[Federal Register Volume 82, Number 4 (Friday, January 6, 2017)]
[Rules and Regulations]
[Pages 2046-2122]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-31590]



[[Page 2045]]

Vol. 82

Friday,

No. 4

January 6, 2017

Part V





Department of the Treasury





-----------------------------------------------------------------------





Internal Revenue Service





-----------------------------------------------------------------------





26 CFR Parts 1, 31, and 301





Regulations Regarding Withholding of Tax on Certain U.S. Source Income 
Paid to Foreign Persons, Information Reporting and Backup Withholding 
on Payments Made to Certain U.S. Persons, and Portfolio Interest 
Treatment; Rule

  Federal Register / Vol. 82 , No. 4 / Friday, January 6, 2017 / Rules 
and Regulations  

[[Page 2046]]


-----------------------------------------------------------------------

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 1, 31, and 301

[TD 9808]
RIN 1545-BL17: RIN 1545-BN74


Regulations Regarding Withholding of Tax on Certain U.S. Source 
Income Paid to Foreign Persons, Information Reporting and Backup 
Withholding on Payments Made to Certain U.S. Persons, and Portfolio 
Interest Treatment

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Removal of temporary regulations; final regulations; and 
temporary regulations.

-----------------------------------------------------------------------

SUMMARY: This document contains final and temporary regulations 
regarding withholding of tax on certain U.S. source income paid to 
foreign persons, information reporting and backup withholding with 
respect to payments made to certain U.S. persons, and portfolio 
interest paid to nonresident alien individuals and foreign 
corporations. This document finalizes (with minor changes) certain 
proposed regulations under chapters 3 and 61 and sections 871, 3406, 
and 6402 of the Internal Revenue Code of 1986 (Code), and withdraws 
corresponding temporary regulations. This document also includes 
temporary regulations providing additional rules under chapter 3 of the 
Code. The text of the temporary regulations also serves as the text of 
the proposed regulations set forth in a notice of proposed rulemaking 
published in the Proposed Rules section of this issue of the Federal 
Register. The temporary regulations affect persons making payments of 
U.S. source income to foreign persons.

DATES: Effective date. These regulations are effective on January 6, 
2017.
    Applicability dates. For dates of applicability, see Sec. Sec.  
1.871-14(j), 1.1441-1(f), 1.1441-3(i), 1.1441-4(g), 1.1441-5(g), 
1.1441-6(i), 1.1441-7(g), 1.1461-1(i), 1.1461-2(d), 1.6041-1(j), 
1.6041-4(d), 1.6042-2(f), 1.6042-3(d), 1.6045-1(q), 1.6049-4(h), 
1.6049-5(g), 31.3406(g)-1(g), 31.3406(h)-2(i), and 301.6402-3(f).

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

SUPPLEMENTARY INFORMATION: 

Paperwork Reduction Act

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

Background

    This document contains amendments to the Income Tax Regulations (26 
CFR part 1) under sections 871, 1441, 1461, 6041, 6042, 6045, 6049, and 
6050 of the Code, the Employment Tax Regulations (26 CFR part 31) under 
section 3406 of the Code, and the Procedure and Administration 
Regulations (26 CFR part 301) under section 6402 of the Code. On 
January 28, 2013, final regulations (TD 9610) under chapter 4 of the 
Code (sections 1471 through 1474) were published in the Federal 
Register (78 FR 5874), and on September 10, 2013, corrections to the 
final regulations were published in the Federal Register (78 FR 55202). 
The regulations in TD 9610 and the corrections thereto are collectively 
referred to in this preamble as the 2013 final chapter 4 regulations. 
To coordinate with certain provisions of the 2013 final chapter 4 
regulations, as well as temporary regulations (TD 9657) under chapter 4 
published in the Federal Register (79 FR 12812) on March 6, 2014, 
temporary regulations (TD 9658) revising certain provisions of the 
final chapters 3 and 61 regulations were published in the Federal 
Register (79 FR 12726) on March 6, 2014, and corrections to those 
temporary regulations were published in the Federal Register (79 FR 
37181) on July 1, 2014. Collectively, the regulations in TD 9657 and 
the corrections thereto are referred to in this preamble as the 2014 
temporary coordination regulations. A notice of proposed rulemaking 
cross-referencing the 2014 temporary coordination regulations was 
published in the Federal Register on March 6, 2014 (79 FR 12880).
    Comments were received in response to the 2014 temporary 
coordination regulations, but no public hearing was requested, and none 
was held. In response to comments, and after further consideration, 
this document includes final and temporary regulations that revise and 
clarify certain sections of the 2014 temporary coordination 
regulations. In some cases, the changes to the 2014 temporary 
coordination regulations contained in these final and temporary chapter 
3 regulations are made to coordinate with final and temporary 
regulations issued under chapter 4 that are being published in the 
Federal Register concurrently with this document. Certain provisions of 
these final and temporary chapter 3 regulations were previewed in 
notices published after the publication of the 2014 temporary 
coordination regulations. See Notice 2014-33, 2014-21 I.R.B. 1033; 
Notice 2014-59, 2014-44 I.R.B. 747; and Notice 2016-42, 2016-19 I.R.B. 
67. In addition, some changes in these final regulations are 
corrections of minor errors in the 2014 temporary coordination 
regulations. Additional unsolicited comments were received regarding 
the final chapters 3 and 61 regulations. These comments are not 
discussed herein, except where changes have been made in response 
thereto.

Summary of Comments and Explanation of Revisions and Provisions

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

1. U.S. Branch Treated as a U.S. Person
    Section 1.1441-1T(b)(2)(iv)(A) of the 2014 temporary coordination 
regulations provides that a U.S. branch of a foreign person that is a 
participating FFI, registered deemed-compliant FFI, or NFFE may agree 
to be treated as a U.S. person. In connection with changes in the 
chapter 4 regulations published concurrently with these regulations, 
the final regulations remove the requirement that the foreign person of 
which the U.S. branch is a part have a specified chapter 4 status. 
Additionally, the requirements for a withholding certificate from a 
U.S. branch that agrees to be treated as a U.S. person in Sec.  1.1441-
1(e)(3)(v)(A) have been modified to remove the requirement that the 
U.S. branch certify to the chapter 4

[[Page 2047]]

status of the foreign person of which the U.S. branch is a part.
2. Presumption of Foreign Status of an Entity Based on Documentary 
Evidence or GIIN
    Section 1.1441-1T(b)(3)(iii)(A) of the 2014 temporary coordination 
regulations provides presumption rules for payments made to exempt 
recipients. Comments requested that if a withholding agent or payor 
makes a payment (other than a withholdable payment) to an entity payee 
that is an exempt recipient and has not received a valid withholding 
certificate but instead has documentary evidence such as a certificate 
of incorporation indicating that the payee is a foreign person, the 
withholding agent or payor should be able to presume, based on the 
documentary evidence, that the payee is a foreign person. The Treasury 
Department and the IRS decline to adopt this recommendation because the 
application of such a presumption rule would be limited in scope (given 
that withholding agents can choose to apply the rules of Sec.  1.1441-
1(b)(3)(iii)(A)(2), which are generally applicable to withholdable 
payments, to all payments with respect to an obligation) and because of 
concerns about the application of the suggested presumption rule in the 
case of foreign partnerships in which non-exempt recipients are 
partners, and to which the presumption rules of Sec.  1.1441-
5(c)(1)(iii) apply.
    Comments also requested that a withholding agent or payor should be 
able to presume that an undocumented entity payee is foreign if there 
is a Global Intermediary Identification Number (GIIN) on file for the 
payee and the payee's name appears on the IRS FFI List. The Treasury 
Department and the IRS have declined to adopt this suggestion. U.S. 
entities can obtain GIINs, and if they do, their names appear on the 
IRS FFI list, such as when they are acting as sponsoring entities for 
chapter 4 purposes. Thus, it would not be appropriate for a GIIN to 
support a presumption of foreign status without more evidence of such 
status.
3. Presumption of Foreign Status for Certain Entities on the per se 
List of Foreign Corporations
    Under Sec.  1.1441-1T(b)(3)(iii)(A)(1)(iii) of the 2014 temporary 
coordination regulations, a withholding agent must presume that an 
undocumented entity payee that is an exempt recipient is a foreign 
person if the name of the payee indicates that the entity is a type of 
entity that is on the per se list of foreign corporations in Sec.  
301.7701-2(b)(8)(i), unless the name contains the designation 
``corporation'' or ``company'' (which, in itself, would not be 
indicative of foreign status). Comments have requested that, rather 
than excluding all exempt entity payees whose names include ``company'' 
or ``corporation'' for purposes of this presumption rule, the rule 
instead be modified to provide that for payees whose names contain 
these designations, foreign status should be presumed if the 
withholding agent has a document that reasonably demonstrates that the 
entity is incorporated in the relevant foreign jurisdiction on the per 
se list. The Treasury Department and the IRS agree that this 
modification is appropriate and have included it in these final 
regulations.
4. Reliance on Electronic Transmission of Certificates, Forms, and 
Documentation
    Generally, a withholding agent must withhold at a 30% rate on any 
payment of an amount subject to withholding unless it can reliably 
associate the payment with documentation upon which it can rely to 
treat the payment as made to a U.S. person or as made to a beneficial 
owner that is a foreign person entitled to a reduced rate of 
withholding. Sec.  1.1441-1(b)(1). The 2014 temporary coordination 
regulations allow a withholding agent to rely on a valid Form W-8 or 
documentary evidence received by facsimile or scanned and furnished by 
email unless the withholding agent knows that the person transmitting 
the withholding certificate or documentary evidence is not authorized 
to do so, effective for payments made after March 6, 2014. This 
effective date prevents withholding agents from relying upon scanned or 
faxed withholding certificates or documentary evidence pursuant to 
Sec.  1.1441-1T(e)(4)(iv)(C) of the 2014 temporary coordination 
regulations for payments made on or before March 6, 2014. As a result, 
withholding agents must instead obtain ``hard copies'' of the original 
form or document in order to cure documentation failures for such 
payments, to the extent allowed under Sec.  1.1441-1(b)(7)(ii). 
Comments have suggested that the effective date with respect to this 
provision be modified to allow withholding agents to rely upon forms or 
documentary evidence received by facsimile or scanned and sent by email 
after March 6, 2014, regardless of when the payment was made. The 
Treasury Department and the IRS agree that requiring hard copies of 
original documentation to cure documentation failures for payments made 
on or before March 6, 2014, but not for payments after that date, 
provides minimal benefits compared to the additional effort required 
for a withholding agent to obtain a hard copy of the documentation. 
Accordingly, these final regulations modify the effective date as it 
relates to this provision so that it applies to any open tax year. In 
addition, to correspond to other changes, Sec.  1.1441-1T(e)(4)(iv)(C) 
of the 2014 temporary coordination regulations is redesignated as Sec.  
1.1441-1(e)(4)(iv)(D) in these final regulations.
5. Curing Late Documentation for Claims That Income Is Effectively 
Connected With the Conduct of a Trade or Business in the United States
    When a withholding agent fails to obtain documentation and fails to 
withhold at the time of payment, the withholding agent is allowed, 
under certain circumstances, to obtain a valid withholding certificate 
(and other certifications, as required) to support a reduced rate of 
withholding. A withholding agent may obtain valid documentation after 
the date of payment to establish that a reduced rate of withholding was 
appropriate when it meets the additional requirements under Sec.  
1.1441-1(b)(7)(ii) (as amended by the 2014 temporary coordination 
regulations).
    The rules in Sec.  1.1441-1T(b)(7)(ii) of the 2014 temporary 
coordination regulations establish when additional documentation is 
required and what the additional documentation is required to contain. 
These temporary regulations add Sec.  1.1441-1T(b)(7)(ii)(B) with 
respect to late documentation for income that is effectively connected 
with the conduct of a trade or business in the United States 
(effectively connected income). Under this rule, the withholding 
certificate (in this case, Form W-8ECI) must be associated with a 
signed affidavit that states that the information and representations 
contained on the certificate were accurate as of the time of the 
payment and either (i) the beneficial owner has included the income on 
its U.S. income tax return for the taxable year in which the income 
must be reported, or (ii) the beneficial owner will include the income 
on its U.S. income tax return for the taxable year in which the income 
must be reported and the due date for filing the return (including any 
applicable extensions) is after the date on which the affidavit is 
signed.
    This rule is added to ensure compliance with the requirement that 
the beneficial owner actually include the income on its income tax 
return for the taxable year in which the income is

[[Page 2048]]

required to be reported for U.S. tax purposes. Because the exemption 
for withholding on effectively connected income under section 
1441(c)(1) applies only when the income is included in the gross income 
of the recipient, the Treasury Department and the IRS have decided it 
is appropriate for a withholding agent that receives a late Form W-8ECI 
to obtain the aforementioned affidavit. A corresponding change has been 
made to the temporary regulations under chapter 4 that are being 
published concurrently with these regulations to address circumstances 
when a withholding agent may rely on a Form W-8ECI provided after the 
date of a payment to claim that the payment is effectively connected 
income (and thus is not a withholdable payment under Sec.  1.1473-
1(a)(5)(ii)).
6. Nonresident Alien Individuals and Dual Residents
    A U.S. person is defined by reference to section 7701(b). The 
definition of nonresident alien individual in the chapter 3 regulations 
does not specify the exact circumstances under which a dual resident of 
the United States and another jurisdiction will be treated as a 
nonresident alien individual under an applicable income tax treaty and 
Sec.  301.7701(b)-7. These temporary regulations therefore clarify that 
an individual will not be treated as a U.S. person for a taxable year 
(or any portion thereof) for which he or she is a dual resident 
taxpayer who is treated as a nonresident alien pursuant to Sec.  
301.7701(b)-7 for purposes of computing his or her U.S. tax liability. 
A corresponding change has also been made to the definition of a U.S. 
person in the chapter 4 regulations that are being published 
concurrently with these regulations.
7. Hold Mail Instruction
    The 2014 temporary coordination regulations provide that an address 
that is provided subject to instructions to hold all mail to that 
address is not considered a permanent residence address; the same rule 
is provided in the 2013 final chapter 4 regulations. Comments have 
requested that the definition of permanent residence address be 
modified to treat an address subject to a hold mail instruction as a 
permanent residence address if additional documentation is provided. 
The Treasury Department and the IRS agree that a hold mail instruction 
should not prevent persons from being able to verify that they have a 
permanent residence address by providing appropriate additional 
documentary evidence that supports their residency in the foreign 
jurisdiction where they are claiming to be resident. These temporary 
regulations thus revise the definition of ``permanent residence 
address'' in Sec.  1.1441-1T(c)(38) to add that an address that is 
subject to a hold mail instruction can be relied upon as a permanent 
residence address if the person provides documentary evidence (as 
described in Sec.  1.1441-1(c)(17)) establishing the person's residence 
in the country where the person is claiming to be resident. These 
revisions also provide that if a hold mail instruction is provided to a 
withholding agent after the withholding certificate was provided, this 
will be considered a change in circumstances requiring that additional 
documentary evidence be obtained in order to use the address on the 
withholding certificate as a permanent residence address.
8. Revisions to Nonqualified Intermediary Withholding Statement for 
U.S. Payee Pool
    Under Sec.  1.1441-1(e)(3)(iv), a withholding statement provided by 
a nonqualified intermediary may include an allocation of a payment to a 
chapter 4 withholding rate pool of U.S. payees when the requirements of 
that paragraph are satisfied, and a similar allowance is provided for 
an FFI withholding statement provided by a nonqualified intermediary in 
the case of a withholdable payment for chapter 4 purposes. A chapter 4 
withholding rate pool of U.S. payees is defined as a pool of payees 
described in either Sec.  1.1471-3(c)(3)(iii)(B)(2)(ii) or (iii) (with 
Sec.  1.1471-3(c)(3)(iii)(B)(2)(ii), as revised in the final chapter 4 
regulations, being published concurrently with these regulations). See 
the preamble to the final chapter 4 regulations for background on this 
revision. Payees described in Sec.  1.1471-3(c)(3)(iii)(B)(2)(ii) 
consist of account holders receiving payments not subject to 
withholding under chapter 3 or 4 or under section 3406 that are either 
(1) holders of non-consenting U.S. accounts maintained by a reporting 
Model 2 FFI, or (2) holders of accounts with U.S. indicia maintained by 
a reporting Model 1 FFI for which appropriate documentation sufficient 
to treat the account holders as other than U.S. persons has not been 
provided to the FFI. Payees described in Sec.  1.1471-
3(c)(3)(iii)(B)(2)(iii) consist of account holders of an FFI that is a 
non-U.S. payor for chapter 61 purposes that are account holders not 
subject to withholding under chapter 3 or chapter 4 or under section 
3406 and that are also: (1) Holders of U.S. accounts that the FFI 
reports as U.S. accounts pursuant to Sec.  1.1471-4(d)(3) or (5) for 
the year in which the payment is made, (2) holders of U.S. accounts 
that the FFI reports pursuant to the conditions of its applicable 
deemed-compliant status under Sec.  1.1471-5(f)(1) for the year in 
which the payment is made, or (3) holders of U.S. accounts that a 
reporting Model 1 FFI reports as reportable U.S. accounts pursuant to 
an applicable Model 1 IGA, and which includes the U.S. taxpayer 
identification numbers (TINs) of such account holders, for the year in 
which the payment is made. Although an allocation of a payment to a 
payee described in Sec.  1.1471-3(c)(3)(iii)(B)(2)(ii) (as revised in 
the final chapter 4 regulations being published concurrently with these 
regulations) is not permitted for a payment subject to chapter 3 
withholding, no such limitation applies under Sec.  1.1471-
3(c)(3)(iii)(B)(2)(iii) for a payment that is allocable to U.S. 
accounts (or reportable U.S accounts) that are maintained by a non-U.S. 
payor and subject to comprehensive reporting (which includes the U.S. 
TINs of such account holders) under FATCA or an applicable IGA. As a 
result, these final regulations add a requirement that a withholding 
agent may not treat as valid an allocation of a payment subject to 
chapter 3 withholding to a withholding rate pool of U.S. payees that a 
nonqualified intermediary does not identify as described in Sec.  
1.1471-3(c)(3)(iii)(B)(2)(iii) (by citing to Sec.  1.1471-
3(c)(3)(iii)(B)(2)(iii) or describing the payees consistent with that 
paragraph). To allow withholding agents time to amend their procedures 
for validating withholding statements provided by nonqualified 
intermediaries, this requirement applies only to payments made on or 
after April 1, 2018.
9. Alternative Withholding Statement of a Nonqualified Intermediary
    Section 1.1441-1T(e)(3)(iv)(C) of the 2014 temporary coordination 
regulations prescribes the information required to be included on a 
withholding statement provided by a nonqualified intermediary (NQI), 
such as the name, address, TIN (if any), and type of documentation 
received by the NQI for each payee. Comments have requested that NQIs 
be permitted to provide, and withholding agents be permitted to rely 
on, simplified withholding statements that do not include all of the 
information specified in Sec.  1.1441-1T(e)(3)(iv)(C) of the 2014 
temporary coordination regulations. These comments noted that 
withholding

[[Page 2049]]

agents are required to independently verify the information provided on 
the NQI withholding statement by reviewing and validating the 
beneficial owner withholding certificates that accompany the NQI's Form 
W-8IMY. Accordingly, the comments requested that withholding agents not 
be required to invalidate a withholding statement that does not provide 
all of the information specified in Sec.  1.1441-1T(e)(3)(iv)(C) of the 
2014 temporary coordination regulations when that information can be 
found on the beneficial owner withholding certificate. The Treasury 
Department and the IRS agree with this recommendation, and these 
temporary regulations add Sec.  1.1441-1T(e)(3)(iv)(C)(3) to provide a 
new rule allowing a withholding agent to rely on an alternative 
withholding statement received from an NQI to the extent that the NQI 
provides the withholding agent with beneficial owner withholding 
certificates (and not only with documentary evidence). The alternative 
withholding statement is not required to include information that is 
also included on the withholding certificates and is not required to 
specify the rate of withholding applicable to each payee, as long as 
the withholding agent can determine the appropriate rate from the 
information on the withholding certificates. Additional requirements 
include that the alternative withholding statement contain any other 
information the withholding agent reasonably requests in order to 
fulfill its obligations under chapters 3, 4, and 61, and section 3406, 
and that the NQI certify that none of the information on the beneficial 
owner withholding certificates is inconsistent with information in the 
NQI's files. For example, under this alternative withholding statement 
rule, if a withholding agent is making a payment to a foreign 
partnership (that is not a withholding foreign partnership) and has 
partners who are all foreign individuals, the withholding agent can 
choose to accept a Form W-8IMY from the foreign partnership that is 
associated with Forms W-8BEN from all of its partners. The foreign 
partnership would provide the withholding agent with, in addition to 
its Form W-8IMY and the Forms W-8BEN, a withholding statement 
indicating the appropriate allocation among the partners and a 
representation that none of the information on the Forms W-8BEN is 
inconsistent with what the foreign partnership has in its files. 
However, if, for example, the foreign partnership has information in 
its files for one of the foreign partners such that it would be unable 
to rely on the withholding certificate under the rules of Sec.  1.1441-
7, the foreign partnership would not be able to provide the 
representation, and the withholding agent would not be allowed to rely 
on an alternative withholding statement.
10. Indefinite Validity of Documentation
    Section 1.1441-1T(e)(4)(ii)(B)(1) of the 2014 temporary 
coordination regulations requires that documentary evidence be provided 
at the same time as a withholding certificate provided by an individual 
to support a claim of foreign status in order for the withholding 
certificate to remain valid indefinitely. Commenters have noted that 
documentary evidence and withholding certificates are often not 
provided at the same time, and therefore the rule should be more 
flexible regarding the timing of when these documents must be obtained. 
The Treasury Department and the IRS agree that the meaning of 
``provided together'' should be clarified. These final regulations 
specify that ``provided together'' means that a withholding certificate 
and the documentary evidence must be received within 30 days of one 
another, regardless of which is received first. The Treasury Department 
and the IRS do not believe it is appropriate to allow the documentary 
evidence to be provided at any point before the expiration of the 
withholding certificate because of the risk of changes in an 
individual's status or residency over a three-year period. In addition, 
account opening procedures are generally performed within a 30-day 
period. See Sec.  1.1441-7(b)(2). Corresponding changes have also been 
made to the chapter 4 regulations that are being published concurrently 
with these regulations.
    In addition, Sec.  1.1441-1T(e)(4)(ii)(B)(2) of the 2014 temporary 
coordination regulations provides that a withholding certificate (other 
than the portion relating to a claim for treaty benefits) described in 
Sec.  1.1471-3(c)(6)(ii)(C)(2) and documentary evidence provided by an 
entity supporting the entity's claim of foreign status are valid 
indefinitely if they are provided together. Similar to comments on 
withholding certificates provided by individuals, comments on 
withholding certificates provided by entities noted challenges with 
respect to the ``provided together'' requirement. In response to these 
comments, the final regulations remove the phrase ``provided together'' 
and instead provide that a withholding certificate provided by an 
entity (that is, a Form W-8BEN-E) (other than the portion relating to a 
claim for treaty benefits) accompanied by documentary evidence will be 
valid indefinitely if the withholding agent receives both before either 
the withholding certificate or the documentary evidence would otherwise 
expire (even if the withholding certificate and documentary evidence 
are not provided simultaneously). The Treasury Department and the IRS 
believe it is appropriate to have different standards for documentation 
received from individuals and entities in this respect because it is 
less common for entities to change their statuses within a three-year 
period. In addition, comments noted that the applicability of this rule 
in the 2014 temporary coordination regulations, limited to the 
withholding certificates described in Sec.  1.1471-3(c)(6)(ii)(C)(2), 
is too narrow. The Treasury Department and the IRS agree; accordingly, 
these final regulations remove the cross-reference to Sec.  1.1471-
3(c)(6)(ii)(B). However, these final regulations cross-reference the 
indefinite validity rules in Sec.  1.1471-3(c)(6)(ii) that apply for 
chapter 4 purposes.
11. Treaty Statements Provided With Documentary Evidence
    Under the chapter 3 regulations, a withholding agent may apply a 
reduced rate of withholding under section 1441, 1442, or 1443 on a 
payment to a foreign entity in certain cases under the terms of an 
income tax treaty if the person represents that the payment is treated 
as derived by a resident of the applicable treaty jurisdiction and all 
of the other requirements for benefits under the applicable treaty are 
satisfied. A withholding certificate provided by an entity that is 
claiming reduced withholding under an income tax treaty must contain a 
statement that the treaty claimant meets the limitation on benefits 
requirement, if any, under the treaty. Because entitlement to a reduced 
rate of withholding under a treaty is conditioned on the beneficial 
owner satisfying limitation on benefits provisions, the requirement for 
a beneficial owner to provide a treaty statement helps ensure that 
beneficial owners understand the relevant treaty provisions and qualify 
for the claims they are making. Under the chapter 3 regulations, a 
treaty statement provided on a Form W-8BEN-E expires on the last day of 
the third calendar year following the date the form was signed, but a 
treaty statement provided with documentary evidence remains valid 
indefinitely (unlike the documentary evidence itself in most cases). In 
order to enhance the reliability and increase the accuracy of the 
claims, to help assure that information is updated when

[[Page 2050]]

ownership thresholds or activity requirements in a particular treaty 
have changed, and to have a consistent validity period regardless of 
how a treaty statement is provided, these temporary regulations provide 
that a treaty statement regarding limitation on benefits that is 
associated with documentary evidence will remain valid until the last 
day of the third calendar year following the year in which the 
statement is provided to the withholding agent. For existing accounts 
that were documented with documentary evidence before the date of 
publication of these temporary regulations, the treaty statements will 
expire on January 1, 2019.
12. Electronic System for Form 8233
    Section 1.1441-1T(e)(4)(iv)(A) of the 2014 temporary coordination 
regulations allows a withholding agent to establish an electronic 
system to collect Forms W-8 (or any other form as the IRS may 
prescribe) from a beneficial owner or payee. Comments requested that 
withholding agents be allowed to establish such an electronic system 
for collecting Forms 8233, ``Exemption from Withholding on Compensation 
for Independent (and Certain Dependent) Personal Services of a 
Nonresident Alien Individual.'' The Treasury Department and the IRS 
accept this request and have added Sec.  1.1441-1T(e)(4)(iv)(C) to 
provide the requirements for the system.
13. Electronic Signatures
    Comments requested that the regulations be amended to allow a 
withholding agent to accept a Form W-8 with an electronic signature 
when the withholding agent has not developed and maintained an 
electronic collection system described in Sec.  1.1441-1(e)(4)(iv)(B). 
The Treasury Department and the IRS have determined that valid 
electronically signed withholding certificates may be accepted by a 
withholding agent if the withholding certificates reasonably 
demonstrate to the withholding agent that they have been electronically 
signed by the recipient identified on the form or a person authorized 
by the recipient to sign the form (by, for example, a signature block 
that includes a time and date stamp and a statement that the 
certificate has been electronically signed and the name of the person 
authorized to sign the form). If the withholding certificate contains 
only a typed name in the signature line and no other information 
regarding the method of signature, a withholding agent cannot treat the 
withholding certificate as validly signed. These temporary regulations 
reflect this change. A coordinating change is also being made to the 
chapter 4 regulations.
14. Authentication of Forms and Documentary Evidence Received by 
Facsimile or Email
    Comments requested more detailed guidance on how a withholding 
agent could authenticate and verify a form or documentary evidence 
received by facsimile or email, for example by obtaining an 
authorization letter from the person who signed the form. The Treasury 
Department and the IRS have not provided prescriptive guidance on the 
procedures that must be used for this purpose, in part because the 
standard under Sec.  1.1441-1(e)(4)(iv)(D) (Sec.  1.1441-
1T(e)(4)(iv)(C) of the 2014 temporary coordination regulations) for a 
withholding agent with respect to whether a form was provided by 
someone authorized to provide the form is an actual knowledge standard 
(that is, the withholding agent must not have actual knowledge that the 
form was transmitted by a person not authorized to do so by the person 
required to execute the form). The Treasury Department and the IRS 
believe that the current regulations offer sufficient flexibility for 
withholding agents to develop the necessary procedures for 
authenticating and verifying that the form was transmitted to the 
withholding agent by a person who was authorized to do so without the 
need for further guidance.
15. Withholding Certificates and Documentary Evidence Furnished Through 
a Third Party Repository
    Comments have requested clarification of guidance provided in the 
Frequently Asked Questions (FAQ) on the IRS Web site (see https://www.irs.gov/businesses/corporations/frequently-asked-questions-faqs-fatca-compliance-legal) regarding when withholding agents may rely on 
withholding certificates obtained from third-party repositories; 
specifically, clarification was requested that the principles for the 
appropriate use of a third-party repository outlined in the FAQ would 
extend to all Forms W-8. The Treasury Department and the IRS have 
included in these temporary regulations guidance regarding the 
circumstances under which a Form W-8 (and, in certain circumstances 
where applicable, a withholding statement) maintained by a third-party 
repository will be considered furnished to the withholding agent by the 
person whose name is on the certificate. See Sec.  1.1441-
1T(e)(4)(iv)(E).
16. Reliance on Prior Versions of Withholding Certificates
    The 2014 temporary coordination regulations allow a withholding 
agent to continue to accept the prior version of a withholding 
certificate that has been revised for a period of six months after the 
date of release of the revised withholding certificate. Comments noted 
that this period may be difficult for withholding agents to comply 
with, depending on when the revised version of the form is released and 
how extensive the revisions are. Comments also noted challenges in 
coordinating this requirement with the renewal requirements for 
withholding certificates, which expire as of the end of a calendar 
year. The Treasury Department and the IRS agree that it is appropriate 
to extend the period during which prior versions of withholding 
certificates may be used beyond six months. These final regulations 
provide that withholding agents generally may use prior versions of 
withholding certificates until the later of six months after the date 
of issuance of the most recent revision to the withholding certificate, 
or the end of the calendar year during which the revised version was 
issued. However, in certain circumstances, such as when a new status 
must be established on the withholding certificate because of a new 
requirement in the regulations, the Treasury Department and the IRS may 
designate a shorter transition period.
17. Revisions Related to Qualified Intermediaries
    On July 1, 2016, in Notice 2016-42, 2016-29 I.R.B. 67, the Treasury 
Department and the IRS released the proposed Qualified Intermediary 
(QI) agreement (the Proposed QI Agreement), which, once finalized, 
would be effective on or after January 1, 2017. In response to comments 
received following the publication of the QI agreement (the 2014 QI 
Agreement) in 2014 in Rev. Proc. 2014-39, 2014-29 I.R.B. 150, the 
Proposed QI Agreement provided more detailed compliance and review 
procedures for QIs, requirements applicable to qualified derivatives 
dealers, and other revisions and corrections. These temporary and final 
regulations include several revisions that align with the Proposed QI 
Agreement. These final regulations clarify the rule already provided in 
the 2014 temporary coordination regulations that when a QI is a 
participating FFI or a registered deemed-compliant FFI for purposes of 
chapter 4, it may represent that it assumes chapter 61 reporting

[[Page 2051]]

responsibilities (and reports accordingly) when it reports its U.S. 
accounts in accordance with the coordination rules of Sec.  1.6049-
4(c)(4). These regulations also clarify that, in certain cases, for 
purposes of the alternative procedures for allocating payments to U.S. 
non-exempt recipients on withholding statements described in the QI 
agreement, QIs may, as provided in the QI agreement, include a chapter 
4 withholding rate pool of U.S. payees in the same zero-rate pool as 
foreign persons that are exempt from chapter 3 withholding.
    Section 1.1441-1T(e)(5)(ii) of the 2014 temporary coordination 
regulations lists the types of entities that are eligible to enter into 
QI agreements, including foreign corporations that are presenting 
claims of treaty benefits on behalf of their shareholders. In Notice 
2016-42, the Treasury Department and the IRS requested comments on the 
situations where a foreign corporation (other than a reverse hybrid 
entity) would be seeking to act as a QI on behalf of its shareholders, 
and questioned why the withholding foreign partnership agreement does 
not accommodate such situations. No comments were received in response 
to this request. As a result, and because Sec.  1.1441-1(e)(5)(ii)(D) 
provides that ``any person acceptable to the IRS'' may be eligible to 
be a QI, these final regulations remove from the list of prospective 
QIs the specific category of foreign corporations presenting treaty 
benefit claims on behalf of their shareholders.
18. Requirement for a Withholding Agent to Collect Foreign Taxpayer 
Identification Number (Foreign TIN)
    Form W-8BEN and the instructions to the form describe circumstances 
under which a foreign person is required to provide a foreign TIN or 
date of birth on the form. Similarly, Form 1042-S and the instructions 
to the form outline circumstances under which a withholding agent is 
required to report such information. These temporary regulations 
provide that, starting January 1, 2017, for an account maintained at a 
U.S. office or branch of a withholding agent that is a financial 
institution, the withholding agent will be required to collect the 
account holder's foreign TIN, and, in the case of an individual account 
holder, the account holder's date of birth, on a withholding 
certificate. A withholding certificate that does not contain a date of 
birth but is otherwise valid will not be invalid if the withholding 
agent has such information in its files. For withholding certificates 
associated with payments made on or after January 1, 2018, a foreign 
person that does not have a foreign TIN must provide a reasonable 
explanation as to the lack of a foreign TIN (for example, that the 
country of residence does not provide TINs).

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

    Under section 887(a), gross income derived by a nonresident 
individual or foreign corporation that constitutes United States source 
gross transportation income (USSGTI) is subject to a four-percent tax, 
and is not subject to tax under section 871, 881, or 882. For these 
purposes, USSGTI consists of income derived from, or in connection 
with, (1) the use (or hiring or leasing for use) of a vessel or 
aircraft or (2) the performance of services directly related to the use 
of a vessel or aircraft, to the extent the income is treated as derived 
from U.S. sources under section 863(c)(2). USSGTI does not include such 
income, however, if it is effectively connected with the trade or 
business in the United States of a nonresident alien or foreign 
corporation, within the meaning of section 887(b)(4), nor does it 
include income taxable in a possession of the United States under the 
provisions of the Code as made applicable in such possession. Items of 
income that are not USSGTI, as defined in section 887(b), are not 
affected by the change to the regulations described in this section, 
and the normal income tax rules apply.
    Under sections 1441 and 1442, items of gross income from U.S. 
sources paid to nonresident individuals and foreign corporations may be 
subject to withholding at a 30-percent rate if such items are ``amounts 
subject to withholding'' within the meaning of Sec.  1.1441-2. In 
general, under Sec.  1.1441-2(a), the term ``amounts subject to 
withholding'' is broadly defined to include amounts from sources within 
the United States that constitute fixed or determinable annual or 
periodical income, which in turn is defined to include all income 
included in gross income under section 61 subject to certain 
exceptions. Given the broad definition of ``amounts subject to 
withholding'' and the lack of a specific exception for USSGTI, 
taxpayers have questioned whether amounts paid that constitute USSGTI 
are subject to withholding under section 1441 or 1442 at a 30-percent 
rate, notwithstanding that, under section 887(a), a four-percent tax is 
imposed on a nonresident alien individual or foreign corporation's 
USSGTI for the taxable year.
    Because USSGTI is not subject to section 871 or 881 gross basis tax 
if section 887(a) applies, it is not an amount subject to withholding 
under section 1441 or 1442. The temporary regulations clarify this 
result under Sec.  1.1441-2T(a)(8) by providing that amounts subject to 
withholding under section 1441 or 1442 do not include gross income of a 
nonresident alien or foreign corporation that is taxable under section 
887(a) at four percent. Comments are requested regarding documentation 
requirements for applying this exception.

C. Comments and Changes to Sec.  1.1441-3--Determination of Amounts To 
Be Withheld-Coordination With Withholding Under Section 1445 as Amended 
by the PATH Act

    The regulations in Sec.  1.1441-3 include rules for coordinating 
with section 1445 in the case of distributions from qualified 
investment entities and United States real property holding companies. 
Section 1445(a) generally imposes a withholding tax obligation on the 
transferee when a foreign person disposes of a United States real 
property interest. Before the enactment of the Protecting Americans 
from Tax Hikes Act of 2015 (PATH Act), enacted as Division Q of the 
Consolidated Appropriations Act, 2016, Public Law 114-113, 129 Stat. 
2422, the withholding rate under the relevant provisions of section 
1445 was 10 percent of either the amount realized or the fair market 
value of the interest, as applicable. The PATH Act generally increased 
the withholding rate under section 1445 from 10 percent to 15 percent 
for dispositions occurring after February 16, 2016 (with certain 
exceptions for acquisitions of residences). These final regulations 
incorporate the PATH Act's rate change for these dispositions when 
referenced in Sec.  1.1441-3.

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

    Compensation for personal services paid to a nonresident alien 
individual is not subject to withholding under section 1441 if the 
compensation is effectively connected with the conduct of a trade or 
business in the United States and is exempt from U.S. federal income 
tax under an income tax treaty. In order for a nonresident alien 
individual to claim treaty benefits for reduced withholding, the 
chapter 3 regulations require that he or she provide a Form 8233 that 
includes a TIN or proof that an

[[Page 2052]]

application for a TIN has been filed. Comments requested that 
individuals in these circumstances be exempt from the requirement to 
include a TIN on the Form 8233. The Treasury Department and the IRS 
decline to accept this request because these individuals also generally 
have an obligation to file a Form 1040NR to claim the exemption from 
tax provided by the income tax treaty and must have a TIN to file the 
Form 1040NR. The requirement that the TIN (or proof of application for 
a TIN) also be provided on the Form 8233 therefore does not place an 
additional burden on these individuals and helps ensure appropriate 
treaty benefits are provided.

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

1. Form W-8BEN-E and Limitation on Benefits Requirements
    In April 2016, the IRS released a revised Form W-8BEN-E, 
``Certification of Status of Beneficial Owner for United States Tax 
Withholding and Reporting (Entities),'' and revised instructions, which 
require an entity claiming treaty benefits to identify the specific 
type of limitation on benefits provision that the entity meets to be 
eligible to claim benefits under the treaty (for example, the publicly 
traded test or the stock ownership and base erosion test, the active 
trade or business test, etc.). These temporary regulations modify the 
chapter 3 regulations, consistent with the revised Form W-8BEN-E and 
instructions, to require that a limitation on benefits statement on 
Form W-8BEN-E identify the specific limitation on benefits provision on 
which the taxpayer is relying to claim treaty benefits. This revision 
to the form and the chapter 3 regulations will further improve the 
compliance of treaty claimants with the specific requirements of the 
applicable limitation on benefits provisions in the treaty pursuant to 
which they seek at-source relief from chapter 3 withholding.
    Comments requested that more guidance be provided on when a payee's 
limitation on benefits claim is unreliable or incorrect. Accordingly, 
these temporary regulations provide that a withholding agent may rely 
on a valid Form W-8BEN-E that includes limitation on benefits 
information unless it has actual knowledge that the information 
provided with respect to the limitation on benefits is unreliable or 
incorrect. Withholding agents are generally expected to report this 
information beginning in 2018.
    Under the chapter 3 regulations, a withholding agent may, in 
certain circumstances, use documentary evidence to document a payee and 
reduce the rate of withholding if the withholding agent obtains a 
treaty statement that the payee meets the limitation on benefits 
provision contained in the applicable income tax treaty. These 
temporary regulations provide, consistent with the requirements for 
withholding certificates, that the treaty statement associated with 
documentary evidence to support a treaty claim must also identify the 
specific limitation on benefits provision on which the entity relies to 
claim benefits under the applicable income tax treaty.
2. Reason To Know That a Treaty is in Force
    More generally, these temporary regulations also clarify a 
withholding agent's responsibility with respect to claims of benefits 
under an income tax treaty, whether they are made by an individual or 
an entity. By way of example, these temporary regulations provide that 
if the income tax treaty that the treaty claimant references on the 
form does not exist or is not in force (which a withholding agent can 
determine by consulting the list of jurisdictions with which the United 
States has an income tax treaty in force maintained on the IRS Web 
site, or the State Department's Treaties in Force publication), a 
withholding agent will have reason to know that the information 
provided on the Form W-8BEN-E is incorrect and the form is therefore 
not valid for purposes of claiming treaty benefits.

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

1. Curing of U.S. Indicia
    Under Sec.  1.1441-7(b), a withholding agent must withhold at the 
full 30-percent rate if it has actual knowledge or reason to know that 
a payee's claim of U.S. status or of entitlement to a reduced rate of 
withholding is unreliable or incorrect. Comments requested that a 
withholding agent should be able to presume that an undocumented entity 
payee is a foreign person if the withholding agent has on file for the 
payee a GIIN and confirms that the payee's name and GIIN appear on the 
IRS FFI list. These comments noted that under Sec.  1.1471-
3(e)(4)(ii)(B), for chapter 4 purposes, a withholding agent can 
reliably associate a withholding certificate with a payment to a 
participating FFI, a registered deemed-compliant FFI, a sponsoring 
entity, or a sponsored FFI without applying the rules of Sec.  1.1441-
7(b)(5) (relating to when a withholding agent has reason to know that a 
withholding certificate is unreliable or incorrect due to the presence 
of U.S. indicia) if the withholding agent has confirmed the entity's 
GIIN on the current published FFI list. The Treasury Department and the 
IRS have declined to adopt this suggestion. Because U.S. entities can 
obtain GIINs, and if they do so, their names would appear on the IRS 
FFI list (as is the case for U.S. entities that are sponsoring 
entities, for example), it is not appropriate to allow a GIIN to cure 
U.S. indicia for purposes of chapter 3.
2. Modification of Applicability Date for Revised Standards of 
Knowledge as Previewed in Notice 2014-33
    The 2014 temporary coordination regulations revised the standards 
of knowledge regarding additional U.S. indicia that will cause a 
withholding agent to have reason to know that a payee's claim of 
foreign status is unreliable or incorrect for purposes of chapter 3 or 
61 to coordinate with the standards of knowledge that apply for 
purposes of chapter 4. These revised standards of knowledge generally 
do not require a withholding agent to take the additional U.S. indicia 
into account for a preexisting obligation of a direct account holder if 
the foreign status of the account holder was documented by the 
withholding agent for purposes of chapter 3 or chapter 61 before July 
1, 2014. On May 19, 2014, Treasury and the IRS published Notice 2014-
33, 2014-21 I.R.B. 1033, which, among other things, generally allowed a 
withholding agent or FFI to treat an obligation held by an entity that 
was issued, opened, or executed on or after July 1, 2014, and before 
January 1, 2015, as a preexisting obligation described in Sec. Sec.  
1.1471-2(a)(4)(ii), 1.1472-1(b)(2), and 1.1471-4(c)(3). Following the 
publication of Notice 2014-33, comments noted that, while the 
modifications made to Sec.  1.1441-7(b) addressed the application of 
the revised reason to know standards for obligations that were 
documented by a withholding agent before July 1, 2014, Notice 2014-33 
did not address how the standards would apply to entity accounts opened 
on or after July 1, 2014, and before January 1, 2015, that are treated 
as preexisting obligations by withholding agents and participating FFIs 
for purposes of chapter 4, pursuant to Notice 2014-33. These comments 
requested that a similar modified applicability date be added to Sec.  
1.1441-7(b) to allow withholding agents to treat

[[Page 2053]]

an entity account opened during the transition period between July 1, 
2014, and January 1, 2015 as a preexisting entity account for purposes 
of the standards of knowledge applicable to accounts under chapters 3 
and 61. Accordingly, these final regulations allow withholding agents 
to apply the rules under Sec.  1.1441-7(b)(5) and (b)(8) as in effect 
and contained in 26 CFR part 1 revised April 1, 2013, to accounts 
opened, and obligations entered into, by an entity on or after July 1, 
2014, and before January 1, 2015. In addition, these final regulations 
provide that, with respect to an obligation held by an entity, a 
withholding agent will not be required to treat the existence of the 
additional U.S. indicia specified in Sec.  1.1441-7(b) as giving rise 
to a change in circumstances under Sec.  1.1441-1(e)(4)(ii)(D) before 
January 1, 2015. These changes to the chapter 3 regulations were 
previewed in Notice 2014-59, 2014-44 I.R.B. 747.
3. Indicia of U.S. Status on Form W-8ECI
    The 2014 temporary coordination regulations describe the U.S. 
indicia that will cause a withholding agent to have reason to know that 
a withholding certificate is unreliable or incorrect for purposes of 
establishing the account holder's status as a foreign person. Comments 
have noted that foreign persons that have a trade or business in the 
United States are likely to have U.S. indicia; therefore, the existence 
of U.S. indicia on a Form W-8ECI should not cause the withholding agent 
to have reason to know that the Form W-8ECI is unreliable or incorrect. 
The Treasury Department and the IRS agree. These final regulations 
reflect this change by providing that the existence of U.S. indicia on 
a Form W-8ECI will not cause a withholding agent to have reason to know 
that the form is unreliable or incorrect for purposes of establishing 
the account holder's status as a foreign person.
4. Reason to Know--Specific Standards of Knowledge Applicable to 
Documentation Received from Intermediaries and Flow-Through Entities
    The chapter 3 regulations permit a withholding agent to accept a 
Form W-8 (or a substitute Form W-8) electronically through a system 
established by the withholding agent that meets the requirements 
described in Sec.  1.1441-1(e)(3)(iv)(B). Announcement 98-27, 1998-1 
C.B. 865, and Announcement 2001-91, 2001-2 C.B. 221, provide similar 
requirements for an electronic system established by a withholding 
agent to receive a Form W-9. Comments requested that specific guidance 
be given to clarify that a withholding agent is allowed to rely on 
documentation provided to it by an intermediary or flow-through entity 
that has established an electronic system to collect documentation from 
a payee. The primary concern raised in these comments was how a 
withholding agent was supposed to validate, and whether a withholding 
agent could rely on, a signature on a beneficial owner withholding 
certificate received through an electronic system. In Notice 2016-08, 
2016-6 I.R.B 304, the Treasury Department and the IRS announced an 
intent to modify the standards of knowledge under Sec. Sec.  1.1441-
7(b)(10) and 1.1471-3(e)(4)(vi)(A)(2) to allow a withholding agent to 
rely on a withholding certificate collected through an electronic 
system maintained by a nonqualified intermediary, nonwithholding 
foreign partnership, or nonwithholding foreign trust. However, in light 
of the new provisions in Sec.  1.1441-1T(e)(4)(i)(B) describing when 
withholding agents may accept withholding certificates signed 
electronically, the Treasury Department and the IRS have determined 
that it is not necessary to modify the standards of knowledge for 
payments to intermediary and flow-through entities as previewed in 
Notice 2016-08.
5. Authorized Agents and Form 8655
    Under the 2014 temporary coordination regulations, a withholding 
agent must file Form 8655, ``Reporting Agent Authorization,'' with the 
IRS if it appoints an agent to act as its reporting agent for filing 
Form 1042, ``Annual Withholding Tax Return for U.S. Source Income of 
Foreign Persons,'' or making tax deposits and payments with respect to 
Form 1042. A comment suggested that a Form 8655 should be required to 
be filed only when an agent files a Form 1042 in its own name (and 
under its own EIN) on behalf of one or more other withholding agents. 
In response to the comment, these final regulations amend the 2014 
temporary coordination regulations to provide that a withholding agent 
must file a Form 8655 only when its agent files a Form 1042 as the 
filer on behalf of one or more other withholding agents. This revision 
is also included in temporary regulations under chapter 4 that are 
being published concurrently with these temporary and final 
regulations.

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

1. Electronic Furnishing of Form 1042-S
    The chapter 3 regulations generally require withholding agents to 
file an information return on Form 1042-S to report the amounts subject 
to reporting that were paid during the preceding calendar year and to 
provide a copy of the form to the recipient of the payment, on or 
before March 15 of the calendar year following the payment. The 
withholding agent must retain a copy of each Form 1042-S for the period 
corresponding to the statute of limitations on assessment and 
collection applicable to the Form 1042 to which the Form 1042-S 
relates. The Treasury Department and the IRS have determined that it is 
appropriate to allow withholding agents to furnish the recipient copy 
of the Form 1042-S electronically under the same conditions applicable 
to furnishers of recipient copies of other forms (for example, Form W-
2, Form 1099-K), and for this reason, these final regulations include a 
cross-reference to the requirements under Sec.  1.6050W-2 for certain 
information statements that are furnished electronically. Statements 
can be furnished electronically beginning in calendar year 2017 for 
payments made in calendar year 2016 that are reportable on Form 1042-S.
2. Provision of Foreign TINs on Recipient Copies of Form 1042-S
    The Form 1042-S requires, among other information, the foreign TIN 
of a recipient if (A) the recipient is claiming a reduced rate of, or 
exemption from, tax under a tax treaty, the person did not provide a 
U.S. TIN, and the income is not the type of income for which an 
exemption from the U.S. TIN requirement applies; (B) the recipient 
receives a payment made with respect to an obligation maintained at a 
U.S. office or branch of the withholding agent, the withholding agent 
is a financial institution, and the foreign TIN is available in the 
withholding agent's electronically searchable information; or (C) the 
withholding agent is required to collect the foreign TIN on the Form W-
8. Comments have requested that the form instructions or the chapter 3 
regulations be modified to allow a foreign TIN to be truncated on the 
recipient copy of the Form 1042-S consistent with the truncation of 
U.S. TINs on the Form 1042-S. The Treasury Department and the IRS agree 
with these comments and will modify the Form 1042-S instructions 
accordingly.

[[Page 2054]]

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

    Under Sec.  1.6041-4, returns of information are not required for 
payments of certain amounts from sources outside the United States that 
are paid by a non-U.S. payor or a non-U.S. middleman and that are paid 
and received outside the United States. Section 1.6049-4(f)(16) 
describes the circumstances under which a payment is considered ``paid 
and received outside the United States'' (and is therefore not a 
reportable payment). Comments have suggested that the definition of 
``paid and received outside the United States'' be limited to allow a 
broader range of payments to be treated as reportable payments, such as 
payments for services performed outside the United States. The Treasury 
Department and the IRS continue to consider this issue but have not 
incorporated this suggestion into these temporary and final 
regulations.

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

    Under Sec.  1.6042-2, every person who makes a payment of dividends 
to any other person during a calendar year must file an information 
return (that is, Form 1099) that contains the aggregate amount of the 
dividends, identifying information about the payee, the amount of tax 
deducted and withheld under section 3406, and such other information as 
the form requires. The 2014 temporary coordination regulations provide 
an exception to this filing requirement for payments made by a paying 
agent on behalf of a passive foreign investment company (PFIC), as 
defined in section 1297(a), with respect to a shareholder in the PFIC 
if, among other things, the paying agent obtains from the corporation a 
written certification signed by an officer of the corporation that 
states that the corporation is described in section 1297(a) for each 
calendar year during which the exception is to be applied, and the 
paying agent has no reason to know that the written certification is 
unreliable or incorrect. The paying agent must also identify, before 
payment, that the PFIC is a participating FFI or a reporting Model 1 
FFI, and must obtain annually a written certification from the PFIC 
representing that it will report payments made by the paying agent 
pursuant to its reporting obligations under chapter 4 or under an 
applicable intergovernmental agreement (IGA).
    Comments have requested that, rather than obtaining an annual 
certification that is signed by an officer of the corporation, the 
paying agent should be able to rely on a single written certification 
of PFIC status until there is a change in circumstances or the paying 
agent knows or has reason to know that the certification is unreliable 
or incorrect, and that such certification can be signed by any person 
that has the authority to sign the certification on behalf of the 
corporation. The Treasury Department and the IRS decline to accept the 
request for a single written certification of PFIC status at this time 
because the annual certification requirement does not appear to present 
a significant compliance burden and helps assure that the paying agent 
is meeting its due diligence standards. However, the request that the 
certification be signed by any person that has the authority to sign 
the certification on behalf of the corporation has been accepted. A 
similar change has been made in Sec.  1.6045-1(c)(3)(xiv)(A).

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

1. Modification of Applicability Date for Use of Documentary Evidence 
With Respect to an Offshore obligation
    The regulations under Sec.  1.6049-5(c)(1) provide guidance on a 
payor's use of documentary evidence to establish a payee's foreign 
status for certain amounts paid outside the United States (as 
determined under Sec.  1.6049-5(e)) with respect to an offshore 
obligation. The 2014 temporary coordination regulations included a 
series of modifications, made in coordination with modifications to 
regulations under chapter 4, to the conditions under which a 
withholding agent or a payor (as defined for chapter 61 purposes in 
Sec.  1.6049-5(c)(5)) may rely on documentary evidence to document a 
payee's foreign status, and also provided guidance on when an amount is 
considered paid outside the United States. The 2014 temporary 
coordination regulations under Sec.  1.6049-5T(c)(1) apply to payments 
made on or after July 1, 2014, except for certain payments made with 
respect to preexisting obligations, as described in Sec.  1.1441-
7(b)(3)(ii).
    In response to requests to allow payors additional time to modify 
their systems to implement the revised requirements of Sec.  1.6049-
5(c)(1), these final regulations allow a payor to continue to use, for 
accounts opened on or after July 1, 2014, and before January 1, 2015, 
the rules regarding the use of documentary evidence under Sec.  1.6049-
5(c)(1) and (c)(4) as in effect and contained in 26 CFR part 1 revised 
April 1, 2013 (prior Sec.  1.6049-5(c)), instead of the new rules 
regarding documentary evidence for offshore obligations under Sec.  
1.6049-5T(c)(1) and (c)(4) of the 2014 temporary coordination 
regulations. For consistency, a payor that applies prior Sec.  1.6049-
5(c) to an account or obligation will also be required to apply Sec.  
1.1441-6(c)(2) (for documentary evidence used to support a treaty 
claim) and Sec.  1.6049-5(e) as in effect and contained in 26 CFR part 
1 revised April 1, 2013, with respect to the account or obligation. 
These modifications to the 2014 temporary coordination regulations were 
previewed in Notice 2014-59.
2. Presumption Rules for Bank Deposit Interest
    These regulations also include a change to the presumption rule for 
U.S. source bank deposit interest in Sec.  1.6049-5(d)(3)(iii)(A). This 
presumption rule was inadvertently removed in the 2014 temporary 
coordination regulations and the 2014 QI Agreement, and it was 
corrected in the Proposed QI Agreement. It is expected to apply only in 
cases in which chapter 4 withholding does not apply.

K. Minor and Non-Substantive Clarifications and Corrections

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

Special Analyses

    Certain IRS regulations, including these, are exempt from the 
requirements of Executive Order 12866, as supplemented and reaffirmed 
by Executive Order 13653. Therefore, a regulatory assessment is not 
required.
    For the applicability of the Regulatory Flexibility Act (5 U.S.C. 
chapter 6), refer to the cross-referenced notice of proposed rulemaking 
published in the Proposed Rules section of this issue of the Federal 
Register. Pursuant to section 7805(f) of the Code, the notice

[[Page 2055]]

of proposed rulemaking preceding the final regulations in this document 
were submitted to the Chief Counsel for Advocacy of the Small Business 
Administration for comment on their impact on small business.

Drafting Information

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

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 301

    Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income 
taxes, Penalties, Reporting and recordkeeping requirements.

Adoption of Amendments to the Regulations

0
Accordingly, 26 CFR parts 1, 31, and 301 are amended as follows:

PART 1--INCOME TAXES

0
Paragraph 1. The authority citation for part 1 continues to read in 
part as follows:

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


0
Par. 2. Section 1.871-14 is amended by revising paragraphs (b), (c)(2) 
introductory text, (c)(2)(i) through (iv), (c)(3)(i), (c)(4), and 
(e)(1), removing paragraph (e)(4)(iv), and revising paragraph (j).
    The revisions read as follows:


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.

* * * * *
    (b) Rules concerning obligations in bearer form before March 19, 
2012--(1) In general. Interest (including original issue discount) with 
respect to an obligation in bearer form is portfolio interest within 
the meaning of section 871(h)(2)(A) or 881(c)(2)(A) only if it is paid 
with respect to an obligation issued after July 18, 1984, and issued 
before March 19, 2012, that is described in section 163(f)(2)(B), as in 
effect before the amendment by section 502 of the Hiring Incentives to 
Restore Employment Act of 2010 (HIRE Act), Public Law 111-147, and the 
regulations under that section and an exception under section 871(h) or 
881(c) does not apply. Any obligation that is not in registered form as 
defined in paragraph (c)(1)(i) of this section is an obligation in 
bearer form.
    (2) Coordination with withholding and reporting rules. For an 
exemption from withholding under section 1441 with respect to 
obligations described in this paragraph (b), see Sec.  1.1441-
1(b)(4)(i). See Sec.  1.1471-2 for rules relating to withholding under 
chapter 4 of the Code that may apply to withholdable payments (as 
defined in Sec.  1.1471-4(b)(145)) made on or after July 1, 2014, with 
respect to an agreement or instrument that is not treated as an 
obligation outstanding before March 19, 2012. For purposes of the 
preceding sentence, the terms obligation and outstanding are described 
in Sec.  1.1471-2(b)). See also Sec.  1.1471-4(d)(6) for the reporting 
requirements of participating foreign financial institutions (as 
defined in Sec.  1.1471-1(b)(91)) with respect to accounts held by 
recalcitrant account holders (as defined in Sec.  1.1471-5(g)). For 
rules relating to an exemption from Form 1099 reporting and backup 
withholding under section 3406, see section 6049 and Sec.  1.6049-
5(b)(8) for the payment of interest and Sec.  1.6045-1(g)(1)(ii) for 
the redemption, retirement, or sale of an obligation in bearer form.
    (c) * * *
    (2) Required statement. For purposes of paragraph (c)(1)(ii)(C) of 
this section, a U.S. person will be considered to have received a 
statement that meets the requirements of section 871(h)(5) if either it 
complies with one of the procedures described in this paragraph (c)(2) 
and does not have actual knowledge or reason to know that the 
beneficial owner is a U.S. person or it complies with the procedures 
described in paragraph (d) or (e) of this section (to the extent 
applicable).
    (i) The U.S. person (or its authorized agent described in Sec.  
1.1441-7(c)(2)) can reliably associate the payment with documentation 
upon which it can rely to treat the payment as made to a foreign 
beneficial owner in accordance with Sec.  1.1441-1(e)(1)(ii). See Sec.  
1.1441-1(b)(2)(vii) for rules regarding reliable association with 
documentation.
    (ii) The U.S. person (or its authorized agent described in Sec.  
1.1441-7(c)(2)) can reliably associate the payment with a withholding 
certificate described in Sec.  1.1441-5(c)(2)(iv) from a person 
claiming to be a withholding foreign partnership or Sec.  1.1441-
5(e)(v) for a person claiming to be a withholding foreign trust.
    (iii) The U.S. person (or its authorized agent described in Sec.  
1.1441-7(c)(2)) can reliably associate the payment with a withholding 
certificate described in Sec.  1.1441-1(e)(3)(ii) from a person 
representing to be a qualified intermediary that has assumed primary 
withholding responsibility for the payment in accordance with Sec.  
1.1441-1(e)(5)(iv) or a qualified intermediary that has provided a 
withholding statement that meets the requirements of Sec.  1.1441-
1(e)(5)(v)(C) or that includes the payment in a withholding rate pool 
for payments excepted from withholding.
    (iv) The U.S. person (or its authorized agent described in Sec.  
1.1441-7(c)(2)) can reliably associate the payment with a withholding 
certificate described in Sec.  1.1441-1(e)(3)(v) from a person claiming 
to be a U.S. branch of a foreign bank or of a foreign insurance company 
that is described in Sec.  1.1441-1(b)(2)(iv)(A) or a U.S. branch 
designated in accordance with Sec.  1.1441-1(b)(2)(iv)(E).
* * * * *
    (3) Time for providing certificate or documentary evidence--(i) 
General rule. Interest on a registered obligation shall qualify as 
portfolio interest if the withholding certificate or documentary 
evidence that must be provided is furnished before expiration of the 
beneficial owner's period of limitation for claiming a refund of tax 
with respect to such interest. See, however, Sec.  1.1441-1(b)(7) for 
consequences to a withholding agent that makes a payment without 
withholding even though it cannot reliably associate the payment with 
the documentation prior to the payment. If a withholding agent 
withholds an amount under chapter 3 of the Code because it cannot 
reliably associate the payment with the documentation for the 
beneficial owner on the date of payment, the beneficial owner may 
nevertheless claim the benefit of an exemption from tax under this 
section by claiming a refund or credit for the amount withheld based 
upon the procedures described in Sec. Sec.  1.1464-1 and 301.6402-3(e) 
of this chapter. See Sec. Sec.  1.1474-5 and 301.6402-3(e) of this 
chapter for the allowance and requirements for a refund with respect to 
an amount (including a payment of interest) that was withheld upon 
under chapter 4 of the Code. In the alternative, adjustments to any 
amount of overwithheld tax may be made under the procedures described 
in Sec.  1.1461-2(a) for a payment withheld upon under

[[Page 2056]]

chapter 3 of the Code or in Sec.  1.1474-2 for a payment withheld upon 
under chapter 4 of the Code.
* * * * *
    (4) Coordination with withholding and reporting rules. For an 
exemption from withholding under section 1441 with respect to 
obligations described in this paragraph (c)(4), see Sec.  1.1441-
1(b)(4)(i). For rules applicable to withholding certificates, see Sec.  
1.1441-1(e)(4). For rules regarding documentary evidence, see Sec.  
1.6049-5(c)(1). For application of presumptions when the U.S. person 
cannot reliably associate the payment with documentation, see Sec.  
1.1441-1(b)(3). For standards of knowledge applicable to withholding 
agents, see Sec.  1.1441-7(b). For rules relating to reporting on Forms 
1042 and 1042-S, see Sec.  1.1461-1(b) and (c). For rules relating to 
an exemption from Form 1099 reporting and backup withholding under 
section 3406, see section 6049 and Sec.  1.6049-5(b)(8) for the payment 
of interest and Sec.  1.6045-1(g)(1)(i) for the redemption, retirement, 
or sale of an obligation in registered form. For rules relating to 
withholding under sections 1471 and 1472 that may apply notwithstanding 
the exemption for payments of portfolio interest under section 1441, 
see Sec. Sec.  1.1471-2(a), 1.1471-4(b), and 1.1472-1(b).
* * * * *
    (e) Foreign-targeted registered obligations--(1) General rule. The 
statement described in paragraph (c)(1)(ii) of this section is not 
required with respect to interest paid on an obligation issued before 
January 1, 2016, that is a registered obligation targeting foreign 
markets in accordance with the provisions of paragraph (e)(2) of this 
section if the interest is paid by a U.S. person, a withholding foreign 
partnership, or a U.S. branch described in Sec.  1.1441-1(b)(2)(iv)(A) 
or (E) to a registered owner at an address outside the United States, 
provided that the registered owner is a financial institution described 
in section 871(h)(5)(B). In that case, the U.S. person otherwise 
required to deduct and withhold tax may treat the interest as portfolio 
interest if it does not have actual knowledge that the beneficial owner 
is a United States person and if it receives the certificate described 
in paragraph (e)(3)(i) of this section from a financial institution or 
member of a clearing organization, which member is the beneficial owner 
of the obligation, or the documentary evidence or statement described 
in paragraph (e)(3)(ii) of this section from the beneficial owner, in 
accordance with the procedures described in paragraph (e)(4) of this 
section.
* * * * *
    (j) Effective/applicability date--(1) In general. Except as 
otherwise provided in paragraph (j)(2) and (3) of this section, this 
section applies to payments of interest made on or after January 6, 
2017. (For the rules that apply after June 30, 2014, and before January 
6, 2017, see this section as in effect and contained in 26 CFR part 1, 
as revised April 1, 2016. For payments of interest made after December 
31, 2000, and before July 1, 2014, see this section as in effect and 
contained in 26 CFR part 1, as revised April 1, 2013.)
    (2) Portfolio interest not to include interest received by 10-
percent shareholders. Paragraph (g) applies to interest paid after 
April 12, 2007. Taxpayers may choose to apply the rules of paragraph 
(g) to interest paid in any taxable year not closed by the period of 
limitations as of April 12, 2007, provided they do so consistently for 
all relevant partnerships during such years.
    (3) Portfolio interest not to include certain contingent interest. 
The rules of paragraph (h) of this section apply beginning September 
18, 2015.


Sec.  1.871-14T   [Removed]

0
Par. 3. Section 1.871-14T is removed.

0
Par. 4. Section 1.1441-0 is amended by:
0
1. Revising entries for Sec.  1.1441-1(b)(2)(vii)(D) through (F) and 
(b)(3)(ii)(C).
0
2. Adding entries for Sec.  1.1441-1 (b)(3)(iii)(A)(1) and (2).
0
3. Revising entry for Sec.  1.1441-1(b)(3)(iii)(D).
0
4. Adding entry for Sec.  1.1441-1(b)(3)(iii)(E).
0
5. Removing entries for Sec.  1.1441-1(b)(3)(v)(C) and (D).
0
6. Revising entries for Sec.  1.1441-1(b)(3)(vi) through 
(b)(3)(vii)(B).
0
7. Revising entries for Sec.  1.1441-1(b)(6)(ii) through (b)(7)(v).
0
8. Adding entries for Sec.  1.1441-1(c)(2)(i) and (ii).
0
9. Revising entries for Sec.  1.1441-1(c)(5), (c)(10), and (c)(28) and 
(29).
0
10. Adding entries for Sec.  1.1441-1(c)(30) through (56).
0
11. Adding entries for Sec.  1.1441-1(e)(2)(ii)(A) and (B).
0
12. Revising the entry for Sec.  1.1441-1(e)(3)(iv).
0
13. Adding entries for Sec.  1.1441-1(e)(3)(iv)(C)(1) through (4) and 
Sec.  1.1441-1(e)(3)(iv)(D)(1) through (8).
0
14. Revising the entry for Sec.  1.1441-1(e)(3)(v).
0
15. Adding entries for Sec.  1.1441-1(e)(4)(i)(A) and (B).
0
16. Revising the entry for Sec.  1.1441-1(e)(4)(ii)(A) and adding 
entries for Sec.  1.1441-1(e)(4)(ii)(A)(1) and (2).
0
17. Adding entries for Sec.  1.1441-1(e)(4)(ii)(D)(1) through (3)
0
18. Revising the entries for Sec.  1.1441-1(e)(4)(iii).
0
19. Adding entries from Sec.  1.1441-1(e)(4)(iv)(B)(1) through (4).
0
20. Revising the entry from Sec.  1.1441-1(e)(4)(iv)(C) and adding 
entries for Sec.  1.1441-1(e)(4)(iv)(D) and (E).
0
21. Revising the entries for Sec.  1.1441-1(e)(4)(v), Sec.  1.1441-
1(e)(4)(viii)(C), Sec.  1.1441-1(e)(4)(ix) introductory text and Sec.  
1.1441-1(e)(4)(ix)(A) and (B).
0
22. Adding entries for Sec.  1.1441-1(e)(4)(ix)(B)(1) and (2)..
0
23. Revising entry for Sec.  1.1441-1(e)(4)(ix)(C) and adding entries 
for Sec.  1.1441(e)(4)(ix)(C)(1) and (2) and Sec.  1.1441-
1(e)(4)(ix)(D).
0
24. Revising entries for Sec.  1.1441-1(e)(5)(i) and
0
25. Adding entries for Sec.  1.1441-1(e)(5)(v)(C)(1) through (f)(3).
0
26. Adding entries for Sec.  1.1441-2(b)(3)(iii), (b)(6), and (e)(7).
0
27. Revising the entry for Sec.  1.1441-3(a) and adding entries for 
Sec.  1.1441-3(a)(1) and (2).
0
28. Revising the entry for Sec.  1.1441-3(c)(4)(i)(C).
0
29. Adding entries for Sec.  1.1441-3(g)(1) and (2).
0
30. Revising entry for Sec.  1.1441-3(h) and adding entries for Sec.  
1.1441-3(h)(1) and (2) and Sec.  1.1441-3(i).
0
31. Adding an entry for Sec.  1.1441-4(a)(3)(iii); and revising entries 
for Sec.  1.1441-4(b)(4) and (g).
0
32. Removing entries for Sec.  1.1441-4(g)(1) through (2).
0
33. Adding an entry for Sec.  1.1441-5(b)(2)(vi).
0
34. Revising and adding entries for Sec.  1.1441-5(c)(1)(iv) and (v).
0
35. Revising entries for Sec.  1.1441-5(c)(3)(iv) through (d)(2).
0
36. Revising the entry for Sec.  1.1441-5(e)(2).
0
37. Adding an entry for Sec.  1.1441-5(e)(3)(iii).
0
38. Revising entries for Sec.  1.1441-5(e)(5)(iv) and (g).
0
39. Removing entries for Sec.  1.1441-5(g)(1) and (2).
0
40. Adding entries for Sec.  1.1441-6(b)(1)(i) and (ii).
0
41. Revising the entry for Sec.  1.1441-6(c)(1).
0
42. Revising the entry for Sec.  1.1441-6(h).
0
43. Adding an entry for Sec.  1.1441-6(i).
0
44. Revising the entry for Sec.  1.1441-7(a)(2), and adding entries for 
Sec.  1.1441-7(a)(3) and (4).
0
45. Adding entries for Sec.  1.1441-7(b)(3)(i) and (ii).

[[Page 2057]]

0
46. Adding entries for Sec.  1.1441-7(b)(5)(i) through (c)(3), Sec.  
1.1441-7(b)(6)(i) through (iii), Sec.  1.1441-7(b)(8)(i) through (iv), 
and Sec.  1.1441-7(b)(9)(i) and (ii).
0
47. Revising entries for Sec.  1.1441-7(b)(10) and (11) and adding 
entries for Sec.  1.1441-7(b)(12) and (13).
0
48. Revising the entry for Sec.  .1441-7(c).
0
49. Adding entries for Sec.  1.1441-7(f)(1) through (f)(2)(ii).
0
50. Revising entry for Sec.  1.1441-7(g).
0
51. Adding an entry for Sec.  1.1441-10.
    The revisions and additions read as follows:


Sec.  1.1441-0  Outline for regulations provisions for section 1441.

    This section lists captions contained in Sec. Sec.  1.1441-1 
through 1.1441-10.


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

* * * * *
    (b) * * *
    (2) * * *
    (vii) * * *
    (D) Special rules applicable to a withholding certificate provided 
by a qualified intermediary that assumes primary withholding 
responsibility under chapter 3 and chapter 4 of the Internal Revenue 
Code.
    (E) Special rules applicable to a withholding certificate provided 
by a qualified intermediary that assumes primary Form 1099 reporting 
and backup withholding responsibility but not primary withholding under 
chapter 3 and chapter 4.
    (F) Special rules applicable to a withholding certificate provided 
by a qualified intermediary that assumes primary withholding 
responsibility under chapter 3 and chapter 4 and primary Form 1099 
reporting and backup withholding responsibility and a withholding 
certificate provided by a withholding foreign partnership or a 
withholding foreign trust.
    (3) * * *
    (ii) * * *
    (C) Documentary evidence furnished for offshore obligation.
    (iii) Presumption of U.S. or foreign status.
    (A) Payments to exempt recipients.
    (1) In general.
    (2) Special rule for withholdable payments made to exempt 
recipients.
* * * * *
    (D) Payments with respect to offshore obligations.
    (E) Certain payments for services.
* * * * *
    (vi) U.S. branches and territory financial institutions not treated 
as U.S. persons.
    (vii) Joint payees.
    (A) In general.
    (B) Special rule for offshore obligations.
* * * * *
    (6) * * *
    (ii) Examples.
    (7) Liability for failure to obtain documentation timely or to act 
in accordance with applicable presumptions.
    (i) General rule.
    (ii) Proof that tax liability has been satisfied.
    (A) In general.
    (B) Special rule for establishing that income is effectively 
connected with the conduct of a U.S. trade or business.
    (iii) Liability for interest and penalties.
    (iv) Special rule for determining validity of withholding 
certificate containing inconsequential errors.
    (v) Special effective date.
* * * * *
    (c) * * *
    (2) * * *
    (i) In general.
    (ii) Dual residents.
* * * * *
    (5) Financial institution and foreign financial institution (or 
FFI).
* * * * *
    (10) Chapter 3 of the Code (or chapter 3).
* * * * *
    (28) Nonwithholding foreign partnership (or NWP).
    (29) Withholding foreign partnership (or WP).
    (30) Possession of the United States or U.S. territory.
    (31) Amount subject to chapter 3 withholding.
    (32) EIN.
    (33) Flow-through withholding certificate.
    (34) Foreign payee.
    (35) Intermediary withholding certificate.
    (36) Nonwithholding foreign trust (or NWT).
    (37) Payment with respect to an offshore obligation.
    (38) Permanent residence address.
    (i) In general.
    (ii) Hold mail instruction.
    (39) Standing instructions to pay amounts.
    (40) Territory financial institution.
    (41) TIN.
    (42) Withholding foreign trust (or WT).
    (43) Certified deemed-compliant FFI.
    (44) Chapter 3 withholding rate pool.
    (45) Chapter 3 status.
    (46) Chapter 4 of the Code (or chapter 4).
    (47) Chapter 4 status.
    (48) Chapter 4 withholding rate pool.
    (49) Deemed-compliant FFI.
    (50) GIIN (or Global Intermediary Identification Number).
    (51) NFFE.
    (52) Nonparticipating FFI.
    (53) Participating FFI.
    (54) Preexisting obligation.
    (55) Registered deemed-compliant FFI.
    (56) Withholdable payment.
* * * * *
    (e) * * *
    (2) * * *
    (ii) * * *
    (A) In general.
    (B) Requirement to collect foreign TIN and date of birth beginning 
January 1, 2017.
    (3) * * *
    (iv) Withholding statement provided by nonqualified intermediary.
* * * * *
    (C) * * *
    (1) In general.
    (2) Nonqualified intermediary withholding statement for 
withholdable payments.
    (3) Alternative withholding statement.
    (4) Example.
    (D) Alternative procedures.
    (1) In general.
    (2) Withholding rate pools.
    (i) In general.
    (ii) Withholding rate pools for .chapter 4 purposes.
    (3) Allocation information.
    (4) Failure to provide allocation information.
    (5) Cure provision.
    (6) Form 1042-S reporting in case of allocation failure.
    (7) Liability for tax, interest, and penalties.
    (8) Applicability to flow-through entities and certain U.S. 
branches.
    (E) Notice procedures.
    (v) Withholding certificate from certain U.S. branches (including 
territory financial institutions).
    (vi) Reportable amounts.
    (4) Applicable rules.
    (i) Who may sign the certificate.
    (A) In general.
    (B) Electronic signatures.
    (ii) Period of validity.
    (A) General rule.
    (1) Withholding certificates and documentary evidence.
    (2) Documentary evidence for treaty claims and treaty statements.
* * * * *
    (D) * * *
    (1) Defined.
    (2) Obligation to notify a withholding agent of a change in 
circumstances.
    (3) Withholding agent's obligation with respect to a change in 
circumstances.

[[Page 2058]]

    (iii) Retention of documentation.
    (iv) Electronic transmission of information
    (A) In general.
    (B) Requirements.
    (1) In general.
    (2) Same information as paper Form W-8.
    (3) Perjury statement and signature requirements.
    (i) Perjury statement.
    (ii) Electronic signature.
    (4) Requests for electronic Form W-8 data.
    (C) Form 8233.
    (D) Forms and documentary evidence received by facsimile or email.
    (E) Third party repositories.
    (v) Additional procedures for certificates provided electronically.
* * * * *
    (viii) * * *
    (C) Reliance on a prior version of a withholding certificate.
    (ix) Certificates to furnished for each obligation unless exception 
applies.
    (A) Exception for certain branch or account systems or system 
maintained by agent.
    (B) Reliance on certification provided by introducing brokers.
    (1) In general.
    (2) Example.
    (C) Reliance on documentation and certifications provided between 
principals and agents.
    (1) Withholding agent as agent.
    (2) Withholding agent as principal.
    (D) Reliance upon documentation for accounts acquired in merger or 
bulk acquisition for value.
    (5) Qualified intermediaries.
    (i) In general.
* * * * *
    (v) * * *
    (A) In general.
    (B) Content of withholding statement.
    (C) Withholding rate pools
    (1) In general.
    (2) Withholding rate pool requirements for a withholdable payment.
    (3) Alternative procedure for U.S. non-exempt recipients.
    (D) Example.
    (6) Qualified derivatives dealers.
    (f) Effective/applicability date.
    (1) In general.
    (2) Lack of documentation for past years.
    (3) Section 871(m) transactions.


Sec.  1.1441-2  Amounts subject to withholding.

* * * * *
    (b) * * *
    (3) * * *
    (iii) Exceptions to withholding.
* * * * *
    (6) Dividend equivalents.
* * * * *
    (e) * * *
    (7) Payments of dividend equivalents.
    (i) In general.
    (ii) Payment.
    (iii) Premiums and other upfront payments.
* * * * *


Sec.  1.1441-3  Determination of amounts to be withheld.

    (a) General rule.
    (1) Withholding on gross amount.
    (2) Coordination with chapter 4.
* * * * *
    (c) * * *
    (4) * * *
    (i) * * *
    (C) Coordination with REIT/QIE withholding.
* * * * *
    (g) * * *
    (1) Duty to withhold.
    (2) Effective date.
    (h) Dividend equivalents.
    (1) Withholding on gross amount.
    (2) Reliance by withholding agent on reasonable determinations.
    (3) Effective/applicability date.
    (i) Effective/applicability date.


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

    (a) * * *
    (3) * * *
    (iii) Exception for specified notional principal contracts.
    (b) * * *
    (4) Final payment exemption.
* * * * *
    (g) Effective/applicability date.


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

* * * * *
    (b) * * *
    (2) * * *
    (vi) Coordination with chapter 4 requirements for U.S. 
partnerships, trusts, and estates.
    (c) * * *
    (1) * * *
    (iv) Coordination with chapter 4 for payments made to foreign 
partnerships.
    (v) Examples.
* * * * *
    (3) * * *
    (iv) Withholding statement provided by nonwithholding foreign 
partnership and coordination with chapter 4.
    (v) Withholding and reporting by a foreign partnership.
    (d) Presumption rules.
    (1) In general.
    (2) Determination of partnership status as U.S. or foreign in the 
absence of documentation.
* * * * *
    (e) * * *
    (2) Payments to foreign complex trusts and foreign estates.
    (3) * * *
    (iii) Coordination with chapter 4 for payments made to foreign 
simple trusts and foreign grantor trusts.
* * * * *
    (5) * * *
    (iv) Withholding statement provided by foreign simple trust or 
foreign grantor trust and coordination with chapter 4.
* * * * *
    (g) Effective/applicability date.


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

* * * * *
    (b) * * *
    (1) * * *
    (i) Identification of limitation on benefits provisions.
    (ii) Reason to know based on existence of treaty.
* * * * *
    (c) * * *
    (1) General rule.
* * * * *
    (h) Dividend equivalents.
    (i) Effective/applicability dates.
    (1) General rule.
    (2) Dividend equivalents.


Sec.  1.1441-7  General provisions relating to withholding agents.

    (a) * * *
    (2) Withholding agent with respect to dividend equivalents.
    (3) Examples.
    (4) Effective/applicability date.
    (b) * * *
    (3) * * *
    (i) In general.
    (ii) Limits on reason to know for preexisting obligations.
* * * * *
    (5) * * *
    (i) Classification of U.S. status, U.S. address, or U.S. telephone 
number.
    (ii) U.S. place of birth.
    (iii) Standing instructions with respect to offshore obligations.
    (6) Withholding certificate--claim of reduced rate of withholding 
under.
    (i) Permanent residence address.
    (ii) Mailing address.
    (iii) Standing instructions.
    (7) Documentary evidence.
    (8) Documentary evidence--establishment of foreign status.
    (i) Documentary evidence received prior to January 1, 2001.
    (ii) Documentary evidence received after December 31, 2000.
    (A) Treatment of individual's foreign status.
    (B) Presumption of entity's foreign status.

[[Page 2059]]

    (iii) U.S. place of birth.
    (iv) Standing instructions with respect of offshore obligations.
    (9) Documentary evidence--claim of reduced rate of withholding 
under treaty.
    (i) Permanent residence address and mailing address.
    (ii) Standing instructions.
    (10) Indirect account holders.
    (11) Limits on reason to know for multiple obligations belonging to 
a single person.
    (12) Reasonable explanation supporting claim of foreign status.
    (13) Additional guidance.
    (c) Agent.
    (1) In general.
    (2) Authorized agent.
    (3) Liability of withholding agent acting through an agent.
* * * * *
    (f) * * *
    (1) Liability of withholding agent.
    (2) Exception for withholding agents that do not know of conduit 
financing arrangement.
    (i) In general.
    (ii) Examples.
    (g) Effective/applicability date.
* * * * *


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

    (a) In general.
    (b) Exception.
    (c) Liability.
    (d) Examples.
    (e) Effective date.

0
Par. 5. Section 1.1441-1 is amended by:
0
1. Revising paragraphs (a), (b)(1), (b)(2)(i), (b)(2)(iii)(A), 
(b)(2)(iv)(A), (b)(2)(iv)(B)(2) though (4), (b)(2)(iv)(C), 
(b)(2)(iv)(E), (b)(2)(vi), (b)(2)(vii)(B) through (b)(2)(vii)(F), 
(b)(3)(i), (b)(3)(ii), (b)(3)(iii) introductory text, 
(b)(3)(iii)(A)(1), and (b)(3)(iii)(A)(1)(i) through 
(b)(3)(iii)(A)(1)(v), (b)(3)(iii)(A)(2), (b)(3)(iii)(D), (b)(3)(iv) 
introductory text, (b)(3)(iv)(A), (b)(3)(v)(B), (b)(3)(vi), 
(b)(3)(vii), (b)(3)(ix)(A), (b)(3)(x), (b)(4) introductory text, 
(b)(4)(i), (b)(5)(ix), (b)(6), (b)(7)(i) introductory text, and 
(b)(7)(i)(A) through (b)(7)(i)(C).
0
2. Redesignating paragraph (b)(7)(ii) as (b)(7)(ii)(A) and revising it.
0
3. Adding reserved paragraph (b)(7)(ii)(C).
0
4. Revising paragraphs (b)(7)(iv) and (v) and (c) introductory text.
0
5. Redesignating paragraph (c)(2) as (c)(2)(i) and revising it.
0
6. Adding reserved paragraph (c)(2)(ii).
0
7. Revising paragraphs (c)(3)(ii), (c)(5), (c)(10), (c)(12), (c)(16) 
and (17), (c)(23), (c)(25), and (c)(28) through (37).
0
8. Redesignating paragraph (c)(38) as (c)(38)(i) and revising it.
0
9. Adding reserved paragraph (c)(38)(ii).
0
10. Revising paragraphs (c)(39) through (56), (d)(4), and 
(e)(1)(ii)(A)(2) and (3).
0
11. Redesignating paragraph (e)(2)(ii) as (e)(2)(ii)(A) and revising 
new paragraph (e)(2)(ii)(A).
0
12. Adding reserved paragraph (e)(2)(ii)(B).
0
13. Revising paragraphs (e)(3)(ii) introductory text, (e)(3)(ii)(A), 
(e)(3)(ii)(C), (e)(3)(ii)(D), (e)(3)(ii)(F), (e)(3)(iii) introductory 
text, (e)(3)(iii)(A), (e)(3)(iii)(C) through (E), and (e)(3)(iv)(A) 
through (e)(3)(iv)(C)(2)(v).
0
14. Adding paragraph (e)(3)(iv)(C)(2)(v).
0
15. Redesignating paragraph (e)(3)(iv)(C)(3) as (e)(3)(iv)(C)(4) and 
revising it.
0
16. Adding reserved new paragraph (e)(3)(iv)(C)(3)
0
17. Revising paragraphs (e)(3)(iv)(D)(1) through (6), (e)(3)(iv)(E), 
(e)(3)(v), and (e)(4) introductory text.
0
18. Redesignating paragraph (e)(4)(i) as (e)(4)(i)(A) and revising it.
0
19. Adding reserved paragraph (e)(4)(i)(B).
0
20. Revising paragraph (e)(4)(ii)(A).
0
22. Revising paragraphs (e)(4)(ii)(B) introductory text, 
(e)(4)(ii)(B)(1) through (6), and (e)(4)(ii)(B)(8) through (10).
0
23. Removing paragraph (e)(4)(ii)(B)(11) and redesignating paragraph 
(e)(4)(ii)(B)(12) as paragraph (e)(4)(ii)(B)(11).
0
24. Revising paragraphs (e)(4)(ii)(C) and (D), (e)(4)(iii), and 
(e)(4)(iv)(A).
0
25. Redesignating paragraph (e)(4)(iv)(C) as (e)(4)(iv)(D) and revising 
it.
0
26. Adding reserved paragraph (e)(4)(iv)(C).
0
27. Adding reserved paragraph (e)(4)(iv)(E).
0
28. Revising paragraphs (e)(4)(v), (e)(4)(vi), (e)(4)(vii) introductory 
text, (e)(4)(vii)(A), (e)(4)(vii)(F), (e)(4)(vii)(H), (e)(4)(vii)(l), 
(e)(4)(viii) introductory text, (e)(4)(viii)(B) and (C), (e)(4)(ix), 
(e)(5)(ii) introductory text, and (e)(5)(ii)(A) through (D).
0
29. Revising paragraphs (e)(5)(iii) and (iv), (e)(5)(v)(A), 
(e)(5)(v)(B) introductory text, and (e)(5)(v)(B)(1) through (3).
0
30. Redesignating paragraph (e)(5)(v)(B)(4) as (e)(5)(v)(B)(5) and 
revising it.
0
31. Revising paragraphs (e)(5)(v)(C) and (D) and (f)(1)(4).
    The additions and revisions read as follows:


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

    (a) Purpose and scope. This section, Sec. Sec.  1.1441-2 through 
1.1441-9, and 1.1443-1 provide rules for withholding under sections 
1441, 1442, and 1443 when a payment is made to a foreign person. This 
section provides definitions of terms used in chapter 3 of the Internal 
Revenue Code (Code) and regulations thereunder. It prescribes 
procedures to determine whether an amount must be withheld under 
chapter 3 of the Code and documentation that a withholding agent may 
rely upon to determine the status of a payee or a beneficial owner as a 
U.S. person or as a foreign person and other relevant characteristics 
of the payee that may affect a withholding agent's obligation to 
withhold under chapter 3 of the Code and the regulations thereunder. 
Special procedures regarding payments to foreign persons that act as 
intermediaries are also provided. Section 1.1441-2 defines the income 
subject to withholding under sections 1441, 1442, and 1443 and the 
regulations under these sections. Section 1.1441-3 provides rules 
regarding the amount subject to withholding and rules for coordinating 
withholding under this section with withholding under section 1445 and 
under chapter 4 of the Code. Section 1.1441-4 provides exemptions from 
withholding for, among other things, certain income effectively 
connected with the conduct of a trade or business in the United States, 
including certain compensation for the personal services of an 
individual. Section 1.1441-5 provides rules for withholding on payments 
made to flow-through entities and other similar arrangements. Section 
1.1441-6 provides rules for claiming a reduced rate of withholding 
under an income tax treaty. Section 1.1441-7 defines the term 
withholding agent and provides due diligence rules governing a 
withholding agent's obligation to withhold. Section 1.1441-8 provides 
rules for relying on claims of exemption from withholding for payments 
to a foreign government, an international organization, a foreign 
central bank of issue, or the Bank for International Settlements. 
Sections 1.1441-9 and 1.1443-1 provide rules for relying on claims of 
exemption from withholding for payments to foreign tax exempt 
organizations and foreign private foundations.
    (b) General rules of withholding--(1) Requirement to withhold on 
payments to foreign persons. A withholding agent must withhold 30 
percent of any payment of an amount subject to

[[Page 2060]]

withholding made to a payee that is a foreign person unless it can 
reliably associate the payment with documentation upon which it can 
rely to treat the payment as made to a payee that is a U.S. person or 
as made to a beneficial owner that is a foreign person entitled to a 
reduced rate of withholding. However, a withholding agent making a 
payment to a foreign person need not withhold where the foreign person 
assumes responsibility for withholding on the payment under chapter 3 
of the Code and the regulations thereunder as a qualified intermediary 
(see paragraphs (e)(5) and (e)(6) of this section), as a U.S. branch of 
a foreign person (see paragraph (b)(2)(iv) of this section), as a 
withholding foreign partnership (see Sec.  1.1441-5(c)(2)(i)), or as a 
withholding foreign trust (see Sec.  1.1441-5(e)(5)(v)). When 
withholding under chapter 4 was applied to a payment, the withholding 
obligation under this section is satisfied. See Sec.  1.1441-3(a)(2). 
This section (dealing with general rules of withholding and claims of 
foreign or U.S. status by a payee or a beneficial owner) and Sec. Sec.  
1.1441-4, 1.1441-5, 1.1441-6, 1.1441-8, 1.1441-9, and 1.1443-1 provide 
rules for determining whether documentation is required as a condition 
for reducing the rate of withholding on a payment to a foreign 
beneficial owner or to a U.S. payee and if so, the nature of the 
documentation upon which a withholding agent may rely in order to 
reduce such rate. Paragraph (b)(2) of this section prescribes the rules 
for the determination of who the payee is, the extent to which a 
payment is treated as made to a foreign payee, and reliable association 
of a payment with documentation. Paragraph (b)(3) of this section 
describes the applicable presumptions for determining the payee's 
status as U.S. or foreign and the payee's other characteristics (e.g., 
as an owner or intermediary, as an individual, partnership, 
corporation, etc.). Paragraph (b)(4) of this section lists the types of 
payments for which the 30-percent withholding rate may be reduced. 
Because the treatment of a payee as a U.S. or a foreign person also has 
consequences for purposes of making an information return under the 
provisions of chapter 61 of the Code and for withholding under other 
provisions of the Code, such as sections 3402, 3405, or 3406, paragraph 
(b)(5) of this section lists applicable provisions outside chapter 3 of 
the Code that require certain payees to establish their foreign status 
(e.g., in order to be exempt from information reporting). Paragraph 
(b)(6) of this section describes the withholding obligations of a 
foreign person making a payment that it has received in its capacity as 
an intermediary. Paragraph (b)(7) of this section describes the 
liability of a withholding agent that fails to withhold at the required 
30-percent rate in the absence of documentation. Paragraph (b)(8) of 
this section deals with adjustments and refunds in the case of 
overwithholding. Paragraph (b)(9) of this section deals with 
determining the status of the payee when the payment is jointly owned. 
See paragraph (c)(6) of this section for a definition of beneficial 
owner. See Sec.  1.1441-7(a) for a definition of withholding agent. See 
Sec.  1.1441-2(a) for the determination of an amount subject to 
withholding. See Sec.  1.1441-2(e) for the definition of a payment and 
when it is considered made. Except as otherwise provided, the 
provisions of this section apply only for purposes of determining a 
withholding agent's obligation to withhold under chapter 3 of the Code 
and the regulations thereunder.
    (2) Determination of payee and payee's status--(i) In general. 
Except as otherwise provided in this paragraph (b)(2) and Sec.  1.1441-
5(c)(1) and (e)(3), a payee is the person to whom a payment is made, 
regardless of whether such person is the beneficial owner of the amount 
(as defined in paragraph (c)(6) of this section). A foreign payee is a 
payee who is a foreign person. A U.S. payee is a payee who is a U.S. 
person. Generally, the determination by a withholding agent of the U.S. 
or foreign status of a payee and of its other relevant characteristics 
(e.g., as a beneficial owner or intermediary, or as an individual, 
corporation, or flow-through entity) is made on the basis of a 
withholding certificate that is a Form W-8 or a Form 8233 (indicating 
foreign status of the payee or beneficial owner) or a Form W-9 
(indicating U.S. status of the payee). The provisions of this paragraph 
(b)(2), paragraph (b)(3) of this section, and Sec.  1.1441-5(c), (d), 
and (e) dealing with determinations of payee and applicable 
presumptions in the absence of documentation apply only to payments of 
amounts subject to withholding under chapter 3 of the Code (within the 
meaning of Sec.  1.1441-2(a)). However, for a payment that is both an 
amount subject to withholding under chapter 3 and a withholdable 
payment under chapter 4, first apply the rules of Sec.  1.1471-3 for 
determining the payee of a withholdable payment under chapter 4 and the 
applicable presumptions in the absence of documentation applicable to 
such payments. See also Sec.  1.6049-5(d) for payments of amounts that 
are not subject to withholding under chapter 3 of the Code (or the 
regulations thereunder) but that may be reportable under provisions of 
chapter 61 of the Code (and the regulations thereunder). See paragraph 
(d) of this section for documentation upon which the withholding agent 
may rely in order to treat the payee or beneficial owner as a U.S. 
person. See paragraph (e) of this section for documentation upon which 
the withholding agent may rely in order to treat the payee or 
beneficial owner as a foreign person. For applicable presumptions of 
status in the absence of documentation, see paragraph (b)(3) of this 
section and Sec.  1.1441-5(d). For definitions of a foreign person and 
U.S. person, see paragraph (c)(2) of this section.
* * * * *
    (iii) Payments to wholly-owned entities--(A) Foreign-owned domestic 
entity. A payment to a wholly-owned domestic entity that is disregarded 
for federal tax purposes under Sec.  301.7701-2(c)(2) of this chapter 
as an entity separate from its owner and whose single owner is a 
foreign person shall be treated as a payment to the owner of the 
entity, subject to the provisions of paragraph (b)(2)(iv) of this 
section. For purposes of this paragraph (b)(2)(iii)(A), a domestic 
entity means a person that would be treated as a U.S. person if it had 
an election in effect under Sec.  301.7701-3(c)(1)(i) of this chapter 
to be treated as a corporation. For example, a limited liability 
company, A, organized under the laws of the State of Delaware, opens an 
account at a U.S. bank. Upon opening of the account, the bank requests 
A to furnish a Form W-9 as required under section 6049(a) and the 
regulations under that section. A does not have an election in effect 
under Sec.  301.7701-3(c)(1)(i) of this chapter and, therefore, is not 
treated as an organization taxable as a corporation, including for 
purposes of the exempt recipient provisions in Sec.  1.6049-4(c)(1). If 
A has a single owner and the owner is a foreign person (as defined in 
paragraph (c)(2) of this section), then A may not furnish a Form W-9 
because it may not represent that it is a U.S. person for purposes of 
the provisions of chapters 3, 4, and 61 of the Code, and section 3406. 
Therefore, A must furnish a Form W-8 with the name, address, and 
taxpayer identifying number (TIN) (if required) of the foreign person 
who is the single owner in the same manner as if the account were 
opened directly by the foreign single owner. See Sec. Sec.  1.894-1(d) 
and 1.1441-6(b)(2) for

[[Page 2061]]

special rules where the entity's owner is claiming a reduced rate of 
withholding under an income tax treaty.
* * * * *
    (iv) Payments to a U.S. branch of certain foreign banks or foreign 
insurance companies--(A) U.S. branch treated as a U.S. person in 
certain cases. A payment to a U.S. branch of a foreign person is a 
payment to a foreign person. However, a U.S. branch of a foreign person 
that is described in this paragraph (b)(2)(iv)(A) may agree to be 
treated as a U.S. person for purposes of withholding on specified 
payments to the U.S. branch. If a U.S. branch agrees to be treated as a 
U.S. person with a withholding agent, it is required to act as a U.S. 
person with respect to all other withholding agents, including when 
acting as an intermediary with respect to withholdable payments for 
purposes of chapter 4. See Sec.  1.1471-3(a)(3)(vi). In such cases, the 
U.S. branch is treated as a payee that is a U.S. person. See paragraph 
(C) of this section for additional requirements for the U.S. branch 
when treated as a payor that is a U.S. person. Notwithstanding the 
preceding sentence, a withholding agent making a payment to a U.S. 
branch treated as a U.S. person under this paragraph (b)(2)(iv)(A) 
shall not treat the branch as a U.S. person for purposes of reporting 
the payment made to the branch. Therefore, a payment to such U.S. 
branch shall be reported on Form 1042-S under Sec.  1.1461-1(c) and 
Sec.  1.1474-1(d)(1)(i) for a payment of U.S. source FDAP income that 
is a chapter 4 reportable amount as defined in Sec.  1.1471-1(b)(18). 
Further, a U.S. branch that is treated as a U.S. person under this 
paragraph (b)(2)(iv)(A) shall not be treated as a U.S. person for 
purposes of the withholding certificate it provides to a withholding 
agent. Therefore, the U.S. branch must furnish a U.S. branch 
withholding certificate on a Form W-8IMY as provided in paragraph 
(e)(3)(v) of this section and not a Form W-9. An agreement to treat a 
U.S. branch as a U.S. person must be evidenced by a U.S. branch 
withholding certificate described in paragraph (e)(3)(v) of this 
section furnished by the U.S. branch to the withholding agent. A U.S. 
branch described in this paragraph (b)(2)(iv)(A) and eligible to be 
treated as a U.S. person is any U.S. branch of a foreign bank subject 
to regulatory supervision by the Federal Reserve Board or a U.S. branch 
of a foreign insurance company required to file an annual statement on 
a form approved by the National Association of Insurance Commissioners 
with the Insurance Department of a State, a Territory, or the District 
of Columbia. In addition, a territory financial institution (including 
a territory financial institution that is a flow-through entity) will 
be treated as a U.S. branch for purposes of this paragraph 
(b)(2)(iv)(A) and therefore is eligible to be treated as a U.S. person. 
The Internal Revenue Service (IRS) may approve a list of U.S. branches 
that may be eligible for treatment as U.S. persons under this paragraph 
(b)(2)(iv)(A) (see Sec.  601.601(d)(2) of this chapter). See Sec.  
1.6049-5(c)(5)(vi) for the treatment of U.S. branches as U.S. payors if 
they make a payment that is subject to reporting under chapter 61 of 
the Code. Also see Sec.  1.6049-5(d)(1)(ii) for the treatment of U.S. 
branches as foreign payees under chapter 61 of the Code.
    (B) * * *
    (2) As a payment directly to the persons whose names are on 
withholding certificates or other appropriate documentation forwarded 
by the U.S. branch to the withholding agent when no agreement is in 
effect to treat the U.S. branch as a U.S. person for such payment, to 
the extent the withholding agent can reliably associate the payment 
with such certificates or documentation;
    (3) As a payment to a foreign person of income that is effectively 
connected with the conduct of a trade or business in the United States 
if the withholding agent has obtained an EIN for the branch and cannot 
reliably associate the payment with a withholding certificate from a 
U.S. branch (or any other certificate or other appropriate 
documentation from another person). See Sec.  1.1441-4(a)(2)(ii); or
    (4) As a payment to a foreign person of income that is not 
effectively connected with the conduct of a trade or business in the 
United States if the withholding agent has not obtained an EIN for the 
branch and cannot reliably associate the payment with a withholding 
certificate from the U.S. branch.
    (C) Consequences to the U.S. branch. A U.S. branch that is treated 
as a U.S. person under paragraph (b)(2)(iv)(A) of this section shall be 
treated as a separate person for purposes of section 1441(a) and all 
other provisions of chapters 3 and 4 of the Code and the regulations 
thereunder (other than for purposes of reporting the payment to the 
U.S. branch under Sec.  1.1461-1(c) and Sec.  1.1474-1(d)(1)(i) for a 
chapter 4 reportable amount by a withholding agent) or for purposes of 
the documentation such a branch must furnish under paragraph (e)(3)(v) 
of this section) for any payment that it receives as such. Thus, the 
U.S. branch shall be responsible for withholding on a payment as a U.S. 
person in accordance with the provisions under chapters 3 and 4 of the 
Code and the regulations thereunder and other applicable withholding 
provisions of the Code. For this purpose, it shall obtain and retain 
documentation from payees or beneficial owners of the payments that it 
receives as an intermediary as a U.S. person in the same manner as if 
it were a separate entity. For example, if a U.S. branch receives a 
payment as an intermediary on behalf of customers of its home office 
and the home office is a qualified intermediary, the U.S. branch must 
obtain a qualified intermediary withholding certificate described in 
paragraph (e)(3)(ii) of this section from its home office. Similarly, 
if a U.S. branch of an FFI treated as a U.S. person receives a payment 
on behalf of another branch of the FFI that is treated as a 
nonparticipating FFI, the U.S. branch must withhold on the payment made 
to the other branch as if it were a separate person to the extent 
required under chapter 4. In addition, a U.S. branch that has not 
provided documentation to the withholding agent for a payment that is, 
in fact, not effectively connected income is a withholding agent with 
respect to that payment. See paragraph (b)(6) of this section and Sec.  
1.1441-4(a)(2)(ii).
* * * * *
    (E) Payments to other U.S. branches. Similar withholding procedures 
may apply to payments to U.S. branches that are not described in 
paragraph (b)(2)(iv)(A) of this section to the extent permitted by the 
IRS. Any such branch must establish that its situation is analogous to 
that of a U.S. branch described in paragraph (b)(2)(iv)(A) of this 
section. In the alternative, the branch must establish that the 
withholding and reporting requirements under chapter 3 of the Code and 
the regulations thereunder impose an undue administrative burden and 
that the collection of the tax imposed by section 871(a) or 881(a) on 
the foreign person (or its members in the case of a foreign 
partnership) will not be jeopardized by the exemption from withholding. 
Generally, an undue administrative burden will be found to exist in a 
case where the person entitled to the income, such as a foreign 
insurance company, receives from the withholding agent income on 
securities issued by a single corporation, some of which is, and some 
of which is not, effectively connected with conduct of a trade or 
business within the United States and the criteria for determining the 
effective connection are unduly difficult to apply because of the 
circumstances under which such

[[Page 2062]]

securities are held. No exemption from withholding shall be granted 
under this paragraph (b)(2)(iv)(E) unless the person entitled to the 
income complies with such other requirements as may be imposed by the 
IRS and unless the IRS is satisfied that the collection of the tax on 
the income involved will not be jeopardized by the exemption from 
withholding. The IRS may prescribe such procedures as are necessary to 
make these determinations (see Sec.  601.601(d)(2) of this chapter).
* * * * *
    (vi) Other payees. A payment to a person described in Sec.  1.6049-
4(c)(1)(ii) that the withholding agent would treat as a payment to a 
foreign person without obtaining documentation for purposes of 
information reporting under section 6049 (if the payment were interest) 
is treated as a payment to a foreign payee for purposes of chapter 3 of 
the Code and the regulations thereunder (or to a foreign beneficial 
owner to the extent provided in paragraph (e)(1)(ii)(A)(6) or (7) of 
this section). Further, a payment that the withholding agent can 
reliably associate with documentary evidence described in Sec.  1.6049-
5(c)(1) relating to the payee is treated as a payment to a foreign 
payee. See Sec.  1.1441-5(b)(1) and (c)(1) for payee determinations for 
payments to partnerships. See Sec.  1.1441-5(e) for payee 
determinations for payments to foreign trusts or foreign estates.
    (vii) * * *
    (B) Special rules applicable to a withholding certificate from a 
nonqualified intermediary or flow-through entity. (1) In the case of a 
payment made to a nonqualified intermediary, a flow-through entity (as 
defined in paragraph (c)(23) of this section), or a U.S. branch 
described in paragraph (b)(2)(iv) of this section (other than a U.S. 
branch that is treated as a U.S. person), a withholding agent can 
reliably associate the payment with valid documentation only to the 
extent that, prior to the payment, the withholding agent can allocate 
the payment to a valid nonqualified intermediary, flow-through entity, 
or U.S. branch withholding certificate (and a withholding certificate 
provided by a nonparticipating FFI with respect to a portion of a 
payment that is a withholdable payment allocated to an exempt 
beneficial owner as described in Sec.  1.1471-3(c)(3)(iii)(B)(4)); the 
withholding agent can reliably determine how much of the payment 
relates to valid documentation provided by a payee as determined under 
paragraph (c)(12) of this section (i.e., a person that is not itself an 
intermediary, flow-through entity, or U.S. branch); and the withholding 
agent has sufficient information to report the payment on Form 1042-S 
or Form 1099, if reporting is required. See, however, paragraph 
(e)(3)(iv) of this section for when a nonqualified intermediary may 
report payees to the withholding agent in a chapter 4 withholding rate 
pool, in which case a withholding agent need not associate the portion 
of the payment attributable to such payees with documentation from each 
such payee. See also paragraph (e)(3)(iii) of this section for the 
requirements of a nonqualified intermediary withholding certificate, 
paragraph (e)(3)(v) of this section for the requirements of a U.S. 
branch withholding certificate, and Sec. Sec.  1.1441-5(c)(3)(iii) and 
(e)(5)(iii) for the requirements of a flow-through withholding 
certificate (including the requirements for a withholding certificate 
associated with a withholdable payment). Thus, a payment cannot be 
reliably associated with valid documentation provided by a payee to the 
extent such documentation is lacking or unreliable, or to the extent 
that information required to allocate and report all or a portion of 
the payment to each payee is lacking or unreliable. If a withholding 
certificate attached to an intermediary, U.S. branch, or flow-through 
withholding certificate is another intermediary, U.S. branch, or flow-
through withholding certificate, the rules of this paragraph 
(b)(2)(vii)(B) apply by treating the share of the payment allocable to 
the other intermediary, U.S. branch, or flow-through entity as if the 
payment were made directly to such other entity. See paragraph 
(e)(3)(iv)(D) of this section for rules permitting information 
allocating a payment to documentation to be received after the payment 
is made.
    (2) The rules of paragraph (b)(2)(vii)(B)(1) of this section are 
illustrated by the following examples. Each example illustrates a 
payment that is not a withholdable payment and, as a result of which, 
neither the chapter 4 status of the NQI nor payee specific 
documentation with respect to the chapter 4 status is required to be 
provided to the withholding agent (and no withholding applies under 
chapter 4 on each payment). See paragraph (e)(3)(iv)(C) of this section 
for the requirements of a withholding statement provided by a 
nonqualified intermediary that receives a withholdable payment and for 
an example illustrating the requirements of an NQI providing a 
withholding statement to a withholding agent for a withholdable 
payment.

    Example 1.  WA, a withholding agent, makes a payment of U.S. 
source interest with respect to a grandfathered obligation as 
described in Sec.  1.1471-2(b) (and thus the payment is not a 
withholdable payment) to NQI, an intermediary that is a nonqualified 
intermediary. NQI provides a valid intermediary withholding 
certificate under paragraph (e)(3)(iii) of this section. NQI does 
not, however, provide valid documentation from the persons on whose 
behalf it receives the interest payment, and, therefore, the 
interest payment cannot be reliably associated with valid 
documentation provided by a payee. WA must apply the presumption 
rules of paragraph (b)(3)(v) of this section to the payment.
    Example 2.  The facts are the same as in Example 1, except that 
NQI does attach valid beneficial owner withholding certificates (as 
defined in paragraph (e)(2)(i) of this section) from A, B, C, and D 
establishing their statuses as foreign persons. NQI does not, 
however, provide WA with any information allocating the payment 
among A, B, C, and D and, therefore, WA cannot determine the portion 
of the payment that relates to each beneficial owner withholding 
certificate. The interest payment cannot be reliably associated with 
valid documentation from a payee, and WA must apply the presumption 
rules of paragraph (b)(3)(v) of this section to the payment. See, 
however, paragraph (e)(3)(iv)(D) of this section providing for 
alternative procedures that allow a nonqualified intermediary to 
provide allocation information after a payment is made.
    Example 3.  The facts are the same as in Example 2, except that 
NQI provides allocation information associated with its intermediary 
withholding certificate indicating that 25% of the interest payment 
is allocable to A and 25% to B. NQI does not provide any allocation 
information regarding the remaining 50% of the payment. WA may treat 
25% of the payment as made to A and 25% as made to B. The remaining 
50% of the payment cannot be reliably associated with valid 
documentation from a payee, however, since NQI did not provide 
information allocating the payment. Thus, the remaining 50% of the 
payment is subject to the presumption rules of paragraph (b)(3)(v) 
of this section.
    Example 4.  WA makes a payment of U.S. source interest to NQI1, 
an intermediary that is not a qualified intermediary. NQI1 provides 
WA with a valid nonqualified intermediary withholding certificate as 
well valid beneficial owner withholding certificates from A and B 
and a valid nonqualified intermediary withholding certificate from 
NQI2. NQI2 has provided valid beneficial owner documentation from C 
sufficient to establish C's status as a foreign person. Based on 
information provided by NQI1, WA can allocate 20% of the interest 
payment to A, and 20% to B. Based on information that NQI2 provided 
NQI1 and that NQI1 provides to WA, WA can allocate 60% of the 
payment to NQI2, but can only allocate one half of that payment 
(30%) to C. Therefore, WA cannot reliably associate the remainder of 
the payment made to NQI2 (30% of the total payment) with valid

[[Page 2063]]

documentation and must apply the presumption rules of paragraph 
(b)(3)(v) of this section to that portion of the payment.

    (C) Special rules applicable to a withholding certificate provided 
by a qualified intermediary that does not assume primary withholding 
responsibility--(1) If a payment is made to a qualified intermediary 
that does not assume primary withholding responsibility under chapters 
3 and 4 of the Code or primary Form 1099 reporting and backup 
withholding responsibility under chapter 61 and section 3406 of the 
Code for the payment, a withholding agent can reliably associate the 
payment with valid documentation only to the extent that, prior to the 
payment, the withholding agent has received a valid qualified 
intermediary withholding certificate described in paragraph (e)(3)(ii) 
of this section and the withholding agent can reliably determine the 
portion of the payment that relates to a chapter 3 withholding rate 
pool, as defined in paragraph (c)(44) of this section; a chapter 4 
withholding rate pool (including for a withholdable payment as 
described in paragraph (e)(5)(v)(C)(2) of this section), as defined in 
paragraph (c)(48) of this section; or a pool attributable to U.S. 
exempt recipients. In the case of a withholding rate pool attributable 
to a U.S. non-exempt recipient, a payment cannot be reliably associated 
with valid documentation unless, prior to the payment, the qualified 
intermediary has provided the U.S. person's Form W-9 (or, in the 
absence of the form, the name, address, and TIN, if available, of the 
U.S. person) and sufficient information for the withholding agent to 
report the payment on Form 1099. See, however, paragraph 
(e)(5)(v)(C)(3) of this section for alternative procedures for 
allocating payments among U.S. non-exempt recipients and paragraphs 
(e)(5)(v)(C)(1) and (2) of this section for when a chapter 4 
withholding rate pool of U.S. payees may be provided by a qualified 
intermediary instead of documentation with respect to each U.S. non-
exempt recipient.
    (2) The rules of this paragraph (b)(2)(vii)(C) are illustrated by 
the following examples:

    Example 1.  WA, a withholding agent, makes a payment of U.S. 
source dividends that is a withholdable payment to QI. QI provides 
WA with a valid qualified intermediary withholding certificate on 
which it indicates that it does not assume primary withholding 
responsibility under chapters 3 and 4 or primary Form 1099 reporting 
and backup withholding responsibility under chapter 61 and section 
3406. QI does not provide any information allocating the dividend to 
withholding rate pools. WA cannot reliably associate the payment 
with valid payee documentation and therefore must apply the 
presumption rules applicable to a withholdable payment under Sec.  
1.1471-3(f)(5) to determine the status of the payee for purposes of 
chapter 4. See Example 2 for an application of the presumption rules 
under Sec.  1.1471-3(f).
    Example 2.  WA makes a payment of U.S. source dividends that is 
a withholdable payment to QI, which is an NFFE. QI has 5 customers: 
A, B, C, D, and E, all of whom are individuals except for C. QI has 
obtained valid documentation from A and B establishing their 
entitlement to a 15% rate of tax on U.S. source dividends under an 
income tax treaty. C is a U.S. person that is an exempt recipient as 
defined in paragraph (c)(20) of this section. D and E are U.S. non-
exempt recipients who have provided Forms W-9 to QI. A, B, C, D, and 
E are each entitled to 20% of the dividend payment. QI provides WA 
with a valid qualified intermediary withholding certificate as 
described in paragraph (e)(3)(ii) of this section with which it 
associates the Forms W-9 from D and E. QI associates the following 
allocation information with its qualified intermediary withholding 
certificate: 40% of the payment is allocable to the 15% chapter 3 
withholding rate pool, and 20% is allocable to each of D and E. QI 
does not provide any allocation information regarding the remaining 
20% of the payment. WA cannot reliably associate 20% of the payment 
with valid documentation and, therefore, must apply the presumption 
rules applicable to a withholdable payment. Because QI is receiving 
a withholdable payment as an intermediary, under paragraph 
(b)(3)(iii) of this section WA must apply the presumption rule of 
Sec.  1.1471-3(f)(5) to treat the portion of the payment that cannot 
reliably be associated with valid documentation as made to a 
nonparticipating FFI account holder of QI. As a result, WA is 
required to withhold at a 30% rate of tax under chapter 4. See Sec.  
1.1441-3(a)(2) permitting WA to credit the amount withheld under 
chapter 4 against the liability for tax due on the payment under 
section 1441 or 1442. The 40% of the payment allocable to the 15% 
withholding rate pool and the portion of the payments allocable to D 
and E are payments that can be reliably associated with 
documentation.

    (D) Special rules applicable to a withholding certificate provided 
by a qualified intermediary that assumes primary withholding 
responsibility under chapter 3 and chapter 4 of the Internal Revenue 
Code. (1) In the case of a payment made to a qualified intermediary 
that assumes primary withholding responsibility under chapters 3 and 4 
of the Code with respect to that payment (but does not assume primary 
Form 1099 reporting and backup withholding responsibility under chapter 
61 of the Code and section 3406), a withholding agent can reliably 
associate the payment with valid documentation only to the extent that, 
prior to the payment, the withholding agent has received a valid 
qualified intermediary withholding certificate and the withholding 
agent can reliably determine the portion of the payment that relates to 
the withholding rate pool for which the qualified intermediary assumes 
primary withholding responsibility and the portion of the payment 
attributable to withholding rate pools for each U.S. non-exempt 
recipient for whom the qualified intermediary has provided a Form W-9 
(or, in absence of the form, the name, address, and TIN, if available, 
of the U.S. non-exempt recipient). See paragraph (e)(5)(iv) of this 
section (requiring a qualified intermediary assuming primary 
withholding responsibility under chapter 3 to assume primary 
withholding responsibility under chapter 4). See also paragraph 
(e)(5)(v)(C)(3) of this section for alternative allocation procedures 
for payments made to U.S. persons that are not exempt recipients and 
paragraphs (e)(5)(v)(C)(1) and (2) of this section for when a qualified 
intermediary may provide a chapter 4 withholding rate pool of U.S. 
payees to a withholding agent instead of documentation with respect to 
each U.S. non-exempt recipient.
    (2) Examples. The following examples illustrate the rules of 
paragraph (b)(2)(vii)(D)(1) of this section. See also the example in 
paragraph (e)(5)(v)(D) for rules for reporting of U.S. non-exempt 
recipients when a qualified intermediary that is an FFI reports a U.S. 
account under chapter 4.
    Example 1. WA makes a payment of U.S. source interest that is a 
withholdable payment to QI, a qualified intermediary that is an 
NFFE. QI provides WA with a withholding certificate that indicates 
that QI will assume primary withholding responsibility under 
chapters 3 and 4 of the Code with respect to the payment. In 
addition, QI attaches a Form W-9 from A, a U.S. non-exempt 
recipient, as defined in paragraph (c)(21) of this section, and 
provides the name, address, and TIN of B, a U.S. person that is also 
a non-exempt recipient but who has not provided a Form W-9. QI 
associates a withholding statement with its qualified intermediary 
withholding certificate indicating that 10% of the payment is 
attributable to A and 10% to B, and that QI will assume primary 
withholding responsibility under chapters 3 and 4 with respect to 
the remaining 80% of the payment. WA can reliably associate the 
entire payment with valid documentation. Although under the 
presumption rule of paragraph (b)(3)(v) of this section, an 
undocumented person receiving U.S. source interest is generally 
presumed to be a foreign person, WA has actual knowledge that B is a 
U.S. non-exempt recipient and therefore must report the payment on 
Form 1099 and backup withhold on the interest payment under section 
3406.

[[Page 2064]]

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

    (E) Special rules applicable to a withholding certificate provided 
by a qualified intermediary that assumes primary Form 1099 reporting 
and backup withholding responsibility but not primary withholding under 
chapter 3 and chapter 4. (1) If a payment is made to a qualified 
intermediary that assumes primary Form 1099 reporting and backup 
withholding responsibility for the payment (but does not assume primary 
withholding responsibility under chapters 3 and 4 of the Code), a 
withholding agent can reliably associate the payment with valid 
documentation only to the extent that, prior to the payment, the 
withholding agent has received a valid qualified intermediary 
withholding certificate and the withholding agent can reliably 
determine the portion of the payment that relates to a withholding rate 
pool or pools provided as part of the qualified intermediary's 
withholding statement and the portion of the payment for which the 
qualified intermediary assumes primary Form 1099 reporting and backup 
withholding responsibility. See paragraph (e)(5)(v)(C)(2) of this 
section for when a qualified intermediary may include a chapter 4 
withholding rate pool on a withholding statement provided to a 
withholding agent with respect to a withholdable payment.
    (2) The following example illustrates the rules of paragraph 
(b)(2)(vii)(D)(1) of this section:

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

    (F) Special rules applicable to a withholding certificate provided 
by a qualified intermediary that assumes primary withholding 
responsibility under chapter 3 and chapter 4 and primary Form 1099 
reporting and backup withholding responsibility and a withholding 
certificate provided by a withholding foreign partnership or a 
withholding foreign trust. If a payment is made to a qualified 
intermediary that assumes both primary withholding responsibility under 
chapters 3 and 4 of the Code and primary Form 1099 reporting and backup 
withholding responsibility under chapter 61 and section 3406 of the 
Code for the payment, a withholding agent can reliably associate a 
payment with valid documentation provided that it receives a valid 
qualified intermediary withholding certificate as described in 
paragraph (e)(3)(ii) of this section. In the case of a payment made to 
a withholding foreign partnership or a withholding foreign trust, the 
withholding agent can reliably associate the payment with valid 
documentation to the extent it can associate the payment with a valid 
withholding certificate described in Sec.  1.1441-5(c)(2)(iv) or in 
Sec.  1.1441-5(e)(5)(v) (respectively). See paragraph (e)(5)(iv) of 
this section, providing that a qualified intermediary assuming primary 
withholding responsibility under chapter 3 must also assume primary 
withholding responsibility under chapter 4 with respect to a 
withholdable payment.
    (3) Presumptions regarding payee's status in the absence of 
documentation--(i) General rules. A withholding agent that cannot, 
prior to the payment, reliably associate (within the meaning of 
paragraph (b)(2)(vii) of this section) a payment of an amount subject 
to withholding (as described in Sec.  1.1441-2(a)) with valid 
documentation may rely on the presumptions of this paragraph (b)(3) to 
determine the status of the person receiving the payment as a U.S. or a 
foreign person and the person's other relevant characteristics (e.g., 
as an owner or intermediary, as an individual, trust, partnership, or 
corporation). The determination of withholding and reporting 
requirements applicable to payments to a person presumed to be a 
foreign person is governed only by the provisions of chapters 3 and 4 
of the Code and the regulations thereunder. For the determination of 
withholding and reporting requirements applicable to payments to a 
person presumed to be a U.S. person, see chapter 61 of the Code, 
section 3402, 3405, or 3406, and, with respect to the reporting 
requirements of a participating FFI or registered deemed-compliant FFI, 
see chapter 4 of the Code and the related regulations. A presumption 
that a payee is a foreign payee is not a presumption that the payee is 
a foreign beneficial owner. Therefore, the provisions of this paragraph 
(b)(3) have no effect for purposes of reducing the withholding rate if 
associating the payment with documentation of foreign beneficial 
ownership is required as a condition for such rate reduction. See 
paragraph (b)(3)(ix) of this section for consequences to a withholding 
agent that fails to withhold in accordance with the presumptions set 
forth in this paragraph (b)(3) or if the withholding agent has actual 
knowledge or reason to know of facts that are contrary to the 
presumptions set forth in this paragraph (b)(3). See paragraph 
(b)(2)(vii) of this section for rules regarding the extent to which a 
withholding agent can reliably associate a payment with documentation.
    (ii) Presumptions of classification as individual, corporation, 
partnership, etc.--(A) In general. A withholding agent that cannot 
reliably associate a payment with a valid withholding certificate or 
that has received valid documentary evidence under Sec. Sec.  1.1441-
1(e)(1)(ii)(A)(2) and 1.6049-5(c)(1) or (4) but cannot determine a 
payee's classification from the documentary evidence must apply the 
rules of this paragraph (b)(3)(ii) to determine the payee's 
classification as an individual, trust, estate, corporation, or 
partnership. The fact that a payee is presumed to have a certain status 
under the provisions of this paragraph (b)(3)(ii) does not mean that it 
is excused from furnishing documentation if documentation is otherwise 
required to obtain a reduced rate of withholding under this section. 
For example, if, for purposes of this paragraph (b)(3)(ii), a payee is 
presumed to be a tax-exempt organization based on Sec.  1.6049-
4(c)(1)(ii)(B), the withholding agent cannot rely on this presumption 
to reduce the rate of withholding on payments to such person (if such 
person is also presumed to be a foreign person under paragraph 
(b)(3)(iii)(A) of this

[[Page 2065]]

section) because a reduction in the rate of withholding for payments to 
a foreign tax-exempt organization generally requires that a valid Form 
W-8 described in Sec.  1.1441-9(b)(2) be furnished to the withholding 
agent.
    (B) No documentation provided. If the withholding agent cannot 
reliably associate a payment with a valid withholding certificate or 
valid documentary evidence, it must presume that the payee is an 
individual, a trust, or an estate, if the payee appears to be such 
person (e.g., based on the payee's name or information in the customer 
file). In the absence of reliable indications that the payee is an 
individual, a trust, or an estate, the withholding agent must presume 
that the payee is a corporation or one of the persons enumerated under 
Sec.  1.6049-4(c)(1)(ii)(B) through (Q) if it can be so treated under 
Sec.  1.6049-4(c)(1)(ii)(A)(1) or any one of the paragraphs under Sec.  
1.6049-4(c)(1)(ii)(B) through (Q) without the need to furnish 
documentation. If the withholding agent cannot treat a payee as a 
person described in Sec.  1.6049-4(c)(1)(ii)(A)(1) through (Q), then 
the payee shall be presumed to be a partnership. If such a partnership 
is presumed to be foreign, it is not the beneficial owner of the income 
paid to it. See paragraph (c)(6) of this section. If such a partnership 
is presumed to be domestic, it is a U.S. non-exempt recipient for 
purposes of chapter 61 of the Code.
    (C) Documentary evidence furnished for offshore obligation. If the 
withholding agent receives valid documentary evidence, as described in 
Sec.  1.6049-5(c)(1) or (c)(4), with respect to an offshore obligation 
from an entity but the documentary evidence does not establish the 
entity's classification as a corporation, trust, estate, or 
partnership, the withholding agent may presume (in the absence of 
actual knowledge otherwise) that the entity is the type of person 
enumerated under Sec.  1.6049-4 (c)(1)(ii)(B) through (Q) if it can be 
so treated under any one of those paragraphs without the need to 
furnish documentation. If the withholding agent cannot treat a payee as 
a person described in Sec.  1.6049-4(c)(1)(ii)(B) through (Q), then the 
payee shall be presumed to be a corporation unless the withholding 
agent knows, or has reason to know, that the entity is not classified 
as a corporation for U.S. tax purposes. If a payee is, or is presumed 
to be, a corporation under this paragraph (b)(3)(ii)(C) and a foreign 
person under paragraph (b)(3)(iii) of this section, a withholding agent 
shall not treat the payee as the beneficial owner of income if the 
withholding agent knows, or has reason to know, that the payee is not 
the beneficial owner of the income. For this purpose, a withholding 
agent will have reason to know that the payee is not a beneficial owner 
if the documentary evidence indicates that the payee is a bank, broker, 
intermediary, custodian, or other agent, or is treated under Sec.  
1.6049-4(c)(1)(ii)(B) through (Q) as such a person. A withholding agent 
may, however, treat such a person as a beneficial owner if the foreign 
person provides a statement, in writing and signed by a person with 
authority to sign the statement, that is attached to the documentary 
evidence and that states that the foreign person is the beneficial 
owner of the income.
    (iii) Presumption of U.S. or foreign status. A payment that the 
withholding agent cannot reliably associate with documentation is 
presumed to be made to a U.S. person, except as otherwise provided in 
this paragraph (b)(3)(iii), in paragraphs (b)(3)(iv) and (v) of this 
section, or in Sec.  1.1441-5(d) or (e). A withholding agent must treat 
a payee that is presumed or known to be a trust but for which the 
withholding agent cannot determine the type of trust in accordance with 
the presumptions specified in Sec.  1.1441-5(e)(6)(ii). In the case of 
a payment that is a withholdable payment, a withholding agent must 
apply the presumption rule under Sec.  1.1471-3(f) for purposes of 
chapter 4.
    (A) Payments to exempt recipients--(1) In general. If a withholding 
agent cannot reliably associate a payment with documentation from the 
payee and the payee is an exempt recipient (as determined under the 
provisions of Sec.  1.6049-4(c)(1)(ii) in the case of interest, or 
under similar provisions under chapter 61 of the Code applicable to the 
type of payment involved, but not including a payee that the 
withholding agent may treat as a foreign intermediary in accordance 
with paragraph (b)(3)(v) of this section), the payee is presumed to be 
a foreign person and not a U.S. person--
    (i) If the withholding agent has actual knowledge of the payee's 
employer identification number and that number begins with the two 
digits ``98'';
    (ii) If the withholding agent's communications with the payee are 
mailed to an address in a foreign country;
    (iii) If the name of the payee indicates that the entity is the 
type of entity that is on the per se list of foreign corporations 
contained in Sec.  301.7701-2(b)(8)(i) of this chapter (and, in the 
case of a name which contains the designation ``corporation'' or 
``company,'' the withholding agent has a document that reasonably 
demonstrates the payee was incorporated in the relevant jurisdiction);
    (iv) If the payment is made with respect to an offshore obligation 
(as defined in paragraph (c)(37) of this section); or
    (v) With respect to an account opened after July 1, 2014, if the 
withholding agent has a telephone number for the person outside of the 
United States.
    (2) Special rule for withholdable payments made to exempt 
recipients. Notwithstanding the provisions of paragraph 
(b)(3)(iii)(A)(1) of this section, a payment that is also a 
withholdable payment made to an entity determined to be an exempt 
recipient under Sec.  1.6049-4(c)(1)(ii)(A)(1), (F), (G), (H), (M), 
(O), (P), or (Q) in the case of interest (or under similar provisions 
in chapter 61 applicable to the type of income) shall be presumed made 
to a foreign payee in the absence of documentation (including 
documentary evidence) establishing the entity as a U.S. person. 
Additionally, a withholding agent may apply the rule provided in this 
paragraph (b)(3)(iii)(A)(2) instead of the rule in provided in 
paragraph (b)(3)(iii)(A)(1) of this section for all payments with 
respect to an obligation. The provisions of this paragraph 
(b)(3)(iii)(A)(2) will not apply, however, to a withholdable payment 
made with respect to a preexisting obligation to a payee that the 
withholding agent determined prior to July 1, 2014, to be a U.S. exempt 
recipient.
* * * * *
    (D) Payments with respect to offshore obligations. A payment is 
presumed made to a foreign payee if the payment is made outside the 
United States (as defined in Sec.  1.6049-5(e)) with respect to an 
offshore obligation (as defined in paragraph (c)(37) of this section) 
and the withholding agent does not have actual knowledge that the payee 
is a U.S. person. See Sec.  1.6049-5(d)(2) and (3) for exceptions to 
this rule.
* * * * *
    (iv) Grace period. A withholding agent may choose to apply the 
provisions of Sec.  1.6049-5(d)(2)(ii) regarding a 90-day grace period 
for purposes of this paragraph (b)(3) (by applying the term withholding 
agent instead of the term payor) to amounts described in Sec.  1.1441-
6(c)(2) and to amounts covered by a Form 8233 described in Sec.  
1.1441-4(b)(2)(ii). Thus, for these amounts, a withholding agent may 
choose to treat the payee as a foreign person and withhold under 
chapter 3 of the Code (and the regulations thereunder) while awaiting 
documentation. For purposes of

[[Page 2066]]

determining the rate of withholding under this section, the withholding 
agent must withhold at the unreduced 30-percent rate at the time that 
the amounts are credited to an account. For reporting of amounts 
credited both before and after the grace period, see Sec.  1.1461-
1(c)(4)(i)(A). The following adjustments shall be made at the 
expiration of the grace period:
    (A) If, at the end of the grace period, the documentation is not 
furnished in the manner required under this section and the account 
holder is presumed to be a U.S. non-exempt recipient, then backup 
withholding only applies to amounts credited to the account after the 
expiration of the grace period. Amounts credited to the account during 
the grace period shall be treated as owned by a foreign payee and 
adjustments must be made to correct any underwithholding on such 
amounts in the manner described in Sec.  1.1461-2.
* * * * *
    (v) * * *
    (B) Beneficial owner documentation or allocation information is 
lacking or unreliable. Except as otherwise provided in this paragraph 
(b)(3)(v)(B), any portion of a payment that the withholding agent may 
treat as made to a foreign intermediary (whether a nonqualified or a 
qualified intermediary) but that the withholding agent cannot treat as 
reliably associated with valid documentation under the rules of 
paragraph (b)(2)(vii) of this section is presumed made to an unknown, 
undocumented foreign payee. As a result, a withholding agent must 
deduct and withhold 30 percent from any payment of an amount subject to 
withholding. If a withholding certificate attached to an intermediary 
certificate is another intermediary withholding certificate or a flow-
through withholding certificate, the rules of this paragraph 
(b)(3)(v)(B) (or Sec.  1.1441-5(d)(3) or (e)(6)(iii)) apply by treating 
the portion of the payment allocable to the other intermediary or flow-
through entity as if it were made directly to the other intermediary or 
flow-through entity. Any payment of an amount subject to withholding 
that is presumed made to an undocumented foreign person must be 
reported on Form 1042-S. See Sec.  1.1461-1(c). See Sec.  1.6049-5(d) 
for payments that are not subject to withholding under chapter 3. 
However, in the case of a payment that is a withholdable payment made 
to a foreign intermediary, the presumption rules under Sec.  1.1471-
3(f)(5) shall apply.
    (vi) U.S. branches and territory financial institutions not treated 
as U.S. persons. The rules of paragraph (b)(3)(v)(B) of this section 
shall apply to payments to a U.S. branch or a territory financial 
institution described in paragraph (b)(2)(iv)(A) of this section that 
has provided a withholding certificate as described in paragraph 
(e)(3)(v) of this section on which it has not agreed to be treated as a 
U.S. person.
    (vii) Joint payees--(A) In general. Except as provided in paragraph 
(b)(3)(vii)(B) of this section and this paragraph (b)(3)(vii)(A), if a 
withholding agent makes a payment to joint payees and cannot reliably 
associate the payment with valid documentation from all payees, the 
payment is presumed made to an unidentified U.S. person. If, however, a 
withholding agent makes a payment that is a withholdable payment and 
any joint payee does not appear, by its name and other information 
contained in the account file, to be an individual, then the entire 
amount of the payment will be treated as made to an undocumented 
foreign person. See paragraph (b)(3)(iii) of this section for 
presumption rules that apply in the case of a payment that is a 
withholdable payment. However, if one of the joint payees provides a 
Form W-9 furnished in accordance with the procedures described in 
Sec. Sec.  31.3406(d)-1 through 31.3406(d)-5 of this chapter, the 
payment shall be treated as made to that payee. See Sec.  31.3406(h)-2 
of this chapter for rules to determine the relevant payee if more than 
one Form W-9 is provided. For purposes of applying this paragraph 
(b)(3), the grace period rules in paragraph (b)(3)(iv) of this section 
shall apply only if each payee meets the conditions described in 
paragraph (b)(3)(iv) of this section.
    (B) Special rule for offshore obligations. If a withholding agent 
makes a payment to joint payees and cannot reliably associate a payment 
with valid documentation from all payees, the payment is presumed made 
to an unknown foreign payee if the payment is made outside the United 
States (as defined in Sec.  1.6049-5(e)) with respect to an offshore 
obligation (as defined in Sec.  1.6049-5(c)(1)).
* * * * *
    (ix) Effect of reliance on presumptions and of actual knowledge or 
reason to know otherwise--(A) General rule. Except as otherwise 
provided in paragraph (b)(3)(ix)(B) of this section, a withholding 
agent that withholds on a payment under section 3402, 3405, or 3406 in 
accordance with the presumptions set forth in this paragraph (b)(3) 
shall not be liable for withholding under this section even if it is 
later established that the beneficial owner of the payment is, in fact, 
a foreign person. Similarly, a withholding agent that withholds on a 
payment under this section in accordance with the presumptions set 
forth in this paragraph (b)(3) shall not be liable for withholding 
under section 3402 or 3405 or for backup withholding under section 3406 
even if it is later established that the payee or beneficial owner is, 
in fact, a U.S. person. A withholding agent that, instead of relying on 
the presumptions described in this paragraph (b)(3), relies on its own 
actual knowledge to withhold a lesser amount, not withhold, or not 
report a payment, even though reporting of the payment or withholding a 
greater amount would be required if the withholding agent relied on the 
presumptions described in this paragraph (b)(3), shall be liable for 
tax, interest, and penalties to the extent provided under section 1461 
and the regulations under that section. See paragraph (b)(7) of this 
section for provisions regarding such liability if the withholding 
agent fails to withhold in accordance with the presumptions described 
in this paragraph (b)(3).
* * * * *
    (x) Examples. The provisions of this paragraph (b)(3) are 
illustrated by the following examples:

    Example 1.  A withholding agent, W, makes a payment of U.S. 
source interest with respect to a grandfathered obligation as 
described in Sec.  1.1471-2(b) (and thus the payment is not a 
withholdable payment) to X, Inc. with respect to an account W 
maintains for X, Inc. outside the United States. W cannot reliably 
associate the payment to X, Inc. with documentation. Under Sec.  
1.6049-4(c)(1)(ii)(A)(1), W may treat X, Inc. as a corporation that 
is an exempt recipient under chapter 61. Thus, under the 
presumptions described in paragraph (b)(3)(iii) of this section as 
applicable to a payment to an exempt recipient that is not a 
withholdable payment, W must presume that X, Inc. is a foreign 
person (because the payment is made with respect to an offshore 
obligation). However, W knows that X, Inc. is a U.S. person who is 
an exempt recipient. W may not rely on its actual knowledge to not 
withhold under this section. If W's knowledge is, in fact, 
incorrect, W would be liable for tax, interest, and, if applicable, 
penalties, under section 1461. W would be permitted to reduce or 
eliminate its liability for the tax by establishing, in accordance 
with paragraph (b)(7) of this section, that the tax is not due or 
has been satisfied. If W's actual knowledge is, in fact, correct, W 
may nevertheless be liable for tax, interest, or penalties under 
section 1461 for the amount that W should have withheld based upon 
the presumptions. W would be permitted to reduce or eliminate its 
liability for the tax by establishing, in accordance with paragraph 
(b)(7) of this section, that its actual knowledge was, in fact, 
correct and that no tax or a lesser amount of tax was due.

[[Page 2067]]

    Example 2.  A withholding agent, W, makes a payment of U.S. 
source interest with respect to a grandfathered obligation as 
described in Sec.  1.1471-2(b) (and thus the payment is not a 
withholdable payment) to Y who does not qualify as an exempt 
recipient under Sec.  1.6049-4(c)(1)(ii). W cannot reliably 
associate the payment to Y with documentation. Under the 
presumptions described in paragraph (b)(3)(iii) of this section, W 
must presume that Y is a U.S. person who is not an exempt recipient 
for purposes of section 6049. However, W knows that Y is a foreign 
person. W may not rely on its actual knowledge to withhold under 
this section rather than backup withhold under section 3406. If W's 
knowledge is, in fact, incorrect, W would be liable for tax, 
interest, and, if applicable, penalties, under section 3403. If W's 
actual knowledge is, in fact, correct, W may nevertheless be liable 
for tax, interest, or penalties under section 3403 for the amount 
that W should have withheld based upon the presumptions. Paragraph 
(b)(7) of this section does not apply to provide relief from 
liability under section 3403.
    Example 3.  A withholding agent, W, makes a payment of U.S. 
source dividends to X, Inc. with respect to an account that X, Inc. 
opened with W after June 30, 2014. W cannot reliably associate the 
payment to X, Inc. with documentation but may treat X, Inc. as an 
exempt recipient for purposes of this section applying the rules of 
Sec.  1.6042-3(b)(1)(vii). However, because the dividend payment is 
a withholdable payment and W did not determine the chapter 3 status 
of X, Inc. before July 1, 2014, W may treat X, Inc. as a U.S. person 
that is an exempt recipient only if W obtains documentary evidence 
supporting X, Inc.'s status as a U.S. person. See paragraph 
(b)(3)(iii)(A)(2) of this section.
    Example 4. A withholding agent, W, is a plan administrator who 
makes pension payments to person X with a mailing address in a foreign 
country with which the United States has an income tax treaty in 
effect. Under that treaty, the type of pension income paid to X is 
taxable solely in the country of residence. The plan administrator has 
a record of X's U.S. social security number. W has no actual knowledge 
or reason to know that X is a foreign person. W may rely on the 
presumption of paragraph (b)(3)(iii)(C) of this section in order to 
treat X as a U.S. person. Therefore, any withholding and reporting 
requirements for the payment are governed by the provisions of section 
3405 and the regulations under that section.

    (4) List of exemptions from, or reduced rates of, withholding under 
chapter 3 of the Code. A withholding agent that has determined that the 
payee is a foreign person for purposes of paragraph (b)(1) of this 
section must determine whether the payee is entitled to a reduced rate 
of withholding under section 1441, 1442, or 1443. This paragraph (b)(4) 
identifies items for which a reduction in the rate of withholding may 
apply and whether the rate reduction is conditioned upon documentation 
being furnished to the withholding agent. Documentation required under 
this paragraph (b)(4) is documentation that a withholding agent must be 
able to associate with a payment upon which it can rely to treat the 
payment as made to a foreign person that is the beneficial owner of the 
payment in accordance with paragraph (e)(1)(ii) of this section. This 
paragraph (b)(4) also cross-references other sections of the Code and 
applicable regulations in which some of these exceptions, exemptions, 
or reductions are further explained. See, for example, paragraph 
(b)(4)(viii) of this section, dealing with effectively connected 
income, that cross-references Sec.  1.1441-4(a); see paragraph 
(b)(4)(xv) of this section, dealing with exemptions from, or reductions 
of, withholding under an income tax treaty, that cross-references Sec.  
1.1441-6. This paragraph (b)(4) is not an exclusive list of items to 
which a reduction of the rate of withholding may apply and, thus, does 
not preclude an exemption from, or reduction in, the rate of 
withholding that may otherwise be allowed under the regulations under 
the provisions of chapter 3 of the Code for a particular item of income 
identified in this paragraph (b)(4). The exclusions and limitations 
specified in this paragraph (b)(4) apply for purposes of chapter 3. 
Additional withholding and documentation requirements may apply to 
withholding agents under chapter 4 with respect to payments that are 
withholdable payments. See, for example, Sec.  1.1471-2(a) requiring 
withholding on withholdable payments made to certain FFIs and Sec.  
1.1471-2(a)(4) for payments exempted from withholding under section 
1471(a).
    (i) Portfolio interest described in section 871(h) or 881(c) and 
substitute interest payments described in Sec.  1.871-7(b)(2) or Sec.  
1.881-2(b)(2) are exempt from withholding under section 1441(a). See 
Sec.  1.871-14 for regulations regarding portfolio interest and section 
1441(c)(9) for the exemption from withholding for portfolio interest. 
Documentation establishing foreign status is required for interest on 
an obligation in registered form to qualify as portfolio interest. See 
section 871(h)(2)(B)(ii) and Sec.  1.871-14(c)(1)(ii)(C). For special 
documentation rules regarding foreign-targeted registered obligations 
described in Sec.  1.871-14(e)(2) (and issued before January 1, 2016), 
see Sec.  1.871-14(e)(3) and (4) and, in particular, Sec.  1.871-
14(e)(4)(i)(A) and (ii)(A) regarding when the withholding agent must 
receive the documentation. The documentation furnished for purposes of 
qualifying interest as portfolio interest serves as the basis for the 
withholding exemption for purposes of this section and establishing 
foreign status for purposes of section 6049. See Sec.  1.6049-5(b)(8). 
Documentation establishing foreign status is not required for 
qualifying interest on an obligation in bearer form described in Sec.  
1.871-14(b)(1) (and issued before March 19, 2012) as portfolio 
interest. However, in certain cases, documentation for portfolio 
interest on a bearer obligation may have to be furnished in order to 
establish foreign status for purposes of the information reporting 
provisions of section 6049 and backup withholding under section 3406. 
See Sec.  1.6049-5(b)(7).
* * * * *
    (5) * * *
    (ix) Payments to a foreign person that are governed by section 
6050W (dealing with payment card and third party network transactions) 
are exempt from information reporting under Sec.  1.6050W-1(a)(5)(ii).
    (6) Rules of withholding for payments by a foreign intermediary or 
certain U.S. branches--(i) In general. A foreign intermediary described 
in paragraph (e)(3)(i) of this section or a U.S. branch or territory 
financial institution described in paragraph (b)(2)(iv) of this section 
that receives an amount subject to withholding (as defined in Sec.  
1.1441-2(a)) shall be required to withhold (if another withholding 
agent has not withheld the full amount required) and report such 
payment under chapter 3 of the Code and the regulations thereunder 
except as otherwise provided in this paragraph (b)(6). A nonqualified 
intermediary, U.S. branch, or territory financial institution described 
in paragraph (b)(2)(iv) of this section (other than a U.S. branch or 
territory financial institution that is treated as a U.S. person) shall 
not be required to withhold or report if it has provided a valid 
nonqualified intermediary withholding certificate or a U.S. branch 
withholding certificate, it has provided all of the information 
required by paragraph (e)(3)(iv) of this section (withholding 
statement), and it does not know, and has no reason to know, that 
another withholding agent failed to withhold the correct amount or 
failed to report the payment correctly under Sec.  1.1461-1(c). The 
withholding requirement of a nonqualified intermediary under the 
previous sentence also excludes a case in which withholding under 
chapter 4 was applied by a withholding agent on the

[[Page 2068]]

payment. See Sec.  1.1441-3(a)(2) (coordinating withholding under 
chapter 3 with withholding applied under chapter 4 of the Code). A 
qualified intermediary's obligations to withhold and report shall be 
determined in accordance with its qualified intermediary withholding 
agreement.
    (ii) Examples. The following examples illustrate the rules of 
paragraph (b)(6)(i) of this section and coordinate rules for 
withholding that apply under chapter 4 with those that apply under 
chapter 3. See also paragraph (e)(3)(iv)(C) of this section for the 
requirements of withholding statements provided by nonqualified 
intermediaries.

    Example 1.  FB, a foreign bank, acts as intermediary for five 
different individuals, A, B, C, D, and E, each of whom owns U.S. 
securities that generate U.S. source dividends (that are 
withholdable payments). The dividends are paid by USWA, a U.S. 
withholding agent. FB furnished USWA with a nonqualified 
intermediary withholding certificate, described in paragraph 
(e)(3)(iii) of this section, on which FB certifies its status as a 
participating FFI (such that withholding under chapter 4 does not 
apply), to which it attached valid withholding certificates for A, 
B, C, D, and E. The withholding certificates from A and B claim a 
15% reduced rate of withholding under an income tax treaty. C, D, 
and E claim no reduced rate of withholding. FB provides a 
withholding statement that meets all of the requirements of 
paragraph (e)(3)(iv) of this section, including information 
allocating 20% of each dividend payment to each of A, B, C, D, and 
E. FB does not have actual knowledge or reason to know that USWA did 
not withhold the correct amounts or report the dividends on Forms 
1042-S to each of A, B, C, D, and E. FB is not required to withhold 
or to report the dividends to A, B, C, D, and E.
    Example 2.  The facts are the same as in Example 1, except that 
FB did not provide any information for USWA to determine how much of 
the dividend payments were made to A, B, C, D, and E. Because USWA 
could not reliably associate the dividend payments with 
documentation under paragraph (b)(2)(vii) of this section with 
respect to a payment that is a withholdable payment, USWA applied 
the presumption rule of Sec.  1.1471-3(f)(5) and withheld 30% from 
all dividend payments under chapter 4 and filed a Form 1042-S 
reporting the payment to an account holder of FB that is a non-
participating FFI. FB is deemed to know that USWA did not report the 
payment to A, B, C, D, and E because it did not provide all of the 
information required on a withholding statement under paragraph 
(e)(3)(iv) of this section (i.e., allocation information). Although 
FB is not required to withhold on the payment under this section 
because the full 30% withholding was imposed by USWA, it is required 
to report the payments on Forms 1042-S to A, B, C, D, and E. FB's 
intentional failure to do so will subject it to intentional 
disregard penalties under sections 6721 and 6722.

    (7) Liability for failure to obtain documentation timely or to act 
in accordance with applicable presumptions--(i) General rule. A 
withholding agent that cannot reliably associate a payment with valid 
documentation on the date of payment and that does not withhold under 
this section, or withholds at less than the 30-percent rate prescribed 
under section 1441(a) and paragraph (b)(1) of this section, is liable 
under section 1461 for the tax required to be withheld under chapter 3 
of the Code and the regulations thereunder, without the benefit of a 
reduced rate unless--
    (A) The withholding agent has appropriately relied on the 
presumptions described in paragraph (b)(3) of this section (including 
the grace period described in paragraph (b)(3)(iv) of this section) in 
order to treat the payee as a U.S. person or, if applicable, on the 
presumptions described in Sec.  1.1441-4(a)(2)(ii) or (a)(3)(i) to 
treat the payment as effectively connected income;
    (B) The withholding agent can demonstrate to the satisfaction of 
the district director or the Assistant Commissioner (International) 
that the proper amount of tax, if any, was in fact paid to the IRS;
    (C) No documentation is required under section 1441 or this section 
in order for a reduced rate of withholding to apply; or
* * * * *
    (ii) Proof that tax liability has been satisfied--(A) In general. 
Proof of payment of tax may be established for purposes of paragraph 
(b)(7)(i)(B) of this section on the basis of a Form 4669 (or such other 
form as the IRS may prescribe in published guidance (see Sec.  
601.601(d)(2) of this chapter)) establishing the amount of tax, if any, 
actually paid by or for the beneficial owner on the income. Proof that 
a reduced rate of withholding was, in fact, appropriate under the 
provisions of chapter 3 of the Code and the regulations thereunder may 
also be established after the date of payment by the withholding agent 
on the basis of a valid withholding certificate or other appropriate 
documentation received after that date that was effective as of the 
date of payment. A withholding certificate furnished after the date of 
payment will be considered effective as of the date of the payment if 
the certificate contains a signed affidavit (either at the bottom of 
the form or on an attached page) that states that the information and 
representations contained on the certificate were accurate as of the 
time of the payment. A withholding certificate received within 30 days 
after the date of the payment will not be considered to be unreliable 
solely because it does not contain the affidavit described in the 
preceding sentence. However, in the case of a withholding certificate 
of an individual received more than a year after the date of payment, 
the withholding agent will be required to obtain, in addition to the 
withholding certificate and affidavit, documentary evidence, as 
described in Sec.  1.1471-3(c)(5)(i), that supports the individual's 
claim of foreign status or documentary evidence described in Sec.  
1.1441-6(c)(4)(i) to support any treaty claim made on the certificate. 
In the case of a withholding certificate of an entity received more 
than a year after the date of payment, the withholding agent will be 
required to obtain, in addition to the withholding certificate and 
affidavit, documentary evidence described in Sec.  1.1471-3(c)(5)(i) 
that supports the entity's claim of foreign status or documentary 
evidence described in Sec.  1.1441-6(c)(4)(ii) to support any treaty 
claim made on the certificate. If documentation other than a 
withholding certificate is submitted from a payee more than a year 
after the date of payment, the withholding agent will be required to 
obtain from the payee a withholding certificate and affidavit 
supporting the claim of chapter 3 status as of the time of the payment. 
See, however, paragraph (b)(7)(ii)(B) of this section for special rules 
that apply when a withholding certificate is received after the date of 
the payment to claim that income is effectively connected with the 
conduct of a U.S. trade or business. See Sec.  1.1471-3(c)(7)(ii) for 
additional requirements that may apply under chapter 4 for 
documentation obtained after the date of payment of a withholdable 
payment.
    (B) [Reserved]. For further guidance, see Sec.  1.1441-
1T(b)(7)(ii)(B).
* * * * *
    (iv) Special rule for determining validity of withholding 
certificate containing inconsequential errors. A withholding agent may 
treat a withholding certificate as valid when the certificate includes 
an error described as an inconsequential error in Sec.  1.1471-
3(c)(7)(i) for which the withholding agent obtains documentation 
sufficient for supporting a payee's claim of status as a foreign person 
or, for a payee that is an entity, its classification to the extent 
permitted under Sec.  1.1471-3(c)(7)(i). For example, if the country of 
residence is abbreviated in an ambiguous way on a

[[Page 2069]]

beneficial owner withholding certificate provided to establish the 
beneficial owner's foreign status, a withholding agent may treat the 
withholding certificate as valid if it has obtained documentary 
evidence supporting that the beneficial owner's residence is in a 
country other than the United States.
    (v) Special effective date. See paragraph (f)(2)(ii) of this 
section for the special effective date applicable to this paragraph 
(b)(7).
* * * * *
    (c) Definitions. The following definitions apply for purposes of 
sections 1441 through 1443, 1461, and regulations under those sections. 
For definitions of terms used in these regulations that are defined 
under sections 1471 through 1474, see subparagraphs (43) through (56) 
of this paragraph.
* * * * *
    (2) Foreign and U.S. person--(i) In general. The term foreign 
person means any person that is not a U.S. person, including a QI 
branch of a U.S. financial institution (as defined in Sec.  1.1471-
1(b)(109). Such a branch continues to be a U.S. payor for purposes of 
chapter 61 of the Code. See Sec.  1.6049-5(c)(4). A U.S. person is a 
person described in section 7701(a)(30), the U.S. government (including 
an agency or instrumentality thereof), a State (including an agency or 
instrumentality thereof), or the District of Columbia (including an 
agency or instrumentality thereof).
    (ii) [Reserved]. For further guidance, see Sec.  1.1441-
1T(c)(2)(ii).
    (3) * * *
    (ii) [Reserved]. For further guidance, see Sec.  1.1441-
1T(c)(3)(ii).
* * * * *
    (5) Financial institution and foreign financial institution (or 
FFI). The term financial institution means a person described in Sec.  
1.1471-1(b)(50). The term foreign financial institution or FFI has the 
meaning set forth in Sec.  1.1471-1(b)(47).
* * * * *
    (10) Chapter 3 of the Code (or chapter 3). For purposes of the 
regulations under sections 1441, 1442, and 1443, any reference to 
chapter 3 of the Code (or chapter 3) shall not include references to 
sections 1445 and 1446, unless the context indicates otherwise.
* * * * *
    (12) Payee. For purposes of chapter 3 of the Code, the term payee 
of a payment is determined under paragraph (b)(2) of this section, 
Sec.  1.1441-5(c)(1) (relating to partnerships), and Sec.  1.1441-
5(e)(2) and (3) (relating to trusts and estates) and includes foreign 
persons, U.S. exempt recipients, and U.S. non-exempt recipients. A 
nonqualified intermediary and a qualified intermediary (to the extent 
it does not assume primary withholding responsibility) are not payees 
if they are acting as intermediaries and not the beneficial owner of 
income. In addition, a flow-through entity (other than a withholding 
foreign partnership, withholding foreign trust, or qualified 
intermediary that assumes primary withholding responsibility) is not a 
payee unless the income is (or is deemed to be) effectively connected 
with the conduct of a trade or business in the United States. See Sec.  
1.6049-5(d)(1) for rules to determine the payee for purposes of chapter 
61 of the Code. See Sec. Sec.  1.1441-1(b)(3), 1.1441-5(d), and (e)(6) 
and Sec.  1.6049-5(d)(3) for presumption rules that apply if a payee's 
identity cannot be determined on the basis of valid documentation. For 
purposes of chapter 4, the term payee has the meaning set forth in 
Sec.  1.1471-3(a) with respect to a withholdable payment.
* * * * *
    (16) Withholding certificate. The term withholding certificate 
means a Form W-8 described in paragraph (e)(2)(i) of this section 
(relating to foreign beneficial owners), paragraphs (e)(3)(i) or 
(e)(5)(i) of this section (relating to foreign intermediaries or 
qualified intermediaries), Sec.  1.1441-5(c)(2)(iv), (c)(3)(iii), and 
(e)(5)(iii) (relating to flow-through entities), a Form 8233 described 
in Sec.  1.1441-4(b)(2), a Form W-9 as described in paragraph (d) of 
this section, a statement described in Sec.  1.871-14(c)(2)(v) 
(relating to portfolio interest), or any other certificates that under 
the Code or regulations certifies or establishes the status of a payee 
or beneficial owner as a U.S. or a foreign person.
    (17) Documentary evidence; other appropriate documentation. The 
terms documentary evidence or other appropriate documentation refer to 
documentary evidence that may be provided for payments made outside the 
United States with respect to offshore obligations in accordance with 
Sec.  1.6049-5(c)(1) or any other evidence that under the Code or 
regulations certifies or establishes the status of a payee or 
beneficial owner as a U.S. or foreign person. See Sec. Sec.  1.1441-
6(b)(2), (c)(3) and (4) (relating to treaty benefits), and 1.6049-
5(c)(1) and (4) (relating to chapter 61 reporting). Also see Sec.  
1.1441-4(a)(3)(ii) regarding documentary evidence for notional 
principal contracts.
* * * * *
    (23) Flow-through entity. A flow-through entity means any entity 
that is described in this paragraph (c)(23) and that may provide 
documentation on behalf of its partners, beneficiaries, or owners to a 
withholding agent. The entities described in this paragraph are a 
foreign partnership (other than a withholding foreign partnership), a 
foreign simple trust (other than a withholding foreign trust) that is 
described in paragraph (c)(24) of this section, a foreign grantor trust 
(other than a withholding foreign trust) that is described in paragraph 
(c)(26) of this section, or, for any payments for which a reduced rate 
of withholding under an income tax treaty is claimed, any entity to the 
extent the entity is considered to be fiscally transparent under 
section 894 with respect to the payment by an interest holder's 
jurisdiction.
* * * * *
    (25) Foreign complex trust. A foreign complex trust is a foreign 
trust other than a foreign simple trust or foreign grantor trust.
* * * * *
    (28) Nonwithholding foreign partnership (or NWP). A nonwithholding 
foreign partnership is a foreign partnership that is not a withholding 
foreign partnership, as defined in Sec.  1.1441-5(c)(2)(i).
    (29) Withholding foreign partnership (or WP). A withholding foreign 
partnership is defined in Sec.  1.1441-5(c)(2)(i).
    (30) Possessions of the United States or U.S. territory. For 
purposes of the regulations under chapters 3 and 61 of the Code, the 
term possessions of the United States or U.S. territory means Guam, 
American Samoa, the Northern Mariana Islands, Puerto Rico, or the 
Virgin Islands.
    (31) Amount subject to chapter 3 withholding. An amount subject to 
withholding under chapter 3 is an amount described in Sec.  1.1441-
2(a).
    (32) EIN. The term EIN means an employer identification number 
(also known as a federal tax identification number) described in Sec.  
301.6109-1(a)(1)(i).
    (33) Flow-through withholding certificate. The term flow-through 
withholding certificate means a Form W-8IMY submitted by a foreign 
partnership, foreign simple trust, or foreign grantor trust.
    (34) Foreign payee. The term foreign payee means any payee other 
than a U.S. payee.
    (35) Intermediary withholding certificate. The term intermediary 
withholding certificate means a Form W-8IMY submitted by an 
intermediary or qualified intermediary.

[[Page 2070]]

    (36) Nonwithholding foreign trust (or NWT). The term nonwithholding 
foreign trust or NWT means a foreign trust as defined in section 
7701(a)(31)(B) that is a simple trust or grantor trust and is not a 
withholding foreign trust.
    (37) Payment with respect to an offshore obligation. The term 
payment with respect to an offshore obligation means a payment made 
outside of the United States, within the meaning of Sec.  1.6049-5(e), 
with respect to an offshore obligation (as defined in Sec.  1.6049-
5(c)(1), Sec.  1.6041-1(d), or Sec.  1.6042-3(b) (depending on the type 
of payment)).
    (38) Permanent residence address--(i) In general. The term 
permanent residence address is the address in the country of which the 
person claims to be a resident for purposes of that country's income 
tax. In the case of a withholding certificate furnished in order to 
claim a reduced rate of withholding under an income tax treaty, whether 
a person is a resident of a treaty country must be determined in the 
manner prescribed under the applicable treaty. See Sec.  1.1441-6(b). 
The address of a financial institution with which the person maintains 
an account, a post office box, or an address used solely for mailing 
purposes is not a permanent residence address unless such address is 
the only permanent address used by the person and appears as the 
person's registered address in the person's organizational documents. 
Further, an address that is provided subject to instructions to hold 
all mail to that address is not a permanent residence address. If the 
person is an individual who does not have a tax residence in any 
country, the permanent residence address is the place at which the 
person normally resides. If the person is an entity and does not have a 
tax residence in any country, then the permanent residence address of 
the entity is the place at which the person maintains its principal 
office.
    (ii) [Reserved]. For further guidance, see Sec.  1.1441-
1T(c)(38)(ii).
    (39) Standing instructions to pay amounts. The term standing 
instructions to pay amounts has the meaning set forth in Sec.  1.1471-
1(b)(126).
    (40) Territory financial institution. The term territory financial 
institution has the meaning set forth in Sec.  1.1471-1(b)(130).
    (41) TIN. The term TIN means the tax identifying number assigned to 
a person under section 6109.
    (42) Withholding foreign trust (or WT). The term withholding 
foreign trust (or WT) means a foreign grantor trust or foreign simple 
trust that has executed the agreement described in Sec.  1.1441-
5(e)(5)(v).
    (43) Certified deemed-compliant FFI. The term certified deemed-
compliant FFI means an FFI described in Sec.  1.1471-5(f)(2).
    (44) Chapter 3 withholding rate pool. The term chapter 3 
withholding rate pool has the meaning described in paragraph 
(e)(5)(v)(C)(1) of this section.
    (45) Chapter 3 status. The term chapter 3 status refers to the 
attributes of a payee relevant for determining the rate of withholding 
with respect to a payment made to the payee for purposes of chapter 3.
    (46) Chapter 4 of the Code (or chapter 4). The term chapter 4 of 
the Code (or chapter 4) means sections 1471 through 1474 and the 
regulations thereunder.
    (47) Chapter 4 status. The term chapter 4 status means a person's 
status as a U.S. person, a specified U.S. person, an individual that is 
a foreign person, a participating FFI, a deemed-compliant FFI, a 
restricted distributor, an exempt beneficial owner, a nonparticipating 
FFI, a territory financial institution, an excepted NFFE, or a passive 
NFFE.
    (48) Chapter 4 withholding rate pool. The term chapter 4 
withholding rate pool has the meaning set forth Sec.  1.1471-1(b)(20). 
For when a withholding statement may include a chapter 4 withholding 
rate pool of U.S. payees for purposes of this section and Sec.  1.1441-
5, however, see paragraph (e)(3)(iv)(A) of this section (for a 
withholding statement provided by a nonqualified intermediary) or 
paragraph (e)(5)(v)(C)(2) of this section (for a withholding statement 
provided by a qualified intermediary).
    (49) Deemed-compliant FFI. The term deemed-compliant FFI means an 
FFI that is treated, pursuant to section 1471(b)(2) and Sec.  1.1471-
5(f), as meeting the requirements of section 1471(b). The term deemed-
compliant FFI also includes a QI branch of a U.S. financial institution 
that is a reporting Model 1 FFI.
    (50) GIIN (or Global Intermediary Identification Number). The term 
GIIN or Global Intermediary Identification Number means the 
identification number that is assigned to a participating FFI or 
registered deemed-compliant FFI. The term GIIN or Global Intermediary 
Identification Number also includes the identification number assigned 
to a reporting Model 1 FFI (as defined in Sec.  1.1471-1(b)(114)) for 
purposes of identifying such entity to withholding agents. All GIINs 
will appear on the IRS FFI list.
    (51) NFFE. The term NFFE or non-financial foreign entity has the 
meaning set forth in Sec.  1.1471-1(b)(80).
    (52) Nonparticipating FFI. The term nonparticipating FFI means an 
FFI other than a participating FFI, a deemed-compliant FFI, or an 
exempt beneficial owner.
    (53) Participating FFI. The term participating FFI has the meaning 
set forth in Sec.  1.1471-1(b)(91).
    (54) Preexisting obligation. The term preexisting obligation has 
the meaning set forth in Sec.  1.1471-1(b)(104).
    (55) Registered deemed-compliant FFI. The term registered deemed- 
compliant FFI has the meaning set forth in Sec.  1.1471-5(f)(1).
    (56) Withholdable payment. The term withholdable payment has the 
meaning set forth in Sec.  1.1473-1(a).
    (d) * * *
    (4) When a payment to an intermediary or flow-through entity may be 
treated as made to a U.S. payee. A withholding agent that makes a 
payment to an intermediary (whether a qualified intermediary or 
nonqualified intermediary), a flow-through entity, or a U.S. branch or 
territory financial institution described in paragraph (b)(2)(iv) of 
this section may treat the payment as made to a U.S. payee to the 
extent that, prior to the payment, the withholding agent can reliably 
associate the payment with a Form W-9 described in paragraph (d)(2) or 
(3) of this section attached to a valid intermediary, flow-through, or 
U.S. branch withholding certificate described in paragraph (e)(3)(i) of 
this section or to the extent the withholding agent can reliably 
associate the payment with a Form W-8 described in paragraph (e)(3)(v) 
of this section that evidences an agreement to treat a U.S. branch or 
territory financial institution described in paragraph (b)(2)(iv) of 
this section as a U.S. person. In addition, a withholding agent may 
treat the payment as made to a U.S. payee only if it complies with the 
electronic confirmation procedures described in paragraph (e)(4)(v) of 
this section, if required, and it has not been notified by the IRS that 
any of the information on the withholding certificate or other 
documentation is incorrect or unreliable. In the case of a Form W-9 
that is required to be furnished for a reportable payment that may be 
subject to backup withholding, the withholding agent may be notified in 
accordance with section 3406(a)(1)(B) and the regulations under that 
section. See applicable procedures under section 3406(a)(1)(B) and the 
regulations under that section for payors who have been notified with 
regard to such a Form W-

[[Page 2071]]

9. Withholding agents who have been notified in relation to other Forms 
W-9, including under section 6724(b) pursuant to section 6721, may rely 
on the withholding certificate or other documentation only to the 
extent provided under procedures as prescribed by the IRS (see Sec.  
601.601(d)(2) of this chapter).
    (e) * * *
    (1) * * *
    (ii) * * *
    (A) * * *
    (2) That the payment is made outside the United States (within the 
meaning of Sec.  1.6049-5(e)) with respect to an offshore obligation 
(within the meaning of paragraph (c)(37) of this section) and the 
withholding agent can reliably associate the payment with documentary 
evidence described in Sec. Sec.  1.1441-6(c)(3) or (4), or 1.6049-
5(c)(1) relating to the beneficial owner;
    (3) That the withholding agent can reliably associate the payment 
with a valid qualified intermediary withholding certificate, as 
described in paragraph (e)(3)(ii) of this section, and the qualified 
intermediary has provided sufficient information for the withholding 
agent to allocate the payment to a chapter 3 withholding rate pool;
* * * * *
    (2) * * *
    (ii) Requirements for validity of certificate--(A) In general. A 
beneficial owner withholding certificate is valid for purposes of a 
payment of an amount subject to chapter 3 withholding only if it is 
provided on a Form W-8 or a Form 8233 in the case of personal services 
income described in Sec.  1.1441-4(b) or certain scholarship or grant 
amounts described in Sec.  1.1441-4(c) (or a substitute form described 
in paragraph (e)(4)(vi) of this section or such other form as the IRS 
may prescribe). A Form W-8 is valid only if its validity period has not 
expired, it is signed under penalties of perjury by the beneficial 
owner, and it contains all of the information required on the form. The 
required information is the beneficial owner's name, permanent 
residence address (as defined in Sec.  1.1441-1(c)(38)), TIN (if 
required), a certification that the person is not a U.S. citizen (if 
the person is an individual) or a certification of the country under 
the laws of which the beneficial owner is created, incorporated, or 
governed (if a person other than an individual), the classification of 
the entity, and such other information as may be required by the 
regulations under section 1441 or by the form or accompanying 
instructions in addition to, or in lieu of, the information described 
in this paragraph (e)(2)(ii) (including when a foreign TIN and an 
individual's date of birth are required). A beneficial owner 
withholding certificate must also include the chapter 4 status of a 
beneficial owner when required for chapter 4 purposes in order to be 
valid. See paragraph (e)(4)(vii) of this section for circumstances in 
which a TIN is required on a beneficial owner withholding certificate.
    (B) [Reserved]. For further guidance, see Sec.  1.1441-
1T(e)(2)(ii)(B).
    (3) * * *
    (ii) Intermediary withholding certificate from a qualified 
intermediary. A qualified intermediary shall provide a qualified 
intermediary withholding certificate for withholdable payments or 
reportable amounts received by the qualified intermediary. See 
paragraph (e)(3)(vi) of this section for the definition of reportable 
amount. A qualified intermediary withholding certificate is valid only 
if it is furnished on a Form W-8, an acceptable substitute form, or 
such other form as the IRS may prescribe, it is signed under penalties 
of perjury by a person with authority to sign for the qualified 
intermediary, its validity has not expired, and it contains the 
following information, statement, and certifications--
    (A) The name, permanent residence address, qualified intermediary 
employer identification number (QI-EIN), and the country under the laws 
of which the qualified intermediary is created, incorporated, or 
governed. If required for purposes of chapter 4 or if the qualified 
intermediary is a participating FFI or registered deemed-compliant FFI 
and certifies that it is providing (or will provide) a chapter 4 
withholding rate pool of U.S. payees under Sec.  1.6049-4(c)(4) with 
respect to accounts that the qualified intermediary maintains, the 
withholding certificate must also include the chapter 4 status of the 
qualified intermediary and its GIIN (if applicable). See paragraph 
(e)(5)(ii) for the chapter 4 status required of a qualified 
intermediary, including when a qualified intermediary withholding 
certificate may include a chapter 4 status of limited FFI (as defined 
in Sec.  1.1471-1(b)(77)). A qualified intermediary that does not act 
in its capacity as a qualified intermediary must not use its QI-EIN. 
Rather, it should provide a nonqualified intermediary withholding 
certificate, if it is acting as an intermediary, and should use the 
taxpayer identification number (if any) that it uses for all other 
purposes and GIIN (if applicable);
* * * * *
    (C) A certification that the qualified intermediary has provided, 
or will provide, a withholding statement as required by paragraph 
(e)(5)(v) of this section;
    (D) A certification that the qualified intermediary meets the 
requirements of Sec.  1.6049-4(c)(4) when the qualified intermediary 
provides (or will provide) a withholding statement associated with its 
Form W-8 that allocates a payment to a chapter 4 withholding rate pool 
of U.S. payees that hold accounts with the qualified intermediary. 
Additionally, when the qualified intermediary provides a chapter 4 
withholding rate pool of U.S. payees that do not hold accounts 
maintained by the qualified intermediary, the qualified intermediary 
provides a certification on the Form W-8 that the qualified 
intermediary has obtained (or will obtain) documentation from the 
intermediary or flow through entity allocating the payment to the pool 
to establish that the entity's status is as a participating FFI, 
registered deemed-compliant FFI, or qualified intermediary under Sec.  
1.1471-3(d)(4) (or, as applicable, Sec.  1.1471-3(e)(4)(vi)(B) or Sec.  
1.1441-1(b)(2)(vii)); and
* * * * *
    (F) Any other information, certifications, or statements as may be 
required by the form or accompanying instructions in addition to, or in 
lieu of, the information and certifications described in this paragraph 
(e)(3)(ii) or paragraph (e)(3)(v) of this section. See paragraph 
(e)(5)(v) of this section for the requirements of a withholding 
statement associated with the qualified intermediary withholding 
certificate.
    (iii) Intermediary withholding certificate from a nonqualified 
intermediary. A nonqualified intermediary shall provide a nonqualified 
intermediary withholding certificate for reportable amounts received by 
the nonqualified intermediary. See paragraph (e)(3)(vi) of this section 
for the definition of reportable amount. A nonqualified intermediary 
withholding certificate is valid only to the extent it is furnished on 
a Form W-8, an acceptable substitute form, or such other form as the 
IRS may prescribe, it is signed under penalties of perjury by a person 
authorized to sign for the nonqualified intermediary, it contains the 
information, statements, and certifications described in this 
paragraphs (e)(3)(iii) and (iv) of this section, its validity has not 
expired, and the withholding certificates and other appropriate 
documentation for all persons to whom the certificate relates are 
associated with the certificate. Withholding certificates and other

[[Page 2072]]

appropriate documentation consist of beneficial owner withholding 
certificates described in paragraph (e)(2)(i) of this section, 
intermediary and flow-through withholding certificates described in 
paragraph (e)(3)(i) of this section, withholding foreign partnership 
and withholding foreign trust certificates described in Sec.  1.1441-
5(c)(2)(iv) and (e)(5)(iii), documentary evidence described in 
Sec. Sec.  1.1441-6(c)(3) or (4) and 1.6049-5(c)(1), and any other 
documentation or certificates applicable under other provisions of the 
Code or regulations that certify or establish the status of the payee 
or beneficial owner as a U.S. or a foreign person. If a nonqualified 
intermediary is acting on behalf of another nonqualified intermediary 
or a flow-through entity, then the nonqualified intermediary must 
associate with its own withholding certificate the other nonqualified 
intermediary withholding certificate or the flow-through withholding 
certificate and separately identify all of the withholding certificates 
and other appropriate documentation that are associated with the 
withholding certificate of the other nonqualified intermediary or flow-
through entity. Nothing in this paragraph (e)(3)(iii) shall require an 
intermediary to furnish original documentation. Copies of certificates 
or documentary evidence may be transmitted to the U.S. withholding 
agent, in which case the nonqualified intermediary must retain the 
original documentation for the same time period that the copy is 
required to be retained by the withholding agent under paragraph 
(e)(4)(iii) of this section and must provide it to the withholding 
agent upon request. For purposes of this paragraph (e)(3)(iii), a valid 
intermediary withholding certificate also includes a statement 
described in Sec.  1.871-14(c)(2)(v) furnished for interest to qualify 
as portfolio interest for purposes of sections 871(h) and 881(c). The 
information and certifications required on a Form W-8 described in this 
paragraph (e)(3)(iii) are as follows--
    (A) The name and permanent resident address of the nonqualified 
intermediary, chapter 4 status (if required for chapter 4 purposes or 
if the nonqualified intermediary provides the certification described 
in paragraph (e)(3)(iii)(D) of this section), GIIN (if applicable), and 
the country under the laws of which the nonqualified intermediary is 
created, incorporated, or governed;
* * * * *
    (C) If the nonqualified intermediary withholding certificate is 
used to transmit withholding certificates or other appropriate 
documentation for more than one person on whose behalf the nonqualified 
intermediary is acting, a withholding statement associated with the 
Form W-8 that provides all the information required by paragraph 
(e)(3)(iv) of this section;
    (D) If the nonqualified intermediary provides a withholding 
statement associated with the Form W-8 allocating a payment to a 
chapter 4 withholding rate pool of U.S. payees, a certification that 
the nonqualified intermediary meets the requirements of Sec.  1.6049-
4(c)(4) with respect to any payees included in such pool that hold 
accounts maintained (as defined in Sec.  1.1471-5(b)(5)) by the 
nonqualified intermediary; and
    (E) Any other information, certifications, or statements as may be 
required by the form or accompanying instructions in addition to, or in 
lieu of, the information, certifications, and statements described in 
this paragraph (e)(3)(iii) or paragraph (e)(5)(iv) of this section.
    (iv) Withholding statement provided by nonqualified intermediary--
(A) In general. A nonqualified intermediary shall provide a withholding 
statement required by this paragraph (e)(3)(iv) to the extent the 
nonqualified intermediary is required to furnish, or does furnish, 
documentation for payees on whose behalf it receives reportable amounts 
(as defined in paragraph (e)(3)(vi) of this section) or to the extent 
it otherwise provides the documentation of such payees to a withholding 
agent. A nonqualified intermediary, however, that is subject to 
withholding under chapter 4 due to its chapter 4 status as a 
nonparticipating FFI need not provide a withholding statement unless it 
is providing documentation to allocate a portion of the payment as made 
to an exempt beneficial owner as described in Sec.  1.1471-
3(c)(3)(iii)(B)(4). A nonqualified intermediary that is subject to 
withholding under chapter 4 due to its chapter 4 status is not required 
to disclose to the withholding agent information regarding persons for 
whom it collects reportable amounts unless it has actual knowledge that 
any such person is a U.S. non-exempt recipient as defined in paragraph 
(c)(21) of this section. Information regarding U.S. non-exempt 
recipients required under this paragraph (e)(3)(iv) must be provided 
irrespective of any requirement under foreign law that prohibits the 
disclosure of the identity of an account holder of a nonqualified 
intermediary or financial information relating to such account holder. 
A nonqualified intermediary is not required to provide information on a 
withholding statement regarding U.S. non-exempt recipients, provided 
that the nonqualified intermediary is a participating FFI (including a 
reporting Model 2 FFI) or registered deemed-compliant FFI (including a 
reporting Model 1 FFI) that identifies on the withholding statement the 
portion of a payment allocable to a chapter 4 withholding rate pool of 
U.S. payees to the extent that the nonqualified intermediary is 
permitted to include such U.S. payees in a pool under Sec.  1.6049-
4(c)(4)(iii). See Sec.  1.1471-3(d)(4) for the requirements of an 
entity to identify itself as a participating FFI or registered deemed-
compliant FFI to a withholding agent for purposes of chapter 4. 
Although a nonqualified intermediary is not required to provide 
documentation and other information required by this paragraph 
(e)(3)(iv) for persons other than U.S. non-exempt recipients not 
included in a chapter 4 withholding rate pool of U.S. payees, a 
withholding agent that does not receive documentation and such 
information must apply the presumption rules of paragraph (b) of this 
section, Sec. Sec.  1.1441-5(d) and (e)(6), 1.6049-5(d), and 1.1471-
3(f)(5) (for a withholdable payment) or the withholding agent shall be 
liable for tax, interest, and penalties. A withholding agent must apply 
the presumption rules even if it is not required under chapter 61 of 
the Code to obtain documentation to treat a payee as an exempt 
recipient and even though it has actual knowledge that the payee is a 
U.S. person. For example, if a nonqualified intermediary receives a 
payment that is not a withholdable payment and fails to provide a 
withholding agent with a Form W-9 for an account holder that is a U.S. 
exempt recipient that is not included in a chapter 4 withholding rate 
pool of U.S. payees to the extent permitted in this paragraph 
(e)(3)(iv)(A), the withholding agent must presume (even if it has 
actual knowledge that the account holder is a U.S. exempt recipient) 
that the account holder is an undocumented foreign person with respect 
to amounts subject to chapter 3 withholding. See paragraph (b)(3)(v) of 
this section for applicable presumptions. Therefore, the withholding 
agent must withhold 30 percent from the payment even though if a Form 
W-9 had been provided, no withholding or reporting on the payment 
attributable to a U.S. exempt recipient would apply. Further, a 
nonqualified intermediary that fails to provide the documentation and 
the information under this paragraph (e)(3)(iv) for another withholding 
agent to report the payments on Forms 1042-

[[Page 2073]]

S (including under the requirements of Sec.  1.1474-1(d)(2) for a 
payment of a chapter 4 reportable amount) and Forms 1099 is not 
relieved of its responsibility to file information returns. See 
paragraph (b)(6) of this section. Therefore, unless the nonqualified 
intermediary itself files such returns and provides copies to the 
payees, it shall be liable for penalties under sections 6721 (failure 
to file information returns), and 6722 (failure to furnish payee 
statements), including the penalties under those sections for 
intentional failure to file information returns. In addition, failure 
to provide either the documentation or the information required by this 
paragraph (e)(3)(iv) results in a payment not being reliably associated 
with valid documentation. Therefore, the beneficial owners of the 
payment are not entitled to reduced rates of withholding and if the 
full amount required to be held under the presumption rules is not 
withheld by the withholding agent, the nonqualified intermediary must 
withhold the difference between the amount withheld by the withholding 
agent and the amount required to be withheld. Failure to withhold shall 
result in the nonqualified intermediary being liable for tax under 
section 1461, interest, and penalties, including penalties under 
section 6656 (failure to deposit) and section 6672 (failure to collect 
and pay over tax).
    (B) General requirements. A withholding statement must be provided 
prior to the payment of a reportable amount and must contain the 
information specified in paragraph (e)(3)(iv)(C) of this section. The 
statement must be updated as often as required to keep the information 
in the withholding statement correct prior to each subsequent payment. 
The withholding statement forms an integral part of the withholding 
certificate provided under paragraph (e)(3)(iii) of this section, and 
the penalties of perjury statement provided on the withholding 
certificate shall apply to the withholding statement. The withholding 
statement may be provided in any manner the nonqualified intermediary 
and the withholding agent mutually agree, including electronically. If 
the withholding statement is provided electronically as part of a 
system established by the withholding agent or nonqualified 
intermediary to provide the statement, however, there must be 
sufficient safeguards to ensure that the information received by the 
withholding agent is the information sent by the nonqualified 
intermediary and all occasions of user access that result in the 
submission or modification of the withholding statement information 
must be recorded. In addition, the electronic system must be capable of 
providing a hard copy of all withholding statements provided by the 
nonqualified intermediary. A withholding statement may otherwise be 
transmitted by a nonqualified intermediary via email or facsimile to a 
withholding agent under the requirements specified in paragraph 
(e)(4)(iv)(D) of this section (substituting the term withholding 
statement for the term Form W-8 or the term document, as applicable). A 
withholding agent will be liable for tax, interest, and penalties in 
accordance with paragraph (b)(7) of this section to the extent it does 
not follow the presumption rules of paragraph (b)(3) of this section or 
Sec. Sec.  1.1441-5(d) and (e)(6), and 1.6049-5(d) for any payment of a 
reportable amount, or portion thereof, for which it does not have a 
valid withholding statement prior to making a payment. A withholding 
agent may not treat as valid an allocation of a payment to a chapter 4 
withholding rate pool of U.S. payees described in paragraph 
(e)(3)(iv)(A) of this section or an allocation of a payment to a 
chapter 4 withholding rate pool of recalcitrant account holders 
described in paragraph (e)(3)(iv)(C)(2) of this section unless the 
withholding agent identifies the nonqualified intermediary maintaining 
the account (as described in Sec.  1.1471-5(b)(5)) as a participating 
FFI (including a reporting Model 2 FFI) or registered deemed-compliant 
FFI (including a reporting Model 1 FFI) by applying the rules of Sec.  
1.1471-3(d)(4). Additionally, in the case of a withholdable payment 
that is an amount subject to withholding made on or after April 1, 
2017, a withholding agent may not treat as valid an allocation of the 
payment to a chapter 4 withholding rate pool of U.S. payees unless the 
nonqualified intermediary identifies the pool of U.S. payees as one 
described in Sec.  1.1471-3(c)(3)(iii)(B)(2)(iii) (or by describing 
such payees consistent with the description provided in Sec.  1.1471-
3(c)(3)(ii)(B)(2)(iii)).
    (C) Content of withholding statement. The withholding statement 
provided by a nonqualified intermediary must contain the information 
required by this paragraph (e)(3)(iv)(C).
    (1) In general. Except as otherwise provided by paragraph 
(e)(3)(iv)(C)(2) and (3) of this section), the withholding statement 
provided by a nonqualified intermediary must contain the information 
required by this paragraph (e)(3)(iv)(C)(1).
    (i) Except as otherwise provided in (e)(3)(iv)(A) of this section 
(which excludes reporting of information with respect to certain U.S. 
persons on the withholding statement), the withholding statement must 
contain the name, address, TIN (if any), and the type of documentation 
(documentary evidence, Form W-9, or type of Form W-8) for every person 
from whom documentation has been received by the nonqualified 
intermediary and provided to the withholding agent and whether that 
person is a U.S. exempt recipient, a U.S. non-exempt recipient, or a 
foreign person. See paragraphs (c)(2), (20), and (21) of this section 
for the definitions of foreign person, U.S. exempt recipient, and U.S. 
non-exempt recipient. In the case of a foreign person, the statement 
must indicate whether the foreign person is a beneficial owner or an 
intermediary, flow-through entity, U.S. branch, or territory financial 
institution described in paragraph (b)(2)(iv) of this section and 
include the type of recipient, based on recipient codes applicable for 
chapter 3 purposes used for filing Forms 1042-S, if the foreign person 
is a recipient as defined in Sec.  1.1461-1(c)(1)(ii).
    (ii) The withholding statement must allocate each payment, by 
income type, to every payee required to be reported on the withholding 
statement for whom documentation has been provided (including U.S. 
exempt recipients except as provided in paragraph (e)(3)(iv)(A) of this 
section). Any payment that cannot be reliably associated with valid 
documentation from a payee shall be treated as made to an unknown payee 
in accordance with the presumption rules of paragraph (b) of this 
section and Sec. Sec.  1.1441-5(d) and (e)(6) and 1.6049-5(d). For this 
purpose, a type of income is determined by the types of income required 
to be reported on Forms 1042-S or 1099, as appropriate. Notwithstanding 
the preceding sentence, deposit interest (including original issue 
discount) described in section 871(i)(2)(A) or 881(d) and interest or 
original issue discount on short-term obligations as described in 
section 871(g)(1)(B) or 881(e) is only required to be allocated to the 
extent it is required to be reported on Form 1099 or Form 1042-S. See 
Sec.  1.6049-8 (regarding reporting of bank deposit interest to certain 
foreign persons). If a payee receives income through another 
nonqualified intermediary, flow-through entity, or U.S. branch or 
territory financial institution described in paragraph (e)(2)(iv) of 
this section (other than a U.S. branch or territory financial

[[Page 2074]]

institution treated as a U.S. person), the withholding statement must 
also state, with respect to the payee, the name, address, and TIN, if 
known, of the other nonqualified intermediary or U.S. branch from which 
the payee directly receives the payment or the flow-through entity in 
which the payee has a direct ownership interest. If another 
nonqualified intermediary, flow-through entity, or U.S. branch fails to 
allocate a payment, the name of the nonqualified intermediary, flow-
through entity, or U.S. branch that failed to allocate the payment 
shall be provided with respect to such payment.
    (iii) If a payee is identified as a foreign person, the 
nonqualified intermediary must specify the rate of withholding to which 
the payee is subject, the payee's country of residence and, if a 
reduced rate of withholding is claimed, the basis for that reduced rate 
(e.g., treaty benefit, portfolio interest, exempt under section 
501(c)(3), 892, or 895). The allocation statement must also include the 
TINs of those foreign persons for whom such a number is required under 
paragraph (e)(4)(vii) of this section or Sec.  1.1441-6(b)(1) 
(regarding claims for treaty benefits for which a TIN is provided 
unless a foreign tax identifying number described in Sec.  1.1441-
6(b)(1) is provided). In the case of a claim of treaty benefits, the 
nonqualified intermediary's withholding statement must also state 
whether the limitation on benefits and section 894 statements required 
by Sec.  1.1441-6(c)(5) have been provided, if required, in the 
beneficial owner's Form W-8 or associated with such owner's documentary 
evidence.
    (iv) The withholding statement must also contain any other 
information the withholding agent reasonably requests in order to 
fulfill its obligations under chapter 3 and chapter 61 of the Code, and 
section 3406.
    (2) Nonqualified intermediary withholding statement for 
withholdable payments. This paragraph (e)(3)(iv)(C)(2) modifies the 
requirements of a withholding statement described in paragraph 
(e)(3)(iv)(C)(1) of this section that is provided by a nonqualified 
intermediary with respect to a reportable amount that is a withholdable 
payment. For such a payment, the requirements applicable to a 
withholding statement described in paragraph (e)(3)(iv)(A) through 
(e)(3)(iv)(C)(1) of this section shall apply, except that--
    (i) The withholding statement must include the chapter 4 status 
(using the applicable status code used for filing Form 1042-S) and GIIN 
(when required for chapter 4 purposes under Sec.  1.1471-3(d)) of each 
other intermediary or flow-through entity that is a foreign person and 
that receives the payment, excluding an intermediary or flow-through 
entity that is an account holder of or interest holder in a withholding 
foreign partnership, withholding foreign trust, or intermediary acting 
as a qualified intermediary for the payment;
    (ii) If the nonqualified intermediary that is a participating FFI 
or registered deemed-compliant FFI provides a withholding statement 
described in Sec.  1.1471-3(c)(3)(iii)(B)(2) (describing an FFI 
withholding statement), the withholding statement may include chapter 4 
withholding rate pools with respect to the portions of the payment 
allocated to nonparticipating FFIs and recalcitrant account holders (to 
the extent permitted on an FFI withholding statement described in that 
paragraph) in lieu of providing specific payee information with respect 
to such persons on the statement (including persons subject to chapter 
4 withholding) as described in paragraph (e)(3)(iv)(C)(1) of this 
section;
    (iii) If the nonqualified intermediary provides a withholding 
statement described in Sec.  1.1471-3(c)(3)(iii)(B)(3) (describing a 
chapter 4 withholding statement), the withholding statement may include 
chapter 4 withholding rate pools with respect to the portions of the 
payment allocated to nonparticipating FFIs;
    (iv) For a payment allocated to a payee that is a foreign person 
(other than a person included in a chapter 4 withholding rate pool 
described in paragraphs (e)(3)(iv)(C)(2)(ii) and (iii) of this section) 
that is reported on a withholding statement described in Sec.  1.1471-
3(c)(3)(iii)(B)(2) or (3), the withholding statement must include the 
chapter 4 status of the payee (unless an exception applies for purposes 
of providing such status under chapter 4) and, for a payee other than 
an individual, the recipient code for chapter 4 purposes used for 
filing Form 1042-S; and
    (v) To the extent that a withholdable payment is not reportable on 
a Form 1042-S, Form 1099 under the rules of chapter 61, or Form 8966 
``FATCA Report,'' no allocation of the payment is required on the 
withholding statement.
    (3) [Reserved]. For further guidance, see Sec.  1.1441-
1T(e)(3)(iv)(C)(3).
    (4)

    Example. This example illustrates the principles of paragraph 
(e)(3)(iv)(C) of this section. WA makes a withholdable payment of 
U.S. source dividends to NQI, a nonqualified intermediary. NQI 
provides WA with a valid intermediary withholding certificate under 
paragraph (e)(3)(iii) of this section that includes NQI's 
certification of its status for chapter 4 purposes as a 
participating FFI. NQI provides a withholding statement on which NQI 
allocates 20% of the payment to a chapter 4 withholding rate pool of 
recalcitrant account holders of NQI for purposes of chapter 4 and 
allocates 80% of the payment equally to A and B, individuals that 
are account holders of NQI. NQI also provides WA with valid 
beneficial owner withholding certificates from A and B establishing 
their status as foreign persons entitled to a 15% rate of 
withholding under an applicable income tax treaty. Because NQI has 
certified its status as a participating FFI, withholding under 
chapter 4 is not required with respect to NQI. See Sec.  1.1471-
2(a)(4). Based on the documentation NQI provided to WA with respect 
to A and B, WA can reliably associate the payment with valid 
documentation on the portion of the payment allocated to them and, 
because the payment is a withholdable payment, may rely on the 
allocation of the payment for NQI's recalcitrant account holders in 
a chapter 4 withholding rate pool in lieu of payee information with 
respect to such account holders. See paragraph (e)(3)(iv)(C)(2) of 
this section for the special rules for a withholding statement 
provided by a nonqualified intermediary for a withholdable payment. 
Also see Sec.  1.1471-2(a) for WA's withholding requirements under 
chapter 4 with respect to the portion of the payment allocated to 
NQI's recalcitrant account holders and Sec.  1.1441-3(a)(2) for 
coordinating withholding under chapter 3 for payments to which 
withholding is applied under chapter 4.

    (D) Alternative procedures--(1) In general. Under the alternative 
procedures of this paragraph (e)(3)(iv)(D), a nonqualified intermediary 
may provide information allocating a payment of a reportable amount to 
each payee (including U.S. exempt recipients) otherwise required under 
paragraph (e)(3)(iv)(B)(2) of this section after a payment is made. To 
use the alternative procedure of this paragraph (e)(3)(iv)(D), the 
nonqualified intermediary must inform the withholding agent on a 
statement associated with its nonqualified intermediary withholding 
certificate that it is using the procedure under this paragraph 
(e)(3)(iv)(D) and the withholding agent must agree to the procedure. If 
the requirements of the alternative procedure are met, a withholding 
agent, including the nonqualified intermediary using the procedures, 
can treat the payment as reliably associated with documentation and, 
therefore, the presumption rules of paragraph (b)(3) of this section 
and Sec. Sec.  1.1441-5(d) and (e)(6) and 1.6049-5(d) do not apply even 
though information allocating the payment to each payee has not been 
received prior to the payment. See paragraph (e)(3)(iv)(D)(7) of this 
section, however, for a nonqualified intermediary's

[[Page 2075]]

liability for tax and penalties if the requirements of this paragraph 
(e)(3)(iv)(D) are not met. These alternative procedures shall not be 
used for payments that are allocable to U.S. non-exempt recipients 
except as provided in paragraph (e)(3)(iv)(D)(2)(ii) of this section. 
Therefore, a nonqualified intermediary is required to provide a 
withholding agent with information allocating payments of reportable 
amounts to U.S. non-exempt recipients prior to the payment being made 
by the withholding agent.
    (2) Withholding rate pools--(i) In general. In place of the 
information required in paragraph (e)(3)(iv)(C)(2) of this section 
allocating payments to each payee, the nonqualified intermediary must 
provide a withholding agent with withholding rate pool information 
prior to the payment of a reportable amount. The withholding statement 
must contain all other information required by paragraph (e)(3)(iv)(C) 
of this section. Further, each payee listed in the withholding 
statement must be assigned to an identified withholding rate pool. To 
the extent a nonqualified intermediary is required to provide, or does 
provide, documentation, the alternative procedures do not relieve the 
nonqualified intermediary from the requirement to provide documentation 
prior to the payment being made. Therefore, withholding certificates or 
other appropriate documentation and all information required by 
paragraph (e)(3)(iv)(C) of this section (other than allocation 
information) must be provided to a withholding agent before any new 
payee receives a reportable amount. In addition, the withholding 
statement must be updated by assigning a new payee to a withholding 
rate pool prior to the payment of a reportable amount. A withholding 
rate pool is a payment of a single type of income, determined in 
accordance with the categories of income used to file Form 1042-S, that 
is subject to a single rate of withholding. A withholding rate pool may 
be established by any reasonable method to which the nonqualified 
intermediary and a withholding agent agree (e.g., by establishing a 
separate account for a single withholding rate pool, or by dividing a 
payment made to a single account into portions allocable to each 
withholding rate pool). The nonqualified intermediary shall determine 
withholding rate pools based on valid documentation or, to the extent a 
payment cannot be reliably associated with valid documentation, the 
presumption rules of paragraph (b)(3) of this section and Sec. Sec.  
1.1441-5(d) and (e)(6) and 1.6049-5(d).
    (ii) Withholding rate pools for chapter 4 purposes. This paragraph 
(e)(3)(iv)(D)(2)(ii) modifies the provisions of paragraph 
(e)(3)(iv)(D)(2)(i) of this section with respect to the withholding 
rate pools permitted for the alternative procedures described in 
paragraph (e)(3)(iv)(D)(1) of this section in the case of a payment 
that is allocable on a withholding statement to a chapter 4 withholding 
rate pool as described in this paragraph. In the case of a withholdable 
payment, a nonqualified intermediary may include reportable amounts 
allocable to a chapter 4 withholding rate pool (other than a chapter 4 
withholding rate pool of U.S. payees) in a 30-percent rate pool 
together with a withholding rate pool for amounts subject to chapter 3 
withholding at the 30-percent rate. For a payment of a reportable 
amount that is allocable to a chapter 4 withholding rate pool of U.S. 
payees on a withholding statement, a nonqualified intermediary may 
include such amount in a single withholding rate pool with the amount 
of the payment that is exempt from withholding under chapter 3 instead 
of providing documentation regarding U.S. non-exempt recipients 
included in the pool or separately allocating the amount to the chapter 
4 withholding rate pool. To the extent that a nonqualified intermediary 
allocates an amount to any chapter 4 withholding rate pool, the 
nonqualified intermediary is required to notify the withholding agent 
of the allocation before receiving the payment and is not required to 
provide documentation with respect to the payees included in such pool. 
The nonqualified intermediary shall determine the chapter 4 withholding 
rate pools permitted to be used under this paragraph 
(e)(3)(iv)(D)(2)(ii) in accordance with the nonqualified intermediary's 
applicable chapter 4 status and under Sec.  1.1471-3(c)(3)(iii)(B)(2) 
(for an FFI withholding statement) or (c)(3)(iii)(B)(3) (for a chapter 
4 withholding statement) or under Sec.  1.6049-4(c)(4) for a chapter 4 
withholding rate pool of U.S. payees (or similar applicable 
coordination rule in chapter 61 for payments other than interest). 
Additionally, the nonqualified intermediary shall identify those payees 
to which withholding under chapter 4 applies that are not included in a 
chapter 4 reporting pool (including payees that could be included in a 
chapter 4 withholding rate pool for whom the nonqualified intermediary 
chooses to provide payee specific information).
    (3) Allocation information. The nonqualified intermediary must 
provide the withholding agent with sufficient information to allocate 
the income in each withholding rate pool to each payee (including U.S. 
exempt recipients or any chapter 4 withholding rate pool identified by 
the withholding agent under paragraph (e)(3)(iv)(D)(2)(ii) of this 
section) within the pool no later than January 31 of the year following 
the year of payment. Any payments that are not allocated to payees for 
whom documentation has been provided or a chapter 4 withholding rate 
pool referred to in the previous sentence shall be allocated to an 
undocumented payee in accordance with the presumption rules of 
paragraph (b)(3) of this section and Sec. Sec.  1.1441-5(d) and (e)(6), 
1.6049-5(d), and 1.1471-3(f)(5) (for a withholdable payment for chapter 
4 purposes). Notwithstanding the preceding sentence, deposit interest 
(including original issue discount) described in section 871(i)(2)(A) 
or 881(d) and interest or original issue discount on short-term 
obligations as described in section 871(g)(1)(B) or 881(e) is not 
required to be allocated to a U.S. exempt recipient or a foreign payee, 
except as required under Sec.  1.6049-8 (regarding reporting of deposit 
interest paid to certain foreign persons).
    (4) Failure to provide allocation information. Except as provided 
in paragraph (e)(3)(iv)(D)(5) of this section, if a nonqualified 
intermediary fails to provide allocation information, if required, by 
January 31 for any withholding rate pool to the extent required in 
paragraph (e)(3)(iv)(D)(3) of this section, a withholding agent shall 
not apply the alternative procedures of this paragraph (e)(3)(iv)(D) to 
any payments of reportable amounts paid after January 31 in the taxable 
year following the calendar year for which allocation information was 
not given and any subsequent taxable year. Further, the alternative 
procedures shall be unavailable for any other withholding rate pool 
(other than a chapter 4 withholding rate pool as otherwise permitted) 
even though allocation information was given for that other pool. 
Therefore, the withholding agent must withhold on a payment of a 
reportable amount in accordance with the presumption rules of paragraph 
(b)(3) of this section, and Sec. Sec.  1.1441-5(d) and (e)(6), 1.6049-
5(d), and 1.1471-3(f)(5) (for a withholdable payment for chapter 4 
purposes), unless the nonqualified intermediary provides all of the 
information, including information sufficient to allocate the payment 
to each specific payee or chapter 4 withholding rate pool (as 
permitted), required by paragraph

[[Page 2076]]

(e)(3)(iv)(A) through (C) of this section prior to the payment. A 
nonqualified intermediary must allocate at least 90 percent of the 
income required to be allocated for each withholding rate pool as 
required under this paragraph (e)(3)(iv)(D)(4) or the nonqualified 
intermediary will be treated as having failed to provide allocation 
information for purposes of this paragraph (e)(3)(iv)(D). For purposes 
of the allocation, a nonqualified intermediary is required to identify 
by January 31 the portion of the payment that is allocated to each 
chapter 4 withholding rate pool (rather than the payees included in 
each such pool). See paragraph (e)(3)(iv)(D)(7) of this section for 
liability for tax and penalties if a nonqualified intermediary fails to 
provide allocation information in whole or in part.
    (5) Cure provision. A nonqualified intermediary may cure any 
failure to provide allocation information by providing the required 
allocation information to the withholding agent no later than February 
14 following the calendar year of payment. If the withholding agent 
receives the allocation information by that date, it may apply the 
adjustment procedures of Sec.  1.1461-2 (or of Sec.  1.1474-2 for an 
amount withheld under chapter 4) to any excess withholding for payments 
made on or after February 1 and on or before February 14. Any 
nonqualified intermediary that fails to cure by February 14 may request 
the ability to use the alternative procedures of this paragraph 
(e)(3)(iv)(D) by submitting a request, in writing, to the IRS. The 
request must state the reason that the nonqualified intermediary did 
not comply with the alternative procedures of this paragraph 
(e)(3)(iv)(D) and steps that the nonqualified intermediary has taken, 
or will take, to ensure that no failures occur in the future. If the 
IRS determines that the alternative procedures of this paragraph 
(e)(3)(iv)(D) may apply, a determination to that effect will be issued 
by the IRS to the nonqualified intermediary.
    (6) Form 1042-S reporting in case of allocation failure. If a 
nonqualified intermediary fails to provide allocation information by 
February 14 following the year of payment for a withholding rate pool, 
the withholding agent must file Forms 1042-S for payments made to each 
payee in that pool (other than U.S. exempt recipients) in the prior 
calendar year by pro rating the payment to each payee (including U.S. 
exempt recipients) listed in the withholding statement for that 
withholding rate pool, treating as a payee for this purpose each 
chapter 4 withholding rate pool identified by the nonqualified 
intermediary under paragraph (e)(3)(iv)(D)(2)(ii) of this section. If 
the nonqualified intermediary fails to allocate 10 percent or less of 
an amount required to be allocated for a withholding rate pool, a 
withholding agent shall report the unallocated amount as paid to a 
single unknown payee in accordance with the presumption rules of 
paragraph (b) of this section and Sec. Sec.  1.1441-5(d) and (e)(6), 
1.6049-5(d), and Sec.  1.1471-3(f)(5) (for a withholdable payment for 
chapter 4 purposes). The portion of the payment that can be allocated 
to specific recipients, as defined in Sec.  1.1461-1(c)(1)(ii), shall 
be reported to each recipient in accordance with the rules of Sec.  
1.1461-1(c) and Sec.  1.1474-1(d)(2) (for a withholdable payment).
* * * * *
    (E) Notice procedures. The IRS may notify a withholding agent that 
the alternative procedures of paragraph (e)(3)(iv)(D) of this section 
are not applicable to a specified nonqualified intermediary, a U.S. 
branch described in paragraph (b)(2)(iv) of this section, or a flow-
through entity. If a withholding agent receives such a notice, it must 
commence withholding under this section or chapter 4 (if applicable) in 
accordance with the presumption rules of paragraph (b)(3) of this 
section and Sec. Sec.  1.1441-5(d) and (e)(6), 1.6049-5(d), and1.1471-
3(f)(5) (for a withholdable payment for chapter 4 purposes) unless the 
nonqualified intermediary, U.S. branch, or flow-through entity complies 
with the procedures in paragraphs (e)(3)(iv)(A) through (C) of this 
section. In addition, the IRS may notify a withholding agent, in 
appropriate circumstances, that it must apply the presumption rules of 
paragraph (b)(3) of this section and Sec. Sec.  1.1441-5(d) and (e)(6), 
1.6049-5(d), and Sec.  1.1471-3(f)(5) (for a withholdable payment for 
chapter 4 purposes) to payments made to a nonqualified intermediary, a 
U.S. branch, or a flow-through entity even if the nonqualified 
intermediary, U.S. branch, or flow-through entity provides allocation 
information prior to the payment. A withholding agent that receives a 
notice under this paragraph (e)(3)(iv)(E) must commence withholding in 
accordance with the presumption rules within 30 days of the date of the 
notice. The IRS may withdraw its prohibition against using the 
alternative procedures of paragraph (e)(3)(iv)(D) of this section, or 
its requirement to follow the presumption rules, if the nonqualified 
intermediary, U.S. branch, or flow-through entity can demonstrate to 
the satisfaction of the IRS that it is capable of complying with the 
rules under chapter 3 of the Code and any other conditions required by 
the IRS.
    (v) Withholding certificate from certain U.S. branches (including 
territory financial institutions). A U.S. branch certificate is a 
withholding certificate provided by a U.S. branch (including a 
territory financial institution) described in paragraph (b)(2)(iv) of 
this section that is not the beneficial owner of the income. The 
withholding certificate is provided with respect to reportable amounts 
and must state that such amounts are not effectively connected with the 
conduct of a trade or business in the United States. The withholding 
certificate must either transmit the appropriate documentation for the 
persons for whom the branch receives the payment (i.e., as an 
intermediary) or be provided as evidence of its agreement with the 
withholding agent to be treated as a U.S. person with respect to any 
payment associated with the certificate. A U.S. branch withholding 
certificate is valid only if it is furnished on a Form W-8, an 
acceptable substitute form, or such other form as the IRS may 
prescribe, it is signed under penalties of perjury by a person 
authorized to sign for the branch, its validity has not expired, and it 
contains the information, statements, and certifications described in 
this paragraph (e)(3)(v). If the certificate is furnished to transmit 
withholding certificates and other documentation, it must contain the 
information, certifications, and statements described in paragraphs 
(e)(3)(v)(A) through (C) of this section and in paragraphs (e)(3)(iii) 
and (iv) (alternative procedures) of this section, applying the term 
U.S. branch instead of the term nonqualified intermediary. If the 
certificate is furnished pursuant to an agreement to treat the U.S. 
branch or territory financial institution as a U.S. person (which 
agreement must be for purposes of chapter 4 in addition to this section 
in the case of a payment that is a withholdable payment), the 
information and certifications required on the withholding certificate 
are limited to the following--
    (A) The name of the territory financial institution or person of 
which the U.S. branch is a part, the address of the territory financial 
institution or U.S. branch;
    (B) A certification that the payments associated with the 
certificate are not effectively connected with the conduct of its trade 
or business in the United States;
    (C) The EIN of the U.S. branch or territory financial institution;

[[Page 2077]]

    (D) When required for chapter 4 purposes, the chapter 4 status and 
GIIN (if applicable) of the entity of which the U.S. branch is a part; 
and
    (E) Any other information, certifications, or statements as may be 
required by the form or accompanying instructions in addition to, or in 
lieu of, the information and certification described in this paragraph 
(e)(3)(v).
* * * * *
    (4) Applicable rules. The provisions in this paragraph (e)(4) 
describe procedures applicable to withholding certificates on Form W-8 
or Form 8233 (or a substitute form) or documentary evidence furnished 
to establish foreign status. These provisions do not apply to Forms W-9 
(or their substitutes). For corresponding provisions regarding Form W-9 
(or a substitute form), see section 3406 and the regulations under that 
section.
    (i) Who may sign the certificate--(A) In general. A withholding 
certificate (including an acceptable substitute) may be signed by any 
person authorized to sign a declaration under penalties of perjury on 
behalf of the person whose name is on the certificate as provided in 
section 6061 and the regulations under that section (relating to who 
may sign generally for an individual, estate, or trust, which includes 
certain agents who may sign returns and other documents), section 6062 
and the regulations under that section (relating to who may sign 
corporate returns), and section 6063 and the regulations under that 
section (relating to who may sign partnership returns). A person 
authorized to sign a withholding certificate includes an officer or 
director of a corporation, a partner of a partnership, a trustee of a 
trust, an executor of an estate, any foreign equivalent of the former 
titles, and any other person that has been provided written 
authorization by the individual or entity named on the certificate to 
sign documentation on such person's behalf.
    (B) [Reserved]. For further guidance, see Sec.  1.1441-
1T(e)(4)(i)(B).
    (ii) Period of validity--(A) General rule--(1) Withholding 
certificates and documentary evidence. Except as provided otherwise in 
paragraphs (e)(4)(ii)(B) and (C) of this section and this paragraph 
(e)(4)(ii)(A), a withholding certificate described in paragraph 
(e)(2)(i) of this section, or a certificate described in Sec.  1.871-
14(c)(2)(v) (furnished to qualify interest as portfolio interest for 
purposes of sections 871(h) and 881(c)), will remain valid until the 
earlier of the last day of the third calendar year following the year 
in which the withholding certificate is signed or the day that a change 
in circumstances occurs that makes any information on the certificate 
incorrect. For example, a withholding certificate signed on September 
30, 2015, remains valid through December 31, 2018, unless circumstances 
change that make the information on the form no longer correct. 
Documentary evidence described in Sec.  1.6049-5(c)(1) provided to 
establish a payee's foreign status shall remain valid until the last 
day of the third calendar year following the year in which the 
documentary evidence is provided to the withholding agent except as 
provided in paragraph (e)(4)(ii)(B) of this section; however, if such 
documentary evidence contains an expiration date, it may be treated as 
valid until that expiration date if doing so would provide a longer 
period of validity than the three-year period. Additionally, a 
withholding certificate or documentary evidence with a period of 
validity that is valid on December 31, 2013, will not be treated as 
invalid based solely on the period described in this paragraph 
(e)(4)(ii) before January 1, 2015. Notwithstanding the validity periods 
prescribed by this paragraph (e)(4)(ii)(A) and paragraphs (e)(4)(ii)(B) 
and (C) of this section, a withholding certificate and documentary 
evidence will cease to be valid if a change in circumstances makes the 
information on the documentation incorrect.
    (2) [Reserved]. For further guidance, see Sec.  1.1441-
1T(e)(4)(ii)(A)(2).
    (B) Indefinite validity period. Notwithstanding paragraph 
(e)(4)(ii)(A) of this section, the certificates (or parts of 
certificates) and documentary evidence described in paragraphs 
(e)(4)(ii)(B)(1) through (11) of this section shall remain valid until 
a change in circumstances makes the information on the documentation 
incorrect under paragraph (e)(4)(ii)(D)(3). See, however, Sec.  1.1471-
3(c)(6)(ii) for when a withholding certificate or documentary evidence 
remains valid (or is subject to renewal) when also provided with 
respect to a withholdable payment made to an entity (including an 
intermediary) for purposes of whether a withholding agent may continue 
to rely on the entity's claim of chapter 4 status. Additionally, the 
provisions of paragraphs (e)(4)(ii)(B)(1), (2), and (11) of this 
section do not apply to documentary evidence or a withholding 
certificate furnished prior to July 1, 2014. (For documentary evidence 
or a withholding certificate furnished after December 31, 2000, and 
before July 1, 2014, see this section as in effect and contained in 26 
CFR part 1, as revised April 1, 2013.)
    (1) A beneficial owner withholding certificate (other than the 
portion of the certificate making a claim for treaty benefits) and 
documentary evidence supporting a claim of foreign status when both are 
provided together by an individual claiming foreign status, if the 
withholding agent does not have a current U.S. residence address or 
U.S. mailing address for the payee, does not have one or more current 
U.S. telephone numbers that are the only telephone numbers the 
withholding agent has for the payee, and, for a payment described in 
Sec.  1.6049-5(c)(1), the withholding agent has not been provided 
standing instructions to make a payment to an account in the United 
States for the obligation. For purposes of the preceding sentence, a 
beneficial owner withholding certificate and documentary evidence 
supporting the individual's claim of foreign status will be treated as 
provided together if they are provided within 30 days of each other, 
regardless of which the withholding agent receives first.
    (2) A beneficial owner withholding certificate (other than the 
portion of the certificate making a claim for treaty benefits) and 
documentary evidence provided by an entity supporting the entity's 
claim of foreign status, if both are received by the withholding agent 
before the validity period of either the withholding certificate or the 
documentary evidence would otherwise expire under paragraph 
(e)(4)(ii)(A) of this section. See, however, Sec.  1.1471-3(c)(6)(ii) 
for rules regarding indefinite validity for chapter 4 purposes.
    (3) A beneficial owner withholding certificate provided by an 
entity claiming status as a tax-exempt entity under section 501(c) that 
is not a foreign private foundation under section 509, provided that 
the withholding agent reports at least one payment annually to the 
entity under Sec.  1.1461-1(c).
    (4) A certificate described in paragraph (e)(3)(ii) of this section 
(a qualified intermediary withholding certificate) but not including 
the withholding certificates, documentary evidence, statements, or 
other information associated with the certificate.
    (5) A certificate described in paragraph (e)(3)(iii) of this 
section (a nonqualified intermediary certificate), but not including 
the withholding certificates, documentary evidence, statements, or 
other information associated with the certificate.
    (6) A certificate described in paragraph (e)(3)(v) of this section 
(a U.S. branch (including a territory financial institution) 
withholding certificate that is not provided by the beneficial owner),

[[Page 2078]]

but not including the withholding certificates, documentary evidence, 
statements, or other information associated with the certificate.
* * * * *
    (8) A withholding certificate provided by a withholding foreign 
trust described in Sec.  1.1441-5(e)(5)(v).
    (9) A certificate described in Sec.  1.1441-5(c)(2)(iv) (dealing 
with a certificate from a person representing to be a withholding 
foreign partnership).
    (10) A certificate described in Sec.  1.1441-5(c)(3)(iii) (a 
withholding certificate from a nonwithholding foreign partnership) or 
in Sec.  1.1441-5(e)(5)(iii) (a withholding certificate of a foreign 
simple or foreign grantor trust) but not including the withholding 
certificates, documentary evidence, statements, or other information 
required to be associated with the certificate; and
    (11) Documentary evidence that is not generally renewed or amended 
(such as a certificate of incorporation).
    (C) Withholding certificate for effectively connected income. 
Notwithstanding paragraph (e)(4)(ii)(B) of this section, the period of 
validity of a withholding certificate furnished to a withholding agent 
to claim a reduced rate of withholding for income that is effectively 
connected with the conduct of a trade or business within the United 
States shall be limited to the three-year period described in paragraph 
(e)(4)(ii)(A) of this section.
    (D) Change in circumstances--(1) Defined. A certificate or 
documentation becomes invalid from the date of a change in 
circumstances affecting the correctness of the certificate or 
documentation to the extent provided in this paragraph (e)(4)(ii)(D). 
For purposes of this section, a person is considered to have a change 
in circumstances only if such change affects the person's claim of 
chapter 3 status. Thus, for example, a change of address is not a 
change in circumstances with respect to a claim of only foreign status 
under this paragraph (e)(4)(ii)(D) if the change is to another address 
outside the United States, but is a change in circumstances if the 
change is to an address in the United States.
    (2) Obligation to notify a withholding agent of a change in 
circumstances. If a change in circumstances makes any information on a 
certificate or other documentary evidence incorrect, then the person 
whose name is on the certificate or other documentation must inform the 
withholding agent within 30 days of the change and furnish a new 
certificate or new documentary evidence. If an intermediary (including 
a U.S. branch or territory financial institution described in paragraph 
(b)(2)(iv)(A) of this section) or a flow-through entity becomes aware 
that a certificate or other appropriate documentation it has furnished 
to the person from whom it collects a payment is no longer valid 
because of a change in the circumstances of the person who issued the 
certificate or furnished the other appropriate documentation, then the 
intermediary or flow-through entity must notify the person from whom it 
collects the payment of the change of circumstances within 30 days of 
the date that it knows or has reason to know of the change in 
circumstances. It must also obtain a new withholding certificate or new 
appropriate documentation to replace the existing certificate or 
documentation the validity of which has expired due to the change in 
circumstances to continue to treat the person who provided the 
certificate or documentary evidence under its claimed chapter 3 status.
    (3) Withholding agent's obligation with respect to a change in 
circumstances. A withholding agent may rely on a certificate without 
having to inquire into possible changes of circumstances that may 
affect the validity of the statement, unless it knows or has reason to 
know that circumstances have changed, as permitted under paragraph 
(e)(4)(viii) of this section. A withholding agent is required to notify 
any person providing documentary evidence (in lieu of a withholding 
certificate) of the person's obligation to notify the withholding agent 
of a change in circumstances. However, a withholding agent may choose 
to apply the provisions of paragraph (b)(3)(iv) of this section 
regarding the 90-day grace period as of that date while awaiting a new 
certificate or documentation or while seeking information regarding 
changes, or suspected changes, in the person's circumstances. A 
withholding agent may also require a new certificate at any time prior 
to a payment, even though the withholding agent has no actual knowledge 
or reason to know that any information stated on the certificate has 
changed.
    (iii) Retention of documentation. A withholding agent must retain 
each withholding certificate and other documentation for purposes of 
this section for as long as it may be relevant to the determination of 
the withholding agent's tax liability under section 1461 and Sec.  
1.1461-1. A withholding agent may retain a withholding certificate or 
documentary evidence that is an original, certified copy, or a scanned 
document (as described in paragraph (e)(4)(iv)(D) of this section). A 
withholding agent may also retain a withholding certificate by other 
means (such as microfiche) that allows a reproduction of the document 
provided that the withholding agent has recorded its receipt of a form 
described in the preceding sentence and is able to produce a hard copy 
of the form. See Sec.  1.6049-5(c)(1) for the requirements for 
maintaining documentary evidence that also apply for purposes of 
determining a payee's U.S. or foreign status for purposes of chapter 3.
    (iv) Electronic transmission of information--(A) In general. A 
withholding agent may establish a system for a beneficial owner or 
payee to electronically furnish a Form W-8, an acceptable substitute 
Form W-8, or such other form as the IRS may prescribe. The system must 
meet the requirements described in paragraph (e)(4)(iv)(B) of this 
section. See paragraph (e)(4)(iv)(D) of this section for other cases in 
which a Form W-8 (or other documentation) may be furnished 
electronically.
* * * * *
    (C) [Reserved]. For further guidance, see Sec.  1.1441-
1T(e)(4)(iv)(C).
    (D) Forms and documentary evidence received by facsimile or email. 
A withholding agent may rely upon an otherwise valid Form W-8 (or 
documentary evidence) received by facsimile or a form or document 
scanned and received electronically, such as, for example, an image 
embedded in an email or as a Portable Document Format (.pdf) attached 
to an email. A withholding agent may not rely on a form or document 
received by such means, however, if the withholding agent knows that 
the form or document was transmitted to the withholding agent by a 
person not authorized to do so by the person required to execute the 
form. A withholding agent may establish other procedures to 
authenticate and verify a form or document sent by such means and may 
reject any form or document that fails to satisfy the requirements of 
such procedures. A taxpayer may apply this paragraph (e)(4)(iv)(D) to 
all of its open tax years, including tax years that are currently under 
examination by the IRS.
    (E) [Reserved]. For further guidance, see Sec.  1.1441-
1T(e)(4)(iv)(E).
    (v) Additional procedures for certificates provided electronically. 
The IRS may prescribe procedures in a revenue procedure (see Sec.  
601.601(d)(2) of this chapter) or may issue other appropriate guidance 
(including a written directive for revenue agents) to further prescribe 
the conditions by which the IRS will determine that a system developed 
by a withholding

[[Page 2079]]

agent to permit beneficial owners and payees to provide Forms W-8 
electronically satisfies the requirements of paragraph (e)(4)(iv)(B) of 
this section.
    (vi) Acceptable substitute form. A withholding agent may substitute 
its own form instead of an official Form W-8 or 8233 (or such other 
official form as the IRS may prescribe). Such a substitute for an 
official form will be acceptable if it contains provisions that are 
substantially similar to those of the official form, it contains the 
same certifications relevant to the transactions as are contained on 
the official form and these certifications are clearly set forth, and 
the substitute form includes a signature-under-penalties-of-perjury 
statement identical to the one stated on the official form. The 
substitute form is acceptable even if it does not contain all of the 
provisions contained on the official form, so long as it contains those 
provisions that are relevant to the transaction for which it is 
furnished (including those required for purposes of chapter 4). For 
example, a withholding agent that pays no income for which treaty 
benefits are claimed may develop a substitute form that is identical to 
the official form, except that it does not include information 
regarding claims of benefits under an income tax treaty. Similarly, a 
withholding agent that is not required to determine the chapter 4 
status of a payee providing a form may develop a substitute form that 
does not contain chapter 4 statuses. A withholding agent who uses a 
substitute form must furnish instructions relevant to the substitute 
form only to the extent and in the manner specified in the instructions 
to the official form. A withholding agent may use a substitute form 
that is written in a language other than English and may accept a form 
that is filled out in a language other than English, but the 
withholding agent must make available an English translation of the 
form and its contents to the IRS upon request. A withholding agent may 
refuse to accept a certificate from a payee or beneficial owner 
(including the official Form W-8 or 8233) if the certificate provided 
is not an acceptable substitute form provided by the withholding agent, 
but only if the withholding agent furnishes the payee or beneficial 
owner with an acceptable substitute form within 5 business days of 
receipt of an unacceptable form from the payee or beneficial owner. In 
that case, the substitute form is acceptable only if it contains a 
notice that the withholding agent has refused to accept the form 
submitted by the payee or beneficial owner and that the payee or 
beneficial owner must submit the acceptable form provided by the 
withholding agent in order for the payee or beneficial owner to be 
treated as having furnished the required withholding certificate.
    (vii) Requirement of taxpayer identifying number. A TIN must be 
stated on a withholding certificate when required by this paragraph 
(e)(4)(vii) for the withholding certificate to be valid for purposes of 
this section. A TIN is required to be stated on--
    (A) A withholding certificate on which a beneficial owner is 
claiming the benefit of a reduced rate under an income tax treaty 
(other than for amounts described in Sec.  1.1441-6(c)(2) or amounts 
for which a foreign tax identifying number has been provided, as 
described in Sec.  1.1441-6(c)(2));
* * * * *
    (F) A withholding certificate from a person representing to be a 
withholding foreign partnership or a withholding foreign trust;
* * * * *
    (H) A withholding certificate from a person representing to be a 
U.S. branch or territory financial institution described in paragraph 
(b)(2)(iv) of this section; and
    (I) A withholding certificate provided by an entity acting as a 
qualified securities lender, as defined for purposes of chapter 3, with 
respect to a substitute dividend paid in a securities lending or 
similar transaction.
    (viii) Reliance rules. A withholding agent may rely on the 
information and certifications stated on withholding certificates or 
other documentation without having to inquire into the veracity of this 
information or certification, unless it has actual knowledge or reason 
to know that the information or certification is incorrect. In the case 
of amounts described in Sec.  1.1441-6(c)(2), a withholding agent 
described in Sec.  1.1441-7(b)(3) has reason to know that the 
information or certifications on a certificate are incorrect only to 
the extent provided in Sec.  1.1441-7(b)(4) through (6). See Sec.  
1.1441-6(b)(1) for reliance on representations regarding eligibility 
for a reduced rate under an income tax treaty. Paragraphs 
(e)(4)(viii)(A) and (B) of this section provide examples of such 
reliance.
* * * * *
    (B) Status of payee as an intermediary or as a person acting for 
its own account. A withholding agent may rely on the type of 
certificate furnished as indicative of the payee's status as an 
intermediary or as an owner, unless the withholding agent has actual 
knowledge or reason to know otherwise. For example, a withholding agent 
that receives a beneficial owner withholding certificate from a foreign 
financial institution may treat the institution as the beneficial 
owner, unless it has information in its records that would indicate 
otherwise or the certificate contains information that is not 
consistent with beneficial owner status (e.g., sub-account numbers that 
do not correspond to accounts maintained by the withholding agent for 
such person or names of one or more persons other than the person 
submitting the withholding certificate). If the financial institution 
also acts as an intermediary, the withholding agent may request that 
the institution furnish two certificates, i.e., a beneficial owner 
certificate described in paragraph (e)(2)(i) of this section for the 
amounts that it receives as a beneficial owner, and an intermediary 
withholding certificate described in paragraph (e)(3)(i) of this 
section for the amounts that it receives as an intermediary. In the 
absence of reliable representation or information regarding the status 
of the payee as an owner or as an intermediary, see paragraph 
(b)(3)(v)(A) for applicable presumptions.
    (C) Reliance on a prior version of a withholding certificate. Upon 
the issuance by the IRS of an updated version of a withholding 
certificate, a withholding agent may continue to accept the prior 
version of the withholding certificate until the later of six full 
months after the revision date shown on the updated withholding 
certificate or the end of the calendar year the updated withholding 
certificate is issued, unless the IRS has issued guidance that 
indicates that the period for accepting a prior version is shortened or 
extended (including in the instructions to the form), such as when 
there is a new payee status required to be established using the form. 
A withholding agent may continue to rely upon a previously signed prior 
version of the withholding certificate until its period of validity 
expires.
    (ix) Certificates to be furnished to withholding agent for each 
obligation unless exception applies. Unless otherwise provided in 
paragraphs (e)(4)(ix)(A) through (D) of this section, a withholding 
agent that is a financial institution with which a customer may open an 
account shall obtain a withholding certificate or documentary evidence 
on an obligation-by-obligation basis and may not rely upon such 
documentation collected by another person or another branch of the 
withholding agent.
    (A) Exception for certain branch or account systems or system 
maintained

[[Page 2080]]

by agent. A withholding agent may rely on a withholding certificate or 
documentary evidence furnished by a customer as part of a single branch 
system, universal account system, or shared account system described in 
Sec.  1.1471-3(c)(8) (substituting the term chapter 3 status for 
chapter 4 status each place it appears in that paragraph). Furthermore, 
a withholding agent may rely on a shared documentation system 
maintained by an agent as described in Sec.  1.1471-3(c)(9)(i) (also 
substituting the term chapter 3 status for chapter 4 status each place 
it appears in that paragraph).
    (B) Reliance on certification provided by introducing brokers--(1) 
In general. A withholding agent may rely on the certification of a 
broker indicating the broker's determination of a payee's chapter 3 
status and that the broker holds a valid beneficial owner withholding 
certificate described in paragraph (e)(2)(i) of this section or other 
appropriate documentation for that beneficial owner with respect to any 
readily tradable instrument, as defined in Sec.  31.3406(h)-1(d) of 
this chapter, if the broker is a United States person (including a U.S. 
branch treated as a U.S. person under paragraph (b)(2)(iv) of this 
section) that is acting as the agent of a beneficial owner. A 
withholding agent may also rely on a certification described in the 
preceding sentence that is provided by a qualified intermediary that 
makes payments to beneficial owners that it receives from the 
withholding agent. The certification must be in writing or in 
electronic form and contain all of the information required of a 
nonqualified intermediary under paragraphs (e)(3)(iv)(B) and (C) of 
this section. If a broker chooses to use this paragraph (e)(4)(ix)(B), 
that broker will be solely responsible for applying the rules of Sec.  
1.1441-7(b) to the withholding certificates or other appropriate 
documentation and shall be liable for any underwithholding as a result 
of the broker's failure to apply such rules. See Sec.  1.1471-
3(c)(9)(iii) for a similar allowance that applies to a broker's 
determination of a payee's chapter 4 status for purposes of chapter 4. 
For purposes of this paragraph (e)(4)(ix)(B), the term broker means a 
person treated as a broker under Sec.  1.6045-1(a).
    (2) Example. The following example illustrates the rules of this 
paragraph (e)(4)(x)(B) with respect to a U.S. broker:

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

    (C) Reliance on documentation and certifications provided between 
principals and agents--(1) Withholding agent as agent. A withholding 
agent that acts on behalf of a principal may rely upon documentation 
(or copies of documentation) obtained from the principal, and, with 
respect to a principal that is a U.S. withholding agent, a qualified 
intermediary (when acting as such for determining a payee's status), or 
a withholding foreign partnership or withholding foreign trust with 
respect to a partner, owner, or beneficiary in the partnership or 
trust, the withholding agent may rely upon certification provided by 
the principal for purposes of determining a payee's chapter 3 status. 
Thus an agent (such as a paying agent or transfer agent) may not rely 
upon a certification provided by a principal that is a participating 
FFI but is not also a qualified intermediary, withholding foreign 
partnership, or withholding foreign trust for purposes of this section, 
even though it may rely on the certification when provided solely for 
purposes of chapter 4 under Sec.  1.1471-3(c)(9)(iv).
    (2) Withholding agent as principal. A withholding agent may also 
rely on documentation collected by an agent of the withholding agent in 
order to fulfill its chapter 3 obligations because such agent's actions 
are imputed to the principal (the withholding agent). For example, a 
withholding agent may contract an agent to collect Forms W-8 from 
account holders on its behalf, but the withholding agent remains liable 
for any tax liability resulting from a failure of the agent to comply 
with the requirements of chapter 3.
    (D) Reliance upon documentation for accounts acquired in merger or 
bulk 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 for determining the chapter 3 status of an 
account holder of such an account. 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 (or a qualified intermediary when the withholding 
agent is also a qualified intermediary) may also rely upon the 
predecessor's or transferor's determination of the account holder's 
chapter 3 status for a transition period of the lesser of six months 
from the date of the merger or until the acquirer knows that the claim 
of entity classification and status is inaccurate or a change in 
circumstances occurs with respect to the account. At the end of the 
transition period, the acquirer will be permitted to rely upon the 
predecessor's determination as to the chapter 3 status of the account 
holder only if the documentation that the acquirer has for the account 
holder, including documentation obtained from the predecessor or 
transferor, supports the status claimed. An acquirer that discovers at 
the end of the transition period that the chapter 3 status assigned by 
the predecessor or transferor to the account holder was incorrect and 
has not withheld as it would have been required to but for its reliance 
upon the predecessor's determination, will be required to withhold on 
future payments, if any, made to the account holder the amount of tax 
that should have been withheld during the transition period but for the 
erroneous classification as to the account holder's status. For 
purposes of this paragraph (e)(4)(ix)(D), a related party transaction 
is a merger or sale of accounts in which the acquirer is in the same 
expanded affiliated group, within the meaning of Sec.  1.1471-5(i)(2), 
as the predecessor or transferor either prior to or after the merger or 
acquisition or the predecessor or transferor (or shareholders of the 
predecessor or transferor) obtain a controlling interest in the 
acquirer or in a newly formed entity created for purposes of the merger 
or acquisition. See Sec.  1.1471-3(c)(v) for a similar reliance rule 
that applies for purposes of chapter 4.
    (5) * * *
    (ii) Definition of qualified intermediary. With respect to a 
payment to a foreign person, the term qualified intermediary means a 
person that is a party to a withholding agreement with the IRS where 
such person is--
    (A) A foreign financial institution that is a participating FFI 
(including a reporting Model 2 FFI), a registered deemed-compliant FFI 
(including a reporting Model 1 FFI), an FFI treated as a deemed-
compliant FFI under an applicable IGA that is subject to due

[[Page 2081]]

diligence and reporting requirements with respect to its U.S. accounts 
similar to those applicable to a registered deemed-compliant FFI under 
Sec.  1.1471-5(f)(1), excluding a U.S. branch of any of the foregoing 
entities, or any other category of FFI identified in a qualified 
intermediary withholding agreement as eligible to act as a qualified 
intermediary;
    (B) A foreign branch or office of a U.S. financial institution or a 
foreign branch or office of a U.S. clearing organization that is either 
a reporting Model 1 FFI or agrees to the reporting requirements 
applicable to a participating FFI with respect to its U.S. accounts;
    (C) [Reserved].
    (D) Any other person acceptable to the IRS.
    (iii) Withholding agreement--(A) In general. The IRS may, upon 
request, enter into a withholding agreement with a foreign person 
described in paragraph (e)(5)(ii) of this section pursuant to such 
procedures as the IRS may prescribe in published guidance (see Sec.  
601.601(d)(2) of this chapter). Under the withholding agreement, a 
qualified intermediary shall generally be subject to the applicable 
withholding and reporting provisions applicable to withholding agents 
and payors under chapters 3, 4, and 61 of the Code, section 3406, the 
regulations under those provisions, and other withholding provisions of 
the Code, except to the extent provided under the agreement.
    (B) Terms of the withholding agreement. The withholding agreement 
shall specify the obligations of the qualified intermediary under 
chapters 3 and 4 including, for a qualified intermediary that is an 
FFI, the documentation, withholding, and reporting obligations required 
of a participating FFI or registered deemed-compliant FFI (including a 
reporting Model 1 FFI as defined in Sec.  1.1471-1(b)(114)) with 
respect to each branch of the qualified intermediary other than a U.S. 
branch that is treated as a U.S. person under paragraph (b)(2)(iv)(A) 
of this section. The withholding agreement will specify the type of 
certifications and documentation upon which the qualified intermediary 
may rely to ascertain the classification (e.g., corporation or 
partnership), status (i.e., U.S. or foreign and chapter 4 status) of 
beneficial owners and payees who receive reportable amounts, reportable 
payments, and withholdable payments collected by the qualified 
intermediary for purposes of chapters 3, 4, and 61, section 3406, and, 
if necessary, entitlement to the benefits of a reduced rate under an 
income tax treaty. The withholding agreement shall specify if, and to 
what extent, the qualified intermediary may assume primary withholding 
responsibility in accordance with paragraph (e)(5)(iv) of this section. 
It shall also specify the extent to which applicable return filing and 
information reporting requirements are modified so that, in appropriate 
cases, the qualified intermediary may report payments to the IRS on an 
aggregated basis, without having to disclose the identity of beneficial 
owners and payees. However, the qualified intermediary may be required 
to provide to the IRS the name and address of those foreign customers 
who benefit from a reduced rate under an income tax treaty pursuant to 
the withholding agreement for purposes of verifying entitlement to such 
benefits, particularly under an applicable limitation on benefits 
provision. Under the withholding agreement, a qualified intermediary 
may agree to act as an acceptance agent to perform the duties described 
in Sec.  301.6109-1(d)(3)(iv)(A) of this chapter. The withholding 
agreement may specify the manner in which applicable procedures for 
adjustments for underwithholding and overwithholding, including refund 
procedures, apply to qualified intermediaries and the extent to which 
applicable procedures may be modified. In particular, a withholding 
agreement may allow a qualified intermediary to claim refunds of 
overwithheld amounts. In addition, the withholding agreement shall 
specify the manner in which the IRS will verify compliance with the 
agreement, including the time and manner for which a qualified 
intermediary will be required to certify to the IRS regarding its 
compliance with the withholding agreement (including its performance of 
a periodic review) and the types of information required to be 
disclosed as part of the certification. In appropriate cases, the IRS 
may require review procedures be performed by an approved reviewer (in 
addition to those performed as part of the periodic review) and may 
conduct a review of the reviewer's findings. The withholding agreement 
may include provisions for the assessment and collection of tax in the 
event that failure to comply with the terms of the withholding 
agreement results in the failure by the withholding agent or the 
qualified intermediary to withhold and deposit the required amount of 
tax. Further, the withholding agreement may specify the procedures by 
which amounts withheld are to be deposited, if different from the 
deposit procedures under the Code and applicable regulations. To 
determine whether to enter a withholding agreement and the terms of any 
particular withholding agreement, the IRS will consider the type of 
local know-your-customer laws and practices to which the entity is 
subject (if the entity is an FFI), as well as the extent and nature of 
supervisory and regulatory control exercised under the laws of the 
foreign country over the foreign entity.
    (iv) Assignment of primary withholding responsibility. Any person 
(whether a U.S. person or a foreign person) who meets the definition of 
a withholding agent under Sec.  1.1441-7(a) (for payments subject to 
chapter 3 withholding) and Sec.  1.1473-1(d) (for withholdable 
payments) is required to withhold and deposit any amount withheld under 
Sec. Sec.  1.1461-1(a) and 1.1474-1(b) and to make the returns 
prescribed by Sec. Sec.  1.1461-1(b) and (c), and by 1.1474-1(c), and 
(d). Under its qualified intermediary withholding agreement, a 
qualified intermediary may, however, inform a withholding agent from 
which it receives a payment that it will assume the primary obligation 
to withhold, deposit, and report amounts under chapters 3 and 4 of the 
Code and/or under chapter 61 and section 3406 of the Code. For assuming 
withholding obligations as described in the previous sentence, a 
qualified intermediary that assumes primary withholding responsibility 
for payments made to an account under chapter 3 is also required to 
assume primary withholding responsibility under chapter 4 for payments 
made to the account that are withholdable payments. Additionally, a 
qualified intermediary may represent that it assumes chapter 61 
reporting and section 3406 obligations for a payment when the qualified 
intermediary meets the requirements of Sec.  1.6049-4(c)(4)(i) or (ii) 
for the payment. If a withholding agent makes a payment of an amount 
subject to withholding under chapter 3, a reportable payment (as 
defined in section 3406(b)), or a withholdable payment to a qualified 
intermediary that represents to the withholding agent that it has 
assumed primary withholding responsibility for the payment, the 
withholding agent is not required to withhold on the payment. The 
withholding agent is not required to determine that the qualified 
intermediary actually performs its primary withholding 
responsibilities. A qualified intermediary that assumes primary 
withholding responsibility under chapters 3 and 4 or primary reporting 
and backup withholding responsibility under chapter 61 and section 3406 
is not required to assume

[[Page 2082]]

primary withholding responsibility for all accounts it has with a 
withholding agent but must assume primary withholding responsibility 
for all payments made to any one account that it has with the 
withholding agent.
    (v) Withholding statement--(A) In general. A qualified intermediary 
must provide each withholding agent from which it receives reportable 
amounts as a qualified intermediary with a written statement (the 
withholding statement) containing the information specified in 
paragraph (e)(5)(v)(B) of this section. A withholding statement is not 
required, however, if all of the information a withholding agent needs 
to fulfill its withholding and reporting requirements is contained in 
the withholding certificate. The qualified intermediary withholding 
agreement will require the qualified intermediary to include 
information in its withholding statement relating to withholdable 
payments for purposes of withholding under chapter 4 as described in 
paragraph (e)(5)(v)(C)(2) of this section. The withholding statement 
forms an integral part of the qualified intermediary's qualified 
intermediary withholding certificate, and the penalties of perjury 
statement provided on the withholding certificate shall apply to the 
withholding statement as well. The withholding statement may be 
provided in any manner, and in any form, to which qualified 
intermediary and the withholding agent mutually agree, including 
electronically. If the withholding statement is provided 
electronically, the statement must satisfy the requirements described 
in paragraph (e)(3)(iv) of this section (applicable to a withholding 
statement provided by a nonqualified intermediary). The withholding 
statement shall be updated as often as necessary for the withholding 
agent to meet its reporting and withholding obligations under chapters 
3, 4, and 61 and section 3406. For purposes of this section, a 
withholding agent will be liable for tax, interest, and penalties in 
accordance with paragraph (b)(7) of this section to the extent it does 
not follow the presumption rules of paragraph (b)(3) of this section, 
Sec. Sec.  1.1441-5(d) and (e)(6), and 1.6049-5(d) for a payment, or 
portion thereof, for which it does not have a valid withholding 
statement prior to making a payment.
    (B) Content of withholding statement. The withholding statement 
must contain sufficient information for a withholding agent to apply 
the correct rate of withholding on payments from the accounts 
identified on the statement and to properly report such payments on 
Forms 1042-S and Forms 1099, as applicable. The withholding statement 
must--
    (1) Designate those accounts for which the qualified intermediary 
acts as a qualified intermediary;
    (2) Designate those accounts for which qualified intermediary 
assumes primary withholding responsibility under chapter 3 and chapter 
4 of the Code and/or primary reporting and backup withholding 
responsibility under chapter 61 and section 3406;
    (3) If applicable, designate those accounts for which the qualified 
intermediary is acting as a qualified securities lender with respect to 
a substitute dividend paid in a securities lending or similar 
transaction;
    (4) [Reserved].
    (5) Provide information regarding withholding rate pools, as 
described in paragraph (e)(5)(v)(C) of this section.
    (C) Withholding rate pools--(1) In general. Except to the extent it 
has assumed both primary withholding responsibility under chapters 3 
and 4 of the Code and primary Form 1099 reporting and backup 
withholding responsibility under chapter 61 and section 3406 with 
respect to a payment, a qualified intermediary shall provide as part of 
its withholding statement the chapter 3 withholding rate pool 
information that is required for the withholding agent to meet its 
withholding and reporting obligations under chapters 3 and 61 of the 
Code and section 3406. See, however, paragraph (e)(5)(v)(C)(2) of this 
section for when a qualified intermediary may provide a chapter 4 
withholding rate pool (as described in paragraph (c)(48) of this 
section) with respect to a payment that is a withholdable payment. A 
chapter 3 withholding rate pool is a payment of a single type of 
income, determined in accordance with the categories of income reported 
on Form 1042-S, that is subject to a single rate of withholding paid to 
a payee that is a foreign person and for which withholding under 
chapter 4 does not apply. A chapter 3 withholding rate pool may be 
established by any reasonable method on which the qualified 
intermediary and a withholding agent agree (e.g., by establishing a 
separate account for a single chapter 3 withholding rate pool, or by 
dividing a payment made to a single account into portions allocable to 
each chapter 3 withholding rate pool). A qualified intermediary may 
include a separate pool for account holders that are U.S. exempt 
recipients or may include such accounts in a chapter 3 withholding rate 
pool to which withholding does not apply. The withholding statement 
must identify the chapter 4 exemption code (as provided in the 
instructions to Form 1042-S) applicable to the chapter 3 withholding 
rate pools contained on the withholding statement. To the extent a 
qualified intermediary does not assume primary Form 1099 reporting and 
backup withholding responsibility under chapter 61 and section 3406, a 
qualified intermediary's withholding statement must establish a 
separate withholding rate pool for each U.S. non-exempt recipient 
account holder that the qualified intermediary has disclosed to the 
withholding agent unless the qualified intermediary uses the 
alternative procedures in paragraph (e)(5)(v)(C)(3) of this section or 
the account holder is a payee that the qualified intermediary is 
permitted to include in a chapter 4 withholding rate pool of U.S. 
payees. A qualified intermediary that is a participating FFI or 
registered deemed-compliant FFI may include a chapter 4 withholding 
rate pool of U.S. payees on a withholding statement by applying the 
rules under paragraph (e)(3)(iv)(A) of this section (by substituting 
``qualified intermediary'' for ``nonqualified intermediary'') with 
respect to an account that it maintains (as described in Sec.  1.1471-
5(b)(5)) for the payee of the payment. A qualified intermediary shall 
determine withholding rate pools based on valid documentation that it 
obtains under its withholding agreement with the IRS, or if a payment 
cannot be reliably associated with valid documentation, under the 
applicable presumption rules. If a qualified intermediary has an 
account holder that is another intermediary (whether a qualified 
intermediary or a nonqualified intermediary) or a flow-through entity, 
the qualified intermediary may combine the account holder information 
provided by the other intermediary or flow-through entity with the 
qualified intermediary's direct account holder information to determine 
the qualified intermediary's chapter 3 withholding rate pools and each 
of the qualified intermediary's chapter 4 withholding rate pools to the 
extent provided in its withholding agreement with the IRS.
    (2) Withholding rate pool requirements for a withholdable payment. 
This paragraph (e)(5)(v)(C)(2) modifies the requirements of a 
withholding statement described in paragraph (e)(5)(v)(C)(1) provided 
by a qualified intermediary with respect to a withholdable payment 
(including a reportable amount that is a withholdable payment). For 
such a payment, the regulations applicable to a withholding statement 
described in

[[Page 2083]]

paragraph (e)(5)(v)(C)(1) of this section shall apply, except that--
    (i) If the qualified intermediary provides a withholding statement 
described in Sec.  1.1471-3(c)(3)(iii)(B)(2) (describing an FFI 
withholding statement), the withholding statement may include a chapter 
4 withholding rate pool with respect to the portion of the payment 
allocated to a single pool of recalcitrant account holders (without the 
need to subdivide into the pools described in Sec.  1.1471-4(d)(6)), 
including both account holders of the qualified intermediary and of any 
participating FFI, registered deemed-compliant FFI, or other qualified 
intermediary for whom the first-mentioned qualified intermediary 
receives the payment, and nonparticipating FFIs (to the extent 
permitted) in lieu of reporting chapter 3 withholding rate pools with 
respect to such persons as described in paragraph (e)(5)(v)(C)(1) of 
this section); or
    (ii) If the qualified intermediary provides a withholding statement 
described in Sec.  1.1471-3(c)(3)(iii)(B)(3) (describing a chapter 4 
withholding statement), the withholding statement may include a chapter 
4 withholding rate pool with respect to the portion of the payment 
allocated to nonparticipating FFIs.
    (3) Alternative procedure for U.S. non-exempt recipients. If 
permitted under its withholding agreement with the IRS, a qualified 
intermediary may, by mutual agreement with a withholding agent, 
establish a single zero withholding rate pool that includes U.S. non-
exempt recipient account holders for whom the qualified intermediary 
has provided Forms W-9 prior to the withholding agent paying any 
reportable payments, as defined in the qualified intermediary 
withholding agreement, and foreign persons for which no withholding is 
required under chapters 3 and 4, and may include payments allocated to 
a chapter 4 withholding rate pool of U.S. payees. In such a case, the 
qualified intermediary may also establish a separate withholding rate 
pool (subject to 28-percent withholding, or other applicable statutory 
back-up withholding tax rate) that includes only U.S. non-exempt 
recipient account holders for whom a qualified intermediary has not 
provided Forms W-9 prior to the withholding agent paying any reportable 
payments. If a qualified intermediary chooses the alternative procedure 
of this paragraph (e)(5)(v)(C)(3), the qualified intermediary must 
provide the information required by its withholding agreement to the 
withholding agent no later than January 15 of the year following the 
year in which the payments are paid. Failure to provide such 
information will result in the application of penalties to the 
qualified intermediary under sections 6721 and 6722, as well as any 
other applicable penalties, and may result in the termination of the 
qualified intermediary's withholding agreement with the IRS. A 
withholding agent shall not be liable for tax, interest, or penalties 
for failure to backup withhold or report information under chapter 61 
of the Code due solely to the errors or omissions of the qualified 
intermediary. If a qualified intermediary fails to provide the 
allocation information required by this paragraph (e)(5)(v)(C)(3), with 
respect to U.S. non-exempt recipients, the withholding agent shall 
report the unallocated amount paid from the withholding rate pool to an 
unknown recipient, or otherwise in accordance with the appropriate Form 
1099 and the instructions accompanying the form.
    (D)

    Example.  The following example illustrates the application of 
paragraph (e)(5)(v)(C) of this section for a qualified intermediary 
providing chapter 4 withholding rate pools on an FFI withholding 
statement provided to a withholding agent. WA makes a payment of 
U.S. source interest that is a withholdable payment to QI, a 
qualified intermediary that is an FFI and a non-U.S. payor (as 
defined in Sec.  1.6049-5(c)(5)), and A and B are account holders of 
QI (as defined under Sec.  1.1471-5(a)) and are both U.S. non-exempt 
recipients (as defined paragraph (c)(21) of this section). Ten 
percent of the payment is attributable to both A and B. A has 
provided WA with a Form W-9, but B has not provided WA with a Form 
W-9. QI assumes primary withholding responsibility under chapters 3 
and 4 with respect to the payment, 80 percent of which is allocable 
to foreign payees who are account holders other than A and B. As a 
participating FFI, QI is required to report with respect to its U.S. 
accounts under Sec.  1.1471-4(d) (as incorporated into its qualified 
intermediary agreement). Provided that QI reports A's account as a 
U.S. account under the requirements referenced in the preceding 
sentence, QI is not required to provide WA with a Form W-9 from A 
and may instead include A in a chapter 4 withholding rate pool of 
U.S. payees, allocating 10% of the payment to this pool. See Sec.  
1.6049-4(c)(4)(iii) concerning when reporting under section 6049 for 
a payment of interest is not required when an FFI that is a non-U.S. 
payor reports an account holder receiving the payment under its 
chapter 4 requirements. With respect to B, the interest payment is 
subject to backup withholding under section 3406. Because B is a 
recalcitrant account holder of QI for withholdable payments and 
because QI assumes primary chapter 4 withholding responsibility, 
however, QI may include the portion of the payment allocated to B 
with the remaining 80% of the payment for which QI assumes primary 
withholding responsibility. WA can reliably associate the full 
amount of the payment based on the withholding statement and does so 
regardless of whether WA knows B is a U.S. non-exempt recipient that 
is receiving a portion of the payment. See Sec.  31.3406(g)-1(e) 
(providing exemption to backup withholding when withholding was 
applied under chapter 4).

* * * * *
    (f) Effective/applicability date--(1) In general. Except as 
otherwise provided in paragraphs (e)(4)(ix)(D), (f)(2), and (f)(3) of 
this section, this section applies to payments made on or after January 
6, 2017. (For payments made after June 30, 2014 (except for payments to 
which paragraph (e)(4)(ix)(D) applies, in which case, substitute March 
5, 2014, for June 30, 2014), and before January 6, 2017, see this 
section as in effect and contained in 26 CFR part 1, as revised April 
1, 2016. For payments made after December 31, 2000, and before July 1, 
2014, see this section as in effect and contained in 26 CFR part 1, as 
revised April 1, 2013.)
    (2) 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, 
2000.
    (3) Section 871(m) transactions. Paragraphs (b)(4)(xxi) through 
(b)(4)(xxiii), (e)(3)(ii)(E), and (e)(6) of this section apply to 
payments made on or after September 18, 2015.
    (4) [Reserved]. For further guidance, see Sec.  1.1441-1T(f)(4).

0
Par. 6. Section 1.1441-1T is added as follows:


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

    (a) through (b)(7)(ii)(A) [Reserved]. For further guidance, see 
Sec.  1.1441-1(a) through (b)(7)(ii)(A).
    (B) Special rules for establishing that income is effectively 
connected with the conduct of a U.S. trade or business. A withholding 
certificate received after the date of payment to claim under Sec.  
1.1441-4(a)(1) that income is effectively connected with the conduct of 
a U.S. trade or business will be considered effective as of the date of 
the payment if the certificate contains a signed affidavit (either at 
the bottom of the form or on an attached page) that

[[Page 2084]]

states that the information and representations contained on the 
certificate were accurate as of the time of the payment. The signed 
affidavit must also state that the beneficial owner has included the 
income on its U.S. income tax return for the taxable year in which it 
is required to report the income or, alternatively, that the beneficial 
owner intends to include the income on a U.S. income tax return for the 
taxable year in which it is required to report the income and the due 
date for filing such return (including any applicable extensions) is 
after the date on which the affidavit is signed. A certificate received 
within 30 days after the date of the payment will not be considered to 
be unreliable solely because it does not contain the affidavit 
described in the preceding sentences.
    (b)(7)(iii) through (c)(2)(i) [Reserved]. For further guidance, see 
Sec.  1.1441-1(b)(7)(iii) through (c)(2)(i).
    (ii) Dual Residents. Individuals will not be treated as U.S. 
persons for purposes of this section for a taxable year or any portion 
of a taxable year for which they are a dual resident taxpayer (within 
the meaning of Sec.  301.7701(b)-7(a)(1) of this chapter) who is 
treated as a nonresident alien pursuant to Sec.  301.7701(b)-7(a)(1) of 
this chapter for purposes of computing their U.S. tax liability.
    (c)(3) through (c)(3)(i) [Reserved]. For further guidance, see 
Sec.  1.1441-1(c)(3) through (c)(3)(i).
    (ii) Nonresident alien individual. The term nonresident alien 
individual means persons described in section 7701(b)(1)(B), alien 
individuals who are treated as nonresident aliens pursuant to Sec.  
301.7701(b)(7) of this chapter for purposes of computing their U.S. tax 
liability, or an alien individual who is a resident of Puerto Rico, 
Guam, the Commonwealth of Northern Mariana Islands, the U.S. Virgin 
Islands, or American Samoa as determined under Sec.  301.7701(b)-1(d) 
of this chapter. An alien individual who has made an election under 
section 6013(g) or (h) to be treated as a resident of the United States 
is nevertheless treated as a nonresident alien individual for purposes 
of withholding under chapter 3 of the Code and the regulations 
thereunder.
    (c)(4) through (c)(38)(i) [Reserved]. For further guidance, see 
Sec.  1.1441-1(c)(4) through (c)(38)(i).
    (ii) Hold mail instruction. Notwithstanding the provisions of 
paragraph (i) of this section, an address that is subject to a hold 
mail instruction can be used as a permanent residence address if the 
person has also provided the withholding agent with documentary 
evidence establishing residence in the country in which the person 
claims to be a resident for tax purposes. If, after a withholding 
certificate is provided, a person's permanent residence address is 
subsequently subject to a hold mail instruction, this is a change in 
circumstances requiring the person to provide the documentary evidence 
described in this paragraph (c)(38)(ii) in order to use the address as 
a permanent residence address.
    (c)(39) through (e)(2)(ii)(A) [Reserved]. For further guidance, see 
Sec.  1.1441-1(c)(39) through (e)(2)(ii)(A).
    (B) Requirement to collect foreign TIN and date of birth beginning 
January 1, 2017. Beginning January 1, 2017, a beneficial owner 
withholding certificate provided to document an account that is 
maintained at a U.S. branch or office of a financial institution is 
required to contain the account holder's foreign TIN and, in the case 
of an individual account holder, the account holder's date of birth in 
order for the withholding agent to treat such withholding certificate 
as valid under paragraph (e)(2) of this section. For withholding 
certificates associated with payments made on or after January 1, 2018, 
if an account holder does not have a foreign TIN, the account holder is 
required to provide a reasonable explanation for its absence (e.g., the 
country of residence does not provide TINs) in order for the 
withholding certificate not to be considered invalid as a result of the 
application of this paragraph (e)(2)(ii)(B). A withholding certificate 
that does not contain the account holder's date of birth will not be 
considered invalid as a result of the application of this paragraph 
(e)(2)(ii)(B) if the withholding agent has the account holder's date of 
birth information in its files.
    (e)(3) through (e)(3)(iv)(C)(2) [Reserved]. For further guidance, 
see Sec.  1.1441-1(e)(3) through (e)(3)(iv)(C)(2).
    (3) Alternative withholding statement. In lieu of a withholding 
statement containing all of the information described in paragraph 
(e)(3)(iv)(C)(1) of this section, a withholding agent may accept from a 
nonqualified intermediary a withholding statement that meets all of the 
requirements of this paragraph (e)(3)(iv)(C)(3) with respect to a 
payment. This alternative withholding statement may only be provided by 
a nonqualified intermediary that provides the withholding agent with 
the withholding certificates from the beneficial owners (i.e., not 
documentary evidence) before the payment is made.
    (i) The withholding statement is not required to contain 
information that is also included on a withholding certificate (e.g., 
name, address, TIN (if any), chapter 4 status, GIIN (if any)). The 
withholding statement is also not required to specify the rate of 
withholding to which each foreign payee is subject, provided that all 
of the information necessary to make such determination is provided on 
the withholding certificate. A withholding agent that uses an 
alternative withholding statement may not apply a different rate from 
that which the withholding agent may reasonably conclude from the 
information on the withholding certificate.
    (ii) The withholding statement must allocate the payment to every 
payee required to be reported as described in paragraph 
(e)(3)(iv)(C)(1)(ii) of this section.
    (iii) The withholding statement must also contain any other 
information the withholding agent reasonably requests in order to 
fulfill its obligations under chapters 3, 4, and 61 of the Code, and 
section 3406.
    (iv) The withholding statement must contain a representation from 
the nonqualified intermediary that the information on the withholding 
certificates is not inconsistent with any other account information the 
nonqualified intermediary has for the beneficial owners for determining 
the rate of withholding with respect to each payee.
    (e)(3)(iv)(C)(4) through (e)(4)(i)(A) [Reserved]. For further 
guidance, see Sec.  1.1441-1(e)(3)(iv)(C)(4) through (e)(4)(i)(A).
    (B) Electronic Signatures. A withholding agent, regardless of 
whether the withholding agent has established an electronic system 
pursuant to paragraph (e)(4)(iv)(A) or (e)(4)(iv)(C) of this section, 
may accept a withholding certificate with an electronic signature, 
provided the electronic signature meets the requirements of paragraph 
(e)(4)(iv)(B)(3)(ii). In addition, the withholding certificate must 
reasonably demonstrate to the withholding agent that the form has been 
electronically signed by the recipient identified on the form (or a 
person authorized to sign for the person identified on the form). For 
example, a withholding agent may treat as validly signed a withholding 
certificate that has, in the signature block, the name of the person 
authorized to sign, a time and date stamp, and a statement that the 
certificate has been electronically signed. However, a withholding 
agent may not treat a withholding certificate with a typed name in the 
signature line

[[Page 2085]]

and no other information as validly signed.
    (e)(4)(ii) through (e)(4)(ii)(A)(1) [Reserved]. For further 
guidance, see Sec.  1.1441-1(e)(4)(ii) through (e)(4)(ii)(A)(1).
    (2) Documentary evidence for treaty claims and treaty statements. 
Documentary evidence described in Sec.  1.1441-6(c)(3) or (4) and a 
statement regarding entitlement to treaty benefits described in Sec.  
1.1441-6(c)(5)(i) (treaty statement) shall remain valid until the last 
day of the third calendar year following the year in which the 
documentary evidence is provided to the withholding agent except as 
provided in paragraph (e)(4)(ii)(B) of this section. Notwithstanding 
the validity period prescribed in this paragraph (e)(4)(ii)(A)(2), a 
treaty statement will cease to be valid if a change in circumstances 
makes the information on the statement unreliable or incorrect. For 
accounts opened and treaty statements obtained prior to January 6, 
2017, the treaty statement will expire January 1, 2019.
    (e)(4)(ii)(B) through (e)(4)(iv)(B)(4) [Reserved]. For further 
guidance, see Sec.  1.1441-1(e)(4)(ii)(B) through (e)(4)(iv)(B)(4).
    (C) Form 8233. A withholding agent may establish a system for a 
beneficial owner or payee to provide Form 8233 electronically, provided 
the system meets the requirements of paragraph (e)(4)(iv)(B)(1) through 
(4) of this section (replacing ``Form W-8'' with ``Form 8233'' each 
place it appears).
    (e)(4)(iv)(D) [Reserved]. For further guidance, see Sec.  1.1441-
1(e)(4)(iv)(D).
    (E) Third party repositories. A withholding certificate will be 
considered furnished for purposes of this section (including paragraph 
(e)(1)(ii)(A)(1) of this section) by the person providing the 
certificate, and a withholding agent may rely on an otherwise valid 
withholding certificate received electronically from a third party 
repository, if the withholding certificate was uploaded or provided to 
a third party repository and there are processes in place to ensure 
that the withholding certificate can be reliably associated with a 
specific request from the withholding agent and a specific 
authorization from the person providing the certificate (or an agent of 
the person providing the certificate) for the withholding agent making 
the request to receive the withholding certificate. Each request and 
authorization must be associated with a specific payment, and, as 
applicable, a specific obligation maintained by a withholding agent. A 
third party repository may also be used for withholding statements, and 
a withholding agent may also rely on an otherwise valid withholding 
statement, if the intermediary providing the withholding certificates 
and withholding statement through the repository provides an updated 
withholding statement in the event of any change in the information 
previously provided (e.g., a change in the composition of a partnership 
or a change in the allocation of payments to the partners) and ensures 
there are processes in place to update withholding agents when there is 
a new withholding statement (and withholding certificates, as 
necessary) in the event of any change that would affect the validity of 
the prior withholding certificates or withholding statement. A third 
party repository, for purposes of this paragraph, is an entity that 
maintains withholding certificates (including certificates accompanied 
by withholding statements) but is not an agent of the applicable 
withholding agent or the person providing the certificate. The 
following examples illustrate the provisions of this paragraph 
(e)(4)(iv)(E):

    Example 1.  A, a foreign corporation, completes a Form W-8BEN-E 
and a Form W-8ECI and uploads the forms to X, a third party 
repository (X is an entity that maintains withholding certificates 
on an electronic data aggregation site). WA, a withholding agent, 
enters into a contract with A under which it will make payments to A 
of U.S. source FDAP that are not effectively connected with A's 
conduct of a trade or business in the United States. X is not an 
agent of WA or A. Prior to receiving a payment, A sends WA an email 
with a link that authorizes WA to access A's Form W-8BEN-E on X's 
system. The link does not authorize WA to access A's Form W-8ECI. 
X's system meets the requirements of a third party repository, and 
WA can treat the Form W-8BEN-E as furnished by A.
    Example 2.  The facts are the same as Example 1 of this 
paragraph (e)(4)(iv)(E), and WA and A enter into a second contract 
under which WA will make payments to A that are effectively 
connected with A's conduct of a trade or business in the United 
States. A sends WA an email with a link that gives WA access to A's 
Form W-8ECI on X's system. The link in this second email does not 
give WA access to A's Form W-8BEN-E. A's email also clearly 
indicates that the link is associated with payments received under 
the second contract. X's system meets the requirements of a third 
party repository, and WA can treat the Form W-8ECI as furnished by 
A.
    Example 3.  FP is a foreign partnership that is acting on behalf 
of its partners, A and B, who are both foreign individuals. FP 
completes a Form W-8IMY and uploads it to X, a third party 
repository. FP also uploads Forms W-8BEN from both A and B and a 
valid withholding statement allocating 50% of the payment to A and 
50% to B. WA is a withholding agent that makes payments to FP as an 
intermediary for A and B. FP sends WA an email with a link to its 
Form W-8IMY on X's system. The link also provides WA access to FP's 
withholding statement and A's and B's Forms W-8BEN. FP also has 
processes in place that ensure it will provide a new withholding 
statement or withholding certificate to X's repository in the event 
of a change in the information previously provided that affects the 
validity of the withholding statement and that ensure it will update 
WA if there is a new withholding statement. X's system meets the 
requirements of a third party repository, and WA can treat the Form 
W-8IMY (and withholding statement) as furnished by FP. In addition, 
because FP is acting as an agent of A and B, the beneficial owners, 
WA can treat the Forms W-8BEN for A and B as furnished by A and B.

    (e)(4)(v) through (f)(3) [Reserved]. For further guidance, see 
Sec.  1.1441-1(e)(4)(v) through (f)(3).
    (4) Effective/applicability date. This section applies to payments 
made on or after January 6, 2017.
    (g) Expiration date. The applicability of this section expires on 
December 30, 2019.

0
Par. 7. Section 1.1441-2 is amended by removing paragraph (e)(7), 
redesignating paragraph (e)(8) as paragraph (e)(7), adding new 
paragraph (a)(8), and revising paragraph (f).
    The revisions and additions read as follows:


Sec.  1.1441-2  Amounts subject to withholding.

    (a) * * *
    (8) [Reserved]. For further guidance, see Sec.  1.1441-2T(a)(8).
* * * * *
    (f) Effective/applicability date--(1) This section applies to 
payments made after December 31, 2000. Paragraphs (b)(5) and (d)(4) of 
this section apply to payments made after August 1, 2006. Paragraph 
(b)(6) of this section applies to payments made on or after January 23, 
2012. Paragraph (e)(8) of this section applies to payments made on or 
after September 18, 2015.
    (2) [Reserved]. For further guidance, see Sec.  1.1441-2T(f)(2).

0
Par. 8. Section 1.1441-2T is added to read as follows:


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

    (a) through (a)(7) [Reserved]. For further guidance, see Sec.  
1.1441-2(a) through (a)(7).
    (8) Amounts of United States source gross transportation income, as 
defined in section 887(b)(1), that is taxable under section 887(a).
    (b) through (f)(1) [Reserved]. For further guidance, see Sec.  
1.1441-2(b) through (f)(1).
    (2) Effective/applicability date. This section applies on January 
6, 2017.

[[Page 2086]]

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

0
Par. 9. Section 1.1441-3 is amended by:
0
1. Revising paragraphs (a), (c)(4)(i), (d), and (i).
0
2. Removing paragraph (j).
    The revisions read as follows:


Sec.  1.1441-3  Determination of amounts to be withheld.

    (a) General rule--(1) Withholding on gross amount. Except as 
otherwise provided in regulations under section 1441, the amount 
subject to withholding under Sec.  1.1441-1 is the gross amount of 
income subject to withholding that is paid to a foreign person. The 
gross amount of income subject to withholding may not be reduced by any 
deductions, except to the extent that one or more personal exemptions 
are allowed as provided under Sec.  1.1441-4(b)(6).
    (2) Coordination with chapter 4. A withholding agent making a 
payment that is both a withholdable payment and an amount subject to 
withholding under Sec.  1.1441-2(a) and that has withheld tax as 
required under chapter 4 from such payment is not required to withhold 
under this section notwithstanding paragraph (a)(1) of this section. 
See Sec.  1.1474-6(b)(1) for the allowance for a withholding agent to 
credit withholding applied under chapter 4 against its liability for 
tax due under sections 1441, 1442, or 1443, and see Sec.  1.1474-
6(b)(1) for the rule allowing a withholding agent to credit withholding 
applied under chapter 4 against its liability for tax due under 
sections 1441, 1442, or 1443, and Sec.  1.1474-6(b)(2) for when such 
withholding is considered applied by a withholding agent. If the 
withholdable payment is not required to be withheld upon under chapter 
4, then the withholding agent must apply the provisions of Sec.  
1.1441-1 to determine whether withholding is required under sections 
1441, 1442, or 1443.
* * * * *
    (c) * * *
    (4) Coordination with withholding under section 1445--(i) In 
general. A distribution from a U.S. Real Property Holding Corporation 
(USRPHC) (or from a corporation that was a USRPHC at any time during 
the five-year period ending on the date of distribution) with respect 
to stock that is a U.S. real property interest under section 897(c) or 
from a Real Estate Investment Trust (REIT) or other entity that is a 
qualified investment entity (QIE) under section 897(h)(4) with respect 
to its stock is subject to the withholding provisions under section 
1441 (or section 1442 or 1443) and section 1445. A USRPHC making a 
distribution shall be treated as satisfying its withholding obligations 
under both sections if it withholds in accordance with one of the 
procedures described in either paragraph (c)(4)(i)(A) or (B) of this 
section. A USRPHC must apply the same withholding procedure to all the 
distributions made during the taxable year. However, the USRPHC may 
change the applicable withholding procedure from year to year. For 
rules regarding distributions by REITs and other entities that are 
QIEs, see paragraph (c)(4)(i)(C) of this section. To the extent 
withholding under sections 1441, 1442, or 1443 applies under this 
paragraph (c)(4)(i) to any portion of a distribution that is a 
withholdable payment, see paragraph (a)(2) for rules coordinating 
withholding under chapter 4.
    (A) Withholding under section 1441. The USRPHC may choose to 
withhold on a distribution only under section 1441 (or 1442 or 1443) 
and not under section 1445. In such a case, the USRPHC must withhold 
under section 1441 (or 1442 or 1443) on the full amount of the 
distribution, whether or not any portion of the distribution represents 
a return of basis or capital gain. If a reduced tax rate under an 
income tax treaty applies to the distribution by the USRPHC, then the 
applicable rate of withholding on the distribution shall be no less 
than 15 percent for distributions after February 16, 2016, and no less 
than 10 percent for distributions on or before February 16, 2016, 
unless the applicable treaty specifies an applicable lower rate for 
distributions from a USRPHC, in which case the lower rate may apply.
    (B) Withholding under both sections 1441 and 1445. As an 
alternative to the procedure described in paragraph (c)(4)(i)(A) of 
this section, a USRPHC may choose to withhold under both sections 1441 
(or 1442 or 1443) and 1445 under the procedures set forth in this 
paragraph (c)(4)(i)(B). The USRPHC must make a reasonable estimate of 
the portion of the distribution that is a dividend under paragraph 
(c)(2)(ii)(A) of this section, and must--
    (1) Withhold under section 1441 (or 1442 or 1443) on the portion of 
the distribution that is estimated to be a dividend under paragraph 
(c)(2)(ii)(A) of this section; and
    (2) Withhold under section 1445(e)(3) and Sec.  1.1445-5(e) on the 
remainder of the distribution or on such smaller portion based on a 
withholding certificate obtained in accordance with Sec.  1.1445-
5(e)(3)(iv).
    (C) Coordination with REIT/QIE withholding. Withholding is required 
under section 1441 (or 1442 or 1443) on the portion of a distribution 
from a REIT or other entity that is a QIE that is not designated (for 
REITs) or reported (for regulated investment companies that are QIEs) 
as a capital gain dividend, a return of basis, or a distribution in 
excess of a shareholder's adjusted basis in the stock of the REIT or 
QIE that is treated as a capital gain under section 301(c)(3). A 
distribution in excess of a shareholder's adjusted basis in the stock 
of the REIT or QIE is, however, subject to withholding under section 
1445, unless the interest in the REIT or QIE is not a U.S. real 
property interest (e.g., an interest in a domestically controlled REIT 
or QIE under section 897(h)(2)). In addition, withholding is required 
under section 1445 on the portion of the distribution designated (for 
REITs) or reported (for regulated investment companies that are QIEs) 
as a capital gain dividend to the extent that it is attributable to the 
sale or exchange of a U.S. real property interest. See Sec.  1.1445-8.
* * * * *
    (d) Withholding on payments that include an undetermined amount of 
income--(1) In general. Where the withholding agent makes a payment and 
does not know at the time of payment the amount that is subject to 
withholding because the determination of the source of the income or 
the calculation of the amount of income subject to tax depends upon 
facts that are not known at the time of payment, then the withholding 
agent must withhold an amount under Sec.  1.1441-1 based on the entire 
amount paid that is necessary to ensure that the tax withheld is not 
less than 30 percent (or other applicable percentage) of the amount 
that could be from sources within the United States or income subject 
to tax. See Sec.  1.1471-2(a)(5) for similar rules under chapter 4 that 
apply to payments made to payees that are entities. The amount so 
withheld shall not exceed 30 percent of the amount paid. With respect 
to a payment described in paragraph (d)(1) or (2) of this section, the 
withholding agent may elect to retain 30 percent of the payment to hold 
in escrow until the earlier of the date that the amount of income from 
sources within the United States or the taxable amount can be 
determined or one year from the date the amount is placed is in escrow, 
at which time the withholding becomes due under Sec.  1.1441-1, or, to 
the extent that withholding is not required, the escrowed amount must 
be paid to the payee.

[[Page 2087]]

    (2) Withholding on certain gains. Absent actual knowledge or reason 
to know otherwise, a withholding agent may rely on a claim regarding 
the amount of gain described in Sec.  1.1441-2(c) if the beneficial 
owner withholding certificate, or other appropriate withholding 
certificate, states the beneficial owner's basis in the property giving 
rise to the gain. In the absence of a reliable representation on a 
withholding certificate, the withholding agent must withhold an amount 
under Sec.  1.1441-1 that is necessary to assure that the tax withheld 
is not less than 30 percent (or other applicable percentage) of the 
recognized gain. For this purpose, the recognized gain is determined 
without regard to any deduction allowed by the Code from the gains. The 
amount so withheld shall not exceed 30 percent of the amount payable by 
reason of the transaction giving rise to the recognized gain. See Sec.  
1.1441-1(b)(8) regarding adjustments in the case of overwithholding.
* * * * *
    (i) Effective/applicability date. Except as otherwise provided in 
paragraphs (g)(2) and (h)(3) of this section, this section applies to 
payments made on or after January 6, 2017. (For payments made after 
June 30, 2014, and before January 6, 2017, see this section as in 
effect and contained in 26 CFR part 1, revised April 1, 2016. For 
payments made after December 31, 2000, see this section as in effect 
and contained in 26 CFR part 1 as revised April 1, 2013.)


Sec.  1.1441-3T   [Removed]

0
Par. 10. Section 1.1441-3T is removed.

0
Par. 11. Section 1.1441-4 is amended by revising paragraphs (a)(2)(ii), 
(b)(2)(i), (b)(2)(iii), (b)(2)(v), (b)(3), and (g) to read as follows:


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

    (a) * * *
    (2) * * *
    (ii) Special rules for U.S. branches of foreign persons--(A) U.S. 
branches of certain foreign banks or foreign insurance companies. A 
payment to a U.S. branch described in Sec.  1.1441-1(b)(2)(iv)(B)(3) is 
presumed to be effectively connected with the conduct of a trade or 
business in the United States without the need to furnish a certificate 
if the withholding agent obtains an EIN for the entity, unless the U.S. 
branch provides a U.S. branch withholding certificate described in 
Sec.  1.1441-1(e)(3)(v) that represents otherwise. If no certificate is 
furnished but the income is not, in fact, effectively connected income, 
then the branch must withhold whether the payment is collected on 
behalf of other persons or on behalf of another branch of the same 
entity. See Sec.  1.1441-1(b)(2)(iv) and (b)(6) for general rules 
applicable to payments to U.S. branches of foreign persons.
    (B) Other U.S. branches. See Sec.  1.1441-1(b)(2)(iv)(E) for 
similar procedures for other U.S. branches to the extent provided in a 
determination letter from the IRS.
* * * * *
    (b) * * *
    (2) Manner of obtaining withholding exemption under tax treaty--(i) 
In general. In order to obtain the exemption from withholding by reason 
of a tax treaty provided by paragraph (b)(1)(iv) of this section, a 
nonresident alien individual must submit a withholding certificate 
(described in paragraph (b)(2)(ii) of this section) to each withholding 
agent from whom amounts are to be received. A separate withholding 
certificate must be filed for each taxable year of the alien 
individual. If the withholding agent is satisfied that an exemption 
from withholding is warranted (see paragraph (b)(2)(iii) of this 
section), the withholding certificate shall be accepted in the manner 
set forth in paragraph (b)(2)(iv) of this section. The exemption from 
withholding becomes effective for payments made at least ten days after 
a copy of the accepted withholding certificate is forwarded to the IRS. 
The withholding agent may rely on an accepted withholding certificate 
only if the IRS has not objected to the certificate. For purposes of 
this paragraph (b)(2)(i), the IRS will be considered to have not 
objected to the certificate if it has not notified the withholding 
agent within a 10-day period beginning from the date that the 
withholding certificate is forwarded to the IRS pursuant to paragraph 
(b)(2)(v) of this section. After expiration of the 10-day period, the 
withholding agent may rely on the withholding certificate retroactive 
to the date of the first payment covered by the certificate. The fact 
that the IRS does not object to the withholding certificate within the 
10-day period provided in this paragraph (b)(2)(i) shall not preclude 
the IRS from examining the withholding agent at a later date with 
respect to facts that the withholding agent knew or had reason to know 
regarding the payment and eligibility for a reduced rate and that were 
not disclosed to the IRS as part of the 10-day review process.
* * * * *
    (iii) Review by withholding agent. The exemption from withholding 
provided by paragraph (b)(1)(iv) of this section shall not apply unless 
the withholding agent accepts (in the manner provided in paragraph 
(b)(2)(iv) of this section) the statement on Form 8233, ``Exemption 
From Withholding on Compensation for Independent (and Certain 
Dependent) Personal Services of a Nonresident Alien Individual,'' (or 
successor form) supplied by the nonresident alien individual. Before 
accepting the statement, the withholding agent must examine the 
statement. If the withholding agent knows or has reason to know that 
any of the facts or assertions on Form 8233 may be false or that the 
eligibility of the individual's compensation for the exemption cannot 
be readily determined, the withholding agent may not accept the 
statement on Form 8233 and is required to withhold under this section. 
If the withholding agent accepts the statement and subsequently finds 
that any of the facts or assertions contained on Form 8233 may be false 
or that the eligibility of the individual's compensation for the 
exemption can no longer be readily determined, then the withholding 
agent shall promptly so notify the IRS by letter, and the withholding 
agent is not relieved of liability to withhold on any amounts still to 
be paid. If the withholding agent is notified by the IRS that the 
eligibility of the individual's compensation for the exemption is in 
doubt or that such compensation is not eligible for the exemption, the 
withholding agent is required to withhold under this section. The rules 
of this paragraph (b)(2) are illustrated by the following examples.

    Example 1. C, a nonresident alien individual, submits Form 8233 
to W, a withholding agent. The statement on Form 8233 does not 
include all the information required by paragraph (b)(2)(ii) of this 
section. Therefore, W has reason to know that he or she cannot 
readily determine whether C's compensation for personal services is 
eligible for an exemption from withholding and, therefore, W must 
withhold.
    Example 2. D, a nonresident alien individual, is performing 
services for W, a withholding agent. W has accepted a statement on 
Form 8233 submitted by D, according to the provisions of this 
section. W receives notice from the IRS that the eligibility of D's 
compensation for a withholding exemption is in doubt. Therefore, W 
has reason to know that the eligibility of the compensation for a 
withholding exemption cannot be readily determined, as of the date W 
receives the notification, and W must withhold tax under section 
1441 on amounts paid after receipt of the notification.
    Example 3.  E, a nonresident alien individual, submits Form 8233 
to W, a

[[Page 2088]]

withholding agent for whom E is to perform personal services. The 
statement contains all the information requested on Form 8233. E 
claims an exemption from withholding based on a personal exemption 
amount computed on the number of days E will perform personal 
services for W in the United States. If W does not know or have 
reason to know that any statement on the Form 8233 is false or that 
the eligibility of E's compensation for the withholding exemption 
cannot be readily determined, W can accept the statement on Form 
8233 and exempt from withholding the appropriate amount of E's 
income.
* * * * *
    (v) Copies of Form 8233. The withholding agent shall forward one 
copy of each Form 8233 that is accepted under paragraph (b)(2)(iv) of 
this section to the IRS within five days of such acceptance. The 
withholding agent shall retain a copy of Form 8233.
    (3) Withholding agreements. Compensation for personal services of a 
nonresident alien individual who is engaged during the taxable year in 
the conduct of a trade or business within the United States may be 
wholly or partially exempted from the withholding required by Sec.  
1.1441-1 if an agreement is reached between the IRS and the alien 
individual with respect to the amount of withholding required. Such 
agreement shall be available in the circumstances and in the manner set 
forth by the Internal Revenue Service, and shall be effective for 
payments covered by the agreement that are made after the agreement is 
executed by all parties. The alien individual must agree to timely file 
an income tax return for the current taxable year.
* * * * *
    (g) Effective/applicability date. This section applies to payments 
made on or after January 6, 2017. (For payments made after June 30, 
2014, and before January 6, 2017, see this section as in effect and 
contained in 26 CFR part 1, revised April 1, 2016. For payments made 
after December 31, 2000, see this section as in effect and contained in 
26 CFR part 1 revised April 1, 2013.)
* * * * *


Sec.  1.1441-4T   [Removed]

0
Par. 12. Section 1.1441-4T is removed.

0
Par. 13. Section 1.1441-5 is amended by:
0
1. Revising paragraphs (b)(2)(iii), (b)(2)(vi), (c)(1)(i) introductory 
text, (c)(1)(i)(C), (c)(1)(iv) and (v), (c)(2)(i) through (iii), 
(c)(2)(iv)(A) and (B), (c)(3)(i) and (ii), (c)(3)(iii)(A), (c)(3)(iv) 
and (v), (d)(2) through (4), (e)(3)(iii), (e)(5)(i) and (ii), 
(e)(5)(iii)(A), (e)(5)(iv) and (v), (e)(6)(ii), (f), and (g) to read as 
follows:


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

* * * * *
    (b) * * *
    (2) * * *
    (iii) U.S. complex trusts and U.S. estates. A U.S. trust that is 
not a trust described in section 651(a) (see paragraph (b)(2)(ii) of 
this section) or sections 671 through 679 (see paragraph (b)(2)(iv) of 
this section) (a U.S. complex trust) is required to withhold under 
chapter 3 of the Internal Revenue Code (Code) as a withholding agent on 
the distributable net income includible in the gross income of a 
foreign beneficiary to the extent the distributable net income consists 
of an amount subject to withholding (as defined in Sec.  1.1441-2(a)) 
that is, or is required to be, distributed currently. The U.S. complex 
trust shall withhold when a distribution is made to a foreign 
beneficiary. The trust may use the same procedures regarding an 
estimate of the amount subject to withholding as a U.S. simple trust 
under paragraph (b)(2)(ii) of this section. To the extent an amount 
subject to withholding is required to be, but is not actually, 
distributed, the U.S. complex trust must withhold on the foreign 
beneficiary's allocable share at the time the income is required to be 
reported on Form 1042-S under Sec.  1.1461-1(c), without extension. A 
U.S. estate is required to withhold under chapter 3 of the Code on the 
distributable net income includible in the gross income of a foreign 
beneficiary to the extent the distributable net income consists of an 
amount subject to withholding (as defined in Sec.  1.1441-2(a)) that is 
actually distributed. A U.S. estate may also use the reasonable 
estimate procedures of paragraph (b)(2)(ii) of this section. However, 
those procedures apply to an estate that has a taxable year other than 
a calendar year only if the estate files an amended return on Form 1042 
for the calendar year in which the distribution was made and pays the 
underwithheld tax and interest within 60 days after the close of the 
taxable year in which the distribution was made.
* * * * *
    (vi) Coordination with chapter 4 requirements for U.S. 
partnerships, trusts, and estates. To the extent that a U.S. 
partnership is required to withhold on an amount under chapter 4 with 
respect to a partner, beneficiary, or owner, the partnership, trust, or 
estate must apply the rules described in Sec.  1.1473-1(a)(5) to 
determine when it must withhold on the amount under chapter 4. In a 
case in which withholding applies under chapter 4 to such an amount, 
see Sec.  1.1441-3(a)(2) to coordinate with withholding that otherwise 
applies to such an amount under this paragraph (b).
    (c) Foreign partnerships--(1) Determination of payee--(i) Payments 
treated as made to partners. Except as otherwise provided in paragraph 
(c)(1)(ii) or (iv) of this section, the payees of a payment to a person 
that the withholding agent may treat as a nonwithholding foreign 
partnership under paragraph (c)(3)(i) or (d)(2) of this section are the 
partners (looking through partners that are foreign intermediaries or 
flow-through entities) as follows--
* * * * *
    (C) If the withholding agent can reliably associate a partner's 
distributive share of the payment with a qualified intermediary 
withholding certificate under Sec.  1.1441-1(e)(3)(ii), a nonqualified 
intermediary withholding certificate under Sec.  1.1441-1(e)(3)(iii), 
or a U.S. branch certificate under Sec.  1.1441-1(e)(3)(v) (including 
one provided by a territory financial institution), then the rules of 
Sec.  1.1441-1(b)(2)(v) shall apply to determine who the payee is in 
the same manner as if the partner's distributive share of the payment 
had been paid directly to such intermediary or U.S. branch or territory 
financial institution;
* * * * *
    (iv) Coordination with chapter 4 for payments made to foreign 
partnerships. A withholding agent that makes a payment of U.S. source 
FDAP income to a foreign partnership that is a withholdable payment to 
which withholding under chapter 4 applies must apply the rules 
described in Sec.  1.1473-1(a)(5)(vi) to determine when the payment is 
treated as made to a partner in the partnership for purposes of chapter 
4. In a case in which withholding applies under chapter 4 to a 
withholdable payment made to a foreign partnership, see Sec.  1.1441-
3(a)(2) to coordinate with withholding otherwise required under this 
paragraph (c) with respect to the amount of the payment included in the 
gross income of a partner. For when a withholding agent may reliably 
associate a withholdable payment with a chapter 4 withholding rate pool 
in lieu of obtaining documentation for each payee include in the pool, 
see Sec.  1.1441-1(e)(3)(iv)(C)(2) (substituting the term 
nonwithholding foreign partnership for the term nonqualified 
intermediary).
    (v) Examples. The rules of paragraphs (c)(1)(i) and (ii) of this 
section are illustrated by the following examples. Each example assumes 
that all payments are not withholdable

[[Page 2089]]

payments and thus no withholding applies under chapter 4.

    Example 1. FP is a nonwithholding foreign partnership organized 
in Country X. FP has two partners, FC, a foreign corporation, and 
USP, a U.S. partnership. USWH, a U.S. withholding agent, makes a 
payment of U.S. source interest to FP that is not a withholdable 
payment. FP has provided USWH with a valid nonwithholding foreign 
partnership certificate, as described in paragraph (c)(3)(iii) of 
this section, with which it associates a beneficial owner 
withholding certificate from FC and a Form W-9, ``Request for 
Taxpayer Identification Number and Certification,'' from USP 
together with the withholding statement required by paragraph 
(c)(3)(iv) of this section. USWH can reliably associate the payment 
of interest with the withholding certificates from FC and USP. Under 
paragraph (c)(1)(i) of this section, the payees of the interest 
payment are FC and USP.
    Example 2.  The facts are the same as in Example 1, except that 
FP1, a nonwithholding foreign partnership, is a partner in FP rather 
than USP. FP1 has two partners, A and B, both foreign persons. FP 
provides USWH with a valid nonwithholding foreign partnership 
certificate, as described in paragraph (c)(3)(iii) of this section, 
with which it associates a beneficial owner withholding certificate 
from FC and a nonwithholding foreign partnership certificate from 
FP1. In addition, foreign beneficial owner withholding certificates 
from A and B are associated with the nonwithholding foreign 
partnership withholding certificate from FP1. FP also provides the 
withholding statement required by paragraph (c)(3)(iv) of this 
section. USWH can reliably associate the interest payment with the 
withholding certificates provided by FC, A, and B. Therefore, under 
paragraph (c)(1)(i) of this section, the payees of the interest 
payment are FC, A, and B.
    Example 3. USWH makes a payment of U.S. source dividends to WFP, 
a withholding foreign partnership, that is not a withholdable 
payment. WFP has two partners, FC1 and FC2, both foreign 
corporations. USWH can reliably associate the payment with a valid 
withholding foreign partnership withholding certificate from WFP. 
Therefore, under paragraph (c)(1)(ii)(A) of this section, WFP is the 
payee of the interest.
    Example 4. USWH makes a payment of U.S. source royalties that is 
not a withholdable payment to FP, a foreign partnership. USWH can 
reliably associate the royalties with a valid withholding 
certificate from FP on which FP certifies that the income is 
effectively connected with the conduct of a trade or business in the 
United States. Therefore, under paragraph (c)(1)(ii)(B) of this 
section, FP is the payee of the royalties.

    (2) Withholding foreign partnerships--(i) Reliance on claim of 
withholding foreign partnership status. A withholding foreign 
partnership is a foreign partnership that has entered into an agreement 
with the IRS, as described in paragraph (c)(2)(ii) of this section, 
with respect to distributions and guaranteed payments it makes to its 
partners. A withholding agent that can reliably associate a payment 
with a certificate described in paragraph (c)(2)(iv) of this section 
may treat the person to whom it makes the payment as a withholding 
foreign partnership for purposes of withholding under chapters 3 and 4 
of the Code, information reporting under chapter 61 of the Code, backup 
withholding under section 3406, and withholding under other provisions 
of the Code. Furnishing such a certificate is in lieu of transmitting 
to a withholding agent withholding certificates or other appropriate 
documentation for its partners. Although the withholding foreign 
partnership generally will be required to obtain withholding 
certificates or other appropriate documentation from its partners 
pursuant to its agreement with the IRS, it generally will not be 
required to attach such documentation to its withholding foreign 
partnership withholding certificate to the extent it is permitted to 
act as a withholding foreign partnership with respect to the payment 
under its agreement. In addition, the IRS may permit a foreign 
partnership to act as a qualified intermediary under Sec.  1.1441-
1(e)(5)(ii)(D) with respect to its partners in appropriate 
circumstances.
    (ii) Withholding agreement. The IRS may, upon request, enter into a 
withholding agreement with a foreign partnership pursuant to such 
procedures as the IRS may prescribe in published guidance (see Sec.  
601.601(d)(2) of this chapter). Under the withholding agreement, a 
foreign partnership shall generally be subject to the applicable 
withholding and reporting provisions applicable to withholding agents 
and payors as defined in Sec.  1.6049-4(a) under chapters 3, 4, and 61 
of the Code, section 3406, the regulations under those provisions, and 
other withholding provisions of the Code, except to the extent provided 
under the withholding agreement. Under the withholding agreement, a 
foreign partnership may agree to act as an acceptance agent to perform 
the duties described in Sec.  301.6109-1(d)(3)(iv)(A) of this chapter. 
For a foreign partnership that is an FFI, the withholding agreement 
will require the partnership to assume the requirements of a 
participating FFI, a registered deemed-compliant FFI, or an FFI treated 
as a deemed-compliant FFI under an applicable IGA that is subject to 
due diligence and reporting requirements with respect to its U.S. 
accounts similar to those applicable to a registered deemed-compliant 
FFI under Sec.  1.1471-5(f)(1). The withholding agreement may specify 
the manner in which applicable procedures for adjustments for 
underwithholding and overwithholding, including refund procedures, 
apply to the withholding foreign partnership and its partners and the 
extent to which applicable procedures may be modified. In particular, 
the withholding agreement may allow a withholding foreign partnership 
to claim refunds of overwithheld amounts on behalf of its customers. In 
addition, the withholding agreement must specify the manner in which 
the IRS will verify the partnership's compliance with its agreement, 
including the requirements for a periodic review of the partnership's 
compliance with the withholding agreement and the procedures for the 
partnership to certify to its compliance with the withholding 
agreement. A withholding foreign partnership must file a return on Form 
1042, ``Annual Withholding Tax Return for U.S. Source Income of Foreign 
Persons,'' and information returns on Form 1042-S, ``Foreign Person's 
U.S. Source Income Subject to Withholding.'' The withholding agreement 
may also require a withholding foreign partnership to file a 
partnership return under section 6031(a) and partner statements under 
6031(b), including for each U.S. partner to the extent required in the 
agreement. Additionally, a partnership that is an FFI will be required 
to file Form 8966, ``FATCA Report'' to the extent provided in the 
withholding agreement.
    (iii) Withholding responsibility. A withholding foreign partnership 
must assume primary withholding responsibility under both chapters 3 
and 4 of the Code to the extent required in the withholding agreement. 
It is not required to provide information to the withholding agent 
regarding each partner's distributive share of the payment (including a 
withholdable payment). The withholding foreign partnership will be 
responsible for reporting the payments under Sec. Sec.  1.1461-1(c), 
1.1474-1(d), and chapter 61 of the Code and filing Form 1042 (to the 
extent required in the withholding agreement). A withholding agent 
making a payment to a withholding foreign partnership is not required 
to withhold any amount under chapters 3 and 4 of the Code on the 
payment unless it has actual knowledge or reason to know that the 
foreign partnership is not acting as a withholding foreign partnership 
with respect to the payment or has not withheld to the extent

[[Page 2090]]

required. The withholding foreign partnership shall withhold the 
payments under the same procedures and at the same time as prescribed 
for withholding by a U.S. partnership under paragraph (b)(2) of this 
section, except that, for purposes of determining the partner's status, 
the provisions of paragraph (d)(4) of this section shall apply.
* * * * *
    (A) The name, permanent residence address (as described in Sec.  
1.1441-1(e)(2)(ii)), the employer identification number of the 
partnership, the country under the laws of which the partnership is 
created or governed, the chapter 4 status of the partnership if 
required for purposes of chapter 4 or if the partnership provides (or 
will provide) a withholding statement associated with the Form W-8 
allocating a payment to a chapter 4 withholding rate pool of U.S. 
payees under Sec.  1.6049-4(c)(4) with respect to its partners, and the 
GIIN of the partnership (if applicable). If the partnership provides 
(or will provide) a chapter 4 withholding rate pool of U.S. payees as 
described in the preceding sentence, the partnership must certify to 
its chapter 4 status as a participating FFI (including a reporting 
Model 2 FFI) or registered deemed-compliant FFI (including a reporting 
Model 1 FFI);
    (B) A certification that the partnership is a withholding foreign 
partnership within the meaning of paragraph (c)(2)(i) of this section, 
and, for a partnership that is an FFI receiving a withholdable payment, 
a certification that the partnership is acting as a participating FFI, 
a registered deemed-compliant FFI, or a nonreporting IGA FFI (as 
defined in Sec.  1.1471-1(b)(83)); and
* * * * *
    (3) Nonwithholding foreign partnerships--(i) Reliance on claim of 
foreign partnership status. A withholding agent may treat a person as a 
nonwithholding foreign partnership if it receives from that person a 
nonwithholding foreign partnership withholding certificate as described 
in paragraph (c)(3)(iii) of this section. A withholding agent that does 
not receive a nonwithholding foreign partnership withholding 
certificate or does not receive a valid withholding certificate from an 
entity it knows, or has reason to know, is a foreign partnership must 
apply the presumption rules of Sec. Sec.  1.1441-1(b)(3) and 1.6049-
5(d) and paragraphs (d) and (e)(6) of this section. In addition, to the 
extent a withholding agent cannot, prior to a payment, reliably 
associate the payment with valid documentation from a payee that is 
associated with the nonwithholding foreign partnership withholding 
certificate or has insufficient information to report the payment on 
Form 1042-S or Form 1099, to the extent reporting is required, the 
withholding agent must apply the presumption rules. See Sec.  1.1441-
1(b)(2)(vii)(A) and (B) for rules regarding reliable association. See, 
however, Sec.  1.1441-1(e)(3)(iv)(C)(2) for when a withholding agent 
may reliably associate a withholdable payment with a chapter 4 
withholding rate pool in lieu of obtaining documentation for each payee 
included in the pool (substituting the term nonwithholding foreign 
partnership for the term nonqualified intermediary). See also Sec.  
1.1441-1(e)(3)(iv)(A) for when a withholding agent may reliably 
associate a payment with a chapter 4 withholding rate pool of U.S. 
payees. See paragraph (c)(3)(iv) of this section and Sec.  1.1441-
1(e)(3)(iv) for alternative procedures permitting allocation 
information to be received after a payment is made.
    (ii) Reliance on claim of reduced withholding by a partnership for 
its partners. This paragraph (c)(3)(ii) describes the manner in which a 
withholding agent may rely on a claim of reduced withholding when 
making a payment to a nonwithholding foreign partnership. To the extent 
that a withholding agent treats a payment to a nonwithholding foreign 
partnership as a payment to the nonwithholding foreign partnership's 
partners (whether direct or indirect) in accordance with paragraph 
(c)(1)(i) of this section, it may rely on a claim for reduced 
withholding by the partner if, prior to the payment, the withholding 
agent can reliably associate the payment (within the meaning of Sec.  
1.1441-1(b)(2)(vii)) with a valid withholding certificate or other 
appropriate documentation from the partner that establishes entitlement 
to a reduced rate of withholding. A withholding certificate or other 
appropriate documentation that establishes entitlement to a reduced 
rate of withholding is a beneficial owner withholding certificate 
described in Sec.  1.1441-1(e)(2)(i), documentary evidence described in 
Sec.  1.1441-6(c)(3) or (4) or Sec.  1.6049-5(c)(1) (for a partner 
claiming to be a foreign person and a beneficial owner, determined 
under the provisions of Sec.  1.1441-1(c)(6)), a Form W-9 described in 
Sec.  1.1441-1(d) (for a partner claiming to be a U.S. payee), a 
withholding foreign partnership withholding certificate described in 
paragraph (c)(2)(iv) of this section, or a withholding statement 
allocating the payment to a chapter 4 withholding rate pool of U.S. 
payees. For when the withholding agent can reliably associate the 
payment with a chapter 4 withholding rate pool, see paragraph (c)(3)(i) 
of this section. See also Sec.  1.1441-3(a)(2) (coordinating 
withholding under chapter 3 when withholding under chapter 4 is applied 
to a payment). Unless a nonwithholding foreign partnership withholding 
certificate is provided for income claimed to be effectively connected 
with the conduct of a trade or business in the United States, a claim 
must be presented for each portion of the payment that represents an 
item of income includible in the distributive share of a partner as 
required under paragraph (c)(3)(iii)(C) of this section. When making a 
claim for several partners, the partnership may present a single 
nonwithholding foreign partnership withholding certificate to which the 
partners' certificates or other appropriate documentation are 
associated. Where the nonwithholding foreign partnership withholding 
certificate is provided for income claimed to be effectively connected 
with the conduct of a trade or business in the United States under 
paragraph (c)(3)(iii)(D) of this section, the claim may be presented 
without having to identify any partner's distributive share of the 
payment.
* * * * *
    (A) The name, permanent residence address (as described in Sec.  
1.1441-1(e)(2)(ii)), the employer identification number of the 
partnership, if any, the country under the laws of which the 
partnership is created or governed, and the chapter 4 status of the 
partnership (for a nonwithholding foreign partnership receiving a 
withholdable payment or providing a withholding statement associated 
with the Form W-8 allocating a payment to a chapter 4 withholding rate 
pool of U.S. payees), and the GIIN of the partnership (if applicable);
* * * * *
    (iv) Withholding statement provided by nonwithholding foreign 
partnership and coordination with chapter 4. The provisions of Sec.  
1.1441-1(e)(3)(iv) (regarding a withholding statement) shall apply to a 
nonwithholding foreign partnership by substituting the term 
nonwithholding foreign partnership for the term nonqualified 
intermediary, including when a nonwithholding foreign partnership may 
provide to a withholding agent a withholding statement that includes a 
chapter 4 withholding rate pool in lieu of information with respect to 
each partner that is a payee of a payment.

[[Page 2091]]

    (v) Withholding and reporting by a foreign partnership. A 
nonwithholding foreign partnership described in this paragraph (c)(3) 
that receives an amount subject to withholding (as defined in Sec.  
1.1441-2(a)) shall be required to withhold and report such payment 
under chapter 3 of the Code and the regulations thereunder except as 
otherwise provided in this paragraph (c)(3)(v). A nonwithholding 
foreign partnership shall not be required to withhold and report if it 
has provided a valid nonwithholding foreign partnership withholding 
certificate, it has provided all of the information required by 
paragraph (c)(3)(iv) of this section (withholding statement), and it 
does not know, and has no reason to know, that another withholding 
agent failed to withhold the correct amount or failed to report the 
payment correctly under Sec.  1.1461-1(c). A nonwithholding foreign 
partnership is also not required to withhold and report under this 
paragraph (c)(3) to the extent that withholding under chapter 4 was 
applied to a payment that is includible in the gross income of a 
partner in the partnership. See also Sec.  1.1441-3(a)(2) for 
coordination rules when withholding under chapter 4 has been applied to 
a withholdable payment. A withholding foreign partnership's obligations 
to withhold and report shall be determined in accordance with its 
withholding foreign partnership agreement.
    (d) * * *
    (2) Determination of partnership status as U.S. or foreign in the 
absence of documentation. In the absence of a valid representation of 
U.S. partnership status in accordance with paragraph (b)(1) of this 
section or of foreign partnership status in accordance with paragraph 
(c)(2)(i) or (c)(3)(i) of this section, the withholding agent shall 
determine the classification of the payee under the presumptions set 
forth in Sec.  1.1441-1(b)(3)(ii). If the withholding agent treats the 
payee as a partnership under Sec.  1.1441-1(b)(3)(ii), the withholding 
agent shall apply the presumptions set forth in Sec.  1.1441-
1(b)(3)(iii)(A)(1) (applied by substituting the term partnership for 
the term exempt recipient) to determine whether to treat the 
partnership as a U.S. person or foreign person. For rules regarding 
reliable association with a withholding certificate from a domestic or 
a foreign partnership, see Sec.  1.1441-1(b)(2)(vii).
    (3) Determination of partners' status in the absence of certain 
documentation. If a nonwithholding foreign partnership has provided a 
nonwithholding foreign partnership withholding certificate under 
paragraph (c)(3)(iii) of this section that would be valid except that 
the withholding agent cannot reliably associate all or a portion of the 
payment with valid documentation from a partner of the partnership, 
then the withholding agent may apply the presumption rule of this 
paragraph (d)(3) with respect to all or a portion of the payment for 
which documentation has not been received. See Sec.  1.1441-
1(b)(2)(vii)(A) and (B) for rules regarding reliable association. The 
presumption rule of this paragraph (d)(3) also applies to a person that 
is presumed to be a foreign partnership under the rule of paragraph 
(d)(2) of this section. Any portion of a payment that the withholding 
agent cannot treat as reliably associated with valid documentation from 
a partner may be presumed made to a foreign payee. As a result, any 
payment of an amount subject to withholding is subject to withholding 
at a rate of 30 percent. Any payment that is presumed to be made to an 
undocumented foreign payee must be reported on Form 1042-S. See Sec.  
1.1461-1(c). For a payment described in this paragraph (d)(3) that is a 
withholdable payment, see Sec.  1.1471-3(f)(5) for the presumption rule 
for determining the payee's chapter 4 status to determine whether 
withholding under chapter 4 applies to the payment.
    (4) Determination by a withholding foreign partnership of the 
status of its partners. Except as otherwise provided in the agreement 
described in paragraph (c)(2) of this section, a withholding foreign 
partnership shall determine whether the partners or some other persons 
are the payees of the partners' distributive shares of any payment made 
by a withholding foreign partnership by applying the rules of Sec.  
1.1441-1(b)(2), paragraph (c)(1) of this section (in the case of a 
partner that is a foreign partnership), and paragraph (e)(3) of this 
section (in the case of a partner that is a foreign estate or a foreign 
trust). Further, the provisions of paragraph (d)(3) of this section 
shall apply to determine the status of partners and the applicable 
withholding rates to the extent that, at the time the foreign 
partnership is required to withhold on a payment, it cannot reliably 
associate the amount with documentation for any one or more of its 
partners.
    (e) * * *
    (3) * * *
    (iii) Coordination with chapter 4 for payments made to foreign 
simple trusts and foreign grantor trusts. A withholding agent that 
makes a payment of U.S. source FDAP income to a foreign simple trust or 
foreign grantor trust that is a withholdable payment to which 
withholding under chapter 4 applies must apply the rules described in 
Sec.  1.1473-1(a)(5)(vi) to determine when the payment is treated as 
made to a beneficiary or owner of the trust for purposes of chapter 4. 
In a case in which withholding applies under chapter 4 to a 
withholdable payment made to a foreign simple trust or foreign grantor 
trust, see Sec.  1.1441-3(a)(2) to coordinate withholding otherwise 
required under this paragraph (e) with respect to the amount of the 
payment included in the gross income of the payee of the payment. For 
when a withholding agent may reliably associate a withholdable payment 
with a chapter 4 withholding rate pool in lieu of obtaining 
documentation for each payee included in the pool, see Sec.  1.1441-
1(e)(3)(iv)(C)(2) (substituting the term nonwithholding foreign trust 
for the term nonqualified intermediary).
* * * * *
    (5) Foreign simple trust and foreign grantor trust--(i) Reliance on 
claim of foreign simple trust or foreign grantor trust status. A 
withholding agent may treat a person as a foreign simple trust or 
foreign grantor trust if it receives from that person a foreign simple 
trust or foreign grantor trust withholding certificate as described in 
paragraph (e)(5)(iii) of this section. A withholding agent must apply 
the presumption rules of Sec. Sec.  1.1441-1(b)(3) and 1.6049-5(d) and 
paragraphs (d) and (e)(6) of this section to the extent it cannot, 
prior to the payment, reliably associate a payment (within the meaning 
of Sec.  1.1441-1(b)(2)(vii)) with a valid foreign simple trust or 
foreign grantor trust withholding certificate, it cannot reliably 
determine how much of the payment relates to valid documentation 
provided by a payee (e.g., a person that is not itself a nonqualified 
intermediary, flow-through entity, or U.S. branch) associated with the 
foreign simple trust or foreign grantor trust withholding certificate, 
or it does not have sufficient information to report the payment on 
Form 1042-S or Form 1099, if reporting is required. See Sec.  1.1441-
1(b)(2)(vii)(A) and (B). See, however, Sec.  1.1441-1(e)(3)(iv)(C)(2) 
for when a withholding agent may reliably associate a withholdable 
payment with a chapter 4 withholding rate pool in lieu of obtaining 
documentation for each payee included in a pool (substituting the term 
nonwithholding foreign trust for the term nonqualified intermediary). 
See also Sec.  1.1441-1(e)(3)(iv)(A) for when a withholding agent may 
reliably associate a payment with a chapter 4 withholding rate pool of 
U.S. payees.
    (ii) Reliance on claim of reduced withholding by a foreign simple 
trust or

[[Page 2092]]

foreign grantor trust for its beneficiaries or owners. This paragraph 
(e)(5)(ii) describes the manner in which a withholding agent may rely 
on a claim of reduced withholding when making a payment to a foreign 
simple trust or foreign grantor trust. To the extent that a withholding 
agent treats a payment to a foreign simple trust or foreign grantor 
trust as a payment to payees other than the trust in accordance with 
paragraph (e)(3)(i) of this section, it may rely on a claim for reduced 
withholding by a beneficiary or owner if, prior to the payment, the 
withholding agent can reliably associate the payment (within the 
meaning of Sec.  1.1441-1(b)(2)(vii)) with a valid withholding 
certificate or other appropriate documentation from a payee or 
beneficial owner that establishes entitlement to a reduced rate of 
withholding. A withholding certificate or other appropriate 
documentation that establishes entitlement to a reduced rate of 
withholding is a beneficial owner withholding certificate described in 
Sec.  1.1441-1(e)(2)(i) or documentary evidence described in Sec.  
1.1441-6(c)(3) or (4) or in Sec.  1.6049-5(c)(1) (for a beneficiary or 
owner claiming to be a foreign person and a beneficial owner, 
determined under the provisions of Sec.  1.1441-1(c)(6)), a Form W-9 
described in Sec.  1.1441-1(d) (for a beneficiary or owner claiming to 
be a U.S. payee), a withholding foreign partnership withholding 
certificate described in paragraph (c)(2)(iv) of this section, or a 
withholding statement allocating the payment to a chapter 4 withholding 
rate pool of U.S. payees. For when the withholding agent can reliably 
associate the payment with a chapter 4 withholding rate pool, see 
paragraph (c)(3)(i) of this section. See also Sec.  1.1441-3(a)(2) 
(coordinating withholding under chapter 3 when withholding under 
chapter 4 is applied to a withholdable payment). Unless a foreign 
simple trust or foreign grantor trust withholding certificate is 
provided for income treated as income effectively connected with the 
conduct of a trade or business in the United States, a claim must be 
presented for each payee's portion of the payment. When making a claim 
for several payees, the trust may present a single foreign simple trust 
or foreign grantor trust withholding certificate with which the payees' 
certificates or other appropriate documentation are associated. Where 
the foreign simple trust or foreign grantor trust withholding 
certificate is provided for income that is treated as effectively 
connected with the conduct of a trade or business in the United States 
under paragraph (e)(5)(iii)(D) of this section, the claim may be 
presented without having to identify any beneficiary's or grantor's 
distributive share of the payment.
    (iii) * * *
    (A) The name, permanent residence address (as described in Sec.  
1.1441-1(e)(2)(ii)), the employer identification number, if required, 
of the trust, the country under the laws of which the trust is created, 
the chapter 4 status of the trust if required for purposes of chapter 4 
or if the trust provides (or will provide) a withholding statement 
associated with the Form W-8 allocating a payment to a chapter 4 
withholding rate pool of U.S. payees under Sec.  1.6049-4(c)(4) with 
respect to the nonwithholding foreign trust's owners and beneficiaries, 
and the GIIN of the trust (if applicable). If a nonwithholding foreign 
trust provides (or will provide) a chapter 4 withholding rate pool of 
U.S. payees as described in the preceding sentence, the trust must 
certify to its chapter 4 status as a participating FFI (including a 
reporting Model 2 FFI) or registered deemed-compliant FFI (including a 
reporting Model 1 FFI);
* * * * *
    (iv) Withholding statement provided by a foreign simple trust or 
foreign grantor trust and coordination with chapter 4. The provisions 
of Sec.  1.1441-1(e)(3)(iv) (regarding a withholding statement) shall 
apply to a foreign simple trust or foreign grantor trust by 
substituting the term foreign simple trust or foreign grantor trust for 
the term nonqualified intermediary, including when a withholding 
statement provided by a foreign simple trust or foreign grantor trust 
may include a chapter 4 withholding rate pool in lieu of information 
with respect to each owner or beneficiary that is a payee of a payment.
    (v) Withholding foreign trusts. The IRS may enter into a 
withholding agreement with a foreign trust to treat the trust or estate 
as a withholding foreign trust. Such a withholding agreement shall 
generally follow the same principles as a withholding agreement with a 
withholding foreign partnership under paragraph (c)(2)(ii) of this 
section. A withholding agent may treat a payment to a withholding 
foreign trust in the same manner the withholding agent would treat a 
payment (including a withholdable payment) to a withholding foreign 
partnership. See Sec.  1.1441-1(e)(5)(ii)(D). For a withholding foreign 
trust that is an FFI, the withholding agreement will require the 
withholding foreign trust to assume the requirements of either a 
participating FFI, registered deemed-compliant FFI, or an FFI treated 
as a deemed-compliant FFI under an applicable IGA that is subject to 
due diligence and reporting requirements with respect to its U.S. 
accounts similar to those applicable to a registered deemed-compliant 
FFI under Sec.  1.1471-5(f)(1).
    (6) * * *
    (ii) Determination of status as U.S. or foreign trust or estate in 
the absence of documentation. In the absence of valid documentation 
that establishes the U.S. status of a trust or estate under paragraph 
(b)(1) of this section and of documentation that establishes the 
foreign status of a trust or estate under paragraph (e)(4) or 
(e)(5)(iii) of this section, the withholding agent shall determine the 
classification of the payee based upon the presumptions set forth in 
Sec.  1.1441-1(b)(3)(ii). If, based upon those presumptions, the 
withholding agent classifies the payee as a trust or estate, the 
withholding agent shall apply the presumptions set forth in Sec.  
1.1441-1(b)(3)(iii)(A)(1) (applied by substituting the term trust for 
the term exempt recipient) to determine whether the trust or estate is 
a U.S. person or foreign person. An undocumented payee presumed to be a 
foreign trust shall be presumed to be a foreign complex trust. If a 
withholding agent has documentary evidence that establishes that an 
entity is a foreign trust, but the withholding agent cannot determine 
whether the foreign trust is a complex trust, a simple trust, or 
foreign grantor trust, the withholding agent shall presume that the 
trust is a foreign complex trust. Notwithstanding the preceding 
sentence, in the case of a foreign trust with a settlor that is a U.S. 
person for which a withholding agent has both a U.S. address and TIN, 
the withholding agent shall presume that the trust is a grantor trust 
when it cannot determine the status of the trust as a simple trust, 
complex trust, or grantor trust. See Sec.  1.1471-3(f)(4) and (5) to 
determine the status of the payee for purposes of chapter 4.
* * * * *
    (f) Failure to receive withholding certificate timely or to act in 
accordance with applicable presumptions. See applicable procedures 
described in Sec.  1.1441-1(b)(7) in the event the withholding agent 
does not hold an appropriate withholding certificate or other 
appropriate documentation at the time of payment or fails to rely on 
the presumptions set forth in Sec.  1.1441-1(b)(3) or in paragraph (d) 
or (e) of this section. For a payment that is a

[[Page 2093]]

withholdable payment, see Sec.  1.1471-3(f) for the presumption rule 
for determining the payee's chapter 4 status.
    (g) Effective/applicability date. This section applies to payments 
made on or after January 6, 2017. (For payments made after June 30, 
2014, and before January 6, 2017, see this section as in effect and 
contained in 26 CFR part 1, as revised April 1, 2016. For payments made 
after December 31, 2000, and before July 1, 2014, see this section as 
in effect and contained in 26 CFR part 1, as revised April 1, 2013.)


Sec.  1.1441-5T   [Removed]

0
Par. 14. Section 1.1441-5T is removed.

0
Par. 15. Section 1.1441-6 is amended by revising paragraphs (a), 
(b)(1), (b)(2)(i) and (iv), (c)(1), (c)(5)(i), and (i) to read as 
follows:


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

    (a) In general. The rate of withholding on a payment of income 
subject to withholding may be reduced to the extent provided under an 
income tax treaty in effect between the United States and a foreign 
country. Most benefits under income tax treaties are to foreign persons 
who reside in the treaty country. In some cases, benefits are available 
under an income tax treaty to U.S. citizens or U.S. residents or to 
residents of a third country. See paragraph (b)(5) of this section for 
claims of benefits by U.S. persons. If the requirements of this section 
are met, the amount withheld from the payment may be reduced at source 
to account for the treaty benefit. See, however, Sec.  1.1471-2(a) and 
Sec.  1.1472-1(b) for when withholding at source on a withholdable 
payment may not be reduced to account for a treaty benefit such that 
the beneficial owner of the payment may need to file a claim for refund 
to obtain a refund for the overwithheld amount of tax. See also Sec.  
1.1441-4(b)(2) for rules regarding claims of a reduced rate of 
withholding under an income tax treaty in the case of compensation from 
personal services and Sec.  1.1441-4(c)(1) for rules regarding claims 
of a reduced rate of withholding under an income tax treaty in the case 
of scholarship and fellowship income.
    (b) Reliance on claim of reduced withholding under an income tax 
treaty--(1) In general. The withholding imposed under section 1441, 
1442, or 1443 on any payment to a foreign person is eligible for 
reduction under the terms of an income tax treaty only to the extent 
that such payment is treated as derived by a resident of an applicable 
treaty jurisdiction, such resident is a beneficial owner, and all other 
requirements for benefits under the treaty are satisfied. See section 
894 and the regulations under section 894 to determine whether a 
resident of a treaty country derives the income. Absent actual 
knowledge or reason to know otherwise, a withholding agent may rely on 
a claim that a beneficial owner is entitled to a reduced rate of 
withholding based upon an income tax treaty if, prior to the payment, 
the withholding agent can reliably associate the payment with a 
beneficial owner withholding certificate, as described in Sec.  1.1441-
1(e)(2), that contains the information necessary to support the claim, 
or, in the case of a payment of income described in paragraph (c)(2) of 
this section made outside the United States with respect to an offshore 
obligation, documentary evidence described in paragraphs (c)(3), 
(c)(4), and (c)(5) of this section. See Sec.  1.6049-5(e) for the 
definition of payments made outside the United States and Sec.  1.6049-
5(c)(1) for the definition of an offshore obligation. For purposes of 
this paragraph (b)(1), a beneficial owner withholding certificate 
described in Sec.  1.1441-1(e)(2)(i) contains information necessary to 
support the claim for a treaty benefit only if it includes the 
beneficial owner's taxpayer identifying number (except as otherwise 
provided in paragraph (c)(1) and (g) of this section, or the beneficial 
owner provides its foreign tax identifying number issued by its country 
of residence and such country has with the United States an income tax 
treaty or information exchange agreement in effect), includes the 
representations that the beneficial owner derives the income under 
section 894 and the regulations under section 894, if required, and 
with regard to a beneficial owner that is an entity, includes a 
statement that the entity meets the limitation on benefits provisions 
of the treaty, if any. For claims for treaty benefits for scholarship 
and fellowship income, the beneficial owner withholding certificate 
must contain the beneficial owner's U.S. taxpayer identifying number 
(not a foreign taxpayer identifying number). The withholding 
certificate must also contain any other representations required by 
this section and any other information, certifications, or statements 
as may be required by the form or accompanying instructions in addition 
to, or in place of, the information and certifications described in 
this section. Absent actual knowledge or reason to know that the claims 
are unreliable or incorrect (applying the standards of knowledge in 
Sec.  1.1441-7(b)), a withholding agent may rely on the claims made on 
a withholding certificate or on documentary evidence. A withholding 
agent may also rely on the information contained in a withholding 
statement provided under Sec. Sec.  1.1441-1(e)(3)(iv) and 1.1441-
5(c)(3)(iv) and (e)(5)(iv) to determine whether the appropriate 
statements regarding section 894 and limitation on benefits have been 
provided in connection with documentary evidence. The Internal Revenue 
Service (IRS) may apply the provisions of Sec.  1.1441-1(e)(1)(ii)(B) 
to notify the withholding agent that the certificate cannot be relied 
upon to grant benefits under an income tax treaty. See Sec.  1.1441-
1(e)(4)(viii) regarding reliance on a withholding certificate by a 
withholding agent. The provisions of Sec.  1.1441-1(b)(3)(iv) dealing 
with a 90-day grace period shall apply for purposes of this section.
    (i) [Reserved]. For further guidance, Sec.  1.1441-6T(b)(1)(i).
    (ii) [Reserved]. For further guidance, Sec.  1.1441-6T(b)(1)(ii).
    (2) Payment to fiscally transparent entity--(i) In general. If the 
person claiming a reduced rate of withholding under an income tax 
treaty is an interest holder of an entity that is considered to be 
fiscally transparent (as defined in the regulations under section 894) 
by the interest holder's jurisdiction with respect to an item of 
income, then, with respect to such income derived by that person 
through the entity, the entity shall be treated as a flow-through 
entity and may provide a flow-through withholding certificate with 
which the withholding certificate or other documentary evidence of the 
interest holder that supports the claim for treaty benefits is 
associated. In the case of a payment that is a withholdable payment, 
see, however, Sec.  1.1471-3(c) for determining the payee of the 
payment and Sec. Sec.  1.1471-2(a) and 1472-1(b) for when withholding 
at source may apply to the payment based on the status of the payee 
notwithstanding a claim for treaty benefits made under this paragraph 
(b)(2) by an interest holder in the payee. In such a case, the interest 
holder may file a claim for refund of the overwithheld amount of tax. 
For purposes of this paragraph (b)(2)(i), interest holders do not 
include any direct or indirect interest holders that are themselves 
treated as fiscally transparent entities with respect to that income by 
the interest holder's jurisdiction. See Sec.  1.1441-1(c)(23) and 
(e)(3)(i) for the definition of flow-through entity and flow-through 
withholding certificate. The entity may provide a beneficial owner 
withholding

[[Page 2094]]

certificate, or beneficial owner documentation, with respect to any 
remaining portion of the income to the extent the entity is receiving 
income and is not treated as fiscally transparent by its own 
jurisdiction. Further, the entity may claim a reduced rate of 
withholding with respect to the portion of a payment for which it is 
not treated as fiscally transparent if it meets all the requirements to 
make such a claim and, in the case of treaty benefits, it provides the 
documentation required by paragraph (b)(1) of this section. If dual 
claims, as described in paragraph (b)(2)(iii) of this section, are 
made, multiple withholding certificates may have to be furnished. 
Multiple withholding certificates may also have to be furnished if the 
entity receives income for which a reduction of withholding is claimed 
under a provision of the Internal Revenue Code (e.g., portfolio 
interest) and income for which a reduction of withholding is claimed 
under an income tax treaty.
* * * * *
    (iv) Examples. The following examples illustrate the rules of 
paragraph (b)(2) of this section. Each of the following examples 
describes a payment of U.S. source royalties, which are not 
withholdable payments under chapter 4. See Sec.  1.1473-1(a)(4)(iii) 
(describing nonfinancial payments that are not treated as withholdable 
payments). Thus, withholding under chapter 4 shall not apply with 
respect to the U.S. source royalties in any of the following examples:

    Example 1.  (i) Facts. Entity E is a business organization 
formed under the laws of country Y. Country Y has an income tax 
treaty with the United States. The treaty contains a limitation on 
benefits provision. E receives U.S. source royalties from 
withholding agent W and claims a reduced rate of withholding under 
the U.S.-Y tax treaty on its own behalf (rather than on behalf of 
its interest holders). E furnishes a beneficial owner withholding 
certificate described in paragraph (b)(1) of this section that 
represents that E is a resident of country Y (within the meaning of 
the U.S.-Y tax treaty), is the beneficial owner of the income, 
derives the income under section 894 and the regulations under 
section 894, and is not precluded from claiming benefits by the 
treaty's limitation on benefits provision.
    (ii) Analysis. Absent actual knowledge or reason to know 
otherwise, as described in paragraph (b)(1) of this section, W may 
rely on the representations made by E to apply a reduced rate of 
withholding.
    Example 2.  (i) Facts. The facts are the same as under Example 
1, except that one of E's interest holders, H, is an entity 
organized in country Z. The U.S.-Z tax treaty reduces the rate on 
royalties to zero whereas the rate on royalties under the U.S.-Y tax 
treaty applicable to E is 5%. H is not fiscally transparent under 
country Z's tax law with respect to such income. H furnishes a 
beneficial owner withholding certificate to E that represents that H 
derives, within the meaning of section 894 and the regulations under 
section 894, its share of the royalty income paid to E as a resident 
of country Z, is the beneficial owner of the royalty income, and is 
not precluded from claiming treaty benefits by virtue of the 
limitation on benefits provision in the U.S.-Z treaty. E furnishes 
to W a flow-through withholding certificate described in Sec.  
1.1441-1(e)(3)(i) to which it attaches H's beneficial owner 
withholding certificate and a withholding statement for the portion 
of the payment that H claims as its distributive share of the 
royalty income. E also furnishes to W a beneficial owner withholding 
certificate for itself for the portion of the payment that H does 
not claim as its distributive share.
    (ii) Analysis. Absent actual knowledge or reason to know 
otherwise, as described in paragraph (b)(1) of this section, W may 
rely on the documentation furnished by E to treat the royalty 
payment to a single foreign entity (E) as derived by different 
residents of tax treaty countries as a result of the claims 
presented under different treaties. W may, at its option, grant dual 
treatment, that is, a reduced rate of zero percent under the U.S.-Z 
treaty on the portion of the royalty payment that H claims to derive 
as a resident of country Z and a reduced rate of 5% under the U.S.-Y 
treaty for the balance. However, under paragraph (b)(2)(iii) of this 
section, W may, at its option, treat E as the only relevant person 
deriving the royalty and grant benefits under the U.S.-Y treaty 
only.
    Example 3.  (i) Facts. E is a business organization formed under 
the laws of country X. Country X has an income tax treaty with the 
United States. E has two interest holders, H1, organized in country 
Y, and H2, organized in country Z. E receives from W, a U.S. 
withholding agent, a payment of U.S. source royalties and interest, 
with respect to an obligation issued before July 1, 2014, that is 
eligible for the portfolio interest exception under sections 871(h) 
and 881(c), provided W receives the appropriate beneficial owner 
statement required under section 871(h)(5). E is classified as a 
corporation under U.S. tax law principles. Country X, E's country of 
organization, treats E as an entity that is not fiscally transparent 
with respect to items of income under the regulations under section 
894. Under the U.S.-X income tax treaty, royalties are subject to a 
5% rate of withholding. Country Y, H1's country of organization, 
treats E as fiscally transparent with respect to items of income 
under section 894 and H1 as not fiscally transparent with respect to 
items of income. Under the country Y-U.S. income tax treaty, 
royalties are exempt from U.S. tax. Country Z, H2's country of 
organization, treats E as not fiscally transparent under section 894 
with respect to items of income. E provides W with a flow-through 
beneficial owner withholding certificate with which it associates a 
beneficial owner withholding certificate from H1. H1's withholding 
certificate states that H1 is a resident of country Y, derives the 
royalty income under section 894, meets the applicable limitation on 
benefits provisions of the U.S.-Y treaty, and is the beneficial 
owner of the income. The withholding statement attached to E's flow-
through withholding certificate allocates one-half of the royalty 
payment to H1. E also provides W with a beneficial owner withholding 
certificate for the interest income and the remaining one-half of 
the royalty income. The withholding certificate states that E is a 
resident of country X, derives the royalty income under section 894, 
meets the limitation on benefits provisions of the U.S.-X treaty, 
and is the beneficial owner of the income.
    (ii) Analysis. Absent actual knowledge or reason to know that 
the claims are incorrect, as described in paragraph (b)(1), W may 
treat one-half of the royalty derived by E as subject to a 5% 
withholding rate and one-half of the royalty as derived by H1 and 
subject to no withholding. Further, it may treat all of the interest 
as being paid to E and as qualifying for the portfolio interest 
exception. W can, at its option, treat the entire royalty as paid to 
E and subject it to withholding at a 5% rate of withholding. In that 
case, H1 would be entitled to claim a refund with respect to its 
one-half of the royalty.
    Example 4.  [Reserved]. For further guidance, see Sec.  1.1441-
6T(b)(2)(iv) Example 4.

    (c) Exemption from requirement to furnish a taxpayer identifying 
number and special documentary evidence rules for certain income--(1) 
General rule. In the case of income described in paragraph (c)(2) of 
this section, a withholding agent may rely on a beneficial owner 
withholding certificate described in paragraph (b)(1) of this section 
without regard to the requirement that the withholding certificate 
include the beneficial owner's taxpayer identifying number. In the case 
of a payment of income not described in paragraph (c)(2) of this 
section, a withholding agent may rely on a withholding certificate that 
includes the beneficial owner's foreign taxpayer identifying number 
described in paragraph (b)(1) of this section instead of the beneficial 
owner's taxpayer identifying number. In the case of payments of income 
described in paragraph (c)(2) of this section made outside the United 
States (as defined in Sec.  1.6049-5(e)) with respect to an offshore 
obligation (as defined in Sec.  1.6049-5(c)(1)), a withholding agent 
may, as an alternative to a withholding certificate described in 
paragraph (b)(1) of this section, rely on a certificate of residence 
described in paragraph (c)(3) of this section or documentary evidence 
described in paragraph (c)(4) of this section, relating to the 
beneficial owner, that the withholding agent has reviewed and maintains 
in its records in accordance with Sec.  1.1441-1(e)(4)(iii). In the 
case of a payment to a person other than an individual, the certificate 
of

[[Page 2095]]

residence or documentary evidence must be accompanied by the statements 
described in paragraphs (c)(5)(i) and (ii) of this section regarding 
limitation on benefits and whether the amount paid is derived by such 
person or by one of its interest holders. The withholding agent 
maintains the reviewed documents by retaining the original, certified 
copy, or photocopy (microfiche, electronic scan, or similar means of 
electronic storage) of such documents. With respect to documentary 
evidence, the withholding agent must also note in its records the date 
on which the documents were received and reviewed. This paragraph 
(c)(1) shall not apply to amounts that are exempt from withholding 
based on a claim that the income is effectively connected with the 
conduct of a trade or business in the United States.
* * * * *
    (5) * * *
    (i) [Reserved]. For further guidance, see Sec.  1.1441-6T(c)(5)(i).
* * * * *
    (i) Effective/applicability dates--(1) General rule. Except as 
otherwise provided in paragraph (i)(2) of this section, this section 
applies to payments made on or after January 6, 2017. (For payments 
made after June 30, 2014 (except for payments to which paragraph (c)(1) 
applies, in which case substitute March 5, 2014, for June 30, 2014), 
and before January 6, 2017, see this section as in effect and contained 
in 26 CFR part 1, revised April 1, 2016. For payments made after 
December 31, 2001, and before July 1, 2014, see this section as in 
effect and contained in 26 CFR part 1 revised April 1, 2013.)
    (2) Dividend equivalents. Paragraph (h) of this section applies to 
payments made on or after December 5, 2013.
    (3) [Reserved]. For further guidance, see Sec.  1.1441-6T(i)(3).

0
Par. 16. Section 1.1441-6T is revised to read as follows:


Sec.  1.1441-6T  Claim of reduced withholding under an income tax 
treaty (temporary).

    (a) through (b)(1) introductory text [Reserved]. For further 
guidance, see Sec.  1.1441-6(a) through (b)(1) introductory text.
    (i) Identification of limitation on benefits provisions. In 
conjunction with the representation that the beneficial owner meets the 
limitation on benefits provision of the applicable treaty, if any, 
required by paragraph (b)(1) of this section, a beneficial owner 
withholding certificate must also identify the specific limitation on 
benefits provision of the article (if any, or a similar provision) of 
the treaty upon which the beneficial owner relies to claim the treaty 
benefit. A withholding agent may rely on the beneficial owner's claim 
regarding its reliance on a specific limitation on benefits provision 
absent actual knowledge that such claim is unreliable or incorrect.
    (ii) Reason to know based on existence of treaty. For purposes of 
this paragraph (b)(1), a withholding agent's reason to know that a 
beneficial owner's claim to a reduced rate of withholding under an 
income tax treaty is unreliable or incorrect includes a circumstance 
where the beneficial owner is claiming benefits under an income tax 
treaty that does not exist or is not in force. A withholding agent may 
determine whether a tax treaty is in existence and is in force by 
checking the list maintained on the IRS Web site at https://www.irs.gov/businesses/international-businesses/united-states-income-tax-treaties-a-to-z (or any replacement page on the IRS Web site) or in 
the State Department's annual Treaties in Force publication.
    (b)(2)(i) through (iv) Example 3 [Reserved]. For further guidance, 
see Sec.  1.1441-6(b)(2)(i) through (b)(2)(iv) Example 3.

    Example 4.  (i) Facts. Entity E is a business organization 
formed under the laws of country Y. Country Y has an income tax 
treaty with the United States that contains a limitation on benefits 
provision. E receives U.S. source royalties from withholding agent 
W. E furnishes a beneficial owner withholding certificate to W 
claiming a reduced rate of withholding under the U.S.-Y tax treaty. 
However, E's beneficial owner withholding certificate does not 
specifically identify the limitation on benefits provision that E 
satisfies.
    (ii) Analysis. Because E's withholding certificate does not 
specifically identify the limitation on benefits provision under the 
U.S.-Y tax treaty that E satisfies as required by paragraph 
(b)(1)(i) of this section, W cannot rely on E's withholding 
certificate to apply the reduced rate of withholding claimed by E.

    (c) introductory text through (c)(4) [Reserved]. For further 
guidance, see Sec.  1.1441-6(c) through (c)(4).
    (5) Statements regarding entitlement to treaty benefits--(i) 
Statement regarding conditions under a limitation on benefits 
provision. In addition to the documentary evidence described in 
paragraph (c)(4)(ii) of this section, a taxpayer that is not an 
individual must provide a statement that it meets one or more of the 
conditions set forth in the limitation on benefits article (if any, or 
in a similar provision) contained in the applicable tax treaty and must 
identify the specific limitation on benefits provision of the article 
(if any, or a similar provision) of the treaty upon which the taxpayer 
relies to claim the treaty benefit.
    (c)(5)(ii) through (i)(2) [Reserved]. For further guidance, see 
Sec.  1.1441-6(c)(5)(ii) through (i)(2).
    (3) Effective/applicability date. This section applies on January 
6, 2017.
    (j) Expiration date. The applicability of this section expires on 
December 30, 2019.

0
Par. 17 Section 1.1441-7 is amended by:
0
1. Revising paragraph (b), (c) and (f)(2)(ii).
0
2. Removing paragraph (f)(3).
0
3. Revising paragraph (g).
0
4. Removing paragraph (h).
    The revisions read as follows:


Sec.  1.1441-7  General provisions relating to withholding agents.

* * * * *
    (b) Standards of knowledge--(1) In general. A withholding agent 
must withhold at the full 30-percent rate under section 1441, 1442, or 
1443(a) or at the full 4-percent rate under section 1443(b) if it has 
actual knowledge or reason to know that a claim of U.S. status or of a 
reduced rate of withholding under section 1441, 1442, or 1443 is 
unreliable or incorrect. A withholding agent shall be liable for tax, 
interest, and penalties to the extent provided under sections 1461 and 
1463 and the regulations under those sections if it fails to withhold 
the correct amount despite its actual knowledge or reason to know the 
amount required to be withheld. For purposes of the regulations under 
sections 1441, 1442, and 1443, a withholding agent may rely on 
information or certifications contained in, or associated with, a 
withholding certificate or other documentation furnished by or for a 
beneficial owner or payee unless the withholding agent has actual 
knowledge or reason to know that the information or certifications are 
incorrect or unreliable and, if based on such knowledge or reason to 
know, it should withhold (under chapter 3 of the Code or another 
withholding provision of the Code) an amount greater than would be the 
case if it relied on the information or certifications, or it should 
report (under chapter 3 of the Code or under another provision of the 
Code) an amount that would not otherwise be reportable if it relied on 
the information or certifications. See Sec.  1.1441-1(e)(4)(viii) for 
applicable reliance rules. A withholding agent that has received 
notification by the Internal Revenue Service (IRS) that a claim of U.S. 
status or of a reduced rate is incorrect has actual knowledge beginning 
on the date that is 30 calendar days after the date the notice is 
received. A withholding agent that fails to act in accordance with

[[Page 2096]]

the presumptions set forth in Sec. Sec.  1.1441-1(b)(3), 1.1441-4(a), 
1.1441-5 (d) and (e), or 1.1441-9(b)(3) may also be liable for tax, 
interest, and penalties. See Sec.  1.1441-1(b)(3)(ix) and (7). In the 
case of a withholding agent making a withholdable payment to a payee 
that the withholding agent is required to treat as a foreign entity, 
see Sec.  1.1471-3(e) for standards of knowledge and Sec. Sec.  1.1471-
2 and 1.1472-1(b) for withholding that may apply under chapter 4. A 
withholding agent is allowed to apply the rules under paragraphs (b)(5) 
and (b)(8) of this section as in effect and contained in 26 CFR part 1 
revised April 1, 2013, to accounts opened, and obligations entered 
into, by an entity on or after July 1, 2014, and before January 1, 
2015.
    (2) Reason to know. A withholding agent shall be considered to have 
reason to know if its knowledge of relevant facts or of statements 
contained in the withholding certificates or other documentation is 
such that a reasonably prudent person in the position of the 
withholding agent would question the chapter 3 claims made. For an 
obligation other than a preexisting obligation, a withholding agent 
will have reason to know that a chapter 3 claim made by the holder of 
the obligation (account holder) is unreliable or incorrect if any 
information contained in its account opening files or other files 
pertaining to the obligation (account information), including 
documentation collected for purposes of AML due diligence (as defined 
under Sec.  1.1471-1(b)(4)), conflicts with the account holder's claim. 
A withholding agent will not, however, be considered to have reason to 
know that a person's chapter 3 claim is unreliable or incorrect based 
on documentation collected for AML due diligence until the date that is 
30 days after the obligation is executed (or the account is opened for 
an obligation that is an account with a financial institution).
    (3) Financial institutions--limits on reason to know--(i) In 
general. For purposes of this paragraph (b)(3) and paragraphs (b)(4) 
through (10) of this section, the terms withholding certificate, 
documentary evidence, and documentation are defined in Sec.  1.1441-
1(c)(16), (17), and (18). Except as otherwise provided in paragraphs 
(b)(4) through (9) of this section, a withholding agent that is a 
financial institution under Sec.  1.1471-5(e), an insurance company 
(without regard to whether such company is a specified insurance 
company), or a broker or dealer in securities that maintains or opens 
an account for a beneficial owner (a direct account holder) has reason 
to know that documentation provided by the direct account holder is 
unreliable or incorrect only if one or more of the circumstances 
described in paragraphs (b)(4) through (9) of this section exist. If a 
direct account holder has provided documentation that is unreliable or 
incorrect under the rules of paragraph (b)(4) through (9) of this 
section, the withholding agent may require new documentation. 
Alternatively, the withholding agent may rely on the documentation 
originally provided if the rules of paragraphs (b)(4) through (9) of 
this section permit such reliance based on additional statements and 
documentation obtained by the withholding agent from the beneficial 
owner. Paragraph (b)(10) of this section provides rules regarding 
reason to know for withholding agents that receive beneficial owner 
documentation from persons (indirect account holders) that have an 
account relationship with, or an ownership interest in, a direct 
account holder of the withholding agent. Paragraph (b)(11) of this 
section provides limitations on a withholding agent's reason to know 
for multiple obligations held by the same person. Paragraph (b)(12) of 
this section defines a reasonable explanation provided by an individual 
with respect to the individual's claim of foreign status. For rules 
regarding reliance on Form W-9, see Sec.  31.3406(h)-3(e)(2) of this 
chapter. For payments that are withholdable payments, see Sec.  1.1471-
3(e)(3) and (4) for additional rules regarding a withholding agent's 
reason to know with respect to a payee's claim of chapter 4 status and 
Sec.  1.1471-3(f) for presumption rules that apply when the claim of 
chapter 4 status is unreliable or incorrect.
    (ii) Limits on reason to know for preexisting obligations. With 
respect to a preexisting obligation, a withholding agent that has 
documented the foreign status of the direct account holder for purposes 
of chapter 3 or chapter 61 before July 1, 2014, may continue to rely on 
such documentation without regard to a U.S. phone number or U.S. place 
of birth. If, however, the withholding agent reviews documentation for 
an individual account holder claiming foreign status that contains a 
U.S. place of birth (as described in paragraph (b)(5)(ii) of this 
section) or if the withholding agent is notified of a change in 
circumstances under the criteria of paragraphs (b)(5) and (8) of this 
section (as effective on July 1, 2014), the obligation will be treated 
as having experienced a change in circumstances under Sec.  1.1441-
1(e)(4)(ii)(D) as of the date that the withholding agent reviews the 
documentation or receives the notification, and the withholding agent 
will then have reason to know that the documentation is unreliable or 
incorrect. With respect to an obligation held by an entity, a 
withholding agent is not required to treat the additional U.S. indicia 
described in this paragraph (b) as a change in circumstances under 
Sec.  1.1441-1(e)(4)(ii)(D) before January 1, 2015. See Sec.  1.1441-
1(b)(3)(iv) for the grace period following a change in circumstances. 
For purposes of this rule, a direct account holder will be considered 
documented prior to July 1, 2014, without regard to whether the 
withholding agent obtains renewal documentation for the account holder 
on or after July 1, 2014, pursuant to the requirements of Sec.  1.1441-
1(e)(4)(ii)(A).
    (4) Rules applicable to withholding certificates--(i) In general. A 
withholding agent has reason to know that a beneficial owner 
withholding certificate provided by a direct account holder is 
unreliable or incorrect if the withholding certificate is incomplete 
with respect to any item on the certificate that is relevant to the 
claims made by the direct account holder, the withholding certificate 
contains any information that is inconsistent with the direct account 
holder's claim, the withholding agent has account information that is 
inconsistent with the direct account holder's claim, or the withholding 
certificate lacks information necessary to establish entitlement to a 
reduced rate of withholding. For purposes of establishing a direct 
account holder's status as a foreign person or resident of a treaty 
country a withholding certificate shall be considered unreliable or 
inconsistent with an account holder's claims only if it is not reliable 
under the rules of paragraphs (b)(5) and (6) of this section. A 
withholding agent that relies on an agent to review and maintain a 
withholding certificate is considered to know or have reason to know 
the facts within the knowledge of the agent.
    (ii) Examples. The rules of paragraph (b)(4) of this section are 
illustrated by the following examples:

    Example 1.  F, a foreign person that has a direct account 
relationship with USB, a bank that is a U.S. person, provides USB 
with a beneficial owner withholding certificate for the purpose of 
claiming a reduced rate of withholding on U.S. source dividends 
(which is a withholdable payment). F resides in a treaty country 
that has a limitation on benefits provision in its income tax treaty 
with the United States. The withholding certificate includes a 
certification of F's status for chapter 4 purposes to except the 
payment from withholding under chapter 4, but does not contain a 
statement regarding

[[Page 2097]]

limitation on benefits or deriving the income under section 894 as 
required by Sec.  1.1441-6(b)(1). USB cannot rely on the withholding 
certificate to grant a reduced rate of withholding for chapter 3 
purposes because it is incomplete with respect to the claim made by 
F.
    Example 2.  F, a foreign person and entity that has a direct 
account relationship with USB, a broker that is a U.S. person, 
provides USB with a withholding certificate for the purpose of 
claiming the portfolio interest exception under section 881(c) with 
respect to interest paid on an obligation issued before July 1, 
2014. The payment of interest is not a withholdable payment under 
Sec.  1.1471-2(b) (referring to payments made with respect to 
grandfathered obligations), and, therefore, withholding does not 
apply to the payment under chapter 4. See Sec.  1.1441-3(c)(4)(i) 
for rules coordinating withholding under chapters 3 and 4. F 
indicates on its withholding certificate, however, that it is a 
partnership. USB may not treat F as a beneficial owner of the 
interest for purposes of the portfolio interest exception because F 
has indicated on its withholding certificate that it is a foreign 
partnership, and such entity classification is inconsistent with its 
claim as a beneficial owner.

    (5) Withholding certificate--establishment of foreign status. A 
withholding agent has reason to know that a beneficial owner 
withholding certificate (as defined in Sec.  1.1441-1(e)(2), but 
excluding a Form W-8ECI) provided by a direct account holder is 
unreliable or incorrect for purposes of establishing the account 
holder's status as a foreign person as set forth in paragraphs 
(b)(5)(i) through (iii) of this section.
    (i) Classification of U.S. status, U.S. address, or U.S. telephone 
number. A withholding certificate is unreliable or incorrect if the 
withholding agent has classified the person as a U.S. person in its 
account information, the withholding certificate has a current 
permanent residence address (as defined in Sec.  1.1441-1(e)(2)(ii)) in 
the United States, the withholding certificate has a current mailing 
address in the United States, the withholding agent has a current 
residence or mailing address as part of its account information that is 
an address in the United States, or the direct account holder notifies 
the withholding agent of a new residence or mailing address in the 
United States (whether or not provided on a withholding certificate). A 
withholding agent also has reason to know that a withholding 
certificate provided by a person is unreliable or incorrect if the 
withholding agent has a current telephone number for the account holder 
in the United States and has no telephone number for the account holder 
outside of the United States. When any of the foregoing U.S. indicia 
are present, a withholding agent may nevertheless rely on the 
beneficial owner withholding certificate to establish the account 
holder's foreign status if it may do so under the provisions of 
paragraph (b)(5)(i)(A) or (B) of this section.
    (A) A withholding agent may treat a direct account holder as a 
foreign person if the beneficial owner withholding certificate has been 
provided by an individual and--
    (1) The withholding agent has in its possession or obtains 
documentary evidence establishing foreign status (as described in Sec.  
1.1471-3(c)(5)(i)) that does not contain a U.S. address and the 
individual provides the withholding agent with a reasonable 
explanation, in writing, supporting the claim of foreign status (as 
defined in paragraph (b)(12) of this section);
    (2) For a payment made outside the U.S. with respect to an offshore 
obligation (as described in Sec.  1.6049-5(c)(1)), the withholding 
agent has in its possession or obtains documentary evidence 
establishing foreign status (as described in Sec.  1.1471-3(c)(5)(i)), 
that does not contain a U.S. address;
    (3) For a payment made with respect to an offshore obligation (with 
offshore obligation defined as in Sec.  1.6049-5(c)(1)), the 
withholding agent classifies the individual as a resident of the 
country in which the obligation is maintained, the withholding agent is 
required to report a payment made to the individual annually on a tax 
information statement that is filed with the tax authority of the 
country in which the office is located as part of that country's 
resident reporting requirements, and that country has a tax information 
exchange agreement or income tax treaty in effect with the United 
States; or
    (4) For a case in which the withholding agent classified the 
account holder as a U.S. person in its account information, the 
withholding agent has in its possession or obtains documentary evidence 
described in Sec.  1.1471-3(c)(5)(i)(B) evidencing citizenship in a 
country other than the United States.
    (B) A withholding agent may treat a direct account holder as a 
foreign person if the beneficial owner withholding certificate has been 
provided by an entity that the withholding agent does not know, or does 
not have reason to know, is a flow-through entity and--
    (1) The withholding agent has in its possession or obtains 
documentation establishing foreign status that substantiates that the 
entity is actually organized or created under the laws of a foreign 
country; or
    (2) For a payment made with respect to an offshore obligation (with 
offshore obligation defined as in Sec.  1.6049-5(c)(1)), the 
withholding agent classifies the entity as a resident of the country in 
which the account is maintained, the withholding agent is required to 
report a payment made to the entity annually on a tax information 
statement that is filed with the tax authority of the country in which 
the office is located as part of that country's resident reporting 
requirements, and that country has a tax information exchange agreement 
or income tax treaty in effect with the United States.
    (ii) U.S. place of birth. A withholding agent has reason to know 
that a withholding certificate claiming foreign status provided by a 
direct account holder that is an individual is unreliable or incorrect 
if the withholding agent has, either on accompanying documentation or 
as part of its account information, an unambiguous indication of a 
place of birth for the individual in the United States. A withholding 
agent may treat the individual as a foreign person, notwithstanding the 
U.S. place of birth, if the withholding agent has in its possession or 
obtains documentary evidence described in Sec.  1.1471-3(c)(5)(i)(B) 
evidencing citizenship in a country other than the United States and 
either a copy of the individual's Certificate of Loss of Nationality of 
the United States or a reasonable written explanation of the account 
holder's renunciation of U.S. citizenship or the reason the account 
holder did not obtain U.S. citizenship at birth.
    (iii) Standing instructions with respect to offshore obligations. A 
beneficial owner withholding certificate is unreliable or incorrect if 
it is provided with respect to an offshore obligation (as defined in 
Sec.  1.6049-5(c)(1)) of a direct account holder that has provided 
standing instructions to pay amounts to an address or an account 
maintained in the United States. The withholding agent may treat the 
account holder as a foreign person, however, if the account holder 
provides either a reasonable explanation in writing that supports its 
foreign status or documentary evidence establishing foreign status 
described in Sec.  1.1471-3(c)(5)(i).
    (6) Withholding certificate--claim of reduced rate of withholding 
under treaty. A withholding agent has reason to know that a withholding 
certificate (other than Form W-9) provided by a direct account holder 
is unreliable or incorrect for purposes of establishing that the 
account holder is a resident of a country with which the United States

[[Page 2098]]

has an income tax treaty if it is described in paragraphs (b)(6)(i) 
through (iii) of this section.
    (i) Permanent residence address. A beneficial owner withholding 
certificate is unreliable or incorrect if the permanent residence 
address on the beneficial owner withholding certificate is not in the 
country whose treaty is invoked, or the direct account holder notifies 
the withholding agent of a new permanent residence address that is not 
in the treaty country. A withholding agent may, however, treat a direct 
account holder as entitled to a reduced rate of withholding under an 
income tax treaty if the account holder provides a reasonable 
explanation for the permanent residence address outside the treaty 
country (e.g., the address is the address of a branch of the beneficial 
owner located outside the treaty country in which the entity is a 
resident) or the withholding agent has in its possession or obtains 
documentary evidence described in Sec.  1.1471-3(c)(5)(i) that 
establishes residency in a treaty country.
    (ii) Mailing address. A beneficial owner withholding certificate is 
unreliable or incorrect if the permanent residence address on the 
withholding certificate is in the applicable treaty country but the 
withholding certificate contains a mailing address outside the treaty 
country or the withholding agent has a current mailing address as part 
of its account information for the direct account holder that is 
outside the treaty country. A mailing address that is a P.O. Box, in-
care-of address, or address at a financial institution (if the 
financial institution is not a beneficial owner) shall not preclude a 
withholding agent from treating the account holder as a resident of a 
treaty country if such address is in the treaty country. If a 
withholding agent has a mailing address (whether or not contained on 
the withholding certificate) outside the applicable treaty country, the 
withholding agent may nevertheless treat a direct account holder as a 
resident of an applicable treaty country if--
    (A) The withholding agent has in its possession or obtains 
documentary evidence described in Sec.  1.1471-3(c)(5)(i) supporting 
the account holder's claim of residence in the applicable treaty 
country (and the additional documentation does not contain an address 
outside the treaty country);
    (B) The withholding agent has in its possession, or obtains, 
documentation that establishes that the direct account holder is an 
entity organized in a treaty country (or an entity managed and 
controlled in a treaty country, if the applicable treaty so requires);
    (C) The withholding agent knows that the address outside the 
applicable treaty country (other than a P.O. box, or in-care-of 
address) is a branch of the account holder that is an entity that is a 
resident of the applicable treaty country; or
    (D) The withholding agent obtains a written statement from the 
direct account holder that reasonably establishes entitlement to treaty 
benefits.
    (iii) Standing instructions. A beneficial owner withholding 
certificate is unreliable or incorrect to establish entitlement to a 
reduced rate of withholding under an income tax treaty if the direct 
account holder has standing instructions to pay amounts directing the 
withholding agent to pay amounts from its account to an address or an 
account outside the treaty country unless the account holder provides a 
reasonable explanation, in writing, or the withholding agent has in its 
possession or obtains documentary evidence described in Sec.  1.1471-
3(c)(5)(i) establishing the account holder's residence in the 
applicable treaty country.
    (7) Documentary evidence. A withholding agent shall not treat 
documentary evidence provided by a direct account holder 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 a 
direct account holder that is a natural person and the photograph or 
signature on the documentary evidence, if any, does not match the 
appearance or signature of the person presenting the document. A 
withholding agent shall not rely on documentary evidence to reduce the 
rate of withholding that would otherwise apply under the presumption 
rules of Sec. Sec.  1.1441-1(b)(3), 1.1441-5(d) and (e)(6), and 1.6049-
5(d) if the documentary evidence contains information that is 
inconsistent with the direct account holder's claim of a reduced rate 
of withholding, the withholding agent has other account information 
that is inconsistent with the direct account holder's claim, or the 
documentary evidence lacks information necessary to establish 
entitlement to a reduced rate of withholding. For example, if a direct 
account holder provides documentary evidence to claim treaty benefits 
and the documentary evidence establishes the direct account holder's 
status as a foreign person and a resident of a treaty country, but the 
account holder fails to provide the treaty statements required by Sec.  
1.1441-6(c)(5), the documentary evidence does not establish the direct 
account holder's entitlement to a reduced rate of withholding. For 
purposes of establishing a direct account holder's status as a foreign 
person or resident of a country with which the United States has an 
income tax treaty, documentary evidence shall be considered unreliable 
or incorrect only if it is not reliable under the rules of paragraph 
(b)(8) or (9) of this section.
    (8) Documentary evidence--establishment of foreign status. A 
withholding agent has reason to know that documentary evidence is 
unreliable or incorrect for purposes of establishing the direct account 
holder's status as a foreign person if the documentary evidence is 
described in paragraphs (b)(8)(i), (ii), (iii), or (iv) of this 
section.
    (i) Documentary evidence received prior to January 1, 2001. A 
withholding agent shall not treat documentary evidence provided by a 
direct account holder before January 1, 2001, as valid for purposes of 
establishing the account holder's status as a foreign person if it has 
actual knowledge that the account holder is a U.S. person or if it has 
a mailing or residence address for the account holder in the United 
States. If a withholding agent has an address for the direct account 
holder in the United States, the withholding agent may nevertheless 
treat the account holder as a foreign person if it can so treat the 
account holder under the rules of paragraph (b)(8)(ii) of this section. 
See, however, paragraph (b)(3)(ii) of this section regarding changes in 
circumstances with respect to preexisting obligations.
    (ii) Documentary evidence received after December 31, 2000. A 
withholding agent shall not treat documentary evidence provided by an 
account holder after December 31, 2000, as valid for purposes of 
establishing the direct account holder's foreign status if the 
withholding agent does not have a permanent residence address for the 
account holder. Documentary evidence is also unreliable or incorrect to 
establish a direct account holder's status as a foreign person if the 
withholding agent has classified the account holder as a U.S. person in 
its account information, if the withholding agent has a current mailing 
or permanent residence address (whether or not on the documentation) 
for the direct account holder in the United States, the direct account 
holder notifies the withholding agent of a new residence or mailing 
address in the United States, or if the withholding agent has a current

[[Page 2099]]

telephone number for the account holder in the United States and has no 
telephone number for the account holder outside of the United States. 
Notwithstanding the foregoing, a withholding agent may rely on 
documentary evidence as establishing the direct account holder's 
foreign status if it may do so under the provisions of paragraph 
(b)(8)(ii)(A) or (B) of this section.
    (A) Treatment of individual's foreign status. A withholding agent 
may treat a direct account holder that is an individual as a foreign 
person even if it has any of the U.S. indicia described in this 
paragraph for the account holder if--
    (1) The withholding agent has in its possession or obtains 
additional documentary evidence supporting the claim of foreign status 
(described in Sec.  1.1471-3(c)(5)(i)) that does not contain a U.S. 
address and a reasonable explanation in writing supporting the account 
holder's foreign status;
    (2) The withholding agent obtains a valid beneficial owner 
withholding certificate on Form W-8 and the Form W-8 contains a 
permanent residence address outside the United States and a mailing 
address outside the United States (or if a mailing address is inside 
the United States the account holder provides a reasonable explanation 
in writing supporting the account holder's foreign status); or
    (3) For a payment made with respect to an offshore obligation (with 
offshore obligation defined as in Sec.  1.6049-5(c)(1)), the 
withholding agent classifies the individual as a resident of the 
country in which the obligation is maintained, the withholding agent is 
required to report a payment made to the individual annually on a tax 
information statement that is filed with the tax authority of the 
country in which the office is located as part of that country's 
resident reporting requirements, and that country has a tax information 
exchange agreement or income tax treaty in effect with the United 
States.
    (B) Presumption of entity's foreign status. A withholding agent may 
treat a direct account holder that is an entity (other than a flow-
through entity) as a foreign person even if it has any of the U.S. 
indicia described in this paragraph for the account holder in the 
United States if--
    (1) The withholding agent has in its possession or obtains 
documentary evidence establishing foreign status that substantiates 
that the entity is actually organized or created under the laws of a 
foreign country;
    (2) The withholding agent obtains a valid beneficial owner 
withholding certificate on Form W-8 and the Form W-8 contains a 
permanent residence address outside the United States and a mailing 
address outside the United States (or if a mailing address is inside 
the United States the account holder provides additional documentary 
evidence sufficient to establish the account holder's foreign status); 
or
    (3) For a payment made with respect to an offshore obligation (with 
offshore obligation defined as in Sec.  1.6049-5(c)(1)), the 
withholding agent classifies the entity as a resident of the country in 
which the account is maintained, the withholding agent is required to 
report a payment made to the entity annually on a tax information 
statement that is filed with the tax authority of the country in which 
the office is located as part of that country's resident reporting 
requirements, and that country has a tax information exchange agreement 
or income tax treaty in effect with the United States.
    (iii) U.S. place of birth. A withholding agent has reason to know 
that documentary evidence provided by a direct account holder to 
support an individual's foreign status is unreliable or incorrect if 
the withholding agent has, either on the documentary evidence or as 
part of its account information, an unambiguous indication of a place 
of birth for the individual in the United States. A withholding agent 
may treat the individual as a foreign person, notwithstanding the U.S. 
birth place, if the withholding agent has in its possession or obtains 
documentary evidence described in Sec.  1.1471-3(c)(5)(i)(B) evidencing 
citizenship in a country other than the United States and a copy of the 
individual's Certificate of Loss of Nationality of the United States. 
Alternatively, a withholding agent may treat the individual as a 
foreign person if the withholding agent obtains a valid beneficial 
owner withholding certificate on Form W-8 from the individual that 
establishes the account holder's foreign status, documentary evidence 
described in Sec.  1.1471-3(c)(5)(i)(B) evidencing citizenship in a 
country other than the United States, and a reasonable written 
explanation of the individual's renunciation of U.S. citizenship or the 
reason the individual did not obtain U.S. citizenship at birth.
    (iv) Standing instructions with respect to offshore obligations. 
Documentary evidence is unreliable or incorrect if it is provided with 
respect to an offshore obligation (as defined in Sec.  1.6049-5(c)(1)) 
of a direct account holder that has provided the withholding agent with 
standing instructions to pay amounts to an address or an account 
maintained in the United States. The withholding agent may treat the 
direct account holder as a foreign person, however, if the account 
holder provides either a reasonable explanation in writing that 
supports its foreign status or a valid beneficial owner withholding 
certificate claiming foreign status.
    (9) Documentary evidence--claim of reduced rate of withholding 
under treaty. A withholding agent has reason to know that documentary 
evidence is unreliable or incorrect for purposes of establishing that a 
direct account holder is a resident of a country with which the United 
States has an income tax treaty if it is described in paragraph 
(b)(9)(i) or (ii) of this section.
    (i) Permanent residence address and mailing address. Documentary 
evidence is unreliable or incorrect if the withholding agent has a 
current mailing or current permanent residence address for the direct 
account holder (whether or not on the documentary evidence) that is 
outside the applicable treaty country, or the withholding agent has no 
permanent residence address for the account holder. If a withholding 
agent has a current mailing or current permanent residence address for 
the direct account holder outside the applicable treaty country, the 
withholding agent may nevertheless treat a direct account holder as a 
resident of an applicable treaty country if the withholding agent--
    (A) Has in its possession or obtains additional documentary 
evidence described in Sec.  1.1471-3(c)(5)(i) supporting the direct 
account holder's claim of residence in the applicable treaty country 
(and the documentary evidence does not contain an address outside the 
applicable treaty country, a P.O. box, an in-care-of address, or the 
address of a financial institution);
    (B) Has in its possession or obtains documentary evidence described 
in Sec.  1.1471-3(c)(5)(i) that establishes the direct account holder 
is an entity organized in a treaty country (or an entity managed and 
controlled in a treaty country, if the applicable treaty so requires); 
or
    (C) Obtains a valid beneficial owner withholding certificate on 
Form W-8 that contains a permanent residence address and a mailing 
address in the applicable treaty country.
    (ii) Standing instructions. Documentary evidence is unreliable or 
incorrect if the direct account holder has provided the withholding 
agent with standing instructions to pay amounts to an address or an 
account maintained outside the treaty country

[[Page 2100]]

unless the direct account holder provides a reasonable explanation, in 
writing, establishing the direct account holder's residence in the 
applicable treaty country, or a valid beneficial owner withholding 
certificate that contains a permanent residence address and a mailing 
address in the applicable treaty country.
    (10) Indirect account holders. A withholding agent that receives 
documentation from a payee through a nonqualified intermediary, a flow-
through entity, or a U.S. branch (including a territory financial 
institution) described in Sec.  1.1441-1(b)(2)(iv) (other than a U.S. 
branch or territory financial institution that is treated as a U.S. 
person) has reason to know that the documentation is unreliable or 
incorrect if a reasonably prudent person in the position of a 
withholding agent would question the claims made. This standard 
requires, but is not limited to, a withholding agent's compliance with 
the rules of paragraphs (b)(10)(i) through (iv).
    (i) The withholding agent must review the withholding statement 
described in Sec.  1.1441-1(e)(3)(iv) and may not rely on information 
in the statement to the extent the information does not support the 
claims made for any payee. For this purpose, a withholding agent may 
not treat a payee as a foreign person if an address in the United 
States is provided for such payee and may not treat a person as a 
resident of a country with which the United States has an income tax 
treaty if the address for that person is outside the applicable treaty 
country. Notwithstanding a U.S. address or an address outside a treaty 
country, the withholding agent may treat a payee as a foreign person or 
a foreign person as a resident of a treaty country if the withholding 
statement is accompanied by a valid withholding certificate and 
documentary evidence (as described in Sec.  1.1471-3(c)(5)(i)) or a 
reasonable explanation is provided, in writing, by the nonqualified 
intermediary, flow-through entity, or U.S. branch supporting the 
payee's foreign status or the foreign person's residency in a treaty 
country.
    (ii) The withholding agent must review each withholding certificate 
in accordance with the requirements of paragraphs (b)(5) and (6) of 
this section and verify that the information on the withholding 
certificate is consistent with the information on the withholding 
statement required under Sec.  1.1441-1(e)(3)(iv). If there is a 
discrepancy between the withholding certificate and the withholding 
statement, the withholding agent may choose to rely on the withholding 
certificate, if valid, and instruct the nonqualified intermediary, 
flow-through entity, or U.S. branch to correct the withholding 
statement or apply the presumption rules of Sec. Sec.  1.1441-1(b), 
1.1441-5(d) and (e)(6), 1.6049-5(d), and 1.1471-3(f) (for a 
withholdable payment for chapter 4 purposes) to the payment allocable 
to the payee who provided the withholding certificate. If the 
withholding agent chooses to rely upon the withholding certificate, the 
withholding agent is required to instruct the intermediary or flow-
through entity to correct the withholding statement and confirm that 
the intermediary or flow-through entity does not know or have reason to 
know that the withholding certificate is unreliable or inaccurate.
    (iii) The withholding agent must review the documentary evidence 
provided by the nonqualified intermediary, flow-through entity, or U.S. 
branch to determine that there is no obvious indication that the payee 
is a U.S. non-exempt recipient or that the documentary evidence does 
not establish the identity of the person who provided the documentation 
(e.g., the documentary evidence does not appear to be an identification 
document).
    (iv) [Reserved]. For further guidance, see Sec.  1.1441-
7T(b)(10)(iv).
    (11) Limits on reason to know for multiple obligations belonging to 
a single person. A withholding agent that maintains multiple 
obligations for a single person will have reason to know that a claim 
of foreign status for the person is inaccurate based on account 
information for another obligation held by the person only to the 
extent that--
    (i) The withholding agent's computerized systems link the 
obligations by reference to a data element such as client number, EIN, 
or foreign tax identifying number and consolidates the account 
information and payment information for the obligations; or
    (ii) The withholding agent has treated the obligations as 
consolidated obligations for purposes of sharing documentation pursuant 
to Sec.  1.1441-1(e)(4)(ix).
    (12) Reasonable explanation supporting claim of foreign status. A 
reasonable explanation supporting an individual's claim of foreign 
status for purposes of paragraphs (b)(5) and (8) of this section means 
a written statement prepared by the individual or the individual's 
completion of a checklist provided by the withholding agent, stating 
that the individual meets the requirements of one of paragraphs 
(b)(12)(i) through (iv) of this section.
    (i) The individual certifies that he or she--
    (A) Is a student at a U.S. educational institution and holds the 
appropriate visa;
    (B) Is a teacher, trainee, or intern at a U.S. educational 
institution or a participant in an educational or cultural exchange 
visitor program, and holds the appropriate visa;
    (C) Is a foreign individual assigned to a diplomatic post or a 
position in a consulate, embassy, or international organization in the 
United States; or
    (D) Is a spouse or unmarried child under the age of 21 years of one 
of the persons described in paragraphs (b)(12)(i)(A) through (C) of 
this section;
    (ii) The individual provides information demonstrating that he or 
she has not met the substantial presence test set forth in Sec.  
301.7701(b)-1(c) of this chapter (e.g., a written statement indicating 
the number of days present in the United States during the three-year 
period that includes the current year);
    (iii) The individual certifies that he or she meets the closer 
connection exception described in Sec.  301.7701(b)-2, states the 
country to which the individual has a closer connection, and 
demonstrates how that closer connection has been established; or
    (iv) With respect a payment entitled to a reduced rate of tax under 
a U.S. income tax treaty, the individual certifies that he or she is 
treated as a resident of a country other than the United States and is 
not treated as a U.S. resident or U.S. citizen for purposes of that 
income tax treaty.
    (13) Additional guidance. The IRS may prescribe other circumstances 
for which a withholding certificate or documentary evidence is 
unreliable or incorrect in addition to the circumstances described in 
paragraph (b) of this section to establish an account holder's status 
as a foreign person or a beneficial owner entitled to a reduced rate of 
withholding in published guidance (see Sec.  601.601(d)(2) of this 
chapter).
    (c) Agent--(1) In general. A withholding agent may authorize an 
agent to fulfill its obligations under chapter 3 if the requirements of 
paragraph (c)(2) of this section are satisfied. The acts of an agent of 
a withholding agent (including the receipt of withholding certificates, 
the payment of amounts of income subject to withholding, and the 
deposit of tax withheld) are imputed to the withholding agent on whose 
behalf it is acting.
    (2) Authorized agent. An agent is an authorized agent only if--

[[Page 2101]]

    (i) There is a written agreement between the withholding agent and 
the person acting as agent that clearly provides which obligations 
under chapter 3 that the agent is authorized to fulfill;
    (ii) A Form 8655, ``Reporting Agent Authorization,'' is filed with 
the IRS by a withholding agent if its agent (including any sub-agent) 
acts as a reporting agent for filing Form 1042 on behalf of the 
withholding agent and the agent (or sub-agent) identifies itself 
(instead of the withholding agent) as the filer on the Form 1042;
    (iii) Books and records and relevant personnel of the agent 
(including any sub-agent) are available to the withholding agent (on a 
continuous basis, including after termination of the relationship) in 
order to evaluate the withholding agent's compliance with the 
provisions of chapters 3, 4, and 61 of the Code, section 3406, and the 
regulations under those provisions; and
    (iv) The U.S. withholding agent remains fully liable for the acts 
of its agent (or for any sub-agent) and does not assert any of the 
defenses that may otherwise be available, including under common law 
principles of agency in order to avoid tax liability under the Code.
    (3) Liability of withholding agent acting through an agent. An 
authorized agent is subject to the same withholding and reporting 
obligations that apply to any withholding agent under the provisions of 
chapter 3 of the Code and the regulations thereunder. See the 
instructions to Form 1042-S for the manner for filing the form when an 
authorized agent acts on behalf of a withholding agent. Except as 
otherwise provided in the QI, WP, and WT agreements, an authorized 
agent does not benefit from the special procedures or exceptions that 
may apply to a QI, WP, or WT. A withholding agent acting through an 
authorized agent is liable for any failure of the agent, such as 
failure to withhold an amount or make payment of tax, in the same 
manner and to the same extent as if the agent's failure had been the 
failure of the withholding agent. For this purpose, the agent's actual 
knowledge or reason to know shall be imputed to the withholding agent. 
The withholding agent's liability shall exist irrespective of the fact 
that the authorized agent is also a withholding agent and is itself 
separately liable for failure to comply with the provisions of the 
regulations under section 1441, 1442, or 1443. However, the same tax, 
interest, or penalties shall not be collected more than once.
* * * * *
    (f) * * *
    (2) * * *
    (ii) Examples. The following examples illustrate the operation of 
paragraph (d)(2) of this section. Each example assumes that withholding 
under chapter 4 does not apply.

    Example 1.  (i) DS is a U.S. subsidiary of FP, a corporation 
organized in Country N, a country that does not have an income tax 
treaty with the United States. FS is a special purpose subsidiary of 
FP that is incorporated in Country T, a country that has an income 
tax treaty with the United States that prohibits the imposition of 
withholding tax on payments of interest. FS is capitalized with 
$10,000,000 in debt from BK, a Country N bank, and $1,000,000 in 
capital from FS.
    (ii) On May 1, 1995, C, a U.S. person, purchases an automobile 
from DS in return for an installment note. On July 1, 1995, DS sells 
a number of installment notes, including C's, to FS in exchange for 
$10,000,000. DS continues to service the installment notes for FS, 
and C is not notified of the sale of its obligation and continues to 
make payments to DS. But for the withholding tax on payments of 
interest by DS to BK, DS would have borrowed directly from BK, 
pledging the installment notes as collateral.
    (iii) The C installment note is a financing transaction, whether 
held by DS or by FS, and the FS note held by BK also is a financing 
transaction. After FS purchases the installment note, and during the 
time the installment note is held by FS, the transactions constitute 
a financing arrangement, within the meaning of Sec.  1.881-
3(a)(2)(i). BK is the financing entity, FS is the intermediate 
entity, and C is the financed entity. Because the participation of 
FS in the financing arrangement reduces the tax imposed by section 
881 and because there was a tax avoidance plan, FS is a conduit 
entity.
    (iv) Because C does not know or have reason to know of the tax 
avoidance plan (and by extension that the financing arrangement is a 
conduit financing arrangement), C is not required to withhold tax 
under section 1441. However, DS, who knows that FS's participation 
in the financing arrangement is pursuant to a tax avoidance plan and 
is a withholding agent for purposes of section 1441, is not relieved 
of its withholding responsibilities.
    Example 2.  Assume the same facts as in Example 1 except that C 
receives a new payment booklet on which DS is described as 
``agent.'' Although C may deduce that its installment note has been 
sold, without more C has no reason to know of the existence of a 
financing arrangement. Accordingly, C is not liable for failure to 
withhold, although DS still is not relieved of its withholding 
responsibilities.
    Example 3.  (i) DC is a U.S. corporation that is in the process 
of negotiating a loan of $10,000,000 from BK1, a bank located in 
Country N, a country that does not have an income tax treaty with 
the United States. Before the loan agreement is signed, DC's tax 
lawyers point out that interest on the loan would not be subject to 
withholding tax if the loan were made by BK2, a subsidiary of BK1 
that is incorporated in Country T, a country that has an income tax 
treaty with the United States that prohibits the imposition of 
withholding tax on payments of interest. BK1 makes a loan to BK2 to 
enable BK2 to make the loan to DC. Without the loan from BK1 to BK2, 
BK2 would not have been able to make the loan to DC.
    (ii) The loan from BK1 to BK2 and the loan from BK2 to DC are 
both financing transactions and together constitute a financing 
arrangement within the meaning of Sec.  1.881-3(a)(2)(i). BK1 is the 
financing entity, BK2 is the intermediate entity, and DC is the 
financed entity. Because the participation of BK2 in the financing 
arrangement reduces the tax imposed by section 881 and because there 
is a tax avoidance plan, BK2 is a conduit entity.
    (iii) Because DC is a party to the tax avoidance plan (and 
accordingly knows of its existence), DC must withhold tax under 
section 1441. If DC does not withhold tax on its payment of 
interest, BK2, a party to the plan and a withholding agent for 
purposes of section 1441, must withhold tax as required by section 
1441.
    Example 4.  (i) DC is a U.S. corporation that has a long-
standing banking relationship with BK2, a U.S. subsidiary of BK1, a 
bank incorporated in Country N, a country that does not have an 
income tax treaty with the United States. DC has borrowed amounts of 
as much as $75,000,000 from BK2 in the past. On January 1, 1995, DC 
asks to borrow $50,000,000 from BK2. BK2 does not have the funds 
available to make a loan of that size. BK2 considers asking BK1 to 
enter into a loan with DC but rejects this possibility because of 
the additional withholding tax that would be incurred. Accordingly, 
BK2 borrows the necessary amount from BK1 with the intention of on-
lending to DC. BK1 does not make the loan directly to DC because of 
the withholding tax that would apply to payments of interest from DC 
to BK1. DC does not negotiate with BK1 and has no reason to know 
that BK1 was the source of the loan.
    (ii) The loan from BK2 to DC and the loan from BK1 to BK2 are 
both financing transactions and together constitute a financing 
arrangement within the meaning of Sec.  1.881-3(a)(2)(i). BK1 is the 
financing entity, BK2 is the intermediate entity, and DC is the 
financed entity. The participation of BK2 in the financing 
arrangement reduces the tax imposed by section 881. Because the 
participation of BK2 in the financing arrangement reduces the tax 
imposed by section 881 and because there was a tax avoidance plan, 
BK2 is a conduit entity.
    (iii) Because DC does not know or have reason to know of the tax 
avoidance plan (and by extension that the financing arrangement is a 
conduit financing arrangement), DC is not required to withhold tax 
under section 1441. However, BK2, who is also a withholding agent 
under section 1441 and who knows that the financing arrangement is a 
conduit financing

[[Page 2102]]

arrangement, is not relieved of its withholding responsibilities.

    (g) Effective/applicability date--(1) Except as otherwise provided 
in paragraph (a)(4) of this section, this section applies to payments 
made on or after January 6, 2017. (For payments made after June 30, 
2014, and before January 6, 2017, see this section as in effect and 
contained in 26 CFR part 1, as revised April 1, 2016. For payments made 
after December 31, 2000, and before July 1, 2014, see this section as 
in effect and contained in 26 CFR part 1, as revised April 1, 2013.)
    (2) [Reserved]. For further guidance, see Sec.  1.1441-7T(g)(2).

0
Par. 18. Section 1.1441-7T is revised to read as follows:


Sec.  1.1441-7T  General provisions relating to withholding agents 
(temporary).

    (a) through (b)(10)(iii) [Reserved]. For further guidance, see 
Sec.  1.1441-7(a) through (b)(10)(iii).
    (iv) If the beneficial owner is claiming a reduced rate of 
withholding under an income tax treaty, the rules of Sec.  1.1441-
6(b)(1)(ii) also apply to determine whether the withholding agent has 
reason to know that a claim for treaty benefits is unreliable or 
incorrect.
    (b)(11) through (g)(1) [Reserved]. For further guidance, see Sec.  
1.1441-7(b)(11) through (g)(1).
    (2) Effective/applicability date. This section applies on January 
6, 2017.
    (h) Expiration date. The applicability of this section expires on 
December 30, 2019.

0
Par. 19. Section 1.1461-1 is amended by:
0
1. Revising paragraphs (b)(1), (c)(1)(i) and (ii), (c)(2)(ii)(E), 
(c)(2)(ii)(H) and (I), (c)(3)(i) and (iii), (c)(4)(i), (c)(4)(ii)(A), 
(c)(4)(iv) and (v), (c)(5), and (i) to read as follows:


Sec.  1.1461-1  Payment and returns of tax withheld.

* * * * *
    (b) Income tax return--(1) General rule. A withholding agent shall 
make an income tax return on Form 1042 (or such other form as the IRS 
may prescribe) for income paid during the preceding calendar year that 
the withholding agent is required to report on an information return on 
Form 1042-S (or such other form as the IRS may prescribe) under 
paragraph (c)(1) of this section. See section 6011 and Sec.  1.6011-
1(c). The withholding agent must file the return on or before March 15 
of the calendar year following the year in which the income was paid. 
The return must show the aggregate amount of income paid and tax 
withheld required to be reported on all the Forms 1042-S for the 
preceding calendar year by the withholding agent, in addition to such 
information as is required by the form and accompanying instructions. 
See Sec.  1.1474-1(c) for the requirement to show the aggregate chapter 
4 reportable amounts and tax withheld on Form 1042. A single Form 1042 
may be filed by a withholding agent to report amounts under chapters 3 
and 4, including tax withheld. Withholding certificates or other 
statements or information provided to a withholding agent are not 
required to be attached to the return. A return must be filed under 
this paragraph (b)(1) even though no tax was required to be withheld 
during the preceding calendar year. The withholding agent must retain a 
copy of Form 1042 for the applicable statute of limitations on 
assessments and collection with respect to the amounts required to be 
reported on the Form 1042. See section 6501 and the regulations 
thereunder for the applicable statute of limitations. Adjustments to 
the total amount of tax withheld, as described in Sec.  1.1461-2, shall 
be stated on the return as prescribed by the form and accompanying 
instructions.
* * * * *
    (c) Information returns--(1) Filing requirement--(i) In general. A 
withholding agent (other than an individual who is not acting in the 
course of a trade or business with respect to a payment) must make an 
information return on Form 1042-S, ``Foreign Person's U.S. Source 
Income Subject to Withholding,'' (or such other form as the IRS may 
prescribe) to report the amounts subject to reporting, as defined in 
paragraph (c)(2) of this section, that were paid during the preceding 
calendar year. Notwithstanding the preceding sentence, any person that 
withholds or is required to withhold an amount under sections 1441, 
1442, 1443, or Sec.  1.1446-4(a) (applicable to publicly traded 
partnerships required to pay tax under section 1446 on distributions) 
must file a Form 1042-S for the payment withheld upon whether or not 
that person is engaged in a trade or business and whether or not the 
payment is an amount subject to reporting. The reference in the 
previous sentence to withholding under Sec.  1.1446-4 shall apply to 
partnership taxable years beginning after May 18, 2005, or such earlier 
time as the regulations under Sec. Sec.  1.1446-1 through 1.1446-5 
apply by reason of an election under Sec.  1.1446-7. A Form 1042-S 
shall be prepared for each recipient of an amount subject to reporting 
and for each single type of income payment. The Form 1042-S shall be 
prepared in such manner as the form and accompanying instructions 
prescribe. One copy of the Form 1042-S shall be filed with the IRS on 
or before March 15th of the calendar year following the year in which 
the amount subject to reporting was paid. It shall be filed with a 
transmittal form as provided in the instructions to the Form 1042-S and 
to the transmittal form. Withholding certificates, documentary 
evidence, or other statements or documentation provided to a 
withholding agent are not required to be attached to the form. Another 
copy of the Form 1042-S must be furnished to the recipient for whom the 
form is prepared (or any other person, as required under this paragraph 
(c) or the instructions to the form) on or before March 15 of the 
calendar year following the year in which the amount subject to 
reporting was paid. The withholding agent must retain a copy of each 
Form 1042-S for the statute of limitations on assessment and collection 
applicable to the Form 1042 to which the Form 1042-S relates. A 
withholding agent required by this section to furnish a recipient copy 
of Form 1042-S may furnish such copy electronically by complying with 
the requirements provided in Sec.  1.6050W-2(a)(2) through (5) 
applicable to statements required under section 6050W (substituting the 
phrase ``Form 1042-S'' for the phrases ``statement required under 
section 6050W'' or ``statements required by section 6050W(f)'' each 
place they appear). A withholding agent that meets the requirements of 
that section for providing electronic copies to recipients may apply 
these rules to payments made in calendar year 2016.
    (ii) Recipient--(A) Defined. For purposes of this section, the term 
recipient means--
    (1) A beneficial owner as defined in Sec.  1.1441-1(c)(6), 
including a foreign estate or a foreign complex trust, as defined in 
Sec.  1.1441-1(c)(25);
    (2) A qualified intermediary as defined in Sec.  1.1441-
1(e)(5)(ii);
    (3) A withholding foreign partnership as defined in Sec.  1.1441-
5(c)(2) or a withholding foreign trust under Sec.  1.1441-5(e)(5)(v);
    (4) A territory financial institution treated as a U.S. person 
under Sec.  1.1441-1(b)(2)(iv)(A);
    (5) A U.S. branch that is treated as a U.S. person under Sec.  
1.1441-1(b)(2)(iv)(A);
    (6) A nonwithholding foreign partnership or a foreign simple trust 
as defined in Sec.  1.1441-1(c)(24), but only to the extent the income 
is (or is treated as) effectively connected with the conduct

[[Page 2103]]

of a trade or business in the United States by such entity, or if the 
nonwithholding foreign partnership or foreign simple trust is also 
described in paragraph (c)(1)(ii)(A)(9) or (c)(1)(ii)(A)(10) of this 
section;
    (7) A payee, as defined in Sec.  1.1441-1(b)(2) that is presumed to 
be a foreign person under the presumption rules of Sec.  1.1441-
1(b)(3); 1.1441-5(d) or (e)(6), or 1.6049-5(d);
    (8) A partner receiving a distribution from a publicly traded 
partnership subject to withholding under section 1446 and Sec.  1.1446-
4 on distributions of effectively connected income. This paragraph 
(c)(1)(ii)(A)(8) shall apply to partnership taxable years beginning 
after May 18, 2005, or such earlier time as the regulations under 
Sec. Sec.  1.1446-1 through 1.1446-5 apply by reason of an election 
under Sec.  1.1446-7.
    (9) A foreign intermediary, nonwithholding foreign partnership, or 
nonwithholding foreign trust that is a participating FFI or registered 
deemed-compliant FFI with respect to a chapter 4 reporting pool of U.S. 
payees;
    (10) A participating FFI or a registered deemed-compliant FFI that 
is a recipient of a withholdable payment described in Sec.  1.1474-
1(d)(1)(ii)(A)(1)(iii); and
    (11) Any other person as required on Form 1042-S or the 
instructions to the form.
    (B) Persons that are not recipients. A recipient does not include--
    (1) A nonqualified intermediary, except with respect to a payment 
(or portion of a payment) for which a nonqualified intermediary that is 
an FFI is a recipient reporting as described in Sec.  1.1474-
1(d)(1)(ii)(A)(1)(iii), or if the nonqualified intermediary is also 
described in paragraph (c)(1)(ii)(A)(9) or (c)(1)(ii)(A)(10) of this 
section;
    (2) A payee included in a chapter 3 or chapter 4 withholding rate 
pool;
    (3) A flow-through entity, as defined in Sec.  1.1441-1(c)(23) (to 
the extent it is receiving amounts subject to reporting other than 
income effectively connected with the conduct of a trade or business in 
the United States), that is not a recipient described in paragraphs 
(c)(1)(ii)(A)(9) or (c)(1)(ii)(A)(10) of this section; and
    (4) A U.S. branch (including a territory financial institution) 
described in Sec.  1.1441-1(b)(2)(iv)(A) that is not treated as a U.S. 
person under that section and is not a recipient described in 
paragraphs (c)(1)(ii)(A)(9) or (10) of this section.
    (C) Coordination with chapter 4 reporting. See Sec.  1.1474-
1(d)(1)(ii)(A) for persons that are defined as recipients of a 
withholdable payment of U.S. source FDAP income for purposes of chapter 
4 in addition to the persons that are recipients under this paragraph 
(c)(1)(ii).
    (2) * * *
    (ii) * * *
    (E) Any item required to be reported on Form 1099, and such other 
forms as are prescribed pursuant to the information reporting 
provisions of sections 6041 through 6050W and the regulations under 
those sections;
* * * * *
    (H) Interest (including original issue discount) paid with respect 
to foreign-targeted registered obligations issued before January 1, 
2016, that are described in Sec.  1.871-14(e)(2) to the extent the 
documentation requirements described in Sec.  1.871-14(e)(3) and (e)(4) 
are required to be satisfied (taking into account the provisions of 
Sec.  1.871-14(e)(4)(ii), if applicable;
    (I) Interest on a foreign-targeted bearer obligation (see 
Sec. Sec.  1.1441-1(b)(4)(i) and 1.1441-2(a)) issued before March 19, 
2012;
* * * * *
    (3) * * *
    (i) The name, address, taxpayer identifying number of the 
withholding agent, and the withholding agent's status for chapter 3 
purposes (based on the status codes applicable for chapter 3 purposes 
provided on the form);
* * * * *
    (iii) For a payment not subject to withholding under chapter 4, the 
rate of withholding applied or the basis for exempting the payment from 
withholding under chapter 3, and the exemption applicable to the 
payment for chapter 4 purposes (based on the exemption codes provided 
on the form);
* * * * *
    (4) Method of reporting--(i) Payments by U.S. withholding agents to 
recipients. A withholding agent that is a U.S. person (other than a 
foreign branch of a U.S. person that is a qualified intermediary as 
defined in Sec.  1.1441-1(e)(5)(ii) that makes payments of amounts 
subject to reporting on Form 1042-S must file a separate Form 1042-S 
for each recipient who receives such amount. For purposes of this 
paragraph (c)(4), a U.S. person includes a U.S. branch (including a 
territory financial institution) described in Sec.  1.1441-
1(b)(2)(iv)(A) that is treated as a U.S. person. Except as may 
otherwise be required on Form 1042-S or the instructions to the form, 
only payments for which the income code, exemption code, withholding 
rate, and recipient code are the same may be reported on a single Form 
1042-S. See paragraph (c)(4)(ii) of this section for reporting of 
payments made to a person that is not a recipient. See Sec.  1.1474-
1(d)(4) for additional requirements that may apply for reporting on 
Form 1042-S with respect to a withholdable payment that is a chapter 4 
reportable amount.
    (A) Payments to beneficial owners. If a U.S. withholding agent 
makes a payment directly to a beneficial owner it must complete Form 
1042-S treating the beneficial owner as the recipient. Under the grace 
period rule of Sec.  1.1441-1(b)(3)(iv), a U.S. withholding agent may, 
under certain circumstances, treat a payee as a foreign person while 
the withholding agent awaits a valid withholding certificate. A U.S. 
withholding agent who relies on the grace period rule to treat a payee 
as a foreign person must file a Form 1042-S to report all payments on 
Form 1042-S during the period that person was presumed to be foreign 
even if that person is later determined to be a U.S. person based on 
appropriate documentation or is presumed to be a U.S. person after the 
grace period ends. In the case of joint owners, a withholding agent may 
provide a single Form 1042-S made out to the owner whose status the 
U.S. withholding agent relied upon to determine the applicable rate of 
withholding. If, however, any one of the owners requests its own Form 
1042-S, the withholding agent must furnish a Form 1042-S to the person 
who requests it. If more than one Form 1042-S is issued for a single 
payment, the aggregate amount paid and tax withheld that is reported on 
all Forms 1042-S cannot exceed the total amounts paid to joint owners 
and the tax withheld thereon.
    (B) Payments to a qualified intermediary, a withholding foreign 
partnership, or a withholding foreign trust. A U.S. withholding agent 
that makes payments to a qualified intermediary (whether or not the 
qualified intermediary assumes primary withholding responsibility for 
purposes of chapter 3 and chapter 4 of the Code), a withholding foreign 
partnership, or a withholding foreign trust shall complete Forms 1042-S 
treating the qualified intermediary, withholding foreign partnership, 
or withholding foreign trust as the recipient. The U.S. withholding 
agent must complete a separate Form 1042-S for each chapter 3 and 
chapter 4 withholding rate pool with respect to each qualified 
intermediary. A qualified intermediary that does not assume primary 
withholding responsibility on all payments it receives provides 
information regarding the proportions of income subject to a particular 
withholding rate (i.e., a chapter 3 withholding rate pool) to the

[[Page 2104]]

withholding agent on a withholding statement associated with a 
qualified intermediary withholding certificate. In such a case, the 
U.S. withholding agent must complete a separate Form 1042-S for each 
chapter 3 and chapter 4 withholding rate pool with respect to the 
qualified intermediary. To the extent a qualified intermediary is 
required to report a payment under chapter 61, it may provide a U.S. 
withholding agent with information regarding withholding rate pools for 
U.S. non-exempt recipients (as defined under Sec.  1.1441-1(c)(21)). 
Amounts paid with respect to such withholding rate pools must be 
reported on a Form 1099 completed for each U.S. non-exempt recipient to 
the extent such U.S. non-exempt recipient is subject to Form 1099 
reporting and is not reported on Form 1042-S. See, however, Sec.  
1.1441-1(e)(5)(v)(C) for when a qualified intermediary may provide a 
chapter 4 withholding rate pool of U.S payees (in lieu of reporting 
such payees on a withholding statement) and for the withholding rate 
pools (including chapter 4 withholding rate pools) otherwise reportable 
on a withholding statement provided by a qualified intermediary.
    (C) Amounts paid to U.S. branches treated as U.S. persons. A U.S. 
withholding agent making a payment to a U.S. branch of a foreign person 
(including a territory financial institution) described in Sec.  
1.1441-1(b)(2)(iv)(A) shall complete Form 1042-S as follows--
    (1) If the branch has provided the U.S. withholding agent with a 
withholding certificate that evidences its agreement with the 
withholding agent to be treated as a U.S. person, the U.S. withholding 
agent files Forms 1042-S treating the U.S. branch or territory 
financial institution as the recipient;
    (2) If the branch has provided the U.S. withholding agent with a 
withholding certificate that transmits information regarding beneficial 
owners, qualified intermediaries, withholding foreign partnerships, or 
other recipients, the U.S. withholding agent must complete a separate 
Form 1042-S for each recipient whose documentation is associated with 
the U.S. branch's or territory financial institution's withholding 
certificate; or
    (3) If the U.S. withholding agent cannot reliably associate a 
payment with a valid withholding certificate from the U.S. branch, it 
shall treat the U.S. branch as the recipient and report the income as 
effectively connected with the conduct of a trade or business in the 
United States except as otherwise provided in Sec.  1.1441-
1(b)(2)(iv)(B)(4).
    (D) Dual Claims. A U.S. withholding agent may make a payment to a 
foreign entity that is simultaneously claiming a reduced rate of tax on 
its own behalf for a portion of the payment and a reduced rate on 
behalf of persons in their capacity as interest holders in that entity 
on the remaining portion. See Sec.  1.1441-6(b)(2)(iii). If the claims 
are consistent and the withholding agent accepts the multiple claims, 
the withholding agent must file a separate Form 1042-S for those 
payments for which the entity is treated as the beneficial owner and 
Forms 1042-S for each of the interest holders in the entity for which 
the interest holder is treated as the recipient. For those payments for 
which the interest holder in an entity is treated as the recipient, the 
U.S. withholding agent shall prepare the Form 1042-S in the same manner 
as a payment made to a nonqualified intermediary or flow-through entity 
as set forth in paragraph (c)(4)(ii) of this section. If the claims are 
consistent but the withholding agent has not chosen to accept the 
multiple claims, or if the claims are inconsistent, the withholding 
agent must file a separate Form 1042-S for the person or persons it has 
chosen to treat as the recipients.
    (ii) Payments made by U.S. withholding agents to persons that are 
not recipients--(A) Amounts paid to a nonqualified intermediary, a 
flow-through entity, and certain U.S. branches. If a U.S. withholding 
agent makes a payment to a nonqualified intermediary, a flow-through 
entity, or a U.S. branch (including a territory financial institution) 
described in Sec.  1.1441-1(b)(2)(iv) (other than a U.S. branch or 
territory financial institution that is treated as a U.S. person), it 
must complete a separate Form 1042-S for each recipient to the extent 
the withholding agent can reliably associate a payment with valid 
documentation (within the meaning of Sec.  1.1441-1(b)(2)(vii)) from 
the recipient which is associated with the withholding certificate 
provided by the nonqualified intermediary, flow-through entity, or U.S. 
branch or territory financial institution. See Sec.  1.1474-1(d)(4)(i) 
for when a withholding agent may report a chapter 4 reportable amount 
made to such an entity in a chapter 4 withholding rate pool. See also 
Sec.  1.1441-1(e)(3)(iv)(A) for when a withholding statement provided 
by a nonqualified intermediary may include a chapter 4 withholding rate 
pool of U.S. payees. If a payment is reported by the withholding agent 
in a chapter 4 withholding rate pool, the withholding agent must report 
on Form 1042-S the nonqualified intermediary or flow-through entity as 
a recipient associated with the applicable chapter 4 withholding rate 
pool. If a payment is made through tiers of nonqualified intermediaries 
or flow-through entities, the withholding agent must nevertheless 
complete Form 1042-S for the recipient to the extent it can reliably 
associate the payment with documentation from the recipient. A 
withholding agent that is completing a Form 1042-S for a recipient that 
receives a payment through a nonqualified intermediary, a flow-through 
entity, or a U.S. branch or territory financial institution must 
include on the Form 1042-S the name of the nonqualified intermediary, 
flow-through entity, U.S. branch or territory financial institution 
from which the recipient directly receives the payment. If a U.S. 
withholding agent cannot reliably associate the payment, or any portion 
of the payment, with valid documentation from a recipient either 
because no such documentation has been provided or because the 
nonqualified intermediary, flow-through entity, or U.S. branch or 
territory financial institution has failed to provide sufficient 
allocation information so that the withholding agent can associate the 
payment, or any portion thereof, with valid documentation, then the 
withholding agent must report the payments as made to an unknown 
recipient in accordance with the appropriate presumption rules for that 
payment. Thus, if the payment is not a withholdable payment and under 
the presumption rules the payment is presumed to be made to a foreign 
person, the withholding agent must generally withhold 30 percent of the 
payment and report the payment on Form 1042-S made out to an unknown 
recipient and shall also include the name of the nonqualified 
intermediary, flow-through entity, U.S. branch or territory financial 
institution that received the payment on behalf of the unknown 
recipient. If, however, the recipient is presumed to be a U.S. non-
exempt recipient (as defined in Sec.  1.1441-1(c)(21)), the withholding 
agent must withhold on the payment as required under section 3406 and 
report the payment as required under chapter 61 of the Code. See Sec.  
1.1474-1(d)(4) for reporting requirements that apply to payments of 
chapter 4 reportable amounts paid to nonqualified intermediaries and 
flow-through entities. If, however, the payment is a withholdable 
payment, the withholding agent must report the payment as made to a 
chapter 4 withholding rate pool of nonparticipating FFIs in accordance

[[Page 2105]]

with the presumption rule under Sec.  1.1471-3(f)(5).
* * * * *
    (iv) Reporting by a nonqualified intermediary, flow-through entity, 
and certain U.S. branches. A nonqualified intermediary, flow-through 
entity, or U.S. branch (including a territory financial institution) 
described in Sec.  1.1441-1(e)(2)(iv) (other than a U.S. branch or 
territory financial institution that is treated as a U.S. person) is a 
withholding agent and must file Forms 1042-S for amounts paid to 
recipients in the same manner as a U.S. withholding agent. A Form 1042-
S will not be required, however, if another withholding agent has 
reported the same amount for which the nonqualified intermediary, flow-
through entity, or U.S. branch would be required to file a return and 
the entire amount that should be withheld from such payment has been 
withheld (including withholding and reporting in accordance with the 
applicable presumption rule for the payment). A nonqualified 
intermediary, flow-through entity, or U.S. branch must report payments 
made to recipients to the extent it has failed to provide the 
appropriate documentation to another withholding agent together with 
the information required for that withholding agent to reliably 
associate the payment with the recipient documentation or to the extent 
it knows, or has reason to know, that less than the required amount has 
been withheld. A nonqualified intermediary or flow-through entity that 
is required to report a payment on Form 1042-S must follow the same 
rules as apply to a U.S. withholding agent under paragraphs (c)(4)(i) 
and (ii) of this section.
    (v) Pro rata reporting for allocation failures. If a nonqualified 
intermediary, flow-through entity, or U.S. branch (including a 
territory financial institution) described in Sec.  1.1441-1(b)(2)(iv) 
(other than a U.S. branch or territory financial institution treated as 
a U.S. person) uses the alternative procedures of Sec.  1.1441-
1(e)(3)(iv)(D) and fails to provide information sufficient to allocate 
the amount subject to reporting paid to a withholding rate pool to the 
payees identified for that pool, then the withholding agent shall 
report the payment in accordance with the rule provided in Sec.  
1.1441-1(e)(3)(iv)(D)(6).
* * * * *
    (5) Magnetic media reporting. A withholding agent that makes 250 or 
more Form 1042-S information returns for a taxable year must file Form 
1042-S returns on magnetic media. See, however, Sec.  301.1474-1(a) of 
this chapter for the requirements for a withholding agent that is a 
financial institution to file Forms 1042-S on magnetic media. See, 
also, Sec.  301.6011-2 of this chapter for requirements applicable to a 
withholding agent that files Forms 1042-S with the IRS on magnetic 
media and publications of the IRS relating to magnetic media filing.
* * * * *
    (i) Effective/applicability date. Except as otherwise provided in 
paragraph (c)(2)(iii) of this section, this section shall apply to 
returns required for payments made on or after January 6, 2017. (For 
payments made after June 30, 2014, and before January 6, 2017, see this 
section as in effect and contained in 26 CFR part 1, as revised April 
1, 2016. For payments made after December 31, 2000, and before July 1, 
2014, see this section as in effect and contained in 26 CFR part 1, as 
revised April 1, 2013.)


Sec.  1.1461-1T   [Removed]

0
Par. 20. Section 1.1461-1T is removed.

0
Par. 21. Section 1.1461-2 is amended by revising paragraphs (a)(2)(i), 
(a)(4), and (d) to read as follows:


Sec.  1.1461-2  Adjustments for overwithholding or underwithholding of 
tax.

    (a) * * *
    (2) Reimbursement of tax--(i) General rule. Under the reimbursement 
procedure, the withholding agent repays the beneficial owner or payee 
for the amount of tax overwithheld. In such a case, the withholding 
agent may reimburse itself by reducing, by the amount of tax actually 
repaid to the beneficial owner or payee, the amount of any deposit of 
tax made by the withholding agent under Sec.  1.6302-2(a)(1)(iii) for 
any subsequent payment period occurring before the end of the calendar 
year following the calendar year of overwithholding. Any such reduction 
that occurs for a payment period in the calendar year following the 
calendar year of overwithholding shall be allowed only if--
    (A) The repayment to the beneficial owner or payee occurs before 
the earlier of the due date (not including extensions) for filing Form 
1042-S for the calendar year of overwithholding or the date the Form 
1042-S is actually filed with the IRS; and
    (B) The withholding agent states on a timely filed (not including 
extensions) Form 1042 for the calendar year of overwithholding, that 
the filing of the Form 1042 constitutes a claim for credit in 
accordance with Sec.  1.6414-1.
* * * * *
    (4) Examples. The principles of this paragraph (a) are illustrated 
by the following examples:

    Example 1.  (i) N is a nonresident alien individual who is a 
resident of the United Kingdom. In December 2001, a domestic 
corporation C pays a dividend of $100 to N, at which time C 
withholds $30 and remits the balance of $70 to N. On February 10, 
2002, prior to the time that C files its Form 1042 and Form 1042-S 
with respect to the payment, N furnishes a valid Form W-8 described 
in Sec.  1.1441-1(e)(2)(i) upon which C may rely to reduce the rate 
of withholding to 15% under the provisions of the U.S.-U.K. tax 
treaty. Consequently, N advises C that its tax liability is only $15 
and not $30 and requests reimbursement of $15. Although C has 
already deposited the $30 that was withheld, as required by Sec.  
1.6302-2(a)(1)(iv), C repays N in the amount of $15.
    (ii) During 2001, C makes no other payments upon which tax is 
required to be withheld under chapter 3 of the Code; accordingly, 
its return on Form 1042 for such year, which is filed on March 15, 
2002, shows total tax withheld of $30, an adjusted total tax 
withheld of $15, and $30 previously paid for such year. Pursuant to 
Sec.  1.6414-1(b), C claims a credit for the overpayment of $15 
shown on the Form 1042 for 2001. Accordingly, it is permitted to 
reduce by $15 any deposit required by Sec.  1.6302-2 to be made of 
tax withheld during the calendar year 2002. The Form 1042-S required 
to be filed by C with respect to the dividend of $100 paid to N in 
2001 is required to show tax withheld under chapter 3 of $30 and tax 
repaid to N of $15.
    Example 2.  The facts are the same as in Example 1. In addition, 
during 2002, C makes payments to N upon which it is required to 
withhold $200 under chapter 3 of the Code, all of which is withheld 
in June 2002. Pursuant to Sec.  1.6302-2(a)(1)(iii), C deposits the 
amount of $185 on July 15, 2002 ($200 less the $15 for which credit 
is claimed on the Form 1042 for 2001). On March 15, 2003, C 
Corporation files its return on Form 1042 for calendar year 2002, 
which shows total tax withheld of $200, $185 previously deposited by 
C, and $15 allowable credit.
    Example 3.  The facts are the same as in Example 1. Under Sec.  
1.6302-2(a)(1)(ii), C is required to deposit on a quarter-monthly 
basis the tax withheld under chapter 3 of the Code. C withholds tax 
of $100 between February 8 and February 15, 2002, and deposits $75 
[($100 x 90%) less $15] of the withheld tax within 3 banking days 
after February 15, 2002, and by depositing $10 [($100-$15) less $75] 
within 3 banking days after March 15, 2002.
* * * * *
    (d) Effective/applicability date. This section applies to payments 
made on or after January 6, 2017. (For payments made after June 30, 
2014, and before January 6, 2017, see this section as in effect and 
contained in 26 CFR part 1, as revised April 1, 2016. For payments made 
after December 31, 2000, and before July 1, 2014, see this section as 
in effect and contained in 26 CFR part 1, as revised April 1, 2013.)

[[Page 2106]]

Sec.  1.1461-2T  [Removed]

0
Par. 22. Section 1.1461-2T is removed.

0
Par. 23. Section 1.6041-1 is amended by revising paragraphs (d)(5)(i) 
and (ii) and (j) to read as follows:


Sec.  1.6041-1  Return of information as to payments of $600 or more.

* * * * *
    (d) * * *
    (5) * * *
    (i) An amount paid with respect to a notional principal contract is 
not required to be reported if the amount is paid by a non-U.S. payor 
or a non-U.S. middleman and is paid and received outside the United 
States (as defined in Sec.  1.6049-4(f)(16)).
    (ii) An amount paid with respect to a notional principal contract 
is not required to be reported if the amount is paid by a payor that 
has no actual knowledge that the payee is a U.S. person and is paid and 
received outside the United States (as defined in Sec.  1.6049-
4(f)(16)), and the payor is--
* * * * *
    (j) Effective/applicability date. This section applies to payments 
made on or after January 6, 2017. (For payments made after June 30, 
2014, and before January 6, 2017, see this section as in effect and 
contained in 26 CFR part 1, as revised April 1, 2016. For payments made 
after December 31, 2010, and before July 1, 2014, see this section as 
in effect and contained in 26 CFR part 1, as revised April 1, 2013.)


Sec.  1.6041-1T   [Removed]

0
Par. 24. Section 1.6041-1T is removed.

0
Par. 25. Section 1.6041-4 is amended by revising paragraphs (a)(1) 
through (3), (a)(7), (b), and (d) to read as follows:


Sec.  1.6041-4  Foreign-related items and other exceptions.

    (a) * * *
    (1) Returns of information are not required for payments that a 
payor can, prior to payment, reliably associate with documentation upon 
which it may rely to treat as made to a foreign beneficial owner in 
accordance with Sec.  1.1441-1(e)(1)(ii) or as made to a foreign payee 
in accordance with Sec.  1.6049-5(d)(1) or presumed to be made to a 
foreign payee under Sec.  1.6049-5(d)(2), (3), (4), or (5). Returns of 
information are also not required for a payment that a payor or 
middleman can, prior to payment, reliably associate with documentation 
upon which it may rely to treat as made to a foreign intermediary or 
flow-through entity in accordance with Sec.  1.1441-1(b) if it obtains 
from the intermediary or flow-through entity a withholding statement 
described in Sec.  1.6049-5(b)(14) that allocates the payment to a 
chapter 4 withholding rate pool (as defined in Sec.  1.6049-4(f)(5)) or 
specific payees to which withholding applies under chapter 4. Payments 
excepted from reporting under this paragraph (a)(1) may be reportable, 
for purposes of chapter 3 of the Internal Revenue Code (Code), under 
Sec.  1.1461-1(b) and (c) and, for purposes of chapter 4 of the Code, 
under Sec.  1.1474-1(d)(2). The provisions in Sec.  1.6049-5(c) 
regarding documentation of foreign status shall apply for purposes of 
this paragraph (a)(1). The provisions in Sec.  1.6049-5(c)(5) regarding 
the definitions of U.S. payor and non-U.S. payor shall also apply for 
purposes of this paragraph (a)(1). See Sec.  1.1441-1(b)(3)(iii)(B) and 
(C) for special payee rules regarding scholarships, grants, pensions, 
annuities, etc. The provisions of Sec.  1.1441-1 shall apply by 
substituting the term ``payor'' for the term ``withholding agent'' and 
without regard to the fact that the provisions apply only to amounts 
subject to withholding under chapter 3 of the Code and the regulations 
under that chapter.
    (2) Returns of information are not required for payments of amounts 
from sources outside the United States (determined under the provisions 
of part I, subchapter N, chapter 1 of the Code and the regulations 
under those provisions) paid by a non-U.S. payor or non-U.S. middleman 
and that are paid and received outside the United States. For a 
definition of non-U.S. payor and non-U.S. middleman, see Sec.  1.6049-
5(c)(5). For circumstances in which an amount is considered to be paid 
and received outside the United States, see Sec.  1.6049-4(f)(16).
    (3) If a foreign intermediary, as described in Sec.  1.1441-
1(c)(13), or a U.S. branch that is not treated as a U.S. person 
receives a payment from a payor, which payment the payor can reliably 
associate with a valid withholding certificate described in Sec.  
1.1441-1(e)(3)(ii) or (iii), or Sec.  1.1441-1(e)(3)(v), respectively, 
furnished by such intermediary or branch, then the intermediary or 
branch is not required to report such payment when it, in turn, pays 
the amount, unless, and to the extent, the intermediary or branch knows 
that the payment is required to be reported under this section and was 
not so reported. For example, if a U.S. branch described in Sec.  
1.1441-1(b)(2)(iv) fails to provide information regarding U.S. persons 
that are not exempt from reporting under Sec.  1.6041-3(q) to the 
person from whom the U.S. branch receives the payment, the U.S. branch 
must report the payment on an information return. See, however, 
paragraph (a)(7) of this section for when reporting under section 
6041is coordinated with reporting under chapter 4 of the Code or an 
applicable IGA (as defined in Sec.  1.6049-4(f)(7)). The exception 
described in this paragraph (a)(3) for amounts paid by a foreign 
intermediary shall not apply to a qualified intermediary that assumes 
reporting responsibility under chapter 61 of the Code with respect to 
amounts reportable under the agreement described in Sec.  1.1441-
1(e)(5)(iii).
* * * * *
    (7) Returns of information are not required for payments with 
respect to which a return is not required by applying the rules of 
Sec.  1.6049-4(c)(4) (by substituting the term ``a payment subject to 
reporting under section 6041'' for the term ``an interest payment'').
    (b) Joint owners. Amounts paid to joint owners for which a 
certificate or documentation is required as a condition for being 
exempt from reporting under paragraph (a) of this section are presumed 
made to U.S. payees who are not exempt recipients if, prior to payment, 
the payor or middleman cannot reliably associate the payment either 
with a Form W-9 furnished by one of the joint owners in the manner 
required in Sec. Sec.  31.3406(d)-1 through 31.3406(d)-5, or with 
documentation described in paragraph (a)(1) of this section furnished 
by each joint owner upon which the payor or middleman can rely to treat 
each joint owner as a foreign payee or foreign beneficial owner. 
However, in the case of a withholdable payment (as defined in Sec.  
1.6049-4(f)(15)) made to joint payees, if any joint payee does not 
appear to be an individual, the payment is presumed made to a foreign 
payee that is a nonparticipating FFI (as defined in Sec.  1.1471-
1(b)(82)). See Sec.  1.1471-3(f)(7).
* * * * *
    (d) Effective/applicability date. This section applies to payments 
made on or after January 6, 2017. (For payments made after June 30, 
2014, and before January 6, 2017, see this section as in effect and 
contained in 26 CFR part 1, as revised April 1, 2016. For payments made 
after December 31, 2002, and before July 1, 2014, see this section as 
in effect and contained in 26 CFR part 1, as revised April 1, 2013.)


Sec.  1.6041-4T   [Removed]

0
Par. 26. Section 1.6041-4T is removed.

0
Par. 27. Section 1.6042-2 is amended by revising paragraphs (a)(1)(i) 
and (f) to read as follows:

[[Page 2107]]

Sec.  1.6042-2  Returns of information as to dividends paid.

    (a) * * *
    (1) * * *
    (i) Every person who makes a payment of dividends (as defined in 
Sec.  1.6042-3) to any other person during a calendar year. The 
information return shall show the aggregate amount of the dividends, 
the name, address, and taxpayer identifying number of the person to 
whom paid, the amount of tax deducted and withheld under section 3406 
from the dividends, if any, and such other information as required by 
the forms. An information return is generally not required if the 
amount of dividends paid to the other person during the calendar year 
aggregates less than $10 or if the payment is made to a person who is 
an exempt recipient described in Sec.  1.6049-4(c)(1)(ii) unless the 
payor backup withholds under section 3406 on such payment (because, for 
example, the payee has failed to furnish a Form W-9), in which case the 
payor must make a return under this section, unless the payor refunds 
the amount withheld pursuant to Sec.  31.6413(a)-3 of this chapter. 
Further, a return of information is not required under this section 
for--
    (A) Payments with respect to which a return is not required by 
applying the rules of Sec.  1.6049-4(c)(4) (by substituting the term 
``dividend'' for the term ``interest''); or
    (B) Payments made by a paying agent on behalf of a corporation 
described in section 1297(a) with respect to a shareholder of the 
corporation if--
    (1) The paying agent obtains from the corporation a written 
certification signed by a person authorized to sign on behalf of the 
corporation, that states that the corporation is described in section 
1297(a) for each calendar year during which the paying agent relies on 
the provisions of paragraph (a)(1)(i)(B) of this section, and the 
paying agent has no reason to know the written certification is 
unreliable or incorrect;
    (2) The paying agent identifies, prior to payment, the corporation 
as a participating FFI (including a reporting Model 2 FFI) (as defined 
in Sec.  1.6049-4(f)(10) or (14), respectively), or reporting Model 1 
FFI (as defined in Sec.  1.6049-4(f)(13)), in accordance with the 
requirements of Sec.  1.1471-3(d)(4) (substituting the terms ``paying 
agent'' and ``corporation'' for the terms ``withholding agent'' and 
``payee,'' respectively) and validates that status annually;
    (3) The paying agent obtains a written certification representing 
that the corporation shall report the payment as part of its reporting 
obligations under chapter 4 of the Code or an applicable IGA (as 
defined in Sec.  1.6049-4(f)(7)) with respect to its U.S. accounts and 
provided the paying agent does not know that the corporation is not 
reporting the payment as required. The paying agent may rely on the 
written certification until there is a change in circumstances or the 
paying agent knows or has reason to know that the statement is 
unreliable or incorrect. A paying agent that knows that the corporation 
is not reporting the payment as required under chapter 4 of the Code or 
an applicable IGA (as defined in Sec.  1.6049-4(f)(7)) must report all 
payments reportable under this section that it makes during the year in 
which it obtains such knowledge; and
    (4) The paying agent is not also acting in its capacity as a 
custodian, nominee, or other agent of the payee with respect to the 
payments.
* * * * *
    (f) Effective/applicability date. This section applies to payments 
made on or after January 6, 2017. (For payments made after June 30, 
2014, and before January 6, 2017, see this section as in effect and 
contained in 26 CFR part 1, as revised April 1, 2016. For payments made 
after December 31, 2000, and before July 1, 2014, see this section as 
in effect and contained in 26 CFR part 1, as revised April 1, 2013.)


Sec.  1.6042-2T  [Removed]

0
Par. 28. Section 1.6042-2T is removed.
0
Par. 29. Section 1.6042-3 is amended by:
0
1. Revising paragraphs (b)(1)(iii) and (iv), (b)(1)(vi), and (b)(3).
0
2. Removing paragraph (b)(5).
0
3. Adding paragraph (d).
    The revisions and addition read as follows:


Sec.  1.6042-3  Dividends subject to reporting.

* * * * *
    (b) * * *
    (1) * * *
    (iii) Distributions or payments that a payor can, prior to payment, 
reliably associate with documentation upon which it may rely to treat 
as made to a foreign beneficial owner in accordance with Sec.  1.1441-
1(e)(1)(ii) or as made to a foreign payee in accordance with Sec.  
1.6049-5(d)(1) or presumed to be made to a foreign payee under Sec.  
1.6049-5(d)(2), (3), (4), or (5). Returns of information are also not 
required for payments that a payor or middleman can, prior to payment, 
reliably associate with documentation upon which it may rely to treat 
as made to a foreign intermediary in accordance with Sec.  1.1441-1(b) 
if it obtains from the intermediary entity a withholding statement 
(described in Sec.  1.6049-5(b)(14)) that allocates the payment to a 
chapter 4 withholding rate pool (as defined in Sec.  1.6049-4(f)(5)) or 
to specific payees to which withholding under chapter 4 applies. 
Payments excepted from reporting under this paragraph (b)(1)(iii) may 
be reportable, for purposes of chapter 3 of the Internal Revenue Code 
(Code), under Sec.  1.1461-1(b) and (c) or, for chapter 4 purposes, 
under Sec.  1.1474-1(d)(2). The provisions in Sec.  1.6049-5(c) 
regarding documentation of foreign status shall apply for purposes of 
this paragraph (b)(1)(iii). The provisions in Sec.  1.6049-5(c) 
regarding the definitions of U.S. payor and non-U.S. payor shall also 
apply for purposes of this paragraph (b)(1)(iii). The provisions of 
Sec.  1.1441-1 shall apply by substituting the term payor for the term 
withholding agent and without regard to the fact that the provisions 
apply only to amounts subject to withholding under chapter 3 of the 
Code.
    (iv) Distributions or payments from sources outside the United 
States (as determined under the provisions of part I, subchapter N, 
chapter 1 of the Code and the regulations under those provisions) that 
are paid by a non-U.S. payor or non-U.S. middleman and that are paid 
and received outside the United States. For a definition of non-U.S. 
payor and non-U.S. middleman, see Sec.  1.6049-5(c)(5). For 
circumstances in which an amount is considered to be paid and received 
outside the United States, see Sec.  1.6049-4(f)(16).
* * * * *
    (vi) If a foreign intermediary, as described in Sec.  1.1441-
1(c)(13), or a U.S. branch that is not treated as a U.S. person 
receives a payment from a payor, which payment the payor can reliably 
associate with a valid withholding certificate described in Sec.  
1.1441-1(e)(3)(ii) or (iii), or Sec.  1.1441-1(e)(3)(v), respectively, 
furnished by such intermediary or branch, then the intermediary or 
branch is not required to report such payment when it, in turn, pays 
the amount, unless, and to the extent, the intermediary or branch knows 
that the payment is required to be reported under this section and was 
not so reported. For example, if a U.S. branch described in Sec.  
1.1441-1(b)(2)(iv) fails to provide information regarding U.S. persons 
that are not exempt from reporting under Sec.  1.6049-4(c)(1)(ii) to 
the person from whom the U.S. branch receives the payment, the amount 
paid by the U.S. branch to such person is a dividend. See, however, 
Sec.  1.6042-2(a)(1)(i)(A) for when reporting under

[[Page 2108]]

section 6042 is coordinated with reporting under chapter 4 of the Code 
or an applicable IGA (as defined in Sec.  1.6049-4(f)(7)). The 
exception of this paragraph (b)(1)(vi) for amounts paid by a foreign 
intermediary shall not apply to a qualified intermediary that assumes 
reporting responsibility under chapter 61 of the Code with respect to 
amounts reportable under the agreement described in Sec.  1.1441-
1(e)(5)(iii).
* * * * *
    (3) Joint owners. Amounts paid to joint owners for which a 
certificate or documentation is required as a condition for being 
exempt from reporting under this paragraph (b) are presumed made to 
U.S. payees who are not exempt recipients if, prior to payment, the 
payor or middleman cannot reliably associate the payment either with a 
Form W-9 furnished by one of the joint owners in the manner required in 
Sec. Sec.  31.3406(d)-1 through 31.3406(d)-5 of this chapter, or with 
documentation described in paragraph (b)(1)(iii) of this section 
furnished by each joint owner upon which it can rely to treat each 
joint owner as a foreign payee or foreign beneficial owner. However in 
the case of a withholdable payment (as defined in Sec.  1.6049-
4(f)(15)) made to joint payees, if any such joint payee does not appear 
to be an individual, the payment is presumed made to a foreign payee 
that is a nonparticipating FFI (as defined in Sec.  1.1471-1(b)(82)). 
See Sec.  1.1471-3(f)(7). For purposes of applying this paragraph 
(b)(3), the grace period described in Sec.  1.6049-5(d)(2)(ii) shall 
apply only if each payee qualifies for such grace period.
* * * * *
    (d) Effective/applicability date. This section applies on or after 
January 6, 2017. (For payments made after June 30, 2014, and before 
January 6, 2017, see this section as in effect and contained in 26 CFR 
part 1, as revised April 1, 2016. For payments made after December 31, 
2000, and before July 1, 2014, see this section as in effect and 
contained in 26 CFR part 1, as revised April 1, 2013).


Sec.  1.6042-3T   [Removed]

0
Par. 30. Section 1.6042-3T is removed.
0
Par. 31. Section 1.6045-1 is amended by:
0
1. Revising paragraphs (c)(3)(ii) and (xiv).
0
2. Removing paragraph (c)(3)(xv) and (c)(7)(v).
0
3. Revising paragraphs (g)(1)(i), (g)(3)(iv), and (g)(4),
0
4. Removing paragraph (g)(5).
0
5. Revising paragraphs (m)(2)(ii) and (n)(12)(ii).
0
6. Adding paragraph (q).
    The revisions and addition read as follows:


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

* * * * *
    (c) * * *
    (3) * * *
    (ii) Excepted sales. No return of information is required with 
respect to a sale effected by a broker for a customer if the sale is an 
excepted sale. For this purpose, a sale is an excepted sale if it is--
    (A) So designated by the Internal Revenue Service in a revenue 
ruling or revenue procedure (see Sec.  601.601(d)(2) of this chapter); 
or
    (B) A sale with respect to which a return is not required by 
applying the rules of Sec.  1.6049-4(c)(4) (by substituting the term 
``a sale subject to reporting under section 6045'' for the term ``an 
interest payment'').
* * * * *
    (xiv) Certain redemptions. No return of information is required 
under this section for payments made by a stock transfer agent (as 
described in Sec.  1.6045-1(b)(iv)) with respect to a redemption of 
stock of a corporation described in section 1297(a) with respect to a 
shareholder in the corporation if--
    (A) The stock transfer agent obtains from the corporation a written 
certification signed by a person authorized to sign on behalf of the 
corporation, that states that the corporation is described in section 
1297(a) for each calendar year during which the stock transfer agent 
relies on the provisions of paragraph (c)(3)(xiv) of this section, and 
the stock transfer agent has no reason to know that the written 
certification is unreliable or incorrect;
    (B) The stock transfer agent identifies, prior to payment, the 
corporation as a participating FFI (including a reporting Model 2 FFI) 
(as defined in Sec.  1.6049-4(f)(10) or (f)(14), respectively), or 
reporting Model 1 FFI (as defined in Sec.  1.6049-4(f)(13)), in 
accordance with the requirements of Sec.  1.1471-3(d)(4) (substituting 
the terms ``stock transfer agent'' and ``corporation'' for the terms 
``withholding agent'' and ``payee,'' respectively) and validates that 
status annually;
    (C) The stock transfer agent obtains a written certification 
representing that the corporation shall report the payment as part of 
its account holder reporting obligations under chapter 4 of the Code or 
an applicable IGA (as defined in Sec.  1.6049-4(f)(7)) and provided the 
stock transfer agent does not know that the corporation is not 
reporting the payment as required. The paying agent may rely on the 
written certification until there is a change in circumstances or the 
paying agent knows or has reason to know that the statement is 
unreliable or incorrect. A stock transfer agent that knows that the 
corporation is not reporting the payment as required under chapter 4 of 
the Code or an applicable IGA must report all payments reportable under 
this section that it makes during the year in which it obtains such 
knowledge; and
    (D) The stock transfer agent is not also acting in its capacity as 
a custodian, nominee, or other agent of the payee with respect to the 
payment.
* * * * *
    (g) * * *
    (1) * * *
    (i) With respect to a sale effected at an office of a broker either 
inside or outside the United States, the broker may treat the customer 
as an exempt foreign person if the broker can, prior to the payment, 
reliably associate the payment with documentation upon which it can 
rely in order to treat the customer as a foreign beneficial owner in 
accordance with Sec.  1.1441-1(e)(1)(ii), as made to a foreign payee in 
accordance with Sec.  1.6049-5(d)(1), or presumed to be made to a 
foreign payee under Sec.  1.6049-5(d)(2) or (3). For purposes of this 
paragraph (g)(1)(i), the provisions in Sec.  1.6049-5(c) regarding 
rules applicable to documentation of foreign status shall apply with 
respect to a sale when the broker completes the acts necessary to 
effect the sale at an office outside the United States, as described in 
paragraph (g)(3)(iii)(A) of this section, and no office of the same 
broker within the United States negotiated the sale with the customer 
or received instructions with respect to the sale from the customer. 
The provisions in Sec.  1.6049-5(c) regarding the definitions of U.S. 
payor, U.S. middleman, non-U.S. payor, and non-U.S. middleman shall 
also apply for purposes of this paragraph (g)(1)(i). The provisions of 
Sec.  1.1441-1 shall apply by substituting the terms ``broker'' and 
``customer'' for the terms ``withholding agent'' and ``payee,'' 
respectively, and without regard for the fact that the provisions apply 
to amounts subject to withholding under chapter 3 of the Code. The 
provisions of Sec.  1.6049-5(d) shall apply by substituting the terms 
``broker'' and ``customer'' for the terms ``payor'' and ``payee,'' 
respectively. For purposes of this paragraph (g)(1)(i), a broker that 
is required to obtain, or chooses to obtain, a beneficial owner 
withholding certificate described in Sec.  1.1441-1(e)(2)(i) from an 
individual may rely on the withholding certificate only to the

[[Page 2109]]

extent the certificate includes a certification that the beneficial 
owner has not been, and at the time the certificate is furnished, 
reasonably expects not to be present in the United States for a period 
aggregating 183 days or more during each calendar year to which the 
certificate pertains. The certification is not required if a broker 
receives documentary evidence under Sec.  1.6049-5(c)(1) or (4).
* * * * *
    (3) * * *
    (iv) Special rules where the customer is a foreign intermediary or 
certain U.S. branches. A foreign intermediary, as defined in Sec.  
1.1441-1(c)(13), is an exempt foreign person, except when the broker 
has actual knowledge (within the meaning of Sec.  1.6049-5(c)(3)) that 
the person for whom the intermediary acts is a U.S. person that is not 
exempt from reporting under paragraph (c)(3) of this section or the 
broker is required to presume under Sec.  1.6049-5(d)(3) that the payee 
is a U.S. person that is not an exempt recipient. If a foreign 
intermediary, as described in Sec.  1.1441-1(c)(13), or a U.S. branch 
that is not treated as a U.S. person receives a payment from a payor or 
middleman, which payment the payor or middleman can reliably associate 
with a valid withholding certificate described in Sec.  1.1441-
1(e)(3)(ii) or (iii) or Sec.  1.1441-1(e)(3)(v), respectively, 
furnished by such intermediary or branch, then the intermediary or 
branch is not required to report such payment when it, in turn, pays 
the amount, unless, and to the extent, the intermediary or branch knows 
that the payment is required to be reported under this section and was 
not so reported. For example, if a U.S. branch described in Sec.  
1.1441-1(b)(2)(iv) fails to provide information regarding U.S. persons 
that are not exempt from reporting under paragraph (c)(3) of this 
section to the person from whom the U.S. branch receives the payment, 
the U.S. branch must report the payment on an information return. See, 
however, paragraph (c)(3)(ii) of this section for when reporting under 
section 6045 is coordinated with reporting under chapter 4 of the Code 
or an applicable IGA (as defined in Sec.  1.6049-4(f)(7)). The 
exception of this paragraph (g)(3)(iv) for amounts paid by a foreign 
intermediary shall not apply to a qualified intermediary that assumes 
reporting responsibility under chapter 61 of the Code except as 
provided under the agreement described in Sec.  1.1441-1(e)(5)(iii).
    (4) Examples. The application of the provisions of this paragraph 
(g) may be illustrated by the following examples:

    Example 1.  FC is a foreign corporation that is not a U.S. payor 
or U.S. middleman described in Sec.  1.6049-5(c)(5) that regularly 
issues and retires its own debt obligations. A is an individual 
whose residence address is inside the United States, who holds a 
bond issued by FC that is in registered form (within the meaning of 
section 163(f) and the regulations under that section). The bond is 
retired by FP, a foreign corporation that is a broker within the 
meaning of paragraph (a)(1) of this section and the designated 
paying agent of FC. FP mails the proceeds to A at A's U.S. address. 
The sale would be considered to be effected at an office outside the 
United States under paragraph (g)(3)(iii)(A) of this section except 
that the proceeds of the sale are mailed to a U.S. address. For that 
reason, the sale is considered to be effected at an office of the 
broker inside the United States under paragraph (g)(3)(iii)(B) of 
this section. Therefore, FC is a broker under paragraph (a)(1) of 
this section with respect to this transaction because, although it 
is not a U.S. payor or U.S. middleman, as described in Sec.  1.6049-
5(c)(5), it is deemed to effect the sale in the United States. FP is 
a broker for the same reasons. However, under the multiple broker 
exception under paragraph (c)(3)(iii) of this section, FP, rather 
than FC, is required to report the payment because FP is responsible 
for paying the holder the proceeds from the retired obligations. 
Under paragraph (g)(1)(i) of this section, FP may not treat A as an 
exempt foreign person and must make an information return under 
section 6045 with respect to the retirement of the FC bond, unless 
FP obtains the certificate or documentation described in paragraph 
(g)(1)(i) of this section.
    Example 2. The facts are the same as in Example 1 except that FP 
mails the proceeds to A at an address outside the United States. 
Under paragraph (g)(3)(iii)(A) of this section, the sale is 
considered to be effected at an office of the broker outside the 
United States. Therefore, under paragraph (a)(1) of this section, 
neither FC nor FP is a broker with respect to the retirement of the 
FC bond. Accordingly, neither is required to make an information 
return under section 6045.
    Example 3. The facts are the same as in Example 2 except that FP 
is also the agent of A. The result is the same as in Example 2. 
Neither FP nor FC are brokers under paragraph (a)(1) of this section 
with respect to the sale since the sale is effected outside the 
United States and neither of them are U.S. payors (within the 
meaning of Sec.  1.6049-5(c)(5)).
    Example 4. The facts are the same as in Example 1 except that 
the registered bond held by A was issued by DC, a domestic 
corporation that regularly issues and retires its own debt 
obligations. Also, FP mails the proceeds to A at an address outside 
the United States. Interest on the bond is not described in 
paragraph (g)(1)(ii) of this section. The sale is considered to be 
effected at an office outside the United States under paragraph 
(g)(3)(iii)(A) of this section. DC is a broker under paragraph 
(a)(1)(i)(B) of this section. DC is not required to report the 
payment under the multiple broker exception under paragraph 
(c)(3)(iii) of this section. FP is not required to make an 
information return under section 6045 because FP is not a U.S. payor 
described in Sec.  1.6049-5(c)(5) and the sale is effected outside 
the United States. Accordingly, FP is not a broker under paragraph 
(a)(1) of this section.
    Example 5. The facts are the same as in Example 4 except that FP 
is also the agent of A. DC is a broker under paragraph (a)(1) of 
this section. DC is not required to report under the multiple broker 
exception under paragraph (c)(3)(iii) of this section. FP is not 
required to make an information return under section 6045 because FP 
is not a U.S. payor described in Sec.  1.6049-5(c)(5) and the sale 
is effected outside the United States and therefore FP is not a 
broker under paragraph (a)(1) of this section.
    Example 6. The facts are the same as in Example 4 except that 
the bond is retired by DP, a broker within the meaning of paragraph 
(a)(1) of this section and the designated paying agent of DC. DP is 
a U.S. payor under Sec.  1.6049-5(c)(5). DC is not required to 
report under the multiple broker exception under paragraph 
(c)(3)(iii) of this section. DP is required to make an information 
return under section 6045 because it is the person responsible for 
paying the proceeds from the retired obligations unless DP obtains 
the certificate or documentary evidence described in paragraph 
(g)(1)(i) of this section.
    Example 7. Customer A owns U.S. corporate bonds issued in 
registered form after July 18, 1984, and carrying a stated rate of 
interest. The bonds are held through an account with foreign bank, 
X, and are held in street name. X is a wholly-owned subsidiary of a 
U.S. company and is not a qualified intermediary within the meaning 
of Sec.  1.1441-1(e)(5)(ii). X has no documentation regarding A. A 
instructs X to sell the bonds. In order to effect the sale, X acts 
through its agent in the United States, Y. Y sells the bonds and 
remits the sales proceeds to X. X credits A's account in the foreign 
country. X does not provide documentation to Y and has no actual 
knowledge that A is a foreign person but it does appear that A is an 
entity (rather than an individual).
    (i) Y's obligations to withhold and report. Y treats X as the 
customer, and not A, because Y cannot treat X as an intermediary 
because it has received no documentation from X. Y is not required 
to report the sales proceeds under the multiple broker exception 
under paragraph (c)(3)(iii) of this section, because X is an exempt 
recipient. Further, Y is not required to report the amount of 
accrued interest paid to X on Form 1042-S under Sec.  1.1461-
1(c)(2)(ii) because accrued interest is not an amount subject to 
reporting under chapter 3 unless the withholding agent knows that 
the obligation is being sold with a primary purpose of avoiding tax.
    (ii) X's obligations to withhold and report. Although X has 
effected, within the meaning of paragraph (a)(1) of this section, 
the sale of a security at an office outside the United States under 
paragraph (g)(3)(iii) of this section, X is treated as a broker, 
under paragraph (a)(1) of this section, because as a wholly-owned 
subsidiary of a U.S. corporation, X is a controlled foreign

[[Page 2110]]

corporation and therefore is a U.S. payor. See Sec.  1.6049-5(c)(5). 
Under the presumptions described in Sec.  1.6049-5(d)(2) (as applied 
to amounts not subject to withholding under chapter 3), X must apply 
the presumption rules of Sec.  1.1441-1(b)(3)(i) through (iii), with 
respect to the sales proceeds, to treat A as a partnership that is a 
U.S. non-exempt recipient because the presumption of foreign status 
for offshore obligations under Sec.  1.1441-1(b)(3)(iii)(D) does not 
apply. See paragraph (g)(1)(i) of this section. Therefore, unless X 
is an FFI (as defined in Sec.  1.1471-1(b)(47)) that is excepted 
from reporting the sales proceeds under paragraph (c)(3)(ii) of this 
section, the payment of proceeds to A by X is reportable on a Form 
1099 under paragraph (c)(2) of this section. X has no obligation to 
backup withhold on the payment based on the exemption under Sec.  
31.3406(g)-1(e) of this chapter, unless X has actual knowledge that 
A is a U.S. person that is not an exempt recipient. X is also 
required to separately report the accrued interest (see paragraph 
(d)(3) of this section) on Form 1099 under section 6049 because A is 
also presumed to be a U.S. person who is not an exempt recipient 
with respect to the payment because accrued interest is not an 
amount subject to withholding under chapter 3 and, therefore, the 
presumption of foreign status for offshore obligations under Sec.  
1.1441-1(b)(3)(iii)(D) does not apply. See Sec.  1.6049-5(d)(2)(i).
    Example 8. The facts are the same as in Example 7, except that X 
is a foreign corporation that is not a U.S. payor under Sec.  
1.6049-5(c).
    (i) Y's obligations to withhold and report. Y is not required to 
report the sales proceeds under the multiple broker exception under 
paragraph (c)(3)(iii) of this section, because X is the person 
responsible for paying the proceeds from the sale to A.
    (ii) X's obligations to withhold and report. Although A is 
presumed to be a U.S. payee under the presumptions of Sec.  1.6049-
5(d)(2), X is not considered to be a broker under paragraph (a)(1) 
of this section because it is a not a U.S. payor under Sec.  1.6049-
5(c)(5). Therefore X is not required to report the sale under 
paragraph (c)(2) of this section.

* * * * *
    (m) * * *
    (2) * * *
    (ii) Delayed effective date for certain options--(A) 
Notwithstanding paragraph (m)(2)(i) of this section, if an option, 
stock right, or warrant is issued as part of an investment unit 
described in Sec.  1.1273-2(h), paragraph (m) of this section applies 
to the option, stock right, or warrant if it is acquired after December 
31, 2015.
* * * * *
    (n) * * *
    (12) * * *
    (ii) Effective/applicability date. Paragraph (n)(12)(i) of this 
section applies to a debt instrument described in paragraph 
(n)(12)(i)(A) or (B) of this section that is acquired after February 
17, 2016. However, a broker may rely on paragraph (n)(12)(i) of this 
section for a debt instrument described in paragraph (n)(12)(i)(A)(or 
(B) of this section acquired before February 18, 2016.
* * * * *
    (q) Effective/applicability date. Except as otherwise provided in 
paragraphs (m)(2)(ii), and (n)(12)(ii) of this section, this section 
applies on or after January 6, 2017. (For rules that apply after June 
30, 2014, and before January 6, 2017, see this section as in effect and 
contained in 26 CFR part 1, as revised April 1, 2016.)


Sec.  1.6045-1T   [Removed]

0
Par. 32. Section 1.6045-1T is removed.

0
Par. 33. Section 1.6049-4 is amended by revising paragraphs (b)(1), 
(c)(4), (f)(3), (f)(4)(ii), (f)(5) through (16), and (h) to read as 
follows:


Sec.  1.6049-4  Return of information as to interest paid and original 
issue discount includible in gross income after December 31, 1982.

* * * * *
    (b) Information to be reported--(1) Interest payments. Except as 
provided in paragraphs (b)(3) and (5) of this section, in the case of 
interest other than original issue discount treated as interest under 
Sec.  1.6049-5(f), an information return on Form 1099 shall be made for 
the calendar year showing the aggregate amount of the payments, the 
name, address, and taxpayer identification number of the person to whom 
paid, the amount of tax deducted and withheld under section 3406 from 
the payments, if any, and such other information as required by the 
forms. An information return is generally not required if the amount of 
interest paid to a person aggregates less than $10 or if the payment is 
made to a person who is an exempt recipient described in paragraph 
(c)(1)(ii) of this section, unless the payor backup withholds under 
section 3406 on such payment (because, for example, the payee (i.e., 
exempt recipient) has failed to furnish a Form W-9 on request), in 
which case the payor must make a return under this section, unless the 
payor refunds the amount withheld pursuant to Sec.  31.6413(a)-3 
(Employment Tax Regulations). For reporting interest paid to certain 
nonresident alien individuals, see Sec.  1.6049-8.
* * * * *
    (c) * * *
    (4) Coordination of reporting with chapter 4 reporting or an 
applicable IGA--(i) U.S. accounts reported by FFIs that are non-U.S. 
payors. An information return shall not be required with respect to an 
interest payment made by a participating FFI (including a reporting 
Model 2 FFI), or registered deemed-compliant FFI (including a reporting 
Model 1 FFI), that is a non-U.S. payor (as defined in Sec.  1.6049-
5(c)(5)) to an account holder of an account maintained by the FFI, when 
the payment is not subject to withholding under chapter 4 or to backup 
withholding under section 3406, and the conditions of paragraphs 
(c)(4)(i)(A), (B), or (C) of this section, as applicable, are met. See 
paragraph (c)(4)(iii) of this section for circumstances in which an FFI 
may allocate a payment described in this paragraph (c)(4)(i) to a 
chapter 4 withholding rate pool of U.S. payees.
    (A) The FFI is a participating FFI (including a reporting Model 2 
FFI) reporting the account holder of the U.S. account (as defined in 
Sec.  1.1471-1(b)(133)) pursuant to either Sec.  1.1471-4(d)(3) or (5) 
for the year in which the payment is made (including reporting of the 
account holder's TIN).
    (B) The FFI is a registered deemed-compliant FFI (other than a 
reporting Model 1 FFI) reporting the account holder of the U.S. account 
pursuant to the conditions of its applicable deemed-compliant status 
under Sec.  1.1471-5(f)(1) for the year in which the payment is made 
(including reporting of the account holder's TIN).
    (C) The FFI is a reporting Model 1 FFI reporting the account holder 
of the reportable U.S. account pursuant to an applicable Model 1 IGA 
for the year in which the payment is made (including reporting of the 
account holder's TIN).
    (ii) Other accounts reported by FFIs under chapter 4. An 
information return shall not be required under this section with 
respect to a payment that is not subject to withholding under chapter 3 
(as defined in Sec.  1.1441-2(a)) or backup withholding under Sec.  
31.3406(g)-1(e) and that is made to a recalcitrant account holder of a 
participating FFI or registered deemed-compliant FFI (or non-consenting 
U.S. account of a reporting Model 2 FFI), provided that the FFI reports 
such account holder in accordance with the classes of account holders 
described in Sec.  1.1471-4(d)(6) for the year in which the payment is 
made. See paragraph (c)(4)(iii) of this section for circumstances in 
which an FFI may allocate a payment described in this paragraph 
(c)(4)(ii) to a chapter 4 withholding rate pool of U.S. payees. In the 
case of a payment made by an FFI that is a reporting Model 1 FFI, an 
information return shall not be required with respect to a payment that 
is not subject to withholding under chapter 3 or backup withholding 
under Sec.  31.3406(g)-1(e) and that is made to an

[[Page 2111]]

account holder of the FFI if the account--
    (A) Has U.S. indicia for which appropriate documentation sufficient 
to treat the account as held by other than a specified U.S. person has 
not been provided pursuant to the due diligence requirements described 
in an applicable Model 1 IGA, and
    (B) Is therefore treated as a U.S. reportable account that the FFI 
is required to report pursuant to the applicable Model 1 IGA.
    (iii) Coordination of reporting exceptions with reporting of 
chapter 4 withholding rate pools. For purposes of paragraphs (c)(4)(i) 
and (ii) of this section, a participating FFI (including a reporting 
Model 2 FFI) or registered deemed-compliant FFI (including a reporting 
Model 1 FFI) receiving a payment from another payor may provide a 
withholding statement to the payor allocating the payment to a chapter 
4 withholding rate of pool of U.S. payees only if the payment is 
excepted from reporting under paragraph (c)(4)(i) of this section or if 
the payment is both excepted from reporting under paragraph (c)(4)(ii) 
of this section and not subject to withholding under chapter 4. See 
Sec.  1.6049-5(b)(14) (providing an exception from reporting under 
section 6049 to a payor that has been furnished a withholding statement 
from an participating FFI (including a reporting Model 2 FFI) or 
registered deemed-compliant FFI (including a reporting Model 1 FFI) and 
that allocates the payment to a chapter 4 withholding rate pool). Thus, 
for example, a U.S. payor that is a participating FFI may not allocate 
a payment to a chapter 4 withholding rate pool of U.S. payees on a 
withholding statement described in Sec.  1.6049-5(b)(14) when the 
payment is made to a U.S. account maintained by the FFI, regardless of 
whether the FFI reports the account in accordance with Sec.  1.1471-
4(d)(3) because the U.S. payor is not excepted from reporting under 
this section pursuant to paragraph (c)(4)(i) of this section.
    (iv) Example. The application of the provisions of paragraphs 
(c)(4)(ii) and (iii) of this section may be illustrated by the 
following example:

    Example. USP is a payor that makes an interest payment that is 
not a withholdable payment (as defined in paragraph (f)(15) of this 
section) to RM2, a U.S. payor and reporting Model 2 FFI. The payment 
is paid and received outside of the United States and is not an 
amount subject to withholding under chapter 3. RM2 receives the 
payment as an intermediary with respect to a preexisting account 
held by A. RM2 has account information with respect to A which 
includes U.S. indicia as described in Sec.  1.1441-7(b)(5) or (8). A 
does not provide consent for RM2 to report A's account. Under the 
presumption rules described in Sec.  1.6049-5(d)(2)(i), RM2 is 
required to treat A as a U.S. non-exempt recipient. Despite this 
presumption rule, and because backup withholding does not apply 
under Sec.  31.3406(g)-1(e), no information return shall be required 
with respect to the payment under paragraph (c)(4)(ii) of this 
section if A is reported by RM2 consistent with Sec.  1.1471-4(d)(6) 
as a non-consenting account holder. Additionally, RM2 may include A 
in the chapter 4 withholding rate pool of U.S. payees on the 
withholding statement provided to USP consistent with the 
requirements of paragraph (c)(4)(iii) of this section.

* * * * *
    (f) * * *
    (3) Obligation. The term obligation includes bonds, debentures, 
notes, certificates, and other evidences of indebtedness regardless of 
how denominated. For the definition of the term offshore obligation, 
see paragraph (f)(9) of this section.
    (4) * * *
    (ii) Example. The application of the provisions of paragraph (f)(4) 
of this section may be illustrated by the following example:

    Example. In January 1984, Broker B, a U.S. payor, purchases on 
behalf of its customer, Individual A, an obligation issued by 
partnership in a public offering on that date. Broker B holds the 
obligation for A throughout 1984. Broker B is required to make an 
information return showing the amount of original issue discount 
treated as paid to A under Sec.  1.6049-5(f).

    (5) Chapter 4 withholding rate pool. The term chapter 4 withholding 
rate pool has the meaning set forth in Sec.  1.1471-1(b)(20). However, 
for determining the U.S. payees included in a chapter 4 withholding 
rate pool for purposes of section 6049, see paragraph (c)(4)(iii) of 
this section.
    (6) Foreign financial institution (or FFI). The term foreign 
financial institution or FFI means an entity described in Sec.  1.1471-
1(b)(47),
    (7) Intergovernmental agreement (or IGA). The term 
intergovernmental agreement or IGA has the meaning set forth in Sec.  
1.1471-1(b)(67) (i.e., either a Model 1 IGA described in Sec.  1.1471-
1(b)(78) or a Model 2 IGA described in Sec.  1.1471-1(b)(79)).
    (8) Non-consenting U.S. accounts. The term non-consenting U.S. 
accounts has the meaning set forth in an applicable Model 2 IGA.
    (9) Offshore obligation. The term offshore obligation means an 
offshore obligation defined in Sec.  1.6049-5(c)(1). For the definition 
of the term obligation, see paragraph (f)(3) of this section.
    (10) Participating FFI. The term participating FFI means an FFI 
that is described in Sec.  1.1471-1(b)(91).
    (11) Recalcitrant account holder. The term recalcitrant account 
holder has the same meaning set forth in Sec.  1.1471-1(b)(110).
    (12) Registered deemed-compliant FFI. The term registered deemed-
compliant FFI means an FFI that is described in Sec.  1.1471-1(b)(111).
    (13) Reporting Model 1 FFI. The term reporting Model 1 FFI means an 
FFI that is described in Sec.  1.1471-1(b)(114).
    (14) Reporting Model 2 FFI. The term reporting Model 2 FFI means a 
participating FFI that is described in Sec.  1.1471-1(b)(91).
    (15) Withholdable payment. The term withholdable payment means a 
payment described in Sec.  1.1471-1(b)(145).
    (16) Paid and received outside the United States--(i) In general. 
Except as otherwise provided in paragraphs (f)(16)(ii) and (iii) of 
this section, the term paid and received outside the United States 
means an amount that is paid by a payor or middleman outside the United 
States as described in Sec.  1.6049-5(e).
    (ii) Transfers to the United States. Without regard to the location 
of the account from which the amount is drawn, an amount that is 
described in paragraph (f)(16)(ii)(A) or (B) of this section and paid 
by transfer to an account maintained by the payee in the United States 
or by mail to a United States address (including an amount paid with 
respect to a bond or a discount obligation described in Sec.  1.6049-
5(e)(4)) is not considered to be paid and received outside the United 
States.
    (A) An amount is described in this paragraph (f)(16)(ii)(A) if it 
is paid by an issuer or the paying agent of the issuer with respect to 
an obligation that is--
    (1) Issued by a U.S. payor, as defined in Sec.  1.6049-5(c)(5);
    (2) Registered under the Securities Act of 1933 (15 U.S.C. 77a); or
    (3) Listed on an exchange that is registered as a national 
securities exchange in the United States or included in an interdealer 
quotation system in the United States.
    (B) An amount is described in this paragraph (f)(16)(ii)(B) if it 
is paid by a U.S. middleman (as defined in Sec.  1.6049-5(c)(5)) that, 
as a custodian, nominee, or other agent of a payee, collects the amount 
for or on behalf of the payee.
    (iii) Deposits or accounts with banks and other financial 
institutions. In the case of an amount paid by a bank or other 
financial institution with respect to a deposit or an account that is 
considered paid at a branch or office

[[Page 2112]]

outside the United States as described in Sec.  1.6049-5(e)(2), the 
amount is not considered paid and received outside the United States if 
the institution has knowledge that the customer has transmitted 
instructions to an agent, branch, or office of the institution from 
inside the United States by mail, telephone, electronic transmission, 
or otherwise concerning the deposit or account (unless the transmission 
from the United States has taken place in isolated and infrequent 
circumstances).
    (iv) Examples. The application of the provisions of paragraph 
(f)(16) of this section may be illustrated by the following examples:

    Example 1.  FC is a foreign corporation that is not a U.S. payor 
or U.S. middleman, as defined in Sec.  1.6049-5(c)(5). A holds FC 
coupon bonds that are not in registered form under section 163(f) 
and the regulations . FB, a foreign branch of DC, a domestic 
corporation, is the designated paying agent with respect to the 
bonds issued by FC. A does not have an account with FB. A presents a 
coupon to FB at its office outside the United States with 
instructions to transfer funds to a bank account maintained by A in 
the United States. FB transfers the funds in accordance with A's 
instructions. Even though the amount is credited to an account in 
the United States, the interest on the FC bonds is paid and received 
outside the United States under paragraph (f)(16)(ii) of this 
section and Sec.  1.6049-5(e)(3) because the coupon is presented for 
payment outside the United States; because FC is a foreign person 
that is not a U.S. payor or U.S. middleman, as defined in Sec.  
1.6049-5(d)(1); because FB is not acting as A's agent; and because 
the obligation is not registered under the Securities Act of 1933 
(15 U.S.C. 77a), listed on a securities exchange that is registered 
as a national securities exchange in the United States, or included 
in an interdealer quotation system.
    Example 2.  FC is a foreign corporation that is not a U.S. payor 
or U.S. middleman, as defined in Sec.  1.6049-5(d)(1). B, a United 
States citizen, holds a bond issued by FC in registered form under 
section 163(f) and the regulations thereunder and registered under 
the Securities Act of 1933 (15 U.S.C. 77a). The bond is not a 
foreign-targeted registered obligation as defined in Sec.  1.871-
14(e)(2). DB, a United States branch of a foreign corporation 
engaged in the commercial banking business, is the registrar of the 
bonds issued by FC. DB supplies FC with a list of the holders of the 
FC bonds. Interest on the FC bonds is paid to B and other 
bondholders by checks prepared by FC at its principal office outside 
the United States, and B's check is mailed from there to his 
designated address in the United States. The bond is described in 
paragraph (f)(16)(ii)(A)(2) of this section. The interest on the FC 
bonds paid to B by FC is not paid and received outside the United 
States under paragraph (f)(16) of this section.
    Example 3.  The facts are the same as in Example 2 except that 
the checks are prepared and mailed in the United States by DC, a 
U.S. corporation engaged in the commercial banking business that is 
the designated paying agent with respect to the bonds issued by FC, 
and B's check is mailed to his designated address outside the United 
States. For purposes of section 6049, the interest on the FC bonds 
paid by DC is not paid and received outside the United States under 
paragraph (f)(16)(i) of this section.

* * * * *
    (h) Effective/applicability dates. Except as otherwise provided in 
paragraphs (b)(5)(ii) and (d)(3)(ii)(B) of this section, this section 
applies to payments made on or after January 6, 2017. (For payments 
made after June 30, 2014, and before January 6, 2017, see this section 
as in effect and contained in 26 CFR part 1, as revised April 1, 2016.)


Sec.  1.6049-4T   [Removed]

0
Par. 34. Section 1.6049-4T is removed.

0
Par. 35. Section 1.6049-5 is amended by:
0
1. Revising paragraphs (b)(6) through (8), (b)(10) through 
(b)(11)(ii)(A), (b)(12), (b)(14) and (15), and (c)(1)(i) through (iii).
0
2. Adding paragraph (c)(1)(iv).
0
3. Revising paragraphs (c)(2) and (3) and (c)(4) introductory text and 
(c)(4)(i).
0
4. Removing paragraph (c)(4)(ii).
0
5. Redesignating paragraphs (c)(4)(iii) and (iv) as paragraphs 
(c)(4)(ii) and (iii).
0
6. Revising paragraphs (c)(5)(i)(F), (c)(6), (d)(1) and (2), (d)(3)(i) 
through (d)(3)(iii)(A), (d)(4), (e), and (g).
    The addition and revisions read as follows:


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

* * * * *
    (b) * * *
    (6) Amounts from sources outside the United States (determined 
under the provisions of part I, subchapter N, chapter 1 of the Internal 
Revenue Code (Code) and the regulations under those provisions) paid by 
a non-U.S. payor or a non-U.S. middleman (as defined in paragraph 
(c)(5) of this section) and paid and received outside the United 
States. See Sec.  1.6049-4(f)(16) for circumstances in which a payment 
is considered to be paid and received outside the United States.
    (7) Portfolio interest, as defined in Sec.  1.871-14(b)(1), paid 
with respect to obligations in bearer form described in section 
871(h)(2)(A), as in effect prior to the amendment by section 502 of the 
Hiring Incentives to Restore Employment Act of 2010 (HIRE Act), Public 
Law 111-147, or section 881(c)(2)(A), as in effect prior to the 
amendment by section 502 of the HIRE Act, that were issued prior to 
March 19, 2012, or with respect to a foreign-targeted registered 
obligation described in Sec.  1.871-14(e)(2) that was issued prior to 
January 1, 2016, and for which the documentation requirements described 
in Sec.  1.871-14(e)(3) and (4) have been satisfied (other than by a 
U.S. middleman (as defined in paragraph (c)(5) of this section) that, 
as a custodian or nominee of the payee, collects the amount for, or on 
behalf of, the payee, regardless of whether the middleman is also 
acting as agent of the payor).
    (8) Portfolio interest described in Sec.  1.871-14(c)(1)(ii), paid 
with respect to obligations in registered form described in section 
871(h)(2) or 881(c)(2) that is not described in paragraph (b)(7) of 
this section.
* * * * *
    (10)(i) Amounts paid and received outside the United States under 
Sec.  1.6049-4(f)(16) (other than by a U.S. middleman (as defined in 
paragraph (c)(5) of this section) that are paid by a custodian or 
nominee or other agent of the payee, of amounts that that it receives 
for, or on behalf of, the payee, regardless of whether the middleman is 
also acting as agent of the payor) with respect to an obligation that: 
Has a face amount or principal amount of not less than $500,000 (as 
determined based on the spot rate on the date of issuance if in foreign 
currency); has a maturity (at issue) of 183 days or less; satisfies the 
requirements of sections 163(f)(2)(B)(i) and (ii)(I), as in effect 
prior to the amendment by section 502 of the HIRE Act, and the 
regulations thereunder (as if the obligation would otherwise be a 
registration-required obligation within the meaning of section 
163(f)(2)(A)) (however, an original issue discount obligation with a 
maturity of 183 days or less from the date of issuance is not required 
to satisfy the certification requirement of Sec.  1.163-
5(c)(2)(i)(D)(3)) and is issued in accordance with the procedures of 
Sec.  1.163-5(c)(2)(i)(D); and has on its face the following statement 
(or a similar statement having the same effect):

    By accepting this obligation, the holder represents and warrants 
that it is not a United States person (other than an exempt 
recipient described in section 6049(b)(4) of the Internal Revenue 
Code and regulations thereunder) and that it is not acting for or on 
behalf of a United States person (other than an exempt recipient 
described in section 6049(b)(4) of the Internal Revenue Code and the 
regulations thereunder).

    (ii) If the obligation is in registered form, it must be registered 
in the name of an exempt recipient described in Sec.  1.6049-
4(c)(1)(ii). For purposes of this paragraph (b)(10), a middleman may 
treat an obligation as described in

[[Page 2113]]

section 163(f)(2)(B)(i) and (f)(2)(B)(ii)(I), as in effect prior to the 
amendment by section 502 of the HIRE Act, and the regulations under 
that section if the obligation, or coupons detached therefrom, 
whichever is presented for payment, contains the statement described in 
this paragraph (b)(10). The exemption from reporting described in this 
paragraph (b)(10) shall not apply if the payor has actual knowledge 
that the payee is a U.S. person who is not an exempt recipient.
    (11) Amounts paid with respect to an account or deposit with a U.S. 
or foreign branch of a domestic or foreign corporation or partnership 
that is paid with respect to an obligation described in either 
paragraph (b)(11)(i) or (ii) of this section, if the branch is engaged 
in the commercial banking business; and the interest or OID is paid and 
received outside the United States as defined in Sec.  1.6049-4(f)(16) 
(other than by a U.S. middleman (as defined in paragraph (c)(5) of this 
section) that acts as a custodian, nominee, or other agent of the 
payee, and collects the amount for, or on behalf of, the payee, 
regardless of whether the middleman is also acting as agent of the 
payor). The exemption from reporting described in this paragraph 
(b)(11) shall not apply if the payor has actual knowledge that the 
payee is a U.S. person who is not an exempt recipient.
    (i) An obligation is described in this paragraph (b)(11)(i) if it 
is not in registered form (within the meaning of section 163(f) and the 
regulations under that section), is described in section 163(f)(2)(B), 
as in effect prior to the amendment by section 502 of the HIRE Act, and 
issued in accordance with the procedures of Sec.  1.163-5(c)(2)(i)(C) 
or (D), and, in the case of a U.S. branch, is part of a larger single 
public offering of securities. For purposes of this paragraph 
(b)(11)(i), a middleman may treat an obligation as described in section 
163(f)(2)(B), as in effect prior to the amendment by section 502 of the 
HIRE Act, if the obligation, and any detachable coupons, contains the 
statement described in section 163(f)(2)(B)(ii)(II), as in effect prior 
to the amendment by section 502 of the HIRE Act, and the regulations 
under that section.
    (ii)(A) An obligation is described in this paragraph (b)(11)(ii) if 
it produces income described in section 871(i)(2)(A); has a face amount 
or principal amount of not less than $500,000 (as determined based on 
the spot rate on the date of issuance if in foreign currency); 
satisfies the requirements of sections 163(f)(2)(B)(i) and (ii)(I), as 
in effect prior to the amendment by section 502 of the HIRE Act, and 
the regulations thereunder (as if the obligation would otherwise be a 
registration-required obligation within the meaning of section 
163(f)(2)(A)) and is issued in accordance with the procedures of Sec.  
1.163-5(c)(2)(i)(C) or (D) (however, an original issue discount 
obligation with a maturity of 183 days or less from the date of 
issuance is not required to satisfy the certification requirement of 
Sec.  1.163-5(c)(2)(i)(D)(3)). For purposes of this paragraph 
(b)(11)(ii), a middleman may treat an obligation as described in 
sections 163(f)(2)(B)(i) and (ii), as in effect prior to the amendment 
by section 502 of the HIRE Act, and the regulations under that section 
if the obligation, or any detachable coupon, contains the statement 
described in paragraph (b)(11)(ii)(B) of this section.
* * * * *
    (12) Payments that a payor can, prior to payment, reliably 
associate with documentation upon which it may rely to treat the 
payment as made to a foreign beneficial owner in accordance with Sec.  
1.1441-1(e)(1)(ii) or as made to a foreign payee in accordance with 
paragraph (d)(1) of this section or presumed to be made to a foreign 
payee under paragraph (d)(2) or (3) of this section. However, such 
payments may be reportable under Sec.  1.1461-1(b) and (c) or under 
Sec.  1.1474-1(d)(2) (for a chapter 4 reportable amount (as described 
in Sec.  1.1471-1(b)(18)). The provisions of Sec.  1.1441-1 shall apply 
by substituting the term ``payor'' for the term ``withholding agent'' 
and without regard to the fact that the provisions apply only to 
amounts subject to withholding under chapter 3 of the Code. In the 
event of a conflict between the provisions of Sec.  1.1441-1 and 
paragraph (d) of this section in determining the foreign status of the 
payee, the provisions of Sec.  1.1441-1 shall govern for payments of 
amounts subject to withholding under chapter 3 of the Code and the 
provisions of paragraph (d) of this section shall govern in other 
cases. This paragraph (b)(12) does not apply to interest paid on or 
after January 1, 2013, to a nonresident alien individual to the extent 
provided in Sec.  1.6049-8.
* * * * *
    (14) Payments that a payor or middleman can, prior to payment, 
reliably associate with documentation upon which it may rely to treat 
as made to a foreign intermediary or flow-through entity in accordance 
with Sec.  1.1441-1(b) if it obtains from the foreign intermediary or 
flow-through entity a withholding statement under Sec.  1.1471-
3(c)(3)(iii)(B)(2) (describing an FFI withholding statement), Sec.  
1.1471-3(c)(3)(iii)(B)(3) (describing a chapter 4 withholding 
statement), Sec.  1.1441-1(e)(3)(iv) (describing a withholding 
statement provided by a non-qualified intermediary), Sec.  1.1441-
1(e)(5)(v) (describing a withholding statement provided by a qualified 
intermediary), or under Sec.  1.1441-5 (describing a withholding 
statement provided by a foreign partnership, foreign simple trust, or 
foreign grantor trust), that allocates the payment (or portion of a 
payment) to a chapter 4 withholding rate pool or specific payees to 
which withholding applies under chapter 4. The provisions of each of 
the foregoing sections shall apply by substituting the term ``payor'' 
for the term ``withholding agent.'' A payor or middleman may rely on a 
withholding statement provided by a foreign intermediary or flow-
through entity that identifies a chapter 4 withholding rate pool of 
U.S. payees (as described in Sec.  1.6049-4(c)(4)) or, with respect to 
a withholdable payment, a chapter 4 withholding rate pool of 
recalcitrant account holders (as described in Sec.  1.1471-4(d)(6)) 
provided that the payor or middleman identifies the foreign 
intermediary or flow-through entity that maintains the accounts (as 
described in Sec.  1.1471-5(b)(5)) included in the chapter 4 
withholding rate pool as a participating FFI (including a reporting 
Model 2 FFI) or registered deemed-compliant FFI (including a reporting 
Model 1 FFI) by applying the rules in Sec.  1.1471-3(d)(4) or in Sec.  
1.1471-3(e)(4)(vi)(B), as applicable, for identifying the payee of a 
payment (by substituting the term ``payor'' for the term ``withholding 
agent''). See, however, Sec.  1.1441-1(e)(5)(v)(C)(2)(i) for when a 
qualified intermediary may provide a single pool of recalcitrant 
account holders (without the need to subdivide into the pools described 
in Sec.  1.1471-4(d)(6)). Additionally, when a foreign intermediary or 
flow-through entity provides to a payor or middleman a withholding 
statement that allocates the payment (or portion of a payment) to a 
chapter 4 withholding rate pool of U.S. payees, the payor or middleman 
may also rely on the withholding statement if the payor or middleman 
identifies the intermediary or flow-through entity as a qualified 
intermediary (as defined in Sec.  1.1441-1(c)(15) by applying the rules 
described in Sec.  1.1441-1(b)(2)(vii)) that provides the certification 
described in Sec.  1.1441-1(e)(3)(ii)(D) with respect to U.S. payees 
that hold accounts with a foreign intermediary or flow-through entity

[[Page 2114]]

other than the qualified intermediary providing the certification.
    (15) If a foreign intermediary, as described in Sec.  1.1441-
1(c)(13), or a U.S. branch that is not treated as a U.S. person 
receives a payment from a payor, which payment the payor can reliably 
associate with a valid withholding certificate described in Sec.  
1.1441-1(e)(3)(ii) or (iii), or Sec.  1.1441-1(e)(3)(v), respectively, 
furnished by such intermediary or branch, then the intermediary or 
branch is not required to report such payment when it, in turn, pays 
the amount, unless, and to the extent, the intermediary or branch knows 
that the payment is required to be reported under this section and was 
not so reported. For example, if a U.S. branch described in Sec.  
1.1441-1(b)(2)(iv) fails to provide information regarding U.S. persons 
that are not exempt from reporting under Sec.  1.6049-4(c)(1)(ii) to 
the person from whom the U.S. branch receives the payment, the amount 
paid by the U.S. branch to such person is interest or original issue 
discount. See, however, Sec.  1.6049-4(c)(4) for when reporting under 
section 6049 is coordinated with reporting under chapter 4 or an 
applicable IGA (as defined in Sec.  1.6049-4(f)(7)). The exception for 
payments described in this paragraph (b)(15) shall not apply to a 
qualified intermediary that assumes reporting responsibility under 
chapter 61 of the Code for the payment under the agreement described in 
Sec.  1.1441-1(e)(5)(iii).
* * * * *
    (c) Applicable rules--(1) Documentary evidence for offshore 
obligations and certain other obligations--(i) A payor may rely on 
documentary evidence described in Sec.  1.1471-3(c)(5)(i) instead of a 
beneficial owner withholding certificate described in Sec.  1.1441-
1(e)(2)(i) in the case of an amount paid outside the United States (as 
described in paragraph (e) of this section) with respect to an offshore 
obligation, or, in the case of broker proceeds described in Sec.  
1.6045-1(c)(2), to the extent provided in Sec.  1.6045-1(g)(1)(i). For 
purposes of this section, the term offshore obligation means--
    (A) An account maintained at an office or branch of a bank or other 
financial institution located outside the United States; or
    (B) An obligation as defined in Sec.  1.6049-4(f)(3) (other than an 
account described in paragraph (c)(1)(i)(A) of this section), contract, 
or other instrument with respect to which the payor is either engaged 
in business as a broker or dealer in securities or a financial 
institution (as defined in Sec.  1.1471-5(e)) that engages in 
significant activities at an office or branch located outside the 
United States. For purposes of the preceding sentence, an office or 
branch of such payor shall be considered to engage in significant 
activities with respect to an obligation when it participates 
materially and actively in negotiating the obligation under the 
principles described in Sec.  1.864-4(c)(5)(iii) (substituting the term 
``obligation'' for the term ``stock or security'').
    (ii) A payor may rely on documentary evidence if the payor has 
established procedures to obtain, review, and maintain documentary 
evidence sufficient to establish the identity of the payee and the 
status of that person as a foreign person; and the payor obtains, 
reviews, and maintains such documentary evidence in accordance with 
those procedures. A payor maintains the documents reviewed for purposes 
of this paragraph (c)(1) by retaining an original, certified copy, or 
photocopy (including a microfiche, electronic scan, or similar means of 
electronic storage) of the documents reviewed for as long as it may be 
relevant to the determination of the payor's obligation to report under 
Sec.  1.6049-4 and this section and noting in its records the date on 
which the document was received and reviewed. Documentary evidence 
furnished for a payment of an amount subject to withholding under 
chapter 3 of the Code or that is a chapter 4 reportable amount under 
Sec.  1.1474-1(d)(2) must contain all of the information that is 
necessary to complete a Form 1042-S for that payment. See Sec. Sec.  
1.1471-3(c) and 1.1471-4(c) for additional documentation requirements 
to identify a payee or account holder for chapter 4 purposes that may 
apply in addition to the requirements under paragraph (c) of this 
section.
    (iii) Even if an account or obligation (as defined in Sec.  1.6049-
4(f)(3)) is not maintained outside the United States (maintained in the 
United States), a payor may rely on documentary evidence associated 
with a withholding certificate described in Sec.  1.1441-1(e)(3)(iii) 
with respect to the persons for whom an entity acting as an 
intermediary collects the payment. A payor may also rely on documentary 
evidence associated with a flow-through withholding certificate for 
payments treated as made to foreign partners of a nonwithholding 
foreign partnership, as defined in Sec.  1.1441-1(c)(28), the foreign 
beneficiaries of a foreign simple trust, as defined in Sec.  1.1441-
1(c)(24), or foreign owners of a foreign grantor trust, as defined in 
Sec.  1.1441-1(c)(26), even though the partnership or trust account is 
an obligation maintained in the United States.
    (iv) For accounts opened on or after July 1, 2014, and before 
January 1, 2015, and for obligations entered into on or after July 1, 
2014, and before January 1, 2015, a payor may continue to apply the 
rules of Sec. Sec.  1.6049-5(c)(1) and (c)(4) as in effect and 
contained in 26 CFR part 1 revised April 1, 2013, rather than this 
paragraph (c)(1) and paragraph (c)(4) of this section. A payor that 
applies the rules of Sec. Sec.  1.6049-5(c)(1) and (c)(4) as in effect 
and contained in 26 CFR part 1 revised April 1, 2013, to an account or 
obligation must also apply Sec.  1.1441-6(c)(2) (to the extent 
applicable) and Sec.  1.6049-5(e) both as in effect and contained in 26 
CFR part 1 revised April, 2013, with respect to the account or 
obligation.
    (2) Other applicable rules. The provisions of Sec.  1.1441-
1(e)(4)(i) through (xii) (regarding who may sign a certificate, 
validity period of certificates and documentary evidence, retention of 
certificates, reliance rules, etc.) shall apply (by substituting the 
term ``payor'' for the term ``withholding agent'' and disregarding the 
fact that the provisions under Sec.  1.1441-1(e)(4) only apply to 
amounts subject to withholding under chapter 3 of the Code) to 
withholding certificates and documentary evidence furnished for 
purposes of this section. See Sec.  1.1441-1(b)(2)(vii) for provisions 
dealing with reliable association of a payment with documentation.
    (3) Standards of knowledge. A payor may not rely on a withholding 
certificate or documentary evidence described in paragraph (c)(1) or 
(4) of this section if it has actual knowledge or reason to know that 
any information or certification stated in the certificate or 
documentary evidence is unreliable. A payor has reason to know that 
information or certifications are unreliable only if the payor would 
have reason to know under the provisions of Sec.  1.1441-7(b)(2) and 
(3) that the information and certifications provided on the certificate 
or in the documentary evidence are unreliable or, in the case of a Form 
W-9 (or an acceptable substitute), it cannot reasonably rely on the 
documentation as set forth in Sec.  31.3406(h)-3(e) of this chapter 
(see the information and certification described in Sec.  31.3406(h)-
3(e)(2)(i) through (iv) of this chapter that are required in order for 
a payor reasonably to rely on a Form W-9). The provisions of Sec.  
1.1441-7(b)(2) and (3) shall apply for purposes of this paragraph 
(c)(3) irrespective of the type of income to which Sec.  1.1441-7(b)(2) 
is otherwise limited. The exemptions from reporting described in 
paragraphs

[[Page 2115]]

(b)(10) and (11) of this section shall not apply if the payor has 
actual knowledge that the payee is a U.S. person who is not an exempt 
recipient.
    (4) Special documentation rules for certain payments. This 
paragraph (c)(4) modifies the provisions of paragraph (c)(1) of this 
section for payments of amounts that are not subject to withholding 
under chapter 3 of the Code, other than amounts described in paragraph 
(d)(3)(iii) of this section (dealing with U.S. short-term OID and U.S. 
source deposit interest described in section 871(i)(2)(A) or 
881(d)(3)). Amounts are not subject to withholding under chapter 3 of 
the Code if they are not included in the definition of amounts subject 
to withholding under Sec.  1.1441-2(a) (e.g., deposit interest with 
foreign branches of U.S. banks, foreign source income, or broker 
proceeds). A payor may rely upon documentation in lieu of documentary 
evidence (as described in paragraph (c)(1) of this section) or a 
written statement (as defined in Sec.  1.1471-1(b)(150)) or another 
statement to the extent permitted in paragraphs (c)(4)(i) through (iii) 
of this section, until the payor knows or has reason to know of a 
change in circumstance that makes the documentation unreliable or 
incorrect (as defined in Sec.  1.1441-1(e)) when the payor does not 
have customer information for the payee that includes any of the U.S. 
indicia described in Sec.  1.1471-3(c)(6)(ii)(C)(1). Further, a payor 
may maintain such documentation or documentary evidence as required in 
paragraph (c)(4)(iv) of this section.
    (i) Statement in lieu of documentary evidence with respect to 
accounts. If under the local laws, regulations, or practices of a 
country in which an account is maintained, it is not customary to 
obtain documentary evidence described in paragraph (c)(1) of this 
section with respect to the type of account, the payor may, instead of 
obtaining a beneficial owner withholding certificate described in Sec.  
1.1441-1(e)(2)(i) or documentary evidence described in paragraph (c)(1) 
of this section, establish a payee's foreign status based on the 
statement described in this paragraph (c)(4)(i) (or such substitute 
statement as the Internal Revenue Service may prescribe) made on an 
account opening form. However, see, also Sec.  1.1471-4(c) or an 
applicable IGA for additional documentation requirements that may apply 
to a participating FFI (including a reporting Model 2 FFI) for 
determining the status of its account holders for chapter 4 purposes. 
The statement referred to in this paragraph (c)(4)(i) must appear near 
the signature line and must state, ``By opening this account and 
signing below, the account owner represents and warrants that he/she/it 
is not a U.S. person for purposes of U.S. Federal income tax and that 
he/she/it is not acting for, or on behalf of, a U.S. person. A false 
statement or misrepresentation of tax status by a U.S. person could 
lead to penalties under U.S. law. If your tax status changes and you 
become a U.S. citizen or a resident, you must notify us within 30 
days.'' Additionally, a payor may, instead of obtaining a beneficial 
owner withholding certificate described in Sec.  1.1441-1(e)(2)(i) or 
Sec.  1.1471-3(c)(3)(ii) or documentary evidence described in paragraph 
(c)(1) of this section, establish a payee's foreign status based on a 
written statement described in paragraph Sec.  1.1471-1(b)(150) to the 
extent a payor uses such written statement to establish a payee's 
chapter 4 status and is permitted to use the written statement under 
Sec.  1.1471-3(d) (by substituting the term ``payor'' for the term 
``withholding agent'') without any other documentary evidence.
    (ii) Documentation under IGA. A payor that is a reporting Model 1 
FFI or reporting Model 2 FFI may rely upon documentation or information 
establishing a payee's status that is permitted under an applicable IGA 
for determining whether the account of the payee is other than a U.S. 
account and regardless of whether such documentation or certification 
is described in paragraph (c)(1) of this section or Sec.  1.1441-
1(e)(2).
    (iii) Maintenance of documentation and written statement. A payor 
maintains documentation if it either maintains the documentary evidence 
as described in paragraph (c)(1) of this section or retains a record of 
the documentary evidence reviewed if the payor is not required to 
retain copies of the documentation pursuant to the payor's AML due 
diligence (as defined in Sec.  1.1471-1(b)(4)). A payor retains a 
record of documentary evidence reviewed by noting in its records the 
type of documentation reviewed, the date the document was reviewed, the 
document's identification number (if any), and whether such 
documentation contained any U.S. indicia described in Sec.  1.1441-
7(b)(8). Any statement described in paragraph (c)(4)(i) of this 
section, must be retained in accordance with Sec.  1.1471-3(c)(6)(iii).
    (5) * * *
    (i) * * *
    (F) A U.S. branch or territory financial institution described in 
Sec.  1.1441-1(b)(2)(iv) that is treated as a U.S. person.
* * * * *
    (6) Examples. The following examples illustrate the provisions of 
paragraphs (b) and (c) of this section:

    Example 1.  FC is a foreign corporation that is not engaged in a 
trade or business in the United States during the current calendar 
year. D, an individual who is a resident and citizen of the United 
States, holds a registered obligation issued by FC in a public 
offering. Interest is paid on the obligation within the United 
States by DC, a U.S. corporation that is the designated paying agent 
of FC. D does not have an account with DC. Although interest paid on 
the obligation issued by FC is foreign source, the interest paid by 
DC to D is considered to be interest under paragraph (b)(6) of this 
section for purposes of information reporting under section 6049 
because it is not paid and received outside the United States within 
the meaning of Sec.  1.6049-4(f)(16).
    Example 2.  The facts are the same as in Example 1 except that D 
is a nonresident alien individual who has furnished DC with a Form 
W-8 in accordance with the provisions of Sec.  1.1441-1(e)(1)(ii). 
By reason of paragraph (b)(12) of this section, the payment of 
interest by DC to D is not considered to be a payment of interest 
for purposes of information reporting under section 6049. Therefore, 
DC is not required to make an information return under section 6049.
    Example 3.  The facts are the same as in Example 2 except that 
the obligation of FC is held in a custodial account for D by FB, a 
foreign branch of a U.S. financial institution. By reason of 
paragraph (c)(5) of this section, FB is considered to be a U.S. 
middleman. Therefore, FB is required to make an information return 
unless FB may treat D as a beneficial owner that is a foreign person 
in accordance with the provisions of Sec.  1.1441-1(e)(1)(ii).
    Example 4.  The facts are the same as in Example 3 except that 
the FC obligation is held for D by NC, in a custodial account at 
NC's foreign branch. NC is a foreign corporation that is a non-U.S. 
middleman described in paragraph (c)(5) of this section. The payment 
by NC to D is paid and received outside of the United States under 
Sec.  1.6049-4(f)(16) and therefore is not considered to be a 
payment of interest for purposes of section 6049 pursuant to 
paragraph (b)(6) of this section. Therefore, NC is not required to 
make an information return under section 6049 with respect to the 
payment.

    (d) Determination of status as U.S. or foreign payee and applicable 
presumptions in the absence of documentation--(1) Identifying the 
payee. The provisions of Sec. Sec.  1.1441-1(b)(2), 1.1441-5(c)(1) and 
(e)(2) and (3) shall apply (by substituting the term ``payor'' for the 
term ``withholding agent'') to identify the payee (other than a payee 
included in a chapter 4 withholding rate pool described in paragraph 
(b)(14) of this section) for

[[Page 2116]]

purposes of this section (and other sections of the regulations under 
this chapter to which this paragraph (d)(1) applies), except to the 
extent provided in this paragraph (d)(1) in the case of a payment of an 
amount that is not subject to withholding under chapter 3 of the Code 
and that is not a withholdable payment (as defined in Sec.  1.6049-
4(f)(15)). Amounts are not subject to withholding under chapter 3 of 
the Code if they are not included in the definition of amounts subject 
to withholding under Sec.  1.1441-2(a) (e.g., deposit interest with 
foreign branches of U.S. banks, foreign source income, or broker 
proceeds). The exceptions to the application of Sec.  1.1441-1(b)(2) to 
amounts that are not subject to withholding under chapter 3 of the Code 
and that are not withholdable payments are as follows:
    (i) The provisions of Sec.  1.1441-1(b)(2)(ii), dealing with 
payments to a U.S. agent or intermediary of a foreign person, shall not 
apply. Thus, a payment to a U.S. agent or intermediary of a foreign 
person is treated as a payment to a U.S. payee.
    (ii) Payments to U.S. branches or territory financial institution 
described in Sec.  1.1441-1(b)(2)(iv) shall be treated as payments to a 
foreign payee, irrespective of the fact that the U.S. branch or 
territory financial institution is otherwise treated as a U.S. person 
for payments of amounts subject to withholding under chapter 3 and 
withholdable payments, and irrespective of the fact that the branch or 
territory financial institution is treated as a U.S. payor for purposes 
of paragraph (c)(5) of this section.
    (2) Presumptions of U.S. or foreign status in the absence of 
documentation--(i) In general. Except as otherwise provided in this 
paragraph (d)(2)(i), for purposes of this section (and other sections 
of regulations under this chapter 61 to which this paragraph (d)(2) 
applies), the provisions of Sec.  1.1441-1(b)(3)(i) through (ix) and 
Sec.  1.1441-5(d) and (e)(6) shall apply (by substituting the term 
``payor'' for the term ``withholding agent'') to determine the 
classification (e.g., individual, corporation, partnership, trust), 
status (i.e., a U.S. or a foreign person), and other relevant 
characteristics (e.g., beneficial owner or intermediary) of a payee if 
a payment cannot be reliably associated with valid documentation under 
Sec.  1.1441-1(b)(2)(vii) irrespective of whether the payments are 
subject to withholding under chapter 3 of the Code or are withholdable 
payments. The provisions of Sec.  1.1441-1(b)(3)(iii)(D) and (vii)(B) 
(referencing presumption rules for payments with respect to offshore 
obligations) shall not apply to a payment of an amount not subject to 
withholding under chapter 3, unless it is an amount that is a 
withholdable payment made to a payee that is an entity. Thus, in the 
case of a withholdable payment made to an entity, the presumption rules 
of Sec.  1.1441-1(b)(3)(iii)(D) and (vii)(B) shall apply regardless of 
whether the payment is an amount subject to withholding under chapter 
3. Additionally, in the case of an amount paid outside the United 
States with respect to an offshore obligation described in Sec.  
1.1441-1(b)(3)(iii)(D) or (vii)(B) of an amount not subject to 
withholding under chapter 3 and that is treated as made to a payee that 
is an individual, the presumption rules of Sec.  1.1441-1(b)(3)(iii) 
shall not apply, and the payee shall be presumed a U.S. person only 
when the payee has any of the indicia of U.S. status that are described 
in Sec.  1.1441-7(b)(5) or (8). In a case in which a withholding agent 
makes a withholdable payment that cannot reliably be associated with 
documentation, see Sec.  1.1471-3(f)(4) and (5) for determining the 
status of the payee for chapter 4 purposes when the payment is treated 
as made to a foreign entity (by substituting the term ``payor'' for the 
term ``withholding agent''). The rules of Sec.  1.1441-1(b)(2)(vii) 
shall apply for purposes of determining when a payment can reliably be 
associated with documentation, by substituting the term ``payor'' for 
the term ``withholding agent.'' For this purpose, the information, 
documentary evidence, statement, or other documentation described in 
paragraph (c)(4) of this section can be treated as documentation with 
which a payment can be associated.
    (ii) Grace period in the case of indicia of a foreign payee. When 
the conditions of this paragraph (d)(2)(ii) are satisfied, the 30-day 
grace period provisions under section 3406(e) shall not apply and the 
provisions of this paragraph (d)(2)(ii) shall apply instead. A payor 
that, at any time during the grace period described in this paragraph 
(d)(2)(ii), credits an account with payments described in Sec.  1.1441-
6(c)(2) (or credits an account with broker proceeds from securities 
described in Sec.  1.1441-6(c)(2)), that are reportable under section 
6042, 6045, 6049, or 6050N may, instead of treating the account as 
owned by a U.S. person and applying backup withholding under section 
3406, if applicable, choose to treat the account as owned by a foreign 
person (and apply the grace period described in Sec.  1.1441-
1(b)(3)(iv)) if, at the beginning of the grace period, the address that 
the payor has in its records for the account holder is in a foreign 
country, the payor has been furnished the information contained in a 
withholding certificate described in Sec.  1.1441-1(e)(2), or the payor 
holds a withholding certificate that is no longer reliable other than 
because the validity period as described in Sec.  1.1441-1(e)(4)(ii)(A) 
has expired. In the case of a newly opened account, the grace period 
begins on the date that the payor first credits the account. In the 
case of an existing account for which the payor holds a Form W-8 or 
documentary evidence of foreign status, the payor may apply the 
provisions of the grace period described in Sec.  1.1441-1(b)(3)(iv), 
beginning on the date that the payor first credits the account after 
the existing documentation held with regard to the account can no 
longer be relied upon (other than because the validity period described 
in Sec.  1.1441-1(e)(4)(ii)(A) has expired). A new account shall be 
treated as an existing account for purposes of this paragraph 
(d)(2)(ii) if the account holder already holds an account at the branch 
location at which the new account is opened, or if the account is 
treated as a consolidated obligation as defined in Sec.  1.1471-
(1)(b)(23) for purpose of chapter 4 to the extent the account does not 
receive any amounts subject to withholding under chapter 3. A new 
account shall also be treated as an existing account for purposes of 
this paragraph (d)(2)(ii) if an account is held at another branch 
location if the institution maintains an account information system 
described in Sec.  1.1441-1(e)(4)(ix). The grace period terminates on 
the earlier of the close of the 90th day from the date on which the 
grace period begins or the date that valid documentation is provided. 
The grace period also terminates when the remaining balance in the 
account (due to withdrawals or otherwise) is equal to or less than 28 
percent (or other statutory tax rate that is applicable to backup 
withholding) of the total amounts credited since the beginning of the 
grace period that would be subject to backup withholding if the 
provisions of this paragraph (d)(2)(ii) did not apply. At the end of 
the grace period, the payor shall treat the amounts credited to the 
account, or paid with respect to an account, during the grace period as 
paid to a U.S. or foreign payee depending upon whether documentation 
has been furnished and the nature of any such documentation furnished 
upon which the payor may rely to treat the account as owned by a U.S. 
or foreign payee. If the documentation has not been

[[Page 2117]]

received on or before the date of expiration of the grace period, the 
payor may also apply the presumptions described in this paragraph (d) 
to amounts credited to the account after the date on which the grace 
period expires (until such time as the payor can reliably associate the 
documentation with amounts credited). See Sec.  31.6413(a)-3(a)(1)(iv) 
of this chapter for treating backup withheld amounts under section 3406 
as erroneously withheld when the documentation establishing foreign 
status is furnished prior to the end of the calendar year in which 
backup withholding occurs. If the provisions of this paragraph 
(d)(2)(ii) apply, the provisions of Sec.  31.3406(d)-3 of this chapter 
shall not apply. For purposes of this paragraph (d)(2)(ii), an account 
holder's reinvestment of gross proceeds of a sale into other 
instruments constitutes a withdrawal and a non-qualified electronic 
transmission of information on a withholding certificate is a 
transmission that is not in accordance with the provisions of Sec.  
1.1441-1(e)(4)(iv). See Sec.  1.1092(d)-1 for a definition of the term 
actively traded for purposes of this paragraph (d)(2)(ii).
    (iii) Joint owners. Amounts paid to accounts held jointly for which 
a certificate or documentation is required as a condition for being 
exempt from reporting under paragraph (b) of this section are presumed 
made to U.S. payees who are not exempt recipients if, prior to payment, 
the payor cannot reliably associate the payment either with a Form W-9 
furnished by one of the joint owners in the manner required in 
Sec. Sec.  31.3406(d)-1 through 31.3406(d)-5 of this chapter, or with 
documentation described in paragraph (b)(12) of this section furnished 
by each joint owner upon which it can rely to treat each joint owner as 
a foreign payee or foreign beneficial owner. In the case of an amount 
that is a withholdable payment made to a joint account, however, see 
Sec.  1.1471-3(f)(7) for when the payment is treated as made to a 
foreign payee that is a nonparticipating FFI (as defined in Sec.  
1.1471-1(b)(82)). For purposes of applying this paragraph (d)(2)(iii), 
the grace period described in paragraph (d)(2)(ii) of this section 
shall apply only if each payee qualifies for such grace period.
    (3) Payments to foreign intermediaries or flow-through entities--
(i) Payments of amounts subject to withholding under chapter 3 of the 
Code or withholdable payments. In the case of payments of amounts that 
the payor may treat as made to a foreign intermediary or flow-through 
entity in accordance with Sec. Sec.  1.1441-1(b)(3)(ii)(C) and 
(b)(3)(v)(A) and 1.1441-5(c) or (e) and that are subject to withholding 
under Sec.  1.1441-2(a), the provisions of Sec. Sec.  1.1441-1(b)(2)(v) 
and 1.1441-5(c)(1), (e)(2), and (3) shall apply (by substituting the 
term ``payor'' for the term ``withholding agent'') to identify the 
payee. If a payment of an amount subject to withholding cannot be 
reliably associated with valid documentation from a payee in accordance 
with Sec.  1.1441-1(b)(2)(vii), the presumption rules of Sec. Sec.  
1.1441-1(b)(3)(v) and 1.1441-5(d) and (e)(6) shall apply to determine 
the payee's status for purposes of this section (and other sections of 
regulations under this chapter to which this paragraph (d)(3) applies). 
In the case of an amount that is a withholdable payment, see Sec.  
1.1471-3(c)(3) for rules to identify the payee and see Sec.  1.1471-
3(f)(5) for the presumption rule that shall apply to amounts treated as 
made to a foreign intermediary or flow-through entity (by substituting 
the term ``payor'' for the term ``withholding agent''). For example, 
where a withholdable payment is made to an intermediary under Sec.  
1.1471-3 that is treated as a nonparticipating FFI under Sec.  1.1471-
3(f)(5), the nonparticipating FFI shall be treated as the payee under 
Sec.  1.1471-3(c)(3) and for purposes of this paragraph (d)(3)(i), 
therefore, no information return shall be required under this section.
    (ii) Payments of amounts not subject to withholding under chapter 3 
of the Code and that are not withholdable payments. Except as provided 
in paragraph (d)(3)(iii) of this section, amounts that are not subject 
to withholding under chapter 3 of the Code and that are not 
withholdable payments that the payor may treat as paid to a foreign 
intermediary or flow-through entity shall be treated as made to an 
exempt recipient described in Sec.  1.6049-4(c) except to the extent 
that the payor has actual knowledge that any person for whom the 
intermediary or flow-through entity is collecting the payment is a U.S. 
person who is not an exempt recipient. In the case of such actual 
knowledge, the payor shall treat the payment that it knows is allocable 
to such U.S. person as a payment to a U.S. payee who is not an exempt 
recipient and has actual knowledge of the amount allocable to such a 
person.
    (iii) Special rule for payments of certain short-term original 
issue discount--(A) General rule. A payment of U.S. source bank deposit 
interest not subject to chapter 4 withholding or U.S. source interest 
or original issue discount on the redemption of an obligation with a 
maturity from the date of issue of 183 days or less (short-term OID) 
described in section 871(g)(1)(B) or 881(e) that the payor may treat as 
paid to a foreign intermediary or flow-through entity in accordance 
with the provisions of Sec.  1.1441-1(b)(3)(ii)(C), (b)(3)(v)(A), Sec.  
1.1441-5(d) or (e) (by substituting the term ``payor'' for the term 
``withholding agent''), shall be treated as paid to an undocumented 
U.S. payee that is not an exempt recipient under paragraph Sec.  
1.6049-4(c) unless the payor has documentation from the payees of the 
payment and the payment is allocated to foreign payees, as a group, and 
to each U.S. non-exempt recipient payee. See Sec.  1.1441-
1(e)(3)(iv)(C)(2). However, a payor may rely on a withholding statement 
provided by an intermediary described in Sec.  1.1441-1(e)(3)(iv) (or 
similar withholding statement for a flow-through entity) that 
identifies a chapter 4 withholding rate pool of U.S. payees (as 
described in Sec.  1.6049-4(c)(4)(iii)) only if it identifies the 
foreign intermediary or flow-through entity as a participating FFI 
(including a reporting Model 2 FFI) or registered deemed-compliant FFI 
(including a reporting Model 1 FFI) under Sec.  1.1471-3(d)(4) (by 
substituting the term ``payor'' for the term ``withholding agent''). 
See also Sec.  1.6049-4(c)(4)(iii) for when an FFI may provide a 
chapter 4 withholding rate pool of U.S. payees on a withholding 
statement.
* * * * *
    (4) Examples. The rules of paragraphs (d)(1) through (3) of this 
section are illustrated by the examples in this paragraph (d)(4). 
Unless otherwise specified in an example, the following facts apply: 
all FFIs, such as a nonqualified intermediary that is an FFI, are 
treated as participating FFIs; all payees have been identified with 
chapter 4 statuses that do not require withholding under chapter 4; and 
none of the payments are withholdable payments.

    Example 1.  (i) Facts. USP is a U.S. payor as defined in 
paragraph (c)(5) of this section. USP pays interest from sources 
within the United States that is a withholdable payment to an 
account maintained in the United States by X. The interest is not 
deposit interest described in sections 871(i)(2)(A) or 881(d). USP 
does not have a Form W-9, or withholding certificate from X as 
defined in Sec.  1.1441-1(c)(16). Moreover, USP cannot treat X as an 
exempt recipient, as defined in Sec.  1.6049-4(c)(1)(ii), without 
documentation and there is no indication that X is an individual, 
trust, or estate.
    (ii) Analysis. The U.S. source interest is an amount subject to 
withholding as defined in Sec.  1.1441-2(a). Under paragraph (d)(1) 
of this section, USP must apply the provisions of Sec. Sec.  1.1441-
1(b)(2) and 1.1441-5(c) and (e) to determine the payee of the 
interest. Under

[[Page 2118]]

Sec.  1.1441-1(b)(2)(i), X, the person to whom the payment is made, 
is considered to be the payee, unless X is determined to be a flow-
through entity, in which case the rules of Sec.  1.1441-5 apply to 
determine the payee. Under paragraph (d)(2)(i) of this section, the 
rules of Sec.  1.1441-1(b)(3)(ii) apply to determine the 
classification of a payee as an individual, trust, estate, 
corporation, or partnership. Under Sec.  1.1441-1(b)(3)(ii)(B), X is 
presumed to be a partnership, since X does not appear to be an 
individual, trust or estate, and X cannot be presumed to be an 
exempt recipient in the absence of documentation. Paragraph 
(d)(2)(i) of this section requires USP to apply the provisions of 
Sec. Sec.  1.1441-1(b)(3)(iii) and 1.1441-5(d) to determine whether 
X is presumed to be a U.S. or foreign partnership. Under Sec. Sec.  
1.1441-1(b)(3)(iii) and 1.1441-5(d)(2), X is presumed to be a U.S. 
partnership in absence of any indicia of foreign partnership status. 
The presumption of U.S. status applies even though the payment is a 
withholdable payment (see paragraph (d)(2) of this section and Sec.  
1.1471-3(f)(2) cross referencing the presumption rules of Sec.  
1.1441-1(b)(3)). The U.S. source interest paid to X is reportable 
under section 6049 on Form 1099 and the interest is subject to 
backup withholding under section 3406 because X has not provided its 
TIN on a valid Form W-9. No withholding or reporting applies to the 
payment under chapter 3 or 4 of the Code.
    Example 2.  (i) Facts. The facts are the same as in Example 1, 
except that the interest paid by USP is from sources outside the 
United States.
    (ii) Analysis. Interest from sources outside the United States 
is not an amount subject to withholding, as defined in Sec.  1.1441-
2(a) or a withholdable payment. Under paragraph (d)(1) of this 
section, USP must apply the provisions of Sec. Sec.  1.1441-1(b)(2) 
and 1.1441-5(c) and (e) to determine the payee. Under Sec.  1.1441-
1(b)(2)(i), X, the person to whom the payment is made, is considered 
to be the payee, unless X is determined to be a flow-through entity, 
in which case the rules of Sec.  1.1441-5(c) or (e) apply to 
determine the payee. Under paragraph (d)(2)(i) of this section, the 
rules of Sec.  1.1441-1(b)(3)(ii) apply to determine the 
classification of a payee as an individual, trust, estate, 
corporation, or partnership. These rules apply irrespective of 
whether the payment is an amount subject to withholding. Under Sec.  
1.1441-1(b)(3)(ii)(B), X is presumed to be a partnership, since X 
does not appear to be an individual, trust or estate, and X cannot 
be presumed to be an exempt recipient in the absence of 
documentation. Paragraph (d)(2)(i) of this section requires USP to 
apply the provisions of Sec. Sec.  1.1441-1(b)(3)(iii) and 1.1441-
5(d) to determine whether, X is presumed to be a U.S. or foreign 
partnership. Under Sec. Sec.  1.1441-1(b)(3)(iii) and 1.1441-
5(d)(2), X is presumed to be a U.S. partnership in absence of any 
indicia of foreign partnership status. The foreign source interest 
is a payment subject to reporting on Form 1099 under Sec.  1.6049-
5(a). Further, because X is a non-exempt recipient that has failed 
to provide its TIN on a valid Form W-9, the foreign source interest 
is subject to backup withholding under section 3406.
    Example 3.  (i) Facts. USP is a U.S. payor as defined in 
paragraph (c)(5) of this section. USP makes a payment of U.S. source 
interest outside the United States to an offshore account of X. See 
paragraphs (c)(1) for a definition of offshore account and (e) for a 
payment outside the United States. USP does not have a withholding 
certificate from X as defined in Sec.  1.1441-1(c)(16) nor does it 
have documentary evidence as described in Sec.  1.1441-
1(e)(1)(ii)(A)(2) and Sec.  1.6049-5(c)(1).
    (ii) Analysis. The interest is an amount subject to withholding 
as defined in Sec.  1.1441-2(a). Under paragraph (d)(1) of this 
section, USP must apply the provisions of Sec.  1.1441-1(b)(2) and 
Sec.  1.1441-5(c) and (e) to determine the payee. Under Sec.  
1.1441-1(b)(2)(i), X, the person to whom the payment is made, is 
considered to be the payee, unless X is determined to be a flow-
through entity, in which case the rules of Sec.  1.1441-5(c) or (e) 
apply to determine the payee. Under paragraph (d)(2)(i) of this 
section, the rules of Sec.  1.1441-1(b)(3)(ii) apply to determine 
the classification of a payee as an individual, trust, estate, 
corporation, or partnership. Under Sec.  1.1441-1(b)(3)(ii)(B), X is 
presumed to be a partnership, since X does not appear to be an 
individual, trust or estate, and X cannot be presumed to be an 
exempt recipient in the absence of documentation. Paragraph 
(d)(2)(i) of this section requires USP to apply the provisions of 
Sec. Sec.  1.1441-1(b)(3)(iii) and 1.1441-5(d) to determine whether, 
X is presumed to be a U.S. or foreign partnership. Under Sec. Sec.  
1.1441-1(b)(3)(iii)(D) and 1.1441-5(d)(2), X is presumed to be a 
foreign partnership. Therefore, under paragraph (d)(1) of this 
section and Sec.  1.1441-5(c)(1)(i)(E), the payees of the interest 
are presumed to be the partners of X. Under Sec.  1.1441-5(d)(3), 
the partners are presumed to be undocumented foreign persons. 
Therefore, USP must withhold 30% of the interest payment under Sec.  
1.1441-1(b)(1) and report the payment on Form 1042-S in accordance 
with Sec.  1.1461-1(c).
    Example 4.  (i) Facts. The facts are the same as in Example 3, 
except that the interest is paid by F, a non-U.S. payor.
    (ii) Analysis. The analysis and result are the same as in 
Example 3. F is a withholding agent under Sec.  1.1441-7 and its 
status as a non-U.S. payor under paragraph (c)(5) of this section is 
irrelevant.
    Example 5.  (i) Facts. USP is a U.S. payor as defined in 
paragraph (c)(5) of this section that is not an FFI. USP makes a 
payment outside the United States of interest from sources outside 
the United States with respect to an offshore obligation held by X. 
USP does not have a withholding certificate from X as defined in 
Sec.  1.1441-1(c)(16) nor does it have documentary evidence as 
described in Sec. Sec.  1.1471-3(c)(5)(i) and 1.6049-5(c)(1). USP 
does not have actual knowledge of an employer identification number 
for X. X does not appear to be an individual, trust, or estate and 
cannot be treated as an exempt recipient, as defined in Sec.  
1.6049-4(c)(1)(ii) in the absence of documentation.
    (ii) Analysis. The interest is not an amount subject to 
withholding as defined in Sec.  1.1441-2(a) and is not a 
withholdable payment. Under paragraph (d)(1) of this section, USP 
must apply the rules of Sec. Sec.  1.1441-1(b)(2) and 1.1441-5(c) 
and (e) to determine the payee of the interest. Under Sec.  1.1441-
1(b)(2)(i), X, the person to whom the payment is made, is considered 
to be the payee, unless X is determined to be a flow-through entity, 
in which case the rules of Sec.  1.1441-5(c) or (e) apply to 
determine the payee. Under paragraph (d)(2)(i) of this section, 
Sec.  1.1441-1(b)(3)(ii) applies to determine X's classification as 
an individual, trust, estate, corporation or partnership. Under 
Sec.  1.1441-1(b)(3)(ii)(B), X is treated as a partnership, since it 
does not appear to be an individual, trust, or estate and cannot be 
treated as an exempt recipient without documentation. Paragraph 
(d)(2)(i) of this section requires USP to apply the provisions of 
Sec. Sec.  1.1441-1(b)(3)(iii) and 1.1441-5(d) to determine whether, 
X is presumed to be a U.S. or foreign partnership. Paragraph 
(d)(2)(i) of this section also states that the presumptions of 
foreign status for payments made with respect to offshore 
obligations contained in Sec. Sec.  1.1441-1(b)(3)(iii)(D) and 
1.1441-5(d)(2) do not apply to amounts that are not subject to 
withholding and that are not withholdable payments described in 
paragraph (d)(2)(i). Therefore, under Sec. Sec.  1.1441-1(b)(3)(iii) 
and 1.1441-5(d)(2), X is presumed to be a U.S. partnership because 
it does not have actual knowledge that X's employer identification 
number begins with the digits ``98.'' Therefore, USP must treat X as 
a U.S. person that is not an exempt recipient and report the payment 
on Form 1099 under section 6049. Under Sec.  31.3406(g)-1(e) of this 
chapter, however, USP is not required to backup withhold on the 
payment unless it has actual knowledge that X is a U.S. person that 
is not an exempt recipient.
    Example 6. (i) Facts. The facts are the same as in Example 5, 
except that the interest is paid by F, a non-U.S. payor, as defined 
under paragraph (c)(5) of this section.
    (ii) Analysis. The analysis is the same as under Example 5. 
However, F is a non-U.S. payor paying foreign source interest 
outside the United States, and there is no indication that the 
amount is received in the United States under Sec.  1.6049-4(f)(16). 
Thus, paragraph (b)(6) of this section exempts the payment from 
reporting under section 6049.
    Example 7. (i) Facts. USP, a U.S. payor as defined in paragraph 
(c)(5) of this section that is not an FFI, makes a payment of U.S. 
source interest that is a withholdable payment to NQI, a 
nonqualified intermediary as defined in Sec.  1.1441-1(c)(14), that 
is a certified deemed-compliant FFI under Sec.  1.1471-5(f)(2). The 
interest is paid inside the United States to an account of a bank or 
other financial institution maintained in the United States. NQI has 
provided USP with a nonqualified intermediary withholding 
certificate, as described in Sec.  1.1441-1(e)(3)(iii) that includes 
its chapter 4 status, but has not attached any documentation from 
the persons on whose behalf it acts or a withholding statement as 
described in Sec.  1.1441-1(e)(3)(iv).
    (ii) Analysis. U.S. source interest is an amount subject to 
withholding under Sec.  1.1441-2(a). USP may treat the payment as

[[Page 2119]]

made to a foreign intermediary under Sec.  1.1441-1(b)(3)(v)(A) 
because USP has received a nonqualified intermediary withholding 
certificate from NQI and may except NQI from withholding under 
chapter 4 of the Code given NQI's status for chapter 4 purposes as a 
deemed-compliant FFI. Under paragraph (d)(3)(i) of this section, USP 
must then apply Sec.  1.1471-3(c)(3) to treat the persons on whose 
behalf NQI is acting as the payees. Paragraph (d)(3)(i) of this 
section also requires USP to apply the presumption rules of Sec.  
1.1441-1(b)(3)(v) if it cannot reliably associate the payment with 
valid documentation from a payee. See Sec.  1.1441-1(b)(2)(vii). As 
the payment is a withholdable payment, the interest is treated as 
paid to a nonparticipating FFI under Sec.  1.1471-3(f)(4). 
Therefore, the payment is not subject to reporting on Form 1099 
under paragraph (b)(12) of this section. See Sec.  1.1471-2(a) for 
the withholding requirement with respect to the payment and Sec.  
1.1474-1(d)(2) for the requirement to report the payment on Form 
1042-S.
    Example 8. (i) Facts. The facts are the same as in Example 7, 
except that the interest is paid outside the United States, as 
defined in paragraph (e) of this section to an offshore account, as 
defined in paragraph (c)(1) of this section and is not a 
withholdable payment.
    (ii) Analysis. Under Sec.  1.1441-1(b)(3)(v)(B), the interest is 
treated as paid to an unknown foreign payee because it cannot be 
reliably associated with documentation under Sec.  1.1441-
1(b)(2)(vii). Therefore, the payment is not subject to reporting on 
Form 1099 under paragraph (b)(12) of this section because the 
payment is presumed made to a foreign person. The payment is subject 
to withholding, however, under Sec.  1.1441-1(b) at a rate of 30% 
and is subject to reporting on Form 1042-S under Sec.  1.1461-1(c).
    Example 9. (i) Facts. The facts are the same as in Example 8, 
except that the interest is paid by F, a non-U.S. payor, as defined 
in paragraph (c)(5) of this section.
    (ii) Analysis. The analysis and results are the same as in 
Example 8.
    Example 10. (i) Facts. USP, a U.S. payor as defined in paragraph 
(c)(5) of this section, makes a payment of foreign source interest 
(other than deposit interest) to NQI, a foreign corporation and a 
nonqualified intermediary as defined in Sec.  1.1441-1(c)(14). NQI 
has provided USP with a nonqualified intermediary withholding 
certificate, as described in Sec.  1.1441-1(e)(3)(iii), but has not 
attached any documentation from the persons on whose behalf it acts 
or a withholding statement as described in Sec.  1.1441-1(e)(3)(iv).
    (ii) Analysis. Foreign source interest is not an amount subject 
to withholding under chapter 3 of the Code and is not a withholdable 
payment. See Sec. Sec.  1.1441-2(a) and 1.1473-1(a). Under paragraph 
(d)(3)(ii) of this section, amounts that are not subject to 
withholding under chapter 3 of the Code and that are not 
withholdable payments described in paragraph (d)(2)(i) of this 
section that a payor may treat as paid to a foreign intermediary are 
treated as made to an exempt recipient described in Sec.  1.6049-
4(c) absent actual knowledge that the payee is a U.S. person who is 
not an exempt recipient. Therefore, the foreign source interest is 
not subject to reporting on Form 1099.
    Example 11. (i) Facts. USP is a U.S. payor as defined in 
paragraph (c)(5) of this section that is a bank. USP pays U.S. 
source original issue discount from the redemption of an obligation 
described in section 871(g)(1)(B) to NQI, a foreign corporation that 
is a nonqualified intermediary as defined in Sec.  1.1441-1(c)(14). 
The redemption proceeds are not paid outside of the United States as 
they are paid with respect to an account NQI has with a branch of a 
bank in the United States. See Sec.  1.6049-5(e)(2). NQI provides a 
nonqualified intermediary withholding certificate as described in 
Sec.  1.1441-1(e)(3)(iii) that includes a certification of its 
status as a registered deemed-compliant FFI but does not attach any 
payee documentation or a withholding statement described in Sec.  
1.1441-1(e)(3)(iv).
    (ii) Analysis. Under paragraph (d)(3)(ii)(A) of this section, 
USP must treat the payment as made to an undocumented U.S. payee 
that is not an exempt recipient and report the payment on Form 1099. 
Further, because the payment is made inside the United States, the 
exception to backup withholding with respect to offshore obligations 
contained in Sec.  31.3406(g)-1(e) of this chapter does not apply, 
and the payment is subject to backup withholding.
    Example 12. (i) Facts. P, a payor, makes a payment to NQI of 
U.S. source interest on debt obligations issued prior to July 18, 
1984, that mature 30 years from their issuance dates. Therefore, the 
interest does not qualify as portfolio interest under section 871(h) 
or 881(d). Additionally, the interest is not a withholdable payment 
under Sec.  1.1471-2(b) as the interest is a payment with respect to 
a grandfathered obligation for purposes of chapter 4 of the Code. 
NQI, a U.S. payor, is a nonqualified foreign intermediary, as 
defined in Sec.  1.1441-1(c)(14), and has furnished P a valid 
nonqualified intermediary withholding certificate described in Sec.  
1.1441-1(e)(3)(iii) to which it has attached a valid Form W-9 for A, 
and two valid beneficial owner Forms W-8, one for B and one for C. A 
is not an exempt recipient under Sec.  1.6049-4(c). NQI furnishes a 
withholding statement, described in Sec.  1.1441-1(e)(3)(iv), in 
which it allocates 20% of the U.S. source interest to A, but does 
not allocate the remaining 80% of the interest between B and C. B's 
withholding certificate indicates that B is a foreign pension fund, 
exempt from U.S. tax under the U.S. income tax treaty with Country 
T. C's withholding certificate indicates that C is a foreign 
corporation not entitled to a reduced rate of withholding.
    (ii) Analysis. As the interest is not a withholdable payment 
under paragraph (d)(3)(i) of this section, P applies the rules of 
Sec.  1.1441-1(b)(2)(v) to determine the payees of the interest even 
though NQI has not certified its status for purposes of chapter 4 of 
the Code. Under that section, the payees are the persons on whose 
behalf NQI acts--A, B and C. Because P can reliably associate 20% of 
the payment with valid documentation provided by A, P must treat 20% 
of the interest as paid to A, a U.S. person not exempt from 
reporting, and report the payment on Form 1099. P cannot reliably 
associate the remaining 80% of the payment with valid documentation 
under Sec.  1.1441-1(b)(2)(vii) and, therefore, under paragraph 
(d)(3)(i) of this section must apply the presumption rules of Sec.  
1.1441-1(b)(3)(v). Under that section, the interest is presumed paid 
to an unknown foreign payee. Under paragraph (b)(12) of this 
section, P is not required to report the interest presumed paid to a 
foreign person on Form 1099. Under Sec.  1.1441-1(b), 80% of the 
interest is subject to 30% withholding, however, and the interest is 
reportable on Form 1042-S under Sec.  1.1461-1(c).
    Example 13. (i) Facts. The facts are the same as in Example 12, 
except that P can reliably associate 30% of the payment of interest 
to B, but cannot reliably associate the remaining 70 percent with A 
or C.
    (ii) Analysis. Under paragraph (d)(3)(i) of this section, P 
applies the rules of Sec.  1.1441-1(b)(2)(v) to determine the payees 
of the interest. Under that section, the payees are the persons on 
whose behalf NQI acts--A, B and C. Because P can reliably associate 
30% of the payment with B, a foreign pensions fund exempt from 
withholding under an income tax treaty, P may treat that payment as 
paid to B and not subject to reporting on Form 1099 under paragraph 
(b)(12) of this section. P cannot reliably associate the remaining 
70% of the payment with valid documentation under Sec.  1.1441-
1(b)(2)(vii) and, therefore, under paragraph (d)(3)(i) of this 
section must apply the presumption rules of Sec.  1.1441-1(b)(3)(v). 
Under that section, the interest is presumed paid to an unknown 
foreign payee. Under paragraph (b)(12) of this section, P is not 
required to report the interest presumed paid to a foreign person on 
Form 1099. Under Sec.  1.1441-1(b), 80% of the interest is subject 
to 30% withholding, however, and the interest is reportable on Form 
1042-S under Sec.  1.1461-1(c).
    Example 14. (i) Facts. The facts are the same as in Example 12, 
except that P also makes a payment of foreign source interest to 
NQI.
    (ii) Analysis. Under paragraph (d)(3)(ii), P may treat the 
foreign source interest as paid to an exempt recipient as defined in 
Sec.  1.6049-4(c) and not subject to reporting on Form 1099 even 
though some or all of the foreign source interest may in fact be 
owned by A, the U.S. person that is not exempt from reporting.
    Example 15.  (i) Facts. The facts are the same as in Example 12, 
except that NQI is a non-U.S. payor.
    (ii) Analysis. The analysis is the same as under Example 12 with 
respect to B and C. However, because NQI is a non-U.S. payor, it may 
under Sec.  1.6049-4(c)(4)(iii) allocate the portion of the payment 
to A to a chapter 4 withholding rate pool of U.S. payees on a 
withholding statement provided to P in lieu of furnishing the Form 
W-9 to P when NQI reports the payments in accordance with Sec.  
1.6049-4(c)(4)(i). In such a case, provided that P obtains a 
certification form confirming NQI's status as a participating FFI, P 
is excepted from reporting the payment under paragraph (b)(14) of 
this section because P

[[Page 2120]]

can reliably associate the payment with the documentation provided 
by NQI.

    (e) Determination of whether amounts are considered paid outside 
the United States--(1) In general. For purposes of section 6049 and 
this section, an amount is considered to be paid by a payor or 
middleman outside the United States if the payor or middleman completes 
the acts necessary to effect payment outside the United States. See 
paragraphs (e)(2) through (5) of this section for further clarification 
of where amounts are considered paid. A payment shall not be considered 
to be made within the United States for purposes of section 6049 merely 
by reason of the fact that it is made on a draft drawn on a United 
States bank account or by a wire or other electronic transfer from a 
United States account.
    (2) Amounts paid with respect to deposits or accounts with banks 
and other financial institutions. Notwithstanding paragraph (e)(1) of 
this section, an amount paid by a bank or other financial institution 
with respect to a deposit or with respect to an account with the 
institution is considered paid at the branch or office at which the 
amount is credited unless the amount is collected by the financial 
institution as the agent of the payee. However, an amount will not be 
considered to be paid at the branch or office where the amount is 
considered to be credited unless the branch or office is a permanent 
place of business that is regularly maintained, occupied, and used to 
carry on a banking or similar financial business; the business is 
conducted by at least one employee of the branch or office who is 
regularly in attendance at such place of business during normal 
business hours; and the branch or office receives deposits and engages 
in one or more of the other activities described in Sec.  1.864-
4(c)(5)(i).
    (3) Coupon bonds and discount obligations in bearer form. 
Notwithstanding paragraph (e)(1) of this section, an amount paid with 
respect to a bond with coupons attached (including a certificate of 
deposit with detachable interest coupons) or a discount obligation that 
is not in registered form (within the meaning of section 163(f) and the 
regulations thereunder) is considered to be paid where the coupon or 
the discount obligation is presented to the payor or its paying agent 
for payment.
    (4) Foreign-targeted registered obligations. Notwithstanding 
paragraph (e)(1) of this section, where the payor is the issuer or the 
issuer's agent, an amount is considered paid outside the United States 
with respect to a foreign-targeted registered obligation issued before 
January 1, 2016, as described in Sec.  1.871-14(e)(2), if either the 
amount is paid by transfer to an account maintained by the registered 
owner outside the United States, or by mail to an address of the 
registered owner outside the United States, or by credit to an 
international account. For purposes of this paragraph (e)(4), the term 
international account means the book-entry account of a financial 
institution (within the meaning of section 871(h)(4)(B)) or of an 
international financial organization with the Federal Reserve Bank of 
New York for which the Federal Reserve Bank of New York maintains 
records that specifically identify an international financial 
organization or a financial institution (within the meaning of section 
871(h)(4)(B)) as either a non-United States person or a foreign branch 
of a United States person as registered owner. An international 
financial organization is a central bank or monetary authority of a 
foreign government or a public international organization of which the 
United States is a member to the extent that such central bank, 
authority, or organization holds obligations solely for its own account 
and is exempt from tax under section 892 or 895.
    (5) Examples. The application of the provisions of this paragraph 
(e) is illustrated by the following examples:

    Example 1.  FC is a foreign corporation that is not a U.S. payor 
or U.S. middleman, as defined in paragraph (c)(5) of this section. A 
holds FC coupon bonds that are not in registered form under section 
163(f) and the regulations thereunder. FB, a foreign branch of DC, 
is the designated paying agent with respect to the bonds issued by 
FC. A does not have an account with FB. A presents a coupon from a 
FC bond for payment to FB at its office outside the United States. 
FB pays A with a check drawn against a bank account maintained in 
the United States. For purposes of section 6049, the place of 
payment of interest on the FC bond by FB to A is considered to be 
outside the United States under paragraph (e)(3) of this section.
    Example 2.  Individual C deposits funds in an account with FB, a 
foreign country X branch of DB, a U.S. corporation engaged in the 
commercial banking business. FB maintains an office and employees in 
foreign country X, accepts deposits, and conducts one or more of the 
other activities listed in Sec.  1.864-4(c)(5)(i). The terms of C's 
deposit provide that it will be payable with accrued interest. Under 
paragraph (e)(2) of this section, FB is considered to pay the 
interest on C's deposit outside the United States.
    Example 3. DC, a U.S. corporation engaged in the commercial 
banking business, maintains FB, a branch in foreign country X. FB 
has an office and employees in foreign country X, accepts deposits, 
and engages in one or more of the other activities listed in Sec.  
1.864-4(c)(5)(i). D, a United States citizen, purchases a 
certificate of deposit issued in 1980 by FB. The certificate of 
deposit has a maturity of 20 years and has detachable interest 
coupons payable at six-month intervals. D presents some of the 
coupons at the U.S. office of DC and receives payment in cash. 
Because the coupon is presented to DC for payment within the United 
States, DC is considered to have made the payment within the United 
States under paragraph (e)(3) of this section.
    Example 4. FB is recognized by both foreign country X and by the 
Federal Reserve Bank as a foreign country X branch of DC, a U.S. 
corporation engaged in the commercial banking business. A local 
foreign country X bank serves as FB's resident agent in Country X. 
FB maintains no physical office or employees in foreign country X. 
All the records, accounts, and transactions of FB are handled at the 
United States office of DC. E deposits funds in an amount maintained 
with FB. Interest earned on the deposit is periodically credited to 
E's account with FB by employees of DC. For purposes of section 
6049, the place of payment of the interest on E's deposit with FB is 
considered to be within the United States by reason of paragraphs 
(e)(1) and (e)(2) of this section.
    Example 5.  DC is a U.S. corporation. A holds bonds that were 
issued by DC in registered form under section 163(f), as in effect 
prior to the amendment by section 502 of the HIRE Act of 2010, and 
the regulations thereunder and that are foreign-targeted registered 
obligations as defined in Sec.  1.871-14(e)(2). DB, a commercial 
banking business, is the registrar of bonds issued by DC. Interest 
on the DC bonds is paid to A and other bondholders by check prepared 
by DB at its principal office inside the United States and mailed 
from there to A's address outside the United States. The check is 
drawn on a United States account maintained by DC with DB within the 
United States. The place of payment to A by DB of the interest on 
the DC bonds is considered to be outside the United States under 
paragraph (e)(4) of this section.

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


Sec.  1.6049-5T   [Removed]

0
Par. 36. Section 1.6049-5T is removed.

0
Par. 37. Section 1.6050N-1 is amended by revising (c)(1)(ii) to read as 
follows:


Sec.  1.6050N-1  Statements to recipients of royalties paid after 
December 31, 1986.

* * * * *
    (c) * * *

[[Page 2121]]

    (1) * * *
    (ii) Returns of information are not required for payments of 
royalties from sources outside the United States paid by a non-U.S. 
payor or non-U.S. middleman and that are paid and received outside the 
United States. For a definition of non-U.S. payor or non-U.S. 
middleman, see Sec.  1.6049-5(c)(5). For circumstances in which a 
payment is considered to be paid and received outside the United 
States, see Sec.  1.6049-4(f)(16).
* * * * *

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

0
Par. 38. The authority citation for part 31 continues to read in part 
as follows:

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

0
Par. 39. Section 31.3406(g)-1 is amended by revising paragraph (e) and 
adding paragraph (f) to read as follows:


Sec.  31.3406(g)-1  Exception for payments to certain payees and 
certain other payments.

* * * * *
    (e) Certain reportable payments made outside the United States by 
foreign persons, foreign offices of United States banks and brokers, 
and others. For reportable payments made after June 30, 2014, a payor 
is not required to backup withhold under section 3406 on a reportable 
payment that is paid and received outside the United States (as defined 
in Sec.  1.6049-4(f)(16)) with respect to an offshore obligation (as 
defined in Sec.  1.6049-5(c)(1)) or on gross proceeds from a sale 
effected outside the United States (as defined in Sec.  1.6045-
1(g)(3)(iii)), unless the payor has actual knowledge that the payee is 
a United States person. Further, no backup withholding is required on a 
reportable payment of an amount already withheld upon by a 
participating FFI (as defined in Sec.  1.1471-1(b)(91)) or another 
payor in accordance with the withholding provisions under chapter 3 or 
4 of the Code and the regulations under those chapters even if the 
payee is a known U.S. person. For example, a participating FFI is not 
required to backup withhold on a reportable payment allocable to its 
chapter 4 withholding rate pool (as defined in Sec.  1.6049-4(f)(5)) of 
recalcitrant account holders (as described in Sec.  1.6049-4(f)(11)), 
if withholding was applied to the payment (either by the participating 
FFI or another payor) pursuant to Sec.  1.1471-4(b) or Sec.  1.1471-
2(a). For rules applicable to notional principal contracts, see Sec.  
1.6041-1(d)(5) of this chapter. For rules applicable to reportable 
payments made before July 1, 2014, see this paragraph (e) as in effect 
and contained in 26 CFR part 1 revised April 1, 2013.)
    (f) Effective/applicability date. This section applies on or after 
January 6, 2017. (For payments made after June 30, 2014, and before 
January 6, 2017, see this section as in effect and contained in 26 CFR 
part 1, revised April 1, 2016).


Sec.  31.3406(g)-1T   [Removed]

0
Par. 40. Section 31.3406(g)-1T is removed.

0
Par. 41. Section 31.3406(h)-2 is amended by revising paragraph 
(a)(3)(i) and adding paragraph (i) to read as follows:


Sec.  31.3406(h)-2  Special rules.

    (a) * * *
    (3) * * *
    (i) In general. If the relevant payee listed on a jointly owned 
account or instrument provides a Form W-8 or documentary evidence 
described in Sec.  1.1441-1(e)(1)(ii) regarding its foreign status, 
withholding under section 3406 applies unless every joint payee 
provides the statement regarding foreign status (under the provisions 
of chapters 3 or 61 of the Internal Revenue Code and the regulations 
under those provisions); any one of the joint owners who has not 
established foreign status provides a taxpayer identification number to 
the payor in the manner required in Sec. Sec.  31.3406(d)-1 through 
31.3406(d)-5; or, in the case of a withholdable payment (as defined in 
Sec.  1.6049-4(f)(15)), any joint payee does not appear to be an 
individual as described in Sec.  1.1471-3(f)(7). See Sec.  1.6049-
5(d)(2)(iii) of this chapter for corresponding joint payees provisions.
* * * * *
    (i) Effective/applicability date. This section applies to payments 
made on or after January 6, 2017. (For payments made after June 30, 
2014, and before January 6, 2017, see this section as in effect and 
contained in 26 CFR part 1, revised April 1, 2016.)


Sec.  31.3406(h)-2T   [Removed]

0
Par. 42. Section 31.3406(h)-2T is removed.

PART 301--PROCEDURE AND ADMINISTRATION

0
Par. 43. The authority citation for part 301 continues to read in part 
as follows:

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

0
Par. 44. Section 301.6402-3 is amended by revising paragraphs (e) and 
(f) to read as follows:


Sec.  301.6402-3  Special rules applicable to income tax.

* * * * *
    (e) In the case of a nonresident alien individual or foreign 
corporation, the appropriate income tax return on which the claim for 
refund or credit is made must contain the tax identification number of 
the taxpayer required pursuant to section 6109 and the entire amount of 
income of the taxpayer subject to tax, even if the tax liability for 
that income was fully satisfied at source through withholding under 
chapters 3 or 4 of the Internal Revenue Code (Code). Also, if the 
overpayment of tax resulted from the withholding of tax at source under 
chapter 3 or 4 of the Code, a copy of the Form 1042-S, ``Foreign 
Person's U.S. Source Income subject to Withholding,'' Form 8805, 
``Foreign Partner's Information Statement of Section 1446 Withholding 
Tax,'' or other statement (required under Sec.  1.1446-3(d)(2) of this 
chapter) required to be provided to the beneficial owner or partner 
pursuant to Sec.  1.1461-1(c)(1)(i), Sec.  1.1474-1(d)(1)(i), or Sec.  
1.1446-3(d) of this chapter must be attached to the return. For 
purposes of claiming a refund, the Form 8805 or other statement must 
include the taxpayer identification number of the beneficial owner or 
partner even if not otherwise required. No claim for refund or credit 
under chapter 65 of the Code may be made by the taxpayer for any amount 
that the payor has repaid to the taxpayer pursuant to reimbursement or 
set-off procedures (described in Sec.  1.1461-2(a)(2),(3) or Sec.  
1.1474-2(a)(3), (4) of this chapter). In addition, no claim for refund 
or credit may be made by a taxpayer for any amount that has been repaid 
to a qualified intermediary (as described in Sec.  1.1441-1(e)(5)(ii)) 
or a participating FFI (as described in Sec.  1.1471-1(b)(91)) pursuant 
to a collective refund filed by such entity on behalf of the taxpayer. 
See Sec.  1.1441-1(e)(5)(iii) (describing a qualified intermediary 
agreement) and Sec.  1.1471-4(h) (describing a collective refund). Upon 
request, a taxpayer must also submit such documentation as the IRS, may 
require establishing that the taxpayer is the beneficial owner of the 
income for which a claim for refund or credit is being made and 
verifying the grounds and facts set forth in taxpayer's claim as 
required by Sec.  301.6402-2(b)(1). See Sec.  1.1474-5 for additional 
requirements that may apply in the case of a refund of tax withheld 
under chapter 4.
    (f) Effective/applicability date--(1) Except as provided in 
paragraph (f)(2) of this section, this section applies on or after 
January 6, 2017. (For payments made after June 30, 2014, and before 
January 6, 2017, see this section as in

[[Page 2122]]

effect and contained in 26 CFR part 1, revised April 1, 2016.)
    (2) References in paragraph (e) of this section to Form 8805 or 
other statements required under Sec.  1.1446-3(d)(2) shall apply to 
partnership taxable years beginning after April 29, 2008. References in 
paragraph (e) of this section to amounts withheld under chapter 4 of 
the Code and claims made with respect to amounts withheld under chapter 
4 of the Code shall apply to withholdable payments made after June 30, 
2014.


Sec.  301.6402-3T   [Removed]

0
Par. 46. Section 301.6402-3T is removed.


John Dalrymple,
Deputy Commissioner for Services and Enforcement.
    Approved: December 22, 2016.
Mark J. Mazur,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2016-31590 Filed 12-30-16; 4:15 pm]
 BILLING CODE 4830-01-P