Internal Revenue Bulletin 2019-26 (PDF rendition): IRS Revenue Rulings

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Bulletin No. 2019–26
June 24, 2019
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.
ADMINISTRATIVE
REV. RUL. 2019-15, page 1332.
Interest rates: underpayments and overpayments. The rates
for interest determined under Section 6621 of the code for
the calendar quarter beginning July 1, 2019, will be 5 per-
cent for overpayments (4 percent in the case of a corpora-
tion), 5 percent for underpayments, and 7 percent for large
corporate underpayments. The rate of interest paid on the
portion of a corporate overpayment exceeding $10,000 will
be 2.5 percent.
INCOME TAX
REG-109826-17, page 1349.
Section 897(a) generally subjects foreign persons to Fed-
eral income taxation when they dispose of United States
Real Property Interests (“USRPI”). Section 897(l) generally
exempts a qualified foreign pension fund from taxation under
section 897(a), and defines a qualified foreign pension fund.
These proposed regulations further elaborate on the defini-
tion of a qualified pension fund.
Finding Lists begin on page ii.

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 of-
ficial rulings and procedures of the Internal Revenue Service
and for publishing Treasury Decisions, Executive Orders, Tax
Conventions, 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 sub-
stantive 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 inter-
nal management are not published; however, statements of
internal 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 rul-
ings to taxpayers or technical advice to Service field offices,
identifying 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,
Legislation 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
Rulings. Bank Secrecy Act Administrative Rulings are issued
by the Department of the Treasury’s Office of the Assistant
Secretary (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.
June 24, 2019 Bulletin No. 2019–26

Part I.
Section 6621.—
Determination of Rate of
Interest
26 CFR 301.6621-1: Interest rate.
Rev. Rul. 2019-15
Section 6621 of the Internal Reve-
nue Code establishes the interest rates
on overpayments and underpayments of
tax. Under section 6621(a)(1), the over-
payment rate is the sum of the federal
short-term rate plus 3 percentage points (2
percentage points in the case of a corpo-
ration), except the rate for the portion of
a corporate overpayment of tax exceeding
$10,000 for a taxable period is the sum
of the federal short-term rate plus 0.5 of
a percentage point. Under section 6621(a)
(2), the underpayment rate is the sum of
the federal short-term rate plus 3 percent-
age points.
Section 6621(c) provides that for pur-
poses of interest payable under section
6601 on any large corporate underpay-
ment, the underpayment rate under section
6621(a)(2) is determined by substituting
“5 percentage points” for “3 percentage
points.” See section 6621(c) and section
301.6621-3 of the Regulations on Proce-
dure and Administration for the definition
of a large corporate underpayment and
for the rules for determining the appli-
cable date. Section 6621(c) and section
301.6621-3 are generally effective for pe-
riods after December 31, 1990.
Section 6621(b)(1) provides that the
Secretary will determine the federal
short-term rate for the first month in each
calendar quarter. Section 6621(b)(2)(A)
provides that the federal short-term rate
determined under section 6621(b)(1) for
any month applies during the first calen-
dar quarter beginning after that month.
Section 6621(b)(3) provides that the fed-
eral short-term rate for any month is the
federal short-term rate determined during
that month by the Secretary in accordance
with section 1274(d), rounded to the near-
est full percent (or, if a multiple of 1/2 of
1 percent, the rate is increased to the next
highest full percent).
Notice 88-59, 1988-1 C.B. 546, an-
nounced that in determining the quarterly
interest rates to be used for overpayments
and underpayments of tax under section
6621, the Internal Revenue Service will
use the federal short-term rate based on
daily compounding because that rate is
most consistent with section 6621 which,
pursuant to section 6622, is subject to dai-
ly compounding.
The federal short-term rate determined
in accordance with section 1274(d) during
April 2019 is the rate published in Reve-
nue Ruling 2019-12, 2019-19 IRB 1081,
to take effect beginning May 1, 2019. The
federal short-term rate, rounded to the
nearest full percent, based on daily com-
pounding determined during the month of
April 2019 is 2 percent. Accordingly, an
overpayment rate of 5 percent (4 percent
in the case of a corporation) and an under-
payment rate of 5 percent are established
for the calendar quarter beginning July 1,
2019. The overpayment rate for the por-
tion of a corporate overpayment exceed-
ing $10,000 for the calendar quarter be-
ginning July 1, 2019 is 2.5 percent. The
underpayment rate for large corporate un-
derpayments for the calendar quarter be-
ginning July 1, 2019, is 7 percent. These
rates apply to amounts bearing interest
during that calendar quarter.
Sections 6654(a)(1) and 6655(a)(1)
provide that the underpayment rate estab-
lished under section 6621 applies in deter-
mining the addition to tax under sections
6654 and 6655 for failure to pay estimated
tax for any taxable year. Thus, the 5 per-
cent rate also applies to estimated tax un-
derpayments for the third calendar quarter
beginning July 1, 2019. In addition, pur-
suant to section 6603(d)(4), the rate of in-
terest on section 6603 deposits is 2 percent
for the third calendar quarter in 2019.
Interest factors for daily compound
interest for annual rates of 2.5 percent, 4
percent, 5 percent and 7 percent are pub-
lished in Tables 10, 13, 15 and 19 of Rev.
Proc. 95-17, 1995-1 C.B. 564, 567, 569
and 573.
Annual interest rates to be compound-
ed daily pursuant to section 6622 that ap
-
ply for prior periods are set forth in the
tables accompanying this revenue ruling.
DRAFTING INFORMATION
The principal author of this revenue
ruling is Casey R. Conrad of the Office of
the Associate Chief Counsel (Procedure
and Administration). For further informa-
tion regarding this revenue ruling, contact
Mr. Conrad at (202) 317-6844 (not a toll-
free number).
June 24, 2019 1332 Bulletin No. 2019–26

APPENDIX A
365 Day Year
0.5% Compound Rate 184 Days
DaysFactorDaysFactorDaysFactor
10.000013699630.0008633801250.001713784
20.000027397640.0008770911260.001727506
30.000041096650.0008908011270.001741228
40.000054796660.0009045121280.001754951
50.000068495670.0009182231290.001768673
60.000082195680.0009319341300.001782396
70.000095894690.0009456461310.001796119
80.000109594700.0009593571320.001809843
90.000123294710.0009730691330.001823566
100.000136995720.0009867811340.001837290
110.000150695730.0010004931350.001851013
120.000164396740.0010142061360.001864737
130.000178097750.0010279181370.001878462
140.000191798760.0010416311380.001892186
150.000205499770.0010553441390.001905910
160.000219201780.0010690571400.001919635
170.000232902790.0010827701410.001933360
180.000246604800.0010964841420.001947085
190.000260306810.0011101971430.001960811
200.000274008820.0011239111440.001974536
210.000287711830.0011376251450.001988262
220.000301413840.0011513391460.002001988
230.000315116850.0011650541470.002015714
240.000328819860.0011787681480.002029440
250.000342522870.0011924831490.002043166
260.000356225880.0012061981500.002056893
270.000369929890.0012199131510.002070620
280.000383633900.0012336291520.002084347
290.000397336910.0012473441530.002098074
300.000411041920.0012610601540.002111801
310.000424745930.0012747761550.002125529
320.000438449940.0012884921560.002139257
330.000452154950.0013022081570.002152985
340.000465859960.0013159251580.002166713
350.000479564970.0013296411590.002180441
360.000493269980.0013433581600.002194169
370.000506974990.0013570751610.002207898
380.0005206801000.0013707921620.002221627
390.0005343861010.0013845101630.002235356
400.0005480921020.0013982271640.002249085
410.0005617981030.0014119451650.002262815
Bulletin No. 2019–26 1333 June 24, 2019

June 24, 2019 1334 Bulletin No. 2019–26
420.0005755041040.0014256631660.002276544
430.0005892111050.0014393811670.002290274
440.0006029171060.0014531001680.002304004
450.0006166241070.0014668181690.002317734
460.0006303311080.0014805371700.002331465
470.0006440391090.0014942561710.002345195
480.0006577461100.0015079751720.002358926
490.0006714541110.0015216941730.002372657
500.0006851611120.0015354141740.002386388
510.0006988691130.0015491331750.002400120
520.0007125781140.0015628531760.002413851
530.0007262861150.0015765731770.002427583
540.0007399951160.0015902931780.002441315
550.0007537031170.0016040141790.002455047
560.0007674121180.0016177341800.002468779
570.0007811211190.0016314551810.002482511
580.0007948311200.0016451761820.002496244
590.0008085401210.0016588971830.002509977
600.0008222501220.0016726191840.002523710
610.0008359601230.001686340
620.0008496701240.001700062

Bulletin No. 2019–26 1335 June 24, 2019
366 Day Year
0.5% Compound Rate 184 Days
DaysFactorDaysFactorDaysFactor
10.000013661630.0008610201250.001709097
20.000027323640.0008746931260.001722782
30.000040984650.0008883661270.001736467
40.000054646660.0009020401280.001750152
50.000068308670.0009157131290.001763837
60.000081970680.0009293871300.001777522
70.000095632690.0009430611310.001791208
80.000109295700.0009567351320.001804893
90.000122958710.0009704091330.001818579
100.000136620720.0009840841340.001832265
110.000150283730.0009977581350.001845951
120.000163947740.0010114331360.001859638
130.000177610750.0010251081370.001873324
140.000191274760.0010387831380.001887011
150.000204938770.0010524591390.001900698
160.000218602780.0010661341400.001914385
170.000232266790.0010798101410.001928073
180.000245930800.0010934861420.001941760
190.000259595810.0011071621430.001955448
200.000273260820.0011208391440.001969136
210.000286924830.0011345151450.001982824
220.000300590840.0011481921460.001996512
230.000314255850.0011618691470.002010201
240.000327920860.0011755461480.002023889
250.000341586870.0011892231490.002037578
260.000355252880.0012029001500.002051267
270.000368918890.0012165781510.002064957
280.000382584900.0012302561520.002078646
290.000396251910.0012439341530.002092336
300.000409917920.0012576121540.002106025
310.000423584930.0012712911550.002119715
320.000437251940.0012849691560.002133405
330.000450918950.0012986481570.002147096
340.000464586960.0013123271580.002160786
350.000478253970.0013260061590.002174477
360.000491921980.0013396851600.002188168
370.000505589990.0013533651610.002201859
380.0005192571000.0013670441620.002215550
390.0005329251010.0013807241630.002229242
400.0005465941020.0013944041640.002242933
410.0005602621030.0014080851650.002256625
420.0005739311040.0014217651660.002270317
430.0005876001050.0014354461670.002284010

June 24, 2019 1336 Bulletin No. 2019–26
440.0006012691060.0014491271680.002297702
450.0006149391070.0014628081690.002311395
460.0006286081080.0014764891700.002325087
470.0006422781090.0014901701710.002338780
480.0006559481100.0015038521720.002352473
490.0006696181110.0015175331730.002366167
500.0006832891120.0015312151740.002379860
510.0006969591130.0015448971750.002393554
520.0007106301140.0015585801760.002407248
530.0007243011150.0015722621770.002420942
540.0007379721160.0015859451780.002434636
550.0007516431170.0015996281790.002448331
560.0007653151180.0016133111800.002462025
570.0007789861190.0016269941810.002475720
580.0007926581200.0016406781820.002489415
590.0008063301210.0016543611830.002503110
600.0008200031220.0016680451840.002516806
610.0008336751230.001681729
620.0008473481240.001695413

Bulletin No. 2019–26 1337 June 24, 2019
TABLE OF INTEREST RATES
PERIODS BEFORE JUL. 1, 1975 - PERIODS ENDING DEC. 31, 1986
OVERPAYMENTS AND UNDERPAYMENTS
PERIODRATEIn 1995-1 C.B.
DAILY RATE TABLE
Before Jul. 1, 19756%Table 2,pg. 557
Jul.1,1975–Jan.31,19769%Table4,pg.559
Feb.1,1976–Jan.31,19787%Table3,pg.558
Feb.1,1978–Jan.31,19806%Table2,pg.557
Feb.1,1980–Jan.31,198212%Table5,pg.560
Feb.1,1982–Dec.31,198220%Table6,pg.560
Jan.1,1983–Jun.30,198316%Table37,pg.591
Jul.1,1983–Dec.31,198311%Table27,pg.581
Jan.1,1984–Jun.30,198411%Table75,pg.629
Jul.1,1984–Dec.31,198411%Table75,pg.629
Jan.1,1985–Jun.30,198513%Table31,pg.585
Jul.1,1985–Dec.31,198511%Table27,pg.581
Jan.1,1986–Jun.30,198610%Table25,pg.579
Jul.1,1986–Dec.31,19869%Table23,pg.577
TABLE OF INTEREST RATES
FROM JAN. 1, 1987 - Dec. 31, 1998
OVERPAYMENTSUNDERPAYMENTS
1995-1 C.B.1995-1 C.B. RATE
TABLEPGRATETABLEPG
Jan.1,1987–Mar.31,19878%215759%23577
Apr.1,1987–Jun.30,19878%215759%23577
Jul.1,1987–Sep.30,19878%215759%23577
Oct.1,1987–Dec.31,19879%2357710%25579
Jan.1,1988–Mar.31,198810%7362711%75629
Apr.1,1988–Jun.30,19889%7162510%73627
Jul.1,1988–Sep.30,19889%7162510%73627
Oct.1,1988–Dec.31,198810%7362711%75629
Jan.1,1989–Mar.31,198910%2557911%27581
Apr.1,1989–Jun.30,198911%2758112%29583
Jul.1,1989–Sep.30,198911%2758112%29583
Oct.1,1989–Dec.31,
198910%2557911%27581

June 24, 2019 1338 Bulletin No. 2019–26
Jan.1,1990–Mar.31,199010%2557911%27581
Apr.1,1990–Jun.30,199010%2557911%27581
Jul.1,1990–Sep.30,199010%2557911%27581
Oct.1,1990–Dec.31,199010%2557911%27581
Jan.1,1991–Mar.31,199110%2557911%27581
Apr.1,1991–Jun.30,19919%2357710%25579
Jul.1,1991–Sep.30,19919%2357710%25579
Oct.1,1991–Dec.31,19919%2357710%25579
Jan.1,1992–Mar.31,19928%696239%71625
Apr.1,1992–Jun.30,19927%676218%69623
Jul.1,1992–Sep.30,19927%676218%69623
Oct.1,1992–Dec.31,19926%656197%67621
Jan.1,
1993–Mar.31,19936%175717%19573
Apr.1,1993–Jun.30,19936%175717%19573
Jul.1,1993–Sep.30,19936%175717%19573
Oct.1,1993–Dec.31,19936%175717%19573
Jan.1,1994–Mar.31,19946%175717%19573
Apr.1,1994–Jun.30,19946%175717%19573
Jul.1,1994–Sep.30,19947%195738%21575
Oct.1,1994–Dec.31,19948%215759%23577
Jan.1,1995–Mar.31,19958%215759%23577
Apr.1,1995–Jun.30,19959%2357710%25579
Jul.1,1995–Sep.30,19958%215759%23577
Oct.1,1995–Dec.31,19958%215759%23577
Jan.1,1996–Mar.31,
19968%696239%71625
Apr.1,1996–Jun.30,19967%676218%69623
Jul.1,1996–Sep.30,19968%696239%71625
Oct.1,1996–Dec.31,19968%696239%71625
Jan.1,1997–Mar.31,19978%215759%23577
Apr.1,1997–Jun.30,19978%215759%23577
Jul.1,1997–Sep.30,19978%215759%23577
Oct.1,1997–Dec.31,19978%215759%23577
Jan.1,1998–Mar.31,19988%215759%23577
Apr.1,1998–Jun.30,19987%195738%21575
Jul.1,1998–Sep.30,19987%195738%21575
Oct.1,1998–Dec.31,19987%195738%21575

Bulletin No. 2019–26 1339 June 24, 2019
TABLE OF INTEREST RATES FROM JANUARY 1, 1999 - PRESENT
NONCORPORATE OVERPAYMENTS AND UNDERPAYMENTS
1995-1 C.B.
RATETABLEPAGE
Jan.1,1999–Mar.31,19997%19573
Apr.1,1999–Jun.30,19998%21575
Jul.1,1999–Sep.30,19998%21575
Oct.1,1999–Dec.31,19998%21575
Jan.1,2000–Mar.31,20008%69623
Apr.1,2000–Jun.30,20009%71625
Jul.1,2000–Sep.30,20009%71625
Oct.1,2000–Dec.31,20009%71625
Jan.1,2001–Mar.31,20019%23577
Apr.1,2001–Jun.30,20018%21575
Jul.1,2001–Sep.30,20017%19573
Oct.1,2001–Dec.31,20017%19573
Jan.1,2002–Mar.31,20026%17571
Apr.1,2002–Jun.30,20026%17571
Jul.1,2002–Sep.30,20026%17571
Oct.1,2002–Dec.31,20026%17571
Jan.1,
2003–Mar.31,20035%15569
Apr.1,2003–Jun.30,20035%15569
Jul.1,2003–Sep.30,20035%15569
Oct.1,2003–Dec.31,20034%13567
Jan.1,2004–Mar.31,20044%61615
Apr.1,2004–Jun.30,20045%63617
Jul.1,2004–Sep.30,20044%61615
Oct.1,2004–Dec.31,20045%63617
Jan.1,2005–Mar.31,20055%15569
Apr.1,2005–Jun.30,20056%17571
Jul.1,2005–Sep.30,20056%17571
Oct.1,2005–Dec.31,20057%19573
Jan.1,2006–Mar.31,20067%19573
Apr.1,2006–Jun.30,20067%19573
Jul.1,2006–Sep.30,20068%21575
Oct.1,2006–Dec.31,20068%21575
Jan.1,2007–Mar.31,20078%21575
Apr.1,2007–Jun.30,20078%21575
Jul.1,2007–Sep.30,20078%21575
Oct.1,2007–Dec.31,20078%21575
Jan.1,2008–Mar.31,20087%67621
Apr.1,2008–Jun.30,20086%65619
Jul.1,2008–Sep.30,20085%63617

June 24, 2019 1340 Bulletin No. 2019–26
Oct.1,2008–Dec.31,20086%65619
Jan.1,2009–Mar.31,20095%15569
Apr.1,2009–Jun.30,20094%13567
Jul.1,2009–Sep.30,20094%13567
Oct.1,2009–Dec.31,20094%13567
Jan.1,2010–Mar.31,20104%13567
Apr.1,2010–Jun.30,20104%13567
Jul.1,2010–Sep.30,20104%13567
Oct.1,2010–Dec.31,20104%13567
Jan.1,2011–Mar.31,20113%11565
Apr.1,2011–Jun.30,20114%13567
Jul.1,2011–Sep.30,20114%13567
Oct.1,2011–Dec.31,20113%11565
Jan.1,2012–Mar.31,20123%59613
Apr.1,2012–Jun.30,20123%59613
Jul.1,2012–Sep.30,20123%59613
Oct.1,2012–Dec.31,20123%
59613
Jan.1,2013–Mar.31,20133%11565
Apr.1,2013–Jun.30,20133%11565
Jul.1,2013–Sep.30,20133%11565
Oct.1,2013–Dec.31,20133%11565
Jan.1,2014–Mar.31,20143%11565
Apr.1,2014–Jun.30,20143%11565
Jul.1,2014–Sep.30,20143%11565
Oct.1,2014–Dec.31,20143%11565
Jan.1,2015–Mar.31,20153%11565
Apr.1,2015–Jun.30,20153%11565
Jul.1,2015–Sep.30,20153%11565
Oct.1.2015–Dec.31,20153%11565
Jan.1,2016–Mar.31,20163%59613
Apr.1,2016–Jun.30,20164%61615
Jul.1,2016–Sep.30,20164%61615
Oct.1,2016–Dec.31,20164%61615
Jan.1,2017–Mar.31,
20174%13567
Apr.1,2017–Jun.30,20174%13567
Jul.1,2017–Sep.30,20174%13567
Oct.1,2017–Dec.31,20174%13567
Jan.1,2018–Mar.31,20184%13567
Apr.
Jul.
Oct.
Jan.
Apr.
Jul.
1,
1,
1,
1,
1,
1,
2018–Jun.
2018–Sep.
2018–Dec.
2019–Mar.
2019–Jun.
2019–Sep.
30,
30,
31,
31,
30,
30,
2018
2018
2018
2019
2019
2019
5%
5%
5%
6%
6%
5%
15
15
15
17
17
15
569
569
569
571
571
569

Bulletin No. 2019–26 1341 June 24, 2019
TABLE OF INTEREST RATES FROM JANUARY 1, 1999 - PRESENT
CORPORATE OVERPAYMENTS AND UNDERPAYMENTS
OVERPAYMENTSUNDERPAYMENTS
1995-1 C.B.1995-1 C.B.
RATETABLEPGRATETABLEPG
Jan.1,1999–Mar.31,19996%175717%19573
Apr.1,1999–Jun.30,19997%195738%21575
Jul.1,1999–Sep.30,19997%195738%21575
Oct.1,1999–Dec.31,19997%195738%21575
Jan.1,2000–Mar.31,20007%676218%69623
Apr.1,2000–Jun.30,20008%696239%71625
Jul.1,2000–Sep.30,20008%696239%71625
Oct.1,2000–Dec.31,20008%696239%71625
Jan.1,2001–Mar.31,20018%215759%23577
Apr.1,2001–Jun.30,20017%195738%21575
Jul.1,2001–Sep.30,20016%175717%19573
Oct.1,2001–Dec.
31,20016%175717%19573
Jan.1,2002–Mar.31,20025%155696%17571
Apr.1,2002–Jun.30,20025%155696%17571
Jul.1,2002–Sep.30,20025%155696%17571
Oct.1,2002–Dec.31,20025%155696%17571
Jan.1,2003–Mar.31,20034%135675%15569
Apr.1,2003–Jun.30,20034%135675%15569
Jul.1,2003–Sep.30,20034%135675%15569
Oct.1,2003–Dec.31,20033%115654%13567
Jan.1,2004–Mar.31,20043%596134%61615
Apr.1,2004–Jun.30,20044%616155%63617
Jul.1,2004–Sep.30,20043%596134%61615
Oct.1,2004–Dec.31,2004
4%616155%63617
Jan.1,2005–Mar.31,20054%135675%15569
Apr.1,2005–Jun.30,20055%155696%17571
Jul.1,2005–Sep.30,20055%155696%17571
Oct.1,2005–Dec.31,20056%175717%19573
Jan.1,2006–Mar.31,20066%175717%19573
Apr.1,2006–Jun.30,20066%175717%19573
Jul.1,2006–Sep.30,20067%195738%21575
Oct.1,2006–Dec.31,20067%195738%21575
Jan.1,2007–Mar.31,20077%195738%21575
Apr.1,2007–Jun.30,20077%195738%21575

June 24, 2019 1342 Bulletin No. 2019–26
Jul.1,2007–Sep.30,20077%195738%21575
Oct.1,2007–Dec.31,20077%195738%21575
Jan.1,2008–Mar.31,20086%656197%67621
Apr.1,2008–Jun.30,20085%636176%65619
Jul.1,2008–Sep.30,20084%616155%63617
Oct.1,2008–Dec.31,20085%636176%65619
Jan.1,2009–Mar.31,20094%135675%15569
Apr.1,2009–Jun.30,20093%115654%13567
Jul.1,2009–Sep.30,20093%115654%13567
Oct.1,2009–Dec.31,20093%115654%13567
Jan.1,2010–Mar.31,20103%115654%13567
Apr.1,2010–Jun.30,20103%115654%13567
Jul.1,
2010–Sep.30,20103%115654%13567
Oct.1,2010–Dec.31,20103%115654%13567
Jan.1,2011–Mar.31,20112%95633%11565
Apr.1,2011–Jun.30,20113%115654%13567
Jul.1,2011–Sep.30,20113%115654%13567
Oct.1,2011–Dec.31,20112%95633%11565
Jan.1,2012–Mar.31,20122%576113%59613
Apr.1,2012–Jun.30,20122%576113%59613
Jul.1,2012–Sep.30,20122%576113%59613
Oct.1,2012–Dec.31,20122%576113%59613
Jan.1,2013–Mar.31,20132%95633%11565
Apr.1,2013–Jun.30,20132%95633%11565
Jul.1,2013–Sep.30,
20132%95633%11565
Oct.1,2013–Dec.31,20132%95633%11565
Jan.1,2014–Mar.31,20142%95633%11565
Apr.1,2014–Jun.30,20142%95633%11565
Jul.1,2014–Sep.30,20142%95633%11565
Oct.1,2014–Dec.31,20142%95633%11565
Jan.1,2015–Mar.31,20152%95633%11565
Apr.1,2015–Jun.30,20152%95633%11565
Jul.1,z2015–Sep.30,20152%95633%11565
Oct.1,2015–Dec.31,20152%95633%11565
Jan.1,2016–Mar.31,20162%576113%59613
Apr.1,2016–Jun.30,20163%596134%61615
Jul.1,2016–Sep.30,20163%
596134%61615
Oct.1,2016–Dec.31,20163%596134%61615
Jan.1,2017–Mar.31,20173%115654%13567
Apr.1,2017–Jun.30,20173%115654%13567
Jul.1,2017–Sep.30,20173%115654%13567
Oct.1,2017–Dec.31,,20173%115654%13567
Jan.1,2018–Mar.31,20183%115654%13567
Apr.
Jul.
Oct.
Jan.
Apr.
Jul.
1,
1,
1,
1,
1,
1,
2018–Jun.
2018–Sep.
2018–Dec.
2019–Mar.
2019–Jun.
2019–Sep.
30,
30,
31,
31,
30,
30,
2018
2018
2018
2019
2019
2019
4%
4%
4%
5%
5%
4%
13
13
13
15
15
13
567
567
567
569
569
567
5%
5%
5%
6%
6%
5%
15
15
15
17
17
15
569
569
569
571
571
569

Bulletin No. 2019–26 1343 June 24, 2019
TABLE OF INTEREST RATES FOR LARGE CORPORATE UNDERPAYMENTS
FROM JANUARY 1, 1991 - PRESENT
1995-1 C.B.
RATETABLEPG
Jan.1,1991–Mar.31,199113%31585
Apr.1,1991–Jun.30,199112%29583
Jul.1,1991–Sep.30,199112%29583
Oct.1,1991–Dec.31,199112%29583
Jan.1,1992–Mar.31,199211%75629
Apr.1,1992–Jun.30,199210%73627
Jul.1,1992–Sep.30,199210%73627
Oct.1,1992–Dec.31,19929%71625
Jan.1,1993–Mar.31,19939%23577
Apr.1,1993–Jun.30,19939%23577
Jul.1,1993–Sep.30,19939%23577
Oct.1,1993–Dec.31,19939%23577
Jan.1,1994–Mar.31,19949%23577
Apr.1,1994–Jun.30,19949%23577
Jul.1,1994–Sep.30,199410%25579
Oct.1,1994–Dec.31,199411%27581
Jan.1,
1995–Mar.31,199511%27581
Apr.1,1995–Jun.30,199512%29583
Jul.1,1995–Sep.30,199511%27581
Oct.1,1995–Dec.31,199511%27581
Jan.1,1996–Mar.31,199611%75629
Apr.1,1996–Jun.30,199610%73627
Jul.1,1996–Sep.30,199611%75629
Oct.1,1996–Dec.31,199611%75629
Jan.1,1997–Mar.31,199711%27581
Apr.1,1997–Jun.30,199711%27581
Jul.1,1997–Sep.30,199711%27581
Oct.1,1997–Dec.31,199711%27581
Jan.1,1998–Mar.31,199811%27581
Apr.1,1998–Jun.30,199810%25579
Jul.1,1998–Sep.30,199810%25579
Oct.1,1998–Dec.31,199810%25579
Jan.1,1999–Mar.31,19999%23577
Apr.1,1999–Jun.30,199910%25579
Jul.1,1999–Sep.30,199910%25579
Oct.1,1999–Dec.31,199910%25579
Jan.1,2000–Mar.31,200010%73627
Apr.1,2000–Jun.30,200011%75629

June 24, 2019 1344 Bulletin No. 2019–26
Jul.1,2000–Sep.30,200011%75629
Oct.1,2000–Dec.31,200011%75629
Jan.1,2001–Mar.31,200111%27581
Apr.1,2001–Jun.30,200110%25579
Jul.1,2001–Sep.30,20019%23577
Oct.1,2001–Dec.31,20019%23577
Jan.1,2002–Mar.31,20028%21575
Apr.1,2002–Jun.30,20028%21575
Jul.1,2002–Sep.30,20028%21575
Oct.1,2002–Dec.31,20028%21575
Jan.1,2003–Mar.31,20037%19573
Apr.1,2003–Jun.30,20037%19573
Jul.1,2003–Sep.30,20037%19573
Oct.1,2003–Dec.31,20036%17571
Jan.1,2004–Mar.31,20046%65619
Apr.1,2004–Jun.30,20047%67621
Jul.1,2004–Sep.30,20046%
65619
Oct.1,2004–Dec.31,20047%67621
Jan.1,2005–Mar.31,20057%19573
Apr.1,2005–Jun.30,20058%21575
Jul.1,2005–Sep.30,20058%21575
Oct.1,2005–Dec.31,20059%23577
Jan.1,2006–Mar.31,20069%23577
Apr.1,2006–Jun.30,20069%23577
Jul.1,2006–Sep.30,200610%25579
Oct.1,2006–Dec.31,200610%25579
Jan.1,2007–Mar.31,200710%25579
Apr.1,2007–Jun.30,200710%25579
Jul.1,2007–Sep.30,200710%25579
Oct.1,2007–Dec.31,200710%25579
Jan.1,2008–Mar.31,20089%71625
Apr.1,2008–Jun.30,20088%69623
Jul.1,2008–Sep.30,20087%67621
Oct.1,2008–Dec.31,
20088%69623
Jan.1,2009–Mar.31,20097%19573
Apr.1,2009–Jun.30,20096%17571
Jul.1,2009–Sep.30,20096%17571
Oct.1,2009–Dec.31,20096%17571
Jan.1,2010–Mar.31,20106%17571
Apr.1,2010–Jun.30,20106%17571
Jul.1,2010–Sep.30,20106%17571
Oct.1,2010–Dec.31,20106%17571
Jan.1,2011–Mar.31,20115%15569
Apr.1,2011–Jun.30,20116%17571
Jul.1,2011–Sep.30,20116%17571

Bulletin No. 2019–26 1345 June 24, 2019
Oct.1,2011–Dec.31,20115%15569
Jan.1,2012–Mar.31,20125%63617
Apr.1,2012–Jun.30,20125%63617
Jul.1,2012–Sep.30,20125%63617
Oct.1,2012–Dec.31,20125%63617
Jan.1,2013–Mar.31,20135%15569
Apr.1,2013–Jun.30,20135%15569
Jul.1,2013–Sep.30,20135%15569
Oct.1,2013–Dec.31,20135%15569
Jan.1,2014–Mar.31,20145%15569
Apr.1,2014–Jun.30,20145%15569
Jul.1,2014–Sep.30,20145%15569
Oct.1,2014–Dec.31,20145%15569
Jan.1,2015–Mar.31,20155%15569
Apr.1,2015–Jun.30,20155%15569
Jul.1,2015–Sep.30,20155%15569
Oct.1,2015–Dec.31,20155%
15569
Jan.1,2016–Mar.31,20165%63617
Apr.1,2016–Jun.30,20166%65619
Jul.1,2016–Sep.30,20166%65619
Oct.1,2016–Dec.31,20166%65619
Jan.1,2017–Mar.31,20176%17571
Apr.1,2017–Jun.30,20176%17571
Jul.1,2017–Sep.30,20176%17571
Oct.1,2017–Dec.31,20176%17571
Jan.1,2018–Mar.31,20186%17571
Apr.1,2018–Jun.30,20187%19573
Jul.1,2018–Sep.30,20187%19573
Oct.1,2018–Dec.31,20187%19573
Jan.1,2019–Mar.31,20198%21575
Apr.1,2019–Jun. 30,20198%21575
Jul.1,
2019–Sep.
30,20197%19573

June 24, 2019 1346 Bulletin No. 2019–26
TABLE OF INTEREST RATES FOR CORPORATE OVERPAYMENTS EXCEEDING $10,000
FROM JANUARY 1, 1995 – PRESENT
1995-1 C.B.
RATETABLEPG
Jan.1,1995–Mar.31,19956.5%18572
Apr.1,1995–Jun.30,19957.5%20574
Jul.1,1995–Sep.30,19956.5%18572
Oct.1,1995–Dec.31,19956.5%18572
Jan.1,1996–Mar.31,19966.5%66620
Apr.1,1996–Jun.30,19965.5%64618
Jul.1,1996–Sep.30,19966.5%66620
Oct.1,1996–Dec.31,19966.5%66620
Jan.1,1997–Mar.31,19976.5%18572
Apr.1,1997–Jun.30,19976.5%18572
Jul.1,1997–Sep.30,19976.5%18572
Oct.1,1997–Dec.31,19976.5%18572
Jan.1,1998–Mar.31,19986.5%18572
Apr.1,1998–Jun.30,19985.5%16570
Jul.1.1998–Sep.30,19985.5%16570
Oct.1,1998–Dec.31,19985.5%16570
Jan.1,1999–Mar.31,19994.5%14568
Apr.1,1999–Jun.30,19995.5%16570
Jul.1,1999–Sep.30,19995.5%16570
Oct.1,1999–Dec.31,19995.5%16570
Jan.1,2000–Mar.31,20005.5%64618
Apr.1,2000–Jun.30,20006.5%66620
Jul.1,2000–Sep.30,20006.5%66620
Oct.1,2000–Dec.31,20006.5%66620
Jan.1,2001–Mar.31,20016.5%18572
Apr.1,2001–Jun.30,20015.5%16570
Jul.1,2001–Sep.30,20014.5%14568
Oct.1,2001–Dec.31,20014.5%14568
Jan.1,2002–Mar.31,20023.5%12566
Apr.1,2002–Jun.30,20023.5%12566
Jul.1,2002–Sep.30,20023.5%12566
Oct.1,2002–Dec.31,20023.5%12566
Jan.1,2003–Mar.31,20032.5%10564
Apr.1,2003–Jun.30,20032.5%10564
Jul.1,2003–Sep.30,20032.5%10564
Oct.1,2003–Dec.31,20031.5%8562
Jan.1,2004–Mar.31,20041.5%56610
Apr.1,2004–Jun.30,20042.5%58612
Jul.1,2004–Sep.30,20041.5%56610

Bulletin No. 2019–26 1347 June 24, 2019
Oct.1,2004–Dec.31,20042.5%58612
Jan.1,2005–Mar.31,20052.5%10564
Apr.1,2005–Jun.30,20053.5%12566
Jul.1,2005–Sep.30,20053.5%12566
Oct.1,2005–Dec.31,20054.5%14568
Jan.1,2006–Mar.31,20064.5%14568
Apr.1,2006–Jun.30,20064.5%14568
Jul.1,2006–Sep.30,20065.5%16570
Oct.1,2006–Dec.31,20065.5%16570
Jan.1,2007–Mar.31,20075.5%16570
Apr.1,2007–Jun.30,20075.5%16570
Jul.1,2007–Sep.30,20075.5%16570
Oct.1,2007–Dec.31,20075.5%16570
Jan.1,2008–Mar.31,20084.5%62616
Apr.1,2008–Jun.30,20083.5%60614
Jul.1,2008–Sep.30,20082.5%58612
Oct.1,2008–Dec.31,20083.5%60614
Jan.1,2009–Mar.31,20092.5%10564
Apr.1,2009–Jun.30,20091.5%8562
Jul.1,2009–Sep.30,20091.5%8562
Oct.1,2009–Dec.31,20091.5%8562
Jan.1,2010–Mar.31,20101.5%8562
Apr.1,2010–Jun.30,20101.5%8562
Jul.1,2010–Sep.30,20101.5%8562
Oct.1,2010–Dec.31,20101.5%8562
Jan.1,2011–Mar.31,20110.5%*
Apr.1,2011–Jun.30,20111.5%8562
Jul.1,2011–Sep.30,20111.5%8562
Oct.1,2011–Dec.31,20110.5%*
Jan.1,2012–Mar.31,20120.5%*
Apr.1,2012–Jun.30,20120.5%*
Jul.1,2012–Sep.30,20120.5%*
Oct.1,2012–Dec.31,20120.5%*
Jan.1,2013–Mar.31,20130.5%*
Apr.1,2013–Jun.30,20130.5%*
Jul.1,2013–Sep.30,20130.5%*
Oct.1,2013–Dec.31,20130.5%*
Jan.1,2014–Mar.31,20140.5%*
Apr.1,2014–Jun.30,20140.5%*
Jul.1,2014–Sep.30,20140.5%*

June 24, 2019 1348 Bulletin No. 2019–26
Oct.1,2014–Dec.31,20140.5%*
Jan.1,2015–Mar.31,20150.5%*
Apr.1,2015–Jun.30,20150.5%*
Jul.1,2015–Sep.30,20150.5%*
Oct.1,2015–Dec.31,20150.5%*
Jan.1,2016–Mar.31,20160.5%*
Apr.1,2016–Jun.30,20161.5%56610
Jul.1,2016–Sep.30,20161.5%56610
Oct.1,2016–Dec.31,20161.5%56610
Jan.1,2017–Mar.31,20171.5%8562
Apr.1,2017–Jun.30,20171.5%8562
Jul.1,2017–Sep.30,20171.5%8562
Oct.1,2017–Dec.31,20171.5%8562
Jan.1,2018–Mar.31,20181.5%8562
Apr.
Jul.
Oct.
Jan.
Apr.
Jul.
1,
1,
1,
1,
1,
1,
2018–Jun.
2018–Sep.
2018–Dec.
2019–Mar.
2019–Jun.
2019–Sep.
30,
30,
31,
31,
30,
30,
2018
2018
2018
2019
2019
2019
2.5%
2.5%
2.5%
3.5%
3.5%
2.5%
10
10
10
12
12
10
564
564
564
566
566
564
* The asterisk reflects the interest factors for daily compound interest for annual rates of 0.5 percent published in Appendix A of
this Revenue Ruling.

Part IV.
Notice of Proposed
Rulemaking
Exception for Interests Held
by Foreign Pension Funds
REG-109826-17
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking.
SUMMARY: This document contains
proposed regulations regarding the excep-
tion from taxation with respect to gain or
loss of a qualified foreign pension fund
attributable to certain interests in United
States real property. The proposed reg-
ulations also include rules for certifying
that a qualified foreign pension fund is not
subject to withholding on certain dispo-
sitions of, and distributions with respect
to, certain interests in United States real
property. The proposed regulations affect
certain holders of certain interests in Unit-
ed States real property and withholding
agents that are required to withhold tax on
certain dispositions of, and distributions
with respect to, such property.
DATES: Written or electronic comments
and requests for a public hearing must be
received by September 5, 2019.
ADDRESSES: Send submissions to:
CC:PA:LPD:PR (REG-109826-17), In-
ternal Revenue Service, Room 5203, P.O.
Box 7604, Ben Franklin Station, Wash-
ington, 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-109826-17),
Courier’s Desk, Internal Revenue Service,
1111 Constitution Avenue, NW, Washing-
ton, DC 20224, or sent electronically via
the Federal eRulemaking Portal at http://
www.regulations.gov (IRS REG-109826-
17).
FOR FURTHER INFORMATION
CONTACT: Concerning the proposed
regulations, Milton Cahn or Logan M.
Kincheloe, (202) 317-6937; concerning
submissions of comments or requests for
a public hearing, Regina Johnson, (202)
317-6901 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Background
I. In General
This document contains proposed
amendments to 26 CFR part 1 under sec-
tions 897, 1445, and 1446 (the “proposed
regulations”). Section 323(a) of the Pro-
tecting Americans from Tax Hikes Act of
2015, Pub. L. 114-113, div. Q (the “PATH
Act”), added section 897(l) to the Code,
and Section 101(q) of the Tax Technical
Corrections Act of 2018, Pub. L. 115-141,
div. U (the “Technical Corrections Act”)
amended certain aspects of section 897(l).
Section 897(l) provides an exemption to
the application of section 897(a) on gain or
loss on certain dispositions of, and distri-
butions with respect to, United States real
property interests (“USRPIs”) for certain
foreign pension funds and their subsid-
iaries. The proposed regulations contain
rules relating to the qualification for the
exemption under section 897(l), as well as
rules relating to withholding requirements
under sections 1445 and 1446 for disposi-
tions of USRPIs by foreign pension funds
and their subsidiaries.
II. Taxation of Foreign Persons under
Section 897
Section 897(a)(1) provides that gain or
loss of a nonresident alien individual or
foreign corporation from the disposition
of a USRPI is taken into account under
section 871(b)(1) or 882(a)(1), as applica-
ble, as if the nonresident alien individual
or foreign corporation were engaged in a
trade or business within the United States
during the taxable year and such gain or
loss were effectively connected with that
trade or business.
Section 897(c)(1)(A) defines a USRPI
as an interest in real property (including
an interest in a mine, well, or other natu-
ral deposit) located in the United States or
the Virgin Islands, and any interest (other
than solely as a creditor) in any domestic
corporation unless the taxpayer establish-
es that such corporation was at no time a
United States real property holding corpo-
ration (“USRPHC”) during the applicable
testing period (generally, the five-year pe-
riod ending on the date of the disposition
of the interest). Under section 897(c)(2),
a USRPHC means any corporation if the
fair market value of its USRPIs equals or
exceeds 50 percent of the total fair market
value of its USRPIs, its interests in real
property located outside the United States,
plus any other assets that are used or held
for use in a trade or business. However,
section 897(c)(1)(B) generally provides
that an interest in a corporation is not a
USRPI if the corporation does not hold
any USRPIs as of the date its stock is sold
and the corporation disposed of all of the
USRPIs that it held during the applicable
testing period in transactions in which the
full amount of gain, if any, was recog-
nized.
Section 897(h)(1) provides that any
distribution by a qualified investment enti-
ty (QIE) to a nonresident alien individual,
a foreign corporation, or other QIE is, to
the extent attributable to gain from sales
or exchanges by the QIE of USRPIs, treat-
ed as gain recognized by such nonresident
alien individual, foreign corporation, or
other QIE from the sale or exchange of a
USRPI, subject to certain exceptions. Un-
der section 897(h)(4)(A), a QIE includes
any real estate investment trust (REIT)
and certain regulated investment compa-
nies.
III. Exception for Qualified Foreign
Pension Funds under Section 897(l)
Section 897(l)(1) provides that a qual-
ified pension fund is not treated as a non-
resident alien individual or foreign cor-
poration for purposes of section 897. Cf.
section 897(a) (subjecting nonresident
alien individuals and foreign corporations
to tax on gain or loss from the disposition
of a USRPI). For this purpose, an entity
all the interests of which are held by a
qualified foreign pension fund (referred to
Bulletin No. 2019–26 1349 June 24, 2019

in this Preamble and the proposed regula-
tions as a “qualified controlled entity”) is
also treated as a qualified foreign pension
fund.
Under section 897(l)(2), a qualified
foreign pension fund is defined as any
trust, corporation, or other organization or
arrangement (any one of which is referred
to in this Preamble and the proposed regu-
lations as an “eligible fund”) that satisfies
five separate requirements. Specifically, a
qualified foreign pension fund is an eligi-
ble fund (A) that is created or organized
under the law of a country other than the
United States, (B) that is established (i)
by such country (or one or more political
subdivisions thereof) to provide retire-
ment or pension benefits to participants
or beneficiaries that are current or former
employees (including self-employed in-
dividuals) or persons designated by such
employees, as a result of services rendered
by such employees to their employers, or
(ii) by one or more employers to provide
retirement or pension benefits to partici-
pants or beneficiaries that are current or
former employees (including self-em-
ployed individuals) or persons designated
by such employees in consideration for
services rendered by such employees to
such employers, (C) that does not have
a single participant or beneficiary with a
right to more than five percent of its assets
or income, (D) that is subject to govern-
ment regulation and with respect to which
annual information about its beneficiaries
is provided, or is otherwise available, to
the relevant tax authorities in the country
in which it is established or operates, and
(E) with respect to which, under the laws
of the country in which it is established or
operates (i) contributions to such eligible
fund that would otherwise be subject to tax
under such laws are deductible or exclud-
ed from the gross income of such entity
or arrangement or taxed at a reduced rate,
or (ii) taxation of any investment income
of such eligible fund is deferred or such
income is excluded from gross income of
such entity or arrangement or is taxed at a
reduced rate.
Section 897(l)(3) provides that the
Secretary of the Treasury (Secretary) shall
prescribe such regulations as may be nec-
essary or appropriate to carry out the pur-
poses of section 897(l).
IV. Applicable Withholding Rules
A. Section 1445 withholding
Section 1445(a) generally imposes a
withholding tax obligation on the trans-
feree when a foreign person disposes of a
USRPI. Section 1445(e)(6) provides that,
if any portion of a distribution from a QIE
to a nonresident alien individual or a for-
eign corporation is treated under section
897(h)(1) as gain realized by such indi-
vidual or corporation from the sale or ex-
change of a USRPI, the QIE must deduct
and withhold tax under section 1445(a) on
the amount so treated.
A transferee of a USRPI is not required
to withhold under section 1445(a) if the
transferor furnishes to the transferee a cer-
tification that, among other things, states
that the transferor is not a foreign person.
§1.1445-2(b)(2)(i). Generally, upon a dis-
tribution and other transactions subject to
withholding, certain entities may treat a
holder of an interest in the entity as a U.S.
person if that interest holder furnishes to
the entity or fiduciary a certification stat-
ing that the interest holder is not a foreign
person. §1.1445-5(b)(3)(ii)(A). Upon the
distribution of any amount attributable to
the disposition of a USRPI, a QIE may
rely on the same certification, a Form
W-9, Request for Taxpayer Identification
Number and Certification, or a form that
is substantially similar to the Form W-9 to
determine whether an interest holder is a
U.S. person. §1.1445-8(e).
Section 323(b) of the PATH Act amend-
ed section 1445(f)(3) to provide that, for
purposes of section 1445, the term “for-
eign person” means any person other than
(A) a United States person, and (B) except
as otherwise provided by the Secretary, an
entity with respect to which section 897
does not apply by reason of section 897(l).
On February 19, 2016, the Department of
the Treasury (the “Treasury Department”)
and the IRS published final regulations
under section 1445 of the Code (“updat-
ed section 1445 regulations”) in the Fed-
eral Register (81 FR 8398-01) to reflect
the PATH Act’s amendments to section
1445(f)(3). A correcting amendment to
the updated section 1445 regulations was
published on April 26, 2016 in the Federal
Register (81 FR 24484-01). As corrected,
the updated section 1445 regulations pro-
vide that neither a qualified foreign pen-
sion fund nor an entity all of the interests
of which are held by a qualified foreign
pension fund is treated as a foreign person,
and thus may provide a certification to a
transferee. See §§1.1445-2(b)(2)(i) (flush
language) and 1.1445-5(b)(3)(ii)(A).
B. Section 1446 withholding
A partnership generally must pay a
withholding tax under section 1446 on
effectively connected taxable income
(“ECTI”) allocable under section 704 to a
foreign partner. Section 1446(c) provides
that ECTI includes the taxable income of
a partnership that is effectively connected
(or treated as effectively connected) with
the conduct of a trade or business in the
United States, subject to certain adjust-
ments. For this purpose, ECTI includes
any partnership income treated as effec-
tively connected with the conduct of a
trade or business in the United States pur-
suant to section 897. §1.1446-2(b)(2)(ii).
A foreign partner’s allocable share of
partnership ECTI does not include income
or gain exempt from U.S. tax by reason
of a provision of the Code or by opera-
tion of any U.S. income tax treaty or re-
ciprocal agreement. §1.1446-2(b)(2)(iii).
In the case of income excluded by reason
of a treaty provision, such income must
be derived by a resident of an applicable
treaty jurisdiction, the resident must be the
beneficial owner of the item, and all other
requirements for benefits under the trea-
ty must be satisfied. To exclude income
or gain from ECTI, the partnership must
receive from the partner a valid withhold-
ing certificate (that is, Form W-8BEN-E,
Certificate of Foreign Status of Beneficial
Owner for United States Tax Withhold-
ing and Reporting (Entities)) containing
the information necessary to support the
claim for treaty benefits required in the
forms and instructions. Id.
A domestic partnership required to
withhold under both sections 1445 and
1446 with respect to income treated as
ECTI pursuant to section 897 is deemed
to satisfy the withholding requirements
of section 1445 if it complies with the re-
quirements of section 1446. §1.1446-3(c)
(2)(i).
June 24, 2019 1350 Bulletin No. 2019–26

Bulletin No. 2019–26 1351 June 24, 2019
V. Prior Request for Comments
In the Preamble to the updated section
1445 regulations that were published on
February 19, 2016, the Treasury Depart-
ment and the IRS requested comments
regarding what regulations, if any, should
be issued pursuant to section 897(l)(3).
Twenty-one comments were received,
requesting, in particular, guidance on is-
sues related to qualification as a “quali-
fied foreign pension fund” under section
897(l)(2). The comments will be included
in the administrative record for this notice
of proposed rulemaking. The Treasury
Department and the IRS considered all
of the comments, and in response to the
comments have issued the proposed reg-
ulations to provide clarification on the
application of section 897(l). Each signif-
icant comment, other than any comment
rendered moot by the Technical Correc-
tions Act, is discussed in the relevant part
of the Explanation of Provisions section
of this preamble.
Explanation of Provisions
The proposed regulations provide
guidance regarding the scope of the ex-
ception described in section 897(l)(1), the
application of the requirements described
in section 897(l)(2) that an eligible fund
must satisfy to be treated as a qualified
foreign pension fund, and rules regarding
exemptions from withholding under sec-
tion 1445 or section 1446.
I. Scope of the Exception
A. General rule
As described in the Background section
of this Preamble, section 897(a) applies to
gain or loss of a nonresident alien indi-
vidual or a foreign corporation from the
disposition of a USRPI. Similarly, section
897(h) generally treats any distribution
from a QIE to a nonresident alien individ-
ual, a foreign corporation, or other QIE, to
the extent attributable to gain from sales
or exchanges by the QIE of USRPIs, as
gain recognized by such nonresident alien
individual, foreign corporation, or other
QIE from the sale or exchange of a US-
RPI for purposes of section 897(a). Sec-
tion 897(l)(1) provides that, for purposes
of section 897, a qualified foreign pension
fund is not treated as a nonresident alien
individual or a foreign corporation. For
this purpose, a qualified controlled entity
is treated as a qualified foreign pension
fund. Accordingly, section 897(l) excepts
from section 897(a) gain or loss of a qual-
ified foreign pension fund or a qualified
controlled entity from the disposition of a
USRPI, including gain from a distribution
described in section 897(h).
Consistent with section 897(l), the pro-
posed regulations provide that gain or loss
of a qualified foreign pension fund or a
qualified controlled entity (under the pro-
posed regulations, each a “qualified hold-
er”) from the disposition of a USRPI, in-
cluding gain from a distribution described
in section 897(h), is not subject to sec-
tion 897(a). This exception from section
897(a) applies solely with respect to gain
or loss recognized by a qualified holder
that is attributable to one or more qualified
segregated accounts maintained by the
qualified holder. The proposed regulations
define a qualified segregated account as
an identifiable pool of assets maintained
for the sole purpose of funding qualified
benefits (generally, retirement, pension,
and certain ancillary benefits) to qualified
recipients (generally, plan participants and
beneficiaries). See Section II.B of this Ex-
planation of Provisions for a detailed dis-
cussion of qualified benefits and qualified
recipients.
The proposed regulations provide sep-
arate standards for determining whether
an identifiable pool of assets constitutes
a qualified segregated account depending
on whether the pool of assets is maintained
by an eligible fund (including an eligible
fund that satisfies the requirements to be
treated as a qualified foreign pension fund)
or a qualified controlled entity. An identi-
fiable pool of assets of an eligible fund is
a qualified segregated account if the assets
in the pool and the income earned with
respect to those assets are subject to le-
gal or contractual requirements requiring
that all such income and assets are used
exclusively to fund the provision of qual-
ified benefits to qualified recipients or to
satisfy necessary reasonable expenses of
the eligible fund. A qualified controlled
entity is treated as maintaining a qual-
ified segregated account if all of the net
earnings of the qualified controlled entity
are credited to its own account or to the
qualified segregated account of a qualified
foreign pension fund or another qualified
controlled entity, and all of the assets of
the qualified controlled entity, after sat-
isfaction of liabilities to persons having
interests in the entity solely as creditors,
vest in the qualified segregated account of
a qualified foreign pension fund or anoth-
er qualified controlled entity upon disso-
lution. In either case, a pool of assets will
not be treated as a qualified segregated
account if the assets or income associated
with such assets may inure to the benefit
of a person other than a qualified recipi-
ent. For this purpose, the fact that assets or
income may inure to the benefit of a gov-
ernmental unit by operation of escheat or
similar laws is ignored.
B. Qualified controlled entities
Several comments submitted in re-
sponse to the updated section 1445 regu-
lations requested clarification concerning
the exception under section 897(l) for an
entity all the interests of which are held
by a qualified foreign pension fund. The
proposed regulations define a qualified
controlled entity as a trust or corporation
organized under the laws of a foreign
country all of the interests of which are
held directly by one or more qualified for-
eign pension funds or indirectly through
one or more qualified controlled entities
or partnerships. The Treasury Department
and the IRS have determined that it is un-
necessary to treat partnerships as qualified
controlled entities because the proposed
regulations’ exemption from section
897(a) applies to gain or loss earned indi-
rectly through one or more partnerships.
Accordingly, the proposed regulations
provide that only corporations and trusts
may be treated as qualified controlled en-
tities.
1. Indirectly Held Entities
Comments requested that the proposed
regulations provide that an entity held in-
directly through one or more corporations
or partnerships by a qualified foreign pen-
sion fund may be treated as a qualified
controlled entity. Thus, for example, if a
qualified foreign pension fund owned all
of the interests of Entity A, and Entity A

June 24, 2019 1352 Bulletin No. 2019–26
owned all of the interests of Entity B, the
comments indicated that Entity B should
be eligible to be treated as a qualified con-
trolled entity. The Treasury Department
and the IRS agree that there is no policy
reason to distinguish between direct and
indirect ownership for purposes of deter-
mining whether an entity is a qualified
controlled entity. Accordingly, the pro-
posed regulations provide that a qualified
controlled entity may be owned directly or
indirectly through one or more qualified
controlled entities.
2. Multiple Qualified Foreign Pension
Fund Owners
Comments requested that the pro-
posed regulations provide that an entity
may qualify as a qualified controlled en-
tity when all of its interests are owned by
multiple qualified foreign pension funds.
Comments noted that qualified foreign
pension funds frequently pool their in-
vestments, such that permitting qualified
controlled entities to be held by multiple
qualified foreign pension funds would be
consistent with current investment prac-
tices. Further, comments argued that there
is no policy rationale for providing the
exception of section 897(l) to an invest-
ment that benefited one qualified foreign
pension fund but not to an investment that
benefited multiple qualified foreign pen-
sion funds. The Treasury Department and
the IRS agree with these comments. Ac-
cordingly, the proposed regulations pro-
vide that the interests in a qualified con-
trolled entity may be held by one or more
qualified foreign pension funds directly or
indirectly through one or more qualified
controlled entities.
3. Creditor Interests
One comment recommended that, for
purposes of determining whether an entity
is a qualified controlled entity, only equity
interests should be taken into account. Cf.
section 897(c)(1)(A) (defining a USRPI as
including any interest (other than solely
as a creditor) in any domestic corporation
unless the taxpayer establishes that such
corporation was at no time a USRPHC
during the applicable testing period). The
comment noted that requiring a qualified
foreign pension fund to hold all of the
creditor’s interests issued by a qualified
controlled entity would prevent the use of
external leverage by a qualified controlled
entity, even though there is no such restric-
tion on direct leveraged investments by a
qualified foreign pension fund. The Trea-
sury Department and the IRS agree that a
creditor’s interest in an entity should not
be an interest taken into account for pur-
poses of determining whether the entity is
treated as a qualified controlled entity if
the interest does not share in the earnings
or growth of the entity. Section 1.897-1(d)
(5) provides that, unless otherwise stated,
the term “interest” as used with regard to
an entity in the regulations under sections
897, 1445, and 6039C, means an interest
other than an interest solely as a creditor.
Given the absence of an express provi-
sion to the contrary in the proposed reg-
ulations, the application of §1.897-1(d)(5)
results in an interest in an entity solely as
a creditor not being taken into account for
purposes of determining whether the enti-
ty is a qualified controlled entity.
4. Interaction with Section 892
Comments requested clarification that
an entity may constitute a qualified con-
trolled entity whether or not the entity
constitutes a controlled entity as defined
in §1.892-2T(a)(3). The Treasury Depart-
ment and the IRS have determined that the
definition of “qualified controlled entity”
in the proposed regulations plainly does
not limit qualified controlled entity status
to only those entities that would qualify as
a “controlled entity” within the meaning
of §1.892-2T(a)(3). It is, therefore, unnec-
essary for these proposed regulations to
provide an express rule.
5. De Minimis Ownership
A comment requested that the pro-
posed regulations provide that de minimis
ownership of a qualified controlled entity
be disregarded under certain circumstanc-
es. For instance, the comment indicated
that de minimis ownership, including by
managers or directors, may be required by
corporate law in certain jurisdictions. The
Treasury Department and the IRS have
determined that permitting a person oth-
er than a qualified foreign pension fund to
own an interest in a qualified controlled
entity would impermissibly expand the
scope of the exception in section 897(l)
by allowing taxpayers other than qualified
foreign pension funds to avoid tax under
section 897. Accordingly, the proposed
regulations do not permit ownership of a
qualified controlled entity by a person oth-
er than a qualified foreign pension fund or
another qualified controlled entity.
6. Avoidance of Section 897
One comment recommended that the
Treasury Department and the IRS consid-
er rules to prevent a qualified foreign pen-
sion fund from indirectly acquiring a US-
RPI held by a foreign corporation, which
would permit the acquired corporation to
avoid tax on gain that would otherwise
be subject to tax under section 897. For
example, assume that FP, a foreign corpo-
ration that is not a qualified holder, owns
100 percent of the stock of FS, a foreign
corporation, and that FS owns a USRPI
with a basis of $80x and a fair market
value of $200x. Assume that FP sells the
stock of FS to a qualified foreign pension
fund. If FS were treated as a qualified
controlled entity and FS later sold the US-
RPI for $200x, neither FP nor FS would
be subject to tax under section 897 on the
$120x gain attributable to its investment
in the USRPI, even though the gain ac-
crued while FS was owned by FP. Simi-
lar issues could arise with entities treated
as part of an organization or arrangement
that is a qualified foreign pension fund.
To address the inappropriate avoidance
of section 897, the proposed regulations
provide that a qualified holder does not in-
clude any entity or governmental unit that,
at any time during the testing period, de-
termined without regard to this limitation,
was not a qualified foreign pension fund, a
part of a qualified foreign pension fund, or
a qualified controlled entity. For this pur-
pose, the testing period generally means
the shortest of (i) the period beginning
on the date that section 897(l) became ef-
fective (December 18, 2015), and ending
on the date of a disposition described in
section 897(a) or a distribution described
in section 897(h), (ii) the ten-year period
ending on the date of the disposition or
the distribution, or (iii) the period during
which the entity (or its predecessor) was
in existence. This limitation does not

Bulletin No. 2019–26 1353 June 24, 2019
apply to an entity or governmental unit
that did not own a USRPI as of the date
it became a qualified controlled entity, a
qualified foreign pension fund, or part of a
qualified foreign pension fund.
C. Organizations or arrangements
Section 897(l)(2) provides that a qual-
ified foreign pension fund may include
any “trust, corporation, or other orga-
nization or arrangement” that satisfies
certain requirements. Congress intended
the term “arrangement” to be a flexible
term that accommodates a broad range of
structures. See STAFF OF THE JOINT
COMM. ON TAX’N, General Explana-
tion of Tax Legislation Enacted in 2015
(JCS-1-16) (General Explanation) 283, n.
967 (2016) (“Foreign pension funds may
be structured in a variety of ways, and
may comprise one or more separate enti-
ties. The word ‘arrangement’ encompass-
es such alternative structures.”).
Several comments submitted in re-
sponse to the updated section 1445 reg-
ulations described the multiple ways that
foreign retirement and pension systems
— particularly those that are administered
entirely or in part by a foreign government
— could be organized. The comments de-
scribed structures involving multiple enti-
ties, one or more accounts on government
balance sheets, foreign legal structures,
and a combination of the foregoing. Al-
though such pension and retirement plans
are often not organized as a single trust or
corporation, the organizations or arrange-
ments, when viewed as a whole, may sat-
isfy the requirements set forth in section
897(l)(2). Based on the General Expla-
nation’s indication that foreign pension
funds may be structured in a variety of
ways, and may be comprised of separate
entities, the comments recommended that
the proposed regulations permit a broad
range of alternative structures to be treat-
ed as a qualified foreign pension fund.
The Treasury Department and the IRS
have determined that the purpose of sec-
tion 897(l) is best served by permitting
a broad range of structures to be eligible
to be treated as a qualified foreign pen-
sion fund. Accordingly, the proposed
regulations provide that, for purposes of
section 897(l), the term “organization or
arrangement” means one or more trusts,
corporations, governmental units, or em-
ployers. The proposed regulations provide
that the term “governmental unit” means
any foreign government or part thereof,
including any person, body, group of per-
sons, organization, agency, bureau, fund,
instrumentality, however designated, of a
foreign government. The proposed regula-
tions include several examples illustrating
the application of the requirements of sec-
tion 897(l) and the proposed regulations
to different types of organizations and ar-
rangements, including organizations and
arrangements that include governmental
units.
The proposed regulations permit an
employer to be part of an organization or
arrangement to address cases in which an
employer is organized as an entity other
than a trust or corporation but operates as
part of an organization or arrangement to
provide pension or retirement benefits.
II. Requirements Applicable to a
Qualified Foreign Pension Fund
A. Created or organized
Section 897(l)(2)(A) and the proposed
regulations require that a qualified foreign
pension fund must be created or organized
under the law of a country other than the
United States. Comments indicated that
many foreign pension funds are created or
organized under the laws of states or polit-
ical subdivisions of a foreign country and
requested that the proposed regulations
clarify that those pension funds would
satisfy section 897(l)(2)(A). The Treasury
Department and the IRS agree that it is
appropriate to allow such foreign pension
funds to be considered qualified foreign
pension funds. Accordingly, the proposed
regulations provide that references to a
foreign country include references to a
state, province, or political subdivision of
a foreign country, subject to an exception
described in part II.E.4 of this Explanation
of Provisions.
B. Established to provide retirement or
pension benefits
Section 897(l)(2)(B) requires that an
eligible fund be established either (i) by
the country in which it is created or or-
ganized (or one or more political subdi-
visions thereof) to provide retirement or
pension benefits to participants or benefi-
ciaries that are current or former employ-
ees (including self-employed individuals),
or persons designated by such employees,
as a result of services rendered by such
employees to their employers; or (ii) by
one or more employers to provide retire-
ment or pension benefits to participants
or beneficiaries that are current or former
employees (including self-employed in-
dividuals) or persons designated by such
employees in consideration for services
rendered by such employees to such em-
ployers.
1. Pension Funds Eligible for Section
897(l)(2)(B)
Several comments requested that the
regulations clarify that multi-employer
pension funds and government-sponsored
public pension funds that provide pension
and pension-related benefits may satisfy
section 897(l)(2)(B). These comments are
consistent with the General Explanation,
which noted that “[m]ulti-employer and
government-sponsored public pension
funds that provide pension and pension-re-
lated benefits may still satisfy [section
897(l)(2)(B)]. For example, such pension
funds may be established for one or more
companies or professions, or for the gen-
eral working public of a foreign country.”
General Explanation at 283, n. 968.
The Treasury Department and the
IRS agree that it is appropriate to allow
such multi-employer pension funds and
government-sponsored public pension
funds to be considered qualified foreign
pension funds. Accordingly, the proposed
regulations provide that an eligible fund
must be established by either (i) the for-
eign country in which it is created or or-
ganized to provide retirement or pension
benefits to participants or beneficiaries
that are current or former employees or
persons designated by such employees
as a result of services rendered by such
employees to their employers, or (ii) one
or more employers to provide retirement
or pension benefits to participants or ben-
eficiaries that are current or former em-
ployees or persons designated by such
employees in consideration for services
rendered by such employees to such em-
ployers.

June 24, 2019 1354 Bulletin No. 2019–26
Under the proposed regulations, qual-
ified recipients generally include persons
eligible to participate in the retirement or
pension plan. Therefore, with respect to an
eligible fund established by one or more
employers, the term “qualified recipient”
includes a current or former employee or
any person designated by such current or
former employee to receive qualified ben-
efits. With respect to an eligible fund es-
tablished by a foreign country to provide
qualified benefits to qualified recipients as
a result of services rendered by such quali-
fied recipients to their employers, the term
includes any person eligible to be treated
as a participant or beneficiary of such el-
igible fund and any person designated by
such person to receive qualified benefits.
In response to comments, the proposed
regulations provide that a person is treated
as designating another person to receive
qualified benefits if such other person
is entitled to receive benefits under the
contractual terms applicable to the eligi-
ble fund or under the laws of the foreign
country in which the eligible fund is cre-
ated or organized, whether or not the first
person expressly designated such person
as a beneficiary.
In response to comments, the proposed
regulations clarify that a retirement or
pension fund that is organized by a trade
union, professional association, or similar
group may be treated as a qualified foreign
pension fund by providing that an eligible
fund is treated as established by any em-
ployer that funds, in whole or in part, the
eligible fund. In addition, the proposed
regulations clarify that, for purposes of
the requirement in section 897(l)(2)(B), a
self-employed individual is treated as both
an employer and an employee.
2. Benefits Other than Retirement or
Pension Benefits
Comments noted that many foreign
pension funds provide a limited amount
of other benefits, including death, disabil-
ity, survivor, medical, unemployment, and
similar benefits, to participants and ben-
eficiaries. Comments requested guidance
on whether a qualified foreign pension
fund could provide certain benefits oth-
er than retirement and pension benefits,
and whether there is any limitation on the
amount of those benefits that a qualified
foreign pension fund may provide to par-
ticipants and beneficiaries. Some com-
ments recommended that the proposed
regulations set forth a specific limitation
on the percentage of benefits other than
retirement or pension benefits that a qual-
ified foreign pension fund may provide,
while other comments recommended a
facts and circumstances test or another
subjective standard.
The Treasury Department and the IRS
have determined that section 897(l) was
not intended to exclude common foreign
pension arrangements that provide a rel-
atively small amount of ancillary bene-
fits to participants and beneficiaries. The
Treasury Department and the IRS have
also determined that a specific limit on
the percentage of ancillary benefits that a
qualified foreign pension fund may pro-
vide to its participants and beneficiaries
is more administrable and provides more
certainty to taxpayers than a subjective
standard. Accordingly, the proposed reg-
ulations require that all of the benefits that
an eligible fund provides are qualified
benefits to qualified recipients, and that
at least 85 percent of the present value
of the qualified benefits that the eligible
fund reasonably expects to provide in
the future are retirement or pension ben-
efits. For this purpose, qualified benefits
include retirement, pension, or ancillary
benefits. The proposed regulations define
ancillary benefits as benefits payable upon
the diagnosis of a terminal illness, death
benefits, disability benefits, medical ben-
efits, unemployment benefits, or similar
benefits. The Treasury Department and
the IRS request comments on whether the
regulations should also define retirement
or pension benefits (for example, with ref-
erence to whether there are penalties for
early withdrawals).
3. Insuring Qualified Benefits and
Similar Activities
One comment requested that the pro-
posed regulations provide that an eligible
fund may be treated as a qualified foreign
pension fund if it is established by a for-
eign government to provide qualified ben-
efits to qualified recipients (directly or
indirectly) in the event that one or more
qualified foreign pension funds that are
created or organized in the same foreign
country are unable to satisfy their liabili-
ties with respect to the provision of qual-
ified benefits to their own qualified recip-
ients. Although the proposed regulations
do not expressly address such plans, the
proposed regulations do not differentiate
between plans that are primarily responsi-
ble for the provision of qualified benefits
to qualified recipients, on the one hand,
and plans that are secondarily responsi-
ble for the provision of qualified benefits
to qualified recipients, on the other hand.
Therefore, whether a plan is established
to provide qualified benefits to qualified
recipients is determined without regard to
whether such plan has primary responsi-
bility to provide qualified benefits to qual-
ified recipients or rather is established to
provide the qualified benefits to qualified
recipients only in the event of the default
of one or more other plans.
C. Five percent limitation
Consistent with section 897(l)(2)(C),
the proposed regulations provide that a
qualified foreign pension fund may not
have a single participant or beneficiary
with a right to more than five percent of
its assets or income (the five-percent lim-
itation). Comments submitted in response
to the updated section 1445 regulations
indicated that it would be appropriate for
the proposed regulations to include attri-
bution rules to prevent a single individual
from using related parties to circumvent
the five-percent limitation. The Treasury
Department and the IRS agree with the
comments. Accordingly, the proposed
regulations provide that, for purposes of
applying the five percent limitation, an in-
dividual is considered to have a right to
the assets and income of an eligible fund
to which any person who bears a relation-
ship to the individual described in section
267(b) or section 707(b) has a right.
One comment requested guidance on
calculating a participant or beneficiary’s
entitlement to the assets and income of a
qualified foreign pension fund for purpos-
es of applying the five-percent limitation.
In light of the complexity that any such
rule would entail and the relatively few
cases in which it would be expected to ap-
ply, the proposed regulations do not pro-
vide specific rules regarding the computa-
tion of the five-percent limitation. Instead,

Bulletin No. 2019–26 1355 June 24, 2019
this determination should be made based
on the underlying facts and circumstances
of each case.
D. Regulation and information
reporting
Section 897(l)(2)(D) and the proposed
regulations set forth two requirements for
a qualified foreign pension fund. First, a
qualified foreign pension fund must be
subject to government regulation (“regu-
lation requirement”). Second, a qualified
foreign pension fund must provide annual
information about its beneficiaries to the
relevant tax authorities in the country in
which it is established or operates, or such
information must otherwise be available
to those authorities (“information require-
ment”). Several comments requested that
the proposed regulations set forth the spe-
cific information that must be provided or
otherwise made available pursuant to the
information requirement in section 897(l)
(2)(D). The proposed regulations adopt
the recommendation included in several
comments by providing that an eligible
fund is treated as satisfying the informa-
tion requirement only if the eligible fund
annually provides to the relevant tax au-
thorities in the foreign country in which
it is established or operates the amount of
qualified benefits provided to each quali-
fied recipient by the eligible fund (if any),
or such information is otherwise available
to those authorities. An eligible fund is not
treated as failing to satisfy the information
requirement if the eligible fund is not re-
quired to provide information to the rele-
vant tax authorities in a year in which no
qualified benefits are provided to qualified
recipients. The Treasury Department and
the IRS request comments as to whether
the final regulations should permit other
types of information to satisfy the infor-
mation requirement.
Several comments indicated that for-
eign government-sponsored retirement
and pension plans frequently are not sub-
ject to substantial information reporting
and regulation compared with private for-
eign pension or retirement plans, in part
because the government administers the
pension or retirement program itself. The
comments recommended that the proposed
regulations treat a government-sponsored
retirement or pension plan as automatical-
ly satisfying both the regulation and in-
formation requirements of section 897(l)
(2)(D). The Treasury Department and
the IRS agree that, when a government
administers a pension or retirement plan
itself, the requirements of section 897(l)
(2)(D) are effectively satisfied because the
government has control over the program
and access to the information about the
program’s beneficiaries. Accordingly, the
proposed regulations generally provide
that an eligible fund that is administered
by one or more governmental units, oth-
er than in its capacity as an employer, is
deemed to satisfy the requirements of sec-
tion 897(l)(2)(D).
Comments noted that many foreign
pension funds must provide information
to one or more governmental bodies in the
country in which the foreign retirement or
pension fund is organized, including agen-
cies that are specifically responsible for
regulating pensions. In many cases, those
governmental bodies may be distinct from
the tax authority in that foreign country.
In light of the wide range of foreign infor-
mation reporting regimes that may apply
to an eligible fund, the Treasury Depart-
ment and the IRS agree that a flexible rule
is necessary and appropriate to carry out
the purposes of section 897(l). According-
ly, the proposed regulations provide that
an eligible fund is treated as satisfying the
information requirement of section 897(l)
(2)(D) if the eligible fund is required, pur-
suant to the laws of the foreign country
in which it is established or operates, to
provide the required information to one
or more governmental units of the foreign
country in which the eligible fund is cre-
ated or organized, or if such information
is otherwise available to one or more gov-
ernmental units of the foreign country in
which the eligible fund is created or or-
ganized.
E. Foreign tax treatment
Section 897(l)(2)(E) and the proposed
regulations provide that, to be a qualified
foreign pension fund, the laws of the for-
eign country in which the eligible fund is
established or operates must provide that
either (i) contributions to the eligible fund
that would otherwise be subject to tax un-
der such laws are deductible or excluded
from the gross income of the eligible fund
or taxed at a reduced rate, or (ii) taxation
of any investment income of the eligible
fund is deferred or such income is exclud-
ed from the gross income of the eligible
fund or is taxed at a reduced rate.
1. Countries with No Income Tax
Comments requested clarification that
an eligible fund may qualify for the ex-
emption in section 897(l) if it is created
or organized in a country that does not
have an income tax. The Treasury Depart-
ment and the IRS have determined that the
purposes of section 897(l) would not be
served by limiting the availability of the
exemption to eligible funds organized in
jurisdictions with an income tax. Accord-
ingly, the proposed regulations provide
that an eligible fund is treated as satisfy-
ing the requirement of section 897(l)(2)
(E) if the eligible fund is established and
operates in a foreign country that has no
income tax.
2. Degree of Reduction
Comments noted that an eligible fund
that otherwise satisfies section 897(l)(2)
(E) may be subject to current income tax
at ordinary rates with respect to a rela-
tively small portion of its income or gain.
The comments requested guidance on the
percentage of income or contributions
that must be eligible for preferential tax
treatment in order for an eligible fund to
satisfy section 897(l)(2)(E). Other com-
ments requested guidance on the extent
to which ordinary income tax rates must
be reduced under section 897(l)(2)(E).
To address these comments, the proposed
regulations provide that an eligible fund
is treated as satisfying the requirement of
section 897(l)(2)(E) in a taxable year if,
under the income tax laws of the foreign
country in which the eligible fund is es-
tablished or operates, at least 85 percent
of the contributions to the eligible fund
are deductible or excluded from the gross
income or taxed at a reduced rate, or tax
on at least 85 percent of the investment
income of the eligible fund is deferred
or taxed at a reduced rate (including by
excluding such investment income from
gross income). The 85 percent threshold
was chosen based on the best judgment
of the Treasury Department and the IRS,

June 24, 2019 1356 Bulletin No. 2019–26
and is consistent with suggestions from
commenters for an appropriate threshold
in an analogous context in the proposed
regulations (namely, for the percentage of
benefits provided by an eligible fund that
must be retirement or pension benefits as
opposed to ancillary benefits), but is not
based on any specific quantitative analy-
sis. The Treasury Department and the IRS
request additional comments regarding
whether the 85 percent threshold is appro-
priate and especially solicit comments that
provide data, other evidence, and models
that can enhance the rigor of the process
by which such threshold is determined.
3. Other Preferential Regimes
Comments requested that the proposed
regulations provide that the requirement
of section 897(l)(2)(E) may be satisfied if,
under the income tax law of the country
in which an eligible fund is established
or operates, an eligible fund is subject to
a preferential tax regime that is, in sub-
stance, equivalent to the type of deduc-
tions or exclusions specifically described
in section 897(l)(2)(E). For example, one
comment described a preferential regime
in which certain eligible funds taxable as
insurance companies are entitled to re-
serve deductions designed to effectively
exclude from gross income investment
income earned by the eligible funds. The
Treasury Department and the IRS agree
that the purposes of section 897(l) are best
served by accommodating a broad range
of preferential tax regimes applicable to
retirement or pension funds. Therefore,
the proposed regulations provide that an
eligible fund that is not specifically sub-
ject to the tax treatment described in sec-
tion 897(l)(2)(E) is nonetheless treated
as satisfying the requirement of section
897(l)(2)(E) if the eligible fund establish-
es that it is subject to a preferential tax re-
gime due to its status as a retirement or
pension fund, and that the preferential tax
regime has a substantially similar effect as
the specific tax treatment described in sec-
tion 897(l)(2)(E).
4. Subnational Tax Exemptions
One comment requested that the pro-
posed regulations provide that preferential
treatment with respect to a tax levied by
a state, province, or political subdivision
(sub-national tax) be sufficient to satisfy
the requirement of section 897(l)(2)(E).
The Treasury Department and the IRS
have determined that the exemption in
section 897(l) was not intended to benefit
foreign persons that fail to benefit from an
exemption from an otherwise applicable
national income tax. Sub-national taxes
generally constitute a minor component of
an entity’s overall tax burden in a foreign
jurisdiction and therefore it would not be
appropriate to allow preferential treatment
with respect to sub-national taxes to satis-
fy the requirement of section 897(l)(2)(E)
when such preference had only a minimal
impact on reducing the fund’s overall tax
burden. Accordingly, the proposed regula-
tions do not adopt this recommendation,
and, to the contrary, provide that for pur-
poses of section 897(l)(2)(E), references
to a foreign country do not include refer-
ences to a state, province, or political sub-
division of a foreign country.
F. Application to organizations and
arrangements
The proposed regulations provide rules
on the application of the requirements de-
scribed in section 897(l)(2) to an eligible
fund that is an organization or arrange-
ment.
1. Single Entity Treatment
The proposed regulations provide that
an eligible fund that is an organization or
arrangement is treated as a single entity
to determine whether the requirements
of section 897(l)(2) are satisfied. Not-
withstanding the foregoing, the proposed
regulations provide that each person or
governmental unit that is part of an organi-
zation or arrangement must independently
satisfy the requirement of section 897(l)
(2)(A), such that each component of the
organization or arrangement must be cre-
ated or organized under the law of a coun-
try other than the United States.
2. Relevant Income and Assets
As noted in several comments, an el-
igible fund may be organized in various
ways. For example, an eligible fund may
be comprised of multiple entities and gov-
ernmental bodies, one or more of which
may conduct activities that are unrelated
to the provision of retirement or pension
benefits. Applying certain requirements
of section 897(l)(2) to an eligible fund re-
quires identifying the specific assets and
income of an organization or arrangement
that must be tested under the proposed
regulations. For instance, under the pro-
posed regulations, an organization or ar-
rangement may include a pension system
in which a private employer provides
pension benefits to its employees that are
funded by the investments of a separate
entity, such as a pension trust organized by
a foreign government. Assets and income
of the private employer that do not fund
the provision of pension benefits would
generally not be relevant to determining
whether the organization or arrangement
satisfies the requirements of section 897(l)
(2) and the proposed regulations. For in-
stance, income of the employer generally
would not be subject to preferential tax
treatment, and the assets of the employer
not used to fund the provision of pension
benefits would not be relevant for purpos-
es of applying the five percent limitation
in section 897(l)(2)(C).
Accordingly, the proposed regulations
generally provide that the determination
as to whether an eligible fund satisfies the
requirements of section 897(l)(2) is made
solely with respect to income and assets
held by the eligible fund in one or more
qualified segregated accounts, the quali-
fied benefits funded by the qualified seg-
regated accounts, the information report-
ing and regulation related to the qualified
segregated accounts, and the qualified
recipients whose benefits are funded by
the qualified segregated accounts. For this
purpose, all qualified segregated accounts
maintained by an eligible fund are treated
as a single qualified segregated account.
G. Coordination with definition of
a pension fund under U.S. income
tax treaties
Comments requested that the pro-
posed regulations provide that an entity
that qualifies as a pension fund or scheme
under a U.S. income tax treaty or as an
exempt beneficial owner under an inter-
governmental agreement (IGA) is treated
as a qualified foreign pension fund under

Bulletin No. 2019–26 1357 June 24, 2019
section 897(l). The statute is clear that an
exemption from section 897(a) is allowed
only for entities meeting the definition of
a “qualified foreign pension fund.” There
is no indication in the legislative histo-
ry that Congress intended the Treasury
Department and the IRS to expand the
exemption to entities that met the defini-
tion of a pension fund under a U.S. in-
come tax treaty or IGA. Furthermore, the
definitions of pension fund under a U.S.
income tax treaty or IGA were designed
with policy goals that are unrelated to
section 897, and therefore pension funds
as defined in those agreements are not
necessarily the types of entities for which
an exemption from section 897(a) is ap-
propriate. Thus, a foreign pension fund
that qualifies for other benefits under an
income tax treaty or IGA must make a
separate determination as to whether it
is a qualified foreign pension fund under
section 897(l)(2).
III. Withholding Rules
Comments requested clarification re-
garding the documentation a qualified
foreign pension fund should provide to
a transferee or partnership to claim an
exemption under section 897(l) and re-
quested a form for this purpose. Com-
ments suggested modifying existing
forms, such as Form W-8EXP, Certif-
icate of Foreign Government or Other
Foreign Organization for United States
Tax Withholding and Reporting, for
this purpose. Comments also requested
clarification regarding the reporting and
withholding responsibilities of transfer-
ees and partnerships that receive docu-
mentation from a qualified foreign pen-
sion fund.
In response to comments, the IRS in-
tends to revise Form W-8EXP to permit
qualified holders to certify their status
under section 897(l). Prior to the release
of revised Form W-8EXP, a certificate of
non-foreign status described in §1.1445-
5(b)(3) may be used for purposes of both
section 1445 and section 1446. In addition
to permitting withholding agents and part-
nerships to rely on revised Form W-8EXP,
the proposed regulations also integrate the
new exception for qualified holders into
existing reporting regimes as described
below.
A. Withholding under section 1445
1. Withholding on Dispositions of
USRPIs Under Section 1445(a)
Section 1445(a) requires a transferee
to withhold 15 percent of the amount re-
alized on any disposition of a USRPI by
a foreign person. Section 1445(b)(2) pro-
vides that no withholding is required if
the transferor furnishes to the transferee
a certificate of non-foreign status. Section
1445(f)(3)(B) provides that for purposes
of section 1445, the term “foreign person”
generally does not include an entity de-
scribed in section 897(l)(1). The proposed
regulations revise the updated section
1445 regulations to utilize the definitions
in proposed §1.897(l)-1(d) and permit a
qualified holder to certify that it is exempt
from withholding under section 1445 by
providing a certificate of non-foreign sta-
tus to a withholding agent. The proposed
regulations provide that a qualified hold-
er may provide a Form W-8EXP for this
purpose, but the transferee, at its option,
may request a certification of non-foreign
status or Form W-8EXP. Consistent with
the approach of current §1.1445-2(b)(1)
(permitting a transferee to request docu-
mentation satisfactory to the transferee),
the transferee may withhold under section
1445 if the requested certification is not
provided and will be considered to have
been required to withhold for purposes of
sections 1461 through 1463.
A transferee must report transactions
subject to section 1445(a) using Form
8288, U.S. Withholding Tax Return for
Dispositions by Foreign Persons of U.S.
Real Property Interests, and Form 8288-A,
Statement of Withholding on Dispositions
by Foreign Persons of U.S. Real Property
Interests. §1.1445-1(c). However, because
a transferee may treat a qualified holder as
not foreign, the transferee is not required
to file Form 8288 or Form 8288-A but is
subject to the retention and reliance rules
generally applicable to certificates of
non-foreign status. See § 1.1445-2(b)(3).
2. Withholding on Certain Distributions
Under Section 1445(e)
Certain distributions and other transac-
tions involving domestic or foreign cor-
porations, partnerships, trusts, and estates
can give rise to a withholding requirement
under section 1445(e). However, an entity
or fiduciary is not required to withhold un-
der section 1445(e) with respect to a distri-
bution or transfer to an interest holder that
is not a foreign person. Consistent with
the changes to the documentation require-
ments under section 1445(a), the proposed
regulations provide that a qualified holder
may provide a certificate of non-foreign
status or a revised Form W-8EXP to certi-
fy its status as a qualified holder. Although
providing such documentation will relieve
the entity or fiduciary from withholding
obligations under section 1445(e), any
otherwise applicable reporting require-
ments (for example, reporting required
on Form 1042-S, Foreign Person’s U.S.
Source Income Subject to Withholding)
remain applicable.
B. Withholding under section 1446
A partnership determines whether it
must withhold tax under section 1446
by first determining whether it has any
foreign partners, and, if it does have for-
eign partners, by determining whether it
has ECTI allocable under section 704 to
any of its foreign partners. §1.1446-1(b).
A partner that is treated as a U.S. person
only for certain specified purposes is con-
sidered a foreign partner for purposes of
section 1446. §1.1446-1(c)(1). Accord-
ingly, a qualified holder is treated as a
foreign partner for purposes of section
1446. However, the proposed regulations
generally provide that any gain from the
disposition of a USRPI, or distribution re-
ceived from a QIE, that is not otherwise
treated as effectively connected with a
trade or business in the United States will
not be treated as ECTI subject to section
1446 withholding to the extent allocable
to a qualified holder.
A partnership may rely on a valid Form
W-8 submitted for purposes of section
1441 or section 1442 to establish a part-
ner’s foreign status. §1.1446-1(c)(2)(ii).
The proposed regulations update the de-
scription of withholding certificates appli-
cable to each type of partner by permitting
a partnership to rely on Form W-8EXP
both to determine a partner’s foreign sta-
tus and, as appropriate, to exclude any
gain from the disposition of a USRPI,
including any distribution treated as gain

June 24, 2019 1358 Bulletin No. 2019–26
from the disposition of a USRPI under
section 897(h), from the determination of
such partner’s allocable share of ECTI. A
partnership may also rely on a certificate
of non-foreign status to treat a partner as a
qualified holder.
The proposed regulations do not mod-
ify general reporting requirements ap-
plicable to partnerships. For example, a
partnership required to file a partnership
return for a taxable year “shall furnish to
every person who was a partner” a state-
ment of the partner’s distributive share of
income, gain, loss, deduction, or credit.
§1.6031(b)-1T. The requirement applies
regardless of whether the partner is do-
mestic or foreign. As a result, a partner-
ship that is required to file Form 1065,
U.S. Return of Partnership Income, and
accompanying schedules must report in-
come allocable to a qualified holder on
Schedule K-1, Partner’s Share of Income,
Deductions, Credit, etc., notwithstanding
that such income is exempt from section
897.
C. Coordination with sections 1441 and
1442
Sections 1441 and 1442 require with-
holding agents to deduct and withhold a
30 percent tax on payments of U.S. source
fixed or determinable, annual or periodi-
cal income to foreign persons, including
a U.S. source corporate distribution de-
scribed in section 301(c)(1). A corporate
distribution described in section 301(c)(2)
or (c)(3) that is not subject to withhold-
ing under section 1441 or section 1442
(for example, because the distributing
corporation made the election described
in §1.1441-3(c)(1)) may nonetheless be
subject to withholding under section 1445
if the distributing corporation is a USR-
PHC or QIE. Section 1.1441-3(c)(4)(i)(A)
and a similar rule in §1.1441-3(c)(4)(i)
(C) coordinate withholding under sections
1441 and 1445 with respect to distribu-
tions from USRPHCs and QIEs. Because
a qualified holder is treated as foreign for
purposes of section 1441 but not for pur-
poses of section 1445, distributions that
would otherwise be subject to the coor-
dination rule should be subject exclusive-
ly to section 1441 if made to a qualified
holder. Accordingly, the proposed regula-
tions provide that distributions made by a
USRPHC or QIE to a qualified holder are
not subject to the coordination rules under
§ 1.1441-3(c)(4) and instead are subject
only to the requirements of section 1441.
IV. Applicability Dates
The proposed regulations are generally
proposed to apply with respect to dispo-
sitions of USRPIs and distributions de-
scribed in section 897(h) occurring on or
after the date of publication of the Treasury
decision adopting these rules as final reg-
ulations in the Federal Register. However,
proposed §§1.897(l)-1(b)(1), 1.897(l)-
1(d)(5), 1.897(l)-1(d)(7), 1.897(l)-1(d)(9),
1.897(l)-1(d)(11), and 1.897(l)-1(d)(14)
are proposed to apply with respect to dis-
positions of USRPIs and distributions de-
scribed in section 897(h) occurring on or
after June 6, 2019. See section 7805(b)(1)
(B). These provisions contain definitions
that prevent a person that would otherwise
be a qualified holder from claiming the
exemption under section 897(l) in situa-
tions where the exemption may inure, in
whole or in part, to the benefit of a per-
son other than a qualified recipient. See
Section I.B.6 of this Explanation of Pro-
visions. The Treasury Department and the
IRS have determined that an immediate
applicability date under section 7805(b)
(1)(B) is appropriate for these provisions
in order to address transactions that are
inconsistent with the purposes of section
897(l) that may occur before these rules
are adopted as final regulations.
A taxpayer may rely on the proposed
regulations with respect to dispositions or
distributions occurring on or after Decem-
ber 18, 2015, and prior to the applicability
date of the final regulations, if the taxpay-
er consistently and accurately complies
with the rules in the proposed regulations.
Special Analyses
I. Regulatory Planning and Review —
Economic Analysis
Executive Orders 13563 and 12866
direct agencies to assess costs and ben-
efits of available regulatory alternatives
and, if regulation is necessary, to select
regulatory approaches that maximize net
benefits, including potential economic,
environmental, public health and safety
effects, distributive impacts, and equity.
Executive Order 13563 emphasizes the
importance of quantifying both costs and
benefits, of reducing costs, of harmoniz-
ing rules, and of promoting flexibility.
These proposed regulations have been
designated as a significant regulatory ac-
tion by the Office of Management and
Budget’s Office of Information and Reg-
ulatory Affairs (“OIRA”) and subject to
review under Executive Order 12866 pur-
suant to the Memorandum of Agreement
(April 11, 2018) between the Treasury
Department and the Office of Manage-
ment and Budget regarding review of tax
regulations.
A. Background
Section 897, more commonly known as
the Foreign Investment in Real Property
Tax Act (“FIRPTA”), was enacted in 1980
due to concerns that the Code provided
foreign persons an advantage in investing
in U.S. real property interests (USRPI)
over U.S. taxpayers because, unlike U.S.
taxpayers, foreigners were not subject to
U.S. capital gains tax on dispositions of
USRPI. Under FIRPTA, when a foreign
person sells USRPI, any gain on the sale
generally is subject to U.S. income tax.
Section 897(l), enacted in 2015 in the
Protecting Americans from Tax Hikes Act
(“PATH Act”), exempts qualified foreign
pension funds (“QFPFs”) from tax under
FIRPTA on gain from the sale of USRPI,
the so-called “foreign pension fund ex-
emption.” Such an exemption has the ef-
fect of encouraging foreign pension fund
investment in the United States (through
investment in real property) and, in gen-
eral, provides consistent tax treatment
between foreign pension funds and U.S.
pension funds, which normally are not
taxed at the entity level. This exemption
is the subject of the proposed regulations.
The foreign pension fund exemption
also affects a related withholding tax
levied under section 1445 on the sale of
USRPI to help enforce payment of the tax
owed by reason of section 897. The rate
for this withholding is 15 percent of gross
sales. In cases where the gross withholding
tax would exceed the tax owed on the net
capital gains, foreigners typically request
and receive approval for reduced rates of
gross withholding tax. If withholding is

Bulletin No. 2019–26 1359 June 24, 2019
excessive or insufficient relative to tax
owed on the net capital gains, the differ-
ence is made up on the foreigner’s U.S.
tax return. Thus, guidance that governs the
foreign pension fund exemption addition-
ally necessitates guidance over the with-
holding tax.
IRS tax data for 2015 and 2016 show
an average of approximately 160 foreign
pension funds earning income from U.S.
real property. Only a fraction of these
funds are likely to sell or transfer USRPI
in any given year.
B. The need for proposed regulations
Comments received indicate that some
foreign pension funds have refrained from
investment in U.S. real property, including
infrastructure projects, due to ambiguities
over their qualification for the foreign
pension fund exemption. Affected parties
have provided a number of comments re-
questing clarifications of the statutes. The
Treasury Department and the IRS have
determined that such comments warrant
the issuance of further guidance. The pro-
posed regulations do not specifically aim
to increase or decrease foreign pension
fund investment in the U.S. Instead, they
aim to provide guidance such that invest-
ment can be made on an efficient basis
consistent with the intents and purposes of
the statute.
C. Summary of proposed regulations
The regulations clarify and modify the
conditions under which foreign pension
funds are exempt from taxation under sec-
tion 897. In plain language, the proposed
regulations provide further clarity over (a)
the entities and organizational structures
that are eligible for the foreign pension
fund exemption; (b) the nature of the ben-
efits, beneficiaries, and foreign taxation
of eligible funds; and (c) the documenta-
tion rules that apply to exemptions from
withholding taxes otherwise required by
sections 1445 (these exemptions from
withholding taxes flow from the foreign
pension fund exemption from tax under
section 897). In addition, the proposed
regulations provide rules to prevent the
inappropriate avoidance of FIRPTA by
imposing conditions on the sale of certain
investment vehicles wholly owned by a
foreign pension fund.
D. Economic analysis
1. Baseline
The Treasury Department and the IRS
have assessed the benefits and costs of the
proposed regulations relative to a no-ac-
tion baseline reflecting anticipated Feder-
al income tax-related behavior in the ab-
sence of these proposed regulations.
2. Summary of Economic Effects
In general, a tax system that prioritizes
minimization of distortions aims to treat
income earned by similar economic activ-
ities similarly, subject to considerations
of compliance burden and tax administra-
bility and to the intents and purposes of
Congress. The proposed guidance adheres
to this principle. In plain language, sec-
tion 897(l) exempts certain foreign pen-
sion funds from tax under FIRPTA, and
the proposed guidance qualifies the terms
of this exemption by further defining the
permissible activities, ownership patterns,
and other economic decisions undertaken
by foreign pension funds. Such guidance
helps ensure that the tax system does not
favor or disfavor particular QFPF activi-
ties over economically similar QFPF ac-
tivities, a requirement for an economically
efficient tax system conditional on the un-
derlying Code.
As a result of the added clarity and re-
duced compliance burdens relative to the
baseline, the proposed regulations have
the effect of providing more efficient in-
vestment incentives, relative to the base-
line and in light of the intents and purpos-
es of the statute. The Treasury Department
and the IRS have not estimated the effects
of the proposed regulations on the U.S.
economy.
3. Economic Analysis of Specific
Provisions
The Treasury Department and the IRS
identified four provisions in the proposed
regulations for which economic analysis
might play a meaningful role in select-
ing the form of the regulations. This part
I.D.2 of this Special Analyses describes
this analysis. The Treasury Department
and the IRS solicit comments on the eco-
nomics of each of the items discussed
subsequently and of any other items of
the proposed regulations not discussed in
this section. The Treasury Department and
the IRS particularly solicit comments that
provide data, other evidence, or models
that could enhance the rigor of the process
by which provisions might be developed
for the final regulations.
a. Investing in USRPI directly and
using pooled investment vehicles
Foreign pension funds often hold USR-
PI indirectly through intermediate entities,
including entities with multiple foreign
pension fund owners. While the statute
contains language stating that an entity
wholly owned by a QFPF is itself a QFPF,
section 897(l) is silent on whether the
entity must be wholly owned by a single
QFPF (or, alternatively, may be wholly
owned by multiple QFPFs).
Because the economic incentives faced
by foreign pension funds under these
various ownership structures regarding
investment in USRPI are similar to the
incentives faced by QFPFs with simpler
structures, the Treasury Department and
the IRS have determined that it would be
consistent with the intents and purposes
of the statute and minimize the potential
for distortionary choices for them to be
eligible for the foreign pension fund ex-
emption. Thus, the proposed regulations
explicitly allow indirect investments and
pooled investments to qualify for the ex-
emption. The Treasury Department and
the IRS considered alternative guidance
that was more restrictive than the proposed
regulations but, under that alternative, for-
eign pension funds could avail themselves
of an exemption only on a more restricted
set of U.S. investment options and would
be denied the exemption on economically
similar investments, a situation that would
generally lead to an economically inferior
outcome.
b. Avoidance through use of foreign
subsidiary
A foreign person that is not a quali-
fied foreign pension fund (“non-QFPF”)
that holds USRPI directly would be taxed

June 24, 2019 1360 Bulletin No. 2019–26
under FIRPTA if the non-QFPF sells the
USRPI. If the non-QFPF instead holds
USRPI indirectly through a foreign sub-
sidiary, the non-QFPF can sell the foreign
subsidiary without taxation under section
897, but, in that case, the unrealized gain
in the USRPI would remain potentially
subject to tax under FIRPTA on dispo-
sition of the USRPI. Absent a provision
to the contrary in the proposed regula-
tions, if the non-QFPF instead sells the
foreign subsidiary to a QFPF, the QFPF
could cause the foreign subsidiary to sell
the USRPI immediately (or in the future)
without incurring tax under section 897,
thus eliminating the taxation (or potential
for future taxation) of gain in the USRPI.
As a result, subject to other provisions
and judicial doctrines (for example, the
step transaction doctrine and the eco-
nomic substance doctrine), a QFPF could
be used as a conduit for a non-QFPF to
sell a USRPI to a purchaser without in-
curring (or preserving) tax under section
897 on the unrealized gain of the seller.
The Treasury Department and the IRS
project that such activity would reduce
U.S. tax revenue and would not result in
an accompanying economic benefit to the
U.S. economy.
To curtail this tax avoidance, the pro-
posed regulations provide a transitory
restriction on exemption when a foreign
subsidiary that owns USRPI is purchased
by a QFPF or qualified controlled entity
(“QCE”) of a QFPF from a non-QFPF or
a foreign person that is not a QCE. This
transitory restriction, referred to as a test-
ing period, is described in full in part I.B.6
of the Explanation of Provisions of the
Preamble. Among other criteria, under the
proposed regulations the foreign pension
fund exemption generally is not available
for gain recognized by an entity from the
disposition of a USRPI if such entity was
not a QFPF or QCE at any time during the
10-year period prior to the recognition of
that gain.
The Treasury Department and the IRS
considered as an alternative requiring the
controlled entity acquired by the foreign
pension fund to account for the gain at the
time the entity was acquired by the foreign
pension fund (known as mark-to-market)
or requiring tracking of the unrealized
gain at the time of sale to a QFPF or QCE
for later recognition and also considered,
under the testing period approach, dif-
ferent lengths for that component of the
testing period. The mark-to-market or
tracking approaches impose greater com-
pliance and administrative costs relative
to the testing period approach without
providing any accompanying general eco-
nomic benefit.
The Treasury Department and the IRS
aim, through this testing period approach
and accompanying requirements, to min-
imize tax avoidance while facilitating
efficient foreign pension fund investment
in USRPI, consistent with the intents and
purposes of the statute. The Treasury De-
partment and IRS solicit comments on
this proposal, particularly comments that
provide data, other evidence, or mod-
els that could enhance the rigor of the
process by which anti-abuse provisions
might be developed for the final regula-
tions.
c. Ancillary benefits
Section 897(l) specifies, along with
other qualifications, that the exemption is
available to foreign entities that are “estab-
lished” to provide retirement or pension
benefits. However, many foreign pension
funds provide ancillary benefits such as
death, terminal health, disability, medical,
unemployment, and survivor benefits in
addition to retirement and pension bene-
fits. These funds may be reluctant to invest
in USRPI due to uncertainty over wheth-
er the fund meets this particular statutory
criterion.
The Treasury Department and the IRS
considered an option to deny the exemp-
tion to foreign pension funds that provide
any benefits other than retirement and
pension benefits. This option runs the risk
of effectively eliminating foreign pen-
sion fund investment in USRPI because
it would deny the exemption to foreign
pension funds no matter how close to 100
percent of their benefits were retirement
or pension related, or would require funds
that wanted to invest in the U.S. under
competitive conditions to undergo cost-
ly restructuring to eliminate or segregate
those benefits, if such options were even
feasible under the foreign country’s laws
and institutions. Both of these outcomes
are economically inefficient relative to the
proposed policies and the baseline because
relative to these options, they incentivize
socially costly tax avoidance choices and/
or overly restrict incrementally improving
market-driven choices.
The proposed regulations provide a
bright-line test limiting the amount of
ancillary benefits to 15 percent or lower.
Such threshold was chosen in part based
on suggestions from comments. The Trea-
sury Department and the IRS aim, through
the bright-line approach and this specific
percentage test, to facilitate foreign pen-
sion fund investment in the U.S. consis-
tent with the intents and purposes of the
statute. The Treasury Department and the
IRS solicit comments on this proposed
standard, and particularly solicit com-
ments that provide data, other evidence,
or models that could enhance the rigor of
the process by which the percentage lim-
itation might be developed for the final
regulations.
The Treasury Department and the IRS
recognize that the threshold approach may
result in a small number of foreign pension
funds oscillating between qualifying and
not qualifying on a year-to-year basis and
that such approach requires measurement
of ancillary benefits relative to retirement
and pension benefits. Thus, the Treasury
Department and the IRS further solicit
comments on alternatives to the threshold
approach and particularly solicit com-
ments that provide data, other evidence,
or models that could enhance the rigor of
the process by which the tax treatment of
foreign pension funds that provide ancil-
lary benefits might be developed for the
final regulations.
d. Determination of foreign tax
preference
Under the statute, to qualify for exemp-
tion a foreign pension fund must be sub-
ject to tax laws in the country in which the
fund is established or operates such that
contributions to the fund are deductible
or excluded from the gross income of the
fund or taxed at a reduced rate, or tax on
investment income of the fund is deferred
or that income is taxed a reduced rate.
To provide further specificity over
what qualifies as a preferential tax rate on
contributions to or income from the fund,
the Treasury Department and the IRS con-
sidered providing a substantive, analytical

Bulletin No. 2019–26 1361 June 24, 2019
information collections in the proposed
regulations. These numbers are there-
fore unrelated to the future calculations
needed to assess the burden imposed by
the proposed regulations. These burdens
have been reported for other regulations
related to the taxation of cross-border
income and the Treasury Department
and the IRS urge readers to recognize
that these numbers are duplicates and to
guard against overcounting the burden
that international tax provisions imposed
prior to the PATH Act.
III. Regulatory Flexibility Act
Pursuant to the Regulatory Flexibili-
ty Act (5 U.S.C. chapter 6), it is hereby
certified that the proposed rule will not
have a significant economic impact on a
substantial number of small entities within
the meaning of section 601(6) of the Reg-
ulatory Flexibility Act. This certification
is based on the fact that foreign entities
are not considered small entities. These
regulations will affect foreign pension
funds and not U.S. pension funds. In ad-
dition, based on comments received, the
foreign pension funds that are affected are
sovereign funds, which are not small en-
tities. Accordingly, a regulatory flexibility
analysis under the Regulatory Flexibility
Act is not required. Pursuant to section
7805(f), this notice of proposed rulemak-
ing has been submitted to the Chief Coun-
sel for Advocacy of the Small Business
Administration for comment on its impact
on small business.
IV. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates
Reform Act of 1995 requires that agencies
assess anticipated costs and benefits and
take certain other actions before issuing a
final rule that includes any Federal man-
date that may result in expenditures in any
one year by a state, local, or tribal govern-
ment, in the aggregate, or by the private
sector, of $100 million in 1995 dollars,
updated annually for inflation. In 2018,
that threshold is approximately $150 mil-
lion. This rule does not include any Fed-
eral mandate that may result in expendi-
tures by state, local, or tribal governments,
or by the private sector in excess of that
threshold.
V. Executive Order 13132: Federalism
Executive Order 13132 (entitled
“Federalism”) prohibits an agency from
publishing any rule that has federalism
implications if the rule either imposes
substantial, direct compliance costs on
state and local governments, and is not
required by statute, or preempts state law,
unless the agency meets the consultation
and funding requirements of section 6 of
the Executive Order. This proposed rule
does not have federalism implications,
does not impose substantial direct compli-
ance costs on state and local governments,
and does not preempt state law within the
meaning of the Executive Order.
Comments and Requests for Public
Hearing
Before these proposed regulations are
adopted as final regulations, consideration
will be given to any comments that are
submitted timely to the IRS as prescribed
in this Preamble under the “Addresses”
heading. The Treasury Department and
the IRS request comments on all aspects of
the proposed rules. All comments will be
available at www.regulations.gov or upon
request. A public hearing will be sched-
uled 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 hearing
will be published in the Federal Register.
Drafting Information
The principal authors of these pro-
posed regulations are Joshua Rabon, for-
merly with the Office of Associate Chief
Counsel (International), and Milton Cahn,
Office of Associate Chief Counsel (Inter-
national). However, other personnel from
the Treasury Department and the IRS par-
ticipated 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 is amended by adding entries to
read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.897(l)-1 also issued under 26
U.S.C. 897(l).
* * * * *
Par. 2. Section 1.897(l)-1 is added to
read as follows:
§1.897(l)-1 Exception for interests held
by foreign pension funds.
(a) Overview. This section provides
rules regarding the exception from section
897 for qualified holders. Paragraph (b)
of this section provides the general rule
excepting qualified holders from section
897. Paragraph (c) of this section provides
the requirements that an eligible fund must
satisfy to be treated as a qualified foreign
pension fund. Paragraph (d) of this section
provides definitions. Paragraph (e) of this
section provides examples illustrating the
application of the rules of this section.
Paragraph (f) of this section provides ap-
plicability dates. For rules applicable to a
qualified foreign pension fund or qualified
controlled entity claiming an exemption
from withholding under chapter 3, see
generally §§1.1441-3, 1.1445-2, 1.1445-
4, 1.1445-5, 1.1445-8, 1.1446-7.
(b) Exception from section 897—(1) In
general. Gain or loss of a qualified hold-
er from the disposition of a United States
real property interest, including gain from
a distribution described in section 897(h),
is not subject to section 897(a).
(2) Limitation. Paragraph (b)(1) of this
section applies solely with respect to gain
or loss that is attributable to one or more
qualified segregated accounts maintained
by a qualified holder.
(c) Qualified foreign pension fund re-
quirements—(1) In general. This para-
graph (c) provides rules regarding the
application of the requirements of section
897(l)(2) to an eligible fund. Paragraph (c)
(2) of this section provides requirements
that an eligible fund must satisfy to be
treated as a qualified foreign pension fund.
Paragraph (c)(3) of this section provides
rules on the application of the require-
ments in paragraph (c)(2) of this section,
including rules regarding the application
of the requirements in paragraph (c)(2) of
this section to an eligible fund that is an
organization or arrangement.
(2) Requirements applicable to an el-
igible fund—(i) Created or organized.
An eligible fund must be created or orga-
nized under the law of a foreign country.
For purposes of this paragraph (c)(2)(i),

June 24, 2019 1362 Bulletin No. 2019–26
test for determining whether a foreign
pension fund benefits from a preferential
tax rate. This option would prove difficult
to administer and require complex rules to
determine whether a pension fund benefits
from a preferential tax regime in the coun-
try in which it is established.
To reduce compliance burden and en-
hance administrability, the proposed reg-
ulations expand the scope of the potential
preferential tax regimes and provide a
bright-line test for determining preferen-
tial treatment by setting a threshold (85
percent) for the percentage of fund con-
tributions/income that is subject to a pref-
erential regime. The 85 percent threshold
was chosen in part based on suggestions
from comments. The Treasury Department
and the IRS aim, through this bright-line
approach and this specific percentage test,
to facilitate foreign pension fund invest-
ment in USRPI consistent with the intents
and purposes of the statute while minimiz-
ing the costs of tax administrability.
The Treasury Department and the IRS
solicit comments on this proposal, and in
particular comments that provide data,
other evidence, or models that could en-
hance the rigor of the process by which
the 897(l)(2)(E) requirements might be
developed for the final regulations.
II. Paperwork Reduction Act
In accordance with the Paperwork
Reduction Act, 44 U.S.C. 3501 et seq.
(“PRA”), information collection re-
quirements contained in these proposed
regulations are in §§1.1441-3(c)(4)(iii),
1.1445-2, 1.1445-4, 1.1445-5, 1.1445-8,
and 1.1446-1.
In 2018, the IRS released and took
comment on drafts of three forms in order
to give members of the public the oppor-
tunity to benefit from certain specific revi-
sions made to the Code. The forms were
Form 1042-S, “Foreign Person’s U.S.
Source Income Subject to Withholding,”
Form 1042, “Annual Withholding Tax Re-
turn for U.S. Source Income of Foreign
Persons” and Form W-8EXP, “Certificate
of Foreign Government or Other Foreign
Organization for United States Tax With-
holding or Reporting.” The IRS received
no comments on the forms during the
comment period. Consequently, the IRS
made the forms available for use by the
public on November 30, 2018 (in the case
of Form 1042-S), November 21, 2018 (in
the case of Form 1042), and July 20, 2017
(in the case of Form W-8EXP). The IRS is
contemplating making additional changes
to those three forms in connection with
these regulations.
The Treasury Department and the IRS
request comments on all aspects of infor-
mation collection burdens related to the
proposed regulations, including estimates
for how much time it would take to com-
ply with the paperwork burdens described
below for each relevant form and ways for
the IRS to minimize the paperwork bur-
den. Proposed revisions to these forms
that reflect the information collections
contained in these proposed regulations
will be made available for public comment
at www.irs.gov/draftforms and will not be
finalized until after these regulations take
effect and have been approved by OMB
under the PRA. The Treasury Department
and the IRS have not estimated the burden,
including that of any new information col-
lections, related to the requirements under
the proposed regulations.
A. Information collections contained in
§ 1.1441-3(c)(4)(iii)
The proposed regulations provide that
distributions made by a USRPHC or QIE
to a qualified holder are subject only to the
requirements of section 1441 and not the
coordination rule under §1.1441-3(c)(4).
Proposed §1.1441-3(c)(4)(iii). As a result,
a USRPHC or QIE making a distribution
to a qualified holder would be required
to report the distribution on Form 1042-
S, “Foreign Person’s U.S. Source Income
Subject to Withholding,” and file Form
1042, “Annual Withholding Tax Return
for U.S. Source Income of Foreign Per-
sons.” For purposes of this reporting, the
IRS is planning to revise Form 1042-S to
include an income code designating pay-
ments made to Qualified Foreign Pension
Plans. No revisions are being made to
Form 1042 in connection with payments
made to Qualified Foreign Pension Plans.
For purposes of the PRA, the reporting
burden associated with proposed §1.1441-
3(c)(4)(iii) will be reflected in the PRA
submissions for Form 1042 (OMB control
numbers 1545-0123 for business filers and
1545-0096 for all other Form 1042 filers)
and Form 1042-S (OMB control number
1545-0096). The PRA submissions for
Form 1042 reflect IRS’s transition to an
updated statistical model that calculates
burden based on the taxpayer filing expe-
rience as a whole. As such, Form 1042 is
in a transition state, as the burden incurred
by business filers is captured in OMB con-
trol number 1545-0123 (under the updated
burden model) and the burden represented
incurred by all other filers is represented
in 1545-0096 (legacy model).
B. Information collections in §§1.1445-
2, 1.1445-4, 1.1445-5, 1.1445-8, and
1.1446-1
Proposed §§1.1445-2, 1.1445-4,
1.1445-5, 1.1445-8, and 1.1446-1 would
require a qualified foreign pension fund
wishing to claim an exemption under
section 897(l) to provide a withholding
agent with either a Form W-8EXP, “Cer-
tificate of Foreign Government or Other
Foreign Organization for United States
Tax Withholding or Reporting,” or, at a
withholding agent’s request and in lieu of
Form W-8EXP, a certificate of non-for-
eign status containing the same informa-
tion as Form W-8EXP. The IRS plans to
revise Form W-8EXP for use by qualified
foreign pension funds. For purposes of the
PRA, the reporting burden associated with
proposed §§1.1445-2, 1.1445-4, 1.1445-5,
1.1445-8, and 1.1446-1, will be reflected
in the PRA submission for Form W-8EXP
(OMB control number 1545-1621).
The reporting burdens associated
with the information collections in the
proposed regulations are included in the
aggregate burden estimates for OMB
control numbers 1545-0096 (which rep-
resents a total estimated burden time for
all forms and schedules of 2.70 million
hours) and 1545-1621 (which represents
a total estimated burden time, including
all other related forms and schedules for
other filers, of 25.13 million hours and
total estimated monetized costs of $2.39
billion). The overall burden estimates for
the OMB control numbers are aggregate
amounts that relate to the entire package
of forms associated with the applicable
OMB control number and will in the
future include, but not isolate, the esti-
mated burden of the tax forms that will
be or have been revised as a result of the

Bulletin No. 2019–26 1363 June 24, 2019
a governmental unit is treated as created
or organized in the foreign country with
respect to which it is, or is a part of, the
foreign government.
(ii) Purpose of eligible fund—(A) In
general. An eligible fund must be estab-
lished by—
(1) The foreign country in which it is
created or organized to provide retire-
ment or pension benefits to participants
or beneficiaries that are current or former
employees or persons designated by such
employees as a result of services rendered
by such employees to their employers; or
(2) One or more employers to provide
retirement or pension benefits to partici-
pants or beneficiaries that are current or
former employees or persons designated
by such employees in consideration for
services rendered by such employees to
such employers.
(B) Established to provide retirement
or pension benefits. An eligible fund is
treated as satisfying the requirement of
paragraph (c)(2)(ii)(A) of this section if
and only if—
(1) All of the benefits that an eligible
fund provides are qualified benefits pro-
vided to qualified recipients; and
(2) At least 85 percent of the present
value of the qualified benefits that the el-
igible fund reasonably expects to provide
are retirement or pension benefits.
(C) Certain employers and employees.
For purposes of this section, the following
rules apply:
(1) A self-employed individual is treat-
ed as both an employer and an employee;
(2) Employees of an individual, trust,
corporation, or partnership are treated as
employees of each member of the em-
ployer group that includes the individual,
trust, corporation, or partnership; and
(3) An eligible fund established by a
trade union, professional association, or
similar group is treated as established by
any employer that funds, in whole or in
part, the eligible fund.
(iii) Single participant or beneficiary—
(A) In general. An eligible fund may not
have a single qualified recipient that has a
right to more than five percent of the as-
sets or income of the eligible fund.
(B) Constructive ownership. For pur-
poses of paragraph (c)(2)(iii)(A) of this
section, an individual is considered to
have a right to the assets and income of
an eligible fund to which any person who
bears a relationship to the individual de-
scribed in section 267(b) or 707(b) has a
right.
(iv) Regulation and information re-
porting—(A) In general. An eligible fund
must—
(1) Be subject to government regula-
tion, and
(2) Provide annual information about
its beneficiaries to the relevant tax author-
ities in the foreign country in which it is
established or operates, or such informa-
tion must otherwise be available to the rel-
evant tax authorities in the foreign country
in which it is established or operates.
(B) Information to be provided. An
eligible fund is treated as satisfying the
requirement of paragraph (c)(2)(iv)(A)
(2) of this section only if the eligible fund
annually provides to the relevant tax au-
thorities in the foreign country in which
it is established or operates the amount
of qualified benefits provided to each
qualified recipient by the eligible fund
(if any), or such information is otherwise
available to such relevant tax authorities.
An eligible fund is not treated as failing
to satisfy the requirement of paragraph
(c)(2)(iv)(A)(2) of this section as a result
of the eligible fund not being required to
provide information to the relevant tax
authorities in a year in which no qualified
benefits are provided to qualified recip-
ients.
(C) Relevant tax authorities. An eli-
gible fund is treated as satisfying the re-
quirement of paragraph (c)(2)(iv)(A)(2) of
this section if the eligible fund is required,
pursuant to the laws of the foreign country
in which it is established or operates, to
provide the information described in para-
graph (c)(2)(iv)(B) of this section to one
or more governmental units of the foreign
country in which the eligible fund is cre-
ated or organized, or if such information
is otherwise available to one or more gov-
ernmental units of the foreign country in
which the eligible fund is created or or-
ganized.
(D) Treatment of certain governmental
units. An eligible fund that is described in
paragraph (c)(2)(ii)(A)(1) of this section,
but is not also described in paragraph (c)
(2)(ii)(A)(2) of this section, is deemed to
satisfy the requirements of paragraph (c)
(2)(iv)(A) of this section.
(v) Tax treatment—(A) In general. The
laws of the foreign country in which the
eligible fund is established or operates
must provide that, due to the status of the
eligible fund as a retirement or pension
fund, either—
(1) Contributions to the eligible fund
that would otherwise be subject to tax un-
der such laws are deductible or excluded
from the gross income of the eligible fund
or taxed at a reduced rate; or
(2) Taxation of any investment income
of the eligible fund is deferred or excluded
from the gross income of the eligible fund
or such income is taxed at a reduced rate.
(B) Income subject to preferential tax
treatment. An eligible fund is treated as
satisfying the requirement of paragraph
(c)(2)(v)(A) of this section in a taxable
year if, under the income tax laws of the
foreign country in which the eligible fund
is established or operates—
(1) At least 85 percent of the contribu-
tions to the eligible fund are subject to the
tax treatment described in paragraph (c)
(2)(v)(A)(1) of this section, or
(2) At least 85 percent of the invest-
ment income of the eligible fund is subject
to the tax treatment described in paragraph
(c)(2)(v)(A)(2) of this section.
(C) Income not subject to tax. An eli-
gible fund is treated as satisfying the re-
quirement of paragraph (c)(2)(v)(A) of
this section if the eligible fund is exempt
from the income tax of the foreign coun-
try in which it is established and operates
or the foreign country in which it is estab-
lished and operates has no income tax.
(D) Other preferential tax regimes. An
eligible fund that does not receive the tax
treatment described in either paragraphs
(c)(2)(v)(A)(1) or (2) of this section is
nonetheless treated as satisfying the re-
quirement of paragraph (c)(2)(v)(A) of
this section if the eligible fund establishes
that each of the conditions described in
paragraphs (c)(2)(v)(D)(1) and (2) of this
section is satisfied:
(1) Under the laws of the country in
which the eligible fund is established and
operates, the eligible fund is subject to a
preferential tax regime due to its status as
a retirement or pension fund; and
(2) The preferential tax regime de-
scribed in paragraph (c)(2)(v)(D)(1) of
this section has a substantially similar
effect as the tax treatment described in

June 24, 2019 1364 Bulletin No. 2019–26
paragraphs (c)(2)(v)(A)(1) or (2) of this
section.
(E) Subnational jurisdictions. Sole-
ly for purposes of this paragraph (c)(2)
(v), a reference to a foreign country does
not include a reference to a state, prov-
ince, or political subdivision of a foreign
country.
(3) Rules on the application of the re-
quirements in paragraph (c)(2) of this sec-
tion—(i) In general. Except as provided
in paragraph (c)(3)(ii) of this section, an
organization or arrangement is treated as
a single entity for purposes of determining
whether the requirements of paragraph (c)
(2) of this section are satisfied.
(ii) Foreign status determined inde-
pendently. Each person or governmental
unit that is part of an organization or ar-
rangement must independently satisfy the
requirement of paragraph (c)(2)(i) of this
section.
(iii) Relevant income, assets, and func-
tions. The determination of whether an
eligible fund satisfies the requirements of
paragraphs (c)(2)(ii) through (v) of this
section is made solely with respect to the
income and assets held by the eligible
fund in one or more qualified segregated
accounts, the qualified benefits funded
by the qualified segregated accounts, the
information reporting and regulation re-
lated to the qualified segregated accounts,
and the qualified recipients whose bene-
fits are funded by the qualified segregated
accounts. For this purpose, all qualified
segregated accounts maintained by an eli-
gible fund are treated as a single qualified
segregated account.
(d) Definitions. The following defini-
tions apply for purposes of this section.
(1) Ancillary benefits. The term ancil-
lary benefits means benefits payable upon
the diagnosis of a terminal illness, death
benefits, disability benefits, medical ben-
efits, unemployment benefits, or similar
benefits.
(2) Eligible fund. The term eligible
fund means a trust, corporation, or other
organization or arrangement that main-
tains one or more qualified segregated
accounts.
(3) Employer group. The term employ-
er group means all individuals, trusts,
partnerships, and corporations with a rela-
tionship to each other specified in section
267(b) or section 707(b).
(4) Foreign country. The term foreign
country means a country other than the
United States. Except for purposes of
paragraph (c)(2)(v) of this section, refer-
ences in this section to a foreign country
include references to a state, province, or
political subdivision of a foreign country.
Solely for purposes of this section, the
Commonwealth of Puerto Rico and any
possession of the United States are treated
as a foreign country.
(5) Governmental unit. The term gov-
ernmental unit means any foreign govern-
ment or part thereof, including any per-
son, body, group of persons, organization,
agency, bureau, fund, or instrumentality,
however designated, of a foreign govern-
ment.
(6) Organization or arrangement. The
term organization or arrangement means
one or more trusts, corporations, govern-
mental units, or employers.
(7) Qualification date. The term qual-
ification date means, with respect to an
entity or governmental unit, the earliest
date during an uninterrupted period end-
ing on the date of the disposition or the
distribution, as the case may be, in which
the trust, corporation, governmental unit,
or employer is a qualified foreign pension
fund or a qualified controlled entity.
(8) Qualified benefits. The term quali-
fied benefits means retirement, pension, or
ancillary benefits.
(9) Qualified controlled entity. The
term qualified controlled entity means a
trust or corporation organized under the
laws of a foreign country all of the in-
terests of which are held by one or more
qualified foreign pension funds directly or
indirectly through one or more qualified
controlled entities or partnerships.
(10) Qualified foreign pension fund.
The term qualified foreign pension fund
means an eligible fund that satisfies the
requirements of paragraph (c) of this sec-
tion.
(11) Qualified holder—(i) In general.
The term qualified holder means a qual-
ified foreign pension fund or a qualified
controlled entity.
(ii) Limitation. Notwithstanding para-
graph (d)(11)(i) of this section, a qual-
ified holder does not include any trust,
corporation, governmental unit, or em-
ployer that, at any time during the testing
period, determined without regard to this
paragraph (d)(11)(ii), was not a qualified
foreign pension fund, a part of a quali-
fied foreign pension fund, or a qualified
controlled entity. The preceding sentence
does not apply to an entity that owned no
United States real property interests as of
the qualification date.
(12) Qualified recipient—(i) In gener-
al. The term qualified recipient means—
(A) With respect to an eligible fund
described in paragraph (c)(2)(ii)(A)(1)
of this section, any person eligible to be
treated as a participant or beneficiary of
such eligible fund and any person desig-
nated by such participant or beneficiary to
receive qualified benefits, and
(B) With respect to an eligible fund
described in paragraph (c)(2)(ii)(A)(2) of
this section, a current or former employee
or any person designated by such current
or former employee to receive qualified
benefits.
(ii) Special rule regarding automatic
designation. For purposes of paragraph
(d)(12)(i) of this section, a person is
treated as designating another person to
receive benefits if the other person is, by
reason of such person’s relationship or
other status with respect to the first per-
son, entitled to receive benefits pursuant
to the contractual terms applicable to the
eligible fund or pursuant to the laws of the
foreign country in which the eligible fund
is created or organized, whether or not the
first person expressly designated such per-
son as a beneficiary.
(13) Qualified segregated account—(i)
In general. The term qualified segregat-
ed account means an identifiable pool of
assets maintained for the sole purpose of
funding qualified benefits to qualified re-
cipients.
(ii) Assets held by eligible funds. For
purposes of paragraph (d)(13)(i) of this
section, an identifiable pool of assets of
an eligible fund is treated as maintained
for the sole purpose of funding qualified
benefits to qualified recipients only if the
contractual terms applicable to the eligible
fund or the laws of the foreign country in
which the eligible fund is established or
operates require that all the assets in the
pool, and all the income earned with re-
spect to such assets, be used exclusively to
fund the provision of qualified benefits to
qualified recipients or to satisfy necessary
reasonable expenses of the eligible fund,

Bulletin No. 2019–26 1365 June 24, 2019
(ii) Analysis. (A) Fund is a trust that
maintains an identifiable pool of assets for
the sole purpose of funding retirement and
ancillary benefits to current and former
employees of Employer (qualified recip-
ients as defined in paragraph (d)(12)(i)(B)
of this section). All assets held by Fund,
and all income earned by Fund, are used to
provide such benefits. Therefore, Fund is a
trust that maintains a qualified segregated
account within the meaning of paragraph
(d)(13) of this section. Accordingly, Fund
is an eligible fund within the meaning of
paragraph (d)(2) of this section.
(B) Because Fund is created or orga-
nized under the law of Country B, Fund
satisfies the requirement of paragraph (c)
(2)(i) of this section.
(C) All of the benefits provided by
Fund are qualified benefits because the
only benefits that Fund provides are pen-
sion or retirement benefits or ancillary
benefits described in paragraph (d)(1) of
this section, which are qualified benefits
described in paragraph (d)(8) of this sec-
tion, to qualified recipients. Furthermore,
Fund reasonably anticipates that more
than 85 percent of the present value of
benefits paid to qualified participants will
be retirement or pension benefits. Accord-
ingly, Fund is established by Employer to
provide retirement or pension benefits to
qualified recipients in consideration for
services rendered by such qualified recipi-
ents to such employers, and Fund satisfies
the requirement of paragraph (c)(2)(ii) of
this section.
(D) No single qualified recipient has
a right to more than five percent of the
assets or income of the eligible fund. Ac-
cordingly, Fund satisfies the requirement
of paragraph (c)(2)(iii) of this section.
(E) Fund is regulated and annually pro-
vides to the relevant tax authorities in the
foreign country in which it is established
or operates the amount of qualified bene-
fits provided to each qualified recipient by
the eligible fund. Accordingly, Fund satis-
fies the requirements of paragraph (c)(2)
(iv) of this section.
(F) Fund is not subject to income tax on
its investment income. Accordingly, Fund
satisfies the requirement of paragraph (c)
(2)(v) of this section.
(G) Because Fund meets the require-
ments of paragraph (c)(2) of this section,
Fund is treated as a qualified foreign
pension fund described in paragraph (d)
(10) of this section. As a qualified foreign
pension fund with respect to which the
limitation described in paragraph (d)(11)
(ii) of this section does not apply, Fund
is a qualified holder. All of Fund’s assets
are held in a qualified segregated account
within the meaning of paragraph (d)(13)
of this section. Consequently, under para-
graph (b) of this section, any gain or loss
of Fund from the disposition of a United
States real property interest, including any
distribution treated as gain from the dispo-
sition of a United States real property in-
terest under section 897(h), is not subject
to section 897(a).
(3) Example 3. Employer controlled
group—(i) Facts. The facts are the same
as in Example 2, except that S2, a Coun-
try B corporation that is wholly owned by
Employer, performs all tax compliance
functions for Employer, S1, and S2, in-
cluding information reporting with respect
to Fund participants.
(ii) Analysis. For purposes of testing
the requirements of paragraph (c)(2) of
this section, Fund and S2 are an organi-
zation or arrangement that is treated as a
single entity under paragraph (c)(3)(i) of
this section and an eligible fund under (d)
(2) of this section with respect to the qual-
ified segregated account held by Fund.
Because the eligible fund comprised of
Fund and S2 satisfies the requirements of
paragraph (c)(2) of this section (including
the requirement under paragraph (c)(3)
(ii) of this section that each entity satisfy
the foreign organization requirement of
paragraph (c)(2)(i) of this section), the el-
igible fund that is comprised of Fund and
S2 constitutes a qualified foreign pension
fund described in paragraph (d)(10) of this
section. Thus, under paragraph (b) of this
section, gain or loss of Fund from the dis-
position of a United States real property
interest, including any distribution treated
as gain from the disposition of a United
States real property interest under section
897(h), is not subject to section 897(a).
(4) Example 4. Third-party assumption
of pension liabilities—(i) Facts. The facts
are the same as in Example 2, except that
Fund anticipates $100x of qualified ben-
efits will be paid each year beginning in
Year 5. Fund enters into an agreement
with Guarantor, a privately held Country
B corporation, which provides that Fund
will, in Year 1, cede a portion of its as-
sets to Guarantor in exchange for annual
payments of $100x beginning in Year 5
and continuing until one or more previ-
ously identified participants (and their
designees) ceases to be eligible to receive
benefits. Guarantor has discretion to in-
vest the ceded assets as it chooses, sub-
ject to certain agreed upon investment re-
strictions. Pursuant to its agreement with
Fund, Guarantor must maintain Segregat-
ed Pool, a pool of assets securing its ob-
ligations under its agreement with Fund.
The value of Segregated Pool must exceed
a specified amount (determined based on
an agreed upon formula) until Guarantor’s
payment obligations are completed, and
any remaining assets in Segregated Pool
(that is, assets exceeding the required pay-
ments to Fund) are retained by Guarantor.
Guarantor bears all investment risk with
respect to Segregated Pool. Accordingly,
Guarantor is required to make annual pay-
ments of $100x to Fund regardless of the
performance of Segregated Pool. In Year
2, Guarantor purchases stock in Compa-
ny A, a United States real property hold-
ing company that is a United States real
property interest, and holds the Company
A stock in Segregated Pool. In Year 4,
Guarantor sells the stock in Company A,
realizing a gain of $100x.
(ii) Analysis. The Segregated Pool is not
a qualified segregated account, because it
is not maintained for the sole purpose of
funding qualified benefits to qualified re-
cipients, and because income attributable
to assets in the Segregated Pool (including
the Company A stock) may inure to Guar-
antor, which is not a qualified recipient.
Accordingly, Fund and Guarantor do not
qualify as an organization or arrangement
that is an eligible fund with respect to the
Company A stock. Therefore, Guarantor
is not exempt under paragraph (b) of this
section with respect to the $100x of gain
realized in connection with the sale of its
shares in Company A.
(5) Example 5. Asset manager—(i)
Facts. The facts are the same as in Ex-
ample 4 except that instead of ceding le-
gal ownership of the assets to Guarantor,
Fund transfers assets to Guarantor to be
held in Trust on behalf of Fund. Guarantor
has exclusive management authority over
the assets, and is entitled to a reasonable

June 24, 2019 1366 Bulletin No. 2019–26
and that such assets or income may not
inure to the benefit of a person other than
a qualified recipient. For this purpose, the
fact that assets or income may inure to the
benefit of a governmental unit by opera-
tion of escheat or similar laws is ignored.
(iii) Assets held by qualified controlled
entities. For purposes of paragraph (d)(13)
(i) of this section, the assets of a qualified
controlled entity are treated as an iden-
tifiable pool of assets maintained for the
sole purpose of funding qualified benefits
to qualified recipients only if both of the
following requirements are satisfied:
(A) All of the net earnings of the qual-
ified controlled entity are credited to its
own account or to the qualified segregat-
ed account of a qualified foreign pension
fund or another qualified controlled entity,
with no portion of its income inuring to
the benefit of a person other than a quali-
fied recipient; and
(B) All of the assets of the qualified
controlled entity, after satisfaction of lia-
bilities to persons having interests in the
entity solely as creditors, vest in a qual-
ified segregated account of a qualified
foreign pension fund or another qualified
controlled entity upon dissolution.
(14) Testing period. The term testing
period means, with respect to a trust, cor-
poration, governmental unit, or employ-
er and a disposition described in section
897(a) or a distribution described in sec-
tion 897(h), as the case may be, the short-
est of—
(i) The period beginning on December
18, 2015, and ending on the date of the
disposition or the distribution;
(ii) The ten-year period ending on the
date of the disposition or the distribution;
and
(iii) The period during which the entity
(or its predecessor) was in existence.
(e) Examples. This paragraph (e) pro-
vides examples that illustrate the rules of
this section. The following examples do
not illustrate the application of the appli-
cable withholding rules, including sec-
tions 1445 and 1446 and the regulations
thereunder. For the purposes of the exam-
ples in this paragraph (e), unless otherwise
stated, the following facts are presumed.
No person is entitled to more than five
percent of any eligible fund’s assets or in-
come, taking into account the constructive
ownership rules in paragraph (c)(2)(iii)(B)
of this section. The limitation described in
paragraph (d)(11)(ii) of this section does
not apply to any entity.
(1) Example 1. No legal entity—(i) Facts. Coun-
try A establishes Retirement Plan for the sole pur-
pose of providing retirement benefits to all citizens
of Country A aged 65 or older. Retirement Plan is
comprised of Asset Pool and Agency. Asset Pool
is a group of accounts maintained on the balance
sheet of the government of Country A. Pursuant to
the laws of Country A, income and gain earned by
Asset Pool is used solely to support the provision of
retirement benefits by Retirement Plan. Agency is
a Country A agency that administers the provision
of benefits by Retirement Plan and manages Asset
Pool’s investments. Under the laws of Country A,
investment income earned by Retirement Plan is not
subject to Country A’s income tax. In Year 1, Agency
sells Property, which is an interest in real property
located in the United States owned by Asset Pool,
recognizing $100x of gain with respect to Property
that would be subject to tax under section 897(a) un-
less paragraph (b) of this section applies with respect
to the gain.
(ii) Analysis. (A) Retirement Plan, which is com-
prised of Asset Pool and Agency, is comprised of one
or more governmental units described in paragraph
(d)(5) of this section. Accordingly, Retirement Plan
is an organization or arrangement described in para-
graph (d)(6) of this section. Furthermore, Retirement
Plan maintains a qualified segregated account in the
form of Asset Pool, an identifiable pool of assets
maintained for the sole purpose of funding retire-
ment benefits to beneficiaries of the Retirement Fund
(qualified recipients as defined in paragraph (d)(12)
(i)(A) of this section). Therefore, Retirement Plan is
an eligible fund within the meaning of paragraph (d)
(2) of this section.
(B) In determining whether or not Retirement
Plan is an eligible fund that satisfies the require-
ments of paragraph (c)(2) of this section and is
treated as a qualified foreign pension fund, the rules
of paragraph (c)(3) of this section apply. Accord-
ingly, the activities of Asset Pool and Agency are
integrated and treated as undertaken by a single
entity to determine whether the requirements of
paragraphs (c)(2)(ii) through (v) of this section are
met. However, Asset Pool and Agency must inde-
pendently satisfy the requirement of paragraph (c)
(2)(i) of this section.
(C) Retirement Plan is comprised of Asset Pool
and Agency, each of which is a governmental unit
and treated as created or organized under the law of
Country A for purposes of paragraph (c)(2)(i) of this
section. Accordingly, Retirement Plan satisfies the
requirement of paragraph (c)(2)(i) of this section.
(D) Retirement Plan is established by Country
A to provide retirement benefits, which are qualified
benefits described in paragraph (d)(8) of this section,
to all citizens of Country A, who are qualified re-
cipients described in paragraph (d)(12)(i)(A) of this
section because they are eligible to be participants or
beneficiaries of Retirement Plan. In addition, all of
the benefits that Retirement Plan provides are qual-
ified benefits provided to qualified recipients, and at
least 85 percent of the benefits that Retirement Plan
reasonably expects to provide are retirement or pen-
sion benefits. Accordingly, Retirement Plan satisfies
the requirement of paragraph (c)(2)(ii) of this sec-
tion.
(E) Retirement Plan provides retirement benefits
to all citizens of Country A aged 65 or older, with no
citizen entitled to more than five percent of Retire-
ment Fund’s assets or to more than five percent of the
income of the eligible fund. Accordingly, Retirement
Plan satisfies the requirement of paragraph (c)(2)(iii)
of this section.
(F) Retirement Plan is comprised solely of gov-
ernmental units within the meaning of paragraph (d)
(5) of this section. Accordingly, under paragraph (c)
(2)(iv)(D) of this section, Retirement Plan is treated
as satisfying the requirements of paragraph (c)(2)(iv)
(A) of this section.
(G) Investment income earned by Retirement
Plan is not subject to income tax in Country A. Ac-
cordingly, Retirement Plan satisfies the requirement
of paragraph (c)(2)(v) of this section.
(H) Because Retirement Plan satisfies the re-
quirements of paragraphs (c)(2)(i) through (v) of
this section, Retirement Plan is a qualified foreign
pension fund as defined in paragraph (d)(10) of this
section. Because Retirement Plan is a qualified for-
eign pension fund and the limitation described in
paragraph (d)(11)(ii) of this section does not apply,
Retirement Plan is a qualified holder. Retirement
Plan’s gain with respect to Property is attributable
solely to Asset Pool, a qualified segregated account
maintained by Retirement Plan. Accordingly, un-
der paragraph (b) of this section, the $100x gain
recognized by Retirement Plan attributable to the
disposition of Property is not subject to section
897(a).
(2) Example 2. Fund established by an employ-
er—(i) Facts. Employer, a corporation organized in
Country B, establishes Fund to provide retirement
benefits to current and former employees of Employ-
er and S1, a Country B corporation that is wholly
owned by Employer. Fund is established as a trust
under the law of Country B, and Employer retains
discretion to invest assets and to administer benefits
on Fund’s behalf. Fund receives contributions from
Employer and contributions from employees that
are beneficiaries of Fund. All contributions to Fund
and all of Fund’s earnings are separately accounted
for on Fund’s books and records and are required by
Fund’s organizational documents to exclusively fund
the provision of benefits to Fund’s beneficiaries, ex-
cept as necessary to satisfy reasonable expenses of
the Fund. Fund currently has over 100 beneficiaries,
a number that is reasonably expected to grow as Em-
ployer expands. Fund will pay benefits to employees
upon retirement based on years of service and em-
ployee contributions, but, if a beneficiary dies before
retirement, Fund will pay a death benefit to the ben-
eficiary’s designee (or deemed designee under local
law if the beneficiary fails to identify a beneficiary).
It is reasonably expected that such death benefits will
account for less than fifteen percent of the present
value of the qualified benefits that Fund expects to
provide in the future. Fund annually provides to the
tax authorities of Country B the amount of qualified
benefits distributed to each participant (or designee).
Country B’s tax authorities prescribe rules and regu-
lations governing Fund’s operations. Under the laws
of Country B, Fund is not taxed on its investment
income.

Bulletin No. 2019–26 1367 June 24, 2019
fixed management fee which it withdraws
annually from Trust’s assets.
(ii) Analysis. Assets held by Fund, including
its interest in Trust, are treated as held by Fund, a
qualified holder within the meaning of paragraph (d)
(11) of this section, in a qualified segregated account
within the meaning of paragraph (d)(13) of this sec-
tion. Paragraph (d)(13)(ii) of this section provides
that the assets of the qualified segregated account
may be used to satisfy reasonable expenses of the
eligible fund, such that the reasonable fixed manage-
ment fee paid to Guarantor does not cause the assets
held in Trust to fail to be treated as held in a qualified
segregated account. Consequently, the limitation of
paragraph (b)(2) of this section does not apply and
Fund Guarantor is exempt under paragraph (b) of
this section with respect to the $100x of gain realized
in connection with the sale of its shares in Company
A.
(6) Example 6. Partnership—(i) Facts. The facts
are the same as in Example 4 except that instead of
ceding legal ownership of the assets to Guarantor,
Fund contributes the assets to a partnership (PRS)
formed with Guarantor. Guarantor contributes nom-
inal capital to the partnership, but receives a profits
interest in the partnership that is reasonable in light
of the Guarantor’s management activity. Guarantor
serves as the general partner of PRS and has discre-
tionary authority to buy and sell PRS assets without
approval from Fund.
(ii) Analysis. All of Fund’s assets, including the
partnership interest, are held in a qualified segre-
gated account within the meaning of paragraph (d)
(13) of this section. See Example 2, paragraph (ii)
(A) of this section. Accordingly, Fund is exempt un-
der paragraph (b) of this section with respect to gain
or loss from the disposition of a United States real
property interest, including any distribution treated
as gain from the disposition of a United States real
property interest under section 897(h), that is allo-
cable to Fund from PRS. Guarantor is not exempt
under paragraph (b) of this section with respect to
gain or loss allocable to Guarantor from PRS.
(7) Example 7. Wholly-owned entity—(i) Facts.
Fund is a qualified foreign pension fund organized in
Country C that meets the requirements of paragraph
(c)(2) of this section. Fund owns all the outstanding
stock of OpCo, a manufacturing corporation orga-
nized in Country C, in a qualified segregated account
maintained by Fund. Fund originally formed OpCo
on January 1, 2016, for the purpose of conducting the
manufacturing business and utilizing the business
profits to fund pension liabilities. OpCo either retains
or distributes to Fund all of its net earnings, and upon
dissolution, must distribute all of its assets to stock-
holders after satisfaction of liabilities to its creditors.
Fund has held all of the stock of OpCo since OpCo
was formed. On June 1, 2017, OpCo realizes $100 of
gain on the disposition of Property A, a United States
real property interest.
(ii) Analysis. (A) A qualified holder described in
paragraph (d)(11) of the section includes a qualified
controlled entity described in paragraph (d)(9) of this
section. A qualified controlled entity includes any
corporation organized under the laws of a foreign
country all the interests of which are owned by one
or more qualified foreign pension funds directly or
indirectly through one or more qualified controlled
entities. Fund is a qualified foreign pension fund that
wholly owns OpCo. Accordingly, OpCo is a quali-
fied controlled entity.
(B) A qualified controlled entity is a qualified
holder under paragraph (d)(11) of this section, but
only if the qualified controlled entity was a qualified
controlled entity throughout the entire testing peri-
od. The testing period under paragraph (d)(14) of
this section is the shortest of the period beginning
on December 18, 2015, and ending on the date of the
disposition or the distribution; the ten-year period
ending on the date of the disposition or the distri-
bution; or the period during which the entity was in
existence. Thus, the testing period is January 1, 2016
(the date of formation) to June 1, 2017 (the date of
the disposition). Because OpCo was a qualified con-
trolled entity as defined in paragraph (d)(9) of this
section at all times during that period, the limitation
in paragraph (d)(11)(ii) of this section does not apply
to OpCo, and OpCo is a qualified holder under para-
graph (d)(11) of this section.
(C) Under paragraph (b)(2) of this section,
only gain or loss attributable to a qualified segre-
gated account is exempt under section 897(l). All
of OpCo’s net earnings are credited to its own ac-
count or distributed to Fund and credited to Fund’s
qualified segregated account. Upon dissolution,
all of OpCo’s assets, after satisfaction of liabili-
ties to persons having interests in the entity solely
as creditors, would be distributed to OpCo’s sole
shareholder, Fund, and credited to Fund’s qualified
segregated account. Accordingly, all of OpCo’s
assets constitute a qualified segregated account.
Therefore, the limitation in paragraph (b)(2) of this
section does not apply, and the $100x gain realized
by OpCo, a qualified holder, from the disposition
of Property A on June 1, 2017, is not subject to tax
under section 897(a).
(8) Example 8. Not a qualified holder—(i) Facts.
The facts are the same as in Example 7, except that
Opco was formed by a person other than Fund on
January 1, 2016, and Fund acquired all the stock of
OpCo on November 1, 2016. During the period from
January 1, 2016, and October 31, 2016, Opco was
not a qualified foreign pension fund, a part of a qual-
ified foreign pension fund, or a qualified controlled
entity. OpCo owned Property A before November 1,
2016.
(ii) Analysis. Under paragraph (d)(11)(ii) of this
section, a qualified holder does not include any en-
tity that was not a qualified foreign pension fund, a
part of a qualified foreign pension fund, or a qualified
controlled entity at any time during the testing peri-
od. The testing period with respect to OpCo is the
period from January 1, 2016 (the date of formation of
OpCo) to June 1, 2017 (the date of the disposition).
Because OpCo was not a qualified foreign pension
fund, a part of a qualified foreign pension fund, or
a qualified controlled entity from January 1, 2016 to
November 1, 2016, OpCo was not a qualified foreign
pension fund, a part of a qualified foreign pension
fund, or a qualified controlled entity at all times
during the testing period. Accordingly, OpCo is not
a qualified holder with respect to the disposition of
Property A, and the $100x of gain recognized by
OpCo is not exempt from tax under section 897(l),
regardless of the amount of unrealized gain in Prop-
erty A as of November 1, 2016.
(f) Applicability date—(1) In general.
Except as otherwise provided in para-
graph (f)(2) of this section, this section
applies to a disposition of a United States
real property interest, or a distribution de-
scribed in section 897(h), occurring on or
after the date of publication of the Trea-
sury decision adopting these rules as final
regulations in the Federal Register.
(2) Certain Provisions. Paragraphs (b)
(1), (d)(5), (7), (9), (11), and (14) of this
section apply with respect to dispositions
of United States real property interests and
distributions described in section 897(h)
occurring on or after June 6, 2019.
Par. 3. Section 1.1441-3 is amended
by adding paragraph (c)(4)(iii) to read as
follows:
§1.1441-3 Determination of amounts
to be withheld.
* * * * *
(c) * * *
(4) * * *
(iii) Special rule for qualified hold-
ers—(A) In general. Any corporate distri-
bution made by a USRPHC or a QIE to a
payee that is a qualified holder (as defined
in §1.897(l)-1(d)(11)) shall not be subject
to the rules of this paragraph (c)(4) but
shall be subject to the requirements of
paragraphs (c)(1) through (3) of this sec-
tion.
(B) Applicability date. Paragraph (c)(4)
(iii)(A) of this section applies to distribu-
tions made by a USRPHC or a QIE occur-
ring on or after the date of publication of
the Treasury decision adopting these rules
as final regulations in the Federal Register.
* * * * *
Par. 4. Section 1.1445-2 is amended by
revising paragraphs (b)(1) and (b)(2)(i)
(C) and adding paragraph (b)(2)(v) and a
new sentence at the end of paragraph (e)
to read as follows:
§1.1445-2 Situations in which with-
holding is not required under section
1445(a).
* * * * *
(b) * * *
(1) In general. No withholding is re-
quired under section 1445 if the transfer-
or of a U.S. real property interest is not
a foreign person. Therefore, paragraph (b)
(2) of this section provides rules pursuant
to which the transferor can provide a cer-
tification of non-foreign status to inform
the transferee that withholding is not re-

June 24, 2019 1368 Bulletin No. 2019–26
quired. A transferee that obtains such a
certification must retain that document for
five years, as provided in paragraph (b)(3)
of this section. Except to the extent pro-
vided in paragraph (b)(4) of this section,
obtaining this certification excuses the
transferee from any liability otherwise im-
posed by section 1445 and §1.1445-1(e).
However, section 1445 and the rules of
this section do not impose any obligation
upon a transferee to obtain a certification
from the transferor; thus, a transferee may
instead rely upon other means to ascertain
the non-foreign status of the transferor. If,
however, the transferee relies upon oth-
er means and the transferor was, in fact,
a foreign person, then the transferee is
subject to the liability imposed by section
1445 and §1.1445-1(e).
(i) A transferee is in no event required
to rely upon other means to ascertain the
non-foreign status of the transferor and
may demand a certification of non-foreign
status or Form W-8EXP in the case of a
qualified holder (as defined in §1.897(l)-
1(d)(11)). If the certification or form is
not provided, the transferee may with-
hold tax under section 1445 and will be
considered, for purposes of sections 1461
through 1463, to have been required to
withhold such tax.
(ii) [Reserved]
(2) * * *
(i) * * *
(C) (1) Is signed under penalties of per-
jury.
(2) In general, a foreign person is a
nonresident alien individual, foreign cor-
poration, foreign partnership, foreign
trust, or foreign estate, except that a qual-
ified holder (as defined in §1.897(l)-1(d)
(11)) is not a foreign person. Additional-
ly, a foreign corporation that has made a
valid election under section 897(i) is gen-
erally not treated as a foreign person for
purposes of section 1445. In this regard,
see §1.1445-7. Pursuant to §1.897-1(p),
an individual’s identifying number is the
individual’s Social Security number and
any other person’s identifying number
is its U.S. employer identification num-
ber (EIN). A certification pursuant to this
paragraph (b) must be verified as true and
signed under penalties of perjury by a re-
sponsible officer in the case of a corpora-
tion, by a general partner in the case of a
partnership, and by a trustee, executor, or
equivalent fiduciary in the case of a trust
or estate. No particular form is needed
for a certification pursuant to this para-
graph (b), nor is any particular language
required, so long as the document meets
the requirements of this paragraph (b)(2)
(i). Samples of acceptable certifications
are provided in paragraph (b)(2)(iv) of
this section.
* * * * *
(v) Qualified holders. As an alterna-
tive to a certification of non-foreign sta-
tus described in paragraph (b)(2)(i) of this
section, a qualified holder (as defined in
§1.897(l)-1(d)(11)) may provide a Form
W-8EXP to certify that it is treated as not
foreign for purposes of section 1445. A
Form W-8EXP provided for this purpose
is subject to the general requirements of a
certification of non-foreign status. For ex-
ample, a Form W-8EXP provided for this
purpose must be retained for the five-year
period described in paragraph (b)(3) of
this section regardless of whether it is re-
quired to be retained for purposes of sec-
tion 1441 and the regulations thereunder.
* * * * *
(e) * * * Paragraphs (b)(1), (b)(2)(i)
and (v) of this section, as revised by the
Treasury decision adopting these rules
as final regulations, apply with respect
to dispositions of U.S. real property in-
terests and distributions described in sec-
tion 897(h) occurring on or after the date
of publication of the Treasury decision
adopting these rules as final regulations in
the Federal Register.
Par. 5. Section 1.1445-4 is amended by
revising paragraphs (a)(2) and (b)(2) and
adding paragraph (g) to read as follows:
§1.1445-4 Liability of agents.
(a) * * *
(2) The transferee is furnished with
a non-foreign certification pursuant to
§1.1445-2(b)(2) or a certification regard-
ing qualified holder status provided on
Form W-8EXP and either:
(i) The agent knows that the certifica-
tion is false; or
(ii) The agent represents a transferor
that is a foreign corporation that is not a
qualified holder. An agent that represents
a transferor that is a foreign corporation is
not required to provide notice to the trans-
feree if the foreign corporation provided
a non-foreign certification or certification
regarding qualified holder status provided
on Form W-8EXP, as applicable, to the
transferee prior to such agent’s employ-
ment and the agent does not know that the
corporation did so.
(b) * * *
(2) The entity or fiduciary is furnished
with a non-foreign certification pursuant
to §1.1445-5(b)(3)(ii) or a certification
regarding qualified holder status provided
on Form W-8EXP and either:
(i) The agent knows that such certifica-
tion is false; or
(ii) The agent represents a foreign cor-
poration (other than a qualified holder)
that made such a certification.
* * * * *
(g) Certain applicability dates. Para-
graphs (a)(2) and (b)(2) of this section, as
revised by the Treasury decision adopting
these rules as final regulations, apply with
respect to dispositions of U.S. real prop-
erty interests and distributions described
in section 897(h) occurring on or after the
date of publication of the Treasury deci-
sion adopting these rules as final regula-
tions in the Federal Register.
Par. 6. Section 1.1445-5 is amended by
revising paragraph (b)(3)(ii)(A) and add-
ing a new sentence at the end of paragraph
(h) to read as follows:
§1.1445-5 Special rules concerning
distributions and other transactions by
corporations, partnerships, trusts, and
estates.
* * * * *
(b) * * *
(3) * * *
(ii) * * *
(A) In general. For purposes of this
section, an entity or fiduciary may treat
any holder of an interest in the entity as
a U.S. person if that interest-holder fur-
nishes to the entity or fiduciary a certifica-
tion stating that the interest-holder is not
a foreign person, in accordance with the
provisions of paragraph (b)(3)(ii)(B) of
this section. In general, a foreign person
is a nonresident alien individual, foreign
corporation, foreign partnership, foreign
trust, or foreign estate, except that a qual-
ified holder (as defined in §1.897(l)-1(d)
(11)) is not a foreign person.
* * * * *
(h) * * * Paragraph (b)(3)(ii)(A) of
this section, as revised by the Treasury
decision adopting these rules as final reg-
ulations, applies with respect to disposi-

Bulletin No. 2019–26 1369 June 24, 2019
tions of U.S. real property interests and
distributions described in section 897(h)
occurring on or after the date of publi-
cation of the Treasury decision adopting
these rules as final regulations in the Fed-
eral Register.
Par. 7. Section 1.1445-8 is amended by
revising paragraph (e) and adding para-
graph (j) to read as follows:
§1.1445-8 Special rules regarding pub-
licly traded partnerships, publicly traded
trusts and real estate investment trusts
(REITs).
* * * * *
(e) Determination of non-foreign status
by withholding agent. A withholding agent
may rely on a certificate of non-foreign sta-
tus pursuant to §1.1445-2(b), a Form W-9,
a Form W-8EXP (in the case of a qualified
holder (as defined in §1.897(l)-1(d)(11)),
or a form that is substantially similar to
such forms, to determine whether an in-
terest holder is not a foreign person. Re-
liance on these documents will excuse the
withholding agent from liability imposed
under section 1445(e)(1) in the absence of
actual knowledge that the interest holder
is a foreign person. A withholding agent
may also employ other means to deter-
mine the status of an interest holder, but,
if the agent relies on such other means and
the interest holder proves, in fact, to be a
foreign person, then the withholding agent
is subject to any liability imposed pursu-
ant to section 1445 and the regulations
thereunder for failure to withhold.
* * * * *
(j) Certain applicability dates. Para-
graph (e) of this section, as revised by the
Treasury decision adopting these rules as
final regulations, applies with respect to
dispositions of U.S. real property inter-
ests and distributions described in sec-
tion 897(h) occurring on or after the date
of publication of the Treasury decision
adopting these rules as final regulations in
the Federal Register.
Par. 8. Section 1.1446-1 is amended by
revising the second sentence of paragraph
(c)(2)(ii)(G) and revising paragraph (c)(2)
(ii)(H) to read as follows:
§1.1446-1 Withholding tax on foreign
partners’ share of effectively connected
taxable income.
* * * * *
(c) * * *
(2) * * *
(ii) * * *
(G) * * * However, except as set
forth in §1.1446-2(b)(2)(iii)(B) (regard-
ing certain qualified holders described
in §1.897(l)-1(d)(11)) and §1.1446-3(c)
(3) (regarding certain tax-exempt organi-
zations described in section 501(c)), the
submission of Form W-8EXP will have no
effect on whether there is a 1446 tax due
with respect to such partner’s allocable
share of partnership ECTI. * * *
(H) Foreign corporations, certain for-
eign trusts, and foreign estates. Consistent
with the rules of this paragraph (c)(2) and
(3) of this section, a foreign corporation, a
foreign trust (other than a foreign grantor
trust described in paragraph (c)(2)(ii)(E)
of this section), or a foreign estate may
generally submit any appropriate Form
W-8 (e.g., Form W-8BEN-E or Form
W-8IMY) to the partnership to establish
its foreign status for purposes of section
1446. In addition to Form W-8BEN-E,
a foreign entity may also submit Form
W-8EXP or a certification of non-foreign
status described in §1.1445-5(b)(3) for
purposes of documenting itself as a qual-
ified holder (as defined in §1.897(l)-1(d)
(11)).
* * * * *
Par. 9. Section 1.1446-2 is amended
by adding paragraph (b)(4)(iii) to read as
follows:
§1.1446-2 Determining a partnership’s
effectively connected taxable income al-
locable to foreign partners under section
704.
* * * * *
(b) * * *
(4) * * *
(iii) Special rule for qualified holders.
With respect to a foreign partner that is a
qualified holder (as defined in §1.897(l)-
1(d)(11)), the foreign partner’s allocable
share of partnership ECTI does not in-
clude gain or loss that is not taken into
account by the qualified holder under
§1.897(l)-1(b) and that is not otherwise
treated as effectively connected with a
trade or business in the United States. The
partnership must have received from the
partner a valid certificate of non-foreign
status or Form W-8EXP. See §1.1446-1(c)
(2)(ii)(G) and (H) regarding documenta-
tion of qualified holders.
* * * * *
Par. 10. Section 1.1446-7 is amended
by revising the section heading and add-
ing a new sentence at the end of the para-
graph to read as follows:
§1.1446-7 Effective/Applicability date.
* * * Sections 1.1446-1(c)(2)(ii)(G)
and (H) and 1.1446-2(b)(2)(iii)(A) and
(B), as revised by the Treasury decision
adopting these rules as final regulations,
apply with respect to dispositions of U.S.
real property interests and distributions
described in section 897(h) occurring on
or after the date of publication of the Trea-
sury decision adopting these rules as final
regulations in the Federal Register.
Kirsten Wielobob,
Deputy Commissioner for Services
and Enforcement.
(Filed by the Office of the Federal Register on June
6, 2019, 8:45 a.m., and published in the issue of the
Federal Register for June 7, 2019, 84 F.R. 26605)

Bulletin No. 2019–26 i June 24, 2019
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 be-
ing made clear because the language has
caused, or may cause, some confusion. It
is not used where a position in a prior rul-
ing 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 transactions.
This term is most commonly used in a ruling
that lists previously published rulings 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
period 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 previous-
ly 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 cas-
es in litigation, or the outcome of a Ser-
vice study.
Abbreviations
The following abbreviations in current use
and formerly used will appear in material
published in the Bulletin.
A—Individual.
Acq.—Acquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cumulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Cooperative.
Ct.D.—Court Decision.
CY—County.
D—Decedent.
DC—Dummy Corporation.
DE—Donee.
Del. Order—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
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.
F.R.—Federal Register.
FUTA—Federal Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grantee.
GP—General Partner.
GR—Grantor.
IC—Insurance Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited Partner.
LR—Lessor.
M—Minor.
Nonacq.—Nonacquiescence.
O—Organization.
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.
T.D.—Treasury Decision.
TFE—Transferee.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpayer.
TR—Trust.
TT—Trustee.
U.S.C.—United States Code.
X—Corporation.
Y—Corporation.
Z—Corporation.

June 24, 2019 ii Bulletin No. 2019–26
Numerical Finding List
1
Bulletin 2019–26
Action on Decision:
2019-1, 2019-08 I.R.B. 569
Announcements:
2019-1, 2019-06 I.R.B. 566
2019-2, 2019-12 I.R.B. 910
2019-3, 2019-15 I.R.B. 965
2019-4, 2019-21 I.R.B. 1192
2019-5, 2019-22 I.R.B. 1262
2019-6, 2019-24 I.R.B. 1327
Notices:
2019-01, 2019-02 I.R.B. 275
2019-02, 2019-02 I.R.B. 281
2019-03, 2019-03 I.R.B. 350
2019-04, 2019-02 I.R.B. 282
2019-05, 2019-02 I.R.B. 283
2019-06, 2019-03 I.R.B. 353
2019-07, 2019-09 I.R.B. 740
2019-08, 2019-03 I.R.B. 354
2019-09, 2019-04 I.R.B. 403
2019-10, 2019-13 I.R.B. 913
2019-11, 2019-05 I.R.B. 430
2019-13, 2019-08 I.R.B. 580
2019-16, 2019-10 I.R.B. 763
2019-17, 2019-12 I.R.B. 907
2019-18, 2019-13 I.R.B. 915
2019-19, 2019-12 I.R.B. 907
2019-20, 2019-14 I.R.B. 927
2019-21, 2019-14 I.R.B. 927
2019-22, 2019-14 I.R.B. 931
2019-23, 2019-15 I.R.B. 941
2019-24, 2019-14 I.R.B. 932
2019-25, 2019-15 I.R.B. 942
2019-26, 2019-15 I.R.B. 943
2019-28, 2019-18 I.R.B. 1077
2019-30, 2019-20 I.R.B. 1180
2019-31, 2019-20 I.R.B. 1181
2019-32, 2019-21 I.R.B. 1187
2019-33, 2019-22 I.R.B. 1255
2019-34, 2019-22 I.R.B. 1257
2019-39, 2019-24 I.R.B. 1322
Proposed Regulations:
REG-104259-18, 2019-02 I.R.B. 300
REG-104352-18, 2019-03 I.R.B. 357
REG-106089-18, 2019-05 I.R.B. 431
REG-134652-18, 2019-09 I.R.B. 747
REG-141739-08, 2019-09 I.R.B. 757
REG-121694-16, 2019-16 I.R.B. 1032
REG-135671-17, 2019-16 I.R.B. 1035
REG-103083-18, 2019-17 I.R.B. 1046
Proposed Regulations—Continued
REG-113943-17, 2019-17 I.R.B. 1067
REG-143686-07, 2019-17 I.R.B. 1072
REG-124627-11, 2019-17 I.R.B. 1073
REG-120186-18, 2019-21 I.R.B. 1193
REG-113604-18, 2019-22 I.R.B. 1265
REG-132240-15, 2019-25 I.R.B. 1328
REG-109826-17, 2019-26 I.R.B. 1349
Revenue Procedures:
2019-1, 2019-01 I.R.B. 1
2019-2, 2019-01 I.R.B. 106
2019-3, 2019-01 I.R.B. 130
2019-4, 2019-01 I.R.B. 146
2019-5, 2019-01 I.R.B. 230
2019-6, 2019-02 I.R.B. 284
2019-7, 2019-01 I.R.B. 268
2019-8, 2019-03 I.R.B. 347
2019-9, 2019-02 I.R.B. 293
2019-10, 2019-02 I.R.B. 296
2019-11, 2019-09 I.R.B. 742
2019-12, 2019-04 I.R.B. 401
2019-13, 2019-09 I.R.B. 744
2019-14, 2019-15 I.R.B. 948
2019-15, 2019-14 I.R.B. 939
2019-17, 2019-17 I.R.B. 1045
2019-18, 2019-18 I.R.B. 1077
2019-20, 2019-20 I.R.B. 1182
2019-21, 2019-21 I.R.B. 1190
2019-22, 2019-22 I.R.B. 1260
2019-25, 2019-22 I.R.B. 1261
2019-26, 2019-24 I.R.B. 1323
Revenue Rulings:
2019-03, 2019-02 I.R.B. 272
2019-04, 2019-07 I.R.B. 567
2019-05, 2019-11 I.R.B. 766
2019-06, 2019-14 I.R.B. 919
2019-07, 2019-10 I.R.B. 761
2019-08, 2019-14 I.R.B. 923
2019-09, 2019-14 I.R.B. 925
2019-10, 2019-16 I.R.B. 1010
2019-11, 2019-17 I.R.B. 1041
2019-13, 2019-20 I.R.B. 1179
2019-15, 2019-26 I.R.B. 1332
Treasury Decisions:
9844, 2019-11 I.R.B. 781
9845, 2019-08 I.R.B. 570
9846, 2019-09 I.R.B. 583
9847, 2019-09 I.R.B. 670
9848, 2019-11 I.R.B. 897
9850, 2019-12 I.R.B. 904
9852, 2019-16 I.R.B. 1010
9853, 2019-16 I.R.B. 1026
9855, 2019-17 I.R.B. 1042
Treasury Decisions—Continued
9854, 2019-18 I.R.B. 1075
9857, 2019-22 I.R.B. 1239
9858, 2019-22 I.R.B. 1251
9859, 2019-24 I.R.B. 1293
9860, 2019-24 I.R.B. 1297
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2018–27 through 2018–52 is in Internal Revenue Bulletin
2018–52, dated December 27, 2018.

Bulletin No. 2019–26 iii June 24, 2019
Finding List of Current Actions on
Previously Published Items
1
Bulletin 2019–26
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2018–27 through 2018–52 is in Internal Revenue Bulletin
2018–52, dated December 27, 2018.

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