26 U.S.C. § 1471 — Withholdable payments to foreign finan-

Page 2539 TITLE 26—INTERNAL REVENUE CODE § 1471 Jan. 1, 1984, pursuant to section 475(b) of Pub. L. 98–369, set out as an Effective Date of 1984 Amendment note under section 33 of this title. § 1461. Liability for withheld tax Every person required to deduct and withhold any tax under this chapter is hereby made liable for such tax and is hereby indemnified against the claims and demands of any person for the amount of any payments made in accordance with the provisions of this chapter. (Aug. 16, 1954, ch. 736, 68A Stat. 360; Pub. L. 89–809, title I, § 103(i), Nov. 13, 1966, 80 Stat. 1554.) Editorial Notes AMENDMENTS 1966—Pub. L. 89–809 struck out requirement that per- sons required to deduct and withhold any tax under this chapter make return thereof on or before March 15 of each year and pay the tax to the officer designated in section 6151, and substituted ‘‘Liability for withheld tax’’ for ‘‘Return and payment of withheld tax’’ in sec- tion catchline. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1966 AMENDMENT Amendment by Pub. L. 89–809 applicable with respect to payments occurring after Dec. 31, 1966, see section 103(n)(3) of Pub. L. 89–809, set out as a note under sec- tion 871 of this title. § 1462. Withheld tax as credit to recipient of in- come Income on which any tax is required to be withheld at the source under this chapter shall be included in the return of the recipient of such income, but any amount of tax so withheld shall be credited against the amount of income tax as computed in such return. (Aug. 16, 1954, ch. 736, 68A Stat. 360.) § 1463. Tax paid by recipient of income If— (1) any person, in violation of the provisions of this chapter, fails to deduct and withhold any tax under this chapter, and (2) thereafter the tax against which such tax may be credited is paid, the tax so required to be deducted and withheld shall not be collected from such person; but this section shall in no case relieve such person from liability for interest or any penalties or addi- tions to the tax otherwise applicable in respect of such failure to deduct and withhold. (Aug. 16, 1954, ch. 736, 68A Stat. 360; Pub. L. 101–239, title VII, § 7743(a), Dec. 19, 1989, 103 Stat. 2406; Pub. L. 104–188, title I, § 1704(t)(9), Aug. 20, 1996, 110 Stat. 1887.) Editorial Notes AMENDMENTS 1996—Pub. L. 104–188 substituted ‘‘this section’’ for ‘‘this subsection’’. 1989—Pub. L. 101–239 amended section generally. Prior to amendment, section read as follows: ‘‘If any tax re- quired under this chapter to be deducted and withheld is paid by the recipient of the income, it shall not be re-collected from the withholding agent; nor in cases in which the tax is so paid shall any penalty be imposed on or collected from the recipient of the income or the withholding agent for failure to return or pay the same, unless such failure was fraudulent and for the purpose of evading payment.’’ Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1989 AMENDMENT Pub. L. 101–239, title VII, § 7743(b), Dec. 19, 1989, 103 Stat. 2406, provided that: ‘‘The amendment made by subsection (a) [amending this section] shall apply to failures after December 31, 1989.’’ § 1464. Refunds and credits with respect to with- held tax Where there has been an overpayment of tax under this chapter, any refund or credit made under chapter 65 shall be made to the with- holding agent unless the amount of such tax was actually withheld by the withholding agent. (Aug. 16, 1954, ch. 736, 68A Stat. 360.) [§ 1465. Repealed. Pub. L. 94–455, title XIX, § 1901(a)(156), Oct. 4, 1976, 90 Stat. 1789] Section, act Aug. 16, 1954, ch. 736, 68A Stat. 360, de- fined withholding agent. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF REPEAL Repeal applicable with respect to taxable years be- ginning after Dec. 31, 1976, see section 1901(d) of Pub. L. 94–455, set out as an Effective Date of 1976 Amendment note under section 2 of this title. CHAPTER 4—TAXES TO ENFORCE REPORT- ING ON CERTAIN FOREIGN ACCOUNTS Sec. 1471. Withholdable payments to foreign financial institutions. 1472. Withholdable payments to other foreign enti- ties. 1473. Definitions. 1474. Special rules. Editorial Notes PRIOR PROVISIONS A prior chapter 4, consisting of sections 1481 and 1482, which related to rules applicable to recovery of exces- sive profits on government contracts, was repealed by Pub. L. 101–508, title XI, § 11801(a)(37), Nov. 5, 1990, 104 Stat. 1388–521. Section 1481, acts Aug. 16, 1954, ch. 736, 68A Stat. 362; June 21, 1965, Pub. L. 89–44, title VIII, § 809(d)(5)(B), 79 Stat. 168; Oct. 4, 1976, Pub. L. 94–455, title XIX, §§ 1901(a)(157), 1906(b)(13)(A), 1951(b)(14)(A), 90 Stat. 1789, 1834, 1840, related to mitigation of effect of renegoti- ation of government contracts. Section 1482, added Pub. L. 85–866, title I, § 62(a), Sept. 2, 1958, 72 Stat. 1648, related to readjustment for repay- ments made pursuant to price redeterminations. § 1471. Withholdable payments to foreign finan- cial institutions (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 Page 2540 TITLE 26—INTERNAL REVENUE CODE § 1471 tax equal to 30 percent of the amount of such payment. (b) Reporting requirements, etc. (1) In general The requirements of this subsection are met with respect to any foreign financial institu- tion if an agreement is in effect between such institution and the Secretary under which such institution agrees— (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, (B) to comply with such verification and due diligence procedures as the Secretary may require with respect to the identifica- tion of United States accounts, (C) in the case of any United States ac- count maintained by such institution, to re- port on an annual basis the information de- scribed in subsection (c) with respect to such account, (D) to deduct and withhold a tax equal to 30 percent of— (i) any passthru payment which is made by such institution to a recalcitrant ac- count holder or another foreign financial institution which does not meet the re- quirements of this subsection, and (ii) in the case of any passthru payment which is made by such institution to a for- eign financial institution which has in ef- fect 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, (E) to comply with requests by the Sec- retary for additional information with re- spect to any United States account main- tained by such institution, and (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 ac- count maintained by such institution— (i) to attempt to obtain a valid and effec- tive waiver of such law from each holder of such account, and (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 sub- section may be terminated by the Secretary upon a determination by the Secretary that the foreign financial institution is out of com- pliance with such agreement. (2) Financial institutions deemed to meet re- quirements in certain cases A foreign financial institution may be treat- ed by the Secretary as meeting the require- ments of this subsection if— (A) such institution— (i) complies with such procedures as the Secretary may prescribe to ensure that such institution does not maintain United States accounts, and (ii) meets such other requirements as the Secretary may prescribe with respect to accounts of other foreign financial institu- tions maintained by such institution, or (B) such institution is a member of a class of institutions with respect to which the Secretary has determined that the applica- tion of this section is not necessary to carry out the purposes of this section. (3) Election to be withheld upon rather than withhold on payments to recalcitrant ac- count holders and nonparticipating foreign financial institutions In the case of a foreign financial institution which meets the requirements of this sub- section and such other requirements as the Secretary may provide and which elects the application of this paragraph— (A) the requirements of paragraph (1)(D) shall not apply, (B) the withholding tax imposed under subsection (a) shall apply with respect to any withholdable payment to such institu- tion 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 (C) the agreement described in paragraph (1) shall— (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 infor- mation as may be necessary for the with- holding agent to determine the appro- priate amount to deduct and withhold from such payment, and (ii) include a waiver of any right under any treaty of the United States with re- spect to any amount deducted and with- held 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 ac- counts of the foreign financial institution. (c) Information required to be reported on United States accounts (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 in- stitution: (A) The name, address, and TIN of each ac- count holder which is a specified United States person and, in the case of any ac- count holder which is a United States owned foreign entity, the name, address, and TIN of each substantial United States owner of such entity. (B) The account number. (C) The account balance or value (deter- mined at such time and in such manner as the Secretary may provide). Page 2541 TITLE 26—INTERNAL REVENUE CODE § 1471 (D) Except to the extent provided by the Secretary, the gross receipts and gross with- drawals or payments from the account (de- termined for such period and in such manner as the Secretary may provide). (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 para- graph— (A) subparagraphs (C) and (D) of paragraph (1) shall not apply, and (B) the agreement described in subsection (b) shall require such foreign financial insti- tution to report such information with re- spect to each United States account main- tained by such institution as such institu- tion would be required to report under sec- tions 6041, 6042, 6045, and 6049 if— (i) such institution were a United States person, and (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 sub- ject to such conditions as the Secretary may provide. (3) Separate requirements for qualified inter- mediaries 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 require- ments of this section shall be in addition to any reporting or other requirements imposed by the Secretary for purposes of such treat- ment. (d) Definitions For purposes of this section— (1) United States account (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. (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 insti- tution if— (i) each holder of such account is a nat- ural person, and (ii) with respect to each holder of such account, the aggregate value of all deposi- tory 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, fi- nancial institutions which are members of the same expanded affiliated group shall be treated for purposes of clause (ii) as a single financial institution. (C) Elimination of duplicative reporting re- quirements Such term shall not include any financial account in a foreign financial institution if— (i) such account is held by another finan- cial institution which meets the require- ments of subsection (b), or (ii) the holder of such account is other- wise subject to information reporting re- quirements which the Secretary deter- mines would make the reporting required by this section with respect to United States accounts duplicative. (2) Financial account Except as otherwise provided by the Sec- retary, the term ‘‘financial account’’ means, with respect to any financial institution— (A) any depository account maintained by such financial institution, (B) any custodial account maintained by such financial institution, and (C) any equity or debt interest in such fi- nancial 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 main- tained by such financial institution. (3) United States owned foreign entity The term ‘‘United States owned foreign enti- ty’’ means any foreign entity which has one or more substantial United States owners. (4) Foreign financial institution The term ‘‘foreign financial institution’’ means any financial institution which is a for- eign 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. (5) Financial institution Except as otherwise provided by the Sec- retary, the term ‘‘financial institution’’ means any entity that— (A) accepts deposits in the ordinary course of a banking or similar business, (B) as a substantial portion of its business, holds financial assets for the account of oth- ers, or (C) is engaged (or holding itself out as being engaged) primarily in the business of investing, reinvesting, or trading in securi- ties (as defined in section 475(c)(2) without regard to the last sentence thereof), partner- ship 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. (6) Recalcitrant account holder The term ‘‘recalcitrant account holder’’ means any account holder which— (A) fails to comply with reasonable re- quests for the information referred to in sub- section (b)(1)(A) or (c)(1)(A), or Page 2542 TITLE 26—INTERNAL REVENUE CODE § 1472 (B) fails to provide a waiver described in subsection (b)(1)(F) upon request. (7) Passthru payment The term ‘‘passthru payment’’ means any withholdable payment or other payment to the extent attributable to a withholdable pay- ment. (e) Affiliated groups (1) In general The requirements of subsections (b) and (c)(1) shall apply— (A) with respect to United States accounts maintained by the foreign financial institu- tion, and (B) except as otherwise provided by the Secretary, with respect to United States ac- counts maintained by each other foreign fi- nancial institution (other than any foreign financial institution which meets the re- quirements of subsection (b)) which is a member of the same expanded affiliated group as such foreign financial institution. (2) Expanded affiliated group For purposes of this section, the term ‘‘ex- panded affiliated group’’ means an affiliated group as defined in section 1504(a), deter- mined— (A) by substituting ‘‘more than 50 percent’’ for ‘‘at least 80 percent’’ each place it ap- pears, and (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). (f) Exception for certain payments Subsection (a) shall not apply to any payment to the extent that the beneficial owner of such payment is— (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, (2) any international organization or any wholly owned agency or instrumentality thereof, (3) any foreign central bank of issue, or (4) any other class of persons identified by the Secretary for purposes of this subsection as posing a low risk of tax evasion. (Added Pub. L. 111–147, title V, § 501(a), Mar. 18, 2010, 124 Stat. 97.) Editorial Notes PRIOR PROVISIONS A prior section 1471, act Aug. 16, 1954, ch. 736, 68A Stat. 361, related to recovery of excessive profits on government contracts, prior to repeal by Pub. L. 94–455, title XIX, § 1901(b)(13)(A), Oct. 4, 1976, 90 Stat. 1840. Statutory Notes and Related Subsidiaries EFFECTIVE DATE Pub. L. 111–147, title V, § 501(d), Mar. 18, 2010, 124 Stat. 106, provided that: ‘‘(1) IN GENERAL.—Except as otherwise provided in this subsection, the amendments made by this section [enacting this chapter and amending sections 6414, 6501, 6513, 6611, and 6724 of this title] shall apply to payments made after December 31, 2012. ‘‘(2) GRANDFATHERED TREATMENT OF OUTSTANDING OB- LIGATIONS.—The amendments made by this section shall not require any amount to be deducted or with- held from any payment under any obligation out- standing on the date which is 2 years after the date of the enactment of this Act [Mar. 18, 2010] or from the gross proceeds from any disposition of such an obliga- tion. ‘‘(3) INTEREST ON OVERPAYMENTS.—The amendment made by subsection (b) [amending section 6611 of this title] shall apply— ‘‘(A) in the case of such amendment’s application to paragraph (1) of section 6611(e) of the Internal Rev- enue Code of 1986, to returns the due date for which (determined without regard to extensions) is after the date of the enactment of this Act, ‘‘(B) in the case of such amendment’s application to paragraph (2) of such section, to claims for credit or refund of any overpayment filed after the date of the enactment of this Act (regardless of the taxable pe- riod to which such refund relates), and ‘‘(C) in the case of such amendment’s application to paragraph (3) of such section, to refunds paid after the date of the enactment of this Act (regardless of the taxable period to which such refund relates).’’ § 1472. Withholdable payments to other foreign entities (a) In general In the case of any withholdable payment to a non-financial foreign entity, if— (1) the beneficial owner of such payment is such entity or any other non-financial foreign entity, and (2) the requirements of subsection (b) are not met with respect to such beneficial owner, then 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. (b) Requirements for waiver of withholding The requirements of this subsection are met with respect to the beneficial owner of a pay- ment if— (1) such beneficial owner or the payee pro- vides the withholding agent with either— (A) a certification that such beneficial owner does not have any substantial United States owners, or (B) the name, address, and TIN of each substantial United States owner of such ben- eficial owner, (2) the withholding agent does not know, or have reason to know, that any information provided under paragraph (1) is incorrect, and (3) the withholding agent reports the infor- mation provided under paragraph (1)(B) to the Secretary in such manner as the Secretary may provide. (c) Exceptions Subsection (a) shall not apply to— (1) except as otherwise provided by the Sec- retary, any payment beneficially owned by— (A) any corporation the stock of which is regularly traded on an established securities market,