Internal Revenue Bulletin 2010-37 (PDF rendition): IRS Notices

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Bulletin No. 201
0-37
September 13, 20
10
HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
INCOME TAX
Notice 2010–58, page 326.
This notice provides guidance in Q & A format to taxpayers
on electing the 3, 4, or 5 year carryback of net operating
losses or a 4 or 5 year carryback of losses from operations
under section 13 of the Worker, Homeownership, and Business
Assistance Act (WHBAA) of 2009.
Notice 2010–60, page 329.
This notice provides preliminary guidance regarding priority is-
sues and requests comments involving the implementation of
chapter 4 of the Code.
EXEMPT ORGANIZATIONS
Announcement 2010–55, page 346.
The IRS has revoked its determinations that the Buyer’s Fund,
Inc., of Salt Lake City, UT; Unicorn Development Corporation
of Saint Joseph, MI; Ameri-Home Foundation, Inc., of Lenexa,
KS; Credit Counseling Bureau of San Diego County, San Diego,
CA; Exegetical Institute, Inc., of Kingsland, GA; Family Home
Foundation, Inc., of Orem, UT; Home Downpayment Gift Foun-
dation, Inc., of Washington, DC; and Xelan Foundation, Inc.,
of Tampa, FL, qualify as organizations described in Sections
501(c)(3) and 170(c)(2) of the Code.
Finding Lists begin on page ii.

The IRS Mission
Provide Americ
a’s taxpayers top-quality service by helping
them understa
nd and meet their tax responsibilities and en-
force the law wi
th integrity and fairness to all.
Introduction
The Internal Revenue Bulletin is the authoritative instrument of
the Commissioner of Internal Revenue for announcing official
rulings and procedures of the Internal Revenue Service and for
publishing Treasury Decisions, Executive Orders, Tax Conven-
tions, legislation, court decisions, and other items of general
interest. It is published weekly and may be obtained from the
Superintendent of Documents on a subscription basis. Bulletin
contents are compiled semiannually into Cumulative Bulletins,
which are sold on a single-copy basis.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application of
the 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 internal
practices and procedures that affect the rights and duties of
taxpayers are published.
Revenue rulings represent the conclusions of the Service on the
application of the law to the pivotal facts stated in the revenue
ruling. In those based on positions taken in rulings to taxpayers
or technical advice to Service field offices, identifying details
and information of a confidential nature are deleted to prevent
unwarranted invasions of privacy and to comply with statutory
requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—19
86 Code.
This part i
ncludes rulings and decisions based on provisions of
the Intern
al 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 these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative Rul-
ings. Bank Secrecy Act Administrative Rulings are issued by
the Department of the Treasury’s Office of the Assistant Secre-
tary (Enforcement).
Part IV
.—Items of General Interest.
This par
t includes notices of proposed rulemakings, disbar-
ment an
d suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.
The c
ontents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
For sale by the Superintendent of Documents, U.S.Government Printing Office, Washington, DC 20402.
September 13, 20102010–37 I.R.B.

Part III. Administrative, Procedural, and Miscellaneous
Expanded Carryback of Net
Operating Losses and Losses
from Operations
Notice 2010–58
This notice provides guidance related
to § 13 of the Worker, Homeownership,
and Business Assistance Act of 2009, Pub.
L. No. 111–92, 123 Stat. 2984 (Novem-
ber 6, 2009) (the WHBAA). Section 13
of the WHBAA amends §§ 172(b)(1)(H)
and 810(b) of the Internal Revenue Code
to allow taxpayers to elect to carry back
an applicable net operating loss (NOL) for
a period of 3, 4, or 5 years, or a loss
from operations for 4 or 5 years, to offset
taxable income in those preceding taxable
years. This notice addresses certain issues
that have arisen under § 172(b)(1)(H), as
amended by the WHBAA. This notice ap-
plies to losses from operations of a life in-
surance company under § 810 in the same
manner as to NOLs under § 172.
BACKGROUND
In general
Section 172(a) allows a deduction equal
to the aggregate of the NOL carryovers
and carrybacks to the taxable year. Section
172(b)(1)(A)(i) provides that an NOL for
any taxable year generally must be carried
back to each of the 2 years preceding the
taxable year of the NOL. Section 172(b)(3)
provides that any taxpayer entitled to a car-
ryback period under § 172(b)(1) may make
an irrevocable election to relinquish the
carryback period for an NOL for any tax-
able year.
Section 56(a) provides certain adjust-
ments that apply in computing alternative
minimum taxable income (AMTI), in
lieu of the treatment applicable in com-
puting the regular tax. Section 56(a)(4)
provides that the alternative tax net op-
erating loss (ATNOL) deduction shall
apply in lieu of the NOL deduction al-
lowed under § 172 in determining the
amount of alternative minimum taxable
income. Section 56(d)(1) provides cer-
tain adjustments and limitations used in
determining the ATNOL deduction for
the taxable year. Under § 56(d)(1)(A)(i),
the ATNOL deduction generally cannot
exceed 90 percent of AMTI, determined
without regard to the ATNOL deduction
and the deduction under § 199 (the 90
percent limitation).
Section 810(b)(1)(A) provides that life
insurance companies may carry back a loss
from operations for any taxable year to
each of the 3 years preceding the taxable
year of the loss. Section 810(b)(3) pro-
vides that any taxpayer entitled to a carry-
back period under § 810(b)(1) may make
an irrevocable election to relinquish the
carryback period for a loss from operations
for any taxable year.
American Recovery and Reinvestment Act
of 2009
Section 1211 of the American Recovery
and Reinvestment Tax Act of 2009, Div.
B of Pub. L. No. 111–5, 123 Stat. 115
(February 17, 2009) (ARRA), amended
§ 172(b)(1)(H) to allow an eligible small
business (ESB) to elect to carry back a
2008 applicable NOL for a period of 3,
4, or 5 years (ARRA election). Unlike
the § 172(b)(1)(H) election under the
WHBAA (WHBAA election), the ARRA
election is applicable only to an NOL at-
tributable to an ESB. The ARRA election
is irrevocable and may be made for only
one taxable year. Rev. Proc. 2009–26,
2009–19 I.R.B. 935 (April 25, 2009),
modifying and superseding Rev. Proc.
2009–19, 2009–14 I.R.B. 747 (March 16,
2009), advises taxpayers how to make the
ARRA election.
Worker, Homeowner, and Business
Assistance Act of 2009
Section 172(b)(1)(H)(i), as amended by
the WHBAA, permits a taxpayer to elect
to carry back its applicable NOL to 3, 4, or
5 years preceding the taxable year of the
applicable NOL. This election is not lim-
ited to an ESB. Section 172(b)(1)(H)(ii)
provides that the term “applicable net oper-
ating loss” means the taxpayer’s NOL for
a taxable year ending after December 31,
2007, and beginning before January 1,
2010. Section 172(b)(1)(H)(iii) provides
that the election under § 172(b)(1)(H) is
requiredtobemadeinamannerprescribed
by the Secretary, and must be made by the
due date (including extensions) for filing
the return for the taxpayer’s last taxable
year beginning in 2009. The election
is irrevocable and, in general, may be
made for only one taxable year. However,
§ 172(b)(1)(H)(v) allows a taxpayer that
made or makes an ARRA election also to
make a WHBAA election.
Section 172(b)(1)(H)(iv) limits the
amount of an applicable NOL that a tax-
payer elects under § 172(b)(1)(H)(i) to
carry back to the 5
th
taxable year preceding
the taxable year of the loss (5
th
preceding
taxable year) to 50 percent of the tax-
payer’s taxable income for the 5
th
preced-
ing taxable year. The taxable income for
the 5th preceding taxable year is computed
without regard to the NOL for the loss year
or any taxable year thereafter. The excess
of the amount of the loss over 50 percent
of the taxable income, as determined under
§ 172(b)(2), for the 5
th
preceding taxable
year is carried to later taxable years. For
the carryback of an ATNOL to the 5
th
preceding taxable year, the 50 percent
limitation is applied separately based on
the AMTI. The limitation on the amount
of an applicable NOL that may be carried
back to the 5
th
preceding taxable year does
not apply to an NOL carryback under the
ARRA election.
Section 13(b) of the WHBAA amends
§ 56(d)(1)(A)(ii) to provide that the 90
percent limitation does not apply to an
ATNOL deduction attributable to an
applicable NOL for which a taxpayer
made an election under § 172(b)(1)(H).
Section 13(e)(4) of the WHBAA pro-
vides that a taxpayer that has elected under
§§ 172(b)(3) or 810(b)(3) to forgo a car-
ryback for a loss for a taxable year end-
ing before the date of enactment of the
WHBAA (November 6, 2009) may revoke
that election before the due date (includ-
ing extensions) for filing the return for the
taxpayer’s last taxable year beginning in
2009. An application under § 6411(a) for
the applicable NOL is treated as timely if
filed before that due date.
Section 13(f) of the WHBAA provides
that the election under § 172(b)(1)(H) is
not available to certain taxpayers that re-
ceive benefits under the Emergency Eco-
nomic Stabilization Act of 2008, Title I of
Div. A of Pub. L. No. 110–343, 122 Stat.
2010–37 I.R.B.326September 13, 2010

3765, and certain affiliates of these taxpay-
ers.
QUESTIONS AND ANSWERS
ARRA and WHBAA Elections
Q–1. A taxpayer makes a valid ARRA
election for an NOL for 2008. May the tax-
payer revoke the ARRA election to make
a WHBAA election for the 2008 NOL?
A–1. No. The ARRA election is irrev-
ocable and a taxpayer may not change or
revoke the ARRA election made for 2008.
Q–2. A fiscal-year taxpayer has NOLs
for its taxable years beginning in 2007,
2008, and 2009. The taxpayer makes a
valid ARRA election for its taxable year
beginning in 2007. May the taxpayer make
a WHBAA election for its taxable year
beginning in 2008 and another WHBAA
election for its taxable year beginning in
2009?
A–2. No. Section 172(b)(1)(H)(v)(I)
provides that, in the case of an ESB that
made or makes an ARRA election, a
§ 172(b)(1)(H) election may be made for 2
taxable years. The ARRA election and the
WHBAA election are both § 172(b)(1)(H)
elections. Accordingly, the taxpayer may
only make one ARRA election and one
WHBAA election. If the taxpayer makes
an ARRA election for its taxable year be-
ginning in 2007, the taxpayer may make
a WHBAA election for either the taxable
year beginning in 2008 or the taxable year
beginning in 2009, but not both.
Q–3. In the taxable year ending in
2008, a taxpayer has an NOL that is partly
attributable to a business that is an ESB
and partly attributable to a business that
is not an ESB (a non-ESB). The taxpayer
makes a valid ARRA election for the por-
tion of the NOL attributable to the ESB.
May the taxpayer make a WHBAA elec-
tion for the portion of the NOL that is at-
tributable to the non-ESB?
A–3. Yes. The ARRA election is appli-
cable only to the portion of the NOL that is
attributable to an ESB. The taxpayer may
make a WHBAA election for the portion
of the 2008 NOL that is attributable to the
non-ESB.
Q–4. Assume the same facts as in
Q–3 and that the taxpayer makes a valid
WHBAA election for the portion of the
NOL attributable to the non-ESB for the
taxable year ending in 2008. May the
taxpayer make a second WHBAA election
for another taxable year?
A–4. No. The taxpayer may not make
a second WHBAA election because the
taxpayer may make only one election un-
der the ARRA and one election under the
WHBAA.
Q–5. In the taxable year ending in
2008, a taxpayer has an NOL that is partly
attributable to an ESB and partly attribut-
able to a non-ESB. For this taxable year
the taxpayer makes a valid ARRA elec-
tion for the portion of the NOL attribut-
able to the ESB and elects a 5-year car-
ryback for this NOL. The taxpayer carries
back the portion of the NOL attributable
to the non-ESB 2 years. After the enact-
ment of the WHBAA, the taxpayer makes
a valid WHBAA election for the portion of
the NOL attributable to the non-ESB and
elects a 5-year carryback for this NOL. In
determining the NOL deduction for the 5
th
preceding taxable year, how does the 50
percent of taxable income limitation ap-
ply?
A–5. The taxpayer computes taxable
income for the 5
th
preceding taxable year
without deducting the portion of the 2008
NOL for which the taxpayer previously
made the ARRA election and without de-
ducting the portion of the 2008 NOL for
which the taxpayer is making an election
under the WHBAA.
Q–6. If a taxpayer previously made an
ARRA election, must the taxpayer con-
tinue to qualify as an ESB in the year
of the WHBAA NOL in order to make a
WHBAA election?
A–6. No. A taxpayer must qualify as an
ESB only for the taxable year of the ARRA
election.
Q–7. A taxpayer makes an ARRA
election for an NOL for 2008. However,
the Internal Revenue Service rejects the
election because the NOL is attributable
to a non-ESB. May the taxpayer make a
WHBAA election for the 2008 NOL?
A–7. Yes. Because a non-ESB may
make a WHBAA election, the taxpayer
may make a WHBAA election for the 2008
NOL, provided it is timely filed.
Alternative Tax Net Operating Loss
Deduction
Q–8. A calendar-year taxpayer makes
an ARRA election for the taxpayer’s NOL
in 2008 and a WHBAA election for the
taxpayer’s NOL in 2009. Does the 90 per-
cent limitation on the use of the ATNOL
deduction apply for either the 2008 NOL
or the 2009 NOL?
A–8. No. Under § 56(d)(1)(A)(ii)(I),
the 90 percent limitation does not apply to
the 2008 ATNOL for which the taxpayer
makes an ARRA election or to the 2009
ATNOL for which the taxpayer makes a
WHBAA election. The 90 percent limita-
tion does not apply to any extended carry-
back election under § 172(b)(1)(H). There-
fore, even if the taxpayer makes only the
ARRA election for 2008, the 90 percent
limitation does not apply.
Q–9. A taxpayer has an applicable
NOL resulting from losses in certain in-
vestment arrangements that took the form
of “Ponzi” schemes and qualify as theft
losses. Section 172(b)(1)(F)(ii)(I) pro-
vides a 3-year carryback period for NOLs
resulting from theft losses. May the tax-
payer make the WHBAA election to carry
back its applicable NOL to the 3
rd
pre-
ceding taxable year for the purpose of not
being subject to the 90 percent limitation
on deducting the ATNOL from the year of
the theft loss?
A–9. Yes.
Q–10. A taxpayer incorporates in 2006
and adopts a calendar taxable year. The
taxpayer has an NOL in 2008. May the
taxpayer make the WHBAA election and
elect to carry back its 2008 NOL to the 3
rd
preceding taxable year for the purpose of
not being subject to the 90 percent limita-
tion on deducting the ATNOL from 2008?
A–10. No. The taxpayer cannot make a
WHBAA election because it does not have
a3
rd
,4
th
,or5
th
preceding taxable year to
which to carry back its NOL.
Q–11. A taxpayer incorporates in 2006
and adopts a calendar taxable year. The
taxpayer has NOLs in 2006, 2007, 2008,
and 2009. May the taxpayer make the
WHBAA election to carry back its 2009
NOL to the 3
rd
preceding taxable year
for the purpose of not being subject to
the 90 percent limitation on deducting the
ATNOL from 2009?
A–11. Yes. The taxpayer has a 3
rd
pre-
ceding taxable year to which to carry back
its 2009 NOL, even though each of the tax-
able years preceding 2009 has a loss and
none of the NOL is used in those years.
Any 2009 NOL that is unused in the tax-
able years preceding 2009 also is not sub-
September 13, 20103272010–37 I.R.B.

ject to the 90% limitation when applied to
taxable years after 2009.
50 Percent Limitation
Q–12. In 2002, a taxpayer has an NOL
of $100,000 that it carries over to 2003.
The taxpayer has an NOL of $200,000 in
2005 that it carries back to 2003. In 2008,
the taxpayer has an NOL of $500,000 and
makes a WHBAA election to carry back
its NOL 5 years to 2003. In 2003, the tax-
payer has $400,000 taxable income before
any NOL carryback or carryover. How
much of the 2008 NOL may the taxpayer
deduct in 2003?
A–12. The taxpayer’s 2003 taxable
income in the amount of $400,000 is
first reduced by the $100,000 NOL car-
ryover from 2002, and also reduced by
the $200,000 NOL carryback from 2005.
Accordingly, the 50 percent limitation is
applied to the remaining $100,000 of tax-
able income. The taxpayer may deduct
$50,000 of its 2008 NOL in 2003. The
taxpayer’s taxable income for 2003, after
deducting the 2008 NOL, is $50,000.
Q–13. A taxpayer has an NOL in 2009
of $100,000 and makes a WHBAA elec-
tion to carry it back 5 years to 2004. In
2004, the taxpayer has taxable income of
$50,000 before the NOL carryback. The
taxpayer has no NOLs from taxable years
before 2009 that it may carry to 2004.
Because the taxpayer is electing to carry
back its NOL to the 5
th
preceding tax-
able year, the taxpayer may deduct only
$25,000 (50 percent of $50,000) of the
2009 NOL in 2004. The portion of the
taxpayer’s 2009 NOL that may be carried
to 2005 and thereafter must be determined
in accordance with § 172(b)(2). Section
172(b)(2) provides that the portion of an
NOL carried to a taxable year is the ex-
cessoftheNOL(ifany)overthesumof
the taxable income for prior taxable years
to which the NOL may be carried. For
this purpose, taxable income for prior tax-
able years is computed with certain modi-
fications. If the taxpayer’s taxable income
for 2004, as determined with the modifica-
tions required under § 172(b)(2) (modified
taxable income), is $60,000, how much of
the taxpayer’s 2009 NOL may be carried
to 2005?
A–13. Taxpayer’s 2009 NOL is ab-
sorbed by 50 percent of the taxpayer’s
modified taxable income for 2004, that
is, $30,000 (50 percent of $ 60,000). The
taxpayer carries the unabsorbed portion of
the 2009 NOL, $70,000, to 2005.
Other Issues
Q–14. Under § 301.9100–2(b) of the
Procedure and Administration Regula-
tions, a taxpayer that files a timely return
has 6 months from the unextended due
date for filing its federal income tax re-
turn for the last taxable year beginning in
2009 to make a WHBAA election on an
amended return. Does a taxpayer that files
a timely return similarly have 6 months
from the unextended due date for filing
its federal income tax return for the last
taxable year beginning in 2009 to file a
Form 1045 or 1139 to carry back an appli-
cable NOL for which a taxpayer makes a
WHBAA election?
A–14. Yes, whether a taxpayer makes
a WHBAA election on an original or
amended return or on a Form 1045 or
1139, the taxpayer has until 6 months
from the unextended due date for filing
its federal income tax return for the last
taxable year beginning in 2009 to make
the election.
Q–15. A calendar year C corporation
is dissolved in June 2008. The taxpayer
files the final tax return for the short tax-
able year by the due date, September 15,
2008, without an extension. The corpora-
tion files a Form 1139 in March 2009 to
carry back its 2008NOL to 2006. May
the corporation file an amended Form 1139
to make a WHBAA election for the 2008
NOL, and if so, by when?
A–15. The corporation may amend its
Form 1139 to make a WHBAA election
for the 2008 NOL. The due date to make
a WHBAA election and file an applica-
tion for tentative refund is determined as if
the corporation remained in existence and
on a calendar taxable year for all of 2008
and 2009. Accordingly, the due date for
the corporation to make a WHBAA elec-
tion by filing an amended Form 1139 is
September 15, 2010. The same due date
applies if the corporation dissolves in 2009
instead of 2008.
Q–16. A taxpayer has an NOL in
2008 and elects to waive the carryback
period under § 172(b)(3). May the tax-
payer revoke its § 172(b)(3) election under
§ 13(e)(4)(A) of the WHBAA without
making a WHBAA election for the 2008
NOL?
A–16. No. The taxpayer may revoke
its § 172(b)(3) election for 2008 only if the
taxpayer is making a WHBAA election for
its 2008 NOL.
Q–17. If, before the enactment of the
WHBAA, a taxpayer makes an election
under § 168(k)(4) not to claim the addi-
tional first year depreciation for a taxable
year ending after 2007 and beginning be-
fore 2010, may the taxpayer revoke this
election to make a WHBAA election for
an NOL in that taxable year?
A–17. A taxpayer may revoke the elec-
tion not to claim the additional first year
depreciation if the Service authorizes the
revocation in a private letter ruling. See
§1.168(k)–1(e)(7)(i). However, the Ser-
vice generally will not issue a private let-
ter ruling allowing the taxpayer to revoke
an election not to claim the additional first
year depreciation if the taxpayer is using
hindsight to create or increase an NOL in
that taxable year that is more beneficial to
the taxpayer.
Q–18. A calendar year taxpayer has an
NOL in 2008. After December 31, 2009,
but before the due date of the taxpayer’s
2009 return, the taxpayer files a Form 1045
to carry back its 2008 NOL to 2006. Is the
taxpayer’s Form 1045 timely?
A–18. No. The taxpayer’s Form 1045
does not constitute a WHBAA election for
the 2008 NOL because itis not an election
to carry back the 2008 NOL for a period
of 3, 4, or 5 years. If the taxpayer does
not make a WHBAA election for the 2008
NOL, the Form 1045 must be filed within
12 months following the end of the loss
year.
Q–19. A farming loss generally is car-
ried back to each of the 5 taxable years pre-
ceding the taxable year of the loss under
§ 172(b)(1)(G). May a taxpayer make the
WHBAA election for an applicable NOL
attributable to the farming loss and carry
back the NOL for a period of 3, 4, or 5
years?
A–19. Yes. However, the taxpayer
must timely waive its 5-year carryback pe-
riod for the NOL under § 172(i)(3) in order
to make a WHBAA election to carry back
the NOL for a period of 3 or 4 years. The
taxpayer does not need to waive the 5-year
carryback period under § 172(b)(1)(G) to
elect a 5-year carryback period under the
WHBAA.
2010–37 I.R.B.328September 13, 2010

Q–20. If a corporate taxpayer makes
the WHBAA election and merges into an-
other corporation in a later taxable year, is
the acquiring corporation that has not pre-
viously made a WHBAA election allowed
to make the WHBAA election for a tax-
able year of the acquiring corporation end-
ing after December 31, 2007, and begin-
ning before January 1, 2010?
A–20. Yes.
DRAFTING INFORMATION
The principal authors of this notice are
Seoyeon Park and Forest Boone of the
Office of Associate Chief Counsel (In-
come Tax and Accounting). For further
information regarding this notice, contact
Ms. Park or Mr. Boone at 202–622–4960
(not a toll-free call).
Notice and Request for
Comments Regarding
Implementation of Information
Reporting and Withholding
Under Chapter 4 of the Code
Notice 2010–60
PURPOSE
On March 18, 2010, the Hiring Incen-
tives to Restore Employment Act of 2010,
Pub. L. 111–147 (H.R. 2847) (the Act)
was enacted into law. Section 501(a) of
the Act added a new chapter 4 (sections
1471 — 1474) to Subtitle A of the Inter-
nal Revenue Code (Code). Chapter 4 ex-
pands the information reporting require-
ments imposed on foreign financial insti-
tutions as defined in section 1471(d)(4)
(FFIs) with respect to certain United States
accounts as defined in section 1471(d)(1)
(U.S. accounts). Chapter 4 also imposes
withholding, documentation, and report-
ing requirements with respect to certain
payments made to certain foreign entities.
Under section 501(d)(1) of the Act,
chapter 4 is generally effective for pay-
ments made after December 31, 2012. The
Department of the Treasury (Treasury)
and the Internal Revenue Service (IRS)
intend to issue guidance in advance of the
effective date of chapter 4 to ensure that
affected persons have time to implement
the systems and processes necessary to
comply fully with the new withholding,
documentation, and reporting obligations
imposed by chapter 4. Consistent with
this intent, this notice provides prelimi-
nary guidance regarding priority issues
involving the implementation of chapter 4,
including the scope of obligations exempt
from chapter 4 withholding under section
501(d)(2) of the Act, the definition of an
FFI under section 1471(d)(4), the scope
of collection of information and identifi-
cation of persons by financial institutions
under sections 1471 and 1472, and the in-
formationthatFFIsmustreporttotheIRS
pursuant to an agreement under section
1471(b) (FFI Agreement) with respect to
their U.S. accounts. In addition, this no-
tice announces the IRS’s intentions with
respect to the electronic filing of returns
for purposes of implementing section
6011(e)(4) as added by section 522 of the
Act.
Treasury and the IRS intend to is-
sue proposed regulations incorporating
the guidance provided in this notice and
addressing other matters necessary to im-
plement chapter 4. In future guidance,
Treasury and the IRS intend to publish
a draft FFI Agreement and draft infor-
mation reporting and certification forms.
Treasury and the IRS request comments
on the issues addressed in this notice and
the priority of other issues that should be
addressed in future guidance.
Section I. Grandfathered Obligations
Section 501(d)(2) of the Act provides
that chapter 4 shall not require any amount
to be deducted or withheld from any pay-
ment under any obligation outstanding on
March 18, 2012, or from the gross pro-
ceeds from any disposition of such an obli-
gation. Thus, any payment made pursuant
to any obligation outstanding on March 18,
2012 (or any gross proceeds from the dis-
position of such an obligation) will not be
subject to withholding under chapter 4.
Treasury and the IRS intend to issue
regulations providing that the term “obli-
gation” for purposes of section 501(d)(2)
of the Act means any legal agreement that
produces or could produce withholdable
payments. Regulations will provide, how-
ever, that an obligation for this purpose
does not include any instrument treated as
equity for U.S. tax purposes, or any le-
gal agreement that lacks a definitive ex-
piration or term. Thus, for example, sav-
ings deposits, demand deposits, and other
similar accounts are not obligations for
purposes of section 501(d)(2) of the Act.
For this purpose, a legal agreement that
produces withholdable payments does not
include brokerage, custodial and similar
agreements to hold financial assets for the
account of others and to make and receive
payments of income and other amounts
with respect to such assets.
Treasury and the IRS also intend to
issue regulations providing that an obli-
gation entered into on or before March
18, 2012 will be treated as outstanding on
March 18, 2012 and that any material mod-
ification of an obligation will result in the
obligation being treated as newly issued
for purposes of section 501(d)(2) of the
Act as of the effective date of such mod-
ification. In the case of an obligation that
constitutes indebtedness for U.S. tax pur-
poses, a material modification means any
significant modification of the debt instru-
ment as defined in § 1.1001–3. In all other
cases, whether a modification of an obli-
gation is material will be determined based
on all relevant facts and circumstances.
Section II. FFIs and NFFEs
Section 1471(a) requires a withholding
agent to deduct and withhold a tax equal to
30 percent of the amount of any withhold-
able payment to an FFI that does not meet
the requirements of section 1471(b). To
meet the requirements of section 1471(b),
an FFI is generally required to enter into an
FFI Agreement, under which the FFI (par-
ticipating FFI) agrees to undertake certain
due diligence, reporting, and withholding
responsibilities.
Under section 1471(d)(4), an FFI is de-
fined as any financial institution which is a
foreign entity. A foreign entity is any en-
tity that is not a United States person. Sec-
tion 1473(5). A “financial institution” is
defined under section 1471(d)(5) as an en-
tity that falls within one (or more) of three
categories. Although many entities may
be within two or more of these three cate-
gories, an entity need only satisfy the def-
inition of one of the three categories to be
a financial institution for purposes of sec-
tion 1471.
Section 1471(d)(5) provides regulatory
authority to modify the definition of finan-
cial institution. Significantly, a foreign en-
tity that is excluded from the definition of a
September 13, 20103292010–37 I.R.B.

financial institution is a non-financial for-
eign entity, as defined in section 1472(d)
(NFFE), and is subject to the documenta-
tion and reporting requirements applicable
to NFFEs unless an exception applies.
Pursuant to section 1471(b)(2), the Sec-
retary may treat an FFI as meeting the re-
quirements of section 1471(b) (a deemed-
compliant FFI) if the FFI: (i) complies with
such procedures as the Secretary may pre-
scribe to ensure that such institution does
not maintain U.S. accounts and meets such
other requirements as the Secretary may
prescribe with respect to accounts of other
FFIs maintained by such institution; or (ii)
is a member of a class of institutions with
respect to which the Secretary determines
that application of section 1471 is not nec-
essary to carry out the purposes of section
1471. Because such a deemed-compliant
FFI would remain a financial institution
under section 1471(d)(5), it would not be
an NFFE, and therefore would not be sub-
ject to withholding under section 1472.
Section 1471(f) provides that withhold-
ing under section 1471(a) does not apply
to any payment to the extent that the ben-
eficial owner of such payment is (1) any
foreign government, any political subdi-
vision 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. Withhold-
able payments that are beneficially owned
by an entity describedin section 1471(f)
are exempt from withholding under sec-
tion 1471(a), whether received directly or
through an FFI.
This section discusses the definition
of “financial institution” for purposes of
chapter 4. This section also identifies
certain classes of foreign entities that will
be (i) excluded from the definition of a
financial institution and treated as NFFEs,
(ii) treated as deemed-compliant FFIs, or
(iii) identified as posing a low risk of tax
evasion and exempted from withholding
pursuant to section 1471(f).
A.Section 1471(d)(5): Definition of
“Financial Institution”
Section 1471(d)(5)provides that, ex-
cept as otherwise provided by the Secre-
tary, the term “financial institution” means
any entity that (A) accepts deposits in the
ordinary course of a banking or similar
business, (B) holds financial assets for the
account of others as a substantial portion
of its business, or (C) is engaged (or hold-
ing 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 sen-
tence thereof), partnership interests, com-
modities (as defined insection 475(e)(2)),
or any interest (including a futures or for-
ward contract or option) in such securi-
ties, partnership interests, or commodities.
As described in the following subsections,
Treasury and the IRS intend to issue regu-
lations providing guidance on each of the
three categories of financial institutions set
forthinsection1471(d)(5).
1.Financial Institutions Under Section
1471(d)(5)(A)
The first category of financial institu-
tions described in section 1471(d)(5) are
entities that accept deposits in the ordi-
nary course of a banking or similar busi-
ness. Such entities generally include, but
are not limited to, entities that would qual-
ify as banks under section 585(a)(2) (in-
cluding banks as defined in section 581
and any corporation to which section 581
would apply except for the fact that it is a
foreign corporation), savings banks, com-
mercial banks, savings and loan associa-
tions, thrifts, credit unions, building so-
cieties and other cooperative banking in-
stitutions. The factthat an entity is sub-
ject to the banking and credit laws of the
United States, a State, a political subdi-
vision thereof, or a foreign country, or to
supervision and examination by agencies
having regulatory oversight of banking or
similar institutions, is relevant to but not
necessarily determinative of whether that
entity qualifies as a financial institution
under section 1471(d)(5)(A).
2.Financial Institutions Under Section
1471(d)(5)(B)
The second category of financial insti-
tutions described in section 1471(d)(5) are
entities that as a substantial portion of their
business, hold financial assets for the ac-
count of others. Such entities may include,
for example, broker-dealers, clearing or-
ganizations, trust companies, custodial
banks, and entities acting as custodians
with respect to the assets of employee ben-
efit plans. As in the case of deposit-taking
institutions under section 1471(d)(5)(A),
the fact that an entity is subject to the
banking and credit laws or broker-dealer
regulations of the United States, a State, a
political subdivision thereof, or a foreign
country, or to supervision and examination
by agencies having regulatory oversight of
banking or similar institutions, is relevant
to but not necessarily determinative of
whether that entity qualifies as a financial
institution under section 1471(d)(5)(B).
3.Financial Institutions Under Section
1471(d)(5)(C)
The third category of financial institu-
tions described in section 1471(d)(5) are
entities that are engaged (or hold them-
selves out as being engaged) primarily
in the business of investing, reinvest-
ing, or trading in securities (as defined
in section 475(c)(2) without regard to the
last sentence thereof), partnership inter-
ests, 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. Thus, this third cate-
gory of financial institutions generally
includes, but is not limited to, mutual
funds (or their foreign equivalent), funds
of funds (and other similar investments),
exchange-traded funds, hedge funds, pri-
vate equity and venture capital funds,
other managed funds, commodity pools,
and other investment vehicles.
Although the statute refers to the “busi-
ness” of investing, reinvesting, or trading,
the concept of “business” as used in sec-
tion 1471(d)(5)(C) is different in scope and
content from the concept of a “trade or
business” as used in other sections of the
Code. For example, isolated transactions
that might not give rise to a trade or busi-
ness for other purposes may cause an entity
to be engaged primarily in the business of
investing, reinvesting, or trading in securi-
ties, depending on such factors as the mag-
nitude and importance of the transaction in
comparison to the entity’s other activities.
2010–37 I.R.B.330September 13, 2010

Treasury and the IRS anticipate that
regulations will provide that whether an
entity is engaged primarily in the business
of investing, reinvesting, or trading in se-
curities must be determined on the basis of
all relevant facts and circumstances. Al-
though the analysis is ultimately fact-spe-
cific, Treasury and the IRS contemplate
that future guidance will provide guide-
lines for determining what types of activ-
ity, carried on in whole or in part, consti-
tutes the business of investing, reinvesting,
or trading, and when an entity is primarily
engaged in such a business.
B.Entities Excluded from Definition of
Financial Institution and/or Otherwise
Exempt from Some or All of the
Obligations Imposed by Chapter 4
Treasury and the IRS intend to issue
guidance identifying certain classes of en-
tities that are included in or excluded from
the definitions of the terms “financial insti-
tution” and FFI, and describing the result-
ing treatment of such entities under chapter
4.
This section identifies entities that
Treasury and the IRS intend to exclude
from the definition of FFI and exempt
from the requirements of section 1472. In
addition, this section describes the treat-
ment of certain specific classes of entities,
including insurance companies, entities
with certain identified owners, and entities
organized in a U.S. possession or territory
identified in section 937(a)(1) (U.S. terri-
tory).
1.Entities That Will Be Exempt From
Withholding Under Sections 1471 and
1472
Treasury and the IRS intend to issue
regulations providing that in general, a for-
eign entity that otherwise satisfies the def-
inition of a financial institution solely be-
cause it is primarily engaged in investing,
reinvesting or trading in securities will not
be treated as a financial institution if it
falls within one of the classes of foreign
entities described in this subsection. Be-
cause these entities are excluded from be-
ing FFIs, they will be NFFEs. Treasury
and the IRS, however, also intend to issue
guidance pursuant to section 1472(c)(1)
exempting payments beneficially owned
by these entities from withholding under
section 1472(a).
•Certain holding companies: A foreign
entity the primary purpose of which
is to act as a holding company for a
subsidiary or group of subsidiaries that
primarily engage in a trade or busi-
ness other than that of a “financial
institution,” as defined under section
1471(d)(5) (an FI business), will be ex-
cluded from the definition of financial
institution. Such holding companies
would include, for example, a tradi-
tional holding company of a group
of operating subsidiaries engaged pri-
marily in a non-FI business. This class
of excepted entities will not, however,
include any entity functioning as an in-
vestment fund, such as a private equity
fund, venture capital fund, leveraged
buyout fund or any investment vehicle
whose purpose is to acquire or fund
the start-up of companies and then
hold those companies for investment
purposes for a limited period of time.
•Start-up companies: A foreign start-up
entity that is investing capital into as-
sets with the intent to operate a busi-
ness other than that of a financial in-
stitution, but is not yet operating such
a business, will be excluded from the
definition of financial institution for
the first 24 months after its organiza-
tion. After such time, a foreign entity
will no longer qualify for this particu-
lar exclusion from the definition of an
FFI. For this purpose, the class of ex-
cepted foreign start-up entities will not
include a venture fund or other invest-
ment fund that invests in start-up enti-
ties.
•Non-financial entities that are liqui-
dating or emerging from reorganiza-
tion or bankruptcy: A foreign entity
that is in the process of liquidating its
assets or reorganizing with the intent to
continue or recommence operations as
a non-financial institution may be ex-
cluded from the definition of financial
institution if it was not a financial in-
stitution before beginning the process
of such liquidation or reorganization.
•Hedging/financing centers of a non-fi-
nancial group: A foreign entity that
primarily engages in financing and
hedging transactions with or for mem-
bers of its expanded affiliated group
(as defined in section 1471(e)(2)) that
are not FFIs and that does not provide
such services to non-affiliates may
be excluded from the definition of fi-
nancial institution, provided that the
expanded affiliated group is primarily
engaged in a non-FI business.
Treasury and the IRS request comments
as to how the classes of entities discussed
above may be more specifically defined in
regulations, what mechanisms withhold-
ing agents could use to properly identify
such entities (including self-certification,
as appropriate) and whether other classes
of entities should be similarly excluded.
2.Insurance Companies
The definition of “financial institution”
in section 1471(d)(5) is broad enough to
encompass certain insurance companies.
The statute grants the Secretary regulatory
authority to exclude or include insurance
companies and certain products sold by in-
surance companies within the definitions
of “financial institution” and “financial ac-
count.”
Treasury and the IRS do not view the
issuance of insurance or reinsurance con-
tracts without cash value as implicating
the concerns of chapter 4. This would in-
clude, for example, most property and ca-
sualty insurance or reinsurance contracts
or term life insurance contracts. Accord-
ingly, Treasury and the IRS plan to issue
regulations treating entities whose busi-
ness consists solely of issuing such con-
tracts as non-financial institutions for pur-
poses of chapter 4.
However, other contracts such as life
insurance (other than term life insurance
contracts without cash value) or annu-
ity contracts typicallycombine insurance
protection with an investment component.
Thus, such cash value insurance contracts
or annuity contracts may present the risk of
U.S. tax evasion that chapter 4 is designed
to prevent. Treasury and the IRS request
comments with respect to the appropriate
treatment under chapter 4 of entities that
issue cash value insurance contracts, annu-
ity contracts, or similar arrangements, and
with respect to the appropriate definition
of cash value insurance contracts, annuity
contracts and similar arrangements for this
purpose.
3.Entities with Certain Identified Owners
The definition of FFI under section
1471(d)(5)(C) includes investment funds
September 13, 20103312010–37 I.R.B.

and other entities that may have only a
small number of direct or indirect account
holders, all of whom are individuals or
NFFEs that will not be subject to with-
holding or reporting under sections 1471
or 1472 or future regulations thereunder
(excepted NFFEs). An example of such
an entity may be a small family trust set-
tled and funded by a single person for the
sole benefit of his or her children. For
such entities, the administrative burden of
entering into an FFI Agreement and com-
plying with the reporting requirements
thereunder may be disproportionate to the
amount of U.S. investments giving rise to
withholdable payments or passthru pay-
ments beneficially owned by such entity.
Treasury and the IRS intend to issue
guidance under which certain foreign en-
tities that are FFIs described in section
1471(d)(5)(C), but are not described in
section 1471(d)(5)(A) or (B), would be
treated as deemed-compliant FFIs if the
withholding agent (i)specifically identi-
fies each individual, specified U.S. person,
or excepted NFFE that has an interest
in such entity, either directly or through
ownership in one or more other entities,
(ii) obtains from each such person the
documentation that the withholding agent
wouldberequiredtoobtainfromsuch
person under the guidance described in
Section III of this Notice if such person
were a new account holder or direct payee
of the withholding agent, and (iii) the
withholding agent reports to the IRS, in
such manner as will be provided in fu-
ture guidance, any specified United States
person identified as a direct or indirect
interest holder in the entity (Documented
FFIs). See Section III of this Notice for
further details about the general documen-
tation requirements applicable to financial
institutions with respect to their account
holders.
Treasury and the IRS request comments
as to whether certain small FFIs should be
required, for purposes of applying chap-
ter 4, to be treated as NFFEs, regardless
of whether withholding agents currently
determine the direct and indirect owners
of such entities for purposes of complying
with local law or regulatory obligations.
4.Financial Institutions Organized in
U.S. Territories
Although entities organized in a U.S.
territory generally are treated as foreign
for purposes of the Code, under section
1471(d)(4), except as otherwise provided
by the Secretary, an FFI does not include
a financial institution organized under the
laws of a U.S. territory (Territory-Orga-
nized FI). Territory-Organized FIs are,
however, withholding agents under chap-
ter 4. Section 1473(4). Treasury and the
IRS intend to coordinate with the territorial
governments in the course of providing
guidance regarding the treatment of Terri-
tory-Organized FIs. In general, Treasury
and the IRS do not intend to treat Ter-
ritory-Organized FIs as FFIs. However,
Treasury and the IRS believe that addi-
tional guidance is necessary to address
the chapter 4 withholding obligations of
Territory-Organized FIs and to address
potential compliance concerns.
Because Territory-Organized FIs are
withholding agents under chapter 4, they
are required to withhold under sections
1471 and 1472 if the withholding has not
previously been satisfied by another with-
holding agent. However, sections 1471
and 1472 do not specify how withholding
applies to withholdable payments made
to FFIs and NFFEs through Territory-Or-
ganized FIs acting as intermediaries.
Accordingly, it is unclear under sections
1471 and 1472 whether a U.S. withhold-
ing agent making withholdable payments
toanFFIorNFFEthroughaTerritory-Or-
ganized FI acting in its capacity as an
intermediary should apply withholding
unless the Territory-Organized FI col-
lected documentation establishing that
withholding did not apply and provided
that documentation to the U.S. withhold-
ing agent. For chapter 3 purposes, this
situationisaddressedbypermittingcer-
tain Territory-Organized FIs to assume the
withholding and reporting responsibilities
applicable to UnitedStates persons as
defined in section 7701(a)(30) (U.S. per-
sons). See § 1.1441–1(b)(2)(iv). Sections
1471 and 1472, however, do not expressly
make this treatment available to Terri-
tory-Organized FIs for chapter 4 purposes.
To help relieve the burden on Terri-
tory-Organized FIs receiving withholdable
payments on behalf of account holders,
Treasury and the IRS intend to issue guid-
ance under which a Territory-Organized FI
that receives withholdable payments in its
capacity as an intermediary would be per-
mitted to represent in writing to its with-
holding agent that with respect to the pay-
ment it is assuming the responsibilities im-
posed on U.S. withholding agents under
sections 1471 and 1472. A Territory-Or-
ganized FI assuming such responsibilities
would not be subject to withholding under
section 1471 or 1472 with respect to such
payments.
In addition, Treasury and the IRS are
considering issuing guidance providing
that a Territory-Organized FI that is de-
scribed in section 1471(d)(5)(C) (and not
in section 1471(d)(5)(A) or (B)) would
not be treated as a financial institution,
and instead would be treated as an NFFE
with respect to withholdable payments
or passthru payments that it receives for
its own account. In that case, the Ter-
ritory-Organized FI may qualify for an
exception to section1472 if the entity is
organized under the laws of a U.S. terri-
tory and is wholly owned by one or more
bona fide residents (as defined in section
937(a)) of such U.S. territory. Section
1472(c)(1)(C).
In addition, Treasury and the IRS intend
to engage in discussions with the territo-
rial governments for the purpose of explor-
ing how the existing territorial information
reporting regimes might be used to sup-
plement the obligations of Territory-Orga-
nized FIs, such as by implementing infor-
mation exchange or similar agreements to
obtain information that is useful for iden-
tifying account holders of Territory-Orga-
nized FIs that are specified United States
persons (specified U.S. persons), as de-
fined in section 1473(3).
C.Classes of Persons Posing a Low Risk
of Tax Evasion Under Section 1471(f)(4)
— Retirement Plans
Pursuant to section 1471(f), withhold-
ing under section 1471(a) does not apply
to any payment to the extent that the ben-
eficial owner of such payment is part of a
class of persons identified by the Secretary
for purposes of section 1471(f) as posing a
low risk of tax evasion. Although a retire-
ment plan may qualify as a financial insti-
tution under section 1471(d)(5), Treasury
and the IRS intend to issue guidance pro-
viding that certain foreign retirement plans
2010–37 I.R.B.332September 13, 2010

pose a low risk of tax evasion for chapter 4
purposes, and therefore payments benefi-
cially owned by such retirement plans will
be exempt from withholding under section
1471(a).
Treasury and the IRS anticipate that a
foreign retirement plan will be identified
as posing a low risk of tax evasion only if
the retirement plan (i) qualifies as a retire-
ment plan under the law of the country in
which it is established, (ii) is sponsored by
a foreign employer, and (iii) does not al-
low U.S. participants or beneficiaries other
than employees that worked for the for-
eign employer in the country in which such
retirement plan is established during the
period in which benefits accrued. Com-
ments are requested on the definition of
a retirement plan for this purpose, and on
how such a plan could appropriately iden-
tify or document itself to a withholding
agent to verify its compliance with any
such definitional requirements. In addi-
tion, comments are requested as to whether
other categories of foreign employee ben-
efit or deferred compensation plans should
be subject to the same treatment as foreign
retirement plans for chapter 4 purposes.
D.Treatment of Certain Other Classes of
Entities
1.U.S. Branches of FFIs
Section 1471 does not provide an ex-
ception to the definition of an FFI in the
case of a foreign entity that has a U.S.
branch. Section 1473(1)(B), however,
does exclude from the definition of a
withholdable payment income taken into
account under section 871(b)(1) or section
882(a)(1) (the ECI exclusion). The ECI
exclusion would relieve an FFI from being
subjected to withholding under section
1471(a) with respect to income it takes into
account under section 871(b)(1) or section
882(a). The ECI exclusion does not, how-
ever, cover all payments that may be made
to an FFI’s U.S. branch. For example, the
ECI exclusion is generally inapplicable to
withholdable payments that a U.S. branch
of an FFI receives on behalf of its account
holders, rather than for its own account.
The ECI exclusion is also inapplicable to
withholdable payments that a U.S. branch
of an FFI is paid for its own account and
that are not taken into account under sec-
tion 871(b)(1) or section 882(a).
Treasury and the IRS do not intend to
exempt an FFI from the requirement to
enter into an FFI Agreement, even if the
FFI receives withholdable payments solely
through its U.S. branch. Thus, where a
U.S. branch of an FFI receives withhold-
able payments that are not eligible for the
ECI exclusion, the FFI generally will be
required to execute an FFI Agreement to
avoid being subjected to withholding un-
der section 1471(a).
When a U.S. branch of an FFI receives
a withholdable payment as an intermedi-
ary, however, Treasury and the IRS are
considering permitting the U.S. branch to
document its account holders for chap-
ter 4 withholding purposes under the re-
quirements to be imposed on USFIs. See
Section III of this notice for guidance on
the documentation requirements to be im-
posedonUSFIs.TreasuryandtheIRSan-
ticipate that regulations will include rules
coordinating the reporting required of FFIs
with U.S. branches under chapter 4 with
other U.S. tax reporting obligations, so as
to avoid duplicative reporting with respect
to accounts maintained by the U.S. branch
of the FFI.
Treasury and IRS also intend to issue
regulations regarding the application of
the ECI exclusion by withholding agents
making payments to U.S. branches of
FFIs. Treasury and IRS do not intend
that those regulations will incorporate
the type of special presumption included
for chapter 3 withholding purposes in
§ 1.1441–4(a)(2)(ii) for payments made to
certain U.S. branches of regulated banks
and insurance companies. Comments are
requested as to other possible rules or
methods that withholding agents could use
to determine the application of the ECI
exclusion.
2.Controlled Foreign Corporations
A controlled foreign corporation (as
defined under section 957(a)) (CFC) that
qualifies as a financial institution under
section 1471(d)(5) isan FFI under section
1471(d)(4). Treasury and the IRS have
received comments requesting that CFCs
be treated as deemed-compliant FFIs un-
der section 1471(b)(2) because CFCs
already are subject to various information
reporting requirements discussed below.
Treasury and the IRS believe that it would
not be appropriate to treat financial insti-
tution CFCs as deemed-compliant FFIs
under section 1471(b)(2) (and exempt
from the requirement to enter into an FFI
Agreement) because the documentation
and reporting requirements to which CFCs
are currently subject are less stringent than
those that apply to FFIs. Accordingly,
such treatment could create a significant
risk of tax evasion, and thus would be
inconsistent with the objectives of chapter
4.
Although CFCs are U.S. payors as de-
fined in § 1.6049–5(c)(5)(i) and are there-
fore subject to the Form 1099 reporting
requirements applicable to such payors,
these reporting obligations differ from the
obligations imposed under section 1471(b)
on FFIs in several respects. In particular,
Form 1099 reporting obligations do not ap-
ply with respect to two important classes
of account holders whose accounts would
be subject to reporting or withholding obli-
gations under section 1471. First, as U.S.
payors, CFCs are not required to report
on certain payments todomestic corpora-
tions, whereas FFIs arerequiredtoreport
information on account holders that are
specified U.S. persons, which, pursuant to
section 1473(3), includes certain domes-
tic corporations. Second, as U.S. payors,
CFCs are not generally required to report
on the U.S. owners of foreign entities for
which they maintain accounts, and the sec-
tion 1472 requirements to identify and re-
port certain U.S. owners of certain for-
eign entities would apply only if a CFC
made a withholdable payment to an NFFE.
In contrast, section 1471(c)(1)(A) requires
FFIs to report information with respect to
substantial United States owners (substan-
tial U.S. owners), as defined in section
1473(2), of account holders that are United
States owned foreign entities as defined
in section 1471(d)(3) (U.S.-owned foreign
entities). Such accounts are not limited to
those accounts to which an FFI has made
withholdable payments.
In addition to the disparities between
the information reporting obligations
discussed above, section 1471(b)(1)(F)
requires FFIs to obtain waivers from ac-
count holders when a section 1471(b)
reporting obligation would otherwise be
prohibited under foreign law (or, in the
absence of such a waiver, to close such
holders’ accounts). No comparable re-
quirement would apply to FFIs that are
CFCs if they were exempted from FFI
September 13, 20103332010–37 I.R.B.

status. Accordingly, deeming CFCs to be
compliant under section 1471(b)(2) would
potentially result in disparate treatment
of account holders of FFIs, depending on
whether they held accounts with FFIs that
are CFCs or other FFIs. Treasury and the
IRS thus do not anticipate that financial in-
stitution CFCs will be exempted from the
requirements to be imposed on other FFIs
under section 1471(b). Treasury and the
IRS do, however, anticipate coordinating
the reporting required of financial institu-
tion CFCs under chapter 4 with other U.S.
tax reporting obligations, with the objec-
tive of avoiding duplicative reporting.
E.Comments Requested
Treasury and the IRS request comments
concerning the treatment under section
1471 of the entities described above, as
well as the treatment of other foreign
entities, including, for example, any for-
eign charitable organizations that may fall
within the definition of an FFI. In partic-
ular, Treasury and the IRS request com-
ments providing specific suggestions for
defining and identifying specific classes of
foreign entities that should be: (i) excluded
from the definition of FFI; (ii) deemed to
meet the requirements of section 1471(b)
pursuant to section 1471(b)(2); or (iii)
identified as posing a low risk of tax eva-
sion pursuant to section 1471(f).
Section III. Collection of Information and
Identification of Persons by Financial
Institutions Under Sections 1471 and
1472
A.Overview
1.Statutory Framework
Section 1471 generally requires FFIs to
enter into FFI Agreements to avoid with-
holding under section 1471(a). An FFI
Agreement provides that the participating
FFI agrees, among other requirements, to:
(i) obtain such information regarding each
holder of each account maintained by the
FFI as is necessary to determine which (if
any) of such accounts are U.S. accounts;
(ii) comply with due diligence procedures
the Secretary may require with respect to
the identification of U.S. accounts; and
(iii) report certain information with respect
to U.S. accounts maintained by the FFI.
Section 1471(b) and (c).
U.S. accounts are financial accounts
which are held by one or more specified
U.S. persons or U.S.-owned foreign enti-
ties. Section 1471(d)(1)(A). A specified
U.S. person is (except as otherwise pro-
vided by the Secretary) any United States
person other than certain types of entities
that are expressly excluded under section
1473(3). A U.S.-owned foreign entity
is any foreign entity which has one or
more substantial U.S. owners. Section
1471(d)(3). A substantial U.S. owner is
generally defined in section 1473(2) to
include a specified U.S. person whose
ownership interests in an entity exceed
certain thresholds.
A participating FFI must also agree to
withhold tax on certain payments made
to non-participatingFFIs and recalcitrant
account holders. Section 1471(b)(1)(D).
Recalcitrant account holders are those ac-
count holders that fail to comply with rea-
sonable requests for information by a par-
ticipating FFI in order for it to meet its
obligations under section 1471(b) and (c),
or that fail to provide a waiver in any case
inwhichanyforeignlawwould(butfor
such waiver) prevent the reporting of any
information an FFI is required to report
under section 1471(b) and (c). Section
1471(d)(6).
Section 1472(a) generally requires a
withholding agent to deduct and withhold
30 percent of the gross amount of a with-
holdable payment made to an NFFE and
beneficially owned by that NFFE or an-
other NFFE, unless the beneficial owner
isamemberofanenumeratedclassof
entities described in section 1472(c)(1)
(excepted NFFEs), the payment is within
a class of payments described in section
1472(c)(2), or certain documentation and
reporting requirements are met. In ad-
dition, under section 1472, withholding
agents are required to report certain in-
formation regarding the substantial U.S.
owners of NFFEs, other than excepted
NFFEs, that beneficially own withhold-
able payments.
Excepted NFFEs include (A) any cor-
poration the stock of which is regularly
traded on an established securities market,
(B) any corporation which is a member of
the same expanded affiliated group as a
corporation the stock of which is regularly
traded on an established securities market,
(C) any entity which is organized under the
laws of a U.S. territory and which is wholly
owned by one or morebona fideresidents
(as defined in section 937(a)) of such U.S.
territory, (D) any foreign government, any
political subdivision of a foreign govern-
ment, or any wholly owned agency or in-
strumentality of any one or more of the
foregoing, (E) any international organiza-
tion or any wholly owned agency or instru-
mentality thereof, (F) any foreign central
bank of issue, and (G) any other class of
persons identified by the Secretary for pur-
poses of section 1472(c).
2.Responsibilities of Participating FFIs
and USFIs
To comply with the obligations im-
posed by sections 1471 and 1472, partic-
ipating FFIs will need to determine (1)
whether their individual account holders
are to be treated as U.S. persons or other
persons and (2) whether their account
holders that are entities are to be treated
as U.S. persons, FFIs, entities described
in section 1471(f), or NFFEs. Participat-
ing FFIs will then need to determine: (1)
whether entities that are U.S. persons are
to be treated as specified U.S. persons
or other U.S. persons; (2) whether FFIs
are to be treated as participating FFIs,
deemed-compliant FFIs, or non-partici-
pating FFIs; and (3) whether NFFEs are
to be treated as U.S.-owned foreign enti-
ties. For this purpose, an NFFE will be
treated as a U.S.-owned foreign entity to
the extent that it is determined to have sub-
stantial U.S. owners. Any entity that is an
excepted NFFE will be excluded from the
definition of a U.S.-owned foreign entity.
To comply with the obligations im-
posed by sections 1471 and 1472, USFIs
will need to make determinations similar
to those required of participating FFIs.
In particular, USFIs making withholdable
payments to entities will need to deter-
mine whether to treat those entities as
U.S. persons, FFIs, entities described in
section 1471(f), or NFFEs. USFIs will
then need to determine: (1) whether FFIs
are to be treated as participating FFIs,
deemed-compliant FFIs, or non-partici-
pating FFIs; and (2) whether NFFEs are to
be treated as excepted NFFEs or as other
NFFEs.
Subsections III.B. and III.C. of this
Notice describe the procedures to be ap-
pliedbyparticipatingFFIsandUSFIsto
make the determinations required to com-
2010–37 I.R.B.334September 13, 2010

ply with the provisions of sections 1471
and 1472. Subsection III.B. generally
discusses the procedures to be applied by
participating FFIs to make the requisite
determinations described above for pur-
poses of complying with both sections
1471 and 1472. For this purpose, Sub-
section III.B. distinguishes procedures for
making such determinations with regard to
each of the following four categories of ac-
counts: (i) preexisting financial accounts
held by individuals (preexisting individual
accounts); (ii) new financial accounts held
by individuals (new individual accounts);
(iii) preexisting financial accounts held by
persons other than individuals (preexisting
entity accounts); and (iv) new financial
accounts held by persons other than indi-
viduals (new entity accounts).
Subsection III.C. generally discusses
the procedures to be applied by USFIs
to make the requisite determinations for
USFIs to comply with chapter 4. For this
purpose, Subsection III.C. distinguishes
procedures applicableto preexisting entity
accounts from those applicable to new
entity accounts.
B.Participating FFIs
1.Reliance on Existing Documentation
and Issuance of FFI EINs
Under an FFI Agreement, participat-
ing FFIs will be required to identify cer-
tain of their account holders. For exam-
ple, a participating FFI will be required
to identify and report holders of financial
accounts that are specified U.S. persons
or U.S.-owned foreign entities. In some
cases, a participating FFI may already have
documented some of its preexisting ac-
count holders as U.S. persons. Form W–9
(Request for Taxpayer Identification Num-
ber and Certification)andFormW–8BEN
(Certificate of Foreign Status of Benefi-
cial Owner for United States Tax With-
holding) are collected by certain foreign
persons (including U.S. branches of FFIs,
CFCs, qualified intermediaries and with-
holding partnerships and trusts) for cer-
tain U.S. tax purposes other than chapter
4. To facilitate compliance with the obli-
gations imposed by chapter 4, participat-
ing FFIs will be permitted to rely on Forms
W–9 they collect for other U.S. tax pur-
poses (i.e., for purposes of chapters 3 and
61 of the Code), and will generally be re-
quired to treat accounts of individuals that
are so documented as U.S. accounts for
purposes of chapter 4. Participating FFIs
will also be required under chapter 4 to
collect Form W–8BEN or Form W–9 (or
acceptable substitute forms) from certain
of their account holders. This requirement
will be limited in scope, as described in the
procedures below.
Participating FFIs (as well as other
withholding agents) also will be required
to identify other FFIs as participating FFIs,
deemed-compliant FFIs, or non-partici-
pating FFIs (or as entities described in
section 1471(f)). To facilitate this process,
Treasury and the IRS contemplate that
the IRS will issue employer identification
numbers (EINs) to participating FFIs (FFI
EINs) and that participating FFIs will use
these FFI EINs to identify themselves to
withholding agents. Until withholding
agents are able to verify the status of FFIs
with the IRS, withholding agents and par-
ticipating FFIs will be permitted to rely
on certifications provided by FFIs as to
their status as participating FFIs, unless
the withholding agent or participating FFI
knows or has reason to know that the cer-
tification provided is incorrect.
2.Individual Financial Accounts —
Identification by Participating FFIs for
Purposes of Section 1471
For purposes of determining which (if
any) of the accounts maintained by a par-
ticipatingFFIandheldbyindividualsare
U.S. accounts, future guidance will pro-
vide procedures that distinguish between
(a) preexisting individual accounts and (b)
new individual accounts.
a.Preexisting Individual Accounts
Preexisting individual accounts are fi-
nancial accounts held by individuals as
of the date that a participating FFI’s FFI
Agreement becomes effective. In the case
of preexisting individual accounts, the
participating FFI is required to determine
whether such accounts are to be treated
as U.S. accounts, accounts of recalcitrant
account holders, or other accounts, ac-
cording to the steps below.
1. The FFI may treat a depository ac-
count as other than a U.S. account
if the average of the month-end bal-
ances or values during the calendar
year preceding the entry into force of
the FFI’s FFI Agreement (or, if the
balance or value is determined less
frequently than monthly for purposes
of reporting to the account holder, the
average of the balance or value as de-
termined for purposes of reporting to
the account holder during the year) of
all depository accounts held by the ac-
count holder at such FFI was less than
$50,000 (or the equivalent in foreign
currency). An FFI will be permitted
to elect not to apply this step.
2. From among accounts not addressed
in step 1, all account holders already
documented as U.S. persons for other
U.S. tax purposes (e.g., for purposes
of chapters 3 and 61 of the Code) will
be treated as specified U.S. persons,
and those account holders’ financial
accounts will be treated as U.S. ac-
counts.
3. From among the accounts that are not
addressedinstep1orstep2,theFFI
shall treat an account as other than
a U.S. account if the electronically
searchable information maintained by
the FFI and associated with the ac-
count (e.g., customer information kept
for purposes of maintaining the ac-
count, corresponding with the account
holder, or complying with regulatory
requirements) does not include any
of the following indicia of potential
U.S. status: (i) identification of any
account holder as a U.S. resident or
U.S. citizen; (ii) a U.S. address associ-
ated with an account holder of the ac-
count (whether a residence address or
a correspondence address); (iii) a U.S.
place of birth for an account holder of
the account; (iv) an “in care of” ad-
dress, a “hold mail” address, or a P.O.
address that is the sole address on file
with respect to the account holder; (v)
a power of attorney or signatory au-
thority granted to a person with a U.S.
address; or (vi) standing instructions
to transfer funds to an account main-
tained in the U.S., or directions re-
ceived from a U.S. address.
4. For all accounts identified as contain-
ing indicia of potential U.S. status
in step 3, the FFI will be required to
obtain certain documentation to es-
tablish whether the account is a U.S.
account. In particular, if an account
holder is identified as a U.S. resident
September 13, 20103352010–37 I.R.B.

or citizen in item 3(i), the FFI shall
obtain Forms W–9 from the individ-
ual account holder identified as a U.S.
resident or citizen. If the account in-
formation includes any of the U.S.
indicia identified in item 3(ii) or (iii),
the FFI shall obtain Form W–9 estab-
lishing U.S. status, or Form W–8BEN
and documentary evidence establish-
ing non-U.S. status of the individual
account holder. For purposes of the
preceding sentence, for an account
holder to establish non-U.S. status,
the account holder will be required to
present a non-U.S. passport or other
similar evidence of non-U.S. citi-
zenship. If the account is identified
as containing only indicia of poten-
tial U.S. status described in items
3(iv)-(vi), the FFI shall obtain Form
W–9 establishing U.S. status, or Form
W–8BEN or documentary evidence
establishing non-U.S. status, from the
individual account holder. A partici-
pating FFI will be entitled to rely on
the documentation received from ac-
count holders unless it knows or has
reason to know that the information
contained in such documentation is
unreliable or incorrect.
5. The FFI will be required to complete
steps one through 3 and request any
documentationrequiredbystep4
from each relevant individual account
holder within one year of the effective
date of the FFI’s FFI Agreement. Ac-
count holders that have not provided
appropriate documentation as of the
date that is one year after the date of
the request will be classified as recal-
citrant account holders from such date
until the date on which appropriate
documentation is received from the
account holder by the participating
FFI.
For purposes of applying the above
procedures, a participating FFI would
bepermittedtorelyondocumentation
maintained in an accountholder’s files and
would be required to obtain additional
documentation from an accountholder
only where the above-described documen-
tation was not previously collected.
Within two years after the date on
which the FFI’s FFI Agreement enters into
effect, all preexisting individual accounts
that were treated under the procedures
described above as other than U.S. ac-
counts and that had an average monthly
balance (or, if the balance or value is
determined less frequently than monthly
for purposes of reporting to the account
holder, the average of the balance or value
as determined for purposes of reporting
to the account holder during the year)
exceeding $1,000,000during the year pre-
ceding the first year in which the FFI’s
FFI Agreement enters into effect will be
subject to the procedures described in
Section III.B.2.b., below, to determine
whether such accounts should continue
to be treated as other than U.S. accounts,
unless the participating FFI has collected,
reviewed, and maintained documentation
sufficient to establish the U.S. or non-U.S.
status of such accounts, and such U.S. or
non-U.S. status is reflected in electroni-
cally searchable information maintained
by the FFI and associated with the account.
Within five years after the date on
which the FFI’s FFI Agreement enters into
effect, all preexisting individual accounts
treated as other than U.S. accounts un-
der the procedures described above will
be subject to the procedures described in
Section III.B.2.b., below, to determine
whether such accounts should continue
to be treated as other than U.S. accounts,
unless the participating FFI has collected,
reviewed, and maintained documentary
evidence sufficient to establish the U.S.
or non-U.S. status of such accounts, and
such U.S. or non-U.S. status is reflected
in electronically searchable information
maintained by the FFI and associated with
the account. Future guidance shall also
prescribe circumstances under which the
procedures described in section III.B.2.a.
will be reapplied for accounts that are
treated as other than U.S. accounts in step
1 of section III.B.2.a. and that have an av-
erage monthly balance exceeding $50,000
in a year subsequent to the first year in
which the FFI’s FFI Agreement is applied
with respect to existing accounts.
A participating FFI will be deemed
to have maintained documentation (other
than a Form W–8BEN or Form W–9, a
copy of which must be retained) if the
participating FFI retains a record of the
documentary evidence collected and re-
viewed, noting the type of document, any
identification number contained in the
document, the place of issuance, and the
date of issuance and expiration date, if
any.
b.New Individual Accounts
New individual accounts are accounts
opened by individuals after the date that
a participating FFI’s FFI Agreement be-
comes effective. For new individual
accounts, the participating FFI will be
required to determine whether such ac-
counts are to be treated as U.S. accounts
according to the steps described below.
For this purpose, new individual accounts
will include new account relationships
established by individuals holding preex-
isting individual financial accounts with
the FFI. Thus, for example, a custodial
account opened after the effective date of
the participating FFI’s FFI Agreement by
an individual that maintains a preexisting
depository account at the FFI will be sub-
ject to the procedures described below.
1. The FFI may treat a depository ac-
count as other than a U.S. account if
the aggregate of the opening account
balance or value of the new individual
financial account, and the average of
the month-end balances or values dur-
ing the preceding calendar year (or, if
the balance or value is determined less
frequently than monthly for purposes
of reporting to the account holder, the
average of the balance or value as de-
termined for purposes of reporting to
the account holder during the year) of
all other depository accounts held by
the account holder at such FFI in the
preceding calendar year was less than
$50,000 (or the equivalent in foreign
currency), unless the FFI elects not to
apply this step.
2. From among the accounts that are
not addressed in step 1, the FFI will
categorize all account holders already
documented as U.S. persons for other
U.S. tax purposes as specified U.S.
persons for purposes of chapter 4, and
treat those account holders’ financial
accounts as U.S. accounts for pur-
poses of chapter 4.
3. From among the accounts that are not
addressedinstep1or2,theFFIwill
obtain and examine from individuals
that are beneficial owners of new in-
dividual accounts documentary evi-
dence establishing U.S. or non-U.S.
status of individual account holders.
2010–37 I.R.B.336September 13, 2010

For new individual accounts that are
identified as held by U.S. persons in
this step, the FFI will obtain Forms
W–9 from the individual holders of
the accounts.
4. With respect to accounts that are not
addressedinstep1orstep2,andthat
are not documented as U.S. accounts
in step 3, FFIs will examine all other
information collected in connection
with the new individual financial ac-
count (e.g., for purposes of maintain-
ing the account, corresponding with
the account holder, or complying with
regulatory requirements) to identify
indicia of potential U.S. status. Such
indicia include: (i) documentation
suggesting that account holders are
U.S. residents or U.S. citizens; (ii) a
U.S. address associated with an ac-
count holder of the account (whether
a residence address or a correspon-
dence address); (iii) a U.S. place of
birth for an account holder of the
account; or (iv) any other indicia of
potential U.S. status, including an “in
care of” address, a “hold mail” ad-
dress, a P.O. address that is the sole
address on file with respect to the
account holder, (v) a power of attor-
ney or signatory authority granted
to a person with a U.S. address, or
(vi) standing instructions to transfer
funds to an account maintained in the
United States or directions received
from a U.S. address. Accounts with
indicia of potential U.S. status will be
treated as potential U.S. accounts for
purposes of step 5 below. All other
accounts not addressed in step 1 or
step 2, or identified as held by a U.S.
person in step 3, shall be treated as
other than a U.S. account.
5. For all accounts identified as contain-
ing indicia of potential U.S. status
in step 4, the FFI will be required
to obtain certain documentation, if
such documentation has not already
been collected, reviewed and main-
tained by the participating FFI, or
treat the account holder as a recalci-
trant account holder. In particular, if
an account holder is identified as a
U.S. resident or citizen in item 4(i),
the FFI shall obtain Forms W–9 from
all individual account holders identi-
fied as U.S. residents or citizens. If
the account is identified as containing
indicia of potential U.S. status de-
scribed in item 4(ii) or (iii), the FFI
shall obtain Form W–9 establishing
U.S. status, or Form W–8BEN and
documentary evidence establishing
non-U.S. status of the individual ac-
count holders. For purposes of the
preceding sentence, for an account
holder to establish non-U.S. status,
the account holder will be required
to present a non-U.S. passport or
other similar evidence of non-U.S.
citizenship. If the account is iden-
tified as containing only indicia of
potential U.S. status described in item
4(iv)-(vi), the FFI shall obtain Form
W–9 establishing U.S. status, or Form
W–8BEN or documentary evidence
establishing non-U.S. status, from the
individual account holder. For this
purpose, a Form W–8BEN will not be
required, but could be relied on by the
FFI. Account holders that do not pro-
vide appropriate documentation will
be classified as recalcitrant account
holders until the date on which ap-
propriate documentation is received
from the account holder by the partic-
ipating FFI. A participating FFI will
beentitledtorelyonthedocumen-
tation received from account holders
unless it knows or has reason to know
that the information contained in such
documentation is unreliable or incor-
rect.
6. An FFI will be required to repeat steps
4 and 5 each time the FFI knows or has
reason to know that circumstances af-
fecting the correctness of the classifi-
cation of an account as a U.S. account
have changed.
Future guidance shall also prescribe the
period during which the steps described in
this section III.B.2.b. must be performed,
the default treatment of account holders
during that period, and the circumstances
under which the procedures described in
section III.B.2.b will be reapplied for ac-
counts that are treated as other than U.S.
accounts in step 1 of section III.B.2.b. and
that have an average monthly balance (or,
if the balance or value is determined less
frequently than monthly for purposes of re-
porting to the account holder, the average
of the balance or value as determined for
purposes of reporting to the account holder
during the year) exceeding $50,000 in a
year ending after the date on which the ac-
count was opened.
3.Financial Accounts Held by Entities —
Identification by Participating FFIs
a.Preexisting Entity Accounts
With respect to financial accounts held
by persons other than individuals as of
the date that an FFI’s FFI Agreement be-
comes effective, the participating FFI will
be required to determine whether such ac-
counts are to be treated as U.S. accounts,
accounts of participating FFIs, accounts of
deemed-compliant FFIs, accounts of non-
participating FFIs, accounts of entities de-
scribed in section 1471(f), accounts of re-
calcitrant account holders, accounts of ex-
cepted NFFEs, accounts of other NFFEs,
or other accounts, according to the steps
described below.
1. The participating FFI will treat all
account holders already identified as
U.S. persons for other U.S. tax pur-
poses as U.S. persons for purposes
of section 1471. Participating FFIs
will permit such entities to provide
documentation establishing that they
are not specified U.S. persons for
purposes of chapter 4. Any U.S.
person that does not provide such
documentation within one year after
the participating FFI’s FFI Agreement
enters into effect will be classified as
a specified U.S. person for purposes
of chapter 4 until such documenta-
tion is received. Treasury and the
IRS also request comments regarding
the development of presumptions on
which a participating FFI could rely
to determine whether a U.S. person is
a specified U.S. person.
2. Of the remaining entity account hold-
ers, the FFI will identify any entities
for which information maintained by
the participating FFI in its electroni-
cally searchable files indicates that the
entity account holderis a U.S. entity
(e.g., a place of incorporation in the
United States). Such entities will be
presumed to be U.S. entities. Partic-
ipating FFIs will permit such entities
to present documentation establishing
that they are not U.S. persons, or, if
they are U.S. persons, they are not
specified U.S. persons for purposes of
chapter 4. The FFI will be required
September 13, 20103372010–37 I.R.B.

to request such documentation within
one year of the effective date of the
FFI’s FFI Agreement. Any such en-
tity that has not presented such docu-
mentation prior to the date that is one
year after the date of the FFI’s request
will be classified as a specified U.S.
person for purposes of chapter 4 until
such documentation is received. An
account holder treated as a specified
U.S. person under this step 2 shall be
treated as a recalcitrant account holder
until the FFI receives the information
it is required to report with respect to
such account holder.
3. All entity account holders not classi-
fied as U.S. persons in step 1 or step
2 will be presumed to be foreign enti-
ties.
a. From among entity account hold-
ers that are presumed to be for-
eign entities, the participating FFI
will determine whether the en-
tity’s name (or other information
readily available to the partici-
pating FFI in its electronically
searchable files regarding the en-
tity account holder) clearly indi-
cates that the entity is an FFI. If
so, the participating FFI will ten-
tatively classify the entity as an
FFI.
b. If an entity account holder is ten-
tatively classified as an FFI in
step 3(a), the participating FFI
will request that the entity pro-
vide the participating FFI with
the entity’s FFI EIN and certifica-
tion of its participating FFI status,
and upon receipt of the FFI EIN
and certification of participating
FFI status, treat the entity as a
participating FFI for purposes of
applying section 1471(a), subject
to confirmation with the IRS that
the FFI EIN is valid.
c. If an entity account holder ten-
tatively classified as an FFI in
Step 3(a) does not provide a valid
FFI EIN and certification of par-
ticipating FFI status within nine
months after the participating
FFI’s FFI Agreement enters into
effect, the participating FFI will,
within one year after the partic-
ipating FFI’s Agreement enters
into effect, request documenta-
tion from the entity indicating
whether the entity is a participat-
ing FFI, a deemed-compliant FFI,
a non-participating FFI, an en-
tity described in section 1471(f),
or an NFFE. An entity account
holder that does not present such
documentation prior to the date
that is one year after the date of
the FFI’s request will be treated
as a non-participating FFI from
such date until the date on which
appropriate documentation is re-
ceived from the entity account
holder by the participating FFI.
During the interim period (i.e.,
prior to the time that the entity
account holder is treated as a
non-participating FFI), the entity
account holder will be considered
an excepted NFFE, and its ac-
count will be treated as other than
a U.S. account, unless the entity
is otherwise identified by the IRS
on a published list. If the entity
is so identified, the entity will
be treated as a non-participating
FFI. Treasury and the IRS also
contemplate requiring participat-
ing FFIs to report information
regarding the identity of any en-
tity that provides documentation
indicating that it is a participating
FFI, but that does not provide a
valid FFI EIN.
4.
a. With respect to any entity ac-
count holder not treated as a U.S.
person after applying steps 1 and
2orasanFFIafterapplyingstep
3, the participating FFI will ex-
amine the entity’s account file
for evidence that the entity is en-
gaged in an active trade or busi-
ness (other than an FI business).
Appropriate evidence in this re-
gard may include statements of
business activities, physical as-
sets used in business activities,
persons employed in business
activities, and receivables and
payables related to business ac-
tivities (such as may be shown on
audited financial statements or
other business records provided
by the account holder). For this
purpose, Treasury and the IRS
are also considering permitting
FFIstorelyinpartoninforma-
tion obtained from third-party
credit databases. An entity ac-
count holder identified in this
step as engaged in an active trade
or business will be treated as an
excepted NFFE and an account
of such an entity will be treated
as other than a U.S. account for
purposes of chapter 4.
b. The participating FFI will permit
entity account holders not treated
in step 4(a) as engaged in an ac-
tive trade or business to present
documentation showing or certi-
fying that they are a participat-
ing FFI (in which case the proce-
duresofstep3(b)and(c)willap-
ply), a deemed-compliant FFI, a
non-participating FFI, an NFFE,
or that they are described in an
exception under section 1471(f).
The participating FFI will be per-
mitted to rely on existing docu-
mentary evidence in its account
files for this purpose, unless the
participating FFI knows or has
reason to know that the documen-
tation is unreliable or incorrect.
If the participating FFI does not
have existing documentary evi-
dence on which it can rely for
this purpose, the participating FFI
will request documentation as re-
quired to show or certify the sta-
tus of the entity account holder
within one year after the partici-
pating FFI’s FFI Agreement en-
ters into effect. If the entity ac-
count holder does not present the
documentation required by this
step, the entity account holder
will be treated as a non-partici-
pating FFI from the date that is
one year after the date of the FFI’s
request for documentation until
the date appropriate documenta-
tion is received from the entity ac-
count holder by the participating
FFI.
c. If the documentation provided by
the account holder in step 4(b)
above indicates that the account
holder is an NFFE, the partic-
ipating FFI must either obtain
documentary evidence (or rely on
existing documentary evidence
in its account files)that the NFFE
is an excepted NFFE, or the FFI
2010–37 I.R.B.338September 13, 2010

must (i) specifically identify each
individual, and each other spec-
ified U.S. person that has an
interest in such entity, either di-
rectly or through ownership in
one or more other entities, other
than through ownership in an
excepted NFFE, a participating
FFI, a deemed-compliant FFI,
or an entity described in section
1471(f), and (ii) if a specified
U.S. person is identified in (i),
treat the account as a U.S. ac-
count and obtain with respect to
each such person the documen-
tation that the participating FFI
wouldberequiredtoobtainfrom
such person if such person were
a new account holder and report
any such specified U.S. person to
the IRS. If the participating FFI
is unable to obtain the documen-
tationrequiredbythisparagraph
with respect to a specified U.S.
person identified in (i), the ac-
count holder will be treated as a
recalcitrant account holder from
the date that is two years after the
date on which the participating
FFI’s FFI Agreement entered into
effect until the date appropriate
documentation is received from
the account holder by the partici-
pating FFI.
A participating FFI will be entitled to
rely on the documentation received from
entity account holders unless it knows or
has reason to know that the information
contained in such documentation is unre-
liable or incorrect. Treasury and the IRS
request comments about the level of evi-
dence that should be sufficient to establish
under step 4(a) that an entity is engaged in
an active trade or business, as well as ways
in which step 4(a) can be structured to en-
sure that it is not subject to abuse.
b.New Entity Accounts
For new financial accounts held by
persons other than individuals and opened
after the date on which the participating
FFI’s FFI Agreement enters into effect,
the participating FFI will be required to
determine whether such accounts are to be
treated as U.S. accounts, accounts of par-
ticipating FFIs, accounts of deemed-com-
pliant FFIs, accounts of entities described
in section 1471(f),accounts of non-par-
ticipating FFIs, accounts of recalcitrant
account holders, accounts of excepted
NFFEs, or accounts of other NFFEs by
following procedures similar to the proce-
dures described above with regard to pre-
existing accounts. However, with respect
to new entity accounts, FFIs must deter-
mine how to treat such accounts using all
information collected by the FFI (e.g.,for
purposes of opening and maintaining the
account, corresponding with the account
holder, and complying with regulatory re-
quirements, including anti-money launder-
ing/know-your-customer (“AML/KYC”)
requirements), regardless of whether such
information is available in electronically
searchable files. Information collected
by the FFI for purposes of opening and
maintaining the account, corresponding
with the account holder, and complying
with regulatory requirements, including
AML/KYC requirements would also be
treated as known by the FFI for purposes
of determining whether the FFI should
treat documentation provided by an entity
as unreliable or incorrect.
4.Coordination With Section 1472
Pursuant to its FFI Agreement, a par-
ticipating FFI must follow the procedures
described in section III.B.3. to determine
whether the accounts of its entity account
holders are to be treated as U.S. accounts,
accounts of participating FFIs, accounts of
deemed-compliant FFIs, accounts of non-
participating FFIs, accounts of entities de-
scribed in section 1471(f), accounts of ex-
cepted NFFEs, or accounts of NFFEs sub-
ject to reporting with respect to their sub-
stantial U.S. owners. A participating FFI
that makes a withholdable payment to an
NFFE account holder will also be a with-
holding agent for purposes of section 1472.
To avoid duplicative documentation, a par-
ticipating FFI must determine the treat-
ment of its entityaccount holders under
the procedures of section III.B.3. of this
Notice, rather than the certification pro-
cedures described in section 1472(b), for
purposes of applying section 1472 with re-
spect to a withholdable payment to an en-
tity account holder.
C.USFIs
To comply with its obligations as a
withholding agent under sections 1471
and 1472, a USFI will be required to de-
termine whether to treat entities to which
it makes withholdable payments as U.S.
persons, participating FFIs, deemed-com-
pliant FFIs, non-participating FFIs, enti-
ties described in section 1471(f), excepted
NFFEs, or other NFFEs. Where the enti-
ties to which a USFI makes withholdable
payments are account holders of the USFI,
these determinations parallel the determi-
nations that a participating FFI is required
to make with respect to its entity account
holders. To ensure that those parallel
determinations are made in a consistent
manner by FFIs and USFIs, Treasury
and the IRS will require USFIs to deter-
mine whether their foreign entity account
holders are NFFEs subject to reporting
or withholding under section 1472 or
FFIs subject to withholding under section
1471(a) by applying procedures similar to
the procedures described in Section III.B.3
of this Notice. A USFI that performs such
procedures will not be required to sepa-
rately request certification under section
1472(b) from its NFFE account holders.
Such procedures will apply only with re-
spect to holders of financial accounts as
defined in section 1471(d)(2) to which the
USFI makes withholdable payments.
1.Identification of Foreign Entities that
Hold Preexisting Financial Accounts
With respect to withholdable payments
made by a USFI to financial accounts
opened before January 1, 2013 and held by
persons other than individuals, Treasury
andtheIRSintendtorequiretheUSFIto
perform the steps described below.
1. The USFI will treat all entity account
holders identified as U.S. persons for
purposes of chapters 3 or 61 of the
Code as U.S. persons for purposes of
chapter 4. The remaining entity ac-
count holders will be treated as for-
eign entities for purposes of chapter 4.
2.
a. For each entity account holder
treated as a foreign entity af-
ter step 1, the USFI will deter-
mine whether the foreign entity’s
name (or other information read-
ily available to the USFI in its
September 13, 20103392010–37 I.R.B.

electronically searchable files re-
garding the entity account holder)
clearly indicates that the foreign
entity is an FFI. If so, the USFI
will tentatively classify the entity
as an FFI.
b. If a foreign entity account holder
is tentatively classified as an FFI
in step 2(a), the USFI will request
that the foreign entity provide the
USFI with the foreign entity’s
certification of its participating
FFI status and FFI EIN, and upon
receipt of the FFI EIN and certi-
fication of participating FFI sta-
tus, treat the foreign entity as a
participating FFI for purposes of
applying section 1471(a), subject
to confirmation with the IRS that
the FFI EIN is valid.
c. If a foreign entity account holder
tentatively classified as an FFI
in Step 2(a) does not provide
a valid FFI EIN by December
31, 2013, the USFI will request
documentation from the foreign
entity indicating whether the for-
eign entity is a participating FFI,
a deemed-compliant FFI, an en-
tity described in section 1471(f),
a non-participating FFI, or an
NFFE. Any foreign entity that has
not provided such documentation
by December 31, 2014, will be
classified as a non-participating
FFI from such date until the date
on which appropriate documen-
tation is received from the entity
account holder by the USFI. Dur-
ing the interim period (i.e., prior
to the time that the entity account
holder is treated as a non-partic-
ipating FFI), the entity account
holder will be considered an ex-
cepted NFFE unless the entity is
otherwise identified by the IRS
on a published list. If the entity
is so identified, the entity will
be treated as a non-participating
FFI. Treasury and the IRS also
contemplate requiring USFIs to
report information regarding the
identity of any entity that pro-
vides documentation indicating
that it is a participating FFI, but
that does not provide a valid FFI
EIN.
3.
a. With respect to any entity account
holder not treated as a U.S. per-
son after applying step 1 or as an
FFI after applying step 2, the FFI
will examine the entity’s account
file for evidence that the entity is
engaged in an active trade or busi-
ness (other than an FI business).
Appropriate evidence in this re-
gard may include statements of
business activities, physical as-
sets used in business activities,
persons employed in business
activities, and receivables and
payables related to business ac-
tivities (such as may be shown on
audited financial statements or
other business records). For this
purpose, Treasury and the IRS
are also considering permitting
USFIstorelyinpartoninfor-
mation obtained from third-party
credit databases. A foreign entity
account holder identified in this
step as engaged in an active trade
or business will be treated as an
excepted NFFE for purposes of
chapter 4.
b. USFIs will permit foreign entity
account holders not treated in
step 3(a) as engaged in an active
trade or business to present docu-
mentation certifying that they are
a participating FFI (in which case
the procedures of step 2(b) and
(c) will apply), a deemed-com-
pliant FFI, a non-participating
FFI, an entity described in section
1471(f), or an NFFE. A USFI
willbepermittedtorelyonex-
isting documentary evidence in
its account files for this purpose,
unless the USFI knows or has
reason to know that the documen-
tation is unreliable or incorrect.
Any entity account holder that
does not present such documen-
tation by December 31, 2014 will
be treated as a non-participating
FFI for purposes of chapter 4
from after such date until the date
on which appropriate documen-
tation is received from the entity
account holder by the USFI.
c. If the documentation provided by
the account holder in step 3(b)
above indicates that the account
holder is an NFFE, the USFI
must either obtain documentary
evidence (or rely on existing doc-
umentary evidence in its account
files) that the NFFE is an ex-
cepted NFFE or (i) specifically
identify each individual and each
other specified U.S. person that
hasaninterestinsuchentity,
either directly or through owner-
ship in one or more other entities,
other than through ownership in
an excepted NFFE, a participat-
ing FFI, a deemed-compliant FFI,
or an entity described in section
1471(f), and (ii) if a specified
U.S. person is identified in (i),
obtain with respect to each such
person the documentation that the
USFIwouldberequiredtoobtain
from such person if such person
were a new account holder, and
report any such specified U.S.
person to the IRS in such man-
ner as will be provided in future
guidance. If the USFI is unable
to identify such persons or obtain
the documentation required by
this paragraph with respect to a
specified U.S. person identified
in (i) by December 31, 2014, the
USFI will apply withholding un-
der section 1472(a) from after
such date until the date on which
appropriate documentation is re-
ceived from the account holder
by the USFI.
A participating FFI will be entitled to
rely on the documentation received from
entity account holders unless it knows or
has reason to know that the information
contained in such documentation is unre-
liable or incorrect.
2.Identification of New Foreign Entity
Accounts
For financial accounts that are opened
at a USFI on or after January 1, 2013 and
are held by persons other than individuals
(new USFI accounts held by foreign enti-
ties), a USFI will be required to determine
whether such accounts are to be treated as
U.S. accounts, accounts of participating
FFIs, accounts of non-participating FFIs,
accounts of deemed-compliant FFIs, enti-
ties described in section 1471(f), accounts
of excepted NFFEs, or accounts of other
2010–37 I.R.B.340September 13, 2010

NFFEs by following procedures similar
to the procedures described in Section
III.C.1 above with regard to preexisting
USFI accounts held by foreign entities.
However, with respect to new USFI ac-
counts held by foreign entities, USFIs
must identify foreign entities using all in-
formation collected by the USFI (e.g.,for
purposes of opening and maintaining the
account, corresponding with the account
holder, and complying with regulatory
requirements, including AML/KYC re-
quirements), regardless of whether such
information is available in electronically
searchable files. Information collected
by the USFI for purposes of opening and
maintaining the account, corresponding
with the account holder, and complying
with regulatory requirements, including
AML/KYC requirements, would also be
treated as known by the USFI for purposes
of determining whether the USFI should
treat documentation provided by an en-
tity as unreliable or incorrect. Treasury
and the IRS request comments regarding
appropriate procedures for identifying par-
ticipating FFIs, deemed-compliant FFIs,
non-participating FFIs, entities described
in section 1471(f), excepted NFFEs, and
other NFFEs from among new account
holders of USFIs.
SectionIV.ReportingonU.S.Accounts
This section describes the preliminary
views of Treasury and the IRS regarding
the manner and type of information report-
ing that FFIs must provide to the IRS an-
nually with respect to their U.S. accounts
under an FFI Agreement.
A.In General
Section 1471 provides that a participat-
ing FFI must report the following informa-
tion pursuant to an FFI Agreement with re-
spect to each U.S. account:
•the name, address and taxpayer identi-
fication number (TIN) of each account
holder which is a specified U.S. per-
son;
•in the case of any account holder which
is a U.S.-owned foreign entity, the
name, address, and TIN of each sub-
stantial United States owner of such
entity;
•the account number;
•the account balance or value (deter-
mined at such time and in such manner
as the Secretary may provide); and
•except to the extent provided by the
Secretary, the gross receipts and gross
withdrawals or payments from the ac-
count (determined for such period and
in such manner as the Secretary may
provide).
The IRS is developing a new form
for reporting the information required by
section 1471(c). This form will be filed
electronically.SeeSection V of this notice
for information on anticipated require-
ments with regard to electronic filing.
The account number to be reported with
respect to an account may be an actual
account number, or,if no account number
is used by the FFI, a serial number or other
number the FFI assigns to the financial
account that is unique and will distinguish
the specific account. Treasury and the IRS
also intend to issue guidance coordinating
the reporting provisions of chapter 4 with
other U.S. tax reporting obligations.
B.Account Balance or Value
Section 1471(c)(1)(C) requires a partic-
ipating FFI to report the account balance
or value of each U.S. account. Treasury
and the IRS intend to issue guidance that
will provide that all such amounts must
be reported in U.S. dollars. Future guid-
ance will provide theappropriate method
for currency translation. With regard to the
account balance of deposit and custodial
accounts, Treasury and the IRS are con-
sidering requiring reporting of the high-
est of the month-end balances during the
year (or, if the balance is determined less
frequently than monthly (e.g.,quarterly)
for purposes of reporting to the account
holder, the highest of the balances as de-
termined for purposes of reporting to the
account holder duringthe year). In ad-
dition, the FFI will be required to pro-
vide additional account-related informa-
tion (e.g., copies of account statements in-
cluding monthly or quarterly balances and
daily receipts and withdrawals) to the IRS
upon request.
In the case of a U.S. account that is
an interest in an entity described in sec-
tion 1471(d)(5)(C), the value of the ac-
count may be required to be determined for
a number of reasons throughout the year,
including for purposes of (i) financial re-
porting, (ii) determining the compensation
of any investment manager of or invest-
ment advisor to the FFI, or (iii) reporting
to the account holder or determining any
distributions or payments to the account
holder. Treasury and IRS are consider-
ing requiring such a participating FFI to
report the highest value of such account
during the year, as determined for the pur-
pose that requires the most frequent deter-
mination of value by the participating FFI.
For example, assume that a participating
FFI is required to be valued for two rea-
sons: annually for purposes of reporting to
its interest holders, and quarterly for pur-
poses of calculating the compensation of
the investment advisor to the FFI. In such
a case, the value reported under section
1471(c)(1)(C) would be the highest of the
quarterly values determined for purposes
of calculating the compensation of the in-
vestment advisor.
Comments are requested regarding the
above approaches, and regarding other po-
tential approaches that may provide ade-
quate information in a manner that will be
administrable by participating FFIs with-
out being subject to manipulation by U.S.
account holders. Comments on possible
currency translation conventions are re-
quested. Comments onspecific situations
in which foreign laws may prevent the re-
porting of the information described above
are also requested, along with descriptions
of the steps that would be required of a par-
ticipating FFI (and account holders of U.S.
accounts maintained by the FFI) in order to
overcome or waive any such restriction.
C.Gross Receipts and Withdrawals
Section 1471(c)(1)(D) requires the re-
porting of gross receipts and gross with-
drawals and payments, except to the extent
provided otherwise by the Secretary. Trea-
sury and the IRS request comments as to
how to minimize burdens on participating
FFIs with respect to such reporting.
D.Section 1471(c)(2) Election
Section 1471(c)(2) allows a partic-
ipating FFI to elect to have section
1471(c)(1)(C) or (D) not apply, and instead
to report under sections 6041, 6042, 6045,
and 6049 as if such FFI were a U.S. person
and each holder of a U.S. account that
is a specified U.S. person or U.S.-owned
September 13, 20103412010–37 I.R.B.

foreign entity were an individual and cit-
izen of the United States. An FFI that
makes this election must still comply with
section 1471(c)(1)(A) and (B), and thus
will also have to report the name, address,
and TIN of each account holder which is
a specified U.S. person and, in the case of
any account holder which is a U.S.-owned
foreign entity, the name, address, and TIN
of each substantial United States owner of
such entity, as well as the relevant account
numbers; however, such an electing FFI
will not have to report the account balance
or value or the gross receipts and gross
withdrawals of payments required under
section 1471(c)(1)(C) and (D).
The time and manner for making the
election and the conditions for meeting the
reporting requirements of the election will
be addressed in future guidance. Treasury
and the IRS request comments regarding
whether and in what circumstances a par-
ticipating FFI should be permitted to make
the election with respect to a subset of its
accounts without making the election for
all of its accounts (for example, whether
a participating FFI should be permitted to
make the election with respect to accounts
held by individuals without requiring that
the FFI make the election with respect to
accounts held by entities).
E.Elimination of Duplicative Reporting
In certain circumstances, the same in-
strument or interest may give rise to a fi-
nancial account with respect to more than
one FFI. For example, assume a partici-
pating FFI (Fund) issues shares that are
treated as a financial account under section
1471(d)(2)(C), and such shares are held by
another participating FFI (Custodian) on
behalf of a specified U.S. person. In that
case, the shares owned by the specified
U.S. person would (absent an applicable
exception) constitute a financial account
maintained by Fund and the specified U.S.
person’s custodial account maintained by
Custodian would also be a financial ac-
count. Treasury and the IRS are aware that
there is concern about whether both Fund
andCustodianwouldberequiredtoreport
the shares of Fund owned by the specified
U.S. person.
Treasury and the IRS believe that,
where possible, it is preferable for re-
porting to be performed by the FFI that
is in a direct payment relationship with
the account holder. This view is consis-
tent with section 1471(d)(1)(C)(i), which
provides that a U.S. account does not in-
clude a financial account held by another
financial institution that meets the require-
ments of section 1471(b). Treasury and
the IRS intend to issue regulations provid-
ing that in the case of a participating FFI
that maintains an account of another par-
ticipating FFI, only the participating FFI
that has the more direct relationship with
the investor or customer will be required
to report the information required under
section 1471(c). Thus, in the example in
the preceding paragraph, Custodian will
be required to report with respect to the
custodial account held by the specified
U.S. person, and the shares of Fund held
by Custodian will not be a U.S. account
subject to reporting by Fund. Moreover, in
a case in which all of a participating FFI’s
direct account holders are also participat-
ing FFIs, the first-mentioned participating
FFI would have no reporting obligations
under section 1471(c).
F.Reporting with Regard to Recalcitrant
Accounts
Treasury and the IRS intend to require
a participating FFI to report the number
and aggregate value of financial accounts
held by recalcitrant account holders and
the number and aggregate value of finan-
cial accounts held by related or unrelated
non-participating FFIs. In addition, Trea-
sury and the IRS intend to require a par-
ticipating FFI to report the number and ag-
gregate value of financial accounts held by
recalcitrant accountholders that have U.S.
indicia (as described in Section III.B.2.b.
step 4 above or in future guidance).
Section V. Request for Specific Comments
A.Verification Requirements Applicable
to Participating FFIs
Under section 1471(b)(1)(B), as part
of an FFI Agreement, a participating FFI
agrees to comply with such verification
procedures as the Secretary may require
with respect to the identification of U.S.
accounts. Treasury and the IRS consider
effective verification procedures to be cru-
cial to ensuring compliance with chapter
4. Treasury and the IRS recognize, how-
ever, that the compliance gains associated
with the implementation of verification
procedures must be balanced against the
costs that such procedures would impose
on FFIs.
Treasury and the IRS understand that
for compliance purposes in connection
with various countries’ AML/KYC and
similar laws, regulators typically place
some degree of reliance on verification
procedures and reviews performed by pub-
lic accountants engaged by financial in-
stitutions or by the internal audit function
of financial institutions. Treasury and the
IRS also understand that, unlike the proce-
dures commonly used by external auditors
to verify compliance with QI agreements,
these verification procedures and reviews
are performed under engagements that are
not agreed-upon procedures.
Treasury and the IRS request comments
about the procedures performed by pub-
lic accountants or other externalauditors
when conducting an AML/KYC audit or
similar engagement, including information
about the objectives of such engagements,
the types of procedures performed, and the
types of reports issued as part of such en-
gagements. In addition, Treasury and the
IRS are exploring the possibility of rely-
ing in some circumstances on written cer-
tifications by high-level management em-
ployees of the applicable financial institu-
tion regarding the steps taken to comply
with chapter 4. Treasury and IRS request
comments on the information and repre-
sentations that should be included in such
certifications and the extent to which pub-
lic accountants or other externalauditors
rely on written certifications of compli-
ance provided by officers or other respon-
sible management employees of the appli-
cable financial institution in the course of
AML/KYC audits or similar engagements.
Treasury and the IRS request comments
concerning the extent to which the format
of reports associated with such engage-
ments could be appropriately modified to
further compliance with chapter 4. Trea-
sury and the IRS further request comments
as to the extent to which public accoun-
tants would be able to perform, consistent
with their attestation or other accounting
standards, verification procedures and re-
porting with respect to FFIs under engage-
ments that are not agreed-upon procedures.
2010–37 I.R.B.342September 13, 2010

B.Treatment of Passthru Payments
As part of an FFI Agreement, an FFI
must deduct and withhold a tax equal to 30
percent of (1) any passthru payment that
is made by such institution to a recalci-
trant account holder or a non-participating
FFI, and (2) in the case of a passthru pay-
ment made by such institution to a partic-
ipating FFI that has elected under section
1471(b)(3) to be withheld upon with re-
spect to such payment, so much of such
payment as is allocable to accounts held
by recalcitrant account holders or non-par-
ticipating FFIs. Section 1471(b)(1)(D).
Section 1471(d)(7) defines “passthru pay-
ment” to mean any withholdable payment
or any other payment to the extent attrib-
utable to a withholdable payment.
One of the purposes of requiring with-
holdingonpassthrupaymentsistopermit
an FFI that has entered into an FFI Agree-
ment to continue to remain in compliance
with its agreement, even if some of its ac-
count holders have failedtoprovidethe
FFI with the information necessary for the
FFI to properly determine whether the ac-
counts are U.S. accounts and perform the
required reporting, or, in the case of ac-
count holders that are FFIs, have failed to
enter into an FFI Agreement. The rule also
encourages FFIs that do not invest directly
in the United States or that do not hold
U.S assets that produce withholdable pay-
ments, but which benefit from investments
that produce payments that are attributable
to withholdable payments, to enter into an
FFI Agreement.
Treasury and the IRS have received
comments concerning the potential diffi-
culties that may arise for FFIs in trying
to determine whether a payment is “at-
tributable to” a withholdable payment.
Comments are requested as to methods
that a participating FFI could use to de-
termine whether payments it makes are
attributable to withholdable payments,
including any associated information re-
porting that may be necessary, and which
take into account the administrative bur-
den imposed by any such approach.
C.Election to be Withheld Upon
Under section 1471(b)(3), subject to
any requirements imposed by the Secre-
tary, a participating FFI may elect to have
a withholding agent withhold on with-
holdable payments or passthru payments
made to it, rather than act as a withholding
agent for passthru payments it makes to
its account holders. If a participating FFI
meets the requirements the Secretary may
provide and so elects, it will be withheld
upon to the extent withholdable payments
or passthru payments made to it are alloca-
ble to accounts that are held by recalcitrant
account holders or non-participating FFIs.
As part of the election, a participating FFI
must agree to notify the withholding agent
of its election to be withheld upon and
provide such other information as may be
necessary for the withholding agent to de-
termine the appropriate amount to deduct
and withhold from withholdable payments
or passthru payments it makes to the elect-
ing FFI. The electing FFI must also agree
to a waiver of any right under any treaty
of the United States with respect to any
amount deducted and withheld pursuant
to the election. To the extent provided by
the Secretary, the election to be withheld
upon may be made with respect to certain
classes or types of accounts of the partici-
pating FFI.
Treasury and the IRS have received
comments regarding the administrative
challenges that may be raised by an elec-
tion under section 1471(b)(3). Comments
are requested as to the appropriate scope of
such an election. In particular, comments
are requested as to the types of financial
accounts for which such an election should
be available. In addition, comments are
requested as to the type of information
reporting an electing FFI would need to
provide to a withholding agent so that
the appropriate amount of tax could be
deducted and withheld from any withhold-
able payments or other passthru payments
made to the electing FFI.
D.Sanctions With Respect to Recalcitrant
Account Holders
As noted above, participating FFIs are
required to withhold tax (or in the case
of an FFI that elects to be withheld upon,
to provide a withholding agent with infor-
mation necessary to determine appropriate
withholding) with respect to passthru pay-
ments made to recalcitrant account hold-
ers. Withholding with respect to recalci-
trant account holders is intended to provide
relief for participating FFIs that would not
otherwisebeabletocollecttheinforma-
tion required to comply with their obli-
gations under their FFI Agreements. It
should not, however, become a permanent
substitute for collecting and reporting in-
formation with respect to U.S. accounts.
Treasury and the IRS request comments on
what measures should be taken to address
long-term recalcitrant accounts, including
whether, and in what circumstances, Trea-
sury and the IRS should consider terminat-
ing FFI Agreements due to the number of
recalcitrant account holders remaining af-
ter a reasonable period of time.
E.FFIs Subject to Restrictions Prohibiting
U.S. Account Holders
Treasury and the IRS have received
comments stating that for purposes of
complying with certain legal requirements,
some foreign collective investment vehi-
cles have procedures and legal restrictions
that prohibit the sale of their interests to
certain U.S. persons, and include or will
include language to that effect in their
prospectuses and application documents.
Similarly, in cases in which interests in
such vehicles are held by intermediaries
or distributors that maintain direct account
relationships with the beneficial owners
in such vehicles, applicable distribution
or similar agreements contain covenants
and representations that prohibit the sale
of such interests to U.S. persons.
Finally, it has been represented that in
certain jurisdictions, AML/KYC laws sup-
port compliance withthese prohibitions
because they apply broadly to all brokers
and distributors in the intermediation chain
to require the identification of beneficial
owners (including certain U.S. persons) in-
vesting in such vehicles.
Treasury and the IRS are considering
whether, under the standard set forth in
section 1471(b)(2)(A), the types of legal
requirements and arrangements described
above, potentially in connection with cer-
tain additional requirements, may provide
a basis to treat such institutions as meeting
the requirements of section 1471(b). Trea-
sury and the IRS thus request further com-
ments on the following:
1. specific information about the appli-
cable laws and regulations that may
result in an investment vehicle’s deter-
mination to prohibit sales of its inter-
ests to U.S. persons;
September 13, 20103432010–37 I.R.B.

2. the categories of investment vehicles
that may be covered by such laws and
regulations;
3. examples of the distribution or similar
agreements that prohibit sales of inter-
ests to U.S. persons;
4. information regarding the legally
binding nature of such prohibitions
and the penalties applicable to a vio-
lation of such prohibitions;
5. the extent to which the AML/KYC
laws used to enforce such a prohibi-
tion would apply in identifying U.S.
persons (as defined for U.S. tax pur-
poses) that may invest in such vehi-
cles, directly or through ownership in
one or more other entities;
6. the extent to which purchases of inter-
ests by non-participating FFIs would
be treated as unsuitable investments
and the extent to which and mech-
anisms by which non-participating
FFIs could be prohibited from pur-
chasing such interests; and
7. approaches that would allow Treasury
and the IRS to verify or otherwise en-
sure compliance with such prohibi-
tions.
Treasury and the IRS are also consider-
ing whether such requirements or similar
factors are an appropriate basis for apply-
ing section 1471(b)(2)(A) to other types of
investment vehicles or FFIs.
F.Electronic Filing Requirements for
Financial Institutions
Section 522 of the Act amends section
6011(e) to the Code to permit the Secretary
to require filing on magnetic media (elec-
tronic filing) by financial institutions as
defined in section 1471(d)(5) with respect
to tax for which such institutions are liable
under chapter 3 and chapter 4 of the Code,
without regard to the general rule under
section 6011(e)(2) that limits the authority
of the Secretary to require electronic filing
to persons required to file at least 250 re-
turns during the calendar year.
Treasury and the IRS consider the re-
ceipt of electronic filings by financial in-
stitutions in lieu of paper filings to be crit-
ical to chapter 3 and chapter 4 compliance
efforts. As a result, Treasury and the IRS
intend to issue regulations that would re-
quire all or most financial institutions to
electronically file their returns with respect
to tax for which such institutions are li-
able under chapter 3 and chapter 4 of the
Code. Treasury and the IRS anticipate that
this requirement would impact many ex-
isting filers. To provide sufficient time
for financial institutions to comment re-
garding the implementation of this require-
ment and to coordinate the effective date
for this requirement with the general effec-
tive date of chapter 4, Treasury and the IRS
intend to require electronic filings with re-
gard to tax for which financial institutions
are liable under chapter 3 and chapter 4 of
the Code beginning with returns filed for
taxable years ending after December 31,
2012.
G.Application of Chapter 4 by U.S.
Withholding Agents Other than USFIs
Treasury and the IRS contemplate per-
mitting U.S. withholding agents other than
USFIs to rely on a foreign entity’s certifi-
cation as to its classification for chapter 4
purposes, absent reason to know that such
certification is unreliable or incorrect.
These requirements would also apply with
respect to withholdable payments made
by FFIs and USFIs to NFFEs that are not
holders of financialaccounts maintained
by the financial institution. Treasury and
IRS request comments on the form of
such certifications, their renewal provi-
sions, and circumstances under which a
withholding agent should not be required
to solicit such certifications from certain
classes of persons or with respect to certain
classes of payments, such as arm’s-length
payments made for goods or services in
the ordinary course of the withholding
agent’s trade or business.
Treasury and the IRS also anticipate
providing an exception in guidance to the
withholding required under section 1472
for payments made to an NFFE engaged
in an active trade or business by withhold-
ing agents other than financial institutions.
Comments are requested regarding the ap-
propriateness of such an exception, how a
withholding agent may determine whether
anNFFEisengagedinanactivetrade
or business, and other exceptions to with-
holding under section 1472 that may be ap-
propriate.
H.Potential Modifications to Chapter 4
Requirements Based on Availability of
Information From Other Sources
In some cases, information required to
be collected and reported by FFIs under
chapter 4 may already be reported to the
IRS, or may otherwise be readily available
to the IRS through other means. Treasury
and the IRS intend to consider approaches
that will help minimize the burden on
participating FFIs. For example, Treasury
and the IRS are considering whether to
exempt a participating FFI from the obli-
gation to perform withholding on passthru
payments to individual recalcitrant ac-
count holders where reporting by the
participating FFI to the IRS is sufficient to
permit the IRS to obtain information about
the identities of those recalcitrant account
holders through an information exchange
request to a foreign jurisdiction. Treasury
and the IRS solicit comments on possible
approaches to reduce the burden imposed
on participating FFIs by chapter 4.
REQUESTS FOR PUBLIC COMMENT
This notice requests public comments
regarding certain priority issues identified
for forthcoming guidance on the applica-
tion of chapter 4 of the Code.
Written comments should be sent to:
CC:PA:LPD:PR (NOT–121556–10), room
5203, Internal Revenue Service, PO Box
7604, Ben Franklin Station, Washing-
ton, DC 20044. Submissions may be
hand-delivered Monday through Friday
between the hours of 8 a.m. and 4 p.m.
to: CC:PA:LPD:PR (NOT–121556–10),
Courier’s Desk, Internal Revenue Service,
1111 Constitution Avenue, NW, Wash-
ington, DC 20224 or sent electronically
via the Federal eRulemaking Portal at
Notice.Comments@irscounsel.treas.gov
(NOT–121556–10). Please insert “Notice
2010–60” in the subject line of any elec-
tronic communications.
Allcommentswillbeavailablefor
public inspection and copying. Due to the
compressed timeline for issuing guidance
in advance of the effective date of chapter
4, this notice solicits written comments
from affected persons by November 1,
2010.
2010–37 I.R.B.344September 13, 2010

DRAFTING INFORMATION
The principal author of this notice is
John Sweeney of the Office of Associate
Chief Counsel (International). For further
information regarding this notice, contact
Kay Holman at (202) 622–3840 (not a toll-
free call).
September 13, 20103452010–37 I.R.B.

Part IV. Items o
fGeneralInterest
Deletions Fro
m Cumulative
List of Organi
zations
Contribution
stoWhich
are Deductib
le Under Section
170 of the Cod
e
Announceme
nt 2010–55
The Interna
l Revenue Service has re-
voked its de
termination that the organi-
zations lis
ted below qualify as organiza-
tions descr
ibed in sections 501(c)(3) and
170(c)(2) o
f the Internal Revenue Code of
1986.
Generally
, the Service will not disallow
deduction
s for contributions made to a
listed org
anization on or before the date
of announc
ement in the Internal Revenue
Bulletin t
hat an organization no longer
qualifie
s. However, the Service is not
preclude
d from disallowing a deduction
for any co
ntributions made after an or-
ganizati
on ceases to qualify under section
170(c)(
2) if the organization has not timely
filed a s
uit for declaratory judgment under
section 7428 a
nd if the contributor (1) had
knowledge of t
he revocation of the ruling
or determinat
ion letter, (2) was aware that
such revocati
on was imminent, or (3) was
in part respon
sible for or was aware of the
activities o
r omissions of the organization
that brought
about this revocation.
If on the othe
r hand a suit for declara-
tory judgmen
t has been timely filed, con-
tributions f
rom individuals and organiza-
tions descri
bedinsection170(c)(2)that
are otherwi
se allowable will continue to
be deductib
le. Protection under section
7428(c) wou
ld begin on September 7, and
would end on
the date the court first deter-
mines that
the organization is not described
in section
170(c)(2) as more particularly
set forth i
n section 7428(c)(1). For indi-
vidual con
tributors, the maximum deduc-
tion prote
cted is $1,000, with a husband
and wife t
reated as one contributor. This
benefit i
s not extended to any individual, in
whole or i
n part, for the acts or omissions
of the org
anization that were the basis for
revocat
ion.
The Buyer’s Fu
nd, Inc.
Salt Lake City
,UT
Unicorn Develo
pment Corporation
Saint Joseph,
MI
Ameri-Home Fou
ndation, Inc.
Lenexa, KS
Credit Counsel
ing Bureau of San Diego
County
San Diego, CA
Exegetical In
stitute, Inc.
Kingsland, GA
Family Home Fou
ndation, Inc.
Orem, UT
Home Downpayme
nt Gift Foundation,
Inc.
Washington, D
C
Xelan Foundat
ion, Inc.
Tampa, FL
2010–37 I.R.B.346September 13, 2010

Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the ef-
fect:
Amplifieddescribes a situation where
no change is being made in a prior pub-
lished position, but the prior position is be-
ingextendedtoapplytoavariationofthe
fact situation set forth therein. Thus, if
an earlier ruling held that a principle ap-
plied to A, and the new ruling holds that the
same principle also applies to B, the earlier
ruling is amplified. (Compare withmodi-
fied,below).
Clarifiedis used in those instances
where the language in a prior ruling is be-
ing made clear because the language has
caused, or may cause, some confusion.
It is not used where a position in a prior
ruling is being changed.
Distinguisheddescribes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modifiedis used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A
and B, the prior ruling is modified because
it corrects a published position. (Compare
withamplifiedandclarified, above).
Obsoleteddescribes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transac-
tions. This term is most commonly used in
a ruling that lists previously published rul-
ings that are obsoleted because of changes
in laws or regulations. A ruling may also
be obsoleted because the substance has
been included in regulations subsequently
adopted.
Revokeddescribes situations where the
position in the previously published ruling
is not correct and the correct position is
beingstatedinanewruling.
Supersededdescribes a situation where
the 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 the
1986 Code and regulations the same po-
sition published under the 1939 Code and
regulations. The term is also used when
it is desired to republish in a single rul-
ing a series of situations, names, etc., that
were previously published over a period of
time in separate rulings. If the new rul-
ing does more than restate the substance
of a prior ruling, a combination of terms
is used. For example,modifiedandsu-
persededdescribes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previously
published ruling in a new ruling that is self
contained. In this case, the previously pub-
lished ruling is first modified and then, as
modified, is superseded.
Supplementedis used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names in
subsequent rulings. After the original rul-
ing has been supplemented several times, a
new ruling may be published that includes
the list in the original ruling and the ad-
ditions, and supersedes all prior rulings in
the series.
Suspendedis used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of cases
in litigation, or the outcome of a Service
study.
Abbreviations
The fol
lowing abbreviations in current use
and for
merly used will appear in material
publis
hedintheBulletin.
A—Individual.
Acq.—A
cquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank
.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cu
mulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Coo
perative.
Ct.D.—Court Decision.
CY—County.
D—Decede
nt.
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—Emp
loyer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduc
iary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Fo
reign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Fed
eral Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grante
e.
GP—General Partner.
GR—Grantor.
IC—Insura
nce Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited
Partner.
LR—Lessor.
M—Minor.
Nonacq.—No
nacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Persona
l Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Pa
rtnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Re
al Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsi
diary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target
Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Trans
feree.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpay
er.
TR—Trust.
TT—Trustee.
U.S.C.—Uni
ted States Code.
X—Corporation.
Y—Corporation.
Z—Corporat
ion.
September 13, 2010i2010–37 I.R.B.

Numerical Finding List
1
Bulletins 2010–27 through 2010–37
Announcements:
2010-43, 2010-27 I.R.B.42
2010-44, 2010-28 I.R.B.54
2010-45, 2010-29 I.R.B.87
2010-46, 2010-29 I.R.B.87
2010-47, 2010-30 I.R.B.173
2010-48, 2010-32 I.R.B.234
2010-49, 2010-34 I.R.B.272
2010-50, 2010-33 I.R.B.260
2010-51, 2010-33 I.R.B.261
2010-52, 2010-36 I.R.B.315
2010-53, 2010-36 I.R.B.323
2010-55, 2010-37 I.R.B.346
Notices:
2010-48, 2010-27 I.R.B.9
2010-49, 2010-27 I.R.B.10
2010-50, 2010-27 I.R.B.12
2010-51, 2010-29 I.R.B.83
2010-52, 2010-30 I.R.B.88
2010-53, 2010-31 I.R.B.182
2010-55, 2010-33 I.R.B.253
2010-56, 2010-33 I.R.B.254
2010-57, 2010-34 I.R.B.267
2010-58, 2010-37 I.R.B.326
2010-60, 2010-37 I.R.B.329
Proposed Regulations:
REG-139343-08, 2010-33 I.R.B.256
REG-151605-09, 2010-31 I.R.B.184
REG-112841-10, 2010-27 I.R.B.41
REG-118412-10, 2010-29 I.R.B.85
REG-120391-10, 2010-35 I.R.B.310
REG-120399-10, 2010-32 I.R.B.239
Revenue Procedures:
2010-25, 2010-27 I.R.B.16
2010-26, 2010-30 I.R.B.91
2010-27, 2010-31 I.R.B.183
2010-28, 2010-34 I.R.B.270
2010-29, 2010-35 I.R.B.309
2010-30, 2010-36 I.R.B.316
2010-32, 2010-36 I.R.B.320
Revenue Rulings:
2010-18, 2010-27 I.R.B.1
2010-19, 2010-31 I.R.B.174
2010-20, 2010-36 I.R.B.312
Tax Conventions:
2010-48, 2010-32 I.R.B.234
2010-52, 2010-36 I.R.B.315
Treasury Decisions:
9486, 2010-27 I.R.B.3
9487, 2010-28 I.R.B.48
9488, 2010-28 I.R.B.51
9489, 2010-29 I.R.B.55
9490, 2010-31 I.R.B.176
9491, 2010-32 I.R.B.186
9492, 2010-33 I.R.B.242
9493, 2010-35 I.R.B.273
1
A cumulative list of all revenue rulings, revenueprocedures, Treasury decisions, etc., publishedin Internal Revenue Bulletins 2010–1 through 2010–26 is in Internal Revenue Bulletin
2010–26, dated June 28, 2010.
2010–37 I.R.B.iiSeptember 13, 2010

Finding List of Current Actions on
Previously Published Items
1
Bulletins 2010–27 through 2010–37
Notices:
2003-19
Revoked by
Notice 2010-53, 2010-31 I.R.B.182
2009-47
Obsoleted by
Rev. Proc. 2010-28, 2010-34 I.R.B.270
Revenue Procedures:
81-18
Obsoleted by
Rev. Proc. 2010-27, 2010-31 I.R.B.183
2007-44
Modified by
Notice 2010-48, 2010-27 I.R.B.9
2009-18
Obsoleted in part by
Rev. Proc. 2010-25, 2010-27 I.R.B.16
2009-30
Superseded by
Rev. Proc. 2010-26, 2010-30 I.R.B.91
Treasury Decisions:
9487
Corrected by
Ann. 2010-50, 2010-33 I.R.B.260
1
A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2010–1 through 2010–26 is in Internal Revenue Bulletin 2010–26, dated June 28, 2010.
September 13, 2010iii2010–37 I.R.B.

INTERNAL REVENUE BULLETIN
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