26 U.S.C. § 1445 — Withholding of tax on dispositions of United States real property interests

**(a) General rule** Except as otherwise provided in this section, in the case of any disposition of a United States real property interest (as defined in section 897(c)) by a foreign person, the transferee shall be required to deduct and withhold a tax equal to 15 percent of the amount realized on the disposition. **(b) Exemptions** (1) **In general** — No person shall be required to deduct and withhold any amount under subsection (a) with respect to a disposition if paragraph (2), (3), (4), (5), or (6) applies to the transaction. (2) **Transferor furnishes nonforeign affidavit** — Except as provided in paragraph (7), this paragraph applies to the disposition if the transferor furnishes to the transferee an affidavit by the transferor stating, under penalty of perjury, the transferor’s United States taxpayer identification number and that the transferor is not a foreign person. (3) **Nonpublicly traded domestic corporation furnishes affidavit that interests in corporation not United States real property interests** — Except as provided in paragraph (7), this paragraph applies in the case of a disposition of any interest in any domestic corporation if the domestic corporation furnishes to the transferee an affidavit by the domestic corporation stating, under penalty of perjury, that— (A) the domestic corporation is not and has not been a United States real property holding corporation (as defined in section 897(c)(2)) during the applicable period specified in section 897(c)(1)(A)(ii), or (B) as of the date of the disposition, interests in such corporation are not United States real property interests by reason of section 897(c)(1)(B). (4) **Transferee receives qualifying statement** (A) *In general* — This paragraph applies to the disposition if the transferee receives a qualifying statement at such time, in such manner, and subject to such terms and conditions as the Secretary may by regulations prescribe. (B) *Qualifying statement* — For purposes of subparagraph (A), the term “qualifying statement” means a statement by the Secretary that— (i) the transferor either— (I) has reached agreement with the Secretary (or such agreement has been reached by the transferee) for the payment of any tax imposed by section 871(b)(1) or 882(a)(1) on any gain recognized by the transferor on the disposition of the United States real property interest, or (II) is exempt from any tax imposed by section 871(b)(1) or 882(a)(1) on any gain recognized by the transferor on the disposition of the United States real property interest, and (ii) the transferor or transferee has satisfied any transferor’s unsatisfied withholding liability or has provided adequate security to cover such liability. (5) **Residence where amount realized does not exceed $300,000** — This paragraph applies to the disposition if— (A) the property is acquired by the transferee for use by him as a residence, and (B) the amount realized for the property does not exceed $300,000. (6) **Stock regularly traded on established securities market** — This paragraph applies if the disposition is of a share of a class of stock that is regularly traded on an established securities market. (7) **Special rules for paragraphs (2), (3), and (9)** — Paragraph (2), (3), or (9) (as the case may be) shall not apply to any disposition— (A) if— (i) the transferee or qualified substitute has actual knowledge that the affidavit referred to in such paragraph, or the statement referred to in paragraph (9)(A)(ii), is false, or (ii) the transferee or qualified substitute receives a notice (as described in subsection (d)) from a transferor’s agent, transferee’s agent, or qualified substitute that such affidavit or statement is false, or (B) if the Secretary by regulations requires the transferee or qualified substitute to furnish a copy of such affidavit or statement to the Secretary and the transferee or qualified substitute fails to furnish a copy of such affidavit or statement to the Secretary at such time and in such manner as required by such regulations. (8) **Applicable wash sales transactions** — No person shall be required to deduct and withhold any amount under subsection (a) with respect to a disposition which is treated as a disposition of a United States real property interest solely by reason of section 897(h)(5). (9) **Alternative procedure for furnishing nonforeign affidavit** — For purposes of paragraphs (2) and (7)— (A) *In general* — Paragraph (2) shall be treated as applying to a transaction if, in connection with a disposition of a United States real property interest— (i) the affidavit specified in paragraph (2) is furnished to a qualified substitute, and (ii) the qualified substitute furnishes a statement to the transferee stating, under penalty of perjury, that the qualified substitute has such affidavit in his possession. (B) *Regulations* — The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out this paragraph. **(c) Limitations on amount required to be withheld** (1) **Cannot exceed transferor’s maximum tax liability** (A) *In general* — The amount required to be withheld under this section with respect to any disposition shall not exceed the amount (if any) determined under subparagraph (B) as the transferor’s maximum tax liability. (B) *Request* — At the request of the transferor or transferee, the Secretary shall determine, with respect to any disposition, the transferor’s maximum tax liability. (C) *Refund of excess amounts withheld* — Subject to such terms and conditions as the Secretary may by regulations prescribe, a transferor may seek and obtain a refund of any amounts withheld under this section in excess of the transferor’s maximum tax liability. (2) **Authority of Secretary to prescribe reduced amount** — At the request of the transferor or transferee, the Secretary may prescribe a reduced amount to be withheld under this section if the Secretary determines that to substitute such reduced amount will not jeopardize the collection of the tax imposed by section 871(b)(1) or 882(a)(1). (3) **Procedural rules** (A) *Regulations* — Requests for— (i) qualifying statements under subsection (b)(4), (ii) determinations of transferor’s maximum tax liability under paragraph (1), and (iii) reductions under paragraph (2) in the amount required to be withheld, shall be made at the time and manner, and shall include such information, as the Secretary shall prescribe by regulations. (B) *Requests to be handled within 90 days* — The Secretary shall take action with respect to any request described in subparagraph (A) within 90 days after the Secretary receives the request. (4) **Reduced rate of withholding for residence where amount realized does not exceed $1,000,000** — In the case of a disposition— (A) of property which is acquired by the transferee for use by the transferee as a residence, (B) with respect to which the amount realized for such property does not exceed $1,000,000, and (C) to which subsection (b)(5) does not apply, subsection (a) shall be applied by substituting “10 percent” for “15 percent”. **(d) Liability of transferor’s agents, transferee’s agents, or qualified substitutes** (1) **Notice of false affidavit; foreign corporations** — If— (A) the transferor furnishes the transferee or qualified substitute an affidavit described in paragraph (2) of subsection (b) or a domestic corporation furnishes the transferee an affidavit described in paragraph (3) of subsection (b), and (B) in the case of— (i) any transferor’s agent— (I) such agent has actual knowledge that such affidavit is false, or (II) in the case of an affidavit described in subsection (b)(2) furnished by a corporation, such corporation is a foreign corporation, or (ii) any transferee’s agent or qualified substitute, such agent or substitute has actual knowledge that such affidavit is false, such agent or qualified substitute shall so notify the transferee at such time and in such manner as the Secretary shall require by regulations. (2) **Failure to furnish notice** (A) *In general* — If any transferor’s agent, transferee’s agent, or qualified substitute is required by paragraph (1) to furnish notice, but fails to furnish such notice at such time or times and in such manner as may be required by regulations, such agent or substitute shall have the same duty to deduct and withhold that the transferee would have had if such agent or substitute had complied with paragraph (1). (B) *Liability limited to amount of compensation* — An agent’s or substitute’s liability under subparagraph (A) shall be limited to the amount of compensation the agent or substitute derives from the transaction. (3) **Transferor’s agent** — For purposes of this subsection, the term “transferor’s agent” means any person who represents the transferor— (A) in any negotiation with the transferee or any transferee’s agent related to the transaction, or (B) in settling the transaction. (4) **Transferee’s agent** — For purposes of this subsection, the term “transferee’s agent” means any person who represents the transferee— (A) in any negotiation with the transferor or any transferor’s agent related to the transaction, or (B) in settling the transaction. (5) **Settlement officer not treated as transferor’s agent** — For purposes of this subsection, a person shall not be treated as a transferor’s agent or transferee’s agent with respect to any transaction merely because such person performs 1 or more of the following acts: (A) The receipt and the disbursement of any portion of the consideration for the transaction. (B) The recording of any document in connection with the transaction. **(e) Special rules relating to distributions, etc., by corporations, partnerships, trusts, or estates** (1) **Certain domestic partnerships, trusts, and estates** — In the case of any disposition of a United States real property interest as defined in section 897(c) (other than a disposition described in paragraph (4) or (5)) by a domestic partnership, domestic trust, or domestic estate, such partnership, the trustee of such trust, or the executor of such estate (as the case may be) shall be required to deduct and withhold under subsection (a) a tax equal to the highest rate of tax in effect for the taxable year under section 11(b) (or, to the extent provided in regulations, 20 percent) multiplied by the gain realized to the extent such gain— (A) is allocable to a foreign person who is a partner or beneficiary of such partnership, trust, or estate, or (B) is allocable to a portion of the trust treated as owned by a foreign person under subpart E of part I of subchapter J. (2) **Certain distributions by foreign corporations** — In the case of any distribution by a foreign corporation on which gain is recognized under subsection (d) or (e) of section 897, the foreign corporation shall deduct and withhold under subsection (a) a tax equal to the highest rate of tax in effect for the taxable year under section 11(b) multiplied by the amount of gain recognized on such distribution under such subsection. (3) **Distributions by certain domestic corporations to foreign shareholders** — If a domestic corporation which is or has been a United States real property holding corporation (as defined in section 897(c)(2)) during the applicable period specified in section 897(c)(1)(A)(ii) distributes property to a foreign person in a transaction to which section 302 or part II of subchapter C applies, such corporation shall deduct and withhold under subsection (a) a tax equal to 15 percent of the amount realized by the foreign shareholder. The preceding sentence shall not apply if, as of the date of the distribution, interests in such corporation are not United States real property interests by reason of section 897(c)(1)(B). Rules similar to the rules of the preceding provisions of this paragraph shall apply in the case of any distribution to which section 301 applies and which is not made out of the earnings and profits of such a domestic corporation. (4) **Taxable distributions by domestic or foreign partnerships, trusts, or estates** — A domestic or foreign partnership, the trustee of a domestic or foreign trust, or the executor of a domestic or foreign estate shall be required to deduct and withhold under subsection (a) a tax equal to 15 percent of the fair market value (as of the time of the taxable distribution) of any United States real property interest distributed to a partner of the partnership or a beneficiary of the trust or estate, as the case may be, who is a foreign person in a transaction which would constitute a taxable distribution under the regulations promulgated by the Secretary pursuant to section 897. (5) **Rules relating to dispositions of interest in partnerships, trusts, or estates** — To the extent provided in regulations, the transferee of a partnership interest or of a beneficial interest in a trust or estate shall be required to deduct and withhold under subsection (a) a tax equal to 15 percent of the amount realized on the disposition. (6) **Distributions by regulated investment companies and real estate investment trusts** — If any portion of a distribution from a qualified investment entity (as defined in section 897(h)(4)) to a nonresident alien individual or a foreign corporation is treated under section 897(h)(1) as gain realized by such individual or corporation from the sale or exchange of a United States real property interest, the qualified investment entity shall deduct and withhold under subsection (a) a tax equal to the highest rate of tax in effect for the taxable year under section 11(b) (or, to the extent provided in regulations, 20 percent) multiplied by the amount so treated. (7) **Regulations** — The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this subsection, including regulations providing for exceptions from provisions of this subsection and regulations for the application of this subsection in the case of payments through 1 or more entities. **(f) Definitions** For purposes of this section— (1) **Transferor** — The term “transferor” means the person disposing of the United States real property interest. (2) **Transferee** — The term “transferee” means the person acquiring the United States real property interest. (3) **Foreign person** — The term “foreign person” means any person other than— (A) a United States person, and (B) except as otherwise provided by the Secretary, an entity with respect to which section 897 does not apply by reason of subsection (l) thereof. (4) **Transferor’s maximum tax liability** — The term “transferor’s maximum tax liability” means, with respect to the disposition of any interest, the sum of— (A) the maximum amount which the Secretary determines could be imposed as tax under section 871(b)(1) or 882(a)(1) by reason of the disposition, plus (B) the amount the Secretary determines to be the transferor’s unsatisfied withholding liability with respect to such interest. (5) **Transferor’s unsatisfied withholding liability** — The term “transferor’s unsatisfied withholding liability” means the withholding obligation imposed by this section on the transferor’s acquisition of the United States real property interest or on the acquisition of a predecessor interest, to the extent such obligation has not been satisfied. (6) **Qualified substitute** — The term “qualified substitute” means, with respect to a disposition of a United States real property interest— (A) the person (including any attorney or title company) responsible for closing the transaction, other than the transferor’s agent, and (B) the transferee’s agent.