[Federal Register Volume 63, Number 251 (Thursday, December 31, 1998)]
[Rules and Regulations]
[Pages 72183-72189]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-34359]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 1, 31, 35a, and 301

[TD 8804]
RIN 1545-AW39


General Revision of Regulations Relating to Withholding of Tax on 
Certain U.S. Source Income Paid to Foreign Persons and Related 
Collection, Refunds, and Credits; Revision of Information Reporting and 
Backup Withholding Regulations; and Removal of Regulations Under Parts 
1 and 35a and of Certain Regulations Under Income Tax Treaties

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final rule; delay of effective date, technical amendments, and 
partial withdrawal.

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SUMMARY: This document contains changes delaying the effective date and 
making technical amendments to final regulations (TD 8734), which were 
published in the Federal Register for October 14, 1997, relating to the 
withholding of income tax on certain U.S. source income payments to 
foreign persons. The Department of the Treasury and the IRS believe it 
is in the best interest of tax administration to extend the effective 
date of the final withholding regulations to ensure that both taxpayers 
and the government can complete changes necessary to implement the new 
withholding regime. As extended by this document, the final withholding 
regulations will apply to payments made after December 31, 1999. This 
document also withdraws two amendments which have already been dealt 
with in TD 8772, which was published in the Federal Register for June 
30, 1998.

DATES: Effective Dates: The amendments in this final rule are effective 
January 1, 2000. As of December 31, 1998, the effective date of the 
final regulations published at 62 FR 53387, October 14, 1997, is 
delayed from January 1, 1999, until January 1, 2000; however, the 
effective date of the addition of Sec. 31.9999-0 and Sec. 35a.9999-0 
and the removal of Sec. 35a.9999-0T remains October 14, 1997.
    Withdrawal: Effective December 31, 1998, the amendments removing 
Secs. 1.6045-1T and 1.6045-2T published at 62 FR 53387, October 14, 
1997, are withdrawn.

FOR FURTHER INFORMATION CONTACT: Lilo Hester, (202) 622-3840 (not a 
toll-free number).

SUPPLEMENTARY INFORMATION:

Background

    The final regulations that are the subject of this amendment 
provide guidance under sections 1441, 1442, and 1443 of the Internal 
Revenue Code (Code) on certain U.S. source income paid to foreign 
persons, the related tax deposit and reporting requirements under 
section 1461 of the Code, and the related changes under sections 
163(f), 165(j), 871, 881, 1462, 1463, 3401, 3406, 6041, 6041A, 6042, 
6045, 6049, 6050A, 6050N, 6109, 6114, 6402, 6413, and 6724 of the Code.

Need for Changes

    On April 13, 1998, in Notice 98-16 (1998-15 I.R.B. 12), the IRS and 
Treasury announced their decision to extend the effective date of the 
final regulations, and to make correlative changes to the transition 
rules for obtaining new withholding certificates and statements 
containing the necessary information and representations required by 
the final regulations. As published in the Federal Register on October 
14, 1997 (62 FR 53387), the final regulations were generally applicable 
to payments made after December 31, 1998, and generally granted 
withholding agents until after December 31, 1999, to obtain the new 
withholding certificates and statements required under those 
regulations. This amendment serves to make the final regulations 
applicable to payments made after December 31, 1999, and to require 
mandatory use of the new withholding certificates and statements after 
December 31, 2000. In addition, this amendment serves to address 
typographical errors, and to withdraw the removal of Secs. 1.6045-1T 
and 1.6045-2T since those sections were already removed on June 30, 
1998, in TD 8772 (63 FR 35517).

Special Analyses

    It has been determined that this Treasury decision is not a 
significant regulatory action as defined in EO 12866. Therefore, a 
regulatory assessment is not required. It has also been determined that 
section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) 
does not apply to these regulations. Finally, it has been determined 
that the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply 
to these regulations because the regulations do not impose a collection 
of information on small entities. Pursuant to 7805(f) of the Code, the 
notice of proposed rulemaking preceding these regulations (61 FR 17614) 
was submitted to the Small

[[Page 72184]]

Business Administration for comment on its impact on small business.

List of Subjects

26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

26 CFR Part 31

    Employment taxes, Income taxes, Penalties, Pensions, Railroad 
retirement, Reporting and recordkeeping requirements, Social security, 
Unemployment compensation.

26 CFR Part 35a

    Employment taxes, Income taxes, Reporting and recordkeeping 
requirements.

26 CFR Part 301

    Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income 
taxes, Penalties, Reporting and recordkeeping requirements.
    Accordingly, under the authority of 26 U.S.C. 7805, 26 CFR parts 1, 
31, 35a, and 301 are amended by making the following correcting 
amendments:

PART 1--INCOME TAXES

    Paragraph 1. The authority citation for part 1 continues to read in 
part as follows:

    Authority: 26 U.S.C. 7805 * * *

    Par. 2. In Sec. 1.871-14, paragraph (h) is revised to read as 
follows:


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

* * * * *
    (h) Effective date--(1) In general. This section shall apply to 
payments of interest made after December 31, 1999.
    (2) Transition rule. For purposes of this section, the validity of 
a Form W-8 that was valid on January 1, 1998, under the regulations in 
effect prior to January 1, 2000 (see 26 CFR parts 1 and 35a, revised 
April 1, 1998) and expired, or will expire, at any time during 1998, is 
extended until December 31, 1998. The validity of a Form W-8 that is 
valid on or after January 1, 1999, remains valid until its validity 
expires under the regulations in effect prior to January 1, 2000 (see 
26 CFR parts 1 and 35a, revised April 1, 1998) or, if earlier, until 
December 31, 2000. The rule in this paragraph (h)(2), however, does not 
apply to extend the validity period of a Form W-8 that expires solely 
by reason of changes in the circumstances of the person whose name is 
on the certificate. Notwithstanding the first three sentences of this 
paragraph (h)(2), a withholding agent or payor may choose to not take 
advantage of the transition rule in this paragraph (h)(2) with respect 
to one or more withholding certificates valid under the regulations in 
effect prior to January 1, 2000 (see 26 CFR parts 1 and 35a, revised 
April 1, 1998) and, therefore, may choose to obtain withholding 
certificates conforming to the requirements described in this section 
(new withholding certificates). For purposes of this section, a new 
withholding certificate is deemed to satisfy the documentation 
requirement under the regulations in effect prior to January 1, 2000 
(see 26 CFR parts 1 and 35a, revised April 1, 1998). Further, a new 
withholding certificate remains valid for the period specified in 
Sec. 1.1441-1(e)(4)(ii), regardless of when the certificate is 
obtained.
    Par. 3. In Sec. 1.1441-1 as revised at 62 FR 53424, paragraph (f) 
is revised to read as follows:


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

* * * * *
    (f) Effective date--(1) In general. This section applies to 
payments made after December 31, 1999.
    (2) Transition rules--(i) Special rules for existing documentation. 
For purposes of paragraphs (d)(3) and (e)(2)(i) of this section, the 
validity of a withholding certificate (namely, Form W-8, 8233, 1001, 
4224, or 1078 , or a statement described in Sec. 1.1441-5 in effect 
prior to January 1, 2000 (see Sec. 1.1441-5 as contained in 26 CFR part 
1, revised April 1, 1998)) that was valid on January 1, 1998 under the 
regulations in effect prior to January 1, 2000 (see 26 CFR parts 1 and 
35a, revised April 1, 1998) and expired, or will expire, at any time 
during 1998, is extended until December 31, 1998. The validity of a 
withholding certificate that is valid on or after January 1, 1999, 
remains valid until its validity expires under the regulations in 
effect prior to January 1, 2000 (see 26 CFR parts 1 and 35a, revised 
April 1, 1998) or, if earlier, until December 31, 2000. The rule in 
this paragraph (f)(2)(i), however, does not apply to extend the 
validity period of a withholding certificate that expires solely by 
reason of changes in the circumstances of the person whose name is on 
the certificate. Notwithstanding the first three sentences of this 
paragraph (f)(2)(i), a withholding agent may choose to not take 
advantage of the transition rule in this paragraph (f)(2)(i) with 
respect to one or more withholding certificates valid under the 
regulations in effect prior to January 1, 2000 (see 26 CFR parts 1 and 
35a, revised April 1, 1998) and, therefore, to require withholding 
certificates conforming to the requirements described in this section 
(new withholding certificates). For purposes of this section, a new 
withholding certificate is deemed to satisfy the documentation 
requirement under the regulations in effect prior to January 1, 2000 
(see 26 CFR parts 1 and 35a, revised April 1, 1998). Further, a new 
withholding certificate remains valid for the period specified in 
paragraph (e)(4)(ii) of this section, regardless of when the 
certificate is obtained.
    (ii) Lack of documentation for past years. A taxpayer may elect to 
apply the provisions of paragraphs (b)(7)(i)(B), (ii), and (iii) of 
this section, dealing with liability for failure to obtain 
documentation timely, to all of its open tax years, including tax years 
that are currently under examination by the IRS. The election is made 
by simply taking action under those provisions in the same manner as 
the taxpayer would take action for payments made after December 31, 
1999.
    Par. 4. In Sec. 1.1441-4 as amended at 62 FR 53450, paragraph (g) 
is revised to read as follows:


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

* * * * *
    (g) Effective date--(1) General rule. This section applies to 
payments made after December 31, 1999.
    (2) Transition rules. The validity of a Form 4224 or 8233 that was 
valid on January 1, 1998, under the regulations in effect prior to 
January 1, 2000 (see 26 CFR part 1, revised April 1, 1998) and expired, 
or will expire, at any time during 1998, is extended until December 31, 
1998. The validity of a Form 4224 or 8233 that is valid on or after 
January 1, 1999, remains valid until its validity expires under the 
regulations in effect prior to January 1, 2000 (see 26 CFR part 1, 
revised April 1, 1998) or, if earlier, until December 31, 2000. The 
rule in this paragraph (g)(2), however, does not apply to extend the 
validity period of a Form 4224 or 8223 that expires solely by reason of 
changes in the circumstances of the person whose name is on the 
certificate. Notwithstanding the first three sentences of this 
paragraph (g)(2), a withholding agent may choose to not take advantage 
of the transition rule in this paragraph (g)(2) with respect to one or 
more withholding certificates valid under the regulations in effect 
prior to January 1, 2000 (see 26 CFR part 1, revised April 1, 1998) 
and, therefore, to

[[Page 72185]]

require withholding certificates conforming to the requirements 
described in this section (new withholding certificates). For purposes 
of this section, a new withholding certificate is deemed to satisfy the 
documentation requirement under the regulations in effect prior to 
January 1, 2000 (see 26 CFR part 1, revised April 1, 1998). Further, a 
new withholding certificate remains valid for the period specified in 
Sec. 1.1441-1(e)(4)(ii), regardless of when the certificate is 
obtained.
    Par. 5. In Sec. 1.1441-5 as revised at 62 FR 53452, paragraph (g) 
is revised to read as follows:


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

* * * * *
    (g) Effective date--(1) General rule. This section applies to 
payments made after December 31, 1999.
    (2) Transition rules. The validity of a withholding certificate 
that was valid on January 1, 1998, under the regulations in effect 
prior to January 1, 2000 (see 26 CFR parts 1 and 35a, revised April 1, 
1998) and expired, or will expire, at any time during 1998, is extended 
until December 31, 1998. The validity of a withholding certificate that 
is valid on or after January 1, 1999, remains valid until its validity 
expires under the regulations in effect prior to January 1, 2000 (see 
26 CFR parts 1 and 35a, revised April 1, 1998) or, if earlier, until 
December 31, 2000. The rule in this paragraph (g)(2), however, does not 
apply to extend the validity period of a withholding certificate that 
expires solely by reason of changes in the circumstances of the person 
whose name is on the certificate. Notwithstanding the first three 
sentences of this paragraph (g)(2), a withholding agent may choose to 
not take advantage of the transition rule in this paragraph (g)(2) with 
respect to one or more withholding certificates valid under the 
regulations in effect prior to January 1, 2000 (see 26 CFR parts 1 and 
35a, revised April 1, 1998) and, therefore, to require withholding 
certificates conforming to the requirements described in this section 
(new withholding certificates). For purposes of this section, a new 
withholding certificate is deemed to satisfy the documentation 
requirement under the regulations in effect prior to January 1, 2000 
(see 26 CFR parts 1 and 35a, revised April 1, 1998). Further, a new 
withholding certificate remains valid for the period specified in 
Sec. 1.1441-1(e)(4)(ii), regardless of when the certificate is 
obtained.
    Par. 6. In Sec. 1.1441-6 as revised at 62 FR 53458, paragraph (g) 
is revised to read as follows:


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

* * * * *
    (g) Effective date--(1) General rule. This section applies to 
payments made after December 31, 1999.
    (2) Transition rules. For purposes of this section, the validity of 
a Form 1001 or 8233 that was valid on January 1, 1998, under the 
regulations in effect prior to January 1, 2000 (see 26 CFR parts 1 and 
35a, revised April 1, 1998) and expired, or will expire, at any time 
during 1998, is extended until December 31, 1998. The validity of a 
Form 1001 or 8233 is valid on or after January 1, 1999, remains valid 
until its validity expires under the regulations in effect prior to 
January 1, 2000 (see 26 CFR parts 1 and 35a, revised April 1, 1998) or, 
if earlier, until December 31, 2000. The rule in this paragraph (g)(2), 
however, does not apply to extend the validity period of a Form 1001 or 
8233 that expires solely by reason of changes in the circumstances of 
the person whose name is on the certificate or in interpretation of the 
law under the regulations under Sec. 1.894-1T(d). Notwithstanding the 
first three sentences of this paragraph (g)(2), a withholding agent may 
choose to not take advantage of the transition rule in this paragraph 
(g)(2) with respect to one or more withholding certificates valid under 
the regulations in effect prior to January 1, 2000 (see 26 CFR parts 1 
and 35a, revised April 1, 1998) and, therefore, to require withholding 
certificates conforming to the requirements described in this section 
(new withholding certificates). For purposes of this section, a new 
withholding certificate is deemed to satisfy the documentation 
requirement under the regulations in effect prior to January 1, 2000 
(see 26 CFR parts 1 and 35a, revised April 1, 1998). Further, a new 
withholding certificate remains valid for the period specified in 
Sec. 1.1441-1(e)(4)(ii), regardless of when the certificate is 
obtained.
    Par. 7. In Sec. 1.1441-8 as redesignated and amended at 62 FR 
53464, paragraph (f) is revised to read as follows:


Sec. 1.1441-8  Exemption from withholding for payments to foreign 
governments, international organizations, foreign central banks of 
issue, and the Bank for International Settlements.

* * * * *
    (f) Effective date--(1) In general. This section applies to 
payments made after December 31, 1999.
    (2) Transition rules. For purposes of this section, the validity of 
a Form 8709 that was valid on January 1, 1998, under the regulations in 
effect prior to January 1, 2000 (see 26 CFR part 1, revised April 1, 
1998) and expired, or will expire, at any time during 1998, is extended 
until December 31, 1998. The validity of a Form 8709 that is valid on 
or after January 1, 1999, remains valid until its validity expires 
under the regulations in effect prior to January 1, 2000 (see 26 CFR 
part 1, revised April 1, 1998) or, if earlier, until December 31, 2000. 
The rule in this paragraph (f)(2), however, does not apply to extend 
the validity period of a Form 8709 that expires solely by reason of 
changes in the circumstances of the person whose name is on the 
certificate. Notwithstanding the first three sentences of this 
paragraph (f)(2), a withholding agent may choose to not take advantage 
of the transition rule in this paragraph (f)(2) with respect to one or 
more withholding certificates valid under the regulations in effect 
prior to January 1, 2000 (see 26 CFR part 1, revised April 1, 1998) 
and, therefore, to require withholding certificates conforming to the 
requirements described in this section (new withholding certificates). 
For purposes of this section, a new withholding certificate is deemed 
to satisfy the documentation requirement under the regulations in 
effect prior to January 1, 2000 (see 26 CFR part 1, revised April 1, 
1998). Further, a new withholding certificate remains valid for the 
period specified in Sec. 1.1441-1(e)(4)(ii), regardless of when the 
certificate is obtained.
    Par. 8. In Sec. 1.1441-9, paragraph (d) is revised to read as 
follows:


Sec. 1.1441-9  Exemption from withholding on exempt income of a foreign 
tax-exempt organization, including foreign private foundations.

* * * * *
    (d) Effective date--(1) In general. This section applies to 
payments made after December 31, 1999.
    (2) Transition rules. For purposes of this section, the validity of 
a Form W-8, 1001, or 4224 or a statement that was valid on January 1, 
1998, under the regulations in effect prior to January 1, 2000 (see 26 
CFR parts 1 and 35a, revised April 1, 1998) and expired, or will 
expire, at any time during 1998, is extended until December 31, 1998. 
The validity of a Form W-8, 1001, or 4224 or a statement that is valid 
on or after January 1, 1999 remains valid until its validity expires 
under the regulations in effect prior to January 1, 2000 (see 26 CFR 
parts 1 and 35a, revised April 1,

[[Page 72186]]

1998) or, if earlier, until December 31, 2000. The rule in this 
paragraph (d)(2), however, does not apply to extend the validity period 
of a Form W-8, 1001, or 4224 or a statement that expires solely by 
reason of changes in the circumstances of the person whose name is on 
the certificate. Notwithstanding the first three sentences of this 
paragraph (d)(2), a withholding agent may choose to not take advantage 
of the transition rule in this paragraph (d)(2) with respect to one or 
more withholding certificates valid under the regulations in effect 
prior to January 1, 2000 (see 26 CFR parts 1 and 35a, revised April 1, 
1998) and, therefore, to require withholding certificates conforming to 
the requirements described in this section (new withholding 
certificates). For purposes of this section, a new withholding 
certificate is deemed to satisfy the documentation requirement under 
the regulations in effect prior to January 1, 2000 (see 26 CFR parts 1 
and 35a, revised April 1, 1998). Further, a new withholding certificate 
remains valid for the period specified in Sec. 1.1441-1(e)(4)(ii), 
regardless of when the certificate is obtained.
    Par. 9. In Sec. 1.1443-1 as revised at 62 FR 53466, paragraph (c) 
is revised to read as follows:


Sec. 1.1443-1  Foreign tax-exempt organizations.

* * * * *
    (c) Effective date--(1) In general. This section applies to 
payments made after December 31, 1999.
    (2) Transition rules. For purposes of this section, the validity of 
an affidavit or opinion of counsel described in Sec. 1.1443-1(b)(4)(i) 
in effect prior to January 1, 2000 (see Sec. 1.1443-1(b)(4)(i) as 
contained in 26 CFR part 1, revised April 1, 1998) that is valid on 
December 31, 1998 is extended until December 31, 2000. However, a 
withholding agent may choose to not take advantage of the transition 
rule in this paragraph (c)(2) with respect to one or more withholding 
certificates valid under the regulations in effect prior to January 1, 
2000 (see 26 CFR part 1, revised April 1, 1998) and, therefore, to 
require withholding certificates conforming to the requirements 
described in this section (new withholding certificates). For purposes 
of this section, a new withholding certificate is deemed to satisfy the 
documentation requirement under the regulations in effect prior to 
January 1, 2000 (see 26 CFR part 1, revised April 1, 1998). Further, a 
new withholding certificate remains valid for the period specified in 
Sec. 1.1441-1(e)(4)(ii), regardless of when the certificate is 
obtained.


Sec. 1.6041-3  [Amended]

    Par. 10. Section 1.6041-3 as amended at 62 FR 53472 is further 
amended by removing the last sentence of the introductory text.
    Par. 11. In Sec. 1.6042-3 as amended at 62 FR 53475, paragraph 
(b)(5) is revised to read as follows:


Sec. 1.6042-3  Dividends subject to reporting.

* * * * *
    (b) * * *
    (5) Effective date--(i) General rule. The provisions of this 
paragraph (b) apply to payments made after December 31, 1999.
    (ii) Transition rules. The validity of a withholding certificate 
(namely, Form W-8 or other form upon which the payor is permitted to 
rely to hold the payee as a foreign person) that was valid on January 
1, 1998, under the regulations in effect prior to January 1, 2000 (see 
26 CFR parts 1 and 35a, revised April 1, 1998) and expired, or will 
expire, at any time during 1998, is extended until December 31, 1998. 
The validity of a withholding certificate that is valid on or after 
January 1, 1999, remains valid until its validity expires under the 
regulations in effect prior to January 1, 2000 (see 26 CFR parts 1 and 
35a, revised April 1, 1998) or, if earlier, until December 31, 2000. 
The rule in this paragraph (b)(5)(ii), however, does not apply to 
extend the validity period of a withholding certificate that expires 
solely by reason of changes in the circumstances of the person whose 
name is on the certificate. Notwithstanding the first three sentences 
of this paragraph (b)(5)(ii), a payor may choose not to take advantage 
of the transition rule in this paragraph (b)(5)(ii) with respect to one 
or more withholding certificates valid under the regulations in effect 
prior to January 1, 2000 (see 26 CFR parts 1 and 35a, revised April 1, 
1998) and, therefore, to require withholding certificates conforming to 
the requirements described in this section (new withholding 
certificates). For purposes of this section, a new withholding 
certificate is deemed to satisfy the documentation requirement under 
the regulations in effect prior to January 1, 2000 (see 26 CFR parts 1 
and 35a, revised April 1, 1998). Further, a new withholding certificate 
remains valid for the period specified in Sec. 1.1441-1(e)(4)(ii), 
regardless of when the certificate is obtained.
    Par. 12. In Sec. 1.6045-1 as amended at 62 FR 53476, paragraph 
(g)(5) is revised to read as follows:


Sec. 1.6045-1  Returns of information of brokers and barter exchanges.

* * * * *
    (g) * * *
    (5) Effective date--(i) General rule. The provisions of this 
paragraph (g) apply to payments made after December 31, 1999.
    (ii) Transition rules. The validity of a withholding certificate 
(namely, Form W-8 or other form upon which the payor is permitted to 
rely to hold the payee as a foreign person) that was valid on January 
1, 1998, under the regulations in effect prior to January 1, 2000 (see 
26 CFR parts 1 and 35a, revised April 1, 1998) and expired, or will 
expire, at any time during 1998, is extended until December 31, 1998. 
The validity of a withholding certificate that is valid on or after 
January 1, 1999, remains valid until its validity expires under the 
regulations in effect prior to January 1, 2000 (see 26 CFR parts 1 and 
35a, revised April 1, 1998) or, if earlier, until December 31, 2000. 
The rule in this paragraph (g)(5)(ii), however, does not apply to 
extend the validity period of a form that expires in 1998 solely by 
reason of changes in the circumstances of the person whose name is on 
the certificate. Notwithstanding the first three sentences of this 
paragraph (g)(5)(ii), a payor may choose not to take advantage of the 
transition rule in this paragraph (g)(5)(ii) with respect to one or 
more withholding certificates valid under the regulations in effect 
prior to January 1, 2000 (see 26 CFR parts 1 and 35a, revised April 1, 
1998) and, therefore, to require withholding certificates conforming to 
the requirements described in this section (new withholding 
certificates). For purposes of this section, a new withholding 
certificate is deemed to satisfy the documentation requirement under 
the regulations in effect prior to January 1, 2000 (see 26 CFR parts 1 
and 35a, revised April 1, 1998). Further, a new withholding certificate 
remains valid for the period specified in Sec. 1.1441-1(e)(4)(ii), 
regardless of when the certificate is obtained.
    Par. 13. Effective December 31, 1999, the amendments removing 
Secs. 1.6045-1T and 1.6045-2T, published at 62 FR 53480, are withdrawn.
    Par. 14. In Sec. 1.6049-5 as amended at 62 FR 53483, paragraph (g) 
is revised to read as follows:


Sec. 1.6049-5  Interest and original issue discount subject to 
reporting after December 31, 1982.

* * * * *
    (g) Effective date--(1) General rule. The provisions of paragraphs 
(b)(6) through (15), (c), (d), and (e) of this

[[Page 72187]]

section apply to payments made after December 31, 1999.
    (2) Transition rules. The validity of a withholding certificate 
(namely, Form W-8 or other form upon which the payor is permitted to 
rely to hold the payee as a foreign person) that was valid on January 
1, 1998, under the regulations in effect prior to January 1, 2000 (see 
26 CFR parts 1 and 35a, revised April 1, 1998) and expired, or will 
expire, at any time during 1998, is extended until December 31, 1998. 
The validity of a withholding certificate that is valid on or after 
January 1, 1999, remains valid until its validity expires under the 
regulations in effect prior to January 1, 2000 (see 26 CFR parts 1 and 
35a, revised April 1, 1998) or, if earlier, until December 31, 2000. 
The rule in this paragraph (g)(2), however, does not apply to extend 
the validity period of a withholding certificate that expires solely by 
reason of changes in the circumstances of the person whose name is on 
the certificate. Notwithstanding the first three sentences of this 
paragraph (g)(2), a payor may choose not to take advantage of the 
transition rule in this paragraph (g)(2) with respect to one or more 
withholding certificates valid under the regulations in effect prior to 
January 1, 2000 (see 26 CFR parts 1 and 35a, revised April 1, 1998) 
and, therefore, may require withholding certificates conforming to the 
requirements described in this section (new withholding certificates). 
For purposes of this section, a new withholding certificate is deemed 
to satisfy the documentation requirement under the regulations in 
effect prior to January 1, 2000 (see 26 CFR parts 1 and 35a, revised 
April 1, 1998). Further, a new withholding certificate remains valid 
for the period specified in Sec. 1.1441-1(e)(4)(ii), regardless of when 
the certificate is obtained.

PARTS 1, 31, 35a, and 301 [AMENDED]

    Par. 15. In the list below, for each section indicated in the left 
column (which was added, revised, or amended at 62 FR 53387), remove 
the language in the middle column and add the language in the right 
column:

------------------------------------------------------------------------
           Section                   Remove                  Add
------------------------------------------------------------------------
1.871-14(c)(2)(iii).........  1.1441-1(c)(3)(ii)..  1.1441-1(e)(3)(ii).
1.871-14(c)(3)(ii), Example,  October 12, 1999....  October 12, 2000.
 first and sixth sentences.
1.871-14(c)(3)(ii), Example,  December 31, 1999...  December 31, 2000.
 sixth sentence.
1.871-14(c)(3)(ii), Example,  June 15, 2003.......  June 15, 2004.
 sixth and seventh sentences.
1.1441-1(b)(2)(iii)(B),       Savings clause......  Saving clause.
 fifth sentence.
1.1441-1(b)(2)(iv)(E),        Actually maintain...  Actually maintains.
 second sentence.
1.1441-1(b)(3)(iii)(B),       That cannot reliably  Cannot reliably.
 first sentence.
1.1441-1(b)(3)(iii)(C), last  1.1441-4(e).........  1.1441-4(d).
 sentence.
1.1441-1(b)(3)(x), Example    W s.................  W's.
 1, seventh and ninth
 sentences.
1.1441-1(b)(3)(x), Example    W s.................  W's.
 2, sixth and seventh
 sentences.
1.1441-1(b)(3)(x), Example    X, nc...............  X, Inc.
 3, third sentence.
1.1441-1(b)(4)(i), first      1.871-7(b)(2)(i)....  1.871-7(b)(2).
 sentence.
1.1441-1(b)(4)(xix).........  January 1, 1999.....  January 1, 2000.
1.1441-1(b)(4)(xix).........  April 1, 1997.......  April 1, 1998.
1.1441-1(b)(5)(viii)........  I.R.B. 1996-49......  1996-2 C.B. 227.
1.1441-1(b)(7)(v), Example    June 15, 1999.......  June 15, 2000.
 1, first, fourth, and
 eighth sentences.
1.1441-1(b)(7)(v), Example    September 30, 2001..  September 30, 2002.
 1, third and ninth
 sentences.
1.1441-1(b)(7)(v), Example    March 15, 2000......  March 15, 2001.
 1, ninth sentence.
1.1441-1(b)(7)(v), Example    June 15, 1999.......  June 15, 2000.
 2, first, fourth, and
 seventh sentences.
1.1441-1(b)(7)(v), Example    September 30, 2001..  September 30, 2002.
 2, third and seventh
 sentences.
1.1441-1(b)(7)(v), Example    March 15, 2000......  March 15, 2001.
 2, seventh and ninth
 sentences.
1.1441-1(c)(6)(ii)(B).......  January 1, 1999.....  January 1, 2000.
1.1441-1(c)(6)(ii)(B).......  April 1, 1997.......  April 1, 1998.
1.1441-1(e)(4)(ii)(A).......  September 30, 1999..  September 30, 2000.
1.1441-1(e)(4)(ii)(A).......  December 31, 2002...  December 31, 2003.
1.1441-1(e)(4)(vi), sixth     Provided the          Provided on the
 sentence.                     acceptable.           acceptable.
1.1441-1(e)(4)(ix)(A)(2),     Sec.  31.3406(c)1(c)  Sec.  31.3406(c)-1(c
 second sentence.              (3)(ii).              )(3)(ii).
1.1441-1(e)(5)(i),            Reportable payments.  Reportable amounts.
 penultimate sentence.
1.1441-1(e)(5)(v)(A), third   The intermediary....  The qualified
 sentence.                                           intermediary.
1.1441-1(e)(5)(v)(A), fourth  The intermediary to.  The qualified
 sentence.                                           intermediary to.
1.1441-1(e)(5)(v)(B),         Paragraph (b)(3)(vi)  Paragraph
 introductory text, third                            (e)(3)(vi).
 sentence.
1.1441-1(e)(5)(v)(B)(1),      Withholding agent...  Qualified
 second sentence.                                    intermediary.
1.1441-1(e)(5)(v)(C), first   The intermediary....  The qualified
 sentence.                                           intermediary.
1.1441-2(a), last sentence..  871(h)(5)(B)........  871(h)(5)(B) or a
                                                     member of a
                                                     clearing
                                                     organization which
                                                     member is the
                                                     beneficial owner of
                                                     the obligation.
1.1441-2(b)(1)(ii), fifth     Someone's...........  Someone's.
 sentence.
1.1441-2(b)(3)(iv)..........  December 31, 1998...  December 31, 1999.
1.1441-2(f).................  December 31, 1998...  December 31, 1999.
1.1441-3(h).................  December 31, 1998...  December 31, 1999.

[[Page 72188]]

 
1.1441-4(a)(2)(i), second     United States.......  United States and is
 sentence.                                           includable in the
                                                     beneficial owner's
                                                     gross income for
                                                     the taxable year.
1.1441-5(a)(6), second        Withholding           Withholding foreign
 sentence.                     partnership.          partnership.
1.1441-5(c)(2)(ii)(B), sixth  Qualified             Withholding foreign
 sentence.                     intermediary.         partnership.
1.1441-5(c)(2)(ii)(B), sixth  Customers...........  Partners.
 sentence.
1.1441-5(c)(3)(iii)(D)......  That the partners...  That the amounts
                                                     allocable to the
                                                     partners.
1.1441-5(d)(4), Example 2,    Depending of........  Depending on.
 second sentence.
1.1441-6(b)(1), first         Sec.  1.1441-1(e)(1)  Sec.  1.1441-1(e)(1)
 sentence.                     (ii)(B).              (ii)(A)(2).
1.1441-6(c)(2)(ii), first     Upon a certificate..  Upon receipt of a
 sentence.                                           certificate.
1.1441-6(d), second sentence  Rate of tax.........  Rate of withholding.
1.441-7(g)..................  December 31, 1998...  December 31, 1999.
1.1461-1(b)(2)(v)...........  Foreign partnership   Foreign partnership
                               shall.                (whether or not a
                                                     withholding foreign
                                                     partnership) shall.
1.1461-1(b)(2)(vi),           Banks, securities     Banks, or insurance
 paragraph heading.            dealers, or           companies.
                               insurance companies.
1.1461-1(c)(4)(iv), first     Certificate attached  Certificate or
 sentence.                     to the                documentary
                               intermediary's or     evidence attached
                               partnership           to the
                               withholding           intermediary's or
                               certificate that is   partnership
                               from a qualified      withholding
                               intermediary or a     certificate.
                               withholding foreign
                               partnership.
1.1461-1(i).................  December 31, 1998...  December 31, 1999.
1.1461-2(a)(1), third         An adjustment to....  A refund of.
 sentence.
1.1461-2(a)(3), first         Beneficial owner....  Beneficial owner or
 sentence.                                           payee.
1.1461-2(a)(4), Example       December 1999.......  December 2000.
 1(i), second sentence.
1.1461-2(a)(4), Example       February 10, 2000...  February 10, 2001.
 1(i), third sentence.
1.1461-2(a)(4), Example       1999................  2000.
 1(ii), first, second, and
 last sentences.
1.1461-2(a)(4), Example       March 15, 2000......  March 15, 2001.
 1(ii), first sentence.
1.1461-2(a)(4), Example       2000................  2001.
 1(ii), third sentence.
1.1461-2(a)(4), Example 2,    2000................  2001.
 second and last sentences.
1.1461-2(a)(4), Example 2,    June 2000...........  June 2001.
 second sentence.
1.1461-2(a)(4), Example 2,    July 15, 2000.......  July 15, 2001.
 third sentence.
1.1461-2(a)(4), Example 2,    1999................  2000.
 third sentence.
1.1461-2(a)(4), Example 2,    March 15, 2001......  March 15, 2002.
 last sentence.
1.1461-2(a)(4), Example 3,    February 15, 2000...  February 15, 2001.
 last sentence.
1.1461-2(a)(4), Example 3,    March 15, 2000......  March 15, 2001.
 last sentence.
1.1461-2(d).................  December 31, 1998...  December 31, 1999.
1.1462-1(c).................  December 31, 1998...  December 31, 1999.
1.1463-1(a), last sentence..  Sec.  1.1441-7(b)(7)  Sec.  1.1441-7(b).
1.1463-1(b).................  December 31, 1989...  December 31, 1999.
1.1464-1(b).................  Sec.  1.1461-4......  Sec.  1.1461-2.
1.6041-4(d).................  December 31, 1998...  December 31, 1999.
1.6041A-1(d)(3)(i)(B), first  If payments made....  If payments are
 sentence.                                           made.
1.6041A-1(d)(3)(iv),          Amount paid.........  Amounts paid.
 paragraph heading.
1.6041A-1(d)(3)(v)..........  December 31, 1998...  December 31, 1999.
1.6043-2(a), first, second,   966.................  1099.
 and last sentences.
1.6045-1(d)(6)(ii)(B).......  December 31, 1998...  December 31, 1999.
1.6045-1(g)(3)(iv), second    Example 7...........  Example 6.
 sentence.
1.6045-1(g)(4), Example       Y s.................  Y's.
 7(ii), last sentence.
1.6049-4(c)(1)(ii)(A),        Certificate meeting   Certificate stating
 second sentence.              the certification     that each member of
                               requirements of       the partnership
                               paragraphs            meets the
                               (c)(2)(ii)(A) (1)     requirements of
                               through (5) of this   paragraphs
                               section.              (c)(1)(ii)(A)(1)
                                                     through (4) of this
                                                     section.
1.6049-4(d)(3)(ii)(B).......  December 31, 1998...  December 31, 1999.
1.6049-5(b)(12), first        Returns of            Payments that.
 sentence.                     information are not
                               required for
                               payments that.
1.6049-5(c)(4)(i), first      The payor may.......  The bank or other
 sentence.                                           financial
                                                     institution may.
1.6049-5(c)(4)(ii), second    Then the financial    Then the bank or
 sentence.                     institution.          other financial
                                                     institution.
1.6049-5(c)(4)(v)...........  January 1, 1999.....  January 1, 2000.
1.6049-5(d)(2)(ii), second    Publicly traded.....  Actively traded.
 and last sentences.
1.6049-5(d)(2)(ii), eighth    Is less than 31.....  Is equal to or less
 sentence.                                           than 31.
1.6049-5(e)(1)(i),            The amount..........  An amount is
 introductory text.                                  described in this
                                                     paragraph (e)(1)(i)
                                                     if it.
1.6049-5(e)(1)(ii)..........  The amount..........  An amount is
                                                     described in this
                                                     paragraph
                                                     (e)(1)(ii) if it.
1.6049-5(e)(4), second        Specifically          Specifically
 sentence.                     identifies.           identify.
1.6049-5(e)(5), Example 5,    Of is section.......  Of this section.
 last sentence.
1.6049-5(e)(5), Example 9,    A holds.............  A holds.
 second sentence.
1.6049-5(e)(5), Example 9,    Paid to a...........  Paid to A.
 third sentence.
1.6049-5(e)(5), Example 9 ,   A's.................  A's.
 third sentence.
1.6049-5(e)(5), Example 9,    To a by DB..........  To A by DB.
 last sentence.
1.6050N-1(e), first sentence  Is applies to.......  Applies to.
1.6050N-1(e), last sentence.  December 31, 1998...  December 31, 1999.

[[Page 72189]]

 
31.3401(a)(6)-1(e),           January 1, 1999.....  January 1, 2000.
 paragraph heading.
31.3401(a)(6)-1(e), first     January 1, 1999.....  January 1, 2000.
 sentence.
31.3401(a)(6)-1(f),           December 31, 1998...  December 31, 1999.
 paragraph heading.
31.3401(a)(6)-1(f), first     December 31, 1998...  December 31, 1999.
 sentence.
31.3406(g)-1(e), first        December 31, 1998...  December 31, 1999.
 sentence.
31.3406(h)-2(d), penultimate  December 31, 1998...  December 31, 1999.
 sentence.
31.9999-0...................  January 1, 1999.....  January 1, 2000.
301.6114-1(b)(4)(ii)(C),      December 31, 1998...  December 31, 1999.
 introductory text.
301.6114-1(b)(4)(ii)(D).....  December 31, 1998...  December 31, 1999.
301.6724-1(g)(2) Q-11.......  January 1, 1999.....  January 1, 2000.
301.6724-1(g)(2) Q-11.......  April 1, 1997.......  April 1, 1998.
301.6724-1(g)(2) A-11.......  January 1, 1999.....  January 1, 2000.
301.6724-1(g)(2) A-11.......  April 1, 1997.......  April 1, 1998.
301.6724-1(g)(3), first       December 31, 1998...  December 31, 1999.
 sentence.
301.6724-1(g)(3), last        January 1, 1999.....  January 1, 2000.
 sentence in both places.
301.6724-1(g)(3), last        April 1, 1997.......  April 1, 1998.
 sentence.
------------------------------------------------------------------------

Robert E. Wenzel,
Deputy Commissioner of Internal Revenue.
    Approved: December 7, 1998.
Donald C. Lubick,
Assistant Secretary of the Treasury.
[FR Doc. 98-34359 Filed 12-30-98; 8:45 am]
BILLING CODE 4830-01-U