Bulletin No. 2022–52

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Bulletin No. 2022–52

December 27, 2022

These synopses are intended only as aids to the reader in

identifying the subject matter covered. They may not be

relied upon as authoritative interpretations.

ADMINISTRATIVE, EXEMPT

ORGANIZATIONS, INCOME TAX

REG-106134-22, page 660.

These proposed regulations identify certain syndicated

conservation easement transactions and substantially

similar transactions as listed transactions per §1.60114(b)(2). Material advisors and certain participants in

these listed transactions are required to disclose their

participation to the IRS and are subject to penalties

for failure to disclose. In addition, while the proposed

regulations exclude qualified organizations from being

treated as participants, material advisors, or parties to

a prohibited tax shelter transaction subject to excise

tax, these proposed regulations request comments on

whether the final regulations should remove the exclusion from the application of the excise tax for qualified

organizations that continue to facilitate syndicated conservation easement transactions.

ADMINISTRATIVE, INCOME TAX

Rev. Proc. 2022-43, page 570.

This Revenue Procedure sets forth the final qualified

intermediary (QI) withholding agreement (QI agreement)

entered into by the Internal Revenue Service and certain foreign persons under Treas. Reg. § 1.1441-1(e)

(5) and (6). The QI agreement currently in effect in Rev.

Proc. 2017-15, 2017-3 I.R.B. 437, expires on December 31, 2022 (the 2017 QI Agreement). This Revenue

Procedure will apply beginning January 1, 2023, with a

six-year term (the 2023 QI Agreement). In general, the

QI agreement allows certain persons to enter into an

agreement with the IRS to simplify their obligations as

Finding Lists begin on page ii.

withholding agents under chapters 3 and 4 and as payors under chapter 61 and section 3406 for amounts

paid to their account holders. The QI agreement also

allows certain foreign persons to act as qualified derivatives dealers (QDDs) and assume primary withholding

and reporting responsibilities on dividend equivalent

payments made in a principal capacity for purposes of

section 871(m). Additionally, the 2023 QI Agreement

allows foreign persons to enter into the agreement

for purposes of the withholding and reporting required

under sections 1446(a) and (f) with respect to their

account holders holding interests in publicly traded

partnerships.

ADMINISTRATIVE, SPECIAL

ANNOUNCEMENT

Announcement 2022-28, page 659.

This announcement is being released in conjunction

with proposed regulations identifying certain syndicated

conservation easement transactions as listed transactions. The announcement explains that the regulations

are being proposed in light of certain court decisions

holding that the APA requires the IRS to identify listed

transactions through notice-and-comment rulemaking,

and that the IRS intends to issue further regulations

identifying other listed transactions, to be finalized in

2023.

INCOME TAX

Notice 2022-61, page 560.

This notice provides guidance on the prevailing wage

and apprenticeship requirements that generally apply to

certain provisions of the Internal Revenue Code (Code),

as amended by the Inflation Reduction Act of 2022. This

notice also serves as the published guidance establishing the 60-day period described in those provisions of

the Code with respect to the applicability of the prevailing wage and apprenticeship requirements. Finally, this

notice provides guidance for determining the beginning

of construction of a facility for certain credits allowed

under the Code, and the beginning of installation of certain property with respect to the energy efficient commercial buildings deduction under the Code.

REG-113839-22, page 673.

This document contains proposed regulations that treat

members of a consolidated group as a single United

States shareholder in certain cases for purposes of

section 951(a)(2)(B) of the Internal Revenue Code.

Rev. Proc. 2022-42, page 565.

This revenue procedure sets forth the procedures under

§ 30D(d)(3) for qualified manufacturers to enter into a

written agreement with the Secretary under which such

a manufacturer agrees to make periodic written reports

to the Secretary providing vehicle identification numbers and such other information related to each vehicle

manufactured by such manufacturer as the Secretary

may require. Vehicles eligible for the credit for qualified

commercial vehicles under § 45W and vehicles eligible

for the credit for previously owned clean vehicles under

§ 25E must be manufactured by a qualified manufacturer as defined in § 30D(d)(3). See §§ 45W(c)(1) and

25E(c)(1)(D)(i). This revenue procedure also provides

the procedures for persons selling vehicles to report

the information required to the IRS in order for a vehicle

to be eligible for the clean vehicle credit under §§ 30D

and 25E.

The IRS Mission

Provide America’s taxpayers top-quality service by helping

them understand and meet their tax responsibilities and

enforce the law with integrity and fairness to all.

Introduction

The Internal Revenue Bulletin is the authoritative instrument

of the Commissioner of Internal Revenue for announcing official rulings and procedures of the Internal Revenue Service

and for publishing Treasury Decisions, Executive Orders, Tax

Conventions, legislation, court decisions, and other items of

general interest. It is published weekly.

It is the policy of the Service to publish in the Bulletin all substantive rulings necessary to promote a uniform application

of the tax laws, including all rulings that supersede, revoke,

modify, or amend any of those previously published in the

Bulletin. All published rulings apply retroactively unless otherwise indicated. Procedures relating solely to matters of internal management are not published; however, statements of

internal practices and procedures that affect the rights and

duties of taxpayers are published.

Revenue rulings represent the conclusions of the Service

on the application of the law to the pivotal facts stated in

the revenue ruling. In those based on positions taken in rulings to taxpayers or technical advice to Service field offices,

identifying details and information of a confidential nature are

deleted to prevent unwarranted invasions of privacy and to

comply with statutory requirements.

Rulings and procedures reported in the Bulletin do not have the

force and effect of Treasury Department Regulations, but they

may be used as precedents. Unpublished rulings will not be

relied on, used, or cited as precedents by Service personnel in

the disposition of other cases. In applying published rulings and

procedures, the effect of subsequent legislation, regulations,

court decisions, rulings, and procedures must be considered,

and Service personnel and others concerned are cautioned

against reaching the same conclusions in other cases unless

the facts and circumstances are substantially the same.

The Bulletin is divided into four parts as follows:

Part I.—1986 Code.

This part includes rulings and decisions based on provisions

of the Internal Revenue Code of 1986.

Part II.—Treaties and Tax Legislation.

This part is divided into two subparts as follows: Subpart A,

Tax Conventions and Other Related Items, and Subpart B,

Legislation and Related Committee Reports.

Part III.—Administrative, Procedural, and Miscellaneous.

To the extent practicable, pertinent cross references to these

subjects are contained in the other Parts and Subparts. Also

included in this part are Bank Secrecy Act Administrative

Rulings. Bank Secrecy Act Administrative Rulings are issued

by the Department of the Treasury’s Office of the Assistant

Secretary (Enforcement).

Part IV.—Items of General Interest.

This part includes notices of proposed rulemakings, disbarment and suspension lists, and announcements.

The last Bulletin for each month includes a cumulative index

for the matters published during the preceding months. These

monthly indexes are cumulated on a semiannual basis, and are

published in the last Bulletin of each semiannual period.

The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.

December 27, 2022

Bulletin No. 2022–52

Part III

Prevailing Wage and

Apprenticeship Initial

Guidance under Section

45(b)(6)(B)(ii) and Other

Substantially Similar

Provisions

Notice 2022-61

This notice provides guidance on

the prevailing wage and apprenticeship

requirements that generally apply to certain provisions of the Internal Revenue

Code (Code), as amended by the Inflation

Reduction Act of 2022. This notice also

serves as the published guidance establishing the 60-day period described in those

provisions of the Code with respect to the

applicability of the prevailing wage and

apprenticeship requirements. Finally, this

notice provides guidance for determining

the beginning of construction of a facility for certain credits allowed under the

Code, and the beginning of installation of

certain property with respect to the energy

efficient commercial buildings deduction

under the Code. This notice affects facilities the construction of which began, or

certain property the installation of which

began, on or after January 29, 2023. The

Department of the Treasury (Treasury

Department) and the IRS anticipate issuing proposed regulations and other guidance with respect to the prevailing wage

and apprenticeship requirements.

DATES: January 29, 2023 is the date

that is 60 days after the Secretary of the

Treasury or her delegate (Secretary) publishes the guidance described in 26 U.S.C.

30C(g)(1)(C)(i), 45(b)(6)(B)(ii), 45Q(h)

(2), 45V(e)(2)(A)(i), 45Y(a)(2)(B)(ii),

48(a)(9)(B)(ii), 48E(a)(2)(A)(ii)(II) and

(a)(2)(B)(ii)(II), and 179D(b)(3)(B)(i).

FOR

FURTHER

INFORMATION CONTACT: Alexander Scott,

CC:PSI:6, Internal Revenue Service, 1111

Constitution Avenue NW, Washington,

DC 20224, at (202) 317-6853 (not a tollfree number).

SUPPLEMENTARY INFORMATION:

SECTION 1. PURPOSE

Public Law 117-169, 136 Stat. 1818

(August 16, 2022), commonly known as

the Inflation Reduction Act of 2022 (IRA),

amended §§ 30C, 45, 45L, 45Q, 45U,

45V, 45Y, 45Z, 48, 48C, 48E, and 179D

of the Internal Revenue Code (Code) to

add prevailing wage and apprenticeship

requirements to qualify for increased

credit or deduction amounts.1 This notice

provides guidance on the prevailing wage

and apprenticeship requirements that

generally apply to those sections of the

Code. This notice also serves as the published guidance under §§ 30C(g)(1)(C)

(i), 45(b)(6)(B)(ii), 45Q(h)(2), 45V(e)

(2)(A)(i), 45Y(a)(2)(B)(ii), 48(a)(9)(B)

(ii), 48E(a)(2)(A)(ii)(II) and (a)(2)(B)(ii)

(II), and 179D(b)(3)(B)(i) establishing

the 60-day period described in such sections with respect to the applicability of

the prevailing wage and apprenticeship

requirements. Finally, this notice provides

guidance for determining the beginning of

construction under §§ 30C, 45, 45Q, 45V,

45Y, 48, and 48E, and the beginning of

installation under § 179D solely for purposes of § 179D(b)(3)(B)(i).

The Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) anticipate issuing proposed regulations and other guidance with

respect to the prevailing wage and apprenticeship requirements.

SECTION 2. BACKGROUND

.01 Increased Tax Benefits For Satisfying Certain Prevailing Wage and Apprenticeship or Construction and Installation

Requirements.

(1) In General. Increased credit

amounts are available under §§ 30C, 45,

45Q, 45V, 45Y, 45Z, 48, 48C, and 48E,

and an increased deduction is available

under § 179D, for taxpayers satisfying

certain prevailing wage and apprenticeship requirements. Increased credit

amounts are available under §§ 45L and

45U for taxpayers satisfying certain prevailing wage requirements. The general

concepts and provisions relating to the

increased tax benefits under § 45(b)(6),

(7), and (8) are similar to those under each

of these other Code sections. Therefore,

only the relevant provisions under § 45(b)

(6), (7), and (8) are discussed in section

2.01(2) and (3) of this notice.

(2) Prevailing Wage Requirements.

Section 45(b)(7)(A) provides that to meet

the prevailing wage requirements with

respect to any qualified facility, a taxpayer must ensure that any laborers and

mechanics employed by the taxpayer or

any contractor or subcontractor in: (i) the

construction of such facility, and (ii) the

alteration or repair of such facility (with

respect to any taxable year, for any portion of such taxable year that is within the

10-year period beginning on the date the

qualified facility is originally placed in

service), are paid wages at rates not less

than the prevailing rates for construction,

alteration, or repair of a similar character in the locality in which such facility

is located as most recently determined

by the Secretary of Labor, in accordance

with subchapter IV of chapter 31 of title

40, United States Code (Prevailing Wage

Rate Requirements). Section 45(b)(7)(B)

provides correction and penalty mechanisms for a taxpayer’s failure to satisfy the

requirements under § 45(b)(7)(A).

(3) Apprenticeship Requirements. Section 45(b)(8)(A)(i) provides that to meet

the apprenticeship requirements taxpayers must ensure that, with respect to the

construction of any qualified facility, not

less than the applicable percentage of

the total labor hours of the construction,

alteration, or repair work (including such

work performed by any contractor or subcontractor) with respect to such facility

is, subject to § 45(b)(8)(B), performed

by qualified apprentices (Apprenticeship

See §§ 13101(f), 13102(k), 13104(d), 13105(a), 13204(a)(1), 13303(a)(1), 13304(d), 13404(d), 13501(a), 13701(a), 13702(a), and 13704(a) of the IRA.

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Labor Hour Requirements). Under § 45(b)

(8)(A)(ii), for purposes of § 45(b)(8)(A)

(i), the applicable percentage is: (i) in the

case of a qualified facility the construction

of which begins before January 1, 2023,

10 percent, (ii) in the case of a qualified

facility the construction of which begins

after December 31, 2022, and before January 1, 2024, 12.5 percent, and (iii) in the

case of a qualified facility the construction

of which begins after December 31, 2023,

15 percent.

Section 45(b)(8)(B) provides that the

requirement under § 45(b)(8)(A)(i) is

subject to any applicable requirements

for apprentice-to-journeyworker ratios of

the Department of Labor or the applicable

State Apprenticeship Agency (Apprenticeship Ratio Requirements). Section

45(b)(8)(C) provides that each taxpayer,

contractor, or subcontractor who employs

4 or more individuals to perform construction, alteration, or repair work with respect

to the construction of a qualified facility

must employ 1 or more qualified apprentices to perform such work (Apprenticeship Participation Requirements).

Under § 45(b)(8)(D)(i), a taxpayer

is not treated as failing to satisfy the

requirements of § 45(b)(8) if: (i) the taxpayer satisfies the requirements described

in § 45(b)(8)(D)(ii) (Good Faith Effort

Exception), or (ii) subject to § 45(b)(8)

(D)(iii) (Intentional Disregard Provision),

in the case of any failure by the taxpayer

to satisfy the requirement under § 45(b)

(8)(A) and (C) with respect to the construction, alteration, or repair work on any

qualified facility to which § 45(b)(8)(D)(i)

(I) does not apply, the taxpayer makes payment to the Secretary of the Treasury or

her delegate (Secretary) of a penalty in an

amount equal to the product of $50 multiplied by the total labor hours for which the

requirement described in § 45(b)(8)(A)

and (C) was not satisfied with respect to

the construction, alteration, or repair work

on such qualified facility.

Under the Good Faith Effort Exception described in § 45(b)(8)(D)(ii), a

taxpayer is deemed to have satisfied the

apprenticeship requirements with respect

to a qualified facility if the taxpayer has

requested qualified apprentices from a

registered apprenticeship program, as

defined in § 3131(e)(3)(B), and: (i) such

request has been denied, provided that

such denial is not the result of a refusal

by the taxpayer or any contractors or subcontractors engaged in the performance

of construction, alteration, or repair work

with respect to such qualified facility

to comply with the established standards and requirements of the registered

apprenticeship program, or (ii) the registered apprenticeship program fails to

respond to such request within 5 business

days after the date on which such registered apprenticeship program received

such request.

Under the Intentional Disregard Provision, if the Secretary determines that

any failure described in § 45(b)(8)(D)(i)

(II) is due to intentional disregard of the

requirements under § 45(b)(8)(A) and (C),

§ 45(b)(8)(D)(i)(II) is applied by substituting “$500” for “$50.”

Under § 45(b)(8)(E)(i), the term “labor

hours” means the total number of hours

devoted to the performance of construction, alteration, or repair work by any

individual employed by the taxpayer or

by any contractor or subcontractor. This

term excludes any hours worked by foremen, superintendents, owners, or persons

employed in a bona fide executive, administrative, or professional capacity (within

the meaning of those terms in part 541 of

title 29, Code of Federal Regulations).

Under § 45(b)(8)(E)(ii), the term

“qualified apprentice” means an individual who is employed by the taxpayer

or by any contractor or subcontractor

and who is participating in a registered

apprenticeship program, as defined in

§ 3131(e)(3)(B).

Section 3131(e)(3)(B) defines a registered apprenticeship program as an

apprenticeship registered under the Act of

August 16, 1937 (commonly known as the

National Apprenticeship Act, 50 Stat. 664,

chapter 663, 29 U.S.C. 50 et seq.) that

meets the standards of subpart A of part

29 and part 30 of title 29 of the Code of

Federal Regulations.2

.02 Beginning of Construction.

(1) In General. A qualified facility,

property, project, or equipment, are hereafter referred to as a “facility” in this notice.

A facility generally must meet the prevailing wage and apprenticeship requirements

to receive the increased credit or deduction amounts under §§ 30C, 45, 45Q, 45V,

45Y, 48, 48E, and 179D if construction (or

installation for purposes of § 179D) of the

facility begins on or after the date 60 days

after the Secretary publishes guidance

with respect to the prevailing wage and

apprenticeship requirements of the Code.3

The IRS has issued notices under §§ 45,4

45Q,5 and 486 (collectively, IRS Notices)

that provide guidance for determining

when construction begins for purposes of

§§ 45, 45Q, and 48, respectively, including a safe harbor regarding the continuity

requirement (described in section 2.02(3)

of this notice).

(2) Establishing Beginning of Construction. The IRS Notices describe two

methods that a taxpayer may use to establish that construction of a facility begins:

(i) by starting physical work of a significant nature (Physical Work Test), and

(ii) by paying or incurring five percent or

more of the total cost of the facility (Five

Percent Safe Harbor).

(i) Physical Work Test. Under the Physical Work Test, construction of a facility

begins when physical work of a significant

nature begins, provided that the taxpayer

maintains a continuous program of construction. This test focuses on the nature

of the work performed, not the amount or

the costs. Assuming the work performed

Effective November 25, 2022, 29 C.F.R. part 29 is no longer divided into subparts A and B because subpart B (Industry Recognized Apprenticeship Programs) was rescinded in a final rule

published on September 26, 2022. See 87 F.R. 58269.

Certain facilities are exempt from the prevailing wage and apprenticeship requirements. See, for example, § 45(b)(6)(B)(i).

Notice 2013-29, 2013-20 I.R.B. 1085; clarified by Notice 2013-60, 2013-44 I.R.B. 431; clarified and modified by Notice 2014-46, 2014-36 I.R.B. 520; updated by Notice 2015-25, 2015-13

I.R.B. 814; clarified and modified by Notice 2016-31, 2016-23 I.R.B. 1025; updated, clarified, and modified by Notice 2017-04, 2017-4 I.R.B. 541; Notice 2018-59, 2018-28 I.R.B. 196; modified by Notice 2019-43, 2019-31 I.R.B. 487; modified by Notice 2020-41, 2020-25 I.R.B. 954; clarified and modified by Notice 2021-5, 2021-3 I.R.B. 479; clarified and modified by Notice

2021-41, 2021-29 I.R.B. 17.

Notice 2020-12, 2020-11 I.R.B. 495.

Notice 2018-59, 2018-28 I.R.B. 196; modified by Notice 2019-43; modified by Notice 2020-41; clarified and modified by Notice 2021-5; clarified and modified by Notice 2021-41.

Bulletin No. 2022–52

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December 27, 2022

is of a significant nature, there is no fixed

minimum amount of work or monetary or

percentage threshold required to satisfy

the Physical Work Test. Physical work of

significant nature does not include preliminary activities, even if the cost of those

preliminary activities is properly included

in the depreciable basis of the facility.7

For purposes of the Physical Work Test,

preliminary activities include, but are not

limited to, planning or designing, securing financing, exploring, researching,

obtaining permits, licensing, conducting

surveys, environmental and engineering

studies, or clearing a site.8

Work performed by the taxpayer and

work performed for the taxpayer by other

persons under a binding written contract9

that is entered into prior to the manufacture, construction, or production of the

property for use by the taxpayer in the

taxpayer’s trade or business (or for the

taxpayer’s production of income) is taken

into account in determining whether construction has begun.10 Both on-site and

off-site work (performed either by the taxpayer or by another person under a binding written contract) may be taken into

account for purposes of demonstrating

that physical work of a significant nature

has begun. Physical work of a significant

nature does not include work (performed

either by the taxpayer or by another person under a binding written contract) to

produce property that is either in existing

inventory or is normally held in inventory

by a vendor.11

(ii) Five Percent Safe Harbor. Under

the Five Percent Safe Harbor, construction

of a facility will be considered as having

begun if: (i) a taxpayer pays or incurs

(within the meaning of § 1.461-1(a)(1) and

(2)) five percent or more of the total cost

of the facility, and (ii) thereafter, the taxpayer makes continuous efforts to advance

towards completion of the facility. All

costs properly included in the depreciable

basis of the facility are taken into account

to determine whether the Five Percent

Safe Harbor has been met.12 For property

that is manufactured, constructed, or produced for the taxpayer by another person

under a binding written contract with the

taxpayer, costs incurred with respect to

the property by the other person before

the property is provided to the taxpayer

are deemed incurred by the taxpayer when

the costs are incurred by the other person

under the principles of § 461.13

(3) Continuity Requirement and Continuity Safe Harbor. The IRS Notices, as

clarified and modified by Notice 2021-41,

provide that for purposes of the Physical

Work Test and Five Percent Safe Harbor,

taxpayers must demonstrate either continuous construction or continuous efforts

(Continuity Requirement) regardless of

whether the Physical Work Test or the Five

Percent Safe Harbor was used to establish

the beginning of construction. Whether a

taxpayer meets the Continuity Requirement under either test is determined by

the relevant facts and circumstances. The

IRS will closely scrutinize a facility and

may determine that the beginning of construction is not satisfied with respect to

a facility if a taxpayer does not meet the

Continuity Requirement.

The IRS Notices, as subsequently

modified and clarified, also provide for a

“Continuity Safe Harbor” under which a

taxpayer will be deemed to satisfy the Continuity Requirement provided a qualified

facility is placed in service no more than

four calendar years after the calendar year

during which construction of the qualified

facility began for purposes of §§ 4514 and

48,15 and no more than six calendar years

after the calendar year during which construction of the qualified facility or carbon

capture equipment began for purposes

of § 45Q.16 Certain offshore projects and

projects built on federal land under §§ 45

and 48 satisfy the Continuity Requirement

if such a project is placed into service no

more than 10 calendar years after the calendar year during which construction of

the project began.17

.03 Recordkeeping.

Section 6001 provides that every person

liable for any tax imposed by the Code, or

for the collection thereof, must keep such

records as the Secretary may from time to

time prescribe. Section 1.6001-1(a) provides that any person subject to income

tax must keep such permanent books of

account or records, including inventories,

as are sufficient to establish the amount

of gross income, deductions, credits, or

other matters required to be shown by

such person in any return of such tax. Section 1.6001-1(e) provides that the books

and records required by § 1.6001-1 must

be retained so long as the contents thereof

may become material in the administration of any internal revenue law.

Section 45(b)(12) authorizes the Secretary to issue such regulations or other

guidance as the Secretary determines necessary to carry out the purposes of § 45(b),

including regulations or other guidance

that provide requirements for recordkeeping or information reporting for purposes

of administering the requirements of

§ 45(b).18

SECTION 3. GUIDANCE WITH

RESPECT TO PREVAILING WAGE

RATE REQUIREMENTS

.01 How to Satisfy Prevailing Wage

Rate Requirements. The Prevailing Wage

Rate Requirements under § 45(b)(7)(A)

and the substantially similar provisions

set forth in §§ 30C, 45L, 45Q, 45U, 45V,

For § 45, see Notice 2013-29, section 4.02(1); Notice 2016-31, section 5.03; for § 45Q, see Notice 2020-12, section 5.03; and for § 48, see Notice 2018-59, section 4.03.

For § 45, see Notice 2013-29, section 4.03(1); for § 45Q, see Notice 2020-12, section 8.02(1); for § 48, see Notice 2018-59, section 7.03(1).

For § 45, see Notice 2013-29, sections 4.01 and 4.03; for § 45Q, see Notice 2020-12, section 8.02; and for § 48, see Notice 2018-59, section 7.03.

For § 45, see Notice 2013-29, section 4.02(2); for § 45Q, see Notice 2020-12, section 5.04; and for § 48, see Notice 2018-59, section 4.04.

For § 45, see Notice 2013-29, section 5.01(1); for § 48, see Notice 2018-59, section 5.02; and for § 45Q, see Notice 2020-12, section 6.02.

For § 45, see Notice 2013-29, section 5.01(2); for § 48, see Notice 2018-59, section 7.03; for § 45Q, see Notice 2020-12, section 8.02.

Notice 2016-31, section 3.

Notice 2018-59, section 6.05.

Notice 2020-12, section 7.05.

Notice 2021-5. Projects under §§ 45 and 48 may also be eligible for the extended Continuity Safe Harbors provided for in Notices 2020-41 and 2021-41 due to the COVID-19 pandemic

depending on when construction began with respect to those projects.

See also §§ 30C(g)(4), 45L(g)(3), 45Q(h)(5), 45U(d)(3), 45V(e)(5), 45Y(f), 45Z(e), 48(a)(16), 48E(i), and 179D(b)(6).

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45Y, 45Z, 48, 48C, 48E, and 179D will be

satisfied if:

(1) The taxpayer satisfies the Prevailing Wage Rate Requirements with respect

to any laborer or mechanic employed in

the construction, alteration, or repair of a

facility, property, project, or equipment by

the taxpayer or any contractor or subcontractor of the taxpayer; and

(2) The taxpayer maintains and preserves sufficient records, including books

of account or records for work performed

by contractors or subcontractors of the

taxpayer, to establish that such laborers

and mechanics were paid wages not less

than such prevailing rates, in accordance

with the general recordkeeping requirements under § 6001 and § 1.6001-1, et

seq.

.02 Prevailing Wage Determinations. If

the Secretary of Labor has published on

www.sam.gov a prevailing wage determination for the geographic area and type

or types of construction applicable to the

facility, including all labor classifications

for the construction, alteration, or repair

work that will be done on the facility by

laborers or mechanics, that wage determination contains the prevailing rates for the

laborers or mechanics who perform work

on the facility as most recently determined

by the Secretary of Labor in accordance

with subchapter IV of chapter 31 of title

40, United States Code, as identified in

§ 45(b)(7)(A). The following procedures

described in section 3.02 of this notice are

designed to be used to request an unlisted

classification only in the limited circumstance when no labor classification on the

applicable prevailing wage determination

applies to the planned work.

If the Secretary of Labor has not published a prevailing wage determination

for the geographic area and type of construction for the facility on www.sam.

gov, or the Secretary of Labor has issued

a prevailing wage determination for the

geographic area and type of construction, but one or more labor classifications

for the construction, alteration, or repair

work that will be done on the facility by

laborers or mechanics is not listed, then

the taxpayer can rely on the procedures

established by the Secretary of Labor for

purposes of the requirement to pay prevailing rates determined by the Secretary

of Labor in accordance with subchapter IV of chapter 31 of title 40, United

States Code.19 To rely on the procedures

to request a wage determination or wage

rate, and to rely on the wage determination or rate provided in response to the

request, the taxpayer must contact the

Department of Labor, Wage and Hour

Division via email at IRAprevailingwage@dol.gov and provide the Wage

and Hour Division with the type of facility, facility location, proposed labor classifications, proposed prevailing wage

rates, job descriptions and duties, and

any rationale for the proposed classifications. The taxpayer may use these procedures to request a wage determination, or

wage rates for the unlisted classifications,

applicable to the construction, alteration,

or repair of the facility. After review, the

Department of Labor, Wage and Hour

Division will notify the taxpayer as to the

labor classifications and wage rates to be

used for the type of work in question in

the area in which the facility is located.

Questions regarding the applicability of

a wage determination or its listed classifications and wage rates should be directed

to the Department of Labor, Wage and

Hour Division via email at IRAprevailingwage@dol.gov.

For purposes of the Prevailing Wage

Rate Requirements, the prevailing rate

for qualified apprentices hired through a

registered apprenticeship program may be

less than the corresponding prevailing rate

for journeyworkers of the same classification, as described in 29 C.F.R. 5.5(a)(4)(i).

For purposes of the Prevailing Wage

Requirements for the § 179D deduction,

the prevailing wage rate for installation

of energy efficient commercial building

property, energy efficient building retrofit

property, or property installed pursuant

to a qualified retrofit plan, is determined

with respect to the prevailing wage rate

for construction, alteration, or repair of a

similar character in the locality in which

such property is located, as most recently

determined by the Secretary of Labor, in

accordance with subchapter IV of chapter

31 of title 40, United States Code.

.03 Definitions. For purposes of the

Prevailing Wage Rate Requirement and

the associated recordkeeping requirements the following definitions apply.

(1) A taxpayer, contractor, or subcontractor is considered to “employ”

an individual if the individual performs

services for the taxpayer, contractor, or

subcontractor in exchange for remuneration, regardless of whether the individual

would be characterized as an employee or

an independent contractor for other Federal tax purposes.

(2) The terms “wage” and “wages”

means “wages” as defined under 29 C.F.R.

5.2(p), including any bona fide fringe benefits as defined therein.

(3) The term “laborer or mechanic”

means “laborer or mechanic” as defined

under 29 C.F.R. 5.2(m).

(4) The term “construction, alteration,

or repair” means “construction, prosecution, completion, or repair” as defined

under 29 C.F.R. 5.2(j).

(5) The term “prevailing wage” means

the wage listed for a particular classification of laborer or mechanic on the applicable wage determination for the type of

construction and the geographic area or

other applicable wage as determined by

the Secretary of Labor.

(6) The term “prevailing wage determination” means a wage determination

issued by the Department of Labor and

published on www.sam.gov.20

.04 Examples.

(1) Example 1. A taxpayer employs laborers and

mechanics to construct a facility. The taxpayer also

uses a contractor and subcontractor to construct the

facility. The Department of Labor has issued a prevailing wage determination that applies to the type of

construction that the laborers and mechanics perform

for the county in which the facility is located. The

taxpayer ensures that the taxpayer, contractor, and

subcontractor pay each laborer and mechanic a wage

rate equal to the applicable rates for their respective

labor classifications listed in this prevailing wage

determination. The taxpayer maintains records that

are sufficient to establish that the taxpayer and the

taxpayer’s contractor and subcontractor paid wages

not less than such prevailing wage rates. Such

records include but are not limited to, identifying

the applicable wage determination, the laborers and

mechanics who performed construction work on the

The taxpayer is not required to follow any other procedure to request a wage determination or a wage rate under § 45(b)(7)(A), including submission of the Form SF-1444.

Prevailing wage determinations and the applicable procedures are described in section 3.02 of this notice, above.

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facility, the classifications of work they performed,

their hours worked in each classification, and the

wage rates paid for the work. Under these facts, the

taxpayer will be considered to have satisfied the Prevailing Wage Rate Requirements with respect to the

facility.

(2) Example 2. The facts are the same as in

Example 1, except that the Department of Labor

has not issued an applicable prevailing wage determination for the relevant type of construction and

geographic area in which the facility is being constructed. The taxpayer contacts the Department of

Labor, Wage and Hour Division under the procedures described in section 3.02 of this notice. After

review, the Department of Labor, Wage and Hour

Division notifies the taxpayer as to the labor classifications and wage rates to be used for the type of

construction work in question in the area in which

the facility is located. The taxpayer ensures that the

taxpayer, contractor, and subcontractor pay each

laborer and mechanic a wage rate equal to the applicable rates for the respective classifications listed in

this wage determination.

The taxpayer maintains records, which include

the additional prevailing wage rates provided by the

Department of Labor to establish that the taxpayer

and the taxpayer’s contractor and subcontractor

paid wages not less than such prevailing wage rates.

Under these facts, the taxpayer will be considered

to have satisfied the Prevailing Wage Rate Requirements with respect to the facility.

(3) Example 3. The facts are the same as in

Example 1, except that the Department of Labor

has issued a prevailing wage determination that

applies to the type of construction that the laborers

and mechanics are hired to perform for the county

in which the facility is located, but that wage

determination does not include a classification of

laborer or mechanic that will be used to complete

the construction work on the facility (for example,

electrician, carpenter, laborer, etc.). The taxpayer

contacts the Department of Labor, Wage and Hour

Division under the procedures described in section

3.02 of this notice. After review, including confirming that no labor classification on the applicable prevailing wage determination that applies to

the work exists, the Department of Labor, Wage

and Hour Division notifies the taxpayer as to the

wage rate to be paid regarding the additional classification. The taxpayer ensures that the taxpayer,

contractor, and subcontractor pay each laborer and

mechanic a wage rate equal to the applicable rates

for their respective labor classifications listed in

the prevailing wage determination, including the

additional wage rates provided by the Department

of Labor.

The taxpayer maintains records, which include

the additional wage rates provided by the Department of Labor to establish that the taxpayer and taxpayer’s contractor and subcontractor paid wages not

less than prevailing wage rates. Under these facts,

the taxpayer will be considered to have satisfied the

Prevailing Wage Rate Requirements with respect to

the facility.

SECTION 4. GUIDANCE WITH

RESPECT TO APPRENTICESHIP

REQUIREMENTS

.01 How to Satisfy Apprenticeship

Requirements. A taxpayer satisfies the

apprenticeship requirements described in

§ 45(b)(8) if:

(1) The taxpayer satisfies the Apprenticeship Labor Hour Requirements, subject to any applicable Apprenticeship

Ratio Requirements;

(2) The taxpayer satisfies the Apprenticeship Participation Requirements; and

(3) The taxpayer complies with the

general recordkeeping requirements under

§ 6001 and § 1.6001-1, including maintaining books of account or records for

contractors or subcontractors of the taxpayer, as applicable, in sufficient form to

establish that the Apprenticeship Labor

Hour and the Apprenticeship Participation

Requirements have been satisfied.

Under the Good Faith Effort Exception,21 the taxpayer will be considered to

have made a good faith effort in requesting qualified apprentices if the taxpayer

requests qualified apprentices from a registered apprenticeship program in accordance with usual and customary business

practices for registered apprenticeship

programs in a particular industry.22 Pursuant to § 6001 and § 1.6001-1, the taxpayer must maintain sufficient books and

records establishing the taxpayer’s request

of qualified apprentices from a registered

apprenticeship program and the program’s

denial of such request or non-response to

such request, as applicable.

.02 Definitions. For purposes of the

apprenticeship requirements the following

definitions apply.

(1) A taxpayer, contractor, or subcontractor is considered to “employ”

an individual if the individual performs

services for the taxpayer, contractor, or

subcontractor in exchange for remuneration, regardless of whether the individual

would be characterized as an employee or

an independent contractor for other Federal tax purposes.23

(2) The term “journeyworker” means

“journeyworker” as defined under 29

C.F.R. 29.2.

(3) The term “apprentice-to-journeyworker ratio” means the ratio described

under 29 C.F.R. 29.5(b)(7).

(4) The term “construction, alteration,

or repair” means “construction, prosecution, completion, or repair” as defined

under 29 C.F.R. 5.2(j).

(5) The term “State Apprenticeship

Agency” means “State Apprenticeship

Agency” as defined under 29 C.F.R. 29.2.

.03 Example. A taxpayer employs workers and

qualified apprentices to construct a new facility. Construction of the facility begins in calendar year 2023,

and the construction of the facility is completed in

calendar year 2023. To satisfy the apprenticeship

labor hour requirement, the percentage of total labor

hours to be performed by qualified apprentices is 12.5

percent for 2023. The total labor hours, as defined in

§ 45(b)(8)(E)(i), for the construction of the facility is

10,000 labor hours. The taxpayer employed qualified

apprentices that performed a total of 1,150 hours of

construction on the facility. On each day that a qualified apprentice performed construction work on the

facility for the taxpayer, the applicable requirements

for apprentice-to-journeyworker ratios of the Department of Labor or the applicable State Apprenticeship

Agency were met.

The taxpayer also hired a contractor to assist

with construction of the facility for 1,000 labor

hours of the 10,000 total labor hours. The contractor employed qualified apprentices that performed

a total of 100 hours of construction on the facility.

On each day that a qualified apprentice performed

construction work on the facility for the contractor, the applicable requirements for apprentice-to-journeyworker ratios of the Department

of Labor or the applicable State Apprenticeship

Agency were met.

The taxpayer ensured that the taxpayer and

the contractor each employed 1 or more qualified

apprentices because the taxpayer and contractor each

employed 4 or more individuals to perform construction work on the qualified facility.

The taxpayer maintained sufficient records to

establish that the taxpayer and the contractor hired

by the taxpayer satisfied the Apprenticeship Labor

Hour Requirement of 1,250 total labor hours for

the facility (12.5% of 10,000 labor hours), and the

Apprenticeship Ratio and Apprenticeship Participation Requirements. Under these facts, the taxpayer

will be considered to have satisfied the Apprenticeship Labor Hour, Apprenticeship Ratio, and Apprenticeship Participation Requirements of the statute

with respect to the facility.

Described in section 2.01(3) of this notice, above.

Registered apprenticeship programs can be located using the Office of Apprenticeship’s partner finder tool, available at https://www.apprenticeship.gov/partner-finder and through the

applicable State Apprenticeship Agency, https://www.apprenticeship.gov/about-us/state-offices.

This definition does not alter any of the existing legal requirements pertaining to the proper classification of qualified apprentices in registered apprenticeship programs as employees for

purposes of certain Federal laws and regulations.

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SECTION 5. DETERMINING

WHEN CONSTRUCTION OR

INSTALLATION BEGINS

To determine when construction begins

for purposes of §§ 30C, 45V, 45Y, and

48E, principles similar to those under

Notice 2013-29 regarding the Physical

Work Test and Five Percent Safe Harbor

apply, and taxpayers satisfying either test

will be considered to have begun construction. In addition, principles similar to those provided in the IRS Notices

regarding the Continuity Requirement

for purposes of §§ 30C, 45V, 45Y, and

48E apply. Whether a taxpayer meets the

Continuity Requirement under either test

is determined by the relevant facts and

circumstances.

Similar principles to those under section 3 of Notice 2016-31 regarding the

Continuity Safe Harbor also apply for purposes of §§ 30C, 45V, 45Y, and 48E. Taxpayers may rely on the Continuity Safe

Harbor provided the facility is placed in

service no more than four calendar years

after the calendar year during which construction began.

For purposes of § 179D, the IRS will

accept that installation has begun if a taxpayer generally satisfies principles similar

to the two tests described in section 2.02

of this notice, above, regarding the beginning of construction under Notice 201329 (Physical Work Test and Five Percent

Safe Harbor). The relevant facts and circumstances will ultimately be determinative of whether a taxpayer has begun

installation.

For purposes of §§ 45, 45Q, and 48, the

IRS Notices will continue to apply under

each respective Code section, including

application of the Physical Work Test and

Five Percent Safe Harbor, and the rules

regarding the Continuity Requirement and

Continuity Safe Harbors.24

SECTION 6. PAPERWORK

REDUCTION ACT

The Paperwork Reduction Act of

1995 (PRA), 44 U.S.C. 3501 et seq., and

its attendant regulations, 5 C.F.R. part

1320, require an agency to consider the

impact of paperwork and other information collection burdens imposed on

the public. The IRA allows taxpayers

to take certain increased credit amounts

or an increased deduction if they satisfy

the Prevailing Wage Requirements, and

Apprenticeship Requirements, where

applicable. The Department of Labor

will collect the data needed to issue

wage rates for taxpayers in connection

with facilities whose construction, alteration, or repair is not subject to one or

more Davis-Bacon and Related Acts

(DBRA), as facilities subject to the

DBRA are already accounted for in an

existing collection approved by OMB.25

DOL data collections needed to register apprentices and apprenticeship programs are accounted for in an existing

collection approved by OMB.26

Under the PRA, an agency may not

collect or sponsor an information collection requirement unless it displays a currently valid Office of Management and

Budget (OMB) control number.27 This

collection of information is approved

under OMB Control Number 1235-0034.

The Department of Labor estimates that

it will take an average of 15 minutes for

respondents to complete this collection

of information, including the time for

reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and

reviewing the collection of information.

The information that the Department of

Labor will collect, as discussed in section

3.02 of this notice, includes the type of

facility, facility location, proposed labor

classifications, proposed prevailing wage

rates, job descriptions and duties, and any

rationale for the proposed classifications.

After review, the Department of Labor

will notify the taxpayer as to the labor

classifications and wage rates to be used

for the type of work in question in the area

in which the facility is located. You may

view the Department of Labor’s webpage

instruction here: https://www.dol.gov/

agencies/whd/IRA.

SECTION 7. DRAFTING

INFORMATION

The principal authors of this notice are

Alexander Scott and Jeremy Milton of

Associate Chief Counsel (Passthroughs &

Special Industries). However, other personnel from the Treasury Department and

the IRS participated in its development.

For further information regarding this

notice contact Mr. Scott at (202) 317-6853

(not a toll-free number).

Melanie R. Krause,

Acting Deputy Commissioner for Services and Enforcement.

Krishna P. Vallabhaneni,

Tax Legislative Counsel.

26 CFR 601.105: Examination of returns and claims

for refund, credit, or abatement; determination of

correct tax liability. (Also: Part I, §§ 6011, 6662,

6662A, 6707A; 1-6011-4.)

Rev. Proc. 2022-42

SECTION 1. PURPOSE

This revenue procedure sets forth

the procedures under § 30D(d)(3) of the

Internal Revenue Code (Code) for qualified manufacturers to enter into a written

agreement with the Secretary of the Treasury or her delegate (Secretary) under

which such manufacturer agrees to make

periodic written reports to the Secretary

providing vehicle identification numbers

and such other information related to each

vehicle manufactured by such manufacturer that is eligible for a clean vehicle

credit as the Secretary may require. Vehicles eligible for the clean vehicle credit

under § 30D of the Code (§ 30D credit),

the credit for qualified commercial clean

vehicles under § 45W of the Code (§ 45W

credit), and vehicles eligible for the credit

for previously-owned clean vehicles

under § 25E of the Code (§ 25E credit),

respectively, generally must be manufactured by a qualified manufacturer as

Described in section 2.02 of this notice, above.

OMB Control Number 1235-0023.

OMB Control Number 1205-0223.

See 5 C.F.R. 1320.8(b)(3)(vi).

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December 27, 2022

described in § 30D(d)(1)(C) and (d)(3).1

See §§ 45W(c)(1) and 25E(c)(1)(D)(i).

This revenue procedure also provides the

procedures for persons selling vehicles

to report the information required to be

reported to the Internal Revenue Service

(IRS) in order for a vehicle to be eligible

for the clean vehicle credit under § 30D

or § 25E.

SECTION 2. BACKGROUND

.01 Section 30D, Clean Vehicle Credit

(1) Section 30D was originally enacted

by § 205(a) of the Energy Improvement

and Extension Act of 2008, Division B

of Public Law 110-343, 122 Stat. 3765,

3835 (October 3, 2008), to provide a

credit for purchasing and placing in service new qualified plug-in electric drive

motor vehicles. Section 30D has been

amended several times since its enactment, most recently by § 13401 of Public

Law 117-169, 136 Stat. 1818 (August 16,

2022), commonly known as the Inflation

Reduction Act of 2022 (IRA). In general,

the amendments made by § 13401 of the

IRA to § 30D apply to vehicles placed in

service after December 31, 2022, except

as provided in § 13401(k)(2) through (5)

of the IRA.

(2) As amended by § 13401(b) of

the IRA, § 30D(d)(1)(G) requires, as of

August 17, 2022, any vehicle eligible for

the § 30D credit to undergo final assembly in North America. Section 30D(d)

(5) defines “final assembly” as the process by which a manufacturer produces a

new clean vehicle at, or through the use

of, a plant, factory, or other place from

which the vehicle is delivered to a dealer

or importer with all component parts

necessary for the mechanical operation

of the vehicle included with the vehicle, whether or not the component parts

are permanently installed in or on the

vehicle.

(3) As amended by § 13401(c)(1) of

the IRA, § 30D(d)(1) defines a “new clean

vehicle” as a motor vehicle that satisfies

the following eight requirements set forth

in § 30D(d)(1)(A) through (H):

(a) The original use of the motor vehicle must commence with the taxpayer.

(b) The motor vehicle must be acquired

for use or lease by the taxpayer and not

for resale.

a qualified manufacturer.

(d) The motor vehicle must be treated

as a motor vehicle for purposes of title II

of the Clean Air Act.

(e) The motor vehicle must have a

gross vehicle weight rating of less than

14,000 pounds.

(f) The motor vehicle must be propelled

to a significant extent by an electric motor

that draws electricity from a battery that

has a capacity of not less than 7 kilowatt

hours and is capable of being recharged

from an external source of electricity.

(g) The final assembly of the motor

vehicle must occur within North America.

(h) The person who sells any vehicle to

the taxpayer must furnish a report to the

taxpayer and to the Secretary, at such time

and in such manner as the Secretary provides, containing the following items:

(i) The name and taxpayer identification number of the taxpayer;

(ii) The vehicle identification number

of the vehicle, unless, in accordance with

any applicable rules promulgated by the

Secretary of Transportation, the vehicle is

not assigned such a number;

(iii) The battery capacity of the vehicle;

(iv) Verification that original use of the

vehicle commences with the taxpayer;

(v) The maximum credit under § 30D

allowable to a taxpayer with respect to

the vehicle (the amount reported is without regard to the § 30D(f)(10) or § 25E(b)

limitations based on modified adjusted

gross income; and

(vi) In the case of a taxpayer who

makes an election to transfer the credit to

an eligible entity under § 30D(g)(1),2 any

amount described in § 30D(g)(2)(C) that

has been provided to such taxpayer.

(4) As amended by § 13401(c)(1) of

the IRA, §§ 30D(d)(1)(C) and 30D(d)

(3) replace the term “manufacturer” with

“qualified manufacturer” applicable to

vehicles placed in service after December 31, 2022.3 Section 30D(d)(3) defines

a “qualified manufacturer” as any manufacturer (within the meaning of the regulations prescribed by the Administrator

of the Environmental Protection Agency

for purposes of the administration of title

II of the Clean Air Act (as defined in 42

U.S.C. §§ 7521, et seq ) that enters into

a written agreement with the Secretary

under which such manufacturer agrees to

make periodic written reports to the Secretary (at such times and in such manner

as the Secretary may provide) providing

vehicle identification numbers and such

other information related to each vehicle

manufactured by such manufacturer as the

Secretary may require. Section 30D(d)(6)

provides that “new clean vehicle” includes

any new qualified fuel cell motor vehicle

(as defined in § 30B(b)(3)) that meets the

requirements under § 30D(d)(1)(G) and

(H).

(5) Section 30D(e)(1)(A) provides that

the critical minerals requirement with

respect to the battery from which the electric motor of a vehicle draws electricity is

satisfied if the percentage of the value of

the applicable critical minerals (as defined

in § 45X(c)(6) of the Code) contained

in such battery that were (i) extracted or

processed in the United States, or in any

country with which the United States

has a free trade agreement in effect, or

(ii) recycled in North America, is equal to

or greater than the applicable percentage

(as certified by the qualified manufacturer,

in such form or manner as prescribed by

Section 30D(d)(6) defines a new clean vehicle to include any new qualified fuel cell motor vehicle (as defined in § 30B(b)(3)) that meets the requirements of § 30D(1)(G) and (H). Section

25E(c) defines a previously-owned clean vehicle to include, in part, a motor vehicle that either (1) meets the requirements of § 30D(d)(1)(C) (regarding qualified manufacturer), or (2) satisfies the requirements of § 30B(b)(3)(A) and (B) (regarding fuel cell motor vehicles) and has a gross vehicle weight rating of less than 14,000 pounds. Therefore, if a new clean vehicle is a

new qualified fuel cell motor vehicle described in § 30D(d)(6), it does not need to be made by a qualified manufacturer, as otherwise required under § 30D(d)(1)(C). Similarly, if a previously-owned clean vehicle is a fuel cell motor vehicle described in § 25E(c)(1)(D)(ii), it does not need to be made by a qualified manufacturer, as otherwise required under § 25E(c)(1)(D)(i).

However, any qualified manufacturer that makes fuel cell vehicles must report on such vehicles as described in sections 4.02 and 6 of this revenue procedure. In addition, any manufacturer

of fuel cell vehicles that is not subject to the requirement to be a qualified manufacturer is encouraged to become a qualified manufacturer for purposes of providing the IRS with information

to facilitate tax administration.

Amendments to § 30D to allow an election to transfer the credit to an eligible entity are effective for vehicles placed in service after December 31, 2023.

See also § 25E(c)(1)(D)(i) of the Code.

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the Secretary). The applicable percentage

for the critical minerals requirement is set

forth in § 30D(e)(1)(B)(i) through (v) and

varies based on when the vehicle is placed

in service. In the case of a vehicle placed

in service after the date proposed guidance

is issued and before January 1, 2024, the

applicable percentage is 40 percent. In the

case of a vehicle placed in service during

calendar year 2024, 2025, and 2026,

the applicable percentage is 50 percent,

60 percent, and 70 percent, respectively.

In the case of a vehicle placed in service

after December 31, 2026, the applicable

percentage is 80 percent.

(6) Section 30D(e)(2)(A) provides that

the battery components requirement with

respect to the battery from which the electric motor of a vehicle draws electricity is

satisfied if the percentage of the value of

the components contained in such battery

that were manufactured or assembled in

North America is equal to or greater than

the applicable percentage (as certified by

the qualified manufacturer, in such form

or manner as prescribed by the Secretary).

The applicable percentage for the battery

components requirement is set forth in

§ 30D(e)(2)(B)(i) through (vi) and varies

based on when the vehicle is placed in

service. In the case of a vehicle placed in

service after the date proposed guidance

is issued and before January 1, 2024, the

applicable percentage is 50 percent. In the

case of a vehicle placed in service during

calendar year 2024 or 2025, the applicable

percentage is 60 percent. In the case of a

vehicle placed in service during calendar

year 2026, 2027, and 2028, the applicable

percentage is 70 percent, 80 percent, and

90 percent, respectively. In the case of a

vehicle placed in service after December

31, 2028, the applicable percentage is 100

percent.

(7) Section 13401(k)(3) of the IRA

provides that the critical minerals and the

battery components requirements apply to

vehicles placed in service after the date

on which proposed guidance with respect

to the critical minerals and the battery

components requirements is issued by the

Secretary. Such guidance is described in

§ 30D(e)(3)(B).4

(8) Section 30D(f)(11)(A) provides

that no credit is allowed for a vehicle with

a manufacturer’s suggested retail price in

excess of the applicable limitation. Section 30D(f)(11)(B) provides that the applicable limitation for each vehicle classification is as follows: in the case of a van,

a sport utility vehicle, or a pickup truck,

$80,000; and in the case of any other vehicle, $55,000.

.02 Section 25E, Previously-Owned

Clean Vehicles Credit

(1) Section 13402 of the IRA added §

25E to the Code, which is generally effective for vehicles acquired after December 31, 2022, and before January 1, 2033

(except the election to transfer of the credit

to an eligible entity is effective for vehicles acquired after December 31, 2023).

Section 25E(a) provides that in the case

of a qualified buyer who during a taxable

year places in service a previously-owned

clean vehicle, an income tax credit is

allowed for the taxable year equal to the

lesser of (1) $4,000, or (2) the amount

equal to 30 percent of the sale price with

respect to such vehicle (that is, the § 25E

credit).

(2) Section 25E(c) defines certain

terms for purposes of the § 25E credit.

Section 25E(c)(1) defines “previously-owned clean vehicle” as, with respect

to a taxpayer, a motor vehicle that satisfies

the following four requirements set forth

in § 25E(c)(1)(A) through (D):

(a) The model year of the motor vehicle is at least 2 years earlier than the calendar year in which the taxpayer acquires

such vehicle.

(b) The original use of the motor vehicle commences with a person other than

the taxpayer.

the taxpayer in a qualified sale.

(d) The motor vehicle:

(i) meets the requirements of § 30D(d)

(1)(C), (D), (E), (F), and (H) (except for

§ 30D(d)(1)(H)(iv)), or

(ii) is a motor vehicle that:

(A) satisfies the requirements under

§ 30B(b)(3)(A) and (B), and

(B) has a gross vehicle weight rating of

less than 14,000 pounds.

(3) Section 25E(c)(2) defines a “qualified sale” as a sale of a motor vehicle

(A) by a dealer (as defined in § 30D(g)(8)),

(B) for a sale price that does not exceed

$25,000, and (C) that is the first transfer

since August 16, 2022, to a qualified buyer

other than the person with whom the original use of such vehicle commenced.

(4) Section 25E(c)(3) defines “qualified

buyer” as, with respect to a sale of a motor

vehicle, a taxpayer (A) who is an individual, (B) who purchases such vehicle for

use and not for resale, (C) with respect

to whom no deduction is allowable with

respect to another taxpayer under § 151

of the Code, and (D) who has not been

allowed a § 25E credit for any sale during

the 3-year period ending on the date of the

sale of such vehicle.

(5) Section 25E(c)(4) defines “motor

vehicle” and “capacity” to have the meaning given such terms in § 30D(d)(2) and

(4), respectively.

03. Section 45W, Credit for Qualified

Commercial Clean Vehicles

(1) Section 13403(a) of the IRA added

new § 45W to the Code, which is effective for vehicles acquired after December

31, 2022, and before January 1, 2033. A

taxpayer can claim a § 45W credit for purchasing and placing in service a qualified

commercial clean vehicle, as defined in

§ 45W(c), during the taxable year. The

amount of the § 45W credit is the lesser

of (1) 15 percent of the taxpayer’s basis

in the vehicle (30 percent in the case of a

vehicle not powered by a gasoline or diesel internal combustion engine), or (2) the

incremental cost of the vehicle. Under §

45W(b)(4), the credit is limited to $7,500

in the case of a vehicle that has a gross

vehicle weight rating of less than 14,000

pounds, and $40,000 for all other vehicles.

(2) Under § 45W(c), a “qualified commercial clean vehicle” is defined as any

vehicle that is of a character subject to the

allowance for depreciation that:

(a) meets the requirement under

§ 30D(d)(1)(C) of being made by a qualified manufacturer and is acquired for use

or lease by the taxpayer and not for resale,

(b) either:

(i) meets the requirement under §

30D(d)(1)(D) of being treated as a motor

vehicle for purposes of title II of the Clean

Air Act and is manufactured primarily for

use on public streets, roads, and highways

(not including a vehicle operated exclusively on a rail or rails), or

Section 8 of this revenue procedure confirms that the issuance of this revenue procedure is not the issuance of the proposed guidance described in § 30D(e)(3)(B).

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(ii) is mobile machinery, as defined in

§ 4053(8) (including vehicles that are not

designed to perform a function of transporting a load over the public highways),

and

(i) is propelled to a significant extent

by an electric motor that draws electricity from a battery that has a capacity of

not less than 15 kilowatt hours (or, in the

case of a vehicle that has a gross vehicle

weight rating of less than 14,000 pounds,

7 kilowatt hours) and is capable of being

recharged from an external source of electricity, or

(ii) is a motor vehicle that satisfies

the requirements under § 30B(b)(3)(A)

and (B) of being a new qualified fuel cell

motor vehicle.

SECTION 3. DEFINITIONS

.01 In General. Terms used in this

revenue procedure and not defined in

section 3 of this revenue procedure have

the same meaning as provided in § 30D,

as amended by the IRA, and §§ 45W and

25E, as enacted by the IRA.

.02 Clean Air Act Regulations. The

Clean Air Act Regulations are the regulations prescribed by the Administrator of

the Environmental Protection Agency for

purposes of the administration of title II of

the Clean Air Act (42 U.S.C. 7521, et seq.).

.03 Model Year. The term “model year”

means the model year determined under

the Clean Air Act Regulations (see 40

CFR 86-082-2).

SECTION 4. QUALIFIED

MANUFACTURER’S WRITTEN

AGREEMENT AND REPORTING

.01 Written Agreement.

(1) To meet certain statutory requirements of § 30D, § 25E, and § 45W, any

manufacturer (within the meaning of the

Clean Air Act Regulations) may enter into

a written agreement with the Secretary

to become a qualified manufacturer as

defined in § 30D(d)(3) by providing the

IRS a statement signed by a person currently authorized to bind the taxpayer in

these matters, in the following form:

“For purposes of establishing [insert

legal name of the manufacturer] as a

qualified manufacturer as described in §

30D(d)(3) of the Internal Revenue Code,

[insert legal name of the manufacturer]

hereby agrees to make periodic written

reports to the Internal Revenue Service

providing vehicle identification numbers

and such other information as described

in any guidance that may be issued by

the Secretary of the Treasury or the Secretary’s delegate (Secretary), including

section 4.02 of Revenue Procedure 202242, related to each vehicle manufactured

by such manufacturer at such times and

in such manner as described in any guidance that may be issued by the Secretary,

including section 6.02 of Revenue Procedure 2022-42.”

(2) Any changes to the content and

format of the written agreement will be

provided on irs.gov, and qualified manufacturers will be notified to enter a

revised written agreement where necessary. The IRS will not consider a vehicle to meet the requirements of § 30D(d)

(1)(C) unless a qualified manufacturer

submits a written report containing the

information required by section 4.02 of

this revenue procedure with respect to

such vehicle. For the purposes of § 25E,

a qualified manufacturer must submit a

written report or reports containing the

information required by section 4.02 of

this revenue procedure with respect to

prior model year vehicles for such vehicle to be considered a previously-owned

clean vehicle, to the extent such information has not already been provided

for purposes of § 30D and/or § 45W. In

addition, any manufacturer of fuel cell

vehicles that is not subject to the requirement to be a qualified manufacturer is

encouraged to become a qualified manufacturer for purposes of providing the

IRS with information to facilitate tax

administration.

.02 Content of Written Reports for

Qualified Manufacturers. The written

report providing information for vehicles

that may be eligible for the credit under

§ 30D, § 25E, and/or § 45W must contain

the name, address, and taxpayer identification number of the qualified manufacturer.

This written report must be provided by

the qualified manufacturer to the IRS in

the time and manner described in section

6.02 of this revenue procedure. In addition, the written report must contain all of

the following information for any vehicle

that the qualified manufacturer asserts is

eligible for the credit under § 30D, § 25E,

and/or § 45W:

(1) General Information.

(a) The make, model, model year, and

any other appropriate identifiers of the

motor vehicle;

(b) Certification that the motor vehicle is made by a qualified manufacturer,

within the meaning of § 30D(d)(3);

is treated as a motor vehicle for purposes

of title II of the Clean Air Act;

(d) The gross vehicle weight rating of

the motor vehicle;

(e) The battery capacity of the motor

vehicle;

(f) The motor vehicle’s vehicle identification number; and

(g) Such other information as the Secretary may provide on irs.gov.

(2) Specifically, for § 30D:

(a) Certification that the motor vehicle

is propelled to a significant extent by an

electric motor that draws electricity from

a battery that has a capacity of not less

than 7 kilowatt hours and the battery is

capable of being recharged from an external source of electricity, or is a new qualified fuel cell motor vehicle (as defined in

§ 30B(b)(3)).

(b) Certification that the motor vehicle

is manufactured primarily for use on public streets, roads and highways (not including a vehicle operated exclusively on a rail

or rails) and has at least four wheels.

North America.

(d) Certification of the percentage of

the value of the applicable critical minerals (as defined in § 45X(c)(6)) contained in

the battery from which the electric motor

of the vehicle draws electricity that were

(i) extracted or processed in the United

States, or in any country with which the

United States has a free trade agreement in

effect, or (ii) recycled in North America.5

This certification takes effect once the Secretary issues proposed guidance pursuant to § 30D(e)(3)(B). The IRS will not accept any certification with respect to the value of applicable critical

minerals until the Secretary issues such guidance.

December 27, 2022

568

Bulletin No. 2022–52

(e) Certification of the percentage of

the value of the components contained in

the battery from which the electric motor

of the vehicle draws electricity that were

manufactured or assembled in North

America.6

(f) Whether the motor vehicle is a van,

sport utility vehicle, pickup truck, or other

vehicle.

(g) The motor vehicle’s manufacturer’s

suggested retail price.

(3) Specifically, for § 25E:7

(a) Certification that the motor vehicle

is either: propelled to a significant extent

by an electric motor that draws electricity from a battery that has a capacity of

not less than 7 kilowatt hours and the battery is capable of being recharged from an

external source of electricity, or is a new

qualified fuel cell motor vehicle that satisfies the requirements under § 30B(b)(3)

(A) and (B) and has a gross vehicle weight

rating of less than 14,000 pounds.

(b) Certification that the motor vehicle

is manufactured primarily for use on public streets, roads and highways (not including a vehicle operated exclusively on a rail

or rails) and has at least four wheels.

(4) Specifically, for § 45W:

(a) For motor vehicles, certification

that the vehicle is manufactured primarily for use on public streets, roads, and

highways (not including a vehicle operated exclusively on a rail or rails), and is

either: a motor vehicle that is propelled to

a significant extent by an electric motor

that draws electricity from a battery that

has a capacity of not less than 15 kilowatt

hours (or, in the case of a vehicle that has

a gross vehicle weight rating of less than

14,000 pounds, 7 kilowatt hours) and is

capable of being recharged from an external source of electricity, or is a new qualified fuel cell motor vehicle that satisfies

the requirements under § 30B(b)(3)(A)

and (B); or

(b) For mobile machinery, certification that the machinery meets the definition in § 4053(8) of the Code (including

vehicles that are not designed to perform

a function of transporting a load over the

public highways), and that the machinery

is either: propelled to a significant extent

by an electric motor that draws electricity from a battery that has a capacity of

not less than 15 kilowatt hours (or, in the

case of a vehicle that has a gross vehicle

weight rating of less than 14,000 pounds,

7 kilowatt hours) and is capable of being

recharged from an external source of electricity, or is a new qualified fuel cell motor

vehicle that satisfies the requirements

under § 30B(b)(3)(A) and (B).

a gross vehicle weight rating of less than

14,000 pounds, the manufacturer’s suggested retail price.

(5) Attestation Required. Each written

report must include: a declaration, applicable to the certification, statements, and

any accompanying documents, signed by

a person currently authorized to bind the

qualified manufacturer (or, in the case of

a foreign vehicle manufacturer, its domestic distributor) in these matters, in the following form: “Under penalties of perjury,

I declare that I have examined this certification, including accompanying documents, and to the best of my knowledge

and belief, the facts presented in support

of this certification are true, correct, and

complete.”

.03 Taxpayer’s Reliance. A taxpayer

who acquires a “new clean vehicle,” a

“previously-owned clean vehicle” for

which the seller provides a clean vehicle

seller report, or a “qualified commercial

clean vehicle” and places it in service may

rely on the manufacturer’s certification

concerning the manufacturer’s status as a

qualified manufacturer (including in cases

in which the certification is received by

the IRS after the purchase of the vehicle).

A taxpayer also may rely on the information and certifications contained in the

qualified manufacturer’s written reports

for the tax credit allowed under §§ 30D,

25E, and 45W.

.04 Erroneous Written Reports. Any

acknowledgment that the IRS provides

for a written report, including a qualified

manufacturer’s certifications under §§

30D, 45W, and 25E, is not a determination

that a motor vehicle or mobile machinery

qualifies for the credit under the respective Code sections.

SECTION 5. SELLER’S REPORTS

.01 Required Reports under Sections

30D and 25E. For purposes of § 30D(d)

(1)(H), the person who sells any vehicle to

the taxpayer or, for purposes of § 25E(c)(1)

(D)(i), the dealer (as defined in § 30D(g)

(8)) who sells any vehicle to the taxpayer,

as applicable, (collectively, Seller) must

furnish a report to the taxpayer and the

IRS, at such time and in such manner as

the Secretary provides containing information that is listed in this section 5.01.

Accordingly, for vehicle sales occurring

in calendar year 2023 or later, the Seller

must provide the report to the taxpayer not

later than the date the vehicle is purchased

and must submit the report to Secretary

within fifteen (15) days of the end of the

calendar year containing the following:

(1) The name and taxpayer identification number of the Seller;

(2) The name and taxpayer identification number of the taxpayer;

(3) The vehicle identification number

of the vehicle, unless, in accordance with

any applicable rules promulgated by the

Secretary of Transportation, the vehicle is

not assigned such a number;

(4) The battery capacity of the vehicle;

(5) Only for sales of new clean vehicles, verification that original use of the

vehicle commences with the taxpayer;

(6) The date of sale, sale price of the

vehicle, and maximum credit under § 30D

or § 25E, as applicable, allowable to the

taxpayer with respect to the vehicle;

(7) For sales after December 31, 2023,

in the case of a taxpayer who makes an

election to transfer the credit to an eligible

entity under § 30D(g)(1), any amount paid

or otherwise allowable as a partial payment or down payment to the taxpayer;

and

(8) A declaration applicable to the

report signed by a person currently authorized to bind the Seller in these matters,

in the following form: “Under penalties

of perjury, I declare that I have examined

this report submitted to the IRS pursuant

to Revenue Procedure 2022-42 by [insert

name of Seller], and to the best of my

knowledge and belief I certify that this

This certification takes effect once the Secretary issues proposed guidance pursuant to § 30D(e)(3)(B). The IRS will not accept any certification with respect to value of the components

contained in a vehicle’s battery until the Secretary issues such guidance.

For motor vehicles for which such certification has not already been provided for purposes of § 30D and/or § 45W.

Bulletin No. 2022–52

569

December 27, 2022

report is true, correct, and complete.” This

written report must be provided to the IRS

in the time and manner described in section 6.03 of this revenue procedure.

SECTION 6. TIME AND METHOD

FOR FILING WRITTEN

AGREEMENTS AND REPORTS

.01 Filing of Qualified Manufacturer

Written Agreement.

Manufacturers must file their written

agreement pursuant to section 4.01 of

this revenue procedure to be considered

a qualified manufacturer. Manufacturers

must send their signed written agreements

IRS.Clean.Vehicle.Manufacturers@

irs.gov. The written agreement must be

signed by a person currently authorized

to bind the taxpayer in these matters. An

electronic signature is acceptable. Manufacturers will not be considered qualified

manufacturers until they have filed their

written agreements with the IRS.

.02 Time for Filing Reports by Qualified Manufacturers.

Qualified manufacturers must file the

reports pursuant to section 4.02 of this revenue procedure with the IRS on a monthly

basis, by the fifteenth of the month. Qualified manufacturers may file reports more

frequently than once a month. Qualified

manufacturers must send an email to IRS.

Clean.Vehicles.QM.Reporting@irs.gov

indicating their intent to submit monthly

reports and the IRS will respond with

instructions on how to submit their reporting information. Additional information

regarding written reports will be provided

on irs.gov.

.03 Time for Filing Seller Reports

For vehicle sales occurring in calendar year 2023 and later, Sellers must

file reports pursuant to section 5 of this

revenue procedure with the IRS within

fifteen days after the end of the calendar

year. Sellers must submit their reporting

information in a format and method that

the Secretary provides. The first reports

from Sellers will be due on January 15,

2024.

SECTION 7. PAPERWORK

REDUCTION ACT

The collection of information contained in this revenue procedure has been

December 27, 2022

submitted to the Office of Management

and Budget in accordance with the Paperwork Reduction Act (44 U.S.C. 3507)

under control number 1545-2137.

An agency may not conduct or sponsor,

and a person is not required to respond

to, a collection of information unless the

collection of information displays a valid

OMB control number.

The collections of information in this

revenue procedure are in sections 4.01,

4.02, 5.01, 6.01, 6.02, and 6.03. This information is collected and retained to ensure

that vehicles meet the requirements for the

clean vehicle credit under § 30D, the new

qualified commercial clean vehicle credit

under § 45, and the previously-owned

clean vehicle credit under § 25E. This

information will be used to determine

whether the vehicle for which the credit

is claimed by a taxpayer is property that

qualifies for the credit. The collection of

information is voluntary to obtain a benefit. The likely respondents are corporations and partnerships.

The estimated total annual reporting

burden is 13,491 hours.

The estimated annual burden per

respondent is 0.25 hours to complete the

reporting required under this revenue procedure. The estimated number of respondents is 53,965. The estimated annual frequency of responses is 12.

Books or 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 § 6103 of the Code.

SECTION 8. PROPOSED

GUIDANZCE FOR CRITICAL

MINERALS AND BATTERY

COMPONENTS REQUIREMENTS

For purposes of § 30D(e)(3)(B), the

issuance of this revenue procedure is not

the issuance of proposed guidance with

respect to the critical minerals and battery

components requirements under § 30D(e).

The Department of the Treasury (Treasury

Department) and the IRS will explicitly

identify when they are issuing proposed

guidance with respect to the critical minerals and battery components requirements under § 30D(e).

570

SECTION 9. DRAFTING

INFORMATION

The principal author of this revenue

procedure is the Office of Associate Chief

Counsel (Passthroughs & Special Industries). However, other personnel from the

Treasury Department and the IRS participated in its development. For further

information regarding this revenue procedure, call the energy security guidance

contact number at (202) 317-5254 (not a

toll-free number).

26 CFR 1.1441-1(e)(5) and (6). 2023 Qualified

Intermediary Agreement.

Rev. Proc. 2022-43

SECTION 1. PURPOSE

.01 In General. This Revenue Procedure sets forth the final qualified intermediary (QI) withholding agreement (QI

agreement) entered into under §1.14411(e)(5) that applies beginning January

1, 2023 (the 2023 QI Agreement). In

general, the QI agreement allows certain

persons to enter into an agreement with

the Internal Revenue Service (IRS) to

simplify their obligations as withholding agents under chapters 3 and 4 and

as payors under chapter 61 and section

3406 for amounts paid to their account

holders and allows certain persons to act

as qualified derivatives dealers (QDDs)

and assume primary withholding and

reporting responsibilities on all dividend

equivalent payments they make. The

2023 QI Agreement also allows foreign

persons to enter into the agreement for

purposes of the withholding and reporting required under sections 1446(a) and

(f) with respect to their account holders holding interests in publicly traded

partnerships.

SECTION 2. SCOPE

.01 Entities Eligible to Execute a

QI Agreement. A QI agreement may be

entered into by persons described in

§1.1441-1(e)(5)(ii), including foreign

financial institutions (FFIs) (as defined

in §1.1471-5(d)), foreign clearing organizations, and foreign branches of U.S.

Bulletin No. 2022–52

financial institutions and clearing organizations. An eligible entity (as defined in

§1.1441-1(e)(6)(ii)) may also enter into a

QI agreement for purposes of becoming a

QDD.

An FFI may apply to enter into a QI

agreement only with respect to its branches

operating in jurisdictions identified on the

IRS’s Approved KYC List and if the FFI is

able to, and agrees to, satisfy the requirements and obligations of (1) a participating FFI (including a reporting Model 2

FFI), (2) a registered deemed-compliant

FFI (including a reporting Model 1 FFI

and a nonreporting Model 2 FFI treated

as registered deemed-compliant), or (3)

a registered deemed-compliant Model 1

IGA FFI (as defined in section 2.17(C)

of the 2023 QI Agreement). An FFI that

is a certified deemed-compliant FFI

(including a nonreporting IGA FFI, as

defined in §1.1471-1(b)(83)) may enter

into a QI agreement if the FFI is able

to, and agrees to, assume the obligations

of, and to be treated as, (1) a participating FFI (including a reporting Model 2

FFI), (2) a registered deemed-compliant

FFI (including a reporting Model 1 FFI

or a nonreporting Model 2 FFI treated

as registered deemed-compliant), or (3)

a registered deemed-compliant Model

1 IGA FFI, with respect to all accounts

that it maintains (even if the FFI does not

intend to act as a QI for all of the accounts

it maintains). A central bank of issue may

enter into a QI agreement provided that

it meets and agrees to assume the obligations of, and to be treated as, (1) a participating FFI (including a reporting Model

2 FFI) or (2) a registered deemed-compliant FFI (including a reporting Model 1

FFI), with respect to any account that it

maintains that is held in connection with

a commercial financial activity described

in §1.1471-6(h) and for which it receives

a withholdable payment (as defined in

§1.1471-1(b)(145)). A foreign branch of a

U.S. financial institution or clearing organization may also apply to enter into a QI

agreement provided that it is a reporting

Model 1 FFI, or it agrees to assume the

requirements and obligations of a participating FFI (including a reporting Model

2 FFI).

An entity that is a territory financial

institution (territory FI) (as defined in

§1.1471-1(b)(130)) or a nonparticipating

Bulletin No. 2022–52

FFI (as defined in §1.1471-1(b)(82)) may

not apply to enter into a QI agreement.

A foreign corporation that is a non-financial foreign entity or NFFE (as defined

in §1.1471-1(b)(80)) that is described in

one of the categories in §1.1441-1(e)(5)

(ii) may also apply to enter into a QI agreement. An NFFE that seeks to act as an

intermediary on behalf of its shareholders

should not apply for QI status and instead

should apply for withholding foreign partnership status as a reverse hybrid entity.

An NFFE that enters into a QI agreement

to act an as intermediary on behalf of persons other than its shareholders will be

required to satisfy the withholding and

reporting requirements of §§1.1472-1(a)

and 1.1474-1(i) with respect to any NFFE

that is a beneficial owner for whom the

QI is acting with respect to a withholdable payment. Except for a QDD that is

a partnership or a branch of a partnership,

the QI agreement generally does not apply

to a foreign partnership or foreign trust. A

foreign partnership or foreign trust may

apply for status as a withholding foreign

partnership or withholding foreign trust.

See §§1.1441-5(c)(2)(ii) and 1.1441-5(e)

(5)(v).

.02 Effect on Other Documents. Revenue Procedure 2017-15, 2017-3 I.R.B.

437 (the 2017 QI Agreement), is superseded with respect to a QI’s requirements

that apply after December 31, 2022. A

QI agreement in effect before December

31, 2022, expires, in accordance with its

terms, on December 31, 2022.

SECTION 3. BACKGROUND –

Withholding and Reporting

Requirements under Chapters 3, 4,

and 61, and Sections 1446 and 3406.

.01 Withholding and Reporting under

Chapter 4 on Payments Made to FFIs and

Other Payees. Section 1471(a) requires a

withholding agent to deduct and withhold

a tax equal to 30 percent on any withholdable payment made to an FFI, unless

the FFI agrees to and complies with the

terms of the FFI agreement to satisfy the

obligations specified in section 1471(b)

(a participating FFI), is deemed to meet

the requirements under section 1471(b) (a

deemed-compliant FFI), or is treated as an

exempt beneficial owner under §1.14716. Section 1472(a) requires a withholding

571

agent to deduct and withhold a tax equal to

30 percent on any withholdable payment

made to an NFFE (other than an excepted

NFFE) unless such entity provides a certification that it does not have any substantial U.S. owners or provides information

regarding its substantial U.S. owners.

A participating FFI (including a

reporting Model 2 FFI) or registered

deemed-compliant FFI (other than a

reporting Model 1 FFI) will satisfy its

requirement to withhold under sections

1471(a) and 1472(a) on withholdable payments made to accounts held by entities

by withholding on accounts that the FFI

is required to treat as held by nonparticipating FFIs and recalcitrant account holders under the FFI agreement, §1.14715(f), or an applicable Model 2 IGA. See

the FFI agreement, the Model 2 IGA,

and §1.1471-5(f) for further withholding

requirements that may apply to FFIs and

the Model 2 IGA’s suspension of withholding on non-consenting U.S. accounts.

A QI that is a reporting Model 1 FFI or

a registered deemed-compliant Model 1

IGA FFI will satisfy its requirement to

withhold under section 1471(a) on withholdable payments made to accounts held

by entities by withholding on accounts

that the FFI is required to treat as held by

nonparticipating FFIs.

A participating FFI (including a

reporting Model 2 FFI), a registered

deemed-compliant FFI, and a registered

deemed-compliant Model 1 IGA FFI

must report certain account information

regarding each U.S. account (or U.S.

reportable account) that it maintains to

the extent required under the FFI agreement, §1.1471-5(f), or a Model 1 or

Model 2 IGA. A participating FFI (including a reporting Model 2 FFI) or a registered deemed-compliant FFI (other than

a reporting Model 1 FFI) must report

certain information about accounts that

it maintains that are held by recalcitrant

account holders (or non-consenting U.S.

accounts). A withholding agent making

payments to an NFFE that is not reported

by an FFI as a U.S. account (or U.S.

reportable account) is also required to

report withholdable payments made to an

NFFE (other than an excepted NFFE) with

substantial U.S. owners on Form 8966,

FATCA Report. See §§1.1472-1(b)(1)

(iii) and 1.1474-1(i). A withholding agent

December 27, 2022

(including a participating FFI or registered

deemed-compliant FFI) that is required to

withhold on a withholdable payment must

report the payment on Form 1042-S, Foreign Person’s U.S. Source Income Subject

to Withholding.

.02 Withholding and Reporting under

Chapter 3 on Payments to Foreign Persons. Sections 1441 and 1442 require a

withholding agent to deduct and withhold

a tax equal to 30 percent on any payment

of U.S. source fixed or determinable

annual or periodical (FDAP) income that

is an amount subject to withholding (as

defined in §1.1441-2(a)) made to a foreign

person (including the payment of a dividend equivalent under section 871(m)). A

lower rate of withholding may apply under

the Internal Revenue Code (the Code)

(for example, section 1443), the regulations, or an income tax treaty. Generally,

a withholding agent must also report these

payments on Form 1042-S regardless

of whether withholding is required. See

§1.1461-1(c) (covering amounts subject

to reporting).

.03 Backup Withholding under Section 3406 and Reporting on Payments

to Certain U.S. Persons under Chapter

61. Under sections 6041, 6042, 6045,

6049, and 6050N (chapter 61 or the

Form 1099 reporting provisions), payors

of interest, dividends, royalties, gross

proceeds from the sale of securities,

and other fixed or determinable income

must report payments made to certain

U.S. persons (that is, U.S. non-exempt

recipients or presumed U.S. non-exempt

recipients) on the appropriate Form 1099

unless an exception to reporting applies.

See §§1.6041-4(a); 1.6042-3(b)(1)(iii);

1.6045-1(g)(1)(i); 1.6049-5(b)(12); and

1.6050N-1(c)(1)(i). Under section 3406,

a payor must generally obtain a Form

W-9, Request for Taxpayer Identification Number and Certification, from a

U.S. non-exempt recipient receiving a

payment reportable on a Form 1099 or

must otherwise backup withhold under

section 3406 and report the payment on

Form 1099.

.04 Coordination of Withholding and

Reporting Requirements under Chapters 3

and 4. With respect to a withholdable payment that is subject to withholding under

chapter 4, a withholding agent may credit

any tax withheld under chapter 4 against

December 27, 2022

its liability for any tax due with respect to

the payment under chapter 3. A withholding agent is required to report on a single

Form 1042-S the information required

under both chapters 3 and 4 with respect

to a payment subject to withholding under

both chapters 3 and 4. With respect to a

withholdable payment that is not subject

to withholding under chapter 4 and that is

an amount subject to withholding under

chapter 3, a withholding agent is also

required to report on Form 1042-S the

applicable chapter 4 exemption code for

the payment and the recipient’s chapter 4

status.

.05 Responsibilities of Intermediaries

that Enter into QI Agreements. When the

IRS enters into a QI agreement with a foreign person (or foreign branch of a U.S.

person), that foreign person (or foreign

branch of a U.S. person) becomes a QI. A

QI is a withholding agent under chapters

3 and 4 and a payor under chapter 61 and

section 3406 for amounts that it pays to its

account holders. In addition, as described

in section 4.01 of this Revenue Procedure,

starting January 1, 2023, a QI may assume

withholding responsibilities under section

1446(a) for a distribution from a publicly

traded partnership (PTP) received on

behalf of an account holder and under section 1446(f) for an amount realized from

the transfer of a PTP interest paid to an

account holder that is the transferor of the

interest. The general obligations of a QI as

a withholding agent, broker, or payor are

described in section 1.01 of the QI agreement and are relevant to whether an event

of default occurs under section 11.06 of

the QI agreement.

A QI agreement also includes required

compliance procedures for QIs. Under

section 10 of the QI agreement, a QI is

required to have a responsible officer

adopt a compliance program and make

periodic certifications of compliance

on behalf of the QI for each three-year

certification period. The periodic certifications also include certain factual

information that is based in part on the

results of a periodic review of the QI’s

compliance with its QI agreement, which

is required to be conducted for one year

of the certification period by an independent reviewer except when the QI

obtains a waiver of its periodic review

requirement.

572

SECTION 4. SUMMARY

OF CHANGES TO THE QI

AGREEMENT

This section 4 outlines changes to the

QI agreement that are included in the

2023 QI Agreement set forth in section

6 of this Revenue Procedure. Section

4.01 of this Revenue Procedure generally

describes a QI’s requirements under sections 1446(a) and (f) that were proposed

to be added to the QI agreement in Notice

2022-23, 2022-20 I.R.B 1062, and modifications to those requirements included

in the 2023 QI Agreement. Section 4.02

of this Revenue Procedure describes the

requirements for QIs acting as QDDs or

as intermediaries with respect to payments

of dividend equivalents for purposes of

section 871(m). Section 4.03 of this Revenue Procedure describes changes included

in the 2023 QI Agreement that relate to

stakeholder remarks regarding the 2017

QI Agreement received following its

publication. Section 4.04 of this Revenue Procedure describes modifications

to the compliance and certification procedures for QIs, which relate to sections

1446(a) and (f) or are otherwise included

in the 2023 QI Agreement for improved

compliance. Section 4.05 of this Revenue

Procedure describes a limited number of

changes included in the 2023 QI Agreement that are not described elsewhere in

this section 4.

.01 QI’s Requirements under Sections

1446(a) and (f). Section 1446(a) requires

withholding by a partnership on its effectively connected income allocable to a

foreign partner for a taxable year at the tax

rates specified in section 1446(b). In the

case of a PTP, however, an entity treated

as a nominee under §1.1446-4(b)(3) for a

PTP distribution made to a foreign partner

is a withholding agent for the distribution

and is required to withhold a tax under

section 1446(a) to the extent required

under §1.1446-4(d). A nominee or broker

holding a PTP interest is also required to

comply with partner reporting requirements under §1.6031(c)-1T.

With respect to transfers of partnership

interests, sections 864(c)(8) and 1446(f)

were added to the Internal Revenue Code

(the Code) by the Tax Cuts and Jobs Act,

Pub. L. 115-97 on December 22, 2017.

Section 864(c)(8) generally provides that

Bulletin No. 2022–52

gain or loss derived by a foreign person

on the sale or exchange of an interest in a

partnership engaged in a trade or business

within the United States is treated as effectively connected gain or loss to the extent

provided in that section. Section 1446(f)

(1) generally provides that if any portion

of the gain on any disposition of an interest in a partnership would be treated under

section 864(c)(8) as effectively connected

with the conduct of a trade or business

within the United States, then the transferee of the interest must withhold a tax

equal to 10 percent of the amount realized

on the disposition.

On November 30, 2020, in TD 9926,

85 FR 76910, final regulations were

published that (1) impose withholding

requirements under section 1446(f) on

brokers (including QIs) that effect transfers of PTP interests and (2) amend certain

of the provisions of §1.1446-4 (relating to

withholding on PTP distributions) that

apply beginning January 1, 2023, including allowing a QI to act as a nominee by

assuming withholding on a PTP distribution (the final regulations). See Notice

2021-51, 2021-36 I.R.B. 361, regarding

the effective date of these provisions of

the final regulations.

On May 16, 2022, the Treasury Department and the IRS released Notice 202223, providing proposed changes to the QI

agreement to permit a QI to assume certain withholding and reporting responsibilities under sections 1446(a) and (f). The

proposed changes to the QI agreement in

Notice 2022-23 cover the documentation,

withholding, and reporting requirements

applicable to QIs receiving payments of

PTP distributions (including amounts

subject to section 1446(a)) and amounts

realized under section 1446(f) on behalf

of account holders. For withholding by

QIs on amounts realized paid on transfers

of PTP interests, the proposed changes

incorporate the exceptions to withholding

provided in §1.1446(f)-4. For PTP distributions, the proposed changes require

withholding by a QI acting as a nominee

for a distribution under §1.1446-4 and

to the extent withholding is otherwise

required under section 3.02(C) of the

QI agreement (covering a QI’s residual

withholding requirement). The proposed

changes allow a QI to assume withholding under section 1446(a) or (f) on a

Bulletin No. 2022–52

payment-by-payment basis and also allow

a QI to act as a disclosing QI by providing

specific payee documentation to its withholding agent for the payment of a PTP

distribution or amount realized from the

sale of a PTP interest, thereby generally

relieving the QI from withholding and

reporting on those payments.

With respect to a QI’s documentation

of account holders for sections 1446(a)

and (f), consistent with requirements for

1446(a) and (f) purposes, a proposed

requirement in Notice 2022-23 provides

that a withholding certificate is not considered valid without a U.S. TIN for the

account holder on the withholding certificate. With respect to a QI’s reporting, the

proposed changes in Notice 2022-23 specify the requirements for QIs to report partner information regarding account holders

holding PTP interests, which are generally derived from the requirements of

§1.6031(c)-1T to facilitate the issuance of

partner statements under section 6031(b)

when nominees hold partnership interests.

Notice 2022-23 also proposed requirements for a QI’s reporting on Forms

1042-S for payments subject to withholding under section 1446(a) or (f), including a requirement regarding a QI’s issuance of a payee-specific Form 1042-S that

reports withholding under section 1446(a)

or (f). Notice 2022-23 further proposed a

restriction on a QI’s filing of a collective

refund for overwithholding under section

1446(a) or (f), material failures and events

of default specific to a QI’s requirements

under sections 1446(a) and (f), and other

modifications to the QI agreement relating

to these proposed changes. Finally, consistent with the final regulations, Notice

2022-23 proposed to permit a QI to apply

the reimbursement and set-off procedures for overwithholding under sections

1446(a) and (f).

Notice 2022-23 did not, however,

include proposed changes to the compliance procedures for QIs under section 10

of the 2017 QI Agreement or the certifications and related information a QI must

provide for each certification period (generally in Appendix I to the 2017 QI Agreement) for purposes of its requirements

under sections 1446(a) and (f). Instead,

Notice 2022-23 requested comments on

these provisions; however, none were

received.

573

Subject to certain modifications, generally in response to comments received,

the 2023 QI Agreement incorporates the

changes proposed in Notice 2022-23.

This section 4.01 highlights comments

and modifications to Notice 2022-23 that

are included in the 2023 QI Agreement.

The 2023 QI Agreement also includes

compliance and certification procedures

for QIs relating to sections 1446(a) and

(f), which are described, together with

other changes to those procedures, in section 4.04 of this Revenue Procedure. For

the conditions in the 2023 QI Agreement

regarding a QI’s issuance of a payee-specific Form 1042-S (including to report

withholding under section 1446(a) or

(f)), see section 4.03(7) of this Revenue

Procedure. For references to general documentation validity standards applicable

to sections 1446(a) and (f) not included

in Notice 2022-23, see section 5.10(A) of

the 2023 QI Agreement.

(1) Requirement to collect U.S. TINs.

Comments expressed concern with a proposed requirement in Notice 2022-23 that

would require QIs to obtain U.S. TINs

from their foreign account holders receiving PTP distributions or amounts realized

in order to treat documentation as valid

for purposes of sections 1446(a) and (f).

The comments raised concerns that, due

to this requirement, a QI might be found

in default of its QI agreement with respect

to section 5.01(A) of the QI agreement

(prescribing best efforts to collect valid

documentation) when it is unable to collect U.S. TINs from a significant number

of its account holders despite having properly withheld based on the documentation

obtained. Comments also proposed that

QIs be provided a transition period to collect U.S. TINs from their account holders

for purposes of section 1446(a) or (f) given

that collecting U.S. TINs from foreign

account holders is generally not required

of a QI for chapter 3 and 4 purposes (and,

thus, may have to be requested after otherwise valid documentation is collected).

One comment requested a “best efforts”

safe harbor for QIs to request U.S. TINs

based on the reasonable cause exception to penalties for missing TINs under

§301.6724-1(e) (such as an initial TIN

solicitation and two follow-up solicitations), while another comment requested

that a QI’s failure to obtain U.S TINs not

December 27, 2022

be treated as a material failure or an event

of default under the QI agreement.

In response to these comments and difficulties that QIs generally may encounter in obtaining U.S. TINs from all their

account holders holding PTP interests, the

2023 QI Agreement provides solicitation

requirements that QIs will be required

to apply for collecting U.S. TINs from

their account holders receiving PTP distributions or amounts realized beginning

January 1, 2023. These requirements are

similar to those for payors to establish

that a failure to provide TINs is due to

the failure of the payee to provide information for purposes of obtaining a waiver

from penalties for missing TINs on Form

1099 based on reasonable cause under

§301.6724-1(e). When a QI satisfies these

requirements, the QI will be considered to

have applied its “best efforts” to obtain the

U.S. TINs of its account holders receiving PTP distributions or amounts realized under section 5.01(A) of the 2023

QI Agreement. The 2023 QI Agreement

makes clear, however, that this allowance does not affect a QI’s requirement to

collect valid documentation with a U.S.

TIN to apply reduced withholding under

section 1446(a) or (f) based on the status

of an account holder for any year, including a foreign partnership or trust account

holder (as also required for a foreign partnership or trust in the instructions to Form

W-8IMY, Certificate of Foreign Intermediary, Foreign Flow-Through Entity, or

Certain U.S. Branches for United States

Tax Withholding and Reporting).

(2) Requirements for disclosing QIs.

Comments also raised concerns with the

proposed requirement in Notice 2022-23

that a QI must, when acting as a disclosing QI for a payment of a PTP distribution or amount realized from the sale

of a PTP interest, act as a disclosing QI

for the entire amount of the payment.

Because this requirement could apply

when multiple account holders of a QI

receive a payment of a PTP distribution

or amount realized from the sale of a PTP

interest, the comments noted that a QI’s

failure to provide valid documentation

to its withholding agent for any account

holder (which includes a U.S. TIN for

the account holder) would prevent the

QI from acting as a disclosing QI with

respect to all account holders receiving

December 27, 2022

the payment. One comment requested that

a QI be permitted to act as a disclosing

QI on both an account-by-account and

payment-by-payments basis. The comment also requested that disclosing QIs

be permitted to apply the documentation

requirements applicable to nonqualified

intermediaries, an allowance that would

not require a disclosing QI to provide

valid payee documentation to its withholding agent when reduced withholding

is not sought. Another comment more specifically requested that a disclosing QI be

permitted to provide documentation to its

withholding agent for a foreign account

holder that does not include a U.S. TIN.

Finally, another comment requested clarification on whether a QI would be permitted to act as a disclosing QI for a U.S.

account holder (in addition to its foreign

account holders).

The 2023 QI Agreement incorporates

the requirement of Notice 2022-23 that

a QI must act as a disclosing QI for the

entire amount of a PTP distribution or

amount realized from the sale of a PTP

interest. Retaining this requirement will

prohibit a disclosing QI from acting as a

nonqualified intermediary with respect to

any account holder receiving a payment

of a PTP distribution or amount realized

and will thereby require the QI to withhold to the extent required under the 2023

QI Agreement due to underwithholding

by its withholding agent on the amount

paid to the account holder. See sections

3.02(C) and 10.05(C)(9) of the 2023 QI

Agreement (covering, respectively, a QI’s

residual withholding requirement and a QI

reviewer’s requirement to determine any

underwithholding when a QI acts as a disclosing QI).

In consideration of the comments,

however, the 2023 QI Agreement clarifies

the requirements of a disclosing QI with

respect to the specific payee documentation it provides to its withholding agent

for a foreign partner. Under the 2023 QI

Agreement, this documentation must

be a Form W-8 for each foreign partner

receiving the payment, but without regard

to whether the Form W-8 includes a U.S.

TIN. This provision addresses concerns

that a QI would not otherwise be permitted to act as a disclosing QI for the entire

amount of a payment made to multiple

account holders due to any account holder

574

failing to provide its U.S. TIN despite

the QI’s efforts to obtain the TIN under

section 5.01(A) of the 2023 QI Agreement. See section 4.01(1) of this Revenue

Procedure.

Concerning whether a QI may act as a

disclosing QI for a payment allocable to a

U.S. account holder, the Treasury Department and the IRS intended this result as

part of Notice 2022-23. For clarification,

the 2023 QI Agreement adds a reference

to Form W-9, Request for Taxpayer Identification Number and Certification, as part

of the specific payee documentation that a

disclosing QI may provide to its withholding agent.

(3) Partner information reporting. For

a QI not acting as a disclosing QI for a

PTP distribution or amount realized paid

to an account holder, Notice 2022-23

proposed to require that the QI issue to

the account holder the statement that is

described in §1.6031(c)-1T(h). Section

1.6031(c)-1T(h) requires this statement

to include information that generally corresponds to the information that the PTP

would have provided the account holder

on a Schedule K-1 (Form 1065)). The

requirement to issue this statement would

apply unless the QI is able to provide to

the PTP (or the PTP’s agent) the statement

specified in §1.6031(c)-1T(a) with respect

to the account holder.

A comment on this proposed requirement requested the allowance of a simplified or modified Schedule K-1 that a QI

would be permitted to issue to an account

holder in lieu of a separate statement for

purposes of §1.6031(c)-1T(h). In response

to this comment, the 2023 QI Agreement

permits a QI to issue the statement by providing to the account holder the Schedule

K-1 issued by the PTP to the QI when the

QI includes with the Schedule K-1 supplemental information determined by the QI

indicating the percentage of each amount

on the Schedule K-1 applicable to the

account holder.

For a QI acting as a disclosing QI

for a PTP distribution or amount realized paid to an account holder, Notice

2022-23 proposed a requirement for the

QI to provide the statement specified

in §1.6031(c)-1T(a) to the PTP (or the

PTP’s agent) or to the QI’s nominee for

the payment. Comments asserted that

providing this statement to a nominee is

Bulletin No. 2022–52

unnecessary when the nominee maintains

fully segregated and disclosed accounts

for the account holders of a disclosing QI

receiving these payments because the QI

would already have provided the nominee with the partner information for the

nominee to report under §1.6031(c)-1T(a)

with respect to the PTP interests held by

the QI. In response to these comments,

the 2023 QI Agreement provides that the

statement specified in §1.6031(c)-1T(a) is

not required to be provided to a QI’s nominee to the extent the nominee maintains

fully segregated and disclosed accounts

for the disclosing QI’s account holders

that include the information for the PTP

to issue the statement. With respect to the

information required on a statement provided by a QI under §1.6031(c)-1T(a), the

2023 QI Agreement specifies that it must

include a U.S. TIN for a foreign account

holder only when provided by the account

holder to the QI.

With respect to the definition of a

nominee included in Notice 2022-23,

one comment noted that the term “nominee” is defined by reference to the definition under §1.1446-4(b)(3) (covering only nominees permitted to assume

withholding on PTP distributions under

section 1446(a)) and questioned whether

this definition should apply for purposes

of proposed section 8.07 of the 2023 QI

Agreement. In response to this comment,

the 2023 QI Agreement defines a nominee

for purposes of section 8.07 to mean any

entity that holds a PTP interest directly or

indirectly for another person (similar to

the term as used in §1.6031(c)-1T(a)).

(4) Validity period for section 1446

documentation. Comments requested

clarification on whether a QI would be

required to obtain revised documentation

from account holders for each payment of

a PTP distribution or amount realized from

the sale of a PTP interest, noting that certain proposed revisions in Notice 2022-23

suggested a payment-by-payment requirement for collecting documentation. The

Treasury Department and the IRS did not

intend to establish a requirement as raised

in these comments and note that references in Notice 2022-23 to a QI’s assumption of withholding on a payment of a PTP

distribution or amount realized from the

sale of a PTP interest were intended to

distinguish those payments from chapter 3

Bulletin No. 2022–52

payments (for which a QI may separately

assume withholding responsibilities).

In response to these comments, section

5.11(A) of the 2023 QI Agreement indicates that the validity period of documentation for purposes of section 1446(a) or

(f) is the same as the validity period that

otherwise applies to documentation under

section 5.11(A) of the 2023 QI Agreement

(covering documentation other than a

Form W-9).

(5) Allowance for collective refunds. A

comment requested that QIs be permitted

to file collective refunds for overwithholding under sections 1446(a) and (f) with

respect to their account holders to the same

extent permitted for chapter 3 payments.

This comment is not adopted as account

holders receiving payments subject to

withholding under section 1446(a) or (f)

are required to file U.S. income tax returns

to report these payments and should claim

any associated credits or refunds of the

withholding on those returns (and report

any other income required on the return).

See §§1.6012-1(b) and 1.6012-2(g). Thus,

the 2023 QI Agreement includes the same

restriction on a QI’s use of the collective

refund procedures for overwithholding

under section 1446(f) or on a PTP distribution as in Notice 2022-23.

(6) Presumption rule for section

1446(a) withholding. Section 5.13(C)

of the 2017 QI Agreement provides presumption rules for a QI withholding on

payments that cannot be reliably associated with valid documentation under section 5.13(B) of the 2017 QI Agreement.

For a payment subject to withholding

under section 1446(a), Notice 2022-23

proposed to allow QIs to presume the status of an account holder when they cannot

reliably associate the payment with valid

documentation, which would require the

QI to treat a partner in a PTP as a foreign

person, with the rate of withholding determined under §1.1446-4(d)(1)(iii). Because

§1.1446-4(d)(1)(iii) applies for determining the rate of withholding in those cases

only when a nominee also does not receive

a qualified notice for a PTP distribution (or

otherwise cannot determine the income

associated with the distribution based on

the notice), the reference to §1.1446-4(d)

(1)(iii) does not cover all cases in which

a QI would be required to determine the

rate of withholding under section 1446(a)

575

due to the absence of valid documentation

associated with a partner. As a result, the

2023 QI Agreement also includes a reference to the presumption rule of §1.14461(c)(3) for a QI to determine the status of

a partner as a foreign individual or corporation (and, thus, the rate of withholding)

when the QI cannot reliably associate a

payment subject to section 1446(a) withholding with valid documentation from a

partner in cases not covered by the rule in

§1.1446-4(d)(1)(iii).

.02 Provisions Applicable to Qualified Derivatives Dealers and Qualified

Security Lenders. The 2017 QI Agreement includes the requirements for QIs

acting as QDDs and the requirements of

QIs with respect to payments of dividend

equivalents they receive in an intermediary capacity for purposes of regulations

issued under sections 871(m), 1441, 1461,

and 1473 (section 871(m) regulations).

The 2017 QI Agreement requires a QI acting as a QDD to act as a QDD for all payments made as a principal with respect to

potential section 871(m) transactions and

all payments received as a principal with

respect to potential section 871(m) transactions and underlying securities, excluding any payments made or received to the

extent treated as effectively connected

with the conduct of a trade or business

within the United States. The 2017 QI

Agreement generally provides that a QDD

must assume primary withholding responsibility for purposes of chapters 3 and 4

and section 3406 for all payments it makes

as a QDD and that a QDD is subject to

withholding on dividends (including

deemed dividends) other than dividends

the QDD receives in its equity derivatives

dealer capacity in calendar year 2017. The

2017 QI Agreement requires that a QI

must act as a QDD for any securities lending or sale-repurchase transaction it enters

into that is a section 871(m) transaction

unless it is acting as an intermediary in the

transaction. The 2017 QI Agreement also

provides rules for how a QDD calculates

its section 871(m) amount and determines

its QDD Tax Liability and its requirements

to report payments on Forms 1042-S. For

further information on the requirements

for QIs to act as QDDs and for withholding on payments of dividend equivalents

and on dividends paid to QDDs, see

§§1.1441-1(e)(6) and 1.871-15. Finally,

December 27, 2022

the 2017 QI Agreement permits a QI to

act as a qualified securities lender (QSL)

in accordance with Notice 2010-46, 201024 I.R.B. 757, but only to the extent that

a QI acts as an intermediary with respect

to payments of substitute dividends when

the QI is not acting as a QDD, and only

for 2017.

Following the publication of the 2017

QI Agreement, the Treasury Department

and the IRS published a series of notices

that deferred the full application of certain provisions of the section 871(m)

regulations, including certain of the

requirements applicable to QDDs, and the

requirement for withholding on payments

of dividends received by QDDs in their

equity derivatives dealer capacity. These

notices also extended the allowance for

QIs to continue to act as QSLs and apply

the provisions of Notice 2010-46, Part III

after 2017. Most recently, on September

12, 2022, the Treasury Department and the

IRS published Notice 2022-37, 2022-37

IRB 234, which extended the prior transition relief for another two years, generally

through calendar year 2024. The portions

of Notice 2022-37 that are relevant to the

2023 QI Agreement are discussed herein.

Similar to the 2017 QI Agreement, Part

V of Appendix 1 to the 2023 QI Agreement reserves on the factual information

required to be reported for a QDD with the

periodic certification, and Appendix II to

the 2023 QI Agreement does not include

a sample of QDD accounts. This information is anticipated to be added to the 2023

QI Agreement in a notice or revenue procedure that will set forth a rider to include

this information and any changes to the

requirements of QDDs deemed necessary.

For the QDD provisions, the 2023 QI

Agreement generally retains the provisions of the 2017 QI Agreement with

some clarifications, including some guidance for QDDs that are a partnership or

a branch of partnership (either, a “QDD

Partnership”). The 2023 QI Agreement

also reflects portions of prior Frequently

Asked Questions (FAQs) to supplement

the 2017 QI Agreement, which are available at: https://www.irs.gov/businesses/

corporations/qualified-intermediary-general-faqs and Notice 2022-37. Consistent

with the 2017 QI Agreement, if a QI acts

as a QDD with respect to the home office

or branch, the home office or branch, as

December 27, 2022

applicable, must act as a QDD for all payments made as a principal with respect to

potential section 871(m) transactions and

all payments received as a principal with

respect to potential section 871(m) transactions and underlying securities, excluding any payments made or received to the

extent treated as effectively connected

with the conduct of a trade or business

within the United States. It may not act as

a QDD with respect to any other payments.

It is expected that additional guidance will

be provided regarding dividend equivalents and QDDs in the future. Below is a

summary of the significant changes from

the 2017 QI Agreement relating to section

871(m).

(1) QSL. Notice 2022-37 extended

the period that withholding agents may

apply the QSL rules provided in Notice

2010-46, Part III, for U.S. source substitute dividend payments made in calendar

year 2023 and 2024. Under the 2023 QI

Agreement, a withholding agent may not

act as a QSL for payments made after

calendar year 2024. Until December 31,

2024, if a QI that is not acting as a QDD

acts as a QSL, it must act as a QSL and

assume primary withholding responsibility (including Form 1099 reporting) for all

substitute dividends received and paid by

the QI when acting as an intermediary or

dealer with respect to securities lending

and similar transactions. A QI that acts

as a QDD may not act as a QSL, except

as described in the prior sentence with

respect to payments on securities lending

or sale-repurchase transactions for which

the QI has determined that it is acting as an

intermediary. QIs acting as intermediaries

(but not as QSLs) for substitute dividends

must also assume primary withholding

responsibility with respect to all substitute

dividends when acting as intermediaries.

(2) Reporting and compliance.

(a) Reporting. Under the 2023 QI

Agreement, a QDD must assume primary

chapter 3 and chapter 4 withholding and

reporting responsibility and primary Form

1099 reporting and backup withholding responsibility under section 3406 for

payments made as a QDD with respect

to potential section 871(m) transactions.

In addition, a QI acting as a QDD (other

than a QDD that is a foreign branch of a

U.S. financial institution and as modified

for QDD Partnerships, discussed below)

576

remains liable for its QDD Tax Liability and must report that liability on the

appropriate U.S. tax returns. U.S. financial institutions and U.S. partners of any

QDD Partnership must pay appropriate

U.S. taxes on the relevant QDD’s activities. The 2023 QI Agreement clarifies that

a QI that is a QDD (or has a branch that is

a QDD) should file (1) a Form 1120 if it is

a domestic corporation, (2) a Form 1120-F

if it is a foreign corporation, or (3) a Form

1065 if it is a partnership. In addition, all

QDD Partnerships must file Forms 1042-S

with respect to any amounts under section

3.09 of the 2023 QI Agreement, as modified for a QDD Partnership, allocated to

each of their foreign partners. The Form

1120-F or 1065, as applicable, must be

filed whether or not it would have to be

filed if the entity were not a QDD (for

example, a foreign corporation cannot

rely on the exceptions to filing in the

Form 1120-F). Although the Form 1065

does not have a Schedule Q, each QDD

of a QDD Partnership must provide comparable information, as detailed in section

7.01(C) of the 2023 QI Agreement.

(b) Compliance. While a QDD is not

required to perform a periodic review for

calendar years 2023 and 2024 with respect

to its QDD activities, the 2023 QI Agreement requires a QDD to certify, as part

of its periodic certification, that it made a

good faith effort to comply with the section 871(m) regulations and relevant provisions of the 2023 QI Agreement. The

2023 QI Agreement clarifies that in order

to rely on the good faith effort standard,

a QI must provide the information previously specified by FAQ #19 – Certifications and Periodic Reviews for the 2017

QI Agreement.

In addition, the 2023 QI Agreement

adds that a QDD must include information about dividends that are received in

its equity derivatives dealer capacity on its

withholding statement for calendar years

2023 and 2024 (which may be done by

designating one or more accounts, if the

only dividends that can be received by

those accounts are in the QDD’s equity

derivatives dealer capacity).

(3) QDD partnership. The 2023 QI

Agreement provides guidance on how

the agreement applies to a QDD Partnership. For example, the 2023 QI

Agreement provides that the QDD Tax

Bulletin No. 2022–52

Liability for each QDD of a QDD Partnership is the gross income components

of the section 3.09 amounts, instead of

the amounts of tax liability under section

881, and that it includes any withholding required to be done by the partnership with respect to its partners. It also

ensures that QDD Partnerships and

their partners retain the same dividend

equivalent payment timing as non-partnerships, and therefore requires that a

QDD Partnership determine the QDD

Tax Liability of its partners and any dividend equivalent payments in the QDD’s

non-equity derivative dealer capacity on

the date provided in §1.871-15(j)(2) for

the applicable dividend for withholding and reporting purposes. In addition,

a QDD partnership must include either

withholding rate pool information or

specific payee information regarding its

partners when it provides a withholding

statement under section 6.02 of the 2023

QI Agreement and must file a recipient

specific Form 1042-S for each foreign

partner in connection with its withholding requirement under section 3.09 of

the 2023 QI Agreement.

(4)

Clarifications

and

FAQ

incorporations.

(a) Naming convention. Under the

2023 QI Agreement, each QDD must separately qualify and be approved for QDD

status. In applying for QDD status, the

applicant must follow the naming convention described in section 2.63 of the

2023 QI Agreement on its application

and, if approved as a QDD, on any other

tax forms or other materials for which the

QDD must be identified. This is the same

naming convention that was previously

described in an FAQ #13 – Certifications

and Periodic Reviews for the 2017 QI

Agreement.

(b) Eligible entity. The 2023 QI Agreement revises the eligible entity definition

in section 2.23 to conform to §1.14411(e)(6)(ii). As noted in a prior FAQ #14

– New Applications/Renewals, the “any

other person otherwise acceptable to the

IRS” category is not intended to function

as a significant expansion of the definition

of eligible entity. If an applicant does not

satisfy one of the specific categories, the

applicant should explain why its facts are

very similar to a specified category and

describe how it is regulated.

Bulletin No. 2022–52

this Revenue Procedure.

.03 Stakeholder Remarks on 2017

QI Agreement. Following publication

of the 2017 QI Agreement, stakeholders

requested clarification on certain of its

provisions, some of which were addressed

as part of FAQs (in addition to the FAQs

related to QDDs referenced in section

4.02 of this Revenue Procedure). This section 4.03 summarizes those stakeholders’

remarks and the related changes that are

included in the 2023 QI Agreement.

(1) Beneficiaries of certain tax-free

plans as direct account holders – Sec.

2.02. The 2017 QI Agreement defines

a direct account holder as any account

holder who has a direct relationship with

a QI that is an FFI (which includes a flowthrough entity such as a grantor trust). A

stakeholder noted uncertainty in the 2017

QI Agreement on whether this definition

could be applied to certain tax-free savings accounts that are treated as trusts

under applicable non-U.S. local law but

have a single grantor and beneficiary

who is treated as the account holder for

purposes of a QI’s anti-money laundering/know-your-customer

(AML/KYC)

requirements. The stakeholder requested

clarification on whether a QI may treat the

sole beneficiary of the trust in these cases

as a direct account holder of an account

held by the trust, a treatment that would

result in more favorable documentation

requirements for a QI than treating the

beneficiary as an indirect account holder.

In response, the IRS issued FAQ #4 –

Provisions for 2017 QI Agreement, which

allows a QI to treat the beneficiary of a

tax-free plan as a direct account holder,

provided that several requirements are

met. The 2023 QI Agreement adopts the

requirements of FAQ #4 in the definition of a direct account holder in section

2.02(A).

(2) KYC Attachments as part of QI

agreement – Sec. 2.03. Unlike QI agreements that preceded the 2017 QI Agreement, the 2017 QI Agreement was not

printed and signed in hard copy. As a

result, the 2017 QI Agreement did not

include the references to “KYC Attachments” for purposes of the IRS-approved

attachments applicable to a QI that had

been affixed to prior QI agreements. Due

to this change, a stakeholder raised its

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concern that the 2017 QI Agreement did

not incorporate the KYC Attachments relevant to a QI. As a result, the IRS issued

FAQ #3 – Provisions for 2017 QI Agreement, which states that the IRS did not

intend to change the applicability of the

approved KYC Attachments in the 2017

QI Agreement, and that QIs may treat

an approved KYC Attachment as incorporated into their agreements. The 2023

QI Agreement incorporates this FAQ

by defining “Agreement” to include the

know-your-customer rules included in a

country attachment on IRS.gov relevant

to the QI (or a branch of the QI).

(3) Joint account treatment and certification of chapter 4 status - Sec. 4.05.

Under section 4.05(A)(1) of the 2017 QI

Agreement, a foreign partnership or trust

to which a QI applies joint account treatment must have a chapter 4 status as a certified deemed-compliant FFI (other than

a registered deemed-compliant Model

1 IGA FFI), an owner-documented FFI

with respect to a QI, an exempt beneficial owner, or an NFFE, or it must be

covered as an account that is excluded

from the definition of financial account

under Annex II of an applicable IGA or

under §1.1471-5(a). Additionally, a QI is

required to obtain from each partnership

or trust a certification indicating that the

partnership or trust maintained a permissible chapter 4 status during the QI’s

entire certification period and must, as

part of Appendix I to the 2017 QI Agreement, indicate that it was provided these

certifications.

Stakeholders remarked that requiring

QIs to obtain chapter 4 certifications for

each certification period is burdensome

given the significant number of partnerships and trusts to which many QIs apply

joint account treatment. The stakeholders

noted that, aside from this requirement, a

withholding agent or QI may continue to

rely on a chapter 4 status represented on a

Form W-8IMY from a partnership or trust

until the QI has reason to know or actual

knowledge that it is unreliable or incorrect

(and which a partnership or trust must otherwise update when applicable).

In response, the IRS released FAQ #11

– Certifications and Periodic Reviews.

This FAQ allows a QI to rely upon a valid

Form W-8IMY it has on file (and which a

QI may rely on under section 5.10 of the

December 27, 2022

2017 QI Agreement) to determine a permissible chapter 4 status of a partnership

or trust for purposes of section 4.05 of the

2017 QI Agreement. Thus, if a QI properly relies on a Form W-8IMY described

in the previous sentence, it is not required

to obtain an additional certification of

chapter 4 status from the partnership or

trust. Consistent with the FAQ, the 2023

QI Agreement omits the requirement

included in the 2017 QI Agreement for a

QI to obtain the additional certifications

regarding the chapter 4 statuses of partnerships and trusts for purposes of section

4.05 and the related requirement to make

the representation in Appendix I that it

received these certifications.

(4) Reporting limitation on benefits

category – Sec. 5.03. The 2017 QI Agreement requires QIs to collect and report on

Forms 1042-S the specific category of the

limitation on benefits (LOB) provision

claimed by an entity account holder. A

stakeholder requested that the IRS require

specific LOB information to be reported

only when a QI files a recipient-specific

Form 1042-S as otherwise QIs would be

required to report withholding rate pool

information separately for each LOB

category when filing Forms 1042-S. In

response to this request, section 5.03(B)

of the 2023 QI Agreement clarifies that

QIs are required to report the specific LOB

category claimed by an entity account

holder only on a recipient-specific Form

1042-S. See also section 8.02(P) of the

2023 QI Agreement and section 4.03(7) of

this Revenue Procedure.

(5) Validity standards for documentation – 5.10(B). Under section 5.10(B) of

the 2017 QI Agreement (providing validity standards for reliance on documentation), a QI that is a financial institution, an

insurance company, or a broker or dealer

in securities has reason to know that documentation provided by a direct account

holder is incorrect or unreliable only as

prescribed in §1.1441-7(b)(3). Section

1.1441-7(b)(3) cross-references §1.14417(b)(4) through (b)(9), which provides

requirements for reliance on documentation for claims of foreign status and

reduced withholding under an income tax

treaty. Section 1.1441-7(b)(5)(i) provides

that a withholding certificate furnished

to establish foreign status is incorrect or

unreliable if the withholding agent has

December 27, 2022

a current residence or mailing address

as part of its account information that is

an address in the United States. For an

account holder claiming treaty benefits

based on documentary evidence, §1.14417(b)(9)(i) provides that documentary

evidence is unreliable or incorrect if the

withholding agent has a current mailing or

current permanent residence address for

the direct account holder (whether or not

on the documentary evidence) that is outside the applicable treaty country or has

no permanent residence address for the

account holder.

Stakeholders noted that the cross-reference to §1.1441-7(b)(3) broadened the

validity standard applicable to a claim

of foreign status from that included in

prior versions of the QI agreement, which

required a QI to treat the claim as unreliable or incorrect based on having a U.S.

address for an account holder (rather than

a U.S. address in the account information). Stakeholders also remarked that by

requiring a permanent residence address

for an account holder claiming treaty benefits based on documentary evidence, the

2017 QI Agreement imposed a further

requirement for reliance on a treaty claim

not included in prior QI agreements.

In response, the IRS issued FAQs #1

and #2 – Provisions for 2017 QI Agreement. FAQ #1 states that a QI is required

to treat a Form W-8 provided by a direct

account holder as unreliable for purposes

of a claim of foreign status if the QI has

a U.S. mailing or permanent address for

the account holder. Additionally, FAQ #2

states that the IRS would not require a QI

to re-document a direct account holder

claiming treaty benefits for purposes of

section 5.10(B) of the 2017 QI Agreement, provided that it had documented the

account holder before January 1, 2018,

in accordance with the prior guidance

applicable to a QI. For a direct account

holder claiming treaty benefits and documented on or after January 1, 2018, FAQ

#2 did require that a QI have a permanent

residence address for the direct account

holder in the jurisdiction associated with

the documentary evidence.

Section 5.10(B) of the 2023 QI Agreement incorporates the conditions specified in both FAQs for a QI’s validity

requirements for relying on documentation. Additionally, as section 5.10(A) of

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the 2017 QI Agreement included only

a limited number of cross references to

regulations covering the validity requirements for withholding agents, the 2023

QI Agreement provides additional cross

references to the specific provisions of

those regulations and reorganizes section

5.10 with additional subsections for easier

reference. Section 5.10(A) also includes

cross references to regulations addressing

general validity standards applicable to

documentation for purposes of sections

1446(a) and (f).

(6) Curing hold mail instruction – Sec.

5.10(D). In 2017, in TD 9808, 82 FR

29719, the Treasury Department and the

IRS promulgated temporary regulations

(the 2017 temporary regulations), which

allow a withholding agent to treat an

address subject to a hold mail instruction

as a beneficial owner’s or account holder’s

permanent residence address, provided

that the withholding agent obtained documentary evidence establishing the person’s residence in the country for which

the person claimed to be a resident for

tax purposes. Comments received on the

2017 temporary regulations requested that

the hold mail rule be eliminated or otherwise that a withholding agent be allowed

to rely on documentary evidence merely

establishing a person’s foreign status

(including documentary evidence that

does not indicate an address). With respect

to the 2017 QI Agreement, a stakeholder

requested similar relief for QIs that receive

addresses subject to hold mail instructions

from their account holders.

In 2020, in TD 9890, 85 FR 192, the

Treasury Department and the IRS published final regulations (the 2020 final regulations) that modify the hold mail rules

set forth in the 2017 temporary regulations

to allow a withholding agent to treat an

account holder’s address subject to a hold

mail instruction as a permanent residence

address if the withholding agent obtains

documentary evidence that supports the

person’s claim of foreign status or, for a

claim of treaty benefits, the person’s residence in the country where the benefits

are claimed. For these purposes, the 2020

final regulations allow a withholding

agent to rely on documentary evidence

described in §1.1471-3(c)(5)(i), without regard to whether the documentation

contains a permanent residence address.

Bulletin No. 2022–52

Section 5.10(D) of the 2023 QI Agreement includes the same requirements as

the 2020 final regulations regarding when

a QI may treat an address subject to a hold

mail instruction as a permanent residence

address.

(7) Furnishing recipient-specific Form

1042-S to account holder – Sec. 8.02.

When overwithholding is applied to a payment made to a QI’s account holder and the

QI does not apply for a collective refund,

the 2017 QI Agreement requires the QI to

provide a recipient-specific Form 1042-S

when requested by the account holder. In

response to this requirement, stakeholders

raised various concerns. Some stakeholders requested a specified time limitation

regarding when an account holder should

be able to obtain a recipient-specific Form

1042-S from a QI. Additionally, a stakeholder further requested that QIs not be

required to issue a recipient-specific Form

1042-S to an account holder that does not

provide a U.S. TIN. Lastly, another stakeholder noted that an account holder may

need a Form 1042-S to support a credit for

withholding on its U.S. income tax return

even when no overwithholding occurred.

Notice 2022-23 proposed a modification to the QI agreement for the issuance

of a recipient-specific Form 1042-S for a

payment subject to withholding on a PTP

distribution or under section 1446(f). This

modification would require a QI to provide a recipient-specific Form 1042-S to

a foreign partner for a payment in those

cases only when the partner provides its

U.S. TIN (or indicates it has applied for

a TIN) to the QI and requests the form

within three calendar years of the year

of the payment for which the form is

requested. Comments on this proposed

requirement questioned whether a QI

should in all cases defer issuing a Form

1042-S until the account holder provides

its U.S. TIN to the QI.

In response to concerns and to broaden

the proposed modification in Notice 202223 to cover additional payments subject to

withholding, section 8.02(P) of the 2023

QI Agreement generally requires a QI to

provide an account holder with a recipient-specific Form 1042-S if the account

holder makes a written request for the

form within two calendar years following the year of the payment for which the

form is requested. If, however, a QI files a

Bulletin No. 2022–52

Form 1042-S to report a payment subject

to section 1446(a) or (f) withholding with

respect to an account holder that requests

a Form 1042-S for the same calendar year,

the request must be made in writing within

three calendar years of the year of the payment, and the QI must provide the account

holder with a separate Form 1042-S for

each amount reportable on Form 1042-S

that was paid to the account holder for the

calendar year.

The three-year period referenced in

the preceding sentence is intended to provide a foreign account holder additional

time to request a Form 1042-S due to its

own requirement to file a U.S. income

tax return to report an amount subject to

section 1446(a) or (f) withholding, which

applies regardless of whether its tax liability on the payment was fully satisfied

through the withholding. Also, since an

account holder may be required to file a

U.S. income tax return in those and certain other cases, even when not requesting

a refund of overwithholding, the 2023 QI

Agreement does not limit a QI’s requirement to issue a recipient-specific Form

1042-S to cases of overwithholding. Additionally, because the IRS requires that a

Form 1042-S used to support an account

holder’s credit for withholding claimed on

an income tax return include the account

holder’s U.S. TIN, the 2023 QI Agreement omits the allowance in Notice 202223 that permitted the account holder to

represent to a QI that it had applied for a

U.S. TIN when requesting a recipient-specific Form 1042-S. The requirement for

an account holder’s U.S. TIN applies to

any request for a recipient-specific Form

1042-S.

Finally, in the case of a recipient-specific Form 1042-S issued by a QI to an

account holder of a disclosing QI, the

2023 QI Agreement requires that the QI

also issue a recipient copy of the Form

1042-S to the disclosing QI. This requirement, which was not included in Notice

2022-23, was also added to the 2023

instructions for Form 1042-S for a withholding agent making payments of PTP

distributions or amounts realized to a QI

acting as a disclosing QI.

(8) Certification due date for third-year

review – Sec. 10.03. The 2017 QI Agreement requires a QI conducting a periodic

review for the third year of a certification

579

period to submit its periodic certification

by December 31 of the year following the

end of the certification period. Citing a

QI’s dependence on other parties in completing a periodic review, a stakeholder

requested that the IRS allow QIs selecting

the third year of a certification period for

their periodic reviews to have until June

30 of the second year following the certification period to submit their periodic certifications. The 2023 QI Agreement retains

the December 31 due date included in the

2017 QI Agreement. A QI, may, however,

seek an extension to this due date, which

will be considered on a case-by-case basis

by the IRS and granted under appropriate

circumstances.

(9) Standards of independence for

external reviewers – Sec. 10.04. A QI may

use either an internal or external reviewer

to conduct the periodic review required

by section 10.04 of the 2017 QI Agreement. The 2017 QI Agreement generally

describes the standard of independence

required of an external reviewer by specifying that the reviewer cannot review

systems, policies, or procedures that the

reviewer (or the reviewer’s firm) was

involved in designing, implementing, or

maintaining for a QI. Similarly, the preamble to the 2017 QI Agreement states

that a reviewer’s independence should be

determined on a firm-wide basis and that

the reviewer must have sufficient independence to objectively conduct the review

and cannot review his or her own work or

the work of others in the reviewer’s firm.

A stakeholder requested clarification

on the 2017 QI Agreement’s standard of

independence applicable to an external

reviewer and raised questions concerning

the application of the standard in certain

scenarios. In consideration of this request

and that the 2017 QI Agreement may have

prescribed an independence standard that

goes beyond external reviewers’ professional standards, the IRS issued FAQ #2

– Certifications and Periodic Reviews.

The FAQ states that the IRS will allow

an external reviewer of a QI to apply

the same standards of independence that

would otherwise apply to its engagement

to conduct the periodic review (such as

an engagement to perform “agreed upon

procedures”). In Section 10.04(A)(2), the

2023 QI Agreement adopts the allowance

provided in FAQ #2 for purposes of the

December 27, 2022

standard of independence for an external

reviewer.

(10) Final certification and periodic

review for terminating QIs – Sec. 11.05.

Section 11.02(B) of the 2017 QI Agreement requires a QI terminating its QI

agreement to submit a final certification

within six months of the date of termination regardless of whether a periodic

review has been completed for the portion of the certification period preceding

termination. For a case in which a QI terminates its QI agreement (predecessor QI)

and merges into or is acquired by another

QI that assumes the predecessor QI’s obligations relating to the predecessor QI’s QI

agreement (successor QI), section 11.05

of the 2017 QI Agreement provides that

either QI must deliver a notice of termination and merger to the IRS. Additionally,

the successor QI must provide the predecessor QI’s final certification and include

the predecessor QI in its periodic review

following the merger.

After publication of the 2017 QI Agreement, a stakeholder requested that the IRS

establish a coordinated approach for QIs

to conduct periodic reviews and make

periodic certifications following a merger

of QIs or an acquisition of a QI by another

QI to avoid duplicative certifications and

periodic reviews. The stakeholder suggested that the IRS allow separate certifications to be made by the predecessor

QI and successor QI or a consolidated

certification that covers both entities to be

submitted by the successor QI. In the case

of a consolidated certification, the stakeholder requested that the deadline for the

successor QI to submit a certification for

the predecessor QI be deferred from the

deadline for a terminating QI’s final certification to align with the deadline for the

successor QI’s next periodic certification.

The stakeholder also requested that, in

the event of a merger or acquisition, the

IRS require only one periodic review to

be conducted by the successor QI, which

would cover both entities for the final certification period of the predecessor QI.

Similar to the 2017 QI Agreement, the

2023 QI Agreement provides that a QI terminating its QI agreement must submit a

final certification within six months of termination. The 2023 QI Agreement specifically provides, however, that if a QI terminates its QI agreement in the final year of

December 27, 2022

a certification period, the QI must submit

a periodic review report covering one of

the two years before the year of termination that meets the requirements of section

10.06, unless the QI is granted a waiver

pursuant to section 10.07. Otherwise, no

periodic review is required for the final

certification period of a QI terminating its

QI agreement.

In consideration of the stakeholder

remarks above, the 2023 QI Agreement

includes certain changes to specify the

requirements for a QI’s termination that

are applicable to a predecessor QI and

successor QI. The 2023 QI Agreement

provides that if a predecessor QI merges

into or is acquired by a successor QI and

the predecessor QI is required to submit a

periodic review report due to its termination, the predecessor QI may satisfy this

requirement through a combined periodic

review.

Under the 2023 QI Agreement, a combined periodic review is a review that

covers one of the two years before the

year of the predecessor QI’s termination

and that includes accounts of both the

predecessor QI and successor QI for purposes of the review procedures in section

10.05 relating to documentation and withholding. This allowance should provide

for a reduced number of accounts to be

reviewed when a QI’s reviewer applies

a sampling methodology. See Appendix

II of the 2023 QI Agreement for requirements for a combined periodic review

based on a sampling of accounts.

Notwithstanding the performance of

a combined periodic review, the predecessor QI and successor QI must make

separate certifications for the period covered by the combined periodic review. A

predecessor QI may, however, obtain a

six-month extension from the deadline

to submit its final certification under section 11.02(B) of the 2023 QI Agreement,

provided that the request for extension

indicates that it is being made due to the

combined periodic review and is delivered

to the IRS before the deadline for the final

certification under section 11.02(B).

(11) Waiver of periodic review for

QI assuming withholding on substitute

interest – Appendix I. A QI may seek a

waiver of the requirement to conduct a

periodic review if the eligibility requirements in section 10.07(B) of the 2017 QI

580

Agreement are met. Section 10.07(C) of

the 2017 QI Agreement also requires a QI

seeking a waiver to provide the information described in Appendix I of the 2017

QI Agreement. For a QI assuming primary

withholding responsibility on payments of

substitute interest, Part VI of Appendix

I to the 2017 QI Agreement requires the

QI to provide certain information regarding these payments as part of its periodic

certification.

A stakeholder noted that a periodic

review must be completed for QIs to provide certain information requested in Part

VI of Appendix I. Because this information is required even when a QI requests

a waiver of the periodic review, a QI

assuming primary withholding responsibility on payments of substitute interest

would be unable to request a waiver. In

response, the IRS issued FAQ #12 – Certifications and Periodic Reviews, which

states that QIs assuming primary withholding responsibility for payments of

substitute interest and that are eligible for

a waiver of the periodic review requirement do not need to complete Part VI of

Appendix I of the 2017 QI Agreement.

The 2023 QI Agreement incorporates this

allowance in the general instructions to

Appendix I.

.04 Compliance Requirements for QIs.

The 2017 QI Agreement sets forth review

steps in sections 10.05(A) through (E) for

a QI’s reviewer to apply in conducting the

periodic review of a QI. These steps relate

to a QI’s compliance with its documentation, withholding and reporting requirements under chapters 3, 4 and 61 (including for payments of substitute interest and

QDD activities) and related provisions of

the 2017 QI Agreement. Appendix I to the

2017 QI Agreement includes the certifications and the factual information to be

furnished by a QI and the material failures

and events of default that a responsible

officer must consider in making a QI’s

periodic certifications. Appendix I further includes information and representations for a QI applying for a waiver of its

periodic review requirement. Appendix II

of the 2017 QI Agreement describes statistical sampling procedures that a QI’s

reviewer may use in conducting a periodic review, which take into account the

review steps set forth in section 10.05 of

the 2017 QI Agreement.

Bulletin No. 2022–52

The 2023 QI Agreement largely incorporates the review steps and compliance

requirements in the 2017 QI Agreement

and adds to those requirements for purposes of a QI’s responsibilities under sections 1446(a) and (f) which, as described

in section 4.01 of this Revenue Procedure,

were not included in Notice 2022-23

(except for material failures and events

of default relating to sections 1446(a) and

(f)). This section 4.04 sets forth a summary of the significant revisions made to

section 10 and Appendices I and II of the

2017 QI Agreement that are included in

the 2023 QI Agreement relating to a QI’s

requirements under sections 1446(a) and

(f) and other requirements that the Treasury Department and IRS have determined

are appropriate to add to the 2023 QI

Agreement for evaluating a QI’s compliance. This section 4.04 also describes new

Appendix III of the 2023 QI Agreement.

Although the 2023 QI Agreement adds

certain review steps and compliance procedures for QIs, the 2023 QI Agreement

does not amend the allowance that a QI’s

periodic review may be conducted for

any calendar year covered by the certification period. Thus, a QI acting as a QI

for purposes of withholding under section 1446(a) or (f) (in addition to its other

withholding responsibilities as a QI) may

select any year of its certification period

for the periodic review to the same extent

permitted under the 2017 QI Agreement.

(1) Revisions to section 10 of the QI

agreement.

(a) Periodic review procedures. The

2023 QI Agreement expands the scope

of the periodic review procedures in section 10.05 of the 2017 QI Agreement to

include a QI’s requirements under sections 1446(a) and (f) and other withholding on PTP distributions. For this purpose,

the procedures include a review of documentation associated with QI accounts

receiving PTP distributions and amounts

realized from the sale of PTP interests

to determine any documentation failures

and underwithholding on those payments.

A review step is specifically included to

determine any underwithholding applicable to a QI acting as a disclosing QI.

This step requires a reviewer to compare copies of the Forms 1042-S issued

by a QI’s withholding agent to the QI’s

account holders to determine whether the

Bulletin No. 2022–52

withholding reported was sufficient based

on the results of the documentation review

in section 10.05(A). A review step is also

added for purposes of a QI’s compliance

with the reporting required under section

8.07 of the 2023 QI Agreement. Another

review step is added to confirm that a QI

did not apply the joint account option

for purposes of section 1446(a) or (f) (a

restriction consistent with a proposed

modification in Notice 2022-23).

The review steps include certain other

changes from the 2017 QI Agreement.

Review steps are added to determine

whether a partnership or trust to which a

QI applies the joint account option has a

permitted chapter 4 status and, more generally, that a review for underwithholding

in these cases is performed when a QI

assumes withholding (in addition to when

a QI provides withholding rate pools). See

section 4.03(1) of this Revenue Procedure

and sections 10.05(B) and (C) of the 2023

QI Agreement. For the review steps for

payments included in withholding rate

pools, section 10.05(B) indicates that the

last payment of each income type made by

the QI for the year may (at a minimum)

be reviewed for determining any underwithholding. For a QI acting as a QSL

or otherwise acting as an intermediary

for substitute dividends, a review step is

added in section 10.05(C) for the requirement that a QI assume withholding on all

such payments (with a similar review step

added for a QI assuming withholding on

substitute interest payments). For section

10.05(D), a review step is added for a

reviewer to determine whether a QI failed

to report with respect to any of its U.S.

account holders. Finally, certain descriptions of review steps include a limited

number of non-substantive changes for

clarification.

(b) Designating compliance QI to execute Form 872. Under the 2017 QI Agreement, two or more QIs that are members

of a group of entities under common

ownership may establish a consolidated

compliance group (CCG) upon approval

by the IRS. Each QI that is a member of

a CCG (CCG member) must designate a

QI (Compliance QI) in the group to act

on its behalf for purposes of conducting

a consolidated periodic review and making a periodic certification. Additionally,

a Compliance QI must agree to be jointly

581

and severally liable for the obligations and

liabilities relating to the QI agreement of

any CCG member for the period covered

by the CCG.

The 2023 QI Agreement adopts the

2017 QI Agreement’s provisions regarding CCGs and adds a requirement that

each CCG member designate, in writing,

the Compliance QI to act as its agent to

execute Form 872, Consent to Extend

the Time to Assess Tax, for extending the

period to assess tax relevant to the 2023 QI

Agreement. As part of this requirement, a

Compliance QI must retain these designations and its agreement with the CCG

members to act as their agent. The IRS

anticipates that these requirements will

provide a more efficient process for executing and providing Forms 872 requested

as part of an IRS review of a CCG’s compliance or consolidated review plan.

report. The 2017 QI Agreement generally

requires the responsible officer of a QI to

arrange for the performance of a periodic

review, the results of which must be documented in a written report addressed to

the responsible officer. Section 10.06 of

the 2017 QI Agreement does not require

a QI to submit the periodic review report

with its periodic certification absent an

IRS request for the report. However, the

IRS considers its analysis of a periodic

review report integral to ensuring a QI’s

compliance (and thus typically requests

the reports in its reviews). For efficiency,

the 2023 QI Agreement requires QIs to

submit a copy of their periodic review

report with their periodic certification.

(d) Submission of remediation plan.

Section 10.03 of the 2017 QI Agreement

requires a QI to submit a qualified certification in accordance with Part II.B of

Appendix I when it has identified a material failure that has not been corrected as

of the date of the periodic certification or

has identified an event of default applicable to the certification period (and which

the QI must disclose). Under Part II.B.3

of Appendix I of the 2017 QI Agreement,

a QI must take appropriate actions to prevent such failures from recurring and may

be required to provide the IRS with a written plan to correct each failure.

The IRS views remediation plans

as critical to ensuring that all QIs institute appropriate and timely actions to

December 27, 2022

address any material failures and events

of default. As a result, the 2023 QI Agreement requires a QI that submits a qualified

certification to complete the remediation

plan information detailed in Part II.B.3 of

Appendix I and submit this information

with the certification.

(e) Waiver of periodic review. Section

10.07 of the 2017 QI Agreement generally

allows a QI that has not received more

than $5 million in reportable amounts in

each calendar year of a certification period

to apply for a waiver of its periodic review

requirement. To obtain a waiver, a QI must

meet the eligibility requirements set forth

in section 10.07(B) of the 2017 QI Agreement and provide certain representations

and factual information with its periodic

certification, which are detailed in Part III

of Appendix I. Additionally, a QI may not

obtain a waiver when it acts as a QDD.

The 2023 QI Agreement adopts the

requirements for a waiver in the 2017 QI

Agreement with certain modifications.

Under the 2023 QI Agreement, to be eligible to apply for the waiver a QI must, in

determining whether it received more than

$5 million in reportable amounts in each

calendar year of a certification period,

include the amount of PTP distributions

subject to withholding under chapter 3 or

4. Additionally, in Part III of Appendix I

of the 2023 QI Agreement, a QI must provide specified information regarding its

receipt of PTP distributions and amounts

realized from sales of PTP interests and

the amount of tax withheld under sections

1446(a) and (f). A QI must also provide the

information shown on Appendix III of the

2023 QI Agreement for each year of the

certification period. See section 4.04(4) of

this Revenue Procedure. Finally, the 2023

QI Agreement clarifies that, although a QI

acting as a QDD may not obtain a waiver,

this restriction does not apply for the 2023

and 2024 years and clarifies when the

curing of documentation is permitted to

be reflected in the reporting of the factual

information required for the waiver.

(2) Revisions to Appendix I.

(a) General information with certification. Part I of Appendix I of the 2017

QI Agreement requests certain general

information to be submitted with a QI’s

periodic certification, such as whether the

QI assumed primary withholding responsibility, was part of a CCG, or applied the

December 27, 2022

agency or joint account option during the

applicable certification period. The 2023

QI Agreement adds certain information

requests to Part I of Appendix I regarding

a QI’s activities related to withholding

under sections 1446(a) and (f).

(b) Certification of internal controls.

Part II.A of Appendix I of the 2017 QI

Agreement contains the certification of

internal controls that a QI is required to

make for a certification period and a list

of material failures and events of default

a QI must identify (when applicable).

The 2023 QI Agreement adds a new certification regarding a QI’s procedures for

complying with sections 1446(a) and (f)

and (more generally) that the QI has acted

only to the extent permitted under the QI

agreement. Thus, for example, a QI would

not be able to make this certification if it

represents its status as a QI with respect

to an amount realized paid to an account

holder for an interest in a partnership that

is not a PTP. The 2023 QI Agreement

also adds material failures and an event

of default specific to sections 1446(a) and

(f) to Part II of Appendix I. The material

failures added to Part II.D of Appendix I

are as proposed in section 10.03 of Notice

2022-23, with the addition of a material

failure for a QI failing to comply with section 5.01(A) of the 2023 QI Agreement in

requesting U.S. TINs from account holders. See section 4.01(1) of this Revenue

Procedure. Part II.D of Appendix I of the

2023 QI Agreement also reflects the 2023

and 2024 transitional relief for section

871(m) purposes discussed in section 4.02

of this Revenue Procedure by referencing

a QI or QDD’s material failures based on

a good faith standard.

IV of Appendix I of the 2017 QI Agreement

generally sets forth factual information

for purposes of chapters 3, 4, and 61 (and

backup withholding under section 3406)

that QIs are required to provide regarding

their accounts, documentation of account

holders, withholding, and reconciliation

of the reporting of payments made and

withholding. The 2023 QI Agreement

generally includes the factual information

included in Part IV of the 2017 QI Agreement and, to coordinate with new Part VII

of Appendix I of the 2023 QI Agreement,

specifically excludes the factual information regarding PTP-related payments

582

that is reported in Part VII. The factual

information relevant to PTP distributions

attributable to amounts subject to withholding under chapters 3 and 4 is, however, to be reported in Part IV of Appendix

I of the 2023 QI Agreement. See section

4.04(2)(d) of this Revenue Procedure

(directly below) for the scope of reporting

in new Part VII.

Part IV of Appendix I to the 2023 QI

Agreement also requires other new information. A chart is to be completed by QIs

using the safe harbor sampling method

in Appendix II for their periodic review

to specify the allocation of accounts to

each certainty stratum (as referenced in

section II.A.3(a) of Appendix II of the

2023 QI Agreement). Part IV of Appendix I also requires QIs to provide certain

information regarding documentation

failures (and resulting underwithholding)

on a post-cure

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