I.R.C. § 1471(a) In General —
In the case of any withholdable payment to a foreign financial institution which does
not meet the requirements of subsection
(b), the withholding agent with respect to such payment shall deduct and withhold
from such payment a tax equal to 30 percent of the amount of such payment.
I.R.C. § 1471(b) Reporting Requirements, Etc.
I.R.C. § 1471(b)(1) In General —
The requirements of this subsection are met with respect to any foreign financial
institution if an agreement is in effect between such institution and the Secretary
under which such institution agrees—
I.R.C. § 1471(b)(1)(A) —
to obtain such information regarding each holder of each account maintained by such
institution as is necessary to determine which (if any) of such accounts are United
States accounts,
I.R.C. § 1471(b)(1)(B) —
to comply with such verification and due diligence procedures as the Secretary may
require with respect to the identification of United States accounts,
I.R.C. § 1471(b)(1)(C) —
in the case of any United States account maintained by such institution, to report
on an annual basis the information described in subsection (c) with respect to such account,
I.R.C. § 1471(b)(1)(D) —
to deduct and withhold a tax equal to 30 percent of—
I.R.C. § 1471(b)(1)(D)(i) —
any passthru payment which is made by such institution to a recalcitrant account holder
or another foreign financial institution which does not meet the requirements of this
subsection, and
I.R.C. § 1471(b)(1)(D)(ii) —
in the case of any passthru payment which is made by such institution to a foreign
financial institution which has in effect an election under paragraph (3) with respect to such payment, so much of such payment as is allocable to accounts
held by recalcitrant account holders or foreign financial institutions which do not
meet the requirements of this subsection,
I.R.C. § 1471(b)(1)(E) —
to comply with requests by the Secretary for additional information with respect to
any United States account maintained by such institution, and
I.R.C. § 1471(b)(1)(F) —
in any case in which any foreign law would (but for a waiver described in clause (i)) prevent the reporting of any information referred to in this subsection or subsection
(c) with respect to any United States account maintained by such institution—
I.R.C. § 1471(b)(1)(F)(i) —
to attempt to obtain a valid and effective waiver of such law from each holder of
such account, and
I.R.C. § 1471(b)(1)(F)(ii) —
if a waiver described in clause (i) is not obtained from each such holder within a reasonable period of time, to close
such account.
Any agreement entered into under this subsection may be terminated by the Secretary
upon a determination by the Secretary that the foreign financial institution is out
of compliance with such agreement.
I.R.C. § 1471(b)(2) Financial Institutions Deemed To Meet Requirements In Certain Cases —
A foreign financial institution may be treated by the Secretary as meeting the requirements
of this subsection if—
I.R.C. § 1471(b)(2)(A) —
such institution—
I.R.C. § 1471(b)(2)(A)(i) —
complies with such procedures as the Secretary may prescribe to ensure that such institution
does not maintain United States accounts, and
I.R.C. § 1471(b)(2)(A)(ii) —
meets such other requirements as the Secretary may prescribe with respect to accounts
of other foreign financial institutions maintained by such institution, or
I.R.C. § 1471(b)(2)(B) —
such institution is a member of a class of institutions with respect to which the
Secretary has determined that the application of this section is not necessary to
carry out the purposes of this section.
I.R.C. § 1471(b)(3) Election To Be Withheld Upon Rather Than Withhold On Payments To Recalcitrant Account
Holders And Nonparticipating Foreign Financial Institutions —
In the case of a foreign financial institution which meets the requirements of this
subsection and such other requirements as the Secretary may provide and which elects
the application of this paragraph—
I.R.C. § 1471(b)(3)(A) —
the requirements of paragraph (1)(D) shall not apply,
I.R.C. § 1471(b)(3)(B) —
the withholding tax imposed under subsection (a) shall apply with respect to any withholdable payment to such institution to the extent
such payment is allocable to accounts held by recalcitrant account holders or foreign
financial institutions which do not meet the requirements of this subsection, and
I.R.C. § 1471(b)(3)(C) —
the agreement described in paragraph (1) shall—
I.R.C. § 1471(b)(3)(C)(i) —
require such institution to notify the withholding agent with respect to each such
payment of the institution's election under this paragraph and such other information
as may be necessary for the withholding agent to determine the appropriate amount
to deduct and withhold from such payment, and
I.R.C. § 1471(b)(3)(C)(ii) —
include a waiver of any right under any treaty of the United States with respect to
any amount deducted and withheld pursuant to an election under this paragraph.
To the extent provided by the Secretary, the election under this paragraph may be
made with respect to certain classes or types of accounts of the foreign financial
institution.
I.R.C. § 1471(c) Information Required To Be Reported On United States Accounts
I.R.C. § 1471(c)(1) In General —
The agreement described in subsection (b) shall require the foreign financial institution to report the following with respect
to each United States account maintained by such institution:
I.R.C. § 1471(c)(1)(A) —
The name, address, and TIN of each account holder which is a specified United States
person and, in the case of any account holder which is a United States owned foreign
entity, the name, address, and TIN of each substantial United States owner of such
entity.
I.R.C. § 1471(c)(1)(B) —
The account number.
I.R.C. § 1471(c)(1)(C) —
The account balance or value (determined at such time and in such manner as the Secretary
may provide).
I.R.C. § 1471(c)(1)(D) —
Except to the extent provided by the Secretary, the gross receipts and gross withdrawals
or payments from the account (determined for such period and in such manner as the
Secretary may provide).
I.R.C. § 1471(c)(2) Election To Be Subject To Same Reporting As United States Financial Institutions —
In the case of a foreign financial institution which elects the application of this
paragraph—
I.R.C. § 1471(c)(2)(A) —
subparagraphs (C) and (D) of paragraph (1) shall not apply, and
I.R.C. § 1471(c)(2)(B) —
the agreement described in subsection (b) shall require such foreign financial institution to report such information with
respect to each United States account maintained by such institution as such institution
would be required to report under sections 6041, 6042, 6045, and 6049 if—
I.R.C. § 1471(c)(2)(B)(i) —
such institution were a United States person, and
I.R.C. § 1471(c)(2)(B)(ii) —
each holder of such account which is a specified United States person or United States
owned foreign entity were a natural person and citizen of the United States.
An election under this paragraph shall be made at such time, in such manner, and subject
to such conditions as the Secretary may provide.
I.R.C. § 1471(c)(3) Separate Requirements For Qualified Intermediaries —
In the case of a foreign financial institution which is treated as a qualified intermediary
by the Secretary for purposes of section 1441 and the regulations issued thereunder,
the requirements of this section shall be in addition to any reporting or other requirements
imposed by the Secretary for purposes of such treatment.
I.R.C. § 1471(d) Definitions —
For purposes of this section—
I.R.C. § 1471(d)(1) United States Account
I.R.C. § 1471(d)(1)(A) In General —
The term “United States account” means any financial account which is held by one
or more specified United States persons or United States owned foreign entities.
I.R.C. § 1471(d)(1)(B) Exception For Certain Accounts Held By Individuals —
Unless the foreign financial institution elects to not have this subparagraph apply,
such term shall not include any depository account maintained by such financial institution
if—
I.R.C. § 1471(d)(1)(B)(i) —
each holder of such account is a natural person, and
I.R.C. § 1471(d)(1)(B)(ii) —
with respect to each holder of such account, the aggregate value of all depository
accounts held (in whole or in part) by such holder and maintained by the same financial
institution which maintains such account does not exceed $50,000.
To the extent provided by the Secretary, financial institutions which are members
of the same expanded affiliated group shall be treated for purposes of clause (ii) as a single financial institution.
I.R.C. § 1471(d)(1)(C) Elimination Of Duplicative Reporting Requirements —
Such term shall not include any financial account in a foreign financial institution
if—
I.R.C. § 1471(d)(1)(C)(i) —
such account is held by another financial institution which meets the requirements
of subsection (b), or
I.R.C. § 1471(d)(1)(C)(ii) —
the holder of such account is otherwise subject to information reporting requirements
which the Secretary determines would make the reporting required by this section with
respect to United States accounts duplicative.
I.R.C. § 1471(d)(2) Financial Account —
Except as otherwise provided by the Secretary, the term “financial account” means,
with respect to any financial institution—
I.R.C. § 1471(d)(2)(A) —
any depository account maintained by such financial institution,
I.R.C. § 1471(d)(2)(B) —
any custodial account maintained by such financial institution, and
I.R.C. § 1471(d)(2)(C) —
any equity or debt interest in such financial institution (other than interests which
are regularly traded on an established securities market).
Any equity or debt interest which constitutes a financial account under subparagraph
(C) with respect to any financial institution shall be treated for purposes of this section
as maintained by such financial institution.
I.R.C. § 1471(d)(3) United States Owned Foreign Entity —
The term “United States owned foreign entity”
means any foreign entity which has one or more substantial United States owners.
I.R.C. § 1471(d)(4) Foreign Financial Institution —
The term “foreign financial institution”
means any financial institution which is a foreign entity. Except as otherwise provided
by the Secretary, such term shall not include a financial institution which is organized
under the laws of any possession of the United States.
I.R.C. § 1471(d)(5) Financial Institution —
Except as otherwise provided by the Secretary, the term “financial institution” means
any entity that—
I.R.C. § 1471(d)(5)(A) —
accepts deposits in the ordinary course of a banking or similar business,
I.R.C. § 1471(d)(5)(B) —
as a substantial portion of its business, holds financial assets for the account of
others, or
I.R.C. § 1471(d)(5)(C) —
is engaged (or holding itself out as being engaged) primarily in the business of investing,
reinvesting, or trading in securities (as defined in section 475(c)(2) without regard to the last sentence thereof), partnership interests, commodities
(as defined in section 475(e)(2)), or any interest (including a futures or forward contract or option)
in such securities, partnership interests, or commodities.
I.R.C. § 1471(d)(6) Recalcitrant Account Holder —
The term “recalcitrant account holder” means any account holder which—
I.R.C. § 1471(d)(6)(A) —
fails to comply with reasonable requests for the information referred to in subsection
(b)(1)(A) or (c)(1)(A), or
I.R.C. § 1471(d)(6)(B) —
fails to provide a waiver described in subsection (b)(1)(F) upon request.
I.R.C. § 1471(d)(7) PassThru Payment —
The term “passthru payment” means any withholdable payment or other payment to the
extent attributable to a withholdable payment.
I.R.C. § 1471(e) Affiliated Groups —
I.R.C. § 1471(e)(1) In General —
The requirements of subsections (b) and (c)(1) shall apply—
I.R.C. § 1471(e)(1)(A) —
with respect to United States accounts maintained by the foreign financial institution,
and
I.R.C. § 1471(e)(1)(B) —
except as otherwise provided by the Secretary, with respect to United States accounts
maintained by each other foreign financial institution (other than any foreign financial
institution which meets the requirements of subsection (b)) which is a member of the same expanded affiliated group as such foreign financial
institution.
I.R.C. § 1471(e)(2) Expanded Affiliated Group —
For purposes of this section, the term ”expanded affiliated group” means an affiliated
group as defined in section 1504(a), determined—
I.R.C. § 1471(e)(2)(A) —
by substituting “more than 50 percent”
for “at least 80 percent” each place it appears, and
I.R.C. § 1471(e)(2)(B) —
without regard to paragraphs (2) and (3) of section 1504(b).
A partnership or any other entity
(other than a corporation) shall be treated as a member of an expanded affiliated
group if such entity is controlled (within the meaning of section 954(d)(3))
by members of such group (including any entity treated as a member of such group by
reason of this sentence).
I.R.C. § 1471(f) Exception For Certain Payments —
Subsection (a) shall not apply to any payment to the extent that the beneficial owner
of such payment is—
I.R.C. § 1471(f)(1) —
any foreign government, any political subdivision of a foreign government, or any
wholly owned agency or instrumentality of any one or more of the foregoing,
I.R.C. § 1471(f)(2) —
any international organization or any wholly owned agency or instrumentality thereof,
I.R.C. § 1471(f)(3) —
any foreign central bank of issue, or
I.R.C. § 1471(f)(4) —
any other class of persons identified by the Secretary for purposes of this subsection
as posing a low risk of tax evasion.
(Mar. 18, 2010, Pub. L. 111-147, Sec. 501(a), 124 Stat. 71.)
BACKGROUND NOTES
EFFECTIVE DATE
Effective for payments made after December 31, 2012.
Sec. 501(d)(2) of Pub. L. 111-147 provided the following special rule:
“(2) GRANDFATHERED TREATMENT OF OUTSTANDING OBLIGATIONS.—The amendments made by this
section shall not require any amount to be deducted or withheld from any payment under
any obligation outstanding on the date which is 2 years after the date of the enactment
of this Act or from the gross proceeds from any disposition of such an obligation.”
