Regulations Relating to Information Reporting by Foreign Financial Institutions and Withholding on Certain Payments to Foreign Financial Institutions…
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Regulations Relating to Information Reporting by Foreign Financial Institutions and Withholding on Certain Payments to Foreign Financial Institutions and Other Foreign Entities
Final and temporary regulations.
CFR Part: "26 CFR Part 1"
RIN Number: "RIN 1545-BL73"
Citation: "79 FR 12812"
Document Number: "TD 9657"
"Rules and Regulations"
SUMMARY: This document contains final and temporary regulations under chapter 4 of Subtitle A (sections 1471 through 1474) of the Internal Revenue Code of 1986 (Code) regarding information reporting by foreign financial institutions (FFIs) with respect to U.S. accounts and withholding on certain payments to FFIs and other foreign entities. These regulations affect persons making certain U.S.-related payments to FFIs and other foreign entities and payments by FFIs to other persons. The text of the temporary regulations also serves as the text of the proposed regulations set forth in a cross-reference notice of proposed rulemaking (REG-130967-13) published in the Proposed Rules section in this issue of the
EFFECTIVE DATE: Effective date. These regulations are effective on
FOR FURTHER INFORMATION CONTACT:
SUPPLEMENTARY INFORMATION: This document contains amendments to the Income Tax Regulations (CFR part 1) under sections 1471 through 1474 of the Code (commonly known as the Foreign Account Tax Compliance Act, or FATCA). On
Following publication of the final regulations, the
II. Regulatory Approach to
Chapter 4 grants the Secretary of the Treasury broad regulatory authority to prescribe rules and procedures relating to the diligence, reporting and withholding obligations under FATCA.
Following publication of the final regulations, the
Explanation of Provisions
In response to comments and after further consideration, these temporary regulations revise and further clarify the final regulations. To this end, these temporary regulations take into account helpful comments received and provide additional detail and certainty regarding the scope of obligations imposed under chapter 4. In addition, these temporary regulations reflect changes made to the final regulations to coordinate the chapter 4 regulations with the temporary regulations published under chapters 3 and 61 and section 3406 of the Code. Additionally, these temporary regulations contain modifications to the final regulations to further harmonize them with the IGAs. Several of the changes made by these temporary regulations were previewed in Notice 2013-69, the draft FFI agreement, and certain of the draft
The following sections provide a discussion of the additions and modifications made by the temporary regulations to the final regulations. To facilitate this discussion, the defined terms set forth in the temporary regulations are used throughout.
II. Comments and Changes to
To address comments received and to provide further clarification, these temporary regulations modify certain definitions contained in the final regulations.
A. Direct Reporting NFFE, Sponsored Direct Reporting NFFE, and Sponsoring Entity
Comments requested an election providing NFFEs with the ability to report information about their substantial U.S. owners directly to the
B. Excepted NFFE
These temporary regulations modify the definition of excepted NFFE such that excepted NFFEs include, among other things, a direct reporting NFFE and a sponsored direct reporting NFFE. In addition, to correct an oversight, the definition of excepted NFFE under these temporary regulations is further expanded to include a NFFE that is a qualified intermediary (QI), withholding foreign partnership (WP) or withholding foreign trust (WT).
C. Offshore Obligation and Offshore Account
In response to comments stating that the definition of offshore obligation in the final regulations is unclear, and in order to harmonize chapters 4 and 61, these temporary regulations define offshore obligation by cross-reference to
D. Pre-FATCA Form W-8
These temporary regulations make a clarifying change to the definition of pre-FATCA Form W-8. The final regulations define pre-FATCA Form W-8 as certain Forms W-8 that do not contain chapter 4 statuses. However, the chapter 4 status of a non-U.S. individual filing a Form W-8 is the same as his or her chapter 3 status. Therefore, the definition in the final regulations could be interpreted to mean that any Form W-8 previously submitted by a non-U.S. individual could not be treated as a pre-FATCA Form W-8. These temporary regulations modify the definition of pre-FATCA Form W-8 to avoid this result.
E. Standardized Industry Coding System
The final regulations define the term standardized industry code to mean a code that is part of a coding system that is used to classify account holders by business type for purposes other than tax purposes and that is implemented by the withholding agent by the later of
F. Certain Foreign Insurance Companies Treated as U.S. Persons
The final regulations treat a foreign insurance company that is not licensed to do business in any State and makes an election under section 953(d) as a foreign person. Comments requested that a foreign insurance company that has made an election under section 953(d) be treated as a U.S. person. A foreign insurance company that has made an election under section 953(d) is required to report on its U.S. income tax return the U.S. persons that own a direct or indirect interest in it. As previewed in Notice 2013-69, and in light of the existing reporting requirements applicable to these entities, the temporary regulations modify the definition of U.S. person to include a foreign insurance company that has made an election under section 953(d) and that either is not a specified insurance company or is a specified insurance company that is licensed to do business in any State. In such cases, the foreign insurance company will be required to continue to report on its owners in accordance with its election under section 953(d). A foreign insurance company that has made an election under section 953(d) and that is a specified insurance company that is not licensed to do business in any State will continue to be treated as a foreign person for purposes of chapter 4.
G. Coordination of Definitions
In response to comments requesting clarification and in order to coordinate the definitions in the final regulations with the definitions in chapters 3 and 61 and the FFI agreement, these temporary regulations add definitions of backup withholding, branch, chapter 4 withholding rate pool, exempt recipient, IGA, non-exempt recipient, reportable payment, and reporting Model 2 FFI and modify the definition of a U.S. branch treated as a U.S. person. In addition, the definitions of financial institution, limited branch, limited FFI, and substantial U.S. owner are modified to ensure coordination between the FFI agreement and these temporary regulations.
H. Harmonization With IGAs
These temporary regulations modify the definition of nonreporting IGA FFI to include (in addition to an FFI that is identified or treated as a nonreporting financial institution pursuant to a Model 1 or Model 2 IGA that is not a registered deemed-compliant FFI) an FFI that is a resident of, located in, or established in a Model 1 or Model 2 IGA jurisdiction, as the context requires, and that meets the requirements for certified deemed-compliant FFI status under the temporary regulations. Certain definitions (including the definition of retirement plan under
III. Comments and Changes to
A. Grandfathered Obligations--Definitions--Material Modification
Comments indicated that outstanding life insurance contracts often contain a provision permitting the substitution of an insured and, as a result, cannot be a grandfathered obligation under the final regulations. Because such provisions are prevalent in existing life insurance contracts, the
B. Grandfathered Obligations--Determination by Withholding Agent of Grandfathered Treatment
The final regulations provide that a withholding agent is required to treat a modification of an obligation as material if the withholding agent knows or has reason to know that a material modification has occurred.
IV. Comments and Changes to
A. Payee Defined
1. Exceptions--U.S. Intermediary or Agent of a Foreign Person
Comments requested that, in cases in which a withholding agent makes a withholdable payment to a U.S. insurance broker that is acting as an intermediary for or agent of a foreign insurer, the withholding agent be allowed to treat the U.S. insurance broker as the payee unless the withholding agent has reason to know that the U.S. insurance broker will not satisfy its withholding obligations. These temporary regulations modify the final regulations to adopt this comment.
2. Exceptions--U.S. Branch of Certain Foreign Banks or Foreign Insurance Companies
A payment made to a U.S. branch of a participating FFI or a registered deemed-compliant FFI may be treated as a payment made to a U.S. person if the branch is treated as a U.S. person for purposes of withholding under chapter 4. The final regulations inadvertently omit a cross-reference to the regulations containing the requirements of U.S. branches to report information regarding certain U.S. owners of owner-documented FFIs and passive NFFEs. These temporary regulations add a cross-reference to
B. Determination of Payee's Status--Determination of Whether the Payment Is Made to a QI, WP, or WT
In order to harmonize the rules in chapter 4 with those in chapters 3 and 61, these temporary regulations clarify that, with respect to a withholding agent's determination of whether a payment is made to a QI, WP, or WT, a Form W-8IMY, "Certificate of Foreign Intermediary, Foreign Flow-Through Entity, or Certain U.S. Branches for United States Tax Withholding," provided by such entity must contain the entity's QI-EIN, WP-EIN, or WT-EIN (as applicable). In addition, QIs, WPs, and WTs that have a GIIN must provide both a QI-EIN, QP-EIN, or WT-EIN and the GIIN to a withholding agent on the Form W-8IMY.
C. Rules for Reliably Associating a Payment With a Withholding Certificate or Other Appropriate Documentation
1. Requirements for Validity of Certificates--Withholding Certificate of an Intermediary, Flow-Through Entity, or U.S. Branch (Form W-8IMY)--In General
These temporary regulations clarify that, when a participating FFI or a registered deemed-compliant FFI has a branch (including a disregarded entity of the FFI) that both acts as an intermediary and is located outside of the FFI's country of residence, the GIIN of the branch (or disregarded entity) must be disclosed on the withholding certificate. This change provides more detail on the use of GIINs issued to branches or disregarded entities of an FFI and that are used, in part, to identify an FFI to withholding agents.
2. Requirements for Validity of Certificates--Withholding Certificate of an Intermediary, Flow-Through Entity, or U.S. Branch (Form W-8IMY)--Withholding Statement--Special Requirements for an FFI Withholding Statement
Comments requested additional clarification to the final regulations concerning the requirements of an FFI withholding statement, specifically with regard to the use of a chapter 4 withholding rate pool identified on an FFI withholding statement to allocate a withholdable payment (or portion of a withholdable payment) to persons included within the chapter 4 withholding rate pool. Some of these clarifications have already been previewed in the draft FFI agreement, published in Notice 2013-69, and the final FFI agreement, published in Rev. Proc. 2014-13. These temporary regulations provide further clarification of FFI withholding statement requirements, including rules on when a chapter 4 withholding rate pool may be used by an FFI to allocate withholdable payments to a class of persons within a particular type of chapter 4 withholding rate pool. For example, if a participating FFI (including a reporting Model 2 FFI) that is a non-U.S. payor receives a withholdable payment on behalf of an account holder of a U.S. account, the participating FFI may include the account holder in a chapter 4 withholding rate pool of U.S. payees provided on an FFI withholding statement to the withholding agent to allocate the payment (or portion thereof) to the U.S. payee pool when the participating FFI reports the account holder under
Additionally, reporting Model 1 FFIs and reporting Model 2 FFIs (without regard to whether such FFIs are U.S. or non-U.S. payors) may include certain recalcitrant account holders in a chapter 4 withholding rate pool of U.S. payees when such payments are not subject to withholding under chapters 3 or 4 or to backup withholding under section 3406 (for example, presumed U.S. non-exempt recipients). This rule was added to provide coordination between the various reporting regimes. For example, a reporting Model 2 FFI may include an account holder of a non-consenting U.S. account in a chapter 4 withholding rate pool of U.S. payees with respect to a withholdable payment that is not subject to withholding under chapters 3 or 4 or to backup withholding under section 3406 when the FFI reports the account holder as described in
Finally, in order to clarify potential ambiguities, and as previewed in the draft and final FFI agreement, these temporary regulations provide that an FFI withholding statement should indicate the portion of the payment allocated to a pool of recalcitrant account holders that hold dormant accounts for which the FFI (and not the withholding agent) will withhold in escrow under the procedures described in
3. Requirements for Validity of Certificates--Withholding Certificate of an Intermediary, Flow-Through Entity, or U.S. Branch (Form W-8IMY)--Withholding Statement--Special Requirements for a Chapter 4 Withholding Statement and Exempt Beneficial Owner Withholding Statement
An intermediary providing a withholding certificate for a withholdable payment under chapter 4 may also need to provide information under chapter 3 or chapter 61 if those chapters also apply to the payment the intermediary receives. These temporary regulations modify the final regulations to coordinate with chapters 3 and 61 by providing cross-references to the regulations under those chapters to clarify the information required to be included on a withholding statement when a withholdable payment is also reportable under chapters 3 or 61.
4. Applicable Rules for Withholding Certificates, Written Statements, and Documentary Evidence--Period of Validity
Under chapter 4, withholding certificates are valid for three years, unless an exception permits indefinite validity (until a change in circumstances occurs). Beneficial owner withholding certificates provided by certain entities qualify for indefinite validity if the certificate is furnished with documentary evidence establishing the entity's foreign status. Comments requested that section 501(c) entities be excluded from the requirement to furnish documentary evidence of foreign status as it is an undue burden on such entities.
5. Applicable Rules for Withholding Certificates, Written Statements, and Documentary Evidence--Electronic Transmission of Withholding Certificate, Written Statement, and Documentary Evidence
The final regulations provide that a withholding agent may accept withholding certificates, written statements, and documentary evidence supporting a payee's claim of chapter 4 status electronically if the agent is able to verify the identity of the sender as the person named on the form. Comments requested that the verification rules be modified or eliminated to reduce the burden on the withholding agent.
6. Applicable Rules for Withholding Certificates, Written Statements, and Documentary Evidence--Acceptable Substitute Withholding Certificate--Non-
In general, a withholding agent may substitute its own form for an official Form W-8 if the substitute form contains provisions that are substantially similar to the official form. The final regulations provide that if a substitute form is used in place of a W-8BEN for individuals, the form must contain, among other things, the individual's city and country of birth.
7. Documentation Furnished on Account-by-Account Basis Unless Exception Provided for Sharing Documentation Within Expanded Affiliated Group--Preexisting Account
The Treasury Department and the
D. Documentation Requirements To Establish Payee's Chapter 4 Status
1. Reliance on Pre-FATCA Form W-8
The final regulations generally allow the withholding agent to rely on a pre-FATCA Form W-8 for international organizations. In order to clarify a potential ambiguity and to conform with chapter 3, these temporary regulations provide that reliance on a pre-FATCA Form W-8 is limited to international organizations as defined under chapter 3 and under section 7701(a)(18).
2. Identification of U.S. Persons--In General
Under chapter 4, a withholding agent must treat certain payees as U.S. persons. In order to clarify a potential ambiguity, these temporary regulations provide that foreign branches of U.S. persons and FFIs that have elected to be treated as U.S. persons under section 953(d) (despite the fact that such FFIs may not be U.S. persons for other purposes of chapter 4) should be treated as U.S. persons by a withholding agent if the withholding agent has a valid Form W-9, " Request for Taxpayer Identification Number and Certification," from the payee or is required to presume that the payee is a U.S. person. This reduces burden because FFIs that have elected to be treated as U.S. persons under section 953(d) are generally treated as U.S. persons under chapter 3 and would need to provide a Form W-9 in connection with payments subject to chapter 3 withholding and reporting.
3. Identification of U.S. Persons--Preexisting Obligations
The final regulations provide that a withholding agent (other than a participating FFI or registered deemed-compliant FFI) that makes a payment with respect to a preexisting obligation may treat a payee as a U.S. person if it previously reviewed a Form W-9 or other documentation that established that the payee is a U.S. person and established that the payee is an exempt recipient for purposes of chapter 61. Comments from U.S. withholding agents indicated that the burden of documenting such payees that have previously been classified as U.S. persons is both significant and disproportionate to the benefits of obtaining documentation of U.S. status. In response to these comments, these temporary regulations modify the final regulations to allow withholding agents (other than a participating FFI or registered deemed-compliant FFI) to treat the payee of a payment with respect to a preexisting obligation as a U.S. person if the withholding agent has previously classified the payee as a U.S. person for purposes of chapters 3 or 61 and established (through documentation or the application of the rules in
4. Identification of Participating FFIs and Registered Deemed-Compliant FFIs
The final regulations generally provide that a withholding agent may only treat a payee as a participating FFI or registered deemed-compliant FFI if the withholding agent receives an appropriate withholding certificate and a GIIN. The final regulations also provide a transitional rule for when withholding agents may treat payments made prior to
5. Identification of Excepted NFFEs--Identifying a Direct Reporting NFFE, Identifying a Sponsored Direct Reporting NFFE, and Identification of an Excepted Inter-Affiliate FFI
These temporary regulations provide that direct reporting NFFEs and sponsored direct reporting NFFEs qualify as excepted NFFEs. Consistent with this change, these temporary regulations add to the final regulations identification rules with respect to direct reporting NFFEs and sponsored direct reporting NFFEs. Additionally, under the final regulations, a financial institution does not include certain foreign entities that are considered excepted inter-affiliate FFIs. One of the requirements for such an entity is that it does not receive payments from, or hold an account with, a withholding agent other than a member of its expanded affiliated group. Comments requested that such entities be permitted to hold bank accounts with certain non-U.S. persons outside of the expanded affiliated group. The temporary regulations modify the final regulations with respect to an excepted inter-affiliate FFI to allow such FFIs to hold depository accounts to pay for expenses in the country in which the FFI is operating and that are maintained within the same country. Accordingly, conforming changes have also been made by these temporary regulations to add identification rules with respect to an excepted inter-affiliate FFI. An identification rule was not necessary under the final regulations because an excepted inter-affiliate FFI was not allowed to hold an account with a withholding agent other than a member of its expanded affiliated group.
E. Standards of Knowledge
1. GIIN Verification
The final regulations provide that, under certain circumstances, a withholding agent has reason to know that a payee is not a financial institution. To clarify a potential ambiguity, these temporary regulations provide that a withholding agent has reason to know that a withholdable payment is being made to a limited branch of a participating or registered deemed-compliant FFI when it is directed to make payment to an address of the FFI in a jurisdiction other than the address of the participating FFI or registered deemed-compliant FFI (or branch of such FFI) that is identified as the FFI (or branch of such FFI) that is supposed to receive the payment. These temporary regulations further provide special rules regarding a direct reporting NFFE and a sponsored direct reporting NFFE's claim of chapter 4 status.
2. Reason to Know
Under chapter 4, a withholding agent may not rely on an FFI's claim of chapter 4 status if the withholding agent has reason to know that such claim is unreliable or incorrect. Under the final regulations, the withholding agent is required to review information used to satisfy AML due diligence requirements in determining whether a claim of chapter 4 status was unreliable or incorrect. In response to comments, these temporary regulations modify the final regulations such that when a withholding agent has classified a person by business type for AML due diligence or another regulatory purpose (other than for a tax purpose) that requires the withholding agent to periodically monitor or update the classification, the withholding agent will have reason to know that information contained in its account files conflicts with the person's claim of chapter 4 status only if the classification recorded by the withholding agent is inconsistent with the chapter 4 status claimed. Comments also requested additional time to review the information collected for AML due diligence because it is typically gathered and stored by a different department or division of the withholding agent and is not linked to the customers' account files. These temporary regulations adopt this comment and allow 30 days to review information collected for AML due diligence for new accounts.
The final regulations also provide due diligence requirements with respect to U.S. indicia of account holders for payments made with respect to preexisting obligations. After further consideration, the temporary regulations modify these provisions such that the U.S. indicia-based due diligence requirements generally do not apply to a withholding agent that has previously documented an account for purposes of chapter 3 or chapter 61. However, under the temporary regulations, a withholding agent that applies the limits on reason to know described in chapter 3 or chapter 61 must review for U.S. indicia any additional documentation upon which the withholding agent is relying to determine the chapter 4 status of the person. A cross-reference in
F.
The Treasury Department and the
V. Comments and Changes to
A. Withholding Requirements
1. Satisfaction of Withholding Requirements--Election To Withhold Under Section 3406
As announced in Notice 2013-69, these temporary regulations modify the final regulations to coordinate withholding under chapter 4 and backup withholding under section 3406. Under
2. Special Rule for Dormant Accounts
With respect to dormant accounts of recalcitrant account holders, the final regulations permit a participating FFI to escrow amounts withheld under chapter 4 rather than deposit such amounts with the
B. Due Diligence for the Identification and Documentation of Account Holders and Payees
1. Identification and Documentation Procedure for Preexisting Individual Accounts--Specific Identification and Documentation Procedures for Preexisting Individual Accounts--U.S. Indicia and Relevant Documentation Rules--Documentation to be Retained Upon Identifying U.S. Indicia--Standing Instructions to Pay Amounts
The final regulations provide a cure for standing instructions to pay amounts to an account maintained in
2. Identification and Documentation Procedure for Preexisting Individual Accounts--Specific Identification and Documentation Procedures for Preexisting Individual Accounts--Exception for Preexisting Individual Accounts Previously Documented as Held by Foreign Individuals
The final regulations provide that a participating FFI that has previously established an account holder's status as foreign in order to fulfill its reporting obligations as a U.S. payor under chapter 61 is not required to perform an electronic search or enhanced review. Comments requested that this exception be extended to the identification and documentation performed by an agent of a participating FFI that is a U.S. payor. To address these comments and to further coordinate between the IGAs and the regulations, these temporary regulations modify the final regulations to adopt this comment.
C. Account Reporting
1. Reporting Requirements In General--Financial Institution Required to Report an Account--Special Reporting of Account Holders of Territory Financial Institutions
Section 1.1471-4(d)(2)(ii)(B) provides a special reporting rule for participating FFIs that maintain an account held by a territory financial institution acting as an intermediary. If such territory financial institution agrees to be treated as a U.S. person, the participating FFI is not required to report under
2. Reporting Requirements In General--Financial Institution Required to Report an Account--Requirement To Identify the GIIN of a Branch That Maintains an Account
The final regulations provide that a participating FFI may elect to comply with its obligation to report under
3. Reporting Requirements In General--Financial Institution Required To Report an Account--Reporting by Participating FFIs and Registered Deemed-Compliant FFIs (Including QIs, WPs, WTs, and Certain U.S. Branches Not Treated as U.S. Persons) for Accounts of Nonparticipating FFIs (Transitional)
The final regulations provide transitional reporting requirements for a participating FFI or registered deemed-compliant FFI making a payment of a foreign reportable amount to a nonparticipating FFI. Under
4. Reporting Requirements In General--Special U.S. Account Reporting Rules for U.S. Payors--Special Reporting Rule for U.S. Payors Other Than U.S. Branches
The final regulations provide that a participating FFI that is a U.S. payor (other than a U.S. branch) is treated as satisfying its chapter 4 reporting obligations with respect to accounts that it is required to treat as U.S. accounts or accounts held by owner-documented FFIs if it reports the information required under chapter 61 and the information described under
5. Reporting Requirements in General--Special U.S. Account Reporting Rules for U.S. Payors--Special Reporting Rules for U.S. Branches Not Treated as U.S. Persons
The final regulations do not include a rule for reporting by a U.S. branch of a registered deemed-compliant FFI or limited FFI that is not treated as a U.S. person. To correct this oversight, these temporary regulations add new
6. Reporting on Recalcitrant Account Holders--Extensions in Filing
In response to comments, the temporary regulations modify the final regulations to provide an automatic 90-day extension of time in which to file Form 8966 with respect to recalcitrant account holders. An additional 90-day hardship extension may be provided in certain circumstances. These revisions are consistent with the extensions of time already permitted for filing Form 8966 with respect to U.S. accounts.
7. Treatment of a Disregarded Entity
In response to comments and in order to address a potential ambiguity in the final regulations about whether a disregarded entity that is owned by an FFI is treated as a branch of an FFI, these temporary regulations clarify that the term branch with respect to an FFI includes an entity that is disregarded as an entity separate from the FFI. This clarification was previewed in the draft FFI agreement which was published in Notice 2013-69. These temporary regulations make additional changes throughout the final regulations to further clarify the treatment of a disregarded entity when such an entity is treated as a branch of an FFI. For example, the GIIN verification procedures that apply with respect to a branch of an FFI also apply with respect to a disregarded entity that is owned by an FFI. Additionally, a disregarded entity that is owned by an FFI may be treated as a limited branch if the disregarded entity is unable to comply with the terms of an FFI agreement with respect to accounts that it maintains, and the reason to know standards that apply to withholdable payments made to a branch of a participating or registered deemed-compliant FFI also apply to withholdable payments made to a disregarded entity that is owned by such an FFI.
D. Expanded Affiliated Group Requirements
The final regulations require that, in general, each FFI within an expanded affiliated group must be either a participating FFI or a registered deemed-compliant FFI. Comments noted that some FFIs within an expanded affiliated group will have the status of an exempt beneficial owner and requested that the regulations be modified to allow for such FFIs to be excluded from this requirement. The temporary regulations modify the final regulations to adopt this comment.
E. Verification--
The final regulations allow the
F. Event of Default
The final regulations define events of default under an FFI agreement. This definition includes the failure to significantly reduce, over a period of time, the number of recalcitrant account holders and payees that are nonparticipating FFIs. Comments were made that this language was ambiguous and could imply an event of default, for example, even in circumstances in which an FFI consistently complies with the regulatory due diligence procedures. Accordingly, in response to the comments, these temporary regulations modify the final regulations to provide that this event of default consists of a failure to significantly reduce, over a period of time, the number of account holders or payees that the participating FFI is required to treat as recalcitrant account holders or nonparticipating FFIs as a result of the participating FFI failing to comply with the due diligence procedures for the identification and documentation of account holders and payees.
VI. Comments and Changes to
A. U.S. Accounts--Account Holder--in General;
The definition of account holder in the final regulations does not treat a grantor trust as an account holder to the extent that the grantor is treated as owning the trust or all the assets in the trust under sections 671 through 679, regardless of whether the grantor is a U.S. or foreign person. If such grantor is a foreign person and the beneficiary of the trust is a U.S. person, the grantor is treated as the account holder and consequently, the account is a non-U.S. account and no beneficiary that is a specified U.S. person is treated as having an interest in the portion of the trust owned by the grantor. Therefore, the specified U.S. person is not an account holder and would not be reported even though such U.S. person might be a substantial U.S. owner of the foreign grantor trust. Further, for purposes of determining whether a foreign grantor trust has a substantial U.S. owner (and is a U.S. account), the final regulations provide that a substantial U.S. owner is any specified U.S. person treated as owning any portion of the grantor trust under sections 671 through 679, and a trust owned only by U.S. grantors is not treated as having a beneficiary that is a specified U.S. person. Thus, in contrast to the account holder rule, the test for determining a substantial U.S. owner of a trust is made without regard to the treatment of the settlor of the trust as a foreign grantor under sections 671 through 679. In response to requests for further clarification, these temporary regulations remove the grantor trust rule in the definition of account holder in the final regulations so that the general rule for treating an entity as an account holder will apply to treat a grantor trust as the account holder. Accordingly, a grantor trust that holds an account must provide documentation of its chapter 4 status as a FFI or NFFE. This change harmonizes the treatment of a grantor trust as an account holder for purposes of the chapter 4 withholding provisions with the provisions in chapters 3 and 61, which treat a grantor trust, rather than the grantor, as the payee.
B. Financial Accounts--Value of Interest Determined, Directly or Indirectly, Primarily by Reference to Assets That Give Rise (or Could Give Rise) to Withholdable Payments, and Return Earned on the Interest (Including Upon a Sale, Exchange, or Redemption) Determined, Directly or Indirectly, Primarily by Reference to one or More Investment Entities or Passive NFFEs
While financial accounts generally include equity or debt interests (other than regularly traded interests) in investment entities, financial accounts include only certain enumerated categories of interests in holding companies, treasury centers, and other financial institutions. Among the enumerated categories are certain equity and debt interests whose return or value is determined, directly or indirectly, primarily by reference to assets that give rise (or could give rise) to withholdable payments. The final regulations provide that a debt interest is considered to have a value determined primarily by reference to such assets if the debt interest is secured by the assets of a U.S. person. The final regulations provide that an equity interest is considered to have a value determined primarily by reference to such assets if the amount payable upon redemption of the equity interest is secured primarily by assets that give rise (or could give rise) to withholdable payments. A similar provision under another enumerated category treating certain interests in holding companies and treasury centers as financial accounts (see SUBSEC 1.1471-5(b)(1)(iii)(B)( 2) and (3)) also applies to a debt interest secured by the assets of one or more investment entities described in SUBSEC 1.1471-5(e)(4)(i)(B) or (C) or one or more passive NFFEs that are members of the entity's expanded affiliated group (collectively, the secured equity and debt provisions).
Comments have suggested that these provisions are overbroad because it is questionable whether the value of, or return earned on, a debt or equity interest is determined primarily by reference to assets of a U.S. person solely because the debt or equity interest is secured by such assets. In response to these comments, these temporary regulations modify the final regulations by eliminating the secured equity or debt provisions. The facts and circumstances may nonetheless lead to a conclusion that the value of a secured equity or debt interest is determined, directly or indirectly, primarily by reference to assets giving rise to withholdable payments (for example, when the amount payable as interest on, or upon redemption or retirement of, a debt interest is determined primarily by reference to the assets securing the debt interest).
In addition, the final regulations provide that a debt interest is considered to have a value determined, directly or indirectly, primarily by reference to assets that give rise to withholdable payments if amounts payable as interest on, or upon redemption or retirement of, the debt are determined primarily by reference to the profits or assets of a U.S. person. This provision inadvertently did not address whether debt interests with amounts payable by reference to equity interests in a U.S. person are debt interests whose return or value is determined primarily by reference to assets that give rise (or could give rise) to withholdable payments. To correct this omission, the temporary regulations modify the final regulations to include a reference to equity interests in, as well as profits and assets of, a U.S. person.
C. Definition of
1. In General
The final regulations provide that the definition of financial institution includes a holding company or treasury center that is part of an expanded affiliated group that includes a depository institution, custodial institution, insurance company, or investment entity. Comments noted that the definition, with respect to an insurance company, should be limited to a specified insurance company which is itself a financial institution. These temporary regulations correct the final regulations to treat a holding company or treasury center as a financial institution if it is part of an expanded affiliated group that includes a specified insurance company.
2. Holding Financial Assets for Others as a Substantial Portion of Its Business--Income Attributable To Holding Financial Assets and
The final regulations provide that an entity is a custodial institution if at least 20 percent of the entity's gross income is attributable to holding financial assets for others and related financial services. The final regulations define income attributable to holding financial assets to include, among other things, fees for providing financial advice. As a result, an entity could qualify as a custodial institution under the final regulations even if the entity's sole business is to provide financial advice to clients and it does not conduct any activities as a custodian or broker. Comments indicated that this definition is overly broad and could cause entities that do not hold financial assets and therefore have no financial accounts to be treated as custodial institutions. In response, these temporary regulations modify the final regulations to define income attributable to holding financial assets to include fees for providing financial advice with respect to financial assets held in (or to be held in) custody by the entity.
3. Investment Entity--Examples
The final regulations generally provide that an investment entity includes an entity whose gross income is primarily attributable to investing, reinvesting, or trading in financial assets and that is managed by another entity that primarily conducts as a business certain investment-related activities. Examples 7 and 8 in
4. Exclusions--Excepted Nonfinancial Group Entities--In General
The final regulations provide that a holding company, treasury center, or captive finance company will not qualify as an excepted nonfinancial group entity if, among other things, it is formed in connection with or availed of certain arrangements or investment vehicles. Comments requested additional guidance on what it means to be "formed in connection with or availed of." The temporary regulations modify the final regulations such that any entity that existed at least six months prior to its acquisition by an arrangement or investment vehicle and which, prior to the acquisition, regularly conducted activities in the ordinary course of business will not be considered to be formed in connection with or availed of such an arrangement or investment vehicle, in the absence of other facts suggesting the existence of an investment strategy.
5. Exclusions--Excepted Nonfinancial Group Entities--
For purposes of determining whether an expanded affiliated group is a nonfinancial group, the final regulations provide an income test for the three-year period preceding the year for which the determination is made. Comments requested: (i) That this exclusion also be applicable if the expanded affiliated group has been in existence for less than three years and (ii) that a group would qualify if it meets the income test over an average of three years (rather than having to meet the test in each of the three preceding years).
In order to provide further clarification when determining the percentage of income or assets of the group that produce or are held for the production of passive income, these temporary regulations also modify the final regulations by excluding transactions between members of the expanded affiliated group. In addition, these temporary regulations provide guidance on measuring the value of such assets.
6. Exclusions--Excepted Nonfinancial Group Entities--Holding Company
Comments requested that, for purposes of determining if a holding company is part of an excepted nonfinancial group, a trust or partnership that owns all the stock of a common parent corporation of an expanded affiliated group be eligible for treatment as a holding company and member of an excepted nonfinancial group. Otherwise, such entities are not treated as part of the expanded affiliated group and cannot qualify for such exception. These temporary regulations modify the final regulations to allow a partnership or other non-corporate entity to be treated as a holding company (and therefore as a potential member of an excepted nonfinancial group) if substantially all the activities of such partnership (or other entity) consist of holding more than 50 percent of the voting power and value of the stock of one or more common parent corporation(s) of one or more expanded affiliated group(s). If a partnership or other non-corporate entity owns more than 50 percent of the voting power and value of the stock of two or more corporations and each such corporation has its own subsidiaries such that it is the common parent corporation of an expanded affiliated group, each common parent corporation's expanded affiliated group will be treated as a separate such group for purposes of applying the rules of this section unless the non-corporate entity is treated as the common parent entity of the entire expanded affiliated group in accordance with
7. Exclusions--Excepted Nonfinancial Group Entities--Treasury Center
Comments were received that the definition of a treasury center in the final regulations is too narrow in that an entity that manages working capital but does not otherwise invest or trade may not satisfy this definition. For example, a group's cash pooling entity may be in a net deficit position and therefore may not be considered to be investing or trading in financial assets. In addition, with respect to the financing activities of such a vehicle, the final regulations could be read to limit situations in which an entity that is itself equity funded can qualify as a treasury center. In response to these comments, the temporary regulations modify the final regulations to clarify that an entity that manages the working capital of an expanded affiliated group (or any member thereof) will not cease to qualify as a treasury center solely because it has no investments and does not trade in financial assets. Further, the temporary regulations clarify that equity-funded affiliates may qualify as treasury centers.
8. Exclusions--Excepted Inter-Affiliate FFI
Under the final regulations, a financial institution does not include certain foreign entities that are considered excepted inter-affiliate FFIs. One of the requirements for such an entity is that it does not receive payments from, or hold an account with, a withholding agent other than a member of its expanded affiliated group. Comments requested that such entities be permitted to hold bank accounts with certain non-U.S. persons outside of the expanded affiliated group. The temporary regulations modify the final regulations to allow such entities to hold depository accounts maintained in the country in which the entity is operating to pay for expenses in that same country.
D. Deemed-Compliant FFIs
1. Registered Deemed-Compliant FFIs--Restricted Funds
Under chapter 4, interests in a restricted fund that are not issued directly by the fund can only be sold through distributors that are participating FFIs, registered deemed-compliant FFIs, nonregistering local banks, or restricted distributors. In response to comments, even though these temporary regulations do not eliminate the requirement of the restricted fund to terminate its agreement with any distributor that has a change in status that causes it to no longer qualify to be a distributor and redeem or transfer all debt and equity interests of the FFI issued through that distributor, these temporary regulations do remove the requirement that the restricted fund certify to the
2. Registered Deemed-Compliant FFIs--Qualified Credit Card Issuers and Servicers
Comments were received that an FFI that issues credit cards may form a separate entity that services the credit cards. Under the final regulations, such an entity could be an FFI, but would not be treated as a registered deemed-compliant FFI because it is not an issuer of credit cards, even though such FFI would otherwise qualify for registered deemed-compliant FFI status. Pursuant to these comments, the temporary regulations expand the registered deemed-compliant FFI category to include qualified credit card servicers.
3. Registered Deemed-Compliant FFIs--Sponsored Investment Entities and Controlled Foreign Corporations
Under the final regulations, an FFI remains liable for its withholding and reporting obligations under chapter 4 even if a sponsoring entity performs these responsibilities on behalf of such FFI. In response to comments, these temporary regulations modify the final regulations to clarify that a sponsoring entity will not be jointly and severally liable for the sponsored FFI's obligations unless the sponsoring entity is also a withholding agent that is separately liable for such obligations.
4. Certified Deemed-Compliant FFIs--
The final regulations provide that, in order to be treated as a nonregistering local bank, an FFI's business must consist primarily of receiving deposits from and making loans to unrelated retail customers. Comments noted that the final regulations do not provide a definition of unrelated for this and other purposes. In addition, it may be unclear how the final regulations would apply to a member-owner of a credit union or similar cooperative credit organization. In order to address these concerns, and consistent with the IGAs, these temporary regulations modify the final regulations such that a credit union or similar cooperative credit organization will be eligible for treatment as a nonregistering local bank if its business consists primarily of receiving deposits from and making loans to members, provided that no such member has a greater than five percent interest in such credit union or cooperative credit organization. For purposes of determining what unrelated means for retail customers of a bank, as well as for purposes of aggregating the interests of related members of a credit union or cooperative credit organization under the five percent test, the temporary regulations provide that the rules of section 267(b) apply.
5. Certified Deemed-Compliant FFIs--Limited Life Debt Investment Entities (Transitional)
Comments were received stating that most securitization investment vehicles could not meet the requirements in the final regulations for a limited life debt investment entity (LLDIE) to be treated as certified deemed-compliant FFIs. To accommodate industry practices and expand the types of securitization vehicles that will qualify as a LLDIE, these temporary regulations make a number of significant changes to the definition of LLDIE in the final regulations. These changes include: (i) Removing the requirement that a LLDIE's organizational documents cannot be amended without the consent of all of its investors; (ii) clarifying that a LLDIE issues debt or equity interests under a trust indenture or similar agreement; (iii) extending the category so that it applies to a LLDIE that issued all of its interests on or before
6. Certified Deemed-Compliant FFIs--
In response to comments, and to coordinate with the IGAs, these temporary regulations add certain investment advisors and investment managers that do not maintain financial accounts as entities eligible for treatment as certified deemed-compliant FFIs. Accordingly, these temporary regulations also add identification rules with respect to such investment advisors and investment managers.
7. Related Persons
Certain provisions in the final regulations (such as SUBSEC 1.1471-3(c)(9)(ii)(B); 1.1471-5(f)(2)(i)(B); 1,1471-5(f)(4)(i); and 1.1471-5(i)(6)(i)) use the term related or unrelated to describe a relationship between parties. Comments noted that the final regulations do not define what is meant by related. These temporary regulations generally amend the relevant paragraphs of the final regulations to provide that parties are related for purposes of the relevant paragraph when such parties have a relationship described in section 267(b).
E.
Comments requested that a LLDIE not be considered a member of an expanded affiliated group as a result of any member of such expanded affiliated group owning interests in such entity. These comments indicated that because interests in these entities are generally held through a clearing organization, these entities often would not be able to determine the identity of their investors. In addition, comments noted the burden of monitoring ownership changes for the purpose of determining when to include or exclude a LLDIE as a member of an expanded affiliated group, and the potential adverse consequences to the rest of the group in the event that any such entity is not properly included. Comments also stated that the definition of expanded affiliated group in the final regulations presents challenges with respect to non-corporate entities that are within a chain of commonly controlled corporations. For example, the final regulations do not clearly indicate whether constructive ownership rules apply to determine whether a non-corporate entity is controlled by a member of the group. In response to these comments, these temporary regulations modify the definition of expanded affiliated group to exclude from the group pre-existing LLDIEs (for example, a LLDIE that issued all of its interests, and was in existence, on or before
VII. Comments and Changes to Section 1.1471-6--Payments Beneficially Owned by Exempt Beneficial Owners--
Comments were received stating that the functions of a foreign central bank of issue may be performed by an institution other than a bank. In response to these comments and in order to coordinate the regulations with the IGAs, these temporary regulations modify the final regulations to include an institution performing such functions within the definition of a foreign central bank of issue. In addition, comments stated that a foreign central bank of issue may earn income from cash as well as securities. Accordingly, the temporary regulations allow a foreign central bank of issue to be a beneficial owner with respect to income earned on cash.
Comments also stated that some foreign central banks maintain depository accounts solely for their employees. These comments requested that such employee-only accounts not be treated as accounts held in connection with commercial activities.
VIII. Comments and Changes to Section 1.1472-1--Withholding on NFFEs
A. Exceptions--Payments to an Excepted NFFE--Active NFFEs
Comments noted that fiscal year financial statements may not be used in determining whether an entity is an active NFFE. These comments noted that preparing calendar year financial statements for entities using non-calendar fiscal years would cause significant burdens without commensurate benefits. Therefore, these comments suggested that an entity be able to use either its calendar or fiscal year in analyzing whether the entity meets the active NFFE test. Comments further suggested that an entity be allowed to use financial statements based on foreign accounting principles. These comments have been adopted and these temporary regulations modify the final regulations accordingly.
B. Exceptions--Payments Made to an Excepted NFFE
After further consideration, these temporary regulations provide that QIs, WPs, and WTs are treated as excepted NFFEs.
C. Exceptions--Payments to an Excepted NFFE--Direct Reporting NFFEs and Sponsored Direct Reporting NFFEs
These temporary regulations provide that excepted NFFE includes a NFFE that is a direct reporting NFFE or sponsored direct reporting NFFE. A direct reporting NFFE is a NFFE that elects to report on Form 8966 directly to the
In addition, these temporary regulations modify the final regulations such that an entity may act as a sponsor for one or more direct reporting NFFEs. A sponsoring entity will report on Form 8966 directly to the
IX. Changes and Comments to
A. Definition of Withholdable Payment--U.S. Source FDAP Income Defined--Special Rule for Sales of Interest Bearing Debt Obligations; Gross Proceeds Defined--Payment of Gross Proceeds--Amount of Gross Proceeds
Under the final regulations, income that is otherwise described as U.S. source FDAP income does not include interest accrued on the date of a sale or exchange of an interest bearing debt obligation if the sale occurs between two interest payment dates. In order to harmonize this rule with the rules in chapter 3, these temporary regulations provide that this type of interest is not excluded from U.S. source FDAP income or gross proceeds if the sale or exchange is part of a plan described in the anti-abuse rule under
B. Definition of Withholdable Payment--Payments Not Treated as Withholdable Payments--Offshore Payments of U.S. Source FDAP Income Prior to 2017 (Transitional)
1. In General
The final regulations provide an exclusion from the definition of withholdable payments for certain non-intermediated offshore payments of U.S. source FDAP income prior to 2017.
Comments indicated that because the defined term payments with respect to an offshore obligation is not used in the final regulations, it is unclear whether, in order for this exception to apply, all payments must be made outside the U.S. To clarify, these temporary regulations modify the final regulations to use the defined term.
2. Insurance Brokers
Because the final regulations treat insurance brokers as intermediaries, the transitional rule for offshore payments of U.S. source FDAP income under the final regulations does not apply to insurance and reinsurance premiums paid to foreign insurance companies by non-U.S. insurance brokers. Comments were received stating that the transitional rule should apply to such premiums, because it applies to insurance premiums paid directly by the insured. These temporary regulations provide a transitional rule such that, for purposes of the exception for offshore payments, an intermediary does not include a person acting as an insurance broker with respect to premiums.
C. Definition of Withholdable Payment--Payments Not Treated as Withholdable Payments--Collateral Arrangements Prior to 2017 (Transitional)
Comments requested relief from withholding on payments made by a secured party with respect to collateral securing one or more transactions under a collateral arrangement between the secured party and the counterparty. Comments indicated that general industry practice is to commingle collateral from all counterparties in a single account held by the secured party and that this practice does not permit the identification of collateral to a particular counterparty. As a result, a secured party is currently unable to determine whether it is acting as an intermediary or a principal with respect to some or all of the payments made to the counterparty based upon the secured party's right under a collateral arrangement to sell or loan the collateral to a third party. To allow the industry time to develop the systems necessary to make this determination, these temporary regulations add a transitional rule so that withholding on such payments will begin on
D. Substantial U.S. Owner--Indirect Ownership of Foreign Entities--Interests Owned or Held by a Related Person
The final regulations define a substantial U.S. owner to include a specified U.S. person that owns, directly or indirectly, more than 10 percent of a foreign corporation, partnership, or trust. Ownership is determined by aggregating interests held by related persons, applying certain provisions of the regulations under section 267 to determine whether such persons are related. These temporary regulations clarify that a person must have direct or indirect ownership in the entity before the aggregation rules apply, such that a substantial U.S. owner does not include an individual with no ownership interest other than an interest attributed to him from a related person.
X. Changes and Comments to
A. Information Returns for Payment Reporting--Filing Requirement--in General
The final regulations provide a general statement that a withholding agent needs to file a Form 1042-S to report a chapter 4 reportable amount, even though there are exceptions to this rule, such as the exception applicable to a participating FFI that provides its withholding agent with sufficient information for it to do the reporting. The final regulations have been modified to qualify this language.
The final regulations also provide that a recipient copy of the Form 1042-S may include more than one type of income, which would thus display information differently than the copy filed with the
However, to allow sufficient time for withholding agents to adapt to this change to the final regulations, a withholding agent will be permitted to include more than one type of income or other payment on the recipient copy of the Form 1042-S for calendar year 2014. Starting with calendar year 2015, the Form 1042-S and accompanying instructions will require a separate Form 1042-S for each type of income or other payment.
B. Information Returns for Payment Reporting--Filing Requirement--Recipient--Defined; Persons That Are Not Recipients
For Form 1042-S reporting, the final regulations provide that an excepted NFFE that is not acting as an agent or intermediary with respect to the payment is the recipient of the payment in question. However, if such entity is a flow-through entity, it is not treated as a recipient on the Form 1042-S for chapter 3 purposes. In order to have a consistent definition of recipient for chapters 3 and 4 reporting purposes (because reporting for both chapters is performed on a single Form 1042-S), these temporary regulations modify the final regulations by providing that an excepted or passive NFFE that is a flow-through entity is not treated as a recipient. Also, the final regulations have been modified to remove the provision indicating that a participating FFI or registered deemed-compliant FFI is not a recipient when it fails to provide information to the withholding agent regarding its reporting pools, which is reflected on Form 1042-S. These temporary regulations further remove the references to a participating FFI, registered deemed-compliant FFI, and U.S. branch that is not treated as a U.S. person from the definition of persons that are not recipients.
C. Information Returns for Payment Reporting--Amounts Subject To Reporting--in General
These temporary regulations make a correction to the definition of the term chapter 4 reportable amount in
D. Information Returns for Payment Reporting--Method of Reporting--Payments by U.S. Withholding Agents to Recipients--Payments To Participating FFIs, Deemed-Compliant FFIs, and Certain QIs
Consistent with changes made by these temporary regulations to clarify the chapter 4 withholding rate pools, the final regulations are modified to clarify that a withholding agent that receives an FFI withholding statement from a participating FFI or registered deemed-compliant FFI [must report with respect to each such pool identified on the FFI withholding statement] on a separate Form 1042-S issued to the participating FFI, registered deemed-compliant FFI, or QI (as applicable) as the recipient with respect to each such pool identified on an FFI withholding statement.
XI. Comments and Changes to
These temporary regulations add a coordination rule for instances in which a participating FFI withholds under chapter 4 on a payment made to a recalcitrant account holder that is a U.S. non-exempt recipient, and such payment is also a reportable amount subject to backup withholding. The rule is applicable to cases in which the participating FFI does not elect to withhold on the payment under section 3406.
XII. Future Guidance
A. Verification Requirements of Sponsoring Entities
Regulations describing the verification requirements of sponsoring entities will be proposed and issued separately from these temporary regulations. Under the proposed regulations, a sponsoring entity will be required to make two separate compliance certifications: one on behalf of its sponsored FFI or sponsored direct reporting NFFE with respect to the sponsored FFI's compliance with the requirements of an FFI agreement or the sponsored direct reporting NFFE's election to be treated as a direct reporting NFFE (as applicable), and a second certification on the sponsoring entity's own behalf with respect to its compliance with the requirements of its status as a sponsoring entity. In addition, the verification requirements in the proposed regulations will allow the
B. FFI Agreement
Several changes made by these temporary regulations are not reflected in and may be inconsistent with certain provisions in the FFI agreement. As a result, the
In addition, cross references to the temporary regulations under chapters 3, 4, and 61 will be updated to reflect changes to the numbering of various sections of those temporary regulations after the date of publication of the revenue procedure containing the FFI agreement. For example, cross references in the FFI agreement to terms defined in the chapter 4 temporary regulations will be modified to reflect the addition of the term reporting Model 2 FFI and the renumbering of subsequent sections in
The FFI agreement will also be revised to reflect a change to the reporting requirements by participating FFIs that elect to backup withhold under section 3406 rather than to withhold under chapter 4 on a withholdable payment that is a reportable payment made to a recalcitrant account holder that is a U.S. non-exempt recipient subject to backup withholding. These temporary regulations clarify that a participating FFI may make the election to apply backup withholding under section 3406 with respect to an account holder only if it complies with the information reporting rules under chapter 61 and section 3406. Accordingly, various sections of the FFI agreement will be modified to reflect this change.
Special Analyses
It has been determined that this Treasury decision is not a significant regulatory action as defined in Executive Order 12866, as supplemented by Executive Order 13653. Therefore, a regulatory assessment is not required. It also has been determined that section 553(b) of the Administrative Procedure Act (5
The collection of information in these temporary regulations is contained in a number of provisions including SUBSEC 1.1471-3, 1.1471-4, 1.1472-1, 1.1474-1, and 1.1474-6. In addition, these temporary regulations amend a number of collections of information set out in TD 9610. The
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid control number.
Books and records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103.
Section 202 of the Unfunded Mandates Reform Act of 1995, Public Law 104-4, requires that an agency prepare a costs and benefits analysis and a budgetary impact statement before promulgating a rule that may result in the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of
For the applicability of the Regulatory Flexibility Act (5 U.S.C. chapter 6), please refer to the Special Analyses section of the preamble to the cross-referenced notice of proposed rulemaking published in the Proposed Rules section in this issue of the
Drafting Information
The principal authors of these regulations are
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
Amendments to the Regulations
Accordingly, 26 CFR part 1 is amended as follows:
PART 1--INCOME TAXES
Paragraph 1. The authority citation for part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.1471-1 is also issued under 26 U.S.C. 1471.
Section 1.1471-2 is also issued under 26 U.S.C. 1471.
Section 1.1471-3 is also issued under 26 U.S.C. 1471.
Section 1.1471-4 is also issued under 26 U.S.C. 1471.
Section 1.1471-5 is also issued under 26 U.S.C. 1471.
Section 1.1471-6 is also issued under 26 U.S.C. 1471.
Section 1.1472-1 is also issued under 26 U.S.C. 1472.
Section 1.1471-3 is also issued under 26 U.S.C. 1473.
Section 1.1474-1 is also issued under 26 U.S.C. 1474.
Section 1.1474-6 is also issued under 26 U.S.C. 1474.
Par. 2. Section 1.1471-1 is amended:
1. By removing paragraph (b)(81).
2. By redesignating paragraphs (b)(115) through (b)(142) as (b)(124) through (b)(151), paragraphs (b)(108) through (b)(114) as (b)(116) through (b)(122), paragraph (b)(107) as (b)(114), paragraphs (b)(82) through (b)(106) as (b)(88) through (b)(112), paragraphs (b)(75) through (b)(80) as (b)(82) through (b)(87), paragraphs (b)(62) through (b)(74) as (b)(68) through (b)(80), paragraphs (b)(39) through (b)(61) as (b)(44) through (b)(66), paragraphs (b)(28) through (b)(38) as (b)(32) through (b)(42), paragraphs (b)(18) through (b)(27) as (b)(21) through (b)(30), paragraphs (b)(9) through (b)(17) as (b)(11) through (b)(19), and paragraphs (b)(7) and (b)(8) as (b)(8) and (b)(9).
3. By adding new paragraphs (b)(7), (b)(10), (b)(20), (b)(31), (b)(43), (b)(67), (b)(81), (b)(113), (b)(115), and (b)(123).
4. By revising newly-designated paragraphs (b)(23), (b)(35), (b)(41), (b)(48), (b)(50), (b)(76), (b)(77), (b)(83), (b)(88), (b)(91), (b)(98), (b)(100), (b)(104)(i), (b)(104)(ii)(A) through (C), (b)(105), (b)(124), (b)(125), (b)(128), (b)(135), and (b)(141).
The revisions and additions read as follows:
* * * * *
(b) * * *
(7) [Reserved]. For further guidance, see
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(10) [Reserved]. For further guidance, see
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(20) [Reserved]. For further guidance, see
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(23) [Reserved]. For further guidance, see
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(31) [Reserved]. For further guidance, see
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(35) [Reserved]. For further guidance, see
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(41) [Reserved]. For further guidance, see
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(43) [Reserved]. For further guidance, see
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(48) [Reserved]. For further guidance, see
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(50) [Reserved]. For further guidance, see
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(67) [Reserved]. For further guidance, see
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(76) [Reserved]. For further guidance, see
(77) [Reserved]. For further guidance, see
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(81) [Reserved]. For further guidance, see
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(83) [Reserved]. For further guidance, see
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(88) [Reserved]. For further guidance, see
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(91) [Reserved]. For further guidance, see
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(98) [Reserved]. For further guidance, see
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(100) [Reserved]. For further guidance, see
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(104) * * *
(i) [Reserved]. For further guidance, see
(ii) * * *
(A) [Reserved]. For further guidance, see
(B) [Reserved]. For further guidance, see
(C) [Reserved]. For further guidance, see
(105) [Reserved]. For further guidance, see
* * * * *
(113) [Reserved]. For further guidance, see
* * * * *
(115) [Reserved]. For further guidance, see
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(123) [Reserved]. For further guidance, see
(124) [Reserved]. For further guidance, see
(125) [Reserved]. For further guidance, see
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(128) [Reserved]. For further guidance, see
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(135) [Reserved]. For further guidance, see
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(141) [Reserved]. For further guidance, see
* * * * *
Par. 3. Section 1.1471-1T is added to read as follows:
(a) [Reserved]. For further guidance, see
(b) [Reserved]. For further guidance, see
(1) through (6) [Reserved]. For further guidance, see
(7) Backup withholding. The term backup withholding means the withholding required under section 3406.
(8) [Reserved]. For further guidance, see
(9) [Reserved]. For further guidance, see
(10) Branch. The term branch means a branch as defined in
(11) through (19) [Reserved]. For further guidance, see
(20) Chapter 4 withholding rate pool. The term chapter 4 withholding rate pool means a pool identified on a chapter 4 withholding statement (as described in
(21) through (22) [Reserved]. For further guidance, see
(23) Consolidated obligations. The term consolidated obligations means multiple obligations that a withholding agent (including a withholding agent that is an FFI) has chosen to treat as a single obligation in order to treat the obligations as preexisting obligations pursuant to paragraph (b)(104)(ii) of this section or in order to share documentation between the obligations pursuant to
(24) through (30) [Reserved]. For further guidance, see
(31) Direct reporting NFFE. The term direct reporting NFFE has the meaning set forth in
(32) through (34) [Reserved]. For further guidance, see
(35) Effective date of the FFI agreement. The term effective date of the FFI agreement with respect to an FFI or a branch of an FFI that is a participating FFI means the date on which the
(36) through (40) [Reserved]. For further guidance, see
(41) Excepted NFFE. The term excepted NFFE means a NFFE that is described in
(42) [Reserved]. For further guidance, see
(43) Exempt recipient. The term exempt recipient means a person described in
(44) through (47) [Reserved]. For further guidance, see
(48) FFI agreement. The term FFI agreement means an agreement that is described in
(49) [Reserved]. For further guidance, see
(50) Financial institution. The term financial institution has the meaning set forth in
(51) through (66) [Reserved]. For further guidance, see
(67) Intergovernmental agreement (IGA). The term intergovernmental agreement or IGA means any applicable Model 1 or Model 2 IGA.
(68) through (75) [Reserved]. For further guidance, see
(76) Limited branch. The term limited branch has the meaning set forth in
(77) Limited FFI. The term limited FFI has the meaning set forth in
(78) through (80) [Reserved]. For further guidance, see
(81) Non-exempt recipient. The term non-exempt recipient means a person that is not an exempt recipient.
(82) [Reserved]. For further guidance, see
(83) Nonreporting IGA FFI. The term nonreporting IGA FFI means an FFI that is identified as a nonreporting financial institution pursuant to a Model 1 IGA or Model 2 IGA that is not a registered deemed-compliant FFI, and an FFI that is a resident of, or located or established in, a Model 1 or Model 2 IGA jurisdiction, as the context requires, and that meets the requirements for certified deemed-compliant FFI status under
(84) through (87) [Reserved]. For further guidance, see
(88) Offshore obligation. The term offshore obligation means an offshore obligation defined in
(89) through (90) [Reserved]. For further guidance, see
(91) Participating FFI. The term participating FFI means an FFI that has agreed to comply with the requirements of an FFI agreement, including an FFI described in a Model 2 IGA that has agreed to comply with the requirements of an FFI agreement (a reporting Model 2 FFI). The term participating FFI also includes a QI branch of a U.S. financial institution, unless such branch is a reporting Model 1 FFI.
(92) through (97) [Reserved]. For further guidance, see
(98) Payor. The term payor has the meaning set forth in SUBSEC 31.3406(a)-2 and 1.6049-1(a)(2) and generally includes a withholding agent.
(99) [Reserved]. For further guidance, see
(100) Person. The term person has the meaning set forth in section 7701(a)(1) and the regulations thereunder and includes an entity or arrangement that is an insurance company. The term person also includes, with respect to a withholdable payment, a QI branch of a U.S. financial institution.
(101) through (103) [Reserved]. For further guidance, see
(104) [Reserved]. For further guidance, see
(i) The term preexisting obligation means any account, instrument, contract, debt, or equity interest maintained, executed, or issued by the withholding agent that is outstanding on
(ii) [Reserved]. For further guidance, see
(A) The account holder or payee also holds with the withholding agent (or a member of the withholding agent's expanded affiliated group or sponsored FFI group) an account, instrument, contract, or equity interest that is a preexisting obligation under paragraph (b)(104)(i) of this section;
(B) The withholding agent (and, as applicable, the member of the withholding agent's expanded affiliated group or sponsored FFI group) treats both of the aforementioned obligations, and any other obligations of the payee or account holder that are treated as preexisting obligations under this paragraph (b)(104)(ii), as consolidated obligations; and
(C) With respect to an obligation that is subject to AML due diligence, the withholding agent is permitted to satisfy such AML due diligence for the obligation by relying upon the AML due diligence performed for the preexisting obligation described in paragraph (b)(104)(i) of this section.
(105) Pre-FATCA Form W-8. The term pre-FATCA Form W-8 means a version of a Form W-8 that was issued by the
(106) through (112) [Reserved]. For further guidance, see
(113) Reportable payment. The term reportable payment means a payment of interest or dividends (as defined in section 3406(b)(2)) and other reportable payments (as defined in section 3406(b)(3)).
(114) [Reserved]. For further guidance, see
(115) Reporting Model 2 FFI. The term reporting Model 2 FFI means a participating FFI that is described in
(116) through (122) [Reserved]. For further guidance, see
(123) Sponsored direct reporting NFFE. The term sponsored direct reporting NFFE has the meaning set forth in
(124) Sponsoring entity. The term sponsoring entity means (i) an entity that registers with the
(125) Standardized industry coding system. The term standardized industry coding system means a coding system used by the withholding agent or FFI to classify account holders by business type for purposes other than U.S. tax purposes and that was implemented by the withholding agent by the later of
(126) through (127) [Reserved]. For further guidance, see
(128) Substantial U.S. owner. The term substantial U.S. owner or substantial
(129) through (134) [Reserved]. For further guidance, see
(135) U.S. branch treated as a U.S. person. The term U.S. branch treated as a U.S. person means a U.S. branch of a participating FFI, registered deemed-compliant FFI, or NFFE that is treated as a U.S. person under
(136) through (140) [Reserved]. For further guidance, see
(141) U.S. person-- (i) The term U.S. person or
(ii) The term U.S. person or
(142) through (151) [Reserved]. For further guidance, see
(c) [Reserved]. For further guidance, see
(d) Expiration date. The applicability of this section expires on
Par. 4. In
a. Revise paragraphs (a)(1), (a)(2)(i), (a)(2)(ii) introductory text, (a)(2)(iii)(A), and (a)(2)(v).
b. Remove the heading of paragraph (a)(4)(ii), and add introductory text to paragraph (a)(4)(ii).
c. Revise paragraphs (a)(4)(ii)(A), (a)(4)(ii)(B), (b)(2)(i)(A)( 1), (b)(2)(ii)(A)( 4), (b)(2)(ii)(B)( 2), (b)(2)(iv), and (b)(4)(ii).
The revisions read as follows:
(a) * * *
(1) [Reserved]. For further guidance, see
(2) * * *
(i) [Reserved]. For further guidance, see
(ii) [Reserved]. For further guidance, see
(iii) * * *
(A) [Reserved]. For further guidance, see
* * * * *
[Reserved]. For further guidance, see
* * * * *
(4) * * *
(ii) [Reserved]. For further guidance, see
(A) [Reserved]. For further guidance, see
(B) [Reserved]. For further guidance, see
* * * * *
(b) * * *
(2) * * *
(i) * * *
(A) * * *
( 1) [Reserved]. For further guidance, see
* * * * *
(ii) * * *
(A) * * *
( 4) [Reserved]. For further guidance, see
* * * * *
(B) * * *
( 2) [Reserved]. For further guidance, see
* * * * *
(iv) [Reserved]. For further guidance, see
* * * * *
(4) * * *
(ii) [Reserved]. For further guidance, see
* * * * *
Par. 5. Section 1.1471-2T is added to read as follows:
(a) [Reserved]. For further guidance, see
(1) General rule of withholding. Under section 1471(a), notwithstanding any exemption from withholding under any other provision of the Code or regulations, a withholding agent must withhold 30 percent of any withholdable payment made after
(2) [Reserved]. For further guidance, see
(i) Requirement to withhold on payments of U.S. source FDAP income to participating FFIs and deemed-compliant FFIs that are NQIs, NWPs, or NWTs. A withholding agent that, after
(ii) Residual withholding responsibility of intermediaries and flow-through entities. An intermediary or flow-through entity that receives a withholdable payment after
(iii) [Reserved]. For further guidance, see
(A) Election to be withheld upon for U.S. source FDAP income. A withholding agent is required to withhold with respect to a payment, or portion of a payment, that is U.S. source FDAP income subject to withholding that is made after
( 1) through (4) [Reserved]. For further guidance, see
(B) [Reserved]. For further guidance, see
(iv) [Reserved]. For further guidance, see
(v) Withholding obligation of a foreign branch of a U.S. financial institution. Generally, a foreign branch of a U.S. financial institution is a withholding agent and is not an FFI. However, a QI branch of a U.S. financial institution is both a withholding agent and either a participating FFI or a registered deemed-compliant FFI. Accordingly, a QI branch of a U.S. financial institution must withhold in accordance with this section and
(vi) [Reserved]. For further guidance, see
(3) [Reserved]. For further guidance, see
(4) [Reserved]. For further guidance, see
(i) through (i)(B) [Reserved]. For further guidance, see
(ii) Exception to withholding for certain payments made prior to
(A) In general. For any withholdable payment made prior to
(B) Prima facie FFIs. If the payee is a prima facie FFI, the withholding agent must treat the payee as a nonparticipating FFI beginning on
( 1) through (2)( xviii) [Reserved]. For further guidance, see
(iii) through (viii) [Reserved]. For further guidance, see
(5) through (5)(ii) [Reserved]. For further guidance, see
(b) [Reserved]. For further guidance, see
(1) [Reserved]. For further guidance, see
(2) [Reserved]. For further guidance, see
(i) [Reserved]. For further guidance, see
(A) [Reserved]. For further guidance, see
( 1) Any obligation outstanding on
( 2) through (3) [Reserved]. For further guidance, see
(B) [Reserved]. For further guidance, see
(ii) [Reserved]. For further guidance, see
(A) [Reserved]. For further guidance, see
( 1) through (3) [Reserved]. For further guidance, see
( 4) A life insurance contract under which the entire contract value is payable no later than upon the death of the individual(s) insured under the contract but, in the case of a life insurance contract that contains a provision that permits the substitution of a new individual as the insured under the contract, only until a substitution occurs; and
( 5) [Reserved]. For further guidance, see
(B) [Reserved]. For further guidance, see
( 1) [Reserved]. For further guidance, see
( 2) Lacks a stated expiration or term (for example, a savings deposit or demand deposit, a deferred annuity contract, or an annuity contract that permits a substitution of a new individual as the annuitant under the contract);
( 3) through (4) [Reserved]. For further guidance, see
(iii) [Reserved]. For further guidance, see
(iv) Material modification. In the case of an obligation that constitutes indebtedness for U.S. tax purposes, a material modification is any significant modification of the debt instrument as defined in
(3) through (3)(iii) [Reserved]. For further guidance, see
(4) [Reserved]. For further guidance, see
(i) [Reserved]. For further guidance, see
(ii) Determination of material modification. For purposes of paragraph (b)(2)(iv) of this section (defining material modification), a withholding agent, other than the issuer of the obligation (or an agent of the issuer), is required to treat a modification of the obligation as material only if the withholding agent has actual knowledge thereof, such as in the event the withholding agent receives a disclosure indicating that there has been or will be a material modification to such obligation. The issuer of the obligation (or an agent of the issuer) that is a withholding agent is required to treat a modification of the obligation as material if the withholding agent knows or has reason to know that a material modification has occurred with respect to the obligation.
(iii) [Reserved]. For further guidance, see
(c) [Reserved]. For further guidance, see
(d) Expiration date. The applicability of this section expires on
Par. 6. Section 1.1471-3 is amended:
1. By adding paragraphs (c)(6)(ii)(B)( 7), (c)(8)(v), (d)(5)(iii), and (d)(11)(x) through (xii).
2. By revising paragraphs (a)(3)(iii), (a)(3)(v) through (vi), (b)(3), (c)(3)(ii)(C) through (D), (c)(3)(iii)(A) introductory text, (c)(3)(iii)(A)( 5), (c)(3)(iii)(B)( 1) through (4), (c)(5)(ii)(B), (c)(6)(ii)(B)( 3), (c)(6)(ii)(B)( 5) through (6), (c)(6)(ii)(C)( 3) through (5), (c)(6)(ii)(E)( 3), (c)(6)(iv), (c)(6)(v)(A) through (B), (c)(9)(ii)(B), (c)(9)(v), (d)(1), (d)(2)(i), (d)(2)(iii), (d)(4)(i) and (ii), (d)(4)(iii) introductory text, (d)(4)(iii)(A)( 1), (d)(4)(iv)(A), (d)(4)(iv)(C) through (D), (d)(4)(v), (d)(5)(i) through (ii), (d)(6)(vii)(A)( 1), (d)(11)(viii)(A) introductory text, (d)(11)(viii)(C), (d)(12)(iii)(A) through (B), (e)(2) through (3), (e)(4) introductory text, (e)(4)(i) through (iv), (e)(4)(v) introductory text, (e)(4)(v)(B)( 1) through (2), (e)(4)(vi)(B), (e)(4)(vii)(B), (e)(4)(viii)(A)( 4), and (f)(1) through (9).
The additions and revisions read as follows:
(a) * * *
(3) * * *
(iii) [Reserved]. For further guidance, see
* * * * *
(v) [Reserved]. For further guidance, see
(vi) [Reserved]. For further guidance, see
* * * * *
(b) * * *
(3) [Reserved]. For further guidance, see
* * * * *
(c) * * *
(3) * * *
(ii) * * *
(C) [Reserved]. For further guidance, see
(D) [Reserved]. For further guidance, see
* * * * *
(iii) * * *
(A) [Reserved]. For further guidance, see
* * * * *
( 5) [Reserved]. For further guidance, see
* * * * *
(B) * * *
( 1) [Reserved]. For further guidance, see
( 2) [Reserved]. For further guidance, see
( i) [Reserved]. For further guidance, see
( ii) [Reserved]. For further guidance, see
( iii) [Reserved]. For further guidance, see
( 3) [Reserved]. For further guidance, see
( 4) [Reserved]. For further guidance, see
* * * * *
(5) * * *
(ii) * * *
(B) [Reserved]. For further guidance, see
* * * * *
(6) * * *
(ii) * * *
(B) * * *
( 3) [Reserved]. For further guidance, see
* * * * *
( 5) [Reserved]. For further guidance, see
( 6) [Reserved]. For further guidance, see
( 7) [Reserved]. For further guidance, see
(C) * * *
( 3) [Reserved]. For further guidance, see
( 4) [Reserved]. For further guidance, see
( 5) [Reserved]. For further guidance, see
* * * * *
(E) * * *
( 3) [Reserved]. For further guidance, see
* * * * *
(iv) [Reserved]. For further guidance, see
(v) * * *
(A) [Reserved]. For further guidance, see
(B) [Reserved]. For further guidance, see
* * * * *
(8) * * *
(v) [Reserved]. For further guidance, see
(9) * * *
(ii) * * *
(B) [Reserved]. For further guidance, see
* * * * *
(v) [Reserved]. For further guidance, see
(d) * * *
(1) [Reserved]. For further guidance, see
(2) * * *
(i) [Reserved]. For further guidance, see
* * * * *
(iii) [Reserved]. For further guidance, see
* * * * *
(4) * * *
(i) [Reserved]. For further guidance, see
(ii) [Reserved]. For further guidance, see
(iii) [Reserved]. For further guidance, see
(A) * * *
( 1) [Reserved]. For further guidance, see
* * * * *
(iv) * * *
(A) [Reserved]. For further guidance, see
* * * * *
(C) [Reserved]. For further guidance, see
(D) [Reserved]. For further guidance, see
(v) [Reserved]. For further guidance, see
(5) * * *
(i) [Reserved]. For further guidance, see
(ii) [Reserved]. For further guidance, see
(A) [Reserved]. For further guidance, see
(B) [Reserved]. For further guidance, see
(iii) [Reserved]. For further guidance, see
(6) * * *
(vii) * * *
(A) * * *
( 1) [Reserved]. For further guidance, see
* * * * *
(11) * * *
(viii) * * *
(A) [Reserved]. For further guidance, see
* * * * *
(C) [Reserved]. For further guidance, see
* * * * *
(x) [Reserved]. For further guidance, see
(xi) [Reserved]. For further guidance, see
(xii) [Reserved]. For further guidance, see
(12) * * *
(iii) * * *
(A) [Reserved]. For further guidance, see
(B) [Reserved]. For further guidance, see
(e) * * *
(2) [Reserved]. For further guidance, see
(3) [Reserved]. For further guidance, see
(i) [Reserved]. For further guidance, see
(ii) [Reserved]. For further guidance, see
(iii) [Reserved]. For further guidance, see
(iv) [Reserved]. For further guidance, see
(4) [Reserved]. For further guidance, see
(i) [Reserved]. For further guidance, see
(ii) [Reserved]. For further guidance, see
(A) [Reserved]. For further guidance, see
(B) [Reserved]. For further guidance, see
(iii) [Reserved]. For further guidance, see
(iv) [Reserved]. For further guidance, see
(v) [Reserved]. For further guidance, see
* * * * *
(B) * * *
( 1) [Reserved]. For further guidance, see
( 2) [Reserved]. For further guidance, see
* * * * *
(vi) * * *
(B) [Reserved]. For further guidance, see
(vii) * * *
(B) [Reserved]. For further guidance, see
* * * * *
(viii) * * *
(A) * * *
( 4) [Reserved]. For further guidance, see
* * * * *
(f) * * *
(1) [Reserved]. For further guidance, see
(2) [Reserved]. For further guidance, see
(3) [Reserved]. For further guidance, see
(4) [Reserved]. For further guidance, see
(5) [Reserved]. For further guidance, see
(6) [Reserved]. For further guidance, see
(7) [Reserved]. For further guidance, see
(i) [Reserved]. For further guidance, see
(ii) [Reserved]. For further guidance, see
(8) [Reserved]. For further guidance, see
(9) [Reserved]. For further guidance, see
* * * * *
Par. 7. Section 1.1471-3T is added to read as follows:
(a) [Reserved]. For further guidance, see
(1) through (2) [Reserved]. For further guidance, see
(3) [Reserved]. For further guidance, see
(i) through (ii)(B) [Reserved]. For further guidance, see
(iii) U.S. intermediary or agent of a foreign person. A withholding agent that makes a withholdable payment to a U.S. person and has actual knowledge that the person receiving the payment is acting as an intermediary or agent of a foreign person with respect to the payment must treat such foreign person, and not the intermediary or agent, as the payee of such payment. Notwithstanding the previous sentence, a withholding agent that makes a withholdable payment to a U.S. financial institution or a U.S. insurance broker (to the extent such withholdable payment is a payment of premiums) that is acting as an intermediary or agent with respect to the payment on behalf of one or more foreign persons may treat the U.S. financial institution or U.S. insurance broker as the payee if the withholding agent does not have reason to know that the U.S. financial institution or U.S. insurance broker will not comply with its obligations to withhold under sections 1471 and 1472.
(iv) [Reserved]. For further guidance, see
(v) Disregarded entity or limited branch. Except as otherwise provided in paragraph (a)(3)(v) through (vii) of this section, a withholding agent that makes a withholdable payment to an entity that is disregarded for U.S. federal tax purposes under
(vi) U.S. branch of certain foreign banks or foreign insurance companies. A withholdable payment to a U.S. branch of either a participating FFI or registered deemed-compliant FFI is a payment to a U.S. person if the U.S. branch is treated as a U.S. person for purposes of
(vii) [Reserved]. For further guidance, see
(b) [Reserved]. For further guidance, see
(1) through (2) [Reserved]. For further guidance, see
(3) Determination of whether the payment is made to a QI, WP, or WT. A withholding agent may treat the person who receives a payment as a QI, WP, or WT if the withholding agent can reliably associate the payment with a valid Form W-8IMY, as described in paragraph (c)(3)(iii) of this section, that indicates that the person who receives the payment is a QI, WP, or WT, provides the person's QI-EIN, WP-EIN, or WT-EIN, and the person's GIIN, if applicable.
(4) [Reserved]. For further guidance, see
(c) [Reserved]. For further guidance, see
(1) through (2)(ii) [Reserved]. For further guidance, see
(3) [Reserved]. For further guidance, see
(i) [Reserved]. For further guidance, see
(ii) [Reserved]. For further guidance, see
(A) through (B) [Reserved]. For further guidance, see
(C) The person's entity classification for U.S. tax purposes;
(D) The person's chapter 4 status; and
(E) [Reserved]. For further guidance, see
(iii) [Reserved]. For further guidance, see
(A) In general. A withholding certificate of an intermediary, flow-through entity, or U.S. branch of such entity (whether or not such branch is treated as a U.S. person) is valid for purposes of chapter 4 only if it is furnished on a Form W-8IMY, an acceptable substitute form, or such other form as the
( 1) through (4) [Reserved]. For further guidance, see
( 5) A GIIN, in the case of a participating FFI or a registered deemed-compliant FFI (including a U.S. branch of such an entity, whether or not such branch is treated as a U.S. person, and a QI, WP, or WT that is a participating FFI or registered deemed-compliant FFI), and an EIN in the case of a QI, WP, or WT. Additionally, if a branch (other than a U.S. branch) of a participating FFI or registered deemed-compliant FFI outside of its country of residence acts as an intermediary, the GIIN of such branch must be provided on the withholding certificate. In the case of a U.S. branch, the GIIN provided must be the GIIN assigned to the participating FFI or registered deemed-compliant FFI.
( 6) through (12) [Reserved]. For further guidance, see
(B) [Reserved]. For further guidance, see
( 1) In general. A withholding statement forms an integral part of the withholding certificate and the penalties of perjury statement provided on the withholding certificate applies to the withholding statement as well. The withholding statement may be provided in any manner, and in any form, to which the person submitting the form and the withholding agent mutually agree, including electronically. A withholding statement may be provided electronically only if it meets the requirements of
( 2) Special requirements for an FFI withholding statement.
( i) An FFI withholding statement may include either payee-specific information or pooled information that indicates the portion of the payment allocable to a chapter 4 withholding rate pool of U.S. payees, each class of recalcitrant account holders identified in
( ii) An FFI withholding statement provided by a reporting Model 2 FFI or a reporting Model 1 FFI may indicate, with respect to a withholdable payment, that the payment is allocable to a chapter 4 withholding rate pool of U.S. payees, which is comprised of account holders that are not subject to withholding under chapters 3 or 4 or to backup withholding under section 3406 (for example, presumed U.S. non-exempt recipients) and that are, with respect to a reporting Model 2 FFI, the holders of non-consenting U.S. accounts as described in an applicable IGA when the FFI reports the accounts in one of the pools described in
( iii) An FFI withholding statement provided by a participating FFI or registered deemed-compliant FFI that is a non-U.S. payor (a payor other than a U.S. payor as defined in
( 3) Special requirements for a chapter 4 withholding statement. A chapter 4 withholding statement must contain the name, address, TIN (if any), entity type, and chapter 4 status of each payee, the amount allocated to each payee, a valid withholding certificate or other appropriate documentation sufficient to establish the chapter 4 status of each payee, and each intermediary or flow-through entity that receives the payment on behalf of the payee, in accordance with paragraph (d) of this section, and any other information the withholding agent reasonably requests in order to fulfill its obligations under chapter 4. Notwithstanding the prior sentence, a chapter 4 withholding statement is permitted to provide pooled allocation information with respect to payees that are treated as nonparticipating FFIs. Additionally, if the payment is a reportable amount under chapters 3 or 61, see the provisions of those chapters for any additional information that may be required (including pooled information under the alternative procedures described in
( 4) Special requirements for an exempt beneficial owner withholding statement. An exempt beneficial owner withholding statement must include the name, address, TIN (if any), entity type, and chapter 4 status of each exempt beneficial owner on behalf of which the nonparticipating FFI is receiving the payment, the amount of the payment allocable to each exempt beneficial owner, a valid withholding certificate or other documentation sufficient to establish the chapter 4 status of each exempt beneficial owner in accordance with paragraph (d) of this section, and any other information the withholding agent reasonably requests in order to fulfill its obligations under chapter 4. The withholding statement must allocate the remainder of the payment that is not allocated to an exempt beneficial owner to the nonparticipating FFI receiving the payment. With respect to the amount of the payment allocable to each exempt beneficial owner and subject to withholding under chapter 3, see
(C) through (H) [Reserved]. For further guidance, see
(iv) through (v) [Reserved]. For further guidance, see
(4) [Reserved]. For further guidance, see
(5) [Reserved]. For further guidance, see
(i) [Reserved]. For further guidance, see
(ii) [Reserved]. For further guidance, see
(A) [Reserved]. For further guidance, see
(B) Preexisting obligation documentary evidence. With respect to a preexisting obligation of an entity, any classification in the withholding agent's records with respect to the payee that was determined based on documentation supplied by the payee (or other person receiving the payment) or a standardized industry coding system and that was recorded by the withholding agent consistent with its normal business practices for AML or another regulatory purpose (other than for tax purposes), to the extent permitted by paragraph (d) of this section and provided there is no U.S. indicia associated with the payee for which appropriate curing documentation has not been obtained as set forth in paragraph (e) of this section; and
(C) [Reserved]. For further guidance, see
(6) [Reserved]. For further guidance, see
(i) [Reserved]. For further guidance, see
(ii) [Reserved]. For further guidance, see
(A) [Reserved]. For further guidance, see
(B) [Reserved]. For further guidance, see
( 1) through (2) [Reserved]. For further guidance, see
( 3) A beneficial owner withholding certificate that is provided by an entity described in paragraph (c)(6)(ii)(C)( 2) of this section (other than an entity described in paragraph (c)(6)(ii)(C)( 2)( iii) of this section) and documentary evidence establishing the entity's foreign status when both are provided together;
( 4) [Reserved]. For further guidance, see
( 5) A withholding certificate, written statement, or documentary evidence furnished by a foreign government, government of a U.S. territory, foreign central bank (including the
( 6) Documentary evidence that is not generally renewed or amended (such as a certificate of incorporation); and
( 7) For the validity period of a beneficial owner withholding certificate provided by an entity described in paragraph (c)(6)(ii)(C)( 2)( iii) of this section, see
(C) [Reserved]. For further guidance, see
( 1) through (2) [Reserved]. For further guidance, see
( 3) A withholding certificate or written statement of an owner-documented FFI, but not including the withholding statements, documentary evidence, and withholding certificates of its owners (unless such documentation is permitted indefinite validity under another provision);
( 4) An owner reporting statement associated with a withholding certificate of an owner-documented FFI, provided the account balance of all accounts held by such owner-documented FFI with the withholding agent does not exceed
( 5) A withholding certificate of a passive NFFE or excepted territory NFFE, provided the account balance of all accounts held by such entity with the withholding agent does not exceed
(D) [Reserved]. For further guidance, see
(E) [Reserved]. For further guidance, see
( 1) through (2) [Reserved]. For further guidance, see
( 3) Withholding agent's obligation with respect to a change in circumstances. A certificate or other documentation becomes invalid on the date that the withholding agent holding the certificate or documentation knows or has reason to know that circumstances affecting the correctness of the certificate or documentation have changed. However, a withholding agent may choose to treat a person as having the same chapter 4 status that it had prior to the change in circumstances until the earlier of 90 days from the date that the certificate or documentation became invalid due to the change in circumstances or the date that a new certificate or new documentation is obtained. See, however,
(iii) through (iii)(B) [Reserved]. For further guidance, see
(iv) Electronic transmission of withholding certificate, written statement, and documentary evidence. A withholding agent may accept a withholding certificate (including an acceptable substitute form), a written statement, or other such form as the
(v) [Reserved]. For further guidance, see
(A) In general. A withholding agent may substitute its own form for an official Form W-8 (or such other official form as the
(B) Non-IRS form for individuals. A withholding agent may also substitute its own form for an official Form W-8BEN (for individuals), regardless of whether the substitute form is titled a Form W-8. However, in addition to the name and address of the individual that is the payee or beneficial owner, the substitute form must provide all countries in which the individual is resident for tax purposes, country of birth, a tax identification number (if any) for each country of residence, the individual's date of birth, and must contain a signed and dated certification made under penalties of perjury that the information provided on the form is accurate and will be updated by the individual within 30 days of a change in circumstances that causes the form to become incorrect. Notwithstanding the previous sentence, the signed certification provided on a form need not be signed under penalties of perjury if the form is accompanied by documentary evidence that supports the individual's claim of foreign status. Such documentary evidence may be the same documentary evidence that is used to support foreign status in the case of a payee whose account has U.S. indicia as described in paragraph (e) of this section or
(vi) through (vii) [Reserved]. For further guidance, see
(7) through (7)(ii) [Reserved]. For further guidance, see
(8) [Reserved]. For further guidance, see
(i) through (iv) [Reserved]. For further guidance, see
(v) Preexisting account. A withholding agent may rely on documentation furnished by a payee for a preexisting account held at another branch location of the same withholding agent or at a branch location of a member of the expanded affiliated group of the withholding agent if the withholding agent obtains and reviews copies of such documentation supporting the chapter 4 status designated for the payee and the withholding agent has no reason to know that, at the time the documentation is obtained by the withholding agent, the documentation is unreliable or incorrect. For example, the withholding agent may not rely on documentation furnished by a payee for a preexisting account held at another branch location of the same withholding agent or at a branch location of a member of the expanded affiliated group of the withholding agent if, based on information in the withholding agent's account records, the withholding agent has reason to know that such documentation is unreliable or incorrect.
(9) [Reserved]. For further guidance, see
(i) [Reserved]. For further guidance, see
(ii) [Reserved]. For further guidance, see
(A) [Reserved]. For further guidance, see
(B) The third-party data provider must be in the business of providing credit reports or business reports to customers unrelated to it and must have reviewed all information it has for the entity and verified that such additional information does not conflict with the chapter 4 status claimed by the entity. For purposes of this paragraph (c)(9)(ii)(B), a customer is related to a third-party data provider if they have a relationship with each other that is described in section 267(b).
(C) through (F) [Reserved]. For further guidance, see
(iii) through (iv)(D) [Reserved]. For further guidance, see
(v) Reliance upon documentation for accounts acquired in merger or bulk acquisition for value. A withholding agent that acquires an account from a predecessor or transferor in a merger or bulk acquisition of accounts for value is permitted to rely upon valid documentation (or copies of valid documentation) collected by the predecessor or transferor. In addition, a withholding agent that acquires an account in a merger or bulk acquisition of accounts for value, other than a related party transaction, from a U.S. withholding agent, a participating FFI that has completed all due diligence required under its agreement with respect to the accounts transferred, or a reporting Model 1 FFI that has completed all due diligence required pursuant to the applicable Model 1 IGA, may also rely upon the predecessor's or transferor's determination of the chapter 4 status of an account holder for a transition period of the lesser of six months from the date of the merger or until the acquirer knows that the claim of status is inaccurate or a change in circumstances occurs. At the end of the transition period, the acquirer will be permitted to rely upon the predecessor's determination as to the chapter 4 status of the account holder only if the documentation that the acquirer has for the account holder, including documentation obtained from the predecessor or transferor, supports the chapter 4 status claimed. An acquirer that discovers at the end of the transition period that the chapter 4 status assigned by the predecessor or transferor to the account holder was incorrect and, as a result, has not withheld as it would have been required to but for its reliance upon the predecessor's determination, will be required to withhold on payments made after the transition period, if any, to the account holder equal to the amount of tax that should have been withheld during the transition period but for the erroneous classification as to the account holder's status. For purposes of this paragraph (c)(9)(v), a related party transaction is a merger or sale of accounts in which either the acquirer is in the same expanded affiliated group as the predecessor or transferor prior to or after the merger or acquisition or the predecessor or transferor (or shareholders of the predecessor or transferor) obtains a controlling interest in the acquirer or in a newly formed entity created for purposes of the merger or acquisition. See
(d) [Reserved]. For further guidance, see
(1) Reliance on pre-FATCA Form W-8. To establish a payee's status as a foreign individual, foreign government, government of a U.S. territory, or international organization, a withholding agent may rely upon a pre-FATCA Form W-8 in lieu of obtaining an updated version of the withholding certificate. This reliance is only available in the case of a payee that is an international organization if such payee is described under section 7701(a)(18). To establish the chapter 4 status of a payee that is not a foreign individual, a foreign government, or an international organization, a withholding agent may, for payments made prior to
(2) [Reserved]. For further guidance, see
(i) In general. A withholding agent must treat a payee as a U.S. person, including a payee that is a foreign branch of a U.S. person (other than a branch that is treated as a QI) or is an FFI that has elected to be treated as a U.S. person for tax purposes under section 953(d), if it has a valid Form W-9 associated with the payee or if it must presume the payee is a U.S. person under the presumption rules set forth in paragraph (f) of this section. Consistent with the presumption rules in paragraph (f)(3) of this section, a withholding agent must treat a payee that has provided a valid Form W-9 as a specified U.S. person unless the Form W-9 contains a certification that the payee is other than a specified U.S. person. Notwithstanding the foregoing, a withholding agent receiving a Form W-9 indicating that the payee is other than a specified U.S. person must treat the payee as a specified U.S. person if the withholding agent knows or has reason to know that the payee's claim that it is other than a specified U.S. person is incorrect. For example, a withholding agent that receives a Form W-9 from a payee that is an individual would be required to treat the payee as a specified U.S. person regardless of whether the Form W-9 indicates that the payee is not a specified U.S. person, because an individual that is a U.S. person is not excepted from the definition of a specified U.S. person.
(ii) [Reserved]. For further guidance, see
(iii) Preexisting obligations. As an alternative to applying the rules in paragraphs (d)(2)(i) and (ii) of this section, a withholding agent that makes a payment with respect to a preexisting obligation may treat a payee as a U.S. person if it has a notation in its files that it has previously reviewed a Form W-9 that established that the payee is a U.S. person and has retained the payee's TIN. A withholding agent, other than a participating FFI or registered deemed-compliant FFI, may also treat a payee of a payment with respect to a preexisting obligation as a U.S. person if it has previously classified the payee as a U.S. person for purposes of chapters 3 or 61 and established (through the documentation or the application of the rules in
(3) through (3)(ii) [Reserved]. For further guidance, see
(4) [Reserved]. For further guidance, see
(i) In general. Except as otherwise provided in paragraphs (d)(4)(ii) through (iv) or paragraphs (e)(3)(i) and (ii) of this section, a withholding agent may treat a payee as a participating FFI or registered deemed-compliant FFI only if the withholding agent has a withholding certificate identifying the payee as a participating FFI, registered deemed-compliant FFI, or branch thereof (including an entity that is disregarded as an entity separate from the FFI), and the withholding certificate contains a GIIN for the payee that is verified against the published
(ii) Exception for payments made prior to
(iii) Exception for offshore obligations. A withholding agent that makes a payment, other than a payment of U.S. source FDAP income, with respect to an offshore obligation may treat a payee as a participating FFI or registered deemed-compliant FFI, or branch thereof (including an entity that is disregarded as an entity separate from the FFI), if the payee provides the withholding agent with its GIIN and states whether the payee is a participating FFI or a registered deemed-compliant FFI, and the withholding agent verifies the GIIN in the manner described in paragraph (e)(3) of this section. A withholding agent that makes a payment of U.S. source FDAP income with respect to an offshore obligation may treat the payee as a participating FFI or registered deemed-compliant FFI, or branch thereof (including an entity that is disregarded as an entity separate from the FFI) if--
(A) [Reserved]. For further guidance, see
( 1) A written statement that contains the payee's GIIN, states that the payee is the beneficial owner of the payment, and indicates whether the payee is treated as a participating FFI or a registered deemed-compliant FFI, as appropriate; and
( 2) [Reserved]. For further guidance, see
(B) [Reserved]. For further guidance, see
(iv) [Reserved]. For further guidance, see
(A) For payments made prior to
(B) [Reserved]. For further guidance, see
(C) For payments made prior to
(D) For payments made on or after
(v) Reason to know. Except as otherwise provided in this paragraph (d)(4), a withholding certificate or written statement pursuant to which the payee claims a status as a participating FFI or registered deemed-compliant FFI but does not provide the payee's GIIN or provides a GIIN that does not appear on the current published
(5) [Reserved]. For further guidance, see
(i) In general. Except as otherwise provided in this paragraph (d)(5), a withholding agent may treat a payee as a certified deemed-compliant FFI, other than a sponsored, closely held investment vehicle, if the withholding agent has a withholding certificate that identifies the payee as a certified deemed-compliant FFI, and the withholding certificate contains a certification by the payee that it meets the requirements to qualify as the type of certified deemed-compliant FFI identified on the withholding certificate. See paragraph (c)(3)(iii) of this section for additional requirements that apply to a valid withholding certificate provided by a certified deemed-compliant FFI that is a flow-through entity or is acting as an intermediary with respect to the payment, or by a U.S. branch of a certified deemed-compliant FFI.
(ii) Sponsored, closely held investment vehicles -- (A) In general. A withholding agent may treat a payee as a sponsored, closely held investment vehicle described in
(B) Offshore obligations. A withholding agent that makes a payment with respect to an offshore obligation may treat a payee as a sponsored, closely held investment vehicle if it obtains a written statement that indicates that the payee is a sponsored, closely held investment vehicle, and provides the sponsoring entity's GIIN, which the withholding agent has verified in the manner described in paragraph (e)(3) of this section. In the case of a payment of U.S. source FDAP income, the written statement must also indicate that the payee is the beneficial owner and must be supplemented with documentary evidence supporting the payee's claim of foreign status (as described in paragraph (c)(5)(i) of this section).
(iii) Investment advisors and investment managers.
(A) In general. A withholding agent may treat a payee as an investment advisor and investment manager described in
(B) Offshore obligations . A withholding agent that makes a payment with respect to an offshore obligation may treat a payee as an investment advisor and investment manager described in
(6) [Reserved]. For further guidance, see
(i) through (vi) [Reserved]. For further guidance, see
(vii) [Reserved]. For further guidance, see
(A) [Reserved]. For further guidance, see
( 1) The payment is made with respect to an offshore obligation that has a balance or value not exceeding
( 2) through (5) [Reserved]. For further guidance, see
(B) [Reserved]. For further guidance, see
(7) through (10)(iii) [Reserved]. For further guidance, see
(11) [Reserved]. For further guidance, see
(i) through (vii)(B)( 3) [Reserved]. For further guidance, see
(viii) [Reserved]. For further guidance, see
(A) Exception for payments made prior to
( 1) through (3) [Reserved]. For further guidance, see
(B) through (B)( 2) [Reserved]. For further guidance, see
(C) Exception for preexisting offshore obligations of
(ix) through (ix)(C) [Reserved]. For further guidance, see
(x) Identifying a direct reporting NFFE --(A) In general. A withholding agent may treat a payment as having been made to a direct reporting NFFE if it has a withholding certificate that identifies the payee as a direct reporting NFFE and the withholding certificate contains a GIIN for the payee that is verified against the published
(B) Exception for offshore obligations. A withholding agent that makes a payment with respect to an offshore obligation may treat the payment as made to a direct reporting NFFE if the withholding agent has--
( 1)( i) General documentary evidence (as described in paragraph (c)(5)(ii)(A) of this section) for the payee providing sufficient information to determine that the payee is a foreign entity that is not a financial institution; or
( ii) A written statement that the payee is a foreign entity that is not a financial institution and, for a payment of U.S. source FDAP income, documentary evidence supporting the payee's claim of foreign status (as described in paragraph (c)(5)(i) of this section), and
( 2) Received (either orally or in writing) a GIIN from the direct reporting NFFE and has verified the GIIN in the manner described in paragraph (e)(3)(iii) of this section.
(C) Special rule for preexisting offshore obligations. A withholding agent that makes a payment with respect to an offshore obligation that is also a preexisting obligation may treat the payee as a direct reporting NFFE if the withholding agent has preexisting account documentary evidence (as described in paragraph (c)(5)(ii)(B) of this section) providing sufficient information to determine that the payee is a foreign entity that is not a financial institution and it has received (either orally or in writing) a GIIN from the direct reporting NFFE and has verified the GIIN in the manner described in paragraph (e)(3)(iii) of this section.
(xi) Identifying a sponsored direct reporting NFFE --(A) In general. A withholding agent may treat a payment as having been made to a sponsored direct reporting NFFE if it has a withholding certificate that identifies the payee as a sponsored direct reporting NFFE and the withholding certificate includes the sponsored direct reporting NFFE's GIIN, which the withholding agent has verified against the published
(B) Exception for offshore obligations. A withholding agent that makes a payment with respect to an offshore obligation may treat the payment as made to a sponsored direct reporting NFFE if the withholding agent has--
( 1) A written statement that the payee is a foreign entity that is a sponsored direct reporting NFFE and, for a payment of U.S. source FDAP income, documentary evidence supporting the payee's claim of foreign status (as described in paragraph (c)(5)(i) of this section), and
( 2) Received (either orally or in writing) the GIIN of the sponsored direct reporting NFFE and has verified the GIIN in the manner described in paragraph (e)(3)(iv) of this section. For payments prior to
(xii) Identification of excepted inter-affiliate FFI.
(A) In general. A participating FFI may treat a payee as an excepted inter-affiliate FFI described in
(B) Offshore obligations. A participating FFI that makes a payment with respect to an offshore obligation may treat the payment as made to an excepted inter-affiliate FFI described in
(C) Reason to know. A participating FFI has reason to know that an entity is not an excepted inter-affiliate FFI if it makes any payments (other than a payment of bank deposit interest) to such entity.
(12) [Reserved]. For further guidance, see
(i) through (ii) [Reserved]. For further guidance, see
(iii) [Reserved]. For further guidance, see
(A) In general. A passive NFFE will be required to provide to the withholding agent either a written certification (contained on a withholding certificate or in a written statement) that it does not have any substantial U.S. owners or the name, address, and TIN of each substantial U.S. owner of the NFFE, to avoid being withheld upon under
(B) Exception for preexisting obligations of
(e) [Reserved]. For further guidance, see
(1) [Reserved]. For further guidance, see
(2) Notification by the
(3) GIIN verification.
(i) In general. A withholding agent that has received a payee's claim of status as a participating FFI or registered deemed-compliant FFI, and that is required under paragraph (d)(4) of this section to confirm that the FFI or branch thereof (including an entity that is disregarded as an entity separate from the FFI) claiming status as a participating FFI or registered deemed-compliant FFI has a GIIN that appears on the published
(ii) Special rules for reporting Model 1 FFIs. Prior to
(iii) Special rules for direct reporting NFFEs. A withholding agent that has received a payee's claim of status as a direct reporting NFFE and that is required under paragraph (d)(11)(x) of this section to confirm that the entity claiming status as a direct reporting NFFE has a GIIN that appears on the published
(iv) Special rules for sponsored direct reporting NFFEs and sponsoring entities --(A) Sponsored direct reporting NFFEs. A withholding agent that has received a payee's claim of status as a sponsored direct reporting NFFE and that is required under paragraph (d)(11)(xi) of this section to confirm that the entity claiming status as a sponsored direct reporting NFFE has a GIIN that appears on the published
(B) Sponsoring entities (transitional rule). For payments made prior to
(4) Reason to know. A withholding agent has reason to know that a claim of chapter 4 status is unreliable or incorrect if its knowledge of relevant facts or statements contained in the withholding certificate or other documentation is such that a reasonably prudent person in the position of the withholding agent would question the claim being made. For an obligation other than a preexisting obligation, a withholding agent has reason to know that a person's claim of chapter 4 status is unreliable or incorrect if any information contained in its account opening files or other customer account files, including documentation collected for AML due diligence purposes, conflicts with the chapter 4 status being claimed. A withholding agent will not, however, have reason to know that a person's claim of chapter 4 status is unreliable or incorrect based on documentation collected for AML due diligence purposes until the date that is 30 days after the obligation is created. In addition to the specific standards of knowledge set forth in this paragraph (e) regarding a person's claim of chapter 4 status, a withholding agent is also required to apply any specific standards of knowledge applicable to the chapter 4 status claimed as set forth in paragraph (d) of this section. A withholding agent that has obtained documentation to reliably associate a payment to a foreign person under paragraph (c) of this section has reason to know that the person's claim of foreign status is unreliable or incorrect only to the extent provided in this paragraph (e)(4). See also
(i) Reason to know regarding an entity's chapter 4 status. A withholding agent has reason to know that a withholding certificate, written statement, or documentary evidence provided by or on behalf of an entity is unreliable or incorrect if there is information on the face of the documentation or in the withholding agent's account files that conflicts with the entity's claim regarding its chapter 4 status. For example, a withholding agent has reason to know that an entity's claim that it is an excepted NFFE is unreliable or incorrect if the withholding agent has obtained a financial statement or credit report for AML purposes that indicates that the entity is engaged in business as a financial institution. See also paragraph (e)(4) of this section for the 30-day period before a withholding agent has reason to know a claim is unreliable or incorrect based on AML information. Further, a withholding agent that has classified an entity as engaged in a particular type of business based on its records, such as through the use of a standardized industry coding system, has reason to know that the chapter 4 status claimed by the entity is unreliable or incorrect if the entity's claim conflicts with the withholding agent's classification of the entity's business type.
(ii) Reason to know applicable to withholding certificates.
(A) In general. A withholding agent has reason to know that a withholding certificate provided by a person is unreliable or incorrect if the withholding certificate is incomplete with respect to any item on the certificate that is relevant to the claims made by the person, the withholding certificate contains any information that is inconsistent with the person's claim, the withholding agent has other account information that is inconsistent with the person's claim, or the withholding certificate lacks information necessary to establish entitlement to an exemption from withholding for chapter 4 purposes. Except as otherwise provided in this paragraph (e)(4)(ii)(A), a withholding agent that has obtained a withholding certificate to reliably associate a payment to a foreign person under paragraph (c) of this section has reason to know that the person's claim of foreign status is unreliable or incorrect only if there are U.S. indicia, as described in
(B) Withholding certificate provided by an FFI. A withholding agent that obtains a withholding certificate to reliably associate a payment to a participating FFI, a registered deemed-compliant FFI, a sponsoring entity, or a sponsored FFI does not need to apply the standards of knowledge described in
(iii) Reason to know applicable to written statements. A withholding agent must apply the standards of knowledge applicable to withholding certificates, as set forth in paragraph (e)(4)(ii) of this section, to determine whether it has reason to know that a written statement is unreliable or incorrect in terms of establishing a person's claim of foreign status. The rules under paragraph (e)(4)(ii) shall be applied by substituting the term written statement for withholding certificate.
(iv) Reason to know applicable to documentary evidence.
(A) In general. A withholding agent may not treat documentary evidence provided by a person as valid if the documentary evidence does not reasonably establish the identity of the person presenting the documentary evidence. For example, documentary evidence is not valid if it is provided in person by an individual and the photograph or signature on the documentary evidence does not match the appearance or signature of the person presenting the document. A withholding agent may not treat documentary evidence as valid if the documentary evidence contains information that is inconsistent with the person's claim as to its chapter 4 status, the withholding agent has other account information that is inconsistent with the person's chapter 4 status, or the documentary evidence lacks information necessary to establish the person's chapter 4 status. Additionally, a withholding agent that has obtained documentary evidence to reliably associate a payment to a foreign person under paragraph (c) of this section has reason to know that the person's claim of foreign status is unreliable or incorrect only if there are U.S. indicia, as described in
(B) Standards of knowledge applicable to certain types of documentary evidence --( 1) Financial statement. A withholding agent that obtains a financial statement for purposes of establishing that a foreign payee meets a certain asset threshold has reason to know that the chapter 4 status claimed is unreliable or incorrect only if the total assets shown on the financial statement for the payee, and if relevant the payee's expanded affiliated group, are not within the permissible thresholds, or the footnotes to the financial statement indicate that the payee is not a foreign entity or is not a type of FFI eligible for the chapter 4 status claimed. A withholding agent that obtains a financial statement for purposes of establishing that the payee is an active NFFE will be required to review the balance sheet and income statement to determine whether the payee meets the income and asset thresholds set forth in
( 2) Organizational documents. A withholding agent that obtains organizational documents for a payee solely for the purpose of supporting the chapter 4 status claimed by the entity will only be required to review the document sufficiently to establish that the entity is a foreign person and that the purposes for which the entity was formed and its basic activities appear to be of a type consistent with the chapter 4 status claimed, unless otherwise specified in paragraph (d) of this section. A withholding agent that obtains organizational documents for the purpose of establishing that an entity has a particular chapter 4 status will only be required to review the document to the extent needed to establish that the entity is a foreign person, that the requirements applicable to the particular chapter 4 status are met, and that the document was executed, but will not be required to review the remainder of the document.
(v) Specific standards of knowledge applicable when only documentary evidence is a code or classification described in paragraph (c)(5)(ii)(B) of this section. A withholding agent may not rely upon a classification described in paragraph (c)(5)(ii)(B) of this section or a standardized industry coding system to treat an entity as having a foreign status if there are U.S. indicia described in paragraph (e)(4)(v)(A) of this section associated with the entity, unless such U.S. indicia are cured in the manner set forth in paragraph (e)(4)(v)(B) of this section.
(A) through (A)( 7) [Reserved]. For further guidance, see
(B) [Reserved]. For further guidance, see
( 1) If there are U.S. indicia described in paragraphs (e)(4)(v)(A)( 1) through (4) of this section associated with the entity, the withholding agent may treat the entity as a foreign person only if the withholding agent obtains a withholding certificate for the entity and one form of documentary evidence, described in paragraph (c)(5) of this section, that establishes the entity's status as a foreign person (such as a certificate of incorporation).
( 2) If there are U.S. indicia described in paragraphs (e)(4)(v)(A)( 1) through (4) of this section associated with the entity and the withholding agent is making a payment with respect to an offshore obligation, the withholding agent may also treat the entity as a foreign person if the withholding agent obtains a withholding certificate for the entity and the withholding agent treats the entity as foreign for purposes of foreign tax reporting. A withholding agent will treat an entity as foreign for purposes of foreign tax reporting only if the withholding agent classifies the entity as a resident of the country in which the obligation is maintained, the withholding agent is required to report a payment made to the entity annually on a tax information statement that is filed with the tax authority of the country in which the account is maintained as part of that country's resident reporting requirements, and that country has a tax information exchange agreement or income tax treaty in effect with
( 3) [Reserved]. For further guidance, see
(vi) [Reserved]. For further guidance, see
(A) through (A)( 2) [Reserved]. For further guidance, see
(B) Limits on reason to know with respect to documentation received from participating FFIs and registered deemed-compliant FFIs that are intermediaries or flow-through entities. A withholding agent that receives documentation from a participating FFI or registered deemed-compliant FFI that is not the payee must apply the requirements of paragraph (e)(4)(vi)(A) of this section, except that the withholding agent may rely upon the chapter 4 status provided by the participating FFI or registered deemed-compliant FFI in the withholding statement unless the withholding agent has information that conflicts with the chapter 4 status provided. If underlying documentation is provided for the payee and information in the documentation or in the withholding agent's records conflicts with the chapter 4 status claimed, the withholding agent has reason to know that the chapter 4 status claimed is unreliable or incorrect. A withholding agent is not, however, required to verify information contained in documentation provided by an intermediary or flow-through entity that is a participating FFI or registered deemed-compliant FFI that is not facially incorrect and is not required to obtain supporting documentation for the payee in addition to a withholding certificate unless the withholding agent obtains such documentation for purposes of chapters 3 or 61 or unless the withholding agent knows that the review conducted by the participating FFI or registered deemed-compliant FFI for purposes of chapter 4 was not adequate. For example, a withholding agent that receives a withholding statement from a participating FFI that is an intermediary stating that the payee is a registered deemed-compliant FFI is only required to determine that any withholding certificate provided for the payee contains a GIIN and that the GIIN does not appear to be facially invalid (for example, because it does not contain the correct amount of digits), but is not subject to the requirements set forth in paragraph (e)(3) of this section. Similarly, a withholding agent that receives from a participating FFI that is a partnership a withholding statement claiming that the payee is an active NFFE has reason to know that the claim is unreliable or incorrect if it receives a withholding statement that contains a U.S. address for the payee unless the partnership also provides a copy of documentation sufficient to cure the U.S. indicia in the manner set forth in paragraph (e) of this section or the withholding statement indicates that appropriate documentation sufficient to cure the U.S. indicia in the manner set forth in paragraph (e) of this section has been obtained and provides details of such documentation, such as the type of documentation and an identification number of the person contained in the document.
(vii) [Reserved]. For further guidance, see
(A) [Reserved]. For further guidance, see
(B) Reason to know there are U.S. indicia associated with preexisting obligations. With respect to a preexisting obligation, a withholding agent may apply the limits on reason to know described in
(viii) [Reserved]. For further guidance, see
(A) [Reserved]. For further guidance, see
( 1) through (3) [Reserved]. For further guidance, see
( 4) Is a spouse or unmarried child under the age of 21 years of an individual described in one of the paragraphs (e)(4)(viii)(A)( 1) through (3) of this section;
(B) through (D) [Reserved]. For further guidance, see
(5) through (6) [Reserved]. For further guidance, see
(f) [Reserved]. For further guidance, see
(1) In general. A withholding agent that cannot, prior to the payment, reliably associate (within the meaning of paragraph (c) of this section) the payment with valid documentation may rely on the presumptions of this paragraph (f) to determine the status of the payee (or other person receiving the payment) as a U.S. or foreign person and such person's other relevant characteristics (for example, as a nonparticipating FFI). Paragraph (f)(2) of this section provides the presumption rules with respect to classification as an individual or entity. Paragraph (f)(3) of this section provides the presumption rules to determine a payee's U.S. or foreign status. Paragraph (f)(4) of this section provides the presumption rules with respect to an entity's chapter 4 status. Paragraph (f)(5) of this section provides the presumption rules with respect to an intermediary or flow-through entity. Paragraph (f)(6) of this section provides the presumption rules with respect to effectively connected income paid to a U.S. branch of a payee. Paragraph (f)(7) of this section provides the presumption rules that apply to a payment made to joint payees. Paragraph (f)(8) of this section provides rules for how a payee may rebut the presumptions described in this paragraph (f). Paragraph (f)(9) of this section provides the consequences to a withholding agent that fails to withhold in accordance with the presumptions set forth in this paragraph (f) or that has actual knowledge or reason to know facts that are contrary to the presumptions set forth in this paragraph (f).
(2) Presumptions of classification as an individual or entity and entity as the beneficial owner. A withholding agent that cannot reliably associate a payment with a valid withholding certificate, or that has received valid documentary evidence (as described in paragraph (c)(5) of this section), but cannot determine a payee's status as an individual or an entity from the documentary evidence, must apply the presumption rules of
(3) Presumptions of U.S. or foreign status. If a withholding agent cannot reliably associate a payment with a valid withholding certificate or valid documentary evidence from which it is possible to determine the payee's U.S. or foreign status, it must apply the presumption rules of
(4) Presumption of chapter 4 status for a foreign entity. If a withholding agent cannot reliably associate a valid withholding certificate or valid documentary evidence sufficient to determine the chapter 4 status of the entity receiving payment under paragraph (d) of this section (for example, as a participating FFI, nonparticipating FFI, or NFFE), it must presume that the entity is a nonparticipating FFI.
(5) Presumption of chapter 4 status of payee with respect to a payment to an intermediary or flow-through entity. If a withholding agent makes a payment to a foreign flow-through entity or intermediary, including a payment that it is required to treat as made to such an entity under paragraphs (f)(2) and (3) of this section, and cannot reliably associate such payment with valid documentation under paragraph (c) of this section, the withholding agent must presume that the payment is made to a nonparticipating FFI.
(6) Presumption of effectively connected income for payments to certain U.S. branches. A withholding agent that makes a payment to a U.S. branch described in this paragraph (f)(6) may presume, in the absence of documentation indicating otherwise, that the U.S. branch is the payee of a payment that is effectively connected with the conduct of a trade or business in
(7) Joint payees --(i) In general. If a withholding agent makes a payment to joint payees and cannot reliably associate the payment with valid documentation from each payee but all of the joint payees appear to be individuals, then the payment is presumed made to an unidentified U.S. person. If any joint payee does not appear, by its name and other information contained in the account file, to be an individual, then the entire payment will be treated as made to a nonparticipating FFI. However, if one of the joint payees provides a Form W-9 in accordance with the procedures described in SUBSEC 31.3406(d)-1 through 31.3406(d)-5, the payment shall be treated as made to that payee.
(ii) Exception for offshore obligations. If a withholding agent makes a payment outside
(8) Rebuttal of presumptions. A payee may rebut the presumptions described in paragraphs (f)(2) through (7) of this section by providing reliable documentation to the withholding agent or, if applicable, to the
(9) Effect of reliance on presumptions and of actual knowledge or reason to know otherwise --(i) In general. Except as otherwise provided in this paragraph (f)(9), a withholding agent that withholds on a payment under section 1471 or 1472 in accordance with the presumptions set forth in this paragraph (f) shall not be liable for withholding under this section even if it is later established that the payee has a chapter 4 status other than the status presumed. A withholding agent that fails to report and withhold in accordance with the presumptions described in paragraphs (f)(2) through (7) of this section with respect to a payment that it cannot reliably associate with valid documentation shall be liable for tax, interest, and penalties. See
(ii) Actual knowledge or reason to know that amount of withholding is greater than is required under the presumptions or that reporting of the payment is required. Notwithstanding the provisions of paragraph (f)(9)(i) of this section, a withholding agent that knows or has reason to know that the status or characteristics of the person are other than what is presumed under this paragraph (f) may not rely on the presumptions described in this paragraph (f) to the extent that, if it determined the status of the person based on such knowledge or reason to know, it would be required to withhold (under this section or another withholding provision of the Code) an amount greater than would be the case if it relied on the presumptions described in this paragraph (f). In such a case, the withholding agent must rely on its knowledge or reason to know rather than on the presumptions set forth in this paragraph (f). Failure to do so shall result in liability for tax, interest, and penalties to the extent described in
(g) [Reserved]. For further guidance, see
(h) Expiration date. The applicability of this section expires on
Par. 8. Section 1.1471-4 is amended:
1. By removing paragraph (d)(3)(v).
2. By redesignating paragraphs (d)(3)(vi) through (viii) as paragraphs (d)(3)(v) through (vii).
3. By adding paragraphs (d)(2)(iii)(C), (d)(2)(ii)(F), and (d)(6)(vii).
4. By revising paragraphs (a)(3), (b)(1) through (3), (b)(6), (c)(5)(iv)(B)( 2)( vi), (c)(5)(iv)(E), (d)(1), (d)(2)(i), (d)(2)(ii)(A), (d)(2)(ii)(B)( 2), (d)(2)(ii)(E), (d)(2)(iii)(A), (d)(2)(iii)(B) introductory text, (d)(3)(ii)(E), (d)(3)(iii)(F), (d)(5)(v) through (vi), (d)(7)(i), (d)(7)(ii)(A), (d)(7)(iii), (d)(7)(iv)(A) through (B), (d)(8), (d)(9) Example 3, Example 5, and Example 7, (e)(1), (e)(2)(ii), (f)(4)(i) through (ii), (g)(1) introductory text, (g)(1)(ii), and (g)(2).
5. By removing the heading of paragraph (d)(7) and adding introductory text to paragraph (d)(7).
The additions and revisions read as follows:
(a) * * *
(3) [Reserved]. For further guidance, see
* * * * *
(b) * * *
(1) [Reserved]. For further guidance, see
(2) [Reserved]. For further guidance, see
(3) [Reserved]. For further guidance, see
(i) [Reserved]. For further guidance, see
(ii) [Reserved]. For further guidance, see
(iii) [Reserved]. For further guidance, see
* * * * *
(6) [Reserved]. For further guidance, see
* * * * *
(c) * * *
(5) * * *
(iv) * * *
(B) * * *
( 2) * * *
( vi) [Reserved]. For further guidance, see
* * * * *
(E) [Reserved]. For further guidance, see
* * * * *
(d) * * *
(1) [Reserved]. For further guidance, see
(2) * * *
(i) [Reserved]. For further guidance, see
(ii) * * *
(A) [Reserved]. For further guidance, see
(B) * * *
( 2) [Reserved]. For further guidance, see
* * * * *
(E) [Reserved]. For further guidance, see
(F) [Reserved]. For further guidance, see
(iii) * * *
(A) [Reserved]. For further guidance, see
(B) [Reserved]. For further guidance, see
* * * * *
(C) [Reserved]. For further guidance, see
(3) * * *
(ii) * * *
(E) [Reserved]. For further guidance, see
(iii) * * *
(F) [Reserved]. For further guidance, see
* * * * *
(5) * * *
(v) [Reserved]. For further guidance, see
(vi) [Reserved]. For further guidance, see
* * * * *
(6) * * *
(vii) [Reserved]. For further guidance, see
* * * * *
(7) [Reserved]. For further guidance, see
(i) [Reserved]. For further guidance, see
(ii) * * *
(A) [Reserved]. For further guidance, see
* * * * *
(iii) [Reserved]. For further guidance, see
(iv) * * *
(A) [Reserved]. For further guidance, see
(B) [Reserved]. For further guidance, see
(8) [Reserved]. For further guidance, see
(9) * * *
Example 3. [Reserved]. For further guidance, see
* * * * *
Example 5. [Reserved]. For further guidance, see
* * * * *
Example 7. [Reserved]. For further guidance, see
(e) * * *</p>
(1) [Reserved]. For further guidance, see
(2) * * *
(ii) [Reserved]. For further guidance, see
* * * * *
(f) * * *
(4) * * *
(i) [Reserved]. For further guidance, see
(ii) [Reserved]. For further guidance, see
(g) * * *
(1) [Reserved]. For further guidance, see
* * * * *
(ii) [Reserved]. For further guidance, see
* * * * *
(2) [Reserved]. For further guidance, see
* * * * *
Par. 9. Section 1.1471-4T is added to read as follows:
(a) [Reserved]. For further guidance, see
(1) through (2) [Reserved]. For further guidance, see
(3) Reporting. A participating FFI is required to report the information described in paragraph (d) of this section annually with respect to U.S. accounts under section 1471(c) and accounts held by recalcitrant account holders. A participating FFI must also comply with the filing requirements described in
(4) through (7) [Reserved]. For further guidance, see
(b) [Reserved]. For further guidance, see
(1) In general. Except as otherwise provided in a Model 2 IGA, a participating FFI is required to deduct and withhold a tax equal to 30 percent of any withholdable payment made by such participating FFI to an account held by a recalcitrant account holder or to a nonparticipating FFI after
(2) Withholding determination. Except as otherwise provided under
(3) Satisfaction of withholding requirements.
(i) In general. A participating FFI that complies with the withholding obligations of this paragraph (b) with respect to accounts held by recalcitrant account holders and payees that are nonparticipating FFIs shall be deemed to satisfy its withholding obligations under sections 1471(a) and 1472 with respect to such account holders and payees.
(ii) Withholding not required. A participating FFI that is an NQI, NWP, NWT, or that is a QI that elects under section 1471(b)(3) not to assume withholding responsibility for a payment and that provides its withholding agent with the information necessary to allocate all or a portion of the payment to each payee as part of a withholding certificate described in
(iii) Election to withhold under section 3406. A participating FFI may elect to satisfy its withholding obligation under paragraph (b)(1) of this section with respect to recalcitrant account holders that are also U.S. non-exempt recipients subject to backup withholding under section 3406 receiving withholdable payments, to the extent that the payments also constitute reportable payments, by applying withholding under section 3406 at the backup withholding rate to such withholdable payments. A participating FFI may make the election described in this paragraph only if it complies with the information reporting rules under chapter 61 and section 3406. Nothing in this paragraph relieves a participating FFI of its requirement to backup withhold under section 3406 with respect to reportable payments that are not also withholdable payments. See
(4) through (5)(ii) [Reserved]. For further guidance, see
(6) Special rule for dormant accounts. A participating FFI that makes a withholdable payment not otherwise subject to withholding under chapter 3 or backup withholding under section 3406 to a recalcitrant account holder of a dormant account that it maintains must withhold on the account for purposes of chapter 4. However, the participating FFI may, in lieu of depositing the tax withheld, set aside the amount withheld in escrow until the date that the account ceases to be a dormant account. In such case, the tax withheld becomes due 90 days following the date that the account ceases to be a dormant account if the account holder does not provide the documentation required under paragraph (c) of this section or becomes refundable to the account holder if the account holder provides the documentation required under paragraph (c) of this section establishing that withholding does not apply. A participating FFI that maintains a dormant account of a recalcitrant account holder and that elects to escrow withheld tax pursuant to this paragraph (b)(6) may not delegate the responsibility to escrow withheld tax to the withholding agent from which it is receiving payment. Once a dormant account escheats irrevocably to a foreign government under the relevant laws in the jurisdiction in which the participating FFI (or branch thereof) operates, the participating FFI is no longer required to deposit with the
(7) [Reserved]. For further guidance, see
(c) [Reserved]. For further guidance, see
(1) through (4)(iii)(B) [Reserved]. For further guidance, see
(5) [Reserved]. For further guidance, see
(i) through (iii)(C) [Reserved]. For further guidance, see
(iv) [Reserved]. For further guidance, see
(A) [Reserved]. For further guidance, see
(B) [Reserved]. For further guidance, see
( 1) through (1)( vii) [Reserved]. For further guidance, see
( 2) [Reserved]. For further guidance, see
( i) through (v) [Reserved]. For further guidance, see
( vi) Standing instructions to pay amounts. If information required to be reviewed with respect to the account contains standing instructions to pay amounts from the account to an account maintained in
( vii) [Reserved]. For further guidance, see
(C) through (D)( 4)( vi) [Reserved]. For further guidance, see
(E) Exception for preexisting individual accounts previously documented as held by foreign individuals. A participating FFI that has previously obtained documentation from an account holder to establish the account holder's status as a foreign individual in order to meet its obligations under its QI, WP, or WT agreement with the
(6) through (7) [Reserved]. For further guidance, see
(d) [Reserved]. For further guidance, see
(1) Scope of paragraph. This paragraph (d) provides rules addressing the information reporting requirements applicable to participating FFIs with respect to U.S. accounts, accounts held by owner-documented FFIs, and recalcitrant account holders. Paragraph (d)(2) of this section describes the accounts subject to reporting under this paragraph (d), and specifies the participating FFI that is responsible for reporting an account or account holder. Paragraph (d)(3) of this section describes the information required to be reported and the manner of reporting by a participating FFI under section 1471(c)(1) with respect to a U.S. account or an account held by an owner-documented FFI. Paragraph (d)(4) of this section provides definitions of terms applicable to paragraph (d)(3). Paragraph (d)(5) of this section describes the conditions for a participating FFI to elect to report its U.S. accounts and accounts held by owner-documented FFIs under section 1471(c)(2) and the information required to be reported under such election. Paragraph (d)(6) of this section provides rules for a participating FFI to report its recalcitrant account holders. Paragraph (d)(7) of this section provides special transitional reporting rules applicable to reports due in 2015 and 2016. Paragraph (d)(8) of this section provides the reporting requirements of a participating FFI that is a QI, WP, or WT with respect to U.S. accounts. See chapter 61 for reporting requirements that may apply to a payor that is a participating FFI or registered deemed-compliant FFI with respect to payees. See
(2) [Reserved]. For further guidance, see
(i) Accounts subject to reporting. Subject to the rules of paragraph (d)(7) of this section, a participating FFI shall report by the time and in the manner prescribed in paragraph (d)(3)(vi) of this section, the information described in paragraph (d)(3) of this section with respect to accounts maintained at any time during each calendar year for which the participating FFI is responsible for reporting under paragraph (d)(2)(ii) of this section and that it is required to treat as U.S. accounts or accounts held by owner-documented FFIs, including accounts that are identified as U.S. accounts by the end of such calendar year pursuant to a change in circumstances during such year as described in paragraph (c)(2)(iii) of this section. Alternatively, a participating FFI may elect to report under paragraph (d)(5) of this section with respect to such accounts for each calendar year. With respect to accounts held by recalcitrant account holders, a participating FFI is required to report with respect to each calendar year under paragraph (d)(6) of this section and not under paragraph (d)(3) or (5) of this section. For separate reporting requirements of participating FFIs with respect to foreign reportable amounts and for transitional rules for participating FFIs to report certain foreign reportable amounts paid to accounts held by nonparticipating FFIs, see
(ii) [Reserved]. For further guidance, see
(A) In general. Except as otherwise provided in paragraphs (d)(2)(ii)(B) through (F) of this section, the participating FFI that maintains the account is responsible for reporting the account in accordance with the requirements of paragraph (d)(2)(iii), (d)(3), or (d)(5) of this section (as applicable) for each calendar year. Except as otherwise provided in paragraph (d)(2)(ii)(C) of this section, a participating FFI is responsible for reporting accounts held by recalcitrant account holders that it maintains in accordance with the requirements of paragraph (d)(6) of this section. A participating FFI is not required to report the information required under paragraph (d)(6) of this section with respect to an account held by a recalcitrant account holder of another participating FFI even if that other participating FFI holds the account as an intermediary on behalf of such account holder and regardless of whether the participating FFI is required to report payments made to the recalcitrant account holder of such other FFI under
(B) [Reserved]. For further guidance, see
( 1) [Reserved]. For further guidance, see
( 2) If the territory financial institution does not agree to be treated as a U.S. person with respect to a withholdable payment, the participating FFI must report with respect to each specified U.S. person or substantial U.S. owner of an entity that is treated as a passive NFFE with respect to which the territory financial institution acts as an intermediary and provides the participating FFI with the information and documentation required under
( i) The information required by chapter 61 and described in paragraph (d)(5)(ii) or (d)(5)(iii) of this section (except account number); or
( ii) The information described in paragraph (d)(3)(ii), (d)(3)(iii), or (d)(3)(iv) of this section (except account number and account balance or value).
(C) through (D) [Reserved]. For further guidance, see
(E) Requirement to identify the GIIN of a branch that maintains an account. A participating FFI may report under paragraph (d)(3) or (d)(5) of this section either with respect to all of its U.S. accounts and recalcitrant accounts, or separately with respect to any clearly identified group of accounts (such as by line of business or the location of where the account is maintained). A participating FFI shall include the GIIN assigned to the participating FFI or its branches to identify the jurisdiction of the FFI or branch that maintains the accounts subject to reporting under paragraph (d)(3) or (d)(5) of this section. Additionally, a participating FFI shall file with the
(F) Reporting by participating FFIs and registered deemed-compliant FFIs (including QIs, WPs, WTs, and certain U.S. branches not treated as U.S. persons) for accounts of nonparticipating FFIs (transitional). Except as otherwise provided in the instructions to Form 8966, "FATCA Report," if a participating FFI or registered deemed-compliant FFI (including a QI, WP, WT, or U.S. branch of a participating FFI or registered deemed-compliant FFI that is not treated as a U.S. person) maintains an account for a nonparticipating FFI (including a limited branch and limited FFI treated as a nonparticipating FFI), the participating FFI or registered deemed-compliant FFI must report on Form 8966 the name and address of the nonparticipating FFI, and the aggregate amount of foreign source payments, as described in paragraph (d)(4)(iv) of this section, paid to or with respect to each such account (foreign reportable amount) for each of the calendar years 2015 and 2016. If, however, the participating FFI is prohibited under domestic law from reporting on a specific payee basis without consent from the nonparticipating FFI account holder and the participating FFI has not been able to obtain such consent, the participating FFI may instead report the aggregate number of accounts held by such non-consenting nonparticipating FFIs and the aggregate amount of foreign reportable amounts paid with respect to such accounts, as described in paragraph (d)(4)(iv) of this section, during the calendar year. A participating FFI may, in lieu of reporting only foreign reportable amounts, report all income, gross proceeds, and redemptions (irrespective of the source) paid to the nonparticipating FFI's account by the participating FFI during the calendar year. In addition, the participating FFI must retain the account statements related to such nonparticipating FFI accounts. See paragraphs (d)(6)(iv), (v), (vi) and (vii) of this section for rules relating to reporting on recalcitrant account holders. Form 8966 shall be filed electronically with the
(iii) [Reserved]. For further guidance, see
(A) Special reporting rule for U.S. payors other than U.S. branches. Participating FFIs that are U.S. payors (other than U.S. branches) shall be treated as having satisfied the chapter 4 reporting requirements described in paragraph (d)(2)(i) of this section with respect to accounts that the participating FFI is required to treat as U.S. accounts, or accounts held by owner-documented FFIs, if the participating FFI reports with respect to each such account either--
( 1) The information required by chapter 61 and described in paragraph (d)(5)(ii) or (d)(5)(iii) of this section; or
( 2) The information described in paragraph (d)(3)(ii), (d)(3)(iii), or (d)(3)(iv) of this section. However, such participating FFI that is required to report on such accounts under chapter 61 is not relieved of that obligation.
(B) Special reporting rules for U.S. branches treated as U.S. persons. A U.S. branch of a participating FFI (and reporting Model 1 FFI) that is treated as a U.S. person shall be treated as having satisfied the reporting requirements described in paragraph (d)(2)(i) of this section if it reports under--
( 1) through (4) [Reserved]. For further guidance, see
(C) Special reporting rules for U.S. branches not treated as U.S. persons. A U.S. branch of a registered deemed-compliant FFI or limited FFI that is not treated as a U.S. person shall be treated as having satisfied the reporting requirements described in paragraph (d)(2)(i) of this section if it reports the information described in paragraph (d)(2)(iii)(B)( 1) through (4) of this section with respect to account holders of accounts that the U.S. branch is required to treat as U.S. accounts or accounts held by owner-documented FFIs.
(3) [Reserved]. For further guidance, see
(i) [Reserved]. For further guidance, see
(ii) [Reserved]. For further guidance, see
(A) through (D) [Reserved]. For further guidance, see
(E) Such other information as is otherwise required to be reported under this paragraph (d)(3) or in the form described in paragraph (d)(3)(v) of this section and its accompanying instructions.
(iii) [Reserved]. For further guidance, see
(A) through (E) [Reserved]. For further guidance, see
(F) Such other information as is otherwise required to be reported under this paragraph (d)(3) or in the form described in paragraph (d)(3)(v) of this section and its accompanying instructions.
(iv) through (iv)(F) [Reserved]. For further guidance, see
(v) [Reserved]. For further guidance, see
(vi) [Reserved]. For further guidance, see
(vii) [Reserved]. For further guidance, see
(4) through (4)(v) [Reserved]. For further guidance, see
(5) [Reserved]. For further guidance, see
(i) through (iv) [Reserved]. For further guidance, see
(v) Time and manner of making the election. A participating FFI (or one or more branches of the participating FFI) may make the election described in this paragraph (d)(5) by reporting the information described in this paragraph (d)(5) on the form described in paragraph (d)(5)(vii) of this section on the next reporting date following the end of the calendar year for which the election is made. A participating FFI may make an election under this paragraph (d)(5) either with respect to all of its U.S. accounts and recalcitrant accounts or, separately, with respect to any clearly identified group of accounts (such as by line of business or the location where the account is maintained).
(vi) Revocation of election. A participating FFI may revoke the election described in paragraph (d)(5)(i) of this section (as a whole or with regard to any clearly identified group of accounts) by reporting the information described in paragraph (d)(3) of this section beginning on the first reporting date with respect to the calendar year that follows the calendar year for which it last reports an account under this paragraph (d)(5).
(vii) [Reserved]. For further guidance, see
(6) [Reserved]. For further guidance, see
(i) through (v) [Reserved]. For further guidance, see
(vi) Extensions in filing. The
(vii) [Reserved]. For further guidance, see
(7) Special reporting rules with respect to the 2014 and 2015 calendar years
(i) In general. If the effective date of the FFI agreement of a participating FFI is on or before
(ii) [Reserved]. For further guidance, see
(A) Reporting with respect to the 2014 calendar year. With respect to accounts maintained during the 2014 calendar year--
( 1) through (3) [Reserved]. For further guidance, see
(B) [Reserved]. For further guidance, see
( 1) through (2) [Reserved]. For further guidance, see
(iii) Participating FFIs that report under
(iv) [Reserved]. For further guidance, see
(A) In general. Except as provided in paragraph (d)(7)(iv)(B) of this section, reporting under paragraph (d)(7)(ii) of this section shall be made on Form 8966 (or such other form as the
(B) Special determination date and timing for reporting with respect to the 2014 calendar year. With respect to the 2014 calendar year, a participating FFI must report under paragraph (d)(3) or (5) of this section on all accounts that are identified and documented under paragraph (c) of this section as U.S. accounts or accounts held by owner-documented FFIs as of
(8) Reporting requirements of QIs, WPs, and WTs. In general, the reporting requirements with respect to the U.S. accounts maintained by a participating FFI that is a QI, WP, or WT will be consistent with the reporting requirements with respect to such accounts of a participating FFI that is not a QI, WP, or WT. See the QI, WP, or WT agreement for the coordination of the chapter 4 reporting obligations of a participating FFI that also is a QI, WP, or WT.
(9) [Reserved]. For further guidance, see
Example 1.
[Reserved]. For further guidance, see
Example 2.
[Reserved]. For further guidance, see
Example 3.
U.S. owned foreign entity. FC, a passive NFFE, holds a custodial account with PFFI1, a participating FFI. U, a specified U.S. person, owns 3% of the only class of stock of FC. Q, another specified U.S. person, owns 12% of the only class of stock of FC. U is not a substantial U.S. owner of FC. See
Example 4.
[Reserved]. For further guidance, see
Example 5.
Owner-documented FFI. DC, an owner-documented FFI under
Example 6.
[Reserved]. For further guidance, see
Example 7.
Sponsored FFI. DC2 is an FFI that has agreed to have a sponsoring entity, PFFI1, fulfill DC2's chapter 4 responsibilities under
(e) [Reserved]. For further guidance, see
(1) In general. Except as otherwise provided in this paragraph (e)(1) or paragraphs (e)(2) and (e)(3) of this section, each FFI that is a member of an expanded affiliated group must have the chapter 4 status of a participating FFI, deemed-compliant FFI, or exempt beneficial owner as a condition for any member of such group to obtain the status of a participating FFI or registered deemed-compliant FFI. Accordingly, except as otherwise provided in published guidance, each FFI other than a certified deemed-compliant FFI or exempt beneficial owner in an expanded affiliated group must submit a registration form to the
(2) [Reserved]. For further guidance, see
(i) [Reserved]. For further guidance, see
(A) through (C) [Reserved]. For further guidance, see
(ii) Branch defined. For purposes of this section, a branch is a unit, business, or office of an FFI that is treated as a branch under the regulatory regime of a country or that is otherwise regulated under the laws of a country as separate from other offices, units, or branches of the FFI and also includes an entity that is disregarded as an entity separate from an FFI (including branches maintained by such disregarded entity). For purposes of this section, a branch includes a unit, business, or office of an FFI located in a country in which it is resident, and a unit, business, or office of an FFI located in the country in which the FFI is created or organized. All units, businesses, and offices of a participating FFI located in a single country, and all entities disregarded as entities separate from a participating FFI and located in a single country, shall be treated as a single branch and may use the same GIIN. An account will be treated as maintained by a branch or disregarded entity if the rights and obligations of the account holder and the participating FFI with regard to such account (including any assets held in the account) are governed by the laws of the country of the branch or disregarded entity.
(iii) through (v) [Reserved]. For further guidance, see
(3) through (4) [Reserved]. For further guidance, see
(f) [Reserved]. For further guidance, see
(1) through (3)(iv)(C) [Reserved]. For further guidance, see
(4) [Reserved]. For further guidance, see
(i) General inquiries. The
(ii) Inquiries regarding substantial non-compliance. If, based on the information reporting forms described in paragraphs (d)(3)(v), (d)(5)(vii), or (d)(6)(iv) of this section filed with the
(g) [Reserved]. For further guidance, see
(1) Defined. An event of default occurs if a participating FFI fails to perform material obligations required with respect to the due diligence, verification, withholding, or reporting requirements of the FFI agreement or if the
(i) [Reserved]. For further guidance, see
(ii) Failure to significantly reduce, over a period of time, the number of account holders or payees that the participating FFI is required to treat as recalcitrant account holders or nonparticipating FFIs, as a result of the participating FFI failing to comply with the due diligence procedures for the identification and documentation of account holders and payees, as set forth in paragraph (c) of this section;
(iii) through (ix) [Reserved]. For further guidance, see
(2) Notice of event of default. Following an event of default known by or disclosed to the
(3) [Reserved]. For further guidance, see
(h) through (j) [Reserved]. For further guidance, see
(k) Expiration date. The applicability of this section expires on
Par. 10. Section 1.1471-5 is amended:
1. By removing paragraphs (a)(3)(ii) (b)(3)(v)(B)( 3), and (b)(3)(vi)(B)( 3).
2. By redesignating paragraphs (a)(3)(iii) through (a)(3)(vi) as paragraphs (a)(3)(ii) through (a)(3)(v) and paragraph (j) as paragraph (l).
3. By adding paragraphs (f)(1)(i)(F)( 3)( vii), (f)(2)(v), (j), and (k).
4. By revising paragraphs (a)(3)(i), (a)(4)(i), (b)(1)(iii)(B)( 2), (b)(3)(iv), (b)(3)(v)(A), (b)(3)(v)(B)( 1) through (2), (b)(3)(vi), (c), (e)(1)(v)(A), (e)(3)(ii), (e)(4)(v) Example 7 through Example 8, (e)(5)(i)(A)( 3), (e)(5)(i)(B) introductory text, (e)(5)(i)(B)( 1), (e)(5)(i)(C), (e)(5)(i)(D)( 1)( iv) through (v), (e)(5)(iv)(B), (f)(1)(i)(A)( 6), (f)(1)(i)(B)( 1), (f)(1)(i)(B)( 3), (f)(1)(i)(C)( 2), (f)(1)(i)(D)( 4) through (6), (f)(1)(i)(D)( 7) introductory text, (f)(1)(i)(E), (f)(1)(i)(F)( 1)( ii), (f)(1)(i)(F)( 3)( v) through (vi), (f)(1)(i)(F)( 5), (f)(1)(ii)(B), (f)(2) introductory text, (f)(2)(i)(B), (f)(2)(iii) through (iv), (f)(4)(i), (g)(3)(i)(D), and (i).
The additions and revisions read as follows:
(a) * * *
(3) * * *
(i) [Reserved]. For further guidance, see
* * * * *
(4) * * *
(i) [Reserved]. For further guidance, see
* * * * *
(b) * * *
(1) * * *
(iii) * * *
(B) * * *
( 2) [Reserved]. For further guidance, see
* * * * *
(3) * * *
(iv) [Reserved]. For further guidance, see
(v) * * *
(A) [Reserved]. For further guidance, see
(B) * * *
( 1) [Reserved]. For further guidance, see
( 2) [Reserved]. For further guidance, see
(vi) [Reserved]. For further guidance, see
* * * * *
(c) [Reserved]. For further guidance, see
* * * * *
(e) * * *
(1) * * *
(v) * * *
(A) [Reserved]. For further guidance, see
* * * * *
(3) * * *
(ii) [Reserved]. For further guidance, see
* * * * *
(4) * * *
(v) * * *
Example 7.
[Reserved]. For further guidance, see
Example 8.
[Reserved]. For further guidance, see
* * * * *
(5) * * *
(i) * * *
(A) * * *
( 3) [Reserved]. For further guidance, see
(B) [Reserved]. For further guidance, see
( 1) [Reserved]. For further guidance, see
* * * * *
(C) [Reserved]. For further guidance, see
(D) * * *</p>
( 1) * * *
( iv) [Reserved]. For further guidance, see
( v) [Reserved]. For further guidance, see
* * * * *
(iv) * * *
(B) [Reserved]. For further guidance, see
* * * * *
(f) * * *
(1) * * *
(i) * * *
(A) * * *
( 6) [Reserved]. For further guidance, see
* * * * *
(B) * * *
( 1) [Reserved]. For further guidance, see
* * * * *
( 3) [Reserved]. For further guidance, see
(C) * * *
( 2) [Reserved]. For further guidance, see
* * * * *
(D) * * *
( 4) [Reserved]. For further guidance, see
( 5) [Reserved]. For further guidance, see
( 6) [Reserved]. For further guidance, see
( 7) [Reserved]. For further guidance, see
* * * * *
(E) [Reserved]. For further guidance, see
(F) * * *
( 1) * * *
( ii) [Reserved]. For further guidance, see
* * * * *
( 3) * * *
( v) [Reserved]. For further guidance, see
( vi) [Reserved]. For further guidance, see
( vii) [Reserved]. For further guidance, see
* * * * *
( 5) [Reserved]. For further guidance, see
(ii) * * *
(B) [Reserved]. For further guidance, see
* * * * *
(2) [Reserved]. For further guidance, see
(i) * * *
(B) [Reserved]. For further guidance, see
* * * * *
(iii) [Reserved]. For further guidance, see
(iv) [Reserved]. For further guidance, see
(F) [Reserved]. For further guidance, see
(v) [Reserved]. For further guidance, see
* * * * *
(4) * * *
(i) [Reserved]. For further guidance, see
* * * * *
(g) * * *
(3) * * *
(i) * * *
(D) [Reserved]. For further guidance, see
* * * * *
(i) [Reserved]. For further guidance, see
(j) [Reserved]. For further guidance, see
(k) [Reserved]. For further guidance, see
Par. 11. Section 1.1471-5T is added to read as follows:
(a) [Reserved]. For further guidance, see
(1) through (2) [Reserved]. For further guidance, see
ved]. For further guidance, see
(i) In general. Except as otherwise provided in this paragraph (a)(3), the account holder is the person listed or identified as the holder or owner of the account with the FFI that maintains the account, regardless of whether such person is a flow-through entity. Thus, for example, except as otherwise provided in paragraph (a)(3)(ii) of this section, if a trust (including a simple or grantor trust) or an estate is listed as the holder or owner of a financial account, the trust or estate is the account holder, rather than its owners or beneficiaries. Similarly, except as otherwise provided in this paragraph (a)(3), if a partnership is listed as the holder or owner of a financial account, the partnership is the account holder, rather than the partners in the partnership. In the case of an account held by an entity that is disregarded for U.S. federal tax purposes under
(ii) [Reserved]. For further guidance, see
(iii) [Reserved]. For further guidance, see
(iv) [Reserved]. For further guidance, see
(v) [Reserved]. For further guidance, see
(4) [Reserved]. For further guidance, see
(i) Exception for certain individual accounts of participating FFIs. Unless a participating FFI elects under paragraph (a)(4)(ii) of this section not to apply this paragraph (a)(4)(i), the term U.S. account shall not include any depository account maintained by such financial institution during a calendar year if the account is held solely by one or more individuals and, with respect to each holder of such account, the aggregate balance or value of all depository accounts held by each such individual does not exceed
(ii) [Reserved]. For further guidance, see
(iii) [Reserved]. For further guidance, see
(b) [Reserved]. For further guidance, see
(1) [Reserved]. For further guidance, see
(i) through (ii) [Reserved]. For further guidance, see
(iii) [Reserved]. For further guidance, see
(A) [Reserved]. For further guidance, see
(B) [Reserved]. For further guidance, see
( 1) [Reserved]. For further guidance, see
( 2) The return earned on the interest is determined, directly or indirectly, primarily by reference to one or more investment entities described in paragraph (e)(4)(i)(B) or (C) of this section or one or more passive NFFEs that are members of the entity's expanded affiliated group (as determined under paragraph (b)(3)(vi) of this section);
( 3) through (4) [Reserved]. For further guidance, see
(C) [Reserved]. For further guidance, see
(iv) [Reserved]. For further guidance, see
(2) [Reserved]. For further guidance, see
(3) [Reserved]. For further guidance, see
(i) through (iii) [Reserved]. For further guidance, see
(iv) Regularly traded on an established securities market. To determine if debt or equity interests described in paragraph (b)(1)(iii) of this section are regularly traded, the principles of
(v) [Reserved]. For further guidance, see
(A) Equity interest. The value of an equity interest is determined, directly or indirectly, primarily by reference to assets that give rise (or could give rise) to withholdable payments if the return earned on such interest (including upon a sale, exchange, or redemption) is determined primarily by reference to profits or assets of a U.S. person or equity interests in a U.S. person.
(B) [Reserved]. For further guidance, see
( 1) Debt is convertible into equity interests in a U.S. person; or
( 2) The return earned on such interest (including upon a sale, exchange, or redemption) is determined primarily by reference to profits or assets of a U.S. person or equity interests in a U.S. person.
(vi) Return earned on the interest (including upon a sale, exchange, or redemption) determined, directly or indirectly, primarily by reference to one or more investment entities or passive NFFEs.
(A) Equity interest. The return earned on an equity interest is determined, directly or indirectly, primarily by reference to one or more investment entities described in paragraph (e)(4)(i)(B) or (C) of this section or passive NFFEs that are members of the entity's expanded affiliated group if the return on such interest (including upon a sale, exchange, or redemption) is determined primarily by reference to profits or assets of, or equity interests in, one or more investment entities described in paragraph (e)(4)(i)(B) or (C) of this section or passive NFFEs that are members of the entity's expanded affiliated group.
(B) Debt interest. The return earned on a debt interest is determined, directly or indirectly, primarily by reference to one or more investment entities described in paragraph (e)(4)(i)(B) or (C) of this section or passive NFFEs that are members of the entity's expanded affiliated group if--
( 1) Debt is convertible into equity interests in one or more investment entities described in paragraph (e)(4)(i)(B) or (C) of this section or passive NFFEs that are members of the entity's expanded affiliated group; or
( 2) The return on such interest (including upon a sale, exchange, or redemption) is determined primarily by reference to profits or assets of, or equity interests in, one or more investment entities described in paragraph (e)(4)(i)(B) or (C) of this section or passive NFFEs that are members of the entity's expanded affiliated group.
(vii) [Reserved]. For further guidance, see
(4) through (5) [Reserved]. For further guidance, see
(c) U.S. owned foreign entity. The term U.S. owned foreign entity means any foreign entity that has one or more substantial U.S. owners (as defined in
(d) [Reserved]. For further guidance, see
(e) [Reserved]. For further guidance, see
(1) [Reserved]. For further guidance, see
(i) through (iv) [Reserved]. For further guidance, see
(v) [Reserved]. For further guidance, see
(A) Is part of an expanded affiliated group that includes a depository institution, custodial institution, specified insurance company, or investment entity described in paragraphs (e)(4)(i)(B) or (C) of this section; or
(B) [Reserved]. For further guidance, see
(2) [Reserved]. For further guidance, see
(3) [Reserved]. For further guidance, see
(i) [Reserved]. For further guidance, see
(ii) Income attributable to holding financial assets and related financial services. For purposes of this paragraph (e)(3), the term income attributable to holding financial assets and related financial services means custody, account maintenance, and transfer fees; commissions and fees earned from executing and pricing securities transactions; income earned from extending credit to customers with respect to financial assets held in custody by the entity (or acquired through such extension of credit); income earned on the bid-ask spread of financial assets; fees for providing financial advice with respect to financial assets held in (or potentially to be held in) custody by the entity; and fees for clearance and settlement services.
(iii) [Reserved]. For further guidance, see
(4) [Reserved]. For further guidance, see
(i) through (iv) [Reserved]. For further guidance, see
(v) [Reserved]. For further guidance, see
Example 1 through Example 6 [Reserved].
For further guidance, see
Example 7.
Individual introducing broker. IB, an individual introducing broker, primarily conducts a business of providing advice to clients, has discretionary authority to manage clients' assets, and uses the services of a foreign entity to conduct and execute trades on behalf of clients. IB provides services as an investment advisor and manager to Entity, a foreign corporation. Entity has earned 50% or more of its gross income for the past three years from investing, reinvesting, or trading in financial assets. Because IB is an individual, notwithstanding that IB primarily conducts certain investment-related activities, IB is not an investment entity under paragraph (e)(4)(i)(A) of this section. Further, Entity is not an investment entity under paragraph (e)(4)(i)(B) of this section because Entity is managed by IB, an individual.
Example 8.
Entity introducing broker. IB, a foreign entity introducing broker, primarily conducts a business of providing advice to clients, has discretionary authority to manage clients' assets, and uses the services of a foreign entity to conduct and execute trades on behalf of clients. IB provides its services as an investment advisor and manager to Entity, a foreign corporation. Entity has earned 50% or more of its gross income for the past three years from investing, reinvesting, or trading in financial assets. Because IB is an entity that primarily conducts certain investment-related activities, IB is an investment entity under paragraph (e)(4)(i)(A) of this section. Further, Entity is an investment entity under paragraph (e)(4)(i)(B) of this section because it is managed by IB, an investment entity that performs certain of the activities described in paragraph (e)(4)(i)(A) of this section on behalf of Entity.
(5) [Reserved]. For further guidance, see SEC 1.1471-5(e)(5).
(i) [Reserved]. For further guidance, see SEC 1.1471-5(e)(5)(i).
(A) [Reserved]. For further guidance, see SEC 1.1471-5(e)(5)(i)(A).
( 1) through (2) [Reserved]. For further guidance, see SEC 1.1471-5(e)(5)(i)(A)( 1) through (2).
( 3) The entity does not hold itself out as (and was not formed in connection with or availed of by) an arrangement or investment vehicle that is a private equity fund, venture capital fund, leveraged buyout fund, or any similar investment vehicle established with an investment strategy to acquire or fund companies and to treat the interests in those companies as capital assets held for investment purposes. For purposes of determining whether an entity was formed in connection with or availed of by such an arrangement or investment vehicle, any entity that existed at least six months prior to its acquisition by such arrangement or investment vehicle and that, prior to the acquisition, regularly conducted activities in the ordinary course of business will not be considered to have been formed in connection with or availed of by the arrangement or investment vehicle, in the absence of other facts suggesting the existence of an investment strategy described in the prior sentence.
(B) Nonfinancial group. An expanded affiliated group defined in SEC 1.1471-5(i)(2) is a nonfinancial group if, taking into account the application of this section--
( 1) For the three-year period (or the period during which the expanded affiliated group has been in existence, if shorter) ending on
( 2) [Reserved]. For further guidance, see SEC 1.1471-5(e)(5)(i)(B)( 2).
(C) Holding company. For purposes of this paragraph (e)(5)(i), an entity is a holding company if its primary activity consists of holding (directly or indirectly) all or part of the outstanding stock of one or more members of its expanded affiliated group. A partnership or any other non-corporate entity shall be treated as a holding company if substantially all the activities of such partnership (or other entity) consist of holding more than 50 percent of the voting power and value of the stock of one or more common parent corporation(s) of one or more expanded affiliated group(s). If a partnership or other non-corporate entity owns more than 50 percent of the voting power and value of the stock of more than one common parent corporation of an expanded affiliated group, each common parent corporation's expanded affiliated group will be treated as a separate expanded affiliated group for purposes of applying the rules of this section unless a non-corporate entity is treated as the common parent entity of the expanded affiliated group in accordance with SEC 1.1471-5(i)(10).
(D) [Reserved]. For further guidance, see SEC 1.1471-5(e)(5)(i)(D).
( 1) [Reserved]. For further guidance, see SEC 1.1471-5(e)(5)(i)(D)( 1).
( i) through (iii) [Reserved]. For further guidance, see SEC 1.1471-5(e)(5)(i)(D)( 1)( i) through (iii).
( iv) Managing the working capital of the expanded affiliated group (or any member thereof) such as by pooling the cash balances of affiliates (including both positive and deficit cash balances) or by investing or trading in financial assets solely for the account and risk of such entity or any member of its expanded affiliated group; or
( v) Acting as a financing vehicle for the expanded affiliated group (or any member thereof).
( 2) [Reserved]. For further guidance, see SEC 1.1471-5(e)(5)(i)(D)( 2).
( i) through (ii) [Reserved]. For further guidance, see SEC 1.1471-5(e)(5)(i)(D)( 2)( i) through (ii).
(E) [Reserved]. For further guidance, see SEC 1.1471-5(e)(5)(i)(E).
(ii) through (iii) [Reserved]. For further guidance, see SEC 1.1471-5(e)(5)(ii) through (iii).
(iv) [Reserved]. For further guidance, see SEC 1.1471-5(e)(5)(iv).
(A) [Reserved]. For further guidance, see SEC 1.1471-5(e)(5)(iv)(A).
(B) The entity does not hold an account (other than a depository account in the country in which the entity is operating to pay for expenses in that country) with or receive payments from any withholding agent other than a member of its expanded affiliated group;
(C) through (D) [Reserved]. For further guidance, see SEC 1.1471-5(e)(5)(iv)(C) through (D).
(v) [Reserved]. For further guidance, see SEC 1.1471-5(e)(5)(v) through (e)(5)(vi)(D).
(6) [Reserved]. For further guidance, see SEC 1.1471-5(e)(6).
(f) [Reserved]. For further guidance, see SEC 1.1471-5(f).
(1) [Reserved]. For further guidance, see SEC 1.1471-5(f)(1).
(i) [Reserved]. For further guidance, see SEC 1.1471-5(f)(1)(i).
(A) [Reserved]. For further guidance, see SEC 1.1471-5(f)(1)(i)(A).
( 1) through (5) [Reserved]. For further guidance, see SEC 1.1471-5(f)(1)(i)(A)( 1) through (5).
( 6) By the later of
( 7) through (9) [Reserved]. For further guidance, see SEC 1.1471-5(f)(1)(i)(A)( 7) through (9).
(B) [Reserved]. For further guidance, see SEC 1.1471-5(f)(1)(i)(B).
( 1) By the later of
( 2) [Reserved]. For further guidance, see SEC 1.1471-5(f)(1)(i)(B)( 2).
( 3) By the later of
(C) [Reserved]. For further guidance, see SEC 1.1471-5(f)(1)(i)(C).
( 1) [Reserved]. For further guidance, see SEC 1.1471-5(f)(1)(i)(C)( 1).
( 2) Each holder of record of direct debt interests in the FFI in excess of
( 3) [Reserved]. For further guidance, see SEC 1.1471-5(f)(1)(i)(C)( 3).
(D) [Reserved]. For further guidance, see SEC 1.1471-5(f)(1)(i)(D).
( 1) through (3) [Reserved]. For further guidance, see SEC 1.1471-5(f)(1)(i)(D)( 1) through (3).
( 4) The FFI ensures that by the later of
( 5) The FFI ensures that by the later of
( 6) With respect to any of the FFI's preexisting direct accounts that are held by the beneficial owner of the interest in the FFI, the FFI reviews those accounts in accordance with the procedures (and time frames) described in SEC 1.1471-4(c) applicable to preexisting accounts to identify any U.S. account or account held by a nonparticipating FFI. Notwithstanding the previous sentence, the FFI will not be required to review the account of any individual investor that purchased its interest at a time when all of the FFI's distribution agreements and its prospectus contained an explicit prohibition of the issuance and/or sale of shares to U.S. entities and U.S. resident individuals. An FFI will not be required to review the account of any investor that purchased its interest in bearer form until the time of payment, but at such time will be required to document the account in accordance with procedures set forth in SEC 1.1471-4(c) applicable to accounts other than preexisting accounts. By the later of
( 7) By the later of
( i) through (ii) [Reserved]. For further guidance, see SEC 1.1471-5(f)(1)(i)(D)( 7)( i) through (ii).
( 8) [Reserved]. For further guidance, see SEC 1.1471-5(f)(1)(i)(D)( 8).
(E) Qualified credit card issuers and servicers. An FFI is described in this paragraph (f)(1)(i)(E) if the FFI meets the following requirements.
( 1) The FFI is an FFI solely because it is an issuer or servicer of credit cards that accepts deposits, on its own behalf or, in the case of a servicer, on behalf of a credit card issuer, only when a customer makes a payment in excess of a balance due with respect to the credit card account and the overpayment is not immediately returned to the customer.
( 2) By the later of
(F) [Reserved]. For further guidance, see SEC 1.1471-5(f)(1)(i)(F).
( 1) [Reserved]. For further guidance, see SEC 1.1471-5(f)(1)(i)(F)( 1).
( i) [Reserved]. For further guidance, see SEC 1.1471-5(f)(1)(i)(F)( 1)( i).
( ii) An entity, other than a nonparticipating FFI, has agreed with the FFI to act as a sponsoring entity for the FFI.
( 2) [Reserved]. For further guidance, see SEC 1.1471-5(f)(1)(i)(F)( 2) through (f)(1)(i)(F)( 2)( iii).
( 3) [Reserved]. For further guidance, see SEC 1.1471-5(f)(1)(i)(F)( 3).
( i) through (iv) [Reserved]. For further guidance, see SEC 1.1471-5(f)(1)(i)(F)( 3)( i) through (iv).
( v) Identifies the FFI in all reporting completed on the FFI's behalf to the extent required under SUBSEC 1.1471-4(d)(2)(ii)(C) and 1.1474-1;
( vi) Performs the verification procedures required under SEC 1.1471-4(f) on behalf of the FFI, including the certification required under SEC 1.1471-4(f)(3);
( vii) Performs the verification procedures required under paragraphs (j) and (k) of this section; and
( viii) Has not had its status as a sponsoring entity revoked.
( 4) [Reserved]. For further guidance, see SEC 1.1471-5(f)(1)(i)(F)( 4).
( 5) A sponsoring entity is not liable for any failure to comply with the obligations contained in paragraph (f)(1)(i)(F)( 3) of this section unless the sponsoring entity is a withholding agent that is separately liable for the failure to withhold on or report with respect to a payment made to the sponsored FFI. A sponsored FFI will remain liable for any failure of its sponsoring entity to comply with the obligations contained in paragraph (f)(1)(i)(F)( 3) of this section that the sponsoring entity has agreed to undertake on behalf of the FFI, even if the sponsoring entity is also a withholding agent and is itself separately liable for the failure to withhold on or report with respect to a payment made to the sponsored FFI. The same tax, interest, or penalties, however, shall not be collected more than once.
(ii) [Reserved]. For further guidance, see SEC 1.1471-5(f)(1)(ii).
(A) [Reserved]. For further guidance, see SEC 1.1471-5(f)(1)(ii)(A).
(B) Have its responsible officer certify every three years to the IRS, either individually or collectively for the FFI's expanded affiliated group, that all of the requirements for the deemed-compliant category claimed by the FFI have been satisfied since the later of the date the FFI registers as a deemed-compliant FFI or
(C) through (D) [Reserved]. For further guidance, see SEC 1.1471-5(f)(1)(ii)(C) through (D).
(iii) [Reserved]. For further guidance, see SEC 1.1471-5(f)(1)(iii).
(2) Certified deemed-compliant FFIs. A certified deemed-compliant FFI means an FFI described in any of paragraphs (f)(2)(i) through (v) of this section that has certified as to its status as a deemed-compliant FFI by providing a withholding agent with the documentation described in SEC 1.1471-3(d)(6) applicable to the relevant deemed-compliant category. A certified deemed-compliant FFI also includes a nonreporting FFI under a Model 1 IGA and a nonreporting FFI treated as a certified deemed-compliant FFI under a Model 2 IGA. A certified deemed-compliant FFI is not required to register with the IRS.
(i) [Reserved]. For further guidance, see SEC 1.1471-5(f)(2)(i).
(A) [Reserved]. For further guidance, see SEC 1.1471-5(f)(2)(i)(A) through (f)(2)(i)(A)( 2).
(B) The FFI's business consists primarily of receiving deposits from and making loans to, with respect to a bank, retail customers that are unrelated to such bank and, with respect to a credit union or similar cooperative credit organization, members, provided that no such member has a greater than 5 percent interest in such credit union or cooperative credit organization. For purposes of this paragraph (f)(2)(i)(B), a customer is related to a bank if the customer and the bank have a relationship described in section 267(b). For purposes of determining whether a member has a greater than 5 percent interest in a credit union or cooperative credit organization, the member must aggregate the ownership or beneficial interests in the credit union or cooperative credit organization that are owned or held by a related member. A member of a credit union or cooperative credit organization is related to another member if the relationship of such members is described in section 267(b).
(C) through (F) [Reserved]. For further guidance, see SEC 1.1471-5(f)(2)(i)(C) through (F).
(ii) [Reserved]. For further guidance, see SEC 1.1471-5(f)(2)(ii) through (f)(2)(ii)(C).
(iii) Sponsored, closely held investment vehicles. Subject to the provisions of paragraph (f)(2)(iii)(F) of this section, an FFI is described in this paragraph (f)(2)(iii) if it meets the requirements described in paragraphs (f)(2)(iii)(A) through (D) of this section.
(A) The FFI is an FFI solely because it is an investment entity and is not a QI, WP, or WT.
(B) A participating FFI, reporting Model 1 FFI, or U.S. financial institution agrees to fulfill all due diligence, withholding, and reporting responsibilities that the FFI would have assumed if it were a participating FFI.
(C) Twenty or fewer individuals own all of the debt and equity interests in the FFI (disregarding debt interests owned by U.S. financial institutions, participating FFIs, registered deemed-compliant FFIs, and certified deemed-compliant FFIs and equity interests owned by an entity if that entity owns 100 percent of the equity interests in the FFI and is itself a sponsored FFI under this paragraph (f)(2)(iii)).
(D) The sponsoring entity complies with the following requirements--
( 1) The sponsoring entity has registered with the IRS as a sponsoring entity;
( 2) The sponsoring entity agrees to perform, on behalf of the FFI, all due diligence, withholding, reporting, and other requirements that the FFI would have been required to perform if it were a participating FFI and retains documentation collected with respect to the FFI for a period of six years;
( 3) The sponsoring entity identifies the FFI in all reporting completed on the FFI's behalf to the extent required under SUBSEC 1.1471-4(d)(2)(ii)(C) and 1.1474-1;
( 4) Performs the verification procedures required under SEC 1.1471-4(f) on behalf of the FFI, including the certification required under SEC 1.1471-4(f)(3);
( 5) Performs the verification procedures required under paragraphs (j) and (k) of this section; and
( 6) The sponsoring entity has not had its status as a sponsor revoked.
(E) The IRS may revoke a sponsoring entity's status as a sponsoring entity with respect to all sponsored FFIs if there is a material failure by the sponsoring entity to comply with its obligations under this paragraph (f)(2)(iii)(E) with respect to any sponsored FFI. A sponsoring entity is not liable for any failure to comply with the obligations contained in this paragraph (f)(2)(iii)(E) unless the sponsoring entity is a withholding agent that is separately liable for the failure to withhold on or report with respect to the payment made to the sponsored FFI. A sponsored FFI will remain liable for any failure of its sponsoring entity to comply with the obligations contained in this paragraph (f)(2)(iii)(E) that the sponsoring entity has agreed to undertake on behalf of the FFI, even if the sponsoring entity is also a withholding agent and is itself separately liable for the failure to withhold on or report with respect to a payment made to the sponsored FFI. The same tax, interest, or penalties, however, shall not be collected more than once.
(iv) Limited life debt investment entities (transitional). An FFI is described in this paragraph (f)(2)(iv) if the FFI is the beneficial owner of the payment (or of payments made with respect to the account) and the FFI meets the following requirements.
(A) The FFI is an investment entity that issued one or more classes of debt or equity interests to investors pursuant to a trust indenture or similar agreement and all of such interests were issued on or before
(B) The FFI was in existence as of
(C) The FFI was formed and operated for the purpose of purchasing or acquiring specific types of debt instruments or interests therein and holding those assets subject to reinvestment only under prescribed circumstances to maturity.
(D) Substantially all of the assets of the FFI consist of debt instruments or interests therein.
(E) All payments made to the investors of the FFI (other than holders of a de minimis interest) are either cleared through a clearing organization or custodial institution that is a participating FFI, reporting Model 1 FFI, or U.S. financial institution or made through a transfer agent that is a participating FFI, reporting Model 1 FFI, or U.S. financial institution.
(F) The FFI's trustee or fiduciary is not authorized through a fiduciary duty or otherwise to fulfill the obligations of a participating FFI under SEC 1.1471-4 and no other person has the authority to fulfill the obligations of a participating FFI under SEC 1.1471-4 on behalf of the FFI.
(v) Investment advisors and investment managers. An FFI is described in this paragraph (f)(2)(v) if the FFI meets the following requirements:
(A) The FFI is a financial institution solely because it is described in SEC 1.1471-5(e)(4)(i)(A).
(B) The FFI does not maintain financial accounts.
(3) [Reserved]. For further guidance, see SEC 1.1471-5(f)(3).
(i) [Reserved]. For further guidance, see SEC 1.1471-5(f)(3)(i).
(ii) [Reserved]. For further guidance, see SEC 1.1471-5(f)(3)(ii).
(A) through (E) [Reserved]. For further guidance, see SEC 1.1471-5(f)(3)(ii)(A) through (E).
(4) [Reserved]. For further guidance, see SEC 1.1471-5(f)(4).
(i) The distributor provides investment services to at least 30 customers unrelated to each other and fewer than half of the distributor's customers are related to each other. For purposes of this paragraph (f)(4)(i), customers are related to each other if they have a relationship with each other described in section 267(b).
(ii) through (viii) [Reserved]. For further guidance, see SEC 1.1471-5(f)(4)(ii) through (viii).
(g) [Reserved]. For further guidance, see SEC 1.1471-5(g).
(1) through (2) [Reserved]. For further guidance, see SEC 1.1471-5(g)(1) through (g)(2)(iv).
(3) [Reserved]. For further guidance, see SEC 1.1471-5(g)(3).
(i) [Reserved]. For further guidance, see SEC 1.1471-5(g)(3)(i).
(A) through (C) [Reserved]. For further guidance, see SEC 1.1471-5(g)(3)(i)(A) through (C).
(D) Preexisting accounts that become high-value accounts. With respect to a calendar year beginning after
(ii) through (iii) [Reserved]. For further guidance, see SEC 1.1471-5(g)(3)(ii) through (iii).
(4) [Reserved]. For further guidance, see SEC 1.1471-5(g)(4).
(h) [Reserved]. For further guidance, see SEC 1.1471-5(h) through (h)(2).
(i) Expanded affiliated group -- Scope of paragraph. This paragraph (i) defines the term expanded affiliated group for purposes of chapter 4. For the requirements of a participating FFI with respect to members of its expanded affiliated group that are FFIs, see SEC 1.1471-4(e).
(1) [Reserved]. For further guidance, see SEC 1.1471-5(i)(1).
(2) Expanded affiliated group defined. Except as otherwise provided in this paragraph (i), an expanded affiliated group is defined in accordance with the principles of section 1504(a) to mean one or more chains of members connected through ownership by a common parent entity if the common parent entity directly owns stock or other equity interests meeting the requirements of paragraph (i)(4) of this section in at least one of the other members (for purposes of this paragraph (i), the constructive ownership rules of section 318 do not apply). Generally, only a corporation shall be treated as the common parent entity of an expanded affiliated group, unless the taxpayer elects to follow the approach described in paragraph (i)(10).
(3) Member of expanded affiliated group. The term member of an expanded affiliated group means a corporation or any entity other than a corporation (such as a partnership or trust) with respect to which the ownership requirements of paragraph (i)(4) of this section are met, regardless of whether such entity is a U.S. person or a foreign person, but excluding corporations described in paragraphs (1), (4), (6), (7), or (8) of section 1504(b).
(4) Ownership test. The ownership requirements of this paragraph (i)(4) are met if--
(i) Corporations. For purposes of paragraph (i)(2) of this section, a corporation (except the common parent entity) will be considered owned by another member entity or by the common parent entity if more than 50 percent of the total voting power of the stock of such corporation and more than 50 percent of the total value of the stock of such corporation is owned directly by one or more other members of the group (including the common parent entity).
(A) Stock not to include certain preferred stock. For purposes of this paragraph (i)(4), the term stock does not include any stock which is described in section 1504(a)(4).
(B) Valuation. For purposes of section 1471(e) and this section, all shares of stock within a single class are considered to have the same value in determining the ownership percentage. Thus, control premiums and minority blockage discounts within a single class are not taken into account.
(ii) Partnerships. For purposes of paragraph (i)(2) of this section, a partnership will be considered owned by another member entity (including the common parent entity) if more than 50 percent (by value) of the capital or profits interest in the partnership is owned directly by one or more other members of the group (including the common parent entity).
(iii) Trusts. For purposes of paragraph (i)(2) of this section, a trust will be considered owned by another member entity or by the common parent entity if more than 50 percent (by value) of the beneficial interest in such trust is owned directly by one or more other members of the group (including the common parent entity). A beneficial interest in a trust includes an interest held by an entity treated as a grantor or other owner of the trust under sections 671 through 679 and a beneficial trust interest.
(5) Treatment of warrants, options, and obligations convertible into equity for determining ownership. For purposes of paragraph (i)(4) of this section, ownership of warrants, options, obligations convertible into the equity of a corporation or entity other than a corporation, and other similar interests is not considered for purposes of determining whether an entity is a member of an expanded affiliated group, except as follows:
(i) Ownership of a warrant, option, obligation convertible into stock, or other similar instrument creating an interest in a corporation will be considered for purposes of paragraph (i)(4) of this section to the extent that the common parent or member of the expanded affiliated group that holds such instrument also maintains voting rights with respect to such corporation. However, interests described in SEC 1.1504-4(d)(2) will not be treated as options.
(ii) Ownership of a warrant, option, obligation convertible into an equity interest, or other similar instrument creating an interest in a corporation or entity other than a corporation will be considered for purposes of paragraph (i)(4) of this section to the extent that such instrument is reasonably certain to be exercised, based on all of the facts and circumstances and in accordance with the principles set forth in SEC 1.1504-4(g).
(6) Exception for FFIs holding certain capital investments. Notwithstanding paragraphs (i)(2) and (i)(4) of this section, an investment entity will not be considered a member of an expanded affiliated group as a result of a contribution of seed capital by a member of such expanded affiliated group if--
(i) The member that owns the investment entity is an FFI that is in the business of providing seed capital to form investment entities, the interests in which it intends to sell to investors that do not have a relationship with each other described in section 267(b);
(ii) The investment entity is created in the ordinary course of such other FFI's business described in paragraph (i)(6)(i) of this section;
(iii) As of the date the FFI acquired the equity interest, any equity interest in the investment entity in excess of 50 percent of the total value of the stock of the investment entity is intended to be held by such other FFI (including ownership by other members of such other FFI's expanded affiliated group) for no more than three years from the date on which such other FFI first acquired an equity interest in the investment entity; and
(iv) In the case of an equity interest that has been held by such other FFI for over three years from the date referenced in paragraph (i)(6)(iii) of this section, the aggregate value of the equity interest held by such other FFI and the equity interests held by other members of its expanded affiliated group is 50 percent or less of the total value of the stock of the investment entity.
(7) Seed capital. For purposes of this paragraph (i), the term seed capital means an initial capital contribution made to an investment entity that is intended as a temporary investment and is deemed by the manager of the entity to be necessary or appropriate for the establishment of the entity, such as for the purpose of establishing a track record of investment performance for such entity, achieving economies of scale for diversified investment, avoiding an artificially high expense to return ratio, or similar purposes.
(8) Anti-abuse rule. A change in ownership, voting rights, or the form of an entity that results in an entity meeting or not meeting the ownership requirements described in paragraph (i)(4) of this section will be disregarded for purposes of determining whether an entity is a member of an expanded affiliated group if the change is pursuant to a plan a principal purpose of which is to avoid reporting or withholding that would otherwise be required under any chapter 4 provision. For purposes of this paragraph (i)(8), a change in voting rights includes a separation of voting rights and value.
(9) Exception for limited life debt investment entities. Notwithstanding paragraphs (i)(2) and (i)(4) of this section, an entity that meets the requirements of SEC 1.1471-5(f)(2)(iv), including the requirements to have been in existence as of
(10) Partnerships, trusts, and other non-corporate entities. For purposes of determining the composition of an expanded affiliated group, an entity other than a corporation may elect to be treated as the common parent entity. Taxpayers following this approach may not, in a later year, follow the rule described in paragraph (i)(2) without the approval of the Commissioner. See also SEC 1.1471-5(e)(5)(i)(C).
(j) Sponsoring entity verification. [Reserved].
(k) Sponsoring entity event of default. [Reserved].
(l) [Reserved]. For further guidance, see SEC 1.1471-5(l).
(m) Expiration date. The applicability of this section expires on
Par. 12. In SEC 1.1471-6, revise paragraphs (d)(1), (d)(4), (f)(2)(iii)(B) through) (C), (f)(3)(ii) through (iii), (f)(5) through (6), (g), and (h)(2) to read as follows:
SEC 1.1471-6 Payments beneficially owned by exempt beneficial owners.
* * * * *
(d) * * *
(1) [Reserved]. For further guidance, see SEC 1.1471-6T(d)(1).
* * * * *
(4) [Reserved]. For further guidance, see SEC 1.1471-6T(d)(4).
* * * * *
(f) * * *
(2) * * *
(iii) * * *
(B) [Reserved]. For further guidance, see SEC 1.1471-6T(f)(2)(iii)(B).
(C) [Reserved]. For further guidance, see SEC 1.1471-6T(f)(2)(iii)(C).
* * * * *
(3) * * *
(ii) [Reserved]. For further guidance, see SEC 1.1471-6T(f)(3)(ii).
(iii) [Reserved]. For further guidance, see SEC 1.1471-6T(f)(3)(iii).
* * * * *
(5) [Reserved]. For further guidance, see SEC 1.1471-6T(f)(5).
(6) [Reserved]. For further guidance, see SEC 1.1471-6T(f)(6).
* * * * *
(g) [Reserved]. For further guidance, see SEC 1.1471-6T(g).
(h) * * *
(2) [Reserved]. For further guidance, see SEC 1.1471-6T(h)(2) through (h)(2)(iii).
* * * * *
Par. 13. Section 1.1471-6T is added to read as follows:
SEC 1.1471-6T Payments beneficially owned by exempt beneficial owners (temporary).
(a) through (c) [Reserved]. For further guidance, see SEC 1.1471-6(a) through (c)(3).
(d) [Reserved]. For further guidance, see SEC 1.1471-6(d).
(1) In general. Solely for purposes of this section and except as provided in paragraph (h) of this section, the term foreign central bank of issue means an institution that is by law or government sanction the principal authority, other than the government itself, issuing instruments intended to circulate as currency. Such an institution is generally the custodian of the banking reserves of the country under whose law it is organized.
(2) through (3) [Reserved]. For further guidance, see SEC 1.1471-6(d)(2) through (3).
(4) Income on certain transactions. Solely for purposes of determining whether an entity is an exempt beneficial owner of a payment under this paragraph (d), a foreign central bank of issue is a beneficial owner with respect to income earned on cash and securities, including cash and securities held as collateral or securities held in connection with a securities lending transaction, held by the foreign central bank of issue in the ordinary course of its operations as a central bank of issue.
(e) [Reserved]. For further guidance, see SEC 1.1471-6(e).
(f) [Reserved]. For further guidance, see SEC 1.1471-6(f).
(1) [Reserved]. For further guidance, see SEC 1.1471-6(f)(1).
(2) [Reserved]. For further guidance, see SEC 1.1471-6(f)(2).
(i) through (ii) [Reserved]. For further guidance, see SEC 1.1471-6(f)(2)(i) through (ii).
(iii) [Reserved]. For further guidance, see SEC 1.1471-6(f)(2)(iii).
(A) [Reserved]. For further guidance, see SEC 1.1471-6(f)(2)(iii)(A).
(B) The fund receives at least 50 percent of its total contributions (other than transfers of assets from accounts described in SEC 1.1471-5(b)(2)(i)(A) (referring to retirement and pension accounts), from retirement and pension accounts described in an applicable Model 1 or Model 2 IGA, or from other retirement funds described in this paragraph (f) or in an applicable Model 1 or Model 2 IGA) from the sponsoring employers;
(C) Distributions or withdrawals from the fund are allowed only upon the occurrence of specified events related to retirement, disability, or death (except rollover distributions to accounts described in SEC 1.1471-5(b)(2)(i)(A) (referring to retirement and pension accounts), to retirement and pension accounts described in an applicable Model 1 or Model 2 IGA, or to other retirement funds described in this paragraph (f) or in an applicable Model 1 or Model 2 IGA), or penalties apply to distributions or withdrawals made before such specified events; or
(D) [Reserved]. For further guidance, see SEC 1.1471-6(f)(2)(iii)(D).
(3) [Reserved]. For further guidance, see SEC 1.1471-6(f)(3).
(i) [Reserved]. For further guidance, see SEC 1.1471-6(f)(3)(i).
(ii) The fund is sponsored by one or more employers and each of these employers are not investment entities or passive NFFEs;
(iii) Employee and employer contributions to the fund (other than transfers of assets from other retirement plans described in paragraph (f)(1) of this section, from accounts described in SEC 1.1471-5(b)(2)(i)(A) (referring to retirement and pension accounts), or retirement and pension accounts described in an applicable Model 1 or Model 2 IGA) are limited by reference to earned income and compensation of the employee, respectively;
(iv) through (v) [Reserved]. For further guidance, see SEC 1.1471-6(f)(3)(iv) through (v).
(4) [Reserved]. For further guidance, see SEC 1.1471-6(f)(4).
(5) Investment vehicles exclusively for retirement funds. A fund established exclusively to earn income for the benefit of one or more retirement funds described in paragraphs (f)(1) through (5) of this section or in an applicable Model 1 or Model 2 IGA, accounts described in SEC 1.1471-5(b)(2)(i)(A) (referring to retirement and pension accounts), or retirement and pension accounts described in an applicable Model 1 or Model 2 IGA.
(6) Pension fund of an exempt beneficial owner. A fund established and sponsored by an exempt beneficial owner described in paragraph (b), (c), (d), or (e) of this section or an exempt beneficial owner (other than a fund that qualifies as an exempt beneficial owner) described in an applicable Model 1 or Model 2 IGA to provide retirement, disability, or death benefits to beneficiaries or participants that are current or former employees of the exempt beneficial owner (or persons designated by such employees), or that are not current or former employees, but the benefits provided to such beneficiaries or participants are in consideration of personal services performed for the exempt beneficial owner.
(7) [Reserved]. For further guidance, see SEC 1.1471-6(f)(7).
(g) Entities wholly owned by exempt beneficial owners. A person is described in this paragraph (g) if it is an FFI solely because it is an investment entity, each direct holder of an equity interest in the investment entity is an exempt beneficial owner described in paragraph (b), (c), (d), (e), (f), or (g) of this section or an exempt beneficial owner described in an applicable Model 1 or Model 2 IGA, and each direct holder of a debt interest in the investment entity is either a depository institution (with respect to a loan made to such entity), an exempt beneficial owner described in paragraph (b), (c), (d), (e), (f), or (g) of this section, or an exempt beneficial owner described in an applicable Model 1 or Model 2 IGA.
(h) [Reserved]. For further guidance, see SEC 1.1471-6(h).
(1) [Reserved]. For further guidance, see SEC 1.1471-6(h)(1).
(2) Limitation. Paragraph (h)(1) of this section will not apply to a foreign central bank of issue as described in paragraph (d) if--
(i) The entity undertakes commercial financial activity described in paragraph (h)(1) of this section solely for or at the direction of other exempt beneficial owners and such commercial financial activity is consistent with the purposes of the entity;
(ii) The entity has no outstanding debt that would be a financial account under SEC 1.1471-5(b)(1)(iii)(C); and
(iii) The entity only maintains financial accounts that are depository accounts for current or former employees of the entity (and the spouses and children of such employees) or financial accounts for exempt beneficial owners.
(i) [Reserved]. For further guidance, see SEC 1.1471-6(i).
(j) Expiration date. The applicability of this section expires on
Par. 14. Section 1.1472-1 is amended:
1. By redesignating paragraph (f) as paragraph (h).
2. By adding paragraphs (c)(1)(vi) through (vii), (c)(3) through (5), (f), and (g).
3. By revising paragraphs (b)(1) introductory text, (b)(2), (c)(1) introductory text, (c)(1)(i) introductory text, (c)(1)(ii) through (iii), (c)(1)(iv) introductory text, (c)(1)(iv)(C), (c)(1)(v), (c)(2), and (d)(1) through (2).
The additions and revisions read as follows:
SEC 1.1472-1 Withholding on NFFEs.
* * * * *
(b) * * *
(1) [Reserved]. For further guidance, see SEC 1.1472-1T(b)(1).
* * * * *
(2) [Reserved]. For further guidance, see SEC 1.1472-1T(b)(2).
(c) * * *
(1) [Reserved]. For further guidance, see SEC 1.1472-1T(c)(1).
(i) [Reserved]. For further guidance, see SEC 1.1472-1T(c)(1)(i).
* * * * *
(ii) [Reserved]. For further guidance, see SEC 1.1472-1T(c)(1)(ii).
(iii) [Reserved]. For further guidance, see SEC 1.1472-1T(c)(1)(iii).
(iv) [Reserved]. For further guidance, see SEC 1.1472-1T(c)(1)(iv).
* * * * *
(C) [Reserved]. For further guidance, see SEC 1.1472-1T(c)(1)(iv)(C).
(v) [Reserved]. For further guidance, see SEC 1.1472-1T(c)(1)(v).
(vi) [Reserved]. For further guidance, see SEC 1.1472-1T(c)(1)(vi).
(vii) [Reserved]. For further guidance, see SEC 1.1472-1T(c)(1)(vii).
(2) [Reserved]. For further guidance, see SEC 1.1472-1T(c)(2).
(3) [Reserved]. For further guidance, see SEC 1.1472-1T(c)(3).
(4) [Reserved]. For further guidance, see SEC 1.1472-1T(c)(4).
(5) [Reserved]. For further guidance, see SEC 1.1472-1T(c)(5) through (c)(5)(iv).
(d) * * *
(1) [Reserved]. For further guidance, see SEC 1.1472-1T(d)(1).
(2) [Reserved]. For further guidance, see SEC 1.1472-1T(d)(2).
* * * * *
(f) [Reserved]. For further guidance, see SEC 1.1472-1T(f).
(g) [Reserved]. For further guidance, see SEC 1.1472-1T(g).
* * * * *
Par. 15. Section 1.1472-1T is added to read as follows:
SEC 1.1472-1T Withholding on NFFEs (temporary).
(a) [Reserved]. For further guidance, see SEC 1.1472-1(a).
(b) [Reserved]. For further guidance, see SEC 1.1472-1(b).
(1) In general. Except as otherwise provided in paragraph (b)(2) of this section (providing transitional relief) or paragraphs (c)(1) or (2) of this section (providing exceptions for payments to an excepted NFFE or an exempt beneficial owner), SEC 1.1471-2(a)(4)(i) (providing an exception to withholding if the withholding agent lacks control, custody, or knowledge), SEC 1.1471-2(a)(4)(vii) (providing an exception to withholding for payments made to an account held with or equity interests traded through a clearing organization with FATCA-compliant membership), or SEC 1.1471-2(a)(4)(viii) (providing an exception to withholding for payments to certain excepted accounts), a withholding agent must withhold 30 percent of any withholdable payment made after
(i) through (iii) [Reserved]. For further guidance, see SEC 1.1472-1(b)(1)(i) through (iii).
(2) Transitional relief. For any withholdable payment made prior to
(c) [Reserved]. For further guidance, see SEC 1.1472-1(c).
(1) Payments to an excepted NFFE. A withholding agent is not required to withhold under section 1472(a) and paragraph (b) of this section on a withholdable payment (or portion thereof) if the withholding agent can treat the payment as made to a payee that is an excepted NFFE. For purposes of this paragraph, the term excepted NFFE means a payee that the withholding agent may treat as a NFFE that is a QI, WP, or WT. Additionally, the term excepted NFFE means, with respect to the payment, a NFFE described in paragraphs (c)(1)(i) through (vii) of this section to the extent the withholding agent may treat the NFFE as the beneficial owner of the payment.
(i) Publicly traded corporation. A NFFE is described in this paragraph (c)(1)(i) if it is a corporation the stock of which is regularly traded on one or more established securities markets for the calendar year.
(A) through (C) [Reserved]. For further guidance, see SEC 1.1472-1(c)(1)(i)(A) through (c)(1)(i)(C)( 3).
(ii) Certain affiliated entities related to a publicly traded corporation. A NFFE is described in this paragraph (c)(1)(ii) if it is a corporation that is a member of the same expanded affiliated group (as defined in SEC 1.1471-5(i)) as a corporation described in paragraph (c)(1)(i) of this section.
(iii) Certain territory entities. A NFFE is described in this paragraph (c)(1)(iii) if it is a territory entity that is directly or indirectly wholly owned by one or more bona fide residents of the U.S. territory under the laws of which the entity is organized. The term bona fide resident of a U.S. territory means an individual who qualifies as a bona fide resident under section 937(a) and SEC 1.937-1.
(iv) Active NFFEs. A NFFE is described in this paragraph (c)(1)(iv) if it is an entity (an active NFFE) and less than 50 percent of its gross income for the preceding taxable year (i.e., calendar or fiscal) is passive income and less than 50 percent of the weighted average percentage of assets (tested quarterly) held by it are assets that produce or are held for the production of passive income, as determined after the application of paragraph (c)(1)(iv)(B) of this section (passive assets).
(A) through (B) [Reserved]. For further guidance, see SEC 1.1472-1(c)(1)(iv)(A) through (c)(1)(B)( 2)( ii).
(C) Methods of measuring assets. For purposes of this paragraph (c)(1)(iv), the value of a NFFE's assets is determined based on the fair market value or book value of the assets that is reflected on the NFFE's balance sheet (as determined under either a U.S. or an international financial accounting standard).
(v) Excepted nonfinancial entities. A NFFE is described in this paragraph (c)(1)(v) if it is an entity described in SEC 1.1471-5(e)(5) (referring to holding companies, treasury centers, and captive finance companies that are members of a nonfinancial group; start-up companies; entities that are liquidating or emerging from bankruptcy; and non-profit organizations).
(vi) Direct reporting NFFEs. A NFFE is described in this paragraph (c)(1)(vi) if it meets the requirements described in SEC 1.1472-1(c)(3) to be treated as a direct reporting NFFE.
(vii) Sponsored direct reporting NFFEs. A NFFE is described in this paragraph (c)(1)(vii) if it meets the requirements described in SEC 1.1472-1(c)(5) to be treated as a sponsored direct reporting NFFE.
(2) Payments made to an exempt beneficial owner. A withholding agent is not required to withhold on a withholdable payment (or portion thereof) under section 1472(a) and paragraph (b) of this section if the withholding agent may treat the payment as made to an exempt beneficial owner.
(3) Definition of direct reporting NFFE. A direct reporting NFFE means a NFFE that elects to report information about its direct or indirect substantial U.S. owners to the IRS and meets the following requirements--
(i) The NFFE must register on Form 8957, "FATCA Registration," (or such other form as the IRS may prescribe) with the IRS to obtain a GIIN pursuant to the procedures prescribed by the IRS;
(ii) The NFFE must report directly to the IRS on Form 8966, "FATCA Report," (or such other form as the IRS may prescribe) the following information for each calendar year (or, may be required by the IRS to certify on Form 8966, or in such other manner as the IRS may prescribe, that the NFFE has no substantial U.S. owners):
(A) The name, address, and TIN of each substantial U.S. owner (as defined in SEC 1.1473-1(b)) of such NFFE;
(B) The total of all payments made to each substantial U.S. owner (including the gross amounts paid or credited to the substantial U.S. owner with respect to such owner's equity interest in the NFFE during the calendar year, which include payments in redemption or liquidation (in whole or part) of the substantial U.S. owner's equity interest in the NFFE);
(C) The value of each substantial U.S. owner's equity interest in the NFFE determined by applying the rules described in SEC 1.1471-5(b)(4) (substituting the term equity for the terms account and financial account);
(D) The name, address, and GIIN of the NFFE, and
(E) Any other information as required by Form 8966 (or such other form as the IRS may prescribe) and its accompanying instructions;
(iii) The NFFE must obtain a written certification (contained on a withholding certificate or in a written statement) from each person that would be treated as a substantial U.S. owner of the NFFE if such person were a specified U.S. person. Such written certification must indicate whether the person is a substantial U.S. owner of the NFFE, and if so, the name, address and TIN of the person. If the NFFE has reason to know that such written certification is unreliable or incorrect, it must contact the person and request a revised written certification. If no revised written certification is received, the NFFE must treat the person as a substantial U.S. owner and report on Form 8966 the information required under paragraph (c)(3)(ii) of this section. The NFFE has reason to know that such a written certification is unreliable or incorrect if the certification is inconsistent with information in the NFFE's possession, including information that the NFFE provides to a financial institution in order for the financial institution to meet its AML or other account identification due diligence procedures with respect to the NFFE's account, information that is publicly available, and U.S. indicia as described in SEC 1.1441-7(b) and for which appropriate documentation sufficient to cure the U.S. indicia in the manner set forth in SEC 1.1441-7(b)(8) has not been obtained.
(iv) The NFFE must keep records that it produces in the ordinary course of its business that summarize the activity (including the gross amounts described in paragraph (c)(3)(ii)(B) that are paid or credited to each of its substantial U.S. owners) relating to its transactions with respect to the equity of the NFFE held by each of its substantial U.S. owners for any calendar year in which the owner was required to be reported under paragraph (c)(3)(ii) of this section. The records must be retained for the longer of six years or the retention period under the NFFE's normal business procedures. A NFFE may be required to extend the six year retention period if the IRS requests such an extension prior to the expiration of the six year period;
(v) The NFFE must respond to requests made by the IRS for additional information with respect to any substantial U.S. owner that is subject to reporting by the NFFE or with respect to the records described in paragraphs (c)(3)(iii) or (iv) of this section;
(vi) The NFFE must make a periodic certification to the IRS within each six-month period following the end of each certification period relating to its compliance with respect to the election described in paragraphs (c)(3) and (4) of this section. The first certification period begins on the date a GIIN is issued and ends at the close of the third full calendar year following that date. Each subsequent certification period is the three calendar year period following the close of the previous certification period. The certification will require an officer of the NFFE to certify to the following statements--
(A)( 1) The NFFE has not had any events of default described in paragraph (c)(4)(v) of this section; or
( 2) If there are any events of default, appropriate measures were taken to remediate such failures and to prevent such failures from recurring; and
(B) With respect to any failure to report to the extent required under paragraph (c)(3)(ii), the NFFE has corrected such failure by filing the appropriate information returns; and
(vii) The NFFE has not had its status as a direct reporting NFFE revoked by the IRS.
(4) Election to be treated as a direct reporting NFFE --(i) Manner of making election. A NFFE may elect to be treated as a direct reporting NFFE by registering on Form 8957 (or such other form as the IRS may prescribe) with the IRS to obtain a GIIN pursuant to the procedures prescribed by the IRS.
(ii) Effective date of election. The election is effective upon the issuance of a GIIN to the NFFE.
(iii) Revocation of election by NFFE. The election may not be revoked by the NFFE without the consent of the Commissioner. The NFFE must notify its sponsoring entity (if applicable) and all relevant withholding agents if it revokes its election.
(iv) Revocation of election by Commissioner. The election may be revoked by the Commissioner upon an event of default described in paragraph (v) of this section.
(v) Event of default. An event of default occurs if a direct reporting NFFE fails to perform any of the obligations described in (c)(3)(i) through (vi) of this section. An event of default also includes any misrepresentation of a material fact to the IRS.
(vi) Notice of event of default. Following an event of default known by or disclosed to the IRS, the IRS will deliver to the NFFE a notice of default specifying the event of default. The IRS will request that the NFFE remediate the event of default within a specified time period. The NFFE must respond to the notice of default and provide information responsive to an IRS request for information or state the reasons why the NFFE does not agree that an event of default has occurred. If the NFFE does not provide a response within the specified time period, the IRS may, at its sole discretion, deliver a notice to the NFFE that its election to be treated as a direct reporting NFFE has been revoked. A NFFE may request, within 90 days of receipt, reconsideration of a notice of default or notice of revocation by written request to the Deputy Commissioner (International), LB&I.
(vii) Remediation of event of default. A NFFE will be permitted to remediate an event of default to the extent it agrees with the IRS on a remediation plan. The IRS may, as part of a remediation plan, require additional information from the NFFE.
(5) Election by a direct reporting NFFE to be treated as a sponsored direct reporting NFFE.
(i) Definition of sponsored direct reporting NFFE. A NFFE is a sponsored direct reporting NFFE if the NFFE is a direct reporting NFFE and if another entity, other than a nonparticipating FFI, has agreed with the NFFE to act as its sponsoring entity, as described in paragraph (c)(5)(ii) of this section.
(ii) Requirements for sponsoring entity of a sponsored direct reporting NFFE. A sponsoring entity meets the requirements of this paragraph (c)(5)(ii) if the sponsoring entity--
(A) Is authorized to act on behalf of the NFFE;
(B) Has registered with the IRS as a sponsoring entity;
(C) Has registered the NFFE with the IRS as a sponsored direct reporting NFFE;
(D) Agrees to perform, on behalf of the NFFE, all due diligence, reporting, and other requirements that the NFFE would have been required to perform as a direct reporting NFFE;
(E) Identifies the NFFE in all reporting completed on the NFFE's behalf;
(F) Complies with the certification and other requirements in paragraphs (f) and (g) of this section;
(G) Has not had its status as a sponsoring entity revoked; and
(H) Agrees to notify all relevant withholding agents and the IRS if its status as a sponsoring entity is revoked, if it otherwise ceases to be the sponsoring entity of any of its sponsored direct reporting NFFEs (for example, if the sponsored direct reporting NFFE changes sponsors), or if the status of any of its sponsored direct reporting NFFEs has been revoked.
(iii) Revocation of status as sponsoring entity. The IRS may revoke a sponsoring entity's status as a sponsoring entity with respect to all sponsored direct reporting NFFEs if there is a material failure by the sponsoring entity to comply with its obligations under paragraph (c)(5)(ii) of this section with respect to any sponsored direct reporting NFFE.
(iv) Liability of sponsoring entity. A sponsoring entity is not liable for any failure to comply with the obligations contained in paragraph (c)(5)(ii) of this section. A sponsored direct reporting NFFE will remain liable for all of its chapter 4 obligations without regard to any failure of its sponsoring entity to comply with the obligations contained in paragraph (c)(5)(ii) of this section that the sponsoring entity has agreed to undertake on behalf of the NFFE.
(d) [Reserved]. For further guidance, see SEC 1.1472-1(d).
(1) In general. For purposes of this section, except in the case of a payee that is a QI, WP, or WT, a withholding agent may treat a withholdable payment as beneficially owned by the payee as determined under SEC 1.1471-3. Thus, a withholding agent may treat a withholdable payment as beneficially owned by an excepted NFFE (other than a QI, WP, or WT) if the withholding agent can reliably associate the payment with valid documentation to determine the payee's status as an excepted NFFE under the rules of SEC 1.1471-3(d).
(2) Payments made to a NFFE that is a QI, WP, or WT. A withholding agent may treat the payee of a withholdable payment as a NFFE that is a QI, WP, or WT if the withholding agent can reliably associate the payment with valid documentation to determine the payee's status as such under the rules of SEC 1.1471-3(b)(3) and (d).
(3) through (5) [Reserved]. For further guidance, see SEC 1.1472-1(d)(3) through (5).
(e) [Reserved]. For further guidance, see SEC 1.1472-1(e) through (e)(2).
(f) Sponsoring entity verification. [Reserved].
(g) Sponsoring entity event of default. [Reserved].
(h) [Reserved]. For further guidance, see SEC 1.1472-1(h).
(i) Expiration date. The applicability of this section expires on
Par. 16. Section 1.1473-1 is amended by revising paragraphs (a)(2)(vi), (a)(3)(iii)(B)( 4), (a)(4)(vi), (a)(5)(i) through (vi), and (b)(2)(v) and by adding new paragraph (a)(4)(vii) to read as follows:
SEC 1.1473-1 Section 1473 definitions.
(a) * * *
(2) * * *
(vi) [Reserved]. For further guidance, see SEC 1.1473-1T(a)(2)(vi).
* * * * *
(3) * * *
(iii) * * *
(B) * * *
( 4) [Reserved]. For further guidance, see SEC 1.1473-1T(a)(3)(iii)(B)( 4).
* * * * *
(4) * * *
(vi) [Reserved]. For further guidance, see SEC 1.1473-1T(a)(4)(vi).
(vii) [Reserved]. For further guidance, see SEC 1.1473-1T(a)(4)(vii).
(5) * * *
(i) [Reserved]. For further guidance, see SEC 1.1473-1T(a)(5)(i).
(ii) [Reserved]. For further guidance, see SEC 1.1473-1T(a)(5)(ii).
(iii) [Reserved]. For further guidance, see SEC 1.1473-1T(a)(5)(iii).
(iv) [Reserved]. For further guidance, see SEC 1.1473-1T(a)(5)(iv).
(v) [Reserved]. For further guidance, see SEC 1.1473-1T(a)(5)(v).
(vi) [Reserved]. For further guidance, see SEC 1.1473-1T(a)(5)(vi).
* * * * *
(b) * * *
(2) * * *
(v) [Reserved]. For further guidance, see SEC 1.1473-1T(b)(2)(v).
* * * * *
Par. 17. Section 1.1473-1T is added to read as follows:
SEC 1.1473-1T Section 1473 definitions (temporary).
(a) [Reserved]. For further guidance, see SEC 1.1473-1(a).
(1) [Reserved]. For further guidance, see SEC 1.1473-1(a)(1) through (a)(1)(ii).
(2) [Reserved]. For further guidance, see SEC 1.1473-1(a)(2).
(i) through (v) [Reserved]. For further guidance, see SEC 1.1473-1(a)(2)(i) through (v).
(vi) Special rule for sales of interest bearing debt obligations. Income that is otherwise described as U.S. source FDAP income in paragraphs (a)(2)(i) through (v) of this section does not include an amount of interest accrued on the date of a sale or exchange of an interest bearing debt obligation if the sale occurs between two interest payment dates and is not part of a plan described in SEC 1.1441-3(b)(2)(ii).
(vii) [Reserved]. For further guidance, see SEC 1.1473-1(a)(2)(vii) through (a)(2)(vii)(B).
(3) [Reserved]. For further guidance, see SEC 1.1473-1(a)(3).
(i) through (ii) [Reserved]. For further guidance, see SEC 1.1473-1(a)(3)(i) through (a)(3)(ii)(C).
(iii) [Reserved]. For further guidance, see SEC 1.1473-1(a)(3)(iii).
(A) [Reserved]. For further guidance, see SEC 1.1473-1(a)(3)(iii)(A).
(B) [Reserved]. For further guidance, see SEC 1.1473-1(a)(3)(iii)(B).
( 1) through (3) [Reserved]. For further guidance, see SEC 1.1473-1(a)(3)(iii)(B)( 1) through (3).
( 4) In the case of a sale of an obligation described in paragraph (a)(2)(vi), gross proceeds includes any interest accrued between interest payment dates other than an amount described in paragraph (a)(2)(vi) of this section that is treated as U.S. source FDAP income; and
( 5) [Reserved]. For further guidance, see SEC 1.1473-1(a)(3)(iii)(B)( 4).
(4) [Reserved]. For further guidance, see SEC 1.1473-1(a)(4).
(i) through (v) [Reserved]. For further guidance, see SEC 1.1473-1(a)(4)(i) through (v).
(vi) Offshore payments of U.S. source FDAP income prior to 2017 (transitional). A payment with respect to an offshore obligation made prior to
(vii) Collateral arrangements prior to 2017 (transitional). A payment made prior to
(5) [Reserved]. For further guidance, see SEC 1.1473-1(a)(5).
(i) In general. This paragraph (a)(5) provides special rules for a flow-through entity, complex trust, or estate to determine when such entity must treat a payment of U.S. source FDAP income that is also a withholdable payment as having been paid by such entity to its partners, owners, or beneficiaries (as applicable depending on the type of entity).
(ii) Partnerships. An amount of U.S. source FDAP income that is also a withholdable payment is treated as being paid to a partner under rules similar to the rules prescribing when withholding is required for chapter 3 purposes as described in SEC 1.1441-5(b)(2)(i)(A).
(iii) Simple trusts. An amount of U.S. source FDAP income that is also a withholdable payment is treated as being paid to a beneficiary of a simple trust under rules similar to the rules prescribing when withholding is required for chapter 3 purposes as described in SEC 1.1441-5(b)(2)(ii).
(iv) Complex trusts and estates. An amount of U.S. source FDAP income that is also a withholdable payment is treated as being paid to a beneficiary of a complex trust or estate under rules similar to the rules prescribing when withholding is required for chapter 3 purposes as described in SEC 1.1441-5(b)(2)(iii).
(v) Grantor trusts. If an amount of U.S. source FDAP income that is also a withholdable payment is paid to a grantor trust, a person treated as an owner of all or a portion of such trust is treated as having been paid such income by the trust at the time it is received by or credited to the trust or portion thereof.
(vi) Special rule for an NWP or NWT. In the case of a partnership, simple trust, or complex trust that is an NWP or NWT, the rules described in paragraphs (a)(5)(ii) and (iii) of this section shall not apply, and U.S. source FDAP income that is also a withholdable payment is treated as being paid to the partner or beneficiary at the time the income is paid to the partnership or trust, respectively.
(vii) [Reserved]. For further guidance, see SEC 1.1473-1(a)(5)(vii).
(6) [Reserved]. For further guidance, see SEC 1.1473-1(a)(6).
(7) [Reserved]. For further guidance, see SEC 1.1473-1(a)(7).
(b) [Reserved]. For further guidance, see SEC 1.1473-1(b).
(1) [Reserved]. For further guidance, see SEC 1.1473-1(b)(1) through (b)(1)(iii)(B).
(2) [Reserved]. For further guidance, see SEC 1.1473-1(b)(2).
(i) through (iv) [Reserved]. For further guidance, see SEC 1.1473-1(b)(2)(i) through (iv).
(v) Interests owned or held by a related person. For purposes of determining whether a specified U.S. person is a substantial U.S. owner in a foreign entity described in paragraphs (b)(2)(i) through (iv) of this section, if a specified U.S. person owns or holds, directly or indirectly, any interest in the foreign entity, that interest must be aggregated with any such interest in the foreign entity owned or held, directly or indirectly, by a related person. For purposes of the preceding sentence, a related person is a person or spouse of a person described in SEC 1.267(c)-1(a)(4), determined by reference to such specified U.S. person.
(3) through (7) [Reserved]. For further guidance, see SEC 1.1473-1(b)(3) through (7).
(c) through (f) [Reserved]. For further guidance, see SEC 1.1473-1(c) through (f).
(g) Expiration date. The applicability of this section expires on
Par. 18. Section 1.1474-1 is amended:
1. By removing paragraphs (d)(1)(ii)(A)( 1)( ix), (d)(3)(iii), (d)(4)(ii)(C), and (i)(1)(iv) through (v).
2. By redesignating paragraphs (d)(1)(ii)(A)( 1)( x) through (xii) as (d)(1)(ii)(A)( 1)( ix) through (xi), and paragraphs (d)(3)(iv) through (x) as (d)(3)(iii) through (ix).
3. By revising paragraphs (d)(1)(i), (d)(1)(ii)(A)( 1)( viii) through (ix), (d)(1)(ii)(B)( 1)( i), (d)(1)(ii)(B)( 1)( vi) through (vii), (d)(1)(ii)(B)( 1)( ix), (d)(2)(i), (d)(4)(i)(B), (d)(4)(i)(E), (d)(4)(ii)(B), (d)(4)(iii), (i)(1) introductory text, (i)(1)(i) through (iii), (i)(2) introductory text, and (i)(2)(iii).
The additions and revisions read as follows:
SEC 1.1474-1 Liability for withheld tax and withholding agent reporting.
* * * * *
(d) * * *
(1) * * *
(i) [Reserved]. For further guidance, see SEC 1.1474-1T(d)(1)(i).
(ii) * * *
(A) * * *
( 1) * * *
( viii) [Reserved]. For further guidance, see SEC 1.1474-1T(d)(1)(ii)(A)( 1)( viii).
( ix) [Reserved]. For further guidance, see SEC 1.1474-1T(d)(1)(ii)(A)( 1)( ix).
* * * * *
(B) * * *
( 1) * * *
( i) [Reserved]. For further guidance, see SEC 1.1474-1T(d)(1)(ii)(B)( 1)( i).
* * * * *
( vi) [Reserved]. For further guidance, see SEC 1.1474-1T(d)(1)(ii)(B)( 1)( vi).
( vii) [Reserved]. For further guidance, see SEC 1.1474-1T(d)(1)(ii)(B)( 1)( vii).
* * * * *
( ix) [Reserved]. For further guidance, see SEC 1.1474-1T(d)(1)(ii)(B)( 1)( ix).
* * * * *
(2) * * *
(i) [Reserved]. For further guidance, see SEC 1.1474-1T(d)(2)(i).
(A) [Reserved]. For further guidance, see SEC 1.1474-1T(d)(2)(i)(A).
(B) [Reserved]. For further guidance, see SEC 1.1474-1T(d)(2)(i)(B).
(C) [Reserved]. For further guidance, see SEC 1.1474-1T(d)(2)(i)(C).
* * * * *
(4) * * *
(i) * * *
(B) [Reserved]. For further guidance, see SEC 1.1474-1T(d)(4)(i)(B).
* * * * *
(E) [Reserved]. For further guidance, see SEC 1.1474-1T(d)(4)(i)(E).
(ii) * * *
(B) [Reserved]. For further guidance, see SEC 1.1474-1T(d)(4)(ii)(B).
(C) [Reserved]. For further guidance, see SEC 1.1474-1T(d)(4)(ii)(C).
(iii) * * *
(A) [Reserved]. For further guidance, see SEC 1.1474-1T(d)(4)(iii) through (d)(4)(iii)(C).
* * * * *
(i) * * *
(1) [Reserved]. For further guidance, see SEC 1.1474-1T(i)(1).
(i) [Reserved]. For further guidance, see SEC 1.1474-1T(i)(1)(i).
(ii) [Reserved]. For further guidance, see SEC 1.1474-1T(i)(1)(ii).
(iii) [Reserved]. For further guidance, see SEC 1.1474-1T(i)(1)(iii) through (i)(1)(iii)(E).
(2) [Reserved]. For further guidance, see SEC 1.1474-1T(i)(2).
* * * * *
served]. For further guidance, see SEC 1.1474-1T(i)(2)(iii).
* * * * *
Par. 19. Section 1.1474-1T is added to read as follows:
SEC 1.1474-1T Liability for withheld tax and withholding agent reporting (temporary).
(a) through (c) [Reserved]. For further guidance, see SEC 1.1474-1(a) through (c)(3).
(d) [Reserved]. For further guidance, see SEC 1.1474-1(d).
(1) [Reserved]. For further guidance, see SEC 1.1474-1(d)(1).
(i) In general. Except as otherwise provided in paragraph (d)(4) of this section or in the instructions to Form 1042-S, every withholding agent must file an information return on Form 1042-S, "Foreign Person's U.S. Source Income Subject to Withholding," (or such other form as the IRS may prescribe) to report to the IRS chapter 4 reportable amounts as described in paragraph (d)(2)(i) of this section that were paid to a recipient during the preceding calendar year. Except as otherwise provided in paragraphs (d)(4)(ii)(B) (certain unknown recipients) and (d)(4)(i)(B) and (d)(4)(iii)(A) of this section (describing payees includable in reporting pools of a participating FFI or registered deemed-compliant FFI), a separate Form 1042-S must be filed with the IRS for each recipient of an amount subject to reporting under paragraph (d)(2)(i) of this section and for each separate type of payment made to a single recipient in accordance with paragraph (d)(4)(i) of this section. The Form 1042-S shall be prepared in such manner as the form and its accompanying instructions prescribe. One copy of the Form 1042-S shall be filed with the IRS on or before
(ii) [Reserved]. For further guidance, see SEC 1.1474-1(d)(1)(ii).
(A) [Reserved]. For further guidance, see SEC 1.1474-1(d)(1)(ii)(A).
( 1) [Reserved]. For further guidance, see SEC 1.1474-1(d)(1)(ii)(A)( 1).
( i) through (vii) [Reserved]. For further guidance, see SEC 1.1474-1(d)(1)(ii)(A)( 1)( i) through (vii).
( viii) An excepted NFFE and passive NFFE that also is not a flow-through entity and that is not acting as an agent or intermediary with respect to the payment;
( ix) A foreign person that is a partner or beneficiary in a flow-through entity that is a NFFE (looking through a partner or beneficiary that is a foreign intermediary or flow-through entity);
( x) through (xi) [Reserved]. For further guidance, see SEC 1.1474-1(d)(1)(ii)(A)( 1)( x) through (xi).
( 2) through (3) [Reserved]. For further guidance, see SEC 1.1474-1(d)(1)(ii)(A)( 2) through (3).
(B) [Reserved]. For further guidance, see SEC 1.1474-1(d)(1)(ii)(B).
( 1) [Reserved]. For further guidance, see SEC 1.1474-1(d)(1)(ii)(B)( 1).
( i) A certified deemed-compliant FFI that is an NQI, NWP, or NWT and that fails to provide its withholding agent with sufficient information to allocate the payment to its account holders and payees;
( ii) through (v) [Reserved]. For further guidance, see SEC 1.1474-1(d)(1)(ii)(B)( 1)( ii) through (v).
( vi) An account holder or payee of a nonparticipating FFI except to the extent described in paragraph (d)(1)(ii)(A)( 1)( x) of this section for an exempt beneficial owner;
( vii) Except as provided in paragraph (d)(1)(ii)(A)( 1) of this section, an entity that is disregarded under SEC 301.7701-2(c)(2) as an entity separate from its owner;
( viii) [Reserved]. For further guidance, see SEC 1.1474-1(d)(1)(ii)(B)( 1)( viii).
( ix) A passive NFFE or an excepted NFFE that is a flow-through entity or acts as an intermediary;
( 2) through (3) [Reserved]. For further guidance, see SEC 1.1474-1(d)(1)(ii)(B)( 2) through (3).
(2) [Reserved]. For further guidance, see SEC 1.1474-1(d)(2).
(i) In general. Subject to paragraph (d)(2)(iii) of this section, the term chapter 4 reportable amount means each of the following amounts reportable on a Form 1042-S for purposes of chapter 4--
(A) An amount of a withholdable payment that is subject to withholding under chapter 4 paid after
(B) An amount of a withholdable payment of U.S. source FDAP income that is also reportable on Form 1042-S under SEC 1.1461-1(c)(2)(i); or
(C) A foreign passthru payment subject to withholding under chapter 4.
(ii) through (iii) [Reserved]. For further guidance, see SEC 1.1474-1(d)(2)(ii) through (iii).
(3) [Reserved]. For further guidance, see SEC 1.1474-1(d)(3) through (d)(3)(x).
(4) [Reserved]. For further guidance, see SEC 1.1474-1(d)(4).
(i) [Reserved]. For further guidance, see SEC 1.1474-1(d)(4)(i).
(A) [Reserved]. For further guidance, see SEC 1.1474-1(d)(4)(i)(A).
(B) Payments to participating FFIs, deemed-compliant FFIs, and certain QIs. Except as otherwise provided in this paragraph (d)(4)(i)(B), a U.S. withholding agent that makes a payment of a chapter 4 reportable amount to a participating FFI or deemed-compliant FFI that is an NQI, NWP, or NWT must complete a Form 1042-S treating such FFI as the recipient. With respect to a payment of U.S. source FDAP income made to a participating FFI or registered deemed-compliant FFI that is an NQI, NWP, or NWT or QI that elects to be withheld upon under section 1471(b)(3) and from whom the withholding agent receives an FFI withholding statement allocating the payment (or portion of the payment) to a chapter 4 withholding rate pool, a U.S. withholding agent must complete a separate Form 1042-S issued to the participating FFI, registered deemed-compliant FFI, or QI (as applicable) as the recipient with respect to each such pool identified on an FFI withholding statement, described in SEC 1.1471-3(c)(3)(iii)(B)( 2). If, however, a participating FFI, deemed-compliant FFI, or QI (as applicable) has made an election under SEC 1.1471-4(b)(3)(iii), for the portion of the payment that the FFI allocates to each recalcitrant account holder that is subject to backup withholding under section 3406, the withholding agent must report on Form 1099 the amount of the payment and tax withheld in accordance with the form's requirements and accompanying instructions. See SEC 1.1471-2(a)(2)(i) for the requirement of a withholding agent to withhold on payments of U.S. source FDAP income made to a participating FFI or registered deemed-compliant FFI that is an NQI, NWP, or NWT. See also SEC 1.1471-2(a)(2)(iii) in the case of payments made to a QI. See SEC 1.1461-1(c)(4)(A) for the extent to which reporting is required under that section for U.S. source FDAP income that is reportable on Form 1042-S under chapter 3 and not subject to withholding under chapter 4, in which case the U.S. withholding agent must report in the manner described under SEC 1.1461-1(c)(4)(ii) and paragraph (d)(4)(ii)(A) of this section. See paragraph (d)(4)(ii)(A) of this section for reporting rules applicable if participating FFIs or deemed-compliant FFIs provide specific payee information for reporting to the recipient of the payment for Form 1042-S reporting purposes. See paragraph (d)(4)(iii) of this section for the residual reporting responsibilities of an NQI, NWP, or NWT that is an FFI.
(C) through (D) [Reserved]. For further guidance, see SEC 1.1474-1(d)(4)(i)(C) through (d)(4)(i)(D)( 3).
(E) Amounts paid to NFFEs. A U.S. withholding agent that makes payments of chapter 4 reportable amounts to an excepted or passive NFFE shall complete Forms 1042-S treating the NFFE as the recipient, except when the NFFE is a flow-through entity or acting as an intermediary and the partner or beneficiary is treated as the payee. In cases in which the chapter 4 reportable amount is also an amount of U.S. source FDAP income reportable on Form 1042-S (described in SEC 1.1441-2(a)), see also SEC 1.1461-1(c)(4)(A) for the extent to which reporting is required with respect to the partners, beneficiaries, or owners of such entities.
(ii) [Reserved]. For further guidance, see SEC 1.1474-1(d)(4)(ii).
(A) [Reserved]. For further guidance, see SEC 1.1474-1(d)(4)(ii)(A).
(B) Nonparticipating FFI that is a flow-through entity or intermediary. If a withholding agent makes a payment of a chapter 4 reportable amount to a nonparticipating FFI that it is required to treat as an intermediary with regard to a payment or as a flow-through entity under rules described in SEC 1.1471-3(c)(3)(iii), and except as otherwise provided in paragraph (d)(1)(ii)(A)( 1)( x) of this section (relating to an exempt beneficial owner), the withholding agent must report the recipient of the payment as an unknown recipient and report the nonparticipating FFI as provided in paragraph (d)(4)(ii)(A) of this section for an entity not treated as a recipient.
(C) Disregarded entities. If a U.S. withholding agent makes a payment to a disregarded entity and receives a valid withholding certificate or other documentary evidence from the person that is the single owner of such disregarded entity, the withholding agent must file a Form 1042-S treating the single owner as the recipient in accordance with the instructions to the Form 1042-S.
(iii) Reporting by participating FFIs and deemed-compliant FFIs (including QIs, WPs, and WTs) --(A) In general. Except as otherwise provided in paragraph (d)(4)(iii)(B) (relating to NQIs, NWPs, NWTs, and FFIs electing under section 1471(b)(3)) and SEC 1.1471-4(d)(2)(ii)(F) (relating to transitional payee-specific reporting for payments to nonparticipating FFIs), a participating FFI or deemed-compliant FFI (including a QI, WP, WT, or U.S. branch of a participating FFI that is not treated as a U.S. person) that makes a payment that is a chapter 4 reportable amount to a recalcitrant account holder or nonparticipating FFI must complete a Form 1042-S to report such payments. A participating FFI or registered deemed-compliant FFI (including a QI, WP, WT, or U.S. branch of a participating FFI that is not treated as a U.S. person) may report in pools consisting of its recalcitrant account holders and payees that are nonparticipating FFIs. With respect to recalcitrant account holders, the FFI may report in pools consisting of recalcitrant account holders within a particular status described in SEC 1.1471-4(d)(6) and within a particular income code. Except as otherwise provided in SEC 1.1471-4(d)(2)(ii)(F), with respect to payees that are nonparticipating FFIs, the FFI may report in pools consisting of one or more nonparticipating FFIs that fall within a particular income code and within a particular status code described in the instructions to Form 1042-S. Alternatively, a participating FFI or registered deemed-compliant FFI (including a QI, WP, WT, or U.S. branch of a participating FFI that is not treated as a U.S. person) may (and a certified deemed-compliant FFI is required to) perform payee-specific reporting to report a chapter 4 reportable amount paid to a recalcitrant account holder or a nonparticipating FFI when withholding was applied (or should have applied) to the payment.
(B) Special reporting requirements of participating FFIs, deemed-compliant FFIs, and FFIs that make an election under section 1471(b)(3). Except as otherwise provided in SEC 1.1471-4(d)(2)(ii)(F), a participating FFI or deemed-compliant FFI that is an NQI, NWP, NWT (including a U.S. branch of a participating FFI that is not treated as a U.S. person), or an FFI that has made an election under section 1471(b)(3) and has provided sufficient information to its withholding agent to withhold and report the payment is not required to report the payment on Form 1042-S as described in paragraph (d)(4)(iii)(A) of this section if the payment is made to a nonparticipating FFI or recalcitrant account holder and its withholding agent has withheld the correct amount of tax on such payment and correctly reported the payment on a Form 1042-S. Such FFI is required to report a payment, however, when the FFI knows, or has reason to know, that less than the required amount has been withheld by the withholding agent on the payment or the withholding agent has not correctly reported the payment on Form 1042-S. In such case, the FFI must report on Form 1042-S to the extent required under paragraph (d)(4)(iii)(A) of this section. See, however, SEC 1.1471-4(d)(6) for the requirement to report certain aggregate information regarding accounts held by recalcitrant account holders on Form 8966, "FATCA Report," regardless of whether withholdable payments are made to such accounts.
(C) Reporting by a U.S. branch of a participating FFI or registered deemed-compliant FFI treated as a U.S. person. A U.S. branch of a participating FFI or registered deemed-compliant FFI that is treated as a U.S. person must report amounts paid to recipients on Forms 1042-S in the same manner as a U.S. withholding agent under paragraph (d)(4)(i) of this section.
(iv) through (vi) [Reserved]. For further guidance, see SEC 1.1474-1(d)(4)(iv) through (vi).
(e) through (h) [Reserved]. For further guidance, see SEC 1.1474-1(e) through (h).
(i) [Reserved]. For further guidance, see SEC 1.1474-1(i).
(1) Reporting by certain withholding agents with respect to owner-documented FFIs.
(i) Beginning on
(ii) Beginning in calendar year 2015, if a withholding agent (other than an FFI reporting accounts held by owner-documented FFIs under SEC 1.1471-4(d)) makes during a calendar year a payment of a chapter 4 reportable amount to an entity account holder or payee of an obligation and the withholding agent treats the entity as an owner-documented FFI under SEC 1.1471-3(d)(6), the withholding agent is required to report for such calendar year with respect to each specified U.S. person that has a direct or indirect debt or equity interest in such entity the information described in paragraph (i)(1)(iii) of this section.
(iii) The information that a withholding agent (other than an FFI reporting accounts held by owner-documented FFIs under SEC 1.1471-4(d)) is required to report under paragraphs (i)(1)(i) and (i)(1)(ii) of this section must be made on Form 8966 (or such other form as the IRS may prescribe) and filed on or before
(A) The name of the owner-documented FFI;
(B) The name, address, and TIN of each specified U.S. person identified in SEC 1.1471-3(d)(6)(iv)(A)( 1) and (2);
(C) For the period from
(D) The account balance or value of the account held by the owner-documented FFI; and
(E) Any other information required on Form 8966 and its accompanying instructions provided for purposes of such reporting.
<p> (2) Reporting by certain withholding agents with respect to U.S. owned foreign entities that are NFFEs. Beginning on
(i) through (ii) [Reserved]. For further guidance, see SEC 1.1474-1(i)(2)(i) through (ii).
(iii) For the period from
(iv) [Reserved]. For further guidance, see SEC 1.1474-1(i)(2)(iv).
(3) [Reserved]. For further guidance, see SEC 1.1474-1(i)(3).
(j) [Reserved]. For further guidance, see SEC 1.1474-1(j).
(k) Expiration date. The applicability of this section expires on
Par. 20. Section 1.1474-6 is amended by revising paragraph (b)(1), by redesignating paragraph (f) as (g), and by adding new paragraph (f) to read as follows:
SEC 1.1474-6 Coordination of chapter 4 with other withholding provisions.
* * * * *
(b) * * *
(1) [Reserved]. For further guidance, see SEC 1.1474-6T(b)(1).
* * * * *
(f) [Reserved]. For further guidance, see SEC 1.1474-6T(f).
* * * * *
Par. 21. Section 1.1474-6T is added to read as follows:
SEC 1.1474-6T Coordination of chapter 4 with other withholding provisions (temporary).
(a) [Reserved]. For further guidance, see SEC 1.1474-6(a).
(b) [Reserved]. For further guidance, see SEC 1.1474-6(b).
(1) In general. In the case of a withholdable payment that is both subject to withholding under chapter 4 and is an amount subject to withholding under SEC 1.1441-2(a), a withholding agent may credit the withholding applied under chapter 4 against its liability for any tax due under sections 1441, 1442, or 1443. See SEC 1.1474-1(c) and (d) for the income tax return and information return reporting requirements that apply in the case of a payment that is a withholdable payment subject to withholding under chapter 4 that is also an amount subject to withholding under SEC 1.1441-2(a).
(2) through (3) [Reserved]. For further guidance, see SEC 1.1474-6(b)(2) through (3).
(c) through (e) [Reserved]. For further guidance, see SEC 1.1474-6(c) through (e).
(f) Coordination with section 3406. A participating FFI that makes a withholdable payment that is also a reportable payment (as defined in the relevant sections of chapter 61) to a recalcitrant account holder that is a U.S. non-exempt recipient is not required to withhold under section 3406 if it withholds on the payment at a 30-percent rate in accordance with its withholding obligations under chapter 4. See, however, SEC 1.1471-4(b)(3)(iii) for the election to withhold on recalcitrant account holders that are non-exempt U.S. recipients under section 3406 instead of withholding under chapter 4.
(g) [Reserved]. For further guidance, see SEC 1.1474-6(g).
(h) Expiration date. The applicability of this section expires on
John Dalrymple,
Deputy Commissioner for Services and Enforcement.
Approved:
Mark J. Mazur,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2014-03967 Filed 2-28-14;
BILLING CODE 4830-01-P
| Copyright: | (c) 2014 Federal Information & News Dispatch, Inc. |
| Wordcount: | 59918 |
Withholding of Tax on Certain U.S. Source Income Paid to Foreign Persons, Information Reporting and Backup Withholding on Payments Made to Certain U.
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