Bulletin No. 2013-15 HIGHLIGHTS OF THIS ISSUEBulletin No. 2013-15 April 8, 2013 HIGHLIGHTS OF THIS ISSUE These synopses are intended only as aids to the reader in identifying the subject

Bulletin No. 2013-15April 8, 2013

HIGHLIGHTSOF THIS ISSUEThese synopses are intended only as aids to the reader inidentifying the subject matter covered. They may not berelied upon as authoritative interpretations.

SPECIAL ANNOUNCEMENT

Notice 2013–22, page 904.This notice invites public comment on recommendations foritems that should be included on the 2013-2014 Guidance Pri-ority List. The Guidance Priority List is used by the TreasuryDepartment and the Service to identify and prioritize the taxissues that should be addressed through regulations, revenuerulings, revenue procedures, notices, and other published ad-ministrative guidance. The 2013-2014 Guidance Priority Listwill establish the guidance that the Treasury Department andthe Service intend to prioritize for purposes of allocating re-sources from July 1, 2013, through June 30, 2014. Pleasesubmit comments by May 1, 2013.

INCOME TAX

Rev. Rul. 2013–8, page 763.Fringe benefits aircraft valuation formula. For purposesof section 1.61–21(g) of the Income Tax Regulations, relatingto the rule for valuing non-commercial flights on employer-pro-vided aircraft, the Standard Industry Fare Level (SIFL) cents-per-mile rates and terminal charge in effect for the first half of2013 are set forth.

Rev. Rul. 2013–9, page 764.Federal rates; adjusted federal rates; adjusted federallong-term rate and the long-term exempt rate. For pur-poses of sections 382, 642, 1274, 1288, and other sectionsof the Code, tables set forth the rates for April 2013.

T.D. 9610, page 765.Final regulations under sections 1471 through 1474 of theCode, commonly known as FACTA, were added by the Hir-ing Incentives to Restore Employment Act of 2010, Pub. L.111–147 (the HIRE Act). These sections generally require U.S.withholding agents to withhold tax on certain payments to aforeign financial institution (FFI) that has not agreed to providethe IRS with certain information regarding its United States ac-counts. These sections also require U.S. withholding agents towithhold tax on certain payments to a nonfinancial foreign entity(NFFE) that does not provide information about its substantialUnited States owners to withholding agents. These regulationsprovide guidance to persons making certain U.S.-related pay-ments to FFIs and NFFE’s, and payments by FFIs to other per-sons. Notices 2010–60, 2011–34, and 2011–53 obsoleted.Announcement 2012–42 obsoleted.

Notice 2013–20, page 902.This notice provides interim guidance relating to the allocationof the credit for increasing research activities to corporationsand trades or businesses under common control for purposesof § 41(f)(1)(A)(ii) and § 41(f)(1)(B)(ii) of the Internal RevenueCode, as amended by section 301(c) of the American TaxpayerRelief Act of 2012, P.L. 112–240, for taxable years beginningafter December 31, 2011.

Notice 2013–21, page 903.This notice postpones until October 15, 2013, the deadline tomake an election under section 165(i) of the Code to deductin the preceding taxable year losses attributable to HurricaneSandy sustained in federally declared disaster areas in Con-necticut, Delaware, District of Columbia, Maryland, Massachu-setts, New Hampshire, New Jersey, New York, Pennsylvania,Rhode Island, Virginia, and West Virginia resulting from Hurri-cane Sandy.

(Continued on the next page)

Finding Lists begin on page ii.


EMPLOYEE PLANS


EXEMPT ORGANIZATIONS


ESTATE TAX

Notice 2013–22, page 904.This notice invites public comment on recommendations foritems that should be included on the 2013-2014 Guidance Pri-ority List. The Guidance Priority List is used by the TreasuryDepartment and the Service to identify and prioritize the taxissues that should be addressed through regulations, revenue

rulings, revenue procedures, notices, and other published ad-ministrative guidance. The 2013-2014 Guidance Priority Listwill establish the guidance that the Treasury Department andthe Service intend to prioritize for purposes of allocating re-sources from July 1, 2013, through June 30, 2014. Pleasesubmit comments by May 1, 2013.

GIFT TAX


EMPLOYMENT TAX


SELF-EMPLOYMENT TAX


(Continued on the next page)

April 8, 2013 2013–15 I.R.B.

EXCISE TAX


TAX CONVENTIONS


ADMINISTRATIVE

T.D. 9613, page 900.Final regulations under section 6654 of the Code relating to re-duced estimated income tax payments for qualified individualswith small business income for any taxable year beginning in2009 and does not apply to any taxable years beginning beforeor after 2009.


2013–15 I.R.B. April 8, 2013

The IRS MissionProvide America’s taxpayers top-quality service by helpingthem understand and meet their tax responsibilities and en-

force the law with integrity and fairness to all.

IntroductionThe Internal Revenue Bulletin is the authoritative instrument ofthe Commissioner of Internal Revenue for announcing officialrulings and procedures of the Internal Revenue Service and forpublishing Treasury Decisions, Executive Orders, Tax Conven-tions, legislation, court decisions, and other items of generalinterest. It is published weekly.

It is the policy of the Service to publish in the Bulletin all sub-stantive rulings necessary to promote a uniform application ofthe tax laws, including all rulings that supersede, revoke, mod-ify, or amend any of those previously published in the Bulletin.All published rulings apply retroactively unless otherwise indi-cated. Procedures relating solely to matters of internal man-agement are not published; however, statements of internalpractices and procedures that affect the rights and duties oftaxpayers are published.

Revenue rulings represent the conclusions of the Service on theapplication of the law to the pivotal facts stated in the revenueruling. In those based on positions taken in rulings to taxpayersor technical advice to Service field offices, identifying detailsand information of a confidential nature are deleted to preventunwarranted invasions of privacy and to comply with statutoryrequirements.

Rulings and procedures reported in the Bulletin do not have theforce and effect of Treasury Department Regulations, but theymay be used as precedents. Unpublished rulings will not berelied on, used, or cited as precedents by Service personnel inthe disposition of other cases. In applying published rulings andprocedures, the effect of subsequent legislation, regulations,court decisions, rulings, and procedures must be considered,

and Service personnel and others concerned are cautionedagainst reaching the same conclusions in other cases unlessthe facts and circumstances are substantially the same.

The Bulletin is divided into four parts as follows:

Part I.—1986 Code.This part includes rulings and decisions based on provisions ofthe Internal Revenue Code of 1986.

Part II.—Treaties and Tax Legislation.This part is divided into two subparts as follows: Subpart A,Tax Conventions and Other Related Items, and Subpart B, Leg-islation and Related Committee Reports.

Part III.—Administrative, Procedural, and Miscellaneous.To the extent practicable, pertinent cross references to thesesubjects are contained in the other Parts and Subparts. Alsoincluded in this part are Bank Secrecy Act Administrative Rul-ings. Bank Secrecy Act Administrative Rulings are issued bythe Department of the Treasury’s Office of the Assistant Secre-tary (Enforcement).

Part IV.—Items of General Interest.This part includes notices of proposed rulemakings, disbar-ment and suspension lists, and announcements.

The last Bulletin for each month includes a cumulative indexfor the matters published during the preceding months. Thesemonthly indexes are cumulated on a semiannual basis, and arepublished in the last Bulletin of each semiannual period.

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

April 8, 2013 2013–15 I.R.B.

Part I. Rulings and Decisions Under the Internal Revenue Codeof 1986Section 42.—Low-IncomeHousing Credit

The adjusted applicable federal short-term, mid-term, and long-term rates are set forth for the monthof April 2013. See Rev. Rul. 2013-9, page 764.

Section 61.—Gross IncomeDefined26 CFR 1.61–21: Taxation of fringe benefits.

Fringe benefits aircraft valuation for-mula. For purposes of section 1.61–21(g)of the Income Tax Regulations, relatingto the rule for valuing non-commercialflights on employer-provided aircraft,

the Standard Industry Fare Level (SIFL)cents-per-mile rates and terminal chargein effect for the first half of 2013 are setforth.

Rev. Rul. 2013–8

For purposes of the taxation of fringebenefits under section 61 of the Inter-nal Revenue Code, section 1.61–21(g) ofthe Income Tax Regulations provides arule for valuing noncommercial flightson employer-provided aircraft. Section1.61–21(g)(5) provides an aircraft valua-tion formula to determine the value of suchflights. The value of a flight is determined

under the base aircraft valuation formula(also known as the Standard Industry FareLevel formula or SIFL) by multiplyingthe SIFL cents-per-mile rates applicablefor the period during which the flight wastaken by the appropriate aircraft multipleprovided in section 1.61–21(g)(7) and thenadding the applicable terminal charge. TheSIFL cents-per-mile rates in the formulaand the terminal charge are calculated bythe Department of Transportation and arereviewed semi-annually.

The following chart sets forth the termi-nal charge and SIFL mileage rates:

Period During Whichthe Flight Is Taken

TerminalCharge

SIFL MileageRates

1/1/13 - 6/30/13 $48.54 Up to 500 miles= $.2655 per mile

501-1500 miles= $.2024 per mile

Over 1500 miles= $.1946 per mile

DRAFTING INFORMATION

The principal author of this revenueruling is Kathleen Edmondson of theOffice of Division Counsel/AssociateChief Counsel (Tax Exempt/GovernmentEntities). For further informationregarding this revenue ruling, contactMs. Edmondson at (202) 622–0047 (not atoll-free call).

Section 280G.—GoldenParachute Payments

Federal short-term, mid-term, and long-term ratesare set forth for the month of April 2013. See Rev.Rul. 2013-9, page 764.

Section 382.—Limitationon Net Operating LossCarryforwards and CertainBuilt-In Losses FollowingOwnership Change

The adjusted applicable federal long-term rate isset forth for the month of April 2013. See Rev. Rul.2013-9, page 764.

Section 412.—MinimumFunding Standards


Section 467.—CertainPayments for the Use ofProperty or Services


Section 468.—SpecialRules for Mining and SolidWaste Reclamation andClosing Costs


Section 482.—Allocationof Income and DeductionsAmong Taxpayers


Section 483.—Interest onCertain Deferred Payments


2013–15 I.R.B. 763 April 8, 2013

Section 642.—SpecialRules for Credits andDeductions


Section 807.—Rules forCertain Reserves


Section 846.—DiscountedUnpaid Losses Defined


Section 1274.—Determi-nation of Issue Price in theCase of Certain Debt Instru-ments Issued for Property(Also Sections 42, 280G, 382, 412, 467, 468, 482,483, 642, 807, 846, 1288, 7520, 7872.)

Federal rates; adjusted federal rates;adjusted federal long-term rate and thelong-term exempt rate. For purposes ofsections 382, 642, 1274, 1288, and othersections of the Code, tables set forth therates for April 2013.

Rev. Rul. 2013–9

This revenue ruling provides vari-ous prescribed rates for federal incometax purposes for April 2013 (the currentmonth). Table 1 contains the short-term,mid-term, and long-term applicable fed-eral rates (AFR) for the current monthfor purposes of section 1274(d) of the

Internal Revenue Code. Table 2 containsthe short-term, mid-term, and long-termadjusted applicable federal rates (adjustedAFR) for the current month for purposesof section 1288(b). Table 3 sets forth theadjusted federal long-term rate and thelong-term tax-exempt rate described insection 382(f). Table 4 contains the ap-propriate percentages for determining thelow-income housing credit described insection 42(b)(1) for buildings placed inservice during the current month. How-ever, under section 42(b)(2), the applicablepercentage for non-federally subsidizednew buildings placed in service after July30, 2008, and before December 31, 2013,shall not be less than 9%. Finally, Table5 contains the federal rate for determiningthe present value of an annuity, an interestfor life or for a term of years, or a remain-der or a reversionary interest for purposesof section 7520.

REV. RUL. 2013–9 TABLE 1

Applicable Federal Rates (AFR) for April 2013

Period for Compounding

Annual Semiannual Quarterly Monthly

Short-term

AFR .22% .22% .22% .22%110% AFR .24% .24% .24% .24%120% AFR .26% .26% .26% .26%130% AFR .29% .29% .29% .29%

Mid-term

AFR 1.09% 1.09% 1.09% 1.09%110% AFR 1.20% 1.20% 1.20% 1.20%120% AFR 1.31% 1.31% 1.31% 1.31%130% AFR 1.43% 1.42% 1.42% 1.42%150% AFR 1.65% 1.64% 1.64% 1.63%175% AFR 1.92% 1.91% 1.91% 1.90%

Long-term

AFR 2.70% 2.68% 2.67% 2.67%110% AFR 2.97% 2.95% 2.94% 2.93%120% AFR 3.25% 3.22% 3.21% 3.20%130% AFR 3.51% 3.48% 3.46% 3.46%

April 8, 2013 764 2013–15 I.R.B.


Adjusted AFR for April 2013

Period for Compounding

Annual Semiannual Quarterly Monthly

Short-term adjustedAFR

.22% .22% .22% .22%

Mid-term adjusted AFR 1.09% 1.09% 1.09% 1.09%

Long-term adjustedAFR

2.70% 2.68% 2.67% 2.67%


Rates Under Section 382 for April 2013

Adjusted federal long-term rate for the current month 2.70%

Long-term tax-exempt rate for ownership changes during the current month (the highest of the adjustedfederal long-term rates for the current month and the prior two months.) 2.77%


Appropriate Percentages Under Section 42(b)(1) for April 2013

Note: Under Section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after July30, 2008, and before December 31, 2013, shall not be less than 9%.

Appropriate percentage for the 70% present value low-income housing credit 7.43%

Appropriate percentage for the 30% present value low-income housing credit 3.19%


Rate Under Section 7520 for April 2013

Applicable federal rate for determining the present value of an annuity, an interest for life or a term of years,or a remainder or reversionary interest 1.4%

Section 1288.—Treatmentof Original Issue Discounton Tax-Exempt Obligations


Section 1471.—Withhold-able Payments to ForeignFinancial Institutions26 CFR 1.1471–1: Scope of chapter 4 and definitions.

T.D. 9610

DEPARTMENT OF THETREASURYInternal Revenue Service26 CFR part 1 and 301

Regulations Relating toInformation Reporting byForeign Financial Institutionsand Withholding on CertainPayments to Foreign Financial

Institutions and Other ForeignEntities

AGENCY: Internal Revenue Service(IRS), Treasury.

ACTION: Final Regulations.

SUMMARY: This document contains fi-nal regulations under chapter 4 of Subti-tle A (sections 1471 through 1474) of theInternal Revenue Code of 1986 (Code) re-garding information reporting by foreignfinancial institutions (FFIs) with respect toU.S. accounts and withholding on certainpayments to FFIs and other foreign enti-ties. These regulations affect persons mak-ing certain U.S.-related payments to FFIsand other foreign entities and payments byFFIs to other persons.

2013–15 I.R.B. 765 April 8, 2013

DATES: Effective date. These regulationsare effective January 28, 2013.

Applicability dates. For datesof applicability, see §§1.1471–1(c);1.1471–2(a)(1); 1.1471–2(a)(2)(i),(ii), (iii)(A); 1.1471–2(a)(4)(ii);1.1471–3(d)(1); 1.1471–3(d)(4)(i),(ii); (iv); 1.1471–3(d)(6)(v);1.1471–3(d)(11)(viii)(A);1471–3(d)(12)(iii)(B); 1471–3(e)(3)(ii);1471–3(e)(4)(vii)(B); 1.1471–4(b)(1),(4); 1.1471–4(d)(7); 1.1471–4(e)(2)(v);1.1471–4(e)(3)(iv); 1.1471–5(f)(2)(iv);1.1471–6(i); 1.1472–1(b);1.1473–1(a)(1)(ii) and 1.1473–1(a)(4)(vi);1.1474–1(d)(4)(iii)(C) and 1.1474–1(i);1.1474–2(c); 1.1471–3(c); 1.1474–4(b);1.1474–5(c); 1.1474–6(f); 1.1474–7(c);301.1474–1(e).

FOR FURTHER INFORMATIONCONTACT: John Sweeney, (202)622–3840 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

I. In General

This document contains final amend-ments to the Income Tax Regulations(CFR parts 1 and 301) under sections1471 through 1474 of the Code (com-monly known as the Foreign Account TaxCompliance Act, or FATCA). On March18, 2010, the Hiring Incentives to Re-store Employment Act of 2010, Pub. L.111–147 (the HIRE Act), added chapter4 of Subtitle A (chapter 4), comprised ofsections 1471 through 1474, to the Code.Chapter 4 generally requires U.S. with-holding agents to withhold tax on certainpayments to foreign financial institutions(FFIs) that do not agree to report certaininformation to the Internal Revenue Ser-vice (IRS) regarding their United Statesaccounts (U.S. accounts), and on certainpayments to certain nonfinancial foreignentities (NFFEs) that do not provide infor-mation on their substantial United Statesowners (substantial U.S. owners) to with-holding agents. Since the enactment ofchapter 4, the Department of the Trea-sury (Treasury Department) and the IRShave issued preliminary guidance on theimplementation of chapter 4. See Notice2010–60, 2010–37 I.R.B. 329, Notice2011–34, 2011–19 I.R.B. 765, and Notice

2011–53, 2011–32 I.R.B. 124, (collec-tively, the FATCA Notices). The FATCANotices are available at IRS.gov.

On February 15, 2012 (77 FR 9022),the Treasury Department and the IRSpublished a notice of proposed rulemak-ing (the proposed regulations) addressingchapter 4’s due diligence, withholding, re-porting, and associated requirements. OnOctober 24, 2012, the Treasury Depart-ment and the IRS released Announcement2012–42, which announced the intentionto amend certain provisions of the pro-posed regulations in adopting the finalregulations.

The Treasury Department and the IRSreceived numerous comments in responseto the proposed regulations, and a publichearing on the proposed regulations washeld on May 15, 2012. The comments re-ceived in writing and at the public hear-ing were carefully considered in develop-ing these final regulations.

II. Chapter 4 Policy in the Context of theU.S. Federal Income Tax Laws

U.S. taxpayers’ investments have be-come increasingly global in scope. FFIsnow provide a significant proportion of theinvestment opportunities for, and act asintermediaries with respect to the invest-ments of, U.S. taxpayers. Like U.S. finan-cial institutions, FFIs are generally in thebest position to identify and report withrespect to their U.S. customers. Absentsuch reporting by FFIs, some U.S. taxpay-ers may attempt to evade U.S. tax by hid-ing money in offshore accounts. To pre-vent this abuse of the U.S. voluntary taxcompliance system and address the use ofoffshore accounts to facilitate tax evasion,it is essential in today’s global investmentclimate that reporting be available with re-spect to both the onshore and offshore ac-counts of U.S. taxpayers. This informa-tion reporting strengthens the integrity ofthe U.S. voluntary tax compliance systemby placing U.S. taxpayers that have ac-cess to international investment opportu-nities on an equal footing with U.S. tax-payers that do not have such access or oth-erwise choose to invest within the UnitedStates.

To this end, chapter 4 extends the scopeof the U.S. information reporting regimeto include FFIs that maintain U.S. ac-counts. Chapter 4 also imposes increased

disclosure obligations on certain NFFEsthat present a high risk of U.S. tax avoid-ance. In addition, chapter 4 provides forwithholding on FFIs and NFFEs that donot comply with the reporting and otherrequirements of chapter 4. This withhold-ing generally may be credited against theU.S. income tax liability of the beneficialowner of the payment to which the with-holding is attributable, and generally maybe refunded to the extent the withhold-ing exceeds such liability. An FFI thatdoes not comply with the requirements ofsection 1471(b), however, and that benefi-cially owns the payment from which tax iswithheld under chapter 4, may not receivea credit or refund of such tax except to theextent required by a treaty obligation ofthe United States.

III. Statutory Provisions

The following discussion briefly ex-plains the statutory provisions of FATCA,which are implemented by these regula-tions. Section 1471(a) requires any with-holding agent to withhold 30 percent ofany withholdable payment to an FFI thatdoes not meet the requirements of section1471(b). A withholdable payment is de-fined in section 1473(1) to mean, subjectto certain exceptions: (i) any payment ofinterest, dividends, rents, salaries, wages,premiums, annuities, compensations, re-munerations, emoluments, and other fixedor determinable annual or periodical gains,profits, and income (FDAP income), ifsuch payment is from sources within theUnited States; and (ii) any gross proceedsfrom the sale or other disposition of anyproperty of a type which can produce in-terest or dividends from sources within theUnited States.

An FFI meets the requirements of sec-tion 1471(b) if it either enters into anagreement (an FFI agreement) with theIRS under section 1471(b)(1) to performcertain obligations or meets requirementsprescribed by the Treasury Departmentand the IRS to be deemed to comply withthe requirements of section 1471(b). AnFFI is defined as any financial institu-tion that is a foreign entity, other than afinancial institution organized under thelaws of a possession of the United States(generally referred to as a U.S. territory inthis preamble). For this purpose, section1471(d)(5) defines a financial institution

April 8, 2013 766 2013–15 I.R.B.

as, except to the extent provided by theSecretary, any entity that: (i) accepts de-posits in the ordinary course of a bankingor similar business; (ii) as a substantialportion of its business, holds financialassets for the account of others; or (iii)is engaged (or holding itself out as be-ing engaged) primarily in the business ofinvesting, reinvesting, or trading in securi-ties, partnership interests, commodities, orany interest in such securities, partnershipinterests, or commodities.

Section 1471(b)(1)(A) and (B) requiresan FFI that enters into an FFI agreement(a participating FFI) to identify its U.S.accounts and comply with verification anddue diligence procedures prescribed bythe Secretary. A U.S. account is definedunder section 1471(d)(1) as any financialaccount held by one or more specifiedUnited States persons, as defined in sec-tion 1473(3), (specified U.S. persons)or United States owned foreign entities(U.S. owned foreign entities), subject tocertain exceptions. Section 1471(d)(2) de-fines a financial account to mean, exceptas otherwise provided by the Secretary,any depository account, any custodial ac-count, and any equity or debt interest in anFFI, other than interests that are regularlytraded on an established securities market.A U.S. owned foreign entity is defined insection 1471(d)(3) as any foreign entitythat has one or more substantial U.S. own-ers (as defined in section 1473(2)).

A participating FFI is required undersection 1471(b)(1)(C) and (E) to reportcertain information on an annual basis tothe IRS with respect to each U.S. accountand to comply with requests for additionalinformation by the Secretary with respectto any U.S. account. The information thatmust be reported with respect to each U.S.account includes: (i) the name, address,and taxpayer identifying number (TIN) ofeach account holder who is a specifiedU.S. person (or, in the case of an accountholder that is a U.S. owned foreign en-tity, the name, address, and TIN of eachspecified U.S. person that is a substantialU.S. owner of such entity); (ii) the ac-count number; (iii) the account balance orvalue; and (iv) except to the extent pro-vided by the Secretary, the gross receiptsand gross withdrawals or payments fromthe account (determined for such periodand in such manner as the Secretary mayprovide). In lieu of reporting account bal-

ance or value and reporting gross receiptsand gross withdrawals or payments, a par-ticipating FFI may, subject to conditionsprovided by the Secretary, elect under sec-tion 1471(c)(2) to report the informationrequired under sections 6041, 6042, 6045,and 6049 as if such institution were a U.S.person and each holder of such U.S. ac-count that is a specified U.S. person or U.S.owned foreign entity were a natural per-son and citizen of the United States. If for-eign law would prevent the FFI from re-porting the required information absent awaiver from the account holder, and theaccount holder fails to provide a waiverwithin a reasonable period of time, the FFIis required under section 1471(b)(1)(F) toclose the account.

Section 1471(b)(1)(D)(i) requires aparticipating FFI to withhold 30 percent ofany passthru payment to a recalcitrant ac-count holder or to an FFI that does not meetthe requirements of section 1471(b) (non-participating FFI). A passthru paymentis defined in section 1471(d)(7) as anywithholdable payment or other paymentto the extent attributable to a withholdablepayment. Section 1471(d)(6) defines arecalcitrant account holder as any accountholder that fails to provide the informationrequired to determine whether the accountis a U.S. account, or the information re-quired to be reported by the FFI, or thatfails to provide a waiver of a foreign lawthat would prevent reporting. A participat-ing FFI may, subject to such requirementsas the Secretary may provide, elect un-der section 1471(b)(3) not to withhold onpassthru payments, and instead be subjectto withholding on payments it receives,to the extent those payments are allocableto recalcitrant account holders or nonpar-ticipating FFIs. Section 1471(b)(1)(D)(ii)requires a participating FFI that does notmake such an election to withhold onpassthru payments it makes to any partici-pating FFI that makes such an election.

Section 1471(e) provides that the re-quirements of the FFI agreement shall ap-ply to the U.S. accounts of the participatingFFI and, except as otherwise provided bythe Secretary, to the U.S. accounts of eachother FFI that is a member of the same ex-panded affiliated group, as defined in sec-tion 1471(e)(2).

Section 1471(f) exempts from with-holding under section 1471(a) certainpayments beneficially owned by certain

persons, including any foreign govern-ment, international organization, foreigncentral bank of issue, or any other classof persons identified by the Secretary asposing a low risk of tax evasion. Section1472(a) requires a withholding agent towithhold 30 percent of any withholdablepayment to an NFFE if the payment isbeneficially owned by the NFFE or an-other NFFE, unless the requirements ofsection 1472(b) are met with respect to thebeneficial owner of the payment. Section1472(d) defines an NFFE as any foreignentity that is not a financial institution asdefined in section 1471(d)(5).

The requirements of section 1472(b) aremet with respect to the beneficial owner ofa payment if: (i) the beneficial owner orpayee provides the withholding agent witheither a certification that such beneficialowner does not have any substantial U.S.owners, or the name, address, and TIN ofeach substantial U.S. owner; (ii) the with-holding agent does not know or have rea-son to know that any information providedby the beneficial owner or payee is incor-rect; and (iii) the withholding agent reportsthe information provided to the Secretary.

Section 1472(c)(1) provides that with-holding under section 1472(a) does not ap-ply to payments beneficially owned by cer-tain classes of persons, including any classof persons identified by the Secretary. Inaddition, section 1472(c)(2) provides thatwithholding under section 1472(a) doesnot apply to any class of payment identi-fied by the Secretary for purposes of sec-tion 1472(c) as posing a low risk of taxevasion.

Section 1474(a) provides that everyperson required to withhold and deductany tax under chapter 4 is made liable forsuch tax and is indemnified against theclaims and demands of any person for theamount of any payments made in accor-dance with the provisions of chapter 4. Ingeneral, the beneficial owner of a paymentis entitled to a refund for any overpaymentof tax actually due under other provisionsof the Code. However, with respect to anytax properly deducted and withheld undersection 1471 from a payment beneficiallyowned by an FFI, section 1474(b)(2) pro-vides that the FFI is not entitled to a creditor refund, except to the extent requiredby a treaty obligation of the United States(and, if a credit or refund is required bya treaty obligation of the United States,

2013–15 I.R.B. 767 April 8, 2013

no interest shall be allowed or paid withrespect to such credit or refund). In addi-tion, section 1474(b)(3) provides that nocredit or refund shall be allowed or paidwith respect to any tax properly deductedand withheld under chapter 4 unless thebeneficial owner of the payment providesthe Secretary with such information asthe Secretary may require to determinewhether such beneficial owner is a U.S.owned foreign entity and the identity ofany substantial U.S. owners of such entity.

Section 1474(c) provides that informa-tion provided under chapter 4 is confiden-tial under rules similar to section 3406(f),except that the identity of an FFI that meetsthe requirements of section 1471(b) is nottreated as return information for purposesof section 6103.

Section 1474(d) provides that the Sec-retary shall provide for the coordinationof chapter 4 with other withholding pro-visions under the Code, including provid-ing for the proper crediting of amountsdeducted and withheld under chapter 4against amounts required to be deductedand withheld under other provisions.

Section 1474(f) provides that the Sec-retary shall prescribe such regulations orother guidance as may be necessary or ap-propriate to carry out the purposes of, andprevent the avoidance of, chapter 4.

IV. Balanced and Integrated Approach toImplementing Chapter 4

Chapter 4 grants the Secretary of theTreasury broad regulatory authority toprescribe rules and procedures relating tothe diligence, reporting, and withholdingobligations of the statute. These finalregulations exercise this authority by pro-viding specific operational guidelines forimplementing FATCA in a manner con-sistent with its principal policy objectives.Recognizing that there are costs asso-ciated with the implementation of anynew withholding and reporting regime,the Treasury Department and the IRSsolicited comments and met extensivelywith stakeholders to develop an imple-mentation approach that achieves an ap-propriate balance between fulfilling theimportant policy objectives of chapter 4and minimizing the burdens imposed onstakeholders. This engagement resulted inhundreds of constructive comments fromand numerous productive meetings with

stakeholders. While the comments cov-ered a broad range of issues relating to theimplementation of FATCA, the vast ma-jority of commenters expressed concernsregarding the costs and burdens associatedwith implementing FATCA and the legalimpediments to compliance in a numberof jurisdictions. Comments also expressedconcerns regarding the procedural andsystems aspects of registering and report-ing.

The Treasury Department and the IRScarefully considered these comments andestablished three avenues for addressingthe principal concerns regarding burdens,legal impediments, and technical imple-mentation. The first avenue was to adopta risk-based approach to implementing thestatute that effectively addresses policyconsiderations, eliminates unnecessaryburdens, and, to the extent possible, buildson existing practices and obligations. Thesecond avenue was to collaborate withforeign governments to develop an al-ternative intergovernmental approach toimplementing chapter 4 that removes le-gal impediments, allows for alignmentand coordination with local law reportingpractices, and achieves further burden re-ductions. The third avenue was to developadministrative approaches to simplify theprocess for registering and entering intoan agreement with the IRS in order to min-imize operational costs associated withcollecting and reporting FATCA informa-tion.

A. Targeted Regulations

These final regulations address poten-tial administrative burdens associated withFATCA compliance by adopting a risk-based and targeted approach to implementthe statute with respect to scope, diligence,and timing. In particular, with respect toscope, consistent with the objectives ofthe statute, the regulations limit the insti-tutions, obligations, and accounts subjectto FATCA to more specifically target con-cerns and address practical considerations.For example, the final regulations refinethe scope of FATCA in the following ways:

• Expansion of Grandfather Rule forCertain Obligations. To promote theorderly implementation of FATCA, thefinal regulations exempt from chapter4 withholding all obligations outstand-

ing on January 1, 2014, and any asso-ciated collateral. In addition, becauseevolving areas of the law may createchapter 4 withholding obligations inthe future and create uncertainty andrisk in the meantime, the final regu-lations address obligations (and asso-ciated collateral) that may give riseto withholdable payments through fu-ture regulations under section 871(m)(relating to dividend equivalent pay-ments) or to foreign passthru paymentsunder the chapter 4 foreign passthrupayment rules. Such obligations aregrandfathered if the obligations areoutstanding at any point prior to sixmonths after the implementing regula-tions are published.

• Scope of Covered Financial Institu-tions. In response to comments, thefinal regulations treat passive entitiesthat are not professionally managed asNFFEs rather than as FFIs. The finalregulations also provide appropriateexemptions for financial institutionsand certain passive NFFEs that are partof a nonfinancial group of companiesand that support the operations of thegroup.

• Expansion of Deemed Compliant andOther Exempt Categories. The finalregulations expand the categories ofFFIs that are deemed to comply withFATCA without the need to enter intoan agreement with the IRS in orderto focus the application of FATCA onhigher-risk financial institutions thatprovide services to the global invest-ment community. In addition, the finalregulations expand the scope of retire-ment funds that are considered exemptbeneficial owners the income of whichis not subject to chapter 4 withholding.

With respect to diligence, the final reg-ulations reduce the administrative burdensassociated with identifying U.S. accountsby calibrating due diligence requirementsbased on the value and risk profile of theaccount, and by permitting FFIs in manycases to rely on information they alreadycollect. For example, the final regulationsreduce the burdens associated with identi-fying U.S. accounts in the following ways:

• Accounts exempt from review. Thefinal regulations exempt from reviewentirely all preexisting accounts held

April 8, 2013 768 2013–15 I.R.B.

by individuals with a balance or valueof $50,000 or less. This threshold israised to $250,000 for preexisting ac-counts held by entities and for pre-existing accounts that are cash valueinsurance and annuity contracts. Inaddition, the final regulations exemptinsurance contracts with a balance orvalue of $50,000 or less from treatmentas financial accounts.

• Reduced diligence and documenta-tion rules for lower value preexistingaccounts. In the case of preexistingaccounts with a balance or value of$1,000,000 or less, the final regula-tions permit a participating FFI todetermine whether any of its accountsheld by individuals are U.S. accountsbased solely on a search of electroni-cally searchable account informationfor certain U.S. indicia. In addition,for such accounts held by passiveNFFEs, the final regulations allow awithholding agent to rely on its reviewconducted for anti-money launderingdue diligence purposes to identify anysubstantial U.S. owners of the payeein lieu of obtaining a certification.

• Reliance on self-certification. In thecase of accounts held by entities, thefinal regulations expand the ability ofFFIs to rely on a self-certification froman account holder as to its chapter 4status.

Finally, with respect to timing, the finalregulations allow reasonable timeframesto review existing accounts and implementFATCA’s obligations in stages to minimizeburdens and costs consistent with achiev-ing the statute’s compliance objectives.For example:

• Time allowed for review of pre-exist-ing accounts. The final regulationstreat all accounts maintained by an FFIprior to January 1, 2014, as preexist-ing accounts. In addition, the final reg-ulations allow participating FFIs andwithholding agents until December 31,2015, to document account holders andpayees that are not prima facie FFIs.

• Phased implementation of reporting.The final regulations modify the duedate for the first information report byrequiring participating FFIs to file thefirst information reports with respect to

the 2013 and 2014 calendar years notlater than March 31, 2015.

• Phased implementation of withholdingon passthru payments and gross pro-ceeds. The final regulations exemptfrom withholding foreign passthrupayments and gross proceeds fromsales or dispositions of property occur-ring before January 1, 2017.

B. Intergovernmental Agreements

1. In general

In many cases, foreign law would pre-vent an FFI from reporting directly tothe IRS the information required by theFATCA statutory provisions and theseregulations, thus potentially exposing theFFI to withholding. Such an outcomewould be inconsistent with FATCA’s ob-jective to address offshore tax evasionthrough increased information reporting.To overcome these legal impediments,the Treasury Department has collabo-rated with foreign governments to developtwo alternative model intergovernmentalagreements that facilitate the effectiveand efficient implementation of FATCAin a manner that removes domestic le-gal impediments to compliance, fulfillsFATCA’s policy objectives, and furtherreduces burdens on FFIs located in partnerjurisdictions.

The first model intergovernmentalagreement was published on July 26,2012. A partner jurisdiction signing anagreement with the United States basedon the first model (Model 1 IGA) agreesto adopt rules to identify and report infor-mation about U.S. accounts that meet thestandards set out in the Model 1 IGA. FFIscovered by a Model 1 IGA that are nototherwise excepted or exempt pursuant tothe agreement must identify U.S. accountspursuant to due diligence rules adopted bythe partner jurisdiction and report speci-fied information about the U.S. accountsto the partner jurisdiction. The partner ju-risdiction then exchanges this informationwith the IRS on an automatic basis. Thesestandards ensure that the IRS will receivethe same quality and quantity of infor-mation about U.S. accounts from FFIscovered by a Model 1 IGA as it receivesfrom FFIs applying these final regulations.

A second model intergovernmentalagreement was published on November

14, 2012. A partner jurisdiction signing anagreement with the United States based onthe second model (Model 2 IGA) agrees todirect and enable all FFIs that are locatedin the jurisdiction, and that are not other-wise excepted or exempt pursuant to theModel 2 IGA, to register with the IRS andreport specified information about U.S.accounts directly to the IRS in a mannerconsistent with chapter 4 and these finalregulations, except as expressly modifiedby the Model 2 IGA. In the case of certainrecalcitrant account holders, the informa-tion reported to the IRS by FFIs coveredby a Model 2 IGA is supplemented bygovernment-to-government exchange ofinformation.

Both Model 1 IGAs and Model 2 IGAs(together, IGAs) contemplate that the part-ner jurisdiction will require all financial in-stitutions that are located in the jurisdic-tion, and that are not otherwise excepted orexempt pursuant to the agreement, to iden-tify and report information about U.S. ac-counts. In consideration of the full cooper-ation by the partner jurisdiction, the modelagreements contemplate a number of sim-plifications and burden reductions associ-ated with the application of FATCA in thepartner jurisdiction. The Treasury Depart-ment and the IRS believe that IGAs repre-sent efficient and effective ways of imple-menting the requirements of chapter 4 andwill continue to conclude bilateral agree-ments based on the two models with inter-ested jurisdictions. In addition, the Trea-sury Department and the IRS continue toreceive comments strongly supporting theapproach to FATCA implementation em-bodied in the IGAs. The Treasury De-partment and the IRS remain committed toworking cooperatively with foreign juris-dictions on multilateral efforts to improvetransparency and information exchange ona global basis.

2. Interaction of IGAs with the FinalRegulations

FFIs covered by a Model 1 IGA, andthat are in compliance with local laws im-plemented to identify and report U.S. ac-counts in accordance with the terms of theModel 1 IGA, will be treated as satisfyingthe due diligence and reporting require-ments of chapter 4. Accordingly, consis-tent with the terms of the Model 1 IGA,these FFIs do not need to apply the fi-

2013–15 I.R.B. 769 April 8, 2013

nal regulations for purposes of comply-ing with and avoiding withholding underFATCA. In certain cases prescribed in theModel 1 IGA, the laws of the partner juris-diction may allow the resident FFI to electto apply provisions of these regulations in-stead of the rules otherwise prescribed inthe Model 1 IGA.

FFIs covered by a Model 2 IGA withthe United States will be required to imple-ment FATCA in the manner prescribed bythese regulations except to the extent ex-pressly modified by the Model 2 IGA. Thefinal regulations accommodate such varia-tions.

C. Streamlined Registration and TechnicalImplementation

FFIs registering with the IRS will beable to do so through a secure online webportal, the FATCA Registration Portal(Portal), from anywhere in the world.The Portal is designed to accomplish anentirely paperless registration process.Registering FFIs will be able to use thePortal to register their chapter 4 status(such as participating FFI or reportingModel 1 FFI (both as defined in the finalregulations)), manage their registrationinformation, and, as appropriate, agree tothe terms of or make the representationsrequired for their status. The Portal willalso facilitate electronic communicationbetween the IRS and FFIs and other reg-istrants. Registered FFIs designated asleads of an expanded affiliated group willbe able to use the Portal to manage theregistration status of group members. ThePortal will also be used by registering FFIsthat are already Qualified Intermediaries(QIs) to renew their QI status. An FFI’ssubmission and maintenance of registra-tion information through the Portal willmaximize processing efficiencies, mini-mize errors, and ensure expedient issuanceof a Global Intermediary IdentificationNumber (“GIIN”). An FFI will use itsGIIN to establish its chapter 4 status forwithholding purposes and to identify theinstitution for reporting purposes underthe final regulations. The IRS currentlycontemplates that the GIIN may also beused by reporting Model 1 FFIs to sat-isfy reporting requirements under locallaw and is discussing this possibility withits Model 1 IGA partners. With regardto reporting, the IRS is also discussing

with partner jurisdictions the possibilityof adopting a single format for reportingFATCA information, whether that infor-mation is reported directly to the IRS or tothe tax administration in a Model 1 IGAjurisdiction.

The IRS also anticipates that the cer-tifications of compliance required to bemade by responsible officers pursuant to§§1.1471–4(c)(7) and 1.1471–4(f)(3) willbe made electronically through the Portal,resulting in similar efficiencies.

Summary of Comments andExplanation of Revisions

I. In General

The Treasury Department and the IRSreceived a number of general commentsrequesting improvements to the readabilityof the proposed regulations. In response,the Treasury Department and the IRS madesubstantial changes in the final regulationsto simplify and clarify the chapter 4 rules.In addition, the Treasury Department andthe IRS received numerous specific com-ments regarding the proposed regulationsand made numerous changes to the finalregulations in response to those comments.

The following discussion addresses thesignificant changes in the final regulationsfrom the proposed regulations. To facili-tate this discussion, the defined terms from§1.1471–1(b) are used throughout.

II. Comments and Changes to §1.1471–1— Scope of Chapter 4 and Definitions

The chapter 4 definitions have been re-vised to reflect the IGAs and other changesadopted in the final regulations. Revisionsof the definitions are discussed as relevantin the succeeding sections of this pream-ble.

III. Comments and Changes to §1.1471–2— Requirement to Deduct and WithholdTax on Withholdable Payments to CertainFFIs

A. Grandfathered Obligations

Comments requested modifications tothe scope of grandfathered obligations tofacilitate market transition and allow timefor adapting master agreements and collat-eral arrangements in light of the IGAs, thefuture issuance of guidance under section871(m), and other systems developments.

In response, the final regulations providethat grandfathered obligations consist of:(1) any obligation outstanding on January1, 2014; (2) any obligation that produceswithholdable payments solely because theobligation is treated as giving rise to adividend equivalent pursuant to section871(m) and the regulations thereunderand that is executed on or before the datethat is six months after the date on whichobligations of its type are first treated asgiving rise to dividend equivalents; and (3)any agreement requiring a secured party tomake payments with respect to collateralsecuring one or more grandfathered obli-gations (even if the collateral is not itself agrandfathered obligation). If collateral (ora pool of collateral) secures both grandfa-thered obligations and obligations that arenot grandfathered, the collateral posted tosecure the grandfathered obligations mustbe determined by allocating (pro rata byvalue) the collateral (or, in the case of apool of collateral, each item comprisingthe pool of collateral) to all outstandingobligations secured by the collateral (orpool of collateral).

In addition, the final regulations pro-vide that an obligation will not give riseto a foreign passthru payment if it is ex-ecuted on or before the date that is sixmonths after the date on which final reg-ulations defining the term foreign passthrupayment are filed with the Federal Regis-ter. Comments also requested clarificationof the outstanding date of a debt instru-ment that is reopened in a qualified reopen-ing under §1.1275–2(k). For debt obliga-tions, the final regulations determine thedate the obligation is outstanding based onthe issue date of the debt. Thus, whetherdebt issued in a qualified reopening willbe treated as a grandfathered obligation de-pends on the issue date of the original debt,which is the issue date of the debt issued inthe qualified reopening.

The final regulations also provide thatthe date a non-debt obligation is outstand-ing is the date a legally binding agreementis executed. Thus, a line of credit or arevolving credit facility for a fixed termmay qualify as an obligation provided thatthe agreement as of its issue date fixes thematerial terms (including a stated maturitydate) under which the credit will be pro-vided.

In response to comments regardinginsurance contracts, the final regulations

April 8, 2013 770 2013–15 I.R.B.

provide that: (1) a life insurance contractpayable no later than upon the death of theinsured individual(s) is an obligation thatmay qualify as a grandfathered obligation;and (2) premiums paid for an insurancecontract or annuity contract that is treatedas a grandfathered obligation are treatedas payments made under a grandfatheredobligation.

Finally, comments requested provisionsto simplify a withholding agent’s determi-nation of whether an obligation is grand-fathered. Accordingly, the final regula-tions provide that: (1) a withholding agent,other than the issuer of the obligation (oran agent of the issuer) may, absent actualknowledge, rely on a written statement bythe issuer of the obligation to determinewhether such obligation meets the require-ments for grandfathered treatment; (2) awithholding agent is required to treat amodification as material only if the with-holding agent knows or has reason to knowthat such modification was material; and(3) a withholding agent, other than the is-suer of the obligation (or an agent of theissuer), absent actual knowledge, will havereason to know of a material modificationif it receives a disclosure thereof from theissuer of the obligation (or from such is-suer’s agent).

B. Other Changes to the WithholdingProvisions

Comments requested that the withhold-ing provisions under chapter 4 conformwith certain withholding provisions ofchapter 3. In addition, comments re-quested that the election to be withheldupon under section 1471(b)(3) and pro-vided in the proposed regulations beavailable on an account-by-account ba-sis. In response to these comments, thefinal regulations: (1) clarify the excep-tion to withholding when a withholdingagent lacks control, custody, or knowledgeof a payment; (2) treat a payment as awithholdable payment in the absence ofknowledge of its source or character, orallow for up to a one-year escrow of 30percent of the payment pending a determi-nation of the relevant facts; and (3) permitthe election to be withheld upon pursuantto §1.1471–2(a)(2)(iii) to be made on anaccount-by-account basis, provided otherapplicable requirements are satisfied.

IV. Comments and Changes to §1.1471–3— Identification of Payee

A. Documentation Alternatives

1. In General

Comments requested that the final reg-ulations generally permit a withholdingagent to rely upon a withholding certifi-cate to establish the chapter 4 status of apayee without obtaining additional docu-mentary evidence, unless such documen-tary evidence is required under chapter3. This comment was adopted. The finalregulations further expand the types ofdocumentary evidence upon which a with-holding agent may rely with respect to off-shore obligations, including governmentwebsites and reports from governmentagencies. For preexisting obligations, thefinal regulations permit a withholdingagent to rely on information previouslyrecorded in the withholding agent’s files,in addition to standardized industry codes,in determining the chapter 4 status of thepayee. For these purposes, a standardizedindustry code may be any coding systememployed by the withholding agent.

2. Written Statements

Comments requested that the final reg-ulations permit reliance on written state-ments without additional documentationfor offshore obligations that do not gener-ate payments of U.S. source FDAP income(such as a depository account maintainedoutside of the United States by an FFI)and enumerate the elements they must con-tain. This comment was adopted. A writ-ten statement may also be relied upon withrespect to an offshore obligation that gen-erates payments of U.S. source FDAP in-come if it is accompanied by documentaryevidence establishing the foreign status ofthe person named on the written statement.

Comments noted that signed docu-mentation outside of the United Statesgenerally does not require signature un-der penalties of perjury, and that such arequirement would depart from currentAML due diligence procedures. The finalregulations remove the penalties of per-jury requirement for written statementsused as documentation for payments madeoutside of the United States on offshoreobligations, other than for payments ofU.S. source FDAP income.

3. Substitute and Non-IRS Forms

Comments requested the ability to usesubstitute forms, including forms preparedor filled out in a foreign language. In re-sponse, the final regulations provide thatsubstitute forms may be both prepared inand filled out in a foreign language, pro-vided the withholding agent furnishes theIRS with a translated version upon request.Such substitute forms must contain thesame certifications as the official IRS formto the extent relevant. For this purpose, asubstitute form for individuals is accept-able, provided that the form contains therequired information, including the indi-vidual’s permanent residence address, allrelevant tax identification numbers, and, ifnot signed under penalties of perjury, thewithholding agent has obtained applicabledocumentary evidence that supports theperson’s claim of foreign status. Quali-fying non-IRS forms may be used withinthe United States as well as for offshoreobligations, and also may be used for pur-poses of chapter 3 to the extent providedin §1.1441–1(e)(4)(vi).

4. Reliance on Pre-FATCA Form W–8

In response to comments that FFIswould have difficulty obtaining new doc-umentation on all preexisting accountholders in a compressed time frame, thefinal regulations provide that a withhold-ing agent may rely upon a pre-FATCAForm W–8 in lieu of obtaining an updatedversion of the withholding certificate incertain circumstances.

5. Curing Inconsequential Errors

Comments requested that a minor errorin a withholding certificate not invalidatethe certificate if the error can be cured withsupplemental information already on filefor the payee. In response, the final reg-ulations provide that a withholding agentmay treat a withholding certificate as valid,notwithstanding an inconsequential error,if it otherwise has sufficient documenta-tion to cure the error that does not con-tradict the information on the withholdingcertificate. A failure to make a requiredcertification, or to provide a country of res-idence (or country under which treaty ben-efits are sought), is not an inconsequentialerror.

2013–15 I.R.B. 771 April 8, 2013

B. Continuing Validity of Documentation

Comments requested relief from thegeneral requirement to refresh documen-tation every three years. In response, thefinal regulations permit documentationto remain valid indefinitely, subject to achange in circumstances, if the chapter 4status claimed is a specified low-risk cat-egory. The Treasury Department and theIRS are considering extending the finalregulations’ validity rule to chapter 3 inappropriate circumstances (for example,when the payee does not make a claim thatwithholding under chapter 3 is reducedpursuant to a treaty).

C. Owner-Documented FFIs

In response to comments requestingreduced documentation requirements forthe owner-documented FFI provisions,the final regulations make several mod-ifications that also take into accountthe policy considerations presented byowner-documented FFIs. These modifica-tions include: (1) permitting transitionalreliance, subject to certain requirements,on documentation collected for AML duediligence purposes for payments madeprior to January 1, 2017, on preexistingobligations; (2) allowing such entitiesto issue debt interests to an expandedgroup of holders, provided such debtholders are reported in the same man-ner as equity holders; (3) simplifying thewithholding statement provided for anowner-documented FFI; and (4) provid-ing for indefinite validity for withholdingcertificates and withholding statementssubmitted with respect to obligations hav-ing an aggregate value equal to or less than$1,000,000.

D. “Eyeball Test” and EffectivelyConnected Income Presumption

Comments requested that chapter 4incorporate the so-called “eyeball test”under chapters 3 and 61 that treats pay-ments inside the United States to certainentities that have “incorporated,” “cor-poration,” or an indication of status asa financial institution in their names asmade to U.S exempt recipients. More-over, comments noted that withholdingagents often already obtain documentaryevidence for these entities to satisfy AML

due diligence requirements. In responseto these comments, the final regulationspermit a withholding agent to rely upondocumentary evidence obtained with re-spect to the payee, in lieu of a Form W–9,in order to establish the entity’s status as aU.S. person and rely on the “eyeball test”to determine (to the extent applicable) thepayee’s status as other than a specifiedU.S. person under chapter 4.

Comments also requested that the fi-nal regulations incorporate the chapter 3rules under which withholding agents arepermitted to presume that payments madeto U.S. branches of certain banks and in-surance companies are payments of in-come that is effectively connected with theconduct of a trade or business within theUnited States. In response, the regulationspermit a withholding agent to presume thata payment made to a U.S. branch of cer-tain banks and insurance companies is apayment of income that is effectively con-nected with a trade or business within theUnited States (and thus not a withholdablepayment) if the withholding agent obtainsa GIIN that enables the withholding agentto confirm that the FFI is a participatingFFI or registered deemed-compliant FFI,as well as an EIN for the U.S. branch thatenables the withholding agent to properlyreport the payment. Conforming changesare anticipated to be made to the presump-tion rule in chapter 3 to provide consis-tency with the rule set forth in these reg-ulations.

E. Rules for Offshore Obligations ofFunds and New Accounts of PreexistingCustomers

Comments requested additional clarityregarding when an interest in an invest-ment fund should be treated as an offshoreobligation. Comments also stated that, ingeneral, an investment fund’s office is notseparate from that of its manager or ad-ministrator, and shares issued by invest-ment funds are not “maintained and exe-cuted” at a particular office. In response tothese comments, the definition of an off-shore obligation has been amended to clar-ify that an offshore obligation also includesan equity interest in a foreign entity if theowner of the interest purchased the inter-est outside the United States either directlyfrom the foreign entity or from another en-tity located outside the United States.

Comments also requested that a new ac-count of a preexisting customer be treatedas a preexisting obligation. Commentsstated that in such cases, withholdingagents and FFIs generally do not get ad-ditional documentation from the customerbecause they are not required to do so forAML due diligence purposes. In responseto these comments, the final regulationspermit a new account of a customer thathas a preexisting obligation to be treatedas a preexisting obligation, provided thatthe withholding agent or FFI maintainingthe account also treats the new obligationand the prior obligation as one obligationfor purposes of applying AML due dili-gence, aggregating balances, and applyingthe standards of knowledge for purposesof chapter 4. The final regulations alsopermit this treatment to apply on a groupbasis for expanded affiliated groups andsponsored FFI groups.

F. Standards of Knowledge

Under the final regulations, the stan-dards of knowledge provisions have beenmodified to allow withholding agents torely on a claim of status as a participatingor registered-deemed compliant FFI basedon checking the payee’s GIIN against thepublished IRS FFI list. Prior to January 1,2015, a withholding agent is not requiredto confirm GIINs regarding an FFI’s claimof status as a reporting Model 1 FFI. How-ever, an FFI will have reason to know thatsuch claim is unreliable if the withholdingagent does not have a permanent residenceaddress for the FFI (or address of the rel-evant branch) in the relevant country thathas in effect a Model 1 IGA.

The final regulations further provide:(1) limits, generally conformed with thechapter 3 limits, on a withholding agent’sreason to know regarding a payee’s claimof status as a foreign person; (2) limits onthe review that must be conducted withrespect to particular types of documenta-tion, and in particular on the scope of re-view with respect to preexisting obliga-tions; and (3) further guidance regardingwhen a payee has made a reasonable ex-planation regarding the presence of U.S.indicia. The Treasury Department and theIRS intend to issue guidance under chapter3 that is consistent with the rules in theseregulations regarding such reasonable ex-planations.

April 8, 2013 772 2013–15 I.R.B.

G. Reliance on Presumptions in Lieu ofDocumentation

Under the final regulations, a withhold-ing agent may choose to rely on presump-tion rules in lieu of accepting and review-ing documentation of payees. This accom-modates withholding agents that are un-sure whether the documentation they haveobtained is reliable or that do not wish toaccept the responsibility associated withthe acceptance of the documentation.

H. Consolidation and Sharing ofDocumentation, and Third-Party Reliance

Comments requested reduction of du-plicative documentation requirements, fa-cilitation of documentation sharing, andmore detailed rules regarding reliance onagents or third-party service providers. Inresponse, the final regulations adopt thefollowing provisions.

1. Multiple Accounts of the Same Payee

The final regulations providerules (consistent with chapter 3 in§1.1441–1(e)(4)(ix)(A)) for a withholdingagent to rely on documentation for mul-tiple accounts of the same payee if thewithholding agent aggregates the balanceor value of those accounts (when relevant)and shares information across those ac-counts for purposes of determining whenthe withholding agent has actual knowl-edge or reason to know that the chapter 4status claimed is inaccurate.

2. Mergers or Bulk Acquisitions

The final regulations provide a tempo-rary six month period during which with-holding agents that acquire accounts in amerger or bulk acquisition for value mayrely, in the absence of contrary knowl-edge or a change in circumstances, uponthe chapter 4 statuses assigned by a prede-cessor that is a U.S. withholding agent, aparticipating FFI, or a reporting Model 1FFI that has completed all due diligencerequired under its agreement or pursuantto the applicable Model 1 IGA, providedthat the predecessor is not a member ofthe withholding agent’s expanded affili-ated group prior to a merger or bulk acqui-sition, or after a bulk acquisition. At theend of the temporary period, the acquirer

may continue to so rely only if the doc-umentation it has, including the acquireddocumentation, supports the chapter 4 sta-tuses claimed.

3. Common Agents

The final regulations pro-vide rules (consistent with§1.1441–1(e)(4)(ix)(A)(4) and (B)) withrespect to sharing and relying upondocumentation that has been providedby a common agent for multiple parties,including a fund advisor or principalunderwriter that collects documentationfor a family of mutual funds. This re-liance is made contingent upon the agentalso sharing any knowledge regardinginaccuracy or unreliability of the chapter4 status claims across all the withholdingagents with which the agent shares thedocumentation.

4. Third-Party Data Providers

The final regulations provide rules per-mitting a withholding agent to rely upondocumentation collected with respect toan entity by a third-party data provider,subject to conditions including: (1) thethird-party data provider is in the busi-ness of collecting information regardingentities and providing business reports orcredit reports to unrelated customers andmust have reviewed all information it hasfor the entity and verified that such addi-tional information does not conflict withthe chapter 4 status claimed by the entity;(2) the third-party data provider collectsdocumentation sufficient to meet the appli-cable documentation requirements; and (3)the third-party data provider provides no-tice of changes in circumstances. This pro-vision permits withholding agents to relyupon documentation collected by a third-party data provider, but does not relieve thewithholding agent of the obligation to de-termine whether that documentation is re-liable based on the information containedin the documentation and other informa-tion in the withholding agent’s files.

5. Introducing Brokers

Comments requested that for purposesof chapter 4 a withholding agent be permit-ted to rely upon certifications regarding apayee’s chapter 4 status provided by an in-

troducing broker that is a QI or participat-ing FFI (in addition to introducing brokerswho are U.S. persons, as provided underthe proposed regulations). In response tothese comments, the final regulations per-mit reliance upon a certification providedby a participating FFI (which includes aQI that is a financial institution) if the par-ticipating FFI is acting as an agent of thepayee with respect to an obligation and re-ceiving all payments made by the with-holding agent with respect to that obliga-tion on behalf of the payee, provided thatcertain requirements are met and the with-holding agent does not know or have rea-son to know that the broker has not ob-tained valid documentation as representedor the information contained in the certifi-cation is otherwise inaccurate.

6. Transfer Agents

Comments requested that a transferagent’s obligations as a withholding agentbe limited to the obligations of the princi-pal on behalf of which the transfer agentacts in order to avoid duplicative efforts orconflicts between the standards applicableto the transfer agent and the principal.In response, the final regulations providethat merely acting as an agent with re-spect to a financial account belonging tothe principal will not cause the agent toalso have a financial account for that cus-tomer unless the agent would be treated ashaving the financial account independentof its actions as an agent. An agent thatmakes a payment on behalf of a princi-pal is a withholding agent with respect tothe payment and, accordingly (as underchapter 3) has a responsibility to deter-mine the chapter 4 status of the payee andwithhold, if required. However, becausethe obligation belongs to the principal,the level of due diligence that must becompleted with respect to the obligationis determined by the obligation’s statuswith respect to the principal. In order tominimize any duplicative responsibilities,the final regulations permit the agent torely (absent contrary knowledge or reasonto know) upon documentation collectedby the principal or a certification by theprincipal that appropriate documentationhas been collected.

2013–15 I.R.B. 773 April 8, 2013

I. Electronic Transmission ofDocumentation

Comments requested that a withholdingagent be permitted to rely upon with-holding certificates that are signed witha handwritten signature, scanned into anelectronic device, and then e-mailed to thewithholding agent. The final regulationsadopt the rule of the proposed regulations,which permits the electronic transmis-sion of a withholding certificate that hasbeen signed with a handwritten signa-ture and then scanned and e-mailed to thewithholding agent if the requirements of§1.1441–1(e)(4)(iv) are met. Further, theTreasury Department and the IRS con-tinue to consider whether to retain theconfirmation requirements in chapters 3and 4. In addition, in response to com-ments, the final regulations do not requirethat documentary evidence that has beentransmitted electronically be a certified ornotarized copy.

J. Other Changes Made to PayeeIdentification Rules

Consistent with a risk-based approachto compliance under chapter 4, the finalregulations adopt in whole or part severalmodifications requested by comments, in-cluding modifications to:

(1) Permit documentary evidence thatdoes not contain an address, providedthat the documentary evidence containsthe person’s country of residence or cit-izenship, and the withholding agent hasobtained a permanent residence addressfor the person.

(2) Include a director, any foreignequivalent of an officer in the UnitedStates, and any other person granted writ-ten authority as a person authorized tosign a withholding certificate or writtenstatement.

(3) Permit, in lieu of retention of copiesof documentation, the retention of nota-tions regarding documentation reviewedand (for obligations that are not preexistingobligations) any U.S. indicia identified, inthe course of AML due diligence.

(4) Treat registered deemed-compliantFFIs as payees under the same circum-stances in which participating FFIs aretreated as payees.

(5) Treat all excepted NFFEs in thesame manner, and provide that any ex-

cepted NFFE is the payee, unless it is act-ing as an agent or intermediary (other thana QI accepting primary withholding re-sponsibility).

(6) Permit the submission of a with-holding certificate within 30 days of pay-ment (rather than the 15 days permitted inthe proposed regulations) without an affi-davit of accuracy as of the time of pay-ment.

(7) Provide a definition for the termstanding instructions to pay amounts toinclude current payment instructions thatwill repeat without further instructions be-ing provided by the account holder.

(8) Clarify that a withholding statementsubmitted by a participating FFI or regis-tered deemed-compliant FFI can includepooled information with respect to eachclass of payees unless payee-specific infor-mation is provided for purposes of chapter3, in which case a chapter 4 status must beprovided for each payee that is identifiedon the withholding statement.

V. Comments and Changes to §1.1471–4— FFI Agreement

A. In General

1. FFI Agreement

The Treasury Department and the IRSreceived comments requesting additionalguidance on the requirements of the FFIagreement. In response to these com-ments, the final regulations set forth allof the substantive requirements applicableto an FFI under the FFI agreement. Thefinal regulations provide the requirementsfor verifying compliance with the FFIagreement, define an event of default andprocedures for remediating of an eventof default, allow participating FFIs tofile collective refund claims on behalf ofcertain account holders and payees foramounts overwithheld, and provide pro-cedural requirements if a participatingFFI is legally prohibited from reportingor withholding as required under the FFIagreement. In addition, the final regula-tions do not restrict a participating FFI’sability to terminate an FFI agreement.This responds to comments concerning fu-ture withholding requirements for foreignpassthru payments, and allows an FFI theflexibility to reconsider its status as furtherguidance is promulgated.

The Treasury Department and the IRSexpect to publish a revenue procedure set-ting out the terms of an FFI agreement,consistent with these final regulations, co-ordinating an FFI’s obligations under theFFI agreement with chapter 3 obligationsand with the provisions of any applicableIGA, and including administrative provi-sions such as those relating to termination,renewal, and modification of the agree-ment.

2. Effective Date of the FFI Agreement

Many comments were received re-garding the effective date provided in theproposed regulations for implementingthe chapter 4 rules. Comments requesteda delay of the effective date of the FFIagreement to allow FFIs sufficient timeto modify systems and to implement therequired account opening procedures. Inresponse to comments, the final regula-tions delay the effective date of the FFIagreement until December 31, 2013, forall participating FFIs that receive a GIINprior to January 1, 2014. This changealigns the effective date of, and due dili-gence periods under, the FFI agreementwith the timelines provided under theIGAs.

3. U.S. Branches of Participating FFIs

Comments requested further clarifi-cations on the application of the chapter4 rules to U.S. branches of participatingFFIs. In response to these comments, thefinal regulations provide comprehensiverules for U.S. branches of participatingFFIs. A U.S. branch of a participatingFFI that is treated as a U.S. person, asprovided in §1.1441–1(b)(2)(iv), is sub-ject to special requirements to fulfill thewithholding, due diligence, and reportingrequirements of a U.S. financial institutionto the extent provided under chapters 4and 61 and section 3406(a). Additionally,such a U.S. branch is required to file a sep-arate Form 1042 to report amounts subjectto reporting under chapter 4 and any taxeswithheld.

A U.S. branch of a participating FFI thatis not treated as a U.S. person is required tofulfill the general requirements set forth in§1.1471–4 for withholding, due diligence,and reporting.

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B. Withholding by FFIs

The final regulations provide that anFFI is not required to withhold on foreignpassthru payments until the later of Jan-uary 1, 2017, or six months after the dateof publication in the Federal Register of fi-nal regulations defining the term foreignpassthru payments.

Comments requested more compre-hensive rules concerning the withholdingrequirements of a participating FFI underthe FFI agreement. In response to thesecomments, the final regulations providethat a participating FFI may apply theexceptions from withholding provided in§1.1471–2, including the exception forgrandfathered obligations and the tran-sitional withholding requirements forpayments made to prima facie FFIs. Inaddition, the proposed regulations did notprovide detail on the coordination of with-holding under sections 1471(a) and 1472with withholding under section 1471(b).The final regulations provide that a par-ticipating FFI that satisfies its obligationsunder §1.1471–4(b) to withhold on with-holdable payments made to payees thatare nonparticipating FFIs and recalcitrantaccount holders will be deemed to satisfyits obligations under sections 1471(a) and1472 with respect to such payees and ac-count holders.

C. Due Diligence

The final regulations adopt numerouscomments intended to assist participatingFFIs in complying with their obligationsto perform due diligence to identify anddocument account holders.

1. General Requirements for DueDiligence

In response to comments, the final reg-ulations modify the general requirementsfor identifying and documenting accountholders in a number of ways. For exam-ple, the final regulations modify the recordretention requirements for offshore obliga-tions to allow an FFI to retain a notationin its files regarding the documentary ev-idence examined, rather than retaining acopy of the documentary evidence itself,unless the FFI is required pursuant to itsAML due diligence to retain copies of doc-umentation reviewed. In such cases, the fi-nal regulations no longer require a notation

of the name of the person who reviewedthe documentary evidence.

The final regulations also provide spe-cial procedures to identify and documentaccounts acquired in mergers or bulk ac-quisitions for value from another financialinstitution. For accounts acquired fromnonparticipating FFIs or deemed-compli-ant FFIs that do not apply the final regu-lations’ due diligence procedures, the fi-nal regulations allow a participating FFIto apply preexisting account identificationand documentation procedures. For ac-counts acquired from another participat-ing FFI, certain deemed-compliant FFIs,or U.S. financial institutions, the final reg-ulations allow a participating FFI to relyon the chapter 4 determinations made bysuch transferor financial institution, sub-ject to certain conditions. Additionally,the final regulations in §1.1471–4 incorpo-rate by reference the revised rules for doc-umentation standards, validity periods ofdocumentation, and reliance on valid doc-umentation collected by other withholdingagents provided in §1.1471–3(c).

2. Account of a Preexisting Customer andSharing of Account Documentation

Comments requested that a new ac-count opened at an FFI by a customer thathas a preexisting account with the FFIbe treated as a preexisting account ratherthan a new account. Comments statedthat in such cases, FFIs generally do notobtain documentation from the customerfor AML due diligence purposes. Rec-ognizing the substantial burden for theFFI to separately document an existingcustomer, the final regulations revise thedefinition of a preexisting obligation topermit a new account of a customer thathas a preexisting account to be treated as apreexisting account provided that the FFImaintaining the account also treats the newaccount and the preexisting account as oneaccount for purposes of applying AMLdue diligence, aggregating balances, andapplying the standards of knowledge forpurposes of chapter 4 to all such accounts.The final regulations allow this treatmenton a group basis for expanded affiliatedgroups and sponsored FFI groups thatshare documentation within the group. Inaddition, to address comments concerningthe burden of documenting multiple ac-counts of a customer generally (regardless

of whether any such accounts are preexist-ing accounts), the final regulations allow aparticipating FFI, participating FFI group,or a sponsored FFI group to apply the pro-visions for documentation sharing systemsdescribed in §1.1471–3(c)(8).

3. Change in Circumstances

In response to comments that the obli-gations of a participating FFI following achange in circumstances were unclear inthe proposed regulations, the final regu-lations provide that an FFI must retain arecord of documentation to establish theaccount holder’s chapter 4 status within theearlier of 90 days from the date of a changein circumstances or the date a withhold-able payment or foreign passthru paymentis made to the account or, if unable to do so,must treat such account as held by a recal-citrant account holder or nonparticipatingFFI (as applicable).

4. Entity Accounts

Comments indicated that for certain in-vestment entities, direct investment maybe held in bearer form so that the invest-ment entity is unable to document such ac-count holders until the time of payment.The final regulations allow a participatingFFI that is an investment entity to docu-ment an account holder of a preexisting ac-count that is in bearer form at the time ofpayment.

The final regulations clarify that in ad-dition to documenting the entity accountholder, a participating FFI is also requiredto document the payee (if other than the ac-count holder) to the extent necessary to de-termine whether withholding applies. Forexample, if an account is held by an NFFEthat is a flow-through entity (other than aWP, WT, or excepted NFFE), the partici-pating FFI is also required to identify anddocument the partners, owners, or benefi-ciaries of such entity to determine if with-holding is required with respect to pay-ments of U.S. source FDAP income madeto such account.

5. Individual Accounts

a. New Accounts

Comments requested alternative docu-mentation options to address difficultiesin obtaining U.S. tax forms from account

2013–15 I.R.B. 775 April 8, 2013

holders. In response to these comments,the final regulations modify the identifi-cation and documentation procedures ofparticipating FFIs with respect to individ-ual accounts that are new accounts to per-mit certain alternative forms of documen-tation. For example, the final regulationspermit a participating FFI to rely on in-formation provided by a third-party creditagency to establish an account holder’sforeign status when certain conditions aremet.

The final regulations adopt the require-ment in the proposed regulations for aparticipating FFI to review all informationcollected in connection with the openingor maintenance of each account, includingdocumentation collected as part of theparticipating FFI’s account opening pro-cedures and documentation collected forother regulatory purposes, to determineif an account holder’s claim of foreignstatus is unreliable or incorrect. The fi-nal regulations clarify that a participatingFFI is required in such reviews to applythe standards of knowledge provided in§1.1471–3(e) for offshore obligations heldby individuals. If the participating FFI isnot able to establish an account holder’sstatus as a foreign person, the final regula-tions require the participating FFI to retaina record of a U.S. TIN and, if necessary,a valid and effective waiver described insection 1471(b)(1)(F)(i) to establish anaccount holder’s status as a U.S. person.The final regulations allow a participatingFFI to retain a record of a U.S. TIN by anymeans (that is, not exclusively by retaininga record of a Form W–9).

The final regulations also provide al-ternative identification and documentationprocedures for certain cash value insur-ance or annuity contracts. Commentsnoted that when a group life insurancecontract or group annuity contract is issuedto an employer and individual employeesare the insured/beneficiaries, the insurancecompany does not have a direct relation-ship with the employee/certificate holdersat inception of the contract. In response,the final regulations do not require theinsurance company to document each em-ployee until the date on which an amount ispayable to an employee/certificate holderor beneficiary if the participating FFI ob-tains a certification from an employer thatno employee/certificate holder (accountholder) is a U.S. person and certain other

conditions are satisfied (for example, thatthe number of employees covered underthe contract exceeds 25). Comments alsorequested relief from the requirement toidentify and document beneficiaries ofcash value insurance contracts. In re-sponse, the final regulations provide that aparticipating FFI may presume that an in-dividual beneficiary (other than the owner)receiving a death benefit with respect to alife insurance contract that is a cash valueinsurance contract is a foreign person,and is therefore not required to retain arecord of documentation from such per-son, unless the participating FFI has actualknowledge or reason to know that the ben-eficiary is a U.S. person. A participatingFFI has reason to know that a beneficiaryof a cash value insurance contract is a U.S.person if the information collected by theparticipating FFI and associated with thebeneficiary contains U.S. indicia.

b. Preexisting Accounts

Comments requested clarification withregard to procedures for identifying anddocumenting preexisting accounts. In re-sponse to these comments, the final reg-ulations provide a more detailed explana-tion of the application of these rules. Forexample, the final regulations expresslyprovide that a participating FFI is not re-quired to retain a record of documentationfrom the account holder until there is achange in circumstances if the identifica-tion and documentation procedure speci-fied for preexisting accounts is applied andno U.S. indicia are identified. In addition,the final regulations expressly provide thatfor preexisting accounts, a participatingFFI may apply the identification and doc-umentation procedure for either new ac-counts or preexisting accounts.

The proposed regulations did notcoordinate the rules in §1.1471–3(e)(covering standards of knowledge) withthe documentation requirements under§1.1471–4(c) to establish an accountholder’s foreign status when U.S. indi-cia are associated with the account. Toprovide such coordination, §1.1471–4(c)incorporates by reference the standards ofknowledge in §1.1471–3(e).

c. Presumption of Status for IndividualAccounts

Comments noted that the proposed reg-ulations were unclear concerning the ap-plication of the presumption rules to in-dividual account holders of participatingFFIs. In response to these comments, thefinal regulations clarify that the presump-tion rules of §1.1471–3(f) do not apply toindividual account holders of a participat-ing FFI. A participating FFI must completethe requisite identification and documen-tation procedures with respect to each ac-count within the time period provided by§1.1471–5(g)(3) (start of recalcitrant ac-count holder status), or, if unable to do so,must treat such account as held by a recal-citrant account holder.

d. Preexisting Individual AccountsPreviously Documented

With respect to the exception to thepreexisting account identification proce-dure (other than the relationship managerinquiry) for an account documented asheld by foreign individuals for purposesof chapter 61 or the QI, WP, or WT agree-ment, the final regulations clarify that anindividual account holder’s foreign sta-tus has been documented under chapter61 if the participating FFI has retained arecord of the documentation required un-der chapter 61 to establish the individual’sforeign status and the account receiveda reportable payment (as defined undersection 3406(b)) in any prior year. Withrespect to QIs, WPs, and WTs, an accountholder’s foreign status has been docu-mented if the QI, WP, or WT has met therelevant documentation requirements ofits agreement with respect to an accountholder that received a reportable amountin any year in which the agreement was ineffect.

e. Certifications of Responsible Officer

The final regulations retain the require-ment in the proposed regulations for a re-sponsible officer to certify, to the best ofhis/her knowledge after conducting a rea-sonable inquiry, that the participating FFIdoes not have any formal or informal prac-tices or procedures in place to assist ac-count holders in avoiding chapter 4, suchas advising account holders to split up theiraccounts to avoid reporting as high-value

April 8, 2013 776 2013–15 I.R.B.

accounts. Comments requested additionalexamples of policies that violate the cer-tification. The final regulations providesuch additional examples, including: ad-vising that account holders of U.S. ac-counts close, transfer, or withdraw fromtheir account to avoid reporting; inten-tional failures to disclose a known U.S. ac-count; or advising that an account holderremove U.S. indicia from its account infor-mation. In response to comments, the finalregulations also provide that an e-mail re-quiring responses from relevant customeron-boarding and management personnel asto whether they engaged in any such prac-tices is considered a reasonable inquiry forpurposes of the certification.

Comments requested specific timingfor making the certifications regardingcompletion of required due diligence. Thefinal regulations respond to these com-ments and also simplify and consolidatethe certifications. The final regulationsprovide that these certifications may bemade concurrently and no later than 60days following the date that is two yearsafter the effective date of the FFI agree-ment. See section V.F.3 of this preamblefor a discussion of a responsible officer’speriodic certification requirements.

Comments also requested clarificationon a responsible officer’s responsibilities ifhe/she could not make the required certifi-cation. The final regulations provide thata responsible officer may make a qualifiedcertification stating why the general certi-fication cannot be made and that correctiveactions will be taken by the responsible of-ficer.

D. Account Reporting

1. In General

As in the proposed regulations, thefinal regulations indicate that the FFIthat maintains an account is generallyresponsible for reporting the account inaccordance with the reporting rules under§1.1471–4(d). The final regulations addin §1.1471–5 a rule to determine if an FFIis treated as maintaining an account.

The final regulations describe the re-porting responsibilities of a sponsoring en-tity that has agreed to fulfill the reportingrequirements of a sponsored FFI and gen-erally require the sponsoring entity to re-port accounts of the sponsored FFI in the

manner the sponsored entity would other-wise be required to report if it were a par-ticipating FFI.

2. Account Balance or Value

In response to comments generally re-questing that the final regulations accom-modate current business practices of FFIs,the final regulations provide that a partici-pating FFI must report the average balanceor value of the account to the extent that theFFI reports average balances or values tothe account holder for a calendar year andotherwise to report the balance or value ofthe account as of the end of the calendaryear.

3. Payments

The final regulations clarify that anydistribution (including a distribution thatwould be considered a redemption) madeto an account holder with respect toa cash value insurance contract or an-nuity contract must be reported under§1.1471–4(d)(4)(iv)(C) without regard tothe U.S. tax treatment.

4. Section 953(d) Insurance Companiesand Reporting in a Manner Similar toSection 6047(d)

Comments requested that a foreign in-surance company that has made an elec-tion under section 953(d) be excluded fromthe definition of an FFI. The final regu-lations do not adopt this comment whenthe foreign insurance company is not li-censed to do business in the United States.How a foreign insurance company and itsUnited States shareholders are taxed is im-material to the need for reporting with re-gard to insurance or annuity contracts is-sued by the insurance company to its cus-tomers. Therefore, the final regulationsprovide that the term U.S. person doesnot include an insurance company that hasmade an election under section 953(d) ifthe company is not licensed to do businessin any State. However, a foreign insurancecompany that has made an election undersection 953(d) and is licensed to do busi-ness in the United States would be consid-ered, for purposes of chapter 4, a U.S. per-son and, therefore, would remain subjectto reporting with respect to its life insur-ance and annuity contracts under section6047(d), not chapter 4.

Comments also requested that a foreigninsurance company be permitted to sat-isfy its chapter 4 reporting obligations byreporting under section 6047(d). Permit-ting a foreign insurance company that isnot licensed to do business in the UnitedStates to report only the information re-quired under section 6047(d) would pro-vide insufficient reporting for FATCA pur-poses because section 6047(d) reportingapplies only to distributions made under acontract issued by an insurance companylicensed to do business under the laws of aState.

In response to the comments, however,the final regulations permit an insurancecompany participating FFI that is not li-censed to do business in the United Statesto elect to report its chapter 4 account in-formation with respect to its life insuranceand annuity contracts in a manner similarto section 6047(d) reporting. Under thiselection, an insurance company participat-ing FFI reports the sum of: (1) a cash valueor annuity contract’s account balance orvalue; and (2) any amount paid under thecontract as a “gross distribution” in Box1 of Form 1099–R. The participating FFIcould then check box 2b to indicate the tax-able amount is not determined.

5. Special Reporting for Calendar Year2013

The final regulations incorporate thereporting requirements in Announcement2012–42, 2012–47 I.R.B. 561, with re-spect to calendar year 2013. The finalregulations provide that if an FFI agree-ment has an effective date that is on orbefore December 31, 2014, the participat-ing FFI is required to report U.S. accountsthat it maintained during 2013 that areoutstanding on December 31, 2013. Thefinal regulations adopt the streamlinedreporting rules provided in the proposedregulations. The final regulations alsoeliminate the proposed regulations’ re-quirement for reporting by September 30,2014, and instead permit participatingFFIs to report for both calendar years 2013and 2014 on or before March 31, 2015.

E. Expanded Affiliated GroupRequirements

The final regulations do not incorporatecomments suggesting the sunset date for

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limited branches and limited FFIs be ex-tended beyond December 31, 2015. Thefinal regulations also do not adopt sug-gestions to relax the requirement that allmembers of an expanded affiliated groupbe participating FFIs, deemed-compliantFFIs, or limited FFIs. The Treasury De-partment and the IRS believe that IGAsare the appropriate vehicle to address theseconcerns.

F. Verification

1. In General

In General The final regulations includethe verification and certification require-ments for participating FFIs. These ver-ification procedures rely on a responsibleofficer (or designee) to establish a compli-ance program that includes policies, proce-dures, and processes sufficient for the par-ticipating FFI to satisfy the requirementsof the FFI agreement. The participatingFFI must subject its compliance programto periodic review. The responsible offi-cer may be any officer of any participatingFFI or reporting Model 1 FFI in the par-ticipating FFI’s expanded affiliated groupwith sufficient authority to fulfill the du-ties of a responsible officer described inthe final regulations. The responsible of-ficer may designate others to implementand oversee the compliance with the ver-ification requirements, but must make anyrequired certifications to the IRS (as de-scribed below).

2. Consolidated Compliance Program

In response to comments supporting theapproach set forth in Notice 2011–34 foran optional consolidated compliance pro-gram, the final regulations provide for sucha program. Under the final regulations, aparticipating FFI, reporting Model 1 FFI,or U.S. financial institution (complianceFI) may agree to establish and maintain aconsolidated compliance program and per-form a consolidated periodic review on be-half of one or more FFIs in the same ex-panded affiliated group that elect this op-tion (the consolidated compliance group).The consolidated compliance group is notrequired to include every FFI in the ex-panded affiliated group, and an expandedaffiliated group may have multiple consol-idated compliance groups organized underdifferent or the same compliance FI. The

final regulations also require a sponsoringentity to act as the compliance FI for all ofthe FFIs that it sponsors (including any cer-tified deemed-compliant FFIs that it spon-sors).

It is anticipated that additional guidancewill be provided in either the instructionsto the registration system or the FFI agree-ment for an electing FFI to identify itselfas part of a consolidated compliance groupand procedures for the responsible officerof the compliance FI to make the requiredcertifications on behalf of the consolidatedcompliance group.

3. Certification of Compliance

The final regulations require the re-sponsible officer, on behalf of the partic-ipating FFI, to periodically certify to theIRS that the FFI is in compliance withthe requirements of the FFI agreement.Such certification is required once everythree years. In advance of such certifi-cation, a participating FFI is required toreview its compliance program and itscompliance with the requirements of theFFI agreement. In consideration of theresults of this review, the responsible of-ficer is required to certify to the IRS thatit maintains effective internal controls andthat there were no material failures duringthe certification period, or any materialfailures that did occur were corrected. Amaterial failure is a failure of the partic-ipating FFI to fulfill the requirements ofthe FFI agreement if the failure was theresult of a deliberate action by the partic-ipating FFI to avoid the requirements ofthe FFI agreement or was an error attrib-utable to a failure to implement sufficientinternal controls. The final regulationsprovide that a material failure that occursin limited circumstances will not result inan event of default. If a material failureoccurring during the certification periodhas not been corrected, or if an event ofdefault has occurred, the final regulationsprovide that a responsible officer may in-stead make a qualified certification.

4. IRS Review of Compliance

Comments requested guidance on thestandards the IRS would apply when re-questing additional information from aparticipating FFI to determine its compli-ance with its FFI agreement. The finalregulations provide for general inquiries

under which the IRS contacts the partici-pating FFI to request additional informa-tion regarding the information reported onthe returns filed by the participating FFI,and for inquiries when the IRS determinesin its discretion that there may have beensubstantial non-compliance with an FFIagreement. The IRS expects that inquiriesregarding substantial non-compliance willnot be made on a routine basis. If a de-termination that there may have beensubstantial non-compliance is made, theIRS may inquire as to the FFI’s compli-ance with certain requirements of the FFIagreement and may request informationnecessary to verify the participating FFI’scompliance with the FFI agreement, suchas a description of the participating FFI’sprocedures for conducting its periodicreview. The IRS may also request the per-formance of specified review procedures(including an external audit). If the IRSdetermines, based upon its review, that theFFI has not substantially complied withthe requirements of an FFI agreement, itwill deliver a notice of event of default.

G. Event of Default

The final regulations define an event ofdefault of the FFI agreement and describeprocedures for a participating FFI to reme-diate an event of default. Comments ex-pressed concern that any failure to complywith an FFI agreement would result in ter-mination of that agreement. In response tothese comments, the final regulations clar-ify that an event of default does not resultin automatic termination of the FFI agree-ment. The final regulations provide thatif the IRS becomes aware of an event ofdefault, it will deliver a notice of defaultto the participating FFI and allow the par-ticipating FFI to develop a plan to reme-diate the event of default. If the partici-pating FFI fails to respond to the notice ofdefault or comply with an agreed-upon re-mediation plan, the IRS may terminate theFFI’s participating FFI status within a rea-sonable period of time, subject to an FFI’srequest for reconsideration of terminationby written request to the LB&I Director forForeign Payments Practice.

H. Collective Refunds

The final regulations provide that a par-ticipating FFI (or a reporting Model 1 FFI)

April 8, 2013 778 2013–15 I.R.B.

may file a collective refund claim on be-half of its account holders and payees thatwere overwithheld upon under chapter 4,subject to certain conditions and proce-dural requirements.

I. Legal Prohibitions on Reporting U.S.Accounts and Withholding

In response to comments requestingclarification on whether an FFI can enterinto an FFI agreement if foreign law im-poses prohibitions on the FFI’s ability toreport or withhold, the final regulationsclarify that an FFI may enter into an FFIagreement if it can meet the requirementsof §1.1471–4(i). The final regulationsrequire, however, that if foreign law pro-hibits a participating FFI from fulfilling itswithholding obligations with respect to anaccount, the participating FFI must closethe account within a reasonable time or, iflocal law prohibits closing the account, theparticipating FFI must block or transferthe account. Similarly, if a participatingFFI is prohibited by foreign law, absent awaiver, from reporting information on anaccount that it must treat as a U.S. account,the final regulations provide that the par-ticipating FFI must request a waiver offoreign law from such account holder andif such waiver is not obtained within a rea-sonable period of time, the participatingFFI must close or transfer such account.

VI. Comments and Changes to §1.1471–5– Definitions Applicable to Section 1471

A. U.S. Accounts

Comments requested additional ex-ceptions from the definition of U.S. ac-count for low-value accounts other thanpreexisting accounts and the depositoryaccount exception provided by section1471(d)(1)(B). In response to these com-ments, the Treasury Department and theIRS have provided a $50,000 exception forcash value insurance contracts by amend-ing the definition of financial account,discussed below.

B. Account Holder

Comments requested clarification ofwhether an entity that is disregarded asan entity separate from its owner under§301.7701–2(c)(2)(i) (disregarded entity)is treated as an account holder. In response

to these comments, because the definitionof person excludes a disregarded entity,the final regulations clarify that an ac-count held by a disregarded entity shall betreated as held by the person owning suchentity.

Comments expressed concern regard-ing the identification of the account holderof insurance and annuity contracts. The fi-nal regulations provide that an insuranceor annuity contract that is a financial ac-count is treated as held by each person thatcan access the contract value (for example,through a loan, withdrawal, or surrender)or change a beneficiary under the contract.If no person can access the contract valueor change a beneficiary under the contract,then the contract is treated as held by boththe person(s) named in the contract as theowner(s) of the contract and each benefi-ciary under the contract. When the obliga-tion to pay any benefit under the contractbecomes fixed, the person entitled to suchbenefit is treated as a holder of the contract.

C. Financial Accounts

1. Depository Accounts

In response to comments, the final reg-ulations limit the scope of the term deposi-tory account in a number of ways. For ex-ample, the final regulations exclude certainescrow accounts established for commer-cial transactions from treatment as finan-cial accounts. The final regulations alsoexclude negotiable debt instruments thatare traded on a regulated market or over-the-counter market and distributed throughfinancial institutions. In response to com-ments, the final regulations also clarify themeaning of “any other similar instrument”in the definition of a depository account.The final regulations limit the scope of adepository account to an account for theplacing of money (as opposed to the hold-ing of property) in the custody of an en-tity engaged in a banking or similar busi-ness. The final regulations also clarify thata credit balance with respect to a creditcard account issued by a credit card com-pany is a depository account.

Comments requested guidance regard-ing the specific circumstances in whichan amount held by an insurance companywould be treated as a depository account.The final regulations provide that a depos-itory account includes an amount that an

insurance company holds under a guaran-teed investment contract or under a similaragreement to pay or credit interest thereon.The final regulations also provide that adepository account does not include an ad-vance premium or premium deposit re-ceived by an insurance company, providedthe prepayment or deposit relates to an in-surance contract for which the premiumis payable annually and the amount of theprepayment or deposit does not exceed theannual premium for the contract. Suchamounts are also excluded from cash valuefor purposes of determining whether a con-tract is a cash value insurance contract.

2. Equity and Debt Interests

With regard to equity or debt interestsin investment entities, the final regulationsrevise the financial account definition tocorrespond to the changes discussed be-low to the definition of FFI for investmententities. Accordingly, the final regulationsgenerally remove from the financial ac-count definition debt or equity interestsin investment entities that are describedsolely in §1.1471–5(e)(4)(i)(A), whichare generally investment advisors or assetmanagers. This treatment parallels thetreatment of equity and debt interests inentities that act solely as depository insti-tutions or custodial institutions.

Comments requested that bank holdingcompanies should be treated like deposi-tory institutions for purposes of the finan-cial account exclusion for non-regularlytraded debt and equity interests to covercases in which the holding company raisesfunds for its subsidiaries. Comments notedthat these interests are often held throughcustodial institutions that are in a better po-sition to document the holders and reportand withhold on such instruments. The fi-nal regulations respond to these commentsby generally removing from the definitionof financial account debt or equity interestsin holding companies and treasury centersof expanded affiliate groups whose aggre-gate income is derived primarily from ac-tive NFFEs, depository institutions, custo-dial institutions, and insurance companies.

Nevertheless, the final regulationslimit the exception from financial ac-count for a debt or equity interest in aholding company or a treasury centerso that the exception does not apply incases in which the debt or equity interest

2013–15 I.R.B. 779 April 8, 2013

tracks the performance of one or moreinvestment entities described in paragraph§1.1471–5(e)(4)(i)(B) or (C) (generallytraders and investment vehicles) or one ormore passive NFFEs that are members ofentity’s expanded affiliated group ratherthan of the group as a whole. The finalregulations also provide anti-abuse rulesif the value of the interest is determined,directly or indirectly, primarily by refer-ence to assets that give rise (or could giverise) to withholdable payments, or the in-terest is issued with a principal purposeof avoiding the reporting or withholdingrequirements of chapter 4.

The proposed regulations provided thatan equity or debt interest in certain typesof financial institutions would be treatedas a financial account only if the value ofthe interest is determined, directly or indi-rectly, primarily by reference to assets thatgive rise (or could give rise) to withhold-able payments. Comments requested addi-tional guidance regarding when an equityor debt interest would be considered to bedetermined, directly or indirectly, primar-ily by reference to assets that give rise (orcould give rise) to withholdable payments.The final regulations provide that the valueof an interest is determined, directly or in-directly, primarily by reference to assetsthat give rise (or could give rise) to with-holdable payments if the amount payableupon redemption of the interest is either se-cured or determined primarily by referenceto assets that give rise to withholdable pay-ments. The value of a debt interest is deter-mined, directly or indirectly, primarily byreference to assets that give rise (or couldgive rise) to withholdable payments if thedebt is convertible into stock of a U.S. per-son, amounts payable as interest or uponredemption of the debt are determined pri-marily by reference to profits or assets of aU.S person, or the debt is secured by assetsof a U.S. person.

A number of comments were receivedregarding the exception from financial ac-count status for debt and equity that is reg-ularly traded on an established securitiesmarket. The final regulations respond tocomments by adopting the definitions pro-vided in the final regulations under sec-tion 1472, including the revisions madeto those regulations that provide a spe-cial rule for the initial year of public of-fering. The final regulations also clarifythat an interest is not regularly traded if

the holder of the interest (other than a fi-nancial institution acting as an intermedi-ary) is registered on the books of the in-vestment entity. This rule does not applyto the extent a holder’s interest is regis-tered prior to January 1, 2014, on the booksof the investment entity. The proposedregulations excluded debt or equity inter-ests in an investment entity that are regu-larly traded because such interests are typ-ically held through other financial institu-tions, so that reporting by the issuing en-tity is not necessary to fulfill the purposesof chapter 4. Where that is not the case,the final regulations clarify that such inter-ests are treated as financial accounts. See§1.1471–3(c)(9)(iii), however, for whenthe entity may rely upon a certificationfrom broker acting as an agent of a payee(including receiving of payments on behalfof the payee from the entity).

3. Accounts Held by Estates

With regard to accounts held by estates,in response to comments, the final regula-tions conformed the chapter 4 rules withthe reporting rules under section 6038D byexcepting accounts held by estates fromthe definition of financial account.

4. Insurance Definitions and Contracts

Comments requested that the defini-tions of “annuity contract,” “life insurancecontract,” and “insurance company” in theproposed regulation be modified to elim-inate the need for foreign companies tobecome proficient in the specialized defi-nitions of these terms under U.S. tax rulesdefining these products and to accommo-date local law definitions and practices.In response to comments, the final regu-lations replace the references to U.S. taxlaw rules when defining these terms withplain language definitions and incorporate,where appropriate, references to local lawdefinitions and practices.

Comments also requested that the fi-nal regulations clarify when an insurancecompany is a financial institution or aNFFE, because an insurance company’sreserve activities could cause an insurancecompany that is not a specified insurancecompany to qualify as a depository insti-tution, custodial institution, or investmententity. In response to these comments,the final regulations clarify that: (1) aninsurance company that is not a specified

insurance company must independentlydetermine whether it is a depository insti-tution, custodial institution, or investmententity; (2) an insurance company’s reserveactivities with respect to its insurance con-tracts and annuity contracts are not takeninto consideration in determining whetherthe company is a depository institution,custodial institution, or investment entity;and (3) an insurance company that is not afinancial institution is a NFFE.

The final regulations also respond tocomments by expanding the exclusionfrom financial account status for certainterm life insurance contracts. Becausemortality risk under an insurance contractincreases as the insured ages, the finalregulations permit increasing periodic pre-mium payments. To prevent front loadingpremiums, however, the final regulationsrequire that the premiums be payable atleast annually during the period the con-tract is in existence or until the insuredattains age 90, and that the premiums donot decrease over time.

In addition, the Treasury Departmentand the IRS did not accept comments re-questing that return of premium be per-mitted to the extent that it did not exceedthe aggregate premiums paid for the con-tract, without regard to mortality, morbid-ity, and expense charges. The TreasuryDepartment and the IRS believe such in-struments implicate the policy objectivesof chapter 4. Accordingly, under the finalregulations, if a policyholder at the begin-ning of January purchases a term life insur-ance contract with a $100,000 annual pre-mium, terminates the contract on April 1st,and upon termination receives $75,000 as areturn of the premium paid ($100,000 less$25,000 mortality, morbidity, and expensecharges for the period the contract was inforce), then the contract qualifies for theterm contract exclusion from a cash valueinsurance contract. If, however, upon ter-mination, the policyholder would receivean amount exceeding $75,000, the contractwould not qualify for exclusion from fi-nancial account status as a term life insur-ance contract.

Comments requested an exemptionfrom financial account status for imme-diate pension or disability annuities thatrelate to exempt retirement or pensionaccounts. The final regulations respond tothis comment by providing that a financialaccount does not include a non-investment

April 8, 2013 780 2013–15 I.R.B.

linked, non-transferable, immediate an-nuity purchased by the accountholder inconnection with an exempt retirement orpension account.

In response to comments requesting anexpansion of the contracts that are exemptfrom financial account status, the final reg-ulations made a number of revisions to therules associated with cash value insurancecontracts. The final regulations providethat an insurance contract is excluded fromthe definition of a financial account unlessit has a cash value that exceeds $50,000at any time during the calendar year, un-less the participating FFI elects to reportall contracts with a cash value. In addi-tion, the final regulations exclude indem-nity reinsurance contracts between two in-surance companies from the definition of acash value insurance contract and expandthe exclusions from cash value to includea refund of premium upon the terminationof a contract.

5. Exception for Certain SavingsAccounts

Numerous comments were received re-questing that the proposed regulation’s ex-ceptions from financial account status forcertain savings accounts be expanded toaccommodate savings vehicles commonlyused in a number of jurisdictions. In re-sponse to these comments, substantial re-visions were made to the exceptions inorder to accommodate more savings ve-hicles without significantly increasing theability for U.S. persons to use such ve-hicles to avoid chapter 4 reporting. Forretirement and pension accounts, the ex-cepted category is revised to eliminate therequirements that all contributions to theaccount be government, employer, or em-ployee contributions and that the contribu-tions be limited to earned income. In addi-tion, the limitation on contributions is lib-eralized to allow plans that either have anannual contribution limit of $50,000 or lessor a maximum lifetime contribution limitof $1,000,000 or less. The final regula-tions also add the condition that the rele-vant tax authorities require information re-porting with respect to the account. Fornon-retirement savings accounts, the finalregulations eliminate the requirement thatcontributions be limited by reference toearned income and instead require that theaccount be tax favored. The final regu-

lations expand the definition of “tax fa-vored” provided in the proposed regula-tions for purposes of these rules.

6. Account Balance or Value

The proposed regulations did not pro-vide express guidance on the manner inwhich debt interests should be valued. Thefinal regulations revise the definition of ac-count balance or value with respect to adebt interest to mean the principal amountof such debt.

Comments noted that certain insurancecompanies value insurance and annuitycontracts on the contract’s anniversarydate under normal business practices. Inresponse to these comments, the finalregulations allow the annual reporting ofaccount balance or value of an insuranceor annuity contract to be based upon eitherthe account value at calendar year endor the account value at each contract an-niversary date. Also, the final regulationsprovide that in the case of an annuity con-tract for which no value is reported to theaccount holder, the annuity is valued usingthe discount interest rate and mortalitytables that are either (1) prescribed undersection 7520 and the regulations thereun-der, or (2) used by the FFI to determinethe amounts payable under the contract.

7. Maintaining a Financial Account

The Treasury Department and the IRSreceived comments that the proposed reg-ulations could be read to provide that a sin-gle account could be maintained by multi-ple entities (such as both a collective in-vestment vehicle and its transfer agent),thereby creating multiple documentation,reporting, or withholding obligations foreach entity. In response to these com-ments, the final regulations identify the en-tity that will be treated as maintaining a fi-nancial account in order to avoid requiringmultiple entities to document, withhold,and report with respect to a financial ac-count.

D. Foreign Financial Institution

In response to comments requestingconformity between IGA definitions andthe chapter 4 definitions, the final reg-ulations amend the definition of FFI toprovide that IGAs determine whether aresident entity described in the applicable

IGA is an FFI. A corresponding changewas made to the definition of NFFE. Thestatutory and regulatory definitions applyfor entities that are not resident in IGAjurisdictions.

E. Financial institution

1. Depository Institution

With regard to the definition of a depos-itory institution, the Treasury Departmentand the IRS received a number of com-ments regarding whether merely accept-ing deposits was or should be sufficient tocreate depository institution status. In re-sponse to these comments, the final reg-ulations clarify that accepting deposits isnecessary but not sufficient to create de-pository entity status. Therefore, an entitythat accepts deposits must also engage inone or more of the enumerated banking orfinancing activities (adapted from section864’s and section 954(f)’s active banking,financing, and similar business rules). Thefinal regulations also provide that, to betreated as a depository institution, an entityneeds to engage on a regular basis in oneor more such activities. In addition, thefinal regulations clarify that an entity thatcompletes money transfers by instructingagents to transmit funds is not in a bankingor similar business because it does not ac-cept deposits or other similar temporary in-vestments of funds. The final regulationsalso clarify that an entity that solely ac-cepts deposits from persons as collateral orsecurity pursuant to a lease, loan, or similarfinancing arrangement is not a depositoryinstitution. This exception is intended toexclude from FFI status entities such as fi-nance companies that do not fund their op-erations through deposits and entities act-ing as networks for credit card banks thathold cash collateral from such banks.

2. Custodial Institution

With regard to the definition of a cus-todial institution, the proposed regulationsdefine custodial institutions by referenceto whether over 20 percent of an entity’sincome is “attributable to the holding of fi-nancial assets.” In response to comments,the final regulations clarify the specifictypes of income that will be treated as at-tributable to holding financial assets.

In addition, in response to commentsthat new institutions (starts-ups) cannot

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qualify as custodial institutions, the fi-nal regulations provide a special rule forstart-up entities that bases custodial in-stitution status on the expectations andpurposes of the entity.

3. Investment Entity

Comments requested that the definitionof “financial institution” be clarified andmore narrowly defined to exclude passive,non-commercial investment vehicles, in-cluding trusts. The IGAs adopt this ap-proach by requiring an investment entity toundertake activity on behalf of customers.The IGAs also expand the definition ofan investment entity to include an entitythat provides certain financial services tocustomers, such as individual or collectiveportfolio management or otherwise invest-ing, administering, or managing funds ormoney on behalf of other persons, regard-less of whether the entity holds financialassets.

Taking into consideration commentsthat the provisions of the final regulationsshould conform as closely as possible tothe provisions of the IGAs, the final regu-lations generally incorporate the definitionof investment entity contained in the IGAsby providing that an investment entity in-cludes any entity that primarily conductsas a business on behalf of customers: (1)trading in an enumerated list of financialinstruments; (2) individual or collectiveportfolio management; or (3) otherwise in-vesting, administering, or managing funds,money, or certain financial assets on be-half of other persons. In addition, the finalregulations limit the scope of the proposedregulations’ definition of investment entityby treating an entity (other than an entitythat primarily conducts as a business onbehalf of customers one of the activitiesenumerated in the preceding sentence) thegross income of which is primarily attrib-utable to investing, reinvesting, or tradingas an investment entity only if the entityis managed by a depository institution, acustodial institution, another investmententity, or an insurance company that quali-fies as a financial institution. Accordingly,passive entities that are not professionallymanaged are generally treated as passiveNFFEs rather than as FFIs. However,entities that function or hold themselvesout as mutual funds, hedge funds, or anysimilar investment vehicle established

with an investment strategy of investing,reinvesting, or trading in financial assetsare investment entities.

Consistent with the approach of theproposed regulations, the final regulationsprovide that an entity primarily conductsan activity as a business if gross incomeattributable to such activity equals orexceeds 50 percent of the entity’s grossincome.

4. Insurance Companies and HoldingCompanies

With regard to insurance companiesand holding companies of insurance com-panies, the final regulations provide thata holding company that is a member ofan expanded affiliated group that includesan insurance company will be treated asan FFI if it issues or is obligated to makepayments with respect to a cash valueinsurance contract or annuity contract,regardless of whether it would otherwisebe treated as an FFI.

5. Certain Holding Companies andTreasury Centers

Comments noted that under many cir-cumstances a company within an affiliatedgroup of companies that serves as a hold-ing company or provides treasury servicesfor or on behalf of group members shouldnot be considered a financial institutionunder chapter 4. In response to these com-ments, the final regulations limit the cir-cumstances under which a holding com-pany or treasury center is treated as a fi-nancial institution. Under the final regula-tions, such entities are FFIs in two situa-tions. First, subject to limited exceptionsfor nonfinancial groups, discussed below,such entities are FFIs if they are part ofan expanded affiliated group that includesa depository institution, custodial institu-tion, insurance company, or investmententity described in paragraph (e)(4)(i)(B)and (C) (not exclusively a financial serviceprovider). Second, they are FFIs regard-less of whether they are a member of a non-financial group if they are formed in con-nection with or availed of by a collectiveinvestment vehicle, mutual fund, exchangetraded fund, private equity fund, hedgefund, venture capital fund, leveraged buy-out fund, or any similar investment vehi-cle established with an investment strat-

egy of investing, reinvesting, or trading infinancial assets. These rules help to en-sure that holding companies and treasurycenters cannot be used by financial groupswith nonparticipating FFIs or limited FFIsto shelter payments from chapter 4 with-holding.

6. Exceptions to FFI Status

The Treasury Department and the IRSreceived a number of comments request-ing more comprehensive exceptions to FFIstatus for holding companies and similarentities. Comments noted instances inwhich holding companies and other finan-cial entities were part of a nonfinancialgroup, the activities of these entities werein furtherance of the nonfinancial businessof the group, and the entities provided nomeaningful investment opportunities tothird-parties. In response to these com-ments, the final regulations provide morecomprehensive exceptions to FFI statusfor certain nonfinancial group entities asdescribed below. These entities are alsoexcepted NFFEs for purposes of section1472.

In particular, the final regulationsprovide an exception to FFI status (andpassive NFFE status for section 1472 pur-poses) for holding companies, treasurycenters, and captive finance companiesthat are part of a nonfinancial group. Inresponse to comments, excepted holdingcompanies may be part of nonfinancialgroup structures that include tiers of hold-ing companies. Nonfinancial groups arepermitted to include FFI members to alimited extent when all such members areparticipating FFIs or deemed-compliantFFIs. In response to comments, the finalregulations also provide that an exceptedentity can provide a mixture of holdingcompany, treasury center, and captivefinance company functions so long assubstantially all of its activities are suchactivities. The final regulations also pro-vide that this excepted status does notapply to entities formed in connection withor availed of by private equity funds andsimilar arrangements.

The final regulations also create a newexception to FFI status for excepted in-ter-affiliate FFIs. Comments noted thatfinancial groups may include dormantentities, entities that were formed for aspecific deal and were not subsequently

April 8, 2013 782 2013–15 I.R.B.

liquidated, or entities formed for regula-tory purposes whose activities are entirelywithin the financial group. In responseto these comments, the final regulationsprovide that an entity that is a member ofa PFFI group is not an FFI if it: (1) doesnot maintain financial accounts (otherthan accounts maintained for members ofits expanded affiliated group); (2) doesnot hold an account with or receive pay-ments from any withholding agent otherthan a member of its expanded affiliatedgroup; (3) does not make withholdablepayments to any person other than to mem-bers of its expanded affiliated group thatare not limited FFIs or limited branches;and (4) has not agreed to report under§1.1471–4(d)(1)(ii) or otherwise act asan agent for chapter 4 purposes on behalfof any financial institution, including amember of its expanded affiliated group.

In response to comments, the final reg-ulations also provide an exception for anentity that is changing its line or business,provided that the entity previously quali-fied as an active NFFE.

With regard to entities described in sec-tion 501(c), the final regulations excludeinsurance companies described in section501(c)(15) from the section 501(c) excep-tion from FFI status. Section 501(c)(15)insurance companies are for-profit insur-ance companies that qualify for the ex-emption from U.S. tax because they aresmall companies, but are not in any wayrestricted from maintaining financial ac-counts for specified U.S. persons. There-fore, these entities are not low-risk, so asto warrant an exemption from FFI status.

F. Deemed-compliant FFIs

1. In General

The final regulations generally retainthe same deemed-compliant categoriesthat were included in the proposed reg-ulations but have made several modi-fications and clarifications in responseto comments received. In addition, thefinal regulations introduce new cate-gories of deemed-compliant FFIs forcertain credit card issuers, as describedin §1.1471–5(f)(1)(i)(E), sponsored FFIs,as described in §1.1471–5(f)(2)(iii), andlimited-life debt investment entities, asdescribed in §1.1471–5(f)(2)(iv). In re-sponse to comments, the deemed com-

pliant category for retirement funds hasbeen combined with the exempt benefi-cial owner category for a retirement fundin §1.1471–6(f). Because a non-profitorganization may be either an FFI oran NFFE, the category for non-profitorganizations that are exempt from with-holding under chapter 4 has been movedfrom the deemed-compliant FFI sectionto §1.1471–5(e)(5), which describes en-tities that are excepted from treatment asfinancial institutions and are treated in-stead as excepted NFFEs. The proposedregulations indicated that the TreasuryDepartment and the IRS were consideringwhether an additional deemed-compliantcategory should be created for insurancecompanies. In response to comments, thefinal regulations instead permit insurancecompanies to qualify as local FFIs andFFIs with only low-value accounts.

The Treasury Department and the IRSdecline to adopt other recommendations toadd to the categories of deemed-compliantFFIs to address jurisdiction-specific enti-ties and arrangements and, instead, retainthe proposed regulations’ approach of us-ing generally applicable attributes to de-fine different categories of deemed com-pliant FFIs. Nevertheless, in the contextof IGAs relating to the implementation ofchapter 4, the Treasury Department willcontinue to identify entities that qualifyas deemed-compliant FFIs on a jurisdic-tion-specific basis, and the final regula-tions treat those entities as deemed-com-pliant FFIs. In addition, the Treasury De-partment and the IRS have undertaken inother parts of these regulations to limit thenumber of entities that are subject to thechapter 4 rules. For example, as discussedherein, the category of exempt beneficialowners has been refined and expanded inresponse to comments and certain entitieshave been removed from the definition ofFFI, either because they have neither cus-tomers nor assets relevant to the applica-tion of chapter 4 or because chapter 4’spurposes are adequately served by treatingsuch entities as NFFEs.

2. Registered Deemed-Compliant FFIs

a. Local FFIs

Comments requested that the final reg-ulations expand the types of entities thatqualify as local FFIs to include insurance

companies, credit unions, and investmententities. The final regulations adopt thesecomments. The final regulations do notadopt comments that requested specificstandards for an FFI to apply when de-termining whether it is regulated as afinancial institution under the laws of itscountry of organization or incorporation.This requirement is intended merely toensure that the government of incorpora-tion or organization exercises some formof financial regulation over the FFI and,accordingly, is intended to be appliedbroadly.

The final regulations have amended therequirement that a local FFI not have afixed place of business outside its countryof incorporation or organization to per-mit an FFI to have a location in anotherjurisdiction, provided that location is notpublicly advertised and performs solelyadministrative support functions (that is,back office functions). The Treasury De-partment and the IRS otherwise intend forthe local FFI category to be available onlyto FFIs whose activities are limited to asingle country. Accordingly, the TreasuryDepartment and the IRS declined to adoptother comments suggesting that the pres-ence and activities of the local FFI and itsexpanded affiliated group should not belimited to one country.

Comments pointed out that an FFI thatservices only the local population may ad-vertise U.S. dollar denominated accountsfor legitimate business reasons. In re-sponse to such comments, the final regu-lations eliminate the proposed regulations’prohibition against advertising U.S. dollardenominated deposit accounts or invest-ments, provided that the FFI does not so-licit customers or account holders outsideits country of incorporation or organiza-tion. For this purpose, an FFI will notbe considered to have solicited customersor account holders outside its country ofincorporation or organization merely be-cause it operates a website, provided thatthe website does not specifically indicatethat the FFI maintains accounts for, or pro-vides services to, nonresidents and doesnot otherwise target or solicit U.S. cus-tomers or account holders. Comments re-quested clarification as to whether an FFIwould be considered to have solicited cus-tomers outside its country of incorporationor organization (the FFI’s country) if it ad-vertises through print, radio, or television

2013–15 I.R.B. 783 April 8, 2013

that is distributed in multiple countries inaddition to the FFI’s country. The Trea-sury Department and the IRS have modi-fied the regulations to indicate that an FFIwhose print, radio, or television advertis-ing is distributed outside the FFI’s coun-try is not considered to have solicited cus-tomers or account holder outside the FFI’scountry, provided the FFI’s advertising isdistributed or aired primarily within theFFI’s country and the FFI does not ad-vertise services or accounts for nonresi-dents and does not otherwise target or so-licit U.S. customers or account holders.

In response to comments stating thatmany countries do not impose informa-tion reporting requirements on their finan-cial institutions, the final regulations pro-vide that an FFI may still qualify as a lo-cal FFI notwithstanding that its accountsare not subject to information reporting orwithholding requirements if the AML duediligence requirements of the FFI’s coun-try require the FFI to identify whether itsaccount holders are residents of the FFI’scountry.

Comments noted that many FFIswould fail to meet the 98 percent resi-dent account holder threshold provided in§1.1471–5(f)(1)(i)(A)(5), and requestedthat the Treasury Department and the IRSreduce the threshold. The local FFI excep-tion is not intended to apply to FFIs thatserve significant numbers of nonresidentaccount holders. The 98 percent thresholdis intended to provide limited flexibilityin cases in which a financial institutionotherwise qualifies as a local FFI but hasa few nonresident account holders, for ex-ample because a prior resident has movedor taken a job in another country. Accord-ingly, the Treasury Department and theIRS have declined to reduce the 98 percentthreshold necessary to qualify for the localFFI exception.

The final regulations have amended theresident test in §1.1471–5(f)(1)(i)(A)(5) torequire the resident threshold be appliedbased on account value instead of the num-ber of accounts. In addition, to accommo-date territories and administrative regionsthat primarily service their mainland pop-ulations, the resident threshold has beenmodified to permit the FFI to apply the testbased on residents or citizens rather thansolely based on residents, as provided inthe proposed regulations.

Comments have also addressed theprovision in the proposed regulations thatrequired each member of the FFI’s ex-panded affiliated group to qualify as alocal FFI in order for any member of thegroup to qualify as a local FFI, and havenoted that this requirement did not per-mit the group to have members that wereNFFEs or other types of FFIs. The finalregulations continue to provide that inorder for an FFI to qualify as a local FFI,any FFI member of the expanded affiliatedgroup should also be a local FFI in thesame country, but provide an exceptionfor members of the expanded affiliatedgroup that are NFFEs or retirements fundsdescribed under §1.1471–6(f).

The final regulations also add as a con-dition of local FFI status a requirement thatthe FFI not have policies or practices thatdiscriminate against opening or maintain-ing accounts for U.S. individuals that areresident in the local FFI’s country.

The Treasury Department and the IRSdeclined to adopt a number of other com-ments requesting changes to the local FFIregistered deemed compliant criteria. TheTreasury Department and the IRS believethat the final regulations strike the ap-propriate balance between ensuring thatonly entities that are low-risk or otherwisenot necessary to carry out the purposesof chapter 4 are given deemed-compliantstatus and providing rules that have ap-plication across a number of jurisdictionsand legal and regulatory systems.

b. Nonreporting Members of PFFI Groups

The final regulations retain the same re-quirements for a nonreporting member of aPFFI group that were provided in the pro-posed regulations except that the final reg-ulations, in response to comments, con-form this deemed-compliant category withother categories by allowing a nonreport-ing member of a PFFI group to close a U.S.account or an account of a nonparticipatingFFI.

c. Qualified Collective InvestmentVehicles

The final regulations retain the deemed-compliant category for qualified collec-tive investment vehicles. The primary pur-pose of this deemed-compliant categoryis to provide relief for investment entities

that are owned solely through participatingFFIs or directly by large institutional in-vestors, payments to which would not besubject to withholding or reporting underchapter 4. For this reason, the TreasuryDepartment and the IRS have generally de-clined to adopt comments that request anexpansion of the types of investors permit-ted in a qualified collective investment ve-hicle except that the final regulations per-mit investors that are retirement plans andnonprofit organizations. An investmententity that has other types of investors maybe able to qualify as a deemed-compli-ant FFI if it meets the requirements un-der §1.1471–5(f)(1)(i)(D) to be a restrictedfund.

Comments suggested that an invest-ment entity that is not regulated as aninvestment fund by its country of incor-poration or organization should be con-sidered regulated as an investment fund ifit is regulated by the country in which itoperates or if its fund manager is regulatedwith respect to the investment entity. Thefinal regulations adopt this suggestion andexpand the cases in which an investmententity will be considered to be regulatedto include cases in which the investmententity is regulated in all of the countriesin which it is registered and all countriesin which it operates, or the investmententity’s manager is regulated with respectto the investment entity in all countries inwhich the investment entity is registeredand all countries in which the investmententity operates.

Comments requested that a collec-tive investment vehicle be eligible fordeemed-compliant status notwithstandingthat the vehicle previously issued bearershares which remain outstanding if thevehicle discontinues issuing such shares.In response to these comments, the finalregulations permit a qualified collectiveinvestment vehicle to have outstandingbearer obligations that were issued priorto January 1, 2013, if the qualified col-lective investment vehicle identifies thestatus of the holder prior to payment, noshares are issued in bearer form, includingreissuances of surrendered shares, afterDecember 31, 2012, and certain other con-ditions are met.

April 8, 2013 784 2013–15 I.R.B.

d. Restricted Funds

As with qualified collective investmentfunds, comments suggested that a fundmay not always be regulated by its countryof incorporation or organization but shouldbe considered regulated if it is regulatedby the country in which it operates or if itsfund manager is regulated with respect tothe fund. The final regulations adopt thissuggestion and expand the methods underwhich a fund will be considered to be reg-ulated to include cases in which the fundis regulated in all of the countries in whichit is registered and all countries in whichit operates, or the fund’s manager is regu-lated with respect to the investment entityin all countries in which the investment en-tity is registered and all countries in whichthe investment entity operates.

Several comments indicated confusionregarding the requirement that all interestsin the fund must be sold through identi-fied distributors or redeemed directly bythe fund. The final regulations clarifythat interests in the fund may be issuedby the fund directly if the investor canonly dispose of those interests by hav-ing them redeemed or transferred by thefund, and not by selling them on a sec-ondary market. Further, the regulationsclarify that interests in the restricted fundcan only be issued directly by the fundor by designated distributors described in§1.1471–5(f)(1)(i)(D)(3). Finally, the reg-ulations clarify that interests in an invest-ment fund that are issued through a trans-fer agent or a distributor that does not holdthe interests as a nominee of the accountholder are considered issued directly bythe fund.

Because the restricted fund categorywas created to provide relief for foreignfunds that only target foreign investors,the Treasury Department and the IRS de-clined to adopt comments requesting thatthe restricted fund category be expandedto permit U.S. distributors. However, inresponse to requests that the restrictedfund distributor provisions include for-eign branches of U.S. financial institutionsin the list of acceptable distributors de-scribed in §1.1471–5(f)(1)(i)(D)(3), thefinal regulations modify the definition ofa participating FFI to include a qualifiedintermediary (“QI”) branch of a U.S. fi-nancial institution. In addition, since a for-eign branch of a U.S. financial institution

that is a reporting Model 1 FFI is a regis-tered deemed-compliant FFI, such foreignbranch will also satisfy the distributor re-quirements of §1.1471–5(f)(1)(i)(D)(3).

In response to comments that therenegotiation of distribution agreementswill take a substantial amount of timeand requests that a restricted fund beprovided an additional year in order torenegotiate its distribution agreementsto include the prohibitions required un-der §1.1471–5(f)(1)(i)(D), the TreasuryDepartment and the IRS are providinginvestment funds until the later of June30, 2014, or six months after the date theinvestment fund registers with the IRSas a registered deemed-compliant FFI torenegotiate its debt and equity interestdistribution agreements to comply with§1.1471–5(f)(i)(i)(D)(4) and (5). TheTreasury Department and the IRS arealso modifying the sales restrictions of§1.1471–5(f)(1)(i)(D)(4) to restrict salesonly to specified U.S. persons, rather thanall U.S. persons as was provided in theproposed regulations.

The Treasury Department and the IRSdid not adopt comments requesting that theprohibition on sales to U.S. persons be lim-ited only to sales to U.S. residents becausesuch change would be inconsistent withthe policy objectives of chapter 4. TheTreasury Department and the IRS also de-clined to remove the requirement that a re-stricted fund acquire or redeem all debt andequity interests that were issued through adistributor that ceases to be a qualifyingdistributor within six months of the dis-tributor’s change in status, but have mod-ified the requirement to permit such inter-ests to be transferred to another distributordescribed in §1.1471–5(f)(1)(i)(D)(3).

Comments also requested that a re-stricted fund be permitted to have pre-existing direct accounts that were issuedin bearer form before January 1, 2013, ifthe fund performs the required accountidentification procedures when the bearercertificate is presented for payment. Inresponse, the final regulations permita restricted fund to have outstandingbearer obligations that were issued priorto January 1, 2013, if the restricted fundidentifies the status of the holder prior topayment, no shares are issued in bearerform, including reissuances of surrenderedshares, after December 31, 2012, and cer-tain other conditions are met.

e. Qualified Credit Card Issuers

The Treasury Department and the IRShave received comments requesting adeemed-compliant category for credit cardissuers that accept deposits associatedwith the credit card. In response to thesecomments, the Treasury Department andthe IRS are adding a new category ofregistered deemed-compliant FFIs to thefinal regulations for credit card issuers thatagree to prevent a customer from havinga deposit with the credit card issuer inexcess of $50,000.

f. Registered Deemed-CompliantProcedural Requirements

Comments requested that the qualifiedcollective investment vehicle rules providea cure period in the case of noncompli-ance that occurs following the FFI’s reg-istration with the IRS (including a changeof status by the FFI’s interest holders thatresults in disqualification as a qualifiedcollective investment vehicle). The finalregulations provide a registered deemed-compliant FFI with six months from thetime it becomes ineligible for the regis-tered deemed-compliant status to cure thedefault or notify the IRS of its change instatus.

g. Sponsored FFIs

Comments noted that in many casesit may be preferable for a trustee or fundmanager to perform the due diligence andreporting for all of the FFIs which it man-ages on a consolidated basis. Commentsalso noted that a number of U.S. financialinstitutions have systems in place to per-form all due diligence, withholding, andreporting obligations of its controlled for-eign corporation subsidiaries for U.S. taxpurposes. In response to these comments,the final regulations create a registereddeemed compliant FFI category for spon-sored FFIs for which a sponsoring entityagrees to perform all due diligence, with-holding, reporting, and other requirementsthe sponsored FFI would have been re-quired to perform if it were a participatingFFI, and complies with certain other re-quirements.

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3. Certified Deemed-Compliant FFIs

a. Nonregistering Local Banks

In response to comments requesting asimplification of the definition of a bankfor purposes of the nonregistering localbank category, the final regulations donot include a cross reference to section581 and have clarified that, in additionto banks, certain credit unions or similarorganizations may also qualify as nonreg-istering local banks. The final regulationsamend the requirements applicable toa nonregistering local bank to conformwith the changes made to the local FFIregistered deemed-compliant category de-scribed above.

Because the nonregistering local bankcategory was intended to apply only tovery small FFIs, the Treasury Departmentand the IRS declined to adopt commentsrequesting that the threshold for total as-sets of the FFI be raised above $175 mil-lion for the FFI and $500 million for theFFI’s expanded affiliated group.

b. Sponsored, Closely Held InvestmentVehicles

The final regulations also create acertified deemed-compliant category forsponsored, closely held investment vehi-cles, which are sponsored by a sponsoringFFI in the same manner as the registereddeemed-compliant category.

c. Limited Life Debt Investment Entities

The Treasury Department and the IRSreceived comments stating that certain in-vestment vehicles will be unable to complywith the registration and due diligence re-quirements in the regulations, thus neces-sitating a deemed-compliant category forsuch entities. In particular, comments havenoted that vehicles that have a fixed lifes-pan and that were created for the purposein investing in a limited type of debt obli-gation with the intent to hold such obli-gations until maturity or until the liquida-tion of the vehicle will often provide thetrustee of the vehicle with limited author-ity to act in manner not specifically pro-vided for under the agreement. In mostcases, the trustee would not be permittedto register the vehicle as a participating FFIor comply with the due diligence require-ments of a participating FFI unless the trust

indenture requires the trustee to do so, thetrustee is required to do so under a provi-sion of law, or all of the investors in thevehicle agree to amend the trust agreementto provide the trustee with the power to actin such a manner. In order to provide timeto address these limitations, the final reg-ulations permit these entities to qualify asdeemed-compliant FFIs for a limited pe-riod of time. After December 31, 2016,the deemed-compliant status of these enti-ties terminates, and each such entity will berequired to comply with the terms of anyapplicable IGA or otherwise register as aparticipating FFI.

4. Owner-Documented FFIs

Comments stated that the $50,000 debtlimit on owner-documented FFIs was toorestrictive for common business practicesof many small FFIs and requested thatsuch entities be allowed to have unlim-ited debt interests provided the FFI iden-tify and pass up to the withholding agentthe chapter 4 status of all debt holders.In response to these comments, the finalregulations no longer prohibit owner-doc-umented FFIs from issuing debt intereststhat constitute financial accounts in excessof $50,000 to persons other than nonpartic-ipating FFIs, provided that the owner-doc-umented FFI reports all individuals andspecified U.S. persons that directly or in-directly hold such interests (other than per-sons that hold such interests through a par-ticipating FFI, registered deemed-compli-ant FFI, certified deemed-compliant FFI,U.S. person, exempt beneficial owner, orexcepted NFFE) to the designated with-holding agent.

5. Restricted Distributors

Comments requested that§1.1471–5(f)(4) be amended to permita participating FFI to treat a distributoras a restricted distributor. The TreasuryDepartment and the IRS agree that per-mitting a participating FFI that holds aninterest in a restricted fund as a nomineeto use a restricted distributor to distributethat interest fulfills the same purpose aspermitting the restricted fund to use arestricted distributor. For this reason,the final regulations have been amendedto permit a participating FFI to use arestricted distributor to distribute interests

in a restricted fund that the participatingFFI holds as a nominee.

G. Recalcitrant Account Holders

The final regulations expand the defi-nition of recalcitrant account holder to in-clude an account holder that is documentedas an NFFE (other than a WP or WT) butthat fails to provide the information re-quired under §1.1471–3(d) regarding itsowners.

The final regulations also revise thestart of recalcitrant account holder statusto coordinate with a participating FFI’swithholding requirements. The final reg-ulations require a participating FFI ordeemed-compliant FFI to treat an ac-count other than preexisting account or anaccount (including preexisting account)that undergoes a change in circumstancesas held by a recalcitrant account holderbeginning on the earlier of the date awithholdable payment or foreign passthrupayment is made to the account or the datethat is 90 days after account opening orthe change in circumstances.

The proposed regulations did not co-ordinate recalcitrant account holder statusunder chapter 4 with the chapter 61 backupwithholding procedures for cases in whicha participating FFI receives a notice fromthe IRS regarding a name and TIN mis-match for an account holder. The final reg-ulations clarify that an account for whichthe participating FFI or deemed-compliantFFI receives a notice from the IRS indi-cating that the name and TIN combinationprovided for the account holder is incor-rect will be treated as a recalcitrant accountholder following the date of such notice ifthe account holder does not provide a cor-rect name and TIN combination within thetime prescribed in §31.3406(d)–5(a). TheIRS intends to provide a process similar tothe “B Notice” process of chapter 61 to no-tify an FFI of a name/TIN mismatch foran account holder of a U.S. account thatwas reported under §1.1471–4(d). Under§31.3406(d)–5(a), a payor that receivesa “B Notice” for a payee is required tostart backup withholding and reporting re-portable payments made to such payee onor before the 30th business day after the re-ceipt of the “B Notice.” Similarly, a partic-ipating FFI or deemed-compliant FFI is re-quired to treat an account holder for whichit receives a notice indicating a name/TIN

April 8, 2013 786 2013–15 I.R.B.

mismatch as a recalcitrant account holder(and withhold and report to the extent re-quired) on or before the 30th business dayafter the FFI receives such notice.

H. Expanded Affiliated Group

Proposed §1.1471–5(i) defined an ex-panded affiliated group for purposes ofchapter 4. The final regulations make twomaterial changes to the proposed regula-tions.

First, some comments requested an ex-clusion from membership in an expandedaffiliated group for entities formed throughseed capital investments by another groupmember. These comments described aseed capital investment as an initial capi-tal contribution made to an investment en-tity by an entity related to the manager ofthe investment entity for purposes of estab-lishing a performance record before sellinginterests in the entity to unrelated investorsor for purposes otherwise deemed appro-priate by the manager. In support of thisexclusion, comments noted the burden ofmonitoring ownership changes in the in-vestment entity for determining when toexclude the entity as a member of such agroup, including the potential updating re-quired for purposes of the group’s FFI ap-plication with the IRS. In response to thesecomments, the final regulations modify thedefinition of expanded affiliated group toexclude from the group an investment en-tity owned by an FFI group member whenthe member’s ownership exists solely toprovide a seed capital investment in an en-tity. The final regulations describe the cir-cumstances in which an investment quali-fies for this treatment (including by defin-ing seed capital) and prescribe a three-yearperiod in which the investment entity is ex-cluded from the group.

Second, the final regulations incorpo-rate an anti-abuse rule that disregards achange in ownership, voting rights, or theform of an entity with respect to an ex-panded affiliated group if the change ispursuant to a plan a principal purpose ofwhich is to avoid withholding or reportingobligations under chapter 4.

VII. Comments and Changes to Section1.1471–6 — Payments Beneficially Ownedby Exempt Beneficial Owners

Proposed §1.1471–6 defined classes ofentities that qualify as exempt beneficial

owners for purposes of chapter 4. The fi-nal regulations expand the circumstancesin which certain classes of entities qual-ify as exempt beneficial owners and mod-ify when an entity qualifies as an exemptbeneficial owner under §1.1471–6(g) (de-scribing certain entities owned by only ex-empt beneficial owners). The final regula-tions also clarify that, except as provided in§1.1471–6(f) (regarding retirement funds),an entity cannot qualify as an exempt ben-eficial owner unless it is the beneficialowner of the payment.

To coordinate the final regulations’identification of specific entities as ex-empt beneficial owners with the IGAs, thedefinition of an exempt beneficial owner isexpanded to include any entity identifiedas an exempt beneficial owner pursuantto an IGA. This change is incorporatedinto the definition of an exempt beneficialowner in §1.1471–1(b)(38).

Comments noted that limiting the defi-nition of international organization to in-clude only international organizations inwhich the United States participates as amember was unnecessary. In response tothese comments, this definition has beenexpanded to allow an entity to qualify asan international organization if the entity:(1) is a supranational organization or in-tergovernmental organization recognizedas an international organization under cer-tain provisions of foreign law or that hasin effect a headquarters agreement witha foreign government; and (2) preventsprivate inurement under the principles of§1.1471–6(b)(3)(ii).

In response to comments, the finalregulations broaden the classes of pen-sion funds qualifying as exempt beneficialowners under §1.1471–6(f) by includingseveral new categories of pension funds,each of which applies without regard towhether the pension fund is the beneficialowner of income. Comments requested re-moval of the beneficial owner requirementbecause, depending on the jurisdiction,a fund may or may not be treated as thebeneficial owner of income it receivesunder local law. Other comments werereceived regarding the interaction of theexemption for retirement plans in pro-posed §1.1471–6(f) with those retirementplans afforded deemed compliant statusin proposed §1.1471–5(f)(2)(ii) (whichdid not require the plan to be the bene-ficial owner and which included certain

plans with fewer that twenty partici-pants). In response to these comments,§1.1471–5(f)(2)(ii) was removed and thetypes of retirement plans that may qual-ify as exempt beneficial owners under§1.1471–6(f) regardless of whether theyare beneficial owners was expanded, asdescribed below.

In response to comments, the final reg-ulations treat a fund entitled to benefits un-der an income tax treaty and operated prin-cipally to administer or provide pension orretirement benefits as an exempt benefi-cial owner regardless of whether the fundis generally exempt from taxation in thecountry in which it is organized.

Regarding the general requirementsfor retirement funds included in pro-posed §1.1471–6(f), comments noted thatmany plans would fail to qualify underthe rule requiring that all contributionsto the plan, except for rollover contribu-tions from other retirement funds, comefrom employer or employee contributions.Comments suggested alternative require-ments to prevent funds from being abusedfor chapter 4 purposes, including annualinformation reporting, strict limitationson withdrawals or distributions from thefund, or penalties for early distributions.Additionally, comments noted that cer-tain types of mandatory government plansmay also fail the requirement in proposed§1.1471–6(f) that contributions be solelyfrom employer or employee contribu-tions. Comments also requested that fundsthat provide for disability or death ben-efits should not disqualify a retirementfund from being an exempt beneficialowner that would otherwise qualify under§1.1471–6(f).

In response to these comments, the fi-nal regulations: (1) provide rules allowingfor alternative sources of contributionsapart from those from employers andemployees; (2) provide anti-abuse provi-sions based on alternatives suggested incomments; and (3) allow, in appropriatecircumstances, plans to provide disabilityor death benefits. In response to com-ments, the final regulations also broadenthe treaty-qualified retirement fund cat-egory and add a new category for fundsformed pursuant to pension plans thatwould meet the requirements of section401(a), other than the requirement thatthe plan be funded by a trust created ororganized in the United States.

2013–15 I.R.B. 787 April 8, 2013

Comments also questioned whether theproposed regulations intended to excludecertain pension funds established by ex-empt beneficial owners, noting that theregulations under section 892 specificallyinclude an exemption for certain pensionfunds established by foreign governments.The Treasury Department and the IRSgenerally intend for these types of pensionfunds to qualify as exempt beneficial own-ers. To eliminate the possibility that suchplans might not so qualify in appropriatecases, the final regulations provide thatpension funds meeting certain require-ments (relating to retirement, disability,or death benefits) will qualify as exemptbeneficial owners when established byanother exempt beneficial owner for itsemployees, employees’ beneficiaries, orother persons providing services to suchfunds.

With respect to the allowance in pro-posed §1.1471–6(g) providing exemptbeneficial owner status to certain enti-ties wholly owned by exempt beneficialowners, comments noted that this pro-vision did not contemplate structures inwhich entities are owned directly by otherentities that would qualify as exempt ben-eficial owners under §1.1471–6(g). Thefinal regulations are amended to clarifythat exempt beneficial owner status under§1.1471–6(g) applies in such cases. Thefinal regulations also clarify that receiv-ing loans from depository institutions orissuing debt to other exempt beneficialowners will not prevent an entity fromqualifying as an exempt beneficial ownerunder §1.1471–6(g).

The final regulations provide in§1.1471–6(h) an exception to exemptbeneficial owner status for foreign govern-ments, international organizations, foreigncentral banks of issue, and the govern-ments of U.S. territories that engage incertain commercial activities, replacingthe prohibition in the proposed regulationson commercial activities that had appliedonly to foreign governments. Some com-ments noted that an entity would fail toqualify as an exempt beneficial ownerunder the commercial activities exceptionin the proposed regulations even when theentity accepts deposits or maintains finan-cial accounts only for exempt beneficialowners (such as the members in an entitysuch as a development bank organized bycertain foreign governments). The final

regulations respond to these comments byproviding a limitation on the commercialactivities exception for activities for or onbehalf of other exempt beneficial owners.

VIII. Section 1.1472–1 — Withholding onNFFEs

The regulations under section 1472 pro-vide rules applicable to withholding agentsfor withholding on certain NFFEs and re-porting with respect to the substantial U.S.owners of certain NFFEs.

In response to comments requestinga transition period to accommodate thecreation of associated systems, the fi-nal regulations provide that withholdingagents are required to withhold undersection 1472 only with respect to with-holdable payments made after December31, 2013. In addition, §1.1472–1(b)(2)provides that withholding agents are notrequired to withhold under section 1472on payments made before January 1, 2015,with respect to a preexisting obligation toa payee that is not a prima facie FFI andfor which a withholding agent does nothave documentation indicating the payee’sstatus as a passive NFFE with one or moresubstantial U.S. owners.

The final regulations also clarify theinteraction of section 1472 withholdingwith a participating FFI’s withholdingobligations under section 1471(b) andthe associated regulations. Under the fi-nal regulations, a participating FFI thatcomplies with its withholding obligationsunder §1.1471–4(b) will be deemed to sat-isfy its obligations under section 1472 withrespect to withholdable payments made toNFFEs that are account holders. Section1472 will continue to apply to a participat-ing FFI that acts as a withholding agent ona withholdable payment made to an NFFEthat is not an account holder (for example,a payment with respect to a contract thatdoes not constitute a financial account).These withholding obligations will belimited, however, by §1.1473–1(a)(4)(vi),which provides a temporary exceptionfrom the definition of withholdable pay-ment for certain payments of U.S. sourceFDAP income made prior to January 1,2017, with respect to offshore obligations.

In response to comments,§1.1472–1(c)(1)(i)(B) clarifies the ap-plication of the publicly traded rules for

excepted NFFE status in the year of aninitial public offering.

With regard to the exception from with-holding for payments to active NFFEs, theTreasury Department and the IRS receivedcomments requesting that passive incomebe defined by reference to section 954(c).This comment was not adopted. The Trea-sury Department and the IRS believe thatproviding a specific list of items constitut-ing passive income will provide more cer-tainty for withholding agents and NFFEs.The final regulations do, however, clarifythe scope of passive income, including therules regarding commodities. In addition,in response to comments, the final regula-tions expand the exceptions to passive in-come in a number of respects. First, thefinal regulations in §1.1472–1(c)(1)(iv)(B)provide that passive income will not in-clude dividends, interest, rents, and royal-ties received or accrued from a related per-son to the extent that they are properly al-locable to income of the payor that is notpassive income. Second, the final regula-tions provide an exception from passive in-come for certain income earned by dealersacting in the ordinary course of their tradeor business.

In addition, the final regulations pro-vide expanded categories of exceptedNFFEs to address the treatment of holdingcompanies and similar entities that are partof and that support a group conducting anactive trade or business. The final regula-tions also clarify that an entity will not bean active NFFE unless less than 50 percentof its gross income is from passive incomeand less than 50 percent of its assets arepassive assets (that is, assets that produceor are held for the production of passiveincome), on a weighted average basis.

Also, the requirements for reporting onsubstantial U.S. owners were moved to§1.1474–1(i)(2) in the final regulations toinclude these requirements with the otherreporting requirements applicable to with-holding agents.

IX. Changes and Comments to §1.1473–1— Section 1473 Definitions

A. Withholdable Payment

1. In General

Comments noted that U.S. mutual fundsthat invest in foreign securities will paydividends that are withholdable payments

April 8, 2013 788 2013–15 I.R.B.

and, correspondingly, that gross proceedsfrom the sale of interests in such U.S. fundswould be withholdable payments. Thosecomments requested that the definition ofwithholdable payment be amended suchthat U.S. fund dividends would be char-acterized based on the assets held by thefund and would be subject to withholdingonly to the extent provided under the for-eign passthru payment rules otherwise ap-plicable to participating FFIs to avoid cre-ating a competitive imbalance.

The final regulations provide temporaryrelief to U.S. stock and debt issuers, in-cluding U.S. funds, by delaying withhold-ing on gross proceeds until 2017. Trea-sury and the IRS do not believe, however,that eliminating chapter 4 withholding onpayments of dividends that constitute U.S.source FDAP income under chapter 3 ad-vances the purposes of chapter 4. It is ex-pected, however, that these issues will bealleviated in practice through the conclu-sion of IGAs.

Comments also requested that the rulesdefining withholdable payment excludepayments that are reported by the with-holding agent on Form 5471 or 5472 inorder to alleviate duplicative reporting.The final regulations do not adopt thiscomment because the chapter 4 withhold-ing rules serve different purposes than thereporting regimes under sections 6038 and6038A which underlie Forms 5471 and5472.

2. Gross Proceeds

Comments noted that clearing organi-zations pay or credit a member’s accountwith the net amount of sales or disposi-tions that occurred throughout a given pe-riod. The final regulations allow clearingorganizations to determine gross proceedsbased on the net amount paid or credited toa member’s account under the settlementprocedures of such organization.

In response to comments, the final regu-lations clarify that any contract that resultsin the payment of a dividend equivalent(as defined in section 871(m) and regula-tions thereunder) is treated as property ofa type that can produce U.S. source FDAPincome, including if such dividend equiv-alent is part of a termination payment.

The final regulations also modify thedefinition of gross proceeds to exclude

proceeds from transactions not subject torecognition under section 1058.

3. Exceptions to Withholdable Payment

a. Withholding on Offshore Payments ofU.S. Source FDAP Income

To coordinate the final regulations’withholding requirements with those of theModel 1 IGAs, the final regulations delaywithholding on certain offshore paymentsof U.S. source FDAP income until January1, 2017. Specifically, the final regulationstemporarily exclude from the definition ofwithholdable payment a payment of U.S.source FDAP income made with regard toan offshore obligation prior to January 1,2017, by a person that is not acting as anintermediary with regard to the payment.For purposes of this exception, the finalregulations expressly include a qualifiedsecurities lender as an intermediary. Thefinal regulations also limit the applicationof this rule for certain flow-through enti-ties.

b. Excluded Nonfinancial Payments

Comments requested clarification andexpansion of the proposed regulations’ordinary course of business exception towithholdable payments. In particular,comments requested that the definition ofordinary course of business payments bemodified by striking the word “nonfinan-cial” because it creates uncertainty as towhether services provided to a financialinstitution that are accounts payable typeexpenses are ordinary course of businesspayments. Comments also noted thatthe ordinary course of business excep-tion imposed significant administrativeburdens given the volume of cross-bor-der payments that had to be identifiedand classified. In response to these com-ments, the final regulations replace theordinary course of business exceptionwith a more comprehensive exception forexcluded nonfinancial payments. The re-vised exception provides greater certaintyby explicitly describing payments that areexcluded from withholdable payments andby providing a list of payments that arewithholdable payments.

The proposed regulations also providedthat the exclusion for ordinary course ofbusiness payments included payments for

the sale of goods. Commentators pointedout that such an exception implied that thesale of goods could give rise to U.S. sourceFDAP income. The final regulations re-move the reference to “goods” in the non-financial payments exclusion and definea payment of U.S. source FDAP incometo expressly incorporate the exclusion un-der §1.1441–2(b)(2)(i) (stating that certaingains from the sale of property do not con-stitute FDAP income).

4. Excise Tax under Section 4371

Under the proposed regulations, with-holdable payments include insurance andreinsurance premiums that are U.S. sourceFDAP income. Comments requested thatthe final regulations exclude insurance andreinsurance premiums from the definitionof withholdable payment to the extent thepremiums are subject to the excise tax un-der section 4371. Such premiums are ex-empt under chapter 3, however, becausethe excise tax under section 4371 is an ad-equate substitute for tax on the business in-come of a foreign issuer. In contrast, with-holding under chapter 4 is intended as anincentive to FFIs to become participatingFFIs, rather than as a proxy for the tax onthe income of the issuer. As a result, thepolicy reasons for the exclusion of such in-surance and reinsurance premiums for pur-poses of chapter 3 withholding are not rel-evant for chapter 4 withholding. The fi-nal regulations therefore do not adopt thiscomment.

B. Substantial U.S. Owner

The final regulations include rules fordetermining whether a specified U.S. per-son is a substantial U.S. owner that remainsubstantially unchanged from the pro-posed regulations subject to the followingmodifications. The proposed regulationsrequired that the determination of whethera person is a substantial U.S. owner bemade by calculating such person’s di-rect and indirect interest in the entity.The attribution rules under the proposedregulations required that a specified U.Sperson’s indirect interest in an entity bedetermined by looking through interestsheld by entities that are U.S. persons. Thefinal regulations do not require an entityto look through interests held by a U.S.person that is not a specified U.S. person

2013–15 I.R.B. 789 April 8, 2013

when determining whether the entity has asubstantial U.S. owner. The final regula-tions add a provision that requires an entitymaking a determination as to whether aspecified U.S. person is a substantial U.S.owner to aggregate the interests ownedby persons related to the specified U.S.person, applying certain provisions of theregulations under section 267 to determinewhether such persons are related.

In response to comments regarding thedifficulty of determining whether a speci-fied U.S. person owns a sufficient interestin an entity to be a substantial U.S. owner,the final regulations provide a safe har-bor that permits an entity, or a withholdingagent with respect to the entity, to treat aspecified U.S. person as a substantial U.S.owner in lieu of making the calculationsnecessary to determine whether such per-son holds a sufficient interest to be a sub-stantial U.S. owner.

Comments requested that the 10 per-cent ownership threshold for determininga substantial U.S. owner be changed to 25percent to align with AML due diligencerequirements. These comments were notadopted. Jurisdictions have varying ap-proaches to enforcing AML due diligencerequirements, and thus, reliance on AMLdue diligence to determine substantial U.S.owners is more appropriate in the contextof the IGAs.

C. Specified U.S. Person

The final regulations add section 457(g)plans and exempt trusts under section403(b) to the classes of U.S. persons thatare not specified U.S. persons.

X. Comments and Changes to §1.1474–1— Liability for Withheld Tax andWithholding Agent Reporting

A. Use of Agents

The proposed regulations described thecircumstances under which a withholdingagent could appoint agents to fulfill itsobligations under chapter 4 and the with-holding agent’s liability. Comments re-quested removal of the proposed regula-tions’ restrictions on the use of sub-agents.The final regulations remove these restric-tions and clarify that a withholding agentremains liable for the acts of both its agentsand its agents’ sub-agents. The final reg-ulations also clarify that any agent or sub-

agent that acts as a reporting agent for fil-ing Form 1042 or making deposits andpayments reportable on the form on be-half of a withholding agent must file aForm 8655, “Reporting Agent Authoriza-tion,” with the IRS.

B. Information Reporting

The proposed regulations set forth theinformation reporting requirements ofa withholding agent paying a chapter 4reportable amount and the transitionalreporting requirements of a participatingFFI or registered deemed-compliant FFImaking a payment of a foreign reportableamount to a nonparticipating FFI. The pro-posed regulations also required financialinstitutions to file such returns electron-ically on magnetic media without regardto the general annual 250 return thresholdapplicable to withholding agents otherthan financial institutions.

The final regulations modify and clarifycertain provisions of the proposed regu-lations with respect to these reporting re-quirements. The final regulations modifywhich persons are recipients for purposesof reporting chapter 4 reportable amountsand describe categories of recipients withrespect to payments of U.S. source FDAPincome. Due to the suspension of with-holding on gross proceeds and foreignpassthru payments until 2017, the defini-tion of a recipient of a payment other thanof U.S. source FDAP income is reserved.Information reporting is required withrespect to a payment of gross proceedsonly if the payment is an amount subjectto withholding. In response to commentsrequesting clarification of the meaningof the term “subject to withholding,” thefinal regulations in §1.1471–1(b)(118) de-fine an amount subject to withholding asan amount withheld upon or required tobe withheld upon under chapter 4. Thefinal regulations also clarify that a chapter4 reportable amount excludes an amountpaid to a payee that the withholding agenttreats as a U.S. person, but add a provi-sion that an amount paid by a withholdingagent to a participating FFI or registereddeemed-compliant FFI is reportable to theextent allocable to U.S. persons identifiedin a pool of payees reported by the FFI (asdescribed in paragraph (d)(4)). The finalregulations also generally describe how awithholding agent reports with respect to

payments made to a participating FFI orregistered deemed-compliant FFI that actsas an intermediary or flow-through entitywhen the FFI provides pooled informa-tion to the withholding agent regardingits account holders and payees subjectto withholding under chapter 4. In thecase of payments that are not subject towithholding under chapter 4, the final reg-ulations require reporting to the extent thatreporting is required under §1.1461–1.

Comments sought clarification on thereporting obligations of a participating FFIor registered deemed-compliant FFI thatacts as an intermediary or is a flow-throughentity. The final regulations provide that ifa payment of U.S. source FDAP income ismade by a U.S. withholding agent to a par-ticipating FFI or registered deemed-com-pliant FFI that is an NQI, NWP, or NWTthat provides sufficient information to thewithholding agent to withhold and reportthe payment, the FFI is not also requiredto report the payment. The final regu-lations clarify, however, that a participat-ing FFI or registered deemed compliantFFI is required to complete Forms 1042–Sby allocating the income and withholdingpaid to its recalcitrant account holder poolsas described in §1.1471–4(d)(6) (requiringa participating FFI to report the numberof accounts and account balance informa-tion), and that such reporting is requiredregardless of whether the FFI made a pay-ment of a chapter 4 reportable amount toeach such account holder.

Comments were also received regard-ing transitional reporting by participatingFFIs and deemed-compliant FFIs for for-eign reportable amounts paid to nonpar-ticipating FFIs. Suggestions included per-mitting aggregate, in lieu of specific, payeereporting; modifying the definition of for-eign reportable amount; and eliminatingthe transitional reporting altogether. Be-cause the transitional reporting providesrelevant information concerning the extentof compliance by FFIs with the require-ments of chapter 4 in the absence of with-holding with respect to foreign passthrupayments, however, these comments arenot adopted in the final regulations. Thefinal regulations otherwise clarify that re-porting during the transitional period is re-quired for aggregate payments paid by aparticipating FFI rather than to a partici-pating FFI.

April 8, 2013 790 2013–15 I.R.B.

XI. Comments and Changes to§§1.1474–2 through –5 — Refunds,Credits, and Reimbursement

Proposed §§1.1471–2 through –5 pro-vide rules relating to the refund or creditof taxes withheld under chapter 4 andreimbursement procedures for withhold-ing agents in cases of overwithholding.Comments requested the establishment ofefficient procedures for beneficial ownersto obtain refunds of tax withheld underchapter 4. In response to these comments,the final regulations provide the alterna-tive allowance for participating FFIs andreporting Model 1 FFIs to obtain refundson behalf of their account holders un-der the collective refund procedures of§1.1471–4(h). To facilitate the provisionof refunds in other appropriate cases, thefinal regulations include in §1.1474–1(d)the allowance for a withholding agentto issue a specific Form 1042–S to anaccount holder subjected to withholdingunder chapter 4 (in lieu of the pooled re-porting otherwise permitted) for purposesof substantiating withholding of amountsunder chapter 4.

XII. Comments and Changes to §1.1474–6— Coordination of Chapter 4 with OtherWithholding Provisions

Proposed §1.1474–6 provided rules forcoordinating withholding under chapter 4with other withholding provisions underthe Code. The final regulations adopt theprovisions of this section without sub-stantial change, but add paragraph (b)(3)to permit a withholding agent to offsetits obligation to withhold under chapter4 with respect to payments of dividendequivalents under section 871(m) in asecurity lending or substantially similartransaction to the extent that another with-holding agent has withheld under chapter3 or 4 with respect to the same underlyingsecurity in such a transaction. This offsetis permitted only when there is sufficientevidence that tax was actually withheld asdetermined under the provisions of chap-ter 3.

XIII. Comments and Changes to§301.1474–1 — Required Use of

Magnetic Media for Financial InstitutionsFiling Form 1042–S or Form 8966

Proposed §301.1474–1 requires that afinancial institution file Forms 1042–S onmagnetic media. The final regulations adda requirement that a financial institutionalso file Form 8966, “FATCA Report,” onmagnetic media.

Procedural Matters

I. The FATCA Registration Portal

The FATCA Registration Portal (Portal)will be the primary means for financial in-stitutions to interact with the IRS to com-plete and maintain their chapter 4 registra-tions, agreements, and certifications. ThePortal will be accessible to financial in-stitutions beginning no later than July 15,2013. At that time, financial institutionswill be able to register and, as appropriate,agree to comply with their obligations asparticipating FFIs or as sponsoring entities(as described in section 3 below), or to reg-ister and agree to act as limited FFIs or reg-istered deemed-compliant FFIs (includingreporting Model 1 FFIs, which are treatedas registered deemed-compliant FFIs un-der the final regulations). The IRS willpermit registration of FFIs that are report-ing Model 1 FFIs or described as a Report-ing Financial Institution under a Model 2IGA so long as the associated jurisdictionis identified on a list published by the IRSof countries treated as having in effect anIGA, as appropriate, even if any necessaryratification of such IGA in the jurisdictionhas not yet been completed.

Once a financial institution has regis-tered, the IRS will approve its registration.The IRS intends, upon such approval, toissue a GIIN to each participating FFI andregistered deemed-compliant FFI. TheseGIINs will be assigned beginning no laterthan October 15, 2013, and should be usedas the institution’s identifying number forsatisfying its reporting requirements andidentifying its status to withholding agents.The IRS will electronically post the firstlist (IRS FFI List) of participating FFIsand registered deemed-compliant FFIs (in-cluding reporting Model 1 FFIs) on De-cember 2, 2013. The IRS intends to up-date the IRS FFI List on a monthly basis.The last date by which a financial institu-tion can register with the IRS to ensure its

inclusion on the December 2013 IRS FFIList is October 25, 2013.

A. The FFI Agreement

A financial institution registeringthrough the Portal will agree to complywith the FATCA requirements pertainingto its particular situation. These require-ments will vary depending on the financialinstitution’s status in the jurisdictions inwhich it operates. For example, an FFImay be a resident of a jurisdiction forwhich it reports as a reporting Model 1 FFIand have other branches in jurisdictionscovered by applicable Model 2 IGAs andbranches in jurisdictions not covered byan IGA. In such case, the FFI will be ableto register once and may enter into an FFIagreement on behalf of its branches thatare not covered under an applicable Model1 IGA. Accordingly, the FFI agreementwill not relate to its operations as a report-ing Model 1 FFI because those operationswill be subject to the rules set out underthe law of the applicable jurisdiction, butthe FFI agreement will incorporate therequirements applicable to its operationsin jurisdictions other than those coveredunder an applicable Model 1 IGA.

Before the Portal opens for registration,the Treasury Department and the IRS willpublish a revenue procedure (FATCA Rev.Proc.) containing all the terms and condi-tions applicable to FFIs for chapter 4 pur-poses and for FFIs also assuming chapter3 responsibilities (that is, as QIs, WPs, andWTs). The terms and conditions set forthin the FATCA Rev. Proc. applicable toFFIs for chapter 4 purposes will be fullyconsistent with the rules set forth in thesefinal regulations. The terms and condi-tions set forth in the FATCA Rev. Proc. ap-plicable to FFIs that are assuming or con-tinuing chapter 3 responsibilities are dis-cussed in more detail in I.C and D of thissection.

B. Sponsored FFIs

As discussed in section VI.F above,the final regulations include threedeemed-compliant categories for spon-sored FFIs, under which a sponsoringentity agrees to register with the IRS andundertake all of the chapter 4 obligationsof a participating FFI on behalf of oneor more sponsored FFIs. Beginning no

2013–15 I.R.B. 791 April 8, 2013

later than July 15, 2013, financial institu-tions will be able to register as sponsoringentities but will not at that time be re-quired to provide information regardingtheir sponsored FFIs. It is anticipated thatsponsoring entities will be able to providesponsored FFI information and obtain GI-INs for each sponsored FFI beginning nolater than October 15, 2013.

If a sponsoring entity must also becomea participating FFI or registered deemed-compliant FFI with respect to accountsthat it maintains or register as a reportingModel 1 FFI, the sponsoring entity will berequired to do so separately from its reg-istration as a sponsoring entity. Such anFFI will obtain a separate GIIN to be usedwith respect to its own chapter 4 or FATCAPartner reporting requirements and to es-tablish its own chapter 4 status to with-holding agents.

C. Qualified Intermediaries

Beginning January 1, 2014, QIs will berequired to assume chapter 4 responsibili-ties with respect to their accounts as a con-dition for maintaining QI status or for ob-taining QI status. For this purpose, exist-ing QI agreements will be modified to takeinto account the applicable chapter 4 re-quirements. The modified provisions ofthe QI agreement will be set forth in theFATCA Rev. Proc. that the IRS will pub-lish before the Portal opens for registra-tion.

Existing QIs will be required to renewtheir QI agreements by registering on thePortal and agreeing to comply with themodified QI agreement described in theFATCA Rev. Proc. Such a renewingQI will be issued a GIIN that it will usefor FATCA reporting purposes and estab-lishing its FATCA status with withholdingagents. The IRS currently contemplatesthat the GIIN will also be used by QIs, inlieu of the current QI EIN, for purposesof QI reporting and establishing QI statusvis-à-vis withholding agents.

FFIs that wish to apply for QI status forthe first time must do so under the existingpaper-based QI application process. Onceapproved as a QI through this process, theFFI must also register or update its in-formation regarding its QI status (includ-ing its chapter 4 requirements) through thePortal.

D. Withholding Foreign Partnerships andWithholding Foreign Trusts

The existing agreements governingWPs and WTs will also be modified toincorporate the applicable chapter 4 re-quirements of these entities (for financialaccounts other than equity interests) withrespect to their partners, owners and ben-eficiaries. The FATCA Rev. Proc. willdescribe these modifications.

Existing WPs and WTs that are FFIswill be required to renew their agreementsby registering on the Portal and agreeing tocomply with the modified agreement de-scribed in the FATCA Rev. Proc. Sucha renewing WP or WT will be issued aGIIN that it will use for FATCA reportingpurposes and establishing its FATCA sta-tus with withholding agents. The IRS cur-rently contemplates that the GIIN will alsobe used by WPs and WTs, in lieu of thecurrent WP EIN or WT EIN, for purposesof chapter 3 reporting and establishing itsstatus vis-à-vis withholding agents.

FFIs that wish to apply for WP or WTstatus for the first time must do so un-der the existing paper-based applicationprocess. Once approved as a WP or WTthrough this process, the FFI must also reg-ister or update its information regarding itsWP or WT status through the Portal. Aforeign entity other than an FFI will be re-quired to apply as a WP or WT or renew itsstatus as such for assuming its chapter 4 re-quirements under the existing paper-basedapplication process.

E. Foreign Branches of U.S. FinancialInstitutions

U.S. financial institutions will registertheir foreign branch operations through thePortal in certain circumstances. A U.S. fi-nancial institution with a foreign branchthat is a reporting Model 1 FFI must reg-ister on behalf of the branch and obtain aGIIN to comply with its FATCA Partnerreporting obligations with respect to suchbranch. A U.S. financial institution witha foreign branch that is a QI and seeks tomaintain QI status will register through thePortal to renew its QI status for the branchregardless of whether the branch is a re-porting Model 1 FFI. A U.S. financial in-stitution with non-QI branch operations ina Model 2 jurisdiction or in a non-IGA ju-risdiction is not required to register with

the IRS. The Treasury Department and theIRS are considering ways to eliminate du-plicative reporting or effect, as appropri-ate, uniform reporting under chapters 4 and61.

II. Future Guidance and Request forComments

A. Qualified Intermediaries

The Treasury Department and the IRSare considering revising the requirementsof the QI agreement for external audit pro-cedures to verify a QI’s compliance withits QI agreement. Comments are requestedregarding the merits of requiring QIs toprovide, in lieu of external audit reports,periodic certifications of compliance sim-ilar to that required of participating FFIsunder the final regulations. Comments arealso requested as to the cases in whichinternal audits and reviews by third-par-ties should be required or permitted in lieuof external audits, including the extent towhich such reviews should include evalu-ations of a QI’s internal controls in lieu (inwhole or in part) of the account review pro-cedures prescribed in Revenue Procedure2002–55.

B. Private Arrangement Intermediaries

The Treasury Department and the IRSanticipate issuing guidance to allow partic-ipating FFIs and registered-deemed com-pliant FFIs currently acting as private ar-rangement intermediaries (PAIs) to con-tinue to act as PAIs for FATCA purposesunder requirements similar to those spec-ified in the current model QI agreement.Further, the QI agreement will be modi-fied in the FATCA Rev. Proc. to incor-porate the requirement that a QI may onlycontract with a PAI that is a participatingFFI or registered-deemed compliant FFI(in addition to the chapter 3 requirementsfor PAIs). As under the existing proce-dures applicable to PAIs, PAIs will not berequired to separately register with the IRSto obtain PAI status (other than registeringfor chapter 4 purposes). QIs that contractwith PAIs for purposes of their QI agree-ment will be required to identify these PAIsas part of the Portal registration process de-scribed above. As part of the revised re-quirements for PAIs, the Treasury Depart-ment and the IRS anticipate amending the

April 8, 2013 792 2013–15 I.R.B.

external audit requirements of PAIs to pro-vide requirements comparable to those re-quired of QIs.

C. Coordination with Chapters 3 and 61

The Treasury Department and the IRSintend: (1) to issue guidance coordinatingchapters 3 and 61 with chapter 4, in orderto reduce or eliminate duplicative report-ing as between chapter 4 (and reportingpursuant to a Model 1 IGA) and chapters 3and 61; and (2) to conform, as appropriate,the withholding, payee identification, andother due diligence rules of chapters 3 and61 with rules under chapter 4. Commentsare requested regarding how such coordi-nation should be undertaken and whetherother chapter 4 rules should be coordinatedwith other Code provisions.

D. Forms

A number of new and revised IRS formsmust be issued due to the new certifica-tion, reporting, and withholding require-ments of chapter 4.

For purposes of obtaining certificationsof account holder status for chapter 3 pur-poses, withholding agents have relied onIRS forms in the “W–8” series. The formsin the W–8 series will be modified forchapter 4 purposes. It should be noted,however, that the regulations provide thata financial institution, depending on thecircumstances, may also rely on substi-tute forms, written certifications, and otherdocumentation.

The IRS has already released draftversions of a revised Form W–8IMY,“Certificate of Foreign Intermediary, For-eign Flow-Through Entity, or Certain U.S.Branches for United States Tax Withhold-ing,” a revised Form W–8ECI “Certificateof Foreign Person’s Claim That Income IsEffectively Connected With the Conduct ofa Trade or Business in the United States,”and a revised Form W–8EXP “Certificateof Foreign Government or Other For-eign Organization for United States TaxWithholding.” The IRS intends to releaseshortly a new Form W–8BEN-E, “Cer-tificate of Status for Beneficial Owner forUnited States Tax Withholding (Entities),”to be used only by beneficial owners thatare entities and, shortly thereafter, a draftversion of a revised Form W–8BEN, “Cer-tificate of Foreign Status of BeneficialOwner for United States Tax Withholding

(Individuals),” to be used only by benefi-cial owners that are individuals.

The IRS also intends to release shortlya new Form 8966, “FATCA Report,” thatwill be used by FFIs (including QIs, WPs,WTs) and withholding agents (in limitedcircumstances) to comply with their chap-ter 4 reporting obligations. This new Form8966 will set forth all the information thatmust be reported with respect to financialaccounts in accordance with these regu-lations. Finally, the IRS intends to issueshortly a revised Form 1042, “AnnualWithholding Tax Return for U.S. SourceIncome of Foreign Persons,” and Form1042–S, “Foreign Person’s U.S. SourceIncome Subject to Withholding.” RevisedForms 1042 and 1042–S will set forthall the information that must be reportedby withholding agents to meet their obli-gations under both §1.1474–1(c) and (d)(chapter 4) and §1.1461–1 (chapter 3).The IRS intends to publish later in 2013or in early 2014 final versions of Form8966 and Form 1042–S, together with theXML-based schemas to be used by with-holding agents for the electronic filing ofthese forms.

Effect on Other Documents

The following publications are obsoleteas of January 28, 2013.

Notice 2010–60, 2010–37 I.R.B. 329Notice 2011–34, 2011–19 I.R.B. 765Notice 2011–53, 2011–32 I.R.B. 124Announcement 2012–42, 2012–47

I.R.B. 561

Special Analyses

It has been determined that this Trea-sury decision is not a significant regula-tory action as defined in Executive Order12866, as supplemented by Executive Or-der 13653. Therefore, a regulatory assess-ment is not required. It also has been de-termined that sections 553(b) and (d) of theAdministrative Procedure Act (5 U.S.C.Chapter 6) do not apply to these regula-tions.

The collection of information in thesefinal regulations is contained in a num-ber of provisions including §§1.1471–2,1.1471–3, 1.1471–4, 1.1472–1, and1.1474–1. The IRS intends that theseinformation collection requirements willbe satisfied by persons complying withrevised chapter 3 reporting forms, new

reporting forms based on these final reg-ulations, the terms, conditions, and re-quirements of an FFI agreement, a QIagreement, a WP agreement, or a WTagreement that satisfies the requirementsof an applicable revenue procedure tobe issued by the IRS, or the alternativecertification and documentation require-ments set out in these final regulations.As a result, for purposes of the Paper-work Reduction Act (44 U.S.C. 3507),the reporting burden associated with thecollection of information in these final reg-ulations will be reflected in the respectiveOMB Form 83–1, Paperwork ReductionAct Submission, associated with new orrevised IRS forms, the revenue procedurerelating to the FFI, QI, WP, and WT agree-ments, and the alternative certification anddocumentation requirements of these finalregulations.

It is hereby certified that the collectionof information in these final regulationswill not have a significant economic im-pact on a substantial number of small en-tities within the meaning of section 601(6)of the Regulatory Flexibility Act (5 U.S.C.chapter 6). Although the Treasury Depart-ment and the IRS anticipate that a substan-tial number of domestic small entities willbe affected by the collection of informa-tion in these final regulations, the Trea-sury Department and the IRS believe thatthe economic impact to these entities re-sulting from the information collection re-quirements will not be significant.

The domestic small business entitiesthat are subject to chapter 4 and theseregulations are those domestic businessentities that are payors of U.S. sourceFDAP income that are presently subject tothe information collection and reportingrules under chapter 3. These domesticsmall business entities are required to befamiliar with chapter 3’s information col-lection and reporting rules and forms inorder to determine a payee’s U.S. with-holding status and, based on that status,withhold and remit the proper amount oftax on payments of U.S. source FDAPincome. Small domestic business entitiesthat are payors of U.S. source FDAP in-come have developed and implementedinternal reporting and information col-lection systems under which the businessentity satisfies its chapter 3 payee identi-fication, withholding, and tax remittancerequirements.

2013–15 I.R.B. 793 April 8, 2013

The IRS intends to revise the presentchapter 3 reporting forms, with the re-vised forms being used by a payor of U.S.source FDAP income to satisfy the payor’sobligations under chapters 3 and 4. As aresult, these final regulations’ informationcollection requirements build on reportingand information collection systems famil-iar to and currently used by payors of U.S.source FDAP income that are domesticsmall business entities, thereby reducingthe burden imposed on these entities. Inaddition, the final regulations’ alternativecertification and documentation provi-sions reduce the information otherwiserequired to be collected by withholdingagents and submitted by payees, therebyfurther limiting the burden imposed bythe final regulations on domestic smallbusiness entities. Therefore, a RegulatoryFlexibility Analysis under the RegulatoryFlexibility Act is not required.

Section 202 of the Unfunded MandatesReform Act of 1995, Public Law 104–4,requires that an agency prepare a costs andbenefits analysis and a budgetary impactstatement before promulgating a rule thatmay result in the expenditure by State, lo-cal, and tribal governments, in the aggre-gate, or by the private sector, of $100 mil-lion or more in any one year. If a budgetaryimpact statement is required, section 205of the Unfunded Mandates Reform Act re-quires an agency to identify and considera reasonable number of regulatory alter-natives before promulgating a rule. TheTreasury Department and the IRS have de-termined that there is no federal mandateimposed by this rulemaking that may re-sult in the expenditure by State, local, andtribal governments, in the aggregate, or bythe private sector, of $100 million or morein any one year.

Pursuant to section 7805(f), the noticeof proposed rulemaking preceding these fi-nal regulations was submitted to the ChiefCounsel for Advocacy of the Small Busi-ness Administration for comment on itsimpact on small businesses. No commentswere received from the Small BusinessAdministration.

Drafting Information

The principal authors of §§1.1471–1through 1.1474–7 are John Sweeney,Danielle Nishida, Tara Ferris,Quyen Huynh, Josephine Firehock,

and Susan Massey, all of the Office ofAssociate Chief Counsel (International).The principal author of §301.1474–1 isMichael E. Hara, Office of Associate ChiefCounsel (Procedure and Administration).However, other personnel from the IRSand the Treasury Department participatedin the development of these regulations.

* * * * *

Adoption of Amendments to theRegulations

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

PART 1—INCOME TAXES

Paragraph 1. The authority citation forpart 1 is amended by adding entries in nu-merical order to read as follows:

Authority: 26 U.S.C. 7805* * *Section 1.1471–1 is also issued under

26 U.S.C. 1471Section 1.1471–2 is also issued under














26 U.S.C. 1474* * *Par. 2. . The undesignated center head-

ing and subheading immediately following§1.1464–1 are removed.

Par. 3. Section 1.1471–1 and the edito-rial note that follows are removed.

Par. 4. A new undesignated centerheading and §1.1471–0 are added imme-diately following §1.1464–1 to read as fol-lows:

Information Reporting by Foreign Fi-nancial Institutions

§1.1471–0 Outline of regulationprovisions for sections 1471 through1474.

This section lists the table of contentsfor §§1.1471–1 through 1.1474–7 and§301.1474–1 of this chapter.

§1.1471–1 Scope of chapter 4 anddefinitions.

(a) Scope of chapter 4 of the InternalRevenue Code.

(b) Definitions.(1) Account.(2) Account holder.(3) Active NFFE.(4) AML due diligence.(5) Annuity contract.(6) Assumes primary withholding re-

sponsibility.(7) Beneficial owner.(8) Blocked account.(9) Broker.(10) Cash value.(11) Cash value insurance contract.(12) Certified deemed-compliant FFI.(13) Change in circumstances.(14) Chapter 3.(15) Chapter 4.(16) Chapter 4 reportable amount.(17) Chapter 4 status.(18) Clearing organization.(19) Complex trust.(20) Consolidated obligations.(21) Custodial account.(22) Custodial institution.(23) Customer master file.(24) Deemed-compliant FFI.(25) Deferred annuity contract.(26) Depository account.(27) Depository institution.(28) Documentary evidence.(29) Documentation.(30) Dormant account.(31) Effective date of the FFI agree-

ment.(32) EIN.(33) Election to be withheld upon.(34) Electronically searchable informa-

tion.

April 8, 2013 794 2013–15 I.R.B.

(35) Entity.(36) Entity account.(37) Excepted NFFE.(38) Exempt beneficial owner.(39) Expanded affiliated group.(40) FATF.(41) FATF-compliant jurisdiction.(42) FFI.(43) FFI agreement.(44) Financial account.(45) Financial institution.(46) Flow-through entity.(47) Flow-through withholding certifi-

cate.(48) Foreign entity.(49) Foreign passthru payment.(50) Foreign payee.(51) Foreign person.(52) GIIN.(53) Grandfathered obligation.(54) Grantor trust.(55) Gross proceeds.(56) Group annuity contract.(57) Group insurance contract.(58) Immediate annuity.(59) Individual account.(60) Insurance company.(61) Insurance contract.(62) Intermediary.(63) Intermediary withholding certifi-

cate.(64) Investment entity.(65) Investment-linked annuity con-

tract.(66) Investment-linked insurance con-

tract.(67) IRS FFI list.(68) Life annuity contract.(69) Life insurance contract.(70) Limited branch.(71) Limited FFI.(72) Model 1 IGA.(73) Model 2 IGA.(74) NFFE.(75) Nonparticipating FFI.(76) Nonreporting IGA FFI.(77) Non-U.S. account.(78) NQI.(79) NWP.(80) NWT.(81) Offshore account.(82) Offshore obligation.(83) Owner.(84) Owner-documented FFI.(85) Participating FFI.(86) Participating FFI group.(87) Partnership.(88) Passive NFFE.

(89) Passthru payment.(90) Payee.(91) Payment with respect to an off-

shore obligation.(92) Payor.(93) Permanent residence address.(94) Person.(95) Preexisting account.(96) Preexisting entity account.(97) Preexisting individual account.(98) Preexisting obligation.(99) Pre-FATCA Form W–8.(100) Prima facie FFI.(101) QI.(102) QI agreement.(103) QI branch of a U.S. financial in-

stitution.(104) Recalcitrant account holder.(105) Registered deemed-compliant

FFI.(106) Relationship manager.(107) Reporting Model 1 FFI.(108) Responsible officer.(109) Restricted distributor.(110) Simple trust.(111) Specified insurance company.(112) Specified U.S. person.(113) Sponsored FFI.(114) Sponsored FFI group.(115) Sponsoring entity.(116) Standardized industry code.(117) Standing instructions to pay

amounts.(118) Subject to withholding.(119) Substantial U.S. owner.(120) Territory entity.(121) Territory financial institution.(122) Territory financial institution

treated as a U.S. person.(123) Territory NFFE.(124) TIN.(125) U.S. account.(126) U.S. branch treated as a U.S. per-

son.(127) U.S. financial institution.(128) U.S. indicia.(129) U.S. owned foreign entity.(130) U.S. payee.(131) U.S. payor.(132) U.S. person.(133) U.S. source FDAP income.(134) U.S. territory.(135) U.S. withholding agent.(136) Withholdable payment.(137) Withholding.(138) Withholding agent.(139) Withholding certificate.(140) WP.

(141) Written statement.(142) WT.(c) Effective/applicability date.

§1.1471–2 Requirement to deduct andwithhold tax on withholdable paymentsto certain FFIs.

(a) Requirement to withhold on pay-ments to FFIs.

(1) General rule of withholding.(2) Special withholding rules.(i) Requirement to withhold on pay-

ments of U.S. source FDAP income to par-ticipating FFIs that are NQIs, NWPs, orNWTs.

(ii) Residual withholding responsibilityof intermediaries and flow-through enti-ties.

(iii) Requirement to withhold if a par-ticipating FFI or registered deemed-com-pliant FFI makes an election to be withheldupon.

(A) Election to be withheld upon forU.S. source FDAP income.

(B) Election to be withheld upon forgross proceeds.

(iv) Withholding obligation of a terri-tory financial institution.

(v) Withholding obligation of a foreignbranch of a U.S. financial institution.

(vi) Payments of gross proceeds.(3) Coordination of withholding under

sections 1471(a) and (b).(4) Payments for which no withholding

is required.(i) Exception to withholding if the with-

holding agent lacks control, custody, orknowledge.

(A) In general.(B) Example.(ii) Exception to withholding for certain

payments made prior to January 1, 2016(transitional).

(A) In general.(B) Prima facie FFIs.(iii) Payments to a participating FFI.(iv) Payments to a deemed-compliant

FFI.(v) Payments to an exempt beneficial

owner.(vi) Payments to a territory financial in-

stitution.(vii) Payments to an account held with

a clearing organization with FATCA-com-pliant membership.

(viii) Payments to certain excepted ac-counts.

2013–15 I.R.B. 795 April 8, 2013

(5) Withholding requirements if sourceor character of payments is unknown.

(i) General rule.(ii) Optional escrow procedure.(b) Grandfathered obligations.(1) Grandfathered treatment of out-

standing obligations.(2) Definitions.(i) Grandfathered obligation.(ii) Obligation.(iii) Date outstanding.(iv) Material modification.(3) Application to flow-through enti-

ties.(i) Partnerships.(ii) Simple trusts.(iii) Grantor trusts.(4) Determination by withholding agent

of grandfathered treatment.(i) In general.(ii) Determination of material modifica-

tion.(iii) Record retention.(c) Effective/applicability date.

§1.1471–3 Identification of payee.

(a) Payee defined.(1) In general.(2) Payee with respect to a financial ac-

count.(3) Exceptions.(i) Certain foreign agents or intermedi-

aries.(ii) Foreign flow-through entity.(iii) U.S. intermediary or agent of a for-

eign person.(iv) Territory financial institution.(v) Disregarded entity or branch.(vi) U.S. branch of certain foreign

banks or foreign insurance companies.(vii) Foreign branch of a U.S. person.(b) Determination of payee’s status.(1) Determining whether a payment is

received by an intermediary.(2) Determination of entity type.(3) Determination of whether the pay-

ment is made to a QI, WP, or WT.(4) Determination of whether the payee

is receiving effectively connected income.(c) Rules for reliably associating a

payment with a withholding certificate orother appropriate documentation.

(1) In general.(2) Reliably associating a payment

with documentation if a payment is madethrough an intermediary or flow-throughentity that is not the payee.

(i) In general.(ii) Exception to entity account docu-

mentation rules for an offshore account ofan intermediary or flow-through entity.

(3) Requirements for validity of certifi-cates.

(i) Form W–9.(ii) Beneficial owner withholding cer-

tificate (Form W–8BEN).(iii) Withholding certificate of an in-

termediary, flow-through entity, or U.S.branch (Form W–8IMY).

(A) In general.(B) Withholding statement.(1) In general.(2) Special requirements for an FFI

withholding statement.(3) Special requirements for a chapter 4

withholding statement.(4) Special requirements for an exempt

beneficial owner withholding statement.(C) Failure to provide allocation infor-

mation.(D) Special rules applicable to a with-

holding certificate of a QI that assumesprimary withholding responsibility underchapter 3.

(E) Special rules applicable to a with-holding certificate of a QI that does notassume primary withholding responsibil-ity under chapter 3.

(F) Special rules applicable to a with-holding certificate of a territory financialinstitution that agrees to be treated as aU.S. person.

(G) Special rules applicable to a with-holding certificate of a territory financialinstitution that does not agree to be treatedas a U.S. person.

(H) Special rules applicable to a with-holding certificate of a U.S. branch treatedas a U.S. person.

(iv) Certificate for exempt status (FormW–8EXP).

(v) Certificate for effectively connectedincome (Form W–8ECI).

(4) Requirements for written state-ments.

(5) Requirements for documentary evi-dence.

(i) Foreign status.(A) Certificate of residence.(B) Individual government identifica-

tion.(C) QI documentation.(D) Entity government documentation.(E) Third-party credit report.(ii) Chapter 4 status.

(A) General documentary evidence.(B) Preexisting account documentary

evidence.(C) Payee-specific documentary evi-

dence.(6) Applicable rules for withholding

certificates, written statements, and docu-mentary evidence.

(i) Who may sign the withholding cer-tificate or written statement.

(ii) Period of validity.(A) General rule.(B) Indefinite validity.(C) Indefinite validity in the case of cer-

tain offshore obligations.(D) Exception for certificate for effec-

tively connected income.(E) Change in circumstances.(1) Defined.(2) Obligation to notify withholding

agent of a change in circumstances.(3) Withholding agent’s obligation with

respect to a change in circumstances.(iii) Record retention.(A) In general.(B) Exception for documentary evi-

dence received with respect to offshoreobligations.

(iv) Electronic transmission of with-holding certificate, written statement, anddocumentary evidence.

(v) Acceptable substitute withholdingcertificate.

(A) In general.(B) Non-IRS form for individuals.(vi) Electronic confirmation of TIN on

withholding certificate.(vii) Reliance on a prior version of a

withholding certificate.(7) Curing documentation errors.(i) Curing inconsequential errors on a

withholding certificate.(ii) Documentation received after the

time of payment.(8) Documentation furnished on ac-

count-by-account basis unless exceptionprovided for sharing documentation withinexpanded affiliated group.

(i) Single branch systems.(ii) Universal account systems.(iii) Shared account systems.(iv) Document sharing gross proceeds.(9) Reliance on documentation col-

lected by or certifications provided byother persons.

(i) Shared documentation system main-tained by an agent.

(ii) Third-party data providers.

April 8, 2013 796 2013–15 I.R.B.

(iii) Reliance on certification providedby introducing brokers.

(iv) Reliance on documentation andcertifications provided between principalsand agents.

(A) In general.(B) Reliance upon certification of the

principal.(C) Document sharing.(D) Examples.(v) Reliance upon documentation for

accounts acquired in merger or bulk acqui-sition for value.

(d) Documentation requirements to es-tablish payee’s chapter 4 status.

(1) Reliance on pre-FATCA Form W–8.(2) Identification of U.S. persons.(i) In general.(ii) Reliance on documentary evidence.(iii) Preexisting obligations.(3) Identification of individuals that are

foreign persons.(i) In general.(ii) Exception for offshore obligations.(4) Identification of participating FFIs

and registered deemed-compliant FFIs.(i) In general.(ii) Exception for payments made prior

to January 1, 2017, with respect to preex-isting obligations (transitional).

(iii) Exception for offshore obligations.(iv) Exceptions for payments to report-

ing Model 1 FFIs.(v) Reason to know.(5) Identification of certified deemed-

compliant FFIs.(i) In general.(ii) Sponsored, closely-held investment

vehicles.(A) In general.(B) Offshore obligations.(6) Identification of owner-documented

FFIs.(i) In general.(ii) Auditor’s letter substitute.(iii) Documentation for owners of

payee.(iv) Content of FFI owner reporting

statement.(v) Exception for preexisting obliga-

tions (transitional).(vi) Exception for offshore obligations.(vii) Exception for certain obligations

of $1,000,000 or less.(7) Nonreporting IGA FFIs.(i) In general.(ii) Exception for offshore obligations.

(8) Identification of nonparticipatingFFIs.

(i) In general.(ii) Special documentation rules for

payments made to an exempt beneficialowner through a nonparticipating FFI.

(9) Identification of exempt beneficialowners.

(i) Identification of foreign govern-ments, governments of U.S. territories,international organizations, and foreigncentral banks of issue.

(A) In general.(B) Exception for offshore obligations.(C) Exception for preexisting offshore

obligations.(ii) Identification of retirement funds.(A) In general.(B) Exception for offshore obligations.(C) Exception for preexisting offshore

obligations.(iii) Identification of entities wholly

owned by exempt beneficial owners.(10) Identification of territory financial

institutions.(i) Identification of territory financial

institutions that are beneficial owners.(A) In general.(B) Exception for preexisting offshore

obligations.(ii) Identification of territory financial

institutions acting as intermediaries or thatare flow-through entities.

(iii) Reason to know.(11) Identification of excepted NFFEs.(i) Identification of excepted nonfinan-

cial group entities.(A) In general.(B) Exception for offshore obligations.(ii) Identification of excepted nonfinan-

cial start-up companies.(A) In general.(B) Exception for offshore obligations.(C) Exception for preexisting offshore

obligations.(iii) Identification of excepted nonfi-

nancial entities in liquidation or bank-ruptcy.


obligations.(iv) Identification of section 501(c) or-

ganizations.(A) In general.(B) Reason to know.(v) Identification of non-profit organi-

zations.


obligations.(D) Reason to know.(vi) Identification of NFFEs that are

publicly traded corporations.(A) Exception for offshore obligations.(B) Exception for preexisting offshore

obligations.(vii) Identification of NFFE affiliates.(A) Exception for offshore obligations.(B) Exception for preexisting offshore

obligations.(viii) Identification of excepted terri-

tory NFFEs.(A) Exception for payments made prior

to January 1, 2017, with respect to pre-existing obligations of $1,000,000 or less(transitional).

(B) Exception for offshore obligations.(C) Exception for preexisting offshore

obligations of $1,000,000 or less.(ix) Identification of active NFFEs.(A) Exception for offshore obligations.(B) Exception for preexisting offshore

obligations.(C) Limit on reason to know.(12) Identification of passive NFFEs.(i) Exception for offshore obligations.(ii) Special rule for preexisting offshore

obligations.(iii) Required owner certification for

passive NFFEs.(A) In general.(B) Exception for preexisting obliga-

tions of $1,000,000 or less (transitional).(e) Standards of knowledge.(1) In general.(2) Notification by the IRS.(3) Participating FFIs and registered

deemed-compliant FFIs.(i) In general.(ii) Special rules for reporting Model 1

FFIs.(4) Reason to know.(i) Information conflicting with per-

son’s claim of chapter 4 status.(ii) Specific standards of knowledge ap-

plicable to withholding certificates.(A) In general.(B) Classification of U.S. status, U.S.

address, or U.S. telephone number.(1) Presumption of individual’s foreign

status.(2) Presumption of entity’s foreign sta-

tus.(C) U.S. place of birth.

2013–15 I.R.B. 797 April 8, 2013

(1) Accounts opened on or after January1, 2014.

(2) Preexisting obligations.(D) Standing instructions with respect

to offshore obligations.(iii) Specific standard of knowledge ap-

plicable to written statements.(iv) Specific standard of knowledge ap-

plicable to documentary evidence.(A) In general.(B) Classification of U.S. status, U.S.

address, or U.S. telephone number.(1) Presumption of individual’s foreign

status.(2) Presumption of entity’s foreign sta-

tus.(C) U.S. place of birth.(1) Accounts opened on or after January

1, 2014.(2) Preexisting obligations.(D) Standing instructions.(E) Standards of knowledge applicable

to certain types of documentary evidence.(1) Financial statement.(2) Organizational documents.(v) Specific standards of knowledge

applicable when only documentary evi-dence is a code or classification describedin paragraph (c)(5)(ii)(B) of this section.

(A) U.S. indicia for entities.(B) Documentation required to cure

U.S. indicia.(vi) Specific standards of knowledge

applicable to documentation received fromintermediaries and flow-through entities.

(A) In general.(B) Limits on reason to know with

respect to documentation receivedfrom participating FFIs and registereddeemed-compliant FFIs that are interme-diaries or flow-through entities.

(vii) Limits on reason to know.(A) Scope of review for preexisting

obligations of entities.(B) Reason to know there is a U.S. tele-

phone number associated with a preexist-ing obligation.

(C) Reason to know there are U.S. in-dicia associated with preexisting offshoreobligations.

(D) Limits on reason to know for mul-tiple obligations belonging to a single ac-count holder.

(viii) Reasonable explanation support-ing claim of foreign status.

(5) Conduit financing arrangements.(6) Additional guidance.

(f) Presumptions regarding chapter 4status of the person receiving the paymentin the absence of documentation.

(1) In general.(2) Presumptions of classification as an

individual or entity.(i) In general.(ii) Documentary evidence furnished

for offshore obligation.(3) Presumptions of U.S. or foreign sta-

tus.(i) Payments to entities with indicia of

foreign status.(ii) Payments to certain exempt recipi-

ents.(iii) Payments with respect to offshore

obligations.(4) Presumption of chapter 4 status for

a foreign entity.(5) Presumption of status as an interme-

diary.(6) Presumption of effectively con-

nected income for payments to certainU.S. branches.

(7) Joint payees.(i) In general.(ii) Exception for offshore obligations.(8) Rebuttal of presumptions.(9) Effect of reliance on presumptions

and of actual knowledge or reason to knowotherwise.

(i) In general.(ii) Actual knowledge or reason to

know that amount of withholding is greaterthan is required under the presumptions orthat reporting of the payment is required.

(g) Effective/applicability date.

§1.1471–4 FFI agreement.

(a) In general.(1) Withholding.(2) Identification and documentation of

account holders.(3) Reporting.(4) Expanded affiliated group.(5) Verification.(6) Event of default.(7) Refunds.(b) Withholding requirements.(1) In general.(2) Withholding determination.(3) Satisfaction of withholding require-

ments.(4) Foreign passthru payments.(5) Withholding on limited FFIs and

limited branches.(i) Limited FFIs.

(ii) Limited branches.(6) Special rule for dormant accounts.(7) Withholding requirements for U.S.

branches of participating FFIs that aretreated as U.S. persons.

(c) Due diligence for the identificationand documentation of account holders andpayees.

(1) Scope of paragraph.(2) General rules for the identification

and documentation of account holders andpayees.

(i) Overview.(ii) Standards of knowledge.(A) In general.(B) Limits on reason to know with

respect to certain accounts acquired inmerger of bulk acquisition.

(1) In general.(2) Participating FFIs and certain

deemed-compliant FFIs that apply the duediligence rules, and U.S. financial institu-tions.

(iii) Change in circumstances.(A) Obligation to identify a change in

circumstances.(B) Definition of change in circum-

stances.(C) Requirements following a change in

circumstances.(iv) Record retention.(v) Special rule for U.S. branches of

participating FFIs that are treated as U.S.persons.

(3) Identification and documentationprocedure for entity accounts and payees.

(i) In general.(ii) Timeframe for applying identifica-

tion and documentation procedure for en-tity accounts and payees.

(iii) Documentation exception for cer-tain preexisting entity accounts.

(A) Accounts to which this exceptionapplies.

(B) Aggregation of entity accounts.(C) Election to forgo exception.(4) Identification and documentation

procedure for individual accounts otherthan preexisting accounts.

(i) In general.(ii) Reliance on third-party for identi-

fication of individual accounts other thanpreexisting accounts.

(iii) Alternative identification and doc-umentation procedure for certain cashvalue insurance or annuity contracts.

(A) Group cash value insurance con-tracts or group annuity contracts.

April 8, 2013 798 2013–15 I.R.B.

(B) Accounts held by beneficiaries of acash value insurance contract that is a lifeinsurance contract.

(5) Identification and documentationprocedure for preexisting individual ac-counts.

(i) In general.(ii) Special rule for preexisting indi-

vidual accounts previously documented asU.S. accounts for purposes of chapter 3 or61.

(iii) Exceptions for certain low valuepreexisting individual accounts.

(A) Accounts to which an exception ap-plies.

(B) Aggregation of accounts.(C) Election to forgo exception.(iv) Specific identification and docu-

mentation procedures for preexisting indi-vidual accounts.

(A) In general.(B) U.S. indicia and relevant documen-

tation rules.(1) U.S. indicia.(2) Documentation to be retained upon

identifying U.S. indicia.(i) Designation of account holder as a

U.S. citizen or resident.(ii) Unambiguous indication of a U.S.

place of birth.(iii) U.S. address or U.S. mailing ad-

dress.(iv) Only U.S. telephone numbers.(v) U.S. telephone numbers and non-

U.S. telephone numbers.(vi) Standing instructions to pay

amounts.(vii) Power of attorney or signatory au-

thority granted to a person with a U.S.address or “in-care-of” address or “holdmail” address.

(C) Electronic search for identifyingU.S. indicia.

(D) Enhanced review for identify-ing U.S. indicia in the case of certainhigh-value accounts.

(1) In general.(2) Relationship manager inquiry.(3) Additional review of non-electronic

records.(4) Limitations on the enhanced review

in the case of comprehensive electroni-cally searchable information.

(E) Exception for preexisting individualaccounts that a participating FFI has doc-umented as held by foreign individuals forpurposes of meeting its obligations underchapter 61 or its QI, WP, or WT agreement.

(6) Examples.(7) Certifications of responsible officer.(d) Account reporting.(1) Scope of paragraph.(2) Reporting requirements in general.(i) Accounts subject to reporting.(ii) Financial institution required to re-

port an account.(A) In general.(B) Special reporting of account holders

of territory financial institutions.(C) Special reporting of account holders

of a sponsored FFI.(D) Special reporting of account hold-

ers that are owner-documented FFIs.(E) Branch reporting of accounts.(iii) Special U.S. account reporting

rules for U.S. payors.(A) Special reporting rule for U.S. pay-

ors other than U.S. branches.(B) Special reporting rules for U.S.

branches treated as U.S. persons.(3) Reporting of accounts under section

1471(c)(1).(i) In general.(ii) Accounts held by specified U.S.

persons.(iii) Accounts held by U.S. owned for-

eign entities.(iv) Special reporting of accounts held

by owner-documented FFIs.(v) Branch reporting.(vi) Form for reporting accounts under

section 1471(c)(1).(vii) Time and manner of filing.(viii) Extensions in filing.(4) Descriptions applicable to reporting

requirements of §1.1471–4(d)(3).(i) Address.(ii) Account number.(iii) Account balance or value.(A) In general.(B) Currency translation of account bal-

ance or value.(iv) Payments made with respect to an

account.(A) Depository accounts.(B) Custodial accounts.(C) Other accounts.(D) Transfers and closing of deposit,

custodial, insurance, and annuity financialaccounts.

(E) Amount and character of paymentssubject to reporting.

(F) Currency translation.(v) Record retention requirements.(5) Election to perform chapter 61 re-

porting.

(i) In general.(A) Election under section 1471(c)(2).(B) Election to report in a manner sim-

ilar to section 6047(d).(ii) Additional information to be re-

ported.(iii) Special reporting of accounts held

by owner-documented FFIs.(iv) Branch reporting.(v) Time and manner of making the

election.(vi) Revocation of election.(vii) Filing of information under elec-

tion.(6) Reporting on recalcitrant account

holders.(i) In general.(ii) Definition of dormant account.(iii) End of dormancy.(iv) Forms.(v) Time and manner of filing.(vi) Record retention requirements.(7) Special reporting rules with respect

to the 2013 through 2015 calendar years.(i) In general.(ii) Participating FFIs that report under

§1.1471–4(d)(3).(A) Reporting with respect to the 2013

and 2014 calendar years.(B) Reporting with respect to the 2015

calendar year.(iii) Participating FFIs that report under

§1.1471–4(d)(5).(iv) Forms for reporting.(A) In general.(B) Special determination date and tim-

ing for reporting with respect to the 2013calendar year.

(8) Reporting requirements of QIs, WPsand WTs.

(9) Examples.(e) Expanded affiliated group require-

ments.(1) In general.(2) Limited branches.(i) In general.(ii) Branch defined.(iii) Limited branch defined.(iv) Conditions for limited branch sta-

tus.(v) Term of limited branch status (tran-

sitional).(3) Limited FFI.(i) In general.(ii) Limited FFI defined.(iii) Conditions for limited FFI status.(iv) Period for limited FFI status (tran-

sitional).

2013–15 I.R.B. 799 April 8, 2013

(4) Special rule for QIs.(f) Verification.(1) In general.(2) Compliance program.(i) In general.(ii) Consolidated compliance program.(A) In general.(B) Requirements of compliance FI.(3) Certification of compliance.(i) In general.(ii) Certification of effective internal

controls.(iii) Qualified certification.(iv) Material failures defined.(4) IRS review of compliance.(i) General inquiries.(ii) Inquiries regarding substantial non-

compliance.(g) Event of default.(1) Defined.(2) Notice of event of default.(3) Remediation of event of default.(h) Collective credit or refund proce-

dures for overpayments.(1) In general.(2) Persons for which a collective re-

fund is not permitted.(3) Payments for which a collective re-

fund is permitted.(4) Procedural and other requirements

for collective refund.(i) Legal prohibitions on reporting U.S.

accounts and withholding.(1) In general.(2) Requesting wavier or closure of a

U.S. account.(i) In general.(ii) Valid and effective waiver for a U.S.

account.(iii) Closure or transfer of U.S. account.(3) Legal prohibitions preventing with-

holding.(i) In general.(ii) Block or transfer accounts or obli-

gations.(j) Effective/applicability date.

§1.1471–5 Definitions applicable tosection 1471.

(a) U.S. accounts.(1) In general.(2) Definition of U.S. account.(3) Account holder.(i) In general.(ii) Grantor trust.(iii) Financial accounts held by agents

that are not financial institutions.

(iv) Jointly held accounts.(v) Account holder for insurance and

annuity contracts.(vi) Examples.(4) Exceptions to U.S. account status.(i) Exception for certain individual ac-

counts of participating FFIs.(ii) Election to forgo exception.(iii) Example.(b) Financial accounts.(1) In general.(i) Depository account.(ii) Custodial account.(iii) Equity or debt interest.(A) Equity or debt interest in an invest-

ment entity.(B) Certain equity or debt interests in a

holding company or treasury center.(C) Equity or debt interests in other fi-

nancial institutions.(iv) Insurance and annuity contracts.(2) Exceptions.(i) Certain savings accounts.(A) Retirement and pension accounts.(B) Non-retirement savings accounts.(C) Rollovers.(D) Coordination with section 6038D.(E) Account that is tax-favored.(ii) Certain term life insurance con-

tracts.(iii) Account held by an estate.(iv) Certain escrow accounts.(v) Certain annuity contracts.(vi) Account or product excluded under

an intergovernmental agreement.(3) Definitions.(i) Depository account.(A) In general.(B) Exceptions.(ii) Custodial account.(iii) Equity interest in certain entities.(A) Partnership.(B) Trust.(iv) Regularly traded on an established

securities market.(v) Value of interest determined, di-

rectly or indirectly, primarily by referenceto assets the give rise (or could give rise)to withholdable payments.

(A) Equity interest.(B) Debt interest.(vi) Redemption or retirement amount

or return earned on the interest determined,directly or indirectly, primarily by refer-ence to one or more investment entities orpassive NFFEs.

(A) Equity interest.(B) Debt interest.

(vii) Cash value insurance contracts.(A) In general.(B) Cash value.(C) Amounts excluded from cash value.(D) Policyholder dividend.(4) Account balance or value.(i) In general.(ii) Special rule for immediate annuity.(A) Immediate annuities without mini-

mum benefit guarantees.(B) Immediate annuities with a mini-

mum benefit guarantee.(C) Net present value of amounts

payable in future periods.(iii) Account aggregation requirements.(A) In general.(B) Aggregation rule for relationship

managers.(C) Examples.(iv) Current translation of balance or

value.(5) Account maintained by financial in-

stitution.(c) U.S. owned foreign entity.(d) Definition of FFI.(e) Definition of financial institution.(1) In general.(2) Banking or similar business.(i) In general.(ii) Exception for certain lessors and

lenders.(iii) Application of section 581.(iv) Effect of local regulation.(3) Holding financial assets for others

as a substantial portion of its business.(i) Substantial portion.(A) In general.(B) Special rule for start-up entities.(ii) Income attributable to holding fi-

nancial assets and related financial ser-vices.

(iii) Effect of local regulation.(4) Investment entity.(i) In general.(ii) Financial assets.(iii) Primarily conducts as a business.(A) In general.(B) Special rule start-up entities.(iv) Primarily attributable to investing,

reinvesting, or trading in financial assets.(A) In general.(B) Special rule for start-up entities.(v) Examples.(5) Exclusions.(i) Excepted nonfinancial group enti-

ties.(A) In general.(B) Nonfinancial group.

April 8, 2013 800 2013–15 I.R.B.

(C) Holding company.(D) Treasury center.(E) Captive finance company.(ii) Excepted nonfinancial start-up

companies or companies entering a newline of business.

(A) In general.(B) Exception for investment funds.(iii) Excepted nonfinancial entities in

liquidation or bankruptcy.(iv) Excepted inter-affiliate FFI.(v) Section 501(c) entities.(vi) Non-profit organizations.(6) Reserving activities of an insurance

company.(f) Deemed-compliant FFIs.(1) Registered deemed-compliant FFIs.(i) Registered deemed-compliant FFI

categories.(A) Local FFIs.(B) Nonreporting members of partici-

pating FFI groups.(C) Qualified collective investment ve-

hicles.(D) Restricted funds.(E) Qualified credit card issuers.(F) Sponsored investment entities and

controlled foreign corporations.(ii) Procedural requirements for regis-

tered deemed-compliant FFIs.(iii) Deemed-compliant FFI that is

merged or acquired.(2) Certified deemed-compliant FFIs.(i) Nonregistering local bank.(ii) FFIs with only low-value accounts.(iii) Sponsored, closely-held invest-

ment vehicles.(iv) Limited life debt investment enti-

ties (transitional).(3) Owner-documented FFIs.(i) In general.(ii) Requirements of owner-docu-

mented FFI status.(4) Definition of restricted distributor.(g) Recalcitrant account holders.(1) Scope.(2) Recalcitrant account holder.(3) Start of recalcitrant account holder

status.(i) Preexisting accounts identified

under the procedures described in§1.1471–4(c) for identifying U.S. ac-counts.

(A) In general.(B) Accounts other than high-value ac-

counts.(C) High-value accounts.

(D) Preexisting accounts that becomehigh-value accounts.

(ii) Accounts that are not preexisting ac-counts and accounts requiring name/TINcorrection.

(iii) Accounts with changes in circum-stances.

(4) End of recalcitrant account holderstatus.

(h) Passthru payment.(1) Defined.(2) Foreign passthru payment.(i) Expanded affiliated group.(1) Scope of paragraph.(2) Expanded affiliated group defined.(i) In general.(ii) Partnerships and entities other than

corporations.(3) Exception for FFIs holding certain

capital investments.(4) Seed capital.(5) Anti-abuse rule.(j) Effective/applicability date.

§1.1471–6 Payments beneficially ownedby exempt beneficial owners.

(a) In general.(b) Any foreign government, any politi-

cal subdivision of a foreign government, orany wholly owned agency or instrumental-ity of any one or more of the foregoing.

(1) Integral part.(2) Controlled entity.(3) Inurement to the benefit of private

persons.(c) Any international organization or

any wholly owned agency or instrumental-ity thereof.

(d) Foreign central bank of issue.(1) In general.(2) Separate instrumentality.(3) Bank for International Settlements.(4) Income on certain collateral.(e) Governments of U.S. territories.(f) Certain retirement funds.(1) Treaty-qualified retirement fund.(2) Broad participation retirement fund.(3) Narrow participating retirement

funds.(4) Fund formed pursuant to a plan sim-

ilar to a section 401(a) plan.(5) Investment vehicles exclusively for

retirement funds.(6) Pension fund of an exempt benefi-

cial owner.(7) Example.

(g) Entities wholly owned by exemptbeneficial owners.

(h) Exception for commercial activities.(1) General rule.(2) Limitation.(i) Effective/applicability date.

§1.1472–1 Withholding on NFFEs.

(a) In general.(b) Withholdable payments made to an

NFFE.(1) In general.(2) Transitional relief.(c) Exceptions.(1) Beneficial owner that is an excepted

NFFE.(i) Publicly traded corporation.(A) Regularly traded.(B) Special rules regarding the regu-

larly traded requirement.(1) Year of initial public offering.(2) Classes of stock treated as meeting

the regularly traded requirement.(3) Anti-abuse rule.(C) Established securities market.(1) In general.(2) Foreign exchange with multiple

tiers.(3) Computation of dollar value of stock

traded.(ii) Certain affiliated entities related to

a publicly traded corporation.(iii) Certain territory entities.(iv) Active NFFEs.(A) Passive income.(B) Exceptions from passive income

treatment.(C) Methods of measuring assets.(v) Excepted nonfinancial entities.(2) Payments made to a WP, WT, or an

exempt beneficial owner.(d) Rules for determining payee and

beneficial owner.(1) In general.(2) Payments made to an NFFE that is

a WP or WT.(3) Payments made to a partner or ben-

eficiary of an NFFE that is an NWP orNWT.

(4) Payments made to a beneficialowner that is an NFFE.

(5) Absence of valid documentation.(e) Information reporting requirements.(1) Reporting on withholdable pay-

ments.(2) Reporting on substantial U.S. own-

ers.

2013–15 I.R.B. 801 April 8, 2013

(f) Effective/applicability date.

§1.1473–1 Section 1473 definitions.

(a) Definition of withholdable payment.(1) In general.(2) U.S. source FDAP income defined.(i) In general.(A) FDAP income defined.(B) U.S. source.(C) Exceptions to withholding on U.S.

source FDAP income not applicable underchapter 4.

(ii) Special rule for certain interest.(iii) Original issue discount.(iv) REMIC residual interests.(v) Withholding liability of payee that

is satisfied by withholding agent.(vi) Special rule for sales of interest

bearing debt obligations.(vii) Payment of U.S. source FDAP in-

come.(A) Amount of payment of U.S. source

FDAP income.(B) When payment of U.S. source

FDAP income is made.(3) Gross proceeds defined.(i) Sale or other disposition.(A) In general.(B) Special rule for sales effected by

brokers.(C) Special rule for gross proceeds from

sales settles by a clearing organization.(ii) Property of a type that can produce

interest or dividend payments that wouldbe U.S. source FDAP income.

(A) In general.(B) Contracts producing dividend

equivalent payments.(C) Regulated investment company dis-

tributions.(iii) Payment of gross proceeds.(A) When gross proceeds are paid.(B) Amount of gross proceeds.(4) Payments not treated as withhold-

able payments.(i) Certain short-term obligations.(ii) Effectively connected income.(iii) Excluded nonfinancial payments.(iv) Gross proceeds from sales of ex-

cluded property.(v) Fractional shares.(vi) Offshore payments of U.S. source

FDAP income prior to 2017 (transitional).(5) Special payment rules for

flow-through entities, complex trusts, andestates.

(i) In general.

(ii) Partnerships.(iii) Simple trusts.(iv) Complex trusts and estates.(v) Grantor trusts.(vi) Special rule for an NWP or NWT.(vii) Special rule for determining when

gross proceeds are treated as paid to apartner, owner, or beneficiary of a flow-through entity.

(6) Reporting of withholdable pay-ments.

(7) Example.(b) Substantial U.S. owner.(1) Definition.(2) Indirect ownership of foreign enti-

ties.(i) Indirect ownership of stock.(ii) Indirect ownership in a foreign part-

nership or ownership of a beneficial inter-est in a foreign trust.

(iii) Ownership and holdings throughoptions.

(iv) Determination of proportionate in-terest.

(v) Interests owned or held by a relatedperson.

(3) Beneficial interest in a foreign trust.(i) In general.(ii) Determining the 10 percent thresh-

old in the case of a beneficial interest in aforeign trust.

(iii) Valuation rules for beneficial inter-ests in foreign trusts.

(4) Exceptions.(i) De minimis amount or value excep-

tion.(ii) Trusts wholly owned by certain U.S.

persons.(5) Special rule for certain financial in-

stitutions.(6) Determination dates for substantial

U.S. owners.(7) Examples.(c) Specified U.S. person.(d) Withholding agent.(1) In general.(2) Participating FFIs and registered

deemed-compliant FFIs as withholdingagents.

(3) Grantor trusts as withholdingagents.

(4) Deposit and return requirements.(5) Multiple withholding agents.(6) Exception for certain individuals.(e) Foreign entity.(f) Effective/applicability date.

§1.1474–1 Liability for withheld tax andwithholding agent reporting.

(a) Payment and returns of tax withheld.(1) In general.(2) Withholding agent liability.(3) Use of agents.(i) In general.(ii) Authorized agent.(iii) Liability of withholding agent act-

ing through an agent.(4) Liability for failure to obtain doc-

umentation timely or to act in accordancewith applicable presumptions.

(i) In general.(ii) Withholding satisfied by another

withholding agent.(b) Payment of withheld tax.(1) In general.(2) Special rule for foreign passthru

payments and payments of gross proceedsthat include an undetermined amount ofincome subject to tax.

(c) Income tax return.(1) In general.(2) Participating FFIs, registered

deemed-compliant FFIs, and U.S.branches treated as U.S. persons.

(3) Amended returns.(d) Information returns for payment re-

porting.(1) Filing requirement.(i) In general.(ii) Recipient.(A) Defined.(B) Persons that are not recipients.(2) Amounts subject to reporting.(i) In general.(ii) Exception to reporting.(iii) Coordination with chapter 3.(3) Required information.(4) Method of reporting.(i) Payments by U.S. withholding agent

to recipients.(A) Payments to certain entities that are

beneficial owners.(B) Payments to participating FFIs,

deemed-compliant FFIs, and certain QIs.(C) Amounts paid to a U.S. branch of

a participating FFI or registered deemed-compliant FFI.

(D) Amounts paid to territory financialinstitutions that are flow-through entitiesor acting as intermediaries.

(E) Amounts paid to NFFEs.(ii) Payments made by withholding

agents to certain entities that are not recip-ients.

April 8, 2013 802 2013–15 I.R.B.

(A) Entities that provide informationfor a withholding agent to perform specificpayee reporting.

(B) Nonparticipating FFI that is a flow-through entity or intermediary.

(C) Disregarded entities.(iii) Reporting by participating FFIs

and deemed-compliant FFIs (includingQIs, WPs, and WTs).

(A) In general.(B) Special reporting requirements

of participating FFIs, deemed-compliantFFIs, and FFIs that make an election undersection 1471(b)(3).

(C) Reporting by participating FFIsand registered deemed-compliant FFIs(including QIs, WPs, and WTs) for certainpayments made to nonparticipating FFIs(transitional).

(D) Reporting by U.S. branchesof a participating FFI or registereddeemed-compliant FFI that is treated as aU.S. person.

(iv) Reporting by territory financial in-stitutions.

(v) Nonparticipating FFIs.(vi) Other withholding agents.(e) Magnetic media reporting.(f) Indemnification of withholding

agent.(g) Extensions of time to file Forms

1042 and 1042–S.(h) Penalties.(i) Additional reporting requirements

with respect to U.S. owned foreign entitiesand owner-documented FFIs.

(1) Reporting by certain withholdingagents with respect to owner-documentedFFIs.

(2) Reporting by certain withholdingagents with respect to U.S. owned foreignentities that are NFFEs.

(3) Cross reference to reporting by par-ticipating FFIs.

(j) Effective/applicability date.

§1.1474–2 Adjustments foroverwithholding or underwithholding oftax.

(a) Adjustments of overwithheld tax.(1) In general.(2) Overwithholding.(3) Reimbursement of tax.(i) General rule.(ii) Record maintenance.(4) Set-offs.(5) Examples.

(b) Withholding of additional tax whenunderwithholding occurs.

(c) Effective/applicability date.

§1.1474–3 Withheld tax as credit tobeneficial owner of income.

(a) Creditable tax(b) Amounts paid to persons that are not

the beneficial owners(c) Effective/applicability date

§1.1474–4 Tax paid only once.

(a) Tax paid.(b) Effective/applicability date.

§1.1474–5 Refunds or credits.

(a) Refund and credit.(1) In general.(2) Limitation to refund and credit for a

nonparticipating FFI.(3) Requirement to provide additional

documentation for certain beneficial own-ers.

(i) In general.(ii) Claim of reduced withholding under

an income tax treaty.(iii) Additional documentation to be

furnished to the IRS for certain NFFEs.(b) Tax repaid to payee.(c) Effective/applicability date.

§1.1474–6 Coordination of chapter 4 withother withholding provisions.

(a) In general.(b) Coordination of withholding for

amounts subject to withholding under sec-tions 1441, 1442, and 1443.

(1) In general.(2) When withholding is applied.(3) Special rule for certain substitute

dividend payments.(c) Coordination with amounts subject

to withholding under section 1445.(1) In general.(2) Determining amount of distribution

from certain domestic corporations subjectto section 1445 or chapter 4 withholding.

(i) Distribution from qualified invest-ment entity.

(ii) Distribution from a United Statesreal property holding corporation.

(d) Coordination with section 1446.(1) In general.(2) Determining the amount of distribu-

tion subject to section 1446.

(e) Example.(f) Effective/applicability date.

§1.1474–7 Confidentiality of information.

(a) Confidentiality of information.(b) Exception for disclosure of partici-

pating FFIs.(c) Effective/applicability date.

§301.1474–1 Required use of magneticmedia for financial institutions filing Form1042–S or Form 8966.

(a) Financial institutions filing certaininformation returns.

(b) Waiver.(c) Failure to file.(d) Meaning of terms.(1) Magnetic media.(2) Financial institution.(e) Effective/applicability date.Par. 5. Section 1.1471–1 is added to

read as follows:

§1.1471–1 Scope of chapter 4 anddefinitions.

(a) Scope of chapter 4 of the InternalRevenue Code. Sections 1.1471–1 through1.1474–7 provide rules for withholdingwhen a withholding agent makes a pay-ment to an FFI or NFFE and prescribe therequirements for and definitions relevantto FFIs and NFFEs to which withholdingwill not apply. Section 1.1471–1 pro-vides definitions for terms used in chapter4 of the Internal Revenue Code (Code)and the regulations thereunder. Section1.1471–2 provides rules for withhold-ing under section 1471(a) on paymentsto FFIs, including the exception fromwithholding for payments made with re-spect to certain grandfathered obligations.Section 1.1471–3 provides rules for de-termining the payee of a payment andthe documentation requirements to estab-lish a payee’s chapter 4 status. Section1.1471–4 describes the requirements of anFFI agreement under section 1471(b) andthe application of sections 1471(b) and (c)to an expanded affiliated group of FFIs.Section 1.1471–5 defines terms relevantto section 1471 and the FFI agreementand defines categories of FFIs that willbe deemed to have met the requirementsof section 1471(b) pursuant to section1471(b)(2). Section 1.1471–6 definesclasses of beneficial owners of payments

2013–15 I.R.B. 803 April 8, 2013

that are exempt from withholding underchapter 4. Section 1.1472–1 provides rulesfor withholding when a withholding agentmakes a payment to an NFFE, and definescategories of NFFEs that are not subjectto withholding. Section 1.1473–1 pro-vides definitions of the statutory terms insection 1473. Section 1.1474–1 providesrules relating to a withholding agent’s li-ability for withheld tax, filing of incometax and information returns, and deposit-ing of tax withheld. Section 1.1474–2provides rules relating to adjustments foroverwithholding and underwithholding oftax. Section 1.1474–3 provides the cir-cumstances in which a credit is allowedto a beneficial owner for a withheld tax.Section 1.1474–4 provides that a chapter4 withholding obligation need only becollected once. Section 1.1474–5 containsrules relating to credits and refunds oftax withheld. Section 1.1474–6 providesrules coordinating withholding under sec-tions 1471 and 1472 with withholdingprovisions under other sections of theCode. Section 1.1474–7 provides the con-fidentiality requirement for informationobtained to comply with the requirementsof chapter 4. Any reference in the pro-visions of sections 1471 through 1474 toan amount that is stated in U.S. dollarsincludes the foreign currency equivalentof that amount. Except as otherwise pro-vided, the provisions of sections 1471through 1474 and the regulations thereun-der apply only for purposes of chapter 4.See §301.1474–1 of this chapter for therequirements for reporting on magneticmedia that apply to financial institutionsmaking payments or otherwise reportingaccounts pursuant to chapter 4.

(b) Definitions. Except as otherwiseprovided in this paragraph (b) or under theterms of an applicable Model 2 IGA, thefollowing definitions apply for purposes ofsections 1471 through 1474 and the regu-lations under those sections.

(1) Account. The term accountmeans a financial account as defined in§1.1471–5(b).

(2) Account holder. The term ac-count holder means the person whoholds an account, as determined under§1.1471–5(a)(3).

(3) Active NFFE. The term activeNFFE has the meaning set forth in§1.1472–1(c)(1)(iv).

(4) AML due diligence. The term AMLdue diligence means the customer due dili-gence procedures of a financial institutionpursuant to the anti-money laundering orsimilar requirements to which the financialinstitution, or branch thereof, is subject.This includes identifying the customer (in-cluding the owners of the customer), un-derstanding the nature and purpose of theaccount, and ongoing monitoring.

(5) Annuity contract. The term annu-ity contract means a contract under whichthe issuer agrees to make payments for aperiod of time determined in whole or inpart by reference to the life expectancy ofone or more individuals. The term also in-cludes a contract that is considered to bean annuity contract in accordance with thelaw, regulation, or practice of the jurisdic-tion in which the contract was issued, andunder which the issuer agrees to make pay-ments for a term of years. For purposesof the preceding sentence, it is immaterialwhether a contract satisfies any of the sub-stantive U.S. tax rules (for example, sec-tions 72(s), 72(u), 817(h), and the investorcontrol prohibition) applicable to the taxa-tion of a contract holder or issuer.

(6) Assumes primary withholding re-sponsibility. The term assumes primarywithholding responsibility means that aQI, territory financial institution, or U.S.branch of a participating FFI or registereddeemed-compliant FFI that assumes re-sponsibility for withholding on a paymentfor purposes of chapters 3 and 4 as if itwere a U.S. person. A QI may only as-sume primary withholding responsibilityif it does not make an election to be with-held upon with respect to the payment.

(7) Beneficial owner. Except as pro-vided in §1.1472–1(d), §1.1471–6(d)(4),and §1.1471–6(f), the term beneficialowner has the meaning set forth in§1.1441–1(c)(6).

(8) Blocked account. The term blockedaccount has the meaning set forth in§1.1471–4(e)(2)(iii)(B).

(9) Broker. The term broker means anyperson, U.S. or foreign, that, in the ordi-nary course of a trade or business duringthe calendar year, stands ready to effectsales to be made by others. Examples of abroker include an obligor that regularly is-sues and retires its own debt obligations, acorporation that regularly redeems its ownstock, and a clearing organization that ef-fects sales of securities for its members. A

broker does not include an international or-ganization described in §1.1471–6(c) thatredeems or retires an obligation of whichit is the issuer, a stock transfer agent thatrecords transfers of stock for a corporationif the nature of the activities of the agentis such that the agent ordinarily would notknow the gross proceeds from sales, an es-crow agent that effects no sales other thantransactions incidental to the purpose ofthe escrow (such as sales to collect on col-lateral), or a corporation that issues and re-tires long-term debt on an irregular basis.

(10) Cash value. The term cashvalue has the meaning set forth in§1.1471–5(b)(3)(vii)(B).

(11) Cash value insurance con-tract. The term cash value insurancecontract has the meaning set forth in§1.1471–5(b)(3)(vii).

(12) Certified deemed-compliantFFI. The term certified deemed-com-pliant FFI means an FFI described in§1.1471–5(f)(2).

(13) Change in circumstances.The term change in circumstanceshas the meaning set forth in§1.1471–3(c)(6)(ii)(E) for withholdingagents and, in the case of a participat-ing FFI, has the meaning set forth in§1.1471–4(c)(2)(iii).

(14) Chapter 3. For purposes of chapter4, the term chapter 3 means sections 1441through 1464 and the regulations thereun-der, but does not include sections 1445 and1446 and the regulations thereunder, un-less the context indicates otherwise.

(15) Chapter 4. The term chapter 4means sections 1471 through 1474 and theregulations thereunder.

(16) Chapter 4 reportable amount. Theterm chapter 4 reportable amount has themeaning set forth in §1.1474–1(d)(2)(i).

(17) Chapter 4 status. The term chapter4 status means a person’s status as a U.S.person, a specified U.S. person, an individ-ual that is a foreign person, a participatingFFI, a deemed-compliant FFI, a restricteddistributor, an exempt beneficial owner, anonparticipating FFI, a territory financialinstitution, an excepted NFFE, or a passiveNFFE.

(18) Clearing organization. The termclearing organization means an entity thatis in the business of holding securities forits member organizations or clearing tradesof securities and transferring, or instruct-ing the transfer of, securities by credit or

April 8, 2013 804 2013–15 I.R.B.

debit to the account of a member withoutthe necessity of physical delivery of the se-curities.

(19) Complex trust. A complex trust isa trust that is not a simple trust or a grantortrust.

(20) Consolidated obligations. Theterm consolidated obligations means mul-tiple obligations that a withholding agent(including a withholding agent that is anFFI) has chosen to treat as a single obli-gation in order to treat the obligationsas preexisting obligations pursuant toparagraph (b)(98)(ii) of this section or inorder to share documentation between theobligations pursuant to §1.1471–3(c)(8).A withholding agent that has opted totreat multiple obligations as consolidatedobligations pursuant to the previous sen-tence must also treat the obligations asa single obligation for purposes of sat-isfying the standards of knowledge re-quirements set forth in §§1.1471–3(e)and 1.1471–4(c)(2)(ii), and for purposesof determining the balance or value ofany of the obligations when applying anyof the account thresholds applicable todue diligence or reporting as set forthin §§1.1471–3(c)(6)(ii), 1.1471–3(d),1.1471–4(c), 1.1471–5(a)(4), and1.1471–5(b)(3)(vii). For example, withrespect to consolidated obligations, if awithholding agent has reason to know thatthe chapter 4 status assigned to the accountholder or payee of one of the consolidatedobligations is inaccurate, then it has reasonto know that the chapter 4 status assignedfor all other consolidated obligations ofthe account holder or payee is inaccurate.Similarly, to the extent that an accountbalance or value is relevant for purposesof applying any account threshold to oneor more of the consolidated obligations,the withholding agent must aggregate thebalance or value of all such consolidatedobligations.

(21) Custodial account. The term cus-todial account has the meaning set forth in§1.1471–5(b)(3)(ii).

(22) Custodial institution. The termcustodial institution has the meaning setforth in §1.1471–5(e)(1)(ii).

(23) Customer master file. A customermaster file includes the primary files ofa participating FFI or deemed-compliantFFI for maintaining account holder infor-mation, such as information used for con-

tacting account holders and for satisfyingAML due diligence.

(24) Deemed-compliant FFI. The termdeemed-compliant FFI means an FFI thatis treated, pursuant to section 1471(b)(2)and §1.1471–5(f), as meeting the re-quirements of section 1471(b). The termdeemed-compliant FFI also includes a QIbranch of a U.S. financial institution thatis a reporting Model 1 FFI.

(25) Deferred annuity contract. Theterm deferred annuity contract means anannuity contract other than an immediateannuity contract.

(26) Depository account. The term de-pository account has the meaning set forthin §1.1471–5(b)(3)(i).

(27) Depository institution. The termdepository institution has the meaning setforth in §1.1471–5(e)(1)(i).

(28) Documentary evidence. The termdocumentary evidence means documents,other than a withholding certificate or writ-ten statement, that a withholding agent ispermitted to rely upon to determine thechapter 4 status of a person in accordancewith §1.1471–3(c)(5).

(29) Documentation. The term docu-mentation means withholding certificates,written statements, documentary evidence,and other documents that may be relevantin determining a person’s chapter 4 sta-tus, including any document containing adetermination of the account holder’s cit-izenship or residency for tax or AML duediligence purposes or an account holder’sclaim of citizenship or residency for tax orAML due diligence purposes.

(30) Dormant account. The term dor-mant account has the meaning set forth in§1.1471–4(d)(6)(ii).

(31) Effective date of the FFI agree-ment. The term effective date of the FFIagreement means the date on which theIRS issues a GIIN to the participating FFI.For participating FFIs that receive a GIINprior to December 31, 2013, the effectivedate of the FFI agreement is December 31,2013.

(32) EIN. The term EIN means an em-ployer identification number (also knownas a federal tax identification number)described in §301.6109–1(a)(1)(i) of thischapter.

(33) Election to be withheld upon. Theterm election to be withheld upon has themeaning set forth in §1.1471–2(a)(2)(iii).

(34) Electronically searchable informa-tion. The term electronically searchableinformation means information that anFFI maintains in its tax reporting files,customer master files, or similar files,and that is stored in the form of an elec-tronic database against which standardqueries in programming languages, suchas Structured Query Language, may beused. Information, data, or files are notelectronically searchable merely becausethey are stored in an image retrieval sys-tem (such as portable document format(.pdf) or scanned documents).

(35) Entity. The term entity means anyperson other than an individual.

(36) Entity account. The term entityaccount means an account held by one ormore entities.

(37) Excepted NFFE. The term ex-cepted NFFE means an NFFE that isdescribed in §1.1472–1(c)(1).

(38) Exempt beneficial owner. Theterm exempt beneficial owner means anyperson described in §1.1471–6(b) through(g) or that is otherwise treated as an ex-empt beneficial owner pursuant to a Model1 IGA or Model 2 IGA.

(39) Expanded affiliated group. Theterm expanded affiliated group has themeaning set forth in §1.1471–5(i)(2).

(40) FATF. The term FATF meansthe Financial Action Task Force, an in-ter-governmental body that develops andpromotes international policies to combatmoney laundering and terrorist financing.

(41) FATF-compliant jurisdiction. Theterm FATF-compliant jurisdiction means ajurisdiction that —

(i) Is not subject to a FATF call on itsmembers and other jurisdictions to applycounter-measures to protect the interna-tional financial system from the on-goingand substantial money laundering and ter-rorist financing risks emanating from thejurisdiction;

(ii) Is not a jurisdiction with strategicAML/CFT (anti-money laundering andcombating the financing of terrorism)deficiencies that has not made sufficientprogress in addressing the deficienciesor has not committed to an action plandeveloped with the FATF to address thedeficiencies; and

(iii) Is not a jurisdiction with strate-gic AML/CFT deficiencies that the FATFhas identified as not making sufficient

2013–15 I.R.B. 805 April 8, 2013

progress on its action plan agreed uponwith the FATF.

(42) FFI. The term FFI or foreign finan-cial institution has the meaning set forth in§1.1471–5(d).

(43) FFI agreement. The term FFIagreement means an agreement that is de-scribed in §1.1471–4(a). An FFI agree-ment includes a QI agreement, a withhold-ing partnership agreement, and a withhold-ing trust agreement that is entered into byan FFI (other than an FFI that is a regis-tered deemed-compliant FFI, including areporting Model 1 FFI) and that has an ef-fective date or renewal date on or after De-cember 31, 2013. The term FFI agreementalso includes a QI agreement that is en-tered into by a foreign branch of a U.S. fi-nancial institution (other than a branch thatis a reporting Model 1 FFI) and that has aneffective date or renewal date on or afterDecember 31, 2013.

(44) Financial account. The term finan-cial account has the meaning set forth in§1.1471–5(b).

(45) Financial institution. The termfinancial institution has the meaning setforth in §1.1471–5(e).

(46) Flow-through entity. The termflow-through entity means a partnership,simple trust, or grantor trust, as determinedunder U.S. tax principles.

(47) Flow-through withholding certifi-cate. The term flow-through withholdingcertificate means a Form W–8IMY sub-mitted by a foreign partnership, foreignsimple trust, or foreign grantor trust.

(48) Foreign entity. The term for-eign entity has the meaning set forth in§1.1473–1(e).

(49) Foreign passthru payment. Theterm foreign passthru payment has themeaning set forth in §1.1471–5(h)(2).

(50) Foreign payee. The term foreignpayee means any payee other than a U.S.payee.

(51) Foreign person. The term foreignperson means any person other than a U.S.person and includes a QI branch of a U.S.financial institution.

(52) GIIN. The term GIIN or Global In-termediary Identification Number meansthe identification number that is as-signed to a participating FFI or registereddeemed-compliant FFI. The term GIIN orGlobal Intermediary Identification Num-ber also includes the identification numberassigned to a reporting Model 1 FFI for

purposes of identifying such entity towithholding agents. All GIINs will appearon the IRS FFI list.

(53) Grandfathered obligation. Theterm grandfathered obligation has themeaning set forth in §1.1471–2(b).

(54) Grantor trust. A grantor trust is atrust with respect to which one or more per-sons are treated as owners of all or a por-tion of the trust under sections 671 through679. If only a portion of the trust is treatedas owned by a person, that portion is agrantor trust with respect to that person.

(55) Gross proceeds. The term grossproceeds has the meaning set forth in§1.1473–1(a)(3).

(56) Group annuity contract. The termgroup annuity contract means an annuitycontract under which the obligees are indi-viduals who are affiliated through an em-ployer, trade association, labor union, orother association or group.

(57) Group insurance contract. Theterm group insurance contract means aninsurance contract that—

(i) Provides coverage on individualswho are affiliated through an employer,trade association, labor union, or otherassociation or group; and

(ii) Charges a premium for each mem-ber of the group (or member of a classwithin the group) that is determined with-out regard to the individual health charac-teristics other than age, gender, and smok-ing habits of the member (or class of mem-bers) of the group.

(58) Immediate annuity. The term im-mediate annuity means an annuity contractthat—

(i) Is purchased with a single premiumor annuity consideration; and

(ii) No later than one year from the pur-chase date of the contract commences topay annually or more frequently substan-tially equal periodic payments.

(59) Individual account. The term indi-vidual account means an account held byone or more individuals.

(60) Insurance company. The term in-surance company means an entity or ar-rangement —

(i) That is regulated as an insurancebusiness under the laws, regulations, orpractices of any jurisdiction in which thecompany does business;

(ii) The gross income of which (for ex-ample, gross premiums and gross invest-ment income) arising from insurance, rein-

surance, and annuity contracts for the im-mediately preceding calendar year exceeds50 percent of total gross income for suchyear; or

(iii) The aggregate value of the assetsof which associated with insurance, rein-surance, and annuity contracts at any timeduring the immediately preceding calendaryear exceeds 50 percent of total assets atany time during such year.

(61) Insurance contract. The term in-surance contract means a contract (otherthan an annuity contract) under which theissuer in exchange for consideration agreesto pay an amount upon the occurrence ofa specified contingency involving mortal-ity, morbidity, accident, liability, or prop-erty risk.

(62) Intermediary. The term inter-mediary has the meaning set forth in§1.1441–1(c)(13).

(63) Intermediary withholding certifi-cate. The term intermediary withholdingcertificate means a Form W–8IMY sub-mitted by an intermediary.

(64) Investment entity. The term invest-ment entity has the meaning set forth in§1.1471–5(e)(1)(iii).

(65) Investment-linked annuity con-tract. The term investment-linked annuitycontract means an annuity contract underwhich benefits or premiums are adjustedto reflect the investment return or marketvalue of assets associated with the con-tract.

(66) Investment-linked insurance con-tract. The term investment-linked insur-ance contract means an insurance contractunder which benefits, premiums, or the pe-riod of coverage are adjusted to reflect theinvestment return or market value of assetsassociated with the contract.

(67) IRS FFI list. The term IRS FFI listmeans the list published by the IRS thatcontains the names and GIINs for all par-ticipating FFIs, registered deemed-compli-ant FFIs, and reporting Model 1 FFIs.

(68) Life annuity contract. The term lifeannuity contract means an annuity contractthat provides for payments over the life orlives of one or more individuals.

(69) Life insurance contract. The termlife insurance contract means an insurancecontract under which the issuer, in ex-change for consideration, agrees to pay anamount upon the death of one or more in-dividuals. That a contract provides one ormore payments (for example, for endow-

April 8, 2013 806 2013–15 I.R.B.

ment benefits or disability benefits) in ad-dition to a death benefit will not cause thecontract to be other than a life insurancecontract. For purposes of the precedingsentence, it is immaterial whether a con-tract satisfies any of the substantive U.S.tax rules (for example, sections 101(f),817(h), 7702, or investor control prohibi-tion) applicable to the taxation of the con-tract holder or issuer.

(70) Limited branch. The term lim-ited branch has the meaning set forth in§1.1471–4(e)(2)(iii).

(71) Limited FFI. The term lim-ited FFI has the meaning set forth in§1.1471–4(e)(3)(ii).

(72) Model 1 IGA. The term Model 1IGA means an agreement or arrangementbetween the United States or the TreasuryDepartment and a foreign government orone or more agencies thereof to implementFATCA through reporting by financial in-stitutions to such foreign government oragency thereof, followed by automatic ex-change of the reported information withthe IRS. The IRS will publish a list iden-tifying all countries that are treated as hav-ing in effect a Model 1 IGA.

(73) Model 2 IGA. The term Model 2IGA means an agreement or arrangementbetween the United States or the TreasuryDepartment and a foreign government orone or more agencies thereof to facilitatethe implementation of FATCA through re-porting by financial institutions directly tothe IRS in accordance with the require-ments of an FFI agreement, supplementedby the exchange of information betweensuch foreign government or agency thereofand the IRS. The IRS will publish a listidentifying all countries that are treated ashaving in effect a Model 2 IGA.

(74) NFFE. The term NFFE or non-fi-nancial foreign entity means a foreign en-tity that is not a financial institution (in-cluding a territory NFFE). The term alsomeans a foreign entity treated as an NFFEpursuant to a Model 1 IGA or Model 2IGA.

(75) Nonparticipating FFI. The termnonparticipating FFI means an FFI otherthan a participating FFI, a deemed-compli-ant FFI, or an exempt beneficial owner.

(76) Nonreporting IGA FFI. The termnonreporting IGA FFI means an FFI that isidentified as a nonreporting financial insti-tution pursuant to a Model 1 IGA or Model

2 IGA that is not a registered deemed-com-pliant FFI.

(77) Non-U.S. account. The term non-U.S. account means an account that is nota U.S. account and that does not have anaccount holder that is a nonparticipatingFFI or recalcitrant account holder.

(78) NQI. The term NQI or nonqualifiedintermediary has the meaning set forth in§1.1441–1(c)(14).

(79) NWP. The term NWP or nonwith-holding foreign partnership means a for-eign partnership that is not a withholdingforeign partnership.

(80) NWT. The term NWT or nonwith-holding foreign trust means a foreign trustas defined in section 7701(a)(31)(B) that isa simple trust or grantor trust and is not awithholding foreign trust.

(81) Offshore account. The term off-shore account means an account that is anoffshore obligation, all payments to whichare made outside of the United States,within the meaning of §1.6049–5(e).

(82) Offshore obligation. The term off-shore obligation means any account, in-strument, or contract that is maintained andexecuted at an office or branch of the with-holding agent at any location outside ofthe United States or in any location in aU.S. territory. The term also includes anyequity interest in a foreign entity that ispurchased by the owner of such interestoutside of the United States either directlyfrom the entity or from another person thatis located outside of the United States.

(83) Owner. The term owner meansa person described in §1.1473–1(b)(1),without regard to whether such person is aU.S. person and without regard to whethersuch person owns a ten percent interest inthe entity. The term also includes a per-son that owns a discretionary interest in atrust and receives a distribution during thecalendar year.

(84) Owner-documented FFI. The termowner-documented FFI means an FFI de-scribed in §1.1471–5(f)(3).

(85) Participating FFI. The term partic-ipating FFI means an FFI that has agreedto comply with the requirements of an FFIagreement, including an FFI described ina Model 2 IGA that has agreed to complywith the requirements of an FFI agreement.The term participating FFI also includes aQI branch of a U.S. financial institution,unless such branch is a reporting Model 1FFI.

(86) Participating FFI group. Theterm participating FFI group means anexpanded affiliated group that includesone or more participating FFIs and meetsthe requirements of §1.1471–4(e)(1). Theterm participating FFI group also meansan expanded affiliated group in whichone or more members of the group is areporting Model 1 FFI and each memberof the group that is an FFI is a registereddeemed-compliant FFI, nonreporting IGAFFI, limited FFI, or retirement fund de-scribed in §1.1471–6(f).

(87) Partnership. The term part-nership has the meaning set forth in§301.7701–2(c)(1) of this chapter.

(88) Passive NFFE. The term passiveNFFE means an NFFE other than an ex-cepted NFFE.

(89) Passthru payment. The termpassthru payment has the meaning setforth in §1.1471–5(h).

(90) Payee. The term payee has themeaning set forth in §1.1471–3(a).

(91) Payment with respect to an offshoreobligation. The term payment with respectto an offshore obligation means a paymentmade outside of the United States, withinthe meaning of §1.6049–5(e), with respectto an offshore obligation.

(92) Payor. The term payor has themeaning set forth in §§31.3406(a)–2 ofthis chapter and 1.6049–(a)(2) and gener-ally includes a withholding agent.

(93) Permanent residence address. Theterm permanent residence address is theaddress in the country of which the personclaims to be a resident for purposes of thatcountry’s income tax. The address of a fi-nancial institution with which the personmaintains an account, a post office box,or an address used solely for mailing pur-poses is not a permanent residence addressunless such address is the only permanentaddress used by the person and appears asthe person’s registered address in the per-son’s organizational documents. Further,an address that is provided subject to in-structions to hold all mail to that address isnot a permanent residence address. If theperson is an individual who does not havea tax residence in any country, the perma-nent address is the place at which the per-son normally resides. If the person is anentity and does not have a tax residence inany country, then the permanent residenceaddress is the place at which the personmaintains its principal office.

2013–15 I.R.B. 807 April 8, 2013

(94) Person. The term person has themeaning set forth in section 7701(a)(1)and the regulations thereunder, and also in-cludes an entity or arrangement that is aninsurance company . The term person doesnot include a wholly owned entity that isdisregarded for federal tax purposes as anentity separate from its owner. Notwith-standing the previous sentence, the termperson includes, with respect to a with-holdable payment, a QI branch of a U.S.financial institution.

(95) Preexisting account. The term pre-existing account means a financial accountthat is a preexisting obligation.

(96) Preexisting entity account. Theterm preexisting entity account means apreexisting account held by one or moreentities.

(97) Preexisting individual account.The term preexisting individual accountmeans a preexisting account held by oneor more individuals.

(98) Preexisting obligation—(i) Theterm preexisting obligation means any ac-count, instrument, contract, debt, or equityinterest maintained, executed, or issued bythe withholding agent that is outstandingon December 31, 2013. With respect toa withholding agent that is a participat-ing FFI, the term preexisting obligationmeans any account, instrument, or con-tract (including any debt or equity interest)maintained, executed, or issued by theFFI that is outstanding on the effectivedate of the FFI agreement. With respectto a withholding agent that is a registereddeemed-compliant FFI, a preexisting obli-gation means any account, instrument,or contract (including any debt or equityinterest) that is maintained, executed, or is-sued by the FFI prior to the later of the datethat the FFI registers as a deemed-com-pliant FFI pursuant to §1.1471–5(f)(1)and receives a GIIN or the date the FFI isrequired to implement its account openingprocedures under §1.1471–5(f).

(ii) The term preexisting obligation alsoincludes any obligation (referring to an ac-count, instrument, contract, debt, or equityinterest) of an account holder or payee, re-gardless of the date such obligation wasentered into, if—

(A) The account holder or payee alsoholds with the withholding agent (or amember of the withholding agent’s ex-panded affiliated group or sponsored FFIgroup) an account, instrument, contract,

or equity interest that is a preexisting obli-gation under paragraph (b)(98)(i) of thissection;

(B) The withholding agent (and, as ap-plicable, the member of the withholdingagent’s expanded affiliated group or spon-sored FFI group) treats both of the afore-mentioned obligations, and any other obli-gations of the payee or account holder thatare treated as preexisting obligations underthis paragraph (b)(98)(ii), as consolidatedobligations; and

(C) With respect to an obligation that issubject to AML due diligence, the with-holding agent is permitted to satisfy suchAML due diligence for the obligation byrelying upon the AML due diligence per-formed for the preexisting obligation de-scribed in paragraph (b)(96)(i) of this sec-tion.

(99) Pre-FATCA Form W–8. The termpre-FATCA Form W–8 means a version ofa Form W–8 (or a substitute form) that wasissued prior to 2013 and that does not con-tain chapter 4 statuses but otherwise meetsthe requirements of §1.1441–1(e)(1)(ii)applicable to such certificate and has notexpired.

(100) Prima facie FFI. The term primafacie FFI means an entity described in§1.1471–2(a)(4)(ii)(B).

(101) QI. The term QI or qualified in-termediary has the meaning set forth in§1.1441–1(e)(5)(ii).

(102) QI agreement. The term QIagreement means the agreement describedin §1.1441–1(e)(5)(iii).

(103) QI branch of a U.S. financial in-stitution. The term QI branch of a U.S. fi-nancial institution means a foreign branchof a U.S. financial institution for which aQI agreement is in effect.

(104) Recalcitrant account holder. Theterm recalcitrant account holder has themeaning set forth in §1.1471–5(g).

(105) Registered deemed-compliantFFI. The term registered deemed-com-pliant FFI means an FFI described in§1.1471–5(f)(1). The term registereddeemed-compliant FFI also includes a QIbranch of a U.S. financial institution thatis a reporting Model 1 FFI.

(106) Relationship manager. A rela-tionship manager is an officer or otheremployee of an FFI who is assigned re-sponsibility for specific account holders onan on-going basis (including as an offi-cer or employee that is a member of an

FFI’s private banking department), advisesaccount holders regarding their banking,investment, trust, fiduciary, estate plan-ning, or philanthropic needs, and recom-mends, makes referrals to, or arranges forthe provision of financial products, ser-vices, or other assistance by internal orexternal providers to meet those needs.Notwithstanding the previous sentence, aperson is only a relationship manager withrespect to an account that has a balance orvalue of more than $1,000,000, taking intoaccount the aggregation rules described in§1.1471–5(b)(4)(iii)(A) and (B).

(107) Reporting Model 1 FFI. The termreporting Model 1 FFI means an FFI withrespect to which a foreign government oragency thereof agrees to obtain and ex-change information pursuant to a Model 1IGA, other than an FFI that is treated asa nonparticipating FFI under the Model 1IGA.

(108) Responsible officer. The termresponsible officer means, with respectto a participating FFI, an officer of anyparticipating FFI or reporting Model 1FFI in the participating FFI’s expandedaffiliated group with sufficient authorityto fulfill the duties of a responsible officerdescribed in §1.1471–4, which include therequirement to periodically certify to theIRS regarding the FFI’s compliance withits FFI agreement. The term responsibleofficer means, in the case of a registereddeemed-compliant FFI, an officer of anydeemed-compliant FFI or participatingFFI in the deemed-compliant FFI’s ex-panded affiliated group with sufficientauthority to ensure that the FFI meets theapplicable requirements of §1.1471–5(f).If a participating FFI elects to be part ofa consolidated compliance program, theterm responsible officer means an offi-cer of the compliance FI (as describedin §1.1471–4(f)) with sufficient authorityto fulfill the duties of a responsible offi-cer described in §1.1471–4(f)(2) and (3)on behalf of each FFI in the compliancegroup.

(109) Restricted distributor. The termrestricted distributor means an entity de-scribed in §1.1471–5(f)(4).

(110) Simple trust. The term simpletrust means a trust that meets the require-ments of section 651(a)(1) and (2).

(111) Specified insurance company.The term specified insurance com-

April 8, 2013 808 2013–15 I.R.B.

pany has the meaning set forth in§1.1471–5(e)(1)(iv).

(112) Specified U.S. person. The termspecified U.S. person or specified UnitedStates person has the meaning set forth in§1.1473–1(c).

(113) Sponsored FFI. The term spon-sored FFI means any entity described in§1.1471–5(f)(1)(i)(F) (sponsored invest-ment entities and sponsored controlled for-eign corporations) or §1.1471–5(f)(2)(iii)(sponsored, closely held investment vehi-cles).

(114) Sponsored FFI group. The termsponsored FFI group means a group ofsponsored FFIs that share the same spon-soring entity.

(115) Sponsoring entity. The termsponsoring entity means an entity that reg-isters with the IRS and agrees to performthe due diligence, withholding, and report-ing obligations of one or more FFIs pur-suant to §1.1471–5(f)(1)(i)(F) or (2)(iii).

(116) Standardized industry code. Theterm standardized industry code means acode that is part of a coding system usedby the withholding agent or FFI to clas-sify account holders by business type forpurposes other than U.S. tax purposes andthat was implemented by the withholdingagent by the later of January 1, 2012, orsix months after the date the withholdingagent was formed or organized.

(117) Standing instructions to payamounts. The term standing instructionsto pay amounts means current payment in-structions provided by the account holder,or an agent of the account holder, that willrepeat without further instructions beingprovided by the account holder. There-fore, for example, a payment instruction tomake an isolated payment is not a standinginstruction to pay amounts, even if theinstructions are given one year in advance.However, an instruction to make paymentsindefinitely is a standing instruction topay amounts for the period during whichsuch instructions are in effect, even if suchinstructions are amended after a singlepayment.

(118) Subject to withholding. The termsubject to withholding, with respect to anamount, means an amount for which with-holding is required under chapter 4 or anamount for which chapter 4 withholdingwas otherwise applied.

(119) Substantial U.S. owner. Theterm substantial U.S. owner or substantial

United States owner has the meaning setforth in §1.1473–1(b).

(120) Territory entity. The term terri-tory entity means any entity that is incor-porated or organized under the laws of anyU.S. territory.

(121) Territory financial institution.The term territory financial institutionmeans a financial institution that is incor-porated or organized under the laws ofany U.S. territory, not including a territoryentity that is an investment entity but thatis not a depository institution, custodial in-stitution, or specified insurance company.

(122) Territory financial institutiontreated as a U.S. person. The term terri-tory financial institution treated as a U.S.person means a territory financial institu-tion that is treated as a U.S. person under§1.1471–3(a)(3)(iv).

(123) Territory NFFE. The term terri-tory NFFE means a territory entity that isnot a financial institution, including a ter-ritory entity that is an investment entity butis not a depository institution, custodial in-stitution, or specified insurance company.

(124) TIN. The term TIN means the taxidentifying number assigned to a personunder section 6109.

(125) U.S. account. The term U.S. ac-count or United States account has themeaning set forth in §1.1471–5(a).

(126) U.S. branch treated as a U.S. per-son. The term U.S. branch treated as aU.S. person means a U.S. branch of a par-ticipating FFI or registered deemed-com-pliant FFI that is treated as a U.S. personunder §1.1441–1(b)(2)(iv)(A).

(127) U.S. financial institution. Theterm U.S. financial institution means a fi-nancial institution that is a U.S. person, in-cluding a U.S. branch treated as a U.S. per-son.

(128) U.S. indicia. The term U.S.indicia has the meaning set forth in§1.1471–4(c)(5)(iv)(B) when appliedto an individual and as set forth in§1.1471–3(e)(4)(v)(A) when applied to anentity.

(129) U.S. owned foreign entity. Theterm U.S. owned foreign entity or UnitedStates owned foreign entity has the mean-ing set forth in §1.1471–5(c).

(130) U.S. payee. The term U.S. payeemeans any payee that is a U.S. person.

(131) U.S. payor. The term U.S. payormeans a U.S. payor or U.S. middleman asdefined in §1.6049–5(c)(5).

(132) U.S. person. The term U.S.person or United States person means aperson described in section 7701(a)(30),the United States government (includingan agency or instrumentality thereof), aState (including an agency or instrumen-tality thereof), or the District of Columbia(including an agency or instrumentalitythereof). For purposes of the precedingsentence, the determination of whetheran insurance company is a U.S. person ismade without regard to an election by acompany not licensed to do business inany State to be subject to U.S. income taxas if it were a domestic insurance com-pany. Thus, a foreign insurance companynot licensed to do business in any Statethat elects pursuant to section 953(d) tobe subject to U.S. income tax as if it werea U.S. insurance company is not a U.S.person.

(133) U.S. source FDAP income. Theterm U.S. source FDAP income has themeaning set forth in §1.1473–1(a)(2).

(134) U.S. territory. The term U.S.territory or possession of the UnitedStates means American Samoa, Guam, theNorthern Mariana Islands, Puerto Rico, orthe U.S. Virgin Islands.

(135) U.S. withholding agent. The termU.S. withholding agent means a withhold-ing agent that is either a U.S. person or aU.S. branch of a foreign person.

(136) Withholdable payment. The termwithholdable payment has the meaning setforth in §1.1473–1(a).

(137) Withholding. The term withhold-ing means the deduction and remittance oftax at the applicable rate from a payment.

(138) Withholding agent. The termwithholding agent has the meaning setforth in §1.1473–1(d).

(139) Withholding certificate. Theterm withholding certificate means a FormW–8, Form W–9, or any other certificatethat under the Code or regulations certifiesor establishes the chapter 4 status of apayee or beneficial owner.

(140) WP. The term WP or withholdingforeign partnership means a foreign part-nership that has executed the agreementdescribed in §1.1441–5(c)(2)(ii).

(141) Written statement. The term writ-ten statement has the meaning set forth in§1.1471–3(c)(4).

(142) WT. The term WT or with-holding foreign trust means a foreigngrantor trust or foreign simple trust that

2013–15 I.R.B. 809 April 8, 2013

has executed the agreement described in§1.1441–5(e)(5)(v).

(c) Effective/applicability date. Thissection applies January 28, 2013.

Par. 6. Section 1.1471–2 is added toread as follows:

§1.1471–2 Requirement to deduct andwithhold tax on withholdable paymentsto certain FFIs.

(a) Requirement to withhold on pay-ments to FFIs—(1) General rule of with-holding. Under section 1471(a), notwith-standing any exemption from withholdingunder any other provision of the Codeor regulations, a withholding agent mustwithhold 30 percent of any withholdablepayment made after December 31, 2013,to a payee that is an FFI unless either thewithholding agent can reliably associatethe payment with documentation uponwhich it is permitted to rely to treat thepayment as exempt from withholding un-der paragraph (a)(4) of this section, or thepayment is made under a grandfatheredobligation that is described in paragraph(b) of this section or constitutes grossproceeds from the disposition of such anobligation. A withholding agent that ismaking a payment must determine who thepayee is under §1.1471–3(a) with respectto that payment and the chapter 4 statusof such payee. See §1.1471–3 for require-ments for determining the chapter 4 statusof a payee, including additional documen-tation requirements where a payment ismade to an intermediary or flow-throughentity that is not the payee. Withholdingunder this section applies without regardto whether the payee receives a withhold-able payment as a beneficial owner or asan intermediary. See paragraph (a)(2)(iv)of this section for a description of thewithholding requirements imposed on ter-ritory financial institutions as withholdingagents under chapter 4. In the case ofa withholdable payment to an NFFE, awithholding agent is required to determinewhether withholding applies under section1472 and §1.1472–1. Except as otherwiseprovided in the regulations under chapter4, a withholding obligation arises on thedate a payment is made, as determinedunder §1.1473–1(a).

(2) Special withholding rules—(i) Re-quirement to withhold on payments ofU.S. source FDAP income to participating

FFIs that are NQIs, NWPs, or NWTs. Awithholding agent that, after December31, 2013, makes a payment of U.S. sourceFDAP income to a participating FFI orreporting Model 1 FFI that is an NQI re-ceiving the payment as an intermediary,NWP, or NWT must withhold 30 percentof the payment unless the withholdingis reduced under this paragraph (a)(2)(i).A withholding agent is not required towithhold on a payment, or portion of apayment, that it can reliably associate, inthe manner described in §1.1471–3(c)(2),with a valid intermediary or flow-throughwithholding certificate that meets the re-quirements of §1.1471–3(d)(4) and an FFIwithholding statement that meets the re-quirements of §1.1471–3(c)(3)(iii)(B)(1)and (2) and that allocates the payment orportion of the payment to payees for whichno withholding is required under chapter4. Further, a withholding agent is not re-quired to withhold on a payment that it canreliably associate with documentation in-dicating that the payee is a U.S. branch ofa participating FFI that is treated as a U.S.person under §1.1441–1(b)(2)(iv)(A).

(ii) Residual withholding responsibilityof intermediaries and flow-through enti-ties. An intermediary or flow-through en-tity that receives a withholdable paymentafter December 31, 2013, is required towithhold on such payment to the extentrequired under chapter 4. Notwithstand-ing the previous sentence, an intermedi-ary or flow-through entity is not requiredto withhold if another withholding agenthas withheld the full amount required. Fur-ther, an NQI, NWP, or NWT is not requiredto withhold with respect to a withholdablepayment under chapter 4 if it has provideda valid intermediary withholding certifi-cate or flow-through withholding certifi-cate and all of the information required by§1.1471–3(c)(3)(iii), and it does not know,and has no reason to know, that anotherwithholding agent failed to withhold thecorrect amount. A QI’s, WP’s, or WT’sobligation to withhold and report is de-termined in accordance with its QI with-holding agreement, WP agreement, or WTagreement.

(iii) Requirement to withhold if a par-ticipating FFI or registered deemed-com-pliant FFI makes an election to be with-held upon. A person that otherwise wouldbe a payee with respect to a payment but

that makes an election to be withheld upondoes not agree to accept primary withhold-ing responsibility for the payment underchapter 3 or 4. Accordingly, such personcannot be treated as the payee and the with-holding agent must determine whether itmust withhold based on the chapter 4 sta-tus of the payee on whose behalf the personis receiving the payment. The election tobe withheld upon is only available to theextent provided in paragraph (a)(2)(iii)(A)and (B) of this section. The election isnot available to an entity that is requiredto accept primary withholding responsibil-ity for the payment, such as a WP or WTreceiving a payment of U.S. source FDAPincome, or an entity that already must bewithheld upon because it may not acceptprimary withholding responsibility for thepayment and, as such, already must pass updocumentation with respect to the payee tothe withholding agent, such as a participat-ing FFI that is an NQI receiving a paymentof U.S. source FDAP income.

(A) Election to be withheld upon forU.S. source FDAP income. A withhold-ing agent is required to withhold with re-spect to a payment, or portion of a pay-ment, that is U.S. source FDAP incomesubject to withholding that is made af-ter December 31, 2013, to a QI that haselected in accordance with this paragraphto be withheld upon. In such case, thewithholding agent must withhold 30 per-cent of the portion of the payment that isallocable, pursuant to a withholding state-ment described in §1.1471–3(c)(3)(iii)(B)provided by the QI, to recalcitrant accountholders and nonparticipating FFIs. If nosuch allocation information is provided,the withholding agent must apply the pre-sumption rules of §1.1471–3(f) to deter-mine the chapter 4 status of the payee. AQI that is an FFI and that makes the elec-tion to be withheld upon with respect toa payment of U.S. source FDAP incomemay not assume primary withholding re-sponsibility under chapter 3 for that pay-ment. Conversely, a QI that is an FFIand that does not make the election to bewithheld upon with respect to a paymentof U.S. source FDAP income is requiredto assume primary withholding responsi-bility under chapter 3 for that payment.The election to be withheld upon is onlyavailable with respect to a payment of U.S.source FDAP income if—

April 8, 2013 810 2013–15 I.R.B.

(1) The withholding agent is a partici-pating FFI, reporting Model 1 FFI, QI, ora U.S. withholding agent;

(2) The person who receives the pay-ment is a participating FFI or registereddeemed-compliant FFI that acts as a QIwith respect to the payment and that is nota QI branch of a U.S. financial institution;

(3) The person who receives the pay-ment provides the withholding agent, ator before the time of the payment, with avalid intermediary withholding certificatewith respect to the payment that notifiesthe withholding agent that it has elected tobe withheld upon, certifies that it is not as-suming primary withholding responsibil-ity under chapter 3, and designates whethersuch election is made for all accounts heldwith the withholding agent or for the spe-cific accounts identified on the withhold-ing certificate; and

(4) The intermediary withhold-ing certificate is accompanied by awithholding statement described in§1.1471–3(c)(3)(iii)(B).

(B) Election to be withheld upon forgross proceeds. [Reserved].

(iv) Withholding obligation of a terri-tory financial institution. A territory fi-nancial institution is a withholding agentwith respect to a withholdable payment if itis a withholding agent under §1.1473–1(d)with respect to such payment. A territoryfinancial institution that is a flow-throughentity or that acts as an intermediary withrespect to a withholdable payment has anobligation to withhold if it agrees to betreated as a U.S. person with respect tothe payment for purposes of both chap-ter 4 and §1.1441–1(b)(2)(iv)(A). A ter-ritory financial institution that is a flow-through entity or that acts as an interme-diary with respect to a withholdable pay-ment is not required to withhold underparagraph (a)(1) of this section, however,if it has provided the withholding agentthat is a U.S. withholding agent, partici-pating FFI, reporting Model 1 FFI, or QIwith all of the documentation described in§1.1471–3(c)(3)(iii) (in which it has notagreed to be treated as a U.S. person withrespect to the payment), and it does notknow, or have reason to know, that anotherwithholding agent failed to withhold thecorrect amount or failed to report the pay-ment correctly under §1.1474–1(d).

(v) Withholding obligation of a foreignbranch of a U.S. financial institution. Gen-

erally, a foreign branch of a U.S. financialinstitution is a withholding agent and is notan FFI. However, a QI branch of a U.S.financial institution is both a withholdingagent and either a participating FFI or aregistered deemed-compliant FFI. Accord-ingly, a QI branch of a U.S. financial in-stitution must withhold in accordance withthis section in addition to meeting its obli-gations under either §1.1471–4(b) and itsFFI agreement or §1.1471–5(f). Similarly,a foreign branch of a U.S. financial insti-tution that is also a reporting Model 1 FFIis both a withholding agent and a regis-tered deemed-compliant FFI. Accordingly,a foreign branch of a U.S. financial insti-tution that is a reporting Model 1 FFI mustwithhold in accordance with this section.A foreign branch of a U.S. financial insti-tution that is not a QI is not permitted tomake an election to be withheld upon.

(vi) Payments of gross proceeds. [Re-served].

(3) Coordination of withholding undersections 1471(a) and (b). The followingentities are deemed to satisfy their with-holding obligations under section 1471(a)and this section: participating FFIs thatcomply with the withholding requirementsof §1.1471–4(b); exempt beneficial own-ers; section 501(c) entities described in§1.1471–5(e)(5)(v); and nonprofit organi-zations described in §1.1471–5(e)(5)(vi).See §1.1471–5(f) for when a deemed-com-pliant FFI is deemed to satisfy its with-holding obligations under section 1471(a)and this section.

(4) Payments for which no withholdingis required. A withholding agent that hasdetermined, in accordance with the doc-umentation requirements and other rulesprovided in §1.1471–3, that the payee ofa withholdable payment is a foreign en-tity must determine whether the paymentis exempt from withholding. Paragraphs(a)(4)(i) through (viii) of this section de-scribe the circumstances in which a with-holdable payment is not subject to with-holding under section 1471(a) and this sec-tion.

(i) Exception to withholding if the with-holding agent lacks control, custody, orknowledge—(A) In general. A withhold-ing agent that is not related to the payeeor beneficial owner has an obligation towithhold under section 1471 only to theextent that, at any time between the datethat the obligation to withhold would arise

(but for the provisions of this paragraph(a)(4)(i)) and the due date for filing the re-turn on Form 1042 (including extensions)for the year in which the payment occurs,it has control over or custody of moneyor property owned by the payee or ben-eficial owner from which to withhold anamount and has knowledge of the facts thatgive rise to the payment. The exemptionfrom the obligation to withhold under thisparagraph (a)(4)(i) does not apply, how-ever, to payments with respect to stock orother securities or if the lack of control orcustody of money or property from whichto withhold is part of a pre-arranged planknown to the withholding agent to avoidwithholding under section 1471 or 1472.A withholding agent does not lack con-trol over money or property for purposesof this paragraph (a)(4)(i) if the withhold-ing agent directs another party to makethe payment. Thus, for example, a prin-cipal does not cease to have control overa payment when it contracts with a pay-ing agent to make the payments to its ac-count holders in lieu of paying the ac-count holders directly. Further, a with-holding agent does not lack knowledge ofthe facts that give rise to a payment merelybecause the withholding agent does notknow the character or source of the pay-ment for U.S. tax purposes. See paragraph(a)(5) of this section for rules addressing awithholding agent’s obligations when thewithholding agent has knowledge of thefacts that give rise to the payment, but thecharacter or source of the payment is notknown. For purposes of this paragraph(a)(4)(i), a withholding agent is related tothe payee or beneficial owner if it is re-lated within the meaning of section 482.Any exemption from withholding pursuantto this paragraph (a)(4)(i) applies with-out a requirement that documentation befurnished to the withholding agent. Thespecial rules set forth in §1.1441–2(d)(2)through (4), regarding the obligation of awithholding agent with respect to cancella-tion of debt, the satisfaction of a tax liabil-ity following underwithholding by a with-holding agent, and amounts described in§1.860G–3(b)(1) (regarding certain part-nership allocations of REMIC net incomewith respect to a REMIC residual interest)also apply for purposes of chapter 4.

(B) Example. A, an individual, owns stock in DC,a domestic corporation, through a custodian, Bank 1,that is a participating FFI. A also has a money mar-

2013–15 I.R.B. 811 April 8, 2013

ket account at Bank 2, which is also a participatingFFI. DC pays a dividend of $1,000 that is deposited inA’s custodial account at Bank 1. A then directs Bank1 to transfer $1,000 to A’s money market account atBank 2. With respect to the payment of the dividendinto A’s custodial account with Bank 1, both DC andBank 1 are withholding agents making a withhold-able payment for which they have custody, control,and knowledge. See §1.1473–1(a)(2)(vii)(B) and (d).Therefore, both DC and Bank 1 have an obligation towithhold on the payment unless they can reliably as-sociate the payment with documentation sufficient totreat the respective payees as not subject to withhold-ing under chapter 4. With respect to the wire transferof $1,000 from A’s account at Bank 1 to A’s accountat Bank 2, neither Bank 1 nor Bank 2 is required towithhold with respect to the transfer because neitherbank has knowledge of the facts that gave rise to thepayment. Even though Bank 1 is a custodian withrespect to A’s interest in DC and has knowledge re-garding the $1,000 dividend paid to A, once Bank 1credits the $1,000 dividend to A’s account, the $1,000becomes A’s property. When A transfers the $1,000to its account at Bank 2, this constitutes a separatepayment about which Bank 1 has no knowledge re-garding the type of payment made. Further, Bank 2only has knowledge that it receives $1,000 to be cred-ited to A’s account but has no knowledge regardingthe type of payment made. Accordingly, Bank 1 andBank 2 have no withholding obligation with respectto the transfer from A’s custodial account at Bank 1to A’s money market account at Bank 2.

(ii) Exception to withholding for cer-tain payments made prior to January 1,2016 (transitional)—(A) In general. Forany withholdable payment made prior toJanuary 1, 2016, with respect to a preex-isting obligation for which a withholdingagent does not have documentation indi-cating the payee’s status as a nonpartici-pating FFI, the withholding agent is not re-quired to withhold under this section andsection 1471(a) unless the payee is a primafacie FFI.

(B) Prima facie FFIs. If the payee isa prima facie FFI, the withholding agentmust treat the payee as a nonparticipatingFFI beginning on July 1, 2014, until thedate the withholding agent obtains docu-mentation sufficient to establish a differentchapter 4 status of the payee. A prima fa-cie FFI means any payee if—

(1) The withholding agent has availableas part of its electronically searchable in-formation a designation for the payee as aQI or NQI; or

(2) For an account maintained in theUnited States, the payee is presumed tobe a foreign entity under §1.1471–3(f) oris documented as a foreign entity for pur-poses of chapter 3 or 61, and the with-holding agent has recorded as part of itselectronically searchable information one

of the following North American IndustryClassification System or Standard Indus-trial Classification codes indicating thatthe payee is a financial institution:

(i) Commercial Banking (NAICS522110).

(ii) Savings Institutions (NAICS522120).

(iii) Credit Unions (NAICS 522130).(iv) Other Depositary Credit Intermedi-

ation (NAICS 522190).(v) Investment Banking and Securities

Dealing (NAICS 523110).(vi) Securities Brokerage (NAICS

523120).(vii) Commodity Contracts Dealing

(NAICS 523130).(viii) Commodity Contracts Brokerage

(NAICS 523140).(ix) Miscellaneous Financial Invest-

ment Activities (NAICS 523999).(x) Open-End Investment Funds

(NAICS 525910).(xi) Commercial Banks, NEC (SIC

6029).(xii) Branches and Agencies of Foreign

Banks (branches) (SIC 6081).(xiii) Foreign Trade and International

Banking Institutions (SIC 6082).(xiv) Asset-Backed Securities (SIC

6189).(xv) Security & Commodity Brokers,

Dealers, Exchanges & Services (SIC6200).

(xvi) Security Brokers, Dealers & Flota-tion Companies (SIC 6211).

(xvii) Commodity Contracts Brokers &Dealers (SIC 6221).

(xviii) Unit Investment Trusts,Face-Amount Certificate Offices, andClosed-End Management Investment Of-fices (SIC 6726).

(iii) Payments to a participating FFI.Except to the extent provided in paragraph(a)(2)(i) of this section, a withholdingagent is not required to withhold undersection 1471(a) and this section on awithholdable payment made to a payeethat the withholding agent can treat asa participating FFI in accordance with§1.1471–3(d)(3). For this purpose, a lim-ited branch of a participating FFI is treatedas a nonparticipating FFI.

(iv) Payments to a deemed-compliantFFI. Except to the extent provided in para-graph (a)(2)(i) or (iii) of this section, awithholding agent is not required to with-hold under section 1471(a) and this sec-

tion on a withholdable payment made toa payee that the withholding agent cantreat as a deemed-compliant FFI in accor-dance with §1.1471–3(d)(4) through (7).For this purpose, a limited branch of adeemed-compliant FFI is treated as a non-participating FFI.

(v) Payments to an exempt beneficialowner. A withholding agent is not re-quired to withhold under section 1471(a)and this section on a withholdable paymentto the extent that the withholding agentcan reliably associate the payment withdocumentation to determine the portion ofthe payment that is allocable to an ex-empt beneficial owner in accordance with§1.1471–3(d)(8). For example, a with-holding agent is not required to withholdunder this section on a withholdable pay-ment made to a payee that is an exemptbeneficial owner with respect to the pay-ment, to a nonparticipating FFI to the ex-tent that the nonparticipating FFI receivesthe payment as an intermediary on be-half of one or more of its account hold-ers that are exempt beneficial owners, orto a flow-through entity to the extent thatthe flow-through entity receives the pay-ment with respect to one or more of itspartners, beneficiaries, or owners (as ap-plicable) that are exempt beneficial own-ers. See §1.1471–3(d)(8)(ii) for specialrules for a withholding agent to determinethe portion of a withholdable payment thatis beneficially owned by an exempt bene-ficial owner in the case of a payment madeto a nonparticipating FFI.

(vi) Payments to a territory finan-cial institution. A withholding agent isnot required to withhold under section1471(a) and this section on a withhold-able payment made to a payee that thewithholding agent can treat as a terri-tory financial institution that beneficiallyowns the payment in accordance with§1.1471–3(d)(10)(i). A withholding agentalso is not required to withhold underthis section on a withholdable paymentthat the withholding agent can treat, inaccordance with §1.1471–3(d)(10)(ii), asmade to a territory financial institutionthat is a flow-through entity or that actsas an intermediary with respect to thepayment and that has agreed to be treatedas a U.S. person for purposes of chapters3 and 4 with respect to the payment. Aterritory financial institution’s agreementto be treated as a U.S. person for pur-

April 8, 2013 812 2013–15 I.R.B.

poses of this section must be evidencedby a withholding certificate described in§1.1471–3(c)(3)(iii)(F) furnished by theterritory financial institution to the with-holding agent.

(vii) Payments to an account held witha clearing organization with FATCA-com-pliant membership. [Reserved].

(viii) Payments to certain exceptedaccounts. A withholding agent is not re-quired to withhold under section 1471(a)and this section on a withholdable pay-ment made to an account described in§1.1471–5(b)(2).

(5) Withholding requirements if sourceor character of payment is unknown—(i)General rule. If a withholding agent hasknowledge of the facts that give rise to apayment but is unable to determine at thetime of payment the character of the pay-ment sufficiently to determine whether itis a withholdable payment, such paymentmust be treated as a withholdable payment.If a withholding agent has knowledge ofthe facts that give rise to a payment but isunable to determine at the time of paymentthe source of the payment, such paymentmust be treated as U.S. source income. Forexample, if a withholding agent does notknow at the time of payment the amountof the payment that is a withholdable pay-ment, because that calculation depends onfacts that are not known at the time of pay-ment (for example, because the withhold-ing agent does not know whether serviceswere performed in the United States orwhether the payment constitutes income tothe recipient) the withholding agent mustwithhold an amount necessary to ensurethat the amount withheld is not less than 30percent of the amount that could be a with-holdable payment, subject to the limitationthat the withheld amount must not exceed30 percent of the amount paid. Notwith-standing this paragraph (a)(5), a withhold-ing agent may presume a payment to beeffectively connected with the conduct ofa trade or business in the United States,and thus, not a withholdable payment, if itcan do so under §1.1471–3(f)(6) (regard-ing payments to certain U.S. branches).

(ii) Optional escrow procedure. Withrespect to a payment described in para-graph (a)(5) of this section, the withhold-ing agent may elect to retain 30 percentof the payment to hold in escrow until theearlier of the date that the amount of thewithholdable payment can be determined

or one year from the date the amount isplaced in escrow, at which time either thewithholding becomes due under this sec-tion or, to the extent that it is determinedthat the payment is of a type for whichno withholding is required, the escrowedamount must be paid to the payee.

(b) Grandfathered obligations—(1)Grandfathered treatment of outstand-ing obligations. Notwithstanding§1.1473–1(a), a withholdable paymentdoes not include any payment made undera grandfathered obligation described inparagraph (b)(2)(i)(A) of this section, orany gross proceeds from the dispositionof such an obligation. Notwithstanding§1.1471–5(h), a foreign passthru paymentdoes not include any payment made un-der a grandfathered obligation describedin paragraph (b)(2)(i)(A) or (B) of thissection, or any gross proceeds from thedisposition of such an obligation. A pre-mium paid with regard to an insurancecontract or annuity contract that is a grand-fathered obligation is treated as a paymentmade under a grandfathered obligation.

(2) Definitions. The following defini-tions apply solely for purposes of this para-graph (b).

(i) Grandfathered obligation—(A) Theterm grandfathered obligation means—

(1) Any obligation outstanding on Jan-uary 1, 2014;

(2) Any obligation that gives rise toa withholdable payment solely becausethe obligation is treated as giving rise toa dividend equivalent pursuant to section871(m) and the regulations thereunder,provided that the obligation is executed onor before the date that is six months afterthe date on which obligations of its typeare first treated as giving rise to dividendequivalents; and

(3) Any agreement requiring a securedparty to make a payment with respect to,or to repay, collateral posted to secure agrandfathered obligation. If collateral (ora pool of collateral) secures both grandfa-thered obligations and obligations that arenot grandfathered, the collateral posted tosecure the grandfathered obligations mustbe determined by allocating (pro rata byvalue) the collateral (or each item compris-ing the pool of collateral) to all outstand-ing obligations secured by the collateral(or pool of collateral).

(B) Solely for purposes of a foreignpassthru payment, the term grandfathered

obligation also includes any obligationthat is executed on or before the date thatis six months after the date on which fi-nal regulations defining the term foreignpassthru payment are filed with the Fed-eral Register.

(ii) Obligation—(A) Except as other-wise provided in paragraph (b)(2)(ii)(B) ofthis section, the term obligation means anylegally binding agreement or instrument.An obligation for purposes of this para-graph (b)(2)(i) includes, for example—

(1) A debt instrument (for example, abond, guaranteed investment certificate, orterm deposit);

(2) An agreement to extend credit for afixed term (for example, a line of credit ora revolving credit facility), provided thatthe agreement as of its issue date fixes thematerial terms (including a stated maturitydate) under which the credit will be pro-vided;

(3) A derivatives transaction enteredinto between counterparties under anISDA Master Agreement that is evidencedby a confirmation;

(4) A life insurance contract underwhich the entire contract value is payableno later than upon the death of the individ-ual(s) insured under the contract; and

(5) An immediate annuity contractpayable for a period certain or for the lifeof the annuitant.

(B) An obligation for purposes of thisparagraph (b)(2)(ii) does not include anylegal agreement or instrument that—

(1) Is treated as equity for U.S. tax pur-poses;

(2) Lacks a stated expiration or term(for example, a savings deposit or demanddeposit, a deferred annuity contract, or alife insurance contract or annuity contractthat permits a substitution of a new indi-vidual as the insured or as the annuitant un-der the contract);

(3) Is a brokerage agreement, custo-dial agreement, investment linked insur-ance contract, investment linked annuitycontract, or similar agreement to hold fi-nancial assets for the account of others andto make and receive payments of incomeand other amounts with respect to such as-sets; or

(4) Is a master agreement that merelysets forth standard terms and conditionsthat are intended to apply to a series oftransactions between parties but that does

2013–15 I.R.B. 813 April 8, 2013

not set forth all of the specific terms nec-essary to conclude a particular transaction.

(iii) Date outstanding. Except as pro-vided in the following sentence, an obliga-tion that constitutes indebtedness for U.S.tax purposes is outstanding on the date pro-vided in paragraph (b)(2)(i) if it has anissue date before such date. In all othercases, including an agreement described inparagraph (b)(2)(ii)(A)(2) of this section,an obligation is outstanding on the dateprovided in paragraph (b)(2)(i) if a legallybinding agreement establishing the obliga-tion was executed between the parties tothe agreement before such date. Any ma-terial modification of an outstanding obli-gation will result in the obligation beingtreated as newly issued or executed as ofthe effective date of such modification.

(iv) Material modification. In the caseof an obligation that constitutes indebt-edness for U.S. tax purposes, a materialmodification is any significant modifica-tion of the debt instrument as defined in§1.1001–3(e). In all other cases, whethera modification of an obligation is materialis determined based on the facts and cir-cumstances.

(3) Application to flow-through enti-ties—(i) Partnerships. A payment madeunder a grandfathered obligation includesa payment made to a partnership with re-spect to such obligation and a paymentmade with respect to a partnership’s dispo-sition of such obligation. A payment madeunder a grandfathered obligation also in-cludes the income from such obligationthat is includible in the gross income of apartner with respect to a capital or profitsinterest in the partnership and the grossproceeds allocated to a partner from thedisposition of such obligation as deter-mined under §1.1473–1(a)(5)(vii).

(ii) Simple trusts. A payment made un-der a grandfathered obligation includes apayment made to a simple trust with re-spect to such obligation, including a pay-ment made with respect to a simple trust’sdisposition of such obligation. A pay-ment made under a grandfathered obliga-tion also includes income from such obli-gation that is includible in the income ofa beneficiary and further includes a bene-ficiary’s share of the gross proceeds froma disposition of such obligation as deter-mined under §1.1473–1(a)(5)(vii).

(iii) Grantor trusts. A payment madeunder a grandfathered obligation includes

a payment made to a grantor trust withrespect to such obligation, including apayment made with respect to the trust’sdisposition of such obligation. A paymentmade under a grandfathered obligationalso includes income from such obliga-tion that is includible in the gross incomeof a person that is treated as an ownerof the trust and the gross proceeds fromthe disposition of such obligation to theextent such owner is treated as owningthe portion of the trust that consists of theobligation.

(4) Determination by withholding agentof grandfathered treatment—(i) In gen-eral. A withholding agent other than theissuer of the obligation (or agent of theissuer) may, absent actual knowledge, relyon a written statement by the issuer of theobligation to determine if such obligationmeets the requirements for grandfatheredtreatment provided under this paragraph(b).

(ii) Determination of material mod-ification. For purposes of paragraph(b)(2)(iv) of this section (defining mate-rial modification), a withholding agent isrequired to treat a modification of an obli-gation as material only if the withholdingagent knows or has reason to know that amaterial modification has occurred withrespect to the obligation. A withholdingagent, other than the issuer of the obliga-tion (or agent of the issuer), has reason toknow that a material modification has oc-curred with respect to an obligation if thewithholding agent receives a disclosurefrom the issuer of the obligation statingthat there has been a material modificationto such obligation.

(iii) Record retention. A withholdingagent that relies on a document providedby the issuer of an obligation as describedin paragraph (b)(4)(i) or (ii) of this sectionmust retain such document in its recordsfor the applicable period of limitations onassessment and collection with respect toamounts paid under the obligation or fromdisposition of the obligation.

(c) Effective/applicability date. Thissection generally applies on January 28,2013. For other dates of applicability, see§§1.1471–2(a)(1); 1.1471–2(a)(2)(i), (ii),(iii)(A); 1.1471–2(a)(4)(ii).


§1.1471–3 Identification of payee.

(a) Payee defined—(1) In general. Ex-cept as otherwise provided in this para-graph (a), for purposes of chapter 4 a payeeis the person to whom a payment is made,regardless of whether such person is thebeneficial owner of the amount.

(2) Payee with respect to a financial ac-count. For purposes of payments made to afinancial account and except as otherwiseprovided in paragraph (a)(3) of this sec-tion, the payee is the holder of the financialaccount.

(3) Exceptions—(i) Certain foreignagents or intermediaries—(A) Exceptas otherwise provided in paragraphs(a)(3)(iv) and (vi) of this section (applica-ble to territory financial institutions andcertain U.S. branches), a foreign personthat is acting as an agent or intermediarywith respect to a payment in accordancewith paragraph (b)(1) of this section is notthe payee if such foreign person is—

(1) An NFFE, unless the NFFE is a QIthat has assumed primary withholding re-sponsibility; or

(2) In the case of a payment of U.S.source FDAP income, a participatingFFI, deemed-compliant FFI, or restricteddistributor, unless the participating FFI,deemed-compliant FFI, or restricted dis-tributor is a QI that has assumed primarywithholding responsibility.

(B) In the case of an agent or interme-diary described in paragraph (a)(3)(i)(A)of this section, the payee is the person orpersons for whom the agent or intermedi-ary collects the payment. Thus, for ex-ample, the payee of a payment of U.S.source FDAP income that the withholdingagent can reliably associate with a with-holding certificate from a QI that does notassume primary withholding responsibil-ity with respect to the payment under chap-ter 3, or a payment to a participating FFIthat is an NQI, is the person or persons forwhom the QI or NQI acts.

(ii) Foreign flow-through entity—(A) Aforeign entity that is a flow-through entityis a payee with respect to a payment onlyif the flow-through entity is—

(1) An FFI that is not a participating FFIor deemed-compliant FFI, or restricted dis-tributor receiving a payment of U.S. sourceFDAP income;

April 8, 2013 814 2013–15 I.R.B.

(2) An excepted NFFE that is not actingas an agent or intermediary with respect tothe payment;

(3) A WP or WT that is not acting as anagent or intermediary with respect to thepayment; or

(4) Receiving income that is (or isdeemed to be) effectively connected withthe conduct of a trade or business in theUnited States, or receiving a payment ofgross proceeds from the sale of propertythat can produce income that is effectivelyconnected with the conduct of a trade orbusiness in the United States and that isexcluded from the definition of a with-holdable payment under §1.1473–1(a)(4).

(B) A withholding agent that makes awithholdable payment to a flow-throughentity that is not described in paragraphs(a)(3)(ii)(A)(1) through (3) of this sectionwill be required to treat the partner, ben-eficiary, or owner (as applicable) as thepayee (looking through partners, benefi-ciaries, and owners that are themselvesflow-through entities that are not describedin paragraphs (a)(3)(ii)(A)(1) through (3)).

(iii) U.S. intermediary or agent of a for-eign person. A withholding agent thatmakes a withholdable payment to a U.S.person and has actual knowledge that theperson receiving the payment is acting asan intermediary or agent of a foreign per-son with respect to the payment must treatsuch foreign person, and not the intermedi-ary or agent, as the payee of such payment.Notwithstanding the previous sentence, awithholding agent that makes a withhold-able payment to a U.S. financial institutionthat is acting as an intermediary or agentwith respect to the payment on behalf ofone or more foreign persons may treat theU.S. financial institution as the payee if thewithholding agent does not have reason toknow that the U.S. financial institution willnot comply with its obligations to withholdunder sections 1471 and 1472.

(iv) Territory financial institution. Awithholding agent that makes a withhold-able payment to a territory financial insti-tution that is a flow-through entity or isacting as an intermediary or agent with re-spect to the payment may treat the territoryfinancial institution as the payee only if theterritory financial institution has agreed (asevidenced by a withholding certificate de-scribed in paragraphs (c)(3)(iii)(A) and (F)of this section) to be treated as a U.S. per-son with respect to the payment for pur-

poses of both chapters 3 and 4. In allother cases, the withholding agent musttreat as the payee the partner, beneficiary,or owner (as applicable) of the territory fi-nancial institution that is a flow-throughentity (looking through partners, benefi-ciaries, and owners that are themselvesflow-through entities that are not describedin paragraphs (a)(3)(ii)(A)(1) through (3))or the person on whose behalf the territoryfinancial institution is acting.

(v) Disregarded entity or branch. Ex-cept as otherwise provided in paragraph(a)(3)(v) through (vii) of this section, awithholding agent that makes a withhold-able payment to an entity that is disre-garded for U.S. federal tax purposes un-der §301.7701–2(c)(2)(i) of this chapter asan entity separate from its single ownermust treat the single owner as the payee.Notwithstanding the previous sentence, awithholding agent that makes a payment toa limited branch will be required to treatthe payment as being made to a nonpartic-ipating FFI.

(vi) U.S. branch of certain foreignbanks or foreign insurance companies. Awithholdable payment to a U.S. branchof either a participating FFI or regis-tered deemed-compliant FFI is a paymentto a U.S. person if the U.S. branch istreated as a U.S. person for purposes of§1.1441–1(b)(2)(iv). In such case the U.S.branch is treated as the payee. A U.S.branch, however, that is treated as a U.S.person under §1.1441–1(b)(2)(iv) is nottreated as a U.S. person for purposes ofthe withholding certificate it may provideto a withholding agent for purposes ofchapter 4. Accordingly, a U.S. branchof either a participating FFI or registereddeemed-compliant FFI must furnish awithholding certificate on a Form W–8to certify its chapter 4 status (and not aForm W–9). See also paragraph (f)(6)for the rules under which a withholdingagent can presume a payment constitutesincome that is effectively connected witha U.S. trade or business. A U.S. branchof either a participating FFI or registereddeemed-compliant FFI that is treated asa U.S. person for purposes of chapter 3may not make an election to be withheldupon, as described in section 1471(b)(3)and §1.1471–2(a)(2)(iii), for purposes ofchapter 4. See §1.1471–4(c)(2)(v) for therule requiring a U.S. branch to apply thedue diligence rules applicable to a U.S.

withholding agent in lieu of those other-wise applicable to a participating FFI. See§1.1471–4(d) for rules for when a U.S.branch of a participating FFI is required toreport as a U.S. person.

(vii) Foreign branch of a U.S. person.A payment to a foreign branch of a U.S.person is generally a payment to a U.S.payee. However, a payment to a foreignbranch of a U.S. financial institution willbe treated as a payment to an FFI if theforeign branch is a QI that is acting as anintermediary with respect to the payment.Therefore, a foreign branch that is a QI willprovide the withholding agent with an in-termediary withholding certificate and thewithholding agent will report the paymentas having been made to the foreign branchon a Form 1042–S.

(b) Determination of payee’s status.Except as otherwise provided in this sec-tion, a withholding agent must base itsdetermination of the chapter 4 status of apayee on documentation that the withhold-ing agent can reliably associate with suchpayment. If a withholding agent makes apayment to a person that is not the payee,the withholding agent will be requiredto determine the chapter 4 status of eachintermediary or flow-through entity in thepayment chain until the withholding agentis able to identify the payee. Paragraph (c)of this section provides rules for when awithholding agent can reliably associate apayment with appropriate documentation.Paragraph (d) of this section providesdocumentation requirements applicableto each class of payees, including excep-tions for payments made with respect tooffshore obligations or preexisting obli-gations. Paragraph (e) provides standardsfor determining when a withholding agentwill be considered to have reason to knowthat a claim of exemption from withhold-ing is unreliable or incorrect. Paragraph(f) of this section provides presumptionsthat apply for purposes of determining apayee’s chapter 4 status in the absence ofdocumentation or if the documentationprovided is unreliable or incorrect.

(1) Determining whether a payment isreceived by an intermediary. A withhold-ing agent must treat the person who re-ceives a payment as an intermediary if itcan reliably associate the payment with avalid intermediary withholding certificateon which the person who receives the pay-ment claims to be a QI or NQI. A U.S.

2013–15 I.R.B. 815 April 8, 2013

person’s foreign branch that is acting inits capacity as a QI is treated as a for-eign intermediary. A withholding agentthat makes a payment with respect to anoffshore obligation must also treat the per-son who receives the payment as an inter-mediary if the person has provided writ-ten notification, whether or not such noti-fication is signed, that it accepts the pay-ment on behalf of another person or per-sons. A withholding agent may rely onthe type of certificate furnished as determi-native of whether the person who receivesthe payment is an intermediary, unless thewithholding agent knows or has reason toknow that the certificate is incorrect. Forexample, a withholding agent that receivesa beneficial owner withholding certificatefrom an FFI may treat the FFI as the ben-eficial owner unless it has information inits records that would indicate otherwise orthe certificate contains information that isnot consistent with beneficial owner status(for example, sub-account numbers that donot correspond to accounts maintained bythe withholding agent for such person ornames of one or more persons other thanthe person submitting the withholding cer-tificate). If the FFI receives a paymentin part as a beneficial owner and in partas an intermediary, the withholding agentmay request that the FFI furnish two cer-tificates, that is, a beneficial owner certifi-cate for the amounts it receives as a ben-eficial owner, and an intermediary with-holding certificate for the amounts it re-ceives as an intermediary. A withholdingagent that cannot reliably associate a pay-ment with documentation sufficient to treatthe person who receives the payment asan intermediary or as other than an inter-mediary pursuant to this paragraph (b)(1)must follow the presumption rules set forthin paragraph (f)(5) of this section to de-termine whether it must treat the personwho receives the payment as an interme-diary. A determination that a payment ismade to an intermediary under this para-graph (b)(1) is not a determination that thepayment can be reliably associated withdocumentation. See paragraph (c)(2) ofthis section for rules on reliably associat-ing a payment with documentation if suchpayment is made through an intermediary.

(2) Determination of entity type. A per-son’s entity classification for purposes ofchapter 4 is the person’s entity classifica-tion for U.S. federal income tax purposes.

Thus, for example, an entity that is disre-garded as a legal entity in its country oforganization or an arrangement that doesnot have a legal personality and is not ajuridical person in the country in which itwas organized will be treated as an entityfor purposes of chapter 4 if it is an entityfor U.S. federal income tax purposes. Awithholding agent may rely upon a per-son’s entity classification contained in avalid Form W–8 or W–9 if the withholdingagent has no reason to know that the entityclassification is incorrect. A withholdingagent that makes a payment with respect toan offshore obligation may also rely upona written notification provided by the per-son who receives the payment, regardlessof whether such notification is signed, thatindicates the person’s entity classification(other than as a QI, WP, or WT) unlessthe withholding agent has reason to knowthat the entity classification indicated bythe person who receives the payment is in-correct. A withholding agent may not relyon a person’s claim of classification otherthan as a corporation if the person’s nameindicates that the person is a per se corpo-ration described in §301.7701–2(b)(8) ofthis chapter unless the certificate or writ-ten statement contains a statement that theperson is a grandfathered per se corpora-tion described in §301.7701–2(b)(8) andthat its grandfathered status has not beenterminated.

(3) Determination of whether the pay-ment is made to a QI, WP, or WT. A with-holding agent may treat the person who re-ceives a payment as a QI, WP, or WT if thewithholding agent can reliably associatethe payment with a valid Form W–8IMY,as described in paragraph (c)(3)(iii) of thissection, that indicates that the person whoreceives the payment is a QI, WP, or WT,and the form contains the person’s GIIN,in the case of a QI or a WP or WT that isan FFI, or the person’s QI-EIN, WP-EIN,or WT-EIN in the case of a QI, WP, or WTthat is not an FFI.

(4) Determination of whether the payeeis receiving effectively connected income.A withholding agent may treat a paymentas being made to a payee that is receivingincome that is effectively connected witha trade or business in the United States,or gross proceeds from the sale of prop-erty that can produce income that is ef-fectively connected with the conduct of atrade or business in the United States, if

it can reliably associate the payment witha valid Form W–8ECI described in para-graph (c)(3)(v) of this section or if it cando so under the presumption rule in para-graph (f)(6) of this section.

(c) Rules for reliably associating apayment with a withholding certificateor other appropriate documentation—(1)In general. A withholding agent can re-liably associate a withholdable paymentwith valid documentation if, prior to thepayment, it has obtained (either directlyor through an agent) valid documenta-tion appropriate to the payee’s chapter4 status as described in paragraph (d) ofthis section, it can reliably determine howmuch of the payment relates to the validdocumentation, and it does not know orhave reason to know that any of the in-formation, certifications, or statementsin, or associated with, the documenta-tion are unreliable or incorrect. Thus, awithholding agent cannot reliably asso-ciate a withholdable payment with validdocumentation provided by a payee tothe extent such documentation appearsunreliable or incorrect with respect to theclaims made, or to the extent that infor-mation required to allocate all or a portionof the payment to each payee is unreliableor incorrect. A withholding agent mayrely on information and certifications con-tained in withholding certificates or otherdocumentation without having to inquireinto the truthfulness of the informationor certifications, unless it knows or hasreason to know that the information orcertifications are untrue. A withholdingagent may rely upon the same documen-tation for purposes of both chapters 3 and4 provided the documentation is sufficientto meet the requirements of each chapter.Alternatively, a withholding agent mayelect to rely upon the presumption rulesof paragraph (f) of this section in lieu ofobtaining documentation from the payee.

(2) Reliably associating a paymentwith documentation if a payment is madethrough an intermediary or flow-throughentity that is not the payee—(i) In gen-eral. A withholding agent that makes apayment to a foreign intermediary or for-eign flow-through entity that is not thepayee under paragraph (a) of this sectioncan reliably associate the payment withvalid documentation if, in addition to thedocumentation described in paragraph(d) of this section that is relevant to each

April 8, 2013 816 2013–15 I.R.B.

payee, the withholding agent also has ob-tained a valid Form W–8IMY, describedin paragraph (c)(3)(iii) of this section,from the intermediary or flow-throughentity (and, with respect to a paymentmade through a chain of intermediariesor flow-through entities, has received avalid Form W–8IMY from each inter-mediary or flow-through entity in thatchain). An intermediary or flow-throughentity that is a participating FFI or reg-istered deemed-compliant FFI receivinga payment of U.S. source FDAP incomemay, in lieu of providing the withholdingagent with documentation for each payee,provide pooled allocation information tothe extent and in the manner permitted byparagraph (c)(3)(iii)(B)(2) of this section.

(ii) Exception to entity account docu-mentation rules for an offshore account ofan intermediary or flow-through entity. Inthe case of an offshore account held by anintermediary or flow-through entity not re-ceiving a payment of U.S. source FDAPincome, an FFI may, in lieu of obtain-ing a withholding certificate, reliably asso-ciate such account with valid documenta-tion if the FFI has obtained a written state-ment certifying as to the account holder’schapter 4 status and stating that the ac-count holder is a flow-through entity or isacting as an intermediary with respect tothe payment. In such case, the interme-diary or flow-through entity will also berequired to provide the withholding state-ment that generally accompanies the FormW–8IMY, designating the payees and theappropriate amount that should be allo-cated to each payee, and valid documenta-tion for each payee. If no such withholdingstatement or underlying documentation isprovided, the payment will be treated asmade to a nonparticipating FFI.

(3) Requirements for validity of certifi-cates—(i) Form W–9. A valid Form W–9,or a substitute form, must meet the require-ments prescribed in §31.3406(h)–3 of thischapter, including the requirement that theform contain the payee’s name and TIN,and be signed and dated under penaltiesof perjury by the payee or a person au-thorized to sign for the payee pursuant tosections 6061 through 6063 and the regu-lations thereunder. A foreign person, in-cluding a U.S. branch of a foreign per-son that is treated as a U.S. person under§1.1441–1(b)(2)(iv), or a foreign branch of

a U.S. financial institution that is a QI, maynot provide a Form W–9.

(ii) Beneficial owner withholding cer-tificate (Form W–8BEN). A beneficialowner withholding certificate includes aForm W–8BEN (or a substitute form) andsuch other form as the IRS may prescribe.A beneficial owner withholding certificateis valid only if its validity period has notexpired, it is signed under penalties ofperjury by a person with authority to signfor the person whose name is on the form,and it contains—

(A) The person’s name, permanent res-idence address, and TIN (if required);

(B) A certification that the person is nota U.S. citizen (if the person is an individ-ual) or a certification of the country underthe laws of which the person is created, in-corporated, or governed (for a person otherthan an individual);

(C) The entity classification of the per-son;

(D) The chapter 4 status of the person;and

(E) Such other information required un-der paragraph (d) of this section applicableto the chapter 4 status selected or other-wise required by the regulations under sec-tion 1471 or 1472, or by the form or its ac-companying instructions in addition to, orin lieu of, the information described in thisparagraph (c)(3)(ii).

(iii) Withholding certificate of an in-termediary, flow-through entity, or U.S.branch (Form W–8IMY)—(A) In general.A withholding certificate of an intermedi-ary, flow-through entity, or U.S. branch isvalid for purposes of chapter 4 only if it isfurnished on a Form W–8IMY, an accept-able substitute form, or such other form asthe IRS may prescribe, it is signed underpenalties of perjury by a person with au-thority to sign for the person named on theform, its validity period has not expired,and it contains the following information,statements, and certifications—

(1) The name and permanent residenceaddress of the person.

(2) The country under the laws of whichthe person is created, incorporated, or gov-erned.

(3) The person’s entity classification forU.S. tax purposes.

(4) The person’s chapter 4 status.(5) A GIIN, in the case of a participating

FFI or a registered deemed-compliant FFI(including a U.S. branch of such an entity),

or an EIN in the case of a QI, WP, or WTthat is not an FFI.

(6) In the case of an intermediary cer-tificate, a certification that, with respect toaccounts listed on the withholding state-ment, the intermediary is not acting for itsown account.

(7) With respect to a withholding cer-tificate of a QI, a certification that it is act-ing as a QI with respect to the accountslisted on the withholding statement.

(8) In the case of a participating FFI orregistered deemed-compliant FFI (includ-ing a U.S. branch of either such entitiesthat is not treated as a U.S. person) that isan NQI, NWP, NWT, or a QI that makes anelection to be withheld upon, an FFI with-holding statement that meets the require-ments of paragraphs (c)(3)(iii)(B)(1) and(2) of this section.

(9) In the case of a territory financial in-stitution that does not agree to be treated asa U.S. person or a U.S. branch that is nota U.S. branch of a participating FFI, regis-tered deemed-compliant FFI, or nonpartic-ipating FFI, a chapter 4 withholding state-ment that meets the requirements of para-graphs (c)(3)(iii)(B)(1) and (3) of this sec-tion.

(10) In the case of an NFFE or cer-tified deemed-compliant FFI that is anNQI, NWP, or NWT and is not the payee,a chapter 4 withholding statement thatmeets the requirements of paragraphs(c)(3)(iii)(B)(1) and (3) of this section.

(11) In the case of a nonparticipatingFFI receiving a payment on behalf of oneor more exempt beneficial owners, an ex-empt beneficial owner withholding state-ment that meets the requirements of para-graphs (c)(3)(iii)(B)(1) and (4) of this sec-tion.

(12) Any other information, certifica-tions, or statements as may be required bythe form or its accompanying instructionsin addition to, or in lieu of, the informationand certifications described in this para-graph.

(B) Withholding statement—(1) In gen-eral. A withholding statement forms anintegral part of the withholding certificateand the penalties of perjury statement pro-vided on the withholding certificate ap-plies to the withholding statement as well.The withholding statement may be pro-vided in any manner, and in any form, towhich the person submitting the form andthe withholding agent mutually agree, in-

2013–15 I.R.B. 817 April 8, 2013

cluding electronically. If the withholdingstatement is provided electronically, theremust be sufficient safeguards to ensure thatthe information received by the withhold-ing agent is the information sent by theperson submitting the withholding certifi-cate and the electronic system must doc-ument all occasions of user access thatresult in the submission or modificationof withholding statement information. Inaddition, the electronic system must becapable of providing a hard copy of allwithholding statements provided electron-ically. The withholding statement mustbe updated as often as necessary for thewithholding agent to meet its reporting andwithholding obligations under chapter 4.A withholding agent will be liable for tax,interest, and penalties under §1.1474–1(a)to the extent it does not follow the pre-sumption rules of paragraph (f) of this sec-tion for any payment, or portion thereof,for which a withholding statement is re-quired and the withholding agent does nothave a valid withholding statement prior tomaking a payment. A withholding agentthat is making a payment for which a with-holding statement is also required for pur-poses of chapter 3, may only rely uponthe withholding statement if, in additionto providing the information required byparagraph (c)(3)(iii)(B) of this section, thewithholding statement also includes all ofthe information required for purposes ofchapter 3 and specifies the chapter 4 statusof each payee or pool of payees identifiedon the withholding statement for purposesof chapter 3.

(2) Special requirements for an FFIwithholding statement. An FFI withhold-ing statement must include either pooledinformation that indicates the portion ofthe payment attributable to U.S. persons,recalcitrant account holders, nonpartici-pating FFIs, and any other class of payeesthat is not subject to withholding underchapter 4; or, when payee specific infor-mation is provided for purposes of chapter3, an allocation of the payment to eachpayee with the payee’s chapter 4 status.Regardless of whether the FFI withhold-ing statement provides information on apooled basis or on a payee specific basis,the withholding statement must identifyeach intermediary or flow-through entitythat receives the payment on behalf ofa payee with such entity’s chapter 4 sta-tus and GIIN, when applicable. An FFI

withholding statement must also includeany other information that the withholdingagent reasonably requests in order to fulfillits obligations under chapter 4.

(3) Special requirements for a chap-ter 4 withholding statement. A chapter4 withholding statement must contain thename, address, TIN (if any), entity type,and chapter 4 status of each payee, theamount allocated to each payee, a validwithholding certificate or other appropri-ate documentation sufficient to establishthe chapter 4 status of each payee, and eachintermediary or flow-through that receivesthe payment on behalf of the payee, in ac-cordance with paragraph (d) of this sec-tion, and any other information the with-holding agent reasonably requests in or-der to fulfill its obligations under chapter4. Notwithstanding the prior sentence, achapter 4 withholding statement is permit-ted to provide pooled allocation informa-tion with respect to payees that are treatedas nonparticipating FFIs.

(4) Special requirements for an exemptbeneficial owner withholding statement.An exempt beneficial owner withholdingstatement must include the name, address,TIN (if any), entity type, and chapter 4status of each exempt beneficial owneron behalf of which the nonparticipatingFFI is receiving the payment, the amountof the payment allocable to each exemptbeneficial owner, a valid withholding cer-tificate or other documentation sufficientto establish the chapter 4 status of eachexempt beneficial owner in accordancewith paragraph (d) of this section, and anyother information the withholding agentreasonably requests in order to fulfill itsobligations under chapter 4. The withhold-ing statement must allocate the remainderof the payment that is not allocated to anexempt beneficial owner to the nonpartic-ipating FFI receiving the payment.

(C) Failure to provide allocation infor-mation. A withholding certificate that failsto provide allocation information or anyof the required documentation for one ormore of the payees will not be treated as in-valid with respect to the persons for whomvalid documentation and allocation infor-mation is properly provided. The portionof the payment that is not reliably asso-ciated with underlying documentation orthat is not properly allocated will be treatedin accordance with the presumption rulesset forth in paragraph (f) of this section.

For example, assume a withholding certifi-cate that is provided by a participating FFIthat is an NQI includes an FFI withholdingstatement that indicates that 50 percent ofthe payment is allocable to payees that areexempt for purposes of chapter 4 but doesnot allocate the remaining 50 percent ofthe payment for purposes of chapter 4. Insuch case, the withholding agent may treat50 percent of the payment as exempt fromchapter 4 and the remaining 50 percent thatwas not allocated will be treated, under thepresumption rules set forth in paragraph (f)of this section, as made to a pool of payeesthat are nonparticipating FFIs.

(D) Special rules applicable to a with-holding certificate of a QI that assumesprimary withholding responsibility underchapter 3. A QI that assumes primarywithholding responsibility under chapter3 for a payment may not make an elec-tion to be withheld upon, as described in§1.1471–2(a)(2)(iii), with respect to thatpayment. Thus, if a QI assumes primarywithholding responsibility under chap-ter 3 with respect to a payment of U.S.source FDAP income, in addition to theother requirements described in paragraph(c)(3)(iii)(A) of this section, a withholdingagent can reliably associate the paymentwith a valid withholding certificate onlywhen the QI has also indicated on the in-termediary withholding certificate that itwill assume primary withholding respon-sibility for that payment for purposes ofchapter 4.

(E) Special rules applicable to a with-holding certificate of a QI that does notassume primary withholding responsibilityunder chapter 3. A QI that does not as-sume primary withholding responsibilityunder chapter 3 with respect to a paymentof U.S. source FDAP income will be re-quired to make the election to be withheldupon with respect to that payment. Thus,if a QI does not assume primary withhold-ing responsibility under chapter 3, a with-holding agent can reliably associate a pay-ment of U.S. source FDAP income with avalid withholding certificate only when, inaddition to the other information requiredby paragraph (c)(3)(iii)(A) of this section,the withholding certificate indicates thatthe QI does not assume primary withhold-ing responsibility for that payment for pur-poses of chapter 4.

(F) Special rules applicable to a with-holding certificate of a territory financial

April 8, 2013 818 2013–15 I.R.B.

institution that agrees to be treated as aU.S. person. A withholding agent may re-liably associate a payment with an inter-mediary withholding certificate or flow-through withholding certificate of a ter-ritory financial institution that agrees tobe treated as a U.S. person if, in additionto the other information required by para-graph (c)(3)(iii)(A) of this section, the cer-tificate contains an EIN of the territory fi-nancial institution and a certification thatthe territory financial institution agrees tobe treated as a U.S. person and accepts pri-mary withholding responsibility with re-spect to the payment for purposes of bothchapters 3 and 4.

(G) Special rules applicable to a with-holding certificate of a territory financialinstitution that does not agree to be treatedas a U.S. person. A withholding agentmay reliably associate a payment with anintermediary withholding certificate or aflow-through withholding certificate of aterritory financial institution that does notagree to be treated as a U.S. person if,in addition to the information required byparagraph (c)(3)(iii)(A) of this section, thecertificate indicates that the institution hasnot agreed to be treated as a U.S. personfor purposes of chapter 4 and the institu-tion provides a withholding statement de-scribed in paragraphs (c)(3)(iii)(B)(1) and(3) of this section.

(H) Special rules applicable to a with-holding certificate of a U.S. branch treatedas a U.S. person. A withholding agent mayreliably associate a payment with a with-holding certificate of a U.S. branch that istreated as a U.S. person for purposes of§1.1441–1(b)(2)(iv) if, in addition to theother information required by paragraph(c)(2)(iii)(A) of this section; the certifi-cate contains the EIN of the U.S. branch;the GIIN of the U.S. branch; and a certi-fication that the U.S. branch is describedin paragraph §1.1441–1(b)(2)(iv) and, ac-cordingly, is required to accept primarywithholding responsibility with respect tothe payment for purposes of both chapters3 and 4.

(iv) Certificate for exempt status (FormW–8EXP). A Form W–8EXP is valid onlyif it contains the name, address, and chap-ter 4 status of the payee, the relevant certi-fications or documentation, and any otherrequirements indicated in the instructionsto the form, and is signed under penalties

of perjury by a person with authority tosign for the payee.

(v) Certificate for effectively connectedincome (Form W–8ECI). A Form W–8ECIis valid only if, in addition to meetingthe requirements in the instructions to theform, it contains the name, address, andTIN of the payee (other than a GIIN), rep-resents that the amounts for which the cer-tificate is furnished are effectively con-nected with the conduct of a trade or busi-ness in the United States and are includablein the payee’s gross income for the taxableyear (or are gross proceeds from the saleof property that can produce income that iseffectively connected with the conduct of atrade or business in the United States), andis signed under penalties of perjury by aperson with authority to sign for the payee.

(4) Requirements for written state-ments. A written statement is a statementby the payee, or other person receivingthe payment, that provides the person’schapter 4 status and any other informationreasonably requested by the withholdingagent to fulfill its obligations under chap-ter 4 with respect to the payment, such aswhether the person is receiving the pay-ment as a beneficial owner, intermediary,or flow-through entity. A written state-ment is valid only if it is provided by aperson with respect to an offshore obli-gation, contains the name of the person,the person’s address, the certifications rel-evant to the person’s chapter 4 status (ascontained on a withholding certificate),any additional information required withrespect to the chapter 4 status claimed asprovided under paragraph (d) of this sec-tion (for example, a GIIN), and a signedand dated certification that the informa-tion provided on the form is accurate andwill be updated by the individual within30 days of a change in circumstances thatcauses the form to become incorrect. Awritten statement may be submitted in anyform that is acceptable to the withholdingagent, including a statement made as partof the account opening documentation. Awritten statement may be used in lieu of awithholding certificate only to the extentprovided under §1.1471–3(d), as applica-ble to the chapter 4 status claimed.

(5) Requirements for documentary ev-idence. Documentary evidence with re-spect to a payee is only reliable if it con-tains sufficient information to support thepayee’s claim of chapter 4 status.

(i) Foreign status. Acceptable docu-mentary evidence supporting a claim offoreign status includes the following typesof documentation if the documentationcontains a permanent residence addressfor the person named on the documenta-tion (or indicates the country in which aperson that is an individual is a resident orcitizen or the country in which a personthat is an entity has a permanent residenceor is incorporated or organized, if thewithholding agent has otherwise obtaineda current permanent residence address forthe person)—

(A) Certificate of residence. A certifi-cate of residence issued by an appropri-ate tax official of the country in which thepayee claims to be a resident that indicatesthat the payee has filed its most recent in-come tax return as a resident of that coun-try;

(B) Individual government identifica-tion. With respect to an individual, anyvalid identification issued by an authorizedgovernment body (for example, a govern-ment or agency thereof, or a municipality),that is typically used for identification pur-poses;

(C) QI documentation. With respectto an account maintained in a jurisdic-tion with anti-money laundering rules thathave been approved by the IRS in connec-tion with a QI agreement (as referencedin §1.1441–1(e)(5)(iii)), any of the docu-ments other than a Form W–8 or W–9 ref-erenced in the jurisdiction’s attachment tothe QI agreement for identifying individu-als or entities;

(D) Entity government documentation.With respect to an entity, any official docu-mentation issued by an authorized govern-ment body (for example, a government oragency thereof, or a municipality); and

(E) Third-party credit report. For a pay-ment made with respect to an offshore obli-gation to an individual, a third-party creditreport that is obtained pursuant to the con-ditions described in §1.1471–4(c)(4)(ii).

(ii) Chapter 4 status. Acceptable doc-umentary evidence supporting an entity’sclaim of chapter 4 status includes—

(A) General documentary evidence.With respect to an entity other than a par-ticipating FFI or registered deemed-com-pliant FFI, any organizational document(such as articles of incorporation or atrust agreement), financial statement,third-party credit report, letter from a

2013–15 I.R.B. 819 April 8, 2013

government agency, or statement from agovernment website, agency, or registrar(such as an SEC report) to the extent per-mitted in paragraphs (d) and (e) of thissection;

(B) Preexisting account documentaryevidence. With respect to a preexistingobligation of an entity, any standardizedindustry code or any classification in thewithholding agent’s records with respectto the payee that was determined basedon documentation supplied by the payee(or other person receiving the payment)and that was recorded by the withholdingagent by the later of January 1, 2012, orsix months after the date the withholdingagent was formed or organized, to the ex-tent permitted by paragraph (d) of this sec-tion and provided there is no U.S. indiciaassociated with the payee for which appro-priate curing documentation has not beenobtained as set forth in paragraph (e) of thissection; and

(C) Payee-specific documentary evi-dence. A letter from an auditor or attorneywith a location in the United States thatis not related to the withholding agent orpayee and is subject to the authority of aregulatory body that governs the auditor’sor attorney’s review of the chapter 4 sta-tus of the payee, any bankruptcy filing,corporate resolution, copy of a stock mar-ket index or other document to the extentpermitted in the specific payee documen-tation requirements in paragraph (d) and(e) of this section.

(6) Applicable rules for withholdingcertificates, written statements, and docu-mentary evidence. The provisions in thisparagraph (c)(6) describe standards gener-ally applicable to withholding certificates(Forms W–8 or substitute forms), writtenstatements, and documentary evidencefurnished to establish the payee’s chapter4 status. These provisions do not apply toForms W–9 (or their substitutes). For cor-responding provisions regarding the FormW–9 (or a substitute Form W–9), see sec-tion 3406 and the regulations thereunder.

(i) Who may sign the withholding cer-tificate or written statement. A withhold-ing certificate (including an acceptablesubstitute) or written statement may besigned by any person authorized to signa declaration under penalties of perjuryon behalf of the person whose name is onthe certificate or written statement, as pro-vided in sections 6061 through 6063 and

the regulations thereunder. A person au-thorized to sign a withholding certificateor written statement includes an officeror director of a corporation, a partner ofa partnership, a trustee of a trust, an ex-ecutor of an estate, any foreign equivalentof the former titles, and any other personthat has been provided written authoriza-tion by the individual or entity named onthe certificate or written statement to signdocumentation on such person’s behalf.

(ii) Period of validity—(A) Generalrule. Except as provided otherwise inparagraphs (c)(6)(ii)(B) and (C), a with-holding certificate or written statementwill remain valid until the last day of thethird calendar year following the yearin which the withholding certificate orwritten statement is signed. Documen-tary evidence is generally valid until thelast day of the third calendar year follow-ing the year in which the documentaryevidence is provided to the withholdingagent. Nevertheless, documentary evi-dence that contains an expiration date maybe treated as valid until that expirationdate if doing so would provide a longer pe-riod of validity than the three-year period.Notwithstanding the validity periods per-mitted by paragraphs (c)(6)(ii)(A) through(D) of this section, a withholding certifi-cate, written statement, and documentaryevidence will cease to be valid if the with-holding agent has knowledge of a changein circumstances that makes the infor-mation on the documentation incorrect.Therefore, a withholding agent is requiredto institute procedures to ensure that anychange to the customer master files thatconstitutes a change in circumstances de-scribed in paragraph (c)(6)(ii)(E) of thissection is identified by the withholdingagent. In addition, a withholding agent isrequired to notify any person providingdocumentation of the person’s obligationto notify the withholding agent of a changein circumstances.

(B) Indefinite validity. Notwithstand-ing paragraph (c)(6)(ii)(A) of this section,the following certificates (or parts ofcertificates), written statements, or docu-mentary evidence shall remain valid untilthe withholding agent has knowledge ofa change in circumstances that makes theinformation on the documentation incor-rect—

(1) A withholding certificate or writtenstatement provided by a participating FFI

or registered deemed-compliant FFI thathas furnished a valid GIIN that has beenverified by the withholding agent in themanner set forth in paragraph (e)(3) of thissection;

(2) A beneficial owner withholding cer-tificate that is provided by an individualclaiming foreign status if the withholdingcertificate is furnished with documentaryevidence supporting the individual’s claimof foreign status and the withholding agentdoes not have a current U.S. residence orU.S. mailing address for the payee anddoes not have one or more current U.S.telephone numbers that are the only tele-phone numbers the withholding agent hasfor the payee;

(3) A beneficial owner withholding cer-tificate that is provided by an entity de-scribed in paragraph (c)(6)(ii)(C)(2) of thissection if the withholding certificate is fur-nished with documentary evidence estab-lishing the entity’s foreign status;

(4) A withholding certificate of an in-termediary, flow-through entity, or U.S.branch (not including the withholding cer-tificates, written statements, or documen-tary evidence of the payees, or withholdingstatements associated with the withholdingcertificate);

(5) A withholding certificate, writ-ten statement, or documentary evidencefurnished by a foreign government, gov-ernment of a U.S. territory, foreign centralbank (including the Bank for InternationalSettlements), international organization,or entity that is wholly owned by any suchentities; and

(6) Documentary evidence that is notgenerally renewed or amended (such as acertificate of incorporation).

(C) Indefinite validity in the case of cer-tain offshore obligations. Notwithstandingparagraph (c)(6)(ii)(A) of this section, thefollowing certificates, written statements,and documentary evidence that are pro-vided with respect to offshore obligationsshall remain valid until a change in circum-stances occurs that makes the informationon the documentation incorrect—

(1) A withholding certificate or doc-umentary evidence provided by an indi-vidual claiming foreign status if the with-holding agent does not have a current U.S.residence or U.S. mailing address for thepayee, does not have one or more currentU.S. telephone numbers that are the onlytelephone numbers the withholding agent

April 8, 2013 820 2013–15 I.R.B.

has for the payee, and has not been pro-vided standing instructions to make a pay-ment in the United States for the obliga-tion;

(2) A withholding certificate, writtenstatement, or documentary evidence pro-vided by one of the following entities ifsuch entity is the payee—

(i) A retirement fund described in§1.1471–6(f) or an entity that is whollyowned by such a retirement fund;

(ii) An excepted nonfinancial group en-tity described in §1.1471–5(e)(5)(i);

(iii) A section 501(c) entity described in§1.1471–5(e)(v);

(iv) A non-profit organization describedin §1.1471–5(e)(5)(vi);

(v) A nonreporting IGA FFI;(vi) A territory financial institution that

agrees to be treated as a U.S. person forchapter 4 purposes;

(vii) An NFFE whose stock is regularlytraded as described in §1.1472–1(c)(1)(i);

(viii) An NFFE affiliate described in§1.1472–1(c)(1)(ii);

(ix) An active NFFE that the withhold-ing agent has determined, through its AMLdue diligence, is engaged in a businessother than that of a financial institution,and ongoing monitoring of the account forpurposes of AML due diligence does notindicate that the determination is incorrect;and

(x) A sponsored FFI described in§1.1471–5(f)(2)(iii);

(3) A withholding certificate of anowner-documented FFI, but not includingthe withholding statements, documentaryevidence, and withholding certificates ofits owners (unless such documentation ispermitted indefinite validity under anotherprovision);

(4) A withholding statement associ-ated with a withholding certificate of anowner-documented FFI provided the ac-count balance of all accounts held by suchowner-documented FFI with the withhold-ing agent does not exceed $1,000,000 onthe later of December 31, 2013, or thelast day of the calendar year in which theaccount was opened, and the last day ofeach subsequent calendar year precedingthe payment, applying the aggregationprinciples of §1.1471–5(b)(4)(iii), andthe owner-documented FFI does not haveany contingent beneficiaries or designatedclasses with unidentified beneficiaries;and

(5) A withholding certificate of a pas-sive NFFE or excepted territory NFFE,provided the account balance of all ac-counts held by such entity with the with-holding agent does not exceed $1,000,000on the later of December 31, 2013, orthe last of the calendar year in which theaccount was opened, and the last day ofeach subsequent calendar year precedingthe payment, applying the aggregationprinciples of §1.1471–5(b)(4)(iii), and thewithholding agent does know not or havereason to know that the entity has any con-tingent beneficiaries or designated classeswith unidentified beneficiaries.

(D) Exception for certificate for effec-tively connected income. Notwithstandingparagraphs (c)(6)(ii)(B) to (C) of this sec-tion, the period of validity of a withholdingcertificate furnished to a withholding agentto claim a reduced rate of withholding forincome that is effectively connected withthe conduct of a trade or business withinthe United States shall be limited to thethree-year period described in paragraph(c)(6)(ii)(A) of this section.

(E) Change in circumstances—(1) De-fined. For purposes of this chapter, aperson is considered to have a change incircumstances only if such change wouldaffect the chapter 4 status of the person.A change in circumstances includes anychange that results in the addition of in-formation described in paragraph (e)(4)relevant to a person’s claim of foreignstatus (that is, U.S. indicia that is not oth-erwise cured by documentation on fileand that is relevant to the chapter 4 sta-tus claimed) or otherwise conflicts withsuch person’s claim of chapter 4 status.Unless stated otherwise, a change of ad-dress or telephone number is a change incircumstances for purposes of this para-graph (c)(6)(ii)(E) only if it changes to anaddress or telephone number in the UnitedStates. A change in circumstances affect-ing the withholding information providedto the withholding agent, including allo-cation information or withholding poolscontained in a withholding statement orowner reporting statement, will terminatethe validity of the withholding certificatewith respect to the information that is nolonger reliable, until the information isupdated.

(2) Obligation to notify withholdingagent of a change in circumstances. Ifa change in circumstances makes any

information on a certificate or other docu-mentation incorrect, then the person whosename is on the certificate or other docu-mentation must inform the withholdingagent within 30 days of the change andfurnish a new certificate, a new writtenstatement, or new documentary evidence.If an intermediary or a flow-through en-tity becomes aware that a certificate orother appropriate documentation it has fur-nished to the person from whom it collectsa payment is no longer valid because of achange in the circumstances of the personwho issued the certificate or furnished theother appropriate documentation, then theintermediary or flow-through entity mustnotify the person from whom it collects thepayment of the change in circumstanceswithin 30 days of the date that it knowsor has reason to know of the change incircumstances. It must also obtain a newwithholding certificate or new appropri-ate documentation to replace the existingcertificate or documentation the validityof which has expired due to the change incircumstances.

(3) Withholding agent’s obligation withrespect to a change in circumstances. Acertificate or other documentation be-comes invalid on the date that the with-holding agent holding the certificate ordocumentation knows or has reason toknow that circumstances affecting thecorrectness of the certificate or docu-mentation have changed. However, awithholding agent may choose to treat aperson as having the same chapter 4 statusthat it had prior to the change in circum-stances until the earlier of 90 days fromthe date that the certificate or documenta-tion became unreliable due to the changein circumstances or the date that a newcertificate or new documentation is ob-tained. A withholding agent may rely ona certificate without having to inquire intopossible changes of circumstances thatmay affect the validity of the statement,unless it knows or has reason to know thatcircumstances have changed. A withhold-ing agent may require a new certificate oradditional documentation at any time priorto a payment, regardless of whether thewithholding agent knows or has reason toknow that any information stated on thecertificate or documentation has changed.

(iii) Record Retention—(A) In general.A withholding agent must retain eachwithholding certificate, written statement,

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or copy of documentary evidence for aslong as it may be relevant to the determina-tion of the withholding agent’s tax liabilityunder section 1474(a) and §1.1474–1. Awithholding agent may retain an original,certified copy, or photocopy (includinga microfiche, electronic scan, or similarmeans of electronic storage) of the with-holding certificate, written statement, ordocumentary evidence. With respect todocumentary evidence, the withholdingagent must also note in its records thedate on which the document was receivedand reviewed. Any documentation that isstored electronically must be made avail-able in hard copy form to the IRS uponrequest during an examination.

(B) Exception for documentary evi-dence received with respect to offshoreobligations. A withholding agent thatis making a payment with respect to anoffshore obligation and is not required toretain copies of documentation reviewedpursuant to its AML due diligence, may,in lieu of retaining the documents as setforth in paragraph (c)(6)(iii)(A), retaina notation of the type of documentationreviewed, the date the documentation wasreviewed, the document’s identificationnumber (if any) (for example, a passportnumber), and whether such documentationcontained any U.S. indicia. The previ-ous sentence applies with respect to anoffshore obligation that is also a preexist-ing obligation, except, in such case, therequirement to record whether the doc-umentation contained U.S. indicia doesnot apply. See also §1.1471–4(c)(2)(iv)for the record retention requirements of aparticipating FFI.

(iv) Electronic transmission of with-holding certificate, written statement, anddocumentary evidence. A withholdingagent may accept a withholding certifi-cate (including an acceptable substituteform), a written statement, or other suchform as the IRS may prescribe, electroni-cally in accordance with the requirementsset forth in §1.1441–1(e)(4)(iv). See§1.1441–1(e)(4)(iv) for procedures forthe electronic transmission of a withhold-ing certificate that has been completedand signed with a handwritten signature,scanned into an electronic system, andsent to the withholding agent via e-mail.A withholding certificate (including a sub-stitute form), written statement, or othersuch form prescribed by the IRS may be

accepted by facsimile if the withholdingagent confirms that the individual or entityfurnishing the form is the individual or en-tity named on the form and the faxed formcontains a signature of the person whosename is on the form (or such person’sauthorized representative) made underpenalties of perjury in the manner de-scribed in §1.1441–1(e)(4)(iv)(B)(3)(i). Awithholding agent may also accept a copyof documentary evidence electronically,including by facsimile or by e-mail, if thewithholding agent confirms that the per-son furnishing the documentary evidenceis the person named on the documentaryevidence (or such person’s authorized rep-resentative) and the copy does not appearto have been altered from its original form.

(v) Acceptable substitute withholdingcertificate—(A) In general. A withhold-ing agent may substitute its own form foran official Form W–8 (or such other of-ficial form as the IRS may prescribe). Asubstitute form will be acceptable if it con-tains provisions that are substantially sim-ilar to those of the official form, it con-tains the same certifications relevant tothe transactions as are contained on theofficial form and these certifications areclearly set forth, and the substitute form in-cludes a signature-under-penalties-of-per-jury statement identical to the one on theofficial form. The substitute form is ac-ceptable even if it does not contain allof the provisions contained on the officialform, so long as it contains those provi-sions that are relevant to the transactionfor which it is furnished. A withholdingagent may choose to provide a substituteform that does not include all of the ex-emptions from withholding provided onthe official version but the substitute formmust include any chapter 4 status for whichwithholding may apply, such as the cate-gories for a nonparticipating FFI or pas-sive NFFE. A withholding agent that usesa substitute form must furnish instructionsrelevant to the substitute form only to theextent and in the manner specified in theinstructions to the official form. A with-holding agent may use a substitute formthat is written in a language other thanEnglish and may accept a form that is filledout in a language other than English, butthe withholding agent must make availablean English translation of the form and itscontents to the IRS upon request. A with-holding agent may refuse to accept a cer-

tificate from a person (including the offi-cial Form W–8) if the certificate providedis not an acceptable substitute form pro-vided by the withholding agent, but only ifthe withholding agent furnishes the personwith an acceptable substitute form withinfive business days of receipt of an unac-ceptable form from the person. In thatcase, the substitute form is acceptable onlyif it contains a notice that the withholdingagent has refused to accept the form sub-mitted by the person and that the personmust submit the acceptable form providedby the withholding agent in order for theperson to be treated as having furnished therequired withholding certificate.

(B) Non-IRS form for individuals. Awithholding agent may also substitute itsown form for an official Form W–8BEN(for individuals), regardless of whetherthe substitute form is titled a Form W–8.However, in addition to the name and ad-dress of the individual that is the payee orbeneficial owner, the form must provideall countries in which the individual is res-ident for tax purposes, city and country ofbirth, a tax identification number, if any,for each country of residence, and mustcontain a signed and dated certificationmade under penalties of perjury that theinformation provided on the form is accu-rate and will be updated by the individualwithin 30 days of a change in circum-stances that causes the form to becomeincorrect. Notwithstanding the previoussentence, the signed certification providedon a form need not be signed under penal-ties of perjury if the form is accompaniedby documentary evidence that supportsthe individual’s claim of foreign status.Such documentary evidence may be thesame documentary evidence that is usedto support foreign status in the case of apayee whose account has U.S. indicia asdescribed in paragraph (e) of this sectionor §1.1471–4(c)(4)(i)(A). The form mayalso request other information required forpurposes of tax or AML due diligence inthe United States or in other countries.

(vi) Electronic confirmation of TINon withholding certificate. The Com-missioner may prescribe procedures in arevenue procedure or other appropriateguidance to require a withholding agentto confirm electronically with the IRS in-formation concerning any TIN stated on awithholding certificate.

April 8, 2013 822 2013–15 I.R.B.

(vii) Reliance on a prior version ofa withholding certificate. Upon the is-suance by the IRS of an updated versionof a withholding certificate, a withholdingagent may continue to accept the prior ver-sion of the withholding certificate for sixmonths after the revision date shown onthe updated withholding certificate, unlessthe IRS has issued guidance that indicatesotherwise, and may continue to rely upona previously signed prior version of thewithholding certificate until its period ofvalidity expires.

(7) Curing documentation errors. Theprovisions in this paragraph (c)(7) de-scribe standards generally applicable towithholding certificates (Forms W–8 orsubstitute forms), written statements, anddocumentary evidence furnished to estab-lish the payee’s chapter 4 status. Theseprovisions do not apply to Forms W–9(or their substitutes). For correspondingprovisions regarding the Form W–9 (or asubstitute Form W–9), see section 3406and the regulations thereunder.

(i) Curing inconsequential errors ona withholding certificate. A withholdingagent may treat a withholding certifi-cate as valid, notwithstanding that thewithholding certificate contains an in-consequential error, if the withholdingagent has sufficient documentation on fileto supplement the information missingfrom the withholding certificate due tothe error. In such case, the documentationrelied upon to cure the inconsequentialerror must be conclusive. For example,a withholding certificate in which the in-dividual submitting the form abbreviatedthe country of residence may be treated asvalid, notwithstanding the abbreviation,if the withholding agent has governmentissued identification for the person froma country that reasonably matches theabbreviation. On the other hand, an abbre-viation for the country of residence thatdoes not reasonably match the country ofresidence shown on the person’s passportis not an inconsequential error. A failureto select an entity type on a withholdingcertificate is not an inconsequential er-ror, even if the withholding agent has anorganization document for the entity thatprovides sufficient information to deter-mine the person’s entity type, if the personwas eligible to make an election under§301.7701–3(c)(1)(i) of this chapter (thatis, a check-the-box election). A failure to

check a box to make a required certifica-tion on the withholding certificate or toprovide a country of residence or a countryunder which treaty benefits are sought isnot an inconsequential error. In addition,information on a withholding certificatethat contradicts other information con-tained on the withholding certificate or inthe customer master file is not an inconse-quential error.

(ii) Documentation received after thetime of payment. Proof that withhold-ing was not required under the provisionsof chapter 4 and the regulations thereun-der also may be established after the dateof payment by the withholding agent onthe basis of a valid withholding certifi-cate and/or other appropriate documenta-tion that was furnished after the date ofpayment but that was effective as of thedate of payment. A withholding certifi-cate furnished after the date of paymentwill be considered effective as of the dateof the payment if the certificate containsa signed affidavit (either at the bottomof the form or on an attached page) thatstates that the information and representa-tions contained on the certificate were ac-curate as of the time of the payment. Acertificate obtained within 30 days afterthe date of the payment will not be con-sidered to be unreliable solely because itdoes not contain an affidavit. However, inthe case of a withholding certificate of anindividual received more than a year af-ter the date of payment, the withholdingagent will be required to obtain, in addi-tion to the withholding certificate and affi-davit, documentary evidence described inparagraph (c)(5)(i) of this section that sup-ports the individual’s claim of foreign sta-tus. In the case of a withholding certifi-cate of an entity received more than a yearafter the date of payment, the withholdingagent will be required to obtain, in addi-tion to the withholding certificate and af-fidavit, documentary evidence specified inparagraph (c)(5)(ii) of this section that sup-ports the chapter 4 status claimed. If docu-mentation other than a withholding certifi-cate is submitted from a payee more thana year after the date of payment, the with-holding agent will be required to also ob-tain from the payee a withholding certifi-cate and affidavit supporting the chapter 4status claimed as of the date of the pay-ment.

(8) Documentation furnished on ac-count-by-account basis unless exceptionprovided for sharing documentation withinexpanded affiliated group. Except as oth-erwise provided in this paragraph (c)(8),a withholding agent that is a financialinstitution with which a customer mayopen an account must obtain withhold-ing certificates, written statements, FormsW–9, or documentary evidence on an ac-count-by-account basis. Notwithstandingthe previous sentence, a withholding agentmay rely upon the withholding certifi-cate, written statement, or documentaryevidence furnished by a customer underany one or more of the circumstances de-scribed in this paragraph (c)(8).

(i) Single branch systems. A withhold-ing agent may rely on documentation fur-nished by a customer for another account ifboth accounts are held at the same branchlocation and both accounts are treated asconsolidated obligations.

(ii) Universal account systems. A with-holding agent may rely on documentationfurnished by a customer for an accountheld at another branch location of the samewithholding agent or at a branch locationof a member of the expanded affiliatedgroup of the withholding agent if the with-holding agent treats all accounts that sharedocumentation as consolidated obliga-tions and the withholding agent and theother branch location or expanded affili-ated group member are part of a universalaccount system that uses a customer iden-tifier that can be used to retrieve system-atically all other accounts of the customer.A withholding agent that opts to rely uponthe chapter 4 status designated for thepayee in the universal account systemwithout obtaining and reviewing copies ofthe documentation supporting the statusmust be able to produce all documentation(or a notation of the documentary evidencereviewed if the withholding agent is notrequired to retain copies of the documen-tary evidence) relevant to the chapter 4status claimed upon request by the IRSand will be liable for any underwithhold-ing that results from any failure to assignthe correct status based upon the availableinformation.

(iii) Shared account systems. A with-holding agent may rely on documentationfurnished by a customer for an accountheld at another branch location of thesame withholding agent or at a branch

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location of a member of the expandedaffiliated group of the withholding agentif the withholding agent treats all accountsthat share documentation as consolidatedaccounts and the withholding agent andthe other branch location or expandedaffiliated group member share an informa-tion system, electronic or otherwise, that isdescribed in this paragraph (c)(8)(iii). Thesystem must allow the withholding agentto easily access data regarding the natureof the documentation, the informationcontained in the documentation (includinga copy of the documentation itself), andthe validity status of the documentation.The information system must also allowthe withholding agent to easily transmitdata into the system regarding any facts ofwhich it becomes aware that may affectthe reliability of the documentation. Thewithholding agent must be able to estab-lish, to the extent applicable, how andwhen it has transmitted data regarding anyfacts of which it became aware that mayaffect the reliability of the documentationand must be able to establish that any datait has transmitted to the information sys-tem has been processed and appropriatedue diligence has been exercised regard-ing the validity of the documentation. Awithholding agent that opts to rely uponthe chapter 4 status designated for thepayee in the shared account system with-out obtaining and reviewing copies of thedocumentation supporting the status mustbe able to produce all documentation (ora notation of the documentary evidencereviewed if the withholding agent is notrequired to retain copies of the documen-tary evidence) relevant to the chapter 4status claimed upon request by the IRSand will be liable for any underwithhold-ing that results from any failure to assignthe correct status based upon the availableinformation.

(iv) Document sharing for gross pro-ceeds. [Reserved].

(9) Reliance on documentation col-lected by or certifications provided byother persons—(i) Shared documentationsystem maintained by an agent. A with-holding agent may rely on documentationcollected by an agent (including a fundadvisor for mutual funds, hedge funds, ora private equity group) of the withholdingagent. The agent may retain the documen-tation as part of an information systemmaintained for a single withholding agent

or multiple withholding agents providedthat under the system, any withholdingagent on behalf of which the agent re-tains documentation may easily accessdata regarding the nature of the docu-mentation, the information contained inthe documentation (including a copy ofthe documentation itself) and its validity,and must allow such withholding agentto easily transmit data, either directly intoan electronic system or by providing suchinformation to the agent, regarding anyfacts of which it becomes aware that mayaffect the reliability of the documentation.The withholding agent must be able to es-tablish, to the extent applicable, how andwhen it has transmitted data regarding anyfacts of which it became aware that mayaffect the reliability of the documentationand must be able to establish that anydata it has transmitted has been processedand appropriate due diligence has beenexercised regarding the validity of the doc-umentation. The agent must have a systemin effect to ensure that any information itreceives regarding facts that affect the reli-ability of the documentation or the chapter4 status assigned to the customer are pro-vided to all withholding agents for whichthe agent retains the documentation andany chapter 4 status assigned by the agentis amended to incorporate such informa-tion. A withholding agent that opts to relyupon the chapter 4 status assigned by theagent without obtaining and reviewingcopies of the documentation supportingthe status must be able to produce all doc-umentation relevant to the chapter 4 statusclaimed upon request by the IRS and willbe liable for any underwithholding thatresults from a failure of the agent to assignthe correct status based upon the avail-able information. See §1.1474–1(a) for awithholding agent’s liability when it re-lies upon an agent for chapter 4 purposes.This paragraph (c)(9)(i) does not applyto a withholding certificate provided by aQI, a withholding certificate provided bya territory financial institution that electsto be treated as a U.S. person, or anywithholding statement, unless the personsubmitting the form specifically identifiesthe withholding agents for which the cer-tificates and/or statements are provided.

(ii) Third-party data providers. Awithholding agent may rely upon docu-mentation collected by a third-party dataprovider with respect to an entity, subject

to the conditions described in this para-graph (c)(9)(ii).

(A) The third-party data provider musthave collected documentation that is suffi-cient to determine the chapter 4 status ofthe entity under paragraph (d) of this sec-tion.

(B) The third-party data provider mustbe in the business of providing credit re-ports or business reports to unrelated cus-tomers and must have reviewed all infor-mation it has for the entity and verified thatsuch additional information does not con-flict with the chapter 4 status claimed bythe entity.

(C) The third-party data provider mustnotify the entity submitting the documen-tation that such entity must notify the third-party data provider in the event of a changein circumstances within 30 days of thechange in circumstances, and the third-party data provider must be obligated un-der its contract with the withholding agentto notify the withholding agent if a changein circumstances occurs.

(D) The withholding agent may notrely upon a chapter 4 status provided by athird-party data provider if the withhold-ing agent knows or has reason to knowthat the chapter 4 status is unreliable orincorrect based on information in the with-holding agent’s account records, or if thedocumentation or information providedby the third-party data provider does notsupport the chapter 4 status claimed.

(E) The withholding agent must be ableto submit copies of the documentation re-ceived from the third-party data providerupon request to the IRS and will remain li-able for any underwithholding that occursas a result of its reliance on informationprovided by the third-party data provider ifthe documentation is invalid or unreliable.

(F) This paragraph (c)(9)(ii) does notapply to a withholding statement or a with-holding certificate that contains an electionto accept withholding or reporting respon-sibility (such as one made by a QI, territoryfinancial institution, or U.S. branch) pro-vided by a third-party data provider.

(iii) Reliance on certification providedby introducing brokers—(A) A withhold-ing agent may rely on a certification ofa broker indicating the broker’s determi-nation of a payee’s chapter 4 status andindicating that the broker holds valid doc-umentation sufficient to determine thepayee’s chapter 4 status under paragraph

April 8, 2013 824 2013–15 I.R.B.

(d) of this section with respect to anyreadily tradable instrument as defined in§31.3406(h)–1(d) of this chapter if theconditions in paragraph (c)(9)(iii)(B) ofthis section are satisfied and the broker iseither—

(1) A U.S. person (including a U.S.branch that is treated as a U.S. person) thatis acting as the agent of the payee; or

(2) A participating FFI or a reportingModel 1 FFI that is acting as the agent ofthe payee with respect to an obligation andreceiving all payments from the withhold-ing agent with respect to such obligation asan intermediary on behalf of the payee.

(B) The certification from the brokermust be in writing or in electronic form andcontain all of the information required of achapter 4 withholding statement describedin paragraph (c)(3)(iii)(B)(3). Notwith-standing this paragraph (c)(9)(iii), a with-holding agent may not rely upon a certi-fication provided by a broker if it knowsor has reason to know that the broker hasnot obtained valid documentation as rep-resented or the information contained inthe certification is otherwise inaccurate. Abroker that chooses to provide a certifica-tion under this paragraph (c)(9)(iii) will beresponsible for applying the rules set forthin the regulations under section 1471 and1472 to the withholding certificates, writ-ten statements, or documentary evidenceobtained from the payee and shall be liablefor any underwithholding that occurs as aresult of the broker’s failure to reasonablyapply such rules.

(iv) Reliance on documentation andcertifications provided between principalsand agents—(A) In general. Subject tothe conditions under §1.1474–1(a)(3), awithholding agent is permitted to use anagent to fulfill its chapter 4 obligationsand such agent’s actions are imputed tothe principal. However, an agent thatmakes a payment pursuant to an agencyarrangement (paying agent) is also a with-holding agent with respect to the paymentunless an exception under §1.1473–(d)applies. Therefore, the paying agent willhave its own obligation to determine thechapter 4 status of the payee and withholdupon the payment if required. Althougha paying agent is generally a withholdingagent for purposes of chapter 4, the finan-cial accounts to which it makes paymentsare not necessarily financial accounts ofthe paying agent. See the rules under

§1.1471–5(b)(5) to determine when a fi-nancial institution maintains a financialaccount. In addition, the status of a pay-ment as made with respect to an offshoreobligation or as a preexisting obligationwill be determined based on such obliga-tion’s status in relation to the principal.Further, the due diligence required with re-spect to the payment will be determined bythe status of the principal and not the pay-ing agent. Consequently, a payment thatis made, for example, by a paying agentthat is a foreign entity on behalf of a prin-cipal that is a U.S. withholding agent willbe subject to the due diligence applicableto the principal. See §1.1474–1(a)(3) forrules regarding the reporting obligationsof a principal and agent in the case of apayment made by an agent of behalf of aprincipal.

(B) Reliance upon certification of theprincipal. An agent that makes a pay-ment on behalf of a principal that it maytreat, pursuant to paragraph (d) of this sec-tion, as a U.S. withholding agent, partici-pating FFI, or reporting Model 1 FFI mayrely upon a certification provided by theprincipal indicating that the principal hasobtained valid documentation sufficient todetermine the chapter 4 status of the payeeand may rely upon the principal’s determi-nation as to the payee’s chapter 4 status.In such a case, the agent will be permittedto rely upon the certification provided bythe principal when determining whether itis required to withhold on the payment andwill not be liable for any underwithhold-ing that occurs as a result of the principal’sfailure to properly determine the chapter 4status of the payee unless the agent knowsor has reason to know the certification pro-vided by the principal is inaccurate.

(C) Document sharing. In lieu of ob-taining a certification from the principal asdescribed in paragraph (c)(9)(iv)(B) of thissection, or when reliance upon such cer-tification is not permitted, an agent thatmakes a payment on behalf of a princi-pal may rely upon copies of documentationprovided to the principal with respect tothe payment. However, in such case, boththe principal and the agent are obligated todetermine the chapter 4 status of the payeebased upon the documentation and ensurethat adequate withholding occurs with re-spect to the payment. While a principal isimputed the knowledge of the agent with

respect to the payment, the agent is not im-puted the knowledge of the principal.

(D) Examples—(1) Example 1. Paying agent thatdoes not collect documentation. A fund, P, that is aparticipating FFI contracts with a U.S. person, A, tomake payments to its account holders with respect totheir equity interests in P. P contracts with anotheragent, B, to obtain documentation sufficient to de-termine the chapter 4 status of such account holders.Based on the documentation it collects, B determinesthat none of P’s account holders are subject to with-holding. P provides a certification to A indicatingthat it has obtained documentation sufficient to de-termine the chapter 4 status of P’s account holdersand that each payee is not subject to withholding un-der chapter 4. As the actions of B, as P’s agent, areattributed to P, P may provide a certification to A in-dicating that it has determined the chapter 4 status ofits payees, even if it is B, and not P, who made thedeterminations. However, P will be liable for any un-derwithholding that results from a failure by B to rea-sonably apply the rules under chapter 4. A is permit-ted to rely upon the certification provided by P and,accordingly, is not required to withhold on the pay-ments made to P’s account holders and would not beliable for any underwithholding that results if the de-terminations made by B are incorrect unless A hadreason to know that chapter 4 status claimed was in-accurate.

(ii) Example 2. Paying agent that collects docu-mentation. A fund, P, that is a participating FFI con-tracts with a U.S. person, A, to make a payment to itsaccount holders on its behalf. P also contracts with Ato obtain documentation sufficient to determine thechapter 4 status of P’s account holders. Based on thedocumentation it collects, A determines that none ofP’s account holders are subject to withholding. Asthe actions of A, as P’s agent, are imputed to P, P willbe liable for any underwithholding that results froma failure by A to reasonably apply the rules underchapter 4. P is also required to retain the documenta-tion upon which A relied in determining the chapter4 status of its account holders. Because A performedthe due diligence on behalf of P, A will have reasonto know if any of the chapter 4 determinations madebased on the documentation received were made in-correctly, and, as a withholding agent with respect tothe payment, is liable, in addition to P, for any under-withholding that results from an incorrect determina-tion that withholding was not required. This resultapplies regardless of whether A retains copies of thedocumentation obtained with respect to P’s accountholders or receives a certification from P indicatingthat P has obtained documentation sufficient to deter-mine the chapter 4 status of its account holders andthat each payee is not subject to withholding underchapter 4.

(v) Reliance upon documentation foraccounts acquired in merger or bulk acqui-sition for value. A withholding agent thatacquires an account from a predecessor ortransferor in a merger or bulk acquisitionof accounts for value is permitted to relyupon valid documentation (or copies ofvalid documentation) collected by the pre-decessor or transferor. In addition, a with-holding agent that acquires an account in a

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merger or bulk acquisition of accounts forvalue, other than a related party transac-tion, from a U.S. withholding agent, partic-ipating FFI that has completed all due dili-gence required under its agreement withrespect to the accounts transferred, or a re-porting Model 1 FFI that has completed alldue diligence required pursuant to the ap-plicable Model 1 IGA, may also rely uponthe predecessor’s or transferor’s determi-nation of the chapter 4 status of an accountholder for a transition period of the lesserof six months from the date of the mergeror until the acquirer knows that the claimof status is inaccurate or a change in cir-cumstances occurs. At the end of the tran-sition period, the acquirer will be permittedto rely upon the predecessor’s determina-tion as to the chapter 4 status of the accountholder only if the documentation that theacquirer has for the account holder, includ-ing documentation obtained from the pre-decessor or transferor, supports the chapter4 status claimed. An acquirer that discov-ers at the end of the transition period thatthe chapter 4 status assigned by the prede-cessor or transferor to the account holderwas incorrect and, as a result, has not with-held as it would have been required to butfor its reliance upon the predecessor’s de-termination, will be required to withholdon future payments, if any, made to the ac-count holder the amount of tax that shouldhave been withheld during the transitionperiod but for the erroneous classificationas to the account holder’s status. For pur-poses of this paragraph (c)(9)(v), a relatedparty transaction is a merger or sale of ac-counts in which the acquirer is in the sameexpanded affiliated group as the predeces-sor or transferor either prior to or after themerger or acquisition or the predecessor ortransferor (or shareholders of the predeces-sor or transferor) obtain a controlling in-terest in the acquirer or in a newly formedentity created for purposes of the mergeror acquisition. See §1.1471–4(c)(2)(ii)(B)for an additional allowance for a partici-pating FFI to rely upon the determinationmade by another participating FFI as tothe chapter 4 status of an account obtainedas part of a merger or bulk acquisition forvalue.

(d) Documentation requirements to es-tablish payee’s chapter 4 status. Unlessthe withholding agent knows or has reasonto know otherwise, a withholding agentmay rely on the provisions of this para-

graph (d) to determine the chapter 4 sta-tus of a payee (or other person that re-ceives a payment). Except as otherwiseprovided in this paragraph (d), a withhold-ing agent is required to obtain a valid with-holding certificate or a Form W–9 from apayee in order to treat the payee as hav-ing a particular chapter 4 status. Para-graphs (d)(1) through (12) of this sectionindicate when it is appropriate for a with-holding agent to rely upon a written state-ment, documentary evidence, or other in-formation in lieu of a Form W–8 or W–9.Paragraphs (d)(1) through (12) of this sec-tion also prescribe additional documenta-tion requirements that must be met in cer-tain cases in order to treat a payee as hav-ing a specific chapter 4 status and spe-cific standards of knowledge that apply toa particular payee, in addition to the gen-eral standards of knowledge set forth inparagraph (e) of this section. This para-graph (d) also provides the circumstancesin which special documentation rules arepermitted with respect to preexisting obli-gations. A withholding agent may not relyon documentation described in this para-graph (d) if the documentation is not validor cannot reliably be associated with thepayment pursuant to the requirements ofparagraph (c) of this section, or the with-holding agent knows or has reason to knowthat such documentation is incorrect or un-reliable as described in paragraphs (d) and(e) of this section. If the chapter 4 statusof a payee cannot be determined under thisparagraph (d) based on documentation re-ceived, a withholding agent must apply thepresumption rules in paragraph (f) to deter-mine the chapter 4 status of the payee.

(1) Reliance on pre-FATCA Form W–8.To establish a payee’s status as a foreignindividual, foreign government, or inter-national organization, a withholding agentmay rely upon a pre-FATCA Form W–8in lieu of obtaining an updated version ofthe withholding certificate. To establishthe chapter 4 status of a payee that is nota foreign individual, foreign government,or international organization, a withhold-ing agent may, for payments made prior toJanuary 1, 2017, rely upon a pre-FATCAForm W–8 in lieu of obtaining an updatedversion of the withholding certificate ifthe withholding agent has one or moreforms of documentary evidence describedin paragraphs (c)(5)(ii), as necessary, to es-tablish the chapter 4 status of the payee and

the withholding agent has obtained any ad-ditional documentation or information re-quired for the particular chapter 4 status(such as withholding statements, certifi-cations as to owners, or required docu-mentation for underlying owners), as setforth under the specific payee rules in para-graphs (d)(2) through (12) of this section.See paragraph (d)(4)(ii) and (iv) of thissection for specific requirements when re-lying upon a pre-FATCA Form W–8 fora participating FFI or registered deemed-compliant FFI. This paragraph (d)(1) doesnot apply to nonregistering local banks,FFIs with only low-value accounts, spon-sored FFIs, owner-documented FFIs, ter-ritory financial institutions that are not thebeneficial owners of the payment, or for-eign central banks (other than a foreigncentral bank specifically identified as anexempt beneficial owner under a Model 1IGA or Model 2 IGA).

(2) Identification of U.S. persons—(i)In general. A withholding agent must treata payee as a U.S. person if it has a validForm W–9 associated with the payee or ifit must presume the payee is a U.S. per-son under the presumption rules set forthin paragraph (f) of this section. Consis-tent with the presumption rules in para-graph (f)(3) of this section, a withholdingagent must treat a payee that has provideda valid Form W–9 as a specified U.S. per-son unless the Form W–9 indicates thatthe payee is other than a specified U.S.person. Notwithstanding the foregoing, awithholding agent receiving a Form W–9indicating that the payee is other than aspecified U.S. person must treat the payeeas a specified U.S. person if the withhold-ing agent knows or has reason to knowthat the payee’s claim that it is other thana specified U.S. person is incorrect. Forexample, a withholding agent that receivesa Form W–9 from a payee that is an indi-vidual would be required to treat the payeeas a specified U.S. person regardless ofwhether the Form W–9 indicates that thepayee is not a specified U.S. person, be-cause an individual that is a U.S. person isnot excepted from the definition of a spec-ified U.S. person

(ii) Reliance on documentary evidence.A withholding agent may also treat thepayee as a U.S. person that is other thana specified U.S. person if the withholdingagent has documentary evidence describedin paragraphs (c)(5)(i)(C) and (D) of this

April 8, 2013 826 2013–15 I.R.B.

section or general documentary evidence(as described in paragraph (c)(5)(ii)(A)of this section) that both establishes thatthe payee is a U.S. person and establishes(either through the documentation or theapplication of the presumption rules in§1.6049–4(c)(ii) or paragraph (f)(3) of thissection) that the payee is an exempt recipi-ent. For purposes of the previous sentence,an exempt recipient means with respectto a withholding agent other than a par-ticipating FFI or registered deemed-com-pliant FFI, an exempt recipient under§1.6049–4(c)(ii) or, with respect to a with-holding agent that is a participating FFI orregistered deemed-compliant FFI, a U.S.person other than a specified U.S. personas described under §1.1473–1(c).

(iii) Preexisting obligations. As analternative to applying the rules in para-graphs (d)(2)(i) and (ii) of this section, awithholding agent that makes a paymentwith respect to a preexisting obligationmay treat a payee as a U.S. person if it hasa notation in its files that it has previouslyreviewed a Form W–9 that established thatthe payee is a U.S. person and has retainedthe payee’s TIN. A withholding agent,other than a participating FFI or registereddeemed-compliant FFI, may also treat apayee as a U.S. person if it has previouslyreviewed a Form W–9 or documentaryevidence that established that the payeeis a U.S. person and established (throughthe documentation or the application ofthe presumption rules in §1.6049–4(c)(ii))that the payee is an exempt recipient forpurposes of chapter 61.

(3) Identification of individuals that areforeign persons—(i) In general. A with-holding agent may treat a payee as an indi-vidual that is a foreign person if the with-holding agent has a withholding certificateidentifying the payee as such a person.

(ii) Exception for offshore obligations.A withholding agent that makes a paymentwith respect to an offshore obligation maytreat the payee as an individual that is a for-eign person if it obtains documentary evi-dence supporting the payee’s claim of sta-tus as a foreign individual (as described inparagraph (c)(5)(i)) or if the payee is pre-sumed to be an individual that is a for-eign person under the presumption rulesset forth in paragraph (f) of this section.

(4) Identification of participatingFFIs and registered deemed-compliantFFIs—(i) In general. Except as otherwise

provided in paragraph (d)(4)(ii) through(iv) of this section, a withholding agentmay treat a payee as a participating FFI orregistered deemed-compliant FFI only ifthe withholding agent has a withholdingcertificate identifying the payee as a par-ticipating FFI or registered deemed-com-pliant FFI and the withholding certificatecontains a GIIN for the payee that is veri-fied against the published IRS FFI list inthe manner described in paragraph (e)(3)of this section (indicating when a with-holding agent may rely upon a GIIN). Forpayments made prior to January 1, 2016,a participating FFI that is a sponsored FFImay provide the GIIN of its sponsoringentity on the withholding certificate if thesponsored FFI has not obtained a GIIN.

(ii) Exception for payments made priorto January 1, 2017, with respect to preex-isting obligations (transitional). For pay-ments made prior to January 1, 2017, withrespect to a preexisting obligation, a with-holding agent may treat a payee as a partic-ipating FFI or registered deemed-compli-ant FFI if the payee has provided the with-holding agent (either orally or in writing)its GIIN and indicated whether it is a par-ticipating FFI or a registered deemed-com-pliant FFI, and the withholding agent hasverified the GIIN in the manner describedin paragraph (e)(3) of this section.

(iii) Exception for offshore obligations.A withholding agent that makes a pay-ment, other than a payment of U.S. sourceFDAP income, with respect to an offshoreobligation may treat the payee as a partic-ipating FFI or registered deemed-compli-ant FFI if the payee provides the withhold-ing agent with its GIIN and states whetherthe payee is a participating FFI or a regis-tered deemed-compliant FFI, and the with-holding agent verifies the GIIN in the man-ner described in paragraph (e)(3) of thissection. A withholding agent that makesa payment of U.S. source FDAP incomewith respect to an offshore obligation maytreat the payee as a participating FFI orregistered deemed-compliant FFI if—

(A) The payee provides the withholdingagent with—

(1) A written statement that contains thepayee’s GIIN and states that the payee isthe beneficial owner of the payment and aparticipating FFI or a registered deemed-compliant FFI, as appropriate; and

(2) Documentary evidence supportingthe payee’s claim of foreign status; and

(B) The withholding agent verifies theGIIN in the manner described in paragraph(e)(3) of this section.

(iv) Exceptions for payments to report-ing Model 1 FFIs.—(A) For paymentsmade prior to January 1, 2015, a withhold-ing agent may treat the payee as a reportingModel 1 FFI if it receives a withholdingcertificate from the payee indicating thatthe payee is a reporting Model 1 FFI andthe country in which the payee is a report-ing Model 1 FFI, regardless of whether thecertificate contains a GIIN for the payee.

(B) For payments made prior to Jan-uary 1, 2015, with respect to a preexist-ing obligation, a withholding agent maytreat a payee as a reporting Model 1 FFIif it obtains a pre-FATCA Form W–8 fromthe payee, and the payee indicates (eitherorally or in writing) that it is a reportingModel 1 FFI and the country in which itis a reporting Model 1 FFI, regardless ofwhether the certificate contains a GIIN forthe payee.

(C) For payments made prior to Jan-uary 1, 2015, with respect to an offshoreobligation, a withholding agent may treatthe payee as a reporting Model 1 FFI ifthe payee informs the withholding agentthat the payee is a reporting Model 1 FFIand provides the country in which thepayee is a reporting Model 1 FFI. In thecase of a payment of U.S. source FDAPincome, such payee must also provide awritten statement that it is the beneficialowner and documentary evidence sup-porting the payee’s claim of foreign status(as described in paragraph (c)(5)(i) of thissection).

(D) For payments made on or afterJanuary 1, 2015, that do not constituteU.S. source FDAP income, the withhold-ing agent may continue to treat a payeeas a reporting Model 1 FFI if the payeeprovides the withholding agent with itsGIIN, either orally in writing, and thewithholding agent verifies the GIIN in themanner described in paragraph (e)(3) ofthis section.

(v) Reason to know. Except as oth-erwise provided in this paragraph (d)(4),a withholding certificate or written state-ment that identifies the payee as a partic-ipating FFI or registered deemed-compli-ant FFI but does not provide the payee’sGIIN or provides a GIIN that does not ap-pear on the current published IRS FFI listwithin 90 calendar days after the date that

2013–15 I.R.B. 827 April 8, 2013

the claim is made, will be treated as invalidfor purposes of chapter 4, and the payeewill be treated as an undocumented payeebeginning on the date that the form wassubmitted until valid documentation or acorrect GIIN is provided. A withholdingagent that discovers that the payee’s GIINdoes not appear on the published IRS FFIlist within 90 calendar days after the datethe claim is made and, as a result, has notwithheld as it would have been required tobut for its reliance upon the payee’s claimof status as a participating FFI or regis-tered deemed-compliant FFI, will be re-quired to withhold on future payments, ifany, made to the payee of the amount of taxthat should have been withheld during the90 day period but for the erroneous classi-fication as to the payee’s status. The with-holding required pursuant the prior sen-tence is in addition to any withholding re-quired under §1.1471–2(a) on those pay-ments. A withholding agent that has with-held as required in the previous two sen-tences may apply reimbursement or set-offprocedures, as described in §1.1474–2(a),if it is later determined that the payee ap-peared on the IRS FFI list as a participatingFFI or registered deemed-compliant FFI atthe time of payment.

(5) Identification of certified deemed-compliant FFIs—(i) In general. Exceptas otherwise provided in this paragraph(d)(5), a withholding agent may treat apayee as a category of certified deemed-compliant FFI, other than a sponsored FFI,if the withholding agent has a withhold-ing certificate that identifies the payee asa certified deemed-compliant FFI, and thewithholding certificate contains a certifi-cation by the payee that it meets the re-quirements to qualify as the type of cer-tified deemed-compliant FFI identified onthe withholding certificate.

(ii) Sponsored, closely held investmentvehicles—(A) In general. A withholdingagent may treat a payee as a sponsored,closely held investment vehicle describedin §1.1471–5(f)(2)(iii) if the withholdingagent can reliably associate the paymentwith a withholding certificate that identi-fies the payee as a sponsored FFI and in-cludes the sponsor’s GIIN, which the with-holding agent has verified against the pub-lished IRS FFI list in the manner describedin paragraph (e)(3) of this section. In ad-dition to the standards of knowledge rulesindicated in paragraph (e) of this section,

a withholding agent will have reason toknow that the payee is not a sponsored,closely held investment vehicle describedin §1.1471–5(f)(2)(iii) if its AML due dili-gence indicates that the payee has in excessof 20 individual investors that own directand/or indirect interests in the payee.

(B) Offshore obligations. A withhold-ing agent that makes a payment with re-spect to an offshore obligation may treat apayee as a sponsored, closely held invest-ment vehicle if it obtains a written state-ment that indicates that the payee is a spon-sored FFI, and provides the GIIN of thesponsor, which the withholding agent hasverified in the manner described in para-graph (e)(3) of this section. In the case ofa payment of U.S. source FDAP income,the written statement must also indicatethat the payee is the beneficial owner andmust be supplemented with documentaryevidence supporting the payee’s claim offoreign status (as described in paragraph(c)(5)(i) of this section).

(6) Identification of owner-documentedFFIs—(i) In general. A withholding agentmay treat a payee as an owner-documentedFFI if all the following requirements ofparagraphs (d)(6)(i)(A) through (F) of thissection are met. A withholding agent maynot rely upon a withholding certificate totreat a payee as an owner-documented FFI,either in whole or in part, if the withhold-ing certificate does not contain all of theinformation and associated documentationrequired by paragraphs (d)(6)(i)(A), (C),and (D) of this section.

(A) The withholding agent has a with-holding certificate that identifies the payeeas an owner-documented FFI that is notacting as an intermediary;

(B) The withholding agent is a U.S.financial institution, participating FFI, orreporting Model 1 FFI that agrees pur-suant to §1.1471–5(f)(3) to act as a desig-nated withholding agent with respect to thepayee;

(C) The payee submits to the withhold-ing agent an FFI owner reporting statementthat meets the requirements of paragraph(d)(6)(iv) of this section;

(D) The payee submits to the withhold-ing agent valid documentation meetingthe requirements of paragraph (d)(6)(iii)of this section with respect to each per-son identified on the FFI owner reportingstatement;

(E) The withholding agent does notknow or have reason to know that thepayee (or any other FFI that is an ownerof the payee and that the designated with-holding agent is treating as an owner-doc-umented FFI) maintains any financialaccount for a nonparticipating FFI; and

(F) The withholding agent does notknow or have reason to know that thepayee is in an expanded affiliated groupwith any other FFI other than an FFI thatis also treated as an owner-documentedFFI by the withholding agent or that theFFI has any U.S. specified persons thatown an equity interest in the FFI or a debtinterest (other than a debt interest that isnot a financial account or that has a bal-ance or value not exceeding $50,000) inthe FFI other than those identified on theFFI owner reporting statement describedin paragraph (d)(6)(iv) of this section.

(ii) Auditor’s letter substitute. A payeemay, in lieu of providing an FFI ownerreporting statement and documentationfor each owner of the FFI as describedin paragraphs (d)(6)(i)(C) and (D) of thissection, provide a letter from an auditor oran attorney that is licensed in the UnitedStates or whose firm has a location in theUnited States, signed no more than fouryears prior to the date of the payment, thatcertifies that the firm or representative hasreviewed the payee’s documentation withrespect to all of its owners and debt holdersdescribed in paragraph (d)(6)(iv) of thissection in accordance with §1.1471–4(c)and that the payee meets the requirementsof §1.1471–5(f)(3). The payee must alsoprovide an FFI owner reporting statementand a Form W–9, with any applicablewaiver, for each specified U.S. person thatowns a direct or indirect interest in thepayee or that holds debt interests describedin paragraph (d)(6)(iv) of this section. Awithholding agent may rely upon the letterdescribed in this paragraph (d)(6)(ii) if itdoes not know or have reason to know thatany of the information contained in theletter in unreliable or incorrect.

(iii) Documentation for owners anddebt holders of payee. Acceptable doc-umentation for an individual owning anequity in the payee or debt holders de-scribed in paragraph (d)(6)(iv) of thissection means a valid withholding cer-tificate, valid Form W–9 (including anynecessary waiver), or documentary evi-dence establishing the foreign status of the

April 8, 2013 828 2013–15 I.R.B.

individual as set forth in paragraph (d)(3)of this section. Acceptable documenta-tion for a specified U.S. person means avalid Form W–9 (including any necessarywaiver). Acceptable documentation forall other persons owning an equity or debtinterest in the payee means documentationdescribed in this paragraph (d), applica-ble to the chapter 4 status claimed by theperson. The rules for reliably associatinga payment with a withholding certificateor documentary evidence set forth in para-graph (c) of this section, the rules for payeedocumentation provided in this paragraph(d), and the standards of knowledge setforth in paragraph (e) of this section willapply to documentation submitted by theowners and debt holders by substitutingthe phrase “owner of the payee” or “debtholder” for “payee.”

(iv) Content of FFI owner report-ing statement. The FFI owner reportingstatement provided by an owner-docu-mented FFI must contain the informa-tion required by this paragraph (d)(6)(iv)and is subject to the general rules ap-plicable to all withholding statementsdescribed in paragraph (c)(3)(iii)(B)(1)of this section. An FFI that is a partner-ship, simple trust, or grantor trust maysubstitute an NWP withholding state-ment described in §1.1441–5(c)(3)(iv) ora foreign simple trust or foreign grantortrust withholding statement described in§1.1441–5(e)(5)(iv) for the FFI owner re-porting statement, provided that the NWPwithholding certificate or foreign simpletrust or foreign grantor trust withholdingcertificate contains all of the informationrequired in this paragraph (d)(6)(iv). Theowner reporting statement will expire onthe last day of the third calendar year fol-lowing the year in which the statementwas provided to the withholding agentunless an exception in paragraph (c)(6)(ii)of this section (for example, accountswith a balance or value of $1,000,000or less) or this paragraph (d)(6) applies.The owner-documented FFI will also berequired to provide the withholding agentwith an updated owner reporting statementif there is a change in circumstances asrequired under paragraph (c)(6)(ii)(E) ofthis section.

(A) The FFI owner reporting statementmust provide the following information:

(1) The name, address, TIN (if any),and chapter 4 status of every individual

and specified U.S. person that owns a di-rect or indirect equity interest in the payee(looking through all entities other thanspecified U.S. persons).

(2) The name, address, TIN (if any),and chapter 4 status of every individualand specified U.S. person that owns a debtinterest in the payee (including any indi-rect debt interest, which includes debt in-terests in any entity that directly or indi-rectly owns the payee or any direct or indi-rect equity interest in a debt holder of thepayee), in either such case if the debt in-terest constitutes a financial account in ex-cess of $50,000 (disregarding all such debtinterests owned by participating FFIs, reg-istered deemed-compliant FFIs, certifieddeemed-compliant FFIs, excepted NFFEs,exempt beneficial owners, or U.S. personsother than specified U.S. persons).

(3) Any other information the withhold-ing agent reasonably requests in order tofulfill its obligations under chapter 4.

(B) The information on the FFI ownerreporting statement may contain names ofequity and debt holders that are prepopu-lated by the withholding agent based onprior information provided to the with-holding agent by the payee if the prepopu-lated form instructs the payee to amend thestatement if the contents are inaccurate, in-complete, or have changed, and the payeeconfirms in writing that the FFI owner re-porting statement submitted to the with-holding agent is accurate and complete.

(C) The FFI owner reporting statementmay be submitted in any form that meetsthe requirements of this paragraph, includ-ing a form used for purposes of AML duediligence.

(v) Exception for preexisting obliga-tions (transitional). A withholding agentmay treat a payment made prior to January1, 2017, with respect to a preexisting obli-gation as made to an owner-documentedFFI if the withholding agent has collected,for purposes of satisfying its AML duediligence, documentation with respect toeach individual and specified U.S. personthat owns a direct or indirect interest in thepayee, other than an interest as a creditor,within four years of the date of payment,that documentation is sufficient to satisfythe AML due diligence requirements ofthe jurisdiction in which the withholdingagent maintains the account, the withhold-ing agent has sufficient information toreport all specified U.S. persons that own

an interest in the payee, and the withhold-ing agent does not know, or have reasonto know, that any nonparticipating FFIowns an equity interest in the FFI or thatany nonparticipating FFI or specified U.S.person owns a debt interest in the FFIconstituting a financial account in excessof $50,000.

(vi) Exception for offshore obligations.A withholding agent that is making a pay-ment, other than a payment of U.S. sourceFDAP income, with respect to an offshoreobligation may, in lieu of obtaining a with-holding certificate as otherwise requiredunder paragraph (d)(6)(i)(A) of this sec-tion, rely upon a written statement that in-dicates the payee meets the requirementsto qualify as an owner-documented FFIunder §1.1471–5(f)(3) and is not acting asan intermediary, if the withholding agentprovides a written notice to the payee in-dicating that the payee is required to up-date the written statement and all associ-ated documentation (such as the FFI ownerreporting statement and underlying docu-mentation) within 30 days of a change incircumstances.

(vii) Exception for certain offshore obli-gations of $1,000,000 or less—(A) A with-holding agent may treat the payment asbeing made to an owner-documented FFIif—

(1) The payment is made with respectto an offshore obligation that has a balanceor value not exceeding $1,000,000 on thelater of December 31, 2013, or the last dayof the calendar year in which the accountwas opened, and the last calendar day ofeach subsequent year preceding the pay-ment, applying the aggregation principlesof §1.1471–5(b)(4);

(2) The withholding agent has collecteddocumentation or a certification as to thepayee’s owners (either for purposes ofcomplying with its AML due diligence orfor purposes of satisfying the requirementsof this paragraph (d)(6)(vii)) sufficient toidentify every individual and specifiedU.S. person that owns any direct or indi-rect interest in the payee (other than aninterest as a creditor) and determine thechapter 4 status of such person;

(3) The documentation described inparagraph (d)(6)(vii)(A)(2) of this sectionis sufficient to satisfy the AML due dili-gence requirements of the jurisdiction inwhich the withholding agent maintains

2013–15 I.R.B. 829 April 8, 2013

the account (and such jurisdiction is aFATF-compliant jurisdiction);

(4) The withholding agent has sufficientinformation to report all specified U.S. per-sons that own an interest in the payee in ac-cordance with §1.1474–1(d); and

(5) The withholding agent does notknow, or have reason to know, that thepayee has any contingent beneficiariesor designated classes with unidentifiedbeneficiaries or owners, that any nonpar-ticipating FFI owns a direct or indirectequity interest in the payee, or that anyspecified U.S. persons or nonparticipatingFFIs own a debt interest constituting a fi-nancial account in excess of $50,000 in thepayee (other than specified U.S. personsthat the withholding agent has sufficientinformation to report).

(B) For example, a withholding agentthat is required to obtain a certificationfrom the payee identifying all personsowning an interest in the payee as part ofits AML due diligence will not be requiredto obtain an FFI owner reporting state-ment, provided the other conditions ofthis paragraph (d)(6)(vii) are met. On theother hand, a withholding agent that hasonly obtained documentation for personsowning a certain threshold percentageof the payee will be required to obtainadditional documentation to satisfy therequirements of this paragraph (d)(6)(vii).A withholding agent that treats a payee asan owner-documented FFI pursuant to thisparagraph (d)(6)(vii) will not be requiredto obtain new documentation, includingthe FFI owner reporting statement, untilthere is a change in circumstances or un-til the account balance or value exceeds$1,000,000 on the last day of the calendaryear.

(7) Nonreporting IGA FFIs—(i) In gen-eral. A withholding agent may treat apayee as a nonreporting IGA FFI if it hasa withholding certificate identifying thepayee, or the relevant branch of the payee,as a nonreporting IGA FFI.

(ii) Exception for offshore obligations.A withholding agent that makes a paymentwith respect to an offshore obligation maytreat a payee as a nonreporting IGA FFI ifit can reliably associate the payment with awritten statement identifying the payee (orthe relevant branch of the payee) as a non-reporting IGA FFI and, with respect to apayment of U.S. source FDAP income, thewritten statement indicates that the payee

is the beneficial owner of the income andis accompanied by documentary evidencesupporting a claim of foreign status (as de-scribed in paragraph (c)(5)(i) of this sec-tion). A withholding agent that makes apayment with respect to an offshore obli-gation may also treat a payee as a nonre-porting IGA FFI if the withholding agenthas a permanent residence address for thepayee, or an address of the relevant branchof the payee, and has obtained a notifica-tion, either orally or in writing, indicatingthat the payee is not acting as an interme-diary and general documentary evidence(as described in paragraph (c)(5)(ii)(A) ofthis section) that provides the withholdingagent with sufficient information to rea-sonably determine that the payee is an en-tity listed as a nonreporting IGA FFI pur-suant to a Model 1 or Model 2 IGA.

(8) Identification of nonparticipatingFFIs—(i) In general. A withholding agentis required to treat a payee as a nonpartic-ipating FFI if the withholding agent canreliably associate the payment with a with-holding certificate identifying the payeeas a nonparticipating FFI, the withholdingagent knows or has reason to know thatthe payee is a nonparticipating FFI, or thewithholding agent is required to treat thepayee as a nonparticipating FFI under thepresumption rules described in paragraph(f) of this section.

(ii) Special documentation rules forpayments made to an exempt beneficialowner through a nonparticipating FFI. Awithholding agent may treat a paymentmade to a nonparticipating FFI as bene-ficially owned by an exempt beneficialowner if the withholding agent can reli-ably associate the payment with—

(A) A withholding certificate that iden-tifies the payee as a nonparticipating FFIthat is either acting as an intermediary oris a flow-through entity; and

(B) An exempt beneficial owner with-holding statement that meets the require-ments of paragraphs (c)(3)(iii)(B)(1) and(4) of this section and contains the associ-ated documentation necessary to establishthe chapter 4 status of the exempt benefi-cial owner in accordance with paragraph(d)(9) of this section as if the exempt ben-eficial owner were the payee.

(9) Identification of exempt beneficialowners—(i) Identification of foreign gov-ernments, governments of U.S. territories,international organizations, and foreign

central banks of issue—(A) In general. Awithholding agent may treat a payee asa foreign government, government of aU.S. territory, international organization,or foreign bank of central issue if it hasa withholding certificate that identifies thepayee as such an entity, indicates that thepayee is the beneficial owner of the pay-ment, and for a government or foreign cen-tral bank, indicates that the payee is notengaged in commercial activities with re-spect to the payments or accounts iden-tified on the form. A withholding agentmay treat a payee as an international or-ganization without requiring a withholdingcertificate if the name of the payee is onethat is designated as an international organ-ization by executive order (pursuant to 22U.S.C. 288 through 288f) and other factssurrounding the transaction reasonably in-dicate that the international organization isnot receiving the payment as an intermedi-ary on behalf of another person. A with-holding agent may treat a payee as an ex-empt beneficial owner pursuant to a Model1 IGA or Model 2 IGA if it has a withhold-ing certificate that identifies the payee assuch an entity and indicates that the payeeis the beneficial owner of the payment.

(B) Exception for offshore obligations.A withholding agent that makes a pay-ment, other than a payment of U.S. sourceFDAP income, with respect to an offshoreobligation may treat a payee as a foreigngovernment, government of a U.S. terri-tory, international organization, or foreigncentral bank of issue if the payee providesa written statement that it is such an en-tity and the written statement indicates thatthe payee receives the payment as a benefi-cial owner (within the meaning provided in§1.1471–6). A written statement providedby a foreign central bank of issue must alsostate that the foreign central bank of issuedoes not receive the payment in connectionwith a commercial activity as provided in§1.1471–6(h).

(C) Exception for preexisting offshoreobligations. A withholding agent thatmakes a payment, other than a payment ofU.S. source FDAP income, with respectto an offshore obligation that is also apreexisting obligation may treat the payeeas a foreign government, government of aU.S. territory, international organization,or foreign central bank of issue if—

(1) The payee is generally known tothe withholding agent to be, the payee’s

April 8, 2013 830 2013–15 I.R.B.

name and the facts surrounding the pay-ment reasonably indicate, or the withhold-ing agent has preexisting account docu-mentary evidence (as described in para-graph (c)(5)(ii)(B) of this section) that rea-sonably indicates that the payee is a for-eign government or government of a U.Sterritory, a political subdivision of a for-eign government or government of a U.S.territory, any wholly owned agency or in-strumentality of any one or more of theforegoing, an international organization, aforeign central bank of issue, or the Bankfor International Settlements; and

(2) The withholding agent does notknow that the payee is not the ben-eficial owner, within the meaning of§1.1471–6(b) through (e) (disregardingany presumption that a financial institutionis assumed to be an intermediary absentdocumentation indicating otherwise) or aforeign central bank of issue receiving thepayment in connection with a commercialactivity.

(ii) Identification of retirementfunds—(A) In general. A withholdingagent may treat a payee as a retirementfund described in §1.1471–6(f) if it has awithholding certificate in which the payeecertifies that it is a retirement fund meet-ing the requirements of §1.1471–6(f).

(B) Exception for offshore obligations.A withholding agent that makes a paymentwith respect to an offshore obligation maytreat the payment as being made to a re-tirement fund described in §1.1471–6(f)if it obtains a written statement in whichthe payee certifies that it is a retirementfund under the laws of its local jurisdictionmeeting the requirements of §1.1471–6(f)and, with respect to a payment of U.S.source FDAP income, documentary evi-dence supporting a claim of foreign status(as described in paragraph (c)(5)(i) of thissection). A withholding agent that makesa payment with respect to an offshoreobligation may also treat the payment asmade to a retirement fund if it obtains gen-eral documentary evidence (as describedin paragraph (c)(5)(ii)(A) of this section)that provides the withholding agent withsufficient information to establish that thepayee is a retirement fund meeting therequirements of §1.1471–6(f).

(C) Exception for preexisting offshoreobligations. A withholding agent thatmakes a payment with respect to an off-shore obligation that is also a preexisting

obligation, may treat the payee as a re-tirement fund described in §1.1471–6(f)if the withholding agent has general doc-umentary evidence or preexisting accountdocumentary evidence (as described inparagraphs (c)(5)(ii)(A) or (B)) that es-tablishes that the payee is a foreign entitythat qualifies as a retirement fund in thecountry in which the payee is organized.

(iii) Identification of entities whollyowned by exempt beneficial owners. Awithholding agent may treat a payee as anentity described in §1.1471–6(g) (refer-ring to certain entities wholly owned byexempt beneficial owners) if the withhold-ing agent has—

(A) A withholding certificate or, for apayment made with respect to an offshoreobligation, a written statement that identi-fies the payee as an investment entity thatis the beneficial owner of the payment;

(B) An owner reporting statement thatcontains the name, address, TIN (if any),chapter 4 status (identifying the type ofexempt beneficial owner), and a descrip-tion of the type of documentation (FormW–8 or other documentary evidence) pro-vided to the withholding agent for everyperson that owns a direct equity interest,or a debt interest constituting a financialaccount, in the payee, and that is subjectto the general rules applicable to all with-holding statements described in paragraph(c)(3)(iii)(B)(1) of this section; and

(C) Documentation for every personidentified on the owner reporting state-ment establishing, pursuant to the docu-mentation requirements described in thisparagraph (d)(9), that such person is anexempt beneficial owner (without regardto whether the person is a beneficial ownerof the payment).

(10) Identification of territory financialinstitutions—(i) Identification of territoryfinancial institutions that are beneficialowners—(A) In general. A withholdingagent may treat a payee as a territory fi-nancial institution if the withholding agenthas a withholding certificate identifyingthe payee as a territory financial institutionthat beneficially owns the payment. Seeparagraph (d)(11)(viii) of this section forrules for documenting territory NFFEs.

(B) Exception for preexisting offshoreobligations. A withholding agent thatmakes a payment with respect to an off-shore obligation that is also a preexistingobligation may treat the payee as a terri-

tory financial institution if the withhold-ing agent receives written notification,whether signed or not, that the payee is thebeneficial owner of the payment and thewithholding agent has general documen-tary evidence (as described in paragraph(c)(5)(ii)(A) of this section) or preexistingaccount documentary evidence (as de-scribed in paragraph (c)(5)(ii)(B) of thissection) establishing that the payee wasorganized or incorporated under the lawsof any U.S. territory and is a depositoryinstitution, custodial institution, or speci-fied insurance company.

(ii) Identification of territory financialinstitutions acting as intermediaries orthat are flow-through entities. A withhold-ing agent may treat a payment as beingmade to a territory financial institutionthat is acting as an intermediary or that isa flow-through entity if the withholdingagent has an intermediary withholdingcertificate or flow-through withhold-ing certificate as described in paragraph(c)(3)(iii) of this section that identifiesthe person who receives the payment as aterritory financial institution. A withhold-ing agent that obtains the documentationdescribed in the preceding sentence maytreat the territory financial institution asthe payee if the withholding certificatecontains a certification that the territoryfinancial institution agrees to be treatedas a U.S. person with respect to the pay-ment. If the withholding certificate doesnot contain such a certification, then thewithholding agent must treat the person onwhose behalf the territory financial insti-tution receives the payment as the payee.See paragraph (c)(3)(iii) of this section foradditional documentation that must ac-company the withholding certificate of theterritory financial institution in this case.

(iii) Reason to know. In addition to thegeneral standards of knowledge describedin paragraph (e) of this section, a withhold-ing agent will have reason to know thatan entity is not a territory financial insti-tution if the withholding agent has: a cur-rent residence or mailing address, either inthe entity’s account files or on documenta-tion provided by the payee, for the entitythat is outside the U.S. territory in whichthe entity claims to be organized; a currenttelephone number for the payee that has acountry code other than the country codefor the U.S. territory or has an area codeother than the area code(s) of the applica-

2013–15 I.R.B. 831 April 8, 2013

ble U.S. territory and no telephone numberfor the payee in the applicable U.S. terri-tory; or standing instructions for the with-holding agent to pay amounts from its ac-count to an address or account outside theapplicable U.S. territory. A withholdingagent that has knowledge of a current ad-dress, current telephone number, or stand-ing payment instructions for the entity out-side of the applicable U.S. territory, maynevertheless treat the entity as a territoryfinancial institution if it obtains documen-tary evidence that establishes that the en-tity was organized in the applicable U.S.territory.

(11) Identification of exceptedNFFEs—(i) Identification of exceptednonfinancial group entities—(A) In gen-eral. A withholding agent may treat apayee as an excepted nonfinancial groupentity described in §1.1471–5(e)(5)(i) ifthe withholding agent has a withholdingcertificate identifying the payee as such anentity.

(B) Exception for offshore obliga-tions. A withholding agent that makesa payment with respect to an offshoreobligation may treat a payee as an ex-cepted nonfinancial group entity describedin §1.1471–5(e)(5)(i) if the withholdingagent obtains:

(1) A written statement in which thepayee certifies that it is a foreign entity op-erating primarily as an excepted nonfinan-cial group entity for a group that primarilyengages in a business other than a finan-cial business described in §1.1471–5(e)(4)and, with respect to a payment of U.S.source FDAP income, documentary evi-dence supporting a claim of foreign status(as described in paragraph (c)(5)(i) of thissection); or

(2) General documentary evidence (asdescribed in paragraph (c)(5)(ii)(A) ofthis section) that provides the withhold-ing agent with sufficient information toestablish that the payee is an exceptednonfinancial group entity described in§1.1471–5(e)(5)(i).

(ii) Identification of excepted nonfinan-cial start-up companies—(A) In general.A withholding agent may treat a payeeas an excepted nonfinancial start-up com-pany described in §1.1471–5(e)(5)(ii) ifthe withholding agent has a withholdingcertificate that identifies the payee as astart-up company that intends to operateas other than a financial institution and the

withholding certificate provides a forma-tion date for the payee that is less than 24months prior to the date of the payment.

(B) Exception for offshore obligations.A withholding agent that makes a pay-ment with respect to an offshore obligationmay treat a payee as an excepted non-financial start-up company described in§1.1471–5(e)(5)(ii) if it obtains—

(1) A written statement from the payeein which the payee certifies that it is aforeign entity formed for the purpose ofoperating a business other than that of afinancial institution and provides the en-tity’s formation date which was less than24 months prior to the date of the pay-ment and, with respect to a payment ofU.S. source FDAP income, documentaryevidence supporting a claim of foreign sta-tus (as described in paragraph (c)(5)(i) ofthis section); or

(2) General documentary evidence (asdescribed in paragraph (c)(5)(ii)(A) ofthis section) that provides the withholdingagent with sufficient information to estab-lish that the payee is a foreign entity otherthan a financial institution and has a for-mation date which is less than 24 monthsprior to the date of the payment.

(C) Exception for preexisting offshoreobligations. A withholding agent maytreat a payment made with respect to anoffshore obligation that is also a preex-isting obligation as made to a start-upcompany described in §1.1471–5(e)(5)(ii)if the withholding agent has generaldocumentary evidence (as described inparagraph (c)(5)(ii)(A) of this section) orpreexisting account documentary evidence(as described in paragraph (c)(5)(ii)(B) ofthis section) that provides the withholdingagent sufficient information to establishthat the payee is, or intends to be, engagedin a business other than as a financial in-stitution and establishes that the payee is aforeign entity that was organized less than24 months prior to the date of the payment.

(iii) Identification of excepted nonfi-nancial entities in liquidation or bank-ruptcy—(A) In general. A withhold-ing agent may treat a payee as an ex-cepted nonfinancial entity in liquida-tion or bankruptcy, as described in§1.1471–5(e)(5)(iii), if the withholdingagent has a withholding certificate thatidentifies the payee as such an entity andthe withholding agent has no knowledgethat the payee has claimed to be such

an entity for more than three years. Awithholding agent may continue to treata payee as an entity described in thisparagraph for longer than three years ifit obtains, in addition to a withholdingcertificate, documentary evidence such asa bankruptcy filing or other public docu-ment that supports the payee’s claim thatit remains in liquidation or bankruptcy.

(B) Exception for offshore obligations.A withholding agent that makes a pay-ment with respect to an offshore obligationmay treat the payee as an excepted nonfi-nancial entity in liquidation or bankruptcy,as described in §1.1471–5(e)(5)(iii) if thewithholding agent has general documen-tary evidence (as described in paragraph(c)(5)(ii)(A) of this section) or a copy ofa bankruptcy filing, or similar documenta-tion, establishing that the payee is a foreignentity in liquidation or bankruptcy and es-tablishing that prior to the liquidation orbankruptcy filing, the payee was engagedin a business other than that of a financialinstitution. A withholding agent may alsotreat the payee with respect to an offshoreobligation as an excepted nonfinancial en-tity in liquidation or bankruptcy, as de-scribed in §1.1471–5(e)(5)(iii), if the with-holding agent obtains a written statementstating that the payee is a foreign entityin the process of liquidating or reorganiz-ing with the intent to continue or recom-mence its former business as a nonfinan-cial institution, the withholding agent hasno knowledge that the payee has claimedto be such an entity for more than threeyears (unless the withholding agent has ob-tained additional documentary evidence tosupport the claim that the entity remainsin bankruptcy or liquidation), and, with re-spect to a payment of U.S. source FDAPincome, documentary evidence supportinga claim of foreign status (as described inparagraph (c)(5)(i) of this section).

(C) Exception for preexisting offshoreobligations. A withholding agent thatmakes a payment with respect to anoffshore obligation that is also a preex-isting obligation may treat a payee asan excepted nonfinancial entity in liq-uidation or bankruptcy, as described in§1.1471–5(e)(5)(iii), if the withholdingagent has preexisting account documen-tary evidence (as described in paragraph(c)(5)(ii)(B) of this section) that unam-biguously indicates that the payee is nota financial institution and is a foreign en-

April 8, 2013 832 2013–15 I.R.B.

tity that entered liquidation or bankruptcywithin the three years preceding the dateof the payment.

(iv) Identification of section 501(c)organizations—(A) In general. Awithholding agent may treat a payeeas a 501(c) organization described in§1.1471–5(e)(5)(v) if the withholdingagent can reliably associate the paymentwith a withholding certificate that identi-fies the payee as a section 501(c) organ-ization and the payee provides either acertification that the payee has been is-sued a determination letter by the IRS thatis currently in effect concluding that thepayee is a section 501(c) organization andproviding the date of the letter, or a copyof an opinion from U.S. counsel certifyingthat the payee is a section 501(c) organiza-tion (without regard to whether the payeeis a foreign private foundation).

(B) Reason to know. A withholdingagent must cease to treat a foreign organi-zation’s claim that it is a section 501(c) or-ganization as valid beginning on the earlierof the date on which such agent knows thatthe IRS has given notice to such foreignorganization that it is not a section 501(c)organization or 90 days after the date onwhich the IRS gives notice to the publicthat such foreign organization is not a sec-tion 501(c) organization. Further, a with-holding agent will have reason to knowthat a payee is not a section 501(c) organ-ization if it has determined, pursuant toits AML due diligence, that the payee hasbeneficial owners (as defined for purposesof the AML due diligence).

(v) Identification of non-profit or-ganizations—(A) In general. A with-holding agent may treat a payee as anon-profit organization described in§1.1471–5(e)(5)(vi) if the withholdingagent has a withholding certificate thatidentifies the payee as a non-profit organ-ization.

(B) Exception for offshore obligations.A withholding agent may treat a paymentwith respect to an offshore obligation asmade to a nonprofit organization withoutobtaining a withholding certificate for thepayee if the payee—

(1) Has provided a written state-ment indicating that the payee is anon-profit organization described in§1.1471–5(e)(5)(vi) and, with respect to apayment of U.S. source FDAP income, hasprovided documentary evidence support-

ing a claim of foreign status (as describedin paragraph (c)(5)(i) of this section); or

(2) Is required to be reported by thewithholding agent as a tax-exempt charita-ble organization under the information re-porting laws of the country in which the ac-count is maintained or is permitted an ex-emption from withholding due to its sta-tus as a tax exempt charitable organiza-tion under the laws of the country in whichthe account is maintained, and the with-holding agent obtains general documen-tary evidence (as described in paragraph(c)(5)(ii)(A) of this section) establishingthat the payee was organized for charita-ble purposes in the same country in whichthe account is maintained by the withhold-ing agent for the purposes described in§1.1471–5(e)(5)(vi) and that the payee hasno beneficial owners (as that term is usedfor purposes of that country’s AML duediligence).

(C) Exception for preexisting offshoreobligations. A withholding agent thatmakes a payment with respect to anoffshore obligation that is also a pre-existing obligation may treat the payeeas a nonprofit organization described in§1.1471–5(e)(5)(vi) if the payee—

(1) Provides a letter of local counselthat certifies that the payee qualifies as atax-exempt entity in its local jurisdiction;or

(2) Provides a letter issued by the taxauthority of the country in which the payeeis organized or a statement provided onthe website of such tax authority indicat-ing that the payee is a tax-exempt entityor charitable organization in the payee’scountry of organization.

(D) Reason to know. A withholdingagent will have reason to know that a payeeis not a nonprofit organization if it has de-termined, pursuant to its AML due dili-gence, that the payee has beneficial own-ers (as defined for purposes of the AMLdue diligence).

(vi) Identification of NFFEs that arepublicly traded corporations. A withhold-ing agent may treat a payee as an NFFEdescribed in §1.1472–1(c)(1)(i) (applyingto an entity the stock of which is regularlytraded on an established securities market)if it has a withholding certificate that cer-tifies that the payee is such an entity andprovides the name of a securities exchangeupon which the payee’s stock is regularlytraded.

(A) Exception for offshore obligations.A withholding agent that makes a pay-ment with respect to an offshore obliga-tion may treat a payee as an NFFE de-scribed in §1.1472–1(c)(1)(i) if the with-holding agent obtains—

(1) A written statement that the payeeis a foreign corporation that is not a finan-cial institution, that its stock is regularlytraded on an established securities market,the name of one of the exchanges uponwhich the payee’s stock is traded, and, withrespect to a payment of U.S. source FDAPincome, documentary evidence supportinga claim of foreign status (as described inparagraph (c)(5)(i) of this section); or

(2) Any documentation establishingthat the payee is listed on a public securi-ties exchange or on a stock market indexand general documentary evidence (as de-scribed in paragraph (c)(5)(ii)(A) of thissection) establishing that the payee is aforeign corporation other than a financialinstitution.

(B) Exception for preexisting offshoreobligations. A withholding agent thatmakes a payment with respect to an off-shore obligation that is also a preexistingobligation may treat the payee as an en-tity described in §1.1472–1(c)(1)(i) if thewithholding agent has any documenta-tion confirming that the payee is listedon a public securities exchange or on astock market index and preexisting ac-count documentary evidence (as describedin paragraph (c)(5)(ii)(B) of this section)establishing that the payee is a foreign cor-poration other than a financial institution.

(vii) Identification of NFFE affiliates.A withholding agent may treat a payee asan NFFE described in §1.1472–1(c)(1)(ii)(applying to an affiliate of an entity thestock of which is regularly traded on an es-tablished exchange) if it has a beneficialowner withholding certificate that iden-tifies the payee as a foreign corporationthat is an affiliate of an entity, described§1.1472–1(c)(1)(i), whose stock is regu-larly traded on an established exchangeand provides the name of the entity that isregularly traded and one of the exchangesupon which the entity’s stock is listed.

(A) Exception for offshore obligations.A withholding agent that makes a pay-ment with respect to an offshore obligationmay treat a payment as being made to anNFFE described in §1.1472–1(c)(1)(ii) ifthe withholding agent obtains—

2013–15 I.R.B. 833 April 8, 2013

(1) Documentary evidence or other in-formation confirming that the payee is af-filiated with an entity listed on a public se-curities exchange or on a stock market in-dex and general documentary evidence (asdescribed in paragraph (c)(5)(ii)(A) of thissection) that indicates that the payee is aforeign corporation other than a financialinstitution; or

(2) A written statement that the payeeis a foreign corporation that is not a finan-cial institution, that the payee is an affil-iate of another nonfinancial entity whosestock is regularly traded on an establishedsecurities exchange, providing the nameof the payee’s affiliate and one of the ex-changes upon which the affiliate’s stock istraded and, in the case of a payment ofU.S. source FDAP income, documentaryevidence supporting the payee’s claim offoreign status (as described in paragraph(c)(5)(i) of this section).

(B) Exception for preexisting offshoreobligations. A withholding agent thatmakes a payment with respect to an off-shore obligation that is also a preexistingobligation may treat the payee as an NFFEdescribed in §1.1472–1(c)(1)(ii) if thewithholding agent has—

(1) Documentation or other informationconfirming that the payee is affiliated witha corporation that is listed on a public secu-rities exchange or on a stock market index;

(2) Preexisting account documen-tary evidence (as described in paragraph(c)(5)(ii)(B) of this section) that unam-biguously indicates that the payee is acorporation that is not a financial institu-tion; and

(3) In the case of a payment of U.S.source FDAP income, documentary ev-idence supporting the payee’s claim offoreign status (as described in paragraph(c)(5)(i) of this section).

(viii) Identification of excepted terri-tory NFFEs. A withholding agent maytreat a payee as an excepted territory NFFEdescribed in §1.1472–1(c)(1)(iii) if it hasa withholding certificate that identifies thepayee as an NFFE that was organized in aU.S. territory and includes a certificationfor chapter 4 purposes that all of its own-ers are bona fide residents of that U.S. ter-ritory.

(A) Exception for payments madeprior to January 1, 2017, with respect topreexisting obligations of $1,000,000 orless (transitional). A withholding agent

that makes a payment prior to January1, 2017, with respect to a preexistingobligation with a balance or value notexceeding $1,000,000 on December 31,2013, and the last day of each subsequentcalendar year preceding the payment,applying the aggregation principles of§1.1471–5(b)(4)(iii), may treat a payeeas an excepted territory NFFE describedin §1.1472–1(c)(1)(iii) if the withholdingagent—

(1) Has a pre-FATCA Form W–8 iden-tifying the payee as a foreign entity with apermanent residence address in a U.S. ter-ritory; and

(2) Has general documentary evidence(as described in paragraph (c)(5)(ii)(A)of this section), preexisting account doc-umentary evidence (as described in para-graph (c)(5)(ii)(B) of this section), or aprospectus establishing that the payee isan entity other than a depository insti-tution, custodial institution, or specifiedinsurance company; and

(3) Is subject, with respect to such obli-gation, to the laws of a FATF-compliant ju-risdiction and as part of its AML due dili-gence has not identified any owners of thepayee that are not bona fide residents of theU.S. territory in which the payee is orga-nized.

(B) Exception for offshore obligations.A withholding agent that makes a pay-ment with respect to an offshore obliga-tion may treat a payment as being madeto an excepted territory NFFE described in§1.1472–1(c)(1)(iii) if it has—

(1) A written statement providing thatthe payee is an entity other than a de-pository institution, custodial institution,or specified insurance company, was or-ganized in a U.S. territory, and is whollyowned by one or more bona fide residentsof that U.S. territory, and, with respect toa payment of U.S. source FDAP income,the written statement must indicate that thepayee is the beneficial owner of the incomeand be accompanied by documentary evi-dence supporting a claim of foreign status(as described in paragraph (c)(5)(i) of thissection); or

(2) General documentary evidence (asdescribed in paragraph (c)(5)(ii)(A) of thissection) or a prospectus establishing thatthe payee is an entity other than a depos-itory institution, custodial institution, orspecified insurance company, establishingthat the payee was organized in a U.S. ter-

ritory, and establishing that the payee iswholly owned by one or more bona fideresidents of that U.S. territory.

(C) Exception for preexisting offshoreobligations of $1,000,000 or less. A with-holding agent that makes a payment withrespect to an offshore obligation that isalso a preexisting obligation with a balanceor value not exceeding $1,000,000 on De-cember 31, 2013, (or the effective date ofthe FFI agreement for a withholding agentthat is a participating FFI) and the lastday of each subsequent calendar year pre-ceding the payment, applying the aggre-gation principles of §1.1471–5(b)(4)(iii),may rely upon its review conducted forAML due diligence purposes to deter-mine whether the owners of the payeeare bona fide residents of the U.S. ter-ritory in which the payee is organized,in lieu of obtaining a written statementor documentary evidence described inparagraph (d)(11)(viii)(B) of this section.The preceding sentence applies only ifthe withholding agent is subject, with re-spect to such account, to the laws of aFATF-compliant jurisdiction and has iden-tified the residence of the owners. Thewithholding agent relying upon this para-graph (d)(11)(viii)(C) must still obtain awritten statement, documentary evidence,as provided in paragraph (d)(11)(viii)(B)of this section, or preexisting accountdocumentary evidence (as described inparagraph (c)(5)(ii)(B) of this section) es-tablishing that the payee is an entity otherthan a depository institution, custodial in-stitution, or specified insurance companyorganized in a U.S. territory.

(ix) Identification of active NFFEs.A withholding agent may treat apayee as an active NFFE described in§1.1472–1(c)(1)(iv) if it has a withhold-ing certificate identifying the payee as anactive NFFE.

(A) Exception for offshore obligations.A withholding agent that makes a paymentwith respect to an offshore obligation maytreat the payee as an active NFFE if thewithholding agent has—

(1) General documentary evidence (asdescribed in paragraph (c)(5)(ii)(A) of thissection) providing sufficient informationto determine that the payee is a foreign en-tity engaged in an active trade or businessother than that of a financial institution; or

(2) A written statement stating that thepayee is a foreign entity engaged in an ac-

April 8, 2013 834 2013–15 I.R.B.

tive business other than that of a financialinstitution and, in the case of a payment ofU.S. source FDAP income, documentaryevidence supporting the payee’s claim offoreign status (as described in paragraph(c)(5)(i) of this section).

(B) Exception for preexisting offshoreobligations. A withholding agent thatmakes a payment with respect to an off-shore obligation that is also a preexistingobligation may treat the payee as an activeNFFE if the withholding agent has pre-existing account documentary evidence(as described in paragraph (c)(5)(ii)(B)of this section) that unambiguously in-dicates that the payee is a foreign entityengaged in a trade or business other thanthat of a financial institution and, in thecase of a payment of U.S. source FDAPincome, documentary evidence support-ing the payee’s claim of foreign status (asdescribed in paragraph (c)(5)(i) of thissection).

(C) Limit on reason to know. A with-holding agent relying on documentary evi-dence to determine that a payee is an ac-tive NFFE will not be required to deter-mine that the payee meets the income andasset thresholds but rather must determineonly that the payee is primarily engaged ina business other than that of a financial in-stitution.

(12) Identification of passive NFFEs. Awithholding agent may treat a payment ashaving been made to a passive NFFE if ithas a withholding certificate that identifiesthe payee as a passive NFFE.

(i) Exception for offshore obligations.A withholding agent that makes a paymentwith respect to an offshore obligation maytreat the payment as made to a passiveNFFE if the withholding agent has—

(A) General documentary evidence (asdescribed in paragraph (c)(5)(ii)(A) of thissection) for the payee providing sufficientinformation to determine that the payee isa foreign entity that is not a financial insti-tution; or

(B) A written statement that the payeeis a foreign entity that is not a financial in-stitution and, for a payment of U.S. sourceFDAP income, documentary evidencesupporting the payee’s claim of foreignstatus (as described in paragraph (c)(5)(i)of this section).

(ii) Special rule for preexisting offshoreobligations. A withholding agent thatmakes a payment with respect to an off-

shore obligation that is also a preexistingobligation may treat the payee as a passiveNFFE if the withholding agent has preex-isting account documentary evidence (asdescribed in paragraph (c)(5)(ii)(B) of thissection) providing sufficient informationto determine that the payee is a foreignentity that is not a financial institution and,with respect to a payment of U.S. sourceFDAP income, documentary evidencesupporting the payee’s claim of foreignstatus (as described in paragraph (c)(5)(i)of this section).

(iii) Required owner certification forpassive NFFEs—(A) In general. Unless itis a WP or WT, a passive NFFE will be re-quired to provide to the withholding agenteither a written certification (contained ona withholding certificate or in a writtenstatement) that it does not have any sub-stantial U.S. owners or the name, address,and TIN of each substantial U.S. owner ofthe NFFE to avoid being withheld uponunder §1.1472–1(b).

(B) Exception for preexisting obliga-tions of $1,000,000 or less (transitional).A withholding agent that makes a paymentprior to January 1, 2017, with respect toa preexisting obligation with a balance orvalue not exceeding $1,000,000 on De-cember 31, 2013, and the last day of eachsubsequent calendar year preceding thepayment, applying the aggregation prin-ciples of §1.1471–5(b)(4)(iii), may relyupon its review conducted for AML duediligence purposes to identify any sub-stantial U.S. owners of the payee in lieuof obtaining the certification or informa-tion required in paragraph (d)(12)(iii)(A)of this section if the withholding agent issubject, with respect to such obligation,to the laws of a FATF-compliant juris-diction and has identified the residenceof any controlling persons (within themeaning of the withholding agent’s AMLdue diligence rules). A withholding agentthat makes a payment with respect to anoffshore obligation that is also a preex-isting obligation with a balance or valuenot exceeding $1,000,000 on December31, 2013, (or the effective date of the FFIagreement for a withholding agent that is aparticipating FFI) and the last day of eachsubsequent calendar year preceding thepayment, applying the aggregation prin-ciples of §1.1471–5(b)(4)(iii), may relyupon its review conducted for AML duediligence purposes to identify any sub-

stantial U.S. owners of the payee in lieuof obtaining the certification or informa-tion required in paragraph (d)(12)(iii)(A)of this section if the withholding agent issubject, with respect to such obligation, tothe laws of a FATF-compliant jurisdictionand has identified the residence of anycontrolling persons (within the meaningof the withholding agent’s AML due dili-gence rules).

(e) Standards of knowledge—(1) Ingeneral. The standards of knowledge dis-cussed in this section apply for purposesof determining the chapter 4 status ofpayees, beneficial owners, intermediaries,flow-through entities, and persons thatown an interest in an owner-documentedFFI. A withholding agent shall be liablefor tax, interest, and penalties to the ex-tent provided under section 1474 and theregulations under that section if it fails towithhold the correct amount despite know-ing or having reason to know the amountrequired to be withheld. A withholdingagent that cannot reliably associate thepayment with documentation and fails toact in accordance with the presumptionrules set forth in paragraph (f) of this sec-tion may also be liable for tax, interest,and penalties. See paragraph (e)(4) inthis section for the specific standards ofknowledge applicable to a person’s spe-cific claims of chapter 4 status.

(2) Notification by the IRS. A withhold-ing agent that has received notification bythe IRS that a claim of status as a U.S. per-son, a participating FFI, a deemed-compli-ant FFI, or other entity entitled to a reducedrate of withholding under section 1471 or1472 is incorrect knows that such a claimis incorrect beginning on the date that is 30business days after the date the notice is re-ceived.

(3) Participating FFIs and registereddeemed-compliant FFIs—(i) In general.A withholding agent that has received apayee’s claim of status as a participatingFFI or registered deemed-compliant FFIand that is required under paragraph (d)(4)of this section to confirm that the branch ofthe FFI claiming status as a participatingFFI or registered-deemed compliant FFIhas a GIIN that appears on the publishedIRS FFI list, has reason to know that suchpayee is not such a financial institution ifthe payee’s name (including a name rea-sonably similar to the name the withhold-ing agent has on file for the payee) and

2013–15 I.R.B. 835 April 8, 2013

GIIN do not appear on the most recentlypublished IRS FFI list within 90 calendardays of the date that the claim is made.The withholding agent will also have rea-son to know that an FFI is either a lim-ited branch or limited FFI (and, thus, nota participating FFI or registered-deemedcompliant FFI) if the withholding agenthas a permanent residence address or mail-ing address for the FFI that is in a coun-try other than the country that in whichthe FFI claims to be a participating FFIor registered deemed-compliant FFI or thewithholding agent makes a payment to theFFI at an address outside of the countryin which the FFI claims to be a partici-pating FFI or registered deemed-compli-ant FFI. A payee whose registration withthe IRS as a participating FFI or a regis-tered deemed-compliant FFI is in processbut has not yet received a GIIN may pro-vide a withholding agent with a Form W–8claiming the chapter 4 status it applied forand writing “applied for” in the box for theGIIN. In such case, the FFI will have 90calendar days from the date of its claimto provide the withholding agent with itsGIIN and the withholding agent will have90 calendar days from the date it receivesthe GIIN to verify the accuracy of the GIINagainst the published IRS FFI list before ithas reason to know that the payee is nota participating FFI or registered deemed-compliant FFI. If an FFI is removed fromthe published IRS FFI list, the withholdingagent knows that such FFI is not a partici-pating FFI or registered deemed-compliantFFI on the earlier of the date that the with-holding agent discovers that the FFI hasbeen removed from the list or the date thatis one year from the date the FFI’s GIINwas actually removed from the list.

(ii) Special rules for reporting Model 1FFIs. Prior to January 1, 2015, a with-holding agent that receives an FFI’s claimof status as a reporting Model 1 FFI willnot be required to confirm that the FFI hasa GIIN that appears on the published IRSFFI list. A withholding agent will havereason to know that the FFI is not a report-ing Model 1 FFI if the withholding agentdoes not have a permanent residence ad-dress for the FFI, or an address of the rele-vant branch of the FFI, located in the coun-try in which the FFI claims to be a re-porting Model 1 FFI or the withholdingagent is directing a payment to a branch ofthe FFI that is not located in the country

in which the FFI claims to be a reportingModel 1 FFI.

(4) Reason to know. A withholdingagent shall be considered to have reasonto know that a claim of chapter 4 statusis unreliable or incorrect if its knowledgeof relevant facts or statements contained inthe withholding certificates or other doc-umentation is such that a reasonably pru-dent person in the position of the with-holding agent would question the claimsmade. For accounts opened on or afterJanuary 1, 2014, a withholding agent willalso be considered to have reason to knowthat a claim of chapter 4 status is unreliableor incorrect if any information containedin its account opening files or other cus-tomer account files, including documenta-tion collected for AML due diligence pur-poses, conflicts with the payee’s claim ofchapter 4 status. In addition to the generalstandards of knowledge set forth in thisparagraph (e) regarding a person’s claimof chapter 4 status, a withholding agent isalso required to apply any specific stan-dards of knowledge applicable to the chap-ter 4 status claimed as set forth in para-graph (d) of this section. A withholdingagent that has relied upon documentationthat is valid pursuant to paragraph (c) totreat a person as a foreign person, however,will have reason to know that a person’sclaim of status as a foreign person is inac-curate only if there are U.S. indicia associ-ated with the person, as described in para-graphs (e)(4)(ii) through (vi) of this sec-tion, for which appropriate documentationsufficient to cure the U.S. indicia in themanner set forth in this paragraph (e) hasnot been obtained.

(i) Information conflicting with per-son’s claim of chapter 4 status. A with-holding certificate, written statement, ordocumentary evidence is unreliable or in-correct if there is information on the faceof the documentation or in the withholdingagent’s account files that conflicts withthe person’s claim regarding its chapter 4status. For example, a withholding agentwill have reason to know that a person’sclaim that it is an excepted NFFE is unre-liable or incorrect if the withholding agenthas a financial statement or credit reportthat indicates that the person is engagedin business as a financial institution or ifdocumentation submitted by the personindicates that the person is acting as anintermediary with respect to the payment

and, thus, is not a beneficial owner forpurposes of §1.1472–1(c)(1). Further, awithholding agent that has classified theperson as engaged in a particular typeof business in its own records, such asthrough a standard industrial classificationcode, will have reason to know that thatthe chapter 4 status claimed by the personis unreliable or incorrect if the claim con-flicts with the withholding agent’s internalclassification.

(ii) Specific standards of knowledge ap-plicable to withholding certificates—(A)In general. A withholding agent has rea-son to know that a withholding certificateprovided by a person is unreliable or in-correct if the withholding certificate is in-complete with respect to any item on thecertificate that is relevant to the claimsmade by the person, the withholding cer-tificate contains any information that isinconsistent with the person’s claim, thewithholding agent has other account infor-mation that is inconsistent with the per-son’s claim, or the withholding certificatelacks information necessary to establishentitlement to an exemption from with-holding for chapter 4 purposes. A with-holding agent that relies on an agent to re-view and maintain a withholding certifi-cate is considered to know or have reasonto know the facts within the knowledge ofthe agent. Paragraphs (e)(4)(ii)(B) through(D) of this section do not apply to a with-holding certificate provided by a partici-pating FFI, a registered deemed-compli-ant FFI, or a sponsored FFI, described in§1.1471–5(f)(2)(iii), if the certificate con-tains a GIIN for the FFI or sponsor that thewithholding agent verifies on the currentpublished IRS FFI list as provided in para-graph (e)(3) of this section.

(B) Classification of U.S. status, U.S.address, or U.S. telephone number. Awithholding agent has reason to know thata withholding certificate provided by a per-son is unreliable or incorrect if the with-holding agent has classified the person as aU.S. person in its customer files, the with-holding certificate has a current permanentresidence address in the United States, thewithholding certificate has a current mail-ing address in the United States, the with-holding agent has a current residence ormailing address as part of its account in-formation that is an address in the UnitedStates, or the person notifies the withhold-ing agent of a new residence or mailing

April 8, 2013 836 2013–15 I.R.B.

address in the United States (whether ornot provided on a withholding certificate).A withholding agent also has reason toknow that a withholding certificate pro-vided by a person is unreliable or incor-rect if the withholding agent has a cur-rent telephone number for the person in theUnited States and has no telephone num-ber for the person outside of the UnitedStates. Notwithstanding the foregoing, awithholding agent may rely upon a with-holding certificate to establish the person’sstatus as a foreign person despite knowingthat the person has any of the U.S. indiciadescribed in this paragraph (e)(4)(ii)(B) ifit may do so under the provisions of para-graphs (e)(4)(ii)(B)(1) and (2) of this sec-tion.

(1) Presumption of individual’s foreignstatus. A withholding agent may treat anindividual that has U.S. indicia describedin paragraph (e)(4)(ii)(B) of this sectionas a foreign person if the individual hasprovided a withholding certificate and—

(i) The withholding agent has in its pos-session, or obtains, documentary evidenceestablishing foreign status (as describedin paragraph (c)(5)(i) of this section) thatdoes not contain a U.S. address and theindividual provides the withholding agentwith a reasonable written explanation sup-porting the claim of foreign status;

(ii) For a payment made with respectto an offshore obligation, the withholdingagent has in its possession, or obtains, doc-umentary evidence establishing foreignstatus (as described in paragraph (c)(5)(i)of this section), that does not contain aU.S. address; or

(iii) For a payment made with respectto an offshore obligation, the withholdingagent classifies the individual as a residentof the country in which the obligation ismaintained, the withholding agent is re-quired to report payments made to the indi-vidual annually on a tax information state-ment that is filed with the tax authority ofthe country in which the office is locatedas part of that country’s resident reportingrequirements, and that country has a tax in-formation exchange agreement or incometax treaty in effect with the United States.

(2) Presumption of entity’s foreign sta-tus. A withholding agent may treat an en-tity that has U.S. indicia described in para-graph (e)(4)(ii)(B) of this section as a for-eign person if the entity has provided awithholding certificate and—

(i) The withholding agent has in its pos-session, or obtains, documentary evidenceestablishing foreign status (as describedin paragraph (c)(5)(i) of this section) thatsubstantiates that the entity is actually or-ganized or created under the laws of a for-eign country; or

(ii) For a payment made with respectto an offshore obligation, the withhold-ing agent classifies the entity as a residentof the country in which the obligation ismaintained, the withholding agent is re-quired to report payments made to the en-tity annually on a tax information state-ment that is filed with the tax authority ofthe country in which the office is locatedas part of that country’s resident reportingrequirements, and that country has a tax in-formation exchange agreement or incometax treaty in effect with the United States.

(C) U.S. place of birth—(1) Accountsopened on or after January 1, 2014. Foraccounts opened on or after January 1,2014, a withholding agent has reason toknow that a withholding certificate indi-cating foreign status provided by an indi-vidual is unreliable or incorrect if the with-holding agent has, either on accompanyingdocumentation or as part of its account in-formation, an unambiguous indication ofa place of birth for the individual in theUnited States. A withholding agent maytreat the individual as a foreign person,notwithstanding the U.S. place of birth, ifthe withholding agent has no knowledgethat the individual has any other U.S. indi-cia described in paragraph (e)(4)(ii) of thissection and the withholding agent obtainsa copy of the individual’s Certificate ofLoss of Nationality of the United States. Awithholding agent may also treat the indi-vidual as a foreign person, notwithstandingthe U.S. place of birth and any other U.S.indicia described in paragraph (e)(4)(ii) ofthis section, if the withholding agent ob-tains a non-U.S. passport or other govern-ment-issued identification that is evidenceof citizenship in a country other than theUnited States and either a copy of the indi-vidual’s Certificate of Loss of Nationalityof the United States, or a reasonable writ-ten explanation of the account holder’s re-nunciation of U.S. citizenship or the reasonthe account holder did not obtain U.S. cit-izenship at birth.

(2) Preexisting obligations. For a pay-ment made with respect to a preexistingobligation, a withholding agent will not be

required to conduct a search of its docu-mentation to identify a U.S. place of birthassociated with an individual. However, ifthe withholding agent, on or after January1, 2014, reviews documentation that con-tains a U.S. birth place for an individualthat is treated as a foreign person or is no-tified that the individual has a U.S. place ofbirth, then the account will be consideredto have experienced a change in circum-stances as of the date that the withhold-ing agent reviewed the documentation andthe withholding agent will be considered tohave reason to know that the individual isa U.S. person. See paragraph (c)(6)(ii)(E)of this section for rules regarding the timeperiod allowed to cure a change in circum-stances.

(D) Standing instructions with respectto offshore obligations. A withholdingagent has reason to know that a withhold-ing certificate provided by a person is un-reliable or incorrect if it is provided withrespect to an offshore obligation and theperson has standing instructions directingthe withholding agent to pay amounts toan address or an account maintained in theUnited States. The withholding agent mayrely upon the withholding certificate to es-tablish the person’s status as a foreign per-son, however, if the person provides docu-mentary evidence establishing foreign sta-tus (as described in paragraph (c)(5)(i) ofthis section).

(iii) Specific standard of knowledge ap-plicable to written statements. A with-holding agent must apply the standards ofknowledge applicable to withholding cer-tificates, as set forth in paragraph (e)(4)(i)and (ii) of this section, when determiningwhether it can rely on a written statement.

(iv) Specific standard of knowledgeapplicable to documentary evidence—(A)In general. A withholding agent maynot treat documentary evidence providedby a person as valid if the documentaryevidence does not reasonably establishthe identity of the person presenting thedocumentary evidence. For example,documentary evidence is not valid if it isprovided in person by an individual andthe photograph or signature on the docu-mentary evidence, if any, does not matchthe appearance or signature of the personpresenting the document. A withhold-ing agent may not rely on documentaryevidence to reduce the rate of withhold-ing that would otherwise apply under

2013–15 I.R.B. 837 April 8, 2013

the presumption rules in paragraph (f) ofthis section if the documentary evidencecontains information that is inconsistentwith the person’s claim as to its chapter4 status, the withholding agent has otheraccount information that is inconsistentwith the person’s claim, or the documen-tary evidence lacks information necessaryto establish the person’s chapter 4 status.

(B) Classification of U.S. status, U.S.address, or U.S. telephone number. Awithholding agent may not treat documen-tary evidence provided by a person as validfor purposes of establishing the person’sforeign status if the withholding agent doesnot have a permanent residence address forthe person. The previous sentence willnot apply, however, to a withholding agentthat is making a payment with respect toan offshore obligation. Documentary ev-idence is unreliable or incorrect to estab-lish a person’s status as a foreign personif the withholding agent has classified theperson as a U.S. person in its customerfiles, the withholding agent has a currentresidence or mailing address (whether ornot on the documentation) for the personin the United States, if the person noti-fies the withholding agent of a new addressin the United States, or if the withhold-ing agent has a current telephone numberfor the person in the United States and hasno telephone number for the person out-side of the United States. Notwithstand-ing the foregoing, a withholding agent mayrely on documentary evidence to establishthe person’s status as a foreign person de-spite knowing that the person has any ofthe U.S. indicia described in this paragraph(e)(4)(iv)(B) if it may do so under the pro-visions of paragraphs (e)(4)(iv)(B)(1) and(2) of this section.

(1) Presumption of individual’s foreignstatus. A withholding agent may treat anindividual that has U.S. indicia describedin paragraph (e)(4)(iv)(B) of this sectionas a foreign person if the individual hasprovided documentary evidence and—

(i) The withholding agent has in its pos-session, or obtains, additional documen-tary evidence establishing foreign status(as described in paragraph (c)(5)(i) of thissection), that does not contain a U.S. ad-dress, and the individual provides the with-holding agent with a reasonable written ex-planation supporting the claim of foreignstatus;

(ii) The withholding agent has in itspossession, or obtains, a valid beneficialowner withholding certificate that containsa permanent residence address outside theUnited States and a mailing address, if any,outside the United States (or, if a mailingaddress is inside the United States, the di-rect account holder provides a reasonablewritten explanation supporting the individ-ual’s claim of foreign status); or

(iii) For a payment made with respectto an offshore obligation, the withhold-ing agent has in its possession, or obtains,a beneficial owner withholding certificatethat contains a permanent residence ad-dress outside the United States.

(2) Presumption of entity’s foreign sta-tus. A withholding agent may treat an en-tity that has U.S. indicia described in para-graph (e)(4)(iv)(B) of this section as a for-eign person if the entity has provided doc-umentary evidence and—

(i) The withholding agent has in its pos-session, or obtains, documentary evidenceestablishing foreign status (as describedin paragraph (c)(5)(i) of this section) thatsubstantiates that the entity is actually or-ganized or created under the laws of a for-eign country;

(ii) The withholding agent obtains avalid withholding certificate that containsa permanent residence address outside theUnited States and a mailing address, ifany, outside the United States; or

(iii) For a payment made with respectto an offshore obligation, the withholdingagent classifies the entity as a resident ofthe country in which the account is main-tained, the withholding agent is required toreport payments made to the entity annu-ally on a tax information statement that isfiled with the tax authority of the countryin which the office is located as part of thatcountry’s resident reporting requirements,and that country has a tax information ex-change agreement or income tax treaty ineffect with the United States.

(C) U.S. place of birth—(1) Accountsopened on or after January 1, 2014. Foraccounts opened on or after January 1,2014, a withholding agent has reason toknow that documentary evidence providedto demonstrate an individual’s status as aforeign person is unreliable or incorrect ifthe documentation contains a U.S. birthplace for the individual or the withhold-ing agent has, as part of its account infor-mation, a place of birth for the individual

in the United States. A withholding agentmay treat the individual as a foreign per-son, notwithstanding the U.S. birth place,if the withholding agent has no knowledgethat the individual has any other U.S. in-dicia described in paragraph (e)(4)(iv) ofthis section and the withholding agent ob-tains a copy of the individual’s Certificateof Loss of Nationality of the United States.A withholding agent may also treat the in-dividual as a foreign person, notwithstand-ing the U.S. birth place and any other U.S.indicia described in paragraph (e)(4)(iv) ofthis section, if the withholding agent ob-tains a withholding certificate from the in-dividual that establishes the payee’s for-eign status and either a copy of the indi-vidual’s Certificate of Loss of Nationalityof the United States or a reasonable writ-ten explanation of the individual’s renunci-ation of U.S. citizenship or the reason theindividual did not obtain U.S. citizenshipat birth.

(2) Preexisting obligations. For a pay-ment made with respect to a preexistingobligation, a withholding agent will not berequired to conduct a search of its docu-mentation to identify a U.S. place of birthassociated with an individual. However, ifthe withholding agent, on or after January1, 2014, reviews documentation that con-tains a U.S. place of birth for the individualthat is treated as a foreign person or is noti-fied that the individual has a U.S. place ofbirth, then the account will be consideredto have experienced a change in circum-stances as of the date that the withhold-ing agent reviewed the documentation andthe withholding agent will be considered tohave reason to know that the individual isa U.S. person. See paragraph (c)(6)(ii)(E)of this section for rules regarding the timeperiod allowed to cure a change in circum-stances.

(D) Standing Instructions. With respectto an offshore obligation, documentary ev-idence is unreliable or incorrect as an in-dication of a person’s status as a foreignperson if the person has standing instruc-tions directing the withholding agent topay amounts to an address or an accountmaintained in the United States. The with-holding agent may treat the person as a for-eign person, however, if the person pro-vides a withholding certificate and docu-mentary evidence establishing foreign sta-tus (as described in paragraph (c)(5)(i) of

April 8, 2013 838 2013–15 I.R.B.

this section), to the extent such documen-tary evidence was not already provided.

(E) Standards of knowledge applica-ble to certain types of documentary evi-dence—(1) Financial statement. A with-holding agent that obtains a financial state-ment for purposes of establishing that aforeign payee meets a certain asset thresh-old will have reason to know that the chap-ter 4 status claimed is inaccurate only if thetotal assets shown on the financial state-ment for the payee, and if relevant thepayee’s expanded affiliated group, are notwithin the permissible thresholds or thefootnotes to the financial statement indi-cate that the payee is not a foreign entityor is not a type of FFI eligible for the chap-ter 4 status claimed. A withholding agentthat obtains a financial statement for pur-poses of establishing that the payee is anactive NFFE will be required to reviewthe balance sheet and income statementto determine whether the payee meets theincome and asset thresholds set forth in§1.1472–1(c)(1)(iv) and the footnotes ofthe financial statement for an indicationthat the payee is not a foreign entity or is afinancial institution. A withholding agentthat obtains a financial statement for pur-poses of establishing a chapter 4 status fora payee that does not require the payee tomeet an asset or income threshold will berequired to review only the footnotes to thefinancial statement to determine whetherthe financial statement supports the claimof chapter 4 status. A withholding agentthat is not relying upon a financial state-ment to establish the chapter 4 status ofthe payee (for example because it has otherdocumentation that establishes the payee’schapter 4 status) is not required to inde-pendently evaluate the financial statementsolely because the withholding agent alsohas collected the financial statement in thecourse of its account opening or other pro-cedures.

(2) Organizational documents. A with-holding agent that obtains organizationaldocuments for an entity solely for thepurpose of supporting the chapter 4 statusclaimed will only be required to reviewthe document sufficiently to establish thatthe entity is a foreign person and that thepurposes for which the entity was formedand its basic activities appear to be ofa type consistent with the chapter 4 sta-tus claimed, unless otherwise specifiedin paragraph (d) of this section. A with-

holding agent that obtains organizationaldocuments for the purpose of establishingthat an entity has a particular chapter 4status will only be required to review thedocument to the extent needed to establishthat the entity is a foreign person, thatthe requirements applicable to the partic-ular chapter 4 status are met, and that thedocument was executed, but will not berequired to review the remainder of thedocument.

(v) Specific standards of knowledge ap-plicable when only documentary evidenceis a code or classification described inparagraph (c)(5)(ii)(B) of this section. Awithholding agent may not rely upon astandard industry code or classification de-scribed in paragraph (c)(5)(ii)(B) of thissection to treat an entity as having a for-eign chapter 4 status if there are U.S. in-dicia described in paragraph (e)(4)(v)(A)of this section associated with the entity,unless such U.S. indicia are cured in themanner set forth in paragraph (e)(4)(v)(B)of this section.

(A) U.S. indicia for entities. The termU.S. indicia when used with respect to anentity includes, for purposes of this para-graph (e)(4)(v) any of the following—

(1) Classification of an account holderas a U.S. resident in the withholdingagent’s customer files;

(2) A current U.S. residence address orU.S. mailing address;

(3) With respect to an offshore obliga-tion, standing instructions to pay amountsto a U.S. address or an account maintainedin the United States;

(4) A current telephone number for theentity in the United States but no telephonenumber for the entity outside of the UnitedStates;

(5) A current telephone number for theentity in the United States in addition to atelephone number for the entity outside ofthe United States;

(6) A power of attorney or signatoryauthority granted to a person with a U.S.address; and

(7) An “in-care-of” address or “holdmail” address that is the sole address pro-vided for the entity.

(B) Documentation required to cureU.S. indicia. A withholding agent mayrely upon a code or classification describedin paragraph (c)(5)(ii)(B) of this section totreat an entity as having a foreign chapter4 status if there are U.S. indicia associ-

ated with the entity and the withholdingagent obtains the relevant documentationdescribed in this paragraph (e)(4)(v)(B).

(1) If there are U.S. indicia describedin paragraphs (e)(4)(v)(A)(1) through (4)of this section associated with the entity,the withholding agent may treat the entityas a foreign person only if the withhold-ing agent obtains a withholding certificatefor the entity and one form of documentaryevidence, described in paragraph (c)(5) ofthis section that establishes the entity’s sta-tus as a foreign person (such as a certificateof incorporation).

(2) If there are U.S. indicia describedin paragraphs (e)(4)(v)(A)(1) to (4) of thissection associated with the entity and thewithholding agent is making a paymentwith respect to an offshore obligation, thewithholding agent may also treat the en-tity as a foreign person if the withholdingagent obtains a withholding certificate forthe entity and the withholding agent treatsthe entity as foreign for purposes of for-eign tax reporting. A withholding agentwill treat an entity as foreign for purposesof foreign tax reporting only if the with-holding agent classifies the entity as a res-ident of the country in which the obliga-tion is maintained, the withholding agentis required to report payments made to theentity annually on a tax information state-ment that is filed with the tax authority ofthe country in which the account is main-tained as part of that country’s resident re-porting requirements, and that country hasan tax information exchange agreement orincome tax treaty in effect with the UnitedStates.

(3) If there are indicia described in para-graphs (e)(4)(v)(A)(5) through (7) of thissection associated with the entity, the with-holding agent may treat the entity as aforeign person if the withholding agentobtains a withholding certificate or oneform of documentary evidence, describedin paragraph (c)(5) of this section, that es-tablishes the entity’s status as a foreign per-son (such as a certificate of incorporation).

(vi) Specific standards of knowledgeapplicable to documentation received fromintermediaries and flow-through enti-ties—(A) In general. A withholding agentthat receives documentation from a payeethrough an intermediary or flow-throughentity is required to review all documen-tation obtained with respect to the payeeand all intermediaries and/or flow-through

2013–15 I.R.B. 839 April 8, 2013

entities in the chain of payment, applyingthe standards of knowledge set forth inparagraph (e) of this section. This standardrequires, but is not limited to, a withhold-ing agent’s compliance with the rules ofparagraphs (e)(4)(vi)(A)(1) and (2) of thissection.

(1) The withholding agent is required toreview the withholding statement or ownerreporting statement provided and may notrely on information in the statement tothe extent the information does not sup-port the claims made regarding the chap-ter 4 status of the person. For this pur-pose, a withholding agent may not treat aperson as a foreign person if an addressin the United States is provided for suchperson unless the withholding statement isaccompanied by a valid withholding cer-tificate and documentary evidence estab-lishing foreign status (as described in para-graph (c)(5)(i) of this section).

(2) The withholding agent must revieweach withholding certificate and writtenstatement in accordance with paragraph(e)(4)(i) through (iii) of this section and alldocumentary evidence in accordance withparagraph (e)(4)(i) and (iv) of this section,and must verify that the information con-tained on the withholding certificate, writ-ten statement, and documentary evidenceis consistent with the information on thewithholding statement or owner reportingstatement. If there is a discrepancy be-tween the withholding certificate, writtenstatement, or documentary evidence andthe withholding statement or owner report-ing statement, the withholding agent maychoose to rely on the withholding certifi-cate, written statement, or documentaryevidence provided such documentation isvalid and the intermediary or flow-throughentity does not indicate that the documen-tation is unreliable or inaccurate, or mayapply the presumption rules set forth inparagraph (f) of this section. If the with-holding agent chooses to rely upon thewithholding certificate, written statement,or documentary evidence, the withholdingagent is required to instruct the interme-diary or flow-through entity to correct thewithholding statement and confirm that theintermediary or flow-through entity doesnot know or have reason to know that thedocumentation is unreliable or inaccurate.

(B) Limits on reason to know withrespect to documentation receivedfrom participating FFIs and registered

deemed-compliant FFIs that are inter-mediaries or flow-through entities. Awithholding agent that receives docu-mentation from a participating FFI orregistered deemed-compliant FFI that isnot the payee must apply the requirementsof paragraph (e)(4)(vi)(A) of this section,except that the withholding agent mayrely upon the chapter 4 status providedby the participating FFI or registereddeemed-compliant FFI in the withholdingstatement unless the withholding agenthas information that conflicts with thechapter 4 status provided. If underlyingdocumentation is provided for the payeeand information in the documentation orin the withholding agent’s records con-flicts with the chapter 4 status claimed,the withholding agent will have reason toknow that the chapter 4 status claimed isinaccurate. A withholding agent is not,however, required to verify informationcontained in documentation provided byan intermediary or flow-through entitythat is a participating FFI or registereddeemed-compliant FFI that is not faciallyincorrect and is not required to obtainsupporting documentation for the payee inaddition to a withholding certificate unlessthe withholding agent obtains such docu-mentation for purposes of chapter 3 or 61or unless the withholding agent knows thatthe review conducted by the participatingFFI or registered deemed-compliant FFIfor purposes of chapter 4 was not ade-quate. For example, a withholding agentthat receives a withholding statement froma participating FFI that is an intermedi-ary stating that the payee is a registereddeemed-compliant FFI is only required todetermine that any withholding certificateprovided for the payee contains a GIINand that the GIIN does not appear to befacially invalid (for example, because itdoes not contain the correct amount ofdigits), but is not subject to the require-ments set forth in paragraph (e)(3) of thissection. Similarly, a withholding agentthat receives from a participating FFI thatis a partnership a withholding statementclaiming that the payee is an active NFFEwill have reason to know that the claimis inaccurate if it receives a withholdingstatement that contains a U.S. address forthe payee unless the partnership also pro-vides a copy of documentation sufficientto cure the U.S. indicia in the manner setforth in paragraph (e) of this section or

the withholding statement indicates thatappropriate documentation sufficient tocure the U.S. indicia in the manner setforth in paragraph (e) of this section hasbeen obtained and provides details of suchdocumentation, such as the type of docu-mentation and an identification number ofthe person contained on the document.

(vii) Limits on reason to know—(A)Scope of review for preexisting obligationsof entities. For purposes of determiningwhether a withholding agent that makes apayment with respect to a preexisting obli-gation to an entity has reason to know thatthe chapter 4 status applied to the entityis unreliable or incorrect, the withholdingagent is only required to review infor-mation contradicting the chapter 4 statusclaimed if such information is containedin the current customer master file, themost recent withholding certificate, writ-ten statement, and documentary evidencefor the person, the most recent accountopening contract, the most recent docu-mentation obtained by the withholdingagent for purposes of AML due diligenceor for other regulatory purposes, anypower of attorney or signature authorityforms currently in effect, and any standinginstructions to pay amounts that is cur-rently in effect.

(B) Reason to know there is a U.S.telephone number associated with a pre-existing obligation. For payments madewith respect to a preexisting obligation,a withholding agent, in lieu of searchingthe account files addressed in paragraph(e)(4)(vii)(A) of this section to determinewhether the payee (or other person receiv-ing the payment) has a current telephonenumber in the United States, may relyupon a search of its electronically search-able information associated with suchperson. However, the withholding agentmay only rely upon the electronic searchdescribed in the previous sentence if theelectronic search produces at least onecurrent phone number for the person. Ifthe electronic search does not produce atelephone number for the person, the with-holding agent will be required, by January1, 2017, to search the files described inparagraph (e)(4)(vii)(A) of this section tolocate a current telephone number for thepayee.

(C) Reason to know there are U.S. in-dicia associated with preexisting offshoreobligations. For payments made outside

April 8, 2013 840 2013–15 I.R.B.

of the United States with respect to an off-shore obligation that is also a preexistingobligation and with respect to a withhold-ing agent that had not already documentedthe payee for purposes of chapter 3 or 61,the withholding agent, in lieu of searchingthe account files addressed in paragraph(e)(4)(vii)(A) of this section to determinewhether there are U.S. indicia associatedwith the payee (or other person who re-ceives the payment), may instead rely upona search of its electronically searchable in-formation associated with such person. Awithholding agent that relies upon an elec-tronic search pursuant to this paragraph(e)(4)(vii)(C) must also review for U.S. in-dicia any documentation upon which thewithholding agent relies to determine thechapter 4 status of the person and any doc-umentation that the withholding agent hadbeen relying upon to determine the resi-dency or citizenship of the person.

(D) Limits on reason to know for multi-ple obligations belonging to a single per-son. A withholding agent that maintainsmultiple obligations for a single personwill have reason to know that a chapter 4status assigned to the person is inaccuratebased on information contained in the cus-tomer files for another obligation held bythe person only to the extent that—

(1) The withholding agent’s computer-ized systems link the obligations by refer-ence to a data element such as client num-ber, EIN, or foreign tax identifying numberand consolidates the customer informationand payment information for the obliga-tions; or

(2) The withholding agent has treatedthe obligations as consolidated obligationsfor purposes of sharing documentationpursuant to paragraph (c)(8) of this sectionor for purposes of treating one or moreaccounts as preexisting obligations.

(viii) Reasonable explanation support-ing claim of foreign status. A reasonableexplanation supporting a claim of foreignstatus for an individual means a writtenstatement prepared by the individual (orthe individual’s completion of a checklistprovided by the withholding agent), stat-ing that the individual meets one of therequirements of paragraphs (e)(4)(viii)(A)through (D).

(A) The individual certifies that he orshe—

(1) Is a student at a U.S. educationalinstitution and holds the appropriate visa;

(2) Is a teacher, trainee, or intern at aU.S. educational institution or a partici-pant in an educational or cultural exchangevisitor program, and holds the appropriatevisa;

(3) Is a foreign individual assigned to adiplomatic post or a position in a consulate,embassy, or international organization inthe United States; or

(4) Is a spouse or unmarried child underthe age of 21 years of one of the personsdescribed in paragraphs (e)(4)(viii)(A)through (C) of this section;

(B) The individual provides informa-tion demonstrating that he or she has notmet the substantial presence test set forthin §301.7701(b)–1(c) of this chapter (forexample, a written statement indicatingthe number of days present in the UnitedStates during the three-year period thatincludes the current year);

(C) The individual certifies that he orshe meets the closer connection excep-tion described in §301.7701(b)–2, statesthe country to which the individual has acloser connection, and demonstrates howthat closer connection has been estab-lished; or

(D) With respect a payment entitled to areduced rate of tax under a U.S. income taxtreaty, the individual certifies that he or sheis treated as a resident of a country otherthan the United States and is not treated asa U.S. resident or U.S. citizen for purposesof that income tax treaty.

(5) Conduit financing arrangements.The rules set forth in §1.1441–7(f), re-garding a withholding agent’s liability forfailing to withhold in the case in whichthe financing arrangement is a conduitfinancing arrangement, apply for purposesdetermining a withholding agent’s liabilityfor any withholding required under chap-ter 4.

(6) Additional guidance. The IRS mayprescribe other circumstances for which awithholding certificate or documentary ev-idence to establish a payee’s chapter 4 sta-tus is unreliable or incorrect in addition tothe circumstances described in this para-graph (e).

(f) Presumptions regarding chapter 4status of the person receiving the paymentin the absence of documentation—(1) Ingeneral. A withholding agent that can-not, prior to the payment, reliably asso-ciate (within the meaning of paragraph (c)of this section) a payment with valid doc-

umentation may rely on the presumptionsof this paragraph (f) to determine the statusof the payee (or other person receiving thepayment) as a U.S. or foreign person andsuch person’s other relevant characteristics(for example, as a participating FFI or anonparticipating FFI). See paragraph (f)(9)of this section for consequences to a with-holding agent that fails to withhold in ac-cordance with the presumptions set forth inthis paragraph (f) or that has actual knowl-edge or reason to know facts that are con-trary to the presumptions set forth in thisparagraph (f).

(2) Presumptions of classification asan individual or entity—(i) In general.A withholding agent that cannot reliablyassociate a payment with a valid withhold-ing certificate, or that has received validdocumentary evidence, as described inparagraph (c)(5) of this section, but cannotdetermine a person’s status as an indi-vidual or an entity from the documentaryevidence, must presume that the personis an individual if the person appears tobe an individual (for example, based onthe person’s name or information in thecustomer file). If the person does notappear to be an individual, then the per-son shall be presumed to be an entity. Inthe absence of reliable documentation, awithholding agent must treat a person thatis presumed to be an entity as a trust orestate if the person appears to be a trustor estate (for example, based on the per-son’s name or information in the customerfile). In addition, a withholding agentmust treat a person that is presumed tobe a trust, or a person that is known tobe a trust but for which the withholdingagent cannot determine the type of trust,as a grantor trust if the withholding agentknows that the settlor of the trust is aU.S. person, and otherwise as a simpletrust. In the absence of reliable indica-tions that the entity is a trust or estate,the withholding agent must presume theperson is a corporation if it can be treatedas such under §1.6049–4(c)(1)(ii)(A)(1).If the withholding agent cannot treatthe person as a corporation under§1.6049–4(c)(1)(ii)(A)(1), then the personmust be presumed to be a partnership. Seeparagraph (a) of this section to determine,based upon the person’s presumed entitytype, whether the person is treated as apayee.

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(ii) Documentary evidence furnishedfor offshore obligation. If the withholdingagent receives valid documentary evi-dence, as described in paragraph (d) of thissection, with respect to an offshore obli-gation from an entity but the documentaryevidence does not establish the entity’sclassification as a corporation, trust, es-tate, or partnership, the withholding agentmay presume that the entity is a corpora-tion unless the withholding agent knows,or has reason to know, that the entity isnot classified as a corporation for U.S. taxpurposes. However, a withholding agentmay not treat a person that is known orpresumed to be a foreign corporation as abeneficial owner if the withholding agentknows, or has reason to know, that the per-son is not the beneficial owner with respectto the payment. For this purpose, a with-holding agent will have reason to knowthat the person is not a beneficial ownerif the documentary evidence indicates thatthe person is a bank, broker, intermediary,custodian, or other agent. A withholdingagent may, however, treat such a personas a beneficial owner if the foreign personprovides written notification, regardlessof whether such notification is signed,that indicates the person is the beneficialowner of the payment.

(3) Presumptions of U.S. or foreignstatus. A payment that the withholdingagent cannot reliably associate with a validwithholding certificate or documentaryevidence is presumed to be made to a U.S.person, except as otherwise provided inthis paragraph (f)(3). A payment that isreliably associated with documentationthat indicates the payment is made to aU.S. person but does not indicate whetherthe person is a specified U.S. person,will be presumed to be made to a spec-ified U.S. person unless the withholdingagent can apply the presumption rules of§1.6049–4(c)(1)(ii)(B), (C), (D), (E), (I),(J), (K), (L), or (N), to presume that theperson is other than a specified U.S. personor the person’s name reasonably indicatesthat the person is a bank (for examplebecause it contains the word “Bank” or aforeign equivalent).

(i) Payments to entities with indicia offoreign status. If a withholding agent can-not reliably associate a payment with validdocumentation sufficient to determine theperson’s status as a U.S. person or foreignperson and the person is presumed to be an

entity, the person is presumed to be a for-eign person and not a U.S. person—

(A) If the withholding agent has actualknowledge of the person’s EIN and thatnumber begins with the two digits “98”;

(B) If the withholding agent’s commu-nications with the person are mailed to anaddress in a foreign country;

(C) If the withholding agent has a tele-phone number for the person outside of theUnited States; or

(D) If the name of the person indicatesthat the entity is of a type that is on the perse list of foreign corporations contained in§301.7701–2(b)(8)(i) of this chapter (otherthan a name which contains the designa-tion “corporation” or “company”).

(ii) Payments to certain exempt re-cipients. If the payment is made toan entity that is treated as an ex-empt recipient under the provisions of§1.6049–4(c)(1)(ii)(A)(1), (F), (G), (H),(I), (M), (O), (P), or (Q) in the case of inter-est, or under similar provisions in chapter61 applicable to the type of payment in-volved, the entity shall be presumed to bea foreign person.

(iii) Payments with respect to offshoreobligations. A payment to an individualor an entity is presumed to be made toa foreign person if the payment is madeoutside of the United States with respect toan offshore obligation and the withholdingagent does not know that the person is aU.S. person.

(4) Presumption of chapter 4 status fora foreign entity. A withholding agent thatmakes a payment to a foreign entity thatit cannot reliably associate with a validwithholding certificate or documentary ev-idence sufficient to determine the chapter 4status of that entity under paragraph (d) ofthis section (for example, as a participatingFFI, nonparticipating FFI, or NFFE) mustpresume that the entity is a nonparticipat-ing FFI.

(5) Presumption of status as an inter-mediary. If a withholding agent cannot re-liably associate a payment with documen-tation to treat the payment as made to anintermediary, then the withholding agentmust treat the payment as made to an inter-mediary if the withholding agent has doc-umentary evidence or other documenta-tion that indicates, or the facts and circum-stances of the transaction (including thename of the person who receives the pay-ment or the presence of sub-account num-

bers not corresponding to accounts main-tained by the withholding agent for suchperson) indicate that the person who re-ceives the payment is a bank, broker, cus-todian, intermediary, or other agent, andthe withholding agent has no knowledgethat the person is receiving the paymentfor its own account. Any portion of a pay-ment that the withholding agent must treatas made to a foreign intermediary (whethera QI or an NQI) but that the withhold-ing agent cannot treat as reliably associ-ated with valid documentation under therules of paragraph (c) of this section, ispresumed to be made to a nonparticipat-ing FFI account holder of the intermediary.A person that the withholding agent is notrequired to treat as a foreign intermediaryunder this paragraph (f)(5) is presumed tobe a person other than an intermediary.

(6) Presumption of effectively con-nected income for payments to certain U.S.branches. A withholding agent that makesa payment to a U.S. branch described inthis paragraph (f)(6) may presume, in theabsence of documentation indicating oth-erwise, that the U.S. branch is the payeeand the payment is effectively connectedwith the conduct of a trade or business inthe United States if the withholding agenthas both an EIN for the branch and a validGIIN for the home office establishing thatthe U.S. branch is a branch of a participat-ing FFI or registered deemed-compliantFFI. A U.S. branch is described in thisparagraph (f)(6) if it is a U.S. branch ofa foreign bank subject to regulatory su-pervision by the Federal Reserve Boardor a U.S. branch of a foreign insurancecompany required to file an annual state-ment on a form approved by the NationalAssociation of Insurance Commissionerswith the Insurance Department of a State,a Territory, or the District of Columbia.A payment is treated as made to a U.S.branch of a foreign bank or foreign insur-ance company if the payment is creditedto an account maintained in the UnitedStates in the name of a U.S. branch of theforeign person, or the payment is madeto an address in the United States wherethe U.S. branch is located and the nameof the U.S. branch appears on documents(in written or electronic form) associatedwith the payment (for example, the checkmailed or letter addressed to the branch).

(7) Joint payees—(i) In general. If awithholding agent makes a payment to

April 8, 2013 842 2013–15 I.R.B.

joint payees and cannot reliably associatethe payment with valid documentationfrom each payee but all of the joint payeesappear to be individuals, then the paymentis presumed made to an unidentified U.S.person. If any joint payee does not ap-pear, by its name and other informationcontained in the account file, to be anindividual, then the entire payment willbe treated as made to a nonparticipatingFFI. However, if one of the joint payeesprovides a Form W–9 furnished in accor-dance with the procedures described in§§31.3406(d)–1 through 31.3406(d)–5 ofthis chapter, the payment shall be treatedas made to that payee.

(ii) Exception for offshore obligations.If a withholding agent makes a paymentoutside the United States with respect toan offshore obligation held by joint payeesand cannot reliably associate a paymentwith valid documentation from each payeebut all of the joint payees appear to beindividuals, then the payment is presumedmade to an unknown foreign individual.

(8) Rebuttal of presumptions. A payeemay rebut the presumptions described inthis paragraph (f) by providing reliabledocumentation to the withholding agent or,if applicable, to the IRS.

(9) Effect of reliance on presumptionsand of actual knowledge or reason to knowotherwise—(i) In general. Except as oth-erwise provided in this paragraph (f)(9), awithholding agent that withholds on a pay-ment under section 1471 or 1472 in ac-cordance with the presumptions set forthin this paragraph (f) shall not be liable forwithholding under this section even if it islater established that the payee has a chap-ter 4 status other than the status presumed.A withholding agent that fails to report andwithhold in accordance with the presump-tions described in this paragraph (f) withrespect to a payment that it cannot reliablyassociate with valid documentation shallbe liable for tax, interest, and penalties.See §1.1474–1(a) for the extent of a with-holding agent’s liability for failing to with-hold in accordance with the presumptionsdescribed in this paragraph (f).

(ii) Actual knowledge or reason to knowthat amount of withholding is greaterthan is required under the presumptionsor that reporting of the payment is re-quired. Notwithstanding the provisions ofparagraph (f)(9)(i) of this section, a with-holding agent that knows or has reason to

know that the status or characteristics ofthe person are other than what is presumedunder this paragraph (f) may not rely onthe presumptions described in this para-graph (f) to the extent that, if it determinedthe status of the person based on suchknowledge or reason to know, it would berequired to withhold (under this sectionor another withholding provision of theCode) an amount greater than would bethe case if it relied on the presumptionsdescribed in this paragraph (f). In such acase, the withholding agent must rely onits knowledge or reason to know ratherthan on the presumptions set forth in thisparagraph (f). Failure to do so shall resultin liability for tax, interest, and penaltiesto the extent provided under §1.1474–1(a).

(g) Effective/applicability date. Thissection generally applies on January 28,2013. For other dates of applicability,see §§1.1471–3(d)(1); 1.1471–3(d)(4)(i),(ii), and (iv); 1.1471–3(d)(6)(v);1.1471–3(d)(11)(viii)(A);1.1471–3(d)(12)(iii)(B);1.1471–3(e)(3)(ii); and1.1471–3(e)(4)(vii)(B).


§1.1471–4 FFI agreement.

(a) In general. An FFI agreement willbe in effect in accordance with section1471(b) if an FFI registers with the IRSpursuant to procedures prescribed by theIRS and agrees to comply with the termsof an FFI agreement. The FFI agreementwill incorporate the requirements set forthin this section, any modifications set forthin an applicable Model 2 IGA, and any pro-visions applicable to a reporting Model 1FFI.

(1) Withholding. A participating FFI isrequired to deduct and withhold tax withrespect to payments made to recalcitrantaccount holders and nonparticipating FFIsto the extent required under paragraph (b)of this section. A participating FFI that isprohibited by foreign law from withhold-ing as required under paragraph (b) of thissection with respect to an account mustclose such account within a reasonable pe-riod of time or must otherwise block ortransfer such account as described in para-graph (i) of this section.

(2) Identification and documentationof account holders. A participating FFI

is required to obtain such informationregarding each holder of each accountmaintained by the participating FFI todetermine whether each account is a U.S.account or an account held by a recalci-trant account holder or nonparticipatingFFI in accordance with the due diligenceprocedures for identifying and document-ing account holders described in paragraph(c) of this section.

(3) Reporting. A participating FFI is re-quired to report the information describedin paragraph (d) of this section annuallywith respect to U.S. accounts under section1471(c) and accounts held by recalcitrantaccount holders. A participating FFI mustalso comply with the filing requirementsdescribed in §1.1474–1(c) and (d) to re-port payments that are chapter 4 reportableamounts paid to recalcitrant account hold-ers and nonparticipating FFIs (includingthe transitional reporting of foreign re-portable amounts paid to nonparticipatingFFIs for calendar years 2015 and 2016described in §1.1474–1(d)(4)(iii)(C)). Aparticipating FFI that is unable to obtain awaiver, if required by foreign law, to reportan account as required under paragraph(d) of this section must close or transfersuch account within a reasonable period oftime as described in paragraph (i) of thissection.

(4) Expanded affiliated group. Exceptas otherwise provided in Model 1 IGA orModel 2 IGA, in order for any FFI that isa member of an expanded affiliated groupto be a participating FFI, each FFI thatis a member of the expanded affiliatedgroup must be a participating FFI or regis-tered deemed-compliant FFI as describedin paragraph (e) of this section. For a lim-ited period described in paragraph (e)(2) or(e)(3) of this section, however, a branch ofan FFI or an FFI that is a member of an ex-panded affiliated group and is unable un-der foreign law to satisfy the requirementsof this section may instead obtain status asa limited branch of a participating FFI orlimited FFI if the branch or FFI meets therequirements set forth in paragraph (e)(2)or (e)(3) of this section (as applicable).

(5) Verification. A participating FFI isrequired to adopt a compliance programas described in paragraph (f) of this sec-tion under the authority of the responsi-ble officer, who will be required to cer-tify periodically to the IRS on behalf of theFFI regarding the participating FFI’s com-

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pliance with the requirements of the FFIagreement. If the IRS identifies concernsabout the participating FFI’s compliance,the IRS may request additional informa-tion to verify compliance with the require-ments of the FFI agreement as described inparagraph (f)(4) of this section.

(6) Event of default. A participating FFIis required to cure an event of default withrespect to the FFI agreement as defined inparagraph (g) of this section. Upon the oc-currence of an event of default, the IRSwill deliver to a participating FFI a noticeof default and will allow the FFI an oppor-tunity to cure the event of default as de-scribed in paragraph (g) of this section.

(7) Refunds. A participating FFI mayfile a collective refund on behalf of certainaccount holders and payees for amountswithheld by the participating FFI or itswithholding agent under chapter 4 inexcess of the account holder or payee’sU.S. tax liability to the extent permit-ted in paragraph (h) of this section. Aparticipating FFI may also make an ad-justment for overwithholding using eitherthe reimbursement procedure described in§1.1474–2(a)(3) or the set-off proceduredescribed in §1.1474–2(a)(4).

(b) Withholding requirements—(1) Ingeneral. Except as otherwise provided ina Model 2 IGA, a participating FFI is re-quired to deduct and withhold a tax equalto 30 percent of any withholdable pay-ment made by such participating FFI toan account held by a recalcitrant accountholder or to a nonparticipating FFI afterDecember 31, 2013, to the extent requiredunder paragraph (b)(3) of this section.See paragraph (b)(2) of this section forrules for a participating FFI to identify thepayee of a payment in order to determinewhether withholding is required under thisparagraph (b). See paragraph (b)(4) of thissection for the extent of a participatingFFI’s requirement to deduct and withholdtax on a foreign passthru payment made bysuch participating FFI to an account heldby a recalcitrant account holder or to anonparticipating FFI. See paragraph (b)(5)of this section for the rules for withhold-ing on payments to limited branches andlimited FFIs. See paragraph (b)(6) for thespecial allowance to set aside in escrowamounts withheld with respect to dormantaccounts. See paragraph (b)(7) of thissection for the withholding requirementsof certain U.S. branches of participating

FFIs. See §1.1471–2 for the exceptionsto withholding and the exclusion from thedefinition of withholdable payment andforeign passthru payment that applies toany payment made under a grandfatheredobligation or the gross proceeds from thedisposition of such an obligation. See§1.1474–1(d)(4)(iii) for the requirementof participating FFIs to report paymentsthat are chapter 4 reportable amounts. See§1.1474–6 for the coordination of with-holding on payments under this paragraph(b) with the other withholding provisionsunder the Code.

(2) Withholding determination. Exceptas otherwise provided under §1.1471–2and paragraph (c) of this section with re-spect to certain preexisting accounts, aparticipating FFI is required to determinewhether withholding applies at the time apayment is made by reliably associatingthe payment with valid documentationdescribed in paragraph (c) of this sectionfor the payee of the payment. For a pay-ment made to an account, if the accountis held by one or more individuals, thepayee is each individual account holder.For a payment made to an account held byan entity, except as otherwise provided in§1.1471–3(a)(3), the payee is the accountholder of the payment. If the participatingFFI makes a withholdable payment to apayee that is an entity and the payment ismade with respect to an obligation that isnot an account, except as otherwise pro-vided in §1.1471–3(a)(3), the payee is theperson to whom the payment is made. See§1.1473–1(a) to determine when a pay-ment is made in the case of a withholdablepayment. If a participating FFI cannot reli-ably associate a payment (or any portion ofa payment) with valid documentation, therules described in paragraph (c) of this sec-tion shall apply to determine the chapter 4status of the account holder (and payee ifother than the account holder). Notwith-standing the foregoing, a participating FFImay establish after the date of paymentthat withholding was not required to theextent permitted under §1.1471–3(c)(7)or may apply the procedures provided in§1.1474–2 when overwithholding occurs.

(3) Satisfaction of withholding require-ments. A participating FFI that complieswith the withholding obligations of thisparagraph (b) with respect to accountsheld by recalcitrant account holders andpayees that are nonparticipating FFIs shall

be deemed to satisfy its withholding obli-gations under sections 1471(a) and 1472with respect to such account holders andpayees. A participating FFI that is an NQI,NWP, NWT, or that is a QI that electsunder section 1471(b)(3) not to assumewithholding responsibility for the pay-ment and that provides its withholdingagent with the information necessary toallocate all or a portion of the payment toeach payee as part of a withholding cer-tificate described in §1.1471–3(c)(3)(iii)will generally not be required to withholdunder paragraph (b)(1) of this section.See §1.1471–2(a)(2)(ii), however, for thecircumstances under which a participatingFFI that is an NQI, NWP, or NWT has aresidual withholding responsibility. Seealso §1.1471–3(c)(9)(iii)(B) for the cir-cumstances under which a participatingFFI that is a broker has a residual with-holding responsibility as an intermediaryof the payment and may also be liable forany underwithholding that occurs. See§§1.1471–2(a) and 1.1472–1(a)(2)(i) andthe QI, WP, or WT agreement for the with-holding requirements of a participatingFFI that is a QI, WP, or WT for purposesof chapter 4.

(4) Foreign passthru payments. A par-ticipating FFI is not required to deduct andwithhold tax on a foreign passthru pay-ment made by such participating FFI toan account held by a recalcitrant accountholder or to a nonparticipating FFI beforethe later of January 1, 2017, or the date ofpublication in the Federal Register of fi-nal regulations defining the term foreignpassthru payment.

(5) Withholding on limited FFIs andlimited branches—(i) Limited FFIs. Aparticipating FFI is required to withhold ona withholdable payment made to a limitedFFI identifying itself as a nonparticipatingFFI. A participating FFI that is a mem-ber of an expanded affiliated group that in-cludes one or more limited FFIs will alsobe required to treat any such limited FFIas a nonparticipating FFI with respect towithholdable payments made to such lim-ited FFI. A participating FFI will be con-sidered to have made a withholdable pay-ment to a limited FFI if such participat-ing FFI receives a withholdable paymentwith respect to a security or instrumentheld on behalf of a limited FFI (or an ac-count maintained by the limited FFI). Aparticipating FFI will also be considered

April 8, 2013 844 2013–15 I.R.B.

to have made a withholdable payment to alimited FFI when the limited FFI receivesa payment with respect to a transaction be-tween the limited FFI and such participat-ing FFI that is in the same expanded affili-ated group and such transaction hedges orotherwise provides total return exposure toanother transaction between such partici-pating FFI and a third party that gives riseto a withholdable payment.

(ii) Limited branches. A participatingFFI is required to withhold on a withhold-able payment made to a limited branchidentifying itself as a nonparticipating FFI.A branch of the participating FFI otherthan the limited branch is also requiredto withhold on a withholdable paymentwhen it receives the payment on behalf ofa limited branch of the participating FFI. Abranch of the participating FFI other thana limited branch will be considered to havereceived a withholdable payment on behalfof a limited branch when such other branchreceives a withholdable payment with re-spect to a security or instrument it holdson behalf of a limited branch (or an ac-count maintained by the limited branch).A branch of a participating FFI other thana limited branch will be considered to holda security or instrument on behalf of alimited branch when it executes a trans-action with a limited branch that hedgesor otherwise provides total return exposureto another transaction between such otherbranch and a third party that gives rise to awithholdable payment.

(6) Special rule for dormant accounts.A participating FFI that makes a pay-ment to a recalcitrant account holder ofa dormant account and that withholds onsuch payment as required under paragraph(b)(1) of this section may, in lieu of de-positing the tax withheld under §1.6302–2and described in §1.1474–1(b), set asidethe amount withheld in escrow until thedate that the account ceases to be a dor-mant account. In such case, the tax with-held becomes due 90 days following thedate that the account ceases to be a dor-mant account if the account holder doesnot provide the documentation requiredunder paragraph (c) of this section or be-comes refundable to the account holder ifthe account holder provides the documen-tation required under paragraph (c) of thissection establishing that withholding doesnot apply. If a dormant account escheatsto a foreign government under the rele-

vant laws in the jurisdiction in which theparticipating FFI (or branch thereof) oper-ates, the participating FFI is not requiredto deposit with the IRS the amount heldin escrow with respect to the account. Seeparagraph (d)(6)(ii) of this section for thedefinition of dormant account.

(7) Withholding requirements for U.S.branches of participating FFIs that aretreated as U.S. persons. A U.S. branch ofa participating FFI that is treated as a U.S.person and that satisfies its backup with-holding obligations under section 3406(a)with respect to accounts held at the U.S.branch by account holders that are treatedas U.S. non-exempt recipients under chap-ter 61 will be treated as satisfying its with-holding obligation with respect to such ac-counts under section 1471(b)(1) and thisparagraph (b). See paragraph (d)(2)(iii)(B)of this section for the special reportingrequirements applicable to U.S. branchesof participating FFIs that are treated asU.S. persons. See paragraphs (c)(2) and(d)(4) of this section for the reporting re-quirements of U.S. branches of participat-ing FFIs with respect to payments that arechapter 4 reportable amounts.

(c) Due diligence for the identificationand documentation of account holders andpayees—(1) Scope of paragraph. Exceptto the extent that a participating FFI re-lies on the due diligence procedures setforth in an applicable Model 2 IGA, a par-ticipating FFI must follow this paragraph(c) to identify and document the chap-ter 4 status of each holder of an accountmaintained by the participating FFI to de-termine if the account is a U.S. account,non-U.S. account, or an account held bya recalcitrant account holder or nonpartici-pating FFI. Paragraph (c)(2) of this sectionprovides the general rules for identifica-tion and documentation of account holdersand payees, and paragraph (c)(2)(v) pro-vides special documentation requirementsfor certain U.S. branches of participatingFFIs. Paragraph (c)(3) of this section pro-vides the rules for documenting entity ac-counts and payees. Paragraph (c)(4) of thissection provides the general rules for doc-umenting individual accounts other thanpreexisting accounts. Paragraph (c)(5) ofthis section provides the identification anddocumentation procedure for preexistingindividual accounts. Paragraph (c)(6) ofthis section provides examples illustratingthe application of the documentation ex-

ceptions for entity accounts and individ-ual accounts. Paragraph (c)(7) of this sec-tion outlines the certification requirementrelating to the due diligence procedures ofthis paragraph (c) with respect to preexist-ing accounts within the specified periodsof time.

(2) General rules for the identificationand documentation of account holdersand payees—(i) Overview. Except as oth-erwise provided in paragraphs (c)(3)(iii)and (c)(5)(iii) of this section (documen-tation exceptions for certain preexistingaccounts), a participating FFI is requiredto identify among accounts maintainedby the participating FFI each account thatis a U.S. account or an account held bya recalcitrant account holder or nonpar-ticipating FFI, and to report informationabout such accounts in the manner pro-vided in paragraph (d) of this section and§1.1474–1(d)(4)(iii). See §1.1471–5(a)(3)for rules to determine the holder of anaccount. The participating FFI is alsorequired to retain a record of the documen-tation collected or otherwise maintainedthat meets the requirements describedin this paragraph (c) when making cer-tain payments to an account holder orpayee (if other than an account holder)to determine whether withholding ap-plies under paragraph (b) of this sec-tion or whether reporting applies under§1.1474–1(d)(4)(iii)(C) and any payeefor which it provides the certificationdescribed in §1.1471–3(c)(9)(iii)(A) toanother withholding agent.

(ii) Standards of knowledge—(A) Ingeneral. A participating FFI may relyon valid documentation that is collectedpursuant to the due diligence proceduresset forth in this paragraph (c) or that isotherwise maintained in the participat-ing FFI’s files, unless the participatingFFI knows or has reason to know thatsuch documentation is unreliable or in-correct. For purposes of a participatingFFI documenting an account holder underthis paragraph (c), the requirements forthe validity of withholding certificates,written statements, and documentary ev-idence provided in §1.1471–3(c) shallapply regardless of whether the participat-ing FFI makes a payment to the account.Except as otherwise provided paragraph(c)(2)(ii)(B) of this section (certain merg-ers or bulk acquisitions) and in paragraph(c)(5)(iv) of this section (preexisting indi-

2013–15 I.R.B. 845 April 8, 2013

vidual accounts), to determine whether aparticipating FFI knows or has reason toknow that the documentation collected orotherwise maintained with respect to theaccount holder is unreliable or incorrect,the standards of knowledge provided in§1.1471–3(e) shall apply regardless ofwhether the participating FFI makes a pay-ment to the account. See §1.1471–3(c)(8)and (9) for the requirement to obtain docu-mentation on an account-by-account basisand the exceptions to this requirement.

(B) Limits on reason to know withrespect to certain accounts acquired inmerger or bulk acquisition. A participat-ing FFI that acquires accounts of anotherfinancial institution either in a mergeror bulk acquisition of accounts for value(other than a related party transaction de-scribed in §1.1471–3(c)(9)(v)) may applythe limitations on reason to know pro-vided in paragraphs (c)(2)(ii)(B)(1) or (2)of this section (as applicable and subjectto the conditions therein), or the rules of§1.1471–3(c)(9)(v) to rely upon docu-mentation collected by another financialinstitution for an account acquired eitherin a merger or bulk acquisition of accountsfor value.

(1) In general. The participatingFFI may treat accounts acquired in atransaction described in this paragraph(c)(2)(ii)(B) as preexisting accounts forpurposes of applying the identificationand documentation procedures of thisparagraph (c) by substituting the date ofacquisition of such accounts for the effec-tive date of the FFI agreement.

(2) Participating FFIs and certaindeemed-compliant FFIs that apply the duediligence rules, and U.S. financial insti-tutions. If a participating FFI (transfereeFFI) acquires accounts of another par-ticipating FFI or deemed-compliant FFI(including a U.S. branch of either suchFFI) that applies the due diligence require-ments of this paragraph (c) as a conditionof its status (as described in §1.1471–5(f)),or of a U.S. financial institution (transferorFI), the transferee FFI may rely on thechapter 4 status determination made by thetransferor FI for an account holder and willnot be subject to the standards of knowl-edge set forth in paragraph (c)(2)(ii)(A)of this section until there is a change incircumstances with respect to the accountif the following conditions are met—

(i) The transferee FFI does not have ac-tual knowledge that the chapter 4 status de-termination provided by the transferor FI isunreliable or incorrect;

(ii) For the certification period follow-ing the acquisition of such accounts (de-scribed in paragraph (f)(3)(i) of this sec-tion), the transferee FFI acquiring the ac-counts tests a sample of the acquired ac-counts to determine if the chapter 4 statusdeterminations made by the transferor FIare reliable;

(iii) In the case of a transferor FI that isa branch of a participating FFI or of a reg-istered deemed-compliant FFI (other thana U.S. branch that is treated as a U.S. per-son) or that is a deemed-compliant FFI thatapplies the requisite due diligence rulesof this paragraph (c) as a condition of itsstatus, the transferor FI provides a writ-ten representation to the transferee FFI ac-quiring the accounts that the transferor FIhas applied the due diligence proceduresof this paragraph (c) with respect to thetransferred accounts and, in the case of atransferor FI that is a participating FFI, hascomplied with the requirements of para-graph (f)(2) of this section; and

(iv) In the case of a transferor FI that isa U.S. financial institution or that is a U.Sbranch of a participating FFI or of a regis-tered deemed-compliant FFI that is treatedas a U.S. person, the transferee FFI mayrely on the chapter 4 status determinationsfor a payee that is an entity only if prior tothe date of transfer the U.S. financial in-stitution or U.S. branch made a withhold-able payment to the payee or, for a payeethat is an individual, only if the U.S. finan-cial institution or U.S. branch made a re-portable payment (as defined under section3406(b)) to the payee.

(iii) Change in circumstances—(A)Obligation to identify a change in circum-stances. A participating FFI is requiredto institute procedures to ensure that anychange in circumstances, as described inparagraph (c)(2)(iii)(B) of this section, isidentified by the participating FFI, includ-ing procedures to ensure that a relationshipmanager identifies any change in circum-stances with respect to an account. Forexample, if a relationship manager is noti-fied that the account holder has a mailingaddress in the United States when therewas no U.S. address previously associatedwith the account, the participating FFI willbe required to treat the new address as a

change in circumstances and will be re-quired to retain a record of the appropriatedocumentation from the account holder asdescribed in paragraph (c)(5)(iv)(B)(2)(iii)of this section.

(B) Definition of change in circum-stances. For purposes of this section,a change in circumstances (as definedin §1.1471–3(c)(6)(ii)(D)) includes anychange or addition of information to theaccount holder’s account (including theaddition, substitution, or other changeof an account holder) or any change oraddition of information to any accountassociated with such account (applyingthe account aggregation rules describedin §1.1471–5(b)(4)(iii) or by treating theaccounts as consolidated obligations) ifsuch change or addition of informationaffects the chapter 4 status of the accountholder. For example, if a holder of anaccount (including a preexisting account)opens another account that is linked tosuch account in the participating FFI’scomputerized system as described under§1.1471–5(b)(4)(iii) and as part of theparticipating FFI’s account opening pro-cedures the account holder provides a U.S.telephone number for such other account,this is a change in circumstances with re-spect to the first mentioned account. Withrespect to a preexisting account that meetsa documentation exception described inparagraphs (c)(3)(iii) and (c)(5)(iii) of thissection, a change in circumstances alsoincludes a change in account balance orvalue in a subsequent year that causes theaccount no longer to meet the documenta-tion exception.

(C) Requirements following a changein circumstances. With respect to an in-dividual account or an account held by apassive NFFE for which there is a changein circumstances with respect to the in-formation regarding its owners, followinga change in circumstances the participat-ing FFI must retain a record of the appro-priate documentation described in para-graph (c)(3) or (c)(5)(iv)(B)(2) of this sec-tion within the time period provided by§1.1471–5(g)(3)(iii) or, if unable to do so,must treat such account as held by a re-calcitrant account holder. With respect toan account held by an entity other than apassive NFFE described in the precedingsentence, following a change in circum-stances, the participating FFI must retaina record of the appropriate documentation

April 8, 2013 846 2013–15 I.R.B.

described in paragraph (c)(3) of this sec-tion by the earlier of 90 days or the date awithholdable payment or foreign passthrupayment is made to the account or, if un-able to do so, must treat such account asheld by a nonparticipating FFI.

(iv) Record retention. A participatingFFI must retain a record of the documen-tation collected (or otherwise maintained)to establish the chapter 4 status of anaccount holder or payee pursuant to the re-quirements of this paragraph (c)(2)(iv). Aparticipating FFI will be treated as havingretained a record of a withholding certifi-cate, written statement, or documentaryevidence if the participating FFI retainseither an original, certified copy, or pho-tocopy (including a microfiche, scan, orsimilar means of record retention) of thewithholding certificate, written statement,or documentary evidence collected to de-termine the chapter 4 status of the accountholder for six calendar years following theyear in which the due diligence proceduresof this paragraph (c) were performed forthe account. With respect to documen-tary evidence for an offshore obligation,however, a participating FFI that is notrequired to retain copies of documentationreviewed pursuant to its AML due dili-gence will be treated as having retained arecord of such documentation if the par-ticipating FFI retains a record in its filesnoting the date the documentation wasreviewed, each type of document, the doc-ument’s identification number (if any) (forexample, passport number), and whetherany U.S. indicia were identified. The pre-vious sentence applies with respect to anoffshore obligation that is also a preexist-ing obligation, except, in such case, therequirement to record whether the doc-umentation contained U.S. indicia doesnot apply. A participating FFI must alsoretain a record of any searches, includ-ing search results provided by third-partycredit agencies as described in paragraph(c)(4)(ii) of this section, results from elec-tronic searches, and requests made andresponses to relationship manager in-quiries for six calendar years following theyear in which the due diligence proceduresof this paragraph (c) were performed forthe account. A participating FFI may berequired to extend the six year retentionperiod if the IRS requests such extensionprior to the end of the six year retentionperiod. Notwithstanding the preceding

sentences, a participating FFI must retaina record of the chapter 4 status of an ac-count holder or payee for as long as theFFI maintains the account or obligation.See §1.1471–3(c)(6)(iii)(A) for the recordretention period applicable to a participat-ing FFI that is a withholding agent withrespect to documentation collected (orotherwise maintained) for a payee.

(v) Special rule for U.S. branches ofparticipating FFIs that are treated as U.S.persons. A U.S. branch of a participat-ing FFI that is treated as a U.S. personshall apply, in lieu of the due diligencerequirements of this paragraph (c), the duediligence requirements of §1.1471–3 todetermine the chapter 4 status of accountholders and payees that are entities andshall apply the documentation require-ments of chapter 3 or 61 (as applicable)with respect to individual account holders.See paragraph (b)(6) of this section forspecial withholding rules and paragraph(d)(2)(iii)(B) of this section for specialreporting rules applicable to such U.S.branches.

(3) Identification and documentationprocedure for entity accounts and pay-ees—(i) In general. With respect toaccounts held by entities, unless the doc-umentation exception described in para-graph (c)(3)(iii) of this section applies, aparticipating FFI must determine if the ac-count is a U.S. account or an account heldby a recalcitrant account holder or nonpar-ticipating FFI by applying the principlesof §1.1471–3(b), (c), and (d) to establishthe chapter 4 status of each account holderand each payee regardless of whether theparticipating FFI makes a payment to theaccount. If an account holder receiving apayment is not the payee of the paymentunder §§1.1471–3(a) and 1.1472–1(d)(3),the participating FFI is also required toestablish the chapter 4 status of the payeeor payees in order to determine whetherwithholding applies under paragraph (b)of this section.

(ii) Timeframe for applying identifi-cation and documentation procedure forentity accounts and payees. For preex-isting entity accounts, a participating FFImust perform the requisite identificationand documentation procedures withinsix months of the effective date of theFFI agreement for any account holderthat is a prima facie FFI, as defined in§1.1471–2(a)(4)(ii)(B), and within two

years of the effective date of the FFI agree-ment for all other entity accounts, except asotherwise provided in paragraph (c)(3)(iii)of this section. For accounts that are notpreexisting accounts, the participating FFImust perform the requisite identificationand documentation procedures by the ear-lier of the date a withholdable payment ora foreign passthru payment is made withrespect to the account or within 90 daysof the date the participating FFI opens theaccount. Notwithstanding the foregoingsentences of this paragraph (c)(3)(ii), withrespect to a preexisting obligation issuedin nonregistered (bearer) form by an in-vestment entity, the investment entity isrequired to perform the requisite identi-fication and documentation procedures atthe time a payment is collected by the ben-eficial owner of the payment (includinga beneficial owner that collects the pay-ment through an intermediary or agent). Ifthe participating FFI cannot obtain all thedocumentation described in §1.1471–3(d)or if the participating FFI knows or hasreason to know that the documentationprovided for an entity account is unreliableor incorrect (by applying the standardsof knowledge applicable to entities in§1.1471–3(e) as modified by paragraph(c)(2)(ii)), the participating FFI shall ap-ply the presumption rules of §1.1471–3(f)(as applicable to entities) to determine thechapter 4 status of the account holder. Inthe case of an account held by a passiveNFFE that provides the documentationdescribed in §1.1471–3(d)(12) to estab-lish its status as a passive NFFE but failsto provide the information regarding itsowners, see §1.1471–5(g)(2)(iv) for therequirement to treat the account as held bya recalcitrant account holder.

(iii) Documentation exception for cer-tain preexisting entity accounts—(A) Ac-counts to which this exception applies. Un-less the participating FFI elects otherwisepursuant to paragraph (c)(3)(iii)(C) of thissection, a participating FFI is not requiredto perform the identification and documen-tation procedure contained in this para-graph (c)(3) with respect to a preexistingentity account the aggregate balance orvalue of which is $250,000 or less if noholder of such account that has previouslybeen documented by the FFI as a U.S. per-son for purposes of chapter 3 or 61 is aspecified U.S. person. For purposes of ap-plying this exception, the account balance

2013–15 I.R.B. 847 April 8, 2013

must be determined as of the effective dateof the FFI agreement and the aggregationrules of paragraph (c)(3)(iii)(B) of this sec-tion shall apply. An account that meets thisexception will cease to meet this exceptionas of the end of any subsequent calendaryear in which the account balance or valueexceeds $1,000,000, applying the aggrega-tion rules of paragraph (c)(3)(iii)(B) of thissection, or as of the date on which there isanother change in circumstances with re-spect to the account or any account aggre-gated with the account.

(B) Aggregation of entity accounts. Forpurposes of determining the aggregate bal-ance or value of accounts held by an en-tity in applying the exception in this para-graph (c)(3)(iii), an FFI is required to ag-gregate the balance or value of all accountsheld (in whole or in part) by the same ac-count holder to the extent required under§1.1471–5(b)(4)(iii)(A) and (B).

(C) Election to forgo exception. Aparticipating FFI may elect to forgo theexception described in this paragraph(c)(3)(iii) by applying the identificationand documentation procedures providedin this paragraph (c)(3) within the timeperiod provided by paragraph (c)(3)(ii)of this section or otherwise applying thepresumption rules of §1.1471–3(f) to de-termine the chapter 4 status of the accountholder.

(4) Identification and documentationprocedure for individual accounts otherthan preexisting accounts—(i) In general.With respect to an individual account thatis not a preexisting account or an accountdescribed under paragraph (c)(4)(iii)(B)of this section or §1.1471–5(a)(4)(i) (pro-viding an exception to U.S. account statusfor certain depository accounts with anaggregate balance or value of $50,000or less), a participating FFI must deter-mine if the account is a U.S. account ornon-U.S. account by retaining a recordof certain documentation to establish thechapter 4 status of each account holder.Specifically, a participating FFI must re-tain a record of documentary evidence thatmeets the requirements of §1.1471–3(c)(5)(as applicable to individuals), the infor-mation described in paragraph (c)(4)(ii)or (c)(4)(iii)(A) of this section, or a with-holding certificate to establish an accountholder’s status as a foreign person. Ex-cept as otherwise provided in paragraph(c)(4)(iii)(A) of this section, the participat-

ing FFI must also review all informationcollected in connection with the openingor maintenance of each account, includ-ing documentation collected as part ofthe participating FFI’s account openingprocedures and documentation collectedfor other regulatory purposes, and applythe standards of knowledge in paragraph(c)(2)(ii) of this section to determine if anaccount holder’s claim of foreign status isunreliable or incorrect. If the participatingFFI is not able to establish an accountholder’s status as a foreign person, the par-ticipating FFI must retain a record of eithera Form W–9 or U.S. TIN (in any manner)and a valid and effective waiver describedin section 1471(b)(1)(F)(i), if necessary,to establish an account holder’s status asa U.S. person and to confirm that the ac-count is a U.S. account. A participatingFFI must complete the requisite identifi-cation and documentation procedures withrespect to each account within the time pe-riod provided by §1.1471–5(g)(3)(ii), or, ifunable to do so, it must treat such accountas held by a recalcitrant account holder.The presumption rules of §1.1471–3(f) donot apply to individual account holders ofa participating FFI.

(ii) Reliance on third party for identi-fication of individual accounts other thanpreexisting accounts. A participating FFImay establish an account holder’s status asa foreign person based on information pro-vided by a third-party credit agency only ifthe following conditions are met—

(A) As part of the participating FFI’saccount opening procedures, the accountholder provides a residence address out-side the United States and attests in writingthat the account holder is not a U.S. citizenor resident;

(B) The third-party credit agency veri-fies the account holder’s claimed residencewith at least one government data sourcefrom the jurisdiction in which the partici-pating FFI (or branch thereof) operates orthe account holder claims residence; and

(C) The participating FFI (or branchthereof) relies on the information providedby the third-party credit agency for pur-poses of satisfying AML due diligencewith respect to the account in a FATF-com-pliant jurisdiction.

(iii) Alternative identification and doc-umentation procedure for certain cashvalue insurance or annuity contracts—(A)Group cash value insurance contracts or

group annuity contracts. A participatingFFI may treat an account that is a groupcash value insurance contract or groupannuity contract and that meets the re-quirements of this paragraph (c)(4)(iii)(A)as a non-U.S. account until the date onwhich an amount is payable to an em-ployee/certificate holder or beneficiary, ifthe participating FFI obtains a certificationfrom an employer that no employee/cer-tificate holder (account holder) is a U.S.person. A participating FFI is also notrequired to review all the account infor-mation collected by the FFI to determine ifan account holder’s claim of foreign statusis unreliable or incorrect. An account thatis a group cash value insurance contract orgroup annuity contract meets the require-ments of this paragraph (c)(4)(iii)(A) if—

(1) The group life insurance contractor a group annuity contract issued to anemployer and covers twenty-five or moreemployee/certificate holders;

(2) The employee/certificate holdersare entitled to receive any contract valueand to name beneficiaries for the benefitpayable upon the employee’s death; and

(3) The aggregate amount payable toany employee/certificate holder or benefi-ciary does not exceed $1,000,000.

(B) Accounts held by beneficiaries ofa cash value insurance contract that is alife insurance contract. A participatingFFI may presume that an individual ben-eficiary (other than the owner) of a cashvalue insurance contract that is a life insur-ance contract (account holder) receiving adeath benefit is a foreign person and treatsuch account as a non-U.S. account unlessthe participating FFI has actual knowledgeor reason to know that the beneficiary is aU.S. person. A participating FFI has rea-son to know that a beneficiary of a cashvalue insurance contract is a U.S. personif the information collected by the partic-ipating FFI and associated with the bene-ficiary contains U.S. indicia as describedparagraph (c)(5)(iv)(B)(1) of this section.If a participating FFI has actual knowl-edge or reason to know that the benefi-ciary is a U.S. person, the participatingFFI must retain a record of the appropri-ate documentation described in paragraph(c)(5)(iv)(B)(2) of this section.

(5) Identification and documentationprocedure for preexisting individual ac-counts—(i) In general. With respect toa preexisting individual account, unless

April 8, 2013 848 2013–15 I.R.B.

the account is an account described in§1.1471–5(a)(4)(i) (providing exceptionto U.S. account status for certain deposi-tory accounts with an aggregate balanceor value of $50,000 or less), a partici-pating FFI may follow the identificationand documentation procedures describedbelow in paragraph (c)(5)(ii) through (iv)of this section (as applicable), in lieu ofthe identification and documentation pro-cedures described in paragraph (c)(4) ofthis section, to determine if an accountthat is a preexisting account is a U.S.account, non-U.S. account, or accountheld by a recalcitrant account holder. Aparticipating FFI must first determinewhether there are any U.S. indicia as-sociated with the account (as defined inparagraph (c)(5)(iv)(B)(1) of this section),and second, if there are U.S. indicia asso-ciated with the account, retain a record ofthe documentation described in paragraph(c)(5)(iv)(B)(2) of this section to estab-lish the account holder’s chapter 4 status.For this purpose, the presumption rules of§1.1471–3(f) do not apply. A participatingFFI must complete the requisite identifi-cation and documentation procedures withrespect to each account within the timeperiod provided by §1.1471–5(g)(3)(i) or(ii) (as applicable) or, if unable to do so,must treat such account as held by a re-calcitrant account holder. A participatingFFI may continue to treat an account withno U.S. indicia or an account that meetsa documentation exception described inparagraph (c)(5)(iii) of this section or§1.1471–5(a)(4)(i) (providing exceptionto U.S. account status for certain deposi-tory accounts with an aggregate balanceor value of $50,000 or less) as a non-U.S.account, until there is a change in cir-cumstances with respect to the account asdescribed in paragraph (c)(2)(iii) of thissection.

(ii) Special rule for preexisting indi-vidual accounts previously documented asU.S. accounts for purposes of chapter 3or 61. If a participating FFI has doc-umented an individual account holder asa U.S. person for purposes of chapter 3or 61 and such account holder is a speci-fied U.S. person, the account holder’s ac-count will be treated as a U.S. accountfor chapter 4 purposes and the identifi-cation and documentation procedures inparagraph (c)(5)(i) and (iv) of this sectionwill not apply.

(iii) Exceptions for certain low valuepreexisting individual accounts—(A) Ac-counts to which an exception applies. Un-less the participating FFI elects otherwisepursuant to paragraph (c)(5)(iii)(C) of thissection, a participating FFI is not requiredto perform requisite identification and doc-umentation procedures described in para-graph (c)(5)(i) and (iv) of this section withrespect to either a preexisting individualaccount, other than a cash value insur-ance or annuity contract, the aggregate bal-ance or value of which is $50,000 or less,or a preexisting individual account thatis a cash value insurance or annuity con-tract described in §1.1471–5(b)(1)(iv) theaggregate balance or value of which is$250,000 or less. For purposes of apply-ing these exceptions, the account balancemust be determined as of the effective dateof the FFI agreement and the aggregationrules of paragraph (c)(5)(iii)(B) of this sec-tion shall apply. An account that meets ei-ther of these exceptions will cease to meetthese exceptions as of the end of any sub-sequent calendar year in which the accountbalance or value exceeds $1,000,000, ap-plying the aggregation rules of paragraph(c)(3)(iii)(B) of this section, or until thereis another change in circumstances with re-spect to the account or any account aggre-gated with the account.

(B) Aggregation of accounts. For pur-poses of determining the aggregate bal-ance or value of a preexisting individualaccount, other than an account that is cashvalue insurance or annuity contract, anFFI is required to aggregate the balance orvalue of all accounts that are not cash valueinsurance or annuity contracts to the extentrequired under §1.1471–5(b)(4)(iii)(A)or (B). For purposes of determining theaggregate balance or value of preexistingindividual account that is a cash valueinsurance or annuity contract, an FFI willbe required to aggregate the balance orvalue of all accounts that are cash valueinsurance or annuity contracts to the extentrequired under §1.1471–5(b)(4)(iii)(A) or(B).

(C) Election to forgo exception. A par-ticipating FFI may elect to forgo the excep-tions described in paragraph (c)(5)(iii) ofthis section by applying the identificationand documentation procedures provided inthis paragraph (c) within the time providedby paragraph (c)(5)(i) of this section orotherwise treating the account as held by

a recalcitrant account holder pursuant to§1.1471–5(g).

(iv) Specific identification and doc-umentation procedures for preexistingindividual accounts—(A) In general. Aparticipating FFI applying the identifi-cation and documentation procedures ofthis paragraph (c)(5)(iv) must review itspreexisting individual accounts (applyingthe electronic search described in para-graph (c)(5)(iv)(C) of this section and,if appropriate, the enhanced review forhigh-value accounts described in para-graph (c)(5)(iv)(D) of this section) todetermine if there are any U.S. indicia (asdescribed in paragraph (c)(5)(iv)(B)(1) ofthis section) associated with the account.If no U.S. indicia are identified with re-spect to an account, the participating FFImay treat the account as a non-U.S. ac-count. If U.S. indicia are identified withrespect to an account, the participatingFFI must retain a record of the appropri-ate documentation described in paragraph(c)(5)(iv)(B)(2) of this section to establishthe account holder’s status as a foreignperson. A participating FFI that followsthe procedures described in this paragraph(c)(5)(iv) (as applicable) with respect to itspreexisting individual accounts will not betreated as having reason to know that thedetermination made with respect to the ac-count was unreliable or incorrect becauseof information contained in any accountfiles that the participating FFI did not re-view and was not required to review underthe applicable identification procedure.Thus, for example, if a participating FFIwas only required to perform an electronicsearch with respect to a preexisting indi-vidual account and no U.S. indicia wereidentified in the results of the electronicsearch, the participating FFI would nothave reason to know that the individualaccount holder was a U.S. person, even ifthe participating FFI had on file (but wasnot required to and did not review) a copyof the individual’s passport that indicatesthat the individual was born in the UnitedStates.

(B) U.S. indicia and relevant docu-mentation rules—(1) U.S. indicia. Aparticipating FFI must review an accountholder’s account information to the extentrequired under paragraphs (c)(5)(iv)(C)and (D) of this section for any of the fol-lowing U.S. indicia:

2013–15 I.R.B. 849 April 8, 2013

(i) Designation of the account holder asa U.S. citizen or resident;

(ii) A U.S. place of birth;(iii) A current U.S. residence address or

U.S. mailing address (including a U.S. postoffice box);

(iv) A current U.S. telephone number(regardless of whether such number is theonly telephone number associated with theaccount holder);

(v) Standing instructions to payamounts from the account to an accountmaintained in the United States;

(vi) A current power of attorney or sig-natory authority granted to a person with aU.S. address; or

(vii) An “in-care-of” address or a “holdmail” address that is the sole address theFFI has identified for the account holder.

(2) Documentation to be retained uponidentifying U.S. indicia. If U.S. indiciaare identified with respect to an accountholder’s account information, a partic-ipating FFI must retain a record of thedocumentation described in paragraphs(c)(5)(iv)(B)(2)(i) through (vii) of thissection, applicable to the U.S. indiciaidentified, to establish the account holder’sstatus as a foreign person. If the partic-ipating FFI cannot establish an accountholder’s status as a foreign person basedon such documentation, the participat-ing FFI must retain a record of a FormW–9 and a valid and effective waiver asdescribed in section 1471(b)(1)(F)(ii), ifnecessary, to confirm that the account is aU.S. account or, if unable to do so, musttreat the account as held by a recalcitrantaccount holder.

(i) Designation of account holder asa U.S. citizen or resident. If the infor-mation required to be reviewed with re-spect to the account contains a designa-tion of an account holder as a U.S. citi-zen or resident, the participating FFI mustretain a record of a withholding certifi-cate and documentary evidence describedin §1.1471–3(c)(5)(i)(B) evidencing citi-zenship in a country other than the UnitedStates in order to establish the accountholder’s status as a foreign person.

(ii) Unambiguous indication of a U.S.place of birth. If information required tobe reviewed with respect to the accountunambiguously indicates a U.S. place ofbirth for an account holder, the partici-pating FFI must retain a record of a formof documentary evidence described in

§1.1471–3(c)(5)(i)(B) evidencing citizen-ship in a country other than the UnitedStates and a copy of the individual’s Cer-tificate of Loss of Nationality of the UnitedStates, or, alternatively, a withholding cer-tificate, a form of documentary evidencedescribed in §1.1471–3(c)(5)(i)(B) evi-dencing citizenship in a country other thanthe United States, and a reasonable writtenexplanation of the account holder’s renun-ciation of U.S. citizenship or the reasonthe account holder did not obtain U.S.citizenship at birth in order to establishthe account holder’s status as a foreignperson.

(iii) U.S. address or U.S. mailingaddress. If information required to bereviewed with respect to the accountcontains a U.S. address or a U.S. mail-ing address for an account holder, theparticipating FFI must retain a recordof a withholding certificate and a formof documentary evidence described in§1.1471–3(c)(5)(i)(A) through (C) in or-der to establish the account holder’s statusas a foreign person.

(iv) Only U.S. telephone numbers. Ifinformation required to be reviewed withrespect to the account contains one ormore telephone numbers in the UnitedStates and no other telephone numbersfor an account holder, the participatingFFI must retain a record of a withholdingcertificate and a form of documentary evi-dence described in §1.1471–3(c)(5)(i)(A)through (C) in order to establish the ac-count holder’s status as a foreign person.

(v) U.S. telephone numbers andnon-U.S. telephone numbers. If informa-tion required to be reviewed with respectto the account contains one or more tele-phone numbers in the United States andat least one telephone number outsidethe United States for an account holder,the participating FFI must retain a recordof a withholding certificate or a formof documentary evidence described in§1.1471–3(c)(5)(i)(A) through (C) in or-der to establish the account holder’s statusas a foreign person.

(vi) Standing instructions to payamounts. If information required to bereviewed with respect to the account con-tains standing instructions to pay amountsfrom the account to an account maintainedin the United States for an account holder,the participating FFI must retain a recordof a withholding certificate and a form

of documentary evidence described in§1.1471–3(c)(5)(i)(A) through (C) in or-der to establish the account holder’s statusas a foreign person.

(vii) Power of attorney or signatoryauthority granted to a person with a U.S.address or “in-care-of” address or “holdmail” address. If information required tobe reviewed with respect to the accountincludes a power of attorney or signatoryauthority granted to a person with a U.S.address or contains an “in-care-of” ad-dress or “hold mail” address that is the soleaddress identified for the account holder,the participating FFI must retain a recordof either a withholding certificate or aform of documentary evidence describedin §1.1471–3(c)(5)(i)(A) through (C) inorder to establish the account holder’sstatus as a foreign person.

(C) Electronic search for identifyingU.S. indicia. Except as provided in para-graph (c)(5)(iv)(D) of this section relatingto the enhanced review for high-valueaccounts, a participating FFI may relysolely on a review of the electronicallysearchable information associated with anaccount and maintained by the participat-ing FFI to determine if there are any ofthe U.S. indicia described in paragraph(c)(5)(iv)(B)(1) of this section associatedwith the account. For purposes of thisparagraph (c)(5)(iv)(C), however, an FFIwill not be required to treat as U.S. indiciaan in-care-of address or a hold mail ad-dress that is the sole address identified forthe account holder.

(D) Enhanced review for identify-ing U.S. indicia in the case of certainhigh-value accounts—(1) In general.With respect to preexisting individual ac-counts that have a balance or value thatexceeds $1,000,000 as of the effectivedate of the FFI agreement, or at the end ofany subsequent calendar year (“high-valueaccounts”), a participating FFI must ap-ply the enhanced review described in thisparagraph (c)(5)(iv)(D) in addition to theelectronic search described in paragraph(c)(5)(iv)(C) of this section to identifyany U.S. indicia described in paragraph(c)(5)(iv)(B)(1) of this section associatedwith the account. For purposes of deter-mining the balance or value of an account,a participating FFI must apply the aggre-gation rules §1.1471–5(b)(4)(iii)(A) and(B). If a participating FFI applied the en-hanced review described in this paragraph

April 8, 2013 850 2013–15 I.R.B.

(c)(5)(iv)(D) to an account in a previousyear, the participating FFI will not be re-quired to reapply such procedures to suchaccount in a subsequent year.

(2) Relationship manager inquiry. Withrespect to all high-value accounts, a par-ticipating FFI must identify accounts towhich a relationship manager is assigned(including any accounts aggregated withsuch account) and for which the relation-ship manager has actual knowledge thatthe account holder is a U.S. citizen or res-ident.

(3) Additional review of non-electronicrecords. Except as provided in paragraph(c)(5)(iv)(E) of this section, and exceptwith respect to any account for which theparticipating FFI has retained a record ofa withholding certificate and documentaryevidence described in §1.1471–3(c)(5) es-tablishing the account holder’s foreign sta-tus, a participating FFI must review toidentify any U.S. indicia the current cus-tomer master file of a high-value accountand, if not contained in the current cus-tomer master file, the following documentsdescribed in paragraphs (c)(5)(iv)(D)(3)(i)through (v) of this section that are asso-ciated with such an account and were ob-tained by the participating FFI within thefive calendar years preceding the later ofthe effective date of the FFI agreement, orthe end of the calendar year in which theaccount exceeded the $1,000,000 thresh-old described in paragraph (c)(5)(iv)(D)(1)of this section. The documents to be re-viewed by the participating FFI if not con-tained in the current customer master fileare—

(i) The most recent withholding certifi-cate, written statement, and documentaryevidence;

(ii) The most recent account openingcontract or documentation;

(iii) The most recent documentation ob-tained by the participating FFI for pur-poses of AML due diligence or for otherregulatory purposes;

(iv) Any power of attorney or signatureauthority forms currently in effect; and

(v) Any standing instructions to payamounts to another account.

(4) Limitations on the enhanced reviewin the case of comprehensive electronicallysearchable information. A participatingFFI is not required to apply the enhancedreview of this paragraph (c)(5)(iv)(D) andmay instead rely on the electronic search

described in paragraph (c)(5)(iv)(C) of thissection to identify U.S. indicia to the ex-tent the following information is availablein the FFI’s electronically searchable infor-mation—

(i) The account holder’s nationalityand/or residence status;

(ii) The account holder’s current resi-dence address and mailing address;

(iii) The account holder’s current tele-phone number(s);

(iv) Whether there are standing instruc-tions to pay amounts to another account;

(v) Whether there is a current “in-care-of” address or “hold mail” address for theaccount holder if no other residence ormailing address is found for the account;and

(vi) Whether there is any power of attor-ney or signatory authority for the account.

(E) Exception for preexisting individ-ual accounts that a participating FFI hasdocumented as held by foreign individualsfor purposes of meeting its obligationsunder chapter 61 or its QI, WP, or WTagreement. A participating FFI that haspreviously obtained documentation froman account holder to establish the accountholder’s status as a foreign individual inorder to meet its obligations under its QI,WP, or WT agreement with the IRS, or tofulfill its reporting obligations as a U.S.payor under chapter 61, is not required toperform the electronic search describedin paragraph (c)(5)(iv)(C) of this sec-tion or the enhanced review described inparagraph (c)(5)(iv)(D)(3) of this sectionfor such account. The participating FFIis required, however, to perform the re-lationship manager inquiry described inparagraph (c)(5)(iv)(D)(2) of this sectionif the account is a high-value account de-scribed in paragraph (c)(5)(iv)(D)(1) ofthis section. For purposes of this para-graph (c)(5)(iv)(E), a participating FFI hasdocumented an account holder’s foreignstatus under chapter 61 if the participatingFFI has retained a record of the docu-mentation required under chapter 61 toestablish the foreign status of an individ-ual and the account received a reportablepayment as defined under section 3406(b)in any prior year. In the case of a partic-ipating FFI that is a QI, WP, or WT, theparticipating FFI has documented an ac-count holder’s foreign status under its QI,WP, or WT agreement (as applicable) ifthe participating FFI has met the relevant

documentation requirements of its agree-ment with respect to an account holderthat received a reportable amount in anyyear in which its agreement was in effect.

(6) Examples. The following exam-ples illustrate the documentation excep-tions provided in paragraphs (c)(3)(iii) and(c)(5)(iii) of this section:

Example 1. Aggregation rules applicable to pre-existing individual accounts. U, a U.S. resident indi-vidual, holds 100 shares of common stock of FFI1,an investment entity. On the effective date of FFI1’sFFI agreement, the common stock held by U is worth$45,000. U also holds shares of preferred stock ofFFI1. On the effective date of FFI1’s FFI agree-ment, U’s preferred stock in FFI1 is worth $35,000.Neither FFI1’s common stock nor FFI1’s preferredstock is regularly traded on an established securi-ties market. U also holds debt instruments issued byFFI1 that are not regularly traded on an establishedsecurities market. On the effective date of FFI1’sFFI agreement, U’s FFI1 debt instruments are worth$15,000. U’s common and preferred equity inter-ests are associated with U and with one another byreference to U’s foreign tax identification number inFFI1’s computerized information management sys-tem. However, U’s debt instruments are not associ-ated with U’s equity interests in FFI1’s computerizedinformation management system. None of these ac-counts are managed by a relationship manager. Pre-viously, FFI1 was not required to and did not obtaina Form W–9 from U for purposes of chapter 3 or 61.U’s FFI1 debt interests are eligible for the paragraph(c)(5)(iii)(A) documentation exception because thataccount does not exceed the $50,000 threshold de-scribed in paragraph (c)(5)(iii)(A)(1) of this section,taking into account the aggregation rule described inparagraph (c)(5)(iii)(A)(2) of this section. However,U’s common and preferred equity interests are not el-igible for the paragraph (c)(5)(iii)(A) documentationexception because the accounts exceed the $50,000threshold described in paragraph (c)(5)(iii)(A)(1) ofthis section, taking into account the aggregation rulesdescribed in §1.1471–5(b)(4)(iii) pursuant to the re-quirements of paragraph (c)(5)(iii)(A)(2) of this sec-tion.

Example 2. Aggregation rules for owners of en-tity accounts. In Year 1, U, a U.S. resident individ-ual, maintains a depository account that is a preex-isting account in CB, a commercial bank. The bal-ance in U’s depository account on the first date CB’sFFI agreement is in effect is $20,000. U also owns100% of Entity X, which maintains a depository ac-count that is a preexisting account in CB, and 50% ofEntity Y, which maintains a depository account thatis a preexisting account in CB. The balance in En-tity X’s account on the first date CB’s FFI agreementis in effect is $130,000 and the balance in Entity Y’saccount on effective date of CB’s FFI agreement is$110,000. All three accounts are associated with oneanother in CB’s computerized information manage-ment system by reference to U’s foreign tax identi-fication number. None of the accounts are managedby a relationship manager. Previously, CB was notrequired to and did not obtain a Form W–9 from Ufor purposes of chapter 3 or 61. U’s depository ac-count qualifies for the §1.1471–5(a)(4)(i) exceptionto U.S. account status because it does not exceed the

2013–15 I.R.B. 851 April 8, 2013

$50,000 threshold, taking into account the aggrega-tion rule described in §1.1471–5(a)(4)(i)(B)(2). En-tity X’s account and Entity Y’s account both qual-ify for the paragraph (c)(3)(iii) documentation excep-tion because the accounts do not exceed the $250,000threshold described in paragraph (c)(3)(iii)(B)(1) ofthis section taking into account the aggregation rulesdescribed in §1.1471–5(b)(4)(iii) pursuant to the re-quirements of paragraph (c)(3)(iii)(B)(2) of this sec-tion.

(7) Certifications of responsible officer.In order for a participating FFI to com-ply with the requirements of an FFI agree-ment with respect to its identification pro-cedures for preexisting accounts, a respon-sible officer of the participating FFI mustcertify to the IRS regarding the participat-ing FFIs compliance with the diligence re-quirements of this paragraph (c). Such cer-tification must be made no later than 60days following the date that is two yearsafter the effective date of the FFI agree-ment. The responsible officer must certifythat the participating FFI has completedthe review of all high-value accounts as re-quired under paragraphs (c)(5)(iv)(D) and(E) of this section and treats any accountholder of an account for which the par-ticipating FFI has not retained a recordof any required documentation as a recal-citrant account holder as required underthis section and §1.1471–5(g).The respon-sible officer must also certify that the par-ticipating FFI has completed the accountidentification procedures and documenta-tion requirements of this paragraph (c) forall other preexisting accounts or, if it hasnot retained a record of the documentationrequired under this paragraph (c) with re-spect to an account, treats such account inaccordance with the requirements of thissection and §1.1471–5(g). The responsibleofficer must also certify to the best of theresponsible officer’s knowledge after con-ducting a reasonable inquiry, that the par-ticipating FFI did not have any formal orinformal practices or procedures in placefrom August 6, 2011, through the date ofsuch certification to assist account hold-ers in the avoidance of chapter 4. A rea-sonable inquiry for purposes of this para-graph (c)(7) is a review of the participat-ing FFI’s procedures and a written inquiry,such as e-mail requests to relevant linesof business, that requires responses fromrelevant customer on-boarding and man-agement personnel as to whether they en-gaged in any such practices during thatperiod. Practices or procedures that as-

sist account holders in the avoidance ofchapter 4 include, for example, suggest-ing that account holders split up accountsto avoid classification as a high-value ac-count; suggesting that account holders ofU.S. accounts close, transfer, or withdrawfrom their account to avoid reporting; in-tentional failures to disclose a known U.S.account; suggesting that an account holderremove U.S. indicia from its account infor-mation; or facilitating the manipulation ofaccount balances or values to avoid thresh-olds. If the responsible officer is unable tomake any of the certifications described inthis paragraph (c)(7), the responsible of-ficer must make a qualified certificationto the IRS stating that such certificationcannot be made and that corrective actionswill be taken by the responsible officer.

(d) Account reporting—(1) Scope ofparagraph. This paragraph (d) providesrules addressing the information reportingrequirements applicable to participatingFFIs with respect to U.S. accounts, ac-counts held by owner-documented FFIs,and recalcitrant account holders. Para-graph (d)(2) of this section describes theaccounts subject to reporting under thisparagraph (d), and specifies the participat-ing FFI that is responsible for reportingan account or account holder. Paragraph(d)(3) of this section describes the infor-mation required to be reported and themanner of reporting by a participating FFIunder section 1471(c)(1) with respect toa U.S. account or an account held by anowner-documented FFI. Paragraph (d)(4)of this section provides definitions ofterms applicable to paragraph (d)(3). Para-graph (d)(5) of this section describes theconditions for a participating FFI to electto report its U.S. accounts and accountsheld by owner-documented FFIs undersection 1471(c)(2) and the information re-quired to be reported under such election.Paragraph (d)(6) of this section providesrules for a participating FFI to report itsrecalcitrant account holders. Paragraph(d)(7) of this section provides specialtransitional reporting rules applicable toreports due in 2015 and 2016. Paragraph(d)(8) of this section provides the report-ing requirements of a participating FFIthat is a QI, WP or WT with respect toU.S. accounts. See §301.1474–1(a) of thischapter for the requirement for a financialinstitution to file the information required

under this paragraph (d) on magnetic me-dia.

(2) Reporting requirements in gen-eral—(i) Accounts subject to reporting.Subject to the rules of paragraph (d)(7) ofthis section, a participating FFI shall reportby the time and in the manner prescribedin paragraph (d)(3)(vii) of this section, theinformation described in paragraph (d)(3)of this section with respect to accountsmaintained at any time during each calen-dar year for which the participating FFIis responsible for reporting under para-graph (d)(2)(ii) of this section and thatit is required to treat as U.S. accounts oraccounts held by owner-documented FFIs,including accounts that are identified asU.S. accounts by the end of such calendaryear pursuant to a change in circumstancesduring such year as described in paragraph(c)(2)(iii) of this section. Alternatively,a participating FFI may elect to reportunder paragraph (d)(5) of this section withrespect to such accounts for each calendaryear. With respect to accounts held byrecalcitrant account holders, a participat-ing FFI is required to report with respectto each calendar year under paragraph(d)(6) of this section and not under para-graph (d)(3) or (5) of this section. Forseparate reporting requirements of par-ticipating FFIs with respect to paymentsand for transitional rules for participatingFFIs to report certain foreign reportableamounts made to nonparticipating FFIs,see §1.1474–1(d)(4)(iii).

(ii) Financial institution required to re-port an account—(A) In general. Ex-cept as otherwise provided in paragraphs(d)(2)(ii)(B) through (E) of this section,the participating FFI that maintains theaccount is responsible for reporting theaccount in accordance with the require-ments of paragraph (d)(2)(iii), (3), or (5)of this section (as applicable) for each cal-endar year. Except as otherwise providedin paragraph (d)(2)(ii)(C) of this section,a participating FFI is responsible for re-porting accounts held by recalcitrant ac-count holders that it maintains in accor-dance with the requirements of paragraph(d)(6) of this section. A participating FFIis not required to report the information re-quired under paragraph (d)(6) of this sec-tion with respect to an account held by a re-calcitrant account holder of another partic-ipating FFI even if that other participatingFFI holds the account as an intermediary

April 8, 2013 852 2013–15 I.R.B.

on behalf of such account holder and re-gardless of whether the participating FFI isrequired to report payments made to the re-calcitrant account holder of such other FFIunder §1.1474–1(d)(4)(iii).

(B) Special reporting of account hold-ers of territory financial institutions. Inthe case of an account held by a territoryfinancial institution acting as an interme-diary with respect to a withholdable pay-ment—

(1) If the territory financial institu-tion agrees to be treated as a U.S. per-son with respect to the payment under§1.1471–3(c)(3)(iii)(F), a participatingFFI is not required to report under para-graph (d)(2)(i) of this section with respectto the account holders of the territory fi-nancial institution; or

(2) If the territory financial institutiondoes not agree to be treated as a U.S.person with respect to a withholdablepayment, the participating FFI must re-port with respect to each specified U.S.person or substantial U.S. owner of a for-eign entity that is an NFFE with respectto which the territory financial institu-tion acts as an intermediary and providesthe participating FFI with the informa-tion and documentation required under§1.1471–3(c)(3)(iii)(G).

(C) Special reporting of account hold-ers of a sponsored FFI. A sponsoring en-tity that has agreed to fulfill the reportingresponsibilities of this paragraph (d) on be-half of a sponsored FFI shall report in ac-cordance with the requirements of para-graph (d)(2)(iii), (3), or (5) of this section(as applicable) with respect to each U.S.account and paragraph (d)(6) of this sec-tion with respect to each account held bya recalcitrant account holder of the spon-sored FFI to the extent and in the mannerrequired if such sponsored FFI were a par-ticipating FFI. The sponsoring entity shallidentify each sponsored FFI for which itis reporting to the extent required on theforms for reporting U.S. accounts and re-calcitrant account holders and the accom-panying instructions to the forms.

(D) Special reporting of accounts heldby owner-documented FFIs. A partic-ipating FFI that maintains an accountheld by an FFI that it has agreed totreat as an owner-documented FFI under§1.1471–3(d)(6) shall report the infor-mation described in paragraph (d)(3)(iv)or (d)(5)(iii) of this section with respect

to each specified U.S. person identi-fied in §1.1471–3(d)(6)(iv)(A)(1). See§1.1474–1(i) for the reporting obliga-tions of a participating FFI with respectto a payee of an obligation other than anaccount that it has agreed to treat as anowner-documented FFI.

(E) Branch reporting of accounts. Aparticipating FFI may elect to comply withits obligation to report under paragraph(d)(3) or (d)(5) of this section by reportingits accounts on a branch-by-branch basiswith respect to one or more of its branches.A participating FFI that makes this elec-tion shall use the information reportingnumber assigned to the branch to identifythe branch that is reporting its accountsseparately. A branch that reports underthis election shall file with the IRS the in-formation required to be reported on ac-counts that it maintains in accordance withthe forms and their accompanying instruc-tions provided by the IRS for purposes ofthis election. For the definition of a branchthat applies for purposes of this paragraph(d), see paragraph (e)(2)(ii) of this section.

(iii) Special U.S. account reportingrules for U.S. payors—(A) Special re-porting rule for U.S. payors other thanU.S. branches. Participating FFIs that areU.S. payors (other than U.S. branches)that report the information required underchapter 61 with respect to account holdersof accounts that the participating FFI is re-quired to treat as U.S. accounts or accountsheld by owner-documented FFIs and thatreport the information described in para-graph (d)(5)(ii) of this section with respectto each such account shall be treated ashaving satisfied the reporting require-ments described in paragraph (d)(2)(i)of this section with respect to accountsthat the participating FFI is required totreat as U.S. accounts or accounts held byowner-documented FFIs.

(B) Special reporting rules for U.S.branches treated as U.S. persons. AU.S. branch of a participating FFI that istreated as a U.S. person shall be treatedas having satisfied the reporting require-ments described in paragraphs (d)(2)(i)and (d)(2)(ii)(C) of this section if it reportsunder—

(1) Chapter 61 with respect to accountholders that are U.S. non-exempt recipi-ents;

(2) Chapter 61 with respect to personssubject to withholding under section 3406;

(3) Section 1.1474–1(i) with respectto substantial U.S. owners of NFFEs thatare not excepted NFFEs as defined in§1.1472–1(c) and;

(4) Section 1.1474–1(i) with respectto specified U.S. persons identified in§1.1471–3(d)(6)(iv)(A)(1) of owner-doc-umented FFIs.

(3) Reporting of accounts under section1471(c)(1)—(i) In general. The partici-pating FFI (or branch thereof) that is re-sponsible for reporting an account that itis required to treat as a U.S. account oraccounts held by owner-documented FFIsunder paragraph (d)(2)(ii) of this sectionshall be required to report such account un-der this paragraph (d)(3) for each calen-dar year unless it elects to report its U.S.accounts or accounts held by owner-docu-mented FFIs under paragraph (d)(5) of thissection.

(ii) Accounts held by specified U.S. per-sons. In the case of an account describedin paragraph (d)(3)(i) of this section thatis held by one or more specified U.S. per-sons, a participating FFI is required to re-port the following information under thisparagraph (d)(3)—

(A) The name, address, and TIN of eachaccount holder that is a specified U.S. per-son;

(B) The account number;(C) The account balance or value of the

account;(D) The payments made with respect

to the account, as described in paragraph(d)(4)(iv) of this section, during the calen-dar year; and

(E) Such other information as is oth-erwise required to be reported under thisparagraph (d)(3) or in the form describedin paragraph (d)(3)(vi) of this section andits accompanying instructions.

(iii) Accounts held by U.S. owned for-eign entities. With respect to each U.S. ac-count described in paragraph (d)(3)(i) ofthis section that is held by an NFFE thatis a U.S. owned foreign entity, a partici-pating FFI is required to report under thisparagraph (d)(3)(iii)—

(A) The name of the U.S. owned foreignentity that is the account holder;

(B) The name, address, and TIN of eachsubstantial U.S. owner of such entity;

(C) The account number;(D) The account balance or value of the

account held by the NFFE;

2013–15 I.R.B. 853 April 8, 2013

(E) The payments made with respectto the account, as described in paragraph(d)(4)(iv) of this section, during the calen-dar year; and

(F) Such other information as is oth-erwise required to be reported under thisparagraph (d)(3) or in the form describedin paragraph (d)(3)(vi) of this section andits accompanying instructions.

(iv) Special reporting of accounts heldby owner-documented FFIs. With respectto each account held by an owner-docu-mented FFI, a participating FFI is requiredto report under this paragraph (d)(3)(iv)—

(A) The name of the owner-docu-mented FFI;

(B) The name, address, and TIN ofeach specified U.S. person identified in§1.1471–3(d)(6)(iv)(A)(1);

(C) The account number of the accountheld by the owner-documented FFI;

(D) The account balance or value of theaccount held by the U.S. owned foreignentity;

(E) The payments made with respect tothe account held by the owner-documentedFFI, as described in paragraph (d)(4)(iv) ofthis section, during the calendar year; and

(F) Such other information as is oth-erwise required to be reported under thisparagraph (d)(3) or in the form describedin paragraph (d)(3)(vi) of this section andits accompanying instructions.

(v) Branch reporting. Except in thecase of a branch that reports separately un-der paragraph (d)(2)(ii)(E) of this section,a participating FFI that reports the infor-mation described in paragraphs (d)(3)(ii)through (iv) of this section shall also reportthe jurisdiction of the branch that main-tains the account being reported in accor-dance with instructions to the form pro-vided for purposes of such reporting.

(vi) Form for reporting accounts un-der section 1471(c)(1). The informationdescribed in paragraphs (d)(3)(ii) through(iv) of this section shall be reported onForm 8966, “FATCA Report,” (or suchother form as the IRS may prescribe)with respect to each account subject toreporting under paragraph (d)(3)(i) of thissection maintained at any time during thecalendar year. This form shall be filed inaccordance with its requirements and itsaccompanying instructions.

(vii) Time and manner of filing. Exceptas provided in paragraph (d)(7)(iv)(B) ofthis section, Form 8966 shall be filed elec-

tronically with the IRS on or before March31 of the year following the end of the cal-endar year to which the form relates. Seethe accompanying instructions to this formfor electronic filing instructions.

(viii) Extensions in filing. The IRS shallgrant an automatic 90-day extension oftime in which to file Form 8966. Form8809, “Request for Extension of Time toFile Information Returns,” (or such otherform as the IRS may prescribe) must beused to request such extension of time andmust be filed no later than the due date ofForm 8966. Under certain hardship con-ditions, the IRS may grant an additional90-day extension. A request for extensiondue to hardship must contain a statementof the reasons for requesting the extensionand such other information as the forms orinstructions may require.

(4) Descriptions applicable to report-ing requirements of §1.1471–4(d)(3)—(i)Address. The address to be reported withrespect to an account held by a speci-fied U.S. person is the residence addressrecorded by the participating FFI for theaccount holder or, if no residence addressis associated with the account holder, theaddress for the account used for mailingor for other purposes by the participatingFFI. In the case of an account held by aU.S. owned foreign entity, the address tobe reported is the address of each sub-stantial U.S. owner of such entity. In thecase of an account held by an owner-doc-umented FFI, the address to be reported isthe address of each specified U.S. personidentified in §1.1471–3(d)(6)(iv)(A)(1).

(ii) Account number. The account num-ber to be reported with respect to an ac-count is the identifying number assignedby the participating FFI for purposes otherthan to satisfy the reporting requirementsof this paragraph (d), or, if no such num-ber is assigned to the account, a unique se-rial number or other number such partici-pating FFI assigns to the financial accountfor purposes of reporting under paragraph(d)(3) of this section that distinguishes theaccount from other accounts maintainedby such institution.

(iii) Account balance or value—(A) Ingeneral. The participating FFI shall re-port the average balance or value of theaccount if the FFI reports average balanceor value to the account holder for a cal-endar year. If the participating FFI doesnot report the average balance or value

of the account to the account holder, theparticipating FFI shall report the balanceor value of the account as of the end ofthe calendar year as determined in accor-dance with §1.1471–5(b)(4). In the caseof an account that is a cash value insur-ance or annuity contract, a participatingFFI shall report the balance or value of theaccount as determined in accordance with§1.1471–5(b)(4).

(B) Currency translation of accountbalance or value. The account balance orvalue of an account may be reported inU.S. dollars or in the currency in whichthe account is denominated. In the caseof an account denominated in one or moreforeign currencies, the participating FFImay elect to report the account balance orvalue in a currency in which the accountis denominated and is required to iden-tify the currency in which the account isreported. If the participating FFI electsto report such an account in U.S. dollars,the participating FFI must calculate theaccount balance or value of the account inthe manner described in §1.1471–5(b)(4).

(iv) Payments made with respect toan account—(A) Depository accounts.The payments made during a calendaryear with respect to a depository accountconsist of the aggregate gross amount ofinterest paid or credited to the accountduring the year.

(B) Custodial accounts. The paymentsmade during a calendar year with respectto a custodial account consist of—

(1) The aggregate gross amount of div-idends paid or credited to the account dur-ing the calendar year;

(2) The aggregate gross amount of in-terest paid or credited to the account dur-ing the calendar year;

(3) The gross proceeds from the sale orredemption of property paid or credited tothe account during the calendar year withrespect to which the FFI acted as a custo-dian, broker, nominee, or otherwise as anagent for the account holder; and

(4) The aggregate gross amount of allother income paid or credited to the ac-count during the calendar year.

(C) Other accounts. In the case of anaccount described in §1.1471–5(b)(1)(iii)(relating to debt or equity interests) or (iv)(relating to cash value insurance contractsand annuity contracts), the payments madeduring the calendar year with respect tosuch account are the gross amounts paid

April 8, 2013 854 2013–15 I.R.B.

or credited to the account holder duringthe calendar year including payments in re-demption (in whole or part) of the account.

(D) Transfers and closings of deposit,custodial, insurance, and annuity financialaccounts. In the case of an account closedor transferred in its entirety by an accountholder during a calendar year that is a de-pository account, custodial account, or acash value insurance contract or annuitycontract, the payments made with respectto the account shall be—

(1) The payments and income paid orcredited to the account that are describedin paragraph (d)(4)(iv)(A) or (B) of thissection for the calendar year until the dateof transfer or closure; and

(2) The amount or value withdrawn ortransferred from the account in connectionwith the closure or transfer of the account.

(E) Amount and character of paymentssubject to reporting. For purposes ofreporting under paragraph (d)(3) of thissection, the amount and character of pay-ments made with respect to an accountmay be determined under the same prin-ciples that the participating FFI uses toreport information on its resident accountholders to the tax administration of thejurisdiction in which the FFI (or branchthereof) is located. Thus, the amount andcharacter of items of income describedin paragraphs (d)(4)(iv)(A), (B), and (C)need not be determined in accordancewith U.S. federal income tax principles.If any of the types of payments describedin paragraph (d)(4)(iv) of this section arenot reported to the tax administration ofthe jurisdiction in which the participatingFFI (or branch thereof) is located, suchamounts may be determined in the samemanner as is used by the participating FFIfor purposes of reporting to the accountholder. If any of the types of paymentsdescribed in this paragraph (d)(4)(iv) isneither reported to the tax administrationof the jurisdiction in which the FFI (orbranch thereof) is located nor reported tothe account holder for the year for whichreporting is required under paragraph (d)of this section, such item must be deter-mined and reported either in accordancewith U.S. federal tax principles or in ac-cordance with any reasonable method ofreporting that is consistent with the ac-counting principles generally applied bythe participating FFI. Once a participat-ing FFI (or branch thereof) has applied

a method to determine such amounts, itmust apply such method consistently forall account holders and for all subsequentyears unless the Commissioner consentsto a change in such method. Consent willbe automatically granted for a change torely on U.S. federal income tax principlesto determine such amounts.

(F) Currency translation. A paymentdescribed in this paragraph (d)(4)(iv) maybe reported in the currency in which thepayment is denominated or in U.S. dol-lars. In the case of payments denominatedin one or more foreign currencies, a par-ticipating FFI may elect to report the pay-ments in a currency in which paymentsare denominated and is required to iden-tify the currency in which the account isreported. If such a payment is reportedin U.S. dollars, the participating FFI mustcalculate the amount in the manner de-scribed in §1.1471–5(b)(4).

(v) Record retention requirements. Aparticipating FFI that produces, in the ordi-nary course of its business, account state-ments that summarize the activity (includ-ing withdrawals, transfers, and closures) ofan account for any calendar year in whichthe account was required to be reported un-der paragraph (d)(3) of this section mustretain a record of such account statements.The record must be retained for the longerof six years or the retention period underthe FFI’s normal business procedures. Aparticipating FFI may be required to ex-tend the six year retention period if the IRSrequests such an extension prior to the ex-piration of the six year period.

(5) Election to perform chapter 61reporting—(i) In general—(A) Electionunder section 1471(c)(2). Except as oth-erwise provided in this paragraph (d)(5), aparticipating FFI may elect under section1471(c)(2) and this paragraph (d)(5) toreport under sections 6041, 6042, 6045,and 6049, as appropriate, with respect toany account required to be reported underthis paragraph (d). Such reporting must bedone as if such participating FFI were aU.S. payor and each holder of an accountthat is a specified U.S. person, U.S. ownedforeign entity, or owner-documented FFIwere a payee who is an individual and cit-izen of the United States. If a participatingFFI makes such an election, the FFI isrequired to report the information requiredunder this paragraph (d)(5) with respectto each such U.S. account or account held

by an owner-documented FFI, regardlessof whether the account holder of such ac-count qualifies as a recipient exempt fromreporting by a payor or middleman undersections 6041, 6042, 6045, or 6049, in-cluding the reporting of payments made tosuch account of amounts that are subjectto reporting under any of these sections.A participating FFI that elects to reportan account under the election described inthis paragraph (d)(5) is required to reportthe information described in paragraph(d)(5)(ii) or (iii) of this section for a calen-dar year regardless of whether a reportablepayment was made to the U.S. accountduring the calendar year. A participatingFFI that reports an account under the elec-tion described in this paragraph (d)(5) isnot required to report the information de-scribed in paragraph (d)(3) of this sectionwith respect to the account. The electionunder section 1471(c)(2) described in thisparagraph (d)(5)(i)(A) does not apply tocash value insurance contracts or annu-ity contracts that are financial accountsdescribed in §1.1471–5(b)(1)(iv). Seeparagraph (d)(5)(i)(B) of this section foran election to report cash value insurancecontracts or annuity contracts that are U.S.accounts held by specified U.S. persons ina manner similar to section 6047(d).

(B) Election to report in a manner simi-lar to section 6047(d). Except as otherwiseprovided in this paragraph (d)(5), a partici-pating FFI may elect to report with respectto any of its cash value insurance contractsor annuity contracts that are U.S. accountsheld by specified U.S. persons under sec-tion 6047(d), modified as follows. Theamount to be reported is the sum of the ac-count balance or value (as of the calendaryear end or the most recent contract an-niversary date) and any amount paid un-der the contract during such reporting pe-riod as if such participating FFI were aU.S. payor. Each holder of a U.S. accountthat is a specified U.S. person is treatedfor purposes of reporting under this para-graph (d)(5)(i)(B) as a contract holder orpayee who is an individual and citizen ofthe United States.

(ii) Additional information to be re-ported. In addition to the informationotherwise required to be reported un-der sections 6041, 6042, 6045, 6047(d)(in the manner described in paragraph(d)(5)(i)(B) of this section with respectto U.S. accounts held by specified U.S.

2013–15 I.R.B. 855 April 8, 2013

persons), and 6049, including the report-ing of payments made to such accountssubject to reporting under the applicablesection, a participating FFI that elects toreport under this paragraph (d)(5)(ii) mustreport with respect to each account that itis required to treat as a U.S. account—

(A) In the case of an account holder thatis a specified U.S. person—

(1) The name, address, and TIN of theaccount holder; and

(2) The account number; and(B) In the case of an account holder that

is a U.S. owned foreign entity that is anNFFE—

(1) The name of such entity;(2) The name, address, and TIN of each

substantial U.S. owner of such entity; and(3) The account number.(iii) Special reporting of accounts held

by owner-documented FFIs. With respectto each account held by an owner-docu-mented FFI, a participating FFI that electsto report under this paragraph (d)(5) mustreport payments made to the owner-docu-mented FFI under the requirements of sec-tions 6041, 6042, 6045, 6047(d), and 6049,the other information required under eachapplicable section, and the following infor-mation—

(A) The name of such FFI;(B) The name, address, and TIN of

each specified U.S. person identified in§1.1471–3(d)(6)(iv)(A)(1); and

(C) The account number for the accountheld by the owner-documented FFI.

(iv) Branch reporting. A participatingFFI that reports the information describedin paragraphs (d)(5)(ii) and (iii) of this sec-tion shall also report the jurisdiction of thebranch that maintains the account being re-ported.

(v) Time and manner of making theelection. A participating FFI (or one ormore branches of the participating FFI)may make the election described in thisparagraph (d)(5) by reporting the informa-tion described in this paragraph (d)(5) onthe form described in paragraph (d)(5)(vii)of this section on the next reporting datefollowing the calendar year for which theelection is made.

(vi) Revocation of election. A partic-ipating FFI may revoke the election de-scribed in paragraph (d)(5)(i) (as a wholeor with regard to any of its accounts) by re-porting the information described in para-graph (d)(3) on the next reporting date fol-

lowing the calendar year for which theelection is revoked.

(vii) Filing of information under elec-tion. In the case of an account holder thatis a specified U.S. person, the informationrequired to be reported under the electiondescribed in this paragraph (d)(5) shall befiled with the IRS and issued to the accountholder in the time and manner prescribedin sections 6041, 6042, 6045, 6047(d), and6049 and in accordance with the formsreferenced therein and their accompany-ing instructions provided by the IRS forreporting under each of these sections. Ifthe account holder is an NFFE that is aU.S. owned foreign entity or owner-docu-mented FFI, however, the information re-quired to be reported under the election de-scribed in this paragraph (d)(5) shall befiled on Form 8966 in accordance withits requirements and its accompanying in-structions.

(6) Reporting on recalcitrant accountholders—(i) In general. Except as oth-erwise provided in a Model 2 IGA, aparticipating FFI, as part of its reportingresponsibilities under this paragraph (d),shall report to the IRS for each calendaryear the information described for each ofthe classes of account holders described inparagraphs (d)(6)(A) through (E) of thissection. See §1.1474–1(d)(4)(ii) for a par-ticipating FFI or registered deemed-com-pliant FFI’s requirement to report chapter4 reportable amounts paid to such accountholders and tax withheld.

(A) The aggregate number and aggre-gate balance or value of accounts heldby recalcitrant account holders at the endof the calendar year that are described in§1.1471–5(g)(2)(iv) (referencing passiveNFFEs that are recalcitrant account hold-ers).

(B) The aggregate number and aggre-gate balance or value of accounts heldby recalcitrant account holders at the endof the calendar year that are described in§1.1471–5(g)(2)(ii) and (iii) (referencingU.S. persons that are recalcitrant accountholders).

(C) The aggregate number and aggre-gate balance or value of accounts held byrecalcitrant account holders at the end ofthe calendar year, other than accounts de-scribed in paragraph (d)(6)(i)(A), (B), or(E) of this section, that have U.S. indicia.

(D) The aggregate number and aggre-gate balance or value of accounts held by

recalcitrant account holders at the end ofthe calendar year, other than accounts de-scribed in paragraph (d)(6)(i)(A) or (E) ofthis section, that do not have U.S. indicia.

(E) The aggregate number and aggre-gate balance or value of accounts heldby recalcitrant account holders at the endof the calendar year that are dormant ac-counts.

(ii) Definition of dormant account. Adormant account is an account (other thana cash value insurance contract or annuitycontract) that is a dormant or inactive ac-count under applicable laws or regulationsor the normal operating procedures of theparticipating FFI that are consistently ap-plied for all accounts maintained by suchinstitution in a particular jurisdiction. Ifneither applicable laws or regulations northe normal operating procedures of the par-ticipating FFI maintaining the account ad-dress dormant or inactive accounts, an ac-count will be a dormant account if—

(A) The account holder has not initiateda transaction with regard to the accountor any other account held by the accountholder with the FFI in the past three years;and

(B) The account holder has not commu-nicated with the FFI that maintains suchaccount regarding the account or any otheraccount held by the account holder withthe FFI in the past six years.

(iii) End of dormancy. An accountthat is a dormant account under paragraph(d)(6)(ii) of this section ceases to be adormant account when—

(A) The account holder initiates a trans-action with regard to the account or anyother account held by the account holderwith the FFI;

(B) The account holder communicateswith the FFI that maintains such accountregarding the account or any other accountheld by the account holder with the FFI; or

(C) The account ceases to be a dormantaccount under applicable laws or regula-tions or the participating FFI’s normal op-erating procedures.

(iv) Forms. Reporting under paragraph(d)(6)(i) of this section shall be filed onForm 8966 in accordance with its require-ments and accompanying instructions.

(v) Time and manner of filing. Exceptas provided in paragraph (d)(7)(iv)(B) ofthis section, Form 8966 shall be filed elec-tronically with the IRS on or before March31 of the year following the end of the cal-

April 8, 2013 856 2013–15 I.R.B.

endar year to which the form relates. Seethe accompanying instructions to this formfor electronic filing instructions.

(vi) Record retention requirements. Aparticipating FFI that produces, in the or-dinary course of its business, account state-ments that summarize the activity (includ-ing withdrawals, transfers, and closures) ofan account held by a recalcitrant accountholder described in paragraph (d)(6)(i)(B)of this section for any calendar year inwhich the account was required to be re-ported under paragraph (d)(6) of this sec-tion must retain a record of such accountstatements. Such record must be retainedfor the longer of six years or the reten-tion period under the FFI’s normal busi-ness procedures. A participating FFI maybe required to extend the six year retentionperiod if the IRS requests such an exten-sion prior to the expiration of the six yearperiod.

(7) Special reporting rules with re-spect to the 2013 through 2015 calendaryears—(i) In general. If the effective dateof the FFI agreement of a participating FFIis on or before December 31, 2014, theparticipating FFI is required to report U.S.accounts and accounts held by owner-doc-umented FFIs that it maintained (or that isotherwise required to report under para-graph (d)(2)(ii) of this section) during the2013, 2014, and 2015 calendar years inaccordance with paragraph (d)(7)(ii) or(iii) of this section.

(ii) Participating FFIs that report under§1.1471–4(d)(3). With respect to accountsthat a participating FFI is required to reportin accordance with paragraph (d)(2) of thissection, the participating FFI may, insteadof the information described in paragraphs(d)(3)(ii) and (iii) of this section, reportonly the following information—

(A) Reporting with respect to the 2013and 2014 calendar years. With respect toaccounts maintained during the 2013 and2014 calendar years—

(1) The name, address, and TIN of eachspecified U.S. person who is an accountholder and, in the case of any accountholder that is an NFFE that is a U.S. ownedforeign entity or that is an owner-docu-mented FFI, the name of such entity andthe name, address, and TIN of each sub-stantial U.S. owner of such NFFE or, inthe case of an owner-documented FFI, ofeach specified U.S. person identified in§1.1471–3(d)(6)(iv)(A)(1);

(2) The account balance or value as ofthe end of the relevant calendar year, or ifthe account was closed after the effectivedate of the FFI agreement, the amount orvalue withdrawn or transferred from theaccount in connection with closure; and

(3) The account number of the account.(B) Reporting with respect to the 2015

calendar year. With respect to the 2015calendar year, the participating FFI mayreport only—

(1) The information described in para-graph (d)(7)(ii)(A) of this section; and

(2) The payments made with respectto the account except for those paymentsdescribed in paragraph (d)(4)(iv)(B)(3) ofthis section (certain gross proceeds).

(iii) Participating FFIs that reportunder §1.1471–4(d)(5). A participatingFFI that elects to report under paragraph(d)(5) of this section may report onlythe information described in paragraphs(d)(7)(ii)(A)(1) and (3) of this section forits 2013 and 2014 calendar years. Withrespect to its 2015 calendar year, a par-ticipating FFI is required to report all ofthe information required to be reportedunder paragraphs (d)(5)(i) through (iii) ofthis section but may exclude from such re-porting amounts reportable under section6045.

(iv) Forms for reporting—(A) In gen-eral. Except as provided in paragraph(d)(7)(iv)(B) of this section, reporting un-der paragraph (d)(7)(ii) of this section shallbe made on Form 8966 (or such other formas the IRS may prescribe), in the man-ner described in paragraph (d)(3)(vii) ofthis section. Reporting under paragraph(d)(7)(iii) of this section shall be made inaccordance with paragraph (d)(5)(vii) ofthis section.

(B) Special determination date andtiming for reporting with respect to the2013 calendar year. With respect to the2013 calendar year, a participating FFImust report under paragraph (d)(3) or (5)of this section on all accounts that areidentified and documented under para-graph (c) of this section as U.S. accountsor accounts held by owner-documentedFFIs as of December 31, 2014, (or as ofthe date an account is closed if the ac-count is closed prior to December 31,2014) if such account was outstanding onDecember 31, 2013. Reporting for boththe 2013 and 2014 calendar year shall befiled with the IRS on or before March 31,

2015. However, a U.S. payor (includinga U.S. branch of a participating FFI orregistered deemed-compliant FFI that istreated as a U.S. person) that reports inaccordance with paragraph (d)(2)(iii) ofthis section may report all or a portionof its U.S. accounts and accounts held byowner-documented FFIs in accordancewith the dates otherwise applicable to re-porting under chapter 61 with respect tothe 2013 calendar year.

(8) Reporting requirements of QIs, WPsand WTs. See the QI, WP, or WT agree-ment for the reporting requirements of aparticipating FFI that is a QI, WP, or WTwith respect to U.S. accounts that it main-tains.

(9) Examples. The following examplesillustrate the provisions of this paragraph(d):

Example 1. Financial institution required to re-port U.S. account. PFFI1, a participating FFI, is-sues shares of stock that are financial accounts un-der §1.1471–5(b). Such shares are held in custodyby PFFI2, another participating FFI, on behalf of U,a specified U.S. person that holds an account withPFFI2. The shares of PFFI1 held by PFFI2 will notbe subject to reporting by PFFI1 if PFFI1 may treatPFFI2 as a participating FFI under §1.1471–3(d)(3).See paragraph (d)(2)(ii)(A) of this section.

Example 2. Financial institution required toreport U.S. account. U, a specified U.S. person,holds shares in PFFI1, a participating FFI that in-vests in other financial institutions (a fund of funds).The shares of PFFI1 are financial accounts under§1.1471–5(b)(3)(iii). PFFI1 holds shares that arealso financial accounts under §1.1471–5(b)(3)(iii)in PFFI2, another participating FFI. The shares ofPFFI2 held by PFFI1 are not subject to reportingby PFFI2, if PFFI2 may treat PFFI1 as a partici-pating FFI under §1.1471–3(d)(3). See paragraph(d)(2)(ii)(A) of this section.

Example 3. U.S owned foreign entity. FC, a pas-sive NFFE, holds a custodial account with PFFI1, aparticipating FFI. U, a specified U.S. person, owns3% of the only class of stock of FC. Q, another spec-ified U.S. person, owns 12% of the only class ofstock of FC. U is not a substantial U.S. owner of FC.See §1.1473–1(b). Q is a substantial U.S. owner ofFC and FC identifies her as such to PFFI1. PFFI1does not elect to report under paragraph (d)(5) ofthis section. PFFI1 must complete and file the re-porting form described in paragraph (d)(3)(vi) of thissection and report the information described in para-graph (d)(3)(iii) with respect to both FC and Q. Seeparagraph (d)(3)(ii) of this section.

Example 4. Election to perform Form 1099 re-porting with regard to an NFFE. Same facts as inExample 3, except that PFFI1 has made the electionin accordance with paragraph (d)(5) of this section.PFFI1 must complete and file the forms describedin paragraph (d)(5)(vii) for FC, treating FC as if itwere an individual and citizen of the United Statesand must identify Q as a substantial U.S. owner of FCon such form. See paragraph (d)(5)(ii) of this section.

2013–15 I.R.B. 857 April 8, 2013

PFFI1 shall not complete the forms described in para-graph (d)(5)(vii) with regard to U.

Example 5. Owner-documented FFI. DC, anowner-documented FFI under §1.1471–3(d)(6),holds a custodial account with PFFI1, a participat-ing FFI. U, a specified U.S. person, owns 3% ofthe only class of stock of DC. Q, another specifiedU.S. person, owns 12% of the only class of stockof DC. Both U and Q are persons identified in§1.1471–3(d)(6)(iv)(A)(1) and DC identifies U andQ to PFFI1 and otherwise provides to PFFI1 all of theinformation required to be reported with respect toDC. PFFI1 must complete and file a form describedin paragraph (d)(3)(vi) of this section with regard toU and Q. See paragraph (d)(3)(iii) of this section.

Example 6. Election to perform Form 1099 re-porting with regard to an owner-documented FFI.Same facts as in Example 5, except that PFFI1 hasmade the election in accordance with paragraph(d)(5) of this section. PFFI1 must complete and filethe forms described in paragraph (d)(5)(vii) for Uand Q.

Example 7. Sponsored FFI. DC2 is an FFIthat has agreed to have a sponsoring entity, PFFI1,fulfill DC2’s chapter 4 responsibilities under§1.1471–5(f)(2)(iii). U, a specified U.S. person,holds an equity interest in DC2 that is a financialaccount under §1.1471–5(b)(3)(iii). PFFI1 mustcomplete and file a form described in paragraph(d)(3)(vi) of this section with regard to U’s accounton behalf of DC2. See paragraph (d)(2)(ii)(C) of thissection.

(e) Expanded affiliated group require-ments—(1) In general. Except as other-wise provided in this paragraph (e)(1) orparagraphs (e)(2) and (e)(3) of this sec-tion, each FFI that is a member of anexpanded affiliated group must have thechapter 4 status of a participating FFI orregistered deemed-compliant FFI as a con-dition for any member of such group toobtain the status of a participating FFI orregistered deemed-compliant FFI. Accord-ingly, except as otherwise provided in pub-lished guidance, each FFI in an expandedaffiliated group must submit a registrationform to the IRS in such manner as the IRSmay prescribe requesting an FFI agree-ment, registered deemed-compliant status,or limited FFI status as a condition for anymember to become a participating FFI orregistered deemed-compliant FFI. Exceptas provided in paragraph (e)(2) of this sec-tion, each FFI that is a member of suchgroup must also agree to all of the re-quirements for the status for which it ap-plies with respect to all accounts main-tained at all of its branches, offices, and di-visions. For the withholding requirementsof a participating FFI with respect to lim-ited branches and affiliates that are limitedFFIs, see paragraph (b)(5) of this section.Notwithstanding the foregoing, an FFI (or

branch thereof) that is treated as a partici-pating FFI or a deemed-compliant FFI pur-suant to a Model 1 IGA or Model 2 IGAwill maintain such status provided that itmeets the terms for such status pursuant tosuch agreement.

(2) Limited branches—(i) In general.An FFI that otherwise satisfies the require-ments for participating FFI status as de-scribed in this section will be allowed tobecome a participating FFI notwithstand-ing that one or more of its branches cannotsatisfy all of the requirements of a partici-pating FFI as described in this section if—

(A) All branches (as defined in para-graph (e)(2)(ii) of this section) that cannotsatisfy all of the requirements of a partici-pating FFI as described in this section arelimited branches as described in paragraph(e)(2)(iii) of this section;

(B) The FFI maintains at least onebranch that complies with all of the re-quirements of a participating FFI, even ifthe only branch that can comply is a U.S.branch; and

(C) The FFI agrees to and complies withthe conditions in paragraph (e)(2)(iv) ofthis section.

(ii) Branch defined. For purposes of thissection, a branch is a unit, business, or of-fice of an FFI that is treated as a branchunder the regulatory regime of a countryor is otherwise regulated under the lawsof such country as separate from other of-fices, units, or branches of the FFI and thatmaintains books and records separate fromthe books and records of other branchesof the FFI. For purposes of this section, abranch includes units, businesses, and of-fices of an FFI located in the country inwhich the FFI is created or organized. Allunits, businesses, or offices of a participat-ing FFI in a single country shall be treatedas a single branch for purposes of this para-graph (e)(2). An account will be treatedas maintained by a branch for purposes ofthis paragraph (e)(2) if the rights and obli-gations of the account holder and the par-ticipating FFI with regard to such account(including any assets held in the account)are governed by the laws of the country ofthe branch.

(iii) Limited branch defined. A limitedbranch is a branch of an FFI that, underthe laws of the jurisdiction as of February15, 2012, and that apply with respect to theaccounts maintained by the branch, cannotsatisfy the conditions of both paragraphs

(e)(2)(iii)(A) and (B) of this section, butwith respect to which the FFI will agreeto the conditions of paragraph (e)(2)(iv) ofthis section.

(A) With respect to accounts that pur-suant to this section the participating FFIis required to treat as U.S. accounts, ei-ther report such accounts to the IRS as de-scribed in paragraph (d) of this section,close such accounts within a reasonableperiod of time, or transfer such accounts toa U.S. financial institution, a branch of theFFI that will so report, a participating FFI,or a reporting Model 1 FFI.

(B) With respect to recalcitrant accountholders and accounts held by nonpartici-pating FFIs, withhold with respect to eachsuch account as required under paragraph(b) of this section, block each such account(as defined in this paragraph), close eachsuch account within a reasonable period oftime, or transfer each such account to aU.S. financial institution, a branch of theFFI that will so report, a participating FFI,or a reporting Model 1 FFI. For purposesof this paragraph (e)(2)(iii)(B), an accountis a blocked account if the FFI prohibits theaccount holder from effecting any transac-tions with respect to an account until suchtime as the account is closed, transferred,or the account holder provides the doc-umentation described in paragraph (c) ofthis section for the FFI to determine theU.S. or non-U.S. status of the account andreport the account if required under para-graph (d) of this section.

(iv) Conditions for limited branch sta-tus. An FFI with one or more limitedbranches must satisfy the following re-quirements when applying for participat-ing FFI status with the IRS—

(A) Identify the relevant jurisdictionof each branch for which it seeks limitedbranch status;

(B) Agree that each such branch willidentify its account holders under the duediligence requirements applicable to par-ticipating FFIs under paragraph (c) of thissection, retain account holder documenta-tion pertaining to those identification re-quirements for six years from the effectivedate of the FFI agreement, and report to theIRS with respect to accounts that it is re-quired to treat as U.S. accounts to the ex-tent permitted under the relevant laws per-taining to the branch;

(C) Agree to treat each such branch asan entity separate from its other branches

April 8, 2013 858 2013–15 I.R.B.

for purposes of the withholding require-ments described in paragraph (b)(5) of thissection;

(D) Agree that each such branch willnot open accounts that it is required totreat as U.S. accounts or accounts held bynonparticipating FFIs, including accountstransferred from any branch of the FFI orfrom any member of its expanded affiliatedgroup; and

(E) Agree that each limited branch willidentify itself to withholding agents as anonparticipating FFI (including to affili-ates of the FFI in the same expanded affil-iated group that are withholding agents).

(v) Term of limited branch status (tran-sitional). An FFI that becomes a par-ticipating FFI with one or more limitedbranches will cease to be a participatingFFI after December 31, 2015, unless other-wise provided pursuant to Model 1 IGA orModel 2 IGA. A branch will cease to be alimited branch as of the beginning of thethird calendar quarter following the dateon which the branch is no longer prohib-ited from complying with the requirementsof a participating FFI as described in thissection. In such case, a participating FFIwill retain its status as a participating FFI ifit notifies the IRS by the date such branchceases to be a limited branch that it willcomply with the requirements of an FFIagreement with respect to such branch, orif otherwise provided pursuant to a Model1 IGA or Model 2 IGA.

(3) Limited FFI—(i) In general. An FFIwill be allowed to become either a partici-pating FFI or a registered deemed-compli-ant FFI notwithstanding that one or moreof the FFIs in the expanded affiliated groupof which the FFI is a member cannot com-ply with all of the requirements of a partic-ipating FFI as described in this section ifeach such FFI is a limited FFI under para-graph (e)(3)(ii) of this section.

(ii) Limited FFI defined. A limitedFFI is a member of an expanded affiliatedgroup that includes one or more participat-ing FFIs that agrees to the conditions de-scribed in paragraph (e)(3)(iii) of this sec-tion to become a limited FFI and if un-der the laws of each jurisdiction that applywith respect to the accounts maintained bythe affiliate, the affiliate cannot satisfy theconditions of both paragraphs (e)(3)(ii)(A)and (B) of this section.

(A) With respect to accounts that areU.S. accounts, report such accounts to the

IRS as described in paragraph (d) of thissection, close such accounts within a rea-sonable period of time, or transfer such ac-counts to a U.S. financial institution, a par-ticipating FFI, or a reporting Model 1 FFI.

(B) With respect to recalcitrant accountholders and accounts held by nonpartici-pating FFIs, withhold with respect to eachsuch account as required under paragraph(b) of this section, block each such ac-count, close each such account within areasonable period of time, or transfer eachsuch account to a U.S. financial institution,a participating FFI, or a reporting Model1 FFI. See paragraph (e)(2)(ii)(B) of thissection for when an account is consideredblocked.

(iii) Conditions for limited FFI status.An FFI that seeks to become a limited FFImust—

(A) Register as part of its expanded af-filiated group’s FFI agreement process forlimited FFI status;

(B) Agree as part of such registration toidentify its account holders under the duediligence requirements applicable to par-ticipating FFIs under paragraph (c) of thissection, retain account holder documenta-tion pertaining to those identification re-quirements for six years from the effectivedate of its registration as a limited FFI, andreport with respect to accounts that it is re-quired to treat as U.S. accounts to the ex-tent permitted under the relevant laws per-taining to the FFI;

(C) Agree as part of such registrationthat it will not open accounts that it is re-quired to treat as U.S. accounts or accountsheld by nonparticipating FFIs, includingaccounts transferred from any member ofits expanded affiliated group; and

(D) Agree as part of such registrationthat it will identify itself to withholdingagents as a nonparticipating FFI.

(iv) Period for limited FFI status (tran-sitional). A limited FFI will cease to bea limited FFI after December 31, 2015.An FFI will also cease to be a limited FFIwhen it becomes a participating FFI ordeemed-compliant FFI, or as of the begin-ning of the third calendar quarter followingthe date on which the FFI is no longer pro-hibited from complying with the require-ments of a participating FFI as describedin this section. In such case, participatingFFIs and deemed-compliant FFIs that aremembers of the same expanded affiliatedgroup will retain their status if, by the date

that an FFI ceases to be a limited FFI, suchFFI enters into an FFI agreement or be-comes a registered deemed-compliant FFI,unless otherwise provided pursuant to anapplicable Model 1 IGA or Model 2 IGA.

(4) Special rule for QIs. An FFI thathas in effect a QI agreement with the IRSwill be allowed to become a limited FFInotwithstanding that none of the FFIs inthe expanded affiliated group of which theFFI is a member can comply with the re-quirements of a participating FFI as de-scribed in this section if the FFI that is aQI meets the conditions of a limited FFIunder paragraph (e)(3)(ii) of this section.

(f) Verification—(1) In general. Thisparagraph (f) describes the requirement fora participating FFI to establish and imple-ment a compliance program for satisfyingits requirements under this section. Para-graph (f)(2) of this section provides therequirement for a participating FFI to es-tablish a compliance program and the op-tion for a group of FFIs to adopt a con-solidated compliance program. Paragraph(f)(3) describes the periodic certificationthat the participating FFI must make to theIRS regarding the participating FFI’s com-pliance with the requirements of an FFIagreement. Paragraph (f)(4) describes IRSinformation requests related to compliancewith an FFI agreement.

(2) Compliance program—(i) In gen-eral. The participating FFI must appointa responsible officer to oversee the par-ticipating FFI’s compliance with the re-quirements of the FFI agreement. The re-sponsible officer must (either personallyor through designated persons) establisha compliance program that includes poli-cies, procedures, and processes sufficientfor the participating FFI to satisfy the re-quirements of the FFI agreement. The re-sponsible officer (or designee) must peri-odically review the sufficiency of the FFI’scompliance program and the FFI’s com-pliance with the requirements of an FFIagreement during the certification perioddescribed in paragraph (f)(3) of this sec-tion. The results of the periodic reviewmust be considered by the responsible of-ficer in making the periodic certificationsrequired under paragraph (f)(3) of this sec-tion.

(ii) Consolidated compliance pro-gram—(A) In general. A participatingFFI that is a member of an expanded af-filiated group that includes one or more

2013–15 I.R.B. 859 April 8, 2013

FFIs may elect to be part of a consoli-dated compliance program (and performa consolidated periodic review) under theauthority of a participating FFI, reportingModel 1 FFI, or U.S. financial institution(compliance FI) that is a member of theelecting FFI’s expanded affiliated group,regardless of whether all such members soelect. A sponsoring entity is required toact as the compliance FI for the sponsoredFFI group. In addition, when an FFI electsto be part of a consolidated complianceprogram, each branch that it maintains(including a limited branch or a branchdescribed in §1.1471–5(f)(1)) must besubject to periodic review as part of suchprogram.

(B) Requirements of compliance FI. Aparticipating FFI, reporting Model 1 FFI,or U.S. financial institution that agrees toestablish and maintain a consolidated com-pliance program and perform a consoli-dated periodic review on behalf of one ormore FFIs (the compliance group), mustagree to identify itself as the complianceFI and identify each FFI for which it acts(an electing FFI) to the extent requiredby the IRS as part of the FFI registrationprocess or certification procedures. Theagreement between the compliance FI andeach electing FFI must permit either thecompliance FI or the electing FFI to termi-nate the agreement upon a finding by theIRS or by either party that the other partyto the agreement is not fulfilling its obliga-tions under the agreement or is no longerable to fulfill such obligations.

(3) Certification of compliance—(i) Ingeneral. In addition to the certificationsrequired under paragraph (c)(7) of this sec-tion, six months following the end of eachcertification period, the responsible officermust make the certification described in ei-ther paragraph (f)(3)(ii) or (iii) of this sec-tion. The first certification period beginson the effective date of the FFI agreementand ends at the close of the third full cal-endar year following the effective date ofthe FFI agreement. Each subsequent cer-tification period is the three calendar yearperiod following the previous certificationperiod, unless the FFI agreement providesfor a different period. The responsible of-ficer must either certify that the participat-ing FFI maintains effective internal con-trols or, if the participating FFI has failedto remediate any material failures (definedin paragraph (f)(3)(iv) of this section) as of

the date of the certification, must make thequalified certification described in para-graph (f)(3)(iii) of this section.

(ii) Certification of effective internalcontrols. The responsible officer mustcertify to the following statements—

(A) The responsible officer (or de-signee) has established a compliance pro-gram that is in effect as of the date of thecertification and that has been subjectedto the review as described in paragraph(f)(2)(i) of this section;

(B) With respect to material failures—(1) There are no material failures for the

certification period; or(2) If there are any material failures, ap-

propriate actions were taken to remediatesuch failures and to prevent such failuresfrom reoccurring; and

(C) With respect to any failure to with-hold, deposit, or report to the extent re-quired under the FFI agreement, the FFIhas corrected such failure by paying anytaxes due (including interest and penal-ties) and filing the appropriate return (oramended return).

(iii) Qualified certification. If the re-sponsible officer has identified an event ofdefault or a material failure that the partic-ipating FFI has not corrected as of the dateof the certification, the responsible officermust certify to the following statements—

(A) With respect to the event of defaultor material failure—

(1) The responsible officer (or de-signee) has identified an event of defaultas defined in paragraph (g)(1) of this sec-tion; or

(2) The responsible officer has deter-mined that as of the date of the certifica-tion, there are one or more material failureswith respect to the participating FFI’s com-pliance with the FFI agreement and thatappropriate actions will be taken to preventsuch failures from reoccurring;

(B) With respect to any failure to with-hold, deposit, or report to the extent re-quired under the FFI agreement, the FFIwill correct such failure by paying anytaxes due (including interest and penal-ties) and filing the appropriate return (oramended return); and

(C) The responsible officer (or de-signee) will respond to any notice ofdefault (if applicable) or will provide tothe IRS, to the extent requested, a descrip-tion of each material failure and a writtenplan to correct each such failure.

(iv) Material failures defined. A ma-terial failure is a failure of the participat-ing FFI to fulfill the requirements of theFFI agreement if the failure was the re-sult of a deliberate action on the part ofone or more employees of the participat-ing FFI (its agent, sponsor, or complianceFI) to avoid the requirements of the FFIagreement or was an error attributable toa failure of the participating FFI to im-plement internal controls sufficient for theparticipating FFI to meet the requirementsof this section. A material failure willnot constitute an event of default unlesssuch material failure occurs in more thanlimited circumstances when a participatingFFI has not substantially complied with therequirements of an FFI agreement. Mate-rial failures include the following—

(A) The deliberate or systemic failureof the participating FFI to report accountsthat it was required to treat as U.S. ac-counts, withhold on passthru payments tothe extent required, deposit taxes withheld,or accurately report recalcitrant accountholders or payees that are nonparticipatingFFIs as required;

(B) A criminal or civil penalty or sanc-tion imposed on the participating FFI (orany branch or office thereof) by a regulatoror other governmental authority or agencywith oversight over the participating FFI’scompliance with the AML due diligenceprocedures to which it (or any branch or of-fice thereof) is subject and that is imposedbased on a failure to properly identify ac-count holders under the requirements ofthose procedures; and

(C) A potential future tax liability re-lated to the participating FFI’s compliance(or lack thereof) with the FFI agreementfor which the FFI establishes, for financialstatement purposes, a tax reserve or provi-sion.

(4) IRS review of compliance—(i) Gen-eral inquiries. The IRS, based upon theinformation reporting forms describedin paragraphs (d)(3)(v), (d)(5)(vi), or(d)(6)(iv) of this section filed with theIRS for each calendar year, may requestadditional information with respect to theinformation reported on the forms or mayrequest the account statements describedin paragraph (d)(4)(v) of this section.

(ii) Inquiries regarding substantial non-compliance. If, based on the informationreporting forms described in paragraphs(d)(3)(v), (d)(5)(vi), or (d)(6)(iv) of this

April 8, 2013 860 2013–15 I.R.B.

section filed with the IRS for each cal-endar year, the certifications made by theresponsible officer described in paragraph(f)(3) of this section, or any other informa-tion related to the participating FFI’s com-pliance with its FFI agreement, the IRSdetermines in its discretion that the par-ticipating FFI may not have substantiallycomplied with the requirements of an FFIagreement, the IRS may request from theresponsible officer (or designee) informa-tion necessary to verify the participatingFFI’s compliance with the FFI agreement.The IRS may request, for example, a de-scription or copy of the participating FFI’spolicies and procedures for fulfilling therequirements of the FFI agreement, a de-scription of the participating FFI’s proce-dures for conducting its periodic review,or a copy of any written reports document-ing the findings of such review in order toevaluate the sufficiency of the participat-ing FFI’s compliance program and reviewof such program. The IRS may also re-quest the performance of specified reviewprocedures by a person (including an exter-nal auditor or third-party consultant) thatthe IRS identifies as competent to performsuch procedures given the facts and cir-cumstances surrounding the FFI’s poten-tial failure to comply with the FFI agree-ment.

(g) Event of default—(1) Defined. Anevent of default occurs if a participatingFFI fails to perform material obligationsrequired with respect to the due diligence,withholding, or reporting requirements ofthe FFI agreement or if the IRS determinesthat the participating FFI has failed to sub-stantially comply with the requirements ofthe FFI agreement. An event of defaultalso includes the occurrence of the follow-ing—

(i) Failure to obtain, in any case inwhich foreign law would (but for a waiver)prevent the reporting of U.S. accounts re-quired under paragraph (d) of this section,valid and effective waivers from holdersof U.S. accounts or failure to otherwiseclose or transfer such U.S. accounts as re-quired under paragraph (i) of this section;

(ii) Failure to significantly reduce, overa period of time, the number of accountholders or payees that the participating FFIis required to treat as recalcitrant accountholders or nonparticipating FFIs;

(iii) Failure, in any case in which for-eign law prevents or otherwise limits with-

holding to the extent required under para-graph (b) of this section, to fulfill the re-quirements of paragraph (i) of this section;

(iv) Failure to establish or maintain acompliance program for fulfilling the re-quirements of the FFI agreement or to per-form a periodic review of the participatingFFI’s compliance;

(v) Failure to take timely correctiveactions to remedy a material failure de-scribed in paragraph (f)(3)(iv) of thissection after making the qualified certifi-cation described in paragraph (f)(3)(iii) ofthis section;

(vi) Failure to make the initial certifica-tion required under paragraph (c)(7) of thissection or to make the periodic certifica-tion required under paragraph (f)(3) of thissection within the specified time period;

(vii) Making incorrect claims for refundunder the collective refund procedures de-scribed in paragraph (h) of this section;

(viii) Failure to cooperate with an IRSrequest for additional information or mak-ing any fraudulent statement or misrepre-sentation of material fact to the IRS; or

(ix) Any transaction relating to sponsor-ship, promotion, or noncustodial distribu-tion for or on behalf of any Local FFI, asdescribed in §1.1471–5(f)(1)(i)(A), that isan investment entity.

(2) Notice of event of default. Follow-ing an event of default known by or dis-closed to the IRS, the IRS will deliver tothe participating FFI a notice of defaultspecifying the event of default. The IRSwill request that the participating FFI re-mediate the event of default within a spec-ified time period. The participating FFImust respond to the notice of default andprovide information responsive to an IRSrequest for information or state the rea-sons why the participating FFI does notagree that an event of default has occurred.Taking into account the terms of any ap-plicable Model 2 IGA, if the participatingFFI does not provide a response within thespecified time period, the IRS may, at itssole discretion, deliver a notice of termi-nation that terminates the FFI’s participat-ing FFI status. A participating FFI may re-quest, within a reasonable period of time,reconsideration of a notice of default ornotice of termination by written requestto the LB&I, Assistant Deputy Commis-sioner (International).

(3) Remediation of event of default. Aparticipating FFI will be permitted to re-

mediate an event of default to the extentthat it agrees with the IRS on a remedi-ation plan. Such a plan may, for exam-ple, allow a participating FFI to remedi-ate an event of default described in para-graph (g)(1)(iii) of this section by provid-ing specific information regarding its U.S.accounts when the FFI has been unable toreport all of the information with respect tosuch accounts as required under paragraph(d) of this section and has been unable toclose or transfer such accounts. The IRSmay, as part of a remediation plan, requireadditional information from the FFI or theperformance of the specified review pro-cedures described in paragraph (f)(4)(ii) ofthis section.

(h) Collective credit or refund proce-dures for overpayments—(1) In general.Except as otherwise provided in the FFIagreement, if there has been an overpay-ment of tax with respect to an accountholder or payee of a participating FFI orreporting Model 1 FFI resulting from taxwithheld under chapter 4 by either the par-ticipating FFI or reporting Model 1 FFIor by its withholding agent during a cal-endar year and the amount withheld hasnot been recovered under the reimburse-ment or set-off procedures described in§1.1474–2(a) (applied by either the with-holding agent or the participating FFI orreporting Model 1 FFI), the participatingFFI or reporting Model 1 FFI may requesta credit or refund from the IRS of theoverpayment to the extent permitted un-der this paragraph (h) on behalf of such ac-count holder or payee. For purposes of thisparagraph (h), an overpayment means anamount withheld in excess of the accountholder or payee’s U.S. tax liability with re-spect to the payment (including overwith-holding as defined §1.1474–2(a)(2)). If aparticipating FFI or reporting Model 1 FFIdoes not elect the procedure provided inthis paragraph (h) to request a credit orrefund, the participating FFI or reportingModel 1 FFI is required to (or must requestthat its withholding agent) file and furnishwithin a reasonable period a Form 1042–S(or such other form as the IRS may pre-scribe) and Form 1042 (or amended forms)to report to any account holder or payeethat has requested such form with regardto the tax withheld by the participating FFIor reporting Model 1 FFI or its withhold-ing agent.

2013–15 I.R.B. 861 April 8, 2013

(2) Persons for which a collective re-fund is not permitted. A participating FFIor reporting Model 1 FFI cannot includein its collective refund claim any paymentsmade to an account holder or payee thatis a nonparticipating FFI, a participatingFFI or reporting Model 1 FFI that is aflow-through entity (including a WP orWT) or that is acting as an intermediary(including a QI), a U.S. person, or a pas-sive NFFE that is a flow-through entitywith respect to taxes allocated to its sub-stantial U.S. owners. A participating FFIor reporting Model 1 FFI must follow theprocedures set forth under sections 6402and 6414 and the regulations thereunder,as modified by this paragraph (h), to claimthe credit or refund. No credit or refundwill be allowed after the expiration of thestatutory period of limitation for refundsunder section 6511.

(3) Payments for which a collective re-fund is permitted. A collective refundis permitted only for payments withheldupon under chapter 4.

(4) Procedural and other requirementsfor collective refund. A participating FFIor reporting Model 1 FFI may use the col-lective refund procedures of this paragraph(h) under the following conditions—

(i) All account holders and payees forwhich the participating FFI or reportingModel 1 FFI seeks a refund must havebeen included on a Form 1042–S in a re-porting pool of nonparticipating FFIs orrecalcitrant account holders described in§1.1474–1(d)(4)(iii) with respect to thepayments for which refund is sought andthe participating FFI or reporting Model1 FFI (or the withholding agent) has notfiled or furnished a Form 1042–S to anysuch account holder or payee with respectto which the refund is sought;

(ii) If a refund is sought on the groundsthat the account holder or payee of a pay-ment that is U.S. source FDAP incomesubject to withholding under chapter 3 isentitled to a reduced rate of tax by rea-son of any treaty obligation of the UnitedStates, the participating FFI or reportingModel 1 FFI has also obtained valid doc-umentation that meets the requirements ofchapter 3 for a reduced rate of tax and suchdocumentation is available to the IRS uponrequest with respect to each such accountholder or payee; and

(iii) In filing a claim for refund with theIRS under this paragraph (h), the partici-

pating FFI or reporting Model 1 FFI sub-mits the following, together with its Form1042 (or amended Form 1042) on which itprovides a reconciliation of amounts with-held and claims a credit or refund, a sched-ule identifying the taxes withheld with re-spect to each account holder or payee towhich the claim relates, and, if applicable,a copy of the Form 1042–S (or such otherform as the IRS may prescribe) furnishedto the participating FFI or reporting Model1 FFI by its withholding agent reportingthe taxes withheld to which the claim re-lates, and a statement that includes the fol-lowing representations and explanation—

(A) The reason(s) for the overpayment;(B) A representation that the partici-

pating FFI or reporting Model 1 FFI orits withholding agent deposited the taxfor which a refund is being sought un-der section 6302 and has not applied thereimbursement or set-off procedure of§1.1474–2 to adjust the tax withheld towhich the claim relates;

(C) A representation that the participat-ing FFI or reporting Model 1 FFI has re-paid or will repay the amount for whichrefund is sought to the appropriate accountholders or payees;

(D) A representation that the participat-ing FFI or reporting Model 1 FFI retainsa record showing the total amount of taxwithheld, credits from other withholdingagents, tax assumed by the participatingFFI or reporting Model 1 FFI, adjustmentsfor underwithholding, and reimbursementsfor overwithholding as its relates to eachaccount holder and payee and also show-ing the repayment to such account holdersor payees for the amount of tax for whicha refund is being sought;

(E) A representation that the partici-pating FFI or reporting Model 1 FFI re-tains valid documentation that meets therequirements of chapters 3 (if applicable)and 4 to substantiate the amount of over-withholding with respect to each accountholder and payee for which a refund is be-ing sought and that such documentation isavailable to the IRS upon request; and

(F) A representation that the participat-ing FFI or reporting Model 1 FFI will notissue a Form 1042–S (or such other formas the IRS may prescribe) to any accountholder or payee for which a refund is be-ing sought.

(i) Legal prohibitions on reporting U.S.accounts and withholding—(1) In general.

A participating FFI (or branch thereof) thatis prohibited by foreign law from reportingthe information required under paragraph(d) of this section with respect to a U.S. ac-count must follow the procedures of para-graph (i)(2) of this section to obtain a validand effective waiver of such law and, ifsuch waiver is not obtained within a rea-sonable period of time, to close or trans-fer such account. A participating FFI (orbranch thereof) that is prohibited by lawfrom withholding with respect to a recal-citrant account holder or nonparticipatingFFI as required under paragraph (b) of thissection is required to perform the proce-dures of paragraph (i)(3) of this section toobtain an authorization to withhold on pay-ments made to the account holder or payeeto the extent required under paragraph (b)of this section, close the account or ter-minate the obligation (as applicable), orto sell the assets in the account that pro-duce (or could produce) withholdable pay-ments and, if such authorization is not ob-tained within a reasonable period of time,to transfer or block such account or obli-gation. An FFI that cannot comply withany of the requirements of this paragraph(i) is not eligible to enter into an FFI agree-ment with the IRS, but may obtain statusas a limited FFI if the FFI meets the re-quirements and agrees to the conditions ofparagraph (e)(3) of this section. If a branchof an FFI cannot comply with the require-ments of this paragraph (i), then the FFImust agree to the conditions of a limitedbranch as described in paragraph (e)(2) ofthis section to obtain status as a participat-ing FFI.

(2) Requesting waiver or closure of aU.S. account—(i) In general. If a partici-pating FFI (or branch thereof) is prohibitedby law from reporting the information re-quired under paragraph (d) of this sectionwith respect to a U.S. account that it main-tains unless a valid and effective waiver ofsuch law is obtained, the participating FFImust request a valid and effective waiver(including by obtaining waivers from allrelevant account holders if necessary). Foraccounts other than preexisting accounts,the participating FFI must obtain a validand effective waiver upon opening the ac-count or, if prohibitions on disclosure can-not by law be waived, the participating FFImust refrain from opening accounts thatare U.S. accounts or must transfer such ac-counts as described in paragraph (i)(2)(iii)

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of this section. Beginning on the date pro-vided in §1.1471–5(g)(3) and until suchtime as the holder of a U.S. account ei-ther consents to disclosure or closure of theaccount or until the account is transferred,the participating FFI is required to treat theaccount as held by a recalcitrant accountholder.

(ii) Valid and effective waiver for a U.S.account. For purposes of this paragraph(i)(2), a valid and effective waiver is awaiver that, under the applicable law gov-erning the participating FFI’s agreementwith the account holder, permits the partic-ipating FFI (or branch thereof) to report tothe IRS all of the information specified inparagraph (d) of this section with respectto the U.S. account and permits the FFI toprovide the IRS with additional informa-tion concerning such account as specifiedin paragraph (f) or (g) of this section.

(iii) Closure or transfer of U.S. account.If the participating FFI (or branch thereof)is prohibited by law from reporting a U.S.account to the IRS under paragraph (d) ofthis section and the participating FFI ei-ther does not obtain a valid and effectivewaiver (and Form W–9) or prohibitions ondisclosure cannot by law be waived, theparticipating FFI (or branch thereof) mustclose or transfer the account within a rea-sonable time. If the participating FFI can-not close or transfer the account absent theaccount holder consenting to closure, theparticipating FFI must request such a con-sent from such account holder and, if ob-tained, close or transfer the account withina reasonable period of time.

(3) Legal prohibitions preventing with-holding—(i) In general. If the participat-ing FFI (or branch thereof) is prohibited bylaw from withholding with respect to pay-ments subject to withholding under para-graph (b) of this section, the participatingFFI (or a branch thereof) must obtain theauthorization described in this paragraph(i)(3)(i) from each account holder or payeereceiving such payments to either with-hold, close the account or terminate theobligation, or sell all of the assets in theaccount that produce (or could produce)withholdable payments. If the participat-ing FFI does not receive such authorizationfrom the account holder or payee within areasonable period of time, the participatingFFI must block or transfer such accountsor obligations as described in paragraph(i)(3)(ii) of this section.

(ii) Block or transfer accounts or obli-gations. If the participating FFI doesnot receive the authorization described inparagraph (i)(3)(i) of this section from theaccount holder or payee within a reason-able period of time and is prohibited bylaw from closing accounts or terminatingobligations with account holders or pay-ees as described in paragraph (i)(3)(i) ofthis section, the participating FFI musteither block or transfer such accounts orobligations prior to the date on which theparticipating FFI would otherwise be re-quired to withhold under paragraph (b) ofthis section. See paragraph (e)(2)(iii)(B)of this section for when an account is con-sidered blocked. A transfer of an accountor obligation must be made to a branch ofthe FFI that may so withhold or to a par-ticipating FFI or reporting Model 1 FFI.

(j) Effective/applicability date. Thissection generally applies on January 28,2013. For other dates of applicability, see§§1.1471–4(b)(1), (4); 1.1471–4(d)(7);1.1471–4(e)(2)(v); 1.1471–4(e)(3)(iv).


§1.1471–5 Definitions applicable tosection 1471.

(a) U.S. accounts—(1) In general. Thisparagraph (a) defines the term U.S. ac-count and describes when a person istreated as the holder of a financial account(account holder). This paragraph alsoprovides rules for determining when anexception to U.S. account status appliesfor certain depository accounts, includingaccount aggregation requirements relevantto applying the exception.

(2) Definition of U.S. account. Subjectto the exception described in paragraph(a)(4)(i) of this section, a U.S. accountis any financial account maintained by anFFI that is held by one or more specifiedU.S. persons or U.S. owned foreign enti-ties. For the definition of the term finan-cial account, see paragraph (b) of this sec-tion. For the definition of the term spec-ified U.S. person, see §1.1473–1(c). Forthe definition of the term U.S. owned for-eign entity, see paragraph (c) of this sec-tion. For reporting requirements of partic-ipating FFIs with respect to U.S. accounts,see §1.1471–4(d).

(3) Account holder—(i) In general.Except as otherwise provided in this para-

graph (a)(3), the account holder is theperson listed or identified as the holderor owner of the account with the FFIthat maintains the account, regardless ofwhether such person is a flow-throughentity. Thus, for example, except as oth-erwise provided in paragraphs (a)(3)(ii)and (iii) of this section, if a trust (includ-ing a simple or grantor trust) or an estateis listed as the holder or owner of a fi-nancial account, the trust or estate is theaccount holder, rather than its owners orbeneficiaries. Similarly, except as oth-erwise provided in this paragraph (a)(3),if a partnership is listed as the holder orowner of a financial account, the partner-ship is the account holder, rather than thepartners in the partnership. In the case ofan account held by an entity that is disre-garded for U.S. federal tax purposes under§301.7701–2(c)(2)(i) of this chapter, theaccount shall be treated as held by theperson owning such entity. With respectto an account held by an exempt beneficialowner, such account is treated as held byan exempt beneficial owner only whenall payments made to such account wouldbe treated as made to an exempt benefi-cial owner. See §1.1471–6(h) for when apayment derived from certain commercialactivities is not treated as made to an ex-empt beneficial owner.

(ii) Grantor trust. A trust is not treatedas an account holder if a person is treatedas the owner of the entire trust under sec-tions 671 through 679. In that case, the ac-count is held by the person that is treatedas the owner of the trust under such sec-tions. In the case of a person that is treatedas the owner of a portion of the trust undersections 671 through 679—

(A) If such person is treated as owningall the assets in the account under sections671 through 679, the account is treated asheld by such person;

(B) If such person is treated as owninga portion of the account or the assets in theaccount under sections 671 through 679,the account is treated as held by both suchperson and the trust; and

(C) If such person is not treated as own-ing any portion of the account or any ofthe assets in the account under sections 671through 679, the account is treated as heldby the trust.

(iii) Financial accounts held by agentsthat are not financial institutions. A per-son, other than a financial institution, that

2013–15 I.R.B. 863 April 8, 2013

holds a financial account for the benefitor account of another person as an agent,custodian, nominee, signatory, investmentadvisor, or intermediary, is not treated asan account holder with respect to such ac-count for purposes of this section. Instead,such other person is treated as the accountholder.

(iv) Jointly held accounts. With respectto a jointly held account, each joint holderis treated as an account holder for pur-poses of determining whether the accountis a U.S. account. Thus, an account is aU.S. account if any of the account hold-ers is a specified U.S. person or a U.S.owned foreign entity and the account is nototherwise excepted from U.S. account sta-tus under paragraph (a)(4) of this section.When more than one U.S. person is a jointholder, each U.S. person will be treated asan account holder and will be attributedthe entire balance of the jointly held ac-count, including for purposes of applyingthe aggregation rules set forth in paragraph(b)(4)(iii) of this section.

(v) Account holder for insurance andannuity contracts. An insurance or annuitycontract is held by each person that is enti-tled to access the contract’s value (for ex-ample, through a loan, withdrawal, surren-der, or otherwise) or change a beneficiaryunder the contract. If no person can ac-cess the contract’s value or change a bene-ficiary, the account holders are any personnamed in the contract as an owner and anyperson who is entitled to receive a futurepayment under the terms of the contract.When an obligation to pay an amount un-der the contract becomes fixed, each per-son entitled to receive a payment is an ac-count holder.

(vi) Examples. The following examplesillustrate the provisions of paragraph (a)(3)of this section:

Example 1. Account held by agent. F, a nonresi-dent alien, holds a power of attorney from U, a speci-fied U.S. person, that authorizes F to open, hold, andmake deposits and withdrawals with respect to a de-pository account on behalf of U. The balance of theaccount for the calendar year is $100,000. F is listedas the holder of the depository account at a participat-ing FFI, but because F holds the account as an agentfor the benefit of U, F is not ultimately entitled to thefunds in the account. Because the depository accountis treated as held by U, a specified U.S. person, theaccount is a U.S. account.

Example 2. Jointly held accounts. U, a specifiedU.S. person, holds a depository account in a partici-pating FFI. The balance of the account for the calen-dar year is $100,000. The account is jointly held with

A, an individual who is a nonresident alien. Becauseone of the joint holders is a specified U.S person, theaccount is a U.S. account.

Example 3. Jointly held accounts. U and Q, bothspecified U.S. persons, hold a depository account ina participating FFI. The balance of the account forthe calendar year is $100,000. The account is a U.S.account and both U and Q are treated as holders ofthe account.

(4) Exceptions to U.S. account sta-tus—(i) Exception for certain individualaccounts of participating FFIs. Unless aparticipating FFI elects under paragraph(a)(4)(ii) of this section not to apply thisparagraph (a)(4)(i), the term U.S. accountshall not include any depository accountmaintained by such financial institutionduring a calendar year if the account isheld solely by one or more individualsand, with respect to each holder of suchaccount, the aggregate balance or valueof all depository accounts held by eachsuch individual does not exceed $50,000as of the end of the calendar year or on thedate the account is closed. For rules fordetermining the account balance or value,see paragraphs (a)(3)(iv) and (b)(4) of thissection.

(ii) Election to forgo exception. A par-ticipating FFI may elect to disregard theexception described in paragraph (a)(4)(i)of this section by reporting all U.S. ac-counts, including those accounts thatwould otherwise meet the conditions ofthe exception.

(iii) Example. Aggregation rules for exception toU.S. account status for certain depository accounts.In Year 1, a U.S. resident individual, U, holds a de-pository account with CB, a commercial bank that isa participating FFI. The balance in U’s CB account atthe end of Year 1 is $35,000. In Year 1, U also holds acustodial account with CB’s brokerage business. Thecustodial account has a $45,000 balance as of the endof Year 1. CB’s retail banking and brokerage busi-nesses share computerized information managementsystems that associate U’s depository account and U’scustodial account with U and with one another withinthe meaning of paragraph (b)(4)(iii)(A) of this sec-tion. For purposes of applying the $50,000 thresholddescribed in paragraph (a)(4)(i) of this section, how-ever, a depository account is aggregated only withother depository accounts. Therefore, U’s depositoryaccount is eligible for the paragraph (a)(4)(i) excep-tion to U.S. account status because the balance of thedepository account does not exceed $50,000.

(b) Financial accounts—(1) In gen-eral. Except as otherwise provided in thisparagraph (b), the term financial accountmeans—

(i) Depository account. Any depositoryaccount (as defined in paragraph (b)(3)(i)

of this section) maintained by a financialinstitution;

(ii) Custodial account. Any custodialaccount (as defined in paragraph (b)(3)(ii)of this section) maintained by a financialinstitution;

(iii) Equity or debt interest—(A) Eq-uity or debt interests in an investment en-tity. Any equity or debt interest (otherthan interests regularly traded on an estab-lished securities market under paragraph(e)(3)(iv) of this section) in an investmententity described in paragraph (e)(4)(i)(B)or (C) of this section (including an entitythat is also a depository institution, cus-todial institution, insurance company, orinvestment entity described in paragraph(e)(4)(i)(A) of this section);

(B) Certain equity or debt interests in aholding company or treasury center. Anyequity or debt interest (other than interestsregularly traded on an established secu-rities market under paragraph (e)(3)(iv)of this section) in a holding company ortreasury center described in paragraph(e)(1)(v) of this section if—

(1) The expanded affiliated group ofwhich the entity is a member includes oneor more investment entities described inparagraph (e)(4)(i)(B) or (C) of this sec-tion or passive NFFEs and the income de-rived by such investment entities or pas-sive NFFEs is 50 percent or more of theaggregate income earned by the expandedaffiliated group;

(2) The redemption or retirementamount or return earned on the inter-est is determined, directly or indirectly,primarily by reference to one or more in-vestment entities described in paragraph(e)(4)(i)(B) or (C) of this section or one ormore passive NFFEs that are members ofthe entity’s expanded affiliated group (asdetermined under paragraph (b)(3)(vi) ofthis section);

(3) The value of the interest is deter-mined, directly or indirectly, primarily byreference to assets that give rise (or couldgive rise) to withholdable payments (as de-termined under paragraph (b)(3)(v)) of thissection); or

(4) The interest is issued with a prin-cipal purpose of avoiding the reporting orwithholding requirements of chapter 4;

(C) Equity or debt interests in otherfinancial institutions. Any equity or debtinterest (other than interests regularlytraded on an established securities market

April 8, 2013 864 2013–15 I.R.B.

under paragraph (e)(3)(iv) of this section)in an entity that is a depository institution,custodial institution, investment entity de-scribed in paragraph (e)(4)(i)(A) of thissection, or insurance company if—

(1) The value of the interest is deter-mined, directly or indirectly, primarily byreference to assets that give rise (or couldgive rise) to withholdable payments (as de-termined under paragraph (b)(3)(v) of thissection); or

(2) The interest is issued with a prin-cipal purpose of avoiding the reporting orwithholding requirements of chapter 4.

(iv) Insurance and annuity contracts.A contract issued or maintained by an in-surance company, a holding company (asdescribed in paragraph (e)(5)(i)(C) of thissection) of an insurance company, or a fi-nancial institution described in paragraphs(e)(1)(i), (ii), (iii), or (v) of this section, ifthe contract is a cash value insurance con-tract (as defined in paragraph (b)(3)(vii) ofthis section) or an annuity contract.

(2) Exceptions. A financial accountdoes not include an account described inthis paragraph (b)(2).

(i) Certain savings accounts—(A) Re-tirement and pension accounts. A retire-ment or pension account that satisfies thefollowing conditions under the laws of thejurisdiction where the account is main-tained:

(1) The account is subject to regulationas a personal retirement account or is partof a registered or regulated retirement orpension plan for the provision of retire-ment or pension benefits (including dis-ability or death benefits);

(2) The account is tax-favored (as de-scribed in paragraph (b)(2)(i)(E) of thissection);

(3) Annual information reporting is re-quired to the relevant tax authorities withrespect to the account;

(4) Withdrawals are conditioned onreaching a specified retirement age, dis-ability, or death, or penalties apply towithdrawals made before such specifiedevents; and

(5) Either—(i) Annual contributions are limited to

$50,000 or less, or(ii) There is a maximum lifetime contri-

bution limit to the account of $1,000,000or less.

(B) Non-retirement savings accounts.An account (other than an insurance or an-

nuity contract) that satisfies the followingconditions under the laws of the jurisdic-tion where the account is maintained:

(1) The account is subject to regulationas a savings vehicle for purposes other thanfor retirement;

(2) The account is tax-favored (as de-scribed in paragraph (b)(2)(i)(E) of thissection);

(3) Withdrawals are conditioned onmeeting specific criteria related to thepurpose of the savings account (for ex-ample, the provision of educational ormedical benefits), or penalties apply towithdrawals made before such criteria aremet; and

(4) Annual contributions are limited to$50,000 or less;

(C) Rollovers. A financial accountthat otherwise satisfies the requirementsof paragraph (b)(2)(i)(A) or (B) of thissection will not fail to satisfy such re-quirements solely because such financialaccount may receive assets or funds trans-ferred from one or more financial accountsthat meet the requirements of paragraph(b)(2)(i)(A) or (B) of this section or fromone or more retirement or pension fundsthat meet the requirements of paragraph(f)(2)(ii) of this section or §1.1471–6(f).

(D) Coordination with section 6038D.The exclusions provided under paragraph(b)(2)(i) of this section shall not apply forpurposes of determining whether an ac-count or other arrangement is a financialaccount for purposes of section 6038D.

(E) Account that is tax-favored. Forpurposes of this paragraph (b)(2)(i), an ac-count is tax-favored under the laws of a ju-risdiction where the account is maintainedif—

(1) Contributions to the account thatwould otherwise be subject to tax undersuch laws are deductible or excluded fromthe gross income of the account holder ortaxed at a reduced rate; or

(2) Taxation of investment income fromthe account is deferred or taxed at a re-duced rate.

(ii) Certain term life insurance con-tracts. A life insurance contract with acoverage period that will end before theinsured individual attains age 90, providedthat the contract satisfies the followingconditions—

(A) Periodic premiums, which do notdecrease over time, are payable at leastannually during the period the contract is

in existence or until the insured attains age90, whichever is shorter;

(B) The contract has no contract valuethat any person can access (by withdrawal,loan, or otherwise) without terminating thecontract;

(C) The amount (other than a death ben-efit) payable upon cancellation or termi-nation of the contract cannot exceed theaggregate premiums paid for the contract,less the sum of mortality, morbidity, andexpense charges (whether or not actuallyimposed) for the period or periods of thecontract’s existence and any amounts paidprior to the cancellation or termination ofthe contract; and

(D) The contract is not held by a trans-feree for value.

(iii) Account held by an estate. An ac-count that is held solely by an estate if thedocumentation for such account includes acopy of the deceased’s will or death certifi-cate.

(iv) Certain escrow accounts. An es-crow account that is established in connec-tion with—

(A) A court order or judgment; or(B) A sale, exchange, or lease of real

or personal property, provided that the ac-count meets the following conditions—

(1) The account is funded solely with adown payment, earnest money, deposit inan amount appropriate to secure an obliga-tion of one of the parties directly relatedto the transaction, or a similar payment, orwith a financial asset that is deposited inthe account in connection with the sale, ex-change, or lease of the property;

(2) The account is established and usedsolely to secure the obligation of the pur-chaser to pay the purchase price for theproperty, the seller to pay any contingentliability, or the lessor or lessee to pay forany damages relating to the leased prop-erty as agreed under the lease;

(3) The assets of the account, includ-ing the income earned thereon, will be paidor otherwise distributed for the benefit ofthe purchaser, seller, lessor, or lessee (in-cluding to satisfy such person’s obligation)when the property is sold, exchanged, orsurrendered, or the lease terminates;

(4) The account is not a margin or simi-lar account established in connection witha sale or exchange of a financial asset; and

(5) The account is not associated with acredit card account.

2013–15 I.R.B. 865 April 8, 2013

(v) Certain annuity contracts. A non-investment linked, non-transferable, im-mediate life annuity contract (including adisability annuity) that monetizes a retire-ment or pension account described in para-graph (b)(2)(i)(A) of this section.

(vi) Account or product excluded un-der an intergovernmental agreement. Anaccount or product that is excluded fromthe definition of financial account underthe terms of an applicable Model 1 IGA orModel 2 IGA.

(3) Definitions. The following defini-tions apply for purposes of chapter 4—

(i) Depository account—(A) In gen-eral. Except as otherwise provided in thisparagraph (b)(3)(i), the term depositoryaccount means any account that is—

(1) A commercial, checking, savings,time, or thrift account, or an account thatis evidenced by a certificate of deposit,thrift certificate, investment certificate,passbook, certificate of indebtedness, orany other instrument for placing moneyin the custody of an entity engaged ina banking or similar business for whichsuch institution is obligated to give credit(regardless of whether such instrument isinterest bearing or non-interest bearing),including, for example, a credit balancewith respect to a credit card account issuedby a credit card company that is engagedin a banking or similar business; or

(2) Any amount held by an insurancecompany under a guaranteed investmentcontract or under a similar agreement topay or credit interest thereon or to returnthe amount held.

(B) Exceptions. A depository accountdoes not include—

(1) A negotiable debt instrument that istraded on a regulated market or over-the-counter market and distributed and heldthrough financial institutions; or

(2) An advance premium or pre-mium deposit described in paragraph(b)(3)(vii)(C)(5) of this section.

(ii) Custodial account. The term cus-todial account means an arrangement forholding a financial instrument, contract,or investment (including, but not limitedto, a share of stock in a corporation, anote, bond, debenture, or other evidenceof indebtedness, a currency or commod-ity transaction, a credit default swap, aswap based upon a nonfinancial index, anotional principal contract as defined in§1.446–3(c), an insurance or annuity con-

tract, and any option or other derivative in-strument) for the benefit of another person.

(iii) Equity interest in certain enti-ties—(A) Partnership. In the case of apartnership that is a financial institution,the term equity interest means either a cap-ital or profits interest in the partnership.

(B) Trust. In the case of a trust thatis a financial institution, an equity interestmeans an interest held by—

(1) A person who is an owner of all ora portion of the trust under sections 671through 679;

(2) A beneficiary who is entitled to amandatory distribution from the trust asdefined in §1.1473–1(b)(3); or

(3) A beneficiary who may receive adiscretionary distribution as defined in§1.1473–1(b)(3) from the trust but only ifsuch person receives a distribution in thecalendar year.

(iv) Regularly traded on an establishedsecurities market. Debt or equity interestsdescribed in paragraph (b)(1)(iii) of thissection are regularly traded on an estab-lished securities market if the requirementsof §1.1472–1(c)(1)(i)(A) and (C) are met.For purposes of paragraph (b)(1)(iii) ofthis section, an interest is not regularlytraded on an established securities marketif the holder of the interest (excluding a fi-nancial institution acting as an intermedi-ary) is registered on the books of the in-vestment entity. The preceding sentenceshall not apply to the extent a holder’s in-terest is registered prior to January 1, 2014,on the books of the investment entity .

(v) Value of interest determined, di-rectly or indirectly, primarily by referenceto assets that give rise (or could give rise)to withholdable payments—(A) Equityinterest. The value of an equity interest isdetermined, directly or indirectly, primar-ily by reference to assets that give rise (orcould give rise) to withholdable paymentsif—

(1) The amount payable upon redemp-tion by the issuer of the interest is securedprimarily by reference to assets that giverise (or could give rise) to withholdablepayments; or

(2) In the case of an unsecured interest,the amount payable upon redemption is de-termined primarily by reference to assetsthat give rise (or could give rise) to with-holdable payments.

(B) Debt interest. The value of a debtinterest is determined, directly or indi-

rectly, primarily by reference to assets thatgive rise (or could give rise) to withhold-able payments if—

(1) Debt is convertible into stock of aU.S. person;

(2) Amounts payable as interest or uponredemption or retirement of the debt aredetermined primarily by reference to prof-its or assets of a U.S person; or

(3) The debt is secured by assets of aU.S. person.

(vi) Redemption or retirement amountor return earned on the interest deter-mined, directly or indirectly, primarilyby reference to one or more investmententities or passive NFFEs—(A) Equityinterest. The return earned on an eq-uity interest is determined, directly orindirectly, primarily by reference to oneor more investment entities described inparagraph (e)(4)(i)(B) or (C) of this sec-tion or passive NFFEs that are membersof the entity’s expanded affiliated groupif the return on such interest (includingupon a sale, exchange, or redemption) isdetermined primarily by reference to thevalue or income (including the value of orincome from one or more assets) of oneor more investment entities described inparagraph (e)(4)(i)(B) or (C) of this sec-tion or passive NFFEs that are membersof the entity’s expanded affiliated group.

(B) Debt interest. The redemption orretirement amount or return earned on adebt interest is determined, directly or in-directly, primarily by reference to one ormore investment entities described in para-graph (e)(4)(i)(B) or (C) of this section orpassive NFFEs that are members of en-tity’s expanded affiliated group if—

(1) Debt is convertible into stock of oneor more investment entities described inparagraph (e)(4)(i)(B) or (C) of this sectionor passive NFFEs that are members of theentity’s expanded affiliated group;

(2) Amounts payable as interest or uponredemption or retirement of the debt aredetermined primarily by reference to thevalue or income (including the value of orincome from one or more assets) of oneor more investment entities described inparagraph (e)(4)(i)(B) or (C) of this sectionor passive NFFEs that are members of theentity’s expanded affiliated group; or

(3) The debt is primarily secured by theassets of one or more investment entitiesdescribed in paragraph (e)(4)(i)(B) or (C)of this section or passive NFFEs that are

April 8, 2013 866 2013–15 I.R.B.

members of the entity’s expanded affili-ated group or is guaranteed by one or moresuch entities.

(vii) Cash value insurance con-tract—(A) In general. The term cashvalue insurance contract means an insur-ance contract (other than an indemnityreinsurance contract between two insur-ance companies and a term life insurancecontract described in paragraph (b)(2)(ii)of this section) that has an aggregate cashvalue greater than $50,000 at any timeduring the calendar year, applying therules set forth in paragraph (b)(4)(iii) ofthis section. A participating FFI may electto disregard the $50,000 threshold in thepreceding sentence by reporting all con-tracts with a cash value greater than zero.

(B) Cash value. Except as otherwiseprovided in paragraph (b)(3)(vii)(C) of thissection, the term cash value means anyamount (determined without reduction forany charge or policy loan) that—

(1) Is payable under the contract to anyperson upon surrender, termination, can-cellation, or withdrawal; or

(2) Any person can borrow under orwith regard to (for example, by pledgingas collateral) the contract.

(C) Amounts excluded from cash value.Cash value does not include an amountpayable—

(1) Solely by reason of the death of anindividual insured under a life insurancecontract;

(2) As a personal injury or sickness ben-efit or a benefit providing indemnificationof an economic loss incurred upon the oc-currence of the event insured against;

(3) As a refund of a previously paidpremium (less cost of insurance chargeswhether or not actually imposed) under aninsurance contract (other than a life insur-ance or annuity contract) due to cancel-lation or termination of the contract, de-crease in risk exposure during the effectiveperiod of the contract, or arising from thecorrection of a posting or similar error withregard to the premium for the contract; or

(4) As a policyholder dividend (otherthan a termination dividend) providedthat the dividend relates to an insurancecontract under which the only bene-fits payable are described in paragraph(b)(3)(vii)(C)(2) of this section.

(5) As a return of an advance premiumor premium deposit for an insurance con-tract for which the premium is payable at

least annually if the amount of the advancepremium or premium deposit does not ex-ceed the next annual premium that will bepayable under the contract.

(D) Policyholder dividend—(1) Forpurposes of paragraph (b)(3)(vii)(C)(4)of this section and except as otherwiseprovided in this paragraph, a policyholderdividend means any dividend or similardistribution to policyholders in their ca-pacity as such, including—

(i) An amount paid or credited (includ-ing as an increase in benefits) if the amountis not fixed in the contract but rather de-pends on the experience of the insurancecompany or the discretion of management;

(ii) A reduction in the premium that,but for the reduction, would have been re-quired to be paid; and

(iii) An experience rated refund orcredit based solely upon the claims expe-rience of the contract or group involved.

(2) A policyholder dividend cannot ex-ceed the premiums previously paid for thecontract, less the sum of the cost of insur-ance and expense charges (whether or notactually imposed) during the contract’s ex-istence and the aggregate amount of anyprior dividends paid or credited with re-gard to the contract.

(3) A policyholder dividend does not in-clude any amount that is in the nature ofinterest that is paid or credited to a con-tract holder to the extent that such amountexceeds the minimum rate of interest re-quired to be credited with respect to con-tract values under local law.

(4) Account balance or value. Thisparagraph (b)(4) provides rules for deter-mining the balance or value of a financialaccount for purposes of chapter 4. Forexample, the rules of this paragraph ap-ply for purposes of determining whether anFFI meets the requirements of paragraph(f)(2)(i), (f)(2)(ii) or (f)(3) of this sectionto certify to a deemed-compliant FFI sta-tus. The rules of this paragraph also ap-ply to a participating FFI’s due diligenceand reporting obligations to the extent re-quired under §1.1471–4(c) or (d) and toa U.S. withholding agent’s due diligenceobligations to the extent required under§1.1471–3.

(i) In general. Except as otherwise pro-vided in paragraph (b)(4)(ii) of this sec-tion with respect to immediate annuities,the balance or value of a financial accountis the balance or value calculated by the fi-

nancial institution for purposes of report-ing to the account holder. In the case of anaccount described in paragraph (b)(1)(iii)of this section, the balance or value of anequity interest is the value calculated bythe financial institution for the purpose thatrequires the most frequent determinationof value, and the balance or value of adebt interest is its principal amount. Ex-cept as provided in paragraph (b)(3)(vii)of this section, the balance or value of aninsurance or annuity contract is the bal-ance or value as of either the calendar yearend or the most recent contract anniver-sary date. The balance or value of the ac-count is not to be reduced by any liabili-ties or obligations incurred by an accountholder with respect to the account or any ofthe assets held in the account and is not tobe reduced by any fees, penalties, or othercharges for which the account holder maybe liable upon terminating, transferring,surrendering, liquidating, or withdrawingcash from the account. Each holder of ajointly held account is attributed the en-tire balance or value of the joint account.See §1.1473–1(b)(3) for rules regardingthe valuation of trust interests that also ap-ply under this paragraph (b)(4)(i) to deter-mine the value of trust interests that are fi-nancial accounts.

(ii) Special rule for immediate annu-ity—(A) Immediate annuities without min-imum benefit guarantees. If the value of animmediate annuity contract with no mini-mum benefit guarantee is not reported tothe account holder, the account balanceor value of the contract is the sum of thenet present values on the valuation dateof the amounts reasonably expected to bepayable in future periods under the con-tract.

(B) Immediate annuities with a mini-mum benefit guarantee. The account bal-ance or value of an annuity contract with aminimum guarantee is the sum of the netpresent values on the valuation date of—

(1) The non-guaranteed amounts rea-sonably expected to be payable in futureperiods; and

(2) The guaranteed amounts payable infuture periods.

(C) Net present value of amountspayable in future periods. The net presentvalue of an amount payable in a futureperiod shall be determined using—

(1) A reasonable actuarial valuationmethod, and

2013–15 I.R.B. 867 April 8, 2013

(2) The mortality tables and interestrate(s)—

(i) Prescribed pursuant to section 7520and the regulations thereunder; or

(ii) Used by the issuer of the contract todetermine the amounts payable under thecontract.

(iii) Account aggregation require-ments—(A) In general. To the extenta financial institution is required underchapter 4 to determine the aggregate bal-ance or value of an account, the financialinstitution is required to aggregate theaccount balance or value of all accountsthat are held (in whole or in part) by thesame person and that are maintained bythe financial institution or members ofits expanded affiliated group, but only tothe extent that the financial institution’scomputerized systems link the accountsby reference to a data element, such asclient number, EIN, or foreign tax iden-tifying number, and allow the accountbalances of such accounts to be aggre-gated. Notwithstanding the rules set forthin this paragraph (b)(4)(iii), a financialinstitution is required to aggregate the bal-ance or value of accounts that it treats asconsolidated obligations.

(B) Aggregation rule for relationshipmanagers. To the extent a financial insti-tution is required under chapter 4 to ap-ply the aggregation rules of this paragraph(b)(4)(iii), the financial institution also isrequired to aggregate all accounts that arelationship manager knows are directlyor indirectly owned, controlled, or estab-lished (other than in a fiduciary capacity)by the same person, as well as all accountsthat the relationship manager has associ-ated with one another through a relation-ship code, customer identification number,TIN, or similar indicator, or that the re-lationship manager would typically asso-ciate with each other under the proceduresof the financial institution (or the depart-ment, division, or unit with which the rela-tionship manager is associated).

(C) Examples. The following examplesillustrate the account aggregation require-ments of this paragraph (b)(4)(iii):

Example 1. FFI not required to aggregate ac-counts for U.S. account exception. A U.S. residentindividual, U, holds a depository account withBranch 1 of CB, a commercial bank that is a partic-ipating FFI. The balance in U’s Branch 1 account atthe end of Year 1 is $35,000. U also holds a depos-itory account with Branch 2 of CB, with a $45,000balance at the end of Year 1. CB’s retail banking

businesses share computerized information manage-ment systems across its branches, but U’s accountsare not associated with one another in the sharedcomputerized information system. In addition, CBhas not assigned a relationship manager to U or U’saccounts. Because the accounts are not associated inCB’s system or by a relationship manager, CB is notrequired to aggregate the accounts under paragraph(b)(4)(iii) and both accounts are eligible for the ex-ception to U.S. account status described in paragraph(a)(4)(i) of this section as neither account exceedsthe $50,000 threshold.

Example 2. FFI required to aggregate accountsfor U.S. account exception. Same facts as Exam-ple 1, except that both of U’s depository accountsare associated with U and with one another by ref-erence to CB’s internal identification number. Thesystem shows the account balances for both accounts,and such balances may be electronically aggregated,though the system does not show a combined balancefor the accounts. In determining whether such ac-counts meet the exception to U.S. account status de-scribed in paragraph (a)(4)(i) of this section for cer-tain depository accounts with an aggregate balance orvalue of $50,000 or less, CB is required to aggregatethe account balances of all depository accounts underthe rules of paragraph (b)(4)(iii) of this section. Un-der those rules, U is treated as holding depository ac-counts with CB with an aggregate balance of $80,000.Accordingly, neither account is eligible for the ex-ception to U.S. account status, because the accounts,when aggregated, exceed the $50,000 threshold.

Example 3. Aggregation rules for joint accountsmaintained by a participating FFI. In Year 1, a U.S.resident individual, U, holds a custodial account thatis a preexisting account at custodial institution CI,a participating FFI. The balance in U’s CI custodialaccount at the end of Year 1 is $35,000. U alsoholds a joint custodial account that is a preexist-ing account with her sister, A, a nonresident alienfor U.S. federal income tax purposes, with anothercustodial institution, CI2. The balance in the jointaccount at the end of Year 1 is also $35,000. CI andCI2 are part of the same expanded affiliated groupand share computerized information managementsystems. Both U’s custodial account at CI and U andA’s custodial account at CI2 are associated with Uand with one another by reference to CI’s internalidentification number and the system allows thebalances to be aggregated. In determining whethersuch accounts meet the documentation exception de-scribed in §1.1471–4(c)(4)(iv) for certain preexistingindividual accounts with an aggregate balance orvalue of $50,000 or less, CI is required to aggregatethe account balances of accounts held in whole orin part by the same account holder under the rulesof paragraph (b)(4)(iii) of this section. Under thoserules, U is treated as having financial accounts withC1 and CI2, each with an aggregate balance of$70,000. Accordingly, neither account is eligible forthe documentation exception.

Example 4. Aggregation for applying indefinitevalidity periods. In Year 1, an owner-documentedFFI, O, holds an offshore account with Branch 1 ofCB, a commercial bank that is a U.S. withholdingagent. The balance in O’s CB account at the endof Year 1 is $600,000. In Year 1, O also holds anaccount in the United States with Branch 2 of CB.The Branch 2 account has a $450,000 balance at the

end of Year 1. CB’s banking businesses share com-puterized information management systems across itsbranches. O’s accounts are associated with one an-other in the shared computerized information sys-tem and the system allows the balances to be aggre-gated. In determining whether CB is permitted to ap-ply an indefinite validity period for the documenta-tion submitted for O’s account at Branch 1 pursuant to§1.1471–3(c)(6)(ii)(C)(4) (permitting indefinite va-lidity for a withholding statement of an owner-doc-umented FFI if the balance or value of all accountsheld by the owner-documented FFI does not exceed$1,000,000), CB is required to aggregate the accountbalance of O’s accounts at Branch 1 and Branch 2to the extent required under the rules of paragraph(b)(4)(iii) of this section. Accordingly, O is treatedas holding financial accounts with CB with an ag-gregate balance of $1,050,000 and the documentationsubmitted for O’s account at Branch 1 is not eligi-ble for the indefinite validity period described under§1.1471–3(c)(6)(ii)(C)(4).

(iv) Currency translation of balance orvalue. If the balance or value of a fi-nancial account, other obligation, or theaggregate amount payable under a grouplife or group annuity contract described in§1.1471–4(c)(4) is denominated in a cur-rency other than U.S. dollars, a withhold-ing agent must calculate the balance orvalue by applying a spot rate determinedunder §1.988–1(d) to translate such bal-ance or value into the U.S. dollar equiva-lent. For the purpose of a participating orregistered deemed-compliant FFI report-ing an account under §1.1471–4(d), thespot rate must be determined as of the lastday of the calendar year (or, in the caseof an insurance contract or annuity con-tract, the most recent contract anniversarydate, when applicable) for which the ac-count is being reported or, if the accountwas closed during such calendar year, thedate the account was closed. In the caseof an FFI determining whether an accountmeets (or continues to meet) a preexist-ing account documentation exception de-scribed in §1.1471–4(c)(3)(iii), (c)(4)(iv),or (c)(4)(v) or whether the account is anaccount described in paragraph (a)(4)(i) ofthis section, the spot rate must be deter-mined on the date for which the FFI isdetermining the threshold amount as pre-scribed in those provisions.

(5) Account maintained by financialinstitution. A custodial account is main-tained by the financial institution thatholds custody over the assets in the ac-count (including a financial institutionthat holds assets in street name for anaccount holder in such institution). Adepository account is maintained by the

April 8, 2013 868 2013–15 I.R.B.

financial institution that is obligated tomake payments with respect to the ac-count (excluding an agent of a financialinstitution regardless of whether suchagent is a financial institution under para-graph (e)(1) of this section). Any equityor debt interest in a financial institutionthat constitutes a financial account un-der paragraph (b)(1)(iii) of this section ismaintained by such financial institution.A cash value insurance contract or anannuity contract described in paragraph(b)(1)(iv) of this section is maintained bythe financial institution that is obligated tomake payments with respect to the con-tract.

(c) U.S. owned foreign entity. The termU.S. owned foreign entity means any for-eign entity that has one or more substantialU.S. owners (as defined in §1.1473–1(b)),including a foreign entity described inparagraph (c)(2) of this section. See§1.1473–1(e) for the definition of foreignentity for purposes of chapter 4. For therequirements applicable to determiningdirect and indirect ownership in an entity,see §1.1473–1(b)(2).

(d) Definition of FFI. The term FFImeans, with respect to any entity that isnot resident in a country that has in effecta Model 1 IGA or Model 2 IGA, any fi-nancial institution (as defined in paragraph(e) of this section) that is a foreign entity.With respect to any entity that is resident ina country that has in effect a Model 1 IGAor Model 2 IGA, an FFI is any entity that istreated as a Financial Institution pursuantto such Model 1 IGA or Model 2 IGA. Aterritory financial institution is not an FFIunder this paragraph (d).

(e) Definition of financial institu-tion—(1) In general. Except as otherwiseprovided in paragraph (e)(5) of this sec-tion, the term financial institution meansany entity that—

(i) Accepts deposits in the ordinarycourse of a banking or similar business (asdefined in paragraph (e)(2) of this section)(depository institution);

(ii) Holds, as a substantial portion of itsbusiness (as defined in paragraph (e)(3) ofthis section), financial assets for the benefitof one or more other persons (custodialinstitution);

(iii) Is an investment entity (as definedin paragraph (e)(4) of this section);

(iv) Is an insurance company or a hold-ing company (as described in paragraph

(e)(5)(i)(C) of this section) that is a mem-ber of an expanded affiliated group that in-cludes an insurance company, and the in-surance company or holding company is-sues, or is obligated to make paymentswith respect to, a cash value insuranceor annuity contract described in paragraph(b)(1)(iv) of this section (specified insur-ance company); or

(v) Is an entity that is a holding com-pany or treasury center (as described inparagraphs (e)(5)(i)(C) and (e)(5)(i)(D)(1)of this section) that—

(A) Is part of an expanded affiliatedgroup that includes a depository insti-tution, custodial institution, insurancecompany, or investment entity describedin paragraphs (e)(4)(i)(B) and (C) of thissection; or

(B) Is formed in connection with oravailed of by a collective investment ve-hicle, mutual fund, exchange traded fund,private equity fund, hedge fund, venturecapital fund, leveraged buyout fund, orany similar investment vehicle establishedwith an investment strategy of investing,reinvesting, or trading in financial assets.

(2) Banking or similar business—(i) Ingeneral. Except as otherwise provided inparagraph (e)(2)(ii) of this section, an en-tity is considered to be engaged in a bank-ing or similar business if, in the ordinarycourse of its business with customers, theentity accepts deposits or other similar in-vestments of funds and regularly engagesin one or more of the following activities—

(A) Makes personal, mortgage, indus-trial, or other loans or provides other ex-tensions of credit;

(B) Purchases, sells, discounts, or ne-gotiates accounts receivable, installmentobligations, notes, drafts, checks, bills ofexchange, acceptances, or other evidencesof indebtedness;

(C) Issues letters of credit and negoti-ates drafts drawn thereunder;

(D) Provides trust or fiduciary services;(E) Finances foreign exchange transac-

tions; or(F) Enters into, purchases, or disposes

of finance leases or leased assets.(ii) Exception for certain lessors and

lenders. An entity is not considered to beengaged in a banking or similar businessfor purposes of this paragraph (e)(2) if theentity solely accepts deposits from personsas collateral or security pursuant to a saleor lease of property or pursuant to a sim-

ilar financing arrangement between suchentity and the person holding the depositwith the entity.

(iii) Application of section 581. Enti-ties engaged in a banking or similar busi-ness include, but are not limited to, entitiesthat would qualify as banks under section585(a)(2) (including banks as defined insection 581 and any corporation to whichsection 581 would apply but for the factthat it is a foreign corporation).

(iv) Effect of local regulation. Whetheran entity is subject to the banking andcredit laws of a foreign country, the UnitedStates, a State, a U.S. territory, or a subdi-vision thereof, or is subject to supervisionand examination by agencies having reg-ulatory oversight of banking or similar in-stitutions, is relevant to, but not necessarilydeterminative of, whether that entity qual-ifies as a financial institution under section1471(d)(5)(A). Whether an entity conductsa banking or similar business is determinedbased upon the character of the actual ac-tivities of such entity.

(3) Holding financial assets for othersas a substantial portion of its business—(i)Substantial portion—(A) In general. Anentity holds financial assets for the accountof others as a substantial portion of its busi-ness if the entity’s gross income attribut-able to holding financial assets and relatedfinancial services equals or exceeds 20 per-cent of the entity’s gross income during theshorter of—

(1) The three-year period ending on De-cember 31 of the year preceding the year inwhich the determination is made; or

(2) The period during which the entityhas been in existence before the determi-nation is made.

(B) Special rule for start-up entities.An entity with no operating history as ofthe date of the determination is consideredto hold financial assets for the account ofothers as a substantial portion of its busi-ness if the entity expects to meet the grossincome threshold described in paragraph(e)(3)(i)(B) of this section based on its an-ticipated functions, assets, and employees,with due consideration given to any pur-pose or functions for which the entity is li-censed or regulated (including those of anypredecessor).

(ii) Income attributable to holdingfinancial assets and related financial ser-vices. For purposes of this paragraph(e)(3), income attributable to holding

2013–15 I.R.B. 869 April 8, 2013

financial assets and related financialservices means custody, account mainte-nance, and transfer fees; commissions andfees earned from executing and pricing se-curities transactions; income earned fromextending credit to customers with respectto financial assets held in custody (or ac-quired through such extension of credit);income earned on the bid-ask spread offinancial assets; and fees for providingfinancial advice and for clearance and set-tlement services.

(iii) Effect of local regulation. Whetheran entity is subject to the banking andcredit, broker-dealer, fiduciary, or othersimilar laws and regulations of the UnitedStates, a State, a U.S. territory, a politicalsubdivision thereof, or a foreign country,or to supervision and examination by agen-cies having regulatory oversight of banks,credit issuers, or other financial institu-tions, is relevant to, but not necessarily de-terminative of, whether that entity holds fi-nancial assets for the account of others asa substantial portion of its business.

(4) Investment entity—(i) In general.The term investment entity means anyentity that is described in paragraph(e)(4)(i)(A), (B), or (C) of this section.

(A) The entity primarily conducts as abusiness one or more of the following ac-tivities or operations for or on behalf of acustomer—

(1) Trading in money market instru-ments (checks, bills, certificates of de-posit, derivatives, etc.); foreign currency;foreign exchange, interest rate, and indexinstruments; transferable securities; orcommodity futures;

(2) Individual or collective portfoliomanagement; or

(3) Otherwise investing, administering,or managing funds, money, or financial as-sets on behalf of other persons.

(B) The entity’s gross income is pri-marily attributable to investing, reinvest-ing, or trading in financial assets (as de-fined in paragraph (e)(4)(ii) of this sec-tion) and the entity is managed by an-other entity that is described in paragraph(e)(1)(i), (ii), (iv), or (e)(4)(i)(A) of thissection. For purposes of this paragraph(e)(4)(i)(B), an entity is managed by an-other entity if the managing entity per-forms, either directly or through anotherthird-party service provider, any of the ac-tivities described in paragraph (e)(4)(i)(A)

of this section on behalf of the managedentity.

(C) The entity functions or holds itselfout as a collective investment vehicle, mu-tual fund, exchange traded fund, privateequity fund, hedge fund, venture capitalfund, leveraged buyout fund, or any sim-ilar investment vehicle established with aninvestment strategy of investing, reinvest-ing, or trading in financial assets.

(ii) Financial assets. For purposes ofthis paragraph, the term financial assetmeans a security (as defined in section475(c)(2) without regard to the last sen-tence thereof), partnership interest, com-modity (as defined in section 475(e)(2)),notional principal contract (as defined in§1.446–3(c)), insurance contract or annu-ity contract, or any interest (including a fu-tures or forward contract or option) in asecurity, partnership interest, commodity,notional principal contract, insurance con-tract, or annuity contract.

(iii) Primarily conducts as a busi-ness—(A) In general. An entity is treatedas primarily conducting as a business oneor more of the activities described in para-graph (e)(4)(i)(A) of this section if theentity’s gross income attributable to suchactivities equals or exceeds 50 percentof the entity’s gross income during theshorter of—


(2) The period during which the entityhas been in existence.

(B) Special rule for start-up entities.An entity with no operating history as ofthe date of the determination is treatedas primarily conducting as a businessone or more of the activities describedin paragraph (e)(4)(i)(A) of this sectionif such entity expects to meet the grossincome threshold described in paragraph(e)(4)(iii)(A) of this section based on itsanticipated functions, assets, and employ-ees, with due consideration given to anypurpose or functions for which the entityis licensed or regulated (including those ofany predecessor).

(iv) Primarily attributable to investing,reinvesting, or trading in financial as-sets—(A) In general. An entity’s gross in-come is primarily attributable to investing,reinvesting, or trading in financial assetsfor purposes of paragraph (e)(4)(i)(B) ofthis section if the entity’s gross income

attributable to investing, reinvesting, ortrading in financial assets equals or ex-ceeds 50 percent of the entity’s grossincome during the shorter of—


(2) The period during which the entityhas been in existence.

(B) Special rule for start-up entities.An entity with no operating history as ofthe date of the determination will be con-sidered to have income that is primarily at-tributable to investing, reinvesting, or trad-ing in financial assets for purposes of para-graph (e)(4)(i)(B) of this section if such en-tity expects to meet the income thresholddescribed in paragraph (e)(4)(iv)(A) of thissection based on its anticipated functions,assets, and employees, with due consider-ation given to any purpose or functions forwhich the entity is licensed or regulated(including those of any predecessor).

(v) Examples. The following examplesillustrate the provisions of paragraph (e)(4)of this section:

Example 1. Investment advisor. Fund Manager isan investment entity within the meaning of paragraph(e)(4)(i)(A) of this section. Fund Manager, among itsvarious business operations, organizes and manages avariety of funds, including Fund A, a fund that investsprimarily in equities. Fund Manager hires InvestmentAdvisor, a foreign entity, to provide advice about thefinancial assets in which Fund A invests. InvestmentAdvisor earned more than 50% of its gross incomefor the last three years from providing services as aninvestment advisor. Because Investment Adviser pri-marily conducts as a business providing investmentadvice on behalf of clients, Investment Advisor is aninvestment entity under paragraph (e)(4)(i)(A) of thissection and an FFI under paragraph (e)(1)(iii) of thissection.

Example 2. Entity that is managed by an FFI. Thefacts are the same as in Example 1. In addition, in ev-ery year since it was organized, Fund A has earnedmore than 50% of its gross income from investing infinancial assets. Accordingly, Fund A is an invest-ment entity under paragraph (e)(4)(i)(B) of this sec-tion because it is managed by Fund Manager and In-vestment Advisor and its gross income is primarilyattributable to investing, reinvesting, or trading in fi-nancial assets.

Example 3. Investment manager. InvestmentManager, a U.S. entity, is an investment entity withinthe meaning of paragraph (e)(4)(i)(A) of this section.Investment Manager organizes and registers Fund Ain Country A. Investment Manager is authorized tofacilitate purchases and sales of financial assets heldby Fund A in accordance with Fund A’s investmentstrategy. In every year since it was organized, FundA has earned more than 50% of its gross incomefrom investing, reinvesting, or trading in financialassets. Accordingly, Fund A is an investment entity

April 8, 2013 870 2013–15 I.R.B.

under paragraph (e)(4)(i)(B) of this section and anFFI under paragraph (e)(1)(iii) of this section.

Example 4. Foreign real estate investment fundthat is managed by an FFI. The facts are the sameas in Example 3, except that Fund A’s assets consistsolely of non-debt, direct interests in real property lo-cated within and without the United States. Fund A isnot an investment entity under paragraph (e)(4)(i)(B)of this section, even though it is managed by Invest-ment Manager, because less than 50% of its gross in-come is attributable to investing, reinvesting, or trad-ing in financial assets.

Example 5. Trust managed by an individual. OnJanuary 1, 2013, X, an individual, establishes TrustA, a nongrantor foreign trust for the benefit of X’schildren, Y and Z. X appoints Trustee A, an indi-vidual, to act as the trustee of Trust A. Trust A’sassets consists solely of financial assets, and its in-come consists solely of income from those financialassets. Pursuant to the terms of the trust instrument,Trustee A manages and administers the assets of thetrust. Trustee A does not hire any entity as a third-party service provider to perform any of the activi-ties described in paragraph (e)(4)(i)(A) of this sec-tion. Trust A is not an investment entity under para-graph (e)(4)(i)(B) of this section because it is man-aged solely by Trustee A, an individual.

Example 6. Trust managed by a trust company.The facts are the same as in Example 5, except that Xhires Trust Company, an FFI, to act as trustee on be-half of Trust A. As trustee, Trust Company managesand administers the assets of Trust A in accordancewith the terms of the trust instrument for the benefit ofY and Z. Because Trust A is managed by an FFI, TrustA is an investment entity under paragraph (e)(4)(i)(B)of this section and an FFI under paragraph (e)(1)(iii)of this section.

Example 7. Individual introducing broker. IB,an individual introducing broker, provides investingadvice to her clients, and uses the services of a for-eign entity to conduct and execute trades on behalf ofher clients. IB has earned 50% or more of her grossincome for the past three years from her services asan investment advisor. Because IB is an individual,she is not an investment entity within the meaning ofparagraph (e)(4) of this section.

Example 8. Entity introducing broker. The factsare the same as in Example 7, except that IB is a for-eign entity and not an individual. Because IB is anentity that conducts investment activities and its grossincome is primarily attributable to such investmentactivities, IB is an investment entity under paragraph(e)(4)(i)(A) of this section and an FFI under para-graph (e)(1)(iii) of this section.

(5) Exclusions. A financial institutiondoes not include an entity described in thisparagraph, provided that the entity is notalso described in paragraph (e)(1)(iv) ofthis section. For the treatment of foreignentities described in this paragraph undersection 1472, see §1.1472–1(c)(1)(vi).

(i) Excepted nonfinancial group enti-ties—(A) In general. A foreign entity thatis a member of a nonfinancial group (as de-fined in paragraph (e)(5)(i)(B) of this sec-tion) if—

(1) The entity is not a depository institu-tion or custodial institution (other than formembers of its expanded affiliated group);

(2) The entity is a holding company,treasury center, or captive finance com-pany and substantially all the activities ofsuch entity are to perform one or moreof the functions described in paragraphs(e)(5)(i)(C), (D), or (E) of this section; and

(3) The entity does not hold itself outas (and was not formed in connection withor availed of by) an arrangement or in-vestment vehicle that is a private equityfund, venture capital fund, leveraged buy-out fund, or any similar investment vehicleestablished with an investment strategy toacquire or fund companies and to treat theinterests in those companies as capital as-sets held for investment purposes.

(B) Nonfinancial group. An expandedaffiliated group is a nonfinancial group if,taking into account the application of thissection,—

(1) For the three-year period preced-ing the year for which the determinationis made, no more than 25 percent of thegross income of the expanded affiliatedgroup (excluding income derived by anymember that is an entity described in para-graph (e)(5)(ii) or (iii) of this section)consists of passive income (as definedin §1.1472–1(c)(1)(v)); no more thanfive percent of the gross income of theexpanded affiliated group is derived bymembers of the expanded affiliated groupthat are FFIs (excluding income derivedfrom transactions between members of theexpanded affiliated group or by any mem-ber of the expanded affiliated group thatis a certified deemed-compliant FFI); andno more than 25 percent of the fair mar-ket value of assets held by the expandedaffiliated group (excluding assets held bya member that is an entity described inparagraph (e)(5)(ii) or (iii) of this section)are assets that produce or are held for theproduction of passive income; and

(2) Any member of the expanded affili-ated group that is an FFI is either a partic-ipating FFI or deemed-compliant FFI.

(C) Holding company. For purposes ofthis paragraph (e)(5)(i), an entity is a hold-ing company if its primary activity consistsof holding (directly or indirectly) all or partof the outstanding stock of one or moremembers of its expanded affiliated group.

(D) Treasury center—(1) Except as oth-erwise provided in this paragraph, an en-

tity is a treasury center for purposes of thisparagraph (e)(5)(i) if the primary activityof such entity is to enter into investment,hedging, and financing transactions withor for members of its expanded affiliatedgroup for purposes of—

(i) Managing the risk of price changesor currency fluctuations with respect toproperty that is held or to be held by theexpanded affiliated group (or any memberthereof);

(ii) Managing the risk of interest ratechanges, price changes, or currency fluc-tuations with respect to borrowings madeor to be made by the expanded affiliatedgroup (or any member thereof);

(iii) Managing the risk of interest ratechanges, price changes, or currency fluctu-ations with respect to assets or liabilities tobe reflected in financial statements of theexpanded affiliated group (or any memberthereof);

(iv) Managing the working capital ofthe expanded affiliated group (or anymember thereof) by investing or tradingin financial assets solely for the accountand risk of such entity or any member ofits expanded affiliated group; or

(v) Acting as a financing vehicle forborrowing funds for use by the expandedaffiliated group (or any member thereof).

(2) An entity is not a treasury center ifany equity or debt interest in the entity isheld by a person that is not a member ofthe entity’s expanded affiliated group andthe redemption or retirement amount or re-turn earned on such interest is determinedprimarily by reference to—

(i) The investment, hedging, and fi-nancing activities of the treasury centerwith members outside of its expanded af-filiated group; or

(ii) Any member of the group that is aninvestment entity described in (e)(4)(i)(B)or passive NFFE (as described in para-graph (b)(3)(vi) of this section with respectto either such entity).

(E) Captive finance company. For pur-poses of this paragraph (e)(5)(i), an entityis a captive finance company if the primaryactivity of such entity is to enter into fi-nancing (including the extension of credit)or leasing transactions with or for suppli-ers, distributors, dealers, franchisees, orcustomers of such entity or of any memberof such entity’s expanded affiliated groupthat is an active NFFE.

2013–15 I.R.B. 871 April 8, 2013

(ii) Excepted nonfinancial start-upcompanies or companies entering a newline of business—(A) In general. A for-eign entity that is investing capital in assetswith the intent to operate a new businessor line of business other than that of afinancial institution or passive NFFE for aperiod of—

(1) In the case of an entity intending tooperate a new business, 24 months fromthe initial organization of such entity; and

(2) In the case of an entity with the in-tent to operate a new line of business, 24months from the date of the board resolu-tion (or its equivalent) approving the newline of business, provided that such en-tity qualified as an active NFFE for the24 months preceding the date of such ap-proval.

(B) Exception for investment funds. Anentity is not described in this paragraph(e)(5)(ii) if the entity functions (or holdsitself out) as an investment fund, such asa private equity fund, venture capital fund,leveraged buyout fund, or any investmentvehicle whose purpose is to acquire or fundcompanies and hold interests in those com-panies as capital assets for investment pur-poses.

(iii) Excepted nonfinancial entities inliquidation or bankruptcy. A foreign en-tity that was not a financial institution orpassive NFFE at any time during the pastfive years and that is in the process of liq-uidating its assets or reorganizing with theintent to continue or recommence opera-tions as a nonfinancial entity.

(iv) Excepted inter-affiliate FFI. A for-eign entity that is a member of a participat-ing FFI group if—

(A) The entity does not maintain finan-cial accounts (other than accounts main-tained for members of its expanded affil-iated group);

(B) The entity does not hold an accountwith or receive payments from any with-holding agent other than a member of itsexpanded affiliated group;

(C) The entity does not make with-holdable payments to any person otherthan to members of its expanded affiliatedgroup that are not limited FFIs or limitedbranches; and

(D) The entity has not agreed to reportunder §1.1471–4(d)(1)(ii) or otherwise actas an agent for chapter 4 purposes on be-half of any financial institution, includinga member of its expanded affiliated group.

(v) Section 501(c) entities. A foreignentity that is described in section 501(c)other than an insurance company de-scribed in section 501(c)(15).

(vi) Non-profit organizations. A for-eign entity that is established and main-tained in its country of residence exclu-sively for religious, charitable, scientific,artistic, cultural or educational purposesif—

(A) The entity is exempt from incometax in its country of residence;

(B) The entity has no shareholders ormembers who have a proprietary or ben-eficial interest in its income or assets;

(C) Neither the laws of the entity’scountry of residence nor the entity’s for-mation documents permit any income orassets of the entity to be distributed to, orapplied for the benefit of, an individual ornoncharitable entity other than pursuantto the conduct of the entity’s charitableactivities, or as payment of reasonablecompensation for services rendered or theuse of property, or as payment represent-ing the fair market value of property thatthe entity has purchased; and

(D) The laws of the entity’s country ofresidence or the entity’s formation docu-ments require that, upon the entity’s liq-uidation or dissolution, all of its assets bedistributed to an entity that meets the re-quirements of §1.1471–6(b) or another or-ganization that meets the requirements ofthis paragraph (e)(5)(vi) or escheat to thegovernment of the entity’s country of resi-dence or any political subdivision thereof.

(6) Reserving activities of an insurancecompany. The reserving activities of an in-surance company will not cause the com-pany to be a financial institution describedin (e)(1)(i), (ii), or (iii) of this section.

(f) Deemed-compliant FFIs. The termdeemed-compliant FFI includes a regis-tered deemed-compliant FFI (as defined inparagraph (f)(1) of this section), a certi-fied deemed-compliant FFI (as defined inparagraph (f)(2) of this section), and, tothe extent provided in paragraph (f)(3) ofthis section, an owner-documented FFI. Adeemed-compliant FFI will be treated pur-suant to section 1471(b)(2) as having metthe requirements of section 1471(b). Adeemed-compliant FFI that complies withthe due diligence and withholding require-ments applicable to such entity as providedin this paragraph (f) will also be deemed tohave met its withholding obligations under

sections 1471(a) and 1472(a). For this pur-pose, an intermediary or flow-through en-tity that has a residual withholding obliga-tion under §1.1471–2(a)(2)(ii) must fulfillsuch obligation to be considered a deemed-compliant FFI.

(1) Registered deemed-compliant FFIs.A registered deemed-compliant FFI meansan FFI that meets the procedural require-ments described in paragraph (f)(1)(ii) ofthis section and that either is described inany of paragraphs (f)(1)(i)(A) through (F)of this section or is treated as a registereddeemed-compliant FFI under a Model 2IGA. A registered deemed-compliant FFIalso includes any FFI, or branch of an FFI,that is a reporting Model 1 FFI that com-plies with the registration requirements ofa Model 1 IGA.

(i) Registered deemed-compliant FFIcategories—(A) Local FFIs. An FFI isdescribed in this paragraph (f)(1)(i)(A) ifthe FFI meets the following requirements.

(1) The FFI is licensed and regulatedas a financial institution under the laws ofits country of incorporation or organiza-tion (which must be a FATF-compliant ju-risdiction at the time the FFI registers fordeemed-compliant status).

(2) The FFI does not have a fixed placeof business outside its country of incorpo-ration or organization. For this purpose, afixed place of business does not include alocation that is not advertised to the pub-lic and from which the FFI performs solelyadministrative support functions.

(3) The FFI does not solicit customersor account holders outside its country ofincorporation or organization. For thispurpose, an FFI will not be considered tohave solicited customers or account hold-ers outside its country of incorporation ororganization merely because it operates awebsite, provided that the website does notspecifically indicate that the FFI maintainsaccounts for or provides services to non-residents, and does not otherwise target orsolicit U.S. customers or account holders.An FFI will also not be considered to havesolicited customers or account holders out-side its country of incorporation or organi-zation merely because it advertises in printmedia or on a radio or television stationthat is distributed or aired primarily withinits country of incorporation or organizationbut is also incidentally distributed or airedin other countries, provided that the adver-tisement does not specifically indicate that

April 8, 2013 872 2013–15 I.R.B.

the FFI maintains accounts for or providesservices to nonresidents and does not oth-erwise target or solicit U.S. customers oraccount holders.

(4) The FFI is required under the lawsof its country of incorporation or organiza-tion to identify resident account holders forpurposes of either information reporting orwithholding of tax with respect to accountsheld by residents or is required to identifyresident accounts for purposes of satisfy-ing such country’s AML due diligence re-quirements.

(5) At least 98 percent of the accountsby value maintained by the FFI as of thelast day of the preceding calendar year areheld by residents (including residents thatare entities) of the country in which the FFIis incorporated or organized. An FFI thatis incorporated or organized in a memberstate of the European Union may treat ac-count holders that are residents (includingresidents that are entities) of other memberstates of the European Union as residentsof the country in which the FFI is incor-porated or organized for purposes of thiscalculation.

(6) By the later of December 31, 2013,or the date it registers as a deemed-compli-ant FFI, the FFI implements policies andprocedures, consistent with those set forthfor a participating FFI under §1.1471–4(c),to monitor whether the FFI opens or main-tains an account for a specified U.S. per-son who is not a resident of the country inwhich the FFI is incorporated or organized(including a U.S. person that was a residentwhen the account was opened but subse-quently ceases to be a resident), an entitycontrolled or beneficially owned (as deter-mined under the FFI’s AML due diligence)by one or more specified U.S. persons thatare not residents of the country in whichthe FFI is incorporated or organized, ora nonparticipating FFI. Such policies andprocedures must provide that if any suchaccount is discovered, the FFI will closesuch account, transfer such account to aparticipating FFI, reporting Model 1 FFI,or U.S. financial institution, or withholdand report on such account as would be re-quired under §1.1471–4(b) and (d) if theFFI were a participating FFI.

(7) With respect to each preexisting ac-count held by a nonresident of the coun-try in which the FFI is organized or heldby an entity, the FFI reviews those ac-counts in accordance with the procedures

described in §1.1471–4(c) applicable topreexisting accounts to identify any U.S.account or account held by a nonpartici-pating FFI, and certifies to the IRS that itdid not identify any such account as a re-sult of its review, that it has closed anysuch accounts that were identified or trans-ferred them to a participating FFI, report-ing Model 1 FFI, or U.S. financial institu-tion, or that it agrees to withhold and reporton such accounts as would be required un-der §1.1471–4(b) and (d) if it were a par-ticipating FFI.

(8) In the case of an FFI that is a mem-ber of an expanded affiliated group, eachFFI in the group is incorporated or or-ganized in the same country and, withthe exception of any member that is a re-tirement plan described in §1.1471–6(f),meets the requirements set forth in thisparagraph (f)(1)(i)(A) and the proceduralrequirements of paragraph (f)(1)(ii) of thissection.

(9) The FFI does not have policies orpractices that discriminate against open-ing or maintaining accounts for individu-als who are specified U.S. persons and whoare residents of the FFI’s country of incor-poration or organization.

(B) Nonreporting members of partici-pating FFI groups. An FFI that is a mem-ber of a participating FFI group is de-scribed in this paragraph (f)(1)(i)(B) if itmeets the following requirements.

(1) By the later of December 31, 2013,or the date it registers with the IRS pur-suant to paragraph (f)(1)(ii) of this sec-tion, the FFI implements policies and pro-cedures to ensure that within six months ofopening a U.S. account or an account heldby a recalcitrant account holder or a non-participating FFI, the FFI either transferssuch account to an affiliate that is a partic-ipating FFI, reporting Model 1 FFI, or U.S.financial institution, closes the account, orbecomes a participating FFI.

(2) The FFI reviews its accounts thatwere opened prior to the time it imple-ments the policies and procedures (includ-ing time frames) described in paragraph(f)(1)(i)(B)(1) of this section, using theprocedures described in §1.1471–4(c) ap-plicable to preexisting accounts of partic-ipating FFIs, to identify any U.S. accountor account held by a nonparticipating FFI.Within six months of the identification ofany account described in this paragraph,the FFI transfers the account to an affil-

iate that is a participating FFI, reportingModel 1 FFI, or U.S. financial institution,closes the account, or becomes a partici-pating FFI.

(3) By the later of December 31, 2013,or the date it registers with the IRS pur-suant to paragraph (f)(1)(ii) of this section,the FFI implements policies and pro-cedures to ensure that it identifies anyaccount that becomes a U.S. account oran account held by a recalcitrant accountholder or a nonparticipating FFI due toa change in circumstances. Within sixmonths of the date on which the FFI firsthas knowledge or reason to know of thechange in the account holder’s chapter 4status, the FFI transfers any such accountto an affiliate that is a participating FFI,reporting Model 1 FFI, or U.S. financialinstitution, closes the account, or becomesa participating FFI.

(C) Qualified collective investment ve-hicles. An FFI is described in this para-graph (f)(1)(i)(C) if it meets the followingrequirements.

(1) The FFI is an FFI solely because itis an investment entity, and it is regulatedas an investment fund either in its countryof incorporation or organization or in all ofthe countries in which it is registered andall of the countries in which it operates. Afund will be considered to be regulated asan investment fund under this paragraphif its manager is regulated with respect tothe investment fund in all of the countriesin which the investment fund is registeredand in all of the countries in which theinvestment fund operates.

(2) Each holder of record of directdebt interests in the FFI in excess of$50,000, direct equity interests in theFFI (for example the holders of its unitsor global certificates), and any other ac-count holder of the FFI is a participatingFFI, registered deemed-compliant FFI,retirement plan described in §1.1471–6(f),non-profit organization described in para-graph (e)(5)(vi) of this section, U.S. personthat is not a specified U.S. person, non-reporting IGA FFI, or exempt beneficialowner. Notwithstanding the prior sen-tence, an FFI will not be prohibited fromqualifying as a qualified collective invest-ment vehicle solely because it has issuedinterests in bearer form provided that theFFI ceased issuing interests in such formafter December 31, 2012, retires all suchinterests upon surrender, and establishes

2013–15 I.R.B. 873 April 8, 2013

policies and procedures to redeem or im-mobilize all such interests prior to January1, 2017, and that prior to payment theFFI documents the account holder in ac-cordance with the procedures set forth in§1.1471–4(c) applicable to accounts otherthan preexisting accounts and agrees towithhold and report on such accounts aswould be required under §1.1471–4(b)and (d) if it were a participating FFI. Forpurposes of this paragraph (f)(1)(i)(C), anFFI may disregard equity interests ownedby specified U.S. persons acquired withseed capital within the meaning of para-graph (i)(4) of this section if the specifiedU.S. person is described in paragraph(i)(3)(i) and (ii) of this section (substitut-ing the term “U.S. person” for “FFI” and“member”), and the specified U.S. personneither has held, nor intends to hold, suchinterest for more than three years.

(3) In the case of an FFI that is part ofan expanded affiliated group, all other FFIsin the expanded affiliated group are par-ticipating FFIs, registered deemed-compli-ant FFIs, sponsored FFIs described in para-graph (f)(1)(i)(F)(1) or (2) of this section,nonreporting IGA FFIs, or exempt benefi-cial owners.

(D) Restricted funds. An FFI is de-scribed in this paragraph (f)(1)(i)(D) if itmeets the following requirements.

(1) The FFI is an FFI solely because itis an investment entity, and it is regulatedas an investment fund under the laws ofits country of incorporation or organiza-tion (which must be a FATF-compliant ju-risdiction at the time the FFI registers fordeemed-compliant status) or in all of thecountries in which it is registered and inall of the countries in which it operates.A fund will be considered to be regulatedas an investment fund for purposes of thisparagraph if its manager is regulated withrespect to the fund in all of the countriesin which the investment fund is registeredand in all of the countries in which the in-vestment fund operates.

(2) Interests issued directly by the fundare redeemed by or transferred by the fundrather than sold by investors on any sec-ondary market. Notwithstanding the priorsentence, an FFI will not be prohibitedfrom qualifying as a restricted fund solelybecause it issued interests in bearer formprovided that the FFI ceased issuing in-terests in bearer form after December 31,2012, retires all such interests upon sur-

render, and establishes policies and proce-dures to redeem or immobilize all such in-terests prior to January 1, 2017, and thatprior to payment the FFI documents the ac-count holder in accordance with the pro-cedures set forth in §1.1471–4(c) applica-ble to accounts other than preexisting ac-counts and agrees to withhold and reporton such accounts as would be required un-der §1.1471–4(b) and (d) if it were a partic-ipating FFI. For purposes of this paragraph(f)(1)(i)(D), interests in the FFI that are is-sued by the fund through a transfer agent ordistributor that does not hold the interestsas a nominee of the account holder will beconsidered to have been issued directly bythe fund.

(3) Interests that are not issued directlyby the fund are sold only through dis-tributors that are participating FFIs, reg-istered deemed-compliant FFIs, nonregis-tering local banks described in paragraph(f)(2)(i) of this section, or restricted dis-tributors described in paragraph (f)(4) ofthis section. For purposes of this para-graph (f)(1)(i)(D) and paragraph (f)(4) ofthis section, a distributor means an under-writer, broker, dealer, or other person whoparticipates, pursuant to a contractual ar-rangement with the FFI, in the distributionof securities and holds interests in the FFIas a nominee.

(4) The FFI ensures that by the laterof June 30, 2014, or six months after thedate the FFI registers as a deemed-compli-ant FFI, each agreement that governs thedistribution of its debt or equity interestsprohibits sales and other transfers of debtor equity interests in the FFI (other thaninterests that are both distributed by andheld through a participating FFI) to spec-ified U.S. persons, nonparticipating FFIs,or passive NFFEs with one or more sub-stantial U.S. owners. In addition, by thatdate, the FFI’s prospectus and all mar-keting materials must indicate that salesand other transfers of interests in the FFIto specified U.S. persons, nonparticipatingFFIs, or passive NFFEs with one or moresubstantial U.S. owners are prohibited un-less such interests are both distributed byand held through a participating FFI.

(5) The FFI ensures that by the laterof June 30, 2014, or six months after thedate the FFI registers as a deemed-compli-ant FFI, each agreement entered into by theFFI that governs the distribution of its debtor equity interests requires the distributor

to notify the FFI of a change in the dis-tributor’s chapter 4 status within 90 daysof the change. The FFI must certify tothe IRS that, with respect to any distrib-utor that ceases to qualify as a distribu-tor identified in paragraph (f)(1)(i)(D)(3)of this section, the FFI will terminate itsdistribution agreement with the distributor,or cause the distribution agreement to beterminated, within 90 days of notificationof the distributor’s change in status and,with respect to all debt and equity interestsof the FFI issued through that distributor,will redeem those interests, convert thoseinterests to direct holdings in the fund, orcause those interests to be transferred toanother distributor identified in paragraph(f)(1)(i)(D)(3) of this section within sixmonths of the distributor’s change in sta-tus.

(6) With respect to any of the FFI’s pre-existing direct accounts that are held bythe beneficial owner of the interest in theFFI, the FFI reviews those accounts in ac-cordance with the procedures (and timeframes) described in §1.1471–4(c) appli-cable to preexisting accounts to identifyany U.S. account or account held by anonparticipating FFI. Notwithstanding theprevious sentence, the FFI will not be re-quired to review the account of any in-dividual investor that purchased its inter-est at a time when all of the FFI’s distri-bution agreements and its prospectus con-tained an explicit prohibition of the is-suance and/or sale of shares to U.S. enti-ties and U.S. resident individuals. An FFIwill not be required to review the accountof any investor that purchased its interestin bearer form until the time of payment,but at such time will be required to docu-ment the account in accordance with pro-cedures set forth in §1.1471–4(c) applica-ble to accounts other than preexisting ac-counts. By the later of June 30, 2014, or sixmonths after the date the FFI registers as adeemed-compliant FFI, the FFI will be re-quired to certify to the IRS either that it didnot identify any U.S. account or accountheld by a nonparticipating FFI as a resultof its review or, if any such accounts wereidentified, that the FFI will either redeemsuch accounts, transfer such accounts to anaffiliate or other FFI that is a participatingFFI, reporting Model 1 FFI, or U.S. finan-cial institution, or withhold and report onsuch accounts as would be required under

April 8, 2013 874 2013–15 I.R.B.

§1.1471–4(b) and (d) if it were a partici-pating FFI.

(7) By the later of December 31,2013, or the date that it registers as adeemed-compliant FFI, the FFI imple-ments the policies and procedures de-scribed in §1.1471–4(c) to ensure that iteither—

(i) Does not open or maintain an ac-count for, or make a withholdable pay-ment to, any specified U.S. person, non-participating FFI, or passive NFFE withone or more substantial U.S. owners and,if it discovers any such accounts, closesall accounts for any such person within sixmonths of the date that the FFI had reasonto know the account holder became such aperson; or

(ii) Withholds and reports on any ac-count held by, or any withholdable pay-ment made to, any specified U.S. person,nonparticipating FFI, or passive NFFEwith one or more substantial U.S. ownersto the extent and in the manner that wouldbe required under §1.1471–4(b) and (d) ifthe FFI were a participating FFI.

(8) For an FFI that is part of an ex-panded affiliated group, all other FFIs inthe expanded affiliated group are partici-pating FFIs, registered deemed-compliantFFIs, sponsored FFIs described in para-graph (f)(2)(iii)(B) or (C) of this section,nonreporting IGA FFIs, or exempt benefi-cial owners.

(E) Qualified credit card issuers.An FFI is described in this paragraph(f)(1)(i)(E) if the FFI meets the followingrequirements.

(1) The FFI is an FFI solely becauseit is an issuer of credit cards that acceptsdeposits only when a customer makes apayment in excess of a balance due withrespect to the card and the overpayment isnot immediately returned to the customer.

(2) By the later of December 31, 2013,or the date it registers as a deemed-compli-ant FFI, the FFI implements policies andprocedures to either prevent a customer de-posit in excess of $50,000 or to ensure thatany customer deposit in excess of $50,000is refunded to the customer within 60 days.For this purpose, a customer deposit doesnot refer to credit balances to the extentof disputed charges but does include creditbalances resulting from merchandise re-turns.

(F) Sponsored investment entities andcontrolled foreign corporations. An FFI

is described in this paragraph (f)(1)(i)(F)if the FFI is described in paragraph(f)(1)(i)(F)(1) or (2) of this section and thesponsoring entity meets the requirementsof paragraph (f)(1)(i)(F)(3) of this section.

(1) An FFI is a sponsored invest-ment entity described in this paragraph(f)(1)(i)(F)(1) if—

(i) It is an investment entity that is nota QI, WP, or WT; and

(ii) An entity has agreed with the FFI toact as a sponsoring entity for the FFI.

(2) An FFI is a sponsored controlledforeign corporation described in this para-graph (f)(1)(i)(F)(2) if the FFI meets thefollowing requirements—

(i) The FFI is a controlled foreign cor-poration as defined in section 957(a) thatis not a QI, WP, or WT;

(ii) The FFI is wholly owned, directlyor indirectly, by a U.S. financial institutionthat agrees with the FFI to act as a sponsor-ing entity for the FFI; and

(iii) The FFI shares a common elec-tronic account system with the sponsoringentity that enables the sponsoring entityto identify all account holders and payeesof the FFI and to access all account andcustomer information maintained by theFFI including, but not limited to, customeridentification information, customer doc-umentation, account balance, and all pay-ments made to the account holder or payee.

(3) A sponsoring entity describedin paragraph (f)(1)(i)(F)(1)(ii) or(f)(1)(i)(F)(2)(ii) of this section meetsthe requirements of this paragraph(f)(1)(i)(F)(3) if the sponsoring entity—

(i) Is authorized to manage the FFI andenter into contracts on behalf of the FFI(such as a fund manager, trustee, corporatedirector, or managing partner);

(ii) Has registered with the IRS as asponsoring entity;

(iii) Has registered the FFI with the IRS;(iv) Agrees to perform, on behalf of the

FFI, all due diligence, withholding, report-ing, and other requirements that the FFIwould have been required to perform if itwere a participating FFI;

(v) Identifies the FFI in all reportingcompleted on the FFI’s behalf to the extentrequired under §§1.1471–4(d)(2)(ii)(C)and 1.1474–1; and

(vi) Has not had its status as a sponsorrevoked.

(4) The IRS may revoke a sponsoringentity’s status as a sponsor with respect to

all sponsored FFIs if there is a materialfailure by the sponsoring entity to com-ply with its obligations under paragraph(f)(1)(i)(F)(3) of this section with respectto any sponsored FFI.

(5) A sponsored FFI will remain liablefor any failure of its sponsoring entity tocomply with the obligations contained inparagraph (f)(1)(i)(F)(3) of this sectionthat the sponsoring entity has agreed toundertake on behalf of the FFI.

(ii) Procedural requirements for reg-istered deemed-compliant FFIs. A reg-istered deemed-compliant FFI describedin paragraph (f)(1)(i)(A) through (E) ofthis section may use one or more agentsto perform the necessary due diligence toidentify its account holders and to take anyrequired action associated with obtainingand maintaining its deemed-compliantstatus. The FFI, however, remains respon-sible for ensuring that the requirementsfor its deemed-compliant status are met.Unless otherwise provided in this section,a registered deemed-compliant FFI de-scribed in paragraph (f)(1)(i)(A) through(E) of this section is required to—

(A) Register with the IRS pursuantto procedures prescribed by the IRS andagree to comply with the terms of its reg-istered deemed-compliant status.

(B) Have its responsible officer certifyevery three years to the IRS, either indi-vidually or collectively for the FFI’s ex-panded affiliated group, that all of the re-quirements for the deemed-compliant cat-egory claimed by the FFI have been satis-fied since the later of the date the FFI regis-ters as a deemed-compliant FFI or Decem-ber 31, 2013;

(C) Maintain in its records the confir-mation from the IRS of the FFI’s registra-tion as a deemed-compliant FFI and GIINor such other information as the IRS spec-ifies in forms or other guidance; and

(D) Agree to notify the IRS if there is achange in circumstances that would makethe FFI ineligible for the deemed-com-pliant status for which it has registered,and to do so within six months of thechange in circumstances unless the FFI isable to resume its eligibility for its regis-tered-deemed compliant status within thesix month notification period.

(iii) Deemed-compliant FFI that ismerged or acquired. A deemed-compliantFFI that becomes a participating FFI or amember of a participating FFI group as a

2013–15 I.R.B. 875 April 8, 2013

result of a merger or acquisition will not berequired to redetermine the chapter 4 sta-tus of any account maintained by the FFIprior to the date of the merger or acquisi-tion unless that account has a subsequentchange in circumstances.

(2) Certified deemed-compliant FFIs.A certified deemed-compliant FFI meansan FFI described in any of paragraphs(f)(2)(i) through (iv) of this section that hascertified as to its status as a deemed-com-pliant FFI by providing a withholdingagent with the documentation describedin §1.1471–3(d)(6) applicable to the rele-vant deemed-compliant category. An FFIthat is described in paragraph (f)(2)(iv)of this section (a limited life debt invest-ment entity) will be treated as a certifieddeemed-compliant FFI prior to January 1,2017. A certified deemed-compliant FFIalso includes any nonreporting IGA FFI.A certified deemed-compliant FFI is notrequired to register with the IRS.

(i) Nonregistering local bank. An FFI isdescribed in this paragraph (f)(2)(i) if theFFI meets the following requirements.

(A) The FFI operates solely as (and islicensed and regulated under the laws ofits country of incorporation or organizationas)—

(1) A bank; or(2) A credit union or similar cooper-

ative credit organization that is operatedwithout profit.

(B) The FFI’s business consists primar-ily of receiving deposits from and makingloans to unrelated retail customers.

(C) The FFI does not have a fixed placeof business outside its country of incorpo-ration or organization. For this purpose, afixed place of business does not include alocation that is not advertised to the pub-lic and from which the FFI performs solelyadministrative support functions.

(D) The FFI does not solicit customersor account holders outside its country ofincorporation or organization. For thispurpose, an FFI will not be considered tohave solicited customers or account hold-ers outside its country of incorporation ororganization merely because it operates awebsite, provided that the website doesnot permit account opening, does not in-dicate that the FFI maintains accounts foror provides services to nonresidents, anddoes not otherwise target or solicit U.S.customers or account holders. An FFIwill also not be considered to have so-

licited customers or account holders out-side its country of incorporation or organi-zation merely because it advertises in printmedia or on a radio or television stationthat is distributed or aired primarily withinits country of incorporation or organiza-tion but is also incidentally distributed oraired in other countries, provided that theadvertisement does not indicate that theFFI maintains accounts for or provides ser-vices to nonresidents and does not other-wise target or solicit U.S. customers or ac-count holders.

(E) The FFI does not have more than$175 million in assets on its balance sheetand, if the FFI is a member of an expandedaffiliated group, the group does not havemore than $500 million in total assets on itsconsolidated or combined balance sheets.

(F) With respect to an FFI that is part ofan expanded affiliated group, each mem-ber of the expanded affiliated group is in-corporated or organized in the same coun-try and does not have a fixed place of busi-ness outside of that country. For this pur-pose, a fixed place of business does not in-clude a location that is not advertised tothe public and from which the FFI per-forms solely administrative support func-tions. Further, each FFI in the group,other than an FFI described in paragraph(f)(2)(ii) of this section or §1.1471–6(f),meets the requirements set forth in thisparagraph (f)(2)(i). For this purpose, afixed place of business does not include alocation that is not advertised to the pub-lic and from which the FFI performs solelyadministrative support functions.

(ii) FFIs with only low-value accounts.An FFI is described in this paragraph(f)(2)(ii) if the FFI meets the followingrequirements:

(A) The FFI is not an investment entity.(B) No financial account maintained by

the FFI (or, in the case of an FFI that is amember of an expanded affiliated group,by any member of the expanded affiliatedgroup) has a balance or value in excessof $50,000. The balance or value of afinancial account shall be determined byapplying the rules described in paragraph(b)(4) of this section, substituting the termfinancial account for the term depositoryaccount and the term person for the termindividual.

(C) The FFI does not have more than$50 million in assets on its balance sheetas of the end of its most recent account-

ing year. In the case of an FFI that is amember of an expanded affiliated group,the entire expanded affiliated group doesnot have more than $50 million in assets onits consolidated or combined balance sheetas of the end of its most recent accountingyear.

(iii) Sponsored, closely held investmentvehicles. Subject to the provisions of para-graph (f)(2)(iii)(F) of this section, an FFI isdescribed in this paragraph (f)(2)(iii) if itmeets the requirements described in para-graphs (f)(2)(iii)(A) through (E) of thissection.

(A) The FFI is an FFI solely because itis an investment entity and is not a QI, WP,or WT.

(B) The FFI has a contractual arrange-ment with a sponsoring entity that is a par-ticipating FFI, reporting Model 1 FFI, orU.S. financial institution and that is au-thorized to manage the FFI and enter intocontracts on behalf of the FFI (such as aprofessional manager, trustee, or manag-ing partner), under which the sponsoringentity agrees to fulfill all due diligence,withholding, and reporting responsibilitiesthat the FFI would have assumed if it werea participating FFI.

(C) The FFI does not hold itself out asan investment vehicle for unrelated parties.

(D) Twenty or fewer individuals own allof the debt and equity interests in the FFI(disregarding debt interests owned by par-ticipating FFIs, registered deemed-com-pliant FFIs, and certified deemed-compli-ant FFIs and equity interests owned by anentity if that entity owns 100 percent ofthe equity interests in the FFI and is it-self a sponsored FFI under this paragraph(f)(2)(iii)).

(E) The sponsoring entity complieswith the following requirements—

(1) The sponsoring entity has registeredwith the IRS as a sponsoring entity;

(2) The sponsoring entity agrees to per-form, on behalf of the FFI, all due dili-gence, withholding, reporting, and otherrequirements that the FFI would have beenrequired to perform if it were a partici-pating FFI and retains documentation col-lected with respect to the FFI for a periodof six years;

(3) The sponsoring entity identifiesthe FFI in all reporting completed on theFFI’s behalf to the extent required under§§1.1471–4(d)(2)(ii)(C) and 1.1474–1;and

April 8, 2013 876 2013–15 I.R.B.

(4) The sponsoring entity has not had itsstatus as a sponsor revoked.

(F) The IRS may revoke a sponsoringentity’s status as a sponsor with respect toall sponsored FFIs if there is a materialfailure by the sponsoring entity to com-ply with its obligations under paragraph(f)(2)(iii)(E) of this section with respect toany sponsored FFI. A sponsored FFI willremain liable for any failure of its spon-soring entity to comply with the obliga-tions contained in paragraph (f)(2)(iii)(E)of this section that the sponsoring entityhas agreed to undertake on behalf of theFFI.

(iv) Limited life debt investment entities(transitional). An FFI is described in thisparagraph (f)(2)(iv) if the FFI is the ben-eficial owner of the payment (or of pay-ments made with respect to the account)and the FFI meets the following require-ments. An FFI that meets the requirementsof this paragraph (f)(2)(iv) will be treatedas a certified deemed-compliant FFI priorto January 1, 2017.

(A) The FFI is a collective investmentvehicle formed pursuant to a trust inden-ture or similar fiduciary arrangement thatis an FFI solely because it is an investmententity that offers interests primarily to un-related investors.

(B) The FFI was in existence as of De-cember 31, 2011, and the FFI’s organiza-tional documents require that the entity liq-uidate on or prior to a set date, and do notpermit amendments to the organizationaldocuments, including the trust indenture,without the agreement of all of the FFI’sinvestors.

(C) The FFI was formed for the purposeof purchasing (and did in fact purchase)specific types of indebtedness and holdingthose assets (subject to reinvestment onlyunder prescribed circumstances) until thetermination of the asset or the vehicle.

(D) All payments made to the investorsof the FFI are cleared through a clearingorganization that is a participating FFI, re-porting Model 1 FFI, or U.S. financial in-stitution or made through a trustee that is aparticipating FFI, reporting Model 1 FFI,or U.S. financial institution.

(E) The FFI’s trust indenture or similarfiduciary arrangement only authorizes thetrustee or fiduciary to engage in activitiesspecifically designated in the trust inden-ture, and the trustee or fiduciary is not au-thorized through a fiduciary duty or other-

wise to fulfill the obligations that a partic-ipating FFI is subject to under §1.1471–4absent a legal requirement to fulfill them,even if the consequence of the trustee fail-ing to fulfill these obligations is to causethe FFI to be withheld upon. Further, noother person has the authority to fulfill theobligations that a participating FFI is sub-ject to under §1.1471–4 on behalf of theFFI.

(3) Owner-documented FFIs—(i) Ingeneral. An owner-documented FFImeans an FFI that meets the requirementsof paragraph (f)(3)(ii) of this section. AnFFI may only be treated as an owner-doc-umented FFI with respect to paymentsreceived from and accounts held with adesignated withholding agent (or withrespect to payments received from andaccounts held with another FFI that is alsotreated as an owner-documented FFI bysuch designated withholding agent). Adesignated withholding agent is a U.S.financial institution, participating FFI,or reporting Model 1 FFI that agrees toundertake the additional due diligenceand reporting required under paragraphs(f)(3)(ii)(D) and (E) of this section in orderto treat the FFI as an owner-documentedFFI. An FFI meeting the requirements ofthis paragraph (f)(3) will only be treatedas a deemed-compliant FFI with respectto a payment or account for which it doesnot act as an intermediary.

(ii) Requirements of owner-documentedFFI status. An FFI meets the requirementsof this paragraph (f)(3)(ii) only if—

(A) The FFI is an FFI solely because itis an investment entity;

(B) The FFI is not owned by or in an ex-panded affiliated group with any FFI thatis a depository institution, custodial insti-tution, or specified insurance company;

(C) The FFI does not maintain a finan-cial account for any nonparticipating FFI;

(D) The FFI provides the designatedwithholding agent with all of the documen-tation described in §1.1471–3(d)(6) andagrees to notify the withholding agent ifthere is a change in circumstances; and

(E) The designated withholding agentagrees to report to the IRS (or, in thecase of a reporting Model 1 FFI, to therelevant foreign government or agencythereof) all of the information describedin §1.1471–4(d) or §1.1474–1(i) (asappropriate) with respect to any speci-fied U.S. persons that are identified in

§1.1471–3(d)(6)(iv)(A)(1). Notwithstand-ing the previous sentence, the designatedwithholding agent is not required to re-port information with respect to an in-direct owner of the FFI that holds itsinterest through a participating FFI, adeemed-compliant FFI (other than anowner-documented FFI), an entity that is aU.S. person, an exempt beneficial owner,or an excepted NFFE.

(4) Definition of a restricted distributor.An entity is a restricted distributor for pur-poses of paragraph (f)(1)(i)(D) of this sec-tion (relating to registered deemed-com-pliant restricted funds) if it operates as adistributor that holds debt or equity inter-ests in a restricted fund as a nominee andmeets the following requirements.

(i) The distributor provides investmentservices to at least 30 unrelated customersand less than half of the distributor’s cus-tomers are related persons.

(ii) The distributor is required to per-form AML due diligence procedures un-der the anti-money laundering laws of itscountry of incorporation or organization(which must be a FATF-compliant jurisdic-tion).

(iii) The distributor operates solely in itscountry of incorporation or organization,does not have a fixed place of business out-side that country, and, if such distributorbelongs to an expanded affiliated group,has the same country of incorporation ororganization as all other members of its ex-panded affiliated group. For this purpose,a fixed place of business does not includea location that is not advertised to the pub-lic and from which the FFI performs solelyadministrative support functions.

(iv) The distributor does not solicit cus-tomers or account holders outside its coun-try of incorporation or organization. Forthis purpose, a distributor will not be con-sidered to have solicited customers or ac-count holders outside its country of organ-ization merely because it operates a web-site, provided that the website does notpermit account opening by persons identi-fied as nonresidents, does not specificallystate that nonresidents may acquire securi-ties from the distributor, and does not oth-erwise target U.S. customers or accountholders. A distributor will also not be con-sidered to have solicited customers or ac-count holders outside its country of incor-poration or organization merely because itadvertises in print media or on a radio or

2013–15 I.R.B. 877 April 8, 2013

television station that is distributed or airedprimarily within its country of incorpora-tion or organization but is also inciden-tally distributed or aired in other countries,provided that the advertisement does notindicate that the distributor maintains ac-counts for or provides services to nonresi-dents and does not otherwise target or so-licit U.S. customers or account holders.

(v) The distributor does not have morethan $175 million in total assets undermanagement and has no more than $7million in gross revenue on its incomestatement for the most recent financialaccounting year and, if the distributor be-longs to an expanded affiliated group, theentire group does not have more than $500million in total assets under managementor more than $20 million in gross revenuefor its most recent financial accountingyear on a combined or consolidated in-come statement.

(vi) The distributor provides the re-stricted fund (or another distributor of therestricted fund that is a participating FFIor registered deemed-compliant FFI, andwith which the distributor has entered intoits distribution agreement) with a validForm W–8 indicating that the distributorsatisfies the requirements to be a restricteddistributor.

(vii) The agreement governing the dis-tributor’s distribution of debt or equity in-terests of the restricted fund—

(A) Prohibits the distributor from dis-tributing any securities to specified U.S.persons, passive NFFEs that have one ormore substantial U.S. owners, and nonpar-ticipating FFIs;

(B) Requires that if the distributor doesdistribute securities to any of the personsdescribed in this paragraph (f)(4)(vii), itwill cause the restricted fund to redeemor retire those interests, or it will trans-fer those interests to a distributor that isa participating FFI or reporting Model 1FFI, within six months and the commis-sion paid to the distributor will be forfeitedto the restricted fund or to the participat-ing FFI to which those interests are trans-ferred; and

(C) Requires the distributor to notify therestricted fund (or another distributor ofthe restricted fund that is a participatingFFI, reporting Model 1 FFI, or registereddeemed-compliant FFI and with which thedistributor has entered into its distributionagreement) of a change in the distribu-

tor’s chapter 4 status within 90 days of thechange in status.

(viii) With respect to sales after Decem-ber 31, 2011, and prior to the time the re-strictions described in paragraph (f)(4)(vii)of this section were incorporated into thedistribution agreement, either the agree-ment governing the distributor’s distribu-tion of debt or equity interests of the rele-vant FFI contained a prohibition of the saleof such securities to U.S. entities or U.S.resident individuals, or the distributor re-views all accounts relating to such sales inaccordance with the procedures (and timeframes) described in §1.1471–4(c) appli-cable to preexisting accounts and certifiesthat it has caused the restricted fund to re-deem or retire, or it has transferred all secu-rities sold to any of the persons describedin paragraph (f)(4)(vii) of this section. Ifthe distribution agreement addressed in theprior sentence contained only a prohibitionon the sale of securities to U.S. residentindividuals, the distributor will not be re-quired to review the individual accountsrelating to such sales but must review andmake certifications with respect to all en-tity accounts in the manner described in theprevious sentence.

(g) Recalcitrant account holders—(1)Scope. This paragraph (g) providesrules for determining when an accountholder of a participating FFI or registereddeemed-compliant FFI is a recalcitrantaccount holder. Paragraph (g)(2) of thissection defines the term recalcitrant ac-count holder. Paragraphs (g)(3) and (4)of this section provide timing rules forwhen an account holder will begin to betreated as a recalcitrant account holderby a participating FFI and when an ac-count holder will cease to be treated asa recalcitrant account holder by such in-stitution. For rules for determining theholder of an account, see paragraph (a)(3)of this section. For the withholding re-quirements of an FFI with respect to itsrecalcitrant account holders, see para-graph (f) of this section and §1.1471–4(b).For the reporting requirements of an FFIwith respect to its recalcitrant accountholders, see §1.1471–4(d)(6), and, for thereporting required with respect to pay-ments made to such account holders, see§1.1474–1(d)(4)(iii). The rules providedin this paragraph (g) to classify certainaccount holders as recalcitrant accountholders shall not, however, apply to a U.S.

branch of a participating FFI. Instead, aU.S. branch of a participating FFI or regis-tered deemed-compliant FFI that is treatedas a U.S. person shall apply the presump-tion rules of §1.1471–3(f) (for foreignentity account holders) and chapter 3 or61 (for individual payees) to determinethe status of a payee if it cannot reliablyassociate a reportable payment made tothe payee with valid documentation.

(2) Recalcitrant account holder. Theterm recalcitrant account holder meansany holder of an account maintained byan FFI if such account holder is not anFFI (or presumed to be an FFI under§1.1471–3(f)), the account does not meetthe requirements of the exception to U.S.account status described in paragraph(a)(4) of this section (for depository ac-counts with a balance of $50,000 or less)and does not qualify for any of the ex-ceptions from the documentation require-ments described in §1.1471–4(c)(3)(iii),(c)(4)(iii), (c)(5)(iii), (c)(5)(iv)(E) (or theparticipating FFI elects to forego suchexceptions) and—

(i) The account holder fails to complywith requests by the FFI for the documen-tation or information that is required un-der §1.1471–4(c) for determining the sta-tus of such account as a U.S. account orother than a U.S. account;

(ii) The account holder fails to providea valid Form W–9 upon request from theFFI or fails to provide a correct name andTIN combination upon request from theFFI when the FFI has received notice fromthe IRS indicating that the name and TINcombination reported by the FFI for theaccount holder is incorrect;

(iii) If foreign law would (but for awaiver) prevent reporting by the FFI (orbranch or division thereof) of the informa-tion described in §1.1471–4(d)(3) or (5)with respect to such account, the accountholder (or substantial U.S. owner of an ac-count holder that is a U.S. owned foreignentity) fails to provide a valid and effectivewaiver to permit such reporting; or

(iv) The account holder pro-vides the documentation described in§1.1471–3(d)(12) to establish its statusas a passive NFFE (other than a WP orWT) but fails to provide the informa-tion regarding its owners required under§1.1471–3(d)(12)(iii).

(3) Start of recalcitrant account holderstatus—(i) Preexisting accounts identi-

April 8, 2013 878 2013–15 I.R.B.

fied under the procedures described in§1.1471–4(c) for identifying U. S. ac-counts—(A) In general. An accountholder of a preexisting account describedin paragraph (g)(2) of this section main-tained by a participating FFI will be treatedas a recalcitrant account holder begin-ning on the dates provided in paragraphs(g)(3)(B) through (D) of this section. Anaccount holder of a preexisting accountdescribed in paragraph (g)(2) of this sec-tion that is maintained by a registereddeemed-compliant FFI will be treated asa recalcitrant account holder beginningon the dates provided in paragraph (f)of this section (setting forth the time bywhich the FFI must identify its accountsin accordance with the requirements of§1.1471–4(c) in order to meet the re-quirements of its applicable registereddeemed-compliant status).

(B) Accounts other than high-value ac-counts. Account holders of preexisting ac-counts maintained by a participating FFIthat are not high-value accounts (as de-scribed in §1.1471–4(c)(8)) and that aredescribed in paragraph (g)(2) of this sec-tion will be treated as recalcitrant accountholders beginning on the date that is twoyears after the effective date of the FFIagreement.

(C) High-value accounts. Accountholders of preexisting accounts main-tained by a participating FFI that arehigh-value accounts (as described in§1.1471–4(c)(5)(iv)(D)) and that are de-scribed in paragraph (g)(2) of this sectionwill be treated as recalcitrant accountholders beginning on the date that is oneyear after the effective date of the FFIagreement.

(D) Preexisting accounts that becomehigh-value accounts. With respect to acalendar year beginning after the later ofthe effective date of the FFI agreementand December 31, 2014, an account holderthat is described in paragraph (g)(2) ofthis section and that holds a preexistingaccount that a participating FFI identi-fies as a high-value account pursuant to§1.1471–4(c)(5)(iv)(D) will be treated asa recalcitrant account holder beginningon the earlier of the date a withholdablepayment is made to the account followingthe calendar year end in which the accountis identified as a high-value account or thedate that is six months after the calendaryear end.

(ii) Accounts that are not preexist-ing accounts and accounts requiringname/TIN correction. An account holderof an account that is not a preexisting ac-count and that is described in paragraph(g)(2) of this section will be treated as a re-calcitrant account holder beginning on theearlier of the date a withholdable paymentor a foreign passthru payment is made tothe account or 90 days after the date theaccount is opened by the participating FFI.An account holder for which the partici-pating FFI received a notice from the IRSindicating that the name and TIN com-bination provided for the account holderis incorrect will be treated as a recalci-trant account holder following the date ofsuch notice within the time prescribed in§31.3406(d)–5(a) of this chapter.

(iii) Accounts with changes in circum-stances. An account holder holding an ac-count that is described in paragraph (g)(2)of this section following a change in cir-cumstances (other than a change in ac-count balance or value in a subsequentyear that causes an individual account tobe identified as a high-value account) willbe treated as a recalcitrant account holderbeginning on the earlier of the date a with-holdable payment or a foreign passthrupayment is made to the account or the datethat is 90 days after the change in circum-stances. For the definition of a change incircumstances with respect to an account,see §1.1471–4(c)(2)(iii).

(4) End of recalcitrant account holderstatus. An account holder that is treated asa recalcitrant account holder under para-graphs (g)(2) and (3) of this section willcease to be so treated as of the date onwhich the account holder is no longer de-scribed in paragraph (g)(2) of this section.

(h) Passthru payment—(1) Defined.The term passthru payment means anywithholdable payment and any foreignpassthru payment.

(2) Foreign passthru payment. [Re-served].

(i) Expanded affiliated group—(1)Scope of paragraph. This paragraph (i)defines the term expanded affiliated groupfor purposes of chapter 4. For the require-ments of a participating FFI with respect tomembers of its expanded affiliated groupthat are FFIs, see §1.1471–4(e).

(2) Expanded affiliated group de-fined—(i) In general. Except as other-wise provided in this paragraph (i), an

expanded affiliated group means an affili-ated group as defined in section 1504(a),determined—

(A) By substituting “more than 50 per-cent” for “at least 80 percent” each place itappears;

(B) Without regard to paragraphs (2)and (3) of section 1504(b);

(C) Without application of section1504(a)(3); and

(D Without application of§1.1504–4(b)(2)(i)(A).

(ii) Partnerships and entities other thancorporations. A partnership or any entityother than a corporation shall be treatedas a member of an expanded affiliatedgroup if such entity is controlled (withinthe meaning of section 954(d)(3), withoutregard to whether such entity is foreignor domestic) by members of such group(including any entity treated as a memberof such group by reason of this sentence).

(3) Exception for FFIs holding cer-tain capital investments. Notwithstandingparagraph (i)(2) of this section, an in-vestment entity will not be considered amember of an expanded affiliated groupas a result of a contribution of seed capitalby a member of such expanded affiliatedgroup if—

(i) The member that owns the invest-ment entity is an FFI that is in the busi-ness of providing seed capital to form in-vestment entities, the interests in which itintends to sell to unrelated investors;

(ii) The investment entity is created inthe ordinary course of such other FFI’sbusiness described in paragraph (i)(3)(i) ofthis section;

(iii) As of the date the FFI acquired theequity interest, any equity interest in the in-vestment entity in excess of 50 percent ofthe total value of the stock of the invest-ment entity is intended to be held by suchother FFI (including ownership by othermembers of such other FFI’s expanded af-filiated group) for no more than three yearsfrom the date on which such other FFI firstacquired an equity interest in the invest-ment entity; and

(iv) In the case of an equity interestthat has been held by such other FFI forover three years from the date referencedin paragraph (i)(3)(iii) of this section, theaggregate value of the equity interest heldby such other FFI and the equity interestsheld by other members of its expanded af-filiated group is 50 percent or less of the

2013–15 I.R.B. 879 April 8, 2013

total value of the stock of the investmententity.

(4) Seed capital. For purposes of thisparagraph (i), the term seed capital meansan initial capital contribution made to aninvestment entity that is intended as a tem-porary investment and is deemed by themanager of the entity to be necessary orappropriate for the establishment of the en-tity, such as for the purpose of establishinga track record of investment performancefor such entity, achieving economies ofscale for diversified investment, avoidingan artificially high expense to return ratio,or similar purposes.

(5) Anti-abuse rule. A change in own-ership, voting rights, or the form of an en-tity that results in an entity meeting or notmeeting the ownership requirements de-scribed in paragraph (i)(2) of this sectionwill be disregarded for purposes of deter-mining whether an entity is a member ofan expanded affiliated group if the changeis pursuant to a plan a principal purposeof which is to avoid reporting or withhold-ing that would otherwise be required un-der any chapter 4 provision. For purposesof this paragraph (i)(5), a change in votingrights includes a separation of voting rightsand value.

(j) Effective/applicability date. Thissection generally applies on January 28,2013. For other dates of applicability, see§1.1471–5(f)(2)(iv).


§1.1471–6 Payments beneficially ownedby exempt beneficial owners.

(a) In general. This section describesclasses of beneficial owners that are iden-tified in section 1471(f) (exempt beneficialowners). Except as otherwise providedin paragraphs (d) (regarding securitiesheld by foreign central banks of issue)and (f) (regarding retirement funds) ofthis section, a person must be a benefi-cial owner of a payment to be treated asan exempt beneficial owner with respectto the payment. The following classesof persons are exempt beneficial own-ers: any foreign government, any politicalsubdivision of a foreign government, orany wholly owned agency or instrumen-tality of any one or more of the foregoingdescribed in paragraph (b) of this sec-tion; any international organization or any

wholly owned agency or instrumental-ity thereof described in paragraph (c) ofthis section; any foreign central bank ofissue described in paragraph (d) of thissection; any government of a U.S. ter-ritory described in paragraph (e) of thissection; certain foreign retirement fundsdescribed in paragraph (f) of this section;and certain entities described in paragraph(g) of this section that are wholly ownedby one or more other exempt beneficialowners. In addition, an exempt benefi-cial owner includes any person treatedas an exempt beneficial owner pursuantto a Model 1 IGA or Model 2 IGA. See§§1.1471–2(a)(4)(v) and 1.1472–1(c)(2)for the exemptions from withholding forpayments beneficially owned by an ex-empt beneficial owner; §1.1471–3(d)(9)for the documentation requirements appli-cable to a withholding agent for purposesof determining when a withholdable pay-ment is beneficially owned by an exemptbeneficial owner; and §1.1471–3(d)(8)(ii)for when a withholding agent may treat apayment made to a nonparticipating FFIas beneficially owned by an exempt ben-eficial owner.

(b) Any foreign government, any polit-ical subdivision of a foreign government,or any wholly owned agency or instrumen-tality of any one or more of the foregoing.Solely for purposes of this section and ex-cept as provided in paragraph (h) of thissection, the term any foreign government,any political subdivision of a foreign gov-ernment, or any wholly owned agency orinstrumentality of any one or more of theforegoing means only the integral parts,controlled entities, and political subdivi-sions of a foreign sovereign.

(1) Integral part. Solely for purposesof this paragraph (b), an integral part ofa foreign sovereign is any person, bodyof persons, organization, agency, bureau,fund, instrumentality, or other body, how-ever designated, that constitutes a govern-ing authority of a foreign country. The netearnings of the governing authority mustbe credited to its own account or to otheraccounts of the foreign sovereign, with noportion inuring to the benefit of any pri-vate person as defined in paragraph (b)(3)of this section. An integral part does notinclude any individual who is a sovereign,official, or administrator acting in a privateor personal capacity. All the facts and cir-cumstances will be taken into account in

determining whether an individual is act-ing in a private or personal capacity.

(2) Controlled entity. Solely for pur-poses of this paragraph (b), a controlledentity means an entity that is separate inform from a foreign sovereign or that oth-erwise constitutes a separate juridical en-tity, provided that—

(i) The entity is wholly owned and con-trolled by one or more foreign sovereignsdirectly or indirectly through one or morecontrolled entities;

(ii) The entity’s net earnings are cred-ited to its own account or to other accountsof one or more foreign sovereigns, with noportion of its income inuring to the benefitof any private person as defined in para-graph (b)(3) of this section; and

(iii) The entity’s assets vest in one ormore foreign sovereigns upon dissolution.

(3) Inurement to the benefit of privatepersons. Solely for purposes of this para-graph (b)—

(i) Income does not inure to the benefitof private persons if such persons (withinthe meaning of section 7701(a)(1)) are theintended beneficiaries of a governmentalprogram carried on by a foreign sovereign,and the program activities constitute gov-ernmental functions under the regulationsunder section 892.

(ii) Income is considered to inure to thebenefit of private persons if such incomebenefits—

(A) Private persons through the use ofa governmental entity as a conduit for per-sonal investment;

(B) Private persons through the use of agovernmental entity to conduct a commer-cial business, such as a commercial bank-ing business, that provides financial ser-vices to private persons; or

(C) Private persons who divert such in-come from its intended use by exerting in-fluence or control through means explic-itly or implicitly approved of by the for-eign sovereign.

(c) Any international organizationor any wholly owned agency or instru-mentality thereof. Except as provided inparagraph (h) of this section, the term anyinternational organization or any whollyowned agency or instrumentality thereofmeans any entity described in section7701(a)(18). The term also includes anyintergovernmental or supranational organ-ization—

April 8, 2013 880 2013–15 I.R.B.

(1) That is comprised primarily of for-eign governments;

(2) That is recognized as an intergov-ernmental or supranational organizationunder a foreign law similar to 22 U.S.C.288–288f or that has in effect a headquar-ters agreement with a foreign government;and

(3) Whose income does not inure to thebenefit of private persons under the prin-ciples of paragraph (b)(3)(ii) of this sec-tion, as applied to the intergovernmental orsupranational organization in place of thegovernment or governmental entity.

(d) Foreign central bank of issue—(1)In general. Solely for purposes of this sec-tion and except as provided in paragraph(h) of this section, the term foreign cen-tral bank of issue means a bank that is bylaw or government sanction the principalauthority, other than the government itself,issuing instruments intended to circulate ascurrency. Such a bank is generally the cus-todian of the banking reserves of the coun-try under whose law it is organized.

(2) Separate instrumentality. A foreigncentral bank of issue may include an in-strumentality that is separate from a for-eign government, whether or not ownedin whole or in part by a foreign govern-ment. For example, foreign banks orga-nized along the lines of, and performingfunctions similar to, the Federal ReserveSystem qualify as foreign central banks ofissue for purposes of this section.

(3) Bank for International Settlements.The Bank for International Settlements is aforeign central bank of issue for purposesof this section.

(4) Income on certain collateral. Solelyfor purposes of determining whether anentity is an exempt beneficial owner of apayment under this paragraph (d), a for-eign central bank of issue is a beneficialowner with respect to income earned on se-curities, including securities held as collat-eral or in connection with a securities lend-ing transaction, held by the foreign centralbank of issue in the normal course of itsoperations as a central bank of issue.

(e) Governments of U.S. territories. Ex-cept as provided in paragraph (h) of thissection, whether a person or entity consti-tutes a government of a U.S. territory forpurposes of this section is determined byapplying principles analogous to those setforth in paragraph (b) of this section.

(f) Certain retirement funds. A fund isdescribed in this paragraph (f) if it is de-scribed in paragraphs (f)(1) through (6) ofthis section. In addition, if a withholdingagent may treat a withholdable payment asmade to a payee that is a retirement fund inaccordance with §1.1471–3, then the with-holding agent may also treat such retire-ment fund as the beneficial owner of thepayment. See §1.1471–3(d)(9)(ii).

(1) Treaty-qualified retirement fund. Afund established in a country with whichthe United States has an income tax treatyin force, provided that the fund is enti-tled to benefits under such treaty on in-come that it derives from sources withinthe United States (or would be entitled tosuch benefits if it derived any such in-come) as a resident of the other countrythat satisfies any applicable limitation onbenefits requirement, and is operated prin-cipally to administer or provide pension orretirement benefits;

(2) Broad participation retirement fund.A fund established to provide retirement,disability, or death benefits, or any com-bination thereof, to beneficiaries that arecurrent or former employees (or personsdesignated by such employees) of one ormore employers in consideration for ser-vices rendered, provided that the fund—

(i) Does not have a single beneficiarywith a right to more than five percent ofthe fund’s assets;

(ii) Is subject to government regulationand provides annual information reportingabout its beneficiaries to the relevant taxauthorities in the country in which the fundis established or operates; and

(iii) Satisfies one or more of the follow-ing requirements—

(A) The fund is generally exempt fromtax on investment income under the lawsof the country in which it is established oroperates due to its status as a retirement orpension plan;

(B) The fund receives at least 50 percentof its total contributions (other than trans-fers of assets from accounts described in§1.1471–5(b)(2)(i)(A) (referring to retire-ment and pension accounts) or from otherplans described in this paragraph (f)) fromthe sponsoring employers;

(C) Distributions or withdrawals fromthe fund are allowed only upon the occur-rence of specified events related to retire-ment, disability, or death (except rolloverdistributions to accounts described in

§1.1471–5(b)(2)(i)(A) (referring to retire-ment and pension accounts) or other re-tirement funds described in this paragraph(f)), or penalties apply to distributions orwithdrawals made before such specifiedevents; or

(D) Contributions (other than certainpermitted make-up contributions) by em-ployees to the fund are limited by referenceto earned income of the employee or maynot exceed $50,000 annually.

(3) Narrow participation retirementfunds. A fund established to provide re-tirement, disability, or death benefits tobeneficiaries that are current or formeremployees (or persons designated by suchemployees) of one or more employers inconsideration for prior services rendered,provided that—

(i) The fund has fewer than 50 partici-pants;

(ii) The fund is sponsored by one ormore employers that are not investmententities or passive NFFEs;

(iii) Employee and employer contribu-tions to the fund (other than transfers ofassets from other funds described in para-graph (f)(1) of this section or accountsdescribed in §1.1471–5(b)(2)(i)(A) (refer-ring to retirement and pension accounts))are limited by reference to earned incomeand compensation of the employee, re-spectively;

(iv) Participants that are not residents ofthe country in which the fund is establishedor operated are not entitled to more than 20percent of the fund’s assets; and

(v) The fund is subject to governmentregulation and provides annual informa-tion reporting about its beneficiaries to therelevant tax authorities in the country inwhich the fund is established or operates.

(4) Fund formed pursuant to a plansimilar to a section 401(a) plan. A fundformed pursuant to a pension plan thatwould meet the requirements of section401(a), other than the requirement that theplan be funded by a trust created or orga-nized in the United States.

(5) Investment vehicles exclusivelyfor retirement funds. A fund establishedexclusively to earn income for the ben-efit of one or more retirement funds de-scribed in paragraphs (f)(1) through (5)of this section or accounts described in§1.1471–5(b)(2)(i)(A) (referring to retire-ment and pension accounts).

2013–15 I.R.B. 881 April 8, 2013

(6) Pension fund of an exempt benefi-cial owner. A fund established and spon-sored by an exempt beneficial owner de-scribed in paragraph (b), (c), (d), or (e)of this section to provide retirement, dis-ability, or death benefits to beneficiaries orparticipants that are current or former em-ployees of the exempt beneficial owner (orpersons designated by such employees), orthat are not current or former employees,but the benefits provided to such benefi-ciaries or participants are in considerationof personal services performed for the ex-empt beneficial owner.

(7) Example. FP, a foreign pension fund estab-lished in Country X, is generally exempt from in-come taxation in Country X, and is operated princi-pally to provide retirement benefits in such country.The U.S.-Country X income tax treaty is identical inall material respects to the 2006 U.S. model incometax convention. FP is a resident of Country X un-der Article 4(2)(a) and a qualified person under Arti-cle 22(2)(d) of the U.S.-Country X income tax treaty.Therefore, FP is a pension fund described in para-graph (f)(1) of this section.

(g) Entities wholly owned by exemptbeneficial owners. A person is describedin this paragraph (g) if it is an FFI solelybecause it is an investment entity, each di-rect holder of an equity interest in the in-vestment company is an exempt beneficialowner described in paragraph (b), (c), (d),(e), (f), or (g) of this section, and each di-rect holder of a debt interest in the invest-ment entity is either a depository institu-tion (with respect to a loan made to suchentity) or an exempt beneficial owner de-scribed in paragraph (b), (c), (d), (e), (f),or (g) of this section.

(h) Exception for commercial activi-ties—(1) General rule. An exempt ben-eficial owner described in paragraph (b),(c), (d), or (e) of this section will not betreated as an exempt beneficial ownerwith respect to a payment that is derivedfrom an obligation held in connectionwith a commercial financial activity of atype engaged in by an insurance company,custodial institution, or depository institu-tion (including the accepting of deposits).Thus, for example, a central bank of issuethat conducts a commercial financial ac-tivity, such as acting as an intermediary onbehalf of persons other than in the bank’scapacity as a central bank of issue, is notan exempt beneficial owner under para-graph (d)(1) of this section with respectto payments received in connection with

an account held in connection with suchactivity.

(2) Limitation. Paragraph (h)(1) of thissection will not apply if—

(i) An entity undertakes commercialfinancial activity described in paragraph(h)(1) of this section solely for or at the di-rection of other exempt beneficial ownersand such commercial financial activity isconsistent with the purposes of the entity;

(ii) The entity has no outstanding debtthat would be a financial account under§1.1471–5(b)(1)(iii); and

(iii) The entity otherwise maintains fi-nancial accounts only for exempt benefi-cial owners.

(i) Effective/applicability date. Thissection applies January 28, 2013.


§1.1472–1 Withholding on NFFEs.

(a) In general. This section providesrules that a withholding agent must ap-ply to determine its obligations to with-hold under section 1472 on withholdablepayments made to a payee that is anNFFE. A participating FFI that complieswith its withholding obligations under§1.1471–4(b) will be deemed to satisfyits obligations under section 1472 withrespect to withholdable payments madeto NFFEs that are account holders. Therules of this section will apply, however,in the case of a participating FFI actingas a withholding agent with respect toa payment made to an NFFE that is notan account holder (for example, a pay-ment with respect to a contract that doesnot constitute a financial account). See§1.1473–1(a)(4)(vi), however, for rulesexcepting from the definition of withhold-able payment certain payments of U.S.source FDAP income made prior to Jan-uary 1, 2017, with respect to an offshoreobligation.

(b) Withholdable payments made to anNFFE—(1) In general. Except as other-wise provided in paragraph (b)(2) of thissection (providing transitional relief) orparagraph (c) of this section (providingexceptions for payments to an exceptedNFFE, a WP or WT, or an exempt ben-eficial owner), a withholding agent mustwithhold 30 percent of any withholdablepayment made after December 31, 2013,to a payee that is an NFFE unless—

(i) The beneficial owner of such pay-ment is the NFFE or any other NFFE;

(ii) The withholding agent can, pur-suant to paragraph (d) of this section, treatthe beneficial owner of the payment as anNFFE that does not have any substantialU.S. owners, or as an NFFE that has iden-tified its substantial U.S. owners; and

(iii) The withholding agent reports theinformation described in §1.1474–1(i)(2)relating to any substantial U.S. owners ofthe beneficial owner of such payment.

(2) Transitional relief. For any with-holdable payment made prior to January1, 2015, with respect to a preexisting obli-gation to a payee that is not a prima fa-cie FFI and for which a withholding agentdoes not have documentation indicatingthe payee’s status as a passive NFFE withone or more substantial U.S. owners, thewithholding agent is not required to with-hold under this section or report under§1.1474–1(i)(2) (describing the reportingobligations of withholding agents with re-spect to NFFEs).

(c) Exceptions—(1) Beneficial ownerthat is an excepted NFFE. A withholdingagent is not required to withhold under sec-tion 1472(a) and paragraph (b) of this sec-tion on a withholdable payment (or portionthereof) if the withholding agent can treatthe payment as beneficially owned by anexcepted NFFE. An excepted NFFE meansan NFFE that is—

(i) Publicly traded corporation. A cor-poration the stock of which is regularlytraded on one or more established securi-ties markets for the calendar year.

(A) Regularly traded. For purposes ofthis section, stock of a corporation is reg-ularly traded on one or more establishedsecurities markets for a calendar year if—

(1) One or more classes of stock of thecorporation that, in the aggregate, repre-sent more than 50 percent of the total com-bined voting power of all classes of stockof such corporation entitled to vote and ofthe total value of the stock of such corpo-ration are listed on such market or marketsduring the prior calendar year; and

(2) With respect to each class relied onto meet the more-than–50-percent listingrequirement of paragraph (c)(1)(i)(A)(1)of this section—

(i) Trades in each such class are ef-fected, other than in de minimis quantities,on such market or markets on at least 60days during the prior calendar year; and

April 8, 2013 882 2013–15 I.R.B.

(ii) The aggregate number of shares ineach such class that are traded on such mar-ket or markets during the prior year are atleast 10 percent of the average number ofshares outstanding in that class during theprior calendar year.

(B) Special rules regarding the regu-larly traded requirement—(1) Year of ini-tial public offering. For the calendar yearin which a corporation initiates a publicoffering of a class of stock for trading onone or more established securities markets,as defined in paragraph (c)(1)(i)(C) of thissection, such class of stock meets the re-quirements of this paragraph (c)(1)(i) forsuch year if the stock is regularly traded inmore than de minimis quantities on 1/6 ofthe days remaining after the date of the of-fering in the quarter during which the of-fering occurs, and on at least 15 days dur-ing each remaining quarter of the calendaryear. If a corporation initiates a public of-fering of a class of stock in the fourth quar-ter of the calendar year, such class of stockmeets the requirements of this paragraph(c)(1)(i) in the calendar year of the offer-ing if the stock is regularly traded on suchestablished securities market, other than inde minimis quantities, on the greater of 1/6of the days remaining after the date of theoffering in the quarter during which the of-fering occurs, or 5 days.

(2) Classes of stock treated as meetingthe regularly traded requirement. A classof stock meets the trading requirements ofthis paragraph (c)(1)(i) for a calendar yearif the stock is traded during such year onan established securities market located inthe United States and is regularly quotedby dealers making a market in the stock.A dealer makes a market in a stock only ifthe dealer regularly and actively offers to,and in fact does, purchase the stock from,and sell the stock to, customers who arenot related persons (as defined in section954(d)(3)) with respect to the dealer in theordinary course of a trade or business.

(3) Anti-abuse rule. Any trade con-ducted with a principal purpose of meetingthe regularly traded requirements of thisparagraph (c)(1)(i) shall be disregarded.Further, a class of stock shall not be treatedas regularly traded if there is a patternof trades conducted to meet the require-ments of this paragraph (c)(1)(i). Simi-larly, paragraph (c)(1)(i)(B)(1) of this sec-tion shall not apply to a public offering ofstock that has as one of its principal pur-

poses qualification of the class of stock asregularly traded under the reduced regu-larly traded requirements for the calendaryear of an initial public offering. For pur-poses of applying the immediately preced-ing sentence, consideration will be given towhether the regularly traded requirementsof this paragraph (c)(1)(i) are satisfied inthe calendar year immediately followingthe initial public offering.

(C) Established securities market—(1)In general. For purposes of this paragraph(c)(1)(i), the term established securitiesmarket means, for any calendar year—

(i) A foreign securities exchange that isofficially recognized, sanctioned, or super-vised by a governmental authority of theforeign country in which the market is lo-cated, and has an annual value of sharestraded on the exchange (or a predeces-sor exchange) exceeding $1 billion duringeach of the three calendar years immedi-ately preceding the calendar year in whichthe determination is being made;

(ii) A national securities exchange thatis registered under section 6 of the Securi-ties Exchange Act of 1934 (15 USC 78f)with the Securities and Exchange Com-mission;

(iii) Any exchange designated under aLimitation on Benefits article of an incometax treaty with the United States that is inforce; or

(iv) Any other exchange that the Secre-tary may designate in published guidance.

(2) Foreign exchange with multipletiers. If an exchange in a foreign countryhas more than one tier or market level onwhich stock may be separately listed ortraded, each such tier shall be treated as aseparate exchange.

(3) Computation of dollar value ofstock traded. For purposes of paragraph(c)(1)(i)(C)(1)(i) of this section, the valuein U.S. dollars of shares traded during acalendar year shall be determined on thebasis of the dollar value of such sharestraded as reported by the World Federationof Exchanges located in Paris (or a suc-cessor institution), or, if not so reported,by converting into U.S. dollars the aggre-gate value in local currency of the sharestraded using an exchange rate equal to theaverage of the spot rates on the last day ofeach month of the calendar year.

(ii) Certain affiliated entities related toa publicly traded corporation. Any cor-poration that is a member of the same

expanded affiliated group (as defined in§1.1471–5(i)) as a corporation described inparagraph (c)(1)(i) of this section.

(iii) Certain territory entities. Any ter-ritory entity that is directly or indirectlywholly owned by one or more bona fideresidents of the U.S. territory under thelaws of which the entity is organized. Theterm bona fide resident of a U.S. terri-tory means an individual who qualifies asa bona fide resident under section 937(a)and §1.937–1.

(iv) Active NFFEs. Any entity (an ac-tive NFFE) if less than 50 percent of itsgross income for the preceding calendaryear is passive income and less than 50 per-cent of the weighted average percentage ofassets (tested quarterly) held by it are as-sets that produce or are held for the produc-tion of passive income, as determined afterthe application of paragraph (c)(1)(iv)(B)of this section (passive assets).

(A) Passive income. Except as providedin paragraph (c)(1)(iv)(B) of this section,the term passive income means the portionof gross income that consists of—

(1) Dividends, including substitute div-idend amounts;

(2) Interest;(3) Income equivalent to interest, in-

cluding substitute interest and amounts re-ceived from or with respect to a pool of in-surance contracts if the amounts receiveddepend in whole or part upon the perfor-mance of the pool;

(4) Rents and royalties, other than rentsand royalties derived in the active conductof a trade or business conducted, at least inpart, by employees of the NFFE;

(5) Annuities;(6) The excess of gains over losses from

the sale or exchange of property that givesrise to passive income described in para-graphs (c)(1)(iv)(A)(1) through (5) of thissection;

(7) The excess of gains over losses fromtransactions (including futures, forwards,and similar transactions) in any commodi-ties, but not including—

(i) Any commodity hedging transactiondescribed in section 954(c)(5)(A), deter-mined by treating the entity as a controlledforeign corporation; or

(ii) Active business gains or losses fromthe sale of commodities, but only if sub-stantially all the foreign entity’s commodi-ties are property described in paragraph(1), (2), or (8) of section 1221(a);

2013–15 I.R.B. 883 April 8, 2013

(8) The excess of foreign currency gainsover foreign currency losses (as defined insection 988(b)) attributable to any section988 transaction;

(9) Net income from notional principalcontracts as defined in §1.446–3(c)(1);

(10) Amounts received under cashvalue insurance contracts; or

(11) Amounts earned by an insurancecompany in connection with its reservesfor insurance and annuity contracts.

(B) Exceptions from passive incometreatment. Notwithstanding paragraph(c)(1)(iv)(A) of this section, the term pas-sive income does not include—

(1) Any income from interest, divi-dends, rents, or royalties that is receivedor accrued from a related person to theextent such amount is properly allocableto income of such related person that is notpassive income. For purposes of this para-graph (c)(1)(iv)(B)(1), the term “relatedperson” has the meaning given such termby section 954(d)(3) determined by sub-stituting “foreign entity” for “controlledforeign corporation” each place it appearsin section 954(d)(3); or

(2) In the case of a foreign entity thatregularly acts as a dealer in propertydescribed in paragraph (c)(1)(iv)(A)(6)of this section (referring to the sale orexchange of property that gives rise topassive income), forward contracts, optioncontracts, or similar financial instruments(including notional principal contracts andall instruments referenced to commodi-ties)—

(i) Any item of income or gain (otherthan any dividends or interest) from anytransaction (including hedging transac-tions and transactions involving physicalsettlement) entered into in the ordinarycourse of such dealer’s trade or businessas such a dealer; and

(ii) If such dealer is a dealer in securities(within the meaning of section 475(c)(2)),any income from any transaction enteredinto in the ordinary course of such trade orbusiness as a dealer in securities.

(C) Methods of measuring assets. Forpurposes of this paragraph (c)(1)(iv), thevalue of an NFFE’s assets is determinedbased on the fair market value or bookvalue of the assets that is reflected on theNFFE’s balance sheet.

(v) Excepted nonfinancial entities. Anyentity described in §1.1471–5(e)(5) (re-ferring to holding companies, treasury

centers, and captive finance companiesthat are members of a nonfinancial group;start-up companies; entities that are liqui-dating or emerging from bankruptcy; andnon-profit organizations).

(2) Payments made to a WP, WT, or anexempt beneficial owner. A withholdingagent is not required to withhold on a with-holdable payment (or portion thereof) un-der section 1472(a) and paragraph (b) ofthis section if the withholding agent may—

(i) Treat the payee as an NFFE that is aWP or WT; or

(ii) Treat the payment as made to anexempt beneficial owner.

(d) Rules for determining payee andbeneficial owner—(1) In general. For pur-poses of this section, except in the case ofa payee that is a WP or WT, a withholdingagent may treat a withholdable payment asbeneficially owned by the payee as deter-mined under §1.1471–3. Thus, a withhold-ing agent may treat a withholdable pay-ment as beneficially owned by an exceptedNFFE if the withholding agent can reli-ably associate the payment with valid doc-umentation to determine the payee’s sta-tus as an excepted NFFE under the rulesof §1.1471–3(d).

(2) Payments made to an NFFE that isa WP or WT. A withholding agent maytreat the payee of a withholdable paymentas an NFFE that is a WP or WT if thewithholding agent can reliably associatethe payment with valid documentation todetermine the payee’s status as such underthe rules of §1.1471–3(b)(3) and (d).

(3) Payments made to a partner or ben-eficiary of an NFFE that is an NWP orNWT. A withholding agent may treat apartner or beneficiary of an NFFE thatis an NWP or NWT, respectively, as thepayee of a withholdable payment underthis section if the withholding agent can re-liably associate the payment with a validForm W–8 or written notification that theNFFE is a flow-through entity as describedin §1.1471–3(c)(2), including valid docu-mentation sufficient to establish the chap-ter 4 status of each payee of the paymentthat is a partner or beneficiary, respec-tively, by applying the rules described in§1.1471–3(d).

(4) Payments made to a beneficialowner that is an NFFE. A withholdingagent may treat the beneficial owner ofa withholdable payment as an NFFE thatdoes not have any substantial U.S. owners

or that has identified all of its substantialU.S. owners if it can reliably associate thepayment with valid documentation iden-tifying the beneficial owner as an NFFEthat does not have any substantial U.S.owners or that has identified all of its sub-stantial U.S. owners by applying the rulesdescribed in §1.1471–3(d).

(5) Absence of valid documentation.A withholding agent that cannot reliablyassociate the payment with documentationas described in any of paragraphs (d)(2)through (4) of this section must treat thepayment as made to a payee in accor-dance with the presumption rules under§1.1471–3(f).

(e) Information reporting require-ments—(1) Reporting on withholdablepayments. A withholding agent thattreats a withholdable payment as madeto any payee described in paragraph (d)of this section must provide informationabout such payee on Form 1042–S andfile a withholding income tax return onForm 1042 to the extent required under§1.1474–1(d) and (c), respectively.

(2) Reporting on substantial U.S. own-ers. A withholding agent that receivesinformation about any substantial U.S.owners of an NFFE that is not an ex-cepted NFFE must report informationabout the NFFE’s substantial U.S. ownersin accordance with §1.1474–1(i)(2). See§1.1471–4(d) for the reporting require-ments of a participating FFI with respectto the substantial U.S. owners of accountholders that are NFFEs.

(f) Effective/applicability date. Thissection generally applies January 28,2013. For other dates of applicability, see§1.1472–1(b).


§1.1473–1 Section 1473 definitions.

(a) Definition of withholdable pay-ment—(1) In general. Except as other-wise provided in this paragraph (a) and§1.1471–2(b) (regarding grandfatheredobligations), the term withholdable pay-ment means—

(i) Any payment of U.S. source FDAPincome (as defined in paragraph (a)(2) ofthis section); and

(ii) For any sales or other dispositionsoccurring after December 31, 2016, anygross proceeds from the sale or other dis-

April 8, 2013 884 2013–15 I.R.B.

position (as defined in paragraph (a)(3)(i)of this section) of any property of a typethat can produce interest or dividends thatare U.S. source FDAP income.

(2) U.S. source FDAP income de-fined—(i) In general—(A) FDAP in-come defined. For purposes of chapter4, the term FDAP income means fixedor determinable annual or periodic in-come that is described in §1.1441–2(b)(1)or §1.1441–2(c) (excluding income de-scribed in paragraph (a)(2)(vi) of thissection or §1.1441–2(b)(2) (such as gainsderived from the sale of certain property))and including the types of income enu-merated in paragraphs (a)(2)(iii) through(v) of this section.

(B) U.S. source. The term U.S. sourcemeans derived from sources within theUnited States. A payment is derived fromsources within the United States if it isincome treated as derived from sourceswithin the United States under sections861 through 865 and other relevant provi-sions of the Code. In the case of a paymentof FDAP income for which the source can-not be determined at the time of payment,see §1.1471–2(a)(5).

(C) Exceptions to withholding on U.S.source FDAP income not applicable underchapter 4. Except as otherwise providedin paragraph (a)(4) of this section, noexception to withholding on U.S. sourceFDAP income for purposes other thanchapter 4 applies for purposes of deter-mining whether a payment of such incomeis a withholdable payment under chapter4. Thus, for example, an exclusion froman amount subject to withholding under§1.1441–2(a) or an exclusion from taxa-tion under section 881 does not apply forpurposes of determining whether such in-come constitutes a withholdable payment.

(ii) Special rule for certain inter-est. Interest that is described in section861(a)(1)(A) (relating to interest paid byforeign branches of domestic corporationsand partnerships) is treated as U.S. sourceFDAP income.

(iii) Original issue discount. The rulesdescribed in §1.1441–2(b)(3)(ii) for deter-mining when an amount representing orig-inal issue discount is subject to withhold-ing for chapter 3 purposes apply for pur-poses of determining when original issuediscount from sources within the UnitedStates is U.S. source FDAP income.

(iv) REMIC residual interests. U.S.source FDAP income includes an amountdescribed in §1.1441–2(b)(5).

(v) Withholding liability of payee thatis satisfied by withholding agent. If awithholding agent satisfies a withholdingliability arising under chapter 4 with re-spect to a withholdable payment from thewithholding agent’s own funds, the sat-isfaction of such liability is treated as anadditional payment of U.S. source FDAPincome to the payee to the extent that thewithholding agent’s satisfaction of suchwithholding liability also satisfies a taxliability of the payee under section 881or 871 with respect to the same payment,and the satisfaction of the tax liabilityconstitutes additional income to the payeeunder §1.1441–3(f) that is U.S. sourceFDAP income. In such case, the amountof any additional payment treated as madeby the withholding agent for purposes ofthis paragraph (a)(2)(v) and any tax lia-bility resulting from such payment shallbe determined under §1.1441–3(f). See§1.1474–6 regarding the coordination ofthe withholding requirements under chap-ters 3 and 4 in the case of a withholdablepayment that is also subject to withholdingunder chapter 3.

(vi) Special rule for sales of interestbearing debt obligations. Income that isotherwise described as U.S. source FDAPincome in paragraphs (a)(2)(i) through (v)of this section does not include an amountof interest accrued on the date of a sale orexchange of an interest bearing debt obli-gation if the sale occurs between two inter-est payment dates.

(vii) Payment of U.S. source FDAPincome—(A) Amount of payment of U.S.source FDAP income. The amount of U.S.source FDAP income is the gross amountof the payment of such income, unreducedby any deductions or offsets. The rules of§1.1441–3(b)(1) shall apply to determinethe amount of an interest payment on aninterest-bearing obligation. In the case ofa corporate distribution, the distributingcorporation or intermediary shall deter-mine the portion of the distribution thatis treated as U.S. source FDAP incomeunder this paragraph (a)(2) in the samemanner as the distributing corporation orintermediary determines the portion of thedistribution subject to withholding under§1.1441–3(c). Any portion of a paymenton a debt instrument or a corporate distri-

bution that does not constitute U.S. sourceFDAP income under this paragraph (a)(2)solely because of a provision other thanthe source rules of sections 861 through865 shall be taken into account as grossproceeds under paragraph (a)(3) of thissection. For rules regarding the determi-nation of the amount of a payment of U.S.source FDAP income under paragraph(a)(2) of this section made in a mediumother than U.S. dollars, see §1.1441–3(e).For determining the amount of a pay-ment of a dividend equivalent, see section871(m) and the regulations thereunder.

(B) When payment of U.S. source FDAPincome is made. A payment is consideredmade when the amount would be includi-ble in the income of the beneficial ownerunder the U.S. tax principles governingthe cash method of accounting. If an FFIacts as an intermediary with respect to apayment of U.S. source FDAP income, theFFI will be treated as making a payment ofsuch U.S. source FDAP income to the per-son with respect to which the FFI acts as anintermediary when it pays or credits suchamount to such person. The followingrules also apply for purposes of this para-graph (a)(2)(vii)(B): §§1.1441–2(e)(2)(regarding when a payment is consid-ered made in the case of income allocatedunder section 482); 1.1441–2(e)(3) (re-garding blocked income); 1.1441–2(e)(4)(regarding when a dividend is consid-ered paid); and 1.1441–2(e)(5) (regardingwhen interest is considered paid if a for-eign person has made an election under§1.884–4(c)(1)).

(3) Gross proceeds defined—(i) Saleor other disposition—(A) In general.Except as otherwise provided in this para-graph (a)(3)(i), the term sale or otherdisposition means any sale, exchange, ordisposition of property described in para-graph (a)(3)(ii) of this section that requiresrecognition of gain or loss under section1001(c), determined without regard towhether the owner of such property issubject to U.S. federal income tax withrespect to such sale, exchange, or dispo-sition. The term sale or other dispositionincludes (but is not limited to) sales of se-curities; redemptions of stock; retirementsand redemptions of indebtedness; enteringinto short sales; and a closing transactionunder a forward contract, option, or otherinstrument that is otherwise a sale. Suchterm further includes a distribution from a

2013–15 I.R.B. 885 April 8, 2013

corporation to the extent the distributionis a return of capital or a capital gain tothe beneficial owner of the payment. Suchterm does not include grants or purchasesof options, exercises of call options forphysical delivery, transfers of securitiesfor which gain or loss is excluded fromrecognition under section 1058, or mereexecutions of contracts that require de-livery of personal property or an interesttherein. For purposes of this section only,a constructive sale under section 1259 ora mark to fair market value under section475 or 1296 is not a sale or disposition.

(B) Special rule for sales effected bybrokers. In the case of a sale effected bya broker (with the term effect defined in§1.6045–1(a)(10)), a sale means a sale asdefined in §1.6045–1(a)(9) with respect toproperty described in paragraph (a)(3)(ii)of this section.

(C) Special rule for gross proceeds fromsales settled by a clearing organization. Inthe case of a clearing organization that set-tles sales and purchases of securities be-tween members of such organization on anet basis, the gross proceeds from sales ordispositions are limited to the net amountpaid or credited to a member’s account thatis associated with sales or other disposi-tions of property described in paragraph(a)(3)(ii) of this section by such memberas of the time that such transactions aresettled under the settlement procedures ofsuch organization.

(ii) Property of a type that can produceinterest or dividend payments that wouldbe U.S. source FDAP income—(A) In gen-eral. Property is of a type that can pro-duce interest or dividends payments thatwould be U.S. source FDAP income if theproperty is of a type that ordinarily givesrise to the payment of interest or dividendsthat would constitute U.S. source FDAPincome, regardless of whether any suchpayment is made during the period suchproperty is held by the person selling ordisposing of such property. Thus, for ex-ample, stock issued by a domestic corpo-ration is property of a type that can pro-duce dividends from sources within theUnited States if a dividend from such cor-poration would be from sources within theUnited States, regardless of whether thestock pays dividends at regular intervalsand regardless of whether the issuer hasany plans to pay dividends or has ever paida dividend with respect to the stock.

(B) Contracts producing dividendequivalent payments. In the case of anycontract that results in the payment of adividend equivalent as defined in section871(m) and the regulations thereunder (in-cluding as part of a termination payment),such contract shall be treated as propertythat is described in paragraph (a)(3)(ii)(A)of this section, without regard to whetherthe taxpayer is a foreign person subjectto U.S. federal income tax with respectto such transaction. To the extent thatthe proceeds from a termination paymentinclude the payment of a dividend equiv-alent, the gross amount of such proceedswill not include the amount of such divi-dend equivalent.

(C) Regulated investment company dis-tributions. The amount of a distributionthat is designated as a capital gain dividendunder section 852(b)(3)(C) or 871(k)(2) isa payment of gross proceeds to the extentattributable to property described in para-graph (a)(3)(ii)(A) of this section.

(iii) Payment of gross proceeds—(A)When gross proceeds are paid. With re-spect to a sale that is effected by a bro-ker that results in a payment of gross pro-ceeds as defined in this paragraph (a)(3),the date the gross proceeds are consideredpaid is the date that the proceeds of suchsale are credited to the account of or other-wise made available to the person entitledto the payment. If gross proceeds are paidto a financial institution or other entity act-ing as an intermediary for the person sell-ing or otherwise disposing of the property,the gross proceeds are considered paid tosuch person on the date that the proceedsare credited to the account of or otherwisemade available to such institution.

(B) Amount of gross proceeds. Exceptas otherwise provided in this paragraph(a)(3)—

(1) The amount of gross proceeds froma sale or other disposition means the totalamount realized as a result of a sale orother disposition of property described inparagraph (a)(3)(ii) under section 1001(b);

(2) In the case of a sale effected bya broker, the amount of gross proceedsfrom a sale or other disposition means thetotal amount paid or credited to the ac-count of the person entitled to the paymentincreased by any amount not so paid byreason of the repayment of margin loans.The broker may (but is not required to)take commissions with respect to the sale

into account in determining the amount ofgross proceeds;

(3) In the case of a corporate distribu-tion, the amount treated as gross proceedsexcludes the amount described in para-graph (a)(2)(vii)(A) of this section that istreated as U.S source FDAP income;

(4) In the case of a sale of an obli-gation described in paragraph (a)(2)(vi),gross proceeds includes any interest ac-crued between interest payment dates; and

(5) In the case of a sale, retirement, orredemption of a debt obligation, gross pro-ceeds excludes the amount of original is-sue discount treated as U.S. source FDAPincome under paragraph (a)(2)(iii) of thissection.

(4) Payments not treated as withhold-able payments. The following paymentsare not withholdable payments under para-graph (a)(1) of this section—

(i) Certain short-term obligations. Apayment of interest or original issue dis-count on short-term obligations describedin section 871(g)(1)(B)(i).

(ii) Effectively connected income. Anypayment to the extent it gives rise to anitem of income that is taken into accountunder section 871(b)(1) or 882(a)(1) forthe taxable year. An item of income istaken into account under section 871(b)(1)or 882(a)(1) when the income is (or isdeemed to be) effectively connected withthe conduct of a trade or business in theUnited States and is includible in the ben-eficial owner’s gross income for the tax-able year. An amount of income shall notbe treated as taken into account under sec-tion 871(b)(1) or 882(a)(1) if the income is(or is deemed to be) effectively connectedwith the conduct of a trade or business inthe United States and the beneficial ownerclaims an exception from tax under an in-come tax treaty because the income is notattributable to a permanent establishmentin the United States.

(iii) Excluded nonfinancial payments.Payments for the following: services(including wages and other forms ofemployee compensation (such as stockoptions)), the use of property, office andequipment leases, software licenses, trans-portation, freight, gambling winnings,awards, prizes, scholarships, and intereston outstanding accounts payable arisingfrom the acquisition of goods or ser-vices. Notwithstanding the precedingsentence and except as otherwise provided

April 8, 2013 886 2013–15 I.R.B.

in §1.1471–2(b) (regarding grandfatheredobligations), withholdable payments in-clude: payments in connection with alending transaction (including loans ofsecurities), a forward, futures, option, ornotional principal contract, or a similarfinancial instrument; premiums for in-surance contracts or annuity contracts;amounts paid under cash value insuranceor annuity contracts; dividends; interest(including substitute interest describedin §1.861–2(a)(7)) other than interestdescribed in the preceding sentence; in-vestment advisory fees; custodial fees;and bank or brokerage fees.

(iv) Gross proceeds from sales of ex-cluded property. Gross proceeds from thesale or other disposition of any propertythat can produce U.S. source FDAP in-come if all such U.S. source FDAP in-come would be excluded from the defini-tion of withholdable payment under para-graphs (a)(4)(i) through (iii) of this section.

(v) Fractional shares. Payments arisingin sales described in §1.6045–1(c)(3)(ix).

(vi) Offshore payments of U.S. sourceFDAP income prior to 2017 (transitional).A payment of U.S. source FDAP incomemade prior to January 1, 2017, with respectto an offshore obligation if such paymentis made by a person that is not acting as anintermediary with respect to the payment.The exception for offshore payments ofU.S. source FDAP income provided in thepreceding sentence shall not apply, how-ever, in the case of a flow-through en-tity that has a residual withholding require-ment with respect to its partners, owners,or beneficiaries under §1.1471–2(a)(2)(ii).For purposes of this paragraph (a)(4)(vi),an intermediary includes a person that actsas a qualified securities lender as definedfor purposes of chapter 3.

(5) Special payment rules forflow-through entities, complex trusts,and estates—(i) In general. This para-graph (a)(5) provides special rules for aflow-through entity, complex trust, or es-tate to determine when such entity musttreat U.S. source FDAP income as havingbeen paid by such entity to its partners,owners, or beneficiaries (as applicabledepending on the type of entity).

(ii) Partnerships. An amount of U.S.source FDAP income is treated as beingpaid to a partner under rules similar to therules prescribing when withholding is re-

quired for chapter 3 purposes as describedin §1.1441–5(b)(2)(i)(A).

(iii) Simple trusts. An amount of U.S.source FDAP income is treated as beingpaid to a beneficiary of a simple trust underrules similar to the rules prescribing whenwithholding is required for chapter 3 pur-poses as described in §1.1441–5(b)(2)(ii).

(iv) Complex trusts and estates. Anamount of U.S. source FDAP income istreated as paid to a beneficiary of a com-plex trust or estate under rules similar tothe rules prescribing when withholdingis required for chapter 3 purposes as de-scribed in §1.1441–5(b)(2)(iii).

(v) Grantor trusts. If an amount of U.S.source FDAP income is paid to a grantortrust, a person treated as an owner of all ora portion of such trust is treated as havingbeen paid such income by the trust at thetime it is received by or credited to the trustor portion thereof.

(vi) Special rule for an NWP or NWT.In the case of a partnership, simple trust, orcomplex trust that is an NWP or NWT, therules described in paragraphs (a)(5)(ii) and(iii) of this section shall not apply, and U.S.source FDAP income is treated as paid tothe partner or beneficiary at the time theincome is paid to the partnership or trust,respectively.

(vii) Special rule for determining whengross proceeds are treated as paid to apartner, owner, or beneficiary of a flow-through entity. [Reserved].

(6) Reporting of withholdable pay-ments. See §1.1474–1(c) and (d) for adescription of the income tax return andinformation reporting requirements appli-cable to a withholding agent that has madea withholdable payment.

(7) Example. Satisfaction of payee’s chapter 4liability by withholding agent. Recalcitrant accountholder (RA) is entitled to receive a payment of $100of U.S. source interest from withholding agent, WA.The payment is subject to withholding under chap-ter 4, but is not subject to withholding under section1442, and RA has no substantive tax liability undersection 881 with respect to this payment. WA paysthe full $100 to RA and, after the date of payment,pays the $30 of tax due under chapter 4 to the IRSfrom its own funds. Because no underlying tax lia-bility of RA is satisfied, and further because WA andRA did not execute any agreement for WA to pay thistax and WA did not have an obligation to pay this taxapart from the requirements of chapter 4, WA’s pay-ment of the tax does not give rise to a deemed pay-ment of U.S. source FDAP income to RA under para-graph (a)(2)(v) of this section. Thus, WA is not re-quired to pay any additional tax with respect to thispayment for purposes of chapter 4.

(b) Substantial U.S. owner—(1) Defini-tion. Except as otherwise provided in para-graph (b)(4) or (5) of this section, the termsubstantial United States owner (or sub-stantial U.S. owner) means:

(i) With respect to any foreign corpora-tion, any specified U.S. person that owns,directly or indirectly, more than 10 percentof the stock of such corporation (by vote orvalue);

(ii) With respect to any foreign partner-ship, any specified U.S. person that owns,directly or indirectly, more than 10 percentof the profits interests or capital interests insuch partnership; and

(iii) In the case of a trust—(A) Any specified U.S. person treated

as an owner of any portion of the trustunder sections 671 through 679; and

(B) Any specified U.S. person thatholds, directly or indirectly, more than 10percent of the beneficial interests of thetrust.

(2) Indirect ownership of foreign enti-ties. For purposes of determining a per-son’s interest in a foreign entity, the fol-lowing rules shall apply.

(i) Indirect ownership of stock. Stockof a foreign corporation that is owneddirectly or indirectly by an entity (otherthan a participating FFI, a deemed-compli-ant FFI (excluding an owner-documentedFFI), a U.S. financial institution, a U.S.person that is not a specified U.S. per-son, an exempt beneficial owner, or anexcepted NFFE) that is a corporation,partnership, or trust shall be considered asbeing owned proportionately by such en-tity’s shareholders, partners, or, in the caseof a trust, persons treated as owners undersections 671 through 679 of any portionof the trust that includes the stock, and thebeneficiaries of the trust. Stock consid-ered to be owned by a person by reasonof the application of the preceding sen-tence shall, for purposes of applying suchsentence, be treated as actually owned bysuch person.

(ii) Indirect ownership in a foreign part-nership or ownership of a beneficial inter-est in a foreign trust. A capital or profitsinterest in a foreign partnership or an own-ership or beneficial interest (as describedin paragraph (b)(3) of this section) in a for-eign trust that is owned or held directly orindirectly by an entity (other than a partic-ipating FFI, a deemed-compliant FFI (ex-cluding an owner-documented FFI), a U.S.

2013–15 I.R.B. 887 April 8, 2013

financial institution, a U.S. person that isnot a specified U.S. person, an exempt ben-eficial owner, or an excepted NFFE) thatis a corporation, partnership, or trust shallbe considered as being owned or held pro-portionately by such entity’s shareholders,partners, or, in the case of a trust, per-sons treated as owners under sections 671through 679 of any portion of the trustthat includes the partnership or beneficialtrust interest, and the beneficiaries of thetrust. Partnership or beneficial trust inter-ests considered to be owned or held by aperson by reason of the application of thepreceding sentence shall, for purposes ofapplying such sentence, be treated as actu-ally owned or held by such person.

(iii) Ownership and holdings throughoptions. If a specified U.S. person holds,directly or indirectly (applying the princi-ples of paragraphs (b)(2)(i) and (ii) of thissection) an option to acquire stock in a for-eign corporation, a capital or profits inter-est in a foreign partnership, or an owner-ship or beneficial interest in a foreign trust,such person is considered to own the un-derlying equity or other ownership interestin such foreign entity for purposes of thisparagraph (b). For purposes of the preced-ing sentence, an option to acquire such anoption, and each one of a series of such op-tions, shall be considered an option to ac-quire such stock or other ownership inter-est described in this paragraph (b)(2)(iii).

(iv) Determination of proportionate in-terest. For purposes of this paragraph (b),and except as otherwise provided in para-graph (b)(3) of this section, the determina-tion of a person’s proportionate interest ina foreign corporation, partnership, or trustis based on all of the relevant facts and cir-cumstances. In making this determination,any arrangement that artificially decreasesa specified U.S. person’s proportionate in-terest in any such entity will be disregardedin determining whether such person is asubstantial U.S. owner. In lieu of apply-ing the rules of this paragraph (b)(2) to de-termine whether an owner’s proportionateinterest in a foreign entity meets the 10percent threshold described in paragraph(b)(1) of this section, the entity or its with-holding agent may opt to treat the owner asa substantial U.S. owner.

(v) Interests owned or held by a re-lated person. For purposes of determiningwhether a person has more than a 10percent interest in a foreign corporation,

foreign partnership, or foreign trust, theperson must aggregate the ownership orbeneficial interests in the foreign corpora-tion, foreign partnership, or foreign trustthat are owned or held by any personrelated to such person. For purposes ofthe preceding sentence, a person is re-lated to another person if the relationshipbetween such persons would result in adisallowance of losses under §§1.267(a)–1through 1.267(f)–1 or §1.707–1(b). Sec-tion 1.267(c)–1(a)(4) is applied as ifthe family of an individual includes thespouses of the members of the individual’sfamily.

(3) Beneficial interest in a foreigntrust—(i) In general. For purposes ofparagraph (b)(1)(iii)(B) of this section,a person holds a beneficial interest in aforeign trust if such person has the right toreceive directly or indirectly (for example,through a nominee) a mandatory distribu-tion or may receive, directly or indirectly,a discretionary distribution from the trust.For purposes of this section, a mandatorydistribution means a distribution that isrequired to be made pursuant to the termsof the trust document. A discretionarydistribution means a distribution that ismade to a person at the discretion of thetrustee or a person with a limited power ofappointment of such trust.

(ii) Determining the 10 percent thresh-old in the case of a beneficial interest in aforeign trust. A person will be treated asholding directly or indirectly more than 10percent of the beneficial interest in a for-eign trust if—

(A) The beneficiary receives, directlyor indirectly, only discretionary distribu-tions from the trust and the fair marketvalue of the currency or other property dis-tributed, directly or indirectly, from thetrust to such person during the prior cal-endar year exceeds 10 percent of the valueof either all of the distributions made bythe trust during that year or all of the assetsheld by the trust at the end of that year;

(B) The person is entitled to receive,directly or indirectly, mandatory distribu-tions from the trust and the value of theperson’s interest in the trust, as determinedunder section 7520, exceeds 10 percent ofthe value of all the assets held by the trust;or

(C) The person is entitled to receive,directly or indirectly, mandatory distribu-tions and may receive, directly or indi-

rectly, discretionary distributions from thetrust, and the value of the person’s inter-est in the trust, determined as the sum ofthe fair market value of all of the currencyor other property distributed from the trustat the discretion of the trustee during theprior calendar year to the person and thevalue of the person’s interest in the trust asdetermined under section 7520 at the endof that year, exceeds either 10 percent ofthe value of all distributions made by suchtrust during the prior calendar year or 10percent of the value of all the assets heldby the trust at the end of that year.

(4) Exceptions—(i) De minimis amountor value exception. A specified U.S. per-son is not treated as a substantial U.S.owner if—

(A) The fair market value of the cur-rency or other property distributed, di-rectly or indirectly, from the trust to suchspecified U.S. person during the prior cal-endar year is $5,000 or less and,

(B) In the case of a specified U.S. per-son that is entitled to receive mandatorydistributions, the value of such person’s in-terest in the trust is $50,000 or less.

(ii) Trusts wholly owned by certain U.S.persons. A trust that is treated as ownedonly by U.S. persons under sections 671through 679 is not required to treat any ofits beneficiaries as substantial U.S. own-ers.

(5) Special rule for certain financialinstitutions. In the case of any financial in-stitution described in §1.1471–5(e)(1)(iii)or (iv) (referring to investment entitiesand specified insurance companies), thissection shall be applied by substituting “0percent” for “10 percent” in each placethat it appears. Additionally, in the caseof a financial institution described in§1471–5(e)(1)(iii) that is a trust, the rulesof paragraph (b)(3) and (4) of this section(referring to beneficial interests in a trust)shall be applied by substituting “calendaryear” for “prior calendar year” in eachplace that it appears.

(6) Determination dates for substan-tial U.S. owners. A foreign entity maymake the determination of whether it hasone or more direct or indirect substantialU.S. owners as of the last day of suchentity’s accounting year or as of the dateon which such foreign entity provides thedocumentation described in §1.1471–3(d)to the withholding agent for which suchdetermination is required to be made. See

April 8, 2013 888 2013–15 I.R.B.

§1.1471–4(c) for when a participating FFIis required to obtain documentation withrespect to its account holders.

(7) Examples. The following examplesillustrate the provisions of paragraph (b) ofthis section:

Example 1. Indirect ownership. U, a specifiedU.S. person, owns directly 100% of the sole class ofstock of F1, a foreign corporation. F1 owns directly90% of the sole class of stock of F2, a foreign cor-poration, and U owns directly the remaining 10% ofthe sole class of stock of F2. F2 owns directly 10%of the sole class of stock of F3, a foreign corporation,and U owns directly 3% of the sole class of stock ofF3. U is treated as owning 13% (3% directly and 10%indirectly) of the sole class of stock of F3 and 100%(10% directly and 90% indirectly) of the sole class ofstock of F2 for purposes of this paragraph (b). U is asubstantial U.S. owner of F1, F2, and F3.

Example 2. Indirect ownership through entitiesthat are specified U.S. persons. U, a specified U.S.person, owns directly 100% of the sole class of stockof US1, a U.S. corporation that is a specified U.S.person. US1 owns directly 100% of the sole class ofstock of US2, a U.S. corporation that is a specifiedU.S. person. US2 owns directly 15% of the sole classof stock of FC, a foreign corporation. For purposesof this paragraph (b), U, US1, and US2 are all sub-stantial U.S. owners of FC.

Example 3. Determining the 10% threshold inthe case of a beneficial interest in a foreign trust.U, a U.S. citizen, holds an interest in FT1, a for-eign trust, under which U may receive discretionarydistributions from FT1. U also holds an interest inFT2, a foreign trust, and FT2, in turn, holds an in-terest in FT1 under which FT2 may receive discre-tionary distributions from FT1. U receives $25,000from FT1 in Year 1. FT2 receives $120,000 fromFT1 in Year 1 and distributes the entire amount to itsbeneficiaries in Year 1. The distribution from FT1is FT2’s only source of income and FT2’s distribu-tions in Year 1 total $120,000. U receives $40,000from FT2 in Year 1. FT1’s distributions in Year 1total $750,000. U’s discretionary interest in FT1 isvalued at $65,000 at the end of Year 1 and thereforedoes not meet the 10% threshold as determined un-der paragraph (b)(3)(ii)(A). U’s discretionary interestin FT2, however, is valued at $40,000 at the end ofYear 1 and therefore meets the 10% threshold as de-termined under paragraph (b)(3)(ii)(A).

Example 4. Determining ownership (determina-tion date). F, a foreign corporation that is an NFFE,has a calendar year accounting year. On December31 of Year 1, U, a specified U.S. person, owns 12%of the sole class of outstanding stock of F. In Marchof Year 2, F redeems a portion of U’s stock and re-duces U’s ownership of F to 9%. In May of Year2, F opens an account with P, a participating FFI,and delivers to P the documentation required under§1.1471–3(d). At the time F opens its account withP, U is the only specified U.S. person that directly orindirectly owns stock in F. Because of the redemp-tion, U’s interest in F is 9% on the date F opens itsaccount with P. Pursuant to paragraph (b)(6) of thissection, F may determine whether it has a substantialU.S. owner as of the date it provides the documenta-tion required under §1.1471–3(d) to P, which wouldbe the day it opens the account. As a result, F may

indicate in its §1.1471–3(d) documentation that it hasno substantial U.S. owners.

(c) Specified U.S. person. The termspecified United States person (or speci-fied U.S. person) means any U.S. personother than—

(1) A corporation the stock of whichis regularly traded on one or more estab-lished securities markets, as described in§1.1472–1(c)(1)(i);

(2) Any corporation that is a mem-ber of the same expanded affiliatedgroup as a corporation described in§1.1472–1(c)(1)(i);

(3) Any organization exempt from tax-ation under section 501(a) or an individ-ual retirement plan as defined in section7701(a)(37);

(4) The United States or any whollyowned agency or instrumentality thereof;

(5) Any State, the District of Colum-bia, any U.S. territory, any political sub-division of any of the foregoing, or anywholly owned agency or instrumentality ofany one or more of the foregoing;

(6) Any bank as defined in section 581;(7) Any real estate investment trust as

defined in section 856;(8) Any regulated investment company

as defined in section 851 or any entity reg-istered with the Securities Exchange Com-mission under the Investment CompanyAct of 1940 (15 U.S.C. 80a–64);

(9) Any common trust fund as definedin section 584(a);

(10) Any trust that is exempt from taxunder section 664(c) or is described in sec-tion 4947(a)(1);

(11) A dealer in securities, commodi-ties, or derivative financial instruments(including notional principal contracts,futures, forwards, and options) that isregistered as such under the laws of theUnited States or any State;

(12) A broker; and(13) Any tax exempt trust under a sec-

tion 403(b) plan or section 457(g) plan.(d) Withholding agent—(1) In general.

Except as provided in this paragraph (d),the term withholding agent means any per-son, U.S. or foreign, in whatever capacityacting, that has the control, receipt, cus-tody, disposal, or payment of a withhold-able payment or foreign passthru payment.

(2) Participating FFIs and regis-tered deemed-compliant FFIs as with-holding agents. The term withholdingagent includes a participating FFI that

has the control, receipt, custody, dis-posal, or payment of a passthru payment(as defined in §1.1471–5(h)). The termwithholding agent also includes a reg-istered deemed-compliant FFI to theextent that such FFI is required to with-hold on a passthru payment as part ofthe conditions for maintaining its sta-tus as a deemed-compliant FFI under§1.1471–5(f)(1)(ii). For the withholdingrequirements of a participating FFI, in-cluding the requirement to withhold withrespect to limited branches and limitedFFIs that are in the same expanded affil-iated group as the participating FFI, see§§1.1471–4(b) and 1.1472–1(a).

(3) Grantor trusts as withholdingagents. The term withholding agent in-cludes a grantor trust with respect toa withholdable payment or a foreignpassthru payment (in the case of a grantortrust that is a participating FFI) made toa person treated as an owner of the trustunder sections 671 through 679. For pur-poses of determining when a paymentis treated as made to such a person, see§1.1473–1(a)(5)(v).

(4) Deposit and return requirements.See §1.1474–1(b) for a withholdingagent’s requirement to deposit any taxwithheld, and §1.1474–1(c) and (d) forthe requirement to file income tax andinformation returns (including the specialallowance in §1.1474–1(b)(2) for par-ticipating FFIs with respect to dormantaccounts).

(5) Multiple withholding agents. Whenseveral persons qualify as a withholdingagent with respect to a single payment,only one tax is required to be withheldand deposited. See §1.1474–1(a). Aperson who, as a nominee described in§1.6031(c)–1T, has furnished to a partner-ship all of the information required to befurnished under §1.6031(c)–1T(a) shallnot be treated as a withholding agent if theperson has notified the partnership that itis treating the provision of information tothe partnership as a discharge of its obli-gations as a withholding agent.

(6) Exception for certain individuals.An individual is not a withholding agentwith respect to a withholdable paymentmade by the individual outside the courseof such individual’s trade or business (in-cluding as an agent with respect to makingor receiving such payment).

2013–15 I.R.B. 889 April 8, 2013

(e) Foreign entity. The term foreignentity means any entity that is not a U.S.person and includes a territory entity.

(f) Effective/applicability date. Thissection generally applies January 28,2013. For other dates of applica-bility see §§1.1473–1(a)(1)(ii) and1.1473–1(a)(4)(vi).


§1.1474–1 Liability for withheld tax andwithholding agent reporting.

(a) Payment and returns of tax with-held—(1) In general. A withholding agentis required to deposit any tax withheld pur-suant to chapter 4 as provided under para-graph (b) of this section and to make the re-turns prescribed by paragraphs (c) and (d)of this section. When several persons qual-ify as withholding agents with respect to asingle payment, only one tax is required tobe withheld and deposited.

(2) Withholding agent liability. Awithholding agent that is required to with-hold with respect to a payment under§1.1471–2(a), 1.1471–4(b) (in the case ofa participating FFI), or 1.1472–1(b) butfails either to withhold or to deposit anytax withheld with an authorized financialinstitution, as required under paragraph(b) of this section, is liable for the amountof tax not withheld and deposited.

(3) Use of agents—(i) In general. Ex-cept as otherwise provided in this para-graph (a)(3), a withholding agent may au-thorize an agent to fulfill its obligationsunder chapter 4. The acts of an agentof a withholding agent (including the re-ceipt of withholding certificates, the pay-ment of amounts subject to withholding,the withholding and deposit of tax with-held, and the reporting required on the rel-evant form) are imputed to the withholdingagent on whose behalf it is acting.

(ii) Authorized agent. An agent is au-thorized only if—

(A) There is a written agreement be-tween the withholding agent and the per-son acting as agent;

(B) A Form 8655, “Reporting AgentAuthorization,” is filed with the IRS if theagent (including any sub-agent) is actingas a reporting agent for filing Form 1042or making tax deposits and payments;

(C) Books and records and relevantpersonnel of the agent (including any

sub-agent) are available to the withholdingagent (on a continuous basis, includingafter termination of the relationship) inorder to evaluate the withholding agent’scompliance with the provisions of chapter4; and

(D) The withholding agent remainsfully liable for the acts of its agent (or anysub-agent) and does not assert any of thedefenses that may otherwise be available,including under common law principlesof agency, in order to avoid tax liabilityunder the Code.

(iii) Liability of withholding agent act-ing through an agent. A withholding agentacting through an agent is liable for anyfailure of the agent, such as a failure towithhold an amount or make a payment oftax, in the same manner and to the sameextent as if the agent’s failure had beenthe failure of the withholding agent. Forthis purpose, the agent’s actual knowledgeor reason to know shall be imputed to thewithholding agent. Except as otherwiseprovided in the QI, WP, or WT agreement,an agent of a withholding agent is sub-ject to the same withholding and report-ing obligations that apply to any withhold-ing agent under the provisions of chapter 4and does not benefit from the special pro-cedures or exceptions that apply to a QI,WP, or WT. If the agent is a foreign person,however, a U.S. withholding agent maytreat the acts of the foreign agent as its ownfor purposes of determining whether it hascomplied with the provisions of chapter4. The withholding agent’s liability un-der paragraph (a)(2) of this section will ex-ist even if the agent is also a withholdingagent and is itself separately liable for fail-ure to comply with the provisions of chap-ter 4. The same tax, interest, or penalties,however, shall not be collected more thanonce.

(4) Liability for failure to obtain docu-mentation timely or to act in accordancewith applicable presumptions—(i) In gen-eral. A withholding agent that cannotreliably associate a payment with docu-mentation on the date of payment and thatdoes not withhold under §1.1471–2(a),1.1471–4(b), or 1.1472–1(b), or withholdsat less than the 30 percent rate prescribed,is liable under this section for the tax re-quired to be withheld under §1.1471–2(a),1.1471–4(b), or 1.1472–1(b) (includinginterest, penalties, or additions to tax oth-

erwise applicable in respect of the failureto deduct and withhold) unless—

(A) The withholding agent has ap-propriately relied on the presumptionsdescribed in §1.1471–3(f) in order to treatthe payment as exempt from withholding;or

(B) The withholding agent obtainedafter the date of payment valid docu-mentation that meets the requirementsof §1.1471–3(c)(7) to establish that thepayment was, in fact, exempt from with-holding.

(ii) Withholding satisfied by anotherwithholding agent. If a withholdingagent fails to deduct and withhold anyamount required to be deducted and with-held under §1.1471–2(a), 1.1471–4(b), or1.1472–1(b), and the tax is satisfied byanother withholding agent or is otherwisepaid, then the amount of tax required tobe deducted and withheld shall not becollected from the first-mentioned with-holding agent. However, the withholdingagent is not relieved from liability in anysuch case for any interest or penalties oradditions to tax otherwise applicable in re-spect of the failure to deduct and withhold.

(b) Payment of withheld tax—(1) Ingeneral. Except as otherwise providedin this paragraph (b), every withhold-ing agent who withholds tax pursuant tochapter 4 shall deposit such tax with an au-thorized financial institution as providedin §1.6302–2(a) or by electronic fundstransfer as provided under §31.6302–1(h)of this chapter. If for any reason the totalamount of tax required to be deposited forany calendar year pursuant to the incometax return described in paragraph (c) ofthis section has not been deposited pur-suant to §1.6302–2, the withholding agentshall pay the balance of such tax due forsuch year at such place as the IRS shallspecify. The tax shall be paid when filingthe return described in paragraph (c)(1) ofthis section for such year, unless the IRSspecifies otherwise. See §1.1471–4(b)(6)for the special rule allowing participatingFFIs to set aside in escrow amounts with-held with respect to dormant accounts.

(2) Special rule for foreign passthrupayments and payments of gross proceedsthat include an undetermined amount ofincome subject to tax. [Reserved].

(c) Income tax return—(1) In general.Every withholding agent shall file an in-come tax return on Form 1042, “Annual

April 8, 2013 890 2013–15 I.R.B.

Withholding Tax Return for U.S. SourceIncome of Foreign Persons,” (or such otherform as the IRS may prescribe) to reportchapter 4 reportable amounts (as definedin paragraph (d)(2)(i) of this section). Thisincome tax return shall be filed on the sameincome tax return used to report amountssubject to reporting for chapter 3 pur-poses as described in §1.1461–1(b). Thereturn must show the aggregate amountof payments that are chapter 4 reportableamounts and must report the tax with-held for the preceding calendar year bythe withholding agent, in addition to anyinformation required by the form and itsaccompanying instructions. Withholdingcertificates and other statements or infor-mation provided to a withholding agentare not required to be attached to the re-turn. A Form 1042 must be filed underthis paragraph (c)(1) even if no tax wasrequired to be withheld for chapter 4 pur-poses during the preceding calendar year.The withholding agent must retain a copyof Form 1042 for the applicable period oflimitations on assessment and collectionwith respect to the amounts required tobe reported on the Form 1042. See sec-tion 6501 and the regulations thereunderfor the applicable period of limitations.Adjustments to the total amount of taxwithheld described in §1.1474–2 shall bestated on the return as prescribed by theform and its accompanying instructions.

(2) Participating FFIs, registereddeemed-compliant FFIs, and U.S.branches treated as U.S. persons. Ex-cept as otherwise provided under an FFIagreement, a participating FFI or reg-istered deemed-compliant FFI shall fileForm 1042 in accordance with paragraph(c)(1) of this section to report chapter 4reportable amounts for which the partici-pating FFI or registered deemed-compliantFFI is required to file Form 1042–S, asdescribed in paragraph (d)(4)(iii) of thissection. A participating FFI or registereddeemed-compliant FFI with a U.S. branchthat is treated as a U.S. person must ex-clude from Form 1042 payments madeand taxes withheld by such U.S. branch.A U.S. branch that is treated as a U.S.person shall file a separate Form 1042 inaccordance with paragraph (c)(1) of thissection and the instructions on the form toreport chapter 4 reportable amounts.

(3) Amended returns. An amended re-turn under this paragraph (c)(3) must be

filed on Form 1042. An amended returnmust include such information as the formor its accompanying instructions shall re-quire, including, with respect to any infor-mation that has changed from the time ofthe filing of the return, the information thatwas shown on the original return and thecorrected information.

(d) Information returns for paymentreporting—(1) Filing requirement—(i) Ingeneral. Every withholding agent mustfile an information return on Form 1042–S,“Foreign Person’s U.S. Source IncomeSubject to Withholding,” (or such otherform as the IRS may prescribe) to reportto the IRS chapter 4 reportable amountsas described in paragraph (d)(2)(i) ofthis section that were paid to a recipientduring the preceding calendar year. Ex-cept as otherwise provided in paragraphs(d)(4)(ii)(B) (certain unknown recipients)and (d)(4)(i)(B) and (d)(4)(iii)(A) of thissection (describing payees includable inreporting pools of a participating FFI orregistered deemed-compliant FFI), a sep-arate Form 1042–S must be filed with theIRS for each recipient of an amount sub-ject to reporting under paragraph (d)(2)(i)of this section and for each separate typeof payment made to a single recipient inaccordance with paragraph (d)(4)(i) ofthis section. The Form 1042–S shall beprepared in such manner as the form andits accompanying instructions prescribe.One copy of the Form 1042–S shall befiled with the IRS on or before March 15of the calendar year following the yearin which the amount subject to report-ing was paid, with a transmittal form asprovided in the instructions to the form.Withholding certificates, certifications,documentary evidence, or other state-ments or documentation provided to awithholding agent are not required to beattached to the form. A copy of the Form1042–S must be furnished to the recip-ient for whom the form is prepared (orany other person, as required under thisparagraph or the instructions to the form)and to any intermediary or flow-throughentity described in paragraph (d)(3)(vii)of this section on or before March 15 ofthe calendar year following the year inwhich the amount subject to reportingwas paid. The copy provided to the per-sons described in the preceding sentencemay show more than one type of incomeor other payment subject to reporting on

the Form 1042–S. The withholding agentmust retain a copy of each Form 1042–Sfor the period of limitations on assess-ment and collection applicable to the taxreportable on the Form 1042 to which theForm 1042–S relates (determined as setforth in paragraph (c)(1) of this section).See paragraph (d)(4)(iii) of this section forthe additional reporting requirements ofparticipating FFIs and deemed-compliantFFIs.

(ii) Recipient—(A) Defined. Ex-cept as otherwise provided in paragraph(d)(1)(ii)(B) of this section, the term re-cipient under this paragraph (d) means aperson that is a recipient of a chapter 4reportable amount, and includes—

(1) With respect to a payment of U.S.source FDAP income—

(i) A QI (including a QI that is a foreignbranch of a U.S. person);

(ii) A WP or WT;(iii) A participating FFI or a registered

deemed-compliant FFI that is an NQI,NWP, or NWT (including its U.S. branchthat is not treated as a U.S. person) and thatprovides its withholding agent with suffi-cient information to determine the portionof the payment allocable to its reportingpools of recalcitrant account holders, pay-ees that are nonparticipating FFIs, andpayees that are U.S. persons described inparagraph (d)(4)(i)(B) of this section;

(iv) An account holder or payee to theextent that the withholding agent issues aForm 1042–S to such account holder orpayee;

(v) An FFI that is a beneficial owner ofthe payment (including a limited branch ofthe FFI);

(vi) A U.S. branch of a participating FFIor registered deemed-compliant FFI that istreated as a U.S. person;

(vii) A territory financial institutiontreated as a U.S. person;

(viii) An excepted NFFE that is not act-ing as an agent or intermediary with re-spect to the payment;

(ix) A passive NFFE except tothe extent described in paragraph(d)(1)(ii)(A)(1)(x) (certain flow-throughNFFEs) of this section;

(x) A foreign person that is a partneror beneficiary in a flow-through entitythat is an NFFE when the withholdingagent treats such partner or beneficiary asa payee and beneficial owner because therequirements of §1.1472–1(d)(3) are met;

2013–15 I.R.B. 891 April 8, 2013

(xi) An exempt beneficial owner of apayment, including when the payment ismade to such owner through an FFI (in-cluding a nonparticipating FFI) that pro-vides documentation and information suf-ficient for a withholding agent to deter-mine the portion of the payment allocableto such owner; and

(xii) Any person (including aflow-through entity) or U.S. branch of aparticipating FFI or reporting Model 1FFI receiving such income that is (or isdeemed to be) effectively connected withthe conduct of its trade or business in theUnited States;

(2) With respect to a payment other thanU.S. source FDAP income. [Reserved];and

(3) Any other person required to be re-ported as a recipient by Form 1042–S, itsaccompanying instructions, under an FFIagreement, or paragraph (d)(4)(iii) of thissection with respect to the Form 1042–Sreporting requirements of a participatingFFI.

(B) Persons that are not recipients. Per-sons that are not recipients include—

(1) With respect to a payment of U.S.source FDAP income—

(i) A participating FFI, registereddeemed-compliant FFI, or certifieddeemed-compliant FFI that is an NQI,NWP, or NWT (including its U.S. branchthat is not treated as a U.S. person) andthat fails to provides its withholding agentwith sufficient information to allocate thepayment to its account holders and payees;

(ii) A financial institution (other than anonparticipating FFI) to the extent that thewithholding agent issues a Form 1042–S tothe FFI’s account holder or payee;

(iii) A participating FFI or a registereddeemed-compliant FFI that is an NQI,NWP, or NWT (including its U.S. branchthat is not treated as a U.S. person) to theextent it provides its withholding agentwith sufficient information to allocate thepayment to its account holders and payeesthat are exempt from withholding underchapter 4;

(iv) An account holder or payee of a par-ticipating FFI or registered deemed-com-pliant FFI (including an account holder orpayee of a U.S. branch of such FFI thatis not treated as a U.S. person) that is in-cluded in the FFI’s reporting pools de-scribed in paragraph (d)(4)(i)(B) of thissection;

(v) A nonparticipating FFI that acts asan intermediary with respect to a paymentor that is a flow-through entity (includinga limited branch);

(vi) An account holder or payee of anonparticipating FFI except to the extentdescribed in paragraph (d)(1)(ii)(A)(1)(xi)of this section for an exempt beneficialowner;

(vii) Except as provided in paragraph(d)(1)(ii)(A)(1)(i) of this section (referringto a QI that is a foreign branch of a U.S.person), a wholly owned entity that isdisregarded under §301.7701–2(c)(2) ofthis chapter as an entity separate from itsowner;

(viii) A territory financial institu-tion to the extent provided in paragraph(d)(4)(i)(D)(2) and (3) of this section; and

(ix) A flow-through entity that is apassive NFFE to the extent that the with-holding agent treats a foreign personthat is a partner or beneficiary of theNFFE as a recipient pursuant to paragraph(d)(1)(ii)(A)(1)(x) of this section;

(2) With respect to a payment other thanU.S. source FDAP income. [Reserved];and

(3) Any other person not treated as a re-cipient on Form 1042–S, its accompanyinginstructions, or under an FFI agreement.

(2) Amounts subject to reporting—(i) Ingeneral. Subject to paragraph (d)(2)(iii) ofthis section, the term chapter 4 reportableamount means each of the followingamounts reportable on a Form 1042–S forpurposes of chapter 4 —

(A) U.S. source FDAP income thatis reportable on Form 1042–S under§1.1461–1(c)(2)(i) or that is otherwisesubject to withholding under chapter 4paid on or after January 1, 2014;

(B) Gross proceeds subject to withhold-ing under chapter 4;

(C) A foreign passthru payment subjectto withholding under chapter 4; and

(D) A foreign reportable amount paidby a participating FFI to the extent re-porting of such amount is required un-der paragraph (d)(4)(iii)(C) of this section.The term foreign reportable amount meansa payment of FDAP income as definedin §1.1473–1(a)(2)(i)(A) that would be awithholdable payment if paid by a U.S.person.

(ii) Exception to reporting. Exceptas otherwise provided in this paragraph(d)(2)(ii), a chapter 4 reportable amount

does not include an amount paid to a U.S.person if the withholding agent treats suchU.S. person as a payee for purposes of de-termining whether withholding is requiredunder §§1.1471–2 and 1.1472–1. A chap-ter 4 reportable amount does, however,include an amount paid to a participatingFFI or registered deemed-compliant FFI tothe extent allocable to its reporting pool ofpayees that are U.S. persons as describedin paragraph (d)(4)(i)(B) of this section.

(iii) Coordination with chapter 3. Apayment that is not subject to reportingunder this paragraph (d)(2) may be subjectto chapter 3 reporting on Form 1042–Sto the extent provided on such form andits accompanying instructions or under§1.1461–1(c)(2). The recipient informa-tion and other information required to bereported on Form 1042–S for purposes ofchapter 4 shall be in addition to the infor-mation required to be provided on Form1042–S for purposes of chapter 3.

(3) Required information. The infor-mation required to be furnished under thisparagraph (d)(3) shall be based upon theinformation provided by or on behalf of therecipient of an amount subject to reporting(as corrected and supplemented based onthe withholding agent’s actual knowledge)or the presumption rules provided under§1.1471–3(f) for a U.S. withholding agentand under §1.1471–4(c)(3)(ii) and (c)(4)(i)for a participating FFI. The Form 1042–Smust include the following information, ifapplicable—

(i) The name, address, and EIN or GIIN(as applicable) of the withholding agent(as required on the instructions to theform) and the withholding agent’s statusfor chapter 3 and chapter 4 purposes (asdefined in the instructions to the form);

(ii) A description of each category ofincome or payment made based on the in-come and payment codes provided on theform (for example, interest, dividends, andgross proceeds) and the aggregate amountin each category expressed in U.S. dollars;

(iii) For the reporting required bya participating FFI under paragraph(d)(4)(iii)(C) of this section, the aggregateamount of foreign reportable amounts paidto a nonparticipating FFI in addition to theinformation described in this paragraph(d)(3);

(iv) The rate and amount of withhold-ing applied or, in the case of a paymentof U.S. source FDAP income not subject

April 8, 2013 892 2013–15 I.R.B.

to withholding and reportable under para-graph (d)(2)(i)(A) of this section, the ba-sis for exempting the payment from with-holding under chapter 4 based on exemp-tion codes provided on the form);

(v) The name and address of the recipi-ent and its TIN or GIIN (as applicable) andforeign taxpayer identification number anddate of birth (as required on the instruc-tions to the form);

(vi) In the case of a payment to a person(including a flow-through entity or U.S.branch) for which the payment is reportedas effectively connected with its conduct ofa trade or business in the United States or,in the case of a U.S. branch that is treatedas a U.S. person, the EIN used by the per-son or U.S. branch to file its U.S. incometax returns;

(vii) The name, address of any FFI,flow-through entity that is an NFFE, orU.S. branch or territory financial institu-tion that is not treated as a U.S. personwhen an account holder or owner of suchentity (including an unknown recipient orowner) is treated as the recipient of thepayment;

(viii) The EIN or GIIN (as applicable),status for chapter 3 and chapter 4 pur-poses (as required on the instructions tothe form) of an entity reported under para-graph (d)(3)(vii) of this section;

(ix) The country of incorporation or or-ganization (based on the country codesprovided on the form) of any entity thename of which appears on the form; and

(x) Such information as the form or in-structions may require in addition to, orin lieu of, information required under thisparagraph (d)(3).

(4) Method of reporting—(i) Paymentsby U.S. withholding agent to recipients.Except as otherwise provided in this para-graph (d)(4) or on the Form 1042–S andits accompanying instructions, a withhold-ing agent that is a U.S. person (including aU.S. branch that is treated as a U.S. per-son and excluding a foreign branch of aU.S. person that is a QI) and that makes apayment of a chapter 4 reportable amountmust file a separate form for each recipi-ent that receives such amount. Except asotherwise provided on Form 1042–S or itsinstructions, only payments for which theincome or payment code, exemption code,withholding rate, and recipient code arethe same may be reported on a single formfiled with the IRS. See paragraph (d)(4)(ii)

of this section for reporting of paymentsmade to a person that is not a recipient andthat is otherwise required to be reported onForm 1042–S.

(A) Payments to certain entities that arebeneficial owners. If the beneficial ownerof a payment made by a U.S. withhold-ing agent is an exempt beneficial owner,an FFI, an NFFE, or a territory entity, itmust complete Form 1042–S treating suchentity as the recipient of the payment.

(B) Payments to participating FFIs,deemed-compliant FFIs, and certain QIs.Except as otherwise provided in this para-graph (d)(4)(i)(B), a U.S. withholdingagent that makes a payment of a chapter4 reportable amount to a participating FFIor deemed-compliant FFI that is an NQI,NWP, or NWT must complete a Form1042–S treating such FFI as the recipient.With respect to a payment of U.S. sourceFDAP income made to a participating FFIor registered deemed-compliant FFI that isan NQI, NWP, or NWT or QI that elects tobe withheld upon under section 1471(b)(3)and from whom the withholding agentreceives pooled information regardingsuch FFI’s account holders and payees, aU.S. withholding agent must complete aseparate Form 1042–S issued to the partic-ipating FFI, registered deemed-compliantFFI, or QI (as applicable) as the recipientwith respect to each such pool of accountholders or payees. See §1.1471–2(a)(2)(i)for the requirement of a withholdingagent to withhold on payments of U.S.source FDAP income made to a partic-ipating FFI or registered deemed-com-pliant FFI that is an NQI, NWP, orNWT. See also §1.1471–2(a)(2)(iii) inthe case of payments made to a QI. See§1.1461–1(c)(4)(A) for the extent to whichreporting is required under that sectionfor U.S. source FDAP income that is re-portable on Form 1042–S under chapter3 and not subject to withholding underchapter 4, in which case the U.S. with-holding agent must report in the mannerdescribed under §1.1461–1(c)(4)(ii) andparagraph (d)(4)(ii)(A) of this section.See paragraph (d)(4)(ii)(A) of this sectionfor reporting rules applicable if partici-pating FFIs, deemed-compliant FFIs, orQIs provide specific payee information forreporting to the recipient of the paymentfor Form 1042–S reporting purposes. Seeparagraph (d)(4)(iii) of this section for the

residual reporting responsibilities of anNQI, NWP, or NWT that is an FFI.

(C) Amounts paid to a U.S. branch ofa participating FFI or registered deemed-compliant FFI. A U.S. withholding agentmaking a payment of U.S. source FDAPincome to a U.S. branch of a participatingFFI or registered deemed-compliant FFIshall complete Form 1042–S as follows—

(1) If the U.S. branch is treated as aU.S. person, the withholding agent treatsamounts paid as effectively connectedwith the conduct of the branch’s tradeor business in the United States, or theU.S. branch is the beneficial owner of thepayment, the withholding agent must fileForm 1042–S reporting the U.S. branch asthe recipient;

(2) If the U.S. branch is not treatedas a U.S. person and provides the with-holding agent with a withholding certifi-cate that transmits information regardingits reporting pools as described in para-graph (d)(4)(i)(B) of this section or in-formation regarding each recipient that isan account holder or payee of the U.S.branch, the withholding agent must com-plete a separate Form 1042–S issued to theU.S. branch for each such pool to the ex-tent required on the form and its accom-panying instructions or must complete aseparate Form 1042–S issued to each re-cipient whose documentation is associatedwith the U.S. branch’s withholding certifi-cate as described in paragraph (d)(4)(ii)(A)of this section and report the U.S. branch asan entity not treated as a recipient; or

(3) If the U.S. branch is not treated as aU.S. person, to the extent its fails to pro-vide sufficient information regarding itsaccount holders or payees, the withholdingagent shall report the recipient of the pay-ment as an unknown recipient to the ex-tent recipient information is not providedand report the U.S. branch as provided inparagraph (d)(4)(ii)(A) of this section foran entity not treated as a recipient.

(D) Amounts paid to territory financialinstitutions that are flow-through entitiesor acting as intermediaries. A U.S. with-holding agent making a withholdable pay-ment to a territory financial institution thatis a flow-through entity or that acts as anintermediary must complete Form 1042–Sas follows—

(1) If the territory financial institutionis treated as a U.S. person or is the bene-ficial owner of the payment, the withhold-

2013–15 I.R.B. 893 April 8, 2013

ing agent must file Form 1042–S treatingthe territory financial institution as the re-cipient;

(2) If the territory financial institu-tion is not treated as a U.S. person andprovides the withholding agent with awithholding certificate that transmits in-formation regarding each recipient thatis an partner, beneficiary, owner, accountholder, or payee, the withholding agentmust complete a separate Form 1042–Sfor each recipient whose documentationis associated with the territory financialinstitution’s withholding certificate as de-scribed in paragraph (d)(4)(ii)(A) of thissection and must report the territory finan-cial institution under that paragraph; or

(3) If the territory financial institution isnot treated as a U.S. person, to the extentits fails to provide sufficient informationregarding its partners, beneficiaries, own-ers, account holders or payees, the with-holding agent shall report the recipient ofthe payment as an unknown recipient andreport the territory financial institution asprovided in paragraph (d)(4)(ii)(A) of thissection for an entity not treated as a recip-ient.

(E) Amounts paid to NFFEs. A U.S.withholding agent that makes payments ofchapter 4 reportable amounts to a passiveNFFE shall complete Forms 1042–S treat-ing the passive NFFE as the recipient, ex-cept to the extent such withholding agenttreats a partner, beneficiary, or owner in aflow-through entity that is a passive NFFEas a payee. In the case of an exceptedNFFE that is a flow-through entity, see§1.1461–1(c)(4)(A) for the extent to whichreporting is required with respect to thepartners, beneficiaries, or owners of suchentities.

(ii) Payments made by withholdingagents to certain entities that are not re-cipients—(A) Entities that provide infor-mation for a withholding agent to performspecific payee reporting. If a U.S. with-holding agent makes a payment of a chap-ter 4 reportable amount to a flow-throughentity that is a passive NFFE, a nonpar-ticipating FFI receiving a payment onbehalf of an exempt beneficial owner, ora participating FFI or deemed-compliantFFI that is an NQI, NWP, or NWT, ex-cept as otherwise provided in paragraph(d)(4)(i)(B) of this section, the withhold-ing agent must complete a separate Form1042–S for each recipient that is a partner,

beneficiary, owner, or account holder ofsuch entity to the extent the withholdingagent can reliably associate the paymentwith valid documentation (under the rulesof §1.1471–3(c) and (d)) provided bysuch entity, as applicable, with respect toeach such recipient. If a payment is madethrough tiers of such entities, the with-holding agent must nevertheless completeForm 1042–S for the recipient to the extentit can reliably associate the payment withdocumentation provided with respect tothat recipient. A withholding agent that iscompleting a Form 1042–S for a recipientdescribed in this paragraph (d)(4)(ii)(A)must include on the form the informationdescribed in paragraph (d)(3)(vii) of thissection for the entity through which therecipient directly receives the payment.

(B) Nonparticipating FFI that is a flow-through entity or intermediary. If a with-holding agent makes a payment of a chap-ter 4 reportable amount to a nonpartici-pating FFI that it is required to treat asan intermediary with regard to a paymentor as a flow-through entity under rulesdescribed in §1.1471–3(c)(2)(iii), and ex-cept as otherwise provided in paragraph(d)(1)(ii)(A)(1)(xi) of this section (relatingto an exempt beneficial owner), the with-holding agent must report the recipient ofthe payment as an unknown recipient andreport the nonparticipating FFI as providedin paragraph (d)(4)(ii)(A) of this sectionfor an entity not treated as a recipient.

(C) Disregarded entities. If a U.S. with-holding agent makes a payment to a dis-regarded entity but receives a valid with-holding certificate or other documentaryevidence from a person that is the singleowner of a disregarded entity, the with-holding agent must file a Form 1042–Streating the single owner as the recipient.The GIIN on the form, or TIN, if required,must be the single owner’s reporting iden-tification number or TIN.

(iii) Reporting by participating FFIsand deemed-compliant FFIs (includingQIs, WPs, and WTs)—(A) In general. Ex-cept as otherwise provided in paragraphs(d)(4)(iii)(B) (relating to NQIs, NWPs,NWTs, and FFIs electing under section1471(b)(3)) and (d)(4)(iii)(C) of this sec-tion (relating to transitional payee specificreporting for payments to nonparticipatingFFIs), a participating FFI or deemed-com-pliant FFI (including a QI, WP, WT, orU.S. branch of such FFIs that is not treated

as a U.S. person) that makes a paymentthat is a chapter 4 reportable amount to arecalcitrant account holder or nonpartici-pating FFI, must complete a Form 1042–Sto report such payments. A participatingFFI or registered deemed-compliant FFI(including a QI, WP, WT or U.S. branchof such FFI that is not treated as a U.S.person) may report in pools consisting ofits recalcitrant account holders and pay-ees that are nonparticipating FFIs. Withrespect to recalcitrant account holders,the FFI may report in pools consisting ofrecalcitrant account holders within a par-ticular status described in §1.1471–4(d)(6)and within a particular income code. Ex-cept as otherwise provided in paragraph(d)(4)(iii)(C) of this section, with respectto payees that are nonparticipating FFIs,the FFI may report in pools consisting ofone or more nonparticipating FFIs thatfall within a particular income code andwithin a particular status code describedin the instructions to Form 1042–S. Alter-natively, a participating FFI or registereddeemed-compliant FFI (including a QI,WP, WT, or U.S. branch of such FFI thatis not treated as a U.S. person) may (anda certified deemed-compliant FFI is re-quired to) perform specific payee reportingto report a chapter 4 reportable amountmade to a recalcitrant account holder ora nonparticipating FFI when withholdingwas applied (or should have applied) tothe payment.

(B) Special reporting requirements ofparticipating FFIs, deemed-compliantFFIs, and FFIs that make an electionunder section 1471(b)(3). Except as other-wise provided in paragraph (d)(4)(iii)(C)of this section, a participating FFI ordeemed-compliant FFI that is an NQI,NWP, NWT (including a U.S. branch ofsuch FFI that is not treated as a U.S. per-son), or an FFI that has made an electionunder section 1471(b)(3) and has providedsufficient information to its withholdingagent to withhold and report the payment,is not required to report the payment onForm 1042–S as described in paragraph(d)(4)(iii)(A) of this section if the pay-ment is made to a nonparticipating FFI orrecalcitrant account holder and its with-holding agent has withheld the correctamount of tax on such payment and cor-rectly reported the payment on a Form1042–S. Such FFI is required to report apayment, however, when the FFI knows

April 8, 2013 894 2013–15 I.R.B.

or, has reason to know, that less than therequired amount has been withheld bythe withholding agent on the payment orthe withholding agent has not correctlyreported the payment on Form 1042–S.In such case, the FFI must report onForm 1042–S to the extent required underparagraph (d)(4)(iii)(A) of this section.See, however, §1.1471–4(d)(6) for therequirement to report certain aggregateinformation regarding accounts held by re-calcitrant account holders on Form 8966,“FATCA Report,” regardless of whetherwithholdable payments are made to suchaccounts.

(C) Reporting by participating FFIsand registered deemed-compliant FFIs(including QIs, WPs, and WTs) for cer-tain payments made to nonparticipatingFFIs (transitional). Except as other-wise provided in the instructions to Form1042–S, if a participating FFI or registereddeemed-compliant FFI (including a QI,WP, WT, or U.S. branch of such FFI that isnot treated as a U.S. person) makes a pay-ment to a nonparticipating FFI of a foreignreportable amount as defined in paragraph(d)(2)(i)(D) of this section, the FFI mustreport on Form 1042–S on a payee specificbasis the aggregate amount of all foreignreportable amounts paid by the FFI to thenonparticipating FFI and any payment ofU.S. source FDAP income made to suchnonparticipating FFI for whom the FFIreceives the payment (and tax withheld)for each of the calendar years 2015 and2016.

(D) Reporting by U.S. branches of aparticipating FFI or registered deemed-compliant FFI that is treated as a U.S.person. A U.S. branch of a participatingFFI or registered deemed-compliant FFIthat is treated as a U.S. person must re-port amounts paid to recipients on Forms1042–S in the same manner as a U.S. with-holding agent under paragraph (d)(4)(i) ofthis section.

(iv) Reporting by territory financial in-stitutions. A territory financial institutionthat is not treated as a U.S. person will notbe required to report on Form 1042–S ifanother withholding agent has reported thesame amount with regard to the same re-cipient for which such entity would other-wise be required to file a return under thisparagraph (d)(4)(iv) and such withholdingagent has withheld the entire amount re-quired to be withheld from such payment.

A territory financial institution must, how-ever, report payments made to recipientsfor whom it has failed to provide the ap-propriate documentation to another with-holding agent or to the extent it knows, orhas reason to know, that less than the re-quired amount has been withheld. A terri-tory financial institution that is treated as aU.S. person or is otherwise required underthis paragraph (d)(4)(iv) to report amountspaid to recipients on Forms 1042–S mustreport in the same manner as a U.S. with-holding agent.

(v) Nonparticipating FFIs. A nonpar-ticipating FFI that is a flow-through en-tity or that acts as an intermediary with re-spect to a payment may file Forms 1042and 1042–S only to report and allocate taxwithheld to the account holders, partners,owners, or beneficiaries of the nonpartici-pating FFI.

(vi) Other withholding agents. Anyperson that is a withholding agent that isnot described in any of paragraphs (d)(4)(i)through (v) of this section shall file Forms1042–S in the same manner as a U.S. with-holding agent and in accordance with theinstructions to the form.

(e) Magnetic media reporting. A with-holding agent that is not a financial in-stitution and that is required to file 250or more Form 1042–S information re-turns for a taxable year must file Form1042–S returns on magnetic media. See§301.6011–2(b) of this chapter for the re-quirements of a withholding agent that isnot a financial institution with respect tothe filing of Forms 1042–S on magneticmedia. See §301.1474–1(a) of this chapterfor the requirements applicable to a with-holding agent that is a financial institutionwith respect to the filing of Forms 1042–Son magnetic media.

(f) Indemnification of withholdingagent. A withholding agent is indemni-fied against the claims and demands ofany person for the amount of any tax itdeducts and withholds in accordance withthe provisions of chapter 4 and the regula-tions thereunder. A withholding agent thatwithholds based on a reasonable beliefthat such withholding is required underchapter 4 and the regulations thereunderis treated for purposes of section 1474 andthis paragraph (f) as having withheld taxin accordance with the provisions of chap-ter 4 and the regulations thereunder. Thisparagraph (f) does not relieve a withhold-

ing agent from tax liability under chapter 3or chapter 4 or the regulations under thosechapters.

(g) Extensions of time to file Forms1042 and 1042–S. The IRS may grant anextension of time to file Form 1042 or1042–S as described in §1.1461–1(g).

(h) Penalties. For penalties and addi-tions to tax for failure to file returns orfile and furnish statements in accordancewith this section, see sections 6651, 6662,6663, 6721, 6722, 6723, 6724(c), 7201,7203, and the regulations under those sec-tions. For penalties and additions to taxfor failure to timely pay the tax required tobe withheld under chapter 4, see sections6656, 6672, 7202, and the regulations un-der those sections.

(i) Additional reporting requirementswith respect to U.S. owned foreign en-tities and owner-documented FFIs—(1)Reporting by certain withholding agentswith respect to owner-documented FFIs.Beginning in calendar year 2014, if awithholding agent (other than an FFIreporting accounts held by owner-docu-mented FFIs under §1.1471–4(d)) makesduring a calendar year a payment of achapter 4 reportable amount to an entityaccount holder or payee of an obligationand the withholding agent treats the en-tity as an owner-documented FFI under§1.1471–3(d)(6), the withholding agent isrequired to report for such calendar yearwith respect to each specified U.S. personthat has a direct or indirect debt or equityinterest in such entity. Such report must bemade on Form 8966 (or such other formas the IRS may prescribe) and filed onor before March 31 of the calendar yearfollowing the year in which the withhold-able payment was made. The report mustcontain the following information—

(i) The name of the owner-documentedFFI;

(ii) The name, address, and TIN ofeach specified U.S. person identified in§1.1471–3(d)(6)(iv)(A)(1);

(iii) The total of all payments made tothe owner-documented FFI;

(iv) The account balance or value ofthe account held by the owner-documentedFFI; and

(v) Any other information required onForm 8966 and its accompanying instruc-tions provided for purposes of such report-ing.

2013–15 I.R.B. 895 April 8, 2013

(2) Reporting by certain withholdingagents with respect to U.S. owned for-eign entities that are NFFEs. Beginningin calendar year 2014, in addition to thereporting on Form 1042–S required un-der paragraph (d)(4)(i)(E) of this section,a withholding agent (other than an FFIreporting accounts held by NFFEs under§1.1471–4(d)) that receives informationabout any substantial U.S. owners of anNFFE that is not an excepted NFFE asdefined in §1.1472–1(c) shall file a reportwith the IRS for such calendar year withrespect to any substantial U.S. owners ofsuch NFFE. Such report must be madeon Form 8966 (or such other form as theIRS may prescribe) and filed on or beforeMarch 31 of the calendar year followingthe year in which the withholdable pay-ment was made. The report must containthe following information—

(i) Name of the NFFE that is owned bya substantial U.S. owner;

(ii) The name, address, and TIN of eachsubstantial U.S. owner of such NFFE;

(iii) The total of all payments made tothe NFFE; and

(iv) Any other information as requiredby the form and its accompanying instruc-tions.

(3) Cross reference to reporting by par-ticipating FFIs. For the reporting require-ments of a participating FFI with respect toan account holder that is a U.S. owned for-eign entity or that it treats as an owner-doc-umented FFI, see §1.1471–4(d).

(j) Effective/applicability date. Thissection generally applies on January 28,2013. For other dates of applicability see§§1.1474–1(d)(4)(iii)(C) and 1.1474–1(i).


§1.1474–2 Adjustments foroverwithholding or underwithholding oftax.

(a) Adjustments of overwithheldtax—(1) In general. Except as otherwiseprovided by this section, a withholdingagent that has overwithheld tax underchapter 4 and made a deposit of the taxas provided in §1.6302–2(a) may adjustthe amount of overwithheld tax eitherpursuant to the reimbursement proceduredescribed in paragraph (a)(3) of this sec-tion or pursuant to the set-off proceduredescribed in paragraph (a)(4) of this sec-

tion. Adjustments under this paragraph(a) may only be made within the time pre-scribed under paragraph (a)(3) or (a)(4) ofthis section. After such time, a refund ofthe amount of overwithheld tax can onlybe claimed pursuant to the procedures de-scribed in §1.1474–5 and chapter 65 of theCode and the regulations thereunder.

(2) Overwithholding. For purposesof this section, the term overwithholdingmeans an amount actually withheld (deter-mined before application of the adjustmentprocedures under this section and regard-less of whether such overwithholding wasin error or appeared correct at the time itoccurred) from an item of income or otherpayment pursuant to chapter 4 that is inexcess of the greater of—

(i) The amount required to be withheldwith respect to such item of income orother payment under chapter 4; and

(ii) The actual tax liability of the ben-eficial owner that is attributable to the in-come or payment from which the amountwas withheld.

(3) Reimbursement of tax—(i) Generalrule. Under the reimbursement procedure,the withholding agent may repay the ben-eficial owner or payee for an amount ofoverwithheld tax. In such case, the with-holding agent may reimburse itself by re-ducing, by the amount actually repaid tothe beneficial owner or payee, the amountof any deposit of tax made by the with-holding agent under §1.6302–2(a)(1)(iii)for any subsequent payment period occur-ring before the end of the calendar yearfollowing the calendar year of overwith-holding. A withholding agent must ob-tain valid documentation as described un-der §1.1471–3(c)(6) with respect to thebeneficial owner or payee supporting a re-duced rate of withholding before reducingthe amount of any deposit of tax under thisparagraph (a)(3)(i). Any such reductionthat occurs for a payment period in the cal-endar year following the calendar year ofoverwithholding shall be allowed only if—

(A) The repayment of the beneficialowner or payee occurs before the earlier ofthe due date (without regard to extensions)for filing the Form 1042–S for the calen-dar year of overwithholding or the date thatthe Form 1042–S is actually filed with theIRS;

(B) The withholding agent states ona timely filed (not including extensions)Form 1042–S the amount of tax withheld

and the amount of any actual repayment;and

(C) The withholding agent states ona timely filed (not including extensions)Form 1042 for the calendar year of over-withholding that the filing of the Form1042 constitutes a claim for credit in ac-cordance with §1.6414–1.

(ii) Record maintenance. If the bene-ficial owner or payee is repaid an amountof overwithheld tax under the provisionsof this paragraph (a)(3), the withholdingagent shall keep as part of its records a re-ceipt showing the date and amount of re-payment, and the withholding agent mustprovide a copy of such receipt to the ben-eficial owner or payee. For this purpose, acanceled check or an entry in a statement issufficient, provided that the check or state-ment contains a specific notation that it isa refund of tax overwithheld.

(4) Set-offs. Under the set-off proce-dure, the withholding agent may repay thebeneficial owner or payee for an amount ofoverwithheld tax by applying the amountoverwithheld against any amount whichotherwise would be required under chapter3 or 4 to be withheld from the amount paidby the withholding agent to such personbefore the earlier of the due date (withoutregard to extensions) for filing the Form1042–S for the calendar year of overwith-holding or the date that the Form 1042–Sis actually filed with the IRS. For pur-poses of making a return on Form 1042 or1042–S (or an amended form) for the cal-endar year of overwithholding and for pur-poses of making a deposit of the amountwithheld, the reduced amount shall be con-sidered the amount required to be withheldfrom such payment under chapter 3 or 4,respectively.

(5) Examples. The principles of thisparagraph (a) are illustrated by the follow-ing examples:

Example 1. (i) Fund A is a unit investment trustthat is an FFI and a resident of Country X. Fund Aalso qualifies for the benefits of the income tax treatybetween the United States and Country X. On Decem-ber 1, 2016, domestic corporation C pays a dividendof $100 to Fund A, at which time C withholds $30of tax pursuant to §1.1471–2(a) and remits the bal-ance of $70 to Fund A, because it does not hold validdocumentation that Fund A is a participating FFI ordeemed-compliant FFI. On February 10, 2017, priorto the time that C is obligated to file its Form 1042,Fund A furnishes a valid Form W–8BEN describedin §§1.1441–1(e)(2)(i) and 1.1471–3(c)(3)(ii) uponwhich C may rely to treat Fund A as the beneficialowner of the income and as a participating FFI so that

April 8, 2013 896 2013–15 I.R.B.

C may reduce the rate of withholding to 15% underthe provisions of the United States-Country X incometax treaty with respect to the payment. C repays theexcess tax withheld of $15 to Fund A.

(ii) During the 2016 calendar year, C makes noother payments upon which tax is required to be with-held under chapter 3 or 4; accordingly, its Form 1042for such year, filed on March 15, 2017, shows totaltax withheld of $30, an adjusted total tax withheld of$15, and tax deposited of $30 for such year. Pursuantto §1.6414–1, C claims a credit for the overpaymentof $15 shown on the Form 1042 for 2016. Accord-ingly, C is permitted to reduce by $15 any deposit re-quired by §1.6302–2 to be made of tax withheld dur-ing the 2017 calendar year with respect to taxes dueunder chapter 3 or 4. The Form 1042–S required to befiled by C with respect to the dividend of $100 paidto Fund A in 2016 is required to show tax withheld of$30 and tax repaid of $15 to Fund A.

Example 2. (i) In November 2016, Bank A, a for-eign bank organized in Country X that is an NQI, re-ceives on behalf of one of its account holders, Z, anindividual, a $100 dividend payment from C, a do-mestic corporation. At the time of payment, C with-holds $30 pursuant to §1.1471–2(a) and remits thebalance of $70 to Bank A, because it does not holdvalid documentation that it may rely on to treat BankA as a participating FFI or deemed-compliant FFI.In December 2016, prior to the time that C files itsForms 1042 and 1042–S, Bank A furnishes a validForm W–8IMY and FFI withholding statement de-scribed in §1.1471–3(c)(3)(iii) that establishes BankA’s status as a participating FFI that is an NQI, aswell as a valid Form W–8BEN that has been com-pleted by Z as described in §1.1471–3(c)(3)(ii) and§1.1441–1(e)(2)(i) upon which C may rely to treatthe payment as made to Z, a nonresident alien indi-vidual who is a resident of Country X eligible for areduced rate of withholding of 15% under the incometax treaty between the United States and Country X.Although C has already deposited the $30 that waswithheld, as required by §1.6302–2(a)(1)(iv), C re-mits the amount of $15 to Bank A for the benefit ofZ.

(ii) During the 2016 calendar year, C makes noother payments upon which tax is required to be with-held under chapter 3 or 4; accordingly, its return onForm 1042 for such year, which is filed on March15, 2017, shows total tax withheld of $30, an ad-justed total tax withheld of $15, and tax deposited of$30. Pursuant to §1.6414–1(b), C claims a credit forthe overpayment of $15 shown on the Form 1042 for2014. Accordingly, it is permitted to reduce by $15any deposit required by §1.6302–2 to be made of taxwithheld during the 2017 calendar year. The Form1042–S required to be filed by C for 2016 with re-spect to the dividend of $100 beneficially owned byZ is required to show tax withheld of $30 and tax re-paid of $15 to Z.

(b) Withholding of additional tax whenunderwithholding occurs. A withholdingagent that has underwithheld under chap-ter 4 may apply the procedures describedin §1.1461–2(b) (by substituting the term“chapter 4” for “chapter 3”) to satisfy itswithholding obligations under chapter 4with respect to a payee or beneficial owner.



§1.1474–3 Withheld tax as credit tobeneficial owner of income.

(a) Creditable tax. The entire amountof the income, if any, attributable to a pay-ment from which tax is required to be with-held under chapter 4 (including incomedeemed paid by a withholding agent un-der §1.1473–1(a)(2)(v)) shall be includedin gross income in a return required to bemade by the beneficial owner of the in-come, without deduction for the amountrequired to be or actually withheld, but theamount of tax actually withheld shall be al-lowed as a credit against the total incometax computed in the beneficial owner’s re-turn.

(b) Amounts paid to persons that are notthe beneficial owners. Amounts actuallydeducted and withheld under chapter 4 onpayments made to a fiduciary, agent, part-nership, trust, or intermediary are deemedto have been paid by the beneficial ownerof the item of income or other paymentsubject to withholding under chapter 4, ex-cept when the fiduciary, agent, partner-ship, trust, or intermediary pays the taxfrom its own funds and does not in turnwithhold with respect to the payment madeto such person. Thus, for example, if abeneficiary of a trust is subject to the taxesimposed by section 1, 2, 3, or 11 uponany amount of distributable net income orother taxable distribution received from aforeign trust, the part of any amount with-held at source under chapter 4 that is prop-erly allocable to the income so taxed tosuch beneficiary shall be credited againstthe amount of the income tax computedupon the beneficiary’s return, and any ex-cess shall be refunded to the beneficiary inaccordance with §1.1474–5 and chapter 65of the Code.



§1.1474–4 Tax paid only once.

(a) Tax paid. If the tax required to bewithheld under chapter 4 on a payment ispaid by the payee, beneficial owner, or thewithholding agent, it shall not be re-col-

lected from any other, regardless of theoriginal liability therefor. However, thissection does not relieve a person that wasrequired to, but did not, withhold tax fromliability for interest or any penalties or ad-ditions to tax otherwise applicable.

(b) Effective/applicability date. Thissection applies January 28, 2013.


§1.1474–5 Refunds or credits.

(a) Refund and credit—(1) In general.Except to the extent otherwise provided inthis section, a refund or credit of tax whichhas actually been withheld at the sourceat the time of payment under chapter 4shall be made to the beneficial owner of thepayment to which the amount of withheldtax is attributable if the beneficial owneror payee meets the requirements of thisparagraph (a) and any other requirementsthat may be required under chapter 65. Tothe extent that the amount withheld underchapter 4 is not actually withheld at source,but is later paid by the withholding agent tothe IRS, the refund or credit under chapter65 of the Code shall be made to the with-holding agent to the extent the withholdingagent provides documentation with respectto the beneficial owner or payee describedin paragraphs (a)(2) and (3) of this sectionsufficient for the beneficial owner or payeeto have obtained a refund of the tax andsufficient for the withholding agent to haveapplied a reduced rate or exemption fromwithholding under chapter 4. The preced-ing sentence shall not, however, apply toa nonparticipating FFI that is acting as awithholding agent with respect to one ormore of its account holders. In such a case,only the account holders of the nonpartici-pating FFI will be entitled to a credit or re-fund of an amount withheld under chapter4, to the extent otherwise allowable underthis section. Additionally, there are collec-tive refund procedures for a participatingFFI or reporting Model 1 FFI to claim arefund or credit on behalf of certain directaccount holders that are beneficial ownersof the payment under §1.1471–4(h) (in lieuof such account holders claiming refund orcredit under this paragraph (a)(1)).

(2) Limitation to refund and credit fora nonparticipating FFI. Notwithstandingparagraph (a)(1) of this section, a nonpar-ticipating FFI (determined as of the time

2013–15 I.R.B. 897 April 8, 2013

of payment) that is the beneficial owner ofan item of income or other payment thatis subject to withholding under chapter 4shall not be entitled to any credit or re-fund pursuant to section 1474(b)(2) andthis section unless it is entitled to a reducedrate of tax with respect to the income orother payment by reason of any treaty obli-gation of the United States. If the nonpar-ticipating FFI is entitled to a reduced rateof tax with respect to an item of income orother payment by reason of any treaty obli-gation of the United States, the amount ofany credit or refund with respect to suchtax shall not exceed the amount of creditor refund attributable to such reduction inrate on the item of income or other pay-ment, and no interest otherwise allowableunder section 6611 shall be allowed or paidwith respect to such credit or refund.

(3) Requirement to provide additionaldocumentation for certain beneficial own-ers—(i) In general. Except as provided inparagraph (a)(3)(ii) of this section, no re-fund or credit shall be allowed under para-graph (a)(1) of this section to the beneficialowner of the income or other payment towhich the amount of such withheld tax wasattributable if such beneficial owner is anNFFE, unless the NFFE attaches to its in-come tax return the information describedin paragraph (a)(3)(iii) of this section.

(ii) Claim of reduced withholding underan income tax treaty. Paragraph (a)(3)(i)of this section does not apply to the extentthat the beneficial owner is entitled to a re-duced rate of tax with respect to the incomeor other payment by reason of any treatyobligation of the United States.

(iii) Additional documentation to befurnished to the IRS for certain NFFEs.The information described in this para-graph (a)(3)(iii) is—

(A) A certification that the beneficialowner does not have any substantial U.S.owners;

(B) The form described in§1.1474–1(i)(2) relating to each substan-tial U.S. owner of such entity; or

(C) Other appropriate documentation toestablish withholding was not required un-der chapter 4.

(b) Tax repaid to payee. For purposes ofthis section and §1.6414–1, any amount oftax withheld under chapter 4, which, pur-suant to §1.1474–2(a)(1), is repaid by thewithholding agent to the beneficial ownerof the income or payment to which the

withheld amount is attributable shall beconsidered as tax which, within the mean-ing of sections 1474 and 6414, was not ac-tually withheld by the withholding agent.



§1.1474–6 Coordination of chapter 4 withother withholding provisions.

(a) In general. This section coordi-nates the withholding requirements of awithholding agent when a withholdablepayment or foreign passthru payment issubject to withholding under both chap-ter 4 and another Code provision. See§1.1473–1(a) for the definition of with-holdable payment and see §1.1471–5(h)(2)for the definition of foreign passthru pay-ment.

(b) Coordination of withholding foramounts subject to withholding undersections 1441, 1442, and 1443—(1) Ingeneral. In the case of a withholdable pay-ment that is both subject to withholdingunder chapter 4 and is an amount subject towithholding under §1.1441–2(a), a with-holding agent may credit the withholdingapplied under chapter 4 against its liabilityfor any tax due under sections 1441, 1442,or 1443. See §1.1474–1(c) and (d) for theincome tax return and information returnreporting requirements that apply in thecase of a payment that is a withholdablepayment subject to withholding underchapter 4 that is also an amount subject towithholding under §1.1441–2(a).

(2) When withholding is applied. Forpurposes of paragraph (b)(1) of this sec-tion, withholding is applied by a withhold-ing agent under section 1441 (or section1442 or 1443) or chapter 4 (as applica-ble) when the withholding agent has with-held on the payment and has designatedthe withholding as having been made un-der section 1441 (or section 1442 or 1443)or chapter 4 to the extent required in the re-porting described in §1.1474–1(c) and (d).For purposes of allowing an offset of with-holding and allowing a credit to a with-holding agent against its liability for suchtax as described in paragraph (b)(1) of thissection, withholding is treated as appliedfor purposes of paragraph (a) of this sec-tion only when the withholding agent hasactually withheld on a payment and has

not made any adjustment for overwithheldtax applicable to the amount withheld thatwould otherwise be permitted with respectto the payment.

(3) Special rule for certain substitutedividend payments. In the case of a divi-dend equivalent under section 871(m) paidpursuant to a securities lending transactiondescribed in section 1058 (or a substan-tially similar transaction), or pursuant to asale-repurchase transaction, a withholdingagent may offset its obligation to withholdunder chapter 4 for amounts withheld byanother withholding agent under chapters3 and 4 with respect to the same underlyingsecurity in such a transaction, but only tothe extent that there is sufficient evidenceas required under chapter 3 that tax was ac-tually withheld on a prior dividend equiva-lent paid to the withholding agent or a priorwithholding agent with respect to the sameunderlying security in such transaction.

(c) Coordination with amounts subjectto withholding under section 1445—(1) Ingeneral. An amount subject to withhold-ing under section 1445 is not subject towithholding under chapter 4 as describedin paragraphs (c)(2)(i) and (ii) of this sec-tion.

(2) Determining the amount of the dis-tribution from certain domestic corpora-tions subject to section 1445 or chapter4 withholding—(i) Distribution from qual-ified investment entity. In the case of apassthru payment (including a withhold-able payment) subject to withholding un-der chapter 4 that is a distribution with re-spect to the stock of a qualified investmententity as described in section 897(h)(4)(A),withholding under chapter 4 does not ap-ply when withholding under section 1445applies to such amounts. With respect tothe portion of such distribution that is notsubject to withholding under section 1445but is subject to withholding under section1441 (or section 1442 or 1443) and chapter4, the coordination rule described in para-graph (b)(1) of this section shall apply.

(ii) Distribution from a United Statesreal property holding corporation. Adistribution (or portion of a distribution)from a United States real property holdingcorporation (or from a corporation thatwas a United States real property hold-ing corporation at any time during thefive-year period ending on the date ofthe distribution) with respect to its stockthat is a United States real property in-

April 8, 2013 898 2013–15 I.R.B.

terest under section 897(c) is subject towithholding under chapter 4 and is alsosubject to the withholding provisions ofsection 1441 (or section 1442 or 1443)and section 1445. In such case, to theextent that the United States real propertyholding corporation chooses to withholdon a distribution only under section 1441(or section 1442 or 1443) pursuant to§1.1441–3(c)(4)(i)(A), the coordinationrule described in paragraph (b)(1) of thissection shall apply to such distribution.Alternatively, to the extent that the UnitedStates real property holding corporationchooses to withhold under both section1441 (or section 1442 or 1443) and section1445 pursuant to §1.1441–3(c)(4)(i)(B),the coordination rule described in para-graph (b)(1) of this section shall apply tothe portion of such distribution describedin §1.1441–3(c)(4)(i)(B)(1), and with-holding under section 1445 shall apply tothe amount of such distribution describedin §1.1441–3(c)(4)(i)(B)(2). A withhold-ing agent other than a United States realproperty holding corporation may rely,absent actual knowledge or reason toknow otherwise, on the representationsof the United States real property hold-ing corporation making the distributionregarding the portion of the distributionthat is estimated to be a dividend under§1.1441–3(c)(2)(ii)(A), and in the case ofa failure by the withholding agent to with-hold under chapter 4 due to this reliance,the required amount shall be imputed tothe United States real property holdingcorporation.

(d) Coordination with section1446—(1) In general. Except as oth-erwise provided in paragraph (d)(2) ofthis section, a withholdable payment ora foreign passthru payment subject towithholding under section 1446 shall notbe subject to withholding under chapter4. See §1.1473–1(a)(4)(ii) for the exclu-sion from withholdable payment and therequirements for such exclusion for anyitem of income that is taken into accountunder section 871(b)(1) or 882(a)(1) forthe taxable year.

(2) Determining the amount of distribu-tion subject to section 1446. [Reserved].

(e) Example. Chapter 4 withholding satisfieschapter 3 withholding obligation. WA, a U.S. with-holding agent, makes a payment consisting of adividend from sources within the United States toNPFFI. NPFFI is a nonparticipating FFI that is aresident of Country X, a country that has an in-

come tax treaty in force with the United States thatwould allow WA to reduce the rate of withholdingfor section 1442 purposes on a payment of U.S.source dividends paid to NPFFI to 15%. Because thepayment is a withholdable payment and NPFFI is anonparticipating FFI, WA withholds on the paymentat the rate of 30% under chapter 4. WA does notmake any adjustment for overwithholding that isotherwise permitted with respect to this payment.Although the payment is also an amount subject towithholding under section 1442, WA is not requiredto withhold any tax on this payment under section1442. WA may credit its withholding applied underchapter 4 against the amount of tax otherwise re-quired to be withheld on this payment under section1442. See §1.1474–5(a)(2) for the credit and refundprocedures for nonparticipating FFIs that are entitledto a reduced rate of tax with respect to an amountsubject to withholding under chapter 4 by reason ofany treaty obligation of the United States.

(f) Effective/applicability date. Thissection applies January 28, 2013.


§1.1474–7 Confidentiality of information.

(a) Confidentiality of information. Pur-suant to section 1474(c)(1), the provisionsof §31.3406(f)–1(a) of this chapter shallapply (substituting “sections 1471 through1474” for “section 3406”) to informationobtained or used in connection with the re-quirements of chapter 4.

(b) Exception for disclosure of par-ticipating FFIs. Pursuant to section1474(c)(2), the identity of a participatingFFI or deemed-compliant FFI shall not betreated as return information for purposesof section 6103.


PART 301 — PROCEDURE ANDADMINISTRATION

Paragraph 20. The authority citation forpart 301 is amended by adding an entry innumerical order to read in part as follows:

Authority: 26 U.S.C. 7805.Section 301.1474–1 also issued under

26 U.S.C. 1474(f). * * *Par. 21. Section 301.1474–1 is added

to read as follows:

§301.1474–1 Required use of magneticmedia for financial institutions filing Form1042–S or Form 8966.

(a) Financial institutions filing certaininformation returns. If a financial insti-tution is required to file a Form 1042–S,

“Foreign Person’s U.S. Source IncomeSubject to Withholding,” (or such otherform as the IRS may prescribe) under§1.1474–1(d) of this chapter, the financialinstitution must file the information re-quired by the applicable forms and sched-ules on magnetic media. Additionally, if afinancial institution is required to file Form8966, “FATCA Report,” (or such otherform as the IRS may prescribe) to reportcertain information about U.S. accounts,substantial U.S. owners of foreign entities,or owner-documented FFIs as requiredunder this chapter, the financial institutionmust file the required information on mag-netic media or other machine-readableform. Returns filed on magnetic mediamust be made in accordance with appli-cable regulations, revenue procedures,publications, forms, instructions, and theIRS.gov Internet site. In prescribing regu-lations, revenue procedures, publications,forms, and instructions, including thoseon the IRS.gov Internet site, the Commis-sioner may direct the type of magneticmedia or other machine-readable formused for filing.

(b) Waiver. The Commissioner maygrant waivers from the requirements of thissection in cases of undue hardship. A re-quest for waiver must be made in accor-dance with applicable revenue proceduresor publications. The waiver also will besubject to such terms and conditions re-garding the method of filing as may be pre-scribed by the Commissioner.

(c) Failure to file. If a financial in-stitution fails to file a Form 1042–S ora Form 8966 on magnetic media whenrequired to do so by this section, thefinancial institution is deemed to havefailed to comply with the information re-porting requirements under section 6723of the Code. See section 6724(c) forfailure to meet magnetic media require-ments. In determining whether there isreasonable cause for failure to file thereturn, §301.6651–1(c) and rules similarto the rules in §301.6724–1(c)(3) (undueeconomic hardship related to filing infor-mation returns on magnetic media) willapply.

(d) Meaning of terms. The follow-ing definitions apply for purposes of thissection—(1) Magnetic media. The termmagnetic media means any magnetic me-dia permitted under applicable regulations,revenue procedures, publications, forms,

2013–15 I.R.B. 899 April 8, 2013

or instructions. These generally includemagnetic tape, tape cartridge, and diskette,as well as other media, such as electronicfiling, specifically permitted under the ap-plicable regulations, revenue procedures,publications, forms, or instructions.

(2) Financial institution. The termfinancial institution has the meaning setforth in section 1471(d)(5) of the Codeand the regulations thereunder.

(e) Effective/applicability date. Thissection applies to any Form 1042–S orForm 8966 (or any other form that the IRSmay prescribe) filed with respect to calen-dar years ending after December 31, 2013.

Steven T. Miller,Deputy Commissioner forServices and Enforcement.

Approved January 11, 2013.

Mark J. Mazur,Assistant Secretary

of the Treasury (Tax Policy).

(Filed by the Office of the Federal Register on January 17,2013, 4:15 p.m., and published in the issue of the FederalRegister for January 28, 2013, 78 F.R. 5874)

Section 6654.—Failure byIndividual to Pay EstimatedIncome Tax26 CFR 1.6654–2: Exceptions to imposition of theaddition to the tax in the case of individuals.

T.D. 9613

DEPARTMENT OF THETREASURYInternal Revenue Service26 CFR Part 1

Reduced 2009 EstimatedIncome Tax Paymentsfor Individuals with SmallBusiness Income

AGENCY: Internal Revenue Service(IRS), Treasury.

ACTION: Final regulations and removalof temporary regulations.

SUMMARY: This document containsfinal regulations under section 6654 ofthe Internal Revenue Code (Code) re-lating to reduced estimated income tax

payments for qualified individuals withsmall business income for any taxableyear beginning in 2009 and does not applyto any taxable years beginning before orafter 2009. The final regulations imple-ment changes to section 6654 made bythe American Recovery and ReinvestmentAct of 2009. The final regulations pro-vide guidance for qualified individualswith small business income to certify thatthey satisfy the statutory gross incomerequirement for purposes of the reductionin their required 2009 estimated incometax payments.

DATES: Effective Date: These regulationsare effective on February 27, 2013.

Applicability Date: These regulationsapply for any taxable year that begins in2009.

FOR FURTHER INFORMATIONCONTACT: Janet Engel Kidd at (202)622–4940 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

This document contains final amend-ments to the Income Tax Regulations (26CFR part 1) under section 6654(d) of theCode relating to the addition to tax forfailure by an individual to pay estimatedincome tax. Section 6654(d)(1)(D) wasadded by section 1212 of Division B of theAmerican Recovery and Reinvestment Actof 2009, Public Law 111–5 (123 Stat. 336(2009)), effective for taxable years begin-ning in 2009. It does not apply to any tax-able years beginning before or after 2009.

Section 6654 imposes an addition totax in the case of an individual taxpayer’sunderpayment of estimated tax. Estimatedtax is payable in four installments through-out the taxable year, and the amount ofeach required installment is generally25 percent of the required annual pay-ment of estimated tax. Under section6654(d)(1)(B), the required annual pay-ment is the lesser of (i) 90 percent of thetax shown on the income tax return for thetaxable year (or, if no return is filed, 90percent of the tax for the year), or (ii) 100percent of the tax shown on the taxpayer’sreturn for the preceding taxable year (or110 percent if the taxpayer’s adjustedgross income for the preceding taxableyear exceeded $150,000). The provision

allowing for the payment of 100 (or 110)percent of the tax shown on the taxpayer’sreturn for the preceding taxable year doesnot apply if the preceding taxable year wasless than 12 months or if the taxpayer didnot file a return for that year.

Section 6654(d)(1)(D) provides a“[s]pecial rule for 2009.” Under this pro-vision, the applicable percentage of taxshown on the return for the precedingtaxable year (either 100 or 110 percent)is reduced to 90 percent for qualified in-dividuals for taxable years that begin in2009. In other words, for taxable yearsthat begin in 2009, a qualified individual’sannual required payment of estimated taxis the lesser of (i) 90 percent of the taxshown on the return for the 2009 taxableyear (or, if no return is filed, 90 percentof the tax for the year), or (ii) 90 percentof the tax shown on the individual’s returnfor taxable year 2008.

To implement the special rule for 2009,the Treasury Department and the IRSpublished in the Federal Register (75FR 9141) on March 1, 2010, a notice ofproposed rulemaking (REG–117501–09,2010–11 I.R.B. 442) proposing amend-ments to §1.6654–2, which providesexceptions to the addition to tax for an in-dividual’s failure to pay estimated incometax. The notice of proposed rulemakingcross-referenced temporary regulations(T.D. 9480, 2010–11 I.R.B. 439) publishedin the Federal Register (75 FR 9101) onthe same day.

The IRS received one written pub-lic comment responding to the pro-posed regulations. The commentis available for public inspection athttp://www.regulations.gov or uponrequest. The commenter expressedappreciation for efforts to simplify taxreporting by small business owners. Apublic hearing was not requested or held.

Explanation of Provisions

The final regulations adopt the pro-posed regulations without change. Thefinal regulations explain who is a qualifiedindividual under section 6654(d)(1)(D)and how a taxpayer establishes that thetaxpayer is a qualified individual. A quali-fied individual is any individual (1) whoseadjusted gross income shown on the indi-vidual’s return for the preceding taxableyear (prior to the taxable year that begins

April 8, 2013 900 2013–15 I.R.B.

in 2009) is less than $500,000, and (2)who certifies that more than 50 percent ofthe gross income shown on that return wasincome from a small business. See section6654(d)(1)(D)(ii). If an individual is mar-ried within the meaning of section 7703,and files a separate return for a taxable yearthat begins in 2009, then to qualify, theindividual’s adjusted gross income shownon the preceding year’s return must beless than $250,000, rather than $500,000.See section 6654(d)(1)(D)(iv). Pursuantto section 6654(d)(1)(D)(ii)(II), the Secre-tary shall prescribe by regulation the form,manner, and time for filing a certification.Additionally, section 6654(m) authorizesthe Secretary to prescribe regulations asnecessary to carry out the purposes of sec-tion 6654.

Income from a small business isdefined in general terms in section6654(d)(1)(D)(iii) as income from a tradeor business the average number of em-ployees of which was less than 500 forcalendar year 2008. The final regulationsspecify that the trade or business must bea bona fide trade or business of which theindividual was an owner. The final regula-tions provide that a trade or business maybe organized as, or take the legal form of,a corporation, partnership, limited liabilitycompany, or sole proprietorship.

The final regulations also provide thata qualified individual shall file a certifica-tion with the IRS in the manner and at thetime prescribed in forms, publications, orother guidance, such as Form 2210, “Un-derpayment of Estimated Tax by Individu-als, Estates, and Trusts” (or any successorform and its instructions).

The final regulations will be appli-cable for taxable years that begin in2009. The reduced percentage in section6654(d)(1)(D) is limited to taxable yearsthat begin in 2009 and does not apply totaxable years that begin before or after2009.

Special Analyses

It has been determined that this Trea-sury decision is not a significant regula-tory action as defined in Executive Order12866, as supplemented by Executive Or-der 13563. Therefore, a regulatory assess-ment is not required. It also has been deter-mined that section 553(b) of the Adminis-trative Procedure Act (5 U.S.C. chapter 5)

does not apply to these regulations, and be-cause the regulations do not impose a col-lection of information on small entities, theRegulatory Flexibility Act (5 U.S.C. chap-ter 6) does not apply. Pursuant to section7805(f) of the Code, the notice of proposedrulemaking that preceded these final regu-lations was submitted to the Chief Counselfor Advocacy of the Small Business Ad-ministration for comment on its impact onsmall business and no comments were re-ceived.

Drafting Information

The principal author of these regula-tions is Janet Engel Kidd, Office of theAssociate Chief Counsel, Procedure andAdministration.

* * * * *

Adoption of Amendments to theRegulations

Accordingly, 26 CFR part 1 is amendedas follows:

PART 1—INCOME TAXES

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

Authority: 26 U.S.C. 7805 * * *Section 1.6654–2 also issued under 26

U.S.C. 6654(m).Par. 2. Section 1.6654–2 is amended by

revising paragraphs (a) introductory text,(a)(1)(ii) and (f) to read as follows:

§1.6654–2 Exceptions to imposition ofthe addition to the tax in the case ofindividuals.

(a) In general. The addition to the taxunder section 6654 will not be imposed forany underpayment of any installment ofestimated tax if, on or before the date pre-scribed for payment of the installment, thetotal amount of all payments of estimatedtax made equals or exceeds the lesser of theamount in §1.6654–2(a)(1) or the amountin §1.6654–2(a)(2).

(1)(i) * * *(ii) Special rule for taxable years begin-

ning in 2009. For any taxable year begin-ning in 2009, for a qualified individual, theamount described in §1.6654–2(a)(1)(i) isreduced to 90 percent of that amount.

(A) Qualified individual means anyindividual whose adjusted gross income

shown on the individual’s return forthe preceding taxable year is less than$500,000 and who certifies, as prescribedin paragraph (a)(1)(ii)(D) of this section,that more than 50 percent of the grossincome shown on the return for the pre-ceding taxable year was income from asmall business.

(B) Income from a small businessmeans income from the operation of abona fide trade or business of which theindividual was an owner during calendaryear 2009, and that on average had fewerthan 500 employees in calendar year 2008.

(C) The trade or business may be orga-nized as, or take the legal form of, a corpo-ration, partnership, limited liability com-pany, or sole proprietorship.

(D) A qualified individual shall file acertification of the individual’s qualifica-tion in the manner and at the time pre-scribed by the Internal Revenue Service informs, publications, or other guidance.

* * * * *(f) Effective/applicability date. Para-

graph (a)(1)(ii) of this section applies toany taxable year beginning in 2009 anddoes not apply to any taxable years begin-ning before or after 2009.

Par. 3. Section 1.6654–2T is removed.

Steven T. Miller,Deputy Commissioner forServices and Enforcement.

Approved February 22, 2013.

Mark J. Mazur,Assistant Secretary

of the Treasury (Tax Policy).

(Filed by the Office of the Federal Register on February 25,2013, 4:15 p.m., and published in the issue of the FederalRegister for February 27, 2013, 78 F.R. 13221)

Section 7520.—ValuationTables


Section 7872.—Treatmentof Loans With Below-MarketInterest Rates


2013–15 I.R.B. 901 April 8, 2013

Part III. Administrative, Procedural, and MiscellaneousAllocation of Controlled GroupResearch Credit

Notice 2013–20

PURPOSE

This notice provides interim guidancerelating to the allocation of the credit forincreasing research activities (researchcredit) to corporations and trades or busi-nesses under common control (controlledgroups) for purposes of § 41(f)(1)(A)(ii)and § 41(f)(1)(B)(ii) of the Internal Rev-enue Code, as amended by section 301(c)of the American Taxpayer Relief Act of2012, P.L. 112–240, H.R. 8 (the Act), fortaxable years beginning after December31, 2011.

BACKGROUND

Under § 41(f)(1) and § 1.41–6(b) of theIncome Tax Regulations, all members ofa controlled group are treated as a singletaxpayer for purposes of computing the re-search credit. Section 1.41–6(b) providesthat the group credit is computed by apply-ing all of the § 41 computational rules onan aggregate basis.

Former § 41(f)(1)(A)(ii) and former§ 41(f)(1)(B)(ii) provided that the researchcredit allowable to a controlled groupmember shall be its proportionate sharesof the qualified research expenses, ba-sic research payments, and amounts paidor incurred to energy research consor-tiums (collectively, “QREs”) giving riseto the credit. Section 1.41–6(c)(1)(i) re-quires a controlled group to allocate thegroup credit in proportion to each mem-ber’s stand-alone entity credit, as definedin § 1.41–6(c)(2), in cases in which thegroup credit does not exceed the sum ofthe stand-alone entity credits of all of themembers. If the group credit does exceedthis sum, then the excess of the groupcredit over the sum of the stand-aloneentity credits of all of the members is al-located in proportion to the QREs of themembers of the controlled group. See§ 1.41–6(c)(1)(ii).

Section 301(c) of the Act amended§ 41(f)(1)(A)(ii) and § 41(f)(1)(B)(ii)by requiring the allocation of research

credits to each controlled group member“on a proportionate basis to its share ofthe aggregate of the qualified researchexpenses, basic research payments, andamounts paid or incurred to energy re-search consortiums, taken into accountby such controlled group for purposesof this section.’’ Thus, the amendmentsto § 41(f)(1)(A)(ii) and § 41(f)(1)(B)(ii)provide that the group credit is allocatedto group members based on a member’sshare of QREs, without regard to whetherthe member would have a stand-alone en-tity credit or what the amount of any suchcredit would be. Section 301(c) of the Actapplies to taxable years beginning afterDecember 31, 2011.

DISCUSSION

For taxable years beginning before Jan-uary 1, 2012, the provisions of § 1.41–6continue to apply in their entirety. For tax-able years beginning after December 31,2011, the provisions of § 1.41–6 continueto apply, subject to the following excep-tions. First, § 1.41–6(c) shall not apply.In addition, references to § 1.41–6(c) re-garding the allocation of the group credit,references to the stand-alone entity creditdescribed in § 1.41–6(c)(2), and the exam-ples in § 1.41–6(e) involving the allocationof the group credit among and computationof the stand-alone entity credits for con-trolled group members, shall not apply.

In lieu of § 1.41–6(c), controlled groupsmust allocate the group credit to eachmember of the controlled group in pro-portion to each member’s contributionof QREs to the controlled group’s totalQREs for the taxable year. Such allocationmethodology must also be applied to de-termine the portion of a group credit thatis allocated to, and within, a consolidatedgroup that is a member of a controlledgroup under § 1.41–6(d)(1) and (3). Forexample, X, a controlled group consistingof 3 members, B, C, and D, has a $100credit for the taxable year. X’s total QREsfor the taxable year is $1000. B paid $200of the QREs, C paid $300 of the QREs,and D paid $500 of the QREs during thetaxable year. Based on the proportion ofeach member’s contribution of QREs tothe controlled group’s total QREs for the

taxable year, B is allocated a $20 credit, Cis allocated a $30 credit, and D is allocateda $50 credit.

The Treasury Department and IRS in-tend to revise § 1.41–6 and the examplesdemonstrating the allocation of the con-trolled group credit consistent with the al-location methodology described in this no-tice.

EFFECT ON OTHER CODE SECTIONS

Rules similar to the rules under§ 41(f)(1) apply for purposes of § 45C,Clinical Testing Expenses for CertainDrugs for Rare Diseases or Conditions;§ 45G, Railroad Track MaintenanceCredit; § 45O, Agricultural ChemicalsSecurity Credit; and § 280C, Certain Ex-penses for Which Credits are Allowable.Therefore, an allocation method similarto the method required under this noticemust be used for purposes of allocatingcredits to controlled group members un-der those Code sections. Specifically,see §§ 45C(d)(3), 45G(e)(2), 45O(g), and280C(b)(3).

EFFECTIVE DATE

This notice is effective for taxable yearsbeginning after December 31, 2011.

REQUEST FOR COMMENTS

The Treasury Department and IRS in-vite taxpayers to submit written commentson issues relating to this notice. Sendcomments to: CC:PA:LPD:RU (Notice2013–20), Room 5203, Internal RevenueService, P.O. Box 7604, Ben FranklinStation, Washington, DC 20044. Sub-missions may be hand-delivered Mondaythrough Friday between the hours of 8a.m. and 4 p.m. to CC:PA:LPD:RU (No-tice 2013–20), Courier’s Desk, InternalRevenue Service, 1111 Constitution Av-enue, NW, Washington, DC. Submissionsmay also be sent electronically via theInternet to the following e-mail address:[email protected] the notice number (Notice2013–20) in the subject line. Commentsmust be received on or before June 6,2013. All comments will be available forpublic inspection and copying.

April 8, 2013 902 2013–15 I.R.B.


The principal author of this noticeis David Selig, Office of the AssociateChief Counsel (Passthroughs and SpecialIndustries). For further informationregarding this notice, please contactMr. Selig at (202) 622–3040 (not atoll-free call).

Postponement of Deadline forMaking an Election to Deductfor the Preceding TaxableYear Losses Attributable toHurricane Sandy

Notice 2013–21

PURPOSE

This notice postpones until October 15,2013, the deadline to make an electionunder § 165(i) of the Internal RevenueCode to deduct in the preceding taxableyear losses attributable to Hurricane Sandysustained in a federally declared disasterarea in Connecticut, Delaware, Districtof Columbia, Maryland, Massachusetts,New Hampshire, New Jersey, New York,Pennsylvania, Rhode Island, Virginia, orWest Virginia resulting from HurricaneSandy. This postponement is granted un-der § 7508A.

BACKGROUND

In late October 2012, Hurricane Sandystruck the east coast causing severe dam-age in a number of states. The President ofthe United States issued major disaster andemergency declarations under the author-ity of the Robert T. Stafford Disaster Reliefand Emergency Assistance Act, 42 U.S.C.§§ 5121–5206 (Stafford Act), for certainareas in Connecticut, Delaware, Districtof Columbia, Maryland, Massachusetts,New Hampshire, New Jersey, New York,Pennsylvania, Rhode Island, Virginia, andWest Virginia. The Federal EmergencyManagement Agency (FEMA) determinedcertain areas within those states and theDistrict of Columbia to be eligible forPublic Assistance or Public Assistance andIndividual Assistance under the StaffordAct.

Section 165(i) provides that if a tax-payer sustains a loss attributable to a

federally declared disaster occurring in adisaster area, the taxpayer may elect todeduct that loss on the taxpayer’s returnfor the taxable year immediately preced-ing the taxable year in which the disasteroccurred. For purposes of § 165(i), afederally declared disaster is a disasterdetermined by the President to warrant as-sistance by the Federal Government underthe Stafford Act (including a disaster forwhich the President issues a major disasterdeclaration or an emergency declaration),and a disaster area is the area so deter-mined to be eligible for such assistance.See § 165(h)(3)(C) and 42 U.S.C. § 5122.

Section 1.165–11(e) of the Income TaxRegulations requires a taxpayer to makethe § 165(i) election by filing a return, anamended return, or a refund claim on or be-fore the later of: (1) the due date of thetaxpayer’s income tax return (determinedwithout regard to any extension of timefor filing the return) for the taxable year inwhich the disaster actually occurred; or (2)the due date of the taxpayer’s income taxreturn (determined with regard to any ex-tension of time for filing the return) for theimmediately preceding taxable year. Sec-tion 1.165–11(e) provides that the returnor claim should specify the date or datesof the disaster that gave rise to the loss,and the city, town, county, and State inwhich the property that was damaged ordestroyed was located at the time of thedisaster. The election is irrevocable 90days after the taxpayer makes the election.

Section 7508A provides the Secre-tary of the Treasury with authority topostpone the time for performing certainacts under the internal revenue laws forup to one year for a taxpayer affectedby a federally declared disaster. Section301.7508A–1(c)(1) of the Regulationson Procedure and Administration listsseveral specific acts performed by tax-payers for which § 7508A relief mayapply, and § 301.7508A–1(c)(1)(vii) au-thorizes the IRS and Treasury Depart-ment to specify additional acts. Sec-tion 301.7508A–1(d)(1) describes sev-eral types of affected taxpayers eligi-ble for relief under § 7508A. Section301.7508A–1(d)(1)(ix) authorizes the IRSto determine that any other person is af-fected by a federally declared disasterand therefore eligible for relief. Under§ 301.7508A–1(d)(2), the area of a feder-ally declared disaster for which the IRS

has determined that the postponement ofone or more deadlines applies is referredto as a covered disaster area.

AFFECTED TAXPAYERS FOR WHICHTHE SECTION 165(i) DEADLINE ISPOSTPONED

Under the authority of § 7508Aand §§ 301.7508A–1(c)(1)(vii) and301.7508A–1(d)(1)(ix), the IRS has de-termined that the areas that FEMA hasdetermined to be eligible for Public Assis-tance or Public Assistance and IndividualAssistance pursuant to the major disas-ter and emergency declarations issuedin response to Hurricane Sandy are cov-ered disaster areas. A list of those areasis available at the Federal EmergencyManagement Agency (FEMA) website atwww.fema.gov/disaster.

Under the authority of§ 301.7508A–1(d)(1)(ix), a taxpayeris an affected taxpayer to which thepostponement of the deadline for makingthe § 165(i) election applies if: (1) thetaxpayer sustained a loss attributable toHurricane Sandy; (2) the loss occurredin a covered disaster area for HurricaneSandy (regardless of whether the tax-payer’s principal residence or principalplace of business is in one of the covereddisaster areas); and (3) the deadline forthe taxpayer to make a § 165(i) electionfor that loss, but for this notice, would bebefore October 15, 2013.

Affected taxpayers for purposes of thisnotice are not affected taxpayers for pur-poses of other relief provided by the IRSunless the taxpayer separately qualifies asan affected taxpayer under other guidanceissued by the IRS.

GRANT OF RELIEF

Under the authority of § 7508A, theIRS grants affected taxpayers, as definedabove, a postponement to October 15,2013, to make an election under § 165(i)for losses attributable to Hurricane Sandy.

To assist the IRS in identifying affectedtaxpayers to ensure that they receive thispostponement of the deadline to makethe § 165(i) election, affected taxpayersshould include a reference to this no-tice, Notice 2013–21, with their return,amended return, or refund claim on whichthey are making a postponed § 165(i) elec-tion pursuant to this notice. The return or

2013–15 I.R.B. 903 April 8, 2013

claim should also include the other infor-mation requested in § 1.165–11(e).

This notice is limited to making an elec-tion under § 165(i) and does not affectthe application of any other section of theCode or the regulations.


The principal author of this no-tice is Grace H. Kim of the Office ofAssociate Chief Counsel (Income Tax& Accounting). For further informationregarding this notice, contact Ms. Kim on(202) 622–7900 (not a toll-free call).

Public Comment Invitedon Recommendations for2013–2014 Guidance PriorityList

Notice 2013–22

The Department of Treasury and In-ternal Revenue Service (Service) invitepublic comment on recommendationsfor items that should be included on the2013–2014 Guidance Priority List.

The Treasury Department’s Office ofTax Policy and the Service use the Guid-ance Priority List each year to identifyand prioritize the tax issues that shouldbe addressed through regulations, revenuerulings, revenue procedures, notices, andother published administrative guidance.The 2013–2014 Guidance Priority Listwill establish the guidance that the Trea-sury Department and the Service intendto prioritize for purposes of allocating re-sources from July 1, 2013, through June30, 2014. The Treasury Department andthe Service recognize the importance ofpublic input to formulate a Guidance Prior-ity List that focuses resources on guidanceitems that are most important to taxpayersand tax administration. Published guid-ance plays an important role in increasingvoluntary compliance by helping to clarifyambiguous areas of the tax law.

As is the case whenever significant leg-islation is enacted, the Treasury Depart-ment and the Service have continued todedicate substantial resources during thecurrent plan year to published guidanceprojects necessary to implement the provi-sions of the multitude of tax acts that havebeen enacted over the past several years

including, but not limited to, the Ameri-can Recovery and Reinvestment Tax Actof 2009, Pub. L. No. 111–5, 123 Stat.115, which was enacted on February 17,2009; the Hiring Incentives to Restore Em-ployment Act, Pub. L. No. 111–147, 124Stat. 71, which was enacted on March 18,2010; the Patient Protection and Afford-able Care Act, Pub. L. No. 111–148, 124Stat. 119, which was enacted on March 23,2010; the Health Care and Education Rec-onciliation Act, Pub. L. No. 111–152, 124Stat. 1029, which was enacted on March30, 2010; the Tax Relief, UnemploymentInsurance Reauthorization, and Job Cre-ation Act of 2010, Pub. L. No. 111–312,124 Stat. 3296, which was enacted on De-cember 17, 2010; and the American Tax-payer Relief Act of 2012, Pub. L. No.112–240, which was enacted on January2, 2013. The Treasury Department andthe Service will continue to evaluate thepriority of each guidance project in lightof the above-mentioned tax legislation andother developments occurring during the2013–2014 plan year.

In reviewing recommendations andselecting projects for inclusion on the2013–2014 Guidance Priority List, theTreasury Department and the Service willconsider the following:

1. Whether the recommended guidanceresolves significant issues relevant tomany taxpayers;

2. Whether the recommended guidancepromotes sound tax administration;

3. Whether the recommended guidancecan be drafted in a manner that willenable taxpayers to easily understandand apply the guidance;

4. Whether the recommended guid-ance involves regulations that areoutmoded, ineffective, insufficient,or excessively burdensome and thatshould be modified, streamlined, ex-panded, or repealed;

5. Whether the Service can administerthe recommended guidance on a uni-form basis; and

6. Whether the recommended guidancereduces controversy and lessens theburden on taxpayers or the Service.

Taxpayers may submit recommenda-tions for guidance at any time during theyear. Please submit recommendations byMay 1, 2013, for possible inclusion on

the original 2013–2014 Guidance PriorityList. The Treasury Department and theService may update the 2013–2014 Guid-ance Priority List periodically to reflectadditional guidance that the Treasury De-partment and the Service intend to publishduring the plan year. The periodic updatesallow the Treasury Department and theService to respond to the need for addi-tional guidance that may arise during theplan year. Recommendations for guidancereceived after May 1, 2013, will be re-viewed for inclusion in the next periodicupdate.

Taxpayers are not required to submitrecommendations for guidance in any par-ticular format. Taxpayers should, how-ever, briefly describe the recommendedguidance and explain the need for the guid-ance. In addition, taxpayers may includean analysis of how the issue should be re-solved. It would be helpful if taxpayerssuggesting more than one guidance projectprioritize the projects by order of impor-tance. If a large number of projects are be-ing suggested, it also would be helpful ifthe projects were grouped in terms of high,medium, or low priority.

Taxpayers should send written com-ments to:

Internal Revenue ServiceAttn: CC:PA:LPD:PR

(Notice 2013–22)Room 5203P. O. Box 7604Ben Franklin StationWashington, DC 20044

or hand deliver comments Mondaythrough Friday between the hours of 8a.m. and 4 p.m. to:

Courier’s DeskInternal Revenue ServiceAttn: CC:PA:LPD:PR

(Notice 2013–22)1111 Constitution Avenue, N.W.Washington, DC 20224

Alternatively, taxpayers may sub-mit comments electronically viae-mail to the following address:[email protected] should include “Notice2013–22” in the subject line. Allcomments submitted by the public willbe available for public inspection andcopying in their entirety.

April 8, 2013 904 2013–15 I.R.B.

For further information regarding thisnotice, contact Henry Schneiderman of

the Office of Associate Chief Counsel (Procedure and Administration) at (202)622–3400 (not a toll-free call).

2013–15 I.R.B. 905 April 8, 2013

Definition of TermsRevenue rulings and revenue procedures(hereinafter referred to as “rulings”) thathave an effect on previous rulings use thefollowing defined terms to describe the ef-fect:

Amplified describes a situation whereno change is being made in a prior pub-lished position, but the prior position is be-ing extended to apply to a variation of thefact situation set forth therein. Thus, ifan earlier ruling held that a principle ap-plied to A, and the new ruling holds that thesame principle also applies to B, the earlierruling is amplified. (Compare with modi-fied, below).

Clarified is used in those instanceswhere the language in a prior ruling is be-ing made clear because the language hascaused, or may cause, some confusion.It is not used where a position in a priorruling is being changed.

Distinguished describes a situationwhere a ruling mentions a previously pub-lished ruling and points out an essentialdifference between them.

Modified is used where the substanceof a previously published position is beingchanged. Thus, if a prior ruling held that aprinciple applied to A but not to B, and thenew ruling holds that it applies to both A

and B, the prior ruling is modified becauseit corrects a published position. (Comparewith amplified and clarified, above).

Obsoleted describes a previously pub-lished ruling that is not considered deter-minative with respect to future transac-tions. This term is most commonly used ina ruling that lists previously published rul-ings that are obsoleted because of changesin laws or regulations. A ruling may alsobe obsoleted because the substance hasbeen included in regulations subsequentlyadopted.

Revoked describes situations where theposition in the previously published rulingis not correct and the correct position isbeing stated in a new ruling.

Superseded describes a situation wherethe new ruling does nothing more than re-state the substance and situation of a previ-ously published ruling (or rulings). Thus,the term is used to republish under the1986 Code and regulations the same po-sition published under the 1939 Code andregulations. The term is also used whenit is desired to republish in a single rul-ing a series of situations, names, etc., thatwere previously published over a period oftime in separate rulings. If the new rul-ing does more than restate the substance

of a prior ruling, a combination of termsis used. For example, modified and su-perseded describes a situation where thesubstance of a previously published rulingis being changed in part and is continuedwithout change in part and it is desired torestate the valid portion of the previouslypublished ruling in a new ruling that is selfcontained. In this case, the previously pub-lished ruling is first modified and then, asmodified, is superseded.

Supplemented is used in situations inwhich a list, such as a list of the names ofcountries, is published in a ruling and thatlist is expanded by adding further names insubsequent rulings. After the original rul-ing has been supplemented several times, anew ruling may be published that includesthe list in the original ruling and the ad-ditions, and supersedes all prior rulings inthe series.

Suspended is used in rare situations toshow that the previous published rulingswill not be applied pending some futureaction such as the issuance of new oramended regulations, the outcome of casesin litigation, or the outcome of a Servicestudy.

AbbreviationsThe following abbreviations in current useand formerly used will appear in materialpublished in the Bulletin.

A—Individual.Acq.—Acquiescence.B—Individual.BE—Beneficiary.BK—Bank.B.T.A.—Board of Tax Appeals.C—Individual.C.B.—Cumulative Bulletin.CFR—Code of Federal Regulations.CI—City.COOP—Cooperative.Ct.D.—Court Decision.CY—County.D—Decedent.DC—Dummy Corporation.DE—Donee.Del. Order—Delegation Order.DISC—Domestic International Sales Corporation.DR—Donor.E—Estate.EE—Employee.E.O.—Executive Order.

ER—Employer.ERISA—Employee Retirement Income Security Act.EX—Executor.F—Fiduciary.FC—Foreign Country.FICA—Federal Insurance Contributions Act.FISC—Foreign International Sales Company.FPH—Foreign Personal Holding Company.F.R.—Federal Register.FUTA—Federal Unemployment Tax Act.FX—Foreign corporation.G.C.M.—Chief Counsel’s Memorandum.GE—Grantee.GP—General Partner.GR—Grantor.IC—Insurance Company.I.R.B.—Internal Revenue Bulletin.LE—Lessee.LP—Limited Partner.LR—Lessor.M—Minor.Nonacq.—Nonacquiescence.O—Organization.P—Parent Corporation.PHC—Personal Holding Company.PO—Possession of the U.S.PR—Partner.

PRS—Partnership.PTE—Prohibited Transaction Exemption.Pub. L.—Public Law.REIT—Real Estate Investment Trust.Rev. Proc.—Revenue Procedure.Rev. Rul.—Revenue Ruling.S—Subsidiary.S.P.R.—Statement of Procedural Rules.Stat.—Statutes at Large.T—Target Corporation.T.C.—Tax Court.T.D. —Treasury Decision.TFE—Transferee.TFR—Transferor.T.I.R.—Technical Information Release.TP—Taxpayer.TR—Trust.TT—Trustee.U.S.C.—United States Code.X—Corporation.Y—Corporation.Z —Corporation.

April 8, 2013 i 2013–15 I.R.B.

Numerical Finding List1

Bulletins 2013–1 through 2013–15

Announcements:

2013-1, 2013-1 I.R.B. 251

2013-2, 2013-2 I.R.B. 271

2013-3, 2013-2 I.R.B. 271

2013-4, 2013-4 I.R.B. 440

2013-5, 2013-3 I.R.B. 306

2013-6, 2013-3 I.R.B. 307

2013-7, 2013-3 I.R.B. 308

2013-8, 2013-4 I.R.B. 440

2013-9, 2013-4 I.R.B. 441

2013-10, 2013-3 I.R.B. 311

2013-11, 2013-6 I.R.B. 483

2013-12, 2013-11 I.R.B. 651

2013-13, 2013-9 I.R.B. 532

2013-14, 2013-11 I.R.B. 651

2013-15, 2013-11 I.R.B. 652

2013-16, 2013-14 I.R.B. 738

2013-19, 2013-14 I.R.B. 760

2013-20, 2013-14 I.R.B. 761

Notices:

2013-1, 2013-3 I.R.B. 281

2013-2, 2013-6 I.R.B. 473

2013-3, 2013-7 I.R.B. 484

2013-4, 2013-9 I.R.B. 527

2013-5, 2013-9 I.R.B. 529

2013-6, 2013-10 I.R.B. 540

2013-7, 2013-6 I.R.B. 477

2013-8, 2013-7 I.R.B. 486

2013-9, 2013-9 I.R.B. 529

2013-10, 2013-8 I.R.B. 503

2013-11, 2013-11 I.R.B. 610

2013-12, 2013-10 I.R.B. 543

2013-13, 2013-12 I.R.B. 659

2013-14, 2013-13 I.R.B. 712

2013-15, 2013-14 I.R.B. 739

2013-16, 2013-14 I.R.B. 740

2013-18, 2013-14 I.R.B. 742

2013-19, 2013-14 I.R.B. 743

2013-20, 2013-15 I.R.B. 902

2013-21, 2013-15 I.R.B. 903

2013-22, 2013-15 I.R.B. 904

Proposed Regulations:

REG-155929-06, 2013-11 I.R.B. 650

REG-106918-08, 2013-13 I.R.B. 714

REG-141066-09, 2013-3 I.R.B. 289

REG-148873-09, 2013-7 I.R.B. 494

REG-102966-10, 2013-10 I.R.B. 579

REG-140649-11, 2013-12 I.R.B. 666

REG-118315-12, 2013-14 I.R.B. 746

REG-122707-12, 2013-5 I.R.B. 450

Proposed Regulations— Continued:

REG-148500-12, 2013-13 I.R.B. 716

Revenue Procedures:

2013-1, 2013-1 I.R.B. 1

2013-2, 2013-1 I.R.B. 92

2013-3, 2013-1 I.R.B. 113

2013-4, 2013-1 I.R.B. 126

2013-5, 2013-1 I.R.B. 170

2013-6, 2013-1 I.R.B. 198

2013-7, 2013-1 I.R.B. 233

2013-8, 2013-1 I.R.B. 237

2013-9, 2013-2 I.R.B. 255

2013-10, 2013-2 I.R.B. 267

2013-11, 2013-2 I.R.B. 269

2013-12, 2013-4 I.R.B. 313

2013-13, 2013-6 I.R.B. 478

2013-14, 2013-3 I.R.B. 283

2013-15, 2013-5 I.R.B. 444

2013-16, 2013-7 I.R.B. 488

2013-17, 2013-11 I.R.B. 612

2013-18, 2013-8 I.R.B. 503

2013-19, 2013-11 I.R.B. 648

2013-20, 2013-14 I.R.B. 744

2013-21, 2013-12 I.R.B. 660

Revenue Rulings:

2013-1, 2013-2 I.R.B. 252

2013-2, 2013-10 I.R.B. 533

2013-3, 2013-8 I.R.B. 500

2013-4, 2013-9 I.R.B. 520

2013-5, 2013-9 I.R.B. 525

2013-6, 2013-13 I.R.B. 701

2013-7, 2013-11 I.R.B. 608

2013-8, 2013-15 I.R.B. 763

2013-9, 2013-15 I.R.B. 764

Tax Conventions:

2013-16, 2013-14 I.R.B. 738

Treasury Decisions:

9601, 2013-10 I.R.B. 535

9603, 2013-3 I.R.B. 273

9605, 2013-11 I.R.B. 587

9606, 2013-11 I.R.B. 586

9607, 2013-6 I.R.B. 469

9608, 2013-3 I.R.B. 274

9609, 2013-12 I.R.B. 655

9610, 2013-15 I.R.B. 765

9611, 2013-13 I.R.B. 699

9612, 2013-13 I.R.B. 678

9613, 2013-15 I.R.B. 900

1 A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2012–27 through 2012–52 is in Internal Revenue Bulletin2012–52, dated December 27, 2012.

2013–15 I.R.B. ii April 8, 2013

Finding List of Current Actions onPreviously Published Items1

Bulletins 2013–1 through 2013–15

Announcements:

2012-42

Obsoleted by

T.D. 9610, 2013-15 I.R.B. 765

Notices:

2000-45

Modified and superseded by

Notice 2013-18, 2013-14 I.R.B. 742

2010-60

Obsoleted by

T.D. 9610, 2013-15 I.R.B. 765

2011-14

Amplified and supplemented by

Notice 2013-7, 2013-6 I.R.B. 477

2011-34

Obsoleted by

T.D. 9610, 2013-15 I.R.B. 765

2011-38

Obsoleted by

REG-148873-09, 2013-7 I.R.B. 494

2011-53

Obsoleted by

T.D. 9610, 2013-15 I.R.B. 765

2012-60

Superseded by

Notice 2013-1, 2013-3 I.R.B. 281

2013-1


Notice 2013-16, 2013-14 I.R.B. 740

Proposed Regulations:

REG-140668-07

Corrected by

Ann. 2013-6, 2013-3 I.R.B. 307

Revenue Procedures:

87-57

Modified by

Rev. Proc. 2013-13, 2013-6 I.R.B. 478

2004-66


Rev. Proc. 2013-11, 2013-2 I.R.B. 269

2008-35


Rev. Proc. 2013-14, 2013-3 I.R.B. 283

Revenue Procedures— Continued:

2008-50


Rev. Proc. 2013-12, 2013-4 I.R.B. 313

2011-14

Modified by

Rev. Proc. 2013-20, 2013-14 I.R.B. 744

2011-49

Modified by

Rev. Proc. 2013-6, 2013-1 I.R.B. 198

2011-52

Modified and partly superseded by

Rev. Proc. 2013-15, 2013-5 I.R.B. 444

2011-55

Amplified and supplemented by

Notice 2013-7, 2013-6 I.R.B. 477

2011-61

Superseded by

Rev. Proc. 2013-17, 2013-11 I.R.B. 612

2011-62

Superseded by

Rev. Proc. 2013-18, 2013-8 I.R.B. 503

2012-1

Superseded by

Rev. Proc. 2013-1, 2013-1 I.R.B. 1

2012-2

Superseded by

Rev. Proc. 2013-2, 2013-1 I.R.B. 92

2012-3

Superseded by

Rev. Proc. 2013-3, 2013-1 I.R.B. 113

2012-4

Superseded by

Rev. Proc. 2013-4, 2013-1 I.R.B. 126

2012-5

Superseded by

Rev. Proc. 2013-5, 2013-1 I.R.B. 170

2012-6

Superseded by

Rev. Proc. 2013-6, 2013-1 I.R.B. 198

2012-7

Superseded by

Rev. Proc. 2013-7, 2013-1 I.R.B. 233

2012-8

Superseded by

Rev. Proc. 2013-8, 2013-1 I.R.B. 237

2012-9

Superseded by

Rev. Proc. 2013-9, 2013-2 I.R.B. 255

Revenue Procedures— Continued:

2012-10

Superseded by

Rev. Proc. 2013-10, 2013-2 I.R.B. 267

2012-30

Corrected and clarified by

Ann. 2013-3, 2013-2 I.R.B. 271

Updated by

Ann. 2013-10, 2013-3 I.R.B. 311

2012-46

Corrected by

Ann. 2013-11, 2013-6 I.R.B. 483

2013-1

Corrected by

Ann. 2013-9, 2013-4 I.R.B. 441

2013-6

Revised by

Ann. 2013-15, 2013-11 I.R.B. 652

Corrected by

Ann. 2013-13, 2013-9 I.R.B. 532

2013-14

Modified by

Rev. Proc. 2013-19, 2013-11 I.R.B. 648

Revenue Rulings:

92-19

Supplemented in part by

Rev. Rul. 2013-4, 2013-9 I.R.B. 520

Treasury Decisions:

9564

Corrected by

Ann. 2013-4, 2013-4 I.R.B. 440

Amended by

Ann. 2013-7, 2013-3 I.R.B. 308

9604

Corrected by

Ann. 2013-19, 2013-14 I.R.B. 760

1 A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2012–27 through 2012–52 is in Internal Revenue Bulletin 2012–52, dated December 27,2012.

April 8, 2013 iii 2013–15 I.R.B.

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