (rather than a with-
holding certificate).

G. Comments and changes to § 1.1473-
1-Section 1473 definitions

### 1. Definition of Withholdable Payment-In General

Under the 2013 final regulations, the
term withholdable payment means any
payment of U.S. source fixed or determin-
able annual or periodical (FDAP) income,
and for sales or other dispositions occur-
ring after December 31, 2016, any gross
proceeds from the sale or other disposition
of any property of a type that can produce
interest or dividends that are U.S. source
FDAP income. After the publication of
the 2013 final regulations, a comment
stated that additional time is needed to
implement withholding on gross pro-
ceeds. As announced in Notice 2015-66,
these final regulations modify the defini-
tion of withholdable payment to include,
for sales or other dispositions occurring
after December 31, 2018, any gross pro-
ceeds from the sale or other disposition of
any property of a type that can produce
interest or dividends that are U.S. source
FDAP income.

2\. Definition of Withholdable
Payment-Payments Not Treated as
Withholdable Payments-Offshore
Payments of U.S. Source FDAP Income
Prior to 2017 (Transitional)

The 2013 final regulations under sec-
tion 1473 provide an exclusion from the
definition of withholdable payments for
certain non-intermediated offshore pay-
ments of U.S. source FDAP income made
prior to January 1, 2017. Under the 2014
temporary regulations, this transitional
rule was expanded to apply to a non-U.S.
insurance broker that pays insurance and
reinsurance premiums to a foreign insur-
ance or reinsurance company. Comments
requested that the transitional rule for off-
shore payments made by non-U.S. insur-
ance brokers be extended for another year
to allow non-U.S. brokers additional time
to develop withholding and information
reporting systems. A comment requesting
further guidance about the sourcing of
premiums was also submitted.

Withholding under chapter 4 is in-
tended to incentivize foreign entities to
report certain information about U.S. per-
sons that make use of offshore accounts or

passive NFFEs. The preamble to the 2013
final chapter 4 regulations stated that
"[t]his information reporting strengthens
the integrity of the U.S. voluntary tax
compliance system by placing U.S. tax-
payers that have access to international
investment opportunities on an equal foot-
ing with U.S. taxpayers that do not have
such access or otherwise choose to invest
within the United States." 78 FR 5874.
Withholding under chapter 4 is broad and
may apply whenever a withholding agent,
whether U.S. or foreign, makes a with-
holdable payment to ensure that the infor-
mation reporting objectives of chapter 4
are met. As a result, chapter 4 withholding
under sections 1471 and 1472 may apply
to a withholdable payment made by a non-
U.S. payor to a foreign payee. Consistent
with these information reporting objec-
tives of chapter 4, a passive NFFE may
avoid being subject to withholding under
chapter 4 by furnishing the documentation
described in § 1.1471-3(d)(12) to its with-
holding agent or by electing to be treated
as a direct reporting NFFE and providing
information directly to the IRS.

The Treasury Department and the
IRS have not accepted the comment to
extend further the offshore payment
transition rule to exclude from the def-
inition of withholdable payments insur-
ance and reinsurance premiums that are
U.S. source FDAP income and paid by a
non-U.S. broker to a foreign insurance
or reinsurance company. A privately-
held foreign insurance or reinsurance
company is treated as a passive NFFE
that is required to report information
about its substantial U.S. owners, or to
certify that it does not have any such
owners, in order to avoid chapter 4 with-
holding on withholdable payments. The
Treasury Department and the IRS have
not excluded privately-held insurance or
reinsurance companies from treatment
as passive NFFEs because of concerns
that these entities may be used to avoid
U.S. taxation. Treating U.S. source pre-
miums paid with respect to an insurance
or reinsurance contract as withholdable
payments will help to ensure that the
IRS receives information about the sub-
stantial U.S. owners, if any, of these
insurance or reinsurance companies,
which will strengthen IRS enforcement
efforts with respect to the use of foreign

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insurance and reinsurance companies
for tax avoidance. These requirements
were promulgated in the 2013 final reg-
ulations published on January 28, 2013,
which provided a generous transition
period to allow for the development of
systems necessary to implement the reg-
ulations. Furthermore, because the tran-
sitional offshore payment rule does not
apply to U.S. brokers that pay insurance
and reinsurance premiums to a foreign
company, the expiration of the transition
rule will ensure equivalent treatment of
withholdable payments made by either a
U.S. or non-U.S. broker to a foreign
insurance or reinsurance company and
consistent documentation and informa-
tion reporting requirements under chap-
ter 4 for all withholding agents. In ad-
dition, the Treasury Department and the
IRS believe that guidance on sourcing
rules for premiums is beyond the scope
of chapter 4. The question of how insur-
ance and reinsurance premiums are
sourced is not unique to FATCA and the
determination may need to be made for
other purposes under the Code (for ex-
ample, for purposes of determining the
limitation on foreign tax credits under
section 904).

From a policy perspective, the ques-
tion of whether a foreign insurance or
reinsurance company is a passive for-
eign investment company within the
meaning of section 1297 is similar to the
question of whether the foreign insur-
ance or reinsurance company is a pas-
sive NFFE. On April 24, 2015, the Trea-
sury Department and the IRS published
proposed regulations (REG-108214-
15) in the Federal Register (80 FR
22954) regarding when a foreign insur-
ance company's income is excluded un-
der section 1297(b)(2)(B) from the def-
inition of passive income for purposes
of the passive foreign investment com-
pany rules. The Treasury Department
and the IRS continue to study these is-
sues. If the Treasury Department and the
IRS issue final regulations addressing
the issues raised by those proposed reg-
ulations, it is possible that the scope of
foreign insurance or reinsurance compa-
nies treated as passive NFFEs may be
modified or potentially conformed to the
scope of foreign insurance companies

treated as passive foreign investment
companies under such final regulations.

H. Comments and changes to
§ 1.1474-1-Liability for withheld tax
and withholding agent reporting

1\. Payments and Returns of Tax
Withheld-Use of Agents-Authorized
Agent

Under the 2013 final regulations, a
withholding agent must file Form 8655,
"Reporting Agent Authorization," with
the IRS if it appoints an agent to act as
its reporting agent for filing Form 1042
or making tax deposits and payments
with respect to Form 1042. A comment
suggested that Form 8655 should only
be required to be filed when an agent
files a Form 1042 in its own name (and
under its own EIN) on behalf of another
withholding agent. In response to the
comment, these final regulations amend
the 2013 final regulations to provide that
a withholding agent must file Form 8655
only when its agent files a Form 1042 as
the filer on behalf of the withholding
agent. This revision is also included in
final regulations under chapter 3 that are
published elsewhere in this issue of the
Bulletin.

### 2. Information Returns for Payment Reporting-Filing Requirement-In General

The 2014 temporary regulations re-
quire withholding agents to file Form
1042-S, "Foreign Person's U.S. Source
Income Subject to Withholding," to re-
port a chapter 4 reportable amount and to
furnish a copy of the form to the recipient
and any intermediary or flow-through entity.
The chapter 3 regulations include a similar
filing requirement for amounts subject to
reporting under chapter 3. The Treasury De-
partment and the IRS have determined that
withholding agents should be permitted to
send Forms 1042-S to recipients electroni-
cally for purposes of both chapters 3 and 4 if
certain requirements are met. These final
regulations allow electronic recipient copies
of Form 1042-S for chapter 4 purposes by
cross-referencing § 1.1461-1(c)(1)(i)(A)
(added in regulations published elsewhere in
this issue of the Bulletin).

3\. Additional Reporting Requirements
with Respect to U.S. Owned Foreign
Entities and Owner-Documented FFIs-
Reporting by Certain Withholding
Agents with Respect to Owner-
Documented FFIs

The 2014 temporary regulations re-
quire reporting by a withholding agent
that makes a withholdable payment to
an FFI that it treats as an owner-
documented FFI, regardless of whether
the owner-documented FFI is reported
by another FFI or withholding agent un-
der § 1.1471-4(d) or § 1.1474-1(i)(1).
These final regulations relieve a with-
holding agent of this reporting when: (1)
the withholding agent obtains from a
participating FFI or reporting Model 1
FFI receiving a withholdable payment
allocable to the owner-documented FFI
a certification that the FFI is reporting
for the year of the payment to the IRS all
of the information described in
§ 1.1471-4(d) or § 1.1474-1T(i)(1) (as
appropriate); and (2) the withholding
agent does not know or have reason to
know that the certification is incorrect or
unreliable. These final regulations also
amend the requirements for an FFI with-
holding statement to permit an FFI to
include the certification described in the
preceding sentence on the FFI's with-
holding statement.

Finally, the 2014 temporary regula-
tions do not allow a withholding agent
reporting under § 1.1474-1T(i)(1) on an
owner-documented FFI to request an ex-
tension of time to file Form 8966. How-
ever, an FFI that otherwise qualifies to
be an owner-documented FFI but in-
stead reports its accounts as a participat-
ing FFI on Form 8966 would be eligible
for the extensions of time to file Form
8966 provided in § 1.1471-4(d)(3)(vii).
In order to allow a withholding agent the
same period of time to report the ac-
counts of an owner-documented FFI as
the FFI could have if it performed its
own reporting, these final regulations
provide that such withholding agent
may request an automatic 90-day exten-
sion of time to file Form 8966 and,
under certain hardship conditions, an
additional 90-day extension.

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4\. Additional Reporting Requirements
with Respect to U.S. Owned Foreign
Entities and Owner-Documented FFIs-
Reporting by Certain Withholding
Agents with Respect to U.S. Owned
Foreign Entities that are NFFEs

The 2014 temporary regulations re-
quire reporting on Form 8966 by a with-
holding agent of information about any
substantial U.S. owners of a passive
NFFE to which the withholding agent
makes a withholdable payment, and re-
quire this reporting regardless of whether
the passive NFFE is reported by a partic-
ipating FFI as a U.S. account or by a
reporting Model 1 FFI as a U.S. reportable
account under an applicable IGA. To
eliminate duplicative reporting of U.S.
owners, these final regulations relieve a
withholding agent of reporting with re-
spect to a passive NFFE with one or more
substantial U.S. owners if: (1) the NFFE is
an account holder of a participating FFI or
a registered deemed-compliant FFI; (2)
the withholding agent obtains the certifi-
cation described in § 1.1471-3(c)(3)
(iii)(B)(2)(iv) (added by these final regu-
lations) that the FFI receiving the pay-
ment is reporting for the year of the
payment a passive NFFE with one or
more substantial U.S. owners (or, with
respect to a reporting Model 1 FFI or
reporting Model 2 FFI, one or more
controlling persons that are specified
U.S. persons, as defined in the applica-
ble IGA) as a U.S. account (other than a
non-consenting U.S. account or an ac-
count held by a recalcitrant account
holder) or U.S. reportable account (as
applicable); and (3) the withholding
agent does not know or have reason to
know that the certificate is unreliable or
incorrect. These final regulations also
modify the requirements for an FFI
withholding statement to provide that
the statement may include the FFI's cer-
tification described in the preceding sen-
tence. These modifications were pre-
viewed in the preamble to the FFI
agreement in Revenue Procedure 2014-
38.

The 2014 temporary regulations do not
provide an exception for intermediaries
and flow-through entities receiving a pay-
ment for a passive NFFE with one or more
substantial U.S. owners that are not re-
quired to report under § 1.1471-4(d) or an

applicable IGA, even though reporting by
those entities duplicates the reporting re-
quired of the withholding agent under
§ 1.1474-1(i)(2). To eliminate this dupli-
cative reporting, these final regulations
provide that an entity not subject to any
other coordination rule in § 1.1474-
1(i)(2) (including as described in the pre-
ceding paragraph) that is a flow-through
entity or an entity acting as an intermedi-
ary for a withholdable payment allocable
to a passive NFFE is not required report
on the substantial U.S. owners of the pas-
sive NFFE under § 1.1474-1(i)(2) if: (1)
the entity provides to the withholding
agent from which it receives the payment
documentation with respect to the passive
NFFE's substantial U.S. owners sufficient
for the withholding agent to report this
information under § 1.1474-1(i)(2); and
(2) the intermediary or flow-through en-
tity does not know or have reason to know
that the withholding agent does not report
this information.

I. Comments and changes to
§ 301.1474-1-Required use of
magnetic media for financial institutions
filing Form 1042-S or Form 8966-
Failure to file

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

#### J. Nonsubstantive clarifications and corrections

These final regulations include various
nonsubstantive clarifications and correc-
tions to the 2013 final regulations and the
2014 temporary regulations.

Erroneous cross-references are cor-
rected in §§ 1.1471-2(a)(4)(iii), 1.1471-
3(c)(6)(ii)(C)(2)(x), 1.1471-4(c)(2)(v),
1.1471-4(d)(9) Examples 1 and 2, 1.1471-
4(e)(4), 1.1471-5(f)(1)(i)(D)(8), 1.1471-
5(f)(2), 1.1471-5(f)(2)(iii)(E), and
1.1474-1(d)(3)(vii). In the first sentence
of § 1.1471-3(c)(8)(iii), "consolidated ac-
counts" is changed to "consolidated obli-
gations" to use the correct defined term,
and in the last sentence of § 1.1471-
2(a)(2)(ii), "QI withholding agreement" is
changed to "QI agreement" to use the
defined term. These final regulations also
revise the description of the U.S. payee
pool in § 1.1471-3(c)(3)(iii)(B)(2)(ii) to
align with the limitations on the use of this
pool in regulations under chapter 61 (see
§ 1.6049-4(c)(4)(ii)). Additionally, the
heading of § 1.1471-3(d)(11)(x) is revised
to clarify that the documentation rules in
that section do not apply to sponsored
direct reporting NFFEs.

These final regulations revise § 1.1471-
4(a)(4), which provides rules concerning
expanded affiliated groups, to conform to
the revisions to § 1.1471-4T(e)(1) in the
2014 temporary regulations, which allow
exempt beneficial owners and certified
deemed-compliant FFIs to be members of
an expanded affiliated group that includes
a participating FFI. These final regulations
also modify references to territory finan-
cial institutions acting as intermediaries in
§ 1.1471-4(d)(2)(ii)(B) to refer to both
territory financial institutions acting as in-
termediaries and territory financial institu-
tions that are flow-through entities, be-
cause the rules described in these sections
apply to both types of territory financial
institutions. In § 1.1471-4(d)(3)(vii) and
(d)(6)(vi), references to Form 8809 are
revised because the IRS created a new
form (Form 8809-I, "Application for Ex-
tension of Time to File FATCA Form
8966") for applications for extensions of
time to file Form 8966.

The 2013 final regulations are incon-
sistent when describing the specified U.S.
persons that a participating FFI is required
to report with respect to an owner-
documented FFI. Under § 1.1471-4(d)
(2)(ii)(D), a participating FFI is required
to report the information described in
§ 1.1471-4(d)(3)(iv) or (d)(5)(iii) with re-
spect to each specified U.S. person
identified in § 1.1471-3(d)(6)(iv)(A)(1).

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However, § 1.1471-4(d)(3)(iv)(B) and
(d)(5)(iii)(B) provide that the participating
FFI reports the name, address, and TIN of
each specified U.S. person identified in
§ 1.1471-3(d)(6)(iv)(A)(1) and (2). These
final regulations clarify the 2013 final reg-
ulations and correct the inconsistency by
adding a cross-reference to § 1.1471-
3(d)(6)(iv)(A)(2) in § 1.1471-4(d)(2)(ii)
for the specified U.S. persons that the
participating FFI must report. Finally,
these final regulations revise the defini-
tion of chapter 4 reportable amount to
coordinate with § 1.1474-1(d)(1)(ii)
(A)(1)(xi), which provides that a recip-
ient for purposes of reporting on Form
1042-S includes a person or U.S. branch
receiving income that is effectively con-
nected with a U.S. trade or business.
Under these final regulations, a chapter
4 reportable amount includes an amount
that would be a withholdable payment
but for the fact that the payment is in-
come effectively connected with a U.S.
trade or business (as described in
§ 1.1473-1(a)(4)(ii)).

### II. Temporary Regulations

#### A. In general

In response to comments and after fur-
ther consideration, this document includes
temporary regulations that revise or clar-
ify certain sections of the 2013 final reg-
ulations. The following portions of this
preamble provide a discussion of the ad-
ditions and modifications made by these
temporary regulations to the 2013 final
regulations.

##### B. Comments and changes to § 1.1471- 1-Scope of chapter 4 and definitions- Permanent residence address

The 2013 final regulations provide
that an address that is provided subject
to an instruction to hold all mail to that
address is not a permanent residence
address. The temporary coordination
regulations apply this rule to chapter 3.
A comment noted that some withholding
agents interpret this provision to mean
that a payee that provides an address
subject to a hold mail instruction cannot
generally establish non-U.S. status (be-
cause, for example, a Form W-8BEN
requires a permanent residence address).

The Treasury Department and the IRS
agree with this interpretation but did not
intend for an account to be treated as
undocumented if there is a permanent
residence address with a hold mail in-
struction. In regulations published else-
where in this issue of the Bulletin, the
temporary coordination regulations are
modified to provide that an address that
is subject to a hold mail instruction can
be relied upon as a permanent residence
address if the account holder provides
documentary evidence establishing res-
idence in the country where the account
holder is claiming to be a resident.
These temporary regulations incorporate
this rule by revising the definition of
permanent residence address to provide
that an address that is subject to a
hold mail instruction can be used to the
extent accompanied by documentary
evidence described in § 1.1441-1(c)
(38)(ii) supporting the claim of foreign
status.

C. Comments and changes to § 1.1471-
3-Identification of payee

1\. Rules for Reliably Associating a
Payment with a Withholding Certificate
or Other Appropriate Documentation

i. In general

The 2013 final regulations provide that
a withholding agent may reliably associ-
ate a withholdable payment with valid
documentation supporting a payee's chap-
ter 4 status if the documentation is ob-
tained "either directly or through an
agent." See § 1.1471-3(c)(1). The 2013
final regulations further provide that such
documentation must be "provided by a
payee." Id. For chapter 3 purposes, a with-
holding agent can reliably associate a pay-
ment with a Form W-8BEN that is "fur-
nished by" the beneficial owner. See
§ 1.1441-1(e)(1)(ii)(A)(1). A comment
noted that it is unclear whether the chapter
3 regulations and chapter 4 regulations
permit a withholding agent to rely on a
withholding certificate provided by a
payee or beneficial owner to a repository
that houses these forms for access by
withholding agents (a third party reposi-
tory).

In consideration of this comment, the
temporary coordination regulations are re-

vised in regulations published elsewhere
in this issue of the Bulletin to permit a
withholding agent to rely on withholding
certificates housed by a third party repos-
itory when certain requirements are met.
Consistently, these temporary regulations
clarify that, in general, a withholding
agent must obtain documentation "either
directly from the payee or through its
agent." These temporary regulations also
provide that a withholding certificate will
be considered provided by a payee if a
withholding agent obtains the certificate
from a third party repository (rather than
directly from the payee or through its
agent) and the requirements in § 1.1441-
1(e)(4)(iv)(E) are satisfied. A withholding
certificate obtained from a third party re-
pository must be reviewed by the with-
holding agent in the same manner as any
other documentation to determine whether
it may be relied upon for chapter 4 pur-
poses.

The 2014 temporary regulations and
the temporary coordination regulations do
not permit a withholding agent to accept
Forms W-8 with an electronic signature,
other than Forms W-8 electronically
transmitted through the withholding
agent's electronic system. The Treasury
Department and the IRS have determined
that Forms W-8 received by facsimile,
e-mail, or from a third party repository
may include an electronic signature, and
that this rule should be consistent in chap-
ters 3 and 4. Therefore, the temporary
coordination regulations are revised in
regulations published elsewhere in this is-
sue of the Bulletin to permit a withhold-
ing agent to accept Forms W-8 with
electronic signatures provided that the re-
quirements in the temporary coordination
regulations are met. These temporary reg-
ulations incorporate this rule into chapter
4 by cross-referencing the amended chap-
ter 3 rule.

ii. Requirements for validity of
certificates-Withholding certificate of
an intermediary, flow-through entity, or
U.S. branch (Form W-8IMY)-
Withholding statement

Temporary regulations under chapter 3
that are published elsewhere in this issue
of the Bulletin include an allowance for a
withholding agent to accept an alternative

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withholding statement from a nonquali-
fied intermediary that meets the require-
ments in § 1.1441-1(e)(3)(iv)(C)(3). To
coordinate with chapter 3, these tempo-
rary regulations provide that a withhold-
ing agent making a withholdable payment
to a nonqualified intermediary for which a
withholding statement is required for pur-
poses of both chapters 3 and 4 may accept
a withholding statement that meets the
requirements described in § 1.1441-
1(e)(3)(iv)(C)(3).

iii. Applicable rules for withholding
certificates, written statements, and
documentary evidence-Change in
circumstances

On July 29, 2016, the Treasury De-
partment and the IRS released An-
nouncement 2016-27, 2016-33 I.R.B.
238, which provides that on January 1,
2017, the Treasury Department will be-
gin updating the list of jurisdictions
treated as if they have an IGA in effect
to provide that certain jurisdictions that
have not brought their IGA into force
will no longer be treated as if they have
an IGA in effect. The list of jurisdic-
tions treated as if they have an IGA in
effect (the "IGA List") is located at
https://www.treasury.gov/resource-center/
tax-policy/treaties/Pages/FATCA.aspx. An-
nouncement 2016-27 also provides that, in
order to provide notice to FFIs, a jurisdic-
tion will not cease to be treated as having an
IGA in effect until at least 60 days after the
jurisdiction's status on the IGA List is up-
dated. Under the 2014 temporary regula-
tions, a change in circumstances includes
any change that affects a person's chapter 4
status. These temporary regulations provide
that a withholding agent will have reason to
know of a change in circumstances with
respect to an FFI's chapter 4 status on the
date that the jurisdiction where the FFI is
resident, organized, or located ceases to be
treated as having an IGA in effect. The rule
under § 1.1471-3(c)(6)(ii)(E)(3) will still
apply to allow the withholding agent 90
days to cure the change in circumstances.

##### iv. Curing documentation

errors-Documentation received after
the time of payment

The 2013 final regulations provide
rules for when a withholding agent may

rely on documentation received after the
time of payment to establish that no with-
holding was required under chapter 4 on
the payment. The temporary coordina-
tion regulations provide similar rules for
establishing that no withholding was re-
quired under chapter 3. In regulations
published elsewhere in this issue of the
Bulletin, the temporary coordination
regulations are revised to include addi-
tional requirements for documentation
obtained after the time of payment to
establish that the payment is income ef-
fectively connected with the conduct of
a trade or business in the United States.
These temporary regulations cross-
reference the chapter 3 rules for addi-
tional requirements for reliance on doc-
umentation received after the time of
payment to establish that a payment was
income effectively connected with the
conduct of a U.S. trade or business (and
therefore is not a withholdable pay-
ment).

2\. Documentation Requirements to
Establish Payee's Chapter 4 Status-
Identification of Owner-Documented
FFIs

Under the 2013 final regulations, an
FFI cannot qualify as an owner-
documented FFI if it is a member of an
expanded affiliated group with any FFI
that is a depository institution, custodial
institution, or specified insurance com-
pany. That is, under the 2013 final regu-
lations, all FFIs in the expanded affiliated
group must be investment entities. The
2013 final regulations further provide that
a withholding agent cannot act as a des-
ignated withholding agent for an owner-
documented FFI if the withholding agent
knows or has reason to know that the
owner-documented FFI is a member of an
expanded affiliated group with any FFI
other than an FFI that is also treated as an
owner-documented FFI by the withhold-
ing agent. These temporary regulations
modify the reason to know rule for desig-
nated withholding agents to conform to
the requirements of an owner-documented
FFI that is a member of an expanded
affiliated group. Under these temporary
regulations, a withholding agent cannot
act as a designated withholding agent for
an owner-documented FFI if the with-

holding agent knows or has reason to
know that the owner-documented FFI is a
member of an expanded affiliated group
with any FFI that is a depository institu-
tion, custodial institution, or specified in-
surance company.

D. Comments and changes to § 1.1471-
4-FFI agreement

1\. Due Diligence for the Identification
and Documentation of Account Holders
and Payees-Standards of Knowledge-
Limits on Reason to Know with Respect
to Certain Accounts Acquired in a
Merger or Bulk Acquisition

The 2013 final regulations provide lim-
itations on the standards of knowledge
that apply in a merger or bulk acquisition
if a participating FFI (transferee FFI) ac-
quires the accounts of a participating FFI
or deemed-compliant FFI (including a
U.S. branch of either such FFI) that ap-
plies the due diligence requirements of
§ 1.1471-4(c) as a condition of its status,
or of a U.S. financial institution (trans-
feror FI), provided certain requirements
are met. One such requirement is that a
transferor FI that is a branch of a partici-
pating FFI or of a registered deemed-
compliant FFI (other than a U.S. branch
that is treated as a U.S. person) or that is
a deemed-compliant FFI that applies the
due diligence rules of § 1.1471-4(c) as a
condition of its status provide a written
representation to the transferee FFI re-
garding the transferor FI's application of
required due diligence procedures. Be-
cause this written representation is to be
provided by all transferor FIs that are
FFIs, these temporary regulations provide
that a transferee FFI must obtain the writ-
ten representation described in § 1.1471-
4(c)(2)(ii)(B)(2)(iii) from a transferor FI
that is a participating FFI or registered
deemed-compliant FFI (or a U.S. branch
of either such entity, excluding a U.S.
branch that is treated as a U.S. person), or
a deemed-compliant FFI that applies the
due diligence rules of § 1.1471-4(c) as a
condition of its status.

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2\. Account Reporting-Reporting
Requirements in General

i. Financial institution required to report
an account-Combined reporting on
Form 8966 following a merger or bulk
acquisition of accounts

The 2014 temporary regulations re-
quire a participating FFI to report infor-
mation with respect to U.S. accounts and
accounts held by owner-documented FFIs
maintained at any time during the calen-
dar year. A participating FFI is also
required to report foreign reportable
amounts paid to accounts held by nonpar-
ticipating FFIs. Comments requested
guidance on reporting accounts acquired
in a merger or bulk acquisition on Form
8966. In response to the comment, these
temporary regulations provide that if a
participating FFI (successor) acquires ac-
counts of another participating FFI (pre-
decessor) in a merger or bulk acquisition
of accounts, the successor may assume the
predecessor's obligations to report the ac-
quired accounts under § 1.1471-4(d) with
respect to the calendar year of the merger
or acquisition (acquisition year) provided
certain requirements are met. First, the
successor must acquire substantially all of
the accounts maintained by the predeces-
sor, or substantially all of the accounts
maintained at a branch of the predecessor,
in a merger or bulk acquisition of ac-
counts. Second, the successor must agree
to report the acquired accounts for the
acquisition year on Forms 8966 to the
extent required in § 1.1471-4(d)(3) or
(d)(5). Third, the successor may not elect
to report under section 1471(c)(2) and
§ 1.1471-4(d)(5) with respect any ac-
quired account that is a U.S. account for
the acquisition year. Fourth, the successor
must notify the IRS on the form and in the
manner prescribed by the IRS that Form
8966 is being filed on a combined basis. If
the requirements described in this para-
graph are not satisfied, the predecessor is
required to report the acquired accounts
for the portion of the acquisition that it
maintains the accounts (marking the ac-
counts as closed), and the successor is
required to report the acquired accounts
for the portion of the acquisition year that
it maintains the accounts. For the rules for
reporting on Forms 1042-S for chapter 4
purposes following a merger or bulk ac-

quisition, see section II.E of this Summary
of Comments and Explanation of Revi-
sions and Provisions.

ii. Descriptions applicable to reporting
requirements of § 1.1471-4(d)(3)-
Payments made with respect to an
account-Other accounts

Under the 2013 final regulations, a par-
ticipating FFI reporting an account that is
a debt or equity interest in the FFI must
report the gross amounts paid or credited
to the account holder during the calendar
year including payments in redemption (in
whole or part) of the account. A comment
requested clarification of the requirements
for such reporting by a participating FFI
that is a partnership for U.S. tax purposes.
The comment noted disparities between
the amount required to be reported by the
partnership on Form 8966 and the amount
of income allocated to the partner by the
partnership, including that the reporting
would overstate the partner's share of the
partnership's income and would include
redemption payments already included in
a partner's income. The comment also
noted that tax return information may not
be available by the due date for filing
Form 8966 for a partnership that invests in
other partnerships and files an extension
of time for filing Schedules K-1 (which is
longer than the extension of time for filing
Form 8966).

In response to the comment, these tem-
porary regulations modify the account re-
porting requirements for participating
FFIs that are partnerships. Under these
temporary regulations, a participating FFI
that is a partnership reporting an account
under § 1.1471-4(d)(3) must report the
partner's distributive share of the partner-
ship's income or loss for the calendar
year, without regard to whether any such
amount is distributed to the partner during
the year, and any guaranteed payments for
the use of capital. The amount required to be
reported with respect to a partner may be
determined based on the partnership's tax
returns or, if the tax returns are unavailable
by the due date for filing Form 8966, the
partnership's financial statements or any
other reasonable method used by the part-
nership for calculating the partner's share of
partnership income by such date. These
temporary regulations provide that the mod-

ifications to account reporting by partner-
ships described in this paragraph apply be-
ginning with reporting with respect to
calendar year 2017. However, taxpayers
may apply these temporary regulations ret-
roactively to January 28, 2013.

iii. Descriptions applicable to reporting
requirements of § 1.1471-4(d)(3)-
Payments made with respect to an
account-Transfers and closings of
deposit, custodial, insurance, and annuity
financial accounts

Under the 2013 final regulations, a par-
ticipating FFI is required to report payments
made with respect to an account that the FFI
is required to treat as a U.S. account or
account held by an owner-documented FFI.
The 2013 final regulations provide that in
the case of an account closed or transferred
in its entirety by an account holder, the
payments made with respect to the account
are the payments made to the account until
the date of transfer or closure and the
amount withdrawn or transferred. The Trea-
sury Department and the IRS intended for
FFIs to report a closed or transferred ac-
count regardless of who initiates the closure
or transfer. Therefore, these temporary reg-
ulations modify the 2013 final regulations to
require reporting on a closed or transferred
account when the account is closed or trans-
ferred by any person (not just the account
holder). This modification is necessary to
prevent FFIs from abusing the rules by
claiming that no reporting is required if the
FFI initiates the closure or transfer rather
than the account holder. This modification is
also consistent with the reporting required
on closed accounts under the Model 1 IGA,
which is not limited to accounts closed by
the account holder.

E. Changes to § 1.1474-1-Liability for
withheld tax and withholding agent
reporting-Information returns for
payment reporting-Method of
reporting-Payments by U.S.
withholding agent to recipients

Revenue Procedure 99-50, 1999-2
C.B. 757, provides procedures for com-
bined reporting on Forms 1042-S follow-
ing a merger or acquisition for purposes of
chapter 3. To provide a consistent rule for
reporting on Forms 1042-S under chap-
ters 3 and 4 in these cases, these tempo-

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rary regulations provide that a withhold-
ing agent required to report on Forms
1042-S under chapter 4 may rely on the
procedures used for combined reporting
on Form 1042-S that apply for chapter 3
purposes (even if the withholding agent is
not required to report under chapter 3)
following a merger or acquisition pro-
vided that all of the requirements for such
reporting provided in the Instructions for
Form 1042-S are satisfied.

### Special Analyses

Certain IRS regulations, including
these, are exempt from the requirements
of Executive Order 12866, as supple-
mented and reaffirmed by Executive Or-
der 13563. Therefore, a regulatory impact
assessment is not required.

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

### Drafting Information

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

* * * * *

### Amendments to the Regulations

Accordingly, 26 CFR parts 1 and 301
are amended as follows:

#### PART 1-INCOME TAXES

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

Authority: 26 U.S.C. 7805

Par. 2. Section 1.1471-0 is amended
by:

1\. Revising the entries for § 1.1471-
1(b)(7) through (142).

2\. Adding entries for § 1.1471-
1(b)(143) through (151).

3\. Revising the entries for § 1.1471-
2(a)(2)(i), (a)(4)(ii), and (a)(5).

4\. Revising the entries for § 1.1471-
3(a)(3)(v) and (vi), (c)(3)(iii)(H), (c)(5)
(ii)(B), and (c)(8)(iv).

5\. Adding an entry for § 1.1471-
3(c)(8)(v).

6\. Revising the entry for § 1.1471-
3(d)(4).

7\. Adding entries for § 1.1471-
3(d)(4)(vi) through (vi)(C) and (d)(5)(iii)
through (iii)(B).

8\. Revising the entries for § 1.1471-
3(d)(6)(iii) and (vii).

9\. Adding entries for § 1.1471-3(d)
(11)(x) through (xii)(C).

10\. Revising the entry for § 1.1471-
3(e)(3).

11\. Adding entries for § 1.1471-
3(e)(3)(iii) through (iv)(B).

12\. Revising the entries for § 1.1471-
3(e)(4)(i), (e)(4)(ii) introductory text,
(e)(4)(ii)(B).

13\. Removing the entries for § 1.1471-
3(e)(4)(ii)(B)(1) through (D).

14\. Revising the entries for § 1.1471-
3(e)(4)(iii), (e)(4)(iv) introductory text,
(e)(4)(iv)(B).

15\. Removing the entries for § 1.1471-
3(e)(4)(iv)(B)(1) through (E).

16\. Revising the entries for § 1.1471-
3(e)(4)(vii)(B),(e)(4)(vii)(D), and (f)(2).

17\. Removing the entries for § 1.1471-
3(f)(2)(i) and (ii) and (f)(3)(i) through
(iii).

18\. Revising the entry for § 1.1471-
3(f)(5).

19\. Adding entries for § 1.1471-
4(b)(3)(i) through (iii).

20\. Revising the entries for § 1.1471-
4(b)(7),(c)(2)(v),(c)(5)(iv)(E), (d)(2)(ii)
(D) and (E).

21\. Adding entries for § 1.1471-
4(d)(2)(ii)(F) and (d)(2)(iii)(C).

22\. Revising the entries for § 1.1471-
4(d)(3)(v) through (vii).

23\. Removing the entry for § 1.1471-
4(d)(3)(viii).

24\. Revising the entries for § 1.1471-
4(d)(4)(iv)(D), and (d)(6)(vi).

25\. Adding an entry for § 1.1471-
4(d)(6)(vii).

26\. Revising the entries for § 1.1471-
4(d)(7), (d)(7)(ii)(A), and (d)(7)(iv)(B).

27\. Adding entries for § 1.1471-4
(e)(2)(vi), and (e)(3)(v) and (vi).

28\. Revising the entry for § 1.1471-
4(i)(2).

29\. Revising the entries for § 1.1471-
5(a)(3)(ii) through (v).

30\. Removing the entry for § 1.1471-
5(a)(3)(vi).

31\. Revising the entries for § 1.1471-
5(b)(1)(iii)(A),(b)(3)(v), (b)(3)(vi) and
(vii), (b)(4)(iv), (e)(4)(iii)(B), and (f)(1)
(i)(E).

32\. Adding an entry for § 1.1471-
5(f)(2)(v).

33\. Revising the entry for § 1.1471-
5(f)(4).

34\. Removing the entries for § 1.1471-
5(i)(2)(i) and (ii).

35\. Revising the entries for § 1.1471-
5(i)(3) through (5).

36\. Adding entries for § 1.1471-5(i)(6)
through (10).

37\. Revising the entry for § 1.1471-
5(j).

38\. Adding entries for § 1.1471-5(k)
and (l).

39\. Revising the entries for § 1.1471-
6(d)(4) and (f)(3).

40\. Revising the entries for § 1.1472-
1(c)(1) and (2), (d)(2), and (f).

41\. Adding entries for § 1.1472-
1(c)(1)(vi) and (vii), (c)(3) through
(c)(5)(iv), (g), and (h).

42\. Revising the entry for § 1.1473-
1(a)(3)(i)(C).

43\. Adding entries for § 1.1473-
1(a)(4)(vii) and (viii).

44\. Revising the entries for § 1.1474-
1(d)(4)(i)(C), (d)(4)(iii) introductory text,
and (d)(4)(iii)(B) and (C).

45\. Adding an entry for § 1.1474-
1(i)(4).

46\. Removing the entry for § 1.1474-
1(d)(4)(iii)(D).

47\. Revising the entries for § 1.1474-
6(c)(2) and (f).

48\. Adding an entry for § 1.1474-6(g).
The revisions and additions read as fol-
lows:

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

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

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§

1.1471-1

Scope of chapter 4 and

(58)

Grandfathered obligation.

(113)

Reportable payment.

definitions.

(59)

Grantor trust.

(114)

Reporting Model 1 FFI.

(60)

Gross proceeds.

(115) Reporting Model 2 FFI.

*

* * *

*

(61)

Group annuity contract.

(116) Responsible officer.

(b)

Definitions.

(62)

Group insurance contract.

(117) Restricted distributor.

*

* * *

*

(63)

Immediate annuity.

(118) Simple trust.

(7)

Backup withholding.

(64)

Individual account.

(119) Specified insurance company.

(8)

Beneficial owner.

(65)

Insurance company.

(120) Specified U.S. person.

(9)

Blocked account.

(66)

Insurance contract.

(121) Sponsored FFI.

(10)

Branch.

(67)

Intergovernmental agreement (IGA).

(122) Sponsored FFI group.

(11)

Broker.

(68)

Intermediary.

(123) Sponsored direct reporting NFFE.

(12)

Cash value.

(69)

Intermediary withholding certificate.

(124) Sponsoring entity.

(13)

Cash value insurance contract.

(70)

Investment entity.

(125) Standardized industry coding

(14)

Certified deemed-compliant FFI.

(71)

Investment-linked annuity contract.

system.

(15)

Change in circumstances.

(72)

Investment-linked insurance contract.

(126)

Standing instructions to pay

(16)

Chapter 3.

(73)

IRS FFI list.

amounts.

(17)

Chapter 4.

(74)

Life annuity contract.

(127) Subject to withholding.

(18)

Chapter 4 reportable amount.

(75)

Life insurance contract.

(128) Substantial U.S. owner.

(19)

Chapter 4 status.

(76)

Limited branch.

(129) Territory entity.

(20)

Chapter 4 withholding rate pool.

(77)

Limited FFI.

(130) Territory financial institution.

(21)

Clearing organization.

(78)

Model 1 IGA.

(131) Territory financial institution

(22)

Complex trust.

(79)

Model 2 IGA.

treated as a U.S. person.

(23)

Consolidated obligations.

(80)

NFFE.

(132) Territory NFFE.

(24)

Custodial account.

(81)

Non-exempt recipient.

(133) TIN.

(25)

Custodial institution.

(82)

Nonparticipating FFI.

(134) U.S. account.

(26)

Customer master file.

(83)

Nonreporting IGA FFI.

(135)

U.S. branch treated as a U.S.

(27)

Deemed-compliant FFI.

(84)

Non-U.S. account.

person.

(28)

Deferred annuity contract.

(85)

NQI.

(136) U.S. financial institution.

(29)

Depository account.

(86)

NWP.

(137) U.S. indicia.

(30)

Depository institution.

(87)

NWT.

(138) U.S. owned foreign entity.

(31)

Direct reporting NFFE.

(88)

Offshore obligation.

(139) U.S. payee.

(32)

Documentary evidence.

(89)

Owner.

(140) U.S. payor.

(33)

Documentation.

(90)

Owner-documented FFI.

(141) U.S. person

(34)

Dormant account.

(91)

Participating FFI.

(142) U.S. source FDAP income.

(35)

Effective date of the FFI agreement.

(92)

Participating FFI group.

(143)

U.S. territory.

(36)

EIN.

(93)

Partnership.

(144)

U.S. withholding agent.

(37)

Election to be withheld upon.

(94)

Passive NFFE.

(145)

Withholdable payment.

(38)

Electronically searchable information.

(95)

Passthru payment.

(146)

Withholding.

(39)

Entity.

(96)

Payee.

(147)

Withholding agent.

(40)

Entity account.

(97)

Payment with respect to an off-

(148)

Withholding certificate.

(41)

Excepted NFFE.

shore obligation.

(149)

WP.

(42)

Exempt beneficial owner.

(98)

Payor.

(150)

Written statement.

(43)

Exempt recipient.

(99)

Permanent residence address.

(151)

WT.

(44)

Expanded affiliated group.

(100)

Person.

* * * *

*

(45)

FATF.

(101)

Preexisting account.

(46)

FATF-compliant jurisdiction.

(102)

Preexisting entity account.

§ 1.1471-2

Requirement to deduct and

(47)

FFI.

(103)

Preexisting individual account.

withhold

tax on withholdable payments

(48)

FFI agreement.

(104)

Preexisting obligation

to certain

FFIs.

(49)

Financial account.

(105)

Pre-FATCA Form W-8.

(50)

Financial institution.

(106)

Prima facie FFI.

(a) *

* *

(51)

Flow-through entity.

(107)

QI.

(2) * * *

(52)

Flow-through withholding certificate.

(108)

QI agreement.

(i)

Requirement to withhold on pay-

(53)

Foreign entity.

(109)

QI branch of a U.S. financial

ments of

U.S. source FDAP income to

(54)

Foreign passthru payment.

institution.

participating

FFIs and deemed-compliant

(55)

Foreign payee.

(110)

Recalcitrant account holder.

FFIs that

are NQIs, NWPs, or NWTs, and

(56)

Foreign person.

(111)

Registered deemed-compliant FFI.

U.S.

branches acting as intermediaries.

(57)

GIIN.

(112)

Relationship manager.

* * * *

*

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(4) * * *

(ii) Exception to withholding for cer-
tain payments made prior to July 1, 2016
(transitional).

* * * * *

(5) Withholding requirements if source
or character of payment is unknown.

* * * * *

§ 1.1471-3 Identification of payee.

(a) * * *

(3) * * *

(v) Disregarded entity or limited
branch.

(vi) U.S. branch of treated as a U.S.
person.

* * * * *

(c) * * *

(3) * * *

(iii) * * *

(H) Rules applicable to a withholding
certificate of a U.S. branch.

* * * * *

(5) * * *

(ii) * * *

(B) Preexisting obligation documen-
tary evidence.

* * * * *

(8) * * *

(iv) Document sharing for gross pro-
ceeds.

(v) Preexisting account.

* * * * *

(d) * * *

(4) Identification of participating FFIs
and registered deemed-compliant FFIs.

* * * * *

(vi) Sponsored investment entities and
sponsored controlled foreign corpora-
tions.

(A) In general.

(B) Payments made prior to January 1,
2017 (transitional).

(C) Payments made after December 31,
2016, to payees documented prior to Jan-
uary 1, 2017.

(5) * * *

(iii) Certain investment entities that do
not maintain financial accounts.

(A) In general.

(B) Offshore obligations.

(6) * * *

(iii) Documentation for owners and
debt holders of payee.

* * * * *

(vii) Exception for certain offshore ob-
ligations of $1,000,000 or less.
* * * * *

(11) * * *

(x) Identifying a direct reporting NFFE
(other than a sponsored direct reporting
NFFE).

(A) In general.

(B) Exception for offshore obligations.

(C) Special rule for preexisting off-
shore obligations.

(xi) Identifying a sponsored direct re-
porting NFFE.

(A) In general.

(1) Payments made prior to January 1,
2017 (transitional).

(2) Payments made after December 31,
2016, to payees documented prior to Jan-
uary 1, 2017.

(B) Exception for offshore obligations.

(xii) Identification of excepted inter-
affiliate FFI.

(A) In general.

(B) Offshore obligations.

(C) Reason to know.

** * * *

(e) * * *

(3) GIIN verification.

* * * * *

(iii) Special rules for direct reporting
NFFEs.

(iv) Special rules for sponsored direct
reporting NFFEs and sponsoring entities.

(A) Sponsored direct reporting NFFEs.

(B) Sponsoring entities (transitional).

(4) * * *

(i) Reason to know regarding an enti-
ty's chapter 4 status.

(ii) Reason to know applicable to with-
holding certificates.

* * * * *

(B) Withholding certificate provided
by an FFI.

(iii) Reason to know applicable to writ-
ten statements.

(iv) Reason to know applicable to doc-
umentary evidence.

* * * * *

(B) Standards of knowledge applicable
to certain types of documentary evidence.
* * * * *

(vii) * * *

(B) Reason to know there are U.S. in-
dicia associated with preexisting obliga-
tions.

* * * * *

(D) Limits on reason to know for mul-
tiple obligations belonging to a single per-
son.

* * * * *

(f) * * *

(2) Presumptions of classification as an
individual or entity and entity as the ben-
eficial owner.
* * * * *

(5) Presumption of chapter 4 status of
payee with respect to a payment to an
intermediary or flow-through entity.

* * * * *

§ 1.1471-4 FFI agreement.

* * * * *

(b) * * *

(3) * * *

(i) In general.

(ii) Withholding not required.

(iii) Election to withhold under section
3406.

** * * *

(7) Withholding requirements for U.S.
branches of FFIs treated as U.S. persons.

(c) * * *

(2) * * *

(v) Documentation rules for U.S.
branches of FFIs that are treated as U.S.
persons.

* * * * *

(5) * * *

(iv) * * *

(E) Exception for preexisting individ-
ual accounts previously documented as
held by foreign individuals.

** * * *

(d) * * *

(2) * * *

(ii) * * *

(D) Special reporting of accounts held
by owner-documented FFIs.

(E) Requirement to identify the GIIN
of a branch that maintains an account.

(F) Reporting by participating FFIs and
registered deemed-compliant FFIs (in-
cluding QIs, WPs, WTs, and certain U.S.
branches not treated as U.S. persons) for
accounts of nonparticipating FFIs (transi-
tional).

(iii) * * *

(C) Rules for U.S. branches of FFIs not
treated as U.S. persons.

(3) * * *

(v) Form for reporting accounts under
section 1471(c)(1).

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(vi) Time and manner of filing.

(iii) * * *

(7) Seed capital.

(vii) Extensions in filing.

(A) Equity or debt interests in an in-

(8) Anti-abuse rule.

(4) * * *

vestment entity.

(9) Exception for limited life debt in-

(iv) * * *

* * * * *

vestment entities.

(D) Transfers and closings of deposit,

(3) * * *

(10) Partnerships, trusts, and other

custodial, insurance, and annuity financial

(v) Value of interest determined, di-

non-corporate entities.

accounts.

rectly or indirectly, primarily by reference

(j) Sponsoring entity verification.

** * * *

to assets that give rise (or could give rise)

(k) Sponsoring entity event of default.

(6) * * *

to withholdable payments.

(l) Effective/applicability date.

(vi) Extensions in filing.

* * * * *

(vii) Record retention requirements.

(vi) Return earned on the interest (in-

§ 1.1471-6 Payments beneficially owned

(7) Special reporting rules with respect

cluding upon a sale, exchange, or redemp-

by exempt beneficial owners.

to the 2014 and 2015 calendar years.

tion) determined, directly or indirectly,

* * * * *

primarily by reference to one or more

* * * * *

(ii) * * *

investment entities or passive NFFEs.

(d) * * *

(A) Reporting with respect to the 2014

* * * * *

(4) Income on certain transactions.

calendar year.

(vii) Cash value insurance contract.

* * * * *

* * * * *

* * * * *

(f) * * *

(iv) * * *

(4) * * *

(3) Narrow participation retirement

(B) Special determination date and

(iv) Currency translation of balance or

funds.

timing for reporting with respect to the

value.

* * * * *

2014 calendar year.

** * * *

* * * * *

(e) * * *

§ 1.1472-1 Withholding

(e) * * *

(4) * * *

on NFFEs.

(2) * * *

(iii) * * *

* * * * *

(vi) Exception from restriction on

(B) Special rule for start-up entities.

(c) * * *

opening U.S. accounts and nonparticipat-

* * * * *

(1) Payments to an excepted NFFE.

ing FFI accounts.

(f) * * *

* * * * *

(3) * * *

(1) * * *

(vi) Direct reporting NFFEs.

(v) Exception from registration re-

(i) * * *

(vii) Sponsored direct reporting NFFEs.

quirement.

(E) Qualified credit card issuers and

(2) Payments made to an exempt ben-

(A) Conditions for exception.

servicers.

eficial owner.

(B) Confirmation requirements of lead

** * * *

(3) Definition of direct reporting

FI.

(2) * * *

NFFE.

(vi) Exception from restriction on

(v) Certain investment entities that do

(4) Election to be treated as a direct

opening U.S. accounts and nonparticipat-

not maintain financial accounts.

reporting NFFE.

ing FFI accounts.

* * * * *

(i) Manner of making election.

** * * * (i) * * *

(4) Definition of a restricted distribu-

(ii) Effective date of election.

(2) Requesting waiver or closure of a U.S. account.

tor. * * * * * (i) * * *

(iii) Revocation of election by NFFE. (iv) Revocation of election by Com- missioner.

* * * * *

(1) Scope of paragraph.

(v) Event of default.

(2) Expanded affiliated group defined.

(vi) Notice of event of default.

§ 1.1471-5 Definitions applicable to

(3) Member of expanded affiliated

(vii) Remediation of event of default.

section 1471.

group.

(5) Election by a direct reporting NFFE

(4) Ownership test.

to be treated as a sponsored direct report-

(a) * * *

(i) Corporations.

ing NFFE.

(3) * * *

(A) Stock not to include certain pre-

(i) Definition of sponsored direct re-

(ii) Financial accounts held by agents

ferred stock.

porting NFFE.

that are not financial institutions.

(B) Valuation.

(ii) Requirements for sponsoring entity

(iii) Jointly held accounts.

(ii) Partnerships.

of a sponsored direct reporting NFFE.

(iv) Account holder for insurance and

(iii) Trusts.

(iii) Revocation of status as sponsoring

annuity contracts.

(5) Treatment of warrants, options, and

entity.

(v) Examples. * * * * *

obligations convertible into equity for de- termining ownership.

(iv) Liability of sponsoring entity. (d) * * *

(b) * * * (1) * * *

(6) Exception for FFIs holding certain capital investments.

(2) Payments made to a NFFE that is a QI, WP, or WT.

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* * * * *

(f) Sponsoring entity verification.

(g) Sponsoring entity event of default.

(h) Effective/applicability date.

§ 1.1473-1 Section 1473 definitions.

(a) * * *

(3) * * *

(i) * * *

(C) Special rule for gross proceeds
from sales settled by a clearing organiza-
tion.

* * * * *

(4) * * *

(vii) Collateral arrangements prior to
2017 (transitional).

(viii) Certain dividend equivalents.

* * * * *

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

* * * * *

(d) * * *

(4) * * *

(i) * * *

(C) Amounts paid to a U.S. branch.
* * * * *

(iii) Reporting by participating FFIs
and deemed-compliant FFIs (including
QIs, WPs, and WTs) and U.S. branches
not treated as U.S. persons.

(A) * * *

(B) Special reporting requirements of
participating FFIs, deemed-compliant
FFIs, FFIs that make an election under
section 1471(b)(3), and U.S. branches not
treated as U.S. persons.

(C) Reporting by a U.S. branch treated
as a U.S. person.

* * * * *

(i) * * *

(4) Extensions of time to file.

* * * * *

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

* * * * *

(c) * * *

(2) Determining the amount of the dis-
tribution from certain domestic corpora-
tions subject to section 1445 or chapter 4
withholding.

* * * * *

(f) Coordination with section 3406.

(g) Effective/applicability date.

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

§ 1.1471-1 Scope of chapter 4 and
definitions.

* * * * *

(b) * * *

(6) Assumes primary withholding re-
sponsibility. The term assumes primary
withholding responsibility refers to when
a QI, territory financial institution, or U.S.
branch assumes responsibility for with-
holding on a payment for purposes of
chapters 3 and 4 as if it were a U.S.
person. A QI may only assume primary
withholding responsibility if it does not
make an election to be withheld upon with
respect to the payment.

(7) Backup withholding. The term
backup withholding means the withhold-
ing required under section 3406.
* * * * *

(10) Branch. With respect to a financial
institution, the term branch means a unit,
business, or office of a financial institution
that is treated as a branch under the reg-
ulatory regime of a country or that is
otherwise regulated under the laws of a
country as separate from other offices,
units, or branches of the financial institu-
tion and also includes an entity that is
disregarded as an entity separate from the
financial institution (including branches
maintained by such disregarded entity). A
branch includes a unit, business, or office
of a financial institution located in a coun-
try in which it is resident, and a unit,
business, or office of a financial institution
located in the country in which the finan-
cial institution is created or organized. All
units, businesses, and offices of a partici-
pating FFI located in a single country, and
all entities disregarded as entities separate
from a participating FFI and located in a
single country, shall be treated as a single
branch and may use the same GIIN. An
account will be treated as maintained by a
branch or disregarded entity if the rights

and obligations of the account holder and
the participating FFI with regard to such
account (including any assets held in the
account) are governed by the laws of the
country of the branch or disregarded en-
tity.

* * * * *

(20) Chapter 4 withholding rate pool.
The term chapter 4 withholding rate pool
means a pool of payees that are nonpar-
ticipating FFIs provided on a chapter 4
withholding statement (as described in
§ 1.1471-3(c)(3)(iii)(B)(3)) to which a
withholdable payment is allocated. The
term chapter 4 withholding rate pool also
means a pool provided on an FFI with-
holding statement (as described in
§ 1.1471-3(c)(3)(iii)(B)(2)) to which a
withholdable payment is allocated to-

(i) A pool of payees consisting of each
class of recalcitrant account holders de-
scribed in § 1.1471-4(d)(6) (or with re-
spect to an FFI that is a QI, a single pool
of recalcitrant account holders without the
need to subdivide into each class of recal-
citrant account holders described in
§ 1.1471-4(d)(6)), including a separate
pool of account holders to which the es-
crow procedures for dormant accounts ap-
ply; or

(ii) A pool of payees that are U.S.
persons as described in § 1.1471-3(c)(3)
(iii)(B)(2).

* * * * *

(23) Consolidated obligations. The
term consolidated obligations means mul-
tiple obligations that a withholding agent
(including a withholding agent that is an
FFI) has chosen to treat as a single obli-
gation in order to treat the obligations as
preexisting obligations pursuant to para-
graph (b)(104)(ii) of this section or in
order to share documentation between the
obligations pursuant to § 1.1471-3(c)(8).
A withholding agent that has opted to treat
multiple obligations as consolidated obliga-
tions pursuant to the previous sentence must
also treat the obligations as a single obliga-
tion for purposes of satisfying the standards
of knowledge requirements set forth in
§§ 1.1471-3(e) and 1.1471-4(c)(2)(ii), and
for purposes of determining the balance
or value of any of the obligations when
applying any of the account thresholds
applicable to due diligence or reporting
as set forth in §§ 1.1471-3(c)(6)(ii),
1.1471-3(d), 1.1471-4(c), 1.1471-5(a)

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(4), and 1.1471-5(b)(3)(vii). For exam-
ple, with respect to consolidated obliga-
tions, if a withholding agent has reason
to know that the chapter 4 status as-
signed to the account holder or payee of
one of the consolidated obligations is
inaccurate, then it has reason to know
that the chapter 4 status assigned for all
other consolidated obligations of the ac-
count holder or payee is inaccurate.
Similarly, to the extent that an account
balance or value is relevant for purposes
of applying any account threshold to one
or more of the consolidated obligations,
the withholding agent must aggregate
the balance or value of all such consol-
idated obligations.

* * * * *

(31) Direct reporting NFFE. The term
direct reporting NFFE has the meaning
set forth in § 1.1472-1(c)(3).

* * * * *

(35) Effective date of the FFI agree-
ment. The term effective date of the FFI
agreement with respect to an FFI or a
branch of an FFI that is a participating FFI
means the date on which the IRS issues a
GIIN to the FFI or branch. For participat-
ing FFIs that receive a GIIN prior to June
30, 2014, the effective date of the FFI
agreement is June 30, 2014.

* * * * *

(41) Excepted NFFE. The term ex-
cepted NFFE means a NFFE that is de-
scribed in § 1.1472-1(c)(1).
* * * * *

(43) Exempt recipient. The term ex-
empt recipient means a person described
in § 1.6049-4(c)(1)(ii) (for interest, div-
idends, and royalties), a person de-
scribed in § 1.6045-2(b)(2)(i) (for bro-
ker proceeds), and a person described in
§ 1.6041-3(q) (for rents, amounts paid
on notional principal contracts, and
other fixed or determinable income).
* * * * *

(48) FFI agreement. The term FFI
agreement means an agreement that is de-
scribed in § 1.1471-4(a). An FFI agree-
ment includes a QI agreement, a WP
agreement, and a WT agreement that is
entered into by an FFI (other than an FFI
that is a registered deemed-compliant FFI,
including a reporting Model 1 FFI) and
that has an effective date or renewal date
on or after June 30, 2014. The term FFI
agreement also includes a QI agreement

that is entered into by a foreign branch of
a U.S. financial institution (other than a
branch that is a reporting Model 1 FFI)
and that has an effective date or renewal
date on or after June 30, 2014.

* * * * *

(50) Financial institution. The term fi-
nancial institution has the meaning set
forth in § 1.1471-5(e) and includes a fi-
nancial institution as defined in an appli-
cable Model 1 or Model 2 IGA.

* * * * *

(67) Intergovernmental agreement
(IGA). The term intergovernmental agree-
ment or IGA means any applicable Model
1 or Model 2 IGA.

* * * * *

(76) Limited branch. The term limited
branch has the meaning set forth in
§ 1.1471-4(e)(2)(iii). With respect to a
reporting Model 2 FFI, a limited branch is
a branch of the reporting Model 2 FFI that
operates in a jurisdiction that prevents
such branch from fulfilling the require-
ments of a participating FFI or deemed-
compliant FFI, or that cannot fulfill the
requirements of a participating FFI or
deemed-compliant FFI due to the expira-
tion of the transitional rule for limited
branches under § 1.1471-4(e)(2)(v), and
for which the reporting Model 2 FFI
meets the terms of the applicable Model 2
IGA with respect to the branch.

(77) Limited FFI. The term limited FFI
has the meaning set forth in § 1.1471-
4(e)(3)(ii). With respect to a reporting
Model 2 FFI, a limited FFI is a related
entity that operates in a jurisdiction that
prevents the entity from fulfilling the re-
quirements of a participating FFI or
deemed-compliant FFI or that cannot ful-
fill the requirements of a participating FFI
or deemed-compliant FFI due to the expi-
ration of the transitional rule for limited
FFIs under § 1.1471-4(e)(3)(iv), and for
which the reporting Model 2 FFI meets
the requirements of the applicable Model
2 IGA with respect to the entity.

* * * * *

(81) Non-exempt recipient. The term
non-exempt recipient means a person that
is not an exempt recipient.
* * * * *

(83) Nonreporting IGA FFI. The term
nonreporting IGA FFI means an FFI that
is a resident of, or located or established
in, a Model 1 or Model 2 IGA jurisdiction,

as the context requires, and that meets the
requirements of one of the following-

(i) A nonreporting financial institution
described in Annex II of the Model 1
IGA;

(ii) A nonreporting financial institution
described in Annex II of the Model 2
IGA;

(iii) A registered deemed-compliant
FFI described in § 1.1471-5(f)(1)(i)(A)
through (F);

(iv) A certified deemed-compliant FFI
described in § 1.1471-5(f)(2)(i) through
(v); or

(v) An exempt beneficial owner de-
scribed in § 1.1471-6.

* * * * *

(88) Offshore obligation. The term off-
shore obligation means an offshore obli-
gation defined in § 1.6049-5(c)(1) (by
substituting the terms withholding agent
or financial institution for the term payor).
* * * * *

(91) Participating FFI. The term par-
ticipating FFI means an FFI that has
agreed to comply with the requirements of
an FFI agreement with respect to all
branches of the FFI, other than a branch
that is a reporting Model 1 FFI or a U.S.
branch. The term participating FFI also
includes an FFI described in a Model 2
IGA that has agreed to comply with the
requirements of an FFI agreement with
respect to a branch (a reporting Model 2
FFI), and a QI branch of a U.S. financial
institution, unless such branch is a report-
ing Model 1 FFI.

* * * * *

(98) Payor. The term payor has the
meaning set forth in §§ 31.3406(a)-2 and
1.6049-4(a)(2) and generally includes a
withholding agent.

(99) [Reserved]. For further guidance,
see § 1.1471-1T(b)(99).

(100) Person. The term person has the
meaning set forth in section 7701(a)(1)
and the regulations thereunder and in-
cludes an entity or arrangement that is an
insurance company. The term person also
includes, with respect to a withholdable
payment, a QI branch of a U.S. financial
institution.

* * * * *

(104) * * *

(i) The term preexisting obligation
means any account, instrument, contract,
debt, or equity interest maintained, exe-

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cuted, or issued by the withholding agent
that is outstanding on June 30, 2014. With
respect to a participating FFI, the term
preexisting obligation means any account,
instrument, or contract (including any
debt or equity interest) maintained, exe-
cuted, or issued by the FFI that is out-
standing on the effective date of the FFI
agreement. With respect to a registered
deemed-compliant FFI, a preexisting ob-
ligation means any account, instrument, or
contract (including any debt or equity in-
terest) that is maintained, executed, or is-
sued by the FFI prior to the later of the
date that the FFI registers as a deemed-
compliant FFI pursuant to § 1.1471-
5(f)(1) and receives a GIIN or the date the
FFI is required to implement its account
opening procedures under § 1.1471-5(f).
Notwithstanding the previous provisions
of this paragraph (b)(104)(i), a preexisting
obligation includes an obligation held by
an entity that is issued, opened, or exe-
cuted on or after July 1, 2014, and before
January 1, 2015, by or with a withholding
agent or FFI that treats the obligation as a
preexisting obligation. See §§ 1.1471-
2(a)(4)(ii), 1.1472-1(b)(2), and 1.1471-
4(c)(3) for the due diligence requirements
applicable to preexisting obligations for
withholding agents and participating FFIs.

(ii) * * *

(A) The account holder or payee also
holds with the withholding agent (or a
member of the withholding agent's ex-
panded affiliated group or sponsored FFI
group) an account, instrument, contract, or
equity interest that is a preexisting obliga-
tion under paragraph (b)(104)(i) of this
section;

(B) The withholding agent (and, as ap-
plicable, the member of the withholding
agent's expanded affiliated group or spon-
sored FFI group) treats both of the afore-
mentioned obligations, and any other ob-
ligations of the payee or account holder
that are treated as preexisting obligations
under this paragraph (b)(104)(ii), as con-
solidated obligations; and

(C) With respect to an obligation that is
subject to AML due diligence, the with-
holding agent is permitted to satisfy such
AML due diligence for the obligation by
relying upon the AML due diligence per-
formed for the preexisting obligation de-
scribed in paragraph (b)(104)(i) of this
section.

(105) Pre-FATCA Form W-8. The
term pre-FATCA Form W-8 means a ver-
sion of a Form W-8 that was issued by
the IRS prior to 2013 (including an ac-
ceptable substitute form based on such
version) and that does not contain chapter
4 statuses but otherwise meets the require-
ments of § 1.1441-1(e)(1)(ii) applicable
to such certificate (or substitute form) and
has not expired, or a Form W-8 that was
issued prior to 2013 and furnished by an
individual to establish such individual's
foreign status but otherwise meets the re-
quirements of § 1.1441-1(e)(1)(ii) appli-
cable to such certificate and has not ex-
pired.

* * * * *

(113) Reportable payment. The term
reportable payment means a payment of
interest or dividends (as defined in section
3406(b)(2)) and other reportable pay-
ments (as defined in section 3406(b)(3)).
* * * * *

(115) Reporting Model 2 FFI. The
term reporting Model 2 FFI means a par-
ticipating FFI that is described in
§ 1.1471-1(b)(91).

* * * * *

(123) Sponsored direct reporting
NFFE. The term sponsored direct report-
ing NFFE has the meaning set forth in
§ 1.1472-1(c)(5).

(124) Sponsoring entity. The term
sponsoring entity means (i) an entity that
registers with the IRS and agrees to per-
form the due diligence, withholding, and
reporting obligations of one or more FFIs
pursuant to § 1.1471-5(f)(1)(i)(F) or (f)(2)
(iii); or (ii) an entity that registers with the
IRS and agrees to perform the due dili-
gence and reporting obligations of one or
more direct reporting NFFEs pursuant to
§ 1.1472-1(c)(5).

(125) Standardized industry coding
system. The term standardized industry
coding system means a coding system
used by the withholding agent or FFI to
classify account holders by business type
for purposes other than U.S. tax purposes
and that was implemented by the with-
holding agent by the later of January 1,
2012, or six months after the date the
withholding agent was formed or orga-
nized.

* * * * *

(128) Substantial U.S. owner. The term
substantial U.S. owner or substantial

United States owner has the meaning set
forth in § 1.1473-1(b). In the case of a
reporting Model 2 FFI, in applying this
section with respect to a passive NFFE the
term substantial U.S. owner means a con-
trolling person as defined in the applicable
Model 2 IGA.

* * * * *

(135) U.S. branch treated as a U.S.
person. The term U.S. branch treated as a
U.S. person means a U.S. branch that
agrees to be treated as a U.S. person as
described in § 1.1441-1(b)(2)(iv)(A). For
the due diligence, withholding, and re-
porting requirements of a U.S. branch of
an FFI treated as a U.S. person for pur-
poses of chapter 4, see § 1.1471-4(b)(7),
(c)(2)(v), (d)(2)(iii)(B), § 1.1472-1(a),
and § 1.1474-1(i)(1) and (2).

* * * * *

(141) U.S. person-(i) Except as oth-
erwise provided in paragraph (b)(141)(ii)
of this section, the term U.S. person or
United States person means a person de-
scribed in section 7701(a)(30), the United
States government (including an agency
or instrumentality thereof), a State (in-
cluding an agency or instrumentality
thereof), or the District of Columbia (in-
cluding an agency or instrumentality
thereof). The term U.S. person or United
States person also means a foreign insur-
ance company that has made an election
under section 953(d), provided that either
the foreign insurance company is not a
specified insurance company (as de-
scribed in § 1.1471-5(e)(1)(iv)), or the
foreign insurance company is a specified
insurance company and is licensed to do
business in any State.

(ii) The term U.S. person or United
States person does not include a foreign
insurance company that has made an elec-
tion under section 953(d) if it is a speci-
fied insurance company and is not li-
censed to do business in any State. An
individual will not be treated as a U.S.
person for a taxable year or any portion of
a taxable year that the individual is a dual
resident taxpayer (within the meaning of
§ 301.7701(b)-7(a)(1) of this chapter)
who is treated as a nonresident alien pur-
suant to § 301.7701(b)-7 of this chapter
for purposes of computing the individu-
al's U.S. tax liability. A U.S. person does
not include an alien individual who has
made an election under section 6013(g) or

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(h) to be treated as a resident of the United
States.

(146) Withholding. The term withhold-
ing means the deduction and withholding
of tax at the applicable rate from a pay-
ment.

(c) Effective/applicability date. This
section applies on January 6, 2017. How-
ever, taxpayers may apply these provi-
sions as of January 28, 2013. (For the
rules that apply beginning on January 28,
2013, and before January 6, 2017, see this
section as in effect and contained in 26
CFR part 1 revised April 1, 2016.)

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

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

(a) [Reserved]. For further guidance,
see § 1.1471-1(a).

(b) [Reserved]. For further guidance,
see § 1.1471-1(b).

(1) through (98) [Reserved]. For fur-
ther guidance, see § 1.1471-1(b)(1)
through (98).

(99) Permanent residence address. The
term permanent residence address is the
address in the country of which the person
claims to be a resident for purposes of that
country's income tax. The address of a
financial institution with which the person
maintains an account, a post office box, or
an address used solely for mailing pur-
poses is not a permanent residence ad-
dress unless such address is the only per-
manent address used by the person and
appears as the person's registered address
in the person's organizational documents.
An address that is provided subject to
instructions to hold all mail to that address
must be accompanied by certain docu-
mentary evidence described in § 1.1441-
1(c)(38)(ii). If the person is an individual
who does not have a tax residence in any
country, the permanent address is the
place at which the person normally re-
sides. If the person is an entity and does
not have a tax residence in any country,
then the permanent residence address is
the place at which the person maintains its
principal office.

(100) through (151) [Reserved]. For
further guidance, see § 1.1471-1(b)(100)
through (151).

(c) [Reserved]. For further guidance,
see § 1.1471-1(c).

(d) Expiration date. The applicability
of this section expires on December 30,
2019

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

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

(a) * * *

(1) General rule of withholding. Under
section 1471(a), notwithstanding any ex-
emption from withholding under any
other provision of the Code or regulations,
a withholding agent must withhold 30 per-
cent of any withholdable payment made
after June 30, 2014, to a payee that is an
FFI unless either the withholding agent
can reliably associate the payment with
documentation upon which it is permitted
to rely to treat the payment as exempt
from withholding under paragraph (a)(4)
of this section or the payment is made
under a grandfathered obligation that is
described in paragraph (b) of this section
or constitutes gross proceeds from the dis-
position of such an obligation. A with-
holding agent that is making a payment
must determine who the payee is under
§ 1.1471-3(a) with respect to that pay-
ment and the chapter 4 status of such
payee. See § 1.1471-3 for requirements
for determining the chapter 4 status of a
payee, including additional documenta-
tion requirements that apply when a pay-
ment is made to an intermediary or flow-
through entity that is not the payee.
Withholding under this section applies
without regard to whether the payee re-
ceives a withholdable payment as a bene-
ficial owner or as an intermediary. See
paragraph (a)(2)(iv) of this section for a
description of the withholding require-
ments imposed on territory financial insti-
tutions as withholding agents under chap-
ter 4. In the case of a withholdable

payment to a NFFE, a withholding agent
is required to determine whether with-
holding applies under section 1472 and
§ 1.1472-1. Except as otherwise provided
in the regulations under chapter 4, a with-
holding obligation arises on the date a
payment is made, as determined under
§ 1.1473-1(a).

(2) * * *

(i) Requirement to withhold on pay-
ments of U.S. source FDAP income to
participating FFIs and deemed-compliant
FFIs that are NQIs, NWPs, or NWTs, and
U.S. branches acting as intermediaries. A
withholding agent that, after June 30,
2014, makes a payment of U.S. source
FDAP income to a participating FFI or
deemed-compliant FFI that is an NQI re-
ceiving the payment as an intermediary, or
a NWP or NWT, must withhold 30 per-
cent of the payment unless the withhold-
ing is reduced under this paragraph
(a)(2)(i). A withholding agent is not re-
quired to withhold on a payment, or por-
tion of a payment, that it can reliably
associate, in the manner described in
§ 1.1471-3(c)(2), with a valid intermedi-
ary or flow-through withholding certifi-
cate that meets the requirements of
§ 1.1471-3(d)(4) and a withholding state-
ment that meets the requirements of
§ 1.1471-3(c)(3)(iii)(B) and that allocates
the payment or portion of the payment to
payees for which no withholding is re-
quired under chapter 4. Further, a with-
holding agent is not required to withhold
on a payment that it can reliably associate
with documentation indicating that the
payee is a U.S. branch treated as a U.S.
person (as defined in § 1.1471-1(b)(135))
or is a U.S. branch of an FFI that is not
treated as a U.S. person but that applies
the rules described in § 1.1471-
4(d)(2)(iii)(C). See also § 1.1471-
3(c)(3)(iii)(H) for the rules for valid doc-
umentation of a U.S. branch.

(ii) Residual withholding responsibility
of intermediaries and flow-through enti-
ties. An intermediary or flow-through en-
tity that receives a withholdable payment
after June 30, 2014, is required to with-
hold on such payment to the extent re-
quired under chapter 4. Notwithstanding
the previous sentence, an intermediary or
flow-through entity is not required to
withhold if another withholding agent has
withheld the full amount required. Fur-

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ther, an NQI, NWP, or NWT is not re-
quired to withhold with respect to a with-
holdable payment under chapter 4 if it has
provided a valid intermediary withholding
certificate or flow-through withholding
certificate and all of the information re-
quired by § 1.1471-3(c)(3)(iii), and it
does not know, and has no reason to
know, that another withholding agent
failed to withhold the correct amount. A
QI's, WP's, or WT's obligation to with-
hold and report is determined in accor-
dance with its QI agreement, WP agree-
ment, or WT agreement.

(iii) * * *

(A) Election to be withheld upon for
U.S. source FDAP income. A withholding
agent is required to withhold with respect
to a payment, or portion of a payment, that
is U.S. source FDAP income subject to
withholding that is made after June 30,
2014, to a QI that has elected in accor-
dance with this paragraph to be withheld
upon, unless such withholding agent also
makes an election to be withheld upon
under this paragraph (a)(2)(iii)(A) or is an
FFI that may not accept primary withhold-
ing responsibility for the payment. In such
case, the withholding agent must withhold
30 percent of the portion of the payment
that is allocable, pursuant to a withholding
statement described in § 1.1471-3(c)(3)
(iii)(B) provided by the QI, to recalcitrant
account holders and nonparticipating
FFIs. If no such allocation information is
provided, the withholding agent must ap-
ply the presumption rules of § 1.1471-3(f)
to determine the chapter 4 status of the
payee. A QI that is an FFI and that makes
the election to be withheld upon with re-
spect to a payment of U.S. source FDAP
income may not assume primary with-
holding responsibility under chapter 3 for
that payment. Conversely, a QI that is an
FFI and that does not make the election to
be withheld upon with respect to a pay-
ment of U.S. source FDAP income is re-
quired to assume primary withholding re-
sponsibility under chapter 3 for that
payment. The election to be withheld
upon is only available with respect to a
payment of U.S. source FDAP income
if-

** * * *

(v) Withholding obligation of a foreign
branch of a U.S. financial institution. A
foreign branch of a U.S. financial institu-

tion is a U.S. withholding agent and a
payee that is a U.S. person, and is gener-
ally not an FFI. However, a foreign
branch of a U.S. financial institution that
is also a reporting Model 1 FFI is both
a withholding agent and a registered
deemed-compliant FFI. Additionally, a QI
branch of a U.S. financial institution is
both a withholding agent and either a par-
ticipating FFI or a registered deemed-
compliant FFI. Therefore, a foreign
branch of a U.S. financial institution is not
subject to withholding under chapter 4 but
has an obligation to withhold under this
section and § 1.1472-1 and may be liable
for the tax if it fails to do so. See
§ 1.1471-2(a) (requirement to withhold
on payments to FFIs) and § 1.1471-
3(a)(3)(iii) (U.S. intermediary or agent of
a foreign person). A foreign branch that is
a reporting Model 1 FFI or a reporting
Model 2 FFI may apply the procedures
under Annex I of an applicable IGA to
document the chapter 4 status of a payee
of a withholdable payment that is a holder
of an account maintained by the branch in
the Model 1 or Model 2 IGA jurisdiction.
A QI branch of a U.S. financial institution
must withhold in accordance with this
chapter as provided in the QI agreement in
addition to meeting its obligations under
either § 1.1471-4(b) and its FFI agree-
ment or § 1.1471-5(f).

* * * * *

(4) * * *

(ii) Exception to withholding for cer-
tain payments made prior to July 1, 2016
(transitional)-(A) In general. For any
withholdable payment made prior to July
1, 2016, with respect to a preexisting ob-
ligation for which a withholding agent
does not have documentation indicating
the payee's status as a nonparticipating
FFI, the withholding agent is not required
to withhold under this section and section
1471(a) unless the payee is a prima facie
FFI.

(B) Prima facie FFIs. If the payee is a
prima facie FFI, the withholding agent
must treat the payee as a nonparticipating
FFI beginning on January 1, 2015, until
the date the withholding agent obtains
documentation sufficient to establish a
different chapter 4 status of the payee. A
prima facie FFI means any payee if-
* * * * *

(iii) Payments to a participating FFI.
Except to the extent provided in paragraph
(a)(2)(i) of this section, a withholding
agent is not required to withhold under
section 1471(a) and this section on a with-
holdable payment made to a payee that the
withholding agent can treat as a partici-
pating FFI in accordance with § 1.1471-
3(d)(4). For this purpose, a limited branch
of a participating FFI is treated as a non-
participating FFI.
* * * * *

(b) * * *

(2) * * *

(i) * * *

(A) * * *

(1) Any obligation outstanding on July
1, 2014;

(2) Any obligation that gives rise to a
withholdable payment solely because the
obligation is treated as giving rise to a
dividend equivalent pursuant to section
871(m) and the regulations thereunder,
provided that the obligation is executed on
or before the date that is six months after
the date on which obligations of its type
are first treated as giving rise to dividend
equivalents;

(3) Any agreement requiring a secured
party to make a payment with respect to,
or to repay, collateral posted to secure a
grandfathered obligation. If collateral (or
a pool of collateral) secures both grandfa-
thered obligations and obligations that are
not grandfathered, the collateral posted to
secure the grandfathered obligations may
be determined by allocating (pro rata by
value) the collateral (or each item com-
prising the pool of collateral) to all out-
standing obligations secured by the collat-
eral (or pool of collateral) or, if the
collateral cannot be allocated pro rata to
all obligations, by allocating all collateral
to obligations that are not grandfathered
and withholding to the extent required un-
der chapter 4; and

(4) Any obligation that gives rise to
substitute interest (as defined in § 1.861-
2(a)(7)) that arises from the payee posting
a grandfathered obligation described in
paragraph (b)(2)(i)(A)(1) of this section as
collateral.

* * * * *

(ii) * * *

(A) * * *

(4) A life insurance contract under
which the entire contract value is payable

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no later than upon the death of the indi-
vidual(s) insured under the contract but, in
the case of a life insurance contract that
contains a provision that permits the sub-
stitution of a new individual as the insured
under the contract, only until a substitu-
tion occurs; and

* * * * *

(B) * * *

(2) Lacks a stated expiration or term
(for example, a savings deposit or demand
deposit, a deferred annuity contract, or an
annuity contract that permits a substitu-
tion of a new individual as the annuitant
under the contract);

* * * * *

(iv) Material modification. In the case
of an obligation that constitutes indebted-
ness for U.S. tax purposes, a material
modification is any significant modifica-
tion of the debt instrument as defined in
§ 1.1001-3(e). For life insurance con-
tracts, a material modification includes
any substitution of the insured under the
contract. In all other cases, whether a
modification of an obligation is material is
determined based on the facts and circum-
stances.

* * * * *

(4) * * *

(ii) Determination of material modifi-
cation. For purposes of paragraph (b)(2)
(iv) of this section (defining material mod-
ification), a withholding agent, other than
the issuer of the obligation (or an agent of
the issuer), is required to treat a modifi-
cation of the obligation as material only if
the withholding agent has actual knowl-
edge thereof, such as in the event the
withholding agent receives a disclosure
indicating that there has been or will be a
material modification to such obligation.
The issuer of the obligation (or an agent of
the issuer) that is a withholding agent is
required to treat a modification of the ob-
ligation as material if the withholding
agent knows or has reason to know that a
material modification has occurred with
respect to the obligation.

* * * * *

(c) Effective/applicability date. This
section applies on January 6, 2017. How-
ever, taxpayers may apply these provi-
sions as of January 28, 2013. (For the
rules that apply beginning on January 28,
2013, and before January 6, 2017, see this

section as in effect and contained in 26
CFR part 1 revised April 1, 2016.)

## § 1.1471-2T [Removed]

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

Par. 7. Section 1.1471-3 is amended
by:

1\. Revising paragraphs (a)(3)(iii),
(a)(3)(v) and (vi), (b)(3), (c)(1),
(c)(3)(ii)(C) and (D), (c)(3)(iii) introduc-
tory text, (c)(3)(iii)(A) introductory text,
(c)(3)(iii)(A)(5), and (c)(3)(iii)(B)(1)
through (4),

2\. Adding paragraph (c)(3)(iii)(B)(5).

3\. Revising paragraphs (c)(3)(iii)(H),
(c)(5)(i)(D), (c)(5)(ii)(B), (c)(6)(ii)(A),
(c)(6)(ii)(B)(2) and (3),(c)(6)(ii)(B)(5)
through (7), (c)(6)(ii)(C)(2)(iii), (c)(6)(ii)
(C)(2)(x),(c)(6)(ii)(C)(3) through (5), and
(c)(6)(ii)(E)(2) and (3),

4\. Adding paragraph (c)(6)(ii)(E)(4).

5\. Revising paragraphs (c)(6)(iv),
(c)(6)(v)(A) and (B), (c)(6)(vii), (c)(7)(i)
and (ii), (c)(8)(iii),(c)(8)(v), (c)(9)(ii)(B),
(c)(9)(v), (d)(1), (d)(2)(i), (d)(2)(iii),
(d)(4)(i) and (ii), (d)(4)(iii) introductory
text, (d)(4)(iii)(A)(1), (d)(4)(iv)(A),
(d)(4)(iv)(C) and (D), (d)(4)(v),

6\. Adding paragraph (d)(4)(vi).

7\. Revising paragraphs (d)(5)(i)
through (iii), (d)(6)(i)(F), (d)(6)(vii)
(A)(1), (d)(7)(i), (d)(11)(viii)(A), (d)(11)
(viii)(C), (d)(11)(x) through (xii), (d)(12)
(iii)(A) and (B), (e)(2) and (3), (e)(4) in-
troductory text, (e)(4)(i) through (iv), (e)
(4)(v), (e)(4)(v)(B)(1) and (2), (e)(4)(vi)
(B), (e)(4)(vii)(B), (e)(4)(viii), (f)(1)
through (9), and (g).

The revisions and additions read as fol-
lows:

§ 1.1471-3 Identification of payee.

(a) * * *

(3) * * *

(iii) U.S. intermediary or agent of a
foreign person. A withholding agent that
makes a withholdable payment to a U.S.
person and has actual knowledge that the
person receiving the payment is acting as
an intermediary or agent of a foreign per-
son with respect to the payment must treat
such foreign person, and not the interme-
diary or agent, as the payee of such pay-
ment. Notwithstanding the previous sen-
tence, a withholding agent that makes a

withholdable payment to a U.S. financial
institution or a U.S. insurance broker (to
the extent such withholdable payment is a
payment of premiums) that is acting as an
intermediary or agent with respect to the
payment on behalf of one or more foreign
persons may treat the U.S. financial insti-
tution or U.S. insurance broker as the
payee if the withholding agent does not
have reason to know that the U.S. finan-
cial institution or U.S. insurance broker
will not comply with its obligations to
withhold under sections 1471 and 1472.
* * * * *

(v) Disregarded entity or limited
branch. Except as otherwise provided in
paragraph (a)(3)(v) through (vii) of this
section, a withholding agent that makes a
withholdable payment to an entity that is
disregarded for U.S. federal tax purposes
under § 301.7701-2(c)(2)(i) of this chap-
ter as an entity separate from its single
owner must treat the single owner as the
payee. The rules under § 1.1471-3(d)(4)
and (e)(3) apply to determine the circum-
stances under which a withholding agent
may treat a payment made to a disre-
garded entity owned by an FFI as made to
a payee that is a participating FFI or reg-
istered deemed-compliant FFI, and not as
a payment made to a payee that is a non-
participating FFI. A withholding agent
that makes a payment to a limited branch
(including an entity disregarded as a sep-
arate entity from its owner if such owner
is an FFI and the disregarded entity is
unable to comply with the terms of an FFI
agreement with respect to accounts that it
maintains) will be required to treat the
payment as being made to a nonparticipat-
ing FFI.

(vi) U.S. branch treated as a U.S. per-
son. A withholdable payment to a U.S.
branch is a payment to a U.S. person if the
U.S. branch is treated as a U.S. person (as
defined in § 1.1471-1(b)(135)). In such
case, the U.S. branch is treated as the
payee. A U.S. branch treated as a U.S.
person, however, is not treated as a U.S.
person for purposes of the withholding
certificate it may provide to a withholding
agent for purposes of chapter 4. Accord-
ingly, a U.S. branch treated as a U.S.
person must furnish a withholding certif-
icate on a Form W-8 to certify its chapter
4 status (and not a Form W-9, "Request
for Taxpayer Identification Number and

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Certification"). See also paragraph (f)(6)
of this section for the rules under which a
withholding agent can presume a payment
to a U.S. branch constitutes income that is
effectively connected with a U.S. trade or
business. A U.S. branch treated as a U.S.
person may not make an election to be
withheld upon, as described in section
1471(b)(3) and § 1.1471-2(a)(2)(iii), for
purposes of chapter 4. See § 1.1471-
4(c)(2)(v) for the rule requiring a U.S.
branch treated as a U.S. person to apply
the due diligence rules applicable to a
U.S. withholding agent. See also
§ 1.1474-1(i)(1) and (2) for the require-
ment of a U.S. branch to report informa-
tion regarding certain U.S. owners of
owner documented FFIs and passive
NFFEs. See § 1.1471-4(d) for rules for
when a U.S. branch reports as a U.S.
person.

* * * * *

(b) * * *

(3) Determination of whether the pay-
ment is made to a QI, WP, or WT. A
withholding agent may treat the person
who receives a payment as a QI, WP, or
WT if the withholding agent can reliably
associate the payment with a valid Form
W-8IMY, as described in paragraph
(c)(3)(iii) of this section, that indicates
that the person who receives the payment
is a QI, WP, or WT, provides the person's
QI-EIN, WP-EIN, or WT-EIN, and the
person's GIIN, if applicable.

* * * * *

(c) * * *

(1) [Reserved]. For further guidance,
see § 1.1471-3T(c)(1).

* * * * *

(3) * * *

(ii) * * *

(C) The person's entity classification
for U.S. tax purposes;

(D) The person's chapter 4 status; and
* * * * *

(iii) Withholding certificate of an inter-
mediary, qualified intermediary, flow-
through entity, or U.S. branch (Form
W-8IMY)-(A) In general. A withhold-
ing certificate of an intermediary, quali-
fied intermediary, flow-through entity, or
U.S. branch of such entity (whether or not
such branch is treated as a U.S. person) is
valid for purposes of chapter 4 only if it is
furnished on a Form W-8IMY, an accept-
able substitute form, or such other form as

the IRS may prescribe, it is signed under
penalties of perjury by a person with au-
thority to sign for the person named on the
form, its validity period has not expired,
and it contains the following information,
statements, and certifications-
* * * * *

(5) A GIIN, in the case of a participat-
ing FFI or a registered deemed-compliant
FFI (including a QI, WP, or WT that is a
participating FFI or registered deemed-
compliant FFI), and an EIN in the case of
a QI, WP, or WT. Additionally, if a
branch (other than a U.S. branch) of a
participating FFI or registered deemed-
compliant FFI outside of its country of
residence acts as an intermediary, a GIIN
of such branch must be provided on the
withholding certificate. In the case of a
U.S. branch, see the rules in paragraph
(c)(3)(iii)(H) of this section.
* * * * *

(B) * * *

(1) In general. A withholding state-
ment forms an integral part of the with-
holding certificate and the penalties of
perjury statement provided on the with-
holding certificate applies to the withhold-
ing statement as well. The withholding
statement may be provided in any manner,
and in any form, to which the person
submitting the form and the withholding
agent mutually agree, including electron-
ically. A withholding statement may be
provided electronically only if it meets the
requirements of § 1.1441-1(e)(3)(iv)(B).
The withholding statement must be up-
dated as often as necessary for the with-
holding agent to meet its reporting and
withholding obligations under chapter 4.
A withholding agent will be liable for tax,
interest, and penalties under § 1.1474-
1(a) to the extent it does not follow the
presumption rules of paragraph (f) of this
section for any payment, or portion
thereof, for which a withholding statement
is required and the withholding agent does
not have a valid withholding statement
prior to making a payment. A withholding
agent that is making a withholdable pay-
ment for which a withholding statement is
also required for purposes of chapter 3
may only rely upon the withholding state-
ment if, in addition to providing the infor-
mation required by paragraph (c)(3)
(iii)(B) of this section, the withholding
statement also includes all of the informa-

tion required for purposes of chapter 3 and
specifies the chapter 4 status of each
payee or pool of payees identified on the
withholding statement for purposes of
chapter 3.

(2) Special requirements for an FFI
withholding statement-(i) An FFI with-
holding statement may include either
payee-specific information or pooled in-
formation that indicates the portion of the
payment allocable to a chapter 4 with-
holding rate pool of U.S. payees, each
class of recalcitrant account holders de-
scribed in § 1.1471-1(b)(20)(i), or a class
of nonparticipating FFIs. In addition, an
FFI withholding statement may include an
allocation of a portion of the payment to a
pool of account holders (other than non-
qualified intermediaries and flow-through
entities) for whom no reporting is required
on any of Forms 1042-S, 1099, and 8966,
provided that the FFI provides to the with-
holding agent for each account holder
payee-specific information (including the
payee's chapter 4 status (using the appli-
cable status code used for filing Form
1042-S)) and any other information re-
quired for purposes of chapter 3 or 61 on
the withholding statement, and the FFI
provides documentation for each account
holder in the pool (an exempt payee pool).
For example, a participating FFI may pro-
vide on its withholding statement an ex-
empt payee pool for a payment of U.S.
source interest on a bank deposit not sub-
ject to withholding or reporting under
chapter 4 that is allocable to a pool of
foreign account holders (that is, a with-
holdable payment that is not reported on
any of Forms 1042-S, 1099, and 8966)
and provide to the withholding agent doc-
umentation for each account holder in-
cluded in the pool. If payee-specific infor-
mation is provided for purposes of chapter
4 it must indicate both the portion of the
payment allocated to each payee and each
payee's chapter 4 status (using the appli-
cable status code used for filing Form
1042-S). A participating FFI that applies
the escrow procedures described in
§ 1.1471-4(b)(6) for dormant accounts
must also indicate the portion of the pay-
ment allocated to a chapter 4 withholding
rate pool of recalcitrant account holders
that hold dormant accounts for which the
participating FFI (and not the withholding
agent) will withhold in escrow. The with-

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holding statement provided by a partici-
pating FFI that applies the election to
backup withhold under § 1.1471-4(b)
(3)(iii) must also indicate the portion of
the reportable payment that is a withhold-
able payment allocated to each recalci-
trant account holder subject to backup
withholding under section 3406. See sec-
tion 3406 for when backup withholding is
required, including the exception to
backup withholding under § 31.3406(g)-
1(e). Regardless of whether the FFI with-
holding statement provides information
on a pooled or payee-specific basis, a
withholding statement provided by an FFI
other than an FFI acting as a WP, WT, or
QI with respect to the account must also
identify each intermediary or flow-
through entity that receives the payment
and such entity's chapter 4 status (using
the applicable status code used for filing
Form 1042-S) and GIIN (when required
under paragraph (d) of this section), when
applicable. An FFI withholding statement
must also include any other information
that the withholding agent or payor rea-
sonably requests in order to fulfill its ob-
ligations under chapter 4, and chapters 3
and 61, if applicable.

(ii) An FFI withholding statement pro-
vided by a reporting Model 2 FFI or a
reporting Model 1 FFI may indicate, with
respect to a withholdable payment, that
the payment is allocable to a chapter 4
withholding rate pool of U.S. payees,
which is comprised of account holders
receiving a payment that is not subject to
withholding under chapter 3 or 4 or to
backup withholding under section 3406
and that are, with respect to a reporting
Model 2 FFI, the holders of non-
consenting U.S. accounts as described in
an applicable IGA when the FFI reports
the accounts in one of the pools described
in § 1.1471-4(d)(6) for the year in which
the payment is made; or with respect to a
reporting Model 1 FFI, the holders of ac-
counts that have U.S. indicia for which
appropriate documentation sufficient to
treat the accounts as held by other than
specified U.S. persons has not been pro-
vided pursuant to an applicable Model 1
IGA and the reporting Model 1 FFI re-
ports the accounts as U.S. reportable ac-
counts pursuant to the applicable Model 1
IGA for the year in which the payment is
made.

(iii) An FFI withholding statement pro-
vided by a participating FFI or registered
deemed-compliant FFI that is a non-U.S.
payor (a payor other than a U.S. payor as
defined in § 1.6049-5(c)(5)) may indi-
cate, with respect to a withholdable pay-
ment, that the payment is allocable to a
chapter 4 withholding rate pool of U.S.
payees (in addition to the U.S. payees
described in paragraph (c)(3)(iii)(B)(2)(ii)
of this section), which is comprised of
account holders that are not subject to
withholding under chapter 3 or 4 or to
backup withholding under section 3406
and that are, with respect to a participating
FFI (including a reporting Model 2 FFI),
account holders that hold U.S. accounts
(as defined in § 1.1471-1(b)(134) and an
applicable Model 2 IGA) that the FFI re-
ports as U.S. accounts pursuant to
§ 1.1471-4(d)(3) or (5) for the year in
which the payment is made; with respect
to a registered deemed-compliant FFI
(other than a reporting Model 1 FFI), ac-
count holders of U.S. accounts that the
FFI reports pursuant to the conditions of
its applicable deemed-compliant status
under § 1.1471-5(f)(1) for the year in
which the payment is made; or with re-
spect to a reporting Model 1 FFI, account
holders of U.S. accounts that the reporting
Model 1 FFI reports as reportable U.S.
accounts pursuant to an applicable Model
1 IGA, and which includes the U.S. TINs
of such account holders, for the year in
which the payment is made.

(iv) An FFI withholding statement pro-
vided by a participating FFI or a regis-
tered deemed-compliant FFI may include
a certification that the FFI is reporting, for
the year in which the payment is made, an
account held by a passive NFFE with one
or more substantial U.S. owners (or, with
respect to a reporting Model 1 FFI or
reporting Model 2 FFI, one or more con-
trolling persons that are specified U.S.
persons, as defined in an applicable IGA)
as a U.S. account (excluding a non-
consenting U.S. account or an account
held by a recalcitrant account holder) or,
with respect to a reporting Model 1 FFI, a
U.S. reportable account, in accordance
with the terms of the FFI agreement or an
applicable IGA.

(v) An FFI withholding statement pro-
vided by a participating FFI or a reporting
Model 1 FFI may include a certification

that the FFI is reporting to the IRS for the
year of the payment all of the information
described in § 1.1471-4(d) or § 1.1474-
1(i)(1) (as applicable) with respect to
all specified U.S. persons described in
§ 1.1471-3(d)(6)(iv)(A)(1) and (2) with
respect to an account holder or payee that
the FFI has agreed to treat as an owner-
documented FFI.

(3) Special requirements for a chapter
4 withholding statement. A chapter 4
withholding statement must contain the
name, address, TIN (if any), entity type,
and chapter 4 status (using the applicable
status code used for filing Form 1042-S)
of each payee, the amount allocated to
each payee, a valid withholding certificate
or other appropriate documentation suffi-
cient to establish the chapter 4 status of
each payee, and each intermediary or
flow-through entity that receives the pay-
ment on behalf of the payee, in accor-
dance with paragraph (d) of this section,
and any other information the withholding
agent reasonably requests in order to ful-
fill its obligations under chapter 4. Not-
withstanding the prior sentence, a chapter
4 withholding statement is permitted to
provide pooled allocation information
with respect to payees that are treated as
nonparticipating FFIs (in lieu of providing
the withholding agent with documentation
for each payee). A chapter 4 withholding
statement may include an allocation of a
portion of the payment to a pool of payees
(rather than to each payee) for whom no
reporting is required on any of Forms
1042-S, 1099, and 8966, provided each
payee is identified on the withholding
statement and documentation is provided
to the withholding agent for each payee
included in the pool. If the withholdable
payment is a reportable amount under
chapter 3, see the provisions of § 1.1441-
1(e)(3)(iv)(C) for any additional infor-
mation that may be required on the with-
holding statement (including pooled
information under the alternative proce-
dures described in § 1.1441-1(e)(3)
(iv)(D), if applicable).

(4) Special requirements for an exempt
beneficial owner withholding statement.
An exempt beneficial owner withholding
statement must include the name, address,
TIN (if any), entity type, and chapter 4
status (using the applicable status code
used for filing Form 1042-S) of each ex-

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empt beneficial owner on behalf of which
the nonparticipating FFI is receiving the
payment, the amount of the payment allo-
cable to each exempt beneficial owner, a
valid withholding certificate or other doc-
umentation sufficient to establish the
chapter 4 status of each exempt beneficial
owner in accordance with paragraph (d) of
this section, and any other information the
withholding agent reasonably requests in
order to fulfill its obligations under chap-
ter 4. The withholding statement must al-
locate the remainder of the payment that is
not allocated to an exempt beneficial
owner to the nonparticipating FFI receiv-
ing the payment. With respect to the
amount of the payment allocable to
each exempt beneficial owner and subject
to withholding under chapter 3, see
§ 1.1441-1(e)(3)(iv).

(5) [Reserved]. For further guidance,
see § 1.1471-3T(c)(3)(iii)(B)(5).

* * * * *

(H) Rules applicable to a withholding
certificate of a U.S. branch. A withhold-
ing agent may reliably associate a pay-
ment with a withholding certificate of a
U.S. branch of an FFI that is treated as a
U.S. person for purposes of § 1.1441-
1(b)(2)(iv) if, in addition to the other in-
formation required by paragraph (c)(2)
(iii)(A) of this section, the certificate con-
tains the EIN of the U.S. branch and a
certification that the U.S. branch is de-
scribed in paragraph § 1.1441-1(b)(2)(iv)
and, accordingly, is required to accept pri-
mary withholding responsibility with re-
spect to the payment for purposes of both
chapters 3 and 4. A withholding agent
may reliably associate a payment with a
withholding certificate of a U.S. branch of
an FFI that is not treated as a U.S. person
and that applies the rules described in
§ 1.1471-4(d)(2)(iii)(C) if, in addition to
the other information required by para-
graph (c)(2)(iii)(A) of this section, the cer-
tificate contains the EIN of the U.S.
branch and a certification that the U.S.
branch applies the rules described in
§ 1.1471-4(d)(2)(iii)(C). However, the
requirement to obtain the certification that
a U.S. branch applies the rules described
in § 1.1471-4(d)(2)(iii)(C) shall not apply
to payments made on or before June 30,
2017.

* * * * *

(5) * * *

(i) * * *

(D) Entity government documentation.
With respect to an entity, any documenta-
tion that substantiates that the entity is
actually organized or created under the
laws of a foreign country; and
* * * * *

(ii) * * *

(B) Preexisting obligation documen-
tary evidence. With respect to a preexist-
ing obligation of an entity, any classifica-
tion in the withholding agent's records
with respect to the payee that was deter-
mined based on documentation supplied
by the payee (or other person receiving
the payment) or a standardized industry
coding system and that was recorded by
the withholding agent consistent with its
normal business practices for AML or an-
other regulatory purpose (other than for
tax purposes), to the extent permitted by
paragraph (d) of this section and provided
there is no U.S. indicia associated with the
payee for which appropriate curing docu-
mentation has not been obtained as set
forth in paragraph (e) of this section; and
* * * * *

(6) * * *

(ii) * * *

(A) General rule. Except as provided
otherwise in paragraphs (c)(6)(ii)(B) and
(C) of this section, a withholding certifi-
cate or written statement will remain valid
until the last day of the third calendar year
following the year in which the withhold-
ing certificate or written statement is
signed. Documentary evidence is gener-
ally valid until the last day of the third
calendar year following the year in which
the documentary evidence is provided to
the withholding agent. Nevertheless, doc-
umentary evidence that contains an expi-
ration date may be treated as valid until
that expiration date if doing so would pro-
vide a longer period of validity than the
three-year period. Notwithstanding the
validity periods permitted by paragraphs
(c)(6)(ii)(A) through (D) of this section, a
withholding certificate, written statement,
and documentary evidence will cease to
be valid if the withholding agent has
knowledge of a change in circumstances
that makes the information on the docu-
mentation incorrect. Therefore, a with-
holding agent is required to institute pro-
cedures to ensure that any change to the
customer master files that constitutes a

change in circumstances described in
paragraph (c)(6)(ii)(E) of this section is
identified by the withholding agent. In
addition, a withholding agent is required
to notify any person providing documen-
tation of the person's obligation to notify
the withholding agent of a change in cir-
cumstances.

(B) * * *

(2) A beneficial owner withholding
certificate and documentary evidence sup-
porting the individual's claim of foreign
status when both are provided together (as
defined in § 1.1441-1(e)(4)(ii)(B)(1)) by
an individual claiming foreign status, if
the withholding agent does not have a
current U.S. residence or U.S. mailing ad-
dress for the payee and does not have one
or more current U.S. telephone numbers
that are the only telephone numbers the
withholding agent has for the payee;

(3) A beneficial owner withholding
certificate that is provided by an entity
described in paragraph (c)(6)(ii)(C)(2) of
this section (other than an entity described
in paragraph (c)(6)(ii)(C)(2)(iii) of this
section) and documentary evidence estab-
lishing the entity's foreign status when
both are received by the withholding
agent before the validity period of either
would otherwise expire under paragraph
(c)(6)(ii)(A) of this section;

* * * * *

(5) A withholding certificate, written
statement, or documentary evidence fur-
nished by a foreign government, govern-
ment of a U.S. territory, foreign central
bank (including the Bank for International
Settlements), international organization,
or entity that is wholly owned by any such
entities;

(6) Documentary evidence that is not
generally renewed or amended (such as a
certificate of incorporation); and

(7) For the validity period of a benefi-
cial owner withholding certificate pro-
vided by an entity described in paragraph
(c)(6)(ii)(C)(2)(iii) of this section, see
§ 1.1441-1(e)(4)(ii).

(C) * * *

(2) * * *

(iii) A section 501(c) entity described
in § 1.1471-5(e)(5)(v);

* * * * *

(x) A sponsored FFI described in
§ 1.1471-5(f)(1)(i)(F);

* * * * *

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(3) A withholding certificate or written
statement of an owner-documented FFI,
but not including the withholding state-
ments, documentary evidence, and with-
holding certificates of its owners (unless
such documentation is permitted indefi-
nite validity under another provision);

(4) An owner reporting statement asso-
ciated with a withholding certificate of an
owner-documented FFI, provided the ac-
count balance of all accounts held by such
owner-documented FFI with the with-
holding agent does not exceed $1,000,000
on the later of June 30, 2014, or the last
day of the calendar year in which the
account was opened, and the last day of
each subsequent calendar year preceding
the payment, applying the aggregation
principles of § 1.1471-5(b)(4)(iii), and the
owner-documented FFI does not have any
contingent beneficiaries or designated
classes with unidentified beneficiaries;
and

(5) A withholding certificate of a pas-
sive NFFE or excepted territory NFFE,
provided the account balance of all ac-
counts held by such entity with the with-
holding agent does not exceed $1,000,000
on the later of June 30, 2014, or the last
day of the calendar year in which the
account was opened, and the last day of
each subsequent calendar year preceding
the payment, applying the aggregation
principles of § 1.1471-5(b)(4)(iii), and the
withholding agent does not know or have
reason to know that the entity has any
contingent beneficiaries or designated
classes with unidentified beneficiaries.
* * * * *

(E) * * *

(2) Obligation to notify withholding
agent of a change in circumstances. If a
change in circumstances makes any infor-
mation on a certificate or other documen-
tation incorrect, then the person whose
name is on the certificate or other docu-
mentation must inform the withholding
agent within 30 days of the change and
furnish a new certificate, a new written
statement, or new documentary evidence.
Notwithstanding the previous sentence, if
an FFI's chapter 4 status changes solely
because the jurisdiction in which the FFI
is resident, organized, or located is later
treated as having an IGA in effect (includ-
ing a jurisdiction that had a Model 2 IGA
in effect and is later treated as having a

Model 1 IGA in effect) or ceases to be
treated as having an IGA in effect, in lieu
of providing a new withholding certifi-
cate, the FFI may, within 30 days of such
change in circumstances, provide to the
withholding agent oral or written confir-
mation (including by e-mail) of the
change in the FFI's chapter 4 status. If an
intermediary or a flow-through entity be-
comes aware that a certificate or other
appropriate documentation it has fur-
nished to the person from whom it collects
a payment is no longer valid because of a
change in the circumstances of the person
who issued the certificate or furnished the
other appropriate documentation, then the
intermediary or flow-through entity must
notify the person from whom it collects
the payment of the change in circum-
stances within 30 days of the date that it
knows or has reason to know of the
change in circumstances. It must also ob-
tain a new withholding certificate or new
appropriate documentation to replace the
existing certificate or documentation
the validity of which has expired due to
the change in circumstances.

(3) Withholding agent's obligation
with respect to a change in circumstances.
A certificate or other documentation be-
comes invalid on the date that the with-
holding agent holding the certificate or
documentation knows or has reason to
know that circumstances affecting the cor-
rectness of the certificate or documenta-
tion have changed. A withholding agent
will not have reason to know of a change
in circumstances with respect to an FFI's
chapter 4 status that results solely because
a jurisdiction is later treated as having an
IGA in effect (including a jurisdiction that
had a Model 2 IGA in effect and is later
treated as having a Model 1 IGA in effect)
until the withholding agent obtains the
confirmation of a change in the FFI's
chapter 4 status described in paragraph
(c)(6)(ii)(E)(2) of this section (which will
become part of the FFI's withholding cer-
tificate or other documentation retained by
the withholding agent). See paragraph
(c)(6)(ii)(E)(4) of this section for when a
withholding agent has reason to know of a
change in circumstances that results solely
because a jurisdiction ceases to be treated
as having an IGA in effect. A withholding
agent may choose to treat a person as
having the same chapter 4 status that it

had prior to the change in circumstances
until the earlier of 90 days from the date
that the certificate or documentation be-
came invalid due to the change in circum-
stances or the date that a new certificate or
new documentation is obtained. See, how-
ever, § 1.1441-1(e)(4)(ii)(D) for require-
ments, including the requirement to with-
hold under chapter 3 or section 3406,
applicable when a change in circum-
stances occurs for purposes of chapter 3
and the related grace period allowed under
§ 1.1441-1(b)(3)(iv). A withholding agent
may rely on a certificate without having to
inquire into possible changes of circum-
stances that may affect the validity of the
statement, unless it knows or has reason to
know that circumstances have changed. A
withholding agent may require a new cer-
tificate or additional documentation at any
time prior to a payment, regardless of
whether the withholding agent knows or
has reason to know that any information
stated on the certificate or documentation
has changed.

(4) [Reserved]. For further guidance,
see § 1.1471-3T(c)(6)(ii)(E)(4).
* * * * *

(iv) Electronic transmission of with-
holding certificate, written statement, and
documentary evidence. A withholding
agent may accept a withholding certificate
(including an acceptable substitute form),
a written statement, or other such form as
the IRS may prescribe, electronically in
accordance with the requirements set forth
in § 1.1441-1(e)(4)(iv).

(v) * * *

(A) In general. A withholding agent
may substitute its own form for an official
Form W-8 (or such other official form as
the IRS may prescribe). A substitute form
will be acceptable if it contains provisions
that are substantially similar to those of
the official form, it contains the same
certifications relevant to the transactions
as are contained on the official form and
these certifications are clearly set forth,
and the substitute form includes a
signature-under-penalties-of-perjury state-
ment identical to the one on the official
form. The substitute form is acceptable
even if it does not contain all of the pro-
visions contained on the official form, so
long as it contains those provisions that
are relevant to the transaction for which it
is furnished. A withholding agent may

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choose to provide a substitute form that
does not include all of the chapter 4 sta-
tuses provided on the official version but
the substitute form must include any chap-
ter 4 status for which withholding may
apply, such as the categories for a nonpar-
ticipating FFI or passive NFFE. A with-
holding agent that uses a substitute form
must furnish instructions relevant to the
substitute form only to the extent and in
the manner specified in the instructions to
the official form. A withholding agent
may use a substitute form that is written in
a language other than English and may
accept a form that is filled out in a lan-
guage other than English, but the with-
holding agent must make available an
English translation of the form and its
contents to the IRS upon request. A with-
holding agent may refuse to accept a cer-
tificate (including the official Form W-8)
from a person if the certificate provided is
not an acceptable substitute form provided
by the withholding agent, but only if the
withholding agent furnishes the person
with an acceptable substitute form within
five business days of receipt of an unac-
ceptable form from the person. In that
case, the substitute form is acceptable
only if it contains a notice that the with-
holding agent has refused to accept the
form submitted by the person and that the
person must submit the acceptable form
provided by the withholding agent in or-
der for the person to be treated as having
furnished the required withholding certif-
icate.

(B) Non-IRS form for individuals. A
withholding agent may also substitute its
own form for an official Form W-8BEN
(for individuals), regardless of whether
the substitute form is titled a Form W-8.
However, in addition to the name and
address of the individual that is the payee
or beneficial owner, the substitute form
must provide all countries in which the
individual is resident for tax purposes,
country of birth, a tax identification num-
ber (if any) for each country of residence,
the individual's date of birth, and must
contain a signed and dated certification
made under penalties of perjury that the
information provided on the form is accu-
rate and will be updated by the individual
within 30 days of a change in circum-
stances that causes the form to become
incorrect. Notwithstanding the previous

sentence, the signed certification provided
on a form need not be signed under pen-
alties of perjury if the form is accompa-
nied by documentary evidence that sup-
ports the individual's claim of foreign
status. Such documentary evidence may
be the same documentary evidence that is
used to support foreign status in the case
of a payee whose account has U.S. indicia
as described in paragraph (e) of this sec-
tion or § 1.1471-4(c)(4)(i)(A). The form
may also request other information re-
quired for purposes of tax or AML due
diligence in the United States or in other
countries.

* * * * *

(vii) Reliance on a prior version of a
withholding certificate. Upon the issuance
by the IRS of an updated version of a
withholding certificate, a withholding
agent may continue to accept the prior
version of the withholding certificate in
accordance with the requirements of
§ 1.1441-1(e)(4)(viii)(C) and without re-
gard to whether a withholdable payment
associated with the certificate is subject to
withholding under § 1.1441-2(a).

(7) * * *

(i) Curing inconsequential errors on a
withholding certificate. A withholding
agent may treat a withholding certificate
as valid, notwithstanding that the with-
holding certificate contains an inconse-
quential error, if the withholding agent has
sufficient documentation on file to supple-
ment the information missing from the
withholding certificate due to the error. In
such case, the documentation relied upon
to cure the inconsequential error must be
conclusive. For example, a withholding
certificate in which the individual submit-
ting the form abbreviated the country of
residence in an ambiguous way may be
treated as valid, notwithstanding the ab-
breviation, if the withholding agent has
government issued identification for the
person from a country that reasonably
matches the abbreviation. On the other
hand, an ambiguous abbreviation for the
country of residence that does not reason-
ably match the country of residence
shown on the person's passport is not an
inconsequential error. A failure to select
an entity type on a withholding certificate
is not an inconsequential error, even if the
withholding agent has an organization
document for the entity that provides suf-

ficient information to determine the per-
son's entity type, if the person was eligi-
ble to make an election under § 301.7701-
3(c)(1)(i) of this chapter (that is, a check-
the-box election). A failure to check a box
to make a required certification on the
withholding certificate or to provide a
country of residence or a country under
which treaty benefits are sought is not an
inconsequential error. In addition, infor-
mation on a withholding certificate that
contradicts other information contained
on the withholding certificate or in the
customer master file is not an inconse-
quential error.

(ii) [Reserved]. For further guidance,
see § 1.1471-3T(c)(7)(ii).

(8) * * *

(iii) Shared account systems. A with-
holding agent may rely on documentation
furnished by a customer for an account
held at another branch location of the
same withholding agent or at a branch
location of a member of the expanded
affiliated group of the withholding agent if
the withholding agent treats all accounts
that share documentation as a consoli-
dated obligation and the withholding
agent and the other branch location or
expanded affiliated group member share
an information system, electronic or oth-
erwise, that is described in this paragraph
(c)(8)(iii). The system must allow the
withholding agent to easily access data
regarding the nature of the documentation,
the information contained in the docu-
mentation (including a copy of the docu-
mentation itself), and the validity status of
the documentation. The information sys-
tem must also allow the withholding agent
to easily transmit data into the system
regarding any facts of which it becomes
aware that may affect the reliability of the
documentation. The withholding agent
must be able to establish, to the extent
applicable, how and when it has transmit-
ted data regarding any facts of which it
became aware that may affect the reliabil-
ity of the documentation and must be able
to establish that any data it has transmitted
to the information system has been pro-
cessed and appropriate due diligence has
been exercised regarding the validity of
the documentation. A withholding agent
that opts to rely upon the chapter 4 status
designated for the payee in the shared
account system without obtaining and re-

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viewing copies of the documentation sup-
porting the status must be able to produce
all documentation (or a notation of the
documentary evidence reviewed if the
withholding agent is not required to retain
copies of the documentary evidence) rel-
evant to the chapter 4 status claimed upon
request by the IRS and will be liable for
any underwithholding that results from
any failure to assign the correct status
based upon the available information.
* * * * *

(v) Preexisting account. A withholding
agent may rely on documentation fur-
nished by a payee for a preexisting ac-
count held at another branch location of
the same withholding agent or at a branch
location of a member of the expanded
affiliated group of the withholding agent if
the withholding agent obtains and reviews
copies of such documentation supporting
the chapter 4 status designated for the
payee and the withholding agent has no
reason to know that, at the time the doc-
umentation is obtained by the withholding
agent, the documentation is unreliable or
incorrect. For example, the withholding
agent may not rely on documentation fur-
nished by a payee for a preexisting ac-
count held at another branch location of
the same withholding agent or at a branch
location of a member of the expanded
affiliated group of the withholding agent
if, based on information in the withhold-
ing agent's account records, the withhold-
ing agent has reason to know that such
documentation is unreliable or incorrect.

(9) * * *

(ii) * * *

(B) The third-party data provider must
be in the business of providing credit re-
ports or business reports to customers un-
related to it and must have reviewed all
information it has for the entity and veri-
fied that such additional information does
not conflict with the chapter 4 status
claimed by the entity. For purposes of this
paragraph (c)(9)(ii)(B), a customer is re-
lated to a third-party data provider if they
have a relationship with each other that is
described in section 267(b).

* * * * *

(v) Reliance upon documentation for
accounts acquired in merger or bulk ac-
quisition for value. A withholding agent
that acquires an account from a predeces-
sor or transferor in a merger or bulk ac-

quisition of accounts for value is permit-
ted to rely upon valid documentation (or
copies of valid documentation) collected
by the predecessor or transferor. In addi-
tion, a withholding agent that acquires an
account in a merger or bulk acquisition of
accounts for value, other than a related
party transaction, from a U.S. withholding
agent, a participating FFI that has com-
pleted all due diligence required under its
agreement with respect to the accounts
transferred, or a reporting Model 1 FFI
that has completed all due diligence re-
quired pursuant to the applicable Model 1
IGA, may also rely upon the predecessor's
or transferor's determination of the chap-
ter 4 status of an account holder for a
transition period of the lesser of six
months from the date of the merger or
until the acquirer knows that the claim of
status is inaccurate or a change in circum-
stances occurs. At the end of the transition
period, the acquirer will be permitted to
rely upon the predecessor's determination
as to the chapter 4 status of the account
holder only if the documentation that the
acquirer has for the account holder, in-
cluding documentation obtained from the
predecessor or transferor, supports the
chapter 4 status claimed. An acquirer that
discovers at the end of the transition pe-
riod that the chapter 4 status assigned by
the predecessor or transferor to the ac-
count holder was incorrect and, as a result,
has not withheld as it would have been
required to but for its reliance upon the
predecessor's determination, will be re-
quired to withhold on payments made af-
ter the transition period, if any, to the
account holder equal to the amount of tax
that should have been withheld during the
transition period but for the erroneous
classification as to the account holder's
status. For purposes of this paragraph
(c)(9)(v), a related party transaction is a
merger or sale of accounts in which either
the acquirer is in the same expanded af-
filiated group as the predecessor or trans-
feror prior to or after the merger or acqui-
sition or the predecessor or transferor (or
shareholders of the predecessor or trans-
feror) obtains a controlling interest in the
acquirer or in a newly formed entity cre-
ated for purposes of the merger or acqui-
sition. See § 1.1471-4(c)(2)(ii)(B) for an
additional allowance for a participating
FFI to rely upon the determination made

by another participating FFI as to the
chapter 4 status of an account obtained as
part of a merger or bulk acquisition for
value.

(d) * * *

(1) Reliance on pre-FATCA Form
W-8. To establish a payee's status as a
foreign individual, foreign government,
government of a U.S. territory, or interna-
tional organization, a withholding agent
may rely upon a pre-FATCA Form W-8
in lieu of obtaining an updated version of
the withholding certificate. This reliance
is only available in the case of a payee
that is an international organization if
such payee is described under section
7701(a)(18). To establish the chapter 4
status of a payee that is not a foreign
individual, a foreign government, or an
international organization, a withhold-
ing agent may, for payments made prior
to January 1, 2017, rely upon a pre-
FATCA Form W-8 in lieu of obtaining
an updated version of the withholding
certificate if the withholding agent has
one or more forms of documentary evi-
dence described in paragraphs (c)(5)(ii),
as necessary, to establish the chapter 4
status of the payee and the withholding
agent has obtained any additional docu-
mentation or information required for
the particular chapter 4 status (such as
withholding statements, certifications as
to owners, or required documentation
for underlying owners), as set forth un-
der the specific payee rules in para-
graphs (d)(2) through (12) of this sec-
tion. See paragraph (d)(4)(ii) and (iv) of
this section for specific requirements ap-
plicable when relying upon a pre-
FATCA Form W-8 for a participating
FFI or registered deemed-compliant
FFI. This paragraph (d)(1) does not ap-
ply to nonregistering local banks, FFIs
with only low-value accounts, spon-
sored FFIs, owner-documented FFIs,
territory financial institutions that are
not the beneficial owners of the pay-
ment, foreign central banks (other than a
foreign central bank specifically identi-
fied as an exempt beneficial owner under
a Model 1 IGA or Model 2 IGA), or
international organizations not de-
scribed under section 7701(a)(18).

(2) * * *

(i) In general. A withholding agent
must treat a payee as a U.S. person, in-

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cluding a payee that is a foreign branch of
a U.S. person (other than a branch that is
treated as a QI) or is an FFI that has
elected to be treated as a U.S. person for
tax purposes under section 953(d), if it has
a valid Form W-9 associated with the
payee or if it must presume the payee is a
U.S. person under the presumption rules
set forth in paragraph (f) of this section.
Consistent with the presumption rules in
paragraph (f)(3) of this section, a with-
holding agent must treat a payee that has
provided a valid Form W-9 as a specified
U.S. person unless the Form W-9 con-
tains a certification that the payee is other
than a specified U.S. person. Notwith-
standing the foregoing, a withholding
agent receiving a Form W-9 indicating
that the payee is other than a specified
U.S. person must treat the payee as a
specified U.S. person if the withholding
agent knows or has reason to know that
the payee's claim that it is other than a
specified U.S. person is incorrect. For ex-
ample, a withholding agent that receives a
Form W-9 from a payee that is an indi-
vidual would be required to treat the
payee as a specified U.S. person regard-
less of whether the Form W-9 indicates
that the payee is not a specified U.S. per-
son, because an individual that is a U.S.
person is not excepted from the definition
of a specified U.S. person.

* * * * *

(iii) Preexisting obligations. As an al-
ternative to applying the rules in para-
graphs (d)(2)(i) and (ii) of this section, a
withholding agent that makes a payment
with respect to a preexisting obligation
may treat a payee as a U.S. person if it has
a notation in its files that it has previously
reviewed a Form W-9 that established
that the payee is a U.S. person and has
retained the payee's TIN. A withholding
agent, other than a participating FFI or
registered deemed-compliant FFI, may
also treat a payee of a payment with re-
spect to a preexisting obligation as a U.S.
person if it has previously classified the
payee as a U.S. person for purposes of
chapter 3 or 61 and established (through
the documentation or the application of
the rules in § 1.6049-4(c)(1)(ii)) that the
payee is an exempt recipient for purposes
of chapter 61.

* * * * *

(4) * * *

(i) In general. Except as otherwise pro-
vided in paragraphs (d)(4)(ii) through (iv)
or paragraphs (e)(3)(i) and (ii) of this sec-
tion, a withholding agent may treat a
payee as a participating FFI or registered
deemed-compliant FFI only if the with-
holding agent has a withholding certificate
identifying the payee as a participating
FFI, registered deemed-compliant FFI, or
branch thereof (including an entity that is
disregarded as an entity separate from the
FFI), and the withholding certificate con-
tains a GIIN described in paragraph (e)(3)
of this section that is verified against the
published IRS FFI list in the manner de-
scribed in paragraph (e)(3) of this section
(indicating when a withholding agent may
rely upon a GIIN). For when a withhold-
ing agent may treat a payee as a regis-
tered deemed-compliant FFI that is a
sponsored investment entity or spon-
sored controlled foreign corporation, see
paragraph (d)(4)(vi) of this section. See
paragraph (c)(3)(iii) of this section for
additional requirements that apply to a
valid withholding certificate provided
by a participating FFI or registered
deemed-compliant FFI that is a flow-
through entity or is acting as an inter-
mediary with respect to the payment.

(ii) Exception for payments made prior
to January 1, 2017, with respect to preex-
isting obligations (transitional). For
payments made prior to January 1, 2017,
with respect to a preexisting obligation, a
withholding agent may treat a payee as a
participating FFI or registered deemed-
compliant FFI, or branch thereof (includ-
ing an entity that is disregarded as an
entity separate from the FFI), if the payee
has provided the withholding agent with a
pre-FATCA Form W-8 and (either orally
or in writing) its GIIN and has indicated
whether it is a participating FFI or a reg-
istered deemed-compliant FFI (or whether
such branch or disregarded entity is
treated as a participating FFI or a regis-
tered deemed-compliant FFI), and the
withholding agent has verified the GIIN of
the FFI, branch, or disregarded entity, as
the context requires, in the manner de-
scribed in paragraph (e)(3) of this section.

(iii) Exception for offshore obligations.
A withholding agent that makes a pay-
ment, other than a payment of U.S. source
FDAP income, with respect to an off-
shore obligation may treat a payee as a

participating FFI or registered deemed-
compliant FFI, or branch thereof (in-
cluding an entity that is disregarded as
an entity separate from the FFI), if the
payee provides the withholding agent
with its GIIN and states whether the
payee is a participating FFI or a regis-
tered deemed-compliant FFI, and the
withholding agent verifies the GIIN
in the manner described in paragraph
(e)(3) of this section. A withholding
agent that makes a payment of U.S.
source FDAP income with respect to an
offshore obligation may treat the payee
as a participating FFI or registered
deemed-compliant FFI, or branch
thereof (including an entity that is dis-
regarded as an entity separate from the
FFI) if-

(A) * * *

(1) A written statement that contains
the payee's GIIN, states that the payee is
the beneficial owner of the payment, and
indicates whether the payee is treated as a
participating FFI or a registered deemed-
compliant FFI, as appropriate; and

* * * * *

(iv) * * *

(A) For payments made prior to Janu-
ary 1, 2015, a withholding agent may treat
a payee that is an FFI or branch of an FFI
(including an entity that is disregarded as
an entity separate from the FFI) as a re-
porting Model 1 FFI if it receives a with-
holding certificate from the payee indicat-
ing that the payee is a reporting Model 1
FFI and the country in which the payee is
a reporting Model 1 FFI, regardless of
whether the certificate contains a GIIN for
the payee.

* * * * *

(C) For payments made prior to Janu-
ary 1, 2015, with respect to an offshore
obligation, a withholding agent may treat
a payee as a reporting Model 1 FFI if the
payee informs the withholding agent that
the payee is a reporting Model 1 FFI and
provides the country in which the payee is
a reporting Model 1 FFI. In the case of a
payment of U.S. source FDAP income,
such payee must also provide a written
statement that it is the beneficial owner
and documentary evidence supporting the
payee's claim of foreign status (as de-
scribed in paragraph (c)(5)(i) of this sec-
tion).

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(D) For payments made on or after
January 1, 2015, that do not constitute
U.S. source FDAP income, the withhold-
ing agent may continue to treat a payee as
a reporting Model 1 FFI if the payee pro-
vides the withholding agent with its GIIN,
either orally or in writing, and the with-
holding agent verifies the GIIN in the
manner described in paragraph (e)(3) of
this section.

(v) Reason to know. See paragraph (e)
of this section for when a withholding
agent will have reason to know that a
withholding certificate or written state-
ment provided by a payee claiming status
as a participating FFI or registered
deemed-compliant FFI is incorrect or in-
valid.

(vi) Sponsored investment entities and
sponsored controlled foreign corpora-
tions-(A) In general. A withholding
agent may treat a payee as a sponsored
investment entity or sponsored controlled
foreign corporation if the withholding
agent has a withholding certificate identi-
fying the payee as a sponsored investment
entity or sponsored controlled foreign cor-
poration (as applicable) and the withhold-
ing certificate includes the GIIN of the
sponsored investment entity or sponsored
controlled foreign corporation entity (as
applicable), which the withholding agent
has verified against the published IRS FFI
list in the manner described in paragraph
(e)(3)(i) of this section.

(B) Payments made prior to January 1,
2017 (transitional). For payments made
prior to January 1, 2017, a sponsored in-
vestment entity or sponsored controlled
foreign corporation may provide the GIIN
of its sponsoring entity on the withholding
certificate, which the withholding agent
must verify against the published IRS FFI
list in the manner described in paragraph
(e)(3)(i) of this section.

(C) Payments made after December
31, 2016, to payees documented prior to
January 1, 2017. For a payment made
after December 31, 2016, to a payee that
the withholding agent has documented
prior to January 1, 2017, as a sponsored
investment entity or sponsored controlled
foreign corporation with a valid withhold-
ing certificate that includes the GIIN of
the sponsoring entity, the withholding
agent must obtain and verify the GIIN of
the sponsored investment entity or spon-

sored controlled foreign corporation
against the published IRS FFI list in the
manner described in paragraph (e)(3)(i) of
this section by March 31, 2017. Notwith-
standing the preceding sentence, a GIIN is
not required for a payee that provides a
valid withholding certificate prior to Jan-
uary 1, 2017, that identifies the payee as a
sponsored FFI and includes the GIIN of
the sponsoring entity if the withholding
agent determines, based on information
provided on the withholding certificate,
that the sponsored entity is resident, orga-
nized, or located in a jurisdiction that is
treated as having a Model 1 IGA in effect.
A withholding agent required to obtain a
GIIN of the sponsored investment entity
or sponsored controlled foreign corpora-
tion under this paragraph (d)(4)(vi)(C)
may obtain such GIIN by oral or written
confirmation (including by e-mail) rather
than obtaining a new withholding certifi-
cate, provided that the withholding agent
retains a record of the confirmation, which
will become part of the withholding cer-
tificate.

(5) * * *

(i) In general. Except as otherwise pro-
vided in this paragraph (d)(5), a withhold-
ing agent may treat a payee as a certified
deemed-compliant FFI, other than a spon-
sored, closely held investment vehicle, if
the withholding agent has a withholding
certificate that identifies the payee as a
certified deemed-compliant FFI, and the
withholding certificate contains a certifi-
cation by the payee that it meets the re-
quirements to qualify as the type of certi-
fied deemed-compliant FFI identified on
the withholding certificate. See paragraph
(c)(3)(iii) of this section for additional re-
quirements that apply to a valid withhold-
ing certificate provided by a certified
deemed-compliant FFI that is a flow-
through entity or is acting as an interme-
diary with respect to the payment, or by a
U.S. branch of a certified deemed-
compliant FFI.

(ii) Sponsored, closely held investment
vehicles-(A) In general. A withholding
agent may treat a payee as a sponsored,
closely held investment vehicle described
in § 1.1471-5(f)(2)(iii) if the withholding
agent can reliably associate the payment
with a withholding certificate that identi-
fies the payee as a sponsored, closely held
investment vehicle and includes the spon-

soring entity's GIIN, which the withhold-
ing agent has verified against the pub-
lished IRS FFI list in the manner
described in paragraph (e)(3) of this sec-
tion. In addition to the standards of knowl-
edge rules indicated in paragraph (e) of
this section, a withholding agent will have
reason to know that the payee is not a
sponsored, closely held investment vehi-
cle described in § 1.1471-5(f)(2)(iii) if its
AML due diligence indicates that the
payee has in excess of 20 individual in-
vestors that own direct and/or indirect in-
terests in the payee. See paragraph
(c)(3)(iii) of this section for additional re-
quirements that apply to a valid withhold-
ing certificate provided by a sponsored,
closely held investment vehicle that is a
flow-through entity or is acting as an in-
termediary with respect to the payment, or
by a U.S. branch of such vehicle.

(B) Offshore obligations. A withhold-
ing agent that makes a payment with re-
spect to an offshore obligation may treat a
payee as a sponsored, closely held invest-
ment vehicle if it obtains a written state-
ment that indicates that the payee is a
sponsored, closely held investment vehi-
cle, and provides the sponsoring entity's
GIIN, which the withholding agent has
verified in the manner described in para-
graph (e)(3) of this section. In the case of
a payment of U.S. source FDAP income,
the written statement must also indicate
that the payee is the beneficial owner and
must be supplemented with documentary
evidence supporting the payee's claim of
foreign status (as described in paragraph
(c)(5)(i) of this section).

(iii) Certain investment entities that do
not maintain financial accounts-(A) In
general. A withholding agent may treat a
payee as an investment entity that does
not maintain financial accounts described
in § 1.1471-5(f)(2)(v) if the withholding
agent can reliably associate the payment
with a withholding certificate that identi-
fies the payee as an investment entity that
does not maintain financial accounts. In
addition to the standards of knowledge
rules indicated in paragraph (e) of this
section, a withholding agent will have rea-
son to know that the payee is not an in-
vestment entity that does not maintain fi-
nancial accounts described in § 1.1471-
5(f)(2)(v) if its AML due diligence

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documentation indicates that the payee
has financial accounts.

(B) Offshore obligations. A withhold-
ing agent that makes a payment with re-
spect to an offshore obligation may treat a
payee as an investment advisor and in-
vestment manager described in § 1.1471-
5(f)(2)(v) if it obtains a written statement
that indicates that the payee is an invest-
ment advisor and investment manager. In
the case of a payment of U.S. source
FDAP income, the written statement must
also indicate that the payee is the benefi-
cial owner and must be supplemented
with documentary evidence supporting
the payee's claim of foreign status (as
described in paragraph (c)(5)(i) of this
section).

(6) * * *

(i) * * *

(F) [Reserved]. For further guidance,
see § 1.1471-3T(d)(6)(i)(F).

* * * * *

(vii) * * *

(A) * * *

(1) The payment is made with respect
to an offshore obligation that has a bal-
ance or value not exceeding $1,000,000
on the later of June 30, 2014, or the last
day of the calendar year in which the
account was opened, and the last day of
each subsequent year preceding the pay-
ment, applying the aggregation principles
of § 1.1471-5(b)(4);

* * * * *

(7) Nonreporting IGA FFIs-(i) In
general. A withholding agent may treat a
payee as a nonreporting IGA FFI de-
scribed in § 1.1471-1(b)(83)(ii) (unless
such FFI is treated as a registered deemed-
compliant FFI under Annex II of the
Model 2 IGA) or as a nonreporting IGA
FFI described in § 1.1471-1(b)(83)(i),
(iv), or (v) if the withholding agent has a
withholding certificate identifying the
payee, or the relevant branch of the payee,
as a nonreporting IGA FFI. A withholding
agent may treat a payee as a nonreporting
IGA FFI described in § 1.1471-1(b)
(83)(ii) that is treated as a registered
deemed-compliant FFI under Annex II of
the Model 2 IGA or as a nonreporting
IGA FFI described in § 1.1471-1(b)
(83)(iii) if the withholding agent has a
withholding certificate identifying the
payee, or the relevant branch of the payee,
as a nonreporting IGA FFI, and the with-

holding certificate contains a GIIN for the
payee that is verified against the published
IRS FFI list in the manner described in
paragraph (e)(3) of this section.

* * * * *

(11) * * *

(viii) * * *

(A) Exception for payments made prior
to January 1, 2017, with respect to preex-
isting obligations of $1,000,000 or less
(transitional). A withholding agent that
makes a payment prior to January 1, 2017,
with respect to a preexisting obligation
with a balance or value not exceeding
$1,000,000 on June 30, 2014, and Decem-
ber 31, 2015, applying the aggregation
principles of § 1.1471-5(b)(4)(iii), may
treat a payee as an excepted territory
NFFE described in § 1.1472-1(c)(1)(iii) if
the withholding agent-

* * * * *

(C) Exception for preexisting offshore
obligations of $1,000,000 or less. A with-
holding agent that makes a payment with
respect to an offshore obligation that is
also a preexisting obligation with a bal-
ance or value not exceeding $1,000,000
on June 30, 2014 (or the effective date of
the FFI agreement for a withholding agent
that is a participating FFI) and the last day
of each subsequent calendar year preced-
ing the payment, applying the aggregation
principles of § 1.1471-5(b)(4)(iii), may
rely upon its review conducted for AML
due diligence purposes to determine
whether the owners of the payee are bona
fide residents of the U.S. territory in
which the payee is organized, in lieu of
obtaining a written statement or documen-
tary evidence described in paragraph
(d)(11)(viii)(B) of this section. The pre-
ceding sentence applies only if the with-
holding agent is subject, with respect to
such account, to the laws of a FATF-
compliant jurisdiction and has identified
the residence of the owners. The with-
holding agent relying upon this paragraph
(d)(11)(viii)(C) must still obtain a written
statement, documentary evidence (as pro-
vided in paragraph (d)(11)(viii)(B) of this
section), or preexisting account documen-
tary evidence (as described in paragraph
(c)(5)(ii)(B) of this section) establishing
that the payee is an entity other than a
depository institution, custodial institu-
tion, or specified insurance company or-
ganized in a U.S. territory.

* * * * *
(x) Identifying a direct reporting
NFFE (other than a sponsored direct re-
porting NFFE)-(A) In general. A with-
holding agent may treat a payment as hav-
ing been made to a direct reporting NFFE
(other than a sponsored direct reporting
NFFE) if it has a withholding certificate
that identifies the payee as a direct report-
ing NFFE and the withholding certificate
contains a GIIN for the payee that is
verified against the published IRS FFI list
in the manner described in paragraph
(e)(3)(iii) of this section (indicating when
a withholding agent may rely upon a
GIIN).

(B) Exception for offshore obligations.
A withholding agent that makes a pay-
ment with respect to an offshore obliga-
tion may treat the payment as made to a
direct reporting NFFE if the withholding
agent has-

(1)(i) General documentary evidence
(as described in paragraph (c)(5)(ii)(A) of
this section) for the payee providing suf-
ficient information to determine that the
payee is a foreign entity that is not a
financial institution; or

(ii) A written statement that the payee
is a foreign entity that is not a financial
institution and, for a payment of U.S.
source FDAP income, documentary evi-
dence supporting the payee's claim of for-
eign status (as described in paragraph
(c)(5)(i) of this section), and

(2) Received (either orally or in writ-
ing) a GIIN from the direct reporting
NFFE and has verified the GIIN in the
manner described in paragraph (e)(3)(iii)
of this section.

(C) Special rule for preexisting off-
shore obligations. A withholding agent
that makes a payment with respect to an
offshore obligation that is also a preexist-
ing obligation may treat the payee as a
direct reporting NFFE if the withholding
agent has preexisting account documen-
tary evidence (as described in paragraph
(c)(5)(ii)(B) of this section) providing suf-
ficient information to determine that the
payee is a foreign entity that is not a
financial institution and it has received
(either orally or in writing) a GIIN from
the direct reporting NFFE and has verified
the GIIN in the manner described in para-
graph (e)(3)(iii) of this section.

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(xi) Identifying a sponsored direct re-
porting NFFE-(A) In general. A with-
holding agent may treat a payment as hav-
ing been made to a sponsored direct
reporting NFFE if it has a withholding
certificate that identifies the payee as a
sponsored direct reporting NFFE and the
withholding certificate includes the spon-
sored direct reporting NFFE's GIIN,
which the withholding agent has verified
against the published IRS FFI list in the
manner described in paragraph (e)(3)(iv)
of this section (indicating when a with-
holding agent may rely upon a GIIN).

(1) Payments made prior to January 1,
2017 (transitional). For payments prior to
January 1, 2017, a sponsored direct re-
porting NFFE may provide the GIIN of its
sponsoring entity on the withholding cer-
tificate, which the withholding agent must
verify against the published IRS FFI list
in the manner described in paragraph
(e)(3)(iv) of this section.

(2) Payments made after December 31,
2016, to payees documented prior to Jan-
uary 1, 2017. For a payment made after
December 31, 2016, to a payee that the
withholding agent has documented prior
to January 1, 2017, as a sponsored direct
reporting NFFE with a valid withholding
certificate that includes the GIIN of the
sponsoring entity, the withholding agent
must obtain and verify the GIIN of the
sponsored direct reporting NFFE against
the published IRS FFI list in the manner
described in paragraph (e)(3)(i) of this
section by March 31, 2017. A withholding
agent required to obtain a GIIN of the
sponsored direct reporting NFFE in the
preceding sentence may obtain such GIIN
by oral or written confirmation (including
by e-mail) rather than obtaining a new
withholding certificate, provided that the
withholding agent retains a record of the
confirmation, which will become part of
the withholding certificate. (B) Exception
for offshore obligations. A withholding
agent that makes a payment with respect
to an offshore obligation may treat the
payment as made to a sponsored direct
reporting NFFE if the withholding agent
has-

(1) A written statement that the payee
is a foreign entity that is a sponsored
direct reporting NFFE and, for a payment
of U.S. source FDAP income, documen-
tary evidence supporting the payee's

claim of foreign status (as described in
paragraph (c)(5)(i) of this section), and

(2) Received (either orally or in writ-
ing) the GIIN of the sponsored direct
reporting NFFE and has verified the GIIN
in the manner described in paragraph
(e)(3)(iv) of this section. For payments
prior to January 1, 2017, such requirement
may be fulfilled by receiving (either orally
or in writing) the GIIN of the sponsoring
entity to the extent that the sponsored di-
rect reporting NFFE has not obtained a
GIIN.

(xii) Identification of excepted inter-
affiliate FFI-(A) In general. A withhold-
ing agent may treat a payee as an excepted
inter-affiliate FFI described in § 1.1471-
5(e)(5)(iv) if it has obtained a withholding
certificate identifying the payee as such an
entity.

(B) Offshore obligations. A withhold-
ing agent that makes a payment with re-
spect to an offshore obligation may treat
the payment as made to an excepted inter-
affiliate FFI described in § 1.1471-
5(e)(5)(iv) if the withholding agent ob-
tains a written statement in which the
payee certifies that it is a foreign entity
operating as an excepted inter-affiliate FFI
and that it is a member of an expanded
affiliated group of participating FFIs or
registered deemed-compliant FFIs. In the
case of a payment of U.S. source FDAP
income, the written statement must also
indicate that the payee is the beneficial
owner and must be supplemented with
documentary evidence supporting the
payee's claim of foreign status (as de-
scribed in paragraph (c)(5)(i) of this sec-
tion).

(C) Reason to know. A withholding
agent that is not a member of the payee's
expanded affiliated group has reason to
know that an entity is not an excepted
inter-affiliate FFI if it makes any pay-
ments (other than a payment of bank de-
posit interest) to such entity.

(12) * * *

(iii) * * *

(A) In general. A passive NFFE will be
required to provide to the withholding
agent either a written certification (con-
tained on a withholding certificate or in a
written statement) that it does not have
any substantial U.S. owners or the name,
address, and TIN of each substantial U.S.

owner of the NFFE, to avoid being with-
held upon under § 1.1472-1(b).

(B) Exception for preexisting obliga-
tions of $1,000,000 or less (transitional).
A withholding agent that makes a pay-
ment prior to January 1, 2017, with
respect to a preexisting obligation with
a balance or value not exceeding
$1,000,000 on June 30, 2014, and De-
cember 31, 2015, applying the aggrega-
tion principles of § 1.1471-5(b)(4)(iii),
may rely upon its review conducted for
AML due diligence purposes to identify
any substantial U.S. owners of the payee
in lieu of obtaining the certification or infor-
mation required in paragraph (d)(12)
(iii)(A) of this section if the withholding
agent is subject, with respect to such obli-
gation, to the laws of a FATF-compliant
jurisdiction and has identified the residence
of any controlling persons (within the mean-
ing of the withholding agent's AML due
diligence rules). A withholding agent that
makes a payment with respect to an offshore
obligation that is also a preexisting obliga-
tion with a balance or value not exceeding
$1,000,000 on June 30, 2014, (or the effec-
tive date of the FFI agreement for a with-
holding agent that is a participating FFI) and
the last day of each subsequent calendar
year preceding the payment, applying
the aggregation principles of § 1.1471-
5(b)(4)(iii), may rely upon its review con-
ducted for AML due diligence purposes to
identify any substantial U.S. owners of the
payee in lieu of obtaining the certification or
information required in paragraph (d)(12)
(iii)(A) of this section if the withholding
agent is subject, with respect to such obli-
gation, to the laws of a FATF-compliant
jurisdiction and has identified the residence
of any controlling persons (within the mean-
ing of the withholding agent's AML due
diligence rules).

(e) * * *

(2) Notification by the IRS. A withhold-
ing agent that has received notification by
the IRS that a claim of status as a U.S.
person, a participating FFI, a deemed-
compliant FFI, or other entity entitled to a
reduced rate of withholding under section
1471 or 1472 is incorrect knows that such
a claim is incorrect beginning on the date
that is 30 days after the date the notice is
received.

(3) GIIN verification-(i) In general. A
withholding agent that has received a pay-

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ee's claim of status as a participating FFI
or registered deemed-compliant FFI, and
that is required under paragraph (d)(4) of
this section to confirm that the FFI or
branch thereof (including an entity that is
disregarded as an entity separate from the
FFI) claiming status as a participating FFI
or registered deemed-compliant FFI has a
GIIN that appears on the published IRS
FFI list, has reason to know that such
payee is not such a financial institution if
the payee's name (including a name rea-
sonably similar to the name the withhold-
ing agent has on file for the payee) and
GIIN do not appear on the most recently
published IRS FFI list within 90 days of
the date that the claim is made. For pur-
poses of this paragraph (e)(3)(i), the GIIN
that the withholding agent must confirm
is, with respect to a payee that is a
participating FFI or registered deemed-
compliant FFI, the GIIN assigned to the
FFI identifying its country of residence
for tax purposes (or place of organization
if the FFI has no country of residence) or,
with respect to a payment that is made to
a branch (including a disregarded entity)
of a participating FFI or registered
deemed-compliant FFI located outside of
the FFI's country of residence or organi-
zation, the GIIN of the branch (or disre-
garded entity) receiving the payment. The
withholding agent will have reason to
know that a withholdable payment is
made to a branch (including a disregarded
entity) of a participating or registered
deemed-compliant FFI that is not itself a
participating FFI or registered deemed-
compliant FFI when the withholding
agent is directed to make the payment to
an address in a jurisdiction other than that
of the participating FFI or registered
deemed-compliant FFI (or branch (includ-
ing a disregarded entity) of such FFI) that
is identified as the FFI (or branch (includ-
ing a disregarded entity) of such FFI) that
is supposed to receive the payment and for
which the FFI's GIIN is not confirmed as
described in the preceding sentence. The
preceding sentence does not apply to an
FFI that is an investment entity. If an FFI
(other than an investment entity) directs
the withholding agent to make the pay-
ment to an account held by the FFI and
maintained by another financial institu-
tion, the FFI must provide to the withhold-
ing agent a statement in writing that the

FFI is not directing the payment to any
branch of such FFI that is not a participat-
ing FFI or a registered deemed-compliant
FFI. An FFI whose registration with the
IRS as a participating FFI or a registered
deemed-compliant FFI is in process but
has not yet received a GIIN may provide a
withholding agent with a Form W-8
claiming the chapter 4 status it applied for
and writing "applied for" in the box for
the GIIN. In such case, the withholding
agent will have 90 days from the date it
receives the Form W-8 to obtain a GIIN
and to verify the accuracy of the GIIN
against the published IRS FFI list before it
has reason to know that the payee is not a
participating FFI or registered deemed-
compliant FFI. If an FFI is removed from
the published IRS FFI list, the withhold-
ing agent knows that such FFI is not a
participating FFI or registered deemed-
compliant FFI on the earlier of the date
that the withholding agent discovers that
the FFI has been removed from the list or
the date that is one year from the date the
FFI's GIIN was actually removed from
the list.

(ii) Special rules for reporting Model 1
FFIs. Prior to January 1, 2015, a with-
holding agent that receives an FFI's claim
of status as a reporting Model 1 FFI will
not be required to confirm that the FFI has
a GIIN that appears on the published IRS
FFI list. A withholding agent has reason to
know that the FFI is not a reporting Model
1 FFI if the withholding agent does not
have a permanent residence address for
the FFI, or an address of the relevant
branch of the FFI, located in the country
in which the FFI claims to be a reporting
Model 1 FFI, or the withholding agent is
making a payment to a branch of the FFI
at an address in a country that does not
have in effect a Model 1 IGA.

(iii) Special rules for direct reporting
NFFEs. A withholding agent that has re-
ceived a payee's claim of status as a direct
reporting NFFE and that is required under
paragraph (d)(11)(x) of this section to
confirm that the entity claiming status as a
direct reporting NFFE has a GIIN that
appears on the published IRS FFI list, has
reason to know that such payee is not such
a NFFE if the payee's name (including a
name reasonably similar to the name
the withholding agent has on file for the
payee) and GIIN do not appear on the

most recently published IRS FFI list
within 90 days of the date that the claim is
made. A payee whose registration with the
IRS as a direct reporting NFFE is in pro-
cess but has not yet received a GIIN may
provide a withholding agent with a Form
W-8 claiming the chapter 4 status it ap-
plied for and writing "applied for" in the
box for the GIIN. In such case, the with-
holding agent will have 90 days from the
date it receives the Form W-8 to verify
the accuracy of the GIIN against the pub-
lished IRS FFI list before it has reason to
know that the payee is not a direct report-
ing NFFE. If a direct reporting NFFE is
removed from the published IRS FFI list,
the withholding agent knows that such
NFFE is not a direct reporting NFFE on
the earlier of the date that the withholding
agent discovers that the NFFE has been
removed from the list or the date that is
one year from the date the NFFE's GIIN
was actually removed from the list.

(iv) Special rules for sponsored di-
rect reporting NFFEs and sponsoring
entities-(A) Sponsored direct report-
ing NFFEs. A withholding agent that has
received a payee's claim of status as a
sponsored direct reporting NFFE and that
is required under paragraph (d)(11)(xi) of
this section to confirm that the entity
claiming status as a sponsored direct re-
porting NFFE has a GIIN that appears on
the published IRS FFI list, has reason to
know that such payee is not such a NFFE
if its name (including a name reasonably
similar to the name the withholding agent
has on file for the payee) and GIIN do not
appear on the most recently published IRS
FFI list within 90 days of the date that the
claim is made. A sponsored direct report-
ing NFFE whose registration with the IRS
as a sponsored direct reporting NFFE is in
process but has not yet received a GIIN
may provide a withholding agent with a
Form W-8 claiming the chapter 4 status it
applied for and writing "applied for" in
the box for the GIIN. In such case, the
withholding agent will have 90 days from
the date it receives the Form W-8 to
verify the accuracy of the GIIN against
the published IRS FFI list before it has
reason to know that the payee is not a
sponsored direct reporting NFFE. If a
sponsored direct reporting NFFE is re-
moved from the published IRS FFI list,
the withholding agent knows that such

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NFFE is not a sponsored direct reporting
NFFE on the earlier of the date that the
withholding agent discovers that the spon-
sored entity has been removed from the
list or the date that is one year from the
date the sponsored entity's GIIN was ac-
tually removed from the list.

(B) Sponsoring entities (transitional).
For payments made prior to January 1,
2017, a withholding agent that has re-
ceived a payee's claim of status as a spon-
sored direct reporting NFFE has reason to
know that such payee is not such a NFFE
if the name of its sponsoring entity (in-
cluding a name reasonably similar to the
name the withholding agent has on file for
the sponsoring entity) and the GIIN of its
sponsoring entity do not appear on the
most recently published IRS FFI list
within 90 days of the date that the claim is
made. A sponsoring entity whose registra-
tion with the IRS is in process but has not
yet received a GIIN may provide a with-
holding agent with a Form W-8 claiming
the chapter 4 status it applied for and
writing "applied for" in the box for the
GIIN. In such case, the withholding agent
will have 90 days from the date it receives
the Form W-8 to verify the accuracy of
the GIIN against the published IRS FFI
list before it has reason to know that the
payee is not a sponsored direct reporting
NFFE. If the sponsoring entity of the
NFFE is removed from the published IRS
FFI list, the withholding agent knows that
such NFFE is not a sponsored direct re-
porting NFFE on the earlier of the date
that the withholding agent discovers that
the sponsoring entity has been removed
from the list or the date that is one year
from the date the sponsoring entity's GIIN
was actually removed from the list.

(4) Reason to know. A withholding
agent has reason to know that a claim of
chapter 4 status is unreliable or incorrect
if its knowledge of relevant facts or state-
ments contained in the withholding certif-
icate or other documentation is such that a
reasonably prudent person in the position
of the withholding agent would question
the claim being made. For an obligation
other than a preexisting obligation, a with-
holding agent has reason to know that a
person's claim of chapter 4 status is unre-
liable or incorrect if any information con-
tained in its account opening files or other
customer account files, including docu-

mentation collected for AML due dili-
gence purposes, conflicts with the chapter
4 status being claimed. A withholding
agent will not, however, have reason to
know that a person's claim of chapter 4
status is unreliable or incorrect based on
documentation collected for AML due dil-
igence purposes until the date that is 30
days after the obligation is created. In
addition to the specific standards of
knowledge set forth in this paragraph (e)
regarding a person's claim of chapter 4
status, a withholding agent is also required
to apply any specific standards of knowl-
edge applicable to the chapter 4 status
claimed as set forth in paragraph (d) of
this section. A withholding agent that has
obtained documentation to reliably asso-
ciate a payment to a foreign person under
paragraph (c) of this section has reason to
know that the person's claim of foreign
status is unreliable or incorrect only to the
extent provided in this paragraph (e)(4).
See also § 1.1441-1(e)(4)(ii)(D) for re-
quirements that apply when a change in
circumstances occurs for purposes of
chapter 3 and the related grace period
allowed under § 1.1441-1(b)(3)(iv). The
limits on reason to know for multiple ob-
ligations held by the same person set forth
in § 1.1441-7(b)(11) shall apply by sub-
stituting the term chapter 4 status for
the term foreign status. See § 1.1471-
3(e)(4)(vii) for the limits on reason to
know with respect to a preexisting obliga-
tion.

(i) Reason to know regarding an enti-
ty's chapter 4 status. A withholding agent
has reason to know that a withholding
certificate, written statement, or documen-
tary evidence provided by or on behalf of
an entity is unreliable or incorrect if there
is information on the face of the documen-
tation or in the withholding agent's ac-
count files that conflicts with the entity's
claim regarding its chapter 4 status. For
example, a withholding agent has reason
to know that an entity's claim that it is an
excepted NFFE is unreliable or incorrect
if the withholding agent has obtained a
financial statement or credit report for
AML purposes that indicates that the en-
tity is engaged in business as a financial
institution. See also paragraph (e)(4) of
this section for the 30-day period before a
withholding agent has reason to know a
claim is unreliable or incorrect based on

AML information. Further, a withholding
agent that has classified an entity as en-
gaged in a particular type of business
based on its records, such as through the
use of a standardized industry coding sys-
tem, AML or other regulatory purpose
that requires the withholding agent to pe-
riodically monitor and periodically update
the business classification based on the
withholding agent's records, the with-
holding agent has reason to know that the
chapter 4 status claimed by the entity is
unreliable or incorrect only if the entity's
claim conflicts with the withholding
agent's classification of the entity's busi-
ness type.

(ii) Reason to know applicable to with-
holding certificates-(A) In general. A
withholding agent has reason to know that
a withholding certificate provided by a
person is unreliable or incorrect if the
withholding certificate is incomplete with
respect to any item on the certificate that
is relevant to the claims made by the per-
son, the withholding certificate contains
any information that is inconsistent with
the person's claim, the withholding agent
has other account information that is in-
consistent with the person's claim, or the
withholding certificate lacks information
necessary to establish entitlement to an
exemption from withholding for chapter 4
purposes. Except as otherwise provided in
this paragraph (e)(4)(ii)(A), a withholding
agent that is a financial institution or other
entity described in § 1.1441-7(b)(3) and
that has obtained a withholding certificate
to reliably associate a payment to a for-
eign person under paragraph (c) of this
section has reason to know that the per-
son's claim of foreign status is unreliable
or incorrect only if there are U.S. indicia,
as described in § 1.1441-7(b)(5), associ-
ated with the person and for which appro-
priate documentation sufficient to cure the
U.S. indicia has not been obtained in ac-
cordance with § 1.1441-7(b) within 90
days of when the U.S. indicia was first
identified by the withholding agent. See
also § 1.1441-1(e)(4)(ii)(D) for require-
ments that apply when a change in cir-
cumstances occurs for purposes of chapter
3 and the related grace period allowed
under § 1.1441-1(b)(3)(iv). A withhold-
ing agent that relies on an agent to review
and maintain a withholding certificate is
considered to know or have reason to

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know the facts within the knowledge of
the agent.

(B) Withholding certificate provided by
an FFI. A withholding agent that obtains
a withholding certificate to reliably asso-
ciate a payment to a participating FFI, a
registered deemed-compliant FFI, a spon-
soring entity, or a sponsored FFI does not
need to apply the standards of knowledge
described in § 1.1441-7(b)(5) if it has
confirmed the FFI's GIIN on the current
published IRS FFI list, in the manner de-
scribed under paragraph (e)(3) of this sec-
tion, within 90 days of receipt of the with-
holding certificate.

(iii) Reason to know applicable to writ-
ten statements. A withholding agent must
apply the standards of knowledge applica-
ble to withholding certificates, as set forth
in paragraph (e)(4)(ii) of this section, to
determine whether it has reason to know
that a written statement is unreliable or
incorrect in terms of establishing a per-
son's claim of foreign status. The rules
under paragraph (e)(4)(ii) shall be applied
by substituting the term written statement
for the term withholding certificate.

(iv) Reason to know applicable to doc-
umentary evidence-(A) In general. A
withholding agent may not treat documen-
tary evidence provided by a person as
valid if the documentary evidence does
not reasonably establish the identity of the
person presenting the documentary evi-
dence. For example, documentary evi-
dence is not valid if it is provided in
person by an individual and the photo-
graph or signature on the documentary
evidence does not match the appearance
or signature of the person presenting the
document. A withholding agent may not
treat documentary evidence as valid if the
documentary evidence contains informa-
tion that is inconsistent with the person's
claim as to its chapter 4 status, the with-
holding agent has other account informa-
tion that is inconsistent with the person's
chapter 4 status, or the documentary evi-
dence lacks information necessary to es-
tablish the person's chapter 4 status. Ad-
ditionally, a withholding agent that is a
financial institution under § 1.1471-5(e),
or other entity as described in § 1.1441-
7(b)(3) that has obtained documentary ev-
idence to reliably associate a payment to a
foreign person under paragraph (c) of this
section has reason to know that the per-

son's claim of foreign status is unreliable
or incorrect only if there are U.S. indicia,
as described in § 1.1441-7(b)(8), associ-
ated with the person and appropriate doc-
umentation sufficient to cure the U.S. in-
dicia has not been obtained in accordance
with § 1.1441-7(b) within 90 days of
when the U.S. indicia was first identified
by the withholding agent. See also
§ 1.1441-1(e)(4)(ii)(D) for requirements
when a change in circumstances occurs
for purposes of chapter 3 and the related
grace period allowed under § 1.1441-
1(b)(3)(iv).

(B) Standards of knowledge applicable
to certain types of documentary evi-
dence-(1) Financial statement. A with-
holding agent that obtains a financial
statement for purposes of establishing that
a foreign payee meets a certain asset
threshold has reason to know that the
chapter 4 status claimed is unreliable or
incorrect only if the total assets shown on
the financial statement for the payee, and
if relevant the payee's expanded affiliated
group, are not within the permissible
thresholds, or the footnotes to the financial
statement indicate that the payee is not a
foreign entity or is not a type of FFI
eligible for the chapter 4 status claimed. A
withholding agent that obtains a financial
statement for purposes of establishing that
the payee is an active NFFE will be re-
quired to review the balance sheet and
income statement to determine whether
the payee meets the income and asset
thresholds set forth in § 1.1472-1(c)(1)
(iv) and the footnotes of the financial
statement for an indication that the payee
is not a foreign entity or is a financial
institution. A withholding agent that ob-
tains a financial statement for purposes of
establishing a chapter 4 status for a payee
that does not require the payee to meet an
asset or income threshold will be required
to review only the footnotes to the finan-
cial statement to determine whether the
financial statement supports the claim of
chapter 4 status. A withholding agent that
is not relying upon a financial statement to
establish the chapter 4 status of the payee
(for example because it has other docu-
mentation that establishes the payee's
chapter 4 status) is not required to inde-
pendently evaluate the financial statement
solely because the withholding agent also
has collected the financial statement in the

course of its account opening or other
procedures.

(2) Organizational documents. A with-
holding agent that obtains organizational
documents for a payee solely for the pur-
pose of supporting the chapter 4 status
claimed by the entity will only be required
to review the document sufficiently to es-
tablish that the entity is a foreign person
and that the purposes for which the entity
was formed and its basic activities appear
to be of a type consistent with the chapter
4 status claimed, unless otherwise speci-
fied in paragraph (d) of this section. A
withholding agent that obtains organiza-
tional documents for the purpose of estab-
lishing that an entity has a particular chap-
ter 4 status will only be required to review
the document to the extent needed to es-
tablish that the entity is a foreign person,
that the requirements applicable to the
particular chapter 4 status are met, and
that the document was executed, but will
not be required to review the remainder of
the document.

(v) Specific standards of knowledge
applicable when only documentary evi-
dence is a code or classification described
in paragraph (c)(5)(ii)(B) of this section.
A withholding agent may not rely upon a
classification described in paragraph
(c)(5)(ii)(B) of this section or a standard-
ized industry coding system to treat an
entity as having a foreign status if there
are U.S. indicia described in paragraph
(e)(4)(v)(A) of this section associated
with the entity, unless such U.S. indicia
are cured in the manner set forth in para-
graph (e)(4)(v)(B) of this section.
* * * * *

(B) * * *

(1) If there are U.S. indicia described in
paragraphs (e)(4)(v)(A)(1) through (4) of
this section associated with the entity, the
withholding agent may treat the entity as a
foreign person only if the withholding
agent obtains a withholding certificate for
the entity and one form of documentary
evidence, described in paragraph (c)(5) of
this section, that establishes the entity's
status as a foreign person (such as a cer-
tificate of incorporation).

(2) If there are U.S. indicia described in
paragraphs (e)(4)(v)(A)(1) through (4) of
this section associated with the entity and
the withholding agent is making a pay-
ment with respect to an offshore obliga-

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tion, the withholding agent may also treat
the entity as a foreign person if the with-
holding agent obtains a withholding cer-
tificate for the entity and the withholding
agent treats the entity as foreign for pur-
poses of foreign tax reporting. A with-
holding agent will treat an entity as for-
eign for purposes of foreign tax reporting
only if the withholding agent classifies the
entity as a resident of the country in which
the obligation is maintained, the withhold-
ing agent is required to report a payment
made to the entity annually on a tax in-
formation statement that is filed with the
tax authority of the country in which the
account is maintained as part of that coun-
try's resident reporting requirements, and
that country has a tax information ex-
change agreement or income tax treaty in
effect with the United States.
* * * * *

(vi) * * *

(B) Limits on reason to know with re-
spect to documentation received from par-
ticipating FFIs and registered deemed-
compliant FFIs that are intermediaries or
flow-through entities. A withholding agent
that receives documentation from a partici-
pating FFI or registered deemed-compliant
FFI that is not the payee must apply the
requirements of paragraph (e)(4)(vi)(A) of
this section, except that the withholding
agent may rely upon the chapter 4 status
provided by the participating FFI or regis-
tered deemed-compliant FFI in the with-
holding statement, including a chapter 4 sta-
tus determined under the requirements of
(and documentation or information that is
publicly available that determines the chap-
ter 4 status of the payee permitted under) an
applicable IGA for an account holder, pro-
vided that the withholding agent has the
information necessary to report on Form
1042-S, unless the withholding agent has
information that conflicts with the chapter 4
status provided. See § 1.1441-1(e)(3)(iv)
(C)(2)(iv) (requiring that a nonqualified in-
termediary withholding statement for a re-
portable amount that is a withholdable pay-
ment include the recipient code for chapter 4
purposes used for filing Form 1042-S for an
entity payee). If underlying documentation
is provided for the payee and information in
the documentation or in the withholding
agent's records conflicts with the chapter 4
status claimed by the payee, the withholding
agent has reason to know that the chapter 4

status claimed is unreliable or incorrect. A
withholding agent is not, however, required
to verify information contained in documen-
tation provided by an intermediary or flow-
through entity that is a participating FFI or
registered deemed-compliant FFI that is not
facially incorrect and is not required to ob-
tain supporting documentation for the payee
in addition to a withholding certificate
unless the withholding agent obtains such
documentation for purposes of chapter 3 or
61 or unless the withholding agent knows
that the review conducted by the participat-
ing FFI or registered deemed-compliant FFI
for purposes of chapter 4 was not adequate.
For example, a withholding agent that re-
ceives a withholding statement from a par-
ticipating FFI that is an intermediary stating
that the payee is a registered deemed-
compliant FFI is only required to determine
that any withholding certificate provided for
the payee contains a GIIN and that the GIIN
does not appear to be facially invalid (for
example, because it does not contain the
correct amount of digits), but is not subject
to the requirements set forth in paragraph
(e)(3) of this section. Similarly, a withhold-
ing agent that receives from a participating
FFI that is a partnership a withholding state-
ment claiming that the payee is an active
NFFE has reason to know that the claim is
unreliable or incorrect if it receives a with-
holding statement that contains a U.S. ad-
dress for the payee unless the partnership
also provides a copy of documentation suf-
ficient to cure the U.S. indicia in the manner
set forth in this paragraph (e) or the with-
holding statement indicates that appropriate
documentation sufficient to cure the U.S.
indicia in the manner set forth in this para-
graph (e) has been obtained and provides
details of such documentation, such as the
type of documentation and an identification
number of the person contained in the doc-
ument.

(vii) * * *

(B) Reason to know there are U.S. in-
dicia associated with preexisting obliga-
tions. With respect to a preexisting obli-
gation, a withholding agent may apply the
limits on reason to know described in
§ 1.1441-7(b)(3)(ii) for a person that the
withholding agent has previously docu-
mented for purposes of chapter 3 or 61. A
withholding agent that applies the limits
on reason to know described in § 1.1441-
7(b)(3)(ii) must, however, review for U.S.

indicia any additional documentation
upon which the withholding agent is rely-
ing to determine the chapter 4 status of the
person, if any.

* * * * *

(viii) Reasonable explanation support-
ing claim of foreign status. A reasonable
explanation supporting a claim of foreign
status for an individual has the meaning
described in § 1.1441-7(b)(12).
* * * * *

(f) * * *

(1) In general. A withholding agent
that cannot, prior to the payment, reliably
associate (within the meaning of para-
graph (c) of this section) the payment with
valid documentation may rely on the pre-
sumptions of this paragraph (f) to deter-
mine the status of the payee (or other
person receiving the payment) as a U.S. or
foreign person and such person's other
relevant characteristics (for example, as a
nonparticipating FFI). Paragraph (f)(2) of
this section provides the presumption
rules with respect to classification as an
individual or entity. Paragraph (f)(3) of
this section provides the presumption
rules to determine a payee's U.S. or for-
eign status. Paragraph (f)(4) of this section
provides the presumption rules with re-
spect to an entity's chapter 4 status. Para-
graph (f)(5) of this section provides the
presumption rules with respect to an in-
termediary or flow-through entity. Para-
graph (f)(6) of this section provides the
presumption rules with respect to effec-
tively connected income paid to a U.S.
branch of a payee. Paragraph (f)(7) of this
section provides the presumption rules
that apply to a payment made to joint
payees. Paragraph (f)(8) of this section
provides rules for how a payee may rebut
the presumptions described in this para-
graph (f). Paragraph (f)(9) of this section
provides the consequences to a withhold-
ing agent that fails to withhold in accor-
dance with the presumptions set forth in
this paragraph (f) or that has actual knowl-
edge or reason to know facts that are
contrary to the presumptions set forth in
this paragraph (f).

(2) Presumptions of classification as
an individual or entity and entity as the
beneficial owner. A withholding agent
that cannot reliably associate a payment
with a valid withholding certificate, or that
has received valid documentary evidence

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(as described in paragraph (c)(5) of this
section), but cannot determine a payee's
status as an individual or an entity from
the documentary evidence, must apply the
presumption rules of § 1.1441-1(b)(3)(ii)
to determine the payee's classification as
an individual, trust, partnership, corpora-
tion, intermediary, or flow-through entity.
Additionally, a withholding agent that re-
ceives valid documentary evidence with
respect to an entity must apply the rules
under § 1.1441-1(b)(3)(ii) to determine
when it may treat such entity as a benefi-
cial owner.

(3) Presumptions of U.S. or foreign
status. If a withholding agent cannot reli-
ably associate a payment with a valid
withholding certificate or valid documen-
tary evidence from which it is possible to
determine the payee's U.S. or foreign sta-
tus, it must apply the presumption rules of
§ 1.1441-1(b)(3)(iii) to determine the
U.S. or foreign status of the payee (sub-
stituting the term withholdable payment
for the term payment). In the case of a
payment that a withholding agent can re-
liably associate with valid documentation
that indicates the payment is made to a
U.S. person but does not indicate whether
the person is a specified U.S. person, the
payment will be presumed made to a spec-
ified U.S. person unless the withholding
agent can apply the presumption rules of
§ 1.6049-4(c)(1)(ii)(B), (C), (D), (E), (I),
(J), (K), (L), or (N), to presume that the
person is other than a specified U.S. per-
son, or the person's name reasonably in-
dicates that the person is a bank (for ex-
ample because it contains the word Bank
or a foreign equivalent).

(4) Presumption of chapter 4 status for
a foreign entity. If a withholding agent
cannot reliably associate a valid withhold-
ing certificate or valid documentary evi-
dence sufficient to determine the chapter 4
status of the entity receiving payment un-
der paragraph (d) of this section (for ex-
ample, as a participating FFI, nonpartici-
pating FFI, or NFFE), it must presume
that the entity is a nonparticipating FFI.

(5) Presumption of chapter 4 status of
payee with respect to a payment to an
intermediary or flow-through entity. If a
withholding agent makes a payment to a
foreign flow-through entity or intermedi-
ary, including a payment that it is required
to treat as made to such an entity under

paragraphs (f)(2) and (3) of this section,
and cannot reliably associate such pay-
ment with valid documentation under
paragraph (c) of this section, the withhold-
ing agent must presume that the payment
is made to a nonparticipating FFI.

(6) Presumption of effectively con-
nected income for payments to certain
U.S. branches. A withholding agent that
makes a payment to a U.S. branch de-
scribed in this paragraph (f)(6) may pre-
sume, in the absence of documentation
indicating otherwise, that the U.S. branch
is the payee of a payment that is effec-
tively connected with the conduct of a
trade or business in the United States if
the withholding agent has obtained an
EIN from the U.S. branch (either orally or
in writing). A U.S. branch is described in
this paragraph (f)(6) if it is a U.S. branch
of a foreign bank subject to regulatory
supervision by the Federal Reserve Board
or a U.S. branch of a foreign insurance
company required to file an annual state-
ment on a form approved by the National
Association of Insurance Commissioners
with the Insurance Department of a State,
a Territory, or the District of Columbia. A
payment is treated as made to a U.S.
branch of a foreign bank or foreign insur-
ance company if the payment is credited
to an account maintained in the United
States in the name of a U.S. branch of the
foreign person, or the payment is made to
an address in the United States where the
U.S. branch is located and the name of the
U.S. branch appears on documents (in
written or electronic form) associated with
the payment (for example, the check
mailed or letter addressed to the branch).

(7) Joint payees-(i) In general. If a
withholding agent makes a payment to
joint payees and cannot reliably associate
the payment with valid documentation
from each payee but all of the joint payees
appear to be individuals, then the payment
is presumed made to an unidentified U.S.
person. If any joint payee does not appear,
by its name and other information con-
tained in the account file, to be an indi-
vidual, then the entire payment will be
treated as made to a nonparticipating FFI.
However, if one of the joint payees pro-
vides a Form W-9 in accordance with the
procedures described in §§ 31.3406(d)-1
through 31.3406(d)-5 of this chapter, the

payment shall be treated as made to that
payee.

(ii) Exception for offshore obligations.
If a withholding agent makes a payment
outside the United States with respect to
an offshore obligation held by joint pay-
ees and cannot reliably associate a pay-
ment with valid documentation from each
payee but all of the joint payees appear to
be individuals, then the payment is pre-
sumed made to an unknown foreign indi-
vidual if the payment with respect to the
offshore obligation is made outside the
United States (as described in § 1.6049-
5(e)).

(8) Rebuttal of presumptions. A payee
may rebut the presumptions described in
paragraphs (f)(2) through (7) of this sec-
tion by providing reliable documentation
to the withholding agent or, if applicable,
to the IRS.

(9) Effect of reliance on presumptions
and of actual knowledge or reason to
know otherwise-(i) In general. Except as
otherwise provided in this paragraph
(f)(9), a withholding agent that withholds
on a payment under section 1471 or 1472
in accordance with the presumptions set
forth in this paragraph (f) shall not be
liable for withholding under this section
even if it is later established that the payee
has a chapter 4 status other than the status
presumed. A withholding agent that fails
to report and withhold in accordance with
the presumptions described in paragraphs
(f)(2) through (7) of this section with re-
spect to a payment that it cannot reliably
associate with valid documentation shall
be liable for tax, interest, and penalties.
See § 1.1474-1(a) for the extent of a
withholding agent's liability for failing to
withhold in accordance with the presump-
tions described in this paragraph (f).

(ii) Actual knowledge or reason to
know that amount of withholding is
greater than is required under the pre-
sumptions or that reporting of the pay-
ment is required. Notwithstanding the
provisions of paragraph (f)(9)(i) of this
section, a withholding agent that knows or
has reason to know that the status or char-
acteristics of the person are other than
what is presumed under this paragraph (f)
may not rely on the presumptions de-
scribed in this paragraph (f) to the extent
that, if it determined the status of the
person based on such knowledge or rea-

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son to know, it would be required to with-
hold (under this section or another with-
holding provision of the Code) an amount
greater than would be the case if it relied
on the presumptions described in this
paragraph (f). In such a case, the with-
holding agent must rely on its knowledge
or reason to know rather than on the pre-
sumptions set forth in this paragraph (f).
Failure to do so shall result in liability for
tax, interest, and penalties to the extent
described in § 1.1474-1(a).

(g) Effective/applicability date. This
section applies on January 6, 2017. How-
ever, taxpayers may apply these provi-
sions as of January 28, 2013. A taxpayer
may apply paragraph (c)(6)(iv) of this sec-
tion to all of its open tax years. (For the
rules that apply beginning on January 28,
2013, and before January 6, 2017, see this
section as in effect and contained in 26
CFR part 1 revised April 1, 2016.)

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

### § 1.1471-3T Identification of payee (temporary).

(a) through (a)(3)(vii) [Reserved]. For
further guidance, see § 1.1471-3(a)
through (a)(3)(vii).

(b) through (b)(4) [Reserved]. For fur-
ther guidance, see § 1.1471-3(b) through
(b)(4).

(c) [Reserved]. For further guidance,
see § 1.1471-3(c).

(1) In general. A withholding agent
can reliably associate a withholdable pay-
ment with valid documentation if, prior to
the payment, it has obtained (either di-
rectly from the payee or through its agent)
valid documentation appropriate to the
payee's chapter 4 status as described in
paragraph (d) of this section, it can reli-
ably determine how much of the payment
relates to the valid documentation, and it
does not know or have reason to know
that any of the information, certifications,
or statements in, or associated with, the
documentation are unreliable or incorrect.
Thus, a withholding agent cannot reliably
associate a withholdable payment with
valid documentation provided by a payee
to the extent such documentation appears
unreliable or incorrect with respect to the
claims made, or to the extent that infor-
mation required to allocate all or a portion

of the payment to each payee is unreliable
or incorrect. A withholding agent may
rely on information and certifications con-
tained in withholding certificates or other
documentation without having to inquire
into the truthfulness of the information or
certifications, unless it knows or has rea-
son to know that the information or certi-
fications are untrue. A withholding agent
may rely upon the same documentation
for purposes of both chapters 3 and 4
provided the documentation is sufficient
to meet the requirements of each chapter.
Alternatively, a withholding agent may
elect to rely upon the presumption rules of
paragraph (f) of this section in lieu of
obtaining documentation from the payee.
A withholding certificate will be consid-
ered provided by a payee if a withholding
agent obtains the certificate from a third
party repository (rather than directly from
the payee or through its agent) and the
requirements in § 1.1441-1(e)(4)(iv)(E)
are satisfied. A withholding certificate ob-
tained from a third party repository must
still be reviewed by the withholding agent
in the same manner as any other docu-
mentation to determine whether it may be
relied upon for chapter 4 purposes. A
withholding agent may rely on an elec-
tronic signature on a withholding certifi-
cate if the requirements in § 1.1441-
1(e)(4)(i)(B) are satisfied.

(2) [Reserved]. For further guidance,
see § 1.1471-3(c)(2).

(3) [Reserved]. For further guidance,
see § 1.1471-3(c)(3).

(i) through (ii) [Reserved]. For further
guidance, see § 1.1471-3(c)(3)(i) through
(ii).

(iii) [Reserved]. For further guidance,
see § 1.1471-3(c)(3)(iii).

(A) [Reserved]. For further guidance,
see § 1.1471-3(c)(3)(iii)(A).

(B) [Reserved]. For further guidance,
see § 1.1471-3(c)(3)(iii)(B).

(1) through (4) [Reserved]. For further
guidance, see § 1.1471-3(c)(3)(iii)(B)(1)
through (4).

(5) Alternative withholding statement.
A withholding agent that is making a
withholdable payment to a nonqualified
intermediary for which a withholding
statement is required under chapters 3
and 4 may accept a withholding state-
ment that meets the requirements for an

alternative withholding statement de-
scribed in § 1.1441-1(e)(3)(iv)(C)(3).

(C) through (H) [Reserved]. For further
guidance, see § 1.1471-3(c)(3)(iii)(C)
through (H).

(iv) through (v) [Reserved]. For further
guidance, see § 1.1471-3(c)(3)(iv)
through (v).

(4) through (5) [Reserved]. For further
guidance, see § 1.1471-3(c)(4) through
(5).

(6) [Reserved]. For further guidance,
see § 1.1471-3(c)(6).

(i) [Reserved]. For further guidance,
see § 1.1471-3(c)(6)(i).

(ii) [Reserved]. For further guidance,
see § 1.1471-3(c)(6)(ii).

(A) through (D) [Reserved]. For fur-
ther guidance, see § 1.1471-3(c)(6)(ii)(A)
through (D).

(E) [Reserved]. For further guidance,
see § 1.1471-3(c)(6)(ii)(E).

(1) through (3) [Reserved]. For further
guidance, see § 1.1471-3(c)(6)(ii)(E)(1)
through (3).

(4) Withholding agent's reason to
know of a change in circumstances due to
a jurisdiction ceasing to be treated as
having an IGA in effect. A withholding
agent will have reason to know of a
change in circumstances with respect to
an FFI's chapter 4 status that results solely
because the jurisdiction in which the FFI
is resident, organized, or located ceases to
be treated as having an IGA in effect on
the date that the jurisdiction ceases to be
treated as having an IGA in effect.

(iii) through (vii) [Reserved]. For fur-
ther guidance, see § 1.1471-3(c)(6)(iii)
through (vii).

(7) [Reserved]. For further guidance,
see § 1.1471-3(c)(7).

(i) [Reserved]. For further guidance,
see § 1.1471-3(c)(7)(i).

(ii) Documentation received after the
time of payment. Proof that withholding
was not required under the provisions of
chapter 4 and the regulations thereunder
also may be established after the date of
payment by the withholding agent on the
basis of a valid withholding certificate
and/or other appropriate documentation
that was furnished after the date of pay-
ment but that was effective as of the date
of payment. A withholding certificate fur-
nished after the date of payment will be
considered effective as of the date of the

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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 representa-
tions contained on the certificate were ac-
curate as of the time of the payment. A
certificate obtained within 30 days after
the date of the payment will not be con-
sidered to be unreliable solely because it
does not contain an affidavit. However, in
the case of a withholding certificate of an
individual received more than a year after
the date of payment, the withholding
agent will be required to obtain, in addi-
tion to the withholding certificate and af-
fidavit, documentary evidence described
in paragraph (c)(5)(i) of this section that
supports the individual's claim of foreign
status. In the case of a withholding certif-
icate of an entity received more than a
year after the date of payment, the with-
holding agent will be required to obtain, in
addition to the withholding certificate and
affidavit, documentary evidence specified
in paragraph (c)(5)(ii) of this section that
supports the chapter 4 status claimed. If
documentation other than a withholding
certificate is submitted from a payee more
than a year after the date of payment, the
withholding agent will be required to also
obtain from the payee a withholding
certificate and affidavit supporting the
chapter 4 status claimed as of the date of
the payment. See, however, § 1.1441-
1(b)(7)(ii) for special rules that apply
when a withholding certificate is received
after the date of the payment to claim that
income is effectively connected with the
conduct of a U.S. trade or business (as
applied for purposes of this paragraph
(c)(7)(ii) to a claim to establish that the
payment is not a withholdable payment
under § 1.1473-1(a)(4)(ii) rather than
to claim an exemption described in
§ 1.1441-4(a)(1)).

(8) through (9) [Reserved]. For further
guidance, see § 1.1471-3(c)(8) through
(c)(9)(v).

(d) [Reserved]. For further guidance,
see § 1.1471-3(d).

(1) through (5) [Reserved]. For further
guidance, see § 1.1471-3(d)(1) through
(5).

(6) [Reserved]. For further guidance,
see § 1.1471-3(d)(6).

(i) [Reserved]. For further guidance,
see § 1.1471-3(d)(6)(i).

(A) through (E) [Reserved]. For further
guidance, see § 1.1471-3(d)(6)(i)(A)
through (E).

(F) The withholding agent does not
know or have reason to know that the
payee is a member of an expanded affili-
ated group with any FFI that is a deposi-
tory institution, custodial institution, or
specified insurance company, or that the
FFI has any specified U.S. persons that
own an equity interest in the FFI or a debt
interest(other than a debt interest that is
not a financial account or that has a bal-
ance or value not exceeding $50,000) in
the FFI other than those identified on the
FFI owner reporting statement described
in paragraph (d)(6)(iv) of this section.

(ii) through (vii) [Reserved]. For fur-
ther guidance, see § 1.1471-3(d)(6)(ii)
through (d)(6)(vii)(B).

(7) through (12) [Reserved]. For
further guidance, see § 1.1471-3(d)(7)
through (12)(iii)(B).

(e) through (g) [Reserved]. For further
guidance, see § 1.1471-3(e) through (g).

(h) Expiration date. The applicability
of this section expires on December 30,
2019

Par. 9. Section 1.1471-4 is amended by:

1\. Revising paragraphs (a)(3) and (4),
(b)(1) through (4), (b)(6) and (7), (c)(1),
(c)(2)(ii)(B)(2)(iii),(c)(2)(v), (c)(3)(ii),
(c)(3)(iii)(A),(c)(5)(iv)(B)(2)(vi), (c)(5)
(iv)(E), (c)(7), (d)(1), (d)(2)(i), (d)(2)
(ii)(A), (d)(2)(ii)(B) introductory text,
(d)(2)(ii)(B)(2), and (d)(2)(ii)(D) through
(F).

2\. Adding paragraph (d)(2)(ii)(G).

3\. Revising paragraphs (d)(2)(iii)(A),
(d)(2)(iii)(B) introductory text, (d)(2)
(iii)(C), (d)(3)(ii)(E), (d)(3)(iii) introduc-
tory text, (d)(3)(iii)(F), (d)(3)(vii),
(d)(4)(i), (d)(4)(iv)(C), (d)(4)(iv)(D) in-
troductory text, (d)(5)(i)(A) and (B),
(d)(5)(ii)(B) introductory text, (d)(5)(v)
through (vii), (d)(6)(vi), (d)(7), (d)(7)(i),
(d)(7)(ii)(A) introductory text, (d)(7)(ii)(A)(1),
(d)(7)(iii), (d)(7)(iv)(A) and (B), (d)(8),
(d)(9) Example 1 through Example 3, (d)(9)
Example 5, (d)(9) Example 7, (e)(1),
(e)(2)(ii),(e)(2)(iv)(D), and (e)(2)(v).

4\. Adding paragraph (e)(2)(vi).

5\. Revising paragraphs (e)(3)(iii)(A)
and (C), (e)(3)(iv).

6\. Adding paragraphs (e)(3)(v) and (vi).

7\. Revising paragraphs (e)(4), (f)(1),
(f)(3)(i), (f)(4)(i) and (ii), (g)(1) introduc-
tory text, (g)(1)(ii), (g)(2), and (j).

The revisions and additions read as fol-
lows:

§ 1.1471-4 FFI agreement.

(a) * * *

(3) Reporting. A participating FFI is re-
quired to report the information described in
paragraph (d) of this section annually with
respect to U.S. accounts under section
1471(c) and accounts held by recalcitrant
account holders. A participating FFI must
also comply with the filing requirements
described in § 1.1474-1(c) and (d) to report
payments that are chapter 4 reportable
amounts paid to recalcitrant account holders
and nonparticipating FFIs (including the
transitional reporting of foreign reportable
amounts paid to nonparticipating FFIs for
calendar years 2015 and 2016 described in
§ 1.1471-4(d)(2)(ii)(F). A participating
FFI that is unable to obtain a waiver, if
required by foreign law, to report an account
as required under paragraph (d) of this sec-
tion must close or transfer such account
within a reasonable period of time as de-
scribed in paragraph (i) of this section.

(4) Expanded affiliated group. Except
as otherwise provided in Model 1 IGA or
Model 2 IGA, in order for any FFI that is
a member of an expanded affiliated group
to be a participating FFI, each FFI that is
a member of the expanded affiliated group
must be a participating FFI, deemed-
compliant FFI, or exempt beneficial
owner as described in paragraph (e) of this
section. For a limited period described in
paragraph (e)(2) or (e)(3) of this section,
however, a branch of an FFI or an FFI that
is a member of an expanded affiliated
group and is unable under foreign law to
satisfy the requirements of this section
may instead obtain status as a limited
branch of a participating FFI or limited
FFI if the branch or FFI meets the require-
ments set forth in paragraph (e)(2) or
(e)(3) of this section (as applicable).
* * * * *

(b) * * *

(1) In general. Except as otherwise
provided in a Model 2 IGA, a participat-
ing FFI is required to deduct and withhold
a tax equal to 30 percent of any withhold-
able payment made by such participating

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FFI to an account held by a recalcitrant
account holder or to a nonparticipating
FFI after June 30, 2014, to the extent
required under paragraph (b)(3) of this
section. See paragraph (b)(2) of this sec-
tion for rules for a participating FFI to
identify the payee of a payment in order to
determine whether withholding is re-
quired under this paragraph (b). See para-
graph (b)(4) of this section for the extent
of a participating FFI's requirement to
deduct and withhold tax on a foreign pass-
thru payment made by such participating
FFI to an account held by a recalcitrant
account holder or to a nonparticipating
FFI. See paragraph (b)(5) of this section
for the rules for withholding on payments
to limited branches and limited FFIs. See
paragraph (b)(6) for the special allowance
to set aside in escrow amounts withheld
with respect to dormant accounts. See
paragraph (b)(7) of this section for the
withholding requirements of certain U.S.
branches of FFIs. See § 1.1471-2 for the
exceptions to and special rules for with-
holding and the exclusion from the defi-
nitions of the terms withholdable payment
and foreign passthru payment that applies
to any payment made under a grandfa-
thered obligation or the gross proceeds
from the disposition of such an obligation.
See § 1.1474-1(d)(4)(iii) for the require-
ment of participating FFIs to report pay-
ments that are chapter 4 reportable
amounts. See § 1.1474-6 for the coordi-
nation of withholding on payments under
this paragraph (b) with the other withhold-
ing provisions under the Code.

(2) Withholding determination. Except
as otherwise provided under § 1.1471-2
and, with respect to certain preexisting
accounts, under paragraph (c) of this sec-
tion, a participating FFI is required to
determine whether withholding applies at
the time a payment is made by reliably
associating the payment with valid docu-
mentation described in paragraph (c) of
this section for the payee of the payment.
For a payment made to an account, if the
account is held by one or more individu-
als, the payee is each individual account
holder. For a payment made to an account
held by an entity, except as otherwise
provided in § 1.1471-3(a)(3), the payee is
the account holder. If the participating FFI
makes a withholdable payment to a payee
that is an entity and the payment is made

with respect to an obligation that is not an
account, except as otherwise provided in
§ 1.1471-3(a)(3), the payee is the person
to whom the payment is made. See
§ 1.1473-1(a) to determine when a pay-
ment is made in the case of a withholdable
payment. If a participating FFI cannot re-
liably associate a payment (or any portion
of a payment) with valid documentation,
the rules described in paragraph (c) of this
section shall apply to determine the chap-
ter 4 status of the account holder (and
payee if other than the account holder).
Notwithstanding the foregoing, a partici-
pating FFI may establish after the date of
payment that withholding was not re-
quired to the extent permitted under
§ 1.1471-3(c)(7) or may apply the proce-
dures provided in § 1.1474-2 when over-
withholding occurs.

(3) Satisfaction of withholding require-
ments-(i) In general. A participating FFI
that complies with the withholding obli-
gations of this paragraph (b) with respect
to accounts held by recalcitrant account
holders and payees that are nonparticipat-
ing FFIs shall be deemed to satisfy its
withholding obligations under sections
1471(a) and 1472 with respect to such
account holders and payees.

(ii) Withholding not required. A partic-
ipating FFI that is an NQI, NWP, NWT,
or that is a QI that elects under section
1471(b)(3) not to assume withholding re-
sponsibility for a payment and that pro-
vides its withholding agent with the infor-
mation necessary to allocate all or a
portion of the payment to each payee as
part of a withholding certificate described
in § 1.1471-3(c)(3)(iii) will generally not
be required to withhold under paragraph
(b)(1) of this section. See § 1.1471-
2(a)(2)(ii), however, for the circumstances
under which a participating FFI that is an
NQI, NWP, or NWT has a residual with-
holding responsibility. See also § 1.1471-
3(c)(9)(iii)(B) for the circumstances under
which a participating FFI that is a broker
has a residual withholding responsibility
as an intermediary of the payment and
may also be liable for any underwithhold-
ing that occurs. See §§ 1.1471-2(a) and
1.1472-1(a)(2)(i) and the QI, WP, or WT
agreement for the withholding require-
ments of a participating FFI that is a QI,
WP, or WT for purposes of chapter 4.

(iii) Election to withhold under section
3406. A participating FFI may elect to
satisfy its withholding obligation under
paragraph (b)(1) of this section with re-
spect to recalcitrant account holders that
are also U.S. non-exempt recipients sub-
ject to backup withholding under section
3406 receiving withholdable payments, to
the extent that the payments also consti-
tute reportable payments, by applying
withholding under section 3406 at the
backup withholding rate to such withhold-
able payments. A participating FFI may
make the election described in this para-
graph only if it complies with the infor-
mation reporting rules under chapter 61
with respect to payments to which backup
withholding applies. Nothing in this para-
graph relieves a participating FFI of its
requirement to backup withhold under
section 3406 with respect to reportable pay-
ments that are not also withholdable pay-
ments. See § 1.1474-6(f) for the general
rule that satisfying withholding require-
ments under chapter 4 will satisfy backup
withholding requirements under section
3406 for a payment that is both a withhold-
able payment and a reportable payment.

(4) Foreign passthru payments. A par-
ticipating FFI is not required to deduct
and withhold tax on a foreign passthru
payment made by such participating FFI
to an account held by a recalcitrant ac-
count holder or to a nonparticipating FFI
before the later of January 1, 2019, or the
date of publication in the Federal Regis-
ter of final regulations defining the term
foreign passthru payment.

* * * * *

(6) Special rule for dormant accounts.
A participating FFI that makes a with-
holdable payment not otherwise subject to
withholding under chapter 3 or backup
withholding under section 3406 to a recal-
citrant account holder of a dormant ac-
count that it maintains must withhold on
the account for purposes of chapter 4.
However, the participating FFI may, in
lieu of depositing the tax withheld, set
aside the amount withheld in escrow until
the date that the account ceases to be a
dormant account. In such case, the tax
withheld becomes due 90 days following
the date that the account ceases to be a
dormant account if the account holder
does not provide the documentation re-
quired under paragraph (c) of this section

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or becomes refundable to the account
holder if the account holder provides the
documentation required under paragraph
(c) of this section establishing that with-
holding does not apply. A participating FFI
that maintains a dormant account of a recal-
citrant account holder and that elects to es-
crow withheld tax pursuant to this paragraph
(b)(6) may not delegate the responsibility to
escrow withheld tax to the withholding
agent from which it is receiving payment.
Once a dormant account escheats irrevoca-
bly to a foreign government under the rele-
vant laws in the jurisdiction in which the
participating FFI (or branch thereof) oper-
ates, the participating FFI is no longer re-
quired to deposit with the IRS the amount
held in escrow with respect to the account.
See paragraph (d)(6)(ii) of this section for
the definition of dormant account.

(7) Withholding requirements for U.S.
branches of FFIs treated as U.S. persons.
A U.S. branch of an FFI treated as a U.S.
person must satisfy its backup withholding
obligations under section 3406(a) with re-
spect to accounts held at the U.S. branch by
account holders that are payees treated as
other than exempt recipients under chapter
61. See §§ 1.1441-1(b)(2)(iv)(C), 1.1471-
2(a), and 1.1472-1(a) for additional with-
holding obligations for a U.S. branch of an
FFI treated as a U.S. person. See paragraph
(d)(2)(iii)(B) of this section for the reporting
requirements applicable to U.S. branches of
FFIs that are treated as U.S. persons.

(c) * * *

(1) Scope of paragraph. Except to the
extent that a participating FFI relies on the
due diligence procedures set forth in an
applicable Model 2 IGA, a participating
FFI must follow this paragraph (c) to
identify and document the chapter 4 status
of each holder of an account maintained
by the participating FFI to determine if the
account is a U.S. account, non-U.S. ac-
count, or an account held by a recalcitrant
account holder or nonparticipating FFI.
Paragraph (c)(2) of this section provides
the general rules for identification and
documentation of account holders and
payees, and paragraph (c)(2)(v) provides
documentation requirements for certain
U.S. branches of FFIs. Paragraph (c)(3) of
this section provides the rules for docu-
menting entity accounts and payees. Para-
graph (c)(4) of this section provides the
general rules for documenting individual

accounts other than preexisting accounts.
Paragraph (c)(5) of this section provides
the identification and documentation pro-
cedure for preexisting individual ac-
counts. Paragraph (c)(6) of this section
provides examples illustrating the applica-
tion of the documentation exceptions for
entity accounts and individual accounts.
Paragraph (c)(7) of this section outlines the
certification requirement relating to the due
diligence procedures of this paragraph (c)
with respect to preexisting accounts within
the specified periods of time.

(2) * * *

(ii) * * *

(B) * * *

(2) * * *

(iii) [Reserved]. For further guidance,
see § 1.1471-4T(c)(2)(ii)(B)(2)(iii).
* * * * *

(v) Documentation rules for U.S.
branches of FFIs that are treated as U.S.
persons. A U.S. branch of an FFI that is
treated as a U.S. person shall apply the
due diligence requirements of § 1.1471-3
to determine the chapter 4 status of ac-
count holders and payees that are entities
and shall apply the documentation re-
quirements of chapter 3 or 61 (as applica-
ble) with respect to individual account
holders. See paragraph (b)(7) of this sec-
tion for withholding rules and paragraph
(d)(2)(iii)(B) of this section for reporting
rules applicable to such U.S. branches.

(3) * * *

(ii) Timeframe for applying identifica-
tion and documentation procedure for en-
tity accounts and payees. For preexisting
entity accounts (including entity accounts
that are opened on or after July 1, 2014,
and before January 1, 2015, that the FFI
treats as preexisting obligations under
§ 1.1471-1(b)(104)(i)), a participating
FFI must perform the requisite identifica-
tion and documentation procedures within
six months of the effective date of the FFI
agreement for any account holder that is a
prima facie FFI, as defined in § 1.1471-
2(a)(4)(ii)(B), and within two years of the
effective date of the FFI agreement for all
other entity accounts, except as otherwise
provided in paragraph (c)(3)(iii) of this
section. For accounts that are not preex-
isting accounts, the participating FFI must
perform the requisite identification and
documentation procedures by the earlier
of the date a withholdable payment or a

foreign passthru payment is made with
respect to the account or within 90 days of
the date the participating FFI opens the
account. Notwithstanding the foregoing
sentences of this paragraph (c)(3)(ii), with
respect to a preexisting obligation issued
in nonregistered (bearer) form by an in-
vestment entity, the investment entity is
required to perform the requisite identifi-
cation and documentation procedures at
the time a payment is collected by the
beneficial owner of the payment (includ-
ing a beneficial owner that collects the
payment through an intermediary or
agent). If the participating FFI cannot ob-
tain all the documentation described in
§ 1.1471-3(d) or if the participating FFI
knows or has reason to know that the
documentation provided for an entity ac-
count is unreliable or incorrect (by apply-
ing the standards of knowledge applicable
to entities in § 1.1471-3(e) as modified by
paragraph (c)(2)(ii)), the participating FFI
shall apply the presumption rules of
§ 1.1471-3(f) (as applicable to entities) to
determine the chapter 4 status of the ac-
count holder. In the case of an account
held by a passive NFFE that provides the
documentation described in § 1.1471-
3(d)(12) to establish its status as a passive
NFFE but fails to provide the information
regarding its owners, see § 1.1471-
5(g)(2)(iv) for the requirement to treat the
account as held by a recalcitrant account
holder.

(iii) * * *

(A) Accounts to which this exception
applies. Unless the participating FFI
elects otherwise pursuant to paragraph
(c)(3)(iii)(C) of this section, a participat-
ing FFI is not required to perform the
identification and documentation proce-
dure contained in this paragraph (c)(3)
with respect to a preexisting entity ac-
count the aggregate balance or value of
which is $250,000 or less if no holder of
such account that has previously been
documented by the FFI as a U.S. person
for purposes of chapter 3 or 61 is a spec-
ified U.S. person. For purposes of apply-
ing this exception, the account balance
must be determined as of the effective
date of the FFI agreement and the aggre-
gation rules of paragraph (c)(3)(iii)(B) of
this section shall apply. An account that
meets this exception will cease to meet
this exception as of the end of any subse-

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quent calendar year in which the account
balance or value exceeds $1,000,000, ap-
plying the aggregation rules of paragraph
(c)(3)(iii)(B) of this section, or as of the
date on which there is another change in
circumstances with respect to the account
or any account aggregated with the ac-
count. The exception to the identification
and documentation procedure described in
this paragraph (c)(3)(iii)(A) does not ap-
ply to an entity account opened on or after
July 1, 2014, and before January 1, 2015,
that the FFI treats as a preexisting account
under § 1.1471-1(b)(104)(i).

* * * * *

(5) * * *

(iv) * * *

(B) * * *

(2) * * *

(vi) Standing instructions to pay
amounts. If information required to be
reviewed with respect to the account con-
tains standing instructions to pay amounts
from the account to an account maintained
in the United States for an account holder,
the participating FFI must retain a record
of a withholding certificate and either a
form of documentary evidence described
in § 1.1471-3(c)(5)(i)(A) through (C) or a
written reasonable explanation (as defined
in § 1.1441-7(b)(12)) establishing the ac-
count holder's status as a foreign person.
* * * * *

(E) Exception for preexisting individ-
ual accounts previously documented as
held by foreign individuals. A participat-
ing FFI that has previously obtained doc-
umentation from an account holder to es-
tablish the account holder's status as a
foreign individual in order to meet its ob-
ligations under its QI, WP, or WT agree-
ment with the IRS, or to fulfill its report-
ing obligations as a U.S. payor under
chapter 61, is not required to perform the
electronic search described in paragraph
(c)(5)(iv)(C) of this section or the en-
hanced review described in paragraph
(c)(5)(iv)(D)(3) of this section for such
account. Additionally, a participating FFI
with a U.S. payor as its paying agent is not
required to perform the electronic search
described in paragraph (c)(5)(iv)(C) of
this section or the enhanced review de-
scribed in paragraph (c)(5)(iv)(D)(3) of
this section for an account for which its
paying agent that is a U.S. payor has pre-
viously obtained documentation to estab-

lish the account holder's status as a for-
eign individual under chapter 61. The
participating FFI is required, however, to
perform the relationship manager inquiry
described in paragraph (c)(5)(iv)(D)(2) of
this section if the account is a high-value
account described in paragraph (c)(5)(iv)
(D)(1) of this section. For purposes of this
paragraph (c)(5)(iv)(E), a participating
FFI has documented an account holder's
foreign status under chapter 61 if the par-
ticipating FFI (or its paying agent that is a
U.S. payor) has retained a record of the
documentation required under chapter 61
to establish the foreign status of an indi-
vidual and the account received a report-
able payment as defined under section
3406(b) in any prior year that was prop-
erly reported in that year. In the case of a
participating FFI that is a QI, WP, or WT,
the participating FFI has documented an
account holder's foreign status under its
QI, WP, or WT agreement (as applicable)
if the participating FFI has met the rele-
vant documentation and reporting require-
ments of its agreement with respect to an
account holder that received a reportable
amount in any year in which its agreement
was in effect.

* * * * *

(7) Certifications of responsible officer.
In order for a participating FFI to comply
with the requirements of an FFI agree-
ment with respect to its identification pro-
cedures for preexisting accounts, a re-
sponsible officer of the participating FFI
must certify to the IRS regarding the par-
ticipating FFI's compliance with the dili-
gence requirements of this paragraph (c).
The responsible officer must certify that
the participating FFI has completed the
review of all high-value accounts as re-
quired under paragraphs (c)(5)(iv)(D) and
(E) of this section and treats any account
holder of an account for which the partic-
ipating FFI has not retained a record of
any required documentation as a recalci-
trant account holder as required under this
section and § 1.1471-5(g). The responsi-
ble officer must also certify that the par-
ticipating FFI has completed the account
identification procedures and documenta-
tion requirements of this paragraph (c) for
all other preexisting accounts or, if it has
not retained a record of the documentation
required under this paragraph (c) with re-
spect to an account, treats such account in

accordance with the requirements of this
section and § 1.1471-5(g) or § 1.1471-
3(f) (as applicable). The responsible offi-
cer must also certify to the best of the
responsible officer's knowledge after con-
ducting a reasonable inquiry, that the par-
ticipating FFI did not have any formal or
informal practices or procedures in place
from August 6, 2011, through the date that
is two years after the effective date of the
FFI's FFI agreement to assist account
holders in the avoidance of chapter 4. A
reasonable inquiry for purposes of this
paragraph (c)(7) is a review of the partic-
ipating FFI's procedures and a written in-
quiry, such as email requests to relevant
lines of business, that requires responses
from relevant customer on-boarding and
management personnel as to whether they
engaged in any such practices during that
period. Practices or procedures that assist
account holders in the avoidance of chap-
ter 4 include, for example, suggesting that
account holders split up accounts to avoid
classification as a high-value account;
suggesting that account holders of U.S.
accounts close, transfer, or withdraw from
their account to avoid reporting; inten-
tional failures to disclose a known U.S.
account; suggesting that an account holder
remove U.S. indicia from its account in-
formation; or facilitating the manipulation
of account balances or values to avoid
thresholds. If the responsible officer is
unable to make any of the certifications
described in this paragraph (c)(7), the re-
sponsible officer must make a qualified
certification to the IRS stating that such
certification cannot be made and that cor-
rective actions will be taken by the re-
sponsible officer. The certifications de-
scribed in this paragraph (c)(7) must be
submitted to the IRS by the due date of the
FFI's first certification of compliance re-
quired under paragraph (f)(3) of this sec-
tion.

(d) * * *

(1) Scope of paragraph. This para-
graph (d) provides rules addressing the
information reporting requirements appli-
cable to participating FFIs with respect to
U.S. accounts, accounts held by owner-
documented FFIs, and recalcitrant ac-
count holders. Paragraph (d)(2) of this
section describes the accounts subject to
reporting under this paragraph (d), and
specifies the participating FFI that is re-

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sponsible for reporting an account or ac-
count holder. Paragraph (d)(3) of this sec-
tion describes the information required to
be reported and the manner of reporting by
a participating FFI under section 1471(c)(1)
with respect to a U.S. account or an account
held by an owner-documented FFI. Para-
graph (d)(4) of this section provides defini-
tions of terms applicable to paragraph
(d)(3). Paragraph (d)(5) of this section de-
scribes the conditions for a participating FFI
to elect to report its U.S. accounts and ac-
counts held by owner-documented FFIs un-
der section 1471(c)(2) and the information
required to be reported under such election.
Paragraph (d)(6) of this section provides
rules for a participating FFI to report its
recalcitrant account holders. Paragraph
(d)(7) of this section provides special tran-
sitional reporting rules applicable to reports
due in 2015 and 2016. Paragraph (d)(8) of
this section provides the reporting require-
ments of a participating FFI that is a QI,
WP, or WT with respect to U.S. accounts.
See chapter 61 for reporting requirements
that may apply to a payor that is a partici-
pating FFI or registered deemed-compliant
FFI with respect to payees. See § 301.1474-
1(a) of this chapter for the requirement for a
financial institution to file the information
required under this paragraph (d) on mag-
netic media.

(2) * * *

(i) Accounts subject to reporting. Sub-
ject to the rules of paragraph (d)(7) of this
section, a participating FFI shall report by
the time and in the manner prescribed in
paragraph (d)(3)(vi) of this section, the
information described in paragraph (d)(3)
of this section with respect to accounts
maintained at any time during each calen-
dar year for which the participating FFI is
responsible for reporting under paragraph
(d)(2)(ii) of this section and that it is re-
quired to treat as U.S. accounts or ac-
counts held by owner-documented FFIs,
including accounts that are identified as
U.S. accounts by the end of such calendar
year pursuant to a change in circum-
stances during such year as described in
paragraph (c)(2)(iii) of this section. Alter-
natively, a participating FFI may elect to
report under paragraph (d)(5) of this sec-
tion with respect to such accounts for each
calendar year. With respect to accounts
held by recalcitrant account holders, a par-
ticipating FFI is required to report with

respect to each calendar year under para-
graph (d)(6) of this section and not under
paragraph (d)(3) or (5) of this section. For
separate reporting requirements of partic-
ipating FFIs with respect to foreign report-
able amounts and for transitional rules for
participating FFIs to report certain foreign
reportable amounts paid to accounts held
by nonparticipating FFIs, see § 1.1471-
4(d)(2)(ii)(F).

(ii) * * *

(A) In general. Except as otherwise
provided in paragraphs (d)(2)(ii)(B)
through (G) of this section, the participat-
ing FFI that maintains the account is re-
sponsible for reporting the account in
accordance with the requirements of para-
graph (d)(2)(iii), (d)(3), or (d)(5) of this
section (as applicable) for each calendar
year. Except as otherwise provided in
paragraph (d)(2)(ii)(C) of this section, a
participating FFI is responsible for report-
ing accounts held by recalcitrant account
holders that it maintains in accordance
with the requirements of paragraph (d)(6)
of this section. A participating FFI is not
required to report the information required
under paragraph (d)(6) of this section with
respect to an account held by a recalcitrant
account holder of another participating
FFI even if that other participating FFI
holds the account as an intermediary on
behalf of such account holder and regard-
less of whether the participating FFI is
required to report payments made to the
recalcitrant account holder of such other
FFI under § 1.1474-1(d)(4)(iii).

(B) Special reporting of account hold-
ers of territory financial institutions. In
the case of an account held by a territory
financial institution that is a flow-through
entity or acting as an intermediary with
respect to a withholdable payment-
* * * * *

(2) If the territory financial institution
does not agree to be treated as a U.S.
person with respect to a withholdable pay-
ment, the participating FFI must report
with respect to each specified U.S. person
or substantial U.S. owner of an entity that
is treated as a passive NFFE with respect
to which the territory financial institution
acts as an intermediary or is a flow-
through entity and provides the participat-
ing FFI with the information and docu-
mentation required under § 1.1471-3(c)
(3)(iii)(G). The participating FFI shall be

treated as having satisfied these reporting
requirements if it reports with respect to
each such specified U.S. person or sub-
stantial U.S. owner of a passive NFFE
either-

(i) The information required by chapter
61 and described in paragraph (d)(5)(ii) or
(d)(5)(iii) of this section (except account
number); or

(ii) The information described in para-
graph (d)(3)(ii), (d)(3)(iii), or (d)(3)(iv) of
this section (except account number and
account balance or value).

* * * * *

(D) Special reporting of accounts held
by owner-documented FFIs. A participat-
ing FFI that maintains an account held by
an FFI that it has agreed to treat as an
owner-documented FFI under § 1.1471-
3(d)(6) shall report the information de-
scribed in paragraph (d)(3)(iv) or (d)(5)(iii)
of this section with respect to each specified
U.S. person identified in § 1.1471-3(d)(6)
(iv)(A)(1) and (2). See § 1.1474-1(i) for the
reporting obligations of a participating FFI
with respect to a payee of an obligation
other than an account that it has agreed to
treat as an owner-documented FFI.

(E) Requirement to identify the GIIN of
a branch that maintains an account. A
participating FFI may report under para-
graph (d)(3) or (d)(5) of this section either
with respect to all of its U.S. accounts and
recalcitrant accounts, or separately with
respect to any clearly identified group of
accounts (such as by line of business or
the location of where the account is main-
tained). A participating FFI shall include
the GIIN assigned to the participating FFI
or its branches to identify the jurisdiction
of the FFI or branch that maintains the
accounts subject to reporting under para-
graph (d)(3) or (d)(5) of this section. Ad-
ditionally, a participating FFI shall file
with the IRS the information required to
be reported on accounts that it maintains
in accordance with the forms and their
accompanying instructions provided by
the IRS. For the definition of a branch that
applies for purposes of this paragraph (d),
see paragraph (e)(2)(ii) of this section.

(F) Reporting by participating FFIs
(including QIs, WPs, WTs, and certain
U.S. branches not treated as U.S. persons)
for accounts of nonparticipating FFIs
(transitional). Except as otherwise pro-
vided in the instructions to Form 8966,

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"FATCA Report" or in this paragraph
(d)(2)(ii)(F), if a participating FFI (includ-
ing a QI, WP, WT, or U.S. branch of a
participating FFI that is not treated as
a U.S. person) maintains an account for a
nonparticipating FFI (including a limited
branch and limited FFI treated as a non-
participating FFI), the participating FFI
must report on Form 8966 the name and
address of the nonparticipating FFI, and
the aggregate amount of foreign source
payments, as described in paragraph
(d)(4)(iv) of this section, paid to or with
respect to each such account (foreign re-
portable amount) for each of the calendar
years 2015 and 2016. If, however, the
participating FFI is prohibited under do-
mestic law from reporting on a specific
payee basis without consent from the non-
participating FFI account holder and the
participating FFI has not been able to ob-
tain such consent, the participating FFI
may instead report the aggregate number
of accounts held by such non-consenting
nonparticipating FFIs and the aggregate
amount of foreign reportable amounts
paid with respect to such accounts, as
described in paragraph (d)(4)(iv) of this
section, during the calendar year. A par-
ticipating FFI may, in lieu of reporting
only foreign reportable amounts, report all
income, gross proceeds, and redemptions
(irrespective of the source) paid to the
nonparticipating FFI's account by the par-
ticipating FFI during the calendar year.
With respect to calendar year 2015, how-
ever, a participating FFI is not required to
report gross proceeds described in para-
graph (d)(4)(iv)(B)(3) of this section paid
to an account held by a nonparticipating
FFI. In addition, the participating FFI
must retain the account statements related
to such nonparticipating FFI accounts. See
paragraphs (d)(6)(iv), through (vii) of this
section for rules relating to reporting on
recalcitrant account holders. Form 8966
shall be filed electronically with the IRS
on or before March 31 of the year follow-
ing the end of the calendar year to which
the form relates.

(G) [Reserved]. For further guidance,
see § 1.1471-4T(d)(2)(ii)(G).

(iii) * * *

(A) Special reporting rule for U.S.
payors other than U.S. branches. Partici-
pating FFIs that are U.S. payors (other
than U.S. branches) shall be treated as

having satisfied the chapter 4 reporting
requirements described in paragraph
(d)(2)(i) of this section with respect to
accounts that the participating FFI is re-
quired to treat as U.S. accounts, or ac-
counts held by owner-documented FFIs, if
the participating FFI reports with respect
to each such account either-

(1) The information required by chap-
ter 61 and described in paragraph
(d)(5)(ii) or (d)(5)(iii) of this section; or

(2) The information described in para-
graph (d)(3)(ii), (d)(3)(iii), or (d)(3)(iv) of
this section. However, such participating
FFI that is required to report on such
accounts under chapter 61 is not relieved
of that obligation.

(B) Special reporting rules for U.S.
branches treated as U.S. persons. A U.S.
branch treated as a U.S. person (as defined
in § 1.1471-1(b)(135)) shall be treated as
having satisfied the reporting require-
ments described in paragraph (d)(2)(i) of
this section if it reports under-

* * * * *

(C) Rules for U.S. branches of FFIs not
treated as U.S. persons. A U.S. branch of
an FFI that is not treated as a U.S. person
shall apply the due diligence rules in para-
graph (c)(2) of this section to document its
accounts and payees, and shall report its
U.S. accounts and accounts held by
owner-documented FFIs under paragraph
(d)(3), (d)(5), or (d)(6) of this section, as if
the U.S. branch were a participating FFI.
In addition, the U.S. branch shall apply
the withholding requirements in para-
graph (b) of this section as if the U.S.
branch were a participating FFI.

(3) * * *

(ii) * * *

(E) Such other information as is other-
wise required to be reported under this
paragraph (d)(3) or in the form described
in paragraph (d)(3)(v) of this section and
its accompanying instructions.

(iii) Accounts held by U.S. owned for-
eign entities. With respect to each U.S.
account described in paragraph (d)(3)(i)
of this section that is held by a passive
NFFE that is a U.S. owned foreign entity,
a participating FFI is required to report
under this paragraph (d)(3)(iii)-
* * * * *

(F) Such other information as is other-
wise required to be reported under this
paragraph (d)(3) or in the form described

in paragraph (d)(3)(v) of this section and
its accompanying instructions.
* * * * *

(vii) Extensions in filing. The IRS shall
grant an automatic 90-day extension of
time in which to file Form 8966. Form
8809-I, "Application for Extension of
Time to File FATCA Form 8966," (or
such other form as the IRS may prescribe)
must be used to request such extension of
time and must be filed no later than the
due date of Form 8966. Under certain
hardship conditions, the IRS may grant an
additional 90-day extension. A request for
extension due to hardship must contain a
statement of the reasons for requesting the
extension and such other information as
the forms or instructions may require.

(4) * * *

(i) Address. The address to be reported
with respect to an account held by a spec-
ified U.S. person is the residence address
recorded by the participating FFI for the
account holder or, if no residence address
is associated with the account holder, the
address for the account used for mailing
or for other purposes by the participating
FFI. In the case of an account held by a
passive NFFE that is a U.S. owned foreign
entity, the address to be reported is the
address of each substantial U.S. owner of
such entity. In the case of an account held
by an owner-documented FFI, the address
to be reported is the address of each spec-
ified U.S. person identified in § 1.1471-
3(d)(6)(iv)(A)(1) and (2).

* * * * *

(iv) * * *

(C) [Reserved]. For further guidance,
see § 1.1471-4T(d)(4)(iv)(C).

(D) [Reserved]. For further guidance,
see § 1.1471-4T(d)(4)(iv)(D).
* * * * *

(5) * * *

(i) * * *

(A) Election under section 1471(c)(2).
Except as otherwise provided in this para-
graph (d)(5), a participating FFI may elect
under section 1471(c)(2) and this para-
graph (d)(5) to report under sections 6041,
6042, 6045, and 6049, as appropriate,
with respect to any account required to be
reported under this paragraph (d). Such
reporting must be done as if such partici-
pating FFI were a U.S. payor and each
holder of an account that is a specified U.S.
person, passive NFFE that is a U.S. owned

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foreign entity, or owner-documented FFI
were a payee who is an individual and citi-
zen of the United States. If a participating
FFI makes such an election, the FFI is re-
quired to report the information required
under this paragraph (d)(5) with respect to
each such U.S. account or account held by
an owner-documented FFI, regardless of
whether the account holder of such account
qualifies as a recipient exempt from report-
ing by a payor or middleman under sections
6041, 6042, 6045, or 6049, including the
reporting of payments made to such account
of amounts that are subject to reporting un-
der any of these sections. A participating
FFI that elects to report an account under the
election described in this paragraph (d)(5) is
required to report the information described
in paragraph (d)(5)(ii) or (iii) of this section
for a calendar year regardless of whether a
reportable payment was made to the U.S.
account during the calendar year. A partic-
ipating FFI that reports an account under the
election described in this paragraph (d)(5) is
not required to report the information de-
scribed in paragraph (d)(3) of this section
with respect to the account. The election
under section 1471(c)(2) described in this
paragraph (d)(5)(i)(A) does not apply to
cash value insurance contracts or annuity
contracts that are financial accounts de-
scribed in § 1.1471-5(b)(1)(iv). See para-
graph (d)(5)(i)(B) of this section for an elec-
tion to report cash value insurance contracts
or annuity contracts that are U.S. accounts
held by specified U.S. persons in a manner
similar to section 6047(d).

(B) Election to report in a manner sim-
ilar to section 6047(d). Except as other-
wise provided in this paragraph (d)(5), a
participating FFI may elect to report with
respect to any of its cash value insurance
contracts or annuity contracts that are U.S.
accounts held by specified U.S. persons
under section 6047(d), modified as fol-
lows. The amount to be reported is any
amount paid under the contract during
such reporting period as if such participat-
ing FFI were a U.S. payor. Each holder of
a U.S. account that is a specified U.S.
person is treated for purposes of reporting
under this paragraph (d)(5)(i)(B) as a con-
tract holder or payee who is an individual
and citizen of the United States.

(ii) * * *

(B) In the case of an account holder
that is a U.S. owned foreign entity that is
a passive NFFE-
* * * * *

(v) Time and manner of making the
election. A participating FFI (or one or
more branches of the participating FFI)
may make the election described in this
paragraph (d)(5) by reporting the informa-
tion described in this paragraph (d)(5)
on the form described in paragraph
(d)(5)(vii) of this section on the next re-
porting date following the end of the cal-
endar year for which the election is made.
A participating FFI may make an election
under this paragraph (d)(5) either with
respect to all of its U.S. accounts and
recalcitrant accounts or, separately, with
respect to any clearly identified group of
accounts (such as by line of business or
the location where the account is main-
tained).

(vi) Revocation of election. A partici-
pating FFI may revoke the election de-
scribed in paragraph (d)(5)(i) of this sec-
tion (as a whole or with regard to any
clearly identified group of accounts) by
reporting the information described in
paragraph (d)(3) of this section beginning
on the first reporting date with respect to
the calendar year that follows the calendar
year for which it last reports an account
under this paragraph (d)(5).

(vii) Filing of information under elec-
tion. In the case of an account holder that
is a specified U.S. person, the information
required to be reported under the election
described in this paragraph (d)(5) shall be
filed with the IRS and issued to the ac-
count holder in the time and manner pre-
scribed in sections 6041, 6042, 6045,
6047(d), and 6049 and in accordance with
the forms referenced therein and their ac-
companying instructions provided by the
IRS for reporting under each of these sec-
tions. If the account holder is a passive
NFFE that is a U.S. owned foreign entity
or owner-documented FFI, however, the
information required to be reported under
the election described in this paragraph
(d)(5) shall be filed on Form 8966 in ac-
cordance with its requirements and its ac-
companying instructions.

(6) * * *

(vi) Extensions in filing. The IRS shall
grant an automatic 90-day extension of
time in which to file Form 8966. Form

8809-I, "Application for Extension of
Time to File FATCA Form 8966," (or
such other form as the IRS may prescribe)
must be used to request such extension of
time and must be filed no later than the
due date of Form 8966. Under certain
hardship conditions, the IRS may grant an
additional 90-day extension. A request for
extension due to hardship must contain a
statement of the reasons for requesting the
extension and such other information as
the forms or instructions may require.
** * * *

(7) Special reporting rules with respect
to the 2014 and 2015 calendar years-(i)
In general. If the effective date of the FFI
agreement of a participating FFI is on or
before December 31, 2015, the participat-
ing FFI is required to report U.S. accounts
and accounts held by owner-documented
FFIs that it maintained (or that it is other-
wise required to report under paragraph
(d)(2)(ii) of this section) during the 2014
and 2015 calendar years in accordance
with paragraph (d)(7)(ii) or (iii) of this
section.

(ii) * * *

(A) Reporting with respect to the 2014
calendar year. With respect to accounts
maintained during the 2014 calendar
year-

(1) The name, address, and TIN of each
specified U.S. person who is an account
holder and, in the case of any account
holder that is a passive NFFE that is a
U.S. owned foreign entity or that is an
owner-documented FFI, the name of such
entity and the name, address, and TIN of
each substantial U.S. owner of such NFFE
or, in the case of an owner-documented
FFI, of each specified U.S. person identi-
fied in § 1.1471-3(d)(6)(iv)(A)(1) and (2);
** * * *

(iii) Participating FFIs that report un-
der § 1.1471-4(d)(5). A participating FFI
that elects to report under paragraph (d)(5)
of this section may report only the infor-
mation described in paragraphs (d)(7)(ii)
(A)(1) and (3) of this section for its 2014
calendar year. With respect to its 2015
calendar year, a participating FFI is re-
quired to report all of the information re-
quired to be reported under paragraphs
(d)(5)(i) through (iii) of this section but
may exclude from such reporting amounts
reportable under section 6045.

(iv) * * *

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(A) In general. Except as provided in
paragraph (d)(7)(iv)(B) of this section, re-
porting under paragraph (d)(7)(ii) of this
section shall be made on Form 8966 (or
such other form as the IRS may pre-
scribe), in the manner described in para-
graph (d)(3)(vi) of this section. Reporting
under paragraph (d)(7)(iii) of this section
shall be made in accordance with para-
graph (d)(5)(vii) of this section.

(B) Special determination date and
timing for reporting with respect to the
2014 calendar year. With respect to the
2014 calendar year, a participating FFI
must report under paragraph (d)(3) or (5)
of this section on all accounts that are
identified and documented under para-
graph (c) of this section as U.S. accounts
or accounts held by owner-documented
FFIs as of December 31, 2014, (or as of
the date an account is closed if the account
is closed prior to December 31, 2014) if
such account was outstanding on or after
the effective date of the participating
FFI's FFI agreement. Reporting for the
2014 calendar year shall be filed with the
IRS on or before March 31, 2015. How-
ever, a U.S. payor (including a U.S.
branch treated as a U.S. person (as defined
in § 1.1471-1(b)(135))) that reports in
accordance with paragraph (d)(2)(iii) of
this section may report all or a portion of
its U.S. accounts and accounts held by
owner-documented FFIs in accordance
with the dates otherwise applicable to re-
porting under chapter 61 with respect to
the 2014 calendar year.

(8) Reporting requirements of QIs,
WPs, and WTs. In general, the reporting
requirements with respect to the U.S. ac-
counts maintained by a participating FFI
that is a QI, WP, or WT will be consistent
with the reporting requirements with re-
spect to such accounts of a participating
FFI that is not a QI, WP, or WT. See the
QI, WP, or WT agreement for the coordi-
nation of the chapter 4 reporting obliga-
tions of a participating FFI that also is a
QI, WP, or WT.

(9) * * *

Example 1. Financial institution required to re-
port U.S. account. PFFI1, a participating FFI, issues
shares of stock that are financial accounts under
§ 1.1471-5(b). Such shares are held in custody by
PFFI2, another participating FFI, on behalf of U, a
specified U.S. person that holds an account with
PFFI2. The shares of PFFI1 held by PFFI2 will not
be subject to reporting by PFFI1 if PFFI1 may treat

PFFI2 as a participating FFI under § 1.1471-3(d)(4).
See paragraph (d)(2)(ii)(A) of this section.

Example 2. Financial institution required to re-
port U.S. account. U, a specified U.S. person, holds
shares in PFFI1, a participating FFI that invests in
other financial institutions (a fund of funds). The
shares of PFFI1 are financial accounts under
§ 1.1471-5(b)(3)(iii). PFFI1 holds shares that are
also financial accounts under § 1.1471-5(b)(3)(iii) in
PFFI2, another participating FFI. The shares of
PFFI2 held by PFFI1 are not subject to reporting by
PFFI2, if PFFI2 may treat PFFI1 as a participating
FFI under § 1.1471-3(d)(4). See paragraph (d)(2)
(ii)(A) of this section.

Example 3. U.S. owned foreign entity. FC, a
passive NFFE, holds a custodial account with PFFI1,
a participating FFI. U, a specified U.S. person, owns
3% of the only class of stock of FC. Q, another
specified U.S. person, owns 12% of the only class of
stock of FC. U is not a substantial U.S. owner of FC.
See § 1.1473-1(b). Q is a substantial U.S. owner of
FC and FC identifies her as such to PFFI1. PFFI1
does not elect to report under paragraph (d)(5) of this
section. PFFI1 must complete and file the reporting
form described in paragraph (d)(3)(v) of this section
and report the information described in paragraph
(d)(3)(iii) with respect to both FC and Q. See para-
graph (d)(3)(ii) of this section.
* * * * *

Example 5. Owner-documented FFI. DC, an
owner-documented FFI under § 1.1471-3(d)(6),
holds a custodial account with PFFI1, a participating
FFI. U, a specified U.S. person, owns 3% of the only
class of stock of DC. Q, another specified U.S.
person, owns 12% of the only class of stock of DC.
Both U and Q are persons identified in § 1.1471-
3(d)(6)(iv)(A)(1) and DC identifies U and Q to
PFFI1 and otherwise provides to PFFI1 all of the
information required to be reported with respect to
DC. PFFI1 must complete and file a form described
in paragraph (d)(3)(v) of this section with regard to
U and Q. See paragraph (d)(3)(iii) of this section.
* * * * *

Example 7. Sponsored FFI. DC2 is an FFI that
has agreed to have a sponsoring entity, PFFI1, fulfill
DC2's chapter 4 responsibilities under § 1.1471-
5(f)(2)(iii). U, a specified U.S. person, holds an
equity interest in DC2 that is a financial account
under § 1.1471-5(b)(3)(iii). PFFI1 must complete
and file a form described in paragraph (d)(3)(v) of
this section with regard to U's account on behalf of
DC2. See paragraph (d)(2)(ii)(C) of this section.

(e) * * *

(1) In general. Except as otherwise
provided in this paragraph (e)(1) or para-
graphs (e)(2) and (e)(3) of this section,
each FFI that is a member of an expanded
affiliated group must have the chapter 4
status of a participating FFI, deemed-
compliant FFI, or exempt beneficial
owner as a condition for any member of
such group to obtain the status of a par-
ticipating FFI or registered deemed-
compliant FFI. Accordingly, except as
otherwise provided in paragraph (e)(3)(v)

of this section, each FFI other than a cer-
tified deemed-compliant FFI or exempt
beneficial owner in an expanded affiliated
group must submit a registration form to
the IRS in such manner as the IRS may
prescribe requesting an FFI agreement,
registered deemed-compliant status, or
limited FFI status as a condition for any
member to become a participating FFI or
registered deemed-compliant FFI. Except
as provided in paragraph (e)(2) of this
section, each FFI other than a certified
deemed-compliant FFI or exempt benefi-
cial owner that is a member of such group
must also agree to all of the requirements
for the status for which it applies with
respect to all accounts maintained at all of
its branches, offices, and divisions. For the
withholding requirements of a participat-
ing FFI with respect to its limited
branches and its affiliates that are limited
FFIs, see paragraph (b)(5) of this section.
Notwithstanding the foregoing, an FFI (or
branch thereof) that is treated as a partic-
ipating FFI or a deemed-compliant FFI
pursuant to a Model 1 IGA or Model 2
IGA will maintain such status provided
that it meets the terms for such status
pursuant to such agreement.

(2) * * *

(ii) Branch defined. The term branch
has the meaning set forth in § 1.1471-
1(b)(10).

* * * * *

(iv)
* * *

(D) Except as otherwise provided in
paragraph (e)(2)(vi) of this section, agree
that each such branch will not open ac-
counts that it is required to treat as U.S.
accounts or accounts held by nonpartici-
pating FFIs, including accounts trans-
ferred from any branch of the FFI or from
any member of its expanded affiliated
group; and
* * * * *

(v) Term of limited branch status (tran-
sitional). An FFI that becomes a partici-
pating FFI with one or more limited
branches will cease to be a participating
FFI after December 31, 2016, unless oth-
erwise provided pursuant to Model 1 IGA
or Model 2 IGA. A branch will cease to be
a limited branch as of the beginning of the
third calendar quarter following the date
on which the branch is no longer prohib-
ited from complying with the require-
ments of a participating FFI as described

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in this section. In such case, a participat-
ing FFI will retain its status as a partici-
pating FFI if it notifies the IRS by the date
such branch ceases to be a limited branch
that it will comply with the requirements
of an FFI agreement with respect to such
branch, or if otherwise provided pursuant
to a Model 1 IGA or Model 2 IGA.

(vi) Exception from restriction on
opening U.S. accounts and accounts held
by nonparticipating FFIs. Notwithstand-
ing the requirements of paragraph (e)(2)
(iv)(D) of this section, a branch may open
U.S. accounts for persons resident in the
same jurisdiction in which such branch is
located or operating and accounts for non-
participating FFIs that are resident in the
same jurisdiction provided that-

(A) The branch does not solicit U.S.
accounts or accounts for nonparticipating
FFIs from persons not resident in the same
jurisdiction in which such branch is lo-
cated or operating; and

(B) The branch is not used by the FFI
or any FFI in its expanded affiliated group
to circumvent the obligations of such FFI
under section 1471.

(3) * * *

(iii) * * *

(A) Except as otherwise provided in
paragraph (e)(3)(v) of this section, register
as part of its expanded affiliated group's
FFI agreement process for limited FFI sta-
tus;

* * * * *

(C) Except as otherwise provided in
paragraph (e)(3)(vi) of this section, agree
as part of such registration that it will not
open accounts that it is required to treat as
U.S. accounts or accounts held by nonpar-
ticipating FFIs, including accounts trans-
ferred from any member of its expanded
affiliated group; and

* * * * *

(iv) Period for limited FFI status (tran-
sitional). A limited FFI will cease to be a
limited FFI after December 31, 2016. An
FFI will also cease to be a limited FFI
when it becomes a participating FFI or
deemed-compliant FFI, or as of the begin-
ning of the third calendar quarter follow-
ing the date on which the FFI is no longer
prohibited from complying with the re-
quirements of a participating FFI as de-
scribed in this section. In such case, par-
ticipating FFIs and deemed-compliant
FFIs that are members of the same ex-

panded affiliated group will retain their
status if, by the date that an FFI ceases to
be a limited FFI, such FFI enters into an
FFI agreement or becomes a registered
deemed-compliant FFI, unless otherwise
provided pursuant to an applicable Model
1 IGA or Model 2 IGA.

(v) Exception from registration re-
quirement-(A) Conditions for exception.
An FFI that seeks to become a limited FFI
is excepted from the registration require-
ment of paragraph (e)(3)(iii)(A) of this
section provided that-

(1) The FFI is prohibited under local
law from registering as a limited FFI;

(2) A member of the FFI's expanded
affiliated group that is a U.S. financial
institution or an FFI seeking status as (or
that is) a participating FFI or reporting
Model 1 FFI registers as a lead FI (de-
fined in the Instructions for Form 8957,
"Foreign Account Tax Compliance Act
(FATCA) Registration") with respect to
the limited FFI; and

(3) The lead FI identifies the limited
FFI on the lead FI's FATCA registration.
However, if the limited FFI is prohibited
under applicable law from being identified
by its legal name on the FATCA registra-
tion website, the lead FI may use the term
Limited FFI in place of the limited FFI's
name and indicate the limited FFI's juris-
diction of residence or organization.

(B) Confirmation requirements of lead
FI. By identifying a limited FFI on the
FATCA registration website pursuant to
paragraph (e)(3)(v)(A)(2) of this section,
the lead FI is confirming that-

(1) The limited FFI has represented to
the lead FI that it will meet the conditions
for limited FFI status described in para-
graph (e)(3)(iii) of this section;

(2) The limited FFI has agreed to notify
the lead FI within 30 days of the date that
such FFI ceases to meet the requirements
of a limited FFI or the date that such FFI
can comply with the requirements of a
participating FFI or deemed-compliant
FFI (and will separately register for that
status); and

(3) The lead FI, if it receives a notifi-
cation described in paragraph (e)(3)(v)
(B)(2) of this section or otherwise knows
that the limited FFI has not complied with
the conditions for limited FFI status or can
comply with the requirements of a partic-
ipating FFI or deemed-compliant FFI,

will, within 90 days of such notification or
acquiring such knowledge, remove the
FFI from the lead FI's registration on the
FATCA registration website and maintain
a record of the date on which the FFI
ceased to be a limited FFI and (if appli-
cable) the circumstances of the limited
FFI's non-compliance, which will be
available to the IRS upon request.

(vi) Exception from restriction on
opening U.S. accounts and accounts held
by nonparticipating FFIs. Notwithstand-
ing paragraph (e)(3)(iii)(C) of this section,
a limited FFI may open U.S. accounts for
persons resident in the same jurisdiction
in which such FFI is resident or organized
and accounts for nonparticipating FFIs
that are resident in the same jurisdiction
provided that-

(A) Such FFI does not solicit U.S. ac-
counts or accounts for nonparticipating
FFIs from persons not resident in the same
jurisdiction in which the FFI is resident or
organized; and

(B) The FFI is not used by another FFI
in the FFI's expanded affiliated group to
circumvent the obligations of such other
FFI under section 1471.

(4) Special rule for QIs. An FFI that
has in effect a QI agreement with the IRS
will be allowed to become a limited FFI
notwithstanding that none of the FFIs in
the expanded affiliated group of which the
FFI is a member can comply with the
requirements of a participating FFI as de-
scribed in this section if the FFI that is a
QI meets the conditions of a limited FFI
under paragraph (e)(3)(iii) of this section.

(f) * * *

(1) In general. This paragraph (f) de-
scribes the requirement for a participating
FFI to establish and implement a compli-
ance program for satisfying its require-
ments under this section. Paragraph (f)(2)
of this section provides the requirement
for a participating FFI to establish a com-
pliance program and the option for a
group of FFIs to adopt a consolidated
compliance program. Paragraph (f)(3) of
this section describes the periodic certifi-
cation that the participating FFI must
make to the IRS regarding the participat-
ing FFI's compliance with the require-
ments of an FFI agreement. Paragraph
(f)(4) describes IRS information requests
related to compliance with an FFI agree-
ment.

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(3)

(i) In general. In addition to the certi-
fications required under paragraph (c)(7)
of this section, on or before July 1 of the
calendar year following the end of each
certification period, the responsible officer
must make the certification described in
either paragraph (f)(3)(ii) or (iii) of this
section on the form and in the manner
prescribed by the IRS. The first certifica-
tion period begins on the effective date of
the FFI agreement and ends at the close of
the third full calendar year following the
effective date of the FFI agreement. Each
subsequent certification period is the three
calendar year period following the previ-
ous certification period, unless the FFI
agreement provides for a different period.
The responsible officer must either certify
that the participating FFI maintains effec-
tive internal controls or, if the participat-
ing FFI has identified an event of default
(defined in paragraph (g) of this section)
or a material failure (defined in paragraph
(f)(3)(iv) of this section) that it has not
corrected as of the date of the certification,
must make the qualified certification de-
scribed in paragraph (f)(3)(iii) of this sec-
tion.

* * * * *

(4) * * *

(i) General inquiries. The IRS, based
upon the information reporting forms
described in paragraphs (d)(3)(v), (d)(5)
(vii), or (d)(6)(iv) of this section filed
with the IRS (or the absence of such
reporting) for each calendar year, may
request additional information with re-
spect to the information reported (or re-
quired to be reported) on the forms or
may request the account statements de-
scribed in paragraph (d)(4)(v) of this
section, or confirmation that the FFI has
no accounts that it was required to re-
port. The IRS may also request any ad-
ditional information to determine an
FFI's compliance with its FFI agree-
ment and to assist the IRS with its re-
view of account holder compliance with
tax reporting requirements.

(ii) Inquiries regarding substantial
non-compliance. If, based on the informa-
tion reporting forms described in para-
graphs (d)(3)(v), (d)(5)(vii), or (d)(6)(iv)
of this section filed with the IRS for each
calendar year, the certifications made by

the responsible officer described in para-
graph (f)(3) of this section, or any other
information related to the participating
FFI's compliance with its FFI agreement,
the IRS determines in its discretion that
the participating FFI may not have sub-
stantially complied with the requirements
of its FFI agreement, the IRS may request
from the responsible officer (or designee)
information necessary to verify the partic-
ipating FFI's compliance with the FFI
agreement. The IRS may request, for ex-
ample, a description or copy of the partic-
ipating FFI's policies and procedures for
fulfilling the requirements of the FFI
agreement, a description of the participat-
ing FFI's procedures for conducting its
periodic review, or a copy of any written
reports documenting the findings of such
review in order to evaluate the sufficiency
of the participating FFI's compliance pro-
gram and review of such program. The
IRS may also request the performance of
specified review procedures by a person
(including an external auditor or third-
party consultant) that the IRS identifies as
competent to perform such procedures
given the facts and circumstances sur-
rounding the FFI's potential failure to
comply with the FFI agreement. The IRS
may make these requests to a sponsoring
entity with respect to any sponsored FFI.

(g) * * *

(1) Defined. An event of default occurs
if a participating FFI fails to perform ma-
terial obligations required with respect to
the due diligence, verification, withhold-
ing, or reporting requirements of the FFI
agreement or if the IRS determines that
the participating FFI has failed to substan-
tially comply with the requirements of the
FFI agreement. An event of default also
includes the occurrence of the follow-
ing-

* * * * *

(ii) Failure to significantly reduce, over
a period of time, the number of account
holders or payees that the participating
FFI is required to treat as recalcitrant ac-
count holders or nonparticipating FFIs, as
a result of the participating FFI failing to
comply with the due diligence procedures
for the identification and documentation
of account holders and payees, as set forth
in paragraph (c) of this section;

* * * * *

(2) Notice of event of default. Follow-
ing an event of default known by or dis-
closed to the IRS, the IRS will deliver to
the participating FFI a notice of default
specifying the event of default. The IRS
will request that the participating FFI re-
mediate the event of default within a spec-
ified time period. The participating FFI
must respond to the notice of default and
provide information responsive to an IRS
request for information or state the rea-
sons why the participating FFI does not
agree that an event of default has oc-
curred. Taking into account the terms of
any applicable Model 2 IGA, if the par-
ticipating FFI does not provide a response
within the specified time period, the IRS
may, at its sole discretion, deliver a notice
of termination that terminates the FFI's
participating FFI status. A participating
FFI may request, within a reasonable pe-
riod of time, reconsideration of a notice of
default or notice of termination by written
request to the IRS.

* * * * *

(j) Effective/applicability date-(1) In
general. This section applies on January
6, 2017. However, taxpayers may apply
these provisions as of January 28, 2013.
(For the rules that apply beginning on
January 28, 2013, and before January 6,
2017, see this section as in effect and
contained in 26 CFR part 1 revised April
1, 2016.)

(2) [Reserved]. For further guidance,
see § 1.1471-4T(j)(2).

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

### § 1.1471-4T FFI agreement (temporary).

(a) through (b) [Reserved]. For further
guidance, see § 1.1471-4(a) through
(b)(7).

(c) [Reserved]. For further guidance,
see § 1.1471-4(c).

(1) through (2) [Reserved]. For further
guidance, see § 1.1471-4(c)(1) through
(2).

(i) [Reserved]. For further guidance,
see § 1.1471-4(c)(2)(i).

(ii) [Reserved]. For further guidance,
see § 1.1471-4(c)(2)(ii).

(A) [Reserved]. For further guidance,
see § 1.1471-4(c)(2)(ii)(A).

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(B) [Reserved]. For further guidance,
see § 1.1471-4(c)(2)(ii)(B).

(1) [Reserved]. For further guidance,
see § 1.1471-4(c)(2)(ii)(B)(1).

(2) [Reserved]. For further guidance,
see § 1.1471-4(c)(2)(ii)(B)(2).

(i) through (ii) [Reserved]. For further
guidance, see § 1.1471-4(c)(2)(ii)
(B)(2)(i) through (ii).

(iii) In the case of a transferor FI that is
a participating FFI or a registered
deemed-compliant FFI (or a U.S. branch
of either such entity that is not treated as
a U.S. person) or that is a deemed-
compliant FFI that applies the requisite
due diligence rules of this paragraph (c) as
a condition of its status, the transferor FI
provides a written representation to the
transferee FFI acquiring the accounts that
the transferor FI has applied the due dili-
gence procedures of this paragraph (c)
with respect to the transferred accounts
and, in the case of a transferor FI that is a
participating FFI, has complied with the
requirements of paragraph (f)(2) of this
section; and

(iv) [Reserved]. For further guidance,
see § 1.1471-4(c)(2)(ii)(B)(2)(iv).

(iii) through (v) [Reserved]. For fur-
ther guidance, see § 1.1471-4(c)(2)(iii)
through (v).

(3) through (7) [Reserved]. For further
guidance, see § 1.1471-4(c)(3) through
(7).

(d) [Reserved]. For further guidance,
see § 1.1471-4(d).

(1) [Reserved]. For further guidance,
see § 1.1471-4(d)(1).

(2) [Reserved]. For further guidance,
see § 1.1471-4(d)(2).

(i) [Reserved]. For further guidance,
see § 1.1471-4(d)(2)(i).

(ii) [Reserved]. For further guidance,
see § 1.1471-4(d)(2)(ii).

(A) through (F) [Reserved]. For further
guidance, see § 1.1471-4(d)(2)(ii)(A)
through (F).

(G) Combined reporting on Form 8966
following merger or bulk acquisition. If a
participating FFI (successor) acquires ac-
counts of another participating FFI (pre-
decessor) in a merger or bulk acquisition
of accounts, the successor may assume the
predecessor's obligations to report the ac-
quired accounts under paragraph (d) of
this section with respect the calendar year
in which the merger or acquisition occurs

(acquisition year), provided that the re-
quirements in paragraphs (d)(2)(ii)(G)(1)
through (4) of this section are satisfied. If
the requirements of paragraphs (d)(2)(ii)
(G)(1) through (4) of this section are not
satisfied, both the predecessor and the suc-
cessor are required to report the acquired
accounts for the portion of the acquisition
year that it maintains the account.

(1) The successor must acquire sub-
stantially all of the accounts maintained
by the predecessor, or substantially all of
the accounts maintained at a branch of the
predecessor, in a merger or bulk acquisi-
tion of accounts for value.

(2) The successor must agree to report
the acquired accounts for the acquisition
year on Form 8966 to the extent required
in § 1.1471-4(d)(3) or (d)(5).

(3) The successor may not elect to
report under section 1471(c)(2) and
§ 1.1471-4(d)(5) with respect to any ac-
quired account that is a U.S. account for
the acquisition year.

(4) The successor must notify the IRS
on the form and in the manner prescribed
by the IRS that Form 8966 is being filed
on a combined basis.

(iii) [Reserved]. For further guidance,
see § 1.1471-4(d)(2)(iii) through (d)(2)
(iii)(C).

(3) [Reserved]. For further guidance,
see § 1.1471-4(d)(3) through (d)(3)(vii).

(4) [Reserved]. For further guidance,
see § 1.1471-4(d)(4).

(i) through (iii) [Reserved]. For further
guidance, see § 1.1471-4(d)(4)(i) through
(iii).

(iv) [Reserved]. For further guidance,
see § 1.1471-4(d)(4)(iv).

(A) through (B) [Reserved]. For further
guidance, see § 1.1471-4(d)(4)(iv)(A)
through (B).

(C) Other accounts. In the case of an
account described in § 1.1471-5(b)(1)(iii)
(relating to a debt or equity interest other
than an interest as a partner in a partner-
ship) or § 1.1471-5(b)(1)(iv) (relating to
cash value insurance contracts and annu-
ity contracts), the payments made during
the calendar year with respect to such
account are the gross amounts paid or
credited to the account holder during the
calendar year including payments in re-
demption (in whole or part) of the ac-
count. In the case of an account that is a
partner's interest in a partnership, the pay-

ments made during the calendar year with
respect to such account are the amount of
the partner's distributive share of the part-
nership's income or loss for the calendar
year, without regard to whether any such
amount is distributed to the partner during
the year, and any guaranteed payments for
the use of capital. The payments required
to be reported under this paragraph
(d)(4)(iv)(C) with respect to a partner may
be determined based on the partnership's
tax returns or, if the tax returns are un-
available by the due date for filing Form
8966, the partnership's financial state-
ments or any other reasonable method
used by the partnership for calculating the
partner's share of partnership income by
such date.

(D) Transfers and closings of deposit,
custodial, insurance, and annuity finan-
cial accounts. In the case of an account
closed or transferred in its entirety during
a calendar year that is a depository ac-
count, custodial account, or a cash value
insurance contract or annuity contract, the
payments made with respect to the ac-
count shall be-

(1) through (2) [Reserved]. For further
guidance, see § 1.1471-4(d)(4)(iv)(D)(1)
through (2).

(E) through (F) [Reserved]. For further
guidance, see § 1.1471-4(d)(4)(iv)(E)
through (F).

(v) [Reserved]. For further guidance,
see § 1.1471-4(d)(4)(v).

(5) through (9) [Reserved]. For further
guidance, see § 1.1471-4(d)(5) through
(d)(9), Example 7.

(e) through (i) [Reserved]. For further
guidance, see § 1.1471-4(e) through (i).

(j) [Reserved]. For further guidance,
see § 1.1471-4(j).

(1) [Reserved]. For further guidance,
see § 1.1471-4(j)(1).

(2) Special applicability date. Para-
graph (d)(4)(iv)(C) of this section applies
beginning with reporting with respect to
calendar year 2017.

(k) Expiration date. The applicability
of this section expires on December 30,
2019

Par. 11. Section 1.1471-5 is amended
by revising paragraphs (a)(3)(i), (a)(4)(i),
(b)(1)(iii)(B)(2),(b)(3)(iv),(b)(3)(v)(A),
(b)(3)(v)(B)(1)and (2),(b)(3)(vi), (c), (d),
(e)(1)(v)(A), (e)(3)(ii), (e)(4)(v) Example
7 and Example 8, (e)(5)(i)(A)(3), (e)(5)

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(i)(B) through (C), (e)(5)(i)(D)(1)(iv) and
(v), (e)(5)(iv)(B), (f), (f)(1)(i)(A)(6) and
(7), (f)(1)(i)(B)(1),(f)(1)(i)(B)(3), (f)(1)
(i)(C)(2), (f)(1)(i)(D)(4) through (6),
(f)(1)(i)(D)(7) introductory text, (f)(1)(i)
(D)(8), (f)(1)(i)(E),(f)(1)(i)(F)(1)(i) and
(ii), (f)(1)(i)(F)(3)(i),(f)(1)(i)(F)(3)(iii),
(f)(1)(i)(F)(3)(v) through (viii), (f)(1)(i)
(F)(5), (f)(1)(ii)(B), (f)(2) introductory
text, (f)(2)(i)(B), (f)(2)(iii) through (v),
(f)(4)(i), (g)(1), (g)(3)(i)(D), and (i)
through (l) to read as follows:

§ 1.1471-5 Definitions applicable to
section 1471.

(a) * * *

(3) * * *

(i) In general. Except as otherwise pro-
vided in this paragraph (a)(3), the account
holder is the person listed or identified as
the holder or owner of the account with
the FFI that maintains the account, regard-
less of whether such person is a flow-
through entity. Thus, for example, except
as otherwise provided in paragraph
(a)(3)(ii) of this section, if a trust (includ-
ing a simple or grantor trust) or an estate
is listed as the holder or owner of a finan-
cial account, the trust or estate is the ac-
count holder, rather than its owners or
beneficiaries. Similarly, except as other-
wise provided in this paragraph (a)(3), if a
partnership is listed as the holder or owner
of a financial account, the partnership is
the account holder, rather than the part-
ners in the partnership. In the case of an
account held by an entity that is disre-
garded for U.S. federal tax purposes under
§ 301.7701-2(c)(2)(i) of this chapter, the
account shall be treated as held by the
person owning such entity. With respect
to an account held by an exempt beneficial
owner, such account is treated as held by
an exempt beneficial owner only when all
payments made to such account would be
treated as made to an exempt beneficial
owner. See § 1.1471-6(h) for when a pay-
ment derived from certain commercial ac-
tivities is not treated as made to an exempt
beneficial owner.

* * * * *

(4) * * *

(i) Exception for certain individual ac-
counts of participating FFIs. Unless a par-
ticipating FFI elects under paragraph
(a)(4)(ii) of this section not to apply this

paragraph (a)(4)(i), the term U.S. account
shall not include any depository account
maintained by such financial institution
during a calendar year if the account is
held solely by one or more individuals and,
with respect to each holder of such account,
the aggregate balance or value of all depos-
itory accounts held by each such individual
does not exceed $50,000 as of the end of the
calendar year or on the date the account is
closed. For rules for determining the ac-
count balance or value, see paragraphs
(a)(3)(iii) and (b)(4) of this section.
* * * * *

(b) * * *

(1) * * *

(iii) * * *

(B) * * *

(2) The return earned on the interest is
determined, directly or indirectly, primar-
ily by reference to one or more investment
entities described in paragraph (e)(4)
(i)(B) or (C) of this section or one or more
passive NFFEs that are members of the
entity's expanded affiliated group (as de-
termined under paragraph (b)(3)(vi) of
this section);

* * * * *

(3) * * *

(iv) Regularly traded on an established
securities market. To determine if debt or
equity interests described in paragraph
(b)(1)(iii) of this section are regularly
traded, the principles of § 1.1472-
1(c)(1)(i)(A)(2)(i) and (ii) shall apply with
respect to the interests, and the principles
of § 1.1472-1(c)(1)(i)(B)(1) shall apply
for this purpose in the case of an initial
public offering of such interests. See
§ 1.1472-1(c)(1)(i)(C) for the definition
of an established securities market. For
purposes of paragraph (b)(1)(iii) of this
section, an interest is not regularly traded
on an established securities market if the
holder of the interest (excluding a finan-
cial institution acting as an intermediary)
is registered on the books of the invest-
ment entity. The preceding sentence shall
not apply to the extent a holder's interest
is registered prior to July 1, 2014, on the
books of the investment entity.

(v) * * *

(A) Equity interest. The value of an
equity interest is determined, directly or
indirectly, primarily by reference to assets
that give rise (or could give rise) to with-
holdable payments if the return earned on

such interest (including upon a sale, ex-
change, or redemption) is determined pri-
marily by reference to profits or assets of a
U.S. person or equity interests in a U.S.
person.

(B) * * *

(1) Debt is convertible into equity in-
terests in a U.S. person; or

(2) The return earned on such interest
(including upon a sale, exchange, or re-
demption) is determined primarily by ref-
erence to profits or assets of a U.S. person
or equity interests in a U.S. person.

(vi) Return earned on the interest (in-
cluding upon a sale, exchange, or re-
demption) determined, directly or indi-
rectly, primarily by reference to one or
more investment entities or passive
NFFEs-(A) Equity interest. The return
earned on an equity interest is determined,
directly or indirectly, primarily by reference
to one or more investment entities described
in paragraph (e)(4)(i)(B) or (C) of this sec-
tion or passive NFFEs that are members of
the entity's expanded affiliated group if the
return on such interest (including upon a
sale, exchange, or redemption) is deter-
mined primarily by reference to profits or
assets of, or equity interests in, one or more
investment entities described in paragraph
(e)(4)(i)(B) or (C) of this section or passive
NFFEs that are members of the entity's ex-
panded affiliated group.

(B) Debt interest. The return earned on
a debt interest is determined, directly or
indirectly, primarily by reference to one or
more investment entities described in para-
graph (e)(4)(i)(B) or (C) of this section or
passive NFFEs that are members of the en-
tity's expanded affiliated group if-

(1) Debt is convertible into equity in-
terests in one or more investment entities
described in paragraph (e)(4)(i)(B) or (C)
of this section or passive NFFEs that are
members of the entity's expanded affili-
ated group; or

(2) The return on such interest (includ-
ing upon a sale, exchange, or redemption)
is determined primarily by reference to
profits or assets of, or equity interests in, one
or more investment entities described in
paragraph (e)(4)(i)(B) or (C) of this section
or passive NFFEs that are members of the
entity's expanded affiliated group.
* * * * *

(c) U.S. owned foreign entity. The term
U.S. owned foreign entity means any for-

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eign entity that has one or more substan-
tial U.S. owners (as defined in § 1.1473-
1(b)). See § 1.1473-1(e) for the definition
of foreign entity for purposes of chapter 4.
For the requirements applicable to deter-
mining direct and indirect ownership in an
entity, see § 1.1473-1(b)(2).

(d) Definition of FFI. The term FFI
means, with respect to any entity that is
not resident in, or organized under the
laws of, as applicable, a country that has
in effect a Model 1 IGA or Model 2 IGA,
any financial institution (as defined in
paragraph (e) of this section) that is a
foreign entity. The term FFI also means,
with respect to any entity that is resident
in, or organized under the laws of, as
applicable, a country that has in effect a
Model 1 IGA or Model 2 IGA, any entity
that is treated as a FATCA Partner Finan-
cial Institution pursuant to such Model 1
IGA or Model 2 IGA. See, however,
§ 1.1471-2(a)(2)(v) for when certain
branches of U.S. financial institutions may
be treated as FFIs. A territory financial
institution is not an FFI under this para-
graph (d).

(e) * * *

(1) * * *

(v) * * *

(A) Is part of an expanded affiliated
group that includes a depository institu-
tion, custodial institution, specified insur-
ance company, or investment entity de-
scribed in paragraphs (e)(4)(i)(B) or (C)
of this section; or

* * * * *

(3) * * *

(ii) Income attributable to holding fi-
nancial assets and related financial ser-
vices. For purposes of this paragraph
(e)(3), the term income attributable to
holding financial assets and related finan-
cial services means custody, account
maintenance, and transfer fees; commis-
sions and fees earned from executing and
pricing securities transactions; income
earned from extending credit to customers
with respect to financial assets held in
custody by the entity (or acquired through
such extension of credit); income earned
on the bid-ask spread of financial assets;
fees for providing financial advice with
respect to financial assets held in (or po-
tentially to be held in) custody by the
entity; and fees for clearance and settle-
ment services.

* * * * *

(4)

(v)

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

Example 8. Entity introducing broker. IB, a for-
eign entity introducing broker, primarily conducts a
business of providing advice to clients, has discre-
tionary authority to manage clients' assets, and uses
the services of a foreign entity to conduct and exe-
cute trades on behalf of clients. IB provides its
services as an investment advisor and manager to
Entity, a foreign corporation. Entity has earned 50%
or more of its gross income for the past three years
from investing, reinvesting, or trading in financial
assets. Because IB is an entity that primarily con-
ducts certain investment-related activities, IB is an
investment entity under paragraph (e)(4)(i)(A) of
this section. Further, Entity is an investment entity
under paragraph (e)(4)(i)(B) of this section because
it is managed by IB, an investment entity that per-
forms certain of the activities described in paragraph

(e)(4)(i)(A) of this section on behalf of Entity.

(5) * * *

(i) * * *

(A) * * *

(3) The entity does not hold itself out
as, and was not formed in connection with
or availed of by, an arrangement or invest-
ment vehicle that is a private equity fund,
venture capital fund, leveraged buyout
fund, or any similar investment vehicle
established with an investment strategy to
acquire or fund companies and to treat the
interests in those companies as capital as-
sets held for investment purposes. For
purposes of determining whether an entity
was formed in connection with or availed
of by such an arrangement or investment
vehicle, any entity that existed at least six
months prior to its acquisition by such
arrangement or investment vehicle and
that, prior to the acquisition, regularly
conducted activities described in para-
graph (e)(5)(i)(C), (D), or (E) of this sec-
tion will not be considered to have been
formed in connection with or availed of
by the arrangement or investment vehicle,
in the absence of other facts suggesting

the existence of an investment strategy
described in the prior sentence.

(B) Nonfinancial group. An expanded
affiliated group defined in paragraph (i)(2)
of this section is a nonfinancial group if,
taking into account the application of this
section-

(1) For the three-year period (or the
period during which the expanded affili-
ated group has been in existence, if
shorter) ending on December 31 (or the
end of the fiscal year of one or more
members of the group) of the year preced-
ing the year in which the determination is
made, no more than 25 percent of the
gross income of the expanded affiliated
group (excluding income derived by any
member that is an entity described in para-
graph (e)(5)(ii) or (iii) of this section, in-
come derived from transactions between
members of the expanded affiliated group,
and interest income on notes issued by
customers to a member of the expanded
affiliated group that is a captive finance
company to finance the customer's pur-
chase of inventory or goods that are man-
ufactured by a member of the expanded
affiliated group) consists of passive in-
come (as defined in § 1.1472-1(c)(1)(iv));
no more than five percent of the gross
income of the expanded affiliated group is
derived by members of the expanded af-
filiated group that are FFIs (excluding in-
come derived from transactions between
members of the expanded affiliated group
or by any member of the expanded affil-
iated group that is a certified deemed-
compliant FFI); and no more than 25 per-
cent of the value of assets held by the
expanded affiliated group (excluding as-
sets held by a member that is an entity
described in paragraph (e)(5)(ii) or (iii) of
this section, assets resulting from transac-
tions between related members of the ex-
panded affiliated group, and receivables
that are notes issued by customers to a
member of the expanded affiliated group
that is a captive finance company to fi-
nance the customer's purchase of inven-
tory or goods that are manufactured by a
member of the expanded affiliated group)
are assets that produce or are held for the
production of passive income; and

(2) Any member of the expanded affil-
iated group that is an FFI is a participating
FFI, deemed-compliant FFI, or an exempt
beneficial owner. However, an acquisition

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by a member of the expanded affiliated
group of an FFI that is not a participating
FFI, deemed-compliant FFI, or an exempt
beneficial owner, or a change in the chap-
ter 4 status of a member of the expanded
affiliated group, will not cause a nonfinan-
cial group to cease to be a nonfinancial
group until 90 days after the acquisition or
change in chapter 4 status.

(C) Holding company. For purposes of
this paragraph (e)(5)(i), an entity is a hold-
ing company if its primary activity con-
sists of holding (directly or indirectly) all
or part of the outstanding stock of one or
more members of its expanded affiliated
group. A partnership or any other non-
corporate entity shall be treated as a hold-
ing company if substantially all the activ-
ities of such partnership (or other entity)
consist of holding more than 50 percent of
the voting power and value of the stock of
one or more common parent corpora-
tion(s) of one or more expanded affiliated
group(s). If a partnership or other non-
corporate entity owns more than 50 per-
cent of the voting power and value of the
stock of more than one common parent
corporation of an expanded affiliated
group, each common parent corporation's
expanded affiliated group will be treated
as a separate expanded affiliated group for
purposes of applying the rules of this sec-
tion unless a non-corporate entity is
treated as the common parent entity of the
expanded affiliated group in accordance
with § 1.1471-5(i)(10).

(D) * * *

(1) * * *

(iv) Managing the working capital of the
expanded affiliated group (or any member
thereof) such as by pooling the cash bal-
ances of affiliates (including both positive
and deficit cash balances) or by investing or
trading in financial assets solely for the ac-
count and risk of such entity or any member
of its expanded affiliated group; or

(v) Acting as a financing vehicle for the
expanded affiliated group (or any member
thereof).

* * * * *

(iv) * * *

(B) The entity does not hold an account
(other than depository accounts in the
country in which the entity is operating to
pay for expenses in that country) with or
receive payments from any withholding

agent other than a member of its expanded
affiliated group;

* * * * *

(f) Deemed-compliant FFIs. The term
deemed-compliant FFI includes a regis-
tered deemed-compliant FFI (as defined in
paragraph (f)(1) of this section), a certified
deemed-compliant FFI (as defined in
paragraph (f)(2) of this section), a nonre-
porting IGA FFI (as defined in § 1.1471-
1(b)(83)), and, to the extent provided in
paragraph (f)(3) of this section, an owner-
documented FFI. A deemed-compliant
FFI will be treated pursuant to section
1471(b)(2) as having met the require-
ments of section 1471(b). A deemed-
compliant FFI that complies with the due
diligence and withholding requirements
applicable to such entity as provided in
this paragraph (f) will also be deemed to
have met its withholding obligations un-
der sections 1471(a) and 1472(a). For this
purpose, an intermediary or flow-through
entity that has a residual withholding ob-
ligation under § 1.1471-2(a)(2)(ii) must
fulfill such obligation to be considered a
deemed-compliant FFI.

(1) * * *

(i) * * *

(A) * * *

(6) By the later of June 30, 2014, or the
date it registers as a deemed-compliant
FFI, the FFI implements policies and pro-
cedures, consistent with those set forth for
a participating FFI under § 1.1471-4(c),
to monitor whether the FFI opens or main-
tains an account for a specified U.S. per-
son who is not a resident of the country in
which the FFI is incorporated or orga-
nized (including a U.S. person that was a
resident when the account was opened but
subsequently ceases to be a resident), an
entity controlled or beneficially owned (as
determined under the FFI's AML due dil-
igence) by one or more specified U.S.
persons that are not residents of the coun-
try in which the FFI is incorporated or
organized, or a nonparticipating FFI. Such
policies and procedures must provide that
if any such account is discovered, the FFI
will close such account, transfer such ac-
count to a participating FFI, reporting
Model 1 FFI, or U.S. financial institution,
or withhold and report on such account as
would be required under § 1.1471-4(b)
and (d) if the FFI were a participating FFI.

(7) With respect to each preexisting
account held by a nonresident of the coun-
try in which the FFI is organized or held
by an entity, the FFI reviews those ac-
counts in accordance with the procedures
described in § 1.1471-4(c) applicable to
preexisting accounts to identify any U.S.
account or account held by a nonpartici-
pating FFI, and certifies to the IRS that it
did not identify any such account as a result
of its review, that it has closed any such
accounts that were identified or transferred
them to a participating FFI, reporting Model
1 FFI, or U.S. financial institution, or that it
agrees to withhold and report on such ac-
counts as would be required under
§ 1.1471-4(b) and (d) if it were a partici-
pating FFI. Such certification must be sub-
mitted by the due date of the FFI's first
certification of compliance required under
paragraph (f)(1)(ii)(B) of this section.
* * * * *

(B) * * *

(1) By the later of June 30, 2014, or the
date it registers with the IRS pursuant to
paragraph (f)(1)(ii) of this section, the FFI
implements policies and procedures to en-
sure that within six months of opening a
U.S. account or an account held by a
recalcitrant account holder or a nonpartic-
ipating FFI, the FFI either transfers such
account to an affiliate that is a participat-
ing FFI, reporting Model 1 FFI, or U.S.
financial institution, closes the account, or
becomes a participating FFI.

* * * * *

(3) By the later of June 30, 2014, or the
date it registers with the IRS pursuant to
paragraph (f)(1)(ii) of this section, the FFI
implements policies and procedures to en-
sure that it identifies any account that be-
comes a U.S. account or an account held
by a recalcitrant account holder or a non-
participating FFI due to a change in cir-
cumstances. Within six months of the date
on which the FFI first has knowledge or
reason to know of the change in the ac-
count holder's chapter 4 status, the FFI
transfers any such account to an affiliate
that is a participating FFI, reporting
Model 1 FFI, or U.S. financial institution,
closes the account, or becomes a partici-
pating FFI.

(C) * * *

(2) Each holder of record of direct debt
interests in the FFI in excess of $50,000,
of any direct equity interests in the FFI

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(for example the holders of its units or
global certificates), and of any other ac-
count holder of the FFI is a participating
FFI, a registered deemed-compliant FFI, a
retirement plan described in § 1.1471-
6(f), a non-profit organization described in
paragraph (e)(5)(vi) of this section, a U.S.
person that is not a specified U.S. person,
a nonreporting IGA FFI, or an exempt
beneficial owner. Notwithstanding the
prior sentence, an FFI will not be prohib-
ited from qualifying as a qualified collec-
tive investment vehicle solely because it
has issued interests in bearer form pro-
vided that the FFI ceased issuing interests
in such form after December 31, 2012,
retires all such interests upon surrender,
and establishes policies and procedures to
redeem or immobilize all such interests
prior to January 1, 2017, and that prior to
payment the FFI documents the account
holder in accordance with the procedures
set forth in § 1.1471-4(c) applicable to
accounts other than preexisting accounts
and agrees to withhold and report on such
accounts as would be required under
§ 1.1471-4(b) and (d) if it were a partic-
ipating FFI. For purposes of this para-
graph (f)(1)(i)(C), an FFI may disregard
equity interests owned by specified U.S.
persons acquired with seed capital within
the meaning of paragraph (i)(4) of this
section if the specified U.S. person is de-
scribed in paragraph (i)(3)(i) and (ii) of
this section (substituting the term U.S.
person for the terms FFI and member),
and the specified U.S. person neither has
held, nor intends to hold, such interest for
more than three years.

* * * * *

(D) * * *

(4) The FFI ensures that by the later of
December 31, 2014, or six months after
the date the FFI registers as a deemed-
compliant FFI, each agreement that gov-
erns the distribution of its debt or equity
interests prohibits sales and other transfers
of debt or equity interests in the FFI (other
than interests that are both distributed by
and held through a participating FFI) to
specified U.S. persons, nonparticipating
FFIs, or passive NFFEs with one or more
substantial U.S. owners. In addition, by
that date, the FFI's prospectus and all
marketing materials must indicate that
sales and other transfers of interests in the
FFI to specified U.S. persons, nonpartici-

pating FFIs, or passive NFFEs with one or
more substantial U.S. owners are prohib-
ited unless such interests are both distrib-
uted by and held through a participating
FFI.

(5) The FFI ensures that by the later of
December 31, 2014, or six months after
the date the FFI registers as a deemed-
compliant FFI, each agreement entered
into by the FFI that governs the distribu-
tion of its debt or equity interests requires
the distributor to notify the FFI of a
change in the distributor's chapter 4 status
within 90 days of the change. The FFI
must, with respect to any distributor that
ceases to qualify as a distributor identified
in paragraph (f)(1)(i)(D)(3) of this section,
terminate its distribution agreement with
the distributor, or cause the distribution
agreement to be terminated, within 90
days of the notification of the distributor's
change in status and, with respect to all
debt and equity interests of the FFI issued
through that distributor, redeem those in-
terests, convert those interests to direct
holdings in the fund, or cause those inter-
ests to be transferred to another distributor
identified in paragraph (f)(1)(i)(D)(3) of
this section within six months of the dis-
tributor's change in status.

(6) With respect to any of the FFI's
preexisting direct accounts that are held
by the beneficial owner of the interest in
the FFI, the FFI reviews those accounts in
accordance with the procedures (and time
frames) described in § 1.1471-4(c) appli-
cable to preexisting accounts to identify
any U.S. account or account held by a
nonparticipating FFI. Notwithstanding the
previous sentence, the FFI will not be
required to review the account of any in-
dividual investor that purchased its inter-
est at a time when all of the FFI's distri-
bution agreements and its prospectus
contained an explicit prohibition of the
issuance and/or sale of shares to U.S. en-
tities and U.S. resident individuals. An
FFI will not be required to review the
account of any investor that purchased its
interest in bearer form until the time of
payment, but at such time will be required
to document the account in accordance
with procedures set forth in § 1.1471-4(c)
applicable to accounts other than preexist-
ing accounts. The FFI is required to cer-
tify to the IRS either that it did not iden-
tify any U.S. account or account held by a

nonparticipating FFI as a result of its re-
view or, if any such accounts were iden-
tified, that the FFI will either redeem such
accounts, transfer such accounts to an af-
filiate or other FFI that is a participating
FFI, reporting Model 1 FFI, or U.S. finan-
cial institution, or withhold and report on
such accounts as would be required under
§ 1.1471-4(b) and (d) if it were a partic-
ipating FFI. Such certification must be
submitted to the IRS by the due date of the
FFI's first certification of compliance re-
quired under paragraph (f)(1)(ii)(B) of
this section.

(7) By the later of June 30, 2014, or the
date that it registers as a deemed-
compliant FFI, the FFI implements the
policies and procedures described in
§ 1.1471-4(c) to ensure that it either-
* * * * *

(8) For an FFI that is part of an ex-
panded affiliated group, all other FFIs in
the expanded affiliated group are partici-
pating FFIs, registered deemed-compliant
FFIs, sponsored FFIs described in para-
graph (f)(1)(i)(F)(1) or (2) of this section,
nonreporting IGA FFIs, or exempt bene-
ficial owners.

(E) Qualified credit card issuers and
servicers. An FFI is described in this para-
graph (f)(1)(i)(E) if the FFI meets the fol-
lowing requirements.

(1) The FFI is an FFI solely because it
is an issuer or servicer of credit cards that
accepts deposits, on its own behalf or, in
the case of a servicer, on behalf of a credit
card issuer, only when a customer makes
a payment in excess of a balance due with
respect to the credit card account and the
overpayment is not immediately returned
to the customer.

(2) By the later of June 30, 2014, or the
date it registers as a deemed-compliant
FFI, the FFI implements policies and pro-
cedures to either prevent a customer de-
posit in excess of $50,000 or to ensure that
any customer deposit in excess of $50,000
is refunded to the customer within 60
days. For this purpose, a customer deposit
does not refer to credit balances to the
extent of disputed charges but does in-
clude credit balances resulting from mer-
chandise returns.

(F) * * *

(1) * * *

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(i) It is an investment entity that is not
a QI, WP (except to the extent permitted
in the WP agreement), or WT; and

(ii) An entity, other than a nonpartici-
pating FFI, has agreed with the FFI to act
as a sponsoring entity for the FFI.

* * * * *

(3)

(i) Is authorized to act on behalf of the
FFI (such as a fund manager, trustee, cor-
porate director, or managing partner) to ful-
fill all due diligence, withholding, and re-
porting responsibilities that the FFI would
have assumed if it were a participating FFI;

(iii) Has registered the FFI with the
IRS by the later of January 1, 2017, or the
date that the FFI identifies itself as quali-
fying under this paragraph (f)(1)(i)(F);

(v) Identifies the FFI in all reporting
completed on the FFI's behalf to the ex-
tent required under §§ 1.1471-4(d)(2)
(ii)(C) and 1.1474-1;

(vi) Performs the verification proce-
dures required under § 1.1471-4(f) on
behalf of the FFI, including the certifica-
tion required under § 1.1471-4(f)(3);

(vii) Performs the verification proce-
dures required under paragraphs (j) and
(k) of this section; and

(viii) Has not had its status as a spon-
soring entity revoked.

(5) A sponsoring entity is not liable for
any failure to comply with the obligations
contained in paragraph (f)(1)(i)(F)(3) of
this section unless the sponsoring entity is
a withholding agent that is separately lia-
ble for the failure to withhold on or report
with respect to a payment made by the
sponsoring entity on behalf of the spon-
sored FFI. A sponsored FFI will remain
liable for any failure of its sponsoring
entity to comply with the obligations con-
tained in paragraph (f)(1)(i)(F)(3) of this
section that the sponsoring entity has agreed
to undertake on behalf of the FFI, even if the
sponsoring entity is also a withholding agent
and is itself separately liable for the failure
to withhold on or report with respect to a
payment made by the sponsoring entity on
behalf of the sponsored FFI. The same tax,
interest, or penalties, however, shall not be
collected more than once.

(ii) * * *

(B) Have its responsible officer certify,
on or before July 1 of the calendar year
following the end of each certification pe-
riod, that all of the requirements for the
deemed-compliant status claimed by the
FFI have been satisfied during the certifi-
cation period. The responsible officer may
certify collectively for the FFI's expanded
affiliated group that all of the require-
ments for the deemed-compliant status
claimed by each member of the expanded
affiliated group that is a registered
deemed-compliant FFI (other than a mem-
ber that is a reporting Model 1 FFI or
deemed-compliant FFI under an applica-
ble Model 1 IGA) have been satisfied. The
certification must be made on the form
and in the manner prescribed by the IRS.
The first certification period begins on the
later of the date the FFI registers as a
deemed-compliant FFI and is issued a GIIN,
or June 30, 2014, and ends at the close of the
third full calendar year following that date.
Each subsequent certification period is the
three calendar year period following the pre-
vious certification period.

* * * * *

(2) Certified deemed-compliant FFIs.
A certified deemed-compliant FFI means
an FFI described in any of paragraphs
(f)(2)(i) through (v) of this section that has
certified as to its status as a deemed-
compliant FFI by providing a withholding
agent with the documentation described in
§ 1.1471-3(d)(5) applicable to the rele-
vant deemed-compliant category. A certi-
fied deemed-compliant FFI is not required
to register with the IRS.

(i) * * *

(B) The FFI's business consists pri-
marily of receiving deposits from and
making loans to, with respect to a bank,
retail customers that are unrelated to such
bank and, with respect to a credit union or
similar cooperative credit organization,
members, provided that no such member
has a greater than 5 percent interest in
such credit union or cooperative credit
organization. For purposes of this para-
graph (f)(2)(i)(B), a customer is related to
a bank if the customer and the bank have
a relationship described in section 267(b).
For purposes of determining whether a
member has a greater than 5 percent interest
in a credit union or cooperative credit orga-
nization, the member must aggregate the
ownership or beneficial interests in the

credit union or cooperative credit organiza-
tion that are owned or held by a related
member. A member of a credit union or
cooperative credit organization is related to
another member if the relationship of such
members is described in section 267(b).
* * * * *

(iii) Sponsored, closely held investment
vehicles. Subject to the provisions of para-
graph (f)(2)(iii)(E) of this section, an FFI
is described in this paragraph (f)(2)(iii) if
it meets the requirements described in
paragraphs (f)(2)(iii)(A) through (D) of
this section.

(A) The FFI is an FFI solely because it
is an investment entity and is not a QI,
WP, or WT.

(B) A participating FFI, reporting
Model 1 FFI, or U.S. financial institution
agrees to fulfill all due diligence, with-
holding, and reporting responsibilities that
the FFI would have assumed if it were a
participating FFI.

(C) Twenty or fewer individuals own
all of the debt and equity interests in the
FFI (disregarding debt interests owned by
U.S. financial institutions, participating
FFIs, registered deemed-compliant FFIs,
and certified deemed-compliant FFIs and
equity interests owned by an entity if that
entity owns 100 percent of the equity in-
terests in the FFI and is itself a sponsored
FFI under this paragraph (f)(2)(iii)).

(D) The sponsoring entity complies
with the following requirements-

(1) The sponsoring entity has regis-
tered with the IRS as a sponsoring entity;

(2) The sponsoring entity agrees to per-
form, on behalf of the FFI, all due dili-
gence, withholding, reporting, and other
requirements that the FFI would have
been required to perform if it were a par-
ticipating FFI and retains documentation
collected with respect to the FFI for a
period of six years;

(3) The sponsoring entity identifies the
FFI in all reporting completed on the
FFI's behalf to the extent required under
§§ 1.1471-4(d)(2)(ii)(C) and 1.1474-1;

(4) The sponsoring entity performs the
verification procedures required under
§ 1.1471-4(f) on behalf of the FFI, in-
cluding the certification required under
§ 1.1471-4(f)(3);

(5) The sponsoring entity performs the
verification procedures required under
paragraphs (j) and (k) of this section; and

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(6) The sponsoring entity has not had
its status as a sponsor revoked.

(E) The IRS may revoke a sponsoring
entity's status as a sponsoring entity with
respect to all sponsored FFIs if there is a
material failure by the sponsoring entity to
comply with its obligations under para-
graph (f)(2)(iii)(D) of this section with
respect to any sponsored FFI. A sponsor-
ing entity is not liable for any failure to
comply with the obligations contained in
paragraph (f)(2)(iii)(D) of this section un-
less the sponsoring entity is a withholding
agent that is separately liable for the fail-
ure to withhold on or report with respect
to a payment made by the sponsoring en-
tity on behalf of the sponsored FFI. A
sponsored FFI will remain liable for any
failure of its sponsoring entity to comply
with the obligations contained in para-
graph (f)(2)(iii)(D) of this section that the
sponsoring entity has agreed to undertake
on behalf of the FFI, even if the sponsor-
ing entity is also a withholding agent and
is itself separately liable for the failure to
withhold on or report with respect to a
payment made by the sponsoring entity on
behalf of the sponsored FFI. The same
tax, interest, or penalties, however, shall
not be collected more than once.

(iv) Limited life debt investment entities
(transitional). An FFI is described in this
paragraph (f)(2)(iv) if the FFI is the benefi-
cial owner of the payment (or of payments
made with respect to the account) and the
FFI meets the following requirements.

(A) The FFI is an investment entity
that issued one or more classes of debt or
equity interests to investors pursuant to a
trust indenture or similar agreement and
all of such interests were issued on or
before January 17, 2013.

(B) The FFI was in existence as of
January 17, 2013, and has entered into a
trust indenture or similar agreement that
requires the FFI to pay to investors holding
substantially all of the interests in the FFI,
no later than a set date or period following
the maturity of the last asset held by the FFI,
all amounts that such investors are entitled
to receive from the FFI.

(C) The FFI was formed and operated
for the purpose of purchasing or acquiring
specific types of debt instruments or inter-
ests therein and holding those assets sub-
ject to reinvestment only under prescribed
circumstances to maturity.

(D) Substantially all of the assets of the
FFI consist of debt instruments or inter-
ests therein (including assets acquired
pursuant to a foreclosure, restructuring,
workout, or similar event with respect to a
debt instrument).

(E) All payments made to the investors
of the FFI (other than holders of a
de minimis interest) are either cleared
through a clearing organization or custo-
dial institution that is a participating FFI,
reporting Model 1 FFI, or U.S. financial
institution or made through a transfer
agent that is a participating FFI, reporting
Model 1 FFI, or U.S. financial institution.

(F) The FFI's trustee or fiduciary is not
authorized through a fiduciary duty or oth-
erwise to fulfill the obligations of a par-
ticipating FFI under § 1.1471-4 and no
other person has the authority to fulfill the
obligations of a participating FFI under
§ 1.1471-4 on behalf of the FFI.

(v) Certain investment entities that do
not maintain financial accounts. An FFI is
described in this paragraph (f)(2)(v) if the
FFI meets the following requirements.

(A) The FFI is a financial institution
solely because it is described in paragraph
(e)(4)(i)(A) of this section.

(B) The FFI does not maintain finan-
cial accounts.

* * * * *

(4) * * *

(i) The distributor provides investment
services to at least 30 customers unrelated
to each other and fewer than half of the
distributor's customers are related to each
other. For purposes of this paragraph
(f)(4)(i), customers are related to each
other if they have a relationship with
each other described in section 267(b).
* * * * *

(g) * * *

(1) Scope. This paragraph (g) provides
rules for determining when an account
holder of a participating FFI or registered
deemed-compliant FFI is a recalcitrant ac-
count holder. Paragraph (g)(2) of this sec-
tion defines the term recalcitrant account
holder. Paragraphs (g)(3) and (4) of this
section provide timing rules for when an
account holder will begin to be treated as
a recalcitrant account holder by a partici-
pating FFI and when an account holder
will cease to be treated as a recalcitrant
account holder by such institution. For
rules for determining the holder of an ac-

count, see paragraph (a)(3) of this section.
For the withholding requirements of an
FFI with respect to its recalcitrant account
holders, see paragraph (f) of this section
and § 1.1471-4(b). For the reporting
requirements of an FFI with respect to
its recalcitrant account holders, see
§ 1.1471-4(d)(6), and, for the reporting
required with respect to payments made
to such account holders, see § 1.1474-
1(d)(4)(iii). A U.S. branch treated as a
U.S. person shall apply the presumption
rules of § 1.1471-3(f) (for foreign entity
account holders) and chapter 3 or 61 (for
individual payees) to determine the sta-
tus of a payee if it cannot reliably asso-
ciate a payment made to the payee with
valid documentation and does not apply
this paragraph (g).

* * * * *

(3) * * *

(i) * * *

(D) Preexisting accounts that become
high-value accounts. With respect to a
calendar year beginning after December
31, 2015, an account holder that is de-
scribed in paragraph (g)(2) of this section
and that holds a preexisting account that a
participating FFI identifies as a high-value
account pursuant to § 1.1471-4(c)(5)
(iv)(D) will be treated as a recalcitrant
account holder beginning on the earlier of
the date a withholdable payment is made
to the account following end of the calen-
dar year in which the account is identified
as a high-value account or the date that is
six months after the calendar year end.
* * * * *

(i) Expanded affiliated group-(1)
Scope of paragraph. This paragraph (i)
defines the term expanded affiliated group
for purposes of chapter 4. For the require-
ments of a participating FFI with respect
to members of its expanded affiliated
group that are FFIs, see § 1.1471-4(e).

(2) Expanded affiliated group defined.
Except as otherwise provided in this para-
graph (i), an expanded affiliated group is
defined in accordance with the principles
of section 1504(a) to mean one or more
chains of members connected through
ownership by a common parent entity if
the common parent entity directly owns
stock or other equity interests meeting the
requirements of paragraph (i)(4) of this
section in at least one of the other mem-
bers (for purposes of this paragraph (i),

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the constructive ownership rules of sec-
tion 318 do not apply). Generally, only a
corporation shall be treated as the com-
mon parent entity of an expanded affili-
ated group, unless the taxpayer elects to
follow the approach described in para-
graph (i)(10) of this section.

(3) Member of an expanded affiliated
group. The term member of an expanded
affiliated group means a corporation or
any entity other than a corporation (such
as a partnership or trust) with respect to
which the ownership requirements of
paragraph (i)(4) of this section are met,
regardless of whether such entity is a U.S.
person or a foreign person, but excluding
corporations described in paragraphs (1),
(4), (6), (7), or (8) of section 1504(b).

(4) Ownership test. The ownership re-
quirements of this paragraph (i)(4) are met
if-

(i) Corporations. For purposes of para-
graph (i)(2) of this section, a corporation
(except the common parent entity) will be
considered owned by another member en-
tity or by the common parent entity if
more than 50 percent of the total voting
power of the stock of such corporation
and more than 50 percent of the total
value of the stock of such corporation is
owned directly by one or more other
members of the group (including the com-
mon parent entity).

(A) Stock not to include certain pre-
ferred stock. For purposes of this para-
graph (i)(4), the term stock does not in-
clude any stock which is described in
section 1504(a)(4).

(B) Valuation. For purposes of section
1471(e) and this section, all shares of stock
within a single class are considered to have
the same value in determining the owner-
ship percentage. Thus, control premiums
and minority blockage discounts within a
single class are not taken into account.

(ii) Partnerships. For purposes of para-
graph (i)(2) of this section, a partnership
will be considered owned by another
member entity (including the common
parent entity) if more than 50 percent (by
value) of the capital or profits interest in
the partnership is owned directly by one
or more other members of the group (in-
cluding the common parent entity).

(iii) Trusts. For purposes of paragraph
(i)(2) of this section, a trust will be con-
sidered owned by another member entity

or by the common parent entity if more
than 50 percent (by value) of the benefi-
cial interest in such trust is owned directly
by one or more other members of the
group (including the common parent en-
tity). A beneficial interest in a trust in-
cludes an interest held by an entity treated
as a grantor or other owner of the trust
under sections 671 through 679 and a ben-
eficial trust interest.

(5) Treatment of warrants, options,
and obligations convertible into equity for
determining ownership. For purposes of
paragraph (i)(4) of this section, ownership
of warrants, options, obligations convert-
ible into the equity of a corporation or
entity other than a corporation, and other
similar interests is not considered for pur-
poses of determining whether an entity is
a member of an expanded affiliated group,
except as follows:

(i) Ownership of a warrant, option, ob-
ligation convertible into stock, or other
similar instrument creating an interest in a
corporation will be considered for pur-
poses of paragraph (i)(4) of this section to
the extent that the common parent or mem-
ber of the expanded affiliated group that
holds such instrument also maintains voting
rights with respect to such corporation.
However, interests described in § 1.1504-
4(d)(2) will not be treated as options.

(ii) Ownership of a warrant, option,
obligation convertible into an equity inter-
est, or other similar instrument creating an
interest in a corporation or entity other
than a corporation will be considered for
purposes of paragraph (i)(4) of this sec-
tion to the extent that such instrument is
reasonably certain to be exercised, based
on all of the facts and circumstances and
in accordance with the principles set forth
in § 1.1504-4(g).

(6) Exception for FFIs holding cer-
tain capital investments. Notwithstand-
ing paragraphs (i)(2) and (i)(4) of this
section, an investment entity will not be
considered a member of an expanded af-
filiated group as a result of a contribution
of seed capital by a member of such ex-
panded affiliated group if-

(i) The member that owns the invest-
ment entity is an FFI that is in the business
of providing seed capital to form invest-
ment entities, the interests in which it in-
tends to sell to investors that do not have

a relationship with each other described in
section 267(b);

(ii) The investment entity is created in
the ordinary course of such other FFI's
business described in paragraph (i)(6)(i)
of this section;

(iii) As of the date the FFI acquired the
equity interest, any equity interest in the
investment entity in excess of 50 percent
of the total value of the stock of the in-
vestment entity is intended to be held by
such other FFI (including ownership by
other members of such other FFI's ex-
panded affiliated group) for no more than
three years from the date on which such
other FFI first acquired an equity interest
in the investment entity; and

(iv) In the case of an equity interest that
has been held by such other FFI for over
three years from the date referenced in para-
graph (i)(6)(iii) of this section, the aggregate
value of the equity interest held by such
other FFI and the equity interests held by
other members of its expanded affiliated
group is 50 percent or less of the total value
of the stock of the investment entity.

(7) Seed capital. For purposes of this
paragraph (i), the term seed capital means
an initial capital contribution made to an
investment entity that is intended as a
temporary investment and is deemed by
the manager of the entity to be necessary
or appropriate for the establishment of the
entity, such as for the purpose of estab-
lishing a track record of investment per-
formance for such entity, achieving econ-
omies of scale for diversified investment,
avoiding an artificially high expense to
return ratio, or similar purposes.

(8) Anti-abuse rule. A change in own-
ership, voting rights, or the form of an
entity that results in an entity meeting or
not meeting the ownership requirements
described in paragraph (i)(4) of this sec-
tion will be disregarded for purposes of
determining whether an entity is a mem-
ber of an expanded affiliated group if the
change is pursuant to a plan a principal
purpose of which is to avoid reporting or
withholding that would otherwise be re-
quired under any chapter 4 provision. For
purposes of this paragraph (i)(8), a change
in voting rights includes a separation of
voting rights and value.

(9) Exception for limited life debt in-
vestment entities. Notwithstanding para-
graphs (i)(2) and (4) of this section, an

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entity that meets the requirements of para-
graph (f)(2)(iv) of this section, including
the requirements to have been in existence
as of January 17, 2013, and to have issued
interests in the entity on or before January
17, 2013, will not be considered a member
of an expanded affiliated group as a result
of any member of such expanded affili-
ated group owning interests in such entity.

(10) Partnerships, trusts, and other
non-corporate entities. For purposes of
determining the composition of an ex-
panded affiliated group, an entity other
than a corporation may elect to be treated
as the common parent entity. Taxpayers
following this approach may not, in a later
year, follow the rule described in para-
graph (i)(2) of this section without the
approval of the Commissioner. See also
paragraph (e)(5)(i)(C) of this section.

(j) Sponsoring entity verification. [Re-
served]

(k) Sponsoring entity event of default.
[Reserved]

(l) Effective/applicability date. This
section applies on January 6, 2017. How-
ever, taxpayers may apply these provi-
sions as of January 28, 2013. (For the
rules that apply beginning on January 28,
2013, and before January 6, 2017, see this
section as in effect and contained in 26
CFR part 1 revised April 1, 2016.)

#### § 1.1471-5T [Removed]

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

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

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

* * * * *

(d) * * *

(1) In general. Solely for purposes of
this section and except as provided in
paragraph (h) of this section, the term
foreign central bank of issue means an
institution that is by law or government
sanction the principal authority, other than
the government itself, issuing instruments
intended to circulate as currency. Such an
institution is generally the custodian of the

banking reserves of the country under
whose law it is organized.

* * * * *

(4) Income on certain transactions.
Solely for purposes of determining
whether an entity is an exempt beneficial
owner of a payment under this paragraph
(d), a foreign central bank of issue is a
beneficial owner with respect to income
earned on cash and securities, including
cash and securities held as collateral or se-
curities held in connection with a securities
lending transaction, held by the foreign cen-
tral bank of issue in the ordinary course of
its operations as a central bank of issue.

* * * * *

(f) * * *

(2) * * *

(iii) * * *

(B) The fund receives at least 50 per-
cent of its total contributions (other than
transfers of assets from accounts de-
scribed in § 1.1471-5(b)(2)(i)(A) (refer-
ring to retirement and pension accounts),
from retirement and pension accounts de-
scribed in an applicable Model 1 or Model
2 IGA, or from other retirement funds
described in this paragraph (f) or in an
applicable Model 1 or Model 2 IGA) from
the sponsoring employers;

(C) Distributions or withdrawals from
the fund are allowed only upon the occur-
rence of specified events related to retire-
ment, disability, or death (except rollover
distributions to accounts described in
§ 1.1471-5(b)(2)(i)(A) (referring to retire-
ment and pension accounts), to retirement
and pension accounts described in an ap-
plicable Model 1 or Model 2 IGA, or to
other retirement funds described in this
paragraph (f) or in an applicable Model 1
or Model 2 IGA), or penalties apply to
distributions or withdrawals made before
such specified events; or

* * * * *

(3) * * *

(ii) The fund is sponsored by one or
more employers and each of these em-
ployers are not investment entities or pas-
sive NFFEs;

(iii) Employee and employer contribu-
tions to the fund (other than transfers of
assets from other retirement plans de-
scribed in paragraph (f)(1) of this section,
from accounts described in § 1.1471-
5(b)(2)(i)(A) (referring to retirement and
pension accounts), or retirement and pen-

sion accounts described in an applicable
Model 1 or Model 2 IGA) are limited by
reference to earned income and compen-
sation of the employee, respectively;
* * * * *

(5) Investment vehicles exclusively for
retirement funds. A fund established ex-
clusively to earn income for the benefit of
one or more retirement funds described in
paragraphs (f)(1) through (5) of this sec-
tion or in an applicable Model 1 or Model
2 IGA, accounts described in § 1.1471-
5(b)(2)(i)(A) (referring to retirement and
pension accounts), or retirement and pen-
sion accounts described in an applicable
Model 1 or Model 2 IGA.

(6) Pension fund of an exempt benefi-
cial owner. A fund established and spon-
sored by an exempt beneficial owner de-
scribed in paragraph (b), (c), (d), or (e) of
this section or an exempt beneficial owner
(other than a fund that qualifies as an
exempt beneficial owner) described in an
applicable Model 1 or Model 2 IGA to
provide retirement, disability, or death ben-
efits to beneficiaries or participants that are
current or former employees of the exempt
beneficial owner (or persons designated by
such employees), or that are not current or
former employees, but the benefits provided
to such beneficiaries or participants are in
consideration of personal services per-
formed for the exempt beneficial owner.
* * * * *

(g) Entities wholly owned by exempt
beneficial owners. A person is described
in this paragraph (g) if it is an FFI solely
because it is an investment entity, each
direct holder of an equity interest in the
investment entity is an exempt beneficial
owner described in paragraph (b), (c), (d),
(e), (f), or (g) of this section or an exempt
beneficial owner described in an applica-
ble Model 1 or Model 2 IGA, and each
direct holder of a debt interest in the in-
vestment entity is either a depository in-
stitution (with respect to a loan made to
such entity), an exempt beneficial owner
described in paragraph (b), (c), (d), (e),
(f), or (g) of this section, or an exempt
beneficial owner described in an applica-
ble Model 1 or Model 2 IGA.

(h) * * *

(2) Limitation. Paragraph (h)(1) of this
section will not apply to treat an exempt
beneficial owner as engaged in a commer-
cial financial activity if-

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(i) The entity undertakes commercial fi-
nancial activity described in paragraph
(h)(1) of this section solely for or at the
direction of other exempt beneficial owners
and such commercial financial activity is
consistent with the purposes of the entity;

(ii) The entity has no outstanding debt
that would be a financial account under
§ 1.1471-5(b)(1)(iii); and

(iii) The entity otherwise maintains fi-
nancial accounts only for exempt benefi-
cial owners, or, in the case of a foreign
central bank of issue as described in para-
graph (d), the entity only maintains finan-
cial accounts that are depository accounts
for current or former employees of the
entity (and the spouses and children of
such employees) or financial accounts for
exempt beneficial owners.

(i) Effective/applicability date. This
section applies on January 6, 2017. How-
ever, taxpayers may apply these provi-
sions as of January 28, 2013. (For the
rules that apply beginning on January 28,
2013, and before January 6, 2017, see this
section as in effect and contained in 26
CFR part 1 revised April 1, 2016.)

## § 1.1471-6T [Removed]

Par. 14. Section 1.1471-6T is removed.
Par. 15. Section 1.1472-1 is amended
by revising paragraphs (a), (b)(1) intro-
ductory text, (b)(2), (c)(1) introductory
text, (c)(1)(i) introductory text, (c)(1)(ii)
and (iii), (c)(1)(iv) introductory text,
(c)(1)(iv)(C), (c)(1)(v) through (vii),
(c)(2) through (5), (d)(1) and (2), and (f)
through (h) to read as follows:

### § 1.1472-1 Withholding on NFFEs.

(a) In general. This section provides
rules that a withholding agent must apply
to determine its obligations to withhold
under section 1472 on withholdable pay-
ments made to a payee that is a NFFE. A
participating FFI that complies with its
withholding obligations under § 1.1471-
4(b) will be deemed to satisfy its obliga-
tions under section 1472 with respect to
withholdable payments made to NFFEs
that are account holders. The rules of this
section will apply, however, in the case of
a participating FFI acting as a withholding
agent with respect to a payment made to a
NFFE that is not an account holder (for

example, a payment with respect to a con-
tract that does not constitute a financial
account). See § 1.1473-1(a)(4)(vi), how-
ever, for rules excepting from the defini-
tion of withholdable payment certain pay-
ments of U.S. source FDAP income made
prior to January 1, 2017, with respect to
an offshore obligation and § 1.1471-2(b)
for rules excepting from the definition of
withholdable payment a grandfathered ob-
ligation. See also § 1.1471-2(a)(2)(ii),
(iv), (v), and (vi) for special rules of with-
holding that apply for purposes of this
section and § 1.1471-2(a)(5) for with-
holding requirements if the source or
character of a payment is unknown. The
following entities are deemed to satisfy
their withholding obligations under sec-
tion 1472: exempt beneficial owners; sec-
tion 501(c) entities described in § 1.1471-
5(e)(5)(v); and nonprofit organizations
described in § 1.1471-5(e)(5)(vi). See
§ 1.1471-5(f) for when a deemed-
compliant FFI is deemed to satisfy its
withholding obligations with respect to
payments made to NFFEs that are account
holders under section 1472.

(b) * * *

(1) In general. Except as otherwise
provided in paragraph (b)(2) of this sec-
tion (providing transitional relief) or para-
graph (c)(1) or (2) of this section (provid-
ing exceptions for payments to an
excepted NFFE or an exempt beneficial
owner), § 1.1471-2(a)(4)(i) (providing an
exception to withholding if the withhold-
ing agent lacks control, custody, or
knowledge), § 1.1471-2(a)(4)(vii) (pro-
viding an exception to withholding for
payments made to an account held with
or equity interests traded through a clear-
ing organization with FATCA-compliant
membership), or § 1.1471-2(a)(4)(viii)
(providing an exception to withholding
for payments to certain excepted ac-
counts), a withholding agent must with-
hold 30 percent of any withholdable pay-
ment made after June 30, 2014, to a payee
that is a NFFE unless-
* * * * *

(2) Transitional relief. For any with-
holdable payment made prior to July 1,
2016, with respect to a preexisting obliga-
tion to a payee that is not a prima facie
FFI and for which a withholding agent
does not have documentation indicating
the payee's status as a passive NFFE when

the NFFE has failed to provide the owner
certification as required under § 1.1471-
3(d)(12)(iii), the withholding agent is not
required to withhold under this section or
report under § 1.1474-1(i)(2) (describing
the reporting obligations of withholding
agents with respect to NFFEs).

(c) * * *

(1) Payments to an excepted NFFE. A
withholding agent is not required to with-
hold under section 1472(a) and paragraph
(b) of this section on a withholdable pay-
ment (or portion thereof) if the withhold-
ing agent can treat the payment as made to
a payee that is an excepted NFFE. For
purposes of this paragraph, the term ex-
cepted NFFE means a payee that the with-
holding agent may treat as a NFFE that is
a QI, WP, or WT. Additionally, the term
excepted NFFE means, with respect to the
payment, a NFFE described in paragraphs
(c)(1)(i) through (vii) of this section to the
extent the withholding agent may treat the
NFFE as the beneficial owner of the pay-
ment.

(i) Publicly traded corporation. A
NFFE is described in this paragraph
(c)(1)(i) if it is a corporation the stock of
which is regularly traded on one or more
established securities markets for the cal-
endar year.

* * * * *

(ii) Certain affiliated entities related to
a publicly traded corporation. A NFFE is
described in this paragraph (c)(1)(ii) if it
is a corporation that is a member of the
same expanded affiliated group (as de-
fined in § 1.1471-5(i)) as a corporation
described in paragraph (c)(1)(i) of this
section (without regard to whether such
corporation is a NFFE).

(iii) Certain territory entities. A NFFE
is described in this paragraph (c)(1)(iii) if
it is a territory entity that is directly or
indirectly wholly owned by one or more
bona fide residents of the U.S. territory
under the laws of which the entity is or-
ganized. The term bona fide resident of a
U.S. territory means an individual who
qualifies as a bona fide resident under
section 937(a) and § 1.937-1.

(iv) Active NFFEs. A NFFE is de-
scribed in this paragraph (c)(1)(iv) (and
thus constitutes an active NFFE) if it is an
entity and for the preceding calendar or
fiscal year less than 50 percent of its
gross income is passive income and the

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weighted average of the percentage of
assets held by it that produce or are held
for the production of passive income
(weighted by total assets and measured
quarterly) is less than 50 percent, as de-
termined after the application of para-
graph (c)(1)(iv)(B) of this section (passive
assets). For purposes of the calculations
described in the preceding sentence, a
NFFE may use any accounting method
permitted under paragraph (c)(1)(iv)(C) of
this section but must apply a uniform
method for measuring assets for the cal-
endar or fiscal year.

* * * * *

(C) Methods of measuring assets. For
purposes of this paragraph (c)(1)(iv), the
value of a NFFE's assets is determined
based on the fair market value or book
value of the assets that is reflected on the
NFFE's balance sheet (as determined un-
der either a U.S. or an international finan-
cial accounting standard).

(v) Excepted nonfinancial entities. A
NFFE is described in this paragraph
(c)(1)(v) if it is an entity described in
§ 1.1471-5(e)(5) (referring to holding
companies, treasury centers, and captive
finance companies that are members of a
nonfinancial group; start-up companies;
entities that are liquidating or emerging
from bankruptcy; and non-profit organiza-
tions).

(vi) Direct reporting NFFEs. A NFFE
is described in this paragraph (c)(1)(vi) if
it meets the requirements described in
§ 1.1472-1(c)(3) to be treated as a direct
reporting NFFE.

(vii) Sponsored direct reporting NFFEs.
A NFFE is described in this paragraph
(c)(1)(vii) if it meets the requirements de-
scribed in § 1.1472-1(c)(5) to be treated as
a sponsored direct reporting NFFE.

(2) Payments made to an exempt ben-
eficial owner. A withholding agent is not
required to withhold on a withholdable
payment (or portion thereof) under section
1472(a) and paragraph (b) of this section
if the withholding agent may treat the
payment as made to an exempt beneficial
owner.

(3) Definition of direct reporting
NFFE. A direct reporting NFFE means a
NFFE that elects to report information
about its direct or indirect substantial U.S.
owners to the IRS and meets the following
requirements-

(i) The NFFE must register on Form
8957, "FATCA Registration," (or such
other form as the IRS may prescribe) with
the IRS to obtain a GIIN pursuant to the
procedures prescribed by the IRS;

(ii) The NFFE must report directly to
the IRS on Form 8966, "FATCA Report,"
(or such other form as the IRS may pre-
scribe) the following information for each
calendar year (or, may be required by the
IRS to certify on Form 8966, or in such
other manner as the IRS may prescribe,
that the NFFE has no substantial U.S.
owners):

(A) The name, address, and TIN of
each substantial U.S. owner (as defined in
§ 1.1473-1(b)) of such NFFE;

(B) The total of all payments made to
each substantial U.S. owner (including the
gross amounts paid or credited to the sub-
stantial U.S. owner with respect to such
owner's equity interest in the NFFE dur-
ing the calendar year, which include pay-
ments in redemption or liquidation (in
whole or part) of the substantial U.S. own-
er's equity interest in the NFFE);

(C) The value of each substantial U.S.
owner's equity interest in the NFFE de-
termined by applying the rules described
in § 1.1471-5(b)(4) (substituting the term
equity for the terms account and financial
account);

(D) The name, address, and GIIN of
the NFFE; and

(E) Any other information as required
by Form 8966 (or such other form as the
IRS may prescribe) and its accompanying
instructions;

(iii) The NFFE must obtain a written
certification (contained on a withholding
certificate or in a written statement) from
each person that would be treated as a
substantial U.S. owner of the NFFE if
such person were a specified U.S. person.
Such written certification must indicate
whether the person is a substantial U.S.
owner of the NFFE, and if so, the name,
address and TIN of the person. If the
NFFE has reason to know that such writ-
ten certification is unreliable or incorrect,
it must contact the person and request a
revised written certification. If no revised
written certification is received, the NFFE
must treat the person as a substantial U.S.
owner and report on Form 8966 the infor-
mation required under paragraph (c)(3)(ii)
of this section. The NFFE has reason to

know that such a written certification is
unreliable or incorrect if the certification
is inconsistent with information in the
NFFE's possession, including information
that the NFFE provides to a financial in-
stitution in order for the financial institu-
tion to meet its AML or other account
identification due diligence procedures
with respect to the NFFE's account, infor-
mation that is publicly available, or U.S.
indicia as described in § 1.1441-7(b) for
which appropriate documentation suffi-
cient to cure the U.S. indicia in the man-
ner set forth in § 1.1441-7(b)(8) has not
been obtained;

(iv) The NFFE must keep records that
it produces in the ordinary course of its
business that summarize the activity (in-
cluding the gross amounts described in
paragraph (c)(3)(ii)(B) of this section that
are paid or credited to each of its substan-
tial U.S. owners) relating to its transac-
tions with respect to the equity of the
NFFE held by each of its substantial U.S.
owners for any calendar year in which the
owner was required to be reported under
paragraph (c)(3)(ii) of this section. The
records must be retained for the longer of
six years or the retention period under the
NFFE's normal business procedures. A
NFFE may be required to extend the six
year retention period if the IRS requests
such an extension prior to the expiration
of the six year period;

(v) The NFFE must respond to requests
made by the IRS for additional informa-
tion with respect to any substantial U.S.
owner that is subject to reporting by the
NFFE or with respect to the records de-
scribed in paragraph (c)(3)(iii) or (iv) of
this section;

(vi) The NFFE must make a periodic
certification to the IRS on or before July 1
of the calendar year following the end of
each certification period relating to its
compliance with respect to the election
described in paragraphs (c)(3) and (4) of
this section on the form and in the manner
prescribed by the IRS. The first certifica-
tion period begins on the later of the date
a GIIN is issued or June 30, 2014, and
ends at the close of the third full calendar
year following that date. Each subsequent
certification period is the three calendar
year period following the close of the pre-
vious certification period. The certifica-

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tion will require an officer of the NFFE to
certify to the following statements-

(A)(1) The NFFE has not had any
events of default described in paragraph
(c)(4)(v) of this section; or

(2) If there are any events of default,
appropriate measures were taken to reme-
diate such failures and to prevent such
failures from recurring; and

(B) With respect to any failure to report
to the extent required under paragraph
(c)(3)(ii), the NFFE has corrected such
failure by filing the appropriate informa-
tion returns; and

(vii) The NFFE has not had its status as
a direct reporting NFFE revoked by the
IRS.

(4) Election to be treated as a direct
reporting NFFE-(i) Manner of making
election. A NFFE may elect to be treated
as a direct reporting NFFE by registering
on Form 8957 (or such other form as the
IRS may prescribe) with the IRS to obtain
a GIIN pursuant to the procedures pre-
scribed by the IRS.

(ii) Effective date of election. The elec-
tion is effective upon the issuance of a
GIIN to the NFFE.

(iii) Revocation of election by NFFE.
The election may be revoked by the NFFE
by canceling its registration account on
the FATCA registration website and noti-
fying the IRS of its revocation in such
manner as the IRS may prescribe in the
Instructions for Form 8966, "FATCA Re-
port." The NFFE must also notify within
30 days its sponsoring entity (if applica-
ble) and each withholding agent and fi-
nancial institution from which it receives
payments or with which it holds an ac-
count for which a withholding certificate
or written statement prescribed in
§ 1.1471-3(d)(11)(x)(B) (as applicable)
was provided on which the NFFE certified
its status as a direct reporting NFFE if it
revokes its election.

(iv) Revocation of election by Commis-
sioner. The election may be revoked by
the Commissioner upon an event of de-
fault described in paragraph (c)(4)(v) of
this section and following the notice and
remediation procedures described in para-
graphs (vi) and (vii) of this section. If the
Commissioner revokes the NFFE's status
as a direct reporting NFFE, the NFFE
must provide notification within 30 days
of the revocation to each withholding

agent and financial institution from which
the NFFE receives payments or with
which it holds an account for which a
withholding certificate or written state-
ment (as permitted for chapter 4 purposes)
was provided by the NFFE to represent its
status as a direct reporting NFFE.

(v) Event of default. An event of de-
fault occurs if a direct reporting NFFE
fails to perform any of the obligations
described in (c)(3)(i) through (vi) of this
section. An event of default also includes
any misrepresentation of a material fact to
the IRS.

(vi) Notice of event of default. Follow-
ing an event of default known by or dis-
closed to the IRS, the IRS will deliver to
the NFFE a notice of default specifying
the event of default. The IRS will request
that the NFFE remediate the event of de-
fault within a specified time period. The
NFFE must respond to the notice of de-
fault and provide information responsive
to an IRS request for information or state
the reasons why the NFFE does not agree
that an event of default has occurred. If
the NFFE does not provide a response
within the specified time period, the IRS
may, at its sole discretion, deliver a notice
to the NFFE that its election to be treated
as a direct reporting NFFE has been re-
voked. A NFFE may request, within 90
days of receipt, reconsideration of a notice
of default or notice of revocation by writ-
ten request to the IRS.

(vii) Remediation of event of default. A
NFFE will be permitted to remediate an
event of default to the extent it agrees with
the IRS on a remediation plan. The IRS
may, as part of a remediation plan, require
additional information from the NFFE.

(5) Election by a direct reporting
NFFE to be treated as a sponsored direct
reporting NFFE-(i) Definition of spon-
sored direct reporting NFFE. A NFFE is
a sponsored direct reporting NFFE if the
NFFE is a direct reporting NFFE and if
another entity, other than a nonparticipat-
ing FFI, has agreed with the NFFE to act
as its sponsoring entity, as described in
paragraph (c)(5)(ii) of this section.

(ii) Requirements for sponsoring entity
of a sponsored direct reporting NFFE. A
sponsoring entity meets the requirements
of this paragraph (c)(5)(ii) if the sponsor-
ing entity-

(A) Is authorized to act on behalf of the
NFFE;

(B) Has registered with the IRS as a
sponsoring entity;

(C) Has registered the NFFE with the
IRS as a sponsored direct reporting NFFE
by the later of January 1, 2017, or the date
that the NFFE identifies itself to a with-
holding agent or financial institution as
qualifying as a sponsored direct reporting
NFFE under paragraph (c)(5) of this sec-
tion;

(D) Agrees to perform, on behalf of the
NFFE, all due diligence, reporting, and
other requirements that the NFFE would
have been required to perform as a direct
reporting NFFE;

(E) Identifies the NFFE in all reporting
completed on the NFFE's behalf;

(F) Complies with the certification and
other requirements in paragraphs (f) and
(g) of this section;

(G) Has not had its status as a sponsor-
ing entity revoked; and

(H) Agrees to notify all relevant with-
holding agents and the IRS if its status as
a sponsoring entity is revoked, if it other-
wise ceases to be the sponsoring entity of
any of its sponsored direct reporting
NFFEs (for example, if the sponsored di-
rect reporting NFFE changes sponsors), or
if the status of any of its sponsored direct
reporting NFFEs has been revoked.

(iii) Revocation of status as sponsoring
entity. The IRS may revoke a sponsoring
entity's status as a sponsoring entity with
respect to all sponsored direct reporting
NFFEs if there is a material failure by the
sponsoring entity to comply with its obli-
gations under paragraph (c)(5)(ii) of this
section with respect to any sponsored di-
rect reporting NFFE.

(iv) Liability of sponsoring entity. A
sponsoring entity is not liable for any fail-
ure to comply with the obligations con-
tained in paragraph (c)(5)(ii) of this sec-
tion. A sponsored direct reporting NFFE
will remain liable for all of its chapter 4
obligations without regard to any failure
of its sponsoring entity to comply with
the obligations contained in paragraph
(c)(5)(ii) of this section that the sponsor-
ing entity has agreed to undertake on be-
half of the NFFE.

(d) * * *

(1) In general. For purposes of this
section, except in the case of a payee that

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is a QI, WP, or WT, a withholding agent
may treat a withholdable payment as ben-
eficially owned by the payee as deter-
mined under § 1.1471-3. Thus, a with-
holding agent may treat a withholdable
payment as beneficially owned by an ex-
cepted NFFE (other than a QI, WP, or
WT) if the withholding agent can reliably
associate the payment with valid docu-
mentation to determine the payee's status
as an excepted NFFE under the rules of
§ 1.1471-3(d).

(2) Payments made to a NFFE that is a
QI, WP, or WT. A withholding agent may
treat the payee of a withholdable payment
as a NFFE that is a QI, WP, or WT if the
withholding agent can reliably associate
the payment with valid documentation to
determine the payee's status as such under
the rules of § 1.1471-3(b)(3) and (d).

* * * * *

(f) Sponsoring entity verification. [Re-
served]

(g) Sponsoring entity event of default.
[Reserved]

(h) Effective/applicability date. This
section applies on January 6, 2017. How-
ever, taxpayers may apply these provi-
sions as of January 28, 2013. (For the
rules that apply beginning on January 28,
2013, and before January 6, 2017, see this
section as in effect and contained in 26
CFR part 1 revised April 1, 2016.)

## § 1.1472-1T [Removed]

Par. 16. Section 1.1472-1T is re-
moved.

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

§ 1.1473-1 Section 1473 definitions.

(a) * * *

(1) * * *

(ii) For any sales or other dispositions
occurring after December 31, 2018, any
gross proceeds from the sale or other dis-
position (as defined in paragraph (a)(3)(i)
of this section) of any property of a type
that can produce interest or dividends that
are U.S. source FDAP income.

(2) * * *

(vi) Special rule for sales of interest
bearing debt obligations. Income that is
otherwise described as U.S. source FDAP
income in paragraphs (a)(2)(i) through (v)
of this section does not include an amount
of interest accrued on the date of a sale or
exchange of an interest bearing debt obli-
gation if the sale occurs between two in-
terest payment dates and is not part of a
plan described in § 1.1441-3(b)(2)(ii).
* * * * *

(3) * * *

(iii) * * *

(B) * * *

(4) In the case of a sale of an obligation
described in paragraph (a)(2)(vi), gross
proceeds includes any interest accrued be-
tween interest payment dates other than an
amount described in paragraph (a)(2)(vi)
of this section that is treated as U.S.
source FDAP income; and

* * * * *

### (4) * * *

(vi) Offshore payments of U.S. source
FDAP income prior to 2017 (transi-
tional). A payment with respect to an off-
shore obligation (as defined in § 1.1471-
1(b)(88)) made prior to January 1, 2017, if
such payment is U.S. source FDAP in-
come and made by a person that is not
acting as an intermediary or as a WP or
WT with respect to the payment. Addi-
tionally, a payment with respect to an
account, obligation, contract, or other in-
strument that is issued or maintained by
an entity other than a financial institution
and that would be treated as an offshore
obligation under § 1.6049-5(c)(1) (ap-
plied by substituting the term entity for the
term financial institution (as defined in
§ 1.1471-5(e)) in each place that it ap-
pears), made prior to January 1, 2017, if
such payment is U.S. source FDAP and
made by a person that is not acting as an
intermediary or as a WP or WT with re-
spect to the payment is not a withholdable
payment under paragraph (a)(1) of this
section. The exception for offshore pay-
ments of U.S. source FDAP income pro-
vided in the preceding sentences shall not
apply, however, in the case of a flow-
through entity that has a residual with-
holding requirement with respect to its
partners, owners, or beneficiaries under
§ 1.1471-2(a)(2)(ii), or in the case of pay-
ments made with respect to debt or equity
issued by a U.S. person (excluding inter-

est payments made by a foreign branch of
a U.S. financial institution with respect to
depository accounts it maintains). For pur-
poses of this paragraph (a)(4)(vi), an in-
termediary includes a person that acts as a
qualified securities lender as defined for
purposes of chapter 3 and does not include
a person acting as an insurance broker
with respect to premiums.

(vii) Collateral arrangements prior to
2017 (transitional). A payment made
prior to January 1, 2017, by a secured
party, or to a secured party other than a
nonparticipating FFI, with respect to col-
lateral securing one or more transactions
under a collateral arrangement, provided
that only a commercially reasonable
amount of collateral is held by the secured
party (or by a third party for the benefit of
the secured party) as part of the collateral
arrangement. For purposes of this para-
graph (a)(4)(vii), the term transaction
generally includes a debt instrument, a
derivative financial instrument (including
a notional principal contract, future, for-
ward, and option), and any securities lend-
ing transaction, sale-repurchase transac-
tion, margin loan, or substantially similar
transaction that is subject to a collateral
arrangement. Solely for purposes of this
paragraph (a)(4)(vii), a secured party may
provide documentation to the withholding
agent indicating that it is the beneficial
owner of a payment described in this para-
graph (a)(4)(vii), and a withholding agent
may rely on such certification for pur-
poses of its requirements under § 1.1471-
3(d) for determining whether withholding
under chapter 4 applies.

* * * * *

(5) * * *

(i) In general. This paragraph (a)(5)
provides special rules for a flow-through
entity, complex trust, or estate to deter-
mine when such entity must treat a pay-
ment of U.S. source FDAP income that is
also a withholdable payment as having
been paid by such entity to its partners,
owners, or beneficiaries (as applicable de-
pending on the type of entity).

(ii) Partnerships. An amount of U.S.
source FDAP income that is also a with-
holdable payment is treated as being paid
to a partner under rules similar to the rules
prescribing when withholding is required
for chapter 3 purposes as described in
§ 1.1441-5(b)(2)(i)(A).

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(iii) Simple trusts. An amount of U.S.
source FDAP income that is also a with-
holdable payment is treated as being paid
to a beneficiary of a simple trust under
rules similar to the rules prescribing when
withholding is required for chapter 3 pur-
poses as described in § 1.1441-5(b)(2)(ii).

(iv) Complex trusts and estates. An
amount of U.S. source FDAP income that
is also a withholdable payment is treated
as being paid to a beneficiary of a com-
plex trust or estate under rules similar to
the rules prescribing when withholding is
required for chapter 3 purposes as de-
scribed in § 1.1441-5(b)(2)(iii).

(v) Grantor trusts. If an amount of U.S.
source FDAP income that is also a with-
holdable payment is paid to a grantor
trust, a person treated as an owner of all or
a portion of such trust is treated as having
been paid such income by the trust at the
time it is received by or credited to the
trust or portion thereof.

(vi) Special rule for an NWP or NWT.
In the case of a partnership, simple trust,
or complex trust that is an NWP or NWT,
the rules described in paragraphs (a)(5)(ii)
and (iii) of this section shall not apply, and
U.S. source FDAP income that is also a
withholdable payment is treated as being
paid to the partner or beneficiary at the
time the income is paid to the partnership
or trust, respectively.

* * * * *

(b) * * *

(2) * * *

(v) Interests owned or held by a related
person. For purposes of determining
whether a specified U.S. person is a sub-
stantial U.S. owner in a foreign entity
described in paragraphs (b)(2)(i) through
(iv) of this section, if a specified U.S.
person owns or holds, directly or indi-
rectly, any interest in the foreign entity,
that interest must be aggregated with any
such interest in the foreign entity owned
or held, directly or indirectly, by a related
person. For purposes of the preceding
sentence, a related person is a person
or spouse of a person described in
§ 1.267(c)-1(a)(4), determined by refer-
ence to such specified U.S. person.

* * * * *

(f) Effective/applicability date. This
section generally applies on January 6,
2017. However, taxpayers may apply
these provisions as of January 28, 2013.

Paragraph (a)(4)(viii) of this section ap-
plies to payments made on or after Sep-
tember 18, 2015. (For the rules that apply
beginning on January 28, 2013, and be-
fore January 6, 2017, see this section as in
effect and contained in 26 CFR part 1
revised April 1, 2016.)

## § 1.1473-1T [Removed]

Par. 18. Section 1.1473-1T is removed.
Par. 19. Section 1.1474-1 is amended
by:

1\. Revising paragraphs (a)(3)(ii)(B),
(d)(1)(i), (d)(1)(ii)(A)(1)(iii), (d)(1)(ii)
(A)(1)(vi), (d)(1)(ii)(A)(1)(viii), (d)(1)(ii)
(A)(1)(ix),(d)(1)(ii)(A)(1)(xi), (d)(1)(ii)
(B)(1)(i), (d)(1)(ii)(B)(1)(iii) and (iv),
(d)(1)(ii)(B)(1)(vi) and (vii), (d)(1)(ii)
(B)(1)(ix),(d)(2)(i), (d)(3)(vii), (d)(4)
(i)(B), (d)(4)(i)(C) introductory text,
(d)(4)(i)(C)(2) and (3), (d)(4)(i)(E),
(d)(4)(ii)(B) and (C), and (d)(4)(iii).

2\. Adding paragraph (d)(4)(vii).

3\. Revising paragraphs (i)(1), (i)(2),
and (i)(2)(iii).

2\. Adding paragraphs (d)(4)(vii) and
(i)(4).

5\. Revising paragraph (j).

The revisions and additions read as fol-
lows:

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

(a) * * *

(3) * * *

(ii) * * *

(B) A Form 8655, "Reporting Agent
Authorization," is filed with the IRS by a
withholding agent if its agent (including any
sub-agent) acts as a reporting agent for filing
Form 1042 on behalf of the withholding
agent and the agent (or sub-agent) identifies
itself as the filer on the Form 1042;

* * * * *

(d) * * *

(1) * * *

(i) In general. Except as otherwise pro-
vided in paragraph (d)(4) of this section or
in the instructions to Form 1042-S, every
withholding agent must file an informa-
tion return on Form 1042-S, "Foreign
Person's U.S. Source Income Subject to
Withholding," (or such other form as the
IRS may prescribe) to report to the IRS
chapter 4 reportable amounts as described

in paragraph (d)(2)(i) of this section that
were paid to a recipient during the preced-
ing calendar year. Except as otherwise
provided in paragraphs (d)(4)(ii)(B) (cer-
tain unknown recipients) and (d)(4)(i)(B)
and (d)(4)(iii)(A) of this section (describ-
ing payees includable in reporting pools
of a participating FFI or registered
deemed-compliant FFI), a separate Form
1042-S must be filed with the IRS for
each recipient of an amount subject to
reporting under paragraph (d)(2)(i) of this
section and for each separate type of pay-
ment made to a single recipient in accor-
dance with paragraph (d)(4)(i) of this sec-
tion. The Form 1042-S shall be prepared
in such manner as the form and its accom-
panying instructions prescribe. One copy
of the Form 1042-S shall be filed with the
IRS on or before March 15 of the calendar
year following the year in which the amount
subject to reporting was paid, with a trans-
mittal form as provided in the instructions to
the form. Withholding certificates, certifica-
tions, documentary evidence, or other state-
ments or documentation provided to a with-
holding agent are not required to be attached
to the form. A copy of the Form 1042-S
must be furnished to the recipient for whom
the form is prepared (or any other person, as
required under this paragraph or the instruc-
tions to the form) and to any intermediary or
flow-through entity described in paragraph
(d)(3)(vii) of this section on or before March
15 of the calendar year following the year in
which the amount subject to reporting was
paid. A person required by this paragraph
(d)(1)(i) to furnish a copy of Form 1042-S
to the recipient for whom it is prepared may
furnish the copy of Form 1042-S in an
electronic format in lieu of a paper format
provided it meets the requirements of
§ 1.1461-1(c)(1)(i)(A). The withholding
agent must retain a copy of each Form
1042-S for the period of limitations on as-
sessment and collection applicable to the tax
reportable on the Form 1042 to which the
Form 1042-S relates (determined as set
forth in paragraph (c)(1) of this section). See
paragraph (d)(4)(iii) of this section for the
additional reporting requirements of partic-
ipating FFIs and deemed-compliant FFIs.

(ii) * * *

(A) * * *

(1) * * *

(iii) A participating FFI or a registered
deemed-compliant FFI that is an NQI,

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NWP, NWT, and a U.S. branch of an FFI
that is not treated as a U.S. person that
applies the rules described in § 1.1471-
4(d)(2)(iii)(C) and that provides its with-
holding agent with sufficient information
to determine the portion of the payment
allocable to its reporting pools of recalci-
trant account holders, payees that are non-
participating FFIs, and payees that are
U.S. persons described in paragraph
(d)(4)(i)(B) of this section;
** * * *

(vi) A U.S. branch of an FFI treated as
a U.S. person;

* * * * *

(viii) An excepted NFFE and passive
NFFE that also is not a flow-through en-
tity and that is not acting as an agent or
intermediary with respect to the payment;

(ix) A foreign person that is a partner or
beneficiary in a flow-through entity that is
a NFFE (looking through a partner or ben-
eficiary that is a foreign intermediary or
flow-through entity);

* * * * *

(xi) Any person (including a flow-
through entity or U.S. branch) receiving
such income that is (or is deemed to be)
effectively connected with the conduct of
its trade or business in the United States;

* * * * *

(B) * * *

(1) * * *

(i) A certified deemed-compliant FFI
that is an NQI, NWP, or NWT and that
fails to provide its withholding agent with
sufficient information to allocate the pay-
ment to its account holders and payees;
* * * * *

(iii) A participating FFI or a registered
deemed-compliant FFI that is an NQI,
NWP, or NWT, and a U.S. branch of an
FFI that is not treated as a U.S. person that
applies the rules described in § 1.1471-
4(d)(2)(iii)(C) to the extent it provides its
withholding agent with sufficient informa-
tion to allocate the payment to its account
holders and payees that are exempt from
withholding under chapter 4;

(iv) An account holder or payee of a
participating FFI or registered deemed-
compliant FFI, and an account holder or
payee of a U.S. branch of an FFI that is
not treated as a U.S. person that applies
the rules described in § 1.1471-4(d)
(2)(iii)(C)that is included in the FFI's re-

porting pools described in paragraph
(d)(4)(i)(B) of this section;
* * * * *

(vi) An account holder or payee of a
nonparticipating FFI except to the extent
described in paragraph (d)(1)(ii)(A)(1)(x)
of this section for an exempt beneficial
owner;

(vii) Except as provided in paragraph
(d)(1)(ii)(A)(1) of this section, an entity
that is disregarded under § 301.7701-
2(c)(2) of this chapter as an entity separate
from its owner;

* * * * *

(ix) A passive NFFE or an excepted
NFFE that is a flow-through entity or acts
as an intermediary;

* * * * *

(2) * * *

(i) In general. Subject to paragraph
(d)(2)(iii) of this section, the term chapter
4 reportable amount means each of the
following amounts reportable on a Form
1042-S for purposes of chapter 4-

(A) An amount of a withholdable pay-
ment that is subject to withholding under
chapter 4 paid after June 30, 2014;

(B) An amount of a withholdable pay-
ment of U.S. source FDAP income (in-
cluding an amount that would be a with-
holdable payment but for the fact that it is
an amount effectively connected with a
U.S. trade or business, as described in
§ 1.1471-3(a)(4)(ii)) that is also report-
able on Form 1042-S under § 1.1461-
1(c)(2)(i); or

(C) A foreign passthru payment subject
to withholding under chapter 4.

* * * * *

(3) * * *

(vii) The EIN or GIIN (as applicable),
status for chapter 3 and chapter 4 purposes
(as required on the instructions to the
form) of an entity reported under para-
graph (d)(3)(vi) of this section;
* * * * *

(4) * * *

(i) * * *

(B) Payments to participating FFIs,
deemed-compliant FFIs, and certain QIs.
Except as otherwise provided in this para-
graph (d)(4)(i)(B), a U.S. withholding
agent that makes a payment of a chapter 4
reportable amount to a participating FFI
or deemed-compliant FFI that is an NQI,
NWP, or NWT must complete a Form
1042-S treating such FFI as the recipient.

With respect to a payment of U.S. source
FDAP income made to a participating FFI
or registered deemed-compliant FFI that
is an NQI, NWP, or NWT or QI that elects
to be withheld upon under section
1471(b)(3) and from whom the withhold-
ing agent receives an FFI withholding
statement allocating the payment (or por-
tion of the payment) to a chapter 4 with-
holding rate pool, a U.S. withholding
agent must complete a separate Form
1042-S issued to the participating FFI,
registered deemed-compliant FFI, or QI
(as applicable) as the recipient with re-
spect to each such pool identified on an
FFI withholding statement, described in
§ 1.1471-3(c)(3)(iii)(B)(2). If, however, a
participating FFI, deemed-compliant FFI,
or QI (as applicable) has made an election
under § 1.1471-4(b)(3)(iii), for the por-
tion of the payment that the FFI allocates
to each recalcitrant account holder that is
subject to backup withholding under sec-
tion 3406, the withholding agent must re-
port on Form 1099 the amount of the
payment and tax withheld in accordance
with the form's requirements and accom-
panying instructions. See § 1.1471-
2(a)(2)(i) for the requirement of a with-
holding agent to withhold on payments of
U.S. source FDAP income made to a par-
ticipating FFI or registered deemed-
compliant FFI that is an NQI, NWP, or
NWT. See also § 1.1471-2(a)(2)(iii) in
the case of payments made to a QI. See
§ 1.1461-1(c)(4)(A) for the extent to
which reporting is required under that sec-
tion for U.S. source FDAP income that is
reportable on Form 1042-S under chapter
3 and not subject to withholding under
chapter 4, in which case the U.S. with-
holding agent must report in the manner
described under § 1.1461-1(c)(4)(ii) and
paragraph (d)(4)(ii)(A) of this section. See
paragraph (d)(4)(ii)(A) of this section for
reporting rules applicable if participating
FFIs or deemed-compliant FFIs provide
specific payee information for reporting to
the recipient of the payment for Form
1042-S reporting purposes. See paragraph
(d)(4)(iii) of this section for the residual
reporting responsibilities of an NQI,
NWP, or NWT that is an FFI.

(C) Amounts paid to a U.S. branch. A
U.S. withholding agent making a payment
of U.S. source FDAP income to a U.S.

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branch shall complete Form 1042-S as
follows-

* * * * *

(2) If the U.S. branch of an FFI is not
treated as a U.S. person and applies
the rules described in § 1.1471-
4(d)(2)(iii)(C) and provides the withhold-
ing agent with a withholding certificate
that transmits information regarding its
reporting pools referenced in paragraph
(d)(4)(i)(B) of this section or information
regarding each recipient that is an account
holder or payee of the U.S. branch, the
withholding agent must complete a sepa-
rate Form 1042-S issued to the U.S.
branch for each such pool to the extent
required on the form and its accompany-
ing instructions or must complete a sepa-
rate Form 1042-S issued to each recipient
whose documentation is associated with
the U.S. branch's withholding certificate
as described in paragraph (d)(4)(ii)(A) of
this section and report the U.S. branch as
an entity not treated as a recipient; or

(3) If the U.S. branch of an FFI is not
treated as a U.S. person and applies the rules
described in § 1.1471-4(d)(2)(iii)(C) to the
extent it fails to provide sufficient informa-
tion regarding its account holders or pay-
ees, the withholding agent shall report the
recipient of the payment as an unknown
recipient to the extent recipient information
is not provided and report the U.S. branch as
provided in paragraph (d)(4)(ii)(A) of
this section for an entity not treated as a
recipient.

* * * * *

(E) Amounts paid to NFFEs. A U.S.
withholding agent that makes payments of
chapter 4 reportable amounts to an ex-
cepted or passive NFFE shall complete
Forms 1042-S treating the NFFE as the
recipient, except when the NFFE is a
flow-through entity or acting as an inter-
mediary and the partner or beneficiary is
treated as the payee. In cases in which the
chapter 4 reportable amount is also an
amount of U.S. source FDAP income re-
portable on Form 1042-S (described in
§ 1.1441-2(a)), see also § 1.1461-
1(c)(4)(ii)(A) for the extent to which re-
porting is required with respect to the
partners, beneficiaries, or owners of such
entities.

(ii) * * *

(B) Nonparticipating FFI that is a
flow-through entity or intermediary. If a

withholding agent makes a payment of a
chapter 4 reportable amount to a nonpar-
ticipating FFI that it is required to treat as
an intermediary with regard to a payment
or as a flow-through entity under rules
described in § 1.1471-3(c)(3)(iii), and ex-
cept as otherwise provided in paragraph
(d)(1)(ii)(A)(1)(x) of this section (relating
to an exempt beneficial owner), the with-
holding agent must report the recipient of
the payment as an unknown recipient and
report the nonparticipating FFI as pro-
vided in paragraph (d)(4)(ii)(A) of this
section for an entity not treated as a recip-
ient.

(C) Disregarded entities. If a U.S.
withholding agent makes a payment to a
disregarded entity and receives a valid
withholding certificate or other documen-
tary evidence from the person that is the
single owner of such disregarded entity,
the withholding agent must file a Form
1042-S treating the single owner as the
recipient in accordance with the instruc-
tions to the Form 1042-S.

(iii) Reporting by participating FFIs
and deemed-compliant FFIs (including
QIs, WPs, and WTs) and U.S. branches of
FFIs not treated as U.S. persons-(A) In
general. Except as otherwise provided in
paragraph (d)(4)(iii)(B) (relating to NQIs,
NWPs, NWTs, and FFIs electing under
section 1471(b)(3)) and § 1.1471-
4(d)(2)(ii)(F) (relating to transitional
payee-specific reporting for payments to
nonparticipating FFIs), a participating FFI
or deemed-compliant FFI (including a QI,
WP, or WT), and a U.S. branch of an FFI
that is not treated as a U.S. person that
applies the rules described in § 1.1471-
4(d)(2)(iii)(C) that makes a payment that
is a chapter 4 reportable amount to a re-
calcitrant account holder or nonparticipat-
ing FFI must complete a Form 1042-S to
report such payments. A participating FFI
or registered deemed-compliant FFI (in-
cluding a QI, WP, or WT), and a U.S.
branch of an FFI that is not treated as a
U.S. person that applies the rules de-
scribed in § 1.1471-4(d)(2)(iii)(C) may
report in pools consisting of its recalci-
trant account holders and payees that are
nonparticipating FFIs. With respect to re-
calcitrant account holders, the FFI may
report in pools consisting of recalcitrant
account holders within a particular status
described in § 1.1471-4(d)(6) and within

a particular income code. Except as
otherwise provided in § 1.1471-4(d)(2)
(ii)(F), with respect to payees that are
nonparticipating FFIs, the FFI may report
in pools consisting of one or more non-
participating FFIs that fall within a partic-
ular income code and within a particular
status code described in the instructions to
Form 1042-S. Alternatively, a participat-
ing FFI or registered deemed-compliant
FFI (including a QI, WP, or WT) and a
U.S. branch of an FFI that is not treated as
a U.S. person that applies the rules de-
scribed in § 1.1471-4(d)(2)(iii)(C) may
(and a certified deemed-compliant FFI is
required to) perform payee-specific re-
porting to report a chapter 4 reportable
amount paid to a recalcitrant account
holder or a nonparticipating FFI when
withholding was applied (or should have
applied) to the payment.

(B) Special reporting requirements of
participating FFIs, deemed-compliant
FFIs, FFIs that make an election under
section 1471(b)(3), and U.S. branches of
FFIs not treated as U.S. persons. Except
as otherwise provided in § 1.1471-
4(d)(2)(ii)(F), a participating FFI or
deemed-compliant FFI that is an NQI,
NWP, or NWT, and a U.S. branch of an
FFI that is not treated as a U.S. person that
applies the rules described in § 1.1471-
4(d)(2)(iii)(C)or an FFI that has made an
election under section 1471(b)(3) and has
provided sufficient information to its
withholding agent to withhold and report
the payment is not required to report the
payment on Form 1042-S as described in
paragraph (d)(4)(iii)(A) of this section if
the payment is made to a nonparticipating
FFI or recalcitrant account holder and its
withholding agent has withheld the cor-
rect amount of tax on such payment and
correctly reported the payment on a Form
1042-S. Such FFI or branch is required to
report a payment, however, when the FFI
knows, or has reason to know, that less
than the required amount has been with-
held by the withholding agent on the pay-
ment or the withholding agent has not
correctly reported the payment on Form
1042-S. In such case, the FFI or branch
must report on Form 1042-S to the extent
required under paragraph (d)(4)(iii)(A) of
this section. See, however, § 1.1471-
4(d)(6) for the requirement to report cer-
tain aggregate information regarding ac-

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counts held by recalcitrant account
holders on Form 8966, "FATCA Report,"
regardless of whether withholdable pay-
ments are made to such accounts.

(C) Reporting by a U.S. branch treated
as a U.S. person. A U.S. branch treated as
a U.S. person (as defined in § 1.1471-
1(b)(135)) must report amounts paid to
recipients on Forms 1042-S in the same
manner as a U.S. withholding agent under
paragraph (d)(4)(i) of this section.
* * * * *

(vii) [Reserved]. For further guidance,
see § 1.1474-1T(d)(4)(vii).

* * * * *

(i) * * *

(1) Reporting by certain withholding
agents with respect to owner-documented
FFIs-(i) Beginning on July 1, 2014, if a
withholding agent (other than an FFI
reporting accounts held by owner-
documented FFIs under § 1.1471-4(d))
makes a withholdable payment to an en-
tity account holder or payee of an obliga-
tion and the withholding agent treats the
entity as an owner-documented FFI under
§ 1.1471-3(d)(6), the withholding agent
is required to report for July 1 through
December 31, 2014, with respect to each
specified U.S. person identified in
§ 1.1471-3(d)(6)(iv)(A)(1) and (2) the
information described in paragraph
(i)(1)(iii) of this section.

(ii) Beginning in calendar year 2015, if
a withholding agent (other than an FFI
reporting accounts held by owner-
documented FFIs under § 1.1471-4(d))
makes during a calendar year a withhold-
able payment to an entity account holder
or payee of an obligation and the with-
holding agent treats the entity as an
owner-documented FFI under § 1.1471-
3(d)(6), the withholding agent is required
to report for such calendar year with re-
spect to each specified U.S. person iden-
tified in § 1.1471-3(d)(6)(iv)(A)(1) and
(2) the information described in paragraph
(i)(1)(iii) of this section.

(iii) The information that a withholding
agent (other than an FFI reporting ac-
counts held by owner-documented FFIs
under § 1.1471-4(d)) is required to report
under paragraphs (i)(1)(i) and (ii) of this
section must be made on Form 8966 (or
such other form as the IRS may prescribe)
and filed on or before March 31 of the
calendar year following the year in which

the withholdable payment was made. A
withholding agent is not required to report
under paragraph (i)(1)(i) or (ii) of this
section on a withholdable payment made
to a participating FFI or reporting Model 1
FFI that is allocated to a payee that is an
owner-documented FFI on an FFI with-
holding statement when the participating
FFI or reporting Model 1 FFI includes on
the statement the certification described in
§ 1.1471-3(c)(3)(iii)(B)(2)(v), provided
that the withholding agent does not know
or have reason to know that the certifica-
tion is incorrect or unreliable. The report
must contain the following information-

(A) The name of the owner-documented
FFI;

(B) The name, address, and TIN of
each specified U.S. person identified in
§ 1.1471-3(d)(6)(iv)(A)(1) and (2);

(C) For the period from July 1 through
December 31, 2014, the total of all with-
holdable payments made to the owner-
documented FFI, and with respect to pay-
ments made after the 2014 calendar year,
the total of all withholdable payments
made to the owner-documented FFI dur-
ing the calendar year;

(D) The account balance or value of the
account held by the owner-documented
FFI; and

(E) Any other information required on
Form 8966 and its accompanying instruc-
tions provided for purposes of such re-
porting.

(2) Reporting by certain withholding
agents with respect to U.S. owned foreign
entities that are passive NFFEs. Begin-
ning on July 1, 2014, in addition to the
reporting on Form 1042-S required under
paragraph (d)(4)(i)(E) of this section, a
withholding agent (other than an FFI re-
porting accounts held by NFFEs under
§ 1.1471-4(d)) that makes a withholdable
payment to, and receives information
about any substantial U.S. owners of, a
passive NFFE that is not an excepted
NFFE as defined in § 1.1472-1(c) shall
file a report with the IRS for the period
from July 1 through December 31, 2014,
and in each subsequent calendar year in
which a withholdable payment is made
with respect to any substantial U.S. own-
ers of such NFFE. Such report must be
made on Form 8966 (or such other form
as the IRS may prescribe) and filed on or
before March 31 of the calendar year fol-

lowing the year in which the withholdable
payment was made. A withholding agent
is not required to report under this para-
graph (i)(2) on a withholdable payment
made to a participating FFI or a registered
deemed-compliant FFI that is allocated to
a payee that is a passive NFFE with one or
more substantial U.S. owners on an
FFI withholding statement when the par-
ticipating FFI or registered deemed-
compliant FFI includes on the statement
the certification described in § 1.1471-
3(c)(3)(iii)(B)(2)(iv), provided that the
withholding agent does not know or have
reason to know that the certification is
incorrect or unreliable. In the case of an
entity to which the preceding sentence
does not apply that is a flow-through en-
tity or is acting as an intermediary receiv-
ing a withholdable payment allocable to a
passive NFFE with one or more substan-
tial U.S. owners, the entity is not required
to report with respect to the passive NFFE
under this paragraph (i)(2) if it provides to
the withholding agent from which it re-
ceives the payment documentation suffi-
cient for the withholding agent to report
information with respect to the passive
NFFE under this paragraph (i)(2), pro-
vided that the intermediary or flow-
through entity does not know or have rea-
son to know that the withholding agent
does not report with respect to the passive
NFFE under this paragraph (i)(2). The
report must contain the following infor-
mation-

** * * *

(iii) For the period from July 1, 2014
through December 31, 2014, the total of
all withholdable payments made to the
NFFE and, with respect to payments made
after the 2014 calendar year, the total of
all withholdable payments made to the
NFFE during the calendar year; and

* * * * *

(4) Extensions of time to file. The IRS
shall grant an automatic 90-day extension of
time in which to file Form 8966 as required
under paragraph (i)(1) or (i)(2) of this sec-
tion. Form 8809-I, "Application of Exten-
sion of Time to File FATCA Form 8966,"
(or such other form as the IRS may pre-
scribe) must be used to request such exten-
sion of time and must be filed no later than
the due date of Form 8966. Under certain
hardship conditions, the IRS may grant an
additional 90-day extension. A request for

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extension due to hardship must contain a
statement of the reasons for requesting the
extension and such other information as the
form or instructions may require.

(j) Effective/applicability date. This
section applies on January 6, 2017. How-
ever, taxpayers may apply these provi-
sions as of January 28, 2013. (For the
rules that apply beginning on January 28,
2013, and before January 6, 2017, see this
section as in effect and contained in 26
CFR part 1 revised April 1, 2016.)

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

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

(a) through (c) [Reserved]. For further
guidance, see § 1.1474-1(a) through (c)(3).

(d) [Reserved]. For further guidance,
see § 1.1474-1(d).

(1) through (3)(ix) [Reserved]. For fur-
ther guidance, see § 1.1474-1(d)(1)
through (3)(ix).

(4) [Reserved]. For further guidance,
see § 1.1474-1(d)(4).

(i) through (vi) [Reserved]. For further
guidance, see § 1.1474-1(d)(4)(i) through
(vi).

(vii) Combined Form 1042-S report-
ing. A withholding agent required to re-
port on Form 1042-S under paragraph
(d)(4) of this section (other than a nonpar-
ticipating FFI reporting under paragraph
(d)(4)(v) of this section) may rely on the
procedures used for chapter 3 purposes
(provided in published guidance) for re-
porting on Form 1042-S (even if the with-
holding agent is not required to report
under chapter 3) for combined reporting
following a merger or acquisition, pro-
vided that all of the requirements for such
reporting provided in the Instructions for
Form 1042-S are satisfied.

(e) through (j) [Reserved]. For further
guidance, see § 1.1474-1(e) through (j).

(k) Expiration date. The applicability
of this section expires on December 30,
2019

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

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

* * * * *

(b) * * *

(1) In general. In the case of a with-
holdable payment that is both subject to
withholding under chapter 4 and is an
amount subject to withholding under
§ 1.1441-2(a), a withholding agent may
credit the withholding applied under chap-
ter 4 against its liability for any tax due
under sections 1441, 1442, or 1443. See
§ 1.1474-1(c) and (d) for the income tax
return and information return reporting re-
quirements that apply in the case of a
payment that is a withholdable payment
subject to withholding under chapter 4
that is also an amount subject to withhold-
ing under § 1.1441-2(a).

* * * * *

(f) Coordination with section 3406. A
participating FFI that makes a withhold-
able payment that is also a reportable pay-
ment (as defined in the relevant sections
of chapter 61) to a recalcitrant account
holder that is a U.S. non-exempt recipient
is not required to withhold under section
3406 if it withholds on the payment at a
30-percent rate in accordance with its
withholding obligations under chapter 4.
See, however, § 1.1471-4(b)(3)(iii) for
the election to withhold on recalcitrant
account holders that are non-exempt U.S.
recipients under section 3406 instead of
withholding under chapter 4.

(g) Effective/applicability date. This
section applies on January 6, 2017. How-
ever, taxpayers may apply these provi-
sions as of January 28, 2013. (For the
rules that apply beginning on January 28,
2013, and before January 6, 2017, see this
section as in effect and contained in 26
CFR part 1 revised April 1, 2016.)

### § 1.1474-6T [Removed]

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

# PART 301 - PROCEDURE AND ADMINISTRATION

Par. 23. The authority citation for part
301 continues to read in part as follows:

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

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

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

* * * * *

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

John Dalrymple
Deputy Commissioner for Services and
Enforcement.

Approved: December 22, 2016

Mark J. Mazur
Assistant Secretary of the Treasury (Tax
Policy).

(Filed by the Office of the Federal Register on December 30,
2016, 4:15 p.m., and published in the issue of the Federal
Register for January 6, 2017, 82 F.R. 2124)

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# Part III. Administrative, Procedural, and Miscellaneous

Guidance Relating to the
Availability and Use of an
Account Transcript as a
Substitute for an Estate
Tax Closing Letter
Notice 2017-12

## SECTION 1. PURPOSE

This notice provides guidance on the
methods available to confirm the closing
of an examination of the estate tax return
(Form 706, United States Estate (and
Generation-Skipping Transfer) Tax Re-
turn). More specifically, this notice an-
nounces that an account transcript issued
by the Internal Revenue Service (IRS) can
substitute for an estate tax closing letter
(Letter 627).

## SECTION 2. BACKGROUND

An estate tax closing letter is a written
communication from the IRS that speci-
fies the amount of the net estate tax, the
state death tax credit or deduction, and
any generation-skipping transfer tax for
which the estate is liable; however, it does
not indicate how much has been paid in
estate tax or generation-skipping transfer
tax.

Notably, the estate tax closing letter
also confirms that the estate tax return has
either been accepted by the IRS as filed, or
has been accepted after an adjustment by
the IRS to which the estate has agreed.
Thus, the receipt of an estate tax closing
letter generally indicates that, for purposes
of determining the estate tax liability of
the decedent's estate, the IRS examination
of the estate tax return is closed. An estate
tax closing letter, however, is not a formal
closing agreement and, as section 5 of
Rev. Proc. 2005-32, 2005-1 C.B. 1206,
and the estate tax closing letter provide, its
issuance does not prevent the IRS from
reopening or reexamining the estate tax
return to determine estate tax liability if
there is (1) evidence of fraud, malfea-
sance, collusion, concealment, or misrep-
resentation of a material fact, (2) a clearly-
defined, substantial error based upon an
established IRS position, or (3) another
circumstance indicating that a failure to

reopen the case would be a serious admin-
istrative omission. In addition, in the case
of the estate of a decedent (survived by a
spouse) that elects portability of the de-
ceased spousal unused exclusion (DSUE)
amount, the issuance of an estate tax clos-
ing letter does not prevent the IRS from
examining the estate tax return of that
decedent for the purpose of determining
the transfer tax liability of the surviving
spouse of that decedent (specifically, the
DSUE amount to be included in the ap-
plicable exclusion amount of the surviv-
ing spouse). See § 2010(c)(5)(B) of the
Internal Revenue Code and §§ 20.2010-
2(d) and 20.2010-3(d) of the Estate Tax
Regulations.

Prior to June 1, 2015, the IRS issued an
estate tax closing letter for every estate tax
return filed (except in the case of an estate
tax return filed for the purpose of electing
portability under § 2010(c)(5)(A) when
the estate had no filing requirement under
§ 6018(a) and the portability election was
denied). However, for estate tax returns
filed on or after June 1, 2015, the IRS
changed its policy and now will issue an
estate tax closing letter only at the request
of an estate, which request is to be made at
least four months after the filing of the
estate tax return.

## SECTION 3. DISCUSSION

The Treasury Department and IRS un-
derstand that executors, local probate
courts, state tax departments, and others
have come to rely on estate tax closing
letters for confirmation that the IRS exam-
ination of the estate tax return has been
completed and the IRS file has been
closed. Estate tax closing letters continue
to be available upon request. However, an
account transcript may substitute for an
estate tax closing letter and is available at
no charge.

An account transcript is a computer-
generated report that provides current ac-
count data. The information reported on
an account transcript includes, but is not
limited to, the return received date, pay-
ment history, refund history, penalties as-
sessed, interest assessed, the balance due
with accruals, and the date on which the
examination was closed. An account tran-

script presents this account data by includ-
ing transaction codes together with the
descriptions of those codes. An account
transcript that includes transaction code
"421" and the explanation "Closed exam-
ination of tax return" indicates that the
IRS's examination of the estate tax return
has been completed and that the IRS ex-
amination is closed. Thus, the issuance of
an estate tax closing letter and the entry of
code "421" on the estate's account tran-
script each independently confirms that
the IRS's examination of the estate tax
return has been completed, and may be
reopened to determine the estate tax lia-
bility of a decedent only in the circum-
stances described in both the closing letter
and Rev. Proc. 2005-32. Accordingly, an
account transcript showing a transaction
code of "421" can serve as the functional
equivalent of an estate tax closing letter.

## SECTION 4. GUIDANCE

For confirmation that the IRS examina-
tion of an estate tax return has been com-
pleted and is closed, estates and their au-
thorized representatives can request an
account transcript in lieu of an estate tax
closing letter. Receipt of an account tran-
script with a transaction code of "421,"
like receipt of an estate tax closing letter,
confirms the closing of the IRS examina-
tion of the estate tax return. The IRS may
reopen the examination of the estate tax
return after the issuance of a closing letter
or the entry of transaction code "421" on
the account transcript for the purpose of
determining the estate tax liability of a
decedent in a circumstance described in
both the closing letter and Rev. Proc.
2005-32. Further, as provided in
§ 2010(c)(5)(B) and §§ 20.2010-2(d)
and 20.2010-3(d), the IRS may examine
the estate tax return of a decedent after
the issuance of a closing letter or the
entry of transaction code "421" on the
account transcript for the purpose of de-
termining the transfer tax liability of the
surviving spouse of that decedent when
portability has been elected.

Estates and their authorized represen-
tatives may request an account transcript
by filing Form 4506-T, Request for Tran-
script of Tax Return. Currently, Form

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4506-T can be filed with the IRS via mail
or facsimile (per the instructions on the
form). Although account transcripts for
estate tax returns are not currently avail-
able through the IRS's online Transcript
Delivery System, the IRS website,
www.irs.gov, will have current informa-
tion should an automated method become
operational. To allow time for processing
the estate tax return, requests should be
made no earlier than four months after
filing the estate tax return.

For those who wish to continue to re-
ceive estate tax closing letters, estates and
their authorized representatives may call
the IRS at (866) 699-4083 to request an
estate tax closing letter no earlier than
four months after the filing of the estate
tax return.

## DRAFTING INFORMATION

The principal author of this notice is
Lane Damazo of the Office of Associate
Chief Counsel (Passthroughs & Special
Industries). For further information re-
garding this notice, contact Lane Damazo
on (202) 317-6859 (not a toll-free num-
ber).

## Rev. Proc. 2017-18

### SECTION 1. PURPOSE

This revenue procedure provides that
the last day of the remedial amendment
period for § 403(b) plans, for purposes of
section 21 of Rev. Proc. 2013-22,
2013-18 I.R.B. 985, is March 31, 2020.
The selection of the last day of the reme-
dial amendment period for § 403(b) plans
was reserved in section 21 of Rev. Proc.
2013-22 (setting forth the procedures for
issuing opinion and advisory letters for
§ 403(b) pre-approved plans).

### SECTION 2. BACKGROUND

.01 Contributions for an annuity con-
tract purchased for an employee by an
eligible employer are generally excluded
from the employee's gross income if the
requirements described in § 403(b) of the
Internal Revenue Code are met. Amounts
paid by an eligible employer to a custodial
account that satisfies the requirements of
§ 401(f)(2) are treated as contributed to an

annuity contract for an employee if the
requirements of § 403(b)(7)(A)(i) and (ii)
are met. For purposes of this revenue
procedure, an eligible employer is a
public school, an employer described in
§ 501(c)(3) that is exempt from tax under
§ 501(a), an employer of a minister de-
scribed in § 414(e)(5)(A) with respect to
the minister, or a minister described in
§ 414(e)(5)(A) with respect to a retire-
ment income account under § 403(b)(9)
established for the minister.

.02 Final regulations under § 403(b)
(§§ 1.403(b)-1 through 1.403(b)-11)
were published on July 26, 2007 (T.D.
9340, 72 FR 41128) (the Ҥ 403(b) regu-
lations").

.03 Revenue Procedure 2013-22 sets
forth the procedures and establishes a pro-
gram for issuing opinion and advisory let-
ters for § 403(b) pre-approved plans (that
is, § 403(b) prototype plans and § 403(b)
volume submitter plans). Under the pro-
gram established by Rev. Proc. 2013-22,
the Internal Revenue Service (IRS) began
accepting applications for opinion and ad-
visory letters regarding the acceptability
under § 403(b) of the form of prototype
plans and volume submitter plans, respec-
tively, starting June 28, 2013.

.04 Section 21.02 of Rev. Proc.
2013-22 provides for a remedial amend-
ment period to allow an eligible employer
to retroactively correct defects in the form
of its written § 403(b) plan in order to
satisfy the written plan requirements in
the § 403(b) regulations either by timely
adopting a § 403(b) pre-approved plan or
by otherwise timely amending its written
§ 403(b) plan. Section 21.02 also provides
that the first day of the remedial amend-
ment period is the later of January 1,
2010, or the plan's effective date. Section
21.03 provides, in general, that the reme-
dial amendment period is available only if
an employer adopts a written plan in-
tended to satisfy the § 403(b) require-
ments on or before the first day of the
remedial amendment period.

.05 Section 21.02 of Rev. Proc.
2013-22 defines a defect in the form of a
plan as a provision, or the absence of a
required provision, that causes the plan
to fail to satisfy the requirements of
§ 403(b). Section 21.03 provides that any
defect in the form of a plan must be cor-
rected on or before the last day of the

remedial amendment period. Section
21.05 provides that the IRS "will an-
nounce, in subsequent guidance, the date
that will be the last day of the remedial
amendment period for all eligible employ-
ers for purposes of this section 21."

## SECTION 3. SECTION 403(b) REMEDIAL AMENDMENT PERIOD

The last day of the remedial amend-
ment period described in section 2 of this
revenue procedure and in section 21 of
Rev. Proc. 2013-22 is March 31, 2020. A
plan that does not satisfy the requirements
of § 403(b) in form on any day during the
remedial amendment period (that is, the
period beginning on the later of January 1,
2010, or the plan's effective date, and
ending on March 31, 2020) will be con-
sidered to have satisfied those require-
ments if, on or before March 31, 2020, all
provisions of the plan that are necessary to
satisfy § 403(b) have been adopted and
made effective in form and operation from
the beginning of the remedial amendment
period.

# SECTION 4. FUTURE GUIDANCE

The Department of the Treasury and
the IRS intend to issue guidance in the
future with respect to the timing of
§ 403(b) plan amendments made after
March 31, 2020.

# SECTION 5. EFFECT ON OTHER DOCUMENTS

Rev. Proc. 2013-22 is clarified by this
revenue procedure.

# SECTION 6. EFFECTIVE DATE

This revenue procedure is effective on
January 13, 2017.

# SECTION 7. DRAFTING INFORMATION

The principal author of this revenue
procedure is Patrick Gutierrez of the Of-
fice of Associate Chief Counsel (Tax Ex-
empt and Government Entities). For fur-
ther information regarding this revenue
procedure contact Patrick Gutierrez on
(202) 317-4148 (not a toll-free number).

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## Part IV. Items of General Interest

### Notice of proposed rulemaking.

Revision of Regulations
Under Chapter 3 Regarding
Withholding of Tax on
Certain U.S. Source
Income Paid to Foreign
Persons

REG-134247-16

AGENCY: Internal Revenue Service
(IRS), Treasury.

ACTION: Notice of proposed rulemaking
by cross-reference to temporary regulations.

SUMMARY: In the Rules and Regula-
tions section of this issue of the Bulletin,
the Department of the Treasury (Treasury
Department) and the IRS are issuing tem-
porary regulations (TD 9808) that revise
certain provisions of the final regulations
regarding withholding of tax on certain
U.S. source income paid to foreign per-
sons and requirements for certain claims
for refund or credit of income tax made by
foreign persons. The text of the temporary
regulations also serves as the text of these
proposed regulations.

DATES: Written or electronic comments
and requests for a public hearing must be
received by April 6, 2017.

ADDRESSES: Send submissions to: CC:
PA:LPD:PR (REG-134247-16), room
5203, Internal Revenue Service, PO Box
7604, Ben Franklin Station, Washington,
DC 20044. Submissions may be hand-
delivered Monday through Friday be-
tween the hours of 8:00 a.m. and 4:00
p.m. to CC:PA:LPD:PR (REG-134247-
16), Courier's Desk, Internal Revenue
Service, 1111 Constitution Avenue,
NW, Washington, DC 20224, or sent
electronically, via the Federal eRule-
making Portal at www.regulations.gov
(IRS REG-134247-16).

FOR FURTHER INFORMATION CON-
TACT: Concerning the proposed regula-
tions, Leni Perkins, (202) 317-6942; con-
cerning submissions of comments and/or

requests for a public hearing, Regina
Johnson, (202) 317-6901 (not toll-free
numbers).

SUPPLEMENTARY INFORMATION:
Background

The temporary regulations in the Rules
and Regulations section of this issue of
the Bulletin amend the Income Tax Reg-
ulations (26 CFR part 1) relating to sec-
tion 1441 of the Internal Revenue Code
(Code). The temporary regulations set
forth rules relating to withholding and re-
porting requirements under chapter 3 of
the Code, including rules relating to
claims for a reduced rate of withholding
under an income tax treaty. The preamble
to the temporary regulations explains the
temporary regulations and these proposed
regulations.

### Special Analyses

Certain IRS regulations, including
these, are exempt from the requirements
of Executive Order 12866, as supple-
mented and reaffirmed by Executive Or-
der 13653. Therefore, a regulatory assess-
ment is not required.

It is hereby certified that the collection
of information in this notice of proposed
rulemaking will not have a significant
economic impact on a substantial number
of small entities within the meaning of
section 601(6) of the Regulatory Flexibil-
ity Act (5 U.S.C. chapter 6).

The domestic small business entities
that are subject to the collections of infor-
mation in this notice of proposed rulemak-
ing are those domestic business entities
that are payors of certain U.S. source in-
come to foreign persons. These domestic
small business entities are subject to com-
prehensive rules under chapter 3 to iden-
tify the proper treatment of payees for
purposes of that chapter's information re-
porting and tax withholding purposes. The
domestic small business entities subject to
the collections of information in this no-
tice of proposed rulemaking are also sub-
ject to comprehensive information report-
ing and tax withholding rules under
chapters 4 and 61 with respect to pay-
ments of certain U.S. source income sub-

ject to information reporting and tax re-
porting under chapter 3. These payors are
also subject to information and reporting
rules under section 3406.

Payors of payments that are subject to
the information reporting and withholding
regimes under chapter 3 play an important
role in U.S. tax compliance by providing
information about payments made to, and
income earned by, U.S. and foreign tax-
payers.

Although the Treasury Department and
the IRS anticipate that a substantial num-
ber of domestic small entities will be af-
fected by the collection of information in
this notice of proposed rulemaking, the
Treasury Department and the IRS believe
that the economic impact to these entities
resulting from the information collection
requirements will not be significant. The
reporting obligations under these pro-
posed regulations flow from the obliga-
tions that domestic small entities may
have as withholding agents for payments
of amounts subject to withholding under
sections 1441 or 1442. As withholding
agents, these entities have already been
subject to the overall framework of these
regulations, and the economic burden of
complying with any additional require-
ments will be minimal. Therefore, a Reg-
ulatory Flexibility Analysis under the
Regulatory Flexibility Act is not required.
Pursuant to section 7805(f) of the Code,
this regulation has been submitted to the
Chief Counsel for Advocacy of the Small
Business Administration for comment on
its impact on small businesses.

### Comments and Public Hearing

Before these proposed regulations are
adopted as final regulations, consideration
will be given to any written comments
that are submitted timely to the IRS as
prescribed in this preamble under the
"ADDRESSES" heading. The Treasury
Department and the IRS request com-
ments on all aspects of the proposed rules,
including comments on the clarity of the
proposed rules and how compliance there-
with could be made easier. All comments
will be available for public inspection and
copying. A public hearing will be sched-
uled if requested in writing by any person

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that timely submits written comments. If a
public hearing is scheduled, notice of the
date, time, and place for the public hear-
ing will be published in the Federal Reg-
ister.

### Drafting Information

The principal author of these proposed
regulations is Leni C. Perkins, Office of
Associate Chief Counsel (International).
However, other personnel from the Trea-
sury Department and the IRS participated
in their development.

* * * * *

### Proposed Amendments to the Regulations

Accordingly, 26 CFR part 1 is pro-
posed to be amended as follows:

## PART 1-INCOME TAXES

Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *

Par. 2. Section 1.1441-1 is amended
by:

1\. Adding paragraphs (b)(7)(ii)(B) and
(c)(2)(ii).

2\. Revising paragraph (c)(3)(ii).

3\. Adding paragraphs (c)(38)(ii), (e)(2)
(ii)(B), (e)(3)(iv)(C)(3),(e)(4)(i)(B), (e)
(4)(ii)(A)(2), (e)(4)(iv)(D), and (e)(4)
(iv)(E).

The revisions and additions read as fol-
lows:

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

* * * * *

(b) * * *

(7) * * *

(ii) * * *

(B) [The text of the proposed amend-
ment to § 1.1441-1(b)(7)(ii)(B) is the
same as the text of § 1.1441-1T(b)
(7)(ii)(B) published elsewhere in this is-
sue of the Bulletin.]

* * * * *

(c) * * *

(2) * * *

(ii) [The text of the proposed amend-
ment to § 1.1441-1(c)(2)(ii) is the same as
the text of § 1.1441-1T(c)(2)(ii) published
elsewhere in this issue of the Bulletin.]

### (3) * * *

(ii) [The text of the proposed amend-
ment to § 1.1441-1(c)(3)(ii) is the same as
the text of § 1.1441-1T(c)(3)(ii) published
elsewhere in this issue of the Bulletin.]
* * * * *

(38) * * *

(ii) [The text of the proposed amend-
ment to § 1.1441-1(c)(38)(ii) is the same
as the text of § 1.1441-1T(c)(38)(ii) pub-
lished elsewhere in this issue of the Bul-
letin.]

* * * * *

(e) * * *

(2) * * *

(ii) * * *

(B) [The text of the proposed amend-
ment to § 1.1441-1(e)(2)(ii)(B) is the
same as the text of § 1.1441-1T(e)(2)
(ii)(B) published elsewhere in this issue of
the Bulletin.]

* * * * *

(3) * * *

(iv) * * *

(C) * * *

(3) [The text of the proposed amend-
ment to § 1.1441-1(e)(3)(iv)(C)(3) is the
same as the text of § 1.1441-1T(e)(3)
(iv)(C)(3) published elsewhere in this is-
sue of the Bulletin.]

* * * * *

(4) * * *

(i) * * *

(B) [The text of the proposed amend-
ment to § 1.1441-1(e)(4)(i)(B) is the same
as the text of § 1.1441-1T(e)(4)(i)(B)
published elsewhere in this issue of the
Bulletin.]

(ii) * * *

(A) * * *

(2) [The text of the proposed amend-
ment to § 1.1441-1(e)(4)(ii)(A)(2) is the
same as the text of § 1.1441-1T(e)(4)
(ii)(A) published elsewhere in this issue of
the Bulletin.]

* * * * *

(iv) * * *

(D) [The text of the proposed amend-
ment to § 1.1441-1(e)(4)(iv)(D) is the
same as the text of § 1.1441-1T(e)(4)
(iv)(D) published elsewhere in this issue
of the Bulletin.]

(E) [The text of the proposed amend-
ment to § 1.1441-1(e)(4)(iv)(E) is the
same as the text of § 1.1441-1(e)(4)
(iv)(E) published elsewhere in this issue
of the Bulletin.]

* * * * *

Par. 3. Section 1.1441-2 is amended by
adding paragraph (a)(8) to read as fol-
lows:

§ 1.1441-2 Amounts subject to
withholding.

(a) * * *

(8) [The text of the proposed amend-
ment to § 1.1441-2(a)(8) is the same as
the text of § 1.1441-2T(a)(8) published
elsewhere in this issue of the Bulletin.]
* * * * *

Par. 4. Section 1.1441-6 is amended
by:

1\. Adding paragraphs (b)(1)(i) and
(b)(1)(ii).

2\. Revising paragraphs (c)(1) and
(c)(5)(i).

The additions and revision read as fol-
lows:

§ 1.1441-6 Claim of reduced
withholding under an income tax treaty.

* * * * *

(b) * * *

(1) * * *

(i) [The text of the proposed amend-
ment to § 1.1441-6(b)(1)(i) is the same as
the text of § 1.1441-6T(b)(1)(i) published
elsewhere in this issue of the Bulletin.]

(ii) [The text of the proposed amend-
ment to § 1.1441-6(b)(1)(ii) is the same
as the text of § 1.1441-6T(b)(1)(ii) pub-
lished elsewhere in this issue of the Bul-
letin.]

* * * * *

(c) * * *

(1) [The text of the proposed amend-
ment to § 1.1441-6(c)(1) is the same as
the text of § 1.1441-6T(c)(1) published
elsewhere in this issue of the Bulletin.]
* * * * *

(5) * * *

(i) [The text of the proposed amend-
ment to § 1.1441-6(c)(5)(i) is the same as
the text of § 1.1441-6T(c)(5)(i) published
elsewhere in this issue of the Bulletin.]
* * * * *

Par. 5. Section 1.1441-7 is amended by
adding paragraph (b)(10)(iv) to read as
follows:

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§ 1.1441-7 General provisions relating
to withholding agents.

(b)

(10)

(iv) [The text of the proposed amend-
ment to § 1.1441-7(b)(10)(iv) is the same as
the text of § 1.1441-7T(b)(10)(iv) published
elsewhere in this issue of the Bulletin.]
* * * * *

John Dalrymple,
Deputy Commissioner for Services and
Enforcement.

(Filed by the Office of the Federal Register on December 30,
2016, 4:15 p.m., and published in the issue of the Federal
Register for January 6, 2017, 82 F.R. 1645)

## Notice of proposed rulemaking.

Chapter 4 Regulations
Relating to Verification and
Certification Requirements
for Certain Entities and
Reporting by Foreign
Financial Institutions

REG-103477-14

AGENCY: Internal Revenue Service
(IRS), Treasury.

ACTION: Notice of proposed rulemak-
ing; notice of proposed rulemaking by
cross-reference to temporary regulation.

SUMMARY: This document contains
proposed regulations under chapter 4 of
Subtitle A (sections 1471 through 1474)
of the Internal Revenue Code of 1986
(Code) describing the verification re-
quirements (including certifications of
compliance) and events of default for
entities that agree to perform the chapter
4 due diligence, withholding, and re-
porting requirements on behalf of cer-
tain foreign financial institutions (FFIs)
or the chapter 4 due diligence and re-
porting obligations on behalf of certain
non-financial foreign entities. These
proposed regulations also describe the
certification requirements and proce-
dures for IRS's review of certain trust-

ees of trustee-documented trusts and the
procedures for IRS's review of periodic
certifications provided by registered
deemed-compliant FFIs. In addition,
these proposed regulations describe the
procedures for future modifications to
the requirements for certifications of
compliance for participating FFIs.
These proposed regulations also de-
scribe the requirements for certifications
of compliance for participating FFIs that
are members of consolidated compli-
ance groups. In addition, in the Rules
and Regulations section of this issue of
the Bulletin, the Department of the
Treasury (Treasury Department) and
IRS are issuing temporary regulations
that provide additional guidance under
chapter 4 (temporary chapter 4 regula-
tions). The text of the temporary chapter
4 regulations also serves as the text of
the regulations contained in this docu-
ment that are proposed by cross-
reference to the temporary chapter 4
regulations. The preamble to the tempo-
rary chapter 4 regulations explains the
temporary chapter 4 regulations and
these proposed regulations that cross-
reference to the temporary chapter 4
regulations.

DATES: Written or electronic comments
and requests for a public hearing must be
received by April 6, 2017.

ADDRESSES: Send submissions to: CC:
PA:LPD:PR (REG-103477-14), Internal
Revenue Service, Room 5203, PO Box
7604, Ben Franklin Station, Washing-
ton, DC 20044. Submissions may be
hand-delivered Monday through Friday
between the hours of 8 a.m. and 4 p.m.
to CC:PA:LPD:PR (REG-103477-14),
Courier's Desk, Internal Revenue Ser-
vice, 1111 Constitution Avenue, NW,
Washington, DC 20224; or sent elec-
tronically via the Federal eRulemaking
Portal at http://www.regulations.gov
(IRS-REG-103477-14).

FOR FURTHER INFORMATION CON-
TACT: Concerning the proposed regula-
tions, Kamela Nelan, (202) 317-6942;
concerning submissions of comments
and/or requests for a public hearing, Re-
gina Johnson, (202) 317-6901 (not toll
free numbers).

SUPPLEMENTARY INFORMATION:

## Background

### I. In General

### A. Chapter 4

Sections 1471 through 1474 under
chapter 4 of Subtitle A (chapter 4) were
added to the Code on March 18, 2010, as
part of the Hiring Incentives to Restore
Employment Act of 2010, Public Law
111-147. Chapter 4 (commonly known as
the Foreign Account Tax Compliance Act,
or FATCA) generally requires withhold-
ing agents to withhold tax on certain pay-
ments to foreign financial institutions
(FFIs) that do not agree to report certain
information to the IRS regarding their
U.S. accounts under section 1471(b)(1).
Chapter 4 also generally requires with-
holding agents to withhold tax on certain
payments to certain non-financial foreign
entities (NFFEs) that do not provide to the
withholding agent information on their
substantial United States owners (substan-
tial U.S. owners) or a certification that
they have no such owners. On January 28,
2013, final regulations (TD 9610) under
chapter 4 were published in the Federal
Register (78 FR 5874), and on September
10, 2013, corrections to the final regula-
tions were published in the Federal Reg-
ister (78 FR 55202). TD 9610 and the
September 2013 corrections are referred
to collectively in this preamble as the
2013 final regulations. On March 6, 2014,
temporary regulations (TD 9657) under
chapter 4 were published in the Federal
Register (79 FR 12812) and corrections
to the temporary regulations were pub-
lished in the Federal Register on July 1,
2014, and November 18, 2014 (79 FR
37175 and 78 FR 68619, respectively). In
this preamble, TD 9657 and the correc-
tions thereto are referred to collectively as
the 2014 temporary regulations, and to-
gether with the 2013 final regulations, as
the chapter 4 regulations. A notice of pro-
posed rulemaking cross-referencing the
2014 temporary regulations was published
in the Federal Register on March 6, 2014
(79 FR 12868).

To address situations where foreign
law would prevent an FFI from reporting
directly to the IRS the information re-
quired by chapter 4, the Treasury Depart-

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ment, in collaboration with certain foreign
governments, developed two alternative
model intergovernmental agreements,
known as the Model 1 IGA and the Model 2
IGA. Under the Model 1 IGA, an FFI that is
treated as a reporting Model 1 FFI is treated
as complying with and not subject to with-
holding under section 1471 provided that
the FFI complies with the requirements
specified in the Model 1 IGA and reports
information about its U.S. accounts to the
Model 1 IGA jurisdiction, which is followed
by the automatic exchange of that informa-
tion on a government-to-government basis
with the United States. Under the Model 2
IGA, an FFI that is treated as a reporting
Model 2 FFI follows the terms of the FFI
agreement and reports information about
U.S. accounts directly to the IRS. See Rev-
enue Procedure 2014-38, 2014-29 I.R.B.
131, as may be amended, for the FFI agree-
ment. An FFI identified as a nonreporting
financial institution pursuant to a Model 1 or
Model 2 IGA is not required to report infor-
mation on U.S. accounts unless specifically
required as a condition of its applicable
chapter 4 status.

### II. Background on Sponsored Entities

#### A. In general

The chapter 4 regulations permit cer-
tain FFIs and NFFEs to be sponsored by
other entities for purposes of satisfying
their chapter 4 requirements. Under the
2013 final regulations, an FFI treated as
complying with the requirements of sec-
tion 1471(b)(1) (a deemed-compliant FFI)
includes a sponsored FFI. In addition, the
2014 temporary regulations provide that a
NFFE excepted from providing informa-
tion regarding its substantial U.S. owners
to a withholding agent (an excepted
NFFE) includes a NFFE that is a direct
reporting NFFE or a sponsored direct re-
porting NFFE. In the preamble to the 2014
temporary regulations, the Treasury De-
partment and IRS announced that regula-
tions describing the verification require-
ments of a sponsoring entity of a
sponsored FFI or sponsored direct report-
ing NFFE (sponsored entities) would be
proposed and issued separately from the
2014 temporary regulations.

B. Background on sponsored FFIs and
trustee-documented trusts

The chapter 4 regulations provide two
general categories of deemed-compliant
FFIs: registered deemed-compliant FFIs
and certified deemed-compliant FFIs. A
registered deemed-compliant FFI includes
an FFI that satisfies the requirements of
§ 1.1471-5(f)(1)(i)(F)(1) or (2) to qualify
as either a sponsored investment entity or
a sponsored controlled foreign corpora-
tion. A certified deemed-compliant FFI
includes an FFI that satisfies the require-
ments of § 1.1471-5(f)(2)(iii) to qualify as
a sponsored, closely-held investment ve-
hicle. The chapter 4 regulations provide
that a sponsored FFI under any of the
foregoing sections must have an agree-
ment with a sponsoring entity under
which the sponsoring entity performs, on
behalf of the sponsored FFI, all of the due
diligence, withholding, reporting, and
other requirements that the FFI would
have been required to perform if it were a
participating FFI. A sponsoring entity of a
sponsored FFI must register with the IRS
as a sponsoring entity on Form 8957,
FATCA Registration, via the FATCA
registration website available at http://
www.irs.gov/fatca, and must also register
any sponsored investment entity or
sponsored controlled foreign corporation
within the time specified in § 1.1471-
5(f)(1)(i)(F)(3)(iii). The 2014 temporary
regulations reserve on the rules for verifi-
cation of compliance and the events of
default for a sponsoring entity of a spon-
sored FFI.

The Model 1 and Model 2 IGAs treat
certain financial institutions as nonreport-
ing financial institutions. Under Annex II
of the Model 1 IGA, a nonreporting finan-
cial institution that is a sponsored invest-
ment entity, sponsored controlled foreign
corporation, or sponsored, closely held in-
vestment vehicle is treated as a deemed-
compliant FFI for purposes of section
1471. A sponsoring entity of a sponsored
entity subject to a Model 1 IGA agrees to
perform, on behalf of the sponsored en-
tity, all of the due diligence, withholding,
reporting, and other requirements that the
sponsored entity would have been re-
quired to perform if it were a reporting
Model 1 financial institution. As a result, a
sponsoring entity of a sponsored entity

subject to a Model 1 IGA reports to the
applicable Model 1 IGA jurisdiction with
respect to the financial accounts main-
tained by the sponsored entity.

Under the Model 1 and Model 2 IGAs,
a nonreporting financial institution in-
cludes a financial institution that "other-
wise qualifies as a deemed-compliant
FFI . . . under relevant U.S. Treasury
Regulations." Thus, a financial institution
covered by a Model 1 or Model 2 IGA
may choose to qualify as a sponsored in-
vestment entity, controlled foreign corpo-
ration, or closely held investment vehicle
pursuant to § 1.1471-5(f) instead of An-
nex II of the Model 1 or Model 2 IGA. In
such a case, the financial institution must
satisfy all of the requirements applicable
to such an entity in the regulations, includ-
ing the requirement for the sponsoring
entity to report information directly to the
IRS, even in the case of a financial insti-
tution covered by a Model 1 IGA.

Under Annex II of the Model 2 IGA, a
financial institution that is a sponsored
investment entity or sponsored controlled
foreign corporation is treated as a regis-
tered deemed-compliant FFI, and a finan-
cial institution that is a sponsored, closely
held investment vehicle is treated as a
certified deemed-compliant FFI. A spon-
soring entity of a sponsored entity subject
to a Model 2 IGA agrees to perform, on
behalf of the sponsored entity, all of the
due diligence, withholding, reporting, and
other requirements that the sponsored en-
tity would have been required to perform
if it were a reporting Model 2 FFI. As a
result, the sponsoring entity of a spon-
sored entity subject to a Model 2 IGA
registers with the IRS and reports to the
IRS with respect to financial accounts of
the sponsored entity. Annex II of the
Model 2 IGA also provides that a regis-
tered deemed-compliant FFI must register
with the IRS on the FATCA registration
website and have its responsible officer
certify every three years to the IRS that all
of the requirements for the deemed-
compliant category claimed by the finan-
cial institution have been satisfied since
July 1, 2014.

The Model 1 and Model 2 IGAs treat
certain FFIs that are trusts as nonreporting
financial institutions. Under Annex II of
the Model 1 IGA, a financial institution
that is a trustee-documented trust is

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treated as a deemed-compliant FFI. Under
Annex II of the Model 2 IGA, a financial
institution that is a trustee-documented
trust is treated as a certified deemed-
compliant FFI. Under both the Model 1
IGA and the Model 2 IGA, a trust quali-
fies as a trustee-documented trust pro-
vided that the trustee of the trust is a U.S.
financial institution, reporting Model 1
FFI, or participating FFI that reports all of
the information required to be reported
pursuant to the IGA with respect to U.S.
accounts or U.S. reportable accounts (as
applicable) of the trust. A trustee of a
trustee-documented trust subject to a
Model 1 or Model 2 IGA should register
with the IRS. A trustee of a trustee-
documented trust subject to a Model 2
IGA reports to the IRS with respect to the
trust, whereas a trustee of a trustee-
documented trust subject to a Model 1
IGA reports to the applicable Model 1
IGA jurisdiction.

## C. Background on sponsored direct reporting NFFEs

Section 1472(c)(1)(G) permits the
Treasury Department and IRS to issue
regulations exempting withholding agents
from withholding or reporting under sec-
tion 1472(a) with respect to payments
beneficially owned by certain persons
identified by the Treasury Department and
IRS, which are referred to in the chapter 4
regulations as excepted NFFEs. As noted
in Part II.A of this Background, the 2014
temporary regulations include direct re-
porting NFFEs as a class of excepted
NFFEs.

A direct reporting NFFE is a NFFE
that elects to report information about its
substantial U.S. owners directly to the IRS
(rather than to the withholding agent) and
that meets the requirements of § 1.1472-
1(c)(3). A direct reporting NFFE may
elect to be treated as a sponsored direct
reporting NFFE if another entity, other
than a nonparticipating FFI, agrees to act
as its sponsoring entity for performing all
of the due diligence, reporting, and other
requirements that the NFFE would have
been required to perform as a direct re-
porting NFFE. The sponsoring entity of a
sponsored direct reporting NFFE must
register with the IRS as a sponsoring en-
tity and must also register the NFFE with

the IRS as a sponsored direct reporting
NFFE as required in the chapter 4 regula-
tions. The sponsoring entity must also
comply with the verification procedures
and other compliance-related require-
ments provided in the regulations. The
2014 temporary regulations reserve on the
verification procedures and the events of
default for a sponsoring entity of a spon-
sored direct reporting NFFE.

Under section VI(b) of Annex I of the
Model 1 and Model 2 IGAs, an active
NFFE includes a NFFE that is treated as
an excepted NFFE under the chapter 4
regulations. An active NFFE (including a
direct reporting NFFE) does not need to
be reported as a U.S. account by a report-
ing Model 1 FFI or reporting Model 2 FFI
with which the NFFE holds an account.

### III. Background on Verification Requirements for Participating FFIs and Compliance FIs

Under the chapter 4 regulations, a
participating FFI is required to establish
and implement a compliance program
for satisfying its requirements under
§ 1.1471-4. The responsible officer of
the FFI must periodically certify to the
IRS that the FFI maintains effective in-
ternal controls or, if the responsible of-
ficer cannot make this certification, he
or she must make a qualified certifica-
tion. If there is an event of default, the
IRS will notify the FFI and request re-
mediation. The FFI must respond to the
notice of default and provide informa-
tion to the IRS. If the FFI does not
provide a response, the IRS may deliver
a notice of termination that terminates
the FFI's participating FFI status.

The chapter 4 regulations permit a par-
ticipating FFI that is a member of an ex-
panded affiliated group to elect to be part
of a consolidated compliance program un-
der the authority of a participating FFI,
reporting Model 1 FFI, or U.S. financial
institution that is a member of the same
expanded affiliated group (compliance
FI). The compliance FI must establish and
maintain the consolidated compliance
program and perform a consolidated peri-
odic review on behalf of each member FFI
that elects to be part of the consolidated
compliance program (electing FFI).

IV. Background on Certification
Requirements for Registered Deemed-
Compliant FFIs

An FFI may be a registered deemed-
compliant FFI if it meets the requirements
of a class of FFIs specified in § 1.1471-
5(f)(1). Certain classes of registered
deemed-compliant FFIs have compliance
obligations as a condition of their status
under this section. For example, a regis-
tered deemed-compliant FFI that is a non-
reporting member of a participating FFI
group under § 1.1471-5(f)(1)(i)(B) must
monitor its accounts to ensure that it iden-
tifies any account that becomes a U.S.
account or an account held by a recalci-
trant account holder or nonparticipating
FFI and meets its requirement to transfer
or close such accounts (or become a par-
ticipating FFI). In order for the IRS to
verify that a registered deemed-compliant
FFI meets the requirements of its applica-
ble deemed-compliant status and is satis-
fying any such compliance obligations,
the chapter 4 regulations require a regis-
tered deemed-compliant FFI to have its
responsible officer certify every three
years to the IRS that the FFI meets the
requirements for its applicable deemed-
compliant status.

## Explanation of Provisions

### I. Sponsoring Entities of Sponsored FFIs

These proposed regulations provide
verification requirements for a sponsoring
entity of a sponsored FFI that are gener-
ally similar to the verification require-
ments for a compliance FI. See Part IV of
this Explanation of Provisions for the ver-
ification requirements for consolidated
compliance programs. Under these pro-
posed regulations, a sponsoring entity
must maintain a compliance program to
oversee its compliance with respect to
each sponsored FFI for purposes of satis-
fying the deemed-compliant status re-
quirements of § 1.1471-5(f)(1)(i)(F) or
(f)(2)(iii) or an applicable Model 2 IGA.
The deemed-compliant status require-
ments include: (i) the assumption by the
sponsoring entity of due diligence, with-
holding, and reporting obligations on be-
half of each sponsored FFI, and (ii) com-
pliance with the additional requirements

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for status as a sponsoring entity, such as
registering with the IRS.

These proposed regulations consoli-
date all of the verification requirements
for a sponsoring entity. The 2014 tempo-
rary regulations, in § 1.1471-5T(f)(1)
(i)(F)(3)(vi),(f)(1)(i)(F)(3)(vii), (f)(2)(iii)
(D)(4), and (f)(2)(iii)(D)(5), require a
sponsoring entity to perform the verifica-
tion procedures described in § 1.1471-
4(f) on behalf of a sponsored FFI and also
perform the verification procedures de-
scribed in § 1.1471-5(j) and (k) on behalf
of itself. The 2014 temporary regulations,
in § 1.1471-5T(j) and (k), reserved such
verification procedures. These proposed
regulations include all of the sponsoring
entity's verification requirements in pro-
posed § 1.1471-5(j).

These proposed regulations also re-
quire that a sponsoring entity appoint
a responsible officer (as defined in
§ 1.1471-1(b)(116) of these proposed reg-
ulations) to oversee the compliance of the
sponsoring entity with respect to each
sponsored FFI for purposes of satisfying
the requirements of § 1.1471-5(f)(1)(i)(F)
or (f)(2)(iii) or of an applicable Model 2
IGA. The responsible officer must certify
to the IRS by July 1 of the calendar year
following the end of each certification pe-
riod that the sponsoring entity is compli-
ant with the requirements to be a sponsor-
ing entity and maintains effective internal
controls with respect to all sponsored FFIs
for which it acts (or provides a qualified
certification) on the form and in the man-
ner prescribed by the IRS. A sponsored
FFI is not required to appoint its own
responsible officer. Although the pream-
ble to the 2014 temporary regulations
states that under proposed regulations a
sponsoring entity would be required to
make two separate compliance certifica-
tions (one on behalf of its sponsored
FFI(s) and another on the sponsoring en-
tity's own behalf), the Treasury Depart-
ment and IRS have determined that a sin-
gle certification is sufficient for this
purpose.

Under these proposed regulations, in
general, a sponsoring entity must make a
certification regarding its compliance with
respect to all sponsored FFIs for which it
acts during the certification period. How-
ever, with respect to a certification period,
a sponsoring entity is generally not re-

quired to certify for a sponsored FFI that
first agrees to be sponsored by the spon-
soring entity during the six month period
prior to the end of the certification period,
provided that the sponsoring entity makes
certifications for such sponsored FFI for
subsequent certification periods and the
first such certification covers both the sub-
sequent certification period and the por-
tion of the prior certification period during
which such FFI was sponsored by the
sponsoring entity. However, the preceding
sentence does not apply with respect to a
sponsored FFI that, immediately before
the FFI agrees to be sponsored by the
sponsoring entity, was a participating FFI,
registered deemed-compliant FFI, or
sponsored, closely held investment vehi-
cle. The sponsoring entity may certify for
a sponsored FFI described in the preced-
ing sentence for the portion of the certifi-
cation period prior to the date that the FFI
first agrees to be sponsored by the
sponsoring entity if the sponsoring entity
obtains from the FFI (or the FFI's spon-
soring entity, if applicable) a written cer-
tification that the FFI has complied with
its applicable chapter 4 requirements dur-
ing such portion of the certification pe-
riod, provided that: (1) the sponsoring en-
tity does not know that such certification
is unreliable or incorrect; and (2) the cer-
tification for the sponsored FFI for the
subsequent certification period covers
both the subsequent certification period
and the portion of the prior certification
period during which such FFI was spon-
sored by the sponsoring entity. The first
certification period begins on the later of
the date the sponsoring entity is issued a
GIIN to act as a sponsoring entity or June
30, 2014.

The requirements for the certification
of compliance may be modified to include
additional certifications or information
(such as quantitative or factual informa-
tion related to the sponsoring entity's
compliance), provided that such addi-
tional information or certifications are
published at least 90 days before being
made effective in order to allow for public
comment. The Treasury Department and
IRS intend to coordinate any such modi-
fication to the requirements for the certi-
fication of compliance for sponsoring en-
tities with any modification to the
requirements for the certification of com-

pliance for participating FFIs. See Part IV
of this Explanation of Provisions for cer-
tifications required by participating FFIs.

These proposed regulations provide
that the responsible officer of a sponsoring
entity must make the certification de-
scribed in § 1.1471-4(c)(7) (preexisting
account certification of a participating
FFI) with respect to each sponsored FFI
that enters into the sponsorship agreement
with the sponsoring entity during the cer-
tification period. However, with respect to
a certification period, the preexisting ac-
count certification is not required for a
sponsored FFI if, immediately before it
first agrees to be sponsored by the spon-
soring entity, the FFI was a participating
FFI, a sponsored FFI, or a registered
deemed-compliant FFI that is a local FFI
or a restricted fund, and the FFI (or the
FFI's former sponsoring entity, if applica-
ble) provides a written certification to the
sponsoring entity that the FFI has made
the preexisting account certification re-
quired of it, provided that the sponsoring
entity does not know that such certifica-
tion is unreliable or incorrect. Further-
more, since a participating FFI could have
up to two years to complete the required
due diligence on its preexisting accounts
under § 1.1471-4(c)(3)(ii) and (c)(5)(i),
the preexisting account certification is not
required for a sponsored FFI that first
agrees to be sponsored by the sponsoring
entity during the two year period prior to
the end of such certification period, pro-
vided that the sponsoring entity makes the
preexisting account certification for such
FFI for the subsequent certification pe-
riod. The preexisting account certification
for the certification period must be sub-
mitted by the due date of the sponsoring
entity's certification of compliance for the
certification period and on the form and in
the manner prescribed by the IRS. With
respect to a sponsored FFI for which the
sponsoring entity is required to make a
preexisting account certification, a preex-
isting obligation means any account, in-
strument, or contract (including any debt
or equity interest) maintained, executed,
or issued by the sponsored FFI that is
outstanding on the earlier of the date the
FFI is issued a GIIN as a sponsored FFI of
the sponsoring entity or the date the FFI or
the sponsoring entity first represents to a
withholding agent or financial institution

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that the FFI is a sponsored FFI of the
sponsoring entity.

These proposed regulations permit the
IRS to make general inquiries to a spon-
soring entity regarding its compliance
with its applicable requirements, similar
to the general inquiries the IRS may make
to a participating FFI with respect to its
compliance (as provided in final regula-
tions under chapter 4 published together
with the temporary chapter 4 regulations).
These proposed regulations provide that
the IRS may request any additional infor-
mation from the sponsoring entity (includ-
ing a copy of the sponsorship agreement
that the sponsoring entity has entered into
with each sponsored FFI) necessary to
determine its compliance with the due dil-
igence, withholding, and reporting re-
quirements of § 1.1471-4 or an applicable
Model 2 IGA with respect to each spon-
sored FFI and to assist the IRS with its
review of account holder compliance with
tax reporting requirements. These pro-
posed regulations also provide that if the
IRS determines that the sponsoring entity
may not have substantially complied with
the requirements of a sponsoring entity
with respect to any sponsored FFI for
which it acts, the IRS may make inquiries
to the sponsoring entity regarding its com-
pliance with the requirements of a spon-
soring entity and may request the perfor-
mance of specified review procedures.
Inquiries regarding the compliance of a
sponsoring entity with respect to a spon-
sored FFI subject to the requirements of
an applicable Model 2 IGA will be made
using the procedures described in these
proposed regulations, except as otherwise
provided in an applicable Model 2 IGA.

These proposed regulations describe
the events of default for a sponsoring en-
tity and the termination procedures fol-
lowing an event of default. The Treasury
Department and IRS recognize that some
events of default may relate only to a
particular sponsored FFI (or several such
FFIs) for which the sponsoring entity acts
and thus should not affect the statuses of
other sponsored FFIs for which the spon-
soring entity acts or the status of the spon-
soring entity. In other cases, an event of
default may relate to a sponsoring entity's
failure to comply with its own require-
ments, such as when it fails to establish
and maintain a compliance program or

perform a periodic review. Accordingly,
these proposed regulations provide IRS
the discretion to determine whether, based
on facts and circumstances, an event of
default should result in the termination of
the sponsoring entity's status as a spon-
soring entity, the deemed-compliant sta-
tuses of one or more sponsored FFIs, or
both the status of the sponsoring entity
and the statuses of one or more sponsored
FFIs. If a sponsoring entity's status is
terminated, the sponsoring entity may not
reregister as a sponsoring entity for any
sponsored FFI or any sponsored entity
subject to a Model 1 IGA without prior
written approval from the IRS. A spon-
sored FFI whose sponsoring entity's sta-
tus is terminated may register on the
FATCA registration website as a partic-
ipating FFI or registered deemed-
compliant FFI or may be registered on
the FATCA registration website as a
sponsored FFI of a new sponsoring en-
tity (other than an entity that has a re-
lationship to the terminated sponsoring
entity described in section 267(b)), as
applicable. However, if the sponsored
FFI's status is terminated (independent
of a termination of the sponsoring en-
tity), the sponsored FFI must obtain
prior written approval from the IRS in
order to register as a participating FFI or
registered deemed-compliant FFI or be
registered as a sponsored FFI of a new
sponsoring entity.

The definition of sponsored FFI in the
2013 final regulations is limited to an en-
tity that is a sponsored investment entity,
sponsored controlled foreign corporation,
or sponsored, closely held investment
vehicle under § 1.1471-5(f)(1)(i)(F) or
§ 1.1471-5(f)(2)(iii). These proposed reg-
ulations expand the definition of spon-
sored FFI to also include a sponsored in-
vestment entity, sponsored controlled
foreign corporation, or sponsored, closely
held investment vehicle treated as a
deemed-compliant FFI under an applica-
ble Model 2 IGA. These proposed regula-
tions do not impose verification require-
ments or specify events of default for a
sponsoring entity of a sponsored entity
subject to an applicable Model 1 IGA. The
obligations of such a sponsoring entity are
governed by the laws and requirements of
the applicable Model 1 IGA jurisdiction.
However, the IRS may treat a sponsored

entity covered by a Model 1 IGA as a
nonparticipating FFI pursuant to Article
5(2)(b) of an applicable Model 1 IGA if
the IRS determines that there is significant
non-compliance with the obligations of
the IGA by the sponsored entity that has
not been resolved within 18 months. In
addition, pursuant to the termination pro-
cedures described in the previous para-
graph, the IRS may revoke the status of a
sponsoring entity based on an event of
default relating to one or more spon-
sored FFIs. Consistent with Annex II of
the Model 1 IGA, such revocation
would prevent the sponsoring entity
from sponsoring an FFI subject to a
Model 1 IGA. The IRS may also notify
such Model 1 IGA jurisdiction of the
revocation. A sponsored entity subject
to a Model 1 IGA whose sponsor's sta-
tus is terminated would need to become
a reporting Model 1 FFI, obtain a new
sponsor, or meet the requirements of
another deemed-compliant status.

As described in Part II.B of the Back-
ground of this preamble, the Model 2 IGA
allows certain sponsored FFIs to be
treated as deemed-compliant FFIs and
provides that the IRS may revoke a spon-
soring entity's status if there is a material
failure by the sponsoring entity to comply
with the obligations described in Annex II
of the IGA. Accordingly, the verification
requirements and events of default in
these proposed regulations apply to a
sponsoring entity of a sponsored FFI sub-
ject to an applicable Model 2 IGA. In
addition, the procedures for IRS inquiries
specified in these proposed regulations ap-
ply to a sponsoring entity of a sponsored
FFI subject to an applicable Model 2 IGA
except to the extent otherwise provided in
the applicable Model 2 IGA. Although
Annex II of the Model 2 IGA permits the
IRS to revoke a sponsoring entity's status
upon a material failure (as described
above), because the Treasury Department
and IRS believe that a consistent standard
for when to terminate a sponsoring enti-
ty's status should apply, these proposed
regulations provide that the IRS will not
revoke the status of a sponsoring entity of
a sponsored FFI subject to a Model 2 IGA
unless there is an event of default and the
procedures for termination described in
these proposed regulations have been ap-
plied.

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### II. Trustees of Trustee-Documented Trusts

These proposed regulations provide
that a trustee of a trustee-documented trust
subject to a Model 2 IGA shall appoint a
responsible officer who will maintain a
compliance program and oversee the
trustee's compliance with respect to each
trustee-documented trust for purposes of
satisfying the requirements of an applica-
ble Model 2 IGA. The responsible officer
must perform a periodic review of the
sufficiency of the trustee's compliance
program for each certification period.
The responsible officer must also certify
to the IRS that the trustee has established
a compliance program, performed a peri-
odic review, and reported to the IRS all of
the information required to be reported
with respect to each trustee-documented
trust for each certification period. Certain
late-joining trustee-documented trusts
may be excluded from a certification un-
der rules similar to those provided in these
proposed regulations for sponsored FFIs.
The IRS will not unilaterally revoke the
status of, or issue a notice of default to, a
trustee of such a trust. Instead, subject to
the requirements of an applicable Model 2
IGA, these proposed regulations permit
the IRS to make inquiries to the trustee
regarding its compliance with its applica-
ble requirements and notify the Model 2
IGA jurisdiction if the trustee has not
complied with its requirements with re-
spect to one or more trustee-documented
trusts established in that jurisdiction. The
IRS may also notify an applicable Model
1 IGA jurisdiction of the trustee's non-
compliance with respect to its require-
ments as a trustee of a trustee-documented
trust subject to a Model 2 IGA if the
trustee also acts on behalf of trustee-
documented trusts in the Model 1 IGA
jurisdiction or if the trustee is located in
the Model 1 IGA jurisdiction.

### III. Sponsoring Entities of Sponsored Direct Reporting NFFEs

These proposed regulations include
verification requirements and the events
of default for a sponsoring entity of a
sponsored direct reporting NFFE. These
proposed regulations also specify the re-
quirements for a sponsorship agreement

between a sponsoring entity and each
sponsored direct reporting NFFE for
which it acts.

Under these proposed regulations, a
sponsoring entity must appoint a respon-
sible officer to oversee the compliance of
the sponsoring entity with respect to each
sponsored direct reporting NFFE. The re-
sponsible officer of the sponsoring entity
must make a periodic certification to the
IRS on the form and in the manner pre-
scribed by the IRS. The certification re-
quirements of a sponsoring entity of a
sponsored direct reporting NFFE are more
limited than the certification requirements
of a sponsoring entity of a sponsored FFI
because the obligations of a sponsoring
entity of a sponsored direct reporting
NFFE are more limited than those of a
sponsoring entity of a sponsored FFI. A
sponsoring entity of a sponsored direct
reporting NFFE must certify that it meets
the requirements of a sponsoring entity,
that it has a written sponsorship agree-
ment that meets the requirements in these
proposed regulations in effect with each
sponsored direct reporting NFFE, that
there have been no events of default (or
that such events have been remediated),
and that the sponsoring entity has cor-
rected any failures to report on Form
8966, "FATCA Report," with respect to
any sponsored direct reporting NFFE.

In general, a sponsoring entity must
make the periodic certification with re-
spect to all sponsored direct reporting
NFFEs for which it acts during the certi-
fication period. However, with respect to a
certification period, a sponsoring entity is
not required to certify for a sponsored
direct reporting NFFE that first agrees to
be sponsored by the sponsoring entity dur-
ing the six month period prior to the end
of the certification period, provided that
the sponsoring entity makes certifications
for such sponsored direct reporting NFFE
for subsequent certification periods and
the first such certification covers both the
subsequent certification period and the
portion of the prior certification period
during which the sponsored direct report-
ing NFFE was sponsored by the sponsor-
ing entity. However, the preceding sen-
tence does not apply to a sponsored direct
reporting NFFE that, immediately before
the NFFE agrees to be sponsored by the
sponsoring entity, was a direct reporting

NFFE or sponsored direct reporting NFFE
of another sponsoring entity. The sponsor-
ing entity may certify for a sponsored
direct reporting NFFE described in the
preceding sentence for the portion of the
certification period prior to the date that
the NFFE first agrees to be sponsored by
the sponsoring entity if the sponsoring
entity obtains from the NFFE (or the
NFFE's sponsoring entity, if applicable) a
written certification that the NFFE has
complied with its applicable chapter 4 re-
quirements during such portion of the cer-
tification period, provided that: (1) the
sponsoring entity does not know that such
certification is unreliable or incorrect; and
(2) the certification for the sponsored di-
rect reporting NFFE for the subsequent
certification period covers both the subse-
quent certification period and the portion
of the prior certification period during
which such NFFE was sponsored by the
sponsoring entity. The first certification
period will begin on the later of the date
the sponsoring entity is issued a GIIN to
act as a sponsoring entity or June 30,
2014.

Under these proposed regulations, the
IRS may make inquiries to a sponsoring
entity to determine the sponsoring entity's
compliance with its requirements. The
IRS may also request any additional in-
formation from the sponsoring entity (in-
cluding a copy of the sponsorship agree-
ment that the sponsoring entity has
entered into with each sponsored direct
reporting NFFE). If the IRS determines
that the sponsoring entity may not have
substantially complied with the require-
ments of a sponsoring entity with respect
to any sponsored direct reporting NFFE
for which it acts, the IRS may request
additional information to verify the spon-
soring entity's compliance with such re-
quirements and may request the perfor-
mance of specified review procedures.

These proposed regulations also spec-
ify the events of default and termination
procedures applicable to a sponsoring en-
tity of a sponsored direct reporting NFFE.
Consistent with the verification require-
ments for direct reporting NFFEs in the
chapter 4 regulations, a notice of default is
triggered by an event of default. An event
of default may result in the termination of
the sponsoring entity's status as a spon-
soring entity, the statuses of one or more

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sponsored direct reporting NFFEs as such,
or both the status of a sponsoring entity
and the statuses of one or more sponsored
direct reporting NFFEs. A sponsored di-
rect reporting NFFE whose sponsoring
entity's status is terminated may register
on the FATCA registration website as a
direct reporting NFFE or sponsored direct
reporting NFFE, unless the sponsored di-
rect reporting NFFE's status is also termi-
nated, in which case the sponsored direct
reporting NFFE must obtain prior written
approval from the IRS in order to register.

### IV. Modifications to the Verification Requirements for Participating FFIs and Compliance FIs

These proposed regulations provide
that the requirements for a participating
FFI's certification of compliance (de-
scribed in § 1.1471-4(f)(3)) may be mod-
ified through an amendment to the FFI
agreement to include additional certifica-
tions or information (such as quantitative
or factual information related to the FFI's
compliance with the FFI agreement), pro-
vided that any additional information or
certifications required are published at
least 90 days before being added to the
FFI agreement to allow for public com-
ment. See also section 12.02 of the FFI
agreement (covering modifications to the
FFI agreement imposing additional re-
quirements on participating FFIs). Addi-
tionally, any such amendment to the FFI
agreement will be published only after
these proposed regulations are published
as final regulations.

These proposed regulations modify the
procedures and timeframes for notices of
default and terminations applicable to par-
ticipating FFIs in the chapter 4 regulations
to conform to the procedures and time-
frames for sponsoring entities in these
proposed regulations. These proposed
regulations include a minimum period of
45 days for a participating FFI to respond
to a notice of default. Within 30 days of a
termination of an FFI's participating FFI
status, the FFI must send a notice of ter-
mination to each withholding agent from
which the FFI receives payments and each
financial institution with which it holds an
account to which a withholding certificate
or other documentation was provided. Re-
quests for reconsideration of a notice of

default or a notice of termination must be
made within 90 days of the notice of de-
fault or notice of termination (as applica-
ble). An FFI that has had its participating
FFI status terminated may not reregister
on the FATCA registration website as a
participating FFI or a registered deemed-
compliant FFI unless it receives written
approval from the IRS.

The chapter 4 regulations provide that
when an FFI elects to be part of a consol-
idated compliance program (electing FFI),
each branch that it maintains (including a
limited branch or a branch described in
§ 1.1471-5(f)(1)) must be subject to peri-
odic review as part of such program.
These proposed regulations clarify that a
branch of an electing FFI located in a
Model 1 IGA jurisdiction is excluded
from the periodic review. In addition,
these proposed regulations clarify that the
responsible officer of the compliance FI
must make the periodic certification de-
scribed in § 1.1471-4(f)(3) (or a qualified
certification) on the form and in the man-
ner prescribed by the IRS. In general, the
certification must be made on behalf of all
electing FFIs in the compliance group
during the certification period. However,
with respect to a certification period, a
compliance FI is not required to make a
certification for an electing FFI that first
elects to be part of the consolidated com-
pliance program of the compliance FI dur-
ing the six month period prior to the end
of the certification period, provided that
the compliance FI makes certifications for
such electing FFI for subsequent certifica-
tion periods, and the first such certification
covers both the subsequent certification
period and the portion of the prior certifi-
cation period during which such FFI was
an electing FFI in the consolidated com-
pliance program of the compliance FI.
However, the preceding sentence does not
apply to an electing FFI that, immediately
before the electing FFI elects to be part of
the consolidated compliance program,
was a participating FFI or registered
deemed-compliant FFI. The compliance
FI may certify for an electing FFI de-
scribed in the preceding sentence for the
portion of the certification period prior to
the date that the electing FFI elects to be
part of the consolidated compliance pro-
gram if the compliance FI obtains from
the FFI (or the FFI's former compliance

FI, if applicable) a written certification
that the FFI has complied with its appli-
cable chapter 4 requirements during such
portion of the certification period, pro-
vided that: (1) the compliance FI does not
know that such certification is unreliable
or incorrect; and (2) the certification for
the electing FFI for the subsequent certi-
fication period covers both the subsequent
certification period and the portion of the
prior certification period during which
such FFI was an electing FFI in the con-
solidated compliance program of the com-
pliance FI. The first certification period
for a compliance group begins on the later
of the date the compliance FI is issued a
GIIN or June 30, 2014, and ends at the
close of the third full calendar year fol-
lowing such date. Each subsequent certi-
fication period is the three calendar year
period following the previous certification
period.

These proposed regulations provide
that the responsible officer of a compli-
ance FI must make the certification de-
scribed in § 1.1471-4(c)(7) (preexisting
account certification of a participating
FFI) with respect to each electing FFI that
elects to be part of the consolidated com-
pliance program under the compliance FI
during the certification period (as defined
in § 1.1471-4(f)(3)(i)). Notwithstanding
the preceding sentence, a preexisting ac-
count certification is not required for an
electing FFI if, immediately before elect-
ing to be part of the consolidated compli-
ance program under the compliance FI,
the FFI was a participating FFI or a reg-
istered deemed-compliant FFI that is a
local FFI or restricted fund, and the FFI
(or the FFI's former compliance FI, if
applicable) provides a written certification
to the compliance FI that the FFI has
made the preexisting account certification
required of it, unless the compliance FI
knows that such certification is unreliable
or incorrect. In addition, a preexisting ac-
count certification is not required for a
certification period for an electing FFI that
elects to be part of the consolidated com-
pliance program under the compliance FI
during the two year period prior to the end
of such certification period, provided that
the compliance FI makes the preexisting
account certification for such FFI by the
due date of the certification of compliance
for the subsequent certification period.

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The preexisting account certification, if
required for a certification period, must be
submitted by the due date of the FFI's
periodic certification of compliance for
the certification period, on the form and in
the manner prescribed by the IRS.

V. Certification and Verification
Requirements for Registered Deemed-
Compliant FFIs

The chapter 4 regulations do not ex-
plicitly provide that the IRS may apply
verification procedures and make inqui-
ries regarding the certifications provided
by registered deemed-compliant FFIs.
These proposed regulations provide that
the IRS may make inquiries of, and re-
quest additional information from and the
performance of specified review proce-
dures by, a registered deemed-compliant
FFI to verify the FFI's compliance with
the requirements of its applicable deemed-
compliant status. These requirements are
similar to the provisions for the IRS's
verification of a participating FFI's com-
pliance with the FFI agreement. If the IRS
determines that a registered deemed-
compliant FFI has not complied with the
requirements of the deemed-compliant
status claimed by the FFI, the IRS may
terminate the FFI's deemed-compliant
status. A registered deemed-compliant
FFI that has had its status terminated may
request reconsideration of the termination
by submitting a written request to the IRS
within 90 days of the notice of termina-
tion.

## Proposed Effective/Applicability Dates

These proposed regulations apply on
the date of publication of a Treasury de-
cision adopting these rules as final regu-
lations in the Federal Register.

## Special Analyses

Certain IRS regulations, including
these, are exempt from the requirements
of Executive Order 12866, as supple-
mented and reaffirmed by Executive Or-
der 13563. Therefore, a regulatory impact
assessment is not required.

The IRS intends that the information
collection requirements in these proposed
regulations will be satisfied by submitting
certifications to the IRS electronically. For

purposes of the Paperwork Reduction Act,
the reporting burden associated with the
collection of information in these pro-
posed regulations will be reflected in the
OMB Form 83-1, Paperwork Reduction
Act Submission, associated with the cer-
tification.

It is hereby certified that the collection
of information requirement in these pro-
posed regulations will not have a signifi-
cant economic impact on a substantial
number of small entities because these
proposed regulations affect foreign per-
sons, not domestic entities. Therefore, a
Regulatory Flexibility Analysis under the
Regulatory Flexibility Act is not required.
Pursuant to section 7805(f) of the Code,
this notice of proposed rulemaking has
been submitted to the Chief Counsel for
Advocacy of the Small Business Admin-
istration for comment on its impact on
small business.

## Comments and Requests for Public Hearing

Before these proposed regulations are
adopted as final regulations, consider-
ation will be given to any comments that
are submitted timely to the IRS as pre-
scribed in this preamble under the "Ad-
dresses" heading. The Treasury Depart-
ment and IRS request comments on all
aspects of the proposed rules, including
comments on the clarity of the proposed
rules and how they could be made easier
with which to comply. All comments
will be available for public inspection
and copying. A public hearing will be
scheduled if requested in writing by any
person that timely submits written com-
ments. If a public hearing is scheduled,
notice of the date, time, and place for
the public hearing will be published in
the Federal Register.

## Drafting Information

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

* * * * *

## Proposed Amendments to the Regulations

Accordingly, 26 CFR part 1 is pro-
posed to be amended as follows:

PART 1 - INCOME TAXES

Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *

Par. 2. Section 1.1471-1 is amended by
revising paragraphs (b)(99), (b)(116), and
(b)(121) to read as follows:

§ 1.1471-1 Scope of chapter 4 and
definitions.

* * * * *

(b) * * *

(99) [The text of proposed § 1.1471-
1(b)(99) is the same as the text of
§ 1.1471-1T(b)(99) published elsewhere
in this issue of the Bulletin].

* * * * *

(116) Responsible officer. The term re-
sponsible officer means, with respect to a
participating FFI, an officer of any partic-
ipating FFI or reporting Model 1 FFI in
the participating FFI's expanded affiliated
group with sufficient authority to fulfill
the duties of a responsible officer de-
scribed in § 1.1471-4, which include the
requirement to periodically certify to the
IRS regarding the FFI's compliance with
its FFI agreement. The term responsible
officer means, in the case of a registered
deemed-compliant FFI, an officer of any
deemed-compliant FFI or participating
FFI in the deemed-compliant FFI's ex-
panded affiliated group with sufficient au-
thority to ensure that the FFI meets the
applicable requirements of § 1.1471-5(f).
The term responsible officer means, with
respect to a sponsoring entity, an officer of
the sponsoring entity with sufficient au-
thority to fulfill the duties of a responsible
officer described in § 1.1471-5(j) or
§ 1.1472-1(f) (as applicable). If a partic-
ipating FFI elects to be part of a consoli-
dated compliance program, the term re-
sponsible officer means an officer of the
compliance FI (as described in § 1.1471-
4(f)) with sufficient authority to fulfill the
duties of a responsible officer described in
§ 1.1471-4(f)(2) and (3) on behalf of each
FFI in the compliance group.

* * * * *

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(121) Sponsored FFI. The term spon-
sored FFI means any entity described in
§ 1.1471-5(f)(1)(i)(F) (describing spon-
sored investment entities and sponsored
controlled foreign corporations) or
§ 1.1471-5(f)(2)(iii) (describing spon-
sored, closely held investment vehicles).
The term sponsored FFI also means a
sponsored investment entity, a spon-
sored controlled foreign corporation, or
a sponsored, closely held investment ve-
hicle treated as deemed-compliant under
an applicable Model 2 IGA.

* * * * *

Par. 3. Section 1.1471-3 is amended
by:

1\. Revising paragraph (c)(1).

2\. Adding paragraphs (c)(3)(iii)(B)(5)
and (c)(6)(ii)(E)(4).

3\. Revising paragraphs (c)(7)(ii) and
(d)(6)(i)(F).

The revisions and additions read as fol-
lows:

§ 1.1471-3 Identification of payee.

* * * * *

(c) * * *

(1) [The text of proposed § 1.1471-
3(c)(1) is the same as the text of § 1.1471-
3T(c)(1) published elsewhere in this issue
of the Bulletin].

* * * * *

(3) * * *

(iii) * * *

(B) * * *

(5) [The text of proposed § 1.1471-
3(c)(3)(iii)(B)(5) is the same as the text of
§ 1.1471-3T(c)(3)(iii)(B)(5) published
elsewhere in this issue of the Bulletin].

* * * * *

(6) * * *

(ii) * * *

(E) * * *

(4) [The text of proposed § 1.1471-
3(c)(6)(ii)(E)(4) is the same as the text of
§ 1.1471-3T(c)(6)(ii)(E)(4) published
elsewhere in this issue of the Bulletin].
* * * * *

(7) * * *

(ii) [The text of proposed § 1.1471-
3(c)(7)(ii) is the same as the text of
§ 1.1471-3T(c)(7)(ii) published else-
where in this issue of the Bulletin].

* * * * *

(d) * * *

(6) * * *

(i) * * *

(F) [The text of proposed § 1.1471-
3(d)(6)(i)(F) is the same as the text of
§ 1.1471-3T(d)(6)(i)(F) published else-
where in this issue of the Bulletin].

* * * * *

Par. 4. Section 1.1471-4 is amended
by:

1\. Revising paragraphs (c)(2)(ii)(B)
(2)(iii), (d)(4)(iv)(C) and (D), (f)(2)(ii)(A),
(f)(3)(i), and (g)(2).

2\. Adding paragraphs (d)(2)(ii)(G) and
(f)(2)(ii)(B)(1) and (2).

The revisions and additions read as fol-
lows:

§ 1.1471-4 FFI agreement.

* * * * *

(c) * * *

(2) * * *

(ii) * * *

(B) * * *

(2) * * *

(iii) [The text of proposed § 1.1471-
4(c)(2)(ii)(B)(2)(iii) is the same as the text
of § 1.1471-4T(c)(2)(ii)(B)(2)(iii) pub-
lished elsewhere in this issue of the Bul-
letin].

* * * * *

(d) * * *

(2) * * *

(ii) * * *

(G) [The text of proposed § 1.1471-
4(d)(2)(ii)(G) is the same as the text of
§ 1.1471-4T(d)(2)(ii)(G) published else-
where in this issue of the Bulletin].

* * * * *

(4) * * *

(iv) * * *

(C) [The text of proposed § 1.1471-
4(d)(4)(iv)(C) is the same as the text of
§ 1.1471-4T(d)(4)(iv)(C) published else-
where in this issue of the Bulletin].

(D) [The text of proposed § 1.1471-
4(d)(4)(iv)(D) is the same as the text of
§ 1.1471-4T(d)(4)(iv)(D) published else-
where in this issue of the Bulletin].
* * * * *

(f) * * *

(2) * * *

(ii) * * *

(A) In general. A participating FFI that
is a member of an expanded affiliated
group that includes one or more FFIs may
elect to be part of a consolidated compli-
ance program (and perform a consolidated

periodic review) under the authority of a
participating FFI, reporting Model 1 FFI,
or U.S. financial institution (compliance
FI) that is a member of the electing FFI's
expanded affiliated group, regardless of
whether all such members so elect. In
addition, when an FFI elects to be part of
a consolidated compliance program, each
branch that it maintains (including a lim-
ited branch or a branch described in
§ 1.1471-5(f)(1)), other than a branch lo-
cated in a Model 1 IGA jurisdiction, must
be subject to periodic review as part of
such program and included on the peri-
odic certification (described in paragraph
(f)(2)(ii)(B)(1) of this section). See
§ 1.1471-5(j) for the requirement of a
sponsoring entity to establish and imple-
ment a compliance program for its spon-
sored FFIs.

(B) * * *

(1) Periodic certification. On or before
July 1 of the calendar year following the
end of the certification period, the respon-
sible officer of the compliance FI must
make the certification described in either
paragraph (f)(3)(ii) or (f)(3)(iii) of this
section with respect to all electing FFIs
for which it acts during the certification
period on the form and in the manner
prescribed by the IRS. The certification
must be made on behalf of all electing
FFIs in the compliance group during the
certification period. In general, with re-
spect to a certification period, a compli-
ance FI is not required to make a certifi-
cation for an electing FFI that first elects
to be part of the consolidated compliance
program of the compliance FI during the
six month period prior to the end of
the certification period, provided that the
compliance FI makes certifications for
such electing FFI for subsequent certifica-
tion periods, and the first such certification
covers both the subsequent certification
period and the portion of the prior certifi-
cation period during which such FFI was
an electing FFI in the consolidated com-
pliance program of the compliance FI.
However, the preceding sentence does not
apply to an electing FFI that, immediately
before the electing FFI elects to be part of
the consolidated compliance program,
was a participating FFI or registered
deemed-compliant FFI. The compliance
FI may certify for an electing FFI de-
scribed in the preceding sentence for the

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portion of the certification period prior to
the date that the electing FFI elects to be
part of the consolidated compliance pro-
gram if the compliance FI obtains from
the FFI (or the FFI's former compliance
FI, if applicable) a written certification
that the FFI has complied with its appli-
cable chapter 4 requirements during such
portion of the certification period, pro-
vided that: (1) the compliance FI does not
know that such certification is unreliable
or incorrect; and (2) the certification for
the electing FFI for the subsequent certi-
fication period covers both the subsequent
certification period and the portion of the
prior certification period during which
such FFI was an electing FFI in the con-
solidated compliance program of the com-
pliance FI. The first certification period
for a compliance group begins on the later
of the date the compliance FI is issued a
GIIN or June 30, 2014, and ends at the
close of the third full calendar year fol-
lowing such date. Each subsequent certi-
fication period is the three calendar year
period following the previous certification
period.

(2) Preexisting account certification.
The responsible officer of a compliance FI
must make the certification described in
paragraph (c)(7) of this section (preexist-
ing account certification of a participating
FFI) with respect to each electing FFI that
elects to be part of the consolidated com-
pliance program under the compliance FI
during the certification period. However, a
preexisting account certification is not re-
quired for an electing FFI if immediately
before electing to be part of the consoli-
dated compliance program under the com-
pliance FI the FFI was a participating FFI
or a registered deemed-compliant FFI that
is a local FFI or restricted fund, and the
FFI (or the FFI's former compliance FI, if
applicable) provides a written certification
to the compliance FI that the FFI has
made the preexisting account certification
required under paragraph (c)(7) of this
section, § 1.1471-5(f)(1)(i)(A)(7), or
§ 1.1471-5(f)(1)(i)(D)(6) (as applicable),
unless the compliance FI knows that such
written certification is unreliable or incor-
rect. In addition, a preexisting account
certification is not required for an electing
FFI that elects to be part of the consoli-
dated compliance program under the com-
pliance FI during the two year period prior

to the end of the certification period, pro-
vided that the compliance FI makes the
preexisting account certification for such
FFI for the subsequent certification pe-
riod. The certification required under this
paragraph (f)(2)(ii)(B)(2) for the certifica-
tion period must be submitted by the due
date of the FFI's certification of compli-
ance required under paragraph (f)(2)(ii)
(B)(1) of this section for the certification
period, on the form and in the manner
prescribed by the IRS.

(3) * * *

(i) In general. In addition to the certi-
fications required under paragraph (c)(7)
of this section, on or before July 1 of the
calendar year following the end of each
certification period, the responsible officer
must make the certification described in
either paragraph (f)(3)(ii) or (iii) of this
section on the form and in the manner
prescribed by the IRS. The first certifica-
tion period begins on the effective date of
the FFI agreement and ends at the close of
the third full calendar year following the
effective date of the FFI agreement. Each
subsequent certification period is the three
calendar year period following the previ-
ous certification period, unless the FFI
agreement provides for a different period.
The responsible officer must either certify
that the participating FFI maintains effec-
tive internal controls or, if the participat-
ing FFI has identified an event of default
(defined in paragraph (g) of this section)
or a material failure (defined in paragraph
(f)(3)(iv) of this section) that it has not
corrected as of the date of the certification,
must make the qualified certification de-
scribed in paragraph (f)(3)(iii) of this sec-
tion. The certification of compliance de-
scribed in paragraph (f)(3)(ii) or (iii) of
this section may be modified through an
amendment to the FFI agreement to in-
clude any additional certifications or in-
formation (such as quantitative or factual
information related to the FFI's compli-
ance with the FFI agreement), provided
that any additional information or certifi-
cations are published at least 90 days be-
fore being incorporated into the FFI
agreement to allow for public comment.

* * * * *

(g) * * *

(2) Notice of event of default. Follow-
ing an event of default known by or dis-
closed to the IRS, the IRS will deliver to

the participating FFI a notice of default
specifying the event of default. The IRS
will request that the participating FFI re-
mediate the event of default within 45
days (unless additional time is requested
and agreed to by the IRS). The participat-
ing FFI must respond to the notice of
default and provide information respon-
sive to an IRS request for information or
state the reasons why the participating FFI
does not agree that an event of default has
occurred. Taking into account the terms of
any applicable Model 2 IGA, if the par-
ticipating FFI does not provide a response
within the specified time period, the IRS
may, at its sole discretion, deliver a notice
of termination that terminates the FFI's
participating FFI status. If the FFI's par-
ticipating FFI status is terminated, in ad-
dition to the requirements in § 1.1471-
3(c)(6)(ii)(E)(2), the FFI must, within 30
days of the termination, send notice of the
termination to each withholding agent
from which it receives payments and each
financial institution with which it holds an
account for which a withholding certifi-
cate or other documentation was provided.
An FFI that has had its participating FFI
status terminated may not reregister on
the FATCA registration website as a
participating FFI or registered deemed-
compliant FFI unless it receives written
approval from the IRS to register. A
participating FFI may request, within 90
days of a notice of default or notice of
termination, reconsideration of a notice
of default or notice of termination by
written request to the IRS.

* * * * *

Par. 5. Section 1.1471-5 is amended
by:

1\. Revising paragraph (f)(1)(i)(F)(3)(vi).

2\. Removing paragraph (f)(1)(i)(F)
(3)(vii).

3\. Redesignating paragraph (f)(1)(i)(F)
(3)(viii) as new paragraph (f)(1)(i)(F)
(3)(vii),

4\. Revising paragraph (f)(1)(i)(F)(4).

5\. Adding paragraph (f)(1)(iv).

6\. Revising paragraph (f)(2)(iii)(D)(4).

7\. Removing paragraph (f)(2)(iii)(D)(5).

8\. Redesignating paragraph (f)(2)(iii)

(D)(6) as new paragraph (f)(2)(iii)(D)(5).

9\. Revising paragraph (f)(2)(iii)(E),

10\. Revising paragraphs (j) and (k).

11\. Redesignating paragraph (l) as
paragraph (m).

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12\. Adding new paragraph (l).

The revisions and additions read as fol-
lows:

§ 1.1471-5 Definitions applicable to
section 1471.

* * * * *

(f) * * *

(1) * * *

(i) * * *

(F) * * *

(3) * * *

(vi) Complies with the verification pro-
cedures described in paragraph (j) of this
section;

* * * * *

(4) The IRS may revoke a sponsoring
entity's status with respect to one or more
sponsored FFIs if there is an event of
default as defined in paragraph (k)(1) of
this section and following the termination
procedures described in paragraphs (k)(2),
(k)(3), and (k)(4) of this section.

* * * * *

(iv) IRS review of compliance by
registered deemed-compliant FFIs-(A)
General inquiries. With respect to a reg-
istered deemed-compliant FFI described
in paragraph (f)(1)(i)(A), (C), or (D) of
this section, the IRS, based upon the
information reporting forms described
in § 1.1471-4(d)(3)(v), (d)(5)(vii), or
(d)(6)(iv) filed with the IRS for each cal-
endar year (if applicable), may request
additional information with respect to the
information reported (or required to be
reported) on the forms, the account state-
ments described in § 1.1471-4(d)(4)(v),
or to confirm that the FFI has no reporting
requirements for the calendar year. The
IRS may request additional information
from the FFI to determine the FFI's com-
pliance with § 1.1471-4 (if applicable)
and to assist the IRS with its review of
account holder compliance with tax re-
porting requirements. For IRS review of
compliance with respect to a registered
deemed-compliant FFI described in para-
graph (f)(1)(i)(F) of this section (describ-
ing sponsored investment entities and
controlled foreign corporations), see para-
graph (j)(4) of this section.

(B) Inquiries regarding substantial
non-compliance. With respect to a regis-
tered deemed-compliant FFI described in
paragraph (f)(1)(i)(A) through (E) of this

section, the IRS, based on the information
reporting forms described in § 1.1471-
4(d)(3)(v), (d)(5)(vii), or (d)(6)(iv) filed
with the IRS for each calendar year (if
applicable), the certifications made by the
responsible officer described in paragraph
(f)(1)(ii)(B) of this section (or the absence
of such certifications), or any other infor-
mation related to the FFI's compliance
with the requirements of the deemed-
compliant status claimed by the FFI, may
determine in its discretion that the FFI
may not have substantially complied with
the requirements of the deemed-compliant
status claimed by the FFI. In such a case,
the IRS may request from the responsi-
ble officer (or designee) information
necessary to verify the FFI's compliance
with the requirements for the deemed-
compliant status claimed by the FFI. For
example, in the case of a local FFI under
paragraph (f)(1)(i)(A) of this section,
the IRS may request a description or
copy of the FFI's policies and proce-
dures for identifying accounts held by
specified U.S. persons not resident in
the jurisdiction in which the FFI is in-
corporated or organized, identifying en-
tities controlled or beneficially owned
by such persons, and identifying non-
participating FFIs. The IRS may also
request the performance of specified re-
view procedures by a person (including
an external auditor or third-party con-
sultant) that the IRS identifies as com-
petent to perform such procedures given
the facts and circumstances surrounding
the FFI's potential failure to comply
with the requirements of the deemed-
compliant category claimed by the FFI.
If the IRS determines that the FFI has
not complied with the requirements of
the deemed-compliant status claimed by
the FFI, the IRS may terminate the FFI's
deemed-compliant status. If the FFI's
deemed-compliant status is terminated,
the FFI must send notice of the termi-
nation to each withholding agent from
which it receives payments and each
financial institution with which it holds
an account for which a withholding cer-
tificate or other documentation was pro-
vided within 30 days after the termina-
tion. An FFI that has had its deemed-
compliant status terminated may not
reregister on the FATCA registration
website as a registered deemed-

compliant FFI or register on the FATCA
registration website as a participating
FFI unless it receives written approval
from the IRS. A registered deemed-
compliant FFI may request, within 90
days of a notice of termination, recon-
sideration of the notice of termination
by written request to the IRS.

(2) * * *

(iii) * * *

(D) * * *

(4) Complies with the verification pro-
cedures described in paragraph (j) of this
section; and

* * * * *

(E) The IRS may revoke a sponsoring
entity's status as a sponsoring entity with
respect to one or more sponsored FFIs if
there is an event of default as defined in
paragraph (k)(1) of this section and fol-
lowing the termination procedures de-
scribed in paragraphs (k)(2), (k)(3), and
(k)(4) of this section. A sponsoring entity
is not liable for any failure to comply with
the obligations contained in paragraph
(f)(2)(iii)(D) of this section unless the
sponsoring entity is a withholding agent
that is separately liable for the failure to
withhold on or report with respect to a
payment made by the sponsoring entity on
behalf of the sponsored FFI. A sponsored
FFI will remain liable for any failure of its
sponsoring entity to comply with the
obligations contained in paragraph (f)(2)
(iii)(D) of this section that the sponsoring
entity has agreed to undertake on behalf of
the FFI, even if the sponsoring entity is
also a withholding agent and is itself sep-
arately liable for the failure to withhold on
or report with respect to a payment made
by the sponsoring entity on behalf of the
sponsored FFI. The same tax, interest, or
penalties, however, shall not be collected
more than once.

* * * * *

(j) Sponsoring entity verification-(1)
In general. This paragraph (j) describes
the requirements for a sponsoring entity of
a sponsored FFI to establish and imple-
ment a compliance program for satisfying
its requirements as a sponsoring entity and
to provide a certification of compliance
with its requirements. This paragraph (j)
also describes the procedures for the IRS
to review the sponsoring entity's compli-
ance with respect to each sponsored FFI for
purposes of satisfying the requirements of

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paragraph (f)(1)(i)(F) or (f)(2)(iii) of this
section or an applicable Model 2 IGA. This
paragraph (j) also requires a sponsoring en-
tity to have in place a written sponsorship
agreement as described in paragraph
(j)(3)(v)(B) of this section with each spon-
sored FFI. References in this paragraph (j)
or paragraph (k) of this section to a spon-
sored FFI mean a sponsored FFI to which
the requirements of paragraph (f)(1)(i)(F) or
(f)(2)(iii) of this section or an applicable
Model 2 IGA apply.

(2) Compliance program. The sponsor-
ing entity must appoint a responsible of-
ficer to oversee the compliance of the
sponsoring entity with respect to each
sponsored FFI for purposes of satisfying
the requirements of paragraph (f)(1)(i)(F)
or (f)(2)(iii) of this section or an applica-
ble Model 2 IGA. The responsible officer
must (either personally or through desig-
nated persons) establish a compliance pro-
gram that includes policies, procedures,
and processes sufficient for the sponsoring
entity to satisfy the requirements de-
scribed in the preceding sentence. The
responsible officer (or designee) must pe-
riodically review the sufficiency of the
sponsoring entity's compliance program,
the sponsoring entity's compliance with
respect to each sponsored FFI for pur-
poses of satisfying the requirements of
paragraph (f)(1)(i)(F) or (f)(2)(iii) of this
section or an applicable Model 2 IGA, and
the compliance of each sponsored FFI
with the due diligence, withholding, and
reporting requirements of § 1.1471-4 or
an applicable Model 2 IGA during the
certification period described in paragraph
(j)(3)(iii) of this section. The results of the
periodic review must be considered by the
responsible officer in making the periodic
certifications described in paragraph (j)(3)
of this section.

(3) Certification of compliance-(i) In
general. In addition to the certification
required under paragraph (j)(5) of this
section (preexisting account certification),
on or before July 1 of the calendar year
following the certification period, the re-
sponsible officer of the sponsoring entity
must make the certification described in
paragraph (j)(3)(v) of this section and ei-
ther the certification described in para-
graph (j)(3)(vi)(A) of this section or the
certification described in paragraph
(j)(3)(vi)(B) of this section with respect to

all sponsored FFIs for which the sponsor-
ing entity acts during the certification pe-
riod on the form and in the manner pre-
scribed by the IRS.

(ii) Late-joining sponsored FFIs. In
general, with respect to a certification pe-
riod, a sponsoring entity is not required to
make a certification for a sponsored FFI
that first agrees to be sponsored by the
sponsoring entity during the six month
period prior to the end of the certification
period, provided that the sponsoring entity
makes certifications for such sponsored
FFI for subsequent certification periods
and the first such certification covers both
the subsequent certification period and the
portion of the prior certification period
during which such FFI was sponsored by
the sponsoring entity. However, the pre-
ceding sentence does not apply to a spon-
sored FFI that, immediately before the FFI
agrees to be sponsored by the sponsoring
entity, was a participating FFI, registered
deemed-compliant FFI, or sponsored,
closely held investment vehicle of another
sponsoring entity. The sponsoring entity
may certify for a sponsored FFI described
in the preceding sentence for the portion
of the certification period prior to the date
that the FFI first agrees to be sponsored by
the sponsoring entity if the sponsoring
entity obtains from the FFI (or the FFI's
sponsoring entity, if applicable) a written
certification that the FFI has complied
with its applicable chapter 4 requirements
during such portion of the certification
period, provided that: (1) the sponsoring
entity does not know that such certifica-
tion is unreliable or incorrect; and (2) the
certification for the sponsored FFI for the
subsequent certification period covers
both the subsequent certification period
and the portion of the prior certification
period during which such FFI was spon-
sored by the sponsoring entity.

(iii) Certification period. The first cer-
tification period begins on the later of the
date the sponsoring entity is issued a GIIN
to act as a sponsoring entity or June 30,
2014, and ends at the close of the third full
calendar year following such date. Each
subsequent certification period is the three
calendar year period following the previ-
ous certification period.

(iv) Additional certifications or infor-
mation. The certification of compliance
described in paragraph (j)(3) of this sec-

tion may be modified to include additional
certifications or information (such as
quantitative or factual information related
to the sponsoring entity's compliance with
respect to each sponsored FFI for pur-
poses of satisfying the requirements of
paragraph (f)(1)(i)(F) or (f)(2)(iii) of this
section or an applicable Model 2 IGA),
provided that such additional information
or certifications are published at least 90
days before being made effective in order
to allow for public comment.

(v) Certifications regarding sponsor-
ing entity and sponsored FFI require-
ments. The responsible officer of the spon-
soring entity must certify to the following
statements-

(A) The sponsoring entity meets all of
the requirements of a sponsoring entity as
described in paragraph (f)(1)(i)(F)(3) or
(f)(2)(iii)(D) of this section or an applica-
ble Model 2 IGA, including the chapter 4
status required of such entity;

(B) The sponsoring entity has a written
sponsorship agreement in effect with each
sponsored FFI authorizing the sponsoring
entity to fulfill the requirements of para-
graph (f)(1)(i)(F) or (f)(2)(iii) of this sec-
tion or an applicable Model 2 IGA with
respect to each sponsored FFI; and

(C) Each sponsored FFI treated as a
sponsored investment entity, a sponsored
controlled foreign corporation, or a spon-
sored, closely held investment vehicle by
the sponsoring entity meets the require-
ments of its respective status.

(vi) Certifications regarding internal
controls-(A) Certification of effective in-
ternal controls. The responsible officer of
the sponsoring entity must certify to the
following statements-

(1) The responsible officer of the spon-
soring entity has established a compliance
program that is in effect as of the date of
the certification and that has been subject
to the review as described in paragraph
(j)(2) of this section;

(2) With respect to material failures
(defined in paragraph (j)(3)(vii) of this
section)-

(i) There are no material failures for the
certification period; or

(ii) If there were any material failures,
appropriate actions were taken to remedi-
ate such failures and to prevent such fail-
ures from reoccurring; and

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(3) With respect to any failure to with-
hold, deposit, or report to the extent re-
quired under § 1.1471-4 or an applicable
Model 2 IGA with respect to any spon-
sored FFI for any year during the certifi-
cation period, the sponsored FFI has cor-
rected such failure by paying (or directing
the sponsoring entity to pay) any taxes
due (including interest and penalties) and
filing (or directing the sponsoring entity to
file) the appropriate return (or amended
return).

(B) Qualified certification. If the re-
sponsible officer of the sponsoring entity
has identified an event of default (defined
in paragraph (k)(1) of this section) or a
material failure (defined in paragraph
(j)(3)(vii) of this section) that the sponsor-
ing entity has not corrected as of the date
of the certification, the responsible officer
must certify to the following statements-

(1) The responsible officer of the spon-
soring entity has established a compliance
program that is in effect as of the date of
the certification and that has been sub-
jected to the review as described in para-
graph (j)(2) of this section;

(2) With respect to the event of default
or material failure-

(i) The responsible officer (or desig-
nee) has identified an event of default; or

(ii) The responsible officer has deter-
mined that there are one or more material
failures as defined in paragraph (j)(3)(vii)
of this section and that appropriate actions
will be taken to prevent such failures from
reoccurring;

(3) With respect to any failure to with-
hold, deposit, or report to the extent re-
quired under § 1.1471-4 or an applicable
Model 2 IGA with respect to any spon-
sored FFI for any year during the certifi-
cation period, the sponsored FFI will cor-
rect such failure by paying (or directing
the sponsoring entity to pay) any taxes
due (including interest and penalties) and
filing (or directing the sponsoring entity to
file) the appropriate return (or amended
return); and

(4) The responsible officer (or desig-
nee) will respond to any notice of default
under paragraph (k)(2) of this section or
will provide to the IRS a description of
each material failure and a written plan to
correct each such failure when requested
under paragraph (j)(4) of this section.

(vii) Material failures defined. A ma-
terial failure is a failure of the sponsoring
entity with respect to each sponsored FFI
to satisfy the requirements of paragraph
(f)(1)(i)(F) or (f)(2)(iii) of this section or
an applicable Model 2 IGA if the failure
was the result of a deliberate action on the
part of one or more employees of the
sponsoring entity or was an error attribut-
able to a failure of the sponsoring entity to
implement internal controls sufficient for
the sponsoring entity to meet its require-
ments. A material failure will not consti-
tute an event of default unless such mate-
rial failure occurs in more than limited
circumstances when a sponsoring entity
has not substantially complied with the
requirements described in the preceding
sentence. Material failures include the fol-
lowing-

(A) With respect to any sponsored FFI,
the deliberate or systematic failure of the
sponsoring entity to report accounts that
such sponsored FFI was required to treat
as U.S. accounts, withhold on passthru
payments to the extent required, deposit
taxes withheld to the extent required, ac-
curately report recalcitrant account hold-
ers (or non-consenting U.S. accounts un-
der an applicable Model 2 IGA), or
accurately report with respect to nonpar-
ticipating FFIs as required under
§ 1.1471-4(d)(2)(ii)(F) or an applicable
Model 2 IGA;

(B) A criminal or civil penalty or sanc-
tion imposed on the sponsoring entity or
any sponsored FFI (or any branch or of-
fice of the sponsoring entity or any spon-
sored FFI) by a regulator or other govern-
mental authority or agency with oversight
over the sponsoring entity's or sponsored
FFI's compliance with the AML due dil-
igence procedures to which it (or any
branch or office thereof) is subject and
that is imposed based on a failure to prop-
erly identify account holders under the
requirements of those procedures;

(C) A potential future tax liability of
any sponsored FFI related to its compli-
ance (or lack thereof) with the due dili-
gence, withholding, and reporting require-
ments of § 1.1471-4 or an applicable
Model 2 IGA for which such sponsored
FFI has established, for financial state-
ment purposes, a tax reserve or provision;

(D) A potential contractual liability un-
der the agreement described in paragraph

(j)(3)(v)(B) of this section of the sponsor-
ing entity to any sponsored FFI related to
such sponsoring entity's compliance (or
lack thereof) with paragraph (f)(1)(i)(F) or
(f)(2)(iii) of this section or an applicable
Model 2 IGA for which the sponsoring
entity has established, for financial state-
ment purposes, a reserve or provision; and

(E) Failure to register with the IRS as a
sponsoring entity or to register each spon-
sored FFI required to be registered under
paragraph (f)(1)(i)(F)(3)(iii) of this sec-
tion or an applicable Model 2 IGA.

(4) IRS review of compliance-(i)
General inquiries. The IRS, based upon
the information reporting forms described
in § 1.1471-4(d)(3)(v), (d)(5)(vii), or
(d)(6)(iv) filed with the IRS (or the ab-
sence of such reporting) by the sponsoring
entity for each calendar year with respect
to any sponsoring FFI, may request addi-
tional information with respect to the infor-
mation reported (or required to be reported)
on the forms, the account statements de-
scribed in § 1.1471-4(d)(4)(v) with respect
to one or more sponsored FFIs, or confir-
mation that the FFI has no reporting require-
ments. The IRS may also request any addi-
tional information from the sponsoring
entity (including a copy of each sponsorship
agreement the sponsoring entity has entered
into with each sponsored FFI) necessary to
determine the compliance with the due dil-
igence, withholding, and reporting require-
ments of § 1.1471-4 or an applicable Model
2 IGA with respect to each sponsored FFI
and to assist the IRS with its review of
account holder compliance with tax report-
ing requirements.

(ii) Inquiries regarding substantial
non-compliance. Based on the informa-
tion reporting forms described in
§ 1.1471-4(d)(3)(v), (d)(5)(vii), or
(d)(6)(iv) filed with the IRS by the spon-
soring entity for each calendar year with
respect to any sponsored FFI (or the
absence of reporting), the certifications
made by the responsible officer de-
scribed in paragraphs (j)(3) and (j)(5) of
this section (or the absence of such cer-
tifications), or any other information re-
lated to the sponsoring entity's compli-
ance with respect to any sponsored FFI
for purposes of satisfying the require-
ments of paragraph (f)(1)(i)(F) or
(f)(2)(iii) of this section or an applicable
Model 2 IGA, the IRS may determine in

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its discretion that the sponsoring entity
may not have substantially complied
with such requirements. In such a case,
the IRS may request from the responsi-
ble officer (or designee) information
necessary to verify the sponsoring enti-
ty's compliance with such requirements.
The IRS may request, for example, a
description or copy of the sponsoring
entity's policies and procedures for ful-
filling the requirements of paragraph
(f)(1)(i)(F) or (f)(2)(iii) of this section
or an applicable Model 2 IGA, a de-
scription or copy of the sponsoring en-
tity's procedures for conducting its pe-
riodic review, or a copy of any written
reports documenting the findings of
such review. The IRS may also request
the performance of specified review pro-
cedures by a person (including an exter-
nal auditor or third-party consultant)
that the IRS identifies as competent to
perform such procedures given the facts
and circumstances surrounding the
sponsoring entity's potential failure to
comply with respect to each sponsored
FFI with the requirements of paragraph
(f)(1)(i)(F) or (f)(2)(iii) of this section
or an applicable Model 2 IGA.

(iii) Compliance procedures for a
sponsored FFI subject to a Model 2 IGA.
In the case of a sponsored FFI subject to
the requirements of an applicable Model 2
IGA, the procedures described in para-
graph (j)(4) of this section apply, except
as otherwise provided in the applicable
Model 2 IGA.

(5) Preexisting account certification.
The responsible officer of a sponsoring
entity must make the certification de-
scribed in § 1.1471-4(c)(7) (preexisting
account certification of a participating
FFI) with respect to each sponsored FFI
that enters into the sponsorship agreement
with the sponsoring entity during the cer-
tification period (as defined in paragraph
(j)(3)(iii) of this section). However, the
preexisting account certification is not re-
quired for a sponsored FFI that, immedi-
ately before the FFI first agrees to be
sponsored by the sponsoring entity, was a
participating FFI, a sponsored FFI of an-
other sponsoring entity, or a registered
deemed-compliant FFI that is a local FFI
or a restricted fund, if the FFI (or the FFI's
former sponsoring entity, if applicable)
provides a written certification to the

sponsoring entity that the FFI has made
the preexisting account certification re-
quired under § 1.1471-4(c)(7) or para-
graph (f)(1)(i)(A)(7) or (f)(1)(i)(D)(6) of
this section (as applicable), unless the
sponsoring entity knows that such written
certification is unreliable or incorrect. In
addition, the preexisting account certifica-
tion is not required for a sponsored FFI
that enters into the sponsorship agreement
with the sponsoring entity during the two
year period prior to the end of the certifi-
cation period, provided that the sponsor-
ing entity makes the preexisting account
certification for such FFI for the subse-
quent certification period. The certifica-
tion described in this paragraph (j)(5) for
the certification period must be submitted
by the due date of the sponsoring entity's
certification of compliance required under
paragraph (j)(3) of this section for the
certification period, on the form and in the
manner prescribed by the IRS. With re-
spect to a sponsored FFI for which the
sponsoring entity makes a preexisting ac-
count certification, a preexisting obliga-
tion means any account, instrument, or
contract (including any debt or equity in-
terest) maintained, executed, or issued by
the sponsored FFI that is outstanding on
the earlier of the date the FFI is issued a
GIIN as a sponsored FFI or the date the
FFI first agrees to be sponsored by the
sponsoring entity.

(k) Sponsoring entity event of de-
fault-(1) Defined. An event of default
with regard to a sponsoring entity occurs
if the sponsoring entity fails to perform
material obligations required with respect
to the due diligence, withholding, and re-
porting requirements of § 1.1471-4 or an
applicable Model 2 IGA with respect to
any sponsored FFI, to establish or main-
tain a compliance program as described in
paragraph (j)(2) of this section, or to per-
form a periodic review described in para-
graph (j)(2) of this section. An event of
default also includes the occurrence of
any of the following-

(i) With respect to any sponsored FFI,
failure to obtain, in any case in which
foreign law would (but for a waiver) pre-
vent the reporting of U.S. accounts re-
quired under § 1.1471-4(d), valid and ef-
fective waivers from holders of U.S.
accounts or failure to otherwise close or

transfer such U.S. accounts as required
under § 1.1471-4(i);

(ii) With respect to any sponsored FFI,
failure to significantly reduce, over a pe-
riod of time, the number of account hold-
ers or payees that such sponsored FFI is
required to treat as recalcitrant account
holders or nonparticipating FFIs, as a re-
sult of the sponsoring entity failing to
comply with the due diligence procedures
set forth in § 1.1471-4(c);

(iii) With respect to any sponsored FFI,
failure to fulfill the requirements of
§ 1.1471-4(i) in any case in which for-
eign law prevents or otherwise limits
withholding under § 1.1471-4(b);

(iv) Failure to take timely corrective
actions to remedy a material failure de-
scribed in paragraph (j)(3)(vii) of this sec-
tion after making a qualified certification
described in paragraph (j)(3)(vi)(B) of this
section;

(v) Failure to make the preexisting ac-
count certification required under para-
graph (j)(5) of this section or the periodic
certification required under paragraph
(j)(3) of this section with respect to any
sponsored FFI within the specified time
period;

(vi) Making incorrect claims for refund
on behalf of any sponsored FFI;

(vii) Failure to cooperate with an IRS
request for additional information under
paragraph (j)(4) of this section;

(viii) Making any fraudulent statement
or misrepresentation of material fact to the
IRS or representing to a withholding agent
or the IRS its status as a sponsoring entity
for an entity other than an entity for which
it acts as a sponsoring entity;

(ix) The sponsoring entity is no longer
authorized to perform the requirements of
a sponsoring entity with respect to one or
more sponsored FFIs; or

(x) Failure to have the written sponsor-
ship agreement described in paragraph
(j)(3)(v)(B) of this section in effect with
each sponsored FFI.

(2) Notice of event of default. Follow-
ing an event of default known by or dis-
closed by the sponsoring entity to the IRS,
the IRS will deliver to the sponsoring en-
tity a notice of default specifying the
event of default and, if applicable, identi-
fying each sponsored FFI to which the
notice relates. The IRS will request that
the sponsoring entity remediate the event

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of default within 45 days (unless addi-
tional time is requested and agreed to by
the IRS). The sponsoring entity must re-
spond to the notice of default and provide
information responsive to an IRS request
for information or state the reasons why
the sponsoring entity does not agree that
an event of default has occurred.

(3) Remediation of event of default. A
sponsoring entity will be permitted to re-
mediate an event of default to the extent
that it agrees with the IRS on a remedia-
tion plan. Such a plan may, for example,
allow a sponsoring entity to remediate an
event of default described in paragraph
(k)(1) of this section with respect to a
sponsored FFI by providing specific infor-
mation regarding the U.S. accounts main-
tained by such sponsored FFI when the
sponsoring entity has been unable to re-
port all of the information with respect to
such accounts as required under § 1.1471-
4(d) and has been unable to close or trans-
fer such accounts. The IRS may, as part
of a remediation plan, require additional
information from the sponsoring entity
or the performance of the specified re-
view procedures described in paragraph
(j)(4)(ii) of this section.

(4) Termination-(i) In general. If the
sponsoring entity does not provide a re-
sponse to a notice of default within the
period specified in paragraph (k)(2) of this
section or does not remediate the event of
default as described in paragraph (k)(3) of
this section, the IRS may deliver a notice
of termination that terminates the spon-
soring entity's status, the status of one
or more sponsored FFIs as deemed-
compliant FFIs, or both the sponsoring
entity and one or more sponsored FFIs.

(ii) Termination of sponsoring entity. If
the IRS terminates the status of the spon-
soring entity, the sponsoring entity must
send notice of the termination to each
sponsored FFI for which it acts, as well as
each withholding agent from which it re-
ceives payments and each financial insti-
tution with which it holds an account for
which a withholding certificate or other
documentation was provided with respect
to each sponsored FFI within 30 days after
the date of termination. A sponsoring en-
tity that has had its status terminated can-
not register on the FATCA registration
website to act as a sponsoring entity for
any sponsored FFI or for any entity that is

a sponsored entity under a Model 1 IGA
unless it receives written approval from
the IRS to register. Unless the status of a
sponsored FFI has been terminated, the
sponsored FFI may register on the
FATCA registration website as a partic-
ipating FFI or registered deemed-
compliant FFI (as applicable). However,
a sponsored FFI whose sponsoring en-
tity has been terminated may not regis-
ter or represent its status as a sponsored
FFI of a sponsoring entity that has a
relationship described in section 267(b)
to the sponsoring entity that was termi-
nated without receiving written approval
from the IRS.

(iii) Termination of sponsored FFI. If
the IRS notifies the sponsoring entity that
the status of a sponsored FFI is terminated
(but not the sponsoring entity's status), the
sponsoring entity must remove the spon-
sored FFI from the sponsoring entity's
registration account on the FATCA regis-
tration website and send notice of the ter-
mination to each withholding agent from
which the sponsored FFI receives pay-
ments and each financial institution with
which it holds an account for which a
withholding certificate or other documen-
tation was provided with respect to such
sponsored FFI within 30 days after the
date of termination. A sponsored FFI that
has had its status as a sponsored FFI ter-
minated (independent from a termination
of status of its sponsoring entity) may not
register on the FATCA registration web-
site as a participating FFI or registered
deemed-compliant FFI unless it receives
written approval from the IRS.

(iv) Reconsideration of notice of de-
fault or notice of termination. A sponsor-
ing entity or sponsored FFI may request,
within 90 days of a notice of default or
notice of termination, reconsideration of
the notice of default or notice of termina-
tion by written request to the IRS.

(v) Sponsoring entity of sponsored
FFIs subject to a Model 2 IGA. Subject to
the provisions of an applicable Model 2
IGA, the IRS may revoke the status of a
sponsoring entity with respect to one or
more sponsored FFIs subject to a Model 2
IGA if there is an event of default as
defined in paragraph (k)(1) of this section
and following the notice, remediation, and
termination procedures described in para-

graphs (k)(2), (k)(3), and (k)(4) of this
section.

(l) Trustee-documented trust verifica-
tion-(1) Compliance program. A trustee
of a trust treated as a trustee-documented
trust under an applicable Model 2 IGA
must establish and implement a compli-
ance program for purposes of satisfying
the requirements of an applicable Model 2
IGA with respect to each such trust. The
trustee must appoint a responsible officer
who must (either personally or through
designated persons) establish policies,
procedures, and processes sufficient for
the trustee to implement the compliance
program. The responsible officer (or des-
ignee) must periodically review the suffi-
ciency of the trustee's compliance pro-
gram and the trustee's compliance with
respect to each trust for purposes of satis-
fying the requirements of an applicable
Model 2 IGA for each certification period
described in paragraph (l)(2) of this sec-
tion. The results of the periodic review
must be considered by the responsible of-
ficer in making the certification described
in paragraph (l)(2) of this section.

(2) Certification of compliance- (i) In
general. On or before July 1 of the calen-
dar year following the end of the certifi-
cation period, the responsible officer must
make a certification for the certification
period with respect to all trustee-
documented trusts described in paragraph
(l)(1) of this section on the form and in the
manner prescribed by the IRS.

(ii) Late-joining trustee-documented
trusts. In general, with respect to a certi-
fication period, the responsible officer of a
trustee is not required to make a certifica-
tion for a trustee-documented trust for
which the trustee first agreed to act as the
trustee for purposes of the trust's status as
a trustee-documented trust during the six
month period prior to the end of the cer-
tification period, provided that the respon-
sible officer of the trustee makes certifi-
cations for such trustee-documented trust
for subsequent certification periods and
the first such certification covers both the
subsequent certification period and the
portion of the prior certification period
during which the trustee acted as the
trustee of the trustee-documented trust.
However, the preceding sentence does not
apply to a trustee-documented trust that,
immediately before the trustee first agrees

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to act as the trustee for purposes of the
trust's status as a trustee-documented
trust, was a trustee-documented trust of
another trustee. The trustee of a trustee-
documented trust may certify for a
trustee-documented trust described in the
preceding sentence for the portion of the
certification period prior to the date that
the trustee first agrees to act as the trustee
for purposes of the trust's status as a
trustee-documented trust if the trustee ob-
tains from the trustee-documented trust
(or the trust's former trustee, if applicable)
a written certification that the trust has
complied with its applicable chapter 4 re-
quirements during such portion of the cer-
tification period, provided that: (1) the
trustee does not know that such certifica-
tion is unreliable or incorrect; and (2) the
certification for the trustee-documented
trust for the subsequent certification pe-
riod covers both the subsequent certifica-
tion period and the portion of the prior
certification period during which the
trustee acts as the trustee for purposes of
the trust's status as a trustee-documented
trust.

(iii) Certification period. The first cer-
tification period begins on the later of the
date the trustee is issued a GIIN to act as
a trustee of a trustee-documented trust or
June 30, 2014, and ends at the close of the
third full calendar year following such
date. Each subsequent certification period
is the three calendar year period following
the previous certification period.

(iv) Certifications. The responsible of-
ficer of the trustee must certify to the
following statements-

(A) The responsible officer of the
trustee has established a compliance pro-
gram that is in effect as of the date of the
certification and has performed a periodic
review described in paragraph (l)(1) of
this section for the certification period;
and

(B) The trustee has reported to the IRS
on Form 8966, "FATCA Report" (or such
other form as the IRS may prescribe), all
of the information required to be reported
pursuant to the applicable Model 2 IGA
with respect to all U.S. accounts of each
trustee-documented trust for which the
trustee acts during the certification period
by the due date of Form 8966 (including
extensions) for each year.

(3) IRS review of compliance by trust-
ees of trustee-documented trusts-(i)
General inquiries. Based upon the infor-
mation reporting forms filed with the IRS
(or the absence of such reporting) by a
trustee with respect to any trustee-
documented trust subject to a Model 2
IGA for each calendar year, and subject to
the requirements of an applicable Model 2
IGA, the IRS may request from the trustee
additional information with respect to the
information reported on the forms with
respect to any trustee-documented trust or
a confirmation that the trustee has no re-
porting requirements with respect to any
trustee-documented trust. The IRS may
also request any additional information to
determine the trustee's compliance for
purposes of satisfying the trust's require-
ments as a trustee-documented trust under
an applicable Model 2 IGA or to assist the
IRS with its review of account holder
compliance with tax reporting require-
ments.

(ii) Inquiries regarding substantial
non-compliance. The IRS, based on the
information reporting forms filed with the
IRS by a trustee with respect to any
trustee-documented trust subject to a
Model 2 IGA for each calendar year (or
the absence of such reporting), the certi-
fication described in paragraph (l)(2) of
this section (or the absence of such certi-
fication), or any other information related
to the trustee's compliance with respect to
any trustee-documented trust for purposes
of satisfying the trust's applicable Model
2 IGA requirements, may determine in its
discretion that the trustee may not have
substantially complied with the require-
ments applicable to a trustee of a trustee-
documented trust. In such a case, the IRS
may request from the responsible officer
information necessary to verify the trust-
ee's compliance with such requirements.
The IRS may also request the perfor-
mance of specified review procedures by a
person (including an external auditor or
third-party consultant) that the IRS iden-
tifies as competent to perform such proce-
dures given the circumstances surround-
ing the trustee's potential failure to
comply with the requirements of an appli-
cable Model 2 IGA with respect to one or
more trustee-documented trusts. The IRS
may notify the applicable Model 2 IGA
jurisdiction that the trustee has not com-

plied with its requirements as a trustee of
one or more trustee-documented trusts
* * * * *

Par. 6. Section 1.1472-1 is amended by
revising paragraphs (c)(5)(iii), (f), and (g)
to read as follows:

§ 1.1472-1 Withholding on NFFEs.

* * * * *

(c) * * *

(5) * * *

(iii) Revocation of status as sponsoring
entity. The IRS may revoke a sponsoring
entity's status as a sponsoring entity with
respect to all sponsored direct reporting
NFFEs if there is an event of default as
defined in paragraph (g) of this section
with respect to any sponsored direct re-
porting NFFE.

* * * * *

(f) Sponsoring entity verification-(1)
In general. This paragraph (f) describes
the requirements for a sponsoring entity to
provide a certification of compliance with
respect to each sponsored direct reporting
NFFE for purposes of satisfying the re-
quirements of paragraph (c)(5) of this sec-
tion and defines the certification period for
such certifications. This paragraph (f) also
describes the procedures for the IRS to
review the sponsoring entity's compliance
with such requirements during the certifi-
cation period. Finally, this paragraph (f)
describes the requirement that a sponsor-
ing entity have in place a written sponsor-
ship agreement with each sponsored direct
reporting NFFE for which it acts and
specifies the terms of such agreement. See
paragraph (g)(1)(i) of this section, de-
scribing an event of default for a sponsor-
ing entity that does not have a sponsorship
agreement with each sponsored direct re-
porting NFFE for which it acts as a spon-
soring entity. References in this paragraph
(f) or paragraph (g) of this section to a
sponsored direct reporting NFFE mean a
sponsored direct reporting NFFE for which
the sponsoring entity acts as a sponsoring
entity under paragraph (c)(5)(ii) of this sec-
tion.

(2) Certification of compliance- (i) In
general. The sponsoring entity must ap-
point a responsible officer to oversee the
sponsoring entity's compliance with re-
spect to each sponsored direct reporting
NFFE for purposes of satisfying the re-

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quirements of paragraph (c)(5) of this sec-
tion. On or before July 1 of the calendar
year following the certification period, the
responsible officer of the sponsoring en-
tity must make a certification for the cer-
tification period with respect to all spon-
sored direct reporting NFFEs for which
the sponsoring entity acts during the cer-
tification period on the form and in the
manner prescribed by the IRS.

(ii) Late-joining sponsored direct re-
porting NFFEs. In general, with respect to
a certification period, a sponsoring entity
is not required to make a certification for
a sponsored direct reporting NFFE that
first agrees to be sponsored by the spon-
soring entity during the six month period
prior to the end of the certification period,
provided that the sponsoring entity makes
certifications for such sponsored direct re-
porting NFFE for subsequent certification
periods, and the first such certification
covers both the subsequent certification
period and the portion of the prior certifi-
cation period during which the sponsored
direct reporting NFFE was sponsored by
the sponsoring entity. However, the pre-
ceding sentence does not apply to a spon-
sored direct reporting NFFE that, imme-
diately before the NFFE agrees to be
sponsored by the sponsoring entity, was a
direct reporting NFFE or sponsored direct
reporting NFFE of another sponsoring en-
tity. The sponsoring entity may certify for
a sponsored direct reporting NFFE de-
scribed in the preceding sentence for the
portion of the certification period prior to
the date that the NFFE first agrees to be
sponsored by the sponsoring entity if the
sponsoring entity obtains from the NFFE
(or the NFFE's sponsoring entity, if ap-
plicable) a written certification that the
NFFE has complied with its applicable
chapter 4 requirements during such por-
tion of the certification period, provided
that: (1) the sponsoring entity does not
know that such certification is unreliable
or incorrect; and (2) the certification for
the sponsored direct reporting NFFE for
the subsequent certification period covers
both the subsequent certification period
and the portion of the prior certification
period during which such NFFE was
sponsored by the sponsoring entity.

(iii) Certification period. The first certi-
fication period begins on the later of the
date the sponsoring entity is issued a GIIN

to act as a sponsoring entity or June 30,
2014, and ends at the close of the third full
calendar year after such date. Each subse-
quent certification period is the three cal-
endar year period following the close of
the previous certification period.

(iv) Certifications. The certification
will require the responsible officer of the
sponsoring entity to certify to the follow-
ing statements-

(A) The sponsoring entity meets all of
the requirements of a sponsoring entity
described in paragraph (c)(5)(ii) of this
section;

(B) The sponsoring entity has the writ-
ten sponsorship agreement described in
paragraph (f)(4) of this section in effect
with each sponsored direct reporting
NFFE;

(C) There were no events of default (as
defined in paragraph (g) of this section)
with respect to the sponsoring entity, or,
to the extent there were any such events of
default, appropriate measures were taken
by the sponsoring entity to remediate and
prevent such events from reoccurring; and

(D) With respect to any failure to re-
port to the extent required under para-
graph (c)(3)(ii) of this section with respect
to one or more sponsored direct reporting
NFFEs, the sponsoring entity has cor-
rected such failure by filing the appropri-
ate information returns.

(3) IRS review of compliance-(i)
General inquiries. The IRS, based upon
the information reporting forms described
in paragraph (c)(3)(ii) of this section filed
with the IRS (or the absence of such re-
porting) by the sponsoring entity for each
calendar year with respect to any spon-
sored direct reporting NFFE, may request
additional information with respect to the
information reported (or required to be
reported) on the forms about any substan-
tial U.S. owner reported on the form or the
records for each direct reporting NFFE
described in paragraph (c)(3)(iv) of this
section. The IRS may also request any
additional information from the sponsor-
ing entity (including a copy of each spon-
sorship agreement the sponsoring entity
has entered into with each sponsored FFI)
to determine its compliance with para-
graph (f) of this section with respect to
each sponsored direct reporting NFFE and
to assist the IRS with its review of any

substantial U.S. owners' compliance with
tax reporting requirements.

(ii) Inquiries regarding substantial
non-compliance. If, based on the informa-
tion reporting forms referenced in para-
graph (c)(3)(ii) of this section filed with
the IRS by the sponsoring entity for each
calendar year with respect to any spon-
sored direct reporting NFFE (or the ab-
sence of such reporting), the certification
made by the responsible officer described
in paragraph (f)(2) of this section (or the
absence of such certification), or any other
information related to the sponsoring en-
tity's compliance with the requirements of
a sponsoring entity with respect to each
sponsored direct reporting NFFE for pur-
poses of satisfying the requirements of
paragraph (c)(5) of this section, the IRS
determines in its discretion that the spon-
soring entity may not have substantially
complied with these requirements, the IRS
may request from the responsible officer
information necessary to verify the spon-
soring entity's compliance with such re-
quirements. The IRS may also request the
performance of specified review proce-
dures by a person (including an external
auditor or third-party consultant) that the
IRS identifies as competent to perform
such procedures given the circumstances
surrounding the sponsoring entity's poten-
tial failure to comply with the require-
ments of a sponsoring entity.

(4) Sponsorship agreement. The spon-
soring entity must have a written sponsor-
ship agreement in effect between the
sponsoring entity and each sponsored di-
rect reporting NFFE in which-

(i) The sponsored direct reporting
NFFE agrees to provide the sponsoring
entity access to the sponsored direct re-
porting NFFE's books and records re-
garding each of its owners (including
AML/KYC documentation regarding
the sponsored direct reporting NFFE's
owners provided by the sponsored direct
reporting NFFE with respect to each
financial account it holds) and such
other information sufficient for the
sponsoring entity to determine the direct
and indirect substantial U.S. owners
of the sponsored direct reporting
NFFE, including the information about
such owners required under paragraph
(c)(3)(ii) of this section to be reported
on Form 8966, "FATCA Report" (or

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such other form as the IRS may pre-
scribe);

(ii) The sponsored direct reporting
NFFE obtains a valid and effective waiver
of any legal prohibitions on reporting the
information about its direct and indirect
substantial U.S. owners required under
paragraph (c)(3)(ii) of this section to be
reported on Form 8966 (or such other
form as the IRS may prescribe);

(iii) The sponsored direct reporting
NFFE authorizes the sponsoring entity to
act on the sponsored direct reporting
NFFE's behalf with respect to the spon-
sored direct reporting NFFE's obligations
as a sponsored direct reporting NFFE (for
example, authorizing the sponsoring en-
tity to file Form 8966 on the sponsored
direct reporting NFFE's behalf, respond-
ing to the IRS inquiries described in para-
graph (f)(3) of this section, and providing
the certification described in paragraph
(f)(2) of this section);

(iv) The sponsored direct reporting
NFFE agrees to identify to the sponsoring
entity on request each withholding agent
and financial institution to which the
sponsored direct reporting NFFE reports
its status as a sponsored direct reporting
NFFE and agrees to provide to the spon-
soring entity a copy of the withholding
certificate or written statement prescribed
in § 1.1471-3(d)(11)(x)(B) (as applicable)
that the sponsored direct reporting NFFE
provides to each such withholding agent
or financial institution;

(v) The sponsored direct reporting
NFFE represents that it does not have any
formal or informal practices or procedures
to assist its substantial U.S. owners with
the avoidance of the requirements of
chapter 4;

(vi) The sponsored direct reporting
NFFE agrees to cooperate with the spon-
soring entity in responding to any IRS
inquiries under paragraph (f)(3) of this
section with respect to the sponsored di-
rect reporting NFFE; and

(vii) The sponsoring entity retains the
records described in paragraphs (c)(3)(iii)
and (iv) of this section for the longer of
six years or the retention period under the
sponsoring entity's normal business pro-
cedures. A sponsoring entity may be re-
quired to extend the retention period if the
IRS requests such an extension prior to
the expiration of the period.

(g) Sponsoring entity event of de-
fault-(1) Defined. An event of default by
the sponsoring entity means the occur-
rence of any of the following-

(i) Failure to have the written sponsor-
ship agreement described in paragraph
(f)(4) of this section in effect with each
sponsored direct reporting NFFE;

(ii) Failure to satisfy the requirements
of paragraph (c)(3)(iii) of this section with
respect to each sponsored direct reporting
NFFE that the NFFE would have been
required to satisfy as a direct reporting
NFFE;

(iii) Failure to report to the IRS on
Form 8966, "FATCA Report," (or such
other form as the IRS may prescribe) all
of the information required under para-
graph (c)(3)(ii) of this section with respect
to each sponsored direct reporting NFFE
and each of its substantial U.S. owners (or
report to the IRS on Form 8966 that the
sponsored direct reporting NFFE had no
substantial U.S. owners) by the due date
of the form (including any extensions);

(iv) Failure to make the certification
required under paragraph (f)(2) of this
section;

(v) Failure to cooperate with an IRS
request for additional information de-
scribed in paragraph (f)(3) of this section,
including requests for the records de-
scribed in paragraph (c)(3)(iv) of this sec-
tion and requests to extend the retention
period for these records as described in
(f)(4)(vii) of this section;

(vi) Making any fraudulent statement
or misrepresentation of material fact to the
IRS or representing to a withholding agent
or the IRS its status as a sponsoring entity
under paragraph (c)(5) of this section for
an entity other than an entity for which it
acts as a sponsoring entity; or

(vii) Failure to obtain from each spon-
sored direct reporting NFFE the informa-
tion required to report on Form 8966.

(2) Notice of event of default. Follow-
ing an event of default known by or dis-
closed to the IRS, the IRS will deliver to
the sponsoring entity a notice of default
specifying the event of default and, if ap-
plicable, identifying each sponsored direct
reporting NFFE to which the notice re-
lates. The IRS will request that the spon-
soring entity remediate the event of de-
fault within 45 days (unless additional
time is requested and agreed to by the

IRS). The sponsoring entity must respond
to the notice of default and provide infor-
mation responsive to an IRS request for
information or state the reasons why the
sponsoring entity does not agree that an
event of default has occurred.

(3) Remediation of event of default. A
sponsoring entity will be permitted to re-
mediate an event of default to the extent
that it agrees with the IRS on a remedia-
tion plan. The IRS may, as part of a re-
mediation plan, require additional infor-
mation from the sponsoring entity,
remedial actions, or the performance of
the specified review procedures described
in paragraph (f)(3)(ii) of this section.

(4) Termination-(i) In general. If the
sponsoring entity does not provide a re-
sponse to a notice of default within the
period specified in paragraph (g)(2) of this
section, or if the sponsoring entity does
not satisfy the conditions of the remedia-
tion plan within the time period specified
by the IRS, the IRS may deliver a notice
of termination that terminates the sponsor-
ing entity's status, the status of one or
more sponsored direct reporting NFFEs as
a direct reporting NFFE, or both the spon-
soring entity and one or more sponsored
direct reporting NFFEs.

(ii) Termination of sponsoring entity. If
the IRS notifies the sponsoring entity that
its status is terminated, the sponsoring en-
tity must send notice of the termination to
each withholding agent from which it re-
ceives payments and each financial insti-
tution with which it holds an account for
which a withholding certificate or written
statement prescribed in § 1.1471-3(d)
(11)(x)(B) (as applicable) was provided
with respect to each sponsored direct re-
porting NFFE within 30 days after the
date of termination. A sponsoring entity
that has had its status terminated cannot
reregister on the FATCA registration
website to act as a sponsoring entity for
any sponsored direct reporting NFFE un-
less it receives written approval from the
IRS. Unless the status of the sponsored
direct reporting NFFEs has been termi-
nated, the sponsored direct reporting
NFFEs may register on the FATCA reg-
istration website as direct reporting
NFFEs or as sponsored direct reporting
NFFEs of another sponsoring entity, other
than a sponsoring entity that is related to
the sponsoring entity that was terminated.

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An entity is related to the terminated
sponsoring entity if they have a relation-
ship with each other that is described in
section 267(b).

(iii) Termination of sponsored direct
reporting NFFE. If the IRS notifies the
sponsoring entity that the status of a spon-
sored direct reporting NFFE is terminated
(but not the sponsoring entity's status), the
sponsoring entity must remove the spon-
sored direct reporting NFFE from the
sponsoring entity's registration account
on the FATCA registration website and
send notice of the termination to each
withholding agent from which the spon-
sored direct reporting NFFE receives pay-
ments and each financial institution with
which it holds an account for which a
withholding certificate or written state-
ment prescribed in § 1.1471-3(d)(11)
(x)(B) (as applicable) was provided with
respect to such sponsored direct reporting
NFFE within 30 days after the date of
termination. A sponsored direct reporting
NFFE that has had its status as a spon-
sored direct reporting NFFE terminated
(independent from a termination of status
of its sponsoring entity) may not register
on the FATCA registration website as a
direct reporting NFFE or as a sponsored
direct reporting NFFE of another sponsor-
ing entity unless it receives written ap-
proval from the IRS.

(iv) Reconsideration of notice of de-
fault or notice of termination. A sponsor-
ing entity or sponsored direct reporting
NFFE may request, within 90 days of a
notice of default or notice of termination,
reconsideration of the notice of default or
notice of termination by written request to
the IRS.

* * * * *

Par. 7. Section 1.1474-1 is amended
by adding paragraph (d)(4)(vii) to read as
follows:

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

(d) * * *

(4) * * *

(vii) [The text of proposed § 1.1474-
1(d)(4)(vii) is the same as the text of
§ 1.1474-1T(d)(4)(vii) published else-
where in this issue of the Bulletin].

* * * * *

John Dalrymple
Deputy Commissioner for Services and
Enforcement.

(Filed by the Office of the Federal Register on December 30,
2016, 4:15 p.m., and published in the issue of the Federal
Register for January 6, 2017, 82 F.R. 1629)

## Notice of proposed rulemaking.

## Electronic Filing of the Report of Health Insurance Provider Information

REG-123829-16

AGENCY: Internal Revenue Service
(IRS), Treasury.

ACTION: Notice of proposed rulemaking.

SUMMARY: This document proposes to
amend the Health Insurance Providers Fee
regulations to require certain covered en-
tities engaged in the business of providing
health insurance for United States health
risks to electronically file Form 8963,
"Report of Health Insurance Provider In-
formation." These proposed regulations
affect those entities.

DATES: Written or electronic comments
and requests for a public hearing must be
received by March 9, 2017.

ADDRESSES: Send submissions to: CC:
PA:LPD:PR (REG-123829-16), room
5205, Internal Revenue Service, PO Box
7604, Ben Franklin Station, Washing-
ton, DC 20044. Submissions may be
hand delivered Monday through Friday
between the hours of 8 a.m. and 4 p.m.
to CC:PA:LPD:PR (REG-123829-16),
Courier's Desk, Internal Revenue Ser-
vice, 1111 Constitution Avenue, NW,
Washington, DC, or sent electronically
via the Federal eRulemaking Portal at
http://www.regulations.gov (indicate
IRS REG-123829-16).

FOR FURTHER INFORMATION CON-
TACT: Concerning the proposed regula-
tions, David Bergman, (202) 317-6844;
concerning submissions of comments or
to request a public hearing, Regina John-
son, (202) 317-6901 (not toll-free
numbers).

SUPPLEMENTARY INFORMATION:

### Background

This document proposes to amend the
Health Insurance Providers Fee Regula-
tions (26 CFR part 57) under section 9010
of the Patient Protection and Affordable
Care Act (PPACA), Public Law 111-148
(124 Stat. 119 (2010)), as amended by
section 10905 of PPACA, and as further
amended by section 1406 of the Health
Care and Education Reconciliation Act of
2010, Public Law 111-152 (124 Stat.
1029 (2010)) (collectively, the Affordable
Care Act or ACA). All references in this
preamble to section 9010 are references to
the ACA.

Section 9010(a) imposes an annual fee
on each covered entity engaged in the
business of providing health insurance. A
covered entity, defined under section
9010(c), is any entity that provides health
insurance for any United States health risk
during each year, subject to certain exclu-
sions. The total aggregate amount of the
fee for all covered entities is determined
by statute and is called the applicable
amount. See section 9010(e). Each cov-
ered entity's annual fee is equal to an
amount that bears the same ratio to the
applicable amount as the covered entity's
portion of net premiums written with re-
spect to health insurance for United States
health risks that are taken into account
compared to the aggregate amount of net
premiums written for all covered entities
that are taken into account. Section
9010(b)(2) clarifies which net premiums
are taken into account for purposes of
calculating the fee. A covered entity (in-
cluding a controlled group) with no more
than $25 million in net premiums written
does not have any premiums taken into
account and is not liable for a fee.

Section 9010(b)(3) requires the Secre-
tary to calculate the amount of each cov-
ered entity's fee on a calendar year basis.
To facilitate these calculations, section
9010(g)(1) requires that each covered en-
tity must report to the Secretary the cov-
ered entity's net premiums written for
health insurance for any United States
health risk for the preceding calendar year
by the date prescribed by the Secretary.
Section 9010(g)(1) also provides the Sec-
retary with authority to prescribe the man-
ner in which a covered entity reports its

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net premiums written. The reporting re-
quirement applies regardless of whether a
covered entity will be liable for a fee.
Section 9010(g)(2) imposes a penalty on a
covered entity for any failure to report the
required information by the date pre-
scribed by the Secretary (determined with
regard to any extension of time for filing),
unless such failure is due to reasonable
cause. Section 9010(g)(3) imposes an
accuracy-related penalty for understating
the covered entity's net premiums written
for health insurance for any United States
health risk for any calendar year.

Section 57.3 of the Health Insurance
Providers Fee regulations implements sec-
tion 9010(g) and provides the rules for
covered entities to report net premiums
written for health insurance of United
States health risks to the IRS. Under that
section, information is reported to the IRS
on Form 8963, "Report of Health Insur-
ance Provider Information," which must
be filed in accordance with the form in-
structions by April 15 of the year follow-
ing the calendar year for which data is
being reported. That section further pro-
vides that rules for the manner of report-
ing may be provided in guidance in the
Internal Revenue Bulletin. The IRS uses
the information reported on Form 8963 as
part of the determination of each covered
entity's annual fee under section 9010.
Neither the statute nor the regulations cur-
rently specify whether Form 8963 must be
submitted electronically or on paper. Cov-
ered entities currently have the option of
filing the form in either manner.

Section 57.5 requires the IRS to send
each covered entity notice of a prelimi-
nary fee calculation for that fee year (the
calendar year in which the fee must be
paid, beginning with 2014), and provides
the content of that notice. Section 57.5
further provides that the timing of the
notice will be provided in guidance pub-
lished in the Internal Revenue Bulletin.
Notice 2013-76 (2013-51 IRB 769) pro-
vides that the IRS will mail each covered
entity its notice of preliminary fee calcu-
lation by June 15 of each fee year. Section
57.6 requires that a covered entity correct
any errors identified after receiving the
preliminary fee calculation by filing a cor-
rected Form 8963. Notice 2013-76 pro-
vides that a corrected Form 8963 must be
filed by July 15 of the fee year. The cor-

rected Form 8963 replaces the original
Form 8963 for all purposes, including the
determination of whether an accuracy-
related penalty applies. The covered entity
remains liable for any failure to report
penalty if it failed to timely submit the
original Form 8963. As with the original
report, the corrected Form 8963 may cur-
rently be submitted either electronically
on paper.

Under § 57.7(b), the IRS must send
each covered entity its final fee calcula-
tion no later than August 31. The IRS
validates the data on Form 8963 in per-
forming the final calculation, and, pursu-
ant to section 9010(b)(3), the IRS is au-
thorized to use any other source of
information to determine each covered en-
tity's net premiums written for health in-
surance of United States health risks. The
covered entity must pay the fee by Sep-
tember 30 of the fee year, as provided by
section 9010(a)(2). The fee must be
paid by electronic funds transfer. See
§§ 57.7(d); 57.6302-1.

The Consolidated Appropriations Act
of 2016 imposes a moratorium on the fee
for the 2017 calendar year. P.L. 114-113,
section 201. Thus, covered entities are not
required to pay the fee or file Form 8963
for the 2017 fee year.

### Explanation of Provisions

The IRS has now had three years of
experience administering the Health In-
surance Providers Fee. Based on this ex-
perience, the IRS concludes that the fee
could be more efficiently administered if
certain covered entities were required to
file Forms 8963 and corrected Forms 8963
electronically.

The calculation of the fee is complex,
and the statute requires that it be paid by
the covered entity by September 30. The
calculation of any one covered entity's fee
depends upon the data reported on Form
8963 by all covered entities - an adjust-
ment to one covered entity's fee affects
other covered entities' fees. Covered en-
tities need time after the end of the year to
compile the information that needs to be
reported. Accordingly, there is a short
window of time for (1) the IRS to compile
and analyze the reported information and
send out preliminary letters, (2) covered
entities to respond with any corrections,
(3) the IRS to compile and analyze the

amended reporting and issue final fee let-
ters, and (4) covered entities to pay the
fee.

Paper reporting slows this process be-
cause paper forms take time to travel
through the mail. Additionally, once the
paper Form 8963 (or corrected Form
8963) reaches IRS personnel, the informa-
tion on the paper form must be transcribed
into IRS computers to calculate the fee.
Transcription of paper forms is costly and
time-consuming. And, because of the na-
ture of the fee, no entity's proposed or
final assessment can be determined until
all the reporting of all payers has been
taken into account.

The IRS uses electronic filing in sev-
eral other contexts to streamline the col-
lection of large volumes of paper forms
and to efficiently use the information pro-
vided. Electronic filing of Forms 8963 and
corrected Forms 8963 would benefit the
administration of the fee by significantly
reducing delays and the resources needed
to calculate the preliminary and final fee
amounts. Electronic filing will also benefit
fee payers by facilitating the process for
computing the fee for all covered entities.

Accordingly, pursuant to section
9010(g)(1), which provides authority to
prescribe the manner for reporting, the
proposed regulations amend § 57.3(a)(2)
to provide that a covered entity (including
a controlled group) reporting more than
$25 million in net premiums written on a
Form 8963 or corrected Form 8963 must
electronically file these forms after De-
cember 31, 2017. Forms 8963 reporting
$25 million or less in net premiums writ-
ten are not required to be electronically
filed. This is because a covered entity
(including a controlled group) reporting
no more than $25 million in net premiums
written is not liable for a fee and therefore
the time constraints applicable to compu-
tation of the fee are not applicable with
respect to these entities. See § 57.4(a)(4).
The proposed regulation also provides
that if a Form 8963 or corrected Form
8963 is required to be filed electronically,
any subsequently filed Form 8963 filed for
the same fee year must also be filed elec-
tronically, even if such subsequently filed
Form 8963 reports $25 million or less in
net premiums written. In addition, the pro-
posed regulation provides that failure to

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electronically file will be treated as a fail-
ure to file for purposes of § 57.3(b).

## Proposed Effective/Applicability Date

These amendments are proposed to ap-
ply to any covered entity reporting more
than $25 million in net premiums written
on any Form 8963 filed after December
31, 2017.

## Special Analyses

Certain IRS regulations, including this
one, are exempt from the requirements of
Executive Order 12866, as supplemented
and reaffirmed by Executive Order 13563.
Therefore, a regulatory impact assessment
is not required. It is hereby certified that
the electronic filing requirement would
not have a significant economic impact on
a substantial number of small entities pur-
suant to the Regulatory Flexibility Act (5
U.S.C. chapter 6). This certification is
based on the fact that the rule is expected
to affect primarily larger entities because
the electronic filing requirement is not met
unless the filer must report more than $25
million in net premiums. Accordingly, a
regulatory flexibility analysis is not re-
quired.

Pursuant to section 7805(f) of the In-
ternal Revenue Code, this notice of pro-
posed rulemaking has been submitted to
the Chief Counsel for Advocacy of the
Small Business Administration for com-
ment on the impact on small business.

## Comments and Public Hearing

Before these proposed regulations are
adopted as final regulations, consideration
will be given to any written or electronic
comments that are submitted timely to the
IRS as prescribed in this preamble under
the "Addresses" heading. The Treasury
Department and the IRS request com-
ments on all aspects of the proposed rules.
All comments will be available for public
inspection and copying at www.regula-
tions.gov or upon request. A public hear-
ing will be scheduled if requested in writ-
ing by any person that timely submits
written comments. If a public hearing is
scheduled, notice of the date, time, and
place for the public hearing will be pub-
lished in the Federal Register.

## Drafting Information

The principal author of the proposed
regulations is David Bergman of the Of-
fice of the Associate Chief Counsel (Pro-
cedure and Administration).

* * * * *

## Proposed Amendments to the Regulations

Accordingly, 26 CFR part 57 is pro-
posed to be amended to read as follows:

## PART 57-HEALTH INSURANCE PROVIDERS FEE

Paragraph 1. The authority citation for
26 CFR part 57 continues to read in part
as follows:

Authority: 26 U.S.C. 7805

Par. 2. Section 57.3 is amended by revis-
ing paragraph (a)(2) to read as follows:

### § 57.3 Reporting requirements and associated penalties.

* * * * *

(a) * * *

(2) Manner of reporting -- (i) In gen-
eral. The IRS may provide rules in guid-
ance published in the Internal Revenue
Bulletin for the manner of reporting by a
covered entity under this section, includ-
ing rules for reporting by a designated
entity on behalf of a controlled group that
is treated as a single covered entity.

(ii) Electronic filing required. Any
Form 8963 (including corrected forms)
filed pursuant to paragraph (a)(1) of this
section reporting more than $25 million in
net premiums written must be filed elec-
tronically in accordance with the instruc-
tions to the form. If a Form 8963 or
corrected Form 8963 is required to be
filed electronically under this paragraph
(a)(2)(ii), any subsequently filed Form
8963 filed for the same fee year must also
be filed electronically. For purposes of
paragraph (b) of this section, any Form
8963 required to be filed electronically
under this section will not be considered
filed unless it is filed electronically.
* * * * *

Par. 3 Section 57.10 is amended by
revising paragraph (a) and adding para-
graph (c) to read as follows:

§ 57.10 Effective/applicability date.

(a) Except as provided paragraphs (b)
and (c) of this section, §§ 57.1 through
57.9 apply to any fee that is due on or after
September 30, 2014.

* * * * *

(c) Section 57.3(a)(2)(ii) applies to
Forms 8963, including corrected Forms
8963, filed after December 31, 2017.

John Dalrymple,
Deputy Commissioner for Services and
Enforcement.

(Filed by the Office of the Federal Register on December 8,
2016, 8:46 a.m., and published in the issue of the Federal
Register for December 9, 2016, 81 F.R. 89020)

## Notice of proposed rulemaking

## Withholding on Payments of Certain Gambling Winnings

## REG-123841-16

AGENCY: Internal Revenue Service
(IRS), Treasury.

ACTION: Notice of proposed rulemaking

SUMMARY: This document contains
proposed regulations under section
3402(q) with respect to withholding on
certain payments of gambling winnings
from horse races, dog races, and jai alai
and on certain other payments of gam-
bling winnings. The proposed regulations
affect both payers and payees of the gam-
bling winnings subject to withholding un-
der section 3402(q).

DATES: Written or electronic comments
and requests for a public hearing must be
received by March 30, 2017.

ADDRESSES: Send submissions to: CC:
PA:LPD:PR (REG-123841-16), Room
5203, Internal Revenue Service, P.O. Box
7604, Ben Franklin Station, Washington,
DC 20044. Submissions may be hand-
delivered Monday through Friday be-
tween the hours of 8 a.m. and 4 p.m.
to CC:PA:LPD:PR (REG-123841-16),
Courier's Desk, Internal Revenue Service,

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1111 Constitution Avenue, NW., Wash-
ington, DC 20224, or sent electroni-
cally, via the Federal eRulemaking Por-
tal at http://www.regulations.gov (IRS
REG-123841-16).

FOR FURTHER INFORMATION CON-
TACT: Concerning the proposed regula-
tions, David Bergman, (202) 317-6845;
concerning submissions of comments or
to request a public hearing, Regina John-
son, (202) 317-6901 (not toll-free
numbers).

SUPPLEMENTARY INFORMATION:

## Paperwork Reduction Act

The collection of information contained
in this notice of proposed rulemaking has
been approved by the Office of Manage-
ment and Budget through Form W-2G
(OMB No. 1545-0238) in accordance with
the Paperwork Reduction Act of 1995 (44
U.S.C. 3507(d)). Notice and an opportunity
to comment on the proposed changes to
burden hours for the forms related to this
proposed rule will be published in a separate
notice in the Federal Register.

## Background

This document contains proposed reg-
ulations to amend the Employment Tax
Regulations (26 CFR 31) under section
3402 of the Internal Revenue Code relat-
ing to withholding from gambling win-
nings for horse races, dog races, and jai
alai. The proposed regulations update and
clarify other provisions of §31.3402(q)-
1 and make conforming changes to
§31.3406(g)-2.

Section 3402(q)(1) requires every per-
son, including the United States govern-
ment, a state, a political subdivision
thereof, or any instrumentality of the fore-
going, that makes any payment of gam-
bling winnings to deduct and withhold tax
on certain payments at the third-lowest tax
rate applicable under section 1(c), which
for the 2016 tax year is 25 percent. Sec-
tion 3402(q)(2) provides an exemption
from withholding under this section for
payments of winnings to nonresident
aliens and foreign corporations subject to
withholding under sections 1441(a) or
1442(a). Section 3402(q)(3) describes the
winnings subject to withholding as pro-

ceeds from a wager determined in accor-
dance with the rules in that subsection.

Whether winnings are subject to with-
holding depends on the type of wagering
transaction, the proceeds from a wager,
and in some cases the odds associated
with a wager. Under sections 3402(q)
(3)(B) and (C)(i), payers generally must
withhold if the proceeds from a wager
exceed $5,000 in a State-conducted lot-
tery, other lottery, sweepstakes, or wager-
ing pool. Under section 3402(q)(3)(A) and
(C)(ii), in the case of a wagering transac-
tion in a parimutuel pool with respect to
horse races, dog races, or jai alai, the
payer must withhold if the proceeds ex-
ceed $5,000 and are at least 300 times as
large as the amount wagered. Winnings
from bingo, keno, and slot machines are
exempted from withholding under section
3402(q)(1) by section 3402(q)(5).

### Proceeds from a Wager and Identical Wagers

Section 3402(q)(4) provides that pro-
ceeds from a wager are determined by
reducing the amount received by the
amount of the wager, and proceeds which
are not money are taken into account at
fair market value. The current regulations
provide rules for determining the amount
of proceeds from a wager, including a
special rule for "identical wagers." The
rule treats "identical wagers" as paid with
respect to a single wager for purposes of
calculating the proceeds from the wager.
See §31.3402(q)-1(c)(ii).

Neither the statute nor the existing regu-
lations explicitly define the terms "wager"
or "identical wagers," but the regulation text
of §31.3402(q)-1(c)(ii), regarding rules for
determining the amount of proceeds from a
wager, and §31.3402(q)-1(d) provide exam-
ples of wagers that are and are not identical
wagers. For example, amounts paid on two
bets placed in a parimutuel pool on a par-
ticular horse to win a particular race are
treated as paid with respect to the same
wager. These two bets would not be identi-
cal, however, if one bet was for the horse to
win and the other bet was for the horse to
place (which are bets in two separate pa-
rimutuel pools, as explained below). Those
two bets would also not be identical if one
bet was placed in a pool conducted by the
racetrack and the other bet was placed in a

separate pool conducted by an off-track bet-
ting establishment and such wagers are not
pooled with those placed at the racetrack. In
addition, two bets on the same race are not
identical where the bettor makes an exacta
bet on horse M to win and horse N to place
and a trifecta bet on horse M to win, horse N
to place, and horse O to show. See
§31.3402(q)-1(d), Example 11. The pream-
ble to the current regulations provides the
following definition for identical bets:
"Identical bets are those in which winning
depends on the occurrence (or non-
occurrence) of the same event or events."
T.D. 7919 (48 FR 46296) (Oct. 12, 1983).

The statute does not explicitly address
how to determine the amount of the wager
in the case of exotic wagers. Exotic wa-
gers are those other than straight wagers.
Straight wagers include bets to win (se-
lecting the first-place finisher), place (se-
lecting a finisher to place first or second),
and show (selecting a finisher to place
first, second, or third). Examples of exotic
bets include multi-contestant bets, such as
an exacta (selecting the first and second-
place finishers in a single contest, in the
correct order) and a trifecta (selecting the
first, second, and third-place finishers in a
single contest, in the correct order). Other
examples include multi-contest bets such
as a Pick 6 (selecting the first-place fin-
isher in six consecutive contests).

The instructions to Form W-2G pro-
vide the rule for multiple wagers reflected
on a single ticket as follows: "For multiple
wagers sold on one ticket, such as the $12
box bet on a Big Triple or Trifecta, the
wager is considered as six $2 bets and not
one $12 bet for purposes of computing the
amount to be reported or withheld." See,
e.g., 2016 Instructions to Forms W-2G
and 5754, at 2, available at https://
www.irs.gov/pub/irs-pdf/iw2g.pdf. Thus,
according to the instructions, the bettor
may only consider the cost of a single
winning combination when determining
the amount wagered for purposes of de-
termining whether proceeds from a wager
meets the threshold for withholding in
section 3402(q)(3)(C)(ii).

### 2015 Request for Comments

The Treasury Department and the IRS
requested comments from the public on
the treatment of wagers in parimutuel

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gambling on March 4, 2015, in a notice of
proposed rulemaking (REG-132253-11)
under section 6041 regarding information
returns to report winnings from bingo,
keno, and slot machine play. The notice of
proposed rulemaking stated that taxpayers
required to report winnings from parimu-
tuel gambling may have concerns relating
to when wagers with respect to horse
races, dog races, and jai alai may be
treated as identical and that the Treasury
Department and the IRS intend to amend
the regulations under §31.3402(q)-1.

Multiple commentators requested a rule
that would take into account all money wa-
gered in a particular parimutuel pool when
determining proceeds from a wager for pur-
poses of determining whether withholding
under section 3402(q) was required. In par-
ticular, some commentators requested that
the Treasury Department and the IRS revise
the regulations to provide a definition of the
"amount of the wager" when multiple bets
are placed in the same pool to include the
total amount wagered by a bettor into a
specific parimutuel pool for purposes of de-
termining whether wagering proceeds are
subject to withholding and reporting. The
commentators stated that this change would
reflect innovations and changes to today's
modern parimutuel wagering strategies.

### Reporting Rules

Section 3402(q)(6) provides that recip-
ients of gambling winnings subject to
withholding must furnish a statement to
the payer, under penalties of perjury, con-
taining the name, address, and taxpayer
identification number of the recipient and
each person entitled to any portion of the
payment. The current regulations provide
that the statement, furnished on a Form
W-2G, Certain Gambling Winnings, or
Form 5754, Statement by Person(s) Re-
ceiving Gambling Winnings, also must
indicate if the payee and any other persons
entitled to payment are entitled to win-
nings from identical wagers. §§1.6011-
3, 31.3402(q)-1(c)(ii). The payer may rely
on this statement in determining the
amount of proceeds from the wager.
§31.3402(q)-1(c)(ii).

On or before February 28 (March 31 if
filed electronically) of the calendar year fol-
lowing the calendar year in which the pay-
ment is made, the payer must file a return on

Form W-2G with the Internal Revenue Ser-
vice reporting the gambling winnings sub-
ject to withholding. §31.3402(q)-1(f). Sec-
tion 6041(d) and the instructions to Form
W-2G require that the payer filing a Form
W-2G also furnish a statement to the payee
on or before January 31 of the calendar year
following the calendar year in which the
payment is made.

## Explanation of Provisions

The current regulations for withhold-
ing from gambling winnings under section
3402(q) were last substantively amended
in 1983. According to commentators,
since that time, exotic bets on horse races,
dog races, and jai alai have accounted for
an increasing percentage of total bets
placed on horse races, dog races, and jai
alai. The increase in exotic betting, and in
particular the use of certain methods of
exotic betting, has resulted in scenarios
where the current rules may result in with-
holding that significantly exceeds the in-
dividual gambler's ultimate income tax
liability. In light of this, the proposed reg-
ulations amend the rules regarding how
payers determine the amount of the wager
in parimutuel wagering transactions with
respect to horse races, dog races, and jai
alai. Specifically, these proposed regula-
tions address exotic bets on horse races,
dog races, and jai alai by providing a new
rule to determine the amount of the wager
when wagers are placed in a single pa-
rimutuel pool and are reflected on a single
ticket. In addition, the current regulations
under section 3402(q) are updated to re-
flect current law regarding the withhold-
ing thresholds and certain information re-
porting requirements.

I. Wagers in the Case of Horse Races,
Dog Races, and Jai Alai

### A. Parimutuel Betting

In parimutuel betting, which translates
to betting "amongst ourselves," the bettors
themselves establish the odds and pay-
outs, as opposed to having fixed odds.
Each type of bet on a contest or series of
contests goes into its own parimutuel
pool. For example, each win bet goes into
the win pool for that contest, regardless of
the finisher selected to win. As amounts
are wagered in the pool, the odds and

payouts adjust accordingly. Following the
contest or contests determinative of a par-
ticular pool, all bettors who placed a win-
ning bet share the money placed in that
particular pool, less the applicable take-
out. Parimutuel betting in the United
States is used in betting on horse races,
dog races, and jai alai.

Parimutuel betting involves both
straight and exotic bets. Each type of
straight or exotic bet is placed in its own
parimutuel pool. For example, a trifecta
bet on a particular contest goes into that
contest's trifecta pool, regardless of the
finishers or order of finish selected, and
the trifecta pool is separate from the win
pool, the exacta pool, and all other pools
associated with that particular contest. Ex-
otic bets provide greater odds and bigger
pay-offs than straight bets.

Multiple combinations of exotic bets
may be placed on a single ticket, making
it easier for bettors to place wagers on the
various possible outcomes. For example
in horse racing, bettors often use box, key,
and wheel bets to place the same type of
exotic bet (e.g., exacta or trifecta) on mul-
tiple combinations of outcomes. Box bets
involve betting on all possible outcomes
of a specific group of horses in the same
race; for example, a three-horse exacta
box is a bet in which three specific horses
are selected to place first or second in any
combination or order of finish. A bettor
wins a three-horse exacta box bet if any
combination of the bettor's three horses
finishes first and second. Key bets involve
betting a single horse in one position with
all possible combinations of the other se-
lected horses; for example, a trifecta key
is a bet where a single horse is selected to
win and the other horses included in the
bet are selected to place second or third in
any combination or order of finish. Fi-
nally, a wheel bet involves multiple horses
in multiple combinations in multiple rac-
es; for example, a Daily Double wheel is
a bet where a single horse is selected to
win the first race and every horse is se-
lected in the second race.

### B. Comments Regarding Current Treatment of Parimutuel Betting

Commentators stated that since the
regulations were last substantively
amended, the rise in the number of exotic

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bets available at certain racetracks and the
popularity of exotic betting has altered
parimutuel betting practices. Commenta-
tors stated that, for example, in the 1978
Kentucky Derby, there were three types of
bets available to be placed at Churchill
Downs racetrack, where the Kentucky
Derby is run. Those bets were bets to win,
place, or show. By contrast, in the 2015
Kentucky Derby, there were twenty-three
types of bets available to be placed at
Churchill Downs racetrack, including the
superfecta, super high five, and pick 7
jackpot. Furthermore, commentators
stated that today approximately 67% of all
parimutuel wagering occurs on exotic wa-
gers (versus straight wagers), as compared
to the 1970s when approximately 10% of
parimutuel wagering occurred on exotic
wagers.

Further, commentators stated that the
increase in availability of exotic betting
has caused bettors to substantially in-
crease their amounts wagered, often by
placing box, key, and wheel bets, in a
particular parimutuel pool to increase
their chances of winning and increase the
potential payout. In addition, commenta-
tors attributed the rise in popularity of
exotic bets to the fact that exotic bets offer
significantly higher odds. As a result,
commentators stated that modern bettors
are putting more money towards bets with
greater potential payouts in anticipation of
significant winnings.

Commentators also stated that payouts
from straight bets were rarely subject to
withholding because they virtually never
came close to exceeding the 300 to 1 ratio
of proceeds to the amount of the wager.
On the other hand, exotic bets do result in
proceeds exceeding the amount of the wa-
ger by a 300 to 1 ratio; for example, seven
different exotic bets at the 2015 Kentucky
Derby produced payouts exceeding the
300 to 1 ratio. However, given the vast
number of potential outcomes possible
with exotic bets, the commentators stated
that bettors are using techniques such as
box, key, or wheel bets to increase their
odds. As a result, it is undoubtedly the
case that the winners wagered far more
into the pool than the cost of the winning
bet.

Commentators stated that the tax treat-
ment under the current rules ignores the
actual investment in a single parimutuel

pool and may result in withholding that
significantly exceeds the amount neces-
sary to cover the individual gambler's ul-
timate income tax liability and suggested
changing the rule to take into account all
wagers in the same parimutuel pool. The
commentators provided the following ex-
ample to illustrate this. A bettor makes a
seven-horse trifecta box wager, which in-
volves selecting a group of seven horses
to place first, second, and third, in any
order. This bet has 210 unique possible
results. Assuming the bettor bets $20 on
each combination, the total amount wa-
gered is $4,200. At race time the winning
combination carries 304 to 1 odds. After
the race, the bettor holds a winning ticket
that pays $6,100 ($304 x $20 wagered +
$20 return of bet). Under the current rules,
the racetrack would withhold $1,520
(($6,100 - 20) x 25%) and report $6,080
in winnings ($6,100-$20) because the
rules treat only the $20 paid for the single
winning combination as the amount wa-
gered. However, the commentators stated
that the individual has netted only $1,900
($6,100 winnings less $4,200 wagered),
and is left with $380 ($1,900 - $1,520)
once withholding taxes are taken out,
which makes the withholding rate 80% of
net winnings.

Under the commentators' proposed
change, the amount of the wager would be
considered to be $4,200. Thus the race-
track would not withhold because the pro-
ceeds from the wager ($1,900) are less
than the $5,000 withholding threshold and
are also less than $1,260,000 (300 times
the amount wagered). Similarly, the race-
track would not report the proceeds be-
cause they are not at least 300 times the
amount wagered.

The commentators noted that although
the bettor may be able to deduct the losing
wagers on the bettor's tax return at the end
of the year as a miscellaneous itemized
deduction, there would be other conse-
quences. For example, the $1,520 with-
holding lowers the amount of money in
circulation at the racetrack that day and
reduces the bettor's cash on hand, whereas
the commentators' proposed change
would result in additional cash on hand to
be bet in subsequent races.

In addition, the commentators stated
that the deduction for losing wagers re-
sults in reporting of higher adjusted gross

income than would result under the com-
mentator's proposed change. Commenta-
tors further stated that a higher adjusted
gross income can cause the bettor to lose
unrelated tax benefits. In addition, the de-
duction is only available if the bettor item-
izes deductions and is not subject to the
alternative minimum tax. Finally the com-
mentators noted that many states limit
itemized deductions for state tax purposes.

C. Proposed Rule for the Amount of the
Wager in the Case of Horse Races, Dog
Races, and Jai Alai

Proposed §31.3402(q)-1(c)(ii) pro-
vides a new rule for purposes of determin-
ing the amount of the wager for wagering
transactions in horse races, dog races, and
jai alai. The proposed rule allows all wa-
gers placed in a single parimutuel pool
and represented on a single ticket to be
aggregated and treated as a single wager
for purposes of determining the amount of
the wager. The proposed rule allows a
payer to take into account the total amount
wagered in a particular pool as reflected
on a single ticket to determine whether the
winnings are subject to withholding and
reporting. This treatment better reflects
the full cost of exotic bets. In addition,
straight wagers are unlikely to have odds
and produce payouts of at least 300 to 1,
so they generally are not subject to with-
holding, regardless of the application of
the proposed rule. The proposed regula-
tions contain examples to illustrate the
proposed rule for wagering transactions in
the case of horse races, dog races, and jai
alai.

The proposed rule for determining the
amount of the wager addresses the fact
that the current rules may result in with-
holding that significantly exceeds the
amount necessary to cover the individual
gambler's ultimate income tax liability,
and that creates an unnecessary burden on
the bettor and the horse racing, dog rac-
ing, and jai alai industries. As described in
the commentators' example, current rules
for exotic bets placed as box, key, or
wheel bets can result in an 80% withhold-
ing rate on net winnings from wagers
placed in the same pool. This result has
become more common in the decades
since the regulations were last amended
because the number of exotic bet types

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and the popularity of exotic bets have
increased substantially, and various com-
binations of these exotic bets are often
placed together on a single ticket as part
of the same transaction.

By limiting the amount of the wager in
a wagering transaction with respect to
horse races, dog races, and jai alai to the
wagers represented on a single ticket, the
proposed rule limits the potential for fraud
and creates an administrable system for
payers. The rule is administrable because
it does not require payers to collect infor-
mation regarding winning wagers where
additional wagers placed in the same pool
are reflected on multiple tickets. If bettors
want to place additional wagers in the
same parimutuel pool after already having
purchased a ticket, commentators stated
that bettors may be able to cancel the first
ticket and place the original and additional
wagers for that pool on a new ticket.

The proposed regulations maintain the
current rule regarding identical wagers.
To clarify the meaning of the term, how-
ever, the proposed regulations provide a
definition of identical wagers taken from
the preamble of the current regulations.
T.D. 7919 (48 FR 46296). The proposed
regulations also move examples of identi-
cal wagers from the regulatory text to the
examples section.

The Treasury Department and the IRS
request comments regarding whether the
proposed rule addressing the amount of
the wager in a wagering transaction in the
case of horse races, dog races, and jai alai
should apply to other types of gambling
subject to withholding under section
3402(q), such as lotteries.

#### II. Ministerial Updates to Current Regulations

In addition to the proposed rule for
wagers in horse races, dog races, and jai
alai, the proposed regulations make min-
isterial updates to the current regulations
to reflect current law.

Proposed regulations §31.3402(q)-
1(a) and (b) are amended to reflect the
current statutory tax rate for withholding
(the third-lowest tax rate under section
1(c)) and the current statutory thresholds
for withholding for all types of gambling
covered by this regulation ($5,000). In
1992 and again in 2001, Congress

amended section 3402(q)(1) to change the
withholding rate first from 20 percent to
28 percent and then to its current level of
"the third lowest rate of tax applicable
under section 1(c)," but the current regu-
lations do not reflect either of these stat-
utory amendments. See Economic Growth
and Tax Relief Reconciliation Act of
2001, Pub.L. 107-16, § 101(c)(8); Energy
Policy Act of 1992, Pub.L. 102-486,
§ 1934(a). In 1992, Congress also
amended sections 3402(q)(3)(A) and (C)
to change the withholding threshold for
certain types of gambling from $1,000 to
$5,000, which the current regulations do
not reflect. Energy Policy Act, § 1942(a).
In addition, the proposed regulations re-
move certain dates reflecting transition
periods, which are no longer necessary.

In addition, proposed regulation
§31.3402(q)-1(c)(4) updates the rule re-
garding payments to nonresident aliens or
foreign corporations.

III. Information Reporting for Gambling
Winnings Subject to Withholding Under
Section 3402(q)

Proposed regulations §31.3402(q)-
1(d) and (e) update and clarify the report-
ing rules for gambling winnings subject to
withholding under section 3402(q). The
amendments to §31.3402(q)-1(d), regard-
ing the statement by the payee of gam-
bling winnings subject to withholding un-
der section 3402(q), reorganize the current
regulations into new sub-sections. Pro-
posed §31.3402(q)-1(d)(1) provides the
general rule that each payer of gambling
winnings subject to withholding under
section 3402(q) must obtain a payee state-
ment. Proposed §31.3402(q)-1(d)(2) de-
scribes the content of the payee statement.
Proposed §31.3402(q)-1(d)(3) states the
reliance rule currently described in
§31.3402(q)-1(c)(1)(ii) that where a
payee furnishes the required payee state-
ment and, as required by §1.6011-3, indi-
cates that he or she is entitled to winnings
from identical wagers, the payer may rely
on the statement in determining the total
amount of proceeds from the wager.

The amendments to proposed
§31.3402(q)-1(e), regarding the informa-
tion return filed by the payer on Form
W-2G, modernize the current reporting
rules. First, the proposed regulations re-

place outdated references to the place of
filing with a requirement that the return be
filed with the appropriate Internal Reve-
nue Service location designated in the in-
structions to the form.

Second, the proposed regulations re-
quire the payer to report the taxpayer
identification number of the winner in lieu
of the social security number to allow for
a broader range of taxpayer identification
numbers, including individual taxpayer
identification numbers (ITINs) and adop-
tion taxpayer identification numbers
(ATINs). This amendment allows trunca-
tion of the taxpayer identification number
on the statement furnished by the payer to
the payee because the regulation no longer
requires a social security number. For pro-
visions relating to the use of truncated
taxpayer identification numbers, see
§31.6109-4 of this chapter.

Third, the proposed regulations update
the payee identification provisions. Sec-
tion 31.3402(q)-1(f)(1)(v) of the current
regulations provides that the identification
verifying the payee's identity must in-
clude the payee's social security number.
According to the current regulations, ex-
amples of acceptable identification in-
clude a driver's license, a social security
card, or a voter registration card. How-
ever, today most forms of identification do
not include a person's social security
number. Therefore, many payees do not
have identification that contains the pay-
ee's social security number and, even if
they do, they may not have this identifi-
cation with them at the time that they
receive a payment of gambling winnings
subject to withholding under section
3402(q).

To address this issue, proposed
§§31.3402(q)-1(e)(1)(v) and (e)(2) pro-
vide that, in addition to government-
issued identification, a properly com-
pleted Form W-9 signed by the payee is
an acceptable form of identification to
verify the payee's identifying informa-
tion. Payers who verify payee information
using identification set forth in proposed
§§31.3402(q)-1(e)(1)(v) and (e)(2) before
the date that final regulations implement-
ing these provisions are published in the
Federal Register will be treated as meet-
ing the requirements of §31.3402(q)-
1(f)(1)(v) of the current regulations.

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Fourth, the proposed regulations con-
tain a special rule in §31.3402(q)-
1(e)(3) that tribal member identification
cards need not contain the payee's photo-
graph to meet the identification require-
ments in §31.3402(q)-1(e)(1)(v) of the
proposed regulations, provided specific
criteria are met. This special rule responds
to comments raised by Indian tribes in
response to the notice of proposed rule-
making (REG-132253-11) under section
6041 regarding information returns to re-
port winnings from bingo, keno, and slot
machine play that many tribal identifica-
tion cards do not contain photographs.

Fifth, the proposed regulations update
the obsolete reference to Form W-3G to
reflect that payers should use Form 1096
to transmit Forms W-2G to the Internal
Revenue Service.

Finally, the proposed regulations in
§31.3402(q)-1(e)(5) provides that a payer
filing an information return with the Inter-
nal Revenue Service must furnish a state-
ment to the payee containing the same
information on or before January 31st of
the year following the calendar year in
which payment of the winnings subject to
withholding is made. See section 6041(d).

Proposed amendments to the regula-
tions under section 3406 update the re-
porting requirements to address horse
races, dog races, and jai alai. Proposed
§31.3406(g)-2(d) is amended to clarify
the definition of a reportable gambling
winning and to add a cross-reference to
§31.3402(q)-1(c) for determining the
amount of the wager in a wagering trans-
action with respect to horse races, dog
races, and jai alai, or amounts paid with
respect to identical wagers.

## Proposed Effective/Applicability Date

These regulations are proposed to ap-
ply to payments made after the date of
publication of the Treasury Decision
adopting these rules as final regulations in
the Federal Register.

## Statement of Availability of IRS Documents

IRS published guidance cited in this
preamble is published in the Internal Rev-
enue Bulletin and is available from the
Superintendent of Documents, U.S. Gov-
ernment Publishing Office, Washington,

DC 20402, or by visiting the IRS website
at http://www.irs.gov.

## Special Analyses

Certain IRS regulations, including this
one, are exempt from the requirements of
Executive Order 12866, as supplemented
and reaffirmed by Executive Order 13563.
Therefore, a regulatory assessment is not
required. It is hereby certified that this rule
will not have a significant economic im-
pact on a substantial number of small en-
tities. This certification is based on the
fact that this rule merely provides guid-
ance regarding withholding and reporting
requirements for payers of certain gam-
bling winnings. The requirement for pay-
ers to withhold and make information re-
turns is imposed by statute and not these
regulations. In addition, this rule reduces
the existing burden on payers to comply
with the statutory requirement by decreas-
ing the number of payments subject to
withholding and reporting. Therefore, a
Regulatory Flexibility Analysis under the
Regulatory Flexibility Act (5 U.S.C.
Chapter 6) is not required.

Pursuant to section 7805(f) of the In-
ternal Revenue Code, this notice of pro-
posed rulemaking has been submitted to
the Chief Counsel for Advocacy of the
Small Business Administration for com-
ment on its impact on small business.

## Comments and Public Hearing

Before these proposed regulations are
adopted as final regulations, consideration
will be given to any written comments (a
signed original and eight (8) copies) or
electronic comments that are submitted
timely to the IRS. In addition to the re-
quests for comments noted in the Back-
ground Section, Treasury and the IRS re-
quest comments on any other aspects of
the proposed rules, and any other issues
relating to the payment of gambling win-
nings that are not addressed in the pro-
posed regulations. All comments will be
available at www.regulations.gov for pub-
lic inspection or upon request.

A public hearing will be scheduled if
requested in writing by any person that
timely submits written comments. If a
public hearing is scheduled, notice of the
date, time, and place for the public hear-

ing will be published in the Federal Reg-
ister.

## Drafting Information

The principal author of these proposed
regulations is David Bergman of the Of-
fice of the Associate Chief Counsel (Pro-
cedure and Administration).

## List of Subjects in 26 CFR Part 31

Employment Taxes and Collection of
Income Tax at Source.

## Proposed Amendments to the Regulations

Accordingly, 26 CFR part 31 is pro-
posed to be amended as follows:

PART 31-EMPLOYMENT TAXES
AND COLLECTION OF INCOME
TAXES AT THE SOURCE

Paragraph 1. The authority citation for
part 31 continues to read in part as fol-
lows:

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

Par. 2. Section 31.3402(q)-1 is amend-
ed:

1\. By revising paragraphs (a)(1), (b),
and (c)(1) and (4).

2\. By redesignating paragraph (d) as
paragraph (f), paragraph (e) as paragraph
(d), and paragraph (f) as paragraph (e).

3\. By revising newly designated para-
graphs (d) and (e).

4\. In paragraph (f), removing Example 3
and Example 11, by redesignating Exam-
ples 4 through 10 as Examples 3 through
9, and adding examples 10 through 16.

5\. In paragraph (f), in newly redesig-
nated Example 4 by removing the lan-
guage "Example 4" and adding in its place
the language "Example 3" and in newly
redesignated Example 6 by removing the
language "Example 6" and adding in its
place the language "Example 5" wherever
it appears.

6\. By adding paragraph (g).

The revisions and additions read as fol-
lows:

§ 31.3402(q)-1 Extension of withholding
to certain gambling winnings.

(a) Withholding obligation-(1) Gen-
eral rule. Every person, including the

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Government of the United States, a State,
or a political subdivision thereof, or any
instrumentality of any of the foregoing
making any payment of "winnings subject
to withholding" (defined in paragraph (b)
of the section) shall deduct and withhold a
tax in an amount equal to the product of
the third lowest rate of tax applicable un-
der section 1(c) and such payment. The
tax shall be deducted and withheld upon
payment of the winnings by the person
making such payment ("payer"). See para-
graph (c)(5)(ii) of this section for a special
rule relating to the time for making depos-
its of withheld amounts and filing the re-
turn with respect to those amounts. Any
person receiving a payment of winnings
subject to withholding must furnish the
payer a statement as required in paragraph
(d) of this section. Payers of winnings
subject to withholding must file a return
with the Internal Revenue Service and fur-
nish a statement to the payee as required
in paragraph (e) of this section. With re-
spect to reporting requirements for certain
payments of gambling winnings not sub-
ject to withholding, see section 6041 and
the regulations thereunder.

* * * * *

(b) Winnings subject to withholding.
(1) In general. Winnings subject to with-
holding means any payment from-

(i) A wager placed in a State-
conducted lottery (defined in paragraph
(c)(2) of this section) but only if the pro-
ceeds from the wager exceed $5,000;

(ii) A wager placed in a sweepstakes,
wagering pool, or lottery other than a
State-conducted lottery but only if the
proceeds from the wager exceed $5,000;
or

(iii) Any other wagering transaction (as
defined in paragraph (c)(3) of this section)
but only if the proceeds from the wager
(A) exceed $5,000 and (B) are at least 300
times as large as the amount of the wager.

(2) Total proceeds subject to withhold-
ing. If proceeds from the wager qualify as
winnings subject to withholding, then the
total proceeds from the wager, and not
merely amounts in excess of $5,000, are
subject to withholding.

(c) Definitions; special rules-(1)
Rules for determining amount of proceeds
from a wager-(i) In general. The amount
of "proceeds from a wager" is the amount

paid with respect to the wager, less the
amount of the wager.

(ii) Amount of the wager in the case of
horse races, dog races, and jai alai. In the
case of a wagering transaction with re-
spect to horse races, dog races, or jai alai,
all wagers placed in a single parimutuel
pool and represented on a single ticket are
aggregated and treated as a single wager
for purposes of determining the amount of
the wager. A ticket in the case of horse
races, dog races, or jai alai is a written or
electronic record that the payee must pres-
ent to collect proceeds from a wager or
wagers.

(iii) Amount paid with respect to a wa-
ger-(A) Identical wagers. Amounts paid
with respect to identical wagers are
treated as paid with respect to a single
wager for purposes of calculating the
amount of proceeds from a wager. Two or
more wagers are identical wagers if win-
ning depends on the occurrence (or non-
occurrence) of the same event or events;
the wagers are placed with the same pay-
er; and, in the case of horse races, dog
races, or jai alai, the wagers are placed in
the same parimutuel pool. Wagers may be
identical wagers even if the amounts wa-
gered differ as long as the wagers are
otherwise treated as identical wagers un-
der this paragraph (c)(1)(iii)(A). Tickets
purchased in a lottery generally are not
identical wagers, because the designation
of each ticket as a winner generally would
not be based on the occurrence of the
same event, e.g., the drawing of a partic-
ular number.

(B) Non-monetary proceeds. In deter-
mining the amount paid with respect to a
wager, proceeds which are not money are
taken into account at the fair market value.

(C) Periodic payments. Periodic pay-
ments, including installment payments or
payments which are to be made periodi-
cally for the life of a person, are aggre-
gated for purposes of determining the
amount paid with respect to the wager.
The aggregate amount of periodic pay-
ments to be made for a person's life is
based on that person's life expectancy.
See §§ 1.72-5 and 1.72-9 of this chapter
for rules used in computing the expected
return on annuities. For purposes of deter-
mining the amount subject to withholding,
the first periodic payment shall be reduced
by the amount of the wager.

* * * * *

(4) Certain payments to nonresident
aliens or foreign corporations. A payment
of winnings that is subject to withholding
tax under section 1441(a) (relating to
withholding on nonresident aliens) or
1442(a) (relating to withholding on for-
eign corporations) is not subject to the tax
imposed by section 3402(q) and this sec-
tion if the payer complies with the re-
quirements of withholding, documenta-
tion, and information reporting rules of
section 1441(a) or 1442(a) and the regu-
lations thereunder. A payment is treated as
being subject to withholding tax under
section 1441(a) or 1442(a) notwithstand-
ing that the rate of such tax is reduced
(even to zero) as may be provided by an
applicable treaty with another country.
However, a reduced or zero rate of with-
holding of tax shall not be applied by the
payer in lieu of the rate imposed by sec-
tions 1441 and 1442 unless the person
receiving the winnings has provided to the
payer the documentation required by
§1.1441-6 of this chapter to establish en-
titlement to treaty benefits.

* * * * *

(d) Statement furnished by payee-(1)
In general. Each person who is making a
payment subject to withholding under this
section must obtain from the payee a
statement described in paragraph (d)(2) of
this section.

(2) Contents of statement. (i) Each per-
son who is to receive a payment of win-
nings subject to withholding under this
section must furnish the payer a statement
on Form W-2G or 5754 (whichever is
applicable) made under the penalties of
perjury containing-

(A) The name, address, and taxpayer
identification number of the winner ac-
companied by a declaration that no other
person is entitled to any portion of such
payment, or

(B) The name, address, and taxpayer
identification number of the payee and of
every person entitled to any portion of
such payment.

(3) If more than one payment of win-
nings subject to withholding is to be made
with respect to a single wager, for exam-
ple in the case of an annuity, the payee is
required to furnish the payer a statement
with respect to the first such payment
only, provided that such other payments

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are taken into account in a return required
by paragraph (e) of this section.

(4) Reliance on statement for identical
wagers. If the payee furnishes the state-
ment which may be required pursuant to
§ 1.6011-3 of this chapter (regarding the
requirement of a statement from payees of
certain gambling winnings), indicating
that the payee (and any other persons en-
titled to a portion of the winnings) is en-
titled to winnings from identical wagers,
as defined in paragraph (c)(1)(iii)(A) of
this section, and indicating the amount of
such winnings, if any, then the payer may
rely upon such statement in determining
the total amount of proceeds from the
wager under paragraph (c)(1) of this sec-
tion.

(e) Return of payer-(1) In general.
Every person making payment of win-
nings for which a statement is required
under paragraph (d) of this section shall
file a return on Form W-2G with the
Internal Revenue Service location desig-
nated in the instructions to the form on or
before February 28 (March 31 if filed
electronically) of the calendar year fol-
lowing the calendar year in which the
payment of winnings is made. The return
required by this paragraph (e) need not
include the statement by the payee re-
quired by paragraph (d) of this section
and, therefore, need not be signed by the
payee, provided such statement is retained
by the payer as long as the contents
thereof may become material in the ad-
ministration of any internal revenue law.
In addition, the return required by this
paragraph (e) need not contain the infor-
mation required by paragraph (e)(1)(v) of
this section provided such information is
obtained with respect to the payee and
retained by the payer as long as the con-
tents thereof may become material in the
administration of any internal revenue
law. For payments to more than one win-
ner, a separate Form W-2G, which in no
event need be signed by the winner, shall
be filed with respect to each such winner.
Each Form W-2G shall contain the fol-
lowing:

(i) The name, address, and employer
identification number of the payer;

(ii) The name, address, and taxpayer
identification number of the winner;

(iii) The date, amount of the payment,
and amount withheld;

(iv) The type of wagering transaction;

(v) Except with respect to winnings
from a wager placed in a State-conducted
lottery, a general description of the two
types of identification (as described in
paragraph (e)(2) of this section), one of
which must have the payee's photograph
on it (except in the case of tribal member
identification cards in certain circum-
stances as described in paragraph (e)(3) of
this section), that the payer relied on to
verify the payee's name, address, and tax-
payer identification number;

(vi) The amount of winnings from iden-
tical wagers; and

(vii) Any other information required by
the form, instructions, or other applicable
guidance published in the Internal Reve-
nue Bulletin.

(2) Identification. The following items
are treated as identification for purposes
of paragraph (e)(1)(v) of this section-

(i) Government-issued identification
(for example, a driver's license, passport,
social security card, military identification
card, tribal member identification card is-
sued by a federally-recognized Indian
tribe, or voter registration card) in the
name of the payee; and

(ii) A Form W-9, "Request for Tax-
payer Identification Number and Certifi-
cation," signed by the payee that includes
the payee's name, address, taxpayer iden-
tification number, and other information
required by the form. A Form W-9 is not
acceptable for this purpose if the payee
has modified the form (other than pursu-
ant to instructions to the form) or if the
payee has deleted the jurat or other similar
provisions by which the payee certifies or
affirms the correctness of the statements
contained on the form.

(3) Special rule for tribal member
identification cards. A tribal member
identification card need not contain the
payee's photograph to meet the identifica-
tion requirement described in paragraph
(e)(1)(v) of this section if-

(i) The payee is a member of a
federally-recognized Indian tribe;

(ii) The payee presents the payer with a
tribal member identification card issued
by a federally-recognized Indian tribe
stating that the payee is a member of such
tribe; and

(iii) The payer is a gaming establish-
ment (as described in §1.6041-

10(b)(2)(iv) of this chapter) owned or li-
censed (in accordance with 25 U.S.C.
2710) by the tribal government that issued
the tribal member identification card re-
ferred to in paragraph (e)(3)(ii) of this
section.

(4) Transmittal form. Persons making
payments of winnings subject to with-
holding shall use Form 1096 to transmit
Forms W-2G to the Internal Revenue Ser-
vice.

(5) Furnishing a statement to the
payee. Every payer required to make a
return under paragraph (e)(1) of this sec-
tion must also make and furnish to each
payee, with respect to each payment of
winnings subject to withholding, a written
statement that contains the information
that is required to be included on the re-
turn under paragraph (e)(1) of this section.
The payer must furnish the statement to
the payee on or before January 31st of the
year following the calendar year in which
payment of the winnings subject to with-
holding is made. The statement will be
considered furnished to the payee if it is
provided to the payee at the time of pay-
ment or if it is mailed to the payee on or
before January 31st of the year following
the calendar year in which payment was
made.

f) Examples. * * *

Example 10. B places a $15 bet at the cashier
window at the racetrack for horse A to win the fifth
race at the racetrack that day. After placing the first
bet, B gains confidence in horse A's prospects to win
and places an additional $40 bet at the cashier win-
dow at the racetrack for horse A to win the fifth race,
receiving a second ticket for this second bet. Horse A
wins the fifth race, and B wins a total of $5,500 (100
to 1 odds) on those bets. The $15 bet and the $40 bet
are identical wagers under paragraph (c)(1)(iii)(A) of
this section because winning on both bets depended
on the occurrence of the same event and the bets are
placed in the same parimutuel pool with the same
payer. This is true regardless of the fact that the
amount of the wager differs in each case.

B cashes the tickets at different cashier windows.
Pursuant to paragraph (d) of this section and
§1.6011-3, B completes a Form W-2G indicating
that the amount of winnings is from identical wagers
and provides the form to each cashier. The payments
by each cashier of $1,500 and $4,000 are less than
the $5,000 threshold for withholding, but under para-
graph (c)(1)(iii)(A) of this section, identical wagers
are treated as paid with respect to a single wager for
purposes of determining the proceeds from a wager.
The payment is not subject to withholding or report-
ing because although the proceeds from the wager
are $5,445 ($1,500 + $4,000 - $55), the proceeds
from the wager are not at least 300 times as great as
the amount wagered ($55 x 300 = $16,500).

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Example 11. B makes two $1,000 bets in a single
"show" pool for the same jai alai game, one bet on
Player X to show and one bet on Player Y to show.
A show bet is a winning bet if the player comes in
first, second, or third in a single game. The bets are
placed at the same time at the same cashier window,
and B receives a single ticket showing both bets.
Player X places second in the game, and Player Y
does not place first, second, or third in the game. B
wins $8,000 from his bet on Player X. Because
winning on both bets does not depend on the occur-
rence of the same event, the bets are not identical
bets under paragraph (c)(1)(iii)(A) of this section.
However, pursuant to the rule in paragraph (c)(1)(ii)
of this section, the amount of the wager is the ag-
gregate amount of both wagers ($2,000) because the
bets were placed in a single parimutuel pool and
reflected on a single ticket. The payment is not
subject to withholding or reporting because although
the proceeds from the wager are $6,000 ($8,000 -
$2,000), the proceeds from the wager are not at least
300 times as great as the amount wagered ($2,000 x
300 = $600,000).

Example 12. B bets a total of $120 on a three-dog
exacta box bet ($20 for each one of the six combi-
nations played) at the dog racetrack and receives a
single ticket reflecting the bet from the cashier. B
wins $5,040 from one of the selected combinations.
Pursuant to the rule in paragraph (c)(1)(ii) of this
section, the amount of the wager is $120, not $20 for
the single winning combination of the six combina-
tions played. The payment is not subject to withhold-
ing under section 3402(q) because the proceeds from
the wager are $4,920 ($5,040-$120), which is below
the section 3402(q) withholding threshold.

Example 13. B makes two $12 Pick 6 bets at the
horse racetrack at two different cashier windows and
receives two different tickets each representing a
single $12 Pick 6 bet. In his two Pick 6 bets, B
selects the same horses to win races 1-5 but selects
different horses to win race 6. All Pick 6 bets on
those races at that racetrack are part of a single
parimutuel pool from which Pick 6 winning bets are
paid. B wins $5,020 from one of his Pick 6 bets.
Pursuant to the rule in paragraph (c)(1)(ii) of this
section, the bets are not aggregated for purposes of
determining the amount of the wager because the
bets are reflected on separate tickets. Assuming that
the applicable rate is 25%, the racetrack must deduct
and withhold $1,252 (($5,020-$12) x 25%) because
the amounts of the proceeds of $5,008 ($5,020 -
$12) is greater than $5,000 and is at least 300 times
as great as the amount wagered ($12 x 300 =
$3,600). The racetrack also must report B's winnings
on Form W-2G pursuant to paragraph (e) of this
section and furnish a copy of the Form W-2G to B.

Example 14. C makes two $50 bets in two dif-
ferent parimutuel pools for the same jai alai game.
One bet is an "exacta" in which C bets on player M
to win and player N to "place". The other bet is a
"trifecta" in which C bets on player M to win, player
N to "place," and player O to "show." C wins both
bets and is paid $2,000 with respect to the bet in the
"exacta" pool and $3,100 with respect to the bet in
the "trifecta" pool. Under paragraph (c)(1)(iii)(A) of
this section, the bets are not identical bets. Under
paragraph (c)(1)(ii) of this section, the bets are not
aggregated for purposes of determining the amount

of the wager for either payment because they are not
wagers in the same parimutuel pool. No section
3402(q) withholding is required on either payment
because neither payment separately exceeds the
$5,000 withholding threshold.

Example 15. C makes two $100 bets for the same
dog to win a particular race. C places one bet at the
racetrack and one bet at an off-track betting estab-
lishment, but the two pools constitute a single pool.
C receives separate tickets for each bet. C wins both
bets and is paid $4,000 from the racetrack and
$4,000 from the off-track betting establishment. Un-
der paragraph (c)(1)(ii) of this section, the bets are
not aggregated for purposes of determining the
amount of the wager because the wager placed at the
racetrack and the wager placed at the off-track bet-
ting establishment are reflected on separate tickets,
despite being placed in the same parimutuel pool. No
section 3402(q) withholding is required because nei-
ther payment separately exceeds the $5,000 with-
holding threshold.

Example 16. C places a $200 Pick 6 bet for a
series of races at the racetrack on a particular day
and receives a single ticket for the bet. No wager
correctly picks all six races that day, so that portion
of the pool carries over to the following day. On the
following day, C places an additional $200 Pick 6
bet for that day's series of races and receives a new
ticket for that bet. C wins $100,000 on the second
day. Pursuant to the rule in paragraph (c)(1)(ii) of
this section, the bets are on two separate tickets, so
C's two Pick 6 bets are not aggregated for purposes
of determining the amount of the wager. Assuming
that the applicable rate is 25%, the racetrack must
deduct and withhold $24,950 (($100,000 - $200) x
25%) because the amount of the proceeds of $99,800
($100,000 - $200) is greater than $5,000, and is at
least 300 times as great as the amount wagered ($200
x 300 = $60,000). The racetrack also must report
C's winnings on Form W-2G pursuant to paragraph
(e) of this section and furnish a copy of the Form
W-2G to C.

(g) Applicability date. These rules ap-
ply to payments made after [the date of
publication of the Treasury decision
adopting these rules as final regulations
in the Federal Register]. For rules that
apply to payments made before that date,
see 26 CFR 31.3402(q)-1 (revised April
2015).

Par. 3. Section 31.3406-0 is amended
by adding an entry for paragraph (h) to
§31.3406(g)-2 to read as follows:

§31.3406-0 Outline of the backup
withholding regulations.

* * * * *

§31.3406(g)-2 Exception for report-
able payments for which backup withhold-
ing is otherwise required.
* * * * *

(h) Effective/applicability date.
* * * * *

Par. 4. Section 31.3406(g)-2 is
amended by revising paragraphs (d)(2)

and (3) and adding paragraph (h) to read
as follows:

§ 31.3406(g)-2 Exception for report-
able payment for which withholding is
otherwise required.

** * * * *

(d) * * *

(2) Definition of a reportable gambling
winning and determination of amount
subject to backup withholding. For pur-
poses of withholding under section 3406,
a reportable gambling winning is any
gambling winning subject to information
reporting under section 6041. A gambling
winning (other than a winning from bingo,
keno, or slot machines) is a reportable
gambling winning only if the amount paid
with respect to the wager is $600 or more
and if the proceeds are at least 300 times
as large as the amount wagered. See
§ 1.6041-10 of this chapter to determine
whether a winning from bingo, keno, or
slot machines is a reportable gambling
winning and thus subject to withholding
under section 3406. The amount of a re-
portable gambling winning is-

(i) The amount paid with respect to the
amount of the wager reduced, at the op-
tion of the payer; by

(ii) The amount of the wager.

(3) Special rules. For special rules for
determining the amount of the wager in a
wagering transaction with respect to horse
racing, dog racing, and jai alai, or amounts
paid with respect to identical wagers, see
§ 31.3402(q)-1(c).

* * * * *

(h) Applicability date. The rules apply
to reportable gambling winnings paid af-
ter [the date of publication of the Treasury
decision adopting these rules as final reg-
ulations in the Federal Register]. For re-
portable gambling winnings paid on or
before [the date of publication of the
Treasury decision adopting these rules as
final regulations in the Federal Register],
§31.3406(g)-2 (as contained in 26 CFR
part 31, revised April 2015) applies.

John Dalrymple
Deputy Commissioner for Services and
Enforcement.

(Filed by the Office of the federal Register on December 29,
2016, 8:45 a.m., and published in the issue of the Federal
Register for December 30, 2016 81 F.R. 96406)

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# Definition of Terms

Revenue rulings and revenue procedures
(hereinafter referred to as "rulings") that
have an effect on previous rulings use the
following defined terms to describe the
effect:

Amplified describes a situation where
no change is being made in a prior pub-
lished position, but the prior position is
being extended to apply to a variation of
the fact situation set forth therein. Thus, if
an earlier ruling held that a principle ap-
plied to A, and the new ruling holds that
the same principle also applies to B, the
earlier ruling is amplified. (Compare with
modified, below).

Clarified is used in those instances
where the language in a prior ruling is
being made clear because the language
has caused, or may cause, some confu-
sion. It is not used where a position in a
prior ruling is being changed.

Distinguished describes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.

Modified is used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A

and B, the prior ruling is modified because
it corrects a published position. (Compare
with amplified and clarified, above).

Obsoleted describes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transac-
tions. This term is most commonly used in
a ruling that lists previously published rul-
ings that are obsoleted because of changes
in laws or regulations. A ruling may also
be obsoleted because the substance has
been included in regulations subsequently
adopted.

Revoked describes situations where the
position in the previously published ruling
is not correct and the correct position is
being stated in a new ruling.

Superseded describes a situation where
the new ruling does nothing more than
restate the substance and situation of a
previously published ruling (or rulings).
Thus, the term is used to republish under
the 1986 Code and regulations the same
position published under the 1939 Code
and regulations. The term is also used
when it is desired to republish in a single
ruling a series of situations, names, etc.,
that were previously published over a pe-
riod of time in separate rulings. If the new
ruling does more than restate the sub-

stance of a prior ruling, a combination of
terms is used. For example, modified and
superseded describes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previously
published ruling in a new ruling that is
self contained. In this case, the previously
published ruling is first modified and then,
as modified, is superseded.

Supplemented is used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names
in subsequent rulings. After the original
ruling has been supplemented several
times, a new ruling may be published that
includes the list in the original ruling and
the additions, and supersedes all prior rul-
ings in the series.

Suspended is used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of
cases in litigation, or the outcome of a
Service study.

# Abbreviations

The following abbreviations in current
use and formerly used will appear in ma-
terial published in the Bulletin.

A-Individual.

Acq .- Acquiescence.

B-Individual.

BE-Beneficiary.

F.R .- Federal Register.

FUTA-Federal Unemployment Tax Act.

FX-Foreign corporation.

G.C.M .- Chief Counsel's Memorandum.

GE-Grantee.

GP-General Partner.

TFR-Transferor.

CI-City.

GR-Grantor.

IC-Insurance Company.

TP-Taxpayer.

TR-Trust.

CY-County.

LE-Lessee.

TT-Trustee.

D-Decedent.

LP-Limited Partner.

U.S.C .- United States Code.

DC-Dummy Corporation.

LR-Lessor.

X-Corporation.

DE-Donee.

Del. Order-Delegation Order.

Nonacq .- Nonacquiescence.

O Organization.

DR-Donor.

P-Parent Corporation.

PHC-Personal Holding Company.

PO-Possession of the U.S.

PR-Partner.

PRS-Partnership.

PTE-Prohibited Transaction Exemption.
Pub. L .- Public Law.

REIT-Real Estate Investment Trust.

Rev. Proc .- Revenue Procedure.

Rev. Rul .- Revenue Ruling.

S-Subsidiary.

S.P.R .- Statement of Procedural Rules.

Stat .- Statutes at Large.

T-Target Corporation.

T.C .- Tax Court.

C-Individual.

T.D .- Treasury Decision.

TFE-Transferee.

CFR-Code of Federal Regulations.

COOP-Cooperative.

Ct.D .- Court Decision.

I.R.B .- Internal Revenue Bulletin.

M-Minor.

Y-Corporation.

DISC-Domestic International Sales Corporation.

E-Estate.

EE-Employee.

E.O .- Executive Order.

ER-Employer.

ERISA-Employee Retirement Income Security Act.
EX-Executor.

F-Fiduciary.

FC-Foreign Country.

FICA-Federal Insurance Contributions Act.

FISC-Foreign International Sales Company.

FPH-Foreign Personal Holding Company.

BK-Bank.

B.T.A .- Board of Tax Appeals.

C.B .- Cumulative Bulletin.

T.I.R .- Technical Information Release.

Z-Corporation.

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## Numerical Finding List1

Bulletin 2017-1 through 2017-5

Notices:

2017-1, 2017-2 I.R.B. 367
2017-2, 2017-4 I.R.B. 539
2017-3, 2017-2 I.R.B. 368
2017-4, 2017-4 I.R.B. 541
2017-6, 2017-3 I.R.B. 422
2017-7, 2017-3 I.R.B. 423
2017-8, 2017-3 I.R.B. 423
2017-9, 2017-4 I.R.B. 542
2017-10, 2017-4 I.R.B. 544
2017-12, 2017-5 I.R.B. xxx

### Proposed Regulations:

REG-128276-12, 2017-2

I.R.B. 369

REG-103477-14, 2017-5

I.R.B. 746

REG-112324-15, 2017-4

I.R.B. 547

REG-134438-15, 2017-2

I.R.B. 373

REG-112800-16, 2017-4

I.R.B. 569

REG-123829-16, 2017-5

I.R.B. 764

REG-123841-16, 2017-5

I.R.B. 766

REG-133353-16, 2017-2

I.R.B. 372

REG-134247-16, 2017-5

I.R.B. 744

## Revenue Procedures:

2017-1, 2017-1 I.R.B. 1
2017-2, 2017-1 I.R.B. 106
2017-3, 2017-1 I.R.B. 130
2017-4, 2017-1 I.R.B. 146
2017-5, 2017-1 I.R.B. 230
2017-7, 2017-1 I.R.B. 269
2017-12, 2017-3 I.R.B. 424
2017-14, 2017-3 I.R.B. 426
2017-15, 2017-3 I.R.B. 437
2017-16, 2017-3 I.R.B. 501
2017-18, 2017-5 I.R.B. 743

## Revenue Rulings:

2017-1, 2017-3 I.R.B. 377
2017-2, 2017-2 I.R.B. 364
2017-3, 2017-4 I.R.B. 522

## Treasury Decisions:

9794, 2017-2 I.R.B. 273
9795, 2017-2 I.R.B. 326
9796, 2017-3 I.R.B. 380
9801, 2017-2 I.R.B. 355
9802, 2017-2 I.R.B. 361
9803, 2017-3 I.R.B. 384
9804, 2017-3 I.R.B. 406
9806, 2017-4 I.R.B. 524
9807, 2017-5 I.R.B. 573
9808, 2017-5 I.R.B. 580
9809, 2017-5 I.R.B. 664

1A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2016-27 through 2016-52 is in Internal Revenue Bulletin
2016-52, dated December 26, 2016.

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## Finding List of Current Actions on Previously Published Items1

Bulletin 2017-1 through 2017-5

Notices:

2002-1
Amplified by
Notice 2017-1, 2017-2 I.R.B. 367

2011-86
Obsoleted by
Notice 2017-1, 2017-2 I.R.B. 367

2016-29
Modified by
Notice 2017-6, 2017-3 I.R.B. 422

### Revenue Procedures:

2013-22
Clarified by
Rev. Proc. 2017-18, 2017-05 I.R.B. 743

1A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2016-27 through 2016-52 is in Internal Revenue Bulletin
2016-52, dated December 26, 2016.

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# Internal Revenue Service Washington, DC 20224

Official Business
Penalty for Private Use, $300

# INTERNAL REVENUE BULLETIN

The Introduction at the beginning of this issue describes the purpose and content of this publication. The weekly Internal Revenue
Bulletins are available at www.irs.gov/irb/.

# We Welcome Comments About the Internal Revenue Bulletin

If you have comments concerning the format or production of the Internal Revenue Bulletin or suggestions for improving it, we
would be pleased to hear from you. You can email us your suggestions or comments through the IRS Internet Home Page
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NW, IR-6230 Washington, DC 20224.