IRS Finalizes Rules on Foreign TIN Requirements and More in Year-End Regulatory Release
On December 27, 2019, the IRS released final regulations (TD 9890) under Chapter 3 and Chapter 4 relating to a number of information reporting provisions that had previously been announced in a temporary or proposed form. The final rules largely adopt prior regulations (these include temporary regulations issued in 2017 and certain burden reduction proposed regulations issued at the end of 2018) without substantial changes, but several new provisions provide withholding agents additional flexibility for due diligence in a few areas.
Prominent among the provisions in the regulatory release are the rules relating to foreign taxpayer identification number (FTIN) solicitation requirements.
In 2017, the IRS provided a temporary regulation stating that Forms W-8 provided by account holders of financial accounts maintained at a U.S. office of a financial institution would require the account holder's FTIN (or a reasonable explanation as to why the account holder was not issued a FTIN). For individual account holders, the date of birth was also required. These requirements were added in order to facilitate IRS FATCA exchange requirements. Subsequent to these initial rules, the IRS provided transitional and other forms of relief in Notice 2017-46 and Notice 2018-20. The notices provided grace periods for FTIN collection for certain Forms W-8 signed prior to January 1, 2018 and outlined several categories of exceptions to the FTIN/reasonable explanation requirements.
The final regulations incorporate the temporary FTIN rules and the guidance provided in the intervening notices. In addition, the final regulations provide withholding agents additional flexibility in allowing them to obtain FTINs in separate written statements even for Forms W-8 provided on or after January 1, 2018. Under prior guidance, FTINs for Forms W-8 signed on or after January 1, 2018 had to be provided on the form itself.
Beyond FTIN solicitation requirements, the rules in TD 9890 also finalize a number of other technical provisions, including provisions relating to nonqualified intermediary withholding statements, electronic signatures, third party repositories, treaty statements and hold-mail instructions, as well as certain correction and administrative changes. These provisions again are being finalized substantially in the form of prior temporary or proposed rules, but a few changes/clarifications arising from taxpayer comments may be highlighted:
1. Withholding Statements: For nonqualified intermediary (NQI) withholding statements, the final rules provide that the NQI can provide a withholding statement that does not include the Chapter 4 recipient status code for one or more payees in certain cases where the withholding agent is able to separately determine such recipient code.
2. Electronic Signatures: Electronic signatures can be evidenced in the signature format as provided in prior temporary regulations, but a withholding agent can also rely on other documentation or information, in addition to the certificate, that supports the fact that a withholding certificate was electronically signed absent actual knowledge that such documentation or information is incorrect.
3. Third Party Repositories: For third party repositories, the IRS clarified that the prior regulatory provision that a withholding agent be able to associate a withholding certificate from a third party repository with a specific request for the form and specific authorization by the person providing it was not intended to require a separate request and authorization for each payment, if the withholding agent is otherwise permitted to rely on the withholding certificate on an obligation-by-obligation basis (e.g., for the account) under section 1441 regulations outside of the third party repository provisions.
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