# Regulations Regarding Withholding of Tax on Certain U.S. Source Income Paid to Foreign Persons, Information Reporting and Backup Withholding on Payments Made to Certain U.S. Persons, and Portfolio Interest Treatment > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/fr%3A2016-31590 ## Record - **Collection:** Federal Register - **Document type:** Rule - **Published:** January 6, 2017 - **Citation:** 82 FR 2046 ## Text DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Parts 1, 31, and 301 [TD 9808] RIN 1545-BL17: RIN 1545-BN74 Regulations Regarding Withholding of Tax on Certain U.S. Source Income Paid to Foreign Persons, Information Reporting and Backup Withholding on Payments Made to Certain U.S. Persons, and Portfolio Interest Treatment AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Removal of temporary regulations; final regulations; and temporary regulations. SUMMARY: This document contains final and temporary regulations regarding withholding of tax on certain U.S. source income paid to foreign persons, information reporting and backup withholding with respect to payments made to certain U.S. persons, and portfolio interest paid to nonresident alien individuals and foreign corporations. This document finalizes (with minor changes) certain proposed regulations under chapters 3 and 61 and sections 871, 3406, and 6402 of the Internal Revenue Code of 1986 (Code), and withdraws corresponding temporary regulations. This document also includes temporary regulations providing additional rules under chapter 3 of the Code. The text of the temporary regulations also serves as the text of the proposed regulations set forth in a notice of proposed rulemaking published in the Proposed Rules section of this issue of the Federal Register . The temporary regulations affect persons making payments of U.S. source income to foreign persons. DATES: Effective date. These regulations are effective on January 6, 2017. Applicability dates. For dates of applicability, see §§ 1.871-14(j), 1.1441-1(f), 1.1441-3(i), 1.1441-4(g), 1.1441-5(g), 1.1441-6(i), 1.1441-7(g), 1.1461-1(i), 1.1461-2(d), 1.6041-1(j), 1.6041-4(d), 1.6042-2(f), 1.6042-3(d), 1.6045-1(q), 1.6049-4(h), 1.6049-5(g), 31.3406(g)-1(g), 31.3406(h)-2(i), and 301.6402-3(f). FOR FURTHER INFORMATION CONTACT: Leni Perkins at (202) 317-6942 (not a toll free number). SUPPLEMENTARY INFORMATION: Paperwork Reduction Act The collection of information in these temporary regulations is contained in a number of provisions including §§ 1.1441-1, 1.1441-3, 1.1441-4, and 1.1441-5. The IRS intends that the information collection requirements of these regulations will be implemented through use of the W-8 series of forms, Form W-9, Form 1042, Form 1042-S, the 1099 series of forms, and Form 8966, as well as certain income tax returns (for example, Forms 1040, 1040-NR, and 1120F). As a result, for purposes of the Paperwork Reduction Act (44 U.S.C. 3507), the reporting burden associated with the collection of information in these regulations will be reflected in the information collection burden and OMB control number of the appropriate IRS form. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number. Books and records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103. Background This document contains amendments to the Income Tax Regulations (26 CFR part 1) under sections 871, 1441, 1461, 6041, 6042, 6045, 6049, and 6050 of the Code, the Employment Tax Regulations (26 CFR part 31) under section 3406 of the Code, and the Procedure and Administration Regulations (26 CFR part 301) under section 6402 of the Code. On January 28, 2013, final regulations (TD 9610) under chapter 4 of the Code (sections 1471 through 1474) were published in the Federal Register (78 FR 5874), and on September 10, 2013, corrections to the final regulations were published in the Federal Register (78 FR 55202). The regulations in TD 9610 and the corrections thereto are collectively referred to in this preamble as the 2013 final chapter 4 regulations. To coordinate with certain provisions of the 2013 final chapter 4 regulations, as well as temporary regulations (TD 9657) under chapter 4 published in the Federal Register (79 FR 12812) on March 6, 2014, temporary regulations (TD 9658) revising certain provisions of the final chapters 3 and 61 regulations were published in the Federal Register (79 FR 12726) on March 6, 2014, and corrections to those temporary regulations were published in the Federal Register (79 FR 37181) on July 1, 2014. Collectively, the regulations in TD 9657 and the corrections thereto are referred to in this preamble as the 2014 temporary coordination regulations. A notice of proposed rulemaking cross-referencing the 2014 temporary coordination regulations was published in the Federal Register on March 6, 2014 (79 FR 12880). Comments were received in response to the 2014 temporary coordination regulations, but no public hearing was requested, and none was held. In response to comments, and after further consideration, this document includes final and temporary regulations that revise and clarify certain sections of the 2014 temporary coordination regulations. In some cases, the changes to the 2014 temporary coordination regulations contained in these final and temporary chapter 3 regulations are made to coordinate with final and temporary regulations issued under chapter 4 that are being published in the Federal Register concurrently with this document. Certain provisions of these final and temporary chapter 3 regulations were previewed in notices published after the publication of the 2014 temporary coordination regulations. See Notice 2014-33, 2014-21 I.R.B. 1033; Notice 2014-59, 2014-44 I.R.B. 747; and Notice 2016-42, 2016-19 I.R.B. 67. In addition, some changes in these final regulations are corrections of minor errors in the 2014 temporary coordination regulations. Additional unsolicited comments were received regarding the final chapters 3 and 61 regulations. These comments are not discussed herein, except where changes have been made in response thereto. Summary of Comments and Explanation of Revisions and Provisions A. Comments and Changes to § 1.1441-1—Requirement for the Deduction and Withholding of Tax on Payments to Foreign Persons 1. U.S. Branch Treated as a U.S. Person Section 1.1441-1T(b)(2)(iv)(A) of the 2014 temporary coordination regulations provides that a U.S. branch of a foreign person that is a participating FFI, registered deemed-compliant FFI, or NFFE may agree to be treated as a U.S. person. In connection with changes in the chapter 4 regulations published concurrently with these regulations, the final regulations remove the requirement that the foreign person of which the U.S. branch is a part have a specified chapter 4 status. Additionally, the requirements for a withholding certificate from a U.S. branch that agrees to be treated as a U.S. person in § 1.1441-1(e)(3)(v)(A) have been modified to remove the requirement that the U.S. branch certify to the chapter 4 status of the foreign person of which the U.S. branch is a part. 2. Presumption of Foreign Status of an Entity Based on Documentary Evidence or GIIN Section 1.1441-1T(b)(3)(iii)(A) of the 2014 temporary coordination regulations provides presumption rules for payments made to exempt recipients. Comments requested that if a withholding agent or payor makes a payment (other than a withholdable payment) to an entity payee that is an exempt recipient and has not received a valid withholding certificate but instead has documentary evidence such as a certificate of incorporation indicating that the payee is a foreign person, the withholding agent or payor should be able to presume, based on the documentary evidence, that the payee is a foreign person. The Treasury Department and the IRS decline to adopt this recommendation because the application of such a presumption rule would be limited in scope (given that withholding agents can choose to apply the rules of § 1.1441-1(b)(3)(iii)(A)( 2 ), which are generally applicable to withholdable payments, to all payments with respect to an obligation) and because of concerns about the application of the suggested presumption rule in the case of foreign partnerships in which non-exempt recipients are partners, and to which the presumption rules of § 1.1441-5(c)(1)(iii) apply. Comments also requested that a withholding agent or payor should be able to presume that an undocumented entity payee is foreign if there is a Global Intermediary Identification Number (GIIN) on file for the payee and the payee's name appears on the IRS FFI List. The Treasury Department and the IRS have declined to adopt this suggestion. U.S. entities can obtain GIINs, and if they do, their names appear on the IRS FFI list, such as when they are acting as sponsoring entities for chapter 4 purposes. Thus, it would not be appropriate for a GIIN to support a presumption of foreign status without more evidence of such status. 3. Presumption of Foreign Status for Certain Entities on the per se List of Foreign Corporations Under § 1.1441-1T(b)(3)(iii)(A)( 1 )( iii ) of the 2014 temporary coordination regulations, a withholding agent must presume that an undocumented entity payee that is an exempt recipient is a foreign person if the name of the payee indicates that the entity is a type of entity that is on the per se list of foreign corporations in § 301.7701-2(b)(8)(i), unless the name contains the designation “corporation” or “company” (which, in itself, would not be indicative of foreign status). Comments have requested that, rather than excluding all exempt entity payees whose names include “company” or “corporation” for purposes of this presumption rule, the rule instead be modified to provide that for payees whose names contain these designations, foreign status should be presumed if the withholding agent has a document that reasonably demonstrates that the entity is incorporated in the relevant foreign jurisdiction on the per se list. The Treasury Department and the IRS agree that this modification is appropriate and have included it in these final regulations. 4. Reliance on Electronic Transmission of Certificates, Forms, and Documentation Generally, a withholding agent must withhold at a 30% rate on any payment of an amount subject to withholding unless it can reliably associate the payment with documentation upon which it can rely to treat the payment as made to a U.S. person or as made to a beneficial owner that is a foreign person entitled to a reduced rate of withholding. § 1.1441-1(b)(1). The 2014 temporary coordination regulations allow a withholding agent to rely on a valid Form W-8 or documentary evidence received by facsimile or scanned and furnished by email unless the withholding agent knows that the person transmitting the withholding certificate or documentary evidence is not authorized to do so, effective for payments made after March 6, 2014. This effective date prevents withholding agents from relying upon scanned or faxed withholding certificates or documentary evidence pursuant to § 1.1441-1T(e)(4)(iv)(C) of the 2014 temporary coordination regulations for payments made on or before March 6, 2014. As a result, withholding agents must instead obtain “hard copies” of the original form or document in order to cure documentation failures for such payments, to the extent allowed under § 1.1441-1(b)(7)(ii). Comments have suggested that the effective date with respect to this provision be modified to allow withholding agents to rely upon forms or documentary evidence received by facsimile or scanned and sent by email after March 6, 2014, regardless of when the payment was made. The Treasury Department and the IRS agree that requiring hard copies of original documentation to cure documentation failures for payments made on or before March 6, 2014, but not for payments after that date, provides minimal benefits compared to the additional effort required for a withholding agent to obtain a hard copy of the documentation. Accordingly, these final regulations modify the effective date as it relates to this provision so that it applies to any open tax year. In addition, to correspond to other changes, § 1.1441-1T(e)(4)(iv)(C) of the 2014 temporary coordination regulations is redesignated as § 1.1441-1(e)(4)(iv)(D) in these final regulations. 5. Curing Late Documentation for Claims That Income Is Effectively Connected With the Conduct of a Trade or Business in the United States When a withholding agent fails to obtain documentation and fails to withhold at the time of payment, the withholding agent is allowed, under certain circumstances, to obtain a valid withholding certificate (and other certifications, as required) to support a reduced rate of withholding. A withholding agent may obtain valid documentation after the date of payment to establish that a reduced rate of withholding was appropriate when it meets the additional requirements under § 1.1441-1(b)(7)(ii) (as amended by the 2014 temporary coordination regulations). The rules in § 1.1441-1T(b)(7)(ii) of the 2014 temporary coordination regulations establish when additional documentation is required and what the additional documentation is required to contain. These temporary regulations add § 1.1441-1T(b)(7)(ii)(B) with respect to late documentation for income that is effectively connected with the conduct of a trade or business in the United States (effectively connected income). Under this rule, the withholding certificate (in this case, Form W-8ECI) must be associated with a signed affidavit that states that the information and representations contained on the certificate were accurate as of the time of the payment and either (i) the beneficial owner has included the income on its U.S. income tax return for the taxable year in which the income must be reported, or (ii) the beneficial owner will include the income on its U.S. income tax return for the taxable year in which the income must be reported and the due date for filing the return (including any applicable extensions) is after the date on which the affidavit is signed. This rule is added to ensure compliance with the requirement that the beneficial owner actually include the income on its income tax return for the taxable year in which the income is required to be reported for U.S. tax purposes. Because the exemption for withholding on effectively connected income under section 1441(c)(1) applies only when the income is included in the gross income of the recipient, the Treasury Department and the IRS have decided it is appropriate for a withholding agent that receives a late Form W-8ECI to obtain the aforementioned affidavit. A corresponding change has been made to the temporary regulations under chapter 4 that are being published concurrently with these regulations to address circumstances when a withholding agent may rely on a Form W-8ECI provided after the date of a payment to claim that the payment is effectively connected income (and thus is not a withholdable payment under § 1.1473-1(a)(5)(ii)). 6. Nonresident Alien Individuals and Dual Residents A U.S. person is defined by reference to section 7701(b). The definition of nonresident alien individual in the chapter 3 regulations does not specify the exact circumstances under which a dual resident of the United States and another jurisdiction will be treated as a nonresident alien individual under an applicable income tax treaty and § 301.7701(b)-7. These temporary regulations therefore clarify that an individual will not be treated as a U.S. person for a taxable year (or any portion thereof) for which he or she is a dual resident taxpayer who is treated as a nonresident alien pursuant to § 301.7701(b)-7 for purposes of computing his or her U.S. tax liability. A corresponding change has also been made to the definition of a U.S. person in the chapter 4 regulations that are being published concurrently with these regulations. 7. Hold Mail Instruction The 2014 temporary coordination regulations provide that an address that is provided subject to instructions to hold all mail to that address is not considered a permanent residence address; the same rule is provided in the 2013 final chapter 4 regulations. Comments have requested that the definition of permanent residence address be modified to treat an address subject to a hold mail instruction as a permanent residence address if additional documentation is provided. The Treasury Department and the IRS agree that a hold mail instruction should not prevent persons from being able to verify that they have a permanent residence address by providing appropriate additional documentary evidence that supports their residency in the foreign jurisdiction where they are claiming to be resident. These temporary regulations thus revise the definition of “permanent residence address” in § 1.1441-1T(c)(38) to add that an address that is subject to a hold mail instruction can be relied upon as a permanent residence address if the person provides documentary evidence (as described in § 1.1441-1(c)(17)) establishing the person's residence in the country where the person is claiming to be resident. These revisions also provide that if a hold mail instruction is provided to a withholding agent after the withholding certificate was provided, this will be considered a change in circumstances requiring that additional documentary evidence be obtained in order to use the address on the withholding certificate as a permanent residence address. 8. Revisions to Nonqualified Intermediary Withholding Statement for U.S. Payee Pool Under § 1.1441-1(e)(3)(iv), a withholding statement provided by a nonqualified intermediary may include an allocation of a payment to a chapter 4 withholding rate pool of U.S. payees when the requirements of that paragraph are satisfied, and a similar allowance is provided for an FFI withholding statement provided by a nonqualified intermediary in the case of a withholdable payment for chapter 4 purposes. A chapter 4 withholding rate pool of U.S. payees is defined as a pool of payees described in either § 1.1471-3(c)(3)(iii)(B)( 2 )( ii ) or ( iii ) (with § 1.1471-3(c)(3)(iii)(B)( 2 )( ii ), as revised in the final chapter 4 regulations, being published concurrently with these regulations). See the preamble to the final chapter 4 regulations for background on this revision. Payees described in § 1.1471-3(c)(3)(iii)(B)( 2 )( ii ) consist of account holders receiving payments not subject to withholding under chapter 3 or 4 or under section 3406 that are either (1) holders of non-consenting U.S. accounts maintained by a reporting Model 2 FFI, or (2) holders of accounts with U.S. indicia maintained by a reporting Model 1 FFI for which appropriate documentation sufficient to treat the account holders as other than U.S. persons has not been provided to the FFI. Payees described in § 1.1471-3(c)(3)(iii)(B)( 2 )( iii ) consist of account holders of an FFI that is a non-U.S. payor for chapter 61 purposes that are account holders not subject to withholding under chapter 3 or chapter 4 or under section 3406 and that are also: (1) Holders of U.S. accounts that the FFI reports as U.S. accounts pursuant to § 1.1471-4(d)(3) or (5) for the year in which the payment is made, (2) holders of U.S. accounts that the FFI reports pursuant to the conditions of its applicable deemed-compliant status under § 1.1471-5(f)(1) for the year in which the payment is made, or (3) holders of U.S. accounts that a reporting Model 1 FFI reports as reportable U.S. accounts pursuant to an applicable Model 1 IGA, and which includes the U.S. taxpayer identification numbers (TINs) of such account holders, for the year in which the payment is made. Although an allocation of a payment to a payee described in § 1.1471-3(c)(3)(iii)(B)( 2 )( ii ) (as revised in the final chapter 4 regulations being published concurrently with these regulations) is not permitted for a payment subject to chapter 3 withholding, no such limitation applies under § 1.1471-3(c)(3)(iii)(B)( 2 )( iii ) for a payment that is allocable to U.S. accounts (or reportable U.S accounts) that are maintained by a non-U.S. payor and subject to comprehensive reporting (which includes the U.S. TINs of such account holders) under FATCA or an applicable IGA. As a result, these final regulations add a requirement that a withholding agent may not treat as valid an allocation of a payment subject to chapter 3 withholding to a withholding rate pool of U.S. payees that a nonqualified intermediary does not identify as described in § 1.1471-3(c)(3)(iii)(B)( 2 )( iii ) (by citing to § 1.1471-3(c)(3)(iii)(B)( 2 )( iii ) or describing the payees consistent with that paragraph). To allow withholding agents time to amend their procedures for validating withholding statements provided by nonqualified intermediaries, this requirement applies only to payments made on or after April 1, 2018. 9. Alternative Withholding Statement of a Nonqualified Intermediary Section 1.1441-1T(e)(3)(iv)(C) of the 2014 temporary coordination regulations prescribes the information required to be included on a withholding statement provided by a nonqualified intermediary (NQI), such as the name, address, TIN (if any), and type of documentation received by the NQI for each payee. Comments have requested that NQIs be permitted to provide, and withholding agents be permitted to rely on, simplified withholding statements that do not include all of the information specified in § 1.1441-1T(e)(3)(iv)(C) of the 2014 temporary coordination regulations. These comments noted that withholding agents are required to independently verify the information provided on the NQI withholding statement by reviewing and validating the beneficial owner withholding certificates that accompany the NQI's Form W-8IMY. Accordingly, the comments requested that withholding agents not be required to invalidate a withholding statement that does not provide all of the information specified in § 1.1441-1T(e)(3)(iv)(C) of the 2014 temporary coordination regulations when that information can be found on the beneficial owner withholding certificate. The Treasury Department and the IRS agree with this recommendation, and these temporary regulations add § 1.1441-1T(e)(3)(iv)(C)( 3 ) to provide a new rule allowing a withholding agent to rely on an alternative withholding statement received from an NQI to the extent that the NQI provides the withholding agent with beneficial owner withholding certificates (and not only with documentary evidence). The alternative withholding statement is not required to include information that is also included on the withholding certificates and is not required to specify the rate of withholding applicable to each payee, as long as the withholding agent can determine the appropriate rate from the information on the withholding certificates. Additional requirements include that the alternative withholding statement contain any other information the withholding agent reasonably requests in order to fulfill its obligations under chapters 3, 4, and 61, and section 3406, and that the NQI certify that none of the information on the beneficial owner withholding certificates is inconsistent with information in the NQI's files. For example, under this alternative withholding statement rule, if a withholding agent is making a payment to a foreign partnership (that is not a withholding foreign partnership) and has partners who are all foreign individuals, the withholding agent can choose to accept a Form W-8IMY from the foreign partnership that is associated with Forms W-8BEN from all of its partners. The foreign partnership would provide the withholding agent with, in addition to its Form W-8IMY and the Forms W-8BEN, a withholding statement indicating the appropriate allocation among the partners and a representation that none of the information on the Forms W-8BEN is inconsistent with what the foreign partnership has in its files. However, if, for example, the foreign partnership has information in its files for one of the foreign partners such that it would be unable to rely on the withholding certificate under the rules of § 1.1441-7, the foreign partnership would not be able to provide the representation, and the withholding agent would not be allowed to rely on an alternative withholding statement. 10. Indefinite Validity of Documentation Section 1.1441-1T(e)(4)(ii)(B)( 1 ) of the 2014 temporary coordination regulations requires that documentary evidence be provided at the same time as a withholding certificate provided by an individual to support a claim of foreign status in order for the withholding certificate to remain valid indefinitely. Commenters have noted that documentary evidence and withholding certificates are often not provided at the same time, and therefore the rule should be more flexible regarding the timing of when these documents must be obtained. The Treasury Department and the IRS agree that the meaning of “provided together” should be clarified. These final regulations specify that “provided together” means that a withholding certificate and the documentary evidence must be received within 30 days of one another, regardless of which is received first. The Treasury Department and the IRS do not believe it is appropriate to allow the documentary evidence to be provided at any point before the expiration of the withholding certificate because of the risk of changes in an individual's status or residency over a three-year period. In addition, account opening procedures are generally performed within a 30-day period. See § 1.1441-7(b)(2). Corresponding changes have also been made to the chapter 4 regulations that are being published concurrently with these regulations. In addition, § 1.1441-1T(e)(4)(ii)(B)( 2 ) of the 2014 temporary coordination regulations provides that a withholding certificate (other than the portion relating to a claim for treaty benefits) described in § 1.1471-3(c)(6)(ii)(C)( 2 ) and documentary evidence provided by an entity supporting the entity's claim of foreign status are valid indefinitely if they are provided together. Similar to comments on withholding certificates provided by individuals, comments on withholding certificates provided by entities noted challenges with respect to the “provided together” requirement. In response to these comments, the final regulations remove the phrase “provided together” and instead provide that a withholding certificate provided by an entity (that is, a Form W-8BEN-E) (other than the portion relating to a claim for treaty benefits) accompanied by documentary evidence will be valid indefinitely if the withholding agent receives both before either the withholding certificate or the documentary evidence would otherwise expire (even if the withholding certificate and documentary evidence are not provided simultaneously). The Treasury Department and the IRS believe it is appropriate to have different standards for documentation received from individuals and entities in this respect because it is less common for entities to change their statuses within a three-year period. In addition, comments noted that the applicability of this rule in the 2014 temporary coordination regulations, limited to the withholding certificates described in § 1.1471-3(c)(6)(ii)(C)( 2 ), is too narrow. The Treasury Department and the IRS agree; accordingly, these final regulations remove the cross-reference to § 1.1471-3(c)(6)(ii)(B). However, these final regulations cross-reference the indefinite validity rules in § 1.1471-3(c)(6)(ii) that apply for chapter 4 purposes. 11. Treaty Statements Provided With Documentary Evidence Under the chapter 3 regulations, a withholding agent may apply a reduced rate of withholding under section 1441, 1442, or 1443 on a payment to a foreign entity in certain cases under the terms of an income tax treaty if the person represents that the payment is treated as derived by a resident of the applicable treaty jurisdiction and all of the other requirements for benefits under the applicable treaty are satisfied. A withholding certificate provided by an entity that is claiming reduced withholding under an income tax treaty must contain a statement that the treaty claimant meets the limitation on benefits requirement, if any, under the treaty. Because entitlement to a reduced rate of withholding under a treaty is conditioned on the beneficial owner satisfying limitation on benefits provisions, the requirement for a beneficial owner to provide a treaty statement helps ensure that beneficial owners understand the relevant treaty provisions and qualify for the claims they are making. Under the chapter 3 regulations, a treaty statement provided on a Form W-8BEN-E expires on the last day of the third calendar year following the date the form was signed, but a treaty statement provided with documentary evidence remains valid indefinitely (unlike the documentary evidence itself in most cases). In order to enhance the reliability and increase the accuracy of the claims, to help assure that information is updated when ownership thresholds or activity requirements in a particular treaty have changed, and to have a consistent validity period regardless of how a treaty statement is provided, these temporary regulations provide that a treaty statement regarding limitation on benefits that is associated with documentary evidence will remain valid until the last day of the third calendar year following the year in which the statement is provided to the withholding agent. For existing accounts that were documented with documentary evidence before the date of publication of these temporary regulations, the treaty statements will expire on January 1, 2019. 12. Electronic System for Form 8233 Section 1.1441-1T(e)(4)(iv)(A) of the 2014 temporary coordination regulations allows a withholding agent to establish an electronic system to collect Forms W-8 (or any other form as the IRS may prescribe) from a beneficial owner or payee. Comments requested that withholding agents be allowed to establish such an electronic system for collecting Forms 8233, “Exemption from Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual.” The Treasury Department and the IRS accept this request and have added § 1.1441-1T(e)(4)(iv)(C) to provide the requirements for the system. 13. Electronic Signatures Comments requested that the regulations be amended to allow a withholding agent to accept a Form W-8 with an electronic signature when the withholding agent has not developed and maintained an electronic collection system described in § 1.1441-1(e)(4)(iv)(B). The Treasury Department and the IRS have determined that valid electronically signed withholding certificates may be accepted by a withholding agent if the withholding certificates reasonably demonstrate to the withholding agent that they have been electronically signed by the recipient identified on the form or a person authorized by the recipient to sign the form (by, for example, a signature block that includes a time and date stamp and a statement that the certificate has been electronically signed and the name of the person authorized to sign the form). If the withholding certificate contains only a typed name in the signature line and no other information regarding the method of signature, a withholding agent cannot treat the withholding certificate as validly signed. These temporary regulations reflect this change. A coordinating change is also being made to the chapter 4 regulations. 14. Authentication of Forms and Documentary Evidence Received by Facsimile or Email Comments requested more detailed guidance on how a withholding agent could authenticate and verify a form or documentary evidence received by facsimile or email, for example by obtaining an authorization letter from the person who signed the form. The Treasury Department and the IRS have not provided prescriptive guidance on the procedures that must be used for this purpose, in part because the standard under § 1.1441-1(e)(4)(iv)(D) (§ 1.1441-1T(e)(4)(iv)(C) of the 2014 temporary coordination regulations) for a withholding agent with respect to whether a form was provided by someone authorized to provide the form is an actual knowledge standard (that is, the withholding agent must not have actual knowledge that the form was transmitted by a person not authorized to do so by the person required to execute the form). The Treasury Department and the IRS believe that the current regulations offer sufficient flexibility for withholding agents to develop the necessary procedures for authenticating and verifying that the form was transmitted to the withholding agent by a person who was authorized to do so without the need for further guidance. 15. Withholding Certificates and Documentary Evidence Furnished Through a Third Party Repository Comments have requested clarification of guidance provided in the Frequently Asked Questions (FAQ) on the IRS Web site (see https://www.irs.gov/businesses/corporations/frequently-asked-questions-faqs-fatca-compliance-legal ) regarding when withholding agents may rely on withholding certificates obtained from third-party repositories; specifically, clarification was requested that the principles for the appropriate use of a third-party repository outlined in the FAQ would extend to all Forms W-8. The Treasury Department and the IRS have included in these temporary regulations guidance regarding the circumstances under which a Form W-8 (and, in certain circumstances where applicable, a withholding statement) maintained by a third-party repository will be considered furnished to the withholding agent by the person whose name is on the certificate. See § 1.1441-1T(e)(4)(iv)(E). 16. Reliance on Prior Versions of Withholding Certificates The 2014 temporary coordination regulations allow a withholding agent to continue to accept the prior version of a withholding certificate that has been revised for a period of six months after the date of release of the revised withholding certificate. Comments noted that this period may be difficult for withholding agents to comply with, depending on when the revised version of the form is released and how extensive the revisions are. Comments also noted challenges in coordinating this requirement with the renewal requirements for withholding certificates, which expire as of the end of a calendar year. The Treasury Department and the IRS agree that it is appropriate to extend the period during which prior versions of withholding certificates may be used beyond six months. These final regulations provide that withholding agents generally may use prior versions of withholding certificates until the later of six months after the date of issuance of the most recent revision to the withholding certificate, or the end of the calendar year during which the revised version was issued. However, in certain circumstances, such as when a new status must be established on the withholding certificate because of a new requirement in the regulations, the Treasury Department and the IRS may designate a shorter transition period. 17. Revisions Related to Qualified Intermediaries On July 1, 2016, in Notice 2016-42, 2016-29 I.R.B. 67, the Treasury Department and the IRS released the proposed Qualified Intermediary (QI) agreement (the Proposed QI Agreement), which, once finalized, would be effective on or after January 1, 2017. In response to comments received following the publication of the QI agreement (the 2014 QI Agreement) in 2014 in Rev. Proc. 2014-39, 2014-29 I.R.B. 150, the Proposed QI Agreement provided more detailed compliance and review procedures for QIs, requirements applicable to qualified derivatives dealers, and other revisions and corrections. These temporary and final regulations include several revisions that align with the Proposed QI Agreement. These final regulations clarify the rule already provided in the 2014 temporary coordination regulations that when a QI is a participating FFI or a registered deemed-compliant FFI for purposes of chapter 4, it may represent that it assumes chapter 61 reporting responsibilities (and reports accordingly) when it reports its U.S. accounts in accordance with the coordination rules of § 1.6049-4(c)(4). These regulations also clarify that, in certain cases, for purposes of the alternative procedures for allocating payments to U.S. non-exempt recipients on withholding statements described in the QI agreement, QIs may, as provided in the QI agreement, include a chapter 4 withholding rate pool of U.S. payees in the same zero-rate pool as foreign persons that are exempt from chapter 3 withholding. Section 1.1441-1T(e)(5)(ii) of the 2014 temporary coordination regulations lists the types of entities that are eligible to enter into QI agreements, including foreign corporations that are presenting claims of treaty benefits on behalf of their shareholders. In Notice 2016-42, the Treasury Department and the IRS requested comments on the situations where a foreign corporation (other than a reverse hybrid entity) would be seeking to act as a QI on behalf of its shareholders, and questioned why the withholding foreign partnership agreement does not accommodate such situations. No comments were received in response to this request. As a result, and because § 1.1441-1(e)(5)(ii)(D) provides that “any person acceptable to the IRS” may be eligible to be a QI, these final regulations remove from the list of prospective QIs the specific category of foreign corporations presenting treaty benefit claims on behalf of their shareholders. 18. Requirement for a Withholding Agent to Collect Foreign Taxpayer Identification Number (Foreign TIN) Form W-8BEN and the instructions to the form describe circumstances under which a foreign person is required to provide a foreign TIN or date of birth on the form. Similarly, Form 1042-S and the instructions to the form outline circumstances under which a withholding agent is required to report such information. These temporary regulations provide that, starting January 1, 2017, for an account maintained at a U.S. office or branch of a withholding agent that is a financial institution, the withholding agent will be required to collect the account holder's foreign TIN, and, in the case of an individual account holder, the account holder's date of birth, on a withholding certificate. A withholding certificate that does not contain a date of birth but is otherwise valid will not be invalid if the withholding agent has such information in its files. For withholding certificates associated with payments made on or after January 1, 2018, a foreign person that does not have a foreign TIN must provide a reasonable explanation as to the lack of a foreign TIN (for example, that the country of residence does not provide TINs). B. Changes to § 1.1441-2—Amounts Subject To Withholding—Withholding on United States Source Gross Transportation Income Under section 887(a), gross income derived by a nonresident individual or foreign corporation that constitutes United States source gross transportation income (USSGTI) is subject to a four-percent tax, and is not subject to tax under section 871, 881, or 882. For these purposes, USSGTI consists of income derived from, or in connection with, (1) the use (or hiring or leasing for use) of a vessel or aircraft or (2) the performance of services directly related to the use of a vessel or aircraft, to the extent the income is treated as derived from U.S. sources under section 863(c)(2). USSGTI does not include such income, however, if it is effectively connected with the trade or business in the United States of a nonresident alien or foreign corporation, within the meaning of section 887(b)(4), nor does it include income taxable in a possession of the United States under the provisions of the Code as made applicable in such possession. Items of income that are not USSGTI, as defined in section 887(b), are not affected by the change to the regulations described in this section, and the normal income tax rules apply. Under sections 1441 and 1442, items of gross income from U.S. sources paid to nonresident individuals and foreign corporations may be subject to withholding at a 30-percent rate if such items are “amounts subject to withholding” within the meaning of § 1.1441-2. In general, under § 1.1441-2(a), the term “amounts subject to withholding” is broadly defined to include amounts from sources within the United States that constitute fixed or determinable annual or periodical income, which in turn is defined to include all income included in gross income under section 61 subject to certain exceptions. Given the broad definition of “amounts subject to withholding” and the lack of a specific exception for USSGTI, taxpayers have questioned whether amounts paid that constitute USSGTI are subject to withholding under section 1441 or 1442 at a 30-percent rate, notwithstanding that, under section 887(a), a four-percent tax is imposed on a nonresident alien individual or foreign corporation's USSGTI for the taxable year. Because USSGTI is not subject to section 871 or 881 gross basis tax if section 887(a) applies, it is not an amount subject to withholding under section 1441 or 1442. The temporary regulations clarify this result under § 1.1441-2T(a)(8) by providing that amounts subject to withholding under section 1441 or 1442 do not include gross income of a nonresident alien or foreign corporation that is taxable under section 887(a) at four percent. Comments are requested regarding documentation requirements for applying this exception. C. Comments and Changes to § 1.1441-3—Determination of Amounts To Be Withheld-Coordination With Withholding Under Section 1445 as Amended by the PATH Act The regulations in § 1.1441-3 include rules for coordinating with section 1445 in the case of distributions from qualified investment entities and United States real property holding companies. Section 1445(a) generally imposes a withholding tax obligation on the transferee when a foreign person disposes of a United States real property interest. Before the enactment of the Protecting Americans from Tax Hikes Act of 2015 (PATH Act), enacted as Division Q of the Consolidated Appropriations Act, 2016, Public Law 114-113, 129 Stat. 2422, the withholding rate under the relevant provisions of section 1445 was 10 percent of either the amount realized or the fair market value of the interest, as applicable. The PATH Act generally increased the withholding rate under section 1445 from 10 percent to 15 percent for dispositions occurring after February 16, 2016 (with certain exceptions for acquisitions of residences). These final regulations incorporate the PATH Act's rate change for these dispositions when referenced in § 1.1441-3. D. Comments and Changes to § 1.1441-4—Exemptions from Withholding for Certain Effectively Connected Income and Other Amounts—Form 8233 TIN Requirement Compensation for personal services paid to a nonresident alien individual is not subject to withholding under section 1441 if the compensation is effectively connected with the conduct of a trade or business in the United States and is exempt from U.S. federal income tax under an income tax treaty. In order for a nonresident alien individual to claim treaty benefits for reduced withholding, the chapter 3 regulations require that he or she provide a Form 8233 that includes a TIN or proof that an application for a TIN has been filed. Comments requested that individuals in these circumstances be exempt from the requirement to include a TIN on the Form 8233. The Treasury Department and the IRS decline to accept this request because these individuals also generally have an obligation to file a Form 1040NR to claim the exemption from tax provided by the income tax treaty and must have a TIN to file the Form 1040NR. The requirement that the TIN (or proof of application for a TIN) also be provided on the Form 8233 therefore does not place an additional burden on these individuals and helps ensure appropriate treaty benefits are provided. E. Comments and Changes to § 1.1441-6—Claim of Reduced Withholding Under an Income Tax Treaty 1. Form W-8BEN-E and Limitation on Benefits Requirements In April 2016, the IRS released a revised Form W-8BEN-E, “Certification of Status of Beneficial Owner for United States Tax Withholding and Reporting (Entities),” and revised instructions, which require an entity claiming treaty benefits to identify the specific type of limitation on benefits provision that the entity meets to be eligible to claim benefits under the treaty (for example, the publicly traded test or the stock ownership and base erosion test, the active trade or business test, etc.). These temporary regulations modify the chapter 3 regulations, consistent with the revised Form W-8BEN-E and instructions, to require that a limitation on benefits statement on Form W-8BEN-E identify the specific limitation on benefits provision on which the taxpayer is relying to claim treaty benefits. This revision to the form and the chapter 3 regulations will further improve the compliance of treaty claimants with the specific requirements of the applicable limitation on benefits provisions in the treaty pursuant to which they seek at-source relief from chapter 3 withholding. Comments requested that more guidance be provided on when a payee's limitation on benefits claim is unreliable or incorrect. Accordingly, these temporary regulations provide that a withholding agent may rely on a valid Form W-8BEN-E that includes limitation on benefits information unless it has actual knowledge that the information provided with respect to the limitation on benefits is unreliable or incorrect. Withholding agents are generally expected to report this information beginning in 2018. Under the chapter 3 regulations, a withholding agent may, in certain circumstances, use documentary evidence to document a payee and reduce the rate of withholding if the withholding agent obtains a treaty statement that the payee meets the limitation on benefits provision contained in the applicable income tax treaty. These temporary regulations provide, consistent with the requirements for withholding certificates, that the treaty statement associated with documentary evidence to support a treaty claim must also identify the specific limitation on benefits provision on which the entity relies to claim benefits under the applicable income tax treaty. 2. Reason To Know That a Treaty is in Force More generally, these temporary regulations also clarify a withholding agent's responsibility with respect to claims of benefits under an income tax treaty, whether they are made by an individual or an entity. By way of example, these temporary regulations provide that if the income tax treaty that the treaty claimant references on the form does not exist or is not in force (which a withholding agent can determine by consulting the list of jurisdictions with which the United States has an income tax treaty in force maintained on the IRS Web site, or the State Department's Treaties in Force publication), a withholding agent will have reason to know that the information provided on the Form W-8BEN-E is incorrect and the form is therefore not valid for purposes of claiming treaty benefits. F. Comments and Changes to § 1.1441-7—General Provisions Relating To Withholding Agents 1. Curing of U.S. Indicia Under § 1.1441-7(b), a withholding agent must withhold at the full 30-percent rate if it has actual knowledge or reason to know that a payee's claim of U.S. status or of entitlement to a reduced rate of withholding is unreliable or incorrect. Comments requested that a withholding agent should be able to presume that an undocumented entity payee is a foreign person if the withholding agent has on file for the payee a GIIN and confirms that the payee's name and GIIN appear on the IRS FFI list. These comments noted that under § 1.1471-3(e)(4)(ii)(B), for chapter 4 purposes, a withholding agent can reliably associate a withholding certificate with a payment to a participating FFI, a registered deemed-compliant FFI, a sponsoring entity, or a sponsored FFI without applying the rules of § 1.1441-7(b)(5) (relating to when a withholding agent has reason to know that a withholding certificate is unreliable or incorrect due to the presence of U.S. indicia) if the withholding agent has confirmed the entity's GIIN on the current published FFI list. The Treasury Department and the IRS have declined to adopt this suggestion. Because U.S. entities can obtain GIINs, and if they do so, their names would appear on the IRS FFI list (as is the case for U.S. entities that are sponsoring entities, for example), it is not appropriate to allow a GIIN to cure U.S. indicia for purposes of chapter 3. 2. Modification of Applicability Date for Revised Standards of Knowledge as Previewed in Notice 2014-33 The 2014 temporary coordination regulations revised the standards of knowledge regarding additional U.S. indicia that will cause a withholding agent to have reason to know that a payee's claim of foreign status is unreliable or incorrect for purposes of chapter 3 or 61 to coordinate with the standards of knowledge that apply for purposes of chapter 4. These revised standards of knowledge generally do not require a withholding agent to take the additional U.S. indicia into account for a preexisting obligation of a direct account holder if the foreign status of the account holder was documented by the withholding agent for purposes of chapter 3 or chapter 61 before July 1, 2014. On May 19, 2014, Treasury and the IRS published Notice 2014-33, 2014-21 I.R.B. 1033, which, among other things, generally allowed a withholding agent or FFI to treat an obligation held by an entity that was issued, opened, or executed on or after July 1, 2014, and before January 1, 2015, as a preexisting obligation described in §§ 1.1471-2(a)(4)(ii), 1.1472-1(b)(2), and 1.1471-4(c)(3). Following the publication of Notice 2014-33, comments noted that, while the modifications made to § 1.1441-7(b) addressed the application of the revised reason to know standards for obligations that were documented by a withholding agent before July 1, 2014, Notice 2014-33 did not address how the standards would apply to entity accounts opened on or after July 1, 2014, and before January 1, 2015, that are treated as preexisting obligations by withholding agents and participating FFIs for purposes of chapter 4, pursuant to Notice 2014-33. These comments requested that a similar modified applicability date be added to § 1.1441-7(b) to allow withholding agents to treat an entity account opened during the transition period between July 1, 2014, and January 1, 2015 as a preexisting entity account for purposes of the standards of knowledge applicable to accounts under chapters 3 and 61. Accordingly, these final regulations allow withholding agents to apply the rules under § 1.1441-7(b)(5) and (b)(8) as in effect and contained in 26 CFR part 1 revised April 1, 2013, to accounts opened, and obligations entered into, by an entity on or after July 1, 2014, and before January 1, 2015. In addition, these final regulations provide that, with respect to an obligation held by an entity, a withholding agent will not be required to treat the existence of the additional U.S. indicia specified in § 1.1441-7(b) as giving rise to a change in circumstances under § 1.1441-1(e)(4)(ii)(D) before January 1, 2015. These changes to the chapter 3 regulations were previewed in Notice 2014-59, 2014-44 I.R.B. 747. 3. Indicia of U.S. Status on Form W-8ECI The 2014 temporary coordination regulations describe the U.S. indicia that will cause a withholding agent to have reason to know that a withholding certificate is unreliable or incorrect for purposes of establishing the account holder's status as a foreign person. Comments have noted that foreign persons that have a trade or business in the United States are likely to have U.S. indicia; therefore, the existence of U.S. indicia on a Form W-8ECI should not cause the withholding agent to have reason to know that the Form W-8ECI is unreliable or incorrect. The Treasury Department and the IRS agree. These final regulations reflect this change by providing that the existence of U.S. indicia on a Form W-8ECI will not cause a withholding agent to have reason to know that the form is unreliable or incorrect for purposes of establishing the account holder's status as a foreign person. 4. Reason to Know—Specific Standards of Knowledge Applicable to Documentation Received from Intermediaries and Flow-Through Entities The chapter 3 regulations permit a withholding agent to accept a Form W-8 (or a substitute Form W-8) electronically through a system established by the withholding agent that meets the requirements described in § 1.1441-1(e)(3)(iv)(B). Announcement 98-27, 1998-1 C.B. 865, and Announcement 2001-91, 2001-2 C.B. 221, provide similar requirements for an electronic system established by a withholding agent to receive a Form W-9. Comments requested that specific guidance be given to clarify that a withholding agent is allowed to rely on documentation provided to it by an intermediary or flow-through entity that has established an electronic system to collect documentation from a payee. The primary concern raised in these comments was how a withholding agent was supposed to validate, and whether a withholding agent could rely on, a signature on a beneficial owner withholding certificate received through an electronic system. In Notice 2016-08, 2016-6 I.R.B 304, the Treasury Department and the IRS announced an intent to modify the standards of knowledge under §§ 1.1441-7(b)(10) and 1.1471-3(e)(4)(vi)(A)( 2 ) to allow a withholding agent to rely on a withholding certificate collected through an electronic system maintained by a nonqualified intermediary, nonwithholding foreign partnership, or nonwithholding foreign trust. However, in light of the new provisions in § 1.1441-1T(e)(4)(i)(B) describing when withholding agents may accept withholding certificates signed electronically, the Treasury Department and the IRS have determined that it is not necessary to modify the standards of knowledge for payments to intermediary and flow-through entities as previewed in Notice 2016-08. 5. Authorized Agents and Form 8655 Under the 2014 temporary coordination regulations, a withholding agent must file Form 8655, “Reporting Agent Authorization,” with the IRS if it appoints an agent to act as its reporting agent for filing Form 1042, “Annual Withholding Tax Return for U.S. Source Income of Foreign Persons,” or making tax deposits and payments with respect to Form 1042. A comment suggested that a Form 8655 should be required to be filed only when an agent files a Form 1042 in its own name (and under its own EIN) on behalf of one or more other withholding agents. In response to the comment, these final regulations amend the 2014 temporary coordination regulations to provide that a withholding agent must file a Form 8655 only when its agent files a Form 1042 as the filer on behalf of one or more other withholding agents. This revision is also included in temporary regulations under chapter 4 that are being published concurrently with these temporary and final regulations. G. Comments and Changes to § 1.1461-1—Payment and Returns of Tax Withheld 1. Electronic Furnishing of Form 1042-S The chapter 3 regulations generally require withholding agents to file an information return on Form 1042-S to report the amounts subject to reporting that were paid during the preceding calendar year and to provide a copy of the form to the recipient of the payment, on or before March 15 of the calendar year following the payment. The withholding agent must retain a copy of each Form 1042-S for the period corresponding to the statute of limitations on assessment and collection applicable to the Form 1042 to which the Form 1042-S relates. The Treasury Department and the IRS have determined that it is appropriate to allow withholding agents to furnish the recipient copy of the Form 1042-S electronically under the same conditions applicable to furnishers of recipient copies of other forms (for example, Form W-2, Form 1099-K), and for this reason, these final regulations include a cross-reference to the requirements under § 1.6050W-2 for certain information statements that are furnished electronically. Statements can be furnished electronically beginning in calendar year 2017 for payments made in calendar year 2016 that are reportable on Form 1042-S. 2. Provision of Foreign TINs on Recipient Copies of Form 1042-S The Form 1042-S requires, among other information, the foreign TIN of a recipient if (A) the recipient is claiming a reduced rate of, or exemption from, tax under a tax treaty, the person did not provide a U.S. TIN, and the income is not the type of income for which an exemption from the U.S. TIN requirement applies; (B) the recipient receives a payment made with respect to an obligation maintained at a U.S. office or branch of the withholding agent, the withholding agent is a financial institution, and the foreign TIN is available in the withholding agent's electronically searchable information; or (C) the withholding agent is required to collect the foreign TIN on the Form W-8. Comments have requested that the form instructions or the chapter 3 regulations be modified to allow a foreign TIN to be truncated on the recipient copy of the Form 1042-S consistent with the truncation of U.S. TINs on the Form 1042-S. The Treasury Department and the IRS agree with these comments and will modify the Form 1042-S instructions accordingly. H. Comments and Changes to § 1.6041-4—Foreign-Related Items and Other Exceptions—Definition of “Paid and Received Outside the United States” Under § 1.6041-4, returns of information are not required for payments of certain amounts from sources outside the United States that are paid by a non-U.S. payor or a non-U.S. middleman and that are paid and received outside the United States. Section 1.6049-4(f)(16) describes the circumstances under which a payment is considered “paid and received outside the United States” (and is therefore not a reportable payment). Comments have suggested that the definition of “paid and received outside the United States” be limited to allow a broader range of payments to be treated as reportable payments, such as payments for services performed outside the United States. The Treasury Department and the IRS continue to consider this issue but have not incorporated this suggestion into these temporary and final regulations. I. Comments and Changes to § 1.6042-2 and § 1.6045-1—Returns of Information as to Dividends Paid and Brokers and Barter Exchanges—Extended Period of Validity for PFIC Statements Under § 1.6042-2, every person who makes a payment of dividends to any other person during a calendar year must file an information return (that is, Form 1099) that contains the aggregate amount of the dividends, identifying information about the payee, the amount of tax deducted and withheld under section 3406, and such other information as the form requires. The 2014 temporary coordination regulations provide an exception to this filing requirement for payments made by a paying agent on behalf of a passive foreign investment company (PFIC), as defined in section 1297(a), with respect to a shareholder in the PFIC if, among other things, the paying agent obtains from the corporation a written certification signed by an officer of the corporation that states that the corporation is described in section 1297(a) for each calendar year during which the exception is to be applied, and the paying agent has no reason to know that the written certification is unreliable or incorrect. The paying agent must also identify, before payment, that the PFIC is a participating FFI or a reporting Model 1 FFI, and must obtain annually a written certification from the PFIC representing that it will report payments made by the paying agent pursuant to its reporting obligations under chapter 4 or under an applicable intergovernmental agreement (IGA). Comments have requested that, rather than obtaining an annual certification that is signed by an officer of the corporation, the paying agent should be able to rely on a single written certification of PFIC status until there is a change in circumstances or the paying agent knows or has reason to know that the certification is unreliable or incorrect, and that such certification can be signed by any person that has the authority to sign the certification on behalf of the corporation. The Treasury Department and the IRS decline to accept the request for a single written certification of PFIC status at this time because the annual certification requirement does not appear to present a significant compliance burden and helps assure that the paying agent is meeting its due diligence standards. However, the request that the certification be signed by any person that has the authority to sign the certification on behalf of the corporation has been accepted. A similar change has been made in § 1.6045-1(c)(3)(xiv)(A). J. Comments and Changes to § 1.6049-5—Interest and Original Discount Subject To Reporting After December 31, 1982 1. Modification of Applicability Date for Use of Documentary Evidence With Respect to an Offshore obligation The regulations under § 1.6049-5(c)(1) provide guidance on a payor's use of documentary evidence to establish a payee's foreign status for certain amounts paid outside the United States (as determined under § 1.6049-5(e)) with respect to an offshore obligation. The 2014 temporary coordination regulations included a series of modifications, made in coordination with modifications to regulations under chapter 4, to the conditions under which a withholding agent or a payor (as defined for chapter 61 purposes in § 1.6049-5(c)(5)) may rely on documentary evidence to document a payee's foreign status, and also provided guidance on when an amount is considered paid outside the United States. The 2014 temporary coordination regulations under § 1.6049-5T(c)(1) apply to payments made on or after July 1, 2014, except for certain payments made with respect to preexisting obligations, as described in § 1.1441-7(b)(3)(ii). In response to requests to allow payors additional time to modify their systems to implement the revised requirements of § 1.6049-5(c)(1), these final regulations allow a payor to continue to use, for accounts opened on or after July 1, 2014, and before January 1, 2015, the rules regarding the use of documentary evidence under § 1.6049-5(c)(1) and (c)(4) as in effect and contained in 26 CFR part 1 revised April 1, 2013 (prior § 1.6049-5(c)), instead of the new rules regarding documentary evidence for offshore obligations under § 1.6049-5T(c)(1) and (c)(4) of the 2014 temporary coordination regulations. For consistency, a payor that applies prior § 1.6049-5(c) to an account or obligation will also be required to apply § 1.1441-6(c)(2) (for documentary evidence used to support a treaty claim) and § 1.6049-5(e) as in effect and contained in 26 CFR part 1 revised April 1, 2013, with respect to the account or obligation. These modifications to the 2014 temporary coordination regulations were previewed in Notice 2014-59. 2. Presumption Rules for Bank Deposit Interest These regulations also include a change to the presumption rule for U.S. source bank deposit interest in § 1.6049-5(d)(3)(iii)(A). This presumption rule was inadvertently removed in the 2014 temporary coordination regulations and the 2014 QI Agreement, and it was corrected in the Proposed QI Agreement. It is expected to apply only in cases in which chapter 4 withholding does not apply. K. Minor and Non-Substantive Clarifications and Corrections These final regulations also include various non-substantive clarifications and corrections to the 2014 temporary coordination regulations, including corrections of erroneous cross-references. For example, these final regulations clarify in § 1.1441-5(c)(2)(iii) that a withholding foreign partnership is required to assume primary withholding responsibility under chapters 3 and 4 to the extent required by the withholding foreign partnership agreement. Special Analyses Certain IRS regulations, including these, are exempt from the requirements of Executive Order 12866, as supplemented and reaffirmed by Executive Order 13653. Therefore, a regulatory assessment is not required. For the applicability of the Regulatory Flexibility Act (5 U.S.C. chapter 6), refer to the cross-referenced notice of proposed rulemaking published in the Proposed Rules section of this issue of the Federal Register . Pursuant to section 7805(f) of the Code, the notice of proposed rulemaking preceding the final regulations in this document were submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on their impact on small business. Drafting Information The principal author of these proposed regulations is Leni C. Perkins, Office of Associate Chief Counsel (International). However, other personnel from the IRS and the Treasury Department participated in their development. List of Subjects 26 CFR Part 1 Income taxes, Reporting and recordkeeping requirements. 26 CFR Part 31 Employment taxes, Income taxes, Penalties, Pensions, Railroad retirement, Reporting and recordkeeping requirements, Social security, Unemployment compensation. 26 CFR Part 301 Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income taxes, Penalties, Reporting and recordkeeping requirements. Adoption of Amendments to the Regulations Accordingly, 26 CFR parts 1, 31, and 301 are amended as follows: PART 1—INCOME TAXES Paragraph 1. The authority citation for part 1 continues to read in part as follows: Authority: 26 U.S.C. 7805 * * * Par. 2. Section 1.871-14 is amended by revising paragraphs (b), (c)(2) introductory text, (c)(2)(i) through (iv), (c)(3)(i), (c)(4), and (e)(1), removing paragraph (e)(4)(iv), and revising paragraph (j). The revisions read as follows: § 1.871-14 Rules relating to repeal of tax on interest of nonresident alien individuals and foreign corporations received from certain portfolio debt investments. (b) Rules concerning obligations in bearer form before March 19, 2012 —(1) In general. Interest (including original issue discount) with respect to an obligation in bearer form is portfolio interest within the meaning of section 871(h)(2)(A) or 881(c)(2)(A) only if it is paid with respect to an obligation issued after July 18, 1984, and issued before March 19, 2012, that is described in section 163(f)(2)(B), as in effect before the amendment by section 502 of the Hiring Incentives to Restore Employment Act of 2010 (HIRE Act), Public Law 111-147, and the regulations under that section and an exception under section 871(h) or 881(c) does not apply. Any obligation that is not in registered form as defined in paragraph (c)(1)(i) of this section is an obligation in bearer form. (2) Coordination with withholding and reporting rules. For an exemption from withholding under section 1441 with respect to obligations described in this paragraph (b), see § 1.1441-1(b)(4)(i). See § 1.1471-2 for rules relating to withholding under chapter 4 of the Code that may apply to withholdable payments (as defined in § 1.1471-4(b)(145)) made on or after July 1, 2014, with respect to an agreement or instrument that is not treated as an obligation outstanding before March 19, 2012. For purposes of the preceding sentence, the terms obligation and outstanding are described in § 1.1471-2(b)). See also § 1.1471-4(d)(6) for the reporting requirements of participating foreign financial institutions (as defined in § 1.1471-1(b)(91)) with respect to accounts held by recalcitrant account holders (as defined in § 1.1471-5(g)). For rules relating to an exemption from Form 1099 reporting and backup withholding under section 3406, see section 6049 and § 1.6049-5(b)(8) for the payment of interest and § 1.6045-1(g)(1)(ii) for the redemption, retirement, or sale of an obligation in bearer form. (c) * * * (2) Required statement. For purposes of paragraph (c)(1)(ii)(C) of this section, a U.S. person will be considered to have received a statement that meets the requirements of section 871(h)(5) if either it complies with one of the procedures described in this paragraph (c)(2) and does not have actual knowledge or reason to know that the beneficial owner is a U.S. person or it complies with the procedures described in paragraph (d) or (e) of this section (to the extent applicable). (i) The U.S. person (or its authorized agent described in § 1.1441-7(c)(2)) can reliably associate the payment with documentation upon which it can rely to treat the payment as made to a foreign beneficial owner in accordance with § 1.1441-1(e)(1)(ii). See § 1.1441-1(b)(2)(vii) for rules regarding reliable association with documentation. (ii) The U.S. person (or its authorized agent described in § 1.1441-7(c)(2)) can reliably associate the payment with a withholding certificate described in § 1.1441-5(c)(2)(iv) from a person claiming to be a withholding foreign partnership or § 1.1441-5(e)(v) for a person claiming to be a withholding foreign trust. (iii) The U.S. person (or its authorized agent described in § 1.1441-7(c)(2)) can reliably associate the payment with a withholding certificate described in § 1.1441-1(e)(3)(ii) from a person representing to be a qualified intermediary that has assumed primary withholding responsibility for the payment in accordance with § 1.1441-1(e)(5)(iv) or a qualified intermediary that has provided a withholding statement that meets the requirements of § 1.1441-1(e)(5)(v)(C) or that includes the payment in a withholding rate pool for payments excepted from withholding. (iv) The U.S. person (or its authorized agent described in § 1.1441-7(c)(2)) can reliably associate the payment with a withholding certificate described in § 1.1441-1(e)(3)(v) from a person claiming to be a U.S. branch of a foreign bank or of a foreign insurance company that is described in § 1.1441-1(b)(2)(iv)(A) or a U.S. branch designated in accordance with § 1.1441-1(b)(2)(iv)(E). (3) Time for providing certificate or documentary evidence —(i) General rule. Interest on a registered obligation shall qualify as portfolio interest if the withholding certificate or documentary evidence that must be provided is furnished before expiration of the beneficial owner's period of limitation for claiming a refund of tax with respect to such interest. See, however, § 1.1441-1(b)(7) for consequences to a withholding agent that makes a payment without withholding even though it cannot reliably associate the payment with the documentation prior to the payment. If a withholding agent withholds an amount under chapter 3 of the Code because it cannot reliably associate the payment with the documentation for the beneficial owner on the date of payment, the beneficial owner may nevertheless claim the benefit of an exemption from tax under this section by claiming a refund or credit for the amount withheld based upon the procedures described in §§ 1.1464-1 and 301.6402-3(e) of this chapter. See §§ 1.1474-5 and 301.6402-3(e) of this chapter for the allowance and requirements for a refund with respect to an amount (including a payment of interest) that was withheld upon under chapter 4 of the Code. In the alternative, adjustments to any amount of overwithheld tax may be made under the procedures described in § 1.1461-2(a) for a payment withheld upon under chapter 3 of the Code or in § 1.1474-2 for a payment withheld upon under chapter 4 of the Code. (4) Coordination with withholding and reporting rules. For an exemption from withholding under section 1441 with respect to obligations described in this paragraph (c)(4), see § 1.1441-1(b)(4)(i). For rules applicable to withholding certificates, see § 1.1441-1(e)(4). For rules regarding documentary evidence, see § 1.6049-5(c)(1). For application of presumptions when the U.S. person cannot reliably associate the payment with documentation, see § 1.1441-1(b)(3). For standards of knowledge applicable to withholding agents, see § 1.1441-7(b). For rules relating to reporting on Forms 1042 and 1042-S, see § 1.1461-1(b) and (c). For rules relating to an exemption from Form 1099 reporting and backup withholding under section 3406, see section 6049 and § 1.6049-5(b)(8) for the payment of interest and § 1.6045-1(g)(1)(i) for the redemption, retirement, or sale of an obligation in registered form. For rules relating to withholding under sections 1471 and 1472 that may apply notwithstanding the exemption for payments of portfolio interest under section 1441, see §§ 1.1471-2(a), 1.1471-4(b), and 1.1472-1(b). (e) Foreign-targeted registered obligations —(1) General rule. The statement described in paragraph (c)(1)(ii) of this section is not required with respect to interest paid on an obligation issued before January 1, 2016, that is a registered obligation targeting foreign markets in accordance with the provisions of paragraph (e)(2) of this section if the interest is paid by a U.S. person, a withholding foreign partnership, or a U.S. branch described in § 1.1441-1(b)(2)(iv)(A) or (E) to a registered owner at an address outside the United States, provided that the registered owner is a financial institution described in section 871(h)(5)(B). In that case, the U.S. person otherwise required to deduct and withhold tax may treat the interest as portfolio interest if it does not have actual knowledge that the beneficial owner is a United States person and if it receives the certificate described in paragraph (e)(3)(i) of this section from a financial institution or member of a clearing organization, which member is the beneficial owner of the obligation, or the documentary evidence or statement described in paragraph (e)(3)(ii) of this section from the beneficial owner, in accordance with the procedures described in paragraph (e)(4) of this section. (j) Effective/applicability date —(1) In general. Except as otherwise provided in paragraph (j)(2) and (3) of this section, this section applies to payments of interest made on or after January 6, 2017. (For the rules that apply after June 30, 2014, and before January 6, 2017, see this section as in effect and contained in 26 CFR part 1, as revised April 1, 2016. For payments of interest made after December 31, 2000, and before July 1, 2014, see this section as in effect and contained in 26 CFR part 1, as revised April 1, 2013.) (2) Portfolio interest not to include interest received by 10-percent shareholders. Paragraph (g) applies to interest paid after April 12, 2007. Taxpayers may choose to apply the rules of paragraph (g) to interest paid in any taxable year not closed by the period of limitations as of April 12, 2007, provided they do so consistently for all relevant partnerships during such years. (3) Portfolio interest not to include certain contingent interest. The rules of paragraph (h) of this section apply beginning September 18, 2015. § 1.871-14T [Removed] Par. 3. Section 1.871-14T is removed. Par. 4. Section 1.1441-0 is amended by: 1. Revising entries for § 1.1441-1(b)(2)(vii)(D) through (F) and (b)(3)(ii)(C). 2. Adding entries for § 1.1441-1 (b)(3)(iii)(A)( 1 ) and ( 2 ). 3. Revising entry for § 1.1441-1(b)(3)(iii)(D). 4. Adding entry for § 1.1441-1(b)(3)(iii)(E). 5. Removing entries for § 1.1441-1(b)(3)(v)(C) and (D). 6. Revising entries for § 1.1441-1(b)(3)(vi) through (b)(3)(vii)(B). 7. Revising entries for § 1.1441-1(b)(6)(ii) through (b)(7)(v). 8. Adding entries for § 1.1441-1(c)(2)(i) and (ii). 9. Revising entries for § 1.1441-1(c)(5), (c)(10), and (c)(28) and (29). 10. Adding entries for § 1.1441-1(c)(30) through (56). 11. Adding entries for § 1.1441-1(e)(2)(ii)(A) and (B). 12. Revising the entry for § 1.1441-1(e)(3)(iv). 13. Adding entries for § 1.1441-1(e)(3)(iv)(C)(1) through (4) and § 1.1441-1(e)(3)(iv)(D)( 1 ) through ( 8 ). 14. Revising the entry for § 1.1441-1(e)(3)(v). 15. Adding entries for § 1.1441-1(e)(4)(i)(A) and (B). 16. Revising the entry for § 1.1441-1(e)(4)(ii)(A) and adding entries for § 1.1441-1(e)(4)(ii)(A)( 1 ) and ( 2 ). 17. Adding entries for § 1.1441-1(e)(4)(ii)(D)( 1 ) through ( 3 ) 18. Revising the entries for § 1.1441-1(e)(4)(iii). 19. Adding entries from § 1.1441-1(e)(4)(iv)(B)( 1 ) through ( 4 ). 20. Revising the entry from § 1.1441-1(e)(4)(iv)(C) and adding entries for § 1.1441-1(e)(4)(iv)(D) and (E). 21. Revising the entries for § 1.1441-1(e)(4)(v), § 1.1441-1(e)(4)(viii)(C), § 1.1441-1(e)(4)(ix) introductory text and § 1.1441-1(e)(4)(ix)(A) and (B). 22. Adding entries for § 1.1441-1(e)(4)(ix)(B)( 1 ) and ( 2 ).. 23. Revising entry for § 1.1441-1(e)(4)(ix)(C) and adding entries for § 1.1441(e)(4)(ix)(C)( 1 ) and ( 2 ) and § 1.1441-1(e)(4)(ix)(D). 24. Revising entries for § 1.1441-1(e)(5)(i) and 25. Adding entries for § 1.1441-1(e)(5)(v)(C)(1) through (f)(3). 26. Adding entries for § 1.1441-2(b)(3)(iii), (b)(6), and (e)(7). 27. Revising the entry for § 1.1441-3(a) and adding entries for § 1.1441-3(a)(1) and (2). 28. Revising the entry for § 1.1441-3(c)(4)(i)(C). 29. Adding entries for § 1.1441-3(g)(1) and (2). 30. Revising entry for § 1.1441-3(h) and adding entries for § 1.1441-3(h)(1) and (2) and § 1.1441-3(i). 31. Adding an entry for § 1.1441-4(a)(3)(iii); and revising entries for § 1.1441-4(b)(4) and (g). 32. Removing entries for § 1.1441-4(g)(1) through (2). 33. Adding an entry for § 1.1441-5(b)(2)(vi). 34. Revising and adding entries for § 1.1441-5(c)(1)(iv) and (v). 35. Revising entries for § 1.1441-5(c)(3)(iv) through (d)(2). 36. Revising the entry for § 1.1441-5(e)(2). 37. Adding an entry for § 1.1441-5(e)(3)(iii). 38. Revising entries for § 1.1441-5(e)(5)(iv) and (g). 39. Removing entries for § 1.1441-5(g)(1) and (2). 40. Adding entries for § 1.1441-6(b)(1)(i) and (ii). 41. Revising the entry for § 1.1441-6(c)(1). 42. Revising the entry for § 1.1441-6(h). 43. Adding an entry for § 1.1441-6(i). 44. Revising the entry for § 1.1441-7(a)(2), and adding entries for § 1.1441-7(a)(3) and (4). 45. Adding entries for § 1.1441-7(b)(3)(i) and (ii). 46. Adding entries for § 1.1441-7(b)(5)(i) through (c)(3), § 1.1441-7(b)(6)(i) through (iii), § 1.1441-7(b)(8)(i) through (iv), and § 1.1441-7(b)(9)(i) and (ii). 47. Revising entries for § 1.1441-7(b)(10) and (11) and adding entries for § 1.1441-7(b)(12) and (13). 48. Revising the entry for § .1441-7(c). 49. Adding entries for § 1.1441-7(f)(1) through (f)(2)(ii). 50. Revising entry for § 1.1441-7(g). 51. Adding an entry for § 1.1441-10. The revisions and additions read as follows: § 1.1441-0 Outline for regulations provisions for section 1441. This section lists captions contained in §§ 1.1441-1 through 1.1441-10. § 1.1441-1 Requirement for the deduction and withholding of tax on payments to foreign persons. (b) * * * (2) * * * (vii) * * * (D) Special rules applicable to a withholding certificate provided by a qualified intermediary that assumes primary withholding responsibility under chapter 3 and chapter 4 of the Internal Revenue Code. (E) Special rules applicable to a withholding certificate provided by a qualified intermediary that assumes primary Form 1099 reporting and backup withholding responsibility but not primary withholding under chapter 3 and chapter 4. (F) Special rules applicable to a withholding certificate provided by a qualified intermediary that assumes primary withholding responsibility under chapter 3 and chapter 4 and primary Form 1099 reporting and backup withholding responsibility and a withholding certificate provided by a withholding foreign partnership or a withholding foreign trust. (3) * * * (ii) * * * (C) Documentary evidence furnished for offshore obligation. (iii) Presumption of U.S. or foreign status. (A) Payments to exempt recipients. ( 1 ) In general. ( 2 ) Special rule for withholdable payments made to exempt recipients. (D) Payments with respect to offshore obligations. (E) Certain payments for services. (vi) U.S. branches and territory financial institutions not treated as U.S. persons. (vii) Joint payees. (A) In general. (B) Special rule for offshore obligations. (6) * * * (ii) Examples. (7) Liability for failure to obtain documentation timely or to act in accordance with applicable presumptions. (i) General rule. (ii) Proof that tax liability has been satisfied. (A) In general. (B) Special rule for establishing that income is effectively connected with the conduct of a U.S. trade or business. (iii) Liability for interest and penalties. (iv) Special rule for determining validity of withholding certificate containing inconsequential errors. (v) Special effective date. (c) * * * (2) * * * (i) In general. (ii) Dual residents. (5) Financial institution and foreign financial institution (or FFI). (10) Chapter 3 of the Code (or chapter 3). (28) Nonwithholding foreign partnership (or NWP). (29) Withholding foreign partnership (or WP). (30) Possession of the United States or U.S. territory. (31) Amount subject to chapter 3 withholding. (32) EIN. (33) Flow-through withholding certificate. (34) Foreign payee. (35) Intermediary withholding certificate. (36) Nonwithholding foreign trust (or NWT). (37) Payment with respect to an offshore obligation. (38) Permanent residence address. (i) In general. (ii) Hold mail instruction. (39) Standing instructions to pay amounts. (40) Territory financial institution. (41) TIN. (42) Withholding foreign trust (or WT). (43) Certified deemed-compliant FFI. (44) Chapter 3 withholding rate pool. (45) Chapter 3 status. (46) Chapter 4 of the Code (or chapter 4). (47) Chapter 4 status. (48) Chapter 4 withholding rate pool. (49) Deemed-compliant FFI. (50) GIIN (or Global Intermediary Identification Number). (51) NFFE. (52) Nonparticipating FFI. (53) Participating FFI. (54) Preexisting obligation. (55) Registered deemed-compliant FFI. (56) Withholdable payment. (e) * * * (2) * * * (ii) * * * (A) In general. (B) Requirement to collect foreign TIN and date of birth beginning January 1, 2017. (3) * * * (iv) Withholding statement provided by nonqualified intermediary. (C) * * * ( 1 ) In general. ( 2 ) Nonqualified intermediary withholding statement for withholdable payments. ( 3 ) Alternative withholding statement. ( 4 ) Example. (D) Alternative procedures. ( 1 ) In general. ( 2 ) Withholding rate pools. ( i ) In general. ( ii ) Withholding rate pools for .chapter 4 purposes. ( 3 ) Allocation information. ( 4 ) Failure to provide allocation information. ( 5 ) Cure provision. ( 6 ) Form 1042-S reporting in case of allocation failure. ( 7 ) Liability for tax, interest, and penalties. ( 8 ) Applicability to flow-through entities and certain U.S. branches. (E) Notice procedures. (v) Withholding certificate from certain U.S. branches (including territory financial institutions). (vi) Reportable amounts. (4) Applicable rules. (i) Who may sign the certificate. (A) In general. (B) Electronic signatures. (ii) Period of validity. (A) General rule. ( 1 ) Withholding certificates and documentary evidence. ( 2 ) Documentary evidence for treaty claims and treaty statements. (D) * * * ( 1 ) Defined. ( 2 ) Obligation to notify a withholding agent of a change in circumstances. ( 3 ) Withholding agent's obligation with respect to a change in circumstances. (iii) Retention of documentation. (iv) Electronic transmission of information (A) In general. (B) Requirements. ( 1 ) In general. ( 2 ) Same information as paper Form W-8. ( 3 ) Perjury statement and signature requirements. ( i ) Perjury statement. ( ii ) Electronic signature. ( 4 ) Requests for electronic Form W-8 data. (C) Form 8233. (D) Forms and documentary evidence received by facsimile or email. (E) Third party repositories. (v) Additional procedures for certificates provided electronically. (viii) * * * (C) Reliance on a prior version of a withholding certificate. (ix) Certificates to furnished for each obligation unless exception applies. (A) Exception for certain branch or account systems or system maintained by agent. (B) Reliance on certification provided by introducing brokers. ( 1 ) In general. ( 2 ) Example. (C) Reliance on documentation and certifications provided between principals and agents. ( 1 ) Withholding agent as agent. ( 2 ) Withholding agent as principal. (D) Reliance upon documentation for accounts acquired in merger or bulk acquisition for value. (5) Qualified intermediaries. (i) In general. (v) * * * (A) In general. (B) Content of withholding statement. (C) Withholding rate pools ( 1 ) In general. ( 2 ) Withholding rate pool requirements for a withholdable payment. ( 3 ) Alternative procedure for U.S. non-exempt recipients. (D) Example. (6) Qualified derivatives dealers. (f) Effective/applicability date. (1) In general. (2) Lack of documentation for past years. (3) Section 871(m) transactions. § 1.1441-2 Amounts subject to withholding. (b) * * * (3) * * * (iii) Exceptions to withholding. (6) Dividend equivalents. (e) * * * (7) Payments of dividend equivalents. (i) In general. (ii) Payment. (iii) Premiums and other upfront payments. § 1.1441-3 Determination of amounts to be withheld. (a) General rule. (1) Withholding on gross amount. (2) Coordination with chapter 4. (c) * * * (4) * * * (i) * * * (C) Coordination with REIT/QIE withholding. (g) * * * (1) Duty to withhold. (2) Effective date. (h) Dividend equivalents. (1) Withholding on gross amount. (2) Reliance by withholding agent on reasonable determinations. (3) Effective/applicability date. (i) Effective/applicability date. § 1.1441-4 Exemptions from withholding for certain effectively connected income and other amounts. (a) * * * (3) * * * (iii) Exception for specified notional principal contracts. (b) * * * (4) Final payment exemption. (g) Effective/applicability date. § 1.1441-5 Withholding on payments to partnerships, trusts, and estates. (b) * * * (2) * * * (vi) Coordination with chapter 4 requirements for U.S. partnerships, trusts, and estates. (c) * * * (1) * * * (iv) Coordination with chapter 4 for payments made to foreign partnerships. (v) Examples. (3) * * * (iv) Withholding statement provided by nonwithholding foreign partnership and coordination with chapter 4. (v) Withholding and reporting by a foreign partnership. (d) Presumption rules. (1) In general. (2) Determination of partnership status as U.S. or foreign in the absence of documentation. (e) * * * (2) Payments to foreign complex trusts and foreign estates. (3) * * * (iii) Coordination with chapter 4 for payments made to foreign simple trusts and foreign grantor trusts. (5) * * * (iv) Withholding statement provided by foreign simple trust or foreign grantor trust and coordination with chapter 4. (g) Effective/applicability date. § 1.1441-6 Claim of reduced withholding under an income tax treaty. (b) * * * (1) * * * (i) Identification of limitation on benefits provisions. (ii) Reason to know based on existence of treaty. (c) * * * (1) General rule. (h) Dividend equivalents. (i) Effective/applicability dates. (1) General rule. (2) Dividend equivalents. § 1.1441-7 General provisions relating to withholding agents. (a) * * * (2) Withholding agent with respect to dividend equivalents. (3) Examples. (4) Effective/applicability date. (b) * * * (3) * * * (i) In general. (ii) Limits on reason to know for preexisting obligations. (5) * * * (i) Classification of U.S. status, U.S. address, or U.S. telephone number. (ii) U.S. place of birth. (iii) Standing instructions with respect to offshore obligations. (6) Withholding certificate—claim of reduced rate of withholding under. (i) Permanent residence address. (ii) Mailing address. (iii) Standing instructions. (7) Documentary evidence. (8) Documentary evidence—establishment of foreign status. (i) Documentary evidence received prior to January 1, 2001. (ii) Documentary evidence received after December 31, 2000. (A) Treatment of individual's foreign status. (B) Presumption of entity's foreign status. (iii) U.S. place of birth. (iv) Standing instructions with respect of offshore obligations. (9) Documentary evidence—claim of reduced rate of withholding under treaty. (i) Permanent residence address and mailing address. (ii) Standing instructions. (10) Indirect account holders. (11) Limits on reason to know for multiple obligations belonging to a single person. (12) Reasonable explanation supporting claim of foreign status. (13) Additional guidance. (c) Agent. (1) In general. (2) Authorized agent. (3) Liability of withholding agent acting through an agent. (f) * * * (1) Liability of withholding agent. (2) Exception for withholding agents that do not know of conduit financing arrangement. (i) In general. (ii) Examples. (g) Effective/applicability date. § 1.1441-10 Withholding agents with respect to fast-pay arrangements. (a) In general. (b) Exception. (c) Liability. (d) Examples. (e) Effective date. Par. 5. Section 1.1441-1 is amended by: 1. Revising paragraphs (a), (b)(1), (b)(2)(i), (b)(2)(iii)(A), (b)(2)(iv)(A), (b)(2)(iv)(B)( 2 ) though ( 4 ), (b)(2)(iv)(C), (b)(2)(iv)(E), (b)(2)(vi), (b)(2)(vii)(B) through (b)(2)(vii)(F), (b)(3)(i), (b)(3)(ii), (b)(3)(iii) introductory text, (b)(3)(iii)(A)( 1 ), and (b)(3)(iii)(A)( 1 )( i ) through (b)(3)(iii)(A)( 1 )( v ), (b)(3)(iii)( A )( 2 ), (b)(3)(iii)(D), (b)(3)(iv) introductory text, (b)(3)(iv)(A), (b)(3)(v)(B), (b)(3)(vi), (b)(3)(vii), (b)(3)(ix)(A), (b)(3)(x), (b)(4) introductory text, (b)(4)(i), (b)(5)(ix), (b)(6), (b)(7)(i) introductory text, and (b)(7)(i)(A) through (b)(7)(i)(C). 2. Redesignating paragraph (b)(7)(ii) as (b)(7)(ii)(A) and revising it. 3. Adding reserved paragraph (b)(7)(ii)(C). 4. Revising paragraphs (b)(7)(iv) and (v) and (c) introductory text. 5. Redesignating paragraph (c)(2) as (c)(2)(i) and revising it. 6. Adding reserved paragraph (c)(2)(ii). 7. Revising paragraphs (c)(3)(ii), (c)(5), (c)(10), (c)(12), (c)(16) and (17), (c)(23), (c)(25), and (c)(28) through (37). 8. Redesignating paragraph (c)(38) as (c)(38)(i) and revising it. 9. Adding reserved paragraph (c)(38)(ii). 10. Revising paragraphs (c)(39) through (56), (d)(4), and (e)(1)(ii)(A)( 2 ) and ( 3 ). 11. Redesignating paragraph (e)(2)(ii) as (e)(2)(ii)(A) and revising new paragraph (e)(2)(ii)(A). 12. Adding reserved paragraph (e)(2)(ii)(B). 13. Revising paragraphs (e)(3)(ii) introductory text, (e)(3)(ii)(A), (e)(3)(ii)(C), (e)(3)(ii)(D), (e)(3)(ii)(F), (e)(3)(iii) introductory text, (e)(3)(iii)(A), (e)(3)(iii)(C) through (E), and (e)(3)(iv)(A) through (e)(3)(iv)(C)( 2 )( v ). 14. Adding paragraph (e)(3)(iv)(C)( 2 )( v ). 15. Redesignating paragraph (e)(3)(iv)(C)( 3 ) as (e)(3)(iv)(C)( 4 ) and revising it. 16. Adding reserved new paragraph (e)(3)(iv)(C)( 3 ) 17. Revising paragraphs (e)(3)(iv)(D)( 1 ) through ( 6 ), (e)(3)(iv)(E), (e)(3)(v), and (e)(4) introductory text. 18. Redesignating paragraph (e)(4)(i) as (e)(4)(i)(A) and revising it. 19. Adding reserved paragraph (e)(4)(i)(B). 20. Revising paragraph (e)(4)(ii)(A). 22. Revising paragraphs (e)(4)(ii)(B) introductory text, (e)(4)(ii)(B)( 1 ) through ( 6 ), and (e)(4)(ii)(B)( 8 ) through ( 10 ). 23. Removing paragraph (e)(4)(ii)(B)( 11 ) and redesignating paragraph (e)(4)(ii)(B)( 12 ) as paragraph (e)(4)(ii)(B)( 11 ). 24. Revising paragraphs (e)(4)(ii)(C) and (D), (e)(4)(iii), and (e)(4)(iv)(A). 25. Redesignating paragraph (e)(4)(iv)(C) as (e)(4)(iv)(D) and revising it. 26. Adding reserved paragraph (e)(4)(iv)(C). 27. Adding reserved paragraph (e)(4)(iv)(E). 28. Revising paragraphs (e)(4)(v), (e)(4)(vi), (e)(4)(vii) introductory text, (e)(4)(vii)(A), (e)(4)(vii)(F), (e)(4)(vii)(H), (e)(4)(vii)(l), (e)(4)(viii) introductory text, (e)(4)(viii)(B) and (C), (e)(4)(ix), (e)(5)(ii) introductory text, and (e)(5)(ii)(A) through (D). 29. Revising paragraphs (e)(5)(iii) and (iv), (e)(5)(v)(A), (e)(5)(v)(B) introductory text, and (e)(5)(v)(B)( 1 ) through ( 3 ). 30. Redesignating paragraph (e)(5)(v)(B)( 4 ) as (e)(5)(v)(B)( 5 ) and revising it. 31. Revising paragraphs (e)(5)(v)(C) and (D) and (f)(1)(4). The additions and revisions read as follows: § 1.1441-1 Requirement for the deduction and withholding of tax on payments to foreign persons. (a) Purpose and scope. This section, §§ 1.1441-2 through 1.1441-9, and 1.1443-1 provide rules for withholding under sections 1441, 1442, and 1443 when a payment is made to a foreign person. This section provides definitions of terms used in chapter 3 of the Internal Revenue Code (Code) and regulations thereunder. It prescribes procedures to determine whether an amount must be withheld under chapter 3 of the Code and documentation that a withholding agent may rely upon to determine the status of a payee or a beneficial owner as a U.S. person or as a foreign person and other relevant characteristics of the payee that may affect a withholding agent's obligation to withhold under chapter 3 of the Code and the regulations thereunder. Special procedures regarding payments to foreign persons that act as intermediaries are also provided. Section 1.1441-2 defines the income subject to withholding under sections 1441, 1442, and 1443 and the regulations under these sections. Section 1.1441-3 provides rules regarding the amount subject to withholding and rules for coordinating withholding under this section with withholding under section 1445 and under chapter 4 of the Code. Section 1.1441-4 provides exemptions from withholding for, among other things, certain income effectively connected with the conduct of a trade or business in the United States, including certain compensation for the personal services of an individual. Section 1.1441-5 provides rules for withholding on payments made to flow-through entities and other similar arrangements. Section 1.1441-6 provides rules for claiming a reduced rate of withholding under an income tax treaty. Section 1.1441-7 defines the term withholding agent and provides due diligence rules governing a withholding agent's obligation to withhold. Section 1.1441-8 provides rules for relying on claims of exemption from withholding for payments to a foreign government, an international organization, a foreign central bank of issue, or the Bank for International Settlements. Sections 1.1441-9 and 1.1443-1 provide rules for relying on claims of exemption from withholding for payments to foreign tax exempt organizations and foreign private foundations. (b) General rules of withholding —(1) Requirement to withhold on payments to foreign persons. A withholding agent must withhold 30 percent of any payment of an amount subject to withholding made to a payee that is a foreign person unless it can reliably associate the payment with documentation upon which it can rely to treat the payment as made to a payee that is a U.S. person or as made to a beneficial owner that is a foreign person entitled to a reduced rate of withholding. However, a withholding agent making a payment to a foreign person need not withhold where the foreign person assumes responsibility for withholding on the payment under chapter 3 of the Code and the regulations thereunder as a qualified intermediary (see paragraphs (e)(5) and (e)(6) of this section), as a U.S. branch of a foreign person (see paragraph (b)(2)(iv) of this section), as a withholding foreign partnership (see § 1.1441-5(c)(2)(i)), or as a withholding foreign trust (see § 1.1441-5(e)(5)(v)). When withholding under chapter 4 was applied to a payment, the withholding obligation under this section is satisfied. See § 1.1441-3(a)(2). This section (dealing with general rules of withholding and claims of foreign or U.S. status by a payee or a beneficial owner) and §§ 1.1441-4, 1.1441-5, 1.1441-6, 1.1441-8, 1.1441-9, and 1.1443-1 provide rules for determining whether documentation is required as a condition for reducing the rate of withholding on a payment to a foreign beneficial owner or to a U.S. payee and if so, the nature of the documentation upon which a withholding agent may rely in order to reduce such rate. Paragraph (b)(2) of this section prescribes the rules for the determination of who the payee is, the extent to which a payment is treated as made to a foreign payee, and reliable association of a payment with documentation. Paragraph (b)(3) of this section describes the applicable presumptions for determining the payee's status as U.S. or foreign and the payee's other characteristics ( e.g., as an owner or intermediary, as an individual, partnership, corporation, etc.). Paragraph (b)(4) of this section lists the types of payments for which the 30-percent withholding rate may be reduced. Because the treatment of a payee as a U.S. or a foreign person also has consequences for purposes of making an information return under the provisions of chapter 61 of the Code and for withholding under other provisions of the Code, such as sections 3402, 3405, or 3406, paragraph (b)(5) of this section lists applicable provisions outside chapter 3 of the Code that require certain payees to establish their foreign status ( e.g., in order to be exempt from information reporting). Paragraph (b)(6) of this section describes the withholding obligations of a foreign person making a payment that it has received in its capacity as an intermediary. Paragraph (b)(7) of this section describes the liability of a withholding agent that fails to withhold at the required 30-percent rate in the absence of documentation. Paragraph (b)(8) of this section deals with adjustments and refunds in the case of overwithholding. Paragraph (b)(9) of this section deals with determining the status of the payee when the payment is jointly owned. See paragraph (c)(6) of this section for a definition of beneficial owner. See § 1.1441-7(a) for a definition of withholding agent. See § 1.1441-2(a) for the determination of an amount subject to withholding. See § 1.1441-2(e) for the definition of a payment and when it is considered made. Except as otherwise provided, the provisions of this section apply only for purposes of determining a withholding agent's obligation to withhold under chapter 3 of the Code and the regulations thereunder. (2) Determination of payee and payee's status —(i) In general. Except as otherwise provided in this paragraph (b)(2) and § 1.1441-5(c)(1) and (e)(3), a payee is the person to whom a payment is made, regardless of whether such person is the beneficial owner of the amount (as defined in paragraph (c)(6) of this section). A foreign payee is a payee who is a foreign person. A U.S. payee is a payee who is a U.S. person. Generally, the determination by a withholding agent of the U.S. or foreign status of a payee and of its other relevant characteristics ( e.g., as a beneficial owner or intermediary, or as an individual, corporation, or flow-through entity) is made on the basis of a withholding certificate that is a Form W-8 or a Form 8233 (indicating foreign status of the payee or beneficial owner) or a Form W-9 (indicating U.S. status of the payee). The provisions of this paragraph (b)(2), paragraph (b)(3) of this section, and § 1.1441-5(c), (d), and (e) dealing with determinations of payee and applicable presumptions in the absence of documentation apply only to payments of amounts subject to withholding under chapter 3 of the Code (within the meaning of § 1.1441-2(a)). However, for a payment that is both an amount subject to withholding under chapter 3 and a withholdable payment under chapter 4, first apply the rules of § 1.1471-3 for determining the payee of a withholdable payment under chapter 4 and the applicable presumptions in the absence of documentation applicable to such payments. See also § 1.6049-5(d) for payments of amounts that are not subject to withholding under chapter 3 of the Code (or the regulations thereunder) but that may be reportable under provisions of chapter 61 of the Code (and the regulations thereunder). See paragraph (d) of this section for documentation upon which the withholding agent may rely in order to treat the payee or beneficial owner as a U.S. person. See paragraph (e) of this section for documentation upon which the withholding agent may rely in order to treat the payee or beneficial owner as a foreign person. For applicable presumptions of status in the absence of documentation, see paragraph (b)(3) of this section and § 1.1441-5(d). For definitions of a foreign person and U.S. person, see paragraph (c)(2) of this section. (iii) Payments to wholly-owned entities —(A) Foreign-owned domestic entity. A payment to a wholly-owned domestic entity that is disregarded for federal tax purposes under § 301.7701-2(c)(2) of this chapter as an entity separate from its owner and whose single owner is a foreign person shall be treated as a payment to the owner of the entity, subject to the provisions of paragraph (b)(2)(iv) of this section. For purposes of this paragraph (b)(2)(iii)(A), a domestic entity means a person that would be treated as a U.S. person if it had an election in effect under § 301.7701-3(c)(1)(i) of this chapter to be treated as a corporation. For example, a limited liability company, A, organized under the laws of the State of Delaware, opens an account at a U.S. bank. Upon opening of the account, the bank requests A to furnish a Form W-9 as required under section 6049(a) and the regulations under that section. A does not have an election in effect under § 301.7701-3(c)(1)(i) of this chapter and, therefore, is not treated as an organization taxable as a corporation, including for purposes of the exempt recipient provisions in § 1.6049-4(c)(1). If A has a single owner and the owner is a foreign person (as defined in paragraph (c)(2) of this section), then A may not furnish a Form W-9 because it may not represent that it is a U.S. person for purposes of the provisions of chapters 3, 4, and 61 of the Code, and section 3406. Therefore, A must furnish a Form W-8 with the name, address, and taxpayer identifying number (TIN) (if required) of the foreign person who is the single owner in the same manner as if the account were opened directly by the foreign single owner. See §§ 1.894-1(d) and 1.1441-6(b)(2) for special rules where the entity's owner is claiming a reduced rate of withholding under an income tax treaty. (iv) Payments to a U.S. branch of certain foreign banks or foreign insurance companies —(A) U.S. branch treated as a U.S. person in certain cases. A payment to a U.S. branch of a foreign person is a payment to a foreign person. However, a U.S. branch of a foreign person that is described in this paragraph (b)(2)(iv)(A) may agree to be treated as a U.S. person for purposes of withholding on specified payments to the U.S. branch. If a U.S. branch agrees to be treated as a U.S. person with a withholding agent, it is required to act as a U.S. person with respect to all other withholding agents, including when acting as an intermediary with respect to withholdable payments for purposes of chapter 4. See § 1.1471-3(a)(3)(vi). In such cases, the U.S. branch is treated as a payee that is a U.S. person. See paragraph (C) of this section for additional requirements for the U.S. branch when treated as a payor that is a U.S. person. Notwithstanding the preceding sentence, a withholding agent making a payment to a U.S. branch treated as a U.S. person under this paragraph (b)(2)(iv)(A) shall not treat the branch as a U.S. person for purposes of reporting the payment made to the branch. Therefore, a payment to such U.S. branch shall be reported on Form 1042-S under § 1.1461-1(c) and § 1.1474-1(d)(1)(i) for a payment of U.S. source FDAP income that is a chapter 4 reportable amount as defined in § 1.1471-1(b)(18). Further, a U.S. branch that is treated as a U.S. person under this paragraph (b)(2)(iv)(A) shall not be treated as a U.S. person for purposes of the withholding certificate it provides to a withholding agent. Therefore, the U.S. branch must furnish a U.S. branch withholding certificate on a Form W-8IMY as provided in paragraph (e)(3)(v) of this section and not a Form W-9. An agreement to treat a U.S. branch as a U.S. person must be evidenced by a U.S. branch withholding certificate described in paragraph (e)(3)(v) of this section furnished by the U.S. branch to the withholding agent. A U.S. branch described in this paragraph (b)(2)(iv)(A) and eligible to be treated as a U.S. person is any U.S. branch of a foreign bank subject to regulatory supervision by the Federal Reserve Board or a U.S. branch of a foreign insurance company required to file an annual statement on a form approved by the National Association of Insurance Commissioners with the Insurance Department of a State, a Territory, or the District of Columbia. In addition, a territory financial institution (including a territory financial institution that is a flow-through entity) will be treated as a U.S. branch for purposes of this paragraph (b)(2)(iv)(A) and therefore is eligible to be treated as a U.S. person. The Internal Revenue Service (IRS) may approve a list of U.S. branches that may be eligible for treatment as U.S. persons under this paragraph (b)(2)(iv)(A) (see § 601.601(d)(2) of this chapter). See § 1.6049-5(c)(5)(vi) for the treatment of U.S. branches as U.S. payors if they make a payment that is subject to reporting under chapter 61 of the Code. Also see § 1.6049-5(d)(1)(ii) for the treatment of U.S. branches as foreign payees under chapter 61 of the Code. (B) * * * ( 2 ) As a payment directly to the persons whose names are on withholding certificates or other appropriate documentation forwarded by the U.S. branch to the withholding agent when no agreement is in effect to treat the U.S. branch as a U.S. person for such payment, to the extent the withholding agent can reliably associate the payment with such certificates or documentation; ( 3 ) As a payment to a foreign person of income that is effectively connected with the conduct of a trade or business in the United States if the withholding agent has obtained an EIN for the branch and cannot reliably associate the payment with a withholding certificate from a U.S. branch (or any other certificate or other appropriate documentation from another person). See § 1.1441-4(a)(2)(ii); or ( 4 ) As a payment to a foreign person of income that is not effectively connected with the conduct of a trade or business in the United States if the withholding agent has not obtained an EIN for the branch and cannot reliably associate the payment with a withholding certificate from the U.S. branch. (C) Consequences to the U.S. branch. A U.S. branch that is treated as a U.S. person under paragraph (b)(2)(iv)(A) of this section shall be treated as a separate person for purposes of section 1441(a) and all other provisions of chapters 3 and 4 of the Code and the regulations thereunder (other than for purposes of reporting the payment to the U.S. branch under § 1.1461-1(c) and § 1.1474-1(d)(1)(i) for a chapter 4 reportable amount by a withholding agent) or for purposes of the documentation such a branch must furnish under paragraph (e)(3)(v) of this section) for any payment that it receives as such. Thus, the U.S. branch shall be responsible for withholding on a payment as a U.S. person in accordance with the provisions under chapters 3 and 4 of the Code and the regulations thereunder and other applicable withholding provisions of the Code. For this purpose, it shall obtain and retain documentation from payees or beneficial owners of the payments that it receives as an intermediary as a U.S. person in the same manner as if it were a separate entity. For example, if a U.S. branch receives a payment as an intermediary on behalf of customers of its home office and the home office is a qualified intermediary, the U.S. branch must obtain a qualified intermediary withholding certificate described in paragraph (e)(3)(ii) of this section from its home office. Similarly, if a U.S. branch of an FFI treated as a U.S. person receives a payment on behalf of another branch of the FFI that is treated as a nonparticipating FFI, the U.S. branch must withhold on the payment made to the other branch as if it were a separate person to the extent required under chapter 4. In addition, a U.S. branch that has not provided documentation to the withholding agent for a payment that is, in fact, not effectively connected income is a withholding agent with respect to that payment. See paragraph (b)(6) of this section and § 1.1441-4(a)(2)(ii). (E) Payments to other U.S. branches. Similar withholding procedures may apply to payments to U.S. branches that are not described in paragraph (b)(2)(iv)(A) of this section to the extent permitted by the IRS. Any such branch must establish that its situation is analogous to that of a U.S. branch described in paragraph (b)(2)(iv)(A) of this section. In the alternative, the branch must establish that the withholding and reporting requirements under chapter 3 of the Code and the regulations thereunder impose an undue administrative burden and that the collection of the tax imposed by section 871(a) or 881(a) on the foreign person (or its members in the case of a foreign partnership) will not be jeopardized by the exemption from withholding. Generally, an undue administrative burden will be found to exist in a case where the person entitled to the income, such as a foreign insurance company, receives from the withholding agent income on securities issued by a single corporation, some of which is, and some of which is not, effectively connected with conduct of a trade or business within the United States and the criteria for determining the effective connection are unduly difficult to apply because of the circumstances under which such securities are held. No exemption from withholding shall be granted under this paragraph (b)(2)(iv)(E) unless the person entitled to the income complies with such other requirements as may be imposed by the IRS and unless the IRS is satisfied that the collection of the tax on the income involved will not be jeopardized by the exemption from withholding. The IRS may prescribe such procedures as are necessary to make these determinations (see § 601.601(d)(2) of this chapter). (vi) Other payees. A payment to a person described in § 1.6049-4(c)(1)(ii) that the withholding agent would treat as a payment to a foreign person without obtaining documentation for purposes of information reporting under section 6049 (if the payment were interest) is treated as a payment to a foreign payee for purposes of chapter 3 of the Code and the regulations thereunder (or to a foreign beneficial owner to the extent provided in paragraph (e)(1)(ii)(A)( 6 ) or ( 7 ) of this section). Further, a payment that the withholding agent can reliably associate with documentary evidence described in § 1.6049-5(c)(1) relating to the payee is treated as a payment to a foreign payee. See § 1.1441-5(b)(1) and (c)(1) for payee determinations for payments to partnerships. See § 1.1441-5(e) for payee determinations for payments to foreign trusts or foreign estates. (vii) * * * (B) Special rules applicable to a withholding certificate from a nonqualified intermediary or flow-through entity. ( 1 ) In the case of a payment made to a nonqualified intermediary, a flow-through entity (as defined in paragraph (c)(23) of this section), or a U.S. branch described in paragraph (b)(2)(iv) of this section (other than a U.S. branch that is treated as a U.S. person), a withholding agent can reliably associate the payment with valid documentation only to the extent that, prior to the payment, the withholding agent can allocate the payment to a valid nonqualified intermediary, flow-through entity, or U.S. branch withholding certificate (and a withholding certificate provided by a nonparticipating FFI with respect to a portion of a payment that is a withholdable payment allocated to an exempt beneficial owner as described in § 1.1471-3(c)(3)(iii)(B)( 4 )); the withholding agent can reliably determine how much of the payment relates to valid documentation provided by a payee as determined under paragraph (c)(12) of this section ( i.e., a person that is not itself an intermediary, flow-through entity, or U.S. branch); and the withholding agent has sufficient information to report the payment on Form 1042-S or Form 1099, if reporting is required. See, however, paragraph (e)(3)(iv) of this section for when a nonqualified intermediary may report payees to the withholding agent in a chapter 4 withholding rate pool, in which case a withholding agent need not associate the portion of the payment attributable to such payees with documentation from each such payee. See also paragraph (e)(3)(iii) of this section for the requirements of a nonqualified intermediary withholding certificate, paragraph (e)(3)(v) of this section for the requirements of a U.S. branch withholding certificate, and §§ 1.1441-5(c)(3)(iii) and (e)(5)(iii) for the requirements of a flow-through withholding certificate (including the requirements for a withholding certificate associated with a withholdable payment). Thus, a payment cannot be reliably associated with valid documentation provided by a payee to the extent such documentation is lacking or unreliable, or to the extent that information required to allocate and report all or a portion of the payment to each payee is lacking or unreliable. If a withholding certificate attached to an intermediary, U.S. branch, or flow-through withholding certificate is another intermediary, U.S. branch, or flow-through withholding certificate, the rules of this paragraph (b)(2)(vii)(B) apply by treating the share of the payment allocable to the other intermediary, U.S. branch, or flow-through entity as if the payment were made directly to such other entity. See paragraph (e)(3)(iv)(D) of this section for rules permitting information allocating a payment to documentation to be received after the payment is made. ( 2 ) The rules of paragraph (b)(2)(vii)(B)( 1 ) of this section are illustrated by the following examples. Each example illustrates a payment that is not a withholdable payment and, as a result of which, neither the chapter 4 status of the NQI nor payee specific documentation with respect to the chapter 4 status is required to be provided to the withholding agent (and no withholding applies under chapter 4 on each payment). See paragraph (e)(3)(iv)(C) of this section for the requirements of a withholding statement provided by a nonqualified intermediary that receives a withholdable payment and for an example illustrating the requirements of an NQI providing a withholding statement to a withholding agent for a withholdable payment. Example 1. WA, a withholding agent, makes a payment of U.S. source interest with respect to a grandfathered obligation as described in § 1.1471-2(b) (and thus the payment is not a withholdable payment) to NQI, an intermediary that is a nonqualified intermediary. NQI provides a valid intermediary withholding certificate under paragraph (e)(3)(iii) of this section. NQI does not, however, provide valid documentation from the persons on whose behalf it receives the interest payment, and, therefore, the interest payment cannot be reliably associated with valid documentation provided by a payee. WA must apply the presumption rules of paragraph (b)(3)(v) of this section to the payment. Example 2. The facts are the same as in Example 1, except that NQI does attach valid beneficial owner withholding certificates (as defined in paragraph (e)(2)(i) of this section) from A, B, C, and D establishing their statuses as foreign persons. NQI does not, however, provide WA with any information allocating the payment among A, B, C, and D and, therefore, WA cannot determine the portion of the payment that relates to each beneficial owner withholding certificate. The interest payment cannot be reliably associated with valid documentation from a payee, and WA must apply the presumption rules of paragraph (b)(3)(v) of this section to the payment. See, however, paragraph (e)(3)(iv)(D) of this section providing for alternative procedures that allow a nonqualified intermediary to provide allocation information after a payment is made. Example 3. The facts are the same as in Example 2, except that NQI provides allocation information associated with its intermediary withholding certificate indicating that 25% of the interest payment is allocable to A and 25% to B. NQI does not provide any allocation information regarding the remaining 50% of the payment. WA may treat 25% of the payment as made to A and 25% as made to B. The remaining 50% of the payment cannot be reliably associated with valid documentation from a payee, however, since NQI did not provide information allocating the payment. Thus, the remaining 50% of the payment is subject to the presumption rules of paragraph (b)(3)(v) of this section. Example 4. WA makes a payment of U.S. source interest to NQI1, an intermediary that is not a qualified intermediary. NQI1 provides WA with a valid nonqualified intermediary withholding certificate as well valid beneficial owner withholding certificates from A and B and a valid nonqualified intermediary withholding certificate from NQI2. NQI2 has provided valid beneficial owner documentation from C sufficient to establish C's status as a foreign person. Based on information provided by NQI1, WA can allocate 20% of the interest payment to A, and 20% to B. Based on information that NQI2 provided NQI1 and that NQI1 provides to WA, WA can allocate 60% of the payment to NQI2, but can only allocate one half of that payment (30%) to C. Therefore, WA cannot reliably associate the remainder of the payment made to NQI2 (30% of the total payment) with valid documentation and must apply the presumption rules of paragraph (b)(3)(v) of this section to that portion of the payment. (C) Special rules applicable to a withholding certificate provided by a qualified intermediary that does not assume primary withholding responsibility —( 1 ) If a payment is made to a qualified intermediary that does not assume primary withholding responsibility under chapters 3 and 4 of the Code or primary Form 1099 reporting and backup withholding responsibility under chapter 61 and section 3406 of the Code for the payment, a withholding agent can reliably associate the payment with valid documentation only to the extent that, prior to the payment, the withholding agent has received a valid qualified intermediary withholding certificate described in paragraph (e)(3)(ii) of this section and the withholding agent can reliably determine the portion of the payment that relates to a chapter 3 withholding rate pool, as defined in paragraph (c)(44) of this section; a chapter 4 withholding rate pool (including for a withholdable payment as described in paragraph (e)(5)(v)(C)( 2 ) of this section), as defined in paragraph (c)(48) of this section; or a pool attributable to U.S. exempt recipients. In the case of a [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2016-31590. Public record. Not legal advice.