Regulations Relating to Withholding and Reporting Tax on Certain U.S. Source Income Paid to Foreign Persons

 
CONTENT
Federal Register, Volume 85 Issue 1 (Thursday, January 2, 2020)
[Federal Register Volume 85, Number 1 (Thursday, January 2, 2020)]
[Rules and Regulations]
[Pages 192-206]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-27979]
[[Page 191]]
Vol. 85
Thursday,
No. 1
January 2, 2020
Part III
 Department of the Treasury
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Internal Revenue Service
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26 CFR Part 1
Regulations Relating to Withholding and Reporting Tax on Certain U.S.
Source Income Paid to Foreign Persons; Final Rule
Federal Register / Vol. 85, No. 1 / Thursday, January 2, 2020 / Rules
and Regulations
[[Page 192]]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 9890]
RIN 1545-BN73, 1545-BN74, 1545-B023, 1545-BN79, 1545-BO30
Regulations Relating to Withholding and Reporting Tax on Certain
U.S. Source Income Paid to Foreign Persons
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final regulations; removal of temporary regulations.
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SUMMARY: This document contains final regulations that provide guidance
on certain due diligence and reporting rules applicable to persons
making certain U.S. source payments to foreign persons, and guidance on
certain aspects of reporting by foreign financial institutions on U.S.
accounts. The final regulations affect persons making certain U.S.-
related payments to certain foreign persons and foreign financial
institutions reporting certain U.S. accounts.
DATES:
    Effective date. These regulations are effective on January 2, 2020.
    Applicability date. For dates of applicability, see Sec. Sec.
1.1441-1(f)(1) and (3), 1.1441-2(f)(2), 1.1441-6(i)(1) and (3), 1.1441-
7(g), 1.1471-4(j)(2), and 1.6049-6(e).
FOR FURTHER INFORMATION CONTACT: John Sweeney at (202) 317-6942 (not a
toll free number).
SUPPLEMENTARY INFORMATION:
Background
    On January 6, 2017, the Department of the Treasury (Treasury
Department) and the IRS published final and temporary regulations (the
chapter 3 temporary regulations) under chapter 3 of subtitle A of the
Internal Revenue Code (the Code) and chapter 61 of subtitle F of the
Code (TD 9808) in the Federal Register (82 FR 2046, as corrected at 82
FR 29719). On the same date, the Treasury Department and the IRS
published a notice of proposed rulemaking (REG-134247-16) in the
Federal Register (82 FR 1645, as corrected at 82 FR 43314 and 82 FR
49549) cross-referencing the temporary regulations (the chapter 3
proposed regulations). Also on January 6, 2017, the Treasury Department
and the IRS published final and temporary regulations (the chapter 4
temporary regulations) under chapter 4 of subtitle A of the Code (TD
9809) in the Federal Register (82 FR 2124, as corrected at 82 FR
27928). On the same date, the Treasury Department and the IRS published
a notice of proposed rulemaking (REG-103477-14) in the Federal Register
(82 FR 1629, as corrected at 82 FR 43314) that cross-referenced the
temporary regulations and included other proposed regulations.\1\ The
proposed regulations cross-referencing the chapter 4 temporary
regulations (redesignated as REG-132857-17) are referred to in this
preamble as the chapter 4 proposed regulations.
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    \1\ The notice of proposed rulemaking also included proposed
regulations under chapter 4 relating to certain requirements for
sponsoring entities, which regulations were finalized on March 25,
2019, in a Treasury Decision (TD 9852) published in the Federal
Register (84 FR 10976).
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    On September 25, 2017, the Treasury Department and the IRS issued
Notice 2017-46, 2017-41 I.R.B. 275, and on March 5, 2018, the Treasury
Department and the IRS issued Notice 2018-20, 2018-12 I.R.B. 444. These
notices provide that the Treasury Department and the IRS intend to
amend certain provisions in the chapter 3 temporary regulations to
narrow the scope of certain documentation requirements and provide a
phase-in for implementation of those rules in response to comments.
Notices 2017-46 and 2018-20 provide that taxpayers may rely on the
guidance provided in these notices until they are incorporated into
final regulations. These notices are further described in Part I of the
Summary of Comments and Explanation of Revisions section of this
preamble.
    On December 18, 2018, the Treasury Department and the IRS published
a notice of proposed rulemaking (REG-132881-17) in the Federal Register
(83 FR 64757) that proposed amendments to the regulations under
chapters 3 and 4 to reduce burden under those regulations (the 2018
proposed regulations). The 2018 proposed regulations respond to
Executive Orders 13777 and 13789, which instructed the Secretary of the
Treasury to reduce regulatory burdens on taxpayers. The 2018 proposed
regulations proposed modifications to certain provisions that are also
in the chapter 3 temporary regulations and the chapter 4 temporary
regulations. Certain of the proposed modifications relate to the
requirement that a withholding certificate or treaty statement provided
with documentary evidence by a treaty claimant that is an entity
identify the applicable limitation on benefits provision that the
entity meets in order to be eligible for treaty benefits. See
Sec. Sec.  1.1441-1(e)(4)(ii)(A)(2) and 1.1441-6(c)(5)(i) of the 2018
proposed regulations. Other proposed modifications relate to the
documentation that a withholding agent may rely on to treat an address
provided by an account holder that is subject to a hold mail
instruction as a permanent residence address for purposes of an account
holder's claim of foreign status or benefits under an income tax
treaty. See Sec. Sec.  1.1441-1(c)(38) and 1.1471-1(b)(62) and (99) of
the 2018 proposed regulations. As discussed further in Parts V and VI
of the Summary of Comments and Explanation of Revisions section of this
preamble, these final regulations incorporate the modifications
included in the 2018 proposed regulations with respect to those
requirements. The Treasury Department and the IRS intend to finalize
the remaining provisions of the 2018 proposed regulations in separate
guidance at a future date.
    No public hearing was requested or held with respect to the chapter
3 proposed regulations or the chapter 4 proposed regulations, though
written comments were received and are available at www.regulations.gov
or upon request. A public hearing was held with respect to the 2018
proposed regulations, but the topics raised in the hearing do not
relate to the provisions in the 2018 proposed regulations that are
finalized in this Treasury Decision. Written comments on the 2018
proposed regulations were received and are available at
www.regulations.gov or upon request. After consideration of the
comments received, the chapter 3 proposed regulations and the chapter 4
proposed regulations are adopted, with modifications (including the
modifications generally described in the preceding paragraph to take
into account certain provisions in the 2018 proposed regulations), as
final regulations in this Treasury Decision, and the corresponding
temporary regulations are removed.
    This document also includes a limited number of technical
corrections and conforming changes to final regulations under chapters
3, 4, and 61.
Summary of Comments and Explanation of Revisions
I. Requirement for a Withholding Agent To Obtain a Foreign Taxpayer
Identification Number and Date of Birth
    Section 1.1441-1T(e)(2)(ii)(B) provides that, 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
taxpayer identification
[[Page 193]]
number (foreign TIN) and, in the case of an individual account holder,
the date of birth, in order for the withholding agent to treat such
withholding certificate as valid. A withholding certificate that does
not contain the account holder's date of birth will not be invalid if
the withholding agent has the account holder's date of birth in its
files. If an account holder does not have a foreign TIN, the account
holder is required to provide a reasonable explanation for its absence.
A foreign TIN obtained by a withholding agent is required to be
reported on Form 1042-S (Foreign Person's U.S. Source Income Subject to
Withholding).
    After publication of the chapter 3 temporary regulations, the
Treasury Department and the IRS received comments about the difficulty
of obtaining foreign TINs and dates of birth from account holders by
January 1, 2017. Several comments requested a delay of one or two years
before the foreign TIN and date of birth requirements apply. One
comment requested a one-year extension of the validity period for
withholding certificates that are scheduled to expire on or before
December 31, 2017 (unless there is a change in circumstance). Several
comments noted that the requirement to obtain additional information
from customers who had recently provided a withholding certificate to a
withholding agent may damage the withholding agent's customer
relationships, and suggested transitional rules to ease the
redocumentation burden. These comments suggested various phase-in rules
that would allow a withholding agent to treat a withholding certificate
provided before the foreign TIN and date of birth requirements apply
that would otherwise be valid as continuing to be valid until the
withholding certificate otherwise expires. For example, for withholding
certificates that have a three-year validity period, comments suggested
that a withholding agent be required to obtain a foreign TIN and date
of birth at the end of the three-year period. For withholding
certificates that are valid indefinitely, comments suggested that
withholding agents be allowed two or three years to collect new
withholding certificates with a foreign TIN and date of birth.
    Comments requested that a withholding certificate not be treated as
invalid if the withholding agent obtains an account holder's foreign
TIN and date of birth in any manner (for example, orally, in a written
statement, or otherwise in account files). Comments also requested
clarifications of terms used in Sec.  1.1441-1T(e)(2)(ii)(B).
Additionally, comments requested clarification of what constitutes a
reasonable explanation for the absence of a foreign TIN.
    Two comments requested that a withholding agent's failure to obtain
an account holder's foreign TIN or date of birth not cause a
withholding agent to treat a withholding certificate as invalid and
withhold on payments made to the account holder. One comment suggested
that an information reporting penalty apply instead. Another comment
requested that the IRS waive penalties for a failure to include a
foreign TIN on Form 1042-S for 2017 and 2018 under sections 6721 and
6722 (relating to penalties for failing to file correct information
returns or to furnish correct payee statements, respectively).
    In response to these comments, the Treasury Department and the IRS
issued Notice 2017-46, which provides that the Treasury Department and
the IRS intend to amend Sec.  1.1441-1T(e)(2)(ii)(B) to generally
narrow its application and provide additional time for a withholding
agent to collect a foreign TIN (or a reasonable explanation for the
absence of a foreign TIN) and date of birth from an account holder.
Notice 2017-46 provides a one-year delay in the implementation of the
foreign TIN and date of birth requirements for payments made on or
after January 1, 2018 (rather than payments made on or after January 1,
2017). Notice 2017-46 also provides transitional rules that phase in
the requirement to obtain a foreign TIN for withholding certificates
provided before January 1, 2018. These transitional rules generally
allow a withholding agent to continue to treat an otherwise valid
withholding certificate as valid even if it does not contain a foreign
TIN (or a reasonable explanation for the absence of a foreign TIN)
until January 1, 2020 (provided there is no change in circumstance and
the withholding certificate does not expire). For payments made on or
after January 1, 2020, the transitional rules permit a withholding
agent to treat a withholding certificate obtained before January 1,
2018, as valid if the withholding agent obtains the account holder's
foreign TIN on a written statement or if the withholding agent
otherwise has the account holder's foreign TIN in the withholding
agent's files (provided there is no change in circumstance that
requires a revised withholding certificate and the withholding
certificate does not expire). These transitional rules were intended to
align with the transitional period (the end of 2019, as also provided
in Notice 2017-46) permitted for reporting Model 1 FFIs to obtain and
report required U.S. TINs for their preexisting accounts that are U.S.
reportable accounts.
    Notice 2017-46 also includes exceptions for an account holder that
is (i) resident in a jurisdiction identified by the IRS on a list of
jurisdictions that do not issue foreign TINs, (ii) a government,
international organization, foreign central bank, or resident of a U.S.
territory, or (iii) resident in a jurisdiction with which the United
States does not have an agreement relating to the exchange of tax
information in force. In addition, the notice limits the requirement to
obtain a foreign TIN and date of birth to payments of U.S. source
income reportable on Form 1042-S.
    Consistent with Sec.  1.1441-1T(e)(2)(ii)(B), Notice 2017-46
provides that the foreign TIN and date of birth requirements apply for
purposes of determining the validity of a withholding certificate.
These final regulations do not adopt the comment suggesting that an
information reporting penalty that is imposed on the withholding agent
should apply rather than treating the withholding certificate as
invalid and thereby requiring that withholding at the full 30-percent
rate be applied on payments to the account holder that are reportable
on Form 1042-S. The Treasury Department and the IRS determined that it
is more appropriate to apply the consequences of noncompliance to the
account holder that remains insufficiently documented rather than
imposing a penalty on the withholding agent. Further, the amount that
may be assessed based on a penalty for incorrect information reporting
is in general small compared to the withholding that would result from
an invalid withholding certificate and therefore is unlikely to be a
sufficient incentive for an account holder to provide the missing
information in many cases.
    After the publication of Notice 2017-46, some jurisdictions with
laws that restrict the collection or disclosure of foreign TINs of
their residents requested that their residents not be required to
provide foreign TINs to withholding agents for purposes of Sec.
1.1441-1T(e)(2)(ii)(B). In response to those requests, the Treasury
Department and the IRS issued Notice 2018-20, which provides that the
IRS intends to expand its list of jurisdictions that do not issue
foreign TINs to their residents to include jurisdictions that request
to be included on the list, even if the jurisdiction issues foreign
TINs to its residents. The list of jurisdictions for which a
withholding agent is not required to collect a foreign TIN of a
resident in such jurisdiction is available
[[Page 194]]
at https://www.irs.gov/businesses/corporations/list-of-jurisdictions-that-do-not-issue-foreign-tins (or at any successor website or as
provided in subsequent published guidance).
    These final regulations incorporate the chapter 3 temporary
regulations and the provisions in Notice 2017-46 and Notice 2018-20
with minor changes. Comments received after the publication of those
notices are described in the following paragraphs.
    Several comments requested that withholding agents be permitted to
obtain a foreign TIN through other means (such as orally, on a
statement, or from the withholding agent's files) when it is not
provided on a withholding certificate signed on or after January 1,
2018 (rather than only withholding certificates signed before January
1, 2018, as provided in Notice 2017-46). One of those comments noted
that a foreign TIN in a withholding agent's files may have been
collected orally. While withholding agents may rely on foreign TINs in
their files for withholding certificates signed before January 1, 2018
without investigating whether they were obtained orally, the Treasury
Department and the IRS have determined that this allowance should be
limited to the transition period because an oral statement does not
provide adequate assurance of accuracy and may raise recordkeeping
concerns. However, to provide flexibility for withholding agents, the
Treasury Department and the IRS have determined that a separate written
statement is an acceptable way for a withholding agent to collect an
account holder's foreign TIN, provided that the account holder
represents its foreign TIN in a signed written statement that
acknowledges that such statement is a part of the withholding
certificate and the withholding agent associates the statement with the
account holder's withholding certificate. While the Treasury Department
and the IRS expect that withholding agents will generally obtain
foreign TINs on withholding certificates, this allowance permits
withholding agents to cure incomplete withholding certificates by
obtaining the foreign TIN on a separate statement rather than having to
obtain a new withholding certificate. The requirement that the signed
written statement include an acknowledgment that such statement is part
of the withholding certificate ensures that the statement is subject to
penalties of perjury to the same extent as any other information
provided on the withholding certificate.
    A comment requested an exception to the foreign TIN requirement for
``onshore accounts that would, by analogy, qualify as excluded
financial accounts.'' These final regulations define the term
``account'' for purposes of Sec.  1.1441-1(e)(2)(ii)(B) by cross-
referencing the definition of a financial account under Sec.  1.1471-
5(b), thereby incorporating the exceptions provided in that paragraph.
Therefore, the Treasury Department and the IRS do not believe that
additional changes are needed to the definition.
    The same comment requested the elimination of the foreign TIN
requirement for a beneficial owner withholding certificate of a foreign
financial institution (FFI) because jurisdictions with a reciprocal
Model 1 IGA may not need the foreign TINs of financial institutions.
This comment is not adopted because there is no exception for an
account held by a financial institution in the Model 1 IGA jurisdiction
in the definition of the term ``FATCA partner reportable account''
(which defines accounts with respect to which the United States
provides information to the partner jurisdiction).
    These final regulations clarify the application of the exception to
the requirement that a withholding certificate include a foreign TIN
for an account holder that is a government, international organization,
foreign central bank, or resident of a U.S. territory by adding an
example specifying that an account holder may claim foreign government
status either under section 892 or otherwise when the withholding agent
may rely upon a claim of exemption either under Sec.  1.1441-8
(generally on an IRS Form W-8-EXP, Certificate of Foreign Government or
Other Foreign Organization for United States Tax Withholding and
Reporting) or under Sec.  1.1441-7 (generally on an IRS Form W-8BEN-E,
Certificate of Status of Beneficial Owner for United States Tax
Withholding and Reporting (Entities)).
    These final regulations also clarify the standard of knowledge
applicable to a date of birth by providing that a withholding agent may
rely on a date of birth provided on a withholding certificate unless it
knows or has reason to know that the date of birth is incorrect. This
is the same standard of knowledge applicable to foreign TINs. Finally,
these final regulations incorporate the allowance in the instructions
for Form W-8 that a reasonable explanation may be provided on a
separate attached statement associated with the withholding
certificate.
II. Nonqualified Intermediary Withholding Statements
    Under the chapter 3 regulations, a nonqualified intermediary is
generally required to provide to a withholding agent a Form W-8IMY
(Certificate of Foreign Intermediary, Foreign Flow-Through Entity, or
Certain U.S. Branches for United States Tax Withholding and Reporting),
a withholding statement, and the documentation for each payee for which
the intermediary receives a payment. A withholding statement must
allocate the payment to each payee and provide each payee's name,
address, TIN (if any), type of documentation provided, and type of
recipient (applying the recipient category codes listed on Form 1042-
S). Because this information may also be included on a payee's
documentation that is associated with the withholding statement, the
chapter 3 temporary regulations provide that a nonqualified
intermediary may provide a withholding statement that does not include
all of the information described in the preceding sentence, provided
that this information can be found on withholding certificates
associated with the nonqualified intermediary withholding statement and
certain other requirements are met. One of those requirements is that
the nonqualified intermediary represent to the withholding agent that
the information on the withholding certificates associated with the
withholding statement is not inconsistent with any other account
information the nonqualified intermediary has for purposes of
determining the withholding rate applicable to each payee.
    A comment requested clarification of the standard of knowledge
applicable to a nonqualified intermediary for purposes of the
representation that the information on the payees' withholding
certificates is not inconsistent with any other account information the
nonqualified intermediary has for purposes of determining the
withholding rate applicable to each payee. These final regulations
clarify that the general standards of knowledge that are applicable to
withholding agents apply to a nonqualified intermediary for reliance on
payee documentation for purposes of making the representation described
in the preceding sentence.
    As noted in the first paragraph of this Part II, a nonqualified
intermediary must provide on its withholding statement the recipient
category code for each payee. A comment noted that nonqualified
intermediaries generally
[[Page 195]]
do not have familiarity with determining the appropriate chapter 4
recipient code for Form 1042-S reporting purposes because nonqualified
intermediaries generally do not file Form 1042-S and the chapter 4
recipient categories listed on Form 1042-S differ from the chapter 4
status categories listed on a Form W-8 that may be provided by a payee.
Because a withholding agent making a payment to the nonqualified
intermediary is required to file Form 1042-S, the comment suggested
that the withholding agent is better able to determine the appropriate
chapter 4 recipient code than a nonqualified intermediary. The comment
recommended that the requirement for chapter 4 recipient codes be
eliminated for certain withholding statements or that the IRS provide
information on the relationship between chapter 4 recipient status on
Forms W-8 and Form 1042-S. The Treasury Department and the IRS have
determined that it is important to continue to obtain chapter 4
recipient codes but agree with the comment that withholding agents may
be better able to determine the appropriate chapter 4 recipient code
than a nonqualified intermediary. In response to the comment, these
final regulations provide that a nonqualified intermediary may provide
a withholding statement that does not include a chapter 4 recipient
code for one or more payees if the withholding agent is able to
determine the appropriate recipient code based on other information
included on, or associated with, the withholding statement or that is
otherwise contained in the withholding agent's records with respect to
the payee. See Sec.  1.1441-1(e)(3)(iv)(C)(3)(ii).
    The provisions described in this Part II also apply to nonqualified
intermediary withholding statements associated with withholdable
payments under chapter 4 by cross-reference to Sec.  1.1441-
1(e)(3)(iv)(C)(3). See Sec.  1.1471-3(c)(3)(iii)(B)(5).
III. Electronic Signatures for Purposes of Chapters 3 and 4
    Section 1.1441-1T(e)(4)(i)(B) permits a withholding agent to accept
an electronically signed withholding certificate if the withholding
certificate reasonably demonstrates to the withholding agent that it
has been electronically signed by the recipient identified on the form
or a person authorized by the recipient to sign the form. The
regulation includes an example that illustrates when a withholding
agent may treat a withholding certificate as validly signed based on a
review of a withholding certificate that reasonably demonstrates that
it has been electronically signed (as opposed to appearing to have a
typed name as a signature). This provision applies in addition to the
allowance provided under Sec.  1.1441-1(e)(4)(iv) for a withholding
agent to establish its own system for a beneficial owner or payee to
electronically furnish to the withholding agent (and sign
electronically) a Form W-8. A comment requested that the example be
removed because it could be interpreted as providing a minimum standard
for accepting an electronically signed withholding certificate and may
become inconsistent with future changes in technology for providing
electronic signatures. Two comments also requested that the final
regulations allow reliance on an electronically signed Form W-9
(Request for Taxpayer Identification Number and Certification), and one
comment requested that a withholding agent be permitted to rely on a
withholding certificate collected through an electronic system
maintained by a nonqualified intermediary or flow-through entity if the
nonqualified intermediary or flow-through entity provides a written
statement confirming that the electronic system meets the requirements
of Sec.  1.1441-1(e)(4)(iv), as described in Notice 2016-08, 2016-6
I.R.B. 304.
    The Treasury Department and the IRS are of the view that a clear
illustration of when a withholding agent can readily determine that a
withholding certificate is electronically signed under current
technology that is frequently used in the industry is warranted as it
demonstrates the difference between an acceptable electronic signature
in contrast to merely having a printed name or unrecognizable notation
in place of a name. Further, Sec.  1.1441-1T(e)(4)(i)(B) clearly states
that this illustration is simply an example of one set of facts that
satisfies the rule. Thus, this example is retained in these final
regulations. To provide additional flexibility, these final regulations
permit a withholding agent to consider, in addition to the withholding
certificate itself, other documentation or information the withholding
agent has that supports that a withholding certificate was
electronically signed, provided that the withholding agent does not
have actual knowledge that the documentation or information is
incorrect. These final regulations do not add a specific allowance for
Form W-9 in Sec.  1.1441-1(e)(4)(i)(B) because rules regarding reliance
on an electronically signed Form W-9 are provided in separate guidance,
such as the Requestor Instructions to Form W-9. Additionally, in light
of the general rule in Sec.  1.1441-1(e)(4) that provides that the
rules in such paragraph are applicable to Form W-8, Form 8233, and
certain documentary evidence, the specific exclusion in Sec.  1.1441-
1T(e)(4)(i)(B) for Form W-9 is unnecessary and therefore not included
in these final regulations.
    The provisions described in this Part III also apply to chapter 4
by cross-reference to Sec.  1.1441-1(e)(4)(i)(B). See Sec.  1.1471-
3(c)(3)(i).
IV. Withholding Certificates and Withholding Statements Furnished
Through a Third Party Repository for Purposes of Chapters 3 and 4
    Section 1.1441-1T(e)(4)(iv)(E) provides the circumstances under
which a withholding certificate (and in certain circumstances a
withholding statement) received electronically by a withholding agent
from a third party repository will be considered furnished to the
withholding agent by the person whose name is on the certificate. These
circumstances include that a withholding agent be able to associate a
withholding certificate received from a third party repository with a
specific request for the withholding certificate and a specific
authorization from the person (or agent of the person) providing the
certificate with respect to each specific payment or each specific
obligation maintained by the withholding agent. A comment requested
clarification on whether a specific request and specific authorization
is required each time a withholding agent makes a payment. The
standards for requiring a separate request and separate authorization
to obtain a withholding certificate from a third party repository were
not intended to deviate from the standards for when a withholding agent
may continue to rely on a withholding certificate furnished directly by
the person providing the withholding certificate (or such person's
agent). Therefore, these final regulations clarify that a separate
request and separate authorization to obtain a withholding certificate
from a third party repository is not required for each payment made by
a withholding agent when the withholding agent is otherwise permitted
to rely on the withholding certificate on an obligation-by-obligation
basis or as otherwise permitted under Sec.  1.1441-1(e)(4)(ix).
    Other comments requested that Sec.  1.1441-1T(e)(4)(iv)(E)
specifically provide that a withholding agent may rely on a Form W-9
obtained from a third party repository. However, the
[[Page 196]]
validity requirements for reliance on a Form W-9 are contained in the
section 3406 regulations (and related guidance under that section) and
are not generally amended solely for purposes of a withholding agent's
reliance in the case of a payment subject to withholding under section
1441. As a result, these final regulations are not amended to add an
allowance for a withholding agent's reliance on a Form W-9 obtained
from a third party repository, and taxpayers should continue to refer
to the other guidance applicable to reliance on a Form W-9.
Additionally, the specific exclusion in Sec.  1.1441-1T(e)(4)(iv)(E)
for Form W-9 is not included in these final regulations for the same
reason that the exclusion for Form W-9 is not included in Sec.  1.1441-
1(e)(4)(i)(B), as described in Part III of this Summary of Comments and
Explanation of Revisions of this preamble.
    As the final chapter 4 regulations adopted by this Treasury
Decision cross reference the final chapter 3 regulations for when a
withholding agent may treat a withholding certificate received from a
third party repository as provided by a payee, the above-described
modifications to Sec.  1.1441-1T(e)(4)(iv)(E) also apply to a
withholding certificate or withholding statement relied upon for
chapter 4 purposes.
V. Limitation on Benefits for Treaty Claims on Withholding Certificates
and Treaty Statements Provided With Documentary Evidence for Purposes
of Chapter 3
    Under the regulations under chapter 3, in order for a withholding
agent to apply a reduced rate of withholding based on an entity's claim
for benefits under a tax treaty, the withholding agent must obtain
either (i) a withholding certificate that includes a treaty claim on
the certificate, or (ii) documentary evidence and a separate treaty
statement. Under the chapter 3 temporary regulations, a treaty
statement must, among other things, identify the specific limitation on
benefits (LOB) provision of the applicable treaty on which the
beneficial owner relies to claim the treaty benefit. Section 1.1441-
6(b)(1) provides that generally, 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 the withholding agent can reliably
associate the payment with a beneficial owner withholding certificate,
or, in the case of a payment made outside the United States with
respect to an offshore obligation, documentary evidence and a treaty
statement. This general standard of knowledge is modified in two
situations in the chapter 3 temporary regulations. First, Sec.  1.1441-
6T(b)(1)(ii) provides that 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 when the
beneficial owner claims benefits under an income tax treaty that does
not exist or is not in force, and that a withholding agent may
determine whether a tax treaty exists or in force by checking a list
maintained on the IRS website. Second, Sec.  1.1441-6T(b)(1)(i)
provides that a withholding agent may rely on a beneficial owner's
claim regarding its reliance on a specific LOB provision absent actual
knowledge that such claim is unreliable or incorrect.
    The chapter 3 temporary regulations also add a validity period of
three years for a treaty statement provided with documentary evidence
in order to provide parity with the validity period for a withholding
certificate containing a treaty claim, enhance the reliability and
increase the accuracy of the claims, and help ensure that information
is updated when ownership thresholds or activity requirements in a
particular treaty have changed. The chapter 3 temporary regulations
provide a transitional rule under which accounts opened and documented
with documentary evidence and a treaty statement prior to January 6,
2017 (preexisting accounts) will expire on January 1, 2019.
    A comment requested that the standard of knowledge applicable to a
LOB provision should be limited to determining whether a tax treaty
exists and is in force. The Treasury Department and IRS are of the view
that such limitation would be inappropriate because a determination of
whether a treaty exists and is in force is a general rule applicable to
a treaty claim and not specifically related to a limitation on benefits
provision. Moreover, the actual knowledge standard applicable to a
limitation on benefits provision is already sufficiently limited as it
should not generally require a withholding agent to obtain facts it
does not normally request or render a conclusion it could not readily
make from the information it already has otherwise collected. Thus,
this comment is not adopted, and these final regulations adopt the
standard of knowledge in the chapter 3 temporary regulations for
reliance on a LOB provision associated with a treaty claim made on a
withholding certificate without modification. See Sec.  1.1441-
6(b)(1)(i) and (ii).
    Comments also noted the burden of complying with the new LOB
requirement for treaty statements associated with documentary evidence,
including difficulties in obtaining new treaty statements by the
January 1, 2019, expiration date given the large number of account
holders providing treaty statements before January 6, 2017. The
comments requested an additional one-year period for withholding agents
to obtain new treaty statements with LOB representations to replace
treaty statements obtained before January 6, 2017. A comment also
requested a further explanation of the reasoning for the three-year
validity period for a treaty statement.
    In response to these comments, the 2018 proposed regulations
include revisions to the LOB requirement and validity period for treaty
statements in the chapter 3 temporary regulations. The 2018 proposed
regulations extend the time for withholding agents to obtain treaty
statements with the specific LOB provisions identified for preexisting
accounts to January 1, 2020 (rather than the January 1, 2019 date
included in the chapter 3 temporary regulations). These final
regulations incorporate this extension for preexisting accounts.
    The 2018 proposed regulations also add an exception to the three-
year validity period for treaty statements associated with documentary
evidence provided by tax-exempt organizations (other than tax-exempt
pension trusts or pension funds), governments, and publicly traded
corporations. With this exception, the validity period for treaty
statements is more closely aligned with the validity period for treaty
claims on withholding certificates. The Treasury Department and the IRS
have also determined that, apart from this exception, three years is an
appropriate validity period for treaty statements and treaty claims
because it requires the entity to periodically redetermine whether it
continues to meet the LOB provision.
    A comment to the 2018 proposed regulations requested that the
exception to the three-year validity period for treaty statements
provided by tax-exempt organizations, governments, and publicly traded
corporations, be extended to apply to withholding certificates used by
such entities to make treaty claims. However, a withholding certificate
contains not only a treaty claim, but also information and
representations about the entity making the treaty claim (including
representations relevant for chapter 4 purposes). Therefore, it is not
appropriate for this exception to be
[[Page 197]]
extended to withholding certificates used to make treaty claims.
Therefore, these final regulations do not adopt this comment and
generally incorporate the same exception to the three-year validity
period for treaty statements that is provided in the 2018 proposed
regulations. However, these final regulations do not include the record
retention requirement included in the 2018 proposed regulations for
treaty statements from publicly traded corporations because the
Treasury Department and the IRS have determined that a retention
requirement in this case is unnecessary for information that is
publicly available.
    These final regulations also include the same modification included
in the 2018 proposed regulations to correct an inadvertent omission of
the applicable standard for a withholding agent's reliance on the
beneficial owner's identification of a LOB provision on a treaty
statement, incorporating the same actual knowledge standard that
applies to a withholding certificate used for a treaty claim.
    A qualified intermediary, withholding foreign partnership, and
withholding foreign trust may rely on the amendments described in this
Part V until they are incorporated into the applicable withholding
agreement.
VI. Permanent Residence Address Subject To Hold Mail Instruction for
Purposes of Chapters 3 and 4
    Sections 1.1441-1T(c)(38)(ii) and 1.1471-1T(b)(99) allow a
withholding agent to treat an address provided by a beneficial owner or
account holder as that person's permanent residence address even if the
address is subject to a hold mail instruction, provided that the
withholding agent obtains documentary evidence establishing the
person's residence in the country in which the person claims to be a
resident for tax purposes. Comments requested that the hold mail rule
be eliminated, and if it is not eliminated that a withholding agent be
allowed to rely on documentary evidence establishing a person's foreign
status (rather than the person's residency in a particular country)
unless the person is claiming treaty benefits, and requested
clarification on the definition of the term ``hold mail instruction''
and the categories of documentary evidence that can be relied upon.
    The Treasury and the IRS have determined that the hold mail rule is
necessary in order to ensure that taxpayers identify a true permanent
residence address. In response to the other comments, the 2018 proposed
regulations included proposed modifications to the requirements for
reliance on an address subject to a hold mail instruction. The 2018
proposed regulations provide that the documentary evidence required in
order to treat an address that is provided subject to a hold mail
instruction as a permanent residence address is documentary evidence
that supports the person's claim of foreign status or, for a person
claiming treaty benefits, documentary evidence that supports the
person's residence in the country where the person claims treaty
benefits. Regardless of whether the person claims treaty benefits, the
2018 proposed regulations allow a withholding agent to rely on
documentary evidence described in Sec.  1.1471-3(c)(5)(i), without
regard to whether the documentation contains a permanent residence
address.
    A comment also requested the removal of any limitations on reliance
on a permanent residence address subject to a hold mail instruction
because many account holders prefer to receive electronic
correspondence rather than paper mail. In response to this comment, the
2018 proposed regulations added a definition of a hold mail instruction
to clarify that a hold mail instruction does not include a request to
receive all correspondence (including account statements)
electronically. Because no comments were received on the 2018 proposed
regulations specific to the modified requirements for reliance on an
address subject to a hold mail instruction, those provisions of the
2018 proposed regulations are included in these final regulations. A
qualified intermediary, withholding foreign partnership, and
withholding foreign trust may rely on the amendments described in this
Part VI until they are incorporated into the applicable withholding
agreement.
VII. Technical Corrections, Conforming Change, and Applicability Dates
    The final regulations in TD 9808 modified Sec.  1.1441-
1(e)(3)(iv)(B) (general requirements for withholding statements
provided by nonqualified intermediaries) and (f)(1) (applicability
date) of the chapter 3 regulations. The last sentence of modified Sec.
1.1441-1(e)(3)(iv)(B) and the first sentence of (f)(1), however,
include typographical errors, which are corrected in these final
regulations. In addition, the final regulations in TD 9808 modified
Sec.  1.1461-1(c)(1)(i) to allow a withholding agent to furnish a
recipient copy of Form 1042-S electronically. These final regulations
make a conforming change to Sec.  1.6049-6(e)(4) to allow a payor to
furnish a recipient copy of Form 1042-S electronically to a nonresident
alien individual that is paid deposit interest reportable under Sec.
1.6049-4(b)(5). To clarify that the 90-day grace period applies to a
change in circumstance that results from a jurisdiction ceasing to be
treated as having an IGA in effect, the text in Sec.  1.1471-
3T(c)(6)(ii)(E)(4) is moved to Sec.  1.1471-3(c)(6)(ii)(E)(3) (which
provides the 90-day period for changes in circumstance). Finally, these
final regulations make ministerial changes to the applicability date
provision in Sec.  1.1441-1(f) to combine the applicability dates of
these final regulations with regulations issued under section 871(m)
that previously were contained in Sec.  1.1441-1(f)(3) and (f)(5) in
Sec.  1.1441-1(f)(3), and clarify the applicability dates of Sec. Sec.
1.1441-2 (with respect to certain payments) and 1.1441-6 (with respect
to identification of limitation on benefits provisions).
Special Analyses
I. Regulatory Planning and Review
    This regulation is not subject to review under section 6(b) of
Executive Order 12866 pursuant to the Memorandum of Agreement (April
11, 2018) between the Treasury Department and the Office of Management
and Budget regarding review of tax regulations.
II. Paperwork Reduction Act
    These final regulations reduce certain information collection
burdens that were included in the chapter 3 temporary regulations. For
purposes of the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d))
(PRA), these reductions in reporting burdens will be reflected in the
PRA submissions associated with Forms W-8 and 1042-S.
    In response to comments on the chapter 3 proposed regulations,
these final regulations reduce the information collection burden by
permitting taxpayers to use alternative methods of providing
documentation to withholding agents and to provide less information on
certain documentation. These final regulations also reduce information
collection burden by permitting taxpayers to provide certain
documentation in a less burdensome manner. The provisions reducing
collections of information are in Sec. Sec.  1.1441-1(e)(2)(ii)(B),
(e)(3)(iv)(C)(3)(ii) and (e)(4)(i)(B) and 1.6049-6(e)(4). Section
1.1441-1(e)(2)(ii)(B) allows payees to provide to a withholding agent
their foreign TIN on a separate statement rather than on a withholding
certificate, for withholding certificates provided after January 1,
[[Page 198]]
2018. This allowance provides flexibility for a payee to use other
methods of transmitting information and permits a withholding agent to
continue to treat a withholding certificate as valid rather than
requesting a new withholding certificate from the payee. Section
1.1441-1(e)(3)(iv)(C)(3)(ii) permits nonqualified intermediaries to
provide withholding statements to withholding agents that omit certain
information (a chapter 4 recipient code) that was previously required.
This allowance provides more flexibility for a nonqualified
intermediary to provide to a withholding agent a Form W-8IMY that is
treated as valid. Section 1.1441-1(e)(4)(i)(B) provides an alternative
method for a withholding agent to determine whether a withholding
certificate is electronically signed, which provides flexibility for
withholding agents that are verifying the validity of such
certificates. Section 1.6049-6(e)(4) permits withholding agents to
provide Form 1042-S to a payee electronically rather than in hard copy.
    The reductions in reporting burden provided in these final
regulations will be reflected in the PRA submission associated with
Forms W-8BEN, W-8BEN-E, W-8ECI, W-8EXP, and W-8IMY (OMB control number
1545-1621) and the PRA submission associated with Form 1042-S (OMB
control number 1545-0096).
    An agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information unless it displays a valid
control number assigned by the Office of Management and Budget. 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.
III. Regulatory Flexibility Act
    It is hereby certified that these final regulations will not have a
significant economic impact on a substantial number of small entities
within the meaning of section 601(6) of the Regulatory Flexibility Act
(RFA) (5 U.S.C. chapter 6).
    This rule primarily affects withholding agents, such as financial
institutions, that make U.S.-connected payments to foreign payees. For
purposes of the RFA, small financial institutions are those with less
than $600 million in assets. The Treasury Department and the IRS do not
have data readily available to assess the number of small entities
potentially affected by these regulations. Even if a substantial number
of domestic small entities were affected by the final regulations, the
Treasury Department and the IRS have determined that the economic
impact to these entities will not be significant. These final
regulations reduce the collection of information requirements that are
currently applicable under existing rules under chapters 3 and 4 in TDs
9808 and 9809. Those rules include detailed requirements for how a
withholding agent identifies a payee, documents the payee's status, and
reports to the IRS and the payee. Those information collections were
certified previously by the Treasury Department and the IRS as not
resulting in a significant economic impact on a substantial number of
small business entities. The final regulations include a limited number
of changes to the temporary regulations that reduce the burden of
withholding agents. The burden-reducing revisions of these final
regulations provide benefits for both small and large entities because
these final regulations allow a withholding agent to collect a foreign
TIN from a payee on a separate statement; allow certain intermediaries
to provide withholding statements that omit certain information
(specifically, a chapter 4 recipient code) that was previously
required; provide an alternative method for a withholding agent to
determine whether a withholding certificate is electronically signed;
and allow withholding agents to provide payee statements electronically
rather than in paper form.
    Pursuant to section 7805(f) of the Code, the proposed regulations
preceding these final regulations were submitted to the Chief Counsel
for Advocacy of the Small Business Association for comment on its
impact on small business, and no comments were received.
IV. Unfunded Mandates Reform Act
    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA)
requires that agencies assess anticipated costs and benefits and take
certain other actions before issuing a final rule that includes any
Federal mandate that may result in expenditures in any one year by a
state, local, or tribal government, in the aggregate, or by the private
sector, of $100 million in 1995 dollars, updated annually for
inflation. In 2019, that threshold is approximately $154 million. This
rule does not include any Federal mandate that may result in
expenditures by state, local, or tribal governments, or by the private
sector in excess of that threshold.
V. Executive Order 13132: Federalism
    Executive Order 13132 (titled ``Federalism'') prohibits an agency
from publishing any rule that has federalism implications if the rule
either imposes substantial, direct compliance costs on state and local
governments, and is not required by statute, or preempts state law,
unless the agency meets the consultation and funding requirements of
section 6 of the Executive Order. This final rule does not have
federalism implications and does not impose substantial direct
compliance costs on state and local governments or preempt state law
within the meaning of the Executive Order.
Drafting Information
    The principal authors of these regulations are Charles Rioux, Nancy
Erwin, and John Sweeney, Office of Associate Chief Counsel
(International). However, other personnel from the IRS and the Treasury
Department participated in the development of these regulations.
Effect on Other Documents
    Section 4 of Notice 2016-08 (2016-6 I.R.B. 304) is obsolete as of
January 2, 2020.
    Sections 4 and 5 of Notice 2017-46 (2017-41 I.R.B. 275) are
obsolete as of January 2, 2020.
Statement of Availability of IRS Documents
    The IRS notices cited in this preamble are published in the
Internal Revenue Bulletin and are available from the Superintendent of
Documents, U.S. Government Printing Office, Washington, DC 20402, or by
visiting the IRS website at https://www.irs.gov.
List of Subjects in 26 CFR Part 1
    Income taxes, Reporting and recordkeeping requirements.
Adoption of Amendments to the Regulations
    Accordingly, 26 CFR part 1 is 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 1.1441-0 is amended by:
0
1. Revising the entry for Sec.  1.1441-1(e)(2)(ii)(B).
[[Page 199]]
0
2. Adding entries for Sec.  1.1441-1(e)(2)(ii)(B)(1) through (6) and
(e)(4)(iv)(F).
0
3. Revising the entry for Sec.  1.1441-1(f)(3).
    The revision and additions read as follows:
Sec.  1.1441-0  Outline of regulation provisions for section 1441.
* * * * *
Sec.  1.1441-1  Requirement for the deduction and withholding of tax on
payments to foreign persons.
* * * * *
    (e) * * *
    (2) * * *
    (ii) * * *
    (B) Requirement to collect foreign TIN and date of birth.
    (1) In general.
    (2) Definitions.
    (3) Requirements for reasonable explanation of the absence of a
foreign TIN.
    (4) Exceptions to the requirement to obtain a foreign TIN (or
reasonable explanation for its absence).
    (i) Jurisdictions with which the United States does not have an
agreement relating to the exchange of tax information.
    (ii) Jurisdictions that do not issue foreign TINs.
    (iii) Account holder that is a government, international
organization, foreign central bank of issue, or resident of a U.S.
territory.
    (5) Transition rules for the foreign TIN requirement for a
beneficial owner withholding certificate signed before January 1, 2018.
    (i) Payments made before January 1, 2020.
    (ii) Payments made after December 31, 2019.
    (iii) Limitation on standard of knowledge.
    (6) Transition rule for the date of birth requirement for a
beneficial owner withholding certificate signed before January 1, 2018.
* * * * *
    (4) * * *
    (iv) * * *
    (F) Examples.
    (1) Example 1.
    (2) Example 2.
    (3) Example 3.
* * * * *
    (f) * * *
    (1) In general.
* * * * *
    (3) Special rules related to section 871(m).
* * * * *
0
Par. 3. Section 1.1441-1 is amended by:
0
1. Revising paragraphs (b)(7)(ii)(B), (c)(2)(ii), (c)(3)(ii), (c)(38),
and (e)(2)(ii)(B).
0
2. Removing ``Sec.  1.1471-3(c)(3)(ii)(B)(2)(iii)'' and adding in its
place ``Sec.  1.1471-3(c)(3)(iii)(B)(2)(iii)'' at the end of the last
sentence of paragraph (e)(3)(iv)(B).
0
 3. Revising paragraphs (e)(3)(iv)(C)(3), (e)(4)(i)(B), and
(e)(4)(ii)(A)(2).
0
4. Adding a sentence to the end of paragraph (e)(4)(ii)(D)(1).
0
5. Revising paragraphs (e)(4)(iv)(C) and (E).
0
 6. Adding paragraph (e)(4)(iv)(F).
0
7. Revising paragraphs (f)(1) and (3).
0
 8. Removing paragraphs (f)(4) and (5).
    The revisions and additions read as follows:
Sec.  1.1441-1  Requirement for the deduction and withholding of tax on
payments to foreign persons.
* * * * *
    (b) * * *
    (7) * * *
    (ii) * * *
    (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 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.
* * * * *
    (c) * * *
    (2) * * *
    (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.
    (3) * * *
    (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.
* * * * *
    (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 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 a hold mail instruction (as
defined in paragraph (c)(38)(ii) of this section) is not a permanent
residence address unless the person provides the documentary evidence
described in paragraph (c)(38)(ii) of this section. 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) Hold mail instruction. The term hold mail instruction means a
current
[[Page 200]]
instruction by a person to keep the person's mail until such
instruction is amended. An instruction to send all correspondence
electronically is not a hold mail instruction. An address that is
subject to a hold mail instruction may be used as a permanent residence
address if the person has also provided the withholding agent with
documentary evidence described in Sec.  1.1471-3(c)(5)(i) (without
regard to the requirement in Sec.  1.1471-3(c)(5)(i) that the
documentary evidence contain a permanent residence address). The
documentary evidence described in Sec.  1.1471-3(c)(5)(i) must support
the person's claim of foreign status or, in the case of a person that
is claiming treaty benefits, must support residence in the country
where the person is claiming a reduced rate of withholding under an
income tax treaty. If, after a withholding certificate is provided, a
person's permanent residence address is subsequently subject to a hold
mail instruction, the addition of the hold mail instruction is a change
in circumstances requiring the person to provide the documentary
evidence described in this paragraph (c)(38)(ii) in order for a
withholding agent to use the address as a permanent residence address.
* * * * *
    (e) * * *
    (2) * * *
    (ii) * * *
    (B) Requirement to collect foreign TIN and date of birth--(1) In
general. In addition to the general requirements of paragraph
(e)(2)(ii)(A) of this section, except as provided in paragraphs
(e)(2)(ii)(B)(4), through (6) of this section, a beneficial owner
withholding certificate provided by an account holder to document an
account that is maintained at a U.S. branch or office of a withholding
agent that is a financial institution is valid for purposes of a
payment of U.S. source income reportable on Form 1042-S (before the
application of this paragraph (e)(2)(ii)(B)) made on or after January
1, 2018, only if it contains the account holder's taxpayer
identification number issued by the account holder's jurisdiction of
tax residence (foreign TIN) or a reasonable explanation for the absence
of a foreign TIN (as described in paragraph (e)(2)(ii)(B)(3) of this
section) and, in the case of an individual account holder, the account
holder's date of birth, unless the withholding agent has the account
holder's date of birth in its files. A withholding agent is permitted
to obtain a foreign TIN on a written statement signed by an account
holder that includes an acknowledgment that such statement is part of
the withholding certificate if the withholding agent associates such
statement with the account holder's withholding certificate. A
withholding agent will be treated as having the account holder's date
of birth in its files if it obtains the date of birth on a written
statement (including a written statement transmitted by email) from the
account holder. A withholding agent may rely on the foreign TIN and
date of birth contained in the withholding certificate unless it knows
or has reason to know that the foreign TIN or date of birth is
incorrect. Therefore, a withholding agent will not be required to
validate the format or other specifications of the foreign TIN against
the applicable jurisdiction's TIN system. For purposes of this
paragraph (e)(2)(ii)(B), a change of address to another jurisdiction
other than the United States is a change in circumstances for purposes
of a withholding agent's reliance on a foreign TIN of the account
holder (or reasonable explanation for its absence).
    (2) Definitions. For purposes of this paragraph (e)(2)(ii)(B), the
term ``account'' means a financial account as defined in Sec.  1.1471-
5(b) (substituting ``U.S. office or branch of a financial institution''
for ``FFI''); the term ``account holder'' has the meaning described in
Sec.  1.1471-5(a)(3); and the term ``financial institution'' means an
entity that is a depository institution, custodial institution,
investment entity, or a specified insurance company, each as defined in
Sec.  1.1471-5(e).
    (3) Requirements for reasonable explanation of the absence of a
foreign TIN. A withholding agent may rely on a reasonable explanation
for the absence of a foreign TIN on a beneficial owner withholding
certificate only if the explanation addresses why the account holder
was not issued a foreign TIN. An explanation provided in the
instructions for, as applicable, Forms W-8BEN, W-8BEN-E, W-8ECI, W-
8EXP, or Form W-8IMY is a reasonable explanation. If an account holder
provides an explanation other than as described in the preceding
sentence, the withholding agent must determine whether the explanation
is reasonable. A reasonable explanation may be provided on the
withholding certificate or on a separate attached statement associated
with the form. A withholding agent may rely on a reasonable explanation
described in this paragraph (e)(2)(ii)(B)(3) unless it has actual
knowledge that the account holder has a foreign TIN.
    (4) Exceptions to the requirement to obtain a foreign TIN (or
reasonable explanation for its absence)--(i) Jurisdictions with which
the United States does not have an agreement relating to the exchange
of tax information. A beneficial owner withholding certificate is not
required to include a foreign TIN (or reasonable explanation for its
absence) for an account holder resident of a jurisdiction that is not
identified, in an applicable revenue procedure (see Sec.  601.601(d)(2)
of this chapter), as a jurisdiction that has in effect with the United
States an income tax or other convention or bilateral agreement
relating to the exchange of tax information within the meaning of
section 6103(k)(4), under which the United States agrees to provide, as
well as receive, tax information. A withholding agent that applies the
exception described in the preceding sentence is, however, required to
obtain the foreign TIN (or reasonable explanation for its absence) of
each account holder resident in a jurisdiction that is added to the
list on the applicable revenue procedure, before the time for filing
Form 1042-S (with any applicable extension) for payments made during
the calendar year following the calendar year in which the revenue
procedure was published that added the jurisdiction to the list.
    (ii) Jurisdictions that do not issue foreign TINs. A beneficial
owner withholding certificate is not required to include a foreign TIN
(or reasonable explanation for its absence) for an account holder
resident of a jurisdiction that has been identified by the IRS on a
list of jurisdictions that either do not issue foreign TINs to their
residents or have requested that their residents not be required to
provide foreign TINs to withholding agents for purposes of this
paragraph (e)(2)(ii)(B). A withholding agent that applies the exception
described in the preceding sentence is, however, required to obtain the
foreign TIN (or reasonable explanation for its absence) of each account
holder resident in a jurisdiction that is removed from the list of
jurisdictions referenced in the preceding sentence before the time for
filing Form 1042-S (with any applicable extension) for payments made
during the calendar year following the calendar year in which the
jurisdiction is removed from the list. A list of jurisdictions that
either do not issue taxpayer identification numbers to their residents
or that have requested to be included on the list is available at
https://www.irs.gov/businesses/corporations/list-of-jurisdictions-that-do-not-issue-foreign-tins (or any replacement page on the IRS website
or as provided in published guidance).
[[Page 201]]
    (iii) Account holder that is a government, international
organization, foreign central bank of issue, or resident of a U.S.
territory. A beneficial owner withholding certificate is not required
to include a foreign TIN (or reasonable explanation for its absence) if
the withholding agent has obtained a valid withholding certificate
under paragraph (e)(2)(ii)(A) of this section or other documentation on
which it may rely for purposes of the section 1441 regulations to treat
the account holder as a government, an international organization, a
foreign central bank of issue, or a resident of a U.S. territory. Thus,
for example, a withholding agent may apply the exception provided in
this paragraph (e)(2)(ii)(B)(4)(iii) with respect to an account holder
claiming exemption under section 892 or otherwise identifying itself as
a foreign government on a beneficial owner withholding certificate when
the withholding agent may rely upon the claim of exemption under Sec.
1.1441-8(b) or the claim of status as a foreign government under Sec.
1.1441-7(b)(1) and (2).
    (5) Transition rules for the foreign TIN requirement for a
beneficial owner withholding certificate signed before January 1,
2018--(i) Payments made before January 1, 2020. For payments made
before January 1, 2020, an otherwise valid beneficial owner withholding
certificate signed before January 1, 2018, is not treated as invalid if
it does not include a foreign TIN (or a reasonable explanation for its
absence) as required under paragraph (e)(2)(ii)(B) of this section
until the earlier of--
    (A) the expiration date of the validity period of the withholding
certificate (if applicable); or
    (B) the date when a change in circumstances (including for chapter
4 purposes) requires a revised withholding certificate.
    (ii) Payments made after December 31, 2019. For payments made after
December 31, 2019, an otherwise valid beneficial owner withholding
certificate signed before January 1, 2018, is not treated as invalid if
it does not include a foreign TIN (or a reasonable explanation for its
absence) as required under paragraph (e)(2)(ii)(B) of this section
until the earlier of the date described in paragraph
(e)(2)(ii)(B)(5)(i)(A) or (B) of this section, provided the withholding
agent either--
    (A) obtains from the account holder its foreign TIN (or reasonable
explanation for its absence) on a written statement (including a
written statement transmitted by email) which the withholding agent
associates with the account holder's withholding certificate, or
    (B) already has the account holder's foreign TIN in the withholding
agent's files, which the withholding agent associates with the account
holder's withholding certificate.
    (iii) Limitation on standard of knowledge. If a withholding agent
maintains an account on December 31, 2017, that is documented with a
valid beneficial owner withholding certificate as of that date, the
withholding agent's reason to know that the foreign TIN is incorrect,
or actual knowledge that an account holder has a foreign TIN despite
providing a reasonable explanation as described in paragraph
(e)(2)(ii)(B)(3) of this section, is limited to electronically
searchable information (as defined in Sec.  1.1471-1(b)(38)) that is in
the withholding agent's files.
    (6) Transition rule for the date of birth requirement for a
beneficial owner withholding certificate signed before January 1, 2018.
For an otherwise valid beneficial owner withholding certificate signed
before January 1, 2018, a withholding agent is not required to treat
the withholding certificate as invalid for payments made before January
1, 2019, to an account holder solely because the withholding
certificate does not include the account holder's date of birth and the
date of birth is not in the withholding agent's files.
    (3) * * *
    (iv) * * *
    (C) * * *
    (3) Alternative withholding statement--(i) In lieu of a withholding
statement containing all of the information described in paragraph
(e)(3)(iv)(C)(1) and (2) 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)(i)
with respect to a payment. The withholding statement described in this
paragraph (e)(3)(iv)(C)(3)(i) may be provided only by a nonqualified
intermediary that provides the withholding agent with the withholding
certificates from the beneficial owners (that is, not documentary
evidence) before the payment is made.
    (A) The withholding statement is not required to contain all of the
information specified in paragraphs (e)(3)(iv)(C)(1) and (2) of this
section that is also included on a withholding certificate (for
example, 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 the
withholding statement may not apply a different rate from that which
the withholding agent may reasonably conclude from the information on
the withholding certificate.
    (B) 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.
    (C) 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, and section 3406.
    (D) 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 (applying the
standards of knowledge applicable to a withholding agent's reliance on
a withholding certificate in the regulations under section 1441 and,
for a withholdable payment, the regulations under section 1471).
    (ii) In lieu of a withholding statement that includes a recipient
code for chapter 4 purposes used for filing Form 1042-S, a withholding
agent may accept a nonqualified intermediary withholding statement that
contains all of the information described in paragraph (e)(3)(iv)(C)(1)
and (2) of this section (or an alternative withholding statement
permitted under paragraph (e)(3)(iv)(C)(3)(i) of this section) but that
does not provide a recipient code for chapter 4 purposes used for
filing Form 1042-S for a payee as required in paragraph
(e)(3)(iv)(C)(2)(iv) of this section if the withholding agent is able
to determine such payee's recipient code based on other information
included on or with the withholding statement or in the withholding
agent's records with respect to the payee.
* * * * *
    (4) * * *
    (i) * * *
    (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
[[Page 202]]
electronic signature meets the requirements of paragraph
(e)(4)(iv)(B)(3)(ii) of this section. 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 recipient). For
example, a withholding agent may treat as signed for purposes of the
requirements for a valid withholding certificate, a withholding
certificate that has in the signature block the name of the person
authorized to sign, a time and date stamp, and a statement that the
certificate has been electronically signed. However, a withholding
agent may not treat a withholding certificate with a typed name in the
signature line and no other information as signed for purposes of the
requirements for a valid withholding certificate. A withholding agent
may also rely upon, in addition to the contents of a withholding
certificate, other documentation or information it has collected to
support that a withholding certificate was electronically signed by the
recipient identified on the form (or other person authorized to sign
for the recipient), provided that the withholding agent does not have
actual knowledge that the documentation or information is incorrect.
    (ii) * * * (A) * * *
    (2) Documentary evidence for treaty claims and treaty statements.
Documentary evidence described in Sec.  1.1441-6(c)(3) or (4) 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. A statement regarding entitlement to treaty benefits
described in Sec.  1.1441-6(c)(5) (treaty statement) shall remain valid
until the last day of the third calendar year following the year in
which the treaty statement is provided to the withholding agent except
as provided in this paragraph (e)(4)(ii)(A)(2). A treaty statement
provided by an entity that identifies a limitation on benefits
provision for a publicly traded corporation shall not expire at the
time provided in the preceding sentence if a withholding agent
determines, based on publicly available information at each time for
which the treaty statement would otherwise be renewed, that the entity
is publicly traded. Notwithstanding the second sentence of this
paragraph (e)(4)(ii)(A)(2), a treaty statement provided by an entity
that identifies a limitation on benefits provision for a government or
tax-exempt organization (other than a tax-exempt pension trust or
pension fund) shall remain valid indefinitely. Notwithstanding the
validity periods (or exceptions thereto) 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 (including those from publicly traded corporations,
governments, and tax-exempt organizations), the treaty statement will
expire January 1, 2020.
* * * * *
    (D) * * * (1) * * * However, see paragraph (e)(2)(ii)(B)(1) of this
section for a special rule for a change of address for purposes of
reliance on a foreign TIN (or a reasonable explanation for the absence
of a foreign TIN) included on a beneficial owner withholding
certificate.
* * * * *
    (iv) * * *
    (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) 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. For purposes of the
preceding sentence, a withholding agent must be able to reliably
associate each payment with a specific request and authorization except
when the withholding agent is permitted to rely on the withholding
certificate on an obligation-by- obligation basis or as otherwise
permitted under paragraph (e)(4)(ix) of this section (treating the
withholding certificate as obtained by the withholding agent and
furnished by a customer for purposes of this paragraph (e)(4)(iv)(E)).
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 (for example, 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.
    (F) Examples. This paragraph contains examples to illustrate the
rules of paragraph (e)(4)(iv)(E) of this section.
    (1) 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. Before 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.
    (2) Example 2. The facts are the same as Example 1 of this
paragraph (e)(4)(iv)(F), 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.
    (3) Example 3. FP is a foreign partnership that is acting on
behalf of its partners, A and B, who are both foreign individuals.
FP
[[Page 203]]
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.
* * * * *
    (f) * * * (1) In general. Except as otherwise provided in
paragraphs (e)(2)(ii)(B), (e)(4)(iv)(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)(iv)(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.)
* * * * *
    (3) Special rules related to section 871(m). Paragraphs
(b)(4)(xxi), (b)(4)(xxiii), (e)(3)(ii)(E), and (e)(6) of this section
apply to payments made on or after September 18, 2015. Paragraphs
(e)(5)(ii)(C) and (e)(5)(v)(B)(4) of this section apply to payments
made on or after on January 19, 2017.
Sec.  1.1441-1T  [Removed]
0
Par. 4. Section 1.1441-1T is removed.
0
Par. 5. Section 1.1441-2 is amended by revising paragraphs (a)(8) and
(f) to read as follows:
Sec.  1.1441-2  Amounts subject to withholding.
    (a) * * *
    (8) Amounts of United States source gross transportation income, as
defined in section 887(b)(1), that is taxable under section 887(a).
* * * * *
    (f) Effective/applicability date. This section applies to payments
made after December 31, 2000. Paragraph (a)(8) of this section applies
to payments made on or after January 6, 2017; however, taxpayers may
apply paragraph (a)(8) to any open tax year. 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)(7) of this section applies to payments
made on or after January 19, 2017.
Sec.  1.1441-2T  [Removed]
0
 Par. 6. Section 1.1441-2T is removed.
0
Par. 7. Section 1.1441-4 is amended by removing paragraph (h).
0
Par. 8. Section 1.1441-6 is amended by:
0
1. Revising paragraphs (b)(1)(i) and (ii).
0
2. Redesignating Example 1 in paragraph (b)(2)(iv) as paragraph
(b)(2)(iv)(A), Example 2 in paragraph (b)(2)(iv) as paragraph
(b)(2)(iv)(B), Example 3 in paragraph (b)(2)(iv) as paragraph
(b)(2)(iv)(C), and Example 4 as paragraph (b)(2)(iv)(D).
0
3. Revising paragraph (c)(5)(i).
0
4. Revising the first sentence of paragraph (i)(1).
0
5. Revising paragraph (i)(3).
    The revisions and addition read as follows:
Sec.  1.1441-6  Claim of reduced withholding under an income tax
treaty.
* * * * *
    (b) * * *
    (1) * * *
    (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 website at https://www.irs.gov/businesses/international-businesses/united-states-income-tax-treaties-a-to-z (or any replacement page on the IRS website) or in the State
Department's annual Treaties in Force publication.
    (2) * * *
    (iv) * * *
    (D) 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.-Country 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.-Country 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) * * *
    (5) * * *
    (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. A withholding agent may rely on the
taxpayer's claim on a treaty statement regarding its reliance on a
specific limitation on benefits provision absent actual knowledge that
such claim is unreliable or incorrect.
* * * * *
    (i) * * * (1) General rule. Except as otherwise provided in
paragraphs (i)(2) and (3) of this section, this section applies to
payments made on or after January 6, 2017. * * *
* * * * *
    (3) Effective/applicability date. Paragraphs (b)(1)(i) and (ii),
(b)(2)(iv)(D), and (c)(5)(i) of this section apply to withholding
certificates and treaty statements provided on or after January 6,
2017.
Sec.  1.1441-6T  [Removed]
0
Par. 9. Section 1.1441-6T is removed.
[[Page 204]]
0
Par. 10. Section 1.1441-7 is amended by adding a new third sentence in
paragraph (b)(4)(i) and by revising paragraphs (b)(10)(iv) and (g) to
read as follows:
Sec.  1.1441-7  General provisions relating to withholding agents.
* * * * *
    (b) * * *
    (4) Rules applicable to withholding certificates--(i) In general. *
* * See, however, Sec.  1.1441-1(e)(2)(ii)(B) for additional reliance
standards that apply to a withholding certificate that is required to
include an account holder's foreign TIN. * * *
* * * * *
    (10) * * *
* * * * *
    (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.
* * * * *
    (g) Effective/applicability date. 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.)
Sec.  1.1441-7T  [Removed]
0
Par. 11. Section 1.1441-7T is removed.
0
Par. 12. Section 1.1471-0 is amended by adding entries for Sec.
1.1471-3(c)(3)(iii)(B)(5), Sec.  1.1471-4(d)(2)(ii)(G), and Sec.
1.1474-1(d)(4)(vii) to read as follows:
Sec.  1.1471-0  Outline of regulation provisions for sections 1471
through 1474.
* * * * *
Sec.  1.1471-3  Identification of payee.
* * * * *
    (c) * * *
    (3) * * *
    (iii) * * *
    (B) * * *
    (5) Nonqualified intermediary withholding statement.
* * * * *
Sec.  1.1471-4  FFI agreement.
* * * * *
    (d) * * *
    (2) * * *
    (ii) * * *
    (G) Combined reporting on Form 8966 following merger or bulk
acquisition.
* * * * *
Sec.  1.1474-1  Liability for withheld tax and withholding agent
reporting.
* * * * *
    (d) * * *
    (4) * * *
    (vii) Combined Form 1042-S reporting.
* * * * *
0
Par. 13. Section 1.1471-1 is amended by revising paragraph (b)(99) to
read as follows:
Sec.  1.1471-1  Scope of chapter 4 and definitions.
* * * * *
    (b) * * *
    (99) Permanent residence address. The term permanent residence
address has the meaning set forth in Sec.  1.1441-1(c)(38).
* * * * *
Sec.  1.1471-1T  [Removed]
0
Par. 14. Section 1.1471-1T is removed.
0
Par. 15. Section 1.1471-3 is amended by:
0
1. Revising paragraphs (c)(1) and (c)(3)(iii)(B)(5).
0
2. Revising the third sentence of paragraph (c)(6)(ii)(E)(3).
0
3. Revising paragraphs (c)(7)(ii) and (d)(6)(i)(F).
    The revisions and addition read as follows:
Sec.  1.1471-3  Identification of payee.
* * * * *
    (c) * * *
    (1) In general. A withholding agent can reliably associate a
withholdable payment with valid documentation if, before the payment,
it has obtained (either directly from the payee or through its agent)
valid documentation appropriate to the payee's chapter 4 status as
described in paragraph (d) of this section, it can reliably determine
how much of the payment relates to the valid documentation, and it does
not know or have reason to know that any of the information,
certifications, or statements in, or associated with, the documentation
are unreliable or incorrect. Thus, a withholding agent cannot reliably
associate a withholdable payment with valid documentation provided by a
payee to the extent such documentation appears unreliable or incorrect
with respect to the claims made, or to the extent that information
required to allocate all or a portion of the payment to each payee is
unreliable or incorrect. A withholding agent may rely on information
and certifications contained in withholding certificates or other
documentation without having to inquire into the truthfulness of the
information or certifications, unless it knows or has reason to know
that the information or certifications are untrue. A withholding agent
may rely upon the same documentation for purposes of both chapters 3
and 4 provided the documentation is sufficient to meet the requirements
of each chapter. Alternatively, a withholding agent may elect to rely
upon the presumption rules of paragraph (f) of this section in lieu of
obtaining documentation from the payee. A withholding certificate will
be considered provided by a payee if a withholding agent obtains the
certificate from a third party repository (rather than directly from
the payee or through its agent) and the requirements in Sec.  1.1441-
1(e)(4)(iv)(E) are satisfied. A withholding certificate obtained from a
third party repository must still be reviewed by the withholding agent
in the same manner as any other documentation to determine whether it
may be relied upon for chapter 4 purposes. A withholding agent may rely
on an electronic signature on a withholding certificate if the
requirements in Sec.  1.1441-1(e)(4)(i)(B) are satisfied.
* * * * *
    (3) * * *
    (iii) * * *
    (B) * * *
    (5) Nonqualified intermediary withholding statement. A withholding
agent that is making a withholdable payment to a nonqualified
intermediary for which a withholding statement is required under
chapters 3 or 4 may accept a withholding statement that meets the
requirements described in Sec.  1.1441-1(e)(3)(iv)(C)(3)(i) or (ii).
* * * * *
    (6) * * *
    (ii) * * *
    (E) * * *
    (3) Withholding agent's obligation with respect to a change in
circumstances. * * * A withholding agent will have reason to know of a
change in circumstances with respect to an FFI's chapter 4 status that
results solely because the jurisdiction in which the FFI is resident,
organized, or located ceases to be treated as having an IGA in effect
on the date that the jurisdiction ceases to be treated as having an IGA
in effect. * * *
    (7) * * *
    (ii) Documentation received after the time of payment. Proof that
withholding was not required under the provisions of chapter 4 and the
regulations thereunder also may be established after
[[Page 205]]
the date of payment by the withholding agent on the basis of a valid
withholding certificate and/or other appropriate documentation that was
furnished after the date of payment but 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 certificate obtained within 30 days after the
date of the payment will not be considered to be unreliable solely
because it does not contain an affidavit. However, in the case of a
withholding certificate of an individual received more than a year
after the date of payment, the withholding agent will be required to
obtain, in addition to the withholding certificate and affidavit,
documentary evidence described in paragraph (c)(5)(i) of this section
that supports the individual's claim of foreign status. In the case of
a withholding 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 specified in paragraph (c)(5)(ii) of this section that
supports the chapter 4 status claimed. If documentation other than a
withholding certificate is submitted from a payee more than a year
after the date of payment, the withholding agent will be required to
also obtain from the payee a withholding certificate and affidavit
supporting the chapter 4 status claimed as of the date of the payment.
See, however, Sec.  1.1441-1(b)(7)(ii) for special rules that apply
when a withholding certificate is received after the date of the
payment to claim that income is effectively connected with the conduct
of a U.S. trade or business (as applied for purposes of this paragraph
(c)(7)(ii) to a claim to establish that the payment is not a
withholdable payment under Sec.  1.1473-1(a)(4)(ii) rather than to
claim an exemption described in Sec.  1.1441-4(a)(1)).
* * * * *
    (d) * * *
    (6) * * *
    (i) * * *
    (F) The withholding agent does not know or have reason to know that
the payee is a member of an expanded affiliated group with any FFI that
is a depository institution, custodial institution, or specified
insurance company, or that the FFI has any specified U.S. persons that
own an equity interest in the FFI or a debt interest (other than a debt
interest that is not a financial account or that has a balance or value
not exceeding $50,000) in the FFI other than those identified on the
FFI owner reporting statement described in paragraph (d)(6)(iv) of this
section.
* * * * *
Sec.  1.1471-3T   [Removed]
0
Par. 16. Section 1.1471-3T is removed.
0
Par. 17. Section 1.1471-4 is amended by revising paragraphs
(c)(2)(ii)(B)(2)(iii), (d)(2)(ii)(G), (d)(4)(iv)(C), (d)(4)(iv)(D)
introductory text, (d)(7) introductory text, and (j)(2) to read as
follows:
Sec.  1.1471-4  FFI agreement.
* * * * *
    (c) * * *
    (2) * * *
    (ii) * * *
    (B) * * *
    (2) * * *
    (iii) In the case of a transferor FI that is a participating FFI or
a registered deemed-compliant FFI (or a U.S. branch of either such
entity that is not treated as a U.S. person) or that is a deemed-
compliant FFI that applies the requisite due diligence rules of this
paragraph (c) as a condition of its status, the transferor FI provides
a written representation to the transferee FFI acquiring the accounts
that the transferor FI has applied the due diligence procedures of this
paragraph (c) with respect to the transferred accounts and, in the case
of a transferor FI that is a participating FFI, has complied with the
requirements of paragraph (f)(2) of this section; and
* * * * *
    (d) * * *
    (2) * * *
    (ii) * * *
    (G) Combined reporting on Form 8966 following merger or bulk
acquisition. If a participating FFI (successor) acquires accounts of
another participating FFI (predecessor) in a merger or bulk acquisition
of accounts, the successor may assume the predecessor's obligations to
report the acquired accounts under paragraph (d) of this section with
respect to the calendar year in which the merger or acquisition occurs
(acquisition year), provided that the requirements in paragraphs
(d)(2)(ii)(G)(1) through (4) of this section are satisfied. If the
requirements of paragraphs (d)(2)(ii)(G)(1) through (4) of this section
are not satisfied, both the predecessor and the successor are required
to report the acquired accounts for the portion of the acquisition year
that it maintains the account.
    (1) The successor must acquire substantially all of the accounts
maintained by the predecessor, or substantially all of the accounts
maintained at a branch of the predecessor, in a merger or bulk
acquisition of accounts for value.
    (2) The successor must agree to report the acquired accounts for
the acquisition year on Form 8966 to the extent required in Sec.
1.1471-4(d)(3) or (d)(5).
    (3) The successor may not elect to report under section 1471(c)(2)
and Sec.  1.1471-4(d)(5) with respect to any acquired account that is a
U.S. account for the acquisition year.
    (4) The successor must notify the IRS on the form and in the manner
prescribed by the IRS that Form 8966 is being filed on a combined
basis.
* * * * *
    (4) * * *
    (iv) * * *
    (C) Other accounts. In the case of an account described in Sec.
1.1471-5(b)(1)(iii) (relating to a debt or equity interest other than
an interest as a partner in a partnership) or Sec.  1.1471-5(b)(1)(iv)
(relating to cash value insurance contracts and annuity contracts), the
payments made during the calendar year with respect to such account are
the gross amounts paid or credited to the account holder during the
calendar year including payments in redemption (in whole or part) of
the account. In the case of an account that is a partner's interest in
a partnership, the payments made during the calendar year with respect
to such account are the amount of the partner's distributive share of
the partnership's income or loss for the calendar year, without regard
to whether any such amount is distributed to the partner during the
year, and any guaranteed payments for the use of capital. The payments
required to be reported under this paragraph (d)(4)(iv)(C) with respect
to a partner may be determined based on the partnership's tax returns
or, if the tax returns are unavailable by the due date for filing Form
8966, the partnership's financial statements or any other reasonable
method used by the partnership for calculating the partner's share of
partnership income by such date.
    (D) Transfers and closings of deposit, custodial, insurance, and
annuity financial accounts. In the case of an account closed or
transferred in its entirety during a calendar year that is a depository
account, custodial account, or a cash value insurance contract or
[[Page 206]]
annuity contract, the payments made with respect to the account shall
be--
* * * * *
    (7) Special reporting rules with respect to the 2014 and 2015
calendar years--
* * * * *
    (j) * * *
    (2) Special applicability date. Paragraph (d)(4)(iv)(C) of this
section applies beginning with reporting with respect to calendar year
2017. (For rules that apply to reporting under paragraph (d)(4)(iv)(C)
with respect to calendar years before 2017, see this section as in
effect and contained in 26 CFR part 1 revised April 1, 2016.)
Sec.  1.1471-4T  [Removed]
0
Par. 18. Section 1.1471-4T is removed.
0
Par. 19. Section 1.1474-1 is amended by revising paragraph (d)(4)(vii)
to read as follows:
Sec.  1.1474-1  Liability for withheld tax and withholding agent
reporting.
* * * * *
    (d) * * *
    (4) * * *
    (vii) Combined Form 1042-S reporting. A withholding agent required
to report on Form 1042-S under paragraph (d)(4) of this section (other
than a nonparticipating FFI reporting under paragraph (d)(4)(v) of this
section) may rely on the procedures used for chapter 3 purposes
(provided in published guidance) for reporting on Form 1042-S (even if
the withholding agent is not required to report under chapter 3) for
combined reporting following a merger or acquisition, provided that all
of the requirements for such reporting provided in the Instructions for
Form 1042-S are satisfied.
* * * * *
Sec.  1.1474-1T  [Removed]
0
Par. 20. Section 1.1474-1T is removed.
0
Par. 21. Section 1.6049-6 is amended by:
0
1. Adding a sentence to the end of paragraph (e)(4).
0
 2. Revising the second sentence of paragraph (e)(5) and adding a new
third sentence to paragraph (e)(5).
    The additions and revision read as follows:
Sec.  1.6049-6  Statements to recipients of interest payments and
holders of obligations for attributed original issue discount.
* * * * *
    (e) * * *
    (4) Special rule for amounts described in Sec.  1.6049-8(a). * * *
A person required by this paragraph (e)(4) 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).
    (5) Effective/applicability date. * * * Paragraph (e)(4) of this
section applies to payee statements reporting payments of deposit
interest to nonresident alien individuals paid on or after January 2,
2020, but it may be applied to payments made on or after January 1,
2016. For payee statements reporting payments of deposit interest to
nonresident alien individuals paid on or after January 1, 2013 and
before January 2, 2020, see paragraph (e)(4) of this section as in
effect and contained in 26 CFR part 1 revised April 1, 2019. * * *
Sunita Lough,
Deputy Commissioner for Services and Enforcement.
    Approved: December 11, 2019.
David J. Kautter,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2019-27979 Filed 12-27-19; 4:15 pm]
BILLING CODE 4830-01-P